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is the Bloomberg Surveillance Podcast. I'm Jonathan

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1:02

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1:05

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1:18

And as always on the Bloomberg Terminal

1:20

and the Bloomberg Business app. We

1:49

have complete conviction. Can you

1:51

just sort of bring that together? Okay, so

1:54

if we think about a soft gliding and

1:56

you're talking about that runway being narrower, that's

1:58

just the impact of data coming in. into

2:00

the market and informing our investment opinions. So

2:02

first of all, if we look at the

2:05

beginning of the year and look at where

2:07

we are, at the beginning of the year,

2:09

the market was predicting six rate cuts. We

2:11

were actually much lower in terms of the

2:13

number of Fed rate cuts. So we were

2:15

actually slightly more optimistic. The market has come

2:17

towards us. It's interesting though, because now soft

2:20

landing is considered a bullish scenario. And I

2:22

think that that really, it

2:24

just doesn't understand the resilience of the US

2:26

economy. It doesn't also look at the fact

2:29

that there are opportunities outside

2:31

of the US market as well. So

2:34

you look at valuations and everything. So when

2:36

we look at this soft landing scenario, we're

2:38

very positive as we go into the second

2:40

half of the year. I

2:43

think that we've got good earnings

2:45

support. We have a labor market

2:47

that is not inflationary. And we

2:49

do think that if I look

2:51

at the impact of AI and

2:54

all of those things, we think it's positive for a

2:56

lot of sectors. Do you think Mary Daly is wrong

2:58

of the San Francisco Fed that this could be

3:00

an inflection point and that often it's sort of

3:03

nonlinear when you see some kind of weakening in

3:05

the labor market? I

3:07

think in terms of calling an inflection

3:09

point is very, very difficult because you're

3:11

calling a kind of point estimate in

3:13

time. And we look at the fact

3:15

that you've got a Fed which we

3:17

really do congratulate for the fact that

3:19

they have been telegraphing so clearly what

3:21

they're paying attention to. They're paying attention

3:23

to inflation. And we've spent a lot

3:25

of time talking about that because

3:28

it's come from such high levels. They're also watching that

3:30

unemployment number. But we're coming from

3:32

historically low levels of unemployment. And

3:35

so we can normalize unemployment and

3:37

we can still have a supportive

3:39

market. I wanna ask about

3:42

what supports that market. The environment is positive,

3:44

but we're talking about a soft landing. We're

3:46

not talking about some huge growth engine. Or

3:48

maybe correct me, maybe we are. But how

3:50

do the cyclical stocks catch up? If again,

3:52

it isn't this huge bout of growth. If

3:54

it's just kind of this anemic soft landing.

3:56

An anemic amount of growth is actually good

3:58

for companies. You know, kind of. a really

4:00

aggressive amount of growth where you've got so

4:02

many things happening. It's very difficult to plan

4:05

for when you're sitting in that CEO seat

4:07

when you've kind of got tepid but you've

4:09

got predictable growth. I think it's much easier

4:11

to plan and to forward forecast. If I

4:13

was to tell you that we know that

4:16

things are only going to two to three

4:18

percent you can kind of get some productivity

4:20

gains in order to be able to manage

4:22

that and so you can manage your cost

4:25

in order to meet that revenue. When things

4:27

are going you're gangbusters and you're the stock

4:29

your market's growing 10 or your revenues are growing 10

4:31

15 percent. You're just adding

4:33

bodies and you're adding cost and then you take

4:35

care of the efficiency. So I do think that

4:38

productivity is where we're actually going to see some

4:40

upward surprises in terms of driving earnings going forward.

4:42

Does this market make sense to you right now.

4:44

I mean maybe we want to strip out the

4:46

Nvidia to ask does it make sense. But OK

4:49

let's say we strip out you look at the

4:51

rest of this market a market where over the

4:53

past quarter it's been utilities and staples that have

4:55

done well and the others have lagged. You look

4:57

at that and say OK given we're trying to

4:59

approach this landing that all makes sense or

5:02

is something strange happening to you. So

5:04

the concerns about the consumer are not

5:06

new news in the last couple of

5:08

weeks. I mean we talk about McDonald's

5:10

for example they were used three six

5:12

months ago talking about the fact that

5:14

we're seeing a shift in

5:16

the consumer to being more cost conscious.

5:18

And what does that mean. Well McDonald's

5:20

sees the shift they use data they

5:22

use a lot of technology in order

5:24

to be able to forward project. And

5:26

they say we are going to bring

5:28

out more cost conscious offerings to

5:30

meet the consumer where they're at. And

5:33

that's a really key aspect of what

5:35

a company needs to do. You need

5:37

to understand what's going on. So we

5:40

already have known that consumer has gotten

5:42

more cost conscious. You're going over to

5:44

the oil prices and looking at what's

5:46

happening at the pump. We know that

5:49

that's also starting to pressure the consumer.

5:51

Interestingly enough you know a lot of

5:53

people are using the strong US dollar

5:55

to travel internationally. So oil prices are

5:58

actually not such a big component. of

6:00

the cost of travel in this summer

6:02

vacation series as they've been in the

6:04

past. So I think that there's just

6:06

a lot of dynamics going on in

6:08

the market, but we look at it,

6:10

the fact that you've got a high-end

6:12

consumer supported by a strong stock market,

6:14

and they're very much a driver. The

6:16

middle-income consumer has got a lot of

6:18

good things going for them, and the

6:20

low-end consumer we're paying attention to, but

6:22

that strength in the job market is

6:24

really positive for them. I'm glad you

6:26

brought up travel, because in the consumer

6:28

confidence survey yesterday, one thing they did

6:30

notice, even though we had seen some

6:32

subdued sentiment, is that most respondents say

6:34

they plan to take, at least half,

6:36

were saying they plan to take some

6:38

sort of vacation in the second half

6:40

of the year. So does that still

6:42

maintain this idea that, okay, we're seeing

6:44

disinflation, but services is gonna be the

6:46

most difficult? Services in terms of

6:49

what the number involves, the biggest driver there

6:51

is actually the housing market, and what's happening

6:53

on the rent side of

6:55

things, and that's a very significant lagging

6:57

indicator, and so I think that the

6:59

indication there is that that number is

7:01

going to come down. So we really

7:03

need to pay attention to that second

7:05

derivative impact, so we do think that

7:07

there's less inflation there. In terms of

7:09

traveling abroad, it is

7:11

the strength of the dollar that's really

7:13

driving that. I mean, I'm heading over

7:16

to London and to Portugal, and you

7:18

look at the prices that we're going

7:20

to be paying for accommodation, for trips

7:22

and for travel, and it's significantly lower,

7:25

and that's a really big driver for a lot of

7:27

these travel. Before we let you go, you said that

7:30

the biggest risk was the election later this year. Is

7:33

there a scenario in your mind about which

7:35

presidential candidate could potentially be more disruptive to

7:37

the market? I think the reason we talk

7:39

about the fact that the presidential election is

7:42

disruptive is the fact that there is no

7:44

clear contender for the White House that we

7:46

can bank on, and you had some data

7:48

earlier yesterday. So

7:51

if I take a look at what we

7:53

think is going to happen, each of them

7:55

has a unique platform, and each of them

7:57

has sectors of the market that will work

7:59

if they're elected. and not work if they're

8:01

not. And that's the uncertainty that we're talking

8:03

about in terms of it's a difference in

8:05

policy and the fact that you don't have

8:07

a clear person that is going into the

8:09

White House. As a result, what will happen

8:11

is that all of the stocks will price

8:13

in the fact that you're going to lose.

8:15

Everyone likes to price in their downside. So

8:17

we do think that once we get through

8:19

the election, we'll have that kind of, those

8:21

gains come back into the market, but we

8:23

foresee the risk. Katrina Dudley, thank you so

8:25

much. Let's take

8:28

a look at the next features of the

8:30

President's inflation policy. Inflation.

8:32

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Member S-I-P-C and M-Y-S-E. Neil

10:01

Dutta, a macro renaissance research, a renaissance macro

10:04

writing this. The Fed needs to get on

10:06

with it. The rationale for

10:08

cutting policy rates is quite strong. In

10:10

short, unemployment is up, core

10:12

inflation is down. This is why a

10:14

federal funds rate based on simple monetary

10:16

policy rules that relate changes to unemployment

10:19

and inflation to a policy rate suggests

10:21

cuts now. Neil joins us now. Neil,

10:23

I love this idea that you're on

10:25

the same page with Mike Wilson after

10:27

having quite a bit of divergence for

10:29

a number of years. Why

10:32

are you saying just get on with it and

10:34

why are you beating the drum right now saying

10:36

as loud as you possibly can you are making

10:38

a mistake? Well,

10:41

so I would say a couple of things. I mean, to

10:43

me it's just look at the realized data. You

10:46

know, the unemployment rate is up. It's up

10:49

about 60 basis points from its

10:51

low. So far

10:53

it's been rising about 30 basis points

10:55

every five months, which all

10:57

else equal would imply that it would be

10:59

around 4.4 percent by year end.

11:01

That's higher than where the Fed currently thinks it's going

11:03

to be. And if you

11:05

look at core inflation after some wobbling earlier

11:08

this year, which I think the Fed is

11:10

a little bit too concerned

11:12

about, generally

11:14

speaking, the trend in inflation is lower.

11:16

Core PC inflation is likely to be

11:19

around two and a half percent in

11:22

May. To

11:24

me it's thinking about which direction

11:27

are both of these indicators going over

11:29

the next six months. What's

11:31

the risk for unemployment? Is it higher or

11:33

lower from here? I mean, with initial jobless

11:36

claims rising and the hiring

11:38

rate low, I think the risk is that the

11:40

unemployment may rise a little bit, not a lot,

11:42

but a little bit from here. And

11:44

with respect to core inflation, there's

11:47

still a significant amount of disinflation in

11:49

the pipeline. Now, the cow is going

11:51

around worrying about import prices. The dollar

11:53

is basically running at year-to-date highs. That's

11:55

going to put downward pressure on imported

11:57

consumer good prices. will

16:00

be very difficult for even the Hawks on

16:02

the committee not to at least make

16:04

a nod to cutting over the

16:06

summer. And, you know, folks like Governor Waller, I

16:08

mean, all they're really doing, I think, is just

16:10

following the last few months of data. That's kind

16:12

of setting their tone. So, you

16:15

know, so in other words, their rhetoric is

16:17

somewhat conditional. So if the data changes and

16:19

their rhetoric quickly changes, then I think things

16:21

will be okay. Now, if that doesn't happen,

16:24

it could be a problem. I

16:27

will say that I do think that, you

16:29

know, we'll get another soft June, you

16:31

know, inflation report that'll be coming out,

16:33

I think, in a couple of weeks

16:36

time. And as that happens,

16:39

you know, I think the doves on the committee are going

16:41

to be fighting tooth and nail to make a more sort

16:43

of meaningful signal at the July of form C meeting. So

16:46

that's kind of what I'm looking for. Neil

16:48

Todow of Renaissance Back Road. Action,

16:55

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Nicholas and Company Incorporated, member SIPC and NYSE.

18:28

Andreijo of UBS alongside Blarina Yorici

18:30

of T. Rowe Price. Blarina, I

18:32

want to start with you. You

18:35

had a call basically saying people are overly sanguine

18:37

about how quickly the Fed could cut rates. Why

18:39

do you say that? Well

18:42

I think when I look at the U.S.

18:44

economy, I don't see a lot of reason

18:46

for concern and for a sharp deceleration. And

18:49

then on the inflation side, we

18:51

have had some progress, but the Fed

18:54

chair has made it very clear that

18:56

they have a different reaction function to

18:58

say the ECB. For Powell,

19:00

the first cut is consequential. They want

19:02

to have confidence that by the time

19:04

they cut, they will deliver a series

19:06

of them rather than one and done

19:09

and see how the economy plays out.

19:11

So in this context, I don't see

19:13

the rush. I see them as playing

19:16

with this patient approach, getting more confidence

19:18

on inflation and getting a clear signal

19:20

that the economy is really decelerating, which

19:22

I don't see right now in the

19:24

data. Jason, do you agree? I

19:27

would agree. I think the markets are pretty

19:29

sanguine about it because the Fed's been able to

19:31

wait because the economy's strong. Think about where we

19:33

were in mid-January. The market was pricing nearly seven

19:35

cuts, including the first one in March. Now

19:38

we are a little under two cuts for this year.

19:40

First one maybe September and the S&P is up 15%

19:43

largely because growth expectations have improved, earnings

19:45

expectations have gone up. So if

19:47

the Fed's waiting because growth is strong, that's not a bad

19:49

thing for the markets. I think the path thereafter is kind

19:52

of uncertain, but the timing I think is less relevant for

19:54

the markets if the economy is doing fine. The

19:56

timing is less relevant for the markets, but

19:58

what about the magnitude? We've been having this

20:00

discussion really for the past week about a

20:02

broadening out. What magnitude of cuts

20:04

do you need for things like small caps

20:07

for the more cyclical parts of the market

20:09

to actually become attractive again? So it's interesting. I think

20:11

the consensus view is clearly among investors that we're going

20:13

to have a soft landing. But I

20:15

think there's lower conviction that the soft finance

20:17

can exist of solid growth, disinflation, and if

20:19

they can do insurance cuts. To think about

20:21

what happened last November when inflation came lower,

20:23

you had some Fed officials out there talking

20:25

about maybe we can proactively cut. That's

20:28

some small caps. That's when cyclicals really rallied for about two

20:30

months. Now it's a little bit concerned. Well,

20:32

maybe the Fed's going to come to the party a little

20:34

too late and cut their rates. So I think the market

20:36

needs to be comfortable that this whole sort of really benign

20:39

macro conditions can play out to really want to rotate away

20:41

from the quality growth, tech stocks that have done well, and

20:43

broaden out into these more cyclical parts of the market. That

20:45

probably won't happen for a few months at this point in

20:47

time. Blurian, I want to bring that idea to you that

20:50

Jason mentioned, this idea that is the Fed

20:52

going to be late to the party? Is

20:54

while for every dove like a daily that

20:56

talks about the fact that the labor market

20:58

is turned, there is a Bowman who talks

21:00

about the fact that inflation could rear its

21:02

head, and that would mean potentially another hike.

21:04

Is there a risk of a policy error

21:06

at that point when you can still hear

21:08

that type of language as there are other

21:10

metrics that start to soften? I

21:14

think this kind of language and

21:16

talking about possibilities and risk

21:18

scenarios is actually quite helpful.

21:20

It does prepare investors to

21:23

better understand the Fed reaction

21:25

function. I do think

21:27

that the bar to say hiking

21:29

interest rates again is pretty high.

21:31

It doesn't, it comes with accelerating

21:33

inflation, but that would only happen

21:36

if the economy itself

21:38

is resilient and growth is

21:40

re-accelerating. We're having here persistent

21:42

inflation in the U.S. economy

21:44

because demand is resilient. I don't

21:47

think we're seeing the kind of

21:49

cost push wage inflation spiral. So

21:51

I think this is important to

21:53

understand. And then I hear a

21:56

lot of talk about the unemployment

21:58

rate and the recent inflation. increase.

22:00

I would say that the unemployment rate

22:03

is a very good summary statistic. It's

22:05

very important. It's the Fed's target

22:07

and so on. But this debate

22:09

I think ignores the fact that

22:11

there is some uncertainty about how

22:13

reliable our household labor market data

22:15

versus establishment data. Are we under

22:17

counting population growth and immigration growth

22:20

in the U.S. and I think

22:22

this will all feature into the

22:24

Fed's reaction function and their decision

22:26

making. You know I think from

22:28

both of you you're hearing a

22:30

lot of strength. You're looking at

22:32

a lot of strength in the

22:34

economy. And Jason to that

22:36

point why aren't we seeing that conviction

22:38

markets. Yes we're seeing all time highs

22:40

but it's we've been talking about a

22:43

week. It's really on the heels of a couple

22:45

of names or one name. It's not any kind

22:47

of convicted sort of under the hood rally. So

22:50

I think if you look at market performance over

22:52

the past say roughly six weeks it's interesting because

22:54

the tech sector is up a lot. NASDAQ is

22:56

up as a result S&P is up. But things

22:58

like the small cap index the Russell 1000 value

23:01

they're actually flatlining. And team that's a

23:03

signal that the market is kind of skeptical about the

23:05

growth story. And as valuations go higher as the market

23:07

kind of goes higher there's an issue where like do

23:09

you actually want to change that performance. Because again maybe

23:11

the growth is slow and we don't know. We've seen

23:13

the data especially for the past eight weeks. Economic data

23:16

is a surprise to the downside. We

23:18

don't know. Is this asymptoting sort of like kind of a

23:20

soft landing or is it going the other way kind of

23:22

falling off a cliff. We just don't know yet. I think

23:24

investors a little bit cautious and believing like if we're doing

23:26

this one in fact we could be doing that. Chris Harvey

23:29

made a point that the reason why

23:31

people are still those so bullish is that

23:33

no one has been penalized. Earlier this year

23:35

people were talking about six cuts. That didn't

23:37

happen. Yet you do see the stock market

23:39

continue to make new all time highs. Is

23:42

there something to be said for that. No

23:44

one got hurt and continues to do well. Just

23:46

basically continue on these consensus trades. So I think

23:48

I would kind of break it down to the

23:50

macro fundamentals that we have an environment where growth

23:52

should still be fine. You know it's around 2

23:54

percent. Inflation still looks like it's going to come

23:56

down and you have a fed that's biased towards

23:58

cutting rates. You give me that

24:00

sort of recipe, this is the macro environment that's

24:02

generally supportive for risk assets. And that leaves out

24:04

the whole AI story of kind of driving things

24:06

higher. So if you have those conditions

24:08

that you think still are generally directly supportive, it's hard

24:11

to get sort of kind of too bearish in the

24:13

markets at this time. Now the fact that

24:15

markets are up, I think people are probably underweight risk to some extent

24:17

relative to how well things have done. I think we talked about this

24:19

a little earlier. It's hard to, you know,

24:21

it's just as hard to be underperformed. You

24:23

know, when the markets are going higher, it's when the markets are going

24:25

lower and you have too much risk on. So

24:27

I think that's forcing people to kind of say

24:30

you just have to be invested. If you aren't,

24:32

you're going to, you know, at the end you're

24:34

going to be lagging your performance. And if you

24:36

try to gather some sort of narrative to drive

24:39

the market on a macro level, you'll probably drive

24:41

yourself crazy as I think we all have. Blurina,

24:43

to that point, you mentioned the craziness of the

24:45

labor market data, that you can look at a

24:48

household survey that shows weakness, you can look at

24:50

NFPs that still show some strength. It is confusing.

24:52

I wonder what you make of what you hear

24:54

from corporates. Are you hearing any more clarity when

24:57

you hear someone like a carnival say that people

24:59

are still growing on cruises or you hear pools

25:01

saying that people don't want to build pools on

25:03

their backyard, in their backyard or target yesterday, saying

25:06

that they're going to cut even more prices on

25:08

their goods. Are you getting any clear picture at

25:10

this moment from corporates and their exposure to the

25:12

consumer? Any clear picture at this moment from corporates

25:14

and their exposure to the consumer? What

25:18

I'm watching very closely is announcements

25:20

of layoffs and how companies are

25:22

discussing the tightness in the labor

25:24

market. What I see

25:26

from the data is certainly a loosening

25:28

in the labor market. Labor

25:30

is not as hard to come by and

25:33

companies are not hiring at the fast pace

25:35

that they did in 22 and part of

25:37

23. But

25:39

at the same time, I'm not seeing widespread

25:41

layoffs in all the survey data from

25:44

the companies, but also the Challenger report

25:46

and so on. This

25:48

suggests to me that we're not

25:50

at the point where the labor

25:52

market is about to sour because

25:55

if that happens, then we should

25:57

start thinking how sustainable is this

25:59

recovery. getting a good signal from

26:01

that. And then on the consumer

26:03

spending story, it's going

26:05

to be complicated and complex

26:07

during this recovery. We are

26:09

due for a correction in

26:11

goods consumption, and that's finally

26:13

materializing. Mind you, it's

26:16

happening maybe a year or a

26:18

year and a half later than

26:20

consensus first expected it. But

26:22

there is still some pent-up demand

26:24

and resilience in services, and that's

26:26

where Carnival and cruise ships and

26:28

overall consumer

26:31

discretionary services spending comes in. So

26:33

again, it's not going to be

26:35

a very clear picture, but understanding

26:37

that this recovery is playing out

26:40

in phases. And I think the

26:42

services strength, that phase of services

26:45

come back is not over yet. So

26:47

this really is an interesting point given

26:49

the fact that so much of goods

26:51

spending has actually derived typically from home

26:53

building and home moving and everything

26:56

that comes around the housing industry, which has

26:58

essentially been frozen in place

27:00

for quite a while. We've been talking about

27:02

this consistently for the past couple of weeks.

27:05

It's very unclear, Jason, exactly

27:07

what will happen when the Fed starts cutting rates.

27:09

Does that lead to more volumes and more potential

27:11

supply that leads to prices to go down? Or

27:13

do you have all of this pent-up demand unleashed

27:16

when mortgage rates go down just a little bit?

27:18

Where do you stand on this? It's

27:20

a great question because ultimately it comes down to how

27:23

restrictive is monetary policy? Why have it not really

27:25

slowed the economy? And one would think

27:27

if it hasn't really slowed the economy, then maybe

27:29

cutting rates at the same time wouldn't be that

27:31

stimulative. But I think there's an argument to be

27:33

made that the housing market we've seen when mortgage

27:35

rates came down last fall, suddenly housing starts, home

27:37

sales picked up, that there's this pent-up

27:39

demand. I'd also think even for a lot of

27:41

small businesses, that relies on bank lending. They're

27:44

boring at higher rates, and if you can go into the public

27:46

markets and issue debt at really low rates, that if those rates

27:48

come down, a lot of holding off on

27:50

making new investment, that could ramp up. So even if

27:52

the Fed's back of their mind, or probably

27:54

front of their mind is, if we cut

27:57

rates, is it something where the economic activity can

27:59

re-exceller pretty quickly? and then sort of find financial

28:01

conditions these. We just don't know.

28:03

I think it's kind of an open question. And the

28:05

argument that it may not be that similar, I think

28:07

there's a risk that it actually could actually really kind

28:09

of ramp up activity. Enough that it just creates inflation

28:11

concerns again. Just to apply that to what

28:14

you buy, does that mean that even if

28:16

the Fed is cutting, the

28:18

impetus for bond yields then to

28:20

move down isn't as straightforward? Well,

28:23

if their cutting ends up being similar, I think the risk is

28:25

that the 10-year instead of kind of going lower, which is a

28:27

typical pattern of the Fed cuts rates and you see the 10-year

28:29

goes lower, that's kind of part

28:31

of our thesis. The risk is that actually that's not

28:33

the case. They go lower almost reactively and then it

28:35

turns out economic activity, we're just slow and then we're

28:37

six months, 12 months down the line and irrelevant. We're

28:40

still growing at two, two and a half percent and

28:42

maybe the 10-year should be at four and a half

28:44

percent, not below four percent. And there's definitely a risk

28:46

of that happening. Lorena, you have a lot of notes

28:48

regarding the housing market right now, the inventory for the

28:50

housing market. If we could just go back to that.

28:54

What do you think will be the end

28:56

game if the Fed only, I mean if

28:58

they cut, it's only going to be what,

29:00

maybe 25 base points, 50 base points the

29:02

entire year. Is that really enough for people

29:04

to want to get in that have been

29:06

waiting on the sidelines because they're so concerned

29:08

about mortgage rates? So

29:11

here's how I think about it. First

29:14

of all, I agree with the point

29:16

that there is pent-up demand for housing.

29:18

We started this hiking cycle

29:20

with very tight inventory and that

29:23

has only gotten worse because builders

29:25

are not starting new homes. We

29:27

have the mortgage lock so people

29:30

are not bringing their existing homes

29:32

into the market. So inventory has

29:34

become even lower. I

29:37

think the question here is even what

29:39

we know from the Fed is

29:41

they want to cut and start a

29:44

series of cuts. And I think what

29:46

happens when they deliver the first cut

29:48

is that the 10-year will respond. This

29:51

is the risk and will price even

29:53

more cuts that maybe the Fed will

29:55

eventually be able to deliver. And then

29:57

this loosening in financial condition and particularly-

30:00

particularly in interest rates, could give

30:02

the housing market that

30:04

leg up and release that pent-up

30:06

demand, it's not going

30:09

to be about just one cut or

30:11

two. It's going to be about what

30:13

the 10-year price is and what the

30:15

market price is for the Fed. That's

30:18

the real risk here. And if that

30:20

happens, we're expecting a deceleration in shelter,

30:22

CPI, and PC, and that's really fundamental

30:25

to bringing inflation down to 2 percent.

30:27

And then the next leg of that risk

30:30

playing out is that the progress that we

30:32

expect on shelter inflation is undermined. Well, Renmack,

30:34

Neil Dutta, earlier this morning basically said, stop

30:36

it with all of this. That basically, if

30:38

you look at the data and you stop

30:41

cherry-picking, as he told me in so many

30:43

words, then you'll actually see that it's important

30:45

to do an adjustment because inflation is coming

30:47

down and growth is slowing. And so if

30:49

the Fed doesn't cut now, they're going to

30:52

risk having some sort of Fed error. Do

30:54

you agree with that, Lorena? I

30:57

think it's very new ones right now. It's

30:59

more new ones than that. I

31:02

do feel like it's cherry-picking season

31:04

at Bloomberg's surveillance this morning. But

31:07

it's important to understand

31:10

that in this complex environment, the

31:12

patient approach that the Fed is

31:14

delivering is the right one. We

31:17

do have a lot of firepower

31:19

should the economy decelerate. But I

31:22

also am of the opinion that

31:24

that first cut and the decision

31:26

to start easing is very consequential

31:28

because of how the market will

31:30

price it. Just remember, in January,

31:32

we were pricing six to seven

31:34

cuts. And so I'm

31:37

not pessimistic on the economy.

31:40

If you think that the Fed will

31:42

deliver two, maybe three cuts, that means

31:44

that other people's baseline view

31:46

is not for a sharp recession. And

31:49

then in this scenario, just

31:51

having more confidence on the progress

31:53

on inflation is right,

31:56

waiting before you deliver on

31:58

that easing and monetary policy. all this day. Jason,

32:01

is it cherry picking here on surveillance or just

32:03

globally, generally right now because that's all the people

32:05

are left with? I think it's more

32:07

like a Rorschach test. Like you have sort of preconceived notions

32:09

and you look at the data and you sort of interpret

32:11

it in the way you want. If you are optimistic you

32:13

can tell an optimistic story. If you're more pessimistic you can,

32:15

you know, tell that story. I think that's that's really, because

32:17

I've had, you know, smart people on both sides say, what

32:19

Neil would say, that the Fed's gonna be too late and

32:21

other people say it's crazy for the Fed to even think

32:23

about cutting the economy, not slowing down. And

32:26

this is that kind of the reality we're dealing

32:28

with still data that's noisy, distorted, kind of, you

32:30

know, from the pandemic. I'm most focused

32:32

on Friday when we get the PC data, not

32:34

the inflation piece but the consumption expenditures, because we

32:36

see goods going lower, but at the end of May

32:38

we set record travel for like kind of going to

32:40

the airport. So are people still spending on services, not

32:42

strong versus goods. So the picture is really kind of

32:45

fuzzy and again you can sort of draw your own

32:47

conclusions and that that's a challenge I think for the

32:49

Fed, but also for us. But as long as it's

32:51

not really deteriorating, it's sort of still I think

32:53

kind of generally risk on. We like cherries. Jason

32:55

Drayho of UBS, Borinar Yururrichi of T-RO Price,

32:57

both of you, thank you so much for

32:59

being with us. UHAN

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