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US Hiring Comes up Short in Possible Warning Sign for Fed · Bloomberg Intelligence

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  Speaker 4: expertise outside of Bloomberg Intelligence as well. And for that
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  Speaker 4: we go to Lindsay Piezga, she is chief economist over
• 0:41
  Speaker 4: at Stefold, to talk about the job support. Okay, so
• 0:43
  Speaker 4: we get the jobs number. Then a couple hours later
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  Speaker 4: we get Chris Waller coming out and talking about the
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  Speaker 4: current batch of data requires action and if appropriate, he
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  Speaker 4: will advocate for front loading cuts.
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  Speaker 3: What does if appropriate.
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  Speaker 4: Mean to frontload cuts for fifty bases point cut in September.
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  Speaker 5: Well, I think that means that if we see a
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  Speaker 5: material weakening in the employment data, if we see a
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  Speaker 5: material weakening in the inflation data, the Fed is poised
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  Speaker 5: to take a more aggressive stance. That being said, the
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  Speaker 5: lack of meaningful downward momentum that we've seen in price
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  Speaker 5: pressures coupled with still a somewhat benign employment report. Remember,
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  Speaker 5: we saw that downtick in the unemployment rate, stronger wage games,
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  Speaker 5: So it doesn't seem that at this point, to Waller's
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  Speaker 5: to use Waller's characterization, it is appropriate to result in
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  Speaker 5: a more aggressive policy response. And as such, I think
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  Speaker 5: the Fed is going to take a more tempered approach
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  Speaker 5: until we see a more clear indication of weakness as
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  Speaker 5: opposed to just normalization in the economy.
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  Speaker 6: All right, somebody comes up to you to Starbucks this
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  Speaker 6: weekend and says, lindsay, how's that labor market?
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  Speaker 7: How would you respond?
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  Speaker 5: Well, I think right now we're still seeing solid conditions
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  Speaker 5: in the labor market. Now, certainly we have lost momentum
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  Speaker 5: from earlier peak levels. Top line hiring has slowed, but
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  Speaker 5: let's put the unemployment rate in perspective, it's still on
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  Speaker 5: a relatively low basis. Wage games are still solid, jobless
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  Speaker 5: flames continue to tick down, so there's still indications again
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  Speaker 5: that the labor market, yes is cooling, losing momentum, but
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  Speaker 5: more to the prospect of normalizing as opposed to indications
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  Speaker 5: of outright weakness suggesting that the FED needs to take
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  Speaker 5: expedited or more aggressive action to help supplement or stabilize
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  Speaker 5: like market conditions.
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  Speaker 4: Actually that happened to Michael McKee. It was on a
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  Speaker 4: train and someone like random guy was like.
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  Speaker 3: Hey, Mike, what are you from the FED?
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  Speaker 4: So lindsay, is this is the FED going to go
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  Speaker 4: twenty five or fifty? And I guess the better question
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  Speaker 4: is how much do you care about that versus us
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  Speaker 4: still pricing in two hundred and forty basis points of
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  Speaker 4: cuts in the next you know, fourteen to fifteen months.
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  Speaker 5: Well, I think the FED is going to take a
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  Speaker 5: guess low and temperate pace. I think out of the
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  Speaker 5: gate twenty five basis points is a appropriate and the
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  Speaker 5: FED has been very clear they're not on a predetermined pathway.
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  Speaker 5: And should we see the data come in better than
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  Speaker 5: expected or weaker than expected, the next policy response will
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  Speaker 5: reflect that data. And so that's going to really be
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  Speaker 5: the driver of how the FED responds over the next
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  Speaker 5: year or two years in terms of slowly returning US
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  Speaker 5: more to a normal position and policy as opposed to
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  Speaker 5: taking an aggressive approach and reversing us to neutral or
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  Speaker 5: well below.
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  Speaker 6: So, lindsay, put this labor data together. I guess for me,
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  Speaker 6: one of the next questions is how does that frame
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  Speaker 6: out how our US consumer is doing.
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  Speaker 7: What's your view there?
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  Speaker 5: Well, I think the US consumer is struggling at this point.
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  Speaker 5: The US consumer feels the weight of these higher prices,
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  Speaker 5: feels the weight of a slowing economy.
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  Speaker 8: But the consumer is still.
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  Speaker 5: Holding its own it's still spending out in the marketplace,
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  Speaker 5: and it's still the backbone of the US economy.
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  Speaker 3: We love that.
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  Speaker 4: We love crying babies in the background. That's super cool.
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  Speaker 4: You can definitely bring them on air. We love that
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  Speaker 4: for you and for us. So I guess when we
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  Speaker 4: talk about how the data will evolve, what are.
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  Speaker 3: We going to really be looking at.
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  Speaker 4: Is CPI really that important next week or is it
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  Speaker 4: just like, let's get past this twenty five or fifty
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  Speaker 4: or whatever and then we see how the labor market evolves.
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  Speaker 5: I think the CPI the PPI are key data points
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  Speaker 5: that are really going to determine the trajectory of the
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  Speaker 5: fence pathway for race.
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  Speaker 7: All right, lindsay, thank you so much. We appreciate it.
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  Speaker 6: Lindsay the Eggs, a chief economist for Stiefel.
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  Speaker 7: She joined us on his zoom from Chicago. She can
• 4:41
  Speaker 7: do it all.
• 4:42
  Speaker 6: She can talk economics and she can then go take
• 4:44
  Speaker 6: care of the little ones.
• 4:45
  Speaker 7: I mean, yeah, that's why you guts are the best.
• 4:48
  Speaker 7: I don't know how to do it.
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  Speaker 4: All right, let's get more in this market reaction here.
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  Speaker 4: Matt Miskin Co, Chief Investment Stratus, John Hancock Investment Management
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  Speaker 4: joins us. Now, hey, Matt, if I just take a
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  Speaker 4: look at what's happening within the market and the reaction.
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  Speaker 3: Oh god, I hate to say it. Is this a
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  Speaker 3: Goldilocks move?
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  Speaker 9: That looks a little bit like that, But the fact
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  Speaker 9: that the tenure treasury yield isn't backing down much actually
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  Speaker 9: to me suggests it's not as favorable.
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  Speaker 4: But a huge it had a huge run, it did.
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  Speaker 9: It did, and mortgage rates are coming down on that,
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  Speaker 9: and then you're gonna get borrowing costs coming down on that.
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  Speaker 9: And we had oil prices lower, and all these things
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  Speaker 9: eventually are going to be good for the consumer.
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  Speaker 10: But if economic growth is weakening, if you're not as
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  Speaker 10: confident about your job, you're not going to be as
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  Speaker 10: confident about spending.
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  Speaker 9: And right now there is a you know, September weakness
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  Speaker 9: that's always seasonal. So we're sitting here saying is this
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  Speaker 9: seasonals or is this some more sinister? And for us,
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  Speaker 9: the economic data is weakening. We like defensive parts of
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  Speaker 9: the market. We like intermediate to longer term bonds, and
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  Speaker 9: we're gonna sit here and wait for a better opportunity
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  Speaker 9: to look at risk assets.
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  Speaker 7: What's defensive in your mind? Met good one?
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  Speaker 2: Yes?
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  Speaker 10: So good old utilities. Utilities are a part of the market.
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  Speaker 9: That were left for not you know, no one wanted
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  Speaker 9: to touch them for much the last two years. They
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  Speaker 9: were only two percent of the market, the lowest level
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  Speaker 9: or sector weight in history. They've been on a tear here.
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  Speaker 9: And we actually like long lived assets. I mean, you know,
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  Speaker 9: alex as you said, I mean like this week, treasury
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  Speaker 9: yields are meaningfully lower and longer duration equities should be
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  Speaker 9: rallying on that. Utilities are, roots are even healthcare is
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  Speaker 9: getting a bit of a bid. But then you've got
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  Speaker 9: things like financials, which have done pretty well here that's
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  Speaker 9: an odd mix, and tech, which used to be the
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  Speaker 9: long duration asset.
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  Speaker 10: Is getting can hit.
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  Speaker 9: So it's not making a ton of It's not the
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  Speaker 9: dots are not connecting all at once here.
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  Speaker 10: It's it's one week. But the trend in terms of
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  Speaker 10: the macro.
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  Speaker 9: Data is what it is, and it looks like softening,
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  Speaker 9: and we want to grab some good defensive parts of
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  Speaker 9: the market while they're still here for us.
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  Speaker 4: Yeah, And I don't want to make light of the
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  Speaker 4: fact that texts down one percent and calling that goldilocks,
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  Speaker 4: but just the idea that that sort of play versus say,
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  Speaker 4: I mean, I'm looking at DOWT Transport. It's only down
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  Speaker 4: quote unquote three tens of one percent. So I'm just
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  Speaker 4: wondering if it's more of a rotation within the market
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  Speaker 4: versus sort of a broad based selling. Do you think
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  Speaker 4: that when we get a Christopher Waller talking at eleven,
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  Speaker 4: is that going to be an event risk for you
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  Speaker 4: right now?
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  Speaker 10: It could be. I mean, you know, right now.
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  Speaker 9: I think the Fed, if they push back too hard
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  Speaker 9: and say, look, we're not we're not going fifty basis points.
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  Speaker 10: We're not ready to cut.
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  Speaker 9: I think if they do that at this juncture, you're
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  Speaker 9: going to be upsetting the bond market. And there's few
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  Speaker 9: times in doing this it's it's you know, nowadays we've
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  Speaker 9: got the forward guidance, so we've got you know, pricing
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  Speaker 9: in of how many cuts.
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  Speaker 10: You know, you rewind ten fifteen years ago, people.
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  Speaker 9: Didn't focus on that as much, but now that it's
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  Speaker 9: one hundred percent probability of a cut in September, if
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  Speaker 9: not more, because you're saying, hey, it could be fifty
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  Speaker 9: basis points. If the FED says no, we're not cutting,
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  Speaker 9: that is going to be bad news for everything. And
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  Speaker 9: so I think you need to hear the FED speakers
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  Speaker 9: come out and say yeah, we're gonna cut, and if
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  Speaker 9: anything against that, I think is going to cause some volatility.
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  Speaker 6: Hey, Matt, on the fixed income side, how much credit
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  Speaker 6: risk are you guys comfortable taking these days?
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  Speaker 10: Not much at all.
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  Speaker 9: Frankly, we started the week at three hundred basis points
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  Speaker 9: spread between junk bonds, high yield bonds, and treasury bonds,
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  Speaker 9: And to.
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  Speaker 10: Put that in perspective, last time that's.
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  Speaker 9: Happened twenty twenty one before spread wide and twenty twenty two,
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  Speaker 9: two thousand and seven before two eight, nineteen ninety nine,
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  Speaker 9: before two thousand and three hundred b points is historically
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  Speaker 9: really tight spreads.
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  Speaker 10: And to us, that's just not a lot of value.
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  Speaker 9: We prefer if you're going to go even in investment
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  Speaker 9: grade corporate bonds, more of a single a kin type
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  Speaker 9: of average portfolio.
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  Speaker 10: Credit rating, and then we like agency nbs.
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  Speaker 9: We like all those bonds or all those mortgages that
• 9:18
  Speaker 9: people locked in low mortgages.
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  Speaker 10: I don't think there's any prepayment risk. People probably aren't
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  Speaker 10: going to be moving.
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  Speaker 9: Again to and it's good for their balance sheets. So
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  Speaker 9: you know, they're yielding about five percent for four to
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  Speaker 9: five percent right now. So we're just looking some high
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  Speaker 9: quality bonds add that to the portfolio.
• 9:36
  Speaker 10: Lock in these.
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  Speaker 9: Yields while you got them, because that cash balance that
• 9:39
  Speaker 9: everybody's loves so much, that money market interest rate, in
• 9:43
  Speaker 9: our view, that's gone into twenty twenty five, not completely gone,
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  Speaker 9: but it's gonna be.
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  Speaker 3: I mean, I'm waiting for it.
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  Speaker 4: We still hit another record high at the end of
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  Speaker 4: last week, according to the data that came out. So
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  Speaker 4: do you think that it matters if it's twenty five
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  Speaker 4: or fifty in September and or is it really how
• 10:01
  Speaker 4: many cuts we're going to be getting. I mean, we're
• 10:03
  Speaker 4: still pricing in something like almost ten cuts through the
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  Speaker 4: end of next year, right.
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  Speaker 9: And you know, I think about it as like you know,
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  Speaker 9: getting lost in the forest.
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  Speaker 10: Wait, is it the forest and the trees?
• 10:14
  Speaker 4: You can't see the forest from the trees, right, Yeah,
• 10:17
  Speaker 4: something like that.
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  Speaker 9: The fast couple of cycles, on average, the FED is
• 10:21
  Speaker 9: cut from peak to trough seventeen times. Now that's twenty
• 10:25
  Speaker 9: five basis point cuts, but seventeen times is how much
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  Speaker 9: the FED usually cuts in a cutting cycle. So whether
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  Speaker 9: or not they cut one time or two times at
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  Speaker 9: the first cut, don't get lost in that.
• 10:37
  Speaker 10: Don't overdo it. What you want to.
• 10:39
  Speaker 9: Do is set up for where this Where does the
• 10:41
  Speaker 9: end of the FED Fund's rate go? Where do we
• 10:44
  Speaker 9: go on the tenure yield? Our view, based on the
• 10:46
  Speaker 9: last three cycles, the tenure yield ends with a two
• 10:50
  Speaker 9: handle and the FED Fund's rate ends with a one handle.
• 10:54
  Speaker 9: If that is the world we're in, we're having a
• 10:57
  Speaker 9: different conversation.
• 10:58
  Speaker 10: Right now, we want to get while the these yields
• 11:00
  Speaker 10: are where they are right now.
• 11:02
  Speaker 9: I know it's been a quick move, but still don't
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  Speaker 9: let it the volatility, you know, get you off course.
• 11:08
  Speaker 9: Bonds are going to be likely recovering all that in
• 11:11
  Speaker 9: our view majority, if not all they lost in twenty
• 11:13
  Speaker 9: twenty two, and we still got upside potential in the
• 11:16
  Speaker 9: Bontdom market.
• 11:17
  Speaker 7: All right, Matt, thanks so much for joining us. Really
• 11:19
  Speaker 7: appreciate it.
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  Speaker 6: Matt misk And he's a co chief investment strategist at
• 11:22
  Speaker 6: John Hancock Investment Management.
• 11:23
  Speaker 7: And look it up there in Boston.
• 11:26
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 4: Happy Friday, Longest Forday week Out there. I'm Alex stan
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  Speaker 4: alongside Paulsman Need. This is Bloomberg Intelligence Radio. We are
• 11:46
  Speaker 4: broadcasting to you live from Interactor Brooker Studio right here
• 11:49
  Speaker 4: in cloudy midtown Manhattan. So the equity market really rolling
• 11:53
  Speaker 4: over here, Big tech in particular getting hit the NASDAC
• 11:56
  Speaker 4: is off over two percent below it's fifty and one
• 11:58
  Speaker 4: hundred day moving average. Quick work of getting to that
• 12:01
  Speaker 4: two hundred day moving average as well. Not helping is
• 12:03
  Speaker 4: what's happening in Broadcom. That stock down by over ten
• 12:06
  Speaker 4: percent on earnings that came out yesterday after the closing bell. Now,
• 12:09
  Speaker 4: the money they made from AI and their forecast was
• 12:12
  Speaker 4: really quite good. It was just everything else that seemed
• 12:15
  Speaker 4: to disappoint investors sort of waiting for that trough, despite
• 12:18
  Speaker 4: the CEO saying yeah, okay, we might have found the
• 12:20
  Speaker 4: bottom and all of that, but nonetheless that stock is
• 12:22
  Speaker 4: off quite a bit. Dana Wolman is Bloomberg Senior Technology editor.
• 12:26
  Speaker 4: She joins us, Now, there's a lot to get through
• 12:27
  Speaker 4: in tech, but I just wanted to hit on Broadcom.
• 12:30
  Speaker 4: When you're looking at the stock reaction to the news
• 12:33
  Speaker 4: like they delivered on AI. They made a boatload of money,
• 12:36
  Speaker 4: They're going to keep making a boatload of money on AI.
• 12:38
  Speaker 4: Do you think it's an overreaction from what you're hearing.
• 12:41
  Speaker 11: A little bit and my background is not in equities,
• 12:44
  Speaker 11: but to your point, you would think that the worst
• 12:46
  Speaker 11: news imaginable would be that the company was not keeping
• 12:49
  Speaker 11: up with expectations and AI. In fact, it beat expectations
• 12:52
  Speaker 11: in all the parts of its business that are related
• 12:54
  Speaker 11: to AI. Somehow, it's really its legacy businesses that were
• 12:58
  Speaker 11: flagging in the forecast, but that, as you said, was
• 13:01
  Speaker 11: enough to just send the stock down.
• 13:03
  Speaker 6: It's interesting, it seems like Broadcom is well positioned for
• 13:08
  Speaker 6: this AI you know, kind of phenomena here because investors,
• 13:11
  Speaker 6: as you know, are trying to figure out a way
• 13:13
  Speaker 6: how do I play AI? And really do I just
• 13:16
  Speaker 6: buy Nvidia? Are there other ways to play it here? So,
• 13:19
  Speaker 6: but tell us about Broadcom and it's exposure to AI,
• 13:22
  Speaker 6: maybe how it's positioned.
• 13:24
  Speaker 11: So I think Broadcom gets less attention in part because
• 13:27
  Speaker 11: I think it's in a highly technical field, a field
• 13:31
  Speaker 11: that's already just very technical and sometimes difficult to explain
• 13:34
  Speaker 11: to play people. I think sometimes Broadcom's equipment is even
• 13:37
  Speaker 11: more so.
• 13:39
  Speaker 3: But it's everywhere. I mean, it's legacy businesses.
• 13:41
  Speaker 11: It's chips were already in everything from automotive to smartphones,
• 13:46
  Speaker 11: and its components are included in.
• 13:50
  Speaker 3: Just AI setups as well.
• 13:52
  Speaker 11: Yep, and the it's not necessarily a one form one
• 13:57
  Speaker 11: comm to what Nvidia is producing, but just complementary components
• 14:02
  Speaker 11: and piece of hardware that people might not know the
• 14:04
  Speaker 11: names ever think of, but are necessary in these larger
• 14:07
  Speaker 11: AI setups.
• 14:08
  Speaker 4: And also what I was reading is that if a
• 14:10
  Speaker 4: company winds at making their own AI tips in house,
• 14:13
  Speaker 4: they need Broadcom to do that.
• 14:14
  Speaker 3: So there's that part of the business as well. Let's
• 14:17
  Speaker 3: go to Intel because that stock is also off over
• 14:19
  Speaker 3: three percent.
• 14:20
  Speaker 4: It's considering some options for its steak in its struggling
• 14:24
  Speaker 4: automated driving system provider Mobile Global. Can you remind us
• 14:28
  Speaker 4: what Mobile Eye Global actually does.
• 14:30
  Speaker 11: Mobile Eye makes automated and automated driving system So is
• 14:34
  Speaker 11: it self driving stuff yes, autonomous vehicles yes. And Intel
• 14:39
  Speaker 11: has had a steak. It actually sold part of its
• 14:41
  Speaker 11: steak last year. I believe we reported profit of netted
• 14:45
  Speaker 11: around one point five billion from that. But it's looking
• 14:48
  Speaker 11: to sell more of its steak, and as we report
• 14:51
  Speaker 11: in the story, it's picking if it's going forward with this,
• 14:54
  Speaker 11: it's picking a not great time. Mobilized stock has been
• 14:59
  Speaker 11: down a lot, and so Intel would not exactly be
• 15:03
  Speaker 11: recouping on its investment if it chose this moment. But
• 15:06
  Speaker 11: as we reported more broadly, Intel is in a dire moment,
• 15:10
  Speaker 11: it does seem to be considering some really desperate severe
• 15:15
  Speaker 11: measures to keep itself afloat.
• 15:17
  Speaker 7: Yeah, I mean, I'm just I mean, it's Intel.
• 15:20
  Speaker 6: It's down sixty two percent year to date, fifty two
• 15:23
  Speaker 6: week low, down three point six percent today. You've covered
• 15:27
  Speaker 6: this tech industry for a long time, Dana.
• 15:30
  Speaker 7: What's going on with mo? With Intel?
• 15:32
  Speaker 6: Did they just miss I guess the technological evolution of
• 15:36
  Speaker 6: the chip business or is there?
• 15:38
  Speaker 7: Is it management? What do you think is going on there?
• 15:40
  Speaker 11: Certainly management doesn't help. I mean, it had that big
• 15:44
  Speaker 11: CEO shake up a few years ago. That was when
• 15:47
  Speaker 11: Brian Krisanich stepped down. It took a while to replace him,
• 15:50
  Speaker 11: and since Pat Gelsinger has been in the role, has
• 15:53
  Speaker 11: bet big on the company's foundry business, and that is
• 15:58
  Speaker 11: in fact dragging down the company performance and seems to be,
• 16:01
  Speaker 11: according to our reporting, something that the companies at least
• 16:05
  Speaker 11: considering splitting off.
• 16:07
  Speaker 4: Well okay, but that's confusing, right because their whole pitch
• 16:10
  Speaker 4: was that, yeah, yeah, we're Intel, yay, but now we're
• 16:12
  Speaker 4: gonna make chips too and be a foundry for us
• 16:14
  Speaker 4: and for also us. You can come to us, We'll
• 16:16
  Speaker 4: make our chips. So why has this gone so south?
• 16:22
  Speaker 11: At least for now, the foundry's biggest client seems to
• 16:24
  Speaker 11: be Intel itself, gotcha. Yes, So, for whatever reason, that
• 16:30
  Speaker 11: part of the business has not taken off as expected.
• 16:35
  Speaker 11: To the extent the company has brighter hopes, it does
• 16:37
  Speaker 11: seem to be on the chip design side, less the manufacturing.
• 16:41
  Speaker 6: So but weren't they a beneficiary or are they not
• 16:44
  Speaker 6: going to be a beneficiary of the US government's investment
• 16:47
  Speaker 6: in domestic chips.
• 16:51
  Speaker 4: I think they'd like to be if they had to
• 16:53
  Speaker 4: delay their plan, right.
• 16:55
  Speaker 11: Yes, So that that is something that our reporters are chasing,
• 17:00
  Speaker 11: is not just the fate of the company, but the
• 17:02
  Speaker 11: possible ramifications for the government's investment plans in strategic areas
• 17:07
  Speaker 11: that of course include.
• 17:09
  Speaker 4: The chip industry.
• 17:11
  Speaker 6: And they're based in Santa Clair, California, where everybody who
• 17:15
  Speaker 6: is anybody in the chip business is based in that.
• 17:17
  Speaker 6: Santa Clara, San Jo's a area there. University of Santa
• 17:20
  Speaker 6: Clara is right there as well. Dana Woman, thank you
• 17:23
  Speaker 6: so much for joining us. Dana Woman, senior Technology editor
• 17:25
  Speaker 6: for Bloomberg News, joining us live here in our Bloomberg
• 17:28
  Speaker 6: Interactive Broker studio which we appreciate.
• 17:30
  Speaker 7: On a Friday, I mean, people come in on it.
• 17:32
  Speaker 3: He likes some people come in, come in on a.
• 17:33
  Speaker 7: Friday special gold Star.
• 17:35
  Speaker 6: But you're right, the Intel stock is just getting crushed,
• 17:37
  Speaker 6: and you know, it's just a it's almost like a
• 17:39
  Speaker 6: shadow of its former self here with down sixteen percent. Dana,
• 17:44
  Speaker 6: thanks so much for joining us there.
• 17:47
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 17:51
  Speaker 2: weekdays at ten am Eastern on applecar Play and androyd
• 17:55
  Speaker 2: Outo with the Bloomberg Business App. You can also listen
• 17:58
  Speaker 2: live on Amazon Alexa from oursip New York station just
• 18:01
  Speaker 2: say Alexa playing Bloomberg eleven thirty.
• 18:06
  Speaker 6: So let's see, we're getting some moves here in the
• 18:08
  Speaker 6: currencies a little bit. I'm looking at the Bloomberg Dollar
• 18:10
  Speaker 6: Index a little just a smidge higher on the Bloomberg
• 18:14
  Speaker 6: Dollar Index, Pound Sterling a little bit weaker, the Euro
• 18:17
  Speaker 6: a little bit weaker on the backs of some of
• 18:19
  Speaker 6: this economic data we've got, including today's jobs number. Audrey
• 18:22
  Speaker 6: Child Freeman joint Is. She's a team leader and chief
• 18:25
  Speaker 6: f X strategist at Bloomberg Intelligence. Audrey, what are the
• 18:29
  Speaker 6: currency markets telling me about some of the economic data
• 18:31
  Speaker 6: we're seeing, including the jobs data today.
• 18:35
  Speaker 1: Well, the US dollar was already very much weaker getting
• 18:39
  Speaker 1: into the non fund pay rolls, and I think in
• 18:41
  Speaker 1: the end, from a currency perspective, for as long as
• 18:45
  Speaker 1: we didn't get any major supplies one way or the other,
• 18:49
  Speaker 1: it wasn't going to be a game changer for the
• 18:52
  Speaker 1: outbook for the dollar, which we know by now has
• 18:56
  Speaker 1: become a lot more negative with the start of the
• 19:00
  Speaker 1: is in cycle looming and most likely now likely on
• 19:04
  Speaker 1: September eighteen.
• 19:06
  Speaker 4: So to that point, how much more downside than is
• 19:09
  Speaker 4: there too? Dollar yeen?
• 19:10
  Speaker 1: In particular, I think dollar yen is being driven lower
• 19:16
  Speaker 1: by both both by the US side of the trade
• 19:18
  Speaker 1: and the US more Davich cyclical narrative, as well as
• 19:24
  Speaker 1: the Japanese side of the trade, and I think in
• 19:27
  Speaker 1: that respect there's probably room for more downside. You know,
• 19:31
  Speaker 1: it's still very difficult to assess the extent to which
• 19:34
  Speaker 1: you know the unwind of the carry trade is complete.
• 19:38
  Speaker 1: You know, some seeing some some people saying it's almost complete.
• 19:41
  Speaker 1: I think, you know, time will tell on that. It's
• 19:45
  Speaker 1: very complicated to assess, but I think that you know,
• 19:49
  Speaker 1: the the rate differential that's been drive driving dollar year
• 19:54
  Speaker 1: lower from one sixty to one forty two is going
• 19:57
  Speaker 1: to continue into Q four.
• 20:00
  Speaker 8: We're most likely.
• 20:00
  Speaker 1: Going to see a great height from the boju and
• 20:04
  Speaker 1: potentially even.
• 20:05
  Speaker 8: More next year.
• 20:06
  Speaker 1: So I feel that, you know, the dollar yen pick
• 20:10
  Speaker 1: is probably for me in the G ten currency space,
• 20:14
  Speaker 1: the most obvious one to expect to continue lower, with
• 20:18
  Speaker 1: the main question being how fast does it go lower?
• 20:22
  Speaker 1: For me, I've been in the camp that we're probably
• 20:24
  Speaker 1: going to see a slide as opposed to another slump.
• 20:27
  Speaker 6: So, Audrey, what currency out there offers the best value
• 20:31
  Speaker 6: from your perspective?
• 20:32
  Speaker 7: Do you think?
• 20:34
  Speaker 1: Well, if your dollar bear and I think for now
• 20:37
  Speaker 1: we still are dollar bearish, even though you know, I
• 20:40
  Speaker 1: kind of feel that this narrative that I've been describing about,
• 20:45
  Speaker 1: you know, weakening the US economy lower fat rates, it's
• 20:49
  Speaker 1: in the price, and I kind of feel at some
• 20:51
  Speaker 1: point the risk would be that there's too much dubbishness
• 20:54
  Speaker 1: price in the fact because the US economy has to
• 20:57
  Speaker 1: be clear, is not really falling apart, is just decelerating.
• 21:02
  Speaker 1: Inflation is coming down, and that means that we can
• 21:04
  Speaker 1: normalize interest rate in the US and that's fine. But
• 21:09
  Speaker 1: you know, in terms of which currency to play against
• 21:11
  Speaker 1: that I said, the Yeni is a good one. I
• 21:14
  Speaker 1: also kind of like the Swiss Frank just because I
• 21:18
  Speaker 1: feel that, you know, euro dollar upside at the moment
• 21:22
  Speaker 1: is a very tricky one because there's one element in
• 21:25
  Speaker 1: the Europe euro dollar bullish story that I'm still waiting
• 21:29
  Speaker 1: to unfold, and that's a pickup in economic activity. We're
• 21:32
  Speaker 1: not saying that happening in Europe. When that happens, I
• 21:36
  Speaker 1: think there'll be more momentum to the upside on the Europe.
• 21:39
  Speaker 1: And until that happens, I think dollar Swiss downside maybe
• 21:43
  Speaker 1: more appealing. And the other advantage of the Swiss Frank
• 21:46
  Speaker 1: I think at the moment is the fact that you know,
• 21:49
  Speaker 1: we've seen some episodes recently of more hesitant market risk advertise,
• 21:54
  Speaker 1: and this would do better if we were to see
• 21:56
  Speaker 1: another phase of risk of markets. So Dollar Swiss downside
• 22:02
  Speaker 1: is another very good and interesting pair. I think as
• 22:05
  Speaker 1: we conteah yeah into.
• 22:08
  Speaker 4: In just about thirty seconds, what do we get from
• 22:10
  Speaker 4: the ECB next week?
• 22:13
  Speaker 1: We get another cuts and I don't think that's going
• 22:16
  Speaker 1: to be too damaging for the Euro, but the euro
• 22:18
  Speaker 1: badly needs an improvement in the economy. That's what we
• 22:21
  Speaker 1: need for euro dollar upside to go through one twelve
• 22:24
  Speaker 1: and one fifteen.
• 22:26
  Speaker 4: All right, thank you so much. I really appreciate addit,
• 22:28
  Speaker 4: Child Freeman joining US team leader and chief FX strategist
• 22:31
  Speaker 4: at Bloomberg Intelligence. Need a better economy, Like how do
• 22:34
  Speaker 4: you get that?
• 22:35
  Speaker 3: You just take a look at Germany.
• 22:36
  Speaker 4: And then the news maybe that Volkswagen's gonna close on
• 22:39
  Speaker 4: some of its plans. Their industrial economy is just really suffering.
• 22:43
  Speaker 4: How do you get the whole Eurozone to really start
• 22:46
  Speaker 4: to outperform when Germany is really in adult drums here?
• 22:49
  Speaker 6: Yeah, and that kind of a lot of it stems
• 22:51
  Speaker 6: from there. Just a big exporter, particularly to China, and
• 22:55
  Speaker 6: if the Chinese economy is slowing, it has been slower
• 22:58
  Speaker 6: than expected in that impact big export nations like Germany.
• 23:02
  Speaker 6: And I saw that in that German reporting about the
• 23:04
  Speaker 6: auto factors Amy close auto factories since nineteen thirty seven,
• 23:07
  Speaker 6: So I mean that's not in their DNA to downsize.
• 23:11
  Speaker 4: Yeah. There was an interesting report out by no Moura
• 23:13
  Speaker 4: that talked about how it's really tourism that is keeping
• 23:17
  Speaker 4: services up and keeping the your economy afloat, so we'll
• 23:20
  Speaker 4: see what then happens when you get out of the
• 23:21
  Speaker 4: summer with John.
• 23:22
  Speaker 6: Tucker and I are the only people I know that
• 23:24
  Speaker 6: haven't been to Europe like the last year, so we're.
• 23:26
  Speaker 4: Just I haven't got anywhere in a year and more.
• 23:28
  Speaker 11: I haven't been out of New Jersey twenty five.
• 23:31
  Speaker 7: That's not for you.
• 23:31
  Speaker 3: Come to the city.
• 23:34
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 23:38
  Speaker 2: weekdays at ten am Eastern on Apple car Play and
• 23:41
  Speaker 2: Android Auto with the Bloomberg Business app. You can also
• 23:44
  Speaker 2: listen live on Amazon Alexa from our flagship New York
• 23:47
  Speaker 2: station Just Say Alexa playing Bloomberg eleven.
• 23:50
  Speaker 6: Thirty Jony Biley, She's a chief workforce analyst at employ Bridge,
• 23:57
  Speaker 6: joining us from Omaha, Nebraska via zoom. Jony, you and
• 24:01
  Speaker 6: employee Bridge, you know exactly how employers are feeling here.
• 24:05
  Speaker 6: What did you make of this job's print here today?
• 24:09
  Speaker 8: Well, this report definitely proves we have a weakening job market.
• 24:16
  Speaker 8: We've been saying that certainly for some time. We feel
• 24:19
  Speaker 8: it in the temporary help industry, our industry, the staffing
• 24:24
  Speaker 8: and recruiting you know, of temporary workers has really been
• 24:28
  Speaker 8: on a decline for about two years, and those are
• 24:32
  Speaker 8: always the jobs that go first. I think we've talked
• 24:34
  Speaker 8: about that in the past, so it's pointing to, you know,
• 24:38
  Speaker 8: more weakness. Obviously, this report did not meet the expectations.
• 24:44
  Speaker 8: I kind of thought we might see this just because
• 24:48
  Speaker 8: you know, I'm constantly talking to employers of all sizes
• 24:52
  Speaker 8: across the US, and there's a lot of uncertainty. There's
• 24:56
  Speaker 8: economic uncertainty, and then there's also the uncertainty, and so
• 25:02
  Speaker 8: I think right now we're seeing a pause on hiring
• 25:06
  Speaker 8: and employers are just not adding to their payrolls due
• 25:11
  Speaker 8: to that uncertainty.
• 25:12
  Speaker 3: So, Johnny, that's such a great point.
• 25:13
  Speaker 4: So they're not adding to payrolls, what do you think
• 25:16
  Speaker 4: it's going to take for them to start laying off
• 25:18
  Speaker 4: their payrolls.
• 25:21
  Speaker 8: Well, we are seeing some layoffs here and there. So
• 25:26
  Speaker 8: that is, you know, concerning what I think will maybe
• 25:31
  Speaker 8: reverse the trend. I mean, it's going to be a
• 25:33
  Speaker 8: number of things. You know. I hate to say it,
• 25:37
  Speaker 8: but we might have to get past this election, regardless
• 25:40
  Speaker 8: of who wins, until employers can say all right, I
• 25:44
  Speaker 8: have to find my path forward and here's where I'm
• 25:47
  Speaker 8: going to invest and hire I think interest rate cuts
• 25:51
  Speaker 8: will help certainly, and you know, maybe we'll see a
• 25:55
  Speaker 8: little bit of relief if we do see, you know,
• 25:59
  Speaker 8: an interest rate cut, which I think we're all in
• 26:01
  Speaker 8: agreement that we're probably going to see one. The big
• 26:03
  Speaker 8: question is how large of a cut will they do,
• 26:05
  Speaker 8: And there's going to be a lot of scrutiny certainly
• 26:08
  Speaker 8: around that because that could signal, you know, are we
• 26:11
  Speaker 8: maybe in a worse economic picture than people had realized.
• 26:17
  Speaker 8: But I do think an interest rate cut will definitely
• 26:20
  Speaker 8: help because employers will then start to loosen up, you know,
• 26:26
  Speaker 8: those purse strings and start investing again in their businesses,
• 26:30
  Speaker 8: and that can certainly lead to more hiring.
• 26:33
  Speaker 6: Jenny, I like in your notes here something very interesting.
• 26:35
  Speaker 6: Employers are focused on employee retention, but they're very cautious
• 26:39
  Speaker 6: about hiring and adding to their current payrolls. How long, Yeah,
• 26:43
  Speaker 6: how long have employers kind of been in that mode?
• 26:46
  Speaker 7: Yeah?
• 26:47
  Speaker 8: No, that's a great question, because that pendulum definitely swings
• 26:51
  Speaker 8: from one side to the other. But I would say
• 26:54
  Speaker 8: that we've seen over the last year employers very focused
• 27:01
  Speaker 8: on retention strategies. Now there's a few dynamics of what's
• 27:05
  Speaker 8: happening certainly in the supply chain world. You know, most
• 27:09
  Speaker 8: of those workers are on site. In the professional and
• 27:13
  Speaker 8: business services, we've seen employers trying to bring people back
• 27:17
  Speaker 8: to the office, but they're balancing that with also trying
• 27:21
  Speaker 8: to give them flexibility. So they're very focused on what
• 27:26
  Speaker 8: types of benefit programs they can give to them. Of course, wages,
• 27:31
  Speaker 8: you know, need to stay competitive. Flexibility is certainly important.
• 27:37
  Speaker 8: But creating a great work environment where people want to stay,
• 27:42
  Speaker 8: you know, where they enjoy the work that they're doing,
• 27:44
  Speaker 8: that really has become a top priority. And we're also
• 27:48
  Speaker 8: seeing that that's what workers really want, you know, they
• 27:52
  Speaker 8: want to enjoy the work, they want to enjoy the environment,
• 27:55
  Speaker 8: and they do want to feel like their employers appreciate
• 27:59
  Speaker 8: them and respect them. And so we've we definitely have
• 28:04
  Speaker 8: seen a switch that employers are very focused on that
• 28:07
  Speaker 8: retention strategy right now.
• 28:09
  Speaker 4: That feels like a young kid thing, but whatever, Johnny,
• 28:13
  Speaker 4: When you take a look across sectors, what sectors are
• 28:17
  Speaker 4: are sort of stronger and what are weaker and sort
• 28:19
  Speaker 4: of how do you foresee that playing out over the
• 28:21
  Speaker 4: next six months as we get past the FED cut,
• 28:24
  Speaker 4: as we get past an election.
• 28:26
  Speaker 8: Yes, so certainly we've seen you know, healthcare continues to
• 28:30
  Speaker 8: be the strongest sector that is adding jobs, and I
• 28:34
  Speaker 8: think we will continue to see that certainly. You know,
• 28:39
  Speaker 8: as we look into twenty twenty five and twenty twenty six,
• 28:42
  Speaker 8: that sector will remain strong. There's a high demand, there's
• 28:46
  Speaker 8: lots of you know, opportunity in many different roles in
• 28:52
  Speaker 8: the healthcare sector, so that will be continue to be strong. Construction,
• 28:57
  Speaker 8: it was good to see that we added you know,
• 28:59
  Speaker 8: over thirty thousand jobs in the construction Construction is a
• 29:03
  Speaker 8: good sign that maybe we're starting to see some things
• 29:08
  Speaker 8: pick up a bit. But again on the other side,
• 29:11
  Speaker 8: we're losing jobs in manufacturing. The professional and business service
• 29:15
  Speaker 8: sector only had eight thousand jobs created. Again I mentioned
• 29:19
  Speaker 8: temporary help actually lost jobs for the month, Retail lost jobs,
• 29:25
  Speaker 8: you know, so overall this this really was a week report.
• 29:28
  Speaker 8: We're only seeing that job growth in healthcare and in government,
• 29:33
  Speaker 8: and then it's you know a little bit kind of
• 29:35
  Speaker 8: trickled out through the other sectors. But healthcare will remain strong.
• 29:39
  Speaker 8: I'm really looking for manufacturing to come back, but we
• 29:42
  Speaker 8: probably won't see that until next year.
• 29:45
  Speaker 6: And another data point for the labor market. Earlier this
• 29:48
  Speaker 6: week was the Jolts report continuing to come down. How
• 29:52
  Speaker 6: do you use the data that that JILT state is that.
• 29:54
  Speaker 7: Important to you?
• 29:56
  Speaker 8: It is important, you know, to watch the trends. We
• 30:01
  Speaker 8: really want to see that number start to reverse and climb.
• 30:05
  Speaker 8: Unfortunately it's it's lagging. It's a lagging report. But when
• 30:08
  Speaker 8: you look at seven point seven million open jobs, to me,
• 30:13
  Speaker 8: that's concerning because month after month we're seeing that number soften.
• 30:18
  Speaker 8: What we need to see is that number start to increase,
• 30:21
  Speaker 8: and that is going to be the first sign that
• 30:24
  Speaker 8: employers are going to be hiring and adding to their
• 30:27
  Speaker 8: payrolls because the first thing they do is advertise those jobs.
• 30:31
  Speaker 8: If they decide to hire, they're going to be posting
• 30:35
  Speaker 8: those positions online and that's what that report is truly measuring.
• 30:39
  Speaker 8: So we want to see that employers are having more
• 30:42
  Speaker 8: optimism about the job market, that they're going to invest
• 30:46
  Speaker 8: and expand their payrolls and add And I'll be looking
• 30:51
  Speaker 8: closely to see, you know what next month reports for
• 30:54
  Speaker 8: the Joltsy report. Hopefully it moves in the right direction,
• 30:57
  Speaker 8: but right now it does seem, you know, to be
• 30:59
  Speaker 8: kind of status.
• 31:00
  Speaker 4: Quo before all you go, what did you make of
• 31:02
  Speaker 4: the wage number and what are you hearing?
• 31:05
  Speaker 8: Yeah, So it's interesting on the wage number because the
• 31:07
  Speaker 8: wage number is still showing that wages, you know, are
• 31:11
  Speaker 8: strong and certainly competitive, but that really has to do
• 31:16
  Speaker 8: with the mix of jobs. When it comes to that
• 31:20
  Speaker 8: wage number, we are seeing a lot of the lower
• 31:23
  Speaker 8: leveled skilled jobs you know, have been either outsourced or
• 31:29
  Speaker 8: you know, whether they've gone overseas or maybe technology, automation,
• 31:33
  Speaker 8: artificial intelligence has eliminated some of those jobs. So it
• 31:37
  Speaker 8: has a lot to do with the mix of jobs.
• 31:39
  Speaker 8: I can tell you employers are not raising wages right now.
• 31:44
  Speaker 8: They are kind of steady. They're not decreasing wages, but
• 31:49
  Speaker 8: they are not in a situation where it's that competitive
• 31:52
  Speaker 8: of a job market that they need to increase wages
• 31:55
  Speaker 8: at this point. So it's a little misleading of an
• 31:58
  Speaker 8: indicator when you look at it in the bl US report.
• 32:02
  Speaker 6: All right, Jenny, thank you so much for joining us.
• 32:04
  Speaker 6: Jenny Biley, she's a chief workforce analyst at employee Bridge,
• 32:07
  Speaker 6: joining us from Omaha, Nebraska via zoom here. So I
• 32:10
  Speaker 6: think in his jobs report there's something.
• 32:12
  Speaker 4: Else for everyone.
• 32:14
  Speaker 3: I was gonna say it's like a rorshack test.
• 32:15
  Speaker 7: Yes, exactly, you can.
• 32:16
  Speaker 3: Make a bit of what you see.
• 32:18
  Speaker 6: We'll get one more I guess data point next week's CPI.
• 32:20
  Speaker 6: So for the FED, I mean Ira Jersey from Bloomberg
• 32:23
  Speaker 6: Intelligence just put out a note here and saying, you
• 32:25
  Speaker 6: know that'll have some meaning as well for the FED
• 32:27
  Speaker 6: in terms of inputs about whether they go twenty five
• 32:29
  Speaker 6: basis points or more.
• 32:30
  Speaker 10: So.
• 32:30
  Speaker 4: I think it's interesting is that if we get to
• 32:32
  Speaker 4: read from from where do we have the FED speak
• 32:35
  Speaker 4: coming with Waller who couldn't get that name, Maybe get
• 32:38
  Speaker 4: a little bit more of a temperance there, and maybe
• 32:40
  Speaker 4: the markets are as pricing in twenty five. I am wondering,
• 32:42
  Speaker 4: with a front end of the curve winds up, doing
• 32:44
  Speaker 4: do we need to kind of sell off a little
• 32:45
  Speaker 4: bit because we've had such a massive run into the
• 32:48
  Speaker 4: bond market, particularly in that front end, really flattening or
• 32:52
  Speaker 4: disinverting that curve of the two tenths. I'm kind of
• 32:54
  Speaker 4: paying attention to that.
• 32:56
  Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 33:00
  Speaker 2: weekdays at ten am Eastern on applecard Play and and
• 33:04
  Speaker 2: royd Otto with the Bloomberg Business app. You can also
• 33:06
  Speaker 2: listen live on Amazon Alexa from our flagship New York station,
• 33:10
  Speaker 2: Just say Alexa playing Bloomberg eleven thirty.
• 33:15
  Speaker 6: Let's go back to this jobs reporting, Abigail suggested, that's
• 33:18
  Speaker 6: a big part of what's driving to sell off in
• 33:20
  Speaker 6: today's market. We welcome Christopher Smart. He's a managing partner
• 33:23
  Speaker 6: in our growth group. He's a former Special Assistant to
• 33:27
  Speaker 6: the President for international Economics.
• 33:29
  Speaker 7: He joins us from Boston, Massachusetts. And if you're listening
• 33:32
  Speaker 7: to us.
• 33:33
  Speaker 6: Up in Boston, our new home is now ninety two
• 33:35
  Speaker 6: nine FM in Boston. Christopher, how do you think the
• 33:39
  Speaker 6: folks down in DC that really think about this economy,
• 33:43
  Speaker 6: worry about this economy, try to manage this economy. How
• 33:45
  Speaker 6: do you think the folks down at DC are taking
• 33:47
  Speaker 6: this labor data we saw today.
• 33:50
  Speaker 12: Well, first of all, welcome to ninety two point nine
• 33:52
  Speaker 12: in Boston. We're all very excited to have you.
• 33:54
  Speaker 7: Thank you for the plan on a new channel.
• 33:57
  Speaker 12: In terms of what they're doing down in Washington, I'm
• 33:59
  Speaker 12: afraid they're probably spend a lot more time thinking about
• 34:02
  Speaker 12: the election implications of all of this. I'll just pause
• 34:07
  Speaker 12: and not answer your question right away. I think it
• 34:09
  Speaker 12: is quite remarkable that we are talking about a FED
• 34:12
  Speaker 12: cut of twenty five or fifty basis points two months
• 34:15
  Speaker 12: out of election, and most of the market and most
• 34:19
  Speaker 12: of the nonpartisan analysis would be that this is totally
• 34:22
  Speaker 12: unrelated to any political calculation on the part of the
• 34:25
  Speaker 12: FED or the Biden administration. So I think that's kind
• 34:27
  Speaker 12: of a nice plug for FED independence. In terms of
• 34:31
  Speaker 12: the jobs report, there was something for everybody, I think
• 34:33
  Speaker 12: in this report. For the hawks, there was, you know,
• 34:36
  Speaker 12: the unemployment rate notched down a little bit, hourly earnings
• 34:40
  Speaker 12: were up a little bit, and so that would give
• 34:42
  Speaker 12: them fuel to argue for twenty five basis points. For
• 34:46
  Speaker 12: the doves, you know, we still have a miss in
• 34:49
  Speaker 12: terms of the headline jobs growth number, and we have
• 34:54
  Speaker 12: downward revisions in the past couple of months. So I think,
• 34:58
  Speaker 12: you know, as I say, there's plenty to fuel both
• 35:00
  Speaker 12: sides of the debate. My bias would still be that
• 35:03
  Speaker 12: we're going to see fifty basis points because of the
• 35:07
  Speaker 12: other data that we've seen accumulating, and because you know,
• 35:11
  Speaker 12: as long as they are able to signal maybe as
• 35:13
  Speaker 12: a hawkish cut that this is not you know, we're
• 35:18
  Speaker 12: not going to get three to fifty basis point cuts
• 35:20
  Speaker 12: for the next three meetings. We're going to do fifty
• 35:23
  Speaker 12: now and then wait and see till the end of
• 35:24
  Speaker 12: the year.
• 35:25
  Speaker 4: You're right, So it's not like they're overdoing it. They're like, okay,
• 35:27
  Speaker 4: we'll go now, but then let's just see what in
• 35:31
  Speaker 4: the economic data tells you that we need fifty, Because
• 35:33
  Speaker 4: the other part of the argument is like, look, if
• 35:34
  Speaker 4: you go fifty, you're saying things are a lot worse
• 35:37
  Speaker 4: than you might have thought.
• 35:39
  Speaker 12: Well to me, you know, maybe to argue with your
• 35:42
  Speaker 12: previous guests that you know, inflation is really not the
• 35:46
  Speaker 12: problem anymore. It is a problem politically, it is a
• 35:48
  Speaker 12: problem for consumers, it's a problem for low, lower income households.
• 35:52
  Speaker 12: But the numbers are coming down the If you're in
• 35:56
  Speaker 12: the monetary policy business, you see that you're from fighting
• 36:01
  Speaker 12: inflation now to boosting growth. And I think they have
• 36:05
  Speaker 12: plenty of room to move from current levels down to
• 36:08
  Speaker 12: something a little bit a little bit easier. If not,
• 36:11
  Speaker 12: you know, it's certainly going to be still in the
• 36:14
  Speaker 12: in the tight range. The economy is slowing in the US,
• 36:17
  Speaker 12: there's much more slowing going on in Europe. China is
• 36:20
  Speaker 12: obviously stuck right now, So I don't see the risks
• 36:26
  Speaker 12: to inflation right now. And I really think as you
• 36:28
  Speaker 12: see you know that is those are big headlines coming
• 36:31
  Speaker 12: out of Governor Wallace's speech. If that's the broader message
• 36:35
  Speaker 12: he intends to deliver, you know, I think that's going
• 36:38
  Speaker 12: to increasingly turn markets towards expecting fifty next time.
• 36:43
  Speaker 7: Chris, you mentioned kind of the timing here.
• 36:45
  Speaker 6: We're in an election year and it looks like this
• 36:47
  Speaker 6: Federal Reserve is going to be pretty active in terms
• 36:49
  Speaker 6: of making some policy changes right around this election.
• 36:54
  Speaker 7: How uncomfortable do you think that makes the Fed?
• 36:57
  Speaker 12: I think it makes them very uncomfortable. I mean, Jay
• 37:00
  Speaker 12: Powell has been asked about this through a couple of
• 37:02
  Speaker 12: different meetings. He's been very forceful and I think very credible.
• 37:05
  Speaker 12: It's saying, look, you can read our minutes. We don't
• 37:08
  Speaker 12: talk about this, we don't talk about the election, we
• 37:11
  Speaker 12: don't talk about any of that. We look at the data.
• 37:13
  Speaker 12: It's hard enough getting the data right, and it's hard
• 37:15
  Speaker 12: enough setting monetary policy for this dual mandate, let alone
• 37:20
  Speaker 12: taking other election implications into view. So I think it
• 37:26
  Speaker 12: is notable that they are they feel free to do
• 37:30
  Speaker 12: it now. I think they don't love the fact that
• 37:33
  Speaker 12: they have to do it now, but they, I think,
• 37:35
  Speaker 12: feel that this is the right time. The data is
• 37:37
  Speaker 12: pointing in that direction, markets are expecting it, and that
• 37:40
  Speaker 12: they can move ahead. I don't think they'll get any
• 37:42
  Speaker 12: more cuts in October or anything like that, but they'll
• 37:46
  Speaker 12: pick up after the election and see where the data
• 37:49
  Speaker 12: guides them.
• 37:50
  Speaker 4: You're also a former Special Assistant to the President for
• 37:52
  Speaker 4: International Economics. Back in your previous life from twenty thirteen
• 37:57
  Speaker 4: to twenty fifteen, we've been getting alive and from about
• 38:00
  Speaker 4: economic plans, particularly when it comes around corporate taxes, and
• 38:04
  Speaker 4: I'm wondering if you've been able to think about our
• 38:06
  Speaker 4: model out the different outcomes on corporate tax policy.
• 38:10
  Speaker 3: Like, clearly, yes, lower.
• 38:12
  Speaker 4: Corporate taxes will be good for the SMP, but in
• 38:14
  Speaker 4: terms of say reinvestment and economic growth, well, the devil.
• 38:18
  Speaker 12: Is always in the details. President Trump's proposal is eye
• 38:21
  Speaker 12: catching in terms of a dramatic cut in the headline rate,
• 38:25
  Speaker 12: but that seems to be linked with manufacturing things in
• 38:29
  Speaker 12: the United States, and I think he talks about, you know,
• 38:31
  Speaker 12: one hundred percent manufacturing in the United States very little
• 38:34
  Speaker 12: as you know, is one hundred percent manufactured in the
• 38:36
  Speaker 12: United States, given the inputs to manufactured goods that come
• 38:42
  Speaker 12: from many, many other countries. Sometimes, you know, I think
• 38:45
  Speaker 12: they say that if you buy a car in the US,
• 38:47
  Speaker 12: there are parts that have crossed the Mexican border five
• 38:50
  Speaker 12: or six times before it reaches the dealer's lot. I
• 38:54
  Speaker 12: would guess what markets are expecting is that, you know,
• 38:57
  Speaker 12: corporate rates are probably not likely to move much much
• 39:00
  Speaker 12: more from where they are right now. Vice President Harris
• 39:04
  Speaker 12: is in line with the Biden proposal to raise them
• 39:08
  Speaker 12: to twenty eight percent. President Trump is talking about fifteen percent.
• 39:12
  Speaker 12: You know, we have this thing called Congress, which is
• 39:14
  Speaker 12: a big toss up and more likely than not, you know,
• 39:17
  Speaker 12: it may move one or two bases, one or two
• 39:19
  Speaker 12: percentage points up or down, but it's not going to
• 39:22
  Speaker 12: be a significant shift.
• 39:23
  Speaker 6: I don't think so, Chris, to what extent are you
• 39:27
  Speaker 6: your team folks.
• 39:29
  Speaker 7: In Washington, DC?
• 39:31
  Speaker 6: Are they talking about, you know, annual deficits, I mean
• 39:34
  Speaker 6: annual deficits the national debt. Is this something that any
• 39:38
  Speaker 6: gets any serious conversation?
• 39:41
  Speaker 12: Yeah, I mean, I'm sorry, debt deficit.
• 39:43
  Speaker 4: Yeah, yeah, totally.
• 39:45
  Speaker 12: I think people like us do talk about it. People
• 39:47
  Speaker 12: in the markets do worry about it. But if you
• 39:50
  Speaker 12: are a politician and you're looking at the next election,
• 39:54
  Speaker 12: why should I worry about this thing that's going out
• 39:56
  Speaker 12: ten twenty thirty years when I've got to win in
• 39:59
  Speaker 12: no member yep so and and and you know you're
• 40:02
  Speaker 12: telling me that credit markets are going to punish me
• 40:04
  Speaker 12: for bad behavior, Well when I haven't seen it yet.
• 40:08
  Speaker 2: And you know why, why.
• 40:11
  Speaker 12: Take on that, that that thorny issue now when I
• 40:15
  Speaker 12: don't have to.
• 40:16
  Speaker 3: Well, this is what gets confusing.
• 40:17
  Speaker 4: I think about the trade deficit too, like to that point, like,
• 40:20
  Speaker 4: don't we need the trade deficit because we need foreign
• 40:23
  Speaker 4: investors and countries to buy our debts. So if we
• 40:26
  Speaker 4: close the trade deficit, there's less money for them to
• 40:28
  Speaker 4: do that. And that's where I think I get a
• 40:30
  Speaker 4: little confused on all of it.
• 40:32
  Speaker 7: Well, you're not at all confused.
• 40:33
  Speaker 12: I mean, you're absolutely right that we you know, we
• 40:36
  Speaker 12: those things are intimately related, and nobody likes to talk
• 40:40
  Speaker 12: about that, you know. I think the focus on the
• 40:45
  Speaker 12: trade deficit raises a lot more issues around our savings rate,
• 40:48
  Speaker 12: our investment incentives and that sort of thing. Rather, you know,
• 40:52
  Speaker 12: the proposals that we tend to go to easily as
• 40:56
  Speaker 12: policymakers and politicians, which are tariffs generally don't tend to
• 41:02
  Speaker 12: do much to redress those differences in trade deficits that
• 41:06
  Speaker 12: people want to because we are so interlinked in so
• 41:09
  Speaker 12: many ways with our foreign markets and with other foreign markets.
• 41:12
  Speaker 12: A bilateral trade deficit gets a lot of attention between
• 41:14
  Speaker 12: the US and China, but really the over it's really
• 41:17
  Speaker 12: the overall balance of trade that we have with all
• 41:20
  Speaker 12: of our trading partners that will matter.
• 41:22
  Speaker 7: All right, Christopher, thank you so much. We appreciate that.
• 41:24
  Speaker 7: Doctor Christopher Smart.
• 41:25
  Speaker 6: He's a managing partner at our Growth Group and a
• 41:28
  Speaker 6: former Special Assistant to the President for International Economics.
• 41:31
  Speaker 7: I googled what our growth is. Apparently it's a berg
• 41:34
  Speaker 7: in Scotland.
• 41:35
  Speaker 4: Okay, there you go.
• 41:37
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