WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.280 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.200 --> 0:00:13.840 This is a breaking news update from Bloomberg instant reaction 0:00:14.120 --> 0:00:17.959 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:18.439 the world. 0:00:19.440 --> 0:00:21.320 The beginning of a walk into the sunset for the 0:00:21.400 --> 0:00:23.960 Chairman of the Federal Reserve. J. Powell only has two 0:00:24.040 --> 0:00:26.640 more of these meetings on the calendar as the chairman 0:00:27.000 --> 0:00:29.440 of the world's most important central bank. For the equity 0:00:29.440 --> 0:00:31.080 market on the S and P five hundred is still 0:00:31.080 --> 0:00:32.760 close to all time highs on the SMP, on the 0:00:32.840 --> 0:00:34.839 NASDA one hundred up by zero point five. In the 0:00:34.840 --> 0:00:38.320 bond market on twos, tens, and thirties, we look like this. 0:00:38.680 --> 0:00:41.240 It's just about unchanged your ten year four to twenty five, 0:00:41.440 --> 0:00:43.760 your two year three point fifty eight. Journalists did their 0:00:43.800 --> 0:00:46.360 best to make this one interesting. Chairman power was determined 0:00:46.479 --> 0:00:48.120 to make it boring. Take a listen to what the 0:00:48.200 --> 0:00:49.320 chairman had to say. 0:00:50.680 --> 0:00:55.240 Some people didn't want to cut and dissented by committee 0:00:55.680 --> 0:00:59.560 pretty broadly for holding today that we still have some 0:00:59.680 --> 0:01:03.680 tension between employment and inflation, but it's less than it was. 0:01:03.720 --> 0:01:06.640 I think that the upside risks to inflation in the 0:01:06.680 --> 0:01:09.560 downside risk of I have probably both diminished a bit, 0:01:10.240 --> 0:01:12.640 so you know, we'll be looking at the other different 0:01:12.680 --> 0:01:14.760 views on the committee and you know we'll find our 0:01:14.800 --> 0:01:16.759 way forward as the data involve TK. 0:01:17.040 --> 0:01:20.000 Just my takeaway, just my observation towards the end, it 0:01:20.040 --> 0:01:22.080 felt like a man who was looking forward to retiring 0:01:22.440 --> 0:01:23.200 and stepping down. 0:01:23.520 --> 0:01:25.360 You know, there was a gold question. It's great he 0:01:25.360 --> 0:01:27.160 doesn't have Kruger ends in the drawer. He's got the 0:01:27.240 --> 0:01:31.440 Jerry Garciam commemorative gold coins in the drawer, so way looser, 0:01:31.560 --> 0:01:36.000 there's no question about that. But it was really interesting 0:01:36.000 --> 0:01:37.920 to see the nuances of the market away from the 0:01:37.920 --> 0:01:41.120 things we usually quote folks to look at what seriously 0:01:41.160 --> 0:01:45.120 what Sterling was doing, the way euro was vibrating that 0:01:45.480 --> 0:01:47.560 and I would suggest they could go back and say, 0:01:47.600 --> 0:01:49.000 you know, we got through that in one piece. 0:01:49.120 --> 0:01:51.160 He's got some advice for the next fort share stat 0:01:51.160 --> 0:01:54.560 of politics Stephanie Ralph Wolf Research joins us now for more, Stephanie, 0:01:54.640 --> 0:01:57.520 the questions loaded with politics. He was not engaging, he 0:01:57.640 --> 0:01:59.280 was not playing. What was the takeaway for you? 0:02:00.240 --> 0:02:02.560 I think it's a FED that is comfortable with the 0:02:03.080 --> 0:02:04.840 backdrop of data, which I think is the right call. 0:02:05.080 --> 0:02:07.640 The data seem to be improving from here. We actually 0:02:07.680 --> 0:02:09.680 think that it will continue to get better, in which 0:02:09.680 --> 0:02:13.399 case this will certainly be the last cut Underchair Powell. 0:02:13.760 --> 0:02:16.320 There's no more cut under Schair Powell. He's done, and 0:02:16.520 --> 0:02:18.800 he's I think that's right. He's fading into the sunset 0:02:18.840 --> 0:02:21.119 and just wants to avoid all of the questions that 0:02:21.200 --> 0:02:22.080 he didn't really want to answer. 0:02:22.200 --> 0:02:24.360 Unfair question, but I can save it for your morning. 0:02:24.400 --> 0:02:27.160 Note it Wilf research. Maybe it'll help you think Mark 0:02:27.200 --> 0:02:32.120 Kearney at Davos talking about the new geometry of Middle countries. 0:02:32.200 --> 0:02:35.720 You look at the president neo mercantilism, the president week dollar. 0:02:36.200 --> 0:02:39.480 Did the Secretary Treasuries save this press conference by coming 0:02:39.520 --> 0:02:43.040 out hours before and sounding like James Baker from another 0:02:43.120 --> 0:02:45.160 time in place on strong dollar? 0:02:46.400 --> 0:02:48.400 Yeah, I mean last night it was getting to be 0:02:48.400 --> 0:02:51.560 a little bit concerning when Trump made the comments regarding 0:02:51.639 --> 0:02:54.440 his comfort around the sharp drop in the. 0:02:54.400 --> 0:02:56.560 Dollar that we've seen. That could also have. 0:02:56.639 --> 0:02:58.600 Reverberations throughout the rest of the morning. So I think 0:02:58.600 --> 0:03:01.400 that is fair to some extent. Powell clearly don't want 0:03:01.400 --> 0:03:04.359 to comment on the dollar regardless, but there was the 0:03:04.720 --> 0:03:07.400 legitimate risk and there still is that there could become 0:03:07.400 --> 0:03:10.280 reverberations as the carry trade on wines. But it seems 0:03:10.800 --> 0:03:12.720 best and very well aware of the. 0:03:12.680 --> 0:03:13.320 Aftermath of that. 0:03:13.400 --> 0:03:18.200 Can I ask economic question please? Analog has been great 0:03:18.240 --> 0:03:20.560 on this, as you have, as well as Stephanie roth 0:03:20.760 --> 0:03:22.600 Or the idea of the vector and goods we take 0:03:22.639 --> 0:03:25.919 for granted is disinflation that's turned around. Now we've got 0:03:25.960 --> 0:03:28.799 goods moving up. We've got gold, command copper and all 0:03:28.800 --> 0:03:31.600 the other stuff John's talking about. Do you just assume 0:03:32.200 --> 0:03:35.800 out there somewhere after stimulus that goods roll over again 0:03:35.920 --> 0:03:40.600 into some form of disinflation, even if service sector stays 0:03:40.640 --> 0:03:42.080 with an inflationary tone. 0:03:42.240 --> 0:03:44.560 Yeah, we're probably going to see a backdrop where we 0:03:44.560 --> 0:03:47.360 were likely to have some firm goods prices in the 0:03:47.360 --> 0:03:49.920 next couple of months, in the sense that one you 0:03:49.960 --> 0:03:51.720 tend to have there's some seasonal issues in some of 0:03:51.760 --> 0:03:52.120 the data. 0:03:52.200 --> 0:03:53.680 You have consumer stimulus that's. 0:03:53.560 --> 0:03:55.880 Going to hit goods prices for the next quarter or so, 0:03:56.280 --> 0:03:57.600 and then beyond that you're going to move to an 0:03:57.640 --> 0:04:00.520 environment where goods are running it roughly zero percent, and 0:04:00.560 --> 0:04:03.520 then it's back to an environment where it's all about 0:04:03.520 --> 0:04:04.200 the service sext. 0:04:04.120 --> 0:04:06.720 Away from the politics of Washington. One of the takeaways 0:04:06.720 --> 0:04:08.880 from that particular news conference that I have is something 0:04:08.920 --> 0:04:11.720 I've heard repeatedly from a lot of Wall Street participants 0:04:11.760 --> 0:04:13.920 market participants, is that the data is going to be better. 0:04:14.240 --> 0:04:16.839 It will improve, the chairman saying overall, it's a stronger 0:04:16.880 --> 0:04:19.559 forecast than in December. The data since the last meetings 0:04:19.560 --> 0:04:22.640 show clear growth improvement, and a lot of people think 0:04:22.680 --> 0:04:25.000 that's going to continue because of the tax refunds. How 0:04:25.040 --> 0:04:27.880 important these tax refunds going to be? Do you think 0:04:27.920 --> 0:04:30.400 people are overly optimistic about the impact this might have. 0:04:31.560 --> 0:04:33.919 I think they will be positive for the consumer, but 0:04:33.960 --> 0:04:36.600 this is a consumer that is already doing fairly well. 0:04:36.600 --> 0:04:38.600 Spending has been fairly solid in. 0:04:38.560 --> 0:04:41.640 The fourth quarter, and everyone's rise up their GDP numbers 0:04:41.920 --> 0:04:45.320 in the fourth quarter Q one should be equally pretty solid. 0:04:45.720 --> 0:04:48.240 I think the main takeaway is that, yeah, maybe even 0:04:48.279 --> 0:04:50.160 you get a bit of a bump in consumer spending, 0:04:50.279 --> 0:04:53.040 people will spend the stimulus checks that come to them, 0:04:53.000 --> 0:04:55.400 and that is the American consumer. Well, then beyond that, 0:04:55.560 --> 0:04:58.680 this is an environment where you have positive momentum in 0:04:58.720 --> 0:05:00.400 the economy. 0:05:00.560 --> 0:05:01.680 I think it will be important. 0:05:01.960 --> 0:05:05.200 That's entirely fair, but it's also an economy that's performing 0:05:05.200 --> 0:05:07.440 a lot better than many expected towards the back part 0:05:07.440 --> 0:05:09.760 of the year last year when everyone was concerned about 0:05:09.960 --> 0:05:11.120 the health of the consumer. 0:05:10.760 --> 0:05:13.760 Which was sin these conference asked the question, why wouldn't 0:05:13.760 --> 0:05:16.560 that lead to higher inflation, given how in some parts 0:05:16.600 --> 0:05:18.279 of this economy we are supply constraints. 0:05:18.320 --> 0:05:19.120 What's the answer to that. 0:05:19.520 --> 0:05:21.360 The answer is that you'll see some sticky inflations of 0:05:21.440 --> 0:05:23.080 the first part of the year, in which case the 0:05:23.120 --> 0:05:24.559 next bet chair is going to be in an environment 0:05:24.560 --> 0:05:27.440 where inflation is running roughly three percent, the economy is 0:05:27.600 --> 0:05:29.760 fairly firm, and they're going to be trying to cut 0:05:29.760 --> 0:05:31.839 interest rates, and they're probably going to have trouble at first. 0:05:32.520 --> 0:05:34.000 It's going to be later in the year. 0:05:33.880 --> 0:05:36.719 When inflation starts to cool again you lose a little 0:05:36.720 --> 0:05:38.760 bit of that momentum where becomes a little bit easier 0:05:38.800 --> 0:05:39.560 of a conversation. 0:05:39.720 --> 0:05:42.360 I haven't answered anyone this question. I think it's fair 0:05:42.400 --> 0:05:45.440 to ask now after this press conference we talked about 0:05:45.480 --> 0:05:48.640 and the President with great negativity would talk about the 0:05:48.680 --> 0:05:53.279 Bidens stimulus, what does the Trump stimulus actually look like 0:05:53.720 --> 0:05:55.360 into the mid term elections. 0:05:56.640 --> 0:06:00.719 Well, you'll certainly you'll see that better or consumer for 0:06:00.760 --> 0:06:02.720 the first part of the year. It will fade into 0:06:02.760 --> 0:06:05.279 the election period of time, in which case then the 0:06:05.279 --> 0:06:07.880 focus is going to continue to be on affordability. So 0:06:08.000 --> 0:06:12.800 that's that's that's the opposite of stimulus from a sentiment perspective. 0:06:12.839 --> 0:06:15.200 And this is going to be the biggest challenge for 0:06:15.240 --> 0:06:16.840 the administration. They're gonna be dealing with all year and 0:06:16.839 --> 0:06:18.560 they're gonna have a lot of trouble. They've been throwing 0:06:18.600 --> 0:06:21.120 a lot of different things at the wall to see 0:06:21.120 --> 0:06:23.760 what will stick, and there is not that much they can. 0:06:23.960 --> 0:06:25.159 Change sticking right now. 0:06:25.240 --> 0:06:29.359 But any given central bank, whether it's it's Chairman Waller, 0:06:29.440 --> 0:06:33.920 Chairman Mirror and whoever, Chairman Pharaoh, whatever, whatever we see 0:06:34.000 --> 0:06:36.240 with the Central Bank, they've got to figure out what 0:06:36.360 --> 0:06:39.280 will stick with half of America flat in their back. 0:06:39.760 --> 0:06:43.200 What's the wolf research plan for that? Besides a check 0:06:43.200 --> 0:06:43.919 in the mail. 0:06:44.400 --> 0:06:46.360 There is not that much can be done. 0:06:46.600 --> 0:06:50.440 The one positive is not about anything the administration can do. 0:06:50.480 --> 0:06:52.479 It is a just a cyclical pickup in the economy 0:06:52.640 --> 0:06:54.840 that will help at the margin for a lot of 0:06:54.839 --> 0:06:56.920 the bottom end of the k who has been left out. 0:06:57.000 --> 0:06:57.760 They've been left out. 0:06:57.680 --> 0:07:02.080 For a wholes and Postner's saying is you know, you 0:07:02.120 --> 0:07:04.400 get a pick up in the economy, you get productivity, 0:07:04.880 --> 0:07:08.360 and it pulls up people. I mean, that's the reigning 0:07:08.440 --> 0:07:10.880 theory here John, into labor Day and into the end 0:07:10.880 --> 0:07:11.240 of the year. 0:07:11.480 --> 0:07:13.120 Just on the next FED share this from the Treasury 0:07:13.120 --> 0:07:15.520 Secretary in the last hour or so speaking to Yahoo, 0:07:15.560 --> 0:07:17.560 saying the pick may come in a week or so. 0:07:17.680 --> 0:07:19.280 It just feels like a rolling week. At the moment, 0:07:19.280 --> 0:07:21.560 we're waiting another week to get that FED chair pick. 0:07:21.760 --> 0:07:23.600 If you're just joining us, we're live on Bloomberg TV 0:07:23.720 --> 0:07:26.120 and on Bloomberg Radio. A FED rate decision behind us, 0:07:26.160 --> 0:07:29.240 a decision to keep rates unchanged after cunning at three 0:07:29.320 --> 0:07:32.640 consecutive meetings. We did get some dissent from two FED governors, 0:07:32.720 --> 0:07:35.000 one being Governor Walla, the other being Governor Myron looking 0:07:35.040 --> 0:07:38.000 for a twenty five basis point reduction. Let's get to 0:07:38.040 --> 0:07:40.640 Michael McKee, who was in that news conference with Chairman Powell. Mike, 0:07:40.680 --> 0:07:42.800 welcome back. I give you an A for Tryank, a 0:07:42.800 --> 0:07:44.880 big A for trying. What would you take away from 0:07:44.880 --> 0:07:45.760 the chairman moments ago? 0:07:47.400 --> 0:07:49.240 Well, I think we got the answer to whether Ja 0:07:49.320 --> 0:07:52.400 Powell would talk politics or policy He focused on policy, 0:07:52.520 --> 0:07:56.160 tried to stay away as much as possible from politics. 0:07:56.160 --> 0:07:58.120 When I asked him, and Nick tim Rose from the 0:07:58.120 --> 0:07:59.600 Wall Street Journal last him, and then he was asked 0:07:59.640 --> 0:08:01.680 about the all three of us got sort of the 0:08:01.680 --> 0:08:04.800 Seinfeld answer, No soup for you, He's not going to 0:08:04.800 --> 0:08:09.040 talk about that issue right now. In terms of policy, however, 0:08:09.360 --> 0:08:13.080 he seemed to be a little stronger on the outlook 0:08:13.200 --> 0:08:18.640 for the economy than his feelings about what rates would 0:08:18.640 --> 0:08:20.680 be doing. He didn't give us any indication that rates 0:08:20.720 --> 0:08:23.800 would be going down, but he didn't give us any 0:08:23.800 --> 0:08:27.080 indication that they think they're at neutral. He suggested we're 0:08:27.120 --> 0:08:29.320 at the high end of it, which would leave you 0:08:29.360 --> 0:08:32.120 open to a rate cut if you were able to, 0:08:32.200 --> 0:08:36.360 in other words, if inflation's going down and unemployment calls 0:08:36.400 --> 0:08:39.800 for it. But as Stephanie was saying, inflation's going to 0:08:39.800 --> 0:08:41.800 stay elevated for a while. So it's going to be 0:08:41.840 --> 0:08:45.120 hard in the remainder of Powell's term to have any 0:08:45.200 --> 0:08:47.600 rate cuts, and it'd be hard for somebody new coming 0:08:47.600 --> 0:08:50.320 in to get rate cuts right in the beginning, even if, 0:08:50.800 --> 0:08:55.920 as Powell says, they think that inflation x tariffs is 0:08:56.000 --> 0:08:58.319 running just about two percent or a little. 0:08:58.160 --> 0:08:59.240 Above on the committee. 0:08:59.280 --> 0:09:00.920 Might there is still a p U for an interest 0:09:01.000 --> 0:09:03.760 right reduction from both Governor Myron and a Governor Waller 0:09:03.840 --> 0:09:05.640 Mike for the paper of the Mischill counverage a little 0:09:05.640 --> 0:09:08.720 bit earlier immediately following the decision. What's the russal for 0:09:08.760 --> 0:09:10.840 that post from those two confidents on this FYMC. 0:09:12.520 --> 0:09:15.200 Well, we know Myron has sort of been ordered to dissent. 0:09:15.440 --> 0:09:17.920 It's interesting that he only dissented for twenty five basis 0:09:17.960 --> 0:09:21.280 points this time instead of for fifty. Either he thinks 0:09:21.320 --> 0:09:24.480 they've gone far enough or he didn't need to do 0:09:24.920 --> 0:09:29.439 fifty to keep the president's favor. For Chris Waller, the 0:09:29.480 --> 0:09:32.640 initial reaction I've seen from just about everybody who has 0:09:32.679 --> 0:09:35.280 written about it is that he's trying to keep his 0:09:35.440 --> 0:09:39.040 place in line for a possible promotion to FED chair 0:09:39.160 --> 0:09:43.520 replacing Powell. But I would imagine also that Waller, knowing 0:09:43.559 --> 0:09:47.080 him and knowing his reputation, will probably come out on 0:09:47.160 --> 0:09:51.040 Friday when the blackoutlifts, and give us some sort of 0:09:51.040 --> 0:09:55.040 statement on the economic reasons why he thinks a cut 0:09:55.080 --> 0:09:57.360 is important at this time. It's a little bit different 0:09:57.360 --> 0:10:01.400 situation now because the unemployment rate has go down. Inflation 0:10:01.720 --> 0:10:05.480 is according to the FEDS calculations which Paul talked about 0:10:05.679 --> 0:10:08.920 going to for the core PCEE hit three percent. So 0:10:09.080 --> 0:10:10.680 it's harder to make the case for a cut at 0:10:10.720 --> 0:10:12.680 the moment. So it'll be interesting to see what Waller 0:10:12.720 --> 0:10:13.280 has to say. 0:10:13.440 --> 0:10:15.840 My McKay, thank you, sir, stay close. Will come back 0:10:15.840 --> 0:10:17.600 to you a little bit later in the program. We 0:10:17.679 --> 0:10:19.840 talked about this. In the immediate aftermath of the decision 0:10:19.880 --> 0:10:22.240 that descend from Governor Waller for a twenty five basis 0:10:22.240 --> 0:10:25.520 point reduction, we heard from Vice Chair former Vice Chair 0:10:25.600 --> 0:10:28.920 Richard Clarder from Torson's Slock of Apollo, essentially calling it 0:10:29.080 --> 0:10:31.880 unfair to characterize this as a man purely voting for 0:10:31.880 --> 0:10:33.520 a reduction to keep his name in the running to 0:10:33.559 --> 0:10:34.320 become the Fed chair. 0:10:34.480 --> 0:10:34.720 Yeah. 0:10:34.800 --> 0:10:36.319 That has been a man who's delivered. 0:10:36.000 --> 0:10:39.160 Effective leadership, thought leadership at the Federal Reserve and call 0:10:39.280 --> 0:10:42.080 every single turn of the economy over the last several years. 0:10:42.160 --> 0:10:44.920 Yeah. I think Tourston summed it up nicely. This is 0:10:44.960 --> 0:10:49.560 a legit academic folks with major crowd out at Washington State. 0:10:49.600 --> 0:10:53.560 He wrote a very important, small, tiny, perfect paper in 0:10:53.679 --> 0:10:55.760 nineteen ninety one I believe it was. It made his 0:10:55.880 --> 0:11:00.680 reputation and it's on game theory, but accessible game theory, 0:11:01.200 --> 0:11:03.520 you know. Besides, he's like you, he's cutting chisels, he's 0:11:03.520 --> 0:11:04.520 lifting weights every day. 0:11:04.600 --> 0:11:06.240 I wish I lifted like he did. Have you seen 0:11:06.320 --> 0:11:06.880 him deadlift? 0:11:07.000 --> 0:11:11.120 Oh yeah, have you seen this? It's ridiculous. It's ridiculous 0:11:11.120 --> 0:11:12.760 how much weight he lifts. But yes, please can take 0:11:12.800 --> 0:11:13.760 a legitimate guy. 0:11:13.840 --> 0:11:16.640 I mean, Ken Rogo is a huge fan of what 0:11:16.720 --> 0:11:19.560 this academic has done. And he's delivered it. And here's 0:11:19.600 --> 0:11:21.680 the key thing, and I think attractive to the president. 0:11:21.960 --> 0:11:25.080 He's done it in a plain spoken way, and that 0:11:25.200 --> 0:11:26.959 may be to the benefit of President. 0:11:27.200 --> 0:11:28.880 I want to avoid the politics of this, Tom, but 0:11:29.120 --> 0:11:31.680 we've complained so much about group think of the Federal Reserve. 0:11:32.040 --> 0:11:34.319 We can't complain when someone sticks their necc count and 0:11:34.320 --> 0:11:35.959 says we need to do something different. And this is 0:11:35.960 --> 0:11:38.360 why I think we need to do this differently. Risk 0:11:38.400 --> 0:11:40.640 cut both ways. And we've seen that coming out in 0:11:40.679 --> 0:11:43.040 the pandemic. How wrong the consensus has been. Oh yeah, 0:11:43.200 --> 0:11:45.360 risk cuts both ways. 0:11:45.440 --> 0:11:48.640 It's the humility is in order, and I frankly I 0:11:48.679 --> 0:11:49.800 heard that from Chairman. 0:11:49.559 --> 0:11:52.320 Poulton Jeffrey Rosenberg of Black Rock joins us now to 0:11:52.400 --> 0:11:54.600 weigh in on all of this. Jeff, Welcome to the show, sir. 0:11:54.880 --> 0:11:58.319 The big takeaway for you, unchanged and a chairman who's 0:11:58.360 --> 0:12:00.480 not looking to change things for the next several months, 0:12:00.520 --> 0:12:03.240 would you agree, Yeah. 0:12:03.280 --> 0:12:06.400 I think the big takeaway on the policy side was 0:12:06.520 --> 0:12:09.160 the removal of the balance of risks from the labor 0:12:09.200 --> 0:12:12.040 market assessment. He got asked that question. I think the 0:12:12.040 --> 0:12:15.160 most interesting interchange was in the very first question, where 0:12:15.640 --> 0:12:18.280 he very clearly laid out he wasn't going to address 0:12:18.320 --> 0:12:20.760 the politics side, and then and got into the substance 0:12:20.920 --> 0:12:23.000 on the change and the balance of risks, and I 0:12:23.040 --> 0:12:25.720 think from the economic perspective, that was the most interesting 0:12:25.800 --> 0:12:30.559 thing in acknowledging that they moved away from both sides 0:12:30.600 --> 0:12:35.080 of the inflation and the labor market tension that was 0:12:35.120 --> 0:12:38.160 there previously, and that's an upgrade to the assessment. I 0:12:38.160 --> 0:12:41.360 think the near term implication is the bond market has 0:12:41.800 --> 0:12:43.800 the pricing right that you know, and then in the 0:12:43.840 --> 0:12:47.600 next six months there's really no real movement towards a 0:12:47.679 --> 0:12:50.760 cut now. Obviously it depends on the data and everything 0:12:50.840 --> 0:12:54.120 in terms of the expectations for the FMC is going 0:12:54.120 --> 0:12:56.360 to be in the back half of the year, Jeff Rozenberg. 0:12:56.480 --> 0:12:59.120 Maybe more important than the press conference is the American 0:12:59.160 --> 0:13:03.000 exceptional is at four oh two, Microsoft four oh three, 0:13:03.480 --> 0:13:07.680 Tesla four oh five, Meta four oh eight. IBM, honey, 0:13:07.720 --> 0:13:10.920 thank you so much for those times. I mean, what's 0:13:11.000 --> 0:13:15.560 keeping this fed going? Is this exceptional America? How do 0:13:15.640 --> 0:13:20.359 they keep that experiment going with their policy given politics. 0:13:21.840 --> 0:13:24.640 Yeah, that's a really important point, Tom, and it came 0:13:24.720 --> 0:13:26.640 up a little bit in the press conference. You just 0:13:26.679 --> 0:13:29.360 had to like listen for it. It's a point I 0:13:29.440 --> 0:13:33.280 made often, you know in these discussions that you know, 0:13:33.440 --> 0:13:37.520 where is the surprise coming from. It's coming from the 0:13:37.559 --> 0:13:41.200 consumption side. It's being supported by the wealth effect, and 0:13:41.240 --> 0:13:44.600 the wealth effect is being supported by all of those 0:13:44.640 --> 0:13:47.600 earnings and that AI story. So you know, we talk 0:13:47.640 --> 0:13:51.600 a lot about the macro economic perspective here, but it's 0:13:51.640 --> 0:13:54.240 really about the micro and the micro is the AI 0:13:54.400 --> 0:13:58.079 and the technology story, the concentration, and it's flowing through 0:13:58.240 --> 0:14:01.400 from the micro to the macro through the wealth effect. 0:14:01.440 --> 0:14:05.280 And that was why most economists are underclubbing GWth in 0:14:05.320 --> 0:14:08.280 twenty twenty five. It may be again the story in 0:14:08.320 --> 0:14:10.079 twenty twenty six. It's a little bit of the CA 0:14:10.280 --> 0:14:13.400 shaped economy story as well, because it's only a small 0:14:13.440 --> 0:14:18.320 portion that are benefiting, but that small portion overwhelmingly is 0:14:18.520 --> 0:14:20.520 influencing that consumption sething wrong. 0:14:20.600 --> 0:14:23.200 I look at that. I love how mister Rosenberg goes 0:14:23.200 --> 0:14:25.080 to the wealth effect as well. I want to frame 0:14:25.120 --> 0:14:28.520 out what we talked to Turston Slock about real GDP, 0:14:28.920 --> 0:14:31.800 which is being buoyant by the wealth effect, maybe with 0:14:31.880 --> 0:14:34.280 a little bit of add out inflation. Where do you 0:14:34.320 --> 0:14:37.680 see nominal GDP for the next chairman, John, We go 0:14:37.800 --> 0:14:40.200 out two meetings, then there's like one or two or 0:14:40.200 --> 0:14:43.240 three meetings. October twenty nine is a dead meeting because 0:14:43.280 --> 0:14:47.800 of the election. Where's nominal labor dayish in America? 0:14:48.320 --> 0:14:51.840 Yeah, you're going to be sitting five percent a little 0:14:51.880 --> 0:14:52.360 bit higher. 0:14:52.400 --> 0:14:54.480 Wealth effect, John, that's what we call this. 0:14:54.600 --> 0:14:56.320 Rosenberg's right, Yeah, I mean. 0:14:56.160 --> 0:14:59.440 And the wealth effect has been really important for the 0:14:59.480 --> 0:15:02.800 past couple years, partially just because it has broadened out 0:15:02.840 --> 0:15:07.120 beyond just the very wealthy. This is a consumer where 0:15:07.280 --> 0:15:10.360 younger people are involved in equities. More people, even though 0:15:10.360 --> 0:15:12.600 they don't have the lion's share of the equities, they 0:15:12.640 --> 0:15:16.640 are still more invested than many years past. So it's 0:15:16.720 --> 0:15:18.720 helping a big part of America, of course, not that 0:15:18.760 --> 0:15:20.240 bottom of the k which just continues. 0:15:20.280 --> 0:15:23.440 And yet by some measures, by some measures, Conference Board 0:15:23.840 --> 0:15:26.239 consumer confidence hasn't been lower in the last decade. 0:15:26.560 --> 0:15:30.240 Explained, Yeah, conference Board was weaker, you mish was stronger. 0:15:30.520 --> 0:15:32.560 I think the net of the two is a consumer 0:15:32.560 --> 0:15:37.400 that feels bad about the price level in the economy, 0:15:37.400 --> 0:15:40.200 which is something that cannot be changed easily by any means. 0:15:41.000 --> 0:15:45.280 But they're largely employed and they don't like the policy uncertainty, 0:15:45.280 --> 0:15:48.040 so they continue to spend because most of them are 0:15:48.040 --> 0:15:50.760 employed and continue to make decent wage gains. They also 0:15:50.800 --> 0:15:52.960 have they benefit from that wealth effect. But when you 0:15:53.000 --> 0:15:55.400 ask them, how do you feel about the economy, it's 0:15:55.440 --> 0:15:56.760 perhaps not great or. 0:15:56.760 --> 0:15:59.080 Maybe four five percent. Nominal GDP is not what it 0:15:59.160 --> 0:16:02.320 used to be, That is not as labor intensive. That 0:16:02.360 --> 0:16:04.880 this growth is coming from tech capex spent, that don't 0:16:04.920 --> 0:16:08.240 change in the lives of everyday Americans, at least not now. 0:16:08.320 --> 0:16:10.320 Isn't that a good explanation as to what's going on? 0:16:10.600 --> 0:16:11.480 Yeah, I think that's part of it. 0:16:11.480 --> 0:16:13.880 And also concerned about the future prospects because we all 0:16:13.920 --> 0:16:15.600 know AI is going to have important impacts on the 0:16:15.640 --> 0:16:18.880 labor market. You continue to see headlines about job cuts. 0:16:18.880 --> 0:16:20.920 The thing is that this part of the year there 0:16:21.000 --> 0:16:23.440 is often headlines about job cuts, and everybody gets scared 0:16:23.440 --> 0:16:25.280 in January about the labor market because they see all 0:16:25.280 --> 0:16:27.520 these headlines, and then it proved to be not such 0:16:27.520 --> 0:16:28.200 a big problem. 0:16:28.400 --> 0:16:31.640 Jeff Rosenberger, I'm sure you're aware of posen and ors 0:16:31.680 --> 0:16:36.600 eggs mapping out of a higher inflation, a more resilient inflation. 0:16:37.200 --> 0:16:41.880 What does your bond world do if we get inflation resilience. 0:16:43.760 --> 0:16:46.400 So a big part of that, Tom is in the 0:16:46.520 --> 0:16:49.040 term premium. Right, the FED, and what we saw in 0:16:49.080 --> 0:16:51.680 twenty twenty five was that the short end of the 0:16:51.760 --> 0:16:56.600 yield curve, shorter maturities, were very responsive to policy rates. 0:16:56.720 --> 0:16:58.600 It came up in the press conference today and the 0:16:58.680 --> 0:17:02.720 question about long term interest rates, and Powell basically admitted 0:17:02.760 --> 0:17:05.199 that longer term interest rates are going to be a function. 0:17:05.480 --> 0:17:08.120 He focused on the fiscal policy uncertainty, but there's more 0:17:08.160 --> 0:17:11.200 than that. There's real interest rates. The whole other picture 0:17:11.280 --> 0:17:15.320 to AI is an incredible shift in investment demand that 0:17:15.400 --> 0:17:18.320 raises real interest rates and the inflation piece to her question, 0:17:18.400 --> 0:17:22.120 Tom is about inflation risk premia, and as you move 0:17:22.200 --> 0:17:25.320 further out in time, there's more time for that uncertainty 0:17:25.560 --> 0:17:29.840 for all those reasons to affect inflation and the bond 0:17:29.880 --> 0:17:34.280 market impact is a steeper yield curve, reflective innominal space 0:17:34.320 --> 0:17:36.439 of greater inflation risk pre I. 0:17:36.480 --> 0:17:39.320 Look at this, Jeff. The question of where we are, 0:17:39.359 --> 0:17:41.760 and this goes back to dollar analysis of the last 0:17:41.800 --> 0:17:45.640 couple of days, is it's very nonlinear at some point. 0:17:45.920 --> 0:17:48.000 If I look, you know, to look at the benchmark 0:17:48.040 --> 0:17:50.960 ten year yield, how close are we to a point 0:17:51.000 --> 0:17:55.040 where you get accelerated tendencies if we unwind, that would 0:17:55.080 --> 0:17:58.680 be lower bond prices, higher yield. Is it ten beeps away? 0:17:58.840 --> 0:18:01.480 Is it thirty beeps away? Is it a fiction? It's 0:18:01.520 --> 0:18:04.520 just out there somewhere. Yeah. 0:18:04.640 --> 0:18:07.080 Again, it kind of came up in the context of 0:18:07.119 --> 0:18:09.440 the recent volatility in jgbs. 0:18:09.640 --> 0:18:10.480 You know, is there a. 0:18:10.480 --> 0:18:14.840 Nonlinear event for the US bond market. You know, it's 0:18:14.840 --> 0:18:18.240 a different market, It's much bigger, it's much deeper. There's 0:18:18.320 --> 0:18:22.200 a lot more impact in terms of price and substitution 0:18:22.320 --> 0:18:24.960 effects that can happen. He talked about it in terms 0:18:25.000 --> 0:18:28.080 of the fiscal side. It you know, the debt level 0:18:28.160 --> 0:18:32.080 is sustainable, but the path is unsustainable at some point. 0:18:32.200 --> 0:18:34.679 You know, no one really knows where that point is. 0:18:35.359 --> 0:18:37.600 We used to talk about it in the context of small, 0:18:37.600 --> 0:18:40.560 open market economies around one hundred percent eighty percent debt 0:18:40.600 --> 0:18:43.760 to GDP. That's a very different setup than for the 0:18:43.880 --> 0:18:45.120 US economy, and. 0:18:45.080 --> 0:18:46.119 We don't really know. 0:18:46.880 --> 0:18:50.040