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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg P M L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. US

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Speaker 1: President Donald Trump and Chinese leader Paying Day will meet

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Speaker 1: on Saturday in Argentina on the sidelines of a G

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Speaker 1: twenty summit taking place in Buenos rs. Joining us now

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Speaker 1: to tell us more about that meeting and other world

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Speaker 1: events is Bill Rhodes is commonly known as the Banker

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Speaker 1: to the World. He is the author of the book

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Speaker 1: Banker to the World, Leadership Lessons from the front Lines

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Speaker 1: of a Global Finance and the book I Understand is

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Speaker 1: currently in a second English edition. It has been published

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Speaker 1: in Mandarin, Korean, Japanese, Portuguese, Do This for a Reason,

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Speaker 1: and most recently two editions in Spanish. Tell us what

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Speaker 1: you believe will happen at the G twenty meeting in

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Speaker 1: Buenos Aires. Well, I think, Pim, there are great expectations

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Speaker 1: that President Hi Jim Ping of China and our President

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Speaker 1: Trump will be able to cut a deal on trade.

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Speaker 1: As you know, at this point in time, we have

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Speaker 1: tariffs on ten percent on two hundred going to come

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Speaker 1: into effect in January UH billion dollars worth of Chinese

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Speaker 1: exports to the United States, and UH President Trump is

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Speaker 1: threatening to increase that amount to from ten percent on

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Speaker 1: that two billion, but also saying that if he doesn't

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Speaker 1: get some indication of positive movement on the part of

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Speaker 1: China next year, he could put a similar tariff on

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Speaker 1: the remaining two sixty seven billion UH vis a vis

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Speaker 1: the trade balance between the two countries. UH. There's great

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Speaker 1: hype over this, not clear what will come out. I

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Speaker 1: think the good point is they're gonna be talking face

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Speaker 1: to face. The real work will be done by the

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Speaker 1: people under them. But there's something else going on at

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Speaker 1: that G twenty the people have sort of forgotten. You

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Speaker 1: will have the three largest producers of oil in the

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Speaker 1: world sitting down. They're together. In other words, the United

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Speaker 1: States was with President Trump putin of Russia and also

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Speaker 1: UH the head of Saudi Arabia, UH, either the king

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Speaker 1: or someone the king will send. And as you know,

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Speaker 1: one of the chief disturbers or let's say, in the

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Speaker 1: marketplace today the chief sources of volatility is oil, and

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Speaker 1: so one side light could be that there could be

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Speaker 1: some discussion on oil. Also because there's a meeting on

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Speaker 1: the fifth of December OPEC, and the feeling is Saudi

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Speaker 1: always is a mover there and will Saudi go along

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Speaker 1: with President Trump who wants to keep prices low or

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Speaker 1: for their own income, will they move on it? So

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Speaker 1: this is sort of a side light which could come

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Speaker 1: out of there, as well as the discussion between Trump

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Speaker 1: and she jumping. Yeah, because a lot of people expect

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Speaker 1: a supply cut at that OPEQUE meeting, It'll be interesting

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Speaker 1: to see whether Saudi Arabia's view is tipped in their

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Speaker 1: connections with President Trump. I do want a home And

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Speaker 1: though on trade and the discussion between Ji jimping and Trump,

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Speaker 1: just because this really has been a huge main driver

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Speaker 1: of recent market volatility, I'm wondering do you view the

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Speaker 1: threat as additional tariffs that President Trump just came out

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Speaker 1: with as a negotiating tactic, or does this indicate that

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Speaker 1: President Trump is serious about trying to completely rejigg or

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Speaker 1: supply chains. Most people think it's a threat On the

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Speaker 1: other hand, I never underestimate what he might do having

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Speaker 1: known him since I think the real issue here is

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Speaker 1: I've said on your show before and on Bloomberg Television,

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Speaker 1: is I think not so much trade but intellectual property

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Speaker 1: because if you go take the long view, which is

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Speaker 1: so called Chinese view, but we have to take the

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Speaker 1: long view. Two, we've always been dominant in this area

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Speaker 1: Silicon Valley, et cetera. And Uh, I think one of

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Speaker 1: the issues that really has to be threshed out here,

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Speaker 1: apart from the trade situation, is what's going to happen

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Speaker 1: on intellectual property. To me, that's the most difficult thing

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Speaker 1: to work on. Bill Rhodes, do you see a possibility

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Speaker 1: that at the last moment, Ping of China will not

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Speaker 1: go to the G twenty meeting and send someone else? No,

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Speaker 1: he he actually glories in these meetings. You will note

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Speaker 1: that he never misses any regional meeting, whether it be

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Speaker 1: in Asia or any uh, you know, any brick meeting

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Speaker 1: or whatever it is. Uh. So there's no doubt that

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Speaker 1: he will go, barring some illness or something. The real

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Speaker 1: question is, uh, is anything going to come out of it? Uh?

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Speaker 1: And he has said very little recently except to talk

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Speaker 1: about the need to have balanced and free trade in

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Speaker 1: the world and all of this. But President Trump has

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Speaker 1: been very vocal almost daily on Twitter and and and

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Speaker 1: he views himself as as a great deal maker. So

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Speaker 1: we'll have to see whether there's just an airing of

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Speaker 1: views or something comes out of it. I think it's

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Speaker 1: about fifty fifty whether something specific will come out of it,

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Speaker 1: or we'll just go on to another phase. Bill Rhodes,

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Speaker 1: I'm hoping he can understand and translate for us how

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Speaker 1: andres Manuel Lopez Orador or am Low, the new president

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Speaker 1: of Mexico who is taking the home in the next

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Speaker 1: few days, how he is going to treat markets because

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Speaker 1: so far the sig knowlls have been very bad, and

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Speaker 1: we've seen stocks plunge in Mexico, the pesos testing uh

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Speaker 1: the year lows, and you're seeing bond yields searched to

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Speaker 1: the highest in at least seven years. Well, I think

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Speaker 1: one of the reasons for that, Liza is that, uh,

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Speaker 1: he was insistent that the that the government go through

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Speaker 1: with some sort of a referendum on the new airport,

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Speaker 1: which was already thirty five complete billion dollar airport. Yeah.

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Speaker 1: Actually more than that. I think the final run was

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Speaker 1: supposed to be between thirty five and thirty eight billion dollars.

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Speaker 1: And of course very a very few number of people

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Speaker 1: showed up for this referendum or plebicite and was turned down,

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Speaker 1: and he says that based on that, he's not going

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Speaker 1: to go ahead with it, and that shook up the

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Speaker 1: Mexican markets because a lot of that paper, the bonds

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Speaker 1: that we used to finance it, are held by Mexicans.

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Speaker 1: Of course, a lot of held by Americans do, but

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Speaker 1: a lot by by the Mexican business community. UH So

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Speaker 1: there was a lot of con tarned there as to

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Speaker 1: what will happen. I was with one of the lead

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Speaker 1: Mexican business people the other day will go unnamed, and

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Speaker 1: he's more optimistic because he's got as his chief advisor

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Speaker 1: of Puncho Romo, who is one of the leading business

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Speaker 1: people of northern Mexico, as his advisor, will be his

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Speaker 1: chief of staff. And the last time I was with

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Speaker 1: UH with Almo, which a little over a year ago,

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Speaker 1: I co hosted a small dinner for him here. Council

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Speaker 1: in America's UH He and UH Puncha Romo were very

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Speaker 1: positive on some of the things they wanted to do.

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Speaker 1: One of the concerns is what he's also going to

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Speaker 1: do in the oil business. UH. Is he going to

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Speaker 1: cut out the contracts going forward? Is he going to

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Speaker 1: seek to modify them? There's concerned there also. And of course,

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Speaker 1: the immediate crisis he faces on his border, of course,

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Speaker 1: is the migrant uh immigration problem with the caravans coming

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Speaker 1: up from Central America, and it's a very difficult situation

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Speaker 1: for him because his predecessors haven't done a very good

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Speaker 1: job with it, and our President Trump is talking about

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Speaker 1: closing the border completely. I think what Trump is looking

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Speaker 1: for is something like Merkel negotiated with Turkey, which is

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Speaker 1: you keep them over there on your side of the border.

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Speaker 1: Uh and UH we will from time to time let

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Speaker 1: some of them go through the normal procedures to come

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Speaker 1: in and UH. There's been a lot of talk that

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Speaker 1: Almo uh and his government will put forth a program

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Speaker 1: to resettle some of these migrants, but it's not clear

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Speaker 1: and he doesn't take office until December one, but that's

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Speaker 1: the first order of importance. And then the other thing

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Speaker 1: that's being watched is before the end of the month

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Speaker 1: in December, he he must go to Congress and present

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Speaker 1: a budget and people are not sure what that budget

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Speaker 1: is gonna say. So because of all these things have

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Speaker 1: been very uh, you know, very many doubts in the market.

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Speaker 1: You've seen the stress on the Mexican peso. You've seen

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Speaker 1: the stress in the stock market in Mexico. So everything

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Speaker 1: is sort of on hold until uh, the week after

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Speaker 1: December one. On how he handles all these programs. Bill Rhodes,

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Speaker 1: just to continue on this oil theme and PEMMICS, which

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Speaker 1: is the nationalized the national oil company in Mexico, price

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Speaker 1: of oil, and you started the segment earlier talking about

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Speaker 1: oil prices from the beginning of October to the current

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Speaker 1: let's say fifty barrel on Thenmax oil has declined in

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Speaker 1: value in dollars more than thirty three per cent. What

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Speaker 1: does that do to the economics of Mexico. Well, certainly,

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Speaker 1: uh a low Mexico doesn't produce as much as it

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Speaker 1: used to. It is not particularly positive obviously, And it's

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Speaker 1: interesting to note that the President of Mexico will be

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Speaker 1: this meeting in low He will be attle office on

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Speaker 1: December one, and also the president of Nigeria, which is

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Speaker 1: a major producer. They're all members of the Group of

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Speaker 1: thirty excuse me of the group of twenty and so

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Speaker 1: I think that what you're going to have here is

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Speaker 1: some discussions on the sidelines of this conference about it.

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Speaker 1: I think what has happened is the US has every

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Speaker 1: day has been reaching higher production levels with the shale

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Speaker 1: oil boom that we see. But if the price of

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Speaker 1: oil drops substantially below fifty dollars, a lot of those

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Speaker 1: operations are not viable. Uh. But the Saudis are peak

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Speaker 1: production at this point. Uh. Many think trying to a

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Speaker 1: suage and gain the favor of President Trump, but they

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Speaker 1: can't continue to do that because they don't have the income.

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Speaker 1: And the Russians are at peak production too. So if

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Speaker 1: you're advising a company right now in the United States,

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Speaker 1: with respect to their relationship in Mexico, which you advised

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Speaker 1: that they would go and make an acquisition because things

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Speaker 1: are so cheap right now, or would you recommend that

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Speaker 1: they stay away you're talking about a new oil business

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Speaker 1: in the oil business were beyond just in general, just

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Speaker 1: taking a look at the background backdrop here politically as

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Speaker 1: well as economically well as you know, because I've said

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Speaker 1: it on the show several times. I think here in

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Speaker 1: the United States we're in a goldilocks period. I think

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Speaker 1: for a year from now we will not be I

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Speaker 1: think next year is problematic because the FED I think

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Speaker 1: will definitely raise in December, and I think we're going

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Speaker 1: to see a couple more increases next year, and then

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Speaker 1: we'll have to see what the economy does. But China

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Speaker 1: is slowing down big time, there's no doubt about it.

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Speaker 1: I think they're going to really have a fight to

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Speaker 1: keep six percent growth. It could dip next year below that.

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Speaker 1: And Europe is slowing down also with the doubts on Brexit,

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Speaker 1: the problems in Italy, even Germany, automobile production slowing. So

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Speaker 1: what you is the United States is a star in

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Speaker 1: the sense of economic growth for the moment, but we're

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Speaker 1: in an intertwined world. And this is why this whole

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Speaker 1: situation about trade, the trade wars, particularly with China, but

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Speaker 1: also what's going on between the United States and Europe

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Speaker 1: on automobiles. I think all of this is very very important,

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Speaker 1: and so I think we're in for even more volatility

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Speaker 1: uh in both the markets, in the sense of the

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Speaker 1: stock markets, the bond markets, but also in the commodities markets.

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Speaker 1: Over the next twelve months, Bill, just quickly, because you've

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Speaker 1: written in the past and proved impression when it comes

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Speaker 1: to stock prices. You're not a stock picker. I understand that,

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Speaker 1: But that same period beginning of October to the current

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Speaker 1: level of stock prices down more than nine per cent,

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Speaker 1: you kind of telegraph that in a lot of your writing.

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Speaker 1: What do you see next? Well, I think what the

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Speaker 1: people on the floor of the Stock Exchange of hoping

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Speaker 1: the trade is. We're gonna get to fame Santa Claus rally.

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Speaker 1: But that's going to be very much tied in with

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Speaker 1: what we've been discussing on the G twenty Because if

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Speaker 1: we don't see some progress between China and the United States,

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Speaker 1: and you want to take the radical view the President

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Speaker 1: Trump will go ahead and increase the tariffs on China

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Speaker 1: and uh, we don't have any resolution on oil, then

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Speaker 1: I think we could be in a difficult situation. Thank

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Speaker 1: you very much, Bill Rhodes. As always bankers to the world,

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Speaker 1: Bill Rhodes, President and chief executive of William Rhodes Global Advisors.

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Speaker 1: US Ambassador to the United Nations Nikki Haley said in

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Speaker 1: the Security Council meeting earlier that Russia's shooting and seizing

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Speaker 1: of Ukrainian vessels is quote outrageous violation of sovereign Ukrainian

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Speaker 1: territory and marks yet another reckless Russian escalation. Here to

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Speaker 1: tell us more about what is going on in geopolitics,

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Speaker 1: including Russia and the United States, is retired Admiral James Stavridis.

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Speaker 1: He is a calmist for Bloomberg Opinion. He is, of

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Speaker 1: course a retired US Navy admiral, former military commander of NATO,

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Speaker 1: and dean emeritus of the Fletcher School of Law and

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Speaker 1: Diplomacy at Tufts University. Admiral Stavridas, thank you for being

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Speaker 1: with us, give us your thoughts, your reaction to the

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Speaker 1: Russian shooting and seizure of those Ukrainian vessels that were

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Speaker 1: transitting to the Sea of Azof from the Black Sea. Well,

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Speaker 1: first of all, having spent my life at sea, even

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Speaker 1: I had to take a moment to recall where the

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Speaker 1: Sea of Azov is. It's tucked away in a little

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Speaker 1: corner of the Black Sea. It's very shallow, it's smaller

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Speaker 1: than the US Great Lakes. But it has now become

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Speaker 1: a flashpoint. And you know, m I would say whoever

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Speaker 1: heard the Gulf Tonkin before Vietnam. So a, there is

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Speaker 1: a potential for this to grow into something much bigger.

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Speaker 1: Be Nikki Haley as usual is completely right. This is

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Speaker 1: an outrageous seizure of sovereign warships on the high seas.

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Speaker 1: That's a big deal in international law. And see, the

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Speaker 1: question is how far is Putin willing to go. He's

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Speaker 1: a risk taker. He's clearly probing here, and I am

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Speaker 1: very concerned that this could escalate into something very dangerous,

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Speaker 1: not only for Russian Ukraine, but for NATO in the west.

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Speaker 1: So can you just extrapolate, extrapolate out what would happen

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Speaker 1: in an escalation like that? I can, Lisa, what I

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Speaker 1: would see happening if there is not an immediate strong

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Speaker 1: pushback in response to this event. Uh Putin will continue

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Speaker 1: to probe, and his real objective here is not simply

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Speaker 1: to control the Strait of Kersh which is what connects

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Speaker 1: the Black Sea and the Sea of Azov, but he

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Speaker 1: also wants a land bridge from Russia through to Crimea,

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Speaker 1: and that requires him to consolidate real control over southeast Ukraine,

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Speaker 1: notably the city of Mario Pool. So I could see

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Speaker 1: a kind of Christmas surprise where we're all very distracted.

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Speaker 1: There hasn't been a lot of pushback, and Putin decides

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Speaker 1: now is the time to really consolidate a strip of

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Speaker 1: land between Crimea, which he's already seized, and the mainland

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Speaker 1: of Russia. And you say that there hasn't been a

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Speaker 1: lot of pushback, you're talking about President Trump and his response. Correct,

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Speaker 1: I am, and uh. Otherwise, we have seen a great

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Speaker 1: deal of pushback from European nations, from NATO as an alliance.

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Speaker 1: We saw the Secretary General. We saw fortunately our u

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Speaker 1: S Ambassador to the United Nations, NICKI Haley. I think

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Speaker 1: we're gonna miss her in a few months, Uh, pushing

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Speaker 1: back hard. We haven't seen the White House step up

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Speaker 1: and go at this. And the big thing, as you've

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Speaker 1: been talking about, is the G twenty down in Argentina.

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Speaker 1: President Trump will be their face to face with President Putin.

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Speaker 1: I hope he raises this both privately and publicly. Admiral

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Speaker 1: ste Frida's Russia has already built a bridge connecting Crimea

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Speaker 1: to the Russian mainland. It's a twelve mile bridge, I believe,

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Speaker 1: and it is so low that it prevents Panamax vessels

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Speaker 1: from actually docking in the Ukraine city of Mario Pole.

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Speaker 1: So is this just another extension of what we see

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Speaker 1: more things like that? Unfortunately, I think we will, given

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Speaker 1: the state in general of Russian infrastructure and their construction abilities.

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Speaker 1: I think no less than six bridges have collapsed in

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Speaker 1: Russia in the last twelve months. Perhaps the Ukrainian shouldn't

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Speaker 1: overly worry about that. But in all seriousness, yes, Tim,

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Speaker 1: this is part of what is sometimes called hybrid warfare.

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Speaker 1: This is what Russia uses without actively going to war

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Speaker 1: with the nation. But it's this combination of using the

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Speaker 1: social networks, using propaganda, troops that are not marked in

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Speaker 1: their uniforms, special forces, seizing points, supporting the rebels in

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Speaker 1: southeastern Ukraine, building bridges that block ships. All of that

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Speaker 1: is part of what I would call hybrid warfare. Putin

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Speaker 1: plays that very well, and it's a dangerous game. Admiral.

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Speaker 1: I want to shift gears a little bit to the

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Speaker 1: southern border. Here in the northern hemisphere. The US has

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Speaker 1: had an increasingly tense relationship with Mexico over immigration. President

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Speaker 1: Trump threatening to close all ports of entry from Mexico.

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Speaker 1: Incidented states as a result of illegal immigration. Can I

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Speaker 1: just get your sense of how feasible that would be

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Speaker 1: and what's been going on down there in the southern border. Well,

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Speaker 1: first of all, we could, certainly, we the United States

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Speaker 1: could certainly build a quote big beautiful wall, and Lisa,

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Speaker 1: it could stretch for eighteen hundred miles, it could be

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Speaker 1: thirty five ft high. Um. It would cost billions and

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Speaker 1: billions of dollars. But here's a news flash, and I

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Speaker 1: know this is true because I'm an admiral. Right to

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Speaker 1: the left of the wall is an ocean. People are

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Speaker 1: going to find ways to get here. So do we

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Speaker 1: need to control our border? Absolutely? What we need is

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Speaker 1: a smart wall, if you will, That is a big

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Speaker 1: physical structure in some places, is unmanned vehicles patrolling in

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Speaker 1: other places. We need to plus up the border patrol

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Speaker 1: and give them the resources to do their job on

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Speaker 1: the border. We ought to get our troops off the border.

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Speaker 1: That's not their job. That could lead to dangerous confrontation.

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Speaker 1: And so we need to control the southern border, certainly,

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Speaker 1: but we need to do it in a more constructive fashion,

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Speaker 1: and above all, to conclude, we need to do it

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Speaker 1: in cooperation with Mexico not in an antagonistic relationship. Threats

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Speaker 1: of simply closing the border are untenable and would hurt

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Speaker 1: both nations. Adams Stevita's in your most recent books see Power,

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Speaker 1: The History and Geopolitics of the World's Oceans. You underscore

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Speaker 1: what you just described. But is Mexico and the migrants,

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Speaker 1: or the asylum seekers or the people on the border,

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Speaker 1: is that really a security threat to the United States.

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Speaker 1: It is not, in the sense that they are not

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Speaker 1: invading the United States. There is a diminimous, a tiny

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Speaker 1: percentage of truly bad actors. Most of these people are

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Speaker 1: economic refugees. They have a legitimate case, both economically and

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Speaker 1: because of violence in Central America, to plead their case

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Speaker 1: for asylum. We can either grant it or not, but

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Speaker 1: we are to respect that process. I do like the

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Speaker 1: idea of working with Mexico to do this on Mexican soil, culturally, linguistically, geographically,

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Speaker 1: that makes sense. I hope we can cut that deal.

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Speaker 1: But as I said before, Pim, what we need is

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Speaker 1: a coopera relationship with Mexico to deal jointly with this challenge.

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Speaker 1: Admiral just ten seconds. I'm curious do you think that

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Speaker 1: we have a greater degree of geopolitical risk today than

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Speaker 1: a year ago or a lower one. It is higher

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Speaker 1: because of the things we've discussed, but principally because of

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Speaker 1: ongoing confrontation between the United States and China economically and

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Speaker 1: the South China Sea. We are steaming into dangerous waters.

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Speaker 1: As we would say in the Navy, it's going to

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Speaker 1: require international cooperation to solve these problems. Admiral, we so

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Speaker 1: appreciate your time. Thank you so much for being with US.

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Speaker 1: Admiral James Stavridi's columnist for Bloomberg Opinion, retired US Navy

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Speaker 1: admiral and former military commando of NATO. Always wonderful to

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Speaker 1: get his thoughts. This is Bloomberg Markets with Pim Fox

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Speaker 1: and Lisa Abramowitz on Bloomberg Radio. We are broadcasting live

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Speaker 1: from the Bloomberg Interactive Broker's studios. A lot of people

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Speaker 1: are sitting around and thinking what we hold well. If

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Speaker 1: you listen to Emily Rowland, perhaps you might be getting

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Speaker 1: a little concerned. Perhaps Emily Rowland, head of Capital markets

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Speaker 1: research for John Hancock Investments based in Boston, bejoining us

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Speaker 1: here in our eleven three studios. I was reading the

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Speaker 1: outlook for that you put together. You said you see

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Speaker 1: a market peak after the yield curve inverts, and advised

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Speaker 1: against taking on too much risk and perhaps even advised

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Speaker 1: shedding some Please explain, well, I can see you read

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Speaker 1: all the way to the end of the outlook there.

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Speaker 1: The first part of it actually states that we are

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Speaker 1: still positive on risk assets. We do still think that

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Speaker 1: there's room left to go in this cycle. The yield

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Speaker 1: curve hasn't inverted yet. The leading economic indicators are still

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Speaker 1: coming in in positive territory. But to us, the time

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Speaker 1: to repair the roof is when the sun is shining

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Speaker 1: right looking ahead into You know, we're going into a

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Speaker 1: very very different macro regime here right. The Fed is

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Speaker 1: continuing down this path of rate normalization, quantitative tightening is

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Speaker 1: going to increase meaningfully. We shed four hundred billion dollars

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Speaker 1: from the balance sheet this year. That goes to six

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Speaker 1: hundred billion next year. That's a very different environment for

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Speaker 1: investors who are used to plentiful liquidity, used to low rates.

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Speaker 1: The Fed buying up fixed income, and we think that

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Speaker 1: that should lead us to a point where potentially we

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Speaker 1: do see a yield curban version and then potentially a

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Speaker 1: market peak down the road. Not there yet, but again

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Speaker 1: preparing to become more defensive. Is the world over leveraged?

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Speaker 1: That's a great question, and I think that's certainly a

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Speaker 1: concern as we head into into and it's a it's

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Speaker 1: a risk that we're watching, um, you know, and I

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Speaker 1: think as credit conditions tighten, as liquidity as withdrawn from

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Speaker 1: the system, you know, you could see that put real

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Speaker 1: pressure on markets globally. Do you think that emerging markets

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Speaker 1: to haven right now? That's an interesting question too. And

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Speaker 1: we've seen you know, a bid for emerging markets over

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Speaker 1: the last few weeks here. We were down more than

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Speaker 1: twenty at one point this year through October, and we're

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Speaker 1: starting to sort of carve out a bit of a

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Speaker 1: bottom here, you know, I think investors are pricing in

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Speaker 1: a somewhat you know, better resolution to trade and terroriffs.

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Speaker 1: We'll have to see what happens after the G twenty

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Speaker 1: meeting this weekend, you know, But for us, we're not

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Speaker 1: ready to go to really go in uh to emerging

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Speaker 1: markets yet until we see some of the fundamentals start

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Speaker 1: to turn around. So we look at things like earnings

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Speaker 1: estimates where you're really continuing to move sideways and emerging

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Speaker 1: market equities, we're gonna need to see that really come

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Speaker 1: back in order to go more positive there. So we're

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Speaker 1: neutral on them right now. What are you finding when

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Speaker 1: you look at investment behavior, because they've certainly voted with

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Speaker 1: their money when it comes to technology stocks, is it

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Speaker 1: likely that investors will put their money into cash? Well,

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Speaker 1: you know, we've really seen that happen, and looking back

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Speaker 1: on it's been the year of cash and the year

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Speaker 1: of ultrashore bonds. Who would have thought that would have

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Speaker 1: happened in right, And as we look at investors really

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Speaker 1: piling into cash and ultra sharp short bond funds, we

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Speaker 1: think that that actually might reverse a bit as we

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Speaker 1: head into twenty nineteen. If you look at the way

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Speaker 1: that investment grade corporates have performed this year, if you

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Speaker 1: look at the way the bar cap AGG has performed

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Speaker 1: this year, it's actually been almost like investment grade corporates

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Speaker 1: have really been beaten down. The eggs down one and

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Speaker 1: a half two percent when you look back at thirteen.

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Speaker 1: When you look back at two thousand eight, when fixed

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Speaker 1: income was really under pressure broadly, the following years were

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Speaker 1: actually quite good for fixed income. So it sounds like

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Speaker 1: rotation into investment grade is something that you foresee in

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Speaker 1: the future because it's gotten pretty beaten up. What are

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Speaker 1: you looking for? What sort of the trigger that will

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Speaker 1: make you reassess and start shutting risk more meaningfully. Yeah,

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Speaker 1: so I think what we'll be looking for first, of course,

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Speaker 1: is a yield curb and version. We're right around twenty

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Speaker 1: two tons. You're looking at two tens. Looking at two tens. Um,

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Speaker 1: we'll be looking for, you know, economic indicators to really

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Speaker 1: start to roll over meaningfully. They're still coming in positive

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00:26:06,960 --> 00:26:10,480
Speaker 1: things like consumer confidence, things like jobless claims, you know,

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00:26:10,640 --> 00:26:13,560
Speaker 1: very low levels here. That data is all still very good.

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00:26:13,560 --> 00:26:16,760
Speaker 1: But of course markets are you know, forward looking, right,

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00:26:17,119 --> 00:26:20,040
Speaker 1: so you know we're looking for for a you know,

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00:26:20,119 --> 00:26:23,560
Speaker 1: a catalyst. Um, we need those things to play out. Um.

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00:26:23,640 --> 00:26:26,160
Speaker 1: We also need to see what happens with earnings. Right

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00:26:26,240 --> 00:26:29,639
Speaker 1: looking on the equity side, you know earnings of course,

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00:26:29,680 --> 00:26:32,240
Speaker 1: peak earnings are behind us, but that doesn't mean that

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00:26:32,359 --> 00:26:35,119
Speaker 1: earnings growth broadly is behind us. If we start to

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00:26:35,119 --> 00:26:38,840
Speaker 1: see earnings estimates and earnings revisions start to roll over,

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00:26:39,200 --> 00:26:41,400
Speaker 1: that's going to be another indication for us that it's

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00:26:41,400 --> 00:26:43,880
Speaker 1: time to get more defensive. Again, we're not there yet.

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00:26:44,840 --> 00:26:46,919
Speaker 1: Just give you about thirty seconds. Do you foresee a

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00:26:47,000 --> 00:26:49,919
Speaker 1: time when credit rating agencies are going to have to

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00:26:50,359 --> 00:26:57,280
Speaker 1: issue revisions to their analysis of investment grade companies? Yeah,

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00:26:57,320 --> 00:26:59,840
Speaker 1: I mean there's certainly a lot of talk about investment

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00:27:00,000 --> 00:27:03,880
Speaker 1: aid corporates and the risks and the triple be market. Um,

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00:27:03,920 --> 00:27:05,919
Speaker 1: you know, we will keep an eye on that. But

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00:27:06,000 --> 00:27:08,800
Speaker 1: at this point, again, investment grade corporates have been treated

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00:27:08,840 --> 00:27:12,680
Speaker 1: like it's a or even two thousand eight type environment,

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00:27:13,080 --> 00:27:15,199
Speaker 1: and we think that there could be an opportunity for

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00:27:15,280 --> 00:27:18,040
Speaker 1: them to you know, come back catch a bit a bit.

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00:27:18,160 --> 00:27:22,720
Speaker 1: You know, our managers are continuing to allocate uh portions

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00:27:22,720 --> 00:27:25,760
Speaker 1: of their portfolio there, and we're comfortable owning some investment

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00:27:25,760 --> 00:27:28,760
Speaker 1: grade corporates heading into the next year. Thanks very much

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Speaker 1: for being with us, very enlightening. Emily Rowland is the

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00:27:31,720 --> 00:27:36,280
Speaker 1: head of Capital markets research for John Hancock Investments, based

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Speaker 1: in Boston, but joining us here in our Bloomberg Interactive

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Speaker 1: broker's studios. Thanks for listening to the Bloomberg P and

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00:27:43,640 --> 00:27:46,680
Speaker 1: L podcast. You can subscribe and listen to interviews at

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00:27:46,720 --> 00:27:51,160
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer I'm

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00:27:51,200 --> 00:27:54,639
Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on

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Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You

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Speaker 1: can always catch us worldwide on bloom A Radio m