The Latest On Infrastructure And Oil And Previewing Jobs Day

plan means for the cities in this country. Sophia, thank so much for joining us here again A big, big number on that bipartisan infrastructure plan. What does it mean for big and small cities across the United States. First of all, thanks so much for having me. Uh. I think the bill is a great first step towards being really being transformational for for cities. I think the impact will be seen differently depending on the city that we're

talking about. Um but I think we need to keep in mind that only only half of the infrastructure bid is actually new spending, while the other half is what we've already been spending just to keep it keep up with maintenance and backlog of projects. And so it's still not enough to close that two and a half trillion dollar infrastructure investment gap that's been growing since the seventies.

It won't solve all of our infrastructure problems across the nation, but it's a great first step to closing, uh, that massive gap beyond what is what is the answer, Sophia. You know, I talked to a lot of people, um, you know Wall Street women and men, but from both sides of the aisle or even a political and they all say we need to spend a lot more on infrastructure. But you know it can't all come directly from the m Jerome Palell's printing presses, right, There's got to be

another way. Yeah, it's not the feed this infrastructure bill alone. You know, since the nineteen seventies, it's actually been an under investment in the US. The you know, in infrastructure investment in the US has been declining since the seventies, which is very different from other countries, especially wealthier nations. We invest less in infrastructure as a percentage of our GDP than many other first world countries. Um. And so when we're talking about you know, the impact on these cities.

You know, some cities will see greater impact than others. You know, our most recent Gunsler City Pulse, which we actually released just yesterday, it shows that cities, these emergency cities like Austin, Atlanta, Denver, and Charlotte, these cities have seen explosive growth but don't have the infrastructure to keep up, and so that growth is coming out of cost. They're dealing with traffic congestion, bad roads, bad bridges, and airports that need to be modernized. And so the bill provides

rising cities an opportunity to address these issues. But to close that gap, I mean, we're we're going to need, you know, a lot more investment, but this is a great first step. Sophia talked to us about a something like a public private partnership. What's the role for private enterprise in infrastructure? It can't just be the U. S.

Government kind of doing everything. Kennett, Yes. So, so what's interesting about this particular bill is that it actually creates space for private investors UM to join government efforts, especially projects that are over seven hundred fifty million dollars. And so when you include the private sector, you actually you actually build in efficiencies UM where you know, greater efficiencies than than contracts that where the government is stuck with

greater efficiencies than no efficiency at all. Like, right, exactly what do you think about? You know? To me? And I don't I'm gonna get flamed probably on Twitter. Um. People have been calling me a bleeding heart liberal lately. But to me, it makes sense to support you know, something like childcare as infrastructure because you know, working parents need to put their kids somewhere if they want to be able to get in a car and drive on a highway to a job at an airport or whatever.

Does does that make sense to everyone? Or no? I mean it makes sense to me. But that's not in the bill. That's in that No, it's in the new Build Back Better Bill. But I mean there are a lot of things now that we talk about its infrastructure that are not just roads, bridges, ports, airports. Right. Um even goes as far as to say, you know, like nutrition counts as infrastructure. Yeah, I mean that's what's what's so unique about this Build Back Better because they are

specifically outlining a social equity infrastructure UM infrastructure bill. All right, Sophia, thank you so much. We appreciate that. As always so if your song Global Cities leader for against again, I don't know what the heck is going on with oil here up one point three percent today after being down as much as four percent earlier this morning says some big big swings. Let's bring in somebody who does this commodity stuff. Will Ryan, the chief executive officer for granted

chair as Advisors. Well, what's going on with the oil today? Well, um, I think it's really just a reaction to what we saw over the last couple of days, which is a pretty significant down leg on the back of the the

new COVID variant. Um and I think that you know that, coupled with probably the news out of OPEC plus that they continue or will continue with their plan to put the four hundred thousand barrels on the market per month start in January, gives a bit more stability to any concern that there might be more barrels put onto the market than that is there any you know, Critty was talking to us earlier about a market that looks like investors will use any excuse to sell, and granted COVID

is very serious. We don't want to make light of any of the new variants, but it does look like a very strong reaction to something um we don't know a lot about yet. No, absolutely, I think that that was You could arguably say that across the market, but whether you're talking about you know, stocks, or whether you're talking about UM commodities. But it was just abroad, I think rejection of risk um while the uncertainty was there

around news of this new variant. But I think as we start to get more data on it, and like you said, you don't want to make light of it, but the more that I think people get comfortable that it's not gonna end in a little lockdown. Of course we don't know that yet, but if the assumptions it's not gonna we're not going to go back to where we were, then I think that you know, the oil price, commodities and the global economy and continue to track on here.

So we'll give us a sense of you know, kind of opec um again, where is Russia Viasa the Opeque plus? So there are they still kind of a wild card out there? Or is Saudi Arabia still kind of really directing things? Saudi Arabia definitely is the main player. I think that you know, like I said that the four hundred thousand barrels that were telegraphed we put onto the market. This is a gradually increasing production from the record cuts that we saw last year with they cut ten million

barrels a day from production. And so clearly, you know, with the prices at these levels, UM not just okay, but other oil producing countries would like to put more production on the market, but they've obviously got to balance that with the demand UM that we're seeing. So right now, the robust the demand is robust, and you know, we've gotten to a position where we had eighty dollar oil,

you know, in a world that's still not open. I mean people forget sometimes that major countries like China other Asian countries still not open really for all terms and purposes. So I think if we're talking about getting back to a world which is looks more like two thousand and nine team where we could travel everywhere and we had the same kind of you know, free flowing commerce and trade, and I think we're talking about an other price that's

materially higher than where we are today. What about the other moves that we're seeing in UM energy commodities. I mean I'm here in the heart of Europe where is getting colder and gas prices are extraordinarily high. Um. Is that linked to the oil issue or is it all about you know, nords dream and a lack of electricity generation? How do you see that? Yeah, it's not so much. Actually, funny enough, it's not so much linked to oil at all.

It's much more of a UM, much more of a phenomenon or European based phenomenon regarding supplies and constraint of supplies UM that are specific to some of these European countries. UM. You know. Throw in also the move to renewable power and perhaps you know, some of that happening maybe too quickly, resulting in a situation where there's just not enough energy that's been generated from renewable sources and so governments are

having to rely more on fossil fuels. But that's sort of colliding with this perfect storm of supply not being there um as expected as as we sort of recover from COVID. By the way, well, do you you know ad grant share advisors, Do you like this kind of volatility because you're in demand as well right now. People need your advice. That's right. I mean I think that there, you know, I would say we probably favor volatility up

until a point. I mean, clearly we don't want or I think for anybody that manages money, you know, I I don't want anything to be too volatile. But like you say, I mean that there's a point where the market is moving around and people do want exposure to these types of assets, and certainly they do want to know, you know, what's going on, because understanding you know, what's happening in

modity market, I think that sort of underpinned everything. It's underpinning the inflation that we're seeing in the global economy, and so really kind of understanding the direction of travel is key for not just commodities, but I think for for everything people are doing. All right, Well, thanks so much for joining us again. We always appreciate your thoughts. Will Ryan, Chief investment Officer, Granted Shairs Advisors, Matt, I mean, for lack of a better scenario analysis, I'm calling it

by the dip. I don't know, yeah, I mean, by the dip is a strategy that seems to work, but it looks like sell the news is something investors really want to do. I think pretty Gooda made a great point earlier when she uh, when she talked about the drops that we've seen, the drama of the drops that we've seen compared to you know, news that seemed to lack that drama. Again, not to underplay the virus or the new variant, because we don't know enough about it yet.

It could be you know, terribly damaging variant, but so far it doesn't look um like something that's going to affect the global economy that much. And yet we had a nine hundred points sell off on the Dow on Friday.

We had um a huge turnaround yesterday. So the question I think is why are investors taking advantage of any headline, especially you know, yesterday we sold off after the headline across the Bloomberg terminal at I think it was one forty two pm New York time, we had a headline that said, we've discovered one case of omicron in California.

We knew that there would be a case or dozens, or hundreds or maybe even thousands of cases of oh macron in the US, and yet mr Market took advantage of that and sold hard right and then here we are today and you you mentioned uh, Bloomberg Markets, corresponding, Cretty, guess what meant? She's back in the Bloomberg Interactive Brooker studio. So, Cretty,

what are you seeing at there? I mean again a couple I went to business squad, spent a lot of time on Wall Street, and I got nothing better than by the dip um Well sometimes, Paul, So I've learned. This was one of the first lessons I learned when I was on the Markets Live team e former traders.

They said, sometimes the answer isn't fundamental. Sometimes it's literally people are trading because they trade, and they want to trade like and and not to simplify too much, but it quite literally is by the dip because and here's why we're not just saying that to get out of a reason. But your your tell here is going to be the VIX because you haven't had a spike in

the VIX like this too. I think a thirty two handle going all the way back to January when they were starting to see some of those hedge funds getting really burned by those shorts against the retail trader and the entire kind of me mania that was happening. And if you remember going back then or even going back to March on a bigger scale, is that when you see volatility, one day it's green, the next day it's read.

This is a very normal reaction on that front, and especially as we go into the holly season where a lot of people are essentially closing out their books, they're rebalancing. You're also waiting for I think about two weeks for the next FMC meeting, and on top of that, you're waiting once again for two weeks for more data and more information on this variant in particular, which we are

still getting contradicting information on. So right now and I think for the foreseeable future, and I mean for the next couple of days, you're going to continue to see this volatility where you see moves in the market that just don't make sense. But then eventually, when we do have more information, those correlations are going to come back together and there will be a very clear risk on or risk off narrative. Right now, we're just not there.

It was also interesting that the FED didn't react as devish lee at least in the Q and a portion of um Jerome pal senate testimony, as maybe the market had anticipated, right because we got that hawkish pivot at the same time as the market seemed to be a little bit on edge about coronavirus. Again. Yeah, and you know, I actually went back and read the exact wording of j. Powell this morning, and he used a lot of maybes and cood's and really a hedged response. He didn't say

we are tapering at a faster pace. He said we could and we might. And that isn't something that we didn't know from the last FMC meeting. In fact, we haven't actually gotten the actual number or the actual asset purchases for January, so we knew there was always going to be this question mark that the pace from for January would completely change, and he's just reiterated that in his testimony, So once again, it's not new. I think what is new, though, is the way the bond market

in particular is pricing it. And the biggest part of that is the curve flattening you've seen really accelerated in the past couple of days because you saw essentially the five thirties curve uh kind of come down, kind of flatten a little bit for the last really I think

two wish months. If you look at the chart. But if you compare that to what you're seeing and say, the equity market, this is a really important comparison because essentially, when for those folks who aren't tuned into the bond market, the curve flattening just means that you are not paid as much of a premium for taking on that extra time risk. If you apply that logic to big tech, which is also a very long duration asset essentially or has been trading as such, that's not exactly a good sign.

And right now you do have that disconnect between stocks in that regard and tech stocks in particular, as well as the bond market. The question is when those two connect, is it the bond market that kind of becomes more risk on more and steepens a little bit, or is it the equity market that gets dragged down by big tech? Yeah, and it's interesting to see how the markets are reacting to that big, big pivot um by FED chairman Powell earlier this week. Again we had that sell off um.

But again, if you're the market was looking for just reasonable signaling to get you to a spot of okay, I kind of have a feeling of how this thing is going to go. He certainly gave it to you. Yeah, it really did. And and what's tricky about right now though, is that And I think this is why there's so much emphasis on tomorrow's payrolls report in particulars because anything could happen. And if you start to see the payer's report come in, the market is planning on interpreting this

as well. This is permission for for J. Powell and the Fed to just say all eyes are on inflation and that means tapering, and that means right, Hicks. And that's a narrative that can spiral very very quickly on one data point. So that's going to be a spot where where you might see some pretty drastic moves. All right. Interesting. We will certainly have wall to wall coverage of the job report, as we do every month here on Bloomberg Radio and Bloomberg TV. We live for that kind of stuff.

Pretty Gupta, Bloomberg Markets correspondent joining us here in our Bloomberg Interactive Broker studio. UH and again full coverage tomorrow of that job's data, which is pretty mentioned, will be a key data point for this federal Reserve. Let's check in with a longtime contributor to Bloomberg Markets, Hugh Johnson Chairman, Chief Economists A Great Point LLC. First of all, you what is the Great Point LLC? What happened to Hugh Johnson Advisors for like a gazillion years? Well, well that's

a good question. We merged our company with a company called Bender Lane, which was a family office business, and then we decided to have a give it one name for the two. But we've kept Hugh Johnson Advisors as a as a division of and I'm sort of the chairman emeritus of Great Point and the Chief Economists A Great Point, and I'm also the is the best I understand it, the chairman of Hugh Johnson Advisors and the chief economists the Hugh Johnson Advisors, and the chief chief

investment officer a huge Johnsen. Well, all right, we're just gonna go, chairman. Yeah, we're just gonna go the chairman, um, and everybody knows you're buying your chairman, Yeah, Mr Chairman, Yeah, that's good. Mr. So who what do you make of this world we're living in now? I mean, it's been such a crazy twenty months here with the pandemic and

the economic disruption and now they reopening. But it just seems like, you know, there's one monkey wrench thrown in after another, and it's got to be tough to kind of forecast where this economy is going. What are your best thoughts at the moment, Well, the best thoughts are really number one. As you get some surprises thrown at us, and that's a part of financial market history. And of course with the the COVID nineteen is kind of surprised

we've been sent with a macron right now. That's a surprise. Very causes a great deal of volatility. That's one surprise. And the second surprise, of course, is some of the comments made by Gairman Paul which seemed to move up the time in which is gonna be gin the taper, and then of course the time they're gonna begin to

start to raise interest rates. These are surprises, create great, great level of volatility, and I would just urge all investors to just try to look through all of that volatility and we'll start to get some real answers on COVID, we'll get some real answers on monetary policy over the course of a little bit of time now. But let's let those things settle out and recognize, and the more important thing is to recognize, Look, we are in a cycle,

a stock market, economic, interest rate cycle. It's very normal by past cycles. We're at the twenty month mark. We're really not far into it, and really all of the kind of the levers. When you look at leading indicators for the economy, you look at the yield curve and what it tells you about what the economy has in store for the next twelve months. Um, it's still very positive. The cycle has further to go, and it's gonna have a little bit of volatility created by these issues, these

exogenous unexpected issues along the way. You just gotta just gotta put those on the back burner and make sure you pay attention to the fact the underlying cycle and where we are in that cycle, and then make your investment decisions asset allocation on the basis of that. Yeah, we had a great story by Matthew Bosler a couple of days ago about how fat corporate profit margins are. We haven't seen margins this fat since the fifties, and

yet it looks like investors, uh current. So you've got the pajama investors, the pajama traders who buy the dip for us every night, but it does look like um sell first ask questions later is the afternoon mantra. You know, you get you have a group of investors, there's very volatile, price sensitive investors, and that's not all of them. That's

really a small group of them. I mean, they were talking about ten percent of all the investors that are involved in these markets that are just extremely edgy and they create a lot of the volatility that you're seeing because they respond to all of the news that comes out. And I'm just saying, you know, okay, that's fine. They're going to be investors like that. There always have been,

there always will be. But I think the majority of investors, quite frankly of are a little bit more sensible, are not caught up in that kind of alatili And that's exactly what they should do. They should, you know, basically set their portfolios on the basis of what is really going on or what the underlying fundamentals, the underlying cycle

is doing, and that's really the most important thing. So don't get caught up in that day to day volatility, even though I'm sure all of us kind of emotionally do get caught up in it all right. Here, you've got more than forty years of experience in this game. Here, what's your outlook for Uh, it's positive, But you've got to keep in mind. I think one thing that's sort of a basic fact, and that is since the bottom in two thousand and nine, the average annualized rate of

return has been over eight. Look, that's just's that's just a big number, and that's not going to continue. So my outlook is positive. In other words, I think the economy is going to continue to expand, although it's gonna slow. I think the same thing is true of earnings, and so you should maintain you should maintain a positive view of the equity markets, in other words, a meaningful allocation

to equities. But recognize one important fact, and that is we're going from a high return environment that's two thousand twenty for sure, um, and we're going to a low return environment. My outlook or prospects for two thousand and twenty two are quite frankly, a low three to five percent single digit return. Don't worry about that, because I think you're gonna be I'm gonna be wrong on earnings.

Earnings are gonna come in higher than I'm expecting, in which case the market will do a little bit better than I'm expecting, but don't look for anything more than single digit returns, and equities will outperform fixed income, so you should overallocate the equities, all right. You thank you so much for joining us once again. You Johnson, Chairman, Chief Economy US, and a bunch of other stuff at Great Point LLC over forty years in the business. Thanks

for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller, three pt on Fall Sweeney I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio.