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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app. The Day Never ends in Bruce Kasmin and Michael FERRELLI ruined it at JP Morgan because they publish their must read weekly Prospects.

This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app. The Day Never ends in Bruce Kasmin and Michael FERRELLI ruined it at JP Morgan because they publish their must read weekly Prospects.

It's seven o five pm Friday night.

It's seven o five pm Friday night.

Yeah, thank you.

Yeah, thank you.

I've read about eighty five percent of Faroli that I've read. I've read in a bar, right, you know. It's the way it is. And they're making multiple further progress towards his Friday where they'll publish the weekly Progress. Joining us now from JP Morgan, Michael Faroli, Michael, what in God's name is multiple further progress? And what do you write about Friday in your weekly Prospects?

I've read about eighty five percent of Faroli that I've read. I've read in a bar, right, you know. It's the way it is. And they're making multiple further progress towards his Friday where they'll publish the weekly Progress. Joining us now from JP Morgan, Michael Faroli, Michael, what in God's name is multiple further progress? And what do you write about Friday in your weekly Prospects?

Well, it's hard to say. I think you're referring to the FMC statement yesterday, and I think that was probably influenced in part by what we saw yesterday morning with the CPI report, and that's probably going to be a big part of what we write about tomorrow.

Well, it's hard to say. I think you're referring to the FMC statement yesterday, and I think that was probably influenced in part by what we saw yesterday morning with the CPI report, and that's probably going to be a big part of what we write about tomorrow.

So I tell me, does Michael FAROLEI did you get an office at the new JP Morgan building on.

So I tell me, does Michael FAROLEI did you get an office at the new JP Morgan building on.

They're above the Gold Vault, though, you know the Diamond Vault.

They're above the Gold Vault, though, you know the Diamond Vault.

The vault exactly, Michael, What did you take from FED Chairman Jay Pal's comments yesterday? It kind of feels like he feels like he's in a pretty good position. He doesn't need the Russian anything. What'd you take away from it?

The vault exactly, Michael, What did you take from FED Chairman Jay Pal's comments yesterday? It kind of feels like he feels like he's in a pretty good position. He doesn't need the Russian anything. What'd you take away from it?

Yeah, you know, I do think he's pretty satisfied with where things are going. And I think he's probably satisfied that he's taken a pretty calm approach both to the you know, favorable inflation surprises we got in the second half of last year the less favorable surprises we got in the first quarter of this year. And I think he's kept a pretty you know, good eye on the horizon rather than getting to you know, swung around here. But you know, I think he's happy with the progress on inflation, labor market. I think, you know, Look, I think over the last several press conferences he has in the market, I think agrees came out quite dubbish.

Yeah, you know, I do think he's pretty satisfied with where things are going. And I think he's probably satisfied that he's taken a pretty calm approach both to the you know, favorable inflation surprises we got in the second half of last year the less favorable surprises we got in the first quarter of this year. And I think he's kept a pretty you know, good eye on the horizon rather than getting to you know, swung around here. But you know, I think he's happy with the progress on inflation, labor market. I think, you know, Look, I think over the last several press conferences he has in the market, I think agrees came out quite dubbish.

Yesterday.

Yesterday.

I thought he had struck the same tone that you kind of picked up in the statement and in the and in the Dotson's Hill coorts. I thought he was much more balanced yesterday. But the one area where he sounded dubbish was I think on the labor market.

I thought he had struck the same tone that you kind of picked up in the statement and in the and in the Dotson's Hill coorts. I thought he was much more balanced yesterday. But the one area where he sounded dubbish was I think on the labor market.

Right now, folks for Global Wall Street, the single question to Michael Frowley of the Booth School Chicago and JP Morgan, Michael, you stop time a long time ago with a potential GDP of America that was sub two percent. If we impute a higher our start, if we settle for something of a two point x percent, as Richard claredon, others talk about if we model in a new inflation, what does that do to your potential GDP estimate?

Right now, folks for Global Wall Street, the single question to Michael Frowley of the Booth School Chicago and JP Morgan, Michael, you stop time a long time ago with a potential GDP of America that was sub two percent. If we impute a higher our start, if we settle for something of a two point x percent, as Richard claredon, others talk about if we model in a new inflation, what does that do to your potential GDP estimate?

Does it lift?

Does it lift?

So I'm not really yet on the higher trend growth story I do see obviously. So first of all, I guess we can divide trend growth and a trend labor force growth and trend productivity growth. I think clearly labor force growth has been stronger in recent years given the immigration story. How much of that is sustained after now, after the election and on into next year, I think is more of a question. I think on productivity, it's still hard for me to be a big believer that in part because when you look at the capital deepening numbers, which is essentially investment after depreciation, they really haven't changed much since slow growth decade we had last decade. So once that you know, that changes, I'll be more of a believer. But I think, you know, what we saw in the first quarter, uh was kind of to me a return to earth after what was a pretty good second half last year of our activity. But without those investment numbers, I'm still kind of thinking we're in the slow growth trend here.

So I'm not really yet on the higher trend growth story I do see obviously. So first of all, I guess we can divide trend growth and a trend labor force growth and trend productivity growth. I think clearly labor force growth has been stronger in recent years given the immigration story. How much of that is sustained after now, after the election and on into next year, I think is more of a question. I think on productivity, it's still hard for me to be a big believer that in part because when you look at the capital deepening numbers, which is essentially investment after depreciation, they really haven't changed much since slow growth decade we had last decade. So once that you know, that changes, I'll be more of a believer. But I think, you know, what we saw in the first quarter, uh was kind of to me a return to earth after what was a pretty good second half last year of our activity. But without those investment numbers, I'm still kind of thinking we're in the slow growth trend here.

Michael, what's your view on inflation here?

Michael, what's your view on inflation here?

We've you know, we had the beginning in the first quarter, the first three months kind of a you know pick up and inflation activity kind of caused some people to really step back here and think about the moderation call and inflation. How do you think about it here? As we as this FED tries to get to its two percent target.

We've you know, we had the beginning in the first quarter, the first three months kind of a you know pick up and inflation activity kind of caused some people to really step back here and think about the moderation call and inflation. How do you think about it here? As we as this FED tries to get to its two percent target.

I still think the moderation is in place. And you know, when I look at I think, in particular, when you look at nominal wage growth, wage inflation, and I know the links between wage and price inflation are very contentious, but I think in the long run, no one disputes that there's got to be some linkage there, right, And what you've seen, for you know, for production workers, is that wage inflation, after peaking around seven percent, has come down to around four percent.

I still think the moderation is in place. And you know, when I look at I think, in particular, when you look at nominal wage growth, wage inflation, and I know the links between wage and price inflation are very contentious, but I think in the long run, no one disputes that there's got to be some linkage there, right, And what you've seen, for you know, for production workers, is that wage inflation, after peaking around seven percent, has come down to around four percent.

Now.

Now.

I know May was a little stronger for average ality inflation, but I think when you look at you know, you kind of look impressionistically at average hourly earnings, Atlanta FED, wage tractor, e C, I E C, e C. All these things kind of suggest moderation in wage inflation, which is ongoing. And I think as long as that is in place, I think the price inflation story to me looks like it's in place. But again, these are stories I think you have to kind of zoom back at and look at a quarterly frequency. But I think the story to me looks, you know, pretty intact.

I know May was a little stronger for average ality inflation, but I think when you look at you know, you kind of look impressionistically at average hourly earnings, Atlanta FED, wage tractor, e C, I E C, e C. All these things kind of suggest moderation in wage inflation, which is ongoing. And I think as long as that is in place, I think the price inflation story to me looks like it's in place. But again, these are stories I think you have to kind of zoom back at and look at a quarterly frequency. But I think the story to me looks, you know, pretty intact.

Driver Michael, thank you so much, particularly those discussions of potential GDP, a key part of JP Morgan research. Doctor Feroli working at Versus Chasman.

Driver Michael, thank you so much, particularly those discussions of potential GDP, a key part of JP Morgan research. Doctor Feroli working at Versus Chasman.

Stuart Kaiser, us equity trading strategy A City Global Markets three ninety Greenwich Street in Lower Manhattan, the worst elevators on Global Wall Street, Stuart, What did you think yesterday from the CPI print from Federal Reserve in the afternoon, What did you guys on a trading desk at City think about all that?

Stuart Kaiser, us equity trading strategy A City Global Markets three ninety Greenwich Street in Lower Manhattan, the worst elevators on Global Wall Street, Stuart, What did you think yesterday from the CPI print from Federal Reserve in the afternoon, What did you guys on a trading desk at City think about all that?

Yeah, good morning guys. You know, I would say, look, the the CPI print was on equickally positive news, right, I mean, the print was low, the mix, the mix within the CPI data was positive. Markets responded. I think as you might have expected, lower quality stocks did well. Stuff that had been sort of under pressure from a higher for longer narrative, you know, rallied pretty well. And then you got the FED. You know, I think the FED is sort of the mirror image of what they did back in March, which was back in March, you would have expected them to have a slightly more hawkish narrative just based on the incoming data, and they sort of tacked a little bit duvish, particularly pow in the press conference. And I think the effort back then was to keep the market centered and not let it drift kind of too far in either direction from the base case. And I think that's really what we got yesterday. In the opposite direction, you would have thought, with the strong payrolls and then the friendly CPI, the FED would have, you know, maybe been a little bit more positive in message and a little more dubbish and pale. I think sounded a little hawkish, and I think that was an intentional effort to keep the market kind of centered on the base case outlook.

Yeah, good morning guys. You know, I would say, look, the the CPI print was on equickally positive news, right, I mean, the print was low, the mix, the mix within the CPI data was positive. Markets responded. I think as you might have expected, lower quality stocks did well. Stuff that had been sort of under pressure from a higher for longer narrative, you know, rallied pretty well. And then you got the FED. You know, I think the FED is sort of the mirror image of what they did back in March, which was back in March, you would have expected them to have a slightly more hawkish narrative just based on the incoming data, and they sort of tacked a little bit duvish, particularly pow in the press conference. And I think the effort back then was to keep the market centered and not let it drift kind of too far in either direction from the base case. And I think that's really what we got yesterday. In the opposite direction, you would have thought, with the strong payrolls and then the friendly CPI, the FED would have, you know, maybe been a little bit more positive in message and a little more dubbish and pale. I think sounded a little hawkish, and I think that was an intentional effort to keep the market kind of centered on the base case outlook.

Does just feel like a market that just wants to move higher given everything else that's out there, just wants to move I'm quoting Alex Steel Tom she came up with, I think the best call I've ever heard, which is a market feels like it just wants to go higher.

Does just feel like a market that just wants to move higher given everything else that's out there, just wants to move I'm quoting Alex Steel Tom she came up with, I think the best call I've ever heard, which is a market feels like it just wants to go higher.

Yeah, I think it does. I think, look, you have, you know, an economy that for now is holding in solidly. You've got double digit EPs growth, and I think those two things, generally speaking, you'd want high or you would expect higher equity markets in that environment. And I think that's just sort of the situation we're in, and that's our view, I mean, our base case view. Is higher until and unless the labor market really comes under significant pressure. So you know, we're gonna remain constructive.

Yeah, I think it does. I think, look, you have, you know, an economy that for now is holding in solidly. You've got double digit EPs growth, and I think those two things, generally speaking, you'd want high or you would expect higher equity markets in that environment. And I think that's just sort of the situation we're in, and that's our view, I mean, our base case view. Is higher until and unless the labor market really comes under significant pressure. So you know, we're gonna remain constructive.

And honor you. It's so intimidating when Stuart Kaiser walks in. I mean, Lisa, we gotta go mathe here, we gotta go log Euclidean math Okay, run semi log mavstack the Stuart Kaiser chart. I ran it back to November of twenty eighteen.

And honor you. It's so intimidating when Stuart Kaiser walks in. I mean, Lisa, we gotta go mathe here, we gotta go log Euclidean math Okay, run semi log mavstack the Stuart Kaiser chart. I ran it back to November of twenty eighteen.

Ben Ladler shingles out at HSBC at the time, and he says, there's something going on, shut up and buy.

Ben Ladler shingles out at HSBC at the time, and he says, there's something going on, shut up and buy.

And what's important here, folks log regression. We're barely out over one standard deviation on the trend. We're not extended in this bull market. I don't think a lot of people know that.

And what's important here, folks log regression. We're barely out over one standard deviation on the trend. We're not extended in this bull market. I don't think a lot of people know that.

Yeah, I think I think to your point toppy, especially if you look at the Erniees growth re generating. You know, I know a lot of people are concerned with the large cap tech and growth rally, but you know why are those stocks out performing Because they're the unique companies that are generating this massive, you know, kind of EPs growth, both realized and in the forecast. So you know, when folks push back about us being more positive, you know, we're just sort of anchoring back to fundamentally.

Yeah, I think I think to your point toppy, especially if you look at the Erniees growth re generating. You know, I know a lot of people are concerned with the large cap tech and growth rally, but you know why are those stocks out performing Because they're the unique companies that are generating this massive, you know, kind of EPs growth, both realized and in the forecast. So you know, when folks push back about us being more positive, you know, we're just sort of anchoring back to fundamentally.

People think they're extended. I mean, I get it, Nton Navidia, and you know Lisa owns it. We don't. Fine, but the answer is the Nasdaq one hundred. The math doesn't show Robert Schiller exuberance, like you know what he wrote about Eel years ago. It's not there. Do you see Do you see exuberance in the Nastack?

People think they're extended. I mean, I get it, Nton Navidia, and you know Lisa owns it. We don't. Fine, but the answer is the Nasdaq one hundred. The math doesn't show Robert Schiller exuberance, like you know what he wrote about Eel years ago. It's not there. Do you see Do you see exuberance in the Nastack?

I'm sure there's a stock here there. Yes, But you know, if you look to your point big picture, this is not tech bubble type valuations, right, This is not you know, tech bubble type over your skis. This is a small number of companies generating a massive amount of earnings growth that are getting rewarded for it. So, you know, are we above average valuation? Yes? I think if you looked at the S and P five hundred, you'd say you're probably maybe even upper cortile, upper decyle. But but you know, there's still room to expand. I think if the economy holds in and we continue to put the type erning growth we are.

I'm sure there's a stock here there. Yes, But you know, if you look to your point big picture, this is not tech bubble type valuations, right, This is not you know, tech bubble type over your skis. This is a small number of companies generating a massive amount of earnings growth that are getting rewarded for it. So, you know, are we above average valuation? Yes? I think if you looked at the S and P five hundred, you'd say you're probably maybe even upper cortile, upper decyle. But but you know, there's still room to expand. I think if the economy holds in and we continue to put the type erning growth we are.

Stuart, I just got in my inbox, you know, from Torsten Slock, our good friend over at Apollo Global management. He's just basically calling out kind of what we know, but he's putting some numbers on it, which is Boy, the big cap stocks are just really richly valued. Small cap stocks relatively cheap here. But I'm not sure I ever, I'm not sure I rotate out of the big caps and try to look for value here. How do you guys think of when you talk to your clients. I mean, I think I just kind of owned the big caps and go to the Jersey shore and wait for September.

Stuart, I just got in my inbox, you know, from Torsten Slock, our good friend over at Apollo Global management. He's just basically calling out kind of what we know, but he's putting some numbers on it, which is Boy, the big cap stocks are just really richly valued. Small cap stocks relatively cheap here. But I'm not sure I ever, I'm not sure I rotate out of the big caps and try to look for value here. How do you guys think of when you talk to your clients. I mean, I think I just kind of owned the big caps and go to the Jersey shore and wait for September.

Look, you know, we we like the broadening theme to start off the year because we actually thought Ernie growth is going to broaden out. I think that's worked probably for a total of four weeks this year. You know where the broadening trade has kind of worked. You know why a small cap not working? I think it's because that's the part of the market that's most susceptible if you get a recession, and is most susceptible to kind of hire for long. But so people have been very cautious, you know, to get into that space and look, large cap is big earnings, introducing dividends, et cetera.

Look, you know, we we like the broadening theme to start off the year because we actually thought Ernie growth is going to broaden out. I think that's worked probably for a total of four weeks this year. You know where the broadening trade has kind of worked. You know why a small cap not working? I think it's because that's the part of the market that's most susceptible if you get a recession, and is most susceptible to kind of hire for long. But so people have been very cautious, you know, to get into that space and look, large cap is big earnings, introducing dividends, et cetera.

This strange word profit Megnum decided LC it is his most important word.

This strange word profit Megnum decided LC it is his most important word.

Profit.

Profit.

Let's bring it over to something bow tie like free cash flow? Do you see margin compression or the gloom of a lesser free cash flow out there for say thirty percent of the universe well run companies.

Let's bring it over to something bow tie like free cash flow? Do you see margin compression or the gloom of a lesser free cash flow out there for say thirty percent of the universe well run companies.

No, not yet. And I think if you were to identify the one fundamental risk equities this year, it was going to be what does the margin out look look like?

No, not yet. And I think if you were to identify the one fundamental risk equities this year, it was going to be what does the margin out look look like?

Right?

Right?

You know, if you look at the past four to six quarters, you've had very high nominal GDP growth and companies were able to So what are your.

You know, if you look at the past four to six quarters, you've had very high nominal GDP growth and companies were able to So what are your.

Security analysts not you? What are your security analysts and city groups say to that?

Security analysts not you? What are your security analysts and city groups say to that?

I think for now they're they're comfortable with the margin outlook. You know Scott Kroner, who's are us equity strategist about two hundred and forty five bucks.

I think for now they're they're comfortable with the margin outlook. You know Scott Kroner, who's are us equity strategist about two hundred and forty five bucks.

I know when he had a real job, Yeah, big sales manager for the West Coast.

I know when he had a real job, Yeah, big sales manager for the West Coast.

Now he's got three real jobs. Yeah, that's even more popular. But he was he was high end of the street for a while on EPs, you know, basically on this logic Tom and he remains there. So they're of the view that it is still a relatively robust fundamental environment for US corporates.

Now he's got three real jobs. Yeah, that's even more popular. But he was he was high end of the street for a while on EPs, you know, basically on this logic Tom and he remains there. So they're of the view that it is still a relatively robust fundamental environment for US corporates.

What is owning twenty five delta calls on either the SPX or IWM.

What is owning twenty five delta calls on either the SPX or IWM.

What does that mean? It just me jo and some out of the money upside in US equities. And you know, basically we don't have very many rules of thumb. But but for a while you could pay less than the ten implied volatility on that. That s and p FUF option, which is just a really attractive entry to kind of rent rented.

What does that mean? It just me jo and some out of the money upside in US equities. And you know, basically we don't have very many rules of thumb. But but for a while you could pay less than the ten implied volatility on that. That s and p FUF option, which is just a really attractive entry to kind of rent rented.

Okay, so is that like betting on the Edmonton Oilers.

Okay, so is that like betting on the Edmonton Oilers.

Yeah, I guess, I guess it is like equivalent.

Yeah, I guess, I guess it is like equivalent.

To saying the Oilers can win one?

To saying the Oilers can win one?

Yeah, yeah, yeah, well I mean I mean win one, yes, win one, maybe not the whole series. Folks, get a game, go to.

Yeah, yeah, yeah, well I mean I mean win one, yes, win one, maybe not the whole series. Folks, get a game, go to.

Bloomberg, type in your stock MVDA or NANCEDAC index whatever OVDV and that will give you the delta in the gamma.

Bloomberg, type in your stock MVDA or NANCEDAC index whatever OVDV and that will give you the delta in the gamma.

And it's got all the volatilty there x y Z, good morning, Bruno to peer in the late Peter Carr.

And it's got all the volatilty there x y Z, good morning, Bruno to peer in the late Peter Carr.

Who put that together for us, it's yeah, you can sell terminals with OVD You're done, right, you can? Yeah, I mean you you just you know, I have no idea what I'm looking at I'm looking at a swissy Hungarian for it, and you throw up an OVD volatility surface.

Who put that together for us, it's yeah, you can sell terminals with OVD You're done, right, you can? Yeah, I mean you you just you know, I have no idea what I'm looking at I'm looking at a swissy Hungarian for it, and you throw up an OVD volatility surface.

And it's like, whoa very cool Stuart kais are on and come come back with the market goes down. He's your city group.

And it's like, whoa very cool Stuart kais are on and come come back with the market goes down. He's your city group.

I should say, ahead of US equity trading strategy.

I should say, ahead of US equity trading strategy.

That was Eddie.

That was Eddie.

I don't have a revision yet on weekly claims. We'll get it here in a moment. I'll interrupt when we get there. But come on, the disinflation vector is in place. We saw it yesterday at eight thirty, We see it this morning at eight thirty.

I don't have a revision yet on weekly claims. We'll get it here in a moment. I'll interrupt when we get there. But come on, the disinflation vector is in place. We saw it yesterday at eight thirty, We see it this morning at eight thirty.

Yeah, I would high both data points.

Yeah, I would high both data points.

You know, initial jobless claims jumping up to two hundred and forty thousand is an important data point. Now there's volatility in the week to week data. But if that were to stick, what's.

You know, initial jobless claims jumping up to two hundred and forty thousand is an important data point. Now there's volatility in the week to week data. But if that were to stick, what's.

Your four week moving average on claims? Where it's a whole new world after all.

Your four week moving average on claims? Where it's a whole new world after all.

I think if you're if you are two forty to two fifty, really that tight. That is usually the numbers.

I think if you're if you are two forty to two fifty, really that tight. That is usually the numbers.

That you might begin to think about.

That you might begin to think about.

I mean an initial job as claims, when they move up in a sustainable way, typically stick there. Now there's volatility in the week to week data. We had to jump a few weeks back up to two hundred and thirty thousand. You have to look at what's going on in the state level data. So I don't want to seeing all the details. It's hard to know. But if that sticks, that's an important data point because the labor market has been strong because layoffs have been low. If that changes, it changes the picture of the labor market. I'm not saying this this morning data point did that, but it certainly could be important if it's sticks.

I mean an initial job as claims, when they move up in a sustainable way, typically stick there. Now there's volatility in the week to week data. We had to jump a few weeks back up to two hundred and thirty thousand. You have to look at what's going on in the state level data. So I don't want to seeing all the details. It's hard to know. But if that sticks, that's an important data point because the labor market has been strong because layoffs have been low. If that changes, it changes the picture of the labor market. I'm not saying this this morning data point did that, but it certainly could be important if it's sticks.

Well, the Sweeney offspring are employed, so you know, we're doing our part here. What'd you take out of the Federal Reserves comments at Chairman's comments yesterday and just kind of the data we saw.

Well, the Sweeney offspring are employed, so you know, we're doing our part here. What'd you take out of the Federal Reserves comments at Chairman's comments yesterday and just kind of the data we saw.

Yeah, so yesterday's morning CPI was a great data point from their perspective. It showed a softening, you know, sixteen basis points a month a month. It was good and a lot of the areas that they would want it to be good. Services inflation was softer, you know, renton O we are was a little bit disappointing. I was surprised that they only showed one rate cut for this year. Now now it is our baseline that they only cut rates once, so you think that only once in December? Okay in December, but I was still surprised that they signaled that yesterday. I thought that they would want to maintain more actively optionality to cut rates before meeting.

Yeah, so yesterday's morning CPI was a great data point from their perspective. It showed a softening, you know, sixteen basis points a month a month. It was good and a lot of the areas that they would want it to be good. Services inflation was softer, you know, renton O we are was a little bit disappointing. I was surprised that they only showed one rate cut for this year. Now now it is our baseline that they only cut rates once, so you think that only once in December? Okay in December, but I was still surprised that they signaled that yesterday. I thought that they would want to maintain more actively optionality to cut rates before meeting.

Now.

Now.

Chair Pale downplayed the signal from that dotlets as he typically does, but at the same time, I don't think he was as dubbish as he could have been. He talked very strongly about the economy, about the labor market, about wage growth being high.

Chair Pale downplayed the signal from that dotlets as he typically does, but at the same time, I don't think he was as dubbish as he could have been. He talked very strongly about the economy, about the labor market, about wage growth being high.

Come on, you're you're at uc LA with a wonderful faculty there and all the prig of Allen Meltzer being there, and come on, no textbook, Obsfeld, Rogue Off all the rest of them has multiple further progress in it. What a bunch of malarkey. I mean, I'm sorry, there's like three adverbs back to back. Who invented multiple further progress?

Come on, you're you're at uc LA with a wonderful faculty there and all the prig of Allen Meltzer being there, and come on, no textbook, Obsfeld, Rogue Off all the rest of them has multiple further progress in it. What a bunch of malarkey. I mean, I'm sorry, there's like three adverbs back to back. Who invented multiple further progress?

Look, the reality is we had four stronger prints to start this year. We did get one much better print. But the FED, looking at the economy, the labor market report that we got on for Atlanta, FED GDP tracking above three percent in Q two is looking at an economy that does not urgently need so then.

Look, the reality is we had four stronger prints to start this year. We did get one much better print. But the FED, looking at the economy, the labor market report that we got on for Atlanta, FED GDP tracking above three percent in Q two is looking at an economy that does not urgently need so then.

Why doesn't he come out like in the old days and say, we don't know, we're data dependent.

Why doesn't he come out like in the old days and say, we don't know, we're data dependent.

The market's gotta pop, the economy's gotta pop, the stock market's gotta pop.

The market's gotta pop, the economy's gotta pop, the stock market's gotta pop.

We're gonna wait instead of all this mumbo jumps.

We're gonna wait instead of all this mumbo jumps.

So I think he did the problem is that they have the dot plot now, and so if you if you just think the press conference in isolation, he essentially said that we are data dependent. We're making decisions on a meeting by meeting basis. We have to see how the inflation and labor market data come in. We think the economy is strong right now, so we don't urgently need to cut rates now. The issues they have the dop plot. Greenspan did not have the dot plot, and so it's harder to get away from any calendar based guidance.

So I think he did the problem is that they have the dot plot now, and so if you if you just think the press conference in isolation, he essentially said that we are data dependent. We're making decisions on a meeting by meeting basis. We have to see how the inflation and labor market data come in. We think the economy is strong right now, so we don't urgently need to cut rates now. The issues they have the dop plot. Greenspan did not have the dot plot, and so it's harder to get away from any calendar based guidance.

Can you can you imagine Luzzetti and Folkartz, Landau and Hooper in a room together talking about the dot plot. They probably have to switch to German.

Can you can you imagine Luzzetti and Folkartz, Landau and Hooper in a room together talking about the dot plot. They probably have to switch to German.

They get so upset rividly.

They get so upset rividly.

All right, initial jobs claims today, again, as Tom mentioned, they came into two hundred and forty two thousand. Consensus was for two and twenty five thousand, so a little bit higher than what we've typically seen. Here was two hundred and twenty nine thousand last period.

All right, initial jobs claims today, again, as Tom mentioned, they came into two hundred and forty two thousand. Consensus was for two and twenty five thousand, so a little bit higher than what we've typically seen. Here was two hundred and twenty nine thousand last period.

But I don't know.

But I don't know.

It seems like the consumer is in good shape. The consumer has a job, they're getting wage increases, they're spending money. How do you feel about the consumer these days?

It seems like the consumer is in good shape. The consumer has a job, they're getting wage increases, they're spending money. How do you feel about the consumer these days?

So there's been a lot of questions about the consumer. You have kind of idiosyncratic reports from companies. You did have a week consumer spending report. If you look two weeks back now, it comes off of consumer strength.

So there's been a lot of questions about the consumer. You have kind of idiosyncratic reports from companies. You did have a week consumer spending report. If you look two weeks back now, it comes off of consumer strength.

But I would agree with you.

But I would agree with you.

You know, there's this circularity between thinking about the labor market and the consumer. You know, as long as the labor market remains resilient and strong, and job gains are solid and wage growth is there, there's very little reason to think that the aggregate consumer weakens. Now there is greater heterogeneity. You do have at the lower end of the income distribution. There does seem to be some evidence of stress strains that are there. From my perspective, that's a little bit more returning to what the pre COVID economy looked like than something that signaling a worrying slowdown on behalf of the consumer is inflation.

You know, there's this circularity between thinking about the labor market and the consumer. You know, as long as the labor market remains resilient and strong, and job gains are solid and wage growth is there, there's very little reason to think that the aggregate consumer weakens. Now there is greater heterogeneity. You do have at the lower end of the income distribution. There does seem to be some evidence of stress strains that are there. From my perspective, that's a little bit more returning to what the pre COVID economy looked like than something that signaling a worrying slowdown on behalf of the consumer is inflation.

You know, we think about inflation, because the FED thinks about an inflation here when we think about a two percent inflation rate is kind of a target. Is that something this economy can get down to, or it just feels like we're kind of stuck here at this I don't know, a high twos or a three percent kind of inflation rate.

You know, we think about inflation, because the FED thinks about an inflation here when we think about a two percent inflation rate is kind of a target. Is that something this economy can get down to, or it just feels like we're kind of stuck here at this I don't know, a high twos or a three percent kind of inflation rate.

Are we stuck there for a while? Do you think? I don't think so.

Are we stuck there for a while? Do you think? I don't think so.

I mean this year, from a year of year rate, we will be stuck there. I mean you have base effects that are difficult. Are inflation for core PC at the end of the year's two point seven a little bit below what the FED was, But as you look ahead to next year, I would expect shelter inflation is coming off. It does lag a bit, but that we can get closer to two percent. It's probably difficult to get into the low twos without shelter inflation coming off more materially. But I think importantly for the Fed, they've been clear they don't need to get down to two percent to begin to cut rates. They just need to have confidence that they are on the path to get there.

I mean this year, from a year of year rate, we will be stuck there. I mean you have base effects that are difficult. Are inflation for core PC at the end of the year's two point seven a little bit below what the FED was, But as you look ahead to next year, I would expect shelter inflation is coming off. It does lag a bit, but that we can get closer to two percent. It's probably difficult to get into the low twos without shelter inflation coming off more materially. But I think importantly for the Fed, they've been clear they don't need to get down to two percent to begin to cut rates. They just need to have confidence that they are on the path to get there.

For our listeners are viewers on YouTube what impacts their life with the first or even the second rate cut. What changes.

For our listeners are viewers on YouTube what impacts their life with the first or even the second rate cut. What changes.

Look, the reality is these rate cuts are priced, so they are there into your yields. They are there in tenyure yields, they are there in mortgage.

Look, the reality is these rate cuts are priced, so they are there into your yields. They are there in tenyure yields, they are there in mortgage.

Right.

Right.

What about and so you need.

What about and so you need.

Surprise to mateo at Costco? Yes? What's it? I'm serious? What's it mean? So?

Surprise to mateo at Costco? Yes? What's it? I'm serious? What's it mean? So?

I think in terms of Costco, it's actually the reverse causality, meaning if Costco is cutting prices, then the Fed can cut rates.

I think in terms of Costco, it's actually the reverse causality, meaning if Costco is cutting prices, then the Fed can cut rates.

We go, we go to economous Right at Lisa, is Costco cutting prices?

We go, we go to economous Right at Lisa, is Costco cutting prices?

They are not.

They are not.

They do have some good sale items, but no, the prices, this is.

They do have some good sale items, but no, the prices, this is.

Important sale items. There's gonna be a lot more sale items.

Important sale items. There's gonna be a lot more sale items.

Yeah.

Yeah.

And I think if you look at the CPI report yesterday, there was reasonably broad based deceleration. Look at the trim mean was weaker. You know, the median has come down pretty materially, so so you did have broad based softening in yesterday's inflation.

And I think if you look at the CPI report yesterday, there was reasonably broad based deceleration. Look at the trim mean was weaker. You know, the median has come down pretty materially, so so you did have broad based softening in yesterday's inflation.

We're getting So we're gonna run the studio conversations when we're on break for all of you worldwide and nationwide.

We're getting So we're gonna run the studio conversations when we're on break for all of you worldwide and nationwide.

Some people say they're smarter than what we actually talk about. I walk in and all Ozetti and Sweeney are talking about, is UCLA gets seventy two million dollars for playing Rutgers in field hockey. It's gonna be crazy.

Some people say they're smarter than what we actually talk about. I walk in and all Ozetti and Sweeney are talking about, is UCLA gets seventy two million dollars for playing Rutgers in field hockey. It's gonna be crazy.

So I mean, Matt, I know you're Villanova undergrad, but you got your PhD at UCLA. But now your UCLA is going to have to come all the way to the East coast to play Big ten.

So I mean, Matt, I know you're Villanova undergrad, but you got your PhD at UCLA. But now your UCLA is going to have to come all the way to the East coast to play Big ten.

It is wild. I mean thinking about that the back ten A PAC twelve and that that disbanding and the.

It is wild. I mean thinking about that the back ten A PAC twelve and that that disbanding and the.

Old Stanford UCLA thing's gone.

Old Stanford UCLA thing's gone.

Right, it is you know, it's disappointing to see that that that lost kind of that history and that legacy.

Right, it is you know, it's disappointing to see that that that lost kind of that history and that legacy.

Problem for the NCAA long term. That's just my opinion because I think the only not the only thing, but one of the big things that college athletics had going forward.

Problem for the NCAA long term. That's just my opinion because I think the only not the only thing, but one of the big things that college athletics had going forward.

Was the rivalry.

Was the rivalry.

So what's it mean for March badness? I mean, that's what counts. I mean, Ozetti, you know he's got six thousand square.

So what's it mean for March badness? I mean, that's what counts. I mean, Ozetti, you know he's got six thousand square.

Villanova Duke will be there. We'll be fine, Brack Vilanovan Duke. But for everybody else, No.

Villanova Duke will be there. We'll be fine, Brack Vilanovan Duke. But for everybody else, No.

But what's it mean if the Big ten is seed to shining seat, that's what we're talking about.

But what's it mean if the Big ten is seed to shining seat, that's what we're talking about.

I don't know it's gonna be I mean, I think a CEC the same way ACC has Stanford doll in it.

I don't know it's gonna be I mean, I think a CEC the same way ACC has Stanford doll in it.

What's it mean for U C L A U s C. I mean that kind of rival.

What's it mean for U C L A U s C. I mean that kind of rival.

I think that very close rivalry does not change. But when you think about, you know, the other rivalry within the back ten per twelve, they'll certainly become weakened.

I think that very close rivalry does not change. But when you think about, you know, the other rivalry within the back ten per twelve, they'll certainly become weakened.

Thing focused Landos listening to this in Frankfort going what kind of.

Thing focused Landos listening to this in Frankfort going what kind of.

What is my chief US economist talking about?

What is my chief US economist talking about?

Matt Lozzetti? Thank you so much to Deutsche Bank.

Matt Lozzetti? Thank you so much to Deutsche Bank.

I really want to resell her the idea that Mattlizzetti was out there and said, you know what, we're going to see a slower economy. We did, but he had the courage and literally his first essay to say, stop guessing when the recession's coming. It's a fool's game. I am happy, happy, happy. I get to talk to Wendy Schiller with Paul Sweetey. She's at Brown University because she owns the high ground on the linkage of our history into where we are.

I really want to resell her the idea that Mattlizzetti was out there and said, you know what, we're going to see a slower economy. We did, but he had the courage and literally his first essay to say, stop guessing when the recession's coming. It's a fool's game. I am happy, happy, happy. I get to talk to Wendy Schiller with Paul Sweetey. She's at Brown University because she owns the high ground on the linkage of our history into where we are.

As I walked into the building this morning, got Officer Korski came down the elevator as they walked into the building. I stared at the G seven photo shoot and Ed Duffner said, Tom, it's the Potsdam conference. Wendy Schiller, what a train wreck of a photo shoot at the G seven nineteen forty five Potsdam, Roosevelt dies, Truman shows up, different guy. While they're there, Churchill's.

As I walked into the building this morning, got Officer Korski came down the elevator as they walked into the building. I stared at the G seven photo shoot and Ed Duffner said, Tom, it's the Potsdam conference. Wendy Schiller, what a train wreck of a photo shoot at the G seven nineteen forty five Potsdam, Roosevelt dies, Truman shows up, different guy. While they're there, Churchill's.

Thrown out of office, Clement Atley becomes a prime minister, and Stalin's Faden's smiling all the way. Wendy Schiller, I saw the guy from Germany going, I think I'm still in power. Mccrom hasn't slept in a week. The president has his own challenges. Trudeau. I don't know what Trudeau's doing. It's a disaster and that's what Trump would say.

Thrown out of office, Clement Atley becomes a prime minister, and Stalin's Faden's smiling all the way. Wendy Schiller, I saw the guy from Germany going, I think I'm still in power. Mccrom hasn't slept in a week. The president has his own challenges. Trudeau. I don't know what Trudeau's doing. It's a disaster and that's what Trump would say.

That's a dasher in Canada. And on the back end of it is a Ruschie Schunach who's still dday. What a mess. Have you ever seen a G seven like this, Wendy Schiller?

That's a dasher in Canada. And on the back end of it is a Ruschie Schunach who's still dday. What a mess. Have you ever seen a G seven like this, Wendy Schiller?

I have not.

I have not.

And the irony is that we're not facing a global economic crisis. So, you know, a lot of these leaders, a lot of the parties, whether the conservative or more moderate, you know, business friendly, they're facing populist.

And the irony is that we're not facing a global economic crisis. So, you know, a lot of these leaders, a lot of the parties, whether the conservative or more moderate, you know, business friendly, they're facing populist.

Sort of anger and gains.

Sort of anger and gains.

I mean, really in the EU elections, and certainly look at Italy, look at Hungary, look all over the place, and you see that it's not connected as much to economic discontent as it was as we might have expected it to be ten years ago.

I mean, really in the EU elections, and certainly look at Italy, look at Hungary, look all over the place, and you see that it's not connected as much to economic discontent as it was as we might have expected it to be ten years ago.

So then that's a bigger puzzle, and that's what brings back World War Two.

So then that's a bigger puzzle, and that's what brings back World War Two.

So what are these deep strains or trends in Europe. Certainly anti migrant is one of them. But if the economy is getting better, and clearly the United States is leading there but nonetheless getting better, yet all these sort of moderate quote unquote liberal democracy, these leaders are fading.

So what are these deep strains or trends in Europe. Certainly anti migrant is one of them. But if the economy is getting better, and clearly the United States is leading there but nonetheless getting better, yet all these sort of moderate quote unquote liberal democracy, these leaders are fading.

Right, that's a big puzzle for us.

Right, that's a big puzzle for us.

Off of the debate at Chicago, at Milwaukee after Labor Day, are we going to see the same populist angst in America?

Off of the debate at Chicago, at Milwaukee after Labor Day, are we going to see the same populist angst in America?

Well so, I think the trends are actually working against that to some extent. In terms of the economy, Right, so we have a little bit of a tick of unemployment, but we had a really good job support and inflation, depending on who you.

Well so, I think the trends are actually working against that to some extent. In terms of the economy, Right, so we have a little bit of a tick of unemployment, but we had a really good job support and inflation, depending on who you.

Talk to, seems to be at least calming down.

Talk to, seems to be at least calming down.

So if consumer sentiments starts to rise just a little bit over the summer, folks can take a vacation, they feel comfortable about that, they have a good summer, they're feeling better about the economy.

So if consumer sentiments starts to rise just a little bit over the summer, folks can take a vacation, they feel comfortable about that, they have a good summer, they're feeling better about the economy.

Then I think things kind of.

Then I think things kind of.

Moderate a little bit on these big pushbacks in terms of the far right. But Trump is courting big business. He's being very strategic about it. He said, listen, don't worry about me. I'm just going to do taxes lower and keep them low, and I'm going to get rid of regulation. I'm not gonna make you happy. I'm not going to do anything scary. And that's going to be his message today in Washington. And that's the big problem for the Biden administration is what.

Moderate a little bit on these big pushbacks in terms of the far right. But Trump is courting big business. He's being very strategic about it. He said, listen, don't worry about me. I'm just going to do taxes lower and keep them low, and I'm going to get rid of regulation. I'm not gonna make you happy. I'm not going to do anything scary. And that's going to be his message today in Washington. And that's the big problem for the Biden administration is what.

Do you do with that messaging?

Do you do with that messaging?

And how does Trump keep that far right wing of his party common enough not to scare a lot of the independent voters away again in twenty twenty four.

And how does Trump keep that far right wing of his party common enough not to scare a lot of the independent voters away again in twenty twenty four.

What do we know about those independent voters, those centrist type of voters. I guess, by and large they broke for President Biden last time around, they broke for the Democratic Party some of the congressional election cycles. What do we know about that group here, which will be critical for the presidential election coming up later this year.

What do we know about those independent voters, those centrist type of voters. I guess, by and large they broke for President Biden last time around, they broke for the Democratic Party some of the congressional election cycles. What do we know about that group here, which will be critical for the presidential election coming up later this year.

The only recent information we have is after the Trump thirty four fel Any convictions. Some palling indicated that some percentage of those independents were less likely to vote for Trump, but you're looking at a body that's probably not likely to vote for Trump anyway.

The only recent information we have is after the Trump thirty four fel Any convictions. Some palling indicated that some percentage of those independents were less likely to vote for Trump, but you're looking at a body that's probably not likely to vote for Trump anyway.

What's interesting is the polling coming.

What's interesting is the polling coming.

Out of Senate Democratic incumbents in swing states. They're actually doing better than Biden, and they're doing better than the Republican opponents or you know, supposed Republican opponents. So how are the Democratic incomment senators holding on in swing states and Biden is behind Trump or tied with Trump. So that's suggest some independence maybe recalibrating thinking, hey, we'll vote for Trump keep our low taxes at but we'll vote for Senate Democrats to control Donald Trump and not give the Republicans a trifecta. It seems like there could be more split ticket voting this summer around.

Out of Senate Democratic incumbents in swing states. They're actually doing better than Biden, and they're doing better than the Republican opponents or you know, supposed Republican opponents. So how are the Democratic incomment senators holding on in swing states and Biden is behind Trump or tied with Trump. So that's suggest some independence maybe recalibrating thinking, hey, we'll vote for Trump keep our low taxes at but we'll vote for Senate Democrats to control Donald Trump and not give the Republicans a trifecta. It seems like there could be more split ticket voting this summer around.

Okay, let's talk about that, because it's not really the zech ace. Yes, but you just mentioned it. Could we see a Gope trifecta?

Okay, let's talk about that, because it's not really the zech ace. Yes, but you just mentioned it. Could we see a Gope trifecta?

Well, that's the thing that I'm watching in terms of these Senate races, particularly Wisconsin, Arizona, Pennsylvania's a little bit dodgy.

Well, that's the thing that I'm watching in terms of these Senate races, particularly Wisconsin, Arizona, Pennsylvania's a little bit dodgy.

There's an open seat in Michigan.

There's an open seat in Michigan.

But thinking about those races and thinking even shared Brown in Ohio is up by four or five points against Bernie Moreno Trump will win Ohio, I think. So that's going to be an interesting thing. I mean, I think the House is totally up for grabs. Right it's an eight seat race. There may be thirty competitive seats and eight can switch and then one party can take over with a narrow majority.

But thinking about those races and thinking even shared Brown in Ohio is up by four or five points against Bernie Moreno Trump will win Ohio, I think. So that's going to be an interesting thing. I mean, I think the House is totally up for grabs. Right it's an eight seat race. There may be thirty competitive seats and eight can switch and then one party can take over with a narrow majority.

So we don't know about the House.

So we don't know about the House.

But the Senate is supposed to be for the in Republican's favor doing the map, But right now it looks like the Democrats are holding their own and that's going to be what I'm watching going forward.

But the Senate is supposed to be for the in Republican's favor doing the map, But right now it looks like the Democrats are holding their own and that's going to be what I'm watching going forward.

Wendy, this isn't why we booked you.

Wendy, this isn't why we booked you.

There's Route one forty six, which comes out of Providence, the land of Decent Pizza, up to a suburb called Boston, and in between he is Foxborough. Did you attend the Tom Brady Hall of Fame soiree at Gillette Stadium, Professor.

There's Route one forty six, which comes out of Providence, the land of Decent Pizza, up to a suburb called Boston, and in between he is Foxborough. Did you attend the Tom Brady Hall of Fame soiree at Gillette Stadium, Professor.

Schiller, I did not.

Schiller, I did not.

I harkened from the New York Long Island area and I am a Giants fan.

I harkened from the New York Long Island area and I am a Giants fan.

Well, you could have worn your Giants jersey. I mean, you know, you know, no, I did.

Well, you could have worn your Giants jersey. I mean, you know, you know, no, I did.

That at a Super Bowl party when the Giants beat the Patriots and it wasn't possable.

That at a Super Bowl party when the Giants beat the Patriots and it wasn't possable.

There we go. Got that in Professor Schuller, go away. Thank you.

There we go. Got that in Professor Schuller, go away. Thank you.

At Brown University surely were their leadership in international relations. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app

At Brown University surely were their leadership in international relations. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app