WEBVTT - It’s a Tech War Now 0:00:13.800 --> 0:00:17.080 Hello, and welcome to What Goes Up, a Bloomberg Weekly 0:00:17.120 --> 0:00:20.479 Markets podcast. I'm Sarah Ponza, a markets reporter on the 0:00:20.520 --> 0:00:23.320 Cross Asset Team, and i am Mike Creagan, a senior 0:00:23.440 --> 0:00:25.560 editor on the Markets Team. This week on the show, 0:00:25.760 --> 0:00:28.680 from long shot to base Case, Wall Street is growing 0:00:28.760 --> 0:00:32.360 increasingly pestimistic, but a trade deal might not be reached 0:00:32.440 --> 0:00:36.239 over the summer months, and even as the Fed preaches patients, 0:00:36.560 --> 0:00:39.159 bonn yields continue to fall, with the ten year treasury 0:00:39.240 --> 0:00:43.440 yield reaching the lowest level since And of course, Sara, 0:00:43.640 --> 0:00:46.440 we will finish the show with the ever popular the 0:00:46.600 --> 0:00:50.159 Craziest Thing I Ever saw in markets? This week, at 0:00:50.200 --> 0:00:51.879 least this week. I hope you have a good one. 0:00:51.880 --> 0:00:53.559 Do you have a good crazy thing? I will have 0:00:53.600 --> 0:00:55.080 a good one by the end of the podcast. All right, 0:00:55.080 --> 0:00:57.160 I've got a good one. No pressure on our guests 0:00:57.240 --> 0:00:59.560 with the mind's mind's pretty good. I'm just throwing it 0:00:59.560 --> 0:01:03.200 out there. That's it. I'm not trying. Well, that's one 0:01:03.200 --> 0:01:06.600 of our guests there, Emily Barrett, you better have something good. Uh. 0:01:06.720 --> 0:01:10.679 Emily is our correspondent straight fresh from the trade wards 0:01:10.720 --> 0:01:13.759 covering the bonds and FX markets. That's exactly how it feels, 0:01:15.280 --> 0:01:18.200 and also joining us on the show, Gina Martin Adams, 0:01:18.280 --> 0:01:22.800 the chief equity strategist here at Bloomberg. Gina spent many 0:01:22.880 --> 0:01:26.319 years as a strategist, said Wells Fargo Wacoba Corp. Before that. 0:01:26.440 --> 0:01:28.440 But Sarah, I was looking at Gina's bio something I 0:01:28.480 --> 0:01:33.000 did not know about her. She's a Gator really, yes, 0:01:33.080 --> 0:01:35.160 you know that. I am from South Florida as well. 0:01:35.200 --> 0:01:37.759 I'm a Gator by birth. I know that's too Florida 0:01:37.800 --> 0:01:40.640 women on the show. I don't know. Florida women don't 0:01:40.640 --> 0:01:44.560 make the news quite as entertaining as Yeah, but maybe 0:01:44.600 --> 0:01:50.640 we can change that. But don't underestimate that. But this week, 0:01:51.160 --> 0:01:53.880 we've been talking about US China trade for a while now, 0:01:53.920 --> 0:01:55.920 but it seems like we got a bit of a 0:01:55.960 --> 0:01:59.200 step up. We think about what's changed, for one being 0:01:59.280 --> 0:02:03.120 the Huaweb acliss. We've also heard talks that other surveillance 0:02:03.120 --> 0:02:06.200 companies out of China could be blacklisted as well. And 0:02:06.240 --> 0:02:09.240 we even have a fight song out of China and 0:02:09.400 --> 0:02:12.080 for Gators. I went to school at Michigan. You know 0:02:12.160 --> 0:02:15.000 a good fight song can really rile people up. Gina, 0:02:15.520 --> 0:02:19.800 from your perspective is this becoming something that traders investors 0:02:19.840 --> 0:02:23.120 can really no longer ignore. Yeah, I don't necessarily think 0:02:23.200 --> 0:02:25.720 they have ignored it, but it did take a new 0:02:25.760 --> 0:02:27.679 step this week, and it took a step into a 0:02:27.800 --> 0:02:30.320 tech war as opposed to just a trade war. I 0:02:30.360 --> 0:02:32.120 think when you look back over the course of the 0:02:32.200 --> 0:02:35.160 last year, that's been the most dangerous aspect of the U. S. 0:02:35.240 --> 0:02:39.080 China relationship shift. It's not the tariffs. The tariffs are 0:02:39.120 --> 0:02:41.799 a teeny tiny portion of GDP growth, They're a teeny 0:02:41.840 --> 0:02:44.760 tiny portion of earnings growth. You know, you've run through 0:02:44.760 --> 0:02:47.600 the quantification of tariffs and you find out real quick 0:02:47.960 --> 0:02:50.639 how small they are, which is why stocks could sort 0:02:50.680 --> 0:02:53.320 of bounce around in the one to three percent decline 0:02:53.400 --> 0:02:55.960 range up until this week, and we did see an 0:02:55.960 --> 0:02:59.320 elevated level of volatility this week. We've seen a lot 0:02:59.400 --> 0:03:04.080 more angst evident in broad market classes, with the rise 0:03:04.120 --> 0:03:06.840 in gold as a good example. This week. Small caps 0:03:06.880 --> 0:03:10.400 really getting creamed this week, So much bigger risk off 0:03:10.760 --> 0:03:13.040 sentiment this week than last week. And I think the 0:03:13.080 --> 0:03:15.600 reason for that is this week it became about tech, 0:03:16.040 --> 0:03:19.760 not about trade. Gee, I'm curious, in uh your career, 0:03:19.800 --> 0:03:22.079 have you ever thought about politics? As much as as 0:03:22.120 --> 0:03:24.359 we have through these days, it seems like a very 0:03:24.440 --> 0:03:31.520 uncomfortable thing for fundamental technical analysts. Yeah, it's uh. I 0:03:31.600 --> 0:03:34.600 have thought about politics a lot over the course of 0:03:34.639 --> 0:03:37.840 the last several years. I mean, I can distinctly remember 0:03:38.360 --> 0:03:41.560 sixteen as a year in which it was all you know, 0:03:41.600 --> 0:03:45.280 the popular sentiment on Wall Street was if Hillary Clinton, 0:03:45.320 --> 0:03:48.440 when stocks should do fine, if trade, if Trump, when 0:03:48.520 --> 0:03:51.360 stocks are gonna get pummeled, right, and the opposite, The 0:03:51.400 --> 0:03:56.119 exact opposite thing occurred right after the Trump election. Then 0:03:56.680 --> 0:03:59.480 the thing was stocks just climbed this walla wari because 0:03:59.480 --> 0:04:02.120 everyone was really concerned about Trump. I think throughout my 0:04:02.200 --> 0:04:05.600 career I've always had to focus on policy in general, 0:04:05.640 --> 0:04:09.120 but more so on monetary policy than on fiscal policy, 0:04:09.160 --> 0:04:13.119 and certainly never on trade policy. And you know, even 0:04:13.160 --> 0:04:16.680 the smodest trade policy movements in the Bush administration weren't 0:04:16.760 --> 0:04:20.159 so meaningful for the broad market. So it's definitely a 0:04:20.240 --> 0:04:23.640 very different kind of policy that we were now focused on. 0:04:23.720 --> 0:04:26.800 Though policy is always important, it's just usually monetary rather 0:04:26.839 --> 0:04:29.599 than than trade or fiscal that really matters. And you 0:04:29.640 --> 0:04:32.240 mentioned how and I think everyone's doing this now. You 0:04:32.279 --> 0:04:38.800 take the x percent tariffs on x dollar value of goods, 0:04:38.800 --> 0:04:40.680 and you get why you get a certain effect on 0:04:40.720 --> 0:04:43.919 earnings on revenue, But I wonder is there more to 0:04:44.000 --> 0:04:47.119 it than that? Or there's sort of unquantifiable risks uh 0:04:47.240 --> 0:04:50.520 to confidence, to sentiment, that sort of thing, and and 0:04:50.560 --> 0:04:52.159 how you know, how do you wrap your head around 0:04:52.160 --> 0:04:54.279 that as the type of strategist you are who is 0:04:54.839 --> 0:04:58.120 deep into the numbers. Yeah, it's it's frankly, very very 0:04:58.120 --> 0:05:00.880 difficult because behavioral and nalys this is a huge part 0:05:00.880 --> 0:05:04.080 of markets, and I think the only way to really 0:05:04.120 --> 0:05:06.920 analyze the potential impact to this is through price itself. 0:05:07.600 --> 0:05:09.320 You know, we can all speculate as to what it 0:05:09.360 --> 0:05:12.320 means for GDP growth globally. We can all speculate us 0:05:12.360 --> 0:05:15.200 to how much this is either inflationary or deflationary, but 0:05:15.240 --> 0:05:17.720 the hard truth is nobody knows. We could try to 0:05:17.800 --> 0:05:19.880 quantify it, we could try to pretend we know more 0:05:19.920 --> 0:05:23.000 than anybody else, but the reality is the market itself, 0:05:23.000 --> 0:05:26.160 which is an aggregate of millions and millions of people's opinions, 0:05:26.240 --> 0:05:28.760 is probably smarter than any of us in this room. Right. 0:05:28.880 --> 0:05:30.520 I've made a whole career out of pretending I know 0:05:30.560 --> 0:05:36.600 more than you and so I watch price very very carefully, 0:05:36.640 --> 0:05:40.160 and what price tells me right now is okay. So 0:05:40.200 --> 0:05:42.800 far the risk of this there's somewhat contained five percent 0:05:42.839 --> 0:05:45.320 correction and stocks is nothing. These things come around every 0:05:45.360 --> 0:05:48.799 nine months or so on average. But if we start 0:05:48.839 --> 0:05:51.479 to work our way towards ten percent, we break that 0:05:51.520 --> 0:05:54.240 ten percent line, it becomes very clear that the market's 0:05:54.240 --> 0:05:57.000 impression of this is something much worse. Right now. Something 0:05:57.040 --> 0:05:59.760 I've been hearing as to why markets have been decently resilient. 0:05:59.800 --> 0:06:01.880 We're not too far off the highs, like you said, 0:06:02.240 --> 0:06:04.000 is that you look at the economic data, you look 0:06:04.000 --> 0:06:07.440 at the fundamentals, and they're still largely strong. However, this 0:06:07.520 --> 0:06:10.400 past week we did see some weaker p m I 0:06:10.520 --> 0:06:14.320 numbers in the US, not yet contracting, but pretty close 0:06:14.360 --> 0:06:18.040 on the cusp. What could it take to really push 0:06:18.120 --> 0:06:22.440 us off the edge? Yeah, so historically you're not pushed 0:06:22.440 --> 0:06:24.800 off the edge until manufacturing pm I in the US 0:06:24.880 --> 0:06:27.240 is all the way down at forty three. I think 0:06:27.279 --> 0:06:33.200 the market will absolutely hesitate reach a point of very 0:06:33.240 --> 0:06:37.160 big insecurity if I s M falls below fifty. Uh. 0:06:37.160 --> 0:06:39.480 That's one of the big keys that we watch. Initial 0:06:39.480 --> 0:06:42.960 claims is another one. Incredibly important to the direction of 0:06:43.000 --> 0:06:46.599 equities long term initial claims. If initial claims start rising, 0:06:46.600 --> 0:06:49.240 and especially if they rise more than fifty thousand, start 0:06:49.279 --> 0:06:52.120 to move towards seventy in a rise, you're pretty much 0:06:52.120 --> 0:06:55.280 assured that you're falling into recession. Uh. The other thing 0:06:55.320 --> 0:06:57.480 to watch is, of course the bond markets. We you 0:06:57.640 --> 0:06:59.680 still haven't had that inversion of the two stents at 0:06:59.720 --> 0:07:02.679 least ust I checked, and that's a big key trigger 0:07:02.720 --> 0:07:05.360 for the equity market sentiment as well. So there are 0:07:05.360 --> 0:07:07.360 a lot of different things that I think you want 0:07:07.360 --> 0:07:12.320 to watch for the economic data. You know, frankly, consumer confidence, 0:07:12.320 --> 0:07:14.320 which is still near a fifteen year high, is still 0:07:14.360 --> 0:07:17.240 pretty supportive, So you need to see a big deterioration 0:07:17.240 --> 0:07:20.760 and consumer confidence as well. That's a good segue into 0:07:20.880 --> 0:07:24.480 our next guest on the Bonds team, Emily. You had 0:07:24.520 --> 0:07:27.960 a story out UM this week talking about the market 0:07:28.160 --> 0:07:31.080 expectations for inflation. I just want to read one line 0:07:31.120 --> 0:07:33.960 because I think it's it's pretty important. Uh. You write 0:07:33.960 --> 0:07:36.440 that since consumer price gains have been lagging the FEDS 0:07:36.440 --> 0:07:39.120 two percent target for much of the past decade, it's 0:07:39.120 --> 0:07:41.480 a little wonder that inflation isn't a hot topic in 0:07:41.520 --> 0:07:44.680 the market yet don't don't done, but it may be 0:07:44.760 --> 0:07:47.400 warming up, with the Fed actively debating how it can 0:07:47.440 --> 0:07:50.880 meet its inflation goals, including a June fourth the Fifth 0:07:50.880 --> 0:07:54.160 Conference to discuss different approaches. I feel like the trade 0:07:54.520 --> 0:07:59.200 tensions are uh causing a lot of confusion about what 0:07:59.280 --> 0:08:03.040 we should expect for inflation. Obviously, the market is pricing 0:08:03.040 --> 0:08:06.440 in lower inflation going forward, um, but a lot of 0:08:06.440 --> 0:08:10.360 people are talking about the pure inflationary effects of the 0:08:10.360 --> 0:08:14.040 tariffs on the consumer. What is sort of the consensus 0:08:14.080 --> 0:08:16.800 out there or what's the smartest take you've heard about 0:08:16.880 --> 0:08:20.720 what we should expect as far as inflation in the 0:08:20.760 --> 0:08:22.840 trade trade war? Right? Yeah, I mean this is the 0:08:22.840 --> 0:08:25.440 interesting thing. I think people trying to seggregate what's the 0:08:25.480 --> 0:08:29.320 shorter term issue in terms of the inflation impact, and 0:08:29.360 --> 0:08:32.280 directly I've seen some golden Sax golden Sax analysis saying, 0:08:32.640 --> 0:08:34.120 you know, this is the boost that we might see 0:08:34.120 --> 0:08:35.800 two c p I and the mean in sort of 0:08:35.840 --> 0:08:38.520 the medium term. But people are really focusing on that 0:08:38.600 --> 0:08:41.880 longer term potential drag on growth, and as they're looking 0:08:41.880 --> 0:08:43.920 to that, they're sort of seeing if growth starts to slow, 0:08:44.120 --> 0:08:47.200 then you have more and more headwinds to that inflationary impulse, 0:08:47.760 --> 0:08:50.400 and so really that's where we're seeing this decline and 0:08:50.400 --> 0:08:52.840 break evens, which is the inflation premium that it built 0:08:52.840 --> 0:08:55.680 into treasuries. Um, we're seeing that just coming down and down. 0:08:55.720 --> 0:08:58.120 And that's despite the fact that you know, we've had 0:08:58.120 --> 0:09:00.200 tariffs put on their other things that's been oil ice 0:09:00.280 --> 0:09:03.439 gains sort of uh in the year to date hasn't 0:09:03.480 --> 0:09:05.960 been reflected at all, and normally breaking evans would follow 0:09:05.960 --> 0:09:08.920 that pretty closely. So we're seeing this kind of really 0:09:08.920 --> 0:09:12.840 sort of counterintuitive moving inflation markets. And it's because you know, 0:09:13.040 --> 0:09:16.080 people talk for ages about secular stactation. You've got bored 0:09:16.080 --> 0:09:19.040 of hearing about this, But it seems that the forces 0:09:19.040 --> 0:09:20.880 that are pressuring inflation lower and it's not just in 0:09:20.920 --> 0:09:23.440 the US, it's globally and so much stronger else where. 0:09:23.440 --> 0:09:27.240 People would argue, really our top of mind for most investors, 0:09:27.280 --> 0:09:29.240 and so that's going to be hard to fight. And 0:09:29.280 --> 0:09:31.319 this is this is where it comes down to people's 0:09:31.360 --> 0:09:34.640 expectations for rate cuts. I mean, there's a sense in 0:09:34.640 --> 0:09:37.000 the market that the FED, if it's going to be 0:09:37.080 --> 0:09:40.040 serious about hitting its two percent inflation target, is really 0:09:40.080 --> 0:09:41.800 going to need to take some action on rates to 0:09:41.880 --> 0:09:44.679 lower them. Um. And people have gone so far as 0:09:44.720 --> 0:09:46.560 to say, a couple of people I spoke to, you know, 0:09:46.600 --> 0:09:48.640 it's not just one KUD. It's probably two or three 0:09:48.679 --> 0:09:51.520 if you want to hit UM. The thing that's interesting 0:09:51.520 --> 0:09:54.280 about where CPI is at the moment is relative to 0:09:54.360 --> 0:09:58.680 the fed's target. The FED prefers consumption expenditure, so they'll 0:09:58.679 --> 0:10:02.000 look at a PC rate which is actually forty basis 0:10:02.040 --> 0:10:06.800 points below where CPI is. So um. So that's it's 0:10:06.800 --> 0:10:09.560 even worse really if you look at their fads preferred measure. 0:10:09.960 --> 0:10:12.280 I know a lot of people are looking at the 0:10:12.280 --> 0:10:14.160 FED minutes that came out this week and calling it 0:10:14.160 --> 0:10:16.960 old news. UM. But I ran a little control fine 0:10:17.040 --> 0:10:19.440 just to see where the word transitory comes up, and 0:10:19.520 --> 0:10:23.000 transitory appeared twice as it relates to inflation, whereas the 0:10:23.120 --> 0:10:25.720 last time around we saw the word transitory once, but 0:10:25.800 --> 0:10:29.680 it was related to GDP and first quarter slower growth 0:10:29.760 --> 0:10:34.920 being transitory. What else did we possibly learn from the minutes, 0:10:35.080 --> 0:10:37.559 if it's possible to clean anything more from what we've 0:10:37.600 --> 0:10:40.280 heard from Fed officials, I think what people wanted to see. 0:10:40.280 --> 0:10:42.880 I mean, this must be the shortest lived transitory impact 0:10:42.960 --> 0:10:46.400 on markets, ever, because after you know, when Fed, the 0:10:46.440 --> 0:10:49.439 Fed's Powell was really pushing that transitory message, you know, 0:10:49.720 --> 0:10:51.880 what's weighing on inflation is going to be very short lived. 0:10:52.160 --> 0:10:54.480 You did see a market correction that started to sell 0:10:54.480 --> 0:10:56.319 off a little. Oh right, Okay, we might come back 0:10:56.360 --> 0:10:58.400 if the Fed believes this is going to happen. But 0:10:58.520 --> 0:11:00.719 that just got crushed. And what the it's gave us 0:11:00.880 --> 0:11:04.559 was this sense that at least among the f O 0:11:04.720 --> 0:11:07.680 m C, that the FEDS Committee, there is a broad 0:11:07.679 --> 0:11:10.600 agreement that these or at least they're on message, that 0:11:10.679 --> 0:11:12.680 people seem to think that, yes, this could be a 0:11:12.679 --> 0:11:16.320 transitory impact. But from the people I've spoken to, they're 0:11:16.360 --> 0:11:19.839 listening at the fact to the fact that the transitory 0:11:19.840 --> 0:11:22.320 effects don't quite make up for the short form inflation, 0:11:22.320 --> 0:11:24.560 and they really do believe that there are stronger forces 0:11:24.600 --> 0:11:26.800 at work here. So what we learned from the minutes, 0:11:26.800 --> 0:11:28.720 it's a really good question. I mean, I'm not even 0:11:28.760 --> 0:11:32.000 sure that uh, you know, the trade impact wasn't factored 0:11:32.000 --> 0:11:35.040 in because obviously most of the trade fallout really happened 0:11:35.040 --> 0:11:38.080 after the minutes were released. Um, so the bump that 0:11:38.120 --> 0:11:40.640 we should have got, well, we've got no much more 0:11:40.679 --> 0:11:44.199 hope of getting it back really at this point. Now 0:11:44.280 --> 0:11:46.640 you know, if the break evens are right and we're 0:11:46.920 --> 0:11:51.640 due for some weaker inflation going forward, what does that 0:11:52.200 --> 0:11:55.439 make certain sectors, certain factors look more attractive to you? 0:11:55.880 --> 0:11:58.160 How would how would you recommend playing sort of the 0:11:59.080 --> 0:12:02.160 low inflation in Well, it depends on if we are 0:12:02.200 --> 0:12:05.440 indeed in for a transitory or a longer term sort 0:12:05.440 --> 0:12:08.920 of disinflationary deflationary in trend first start. But if we 0:12:09.000 --> 0:12:12.800 assume that it's very very short term, more than likely, 0:12:12.840 --> 0:12:15.600 it pushes you into more defensive sort of sectors. And 0:12:15.640 --> 0:12:17.120 I think we've seen that over the course of the 0:12:17.200 --> 0:12:20.600 last couple of months. Our sector strategy model even pushed 0:12:20.679 --> 0:12:23.280 us into defensive sectors as early as the end of April, 0:12:24.080 --> 0:12:26.920 and that largely reflects what's happening in rates. And rates 0:12:26.920 --> 0:12:30.840 are rallying so much, indicating that this inflation pressure is 0:12:30.880 --> 0:12:33.880 somewhat nil, at least in the short run, suggesting that 0:12:33.960 --> 0:12:37.360 the downside risk to growth is still pretty evident. And 0:12:37.440 --> 0:12:40.080 at a time after stocks had already rallied tremendously in 0:12:40.120 --> 0:12:43.600 the first quarter, the valuation multiple started to shift as well. 0:12:43.679 --> 0:12:46.520 On the cyclicals versus defensives. Call I could tell you 0:12:46.600 --> 0:12:50.680 one sector it absolutely suggests you want to stay away from, 0:12:50.720 --> 0:12:53.600 and this is manifestings price performance as well as energy. 0:12:54.040 --> 0:12:57.000 There's one sector that is just constantly the inflation play 0:12:57.040 --> 0:12:59.360 in the equity market. It's energy and then, to a 0:12:59.440 --> 0:13:02.920 lesser extent, materials. As much as this last month of 0:13:02.960 --> 0:13:05.520 weakness in the equity market seems to have been about tech, 0:13:05.640 --> 0:13:08.760 the energy sector is down four bases points more than 0:13:08.800 --> 0:13:12.360 tech stocks. I mean, it's just getting crushed. It's making 0:13:12.440 --> 0:13:15.800 new relative price lows in comparison to the SMP five hundred, 0:13:15.880 --> 0:13:18.720 and has been persistently for the last several years. So 0:13:18.760 --> 0:13:24.040 the equity signal is actually very deflationary. If not deflationary, 0:13:24.080 --> 0:13:28.400 then at least disinflationary, and has persisted through a long 0:13:28.480 --> 0:13:30.400 period of time. At the beginning of the year, I 0:13:30.440 --> 0:13:32.480 heard the case being made a lot that we needed 0:13:32.480 --> 0:13:35.720 to see energy prices close the gap with oil prices 0:13:35.720 --> 0:13:37.880 because we had seen oil rally so much. Well, now 0:13:38.120 --> 0:13:41.120 clearly we're seeing oil prices roll over, we're seeing energy 0:13:41.120 --> 0:13:44.520 stocks roll over. Is the case for that for energy 0:13:44.520 --> 0:13:46.720 prices to move up to oil prices and close the 0:13:46.720 --> 0:13:50.079 gap kind of disintegrating. Yeah, you know, that gap has 0:13:50.080 --> 0:13:53.040 been existing for the last three years, so you could 0:13:53.080 --> 0:13:55.640 even take it all the way back ton when the 0:13:55.640 --> 0:13:58.400 gaps started to widen. You know, I think that the 0:13:59.200 --> 0:14:03.880 terrible fate for energy stocks is unfortunately, every time oil 0:14:03.920 --> 0:14:06.319 prices rise, it's met with a new wave of supply, 0:14:06.800 --> 0:14:10.960 which constrains profitability and constrains the inevitent and constrains the 0:14:11.040 --> 0:14:15.160 oil price from continuing to rise. And that's very well 0:14:15.200 --> 0:14:18.800 played out in energy stocks and energy investors. Investors just 0:14:18.840 --> 0:14:21.320 don't want to touch the sector on that premise alone. 0:14:22.080 --> 0:14:25.360 From a sentiment perspective, you gotta love energy for a 0:14:25.480 --> 0:14:28.600 long term sort of sentiment call. You're looking at a 0:14:28.640 --> 0:14:30.960 sector that's now less as a share of market cap 0:14:30.960 --> 0:14:34.240 of the SMP five than it was in oil prices 0:14:34.240 --> 0:14:37.320 were ten dollars of barrel. So nobody wants to touch 0:14:37.360 --> 0:14:40.880 this stuff. But how do you jump in in the 0:14:40.960 --> 0:14:45.440 face of clear signals from the rates market generally sort 0:14:45.440 --> 0:14:48.600 of depressed economic signals relative to where we were at 0:14:48.640 --> 0:14:51.600 least a year ago, stock price signals that are still 0:14:51.720 --> 0:14:56.120 very very negative, and frankly, the dynamics of oil supply 0:14:56.160 --> 0:14:59.080 and demand are different today than they were ten years ago. 0:14:59.640 --> 0:15:02.840 So it's a tough space, and there's just not a 0:15:02.920 --> 0:15:05.960 lot to suggest that that gap necessarily needs to close, 0:15:06.040 --> 0:15:10.440 because frankly, oil prices keep closing back toward energy stocks 0:15:10.480 --> 0:15:13.280 every time they try to rally, and that's just a 0:15:13.880 --> 0:15:16.760 the fracking boom. I take it just to supply. Yeah, 0:15:16.800 --> 0:15:18.520 I mean, if you think about sort of how things 0:15:18.520 --> 0:15:21.320 have changed over the last decade or so, go back 0:15:21.360 --> 0:15:23.920 to two thousand seven, two thousand and eight, when oil 0:15:23.960 --> 0:15:26.160 prices were moving towards a hundred and fifty dollars and 0:15:26.200 --> 0:15:28.840 the sentiment was we're never going to find supply again. 0:15:28.960 --> 0:15:30.920 I mean, there's just just not enough oil in the world. 0:15:31.560 --> 0:15:34.360 And so yeah, over the course of the next several years, 0:15:34.360 --> 0:15:36.240 we found out, oh lo and behold, there is actually 0:15:36.280 --> 0:15:38.760 plenty of supply. We just needed to use new technologies 0:15:38.800 --> 0:15:42.560 to get to it. That's created this massive downtrend and 0:15:42.600 --> 0:15:46.040 oil prices really since they peaked in twenty two seven 0:15:46.040 --> 0:15:49.400 and then again in and the result of that is 0:15:49.520 --> 0:15:53.560 just this this persistence of supply, or even the perceived 0:15:53.600 --> 0:15:57.000 persistence of supply, con strange your upward potential for price growth, 0:15:57.440 --> 0:16:15.840 and it's feeding through the energy stocks. Emily to get 0:16:15.840 --> 0:16:18.720 back to the Fed minutes. There's this weird situation that 0:16:18.800 --> 0:16:22.440 happens where, Okay, the trade war escalates a couple of 0:16:22.440 --> 0:16:25.480 weeks ago with President Trump's tweets, and then he follows 0:16:25.480 --> 0:16:28.840 through and raises the tariffs. Then along come the minutes, 0:16:29.200 --> 0:16:32.800 which are reflecting a meeting that occurred before that. So 0:16:33.640 --> 0:16:36.720 yet people still seem to react to them. I mean, 0:16:37.680 --> 0:16:41.800 assuming this is the last best evidence we've gotten from 0:16:41.800 --> 0:16:44.440 the Federal Reserve on their thinking, but at some point 0:16:44.480 --> 0:16:47.360 that people just to ignore them. You've talked to a 0:16:47.440 --> 0:16:51.480 lot of investors after the minutes. Presumably they're still reading 0:16:51.480 --> 0:16:53.880 these minutes even though so much has changed since then, 0:16:54.160 --> 0:16:56.320 or did they discount them to some degree. I think 0:16:56.360 --> 0:16:57.840 this is the weird thing, And this is the thing 0:16:57.880 --> 0:17:00.120 that always makes me just sigh and kind of a 0:17:00.200 --> 0:17:02.040 scream sometimes when you look at the minutes, because like 0:17:02.160 --> 0:17:05.640 this is essentially stale news, right, and particularly at this point, 0:17:05.720 --> 0:17:08.840 because it's prior to all of the trade stuff that happened. 0:17:09.119 --> 0:17:11.119 So I was actually really interested myself to see what 0:17:11.119 --> 0:17:12.440 the market was going to do to this, And it 0:17:12.520 --> 0:17:14.880 just it's funny because I don't know if people actually 0:17:14.920 --> 0:17:18.280 forget they're still they're so busy reading the Fed's ruins 0:17:18.359 --> 0:17:21.280 sometimes that any signal like this sort of smoke signal 0:17:21.400 --> 0:17:23.119 is is going to tell them what to do. But 0:17:23.200 --> 0:17:25.040 I think the interesting thing that most people are trying 0:17:25.040 --> 0:17:27.919 to pause out of that document is how much consensus 0:17:27.960 --> 0:17:30.399 is there, how firmly held a belief is this in 0:17:30.440 --> 0:17:32.800 the ft and how difficult might it be to dislodge, 0:17:33.200 --> 0:17:35.880 Like how much they're looking at the data really and 0:17:35.960 --> 0:17:37.960 what what is their interpretation of the data, so people 0:17:37.960 --> 0:17:39.679 are astant. The thing that I find most amusing is 0:17:39.680 --> 0:17:42.320 looking at how people understand the word few versus several 0:17:42.480 --> 0:17:44.600 versus a number of versus some, you know, as a 0:17:44.640 --> 0:17:47.320 measure of how many people on the committee actually hold 0:17:47.320 --> 0:17:50.000 a certain view. So that's that's one of the things 0:17:50.040 --> 0:17:51.919 you talk about stale news. If you looked at the 0:17:51.920 --> 0:17:55.800 staff economic projections in the minute, they actually talked about 0:17:55.840 --> 0:17:59.080 how trade the U. S and China coming together was 0:17:59.440 --> 0:18:04.439 positive relaptimistic. So that's changed since ad minutes were actually written. 0:18:04.960 --> 0:18:07.920 I want to ask you, though, how far off does 0:18:07.960 --> 0:18:11.639 it seem like the bond market is from where the 0:18:11.680 --> 0:18:15.040 FED actually stands at this point in time. This is 0:18:15.359 --> 0:18:18.480 starting to feel as if that disconnect is actually widening again. 0:18:18.600 --> 0:18:21.520 I mean, we saw earlier this year there was you know, 0:18:21.560 --> 0:18:24.320 the market was really doubling down to say even as 0:18:24.359 --> 0:18:26.320 many as you know, sort of too high starting to 0:18:26.359 --> 0:18:29.520 get pricing. We're getting closer to that now. I think 0:18:29.600 --> 0:18:32.400 that the interesting point from what the market is pricing 0:18:32.400 --> 0:18:34.359 in is there is actually now still more than one 0:18:34.440 --> 0:18:36.359 hike pricing by the end of the year, just a 0:18:36.359 --> 0:18:39.679 little more. The Fed, I think that after giving that 0:18:39.840 --> 0:18:42.679 message of transient, they're just sitting there with that for 0:18:42.760 --> 0:18:46.439 the time being, and it seems as if that that 0:18:46.560 --> 0:18:51.440 conviction among policymakers is really at odds with the markets 0:18:51.520 --> 0:18:54.200 movements lately. Um, but it's hard to see. I mean, 0:18:54.240 --> 0:18:56.600 as as you Jina, you were discussing before, you know, 0:18:56.720 --> 0:19:01.000 the data are still reasonably strong. There's there's actually looking 0:19:01.000 --> 0:19:03.399 at it objectively from a dispassionate viewpoint, it's hard to 0:19:03.400 --> 0:19:06.480 see whether the FED would find a decent case to 0:19:06.640 --> 0:19:09.000 cut rates at this point. And now that they're starting 0:19:09.040 --> 0:19:11.639 up their inflation review, this is going to become a 0:19:11.720 --> 0:19:14.239 really interesting topic to follow over the next couple of 0:19:14.240 --> 0:19:16.199 months because they're really going to have to look at 0:19:16.240 --> 0:19:18.720 what other kinds of strategies they might take to try 0:19:18.760 --> 0:19:21.880 and meet their mandate. Now, Gina, you have a lot 0:19:21.880 --> 0:19:25.520 of letters after your name, C F, A, c MT. 0:19:25.920 --> 0:19:29.040 I also have three names. I'm just trying to extend 0:19:29.320 --> 0:19:34.800 their business parts has continued on the part of the game. 0:19:35.720 --> 0:19:39.000 So I was I was curious to see your technicals, 0:19:39.200 --> 0:19:43.520 putting your CMT had on Chartered Market technician and and 0:19:43.600 --> 0:19:47.520 looking at the technicals. Um so walk us through two things. 0:19:47.520 --> 0:19:50.879 I'm curious a sort of what levels you're looking at, 0:19:51.320 --> 0:19:56.360 but also is it the time right now where technicals 0:19:56.400 --> 0:19:58.760 kind of take a backseat to the fact that everyone's 0:19:59.000 --> 0:20:01.320 waiting for the next head line, waiting for the next tweet? 0:20:01.359 --> 0:20:03.600 You know, are there times when you sort of uh 0:20:04.080 --> 0:20:06.719 discount technicals to some degree and don't give them as 0:20:06.800 --> 0:20:09.080 much weight as you normally would and and are we 0:20:09.119 --> 0:20:12.320 in a period like that now? I never discount technicals. 0:20:12.800 --> 0:20:15.920 I am a technician. I think they're actually always valuable 0:20:16.359 --> 0:20:20.040 at every market stage, and they're valuable in different ways. 0:20:20.080 --> 0:20:22.879 They give you different signals, either they're confirming or not 0:20:22.960 --> 0:20:25.560 confirming your fundamental case. That gives you a reason to 0:20:25.560 --> 0:20:29.000 go back and look at the fundamental case. Nonetheless, I 0:20:29.040 --> 0:20:31.200 think you know right now what the technicals are saying 0:20:31.320 --> 0:20:34.080 is near term, there's just not a lot of reason 0:20:34.119 --> 0:20:39.520 for optimism. It's still markets, you know, maybe testing the 0:20:40.119 --> 0:20:45.720 early maylow's, which were support levels created by resistance points 0:20:45.760 --> 0:20:48.880 that we had matched on the SMP five hundred back 0:20:48.880 --> 0:20:51.959 in the October attempt at an advance, in November attempt 0:20:52.000 --> 0:20:55.440 at advance, and then during the rise earlier this year 0:20:55.560 --> 0:20:59.280 we sort of got stuck in this level in the 0:20:59.359 --> 0:21:02.800 SMP five dred. We're back there again. If we can 0:21:02.880 --> 0:21:07.320 hold these levels, fantastic stocks are probably in pretty good shape. 0:21:07.840 --> 0:21:11.520 But it's really questionable because you're getting breakdown, some small capture, 0:21:11.560 --> 0:21:14.960 getting breakdown some semiconductors, you're getting breakdowns and transportation stocks. 0:21:15.000 --> 0:21:18.159 Just the near term weakness is evident. Longer term, is 0:21:18.200 --> 0:21:21.840