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Speaker 1: Peace talks underway in the Middle East between Israel and
Speaker 1: international mediators, Axios reporting some progress was made on the
Speaker 1: first day of discussion, citing US officials, This coming as
Speaker 1: Israel braces for a possible attack from Ran. Joining US
Speaker 1: now is Ambassador John Bolton, former US National Security Advisor
Speaker 1: and former Ambassador to the UN. Ambassador Borlton, thank you
Speaker 1: so much for being with us. To start with what
Speaker 1: you think of the recent talks underway and why you
Speaker 1: think Iran has not retaliated yet.
Speaker 3: Well, with respect to the talks, the administration saying making progress.
Speaker 3: You know they've been saying making progress on these talks
Speaker 3: for about four or five months now. They never seem
Speaker 3: to get to the finish line. I think there's still
Speaker 3: enormous gaps between the Israeli position and the Hamas position.
Speaker 3: I'm not saying a miracle couldn't happen. It happens in
Speaker 3: the Middle East from time to time, but I wouldn't
Speaker 3: look forward. I do think Iran has hesitated to retaliate
Speaker 3: for the killing of Ismail Hania, the Hamas leader in Tehran.
Speaker 3: They need to strike back. I think very strongly. They've
Speaker 3: been humiliated by what Israel did, killing this terrorist leader
Speaker 3: in their capital in a secure compound with a bomb
Speaker 3: planted two months before. It shows nobody in Iran is
Speaker 3: safe from Israel, including the Supreme Leader. On the other hand,
Speaker 3: the Iranian leaders are also intimidated by bb Net and
Speaker 3: Yahoo and Israel. I think this time they are worried
Speaker 3: that the US will not be able to pressure Israel
Speaker 3: into a limited response as Israel did after the three
Speaker 3: hundred and twenty drone and missile assault on Israel from
Speaker 3: Iran's territory some months ago. Really, Iran is more intimidated
Speaker 3: by Israel than it is by the Biden administration. So
Speaker 3: they've got a difficult decision how strong a response to
Speaker 3: make to restore their own very damaged credibility versus their
Speaker 3: fear of what Israel would then do to them.
Speaker 4: Well, in April, when those three hundred missiles were flying over,
Speaker 4: it was because of the US defense that Israel's able
Speaker 4: to fend them off. Ambassador, given your level of intel
Speaker 4: regarding Iran, how can they retaliate but also try to
Speaker 4: not strike this cycle of endless retaliations back and forth.
Speaker 3: Well, let's come back to the attack. Wall Street Journal
Speaker 3: and CBS reported that of the one hundred and twenty ballistic
Speaker 3: missiles that Iran fired at Israel, sixty never made it
Speaker 3: within range to be shot down. They either blew up
Speaker 3: on the launch pad or crashed before they got close enough,
Speaker 3: which speaks to the quality of Iran's ballistic missile force.
Speaker 3: But if there had been one hundred and twenty rather
Speaker 3: than sixty ballistic missiles in the skies over Israel, I
Speaker 3: don't think it would have been such a good performance.
Speaker 3: The cycle that's at work here is caused by Iran. Look,
Speaker 3: this is not a war between Palestinians or Gosans in Israel.
Speaker 3: This is a war by Iran against Israel, what they
Speaker 3: themselves call the ring of Fire strategy. And as long
Speaker 3: as the current regime in Tehran is in power, seeking
Speaker 3: nuclear weapons, arming, equipping, training, financing, giving intelligence to multiple
Speaker 3: terrorist groups in the region, threatening not only Israel but
Speaker 3: the Gulf Arab states too, there's going to be conflict.
Speaker 3: And what's driving Israel and the Golf Arabs closer together
Speaker 3: is that they all see Iran as the main strategic
Speaker 3: threat and they think the United States is feckless.
Speaker 4: As these ceasefire talks continued, do you agree with the
Speaker 4: idea that Iran could potentially use those if they were
Speaker 4: to incadeal use that as an off ramp to not retaliate.
Speaker 3: Well, they may want to use it as an off ramp,
Speaker 3: but I think it would be a big blow to
Speaker 3: Iran's prestige. You know, they're not exactly stepping up here
Speaker 3: to take responsibility for what happened to Hamas after the
Speaker 3: October seven attack, and they've also not been able yet
Speaker 3: to persuade Hezballah to use its unbelievably large arsenal of
Speaker 3: missiles against Israel. So, as I say, I think it's
Speaker 3: the fear of further Israeli retaliation that has the Iranians
Speaker 3: intimidated with.
Speaker 5: That retaliation coming from Israel if Ron does do some
Speaker 5: sort of large attack. Ambassador Bolton, what is the ability
Speaker 5: of the US and its allies to reign in Netanyahu's response?
Speaker 3: Well, I'm sure that the Biden administration will want to
Speaker 3: rein them in. They've been afraid of this issue and
Speaker 3: the war in Ukraine dominating the news in the United
Speaker 3: States because it shows a world and chaos due to
Speaker 3: three and a half years of American weakness. Really, what
Speaker 3: they would like to see is this go away until
Speaker 3: after election day, even though Biden's no longer running himself.
Speaker 3: You know, Frankly, I think the lesson to be learned
Speaker 3: is that the prospect of a really forceful Israeli response
Speaker 3: if Israel comes back at them, shows that a strong
Speaker 3: posture toward these rogue states is the way to go.
Speaker 3: And Iran has a lot to fear from Israel. It
Speaker 3: should have a lot to fear from the United States,
Speaker 3: but at the moment it doesn't.
Speaker 5: And Ambassador, a lot of times when we're talking about
Speaker 5: this retali even if Iran would like to do that
Speaker 5: without provoking a response. The question always comes into the fore,
Speaker 5: what is the likelihood that mistakes are made, mistakes are
Speaker 5: made that escalate things further and that there's been this
Speaker 5: conversation that it won't just be around this time. But
Speaker 5: Hesbala as well. Are the ows for mistakes higher by
Speaker 5: involving proxy forces in the retaliation to the retaliation to
Speaker 5: the retaliation.
Speaker 3: Well, look, I think you have to look at what
Speaker 3: the strategic picture is. There is a regional war in
Speaker 3: the Middle East now of Iran against Israel on five
Speaker 3: fronts Hesbala from Lebanon, Hamas and the Gaza Strip. The
Speaker 3: Hoodies that have closed the Souez Canal Red Sea passage,
Speaker 3: one of the most important commercial shipping channels in the world,
Speaker 3: closed effectively since October. The Shia militia in Iraq and
Speaker 3: Syria that have been attacking American positions and Iran itself,
Speaker 3: and the question is how do they dial up one
Speaker 3: or the other. Israel does Hesbelah's Arsenal, which in public
Speaker 3: estimates this is an extraordinary number, but public estimates are
Speaker 3: that Hezbola has between one hundred and twenty and one
Speaker 3: hundred and fifty thousand missiles, which would obviously be enough
Speaker 3: to overwhelm Israel's air defenses, and leads to the question,
Speaker 3: if they really think it's about to happen, might not
Speaker 3: Israel strike first. It's complicated. It's not mistakes. It's the
Speaker 3: fact that the leadership in Tehran is determined to destroy
Speaker 3: the Little Satan. That's what's at work.
Speaker 6: Here, Ambassador Bolton.
Speaker 4: Yesterday we heard from Foreign President Donald Trump, who.
Speaker 6: You worked for.
Speaker 4: He said, I'm not looking to be bad to Iran.
Speaker 4: We're going to be friendly. I hope with Iran, maybe
Speaker 4: but maybe not. But we're going to be friendly. I
Speaker 4: hope we're going to be friendly. Do you know what
Speaker 4: trump two point zeros policy towards Iran potentially will look like.
Speaker 3: Look, he has no idea what it will look like.
Speaker 3: People who look at what happened in the first term
Speaker 3: and believe that it'll be the same in the second term,
Speaker 3: I think are mistaken. It's always possible. But remember he
Speaker 3: Trump almost met with Iran's then foreign minister job At
Speaker 3: Zarief at the ba ritz G seventh Summit in August
Speaker 3: of twenty nineteen. Emmanuel mccrown, the President of France, had
Speaker 3: Zerief in a villa in bea ritz almost persuaded Trump
Speaker 3: to do it. The attraction to Donald Trump of making
Speaker 3: a deal with anybody is hard to quantify. It really
Speaker 3: goes off the charts, and it could be the same
Speaker 3: way in a second term. And that's why I think
Speaker 3: there's a certain amount of pressure on the Israelis if
Speaker 3: they're going to do something, to do it now rather
Speaker 3: than to wait for the uncertainty of the American election.
Speaker 1: Ambassador job Bolton, thank you so much for taking the
Speaker 1: time with us. To begin with the top story, The
Speaker 1: Goldilock scenario is back on the table and fully embraced,
Speaker 1: stocks rallying on strong US retail and labor data indicating
Speaker 1: continued economic strength. Daryl Krok of Wells Frago remaining cautious,
Speaker 1: saying this the US economy is slowing and the Fed
Speaker 1: should be cutting interest rates.
Speaker 6: They probably should have already cut in July.
Speaker 1: The burden of proof has now switched over in the
Speaker 1: market's eyes and is on the soft landing to prove itself.
Speaker 1: Daryl joins us, Now, Darryl, did you write this before
Speaker 1: last this past.
Speaker 7: Week's I did not actually wrote it yesterday morning. Look,
Speaker 7: I think outside of market's kind of vicious reaction last
Speaker 7: week and this if you kind of double click below
Speaker 7: the surface, there is disconnects here, right, they'll curve is disconnected.
Speaker 7: I think some of the consumer data is disconnected. We
Speaker 7: read retail sales yesterday up one percent. That was almost extensive.
Speaker 7: It was autos, right. The rest of it was food beverage,
Speaker 7: which is stuff we all have to consume every day.
Speaker 7: So it wasn't like discretionaries, right, It wasn't some big,
Speaker 7: you know, element that showed that the consumers out there
Speaker 7: spending crazily right on this, And I think there's disconnect
Speaker 7: in the manufacturing data and the housing data. We got
Speaker 7: the National Association of home Builders yesterday. Think about it
Speaker 7: this way. That came in a thirty nine right. Anything
Speaker 7: below fifties, you know, means that their outlook is poor
Speaker 7: for homebuilders. Yet homebuilder stocks are going crazy, right, I
Speaker 7: mean they're upsetting new basically all time highs. So you've
Speaker 7: got all these disconnects that I think markets have to
Speaker 7: reconcile themselves with.
Speaker 1: Let's talk about one particular disconnect in the bond market,
Speaker 1: where you have parts of the bond market talking about
Speaker 1: an economy that is in need of a lot of
Speaker 1: FED support, and then you have other parts of the
Speaker 1: bond market that are suggesting that this is an economy
Speaker 1: that's quite robust. How do you understand and reconcile some
Speaker 1: of these discrepancies.
Speaker 7: Well, I think you put it well earlier, right, think
Speaker 7: about it this way. I wake up in the morning,
Speaker 7: and the first thing I look at is the two
Speaker 7: year treasury right quickly generally now last couple weeks, followed
Speaker 7: by the Japanese yen.
Speaker 8: Right, those are the two.
Speaker 7: Eyes on em The two year treasury at four to
Speaker 7: four and a quarter does not sync with nine interest
Speaker 7: rate cuts between now and next year.
Speaker 8: Right.
Speaker 7: The math just doesn't work. I mean, the FED funds
Speaker 7: is a five and a quarter. You bring it down
Speaker 7: to let's say four, that's one hundred and twenty five
Speaker 7: basis points cuts. We have one hundred priced in for
Speaker 7: this year alone, much less what we're going to do
Speaker 7: in twenty twenty five according to FED. So we're right
Speaker 7: back into this camp of who's right.
Speaker 8: Who's wrong?
Speaker 7: Is the YO curve right and the two year treasury
Speaker 7: right at four to four and a quarter and maybe
Speaker 7: grinding higher or you know, are we going to get
Speaker 7: nine big interest rate cuts. You know, we've seen this
Speaker 7: movie before. We didn't believe it at the beginning of
Speaker 7: this year on the six interest rate cuts, right, we
Speaker 7: said that would get walked back. We didn't believe it
Speaker 7: at the beginning of twenty twenty three. When the FED
Speaker 7: funds future is priced in three interest rate cuts for
Speaker 7: the back half of twenty twenty three. You know, third
Speaker 7: times a charm, But there's no doubt the Fed will
Speaker 7: go in September. I just don't believe the seven to nine.
Speaker 7: And if you get seven to nine, it's a problem
Speaker 7: for the economy. That's the reason we're cutting that aggressively, right.
Speaker 7: It's not because we're soft landing this thing and we
Speaker 7: need nine interest rate cuts to get back to our start.
Speaker 5: I wonder what you make of duration and the level
Speaker 5: of the tenure right now. We were having this discussion
Speaker 5: earlier with Stay Street, this idea that you're living in
Speaker 5: a time where the soft landing seems probable, at least
Speaker 5: for now, we're not pulling off a cliff at the
Speaker 5: very this week.
Speaker 6: This week. We'll talk again next week.
Speaker 8: Yes.
Speaker 5: And in the meantime, you have these policy proposals coming
Speaker 5: from candidates that seem to indicate a lot of spending,
Speaker 5: and you have fears about auctions and auctions that have tailed.
Speaker 5: Yet it is a tenure that is still below four percent.
Speaker 6: Does not make sense.
Speaker 8: I don't think it makes sense.
Speaker 7: I do think the long term kind of neutral rate
Speaker 7: of the tenure is around three seventy five to three
Speaker 7: eighty not very different from today. But just last week
Speaker 7: on the volatility, we had been like most people, kind
Speaker 7: of crowded on the short side of the curve in
Speaker 7: our exposure and positioning. We basically took that positioning and
Speaker 7: we bulleted it right not Barbell, So in other words,
Speaker 7: we took money out alongside, took money on the short side,
Speaker 7: and went right to the belly of the curve.
Speaker 8: Think we think you're getting good value there.
Speaker 7: You do have to start biting in duration and take
Speaker 7: some some uh exposure there. If the FED is gonna
Speaker 7: cut interest rates, which we believe they will, we just
Speaker 7: maybe fade this idea that they're gonna be able to
Speaker 7: cut as aggressively as what everybody else does. So you
Speaker 7: do have to go after some duration here. You can't
Speaker 7: just live on the short side of the curve or
Speaker 7: you're gonna get you're gonna get killed with reinvestment risk
Speaker 7: over the next twelve to eighteen months.
Speaker 4: Back to the fiscal policy outlook, though, is the bond
Speaker 4: market just ignoring all these policy proposals.
Speaker 7: For the time, Yes, I mean I if you win.
Speaker 7: So so if you take my neutral rate on the
Speaker 7: ten ure, it's three eighty, and then you regardless of
Speaker 7: the candidate. Right, the two things that I think are
Speaker 7: certainties post November are you know, bigger federal budgets and
Speaker 7: fiscal spending and more uh tariffs.
Speaker 8: Right, those are the two things you.
Speaker 7: Can bank on regardless of whether you get you know,
Speaker 7: Harris or Trump, and both of those put an upward
Speaker 7: bias into interest rates, all else equal, Right, So I
Speaker 7: think you're gonna see this continued, you know, fight these
Speaker 7: kind of two sigma moves and yields on a daily
Speaker 7: basis that we haven't seen in maybe careers of a
Speaker 7: lot of bond traders and people.
Speaker 8: Who manage money. But it may be the new norm.
Speaker 7: The volatility may now exist fully in the fixed income
Speaker 7: markets and not as much in the equity markets as
Speaker 7: we just keep you know, keep the carry trade in
Speaker 7: the short ball, and we just drive the vix down
Speaker 7: into from sixty five to fifteen, and we push the
Speaker 7: end back weaker again. Right, It's just we're carrying on
Speaker 7: right now.
Speaker 5: It sure feels like we're seeing a lot of once
Speaker 5: in a career events just in the past two weeks,
Speaker 5: one of them being the yen.
Speaker 6: Which you said you wake up in the morning in check.
Speaker 5: What does it tell you when you wake up on
Speaker 5: a day like yesterday after the US data and you
Speaker 5: see dollar yen up one in a third percent after
Speaker 5: just again two weeks ago, a week ago rather about
Speaker 5: a week and a half, we saw this huge appreciation
Speaker 5: in the end that we can get that firepower back
Speaker 5: with dollar yen.
Speaker 7: Yeah, I think it's you know, last week was all
Speaker 7: about kind of vicious unwines of the gen Carrie and
Speaker 7: the short ball level bridge to trade.
Speaker 8: Right.
Speaker 7: They're putting it right back on this week, right, I mean,
Speaker 7: and putting it on with a vengeance. And it's coming
Speaker 7: from the buyers. You know, they're shorting the end and
Speaker 7: they're shorting the ball or vix using that capital to
Speaker 7: go out and buy risk on assets, right. And it's
Speaker 7: coming from all sources. It's coming from the hedge fund community,
Speaker 7: it's coming from institutions, it's coming from retail, it's coming
Speaker 7: from buyback programs. Then now that we're getting to the
Speaker 7: end of Q two, companies are using any weakness to
Speaker 7: aggressively step in with their buyback programs.
Speaker 8: So it's coming from all corners.
Speaker 7: And until you change that and you couple it with
Speaker 7: kind of August seasonal low liquidity, and it creates these
Speaker 7: outsized moves.
Speaker 6: Let's just take a step back for a second.
Speaker 1: You say, the volatility now exist fully in the bond market,
Speaker 1: almost more so than in the stock market.
Speaker 6: Has it affected the.
Speaker 1: Way that you position, where suddenly stocks become more of
Speaker 1: the have in trade and bonds become more of a
Speaker 1: trading game, sort of the sort of daily grind that
Speaker 1: you think of with day trading of stocks, not traditionally bonds.
Speaker 8: Yeah.
Speaker 7: Look, I mean, you know, some of the worst performing
Speaker 7: returns at the asset class level, we're on the fixed
Speaker 7: income markets this year, right maybe up until about the
Speaker 7: last week. But the Barclays Egg, you know, which is
Speaker 7: your common domestic indicy, is one of the few indices
Speaker 7: that still hasn't set a new all time high. Everything
Speaker 7: else is pushing, you know, all time highs across the
Speaker 7: board and the Barclays egg has not given you much
Speaker 7: return over the last few years. People get they get
Speaker 7: enamored with the idea of I can now get four
Speaker 7: or five six percent, you know, on the short side
Speaker 7: of curve. But when you actually get to a total return,
Speaker 7: it's pretty anemic and it's pretty bad. So it's pushed
Speaker 7: people to equities as kind of the there is no
Speaker 7: other alternative, right the Tina trade, and they just keep
Speaker 7: going back to that as a way to get exposure
Speaker 7: until you can't or don't right until volatility spikes.
Speaker 6: Is that how you're arranging things?
Speaker 1: Are you buying it to the tina and staying away
Speaker 1: from big.
Speaker 6: Risk in bonds.
Speaker 8: No, I would say we're a little more balanced.
Speaker 7: So we used last week's weakness that we bought into
Speaker 7: small caps right when the Rustle two came all the
Speaker 7: way down to two thousand and had a ten percent
Speaker 7: full correction. We bought into high yield because we thought,
Speaker 7: you know, at three eighty three eighty five on highyield spreads,
Speaker 7: that was the highest or widest spreads of the year, right,
Speaker 7: we finally got a chance to take a bite at
Speaker 7: some high yield in that environment and then we moved
Speaker 7: out duration on the fixed income market. But overall, I
Speaker 7: think from equities to fixed income were slightly overweight equities,
Speaker 7: but nothing where you've pushed risk budgets or positioning out
Speaker 7: to extremes at this point, and I think that'd be
Speaker 7: a mistake to be honest at this point.
Speaker 1: Well, we can get into why in a bit. Daryl
Speaker 1: Kronk always wonderful to speak with you. Thank you so
Speaker 1: much for being with us. Daryl Kronk of Wills for
Speaker 1: a Global.
Speaker 6: Here's the latest.
Speaker 1: Kamala Harris set to pitch her economic agenda in North
Speaker 1: Carolina this afternoon.
Speaker 6: Ahead of the DNC next week.
Speaker 1: Harris and Donald Trump both looking to put the economy
Speaker 1: front and center. Noel Dixon of State Street Global Markets
Speaker 1: warning quote, this could turn out to be a race
Speaker 1: to the bottom as it relates to fiscal irresponsibility. I
Speaker 1: think it's difficult to see how there is not a
Speaker 1: floor under the long end of the US curve, regardless
Speaker 1: of who wins. Make bond auctions great again, Noel joins
Speaker 1: us again. Now, Noel, thank you so much for being
Speaker 1: with us.
Speaker 6: I want to start there.
Speaker 1: Yeah, it seems like people have forgotten about this storyline,
Speaker 1: and it seems like it only gets reprised where there
Speaker 1: is a lot of other.
Speaker 6: Types of drama in the market. Why is it not just.
Speaker 1: A convenient boogeyman to pull out when people don't seem
Speaker 1: to have that many worries.
Speaker 9: Yeah, I just I feel like, you know, you know,
Speaker 9: right now the market is certainly focused on different elements
Speaker 9: that it's a lot coming at once, and I think
Speaker 9: right now the main focus is, or the concern is,
Speaker 9: you know, both candidates seem to be wanting to embrace
Speaker 9: or add to the fiscal spending tab and that is
Speaker 9: what I think most people are going to be focused
Speaker 9: on and keeping an eye out on, and it gives
Speaker 9: them trepidation about going fully in into the bond market,
Speaker 9: especially into the long end. So from what we experience,
Speaker 9: it seems people are more focused on more the belly
Speaker 9: of the curve, staying on the short end of things
Speaker 9: because there's just a lot of uncertainty and we're certainly
Speaker 9: going to get I think a risk premium baked in
Speaker 9: as we get into or approach the election.
Speaker 4: NOLL when it comes to some of this rhetoric that's
Speaker 4: being thrown around Kamala Harris today is going to talk
Speaker 4: about twenty five thousand dollars. If you're a new home buyer,
Speaker 4: of course you need Congress. So it feels like rhetoric.
Speaker 4: But Trump tart tax cuts are back in play. He's
Speaker 4: talking about a lower his words, lower class, middle class,
Speaker 4: upper class tax cut across the board. Is anyone in
Speaker 4: these parties serious about ratcheting back fiscal spending?
Speaker 9: I don't think so. I think right now, you know,
Speaker 9: you know, we've been able to sustain these high levels
Speaker 9: of debt, and they think, you know, the music will
Speaker 9: continue to play. But I think, you know, we're at
Speaker 9: a very different starting point. And this is what I
Speaker 9: think markets and investors are starting to get concerned about.
Speaker 9: We see it with some of the activity, and like
Speaker 9: I mentioned before, I think a lot of this risk
Speaker 9: is going to start to get baked in post Labor Day,
Speaker 9: and I think we could expect some volatility.
Speaker 4: To borrow a phrase from Lisa, are you expecting potentially
Speaker 4: a Liz Trust moment? Is that what it would take
Speaker 4: the market to push back on the US federal government.
Speaker 9: I think I would say that's what it would take.
Speaker 9: I don't think we'll get to that extense just to
Speaker 9: be fair. I think, you know, we are still the
Speaker 9: reserve currency of the world. I think we still have
Speaker 9: very deep capital markets. However, you know, I do think
Speaker 9: we have to expect that we're going to get some
Speaker 9: volatility leading into November.
Speaker 5: I mean, it is pretty remarkable that we have everything
Speaker 5: you're saying.
Speaker 6: We've seen some bond options tail. The deficit's going to
Speaker 6: get worse.
Speaker 5: The economy isn't falling off a cliff, but ten year
Speaker 5: yields are still below four percent.
Speaker 8: That's right.
Speaker 5: What is fair value to incorporate the fear of rising
Speaker 5: deficits in the US?
Speaker 9: Yeah, I think to me, I think fear value is
Speaker 9: definitely higher than four percent right now. I think you
Speaker 9: have to juxtapose the fiscal concerns with with what's going
Speaker 9: on with central banks. And there was up until I
Speaker 9: would say yesterday, until we got retail sales, there was
Speaker 9: this concern that, you know, the US economy was starting
Speaker 9: to roll over. But as we see, you know, the
Speaker 9: labor market is still tight, the US economy is still
Speaker 9: relatively strong. So you have that environment. You augment that
Speaker 9: with some fiscal spending, and I think that's where you
Speaker 9: get above four percent and stay there.
Speaker 6: Well, people have.
Speaker 5: Pointed to this idea that there's going to be less
Speaker 5: fiscal support than there was in the era of the
Speaker 5: Chips Act, the Inflation Reduction Act. Bank of America puts
Speaker 5: it at about a five percent drop in US government
Speaker 5: spending year over year. How are you thinking about the
Speaker 5: US fiscal impulse at this moment.
Speaker 9: So the fiscal impulse, I think you have to keep
Speaker 9: in mind the CBO projections right now factor in the
Speaker 9: lapse of the Trump tax cuts. So both parties are
Speaker 9: going to keep you know, Trump obviously wants to keep
Speaker 9: it full stop, but you know the Democrats, you know,
Speaker 9: they're saying, you know, four hundred thousand or or below,
Speaker 9: are going to keep the tax cuts. You add on
Speaker 9: to that, you know, they both seem to be on
Speaker 9: consensus in terms of no taxes on tips. That's another tab.
Speaker 9: So you can start to see it start to add up.
Speaker 9: Like she mentioned before, Kamala Harris is talking about twenty
Speaker 9: five thousand dollars tax credit. I know she wants to
Speaker 9: probably extend some of the tax credits that they had
Speaker 9: during the you know, the Biden's tenure. So all of
Speaker 9: that's adding up, and I think it's going to definitely,
Speaker 9: like I said, cost some volatility.
Speaker 1: Just to sort of underscore this whole point, are you
Speaker 1: basically recommending to State Street clients not to go into
Speaker 1: long bonds?
Speaker 9: I think I think I would be definitely skeptical to
Speaker 9: go into the longside right now.
Speaker 8: Of the curve.
Speaker 9: I think it's I think it's more secure to probably
Speaker 9: stay on the short end. And you know, if you
Speaker 9: have the FED may cut rates. However, you know, given
Speaker 9: how the like I mentioned before, the economy is pretty strong,
Speaker 9: I think you know, the Feds, they only could go
Speaker 9: so far.
Speaker 6: Well, how far.
Speaker 1: Would long end yields have to back up for you
Speaker 1: to recommend them against clients.
Speaker 9: I think they would have to get to five percent
Speaker 9: for me to feel comfortable recommended long end at the stage.
Speaker 8: And that's the tenure.
Speaker 1: And this is entirely because of political concerns, not because
Speaker 1: of what you're seeing with respect to potentially preemptive FED
Speaker 1: cuts and just where inflation might be long term. This
Speaker 1: is having to do specifically with the deficit.
Speaker 8: Correct it does.
Speaker 9: Yeah, I think it's completely the fiscal situation that we
Speaker 9: find ourselves in, and I think it's just going to
Speaker 9: get exacerbated regardless of who wins.
Speaker 6: How much futback are you getting from clients?
Speaker 9: I would say it's kind of mixed. I would say
Speaker 9: it's maxed. Some clients are you know, all in because
Speaker 9: you know their perspective is, you know, you know, global
Speaker 9: central banks of cutting rates, good environment to go into
Speaker 9: into bonds. But some are starting to get concerned about
Speaker 9: some of the proposals that are getting floated around. I
Speaker 9: think they were caught off guard a little bit when
Speaker 9: Carmala embraced this, you know, no tax taxes on tips,
Speaker 9: because that was something new. Now now the thinking is, okay,
Speaker 9: what else could come to the fore? What else can
Speaker 9: be reintroduced here? So I think that'll you know, what
Speaker 9: she lays out later on today, what she kind of
Speaker 9: emphasizes during the DNC will be critical.
Speaker 1: Nor Dickson, thank you so much for being with us.
Speaker 6: Really interesting, Nold Dickson that on State Street.
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