Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. All right, we heard
Speaker 1: from Michael McKee was speaking with the New York Fed
Speaker 1: President today. Rates are going higher. I think the concern
Speaker 1: are one of the several concerns in the marketplace is
Speaker 1: what's the risk of this Fed reserve going too far,
Speaker 1: too fast, maybe pushing this economy into recession. Danielle di Martino,
Speaker 1: Booth CEO and chief strategists at Quill Intelligence, joins us. Danielle,
Speaker 1: how is your federal reserve performing rate here? How and
Speaker 1: how do you expect them to perform for the remainder
Speaker 1: of the year. Well, you know, I think that that
Speaker 1: we can expect Federal Reserve officials to attempt to stay
Speaker 1: the course oh over the next few months. People forget
Speaker 1: that this is a mid term election year, and if
Speaker 1: there's one unwritten rule at the Fed, it's that you
Speaker 1: don't appear overtly political during an election year. So I
Speaker 1: think the reason that so many FED officials, including the
Speaker 1: two most doublished the vice share of the F one,
Speaker 1: John Williams, who was just on Bloomberg and Leo Brainerd.
Speaker 1: I think the reason that they've been corralled by J.
Speaker 1: Powell is that they want to be consistent in their broadcasting,
Speaker 1: that they're going to to be methodical and that they're
Speaker 1: going to raise rate, and that they're they've got a
Speaker 1: goal of getting to neutral, and that they're going to
Speaker 1: try and stay the course into the election, even though
Speaker 1: those last few words they're not saying, but I think
Speaker 1: that that's really the message right now. How do you
Speaker 1: set yourself a goal of getting to neutral when you
Speaker 1: have no idea where neutral is? I just you know,
Speaker 1: nobody can I ask all people all the time, what's neutral?
Speaker 1: What's your our star? And nobody he has an exact answer.
Speaker 1: It's always kind of a wishy, washy spongy guess well,
Speaker 1: and it's going to be right. Because J. Powell was
Speaker 1: determined in two thousand eighteen that he was going to
Speaker 1: get to three, it was as if he had this
Speaker 1: neutral goal in mind. Now. You know, you listen to
Speaker 1: Christopher Waller yesterday, governor who used to be the director
Speaker 1: of research at the St. Louis Fete under Bullard. He said,
Speaker 1: two point and that is the number that it seems
Speaker 1: like things started to break last time in the markets.
Speaker 1: So I think that they can. They can, they can
Speaker 1: have as many models as they want. I think that
Speaker 1: they're simply looking back in time and saying, well, look,
Speaker 1: credit credit broke when we were approaching two and a
Speaker 1: half percent, So let's let's just shoot a little bit
Speaker 1: under that and call it two point four. By the way,
Speaker 1: I have Danielle has a big fan who listens to
Speaker 1: the show every day. We got a lot of fans. No,
Speaker 1: I mean listen to our show every day. Okay, he
Speaker 1: and I talk, but he also has heard Danielle speak
Speaker 1: a few times. He's a big fan. He wants he's
Speaker 1: writing in right now. He wants to do you agree
Speaker 1: with the change in work. That's the you know, the
Speaker 1: Bloomberg function about inflation peaking and the market pricing in
Speaker 1: fewer hikes. You know, I think I don't think that
Speaker 1: the market has priced anything definitively in look at where
Speaker 1: the tenure you'ld is right now and this is just
Speaker 1: off of a stormer than expect University of Michigan expectations
Speaker 1: number that that just crossed the wires a two minutes ago.
Speaker 1: Right now, markets are extremely volatile and I and and
Speaker 1: pricing of future inflation is is really it's undetermined right well,
Speaker 1: but everybody has been saying this is the peak, you know,
Speaker 1: or this is likely the peak. I don't. I don't
Speaker 1: know if I personally buy that. Also, the biggest asset
Speaker 1: managers in the world are betting that the terminal rate
Speaker 1: is going to be about three percent, which I know
Speaker 1: because black Rock came out today and said, Nope, it's
Speaker 1: going to be closer to two. What do you think,
Speaker 1: you know? I think uh, I think that what we're
Speaker 1: seeing and what few two two people are talking about
Speaker 1: is we're seeing that that freight that trucking in America
Speaker 1: hit a wall on in early March. That is a
Speaker 1: sign to you and I think that this is what
Speaker 1: everybody's kind of kind of globbing onto. That's a sign
Speaker 1: that demand in the United States has really come under pressure,
Speaker 1: and that's why we're not seeing all these crazy supply
Speaker 1: Chaine disruption inflationary impulses, despite what's going on in Ukraine
Speaker 1: and despite what's going on in China. I think the
Speaker 1: demanding the United States is really what's hit a wall,
Speaker 1: and that that is what is going to anchor core
Speaker 1: inflation moving forward. But we don't know what food prices
Speaker 1: are going to do, and we're hoping that gas prices
Speaker 1: are coming down. And by the way, University of Michigan
Speaker 1: is a pure play the upside surprise, a pure play
Speaker 1: on the fact that we gave back all of the
Speaker 1: games at the gas pump and came and and pump
Speaker 1: gas prices came down, and that's all you're looking at,
Speaker 1: because it's still at recessionary readings. And I think that
Speaker 1: that is something that shouldn't be shouldn't be lost, and
Speaker 1: we should know that there is no uh Ohio State
Speaker 1: sentiment index because we are focused on the game of football.
Speaker 1: I admit that the University of Michigan is a great school.
Speaker 1: It's an incredible academy. It's an institution for higher learning,
Speaker 1: and I love ann Arbor. It's a great place to go,
Speaker 1: except for when they're playing Ohio State, because then they
Speaker 1: lose and it's so depressed. I know, I know, I
Speaker 1: just wanted to get get that in there. All right,
Speaker 1: So Danielle, just real quickly, here is my federal Reserve
Speaker 1: going to deliver a soft landing for me? Or are
Speaker 1: we gonna risk recession? Maybe next year? Oh heck no.
Speaker 1: And I don't think recession is the next year proposition.
Speaker 1: Oh look, look, what have we had a tenure expansion,
Speaker 1: a twelve year expansion right now we're talking about a
Speaker 1: two and a half year expansion, give or take. Why
Speaker 1: is the why? Why is the general operating assumption that
Speaker 1: we're going to go into recession as slowly as we have.
Speaker 1: We've really protracted elongated expansion. When this expansion in the
Speaker 1: entire cycle has been compressed into a time machine. I
Speaker 1: think that I think that I think it's species to
Speaker 1: say you're gonna have your eighteen months runway. I think
Speaker 1: people are worried that you know, this monitor, uh what
Speaker 1: do you call it? Modern monetary theory has brought in
Speaker 1: an incredible inflation. And now look, Ira Jersey says, not
Speaker 1: a question of um, you know, if we're gonna have
Speaker 1: a recession, but what kind it's gonna be? I couldn't
Speaker 1: agree more. We've only tacked on two trillion dollars more
Speaker 1: in corporate debt since Operate the nineteen so more things
Speaker 1: can break. Yep. Absolutely. Daniel D. Martino, Booth CEO and
Speaker 1: Chief Strategies a quick intelligence giving us her thoughts. We
Speaker 1: have a great pleasure ed prices in the studio with
Speaker 1: a senior fellow and former British trade official senior foul
Speaker 1: at at n y u and former British trade official.
Speaker 1: Uh he's a political economist. He represented Her Majesty's government
Speaker 1: to Wall Street and uh US official sector from seventy
Speaker 1: one and um he's Uh. I guess you specialize in
Speaker 1: German economic history, but you look at obviously the entire world.
Speaker 1: Is that fair? Yes? I think, like you know, German
Speaker 1: history is always in my mind. I think it's a
Speaker 1: good a good benchmark for a lot of things, particularly
Speaker 1: if we're gonna talk about inflation. Of course, yeah, the
Speaker 1: Weimar Republican the hyper inflation is um the big scare
Speaker 1: and that's why Germans hate it so much. But I
Speaker 1: think we all hate inflation. I mean, Ronald Reagan hated
Speaker 1: inflation as much as any German. Um. Uh. Somebody asked
Speaker 1: me today, who's your least favorite German politician. And I
Speaker 1: was thinking, Um, first of all, I didn't any I like,
Speaker 1: I like a lot of them on both sides of
Speaker 1: the aisle. There's very there's not as much differentiation there
Speaker 1: as there is here, at least of the two parties.
Speaker 1: But I thought, you know what, when I was the
Speaker 1: G twenty in Hamburg, um, angl a miracle got like
Speaker 1: a standing ovation from all the other leaders. She was
Speaker 1: clearly leading the free world right um and and it
Speaker 1: was amazing, like she was the hero. And now in hindsight,
Speaker 1: we realized she's been appeasing Vladimir Putin for years and
Speaker 1: making Germany dependent on Russian oil and gas. They're basically
Speaker 1: fun funding his war in Ukraine, these atrocities, um that
Speaker 1: we're that we're watching. How does how does Anglo miracle
Speaker 1: go down in history? I mean it's that's a profound question,
Speaker 1: right And to use the word appeasement um of Germans
Speaker 1: is sort of metso ironic and you have, you know,
Speaker 1: you have to sit down and think about that. That's
Speaker 1: why you chose it was. I appreciate it. Um, Yeah,
Speaker 1: how does she go down in history? Right now? Not
Speaker 1: that well? And I suppose if you want to think
Speaker 1: about why the Germans were taking in all that gas
Speaker 1: and why they were appeasing Russia, maybe there was some
Speaker 1: sort of back in their mind war guilt. You know,
Speaker 1: we invaded the Russians twice, we caused a lot of damage,
Speaker 1: and maybe we have some sort of historical responsibility to
Speaker 1: bring the Russians back into the European fold. And again, ironically,
Speaker 1: they are not in the European fold, and they seem
Speaker 1: to have used this relationship with Germany to to break
Speaker 1: away from what you might call norms. It's crazy. I
Speaker 1: was over there for the last six years in Berlin,
Speaker 1: and I kept running into like Dan Yet, the U
Speaker 1: S Energy Minister. At every time, I'll tell you, Dan,
Speaker 1: what are you doing here? He's like, I'm trying to
Speaker 1: get these guys to buy our l en g I'm
Speaker 1: trying to get them to build more terminals so they
Speaker 1: can accept our gas and not buy all the stuff
Speaker 1: from Vladimir Putin and a shut down Nords dream too.
Speaker 1: Obviously he was unsuccessful. I mean, I guess they wish
Speaker 1: they would have now, But is it even possible for
Speaker 1: Western Europe to cut off Russian oil and gas or
Speaker 1: would they be kind of shooting themselves in the foot. Well,
Speaker 1: it's certainly possible for Putin to shoot them in the
Speaker 1: foot and cut off at least some of that gas. Right,
Speaker 1: So I think it's definitely it's now become clear that
Speaker 1: that's a major security risk. Uh. And so whether it's
Speaker 1: possible to the upside, whether they can actually pivot back
Speaker 1: to US oil production, one would hope. Um, Now, of course,
Speaker 1: I mean, you guys, tell me what you think about this,
Speaker 1: but you're immediately going to drive into the wall of
Speaker 1: the climate lobby. Um. Possibly correctly, right, But it's on
Speaker 1: the one hand, on the other hand, situation, Um, so
Speaker 1: we need to pump. Do you want to finance war crimes?
Speaker 1: Do you want to mind more dirty call? Do you
Speaker 1: want to roast to death? Which way like atomic weapons?
Speaker 1: Or slowly? So we we heard from Christine Leguard I
Speaker 1: m F this morning. It gives us your sense of
Speaker 1: how the world's banks to fair. The e c B,
Speaker 1: the Bank of England. How coordinated are they in terms
Speaker 1: of trying to bring down inflation? We've got a reopening economy.
Speaker 1: How are they in Canada? Don't forget forget fends, they're
Speaker 1: all fighting the same inflation. Right, Hopefully they're on the
Speaker 1: phone with each other, one would hope. Yeah, I think
Speaker 1: I think the central bank has talk to each other
Speaker 1: all the time. How coordinates coordinated there are in actual
Speaker 1: policy terms remains to be seen, and I think the
Speaker 1: CBS behind But if you're asking me my sense of it,
Speaker 1: I think all central banks around the world are realizing
Speaker 1: two two things right. Number one, fat currency is a
Speaker 1: massive experiment, and number two, we've been running an experiment
Speaker 1: within an experiment with endless que So an M T right, MMC,
Speaker 1: Please don't get me started on M T R. So,
Speaker 1: I mean how much money did we spend, not just
Speaker 1: monetary policy, right, how much money do we spend in
Speaker 1: fiscal um since the pandemic started, and we at least
Speaker 1: brought ourselves out of a recession quickly. But the questions
Speaker 1: are we headed right back down there with massive inflation
Speaker 1: um to join it. I think the answer is yes,
Speaker 1: So a nine trillion dollar balance sheets and absurdity. And
Speaker 1: if you remember, we were talking about inflation being transitory passing,
Speaker 1: we kind of moved from passing to persistent, and now
Speaker 1: I think we need to move from persistent to pernicius
Speaker 1: and the Fed really does need to get a handle
Speaker 1: on this. I understand that there's a war in Ukraine.
Speaker 1: I understand that there are all sorts of other financial
Speaker 1: markets reasons for like, you know, keeping the juice going,
Speaker 1: But this is going to become a disaster. Eight could
Speaker 1: be ten, and if it's ten, you could imagine twins.
Speaker 1: So you think they should be quicker with much QT,
Speaker 1: much quicker with QT, much quicker with hikes. So you're
Speaker 1: not in the camp that the CPI inflation reading we
Speaker 1: just got is the peak. I don't think it matches
Speaker 1: if it's the peak. I mean, what if it goes back,
Speaker 1: goes back down to seven? I mean, who cares? This
Speaker 1: is a major problem. This is eating into people, and
Speaker 1: this is something like I guess one of my questions
Speaker 1: has always been, dude, those costs don't go back down, right,
Speaker 1: I've been watching My from in January is fifty grand.
Speaker 1: In February, mid February they raised it to fifty three.
Speaker 1: You know, now the beginning of March it was did
Speaker 1: get no, I'm talking we're talking about the forward f
Speaker 1: one fifty for Matt Miller. It's a big issue that
Speaker 1: just that's a general term I really am trying to
Speaker 1: decide between a GMC Sierra four X and the Chevy Stilverado.
Speaker 1: But in any case, the point is the prices stay elevated, right,
Speaker 1: they still sift of gas and food. Hopefully they'll come
Speaker 1: back down. Prices upwardly sticky. Let's be weird like that.
Speaker 1: And I've been looking at the Toyoto Super myself like
Speaker 1: that thing looks like a beast. So you know what
Speaker 1: I mean. Share development with BMW is a kind word. Yes, yes,
Speaker 1: I'm trying to be right now. Yeah, you cause I'm
Speaker 1: a fan. Okay, cool, I'm driving a Subaru, so if
Speaker 1: you want me to leave right nice? No, No, that's
Speaker 1: a boxer motor. I love it and very reliable that
Speaker 1: Consumer Reports ranks Subaru as one of the greatest brands
Speaker 1: of all car brands in the world. So I'm feeling
Speaker 1: good about my choice. Yeah, thank you. What's our fed dude?
Speaker 1: Next there? And I mean fifty basis points? Do I
Speaker 1: have multiple fifty basis point moves from my federal reserve?
Speaker 1: I'd like to see that. Um No, probably. I mean
Speaker 1: they're they're very hesitant, aren't they about even suggesting they'll
Speaker 1: do one? I mean they've said they might, um, but
Speaker 1: my guess on it says they're gonna be four coming off.
Speaker 1: I'd like to see that too. Um. But I think
Speaker 1: that if they do that, there's a moment in markets
Speaker 1: right where the markets are like, oh what is this?
Speaker 1: H If you do it once, you've kind of broken
Speaker 1: the seal. And so they're facing two panics, right They're
Speaker 1: facing either the real economy panicking because we can't buy
Speaker 1: the things that we want to buy, and on the
Speaker 1: other hand, they're facing the financial market panic potentially in
Speaker 1: which markets stone around in side. You imagine four fifty
Speaker 1: basis point hikes. That sounds crazy, but it brings us
Speaker 1: only to two and a quarter percent. Still nothing. So
Speaker 1: what does normalization mean? Yeah, okay, normalization doesn't mean anything
Speaker 1: right now, We're still going to be in a very
Speaker 1: loose environment even with that kind of even with that
Speaker 1: kind of piking, Good time to buy a house, all right,
Speaker 1: Ed Brice, thank you so much, and senior fellow n
Speaker 1: y U, former British trade official. Remember the Economic Club
Speaker 1: of New York? Do they actually have it like a clubhouse?
Speaker 1: That's a big deal, that's that's a big old club. Actually,
Speaker 1: did they have a clubhouse to I mean, where do
Speaker 1: they think they meet? They probably meet it like the
Speaker 1: Metropolitan Club or something. And I mean I took economic time.
Speaker 1: Can I get in there? I don't know what you
Speaker 1: have to do to join it? Alright, thank you so much.
Speaker 1: We appreciate it. Looking at the wall, worry a new
Speaker 1: brick has recently been added over the past couple of months,
Speaker 1: and that is geopolitical risk, as you have a hot
Speaker 1: war now in Ukraine, and that there is another issue
Speaker 1: for investors to digest. Sedec Wabba joins us. He is founder,
Speaker 1: chairman and managing partner of I Squared Capital. Sedec. You know,
Speaker 1: we have this hot war in Ukraine. It feels so
Speaker 1: twentieth century that people, I think, I have a hard
Speaker 1: time kind of really appreciating the impacts. How do you
Speaker 1: think about that in terms of your investment outlook great
Speaker 1: to be with you, Matt, and I appreciate the invite.
Speaker 1: My biggest concern is the impact the war who is
Speaker 1: having on global inflation and US inflation in particular. So
Speaker 1: the numbers came out two days ago, eight point five
Speaker 1: percent increase in March compared to seven point nine you
Speaker 1: had one point to percent increase in one month. That
Speaker 1: increase will continue, and I suspect inflation will be around
Speaker 1: ten plus by the summer. So that puts enormous pressure
Speaker 1: on the Federal Reserve to increase interest rates, and that
Speaker 1: of course is not going to help the economy. My senses,
Speaker 1: we are sleepwalking towards global economic crisis unless this Ukraine
Speaker 1: situation get resolved. I want to jump in and say,
Speaker 1: first of all, that was Paul. Uh, that that was Paul.
Speaker 1: This is Matt. I'm just saying, OK, we we we
Speaker 1: look a lot like on the radio. UM. First of all,
Speaker 1: hello and thanks so much for joining us. Great talking
Speaker 1: to you. UM, I want to know what you think about, UM,
Speaker 1: you know the U s economy in this context? Are
Speaker 1: we are we headed towards a recession with ten percent inflation?
Speaker 1: That sounds like a horrible situation. I think if the
Speaker 1: war in Ukraine is not resolved relatively quickly, you will
Speaker 1: have the trifecta of a pandemic of a global logistics
Speaker 1: Chaine supply crisis and war that has pushed energy prices,
Speaker 1: commodity prices, food prices way way up, and that yes,
Speaker 1: will probably lead to a recession. UM. I give you.
Speaker 1: One simple example, we passed one point two trillion infrastructure bill.
Speaker 1: The cost of construction has gone up by more than
Speaker 1: that means that that infrastructure bill, at one point to trillion,
Speaker 1: has already lost so it's lost two billion dollars of
Speaker 1: its purchasing power. So that's a problem. So are we
Speaker 1: going to get any more fiscal help? You think, um,
Speaker 1: because we've fallen off this fiscal cliff. It's kind of
Speaker 1: a cliche now, but it's true. And you know, on
Speaker 1: one hand, a lot of that fiscal spending is to
Speaker 1: um is getting the blame for inflation. On the other hand, Um,
Speaker 1: can we really go cold Turkey without any more? No,
Speaker 1: you can't. So so you have to continue to invest,
Speaker 1: but invest productively in areas where that has a positive
Speaker 1: effect on American productivity. That has to continue to happen,
Speaker 1: and that is in fact what the Biden administration is doing.
Speaker 1: They're trying to ensure that the infrastructure bill, which is
Speaker 1: the biggest bill we've ever had, is allocated properly across
Speaker 1: productive projects across the US. So that is certainly going
Speaker 1: to be a huge plus, and that has to continue.
Speaker 1: I think the other element is to be able to
Speaker 1: have a synchronized effort globally to try and stop the
Speaker 1: war in Ukraine, because that is going to be the
Speaker 1: biggest positive impact it can have on the global economy.
Speaker 1: In terms of US infrastructure, select, where do you think
Speaker 1: the priorities be. I'll take your minds minus the Gateway project,
Speaker 1: getting some new tunnels connecting New Jersey and New York
Speaker 1: and Amtrak. I've been lobbying that forever. Where do you
Speaker 1: think the money should be spent? So the most efficient
Speaker 1: way today is to spend the money on things that
Speaker 1: needs immediate repair. Why because you don't have to wait
Speaker 1: another three or four years of planning to be able
Speaker 1: to do that. So things that have broken bridges that
Speaker 1: are almost falling are the easiest target. Whether is the
Speaker 1: most impact, the biggest bank for your buck, And that
Speaker 1: is what is in fact the administration currently doing. The
Speaker 1: next will be to really focus on energy supply and
Speaker 1: adopt on all of the above strategy. Right, so, we
Speaker 1: realize that we need to ensure independence but also the
Speaker 1: independence of allies in Europe, and so that means accelerating
Speaker 1: energy projects and ensuring that that will allow gas to
Speaker 1: flow into Western Europe, which I think indirectly should help
Speaker 1: accelerate the end of the war. As an investor, sodic,
Speaker 1: are there infrastructure projects that you think have decent returns
Speaker 1: right now? What's the what's the what's the environment look like? Look,
Speaker 1: the environment is generally positive. Of course, everything is expensive,
Speaker 1: even though there's been a market adjustment, but real assets
Speaker 1: haven't yet adjusted the way that probably should. But you
Speaker 1: have investments in digital infrastructure, which continues to be very important.
Speaker 1: You have investments in renewables in solar and wind, which
Speaker 1: is going to be critical. And I think investment in
Speaker 1: basic infrastructure associated with the transport of gas across the
Speaker 1: US to ensure that you can unblock the supply of
Speaker 1: gas for export purposes, that's going to be an important element.
Speaker 1: So so that at the beginning of this pandemic, you know,
Speaker 1: when supply chain issues became so apparent to so many people,
Speaker 1: there's certainly talk about on shoring more of our supply chain.
Speaker 1: Is that something you think this U s economy has
Speaker 1: an appetite force, that's something that should occur. It. Look,
Speaker 1: the strategy is from a just in time to just
Speaker 1: in case. Uh, that just in case, of course comes
Speaker 1: at an expense. Right The fact is Europe was buying
Speaker 1: gas from Russia and not from other Reasians. It's because
Speaker 1: it's cheaper. So the moment we start on shoring as
Speaker 1: opposed to offshoring, we will by definition increase the cost
Speaker 1: to the consumers and that will also fuel inflation. And
Speaker 1: so from that perspective, it's a choice that consumers have
Speaker 1: to make. I think in times of crisis that's what happens.
Speaker 1: But I think once that stabilizes, I would not be
Speaker 1: surprised that we returned to a more balanced offshore on
Speaker 1: shore type of strategy. Alright, sedek Wabba, thank you so
Speaker 1: much for joining us. Todek Wabba, Founder, chairman and managing
Speaker 1: partner of I Squared Capital. Matt, you ever think we're
Speaker 1: gonna build a silicon chip factory here in the US, Yeah,
Speaker 1: for sure, I'm They're they're building chip factories here in
Speaker 1: the US right now. I believe one in the great
Speaker 1: state of Ohio, at least one. UM And I think
Speaker 1: Sodic makes a great point. You know it's going to
Speaker 1: be more expensive obviously, UM, you can't treat workers here
Speaker 1: the way you do in low costs labor nations. And UM.
Speaker 1: On the other hand, though, maybe we're willing to spend
Speaker 1: enough so that the workers who do build our chips
Speaker 1: live a better life. Yep. Interesting to see how this
Speaker 1: plays app That was certainly the on shoring of certain
Speaker 1: manufacturing issues, supply chain issues, certainly the talk in the
Speaker 1: beginning of this pandemic. See how this plays out. There's
Speaker 1: a film called Trading Places. Highly recommend if you haven't
Speaker 1: seen it. If you're working on Wall Street, watching Trading
Speaker 1: Places is like reading Liars Poker. It's something that you
Speaker 1: have to have done. So. Jennifer Lee, Senior Conmers Managing Director,
Speaker 1: Femoil Capital Markets. Have you seen Trading Places, Jennifer. I
Speaker 1: think my favorite line is when he his legs. We're
Speaker 1: discovered that they worked, and he was like, it's a miracle.
Speaker 1: It's a miracle. I can walk. Eddie Murphy, Jennifer's see.
Speaker 1: Jennifer's seen, and she can stay and play with us.
Speaker 1: All right, Jennifer talked to us about this economy. It's
Speaker 1: bad enough I have to deal with inflation at the
Speaker 1: gas pump in the supermarket. Now you've got some economists
Speaker 1: talking about recession next year. How do you think about
Speaker 1: this Federal Reserve and is a recession risk reel in
Speaker 1: your mind. They are. Remember when we spoke about this
Speaker 1: last month, I was saying, it's not our base case scenario,
Speaker 1: and it's still that's still the point the case that
Speaker 1: is not again our base case scenario. But you know,
Speaker 1: the longer that you know, the the war last for
Speaker 1: for Examp Bowl, you know, um, the FED communication has
Speaker 1: been very clear that they are going to go faster
Speaker 1: and higher um than everyone was anyone was expecting, you know,
Speaker 1: like half a year ago or so. So I think
Speaker 1: the risk of a hard landing is is rising. But
Speaker 1: again it's not our base case scenario. But you know,
Speaker 1: probably the next couple of years, you know, we're probably
Speaker 1: gone some kind of pulled back. So what do you
Speaker 1: expect in terms of you know, we were just talking
Speaker 1: about some people forecasting four fifty basis point hikes. Um,
Speaker 1: I don't think that's the consensus, but we are looking
Speaker 1: for If you take a look at the w I
Speaker 1: RP function on the Bloomberg terminal, you can see that
Speaker 1: the market has priced in essentially nine twenty five basis
Speaker 1: point hikes between now and the beginning of February. What
Speaker 1: do you think, all right, so this is a very
Speaker 1: humbling job, by the way, and I remember pooing people
Speaker 1: who are saying, you know, four or five, and I'm like, oh,
Speaker 1: come on, you know, let's be reasonable. We can account anymore.
Speaker 1: We have rate hikes um going for every single meeting
Speaker 1: this year and I think two next year. UM. And
Speaker 1: we're looking for fifty basis points in May and in
Speaker 1: June twenty five and whatever after that. UM. Again, the
Speaker 1: risk is higher. And it's not just the FED, it's
Speaker 1: you know, as everyone knows, it's like almost all center
Speaker 1: banks around the world. You know, this week we had
Speaker 1: to make a Canada going fifty. We had New Zealand
Speaker 1: going fifty. We had a governor governor less big of
Speaker 1: Korea going twenty five, you know. So it's, uh, this
Speaker 1: is like the story for for everyone, and it's almost
Speaker 1: like what's that movie about them? Anyways, It's like fifty
Speaker 1: is like the new That's sort of how I've been
Speaker 1: thinking about it. What we had Christine Legarde, president of
Speaker 1: the e c B, this morning speaking what was your
Speaker 1: takeaway there? It seems like it's less clear for the
Speaker 1: ECB their path relative to the FED reserve. Right, so
Speaker 1: Europe has you know, it's it's a very different story
Speaker 1: over there, um, you know, especially with with the war
Speaker 1: and energy prices especially. UM. It was interesting because I
Speaker 1: think that the press release it self was pretty cut
Speaker 1: and dry, you know, saying that if that we are
Speaker 1: basically seen enough and the A p P will end
Speaker 1: in Q three. But during the press conference, President regard Um,
Speaker 1: who was working from home, sounded a lot more wishy washy,
Speaker 1: a lot more vague and in sort of like typical
Speaker 1: of the UCB, where you know, she was emphasizing UM
Speaker 1: flexibility and optionality, and she didn't She was like, you know,
Speaker 1: we see it's going to end in QC Q three,
Speaker 1: but we didn't say when, you know, is it gonna
Speaker 1: be early or later? Um, So I think July is
Speaker 1: still a possibility. But I've sort of tossed that one
Speaker 1: up the window now and I think we're going to
Speaker 1: go for a September ray hike, just given how uncertain
Speaker 1: the the e c B was sounding UM today, it's
Speaker 1: amazing to me that we have seen such little movement
Speaker 1: UM in the euro For a while, I thought I
Speaker 1: was going to go to parody as it was going
Speaker 1: up to you know, one twelve, one thirteen. Then I
Speaker 1: thought up is the path and now it's come back
Speaker 1: down to to one oh eight. Where do you see
Speaker 1: euro dollar? Um, we're a little bit more on the
Speaker 1: bare side of things, UM. And I guess I was
Speaker 1: just sort of anticipating that, you know, the the CP
Speaker 1: will probably get cold feet, um, and they will probably
Speaker 1: keep communicating and they they're already pulling back on that accommodation.
Speaker 1: But when they're actually going to be more aggressive on
Speaker 1: the right hike front, I don't know when that's going
Speaker 1: to happen. But we've got the euro ending at around
Speaker 1: one oh six by the end of this year. Um.
Speaker 1: You know, hopefully I'm wrong on this one, but you know,
Speaker 1: maybe around lower than where we are now. Are they
Speaker 1: all on the phone, Jennifer? Are are Christine Leguarde and
Speaker 1: Jerome Powell? And you know, um the Bank of England
Speaker 1: and the Bank of Canada? Are they all talked? Because
Speaker 1: they're fighting the same inflation right with different rate hikes? Right?
Speaker 1: I think they were, you know, um chatting and probably
Speaker 1: they have a WhatsApp group going on, you know, back
Speaker 1: in But UM, now I think you know, things are
Speaker 1: heading in different directions, you know, especially uh inflation and
Speaker 1: then with the economies in North America a little bit stronger.
Speaker 1: You know, the US was certainly starting on the starting
Speaker 1: off on our stronger footing, so they have more um,
Speaker 1: more comfort I think, in raising rates very quickly and
Speaker 1: very aggressively. And it's that your poll and said, you know,
Speaker 1: the labor market is strong and the economy can raise rates,
Speaker 1: but um in here in Canada as well, but in Europe,
Speaker 1: like I said, it's a very different story and they're
Speaker 1: more concerned about the impact of the war. All right, Jennifer,
Speaker 1: thanks so much for joining us again. Jennifer LEAs and
Speaker 1: your economist managing director Demo Capital Markets, thanks for listening
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