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Speaker 1: Peter's share of Academy Securities coming back with us, saying,
Speaker 1: bottom line, the FED cuts by twenty five at the
Speaker 1: next meeting. It should be a neutral to mildly hawkish
Speaker 1: twenty five basis points as the underlying data away from
Speaker 1: the unemployment rate based on back to back bad months
Speaker 1: in the household survey, is likely to be deemed the outlier.
Speaker 1: Peter joins us. Now, Peter, thank you so much for
Speaker 1: being back with us. Want to get a sense of
Speaker 1: what you make of yesterday's price action. I know reading
Speaker 1: the tea leaves of the market can be a fool's errand,
Speaker 1: but it seemed odd that the initial reaction was to
Speaker 1: buybonds great auction and then something changed.
Speaker 3: No, I think everyone really has these animal spirits. I
Speaker 3: think everyone's trying to look through this and say, there
Speaker 3: is a real chance that Trump cuts a lot of
Speaker 3: red tape, that he reduces regulation, that he promotes business.
Speaker 3: I think you're seeing stimulus from the rest of the world.
Speaker 3: I think at some point we might get worried that
Speaker 3: the rest of the world's going to slow down enough
Speaker 3: that it drags.
Speaker 4: The US down.
Speaker 3: But for now, I think it's just that excitement that
Speaker 3: kind of all this not in my backyard gets thrown
Speaker 3: away and we actually see progress. We see investment done,
Speaker 3: we see buildouts here, and I think that's real. And
Speaker 3: that's what's outweighing even the moving yields.
Speaker 1: Well, it might be outweighing the yield and the move
Speaker 1: it yields, but what is behind that yield, that move
Speaker 1: and yields Given the fact that basically we're counting on
Speaker 1: a federal reserve to cut rates by twenty five basis
Speaker 1: points next week, and you got central branks around the
Speaker 1: world so that are chopping away as quickly as they can.
Speaker 3: Are not going to see a much lower inflation picture
Speaker 3: in the US. Partly companies are front running some you know,
Speaker 3: tariffere so there's been buying on that. And if we
Speaker 3: are going to build things in the US, which I
Speaker 3: think there's going to be a push quite frankly, it's
Speaker 3: going to be more expensive to do it here then
Speaker 3: it would be elsewhere. Otherwise we've probably been doing it
Speaker 3: here already, so I think there's going to be some
Speaker 3: cost associated with that. There's going to be a build
Speaker 3: out and logistics. You know, we're going to need infrastructure
Speaker 3: to do all that. So I think it's going to
Speaker 3: kind of keep inflation a little bit high. You're seeing
Speaker 3: the data centers go all those things. I would say
Speaker 3: on the equity markets, I see some froth. I'm a
Speaker 3: little bit nervous, but I think, as we talked about
Speaker 3: earlier in the week, it's really hard to short anything
Speaker 3: in December, right, the seasonal you know, factors are in
Speaker 3: your adjustment. And let's also not forget the amount of
Speaker 3: money that's been made in crypto in the last few
Speaker 3: months is certainly helping spur Christmas shopping or holiday shopping.
Speaker 3: It's doing everything so well. Bitcoin kind of keeps going
Speaker 3: up and everyone's excited. I just think that feeds to
Speaker 3: that overall, we have to buy more of this stuff.
Speaker 1: Yea.
Speaker 5: I wonder with the housing market in Miami looks like
Speaker 5: right now, with after that bitcoin surge, getting back to
Speaker 5: the central banks of it all.
Speaker 4: Though on the way up on.
Speaker 5: The hiking cycle, there is this fear of diverging from
Speaker 5: the FED because you want your currency to stay strong
Speaker 5: enough that you could continue to fight inflation. The opposite
Speaker 5: is happening now, and you have concerns from different countries
Speaker 5: about the weakness and their growth. Do you think that
Speaker 5: this is going to be a divergent cutting cycle that
Speaker 5: you're going to see other central banks that want to
Speaker 5: get out in front of the FED and have bigger
Speaker 5: cuts to them. And frankly would welcome a FED that
Speaker 5: maybe goes on pause in twenty twenty five.
Speaker 4: Yeah, I think.
Speaker 3: They want to do that. I think they need to
Speaker 3: do that again. In Europe is kind of a mess
Speaker 3: right now. In that Germany, which had been the juggernaut
Speaker 3: and real the anchor and support of everything, they themselves
Speaker 3: are struggling right now. So that's going to leave the
Speaker 3: ECB job very difficult. And I've always thought that a
Speaker 3: big chunk of the tariffs, if any actually get put on,
Speaker 3: will be absorbed by a much stronger dollar, and I
Speaker 3: think that's what we're seeing right This dollar strength will
Speaker 3: offset any of the terrorf prices, and that will keep
Speaker 3: you know, that pressure lower than it would be otherwise.
Speaker 5: You also said something moments ago, though, you said that
Speaker 5: the animal spirits are dependent on everyone believe in weak
Speaker 5: growth elsewhere won't affect the US. At what point does
Speaker 5: that change?
Speaker 4: You know?
Speaker 3: Certainly probably not this month because everyone's kind of very
Speaker 3: focused on the holiday season coming up. But I think
Speaker 3: as you start looking at annual in February, okay, like
Speaker 3: how long can we continue? And again today I think
Speaker 3: I saw a headline from you that I think is
Speaker 3: going to be a bigger theme again next year is
Speaker 3: byd is Now I think outpacing Volkswagen in Brazil. And
Speaker 3: my view has all long been that China is trying
Speaker 3: to buy time to make sure they can sell their
Speaker 3: brands globally. So I think we get all excited about
Speaker 3: this growth and all the stimulus, and I think in
Speaker 3: the end we have to be much more prepared for
Speaker 3: China trying to sell their brands globally, particularly into emerging
Speaker 3: markets and more and more Europe.
Speaker 4: I think the European weakness plays.
Speaker 6: To China, right because if the walls go up on everyone,
Speaker 6: China's going to have to find a place to dump
Speaker 6: their exports. When it comes to this idea of potentially
Speaker 6: where animal spirits are trying to maybe wane, do you
Speaker 6: want to look elsewhere places like China, places like Europe.
Speaker 4: Yeah.
Speaker 3: I actually think the Chinese stock markets someone interesting. It's
Speaker 3: sold off after Trump one, but I think something that's
Speaker 3: going to be a mistake because a I do believe
Speaker 3: that they really have to continue with the stimulus. They
Speaker 3: have to get their things going, and they're going to
Speaker 3: do everything that they can to help their brands and
Speaker 3: therefore their stocks. I don't think it's going to be
Speaker 3: great for global growth. I think there was an opportunity
Speaker 3: in Chinese stocks as a trade, not as an investment,
Speaker 3: So I like that. I think around here a commercial
Speaker 3: real estate that's.
Speaker 4: Become kind of more and more of a theme.
Speaker 3: I think, you know, work from home is winding down.
Speaker 3: I think you know, the dog or whatever it's called,
Speaker 3: is one thing. The dog is very convinced that and
Speaker 3: I think rightfully, so that all federal employees are still
Speaker 3: working from home will be pushed into office. So I
Speaker 3: think you can see a resurgence in that and yields
Speaker 3: while they go higher. Maybe you get to four to
Speaker 3: fifty on tens with potential spike to five.
Speaker 4: You don't go below four.
Speaker 3: I think a lot of commercial real estate can do
Speaker 3: well in that environment if you're.
Speaker 6: A traveler and not a settler. In terms of the
Speaker 6: China stock market, how concern is if you that Congressman Wald,
Speaker 6: Senator Rubio, potential embassador Jamison Greer have all called for
Speaker 6: decoupling of China and the United States.
Speaker 3: You know, I think we should be somewhat concerned. Then,
Speaker 3: on the other hand, Trump supposing invites you to come
Speaker 3: to the inauguration. So again, I think everything with Trump
Speaker 3: is a little bit of a game and a lot
Speaker 3: of negotiations back and forth. I think it's in China's
Speaker 3: interest to remain as coupled as possible. I think long
Speaker 3: term we'd probably be better decoupling, but I think we'll
Speaker 3: get sucked into doing short term trades that actually favored
Speaker 3: China over us in the long term.
Speaker 5: Can you get into that more because you have a
Speaker 5: really fascinating view that you've been writing about for some time,
Speaker 5: that Trump could go for what looks like a win
Speaker 5: with China but actually gives China an advantage in the US.
Speaker 3: So we see all the problems that Chinese economies having
Speaker 3: right and US companies do not want to invest in
Speaker 3: their US companies are kind of running their factories at
Speaker 3: a minimum there. So China the only way they're ever
Speaker 3: going to grow is by selling their products.
Speaker 4: They need to buy time to do that, right.
Speaker 3: They're struggling right now, and I think they will come
Speaker 3: up with some deal that looks attractive to us and say, oh,
Speaker 3: this is perfect, this solves our issues, and then three
Speaker 3: to five years down the road will regret it because
Speaker 3: it'll give in China time to continue to build up
Speaker 3: their manufacturing, to build up their chip industry, which I
Speaker 3: think we should be really concerned with. I think when
Speaker 3: we talk about it from a geopolitical front, it's their chips,
Speaker 3: it's their AI focus that we need to be worried about.
Speaker 3: And I don't like any deal that kind of buys
Speaker 3: them time, takes some pressure off of that and lets
Speaker 3: them grow. And that's, to me, is the risk because
Speaker 3: they've got that longer term arise than we necessarily do.
Speaker 4: Can we talk about timeline for this? What does a
Speaker 4: longer term horizon look like?
Speaker 3: You know, I think they can think in terms of decades,
Speaker 3: But to me and something like AI and chips, this
Speaker 3: is a three to five year thing where they're trying
Speaker 3: to play catch up.
Speaker 4: They're aggressively doing it.
Speaker 3: They don't have access to ASML or some of the
Speaker 3: high technology. But two things are going on. One, they're
Speaker 3: able to make smaller chips than we would have thought possible.
Speaker 3: They make them very inefficiently, using old machines to make those,
Speaker 3: but they are getting those. And then the bigger advances
Speaker 3: that we're starting to see in the chip industry are
Speaker 3: coming from packaging and how these chips are layered in
Speaker 3: the semiconductors, and that technology is actually much easier. So
Speaker 3: China might be able to actually get some pretty good
Speaker 3: advancements even.
Speaker 4: While we're trying to restrict it.
Speaker 3: And on top of that, we're seeing how easy it
Speaker 3: is to get around restrictions.
Speaker 4: Anyways, Well, and that's.
Speaker 1: Actually what I wanted to ask you. What do you
Speaker 1: make of Nvidia expanding its staff in China at a
Speaker 1: time where there are supposedly these restrictions, and they're trying
Speaker 1: to find ways to maintain their presence and their business
Speaker 1: in the region.
Speaker 3: And I think that's going to be a really difficult thing,
Speaker 3: and I do think companies like that will unfortunately face
Speaker 3: some pressure from this administration. I think, no matter what
Speaker 3: Trump would like to do from a business side, I'm
Speaker 3: a complete believer that some high level of national security
Speaker 3: has this very high on their agenda. It's bipartisan and
Speaker 3: no matter what you might think, once you kind of
Speaker 3: really get read in on what's going on, what the
Speaker 3: fears are, I think there will be a lot of
Speaker 3: pushback to you know, keeping chips and technology out of China.
Speaker 3: You know, you look at some of these the volt typhoon,
Speaker 3: all these hacks have been done to impact our infrastructure.
Speaker 4: Potentially, this is.
Speaker 3: A real issue, and I think there that's going to
Speaker 3: be a struggle for all the companies trying to figure
Speaker 3: out what can be sold into China because it has
Speaker 3: to be and quite frankly, I've heard about eighty percent
Speaker 3: of the chips we sell into China come back into
Speaker 3: the US in various products.
Speaker 4: So it's not an easy answer. But this is strict.
Speaker 3: I think we talked about the other day China or
Speaker 3: zav starting to try and restrict some of the dual
Speaker 3: use chips that have been making their way into the
Speaker 3: Ukrainian drones. This is going to be messy and I
Speaker 3: don't see any way around that.
Speaker 1: Peter Shaer, wonderful to talk to you as always. Thank
Speaker 1: you so much for being with us, Peter share of
Speaker 1: Academy Securities. Here's the latest, President Elect Donald Trump naming
Speaker 1: and Ferguson's incoming FTC chair to replace Lena Kahan the Moon,
Speaker 1: raising expectations for mergers and acquisitions under Trump's second administration.
Speaker 1: The news coming just as grocery store chain Alberton's backed
Speaker 1: out of a merger agreement with Kroger after it was
Speaker 1: blocked by a federal judge, as well as following up
Speaker 1: with a number of vicious back and forth in the
Speaker 1: legal space. Frank Akila, Sullivant, and Cromwell joins us now,
Speaker 1: who focuses on mergers and acquisitions. Frank, we heard that
Speaker 1: incredible bullishness from Paul Taubin. How much is that what
Speaker 1: you're hearing from pretty much every single one of your
Speaker 1: clients right now?
Speaker 7: Well, I think, first of all, we are definitely hearing
Speaker 7: it from the investment banking community, and you know, Paul
Speaker 7: has somebody I've worked with for a long time, and
Speaker 7: he certainly knows, you know, what's happening in the markets.
Speaker 7: What we're hearing from clients is that deals they talked
Speaker 7: about eighteen months ago, a year ago, they are now
Speaker 7: to talking about, Okay, now's the time to do it.
Speaker 8: Because one of the.
Speaker 7: Concerns under the current administration is that even if you've
Speaker 7: got approved, because ninety eight percent of the deals go
Speaker 7: through is it was taking six, nine, twelve months for
Speaker 7: deals that had no anti competitive aspects to it. So
Speaker 7: there was a real concern that you'd get tied up
Speaker 7: in the process and it would sort of frees you
Speaker 7: from a strategic financial point of view. So the view
Speaker 7: is that things are going to happen much more quickly. Yes,
Speaker 7: certain deals will get blocked, certain deals will get challenged,
Speaker 7: but it's going to be.
Speaker 8: A distinct minority.
Speaker 1: Is there a clear sight of what will get blocked
Speaker 1: that there is a certain type of transaction that will
Speaker 1: come into focus, whether it's foreign money coming into say
Speaker 1: a steel company, or whether it's say a tech company
Speaker 1: looking to pick up another smaller firm.
Speaker 7: Well, I think we have to remember that even in
Speaker 7: the Ronald Reagan era, which was pretty wide open in
Speaker 7: terms of merger clearance and antitrust generally, you know, there
Speaker 7: were deals blocked. So anti competitive deals have been blocked
Speaker 7: in every single administration, and I'm sure we'll get blocked.
Speaker 8: Now. Which sectors will they look at more closely?
Speaker 7: Certainly tech, you know, healthcare to a certain extent, retail
Speaker 7: things of that you know directly impact the consumer. Those
Speaker 7: things are definitely going to get looked at very closely.
Speaker 6: What do you see the appetitean for foreign companies and
Speaker 6: is it driven by this carrotenstick idea of potential tariffs
Speaker 6: or is it because they want exposure to US exceptionalism.
Speaker 7: I think we were going to going to see a
Speaker 7: lot of inbound M and A from Europe and Asia,
Speaker 7: particularly Japan, even if Harris was elected. The drive is that,
Speaker 7: you know, the US is growing, the markets in both
Speaker 7: Europe and Asia are fairly stagnant.
Speaker 8: So that's first of all.
Speaker 7: The second thing is if you're producing, if you're selling
Speaker 7: in the United States, you want to be producing here
Speaker 7: because the costs and the potential disruption in the supply chain.
Speaker 7: You know, it becomes more difficult, So we would have
Speaker 7: seen it anyway, but it's going to be increased.
Speaker 6: So what would have been your advice for nip On
Speaker 6: Steel wants to overtake US steal manufacturing factories continued to
Speaker 6: be in the United States, but both Biden and Trump
Speaker 6: said that they would block this deal.
Speaker 8: I think that's pure politics. Pennsylvania was the big state
Speaker 8: in play, and that's so.
Speaker 6: Maybe just timing. Don't do it around a huge presidential
Speaker 6: election with the number one swing state in.
Speaker 8: Le Hopefully that still happens, but we'll see.
Speaker 5: I just wonder for companies that are or private equity
Speaker 5: are looking abroad and companies have international soply chains right
Speaker 5: now and they're faced with a potential reality of tariffs
Speaker 5: changing the entire cost of business. Is that putting deals
Speaker 5: on ice right now or things getting a second look
Speaker 5: because of the risks in twenty twenty five, You.
Speaker 7: Know, I think people have been focused on supply chain issues,
Speaker 7: not necessarily because of tariffs, but since the pandemic, and
Speaker 7: that's really when we saw the first disruptions, which a
Speaker 7: lot of it is what led to inflation. So companies
Speaker 7: are very much focused on that. But you know, I
Speaker 7: think it's a driver of transactions as opposed to an
Speaker 7: impediment to transactions.
Speaker 5: One of the other hopes for a driver of transactions
Speaker 5: was just a lower rate environment, and we've got that
Speaker 5: to some extent. But there's a fear right now in
Speaker 5: this market that the FED can only go so far.
Speaker 5: Maybe it's a cut next week and then a pause.
Speaker 5: What does that do to deal activity?
Speaker 7: You know, first of all, interest rates are historically at
Speaker 7: historically low levels. I mean, we think about the last
Speaker 7: couple of years when they're extraordinarily low, but if you
Speaker 7: look at the Japanese economy where they've had close to
Speaker 7: zero interest rates and very stagnant business activity. I think
Speaker 7: if the economy is growing and you can build in
Speaker 7: a four percent interest rate or whatever, you can make
Speaker 7: most transactions work from a financial point of view. And also,
Speaker 7: right now, you have a tremendous amount of cash, whether
Speaker 7: it's private equity group strategic buyers. They have cash on
Speaker 7: their balance sheets, so they don't need to borrow as much.
Speaker 8: So I think that's a driver as well.
Speaker 1: That said, valuations will basically take a hit as a
Speaker 1: result of a rate being higher now than say when
Speaker 1: companies got founded or were bought out by certain private
Speaker 1: equity companies. And arguably this is the reason why we
Speaker 1: haven't seen more exits, why we haven't seen more activity.
Speaker 1: How much will there be a reckoning and valuations even
Speaker 1: if some of these deals get back on the market.
Speaker 7: Well, you know, one question is whether or not companies
Speaker 7: are going to be valued much longer term, So not
Speaker 7: looking at sort of the next twelve months, but really
Speaker 7: you know, two four or five years out, and so
Speaker 7: to the extent that you're doing an acquisition, I think
Speaker 7: you're going to be prepared to look at it much
Speaker 7: longer term. In terms of exits, I know, talking to
Speaker 7: you know, people in the VC and private equity world,
Speaker 7: they've not had a lot of exits the last few years.
Speaker 7: They're looking forward to a number of exits next year.
Speaker 8: And I think they're also.
Speaker 7: Whether it's through sales or IPOs. And I think the
Speaker 7: IPO market's going to be hot as well. That's not
Speaker 7: my area, but I think it's going to be hot.
Speaker 1: Paul Taubman said that it's going to be the fastest
Speaker 1: semina market in ten years.
Speaker 4: Do you agree, yes, Frank Kikuila.
Speaker 1: Thank you so much for being with us. Frank, Gequila,
Speaker 1: Sullivan and cromwellcome joining us now from JP Morgan Private
Speaker 1: Bank is Sam z Pas. He sits here and watches
Speaker 1: all of these headlines crossed. Sam, what's your impression.
Speaker 4: I think you guys have really nailed it.
Speaker 9: All of these central banks, between the FED, the SMB,
Speaker 9: and the ECB now are trying to ensure that inflation
Speaker 9: stabilizes a two percent, but how they're going about it
Speaker 9: is completely different. The FED is thinking about how do
Speaker 9: they inch down towards neutral, keeping policy restrictive enough because
Speaker 9: the economy is in a really good place and they
Speaker 9: don't want inflation to reaccelerate. Or I would argue that
Speaker 9: the SMB and now the ECB, with the drop of
Speaker 9: restrictive in the terminology, is actually just arguing, well, how
Speaker 9: far below neutral might we need to go to ensure
Speaker 9: that inflation stabilizes a two percent? And that divergence between
Speaker 9: what we're seeing with these major European central banks and
Speaker 9: the FED is really what underpins our view and fts
Speaker 9: that the dollar is going to be strong, particularly against
Speaker 9: these types of currencies.
Speaker 5: Does it go far enough because Robin Brooks of the
Speaker 5: Brookings Institute has been arguing that Europe desperately needs a
Speaker 5: weaker euro, that you're not going to get instituted anything
Speaker 5: that Droggy outlined of Europe coming together and spending more.
Speaker 5: The budget stand off in France shows that they have
Speaker 5: very little fiscal room and because of that they should
Speaker 5: be decoupling from the FED at this moment and be
Speaker 5: doing larger cuts. Do you think there's any credence of
Speaker 5: that argument.
Speaker 9: Yeah, I mean whether it's because you know, I don't
Speaker 9: know if a weaker Euro is going to actually spur
Speaker 9: innovation and investment, which is what that Droggi report made.
Speaker 4: But clearly the economic trajectories are very different.
Speaker 9: The FEDS or the US's is arguably tilted to the upside.
Speaker 9: The economy is in a really strong place. European economic
Speaker 9: economic outlook is definitely tilted to the downside when it
Speaker 9: comes to growth. I don't think the Euro is the
Speaker 9: main policy tool there. I think it's interest rates. But
Speaker 9: there's room to lower interest rates, there's room to move
Speaker 9: further into accommodative territory. That's going to be the ECB's priority.
Speaker 9: Hero is the knock on effect and it's going to
Speaker 9: end up in a weaker euro, but really it's going
Speaker 9: to be the rate channel that they focus on.
Speaker 6: We do see the euro dropping after this decision below
Speaker 6: one point h five against the dollar.
Speaker 4: Do you see parody next year?
Speaker 6: Given the fact that it's a weaker growth environment in
Speaker 6: Europe and on top of that they're dealing with a
Speaker 6: Donald Trump administration, we definitely.
Speaker 4: Wouldn't rule it out.
Speaker 9: In the private bank, the lower end of our kind
Speaker 9: of euro range that we're looking at in twenty twenty
Speaker 9: five is one oh two. But you know, as an
Speaker 9: FX strategist, I know the difference between one oh two
Speaker 9: and parody is you know, going to a few days,
Speaker 9: let's say, of trading. So a test of parody is
Speaker 9: definitely something that we're not ruling out, and definitely one
Speaker 9: of our high conviction views that we're talking about with
Speaker 9: our private bank clients is being underweight European assets, favoring
Speaker 9: the dollar, being short euros, funding in euros, all of
Speaker 9: these things that benefit from the same thing.
Speaker 6: Given the political process we're seeing in France and Germany,
Speaker 6: given the fact that they are dealing with a tougher
Speaker 6: environment in terms of potential trade wars in twenty twenty five,
Speaker 6: the ECB is saying they're going to follow data dependent
Speaker 6: meeting by meeting approach. Is that correct or do you
Speaker 6: think Legard she comes out and gives her rhetoric and
Speaker 6: answers questions she's going to tilt war to the dubbish side.
Speaker 9: I think the most interesting thing from the press conference
Speaker 9: that I'm going to be watching is so they've gone
Speaker 9: by twenty five basis points today, but the market is
Speaker 9: still pricing in about a thirty forty percent prob ability
Speaker 9: of a fifty basis point move at some point either
Speaker 9: in January or in March. Whether that there's some nod
Speaker 9: to the fact that that could be on the cards.
Speaker 9: They've so far been fairly let's say, cautious and guiding
Speaker 9: against a fifty basis point move. But I think because
Speaker 9: that market pricing is there, it's going to be really
Speaker 9: important to watch whether they endorse that type of probability
Speaker 9: or possibility. And then that's going to be how I
Speaker 9: take a profess conference to be whether they're moving in
Speaker 9: a more dubbish direction or not.
Speaker 5: Should we be talking about negative rates again like the
Speaker 5: SMB is.
Speaker 4: So I would say that what they said. Just to
Speaker 4: be clear, is that, as you said.
Speaker 9: No one likes them, but they're there and they work,
Speaker 9: particularly for a country that is really using let's say
Speaker 9: the currency as their main tool for monetary policy. I
Speaker 9: don't think that the SMB is going to go back
Speaker 9: into negative rates unless the ECB kind of forces them.
Speaker 4: Right.
Speaker 9: Think about when they went into negative rates last time.
Speaker 9: It's when the ECB went negative. The SMB felt like
Speaker 9: they needed to respond. I think that would take not
Speaker 9: just economic weakness in Europe to get the ECB to
Speaker 9: think about that, but really whether you want to call
Speaker 9: it a crisis or really deep recession if that comes
Speaker 9: to fruition, I have no doubt that that negative rate
Speaker 9: tool option is there in the European Union.
Speaker 8: They've used it before.
Speaker 1: Just to underscore that, the ECB dropped the reference to
Speaker 1: keeping rates restrictive in this latest memorandum, in this latest
Speaker 1: rate decision, How big of a shift is that, just
Speaker 1: to underscore in their rhetoric in their approach what previously
Speaker 1: they've been talking about inflation is really the pre eminent concern.
Speaker 9: I think this is definitely the I mean, I think
Speaker 9: everyone knew that they were going back to neutral the
Speaker 9: market is already pricing some probability they go into accommodative territory.
Speaker 9: But I think this really crystallizes the break between the
Speaker 9: ECV and the FED, and that the FED is still
Speaker 9: talking about keeping rates sufficiently restrictive to ensure that they
Speaker 9: bring inflation down from the high side, where now the
Speaker 9: ECV is officially basically endorsing that they're going to need
Speaker 9: to go not only to neutral, but maybe below, and
Speaker 9: that's how they're going to stabilize inflation.
Speaker 1: With this divergence potentially widening, at what point do we
Speaker 1: have to worry about a strong dollar becoming an actual
Speaker 1: disruptive force in global markets.
Speaker 9: So it tends to be the not just the strength
Speaker 9: of the dollar, but the magnitude of the moves. It's
Speaker 9: when you get really multi standard deviation moves over a
Speaker 9: month or two or three, that you start to see
Speaker 9: other central banks, whether they be in emerging markets or others,
Speaker 9: start to respond, whether they be through outright EFS intervention
Speaker 9: or trying to you know, not cut as much as
Speaker 9: maybe the market is pricing.
Speaker 4: I don't think we're there.
Speaker 9: The dollar is not as strong as it was in
Speaker 9: the second half of twenty twenty two, it's not as
Speaker 9: overvalued either, and I think again the dollars just kind
Speaker 9: of the byproduct of this divergence, and so at least
Speaker 9: at the private bank, we're continuing to lean into it.
Speaker 4: We don't think that this strip is.
Speaker 1: Over samzz If of a JP Morgan Private Bank.
Speaker 4: Thank you ever.
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