Surveillance: Vaccine Rollout With Yale's Forman

looking at one. Is there anything between now and year end that could derail the optimism around a better outlook? Um, I don't think so, if I I hope not. You know, Having said that, I will say that markets are quite stretched at the end of November. Um, you know, particularly you know the cyclical trade, which which we've favored for several months. Um, you know, it's had it's had a

hell of a move. Um. Yeah, I've seen plenty of the members which have a tricky couple of weeks in the middle of them, and you know that wouldn't be a surprise. But you know, I think generally, Um, you know what I was personal, as we doable goods economy is really following on all cylinders at this point in time. I think a vaccine would be helpful to that, but

I don't even think it's necessary. We've had such a massive month through November for international equities, the best month ever on a stock six underd I think, the best month on an ECO for in Japan since the middle of the nineteen nineties. This came from JP Morgan this morning. We upgrade Eurozone to overweight, reduce the United States to neutral. Relative earnings trends have favored US over Europe for a while now, but a potential bass in relative earnings of

the Eurozone could be on the cards. Michael, that's just an echo, a flavor of what we've heard so much over the last several weeks around the international stories. It's something you buy into. Two Well, you know, I think analysis does unfortunately often follow performance, So I think people

under tremendous persons have changed their views. But you know, the point I made a couple of months ago was literally so much market cap trapped in the stuff that had been working, US technology as a sort of shorthand to that, but that any kind of reallocation away from that towards almost anything else is going to have an explosive impact. You know, we we would favor Japan over the ewer zone. You know, I like what's in the nick A. I like that part of the world in

you know, in general. But I you know, but I think that that you know, you've had four or five years of tremendous out performance by by U S tech against global equities. UM, and I think you've unlocked a little bit of a rebound now. You know. The tricky thing going forward is that if this is a true turning point, and the sort of turning point you look back in five years time and say, wow, that really was something that normally implies a problem in the stuff

that had been working. UM. You know, certainly that was the case at the end of the late nineties, certainly the case when he M you know, finished out performing in say two thousand and eleven. And so I think the tricky thing not not obviously for December twenty twenty, but maybe one is you know, if this out performance continues, does that involve US tech or the popular portions of the US equity market actually going down. There's also a

question of whether the pandemic still matters, does it? It depends what you are that matters tremendously. I think for for urban service economies, it doesn't matter a great deal. Um. It may even be having a sort of strange beneficial

effect um for the doable goods economy. Uh. And again I think, you know, a slightly different question would be, if we do have a successful vaccine and we sort of arrived in the summer of one in a in a better place medically and socially, thankfully, you know, does that come at the expense of the doable goods economy or have we just really, you know, have we just ignited a self self perpetuating cycle in that part of

the global economy. At what point do you take a message from the bond market that really hasn't participated in the rally, the idea the treasury yields have remained so suppressed despite the optimism that we've seen everywhere else. You know, I think I take a partial message from that, you know, I think I do think sped guidance has something to play, and I do also think that the fixed income is

something of a relative value play. But but it's difficult for US yields to be much higher than they are given where global yields are. But you know, I do think that if, if, if these sort of cyclical forces do continue, you will have higher U S treasury yields to the US tenure will find its way tot once fifty or one seventy five at some point next year, which you know would hardly be a shocking level. Historically wicked dollar started to come through Euro dollar right now.

Six The line of the stand for so many of you at home, I know is one twenty, the high after yearn that was the start of September. We know that's the line of the stand for the e CP because whenever we got to euro dollar one twenty, Mr Philip Lane came out and battled it back down again. Michael Schaller, let's leave it there, shall we. Just a word on the U S order if you can. The calls are lining up. It's consensus for you for twenty one a week a dollar. Is that the side of

the trade you're onto? Yeah, I think I think we cow against the sixthly sensitive currencies, So I think some of the e m courncies can gain a lot against. Michael Show of market Field, great to catch how your Michael Michael Scharltt Marketfield asked management the CEO and portfolio manager listen. So you Ki joined us NOW Banks for America Security Senior Hardline to reach out analysts. It's always great to get you on the show. Are we shopping

less or just shopping somewhere else? Liz Well, I think where people are shopping has certainly changed. There's been this shift to online, and I think some of that has been intentional on the part of the retailers. What we've seen this holiday season especially is the early start to promotional activity, which began, you know, Black Friday sales began.

It's early, it's November one for a lot of retailers, and and the shift has been to promote these you know, the online channels, partly for health and safety reasons, to you know, to avoid overcrowding in the stores, uh, you know, but also because the retailers have been seeing demand moving that direction and so they're you know, they're not trying

to fight against it. So what we've seen a lot of this holiday season, in particular, which was relatively new, was the move towards um promoting curbside pickup and buy online pickup in store, which you know, which which has is beneficial to the consumer because they get the products sooner than they would if they went for the ship to home option. And it's beneficial for the retailer because they avoid having to spend the cost of shipping that product to the consumer. So it's kind of it's a

win win situation. But you know, in general, we have we've seen a shift in spending also, I mean this is broader, longer term, which has been towards home categories, away from things like you know, travel and restaurants obviously an entertainment and so those dollars have been shifted into the home and so we we think that this holiday season is really going to be about uh, you know these home categories, comfort, yeah, end and and all of that. At least that takes us to home Depot, which has

had a fantastic year through for many people. The vaccine is kryptonite for big tech. I wonder what it means for the shopping trends that have really been reinforced through much of looking ahead to twenty one. What are your thoughts on that at the moment? Is sure? I mean I think that for for home improvement retailers like like home Deboat lows, uh, there has been a big benefit this year from people staying at home and investing in their homes, making those upgrades, you know, putting doing the

projects that they had put off for a while. But you know, as we look beyond this year and into one even post vaccine, you know, one of the big factors that we think is going to be a driver for next year is the fact that people have moved from urban markets into suburban markets. Housing metrics are you know,

just on fire. And so what that means is there's this whole new slew of homeowners that become consumers and become home improvement customers for life essentially, So you know, for the next few years, that will continue to be a benefit. So even though these retailers are up against this difficult comparison in one, there are longer term tail winds that are still at play here, which are really those you know, those housing metrics that continue to trend positively.

I do have to wonder, though, Liz, a lot of people have been home a lot. They can't go on vacation, so they're spending their money on the place where they stay. When they can go on vacation, when they can leave their homes, they will everyone who I've talked to, especially if they have small kids, wants to get out. So, in other words, how does that challenge the thesis that

you just presented. Sure, yeah, I mean I think that there there will be eventually a return or maybe some you know, there's pent up demand for you know, for getting out of the house, and so at some point people will go back to travel. I think it will take time, though, because comfort won't be you know, immediate once there's a vaccine. It's going to take uh, you know, several months or quarters until people really feel comfortable traveling

as they normally would. So for you know, for at least the next probably the majority of one, there's still gonna be this uh you know, this continued time spent in the home and focus on the home. But you know, after that, yeah, there there is probably going to be some period of payback or certainly a deceleration. You know. The speed of that deceleration will really be contingent upon

the speed at which vaccines are distributed widely. Um, you know, so I think that there is uh, there's there's risk that growth will decelerate. I don't think it's possible for improvement spending to continue at this plus thirty percent, you're over your growth base. But I also don't think that that's what's priced into the stocks. I mean, right now, these stocks are trading at pretty modest multiples relative to their historical rates, So they're not trading at companies that

will continue to to put up percent growth. You're year. Let's before we let you go. We talked a lot about companies retail. Let's pushing people to go to e commas. Can you walk me through where the bed, Bath and beyond have actually sorted out things in store for when things finally reopened properly get a better experience. It's overwhelming in there, there's too much stuff. They're doing something about it.

I agree, yeah, And so they're they're new. The new CEO or relatively new CEO is the chief merchant a target, and so you know, the experience that he brings to that role is certainly what the company needed. And I think you're right, like the Florida ceiling stuff your pillows that you can't even reach up on the highest possible shelves, it's overwhelming, all right. So I think that they're changing

the merchandizing in a pretty big way. And that's going to be a really big part of the turnaround story. There Lets it's great to catch up. Good to see you listen Oki there a Bank for America Securities makes I said that joining us now is John Riding Bring Capital, Chief Economic Advisor. John, great to get you back on the program sir as always good friend of Bloomberg Surveillance over the years. John, the near term risk, I want

to start. They're a lot of people factor in this brighter forward outlook and the emphasizing the near term substantially so over the last couple of weeks, John, how much gap damage can we do to the outlook over the next couple of months, Well, we could do quite a bit of damage. The key thing here is that the income support for the ten million people are so who have lost their jobs since February aventually effectively evaporates mid

to late December. It's either six months plus the thirteen weeks from when they lost their job, or at the end of the year, the thirteen week extension program under

the Cares Act disappears. And that is about thirty billion dollars a month of household income and from the macro economy perspective, that's not a huge number because of the accumulated savings that has gone on through the pandemic period, the excess savings, which totals about one point five trillion, but those savings are not much of those savings are going to be in those distressed households. So those households

are going to have to cut back on spending. They're going to be distressed, and and that is something that that could hit demand, not to think to the point where we see a negative growth print um, but could certainly yes slow growth considerably, which right now we think for the fourth quarter at least is looking about six

real GDP growth. Let me also say, and what's very important is when we get a virus and we can get the four million people is so in the leisure, hospitality, travel industry who really can't return to work, and especially with the upswinging the virus infections that we sold through in November, those people are going to have to need

businesses to go back to. So that's another area. How much damage can we have to the actual employers, to the small businesses that employ many of those people between now and then. So there is real hope over the horizon six months down road with the vaccines, but the next few months are going to be I think quite difficult. John. I'm so pleased you started with the disparity beneath the aggregate numbers, because the aggregate numbers get talked about way

too much. A high savings rate. The savings are exactly where we don't want them to be there in the hands of the people with a lower marginal propensity to spend, and the people without the savings, and the people where we'd like to see the money as things open up, because they're likely the ones to go out there and

spend it immediately. John. Going forward from here, I think if there's any complacency, it's because people have been experienced, been conditioned by the experience of the last few months where we snap back so quickly, and the recovery in America was much much better, bigger and better than I expected, and many others to John. And it's a belief that if we go into a small down term will come

out of it the other side just as fast. Is there any reasons to believe that wouldn't happen, John, Well, as I said, it really matters about either business is going to be there to re employ people. So we do have a very difficult period markets where we need to work things out. For example, commercial rents are what's

going to happen. There was a report out from the New York City Hospitality Alliance a few weeks ago that said eight percent of renters commercial renters in New York City couldn't make full or whole payment of the rent or partial payment of the rent in October. So what's going to happen to those businesses is the accumulated rent bird and going to be a major obstacle for them reopening. Are they're going to throw in the towels sadly when the end is very much in sight. We don't know,

but that's important. It's not just about demand. It's about businesses to employ those ten million people who will be ready and able to go back to work once the vaccine is available. John, As you talk, I think about what Katherine Man of City Group was saying last week, which is the economy that emerges from COVID will look very different, in part because the biggest companies have had

the best chance of survival. Well, the smaller ones have gone out of business at a record pace, And I do wonder what is the long term structural economic damage of this entire swath of smaller companies that have gotten wiped out, given the fact that they account for so much of the hiring in the United States and elsewhere. But that's an absolutely great point least, because if you look at the US labor market, about half of people employed work for big businesses and the other half work

for small businesses. So we can't have enough expansion in big business activity to employ those people. Small businesses really are a great part of the entrepreneurial side of the US economy, and I have no doubt that two, three or four years down the road, whatever the damage has done over the next few months, entrepreneurial America will come

back and will come back strongly. But that's a very long time frame for someone who has lost their job and doesn't have that prospect of getting back to immediate employment. So yes, we do have a to use the rather overworked term of ideas from Charles Dickens, a tale of two economies. We do have the large, big tech, large cap economy that's adjusted well through this in terms of e commerce and some of the big names of gain business.

And then on the other hand, you've got the small businesses, especially in restaurants, host in the hospitality industry, and some of the larger business in that area, like airlines, which are really really struggling. And I think that that's got to be a major priority. If we don't get something done in this lame duck session, and it's a very short lame duck session with an awful lot to do in it haven't been we would have a government shutdown in the midst of all of this. If we don't

get that done. That has to be the numble one focused alongside virus vaccine distribution for the incoming administration. Hi, John, great to give you on the program. Stay well, I send my best of the family. Won't you jump riding the up bring capital? Thank you John, joining us down. We really want to take a look at this vaccine distribution, the moderna news really accelerating that timeframe, Operation Warp Speed

taking a little bit more shape. Dr Howard Foreman joining Yale University, Professor of Public Health and Economics and Radiology. What else. Dr Foreman, thank you so much for being with us. I want to start with this Operation Warp Speed and where we are based on the application that we're expecting from moderna based on what the FDA has signaled. When do you think we will start to get a trickle turn into a flood where we get a real

critical mass of people in the United States being inoculated. Look, I'm one of the more optimistic people who believe that we're going to see tens of millions of doses starting to be used in January. February will obviously see something at the end of this month, probably at least, you know, several million, But we're gonna see tens of millions starting

off in January. Uh, And it is not inconceivable that will have more doses than demand by the time we get this summer, and that would be a sort of good thing, But then we have to work on the whole issue of vaccine hesitancy. All right, let's let's tease out some of this aside from the demand side, when you talk about the supply coming on. Joshua Sharfstein was on earlier this morning, and he was saying he's concerned about the number of individuals out there, the infrastructure to

deliver the inoculations in a timely manner. Is that something that concerns you as well, it's you know, we were all worried about that, but the first trench of vaccinations are sort of easier for us to do because they're going to be healthcare workers who work within healthcare systems that generally already have an infrastructure and apparatus in place, and they're going to hopefully be nursing homes. And for vulnerable individuals living in an institutions for which we also

have an apparatus in place. It's the next step after that that we should all be most concerned about. But because we really want to get the vulnerable individuals in the community have suffered so much, the people of color, poor people, people that that have to risk their life every day as an essential worker, but not a healthcare worker, and how do we reach them. That's where it starts

getting more challenging. Is the issue that people don't have confidence necessarily in a vaccine that's rushed out, or is the issue that there isn't the medical infrastructure built into some of those areas. This idea of people having a primary care physician or somebody that they regularly contact. Look, I think urban areas that have well developed public health infrastructure are going to be in a much better position

to do this. And I think the fact that the federal government has already contracted with I believe CBS and Walgreens as part of the distribution plan abodes well for urban areas. I think getting out to rural areas. And then, as you point out, this issue of vaccine hesitancy should

should concern everybody. We have witnessed over the last several months, um a schism in this country where some people are adherents of of good public health practices and some people think that it is a political statement to UM to basically give up on all those public health practices. We need everybody to want to get this vaccination. Well, how do you combat that? I mean, we've had anti vaxxers

for years. I mean how do you combat that, especially at a time when there is the perception that this has been rushed through. So I think consistent messaging from leadership all the way on down. It has to be bipartisan. It has to come from the president, it has to come from the vice president, It has to come from all public health officials, it has to come from all state officials. Right now, we know that if we even look among red states, there are some red states where

the messaging is excellent. There are some red states where the messaging is not excellent right now, Um, And so we've got to get over that. We've got to get past this sort of partisan divide in our country and get back to a point where everybody is basically messaging consistent evidence and fact and allowing the public to make a good decision, which in this case is about a vaccine that is highly highly effective and has very very

low uh react to genicity or side effects. How politically fraught is it for big companies to get chunks of doses basically to distribute to their workforce that they can get back up in business. I'm sure from an economic perspective it would help people get back into the office and increase productivity. But is that something that could be a politically difficult thing to swallow, especially in the initial

phases of the vaccine distribution. So in the initial phases, certainly, But but again I think that really helps the cause is if employers are able to facilitate this, if they too message this in a nonpartisan manner, if they are able to a message to their employees that this is something that they're providing to them as a benefit and facilitating it. That can be very very helpful. All right, going forward, when do you think that we'll reach some

sort of full herd immunity. Do you think that that is a time in the near future where we can stop wearing masks and actually get together and hug each other. I mean just generally, Look, yeah, right, Um, herd immunity is about me being vaccinated, but protecting people who are not vaccinated, And unfortunately, I think that's going to be a long way off, a lot further off than people realize.

And let me just point this out. We don't know whether the Maderna vaccine nor the Fiser vaccine provides true sterilizing immunity, which is what you need for her immunity. So her immunity means that I cannot infect you. What we know about these two vaccines so far is that they definitely protect against moderate and severe infection uh in in both cases I think protect against death. Um. That

is huge for the individual. It doesn't mean that we'll achieve her immunity, because it may be the case that half the population that gets vaccinated still gets infected, but they just have no symptoms and therefore they may still be part of the feedstock of continued infection. We need those answers and those those may not come for several months. Dr Howard Foreman, thank you so much of being with

us of Yale University. Certainly people are putting their hope in the vaccines coming out and putting an end to some of the pandemic that we have seen so far that seems to be accelerating and worsening throughout the United States and around the world. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.