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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
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Speaker 2: story investors mapping out growing guards of a second drum term.
Speaker 2: Joe Quinlan and Maryland Bank for America Private Bank writing this.
Speaker 2: The key variable to watch is the US dollar. Will
Speaker 2: foreigners vote with their wallet per the US election? Owning
Speaker 2: twenty eight percent of marketable treasuries, thirty two percent of
Speaker 2: the corporate bond market, and twenty percent of US secreits.
Speaker 2: Joe joins us. Now for more, Joe, let's talk about this.
Speaker 2: You'll rection to what happened on Thursday night and what
Speaker 2: you think it means for this market.
Speaker 3: Well, John, Post Thursday night, I was watching a dollar
Speaker 3: very carefully over in Asia and Europe, and really no
Speaker 3: sell off here related to any political unrest here in
Speaker 3: the United States or uncertainty. You know, you're just talking
Speaker 3: your lease about the dollar. It's what the dollar has strength.
Speaker 3: I'm surprised it's not stronger because what's behind the dollar
Speaker 3: is the great US economy, the private sector, the most
Speaker 3: productive economy out there. And when I talk to foreign wealth,
Speaker 3: sovereign wealth funds or family offices around the world, they
Speaker 3: want to own US assets, and there's a preference in
Speaker 3: a premium on owning US securities. I don't think that's
Speaker 3: going to change between now and the election. Some uncertainty,
Speaker 3: but no big change.
Speaker 2: John. Let's talk about what would happen on a Trump win.
Speaker 2: I've got to go through a couple of steps here,
Speaker 2: but for the sake of scenario analysis, let's say he
Speaker 2: gets a win. Let's even go one step further. Let's
Speaker 2: say we get that red waves. I'm thinking back to
Speaker 2: twenty sixteen. A lot of people are thinking about the
Speaker 2: Trump playbook at that time, and this bond market was
Speaker 2: demanded bond issuance. In fact, the economic backdrop demanded fiscal stimulus.
Speaker 2: That's not where we're at in twenty twenty four and
Speaker 2: if you think about the trades that works back then, Yes,
Speaker 2: yields climbed, Yes, the dollar rallied, but small caps that
Speaker 2: month in November twenty sixteen, rallied by eleven percent. Joe,
Speaker 2: I'm just wondering, give that's the trade this time around,
Speaker 2: because that's not what I say in small camps in
Speaker 2: the last twenty four hours.
Speaker 4: I mean, the small caps are still in purgatory here. Good.
Speaker 3: You could be right in the sense that if you've
Speaker 3: got to, if you've got an administration that's bent on
Speaker 3: doing things here in the United States terrors, anti immigration,
Speaker 3: we're going to have to raise the bar.
Speaker 4: We're going to have.
Speaker 3: To increase our production across the board, not just large
Speaker 3: gap small caps. So it could spread, but you know,
Speaker 3: to me, for all the wrong reasons, you know, nationalism, protectionism.
Speaker 3: So I think that trade is it could come back,
Speaker 3: but to me, it doesn't. It doesn't give me any
Speaker 3: comfort because I think we're small casts can come back
Speaker 3: on their own.
Speaker 4: But if we suit.
Speaker 3: Policy protectionism, that's a different animal.
Speaker 4: Together.
Speaker 3: I understand exactly where you're going in small caps will
Speaker 3: have their day. I think under a Republican suite.
Speaker 1: Jo, I'm wondering how far out you can actually make
Speaker 1: some sort of prediction. We were talking earlier, John raised
Speaker 1: Lori Calvacina and talking about how there's just this no
Speaker 1: visibility around twenty twenty five. Do you feel the same way.
Speaker 3: No, Actually I don't so I think twenty twenty five, yes,
Speaker 3: the policy backdrop becomes uncertain.
Speaker 4: But when you step back, look at the AI.
Speaker 3: Revolution, the productivity that's coming, look at the US economy
Speaker 3: in general relative to the rest of the world, look
Speaker 3: at the geopolitics, and there are places put money to work.
Speaker 3: There's a premium out of resources, the infrastructures build, it's
Speaker 3: going to continue. So there's policy fog, but I think
Speaker 3: there's opportunities put money to work in certain sectors that irregardless,
Speaker 3: it doesn't matter what's happening with politics, it's going to
Speaker 3: continue into the second half of this decade.
Speaker 1: A lot of people were worried about valuations, particularly in
Speaker 1: the areas that you mentioned, AI in particular, looking at
Speaker 1: videos some kind of one hundred and forty percent gains
Speaker 1: so far this year, you're seeing it kind of trade
Speaker 1: range bound over the past few trading sessions do you
Speaker 1: agree that it is concerning where valuations are that there
Speaker 1: should be some sort of retlacement before you feel comfortable
Speaker 1: really doubling down on those names.
Speaker 4: I think to it.
Speaker 3: Agree, So, yes, we're getting well, you know, there's a
Speaker 3: lot of bullet sentiments in the market, so we're careful
Speaker 3: about that putting new money to work. But these companies
Speaker 3: are backing up these valuation with earnings growth and we
Speaker 3: see that continuing.
Speaker 4: Is that going to continue in the twenty twenty five?
Speaker 4: Probably not.
Speaker 3: Your your comps are going to come down, But we're
Speaker 3: still comfortable owning this market broadening out.
Speaker 4: We like the cyclicals.
Speaker 3: We still like energy, I like commodities, anything related to
Speaker 3: transportation and distribution, transmission.
Speaker 4: We like that space as well. So we're very bullsh
Speaker 4: on defense spending, giving where we are. So, yes, there's
Speaker 4: parts of the market that could be allegedly overvalued.
Speaker 3: This is backed up by a strong economy, good earnings,
Speaker 3: good consumption, and foreign demand.
Speaker 4: Coming back to you for US securities.
Speaker 2: Joe build on that energy defense. Is there some connection
Speaker 2: there between the two.
Speaker 4: Absolutely, John, because what's the premium?
Speaker 3: United States is energy independent relatively speaking, but certainly relative
Speaker 3: to Europe.
Speaker 4: And Asia.
Speaker 3: So you've got all the demand for AI the data centers.
Speaker 3: There's only one country really that can feed this beast, right,
Speaker 3: this AI beast in a relative way, and that's the
Speaker 3: United States. Because we're energy independent. People haven't made the connection.
Speaker 3: If you want to drive data, drive AI, you need energy.
Speaker 4: Who has the energy?
Speaker 3: The United States We're going to pull ahead because of
Speaker 3: our energy independence driving AI.
Speaker 4: Artificial intelligence, We're going to pull ahead of the rest
Speaker 4: of the world.
Speaker 3: And that's what the bet people are making when they
Speaker 3: buy the US relative to the rest of the world.
Speaker 2: John Le's got one step. What am I buying then
Speaker 2: you say it's energy, Is that the oil produces energy services?
Speaker 2: Where am I going for that?
Speaker 5: Right?
Speaker 3: Our equity ailst like the whole spectrum, John, but also
Speaker 3: transmission distribution utilities and really across the spectrum. We like
Speaker 3: renewables as well. In this space the interconnection queue. People
Speaker 3: don't talk about that. We've got to get that better.
Speaker 3: We've got to be able to take all this renewable
Speaker 3: capacity and plug it in. It's that simple, and we're
Speaker 3: missing it. So I think that's coming down the pipeline.
Speaker 3: More infrastructure on just basic transmission wires, distribution getting this out,
Speaker 3: and I think that's a whole new ballgame for US competitiveness.
Speaker 1: I want to be at the Independence Day celebration at
Speaker 1: your house, Joe. It seems like it's going to be exciting.
Speaker 1: I do think that there is a question when you
Speaker 1: talk about energy, particularly on a day like today where
Speaker 1: you do see oil prices climbing to the highest levels
Speaker 1: going back to April. And this is on the heels
Speaker 1: of both the hurricane barrel that's going the first one
Speaker 1: on records going back to the eighteen hundreds that really
Speaker 1: has reached that category five level. Well, how concerned are
Speaker 1: you about a potential spike in prices over the summer
Speaker 1: if there is some sort of hurricane season that is
Speaker 1: as violent as some people are worried about.
Speaker 3: Well, listen, I would say to be short term the
Speaker 3: spike up in prices, because there's plenty of oil out
Speaker 3: there globally, not just stay here in the United States
Speaker 3: as well.
Speaker 4: So yes, that's a concern. It could to me.
Speaker 3: Longer term is everything we just talked about. It's the
Speaker 3: demand for electricity, EVS data centers. So we're watching the
Speaker 3: hurricane season in particularly when it comes to insurance companies.
Speaker 3: What does it mean to get insurance in for housing
Speaker 3: and these other businesses that we've been talking about.
Speaker 4: That's a big issue buyers.
Speaker 3: You know, the climate change, the climate mitigation is becoming
Speaker 3: broadening out for insurance companies. It's broadening out. It's going
Speaker 3: to affect more consumers. I think that's going to be
Speaker 3: a big issue in the second half of this decade.
Speaker 4: They're going to be talking.
Speaker 2: About Brent back in the high eighties, eighty seven, Joe,
Speaker 2: it's going to hear from your Joe quinnin of Mariland
Speaker 2: Banks for America Private Bank, Keith theme for Joe, preference
Speaker 2: for hard power, defend herd assets, commodities, hard hats, infrastructure,
Speaker 2: President Biden slamming a Supreme Court ruling that could allow
Speaker 2: Donald Trump to escape prosecution for his role in the
Speaker 2: January sixth right on Capitol Hill. Bannon's comments coming as
Speaker 2: his campaign looks to move the narrative away from last
Speaker 2: week's debate tobacco, which saw a growing number of Americans
Speaker 2: question the president's ability to serve. Joining US now is
Speaker 2: Jeanette loves Fatigua's a bad company. Jeanette, I've got to say,
Speaker 2: you're on the money when it comes to what you're
Speaker 2: focused on, and that's the tight senate races that we
Speaker 2: should all be watching. And if those start to shift,
Speaker 2: maybe this president's in even more trouble than he already is. Jene,
Speaker 2: what are you seeing in those type races now?
Speaker 6: Yeah, good mornings. I mean, it's a great point.
Speaker 4: One.
Speaker 7: The big thing that we're seeing coming out of Thursday
Speaker 7: is that everyone's worried about Trump I mean sorry, Biden
Speaker 7: being at the top of the ticket and now potentially
Speaker 7: having that debate perform Mormans. That really did not change
Speaker 7: the election trajectory the way he wanted it to do.
Speaker 7: The bigger impact is what's going to happen in these
Speaker 7: down ballot races. And so one thing that's really important
Speaker 7: is that you are seeing Democratic senators who are in
Speaker 7: general it is more difficult to actually unseat an incumbent senator.
Speaker 7: View Democratic senators in states like Pennsylvania and Wisconsin, in
Speaker 7: Arizona who are actually currently out running Biden in the polls,
Speaker 7: and so I think that if you start to see
Speaker 7: those numbers really change direction over the course the next
Speaker 7: few weeks. Right now, the Democratic Party is kind of
Speaker 7: rallying around Biden saying that they're going to have him
Speaker 7: remain at.
Speaker 6: The top of the ticket.
Speaker 7: But if you really start to see deterioration in the polls,
Speaker 7: deterioration and fundraising and deterioration and the polling for these
Speaker 7: down ballot states, that's going to pose a lot more
Speaker 7: trouble for the Democratic Party come November.
Speaker 2: You mentioned three things there, polling, fundraising, down ballot Senate races.
Speaker 2: Can we talk about fund raising some of the numbers
Speaker 2: that I've been seeing Jeanette say, there's no problem here whatsoever.
Speaker 2: What the numbers that you're looking at.
Speaker 6: But right now there is no problem.
Speaker 7: So they have pretty good numbers over the weekend for
Speaker 7: the Democratic side, We'll have to see. I think right
Speaker 7: now they're definitely concerned that the Republicans are having really
Speaker 7: good fundraising and kind of eating into the fundraising advantage
Speaker 7: that Biden did have earlier this year. But right now
Speaker 7: there is kind of this rallying right around him. You
Speaker 7: had the President come out and speak last night about
Speaker 7: the Supreme Court decision. This is really him trying to reframe,
Speaker 7: maybe try to get some of those images of Thursday
Speaker 7: night out of the public view and put some new
Speaker 7: images out there. So him taking that stand last night
Speaker 7: to make a statement was important for the campaign to
Speaker 7: try to reset and to try to change the narrative
Speaker 7: a little bit away from that debate performance and be
Speaker 7: a little bit more presidential.
Speaker 6: So I think that we're going to be watching those numbers.
Speaker 7: Right now, everything does seem to be okay, but I
Speaker 7: think the next couple of weeks are going to be
Speaker 7: really critical for this race.
Speaker 1: There's some discussion of the DNCA Bloomberg reporting with Democratic
Speaker 1: National Convention is thinking committee is thinking of actually pulling
Speaker 1: forward the nomination of Joe Biden to try to throw
Speaker 1: a sense of support behind him. Is this the right
Speaker 1: idea given the facts that anger is still out there?
Speaker 1: Very much so. And there's a question of why the
Speaker 1: internal circle around Biden isn't necessarily being more transparent about
Speaker 1: this process, right.
Speaker 7: And this is something that was actually kind of planned
Speaker 7: a little bit earlier. They were thinking about doing it
Speaker 7: before August seventh, just because there had been issues with
Speaker 7: the Ohio ballot, and so the party wanted to have
Speaker 7: him basically nominated early just so that there couldn't be
Speaker 7: any turmoil at the convention in August. If you have
Speaker 7: a contentious convention that generally doesn't vode very well for
Speaker 7: the party ahead of the actual election, and so that
Speaker 7: was something that they were actually trying to avoid. But
Speaker 7: one of the things that they're trying to do now
Speaker 7: is thinking about, Okay, well we can actually move this
Speaker 7: forward that would kind of solidify Biden as the nominee.
Speaker 7: You can't have people coming up with the convention trying
Speaker 7: to throw another candidate's name into the hat.
Speaker 6: But this is ultimately going to be for better or
Speaker 6: for worse.
Speaker 7: This is down to Biden making the decision whether he
Speaker 7: wants to stay at the top of the ticket or
Speaker 7: if he wants to step down.
Speaker 6: He can do that before the convention.
Speaker 7: That could be very messy having a multiple delegates having
Speaker 7: votes to figure out who should be the next nominee.
Speaker 7: The committee can also do it after the convention as well,
Speaker 7: or we could see Biden's stay in the entire time.
Speaker 7: But I think this move to potentially have the nomination
Speaker 7: done in July is a way to try to squash
Speaker 7: any dissent. If Biden can keep his numbers up over
Speaker 7: the next couple of weeks, we don't see the great
Speaker 7: deterioration in polling. If we can see him making more
Speaker 7: statements like last night than last Thursday, I think that
Speaker 7: would be something that would allow him to stay at
Speaker 7: the ticket.
Speaker 6: But this is something definitely to be watching tonight.
Speaker 1: Yesterday we had a series of guests talking about how
Speaker 1: Thursday night was a game changer for them in the market,
Speaker 1: that essentially they were looking at the higher likelihood, much
Speaker 1: higher likelihood of a Republican sweep, exactly going to your
Speaker 1: first point, which is essentially you need to watch down
Speaker 1: ballot and see how many people basically stay home, are
Speaker 1: not excited about the top of the ticket, don't feel
Speaker 1: like they're being heard by the Democratic Party. How much
Speaker 1: is that something that you're seeing is a much greater
Speaker 1: likelihood today than say, Thursday morning.
Speaker 6: So I will agree.
Speaker 7: I think the consensus is is that there is definitely
Speaker 7: a greater chance that we're going to have a Republicans
Speaker 7: sweep in this election. But I do think it is
Speaker 7: important to not assume that would be the case. Again,
Speaker 7: these down ballot races are quite important. What we have
Speaker 7: kind of seen is that it seems that there's much
Speaker 7: bigger problem with Biden and Harris at the top of
Speaker 7: the ticket. Rather than an overall problem with the Democratic brand.
Speaker 7: So you do see House races that have done quite well.
Speaker 7: You do also see these Senate races again where the
Speaker 7: Democratic candidates are outperforming Biden in key swing states. The
Speaker 7: other thing I think that what it's important to watch
Speaker 7: is we don't want to just watch just what the
Speaker 7: polls say.
Speaker 6: We want to see actual results. So we've been.
Speaker 7: Watching the special elections that have occurred since January, and
Speaker 7: Democrats have been out performing by eleven percentage points versus
Speaker 7: what happened in those districts in the last election. So
Speaker 7: that does seem to indicate that there could be some
Speaker 7: tickets splitting this year. It could be that voters might
Speaker 7: think that they could vote for maybe Trump at the
Speaker 7: top of the ticket, but then Democrats and either in
Speaker 7: the House or the Senate races. The important thing to
Speaker 7: remember is that currently Congress has very tight majorities in
Speaker 7: both the House and the Senate. It will not take
Speaker 7: a lot of seats one way or the other to
Speaker 7: really move that. But there is still the possibility that
Speaker 7: maybe we don't see a Republican sweep, maybe we actually
Speaker 7: see a divide in Congress next year.
Speaker 2: Jane, you get the distinct sense right now that a
Speaker 2: lot of people in this country feel like they're being
Speaker 2: like to, like there's a division emerging between the campaign
Speaker 2: and the rest of this country. And I don't know
Speaker 2: what this campaign does about that. If I think about
Speaker 2: some of the stories over the weekend, we saw even
Speaker 2: CNN getting blamed for the makeup they used on Joe Biden,
Speaker 2: as if that was the problem on Thursday Night. What
Speaker 2: do you think they're going to do over the next
Speaker 2: four months to try and write course what we've been saying,
Speaker 2: not just on Thursday Night, but for the last twelve months, right, And.
Speaker 7: So I mean, I think that this is Thursday's debate
Speaker 7: definitely reinforced voters concerns about Biden's age, about his fitness
Speaker 7: to continue to serve as a president, and the president
Speaker 7: really needs to try to change this race. It is
Speaker 7: currently a referendum on his first term in office. His
Speaker 7: approval rating is hovering around forty percent. That is not
Speaker 7: good if you're looking to get re elected.
Speaker 6: So he really does need to change this into a choice.
Speaker 7: There are some key factors to look for in the
Speaker 7: coming days. Obviously, with the Supreme Court decision yesterday, you
Speaker 7: saw Biden's statement to try to change this just try
Speaker 7: to say, Okay, that was the decision, but I'm going
Speaker 7: to try to frame this as more of a choice.
Speaker 6: Between me and former President Trump.
Speaker 7: You also have Trump's sentencing coming up next week, so
Speaker 7: that's going to be a important point. Things I'll stove
Speaker 7: to watch for us. Who is the vice presidential pick
Speaker 7: on the Republican ticket. So there are options for the
Speaker 7: Democratic Party to try to reframe the race to make
Speaker 7: it just more of a choice between Trump and Biden,
Speaker 7: But there already is kind of this baked in feeling
Speaker 7: that voters have been concerned about Biden's age that wasn't
Speaker 7: alleviated over the course of the last week.
Speaker 6: And that's something that we're going to have to figure
Speaker 6: out how.
Speaker 1: To deal with.
Speaker 2: Jeanette, this was great. Janette low As Fatigas, thank you.
Speaker 2: Let's continue this conversation and gets to the panel. Joining
Speaker 2: us now is Point seventy two's Dean Macki alongside Femos
Speaker 2: in Linga. Gents, it's great to catch up with you both,
Speaker 2: and I'm going to come to you first. What is
Speaker 2: more important to this bond market right now? The economic
Speaker 2: data that we get this week or the debate that
Speaker 2: took place Thursday evening.
Speaker 5: Well over the course of the last two training sessions,
Speaker 5: it has undoubtedly been the political tides in Washington and
Speaker 5: what it means for November. That being said, we have
Speaker 5: payrolls on Friday, but perhaps more importantly, next week, we
Speaker 5: get CPI again, and that will give the market some
Speaker 5: very good context for whether or not we'll see that
Speaker 5: September rate cut. That's the active debate that matters at
Speaker 5: the moment.
Speaker 2: And there's still some banks out there suggesting that maybe
Speaker 2: payrolls this Friday is more important than CPI next week.
Speaker 2: Would you take the other side of that?
Speaker 5: I would take the other side of it in a
Speaker 5: consensus print. But if there's a surprise, if you hit
Speaker 5: a four point two unemployment rate or a some one
Speaker 5: hundred thousand break four headline payrolls, and then all of
Speaker 5: a sudden, the dual mandate employment aspect becomes a lot
Speaker 5: more relevant than CPI.
Speaker 2: Dean, how are you thinking about that trade off? If
Speaker 2: unemployment continues to creep hire this Friday, does it take
Speaker 2: some way away from the importance of CPI next Thursday.
Speaker 8: I think at this point the fad really is focused
Speaker 8: on inflation. The FED needs to see inflation headed back
Speaker 8: toward the two percent target, and if that's the case,
Speaker 8: then we can have a strong payroll report and the
Speaker 8: FED will still about cutting. So I think the Fed's
Speaker 8: focus really is on the CPI next week.
Speaker 1: Dean, how do you understand what some of the data
Speaker 1: has been saying in terms of slowing but not slow?
Speaker 1: There is this feeling right now, especially as you look
Speaker 1: more to the inflation print than you do the labor market.
Speaker 1: There has been this feeling that we're on the precipice
Speaker 1: of something that could be more punitive for the US economy.
Speaker 6: Do you agree? And if not, why not? I don't agree.
Speaker 8: I think there's been some mixshifts within the data that
Speaker 8: make some of the data look weaker than it really is. So,
Speaker 8: for example, consumers are shifting away from spending on goods
Speaker 8: and food services and towards other categories, but those other
Speaker 8: categories are not included in retail sales, So retail sales
Speaker 8: looks weaker than overall consumers spending, but markets tend to
Speaker 8: focus only on the retail sales report.
Speaker 6: So that's part of what's.
Speaker 8: Happening, is that consumers are shifting toward pre COVID norms,
Speaker 8: and that's not showing up in some of the data
Speaker 8: that people are focused on.
Speaker 1: Do you agree in ian.
Speaker 5: So, I would say that generally speaking on the consumption side,
Speaker 5: I agree, but I am a bit more concerned as
Speaker 5: it pertains to what's going on in the employment landscape.
Speaker 5: We do have higher claims. We have the Joel's quit
Speaker 5: rate at two point two percent, and there are signs
Speaker 5: that the FED has been effective in reintroducing balance to
Speaker 5: the labor market. But my concern is whether or not
Speaker 5: the pendulum swings too far in the side or towards
Speaker 5: the side of cooling, and then that starts to perpetuate
Speaker 5: on itself and it's difficult for the FED to address
Speaker 5: that without some type of policy response.
Speaker 2: This is the worry that Claudia sam has as well.
Speaker 2: We had her on the program with us a little
Speaker 2: bit earlier this morning. We quoted her before we went
Speaker 2: into some of her work. I just want to share
Speaker 2: this quote with you, jentlemen. A good labor market is
Speaker 2: not a reason to wait. The reasons is that inflation
Speaker 2: is down considerably. A good labor market is what it's
Speaker 2: at risk. If the FED doesn't move, Dean, how do
Speaker 2: you think about that frame going into the July meeting
Speaker 2: at the end of this month and ultimately when Shairman
Speaker 2: Powe speaks in about forty five minutes.
Speaker 8: I guess I'm a little less worried about the labor
Speaker 8: market at this point than some people are. And one
Speaker 8: reason is that corporate profits corporate profit margins are close
Speaker 8: to the highest level since the nineteen sixties, and corporations
Speaker 8: are not inclined to do massive layoffs with profitability that strong.
Speaker 8: You know, payroll growth over the last three months is
Speaker 8: two hundred and fifty thousand per month. Childless claims are
Speaker 8: in the two thirties. This still looks like a pretty
Speaker 8: good labor market.
Speaker 5: To me.
Speaker 8: What I think has happened is the labor market has
Speaker 8: normalized rather than weak and sharply.
Speaker 2: In This has big implications, consequences for the shape of
Speaker 2: a yield curve. We came into twenty twenty four. We
Speaker 2: were looking for steepness, but we thought it would be
Speaker 2: driven by a rat kin of cycle fueling a rally
Speaker 2: at the front end of the curve. Can you just
Speaker 2: put some meat on the bones of this best? Thepener
Speaker 2: of the last couple of days, and how sustainable you
Speaker 2: think this move actually is a disinverting yield curve driven
Speaker 2: by the long end.
Speaker 5: So I think that we all know the story. It
Speaker 5: has to do with the potential Trump regaining the White
Speaker 5: House and some of the forward inflationary implications of that
Speaker 5: that steepened out the curve. Deficit spending implies greater issuance,
Speaker 5: So that's why we had a bear steep there.
Speaker 4: Now.
Speaker 5: Transitioning this to a bull steeper I think will require
Speaker 5: at least an initial bear flattening impulse as the economic
Speaker 5: data starts to deteriorate. But eventually what we'll see is
Speaker 5: when it becomes abundantly clear that the Fed is about
Speaker 5: to start normalizing yields or olicy rates lower, two year
Speaker 5: yields will drop and they'll price in an extended cycle
Speaker 5: back to some version of neutrol. And so we could
Speaker 5: easily see a fifty to sixty basis point rally in
Speaker 5: the two year sector once the process starts, and that
Speaker 5: should re steep in the yield curve and put the
Speaker 5: benchmark two his tens curve back in a positive territory.
Speaker 1: So Yan, do you kind of agree with John stolsis
Speaker 1: that this is essentially the market looking for attention from
Speaker 1: the Fed.
Speaker 5: To a large extent, the bond market is I mean
Speaker 5: for the FED at a moment where the Fed is
Speaker 5: considering dialing it back. So I do think that to
Speaker 5: some extent, this is a reminder that loads and supplying
Speaker 5: demand do matter in the treasure market, but only within
Speaker 5: the context of the prevailing range. Keep in mind, ten
Speaker 5: year yields are still below four fifty, and it's in
Speaker 5: an environment where the real economy still appears to be
Speaker 5: on strong pooty, at least for the time being.
Speaker 1: Dan, you've been in the market for decades trying to
Speaker 1: analyze the economics of the moment. I would love your
Speaker 1: insight into how realistic we can be about some of
Speaker 1: the potential scenarios that are being priced into the bond market,
Speaker 1: with really Thursday night being thought of as a watershed moment,
Speaker 1: really looking for the potential for a Republican sweep and
Speaker 1: the idea of some of the fiscal policies as well
Speaker 1: as tariffs ETCA put into place. Is that something that
Speaker 1: you are gaming out actively and think is a beedible
Speaker 1: type of option.
Speaker 8: I think we always want to be thinking about all
Speaker 8: of the various scenarios, and markets will try to price
Speaker 8: in what might happen. But ultimately, from my experience, markets
Speaker 8: don't really fully prace things in until the market is
Speaker 8: pretty sure it's going to happen, So we might see
Speaker 8: the scenario shift back and forth, back and forth multiple
Speaker 8: times in the next several months before it finally settles
Speaker 8: on what truly is.
Speaker 4: Going to happen.
Speaker 2: Hey, Gens, this was great. Dean mackiew points seventy two
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