1 00:00:00,120 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:38,160 Speaker 2: Terminal and the Bloomberg Business app. Alongside Samir, we're joined 10 00:00:38,159 --> 00:00:40,800 Speaker 2: by Chrishna Mamani of Lafaette College. Gents, great to catch 11 00:00:40,880 --> 00:00:43,000 Speaker 2: up with you both. Submit it first to you? Is 12 00:00:43,080 --> 00:00:45,360 Speaker 2: bad news just bad news? And could you define for 13 00:00:45,440 --> 00:00:48,120 Speaker 2: us this Friday when we get payrolls what bad news 14 00:00:48,159 --> 00:00:48,600 Speaker 2: looks like. 15 00:00:49,880 --> 00:00:51,760 Speaker 3: Yeah, John, you know, as you know, we've been cautious 16 00:00:51,760 --> 00:00:53,840 Speaker 3: for some time, and a lot of that caution has 17 00:00:53,880 --> 00:00:55,920 Speaker 3: been driven by the fact that the FED raised reads 18 00:00:55,920 --> 00:00:59,120 Speaker 3: so precipitously over the last couple of years. And although 19 00:00:59,160 --> 00:01:01,280 Speaker 3: those kind of low invariable lags might be a little 20 00:01:01,320 --> 00:01:03,040 Speaker 3: bit more long and a little bit more variable this 21 00:01:03,160 --> 00:01:05,479 Speaker 3: time we've thought for some time that the economy will 22 00:01:05,520 --> 00:01:07,920 Speaker 3: slow as far as Friday goes. I mean, the tricky 23 00:01:08,000 --> 00:01:09,759 Speaker 3: part is, you know, there's gonna be some who are 24 00:01:09,760 --> 00:01:11,959 Speaker 3: hoping for rate cuts to come back to the forefront. 25 00:01:12,200 --> 00:01:15,480 Speaker 3: For those folks, they'll clearly want a worse number. I 26 00:01:15,480 --> 00:01:17,360 Speaker 3: think the tricky part for us, though, is we tend 27 00:01:17,360 --> 00:01:19,480 Speaker 3: to be more fundamentally driven, and if you do get 28 00:01:19,520 --> 00:01:21,200 Speaker 3: a worse number, you know at some point you do 29 00:01:21,240 --> 00:01:22,720 Speaker 3: have to deal with the slowdown on the way to 30 00:01:22,760 --> 00:01:23,399 Speaker 3: those rate cuts. 31 00:01:23,480 --> 00:01:25,800 Speaker 2: Chris, Now, let's talk about what bad actually is one 32 00:01:25,920 --> 00:01:29,640 Speaker 2: twenty five over a Bank of America. That's bad news, apparently, 33 00:01:29,680 --> 00:01:32,559 Speaker 2: Stuart Kaiser City, who'll be catching up with Lakes this week, 34 00:01:32,640 --> 00:01:35,720 Speaker 2: headline paid ros below one fifty would be worsome? What 35 00:01:35,880 --> 00:01:37,000 Speaker 2: is bad this Friday? 36 00:01:37,319 --> 00:01:40,200 Speaker 4: Well, so, I don't think one fifty would be such 37 00:01:40,200 --> 00:01:42,840 Speaker 4: a bad number. I think if you kind of put 38 00:01:42,959 --> 00:01:46,759 Speaker 4: one fifty in conjunction with GDP now coming down from 39 00:01:46,800 --> 00:01:50,320 Speaker 4: three percent to one point eight, you can make that case. 40 00:01:50,360 --> 00:01:52,360 Speaker 4: But I think in the sequence of things that we 41 00:01:52,400 --> 00:01:55,600 Speaker 4: have seen and the variability in employment, I don't think 42 00:01:55,600 --> 00:01:58,760 Speaker 4: one fifty is a really bad number. The point I 43 00:01:58,800 --> 00:02:02,360 Speaker 4: would make to kind of counter what Savere was saying was, 44 00:02:03,200 --> 00:02:05,400 Speaker 4: you know, there will be a slowdown, and we have 45 00:02:05,520 --> 00:02:09,160 Speaker 4: been hoping for a slowdown, but there's absolutely nothing in 46 00:02:09,200 --> 00:02:12,080 Speaker 4: the data that indicates that things are actually slowing down 47 00:02:12,320 --> 00:02:15,240 Speaker 4: in any perceptible way. I think the FED would like 48 00:02:15,280 --> 00:02:17,600 Speaker 4: to see that, but there is really no evidence of 49 00:02:17,639 --> 00:02:18,239 Speaker 4: that just yet. 50 00:02:18,360 --> 00:02:19,880 Speaker 1: Hold on a second question. Now, a lot of people 51 00:02:19,880 --> 00:02:22,200 Speaker 1: would disagree with you. Even Neil Dudda is actually getting 52 00:02:22,400 --> 00:02:24,760 Speaker 1: as constructive as he has been in the past, partly 53 00:02:24,800 --> 00:02:27,800 Speaker 1: because what you are seeing under the hood is ism, 54 00:02:27,800 --> 00:02:32,000 Speaker 1: manufacturing coming in lower than expected, the US Economic Surprise 55 00:02:32,080 --> 00:02:35,360 Speaker 1: Index falling to its most negative going back to twenty nineteen. 56 00:02:35,760 --> 00:02:38,560 Speaker 1: Why is that not enough to say that things are slowing. 57 00:02:38,720 --> 00:02:42,560 Speaker 4: I mean, things are certainly slowing from a very rapid pace. 58 00:02:42,919 --> 00:02:45,160 Speaker 4: But I think if you have your growth rate at 59 00:02:45,200 --> 00:02:47,840 Speaker 4: two percent at this point in the cycle, after five 60 00:02:47,919 --> 00:02:50,760 Speaker 4: hundred and fifty basis points of rate increases, I don't 61 00:02:50,760 --> 00:02:54,800 Speaker 4: think that is really would be considered a meaningful slowdown. 62 00:02:54,840 --> 00:02:56,760 Speaker 4: That's the point I'm trying to make. That is, if 63 00:02:56,760 --> 00:02:59,040 Speaker 4: we stay at two percent, which is what Neil says. 64 00:02:59,080 --> 00:03:02,399 Speaker 1: He at two am. 65 00:03:02,200 --> 00:03:05,120 Speaker 4: Last night to kind of confirm that. The fact is, 66 00:03:05,200 --> 00:03:08,120 Speaker 4: if it is at two percent, then that's really not 67 00:03:08,160 --> 00:03:09,919 Speaker 4: a slowdown at this point in the cycle. 68 00:03:09,960 --> 00:03:11,560 Speaker 1: All right, Samir, So what would you say to that, 69 00:03:11,600 --> 00:03:13,520 Speaker 1: given the fact that we've been grappling with this for 70 00:03:13,560 --> 00:03:16,560 Speaker 1: a number of months now, what is slowing but not slow? 71 00:03:16,880 --> 00:03:17,040 Speaker 4: Right? 72 00:03:17,120 --> 00:03:20,160 Speaker 1: What is sort of the normal cooling that is positive 73 00:03:20,240 --> 00:03:22,160 Speaker 1: versus something that is nefarious. 74 00:03:23,400 --> 00:03:24,760 Speaker 3: I mean, first of all, I know I'm not in 75 00:03:24,760 --> 00:03:27,280 Speaker 3: this DM group at two am at night, but you know, 76 00:03:27,480 --> 00:03:30,000 Speaker 3: away from that, I mean, look, I think the tricky 77 00:03:30,040 --> 00:03:33,000 Speaker 3: part is, like I said, those lags have been longer 78 00:03:33,000 --> 00:03:35,120 Speaker 3: and maybe a little bit more variable, but every time 79 00:03:35,160 --> 00:03:37,280 Speaker 3: somebody goes to refinance, they pay a much higher interest 80 00:03:37,360 --> 00:03:39,440 Speaker 3: rate than they did the last year, the last two years, 81 00:03:39,560 --> 00:03:42,400 Speaker 3: last three years. Right, So again that is creeping into 82 00:03:42,400 --> 00:03:44,920 Speaker 3: the economy. You have seeing it on the lower rungs. 83 00:03:45,680 --> 00:03:48,040 Speaker 3: I think you know, typically it tends to go up 84 00:03:48,160 --> 00:03:50,040 Speaker 3: from the lower rungs to the upper rungs, and I 85 00:03:50,040 --> 00:03:52,640 Speaker 3: think you're seeing that. I think you're also seeing, you know, 86 00:03:52,640 --> 00:03:55,440 Speaker 3: whether it's all in yields on long corporates and high 87 00:03:55,520 --> 00:03:58,120 Speaker 3: yield also creep up. I know spreads are low, but 88 00:03:58,200 --> 00:04:00,840 Speaker 3: the amount of the companies are paying has gone up. 89 00:04:00,880 --> 00:04:02,880 Speaker 3: So I think from that standpoint, what we see is 90 00:04:02,880 --> 00:04:04,760 Speaker 3: a little bit of a saucer in terms of things 91 00:04:04,800 --> 00:04:06,880 Speaker 3: come down, they settle into kind of a new normal, 92 00:04:07,320 --> 00:04:09,840 Speaker 3: and then eventually, you know, you reaccelerate once kind of 93 00:04:09,880 --> 00:04:11,760 Speaker 3: savings have been rebuilt and people have kind of worked 94 00:04:11,760 --> 00:04:12,160 Speaker 3: off some of the. 95 00:04:12,200 --> 00:04:14,960 Speaker 2: Excesses, and you're looking for that recovery in twenty twenty five, 96 00:04:15,080 --> 00:04:17,320 Speaker 2: a recovery to a slow down that Christmas says hasn't 97 00:04:17,320 --> 00:04:19,520 Speaker 2: happened yet. So may can you have to understand the 98 00:04:19,520 --> 00:04:21,320 Speaker 2: next twelve months and how you think this place out. 99 00:04:22,520 --> 00:04:24,400 Speaker 3: So I think for markets anyways, you know, I think 100 00:04:24,440 --> 00:04:26,440 Speaker 3: probably the next few months are gonna be very choppy. 101 00:04:26,520 --> 00:04:29,240 Speaker 3: I don't anticipate new highs in twenty twenty four until 102 00:04:29,279 --> 00:04:32,520 Speaker 3: maybe after the elections. And again I think that's depending 103 00:04:32,520 --> 00:04:34,960 Speaker 3: on when we finally get kind of clarity around the elections, 104 00:04:34,960 --> 00:04:37,440 Speaker 3: which you know, possibly could push into late twenty four 105 00:04:37,520 --> 00:04:40,080 Speaker 3: early twenty five. I think once we get that clarity, 106 00:04:40,120 --> 00:04:41,640 Speaker 3: then I think the markets can kind of figure out, 107 00:04:41,640 --> 00:04:43,640 Speaker 3: all right, you know, which set of socks will do 108 00:04:43,720 --> 00:04:46,760 Speaker 3: well kind of in this administration, whoever that might be. 109 00:04:47,360 --> 00:04:48,640 Speaker 3: And then I think, you know, we do make new 110 00:04:48,680 --> 00:04:51,520 Speaker 3: highs probably in twenty twenty five alongside that economic recovery. 111 00:04:51,640 --> 00:04:55,599 Speaker 4: To share that view, well, I think the overall trend 112 00:04:55,760 --> 00:04:59,320 Speaker 4: in for acid prices is probably higher. I don't think 113 00:04:59,600 --> 00:05:02,360 Speaker 4: it happen in early twenty twenty five, and a lot 114 00:05:02,400 --> 00:05:05,600 Speaker 4: of the policies that will be implemented after the election, 115 00:05:05,720 --> 00:05:07,880 Speaker 4: I think if there's a driver on the upside, it's 116 00:05:07,880 --> 00:05:10,360 Speaker 4: probably going to be driven by that far more than 117 00:05:11,960 --> 00:05:15,680 Speaker 4: the election results themselves, because there'll be some amount of uncertainty. 118 00:05:15,520 --> 00:05:18,320 Speaker 4: But having said that, though I think from an economic perspective, 119 00:05:18,360 --> 00:05:21,120 Speaker 4: things started at a good place, the real question is 120 00:05:21,160 --> 00:05:25,120 Speaker 4: how do you kind of incorporate that okay economic news 121 00:05:25,160 --> 00:05:29,120 Speaker 4: in the context of valuations and likelihood that inflation remains 122 00:05:29,160 --> 00:05:33,800 Speaker 4: somewhat elevated relative to what the FED would. 123 00:05:33,520 --> 00:05:34,040 Speaker 1: Like it to be. 124 00:05:34,320 --> 00:05:35,120 Speaker 2: I love this right. 125 00:05:35,160 --> 00:05:38,640 Speaker 1: You guys have different kind of economic outlooks, perhaps, but 126 00:05:39,000 --> 00:05:41,920 Speaker 1: you might have the same actual investment thesis. You're still 127 00:05:41,920 --> 00:05:43,000 Speaker 1: just saying t bill's. 128 00:05:42,720 --> 00:05:45,440 Speaker 4: And chill, Well, bills and chill, because I think the 129 00:05:45,480 --> 00:05:50,560 Speaker 4: summer is basically lost, like the second quarter was lost. 130 00:05:50,600 --> 00:05:54,680 Speaker 4: In the things started not slowing down in February. It 131 00:05:54,760 --> 00:05:57,120 Speaker 4: became quite clear that we are going to be in 132 00:05:57,160 --> 00:05:59,720 Speaker 4: this range bound market for quite some time, and that 133 00:05:59,760 --> 00:06:02,120 Speaker 4: has how exactly it has panned out. It doesn't mean 134 00:06:02,320 --> 00:06:04,120 Speaker 4: that things cannot go up. It's just that we have 135 00:06:04,160 --> 00:06:07,240 Speaker 4: to catch up to evaluations. Let the economy, the economic 136 00:06:07,279 --> 00:06:10,080 Speaker 4: growth run and let's see if inflation slows. 137 00:06:09,800 --> 00:06:22,320 Speaker 5: Down, Samir, are you tbils and chill as well? 138 00:06:23,680 --> 00:06:25,320 Speaker 3: You know, we don't mind the short end of the curve, 139 00:06:25,360 --> 00:06:27,400 Speaker 3: but I think as we kind of approach the upper 140 00:06:27,440 --> 00:06:29,040 Speaker 3: fours on the tenure, I think we would like to 141 00:06:29,120 --> 00:06:31,160 Speaker 3: lead the duration. I mean, you know, I don't know 142 00:06:31,240 --> 00:06:33,120 Speaker 3: if it takes six months or twelve months for the 143 00:06:33,120 --> 00:06:36,080 Speaker 3: FED probably cuts and at that point probably you will 144 00:06:36,080 --> 00:06:37,760 Speaker 3: see people start extend duration. We want to be a 145 00:06:37,800 --> 00:06:40,040 Speaker 3: little bit ahead of that. I think, you know, from 146 00:06:40,080 --> 00:06:42,640 Speaker 3: a from a market standpoint, from investing standpoint, I think 147 00:06:42,680 --> 00:06:44,760 Speaker 3: the nice part for investors, and we've been on the 148 00:06:44,800 --> 00:06:47,120 Speaker 3: right side of this is if you're in large caps, 149 00:06:47,120 --> 00:06:50,520 Speaker 3: you get better profitability, better quality, better performance. That doesn't 150 00:06:50,520 --> 00:06:53,320 Speaker 3: happen very often. So right now you can fade em, 151 00:06:53,360 --> 00:06:55,720 Speaker 3: you can fade small caps and kind of concentrate more 152 00:06:55,760 --> 00:06:57,440 Speaker 3: on the larger cap side. Be okay, and I think 153 00:06:57,480 --> 00:07:00,520 Speaker 3: that's kind of the way to approach the next few months. 154 00:07:00,640 --> 00:07:01,279 Speaker 2: Krishna. 155 00:07:01,520 --> 00:07:04,000 Speaker 4: I think the point Samir is making is a really 156 00:07:04,080 --> 00:07:05,919 Speaker 4: good one, which is, if you look at the markets 157 00:07:05,920 --> 00:07:08,320 Speaker 4: and you kind of see which market has a higher 158 00:07:08,400 --> 00:07:11,520 Speaker 4: potential of running away from you in a hurt, I 159 00:07:11,520 --> 00:07:14,280 Speaker 4: don't think that's equity market, and I don't think that's 160 00:07:14,680 --> 00:07:17,360 Speaker 4: bond markets on the negative side. I think if it is, 161 00:07:17,480 --> 00:07:18,600 Speaker 4: it's bond markets on. 162 00:07:18,560 --> 00:07:20,920 Speaker 2: The positive side, so yields, tropic. 163 00:07:20,880 --> 00:07:23,880 Speaker 4: Yields, dropping bonds doing much better. I think if you 164 00:07:23,920 --> 00:07:26,800 Speaker 4: wanted to take a punt on the risky side, that's 165 00:07:26,840 --> 00:07:28,720 Speaker 4: the punt I would take rather than the other way. 166 00:07:29,000 --> 00:07:31,360 Speaker 2: You mentioned the politics, samre Let's talk about that. This 167 00:07:31,400 --> 00:07:34,080 Speaker 2: is what paid chairs basically said. Both candidates are troublesome 168 00:07:34,120 --> 00:07:36,240 Speaker 2: for bombs and we'll get more and more clarity on 169 00:07:36,280 --> 00:07:37,640 Speaker 2: that as the a C grows older. So may what 170 00:07:37,640 --> 00:07:39,280 Speaker 2: would you sind back to that? For somebody's looking for 171 00:07:39,320 --> 00:07:41,760 Speaker 2: that recovery in twenty five, there are others who are 172 00:07:41,760 --> 00:07:44,560 Speaker 2: pointing to the bond market. It's troublesome, maybe the recipe 173 00:07:44,600 --> 00:07:46,440 Speaker 2: for a problem in equities because of what may or 174 00:07:46,480 --> 00:07:48,160 Speaker 2: may not happen come November. 175 00:07:49,760 --> 00:07:51,280 Speaker 3: Yeah, look, I think with bonds you have to be 176 00:07:51,360 --> 00:07:53,560 Speaker 3: very disciplined because again you do have kind of this 177 00:07:53,560 --> 00:07:56,480 Speaker 3: fiscal proficacy in Washington. So I think again, if you 178 00:07:56,560 --> 00:07:59,200 Speaker 3: push north of you know, again four to seventy five, 179 00:07:59,240 --> 00:08:01,320 Speaker 3: I think there's some val you and fix comes, especially 180 00:08:01,360 --> 00:08:03,760 Speaker 3: if there is some disappointment on the economic side. Right, 181 00:08:03,760 --> 00:08:06,840 Speaker 3: you've got to kind of traverse this path of bad 182 00:08:06,880 --> 00:08:08,640 Speaker 3: news to those fed cuts. So I think at four 183 00:08:08,680 --> 00:08:11,200 Speaker 3: seventy five that probably makes some sense, But then you 184 00:08:11,320 --> 00:08:14,680 Speaker 3: fall back down into the low fours, high threes. I 185 00:08:14,680 --> 00:08:16,680 Speaker 3: think you have to reconsider and possibly close out some 186 00:08:16,720 --> 00:08:19,360 Speaker 3: of those tactical long so I think at least for Treasury, 187 00:08:19,440 --> 00:08:20,960 Speaker 3: especially on the longer end, I think you have to 188 00:08:20,960 --> 00:08:24,160 Speaker 3: be very nimble. But I think there will be opportunities. 189 00:08:23,640 --> 00:08:25,800 Speaker 2: Still ready ety dies, it's early June. Is it too 190 00:08:25,800 --> 00:08:27,080 Speaker 2: early to talk about November? 191 00:08:27,160 --> 00:08:29,560 Speaker 4: Oh, yes, very much so. I think there's a great 192 00:08:29,600 --> 00:08:31,080 Speaker 4: deal of un just start to consider it. 193 00:08:31,520 --> 00:08:31,800 Speaker 3: Well. 194 00:08:32,000 --> 00:08:35,720 Speaker 4: I think when the picture gets slightly clearer, which is 195 00:08:35,760 --> 00:08:42,880 Speaker 4: never the point is right now in terms of political developments, 196 00:08:42,880 --> 00:08:45,680 Speaker 4: it's still very early and very uncertain. I think within 197 00:08:45,720 --> 00:08:48,480 Speaker 4: a few months things will start crystallizing a bit more 198 00:08:48,520 --> 00:08:49,560 Speaker 4: as to who's getting more. 199 00:08:49,480 --> 00:08:51,400 Speaker 1: Traction that' said, what's the bigger risk right now? Because 200 00:08:51,400 --> 00:08:53,640 Speaker 1: we've had numbers of guests come on and say, the 201 00:08:53,640 --> 00:08:56,880 Speaker 1: bigger risk is that the Fed customer rates now, and 202 00:08:56,920 --> 00:08:59,960 Speaker 1: then whoever wins in November is going to announce something 203 00:09:00,080 --> 00:09:05,120 Speaker 1: fiscal package including prolonged tax cuts, including potentially tariffs, and 204 00:09:05,160 --> 00:09:08,640 Speaker 1: that could send inflation higher and push shields higher. 205 00:09:08,640 --> 00:09:09,199 Speaker 2: Do you buy that? 206 00:09:09,559 --> 00:09:11,720 Speaker 4: I think that is certainly a risk. I don't buy 207 00:09:11,760 --> 00:09:13,680 Speaker 4: that because I don't think the Fed is cutting rates 208 00:09:13,720 --> 00:09:16,520 Speaker 4: anytime soon. Because I think for the Fed to cut 209 00:09:16,600 --> 00:09:19,679 Speaker 4: rates anytime soon, especially ahead of the election, things have 210 00:09:19,760 --> 00:09:22,280 Speaker 4: to slow down in a more pronounced way than they 211 00:09:22,320 --> 00:09:23,160 Speaker 4: have done so far. 212 00:09:23,360 --> 00:09:26,440 Speaker 1: Samir, this is actually an interesting debate that's percolating, and honestly, 213 00:09:26,440 --> 00:09:29,280 Speaker 1: I don't get a good sense of where the majority 214 00:09:29,280 --> 00:09:32,079 Speaker 1: of people stand. What is the balance of risks right 215 00:09:32,120 --> 00:09:34,640 Speaker 1: now for the Federal Reserve that they're too tight or 216 00:09:34,679 --> 00:09:37,439 Speaker 1: too loose. I mean, honestly, we still don't know. 217 00:09:38,880 --> 00:09:41,520 Speaker 3: We don't And again, look, it's a bifurcated economy, and 218 00:09:41,559 --> 00:09:44,000 Speaker 3: so you've got people who can make really good, solid, 219 00:09:44,040 --> 00:09:46,320 Speaker 3: well reasoned arguments probably on both sides, which is why. 220 00:09:46,360 --> 00:09:48,640 Speaker 3: I think there's you know, these opportunities that are kind 221 00:09:48,640 --> 00:09:51,040 Speaker 3: of being underappreciated by markets. So I guess what we've 222 00:09:51,040 --> 00:09:53,560 Speaker 3: done is maybe taken a step back and looked for 223 00:09:53,920 --> 00:09:56,200 Speaker 3: you know, secular trends, right, things that will probably do 224 00:09:56,760 --> 00:09:59,400 Speaker 3: regardless of whether the Fed cuts or doesn't cut, regardless 225 00:09:59,400 --> 00:10:01,360 Speaker 3: of who wins them White House. So I would go 226 00:10:01,400 --> 00:10:05,720 Speaker 3: back to energy industrials, materials all are involved with AI 227 00:10:06,080 --> 00:10:09,560 Speaker 3: and you know, decarbonization in some ancillary ways, and then healthcare. Right, 228 00:10:09,600 --> 00:10:12,600 Speaker 3: all those areas can grow earnings, they trade at reasonable valuations. 229 00:10:12,840 --> 00:10:15,319 Speaker 3: Maybe you don't fully outperform, but you at least participate 230 00:10:15,400 --> 00:10:18,240 Speaker 3: without having to lean into probably the most crowded trades. 231 00:10:18,280 --> 00:10:20,360 Speaker 1: What about the bond offset on a long end? 232 00:10:21,679 --> 00:10:23,800 Speaker 3: So again I think if we if we get you know, 233 00:10:23,840 --> 00:10:26,240 Speaker 3: those markets come to us, I think that's a great offset. 234 00:10:26,320 --> 00:10:26,440 Speaker 6: Right. 235 00:10:26,480 --> 00:10:28,440 Speaker 3: You pair kind of some of those cyclical areas that 236 00:10:28,480 --> 00:10:31,080 Speaker 3: are cheaper maybe you know, play well in an okay 237 00:10:31,160 --> 00:10:33,720 Speaker 3: economy with kind of that hedge on the on the 238 00:10:33,760 --> 00:10:36,000 Speaker 3: longer term fixed income side, because again, you know, if 239 00:10:36,080 --> 00:10:37,800 Speaker 3: you if you do see a rough patch, those short 240 00:10:37,880 --> 00:10:39,360 Speaker 3: term yields will melt very quickly. 241 00:10:39,600 --> 00:10:40,800 Speaker 1: Final word, Christia yeah. 242 00:10:40,840 --> 00:10:43,760 Speaker 4: I think the interesting thing about the bond market is 243 00:10:43,760 --> 00:10:45,840 Speaker 4: we can worry as much as we want about fiscal 244 00:10:45,880 --> 00:10:48,320 Speaker 4: profligacy and all of that stuff. But the moment you 245 00:10:48,440 --> 00:10:52,080 Speaker 4: see a sign of a recession arrive, that's it. You know, 246 00:10:52,200 --> 00:10:53,959 Speaker 4: we are rallying mass laws. 247 00:10:54,040 --> 00:10:55,760 Speaker 2: What does that look like? The moment you see a 248 00:10:55,800 --> 00:10:58,079 Speaker 2: sign of a recession arrive. And some people think we 249 00:10:58,160 --> 00:10:59,439 Speaker 2: might have seen that already. 250 00:10:59,120 --> 00:11:01,920 Speaker 4: Well again, it's not in the data. You might have seen. 251 00:11:01,920 --> 00:11:04,000 Speaker 4: It doesn't exist. But the fact of. 252 00:11:03,920 --> 00:11:05,880 Speaker 2: The matter is, I think for that a way for 253 00:11:05,920 --> 00:11:07,800 Speaker 2: a group of economists to look back twelve months and 254 00:11:07,840 --> 00:11:08,920 Speaker 2: say there it was well. 255 00:11:09,559 --> 00:11:12,559 Speaker 4: For that to happen, I think consumption has to slow 256 00:11:12,600 --> 00:11:16,679 Speaker 4: down significantly more, and employment has to The growth has 257 00:11:16,720 --> 00:11:19,240 Speaker 4: to taper off, and you have to start losing jobs. 258 00:11:19,400 --> 00:11:20,800 Speaker 4: There's no sign of that just yet. 259 00:11:20,920 --> 00:11:23,640 Speaker 2: Krishna, Thank you big week of data. Appreciate your time. 260 00:11:23,720 --> 00:11:27,000 Speaker 2: Christian Marley alongside submits amounta of wels Vaga and Laffette 261 00:11:27,000 --> 00:11:39,680 Speaker 2: College respectively. Johnny us Now to look ahead to the 262 00:11:39,679 --> 00:11:42,280 Speaker 2: week ahead is JP Morgan's CALSI Barrow and Bank for 263 00:11:42,280 --> 00:11:45,320 Speaker 2: Americas Aditya Barve. Let's start with you CALCI first, of 264 00:11:45,360 --> 00:11:47,680 Speaker 2: all on that calendar, and we can bring that calendar 265 00:11:47,720 --> 00:11:51,480 Speaker 2: back up hopefully payrolls on Friday, jobless claims on Thursday, 266 00:11:51,520 --> 00:11:54,680 Speaker 2: the ECB, We've got the m services read tomorrow as well. 267 00:11:54,920 --> 00:11:56,800 Speaker 2: Take your pick on this calendar right now, what stands 268 00:11:56,800 --> 00:11:58,319 Speaker 2: out for you? What's the big one for you and 269 00:11:58,360 --> 00:11:58,920 Speaker 2: the team? 270 00:11:59,120 --> 00:11:59,880 Speaker 1: So I think. 271 00:11:59,720 --> 00:12:03,480 Speaker 7: The hard labor market data is really what is important 272 00:12:03,480 --> 00:12:06,160 Speaker 7: to us, because when we look at the Fed's reaction function, 273 00:12:06,240 --> 00:12:09,480 Speaker 7: we think it's becoming more asymmetric, meaning that the FED 274 00:12:09,559 --> 00:12:13,560 Speaker 7: is going to be more sensitive to weaker economic data 275 00:12:13,600 --> 00:12:16,840 Speaker 7: than they are to continued strength. Continued strength is what 276 00:12:16,880 --> 00:12:20,760 Speaker 7: we all expect, right, So it's interesting when you talk 277 00:12:20,800 --> 00:12:23,440 Speaker 7: about something like this is a manufacturing report which apparently 278 00:12:23,480 --> 00:12:25,360 Speaker 7: drove the rally in yields yesterday. 279 00:12:25,840 --> 00:12:28,120 Speaker 2: You say, apparently, well, isn't. 280 00:12:27,920 --> 00:12:33,200 Speaker 7: Manufacturing has been below fifty for sixteen months in a row. 281 00:12:33,760 --> 00:12:36,679 Speaker 7: It popped up above fifty in March and then fill 282 00:12:36,760 --> 00:12:39,320 Speaker 7: back below fifty for the last two months. So essentially, 283 00:12:39,720 --> 00:12:42,160 Speaker 7: the soft data has been telling us that the economy 284 00:12:42,240 --> 00:12:46,000 Speaker 7: stinks for quite a while now, and it's the hard 285 00:12:46,160 --> 00:12:49,040 Speaker 7: data that is actually going to move the needle. So 286 00:12:49,080 --> 00:12:51,640 Speaker 7: you need to be looking at things like claims like 287 00:12:51,760 --> 00:12:55,199 Speaker 7: jolts at ten am, and like the and the unemployment 288 00:12:55,280 --> 00:12:58,440 Speaker 7: rate and job growth on Friday, because that's what's going 289 00:12:58,480 --> 00:13:02,960 Speaker 7: to shift the fed's mindset from fighting inflation to protecting 290 00:13:03,000 --> 00:13:06,000 Speaker 7: the labor market. We're not there yet, that's what we're watching. 291 00:13:06,080 --> 00:13:08,120 Speaker 2: Let's pick up on that distinction. So it's soft Danka 292 00:13:08,160 --> 00:13:10,960 Speaker 2: versus heard data, Adita. Do you think we're being misled 293 00:13:11,000 --> 00:13:12,920 Speaker 2: by the survey data? 294 00:13:13,040 --> 00:13:15,880 Speaker 6: I think we focus on the hard data, as Kelsey said, 295 00:13:16,040 --> 00:13:18,920 Speaker 6: for the jobs report, we're pretty optimistic. We're looking for 296 00:13:19,000 --> 00:13:22,120 Speaker 6: two hundred thousand in job growth, which should be just fine. 297 00:13:22,240 --> 00:13:26,160 Speaker 6: That's trend like that keeps the FED very firmly on hold. 298 00:13:26,200 --> 00:13:28,600 Speaker 6: Our view has been on the Fed that nothing changes 299 00:13:28,720 --> 00:13:32,000 Speaker 6: until something changes. In other words, the data aren't strong 300 00:13:32,160 --> 00:13:34,800 Speaker 6: enough for the FED to worry about hiking, but the 301 00:13:34,880 --> 00:13:38,600 Speaker 6: data aren't weak enough to warrant rate cuts just yet. 302 00:13:38,920 --> 00:13:41,880 Speaker 6: And we're very much sitting in that space very comfortably 303 00:13:42,000 --> 00:13:45,920 Speaker 6: right now. As Kelsey said, focus on the hard data, 304 00:13:46,040 --> 00:13:49,720 Speaker 6: focus on the jobs report. That's really where that's the 305 00:13:49,720 --> 00:13:50,680 Speaker 6: start of this week's show. 306 00:13:50,720 --> 00:13:53,760 Speaker 1: You see, as Kelsey said, But Kelsey also said the 307 00:13:53,800 --> 00:13:56,160 Speaker 1: economy stinks has been sticking for quite a while. 308 00:13:56,160 --> 00:13:58,160 Speaker 6: Do you agree, Well, she said, the soft data are 309 00:13:58,160 --> 00:14:03,760 Speaker 6: telling you that the economy stinks. GDP growth was more 310 00:14:03,800 --> 00:14:04,520 Speaker 6: than three. 311 00:14:04,320 --> 00:14:06,960 Speaker 2: Percent last established laces plass not castles. 312 00:14:07,800 --> 00:14:11,640 Speaker 6: GDP growth was more than three percent last year. In 313 00:14:11,720 --> 00:14:15,880 Speaker 6: that entire period, the manufacturingism was under fifty. So if 314 00:14:15,880 --> 00:14:18,760 Speaker 6: it pops about fifty very narrowly for a month and 315 00:14:18,800 --> 00:14:21,920 Speaker 6: then goes back down below fifty, you know you take 316 00:14:21,920 --> 00:14:23,800 Speaker 6: that with a grain of salt. The US is not 317 00:14:24,120 --> 00:14:28,200 Speaker 6: a fundamentally a manufacturing economy, right, It's a service's economy. 318 00:14:28,200 --> 00:14:31,280 Speaker 6: It's a consumer driven economy, and the consumer for now 319 00:14:31,360 --> 00:14:34,040 Speaker 6: looks just fine. I mean, you talked about air travel 320 00:14:34,680 --> 00:14:39,080 Speaker 6: over Memorial Day. For that week, we had more people 321 00:14:39,120 --> 00:14:41,760 Speaker 6: flying than in any week last year. 322 00:14:42,200 --> 00:14:42,360 Speaker 4: Right. 323 00:14:42,440 --> 00:14:45,480 Speaker 6: We set a record above the summer peaks, above the 324 00:14:45,520 --> 00:14:48,520 Speaker 6: Thanksgiving peak, the Christmas peak, So you're probably going to 325 00:14:48,600 --> 00:14:51,640 Speaker 6: see even stronger summer travel this year. And personally, I'm 326 00:14:51,640 --> 00:14:53,000 Speaker 6: not flying the summer for that reason. 327 00:14:53,120 --> 00:14:55,320 Speaker 1: Really, well, I know that some people on this said 328 00:14:55,760 --> 00:14:58,840 Speaker 1: did actually travel on a more labor moral day weekend 329 00:14:59,160 --> 00:15:02,520 Speaker 1: and had fun experiences from what I can gather. I'm wondering, though, Kelsey, 330 00:15:02,600 --> 00:15:05,640 Speaker 1: not to mischaracter or characterize what you're saying, but you 331 00:15:05,720 --> 00:15:09,680 Speaker 1: do see enough weakness to validate the idea of FED 332 00:15:09,760 --> 00:15:11,120 Speaker 1: rate cuts later this year. 333 00:15:11,560 --> 00:15:13,360 Speaker 6: So I guess what gives you that. 334 00:15:13,400 --> 00:15:16,920 Speaker 1: Confidence if the soft data has been thinking for quite 335 00:15:16,920 --> 00:15:20,640 Speaker 1: a while, not necessarily the hard data, but you know, 336 00:15:20,840 --> 00:15:23,200 Speaker 1: it's kind of left people in this level of uncertainty 337 00:15:23,240 --> 00:15:25,680 Speaker 1: debating whether the FED is hot, too hot, too cold? 338 00:15:26,240 --> 00:15:28,400 Speaker 1: You know basically what their biggest mistake could be. 339 00:15:28,560 --> 00:15:31,320 Speaker 7: So if I think about how we've been positioned so 340 00:15:31,360 --> 00:15:34,360 Speaker 7: far this year, the first five months this year, our 341 00:15:34,440 --> 00:15:37,560 Speaker 7: game plan was to embrace the soft landing, to lean 342 00:15:37,600 --> 00:15:40,480 Speaker 7: into credit, to lean into high yield, and to put 343 00:15:40,600 --> 00:15:43,680 Speaker 7: less of our risk budget on duration. Now, there was 344 00:15:43,680 --> 00:15:45,720 Speaker 7: a reason we still like duration, and that was because 345 00:15:45,720 --> 00:15:49,480 Speaker 7: of valuations and the skew the skill, meaning the Fed's 346 00:15:49,520 --> 00:15:52,120 Speaker 7: done hiking. We think the bar to restarting hiking is 347 00:15:52,200 --> 00:15:55,080 Speaker 7: very high, and there is a ton of policy space 348 00:15:55,160 --> 00:15:58,400 Speaker 7: for the FED to respond if things start to weaken. 349 00:15:59,080 --> 00:16:02,320 Speaker 7: And I think there's a limit to the painless labor 350 00:16:02,400 --> 00:16:06,600 Speaker 7: market rebalancing that we've experienced. So for example, job openings 351 00:16:06,640 --> 00:16:10,320 Speaker 7: have come down, the unemployment rate hasn't gone up, the 352 00:16:10,440 --> 00:16:14,200 Speaker 7: quicks rate has come down, the unemployment rate hasn't gone up. Now, 353 00:16:14,280 --> 00:16:17,280 Speaker 7: that can persist for a period of time, but I 354 00:16:17,400 --> 00:16:21,560 Speaker 7: don't think it can persist forever. So again, we're watching 355 00:16:21,600 --> 00:16:24,520 Speaker 7: that labor market rebalancing. But I think the next move 356 00:16:24,560 --> 00:16:27,040 Speaker 7: that the FED is going to make is ultimately going 357 00:16:27,080 --> 00:16:29,680 Speaker 7: to be one that protects the strength of the labor 358 00:16:29,720 --> 00:16:32,680 Speaker 7: market rather than one that in which they need to 359 00:16:32,680 --> 00:16:35,800 Speaker 7: be fighting inflation. We do think that inflation generally is 360 00:16:35,880 --> 00:16:39,400 Speaker 7: under control. The majority of the inflation overshoot we think 361 00:16:39,480 --> 00:16:43,480 Speaker 7: is lagged, compositional, it's generally related to housing, and secondarily 362 00:16:43,520 --> 00:16:45,000 Speaker 7: for CPI, it's auto insurance. 363 00:16:45,240 --> 00:16:48,480 Speaker 2: Is that preemptive? Is that policy protection preemptive? Do they 364 00:16:48,480 --> 00:16:50,400 Speaker 2: do that before they see weakness in the labor market 365 00:16:50,480 --> 00:16:52,240 Speaker 2: or do they have to wait to actually see it. 366 00:16:52,600 --> 00:16:55,160 Speaker 7: So when we look back at history, pretty much every 367 00:16:55,240 --> 00:17:00,240 Speaker 7: rate cut is initially considered preemptive until it's not. So, 368 00:17:00,880 --> 00:17:03,200 Speaker 7: I mean, if you look at what the market prices 369 00:17:04,359 --> 00:17:06,760 Speaker 7: when the FED is doing their first cut, they always 370 00:17:06,800 --> 00:17:11,199 Speaker 7: underestimate the amount of cuts that are actually delivered, And 371 00:17:11,280 --> 00:17:13,479 Speaker 7: so yeah, I think it probably will be viewed as 372 00:17:13,520 --> 00:17:16,879 Speaker 7: preentup initially, but then we'll have to see if it 373 00:17:16,920 --> 00:17:17,480 Speaker 7: will be enough. 374 00:17:17,600 --> 00:17:19,240 Speaker 2: I did cha, Do you agree? 375 00:17:19,760 --> 00:17:21,800 Speaker 6: I'd say on the FED, you know, not so fast. 376 00:17:22,359 --> 00:17:25,280 Speaker 6: We do have the first cut in December. But you 377 00:17:25,359 --> 00:17:27,760 Speaker 6: have to recognize that over the last four months the 378 00:17:27,760 --> 00:17:31,240 Speaker 6: core PC has been running at four percent annualized right 379 00:17:31,600 --> 00:17:34,000 Speaker 6: March or sorry, the April data that was viewed as 380 00:17:34,119 --> 00:17:36,840 Speaker 6: a big improvement, Well, guess what, we still annualize to 381 00:17:36,880 --> 00:17:39,399 Speaker 6: more than three percent in April. So there's still some 382 00:17:39,520 --> 00:17:41,840 Speaker 6: ways to go for inflation to come down. I agree 383 00:17:41,880 --> 00:17:44,400 Speaker 6: that some of it is housing, but they can't look 384 00:17:44,440 --> 00:17:47,520 Speaker 6: through that right because you just can't cherry pick in 385 00:17:47,800 --> 00:17:49,520 Speaker 6: the situation that the FED is in right now. 386 00:17:49,600 --> 00:17:52,520 Speaker 1: One of the backdrops to this is uncertainty around immigration. 387 00:17:52,600 --> 00:17:55,439 Speaker 1: We were talking earlier to Seve Englander about that and 388 00:17:55,480 --> 00:17:57,879 Speaker 1: how much that has been a supply shock in a 389 00:17:57,920 --> 00:18:00,520 Speaker 1: way for the labor market. The other aspect is just 390 00:18:00,560 --> 00:18:03,439 Speaker 1: fiscal stimulus in general. That aditya I know you've been 391 00:18:03,480 --> 00:18:06,840 Speaker 1: pointing to as still being a tailwind to economic growth. 392 00:18:07,240 --> 00:18:10,640 Speaker 1: How do you factor that in as something that is 393 00:18:10,840 --> 00:18:14,879 Speaker 1: the new normal or continuable or something that isn't going 394 00:18:14,920 --> 00:18:16,359 Speaker 1: to run out right, So. 395 00:18:16,280 --> 00:18:18,800 Speaker 6: It actually does look like the fiscal impulse is fading 396 00:18:18,840 --> 00:18:21,159 Speaker 6: If you look at the first quarter GDP data on 397 00:18:21,240 --> 00:18:24,439 Speaker 6: both public and private investment, you got this very large 398 00:18:24,480 --> 00:18:27,680 Speaker 6: surge in public investment as well as manufacturing structures, which 399 00:18:27,760 --> 00:18:30,080 Speaker 6: was related. The public side was related to the IIJA, 400 00:18:30,359 --> 00:18:32,600 Speaker 6: the private side was related to the Chips act in 401 00:18:32,640 --> 00:18:36,119 Speaker 6: the IRA. Big deceleration across all of those components. Still growing, 402 00:18:36,600 --> 00:18:38,920 Speaker 6: but much slower in the first quarter. So it looks 403 00:18:39,000 --> 00:18:42,560 Speaker 6: like that stimulus has that that impulse to growth has 404 00:18:42,640 --> 00:18:45,600 Speaker 6: run its course, which makes sense, right because at a 405 00:18:45,600 --> 00:18:48,440 Speaker 6: certain level of investment, you can continue growing the capital stock, 406 00:18:48,480 --> 00:18:50,760 Speaker 6: but investment doesn't need to keep growing, and I think 407 00:18:50,840 --> 00:18:53,320 Speaker 6: that's where we are right now. So the fiscal impulse 408 00:18:53,320 --> 00:18:56,679 Speaker 6: seems to be fading. That means that broadly, supply shocks 409 00:18:56,680 --> 00:18:59,159 Speaker 6: are becoming less of a story and it's more of, 410 00:18:59,520 --> 00:19:01,439 Speaker 6: you know, going to accelerate or is it going to 411 00:19:01,440 --> 00:19:01,840 Speaker 6: cool off. 412 00:19:01,920 --> 00:19:04,960 Speaker 2: You've got tons of data on bank balances, what people 413 00:19:05,000 --> 00:19:07,119 Speaker 2: are spending month to month. What's that data telling you 414 00:19:07,119 --> 00:19:08,760 Speaker 2: at the moment, So it still. 415 00:19:08,600 --> 00:19:10,920 Speaker 6: Looks like spendings holding up pretty well. It's a little 416 00:19:10,920 --> 00:19:14,320 Speaker 6: bit difficult to translate the daily data into monthly growth rate, 417 00:19:14,400 --> 00:19:17,040 Speaker 6: so we still don't have a forecast for March retail sales, 418 00:19:17,440 --> 00:19:21,080 Speaker 6: but sorry, may retail sales but may look pretty solid 419 00:19:21,160 --> 00:19:23,200 Speaker 6: from what we've seen in the daily data. We'll see 420 00:19:23,200 --> 00:19:23,640 Speaker 6: what it means. 421 00:19:23,680 --> 00:19:25,840 Speaker 2: Don't want to get JP Morganjellius Chips has got tons 422 00:19:25,880 --> 00:19:28,560 Speaker 2: of data, lots of balances. What do you see happening 423 00:19:28,560 --> 00:19:29,160 Speaker 2: with the consumer? 424 00:19:29,520 --> 00:19:32,359 Speaker 7: Well, we do see the consumer continuing to spend, and 425 00:19:32,440 --> 00:19:34,600 Speaker 7: I think when I when I think about what drives that, 426 00:19:34,840 --> 00:19:37,960 Speaker 7: ultimately it's income growth. So again it all ties back 427 00:19:38,000 --> 00:19:40,520 Speaker 7: to this labor market report. You know, we do see 428 00:19:40,560 --> 00:19:44,320 Speaker 7: consumer sentiment is soft. We do see from consumers that 429 00:19:44,359 --> 00:19:46,880 Speaker 7: they're trading down, that they're a little bit more conservative. 430 00:19:47,160 --> 00:19:51,080 Speaker 7: We see delinquency rates are rising for lower income consumers. 431 00:19:51,119 --> 00:19:53,720 Speaker 7: So there are cracks forming. But ultimately, as long as 432 00:19:53,760 --> 00:19:56,520 Speaker 7: you're employed, you know, you can continue to keep spending, 433 00:19:56,560 --> 00:19:59,119 Speaker 7: and that is ultimately what we're seeing. 434 00:19:59,359 --> 00:20:01,720 Speaker 1: How much do you see immigration and sort of the 435 00:20:01,760 --> 00:20:05,000 Speaker 1: supply shock from that level kind of changing the numbers 436 00:20:05,200 --> 00:20:08,399 Speaker 1: or making it look better than it is on the 437 00:20:08,480 --> 00:20:10,680 Speaker 1: labor front. That's what Steven Glitter was saying earlier. 438 00:20:11,160 --> 00:20:13,200 Speaker 7: I think that is part of the story. The FED 439 00:20:13,320 --> 00:20:16,080 Speaker 7: is acknowledged that's part of the story. It's part of 440 00:20:16,119 --> 00:20:19,840 Speaker 7: the painless rebalancing in the labor market that we just discussed, 441 00:20:20,920 --> 00:20:23,480 Speaker 7: and it's something that we're going to have to continue 442 00:20:23,880 --> 00:20:27,320 Speaker 7: to monitor. But I think probably you know, the bulk 443 00:20:27,359 --> 00:20:32,359 Speaker 7: of that impulse, the surprise associated with immigration and the 444 00:20:32,359 --> 00:20:36,000 Speaker 7: resiliency of the labor market associated with immigration, we've now 445 00:20:36,040 --> 00:20:38,879 Speaker 7: factor that in, so you know, I'm not sure exactly 446 00:20:39,040 --> 00:20:41,840 Speaker 7: how much more we're going to get from that going forward, 447 00:20:41,920 --> 00:20:45,800 Speaker 7: particularly when you know the whole regime could change in November. 448 00:20:45,920 --> 00:20:49,480 Speaker 1: This raises this question of what is normal I mean 449 00:20:49,680 --> 00:20:51,680 Speaker 1: on a lot of levels, and I mean that sort 450 00:20:51,680 --> 00:20:54,120 Speaker 1: of next essential way too, but also this idea of 451 00:20:54,320 --> 00:20:56,399 Speaker 1: what are we going back to? I did you do 452 00:20:56,440 --> 00:20:57,080 Speaker 1: have a sense of that? 453 00:20:58,280 --> 00:21:01,080 Speaker 6: So if you the challenge doing that is that any 454 00:21:01,119 --> 00:21:04,280 Speaker 6: of these macro models that you run to kind of 455 00:21:04,320 --> 00:21:06,919 Speaker 6: get trend growth our star, they all tend to be 456 00:21:06,960 --> 00:21:09,680 Speaker 6: a bit backward looking, so you're not going to capture 457 00:21:09,720 --> 00:21:12,919 Speaker 6: structural changes until it's too late. Instead, I think you 458 00:21:13,000 --> 00:21:15,800 Speaker 6: have to think about, you know, what factors might have 459 00:21:15,880 --> 00:21:19,000 Speaker 6: driven structural changes and then just make sort of qualitative 460 00:21:19,040 --> 00:21:21,119 Speaker 6: judgments on how long they can last. So on the 461 00:21:21,119 --> 00:21:24,920 Speaker 6: fiscal impulse, on the labor supply shok, we think that's 462 00:21:25,000 --> 00:21:28,760 Speaker 6: probably not going to last because with labor force participation, 463 00:21:29,000 --> 00:21:32,560 Speaker 6: ultimately demographics will win. With immigration. Even if you maintain 464 00:21:32,640 --> 00:21:35,399 Speaker 6: current levels, it's difficult to keep growing at these rates. 465 00:21:35,600 --> 00:21:37,880 Speaker 6: So the labor supply shock has probably run its course. 466 00:21:37,880 --> 00:21:41,440 Speaker 6: It could last for another six months as these new entrants, 467 00:21:41,920 --> 00:21:44,239 Speaker 6: you know, take time to get jobs. And then on 468 00:21:44,280 --> 00:21:47,520 Speaker 6: the investment side as well, the impulse has probably run 469 00:21:47,560 --> 00:21:49,960 Speaker 6: its cosed. So at least in growth terms, we probably 470 00:21:50,000 --> 00:21:52,359 Speaker 6: go back to roughly two percent growth. 471 00:21:52,560 --> 00:21:54,679 Speaker 2: The DASA this week send the stage for the federateserve 472 00:21:55,080 --> 00:22:00,359 Speaker 2: next Wednesday. Let's talk about that briefly, three part act statement, forecast, news, calm, diference. 473 00:22:00,520 --> 00:22:01,880 Speaker 2: Walk us through where we are on the dot plot 474 00:22:01,880 --> 00:22:03,879 Speaker 2: at the moment, how you and the same Cassie expect 475 00:22:03,960 --> 00:22:06,720 Speaker 2: that to sort of evolve in the next way co site. 476 00:22:07,119 --> 00:22:10,920 Speaker 7: So the market always moves ahead of the Fed. And 477 00:22:11,240 --> 00:22:13,600 Speaker 7: just to go back to this conversation on the neutral rate, 478 00:22:13,960 --> 00:22:16,400 Speaker 7: you know, we can all hypothesize what the neutral rate 479 00:22:16,440 --> 00:22:19,040 Speaker 7: will be, but what are the markets saying. The markets 480 00:22:19,040 --> 00:22:21,199 Speaker 7: are saying the neutral rate is higher. I don't know 481 00:22:21,200 --> 00:22:24,199 Speaker 7: if it's as high as the trough that is currently 482 00:22:24,240 --> 00:22:26,920 Speaker 7: being priced. The terminal rate right now is around three 483 00:22:27,000 --> 00:22:29,800 Speaker 7: seventy five four percent is what the market's pricing. I 484 00:22:29,880 --> 00:22:32,080 Speaker 7: think it may not be that high because that would 485 00:22:32,119 --> 00:22:34,960 Speaker 7: imply a two or two and a half percent real rate, 486 00:22:35,520 --> 00:22:38,840 Speaker 7: But that being said, the market is sending you a 487 00:22:38,840 --> 00:22:41,959 Speaker 7: signal and I think we do need to listen to that. Similarly, 488 00:22:42,119 --> 00:22:44,199 Speaker 7: when we think about the FED next week and the 489 00:22:44,240 --> 00:22:48,119 Speaker 7: dot plot, you know, the market has adjusted to anticipate 490 00:22:48,520 --> 00:22:50,760 Speaker 7: a dot plot that is going to show less cuts 491 00:22:50,880 --> 00:22:54,119 Speaker 7: this year, and so you know, my expectation would be 492 00:22:54,200 --> 00:22:56,639 Speaker 7: that you show instead of three cuts, it's going to 493 00:22:56,720 --> 00:22:59,120 Speaker 7: show two. I don't think it could go to one, 494 00:22:59,200 --> 00:23:02,280 Speaker 7: but it could. And then I think we are on 495 00:23:02,520 --> 00:23:05,439 Speaker 7: a journey for the long run dot to continue to 496 00:23:05,440 --> 00:23:08,119 Speaker 7: move higher. So we saw that first move from two 497 00:23:08,200 --> 00:23:10,680 Speaker 7: point five to two point six, and to be honest, 498 00:23:10,720 --> 00:23:12,760 Speaker 7: it's actually been going on for a while now. So 499 00:23:12,800 --> 00:23:15,480 Speaker 7: if you look at the minimum and the maximum submissions, 500 00:23:15,800 --> 00:23:19,240 Speaker 7: those had been drifting for really a year before the 501 00:23:19,280 --> 00:23:22,280 Speaker 7: long term dot actually started to move. So we're in 502 00:23:22,320 --> 00:23:26,040 Speaker 7: a transition there. But you know that happens way after 503 00:23:26,080 --> 00:23:27,240 Speaker 7: the market sniffs it out. 504 00:23:27,480 --> 00:23:29,720 Speaker 2: You're looking for complic counts this year, you're looking for one. 505 00:23:30,000 --> 00:23:31,600 Speaker 2: Do you see the federals that have coming down to 506 00:23:31,640 --> 00:23:33,800 Speaker 2: your view of the world Next Wednesday. 507 00:23:33,560 --> 00:23:35,880 Speaker 6: It's going to be a close call between two and 508 00:23:35,960 --> 00:23:38,399 Speaker 6: one cut and the dot plot this year. The question is, 509 00:23:38,640 --> 00:23:40,119 Speaker 6: on the one hand, do you want to take that 510 00:23:40,200 --> 00:23:43,000 Speaker 6: optionality out for September or do you want to leave 511 00:23:43,040 --> 00:23:44,960 Speaker 6: it in or And on the other hand, are you 512 00:23:45,000 --> 00:23:47,919 Speaker 6: concerned about sounding too dubbish and kind of moving incrementally 513 00:23:47,960 --> 00:23:50,440 Speaker 6: knowing that you'll have to move again. Right, So it'll 514 00:23:50,480 --> 00:23:52,600 Speaker 6: be a close call between two and one. But I 515 00:23:52,600 --> 00:23:55,159 Speaker 6: think more importantly, there's going to be a lot of 516 00:23:55,200 --> 00:23:57,160 Speaker 6: focus on the dots, but they're not going to matter 517 00:23:57,280 --> 00:24:01,080 Speaker 6: that much because the FED is so data so it's 518 00:24:01,119 --> 00:24:04,560 Speaker 6: all about the data. The dots will potentially cause some 519 00:24:04,640 --> 00:24:07,240 Speaker 6: knee jerk reaction in the markets, but ultimately we just 520 00:24:07,280 --> 00:24:08,119 Speaker 6: don't think they matter. 521 00:24:08,440 --> 00:24:10,639 Speaker 2: Vulnerable from one data point to the next, and you 522 00:24:10,680 --> 00:24:12,480 Speaker 2: can tell us if that date's point actually matters when 523 00:24:12,480 --> 00:24:15,000 Speaker 2: we catch up next time. Cassie Barrow, JP Morgan, Cassie, 524 00:24:15,000 --> 00:24:17,320 Speaker 2: thank you. Bank for America is at Echo bave a teacher, 525 00:24:17,359 --> 00:24:21,600 Speaker 2: Thank you. This is the Bloomberg Surveillance Podcast, bringing you 526 00:24:21,880 --> 00:24:25,040 Speaker 2: the best in markets, economics, an gio politics. You can 527 00:24:25,040 --> 00:24:27,840 Speaker 2: watch the show live on Bloomberg TV weekday mornings from 528 00:24:27,840 --> 00:24:31,120 Speaker 2: six am to nine am Eastern. Subscribe to the podcast 529 00:24:31,160 --> 00:24:34,720 Speaker 2: on Apple, Spotify, or anywhere else you listen, and, as always, 530 00:24:34,720 --> 00:24:37,320 Speaker 2: on the Bloomberg Terminal and the Bloomberg Business Amp