Latest / Bloomberg Intelligence / Interest Rates, Markets, and The Economy In 2022

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Interest Rates, Markets, and The Economy In 2022 · Bloomberg Intelligence

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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: called Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. I want to bring
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Speaker 1: Jill Garvey, Senior VP and senior wealth strategist at the
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Speaker 1: Huntington's National Bank UM and and get your take, Jill
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Speaker 1: on the markets. I mean, on a day when we're
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Speaker 1: ripping up after la Kremlin hated that hinted that, uh,
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Speaker 1: progress and Pete's talks with Ukraine. UM, looks good. The Ukrainians,
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Speaker 1: UH kind of did the same. So UM and this
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Speaker 1: ahead of a FED rate hike that we were all expecting. UM.
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Speaker 1: What do you think about equity indexes right now? Good
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Speaker 1: morning Manton, Paul, it's great to be with you. Well.
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Speaker 1: Number one, our thoughts are with the forty four million
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Speaker 1: Ukrainians in the care of all human strategy, and number two,
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Speaker 1: in terms of the market, we're really going to be
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Speaker 1: focusing on the language around the increase we think that
1:09
Speaker 1: the FED will make a basis point increase today. We
1:14
Speaker 1: expect maybe three more increases this year, So we're watching
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Speaker 1: the markets very carefully. We think the volatility is going
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Speaker 1: to stay elevated in the markets during the first half
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Speaker 1: of two and there are three sources, one from inflation,
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Speaker 1: to from the central bank responses, and three from the
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Speaker 1: continued conflict in the Ukraine. So Joe, coming into this year,
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Speaker 1: I read a lot of strategy pieces from our our
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Speaker 1: good friends on on Wall Street and they said get
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Speaker 1: ready for volatility in employ What they write on that
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Speaker 1: call is that something you expect to continue here over
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Speaker 1: the course of this year's we try to digest some
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Speaker 1: of these geopolitical risks as well as economic and financial risks. Yes,
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Speaker 1: we absolutely expect volatility to continue, and we're viewing that
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Speaker 1: as an opportunity. Mant and Paul, we have clients who
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Speaker 1: are sitting on a lot of cash, as you know,
2:11
Speaker 1: representing clients nationally as a as a top national bank,
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Speaker 1: we're seeing tons of liquidity events. So our clients have
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Speaker 1: cast and we're using that cast as an opportunity to
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Speaker 1: extend their dollar cost averaging programs and strategically go into
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Speaker 1: the market. Our equity team has a strapping list and
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Speaker 1: we're being bearra strategic in how we deploy our cash.
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Speaker 1: Right now, we're focused heavily on equities and being US centric.
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Speaker 1: And again, unless we're actively deploying the cash going to
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Speaker 1: the market, we're telling our clients to hold back on
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Speaker 1: the amount of cash that you have and remain bond
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Speaker 1: light in this period of what we see will be
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Speaker 1: increasing interest rates. First of all, I want to say,
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Speaker 1: uh that Ohio is a great place to be if
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Speaker 1: you have cash? Is that right? Mean? Having cash is
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Speaker 1: probably good no matter what. But being in Ohio it's
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Speaker 1: just a very inexpensive place to live, isn't um and
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Speaker 1: a fantastic place to live? Um? You know, culturally rich,
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Speaker 1: pretty good football team, a great sports early across the board.
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Speaker 1: But where where would you buy equities in terms of
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Speaker 1: UM industry groups? What would you look at? Anything stand
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Speaker 1: out for you? Are you doing bottoms up research? How
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Speaker 1: does it look? Well? It depends on what our clients
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Speaker 1: are focused on. So we think of our clients overall
3:35
Speaker 1: portfolios in a few different segments. Number one lifestyle. So
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Speaker 1: in the example of working with a number of business owners,
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Speaker 1: if they liquidate. They need a tranche of their portfolio
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Speaker 1: to provide for their lifestyle, so that may be a
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Speaker 1: little more dividend focused, and in that space, we're looking
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Speaker 1: at technology, healthcare, and energy. For clients who also have
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Speaker 1: a portion of assets that they will never live in
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Speaker 1: our ve for legacy purposes, we may be more growth focused,
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Speaker 1: and in that case we also like healthcare. We're also
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Speaker 1: looking at rates and consumer staples. So it really depends
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Speaker 1: on our clients goals and we're ready to act and
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Speaker 1: invest depending on those. How concerned are you about inflation?
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Speaker 1: I just filled up my gas tank and boom, I
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Speaker 1: really experienced some inflation there. How concerned are you about
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Speaker 1: that as it relates to kind of equity returns? Well,
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Speaker 1: that's that's certainly a common concern um. And even though
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Speaker 1: I traveled to Ohio a lot, I'm in Growth Point Farms,
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Speaker 1: Michigan looking out at Lake St. Clair right now and
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Speaker 1: very nice gross points. Yes, and everyone is concerned. The
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Speaker 1: voters are concerned about how much it's going to cost
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Speaker 1: to up their gas. So our focus right now is
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Speaker 1: firmly protecting our clients purchasing power, whether that's to fill
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Speaker 1: up their cars, fill up their boats by everyday items
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Speaker 1: in this very high inflation and low yield environment. And
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Speaker 1: again we are tackling that and being very strategic about
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Speaker 1: it by being bond light in our portfolios. I'm not
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Speaker 1: saying we are not without bomb, but we're being bond light.
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Speaker 1: So uh. First of all, I agree, Gross Point is gorgeous. Also,
5:19
Speaker 1: I love the John Cusack film Gross gross Point Blank.
5:23
Speaker 1: I'm just brilliant, which was not filmed in gross Point.
5:26
Speaker 1: Oh no, I didn't know that. Just the opening scene
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Speaker 1: was lake Shore Drive. Wow, that's interesting off to look
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Speaker 1: that up. I just want to get your take on
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Speaker 1: the automakers though, since you're so close, just down the
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Speaker 1: street from General Motors. Um like twin towers, they're the
5:44
Speaker 1: two giant cylinders sticking up out of central detroit Ford,
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Speaker 1: just close to you. Over and dearborn, what do you
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Speaker 1: think about the automakers Now, Well, certainly there's a big
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Speaker 1: bush with the electric vehicles, and we have a number
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Speaker 1: of auto dealer clients, and our auto dealer client have
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Speaker 1: been doing very well even though the supply as well.
6:03
Speaker 1: I mean, drive by any dealership lot and you really
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Speaker 1: can't get anything but the increase in used vehicle sales
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Speaker 1: are helping them, and clients are going to talk to
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Speaker 1: their customers about getting in buying the car several months
6:18
Speaker 1: in advance out of the leases, so it really haven't
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Speaker 1: impaired the auto dealers revenue streams. Hey, Joe, thanks so
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Speaker 1: much for joining us. We always appreciate getting your thoughts
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Speaker 1: in perspective. From the Great Midwest, Gross Point, Michigan. Joe Garvey,
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Speaker 1: Senior vice president and senior wealth Strategist at Huntington's National Bank.
6:42
Speaker 1: It is FED day, and of course Bloomberg Radio t
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Speaker 1: kV will bring you live coverage beating one thirty Wall
6:47
Speaker 1: Street time, and that's in the PM. It's gonna preview
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Speaker 1: what we might hear from our Federal Reserve and from
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Speaker 1: our Federal Reserve Chairman J. Pal. It's bring Jennifer Lee,
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Speaker 1: Senior economist and Managing director at BMO Capital Markets. Jennifer,
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Speaker 1: what are you looking out for today when we hear
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Speaker 1: from FED chair J? Pal? Good morning? I think the
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Speaker 1: the the questions of what or how aggressive he is
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Speaker 1: going to be? What can a signal still send out
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Speaker 1: UM as to how he sees rate hikes going forward?
7:16
Speaker 1: UM will be closely watched, and you know I'm sure
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Speaker 1: he's going to use the words like nimble and humble
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Speaker 1: and in certain and and rightfully still, because I think
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Speaker 1: that's critical now for for any central bankers, is to
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Speaker 1: remain nimble and humble and and because there's so much
7:31
Speaker 1: uncertainty right now in the markets. Yeah, and they want
7:33
Speaker 1: to keep their optionality open as well. Um, what do
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Speaker 1: you see as the odds of a recession? You know
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Speaker 1: from here, Jennifer especially, I look at the word function
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Speaker 1: on the Bloomberg terminal and I see almost eight rate
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Speaker 1: hikes priced in through February of Um, the curve is
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Speaker 1: I don't know right now, what is it like twenty
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Speaker 1: three uh points, so almost completely flat and have got inflation, Um,
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Speaker 1: that looks like it could pretty easily hit double digits
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Speaker 1: in the short term. Um, thirty seems kind of low
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Speaker 1: to me. What's your view so base case scenario? It's
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Speaker 1: it's not in our forecast, but obviously it's something that
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Speaker 1: we are watching very closely. I think, Um, you know,
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Speaker 1: I'm going to say anything between three percent. I think,
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Speaker 1: oh it's right now for recession is probably uh my
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Speaker 1: best guest right now. Um, you know, of course I'm
8:28
Speaker 1: going to keep saying that the US is coming off
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Speaker 1: of of of a base of of great strength as
8:33
Speaker 1: we were as we left the pandemic. Although I don't
8:36
Speaker 1: think pandemic is officially over yet, but you know, the
8:38
Speaker 1: US has been very strong um um, going or going
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Speaker 1: into and heading out of it. So I think that
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Speaker 1: will work totally in its favor. Of course, there's the
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Speaker 1: risk that the FED is going to overshoot. You know,
8:50
Speaker 1: we are looking for for the FED to go five
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Speaker 1: times this year and four next year for a total
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Speaker 1: of m basis points. That might do my math right
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Speaker 1: t I five basis points each, so just within neutral territory,
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Speaker 1: I guess by towards the end of next year. Um,
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Speaker 1: and yeah, you're right. Let mean, inflation is is definitely
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Speaker 1: higher than we were were above consensus always, but even
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Speaker 1: it's going higher than we had imagined. And you know
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Speaker 1: we're already seeing double digits and in terms of the
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Speaker 1: PPI already too, So a little on the scary side
9:17
Speaker 1: in my opinion. Alright, I should not here. The Bloomberg
9:20
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9:31
Speaker 1: I wanted to kind of go, Jennifer. Inflation, I mean, yes,
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Speaker 1: we're seeing it. The question is to what extent will
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Speaker 1: it be transitory and when will it start to come down.
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Speaker 1: I just don't think we should be relying on our
9:42
Speaker 1: federal reserve to really battle inflation, given it seems like
9:47
Speaker 1: a lot of it has been the result of this pandemic,
9:49
Speaker 1: of the supply chain issues, um, and that those just
9:52
Speaker 1: need to play out. How do you think about the FED?
9:55
Speaker 1: You know thinks about its role in fighting inflation? The
9:59
Speaker 1: FED is, you know, they can only do so much.
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Speaker 1: They can't do anything in terms of like raising rates
10:05
Speaker 1: is not going to help energy prices come down. You know,
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Speaker 1: of course the single rally today which is which is helpful,
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Speaker 1: But you know, raising rates is not going to help
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Speaker 1: the energy crunch at all. But it will help will
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Speaker 1: help at least, you know, clip a little bit of
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Speaker 1: that strong demand as these as you pointed it coming
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Speaker 1: from from the pandemic itself, um, and that will at
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Speaker 1: least whole help cool inflation somewhat. The supply chain issues
10:30
Speaker 1: remain a problem in this invasion of Ukraine has worsened it.
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Speaker 1: You know, you've seen a new stories about all these
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Speaker 1: carmakers who are already you know, pulling back some of
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Speaker 1: the production because of lack of supplies coming from Ukraine
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Speaker 1: that that originally came from Ukraine and now they don't
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Speaker 1: get them anymore. So that's going to be a problem.
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Speaker 1: And of course this week you know, news of China
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Speaker 1: and shutting down Shenzen and shang Hi, which is huge,
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Speaker 1: you know, and then that's does not help the supply
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Speaker 1: issues at all. So that's going to make things a
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Speaker 1: little bit worse. We're plugging the inflation heading higher, um,
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Speaker 1: before it starts coming down. Jennifer, what do you make
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Speaker 1: of the very positive China news we got out today? Um?
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Speaker 1: It just seems so comprehensive that they're ready to boost companies, markets,
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Speaker 1: the economy from every direction. Well, so I sort of
11:21
Speaker 1: take it with a grain of salt. I mean, China
11:23
Speaker 1: can do you know, the government can do whatever it wants. Um.
11:25
Speaker 1: And you know, um, so when I'm looking for example,
11:28
Speaker 1: at the data, um, you know, the industrial production data,
11:30
Speaker 1: on the retail sales data, always take these early year
11:35
Speaker 1: reports with a grain of salt because it's so heavily
11:37
Speaker 1: influenced by the Chinese New Year or the festivities, and
11:41
Speaker 1: this year was sort of skewed because they were told
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Speaker 1: all the citizens were told please don't travel and and
11:46
Speaker 1: don't spend all your money and everything because you have
11:48
Speaker 1: to stay put because of the pandemic. So I started
11:50
Speaker 1: take that with a grain of salt. But um, for sure,
11:52
Speaker 1: China's the government's saying that is going to go out
11:55
Speaker 1: and and and throw it in. So much support shows
11:58
Speaker 1: that you know that the economy is economy is weaker,
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Speaker 1: and they are willing to do whatever it takes I
12:03
Speaker 1: think to two key to throw a support behind it.
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Speaker 1: All right, Jennifer, thanks so much for joining us. Appreciate
12:09
Speaker 1: getting your thoughts, your perspective from Toronto, Canada. Jennifer Lee,
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Speaker 1: Senior Economists and Managing director of BMO Capital Markets. A
12:20
Speaker 1: lot of cross currents out there. We've got talk of inflation, stagflation, recession.
12:25
Speaker 1: That's a lot for this Fed Reserve to deal with
12:28
Speaker 1: and we're going to hear about that later today with
12:30
Speaker 1: Chairman j Pale. Stephen Oh, global head of fixed income
12:34
Speaker 1: at pine Bridge Investments, joins us here, Steven, again, a
12:37
Speaker 1: lot of cross currents out there for this FED to navigate.
12:40
Speaker 1: What are you really focusing on here? Well, I think
12:44
Speaker 1: the expectation of what the FED is going to do
12:46
Speaker 1: in terms of raid hike is pretty much baked in
12:48
Speaker 1: at this point of a basis point rade hikes. So
12:51
Speaker 1: the focus is really going to be on guidance and
12:55
Speaker 1: signaling with respect to how they intend to have a
12:59
Speaker 1: glide path or future moves, including what is the terminal
13:03
Speaker 1: rape forecastle like and does it change? As well as
13:07
Speaker 1: although there won't be explicit guidance on what they intend
13:10
Speaker 1: to do with the balance sheet reduction to the extent
13:13
Speaker 1: that they will indicate that aspect. And then the third
13:16
Speaker 1: component is going to be around a number of questions
13:19
Speaker 1: that I'm sure will be forthcoming respect to impact from
13:24
Speaker 1: the Russian invasion of Ukraine. What do you think about
13:27
Speaker 1: the um you know, with the Russian invasion of Ukraine,
13:33
Speaker 1: with the incredible inflation that we've seen as a result
13:37
Speaker 1: of the pandemic, you've got this flattening yield curve almost
13:41
Speaker 1: down to zero, and we're the FEDS about to embark
13:45
Speaker 1: on a hiking cycle. What's the likelihood of a recession.
13:50
Speaker 1: I think the risk of a recession has been elevated.
13:52
Speaker 1: There's absolutely no doubt about that. Uh Europe is, you know,
13:56
Speaker 1: in all likelihood about to go into a new assuming
14:00
Speaker 1: that the conflict remains unsolved unresolved overall. Uh So, so
14:06
Speaker 1: the risk is certainly higher. But you know, one of
14:09
Speaker 1: the aspects of what's played out right now with the
14:12
Speaker 1: yield curve is the fact that not only the yield
14:15
Speaker 1: curve of credit markets has been the tightening of financial conditions.
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Speaker 1: When you think about what does the FET attempt to
14:21
Speaker 1: do to rein in inflation by monetary policy, is to
14:26
Speaker 1: damp and demand by in effect tighten financial conditions, and
14:31
Speaker 1: some respects that has already taken place from a combination
14:34
Speaker 1: of fat expectation, but also with higher recession probability scenarios,
14:39
Speaker 1: all be distills in the minority. Alright, Stephen, your global
14:44
Speaker 1: head of fixed income, where do you see opportunities in
14:46
Speaker 1: fixed in them? Given that backdrop, It's interesting because at
14:51
Speaker 1: the start of the year the single biggest concern was
14:55
Speaker 1: relating to a lack of opportunities given how tight valuations
14:59
Speaker 1: were across the board, across almost all asset classes, and
15:03
Speaker 1: what you have today is a flip flop from the
15:05
Speaker 1: standpoint that the fundamental outlook was much stronger at the
15:09
Speaker 1: beginning of the year, but valuations were extremely type of
15:12
Speaker 1: respect to that outlook. Today what you have our circumstances
15:16
Speaker 1: whereby valuations are much more attractive in parts of the
15:20
Speaker 1: fixing income marketplace, but the fundamental outlook has deteriorated combination
15:25
Speaker 1: of both inflation persistency as well as the deal political
15:30
Speaker 1: or overall, So where we see the opportunities are more
15:34
Speaker 1: in traditional sort of risk asset classes. When you look
15:37
Speaker 1: at you know, investment grade corporate credit in the US,
15:39
Speaker 1: now you know it was spread stead of why not
15:42
Speaker 1: to sort of one forty type of level high yell
15:46
Speaker 1: spreads are now you know, start of the year in
15:48
Speaker 1: the high two hundreds. Now we're in the four hundreds. Overall,
15:51
Speaker 1: it's not absolutely cheap, but it's certainly much more attractive
15:54
Speaker 1: starting point. As well as the fact that I think
15:57
Speaker 1: it will be a little bit more controversial. But you know, Treasury,
16:01
Speaker 1: your curves are now you know, substantially higher, certainly than
16:05
Speaker 1: when we're at the beginning of the year. And so
16:07
Speaker 1: at the start of the year we were concerned about
16:10
Speaker 1: treasury risk exposure now starting to enter into a character
16:13
Speaker 1: where it becomes somewhat attractive overall, so there's a lot
16:17
Speaker 1: more opportunities for longer term investors. I think the concern
16:21
Speaker 1: right now is where did the next you know, two
16:23
Speaker 1: to three months take you, as opposed to where does
16:26
Speaker 1: the market opportunities that look like if you're looking invest
16:29
Speaker 1: for the next two years. Um, I'm not sure if
16:33
Speaker 1: you wade into these waters, but what do you think
16:35
Speaker 1: about distressed debt buyers looking at Russian debt? You know,
16:41
Speaker 1: having been a distressed practitioner myself in the past, I
16:44
Speaker 1: always say that there's two axioms of distressed investing. One
16:48
Speaker 1: go where there is a lot of stress, and you know,
16:51
Speaker 1: for the most part, we haven't had much distress, though
16:53
Speaker 1: I have been very averse to distress debt for the
16:56
Speaker 1: last several years overall. Uh uh, you know, I I
17:00
Speaker 1: view the pandemic opportunity not as a distressed opportunity, but
17:04
Speaker 1: it's really as a dislocation opportunity for for really performing debt.
17:10
Speaker 1: In terms of Russia right now, where there is trauma,
17:13
Speaker 1: there is clearly an opportunity and I'm sure there is
17:16
Speaker 1: a number of opportunities in Russia. But my concern would be, uh,
17:20
Speaker 1: the players that are looking at it one, do they
17:22
Speaker 1: have the expertise as opposed to we saw circumstances where
17:26
Speaker 1: distressed investors were mind into Argentina and Venezuela and frankly
17:30
Speaker 1: without the knowledge of the capabilities overall. And then I
17:34
Speaker 1: think the second broader concerned that you have to ask
17:36
Speaker 1: yourself is given the circumstances, well as investors are trying
17:41
Speaker 1: to produce the best outcome, you know, is there a
17:44
Speaker 1: moral and ethical obligation in terms of how you produce
17:47
Speaker 1: that outcome? And what is your comfort level? What is
17:50
Speaker 1: your investor comfort level with investing into a Russia type
17:55
Speaker 1: situation that could be benefiting whether the government or the
18:00
Speaker 1: bar original. Alright, very very interesting lots going on there, Steve. Oh,
18:05
Speaker 1: we appreciate getting your time. Stevo, Global head of fixed
18:08
Speaker 1: income pine Bridge Investments. There a lot going on and
18:16
Speaker 1: I'm not sure I want to be a credit investor here,
18:18
Speaker 1: but we'll have to see how it goes. But Steve,
18:21
Speaker 1: you know, he's not really going in that distressed debt
18:24
Speaker 1: for the Russian debt. He's not doing it. But you
18:26
Speaker 1: gotta bet somebody is we need to call up Hans
18:29
Speaker 1: Humes or get hold of somebody from Elliott, because this
18:32
Speaker 1: is when the sharks start to circle, you know, um,
18:35
Speaker 1: when you start to see debt priced at twenty cents
18:39
Speaker 1: on the dollar um and headed down. Especially you know,
18:43
Speaker 1: today's the day, right, today is the day they need
18:46
Speaker 1: to pay a hundred I think a hundred seventeen million
18:49
Speaker 1: dollars um. And then they get uh As Damien sass
18:53
Speaker 1: Hours explaining it to me a thirty day grace period.
18:55
Speaker 1: So default is imminent. Yeah, that's gonna be amazing if
18:59
Speaker 1: and and that happens, because it's been a while since
19:01
Speaker 1: we've had to deal with that. But you don't want
19:03
Speaker 1: to put Argentina in the same sentence as with any
19:06
Speaker 1: other country, I don't think. All right, let's get a
19:08
Speaker 1: little preview here. We're waiting for President about it to
19:10
Speaker 1: make some comments on the situation in Ukraine. But of
19:15
Speaker 1: course it is a FED day. We're expecting comments from
19:17
Speaker 1: FED Chairman j Palace. Afternoon. Michael McKee joins us kind
19:20
Speaker 1: of Bloomberg Economist extraordinaire for Bloomberg News Bloomberg Television joins
19:25
Speaker 1: us here on a Bloomberg Interactive Broker Studio. I will
19:28
Speaker 1: be paying attention this afternoon. I will be listening, Mike,
19:30
Speaker 1: trust me on that. What should I be listening for?
19:34
Speaker 1: What's next? We know what the what is happening today?
19:38
Speaker 1: The Fed's gonna raise rates and they're gonna put out
19:40
Speaker 1: new projections. UH. The question is what's next? How fast
19:44
Speaker 1: are they going to raise rates? How often are they
19:46
Speaker 1: going to raise rates? Uh? That's what the market's going
19:48
Speaker 1: to care about. And UH, give us some idea of
19:52
Speaker 1: how you're going to pull this off without sending the
19:54
Speaker 1: economy into recession. What do you think the risk is
19:57
Speaker 1: there of that recession? You know, is it climbing? Is
20:01
Speaker 1: it climbing? There was a great piece by uh Nikos
20:04
Speaker 1: Chrystal Laures over the weekend about you know, the um
20:08
Speaker 1: the light is starting to to dim a little bit here.
20:11
Speaker 1: Goldman Sachs last week raised their UM likelihood to thirty
20:15
Speaker 1: and I felt like that was low given all of
20:17
Speaker 1: the bad news we're getting around slowing growth, UH and
20:21
Speaker 1: around accelerating inflation in the midst of a war. I
20:25
Speaker 1: think that the odds have risen a lot, UH in
20:29
Speaker 1: part because of the war. What's interesting is uh, everybody
20:33
Speaker 1: immediately went to energy prices, and then energy prices have
20:37
Speaker 1: started to come back down again, and a lot of
20:40
Speaker 1: analysts points the fact that usually a spike doesn't last
20:43
Speaker 1: that long, and if we can avoid that, then maybe
20:48
Speaker 1: we can avoid recession. But it's gonna be really hard
20:50
Speaker 1: for the FED to put to get rid of inflation,
20:53
Speaker 1: to get inflation down from where it is now without
20:58
Speaker 1: getting awfully close of recession. My thought was, and you know,
21:03
Speaker 1: probably sleeping through half of my economics classes at Duke,
21:06
Speaker 1: that this inflation hasn't been has not been primarily driven
21:11
Speaker 1: by the FED. It has been primarily driven by some
21:14
Speaker 1: of the impacts of the pandemic, the supply chain challenges,
21:18
Speaker 1: you know, you've got that's and as those things play out,
21:21
Speaker 1: then it's going to take care of itself. Well, that's
21:25
Speaker 1: been the Fed's argument all along. That's where transitory came from.
21:29
Speaker 1: Not a great strategy, admit it's not. Well, it's calling
21:32
Speaker 1: a little bit more slowly they anticipated, but uh, it's
21:35
Speaker 1: there's still reason to think in a lot of these
21:37
Speaker 1: areas that will happen. We will see supply chains rationalized.
21:43
Speaker 1: Although somebody please, hopefully somebody please tell me what's happening
21:47
Speaker 1: in Japan, because you remember what happened the last time
21:49
Speaker 1: we had the earthquake there in terms of supply chains.
21:53
Speaker 1: And then uh, we will see the base effects come
21:57
Speaker 1: in where high inflation last year, we'll start to fall out,
22:04
Speaker 1: and then uh, we'll see some of these things that
22:07
Speaker 1: like use cars, they're already going down in price. The
22:11
Speaker 1: question is how far do they go down? And what's
22:14
Speaker 1: the impact of the war, how long is that gonna last?
22:17
Speaker 1: All those things make your confidence intervals. Well, look, I
22:22
Speaker 1: just talked to yesterday the CEO of Mercedes, and I said,
22:25
Speaker 1: you know, give me a date when is the chip
22:28
Speaker 1: shortage going to be fixed, so that you know we
22:31
Speaker 1: can all get the cars and trucks that we've ordered
22:34
Speaker 1: on time. And he said, I'm not optimistic it's gonna
22:37
Speaker 1: happen this year. You know, it's gonna be into next year.
22:40
Speaker 1: And I remember when last year they were saying it
22:43
Speaker 1: was going to be into the beginning of two. So
22:45
Speaker 1: it's gonna take a little longer. I want to just
22:46
Speaker 1: read a quote if I can. This is from Ed Clissold,
22:50
Speaker 1: who is the chief US strategist at ned Davis Research.
22:53
Speaker 1: So he says, over time, the three biggest factors that
22:57
Speaker 1: tend to drive the U. S economy into a recession
22:59
Speaker 1: and out along with me. Here are one. An inverted
23:02
Speaker 1: yield curve. We're almost there to some kind of commodity
23:06
Speaker 1: price shock. We've definitely seen that, or fed tightening number three.
23:12
Speaker 1: All of these things are happening. Am I being alarmist? No,
23:16
Speaker 1: you're not being alarmist. The only question is, um, how
23:22
Speaker 1: long do those effects last? Now? If you're looking at
23:25
Speaker 1: yield curves. Interesting note this morning from the folks at
23:29
Speaker 1: Data Trek. Uh. Yeah, the ten uh two to tenure
23:34
Speaker 1: is very narrow, but the three month uh ten year
23:40
Speaker 1: is not a problem at all. And so uh it
23:44
Speaker 1: kind of depends on what you're looking at. And as
23:46
Speaker 1: they say, the yield curves predicted uh ten of the
23:49
Speaker 1: last you know, five recessions, um, so well all of
23:53
Speaker 1: them given a long enough time period after right, well,
23:57
Speaker 1: given a long enough timeframe, we're all dead, as they
24:00
Speaker 1: But the commodities, you know that a lot of them
24:03
Speaker 1: have started to come down. If it's not just oil um,
24:06
Speaker 1: and and it isn't just nickel which is struggling to
24:09
Speaker 1: find a price. But uh, some of the other commodities.
24:12
Speaker 1: Wheat has come down significant wheat that's pronounced wheat? Is
24:17
Speaker 1: that was that the Ohio? You know triskits anyway, So
24:26
Speaker 1: it's it's I mean you, I tell you, I will
24:30
Speaker 1: give you. Let you know a little secret here. I
24:32
Speaker 1: was talking with David Weston a few minutes ago and
24:35
Speaker 1: he was asking, what are you gonna ask the chairman?
24:38
Speaker 1: And I said, well, if I ask last, I'm gonna
24:40
Speaker 1: say three year pandemic war in Europe, inflation at its
24:46
Speaker 1: highest in four decades, the possibility of recession, and now
24:49
Speaker 1: an earthquake in Japan? Are you sure you want to
24:52
Speaker 1: be confirmed to this job for another term? Exactly? Is
24:56
Speaker 1: fifty basis points today off the table? Pretty much? Um there.
25:01
Speaker 1: The FED would only do that to make a point,
25:04
Speaker 1: and I don't think they want us at the point
25:07
Speaker 1: would be like, we're not communicating to you. There They're
25:11
Speaker 1: feeling is if you are clear and direct with the markets,
25:15
Speaker 1: then the markups absorb the monetary policy that you want,
25:19
Speaker 1: without volatility that you don't want. In other words, we've
25:21
Speaker 1: seen mortgage rates go up, we're seeing lending rates go up,
25:24
Speaker 1: and the FED hasn't done anything yet, but we also
25:27
Speaker 1: haven't had a taper tantrum, so what else should we
25:30
Speaker 1: be looking for? Again? But I wonder about Sarah Bloom Raskin.
25:33
Speaker 1: Can we can we about Raskin? Um? So that's off
25:38
Speaker 1: the table. She's out of there. Basically, Um. Shared Brown
25:44
Speaker 1: had tied all four of these confirmations together. He wanted
25:47
Speaker 1: to do them all at once, the Senator from the
25:49
Speaker 1: great state of Ohio. Um. But uh, now we need
25:54
Speaker 1: to know who the fourth is going to be, and
25:56
Speaker 1: maybe they change that plan. Still, Um, Powell may not
26:01
Speaker 1: necessarily be in this job for much longer, right, I
26:03
Speaker 1: mean he he hasn't been confirmed yet. Well, he can
26:06
Speaker 1: be in the job for many years as chairman because
26:09
Speaker 1: he's got years to go on his board governorship, for
26:13
Speaker 1: which he's separately confirmed. But UM, it's they are probably
26:17
Speaker 1: going to move expeditiously on the four remaining nominees, and
26:21
Speaker 1: we don't know if or when we'll get a vice
26:24
Speaker 1: chair for supervision because with an election coming up in
26:27
Speaker 1: the fall, if you think the Republicans were stalling on
26:30
Speaker 1: Sarah Bloom Raskin, whoever the President puts up, they're probably
26:34
Speaker 1: going to try to drag it out long enough that
26:37
Speaker 1: if they take control of the sentence. Well, and if
26:38
Speaker 1: the president wants to put forward a progressive candidate, he
26:41
Speaker 1: or she is going to have is likely going to
26:44
Speaker 1: have said something in the past. Right, we all say
26:48
Speaker 1: some things, um that uh, that the Republicans are going
26:52
Speaker 1: to want to use against her. That to me is
26:54
Speaker 1: gonna say no way, Jose. Yeah, same thing happened with
26:57
Speaker 1: Sally Ulmarrosso the nomine presidents nominee for Controller of the Currency,
27:02
Speaker 1: and she was forced to withdraw her nomination. So I
27:06
Speaker 1: would not expect that seat to be filled for a while. Wow,
27:10
Speaker 1: all right? Is that enough from Mike? Should we let
27:12
Speaker 1: him go to TV? I usually like to haug In,
27:15
Speaker 1: but I guess he's gonna have to go to Keene.
27:18
Speaker 1: I think they were making some ugly faces. Why aren't
27:20
Speaker 1: they walked by? Did they leave? Oh? I thought they
27:22
Speaker 1: were coming in here. I thought they were going to
27:24
Speaker 1: come in here. I don't know, I don't I don't
27:26
Speaker 1: know where they are. They're getting ready for the big
27:27
Speaker 1: TV show. Thanks for listening to the Bloomberg Markets podcast.
27:32
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
27:35
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller, I'm
27:39
Speaker 1: on Twitter at Matt Miller three. Pet On Ball Sweeney,
27:43
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
27:46
Speaker 1: can always catch us worldwide at Bloomberg Radio