Surveillance: Risk Parity Framework is Unraveling, Major Says

couple of days. British and European officials have hailed progress in these Brexit negotiations, with the UK leader negotiator Dominic rob predicting a deal on the divorce will be finalized by November twenty one. Now joining us now with Semma La Tra a member of Parliament for the UK Labor Party and a member of the Select Committee on Exiting the europe In Union, still with us, as well as David Owen of Jeffreys that Mr Malanger, thank you so much for joining us. What is your basic case scenario

of what happens and Brexit? Well, I don't believe that we're going to see a deal by the twenty one November. I think in terms of Dominic Rath prediction that was

already being backtracked. You know, we're in less than a hundred fifty days from Brexit and there is still huge uncertainty, huge uncertainty about what we're going to have as the final deal, huge uncertainty almost more importantly about what's going to be in the Political Declaration which is the forerunner to the Future Trade Agreement that we will have in the future framework with the European Union, And even of more significance as well to members of Parliament, what kind

of parliamentary process we're going to have, what meaningful vote there's going to be, and if our evidence of the Select Committee yesterday is anything to go by, this is more of a meaning less vote than a meaningful vote with huge consequences for scrutiny and accountability of the government. Right, what exactly what are you telling me that we'll have an agreement? And well banks, how to access are we are? Are we staying in the Common Market for a no?

How or what will the deal look like? Well, we don't know what the deal would look like. I think in terms of transition we will be saying staying within much of the framework that we already have, but we will be rule takers rather than be seated around the table and having a say in what happened. People are very concerned about what this could mean if there is no deal as well. For the UK, we there is no guarantee that's going to be a deal that gets

through Parliament. That could mean real challenges in terms of um difficulties with trade, delays at the border, questions about whether even basics like the European Health Insurance Card would be available to citizens, legal certainty around contracts. I mean, this uncertainty is not what people voted for, and it's in credibly concerning that we may have two cliff edges as well facing us, one at the end of March and then the second one at the end of our

transition period as well. So the government has a lot to do in a very short space of time, both to get a deal, to have a deal that's going to win the confidence of Parliament, and then to have us be ready for leaving on March twenty nine. There are huge questions as well about whether we will be ready in terms of having passed the legislation that's needed, with over eight hundred statutory instruments still set to go through, so we We've got a lot of work to do yet.

So what does that mean for the Labor Party? Will they push for a second referendum if it's not the right kind of deal? Do you want elections if it's not the right kind of deal? Well, there are increasing calls for a second referendum, and for the very simple reason that what's emerging and what the Prime Minister has been has has now is now doing in terms of being forced into a very difficult position, is not what people thought was going to happen as a result of Brexit.

We there is no way in which we are heading to be a more prosperous nation. In fact, every scenario under the government's own Brexit impact assessments suggested that we would be worse of to some scenarios would be less worse of than others. So two percent less growth over fifteen years which were staying within the European Economic Area.

So the reason why there's called for a second referendum is because people are saying, if, if, if what is now on offer isn't what people voted for, surely they should have a chance to express a point of view when it comes to the final deal, and particularly if

that deal doesn't go through Parliament. The Labor Party has said that if there is no deal that's agreed by Parliament, and if there is no general election, which would be our preference, so that we can have a different negotiating team that's really putting the economy first and not party interest first, which is what Theresa May has now become

known for, then should the people have another say? But there is all going to be an important question about what they have a say about, and there are increasing calls as well from some in Parliament to say, look, if there is no end state and we are going to leave, then it's better to leave with being a member potentially in something like the European Economic Area, with with some of the the benefits that go with that, rather than leave with no deal, which would be catastrophic

for our country and our economy. It's wonderful to speak to you, and I think I can speak for a global audience that finds a Labor Party of the United Kingdom and absolute mystery. You've provided leadership to the Fabian Society for years, and whether it's Bernard Shaw, or it's Harold Laski or maybe even at Balls, everybody wants to know how labor gets back to what it used to be. Could labor go back to the nostalgia of the favors

Fabian Society or does labor have to find a new way. Well, there's one guarantee in politics, which is the past is never redeterminant of the future. And what you've got to do is always be reinventing yourself to have your values in line with where modern situation seeks political solutions. And if you take the budget this week as one example and how labors responded, what we've seen is, i would quote it is less of the same but certainly the same coming from the Tory government with a sense of

a failed economic How do your own target? Okay, Labor Party, it's yes, you're absolutely right. But for the Labor Party is about having an economic policy that's going to respond to the challenges that Mr Corbin provide that this is critical because Jeremy Corbin is miles from the Fabian Society. How do you get back to the values of another time and place. Well, you know, the Fabian Society is

one of many voices. The Fabian Society was one of the founders of the Labor Party, just as the Unions were in the Cooperative Party was also very influential at that time. And you know, what you have in the labor family is a wide range of views, but set around common values where we do believe in fairness and equality and in all of us paying our part for society as a whole. And you know, when we look at the budget this week, I'll take that as an

indicator of where the policy is now going. They saw that they had failed in terms of their previous economics, economic plans and strategy. They didn't tell you that. They pretended that there was going to be some sort of change, potentially an end to austerity. But what they haven't got is a plan for investment in our country. This was a budget that brought off some of their backbenches and did enough to get by for the next six months.

If you make this point, we won seats in the general election last year, and when I'm going around the country now, I'm seeing people increasingly dissatisfied with the Tories. But I need do they not have a plan for break so they don't plan for them? Then here's the key question. That's that's absolutely correct, But the key question is who did they go to if they don't go to the Tories. Is an m P of the Labor Party.

Does a Labor Party need a new, cogent view with the nostalgia of your fabian society and under something new? I mean, I don't see a cogent labor voice in this Brexit debate. I don't know if it's about a sort of romanticizing the past, because it was very different at that time. I do think it is about saying, what are our solutions for the present? You know, we founded the National Health Service, we brought in the minimum wage,

we invested in early years. We saw huge growth across our country and more an increase in equality between our regions as well. We've seen inequality rise hugely. We've seen child poverty rise significantly under the Conservatives. I see it in my own constituency. People want to know that they've got access to good jobs. They want to know they've got investment in education. They want good prospects for their children. This is the first generation where children are set to

do worse than their parents. Now, those are the things homeownership or a secure place to live in, decent education, and that's where the Labor Party's answers are. What people are now responding to very very strongly. Are you frustrated that many people are proving many voters still going a hundred percent know where the Labor stands on Brexit? Sorry I couldn't hear your question fully. Am I frustrated with the question? Is? Are you frustrated that the voters don't

understand where Labor is on Brexit? I do think we've got to be clearer about that. You know, we had a big debate at party conference which was just last month, and in that we move the position of the party in favor of a second referendum as well under the circumstances where there isn't a deal that's agreed by Parliament

and also where there isn't a general election. Now I have called since the week after the referendum, in fact that you know, from from my person all the point of view thinking about the economy and what I think is right for our country, we should be seeking to stay in the Single Market as far as possible. I do think that we need need to have greater controls over freedom of movement and that's something which the EU can deliver if it chooses to it. There is no

legal reason why it couldn't. It's a political reason and I do believe that we need to stay within a Customs Union or the Customs Union so that we have that security for Northern Ireland as well and an Ireland. Now, the reason why Ireland is such an issue is because the border in Northern Ireland won't just be a border between the Republic and Northern Ireland. It will be a border between the European Union and a third country that

is fundamentally different. And we have to accept a responsibility in that and say, well, look, if we don't want this to have a negative impact on the economy and the free flow of trade and goods and supplies between the Northern Ireland and the Republic of Ireland, we have to say, what's a solution for the UK as a whole. And that's why I do think that the custom Genie has got to be a big part of that. We

must leave it there. A Member of Parliament for the Labor spirited discussion on the future of the Labor Party as well, thank you so much so. The sleepy days of seventeen well, they are long gone. There was the Vole Shock of February and then there was that ugly October, A warm welcome to November. Is there more to come? Steve Whining? Dropping behind the studio, City Global Chief Investment officer joins us. Now, good morning to Steve, good morning.

So it is there more to come? Steve? Well, look the way the market dropped so sharply and as rebounding so sharply tells us that we're still in a volatile environment. And that environment is one where you can still have fairly big draw downs and it can be unclear that we're in an exact bottom. You don't do that in

a matter of a couple of days. But I do think that the absolute declines that we've seen in US shares uh and particularly global shares um really points to a larger slowdown than is likely for two thousand nineteen, and if we simply know where interest rates are and get through a few other issues. Obviously, trade has been a major major surprise for markets in two thousand nineteen, but I don't think that we can really shock markets again with things like tariffs. You know, this expectation is

high and embedded in the marketplace. So I think that we recover from here. I think that that's the story, you know, independent of h the volatility continuing in the near term. So we had a big vull shelk in February. So he essentially sang to the playbook. The post February playbook is still intact. If you think about what had happened in February, we were in a strong earnings period, we were about to rebound UH the March April period.

The notion of a larger global trade wark was first initiated in the marketplace we stop for example, you know, the policy uncertainty industries related to trade just absolutely surged from nowhere. It shouldn't have been nowhere. Now. I don't think that shock can hold us back again. What I do think is that we will expect a slower pace of earnings gains just you know, three consecutive quarters well

above that doesn't continue. But I think again, the combination of a market that is down, one in which we have a good deal of trade warrior priced in around the world, and UH a good decent earnings gain still ahead of us at a slower pace is enough for

us to to make a recovery. You've drown a clear distinction between peacunnings growth and pecunning absolutely growth because a lot of people are sort of confusing the two at the moment when they come on programs like this, I hear a mix of the two absolutely, and you just see it all the time. So that's the thing. If you want to say that share prices need to drop and level because they embedded too strong a growth rate,

you can do that. But if we're still going to grow, eventually you arrest those declines and prices, you know, And that's my point. I think that there's enough inertia for us to continue to grow earnings in the coming year, both in the U S and the and the rest of the world. It was somewhat interesting in the last month that actually we find you still some cracks and credit in high yield and triple sees whether resiliency has been through much of What do you take from that,

and it's that a sign of fragility. The biggest drag on high yield markets, the biggest drags on credit has been on the rate front. You know. Again, absolute spread levels are low. I do think that you're going to see bank credit continuing to be fairly robust. Um. I look at credit is more or less a coincident variable. I think that's happening from the FED, and what's happening

in the yield curve is a real leading variable. So I think that we're going to see as equities recover some, as growth expectations probably stabilize, and the big uncertainty here you've got to admit as trade that away from all of that, we're going to see credit is not really going to be a big inhibitor of of equity markets. We're just not going to get any push from credit. What have we done with I mean I saw a nice matrix from uh Gentleman in Edinburgh yesterday which was

get out of small caps getting large caps? Do this? Do this, do this, do this? What's the do this? Do this? Do this for city private bank? Look, since midyear, we took down our absolute risk budget some of the emerging markets that we might rebound very nicely in a very high beta markets for example Eastern Europe, you know the ones um These are markets that were underweight, and even in a rebound, we're just not going to put

a lot of money there. We're going to take take our risks in Asia to a certain extent and we're gonna have a small overweight. And as we mentioned on television. You know, we now have an underweight in US small caps right for the first time in the cycle. I don't think performance is going to be that bad, but I think when we look out, you know, we're not gonna want to have a massive, massive amount of risk in that. But it's still a positive equity environment anticipated

at least for two thousand. What do earnings grow, because yeah, I get the idea that we're phasing out the text cut. You can argue if there's a persistent value to its good morning, Mr Cudlow, or or if there's a one off of vent or a two quarter of it you okay, over there, John, I'm doing you were a trick or treating too like ton of clocks. I'm hanging in there. I was having oysters at Elise at ninety one in Madison, and you went by me. You look so good as

quantitative tightening. Yeah, thank you. It was great. Appreciate that you just you know, he looks as good as quantitative tighten. He went his quantitative tightening and went to bed with lemon and honey and some hot water. My suit is quantitatively tightening, as I get found. Yeah, well, no, I want his quantitative easy because that's what's happening. But but what what is the profit model for it? I mean, you're one of the best I know gaming earnings. What's

the game forward? So if you take a look at the level of production and demand in the United States, and you say, we can quibble the third quarter, we pulled in a lot of imports ahead of tariffs, We built some inventories on the external saw Um, we have, you know, some modest weakness in some of the cyclical areas and housing and autos, but sort of the production level, uh, and the cost problems that we have, you know, are still not large enough to completely erase the inertia we

have up in property. This conversation is way too sophisticated for this program. What are you doing? No, I'm waiting for Steve to end on profits because what he says is really important. Profits still Amazon, Just so everyone knows, Tom Keane has an alpen prime box. What's in it? I don't know? Maybe you do? You know two of the kids laptops have broken in the last forty Why are you opening your post? What if you got Oh? Is it Anthony Anthony from Sparta? Is it it's pink?

Whatever it is it's John. You it's going to bring a tear to your eye. I try to open if you bought by this. This is a gift Anthony from Sparta. It's a breakfast set for you and me and the studio. You've got a child's breakfast set. It is. It's a tea set for girls, child's breakfast, so you and I can dine and style. I don't think this is the studio who gave you this said came Amazon, you know, Anthony from Sparta. It's it's it's children breakfast set. Yeah,

we can put it right here. You like that, John, Steve Pink, I can only apologize to my colleague honestly, how much did you drink yesterday? I didn't. I didn't. You didn't? You didn't? Did you drink? Actually? Can we say good morning to Candy on Madison went in huge John Farrell fans. I'll write the Dina Yeah yeah, yeah, they came in and you know we're having a beverage of our choice, Candy Dinas. Good morning to those up Madison Avenue, every on Lexington on Lexion. Now this is Candy.

This is a beverage store. The store, yes you're familiar with that. Yes. Yeah. At the Feral Wall on the side store on ninety four, I walked in a Quantitative Easy and they said good morning. You know they they, you know, said thoughts to you. Yeah, I think you like pay the rent. I like the Amarona in the top left of the store, in the left corner. The amaroni. What is the amaroni? I don't know, Amarondi. It's a

very good red wine. I'll buy you a ball. Steve Whine is going why are we having brought toast in the studio? What's going on this show? Well, this is a lot easier than talking about markets and whether it's rates of growth or slower rates of growth. But I mean the cacophony of October and John we got a salvation day yesterday, right seriously at a couple of That was the first two day gain on the SMP for September. What what do you do into November into December? Steve

Whining rights is here in report. So let's just remember first that knowing what's going on in the market now often tells you very very little about what is a good investment, what is a longer term holding? And you're listeners really really should decide on whether they're trading this

or they're investing in this. Now, my point of view here is that panic is unnecessary, that the economic outlook will again is not going to yield eternal growth, but it's good enough to yield us further profit games and the constraints that we have on the interest rate front, they are not enough to knock us over. They're not gonna They're not going to compete with equity. See why did you thank you so much? I was just wonderful, John? Can I just say it? Granger's causality. Clyde Granger was

a British giant of mathematics. He ended up and of course one of the climbs of the United Kingdom. The University of San Diego, Usity of California, San Diego want a Nobel Prize for garch with the Robert angle and all that. Okay, Does wage growth in a better economy cause better productivity? Or does better productivity cause better wage grows? The chicken and the egg of economics exactly, And I'm sorry there. It is better productivity with a revision up

for previous productivity. It's interesting head to pay rolls tomorrow. Do you want to bring in our guest. No, no, you like eating into important times, someone really important? But west Ham? Is it? What do we start? Well done? I guess start with East London. Please starting with west Ham. Steve Major, HSBC Global head of Fixed Income Research, Steve, I'm sure that most of our listeners want to talk fixed income. Let's start with west Ham. How are we doing.

There's a lack of productivity there, certainly last night. So so this is interesting because productivity must be going up in the US economy and in the UK economy by the way, because if wages are going at what three and a half percent, and the Fed's preferred measures of relation they all stuck around two and frankly, the FEDS deflator has been falling all year. It's even less than that.

So if you if you assume too and three and a half on wages and someone's working a bit harder, if the hours haven't changed, I've got like five we could go for two hours and easily none Stop with you on this fascinating fixting income. Let us go to what we just saw with the Bank of England. You are the arch call of lower interest rates. I think everybody's sobered at the rate stability we've seen through this

ugly October. Do you maintain a low rate cart totally that The latest that's allocation published yesterday was called a bucket of cold water, and so you know, I don't know if that works in American English kind of it worked less. Say we went I went his quantity ative easing for Halloween, John went for quantitative tightening, and he threw a bucket of cold water. I mean, was it

the fifth Guinness so you so you get it. At The point is October was a bucket of cold water for the SMP and for risky assets around the world. The last few months have been a bucket of cold water. The point is is that yields in Europe and lower than where we started the year, for Germany and France, not Italy, by the way, The UK yields are low. Um, China yields have been falling all year. Japan's doing nothing

so um. The US is the outlier, and I'm happy to sit here and talk about US treasuries as well. But the point is that those yields look too high given what's going on in the rest of the world. Pretty interesting though, that we get a bucket of cold water on U S sequities, and the US thirty ye

yield actually climbs through October. Steve, Yeah, well this didn't happen in February because in February, when we had a wobble on the Chinese, Hong Kong and US exchanges, the treasury is rallid, so you had a risk of money went from equities into bonds. This time it didn't happen. And so the whole risk parity framework, if you like, seems to be unraveling. And look, this shouldn't be a complete surprise. If you have unconventional poll this is you

should expect unconventional outcome. So I'm worried about investment grade credit, for example, I'm worried about equities and worried about emerging markets. It doesn't seem so far or certainly in the last few weeks that the money is going into treasuries. Doesn't mean to say isn't going to let me ask you what do you get on your bank account? Here? Not a lot, assuming you've got any money in the account.

For some money, so would you get nothing ten basis points if you're lucky, how much can you get for one month on treasury bills, you would get a couple of you can get three. To go a bit further out with within your fixed income game of trying to figure out what full faith and credit is going to do, with what corporate is going to do, what how yield is going to do? You're now dealing with central banks with a date calendar which I've never seen, where they're

gaming policy after the end of summer two thousand. Relate two to a grizzled pro like you, Steve Major rights, Steve Major wrong? What does that mean to you when you see dragging currently doing that well with Druggie. I think the market is collectively giggling, laughing at this idea that wages are going up and therefore CPI is going to rise. I mean the causality you mentioned before, Tom could be the other way around. It could be headline into core. That tends to be how it works in Europe.

You get prices higher in the shops and people are But anyway, the point is is that he thinks inflation is going up, but the market doesn't believe it. I just told you yield to going down, and um look, think think this through. If the ECB thinks they're going to hike next year or the year after. So many things have to be aligned. The stars have to be aligned in such a way that first of all, Brexit's

no problem. Secondly, Italy is no problem. Thirdly, the US presumably isn't easing at some point in the next couple of years. Then there's the data, inflation and reactivity data. Frankly, there's a lot of stuff there that's going to be lined up. Strikes me as it's not a hype of a bit t that the ECB can manage a normal tightening cycle. To run a marathon now you were cut and chiseled, but of a certain vintage. How do you run a marathon now versus how you would have run

it ten years ago? It's a good question. I ran five last year, and I've run about fifty and I was running them thirty years ago. I ran New York last twenty years ago. So short answer to the question is I do a lot less running because I'm fifty five next year, so I do a lot less running than I used to. I probably do half of the mileage to get ready and are there do a lot more, a lot more conditioning, a lot more strength and stretching,

so it's a lot less pounding the streets. How is the New York Marathon different from all the other mean Boston Terrible Hill and Newton at the end, but but there's got to be something unique here. I've done, I've done them. Are that that It's it's dead straight from Staten Island until you get to the park and you turn around more or less, so it's a straight marathon. It's got the bridges. I think there's five bridges, and there's a lot of concrete. So as opposed to tarmac,

you have you run that risk. I mean, I'm not looking forward to that because I know my legs are gonna get a pounding. Elsewhere in the world like Berlin or Athens, London is mainly tarmac, but here it's pavement. I know Paula Radcliffe complained about it when she went for the record, But anyway, I'm looking forward to the Sacos. Hope it's not too hot. It's even great you have. The heat is an issue. It was of course the lovely here today and for Hellowen yesterday. That's a TCS

New York City Marathon. Tata Consultancy Services behind the force behind that as well, and again Steve Major with us today of course running the New York Marathon and also the marathon. Of when rates will go up, it's the great wrong call. You're in a camp with a select few. Shout out to Gary Shilling, who has been there, is well in still rates are going higher. Yeah, you see that. No forecast is actually wrong until you get to the forecast horizon. But granted tom yields have been going up

this year, I forecast they'd be going down. I'm still forecasting they're going to go down. And I think that, you know, ten eleven years into recoveries, six years into reducing the long dot, four years into tightening with a fed chair doesn't know where the stars are. Doesn't strike me that they're going to accelerate from here. What is the prole like you think about the stars? I mean, economists can talk theoretical about the stars, Vice Chairman Clara.

Of course, with prodigious ability in D s g E dynamics, stochastic general equilibrium theory, you've got to go out to HSBC clients and say here's how you can plan. Yeah, it's a big difference, right, So with the stars, nobody knows. With any certainty until afterwards we know what the real natural rate of interest is. It's not a new thing. It's an eighteenth century concept from from Wixall. Actually, that's

what the real natural rates of interest is. To me, one percent real rates in the US is going to be sufficient given this amount of debt and given where we are in the cycle, and we're sort of getting towards one percent one percent real. And I'm looking at this in terms of modeling this, I think it's difficult

to find any model with these unconventional policies. But think about prospect theory, think about interesting you think about loss Yeah, think about investor behavior when you're in the domain of certain losses, which is when you had minus minus two real yields ten years ago compared to today, where you've got a certain gain in real, real terms, presumably your more cautious Steve major critical question, and this is for

global Wall Street listening worldwide. If you're gonna look at a real rate study, where on the X axis do you look at that? Are you looking at a two year rate, are you looking at a three month library? Or do you where where's the most advantageous study point a real rate real dynamics. That's a really good question. You've got to go to the five year point if you want to get if you want to get a cycle number. So so we think about where will the

five year rate being five years time? Currently the five year US treasury five five year, five year four exactly. So in the US the Treasury is at three thirty three forty. That's the five year rate. The FED says they're going to three three and a quarter. Some people in the FEDS say they're going to go higher first, which to me is ludicrous. I mean, the idea that you're going to overtighten so you can cut seems to

be some kind of nonsense. But but if it's so obvious you're going to hike four times and cut twice, just hike twice. When you and Ben Laser Lasler, your equity strategist, when you get together, how do you dovetails Steve major fixed income theory with Ben Laidler equity theory. Well, I think it works quite well because for him, he'll take the longer term rate forecast is his input into his dividend yield calculations and his assumptions, which says we got to be in equity. If I believe in a

Steve Major world, I'm going to stay in equities. Right. It does if your valuations are fair. Though the thing is, Tom, is are the valuations fair? Because you've got to add on top of this, not just the interest rate level, it's the withdrawal of liquidity that you mentioned quantitative tightening before. There's fifty billion dollars per month of reduced balance sheet.

The rest of the world is shifting the impulse on the QUEUEI so it so the rates are one thing for the equity market forecast, but what about the liquidity that pumped up the process of those stocks. I have to ask one more question the chronic nature of negative interest rates in Europe? What is the price Well, we're seeing actually sort of slow zombification of some parts of the industrial base. Um. It strikes me that that maybe

is very difficult to remove them. That that's the other the other thing, I mean, how do they remove negative rates very quickly? Um, there's there's a there's a lot of thought behind the negative right policy because it is linked to the forward guidance and the asset pertions is extremely potent. But the circumstances are never going to be right to reverse them. But this is this is the thing. I mean, how do you know when it's safe to actually we move them. You're gonna go off to talk

to John Farrell and one of his other properties. We need to say thank you. And also we're hoping for forty two degree weather with no wind, no rain. No, that's forty two degrees for the marathon. About a following wind, okay, following win as well. Stephen Major with HSBC he is in New York of course with HSBC clients coast to coast and of course to running the TCS New York City Marathon is well, pim Fox and Tunkey, thank you

for being with us. And if you're a bit confused, used or intrigued by the election, always good to speak to. Greg Vllier of Horizon Investments. Greg David Wasserman writing for the Cook Political Report with a at the margin nudge. You looked at six races and he nudged it a little bit Democrat? Is that where you are you nudging on a Thursday towards the Democrat or Democratic Party? Yeah? A little bit. Tom, good morning. I think that you know,

maybe the Democrats take up seats in the House. That's enough, they only need twenty three. But in the in the Senate there's been a real momentum shift. I feel pretty confident the Republicans not only will hold on to the Senate, but they're going to gain a seat or two. Where is turnout? I think with all the polls, I still can't tell on both sides who's going to actually darken

the door of the voting booth. Who is it? Well, traditionally it's people who are angriest, and I think the angriest people are Democrats, Uh, some urban women who don't like Trump who want to send a message. But it's impossible for poll takers to predict. I mean, they'll tell you in private that they may get their demographic mix correct,

but they can't quite figure out turnout. Greg Value, as someone that previously worked at the Schwab and was the director of research for the Charles Schwab Research Group, you're great at connecting political events to financial outcomes, and you've described a red hot economy and rising interest rates. Do you see President Donald Trump getting into a real public slanging match with Federal Reserve Chairman Jerome Powell? Absolutely, Pam, I think that's a real risk for the market, says

the year unfold. I still think we get a rate hike in December, Copple more, maybe three next year, and Trump will tweet. I mean, if Trump's angry, now, just imagine what you'll be like, seventy five basis points higher. All right, so let's imagine that it's seventy five basis points higher. Is President Trump already running for election? Absolutely? I don't think there's any doubt. He's got his foils. I mean, nobody plays against foils better than this guy.

I mean, he's got a foil in uh Paul Ryan, He's got a foil in Jerome Powell at the FED. So yes, he is running. And you know, I've been saying in all of my talks lately, I think he's the favorite to win reelection. What do you believe is causing the market volatility that we've experienced in the last month, Well, there's a lot of there's a lot of villains here, you know, whether it's people getting too euphoric towards the

end of the summer, whether it's the FED. I think Powell was a little indiscreet when he said we're not close to neutral yet. I don't think he should have said that, But there are so many other factors, and I would also at it looks like things could get even worse before they get better on trade. Greg. Then this is five days to the election. What's the plan right now for the big money? I love how yesterday everything got quiet. Obviously, all the pros working at the margin.

What's the VALI a margin for the pros getting through the weekend, getting to the Sunday talk shows, including thank you facing hn CBS for joining us every Friday. But what's what's the vliate to do list for pros right now? Well? I think for the pros the outlook is surprisingly sanglord h. It's in the market that the House flips to the Democrats. It's in the market that the Senate gets a little more Republicans. I think the big story and the reason why Tom I don't think this election is a huge

deal for the markets. The big story is that even if the Democrats took both houses, Trump's Vito was good. So any fear that Trump's economic agenda would get undone kill kill the tax cuts, It's not gonna happen because veto it. I mean, this is fascinating Pivot's the first time I've ever heard anybody talk about Mr Trump with a veto pen in hand. I mean, give us a clinic on that, Greg, right now. I mean presidents are reluctant to veto, etcetera. But this is an original president,

isn't it? Original? Is an understatement a couple of points. Number One time, I do think that Trump will play against a more liberal House that may talk about impeachment. But I think the big thing for investors to remember is that you need sixty seven votes in the Senate to override a veto. It's not going to be sixty seven votes. I think the Republicans will actually add seats in the Senate. So I think the Trump agenda is safe for two more years, Greg Valuer, Who in the

White House do you believe is making economic policy? Donald Trump? That, maybe a few others, maybe Larry cud Lolo. I think a lot of the policies go against what Larry has said for his entire career. Uh, it's it's it's at the end of the day, I think you've got to say it's Trump and um right now, I think he's thinking exactly what you guys said what's going to happen in Well, we know that there's going to be a

G twenty meeting in Buenos Aires. We also know that President Donald Trump is going to meet the Chinese President j Pink. In fact, Larry Cudlow coming out just now and saying that the meeting would be very formal. Do you believe anything will be resolved at that meeting? Well, that's a key issue for the market, so obviously November thirty, December one. So I would think that the personal chemistry

between z and Trump might get resurrected a little. Maybe there's a nice photo of they might even agree to resurrect the talks between the two countries. But any hope that there would be a dramatic breakthrough in Buenos Areas, I think that hope is unrealistic. And now, folks, we move forward with Greg Villier. Yes, we can only do with a man from New Hampshire. Greg. It's five days to the mid terms and your entire note today is out exactly two years in one week. How many Democrat

candidates are there right now? You know, I gotta say, Tom, it could be twenty five. It's a huge list. I mean, if if if your top three is Biden, Bernie and Elizabeth Lawren. I mean, there's a lot of room for other candidates, so maybe are a little younger, maybe you got some fresh blood, and there is So we'd be on until noon if we talked about you know, Ali out of Life, Corey Booker, Kirsten gillibrand uh Amy klob Shark, obviously, CaMLA Harris. The list goes on and on and on.

But I do say, and some people don't like me and me saying this, I do say that as of now, Trump is the favorite. He's easily going to win the nomination in that party, and I don't see anyone right now is a clear likely opponent who could beat Trump. Having said that, do you believe that the Democrats have a coherent plan. Well, there's a lot of friction. I mean, you've got what I call the Bronx Socialists, and you've got the old Guard and people like Joe Biden, and

the party is divided. I think they need to resolve this. I mean, the young Bronx socialist has some very seductive ideas, but they can't describe how they would pay for these ideas. So that's going to be a big problem. For them in describing how you can get this done without consiscuatory taxation. Greg, Thank you so much. Greg, with a nice update there on what we make gazette next Tuesday. Thanks for listening

to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio