Bloomberg Audio Studios, Podcasts, radio News.
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.
Definitely my highlight of the day, Jamie Diamond, a lot to talk about. JP Morgan Chare and chief Executive, Thank you so much for hosting us again again at your Global Market conference. What's market turbulence looking like right now? So we have the CPI print yesterday, market's rally. Are there getting ahead of themselves?
Yeah? So I wouldn't call it turbulence. And we've we've had good, healthy markets for quite a while. You know, they kind of predicting a soft landing. And you see that in both dock prizes, which are kind of high credit breads, which are kind of low markets, which are kind of wide open. That's all good. It doesn't tell what the future is going to be. That good point a lot of times in history where that was true and the next year wasn't true. And so you know,
we'll see. I don't pay as much attention to monthly numbers as most people.
Do, I know. So what do you think the future is for inflation?
And probably more worried about it. I mean, you know, we've had very big fiscal deficits, and you know, I think the underlying inflation may not go a way the way people expect it to. And I look at the future like a lot of things we look at a kind of inflation are the green economy, the remilitarization of the world, the infrastructure requirements, the restructuring of trade, fiscal deficits. So I think there are a lot of inflationary forces in front of us that you know, may keep it
a little bit higher than people expect. So the surprise would be rates are higher, inflation a little bit higher, and maybe that will slow growth. And obviously the geo politics is a whole different issue that can that could be determinative in what comedy does next year. And we just we're just not gonna know.
But does that mean you think it's fifty to fifty whether the FED cuts or hikes next time.
I really don't pay that much tention to that. The FED will have to follow the data, and I don't know what the data is going to say. But they I think, you know, they are doing the right to be patient right now, see what's going to happen. They may not know for a couple of months, but.
No big correction. And if you don't pay, you know, that much attention to it, it means you're not worried about it anything, not worried.
I just said stocks are very high. I think the chance of inflation staying high or a race going up or higher than other people of things. So I think the chance, my view is whatever the world is pricing it for a soft landing, I think it's probably half that. I think the chance of something going wrong is higher than.
People think in the US globally in the.
US, but also that could affect globally.
Yeah, and so that what does that mean for markets?
There'd be down and credits president've got gap out?
So why is the market not pricing that?
In not a happy talk?
Where does that happy talk come?
From low rates, central banks and reduced rates. You know, maybe the geopolitical things disseminate, don't cause problems, and so you know the future isn't predictable like that. So you know, I'm a student of history. I've watched all the inflection points.
You go back, and my dad was a stockbroker. I go back to the booming market of seventy two and the collapse of seventy four, the healthy markets of eighty the collapse of eighty two, you know, the ninth the eighty seven market crash, the nineteen ninety real estate crash, and almost all of them were not predicted the year before. So I look at these factors that drive these things are not always known. As a company, we prepare for all of us. We can serve all our colis regardless.
But what do you see as the main stress right now? Because if it's geopolitics, we talk about it, it's just not really priced it. Where does where? Does is it distress? Is it something actually going under that you worry about, or just a multiple factors coming in at the same time.
I think, well, geopolitics could create the main stress that we're worried about. Oil and gas prices are trade alliances. But I think the surprise would be higher rates because inflation didn't go down. Then inflation has been stubborn and maybe bounces up next year. I think inflation next year may be in the cards, may have nothing to do with what you're seeing today. So that to me is
the surprise. If you at higher rates and God forbid stagflation, Yeah, you'll see stress in real estate and leverage companies and some private credit and things like that.
So it's unpredictability than you normal.
I think it's been the enormous of my whole life, has it.
It's not worse now what happens between China and the US, and what does that mean for your appetite of being China.
Yeah, So the geopolitical situation is very tense because the more the Ukraine and Russia I ran, the terrors activities in Israel, North Korea, nuclear black mail, We've never had nuclear blackmail before. And this is of course affecting our relationship with China, and you know, it's gonna be hard to have a great relation with China. The Ukraine War,
we're kind of different sides of that. And put Taiwan aside, having said that, I think it's the right thing for America to fully and deeply engage with China, you know, competitively. You know, every nation is going to do. It's in their own interest in national security, social America. We should define that fairly improperly. If it's unfair trade, you know, negotiate that or do whatever you need to do. But the engagement is the right thing to do. China is
not the natural enemy the United States. They have a lot of their own problems. So you know, to me, we could work together as best we can, and then we have common interests climate, anti nuclear, pferation, anti terrorism.
What does it mean for bank working in China? Actually? Given all of this solatility.
Cautious I mean, you know China, if you look at China from a risk of war basis, it used to be very good. It's not so good anymore because all these things can go wrong. And remember we bank I mean, I've got the number, but fifteen hundred multinationals in China. They're not leaving China. So we're going to serve our clients there. We're just much more cogniti that the risk is higher. I might put Hong Kong in that bucket two.
You know, we look kind of look at China, Hong Kong as one at this point from a risk standpoint, what does.
A Trump administration mean for the US economy?
I don't know.
You know, they're why because it's unfrectable, or because we're too soon to actually try trying to figure out the policies that he laves it in place.
So if you look at history, who was elected president may not necessarily effect the next year. That's kind of like we're a big tanker and that's going to happen. I think the much more important thing is what we do in the geopolitical situation. You know, I've always been quite clear that American leadership is provided to keep the world free and safe for democracy, and that means economic alliances, which includes trade. By the way, I think we should
spend more time in trade. It means NATO. It means that Russia should not win in Ukraine, because if they do, I think it can tear us under this Western world.
I know you've ruled out being Treasury secretary. Why what would it take to get you into politics.
I don't think I'm suited for politics. I love my job, you know, and so I'm not sure I want to do something like that, and I can hope even.
If you got the call, would it be hard to say no, I don't know.
Probably yes. I love my job and I have no inis in leaving and doing N ANDL.
So what we're in France at a global markets conference. What are you expecting from Bozel three? What will j Powell put in place? And you will book.
I should mention, by the way, because President McCrone has done an outstanding job here. Pro Business got us to move our trading floors here. You know he wants to grow his economy. There's much more innovation. We had a thing lands by a lot of innovation. So look Basil three, We've been quite clear. We thought it was excessive, not well thought through. I would love to know what the endgame is. What are they trying to accomplish with private credit?
What are they trying to accomplish with Like even the other day, eighty percent or more has left the system, and now the government's talking about having a bailout system for mortgage companies because they're no longer in a bank that has the ability to provide liquidity in tough markets. That would be the same thing in market making, so they're looking at at it. You know, I trust J. Powell to look at and analyze what they need to do,
how they need to do it. The other thing, which I'm not sure Europeans know, I have no idea, and it may end up in a lawsuit or something like that. But but the amazing thing to me is that America ended up the end game thirty percent more capital than the European Bank in America. And I just why we argue about international standards and then we simply don't do them. And also I think the regulation answer the question what do you want how do you want the system to work?
Is do you want it to put private credit a public credit? Do you want moretage out of the banks just dictated? If that's the goal is just dictated. If you don't want leverage land the bank just dictated, you know. And I think you know, we are guardian in the financial system. You know, we bank, you know, we bank one hundred countries and you know we're on the ground of sixty countries. You know, we do great work for cities, schools, states, hospitals,
soul or whin climate. Middle market companies is that what they don't want or they do want, you know, they want.
To make it more expensive. Are they to figure it out?
I think they've got to figure out. I don't think it's quite clear from any now. So they did. You guys should read it and write about it. There was no detailed announced about cost benefit, what they're trying to accomplish, what the outcome will be.
That's why we're asking you, Jamie, talk to me about France. So you're positive on the President Malcamoy. Also know that you were at the Chiefs France event on Monday. If he relacks labor laws, would you hire more in this country?
He did relax labor laws, but if he relax the more possibly. You know, we now have a thousand people here. We have large trading floors here with Strade. I've got the number five or eight, five or six or seven eight hundred million dollars a day. When you have a thousand people, you tend to hire more and more technology more, and that's been true for us so that I've been at JP Moore and once you have a very competent group of people and you have hiring capability and friends,
you tend to do more things there. So my view is we will be doing more things here, and it was the tax lad they put in place, the regulations they put in place, the labor flexibility they put in place. Those things do make a difference, and very importantly just lift up JP Morgan here. We pay a lot of taxes here which help lift up all citizens. I don't
think President macrohane did that for JP Morgan. He did because he knows his country needs to grow, bring it innovation, and that's that's how you build a better country.
So the chief executive is the largest wealth fund in the world, says that actually America is doing much better because Americans are less lazy or work harder than the Europeans. I mean, is that fair? Is that regulation?
I hate total blanking statements like that. I know a lot of Europeans who work hard. But I think when you see the things about work hours, I think it is somewhat true. Americans are hard working. Anywhere you go around, Americas are hard working. But I see that here too, I don't think, and the innovation people you meet through working just as hard as the innovation people in the United States.
So you also in terms of headcount in the UK, I think it's at the highest that it's ever been. And you're also doing you're giving money to try and retrain and you've recently met with possibly the next Prime minister. See so far advance in the polls. What do you think?
Yeah, look, I like the fact that both the Conservative and the Labor governments are talking about pro business, simpler regulations, getting more innovation in the country, becoming competitive, and we all need like we all have too much debt. Growth is the best anecdote for antidote for everything, and so having a growth strategy is good for a country, and
it's good for the lower income people. And this training stuff is maybe the most important to get training jobs, that first job as a first run in a ladder, creates dignity, you know, more home household formation, and I think countries have to do more of that because if they don't, you know, you can have a tough time.
But do you think the UK com you will change under Labor?
I don't know yet, but I was happy with what they were talking about. We had Rachel Reeves come to our conference too, that they're all talking from the playbook. We need growth, simpler regulations, more capital formation, more capital investment, need proper taxation because that's the way to help whole country and all our citizens. So that is what we shall all be doing.
Jamie Denman, we talk around, you know, India all the time. Is this a decade for India and does it somehow counterbaland China for you know, world growth?
Yeah, Look, I think India has done a very good job. And you know when you look at India, yes, it should have a very bright future. I'm not saying as account in a China, but a very bright future. And I think we shall be reaching out to India that you know, they have to stay not aligned because they're kind of where they are in the world between Russia and China. But you know, they're a democracy, they're a natural friend of America and the Western world, and we
shall all be helping them. And they've they've made a lot of changes there, infrastructure, transfer payment, seven hundred million people bank accounts that are going to be very good for that country.
So what does that mean for JP Morgan.
Well, we're not we're not in the retail business there, but we will be in. We have sixty thousand employees there. We got big campuses, high technology, uh, and we're expanding our trading, our research, our investment banking. Yeah, we're there at a big time.
Can you talk to me a little bit about JP Morgan and how I mean you've had a number of high profile departures. How does that change actually the way you focus your business and how you run things going forwards?
Not at all?
Nothing zero. If you were to buy anything, what would you buy?
Oh that's different. Look we have we can't buy banks. You do know that?
So you know you could buy your European bank, could you?
I wouldn't even try. I think the American relgud hate it. I think the regulators he would hate it. Even if they said go ahead and do it, I'd probably be in courts and things for a year and a half. Huge distraction in my own company. I'd rather just say we want to add clients in this country, and clients and that kind of add bankers and technology and branches. Just a better way for us to grow.
Okay, But if there's a if you could buy anything, I mean not about I tell you, but you were thinking of something.
Yeah, we always look at stuff. Yeah, so we're not looking at any major acquisition or anything like that.
Technology.
You know, if you look who we're doing. We're adding literally and sort we have yesterday, next week. We're adding retail and wholesale branches. We're adding them in the United States. We're almost all the major hundred cities there now. We're adding commercial banking all over Europe and Asia. We're adding technology around payments and even the blockchain called honorx to move data and maybe move money one day. We're constantly investing.
We have two hundred people, two thousand people, AI and machine learning for use cases on the way to probably AID.
I know I speak in five years. How much bigger and how much different?
Probably be speaking to a fake diamond who's just answering question n avatar an avatar.
Yeah, do you think about technology a lot?
Yes, all the time. Every meeting we have. This has been true my whole life. When we have any management meeting, your technology jets on the table that includes AI, cloud, just more analytics. What are you doing to do things better, faster, quicker for clients digital huge amount of digital services, integrating them better or a mating them better.
So that would I mean that will change? I guess see the heart of banking. Does that mean that you we'll see more winners? Than losers because of the technological eventments.
So technology has always changed the heart of banking, moving money, holding money, advising money, radio. That won't change, and you have to do that according to rules, laws, regulations by country. What it will change is how you deliver it. So like right now you go on your phone, you can move money and buy stocks. That wasn't true twenty years ago. So yes, everything you do will change to the technology. But you'll still have to move money, budget, raise money,
make investments, et cetera. So you know, the core won't change, but will it change. Regulations may change that too, obviously, so.
In the US. So again, would a Trump presidency be more favorable to banks when it comes to regulation?
You know, I don't know. I mean, you know, I am unhappy with the amount of rules and regulations coming out today. I don't know what a second administration of either one would do. I'm hopeful that they focus on growth. Wh's good for the citizens, it's good for the country, and I would help anyone I can to do that for my country. I'm quite patriotic about that. And I do think you need a service. I think you needed no helping.
Helping as a bank, you it's good to get that clearer.
The friend of ours in this program joined us. Now for more, Mike Collins, let's start with yesterday and talk about what that data means going forward from here.
Yeah, Jonathan, good, good morning, Thanks for having me again.
Yeah.
I think we're just moving in the direction we've been expecting, right, which.
Is slight moderation in growth down.
Toward two percent, maybe a little bit below two percent this year, and a continued moderation in inflation. I mean, if you strip out we're back to stripping out shelter again, right, because that continues to be sticky running, you know, closer to six percent than two or three.
If you strip that out, both had.
Line and core CPI year over year now are back in the low to mid two. So we're moving in the right direction. That's our expectation that the shelter component will probably get cut in half as the year goes on, from close to six to closer to three. So I think it's pretty good news on all front. The question is, as you heard from from Williams this morning, you know, why does the FED need to do anything. I mean, we're in the zero to two cut camp now, as you just indicated, and I don't know.
I mean, I think I think zero.
Is probably the highest probability of a zero one or two if you had to really push me on it. You know, the FED'SMO historically has been sit on your hands, don't do anything until you're really forced to move, until the data really points hard in one direction or the other.
And it is not doing that, Mike, I want to push you on it. I've got a quote in front of me from you at the start of April. You said this, the economy continues to be solid, Inflation continues to be stayed ken well above their target, the labor market is still rock solid, financial conditions to the easiest they've been since the Fett sneid hiking. Why would you cut interest rates with that backdrop? Mike, is that quote still your quote right now? Would you say exactly the same thing?
Absolutely? You know?
I mean now, Powell is a dove, right, he is a labor market economist, kind of trained under Yellen.
That's his that's his mo.
He's very sensitive to getting pushed from the left about the job market. I mean, if things change, and things can change rapidly, as we all know, Jonathan, if things change in the labor market really starts to weaken over the course of the year, then sure, I mean a cut or two are definitely in the cards. But right now, the way the data is pointing, I would certainly still stick to that statement that their mo is to do nothing.
Until they're forced to.
And again with the election looming, they start running out of dates as we all know, so that's definitely part of the capitalist Mike.
We've been playing around with what this means for risk your assets, and a lot of people have had conflicting views.
About how much it actually matters.
Since we're seeing a stickiness and a lack of potential rate cuts. This here because of positive economic trends.
From your vantage point, does.
This push you further into risk assets in credit or maybe make you a little concerned hold back.
Yeah, We're continuing to be pretty defensive in credits. We're continuing to cut back. In fact, our recent trades I've really been to continue to reduce exposure to corporate credit and increase exposure to things like Believe it or Not, you know, old fashioned government guaranteed agency mortgage backed securities, where they have been a big laggard, not only this year but over years now relative to corporate credit, and they actually have some technical and valuation dynamics that actually
look pretty appealing. Right, if interest rates fall, if you get a weakening in the economy, which again isn't our base case, mortgages would actually outperform corporate credit in my mind in that scenario. So again, that's an up in quality trade, that's an up in liquidity trade, that's a more defensive trade, and that's generally been our direction of travel.
It raises this interesting point about whether the biggest risk is not a reacceleration of inflation anymore, whether we've basically taken that off the table and now people are just looking for the timing of one thing's slow more materially, which is the reason why people are getting bullish on duration. Is that essentially your baseline presumption.
Yes, yes, I think the upside risk we're there. We've had it.
We've had the big boom in nominal GDP, we've had the overshoot in real growth, we've had the overshoot in inflation and nominal growth.
We've had the overshoot in interest rates.
Lisa, and and I think you know when the markets just a few weeks ago we're pricing in a permanent funds rate of around four percent as the low terminal rate.
For the next ten years.
I look at that as an overshoot, and that rates where you know, fifty two hundred basis points too high.
And then look what just happened.
They rallied forty basis points really fast, right, So now maybe there's still half a percent, you know, higher than what I would say is fair value, which is probably more in the in the mid to high threes, let's say, on a ten year treasury.
Than in the in the low to mid mid fourth.
So yeah, we're still advising our clients that, you know, you get four handle yields across the curve on long term rates, you know, four to four and a half, and anything above four and a half is the bi zone for adding duration to their portfolios, which really.
Goes to this question that we were asking earlier when we were peeking out in rates, about how much these other concerns about the deficit, about tariffs, about a structurally more inflationary environment would really be problematic for longer term bonds. I'd say it's sort of a gut check for me because I hear things like Ray Dalio talking about civil war and the possibility of the US det completely undermining
the value of the dollar. David Solomon with Jonathan Ferrell earlier this week, talking about how concerned he is about the deficit. Is this all just lip service to basically cover any potential risks that they have, but that everyone just sees this as continuing to be the same old story that isn't going to come to the markets for you know, I.
Think what a lot of people in the US, right we're a very kind of nationalistic, you know, US centrist view here in the US, and it is a global bond market, and our clients are big pools of money all over the world. And if you look at, you know, the fiscal situations elsewhere, I mean, they are at least as bad as ours. The supply is brutal everywhere. Europe's actually maybe a little bit of a shining star because they actually do have a fiscal rules, even.
Though they let them slip.
But our rates, Lisa, our rates are two hundred basis points higher than China, two hundred basis points higher than German and European yields, you know, three hundred you know, basis points three hundred fifty base points higher than Japanese yields.
I mean, these.
Investors controlled giant, you know, sometimes trillion dollar pools of capital, and a lot of them, especially you know, pensions, insurance and sovereign wealth funds and central banks. They buy fixed income, right, And we are the world's bond market, and I think
a lot of people in the US forget that. And you know, the dollar is still you know, the one of the strongest currencies, and I think it's you know, when push comes to shove, global investors will we'll look to the US bond market for safety, and I think that will continue to hold.
Truth.
Well, let's focus on that. Let's just get into it just a little bit more. The buyers are still showing up. Have you noticed any change in the background of the buyers over the last twelve months. Is it becoming more domestic?
You know, a little bit on the margin, Jonathan, But we're also seeing more and more interest now just recently from from non US investors into the US bond market.
Right.
And remember it's not just our treasury yields and our treasury auctions, because a lot of these folks aren't buying just right. Yeah, And the auctions, it's a big deal. You need a marginal buyer to step in. But we have, you know the world's biggest, most liquid, diversified, regulated, attractive credit markets, which you had a lot of yield and spread on top of that, and that's where you really see the demand. And that's one reason, to your point, Lisa,
why credit spreads continue to be pretty tight. I mean, you have a lot of supply of treasuries, not a lot of net supply of private sector debt, meaning corporate debt, structured debt, mortgage debt, et cetera. So that could keep those spreads relatively tight. But you know, on the auction size, yeah, I mean, they're gigantic auctions, and you think at some point there's going to be a failed auction, and we always worry about that, Jonathan, but wow, we haven't seen
it yet. And there's no empirical evidence that supply of treasuries in and of itself drives the level of interest rates. That is driven by growth, by inflation, and by the ultimate path of the funds.
Right.
That's been the case in my nearly forty year career, and it'll probably be the keys for a waldote.
If it changes.
You're on the list of names we'll call first, Okay, Michael Collins, A PJM. Mike, appreciate it were beginning that top story stocks at all time highs following the lowest inflation print in six months. Mana, Mahjana, Edward Jones right in this if we see a Goldilocks calling of the economy, markets may welcome this outcome. While this scenario continues to be our base case, the tail risk is a more rapid downturn that also leads to rate cuts, but for
the wrong reason. Mana joins us. Now for more matter, If Walmart is doing well, what does it say about a broader economy?
Yeah, you look, thanks Seana.
It does feel like it's consistent with the narrative we've been getting over the last several days, which is, retail sales have been cooler, the labor market looks to be moderating. Perhaps more consumers are headed to Walmart to get that better discount. It does feel like the consumer feels a little bit stretched, but of course we're watching that lower income consumer more so than the broader economy. Now, keep in mind, both the labor market and the consumer started
from a position of strength. So when we think about cooling, it's cooling from a very strong base. And so the scenario that we laid out, what we call a Goldilocks moderation of the economy, really means that the economy could soften a bit, but we're still talking about at trend levels, maybe slightly below trend levels. That kind of cooling also, keep in mind, can lead to better inflation trends. So if we are at the start of a bumpy ride lower in inflation, a goal delocks cooling in the economy.
That's an environment that the market will welcome. What they don't want to see is a more rapid decline, and that's what we're on the lookout for.
We don't see it yet.
Well, what you're going through, and I think what you're setting up is something we've discussed on this program for a while, the difference between a welcome cooling and an unwelcome deterioration. Can we turn to the labor market. What's the labor market telling you versus say, what Corporate America is telling you?
Yeah, you know, I think the labor market's an interesting story here. Of course, you know, at three point eight three point nine per unemployment rate still near multi decade lows, so still relatively strong. But what we're seeing is better supply and better demand, or a more balanced supply demand picture, and I think the FED has highlighted this as well. We are seeing on the supply side more workers returning
to the labor market, perhaps after that pandemic hiatus. We also have the immigration story working in our favor from the supply perspective, but we are also seeing job openings move lower, so the demand for that labor is coming down, the supply of that labor is moving higher. We think that will lead to a nice cooling in the wage gains figure, and that's what we really want to see.
For services inflation.
We'd say more broadly, also on the labor market, some of those leading indicators not only job openings, but the quits rates. Keep in mind, folks are not quitting their jobs like they once were, perhaps because there's not as many openings to go into after you quit your job, but that tends to be a leading indicator for the labor economy.
We could see an unemployment rate.
Tick higher, perhaps above four percent, but in our view, that is still healthy and probably not getting much more beyond that.
So dancing on the head of a pin of this goldilocks type of situation that seems to be great for stocks no matter what, regardless of how far we push on either direction. What would trigger some sort of end to this goldilocks that so far has been an absolute panaceat of stocks and you see it continuing.
To be Yeah, you know, look, I think that's what we are all thinking about. We had our first correction earlier this year, was only about five and a half percent page trough in the S and P.
Five hundred.
What we were really thinking about is what would lead us to become for that correction to become more nefarious? Would it ever turn into a bear market a twenty percent plus decline? Historically, when we are in that environment, when we are entering a bear market or in a bear market, we tend to see a few factors in place. One, the economy is usually hitting a recession. We may not be in a yet or heading in that direction. Two,
the FED tends to be raising rates pretty aggressively. And then three there's usually that unknown shock factor, which is hardest to handicap. But I'd say when we think about the first two, either recession or FED rates aggressively. That doesn't seem like a likely scenario as we look forward, So again, we don't expect that one five and a half percent correction to be it this year. We are headed towards an election season, et cetera. There could be
more volatility ahead. But as long as we feel comfortable that that volatility doesn't turn into something deeper or more prolonged, we think it's an interesting opportunity for investors more than anything.
In the meantime, a lot of people have been waiting for that pivot.
Point to really start to broaden out.
We are seeing some broadening out in specific sectors, but broadening out to small calfs and some of the value names you see is really coming into play when we actually see rate cuts.
Won't it be too late then, don't you kind of have to get ahead of it.
Yeah, it's a good point.
And look, I think as we get opportunities along the way, any of that volatility that we noted earlier, that is a great opportunity to not only diversify, make sure you're balanced in your growth value cyclical portfolio, but thinking about rebalancing, thinking about adding those quality investments at better prices. We do think one, as we get closer to FED rate cuts, that will be a catalyst to unlock a more sustainable
broadening of market participation. But two, as we head to the back half of the year, what we're seeing in earnings growth is that earnings growth contribution becomes more balanced between those growth tech sectors and those cyclical and value parts of the market. You know, Q one and even Q two to some extent really driven by tech Magnificent seven
outperforming on the earnings front. But as we get more balanced on earnings, as we get closer to FED rate cuts, and by the way, if inflation continues to moderate, that's a good environment for a broadening of participation, not only between growth and value and US equities perhaps international continuing to play some meaningful catchup. And by the way, of course, your bond portfolio is starting to look a lot more
interesting too. Mony you talk about the probability of September rate cut was moved up higher.
But what do you make of.
Neil Koshkari yesterday basically saying we might need to stay here.
A lot longer.
Yeah, you know, we think higher for longer should be the base case. And whether it's September December, even early next year. The longer for longer term investors than the narrative really is. The FED was embarking on not just a twenty twenty four rate cutting cycle, was twenty twenty four, twenty twenty five, twenty twenty six, so two to three year rate cutting cycle to get them at least somewhat
closer to a neutral level. So we do think they are on that path for a multi year rate cutting cycle. They will need to see as a prerequisite to that, as many of us have talked about, at least probably two to three better inflation prints. Now we got a good one this week. Hopefully that resets the clock and we get a couple more in the months ahead. The one thing I'll say is I do think it's interesting the way the narrative is setting up for September, December,
and then March. So this quarterly pace of rate cuts could be an interesting one for the Fed. At least it takes a little bit of the uncertainty out of it, makes it a little bit more systematic. If they can get the data to fall into place, I think that could be something they consider down the road as well.
I appreciate the reaction to the earnings from Wilmot and a comment Schay on the fold of market mightamhitch on that of Edwards Jones. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, a gio politics. 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 app.