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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is a breaking news update from Bloomberg, instant reaction

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Speaker 2: and analysis from our three thousand journalists and analysts around

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Speaker 2: the world. Mima kay As your.

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Speaker 3: Decision, no change in rates, but we have four four descents.

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Speaker 3: Laurie Logan, Beth Hammock, Neil Kashkari agreed rates should stay

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Speaker 3: on hold, but they did not support including an easing

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Speaker 3: bias in the statement at this time. Stephen Myron wanted

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Speaker 3: a quarter point cut. The last time there were four

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Speaker 3: descents October sixth of nineteen ninety two. As for that

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Speaker 3: easing bias, the statement still contains the phrase in considering

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Speaker 3: the extent and timing of additional adjustments to the target

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Speaker 3: range aligned meant to suggest that the easing cycle has

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Speaker 3: not necessarily ended. The Iran War figures prominently in the

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Speaker 3: economic overview. Inflation is elevated, in part reflecting the recent

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Speaker 3: increase in global energy prices. The statement says developments in

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Speaker 3: the Middle East are contributing to a high level of

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Speaker 3: uncertainty about the economic outlook. The Committee remains attentive to

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Speaker 3: the risks on both sides of its dual mandate. It says,

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Speaker 3: even though recent indicators suggest that economic activity has been

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Speaker 3: expanding at a solid pace, job gains have remained low

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Speaker 3: on average, the statement says, and the unemployment rate has

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Speaker 3: been little changed in recent months. The descents open up

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Speaker 3: a whole new line of questioning for Chair Powell. For

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Speaker 3: descents would ordinarily be a sign of discontent with the Chair.

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Speaker 3: Since this is likely Powell's last meeting as the chair,

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Speaker 3: it may not be anything more than expressions of concern

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Speaker 3: about the toll of the war. At each meeting this year,

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Speaker 3: the number of Open Market Committee members who have worried

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Speaker 3: they might have to raise rates has increased. We shall

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Speaker 3: see when we get a chance to talk to the.

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Speaker 4: I'm a key, stay close. I just want to run

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Speaker 4: through the price action. I've got a big question to

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Speaker 4: come back at you with in just a moment. Equities

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Speaker 4: have stayed slightly lower, no drama here, down by zero

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Speaker 4: point two percent. Into this decision, Yields were already elevated,

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Speaker 4: particularly at the front end of the curve. They stay

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Speaker 4: somewhat elevated, up seven basis points at three ninety. This

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Speaker 4: isn't the kind of decision that moves around crude could

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Speaker 4: is still higher by sixty seven one eighteen on Brent

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Speaker 4: Mike McKee. I just wonder coming into this decision, we

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Speaker 4: were talking about the possibility, the potential this Federal Reserve

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Speaker 4: introduced some symmetrical reaction function, but looking at that kind

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Speaker 4: of descent, I wonder if the descent alone has achieved

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Speaker 4: the same thing just by introducing to two way risk.

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Speaker 4: Given the level of descent you can see in this

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Speaker 4: afternoon's decision, that's a.

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Speaker 3: Very good point because, of course, if Powell leaves the FED,

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Speaker 3: that's one less vote that we know would be on

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Speaker 3: the easing side. At this point, we're going to have

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Speaker 3: to wait for the minutes unless the Chairman wants to

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Speaker 3: give us a number, which I doubt he will. Of

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Speaker 3: people who think that they should be at least suggesting

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Speaker 3: the idea of raising rates in the future, but it's

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Speaker 3: obviously grown since the last time, and feelings have grown

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Speaker 3: more certain, at least among those who think that two

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Speaker 3: way warning should be included in the statement. It's very,

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Speaker 3: very unusual. Obviously, it has been almost thirty years since

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Speaker 3: we've seen anything like this, and it is definitely a

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Speaker 3: sign that the FED is split over this question. And

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Speaker 3: one would think that if these people were willing to

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Speaker 3: dissent because they wanted a two way warning, because they

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Speaker 3: did not want an easing bias in the statement, that

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Speaker 3: they probably would have voted for a rate increase had

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Speaker 3: that been on the table.

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Speaker 4: Mamma Kay, appreciate your time you get in the news conference,

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Speaker 4: looking forward to you a lot of questioning. A little

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Speaker 4: bit late to that news conference, twenty seven minutes away,

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Speaker 4: we have an eight to four vote at the Federal Reserve.

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Speaker 2: That's some level of descent.

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Speaker 5: Yeah, And didn't Mike just say that that was the

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Speaker 5: first time we've seen that since October sixth, nineteen ninety two.

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Speaker 5: This is unusual to me. This really highlights the committee

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Speaker 5: aspect of this, and the fact that Fedcher J. Powell,

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Speaker 5: for all the job owning from the President, sits on

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Speaker 5: the more dubvish end of this, and I think that

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Speaker 5: that's very notable. So how does he message this given A,

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Speaker 5: he probably doesn't matter as much, but B, how does

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Speaker 5: he signal that this isn't necessarily a sign of dysfunction

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Speaker 5: ahead of a new FED chair coming in, but rather

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Speaker 5: how difficult this moment really is.

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Speaker 6: The expert on this is John Ferrell is the gentleman

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Speaker 6: from the United Kingdom, or descent is far more evident.

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Speaker 6: There were two moments of four descents in the eighty

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Speaker 6: nine to ninety two period, and the distinction here, John

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Speaker 6: is those descents were too ease to let up as

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Speaker 6: green span was stricter. And this is radically and historically different.

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Speaker 4: So I remember a level of descent, at degree of

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Speaker 4: descent back of the bank having that coming out, what

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Speaker 4: to do right? He wanted Milkiwi, And I remember the

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Speaker 4: governor being voted down on countless occasions. On this occasion,

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Speaker 4: I'm looking at this level of descent, and I just

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Speaker 4: wonder if the chairman would welcome it.

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Speaker 2: I think it's probably a good thing.

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Speaker 4: Right now that there is no group thing that we're

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Speaker 4: in a situation at the moment that deserves some kind

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Speaker 4: of debate about where policy should be and where is

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Speaker 4: it going and what kind of risks we face in

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Speaker 4: the economy right now. I actually also think that that's

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Speaker 4: the kind of committee that Kevin Wall should want to inherit.

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Speaker 4: Group think has been a problem at this institution for

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Speaker 4: the last five years. I wouldn't look at that as

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Speaker 4: a committee that's voted down the chairman in quite the

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Speaker 4: same way that the committee voted down the governor at

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Speaker 4: the Bank of England a number of years ago.

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Speaker 2: This feels somewhat different.

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Speaker 4: And if you want to move to some kind of

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Speaker 4: symmetrical reaction function at the Federal Reserve based on that vote,

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Speaker 4: I don't think you need it.

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Speaker 2: In the statement, I think the descent already speaks.

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Speaker 5: To it, which I think is why I'm noting the

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Speaker 5: increase in the dollar more than anything in body yields.

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Speaker 5: You're seeing a strengthening in the dollar versus the euro,

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Speaker 5: and that I think gives you a sense maybe at

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Speaker 5: least of the tendance question and the fact that this

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Speaker 5: truly is a committee.

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Speaker 6: But to get up in front of a pundits, is

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Speaker 6: this the committee and descent that President Trump wants?

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Speaker 2: That's a different question.

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Speaker 4: Yeah, this president clearly wants lower interest rates TK and

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Speaker 4: the kind of thing that we've just seen voted for

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Speaker 4: right now is not for lower interest rates. You've got

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Speaker 4: a committee that's worried about the prospect of a market

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Speaker 4: thinking they'll always get interest rate cuts that they don't

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Speaker 4: have to worry about inflation. First and foremost, the first

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Speaker 4: rule for any central banker, any real central banker anchor

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Speaker 4: inflation expectations.

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Speaker 2: This is part of the exercise.

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Speaker 5: Yeah, as Neil Dota put it, he messaged, it's clear

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Speaker 5: that worsh has his work cut out for him. Good

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Speaker 5: luck convincing some of these folks that it's time to

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Speaker 5: cut rates and potentially overall the whole system.

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Speaker 2: Different question entirely.

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Speaker 4: Bob Michael with us around a table from JP Morgan

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Speaker 4: Asset Management. Bobby Ready reflections on this decision.

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Speaker 1: Yeah, clearly it's in the dissense. Clearly they're moving more

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Speaker 1: towards a symmetrical policy. It's confirmed in the first paragraph

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Speaker 1: where they characterize inflation previously as remained somewhat elevated, they

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Speaker 1: remove the somewhat and it's just elevated. So they're telling

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Speaker 1: us they are increasingly concerned about the level of prices,

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Speaker 1: the level of oil, and the potential paths through to

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Speaker 1: the system. I think you're right. I think this is

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Speaker 1: less a message about JPAL and more a message to

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Speaker 1: the incoming FED chair that hey, we could be dissenting.

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Speaker 1: Get prepared for that. He may welcome that.

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Speaker 4: T K asked the question about the president, what the

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Speaker 4: president would like? This is another exercise it's quite important.

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Speaker 4: Everyone's been worried about the future of the Federal Reserve

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Speaker 4: Central Bank independence.

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Speaker 2: Will the chairman stay on? That degree of descent makes.

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Speaker 4: The life of I think Chairman Powell easier to walk

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Speaker 4: away from this institution. There's no capture of this institution.

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Speaker 4: This institution is still independent. Inflation expectations are still anchored,

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Speaker 4: and that is not dependent on fetch J. Pow staying

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Speaker 4: gone as a governor on this board for the next

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Speaker 4: two years.

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Speaker 5: I see what you did there.

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Speaker 2: So maybe they agreed.

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Speaker 5: Four people dissent, although one of them is perhaps in

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Speaker 5: a different direction. You're to Jerome Powell coming out and

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Speaker 5: saying I'm gone.

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Speaker 2: Good luck for you. Go ahead, Kevin.

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Speaker 4: I'm not suggesting there was any choreography here, just that

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Speaker 4: there are some benefits to that level of descent stefinitely. Rather,

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Speaker 4: Wolf's research has been going through the statement and reacting

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Speaker 4: to all of this and looking at the price action. Stephanie,

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Speaker 4: you're really take please.

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Speaker 7: Yeah, I mean, I think when it tells us that

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Speaker 7: the committee is certainly divided, and they're not going to

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Speaker 7: be a committee that's willing to just cut rates because

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Speaker 7: Warts wants them to do so, and It's also interesting

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Speaker 7: because in the hearing last week, Warsh noted that he

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Speaker 7: wants the bit in the room, but he wants a

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Speaker 7: more unified statement, and that's certainly not what we got today.

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Speaker 7: So the odds of COTS later this year certainly should

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Speaker 7: go down on the back of what we're seeing today.

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Speaker 7: It's just a committee that certainly doesn't even want to

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Speaker 7: have an easing bias, let alone easing in the near term.

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Speaker 5: Stephany, does it surprise you that more members of the

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Speaker 5: Federal Reserve didn't get on board with moving to a

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Speaker 5: more symmetrical type of approach.

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Speaker 2: A little bit?

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Speaker 7: I mean it certainly it sounds like it was a

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Speaker 7: fairly divided group, and perhaps there were others that were

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Speaker 7: even more on the fence that didn't officially dissent. This

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Speaker 7: was a big question for the meeting today. There was

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Speaker 7: actually two big questions. One was were they going to

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Speaker 7: maintain the easing bias in the statement? And many thought

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Speaker 7: that they would actually remove it, So that was, you know,

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Speaker 7: perhaps a bit of a surprise to some extent. And then,

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Speaker 7: of course the other question is how is how we're

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Speaker 7: going to answer the questions about what his plans are

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Speaker 7: once wars is actually confirmed.

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Speaker 6: But Michael, what is our overall stimulus right now? I

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Speaker 6: know we had timing for tech season where everybody got

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Speaker 6: a check in the mail and all that, But what

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Speaker 6: is all of this discussion about an historic post COVID

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Speaker 6: stimulus that it's starting to make the wheels come off

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Speaker 6: the wagon.

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Speaker 1: Yeah. Well, when I was listening to Matt and Subadra

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Speaker 1: earlier going into this, I was thinking the Fed would

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Speaker 1: be nuts not to move to a symmetrical posture because

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Speaker 1: we know we have higher prices. And what I heard

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Speaker 1: from them is the economy is doing just fine. They're right,

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Speaker 1: You've got the stimulus from the one big, beautiful Bill

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Speaker 1: Act that's not finished. We know there's a tremendous amount

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Speaker 1: of CAPEX. When I talk to our clients, they're just

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Speaker 1: getting started on the AI journey. There's a lot more

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Speaker 1: spending to come. And we also know there's a lot

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Speaker 1: of money slashing around the system. You look at any

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Speaker 1: measure of money, M two deposits, you know, money market funds,

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Speaker 1: they're still going vertical.

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Speaker 2: Can I do an audible?

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Speaker 6: Yeah, you're doing audible here to get the four pm

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Speaker 6: and four fifteen pm. You're the bondpro what's sowhat of

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Speaker 6: thirty billion dollars from one of these mag simis. They're

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Speaker 6: going to put the money out, They're going to call

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Speaker 6: Bob Michael, it's all going to go to JP Morgan.

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Speaker 6: And when they do that, what does it mean for

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Speaker 6: the dynamics of their balance sheet? What does it mean

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Speaker 6: for the dynamics of the American fixed in gum market?

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Speaker 1: Well, the guys reporting today, if they were to issue

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Speaker 1: thirty billion, you'd hardly notice it. That's how big they are,

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Speaker 1: that's how little leverage they've carried. And in our conversations

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Speaker 1: with a lot of big borrowers, we want to know

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Speaker 1: do they see the demand? These guys have the demand.

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Speaker 1: They'll show you the demand, and they can't monetize it

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Speaker 1: until they put in place the capacity. So there is

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Speaker 1: a big bill to go, and I think these guys

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Speaker 1: are right to borrow and get that bill going.

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Speaker 4: Are you some twos at three ninety three up? Ten

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Speaker 4: basis points off the back of this?

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Speaker 5: Do you know?

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Speaker 1: You ask me what if the FED did this and

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Speaker 1: we never really thought they were going to do this,

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Speaker 1: It's a very artistic way to do it. Nope, I

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Speaker 1: wouldn't touch it to that.

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Speaker 4: Point, to that framing, that's really important. Haven't they achieved

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Speaker 4: the same thing you don't need it in the statement?

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Speaker 4: Haven't the sents achieved the same thing?

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Speaker 1: Well, it's kind of in the statement. It's the last

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Speaker 1: line at the statement. It's and you talked about was

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Speaker 1: this choreographed or not? I absolutely think it was. Every

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Speaker 1: single word in the statement is choreographed. They sit there

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Speaker 1: and they debate it. I think this very nicely opens

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Speaker 1: the door for Jay to peacefully deparse it, depart from

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Speaker 1: the FED.

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Speaker 5: So this is their sort of offering to him. The

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Speaker 5: farewell gift to him is here you go, and that

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Speaker 5: ultimately we're going to give Kevin wartsh a hard time.

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Speaker 1: I don't well, okay, I didn't say that. I think

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Speaker 1: what they're indicating is, like, we recognize inflation is a problem.

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Speaker 1: We're not going to sit there and keep advocating for

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Speaker 1: more monetary ease. We're going to be more balance, don't

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Speaker 1: worry about the independence of the FED. Jay go off

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Speaker 1: into retirement.

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Speaker 4: You said you wouldn't buy it. Why wouldn't you buy it?

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Speaker 1: Because I think the FLED has flipped the tables on

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Speaker 1: the markets right now, and what does that mean I

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Speaker 1: think they've now shifted to something. It's not outright hawkish,

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Speaker 1: but it's more hawkish than where they've been. And then

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Speaker 1: you step back and go there is still stimulus out there,

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Speaker 1: and we're in the middle of the Middle East conflict.

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Speaker 1: Those things have yet to be settled. Let's just get

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Speaker 1: out of the way of this and see where them.

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Speaker 2: Okay, so let's build on that. Let's extend the conversation

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Speaker 2: a little bit more.

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Speaker 4: Tens are at full forty one right now, what kind

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Speaker 4: of numbers are you thinking about?

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Speaker 1: Well, we were breaking through to new highs. I don't

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Speaker 1: think you get to five percent, but do you get

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Speaker 1: to something like four and five eighths, Probably, then I

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Speaker 1: get interested. Then you're starting to you're putting a percent

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Speaker 1: on the Fed funds rate. And I think it's one

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Speaker 1: thing to switch to a symmetrical bias. It's another thing

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Speaker 1: to actually come in and start hiking rates. And I

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Speaker 1: did say I don't expect any changes in rates this year.

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Speaker 1: That's cuts or hikes.

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Speaker 6: John. Five eighths is how we used to quote papers.

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Speaker 6: Thirty seconds in the next hour.

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Speaker 4: I'm aware tends right now at full forty one. With

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Speaker 4: this move at the front end of the curve. As

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Speaker 4: I mentioned, up ten basis points three ninety four, let's

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Speaker 4: call it three ninety three. Equity start to break down

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Speaker 4: just a little bit. Don't make too much of this.

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Speaker 4: We're down by zero point three percent on the S

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Speaker 4: and P five hundred. You will notice Bramma the on

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Speaker 4: the performance in a Russo down by one percent plus.

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Speaker 5: These are the companies that are most vulnerable to rates

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Speaker 5: going higher. I really am struck by what Bob's talking about,

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Speaker 5: because this is a market shift, and really it does

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Speaker 5: highlight how much this war has changed the dynamic fundamentally

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Speaker 5: for people who believed that rates would just gradually go lower.

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Speaker 5: And if they don't, how much does that change some

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Speaker 5: of the expectations about the equal weight market which we've

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Speaker 5: seen in being baked in, and frankly about the broadening

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Speaker 5: out trade, and adding to that, how much steam can

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Speaker 5: it be behind some of the tech trades that are

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Speaker 5: somewhat dependent on some of.

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Speaker 2: The consumer aspects.

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Speaker 5: I'm thinking, for example, meta advertising or Amazon, your cleaning supplies,

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Speaker 5: your children's costumes, whatever children's costumes.

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Speaker 2: I ended to buying a lot of those. Okay, well,

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Speaker 2: I had a Halloween it's getting the discount.

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Speaker 5: And also senior parties.

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Speaker 4: Okay, all right, important stuff. Hey's definitely good to hear

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Speaker 4: from me this afternoon. Thanks for your time, Stephanie Roth

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Speaker 4: for for research to talk about the equity market. Kate

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Speaker 4: Moore City joined us now for more. Kay, you're just

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Speaker 4: starting to move higher, getting a squeeze over and crude

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Speaker 4: Brent out to close to one twenty. Equities somewhat softer

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Speaker 4: but not really looking at this as a dramatic event.

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Speaker 4: How would you frame things?

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Speaker 8: Yeah, I don't think today's event and would have said

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Speaker 8: is the big event for equities right now. This is

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Speaker 8: also like a massive lallabluzo when it comes to earnings

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Speaker 8: this week, which you know Donvin quite well. And I

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Speaker 8: think the equity market attention is much more there and

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Speaker 8: so far everything that we got yesterday, expectations for Act

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Speaker 8: of the Clothes today and tomorrow are for actually quite

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Speaker 8: strong numbers, reiterating not just the AI text story but

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Speaker 8: also actually a very solid US consumer. So I think

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Speaker 8: that is really where kind of equity risk is focused

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Speaker 8: right now. Less so on this what is what I

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Speaker 8: would argue is also a very interesting set of descents

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Speaker 8: in the FMC.

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Speaker 5: That said, is there a level or is there some

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Speaker 5: sort of rate of change that gets you concerned as

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Speaker 5: an equity investor about what's going on in the bond market.

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Speaker 5: Should this FED suddenly move to put rate hikes squarely

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Speaker 5: on the table.

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Speaker 8: It seems unlikely in our view that the FED is

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Speaker 8: going to put great hikes on the table. Lisa, I

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Speaker 8: would say that is not in our kind of any

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Speaker 8: of our distribution for the back half of this year stability,

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Speaker 8: even as inflation is warm, and even as the FED

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Speaker 8: is going to wait and see and more descent happens

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Speaker 8: across the FMC. But we of course will watch what happens.

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Speaker 8: Because the relationship between equities and bonds has broken down

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Speaker 8: a number of times over the last couple of years.

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Speaker 8: The correlations are not exactly what they had been historically,

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Speaker 8: and bonds have not been the safe even asset that

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Speaker 8: some people had become used to in their early days

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Speaker 8: of acid allocation. So across our multi asset portfolios, we've

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Speaker 8: been more Tactical's continue to be short duration. I heard

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Speaker 8: Bob a moment ago say he wouldn't be buying two

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Speaker 8: years at this point. I tend to agree with that.

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Speaker 8: And we tend to like to take most of our

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Speaker 8: risk on the equity side and think about other diversifiers

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Speaker 8: outside of the fixed income space.

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Speaker 6: Gay I look at where we are in the market,

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Speaker 6: and John I brought this up today because frankly I

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Speaker 6: have misplaced this. The Dow up twenty percent one year trailing,

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Speaker 6: SPX up twenty eight percent one year trailing, all in

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Speaker 6: Nasdaq of forty one percent one year trailing. Kate's completely

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Speaker 6: separated from the nation's angst. What do you see as

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Speaker 6: an indication that that keeps going and how can the

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Speaker 6: Fed and assist with that?

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Speaker 8: Yeah, Tom, One of the things we've been focusing on

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Speaker 8: in something our Investment Committee was talking about earlier today

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Speaker 8: is the massive dispersion in terms of sectoral earnings, not

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Speaker 8: just this order, but through the balance of twenty twenty six.

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Speaker 8: And this is also kind of what we're seeing in

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Speaker 8: the overall economy. We've gotten hired. I think of talking

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Speaker 8: about the case shaped consumer because even the bottom part

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Speaker 8: of the case seems to be holding up relatively well

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Speaker 8: with decent real wages, but there is a huge amount

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Speaker 8: of dispersion below the surface in the equity market fundamentals

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Speaker 8: and in the macro fundamentals, and that can make people uncomfortable,

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Speaker 8: But unfortunately, what's really driving the market higher has been

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Speaker 8: extremely strong earnings and expected free cash flow from the

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Speaker 8: large parts of the market cap. And we continue to

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Speaker 8: stay kind of anchored to the equity risk and loving

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Speaker 8: US large caps, even as we recognize it is going

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Speaker 8: to be a very uneven experience and perhaps a better

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Speaker 8: opportunity for some more active management as we go through

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Speaker 8: this year.

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Speaker 4: Unfortunately, part of the downs right now monitoring equity markets,

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Speaker 4: bond markets, and commodity markets. More importantly is following these

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Speaker 4: headlines regarding the Middle East, and we've got more from

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Speaker 4: the President this time, some comments on the Russian leader,

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Speaker 4: Vladimir Putin. They've had a conversation. The Russian leader said

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Speaker 4: he'd like to help with the Iranian enrichment. There has

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Speaker 4: been some suspicion for a while that maybe that in

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Speaker 4: rich Iranian would be moved to a third party, and

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Speaker 4: perhaps that would be Russia. And some headlines I have

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Speaker 4: to say, looking at this that are lose to that, Lisa,

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Speaker 4: at least a soufternoon now, as we said on countless

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Speaker 4: occasions over the last two months, one headline that speaks

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Speaker 4: to one story will last about five minutes, and things

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Speaker 4: can quickly change. All I can do with you is

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Speaker 4: share with you the current headlines, and that the headlines

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Speaker 4: that dropped just moments ago.

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Speaker 5: Yeah, and they include the idea of potentially having a

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Speaker 5: ceasefire with Ukraine in Russia and then Urania moving from

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Speaker 5: ran over to Russia. I mean a lot of things

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Speaker 5: that are a lot of questions what you do with this.

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Speaker 2: I think people have.

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Speaker 5: Shrugged it off and moved on because they don't know

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Speaker 5: what to do with it, because it's just a headline.

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Speaker 5: So they look at things like, oh, the placating idea

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Speaker 5: of rates going down. You start removing some of these pillars.

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Speaker 5: That's when suddenly some of the inks starts to percolate

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Speaker 5: up a little bit more.

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Speaker 4: Initially, I think this market took comfort from the intent

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Speaker 4: they commit to de escalation, the commitment to de escalation

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Speaker 4: and not returning to hostilities. But the fact of the

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Speaker 4: matter is that over this entire period, creud's not been moving.

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Speaker 4: Energy has not been flowing sufficiently, and every day for

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Speaker 4: the last eight sessions, crew keeps grinding higher.

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Speaker 2: It's intriguing about this.

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Speaker 4: Every time we get a bit of hopeium some headlines

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Speaker 4: and reports here, there and everywhere. CREWD has really stopped

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Speaker 4: responding to it in the same way Brent is still

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Speaker 4: elevated here TK one to eighteen and up on the

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Speaker 4: session by six percent.

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Speaker 6: I really agree with that. And you see the angst

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Speaker 6: in Southeast Asia and other selected geographies, and it's way

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Speaker 6: more tangible than anything we have. The sum of this

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Speaker 6: is real GDP and the inflation piled on top of it.

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Speaker 6: Kate Moore, if you're still with us, I'm absolutely fascinated

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Speaker 6: how you feel nominal GDP will affect our listeners. In viewers,

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Speaker 6: it's still going to be buoyant, I guess. But it's

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Speaker 6: a different nominal GDP, isn't it.

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Speaker 5: Yeah, it is.

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Speaker 8: And look, I think some of this tom is getting

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Speaker 8: reflected in the consumer confidence data and the surveys that

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Speaker 8: have come out out where consumers are talking about their discomfort.

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Speaker 8: It's not just high gas line prices, and maybe it's

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Speaker 8: they don't like the direction of the country. They don't

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Speaker 8: feel as confident as they have in the past. Yet

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Speaker 8: the thing that I keep anchoring on is actually what's

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Speaker 8: happening in their behavior. And we've been looking at all

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Speaker 8: this high frequency consumer data VITA, whether it's around dining

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Speaker 8: outside the home or traveling and spending. And we've got

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Speaker 8: some good reports from our couple early consumer companies this quarter,

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Speaker 8: and all of it is showing that despite all these

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Speaker 8: negative surveys, people feeling uncomfortable with the path of the economy,

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Speaker 8: that they're continuing to operate more bau. So, Tom, this

440
00:20:35,920 --> 00:20:37,560
Speaker 8: is a little bit of a friction I think we have,

441
00:20:37,960 --> 00:20:40,199
Speaker 8: which is maybe we don't get a massive acceleration that

442
00:20:40,280 --> 00:20:42,800
Speaker 8: benefits all parts of the economy, but as long as

443
00:20:42,800 --> 00:20:45,920
Speaker 8: both the consumer and the AI text space continue to fire,

444
00:20:46,280 --> 00:20:47,960
Speaker 8: you know, we feel like you can't be on the

445
00:20:47,960 --> 00:20:49,240
Speaker 8: sidelines for risk assets.

446
00:20:49,280 --> 00:20:51,480
Speaker 4: Okay, it's going to say the cash up, as always

447
00:20:51,560 --> 00:20:54,040
Speaker 4: came more than of citsy breaking down the secuity market

448
00:20:54,040 --> 00:20:56,520
Speaker 4: and reflecting on this decision from the Federal Reserve about

449
00:20:56,520 --> 00:20:59,000
Speaker 4: twenty minutes ago. If you're just churning again, welcome to

450
00:20:59,040 --> 00:21:01,159
Speaker 4: the program. At about him time, we're here from the

451
00:21:01,240 --> 00:21:03,639
Speaker 4: Chairman of the Federal Reserve, Chairman J. Powell, in what

452
00:21:03,720 --> 00:21:07,080
Speaker 4: could be should be his final meeting at the Federal Reserve.

453
00:21:07,200 --> 00:21:07,880
Speaker 2: Just moments ago.

454
00:21:08,000 --> 00:21:10,320
Speaker 4: Twenty minutes ago, we had a decision from the Federal

455
00:21:10,320 --> 00:21:13,080
Speaker 4: Reserve to leave interest rates unchanged. What stood out was

456
00:21:13,119 --> 00:21:16,320
Speaker 4: the degree of descent eight to four, eight four, and

457
00:21:16,359 --> 00:21:18,520
Speaker 4: that eight to four vote marking the first time since

458
00:21:18,520 --> 00:21:23,159
Speaker 4: October nineteen ninety two the four officials have dissented against

459
00:21:23,200 --> 00:21:26,040
Speaker 4: an f WEBC decision, so something we haven't seen a

460
00:21:26,080 --> 00:21:28,959
Speaker 4: number of decades. All of this and anticipation of earnings

461
00:21:28,960 --> 00:21:31,120
Speaker 4: after the closing bow from some of the biggest companies

462
00:21:31,160 --> 00:21:36,159
Speaker 4: on the planet, including Microsoft, Amazon, Meta Alphabet, all of

463
00:21:36,160 --> 00:21:38,679
Speaker 4: that's still to come, which has supported the Nasdaq. The

464
00:21:38,720 --> 00:21:40,840
Speaker 4: nasdak is still positive by a quarter of one percent.

465
00:21:41,000 --> 00:21:42,240
Speaker 4: But if you want to look at the small caps

466
00:21:42,320 --> 00:21:44,919
Speaker 4: right now, the Russell down by one percent. Allow me

467
00:21:44,960 --> 00:21:46,600
Speaker 4: to give you a why this move at the front

468
00:21:46,680 --> 00:21:48,679
Speaker 4: end of the yield curve on a two year up

469
00:21:48,800 --> 00:21:51,280
Speaker 4: nine basis points to three ninety three Off the back

470
00:21:51,320 --> 00:21:54,200
Speaker 4: of this move in the commodity market, Lisa Brent crude

471
00:21:54,320 --> 00:21:55,960
Speaker 4: one to eighteen and up six percent.

472
00:21:56,040 --> 00:21:58,320
Speaker 5: Fed funds features have now priced out completely at any

473
00:21:58,400 --> 00:22:01,080
Speaker 5: rate cuts this year. We are now racing out interest

474
00:22:01,119 --> 00:22:03,960
Speaker 5: rate cuts by the Fed Reserve for twenty twenty six.

475
00:22:04,240 --> 00:22:06,840
Speaker 5: Whether we shift to people starting to price in rate

476
00:22:06,880 --> 00:22:08,639
Speaker 5: hikes like we did a couple of weeks ago. That

477
00:22:08,680 --> 00:22:11,639
Speaker 5: remains to be seen. It also is unclear exactly how

478
00:22:11,720 --> 00:22:13,200
Speaker 5: much the press conference can really do to that. It

479
00:22:13,240 --> 00:22:17,359
Speaker 5: will be political intrigue and drama whether Jerome Powell's future. Nonetheless,

480
00:22:17,480 --> 00:22:20,199
Speaker 5: this market is moving, it's responding, and the idea that

481
00:22:20,240 --> 00:22:22,439
Speaker 5: the strength of the US economy can continue is the

482
00:22:22,480 --> 00:22:25,040
Speaker 5: reason why this is viewed as more inflationary right now

483
00:22:25,200 --> 00:22:28,679
Speaker 5: than maybe disinflation or outright deflationary later on.

484
00:22:28,840 --> 00:22:32,240
Speaker 4: The cross asset moves are particularly spectacular. We've gone back

485
00:22:32,280 --> 00:22:34,320
Speaker 4: to where we were about a month ago, about a

486
00:22:34,320 --> 00:22:37,200
Speaker 4: month ago when the equity market was about thirteen percentage

487
00:22:37,200 --> 00:22:38,840
Speaker 4: points south of where it is right now. In the

488
00:22:38,880 --> 00:22:40,960
Speaker 4: s and P five hundred yields to bat through the

489
00:22:41,000 --> 00:22:43,239
Speaker 4: heights on some maturities, I'm looking more at the long

490
00:22:43,320 --> 00:22:45,399
Speaker 4: end of a curve. The long bond on thirties and

491
00:22:45,480 --> 00:22:48,080
Speaker 4: crude has made new highs as well. And what's more important,

492
00:22:48,080 --> 00:22:50,720
Speaker 4: I think, away from the front month of the future's curve,

493
00:22:51,000 --> 00:22:53,240
Speaker 4: is what's happening on longer dated prices as well. You've

494
00:22:53,240 --> 00:22:55,720
Speaker 4: talked about this around the week on Bloomberg's surveillance promo

495
00:22:55,880 --> 00:22:58,680
Speaker 4: where decembers training, where the latter months are the back

496
00:22:58,760 --> 00:23:01,760
Speaker 4: end of the future's curve that's making new highs as well.

497
00:23:01,800 --> 00:23:04,120
Speaker 4: This is a market that's pricing high for longer, not

498
00:23:04,160 --> 00:23:06,200
Speaker 4: just for interest rates, but for energy as well.

499
00:23:06,480 --> 00:23:08,439
Speaker 5: And that's why we always have been talking about boiling

500
00:23:08,440 --> 00:23:10,520
Speaker 5: the frog, because it's getting harder and harder and harder.

501
00:23:10,520 --> 00:23:13,040
Speaker 5: And at what point do capital markets start to slow

502
00:23:13,119 --> 00:23:15,359
Speaker 5: down as a result of benchmark rates going higher and

503
00:23:15,400 --> 00:23:16,960
Speaker 5: inflationary pressures being This has.

504
00:23:16,920 --> 00:23:19,080
Speaker 4: Been the exercise for US now for the best part

505
00:23:19,080 --> 00:23:22,679
Speaker 4: of two months. Energy shock, rates shock, What does it

506
00:23:22,760 --> 00:23:24,760
Speaker 4: mean for growth? But that's the question I think is

507
00:23:24,800 --> 00:23:25,960
Speaker 4: still an open ended question.

508
00:23:26,040 --> 00:23:26,280
Speaker 2: Really.

509
00:23:26,320 --> 00:23:29,399
Speaker 4: We've seen it in commodities, we've seen it in energy,

510
00:23:29,640 --> 00:23:32,280
Speaker 4: and I'm asking this question with America in might before

511
00:23:32,280 --> 00:23:34,399
Speaker 4: we get to the international bank drop where it's much harder.

512
00:23:34,560 --> 00:23:36,800
Speaker 2: What does it mean for US growth if anything at all?

513
00:23:36,920 --> 00:23:39,240
Speaker 1: Well, I think we have to acknowledge that the three

514
00:23:39,280 --> 00:23:41,960
Speaker 1: descents weren't in favor of hikes. They were in favor

515
00:23:42,000 --> 00:23:45,959
Speaker 1: of a more symmetrical policy, which leaves three quarters of

516
00:23:46,000 --> 00:23:50,960
Speaker 1: the FED still biased towards ease. So let's accept that.

517
00:23:50,960 --> 00:23:55,560
Speaker 1: That said, the bar to hikes just got lowered a notch.

518
00:23:56,200 --> 00:23:59,080
Speaker 1: What does it mean for growth? It means that unless

519
00:23:59,119 --> 00:24:04,439
Speaker 1: the economy can absorb higher prices from energy and higher

520
00:24:04,480 --> 00:24:07,520
Speaker 1: cost of funding from where rates are, then you're going

521
00:24:07,600 --> 00:24:09,120
Speaker 1: to see a real slow down.

522
00:24:09,320 --> 00:24:12,359
Speaker 5: At what point do higher yields start to crimp the

523
00:24:12,400 --> 00:24:15,240
Speaker 5: capital markets activity? I'm talking about all the bond sales.

524
00:24:15,280 --> 00:24:18,600
Speaker 5: I'm talking about beyond that, mergers and acquisitions that have

525
00:24:18,680 --> 00:24:20,320
Speaker 5: been absolutely flying recently.

526
00:24:21,640 --> 00:24:24,880
Speaker 1: I don't think we're there yet. I think really you'd

527
00:24:24,880 --> 00:24:28,240
Speaker 1: have to get the ten year above five percent to

528
00:24:28,280 --> 00:24:32,240
Speaker 1: create any kind of damage. And let's also remember that

529
00:24:32,760 --> 00:24:36,760
Speaker 1: most of corporate America finances itself with floating rate. We

530
00:24:36,800 --> 00:24:40,240
Speaker 1: should know that from private credit and direct lending now.

531
00:24:40,560 --> 00:24:43,840
Speaker 1: So unless the FED is going to start hiking rates,

532
00:24:43,880 --> 00:24:47,600
Speaker 1: which we're not calling for this year, then the cost

533
00:24:47,640 --> 00:24:50,399
Speaker 1: of funding for most of corporate America is going to

534
00:24:50,440 --> 00:24:51,679
Speaker 1: remain roughly the same.

535
00:24:52,240 --> 00:24:55,520
Speaker 6: Is the FED doing policy for the havels. It's just

536
00:24:55,560 --> 00:24:58,240
Speaker 6: as simple as that. The economy here between the halves

537
00:24:58,240 --> 00:25:03,240
Speaker 6: and the havens. Witness attention or fourth sense, How does

538
00:25:03,359 --> 00:25:07,439
Speaker 6: the new chairman address the have nuts, the people flat

539
00:25:07,480 --> 00:25:07,920
Speaker 6: in their back.

540
00:25:09,359 --> 00:25:11,680
Speaker 1: I don't think it's a question of have or have nots,

541
00:25:11,680 --> 00:25:13,600
Speaker 1: and I think you go back to the twenty twenty

542
00:25:13,680 --> 00:25:16,639
Speaker 1: two experience. I think they're scarred from that. They were

543
00:25:16,720 --> 00:25:21,280
Speaker 1: late to react. Inflation was painful and it hit all

544
00:25:21,400 --> 00:25:24,280
Speaker 1: levels of the economy, both the haves and the have nots.

545
00:25:24,560 --> 00:25:27,720
Speaker 1: And I think they are genuinely as a body trying

546
00:25:27,760 --> 00:25:30,480
Speaker 1: to get their arms around that. And there are a

547
00:25:30,520 --> 00:25:33,399
Speaker 1: group of people who were courageous enough to step forward

548
00:25:33,680 --> 00:25:36,439
Speaker 1: and do something different than what's been done in the past.

549
00:25:36,800 --> 00:25:39,520
Speaker 6: What will the next meeting look like? For you? You

550
00:25:39,680 --> 00:25:42,960
Speaker 6: guess right now what the next meeting will look like.

551
00:25:43,800 --> 00:25:45,840
Speaker 1: I think there will be a lot more to a

552
00:25:46,080 --> 00:25:51,000
Speaker 1: debate on whether they should be hiking rates, will they

553
00:25:51,040 --> 00:25:53,439
Speaker 1: have to cut rates down the road, or will they

554
00:25:53,480 --> 00:25:54,400
Speaker 1: remain Larry.

555
00:25:54,200 --> 00:25:57,040
Speaker 6: Meyer wrote that monograph years ago about Alan Greenspan, and

556
00:25:57,080 --> 00:25:59,080
Speaker 6: there was some real John, There were some real back

557
00:25:59,080 --> 00:26:01,480
Speaker 6: and forth going on way back. Is that what we're

558
00:26:01,560 --> 00:26:04,680
Speaker 6: up for now is a Lawrence Meyer Allen Greenspan fed

559
00:26:04,960 --> 00:26:06,879
Speaker 6: with Chairman wsh It.

560
00:26:07,080 --> 00:26:10,239
Speaker 1: Probably it doesn't feel like the Middle East is in

561
00:26:10,280 --> 00:26:13,520
Speaker 1: the rear view mirror or will be six weeks from now.

562
00:26:13,680 --> 00:26:16,960
Speaker 4: I've got a personnel question. When the next mate should

563
00:26:16,960 --> 00:26:19,199
Speaker 4: be chairman. Walsh is pal there or not.

564
00:26:20,359 --> 00:26:21,320
Speaker 1: I don't think he will be.

565
00:26:21,480 --> 00:26:22,360
Speaker 2: You think he steps away.

566
00:26:22,560 --> 00:26:27,359
Speaker 1: I think the FED is in good hands with Walsh.

567
00:26:27,640 --> 00:26:30,960
Speaker 1: I think you've had a group of people say, don't worry,

568
00:26:31,000 --> 00:26:33,879
Speaker 1: we're still independent, and I think you've just got to

569
00:26:33,920 --> 00:26:37,240
Speaker 1: pass the reins on and let somebody else try things

570
00:26:37,240 --> 00:26:39,840
Speaker 1: that may be a little bit more innovative, a little

571
00:26:39,840 --> 00:26:41,439
Speaker 1: bit different from what you've done.

572
00:26:41,680 --> 00:26:43,679
Speaker 5: Is there a market liability if he doesn't do that?

573
00:26:44,040 --> 00:26:45,120
Speaker 5: Is there a market reaction?

574
00:26:46,880 --> 00:26:49,560
Speaker 1: I don't think so. I think there will be a

575
00:26:49,600 --> 00:26:53,760
Speaker 1: lot of concern that it's too much of a political decision.

576
00:26:54,280 --> 00:26:58,000
Speaker 1: I think the door is wide open to exit gracefully.

577
00:26:58,119 --> 00:27:00,840
Speaker 6: John June seventeenth, I guess I got to cancel my plans.

578
00:27:00,880 --> 00:27:03,479
Speaker 6: I was supposed to be in chulting him, but instead

579
00:27:03,520 --> 00:27:04,600
Speaker 6: I'll be June seventeenth.

580
00:27:04,640 --> 00:27:07,640
Speaker 4: I'll be here two things, one chout them and two

581
00:27:08,040 --> 00:27:09,240
Speaker 4: for the record, I won't be here.

582
00:27:09,240 --> 00:27:10,760
Speaker 2: I will be away. I won't be a chouten him,

583
00:27:10,760 --> 00:27:13,840
Speaker 2: though I'll be missing that one.

584
00:27:14,000 --> 00:27:16,240
Speaker 4: Does this make the life of Kevin Walsh just that

585
00:27:16,280 --> 00:27:19,280
Speaker 4: a little bit easier entering the Federal Reserve? This might

586
00:27:19,320 --> 00:27:22,520
Speaker 4: sound somewhat counterintuitive, but entering the Federal Reserve under a

587
00:27:22,520 --> 00:27:25,080
Speaker 4: little bit of a dark cloud where some people are concerned,

588
00:27:25,160 --> 00:27:28,080
Speaker 4: particularly the Fed watchers, about the future of this institution

589
00:27:28,240 --> 00:27:30,840
Speaker 4: and central Bank independence. I think not only of these

590
00:27:30,880 --> 00:27:33,400
Speaker 4: dissenters done Shairman Powell a favor. I do think they've

591
00:27:33,400 --> 00:27:36,200
Speaker 4: done Kevin Walsh a favor as well. Yes, he doesn't

592
00:27:36,200 --> 00:27:38,159
Speaker 4: want this planing out in public, but one of the

593
00:27:38,240 --> 00:27:41,439
Speaker 4: criticisms of this institution, particularly under Chairman Powell, is the

594
00:27:41,440 --> 00:27:44,159
Speaker 4: group thing. I think it's refreshing to see the descent.

595
00:27:44,160 --> 00:27:46,119
Speaker 4: We've been asking for it for ages. You can't complain

596
00:27:46,160 --> 00:27:47,400
Speaker 4: about it once you've got it.

597
00:27:47,520 --> 00:27:50,760
Speaker 5: Not only that, but arguably the inner Kevin worsh is

598
00:27:50,800 --> 00:27:53,800
Speaker 5: a hawk is somebody who wants to say inflation is

599
00:27:53,840 --> 00:27:56,320
Speaker 5: a choice. He didn't mention employment once, We didn't talk

600
00:27:56,320 --> 00:27:58,480
Speaker 5: about the labor market in those hearings. He wasn't talking

601
00:27:58,480 --> 00:28:01,320
Speaker 5: about the average American flat on their back. He talked

602
00:28:01,320 --> 00:28:04,080
Speaker 5: about inflation and how important it was to the credibility

603
00:28:04,080 --> 00:28:05,800
Speaker 5: of the Fed to get it under control. So what's

604
00:28:05,800 --> 00:28:08,080
Speaker 5: the risk that he comes in is actually incredibly hawkish.

605
00:28:08,280 --> 00:28:10,959
Speaker 5: It joins those three other dissenters in case of a

606
00:28:11,000 --> 00:28:13,440
Speaker 5: more symmetric risk. What does a market do with that?

607
00:28:13,600 --> 00:28:16,520
Speaker 4: This is the secret source of central bank independence. He

608
00:28:16,600 --> 00:28:19,040
Speaker 4: want to make it easier to cut rates, convince the

609
00:28:19,080 --> 00:28:22,119
Speaker 4: market you're willing to hike, and we have gone some

610
00:28:22,320 --> 00:28:24,960
Speaker 4: way through that exercise the sou afternoon with this degree

611
00:28:25,000 --> 00:28:25,399
Speaker 4: of descent.

612
00:28:25,680 --> 00:28:28,440
Speaker 5: What's interesting is what Bob said is that levels here

613
00:28:28,560 --> 00:28:30,800
Speaker 5: are not going to necessarily hijack any of the capital

614
00:28:30,840 --> 00:28:33,159
Speaker 5: markets activity. It's not going to slow the M and A,

615
00:28:33,320 --> 00:28:35,520
Speaker 5: it's not going to slow the huge tech trade that's

616
00:28:35,560 --> 00:28:38,480
Speaker 5: really been the ballast to this market. So what exactly

617
00:28:38,520 --> 00:28:40,200
Speaker 5: is it going to do to actually slow the economy

618
00:28:40,200 --> 00:28:42,200
Speaker 5: and actually achieve what the FED is looking to do?

619
00:28:42,320 --> 00:28:44,720
Speaker 4: Bob Michael In just about ninety seconds time, the Chairman

620
00:28:44,760 --> 00:28:47,200
Speaker 4: of the Federal Serve, J. Powell, walks into that room

621
00:28:47,440 --> 00:28:50,880
Speaker 4: and steps up behind that podium for probably likely the

622
00:28:50,960 --> 00:28:53,640
Speaker 4: final time. Just a reflection on this man and his

623
00:28:53,720 --> 00:28:54,800
Speaker 4: tenure at this institution.

624
00:28:56,720 --> 00:29:01,840
Speaker 1: I think he was dealt some shockingly difficult circumstances, and

625
00:29:01,920 --> 00:29:05,160
Speaker 1: I think he did his best to navigate through them.

626
00:29:05,480 --> 00:29:10,120
Speaker 1: We did get through COVID, we got through the regional

627
00:29:10,240 --> 00:29:14,440
Speaker 1: banking crisis. We've gotten through different rounds of tariffs, and

628
00:29:14,680 --> 00:29:19,680
Speaker 1: we're looking at an economy that's actually doing pretty well considering.

629
00:29:20,120 --> 00:29:23,040
Speaker 1: I think he's done a really good job. And Walsh

630
00:29:23,160 --> 00:29:26,120
Speaker 1: isn't an outsider, he's an insider. He was at the

631
00:29:26,160 --> 00:29:28,120
Speaker 1: FED before. He'll do a good job.

632
00:29:28,240 --> 00:29:30,240
Speaker 4: But Michael, I appreciate your time, sir, thank you. BUTB

633
00:29:30,240 --> 00:29:31,480
Speaker 4: Michael there of JP Morgan