WEBVTT - Bloomberg Surveillance TV: January 6th, 2026 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordernt join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.479 Terminal and the Bloomberg Business app. Julian and Manuel, I've ever, 0:00:37.479 --> 0:00:40.040 of course, selling US seventy seven to fifty price target 0:00:40.080 --> 0:00:42.000 for the S and P by year end, expecting more 0:00:42.000 --> 0:00:45.440 of everything that drove twenty five, more AI, more stimulus, 0:00:45.440 --> 0:00:48.440 more earnings, growth, more volatility. Julian joins us now for more. 0:00:48.479 --> 0:00:50.840 Julian and Monic, good morning, Good to see you, sir. 0:00:51.000 --> 0:00:53.640 Welcome to the program. Everything that worked last year is 0:00:53.640 --> 0:00:56.040 going to keep on working. The temptation to choose something new, 0:00:56.360 --> 0:00:58.520 find that new thing, why aren't you embracing it? 0:00:58.800 --> 0:01:04.000 So is here and again this concept of concentration risk. 0:01:04.400 --> 0:01:07.400 If you go back to the beginning of this century, 0:01:07.680 --> 0:01:10.320 when the top ten stocks were twenty five percent of 0:01:10.680 --> 0:01:12.520 the way in the s and P five hundred, there 0:01:12.560 --> 0:01:15.360 was a thought that could not be exceeded. We're now 0:01:15.360 --> 0:01:18.280 at forty percent, and frankly, again, if you think about 0:01:18.400 --> 0:01:21.600 concentration risk, you look at a market like Korea, we're 0:01:21.640 --> 0:01:24.479 in the COSTPI. You've got two stocks that account for 0:01:24.480 --> 0:01:25.480 forty five percent. 0:01:26.240 --> 0:01:28.600 So the point is, the math. 0:01:28.440 --> 0:01:34.319 Doesn't work for these stocks not to market perform or outperform. 0:01:35.120 --> 0:01:40.840 But the truth is is that the capital market cycle 0:01:41.240 --> 0:01:45.360 has yet to fully play out, and the beneficiary of 0:01:45.400 --> 0:01:49.600 a robust capital market cycle time and time again are 0:01:49.640 --> 0:01:50.880 the stocks that led you into this. 0:01:51.120 --> 0:01:52.800 So funny when it comes on a program later on 0:01:52.800 --> 0:01:55.560 this morning, saying dive into what's hamdling gon Asia, what's 0:01:55.560 --> 0:01:58.800 developing its South Korea, you're saying, take a step back, resist. 0:01:59.520 --> 0:01:59.720 No. 0:02:00.480 --> 0:02:04.560 Basically, what we're saying is is that you know, there 0:02:04.640 --> 0:02:09.440 should be a discomfort around the fact that the market 0:02:09.639 --> 0:02:14.600 is really clustering in this theme. But that discomfort, as 0:02:14.639 --> 0:02:18.000 we saw earlier at the end of last last year 0:02:18.400 --> 0:02:22.639 with the discomfort around the one marquee name that has 0:02:22.720 --> 0:02:26.080 taken on a great deal of debt to finance capex. 0:02:26.360 --> 0:02:30.680 The majority of these companies have you know, very very 0:02:30.760 --> 0:02:34.079 robust cash flow, and so therefore you're going to have 0:02:34.520 --> 0:02:37.480 this sort of virtuous cycle of earnings continue to be 0:02:37.560 --> 0:02:38.680 driven by these names. 0:02:38.880 --> 0:02:40.720 Is the bet right now just to bet on the 0:02:40.720 --> 0:02:44.239 biggest tech companies in both regions, both the US and China, 0:02:44.320 --> 0:02:47.320 betting that they can consolidate their dominance going forward, regardless 0:02:47.680 --> 0:02:50.160 of whether the US or China wins. 0:02:51.440 --> 0:02:54.640 It does come down to that to a great degree. 0:02:54.680 --> 0:02:57.680 And you know, we get asked all the time again, 0:02:57.840 --> 0:03:01.040 should we rotate to other sectors. There'll be plenty of 0:03:01.080 --> 0:03:04.680 opportunity to do it. Opportunistically. There's going to be a 0:03:04.680 --> 0:03:09.560 continued skirmish around healthcare towards the end of this month, obviously, 0:03:10.200 --> 0:03:14.079 in fact, with the one big beautiful bill tax benefits 0:03:14.080 --> 0:03:17.519 starting to kick in later this quarter. We think there's 0:03:17.560 --> 0:03:23.320 an opportunity for consumers beaten down consumer names to rally. 0:03:23.760 --> 0:03:27.359 But you step away and the bull market has been 0:03:27.480 --> 0:03:30.600 led by these names and these themes, and we think 0:03:30.600 --> 0:03:31.799 it's further to run. 0:03:32.080 --> 0:03:33.959 There might be some people who read what's going on 0:03:34.000 --> 0:03:35.880 in the news and then look at markets and say 0:03:35.880 --> 0:03:37.760 that everybody's just going la la la la, la la la. 0:03:37.760 --> 0:03:39.480 We're not going to listen to anything that could potentially 0:03:39.480 --> 0:03:41.600 be game changing. Is it just been on what you 0:03:41.680 --> 0:03:44.280 know and that you don't know so much you just 0:03:44.320 --> 0:03:44.840 ignore it. 0:03:45.760 --> 0:03:52.280 Well, I think again, part of the rationale around AI 0:03:52.440 --> 0:03:56.880 is you're still betting on something that you don't fully know. Okay, 0:03:56.960 --> 0:03:59.960 And for us, what we think is going to have 0:04:00.000 --> 0:04:02.280 happened in twenty twenty six is you're going to go 0:04:02.400 --> 0:04:06.520 from the inflection year twenty twenty five for AI adoption 0:04:06.960 --> 0:04:11.360 to the year where it accelerates when corporate global corporates 0:04:11.760 --> 0:04:16.599 realize that if they don't find ways to drive revenues 0:04:16.839 --> 0:04:20.360 and cut costs through using AI, they will be at 0:04:20.360 --> 0:04:21.839 a competitive disadvantage. 0:04:21.880 --> 0:04:23.560 When Lisa says things going on in the news, she 0:04:23.600 --> 0:04:26.880 means Venezuela, And you actually writen your note that you think, 0:04:26.880 --> 0:04:29.920 if anything, Venezuela increases the chances of an AI bubble. 0:04:30.000 --> 0:04:31.320 Why is that so? 0:04:32.040 --> 0:04:36.120 Think about a confluence of events. First of all, we 0:04:36.200 --> 0:04:39.039 found out a week and a half ago that the 0:04:39.080 --> 0:04:44.280 economy's last reading was actually stronger than expected. Thinking about 0:04:44.480 --> 0:04:48.360 the stimulus that's ahead, it sets up more economic upside 0:04:48.400 --> 0:04:50.800 in the US. In fact, our team just took its 0:04:50.839 --> 0:04:54.000 twenty twenty six forecast up to two point five percent. 0:04:54.680 --> 0:04:58.839 From a FED perspective, we actually think there won't be 0:04:58.920 --> 0:05:01.599 two cuts, they'll be three, possibly more. 0:05:01.800 --> 0:05:04.320 They have both growing economy, fiscal stimulus p touch a 0:05:04.440 --> 0:05:07.039 higher inflation, and then you're saying three federal reserve. 0:05:06.760 --> 0:05:13.000 Guts because you have a political backdrop where the impetus 0:05:13.640 --> 0:05:17.760 is to keep the consumer moving forward as we get 0:05:17.800 --> 0:05:22.360 to the midterm elections. Now on Venezuela, basically the issue 0:05:22.400 --> 0:05:28.039 here is long term. It's likely a moderating influence for 0:05:28.120 --> 0:05:32.000 oil prices, and if you think about oil prices staying 0:05:32.800 --> 0:05:36.160 flat for longer, that's bullish for long dated bonds. 0:05:36.240 --> 0:05:38.760 Let's punk Venezuela just from moment. Your view on the 0:05:38.760 --> 0:05:41.960 federal reserve becoming increasingly politicized in the last twenty four 0:05:42.000 --> 0:05:43.280 and has had a series of guests come on the 0:05:43.279 --> 0:05:46.120 program and talked about the unintended consequence of pushing for 0:05:46.200 --> 0:05:48.280 law of interest rights at a federal reserve, galvanizing the 0:05:48.279 --> 0:05:50.120 other members of a committee to push back against the 0:05:50.120 --> 0:05:52.080 push for law of interest rights. Why are you taking 0:05:52.120 --> 0:05:52.719 the other side of that? 0:05:54.800 --> 0:06:00.800 Essentially because a couple things is that for the most part, 0:06:01.839 --> 0:06:05.400 even though the economy is strung, there's still this dichotomy 0:06:05.720 --> 0:06:09.880 between what the labor market actually looks like. You know, 0:06:10.000 --> 0:06:13.719 obviously a lot of that has to do with immigration policy, etc. 0:06:14.360 --> 0:06:17.640 But the fact of the matter is is that politically 0:06:18.000 --> 0:06:23.120 and sort of psychologically, to see monthly job gains closer 0:06:23.120 --> 0:06:27.839 to zero than closer to one hundred thousand going forward 0:06:28.200 --> 0:06:31.880 will be something that you know, given the fact, and 0:06:31.920 --> 0:06:37.720 we also think that the tariff flow through has reasonably 0:06:37.760 --> 0:06:42.960 fully flown flowed through, and so you know, a moderate 0:06:43.080 --> 0:06:50.600 jobs environment and a lower inflation trajectory just continue to 0:06:50.720 --> 0:06:52.200 drive the ability to cut rates. 0:06:52.320 --> 0:06:54.560 Let's finish my pushing that through the equity market. Consumer 0:06:54.600 --> 0:06:56.880 discretion ry does it tend things around? 0:06:57.760 --> 0:07:03.679 We do think so. And again our sector preferences consumer discretionary, 0:07:04.000 --> 0:07:08.799 communication services, infotech, the subtexts, all of them have large 0:07:08.800 --> 0:07:13.680 exposure to AI. But in this algorithmic trading world, what's 0:07:13.720 --> 0:07:16.400 good for the consumer is going to flow through and 0:07:16.480 --> 0:07:19.600 be good for AI names and you know, boost that sector. 0:07:19.720 --> 0:07:23.040 Jenny, and you talked about the importance of sixty dollars crude. 0:07:23.200 --> 0:07:24.840 Just flash that out for us. Why is it so 0:07:24.920 --> 0:07:26.640 important to the stock market? 0:07:26.680 --> 0:07:31.040 Well, it's the stability of the price. And look, you know, 0:07:31.080 --> 0:07:33.880 I think one of the things that Trump has been 0:07:34.040 --> 0:07:37.080 very happy that he's been able to deliver going back 0:07:37.120 --> 0:07:40.600 to this first year, is that visibly, in terms of 0:07:40.640 --> 0:07:44.640 the affordability crisis, there is not an affordability crisis at 0:07:44.640 --> 0:07:49.040 the pump anymore. Gas prices have continued to fall, and 0:07:49.400 --> 0:07:53.080 what we've seen is that that has a tendency to 0:07:53.160 --> 0:07:56.080 bleed through to other areas. It has not yet, and 0:07:56.120 --> 0:07:58.120 it may not. I mean, if you think about what 0:07:58.200 --> 0:08:01.760 happened in the commodity market, it's yesterday, the surge and 0:08:01.800 --> 0:08:06.400 copper was anticipatory for this build out that we're going 0:08:06.440 --> 0:08:09.520 to have in Venezuela. But the fact is that the 0:08:09.560 --> 0:08:13.680 consumer among the prices that the consumer anchors on, the 0:08:13.840 --> 0:08:18.480 energy price is extremely important, and in that respect, sort 0:08:18.480 --> 0:08:22.000 of knowing that you're below three dollars a gallon is 0:08:22.240 --> 0:08:23.840 very psychologically beneficial. 0:08:23.960 --> 0:08:26.240 Is it consistent to have low oil prices and an 0:08:26.280 --> 0:08:27.640 outperforming energy sector. 0:08:29.800 --> 0:08:32.920 It's a rough go to think about that in the 0:08:33.000 --> 0:08:36.600 long term. But again, and I think we've seen this 0:08:36.800 --> 0:08:42.040 over the entirety of this rally, there's a massive dispersion. 0:08:42.559 --> 0:08:47.120 The lowest correlations of really in many years amongst stocks, 0:08:47.280 --> 0:08:50.079 and I think when you look at the energy sector, 0:08:50.320 --> 0:08:54.319 you're going to see winners and losers based on where 0:08:54.400 --> 0:08:55.240 this is all going. 0:08:55.360 --> 0:08:57.200 Do you see a reason to invest more in Latin 0:08:57.240 --> 0:09:01.080 America as a result of the don Roe doctrine that 0:09:01.120 --> 0:09:02.080 we keep hearing about? 0:09:05.240 --> 0:09:11.040 Interesting question. Frankly, The reason that we think that you know, 0:09:11.320 --> 0:09:15.160 the rest of the world, Latin America included, is more 0:09:15.240 --> 0:09:18.600 interesting is because we think you saw a very significant 0:09:18.640 --> 0:09:22.160 top in the dollar a year ago and all lse 0:09:22.160 --> 0:09:25.560 sequel again over the long haul, what we started to 0:09:25.600 --> 0:09:30.040 see was portfolio rebalancing away from the US dribs and 0:09:30.120 --> 0:09:34.480 drabs slowly, and frankly, that's not going to accelerate, given 0:09:34.520 --> 0:09:36.679 the fact that our view that the AI theme has 0:09:36.720 --> 0:09:39.960 further to run. But over the long term, if you believe, 0:09:40.000 --> 0:09:42.480 as we do, that you've made a significant top in 0:09:42.520 --> 0:09:44.960 the dollar, you want to diversify to the rest of 0:09:44.960 --> 0:09:45.360 the world. 0:09:45.480 --> 0:09:48.200 The oil majors are jumping on this news, not so 0:09:48.280 --> 0:09:51.520 much crude energy before the weekend as opposed to after 0:09:51.559 --> 0:09:53.640 the weekend. Would you have a different view on potentially 0:09:53.720 --> 0:09:56.160 wanting to invest in the US majors. 0:09:58.160 --> 0:10:03.320 Again, you look at twenty twenty five, one of the themes 0:10:03.520 --> 0:10:07.880 has been the Trump administration sort of influencing the selection 0:10:08.040 --> 0:10:13.520 of winners and losers on various themes. Obviously steal rare earths, 0:10:13.559 --> 0:10:18.520 et cetera. Clearly there's an element of this happening. Now 0:10:19.280 --> 0:10:21.839 we don't know what it looks like, but we do 0:10:22.000 --> 0:10:25.800 know that Donald Trump is a businessman, and the endorsement 0:10:25.840 --> 0:10:30.400 of Rodriguez, given her experience in the oil patch, really 0:10:30.440 --> 0:10:32.920 tells you that that's where the emphasis. 0:10:32.679 --> 0:10:35.320 Does potentially help put a lid on oil prices. But 0:10:35.360 --> 0:10:38.319 when you think about AI, there's one issue of affordability 0:10:38.320 --> 0:10:41.640 that Americans are dealing with, and that's electricity prices. How 0:10:41.640 --> 0:10:44.120 are you thinking about that this year, given it is 0:10:44.160 --> 0:10:45.120 a mitern election year. 0:10:45.240 --> 0:10:48.200 Well, there's no question that that is the push pull. 0:10:48.440 --> 0:10:52.080 It's been the push pull the entire year. But again, 0:10:52.240 --> 0:10:56.880 all else equal, the president has shown an ability to 0:10:57.040 --> 0:11:01.560 influence events that moderate oil prices, and at some point 0:11:01.679 --> 0:11:03.959 that's likely to flow through to the. 0:11:03.920 --> 0:11:04.439 Rest of it. 0:11:04.480 --> 0:11:09.440 But again, the intent is because of the recognition of 0:11:09.520 --> 0:11:13.280 the importance is AI of AI as a theme both 0:11:13.320 --> 0:11:16.959 for the US and on the US corporate life. 0:11:17.000 --> 0:11:19.280 And we finished with a sentiment check year end price 0:11:19.360 --> 0:11:22.080 targets seventy seven, fifty and busy speaking to clients. When 0:11:22.120 --> 0:11:24.240 you talk to them, are they more excited about what 0:11:24.280 --> 0:11:26.800 can go right this year or more worried about what 0:11:26.880 --> 0:11:27.400 can go wrong? 0:11:29.080 --> 0:11:32.600 I would say it's in balance, to be perfectly frank 0:11:32.840 --> 0:11:36.120 What bothers us is that this is the first time 0:11:36.120 --> 0:11:38.440 in my memory, going back to when I was on 0:11:38.480 --> 0:11:42.280 the buy side, that there was no strategists on the 0:11:42.320 --> 0:11:45.679 street that had a price target below where the index 0:11:45.800 --> 0:11:50.199 level is. Thank you Bloomberg for compiling that information and 0:11:50.320 --> 0:11:53.560 what we found that over the course of last year, 0:11:53.880 --> 0:11:58.240 when sentiment got tipped too far in one direction, you 0:11:58.320 --> 0:12:01.600 had pullbacks, and here we are at Vicks fourteen. So 0:12:01.720 --> 0:12:05.680 to assume that it's clear sailing, you know, for weeks 0:12:05.720 --> 0:12:08.000 on end, is probably a faulty assumption. 0:12:08.640 --> 0:12:12.160 Stay with us. More Bloomberg surveillance coming up after this. 0:12:21.040 --> 0:12:23.400 Investors look into a fresh lighte of economic data to 0:12:23.480 --> 0:12:25.760 kick off the new year. So I'll desigre Franklin temput 0:12:25.760 --> 0:12:28.320 and fixed income writing. I maintain a constructive outlook for 0:12:28.400 --> 0:12:31.080 US growth. There is a lot of uncertainty. However, I 0:12:31.120 --> 0:12:34.400 see the balance skewed towards inflation risk, especially in the 0:12:34.440 --> 0:12:36.120 first part of twenty six. And now John, just now 0:12:36.160 --> 0:12:37.640 for Mores and good morning. It's going to see you. 0:12:38.000 --> 0:12:38.520 Nice to see you. 0:12:38.600 --> 0:12:40.600 It's very nice to see you. Happy New Year. Let's 0:12:40.600 --> 0:12:43.240 talk about that source of inflation risk. What's the most 0:12:43.280 --> 0:12:46.120 prominent source of inflation risk for you in the team. 0:12:46.360 --> 0:12:47.280 The fiscal impulse. 0:12:47.600 --> 0:12:51.360 So you were just talking about the what we hope 0:12:51.400 --> 0:12:54.480 to see, but the reality is this week we already 0:12:54.520 --> 0:12:56.800 know the big beautiful Bill is going to hand out 0:12:57.000 --> 0:12:59.360 a lot of goodies across the board. 0:13:00.000 --> 0:13:01.720 We're talking about. 0:13:01.800 --> 0:13:04.960 The consumer, whether we're talking about industry, All of these 0:13:04.960 --> 0:13:08.520 factors lead to inflation, and we haven't actually something which 0:13:08.800 --> 0:13:12.040 comes on and then moves off the front page is 0:13:12.360 --> 0:13:16.320 the two thousand dollars rebate check. Remember that in the 0:13:16.360 --> 0:13:19.360 first three months of the Biden administration, we helicopter dropped 0:13:19.400 --> 0:13:22.960 fourteen hundred dollar checks. And I've always maintained that was 0:13:22.960 --> 0:13:25.960 one of the principal sources of the inflation burst. We 0:13:26.120 --> 0:13:29.959 saw that massive fiscal splurge. If we get that splurge 0:13:30.000 --> 0:13:33.280 in h one, it results in consumer demand. And I 0:13:33.360 --> 0:13:35.600 know that there is a lot of concern and angst 0:13:35.600 --> 0:13:38.400 about the labor market. The labor market is a different 0:13:38.480 --> 0:13:41.560 labor market. I don't think you can read thirty k 0:13:41.800 --> 0:13:44.280 jobs the same way you could read thirty k jobs 0:13:44.320 --> 0:13:47.960 two years ago. That's supposed to be balance right now. 0:13:48.000 --> 0:13:51.360 So if you're above thirty, you know the economy's kind 0:13:51.400 --> 0:13:52.640 of treading water. 0:13:53.000 --> 0:13:55.520 Do you see companies potentially passing on more of these 0:13:55.559 --> 0:13:57.760 higher costs if the consumer is able to do it 0:13:57.760 --> 0:13:59.200 because they have more money in their pocket. 0:13:59.360 --> 0:14:00.280 Yeah, I do. 0:14:00.400 --> 0:14:03.920 I do actually passing on the higher costs, but also 0:14:04.480 --> 0:14:07.679 genuine higher demand. The one thing which continues to flow 0:14:07.720 --> 0:14:11.600 through is the American American consumers desire to consume. And 0:14:11.640 --> 0:14:14.200 I'm very interested to know what the end of this 0:14:14.400 --> 0:14:17.480 Christmas season will look like. But looking at what we're 0:14:17.520 --> 0:14:19.720 hearing in real time, it looks like it's going to 0:14:19.760 --> 0:14:20.360 be a strong one. 0:14:20.400 --> 0:14:22.960 Putting these two stories together in Washington, DC right now, 0:14:22.960 --> 0:14:25.480 the President is clearly putting a lid on oil prices 0:14:25.520 --> 0:14:27.880 going up when it looks what's happening in Venezuela. But 0:14:27.920 --> 0:14:30.040 at the same time, they're going to potentially get more 0:14:30.080 --> 0:14:33.960 fiscal impulse ahead of the midterm election. Does the oil 0:14:34.280 --> 0:14:38.520 depression of a price help the potential statflationary fears you have. 0:14:38.720 --> 0:14:41.280 So it's not a it's not statulation. I'm expecting growth 0:14:41.280 --> 0:14:43.360 to two point seventy five to three percent, driven by 0:14:43.360 --> 0:14:45.680 that consumer demand, driven by the fact that we're getting 0:14:45.960 --> 0:14:49.400 private sector investment in this country. Between last year and 0:14:49.440 --> 0:14:52.840 this year. It's around one trillion dollars. That's more than 0:14:52.880 --> 0:14:54.800 what it's about as much Germany is going to do 0:14:54.880 --> 0:14:57.160 over ten years. So when you stop and put that 0:14:57.200 --> 0:15:00.360 into perspective, you've got a lot of tailwinds coming in 0:15:00.520 --> 0:15:02.840 for growth this year. So it's not really stagflation that 0:15:02.880 --> 0:15:05.320 I'm talking about. I'm just saying that I don't expect 0:15:05.360 --> 0:15:07.320 major advances on inflation. 0:15:07.760 --> 0:15:07.880 Now. 0:15:08.080 --> 0:15:10.920 Can oil be the game changer? I don't think so. 0:15:11.280 --> 0:15:12.360 I don't think in the near term. 0:15:12.400 --> 0:15:15.920 I think Venezuelan oil that's a two three year out 0:15:15.920 --> 0:15:19.480 story because yeah, there's a sentiment driven Yes there's going 0:15:19.520 --> 0:15:22.040 to be a lot more supply, but how much actual 0:15:22.040 --> 0:15:23.600 supply are you going to see in the new term. 0:15:23.800 --> 0:15:26.280 So we talk about inflation as though or a monolith, 0:15:26.560 --> 0:15:28.720 and inflation can be expressed through the market in many 0:15:28.720 --> 0:15:31.160 different ways. It can be a higher long end of 0:15:31.280 --> 0:15:34.400 the yield curve, you could see, for example, the dollar weeke, 0:15:34.480 --> 0:15:37.720 and substantially you could see metals prices go up significantly. 0:15:37.840 --> 0:15:42.560 Which node do you think will transmit through markets most directly, I. 0:15:42.600 --> 0:15:43.440 Think a little bit of all. 0:15:43.640 --> 0:15:45.320 So you're going to see a further steepening of the 0:15:45.400 --> 0:15:47.640 yield curve in my book, because I think the Fed 0:15:47.680 --> 0:15:49.520 should not have got up to three fifty, and if 0:15:49.520 --> 0:15:51.920 they actually go further than three fifty, I think it 0:15:51.920 --> 0:15:53.720 would be a substantial mistake. And we're going to see 0:15:53.720 --> 0:15:57.400 a significantly steeper yield curve because if we stop to think, 0:15:57.800 --> 0:15:59.920 the Fed has got one hundred and seventy five basis 0:16:00.040 --> 0:16:03.520 points and tenure yields are higher than they were before 0:16:03.560 --> 0:16:09.440 they started cutting, which means underlying the market's apparent sanguineness 0:16:09.960 --> 0:16:12.800 about everything that's going on, clearly there is some concern 0:16:12.920 --> 0:16:14.200 on the fiscal and the inflation. 0:16:14.600 --> 0:16:16.720 And in terms of the dollar, I'd say the dollar 0:16:16.800 --> 0:16:17.760 is a little bit mixed. 0:16:17.960 --> 0:16:20.320 In terms of the G three, I think we're pretty 0:16:20.360 --> 0:16:23.000 close to fair value against the euro actually, and I 0:16:23.080 --> 0:16:24.400 think we're massively overvalued. 0:16:24.720 --> 0:16:26.560 Jump in because you acknowledged the bulk of that move 0:16:26.680 --> 0:16:28.080 was in twenty four, not twenty five. 0:16:28.160 --> 0:16:28.640 Absolutely. 0:16:28.720 --> 0:16:30.680 In twenty five, the cut interest rates and bond yards 0:16:30.720 --> 0:16:33.360 on a ten year maturity actually fell, they didn't rise. 0:16:33.720 --> 0:16:36.440 What's changed for twenty five in the cutting cycle of 0:16:36.560 --> 0:16:39.000 last year compared to what we saw in twenty four because. 0:16:38.800 --> 0:16:40.720 I think this is the year you actually get if 0:16:40.800 --> 0:16:44.640 you get the fiscal impulse that I'm talking about, those 0:16:44.760 --> 0:16:48.760 tax rebate checks, those so the consumption demands, the tailwinds 0:16:48.840 --> 0:16:53.320 are stronger. I think in addition, on the non AI 0:16:53.720 --> 0:16:58.320 hyper scaling front, we actually haven't seen that much investment 0:16:58.440 --> 0:17:00.400 last year, and I think we probably will this year. 0:17:00.640 --> 0:17:02.640 So I think there are lots of tailwinds to growth 0:17:02.800 --> 0:17:05.280 this year that we didn't actually have last year, and 0:17:05.400 --> 0:17:08.720 you had everything related to the tariff related uncertainty which 0:17:08.760 --> 0:17:09.920 really skewed. 0:17:09.960 --> 0:17:10.920 One half of the year. 0:17:11.359 --> 0:17:14.920 So I think when Tariff's liberation Day was first announced, 0:17:15.000 --> 0:17:17.440 everyone was sure that meant a recession in the US. 0:17:17.680 --> 0:17:18.119 I didn't. 0:17:18.760 --> 0:17:22.480 I'm just eratulated, but it was, so I think we 0:17:22.640 --> 0:17:23.840 just start from a different spot. 0:17:24.040 --> 0:17:25.920 So a super Yeld curve in and of itself isn't 0:17:25.920 --> 0:17:29.040 necessarily negative for the market. It can be actually really positive. 0:17:29.119 --> 0:17:30.160 When it comes to financials. 0:17:30.440 --> 0:17:33.600 The absolute level of yields does matter? Yes, what's the 0:17:33.720 --> 0:17:37.280 stopping out point for ten year yields? Were suddenly risk 0:17:37.359 --> 0:17:38.879 assets lose their luster? 0:17:39.200 --> 0:17:41.600 So I think, you know, I'm not. I think that. 0:17:43.440 --> 0:17:46.719 Fixed in markets have shown an ability to absorb all 0:17:46.800 --> 0:17:49.720 the way to four seventy five and above. Equity markets, 0:17:49.760 --> 0:17:51.760 it's a different question, and I'm not an equity person, 0:17:51.800 --> 0:17:54.520 so I'll talk to that'd just say that, do I 0:17:54.720 --> 0:17:59.280 see ten year yields going back to those substantially above 0:17:59.320 --> 0:18:02.359 four fifty for close to four seventy five levels? I 0:18:02.359 --> 0:18:06.000 actually I do if you don't have the wild card, 0:18:06.160 --> 0:18:09.560 which is something which knocks the economy into a recession. 0:18:10.080 --> 0:18:13.800 And really that's it's just not my baseline. If I 0:18:13.840 --> 0:18:16.200 look at the tailwinds coming from Montree and fiscal policy 0:18:16.320 --> 0:18:20.080 right now, it's very hard to argue that we're heading 0:18:20.119 --> 0:18:21.199 for a weakening of the. 0:18:21.560 --> 0:18:24.720 Pretty guys love to talk about bonds, but people can 0:18:24.760 --> 0:18:26.840 talk about equacies. The spread in the last thirty minutes 0:18:27.000 --> 0:18:29.560 is three three cuts. You're basically at zero for this year, 0:18:29.600 --> 0:18:30.840 and during the man you want I've had the core 0:18:30.960 --> 0:18:33.040 equity guy is a three for this year. 0:18:33.119 --> 0:18:35.120 No, And I think that's the difference because I think 0:18:35.200 --> 0:18:38.040 equity people do get concerned. Certainly within my own film, 0:18:38.280 --> 0:18:40.520 my equity colleagues get very concerned when I say that, 0:18:40.720 --> 0:18:42.600 you know, honestly, they should have got last time. And 0:18:42.640 --> 0:18:44.080 I'm not sure they're going to cut at all this 0:18:44.240 --> 0:18:45.280 year this year. 0:18:45.560 --> 0:18:46.200 Really honest. 0:18:46.400 --> 0:18:48.680 How pretty guys talk about bonds and bond guys talk 0:18:48.680 --> 0:18:49.679 about equities all the time. 0:18:49.720 --> 0:18:52.320 They designed by saying we don't cover that. 0:18:52.480 --> 0:18:55.440 But let me tell you that's what happens every single 0:18:55.960 --> 0:18:56.480 I agree. 0:18:56.640 --> 0:19:00.840 What can I say? Starts a dropping by and I'm 0:19:00.840 --> 0:19:04.600 design the a Franklin sampleton stay with us. More Bloomberg 0:19:04.640 --> 0:19:16.399 surveillance coming up after this, Andrew Homholst, The city's got 0:19:16.480 --> 0:19:18.479 things to say on the data and on that too, 0:19:18.720 --> 0:19:20.760 and on base case. The unemployment rate rises to four 0:19:20.800 --> 0:19:23.840 point seven percent. Indie December jobs report continue itis trend 0:19:23.960 --> 0:19:27.040 higher and keeping the FED reducing policy interest rates. Andrew 0:19:27.119 --> 0:19:30.119 john Is now for more. Andre Camrnic Yeah, happy to 0:19:30.200 --> 0:19:31.840 year to you too. That's not such a happy new 0:19:31.880 --> 0:19:34.880 year for the labor market though, to drift towards five continues. 0:19:35.440 --> 0:19:38.200 We think so, and I think that, you know, we're 0:19:38.200 --> 0:19:40.639 in the business of forecasting these things on a monthly basis, 0:19:40.640 --> 0:19:43.680 there's a lot of volatility, we have some residual seasonality 0:19:43.720 --> 0:19:45.640 in the data. All those things kind of obscure what's 0:19:45.640 --> 0:19:47.240 going on. But if you just step back and look 0:19:47.320 --> 0:19:49.520 at what this labor market has done over the last 0:19:49.600 --> 0:19:52.479 two years, we've been trending higher in the unemployment rate. 0:19:52.520 --> 0:19:55.239 We've just been consistently trending higher in the unemployment rate. 0:19:55.320 --> 0:19:57.680 So we think that trend continues this year. We do 0:19:57.800 --> 0:19:59.439 think that can happen in the jobs report that we're 0:19:59.480 --> 0:20:01.560 going to get this week, with the participation rate coming 0:20:01.640 --> 0:20:03.440 up a little bit, maybe that's going to push the 0:20:03.560 --> 0:20:06.159 unemployment rate higher. But what I would really emphasize is 0:20:06.200 --> 0:20:08.200 that that broad trend towards loosening in the job. 0:20:08.160 --> 0:20:10.960 I talked about the hawkish two. As the FMC rotates 0:20:10.960 --> 0:20:12.760 and you get the regional voters, the new ones coming 0:20:12.840 --> 0:20:15.200 on board for a year, what is the credible case 0:20:15.520 --> 0:20:17.800 to stay on hold? What is that case of the moment? 0:20:18.080 --> 0:20:20.200 So I think it's all about how comfortable are you 0:20:20.280 --> 0:20:22.920 with the labor market, and then how much discomfort you 0:20:23.080 --> 0:20:26.520 have about inflation, and then, to some extent, financial conditions. Also, 0:20:26.560 --> 0:20:29.080 because financial conditions are easy, they've been easy for some time. 0:20:29.800 --> 0:20:32.360 And then on inflation, and this is where I think 0:20:32.440 --> 0:20:35.680 people really differ. We're above target on inflation. If you 0:20:35.720 --> 0:20:38.399 listen to Chair Powell, he'll say two point eight percent 0:20:38.520 --> 0:20:41.320 or so core PCE inflation, But go ahead and subtract 0:20:41.320 --> 0:20:44.360 about fifty basis points from that due to tariffs, you're 0:20:44.400 --> 0:20:46.280 down to two point three percent. So I think there's 0:20:46.480 --> 0:20:49.680 a core of more dubbish FED officials that are looking 0:20:49.720 --> 0:20:53.040 through that tariff inflation and are not that concerned about inflation. 0:20:53.960 --> 0:20:56.359