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FOMC, Inflation, and the Economy · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. This is a treat.
0:21
Speaker 1: Jennifer Lee, Senior economist and Managing director BEMO Capital Markets
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Speaker 1: joins is via the phone, and Daniel D. Martino, Boots,
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Speaker 1: CEO and chief Strategists at Quick Intelligence Joints, is here
0:30
Speaker 1: in on our Bloomberg Interactive Broker Studio, and Jennifer, I'm
0:33
Speaker 1: gonna start with you. We had Christine Legard today, FED
0:37
Speaker 1: Chairman j Pal yesterday. Let's talk central banks. What's going
0:41
Speaker 1: on at there with their central bankers globally? You tell me,
0:45
Speaker 1: we'll both be the You know, I think I think
0:48
Speaker 1: everyone it was funny with just Jimmy in on the
0:50
Speaker 1: FED for a second. You know, I thought there was
0:52
Speaker 1: a little bit of something for everyone in that press conference,
0:54
Speaker 1: but I was leading towards the view that he was
0:57
Speaker 1: more hawkish than I think. What the market was initially thinking, um,
1:01
Speaker 1: the big of England. I have no idea it was.
1:03
Speaker 1: It was um. It was a bit mixed, but it
1:06
Speaker 1: sounds like they're towards the end of the red hikes
1:08
Speaker 1: and the c D was all in the hawki ish,
1:10
Speaker 1: so I was calling it was interesting how the entire
1:13
Speaker 1: governing Council seems to be on board this, this s
1:16
Speaker 1: S hawk Is ship. It has led by Christie Legard
1:18
Speaker 1: to Captain Legard um and I think you have to
1:20
Speaker 1: call her. There's an unwritten rule you don't call anybody
1:25
Speaker 1: else Mr or missus anything, but in her case it
1:27
Speaker 1: has to be Madam. Okay, I don't like, but yeah,
1:30
Speaker 1: I can see another ray high coming up after March.
1:32
Speaker 1: But you guy, it's all good. Be data dependent. I
1:33
Speaker 1: don't know about you know, the ECB and the b
1:35
Speaker 1: o E. But in terms of the FED. You know,
1:37
Speaker 1: my wife always says, I don't care what you say.
1:40
Speaker 1: Your actions speak much louder than your words, and they
1:43
Speaker 1: only easily good for nothing. Twenty five basis points not
1:47
Speaker 1: to mention the fact that um, they see disinflation. He
1:51
Speaker 1: admitted he waffled on the question Powell about whether or
1:55
Speaker 1: not anyone talked about a pause last time. He just said, no,
1:58
Speaker 1: point blank, end their data dependent. So what is the
2:03
Speaker 1: point of telling me what you plan to do maybe
2:06
Speaker 1: if the data goes your way, and then saying your
2:08
Speaker 1: data dependent, Danielle. So look, I think it's all very nuanced.
2:13
Speaker 1: We forget that the way the CPI is constructed is
2:16
Speaker 1: changing before our very eyes. Used car prizes which are
2:19
Speaker 1: coming down hard, that weight's going to be reduced. New
2:22
Speaker 1: York rents which spiked after the entire rest of the country.
2:26
Speaker 1: That's eleven percent of shelter in the in in inflation
2:29
Speaker 1: that's going to feed through with a lag. There are
2:31
Speaker 1: many cases to be made for inflation being higher in
2:33
Speaker 1: the second half of the year than what the market
2:35
Speaker 1: is currently anticipating. What I think was the most devish
2:39
Speaker 1: what I think turn markets around yesterday. The hardest was
2:43
Speaker 1: when he was specifically asked about the Jolts data, which
2:46
Speaker 1: was obviously stronger than what was That was that was
2:48
Speaker 1: why markets freaked out going into the FED yesterday, was
2:50
Speaker 1: Jolts was so strong north of eleven million openings again
2:52
Speaker 1: one point nine two per every for um for every
2:56
Speaker 1: opening um. Anyways, he did site that, but then he
2:58
Speaker 1: faded it. He's like, you know, when he faded, jolts
3:01
Speaker 1: markets turntail and went straight to the moon. Did I mean,
3:05
Speaker 1: did I misunderstand, did I maybe miss here? Or did
3:08
Speaker 1: he say financial conditions were tightening? He said? And then
3:12
Speaker 1: I have to ask in what universe does exactly, because
3:16
Speaker 1: because financial conditions have given back everything all the way
3:19
Speaker 1: until February two, it's as if the Fed has not
3:22
Speaker 1: hiked up one basis point forget twenty five or unusually
3:26
Speaker 1: large seventy five times four plus fifty plus twenty five.
3:29
Speaker 1: But but he did say that he anticipated that in time,
3:34
Speaker 1: ultimately financial conditions would reflect his restrictive stance of monetary policy. Again,
3:41
Speaker 1: yesterday was just wishy washy. Yeah, Jennifer, I want to
3:44
Speaker 1: get your opinion here. I mean, the markets have been saying, well,
3:49
Speaker 1: the FED officials and central bankers around the world have
3:51
Speaker 1: been saying, they've been talking tough, We're gonna keep rates higher,
3:53
Speaker 1: We're not going to turn tail. But the markets are
3:56
Speaker 1: saying not so fast. I mean, the market of pricing
3:58
Speaker 1: in rate decreases it the end of the year. How
4:00
Speaker 1: do you think about that dichotomy? Uh, you know, in
4:05
Speaker 1: many ways this is all, you know, the communications, and
4:07
Speaker 1: it sounds like it's being muddled again. UM, just given it,
4:11
Speaker 1: you know, just everyone here on this of his call
4:12
Speaker 1: to UM. But you know, we have been always of
4:15
Speaker 1: the view that you know, the rate cuts would not
4:17
Speaker 1: be uh seen this year. UM. But I guess the
4:20
Speaker 1: scary part is that you know that you know, as
4:22
Speaker 1: they I was saying, we were talking about the old
4:24
Speaker 1: data of the employment data. You know, he was saying
4:26
Speaker 1: that it's still you know that the job market is
4:28
Speaker 1: way too strong, and uh, it almost frightens me to think,
4:31
Speaker 1: you know, what are they willing to do to to
4:33
Speaker 1: cause the labor market to almost buckle? It seems, in
4:36
Speaker 1: order to bring inflation back down to two percent, and
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Speaker 1: it sounds like they're going to keep it, you know, higher,
4:41
Speaker 1: for longer. Alright, I have a listener who's written in Okay,
4:45
Speaker 1: he sent me a chart of different countries inflation data.
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Speaker 1: I just showed it to Danielle because I don't really
4:50
Speaker 1: know what to do with it. But UM, he's saying
4:55
Speaker 1: and asking a question, what happens to Marcus if we
4:57
Speaker 1: become like in the nineteen se and d's we pause
5:01
Speaker 1: and then have to hike again and this I thought
5:03
Speaker 1: was a concern, but I guess their data dependence, so
5:06
Speaker 1: they're willing to change the way they're going every single meeting. No,
5:11
Speaker 1: uh no, no, no, no, I'm going to push back
5:13
Speaker 1: on this because he was asked that question specifically yesterday
5:18
Speaker 1: and he said, I don't mind if we overtighten, because
5:22
Speaker 1: we cannot pull the genie back into the bottle if
5:25
Speaker 1: inflation gets re released. He's like, if we tighten too much,
5:29
Speaker 1: we've got tools to bring it back down. But he said,
5:32
Speaker 1: I will not stop until I'm convinced that we don't
5:36
Speaker 1: have to go back in. So he again, there was
5:39
Speaker 1: so much that he said yesterday that was flat out ignored,
5:42
Speaker 1: and he was very articulate and emphatic in saying, I
5:45
Speaker 1: don't care if we go too far. Well, Jennifer, the
5:49
Speaker 1: market still clearly doesn't believe that the FED is going
5:53
Speaker 1: to raise rates past you know, five percent um at
5:57
Speaker 1: least that's not the pricing on w I RP GO
6:00
Speaker 1: shows me that the market doesn't buy that, and the
6:02
Speaker 1: market still is pricing in cuts this year in fact too.
6:08
Speaker 1: So what does that mean to you at demo UM,
6:12
Speaker 1: that that that that that this FED doesn't have credibility
6:15
Speaker 1: or that the market thinks Pale is going to change
6:18
Speaker 1: his course. Why, Jennifer, I don't know if they're going
6:23
Speaker 1: to change their quarters. The market is thinking that. It
6:25
Speaker 1: sounds like they're almost ignoring everything he's saying. But you know,
6:29
Speaker 1: again for the way, what dinner I was just saying,
6:30
Speaker 1: I mean, he did see yesterday about history cautioning against
6:33
Speaker 1: prematurely loosening policy, and and he said that before. Was
6:36
Speaker 1: it Jackson hole when you know when he first made
6:38
Speaker 1: that comment, and he's still standing by that. And I
6:41
Speaker 1: think it's it's it's better too, as they have said before,
6:43
Speaker 1: to tighten too much than and then they're not tightened enough.
6:46
Speaker 1: And again they have you know, they have the tools
6:49
Speaker 1: to back down on that. Even um regard this morning,
6:52
Speaker 1: she was saying, do not students that are in faulved
6:55
Speaker 1: to bring in flash back down to target. And I
6:57
Speaker 1: think that's what again the same thing she's trying to
6:59
Speaker 1: make sure that they're indibility is intact um and it
7:03
Speaker 1: just just continue to talk. But of course, you know,
7:05
Speaker 1: the markets look seems like it's looking at the other way.
7:08
Speaker 1: All right, we are breaking this down. We have a
7:09
Speaker 1: FED round table here Jennifer Lee Sing your economists and
7:12
Speaker 1: managing director at Demo Capital Markets, and Daniel D. Martino Booth,
7:15
Speaker 1: CEO of quill uh Intelligence. Uh, Danielle, I'm looking at
7:20
Speaker 1: my ECO screen. I got a lot of ECO data
7:21
Speaker 1: this morning, and I see a lot of some negative numbers. Here.
7:23
Speaker 1: I mean factory orders X transportation minus one. The consensus
7:29
Speaker 1: was positive zero point two percent, durable goods X transportation
7:34
Speaker 1: negative zero point two percent? Consensus was negative point one?
7:38
Speaker 1: Am I seeing a recession in my economy? Here? What
7:41
Speaker 1: am I seeing with these negative numbers? You look, the
7:43
Speaker 1: National Beer of Economic Research follows um real disposable income ex.
7:47
Speaker 1: Government transfers. That's that's in the tank in dustphere Industrial
7:50
Speaker 1: production yuck. What we just got out feeds g d P.
7:54
Speaker 1: The data that you specifically sided the disappointed to the downside,
7:57
Speaker 1: especially on the on the shipments that feeds into g EP.
8:00
Speaker 1: Ben hers On is my favorite. Uh. He was at
8:03
Speaker 1: mcgar Advisors and I S Market bought them out then
8:06
Speaker 1: s in P level. Anyways, he basically created the GDP
8:09
Speaker 1: model and right now he's at negative one point five
8:12
Speaker 1: pc after the day we just got out this morning.
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Speaker 1: He's going to be taking that Q one number down
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Speaker 1: below negative one. The answer, yes, we are in recession. Okay, Jennifer,
8:22
Speaker 1: what do you think, Um, we still have you know,
8:26
Speaker 1: we've always been penciled and we've always had that uh
8:28
Speaker 1: two negative quarters by definition penciled into our into this year. Um.
8:33
Speaker 1: But you know, we continue to see you know, some
8:35
Speaker 1: sort of a bounce back or a little bit of
8:38
Speaker 1: recovery in the second half, but you know, averaging out
8:41
Speaker 1: to you know, still about almost like a lot years.
8:44
Speaker 1: So I think this year is almost going to be
8:45
Speaker 1: a write off still. Um. Of course, what happens next
8:48
Speaker 1: year is another story. But um, right now, I mean
8:51
Speaker 1: it's like, here's another thing. I mean, we were talking
8:53
Speaker 1: about the data this morning, and we know how extremely
8:55
Speaker 1: volatile the factor order's data are. But you know, we
8:57
Speaker 1: at least we got that bounced back yesterday and auto sales.
9:00
Speaker 1: I mean, of course it was a big drop in December,
9:02
Speaker 1: so it's almost like a wash for the two tho
9:04
Speaker 1: for the two months. So I wouldn't completely discount um, um,
9:08
Speaker 1: you know, for example, the US consumer just yet. But
9:10
Speaker 1: obviously all these rate hypes are finally finally trying starting
9:13
Speaker 1: to make make their mark on the economy Daniel. Let's
9:16
Speaker 1: talk about the labor market here again. We had an
9:19
Speaker 1: initial jobles claims print dight three thousand that was lower
9:22
Speaker 1: than expected. Another print below two hundred thousand, which you
9:24
Speaker 1: kind of tell me is is kind of important jobless
9:27
Speaker 1: non farm payrolls. Tomorrow we get that data. That consensus
9:31
Speaker 1: is a hundred ninety thousand added. Boy, this is a
9:35
Speaker 1: strong labor market. Is there anything that breaks this labor market?
9:38
Speaker 1: It sure looks like it's a strong labor market on
9:40
Speaker 1: the surface, doesn't it. Yes, because this morning Challenger Gray
9:43
Speaker 1: and Christmas came out and said laoffs in January for
9:45
Speaker 1: the month of January that was the weakest January since
9:47
Speaker 1: two thousand and nine. They said that hiring announcements were
9:51
Speaker 1: cut in by between December and January. And by the way,
9:56
Speaker 1: the Department of Labor, the Beuer of Labor Statistics, they've
9:59
Speaker 1: already pretty clear that they're having trouble with seasonal adjustments
10:02
Speaker 1: post pandemic. I've been tracking closely Google trends file for
10:07
Speaker 1: unemployment people searching for file for unemployment. It's tracking right
10:10
Speaker 1: alongside not seasonally adjusted continuing claims, which popped up again
10:15
Speaker 1: to one point nine million this week. They're up off
10:18
Speaker 1: their lows, not seasonally adjusted. Continuing under the surfaces. Under
10:22
Speaker 1: the surface, it's much weaker than it appears on the headline.
10:25
Speaker 1: But if we're talking about the Fed, J. Powell doesn't
10:27
Speaker 1: appear to care. He's going to follow the headlines that
10:29
Speaker 1: suit him. I can tell you all the Sweeney offspring
10:32
Speaker 1: are employed. That's good gradulations. Well they should be, right
10:36
Speaker 1: if there are two jobs out there for every single person.
10:40
Speaker 1: I mean, there's eleven million job openings. I thought. Again,
10:44
Speaker 1: the Boweing interview that guy Johnson did the other day
10:48
Speaker 1: was amazing, and the CEO Bowing said, look every time,
10:50
Speaker 1: basically said, I'm paraphrising every time Microsoft or Amazon lays
10:55
Speaker 1: off a smart engineer, we're gonna go scoop him up.
10:58
Speaker 1: So you do see some pink slips out there on
11:00
Speaker 1: the West coast, But that doesn't mean those people aren't
11:03
Speaker 1: getting jobs right away. Again, Yeah, I don't know. Bowe
11:06
Speaker 1: never should have left Seattle. By the way, that's my
11:07
Speaker 1: number one call, um, Jennifer. When when you take a
11:11
Speaker 1: look at this economy here, what's your real call here
11:15
Speaker 1: for twenty three four? I mean, is this recession if
11:19
Speaker 1: so is it a shallow one? How what what level
11:23
Speaker 1: does the economy in North America bounce back if, in
11:26
Speaker 1: fact we do go into a recession. How do you
11:28
Speaker 1: guys think about that? A female? Well, right now, everything's
11:32
Speaker 1: obviously fluid um as Again, as I said, you know,
11:34
Speaker 1: we're looking for a flat ish um um year for
11:38
Speaker 1: three decline the first half, better second half, and then
11:42
Speaker 1: you know, some sort of a recovery as as rate
11:43
Speaker 1: cuts start to take hold or start to kick in
11:45
Speaker 1: probably uh. You know again, this is all goes back
11:50
Speaker 1: to how it's how intentional the the set is going
11:53
Speaker 1: to be in keeping rates up at these restrictive levels
11:57
Speaker 1: um for how long as well? And what I guess
11:59
Speaker 1: what is a little bit is puzzling to I think
12:02
Speaker 1: everyone is going to be like again the job market
12:04
Speaker 1: and the fact that we still have for ten million
12:06
Speaker 1: job openings out there. You know, at some point those
12:09
Speaker 1: ones are gonna be wants to be cut first. Um.
12:11
Speaker 1: It's almost like a lot of fat before you get
12:13
Speaker 1: to the bone. Um. But we still expect, you know,
12:16
Speaker 1: unemployment to start rising the longer that the rates still
12:20
Speaker 1: you know, the fed stas um um um height with
12:23
Speaker 1: their with your conditions you know, and keep rates higher
12:26
Speaker 1: for longer. So if I could just jump in here
12:29
Speaker 1: on jolts, I think one of the reasons that the
12:30
Speaker 1: FED chair faded it yesterday's because joint research between the St.
12:33
Speaker 1: Louis FED and the Dallas FED showed that about of
12:36
Speaker 1: all job openings for the purpose of coaching your closest
12:38
Speaker 1: competitors worker. That's what I was wondering about. Why is
12:41
Speaker 1: the JOLTS number so strong when a DP isn't, Because
12:44
Speaker 1: because you're you're trying to get your competitors worker and
12:45
Speaker 1: not have to pay to train them. Just like going said,
12:47
Speaker 1: all right, good stuff, good stuff FED round table, like
12:51
Speaker 1: only Bloomberg Radio can do. Jennifer Lee, Senior commiss and
12:54
Speaker 1: Managing Director with BMO Capital Markets, joining us on the
12:56
Speaker 1: phone at Daniel D. Martino, Booth, CEO and Chief straps
13:00
Speaker 1: it just at Quill Intelligence, joining us live here in
13:02
Speaker 1: a Bloomberg Interactive Broker studio, breaking down the FED speak
13:06
Speaker 1: we've heard over the last twenty four hours. ECO data
13:08
Speaker 1: lots going on a lot across winds for investors. I
13:13
Speaker 1: want to bring in right now Hugh Roberts at quant
13:16
Speaker 1: Insight to talk to us about what we saw yesterday, um,
13:20
Speaker 1: with the FED and what we're seeing today with the
13:22
Speaker 1: b o E and the e c B. Basically, all
13:23
Speaker 1: this big central bank action is moving markets pretty substantially. So, Hugh, uh,
13:29
Speaker 1: you were with us on television yesterday, and I'm glad
13:32
Speaker 1: you could join us on radio today we get a
13:33
Speaker 1: little bit more time. UM, let me first get your
13:36
Speaker 1: reaction to what we saw yesterday. Was it more devish
13:39
Speaker 1: than you would have expected? Um? Well, I think the
13:43
Speaker 1: biggest takeaway is that Chair Powell and the broader Fed
13:47
Speaker 1: clearly think about financial conditions, um, in a different way
13:51
Speaker 1: to most of the mainstream market. Was that just a
13:54
Speaker 1: slip up or two? I mean, so Powell was asked
13:56
Speaker 1: about financial conditions loosening and their looser by Bloomberg's measure,
14:01
Speaker 1: by Goldman Sachs measure, by Wall Street measures than they
14:04
Speaker 1: have your own, uh, your own measures, and they have
14:07
Speaker 1: been in like a year, right, So was it just
14:09
Speaker 1: a mistake that he made? Yeah? I mean I've seen
14:13
Speaker 1: some conspiracy theories. I have to confess I've missed that
14:15
Speaker 1: he actually suffered from about the COVID, And I saw
14:18
Speaker 1: one conspiracy theory saying, you know, was it just a
14:20
Speaker 1: subpar performance because he's still suffering a little bit on
14:24
Speaker 1: the health front. I don't know about that. I mean,
14:27
Speaker 1: I think taking a step back, there's always a danger
14:30
Speaker 1: that we all start to over analyze and overthink certain things.
14:34
Speaker 1: You know, we have had the most interesting bit of
14:36
Speaker 1: pushback in the last twenty four hours that I've seen
14:39
Speaker 1: is to fed unofficial press boatsman operating in a divorce.
14:42
Speaker 1: Street journal has today pointed us in the direction of
14:45
Speaker 1: a brain Ard speech from two weeks ago and which
14:49
Speaker 1: opens with a comment about overall financial conditions. And two
14:54
Speaker 1: things come out from that speech. One is just the
14:56
Speaker 1: timeframe that they're looking almost a year on year. They're
15:00
Speaker 1: looking at a much longer history compared to the likes
15:02
Speaker 1: of ourselves, who say, well, look at the unwinding of
15:06
Speaker 1: the financial conditions we've seen in the last six months
15:08
Speaker 1: or so. And then secondly, if you look at the
15:12
Speaker 1: specific references in that speech, there is no eputy market
15:16
Speaker 1: com opponent and so no wealth effect component. It's sites
15:19
Speaker 1: will yield in particular, that's probably the most overweighted um variable.
15:24
Speaker 1: But hang on you so um so. Brainerd also said
15:27
Speaker 1: financial conditions are tightening, and this is interesting because I
15:32
Speaker 1: was talking with you about this yesterday. If you take
15:35
Speaker 1: out the stock market effects, aren't financial conditions still pretty loose? Yeah,
15:43
Speaker 1: So that's that would be the time scale point that
15:45
Speaker 1: we're looking at on our measure, and like your measure,
15:48
Speaker 1: I think the unwind of the easing has come in
15:51
Speaker 1: the last six months or so and the brain our
15:53
Speaker 1: speech and I think maybe there, whether it was a
15:55
Speaker 1: slip of the tongue or just whatever it was from
15:57
Speaker 1: Powell yesterday, was actually a much longer horizon. They were
16:00
Speaker 1: saying over the duration of their tightening cycle from where
16:03
Speaker 1: we were a year ago, conditions are still tighter. So
16:07
Speaker 1: it's to a degree, it's where you stop the clock,
16:10
Speaker 1: if you see what I mean, Hugh. So there is
16:13
Speaker 1: a disconnected obviously, between what we're hearing from the central bankers,
16:16
Speaker 1: including Madame Leguard today, in terms of you know, talking
16:20
Speaker 1: the talk and a tough fight. We're gonna keep rates
16:23
Speaker 1: higher for for longer, and the market is just not
16:26
Speaker 1: buying it. How unusual is that dichotomy in the marketplace.
16:31
Speaker 1: It's one of the more aggressive examples, I agreed, hopefully,
16:34
Speaker 1: I mean to see such a coordinated response. And there
16:38
Speaker 1: were the events we had this week between the third
16:41
Speaker 1: yesterday d CD in the Bank of England, and in
16:44
Speaker 1: each instance for the bond market to react the way
16:47
Speaker 1: there is the repricing we've seen at the front end.
16:51
Speaker 1: I'm struggling off the top of my head to think
16:53
Speaker 1: of many examples where the market has so aggressively and
16:57
Speaker 1: so uniformly flown in the opposite action to the manta
17:02
Speaker 1: from central banks. I agree where we're in fairly unpaceded
17:05
Speaker 1: tempories and it does make you think that that we're
17:08
Speaker 1: coming to a rather severe pitch point at some stage.
17:13
Speaker 1: Either the markets pricing has to be vindicated um or
17:17
Speaker 1: we're just going to make this worse. And I guess
17:19
Speaker 1: that's part of the reasons, I guess to justify our actions.
17:21
Speaker 1: In terms of us all trying to analyze the FED
17:24
Speaker 1: going into last night's meeting, I think one of the
17:26
Speaker 1: motivations everyone had in the back of their mind was that,
17:29
Speaker 1: you know, is the whole kind of stitching time type
17:32
Speaker 1: approach that you need to get in front of this. Otherwise,
17:36
Speaker 1: if you allow this kind of almost a rational exuberance,
17:39
Speaker 1: you could classify it as to get too far carried
17:41
Speaker 1: away that when the day of reckoning comes and if
17:43
Speaker 1: the FED and the ECB version of events is proved right,
17:47
Speaker 1: then the repricing then become that much more severe. And
17:51
Speaker 1: the problem with that, it's not just from a financial
17:52
Speaker 1: market perspective, but the transmission through to the real economy.
17:55
Speaker 1: Does it then start to really really make what could
17:58
Speaker 1: have been a soft landing, that could they such defeat
18:00
Speaker 1: from the jaws of victory the soft landing, but the
18:03
Speaker 1: repricing makes it a heart on me. So that's because
18:06
Speaker 1: the market is pricing in a couple of cuts this year,
18:08
Speaker 1: and you're saying that the FED just holds high, you know,
18:12
Speaker 1: after another rate rise or two at five and a
18:15
Speaker 1: quarter percent, and doesn't cut by the end of this year,
18:19
Speaker 1: even if the data shows they should. That's snatching defeat
18:22
Speaker 1: from the jaws of victory. Yeah. That that and also,
18:26
Speaker 1: as I say, just the fact that if you have
18:29
Speaker 1: a too big a disconnect between what the central bank
18:32
Speaker 1: is trying to do and what financial markets are pricing,
18:35
Speaker 1: then at some point something has to give. That elastic
18:37
Speaker 1: can only go so far, I would argue, And then
18:39
Speaker 1: there comes a point where if the FED version of
18:43
Speaker 1: events proves true and the higher for longer scenario wins out.
18:46
Speaker 1: The implication for that is quite an aggressive sell off
18:49
Speaker 1: and risky assets, and that hurts the real economy through
18:52
Speaker 1: the wealth effect for equities, corporate America's ability to finance itself,
18:56
Speaker 1: through why the credit spreads stronger. Dollar took sense. So
19:01
Speaker 1: h when you look at the market over the past
19:03
Speaker 1: two days, I mean yesterday a strong move, today, very
19:07
Speaker 1: strong move. We got the SMP up one point four percent,
19:09
Speaker 1: the NASDAK up, but two point nine just really significant moves.
19:14
Speaker 1: Does that seem like an overreaction to you from this
19:17
Speaker 1: market or just more of the same. This is a
19:20
Speaker 1: market that's really much more optimistic or bullish than maybe
19:24
Speaker 1: central bankers are. Yeah, I mean we were inclined, um.
19:28
Speaker 1: I think up until the last twenty four hours, were
19:30
Speaker 1: inclined to think that there was a bit of positioning
19:32
Speaker 1: and sentiment dynamics at work. And I think sentiment and
19:36
Speaker 1: equity market has been poor, but positioning probably wasn't as
19:39
Speaker 1: bearish as everyone thought. I think there was an element
19:42
Speaker 1: of a straight rotation. Winners have become twenty twenties lag
19:46
Speaker 1: ards and vice versa, um and on our modeling, although
19:51
Speaker 1: that proven like NASDAK or XLK or anything vaguely tech related,
19:56
Speaker 1: was modestly rich, it wasn't crazy extended. It's now starting
20:01
Speaker 1: to look a little bit more stretched, and there's lots
20:03
Speaker 1: sun to look like the move is moving further away
20:06
Speaker 1: from macro fundamentals. So um, I think up until now
20:10
Speaker 1: we would have said it's been a relatively orderly moved,
20:13
Speaker 1: but this is beginning to raise eyebrows. All right, Hugh
20:16
Speaker 1: Key question your officers are based at right there in
20:18
Speaker 1: Liverpool Street, right in the city of London. How is
20:21
Speaker 1: the city of London today? Today's Thursday crowded? How's the
20:25
Speaker 1: two are people back in your office? What's gone on
20:26
Speaker 1: in the city. Yeah, it feels like I mean buying
20:30
Speaker 1: large things about to normal. I mean that the kind
20:32
Speaker 1: of PrePost COVID dynamics I think has largely worked through.
20:36
Speaker 1: There's a lot of hybrid working models. But on the
20:38
Speaker 1: whole foot traffic is normal obviously, where the UK is
20:41
Speaker 1: a slant slight outliers of all the industrial actions which
20:44
Speaker 1: has just made things much worse. So you know, on
20:47
Speaker 1: any given day there's a tube or a trained strike,
20:49
Speaker 1: or if trape teachers are striking, then some people have
20:52
Speaker 1: to stay the home and do you know kind of
20:53
Speaker 1: our home schooling and childcare, so we haven't had an
20:57
Speaker 1: uninterrupted period of normal what the normal might be. To
21:01
Speaker 1: give you a goods on the fight, alright, good stuff,
21:04
Speaker 1: Hugh Roberts. The offices are Liverpool Street, really close to
21:07
Speaker 1: Bloomberg's London headquarters at Queen Victoria Street, just as films
21:11
Speaker 1: throw there in the City of London by bank yep,
21:14
Speaker 1: right by bank, but they're there. Asses are right on
21:16
Speaker 1: the Liverpool Street station, which is an awesome train station,
21:19
Speaker 1: great tube stop. Kind of get pretty much everywhere from there.
21:22
Speaker 1: Some good stuff. Hugh Roberts. He's head of analytics at
21:24
Speaker 1: quant Insights, based in the UK, giving us some thoughts
21:28
Speaker 1: on these markets. Let's do something insane right now. We'll
21:34
Speaker 1: rip up the script. I've never had a five person
21:37
Speaker 1: round table. Let's bring Carl Rickadonna without Jess Matten. You're
21:41
Speaker 1: gonna stay here. Bloomberg Equities reporters Katie Greifeld, Cross Asset,
21:46
Speaker 1: Maven and Carl Rickadonna joins us right now from BNP.
21:50
Speaker 1: Perry Boy he's chief US economist. UM, anyone feel free
21:54
Speaker 1: to jump in. But Carl, let's throw this to you.
21:56
Speaker 1: What do you make of Jerome Powell, the Chair of
21:59
Speaker 1: the FED, who arguably has um easy access to the
22:03
Speaker 1: Bloomberg Terminal to everybody else's f con um index. Yesterday
22:08
Speaker 1: he said financial conditions are tighter. What on earth was
22:12
Speaker 1: he talking about? Well, Matt, I was as perplexed as
22:16
Speaker 1: everyone else sitting around the table. Good morning to you all.
22:19
Speaker 1: But I also then quickly said, well, if if they're
22:23
Speaker 1: not looking at f CON on the Bloomberg Terminal, which
22:26
Speaker 1: I think is a great index, which I've worked with
22:29
Speaker 1: a lot in the past, they're probably looking at one
22:32
Speaker 1: of their own indices. And so I pulled up that
22:34
Speaker 1: Chicago Fed index and sure enough, it's a little bit
22:38
Speaker 1: less of a dramatic story than what f CON is showing.
22:41
Speaker 1: But if we look at that Bloomberg index, it's telling
22:43
Speaker 1: us financial conditions are easier now than they were at
22:48
Speaker 1: the start of the FEDS tightening campaign last year. So,
22:51
Speaker 1: regardless of whatever Powell said during the press conference, UH,
22:55
Speaker 1: Bloomberg financial conditions, which has a high correlation with GDP.
22:59
Speaker 1: It's been cited in FED research papers because of its
23:03
Speaker 1: prowess as a predictive tool for a GDP growth economic activity. UH,
23:08
Speaker 1: it is easy and it's telling you. Unless they fixed
23:11
Speaker 1: the narrative and financial markets to get the message, we
23:15
Speaker 1: could be looking at a re acceleration in the economy,
23:18
Speaker 1: which in turn would undermine all of their efforts to
23:22
Speaker 1: get the inflation genie back in the bottle. And we
23:25
Speaker 1: could be looking at, you know, a very difficult inflation
23:28
Speaker 1: landscape going forward, which is not what the Fed wants
23:31
Speaker 1: to be confronted. So, Carl, this is Katie Greyfeld. It
23:34
Speaker 1: is thrilling to talk to you. I will say, my
23:36
Speaker 1: heart rate is sixty right now, pretty high for me.
23:40
Speaker 1: I'm really happy to hear that you also went to
23:42
Speaker 1: the Chicago Fed measure. Uh, and it does. I mean
23:45
Speaker 1: the absolute levels are a little bit different from the
23:47
Speaker 1: Bloomberg measure. By the Chicago Feds absolute level, they are
23:51
Speaker 1: tighter than they were at the start of the hiking cycle,
23:53
Speaker 1: but still they've been lostening. I want to talk about
23:56
Speaker 1: why it matters. I mean, you mentioned that this could
23:59
Speaker 1: under mind the FEDS you know, inflation fighting campaign, but
24:04
Speaker 1: walk us through how that actually works. Because I feel
24:07
Speaker 1: like we talk about financial conditions all the time without
24:10
Speaker 1: actually defining them. Yes, so financial conditions, whether it's a
24:14
Speaker 1: Bloomberg metric or the Chicago Fans metric. The Bloomberg metric
24:18
Speaker 1: very efficient because it has just a narrow um a
24:22
Speaker 1: small number of inputs. I think it's probably about ten inputs.
24:26
Speaker 1: Chicago FED has something like one dred inputs. But they
24:29
Speaker 1: both tell the same story. So even though the Chicago
24:32
Speaker 1: Fed index has been a little less dramatic in the
24:36
Speaker 1: signal at sending UH, these things matter because either index
24:41
Speaker 1: correlates well with GDP growth, and we know the Fed
24:44
Speaker 1: has to slow the economy down from that twelve and
24:47
Speaker 1: a half percent growth rate that we were registering in
24:50
Speaker 1: the middle of one and it has to hold the
24:53
Speaker 1: economy at a below trend growth rate. Now, some folks
24:57
Speaker 1: like myself will say that means they have to cause
25:00
Speaker 1: a recession to create some dislocation in the labor market.
25:04
Speaker 1: Other folks, including Jerome Powell and a lot of SET
25:07
Speaker 1: officials including that I think Governor Waller as well, are saying, no, no, no,
25:11
Speaker 1: we we don't need to cause recession. We can just
25:13
Speaker 1: push growth below its trend rate and hold it there
25:16
Speaker 1: for an extended period of time. That will create slack
25:19
Speaker 1: in the economy, ease labor pressures, and easy inflation. Pressures
25:24
Speaker 1: as well. Um, that's something that they've actually never done
25:27
Speaker 1: in the past. So that's why we're a bit skeptical
25:29
Speaker 1: that it won't ultimately tilt us into recession. If you
25:32
Speaker 1: push the economy to a slow enough growth rate, it
25:35
Speaker 1: becomes very sensitive to exogen the shocks and and resilience
25:39
Speaker 1: won't be the story. Fragility will be the story, and
25:41
Speaker 1: then you get a recession anyways. But nonetheless, if you're
25:45
Speaker 1: not keeping the brake pedal on, and financial conditions tell
25:48
Speaker 1: us how well the FET is keeping their put on
25:50
Speaker 1: the brake pedal, then you're not going through that low
25:53
Speaker 1: growth regime that accomplishes your inflation goals. I think that's
25:57
Speaker 1: a real risk. That's where the tension is in the markets,
25:59
Speaker 1: which are still saying the FED will stop sooner and
26:02
Speaker 1: start easing sooner than what the Fed is saying. So
26:06
Speaker 1: just to put a full circle around it, I think
26:09
Speaker 1: we've seen this drama play out before. It was last summer.
26:14
Speaker 1: In July, the Fed teas the idea that they may
26:17
Speaker 1: need that there would be some point where they would
26:20
Speaker 1: be willing to downshift the pace of tightening. The markets
26:23
Speaker 1: went haywire, went too far with that narrative. And then
26:27
Speaker 1: we go from the July A poem C meeting to
26:30
Speaker 1: the Jackson Hole Fed Policy Conference in late August uh,
26:33
Speaker 1: and Jerome pal comes in, rips up the script uh
26:37
Speaker 1: and delivers a very hawkish direct message saying, Okay, markets
26:41
Speaker 1: are not listening, let's all get on the same page here. Uh.
26:44
Speaker 1: And he largely accomplished that goal. But then what kind
26:47
Speaker 1: of right right back to square one where they need
26:50
Speaker 1: to have a reprise, if you will, or a rerun
26:54
Speaker 1: of that Jackson Hole messaging campaign. Carl, this is jas.
26:57
Speaker 1: It's good to talk to you again. Something that I'm
27:00
Speaker 1: looking ahead too. We will get another update on cp
27:02
Speaker 1: I on Valentine's Day, and so this will be for
27:04
Speaker 1: the month of January. And I am aware that the
27:07
Speaker 1: CPI there is going to be a rewaiting, and this
27:09
Speaker 1: does happen at times. But I have talked to certain
27:12
Speaker 1: economists who have argued that potentially this could push down
27:16
Speaker 1: cp I faster just given what's happening. If you're looking
27:20
Speaker 1: at the rewaiting, potentially there could be larger weights and
27:23
Speaker 1: autos maybe notably rents potentially could fall. But then I've
27:26
Speaker 1: had other economists argue that you might actually see more
27:28
Speaker 1: of a boost in the first quarter towards core c
27:32
Speaker 1: p I, and so it's kind of been split when
27:33
Speaker 1: I've talked to economists, and so I was curious if
27:35
Speaker 1: that's something that you have been focusing on just yet
27:38
Speaker 1: and what your expectations are, if there is could be
27:41
Speaker 1: any sort of changes there as far as what that
27:44
Speaker 1: could mean when we are still looking very closely at
27:46
Speaker 1: those inflation numbers. Yes, So to kind of summarize the
27:50
Speaker 1: landscape for the listeners, UH, they rewait the components in
27:54
Speaker 1: the CPI so that the waiting factors we give to
27:58
Speaker 1: the various components, UH, to the extent that in recent
28:01
Speaker 1: years has been more spending on goods, which was the
28:04
Speaker 1: story during the pandemic. We couldn't go to restaurants, we
28:06
Speaker 1: couldn't go on vacation, we bought lots of things on
28:10
Speaker 1: online and whatnot. We see it in the income and
28:13
Speaker 1: spending numbers, and it will be reflected in the CPI
28:16
Speaker 1: numbers as well as those weighting factors change. So if
28:19
Speaker 1: goods inflation is running cooler and we're giving them a
28:22
Speaker 1: higher weighting factor, that could reset the c p I
28:26
Speaker 1: UH marginally or incrementally lower. It doesn't change the narrative though,
28:32
Speaker 1: So this is a little bit of dithering over the details. Uh,
28:36
Speaker 1: it won't happen in the CORE PC deflator or the
28:39
Speaker 1: FEDS PC deflator, the metric they like to track. Um.
28:44
Speaker 1: So so it's a it's a nuanced story, but it
28:46
Speaker 1: doesn't change the inflation landscape. Is the cp I now
28:49
Speaker 1: different from what we had in the seventies? And by
28:52
Speaker 1: the way, Matt Miller here, Uh, I have a beard.
28:54
Speaker 1: Um do you do you think the comparisons to the
28:58
Speaker 1: seventies are fair because a lot of people are asked today,
29:00
Speaker 1: what if you know this devish fed has to turn
29:02
Speaker 1: hawk comes back. I remember elements of the seventies, Paul.
29:08
Speaker 1: And there was there was some great television programming in great,
29:11
Speaker 1: great hunt, great music back then, Paul. Uh. But to
29:15
Speaker 1: Matt's point, so that the CPI does evolve over time.
29:18
Speaker 1: So of course the waiting factors are different than where
29:21
Speaker 1: we were in the seventies. So how much we spend
29:23
Speaker 1: on rent and housing versus goods or food or energy,
29:27
Speaker 1: that has evolved over time. Also, there have been methodological
29:30
Speaker 1: changes to the CPI, so the way they count housing
29:33
Speaker 1: costs and rents and shelter has changed a lot. So
29:37
Speaker 1: it's not your father's, or we'll say it's not Paul
29:40
Speaker 1: Sweeney's c P i UM. But nonetheless it gives you
29:44
Speaker 1: a sense of the direction of price pressure in the economy.
29:47
Speaker 1: The other key difference I'll draw to the nineteen seventies,
29:50
Speaker 1: so we can say, sure, inflations running as hot as
29:52
Speaker 1: it was in the early nineteen eighties, it's a very
29:56
Speaker 1: different landscape. So the inflation that Paul Vulker had to
30:00
Speaker 1: confront in the early nineteen eighties was really fifteen years
30:04
Speaker 1: in the making, right, It started in Lyndon Johnson's Great Society,
30:09
Speaker 1: and the spending on the Vietnam War, two oil crises
30:12
Speaker 1: that changed to foreign exchange policy globally, a lot of
30:16
Speaker 1: shocks that had eroded the psychology. Uh, the problem that
30:20
Speaker 1: Jerome Palace confronting was really fifteen months in the making,
30:23
Speaker 1: So much more surgical solution, all right, Carl great stuff
30:26
Speaker 1: as always called ricka Donna chief US economists from BNP,
30:30
Speaker 1: Parry ba phoning it in. I will note, but Jess
30:33
Speaker 1: metten he was here in the office yesterday, was he? Yeah? Okay,
30:36
Speaker 1: so we'll give him some credit there, Jess Met and
30:37
Speaker 1: Katie Gray felt there from Bloomberg News there in our
30:39
Speaker 1: Bloomberg Interactive Broker studio, they get the gold stars today.
30:44
Speaker 1: All right, kids, we all know the adage don't fight
30:48
Speaker 1: the Fed, but the market seems to be fighting the
30:50
Speaker 1: Fed to fetch talking tough of the markets just not
30:52
Speaker 1: buying it. Let's break down what's going on out there
30:55
Speaker 1: in the market. We get the equity markets ripping again today,
30:57
Speaker 1: You've got yields coming down pretty substantially. Let's check in
31:00
Speaker 1: with Ben Emmets. He's a senior portfolio management had a
31:02
Speaker 1: fixed income at New Edge Wealth. He joins us here
31:04
Speaker 1: in our Bloomberg in our actor broker studios. So, Ben,
31:07
Speaker 1: we had the FED yesterday, the Bank of England, uh,
31:10
Speaker 1: the ECB today, a lot of people talking tough as
31:13
Speaker 1: it relates to holding the line on rates, but the
31:15
Speaker 1: markets saying not so much. What do you make of it? Yeah,
31:18
Speaker 1: the tougher they sound and the more hawkish they sound,
31:21
Speaker 1: again not a reason for markets to rally. And I
31:24
Speaker 1: think it was really triggered by that where disinflation that
31:27
Speaker 1: Powell said yesterday. So the market is discounting and even
31:30
Speaker 1: faster disinflation for cpis was listening. That means CPI goes
31:34
Speaker 1: down even quicker faster than but the feeders forecasting, and
31:38
Speaker 1: it's the Fed because he used to talk tough. Then
31:41
Speaker 1: the market says, okay, you're not only going to reach
31:43
Speaker 1: two percent for sure, you're going to reach it much faster.
31:46
Speaker 1: And it triggers this major valley because at the end,
31:49
Speaker 1: if you if you do get faster to percent inflation one,
31:52
Speaker 1: you don't have to hike anymore too. At some point,
31:55
Speaker 1: the Fed also may have to consider the couprights and
31:57
Speaker 1: playing into the market expectations. So I think especially their
32:01
Speaker 1: data dependent ben I mean, why uh, why try even
32:06
Speaker 1: to talk tough in terms of your forward guidance. If
32:10
Speaker 1: you say in the same breath that your data dependent,
32:13
Speaker 1: you know, it's like I'm never gonna cut rates. I
32:15
Speaker 1: will cut rates of the data tells me too. Yeah,
32:18
Speaker 1: I totally agree. In fact, you know probably even yes.
32:20
Speaker 1: They said like so yeah, if the markets are right,
32:23
Speaker 1: then yeah, we should factor it into our policy. Why
32:27
Speaker 1: would you then say that you're going to high grade
32:29
Speaker 1: So what's interesting math is that you know you could
32:33
Speaker 1: maybe next weeks he speakers come out if they started
32:36
Speaker 1: more and more leaning towards that idea. Yeah, and the
32:38
Speaker 1: market maybe right, that sounds more dovish, right, that market
32:41
Speaker 1: is getting a different sense. Okay, But as inflation story
32:44
Speaker 1: is not over at you getting them at some point
32:46
Speaker 1: two dovish speakers out there. That's the other side of that.
32:49
Speaker 1: At this moment, it's about too hawkish and there for
32:51
Speaker 1: the market valley. So um, how far can this continue?
32:55
Speaker 1: It does look much like a source source squeeze to me.
32:57
Speaker 1: You know, the nastac popping really higher this way, that's
33:00
Speaker 1: where the biggest short positions are. So that's I think
33:03
Speaker 1: part of the reason why we have markets higher. Well,
33:05
Speaker 1: we had fed. I mean, I'm sorry ECB president of
33:08
Speaker 1: Madame Legard this morning. I don't know, she sounded pretty
33:11
Speaker 1: hawkish to me. Fifty basis points and there's more to come.
33:15
Speaker 1: But you know, I'm looking at the German tenure. You know,
33:19
Speaker 1: it's it's down to two point zero seven percent of
33:22
Speaker 1: twenty one basis points today. So again that rhetor did
33:25
Speaker 1: not work. No, especially when she said we intend to
33:28
Speaker 1: hike intend Like you guys really touched that language and
33:33
Speaker 1: you intend to do something that means that you may
33:35
Speaker 1: or may not. And you know, I think that the
33:38
Speaker 1: German bude market, the entire periphery by the way, really
33:41
Speaker 1: collapsing in yields. So they probaced out the access of
33:44
Speaker 1: hikes that were maybe through in the back back part
33:47
Speaker 1: of the three. And not forget that the ECB put
33:51
Speaker 1: in place a program to ensure that spreads stay relatively
33:56
Speaker 1: stable while they were hiking rates. So that too, I
33:58
Speaker 1: think is supporting market now. But that's their job keeping
34:02
Speaker 1: spread stable. He's learned. He learned from not saying we're
34:06
Speaker 1: not in the business to collapse preads yet you are.
34:09
Speaker 1: What what do you think about? You know the four
34:11
Speaker 1: twenty or four five that we saw on the tenure um,
34:15
Speaker 1: was that the peak and rates? Yeah, you could say
34:18
Speaker 1: that now, yeah, because it's it's not going to be
34:20
Speaker 1: so easy to go back to that level unless this
34:24
Speaker 1: China reopening, which we've talked about previously. That was October
34:28
Speaker 1: also right around the time we saw low inequities, low
34:31
Speaker 1: in equities, and right around the time that the first
34:34
Speaker 1: news out of China came came out that they were
34:37
Speaker 1: looking at zero COVID in a in a potentially different way.
34:40
Speaker 1: So that was probably the moment of at least the bottom.
34:44
Speaker 1: China plays big into um, you know, the markets moves here.
34:48
Speaker 1: I mean, is China is the reopening? Are people optimistic
34:55
Speaker 1: about that because for a while we couldn't tell which
34:58
Speaker 1: they were reopening, but they were getting you millions of
35:00
Speaker 1: COVID cases every day, um. And also it's a different
35:04
Speaker 1: China than it was before they went into lockdown. Yeah.
35:07
Speaker 1: I do think it plays a big role because the
35:10
Speaker 1: impact has already seen through one money coming into China
35:13
Speaker 1: assets which by the way, for example, our e t
35:16
Speaker 1: F here listed on exchange and people buying them here
35:18
Speaker 1: because the money has been put to work. That obviously
35:20
Speaker 1: spills over into Banaszak, into other markets. But it's really
35:25
Speaker 1: you know, you could tell from the p MY data
35:27
Speaker 1: this week just alone out of the lunar year. Immediately,
35:29
Speaker 1: the PM data recovered above fifty as one simple example,
35:34
Speaker 1: So this is reopening is real. They lost about two
35:37
Speaker 1: percent of output during the COVID lockdown, so they want
35:39
Speaker 1: to get back to five. That's a big change. Lots
35:42
Speaker 1: of different estimates had to impact global GDP, but that
35:45
Speaker 1: could be up to a percent globally, and that's that's
35:48
Speaker 1: I think significant. The changes the outcomes on the recession
35:52
Speaker 1: that people were fearing. My view owner this that China
35:55
Speaker 1: reopening actually means the recession this year may not really happen,
35:59
Speaker 1: and it's that significant, and the commodity prices is very significant. Yeah,
36:03
Speaker 1: that's very significant. And the Solar Guards interestingly did address
36:08
Speaker 1: China today and like Powell, he did not really and
36:11
Speaker 1: she did say you have to really take a close
36:13
Speaker 1: look at this and monitor because they understand just like
36:16
Speaker 1: anyone really has a I know they have a pronounced
36:20
Speaker 1: trade relationship with China. Think that's some of these big
36:23
Speaker 1: German industrial companies and you know, sending turbines over there,
36:26
Speaker 1: that's a big deal for them. The belt in roads
36:28
Speaker 1: and they went straight up through Italy right exactly, so
36:31
Speaker 1: into the heart of Europe. So the collapse in these
36:33
Speaker 1: boondhields and and the Italian heels today, I've really about
36:36
Speaker 1: the ECB and maybe not hiking anymore after March. But
36:39
Speaker 1: if you think about the impact that China could have
36:41
Speaker 1: on those economies and thereby inflation, it's still really high
36:44
Speaker 1: in both of these economies. That's where the Guard was
36:47
Speaker 1: was hinting at, and the market is not listening to
36:49
Speaker 1: that now. But that's something that will come back. I
36:51
Speaker 1: think at some points now nuance is not my strength. Um,
36:55
Speaker 1: you know, but to me, uh so this is optimistic. Right,
36:59
Speaker 1: China reopens, Um, maybe we don't get a recession in Europe. Um,
37:04
Speaker 1: these central banks are sounding devish because inflation is coming
37:08
Speaker 1: down pretty rapidly. Um, why isn't Why aren't we off
37:12
Speaker 1: to the races When it comes to commodities. You know,
37:14
Speaker 1: oil is still trading eighty dollars a barrel. Um, if
37:17
Speaker 1: if all that good news was it priced in? Is
37:20
Speaker 1: this the good news eighty two dollars a barrel? Or
37:23
Speaker 1: do we still have to look forward to a hundred
37:25
Speaker 1: dollars for brand? So that that those are expectations out
37:28
Speaker 1: there that I think if we're gonna go back to
37:30
Speaker 1: huntred dollars a barrel, and that there has been I
37:32
Speaker 1: think in the oil price liquidation that took plicity end
37:35
Speaker 1: of lash year, big positioning arch styles. And in addition
37:39
Speaker 1: to that, there was I think expectations in that market
37:42
Speaker 1: that as the OPAC doesn't really change output as much,
37:45
Speaker 1: caught it more, say, then the recession fears do hit
37:50
Speaker 1: that that part of the commodity market a bit harder
37:52
Speaker 1: because China's pent up de ment is really through the
37:55
Speaker 1: metals market and that part of the commodity markets we
37:57
Speaker 1: outperformed energy and out of parts. In addition that wheat,
38:01
Speaker 1: for example, that has been also depressed because the Ukraine
38:04
Speaker 1: situation is slowly resolving the supply shortage even though the
38:09
Speaker 1: ongoing war. So I think it's the metal sector that's
38:12
Speaker 1: where it's called quick priced in and where it showed
38:14
Speaker 1: up first. The next stage will be that energy does
38:18
Speaker 1: pick up. And you know, but some estimates we will
38:20
Speaker 1: have again really low gasoline stock this summer as we
38:25
Speaker 1: get into driving season. And my this is on this
38:28
Speaker 1: is is that the China effect is really the tourism issue.
38:32
Speaker 1: So recently the Japan's CPI numbers showed a big jump
38:35
Speaker 1: because of recreation. There's the first impact from China tourism
38:39
Speaker 1: that's coming on shortward hair. It's happening in Assolia too,
38:42
Speaker 1: will happen here. My say, not more out of things
38:45
Speaker 1: on this. We can just take a walk through a
38:46
Speaker 1: time score. That's that's my thing. When I walked the
38:48
Speaker 1: Penn station. Now I'll give you a man on the
38:51
Speaker 1: on the ground view of what's happening and that Europeans
38:54
Speaker 1: are back big time. I have, but I haven't seen
38:57
Speaker 1: Chinese per se exactly. So that's that's just coming. We
39:00
Speaker 1: can imagine that the payroll I'm gonna get tomorrow, it
39:02
Speaker 1: may may go down a bit of the next few
39:04
Speaker 1: months because of all the layoffs but the shortages, but
39:06
Speaker 1: it really is in the leisure sector, and the leisure
39:09
Speaker 1: sector has been the huge contributor to payroll growth. So
39:12
Speaker 1: if this wave of tourism is coming, I mean, the
39:15
Speaker 1: payroll numbers could actually start rising again at least driven
39:18
Speaker 1: by leisure bench just real quick, thirty seconds and I
39:21
Speaker 1: got the ten year treasury three thirty five here, just
39:23
Speaker 1: amazing off six basis points today. What are you telling
39:25
Speaker 1: your clients about the fixed income markets? Yeah, continue to
39:29
Speaker 1: have an emphasis on that batty yields are on the
39:32
Speaker 1: short end of the Yel curve, then on the long
39:34
Speaker 1: end of the Yel curve. Really because the price sensitivity
39:37
Speaker 1: of those securities is still really high. It's called duration.
39:40
Speaker 1: And so no question So therefore sorry, that was that
39:45
Speaker 1: was our producer, Rich Truman in your ears. He was
39:48
Speaker 1: telling us, no more questions for you. He's a micro manager,
39:52
Speaker 1: he's like a helicopter mom because we need it. Basically, Yeah,
39:56
Speaker 1: that's not that's not unfair. So at the finish it,
40:00
Speaker 1: you know, short maturity securities remain interesting. I mean, if
40:03
Speaker 1: the FETE stoles out with this radition, does look at
40:06
Speaker 1: this the case, then there's where you you pick up
40:09
Speaker 1: continues to be that ultimate. Those hiels will decline um
40:13
Speaker 1: as the FETE does move to a neutral stance. Alright,
40:16
Speaker 1: good stuff as always. Ben em And senior portfolio manager
40:19
Speaker 1: and he's head of the fixed income over there at
40:20
Speaker 1: New Edge Wealth. Joining us here in our Bloomberg Interactive
40:23
Speaker 1: Broker Studio. Thanks for listening to the Bloomberg Markets podcast.
40:27
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
40:30
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
40:34
Speaker 1: on Twitter at Matt Miller V three, pt on Ball
40:38
Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
40:41
Speaker 1: you can always catch us worldwide at Bloomberg Radio