Bloomberg The Open 08/18/2023

and breathe what a week one more day to go live from New York City this morning good morning good morning your Equity Market negative here my 0.6 the countdown to the open starts right now everything you need to get set for the start of U.S trading this is Bloomberg the open with Jonathan Farrow [Applause] [Music] thank you a live from New York coming up stocks Poise for the longest losing streak of the year with investors bracing for high rates for longer and economists slashing China growth expectations we begin with a big issue the countdown to Jackson Hole Jackson Hall of Jackson Hole next week next week Jackson Hall at Jackson Hole there's really going to be two two points of focus it will really come down to Powell to be on message don't really think that we're going to have we're going to hear a big change in narrative we're getting a Fed that was hawkish and race rates very substantially what is the Fed ultimately looking for they're likely to take a look at Supply demand imbalances in labor markets to decide how much more if at all they need to adjust the overnight that funds rate higher lean onto into into a hawkish bias still the FMC participants should be looking at the last three months worth of data the FED has done so much already in terms of delivering those hikes these are not going to be kind of near-term policy decisions of what they may do with rates next month rate hikes at the September meeting maybe the FED doesn't need to hike we are not certain that the last hike is behind us the FED keeping rates higher for longer the FED will have to be more aggressive raising rates higher and keeping rates higher for longer we get lucky on Fridays joining us now to recap the week Mohammed al-arin of Queen's College Cambridge Mohammed so much that you and I need to discuss this bond market move China Jackson Hole next week let's start with this bond market move Muhammad from your perspective what's behind this monster move not just of the last week but the last month in order of importance John Supply first and foremost followed by a revisiting of the growth prospects to Stronger growth followed by a recognition that inflation may be sticky over the longer term and then finally people are keeping an eye on what's happening in Japan so we've had these four things come together supply has been the main drivers and the others have contributed Muhammad given the reasons you offer are there also reasons to believe then that these kind of levels are sustainable yes gone but a lot will depend on which what chair pal decides to do next Friday and he has a range of choices um he can talk about short-term monetary prospects you can talk about longer term monetary Prospect oh he can punt both and focus on some of the challenging economic issues facing the US economy but what he says is going to be critical in terms of what it does to the bond market the other thing to keep an eye on and you've mentioned it is China I don't think people recognize enough that you've had two long-standing problems coming together first pockets of debt and leverage becoming systemic and second an inability to generate high and genuine economic growth and suddenly these two things are merging and risking Financial instability other Chinese and that's something to keep an eye on as well well let's break down those two things so we can start with China and then we'll work our way back to Jackson Hole and chair Pal's address about a week from now 1005 eastern time for those of you not familiar with the time that release came out just yesterday afternoon from the Federal Reserve China's done a range of things this week Muhammad I'll go through a few of them China has delivered the strongest pushback in the FX Market with a really strong fix for the currency overnight we know the requested state-owned Banks to escalate interventions support the currency based on our reporting we also know that Mainland exchanges have asked some investment funds to avoid net selling of equities they've even asked some companies to buy back stock Muhammad it seems like it's all insufficient what do they need to do to draw a line under all of that so what I'm trying to do John is is to stop these problems the debt overhang and the growth issues becoming financial problems so everything you've cited is an attempt to Source circuit the financial instability but that's not going to work unless they address the two fundamental issues and you and I have been talking about this on the growth side then the model middle um they're not sure whether they want to do more of the traditional stimulus which ultimately will not work or do they focus on the reforms which pushes down the growth drivers something that politically is difficult for them on the other side on the debt side they haven't dealt with a fundamental restructuring of the debt so these small problems are becoming systemic in nature so unless they address these other two issues all the things that you've mentioned um are not going to prove sufficient to avert Financial stability already are we seeing outflows out of China and that for them is a big issue Ben later avitaro wrote a line yesterday Mohammed and he said something like it's an economic giant it's a financial Market minnow is this an economic giant we need to pay attention to or a financial Market minnow that we can ignore and what I'm getting at here Muhammad is whether this is a contagion issue whether there is a prospect that this bleeds out into broader markets worldwide or not so it won't bleed out through the financial channel so because financially they're not as big um as they are economically but keep an eye on the economics you know now the global economy is almost wholly dependent on the US economy the U.S economy is the bright spot the U.S economy is an economy that is growing and growing in a genuine fashion Europe is having difficulties the UK is having difficulties China now is decelerating so it is all about global economic growth and how much of the burden can the U.S continue to shoulder because China is now a detractor to Global growth you just said Muhammad the global economy is highly dependent on the US economy can we flip that and I'll ask a question how dependent is the U.S economy on the global economy can we continue to see strength like this in the US with weakness elsewhere to the places you pointed to we could the US has the privilege of being a large relatively close economy well Diversified entrepreneurial so yes we could it's harder because exports do contribute to economic growth it is harder but yes absolutely we could and that has been the story of this year is that the U.S has continued to do well in its accelerating even though the rest of the world has been very sluggish so the title next week as you know structural shifts in the global economy which takes us to point two and Jackson Hole and chairman Powell is he Central Banker to the world to borrow a question from my good friend Tom Kane do you think he is this week Mohammed into next week the FED has always been Central Banker to the world we issued a reserve currency we manage other people's savings because we have the most deepest and most liquid financial markets um so yes the U.S fed has enormous influence on the rest of the world look John you're going to make me front one yet again an FD article coming out on Monday but chair pal has three choices and it's not clear to me what he will opt for what what we know is he has lots and lots of topics he can he can cover short-term topics longer term topics tactical ones secular ones structural ones he has a lot to choose from ultimately it's not clear to me what he will do if he picked out the structural reasons Muhammad if we pick those out are there structural reasons to make the argument the race can be higher for longer than we have truly broken out of that pre-pandemic post-gfc regime that we were in for the best part of a decade oh absolutely and you've heard me say this this is a different global economy um this is no longer an economy where aggregate demand is deficient this is an economy where there's insufficient aggregate supply we feel it in the labor market we feel it in terms of the supply chains being rewired we feel it in terms of the energy transition and the list goes on so yes this is structurally a very different global economy and that's a problem because that framework is directed at an economy with with insufficient aggregate demand the inflation Target as you've heard me say may be too low for this world so yes there's lots of reasons to argue that this is a fundamentally different economy but it raises critical aspects in terms of monetary policy let's talk about the monetary policy call for September which sounds boring compared to what we just discussed is it too early to make a call as to what they may or may not do a month from now given we still have one more CPI report and another payrolls report around the corner I think it is um they've told us over and over again that they are highly data dependent and we have to respect that so we have to see what the jobs report and what the what the CPI inflation report is going to say CPI September 13 for those following early September you get the payrolls report Muhammad if we can finish on the market I think we should Equity is today down about a half of one percent off the highs of July by about five percent on the S P 500 on the NASDAQ by a high yield spread still incredibly tight what do you think explains that Muhammad given the challenge we see developing in the bond market with rates of five percent at the front end close to 450 down the longer end of the curve just yesterday isn't that a challenge to this risk appetite in equities in credit it is a challenge but I think we have to put into context John um you know when we were talking back in July there was a sense of the market overdoing the romance with the soft Landing narrative and it went too far both on the bond side and on the equity side so I see this as a give back after a month of excesses excessive romance with the soft Landing step back John if I had told you in the beginning of the year that the SMP would be up 14 that the NASDAQ would be up 27 percent um I think you would have said most investors would have taken that so I you know it's important to keep a perspective on this I think what you're seeing here is is people are realizing that it's not going to be as simple as the soft Landing narrative that the market fell in love with back in July an excessive romance Muhammad is good to see you it always says thank you sir and the tease of the Ft column come and get about a week from now and I don't work for the Ft so I'm happy to get that sneak peek of what's in that column about a week from now looking at equities at the moment on the S P 500 we're negative by a 0.6 on the s p with some movers here's Abby and John we are also in the worst four day stretch since early March so let's take a look at what is dragging this morning starting out with the shares of Estee Lauder despite beating the uh estimates for the last quarter the stock is down about uh seven percent this as the Outlook misses uh on duty free sales lagging in Asia Tesla they're one of the big drags this morning down uh two percent heading to a sixth down day or 10 out of 11 days down about 25 or more from its recent take those price Cuts recently plus just a consolidation of this year's Big Move there's also litigation around a 2019 autopilot accident so lots Weighing on Tesla and then finally deer down two percent a big beaten raise company a quarter out of this company jump but it's interesting analysts are always looking ahead saying that this could be the peak for deer that we're at the peak of the AG cycle and that margins may not be sustainable Abby thank you more from Abby around the up and Empower coming up all eyes on Jackson Hole if you look at just a theme for next week Jackson Hole it's not sort of the what's happening in the economy right now but what is happening structurally with the global economy these are not going to be kind of near-term policy decisions of what they may do with rates next month that conversation coming up with mufg's Jose calves and Zach Griffiths of credit sites from New York this is Bloomberg [Music] Cher pal has three choices and it's not clear to me what he will opt for what what we know is he has lots and lots of topics he can he can cover short-term topics longer term topics tactical ones secular ones structural ones he has a lot to choose for ultimately it's not clear to me what he will do that was Muhammad just moments ago discussing chair Powell at Jackson Hole next week Central bankers and policymakers gathering in Wyoming with the FED Chief in the spotlight just one year after predicting pain while higher interest rates slower growth and softer labor market conditions will bring down inflation they will also bring some pain to households and businesses these are the unfortunate costs of reducing inflation but a failure to restore price stability would mean far greater pain for a preview rhsc joins us now Ira what happened to that pain yeah it uh it was less painful maybe than uh than Jerry Powell thought and yeah you know I agree with some of the guests that have been on your show this morning with the idea that long and variable lags have just gotten longer and there's a variety of structural reasons for that so you know it I and I agree with Muhammad as well like it's it's a little bit unclear what part of the economic Outlook Jay Powell is going to focus on next year um I assume that he's going to talk more about the medium to longer term as opposed to the very short term although it would be pretty surprising if you didn't at least reiterate what he said uh at the last press conference talking about um you know that more interest rate hikes might be needed that uh that that policy had to remain restrictive for a long period of time in order to get uh inflation down so it'll be interesting to see if he does talk about medium-term economic Outlook how he thinks that inflation will develop over time whether he talks about uh the housing market if he talks about the labor market and you know maybe even talks about some supply chain issues that could continue to creep up here in the economy door is wide open to say whatever he likes structural shifts in the global economy all right thank you all right jersey got a catch up looking back to last year and thinking about what he might say this year let's continue that conversation with George concarvis of mufg Zach Griffiths a credit size George let's start there we were promised pain to deal with this inflation issue haven't really seen much pain at all now George ether those legs are super long or maybe we just aren't sufficiently restrictive George which one is it oh John it's the lags and let's be honest we've had a 10-year sub four percent through that this first half of the year for the most part right we're only now starting to see an actual move higher in rates it's the bear steeper that gets you I've mentioned it a few times before and we're in that pain period the normalization of the belly of the curve is really what gets the economy Zach is this the period for pain while the bare steepener certainly seems painful and has been more aggressive than we had anticipated but the U.S economy is holding up very well we don't think that means the FED has to hike anymore at this time but the real question is how high do they have to remain or how long do they have to remain this high in terms of the policy rate this may have been phenomenal over the last six days about 20 basis points the tenure at the moment by the way down about a basis point to about 4 26 on a two-year just short of five percent breach in that level in the last week at about 493. George the pushback I often get on this program about higher interest rates is that it's unsustainable that we can't sustain life above four percent well we've done it for 13 consecutive days that are close on a 10-year George why can't that continue okay continue and I think we probably will for quite some time until something breaks much more materially I mean this is this is a negative feedback loop between what's going on overseas with the dollar and the dollar will strengthen through this and the lack of kind of uh access to Dollars and what that does to potentially maybe selling of treasuries those that need to actually Source dollars and the fact that we have a massive fiscal impulse that both kind of extended this business like let's be honest I mean if it wasn't for the government type spending we would not have had as robust of recovery if we didn't have rates sub four percent we would have had a strong housing market in the first half of the year now we're in the second half of the year if rates keep rising or stay at these levels this is where it starts to buy deficits matter and they matter in expansions because money goes elsewhere George that's what's missing here usually in a downturn when you get deficit starting to expand the deficit matters so much because do you have that risk aversion driving people into treasuries in an expansion George if you've ever seen and I've asked this question before deficits this large with unemployment this low and are these the prices the yields that we need to get to to get that additional Supply away look ironically typically it's a private sector that does the slowing down but this time it's gonna the restrictor and the governor of economic activity is going to come from the econ from the government side because they've been such a large fiscal impulse and is spending on par to like wartime periods I mean it's not sustainable number one but that's what really matters it's going to be the interest cost and the ability to continue spending like this which I think we think it's not going to happen Zach how does that compete with what's happening in credit right now Reddit has been incredibly resilient and when you think about the primary markets they have remained open spreads have been even tighter than we had anticipated them to stay we did recently shift to a market weight recommendation from overweight for IG credits we do think the risks are a little bit more balanced and frankly we're a little bit more comfortable taking duration risk at these levels versus credit risk as we think some of the economic optimism going forward has shifted a little bit too much in that optimistic Direction and we're getting a little nervous that with fed policy remaining this high for this long can the economy really remain in expansionary territory throughout that period Zach have you been surprised by how Thai spreza near the tides of the year so far it's incredible John when you think about just how much volatility and rates we've had and you really haven't seen spreads blow out or move materially wider I think part of that is fundamentals are strong so we do have a constructive Outlook overall but we think the probability of further spread compression here is very limited skewing the risk towards spread widening that's why we shifted to a more balanced Outlook in terms of credit George you said things break things have broken this year let's be clear about that some banks broke down back in Spring we just seemed to move on from it pretty quickly George any reason to believe that those issues come back to the surface all over again have we truly moved beyond all of that from earlier this year well that's the irony the irony is the longer we wait and the fact that the fed's gonna be on a such a high level for for longer it will kind of fester and potentially expose some of those risks again both in the banking system but again I'm really more focused on overseas factors and what's going on with the dollar and access to Dollar liquidity and I think that's where it matters more we've lived in a world where U.S funding was cheap for multiple decades now at five plus percent foreigners are gonna have to pay up for dollars and I think that's going to matter so George just build on something that's been developing in China the currency intervention is there some connection there between what may happen with China and the FX market and what might happen in the treasury market domestically here in America look I mean I think there there's uh a you know a managed decline a very targeted Focus out of the Chinese policy makers and authorities to try to really take care what's a homegrown issue on the FX side I mean the currency is going to matter and and of course I think if there's a need for dollars then you know you have to then sell and and really what I'm really more concerned about is like the US bond market is not like the guilt Market it's a much deeper Market it's globalized it's a dollar Reserve currency but we could have our ldi movement too and that could come from the FX markets Joe just describe that go a step further I've got a minute we can play with that what does that look like I mean that looks like when you need to defend your currency you start to go into an actual sell program and you start to raise dollars and and unfortunately most of the bonds that are out there in the system in the foreign markets are primarily in the belly of the curve which is the part that has to normalize the most versus fat funds it's you know fed funds F550 we have still the whole curve under five percent so you focused on China on Japan George where's the focus it's Asia 100 percent I wish we had more time George we spent 10 minutes talking about that George thank you thought provoking stuff going into the weekend coming out the money calls and later State streets Laurie heinel making a case for staying overweight equities even with this mess in the bond market potentially developing that conversation coming up shortly your Equity market near session lows we're negative here by zero point six percent foreign [Music] calls your first one from Morgan Stanley downgrading Affleck to equal way seeing limited upside due to the Stock's Loft evaluation that's stock down 1.3 percent Wells Fargo upgrading Hawaiian Electric to equal weight Eight dollar price Target saying the recent sell-off has created a more balanced risk reward and finally Edward Jones dank reading signature to hold growing increasingly concerned about mounting competition within the pharmacy space we're down there about 0.4 coming up Americans keep on spending but the country's biggest retailers doubt it'll last we're wrapping up a busy week of retail earnings with stay streets Laurie heinle that conversation coming up next they're opening power just around the corner thank you foreign streak on the S P 500 about to become four based on this we're down by 0.7 on the s p on the NASDAQ we're down one full percentage Point going into the opening bow after the biggest three-day slide on the NASDAQ 100 gun all the way back to February and Poise now for a third week of losses on the NASDAQ the longest losing streak on a weekly basis on the year so far let's show opening bell switch at the board and get to the bond market the epicenter of the equity pain has been in treasuries yields are just a little bit lower this morning to 426.84 over the previous six days though up every single day and up over those six days for a gain of more than 20 basis points on a 10-year this morning 4 26 84 after the highest closing yield going back to well seven on tens and going back to 2011 on a 30-year in the FX Market the dollar shown a bit of strength the Euro some weakness 108 859 going into the ECB on September 14th who knows what the fed's going to do I've got no idea what the ECB does from here with a soft backdrop for growth and stubbornly high inflation 108.59 on euro dollar into the commodity market crude positive here by a half of one percent eighty dollars and about 75 cents about 50 seconds into this one fourth day of losses on the S P we're down 0.7 down about one full percentage point on the NASDAQ the one stock to watch at the open is this one it's dear the company raising its annual profit Outlook with demand remaining strong the CEO sang this fundamentals are expected to continue fueling solid demand supported by a strong Advance order position Abby has more morning Abby hey John well this morning we're looking at the worst day or moments ago at least for deer since early April now it's the end of July but investors clearly not looking at that demand or the big beat that they produce in fact numbers really Stellar for this company they put up uh 10 and 20 cents in one quarter in a trusted earnings that beat the estimate by 25 percent that is a monster beat on 14.3 billion dollars of Revenue a 1.2 percent beat so a very strong quarter they also raised the Outlook net income but Oppenheimer is saying that that guidance from Deer implies a more muted fourth quarter uh and this has to do with some analysts thinking that we've seen Peak agriculture that the best is really uh kind of here for deer in terms of the Russia Ukraine war that that set sent a cropped higher and U.S Farmers scrambling to buy their Machinery well something to keep in mind now John we do have some of the grains down sharply in fact wheat this year down more than 20 percent it's worse year since 2008. perhaps supporting this idea that we have seen Peak AG on the year deer is now down about three percent or so underperforming the S P 500 dramatically it's down two percent this morning Abby thanks for that this one just dropped in my inbox from Bank of America the title of it from Mike Capen and the team it's a scorcher here are the bullet points of it this week's data flow was red hot he pointed to today retail sales industrial production coming in well above expectations pointed to the fomc minutes that came out on Wednesday afternoon called them balanced but a little stale and added this looking ahead to Jackson Hole and chairman Powell Powell should sound less balanced at Jackson Hole since the latest data rise the risk of a fresh increase in inflation chairman Powell and Jackson Hole 1005 Eastern Time a week today let's stick with the earnings Applied Materials issuing a bullish forecast signaling the chip slump may be easing the CEO said this over the past several years we've focused our strategy and Investments on key Technologies to accelerate the AI era enabling us to consistently deliver strong results in 2023. that stock is up by about one percent this morning let's turn to the utility sector Shares are for one electric rebounding after providing an investor update in an SEC filing saying the company's goal isn't to restructure joining us now to discuss Bloomberg's Simone foxman hey Simone hey John yeah if the games that we're seeing this morning hold this would snap an eight-day losing streak with a stock lost almost 68 of its value but this investor update appearing to give Traders a little bit of positivity here the company also saying that it tends to be there for the long term uh it's also restored power to about 80 percent of affected customers however 1900 people it says still without power in Maui something else that may be driving the stock this morning Bloomberg reporting late last night that the the Jeffries is among the bond Brokers that has been sending out quotes for private placement notes that deeply distressed levels 40 to 60 cents on the dollar but this could be a signal that the company is really moving forward with trying to Grapple with the kinds of losses it faces as a result of these Maui wild fires of course plenty left unknown and of course the PG e bankruptcy example still lives large Moody's also cutting as the rating of Hawaiian Electric to junk last night that stuck up by almost 12 percent about five five minutes into the session just to double check the clock there for you five minutes into the session this move this morning following eight straight days of heavy declines for the stock Wells Fargo stepping in saying they've seen enough upgrading shares of Awana literally to equal weight and right in the following with a depressed valuation we think the risk reward is far more balanced in what is a highly volatile situation we believe these are scenarios albeit seemingly remote where significant upside exists that stock is up by 9.6 let's turn back to the earnings Estee Lauder delivering a weak Outlook signaling a slope with an anticipated recovery in its Asian travel retail business the CEO's saying this we're taking actions in Asia to capture demand from the returning individual Travelers and continuing to reduce inventories as we navigate the current market headwinds Katie has the story morning Katie good morning Tanya Estee Lauder taking a beating on the heels of that report currently off about five percent from the Bell after delivering that disappointing Outlook let's get into the numbers first because the fourth quarter adjusted DPS actually came in at seven cents versus estimates of a loss while Revenue beat expectations as well but the company warned that fiscal 2024 adjusted earnings will be 3.43 to 3.70 a show that is below the consensus estimates an Estee Lauder it also said that net sales will decrease by 10 to 12 percent in the current current quarter from a year earlier so those are the numbers let's get into the why because the beauty company had said that ongoing weakness in its duty-free business in particular in particular in Asia that is is expected to overshadow the sales growth that it sees in markets such as Europe and specifically Estee Lauder said that too much inventory after misjudging demand from Travelers in both China and South Korea this year is going to weigh on the bottom line it's the duty free business primarily in Asia that makes up about a third of Estee lauder's Revenue so that's Weighing on guidance that's Weighing on the stock this morning for the year Estee laudered down almost 40 percent they've not had a good time of it at all Katie thank you that stock is down by another 4.9 percent the concern there as Kelly indicated on Asia potentially on China much more so in the months still to come I want to turn back to Bank of America and some of the numbers they've put out recently just in terms of the global economy and not just the U.S economy this is what they've got to say this morning global data is gradually confirming our view that the main economic blocks are likely in the process of decoupling the type of This research the decoupling continues but can it last they point out as we all know the U.S remains strong China continues disappointing at the margin and Global Investors are becoming increasingly concerned they say this going forward it is likely this decoupling continues or the negative impact of a China's slowdown impacts the U.S Outlook I guess picky poison but that's going to be a debate for us not just the domestic economy in Jackson Hole next week in our coverage when we're down there in Wyoming but also on the global economy can we decouple or will that China slow down actually start to weaken the rest of the world about seven minutes into the session just a snapshot of the price action for you we are negative by half of one percent off the lows on the NASDAQ we're down by 0.9 percent into the bond market six days it's been Relentless over the last month but the last six days particularly since consecutive days of yields higher on a 10-year the tenure this morning down about a basis point to 427. let's turn to the earnings a host of retailers topping earnings estimates this week but delivering a warning to investors about the Outlook Walmart's CEO saying this Rising Energy prices resuming student loan payments higher borrowing costs tightening lending standards and a drawdown at access excess savings mean that household budgets are still under pressure got a similar message from Target stating the consumer is still taking a very cautious approach to discretionary spending student loan payments will cause additional pressure on already strained consumer budgets State Street's Laurie heinle joins us now to wrap this up and look ahead Lori great to catch up with you as always this year I said it this morning it's been like The Economist who cried recession and now it's the retailers telling us this is truly it the consumer is going to hit some headwinds do you think they will well we don't think that consumers are hitting too many headwinds yet certainly they are spending on savings certainly they're pivoting their expenses from you know Goods to services and so that's part of what you're seeing in the retailers but as long as employment markets remain strong which they continue to do so we think that the consumer still has legs you and I have talked about the prospect for soft Landing is there such thing as too much of a good thing is this data too hot well it is too hot through the lens of what does the FED then do one of the big conundrums is that the inflationary pressures just are not coming down as fast or as durably as what we had hoped earlier this year and so that's going to keep the the FED kind of on watch we actually think they've done enough already but as long as some of this data comes in strong and especially as we see third quarter GDP being strong and we see inflation pressures not really abating the FED might feel compelled to do some more work the chairman powder coating to Bank of America should sound less balanced to Jackson Hole since the latest data raise the risk of a fresh increase in inflation is that what you think is going to be the driving force behind that speech a week today we do and look the trajectory on lowering inflation is not going to be a straight line they are likely to be bumps in the road we're going to lose the benefit of some of the base effects that we saw earlier in this year and so we're likely to see episodes where inflation starts to become a little bit higher again again we believe that the FED has done enough already but given the fact that they were late to the game it's likely that the FED will remain more hawkish than perhaps as ideal only two weeks ago we were talking about being in a soft spot in a sweet spot for a soft Landing Glory has anything changed in terms of your outlook for the equity Market well we still think that there's a trajectory here and in fact we think a session is really real employment picture remains strong inflation starts to look like it's starting to obey Central Bankers maybe are getting to the end of their tightening cycle that gives us confidence that we could actually see if anything a very minor type of recession in 2024 but even perhaps a soft Landing so we do still have hope and we remain constructive on risk assets more generally but certainly it's a very precarious world out there right now you have retained one hedge and it's gold Laurie why is gold the hedge of choice for you well look gold is one of those few things that actually provides diversification against this backdrop as we see when Equity markets are selling off we're seeing Bond markets sell off at the same time and so you want something the portfolio that's going to react very idiosyncratically to the rest of the portfolio so gold is one of the few places where you can find that we get a repeat of last year for 60 40 investors that your bond dedication and Equity allocation can full simultaneously given what's developing well we don't think we're going to have a repeat of last year and in part that's because the starting point is a lot better so if you think about bond yields with a four handle that provides a lot of protection you're getting some nice income there if you look at adding credit to that the credit spread has been pretty durable so we don't think we see a repeat but certainly we could be entering a period where you have very muted returns across the board it's felt like it this week that's for sure Lori thank you lorihano there stay straight on the latest about 12 minutes into the session just an update for you on the equity Market we are negative by 0.5 percent on the s p a fourth day of losses potentially on the S P there's a lot still to play for for the rest of today on the NASDAQ we're down by 0.9 percent in the bond market yields have been higher all week every single day this week we're backtracking just a touch by not even a basis point on a 10-year 427 right now on a 10-year in the FX Market some dollar strength out there for you the Euro now just about holding on to one away one away 58 and negative 0.1 percent on their currency pair coming up on this program the former president taking fed share J Powell to task I'm not a fan of j-pell I would not reappoint him uh I thought he was always late whether it was good or bad but he was always late I was surprised he was reappointed we'll catch up with amh down in Washington up next [Music] [Music] I'm not a fan of Jay pal I would not reappoint him I thought he was always late whether it was good or bad but he was always late I was surprised he was reappointed I was very tough on him and if I wasn't I think we would have had much higher interest rates for much longer presidential candidate Donald Trump speaking with Larry Catlow on Fox Business yesterday taking a shot at the Federal Reserve chair Jay Powell this head of next week's Republican presidential debate in Milwaukee the president the former president still hasn't said whether or not he'll show up to the event saying quote if you're leading by a law what's the purpose of doing it I guess that's a question we've got to go ask going into next week one man who will be on that debate stage is Governor DeSantis of Florida and this is what he has to say on chairman Powell we need to reign in the Federal Reserve it's not designed or supposed to be an economic Central planner he's gone on to say it is not supposed to be indulging in social justice or social engineering it's got one job maintaining stable prices and it has departed from that with what it's done over the last many years joining us now pleased to say Bloomberg's Anne-Marie amh the former president not the only one taking shots at the current federal reserve chair what do you think that actually looks like in practice if one of those individual Jewels is in the White House well it's a great question because of course Powell has a term till 2026 so if one of those individuals was to go to the White House do they fire him remember Trump in 2019 said he should be able to demote or fire uh Jay Powell and then one of his most Brazen critiques of the Fed chair at that time said he didn't know who was worse for the U.S economy Jay Powell or Xi Jinping so this duel and drama between Jay Powell and the former president is not new you'd have to be living under a rock if if you didn't know how Donald Trump felt about Jay Powell but it does Bode this question that other candidates are going to have to answer how do they feel about how the FED has handled the economy it's been a difficult few years for the FED obviously coming out of covid-19 and this handling of inflation and now the rate hikes the path of the aggressive rate hikes we are on so DeSantis is in the Trump Camp the governor is saying a hard no he would not reappoint him but then there's others like Governor Chris Christie who sat down with us and said he doesn't think Jay Powell did anything horribly wrong he would consider it obviously he thought he was a bit late on inflation but then we spoke to Doug burgum yesterday Jonathan this is the governor of North Dakota he is running on an economy first um campaign but he would not speculate about any future appointments but he doesn't like the way the Biden Administration handled inflation let's talk about next week if you're leading by a lot what's the purpose of doing it the former president's words about attending the debate next Wednesday what are the arguments for and against for his team attending that debate president was to show up he would take the oxygen out of the room and potentially he has a chance to leave lead even further in the polls he's also an individual that probably doesn't want to be left out and wants to dominate the only way to do that is to show up and dominate dominate alongside those other individuals on the debate stage but at the same time given the fact that he does have this wide lead in the polls he's thinking do I even need to go there and there's a CNN report that they're leaning towards not showing up but they of course at the same time saying we could change our minds at the 11th hour and potentially he just does his own counter programming and then Republican primary voters will have to flip-flop between the two if they want to see an array of different voices on a stage or just want to hear what the former president has to say let's get those names on the screen again and go through them and Marie give us the guide for next week from your perspective the names to watch outside of the obvious Governor DeSantis of Florida who would you be looking for well I'm really interested to see how Senator Tim Scott uh plays this because he's putting millions of dollars at the moment following this debate in ad campaigns and he sees potentially a way that he can have an uptick um in the polls following the debate also Vivek ramaswamy this is an individual that we know from trolls of document uh documents from a Super PAC that is helping and Advising uh Governor DeSantis they're saying that he should hit Vivek very hard and defend Donald Trump so be interesting to see how Mr ramaswamy deals with that especially as his numbers have really been rising in the polls hey Ms thank you an update down in Washington it's good to have Ann Marie back Emery hotel in there in Washington DC our chief Washington correspondent about 21 minutes into the session equities are negative here by 0.3 percent on the s p on the NASDAQ we are lower by 0.7 into the bond market treasury shaping up as follows with yield to lower by about three basis points on a 10-year 424 and a 30-year here down by about two basis points to four 437 with some sector price action here's Abby so we are off the lows for the S P 500 to your point John down just three tenths of one percent moments ago we had actually more sectors higher than not and we could actually and we do actually right now in this moment too as industrial flip-flops between very small gains and losses up top though Consumer Staples a bit defensive up just four tens of one percent to the downside though communication Services one of those Mega cap Tech sectors down one point three percent Tech down uh eight tenth of one percent and discretionary down half a percent so those Mega cap Tech sectors getting beaten down once again today now on the week so many different superlatives as you know uh the worst four days since March the worst week I believe since February these are the worst sectors all 11 sectors are lower discretionary up top I think Tesla has a lot to do with that down 4.2 percent it'll be interesting to see if and when that stock not if when that stock gets a break and then real estate this is interesting because maybe in sympathy with China or it could just be the fact that yields are higher and those dividends look worse John Abby thanks for the update what a week we've got coming up for you next week think about what's on the horizon on the agenda on the earnings front Nvidia just explosive gains through the year so far in 2023 on the political front we've got that debate in Milwaukee the first one for Republicans coming up on Wednesday that by the way hosted by Fox News and then on the macro front who knows what's going to happen with China but one thing we do know we're going to hear from chairman Powell scheduled to speak next Friday in Jackson Hole Wyoming at 1005 eastern time about 23 minutes in equity is lower you're treading diary up next foreign [Music] he can talk about short-term monetary prospects you can talk about longer term monetary Prospect oh he can punt both and focus on some of the challenging economic issues facing the U.S economy but what he says is going to be critical in terms of what it does to the bond market this hour moments ago Muhammad al-airin on the bond market on chairman power going into Jackson Hole next week the price action trying to recover from three days of losses will it become for let's see if this sticks let's get to the trading diary the week ahead looks like this President Biden heading to Hawaii on Monday to assess the damage in Maui more retail earnings Tuesday with results from Macy's and lows then the first Republican debate taking place on Wednesday in Milwaukee the earnings event of the week Nvidia reports after the close later next week Jackson Hole kicking off on Thursday with chairman Powell speaking on Friday from New York City that does it for me thank you for choosing Bloomberg TV and good luck for the rest of the trading day and enjoy your weekend this was the countdown to the open this is Bloomberg foreign

Channel: Bloomberg Television

Views: 10,755

Keywords: Jon Ferro

Id: --N3oagNoSM

Length: 44min 53sec (2693 seconds)

Published: Fri Aug 18 2023