Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week Inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Well.
Speaker 3: Our most ret story on the Bloomberg this Friday is
Speaker 3: about last night's debate. President Joe Biden bet that a
Speaker 3: debate with Republican and former President Donald Trump would boost
Speaker 3: his moribund reelection campaign. Tim his gamble, though many would say,
Speaker 3: has failed.
Speaker 4: Yeah.
Speaker 5: We continue Bloomberg's coverage of last night's debate here with
Speaker 5: us as Bloomberg Radio and TV Political news director Jody
Speaker 5: Schneider in our Washington DC bureau. Also with US Bloomberg
Speaker 5: Opinion West Coast Politics and Policy course columnist Erica D.
Speaker 5: Smith in Los Angeles. Jody, Let's start with you. Carol
Speaker 5: did a really scientific or not so science at the
Speaker 5: pull on the website formerly known as X asking people
Speaker 5: if they were voting today. Carol, what were the results
Speaker 5: of that?
Speaker 3: Yeah, I'm just pulling it up. So I asked if
Speaker 3: you were voting today Biden got fifty percent, Trump got
Speaker 3: thirty one percent, and undecided got nineteen percent. People might
Speaker 3: be surprised by that. No standard deviations yet, I like
Speaker 3: we said, not very scientific.
Speaker 2: Yeah, exactly.
Speaker 3: Listen, we all watched the debate last night, and we're
Speaker 3: gonna dig a little bit deeper into President Biden's performance
Speaker 3: in a moment. I know everybody's focusing on that simply though,
Speaker 3: and maybe this is naive in our question is there
Speaker 3: a winner? Is there a loser from last night? A
Speaker 3: clear winner, clear loser?
Speaker 6: Well, I think if you're looking at performance, Joe Biden
Speaker 6: clearly lost. He seemed lost at times. He had First
Speaker 6: of all, his voice was odd. They told us that
Speaker 6: he had a cold, but they didn't kind of tell
Speaker 6: us that beforehand. So when your your first impression of
Speaker 6: Joe Biden, a question or so in was what's going
Speaker 6: on here? His voice was bad, he seemed to be faltering.
Speaker 6: He was really put on the ropes early on by
Speaker 6: Donald Trump and stayed there. Frankly, so, in terms of performance,
Speaker 6: Donald Trump was clearly the winner. Now in terms of
Speaker 6: policy issues, first of all, there wasn't a lot of
Speaker 6: policy debate. They were each going on kind of in
Speaker 6: their own way. But Donald Trump, you know, continued a
Speaker 6: lot of misstatements, lies, attacks, the sort of ungrounded attacks.
Speaker 6: So from that standpoint you're watching it, you know, you
Speaker 6: don't exactly feel good about the grasp of the issues there.
Speaker 6: But he did have a much stronger performance than President Biden,
Speaker 6: and interestingly, President Biden today on a campaign event seemed robust,
Speaker 6: so very very odd performance last night.
Speaker 3: Okay, go ahead, Carole, No, well that's let's just go
Speaker 3: there for a moment because we were just watching too
Speaker 3: where he was in Raleigh, North Carolina, and it seemed
Speaker 3: much more like the President Biden of the state to
Speaker 3: the Union.
Speaker 2: What gives?
Speaker 7: What?
Speaker 2: How do we reconcile that?
Speaker 6: Yeah?
Speaker 8: I don't know.
Speaker 6: I mean that's the question of the day. I think
Speaker 6: one thing is he didn't have a teleprompter in Raleigh
Speaker 6: at that campaign event. He didn't last night, which is interesting.
Speaker 6: There was no audience last night, which everyone seemed to
Speaker 6: think was going to benefit the president rather than the
Speaker 6: former President Trump because Trump loves the crowd, right, but
Speaker 6: it really seemed to hurt President Biden.
Speaker 5: Okay, so let's look at a couple key aspects from
Speaker 5: last night's debate, Jody. Here's CNN's Dana Bash and Donald
Speaker 5: Trump at last night's CNN Presidential debate on Trump whether
Speaker 5: or not he'd accept the next election outcome in November.
Speaker 9: Check it out.
Speaker 6: The question was, will you accept the results of the election,
Speaker 6: regardless of who wins?
Speaker 2: Yes or no? Please?
Speaker 10: If it's a fair and legal and good election, absolutely,
Speaker 10: I would have much rather accepted these But the fraud
Speaker 10: and everything else was ridiculous. That if you want, we'll
Speaker 10: have a new conference ordered in a week.
Speaker 5: Okay, Jody, Not exactly a yes or a no answer there.
Speaker 5: I'm curious if Trump's reticence is going to alienate people,
Speaker 5: or perhaps alienate swing voters. I mean, they can think
Speaker 5: of January sixth, just four years ago, and the way
Speaker 5: the president at the time responded to the twenty twenty election.
Speaker 6: Yeah, I think if something was going to hurt him
Speaker 6: with swing state voters, it would be that timp He
Speaker 6: not only did he not answer yes or no, he
Speaker 6: made up things, you know, saying it was not a
Speaker 6: free and fair election. Every single court seemed to, you know,
Speaker 6: said that right. He would not be Joe Biden wouldn't
Speaker 6: be standing there. If this was something that was litigated.
Speaker 6: It wasn't so not accepting the legal outcome of an election,
Speaker 6: I think is something that does disturb swing state voters
Speaker 6: and it's that kind of answer that gives them possible.
Speaker 3: All right, and let's get to something that you certainly
Speaker 3: talked about before, Jody, and was disturbing to a lot
Speaker 3: of folks who were watching, and what many would say
Speaker 3: was a key concerned Democrats, and that is President Biden's
Speaker 3: performance last night.
Speaker 2: Here he is at the CNN presidential debate.
Speaker 11: Making sure that we continue to suppend strength in our
Speaker 11: healthcare system, making sure that we're able to make every
Speaker 11: single solitary person eligible for what I've been able to
Speaker 11: do with with the COVID, I should be with dealing
Speaker 11: with everything we have to do with Look if we
Speaker 11: finally beat Medicare.
Speaker 3: All right, That, of course was President Biden at the
Speaker 3: debate last night. I want to bring in Erica D.
Speaker 3: Smith West Coast Politics and policy columnists at Bloomberg Opinion,
Speaker 3: because Erica, you write that of the many prominent Democrats
Speaker 3: with aspirations for higher office, California, Gavin Newsom is arguably
Speaker 3: the best equipped to pick up the baton from President Biden.
Speaker 3: We wouldn't have had this conversation necessarily twenty four hours ago,
Speaker 3: but because of the performance last night, we are having
Speaker 3: this conversation. How is Governor some the right person to
Speaker 3: maybe pick up that baton?
Speaker 5: Yeah?
Speaker 12: I agree, we wouldn't be having this conversation, and I
Speaker 12: actually don't think that Governor Newsom actually wants to have
Speaker 12: this conversation either right now. But you know, he has
Speaker 12: been you know a lot of people have thought that
Speaker 12: he's been kind of running the shadow campaign for several
Speaker 12: months now, particularly people in California who were voters of his.
Speaker 12: You know, he's been traveling the country, traveling the world,
Speaker 12: building his national profile. He has you know, socked a
Speaker 12: lot of his campaign cash into helping Democrats in other
Speaker 12: states and networking.
Speaker 13: Obviously, he's a top surrogate for for.
Speaker 12: Joe Biden and has been on the campaign trail almost
Speaker 12: no stop for several months. He's emerged as probably one
Speaker 12: of his best surrogates because he's really nimble in debates
Speaker 12: and he goes on Fox News and on the right
Speaker 12: wing media without hesitation. He we all remember the debate
Speaker 12: that he did last year with Florida. Florida Governor Ron
Speaker 12: DeSantis when DeSantis was still a presidential candidate for Republicans,
Speaker 12: and you know, he got a lot of applause for
Speaker 12: that though it was you know, I don't know much
Speaker 12: as he came out of that debate either, but he
Speaker 12: has really served as as somebody who's kind of ready
Speaker 12: to kind of take into that next step as a backup.
Speaker 13: And so now we're having this discussion.
Speaker 3: Why Gavin Newsome over Vice President Kamala Harris, also from California,
Speaker 3: and also another California petition politician, Erica.
Speaker 7: Yeah.
Speaker 12: I mean I think that those are the two, you know,
Speaker 12: candidates I think most people are going to be talking about,
Speaker 12: obviously Kamala Harris because she's the vice president and as
Speaker 12: I write my column, I mean, vice President Harris is
Speaker 12: more than capable I think of taking over this job
Speaker 12: if necessary and running at the top of the TI
Speaker 12: ticket if that's what voters want.
Speaker 13: I think her biggest problem is for polling.
Speaker 12: You know, you can argue about why people don't like
Speaker 12: her as much as you know, the various different reasons
Speaker 12: what it you know, has to do it sexism or
Speaker 12: racism or what, but you know, her polling numbers have
Speaker 12: never been that great, and I think that you know,
Speaker 12: Gavin Newsom probably is going to do better with voters
Speaker 12: right now than than Vice President Harris Well.
Speaker 5: Jody, give us the view from from Washington, DC on this.
Speaker 5: I'm curious if Gavin Newso, in your opinion and you
Speaker 5: and given in the circles that you report from, has
Speaker 5: what it takes nationally to have that national appeal. Certainly
Speaker 5: well known in California. But is he known well enough nationally?
Speaker 6: Yeah, I think he's well known, Tim. I think the
Speaker 6: question is a California you know, is that is that
Speaker 6: who's going to kind of be able to take on
Speaker 6: Donald Trump if Joe Biden were to step out a
Speaker 6: step away. Uh, there's a lot of you know, Monday morning,
Speaker 6: I guess, Friday morning quarterbacking here today and a lot
Speaker 6: of people are talking.
Speaker 5: You know.
Speaker 6: You hear Gretchen Whitmer, Whitmere's name out there from Michigan.
Speaker 6: You hear Wes Moore from Maryland, who's only been in office,
Speaker 6: you know, a couple of years. We're hearing a lot
Speaker 6: of names, and of course Kevin Newsimp's name comes up.
Speaker 6: He has been you know, out there on the national stage.
Speaker 6: But I think at this point, it's still just kind
Speaker 6: of a parlor game. But we are hearing some prominent
Speaker 6: Democrats and some people who had worked with uh, you know,
Speaker 6: certainly for Obama's campaign, uh some even honor ly Biden campaigns,
Speaker 6: who are questioning whether the president should step aside for someone.
Speaker 6: But there really has to be a conversation that Joe
Speaker 6: Biden accepts, and that seems to be certainly from his
Speaker 6: campaign performance today for his at that rally, he does
Speaker 6: not want to step aside. So until that happens, kind
Speaker 6: of the parlor game is just a parlor game.
Speaker 1: Erica.
Speaker 3: For those who are listening and watching right now on
Speaker 3: Bloomberg Radio and TV and across our platforms, I mean,
Speaker 3: you understand California politics, you understand Governor Newsom for our
Speaker 3: national and really global audiences, because Bloomberg has put out
Speaker 3: some reports about around the world, how people watched political leaders.
Speaker 3: Global leaders watch that debate very closely and are nervous.
Speaker 2: What do they need to know and.
Speaker 3: Understand about Gavin Newsom because he's been playing too on
Speaker 3: the international stage.
Speaker 12: Oh yeah, he has. I mean, he is a big thinker.
Speaker 12: I mean, I know he kind of comes across as
Speaker 12: kind of this. You know, he has this Hollywood kind
Speaker 12: of stereotype, but he's really a policy wonk and he
Speaker 12: knows this stuff. He is very cares I think is
Speaker 12: pretty clear from all the interviews that he's done. But
Speaker 12: I do think he has a really.
Speaker 13: Good mind for policy and for politics.
Speaker 12: He's managed to get himself out of jams that I
Speaker 12: think would have you know, taken other politicians out here
Speaker 12: in California. And but you know, to the broader point
Speaker 12: about California, right, I mean, California is so far left
Speaker 12: on the political spectrum that it's hard for I think
Speaker 12: a lot of Americans to understand California at all, much
Speaker 12: less California politics. And I think that's going to be
Speaker 12: his challenge. He's a very likable person. He can move
Speaker 12: around in different crowds and different groups of people. The
Speaker 12: question is whether or not that will I guess fly
Speaker 12: if it even comes to that. Again, if if Biden
Speaker 12: actually decides to set aside, which there's a lot of
Speaker 12: ifs that get to to get through before we get
Speaker 12: to whether I Knewsom is gonna potentially run for.
Speaker 2: Presidents well Erica.
Speaker 5: Again, it is a parlor game, but we are we
Speaker 5: are playing it today, and you do have a column
Speaker 5: that he's among the most read all about it. I
Speaker 5: do so potentially potentially step again. So we're gonna I'm
Speaker 5: going to continue with my line of questioning to you
Speaker 5: about this because I am wondering about the California element,
Speaker 5: whether it helps or hurts Gavin Newsom. You mentioned it's
Speaker 5: a liberal state. However, it does have an incredibly huge economy,
Speaker 5: among the biggest economies in the entire world. But the
Speaker 5: view of California, and I can say this is a Californian.
Speaker 5: What is outside of California is I think for a
Speaker 5: lot of people very confusing. Perhaps they see problems with
Speaker 5: crime in Los Angeles and San Francisco, they see reports
Speaker 5: of people moving to less expensive states like Arizona and Texas.
Speaker 5: They hear about the high cost of living in the state.
Speaker 5: Does it help or hurt a potential presidential candidate from
Speaker 5: the state.
Speaker 13: I think on the most basic level, I think it
Speaker 13: hurts because people see those headlines and they think, you know,
Speaker 13: California is a mess. I think there's a story to
Speaker 13: be told about how California grapples with those issues and
Speaker 13: about how oftentimes those issues don't say, contained California, but
Speaker 13: the California is the first one to experience them. And
Speaker 13: I think when we think about homosis in particular, I mean,
Speaker 13: California has had a homosis problem for quite some time,
Speaker 13: but we've seen seeing that as a problem spread to
Speaker 13: cities all over the country, you know, big and small,
Speaker 13: and people are now looking into California about how do
Speaker 13: you actually deal with this problem? Which should we do?
Speaker 12: And so I think there's a story to be told about,
Speaker 12: you know, the mess that is California, but I think
Speaker 12: there's also a story to be told about how we
Speaker 12: deal with it. And then there's just the broader story
Speaker 12: of innovation, right. You know, Gavin Newsom gave his State
Speaker 12: of the State address much later than usually planned, but
Speaker 12: he did it online and it was very kind of
Speaker 12: national Suite kind of putting California as this, you know,
Speaker 12: the face of liberalism is the model of liberalism and
Speaker 12: democracy in the face of you know, mega republicanism and
Speaker 12: how we embrace equity and all of these things that
Speaker 12: you know, he's gone and stumped about. And so I
Speaker 12: think there are a lot of things that democrats in
Speaker 12: this country want our country to be and to be
Speaker 12: more accepting and to be more open and inclusive. And
Speaker 12: I think California does represent that, but there is there's
Speaker 12: some mess to get through before you understand what.
Speaker 13: That actually looks like.
Speaker 3: And I gotta say, when it comes to governor knew
Speaker 3: some I just go back to COVID. I mean, that
Speaker 3: was one of the big voices that you know, it
Speaker 3: wasn't just a California governor, but on a national scale.
Speaker 3: I feel like the nation was watching what he was
Speaker 3: doing and what he was saying in a big way.
Speaker 3: Having covered that day in day out, Jody, come on
Speaker 3: back in. I want to know what you are hearing
Speaker 3: those specifically from the Democratic power brokers, from the big
Speaker 3: fundraisers that have been backing President Biden, what they need
Speaker 3: to would they want to happen next?
Speaker 2: Are they pushing for change? Are they pushing for him
Speaker 2: to step down?
Speaker 6: Well, I think there's a lot of conversations going on
Speaker 6: at different levels, and one of them is to where
Speaker 6: to put your money. And one thing I think hasn't
Speaker 6: gotten so much attention yet, and certainly something we're hearing
Speaker 6: a lot today is the so called down ballot candidates
Speaker 6: Democrats in the House, in the Senate where you know,
Speaker 6: the Democrats could very well win the House this year,
Speaker 6: and how Keem Jefferies could become, you know, the Speaker
Speaker 6: of the House and very much wants to be the
Speaker 6: Speaker of the House. So I think there's a lot
Speaker 6: of concern there they not be dragged down that if
Speaker 6: the ticket, you know that if Biden at the top
Speaker 6: of the ticket is not as you know, is going
Speaker 6: to have issues and going to have increasing issues, that
Speaker 6: they don't want that to reflect on them. Same thing
Speaker 6: with Senate candidates. So I think there is a fair
Speaker 6: amount of concern there, and frankly, we may see some
Speaker 6: donors if they decide they don't really want to back Biden,
Speaker 6: they could go instead go to back house and Senate
Speaker 6: candidates instead. I think that's something we're going to have
Speaker 6: to see with the money where the money flows in
Speaker 6: coming weeks. Both campaigns, both Trump's and Biden's campaigns, have
Speaker 6: said they had very good fundraising calls last night with
Speaker 6: the debate.
Speaker 5: Okay, So, so, Jody, what's the next vocal point for
Speaker 5: you if we think about the roadmap to November. We
Speaker 5: see President Biden in North Carolina today, President Trump, I
Speaker 5: saw a video of him hitting the links and making
Speaker 5: some comments after making a drive. What's your focal point?
Speaker 3: And great if you could do it in thirty because
Speaker 3: we'd love to get Erica's view on that as well.
Speaker 2: Go ahead, Jody.
Speaker 6: Well, first of all, in two weeks we have a
Speaker 6: sentencing on the eleventh of former President Trump in New
Speaker 6: York on the thirty four cants of which she was
Speaker 6: found guilty, and then we have the R and C
Speaker 6: convention in Milwaukee just days later, So those will be
Speaker 6: big moments for the former president. And of course we
Speaker 6: have the Democratic Convention in August for President Biden.
Speaker 3: All right, save thirty seconds for you, Eric as well.
Speaker 3: What's the next thing on your focal point or on
Speaker 3: your radar?
Speaker 13: Yeah, I'm looking at.
Speaker 12: The down ballot race is obviously Arizona, Nevada, a big
Speaker 12: swing states. You know there's a primary, not presidential primary,
Speaker 12: but there's a primary coming up in Arizona at the
Speaker 12: end of July.
Speaker 13: Obviously looking at the rn C and what happens.
Speaker 12: In court for Donald Trump, but also you know there's
Speaker 12: a Supreme Court ruling hanging out there about community which
Speaker 12: hasn't landed yet, which I guess will land on Monday.
Speaker 12: So there's a lot of different ways that could go,
Speaker 12: so just kind of cred to keep up.
Speaker 3: And we're only halfway through twenty twenty four. All right, guys,
Speaker 3: thank you so much. Bloomberg Radio and TV Political News
Speaker 3: director Jody Schneider and our DC bureau and on the
Speaker 3: West Coast Bloomberg Opinion West Coast Politics and policy columnist
Speaker 3: Erica D.
Speaker 2: Smith.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: Live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play and then brought auto with a
Speaker 1: Bloomberg Business app or want us Live on YouTube.
Speaker 2: One of the focal points.
Speaker 3: Certainly, we've been talking about it all week. How's to
Speaker 3: do with the feds preferred inflation gauge, the measure of
Speaker 3: underlying use inflation decelerating in the month of May, bolstering
Speaker 3: the case for lower interest rates later on this year.
Speaker 5: At the same time, household spending rebounded after a pullback
Speaker 5: in April, and income showed solid growth, offering some hope
Speaker 5: that price pressures can be tamed without lasting damage to consumers.
Speaker 2: All right, so let's get to it.
Speaker 3: Our Economics and Rates round table back with us Molly Smith,
Speaker 3: Bloomberg News Economics editor, and Bloomberg News rates reporter Michael mackenzie,
Speaker 3: both here in our studio. All right, Molly, first up
Speaker 3: the data, the inflation print. The data confirms essentially what.
Speaker 2: That it's easing. Correct. Yes, good stuff, good news.
Speaker 3: We're not surprised, right. We knew a lot of the
Speaker 3: components that go into this correct.
Speaker 8: Yeah, So we knew.
Speaker 14: We had a strong feeling that that point one monthly
Speaker 14: increase in the core was coming. So that came in
Speaker 14: as expected, and then you know, for all of our
Speaker 14: fantasy like to look at it out to two decimal places,
Speaker 14: it was actually a point zero eight increase, So looking
Speaker 14: at it on the unrounded basis, that's the smallest rise
Speaker 14: since late twenty twenty, so that's definitely a great sign
Speaker 14: as well. And also looking at the spending data, this
Speaker 14: was encouraging in the sense that services spending really.
Speaker 8: Slowed down in the month.
Speaker 14: This has been the part of spending has kept inflation
Speaker 14: so elevated that if we are going to hopefully see
Speaker 14: some more slowing in services spending, that's hopefully going to
Speaker 14: translate into the stickiest part of inflation ebbing as well.
Speaker 5: Any surprises whatsoever. Everything was pretty much.
Speaker 8: I was surprised to see the savings rate go up.
Speaker 5: Yeah, I mean that's just because you hear about excess savings.
Speaker 8: Being right and that people are.
Speaker 14: You know, you're stretching more for like where you're going
Speaker 14: to find money to support spending. So to see the
Speaker 14: savings rate go up, I was surprised by that. And
Speaker 14: also to see inflation adjusted disposable income rise by the
Speaker 14: most since early last year, that was certainly surprising. I
Speaker 14: feel like I struggle with this a lot to know,
Speaker 14: and we talked about a lot on this show too.
Speaker 8: What is the truest measure of the labor market right now?
Speaker 14: There's so many mixed signals wages especially, I really struggle
Speaker 14: with that one. There's so many different metrics of what
Speaker 14: is going on with earnings growth and this one, I
Speaker 14: feel like, you know whether you're going to take signal
Speaker 14: from this report. Within the PCE, we get average hourly
Speaker 14: earnings next week, you have also the Employment Cost Index
Speaker 14: that's quarterly. There's so many different measures out there to
Speaker 14: describe the state of wage growth, and they can be
Speaker 14: conflicting at times.
Speaker 3: This is why it makes it tricky speaking of maybe
Speaker 3: a little bit of a conflict.
Speaker 2: I don't know.
Speaker 3: It feels like rates have moved around a little bit today, Michael,
Speaker 3: so walk us through in terms of the reaction off
Speaker 3: of the inflation print.
Speaker 9: Well, Carol, the inflation data was as expected and that's
Speaker 9: a relief, and we saw a bit of a bump
Speaker 9: up here in treasury prices, so yuels dropped and then
Speaker 9: we've just gradually down wound that. And I think what's
Speaker 9: interesting now is we've got higher yields led by the
Speaker 9: thirty year and ten year, and that's called what we
Speaker 9: call the bear steepener. And the bear steeper I think
Speaker 9: has probably more to do with what happened last night
Speaker 9: in the debate, because you saw Trump doing very well
Speaker 9: and the market now thinking, okay, this has put the
Speaker 9: election on the radar here firmly. And what we're hearing
Speaker 9: from Trump and is like tax cuts, wants to keep spending.
Speaker 9: So you start to think about down the road, you
Speaker 9: want to be in a curve steepener. You want to
Speaker 9: be selling the back end those longer dated rates because
Speaker 9: the deficit situation is still going to be a problem
Speaker 9: coming down the road.
Speaker 5: Interesting so that it's.
Speaker 9: Also month end and quarter ener day, So I do
Speaker 9: feel the market kind of bored enough trochies. Earlier this
Speaker 9: week we had three auctions for example, So it's just
Speaker 9: really about day. It's the last day of the month,
Speaker 9: last day of the quarter. So but the reaction, if
Speaker 9: you look at it straight line, after what happened last night,
Speaker 9: you can go people want to put a sleeper on.
Speaker 5: But not a big reaction.
Speaker 9: Though not a big reaction. We're still very much within
Speaker 9: the recent ranges.
Speaker 5: We're still reset.
Speaker 9: It's not a change of health.
Speaker 6: No.
Speaker 9: And in fact, if you look at the odds for
Speaker 9: a September rate cut, there's still around about sixty five
Speaker 9: sixty eight percent. We're still pricing in a little less
Speaker 9: than fifty bases once a half percentage point of cuts
Speaker 9: for this year, So the mark is still very much
Speaker 9: in line with the Fed. September's in play. And as
Speaker 9: Molly you know, mentioned earlier, we got the big employment
Speaker 9: report coming out a week today. That's going to reach
Speaker 9: that's going to be the next big piece of of
Speaker 9: sort of data that we the market will be looking.
Speaker 14: But of course that's coming out coincidentally July fifth. I mean,
Speaker 14: I personally actually won't be here so nice for me,
Speaker 14: But like Tim, you will be here'll be here.
Speaker 8: Of course, there's no it's got to be here for
Speaker 8: the news.
Speaker 14: And I found that day off without even realizing the
Speaker 14: jobs report was coming out, So who knows me if
Speaker 14: that's again poor on my fault. But I mean, look,
Speaker 14: I'm sure there are going to be a lot of
Speaker 14: people away from their desks, and who knows what kind
Speaker 14: of tropic trading activity you might get on some lighter volume,
Speaker 14: presumably that day.
Speaker 5: Hey, Michael, I do you want to go back to
Speaker 5: an election question here, because you talk to bond traders
Speaker 5: every day, yep, And I'm wondering how they're thinking about
Speaker 5: the FED if the former president wins election in November,
Speaker 5: and he's talked openly about his desire for lower interest
Speaker 5: rates even when he was president. And also we saw
Speaker 5: that Wall Street Journal report a few months ago about
Speaker 5: the idea of being more involved in policymaking with the
Speaker 5: Federal Reserve during a Trump administration.
Speaker 9: It's certainly a topic, certainly a topic that myself and
Speaker 9: my colleague Lizabeth Cormack had been asking a lot of
Speaker 9: investors recently, and the general view has been, you can't
Speaker 9: rule out something different happening here, but everyone we've spoken
Speaker 9: to make the point the FED is an independent institution.
Speaker 9: He has a lot of backing across party device in Congress,
Speaker 9: and you have to see some the recent term appearances
Speaker 9: of power in front of the Senate Banking Committee and
Speaker 9: how Financial Services Committee people on both sides of the
Speaker 9: aisle have made it very clear to how you do
Speaker 9: you know, we thank you for being independent focusing on
Speaker 9: the economy. I think there's a lot of credibility with
Speaker 9: the FED, and I think ultimately it's very hard to
Speaker 9: see how a president can really bully this FED.
Speaker 3: You want a royal global markets right, start making a
Speaker 3: FED and making it not independent.
Speaker 9: And actually some people said to me, you can see
Speaker 9: a scenario where the FED actually ends up having to
Speaker 9: be the voice of reason and makes a big stand.
Speaker 9: And I think actually, in the end of the day,
Speaker 9: you're getting inflation down, you are going to ease policy
Speaker 9: if unemployment starts to rise. That's the Fed's job. They
Speaker 9: know that it's a I mean, I'm sure Molly's got
Speaker 9: some good views on this as well, but that's the
Speaker 9: feedback we've got from bond riisters.
Speaker 14: Yeah, Mary Daly was speaking about that today as well,
Speaker 14: that like, you know, take a look at the PC
Speaker 14: this morning. She was speaking after it came out, that
Speaker 14: this is a great example that policy is working. I mean,
Speaker 14: I think the counterpoint to that though, when she was
Speaker 14: saying that, you know, inflation is coming down, that the
Speaker 14: jobs markets cooling, spending is cooling, and that's all evident
Speaker 14: of policy working.
Speaker 8: I think a lot of that.
Speaker 14: You could also just say that we're coming from extremely
Speaker 14: high levels of all of these measures and inevitably they
Speaker 14: had to come down, whether interest rates were high or not.
Speaker 14: Just the sheer fact that inflation has persisted has also
Speaker 14: lead led to a lot of these indicators starting to weaken.
Speaker 14: So I don't know, just a little counterpoint there that,
Speaker 14: you know, I don't know that necessarily this is all
Speaker 14: the work of monetary policy.
Speaker 3: I also do wonder Ella Ariyan, Muhammad Ali Airy and
Speaker 3: Michael in your story, you know, continues to be concerned
Speaker 3: about a.
Speaker 2: FED policy mistake.
Speaker 3: I mean does the data First, let me let me
Speaker 3: ask you, Molly, like, based on the data that you
Speaker 3: continue to see, does.
Speaker 2: It feel like the FED is behind No?
Speaker 8: I don't think so.
Speaker 14: I mean I think that look, look I'm going to
Speaker 14: sound like a broken record. Have said it here so
Speaker 14: many times, but like the first three months of the
Speaker 14: year certainly did.
Speaker 8: Not support the FED to start cutting rates any sooner.
Speaker 14: That was like you know, when you look for like
Speaker 14: you know, what's it like one's a print, two's a party,
Speaker 14: three as a trend or whatever we said, like you know,
Speaker 14: that was certainly like they said, we have to take
Speaker 14: signal from this, and they did, and now we're finally
Speaker 14: starting to see like maybe some more prints come in
Speaker 14: line to show that inflation has resumed its downward path.
Speaker 8: Jobs remarket has very very gradually slowed.
Speaker 14: Still hard to really say that it's really cracking in
Speaker 14: any meaningful way.
Speaker 8: So no, I don't think that they're behind. But then
Speaker 8: of course you have people who say that policy acts
Speaker 8: with long invariable lags, so that the worst may be
Speaker 8: to come.
Speaker 9: So over to you, Michael Well, I think the FED
Speaker 9: is looking pretty good here because this week we saw
Speaker 9: an Australia in Canada inflation kicking back up in Canada
Speaker 9: recently cut rates, so it puts the spotlight on central
Speaker 9: banks out of John Turley, including ECB, whereas the FED
Speaker 9: is said, Nina, we want to be sure. Now with
Speaker 9: PCE running at an annual rate of two six percent,
Speaker 9: we're getting into that zone that Rich Clarenda talked about
Speaker 9: last last year when he said is when is this
Speaker 9: FED going to feel comfortable? What level of PC do
Speaker 9: we need to see?
Speaker 2: And the one ship there's still lags right in the
Speaker 2: policy and so they're debatable how long and variable they are.
Speaker 9: It is Yes, So the question we've yet to hear
Speaker 9: from this FED, or you know, from Powell, what is
Speaker 9: the sort of playbook here? At what point do you
Speaker 9: start to look at easy? I guess they're waiting to
Speaker 9: see how how long employment can stay in shape here,
Speaker 9: and that what I think shape the second half of
Speaker 9: this year. Now, the thing about the FED being behind
Speaker 9: the curve, you could argue basically pretty much central banks
Speaker 9: are always behind the curve. And this is a central
Speaker 9: bank that has raised rates to five and a quarter
Speaker 9: five and a half. They can definitely take the elevator
Speaker 9: down and cut rates if they have to. And that's
Speaker 9: a good insurance policy to have, is your central it can.
Speaker 2: Be more aggressive if they need to. Right, They've got
Speaker 2: a lot of room to player exactly.
Speaker 14: But to your point, they certainly have to be feeling
Speaker 14: better than like you said, in Canada in Australia right
Speaker 14: now that they're looking at oh God, like do we
Speaker 14: need to go? The teams like to see it happen
Speaker 14: over the the ECP probably breathing aside of relief today
Speaker 14: that French and Spanish inflation came down a bit and it's like, okay,
Speaker 14: maybe like it's going to be okay, just keep cutting.
Speaker 2: All right, guys, thank you so much. Great set up
Speaker 2: as we head into the weekend.
Speaker 3: Molly Smith, Bloomberg News Economics editor and Bloomberg News Rates
Speaker 3: reporter Michael mackenzie.
Speaker 2: Guys, thank you so much, really appreciate it.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 1: each weekday starting at two pm Eastern on Apple car
Speaker 1: Play and Android Auto with the Bloomberg Business App. You
Speaker 1: can also listen live on Amazon Alexa from our flagship
Speaker 1: New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 13: All right, we are.
Speaker 2: As you know, we keep saying it.
Speaker 3: Wrapping up the month of June, incredible second quarter wise,
Speaker 3: and the first half of trading in twenty twenty four.
Speaker 5: Yeah, okay, so we get ready to do that Wall
Speaker 5: Street traders sent stocks toward fresh all time highs as
Speaker 5: signs of cool down in inflation reinforce bets at the Fed,
Speaker 5: we'll be able to start cutting interest this year. We
Speaker 5: talked about that a little earlier.
Speaker 3: Yeah, we did with Molly and Michael mackenzie. Hey equities extended.
Speaker 3: Though this year's rally, we did see the S and
Speaker 3: P five hundred.
Speaker 2: Hitting fifty five hundred, we're back below that.
Speaker 3: And we did see the Nasdaq one hundred briefly surpass
Speaker 3: the historic twenty thousand mark. We're back below that as well.
Speaker 3: So we've been passing around here, Tim.
Speaker 5: Okay, So we got with us someone from our M
Speaker 5: Live team who can tell us about stocks rising until
Speaker 5: they dropped like a rock. It is a recent story.
Speaker 5: Christina Quino is Bloomberg News Managing editor for Bloomberg's Markets
Speaker 5: Live block. She's here in our studio. We're going to
Speaker 5: get to that story in a minute. But we've spent
Speaker 5: a good portion of our program talking about the sort
Speaker 5: of hangover I think that people have from last night's
Speaker 5: CNN presidential debate. What kind of commentary and comments are
Speaker 5: coming in after that?
Speaker 15: Well, Tim, I think there's a little bit more concerns
Speaker 15: that we say in markets, because I think prior to
Speaker 15: this there really was the sense that, oh, you know what,
Speaker 15: we can probably ignore the election until we're much closer
Speaker 15: to November. But I think yesterday's debate heightens the uncertainty
Speaker 15: surrounding Biden and whether he is going to be able
Speaker 15: to contest Trump sufficiently when it comes to November, and
Speaker 15: so I think there is a little bit of concern
Speaker 15: now among analysts. We are see, for instance, strategists as
Speaker 15: Barclays recommending some strategies that will protect you against inflation,
Speaker 15: especially because we know that tariffs are one thing that
Speaker 15: Trump is particularly keen on.
Speaker 5: Sol Waits, are you saying that the analysts of Barklays
Speaker 5: are saying, if a Trump victory comes, we could see
Speaker 5: higher inflation as a result of tariffs.
Speaker 15: That's exactly that too. I mean, they are focusing on
Speaker 15: the potential for higher prices just because we know that
Speaker 15: Trump during his previous presidency had hammered home a lot
Speaker 15: of the points about tariffs.
Speaker 5: He did say last night he repeated again the claim
Speaker 5: that tariffs, we bring in so much money from tariffs,
Speaker 5: again representing I think that many economists would argue a
Speaker 5: disconnect with who actually pays for tariffs, which oftentimes is
Speaker 5: the end consumer who pays higher prices that are passed on.
Speaker 2: You're so much.
Speaker 3: Calmer than I am, because I think I was yelling
Speaker 3: at the screen like no, we consumers will pay for that.
Speaker 3: But our Michael mackenzie was saying that we could see
Speaker 3: it in the US rates curve if you look at
Speaker 3: the tens the thirties, like this expectation that if there
Speaker 3: is a win by Donald Trump and things like tariffs,
Speaker 3: you know, just talking about more debt if you will,
Speaker 3: being issued and so you're going to see that play
Speaker 3: out in the market.
Speaker 2: All right, So should we talk about what we're wrapping
Speaker 2: up tonight? Are you ready? Okay?
Speaker 3: So we said we're wrapping up the month, the quarter,
Speaker 3: and the first half of the year. First up, the
Speaker 3: first half bit.
Speaker 2: Of a wild one.
Speaker 15: Absolutely, that's probably the tamest way you can describe it, Carrol.
Speaker 15: But yeah, there's been a lot of twists and turns,
Speaker 15: for sure. But really what kind of prevailed over all
Speaker 15: the nervousness, over all the worry about stock markets is
Speaker 15: that we're still here and we're still near record highs.
Speaker 15: But there's still a lot of kind of nervousness. I
Speaker 15: would say that the first half of the year was
Speaker 15: very much characterized by unhappiness despite the fact that we're
Speaker 15: hitting record after record and equity markets and you know,
Speaker 15: there's just a lot of questions over how long can
Speaker 15: this go for? And you can really sense that investors
Speaker 15: are kind of caught between fomo but also the sense
Speaker 15: that it really can't be going on this good for
Speaker 15: this long, right, and so they're starting to think, what
Speaker 15: are they going to do once that inevitable shoe drops,
Speaker 15: once that inevitable pull back comes?
Speaker 5: What is the shoe though? That's what we're trying to
Speaker 5: figure out, and that's what we've been asking our own
Speaker 5: market observers over at the m Life blog. What are
Speaker 5: people talking about when it comes to that proverbial shoe
Speaker 5: to drop?
Speaker 15: Yeah, well, I think tim the focus is really on
Speaker 15: the labor market, and that's kind of the main shoe
Speaker 15: that we're watching out for. My colleague Tatiana Dairy argues that,
Speaker 15: you know, when it comes to the labor market, there
Speaker 15: are just like certain unemployment thresholds that would trigger the
Speaker 15: Palm rule, for instance, which has been a very reliable
Speaker 15: recession indicator, and so we're very close to that four
Speaker 15: percent unemployment level that would take us to that level
Speaker 15: in the so M rule that would pretend a recession potentially.
Speaker 2: And that's the forecast for.
Speaker 3: Next Fridays exact employment rate would be four percent. That's
Speaker 3: the expectation for the month of June. So we'll see, well, no,
Speaker 3: a week from now, but so anyway, please.
Speaker 2: Continue, Yeah, exactly that.
Speaker 15: But yeah, it really is the labor market that's going
Speaker 15: to be the backbone and the mayk or break kind
Speaker 15: of factor in this equity markets, right, And it makes
Speaker 15: a lot of sense, right because you know, if people
Speaker 15: are gainfully employed, they're very much happy to spend. What
Speaker 15: they spend on is up for debate, because you know,
Speaker 15: we do have the sense that maybe they're foregoing goods
Speaker 15: and instead spending money and services, but they're still spending.
Speaker 15: But if their resources dry up and you know, we
Speaker 15: start seeing kind of mass layoffs, I mean not that
Speaker 15: we're going to get there immediately. This is going to
Speaker 15: be you know, over a few months, if not a
Speaker 15: year sort of story. But if you do get there,
Speaker 15: then that's definitely.
Speaker 2: Going to be nues for stock market.
Speaker 3: Yeah, because we did see personal income numbers coming in
Speaker 3: a little bit stronger today. Spending was a little bit lighter,
Speaker 3: But I know Molly was talking a little bit about
Speaker 3: I thought with a consumption or something that was going
Speaker 3: on that was savings forgive me, that was a little
Speaker 3: surprise that we saw bump up when it comes to
Speaker 3: savings rates.
Speaker 5: What I'm wondering about breadth right now, because one criticism
Speaker 5: of the rally that we've seen this year is that
Speaker 5: it's been very concentrated in the top tech stocks, and
Speaker 5: we're talking about Microsoft and Video, Amazon meta platforms so
Speaker 5: far this year just dominating in terms of US equities.
Speaker 5: What does that tell you the lack of breadth about
Speaker 5: further upside potential.
Speaker 15: Well, I mean, it definitely is one of the reasons
Speaker 15: why there is such nervousness about this right the fact
Speaker 15: that your stock rally is built on just a really
Speaker 15: small number of stocks that yes, they seem to have
Speaker 15: a lot of momentum right now, but again, it only
Speaker 15: takes one or two external factors to kind of unseat
Speaker 15: a lot of that optimism. And again, if we're bringing
Speaker 15: this back to the potential, for instance, in the presidential
Speaker 15: election outcome, in November. If one of the potential outcomes
Speaker 15: is inflation, that's not necessarily going to be good for
Speaker 15: the tech sector, right. They're very inflation sensitive sectors, and
Speaker 15: so if your rally is built primarily on that sector,
Speaker 15: then that's only reason to worry.
Speaker 3: Well, I guess my always question is, Okay, then do investors,
Speaker 3: as long as the economy continues to grow here in
Speaker 3: the United States, do investors maybe start to think, Okay,
Speaker 3: there are some numbers that haven't enjoyed not some numbers,
Speaker 3: some companies and their share prices that haven't run up
Speaker 3: like we've seen in that small group of like megacap
Speaker 3: tech names.
Speaker 2: So does the rally broad now potentially could it?
Speaker 15: I mean there's definitely a question or a merit to diversification, right,
Speaker 15: I mean, every investment strategy is worth their soul is
Speaker 15: going to tell you that look like there is a
Speaker 15: potential for kind of danger if if you concentrate too
Speaker 15: much in one sector. The problem, I think is that
Speaker 15: for a lot of investors, if they look beyond that
Speaker 15: that tech sector rather meg cap tech sector, there there
Speaker 15: really isn't a lot of kind of companies that promise
Speaker 15: a similar rate of return and you know, for for
Speaker 15: a lot of investors, especially people saving up for retirement
Speaker 15: and whatnot. It really the return of a money over
Speaker 15: time is really a crucial factor here, and this is
Speaker 15: why I think what has contributed to dot tech blowout.
Speaker 3: But we will see what will happen in the second half.
Speaker 3: Michael mackenzie was talking about the importance of the labor
Speaker 3: market certainly in the second half. Remember, the Fed has
Speaker 3: a dual mandate, it's inflation and the labor market. So
Speaker 3: if that starts to come undone and crosses a certain threshold,
Speaker 3: that could be problematic.
Speaker 1: Yeah.
Speaker 5: Also keep an eye certainly on the bond market and
Speaker 5: the bond market reaction to all this, given that we
Speaker 5: didn't hear last night a big idea of not spending
Speaker 5: as much.
Speaker 2: No, exactly no.
Speaker 3: And you know if people have said that in an
Speaker 3: election year, are you know that everybody's like, we're going
Speaker 3: to spend because everybody.
Speaker 2: Wants to get some money, you know, when somebody wants
Speaker 2: everybody wants to get the voters.
Speaker 4: Right.
Speaker 2: So you said you're going to be.
Speaker 5: So there's a word pander, but there's not a better word,
Speaker 5: like you have to pander to different groups.
Speaker 3: Yeah, exactly, so that's why you tend to see it. Christine,
Speaker 3: thank you so much, really appreciate it. Are Christina Quino,
Speaker 3: Bloomberg News Managing editor for the Bloomberg's Market Live blog.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: Live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play and then brout Auto with a
Speaker 1: Bloomberg Business app or want us Live on YouTube.
Speaker 5: Well, we are all talking about that debate last night.
Speaker 5: There to say, there wasn't much discussion of policy in
Speaker 5: the debate, though each candidate did try to make their
Speaker 5: case that the economic policies that they have are better
Speaker 5: for the country. The former president made the case without
Speaker 5: offering any evidence, Carol, that immigrants are coming into the
Speaker 5: country and taking jobs from Americans. You heard him say
Speaker 5: this a couple times.
Speaker 2: He did several times.
Speaker 3: And what's true is that the unemployment rate is right
Speaker 3: now hovering around historic lows, and even though things are
Speaker 3: cooling a bit, the labor market remains tight. We get
Speaker 3: another read on jobs next Friday when the June payrolls
Speaker 3: numbers come out. The day after the fourth of July holiday.
Speaker 3: We've had so many conversations though the importance of immigration exactly.
Speaker 5: And that's one thing that was driving crazy during the
Speaker 5: debate last night is there was no discussion about how
Speaker 5: important immigrants are to the US. And well, no, I
Speaker 5: mean if without immigration in the US, we would not
Speaker 5: have enough workers to fill jobs. I mean, we've talked
Speaker 5: about this so much, right.
Speaker 2: Right, it would put more kind of inflationary pressures out there.
Speaker 5: Okay, So to that end, our next guest argues that
Speaker 5: a tight labor market in advanced economies like we see
Speaker 5: here in the US is a long term trend that
Speaker 5: could continue as workers get older, and that has some
Speaker 5: serious economic implications and they're not pretty. Olivia White is
Speaker 5: senior partner at McKinsey and Company. She's also the director
Speaker 5: of the McKenzie Global Institute. She joins US from London. Olivia,
Speaker 5: what did you find in this most recent report and
Speaker 5: start up with the idea that the tight labor market
Speaker 5: it's not just a post COVID blit, but it's actually
Speaker 5: a long term trend.
Speaker 4: It is not Yeah, that's totally right, and thanks, it's
Speaker 4: a real pleasure to be here. It's the cumulation of
Speaker 4: a long term trend that started roughly in twenty ten,
Speaker 4: after the protracted end of the global financial crist and
Speaker 4: that was a time where we had far too many workers.
Speaker 13: Not enough jobs.
Speaker 4: And we've been steadily moving to a place where all
Speaker 4: of a sudden we have too many jobs not enough workers.
Speaker 4: And of course COVID threw us quite a bit for
Speaker 4: a couple of years. But where we're softening back too
Speaker 4: right now is that more tight place. And you can
Speaker 4: draw a line from twenty ten to where we are today.
Speaker 3: All right, So why should we be having this conversation?
Speaker 3: Why should we be talking about this right now?
Speaker 4: Well, look, if what we want to maintain over the
Speaker 4: next call it, ten years is an out economic output
Speaker 4: GDP growth of what we've had even over the past
Speaker 4: ten so about two percent. If we maintain our current
Speaker 4: levels of labor force participation, and if we maintain our
Speaker 4: current levels of productivity growth, we're going to be roughly
Speaker 4: a percentage point short. And that's problem. And so we
Speaker 4: have to think about of what we need to be
Speaker 4: able to do in terms of labor supply and what
Speaker 4: we need to do in terms of boosting productivity.
Speaker 5: Okay, so where does immigration come into this? Because it's
Speaker 5: something that we wanted to understand, not just in the US,
Speaker 5: but as we're seeing migration patterns all around the world
Speaker 5: right now as a result of many, many reasons. It's
Speaker 5: not just an issue here politically in the US, it's
Speaker 5: a huge issue in Western Europe. How does immigration play
Speaker 5: into this?
Speaker 4: Immigration is one element, and thinking about how you can
Speaker 4: boost your labor supply, particularly is your population populations age,
Speaker 4: So yeah, of course foreign born workers important elements. Other
Speaker 4: important elements to consider is both the female female labor
Speaker 4: force participation ratio, but also how much everybody at every
Speaker 4: age and particularly older people, say, people above about fifty
Speaker 4: five are working. So all of those things create an
Speaker 4: important mix that frankly, as you said, every country across
Speaker 4: the developing world has to think about.
Speaker 5: Why, Sorry, Carol, I want to jump in here. Why
Speaker 5: are you seeing a tight labor market in other areas
Speaker 5: of the world too, Like, it's not unique to the US,
Speaker 5: but it's unique to advanced economies. You just laid out
Speaker 5: the US version of it, but while other advanced economies,
Speaker 5: why are you seeing it too?
Speaker 4: Well? So, first, if you look at a set of
Speaker 4: economies that seemed developed economies that seem to have nothing
Speaker 4: much in common except these tight labor markets.
Speaker 13: That you talked about.
Speaker 4: You see places like Germany, places like Japan, Norway, Singapore,
Speaker 4: the Czech Republic, and all of those places were actually
Speaker 4: at a fairly similar juncture where actually populations are aging
Speaker 4: and folks in general have eaten up the labor supply
Speaker 4: that they had in access at the end of the
Speaker 4: global financial crisis. So it's a pretty similar explanation, quite frankly.
Speaker 4: And you know, something I've talked to you guys about
Speaker 4: before is productivity growth or the lack of it, and
Speaker 4: a bunch of developed economies we've been living through these
Speaker 4: call it ten years up until about twenty nineteen when
Speaker 4: COVID hit, where we hit the luxury of being able
Speaker 4: to throw more people, more labor at the economy at output,
Speaker 4: and we weren't grow productivity growth. We weren't growing productivity enough.
Speaker 4: And then we've eaten to bone and we're at a
Speaker 4: place where we have to figure out both how to
Speaker 4: get more labor supply but also how to continue going productivity.
Speaker 3: Hey, one thing I want to ask you is we
Speaker 3: talk about productivity. As you know, I'm sure you have
Speaker 3: these conversations we talk a lot about artificial intelligence, and
Speaker 3: now that's going to take over a lot of tasks, right,
Speaker 3: Generative AI, large language models, you know, advanced AI, right,
Speaker 3: that that's going to do a lot of tasks going forward,
Speaker 3: and maybe there'll be some worker adjacent you know, with AI.
Speaker 2: Have you said that?
Speaker 3: But my question is, you know, if we need to
Speaker 3: I feel like we're arguing to bring in more immigrants,
Speaker 3: right or immigration because we're going to need it maybe
Speaker 3: going forward to fill some of the jobs.
Speaker 2: But at the same time, like when I think about that,
Speaker 2: when I think about.
Speaker 3: Reskilling, do we really know what we need to be
Speaker 3: reskilling for if we don't really.
Speaker 2: Know exactly all the jobs AI is going to ultimately
Speaker 2: take over.
Speaker 4: Well, you know, and even you and I have had
Speaker 4: this conversation about AI, Carol, So near term, yeah, for sure,
Speaker 4: you know near term. We're already in nearbone. So we
Speaker 4: can look quite specifically at the jobs where vacancies are
Speaker 4: the highest, and then we can start to extrapolate that
Speaker 4: into the future. And sure, if you take a telescope
Speaker 4: and you look, you know, even ten fifteen years out,
Speaker 4: it's harder. But next year, the year after, yeah, we know,
Speaker 4: and the sorts of reskilling that we need to have
Speaker 4: in the pipeline are, for example, vacancies are very high
Speaker 4: in healthcare.
Speaker 13: How do we make sure people so.
Speaker 5: Sorry, how do you address that? I mean, immigrants make
Speaker 5: up a huge portion of healthcare workers, at least in
Speaker 5: large cities.
Speaker 4: We know that, sure, but you could also for example
Speaker 4: we're just talking about, you can increase productivity of healthcare.
Speaker 4: You can help educate younger people so that makes them
Speaker 4: makes it easier for them to shift into other healthcare
Speaker 4: related jobs. So you know, this is not a one
Speaker 4: bullet solution type thing. You got to do productivity, and
Speaker 4: youve got to think about boosting the labor supply along
Speaker 4: multiple axes. Foreign born folks absolutely, but also in increased
Speaker 4: participation of everybody else.
Speaker 3: Do we need to also have policies to encourage people
Speaker 3: to have babies? As Elon Musk suggests.
Speaker 4: Well, if our babies are going to start working at
Speaker 4: one or two.
Speaker 8: You know what I mean.
Speaker 2: But you know, the birth rates and so on and
Speaker 2: so forth. Although there's some debate about whether really birth rates.
Speaker 5: Are going two year old, they are not productive. They
Speaker 5: do not add to productivity.
Speaker 2: Wait live is it?
Speaker 10: Like?
Speaker 4: You know? Look, I will absolutely embrace this demographics conversation.
Speaker 4: I think it's super important. I'm actually working on it too,
Speaker 4: but it's not a fix for what we're talking about
Speaker 4: right now.
Speaker 5: Hey, when do we start to see We had an
Speaker 5: interesting conversation with Gina Martin Adams, or chief Eaculty Strategies
Speaker 5: here at Bloomberg Intelligence earlier this week about the way
Speaker 5: that AI has really benefited a few of the very
Speaker 5: large companies in Video and Microsoft, and we're still not
Speaker 5: seeing it play into the bottom lines of other companies
Speaker 5: that are not necessarily in pure play AI categories. I'm
Speaker 5: wondering lyvia what what sort of you can tell us about,
Speaker 5: you know, when we're start to see that productivity end
Speaker 5: up in the bottom line of these other companies.
Speaker 9: Yeah.
Speaker 4: Look, my take on this is you see this sort
Speaker 4: of life scale of this going up.
Speaker 6: Go.
Speaker 4: If you first get some experimentation, you then get some pilot,
Speaker 4: you then start to be able to wire it through
Speaker 4: your company. I would start to think three years, four years,
Speaker 4: and it's going to depend on the company, right, So
Speaker 4: the companies that start to see it coming in most quickly,
Speaker 4: we'll think about it on that time scale. But look,
Speaker 4: remember in all of this half of our economy is
Speaker 4: powered by small businesses. So it's one thing to talk
Speaker 4: about large companies starting to adopt things like AI, but
Speaker 4: it's just going to take longer to work its way
Speaker 4: through the full economy.
Speaker 3: So if there is one policy you could change, or
Speaker 3: one thing that you are piece of advice that you
Speaker 3: would give to either governments and or companies, what would
Speaker 3: it be?
Speaker 4: Companies, focus on broader talent pools and make sure you
Speaker 4: really give a good talent proposition to the people you hire.
Speaker 3: All right, good to know, Hey, listen. Always fun to
Speaker 3: check in with you, Olivia. Have a good week in
Speaker 3: Olivia White, partner at mackenzie and Company, Director of the
Speaker 3: McKenzie Global Institute. Joining us there in London, Marc.
Speaker 4: A journal.
Speaker 7: Now about you?
Speaker 11: Let me drive?
Speaker 9: Oh no, no, no, no, all right please, I'll travel ease, wait,
Speaker 9: I want to drive.
Speaker 13: It's a good question.
Speaker 1: This is the drive to the globe. Pick we'll buy
Speaker 1: around each other down on Bloomberg Radio.
Speaker 5: All right, TikTok everyone, it is that time, less than
Speaker 5: twenty minutes to go till the close of trading on
Speaker 5: this last trading day of June.
Speaker 9: Nice job of the month of the month.
Speaker 5: Of the quarter, of the half, of the first half
Speaker 5: of the year. Not happy, not of the year earlier.
Speaker 2: Although it feels like we've been through a year.
Speaker 5: It does feel like we've been through a year. Let's
Speaker 5: get to it with Alan Zaffern. He's founding a partner
Speaker 5: in co CEO at i EQ Capital, joining us once
Speaker 5: again from Foster City, California.
Speaker 7: Allen, how are you doing great?
Speaker 9: Tim?
Speaker 7: And Carroll? How you doing?
Speaker 5: Hey, We're doing pretty well. We spent a lot of
Speaker 5: time on our program today talking about the debate, and
Speaker 5: we've got to ask by start by asking you about
Speaker 5: last night's debate. You manage around twenty five billion dollars.
Speaker 5: Did last night's debate change the way you're thinking about
Speaker 5: what happens in November and therefore change the way you're
Speaker 5: thinking about asset allocation moving forward?
Speaker 8: Uh?
Speaker 7: No, the debate result or the end of the debate
Speaker 7: didn't really change much. I think Trump has been the
Speaker 7: considered favorite going into the election. If you're taking a
Speaker 7: long term perspective, you want to focus on economic issues,
Speaker 7: not near term issues. I suppose if you're a trader,
Speaker 7: you could jump into health insurance companies and private prison
Speaker 7: stocks and credit card company stocks and they're going up today,
Speaker 7: and avoid cannabis stocks and energy stocks. You know EV
Speaker 7: stocks today they're going down a bit. But other than
Speaker 7: short term trades, I don't think anything's really changed. The
Speaker 7: market in essence is betting that for the most part,
Speaker 7: things aren't going to change. And again just remind people.
Speaker 7: For us here, Biggs issues really Congress and tax laws
Speaker 7: and are the best guesses we're getting up with a
Speaker 7: divided Congress, and therefore there's going to be a limitation
Speaker 7: to some degree able what happens to changes in the
Speaker 7: taxes for corporations and for individuals that's really striving probably
Speaker 7: future investing thoughts.
Speaker 2: Well, so let's go there a little bit.
Speaker 3: Let's throw in tariffs into that, because President former President
Speaker 3: Donald Trump has certainly said that that's a route he
Speaker 3: would go, putting more tariffs on foreign companies he believes
Speaker 3: it seems from conversations that he believes that it's the
Speaker 3: foreign companies or that ultimately pay it. We know that
Speaker 3: it ultimately ends up in higher prices of goods and
Speaker 3: more inflationary pressures. If he pursues that course of a policy,
Speaker 3: what's the impact then, potentially on the US economy and
Speaker 3: the US financial climate.
Speaker 7: You're right, Carol, under a Ricardian necnomics, if we're not
Speaker 7: going to optimize where things are going to be built
Speaker 7: and then transferred, we're going to up in an environment
Speaker 7: of moderately higher prices than the cost of your bronze shaver,
Speaker 7: and your other imported autos or goods, particularly in China,
Speaker 7: are going to go up. That's not a great world
Speaker 7: to live in. It's going to also impair returns. All
Speaker 7: things equal, of non US equities will continue to on
Speaker 7: shoring theme that we've seen quite some time. But I'm
Speaker 7: going to tell you a lot of that is already
Speaker 7: built into the markets. If you look year to date,
Speaker 7: what's going on is the SMP is dominated by the
Speaker 7: Mega eight stocks, is up fifteen percent. Small cap stocks
Speaker 7: are up only one percent for the year. So you're
Speaker 7: already seeing this dichotomy. And if you really want to
Speaker 7: get into the nuances of the difference between a Trump
Speaker 7: administration and a Biden administration, all things equal, the issues
Speaker 7: I think are a fewfold. One, as I think you're
Speaker 7: going to end up with more fiscal stimulus from tax
Speaker 7: cut extensions and new spending. I think what they're going
Speaker 7: to do is they're going to take that Tax Cuts
Speaker 7: and Jobs Act, where the tax provisions are supposed to
Speaker 7: end at the end of twenty twenty five, and they're
Speaker 7: likely going to extend them other than possibly for household
Speaker 7: incomes above four hundred thousand dollars. And I think the
Speaker 7: other issue is I think you have less predictable central
Speaker 7: bank policy. I think there's a chance if we have
Speaker 7: a Trump administration, there's a greater likelihood Jerome Powell gets
Speaker 7: replaced as the FED chair. So I think you're going
Speaker 7: to be in a world of slightly higher, all things equal,
Speaker 7: elevated prices, slightly more inflation a little. I think you
Speaker 7: have less certainty about who's running the FED in the
Speaker 7: short run. I think under both administrations you're going to
Speaker 7: see fiscal stimulus either way. I don't think you're going
Speaker 7: to see changes in the Affordable Care Act. I don't
Speaker 7: think you're see changes in Medicaid cuts. You're probably just
Speaker 7: going to see moderately higher China tariffs. But again, Congress
Speaker 7: could get involved and mitigate what a otherwise Republican administration
Speaker 7: might want to do.
Speaker 5: Alan when does the bond market start to care.
Speaker 7: It already does care. The bond market is fighting the
Speaker 7: fact we have slowing the economy, pushing wields down with
Speaker 7: the recognition that you're in a perpetual fiscal stimulus process
Speaker 7: where we can't balance our budget. So what's what's really
Speaker 7: driving the market crazy is the following, tim, here's the problem.
Speaker 7: If you came to me right now, said Alan your bank,
Speaker 7: I Tim, I'm thirty four million dollars in debt, and
Speaker 7: I also spend two million dollars more every year than
Speaker 7: I earn. We lend me money.
Speaker 1: Of course I wouldn't.
Speaker 7: But if you're the US government, you're thirty four trillion
Speaker 7: in debt, you spend two trillion more every year you
Speaker 7: than you earn, and you get away of borrowing ten
Speaker 7: years fixed at four and a quarter percent. It's not sustainable.
Speaker 7: So the market is trying to discern at what point
Speaker 7: does somebody say, hey, the US government can't pay its
Speaker 7: debt back anymore, which would put insane pressure on guilds
Speaker 7: to go higher. But as in right now, the dollar
Speaker 7: is our currency of choice across the globe. There isn't
Speaker 7: a better alternative right now, and in a world of
Speaker 7: slowing economic growth, all things equal lower inflation as measured
Speaker 7: by today's PCE figures, and in a world where there
Speaker 7: isn't a better currency, yields are going to come down
Speaker 7: a bit.
Speaker 2: They're going to come down a bit.
Speaker 3: Interesting, interesting, Interesting. Do you think the outcome of the
Speaker 3: election is given at this point?
Speaker 7: No, it's never It's never a given. I mean, even
Speaker 7: though I think it's a foregunk conclusion that Biden will
Speaker 7: be the pick, there's some modest and I mean relatively
Speaker 7: modest possibility they'll choose a different candidate. But I think
Speaker 7: yesterday's debate lessened Biden's chances of winning the election, But
Speaker 7: it's far from over. A lot can happen between now
Speaker 7: and then, but whatever was already built into expectations has
Speaker 7: increased the possibility that we'll see Trump as President's way
Speaker 7: too early to reach that conclusion.
Speaker 2: How much do you think too potentially?
Speaker 3: I'm just thinking if some of the conversations we've had today,
Speaker 3: and you mentioned Jay Powell, and you know the risk
Speaker 3: of him being replaced, But I also do wonder about
Speaker 3: the dual mandate. Just generally the Fed, right, it's inflation,
Speaker 3: it's also the labor market. One week from now, we're
Speaker 3: going to be all over. The latest read on the
Speaker 3: US employment situation. Having said that, is there a concern
Speaker 3: that the labor market we're getting mixed conflicted data, that
Speaker 3: that is starting to come undone, and that's going to
Speaker 3: be a major risk potentially to the US economy when
Speaker 3: it comes to spending. When it comes to you know
Speaker 3: the cycle and you know how it plays out.
Speaker 7: Right, And so whereas large cap tech stocks are trading
Speaker 7: the megate are trading at thirty one times forward earnings,
Speaker 7: the S and P itself, even including them, is only
Speaker 7: twenty one times forward earnings, and you look at midcaps
Speaker 7: and small caps, they're fifteen and four time time.
Speaker 3: For that places into what you're seeing in the small
Speaker 3: cap in MidCap place space.
Speaker 7: Exactly, the market is already snuffed out that other than
Speaker 7: if you're not an AI stock or a weight loss stock,
Speaker 7: you're not really doing soil right now. So the market's
Speaker 7: already sniffing out kind of that labor market weakness. And
Speaker 7: interestingly enough, if you look back about twenty four months
Speaker 7: after the first rate hikes, where you really typically see
Speaker 7: the detriment of labor markets, So we're actually seeing now
Speaker 7: the effects of the first rate hikes that happened almost
Speaker 7: twenty four months ago.
Speaker 2: We've talked about that's what's long and.
Speaker 7: The t shirts, particularly particularly Tim and Carroll an environment.
Speaker 7: We threw massive amounts of fiscal stimulus to offs at COVID.
Speaker 7: What we did is longated and delayed the.
Speaker 3: Impact, so even longer invariable impact and lag effect. Allen Zafford,
Speaker 3: thank you so much. Have a good weekend, happy fourth
Speaker 3: of July.
Speaker 2: That's just around the corner.
Speaker 3: Founding partner and co CEO at IEQ Capital joining us
Speaker 3: from Foster City, California.
Speaker 1: This is the Bloomberg Business Week Podcast, Apple, Spotify, and
Speaker 1: anywhere else you get your podcast. Listen live weekday afternoons
Speaker 1: from two to five pm Eastern Bloomberg dot com radio
Speaker 1: app tune In, and the Bloomberg Business app. You can
Speaker 1: also watch us live every weekday on YouTube and always
Speaker 1: on the Bloomberg terminal.