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Bloomberg Terminal and the Bloomberg Business app. Haidi Creeper, redictor of the Council of Foreign Relations, writing final days come down to turn out? Does the floating garland of garbage in soult reminded where the recon voters in swing states of Trump's poor treatment of the island after Hurricane Maria, seeing massive backlash, But will they vote on it? This could make or break the election?
Heid?
He joined us now for more, Hidy, just elaborate on that your thoughts on the last few days, this word garbage and how it may shake up this election.
Rice. So I actually I'm paying a lot less attention to the Trump comments on garbage than what happened at Madison Square Garden on the floating island of garbage comments. And I think the reason that I'm thinking that is because right now it really does come down to turn out. The polls are razorsin in the states that matter, in the communities that matter. And so if you're undecided and you haven't voted yet, what's going to make you decide? If you're ambivalent, and you are, you know, you need
an actual reason to vote. Is what Trump's talking about, going to actually, you know, turn the dial for you. Because I think his I think his supporters are pretty you know, they're they're pretty committed, and if they haven't voted already, they're probably going to vote for him regardless of the garbage comment. For the Puerto Rican community, I think it's really a wild card.
That's That's what I'm paying attention to.
Because the comment at the event at Madison Square Garden, even though Trump did not make it himself, he never apologized for it, and it insulted and reminded Puerto Rican voters in swing states of Trump's poor treatment of the island after Hurricane Maria, about the way he delayed aid and then when he got there two weeks after a devastating hurricane.
He threw a bunch of paper towels at the crowd.
And so, you know, it's a question of whether or not these very large Puerto Rican specifically populations in these swing states. And Marius talking about Pennsylvania. Half a million Puerto Ricans live in Pennsylvania, in a state that Joe Biden when he won last time, it was on eight eighty thousand votes. So you know, we're talking about very large numbers who could decide they're really not very happy about what they saw four years more than four years ago in the treatment of Puerto Ricans.
It was insulting and it could move the dial Heidi.
Of course, the flip side of this is a large part of Individuals can also be turned off on the President of the United States comments that half of Trump's supporters are quote garbage and Kamala Harris is now having to clean up Joe Biden's comments. Is he doing more damage to her every time he goes out and speaks.
So I think that it was unfortunate that he used that that that language, and it obviously harkened back to to uh to comments that were made during the campaign with with Trump and with with Hillary Clinton.
So you know, but.
Again, if you are going to it's really about a narrow swath of voters.
And what can what can motivate them.
To change their decision or if they are turned off of politics and just want to sit this election out, what can make them actually get up out of their house and actually cast that vote. And I don't I don't know if press in Biden's comments, which we're not reflected, we're not we're not re electing President Biden, if they actually are going to move the dial for that very important group of undecided or ambivalent voters.
How do how do you think she sticks the landing when it comes to the economy the ft this morning calls Kamala Harris's other electoral foe inflation. This continuously shows up in polls. How does she distance herself in these final days in these swing states from the current administration when it comes to inflation.
So it's really it's a hard it's a hard narrative.
I mean, people are actually people are generally hurting from the fact that the goods, you know, the everyday goods, cost more than they than they did pre COVID. I guess what I would what I would suggest is that you know, looking it's not just looking back over the last four years, it's looking forward to what what a blanket teariff policy across all you know, the whole the whole world of ten to twenty percent and sixty percent
on China, What that actually could mean for inflation? Well, it's probably they're you know, those kind of tariffs are inflationary tariffs.
We you know, we've had for many years.
We know what they do, what they're They're inflationary, and it depends if they are tactical and targeted versus across the board.
I don't think I don't think that.
That voters really understand that that that Trump, saying that he is tariff man, can get into the Oval Office day one and actually without any checks and balance, he can actually implement his across the board tariff policy.
That would be inflationary. And what does that mean.
It means that it's going to impact consumers intermediate inputs, like for every every business that's part of a supply chain.
You can count on retaliation.
You'll blow up all of our our FTAs with countries, and our allies will push back pretty pretty heartily against us in a world where we actually need our allies, we don't need to alienate our allies. So I think that there are you know, it's not only inflation, but you could have both, you know, commercial inflation and and geopolitical reactions that would be highly negative. What does the FED do, We're talking about the FED for next week.
What does the FED do if they're facing you know, challenges to inflation on the on one side, and then spillovers that might impact credit markets, mortgages, company borrowing, You're going to be in a very different, a very different dynamic if we come January and.
You have massive across the board tariffs.
And post id or what are you watching in the final days of the election race.
So you know, again it's the markets are are not a good predictor of of of who's going to be in this in this election, who's going to win this election. But I do think that the fact that you've had a lot of women show up in early voting, You've had and the gender divide plays very much into into Harris's into Harris's camp.
The fact that.
You do have these narrow, these narrow populations, who can actually you really determine the election one way or the other, and we just don't know. Anyone who tells you they know who's gonna win doesn't know what they're talking about. We are neck and neck right now, and we're not going to know until until the votes are finally counted, and that might not be next next Tuesday, might not be next week.
Don't say that, Heidi, hoping it's so low by THENI do you appreciate your time as always, Hidi cree by Redik of the Council on Farm Relations. Seth Carpenter, the chief Global economist that Mark and Stanley is with us around the table, Seth to sixteen. Should I ignore the random number generator tomorrow morning at eight thirty Eastern if it's weak based on the fact the jobless claims are this slow?
Absolutely. I think if it's weak, even if today hadn't been two sixteen, you would have still ignored the random number generator. The bottom line is the labor market's actually pretty healthy. I think the two sixteen is consistent with that. I think the fact that you're getting a little bit of a drift up in the continuing claim says, boy, you know, maybe people aren't getting rehired as quickly, but there's not a wave of layoffs, and that, for me is what's fundamental.
The hurricane impact doesn't seem to be there. Last week already predated. Those numbers were actually below the hurricane impact the pre hurricane hit. And then you've got the strikes. So we're not seeing any real mushrooming into the economy off the back of these strikes either. How do you frame a downside surprise like this. I'm still scratching my head. What are we doing here down at two sixteen?
I mean, this is the question we keep asking ourselves. So this whole expansion, we've been on the constructive side of things. When it was hard landing versus soft landing, we said soft landing. When it was late summer and we got a week jobs report, we said, don't worry about the economy as strong and people through rotten garbage ass Untilda said, we were ugly and stupid. If we've
been wrong, it's because we've been insufficiently optimistic. And I think these numbers are really consistent with a super healthy job market.
So then why should the FED cut rates next week?
I think the Fed's view on this is going to be. Inflation's coming down, it's clearly off its peaks, it's trending down. The number we got today it is a little bit of sort of wobbling around in it, but I think the trend is still pretty clearly down, and so from their perspective, you can still lower rates from where we are, be restrictive, try to take a little bit more steam out of the economy without jeopardizing the prospect of growth.
So I think they're trying to walk this very fine balance of being tight but not too tight.
I'm looking right now at the PCEE data. Within all of this, you see a strong labor market and see pce inflation data that came in slightly above expectations. At what point does that get people's attention? At what point do central bankers start caring about the inflation rate again?
Well, I think we saw, for example, in Q one of this year, they really cared a lot. Everyone was gearing up for them to start cutting in the beginning of the year, and then Q one data were strong surprise to the upside, and they pushed off the rate cuts obviously until September. So I think it needs two things. One, a couple more months of upside surprises, because we really have had things come down. You'll remember Chris Waller from
the FED. So the reason he went for fifty basis points instead of twenty five was because inflation data had surprised them to the upside. So a month or two to the upside isn't going to change the fundamentals. And then he needed to be compositionally. The stuff that we know has a lot of inertia, like housing inflation that sort of wobbled for a little while, it wasn't clear,
and then it came down again. And I think as long as those really core pieces no pun intended on inflation, as long as there's really central parts of inflation keep trending down, then I think they're going to feel comfortable.
Most voices on the FMC said they didn't want to see to cherry in the labor market.
That was part of their reasons.
Mission accomplished.
Right, Seriously, what do they come out and say in terms of the assessment of the labor market on Thursday.
I think you're going to see words along the lines of solid, robust, healthy. The unemployment rate is four point two percent, so it's up off of the lows we had had an unemployment rate that was around three and a half percent. So I think you have to be able to say that there's been some cooling. If you look at the job openings data from where it was when the labor mark was tight tightest, you have to say there's been some cooling. So I think in that regard,
you know they're fine. The pendulum had swung a bit too far. People got a little bit too breathless over a couple of week months of jobs data. We're not deteriorating.
Let's talk about the other big event next week, and that's the election. You're spending a lot of time talking to clients and something that was interesting in your notes is there seems to be differential for clients that are in the United States and those abroad, and what is that centering around.
So I think one of the key parts is tariffs. Right, the elections going to have, from a top down macro perspective, three key policy implications tariffs, immigration, and fiscal policy. And to a person, when I'm oversees all investors are convinced former President Trump, if re elected, will go back to putting in tariffs. And there's just no doubt in their mind.
I think there's a bit more debate and difference of opinion on this side of the Atlantic, people who think either oh, well, it's going to be a negotiating tactic, or if in fact he announces it and it ends up being bad for the market, for the economy, then it won't come through. So I think that's an interesting dichotomy of views.
You've got to work out who wins. You've got to work out the make up the division of government, if the risk one, if there's a sweep. If it's not a sweep, then you've got to work out whether the promise becomes reality once you've got there. Okay, let's just deal with this. If you take everything that's been said on the campaign trail, a stagflation reproposal from the Trump side, is that how you see things at more con Stanley.
Absolutely, we were to literally take everything that's been said. Let's just deal with tariffs that we were talking about before. If you had in January sixty percent tariffs on everything imported from China, ten percent tariffs imported from everything around the world, I think that pushes up inflation, and that probably happens first the numbers we've calculated are in the nine tenths of a percentage point kind of boost, but the dragged to growth could be as much as one
and a half percent. I mean, I think it really is important, and that ignores the immigration side of things. The reason we had three plus percent growth for a year year and a half and inflation continuing to fall is because we've had this big ad to the labor force.
How different is the Harris proposal as things stand when you go through that big eighty two page document on the website, eighty two pages long, when you go through that, how different is the proposal?
Well, I mean, I think again, going back to teriffs as an example, I look at what the Biden administration has done. They put tariffs on electric vehicles coming in from China. Boy, that's almost entirely rhetorical, right. There aren't that many electric vehicles that have been imported in the United States from China, so it's not have anywhere near the same effect. We can look back to twenty eighteen twenty nineteen and see the hit to industrial production industrial
output from that wave of tariffs. I think there's a pretty meaningful difference.
Markt anticipants a running around saying not a big deal, We'll work through this. Stocks go up up into the right. That's what the chat always looks like for a long time. Do you think this does have the potential to really redefine things years out this election? Do you think it's not important?
I do think so. I do think so. The rejiggering of the global supply chain, the rejiggering of global economic interactions, that's real. That's been going on for some time. It got accelerated with tariffs. I think this another round of tariffs, another trade war, could in fact accelerate the rejiggering in ways that maybe we can't fully anticipate.
Seth, it's got to see you as always, Thank you, sir. Good luck over the next week. Seth campens there of more ca and Stantley going into payrolls tomorrow, jumping in the seat. Lindsay Rose, I've goma sex asset management. Let's good to see you.
Good to see you.
Got to start with this economic data. Is there anything not to like? Jobis claims GDP looks pretty.
Good, looks good, looks fine, looks quiet. I think that's something that's a big relief right now. There is a lot of volatility priced into the market. If you look at the move index, which is looking at radevall over October, it's gone, like you were saying, top to the right. For equities, it has made a move for sure in October. This is a good day of quiet. I think the event will actually be month end at the end of the day, not the data this morning wet me through.
Why so, there's actually going to be a pretty decent rebalancing. So if you think about how bonds have performed in October versus what's gone on with equities, you want to shift your portfolio given the outperformance and equities you have the normal month end extension, which happens always with indices in the bond market, so there has to be kind of this natural buying of duration. But there's going to be this additional, much bigger thing of asset allocation at equities into bonds.
So are you saying that essentially this is noise and it's the technical unders that really will drive yields lower regardless of what happens with all of these different events next week.
Well, today's story is going to be the month end story. The things that happen over the next week are actually big beside from the data prints, we've got auctions, we've got threes, we've got the bond, we have obviously the election, and then we lead up to f OMC. So not necessarily that yields are going to go lower for the rest of the week. I think we're in a moment of a lot of volatility between now and then. But today's movement, I think is really month end.
Do you see a shift in the narrative though right now? Or people have just been underestimating how strong this economy is, and that has been the theme again and again and yet again here as we wait for potentially weakness that may not show up tomorrow in the jobs report. Is there a sense that there could be a reacceleration in inflation in a more meaningful way? Is that starting to come back to the table and the discussions that you're having.
Yeah, and that's been a big explanation for what's happened with yields. I mean, the amazing thing is the FED cut fifty basis points and we're now six d basis for one's higher across the curve. That is pretty tremendous, And a big part of that is a concern about inflation because growth just is that good. But I think on a going forward, we've got a lot of noise that's going to happen in the next week, but things are going to calm down and I think we'll have
a lot more certainty. And the way we actually are talking with clients right now is that you've got a huge opportunity with this move up in yields. The economy is good. The FED has the power to do what it needs to do. And where we were a month ago was much lower yielts or a little bit past that, earlier than September eighteenth, earlier than the cut was. You're waiting on the FED to see if they are going
to go and how much they're going to go. Well, now you actually have an entry point of higher yields and you know that the Fed's going that's a home run and this is a great opportunity to be in fixed income.
Is there a chance they skip though and push this decision to November December.
There's always some probability around skip, but we think the conversation around skip is really something of twenty twenty five. We feel pretty good that the Fed's going to go twenty five next week. They're going to go twenty five again in December. That puts them in a really good spot. They've done some hard work at chopping some wood there of one hundred basis points. Then they can pause and survey what's going on.
They have to pause, right because policy in twent twenty five. Does anyone have any idea what that's going to look like?
We do not know right now.
I think you're absolutely right, but they will start to have an inclination. We'll obviously know a lot more. We may not know an election day who's actually one and how everything else shakes out, but we'll know pretty soon and what those policies do look like. It's going to take time, though, to your point, to implement them. And so for us right now, I think a lot of people want to talk about how do you trade the election?
It's not about trading the election, right It's about where do you want to be from a long term portfolio allocation. For us, we think it's really important from a strategic value perspective to get bonds into your portfolio, and we think there's no time like the present.
So treasury is a big pace of that. Given the rise we've seen in yodes across the curve by about fifty basis points. How YOD spreads a super time on a historical basis two seventy six. Right now, how do you frame that for clients at the moment? What's the opportunity look like? In coporate credit and.
A corporate credit is tight.
But I think what's so amazing right now is that you've got a ton of volatility in the rates market. We've had no volatility in the credit market. So what's behind that? So we start to unpack it. What's behind that is there's not a recession. Balance sheets are strong.
Management companies are doing the right thing. But when you go underneath the hood of the car and look at what's happening in high yield, something that's flagging for us is just how well Triple cs so the lowest of low in high yield have performed on the past month. That to us is a little bit of a complacency indicator. So not all those companies make sense, not all those balance sheets make sense, and it has been off to
the races for Triple C's. That for US says this is really important to have an active manager in this environment because yes, maybe Triple c's did well this month. Long term, there are a lot of companies there that aren't going to do well, and you want to make sure you're in the right spot.
How were you navigating? What are the right spots? So imagine there's an uping quality bias. What are the right spots right now? In corporate America?
Right for us, it's really kind of a curve thing and a quality thing. We've spoken before about like the front end of the corporate curve. We think that that's going to do a lot better than the back end. So that's how we're positioned in terms of maturities, and then we are down in quality and investment grade. Triple B companies are doing all the right things to stay investment grade. They don't want to be in high yield.
And then in high yield we're up in quality in those double b's and single bees and specific names that we like.
Do you expect more tech related issueans coming into the fore not necessarily tied to tech, but tied to some of the investments in the infrastructure around them that you expect them and they're talking about having.
To make Yeah, there's definitely going to be CAPEX and it's interesting you bring up the capex expenditures on tech that is actually back to areas of corporate credit we have to think about and be more cautious on, one of which is utilities. When it comes to spending, that's a spend we're actually really concerned about in terms of
the capex that's needed for going green. So that kind of the drivers of who needs to spend and for what and are they going to be worthwhile projects or are they really just wanting to be on a drain in regulatory that really guides the sectors that we like and those that we stay away from.
It's a fascinating sector right now, that's for sure. Lindsay. Is wonderful to catch up with you, as always, appreciate it. Thank you, Lindsay Rosma there of Gorm and Sachs. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angiot politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern.
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