Fed to Maintain Bond Buys Until ‘Substantial’ Economy Gains Seen

dot com. If you can also listen to our radio show at two pm Eastern on Bloomberg Radio and be sure to watch us too on YouTube by searching Bloomberg Global News. It is fed Wednesday. We are Bloomberg Business Week, Carol Master, along with Tim Stenovik. Let's bring in the team Kathleen Hayes, Global Economics and Policy editor at Bloomberg News. She's back in our interactive broker studio. Dave Wilson, Stocks

editor at Bloomberg News on the remote access from New Jersey. Kathleen, you had a few minutes to look at these headlines. What stands out for Well, I'd just like to start with what the bond market has done, Carol, because I made very careful note of where it was and the there was it was flat. Just maybe the tenure was down to tenth. The tenure is now down eleven thirty seconds. The thirty year bond, which was down three three thirty seconds,

now down a full point. Why, Kathleen do you ask? Well? Because the Fed, as mostly expected, apparently, at least in the policy statement, has said nothing about the possibility of Number one increasing the number of bonds they've been buying. That wasn't so expected. But the very least some signal that they are ready to start changing the composition of the bond maturities right go out the curve by more

long term bonds. Make sure that that ten year, which the yield is currently zero point nine four, people are going, oh my god. But if it goes above one percent, well, the Fed apparently is not ready to say that yet. Certainly at the press conference, J. Poe will be asked about that. I think, what's surprised me? I guess not when the when the Fed? One of the headlines here is the FED Activity saying the economic activity and employment

have continued to recover. Okay, so some people are really concerned about even a negative first quarter, for example, something that didn't change meeting forecast sharing rates near zero through So the dot plots will not have changed. And of course they're revising their economic and inflation forcus etcetera, etcetera.

But the headlines one more thing when you throw in um that they're study the temporary dollar swap lines and repurchase facility, because that's just showing the doors open to overseas central banks reaching out if they need a little help from the FED. And I forgive me if you said this, I'm like been listening to you going through

the bloomberg. The FED forecasting shows five of seventeen officials saw a rate hike during So looking way out, Tim, we got to talk about the equity market reaction to Yeah, we we certainly do. I mean, is anything surprising equity investors right now? Dave, if you want to come in on that, Yeah, sure doesn't look like it because you had a little bit of fluctuation in the SMP five hundred after the meeting results were released. But I mean you're talking about an SMP five d it's up a

tenth of a percent at this point. And if you look at things as they shake out in terms of industry groups, it's a familiar kind of story. You know, the performer among the eleven main groups Consumer Discretionary. It's a category that includes retailion therefore includes Amazon dot Com, and the entire gain in that index can be explained by the fact that Amazon is up one point eight percent, and then right after that technology stocks, and certainly they've

been the story, you know for some time. Uh. But seven of the eleven groups are lower utilities taking the biggest hit. Uh. Talk about an initiest rate sensitive group. So you know what we're seeing, not really a whole lot in what the Federal Reserve release to change investors minds, it seems when it comes to stocks here. So it's so it's fair to say, Dave, that there were no big surprises at least when it came to investors in

this latest FED meeting. Sure doesn't look that way. I mean, not a whole lot of fluctuation in share prices, that's for sure. Yeah, it's interesting too, and I'm just going through our our Bloomberg live blog love this. Uh. Notably, officials did not change their tone with respect to economic conditions, reiterating that the recovery depend on the course of the virus and that the pandemic will continue to weigh on conditions in the near term. They say, it's it poses

considerable risks to the outlook in the medium term. Um, you know we're watching this, Uh, Kathleen, you know it's so interesting. I just think about FED decisions of the past where we were also focused on the rates for often, you know, but it's not really about that. Uh. It's really about what they are doing to either help out this economy because of the pandemic. Well, and um, I think you're right to point out the fact that, yes, it's still gonna they're still saying that the economy is

going to depend on the virus. And we could even add to that, well, vaccines, how quickly can you get them out? Et cetera. I think it's interesting too when you look at the change in the summary of economic projections, the steps, which that's where the dot plots for the

interest rate hikes come from. People were saying, including Elena Shila Kiva and our Bloomberg Economics team before this came out, that undoubtedly their outlook for unemployment because it's come down a lot faster than they expect, it would be much brighter. And in fact they do say the jobless rate six point seven. Uh, they had forecast at seven point six and for next year you'll get down to five five

point oh versus five point five. You know, those are unemployment rates that look like the olden days, right before we got to those fifty year lows. Uh. The GDP forecast a little bit more optimistic on inflation, though they really have a little bit of improvement, but not much. They don't see us getting the economy getting to um two percent on the core inflation rate until three But I think that's kind of what they've been saying for

a while, Kathleen. I do want to ask you, we were talking about it early on our planning call, that if during the Powell press conference, if news comes down about a stimulus plan or any progress, significant progress, um, would we assume that everybody in the room will have access to headlines and that is something that they could bring up. You know that, Carl, because I remember thinking, now,

you're absolutely right. The times I've been there, you have to uh, well, certainly the lock up because you go in early, then you give over your cell phone. However, you are allowed to have laptops because that's how you put the headlines together to flash them. So yes, I think it during the press or they will. I thought, you're gonna ask me how j Power react, and I was gonna say he he'll probably do a happy dance right there in the middle of the press conference. I mean,

that's did a happy dance. I'm just gonna put that out there. Yeah. Well, you know, he does play guitar, and he and his wife love to dance. You read this all the time. He's quite a renaissance man. But it's certainly a big deal. It's probably the biggest deal to the fat and I expect that, you know, reporters going to ask him a number of different questions about this, like what if this doesn't pass, do you get worried chair about a negative first quarter? Etcetera. So I think

this is something that is clearly on the table. We'll hear more about it. But who any minute. You know, we were talking about that well into the night on US ASIA, you know, our Daybreak Asia and Blueberg market shows of the stimulus package. Everybody's watching. Yeah, absolutely, Dave Wilson, what are you gonna be watching for during that Power press conference? Since it doesn't look like we're having Although I will say the equity markets look like they're steepening

some of their losses. But mind you, um not a ton and the NAZAC has paired its gain. It was up about forty five fried to the FED announced, but now just up about eighteen nineteen points. What could Fed Chief J. Powe will say that could maybe move the equity markets here. I think the real question is how much pressure does he put, in essence, on Congress in the White House to try and get something done in

terms of a stimulus. You know, how does he see things shaking out based on whether they move, come together, get something done or you know, it's wait until next year. I mean, that's going to be well worth listening for. All right. That is certainly setting us up really well. Hey guys, thank you, Thank you so much. Dave Wilson, Stocks editor at Bloomberg News on the remote access from New Jersey. Kathleen Hayes, Global Economics and Policy editor at

Bloomberg News. She's back in our interactive Brokers studio. Our top headline, top story tim the FED saying it will continue to support the economy through massive monetary stimulus until it sees quote substantial further progress in employment and inflation. So they are watching this and I'm assuming they're going to get a lot of questions. J Powell will indeed

on all of this. Let's do some analysis and let's talk about this because keep in mind, in just about seventeen minutes time, at the bottom of the hour, we will hear from J. Powell, Chairman of the Federal Reserve, his comments, and of course that press conference with reporters after today's decision. So let's bring in Francis Donald. She is global chief Economist, head of macroeconomic Strategy at Manu

Life Investment Management. She's on the phone in Toronto. Stephen Skanky back with us, also chief economic advisor at kill Point, former U S. Treasury and White House National Security Council staff member. He's based in Washington, d C. And I believe that's where he is on the phone on this FED Wednesday. Steve, let me start with you. So um FED maintaining its bond buys, just watching looking for the economy to see some improvement. What's key for you in

terms of this decision. Well, it's not surprising that the Fed didn't change any of his policy stance. Uh, there was a little bit of expectation that they might say something about the composition of their their bond buying. But uh, you know on net there was nothing, there was nothing for them to gain by doing that, so so they just held it steady. Obviously the economic environment is particularly complicated with the vaccine rolling out, but yet at the

same time record rates of infection, hospitalization's mortality. I think what was most interesting to me though, was the adjustment

in their economic projections. Even with all the sworld that's going on in this quarter and and weak economic news on retail sales coming even just today, they did reduce, uh that they did improve the projection e change in real t GP for overall, taking it from minus three point seven percent for the year to to minus two point four That's actually quite encourage and likewise for two

they also improved their their projected estimates. Well, it's interesting and Neil Dada Renaissance Macro emailing me and saying, you know, the bond market gets because he said to the Fed marking up growth in need to the next two years, marked down unemployment and marked up core inflation. The bond markets selling off because it gets that positive growth story. Um Francis, come on in on this is that also what is jumping out at you, or or is something

else here's a jumping out of me. We got a you know, the end of the news on fiscal We're getting a crystal package that looks like it's done done Today we get up said that basically does nothing and marks up growth and inflation, and all we got was a three and a half basic point jump in the

ten year to nine basis points. Yes, the bond market knows things are a little bit better now than they were before, but the bond arm because is also staring down three months of data that is going to quickly deteriorate a central bank that is, whether they do it now or next month, going to have to and way to average maturity and the possibility that there are you know, ongoing turbulence created by the disappearance of thirteen three programs.

When I look at this bond market, we can kind of look at the daily charts, but it's telling me the same thing, which is that we're still stuck in a recessionary environment. Even if you throw a massive fiscal package and a more hawkish than expected FED statement, you're still only getting the ninety four basis points. And that's the biggest message I can read in the last fifteen minutes. Well, Francis, what more could could have Fed do here? I mean,

we're looking at the forecast. It shows that five of seventeen officials see a rate hike happening during twenty twenty three, the median forecast showing that rates are going to be at near zero levels through three. What more can the FED do to stimulate the economy? The FAN can't do much to stimulate the economy at all, but they could reduce the possibility of tail risks. They can make sure that we don't incur a rate tantrum right at the period when the economy goes through a double dip. And

in fact, they should be doing this now. Powell is going to get away with this just like Regard did last week. Just a little bit of an increase in niels, that's totally something that the that the entire economy and financial system can deal with. But if we start to see rates move above that one percent and we get more nervous more of that reflation trade coming in, then we might be heading into a period where those tail

risks starts to become higher probability. We don't rely on the side to boost employment you can lower rate as much as you want. I'm not going to a movie theater, but what you can do is make sure that it doesn't create a spiraling event that creates a credit event. I think Powell is going to have to come in here in about twelve minutes and lean pretty heavily here or else who's going to have to direct the New York said to start buying the sadder at the curve

as they have been in the last week or so. Well, Francis, she took us exactly where I want to go. Um, Steve, come on in back on this conversation. I mean, what do you want to hear from Pal? What would you be asking him? And I do think about do we need to really start thinking about This is the last FED meeting of this year, then the first one of next year will be just after the Biden administration gets

into the White House. Um, we've already talked about a lot of collaboration expected between Pal and Yelling and the economic team of Joe Biden. But what is it that you would want to ask Powell and what are you expecting come January? Well, what I'd really like to ask him, But I'm sure he won't answer at all? Is how does he look forward to the partnership with the new Treasury secretary of his old friend Janny Yellen? And H

what types of things are are they thinking about? You know, they're going to have some big challenges coming ahead, the disadvantage labor groups, UH, some specific industries that are uh facing insolvency and credit issues that liquidity won't really solve. And um, what do they do when they can't get the sort of fiscal stimulus that they really need to have?

And how is all that going to work together? I think it's premature for him to tip his hand on that, but we'll see if any of the questioning can tease any of that out. Uh. That that's the big challenge. To do much right now is no game for the Fed. Better better to be reserved, keep quiet, see how things behave and if they need to do something before they end of January, obviously they can do that. But but for right now, just just lay low and act confident

and uh give give markets a positive signal. Francis, let's let's get that same question over to you. What would you ask the FED chair if you were able to talk to him in a few minutes. Well, if it was over drinks, I'd asked him if he thought this morning's retail sales report, I want to be at that. I want to be at that drinks. By the way, Yes,

it's definitely it's definitely over drinks. Yeah. If I was in the room though at two thirty, I'd probably dive deeper into what they're expecting to do with the longer maturities and how comfortable they are with them. And the reason that I want to ask that is because I would want to subtily get under the surface of how much of a connection and Powell wants between fundamentals and rates.

Is he ready to take off the rains and let the market trade off of better news push that tenure higher up until where it should be, which is probably closer to one forty, or do they want to maintain some financial repression in this and allow them overheating. Of course, he'll never say that he's happy with financial repression in the bond market, but if you could get a sense of where they're going on longer duration purchases, I might give you a little bit of some insight into the

way they're thinking about that. Well, Francis and do you think he's also thinking about something We've talked about a lot on air with Peter Atwater about the K shaped recovery.

There are people who don't really even feel this economically, or they're in the markets and they've made a lot of money and they've actually done okay, And then there are others who have felt so much too much um And I do wonder if J Powell, I think he is thinking about letting it run a little hot so that those who really have been left out here again

maybe get some help. Yeah, Carol, I think they probably obsess over the K shaped recovery, both because it impacts manufacturing and services differently, so the stock market is going to take off while the rest of the economy gets left behind, but also because if we look at what central banks are doing, they continue to expand the way they're looking at the world. They're talking about climate change, incommitteequality, racially in qualities, the Reserve Bank of New Zealand talking

about housing affordability. Now that doesn't mean they're going to change their duel um, their inflation and employment mandate, but it doesn't mean the scope over which they observe that is going to change. And this is why, yes, we can kind of talk about the three basis points in the tenure, and we can talk about way at average maturity, but look at the dot plot. Look at what they're

telling us an average inflation targeting. The set is not lifting off until at least five and the rest of it is really kind of coming down to tactical trading and not the main messaging that they're trying to get across. And I really hope that at two thirty Powell just pounds that down to the table and reminds us we are not thinking about thinking about raising indust rates because

we use the word like that today. Steve, want to bring you back in here and then just talk more about these interest rates POTENTI staying at near zero rates until what are the long term implications of that? I mean beyond financial markets. We look what's happening in the real estate industry, because mortgage rates are just at rock bottom right now and demand is pushing prices higher throughout the country. Despite this week, Economy give us an idea

of long term implications of low interest rates. Well over time, you can get um disruption in in fixed income and borrowing markets when when rates stay too low, too long. Uh, But it seems like they're willing to take that chance

and run that experiment. Both Janet Yellen and j Powella have have spoken often about the need and the fact that the lower income groups and disadvantaged labor groups only benefit at the UH in the final stages of the economic growth cycle, and so they are going to the economy run a little bit hot and inflation be a little bit on the high side to get out there, and whether that means that they have to apply the brake pedal all that much more firmly if if inflation

should accelerate, that might be the case. Um it it's it's not helpful to longer equilibrium in in free markets. UH. But I don't think that that's their focus right now.

You know, it's interesting. Real focus is the K the case shape recovery and UH and doing something to benefit those that are on the bottom length of that K Muhammada area and tweeting out over PIMCO and he's saying he highlighted a certain segment of a chair pals upcoming press conference and or from the FED statement, I should say, and he says that this should be talked about at the press conference, but he said, in addition, the Fed

this is this is a statement from the FED. In addition, the FED will continue to increase its holdings of treasure securities by at least eighty billion dollars per month and of agency mortgage back securities by at least forty billion per month until substantial further progress has been made towards the Committee's maximum employment and price stability goals. I mean, so he's saying, you know, he'll be he'll be asked a lot more about that UM and I guess some

more details about that. I mean, I don't know, for insis, we talked about this before. I mean, there isn't a lot more that the FED can do, especially when it comes to you know, they're about lending, they're not about spending. That's where Congress comes in. And I do wonder what he will say or what we need him to say at the press conference when it comes to that next round of federal aid and federal stimulus that seems to be making progress, but men, it's taking forever now, you know.

I think he'll push back against the idea that the FED can't do anything else. They can latten this curve pretty aggressively, and they can make sure that the so called inflation scare that's coming through doesn't maturely list rate prematurely, particularly in the period where we're heading into weakness. But I think one of the things Central Makes are gonna have to push back on in the next year or so is really, you know, trying to push back against

the idea that they're even thinking about normalizing. The DTV just suddenly brings up the concept of a roll off. Nobody was asking them about that. They just volunteered that information. It's like those means that go like nobody, absolutely nobody, Hey, you want to hear about our roll offs pens. These are not really what we need to be hearing. What we need to be hearing is we're boring. We're not doing anything will be more needed. We're not even thinking

about what an exit plan looks like. We need that. We just need that for three six more months. That's all I need, just three six more months. Then we can talk about roll offs. Going into a period that's very, very weak and we have to prepare for it. We have to be relaxed and not reactive. Well, it's a year where we talked you know so much about deliberate actions, whether it you know of all that ails us right, it needs to be and it sounds like you know, Francis,

that's what you're saying, Steve. Do you agree that the Fed needs to be incredibly deliberate right here about and make sure it's message is very clear? Oh? Absolutely, because they can markets can be confused, especially as Frances says, when you look at what the the e c B

just sort of uh, let let drop out there. The Ft has been adamant about that, and I think that the Chairman Powell will will reiterate that just so there's absolutely no confusion that they're thinking about doing anything in terms of raising rates or or or dampening down there um quantitative easing until well well into or beyond even the end of tree, depending on where labor markets and inviceing are at that point in time. I don't think we'll hear about it today because these are are primarily

the biggest issues. But there there's also an opportunity if if in the new Congress, and depending on what that composition looks like, if if there's not an opportunity too to obtain the sort of fiscal stimulus that the incoming by the administration thinks that it needs of the yell and power combination of figuring out how the Fed can can provide fiscal like monetary stimulus in one to to get that additional boost that they may decide they need

to have. Steve we we talked a lot about the fetch her, of course being very deliberate with his language and deliberate in those statements. But what could he say today that could move markets? Well, I think if he walked, if he waffles at all on their the interest rate outlook. So it's more of a question what he doesn't say. Yes, it's more a question of what he doesn't say. The

statement that they came out with was very clear. You know, there's been a lot of hope and expect Mason that they would say something about extending duration, uh increasing the treasury bond buying at the expense of mortgage backed security bond buying, and they avoided all of that. Um I think because it's not needed, it's untimely, it clouds the issue, and it gives the market's a better opportunity to to

misread what they're trying to say. So so so they they are at a very narrow lane in uh what they've put in their press release. Uh. I guess is that Charmin Powell will will stay in that lane and be deliberate about reiterating the points that they made in the press conference. Got it, francis saving you thirty seconds. Final thoughts here, Paul got a lean back against some of this hawkishness after this statement. I'm very nervous about

this press conference. It will come down to communication. I wouldn't be surprised you can make an argument that we see rape to one percent at the end of the press conference or their back down five basis points. It's been a long time since you head into a press conference who have been so nervous and the range of outcome so wide. Yeah, exactly, all right, Gonna leave it there.

Thank you both. Francis Donald, chi's global chief Economist, head of Macroeconomic Strategy and Manual Life Investment Management on the phone from Toronto, and of course Steve Skanky, chief economic advisor at Keel Point, former US Treasury and White House

National Security Council staff member. This is Bloomberg Business Week with Carol Masser from Bloomberg Radio, and you are listening to Bloomberg Business Week on this FED Wednesday Carol Masser along with Tim Stanovic of Bloomberg quicktake and as expected,

leaving rates unchanged. But we did hear a lot from FED Chief J Powell, certainly as Charlie highlighted there about expectations, hopes if you will, for fiscal stimulus, something that is still winding its way slowly through Congress, and we'll see fultimately we get something, Tim before the end of the year. Slowly, is right, We're counting down the days until something needs

to happen. Yeah, exactly right, And there's not much left here in Hey, let's see what um our round table has to say about this FED decision and really that FED press conference with j Palasti Blitz back with US chief US economist at T S. Lombard. Lombard, excuse me on the phone in New York City. Also Bloomberg Economics senior US economist Elana Shaleva. She's on the phone in

Long Island. Elena, let me start with you briefly. I want to get from both of you, UM the highlights in the press conference, things that you think investors are Bloomberg audience really need to take note of absolutely. I think what was very interesting from the press conferences that check Powell dismissed any expectations for a need term change

in the piece or the composition of as it touchased it. Uh. He noted that financial conditions are appropriate for now, and the FED is providing enough accommodation, uh, substantial accommodation, So shifting towards Bloomber term maturities by simultaneous reducing the pace of purchases something that was like hinted in the latest affiency minutes. Uh, it's not high on our list of priorities,

he said. So. I think what it was very interesting uh in the whole uh effiency community was that they did not hint at any more aggressive case of purchases going forward. They did actually refined its communications um in terms of what to expect in terms of purchases going forward, but they were not aggressively saying that they will increase the piece. In the daed to Steve, I want to

bring you into the conversation, chief chief US economist at T. S. Lombard. Um. Look, I had a chance to look at your note and your reaction right at two o'clock. You said not very interesting. Nothing very interesting in the f O m C statement. What about when it comes to fed your palace press conference, any more color or anything else that you found anything

in there that you actually found interesting surprising? Well, yes and no. I think first of all, I think he basically waved again the white flag and said, look, near term, over the next four or five months, you know, the bridge to you know, the vaccinated world, and the ability for the economy to get there and hold and whole rests with fiscal policy, not monetary policy. That you know, what's suffering is not interest rate sensitive, and therefore for

them to do anything more isn't going to help. I mean, reading the reading between the lines here, that's a message to Congress and to lawmakers that's like, hey, get something done now. I think it's a sledge em and not between the lines. But the other part of his message, though, I think, as long as we're talking after your audience are market participants, is this they're also making the bet that when the recovery occurs, it's going to be another

extended growth low in station environment. I thought that was really interesting, Steve. I thought that was really interesting that he even actually put that out there. Yeah, And so the question is, as a market participant, do you believe that the next cycle is going to have the same dynamic as the last one. I would argue the answer is no, and that their timeline of when they're actually going to begin to react is a lot shorter than what they're laying out there. Um. But of course there's

no way for them right now. There's no way for right now that they would alter that because it would be counterproductive to their their messaging. So I understand that. But as a market participant, are you going to bet with that forward curve or you're gonna bet against that? And I think it makes more sense to bet against it that the economy is gonna end up being stronger and so they're gonna gonna have to react. Well, Helena, this is kind of your world too, in terms of

watching the economy. I mean, could we be setting this age for another kind of very long protracted, you know, kind of slow growth, low inflation economy, which is one that we know market investors just love, certainly equity investors. Well, I think I totally agree with that. And I think despite some you know, expected rebound probably in the second half of this year, it will take time for the labor market to uh get fixed. So look at what

has happened already. You know, yes, there was a quick rebound in economic growth, but lest over rebound in the label market, and that's what we are facing going into the next year. I think in terms of inflation, that was very interesting as well. I think the you know, the changes to the summer economic projections reflecting stronger growth, lower unemployment rate, but no substantial changes to inflation projections actually highl that the set is not expecting much of

higher inflation going forward. So that tells me that they're not that optimistic with respect to developments in the label market going forward. Lena, what would have to happen for the Fed to raise interest rates? Oh my god, that's the one. We are not expecting interest rates until by the way, So so even further than the Fed the FED set today, Yes, but you know, the consensus is still pretty uh you know, in line with no interest rates increases. Just a few of participants are expecting those.

But I think we need to see that the output that gap to close, and we will need to see inflation expectations picking up substantially. That will not happen without substantial and sustainable will increase in the prices going forward. So I think we are ways away from the first race in Greason. By the way, we did not expect a tapering of asset purchases until but listen, Tim brings up a good point, and you know, I do understand.

What's is there's something out there, an outlier that we could miss, you know, or that you're thinking about significantly. It sounds like you're a little bit more tempered, but something significantly on the downside or significantly on the upside. I mean, we are living in unusual times this year certainly where we saw, you know, a drop off like no other in the economy and a bounce back like no other in the economy. And we know the way back is usually tip, you know, much much more difficult.

But is there something out there, an outlier when you get your team together and you're like, don't forget, this is still got to be on your radar the label market. I think if we see a significant improvement in a jobless rate as well as a significant improvements a patient, that will uh you know, result in significant growth in our personal income and consumer spending, like way better than the market and the economy's expectations, that could incur some

high inflation Quaker. So that's something to watch for you. Yeah. I think that the key thing here is that, first of all, it's not your typical recession because it's been it's been in effect falsely created, and it falsely created in the sense that we asked a big part of the economy to shut down, and that part of the

economy eventually reopens. What if you look at the last ten years with Howell's essentially expecting is for a similar pattern of growth, namely a lot of high end growth and a lot of low end growth in the labor market. If instead head because of COVID and everybody wanted to move someplace else, you get more and and reshoring of economic activity. You get higher um construction employment, higher manufacturing employment,

higher office administration employment. It's not gonna matter in one, but because then you can see a lot of the lower wage workers coming back as restaurant if it comes back to online. But in two you're gonna see the return of a much higher level of average hourly earning growth and relative to the unemployment rate than what we saw in the last recovery and to set all of a sudden is going to be looking at a from their perspective, not mine, but from their perspective, a return

of the Philip skirt. And so I think that at the very end of two. First of all, I think at the end of one they taper, if not in the asset purchases, and by the end of two get your first little ink in the funds rate. All right, we gotta leave it there. Hey, guys, thank you so much. Have a good holiday. Steve and Elena YouTube. If we don't catch you before the new year, though I'm guessing we probably will. Steve bletch chie you chief US economist

at T S. Lombard and Bloomberg Economics. Senior US economist Lena, she'll like you, I brom journal. Yeah, but you let me drive? No, no, no, dr home honey please, I'll do the riding. Drivels me. I want to drive, Just drive baby, good questions trying. Yeah, this is the drive to the Globe Commune. Thanks, we'll drive us down on Bloomberg Radio. Yeah, let's get right to it. Time for the drive to the clothes Ready wants back with us chief investments stragist at O'Neil Global Advisors. He's with us

once again on the phone in Miami. Randy, good to have you here with Tim and myself. Um, I hope you're doing well, and I feel like there's so much to talk about, So where so we begin. I'm curious the Fed, the meeting today, anything that you think is just really standing out for you and I think that well, first of all, thanks for having me back. I'll try to make it quick so you guys get get out of there before the snow really starts in New York. Uh. With with regard to the Fed, you know, I really

think there were a couple of things. The first is that they're committed to continuing the bond buying. I'm sure you've talked about some of this on the show already. They said they'll increase asset purchases at the economy slows. So what the bulls wanted to hear today they got right. The Fed is committed. They're gonna keep buying bonds and they're going to do more if they need to. The balance sheets at seven point three trillion that doesn't seem

to bother them. They're willing to a low to keep going. What's the market expecting from Congress right now, because we know, and we just heard from Mitch McConnell sign a majority leader that they're close but not yet. I mean they expect this, you know, nine billion dollar bill they expect before the end of the year. They would like to see some relief for small business. I think the current version does include direct payments to consumers. I think that's needed.

I think again, as I've said before, the number one thing that is not focused on enough is the damage being done to small business. And you can see that, particularly in Manhattan, where so many small businesses and restaurants and bars are going out of business. Yeah, it's just devastating. It kind of breaks my heart. Anytime I'm kind of going through New York, it's just one boarded up or closed um retail front after another, restaurants in particular Randy.

One thing that really stood out for Tim and me today in listening to the FED chairman was what do you have to say about climate change? And I love you just put out an article UM at the end of November and Forbes how to invest in the coming

alternative energy boom. I think that there is and many people are thinking about this that we are at this interesting critical time where there's a lot of money being spent by global governments to kick start the global economies, and that we can do it in a thoughtful, deliberate, environmentally, a conscious way. And I'm just curious how you see it.

I'd say three things. First, I feel like clean energy, like I mentioned in the article, it's like biotechnology and biotechnology really got going Amgen had those two major drugs in the whole sector took off. I think you're looking at a thirty year cycle here for clean energy. If you look at both the Biden administration and the European Commission overseas, both of them want to get their respective economies to basically carbon neutral by So if that's going

to happen, that's an awful lot of spending. The Biden administration wants to spend four hundred billion initially over ten years. In Europe it's even bigger. They want to spend a trillion euros over ten years. So there's gonna be a ton of spending. And then the third point is that if you look at new builds, so brand new builds for power generation, solar and wind are now actually cost effective. They are as low cost as the lowest cost fossil fuel. So if the cost is the same, why wouldn't you

do clean energy? So can I just can I just follow? So then traditional oil carbon like I mean, you know the big integrated oil companies, would you just run from them? I know they're also getting involved in alternative energy. I think they need to get involved. I think some are transitioning quicker than others. Despides the integrated can also look at things like utilities. I mean FPL here in Florida has been very aggressive in terms of increasing its clean

energy exposure. But I think you want to be with the companies that are really committed to it, and I've already started a transition, not the ones that are gonna be late to the party because it's gonna be it's gonna hurt them, or it's going to be expensive for them to catch up. Well, one of those companies that you certainly have on your list is Tesla. Uh, this company has just had an amazing year. It's up more than sient so far this year. It's unbelievable. Um is

the party over? Though? I mean, is there still room to get in on this? I think I think it's a question of timing. Right. So they're the largest electronic vehicle manufacturer in the world that gets sixteen percent share of the EV market, but they've only got four percent of the total markets. They have a lot of room to grow. Their energy storage business is growing about forty five percent a year, but only revenue. However, let's remember the stocks going into the SMP on December one. That's

caused a lot of forward buying in the stock. I think if I owned it, I would hold it, But if I didn't own it, I'd really be looking for a better chance to get in sometime in the first or second quarter of next year. And that really I

think goes for a lot of stocks. If you if you look at the market right now, technically it's trending up along at a rising fifty day moving average, but are an individual basis, there's an awful lot of names that are that are very extended from proper entry points, very extended from their fifty and two day moving averages, And I think there are a lot of names out there where people should be taken some profits because they're probably gonna get a better chance to buy the stocks

back in the first half of the year. And I know there's a lot of other names, Randy in the alternative energy space that you're looking at and phase energy soilaria. Um. So we're gonna have to have you come back and join us a because we'd love to diggle a bit more deeper into the space, Randy. Randy, have a great holiday, a safe holiday, and happy New Year, and look forward to talking with you in Randy Watt's chief Investment Strategies at O'Neil Global Advisors, on the phone in Miami. Um.

Interesting to hear we did to say about Tesla. Thanks so much for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or at Bloomberg dot com, and be sure to check out our daily radio show at two pm Eastern on Bloomberg Radio, and be sure to watch us too on YouTube by searching Bloomberg Global News.