Speaker 1: Welcome to the Bloomberg Surveillance podcast name Tom Keene. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. We've caught up
Speaker 1: with the British Prime Minister Boris Johnson, John Michael the
Speaker 1: way the Bloomberg News, the editor in chief sitting down
Speaker 1: with a British leader's take a listen. China is a
Speaker 1: gigantic part of our economic life and will be for
Speaker 1: a for a long time, for for our lifetimes and that.
Speaker 1: But that does not mean that we should be a
Speaker 1: naive in the way that we look at our our
Speaker 1: critical natural infrastructure, the way we look at You mentioned
Speaker 1: nuclear power, you mentioned five G technology. Those are all
Speaker 1: legitimate concerns at any government, many many other governments around
Speaker 1: the world have. But I am I want to be
Speaker 1: I've said this many times, it's worth repeating. I am
Speaker 1: no sinophobe, very far from it. I think you think
Speaker 1: you're the last sinophile in the cabinet. No, I expect
Speaker 1: there are lots of looks China's China is great about
Speaker 1: wind power? Would you let them buy offshore wind power?
Speaker 1: That's think I think you'd have to with You'd have
Speaker 1: to look at as you'd have to look at what
Speaker 1: was your defining as strategic or critical. But I certainly
Speaker 1: think that having a know our trading relationship with China,
Speaker 1: if you look at it, what's what it's it's in
Speaker 1: spite of all the difficulties, in spite of you know,
Speaker 1: all the angry conversations about or the difficult conversations about
Speaker 1: the Dalai lam Or or Hong Kong or or the Wakers,
Speaker 1: and where where we will continue to stick to our points, right,
Speaker 1: we will continue to stick to our to our views.
Speaker 1: But actually trade with China has continued to expand for
Speaker 1: a very long time and I think probably will continue
Speaker 1: to expand, as I say, for for the rest of
Speaker 1: our lives. That doesn't mean that we should be um,
Speaker 1: you know, we should be also we should be cautious
Speaker 1: about how we had at our cn I and about
Speaker 1: how we handle FDI from China into some of our
Speaker 1: That's why we brought in some of the legislation that
Speaker 1: we have. The Prime Minister of the United Kingdom getting
Speaker 1: to greet those at copy in Glasgow, joining us now
Speaker 1: the other in chief of Bloomberg News, John michaels Wade,
Speaker 1: I put on a new shirt and sat up straight
Speaker 1: today for this discussion. John. There will be Johnson, Thank you.
Speaker 1: There will be Johnson, there will be Scotland, and there
Speaker 1: will also be the hope for a future perfect. You're
Speaker 1: wonderful book of too many years ago two thousand three.
Speaker 1: We need to redo, John, and I want to talk
Speaker 1: at the back end of that book about the back ash.
Speaker 1: You mentioned the backlash of globalization. What's going to be
Speaker 1: the backlash of climate change at the Prime Minister in
Speaker 1: others face at Glasgow. I think that's actually quite a
Speaker 1: good comparison. In fact, I think if you look at
Speaker 1: the issue in Britain of heat heat pumps, which is
Speaker 1: from a green point of view, people are trying to
Speaker 1: put in much more kind of low energy heat pumps
Speaker 1: into their houses and everyone thinks that's wonderful and green.
Speaker 1: But what's happening is consumers, who are generally quite keen
Speaker 1: on green things, they're saying, no, God, these are going
Speaker 1: to cost. It could cost five thou dollars they could
Speaker 1: cost huge amounts of money. And I think that what
Speaker 1: is happening with greenery is a little bit similar to globalization.
Speaker 1: It's something that everyone generally thinks is a good idea.
Speaker 1: And remember there was an era where people thought that
Speaker 1: generally opening up economies were great, and everyone approved of
Speaker 1: globalization until it happened to them. Everyone approves of fighting
Speaker 1: climate change until suddenly it means the price of petrol
Speaker 1: or gas as you mistaken they call it rises. That
Speaker 1: that's where that's where it hurts. It's when you're heating
Speaker 1: for your house hurts. It's where things that really affect
Speaker 1: people particularly, and Johnson is kind of caught in the
Speaker 1: middle of that as Indeed, you know, you can look
Speaker 1: at what's happening with the Democrats in Congress. Do the
Speaker 1: elites know there's a cup twenty six they have to
Speaker 1: sell to a public that's hugely skeptical. I think, well
Speaker 1: that one example of the elites is her Majesty Queen
Speaker 1: Elizabeth and she she was caught on caught on the
Speaker 1: recorder the other day talking about that that nobody was
Speaker 1: coming and that it all looked very difficult. Um. So
Speaker 1: I think some people are aware of that, but I
Speaker 1: think in general, no, I think that it's one of
Speaker 1: those zip areas where there is a divide that opens
Speaker 1: up and you look around the world. Every time it's
Speaker 1: come up, it's always sort of hit the elites harder.
Speaker 1: You might remember that example a bit ago where Macron
Speaker 1: suddenly ray you know, changed the speed limits on various
Speaker 1: roads in part for kind of green reasons, and you
Speaker 1: suddenly end up with the La Jean. There's few things
Speaker 1: that make people more annoyed than something directly hitting part
Speaker 1: of their pocketbook. You look around parts of America as
Speaker 1: well in the debates now about what happens with infrastructure
Speaker 1: bills and so on. So I do think it's I
Speaker 1: think it's a worrying area from the point of view
Speaker 1: of a kind of global elite view. Meanwhile, they are
Speaker 1: hosting a Copper twenty six at a time when there's
Speaker 1: a lot of questions around how much to open your borders.
Speaker 1: It's been an issue of serious disagreement and frankly a
Speaker 1: lot of consternation. However, at this moment in time, UK's
Speaker 1: hospitalization and death rate for from COVID has actually been
Speaker 1: going up. After being celebrated as one of the big
Speaker 1: winners from the whole pandemic. How do you respond to that, Well,
Speaker 1: it's interesting you look at the numbers for COVID. You know, sufferers,
Speaker 1: people who caughts over COVID, those have been rising very
Speaker 1: rapidly in Britain. You're right, the hospitalization and death rates
Speaker 1: have gone up, but so far, at least, at least
Speaker 1: as far as you can see, the sort of vaccine
Speaker 1: protection thing is sort of holding the current levels. I
Speaker 1: thinks around forty a day people are catching it. You
Speaker 1: would expect to see many more people dying and in
Speaker 1: the rather gruesome way in which this works, and it
Speaker 1: doesn't seem to be happening because it's it's really ripping
Speaker 1: through especially young people. Everyone who's got schools, people were
Speaker 1: working with here, you know, they they've got people are
Speaker 1: stuck at home because their children are suddenly got it.
Speaker 1: And so there is there's a degree of that, but
Speaker 1: there is also the sort of general sense that back
Speaker 1: to what you said earlier, these things to do with
Speaker 1: opening up economies, people being there, they are taking in
Speaker 1: this in COVID. You know that Johnson is going a
Speaker 1: little bit back to his more liberal routes in that interview,
Speaker 1: I talk about the fact that we're in Margaret Thatcher's study.
Speaker 1: There's a picture of her glowering down on us and
Speaker 1: a copy of High X Road to serve to a
Speaker 1: key part of the Tom Keen booklist, staring down at us.
Speaker 1: That that was the culture from which Boris Johnson came
Speaker 1: and he still has some quite strong libertarian stinks at
Speaker 1: the same time as that he is, by any measure,
Speaker 1: increasing the size of government fairly formidably. He blames that
Speaker 1: on cop COVID, and he's also trying to sort of,
Speaker 1: I suppose do a version of industrial policy to push
Speaker 1: the British economy, especially towards the North, towards manufacturing, towards
Speaker 1: things like that. The football stadiums are full again, John.
Speaker 1: The important questions, sir, Were you at lester Manchester United
Speaker 1: last weekend? No, very, very sadly I missed that. My
Speaker 1: life is happy because I saw Brendan Rodgers in a restaurant,
Speaker 1: didn't you. None of this will mean anything to people
Speaker 1: like sometimes you know Tom Night. John, Thank you, sir,
Speaker 1: great work as always. John Mchothwaite. There Bloomberg News editor
Speaker 1: in chief sitting down with the Prime Minister in the
Speaker 1: UK Tom, I'm delighted to be here in the Science
Speaker 1: Museum where we also just run from the Prime Minister
Speaker 1: of doing a big speech on innovation and he wants
Speaker 1: to attract the big box around the world. One person
Speaker 1: who was in the room and who I believe also
Speaker 1: had dinner with the Prime Minister yesterday, is David Solomon.
Speaker 1: He's the chief executive of Goldman SAX. Thank you so
Speaker 1: much for joining us. It's been a while since we
Speaker 1: saw you in London. It's it's been a while since
Speaker 1: I've been in London. I'm thrilled to be back in London. Um.
Speaker 1: It's really been since March um and to be back,
Speaker 1: it's good. It's good to be back, and it's good
Speaker 1: to be spending time with people. And and the pitch
Speaker 1: from the UK government is come here, invest to be
Speaker 1: green and you know invest the more. Have they been persuasive,
Speaker 1: What has the government been able to tell executives? Well,
Speaker 1: I you know, I think they have a good pitch.
Speaker 1: But as you know, we've been very, very committed to
Speaker 1: the UK for a long time. We have people here
Speaker 1: in the UK and in fact even you know Preak
Speaker 1: Panbamic going back to team We've built a new building
Speaker 1: here plump Tree Court, which is a billion dollar commitment.
Speaker 1: We've been growing up, you know, up also in Birmingham,
Speaker 1: where we now have expanded our presence in the UK.
Speaker 1: So we've seen the UK as a tremendous opportunity for
Speaker 1: us to have a significant outpost, serve our clients you know,
Speaker 1: both here and also provide resources across the continent. Has
Speaker 1: that changed at all because of Brexit? We have the
Speaker 1: energy crisis, there's a lack of drivers. Is there anything
Speaker 1: that you need to ask authorities to do better or
Speaker 1: that you clients want the UK to do better? Well?
Speaker 1: I think we're at a moment in time where we're
Speaker 1: coming out of the pandemic and there are a handful
Speaker 1: of things going on. I think all over the world.
Speaker 1: There are labor issues that are really a reflection of
Speaker 1: the transition out of the pandemic. There are supply chain issues.
Speaker 1: Some of this stuff is transitory. There are some secular
Speaker 1: trends that we have to watch closely. Um. But I
Speaker 1: think we're adjusting and dealing with it as anybody else's
Speaker 1: and I you know, I think leaders here are thinking
Speaker 1: about it the same way leaders are around the world.
Speaker 1: When you look at the UK and of course some
Speaker 1: of these green investments that the UK and the City
Speaker 1: of London particularly has been really trying to pitch. You've
Speaker 1: been extremely involved in carbon off setting. Can London really
Speaker 1: spearhead that movement? Well, I think it's important that governments
Speaker 1: around the world partner with the private sector to try
Speaker 1: to get capital directed toward innovation in a way that
Speaker 1: we can accelerate the climate transition. And you know, I
Speaker 1: want to emphasize it's early transition. Um. We need thoughtful policy.
Speaker 1: In my opinion, we need to put a price on
Speaker 1: carbon um and I think this is something that is
Speaker 1: very important. There's an enormous premium for certain green technologies.
Speaker 1: We can invest in technology that can collapse that premium
Speaker 1: and allow us to deliver a much more sustainable future.
Speaker 1: But this is something that's going to take some time,
Speaker 1: and I think it requires both good public policy from
Speaker 1: from our governments and then active involvement from the private sector.
Speaker 1: We're trying to do our part. I think, you know,
Speaker 1: we've made a big pledge towards seven fifty billion dollars
Speaker 1: of sustainable financing, investment advisory services. We're working toward that
Speaker 1: and we try to spend a lot of time with
Speaker 1: our clients thinking about how we can support them in
Speaker 1: their individual transitions. And so this is getting a lot
Speaker 1: of attention, as you would expect it should mean. There's
Speaker 1: also quite a lot of regulation going aheads and we've
Speaker 1: heard yesterday, for example about E S G derivatives exactly
Speaker 1: you know, where does that end? And can can London
Speaker 1: as a capital be the green finance capital of Europe
Speaker 1: and the world? Well, I think there's a real you know,
Speaker 1: we heard very very clearly from the Prime Minister, a
Speaker 1: real sense of trying to spur on in this economy.
Speaker 1: Here an opportunity to create less regulatory structure and therefore
Speaker 1: more incentives to spur more of that investment. And there's
Speaker 1: a great center of excellent and investment here, certainly around
Speaker 1: the vaccines. There was a bunch that happened here in
Speaker 1: the UK and so you know, I'm optimistic the UK
Speaker 1: will play apart. But when you think broadly about these issues,
Speaker 1: this is a global issue, and particularly in the developing world.
Speaker 1: You know, we in the developed parts of the world
Speaker 1: are going to have to help to bring the world
Speaker 1: along and get capital focused on technologies that can move
Speaker 1: this transition over time, and it's really it's not just
Speaker 1: here or there, it's everywhere, and talk to me about China.
Speaker 1: So we had exciting news from Golden Sex. I think
Speaker 1: in the last couple of days. How committed are you
Speaker 1: to China or how where we are you of things
Speaker 1: changing quite quickly given some of the economic posts he's
Speaker 1: put in place by the President. Sure, we take a
Speaker 1: very long term view, um and we take this view,
Speaker 1: you know, rooted largely in the fact that we have many,
Speaker 1: many clients that have been doing business in China for
Speaker 1: a long time. They want our support in our involvement.
Speaker 1: We're extremely pleased that after a long period of time,
Speaker 1: seventeen years since we started our joint venture, that we
Speaker 1: actually now have ownership and control of our joint venture
Speaker 1: in China. So we're thankful for that. We have a
Speaker 1: long term plan to continue to grow in China. We've
Speaker 1: recently announced a wealth management joint venture there. There's no
Speaker 1: question that the bilateral relationship between the US and China
Speaker 1: is complex and it's going to continue to evolve. We're
Speaker 1: watching it closely, but with a long term lens. China
Speaker 1: is an important part of the global economy. Goldman Sex
Speaker 1: operates as a global player with businesses around the world
Speaker 1: that are participating in global growth, and so we think
Speaker 1: in the long term that presence there will be very
Speaker 1: important for us. Is it risk you're being alone or
Speaker 1: is it safe for being a joint venture? Like, what
Speaker 1: does it mean in terms of regulatory risks? Well, I
Speaker 1: I think there are always regulatory risks um and all markets.
Speaker 1: And I think that you know, we've shown that ability
Speaker 1: to adapt to regulatory change and adapt our business appropriately
Speaker 1: to the degree that our regulatory challenges will deal with them.
Speaker 1: The big reason that we like controlling our joint venture
Speaker 1: is when we didn't own our joint venture, we own
Speaker 1: thirty three of our business in China. Every dollar of
Speaker 1: investment we made, we only own thirty three cents of it.
Speaker 1: So this allows us to continue to invest for the
Speaker 1: long term and growing our franchise in our business and
Speaker 1: serving our clients in China, and we're excited about that.
Speaker 1: And again, you know, my job in stewarding this a
Speaker 1: hundred and fifty three year old institution is to take
Speaker 1: a very you know, a very very long term view,
Speaker 1: and that's how we think about it. When we're when
Speaker 1: we're investing in building there. Did how much do you
Speaker 1: want to grow in China the next five years? I
Speaker 1: think there's I think there's a big opportunity. We've put
Speaker 1: forward a five year China plan. We haven't put the
Speaker 1: details of that five year China plan how publicly, but
Speaker 1: we run a relatively big business in China, although it's
Speaker 1: a very small part of overall Goldmen Sex. Our growth
Speaker 1: is correlated to where there's growth in the world, and
Speaker 1: there's certainly good growth in China. UM access to UM,
Speaker 1: the wealth of individuals and wealth management platform, given our
Speaker 1: broad wealth management platform, is something that's very attractive to us.
Speaker 1: Corporate activity has been quite high there. UM. There's no
Speaker 1: question that that that's something that that corporates there turned
Speaker 1: to our expertise and capital markets and advisory services. So
Speaker 1: I think there's a good opportunity set for us to
Speaker 1: prosecute over time. How painful have these high energy prices
Speaker 1: been in customers in China but elsewhere in the world. Well,
Speaker 1: I think there's there's no question that we're going to
Speaker 1: go through a period where there's more inflationary pressure on
Speaker 1: commodities prices. And this goes back to why when we
Speaker 1: were talking about sustainability broadly, I said, we have to
Speaker 1: balance good public policy, you know, with the short term implications.
Speaker 1: And that's why it's a transition. If we're too aggressive
Speaker 1: in the context of how we direct capital or the
Speaker 1: private sector, that can be more inflationary, and obviously that
Speaker 1: makes its way down to the end users individuals um
Speaker 1: and the cost of their energy or their gasoline, etcetera.
Speaker 1: And there's a balance in that. If that goes too quickly, um,
Speaker 1: you know, that's that's something that that's something that people
Speaker 1: are not going to be happy about, and for politicians
Speaker 1: that will be certainly something that they'll have to wrestle with.
Speaker 1: But what do you say to a climate change activists
Speaker 1: that says, actually, we have the energy prices. But it's
Speaker 1: also a good excuse for big banks, big companies, big
Speaker 1: finance to delay the transition, so to go through a transition,
Speaker 1: but actually not as be as aggressive in stopping, for example,
Speaker 1: funding some of the fossil fuel companies. I think this
Speaker 1: is all balance. And you know, I've said clearly that
Speaker 1: Goldman Sachs is going to be in a position where
Speaker 1: we're going to be doing business with fossil fuel companies
Speaker 1: and financing certain fossil fuel companies. But it's it's a
Speaker 1: direction of transition. We want to be in business with
Speaker 1: people that are investing in their transition. We want good
Speaker 1: public policy. I said to you earlier, we have to
Speaker 1: put a price on carbon and my opinion because that
Speaker 1: will allow us to therefore accelerate the transition. But all
Speaker 1: of this is a balance the most aggressive point of
Speaker 1: view on the transition and the least aggressive art right.
Speaker 1: It's a constructive partnership between governments and the private sector
Speaker 1: to make sure, you know, we protect our society and
Speaker 1: get capital into technologies that can evolve and help us
Speaker 1: make the world greener. And I firmly believe that something
Speaker 1: we can do. But it's something that's going to require
Speaker 1: a lot of focus and a little bit of patients,
Speaker 1: but with appropriate intention and energy and commitment um and
Speaker 1: we certainly have that. What happens if a failure, I
Speaker 1: I don't see it as as as I don't see
Speaker 1: it as black and white as being a you know,
Speaker 1: a failure. I know, you know, the Prime Minister was
Speaker 1: asked this morning, you know, what do you expect and
Speaker 1: what's a win? I think part of this and I
Speaker 1: think this is one of the constructive things about being
Speaker 1: a part of the session here today, this Global Investment Summit,
Speaker 1: and I know what will be the same with copy.
Speaker 1: You need to create dialogue. People need to have debates.
Speaker 1: We have to be willing to debate, discuss, learn and
Speaker 1: therefore make good policy decisions as we move forward. And
Speaker 1: this is all constructive part of the process. So I
Speaker 1: I see the fact that these dialogues are occurring is
Speaker 1: pushing us forward. I think that's a very very important
Speaker 1: part of the transition journey that we're on. But it's
Speaker 1: not a it's not a yes or no to me
Speaker 1: that there's a win or a failure. This is going
Speaker 1: to be a process that we're all invested heavily in.
Speaker 1: Thank you so much, David Solomon. I want to talk
Speaker 1: about your music, but we'll have to do another time.
Speaker 1: I don't know if there's anything really really happy to
Speaker 1: be with you and just happy to be back in
Speaker 1: London today. Yeah, it's nice to have you back. With that.
Speaker 1: We're going to send it back to you in New
Speaker 1: York right now to the parlor games. Subrato or Jampa
Speaker 1: joins us head of the US rates Strategy at SoC
Speaker 1: Gen's world. We could get an update heres. So Brad,
Speaker 1: how important is the adjustment in the FED message? Do
Speaker 1: they have to catch up where the market is on
Speaker 1: maybe a slower growth and maybe a more controlled inflation
Speaker 1: um Not really. I think I think that for the
Speaker 1: most part, you're going to consistently here the same message
Speaker 1: from all the feed speakers that they're probably going to
Speaker 1: be very careful and cautious on heights because of the
Speaker 1: fact that they just don't have enough information on the
Speaker 1: inflation front for them to sort of guide the markets
Speaker 1: towards rate heights. And that's why I think you're seeing
Speaker 1: a little bit of an adjustment in the in the
Speaker 1: two year part of the curve. This morning, we did
Speaker 1: see the market fully priced in three hikes by the
Speaker 1: end of three and now you're going to see a
Speaker 1: little bit of adjustment based on what the fense say.
Speaker 1: Equities are on a tear. What does that signal to
Speaker 1: you in an overarching strategy, and particularly in fixed income, well,
Speaker 1: I think that low yields are here to stay. As
Speaker 1: long as yields are low, real yields remain low, then
Speaker 1: you have to go out the respectrum and invest in
Speaker 1: higher yielding assets. So if you look at the bond
Speaker 1: market complex, whether it be high yield or or treasuries
Speaker 1: on the other end of the spectrum, your real returns
Speaker 1: are very very low. I mean, in treasuries are getting
Speaker 1: negative ninety basis points. So it just doesn't make any
Speaker 1: sense to be in bonds, and you're better investing out
Speaker 1: the respectrum. And that's why you're seeing more and more
Speaker 1: demand if you will, for risky assets as well as
Speaker 1: corporate bonds and high yielding bonds, an environment where tragedy
Speaker 1: als are going to potentially remain low for the receiver
Speaker 1: of future. So about I want to sit on the
Speaker 1: federal reserve for a minute. The idea here that very
Speaker 1: inevitably will push back as of the right rate hiking
Speaker 1: expectations that are being built into markets. Would they embrace this?
Speaker 1: I mean, markets are still chugging along even as traders
Speaker 1: price in two rate hikes. Don't they want to propagate
Speaker 1: that because it gives them, frankly, more ammunition down the
Speaker 1: line to either ease without even moving the rate just
Speaker 1: by verbal intervention, or down the line it does leave
Speaker 1: them the ability to cut because rates will not be
Speaker 1: at zero um. So I think the way I would
Speaker 1: look at it is I think montreal policy, especially rate hikes,
Speaker 1: is a very blunt tool in this environment. Right You're
Speaker 1: looking at a very unusual inflationary environment that's driven by
Speaker 1: supply chain instructions and labor shortages, you know, higher rents,
Speaker 1: and you know, the the FED can't really meaningfully do
Speaker 1: anything by raising rates to sort of fix the inflation
Speaker 1: problem that we're going through right now. So I think
Speaker 1: the best course of action for the FED is to
Speaker 1: remain patient until it really really needs to raise rates.
Speaker 1: So that's why I think they're gonna err on the
Speaker 1: side of the caution, because they know they can pivot
Speaker 1: easily to guiding the markets towards rate hexs if they
Speaker 1: need to. If they do it now, then what you're
Speaker 1: gonna see is is this sort of price action you're
Speaker 1: seeing in the bar market, where the bar market things,
Speaker 1: and the FED is going to be able to raise
Speaker 1: rates soon, sooner faster, kind of prompload the rate HEGs,
Speaker 1: if you will, which would imply a much slower trajectory
Speaker 1: for growth over the longer run, and that's causing this
Speaker 1: extreme flattening of the curve. They don't really want that either,
Speaker 1: steeping of the curve is is healthy for a variety
Speaker 1: of the sectors of the economy, So they just aren't
Speaker 1: They shouldn't really be in a Russia, if you will,
Speaker 1: to sort of guide the markets towards rate heights. There's
Speaker 1: also the idea of political risk, but this is the
Speaker 1: perhaps view of the Federal Reserve as it is composed today. Yeah,
Speaker 1: we really have heard from President Biden in terms of
Speaker 1: replacing FED Chair J Powell. An increasing question if you
Speaker 1: look at predicted the odds have actually been going down.
Speaker 1: What's your view of the of the potential market risk
Speaker 1: of turmoil at the top of the FED. Um. Yes,
Speaker 1: there's there's more uncertainty now than there was probably even
Speaker 1: a few weeks back about who's going to be sharing
Speaker 1: the FED and what the composition of the committee is
Speaker 1: going to be next year. But broadly speaking, I think
Speaker 1: that regardless of the choices that I mean, I think
Speaker 1: you know, any and most presidents want a very devilish FED.
Speaker 1: They want policy to be accommodative so that you know,
Speaker 1: invested in certain seed robust growth trajectory, and the labor
Speaker 1: market is strong and inflation is not a concern. So
Speaker 1: I think broadly speaking, you know, the composition is going
Speaker 1: to remain somewhat doublish even if there are new choices
Speaker 1: made for the chair as well as some of the
Speaker 1: committee members. So I'm I'm I think that policy, especially
Speaker 1: with the FED, tends to be somewhat stay able. Uh
Speaker 1: So I think that they that I'm just I'm not
Speaker 1: nearly as concerned about the change in leadership, if you will.
Speaker 1: What how does this devolve into the equity market. I
Speaker 1: know it's off your remit, but the gloom crew sabad
Speaker 1: has been absolutely crushed in the last ten days. How
Speaker 1: do you adapt to that? How does it change your perspective? Um?
Speaker 1: You know, by by gloom creamy, the people that are
Speaker 1: that that expect the equity marketing narratives here that fear,
Speaker 1: whatever the fears are in bonds or stocks, they've been
Speaker 1: they've been obliterated. You know. It's interesting because it has
Speaker 1: happened within the context of the bond market being concerned
Speaker 1: about very higher trajectory to inflation. The bondmark could be
Speaker 1: concerned about the FED raising grades. So the equity market,
Speaker 1: for the most part, is dismissing all the signals that
Speaker 1: that the bond market sending on the fact that the
Speaker 1: front and yields have gone up with a faster case
Speaker 1: of rate heights, there's probably uh, you know, a potential
Speaker 1: store down in growth. So I think the equity market
Speaker 1: is going to wait. I mean, I'm not an equity strategist,
Speaker 1: but I think that really the signal that I'm getting
Speaker 1: from the equity market is that they want to see
Speaker 1: and here from the Fed before they start pricing in
Speaker 1: sort of this this doomsday scenario, and the bond market
Speaker 1: always tends to lead, if you will, in some respects,
Speaker 1: so the signal from the bond market is going to
Speaker 1: be very key for all the other risky assets. It's
Speaker 1: a battery. You are perfectly entitled to talk about the
Speaker 1: equity market since equity strategist to spend the whole of
Speaker 1: this year pretending to be bond market strategists, pretty much
Speaker 1: all of this year. Spatter thank you as always a
Speaker 1: bat out for there of skin. On radio out of
Speaker 1: New York and of course Boston, Washington, San franciscoing all
Speaker 1: across the nation and truly around the world, we say
Speaker 1: good morning and on radio and TV it's about okay,
Speaker 1: now what French shooting is Chief investment officer. Okay, now,
Speaker 1: what if the Northwestern Mutual Company Brett, What is the
Speaker 1: mood of your institutional and retail clientele that's worried, cautious,
Speaker 1: or flat out scared. Yeah, we think there's been worries
Speaker 1: in the market's about mid May. So if you think
Speaker 1: back then, everything was going well in this country. Everything
Speaker 1: that we had tried to do over the prior year
Speaker 1: was kind of coming to fruition. So we had rising vaccination,
Speaker 1: declining COVID cases, and economic growth was strong, and I
Speaker 1: think people sat around and wondered what could go wrong?
Speaker 1: And so you had to worry about too much. I
Speaker 1: think the inflation commentary that we still have today, and
Speaker 1: what would the FED do you had the two little
Speaker 1: crowd China? Evergrand would the economy roll over? And then valuations?
Speaker 1: Are stocks too strong? Have they rallied too much? And
Speaker 1: we think that's really driven trading over the past few months.
Speaker 1: And we think that as you move towards the end
Speaker 1: of the year, investors will refocus on economic and earnings fundamentals,
Speaker 1: which will push stocks higher. And I think that's what
Speaker 1: you're seeing right now. Earnings are coming in strong, the
Speaker 1: economy is still strong. Certainly there has been a weak
Speaker 1: patch because of COVID, but I think that alleviates and
Speaker 1: I think you're left with an economy that's moving higher,
Speaker 1: earnings that are strong, in a tenure treasury still setting
Speaker 1: around one sixty. Where are you going to put your money?
Speaker 1: How important is that one six in all of this?
Speaker 1: It's important? I mean, if you think right now, I
Speaker 1: find the narrative kind of odd when people come on
Speaker 1: worried about inflation, saying that is going to do nothing, uh,
Speaker 1: and then they tell you to invest in bonds. To me,
Speaker 1: I still think there's plenty of rooman equities. I think
Speaker 1: especially in the more cyclical areas, which I think we've
Speaker 1: all given up on after a brief six months rally.
Speaker 1: In those versus things like the apple nineteen dollar cloth
Speaker 1: that you were talking about, I think that you're in
Speaker 1: now and oil in places like that is where you
Speaker 1: want to invest, more so than the secular growers like
Speaker 1: you just mentioned. I've been asking guests over the last week, Brent,
Speaker 1: what are the pillars of support that will persist we
Speaker 1: can lean on through next year as well, not just
Speaker 1: into year round. Black Rock gave me too, they said
Speaker 1: pence up demand that will persist and pricing Papa, Do
Speaker 1: you share that view, Brent? I do if you look
Speaker 1: right now. For example, on the consumer side of the equation,
Speaker 1: the consumer has spent the prior thirteen years deleveraging their
Speaker 1: balance sheet. Their debt to net worth has gone from
Speaker 1: twenty four to twelve, the cost of that debt has
Speaker 1: gone from eighteen to twelve. And so the consumer is healthy,
Speaker 1: they have pent up demand, and I think you're gonna
Speaker 1: continue to see spending. The question is going to be
Speaker 1: on the supply chains. Can those snarls kind of alleviate
Speaker 1: a bit? And I think they will as you move
Speaker 1: into the new year, And so I think you have
Speaker 1: a setup where equities continue to push higher. There certainly
Speaker 1: are risk and I don't expect to the same push
Speaker 1: that you had post COVID, But I think on a
Speaker 1: relative basis, stocks are still attractive relative to bonds just
Speaker 1: given the economic Outlooking where the fet is brom when
Speaker 1: you were saying that there is a lot of pessimism
Speaker 1: in markets, where are you seeing that pessimism? Yeah? For example,
Speaker 1: just the uh full client visits I The questions that
Speaker 1: I get are not what could go right, it's what
Speaker 1: could go wrong? And that's kind of a continual question
Speaker 1: that I get all the time because things have gone
Speaker 1: fairly well. Um, but if you look at the A
Speaker 1: A AII Bullish Sentiment Survey, it peaked around May. We
Speaker 1: kind of had all the meme stocks moving higher, we
Speaker 1: had people trading on a daily basis. We had optimism
Speaker 1: actually go above fifty, which is kind of rare air
Speaker 1: during the past thirteen years. And it's spent the next
Speaker 1: three or four months falling too. I believe twenty two
Speaker 1: in September, it's starting to rise a bit again, and
Speaker 1: I think people are gonna get warmed up to the
Speaker 1: fact that the economy is still pushing along and that
Speaker 1: typically pulls markets with it, and I don't expect this
Speaker 1: time to be any different. When you talk to clients
Speaker 1: and they hear from asset manager after asset manager, it's
Speaker 1: a stock pickers market. What do you tell them. Do
Speaker 1: you say, look, the index is doing pretty well. It's
Speaker 1: supported by a number of different pillars, or do you say, yeah,
Speaker 1: you should be very selective, or you should just pay
Speaker 1: very big fees to somebody to invest your money. On
Speaker 1: a stock level, we attempt to pull both lovers, and
Speaker 1: so we attempt to add value through security selection and
Speaker 1: asset allocations. So we are overweighted small caps, for example,
Speaker 1: and we certainly do try to tilt our portfolio towards
Speaker 1: those cyclical names that I mentioned kind of in my
Speaker 1: opening comments. And always fantastic to catch up with you said,
Speaker 1: very calm and constructive on the outlook French shooting, that
Speaker 1: of northweston Mutchell. This is the Bloomberg Surveillance Podcast. Thanks
Speaker 1: for listening. Join us live weekday from seven to ten
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