WEBVTT - Instant Reaction: Fed Holds Rates, Three Officials Dissent 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.160 --> 0:00:13.800 This is a breaking news update from Bloomberg, instant reaction 0:00:14.080 --> 0:00:17.919 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:20.000 the world. Mima kay As your. 0:00:19.840 --> 0:00:25.520 Decision, no change in rates, but we have four four descents. 0:00:25.760 --> 0:00:29.800 Laurie Logan, Beth Hammock, Neil Kashkari agreed rates should stay 0:00:29.880 --> 0:00:33.040 on hold, but they did not support including an easing 0:00:33.080 --> 0:00:36.440 bias in the statement at this time. Stephen Myron wanted 0:00:36.479 --> 0:00:38.880 a quarter point cut. The last time there were four 0:00:38.920 --> 0:00:42.760 descents October sixth of nineteen ninety two. As for that 0:00:42.880 --> 0:00:46.640 easing bias, the statement still contains the phrase in considering 0:00:46.680 --> 0:00:49.839 the extent and timing of additional adjustments to the target 0:00:49.920 --> 0:00:53.360 range aligned meant to suggest that the easing cycle has 0:00:53.400 --> 0:00:57.920 not necessarily ended. The Iran War figures prominently in the 0:00:57.960 --> 0:01:02.400 economic overview. Inflation is elevated, in part reflecting the recent 0:01:02.480 --> 0:01:06.440 increase in global energy prices. The statement says developments in 0:01:06.480 --> 0:01:09.160 the Middle East are contributing to a high level of 0:01:09.240 --> 0:01:13.920 uncertainty about the economic outlook. The Committee remains attentive to 0:01:14.000 --> 0:01:17.280 the risks on both sides of its dual mandate. It says, 0:01:17.680 --> 0:01:22.000 even though recent indicators suggest that economic activity has been 0:01:22.120 --> 0:01:26.240 expanding at a solid pace, job gains have remained low 0:01:26.360 --> 0:01:29.479 on average, the statement says, and the unemployment rate has 0:01:29.520 --> 0:01:33.560 been little changed in recent months. The descents open up 0:01:33.600 --> 0:01:36.800 a whole new line of questioning for Chair Powell. For 0:01:37.080 --> 0:01:41.000 descents would ordinarily be a sign of discontent with the Chair. 0:01:41.480 --> 0:01:44.679 Since this is likely Powell's last meeting as the chair, 0:01:45.000 --> 0:01:48.320 it may not be anything more than expressions of concern 0:01:48.680 --> 0:01:51.680 about the toll of the war. At each meeting this year, 0:01:51.720 --> 0:01:54.640 the number of Open Market Committee members who have worried 0:01:54.640 --> 0:01:57.840 they might have to raise rates has increased. We shall 0:01:57.840 --> 0:01:59.920 see when we get a chance to talk to the. 0:02:00.600 --> 0:02:02.520 I'm a key, stay close. I just want to run 0:02:02.560 --> 0:02:04.560 through the price action. I've got a big question to 0:02:04.600 --> 0:02:06.880 come back at you with in just a moment. Equities 0:02:06.880 --> 0:02:09.000 have stayed slightly lower, no drama here, down by zero 0:02:09.000 --> 0:02:12.800 point two percent. Into this decision, Yields were already elevated, 0:02:12.840 --> 0:02:14.399 particularly at the front end of the curve. They stay 0:02:14.440 --> 0:02:17.320 somewhat elevated, up seven basis points at three ninety. This 0:02:17.400 --> 0:02:19.720 isn't the kind of decision that moves around crude could 0:02:19.760 --> 0:02:22.720 is still higher by sixty seven one eighteen on Brent 0:02:23.280 --> 0:02:26.720 Mike McKee. I just wonder coming into this decision, we 0:02:26.720 --> 0:02:29.800 were talking about the possibility, the potential this Federal Reserve 0:02:29.919 --> 0:02:34.200 introduced some symmetrical reaction function, but looking at that kind 0:02:34.240 --> 0:02:36.400 of descent, I wonder if the descent alone has achieved 0:02:36.440 --> 0:02:39.119 the same thing just by introducing to two way risk. 0:02:39.200 --> 0:02:41.440 Given the level of descent you can see in this 0:02:41.520 --> 0:02:44.320 afternoon's decision, that's a. 0:02:44.280 --> 0:02:47.200 Very good point because, of course, if Powell leaves the FED, 0:02:47.240 --> 0:02:49.560 that's one less vote that we know would be on 0:02:49.919 --> 0:02:52.960 the easing side. At this point, we're going to have 0:02:52.960 --> 0:02:55.239 to wait for the minutes unless the Chairman wants to 0:02:55.240 --> 0:02:56.960 give us a number, which I doubt he will. Of 0:02:57.000 --> 0:03:00.840 people who think that they should be at least suggesting 0:03:00.880 --> 0:03:04.200 the idea of raising rates in the future, but it's 0:03:04.240 --> 0:03:07.000 obviously grown since the last time, and feelings have grown 0:03:07.160 --> 0:03:10.480 more certain, at least among those who think that two 0:03:10.520 --> 0:03:14.440 way warning should be included in the statement. It's very, 0:03:14.520 --> 0:03:17.680 very unusual. Obviously, it has been almost thirty years since 0:03:17.720 --> 0:03:21.960 we've seen anything like this, and it is definitely a 0:03:22.000 --> 0:03:24.880 sign that the FED is split over this question. And 0:03:24.919 --> 0:03:28.200 one would think that if these people were willing to 0:03:28.360 --> 0:03:32.280 dissent because they wanted a two way warning, because they 0:03:32.360 --> 0:03:36.000 did not want an easing bias in the statement, that 0:03:36.080 --> 0:03:39.280 they probably would have voted for a rate increase had 0:03:39.280 --> 0:03:40.240 that been on the table. 0:03:40.400 --> 0:03:42.480 Mamma Kay, appreciate your time you get in the news conference, 0:03:42.520 --> 0:03:44.280 looking forward to you a lot of questioning. A little 0:03:44.280 --> 0:03:47.200 bit late to that news conference, twenty seven minutes away, 0:03:47.520 --> 0:03:50.720 we have an eight to four vote at the Federal Reserve. 0:03:50.760 --> 0:03:52.080 That's some level of descent. 0:03:52.280 --> 0:03:54.040 Yeah, And didn't Mike just say that that was the 0:03:54.360 --> 0:03:56.839 first time we've seen that since October sixth, nineteen ninety two. 0:03:56.880 --> 0:03:59.960 This is unusual to me. This really highlights the committee 0:04:00.040 --> 0:04:02.320 aspect of this, and the fact that Fedcher J. Powell, 0:04:02.400 --> 0:04:05.000 for all the job owning from the President, sits on 0:04:05.080 --> 0:04:06.840 the more dubvish end of this, and I think that 0:04:06.840 --> 0:04:09.320 that's very notable. So how does he message this given A, 0:04:09.600 --> 0:04:11.960 he probably doesn't matter as much, but B, how does 0:04:11.960 --> 0:04:15.520 he signal that this isn't necessarily a sign of dysfunction 0:04:15.640 --> 0:04:17.760 ahead of a new FED chair coming in, but rather 0:04:18.080 --> 0:04:19.640 how difficult this moment really is. 0:04:19.760 --> 0:04:22.560 The expert on this is John Ferrell is the gentleman 0:04:22.600 --> 0:04:25.159 from the United Kingdom, or descent is far more evident. 0:04:25.560 --> 0:04:27.839 There were two moments of four descents in the eighty 0:04:27.920 --> 0:04:30.200 nine to ninety two period, and the distinction here, John 0:04:30.640 --> 0:04:34.080 is those descents were too ease to let up as 0:04:34.160 --> 0:04:38.280 green span was stricter. And this is radically and historically different. 0:04:38.360 --> 0:04:40.120 So I remember a level of descent, at degree of 0:04:40.120 --> 0:04:43.520 descent back of the bank having that coming out, what 0:04:43.640 --> 0:04:45.880 to do right? He wanted Milkiwi, And I remember the 0:04:45.880 --> 0:04:49.480 governor being voted down on countless occasions. On this occasion, 0:04:49.520 --> 0:04:51.160 I'm looking at this level of descent, and I just 0:04:51.200 --> 0:04:52.680 wonder if the chairman would welcome it. 0:04:53.040 --> 0:04:54.400 I think it's probably a good thing. 0:04:54.560 --> 0:04:56.840 Right now that there is no group thing that we're 0:04:56.880 --> 0:04:59.560 in a situation at the moment that deserves some kind 0:04:59.600 --> 0:05:01.480 of debate about where policy should be and where is 0:05:01.520 --> 0:05:02.920 it going and what kind of risks we face in 0:05:02.960 --> 0:05:05.680 the economy right now. I actually also think that that's 0:05:05.680 --> 0:05:09.160 the kind of committee that Kevin Wall should want to inherit. 0:05:09.400 --> 0:05:11.800 Group think has been a problem at this institution for 0:05:11.839 --> 0:05:14.800 the last five years. I wouldn't look at that as 0:05:14.800 --> 0:05:17.320 a committee that's voted down the chairman in quite the 0:05:17.360 --> 0:05:19.479 same way that the committee voted down the governor at 0:05:19.520 --> 0:05:21.160 the Bank of England a number of years ago. 0:05:21.440 --> 0:05:22.640 This feels somewhat different. 0:05:22.760 --> 0:05:24.240 And if you want to move to some kind of 0:05:24.360 --> 0:05:27.880 symmetrical reaction function at the Federal Reserve based on that vote, 0:05:27.920 --> 0:05:28.719 I don't think you need it. 0:05:28.720 --> 0:05:31.040 In the statement, I think the descent already speaks. 0:05:30.800 --> 0:05:33.479 To it, which I think is why I'm noting the 0:05:33.960 --> 0:05:36.400 increase in the dollar more than anything in body yields. 0:05:36.440 --> 0:05:38.640 You're seeing a strengthening in the dollar versus the euro, 0:05:38.720 --> 0:05:40.880 and that I think gives you a sense maybe at 0:05:40.960 --> 0:05:43.359 least of the tendance question and the fact that this 0:05:43.400 --> 0:05:44.359 truly is a committee. 0:05:44.360 --> 0:05:46.200 But to get up in front of a pundits, is 0:05:46.240 --> 0:05:49.400 this the committee and descent that President Trump wants? 0:05:50.360 --> 0:05:51.279 That's a different question. 0:05:51.400 --> 0:05:55.440 Yeah, this president clearly wants lower interest rates TK and 0:05:55.600 --> 0:05:57.280 the kind of thing that we've just seen voted for 0:05:57.360 --> 0:05:59.440 right now is not for lower interest rates. You've got 0:05:59.480 --> 0:06:01.839 a committee that's worried about the prospect of a market 0:06:02.080 --> 0:06:04.880 thinking they'll always get interest rate cuts that they don't 0:06:04.920 --> 0:06:08.160 have to worry about inflation. First and foremost, the first 0:06:08.240 --> 0:06:11.400 rule for any central banker, any real central banker anchor 0:06:11.440 --> 0:06:12.680 inflation expectations. 0:06:13.200 --> 0:06:14.440 This is part of the exercise. 0:06:14.600 --> 0:06:17.080 Yeah, as Neil Dota put it, he messaged, it's clear 0:06:17.120 --> 0:06:18.760 that worsh has his work cut out for him. Good 0:06:18.839 --> 0:06:20.719 luck convincing some of these folks that it's time to 0:06:20.720 --> 0:06:23.080 cut rates and potentially overall the whole system. 0:06:23.120 --> 0:06:24.200 Different question entirely. 0:06:24.279 --> 0:06:26.640 Bob Michael with us around a table from JP Morgan 0:06:26.680 --> 0:06:29.680 Asset Management. Bobby Ready reflections on this decision. 0:06:29.960 --> 0:06:33.000 Yeah, clearly it's in the dissense. Clearly they're moving more 0:06:33.080 --> 0:06:37.320 towards a symmetrical policy. It's confirmed in the first paragraph 0:06:37.600 --> 0:06:43.200 where they characterize inflation previously as remained somewhat elevated, they 0:06:43.320 --> 0:06:46.919 remove the somewhat and it's just elevated. So they're telling 0:06:47.000 --> 0:06:50.680 us they are increasingly concerned about the level of prices, 0:06:50.880 --> 0:06:53.599 the level of oil, and the potential paths through to 0:06:53.680 --> 0:06:56.039 the system. I think you're right. I think this is 0:06:56.480 --> 0:07:00.080 less a message about JPAL and more a message to 0:07:00.240 --> 0:07:03.919 the incoming FED chair that hey, we could be dissenting. 0:07:04.080 --> 0:07:06.760 Get prepared for that. He may welcome that. 0:07:06.880 --> 0:07:08.920 T K asked the question about the president, what the 0:07:08.960 --> 0:07:12.880 president would like? This is another exercise it's quite important. 0:07:13.160 --> 0:07:15.360 Everyone's been worried about the future of the Federal Reserve 0:07:15.440 --> 0:07:16.440 Central Bank independence. 0:07:16.480 --> 0:07:19.840 Will the chairman stay on? That degree of descent makes. 0:07:19.600 --> 0:07:21.520 The life of I think Chairman Powell easier to walk 0:07:21.520 --> 0:07:24.800 away from this institution. There's no capture of this institution. 0:07:25.360 --> 0:07:29.800 This institution is still independent. Inflation expectations are still anchored, 0:07:29.920 --> 0:07:32.880 and that is not dependent on fetch J. Pow staying 0:07:32.880 --> 0:07:34.840 gone as a governor on this board for the next 0:07:34.880 --> 0:07:35.360 two years. 0:07:35.400 --> 0:07:36.400 I see what you did there. 0:07:36.440 --> 0:07:37.600 So maybe they agreed. 0:07:37.920 --> 0:07:39.920 Four people dissent, although one of them is perhaps in 0:07:39.920 --> 0:07:43.960 a different direction. You're to Jerome Powell coming out and 0:07:43.960 --> 0:07:44.720 saying I'm gone. 0:07:44.880 --> 0:07:46.760 Good luck for you. Go ahead, Kevin. 0:07:46.840 --> 0:07:49.440 I'm not suggesting there was any choreography here, just that 0:07:49.480 --> 0:07:53.000 there are some benefits to that level of descent stefinitely. Rather, 0:07:53.080 --> 0:07:55.880 Wolf's research has been going through the statement and reacting 0:07:55.880 --> 0:07:58.160 to all of this and looking at the price action. Stephanie, 0:07:58.200 --> 0:07:59.440 you're really take please. 0:08:00.240 --> 0:08:02.080 Yeah, I mean, I think when it tells us that 0:08:02.080 --> 0:08:04.520 the committee is certainly divided, and they're not going to 0:08:04.520 --> 0:08:06.600 be a committee that's willing to just cut rates because 0:08:06.640 --> 0:08:09.080 Warts wants them to do so, and It's also interesting 0:08:09.120 --> 0:08:12.840 because in the hearing last week, Warsh noted that he 0:08:12.880 --> 0:08:14.200 wants the bit in the room, but he wants a 0:08:14.200 --> 0:08:17.400 more unified statement, and that's certainly not what we got today. 0:08:17.680 --> 0:08:20.880 So the odds of COTS later this year certainly should 0:08:20.920 --> 0:08:23.040 go down on the back of what we're seeing today. 0:08:23.080 --> 0:08:25.840 It's just a committee that certainly doesn't even want to 0:08:26.000 --> 0:08:29.200 have an easing bias, let alone easing in the near term. 0:08:29.480 --> 0:08:32.040 Stephany, does it surprise you that more members of the 0:08:32.040 --> 0:08:34.400 Federal Reserve didn't get on board with moving to a 0:08:34.400 --> 0:08:36.680 more symmetrical type of approach. 0:08:37.760 --> 0:08:38.200 A little bit? 0:08:38.240 --> 0:08:40.040 I mean it certainly it sounds like it was a 0:08:40.080 --> 0:08:42.480 fairly divided group, and perhaps there were others that were 0:08:42.480 --> 0:08:45.480 even more on the fence that didn't officially dissent. This 0:08:45.600 --> 0:08:47.560 was a big question for the meeting today. There was 0:08:47.559 --> 0:08:50.200 actually two big questions. One was were they going to 0:08:50.240 --> 0:08:53.640 maintain the easing bias in the statement? And many thought 0:08:53.640 --> 0:08:55.720 that they would actually remove it, So that was, you know, 0:08:56.080 --> 0:08:58.040 perhaps a bit of a surprise to some extent. And then, 0:08:58.040 --> 0:09:00.319 of course the other question is how is how we're 0:09:00.320 --> 0:09:02.880 going to answer the questions about what his plans are 0:09:03.320 --> 0:09:04.760 once wars is actually confirmed. 0:09:05.240 --> 0:09:08.600 But Michael, what is our overall stimulus right now? I 0:09:08.640 --> 0:09:11.720 know we had timing for tech season where everybody got 0:09:11.760 --> 0:09:14.080 a check in the mail and all that, But what 0:09:14.800 --> 0:09:18.439 is all of this discussion about an historic post COVID 0:09:18.559 --> 0:09:21.679 stimulus that it's starting to make the wheels come off 0:09:21.720 --> 0:09:22.160 the wagon. 0:09:22.640 --> 0:09:25.439 Yeah. Well, when I was listening to Matt and Subadra 0:09:25.760 --> 0:09:28.640 earlier going into this, I was thinking the Fed would 0:09:28.640 --> 0:09:32.200 be nuts not to move to a symmetrical posture because 0:09:32.240 --> 0:09:34.760 we know we have higher prices. And what I heard 0:09:34.760 --> 0:09:37.680 from them is the economy is doing just fine. They're right, 0:09:37.720 --> 0:09:40.560 You've got the stimulus from the one big, beautiful Bill 0:09:40.600 --> 0:09:44.760 Act that's not finished. We know there's a tremendous amount 0:09:44.920 --> 0:09:47.679 of CAPEX. When I talk to our clients, they're just 0:09:47.720 --> 0:09:50.959 getting started on the AI journey. There's a lot more 0:09:51.000 --> 0:09:53.800 spending to come. And we also know there's a lot 0:09:53.840 --> 0:09:56.600 of money slashing around the system. You look at any 0:09:56.679 --> 0:10:01.959 measure of money, M two deposits, you know, money market funds, 0:10:02.160 --> 0:10:03.600 they're still going vertical. 0:10:03.679 --> 0:10:04.520 Can I do an audible? 0:10:04.720 --> 0:10:08.679 Yeah, you're doing audible here to get the four pm 0:10:08.760 --> 0:10:12.839 and four fifteen pm. You're the bondpro what's sowhat of 0:10:12.880 --> 0:10:16.040 thirty billion dollars from one of these mag simis. They're 0:10:16.040 --> 0:10:17.719 going to put the money out, They're going to call 0:10:17.800 --> 0:10:20.280 Bob Michael, it's all going to go to JP Morgan. 0:10:20.679 --> 0:10:23.560 And when they do that, what does it mean for 0:10:23.640 --> 0:10:25.920 the dynamics of their balance sheet? What does it mean 0:10:25.960 --> 0:10:28.400 for the dynamics of the American fixed in gum market? 0:10:28.880 --> 0:10:32.360 Well, the guys reporting today, if they were to issue 0:10:32.400 --> 0:10:36.640 thirty billion, you'd hardly notice it. That's how big they are, 0:10:37.040 --> 0:10:41.160 that's how little leverage they've carried. And in our conversations 0:10:41.200 --> 0:10:43.520 with a lot of big borrowers, we want to know 0:10:43.720 --> 0:10:47.120 do they see the demand? These guys have the demand. 0:10:47.240 --> 0:10:50.160 They'll show you the demand, and they can't monetize it 0:10:50.440 --> 0:10:54.000 until they put in place the capacity. So there is 0:10:54.040 --> 0:10:57.679 a big bill to go, and I think these guys 0:10:57.679 --> 0:10:59.640 are right to borrow and get that bill going. 0:11:00.040 --> 0:11:02.120 Are you some twos at three ninety three up? Ten 0:11:02.200 --> 0:11:03.400 basis points off the back of this? 0:11:04.120 --> 0:11:04.400 Do you know? 0:11:04.600 --> 0:11:07.440 You ask me what if the FED did this and 0:11:07.600 --> 0:11:09.800 we never really thought they were going to do this, 0:11:10.320 --> 0:11:12.800 It's a very artistic way to do it. Nope, I 0:11:12.800 --> 0:11:13.920 wouldn't touch it to that. 0:11:13.880 --> 0:11:16.360 Point, to that framing, that's really important. Haven't they achieved 0:11:16.360 --> 0:11:18.240 the same thing you don't need it in the statement? 0:11:18.240 --> 0:11:19.679 Haven't the sents achieved the same thing? 0:11:19.760 --> 0:11:21.559 Well, it's kind of in the statement. It's the last 0:11:21.600 --> 0:11:24.920 line at the statement. It's and you talked about was 0:11:24.960 --> 0:11:28.960 this choreographed or not? I absolutely think it was. Every 0:11:29.000 --> 0:11:31.720 single word in the statement is choreographed. They sit there 0:11:31.720 --> 0:11:35.840 and they debate it. I think this very nicely opens 0:11:36.040 --> 0:11:39.720 the door for Jay to peacefully deparse it, depart from 0:11:39.800 --> 0:11:40.160 the FED. 0:11:40.320 --> 0:11:42.319 So this is their sort of offering to him. The 0:11:42.440 --> 0:11:44.440 farewell gift to him is here you go, and that 0:11:44.520 --> 0:11:46.440 ultimately we're going to give Kevin wartsh a hard time. 0:11:46.600 --> 0:11:50.000 I don't well, okay, I didn't say that. I think 0:11:50.160 --> 0:11:54.360 what they're indicating is, like, we recognize inflation is a problem. 0:11:54.600 --> 0:11:57.520 We're not going to sit there and keep advocating for 0:11:57.640 --> 0:12:00.800 more monetary ease. We're going to be more balance, don't 0:12:00.800 --> 0:12:03.800 worry about the independence of the FED. Jay go off 0:12:03.880 --> 0:12:04.640 into retirement. 0:12:04.679 --> 0:12:07.040 You said you wouldn't buy it. Why wouldn't you buy it? 0:12:08.480 --> 0:12:12.080 Because I think the FLED has flipped the tables on 0:12:12.760 --> 0:12:15.480 the markets right now, and what does that mean I 0:12:15.520 --> 0:12:20.920 think they've now shifted to something. It's not outright hawkish, 0:12:21.120 --> 0:12:24.559 but it's more hawkish than where they've been. And then 0:12:24.600 --> 0:12:28.000 you step back and go there is still stimulus out there, 0:12:28.440 --> 0:12:33.560 and we're in the middle of the Middle East conflict. 0:12:34.280 --> 0:12:37.000 Those things have yet to be settled. Let's just get 0:12:37.040 --> 0:12:38.719 out of the way of this and see where them. 0:12:38.840 --> 0:12:40.680 Okay, so let's build on that. Let's extend the conversation 0:12:40.720 --> 0:12:41.240 a little bit more. 0:12:41.400 --> 0:12:43.760 Tens are at full forty one right now, what kind 0:12:43.760 --> 0:12:44.840 of numbers are you thinking about? 0:12:45.559 --> 0:12:49.400 Well, we were breaking through to new highs. I don't 0:12:49.400 --> 0:12:51.839 think you get to five percent, but do you get 0:12:51.880 --> 0:12:56.199 to something like four and five eighths, Probably, then I 0:12:56.320 --> 0:12:59.320 get interested. Then you're starting to you're putting a percent 0:12:59.520 --> 0:13:02.240 on the Fed funds rate. And I think it's one 0:13:02.240 --> 0:13:06.640 thing to switch to a symmetrical bias. It's another thing 0:13:06.720 --> 0:13:09.880 to actually come in and start hiking rates. And I 0:13:09.920 --> 0:13:13.000 did say I don't expect any changes in rates this year. 0:13:13.280 --> 0:13:14.720 That's cuts or hikes. 0:13:14.960 --> 0:13:17.160 John. Five eighths is how we used to quote papers. 0:13:17.800 --> 0:13:19.439 Thirty seconds in the next hour. 0:13:19.400 --> 0:13:22.360 I'm aware tends right now at full forty one. With 0:13:22.440 --> 0:13:24.040 this move at the front end of the curve. As 0:13:24.040 --> 0:13:26.800 I mentioned, up ten basis points three ninety four, let's 0:13:26.800 --> 0:13:29.000 call it three ninety three. Equity start to break down 0:13:29.120 --> 0:13:30.680 just a little bit. Don't make too much of this. 0:13:30.760 --> 0:13:32.520 We're down by zero point three percent on the S 0:13:32.559 --> 0:13:34.599 and P five hundred. You will notice Bramma the on 0:13:34.679 --> 0:13:37.720 the performance in a Russo down by one percent plus. 0:13:37.800 --> 0:13:40.720 These are the companies that are most vulnerable to rates 0:13:40.760 --> 0:13:43.560 going higher. I really am struck by what Bob's talking about, 0:13:43.559 --> 0:13:46.280 because this is a market shift, and really it does 0:13:46.360 --> 0:13:50.520 highlight how much this war has changed the dynamic fundamentally 0:13:50.600 --> 0:13:53.840 for people who believed that rates would just gradually go lower. 0:13:53.880 --> 0:13:56.560 And if they don't, how much does that change some 0:13:56.679 --> 0:13:59.800 of the expectations about the equal weight market which we've 0:13:59.840 --> 0:14:02.920 seen in being baked in, and frankly about the broadening 0:14:02.920 --> 0:14:05.800 out trade, and adding to that, how much steam can 0:14:05.840 --> 0:14:08.319 it be behind some of the tech trades that are 0:14:08.440 --> 0:14:09.520 somewhat dependent on some of. 0:14:09.520 --> 0:14:10.360 The consumer aspects. 0:14:10.360 --> 0:14:14.480 I'm thinking, for example, meta advertising or Amazon, your cleaning supplies, 0:14:14.600 --> 0:14:18.520 your children's costumes, whatever children's costumes. 0:14:18.240 --> 0:14:20.240 I ended to buying a lot of those. Okay, well, 0:14:20.240 --> 0:14:22.400 I had a Halloween it's getting the discount. 0:14:22.040 --> 0:14:22.960 And also senior parties. 0:14:23.000 --> 0:14:25.560 Okay, all right, important stuff. Hey's definitely good to hear 0:14:25.560 --> 0:14:27.520 from me this afternoon. Thanks for your time, Stephanie Roth 0:14:27.800 --> 0:14:29.800 for for research to talk about the equity market. Kate 0:14:29.840 --> 0:14:32.520 Moore City joined us now for more. Kay, you're just 0:14:32.520 --> 0:14:35.720 starting to move higher, getting a squeeze over and crude 0:14:36.000 --> 0:14:39.880 Brent out to close to one twenty. Equities somewhat softer 0:14:40.440 --> 0:14:43.000 but not really looking at this as a dramatic event. 0:14:43.040 --> 0:14:44.040 How would you frame things? 0:14:45.120 --> 0:14:46.880 Yeah, I don't think today's event and would have said 0:14:47.080 --> 0:14:49.040 is the big event for equities right now. This is 0:14:49.080 --> 0:14:52.360 also like a massive lallabluzo when it comes to earnings 0:14:52.360 --> 0:14:55.480 this week, which you know Donvin quite well. And I 0:14:55.480 --> 0:14:58.200 think the equity market attention is much more there and 0:14:58.280 --> 0:15:01.360 so far everything that we got yesterday, expectations for Act 0:15:01.360 --> 0:15:04.160 of the Clothes today and tomorrow are for actually quite 0:15:04.160 --> 0:15:07.320 strong numbers, reiterating not just the AI text story but 0:15:07.480 --> 0:15:10.520 also actually a very solid US consumer. So I think 0:15:10.600 --> 0:15:13.360 that is really where kind of equity risk is focused 0:15:13.440 --> 0:15:15.960 right now. Less so on this what is what I 0:15:16.000 --> 0:15:18.520 would argue is also a very interesting set of descents 0:15:19.160 --> 0:15:19.920 in the FMC. 0:15:20.720 --> 0:15:23.320 That said, is there a level or is there some 0:15:23.360 --> 0:15:25.480 sort of rate of change that gets you concerned as 0:15:25.480 --> 0:15:28.520 an equity investor about what's going on in the bond market. 0:15:28.560 --> 0:15:31.920 Should this FED suddenly move to put rate hikes squarely 0:15:31.960 --> 0:15:32.520 on the table. 0:15:34.040 --> 0:15:36.400 It seems unlikely in our view that the FED is 0:15:36.440 --> 0:15:38.880 going to put great hikes on the table. Lisa, I 0:15:38.880 --> 0:15:42.040 would say that is not in our kind of any 0:15:42.080 --> 0:15:45.320 of our distribution for the back half of this year stability, 0:15:45.480 --> 0:15:48.200 even as inflation is warm, and even as the FED 0:15:48.240 --> 0:15:49.920 is going to wait and see and more descent happens 0:15:49.920 --> 0:15:53.560 across the FMC. But we of course will watch what happens. 0:15:53.640 --> 0:15:56.360 Because the relationship between equities and bonds has broken down 0:15:56.400 --> 0:15:58.400 a number of times over the last couple of years. 0:15:58.840 --> 0:16:01.680 The correlations are not exactly what they had been historically, 0:16:02.040 --> 0:16:05.280 and bonds have not been the safe even asset that 0:16:05.320 --> 0:16:07.880 some people had become used to in their early days 0:16:07.880 --> 0:16:11.400 of acid allocation. So across our multi asset portfolios, we've 0:16:11.440 --> 0:16:14.120 been more Tactical's continue to be short duration. I heard 0:16:14.160 --> 0:16:16.440 Bob a moment ago say he wouldn't be buying two 0:16:16.520 --> 0:16:18.520 years at this point. I tend to agree with that. 0:16:19.680 --> 0:16:21.560 And we tend to like to take most of our 0:16:21.640 --> 0:16:24.560 risk on the equity side and think about other diversifiers 0:16:24.600 --> 0:16:26.040 outside of the fixed income space. 0:16:26.520 --> 0:16:28.880 Gay I look at where we are in the market, 0:16:29.160 --> 0:16:31.360 and John I brought this up today because frankly I 0:16:31.400 --> 0:16:36.520 have misplaced this. The Dow up twenty percent one year trailing, 0:16:36.880 --> 0:16:40.000 SPX up twenty eight percent one year trailing, all in 0:16:40.160 --> 0:16:44.160 Nasdaq of forty one percent one year trailing. Kate's completely 0:16:44.200 --> 0:16:48.400 separated from the nation's angst. What do you see as 0:16:48.400 --> 0:16:52.120 an indication that that keeps going and how can the 0:16:52.160 --> 0:16:54.200 Fed and assist with that? 0:16:55.360 --> 0:16:57.200 Yeah, Tom, One of the things we've been focusing on 0:16:57.280 --> 0:17:00.000 in something our Investment Committee was talking about earlier today 0:17:00.160 --> 0:17:03.560 is the massive dispersion in terms of sectoral earnings, not 0:17:03.680 --> 0:17:06.119 just this order, but through the balance of twenty twenty six. 0:17:07.160 --> 0:17:09.920 And this is also kind of what we're seeing in 0:17:09.960 --> 0:17:12.480 the overall economy. We've gotten hired. I think of talking 0:17:12.520 --> 0:17:14.920 about the case shaped consumer because even the bottom part 0:17:14.920 --> 0:17:17.080 of the case seems to be holding up relatively well 0:17:17.080 --> 0:17:20.720 with decent real wages, but there is a huge amount 0:17:20.800 --> 0:17:24.639 of dispersion below the surface in the equity market fundamentals 0:17:24.680 --> 0:17:28.520 and in the macro fundamentals, and that can make people uncomfortable, 0:17:28.600 --> 0:17:32.440 But unfortunately, what's really driving the market higher has been 0:17:32.520 --> 0:17:36.119 extremely strong earnings and expected free cash flow from the 0:17:36.200 --> 0:17:39.520 large parts of the market cap. And we continue to 0:17:39.520 --> 0:17:41.520 stay kind of anchored to the equity risk and loving 0:17:41.640 --> 0:17:44.280 US large caps, even as we recognize it is going 0:17:44.320 --> 0:17:47.199 to be a very uneven experience and perhaps a better 0:17:47.440 --> 0:17:50.400 opportunity for some more active management as we go through 0:17:50.400 --> 0:17:50.800 this year. 0:17:51.040 --> 0:17:54.600 Unfortunately, part of the downs right now monitoring equity markets, 0:17:54.640 --> 0:17:57.719 bond markets, and commodity markets. More importantly is following these 0:17:57.760 --> 0:18:00.200 headlines regarding the Middle East, and we've got more from 0:18:00.200 --> 0:18:02.960 the President this time, some comments on the Russian leader, 0:18:03.000 --> 0:18:06.560 Vladimir Putin. They've had a conversation. The Russian leader said 0:18:06.560 --> 0:18:09.600 he'd like to help with the Iranian enrichment. There has 0:18:09.680 --> 0:18:12.040 been some suspicion for a while that maybe that in 0:18:12.160 --> 0:18:14.040 rich Iranian would be moved to a third party, and 0:18:14.080 --> 0:18:16.720 perhaps that would be Russia. And some headlines I have 0:18:16.800 --> 0:18:19.439 to say, looking at this that are lose to that, Lisa, 0:18:19.520 --> 0:18:21.919 at least a soufternoon now, as we said on countless 0:18:21.920 --> 0:18:25.240 occasions over the last two months, one headline that speaks 0:18:25.280 --> 0:18:28.000 to one story will last about five minutes, and things 0:18:28.000 --> 0:18:29.720 can quickly change. All I can do with you is 0:18:29.760 --> 0:18:32.119 share with you the current headlines, and that the headlines 0:18:32.160 --> 0:18:33.080 that dropped just moments ago. 0:18:33.240 --> 0:18:35.560 Yeah, and they include the idea of potentially having a 0:18:35.560 --> 0:18:39.280 ceasefire with Ukraine in Russia and then Urania moving from 0:18:39.480 --> 0:18:41.840 ran over to Russia. I mean a lot of things 0:18:41.840 --> 0:18:43.679 that are a lot of questions what you do with this. 0:18:44.040 --> 0:18:44.720 I think people have. 0:18:44.680 --> 0:18:46.720 Shrugged it off and moved on because they don't know 0:18:46.720 --> 0:18:48.400 what to do with it, because it's just a headline. 0:18:48.520 --> 0:18:51.480