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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. So here's the Lakes.

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Speaker 2: This this morning, Vice President Kamala Harris reportedly speaking to

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Speaker 2: potential candidates to join a new ticket for the Democratic Party.

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Speaker 2: The Wall Street Journal reporting Harris had a calls with

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Speaker 2: Pennsylvania Governor Josh Shapiro, North Carolina Governor Roy Cooper, and

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Speaker 2: Kentucky Governor Andy Basher. Henry of Trees of Vader Partners

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Speaker 2: writes in this the enormity of Biden's decision to step

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Speaker 2: down and the drama that is about to ensue with

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Speaker 2: the the Democratic Party means all eyes and media attention

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Speaker 2: will be on the palace intrigue process and the hunt

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Speaker 2: for the next VP. Henrietta joins us. Now for more, Henritta,

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Speaker 2: I want to turn to the process. I want to

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Speaker 2: talk with you about what the next month looks like,

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Speaker 2: going into August nineteenth to the DNC in Chicago. What

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Speaker 2: are the key dates before that? What does this process

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Speaker 2: look like?

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Speaker 3: Thanks for having me. The process starts around July twenty ninth.

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Speaker 3: There are going to be some behind the scenes Rules

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Speaker 3: Committee and Platform Committee meetings before then, But around July

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Speaker 3: twenty ninth into August, first you start getting the delegates

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Speaker 3: lined up, having an understanding of how they're going to vote.

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Speaker 4: August seventh are some critical dates along.

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Speaker 3: With August ninth, and then we kick off into the convention,

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Speaker 3: when all of this will have been sorted and will

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Speaker 3: know how the delegates are going to vote, whether the

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Speaker 3: super delegates are going to need to weigh in, which

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Speaker 3: would be on a second round, and then the convention

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Speaker 3: itself occurs. Donald Trump announced tens vice presidential running mete

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Speaker 3: on the Monday before the RNC launched. I think we

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Speaker 3: should expect a similar kind of flow from the Democrats

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Speaker 3: this year, and obviously, as I rode yesterday, the palace

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Speaker 3: intrigue around who it might be, which state is going

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Speaker 3: to get the nod, Which electoral college map is what

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Speaker 3: the Democrats are.

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Speaker 4: Going to be working on.

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Speaker 3: I suspect it's going to be in North Carolina, Georgia

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Speaker 3: heavy focus versus just a blue wall or Russ Belt focus.

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Speaker 4: And then Mark Kelly in Arizona.

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Speaker 3: As I was just speaking with Tom Keaton, Sabillance is

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Speaker 3: a perfect example of somebody else who could help expand

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Speaker 3: the map where Biden was losing ground considerably over the

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Speaker 3: last couple months.

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Speaker 5: So is he your understanding that they will hold a

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Speaker 5: virtual role call vote before August nineteenth?

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Speaker 3: That is the plan right now. That has been what

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Speaker 3: is scheduled. The virtual component comes from a string of things,

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Speaker 3: all of which are basically expired now, including some issues

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Speaker 3: with the Ohio ballot, and the dates have all been moved,

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Speaker 3: sometimes very publicly. So even with Majority Leader Schumer weighing

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Speaker 3: in and saying, hey, don't you dare try to pull

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Speaker 3: this forward, We're going to take all the time we

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Speaker 3: need to get to the skinvention and have the delegates

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Speaker 3: vote live if we need to. But the roll call

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Speaker 3: vote virtually is still scheduled to proceed. As far as

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Speaker 3: I'm aware in those early August days.

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Speaker 5: So let's talk about the vps, Roy Cooper, Josh Shapiro,

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Speaker 5: Andy Basheer, the names John mentioned that she Kamala Harris

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Speaker 5: got on the phone with yesterday, according to the Wall

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Speaker 5: Street Journal. What do those three men bring to the ticket?

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Speaker 3: I mean knowledge of the states that the Democratic Party

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Speaker 3: needs the most. I think there's a lot of merit

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Speaker 3: to considering that we might be hearkening back to a

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Speaker 3: time and the vice presidential pick and the name recognition

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Speaker 3: they had on the ground in a key state is

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Speaker 3: really critical to someone who's launching their campaign one hundred

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Speaker 3: and five days out from the election. Many folks, myself included,

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Speaker 3: for the last several years, have been saying the vice

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Speaker 3: presidential pick doesn't really matter from.

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Speaker 4: A geographical standpoint.

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Speaker 3: I think Mike pens in Indiana or even Jade Vance

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Speaker 3: in Ohio.

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Speaker 4: Trump has got those states locked up. It shouldn't be

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Speaker 4: too much of a concern for the.

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Speaker 3: Democrats, and particularly for Kamala Harris, who has much larger name,

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Speaker 3: much lower name regnition than even Donald Trump and all

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Speaker 3: of those candidates that are listed there. Name recognition is

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Speaker 3: going to be paramount to setting the message about who.

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Speaker 4: They are, and that's already higher in those states.

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Speaker 3: So for North Carolina with Roy Cooper Shapiro in Pennsylvania,

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Speaker 3: this all makes sense to start with somebody who's already

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Speaker 3: got an operation on the ground.

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Speaker 6: And one of the big reasons why the vice presidential

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Speaker 6: pick is going to be so important is people are

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Speaker 6: wondering whether Kamala Harris is a true continuation candidate basically

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Speaker 6: picking up the torch from Joe Biden, or whether her

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Speaker 6: platform is going to differ some somewhat substantially as certain

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Speaker 6: key areas. How much do you think that we're going

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Speaker 6: to get a sense of this, What direction do you

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Speaker 6: think she's going to go in?

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Speaker 4: You know, I'll be really honest.

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Speaker 3: Next year, we're going to write a tax bill, so

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Speaker 3: we can talk about Kamala Harrison's position on taxes. But frankly,

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Speaker 3: she wasn't on a maybe the relevant committees to be

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Speaker 3: a tax policy expert, and she doesn't have the authority

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Speaker 3: via the constitution to write the tax bill in the

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Speaker 3: first place.

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Speaker 4: If you're focused on you know, what.

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Speaker 3: Is the platform going to be, Call up the House

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Speaker 3: Democratic Ways and Means Committee member, call it Briccinio, call

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Speaker 3: up their staff and have those conversations and see what

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Speaker 3: their position is. Helpfully, they already wrote this bill and

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Speaker 3: they published it several years ago, and it is, you know,

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Speaker 3: science sealed delivered from the Democratic Party, ready to go

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Speaker 3: to Kamala Harris.

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Speaker 4: Where that's the platform.

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Speaker 3: She's going to pursue on the tax front with regards

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Speaker 3: to climate and AI and emerging tech. I suspect the

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Speaker 3: trade policy will be very similar to President Biden's. I

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Speaker 3: wonder how many of the same USTR folks would stay

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Speaker 3: on for a second Kamala Harris term. A lot of

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Speaker 3: these agencies, I would say the Department of Commerce, for example,

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Speaker 3: have built these robust platforms just in the last couple

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Speaker 3: of years, since things like the Chips Act, the Infrastructure

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Speaker 3: Bill have passed.

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Speaker 4: The Inflation Reduction Act. There's a lot of work that

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Speaker 4: those same people still have to do. I suspect there

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Speaker 4: wouldn't be a lot of turnover. And there continued their agenda.

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Speaker 2: And none of this was great. Hendrita Triceda partners on

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Speaker 2: the process over the next month and the answer that

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Speaker 2: Kamala Harris can get this done. Joining us now to

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Speaker 2: discuss the weak ahead and the federal reserve decisions still

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Speaker 2: to be made for the year ahead. Matt Raskin at

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Speaker 2: Deutsche Bank alongside Earl Davis of BIMO. Earl, I want

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Speaker 2: to come to you first, and I want to understand

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Speaker 2: where this economy is at, and I'll share the words

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Speaker 2: of my gape and over at Bank for America with you,

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Speaker 2: he said. Cooling question mark, Yes, cool question mark.

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Speaker 1: No.

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Speaker 2: Is that how you would characterize this economy?

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Speaker 7: Yeah, I think that's a fair characterization, especially you know

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Speaker 7: when you look at the city you know, economic surprise Index,

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Speaker 7: you know that's at nine year molds.

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Speaker 8: So cooling.

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Speaker 7: Yes, But there's a lot of fiscal support underneath, so

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Speaker 7: cool not.

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Speaker 8: So I fully agree with that that assessment.

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Speaker 6: So, Earl, how much do you see politics as sort

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Speaker 6: of noise and the sort of big story right now

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Speaker 6: being that yields are going to remain higher for longer

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Speaker 6: because of the strength because of some of the inflation

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Speaker 6: that you have talked about extensively.

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Speaker 8: No, you know what, I don't see it as noise.

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Speaker 7: I actually see it as providing a great trade opportunity.

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Speaker 7: And why I say that's both the Democrats and the

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Speaker 7: Republicans are still going to have significant fiscal deficits, So

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Speaker 7: that's supportive of the economy going forward. Having said that,

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Speaker 7: you almost get like a free option on a steepener

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Speaker 7: with a Republican win because of the de regulatory thrust

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Speaker 7: that they will bring to the market. Bring in that

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Speaker 7: de regulatory thrust that impacts small and medium sized businesses.

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Speaker 8: The molts in regards to.

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Speaker 7: A reduction of costs, those costs being put back into business,

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Speaker 7: and they are the biggest employers.

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Speaker 8: It's not your your Microsauce or your Amazon.

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Speaker 7: It's actually small and medium sized businesses that could get

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Speaker 7: a thrust and economic thrust to the market. So you

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Speaker 7: need risk premium for that, which is why we like

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Speaker 7: the steepener.

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Speaker 8: Now.

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Speaker 7: We think it's a heads eye win tails you lose scenario,

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Speaker 7: whether it's a bull steepener or beer stepner.

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Speaker 6: Matt, do you agree with that basically that we're looking

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Speaker 6: at longer term deficits in a long term and near

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Speaker 6: term this idea that the Fed can either hold rates

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Speaker 6: here or cut them, that that's going to be a

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Speaker 6: steepener regardless of who wins.

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Speaker 1: I would tend to agree with that. I think you

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Speaker 1: as all pointed out, you know, on the on the

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Speaker 1: election side and the outlook for fiscal I think, regardless

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Speaker 1: of which party wins, we're looking at, you know, big,

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Speaker 1: big fiscal deficits as far as the eye can see.

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Speaker 1: I do think that, you know, as Trump's election odds

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Speaker 1: go up, the odds of a sweep election also go up,

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Speaker 1: and that is the scenario that's likely to produce the

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Speaker 1: biggest fiscal deficits. That's inflationary. It also increases treasury supply

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Speaker 1: and should should boost term premium, provide some steepening and

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Speaker 1: yield curves through that channel. At the same time, you know,

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Speaker 1: as the Fed is is moving towards a first rate cut,

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Speaker 1: which seems very likely to come in September, we're naturally

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Speaker 1: going to get some steepening in the curve that comes

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Speaker 1: from that. So I do think both both of those

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Speaker 1: big stories that are at play in markets right now

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Speaker 1: on the election and the Fed pivoting to rate cuts,

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Speaker 1: are supportive of steepeners.

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Speaker 5: Matt, do you think the need to take into consideration

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Speaker 5: that potentially with Biden stepping aside, there is more momentum

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Speaker 5: behind VP Harris, I do.

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Speaker 1: I mean, I think, you know, the developments over the weekend,

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Speaker 1: over the past month are shifting the range of possible

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Speaker 1: outcomes coming out of the election, They're shifting the likelihoods

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Speaker 1: of those different outcomes, and I think the market needs

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Speaker 1: to take that into account. As I think you pointed

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Speaker 1: out earlier, the move in you know, predicted election probabilities

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Speaker 1: over the weekend, you know, are are notable, but not

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Speaker 1: that big, and I think we've generally seen in rates

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Speaker 1: at least you know, a response that's in line with

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Speaker 1: what we'd seen previously, as we got big shifts in

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Speaker 1: the odds of Trump winning the election, and that tends

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Speaker 1: to be you know, higher yields and steeper curves. And

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Speaker 1: so I think as those odds are moving around, as

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Speaker 1: the likelihood that you know that the Democrats you know,

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Speaker 1: win the presidency increase, albeit modestly, the market should take

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Speaker 1: that into account and should be reflected in somewhat flatter

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Speaker 1: yield curves, which is what we've seen today. I guess

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Speaker 1: the one thing that I'd point out is all of

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Speaker 1: the dynamics that we talk about as being at play

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Speaker 1: with the election, the prospects of more expansionary fiscal policy,

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Speaker 1: the impact that that can have on the level of

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Speaker 1: yields and shape and the curve. You know, those impacts

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Speaker 1: on yields in the curve are also you know, those

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Speaker 1: things are also heavily driven by the outlook for FED policy.

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Speaker 1: And so, as you pointed out, we get important data

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Speaker 1: later this week, we have a FED meeting next week,

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Speaker 1: We get the next employment report at the end of

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Speaker 1: next week, and so I just think those those things

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Speaker 1: are potentially good, you know, going to swamp any effect

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Speaker 1: that you see, you know, coming out of shifts and

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Speaker 1: election odds from developments over the weekend.

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Speaker 5: Matt I asked this question last night. I'll ask it again.

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Speaker 5: So what matters more in August? Is it Jackson Hole

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Speaker 5: or the DNC.

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Speaker 1: I think we're probably gonna have, you know, good clarity

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Speaker 1: around what will come from the Democratic National Convention ahead

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Speaker 1: of ahead of time in August. I actually think Chair

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Speaker 1: Pal's remarks at Jackson Hole are likely be quite important

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Speaker 1: the way I see things unfolding from here. I think,

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Speaker 1: you know, at next week's meeting, the FED is not

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Speaker 1: going to make any changes, you know, to to the

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Speaker 1: FED funds rate, but I do think that they'll signal

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Speaker 1: that a first cut is coming in September.

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Speaker 2: I think what Chair.

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Speaker 1: Pala is likely to use is his remarks to Jackson Hole.

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Speaker 1: To then do is frame you know, the cutting cycle

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Speaker 1: and provide some perspective that will, you know, probably help

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Speaker 1: to temper any inclination that markets might have to price

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Speaker 1: in a very aggressive fed cutting cycle once they begin

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Speaker 1: to cut in September. So I actually think that framing

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Speaker 1: that we're likely to get from from Palett Jackson Hole

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Speaker 1: is going.

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Speaker 8: To be going to be quite important.

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Speaker 2: Just to build on that. Do you think the framing

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Speaker 2: that we could get from Jackson Holle from Shaman Patt

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Speaker 2: on the issue that Matt describes, do you think it

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Speaker 2: might be similar to what we've heard from the ACP.

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Speaker 7: That's a tough question, and the reason why is because

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Speaker 7: of the fiscal impulse that we're talking about in de

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Speaker 7: revatory that's actually extremely stimmy reive after the election. So

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Speaker 7: I do think there will be some pointing towards eases,

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Speaker 7: but they have to be tentative as to the significance

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Speaker 7: are quantum of a possible easing cycle, So I think

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Speaker 7: you have to watch out there. Having said that, I

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Speaker 7: do think one important thing about August and about the

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Speaker 7: bond markets in general now, and you can say it's

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Speaker 7: because of summer. You know, there's different reasons. There is

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Speaker 7: a sense of complacency in the bond market. When you

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Speaker 7: look at the volatility index, the move index were below

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Speaker 7: one hundred. It doesn't stay below one hundred or long

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Speaker 7: since COVID. So my expectation is that that volatility will

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Speaker 7: increase and will spike, whether it be DNC, whether it

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Speaker 7: be Jackson Hall. I think those are two very real possibilities. Also,

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Speaker 7: next week's Fed meeting, you know, the market's only discounting

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Speaker 7: a two and a half percent chance of an ease.

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Speaker 7: We think it's greater than twenty five percent. So there's

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Speaker 7: a lot of reasons here to expect the market to

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Speaker 7: not be as complacent for as long.

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Speaker 2: Interesting, Oh what if it can the oh Davis OFBIMO

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Speaker 2: and likewise with you, Matt Ruskin of Deutsche Bank. Gents,

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Speaker 2: thank you big week ahead, looking ahead to next week

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Speaker 2: Federal Reserve decision, some jobless claim dates on Thursday. Might

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Speaker 2: just to come back to you just briefly on jobless

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Speaker 2: claims given Hurricane Beryl and what you described as may

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Speaker 2: be some impact on the claims number of last week.

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Speaker 2: How reliable is the incoming labor market data going to

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Speaker 2: be over the next few weeks.

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Speaker 9: Well, part of the problem is that July is usually

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Speaker 9: a very bad month for jobless claims accuracy because a

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Speaker 9: lot of manufacturing companies shut down briefly to retool, particularly

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Speaker 9: the auto companies, and that happens on a rolling basis,

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Speaker 9: so throughout the month you're not really sure whether the

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Speaker 9: jobless claims are accurate or not, and that just builds

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Speaker 9: into that whole situation. But if they go down in

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Speaker 9: part because people went back to work in Houston, then

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Speaker 9: that'll be seen as a relatively good sign.

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Speaker 2: I guess they good news for the federal reserves. They're

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Speaker 2: not in the business of forward guidance anymore. Can you

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Speaker 2: imagine if they were, how do you construct forward guidance

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Speaker 2: around this?

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Speaker 6: The good news for them is that they're in the

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Speaker 6: quiet period this week as everyone talks about politics, because

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Speaker 6: you imagine if they had to actually weigh in on

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Speaker 6: any of this stuff.

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Speaker 2: Yeah, although Chairman Power gave us a different template last

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Speaker 2: week of how to avoid it, basically, don't answer questions.

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Speaker 2: We've heard that before. Either way.

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Speaker 6: To me, it's fascinating to see basically we're in a

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Speaker 6: black box that's clouded with a cloth over it that's

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Speaker 6: tied up in knots. I mean, basically, we're talking about

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Speaker 6: the data not being as accurate during this time of year,

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Speaker 6: an election that's haywire, and a lot of people really

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Speaker 6: questioning what the policies are going to be that they

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Speaker 6: can analyze.

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Speaker 2: I've heard the chairman power speech rights. So watches this show?

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Speaker 2: Do you remember the line from last August navigating the

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Speaker 2: stars of the cloudy skies? I wonder if they borrow

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Speaker 2: that line you just said you'd have to repeat it though,

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Speaker 2: because I forgomin it or black box underw well.

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Speaker 6: A cloth with a bunch of knots tied up all

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Speaker 6: around us clouds.

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Speaker 2: Okay, green cloud, that's sort of there. Making notes Now.

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Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best

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Speaker 2: in markets, economics, angiot politics. You can watch the show

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Speaker 2: live on Bloomberg weekday mornings from six am to nine

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Speaker 2: Blog terminal and the Bloomberg Business out

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Speaker 1: M