Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple, podcast, Suncloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. Let's dive in
Speaker 1: now to the equity markets. Dan Ives will join us
Speaker 1: here on tech. We're gonna try to have him give
Speaker 1: us a two hundred dollar top tick on Apple. We're
Speaker 1: not going to do that with beyond A. Kirschy's co
Speaker 1: head of investment Strategies, Burnsteain Private Wealth, but she is
Speaker 1: in the heart of the earning season as our Gina
Speaker 1: Martin Adams, what is the trajectory of earnings that you
Speaker 1: seem as Kerr Well, what we see as an earning
Speaker 1: season that's likely to be more volatile than the last
Speaker 1: several We're coming off of a substantial rebound and earnings,
Speaker 1: whereas in prior quarters earnings are up forty percent year
Speaker 1: over year, the consensus view for twenty two has really
Speaker 1: moved to a nine percent year over year view. Now
Speaker 1: that's still positive and that's one of the fundamental underpinnings
Speaker 1: that's really driving the equity market forward. But like you
Speaker 1: just said, this is going to be a story of
Speaker 1: figuring out supply and demand. The demand still appears to
Speaker 1: be there. Who's got pricing power is one of the
Speaker 1: fundamental differentiators in this earning season, Bietta. Are you buying
Speaker 1: consumer staples considering how much they've sold off in the
Speaker 1: fact that we have seen them able to pass along
Speaker 1: that pricing, Well, what I would say, at least says
Speaker 1: it's not about a sector, it's not about a style.
Speaker 1: It's about the stock picking. Stock picking is back, and
Speaker 1: even though thirty percent of managers only are beating the
Speaker 1: SMP year to date at Bernstein, we've had great success
Speaker 1: this year with stock selection. So it's not as easy
Speaker 1: as saying by this sector. It's about the company. Do
Speaker 1: they have the ability to pass on price increases? And
Speaker 1: some companies do and some companies don't, So you really
Speaker 1: have to differentiate by the individual company. So told to
Speaker 1: me about the pittas of support into next year for
Speaker 1: this equity market. If you're constructive next year, what are
Speaker 1: the things that you see right now that can persist
Speaker 1: into a new year. Well, what we see is still
Speaker 1: strong economic growth. Obviously, economic growth is fading from the
Speaker 1: incredible rate at which we were growing in this calendar year.
Speaker 1: But we're still looking for close to four percent GDP
Speaker 1: growth in the US and over four percent GDP growth
Speaker 1: globally for twenty two. So you've got that as an
Speaker 1: economic back drup. We don't think the Fed moves rates
Speaker 1: until tree. The taper argument is out there kind of
Speaker 1: well understood by the market, and as you were just discussing,
Speaker 1: it looks like we're still going to get some stimulus,
Speaker 1: even though it is a measure pace. This is really important.
Speaker 1: You have us vision for how along be out of
Speaker 1: that's for two thousand and twenty two. Like you said earlier,
Speaker 1: the visibility is murkier, Tom, So there's a wider range
Speaker 1: around that. Fair okay, But how do you get to
Speaker 1: that optimism we got, We got most people way under
Speaker 1: yond that. What's the Bernstein call that gives you that enthusiasm?
Speaker 1: I would say that the Bernstein bottom of view to
Speaker 1: get to that economic perspective is still that there is
Speaker 1: tremendous support in the overall output. What we're seeing is
Speaker 1: while you see manufacturing plateauing a bit. You still got
Speaker 1: services rebounding. Look at the supply and demand issue. The
Speaker 1: real issue has really been in goods. Services are coming back,
Speaker 1: you just said it earlier. Consumers are coming back, families
Speaker 1: are traveling again. We do have to be careful on
Speaker 1: the lower end of the consumer especially, but what we
Speaker 1: see broadly is still support for that strong economic PETA.
Speaker 1: One debate aspect of debate on this show repeatedly over
Speaker 1: the past few months has been what the investment thesis
Speaker 1: is around what's going on in Washington, d C. We've
Speaker 1: seen mostly dysfunction, but they are working to get something done.
Speaker 1: How do you price in the idea of more fiscal
Speaker 1: stimulus but also the idea of higher corporate taxes. Yeah,
Speaker 1: we think the market is really acknowledging that the corporate
Speaker 1: tax rate is going to move up a couple of
Speaker 1: percentage points, so you're looking at a mid single digit
Speaker 1: hit to earning scrolls. So there is some vulnerability in
Speaker 1: that current consensus number. The market has been a in
Speaker 1: a weight and see mode to see what actually happens.
Speaker 1: But if you look over the last six months, nothing
Speaker 1: close to what was originally proposed is going to happen.
Speaker 1: So while there is some downside pressure from the corporate
Speaker 1: tax right likely to come up, it's far less threatening
Speaker 1: than it was at the outset. And then, like you said, Lisa,
Speaker 1: there's the offset of more stimulus actually coming in to
Speaker 1: support the consumers. So I think the markets, you know,
Speaker 1: saying weed again, it comes back to companies pricing power
Speaker 1: that's supplied. Demand picture is going to be much more
Speaker 1: important for earnings outcomes and ultimately market outcomes. Bieta, we've
Speaker 1: been talking about some of the pessimism out there and
Speaker 1: that markets have rallied despite all of that gloomy talk.
Speaker 1: What is the biggest concern among clients who you speak
Speaker 1: to who have to figure out how to reposition. Well,
Speaker 1: it's not just the biggest concern amongst clients, but it's
Speaker 1: something that we're watching the most closely as a potential
Speaker 1: risk for the market, and it's what we've already brought
Speaker 1: up several times. Is inflation transitory and our house view
Speaker 1: is that it is going to moderate from the extraordinary
Speaker 1: price increases that we've seen over the summer, but that
Speaker 1: the likelihood of it being higher than it was pre
Speaker 1: pandemic is going up. So We're not talking about in
Speaker 1: nineteen seventies type environment, but we are talking about an
Speaker 1: environment that's in the two to three percent range in
Speaker 1: all likelihood compared to the much lower numbers that we
Speaker 1: sought pre pandemics. To thank you Bianno that of Burnstein
Speaker 1: Private Wealth Management on the path forward, rust Coat Street
Speaker 1: joining us now he's not ugly portfolio manager for the
Speaker 1: blank Rock Global Adication Fund. Just around the corner, Russ
Speaker 1: from all time highs walk me through while you're still
Speaker 1: constructive set. Good morning, John. You look, I think it's
Speaker 1: pretty straightforward up. We have a market that's earnings driven.
Speaker 1: You know, last year was all about the multiples. This year,
Speaker 1: multiples have been flat. They've actually been down a little
Speaker 1: bit in many sectors. But is Lisa pointed out a
Speaker 1: moment ago, earnings have been stellar, and yes there are
Speaker 1: reasonable concerns about margins. But when you have an economy
Speaker 1: it is growing this fast where nominal GDP is still
Speaker 1: growing at the best level in years, if not decades,
Speaker 1: you're seeing that manifest on the earning side, and that's
Speaker 1: been powering the market higher really all year. You know,
Speaker 1: I look ross where we are right now, and we're
Speaker 1: all trying to reset. I'm getting some optimism out there. Lisa,
Speaker 1: I think nailed it in her opening comments, and the
Speaker 1: idea that even with some worry about rising raids, steeper
Speaker 1: curves and all that, we see corporations delivering within this
Speaker 1: environment is at what you expect. Yes, I think the
Speaker 1: short answer is yes. And you know, just to be clear,
Speaker 1: I get the rate concern. We've had some volatility coming
Speaker 1: from the bond market that is likely to continue. But again,
Speaker 1: just to put things in perspective, we've got some deceleration,
Speaker 1: economy still very strong numbers. We've got the US household
Speaker 1: arguably in the best shape in decades, whether you look
Speaker 1: at savings, household net work, you look at the growth
Speaker 1: and income, and against all of that, against all of that,
Speaker 1: we've got a ten year at one sixty three that
Speaker 1: is not an exerstential threat to equity markets. When I
Speaker 1: look when I look Russ at the moment and the
Speaker 1: back and forth narratives, we see the gloom narrative is
Speaker 1: evaporated in the last ten or twelve days. What's the
Speaker 1: caution you have in portfolio management? How do you take
Speaker 1: those narratives, take them in and stay optimistic now I
Speaker 1: think one look at what's driving Mark gets to go
Speaker 1: back to earnings. But there are some risks out there,
Speaker 1: up the risk to needs. Not again whether the ten
Speaker 1: years at one sixty. Uh, it's around some of these
Speaker 1: supply issues. One because obviously it feeds into inflation, and
Speaker 1: as we've seen, inflation has been stickier than forecast six
Speaker 1: months ago. But it also can affect growth. But the
Speaker 1: key here is that you know, these supply issues are
Speaker 1: while they're widespread, they're more heterogeneous than I think. A
Speaker 1: lot of the narrative talks about what do I mean
Speaker 1: about that? Just take one segment of the economy. People
Speaker 1: have spoken about commodities. Even there you see all of
Speaker 1: this diversions, copper, iron, ore, lumber, aluminum, They're all doing
Speaker 1: different things. And this is just again within industrial commodity.
Speaker 1: So this notion that we're going to be strangled by
Speaker 1: supply I don't things right. But at the same time,
Speaker 1: whether you're talking about inputs, semiconductors or the most important one, labor,
Speaker 1: there are real supply constraints that we have to watch. Okay, Ross,
Speaker 1: so you talk about nuance, let's talk about nuance. You
Speaker 1: like consumer discretionaries, you're not that fond of financials at
Speaker 1: this point, even as you do expect yields to rise.
Speaker 1: Can you square that for us? Absolutely? I think there
Speaker 1: are a couple of things behind that. The first of
Speaker 1: which is we don't expect yields to rise that much.
Speaker 1: There's still a wall of money looking to invest. You
Speaker 1: still have everyone from pensions to UH endowments looking to
Speaker 1: take advantage of the backup and yields. You've got foreign
Speaker 1: investors looking to take advantage of backup and yields. Second,
Speaker 1: if you actually look at what's been happening on the curve,
Speaker 1: as you know, it's been flattening again, not up. Not
Speaker 1: a huge head wind, but again not a tail wind
Speaker 1: either for for financials. And then finally, I think we
Speaker 1: consider where do we want to be right now. One
Speaker 1: of the key ingredients is pricing power, and this the
Speaker 1: simple answers. We see better examples of pricing power in
Speaker 1: manufacturing UH in parts of materials in the consumer space,
Speaker 1: and we do in the financial space. It's not obvious
Speaker 1: how much pricing power banks and other financial companies have
Speaker 1: right now. I think they're better opportunities elsewhere in the economy.
Speaker 1: All right, and the other side that I thought was
Speaker 1: really interesting about how you are nuancing your portfolio. As
Speaker 1: you don't like gold, you think it's kind of useless
Speaker 1: as a hedge, you think it's kind of useless as
Speaker 1: a potential for profit. Aine why and when did you
Speaker 1: start to actually sour completely on gold as an allocation.
Speaker 1: So we were fairly long gold about fourteen months ago.
Speaker 1: I think, as we've discussed now the shows, we were
Speaker 1: really brought it down starting late last year earlier this year.
Speaker 1: And it's not that gold is always useless. There are
Speaker 1: periods such as last year in gold is an incredibly
Speaker 1: efficient hedge. The problem is gold is very responsive to
Speaker 1: real rates, and we have seen some normalization real rates.
Speaker 1: The other issues you've got to ask what is gold
Speaker 1: hedging against? What is its efficacy as a hedge? And
Speaker 1: there are two areas that people normally quote. One is
Speaker 1: risk unfortunate right, and now if you look at how
Speaker 1: gold is trading, is actually trading with a positive correlation
Speaker 1: with equities, so it's not really doing a great job
Speaker 1: hedge and equity risk. The other argument is gold hedges inflation.
Speaker 1: I think that's partly right, but it's right on a
Speaker 1: timeframe that most of us don't think about whether you're
Speaker 1: talking about literally decades if we're thinking about how do
Speaker 1: we want to hedge inflation in the near term. To
Speaker 1: my mind, the better hedge is focusing on equities with
Speaker 1: pricing power that are gonna keep up with that sticky
Speaker 1: inflation rush. Fantastic to catch up with you, sir, with
Speaker 1: record high it's just around coal and a rust Co strick.
Speaker 1: There a black rock widely anticipated by Global Wall Street.
Speaker 1: We bring a Daniel, I've senior equity research journalists at
Speaker 1: wed Bush, will do Apple here one question on Tesla
Speaker 1: this morning, Dan Ives reaffirm the accounting integrity that gets
Speaker 1: you to a thousand on Tesla and ms Wood to
Speaker 1: three thousand. I think it continues to I never viewed
Speaker 1: house as an automotive comes a disruptive technology player, and
Speaker 1: it comes down to can they do one points three
Speaker 1: to one point four million units next year for coming out?
Speaker 1: It's now start me profitable selling cars. You put that together,
Speaker 1: some of the parts, I think thousand dollars in East case,
Speaker 1: I think bull case. You we've got to reset on Apple.
Speaker 1: The new toys are the new chip is extraordinary by
Speaker 1: twelve course speed for those that don't understand that. All
Speaker 1: you need to know is there technological marvels. Do you
Speaker 1: adjust your bull case not your call of two hundred,
Speaker 1: but to get out to a three trillion dollar Apple
Speaker 1: at a hundred eighty one dollars a share or a
Speaker 1: four trillion dollar Apple a two hundred and forty one
Speaker 1: dollars a year state the bull case, Yeah, in bull
Speaker 1: case now to was two hundred, and I think that
Speaker 1: the part that's really the delta is the innovation from
Speaker 1: a marginal expansion story that you're gonna see a Apple
Speaker 1: on their new chips, as well as what I believe
Speaker 1: forget just the chip shortage for a second, but right
Speaker 1: now demands outstripping supply by about ten to fifteen thousand,
Speaker 1: you know iPhones. You know i'd say per day. You
Speaker 1: sort of put that together. This is something that you know,
Speaker 1: I believe right now we're running into about a five
Speaker 1: percent SHORTAGEES on iPhone going into holiday season. If you've
Speaker 1: got an idea down of what the product mixes like
Speaker 1: around that shortage, is the high marchin goods that can't
Speaker 1: get the chips? What is it? Is it broad based?
Speaker 1: What's you read on that down it's important for the
Speaker 1: Martin story. Yeah, I mean we got a call about
Speaker 1: five ten million shortage that that you could see going
Speaker 1: into holiday when you put all together. But I think
Speaker 1: the one thing too is a SPS continue to trend
Speaker 1: much higher. China the star of the show for Apple.
Speaker 1: That's going to be front and center going into next week.
Speaker 1: I think you put this all together, we think this
Speaker 1: is the three trillion dollar mark APP going to early
Speaker 1: next year. As well as the services you know continues
Speaker 1: to be the accelerant in that Cupertino growth story. Now
Speaker 1: you've got two new products from a hardware perspective in
Speaker 1: terms of the macro time talking about in AirPods. I
Speaker 1: I continue to think this is just a massive growth
Speaker 1: renaissance and Cupertino down hard to gain this out, But
Speaker 1: just for this quarter, given the supply issues, can you
Speaker 1: envision a story where we miss on the top line
Speaker 1: but beats on the bottom line for everything you've described.
Speaker 1: While I see it, it's a beat on September across
Speaker 1: the board. I think Nicked Gardens for December may be
Speaker 1: cut by about two to three percent just on that
Speaker 1: unit shortage, but then ultimately two thousand numbers come up
Speaker 1: and right now the streets looking through any sort of
Speaker 1: timing trans story issues and ship shortage to two thousand
Speaker 1: twenty two growth story. That's why haters will continue to
Speaker 1: hate on Apple. But in my opinion, this is the
Speaker 1: stock that continues to move higher right now. They have
Speaker 1: a supply issue, not demand issue of high class problem. Dan,
Speaker 1: how would you like to see them use their money
Speaker 1: on the outside of buying a country right which is
Speaker 1: always an option which they they have the I think
Speaker 1: I think right now it's going to continue to be
Speaker 1: about to buy back, David, I don't see them. The
Speaker 1: only acquisitions I see them doing is more and more
Speaker 1: we'll call it strategic content acquisitions, you know, as it
Speaker 1: goes to an Apple TV. But this is all the
Speaker 1: drum roll to what's gonna be the next product in
Speaker 1: the nation coming on Apple, the A R v R
Speaker 1: Apple Glass next year and then the Apple Car in
Speaker 1: two thousand twenty four. I think that's what the drum
Speaker 1: roll and Tom talks about. How you get the four
Speaker 1: trillion I think three trillion next year and the next
Speaker 1: two years you're looking at a four trillion dollar mark
Speaker 1: ap for Apple as this all plays out. You said
Speaker 1: that really the accelerant here is the services component. However,
Speaker 1: Apple is still very much a consumer products company, at
Speaker 1: least in terms of the reputation of consumers. We see
Speaker 1: certain pressures with respect to the app store. What services
Speaker 1: do you see really driving the charge as we really
Speaker 1: continue to look for the product side of Apple to innovate. Yeah,
Speaker 1: it's a great question. It's all probably the reratings store
Speaker 1: and you go back eighteen months goes services Street was
Speaker 1: assigning three n jibillion. We think it's worth one point
Speaker 1: four and one point five trillion, So by monization on cloud,
Speaker 1: on app store, you know, really across the ecosystem, and
Speaker 1: just go back to some of the head winds called
Speaker 1: epic trial and regulatory streets, kind of viewing that as
Speaker 1: background noise. And that's why this stock is the one
Speaker 1: that continues to power through that for a mid team grower.
Speaker 1: And what's a seventy billion annual revenue stream? Dan, you
Speaker 1: and I are close. I missed this one. Maybe I
Speaker 1: missed it a long time ago. When did you start
Speaker 1: covering GM? Yes, we look. We started covering GM over
Speaker 1: the last six months because my view in GM is
Speaker 1: that this is gonna be an e v transformation story.
Speaker 1: You know, as as it gets rerated, and I think
Speaker 1: what you're seeing a GM and four renaissance and Detroit
Speaker 1: you start to get more of rerating a year from
Speaker 1: that GM to double very quickly, Dan, are they gonna
Speaker 1: make a cur America once, not some fancy techy thing
Speaker 1: like Tesla, but something you can get the family in.
Speaker 1: I mean, look, two weeks ago, I was out at
Speaker 1: their test driving facility and I test you have a
Speaker 1: bunch of the models. I think it's gonna be a
Speaker 1: game change where they're coming out with a GM. I
Speaker 1: think marrying the team, phenomenal job what they're doing on
Speaker 1: this green tidal way. They're gonna be a big participant.
Speaker 1: Although right now it's Tesla's world. Everyone else is paying
Speaker 1: rent on evs and just quickly though, before you run
Speaker 1: for people who aren't familiar with the stocks you cover, Apple, Microsoft,
Speaker 1: Docu signed. Are you expecting them to get a tech
Speaker 1: like multiple of the time. Well, that's my view. My
Speaker 1: view is GM and four they start to get rerated
Speaker 1: on disruptive technology. As they convert that base. You start
Speaker 1: to do some math. You convert about timber Center GMS
Speaker 1: based by two thousand five I think there's a three
Speaker 1: digit stock and I think that's the key here as
Speaker 1: it starts to get more of a rerating on this
Speaker 1: green tidle. It's a five trillion dollar green tidal way.
Speaker 1: Tesla's the lead about many others are going to benefit
Speaker 1: by what you're seeing. The biggest transformation to the auto
Speaker 1: industry since nineties down amazing, fantastic acoun shops. I spent
Speaker 1: a bit more time on that in the future. Then
Speaker 1: I said that of wet Bush on GM general modes.
Speaker 1: We are advantaged with Julia Carnado of macro policy perspectives.
Speaker 1: She is truly an academic of the FED working in
Speaker 1: market economics with the knowledge of Dr Weidman as well.
Speaker 1: Did he leave Julia, would you suspect because of the
Speaker 1: transition from miracle to something new for the Republic of Germany?
Speaker 1: Oh yes, I mean that was a very important inflection
Speaker 1: point for the Eurozone and UH and and the appointment
Speaker 1: of drag Each as as Jonathan said, it changed everything.
Speaker 1: So I don't I remember very well the existential moment
Speaker 1: that we were in at that time. I was working
Speaker 1: for a European bank B and P Perry BA and
Speaker 1: UH we we actually had a repeated series of existential
Speaker 1: moments uh and Draggy turned out to be the glue
Speaker 1: that held it all together. In addition to Merkel Merkel's actions. Um,
Speaker 1: but I think that that was actually a very important
Speaker 1: transition away from the Bundesbank driven e c B towards
Speaker 1: something more flexible that had a view and a vision
Speaker 1: to holding the euro Zone together. The hallmark of your
Speaker 1: work at BMP paribas you were absolutely right about Tepe
Speaker 1: of g d P within that era. The reality for
Speaker 1: Germany is massive trade surplus two x billion, only China
Speaker 1: ahead of Germany, with a huge foreign common component, and
Speaker 1: yet a domestic economy flat on its back. Does the
Speaker 1: new Bundesbank president have to say let's get this domestic
Speaker 1: economy going or do they not care? I mean, I
Speaker 1: think to some extent they do need to to to
Speaker 1: say that. I mean, we do, we do still need
Speaker 1: UH demand driver in the Eurozone. All though you know,
Speaker 1: I think it's not quite as dire as where we
Speaker 1: were before. I mean, the Eurozone is is has weathered
Speaker 1: the crisis reasonably well as in a pretty decent position.
Speaker 1: But but yeah, I mean Germany is in the same position.
Speaker 1: And it's always been. It is a really key economy
Speaker 1: for the Eurozone and it does need to help drive
Speaker 1: demand for the region. Julia. The idea that one of
Speaker 1: the lone hawks on the e c B is gone
Speaker 1: raises the issue that we see more broadly for central banks,
Speaker 1: which is the pressure really is to not make a move,
Speaker 1: to not make a policy, or to not raise rates
Speaker 1: too soon. And yet the market in the United States
Speaker 1: is pricing in two rate hikes by the end of
Speaker 1: next year. What do you think it will take for
Speaker 1: the FED to actually get to that place given this
Speaker 1: pressure towards easy money policies for a longer time, I
Speaker 1: think the main scenario that has to develop for the
Speaker 1: Fed to move to rate hikes that steadily would be
Speaker 1: that most of this inflation do us turn out to
Speaker 1: be demand driven, that it really is reflective of a
Speaker 1: hot economy, a tight labor market generating strong wage gains,
Speaker 1: that the hawks are right about the labor supply not
Speaker 1: coming back, and that you really have these demand driven,
Speaker 1: incipient inflation pressures that are building and broadening. That is
Speaker 1: the only scenario in which rate hikes makes sense as
Speaker 1: the solution to the problem. If instead most of this inflation,
Speaker 1: or at least a significant portion of it, is tied
Speaker 1: to chip shortages and supply chain bottlenecks that get resolved
Speaker 1: over time. The FED hiking rates wouldn't do anything to
Speaker 1: fix that and would actually harm the broader recovery. So
Speaker 1: it's going to be really difficult to read these tea leaves. Luckily,
Speaker 1: the FED has some time. They've set out a tapering
Speaker 1: schedule that's probably not going to deviate, So we're tapering
Speaker 1: from here to June, and then then we'll see where
Speaker 1: we are by then. I think companies earning reports are
Speaker 1: going to be a really important bell weather indication of
Speaker 1: how companies are navigating this, because let's not forget one
Speaker 1: of the things that's been one of the narratives this
Speaker 1: year is that companies have actually been navigating these challenges
Speaker 1: surprisingly well and in a profitable way, and all the
Speaker 1: incentives are aligned for them to do so. We've so
Speaker 1: we've been in a highly profitable, highly productive economy despite
Speaker 1: all of these frictions and challenges. Does that continue to
Speaker 1: be the case? Do these problems get solved and we
Speaker 1: hum right into two That's not an unlikely scenario, all right,
Speaker 1: So in that scenario. If you see the FED staying
Speaker 1: on hold because everything's coming along, what sort of the
Speaker 1: tipping point in terms of ten year yields? I mean,
Speaker 1: if we keep coming along and the FED remains easy,
Speaker 1: the expectation is for ten year yields to rise at
Speaker 1: what point is unsustainable for an economy that has more
Speaker 1: debt than ever before? Oh, I think we're really far
Speaker 1: from those levels. Uh, you know where we are is
Speaker 1: I mean last recovery, we we discovered through the ebbs
Speaker 1: and flows of yields that three percent was the magic
Speaker 1: yield on the ten year That really started to hurt
Speaker 1: the economy, That really started to hurt the interest sensitive sectors.
Speaker 1: And obviously that might be lower now, it might be
Speaker 1: higher now, but it's we're certainly far from there if
Speaker 1: that is still the sort of magic number. Uh. So,
Speaker 1: you know, we could probably see, especially if this Rosier
Speaker 1: scenario turns out to be the right one, yields can
Speaker 1: rise and it's just fine for the economy. It actually
Speaker 1: serves to naturally cool things off, like housing which have
Speaker 1: been running super red hot. Julia, should we pay attention
Speaker 1: to Atlanta GDP now? I mean, it's a wonderful methodology.
Speaker 1: Great respect for the talent here in it. Frankly the
Speaker 1: other regional banks that are guessing GDP E. But do
Speaker 1: you find value in the vector of Atlanta GDP lower
Speaker 1: or even the sub number? Yeah, no, I do pay
Speaker 1: attention to Atlanta GDP. They they're not always right, but
Speaker 1: they have a very careful and methodology that I understand.
Speaker 1: And so we're actually tracking one and a half percent
Speaker 1: two I mean they're lower. Let me interrupt because the times, Juliet,
Speaker 1: I've got to interrupt here. If we have a sub
Speaker 1: two percent g d P, does that constrain the FED
Speaker 1: in tapering and also in rate hikes? Well, the problem
Speaker 1: with this number is it's all cars, it's all autos.
Speaker 1: It is all about the semiconductor shortage. So auto sales
Speaker 1: have plunged not because of lack of demand, but because
Speaker 1: of lack of supply. Inventories are down. This is also
Speaker 1: maybe constraining the construction sector. Where the number, what's the number,
Speaker 1: what's the real GDP number if it's are adjusted. Well
Speaker 1: I don't I don't do that myself pre g d P.
Speaker 1: But you can look at that number once the GDP
Speaker 1: UH number comes out, and it will be substantially higher.
Speaker 1: So domestic demand. We've seen retail sales be resilient, We've
Speaker 1: seen other service sectors remain resilient. Uh, the consumer is
Speaker 1: pretty resilient, the demand is pretty strong. So uh, you know,
Speaker 1: I think X Autos is going to be a pretty
Speaker 1: healthy above trend gain and we expect some you know,
Speaker 1: the beginnings of you know, higher production in Q four
Speaker 1: to produce another decent number were at four percent. Uh,
Speaker 1: So we'll see. Timing these bottleneck resolutions, especially with a SEMIS,
Speaker 1: has been maddeningly difficult. Every time we start to get
Speaker 1: production ramping up, COVID comes back up, another factory shuts down,
Speaker 1: and the whole thing uh you know, hits the brakes again,
Speaker 1: no pun intended um. And so we're we're you know,
Speaker 1: we're just watching day by day how how things evolve
Speaker 1: on that production front. Uh. Now, magnesium might be another bottleneck,
Speaker 1: So we'll we'll see how all of these things have all.
Speaker 1: But it's it's a wild ride given you know, remember
Speaker 1: was all about how resilient, surprisingly resilient the economy was.
Speaker 1: Now it's all about how surprisingly unresilient global supply chains are.
Speaker 1: But again, in sentenced are aligned to fix these problems.
Speaker 1: So uh and and COVID knock on wood. We're heading
Speaker 1: in the right direction. Uh. And you know, hopefully the
Speaker 1: economy can move forward and and and those wheels can
Speaker 1: spin which struggle into capop still with Judia, thank you
Speaker 1: as always, Judy Carran out of that, Mattcrowth policy perspectives
Speaker 1: just wonderful. This is the Bloomberg Surveillance Podcast. Thanks for listening.
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