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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business App. We begin with our top story, the S and P five hundred notching its longest winning street since November as Trader's Way the Fed's path ahead, Bob Michael of JP Morgan Accid Management letting out his timeline right in the following. We expect twenty five basis point ray cuts at each FMC meeting in twenty twenty four, and then quarterly in twenty five. A consistent rate cutting cycle is the essential ingredient in our
forecast of a soft landing. On just now for more, Buck and Mornic, good morning, everything and nothing has changed since we last spoke, Because I think we lost spoke on federalzerv Decision Day two days before that scary job support, which we've all moved on from what's your take on where things have been over the last couple of weeks.
But so much has changed. We were sitting here on FED Day and we were saying, just get through this meeting. You have a free inter meeting meeting with Jackson Hole. You can wait and watch the data and have a do over before this September meeting. And here we are at Jackson Hole, and they should take the do over. They've they looked at the employment data, it's softened up. You look at the inflation data, it's come into where they would like.
To see it.
I would use this Jackson Hole conference to set the time frame and expectations for the market. We're going to cut rates. This is the shape it's going to take. These are the things we're looking at. There's a gift. On the other hand, I think they should just do nothing. All the data has come their way. They've guided us to a feathery soft landing. Just don't mess it up. Start cutting rates in September and let's get on with you.
You're talking about what's needed, the essential ingredient for that feathery soft landing, and it's quite a cool Still you're looking for three cuts this year at twenty five basis points, and then again through twenty twenty five. Just this consistent rate cutting cycle you've described. Why is that the essential ingredient? Where do you think neutral is? What is restrictive, what's accommodative? What do we need for this economy that we have?
Because inflation has come from here down to here, and it's still on that downward trajectory. If you look at the three month annualized rate of course CPI and the expectation on where a core PC is going to be, there's sub two percent. So inflation has come down a lot. You're hearing from a lot of the retail marketers. They're announcing earnings, there's some consumer pushback on pricing. They're choosier about what they're spending on, and that's it the top line.
So inflation is coming down. You look at the labor market, slack has been created. We've got unemployment up at four point three percent, we're not at three point four percent. You look at wages, Wages dropped from three point nine percent year every year to three point six percent year every year. If you leave restrictive rates at the level they're at currently, then that worsens the labor market, and then you've got not a problem with inflation, but the
pace of disinflation. You've got to start relieving the pressure on businesses and households.
Why do you think that we haven't seen a more aggressive slow down then? If this really is because of the rates? And I ask this because I was looking at data compiled by Evercore, isis Julian and Manuel showing that you're seeing the S and P five hundred and second quarter a year over year earnings per share growth at ten percent, You're seeing profit margins that are expanding. How does this scream a market that's on the brink of falling off if you don't get those rate cuts that are significant.
Well, there's still a lot of money sloshing around in the system. What I'm talking about is slowing down to trend and then bringing policy in line with stabilizing growth and inflation around trend. What Julian's talking about is, hey, there's still a lot of economic activity out there. He's right. I was listening to Mary Powell earlier from sun Roun she's talking about everyone accessing the wonderfully named Inflation Reduction Act to spend and invest in solar. There's all that
money still in the system. It is creating an underlying level of economic activity. It's probably one of the things you need to ensure that a soft landing actually occurs and you don't have recession.
So you said that Jay Powell should both do nothing but also should sort of telegraph some kind of path ahead in the Jacksonville.
That's what I want. I want a very clear road, all right.
So you want to clear them map, but you don't expect him to do it because there's absolutely no advantage
to him doing that. Okay, So what do you think actually could be the roadmap beyond this year that you could give with any clarity, Given the fact that you're talking about some of that income that people received that has helped fuel some of the price inflation, that could reprise itself next year depending on some of the policies that may or may not be fact that we're hearing from both candidates.
Well, that keeps a twenty seven trillion dollar economy operating at twenty seven trillion dollars. That's okay, But how do you start building some real growth upon that. You need the housing market to reignite again. Clearly there's demand for housing. There's a three to four million unit housing shortage in the US. You bring down rates, it pulls down mortgage rates.
That suddenly makes housing affordable again, and you get the first time buyers to step in there and all the things that you talk about, building decks and stuff like that begins to happen. So it's one of the things that bringing rates down actually does. It's not that a quarter fifty basis point cut doesn't do anything. It actually does a lot. A lot of businesses and households fund themselves off of the floating rate market.
Well, when it comes to housing, what about twenty five thousand dollars for new homeowners? Also in what you love to hear this week but unlikely, is a detailed economic plan from Kamala Harris.
What do you make of what we heard so far?
I think the DNC is in the same position as the FED. The data has come their way in a big way and they're well ahead in the polls. So just get through this conference with a lot of platitudes and euphoria and take that momentum. I don't think we're going to see a detailed economic agenda. I think twenty five thousand housing credit, it's a great idea. Who ends up paying that bill? Does it just get sent to the Treasury and there's more funding that comes out? Probably?
Will it ever get through a split Congress?
Maybe not. We don't have detailed proposals.
But he is basically running on the Biden platform and Trump was already president before they are incumbents. How do you think about twenty twenty five when you think about these two individuals potentially being in the White House.
I think we've gone through periods where the administration has had very clear views on what they've want to do. But if you have a split Congress, they've got a very different mindset and it's very difficult to get legislation through. So I think the real focus should be looking at Congress, looking at the House, looking at the Senate, and seeing how those elections go.
Let's work through your calls.
Just to wrap it up, long duration, curve, steepness, stay overweight credit. I just want to pick up on the duration point. Explore this with Calsie Barrow yesterday. I want an idea from you on where you think yields are heading this time next year, What kind of yield curve are we going to be looking at, What kind of numbers are along the bondom?
What are you looking for?
So intuitively, I want to say where yields are today? The FED has to bring rates down to three and a half percent. That's two hundred basis points. That's a lot. That's pretty normal in a cutting cycle, and cutting cycles are usually coincident with recession. We don't see a recession, but a three and a half percent FED funds rate is one and a half real That seems to be a fair level in the curse price for that. Then I look at all the money still sitting in cash
that's out there. I think of every single client conversation I have every day. It doesn't matter if it's institutional or it's in a wealth management platform. It doesn't matter if it's domestic or international. Everyone is looking for a way to get into the bond market and frustrated beyond
belief because they never got to buy it. Yields a five to six percent, and once rates start coming down and money market fund returns start to drift lower, that money will come in, and that money's not thinking about, Oh, I want to buy the ten year, I want to put on a two ten steepener or flattener. The market's thinking. Put me in an aggregate bond fund. Put me in a general muni bond fund. Do you have an income fund? Okay, put me in there. What kind of ETF do you have?
Do you have a core plus etf? Put me in there, And that money comes into the market in a big way, And asset managers may sit there and say, oh, you know, yields are a little rich. I'm going to be underweight duration by a quarter of a year. So they're still buying six years of duration. They're under by a quarter of a year. And that money's coming in, So I wear yields could get down to three percent.
Or even lower.
Three point zero yep, three point zero on tens on tens. Is that process started.
It's started in just the tiniest drip of ways, which I've always turned around, said look where yields are, and everyone's telling you, oh, we don't like them. Here, we don't like them.
Here.
Look how far through the fed funds radar. Look how cozy it is at five and a half percent in cash, then who the heck is buying to take the entire yal curve down through four percent. There's a lot of buying of money that's leaking in, but it is not come in in earnest. That process hasn't started.
Bob.
This was fun, Thank you, sir. Going to catch you.
Appreciate it, Bob, Michael.
There JP Morgan as a management with some very interesting cause on what isn't happening and will happen in fixed income over.
The next year or so.
Vice President Kamala Harris looking to rebrand Bidyomics as she develops her own economic policy, zeroing in on the middle class. She's pledging to expand caps on prescription drug casts, revamp child tax credits, and eliminate price scout chick. Mike Pile, a former Biden Administration Deputy National Security Advisor for International Economics, is currently an economic advisor for Kamala Harris and joined US now. Mike is going to see you, sir.
Great to be here.
Black Rock also worked in the Vice President's office, so you're an experienced guy to ask this first question too. There are already some laws around price gouging, particularly at the state level across this country. What would a Harris administration look to achieve that we don't already have.
Yes, I think you're right to point to those state laws. I think if you look at the principles that the Vice president's thinking about when she thinks about it in an action like this, you know there are a few. You know, One, this has got to be focused on the food and grocery industry. Two, this is really about emergencies. This is about very acute moments of dislocation, like after a hurricane or natural disaster.
Three.
Going to build off of those state laws. There are forty state laws on the books that go to price gouging and emergency situations, Red and blue states alike. That's going to be a model for her. You know, she's also really focused on bad actors, nefarious actions.
This is not price controls.
There is no preset metric or other kind of quantitative target she's looking at.
It's really bad action.
And lastly, she recognizes that the food industry in general is one that needs more competition, and she's going to work hard to spur small providers both of food and groceries to really work on that competition.
All let's unpack some of that piece by pace we can get into the industry and just the moment, I want to talk about the word emergency and how you defined it. Would you define the pandemic as an emergency? And at what point did the pandemic start and at what point did it end? Because I'm just trying to work out how this rule might be applied, how people might define things going forward.
Yeah, I mean, I think that the type of emergency that we have in mind is much more like an acute natural disaster. I think, much more like hurricane, earthquake, a very acute dislocation. Obviously, the pandemic at some level was everything for two or three years. That's very different than a very acute dislocation on the back of a natural disaster.
Does do you or the Vice president right now see companies that are price gouging?
So yeah, I think, like I said, I don't really think there are emergency conditions out there. So I think it's very hard to say that this is anything that would apply in the here and now. I think she does look at the food and end grocery industry or at large, sees one that in particular places has a good deal of concentration, and I think as a result, is really focused on spurring competition more broadly, including like I said, with small providers both on the agriculture and and grocery side.
If we can spur more competitions, spur more supply, that's going to lead to lower prices for consumers. But that's different than going after our bad actors in the course of an emergency.
Speaking of competition, there's a debate within the Democratic Party, especially the donor class and the progressives about this exact thing, competition, anti trust and whether or not Lena Khan should still be the head of the FTC under a Harris administration. Where is Kamala Harris the Vice president on that right now?
So where the vice president is focused over the next seventy eight days on unifying the Democratic Party and beating Donald Trump.
That is her core focus.
I think, you know, she, alongside the president, over the last three and a half years, has built a governing record across a whole range of issues. She's proud of that record, but right now her focus is on prosecuting the case for the next seventy eight days.
Let's talk about the record.
You briefed her every day as her economic advisor when she was vice president before you moved to the west wing. At one point, when she was running to be president in the primary, she was against racking. Now she says she's not healthcare. At one point she's supported to eliminate private health insurance. She says she's not. Do you know which Kamala Harris we are going to get if she becomes president again?
I would say she has built a three and a half year governing track record with the president. If you look at issue after issue after issue, she and the president have made choices to advance the interests of the middle class, to advance the interests of working people in this country. I'd say, you know, look at the record she's built has vice president sitting in office for the
last three and a half years. That's the starting point for how you should think about how the vice president would govern wud she's president.
There's a question about the feasibility of some of the proposals. I'm thinking in particular about the housing market and the twenty five thousand dollars subsidies for people to be able to make a down payment, as well as adding three million homes. A question of whether you can do that in such a way that giving money to people for down payments won't just prop up prices and lead to less affordability. How do you sort of square that circle?
Yeah, I think the most important thing that you heard the Vice President talk about with respect to housing affordability is saying, we've got a crisis of building in this country. We've got to get more units built. We need to be ambitious with respect to what we're going to target in terms of eliminating that affordable housing construction gap. And we're going to work with builders and developers across the
country to get units built. We're going to work with state and the whole governments to knock down barriers to construction to get units built. That is the center of
her vision. She also recognizes that as we do that, it takes time to get tracked, It takes time to get momentum, It takes time to get things built, and in the meantime, people are still suffering, are still feeling that pinch of housing affordability, and something like a buyer's credit can make a difference for household struggling to reach the middle class.
In the meantime, while supply ramps up.
I guess that one question that people have is what we saw during the pandemic, was it some of the subsidies, some of the money that was sent to people was done before some of the products were brought online, which is part of the reason why we saw the surgeon inflation.
How do you sort of get ahead of that type of response, given that we've seen the difficulty in building homes consistently, the red tape, etc. It just takes time, not to mention the lumber costs as well as getting enough people to build the homes.
Yeah again, I mean, I think that's why it was so important that you heard the Vice President putting the supply story at the beginning of the story of housing affordability. I think she's laser focused on recognizing there are barriers across this country, Blue states and red states alive to
getting things built. And whether it's new initiatives to help builders and developers work alongside the federal government to get things built, whether that's working with statele governments to punch through red tape, that's going to be your focus because she recognizes that's the key to affordability, and it's going to take time and focused energy to get that done.
Just to Stan on Lisa's line of questioning, Ultimately, there's a duration mismatch here between how quickly you can stimulate demand and how quickly you can address supply. Will we just have to tolerate higher prices in the meantime? Is that basically what we're going to see? Isn't that the outcome of all of this?
So I think that these things are meant to work in parallel with one another. That supply is going to ramp up or going to get traction, There's going to be a lot of focus there. At the same time, there's a crisis today. Working in middle class families need support today, and the Vice President's proposed a way to do exactly that.
We talk about taxes, Sure, what's a good corporate tax right for this country?
I think you saw the Vice president embrace the Biden Harris proposal. Twenty percent is the proposal that the Vice President supported, alongside what she and the President have already proposed.
So we move up to twenty eight Is she in line with Biden as well on what he would have done with the taxes that are set to expire, the tax cuts that expire in twenty twenty five.
Yeah, I think that if you look at if you look at the Biden Harris budget, you see a range of tax proposals, you see a range of investments, you see a range of principles around how the TCGA expiration should be handled. And that's something that has a governing partner to the President. That the Vice President has embraced.
Is the deficit and ongoing concern for you and the team.
I mean, I think you heard from the Vice President herself on Friday when she gave her speech. She pointed to the fact that when you look at the Trump campaign playbook, it's extending and deepening tax cuts for corporations in the wealthiest. It is not fully offsetting those with a set of sales taxes on imported goods that will hurt working families, and as a result, that's going to
increase and blow up the deficit. On the flip side, if you look at the Biden Hair Ferris budget, there is net deficit reduction alongside the investments in the middle class, and she continues to believe that deficit reduction needs to be an important part of the pitch.
We've run out of ton and we've only scratched the surface. Do you think that the Vice president would sit down with Bloomberg TV and actually have a conversation about the economy, because we'd like to make that happen.
I think that the Vice President looks to go meet voters wherever she can meet them, and there's a lot of constraints center time over the next sev of the eight days, but she wants to go where the voters are.
Got to make one interview happen might come on Mike Pile, economic advisor to Vice President Kamala Harris. Let's turn to energy and the energy sector. The boom and AI spending putting a strain on the US electrical grip as companies race the supply power for data centers. Mary Powell is the CEO of sun Run, a solar rooftop company, and says forecasts show the US needing the equivalent of about thirty four new nuclear plants over the next five years
to meet rise in demand. Mary's with us around the type of American morning to you, Good morning to you. Great to have you with us. First question, what is the utility exec doing at the largest rooftop solar installer in this Oh?
Well, what she's doing is helping to change America and bring more affordable, resilient energy to homes all across America. So, as a utility CEO, way back and I would say mid two thousand, two thousand and five, two thousand and six era, it was so obvious, so painfully obvious to me that the utility grid itself was not a socioeconomics
solution for the long term for America. With the pressures on costs and then climatic events, it was becoming very very clear that we were going to end up where we are, which is over one hundred billions spent last year, trillions on the horizon, with no solution in sight to lowering costs for Americans and delivering resilient power.
Can you talk to us a little bit more about the initiatives that you'd like to see deployed to stabilize the grid at times when it's super stress, when a demand is really really high. What would you like to see happen?
Well, what I'd like to see happen is what we're doing expanded dramatically. So again part of why I'm passionate about what we do. You know, we just hit a million customers that represents a million people with the ability to generate and in many cases store that clean energy and then supply it back to the grid when it needs it. And we are doing that all across America.
In fact, we just did a proof of concept pilot using Ford F one fifty lightnings and showing how if you have that plugged into your garage, you can also support the grid and help make the grid more affordable and resilient for all. So the vision has always been the same and it's what I did as a utility CEO, is that prove that having distributed generation assets all across America can help be the solution for bringing down the cost of the grid in the future.
There's sort of the next essential question we've been talking a lot with policymakers, which is how how independent can the US be while trying to provide renewable energy that's affordable to the United States. A lot of the supplies coming from China to create solar panels, to create some of the renewable energies. How much does the industry really hinge on ongoing access to those materials, to those supplies from China.
Well, there has I mean from a supply chain perspective, the story's actually gotten stronger recently, so we're feeling really good about robust supply, both in solar and storage, but also with the Inflation Reduction Act, as you know, and the domestic content adders that are in that. What you're seeing is jobs factories expanding in America and so we expect to have access to more American made panels in the future, and we also are already seeing significant benefits
in the storage space relative to that. So you know, my view is what we do is the ultimate in energy independence, and not just for helping America become energy and dependent ultimately, but for those consumers.
I mean, it is really.
Powerful to have the sense of security, safety, and resilience in your own home when you're generating and storing that energy.
You talk about the IRA.
There is a sort of pretty massive policy backdrop to this, and people think of the Biden administration as being more friendly to certain types of renewable energy sources. How vulnerable is the industry to some pretty significant policy shifts regardless of depending on who gets into the White House.
You know, from a foundational perspective, let's remember that when President Trump signed the extension of the ITC which benefits the adoption of solar across America. And what I would also say is the Inflation Reduction Act has benefited states
very broadly. In fact, a group of governors, Republican governors just signed a letter saying that they really support the you know, continuation of the benefits of the Inflation Reduction Act because they're seeing jobs in their states, they're seeing the kind of development that was expected with the Inflation
Reduction Act. So we're feeling that when you're doing something that's benefiting Americans, the chances are those that represent Americans are going to want to see those incentives continued.
Have you seen an uptick of Americans putting solar in their homes, retrofitting their homes because of the Inflation Reduction Act because of these subsidies.
One hundred percent.
I mean, what you're seeing is very much in the space of low and moderate income, the energy communities, multifamily housing. We are absolutely seeing that it opened up the total addressable market and you're seeing it become affordable and accessible to even more Americans.
You know, at the end of the.
Day, our customers are saving money on average, they are again having a more energy and dependent, resilient way to power their homes and their lives, and that is very powerful. So hitting a million customers looks like just the beginning from my perspective.
To Lisa's point though, about the supply chain, what is sixty percent tariffs of imports it's coming from China or ten percent from around the world.
What would that mean to your business?
You know, it wouldn't be a positive move in the sense of the overall cost deack. But let's remember that actually the panels are relatively when you look at the total cost stack, they are actually a smaller percentage of the pie. So it is something that we absolutely will you know, address and work our way through if we have to face that. You know, again, it wouldn't be a positive for the industry, but we also look at it as something that we've had to deal with in
the past. We find ways to navigate and move forward.
Can we finish where we started thirty four nuclear plants over the next five years? How did you think we'll actually build?
Maybe none? You know.
So again, a huge part of why I felt it was so important to embrace distributed generation as a utility executive is I saw firsthand how hard it was to build anything anywhere, and it's not getting easier. Actually, what's happening happening is it's getting harder every single year, which also means it's getting more expensive because there's even more you have to do. So again, I was in a state. I built the state's largest wind farm. It was not
large by energy standards and needs. It took four years and a lot of a lot of time and money to build it in a state that actually really embraced renewable energy. So again, these solutions, these big solutions that are needed, are very hard, very expensive, and in many many cases, particularly in the world of transmission, they're still talking about projects that they were talking about twenty years ago.
I'm going to walk away from this conversation quite faithful. So I give you the opportunity to have a correct course if you want. If you say we need thirty four new nuclear plants over the next five years to meet this rising demand, but also say we might get none, what kind of crisis could we see in this country.
Well, I think what we're going to continue to see is we are going to see utilities come to the table, for sure. But it is why I also really believe that this customer led revolution to a more modern innovative.
Solution for the fill the gap jet.
You think so powerful, you know, when you think about it. I mean, what we're doing now can power a city the size of San Francisco for several hours of a day. We are scaling at a level of, you know, in solar terms, seven gigawatts a year, and we are installing now storage in the context of a couple of gigawatt hours a year. So as we scale and as America leans into those kinds of innovative technologies one hundred percent, they can have a very very powerful impact.
This feels like an ongun convers sanction, So no toubt we'll catch up soon. Thanks for having us, Thank you appreciate it. Mary Power there, a CEO of Sunrun. This is the Bloomberg Sevenmants podcast, bringing you the best in markets, economics, anngiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business out
Mm hmm.