Latest / Bloomberg Intelligence / Stifel's Piegza: Could Be Discussing US Recession Again (Audio)

Transcript

Stifel's Piegza: Could Be Discussing US Recession Again (Audio) · Bloomberg Intelligence

• 0:04
  Speaker 1: Broadcasting live to New York Bloomberg eleven, Brio to Washington,
• 0:08
  Speaker 1: d C. Bloomberg to Boston, Bloomberg Well Under, to San
• 0:12
  Speaker 1: Francisco Bloomberg nine, to the country, US Exam General one
• 0:17
  Speaker 1: nineteen and around the globe the Bloomberg Radio plus Zappen
• 0:21
  Speaker 1: Bloomberg dot Com. This is taking stock. I'm Kathleen Hayes,
• 0:25
  Speaker 1: along with pim Fox. US treasury thirty year bonds sell
• 0:29
  Speaker 1: at a record low two point one seven percent. Germany's
• 0:33
  Speaker 1: benchmark tenure bund selling at a negative yield for the
• 0:36
  Speaker 1: first time ever. This as the Federal Reserve signals that
• 0:39
  Speaker 1: the US is growing modestly and traders scratch their heads
• 0:43
  Speaker 1: over where central banks around the world are going. Next,
• 0:46
  Speaker 1: we'll be speaking with Lindsay Piegza, chief economist at Stifle Nicholas,
• 0:50
  Speaker 1: about the Beige Book and about the Federal Reserve in
• 0:52
  Speaker 1: the US economy. But right now, let's go to Charlie
• 0:54
  Speaker 1: pelevin the Bloomberg Boose Room for Bloomberg Business Flag and
• 0:57
  Speaker 1: I think of pim Fox. Thank you, Kathleen Hayes. That
• 1:00
  Speaker 1: on smp R higher Naz tak Laura, and this update
• 1:02
  Speaker 1: is brought to you this Wednesday by sector spider e
• 1:06
  Speaker 1: T S. Why by a single stock when you can
• 1:09
  Speaker 1: invest in the entire sector of visits sector s P,
• 1:12
  Speaker 1: d R S dot Com or call one sector e
• 1:17
  Speaker 1: T F. Philip Hammond has been appointed the UK's Chancellor
• 1:22
  Speaker 1: of the Exchequer, tasked with the job of protecting the
• 1:25
  Speaker 1: economy from the fall out of Brexit. A meeting you
• 1:28
  Speaker 1: Prime Minister Theresa May's pledge to tackle quote burning injustice
• 1:33
  Speaker 1: in society. He must now decide how best to stimulate
• 1:36
  Speaker 1: the UK economy, which is already at risk of sliding
• 1:39
  Speaker 1: into recession, while quelling voters frustration following six years of
• 1:44
  Speaker 1: George Osborne's austarity driven policies. Federal Reserve out with its
• 1:49
  Speaker 1: paige Book report and it says the U s economy
• 1:52
  Speaker 1: expanded at a modest pay since mid May, amid slight
• 1:55
  Speaker 1: price pressures and some softening in consumer spending. The rally
• 2:00
  Speaker 1: and US shares faltering today, equities fluctuating at all time
• 2:03
  Speaker 1: highs as crew plunges amid an unexpected rise in fuel stockpiles.
• 2:08
  Speaker 1: Treasuries have halted a two day slide. Laura Rosener is
• 2:11
  Speaker 1: Senior economists of b MP poda ba. We're getting more
• 2:16
  Speaker 1: easing and more concern externally. It's just increasing demand for
• 2:22
  Speaker 1: assets that actually are yielding something positive and so that's
• 2:26
  Speaker 1: fueling demand for US Treasury securities and and driving them
• 2:29
  Speaker 1: much lower. So no, it's not really fundamentals which are
• 2:33
  Speaker 1: are driving US treasury yields. And right now with you
• 2:36
  Speaker 1: have gold up seven tenths of one percent, SMP five
• 2:40
  Speaker 1: hundred index unchanged, and now we'll look at the other
• 2:43
  Speaker 1: stories making news. Thank you, Charlie from the Bloomberg Newsroom.
• 2:47
  Speaker 1: I'm Eric Shatzker. Hillary Clinton is talking unity today while
• 2:51
  Speaker 1: on the road in Illinois, one day after Bernie Sanders
• 2:54
  Speaker 1: officially endorsed her. Clinton spoke at the Old State House
• 2:57
  Speaker 1: in Springfield. There is too much and hate in our country,
• 3:03
  Speaker 1: too little trust and common ground. An analysis by the
• 3:08
  Speaker 1: New York City Council finds that Donald Trump's proposals to
• 3:11
  Speaker 1: deport illegal immigrants and temporarily banned Muslims could hurt the
• 3:15
  Speaker 1: local economy. The council finds the plans could cost the
• 3:18
  Speaker 1: state more than eight hundred million dollars in the city
• 3:21
  Speaker 1: more than three forty thousand jobs. British Prime Minister David
• 3:25
  Speaker 1: Cameron has left Downing Street for the last time as leader.
• 3:29
  Speaker 1: Mr Cameron thanked his political supporters, his children, and offered
• 3:33
  Speaker 1: a special thank you to his wife, Samantha, you have
• 3:36
  Speaker 1: kept me vaguely saying and as well as being an
• 3:39
  Speaker 1: amazing wife, mother and businesswoman, you have done something every
• 3:43
  Speaker 1: week in that building behind me to celebrate the best
• 3:47
  Speaker 1: voluntary service in our country. You came home. Secretary Theresa
• 3:51
  Speaker 1: May has taken over from Cameron as the new Prime Minister.
• 3:54
  Speaker 1: Cameron Sterling is calling on protesters to protest the right way,
• 3:58
  Speaker 1: protest in peace. He's the fifteen year old son of
• 4:01
  Speaker 1: Alton Sterling, a black man who was shot and killed
• 4:04
  Speaker 1: by white police officers outside of convenience store in Baton Rouge,
• 4:07
  Speaker 1: Louisiana last week. There are extensive subway delays across the city.
• 4:12
  Speaker 1: Officials say of power outage at a rail control center
• 4:14
  Speaker 1: has caused major backups on the one, two, three, four, five,
• 4:18
  Speaker 1: and six lines. Global News twenty four hours a day,
• 4:21
  Speaker 1: powered by more than journalists and analysts in more than
• 4:24
  Speaker 1: one twenty countries. I'm Eric Shasker, this is Bloomberg, Charlie,
• 4:30
  Speaker 1: and we thank you and again recapping a move higher
• 4:32
  Speaker 1: for the down Jones industrial average up by two tenths
• 4:35
  Speaker 1: of one percent, s and P up by less than
• 4:37
  Speaker 1: half a point. Little change there. Nazdek is down two
• 4:40
  Speaker 1: tenths of one percent. I'm Charlie Pelican. That's a Bloomberg
• 4:44
  Speaker 1: business flash. He's taking stock the FED in Focus on
• 4:49
  Speaker 1: Bloomberg Radio. The FED in Focus reports from the twelve
• 4:53
  Speaker 1: Federal Reserve districts indicate that economic activity continued to expand
• 4:58
  Speaker 1: at a modest pace across MO regions from mid May
• 5:01
  Speaker 1: through the end of June. Here to tell us more,
• 5:05
  Speaker 1: Lindsay Pieza, chief economist at a Stifle Nicholas, joining us
• 5:09
  Speaker 1: from Chicago, and she can be followed on Twitter at
• 5:13
  Speaker 1: Lindsay PA. All Right, Lindsay, so, tell us a little
• 5:16
  Speaker 1: bit about your reaction to the Beige Book. Well, it's
• 5:19
  Speaker 1: pretty much in line with expectations. The Beige Book has
• 5:23
  Speaker 1: consistently painted a much rosier picture of the US economy
• 5:27
  Speaker 1: than the data would otherwise suggest. Remember, at the start
• 5:30
  Speaker 1: of the year, with a very flow start out of
• 5:32
  Speaker 1: the Gage, the Beige Book continued to emphasize that economic
• 5:36
  Speaker 1: activity expanded at a moderate pace, a very similar tone
• 5:40
  Speaker 1: that we continue to hear in this morning's report. Well, actually,
• 5:43
  Speaker 1: what I really see in this Beige Book is the
• 5:45
  Speaker 1: word modest amid slight price pressures. To me, this is
• 5:48
  Speaker 1: a very very cautious view of how the economy is growing.
• 5:53
  Speaker 1: That doesn't seem to me there's anything that suggests, oh
• 5:55
  Speaker 1: my gosh, we're seeing a big spurt of growth here. Well,
• 5:58
  Speaker 1: I think the idea is more stability, the economy continue
• 6:01
  Speaker 1: to grow to modest or moderate pace. What I'm really
• 6:04
  Speaker 1: looking for is an acknowledgement that the U S economy
• 6:07
  Speaker 1: is still on very fragile footing. Now, of course they
• 6:10
  Speaker 1: did mention that manufacturing activity was mixed, consumer spending showing
• 6:14
  Speaker 1: some signs of softening. But what's so interesting is that
• 6:17
  Speaker 1: they talked about the labor market remaining stable, and of course,
• 6:21
  Speaker 1: as we know, May employment virtually non existent, followed by
• 6:25
  Speaker 1: a very large uptick in June, the exact opposite of
• 6:28
  Speaker 1: what I would describe as stable. Lindsey, take away all
• 6:31
  Speaker 1: the politics, takeaway Brexit, all of the extraneous events. If
• 6:36
  Speaker 1: you were just to read this Beige Book and then
• 6:40
  Speaker 1: add into that the release of the previous f O
• 6:42
  Speaker 1: m C minutes, can you tell me what your position
• 6:46
  Speaker 1: would be about raising interest rates, Well, I think right
• 6:49
  Speaker 1: now it's a matter of so so economic growth, and
• 6:53
  Speaker 1: it really depends where your bar of expectation falls. For me,
• 6:57
  Speaker 1: I'm looking for strong, solid, robust growth in order for
• 7:02
  Speaker 1: the Fed to feel comfortable to give us that second
• 7:04
  Speaker 1: rate increase. But for many sitting at these low low
• 7:07
  Speaker 1: levels for years now, so so we're modest is good enough,
• 7:12
  Speaker 1: and some of the Fed will certainly push for a
• 7:14
  Speaker 1: second rate increase within the confines of It's hard to uh,
• 7:20
  Speaker 1: you know, sort of all out at times, isn't it.
• 7:21
  Speaker 1: But I think we had a trivick story on the
• 7:23
  Speaker 1: Bloomberg today pointing out that, uh, in terms of the
• 7:27
  Speaker 1: odds of the December interest rate increase, they're back up
• 7:30
  Speaker 1: to which is almost where they were before the Briggsit vote.
• 7:33
  Speaker 1: It still doesn't indicate that people are betting on a
• 7:36
  Speaker 1: rate hike this year, at least not traders, because our
• 7:38
  Speaker 1: economists more and more, I think, once again, who are
• 7:40
  Speaker 1: seeing the December hike? Uh? Your your your view? Will
• 7:44
  Speaker 1: they hick at all this year? Lindsay? And is it
• 7:45
  Speaker 1: better if they do or they don't? I think at
• 7:48
  Speaker 1: this point the Fed is going to remain on the
• 7:50
  Speaker 1: sidelines through and most likely the better part of I
• 7:57
  Speaker 1: think right now it's very fragile out in the economy,
• 8:01
  Speaker 1: and I think the Fed really learned their lesson from
• 8:03
  Speaker 1: lifting off in December based on expectations of further improvement,
• 8:08
  Speaker 1: which we're still waiting for now six months later, and
• 8:11
  Speaker 1: so I think a good portion of the committee is
• 8:13
  Speaker 1: going to err on the side of caution, waiting for
• 8:16
  Speaker 1: realized improvement rather than expecting improvement down the line. It's
• 8:21
  Speaker 1: all us about your thoughts having to do with the
• 8:22
  Speaker 1: Bank of England. Will they cut rates? I think there's
• 8:26
  Speaker 1: a need for additional stimulus. There's a significant amount of uncertainty,
• 8:30
  Speaker 1: there's a significant amount of volatility out in the marketplace,
• 8:34
  Speaker 1: and I think additional support from the Bank of England
• 8:37
  Speaker 1: will at the very least begin to calm some of those, uh,
• 8:42
  Speaker 1: those uncertainties in the marketplace. So I do expect another
• 8:45
  Speaker 1: rate cut, additional stimulus out in the marketplace. Okay, of course,
• 8:50
  Speaker 1: that's were almost evenly divided among economists between tomorrow, July fourteen,
• 8:54
  Speaker 1: Thursday or three weeks from now, and as you and
• 8:57
  Speaker 1: you point out, they probably will move pretty quickly. But
• 9:00
  Speaker 1: you also to comment on the negative bond heals the
• 9:02
  Speaker 1: thirty year bonds selling at a record low two point
• 9:04
  Speaker 1: one seven percent Germany's tenure bune now with a negative yield. Uh,
• 9:09
  Speaker 1: if you're a central banker, do you just say, well,
• 9:11
  Speaker 1: we've bought up so much sovereign debt that there's nothing
• 9:14
  Speaker 1: left to buy and they'll take any kind of yield
• 9:15
  Speaker 1: they can get, or would you be concerned? I think
• 9:19
  Speaker 1: it's a little from column Ay and a little from
• 9:21
  Speaker 1: column by. Certainly central banks have gone around buying up
• 9:25
  Speaker 1: all substantial amount, I should say, of debt, but at
• 9:29
  Speaker 1: this point it's also a concern. It's a flight to
• 9:31
  Speaker 1: quality trade as investors are looking out in the marketplace
• 9:35
  Speaker 1: and we're experiencing three four five standard deviation events, particularly
• 9:39
  Speaker 1: surrounding the Brexit, and there's a rush to be safe haven,
• 9:43
  Speaker 1: be that German bonds, be that the yend, be that
• 9:46
  Speaker 1: the dollar or gold. And I suspect that we will
• 9:49
  Speaker 1: continue to see these capital flows into these safe havens
• 9:52
  Speaker 1: during this time of uncertainty. If these capital flows into
• 9:56
  Speaker 1: these safe havens continue on the institutional and corporate level,
• 9:59
  Speaker 1: then what is an individual supposed to make of all this? Well,
• 10:03
  Speaker 1: I think individuals are very concerned at this point, and
• 10:06
  Speaker 1: I do suspect that we're going to see a lot
• 10:08
  Speaker 1: of individuals hoarding cash, pulling their money out of the marketplace,
• 10:12
  Speaker 1: with a big question mark of where we headed from here.
• 10:15
  Speaker 1: Now again, the big books got officials. They're telling us
• 10:17
  Speaker 1: the economy is on relatively moderate footing, but there is
• 10:21
  Speaker 1: a big concern that we could be discussing the R
• 10:23
  Speaker 1: word recession sometime in the near future. And of course,
• 10:27
  Speaker 1: the fact that the yield curve gets ever flatter as
• 10:30
  Speaker 1: the yields continue to drop on long term treasuries and
• 10:33
  Speaker 1: long term deating around the world. Typically that is has
• 10:37
  Speaker 1: been in the past a signal that that our word
• 10:39
  Speaker 1: recession could be coming. It's a little bit more complicated
• 10:42
  Speaker 1: these days, though, Lindsay p St thank you so very
• 10:44
  Speaker 1: much for joining us chief economist as Stiffil Nicholas and co.
• 10:48
  Speaker 1: We're gonna be continuing our look at the markets later
• 10:51
  Speaker 1: in the show, will be be speaking with Jack Ablin
• 10:54
  Speaker 1: from BMO Private Bank in Chicago. This is Bloomberg Fed
• 11:01
  Speaker 1: in Focus is brought to by Willoughby since eighteen ninety eight,
• 11:03
  Speaker 1: New York City's boutique camera store for precision craft at
• 11:06
  Speaker 1: Hazzle Blot and like at Cameras, plus a full selection
• 11:09
  Speaker 1: of go pro action adventure cameras. Willoughby's corner of Fifth
• 11:12
  Speaker 1: Avenue and thirty first Street