WEBVTT - Upside Risks to Inflation and Outlook for a US Recession 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen, and always on Bloomberg Radio, 0:00:43.080 --> 0:00:47.800 the Bloomberg Terminal, and the Bloomberg Business App. I will 0:00:47.800 --> 0:00:51.879 not mince words on Global Wall Street. With great respect 0:00:51.880 --> 0:00:55.160 to Cliff Astness and a few other worthies, there is 0:00:55.320 --> 0:00:58.840 no one that does the math like way lead at Blackrock. 0:00:58.960 --> 0:01:02.440 She joins us this morning, partiers from Cambridge, but far 0:01:02.480 --> 0:01:05.640 more acclaim in her China. Wait thrilled to have you 0:01:05.720 --> 0:01:09.440 on right now. I look really at where we are, 0:01:09.840 --> 0:01:15.600 and my question to you is, when you correlate equities, bonds, currencies, commodities, 0:01:15.959 --> 0:01:19.360 do you see a stable global system or is there 0:01:19.480 --> 0:01:21.920 enough instability out there to give you concern? 0:01:23.760 --> 0:01:27.000 Good morning, Thank you so much for having me. So 0:01:27.080 --> 0:01:30.399 when we look at cross asset correlation, you look at 0:01:30.600 --> 0:01:33.959 apply bond correlation in the US, you look at apply 0:01:34.000 --> 0:01:40.000 bond correlation in Europe, they have been going steadily from negative. 0:01:40.160 --> 0:01:44.200 It's a very chan for portfolio diversification. We have gone 0:01:44.240 --> 0:01:48.000 from the period of this inflation and our environment for 0:01:48.120 --> 0:01:53.680 a period of persistent inflationary environment. And as such, duration 0:01:54.080 --> 0:01:57.040 and the role of duration as balanced in your portfolio 0:01:57.040 --> 0:02:00.760 construction is severely challenged, which is why we need to 0:02:00.800 --> 0:02:04.440 really rethinkful for your construction in his current environment, right 0:02:04.600 --> 0:02:07.520 to really kind of think about diversifying your diversifiers. 0:02:07.520 --> 0:02:10.640 Well, let's diversify the diversifiers, because we know Waylee bought 0:02:10.639 --> 0:02:14.040 in video three years ago when I did not spell it. Wait, 0:02:14.120 --> 0:02:18.480 how do you diversify the diversifiers with big tech again 0:02:18.600 --> 0:02:20.560 on this Thursday moonshot? 0:02:21.960 --> 0:02:26.040 Yeah. Actually, it has been a very concentrated actuality market 0:02:26.120 --> 0:02:27.400 already in the US. 0:02:27.880 --> 0:02:30.480 I need to interrupt, and I need to interrupt and 0:02:30.480 --> 0:02:32.840 say way Lee has said just shut up and own 0:02:32.880 --> 0:02:34.880 it and say thank you. I want to say that 0:02:34.919 --> 0:02:37.600 she's been onboard. Let's continue doctually. 0:02:37.919 --> 0:02:43.520 We still like, we still like the magnificent world, not 0:02:43.680 --> 0:02:45.720 seven maybe it's six, maybe it's five. 0:02:46.000 --> 0:02:46.919 But if you look at. 0:02:46.800 --> 0:02:49.280 Their earnings right like, so, yes, the media has done 0:02:49.280 --> 0:02:55.120 extraordinarily well, up five hundred percent and more since last year, 0:02:55.360 --> 0:02:58.760 but it's forward earnings has gone up just as much, 0:02:58.840 --> 0:03:04.480 and they're beating those very high levels of earning expectations. 0:03:05.040 --> 0:03:07.079 And it's not just in media, right you look at 0:03:07.400 --> 0:03:11.359 tech sectors as a whole, it's really carrying the earnings 0:03:11.360 --> 0:03:14.359 momentum in the US. So we're still very comfortable with 0:03:14.440 --> 0:03:18.760 our Nvidia call, with our tech sector call, but we 0:03:18.880 --> 0:03:22.359 also see kind of momentum broadening out. If you look 0:03:22.360 --> 0:03:26.040 at kind of margin expansion in the US ACTE market, 0:03:26.200 --> 0:03:30.320 eight out of eleven sectors managed to grow their margins 0:03:30.480 --> 0:03:34.200 the last earning season, which gives us confidence behind our 0:03:35.000 --> 0:03:38.240 US actly overweight. But the AI theme in our review 0:03:38.680 --> 0:03:41.800 has a significant runway to play out as we think 0:03:41.800 --> 0:03:45.760 about other sectors kind of starting to extract profitability and 0:03:45.800 --> 0:03:46.600 benefit from that. 0:03:47.600 --> 0:03:48.000 Willie. 0:03:48.000 --> 0:03:51.440 We had some central bank movement recently, the Swiss National 0:03:51.520 --> 0:03:53.600 Bank cutting their interest rates, the Bank of England holding 0:03:53.640 --> 0:03:56.880 their rate steady. How do you get you handicapped? The 0:03:57.080 --> 0:04:01.040 US Federal Reserve here is maybe behind the curve a 0:04:01.080 --> 0:04:04.440 little bit in cutting rates here or do you think 0:04:04.440 --> 0:04:05.880 they should in fact hold study. 0:04:07.480 --> 0:04:11.240 I think this environment where the FED is later than 0:04:11.360 --> 0:04:14.880 the other central banks is highly unusual, right, So the 0:04:15.000 --> 0:04:20.839 Easy be going before the Fed, and BOE likely going 0:04:21.120 --> 0:04:23.760 before the Fed as well. I think this is highly unusual. 0:04:23.800 --> 0:04:27.520 It's also highly unusual because we're talking about an environment 0:04:27.560 --> 0:04:31.560 where central banks are looking to cut rates when inflation 0:04:32.120 --> 0:04:35.880 is way above target, when growth is not really tittering 0:04:36.720 --> 0:04:37.839 around recession. 0:04:37.920 --> 0:04:38.080 Right. 0:04:38.120 --> 0:04:40.599 So this is all very very extraordinary in terms of 0:04:40.600 --> 0:04:44.120 the environment for central banks, which is why we are 0:04:44.320 --> 0:04:47.799 of the view that even when the FED starts cutting 0:04:47.960 --> 0:04:51.279 later this year, which is our expectation, one or two 0:04:51.320 --> 0:04:55.560 cuts for twenty twenty four, which is not really contrariant. 0:04:55.800 --> 0:04:58.400 But even when they start cutting, we're talking about an 0:04:58.440 --> 0:05:00.640 environment of high for longer, not going to be able 0:05:00.640 --> 0:05:04.080 to cut as much as before to come to the 0:05:04.120 --> 0:05:09.120 rescue of the economy because of the broadly inflationary environment 0:05:09.279 --> 0:05:14.360 given structural forces such as the low carbon transitions such 0:05:14.400 --> 0:05:18.880 as aging population pushing inflation higher. But even AI, you know, 0:05:18.920 --> 0:05:22.960 people think about AI as deflationary because of the productivity 0:05:23.000 --> 0:05:26.360 boost that we are all hoping for. The market to 0:05:26.360 --> 0:05:32.279 some extent pricing in but before it becomes deflationary through 0:05:32.320 --> 0:05:37.719 productivity boost the copex spent, the enormous copex spent actually 0:05:37.760 --> 0:05:41.480 means that AI will have to be inflationary first before 0:05:41.520 --> 0:05:43.719 it can be deflationary. Right, So, because of all of this, 0:05:44.000 --> 0:05:46.039 we're talking about high for longer for central banks. That 0:05:46.080 --> 0:05:48.760 applies to the fact that applies to the BOE, that 0:05:48.800 --> 0:05:50.520 applies to the ECB as. 0:05:50.440 --> 0:05:53.159 Wet Wellie, thank you so much and thank you for 0:05:53.600 --> 0:06:07.719 being in the market and explaining it to us. Joining 0:06:07.800 --> 0:06:11.480 us right now. Turston Slock of Polyglobal Management, hugely read 0:06:11.520 --> 0:06:14.200 on Wall Street. Of course, off of is a kind 0:06:14.240 --> 0:06:18.080 of work at Deutsche Bank, is well Turston. Twelve months forward, 0:06:18.520 --> 0:06:20.080 where's real GDP. 0:06:21.320 --> 0:06:25.400 With still mildly hot economy, mildly hot weather, but with 0:06:25.480 --> 0:06:28.599 a risk that we may have some slow down coming 0:06:28.800 --> 0:06:31.280 maybe twelve months, but more eighteen months into the future. 0:06:31.640 --> 0:06:33.880 The fear you can have is that higher for longer 0:06:34.000 --> 0:06:38.240 ultimately begins to bite harder on LeVert balance sheets for consumers, 0:06:38.440 --> 0:06:41.160 on LeVert balance sheets for firms, and LeVert balancets in 0:06:41.200 --> 0:06:44.159 the banking sector, and that could potentially create that dreaded 0:06:44.200 --> 0:06:46.599 recession that we've been worrying about for so long, but 0:06:46.760 --> 0:06:49.360 so far for the next seven quarters, we still think 0:06:49.440 --> 0:06:52.000 that the tailwinds to growth are very strong from fiscal 0:06:52.040 --> 0:06:54.200 policy and from easy financial conditions. 0:06:54.880 --> 0:06:57.200 Torsten, you've been pretty consistent here in your call that 0:06:57.520 --> 0:07:00.400 this federal Reserve doesn't really have to cut rates in 0:07:00.400 --> 0:07:06.000 twenty twenty four. Do you still believe that, and if so, why. 0:07:04.720 --> 0:07:06.680 I still believe that because of what I think. I mean. 0:07:06.800 --> 0:07:08.440 The first test is, well. 0:07:08.279 --> 0:07:10.240 If we literally just a quote unquote look out of 0:07:10.240 --> 0:07:12.480 the window and see how things going in the incoming data, 0:07:13.040 --> 0:07:15.440 non farm payrolls at two hundred and seventy two thousand, 0:07:15.880 --> 0:07:17.240 that's a really strong number. 0:07:17.440 --> 0:07:19.280 There's some debate about whether. 0:07:19.160 --> 0:07:22.040 Some of that maybe is driven higher because of immigration, 0:07:22.360 --> 0:07:25.160 when the Edelburgh and Tara Watson at the Brookings Institute 0:07:25.160 --> 0:07:29.240 wrote a very important paper suggesting that maybe the equilibrium 0:07:29.360 --> 0:07:32.040 growth in non farm payrolls is about one hundred thousand 0:07:32.120 --> 0:07:35.760 higher than normal because of immigration. But I still think 0:07:35.800 --> 0:07:38.640 that strength in the numbers across the board, where a 0:07:38.680 --> 0:07:40.720 little bit of weakness may be in retail sales earlier 0:07:40.760 --> 0:07:42.560 this week, but at the same day we also had 0:07:42.560 --> 0:07:46.480 industrial production was very strong, so jobless claims also looking good. 0:07:46.760 --> 0:07:48.840 It's just hard to see where that slowdown is that 0:07:48.880 --> 0:07:50.800 so many people are worried about. So because of that, 0:07:51.080 --> 0:07:53.600 we just don't see the urgency for the FAT having 0:07:53.600 --> 0:07:54.480 to cut rates. 0:07:54.800 --> 0:07:58.200 Are you surprised that the higher rates haven't impacted the 0:07:58.240 --> 0:08:01.400 consumer more? I mean, it's it's tough to get a 0:08:01.400 --> 0:08:02.880 plane seat, it's tough to get a seat on a 0:08:02.920 --> 0:08:05.360 cruise ship, it's tough to get a seat at a restaurant. 0:08:05.640 --> 0:08:07.240 Talk to just about how the consumers reacting. 0:08:07.960 --> 0:08:09.160 Yeah, this is very important pole. 0:08:09.200 --> 0:08:11.400 So I think it's very critical in that discussion is 0:08:11.400 --> 0:08:15.480 that the transmission mechanism of mortary policy was actually working 0:08:15.600 --> 0:08:19.080 last year, exactly as the textbook would have predicted. The 0:08:19.120 --> 0:08:21.960 FED raise rates in March of twenty twenty two, and 0:08:22.040 --> 0:08:25.760 the most highly leveled consumers started responding because you saw 0:08:25.760 --> 0:08:27.400 the Linguagy rates go up on credit cards. 0:08:27.440 --> 0:08:30.560 The Linguagy rate codes about auto loans, especially. 0:08:30.200 --> 0:08:33.040 For consumers that have more debt, which generally are consumers 0:08:33.080 --> 0:08:35.160 that are younger also and consumers that have lower five 0:08:35.160 --> 0:08:38.080 coats goals. Same thing for corporates. You began to see 0:08:38.120 --> 0:08:40.600 the four rates go up for high yield, the fall rates. 0:08:40.360 --> 0:08:41.160 Go up for loans. 0:08:41.320 --> 0:08:43.679 So in other words, balance sheets that had a lot 0:08:43.679 --> 0:08:47.200 of debt were first hit by the Fed raising rates. 0:08:47.320 --> 0:08:49.960 But what really is unique at the moment, that's. 0:08:49.840 --> 0:08:52.480 Just the answer to your question, Paul, is that for consumers, 0:08:52.880 --> 0:08:55.959 they have locked in during the pandemic. Mortgage rates, as 0:08:56.000 --> 0:08:58.160 we all know, ninety five percent are thirty year fixed 0:08:58.360 --> 0:09:01.560 at very low levels. Like Wise, for corporates, the vast 0:09:01.640 --> 0:09:05.480 majority of credit markets is IG and IT companies locked 0:09:05.480 --> 0:09:07.959 in and termed out also very low interest rates. 0:09:08.000 --> 0:09:10.240 And as a result of that, the transmission maganism has 0:09:10.280 --> 0:09:12.200 just been weaker than what it normally is. 0:09:12.440 --> 0:09:15.080 And that changed with a fit pivoting to Duvish because 0:09:15.080 --> 0:09:17.040 then on top of that, not only was the transmission 0:09:17.040 --> 0:09:19.800 making week, but we also got a tailwind from easy 0:09:19.800 --> 0:09:22.360 financial conditions with S and p up as much as 0:09:22.360 --> 0:09:23.000 we have seen. 0:09:22.920 --> 0:09:25.320 Turstan, you've led on this and it's your best chart 0:09:25.480 --> 0:09:28.840 of the many charts you put out ten years ago. Folks, 0:09:29.559 --> 0:09:34.160 the share of mortgages below four percent, Paul, was thirty percent, 0:09:34.880 --> 0:09:38.160 is it for the conversation is doubled. I mean, I 0:09:38.200 --> 0:09:40.920 mean the number of mortgages below four percent is doubled 0:09:41.600 --> 0:09:45.080 in ten eleven years and Turston. That goes directly into 0:09:45.120 --> 0:09:49.439 the transmission mechanism. You know, I'm very negative on the dots. 0:09:49.760 --> 0:09:55.280 Do the dots of the FED have they adjusted to 0:09:55.400 --> 0:09:58.600 the slock slower transmission mechanism. 0:10:00.520 --> 0:10:02.520 Well, I do think what is very important in the 0:10:02.600 --> 0:10:04.760 last if I'm seeing meeting, and you have also talked 0:10:04.760 --> 0:10:08.960 about that on a surveillance radio, because what we saw was, 0:10:09.000 --> 0:10:11.440 of course that the FED went from instead saying three 0:10:11.480 --> 0:10:14.880 cuts in twenty twenty four to now saying one cut. 0:10:15.200 --> 0:10:18.440 That on its own is an admission that we were 0:10:18.480 --> 0:10:20.680 wrong at the FED. We thought that we would have 0:10:20.720 --> 0:10:22.600 three cuts. Now we think we're to have one cut. 0:10:22.760 --> 0:10:25.400 So in some sense, the FED is coming quote unquote 0:10:25.440 --> 0:10:28.560 back to the view that maybe there is no strong 0:10:28.800 --> 0:10:32.679 arguments for being in this urgent drag pace having two 0:10:32.760 --> 0:10:33.560 cut rates. 0:10:33.320 --> 0:10:35.480 As quickly as they thought just six months ago. 0:10:35.520 --> 0:10:37.520 We're thrilled you with us for the entire half our 0:10:37.600 --> 0:10:40.559 Turst and Slock. You know, We're gonna go to Michael 0:10:40.559 --> 0:10:42.520 barn News, but I'm gonna really come up on beating 0:10:42.559 --> 0:10:45.120 his folks. I haven't mentioned this on area yet, but 0:10:45.240 --> 0:10:48.640 it's a symptotic twenty twenty four. 0:10:48.840 --> 0:10:50.160 What is he talking about? 0:10:50.760 --> 0:10:55.480 Come on Tourston all the assim Tote discussion. Ethan Harris 0:10:55.520 --> 0:10:58.679 retired from Bank of America leading the charge on this. 0:10:58.840 --> 0:11:02.160 A few others as well. Well, they're lost and they're 0:11:02.200 --> 0:11:06.160 extending out the axis as far as they can. It's 0:11:06.200 --> 0:11:09.000 that simple, right, I agree. 0:11:09.200 --> 0:11:11.520 I think that what is very important here is that 0:11:11.559 --> 0:11:16.079 we have unleashed some fairly significant powers with inflation going up. 0:11:16.280 --> 0:11:18.800 And one point that's also very critical in this discussion 0:11:18.840 --> 0:11:21.320 is that if you look at Michigan five to tenure 0:11:21.400 --> 0:11:23.840 inflation long term inspectations. 0:11:23.520 --> 0:11:26.040 The median is still very well behaved. 0:11:26.040 --> 0:11:29.280 So the median household still thinks inflation will be three 0:11:29.320 --> 0:11:31.400 point one, which is where it's been for the. 0:11:31.360 --> 0:11:32.120 Last several years. 0:11:32.320 --> 0:11:34.640 But if you look at the mean, you will see 0:11:34.720 --> 0:11:38.920 a significant increase in one half of the population expecting 0:11:39.040 --> 0:11:40.120 that inflation is going. 0:11:40.000 --> 0:11:42.480 To be dramatically higher than the other half. 0:11:42.679 --> 0:11:44.120 And if you look at the sub questions in the 0:11:44.200 --> 0:11:47.120 University of Michigan, who is it that's expecting inflation to 0:11:47.200 --> 0:11:49.959 be higher, it is generally speaking, the bottom thirty three 0:11:50.000 --> 0:11:53.080 percent of household incomes, meaning low income households to expect 0:11:53.240 --> 0:11:55.480 much higher inflation than high income households. 0:11:55.559 --> 0:11:57.480 And it's generally also people with high. 0:11:57.360 --> 0:12:00.440 School or less education that expects inflation to be a 0:12:00.440 --> 0:12:03.160 lot higher. So you're beginning to see some divergence in 0:12:03.160 --> 0:12:04.160 inflation expectations. 0:12:04.200 --> 0:12:06.400 And this is opening up a very important. 0:12:06.000 --> 0:12:08.120 Debate in the Phillips curve that you and I, Tom 0:12:08.160 --> 0:12:10.840 and I talked about for years, where if inflation expectations 0:12:11.040 --> 0:12:14.000 for half of the population are very very high, what 0:12:14.040 --> 0:12:15.520 does that mean for when. 0:12:15.320 --> 0:12:17.840 The fits is that inflation expectations are under control. 0:12:17.960 --> 0:12:20.000 Yes, the media may be under control, but there's a 0:12:20.000 --> 0:12:22.680 significant part of the population they're still worry about inflation. 0:12:22.840 --> 0:12:26.040 To us and talk to us about what concern do 0:12:26.080 --> 0:12:28.800 you have about this? Maybe the commercial real estate market 0:12:28.920 --> 0:12:31.600 in this country. It feels like it's there's still a 0:12:31.640 --> 0:12:35.560 big shoe or two or three to drop, but maybe not. 0:12:35.720 --> 0:12:37.480 How do you think about that risk here as we 0:12:37.679 --> 0:12:39.280 look around to some of these big cities and see 0:12:39.280 --> 0:12:40.480 a lot of vacant office space. 0:12:41.480 --> 0:12:43.800 I think the important data point first to keep in 0:12:43.800 --> 0:12:46.679 mind is that the price per square foot for office 0:12:46.760 --> 0:12:50.400 nationwide is down more than forty percent from the peak. 0:12:51.360 --> 0:12:53.920 So if we think about what that means, that of course, 0:12:54.000 --> 0:12:56.240 means that there's a lot of office that has been 0:12:56.320 --> 0:12:59.800 reset at a lower level. Now, there's an important differences 0:12:59.800 --> 0:13:03.280 as the country, of course, with the Sun Belt, with 0:13:03.679 --> 0:13:07.120 the West Coast relative to East Coast, relative to metropolitan areas. 0:13:07.440 --> 0:13:10.559 But the bottom line is really that well, when an 0:13:10.600 --> 0:13:13.480 act price goes down more than forty percent, and in 0:13:13.520 --> 0:13:16.560 particularly when the financing of that asset price is something 0:13:16.640 --> 0:13:20.280 that normally is reset every five years, then we still 0:13:20.280 --> 0:13:22.520 have a maturity wall in commercial real estate, in particular 0:13:22.520 --> 0:13:26.640 in office that is really really steep. For other types 0:13:26.679 --> 0:13:29.640 of commercial real estate, things look a lot better. So 0:13:29.800 --> 0:13:33.800 of course you have warehouses, industrial, you have apartments, multi family, 0:13:34.880 --> 0:13:38.560 shopping malls of course, also have data centers. There's some 0:13:38.679 --> 0:13:42.360 very idiosyncratic stories across the different types of commercial real estate. 0:13:42.440 --> 0:13:44.880 But the main issue still that we should all be 0:13:44.920 --> 0:13:48.760 watching is office because that is just still where most 0:13:48.800 --> 0:13:49.960 of the downward drift. 0:13:49.760 --> 0:13:53.599 Is towards another economic issue that's really been or I 0:13:53.640 --> 0:13:56.679 guess this discussion point over the last eighteen months as 0:13:56.720 --> 0:13:59.480 we look around the world as this concept of American 0:13:59.520 --> 0:14:03.439 exception from an economic perspective, you know, the commercial rule 0:14:03.480 --> 0:14:07.640 state issue. Notwithstanding, how real is that the US economy 0:14:07.679 --> 0:14:09.320 strength vis to be the rest of the world, or 0:14:10.360 --> 0:14:11.240 how do you explain that. 0:14:12.120 --> 0:14:13.400 Yeah, this is really important. 0:14:13.440 --> 0:14:17.320 So there is a structural discussion exactly about is the 0:14:17.400 --> 0:14:20.400 US exceptional and the US, its course is exceptional because 0:14:20.440 --> 0:14:24.480 of large capital markets, much more spending and broadly speaking 0:14:25.000 --> 0:14:29.520 across the board, in including on defense, including also on 0:14:29.600 --> 0:14:30.960 the role of. 0:14:30.840 --> 0:14:31.760 The US consumer. 0:14:32.440 --> 0:14:35.160 So simply because the US as the biggest economy in 0:14:35.200 --> 0:14:38.600 the world, playing this very substantial role, it does generally 0:14:38.600 --> 0:14:41.400 speaking attract capital. On top of that comes the most 0:14:41.400 --> 0:14:45.240 cygnical arguments, namely that the US business cycle just happens 0:14:45.280 --> 0:14:48.080 to be a lot stronger than the business cycle in Europe, 0:14:48.120 --> 0:14:51.760 the business cycle in Japan, Canada, Australia, emerging markets, and 0:14:51.800 --> 0:14:52.720 of course also China. 0:14:53.080 --> 0:14:55.480 And when the US is stronger, then that. 0:14:55.480 --> 0:14:57.920 Means, of course, as we're seeing and as we're talking about, 0:14:58.080 --> 0:14:59.960 then breaks will be higher for longer in the USA 0:15:00.120 --> 0:15:02.480 that elsewhere. That's of course what we saw with EACV 0:15:02.600 --> 0:15:04.800 cutting rates. They being in today is staying at hold, 0:15:04.800 --> 0:15:07.600 but now signaling clearly the rate cuts are coming. All 0:15:07.640 --> 0:15:10.040 that argues for still more upward pressure on the dollar. 0:15:10.240 --> 0:15:14.600 Because the US is exceptional not only from a structural perspective, 0:15:14.800 --> 0:15:17.800 but also at the moment exceptional from a cyclical perspective. 0:15:18.040 --> 0:15:20.560 So with that background, when will that exceptionalism from the 0:15:20.600 --> 0:15:23.680 cyclical perspective change? When the fat begins to cut rates, 0:15:23.880 --> 0:15:26.440 then we could begin to see the dollar begin to 0:15:26.520 --> 0:15:28.880 turn really south in a most more substantial way. But 0:15:28.920 --> 0:15:32.200 given that's still now being pushed out repeatedly, then I 0:15:32.200 --> 0:15:33.760 still think the dollar will be going up, and the 0:15:33.800 --> 0:15:36.280 exceptionalism does play a very important role, both on the 0:15:36.280 --> 0:15:38.160 structural side and on the cyclical side. 0:15:38.320 --> 0:15:39.960 Tourst then one more question. We've got to go to 0:15:40.000 --> 0:15:42.520 breaking news. But I think this is too too important. 0:15:43.160 --> 0:15:45.800 Back to the idea of an x exis it goes 0:15:45.840 --> 0:15:50.880 out forever in the new idea percolating of an assim tote, 0:15:50.920 --> 0:15:54.240 I guess down to two percent? Is the assump tote 0:15:54.240 --> 0:15:56.960 a smooth lide path down to two percent out there 0:15:57.000 --> 0:15:59.680 somewhere or is it two point x percent? 0:16:01.240 --> 0:16:03.880 So if you mean inflation, of course, then the issue 0:16:03.920 --> 0:16:06.040 is that inflation at the moment, as you know, is 0:16:06.080 --> 0:16:08.680 three point three. The FEDS target is that it should 0:16:08.720 --> 0:16:11.520 be two. Three point three is not two. So that's 0:16:11.520 --> 0:16:14.120 why if I'm seeing members repeatedly talk about, well, maybe 0:16:14.160 --> 0:16:16.160 we do need to wait a little while longer before 0:16:16.160 --> 0:16:18.520 we start cutting rates. And to your question, will we 0:16:18.560 --> 0:16:21.040 have an asymptotic move down from three point three to 0:16:21.080 --> 0:16:22.040 two points zero? 0:16:22.360 --> 0:16:24.160 I think that the answer to that is absolutely not. 0:16:24.680 --> 0:16:25.400 We still have. 0:16:25.480 --> 0:16:29.160 Significant tailwinds from fiscal policy, the Chips Act, the Inflation Reduction, 0:16:29.240 --> 0:16:33.800 infrastructure and all policies that designed to lift growth over 0:16:33.800 --> 0:16:36.200 the next several years. Likewise, we have a very strong 0:16:36.200 --> 0:16:38.320 tail wind from easy financial conditions. As long as the 0:16:38.360 --> 0:16:40.560 AI story and the stock mirk goes up, we still 0:16:40.560 --> 0:16:43.240 will have, like we saw this early season, strong demand 0:16:43.280 --> 0:16:47.400 for airlines, hotels, restaurants, concerts, sporting events. So the short 0:16:47.440 --> 0:16:49.400 answer to your question is I worry that inflation is 0:16:49.440 --> 0:16:51.200 not going to come down in a straight line to 0:16:51.280 --> 0:16:53.840 two percent from the three point three percent where we 0:16:53.840 --> 0:16:54.240 are today. 0:16:54.320 --> 0:17:08.160 Ristin Sluk, thank you so much. Okay, what we're supposed 0:17:08.160 --> 0:17:12.359 to do here is give Anastasia Ameroso of IICAP a 0:17:12.520 --> 0:17:16.320 massive victory lap nine months ago. Whatever, just shut up 0:17:16.320 --> 0:17:18.720 and get in the market and buy big tech. She 0:17:19.040 --> 0:17:23.000 absolutely nailed the twenty twenty four We were talking about 0:17:23.040 --> 0:17:27.119 AI and you are the chat GPT queen. I mean, 0:17:27.200 --> 0:17:29.520 let's be honest here, you're glued to it. How do 0:17:29.640 --> 0:17:33.440 you use chat GPT for our entire audience? 0:17:33.440 --> 0:17:35.800 It's like what, Well, it. 0:17:35.840 --> 0:17:38.040 Is a game changer, and I think it's a huge 0:17:38.040 --> 0:17:40.560 productivity boost. And if you haven't used, not to make 0:17:40.560 --> 0:17:42.720 any product endorsements here, but if you haven't used the 0:17:42.760 --> 0:17:46.360 Microsoft Copilot, I think you're really missing out the next 0:17:46.440 --> 0:17:48.600 wave of how search is going to be done, and 0:17:48.680 --> 0:17:52.239 whether it's preparing for an interview, whether it's preparing for 0:17:52.280 --> 0:17:55.240 a client meeting, whether it's needing a quick synopsis of 0:17:55.280 --> 0:17:56.320 a particular topic. 0:17:56.720 --> 0:17:59.320 It is amazing what you can do with about five seconds. 0:17:59.119 --> 0:18:04.960 Or need seven pages of I capitol brilliance. You're at O'Hare, 0:18:05.520 --> 0:18:09.320 you're planes delayed two hours, You're on a laptop with 0:18:09.440 --> 0:18:13.960 chet GPT. How does it help you create that research note? 0:18:14.680 --> 0:18:17.320 Well, you know, first of all, it's a quick prompt. 0:18:17.400 --> 0:18:20.480 It's a question that you ask, please generate five hundred words, 0:18:20.520 --> 0:18:22.080 and here they are. And by the way I have 0:18:22.200 --> 0:18:25.160 done this, I do not publish the chat GIPT as 0:18:25.200 --> 0:18:28.239 the research. But if I need a quick synopsis of 0:18:28.280 --> 0:18:32.080 a particular topic, that's the perfect way. I also do 0:18:32.200 --> 0:18:35.240 happen to do a lot of interviews with a lot 0:18:35.280 --> 0:18:38.520 of our asset managers, and what a great way to 0:18:38.600 --> 0:18:42.040 prepare and know the key points going into it, whether 0:18:42.440 --> 0:18:46.439 it's about the firm, about the investment strategies. So I 0:18:46.480 --> 0:18:52.320 think you can use a qu across. 0:18:50.160 --> 0:18:52.800 What's great Paul when in the stage is at O'Hare, 0:18:53.280 --> 0:18:57.960 she's at Stanley's Blackhawk kitchen and tap she's chat GPT 0:18:58.119 --> 0:18:59.720 to get the correct craft. 0:19:00.600 --> 0:19:03.000 So a station. How do we bring that into our 0:19:03.040 --> 0:19:05.880 investment thought here? I mean because for really eighteen months 0:19:05.960 --> 0:19:07.919 AI has been one of the key themes driving this 0:19:08.040 --> 0:19:11.359 market higher. Is that justified in your minds? Are you 0:19:11.440 --> 0:19:14.119 kind of as an investor all into that story and 0:19:14.200 --> 0:19:15.280 looking for ways to play it? 0:19:15.359 --> 0:19:15.560 Yeah? 0:19:15.560 --> 0:19:17.760 I think it's one hundred percent justified. And I know 0:19:17.840 --> 0:19:19.480 a little bit before we came on ere we were 0:19:19.480 --> 0:19:22.040 talking that maybe not a lot of people are actually 0:19:22.280 --> 0:19:25.439 using this across their functions right now, but I think. 0:19:25.320 --> 0:19:26.840 A lot of people will in the future. 0:19:27.080 --> 0:19:28.919 I think what's happening right now is the race to 0:19:29.000 --> 0:19:34.159 invest in artificial intelligence by hyperscalers, but also by other companies, 0:19:34.240 --> 0:19:36.520 you know, across different industry verticals. 0:19:36.640 --> 0:19:38.520 I think there's a grave realization. 0:19:38.119 --> 0:19:40.720 By companies if you're not going to focus on investing 0:19:40.720 --> 0:19:43.200 in AI now, you are going to be left behind. 0:19:43.359 --> 0:19:46.960 So why would you continue to hire the same amount 0:19:47.320 --> 0:19:51.240 of you know, workforce when you can automate certain tasks 0:19:51.320 --> 0:19:55.760 and boost your margins. So I think that's a universal 0:19:55.880 --> 0:19:59.720 sort of understanding right now, you know, from corporate development departments. 0:20:00.040 --> 0:20:02.639 That's what's driving the investment cycle and artificial intelligence. 0:20:02.800 --> 0:20:03.760 That's why I don't. 0:20:03.560 --> 0:20:06.560 Think it's a coincidence that the likes of Nvidia and 0:20:06.640 --> 0:20:09.560 Broadcom and you know, actually a whole suite of semiconductors 0:20:09.640 --> 0:20:12.520 are benefiting from the build out of the backbone of 0:20:12.640 --> 0:20:13.800 artificial intelligence. 0:20:14.000 --> 0:20:14.720 You know, do I. 0:20:14.600 --> 0:20:17.200 Think the momentum is a little bit stretched at this 0:20:17.320 --> 0:20:17.840 very point? 0:20:17.960 --> 0:20:18.119 You know? 0:20:18.200 --> 0:20:22.640 Do I think some exuberants crept into a stock like Nvidia. Yes, 0:20:22.920 --> 0:20:25.920 But at the same time, if the data center sales 0:20:26.000 --> 0:20:30.320 are growing four hundred percent plus year over year, that's fundamentals. 0:20:30.720 --> 0:20:33.640 So all right, so in Nvidia, check I got that. 0:20:34.200 --> 0:20:37.320 How else are you suggesting to your clients that they 0:20:37.680 --> 0:20:39.800 maybe get some exposure to this It is, in fact 0:20:39.800 --> 0:20:40.720