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Speaker 1: Let's get to our guest, Henrietta Treys, director of economic

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Speaker 1: policy at Vada Partners, and Ritta, I'm sure you want

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Speaker 1: to talk a little bit about the soul of the nation,

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Speaker 1: and we'll get to that in a few moments. I

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Speaker 1: want to talk about the action in the markets today.

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Speaker 1: It seems like Trader has probably moved to a neutral

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Speaker 1: stance here ahead of the jobs report because there's a

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Speaker 1: lot on the line there. I'm not sure if there

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Speaker 1: was really much of a tell today in the market action.

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Speaker 1: Do you think at the moment bad news is good

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Speaker 1: news when it comes to the jobs report? I think

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Speaker 1: I think definitely, as counterintuitive as it seems, bad news

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Speaker 1: would be good news for the market. Everybody's eyes are

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Speaker 1: on the Fed, as you and your colleagues know, and

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Speaker 1: I've been talking about now for months. It's really all

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Speaker 1: that matters. UM. The stunning July uh employment numbers thousand

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Speaker 1: new jobs was unexpected. So it's almost like people are

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Speaker 1: throwing into talent saying, we cannot predict post pandemic how

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Speaker 1: these monthly numbers are going to go. We have a

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Speaker 1: general sense of where inflation is, what the economy is doing, UM,

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Speaker 1: but we can't forecast with any kind of hard certainty

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Speaker 1: what the jobs number is going to be tomorrow and

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Speaker 1: where all eyes are on the Fed as as ever, UM,

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Speaker 1: And I think you know, as you mentioned earlier, there's

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Speaker 1: a pretty conservative estimate outs out there about how the

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Speaker 1: Fed's going to have to react from here, um, continuing

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Speaker 1: its current stance, UM, try and ward off inflation and

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Speaker 1: keep the economy from running uh rough shot over everything

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Speaker 1: that they have tried to secure so far in the

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Speaker 1: last what five or six months? UM. So I do

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Speaker 1: think that tomorrow's if there is bad news, would be

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Speaker 1: good news. Obviously. President Biden is going to try to

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Speaker 1: get out in front of that by talking about how

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Speaker 1: we are not walking into a recessionary environment. The economy

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Speaker 1: remains strong almost even if there was a bad jobs number. Still, Yes, yeah, yeah,

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Speaker 1: I just just get a sense of, you know, we

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Speaker 1: got the jobs report, how does is that not taking

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Speaker 1: a back seat to what we get on the thirteenth,

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Speaker 1: which is a CPI read. I think. So it's certainly

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Speaker 1: where I've been focused, although you know, it's an interesting

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Speaker 1: question because we did have that Inflation Production Act passed

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Speaker 1: and the big hang up there, and my central focus

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Speaker 1: has always been on whether we could get that bell

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Speaker 1: to become a law. Now that it is a law,

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Speaker 1: it's maybe less of an indicator um the CPI numbers. Also,

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Speaker 1: you know, we know that gas prices are down. UH.

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Speaker 1: In my neck of the woods, it's three thirty four now,

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Speaker 1: So we can see tangibly as voters that the UH

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Speaker 1: and as as investors that the gas prices are coming down.

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Speaker 1: That's such a pivotal component of how voters deal erally,

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Speaker 1: So it's almost not the issue though. Professor Jeremy Siegel

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Speaker 1: at Wharton said that twenty six of the last twenty

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Speaker 1: seven inflation indicators in various economic reports we had one today,

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Speaker 1: prices paid in the I s M have decelerated. But

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Speaker 1: the fet IS is stepping up its inflation fighting rhetoric

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Speaker 1: and it's it's promised to raise interest right, So it's

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Speaker 1: telling you that the feed is not data dependent. Now

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Speaker 1: markets are generally data dependent. Is that a negative for

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Speaker 1: the market and if so by how much? Well? I

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Speaker 1: think it's really difficult for investors to see that the

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Speaker 1: Fed is not paying attention to the same data that

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Speaker 1: everyone is seeing. I you seen charts all week about

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Speaker 1: how all the economic indicators on CPI are coming down

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Speaker 1: across pretty much every category, UM, and especially the ones

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Speaker 1: that people feel the most. And as as we saw

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Speaker 1: for the last however many months, the inflation argument is

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Speaker 1: almost self fulfilling as well. UM. So to see that

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Speaker 1: people are bringing prices down, the prices are in fact

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Speaker 1: coming down, it makes it difficult for the FED to

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Speaker 1: disconnect and justify that. UM. But nonetheless, all attentions on

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Speaker 1: the FED is they're the drivers, and you don't want

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Speaker 1: to fight with that. How do you to what at

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Speaker 1: what point do the midum elections become an issue for

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Speaker 1: markets or do they not? You know, it's interesting you

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Speaker 1: asked that question. Um. I've been going to some macro

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Speaker 1: lunches with a bunch of economists and clients, and almost

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Speaker 1: always they use November eight is sort of an inflection

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Speaker 1: point for when they expect the FED to start reacting

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Speaker 1: a little bit differently to the state of the economy. UM.

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Speaker 1: So it's almost this sense amongst investors that post election

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Speaker 1: things will start to level out. UM. This you know,

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Speaker 1: some of that was expectations that inflation would be back

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Speaker 1: to a roughly normal space. But I do think that

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Speaker 1: the investment community is very focused on the mid terms.

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Speaker 1: There's a lot of confusion with the polling data rope

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Speaker 1: moving around as rapidly as it has in the wake

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Speaker 1: of the rovy Way decision by the Supreme Court, um,

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Speaker 1: the passage of the Inflation Reduction Act, and then the

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Speaker 1: latest developments with former President Trump. UM. So there there

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Speaker 1: is a lot of attention on the mid terms. I

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Speaker 1: would say amongst investors right now, we should remind listeners

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Speaker 1: that President Biden will deliver this primetime speech coming up

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Speaker 1: outside Independence Hall in Philadelphia that will be carried live

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Speaker 1: here on the program coming up in about an hour

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Speaker 1: and forty minutes. Henrietta. We we know there's a lot

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Speaker 1: of divisiveness in the United States. That's not really new,

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Speaker 1: but apparently it's getting a little bit worse. And I'm

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Speaker 1: wondering if you think that President Biden, after becoming president,

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Speaker 1: should have done more to reach out to Republicans, or

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Speaker 1: if the Democrats are right that it's the fault of

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Speaker 1: the Republicans. You know, that's that's tough to say. I

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Speaker 1: think President Biden behaves a lot like Senator Biden, which

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Speaker 1: is that he focuses on passing legislation and it's pretty

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Speaker 1: hard to argue with the track record, you know, a

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Speaker 1: one and a half trillion dollar by person infrastructure bill. UM.

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Speaker 1: And then obviously the legislation the past on COVID relief

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Speaker 1: UM and the different bills that were passed in the

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Speaker 1: run up, like the Chips Act, which was a material

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Speaker 1: bipartisan bill. I think it got sixty nine votes, which

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Speaker 1: implies nine Team Republicans voted for it in the Senate.

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Speaker 1: So I think there's a lot of legislative focus on

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Speaker 1: bridging the gap between Democrats and Republicans, at least in Congress. UM.

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Speaker 1: But as you can see from the polling data around

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Speaker 1: President Trump supporters, that's the thirty percent threshold that will

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Speaker 1: not budge under any circumstances. So it's almost hard to

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Speaker 1: imagine something that President Biden could do to sway those voters. UM.

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Speaker 1: And obviously we're seeing it from external forces like the

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Speaker 1: Department of Justice, the FBI, UM, and people's reactions to

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Speaker 1: the January six Committee, so the things that are outside

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Speaker 1: the control of the White House. UM. But but certainly

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Speaker 1: it's a polarized nation. UM. And interestingly, when you have

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Speaker 1: polarization that works both ways with both Republicans and Democrats,

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Speaker 1: very galvanized to vote. Weirdly enough, that usually results in

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Speaker 1: a very even keeled election because everybody from both sides,

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Speaker 1: and the two sides are roughly equal in this country

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Speaker 1: in terms of voter population, they both go out to

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Speaker 1: vote in droves, and that yields a pretty moderate um shift.

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Speaker 1: No waves of either side, no red wave, no blue waves. Um.

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Speaker 1: So you're looking at probably a pretty status quo environment

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Speaker 1: for Congress in three as a result of the current polarization. Yeah,

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Speaker 1: and go ahead. I was just gonna just add probably

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Speaker 1: something you're gonna say that you know, we have gridlock,

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Speaker 1: but one the fact markets it really does. In fact,

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Speaker 1: they quite like gridlock. Right. Markets traditionally love a gridlock situation. Um.

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Speaker 1: So it's our forecast with the House will be Republican

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Speaker 1: with slight control, maybe fifteen twenty seats um, and the

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Speaker 1: Senate will remain pretty evenly split. Um, neither party will

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Speaker 1: have a material majority. Is it the economy? And and

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Speaker 1: you know, finally, because you don't have that much time,

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Speaker 1: you're reading on the economy and whether it benefits Joe

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Speaker 1: Biden or heards him? Well, I think, um, the argument

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Speaker 1: that inflation is the number one reason President Biden should

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Speaker 1: be kicked out office and Democrats should all lose their

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Speaker 1: election has largely been um diluted since its peak in February.

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Speaker 1: At that point, there was an eighteen point spread in

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Speaker 1: the polls between Democrats and Republicans. Voters overwhelmingly we're supporting Republicans,

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Speaker 1: and that eighteen point spread has been eliminated now, some

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Speaker 1: of it because of the inflation numbers, as you pointed

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Speaker 1: out earlier, coming down across the twenty four different segments. Henrietta,

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Speaker 1: thank you so much for joining you to trade, the

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Speaker 1: director of Economic policy at a Vada Partner,