Surveillance: Voter Safety With Boston Mayor

he had to root for the New England Patriots. He appears with us today even though the Patriots are not the patriots he and I know, and even though Brady did better than good last night. Marty Walsh, it is a Boston in transition. Clearly you are for President Biden. What do the cities need from an administration day one? Uh, the collaboration, I think is the first and first thing

that we need the most. Myself and me at Lance Bottoms from Atlanta just didn't not bed and we talked about the importance of having a White House that that understands how a city works and understands the relationships that need to happen and in the last three and a half years, I've had no meetings, no conversations with the White House. The White House the way currently exists is a top down approach, and the Joe Biden White House

will be very different. Mayor Walsh, Christopher Whale, and a good friend of the show, an expert in financial history, just put out a photo on Twitter on Central Park South and it's from the Trump campaign. New Yorkers are going to suffer and that's their problem. That's been the attitude of this president towards Democratic strongholds, and yet we see Republican cities as well having challenges in the pandemic. How much do you need from Washington and what will

you do with the money when you get it? Well, when it comes to me, as mayors don't regard each other as Democrats and Republicans. We regard each other as mayors that run our cities, and we collectively need to have an administration of Washington that's gonna work with us. And I can say firsthand here in Boston, from their early days of the pandemic right through the pandemic, there's

been no assistance from Washington. We've had to go alone for the most party, including states, we've had to figure out ppe we've had to figure out even thinking about how how do we prepare our residents for the future. As far as being careful and physical distancing and show social distancing messages have been consistent across America. It's really important. And then as racism read, it's ugly head in America again and we had protests and demonstrations across the streets

around the streets in America. Uh. This White House quite honestly just agitated and incited violence. Uh. And it's really we need leadership right now. And in Boston, I'll tell you a hundred and fifty nine thousand people have already voted before election day. So there is definitely a feel for change in the air. And it's not just democratic cities, it's it's it's all cities across America. Mayywell's there is a feeling of change. There's also a feeling of fear.

And my younger son last night said to me, you know, is there going to be violence? And he's looking around and he's seeing all of the boarded up windows around New York City. And I believe in Boston as well, your town, how concerned are you about violence in response to any election outcome, particularly if President Trump is in

the lead. Given the fact that people in democratic cities are the ones, honestly that are having boarded up windows, just think about what the question you just asked me. We live in the greatest country in the world, where where freedom and democracy is what we're proud of, and we have cities and businesses all across America putting boards on windows worrying about violence because of the general election. We've never seen anything like that. This is not result

of of Joe Biden and his speeches. This is a result of a president who has failed America. This is the result of a president whos failed American economy. He's failed, He's failed everything that he claims he stands for. UH. And I'm hoping that after today's election we don't see violence.

And what I'm focused on today is making sure that people get out to vote, people can vote without intimidation, people can vote safely, UH, And that they should be able to do that in Boston, Massachusetts, and they should be to do that all across America today without that fear. I hope that's not the country that we're becoming quite honestly, Mary wash one final question, if we would uh this morning.

Dorchester represents the heritage of a Democratic Party that has lost so many people to the Republicans or at least Donald Trump. What is the policy prescription you would suggest for the Liberals in your party to get back to the kind of voters that made Dorchester years ago. I think, first and foremost, we need to elect Joe Biden president today.

And I think that then we go back and to kind of look at the party and not I would say we have to rebuild the Democratic Party, but certainly we have to go back and get those Democrats that used to be Democrats and pull them back into the Democratic Party. The values of the Democratic Party of the same values that those people the party they joined many

many years ago. And as mayor of the City of Boston, I'm committed to doing that, and as other may as across America were committed to bring out party back and representing everyone. Mayor wasalh. I'd like to see it. Tom English is pub but I believe it's shut down a year ago. There's still one in Southie. That's all that matters. Mayor. Thank you so much, Marty Walsh, the Mayor of Boston. Here on a most interesting day, and again we say

good morning to Bloomberg Radio listening across the England. One of six one f M right now in trouble is Stephanie Kelly with Aberdeen Standard Investment. She has a really interesting mandate at the large investment management firm of trying to figure out what all this means for investment management and particularly longer term money. Stephanie Kelly, thank you for us so much for joining us today. What does this mean for active management? How does election play into the

investment management industry next year? I think if any of the US election illustrates just how crucial that role really is for us A managers, because if we look at what a Biden administration might mean with or without a democratic majority, or indeed what happens if gets reelected, all of those things I think are really storied about the sector rather than necessarily just the pure index. And so it's a time when you really need to be thinking

about what does the regulatory environment mean? And that's not always super clear cut, it's not cut and dry, and so understanding and actively thinking about what does regulation mean, what does legislation mean, and which are the sectors who win and which are the sectors who lose. That's what's going to be the key to invest gonagement. Summarize the

state of populism. Right now we have this terrible terror attack in Vienna, Austria, the state of populism in Austria, in England for that matter, in Canada, and certainly with Mr Trump in America, the state of populism on the selection day. So I think there's a couple of ways to think about populism. We tend to focus on right wing populism, and I think that's been the one that's

been the most successful in recent years. Indeed, you look at places like the French, the French Tarty seventeen elections. We look in the US, we look to the UK that seems to be where the kind of populism support is growing. I think the one to watch for investors though, is in the next kind of year or so, it's actually Italy because although at the moment we have just coalition which is relatively stable and for now seems quite stable.

But my fear is that that kind of is hiding what is underneath, which is that actually the majority of support for parties in Italy is for populist parties, and in particular it looks as though a right wing populist coalition could be the next government when we get to the next selection. So that's one to watch for the

next year. It's a near term risk, but it's definitely one to bear in mind that it leaves this permanent kind of challenge with populism and systemic issues and cyclical issues that make it for me quite a kind of ever present source of president of political risk. Just not right now. This definitely is state the obvious. There is upside risk as well as downside risk, and I wonder

what we're learning about what populism actually means for financial markets. Well, I think the interesting things is that, you know, we use this kind of term populism very broad sweep. What matters is like, what are the policies that they're incorporating or are they making a risk event, you know, bigger than it would be otherwise. Right to an election is a good example. I think here we probably need to give your away from just the populism and think more

about that polarization. Right It's not just that you've got parties in the far right or the far left, it's not those more centrist parties can also pull apart. And in the US prime example, we're looking at a Democratic party that's much further left than it was four years ago against a Republican party which remains kind of quite conservative at its core, although of course Trump is kind

of implemented this additional element. I think what that means is that from one election to the next, you can get a lot of swings, and that's where the risk comes in for investors at the short term risk. And then really the question, as I mentioned, it's what is once you're over the event, once you know the result, once the uncertainty has gone, what does regulation look like? What does legislation look like? And what does that mean for the companies you're investing in. That's the way we

have to think about it, Stephanie. Just to build on that sort of connection between markets and politics, can you give us a granular sense of the process of how you work with investment managers, whether you're looking at long term place or short term place based on some of the political developments that you were just talking about. Sure, so there's a couple of ways that we do this.

The main was when I started doing this kind of political analysis in the asset management industry, which I have to say, there aren't that many political economists blowing around the asset management industry, and so I was quite struck by the extent to which they're just weren't these frameworks in place to think about politics. So I always say to our investors, to our clients, you know you have to do in scenarios. It's not enough to just have

a base case. Investors always anchor on this kind of base case approach when it comes to politics. You have to accept there's a lot of information you don't know. We don't know if pauls are accurate until they've proven accurate or inaccurate. We don't know how politicians are feeling inside. We can do lots of engagement, we can do lots of research, but I think the best way to think about it is not single base case what's going to happen,

but what's the distribution of risks here? And then from that say, okay, this is the distribution of political risks, what happens to markets in each of those scenarios, And then that way you have not only a distribution of political risk, but actually of market risk, and then you have a better understanding of how exposed you are to a given outcome, be that Brexit, be that U. S.

China trade relations, or in d the U. S. Election. Definitely, probably the most prominent political economists these days or moonlighting perhaps is a political economist is rate Hio of Ridgewater. He's been talking a lot about the rise of populism, about the inequality, and about cash is trash, the expectation for inflation in the United States. Do you agree with his conclusions based on his assessment of the political landscape, But I think that there's a there's a lot of

parts out in terms of that connection. I think we should never kind of be too quick to rush into what it means. And in particular, I think you know, there tends to be in a particularly that relationship, and I don't mean specifically to rad Dalio here, but there tends to be this discussion that takes place whereby more government intervention equals lots more inflation, and I think we really need to put that in the context of what

other political kind of issues are going on. And one big one is actually the globalization element, but also the kind of cyclical weakness and the structural weakness. Those things push and pull against inflation in different ways, and so I think it's another example of where we've got to be quite careful and kind of considered when we think about each individual risk and how that plays into the big macro themes, which still also rely on kind of

you know, bread and butter economics. Right, what's being produced, what's being where's the demand, where's the supply? Thanks deephitiely Kelly of Aberdeen Standard Investments, definitely, thank you very much. Michael Jesus is with us with Morgan Stanley, not only doing policy research, but with a foundational understanding of our municipal finance. We're thrilled you could join us this morning. Michael, every single conversation we have in your area says and

then they'll be infrastructure, and yet there's never infrastructure. What is a political outcome you need so there can be infrastructure. I think it is a necessary condition to get a meaningful infrastructure package that you end up with a situation where the Democrats take the White House and the Senate and keep control of the House. Uh. Simply put in a divided government scenario, there's not much legislation getting done.

Beyond perhaps another COVID relief package under certain circumstances. In a scenario where the Republicans take control of the House and keep the White House in the Senate, you have the same problem that you had in every other time that you've had complete control by the Republican Party. In theory, they're on board with the idea of infrastructure spending. In practice, they haven't been able to get there because they also can't agree on raising taxes to do it. They are

against letting the deficits expand to do it. So you end up uh to twist it up without a solution. Uh. The Democratic Party uh sort of is obviously a little more amenable to raising taxes are expanding deficits when it

comes to spending. So again I say it's a necessary condition that that's the configuration that you get, uh, not a sufficient one, because of course the Democrats are gonna have to balance their um uh their policy priorities, and healthcare is certainly in the mix and probably a high priority of them. Also, Michael, there's a lot to unpack their I think the broader theme to all of your comments is just the risk of a divided government when

it comes to fiscal spending. How big of a downside risk could there be the markets should there be a divided government, because it does not appear that that's being priced in. Yeah. Well, so the first thing to say is that in most post election configurations here lead to fiscal expansion. The one that concerns us is the one where the Democrats take the White House but the Republicans

keep control of the Senate. And it's not to say that you might never get fiscal expansion or COVID specific relief in that situation, but that you might need a greater demonstration from economic data or markets that such a response is needed. And that's because we know where the Democrats are on COVID relief. They want to go big. Uh. Senate Republicans um are expressing skepticism that the economy needs it, are also expressing concern about raising deficits further, and so

that disagreement manifests in that type of election outcome. And again, you might eventually get there, but the fiscal reaction function becomes very reactionary as opposed to proactive, which is what markets are expecting right now. Mike, I'm really interested in the conversations you're having with clients at the moment, if you were to ask them you think whether they would prefer to know the outcome of the Senate rice or

the White House White House rice ahead of time? What do you think I'd say most clients would prefer to know the outcome of the presidential race. Is that the consensus is still, at least in terms of the surveys that we've run, the consensus is still that a divided government outcome of any type is preferable to be unified outcome, mostly because it creates certainty around policy, or at least that's the perception right abviously outlined an argument where I

think it's it's nuanced in a little bit different. So I do think that that's where most investors are paying their attention. But they are also obviously understand the difference between the Democrats taking the White House without the Senate versus with the Senate um and generally speaking, in our surveys are agreeing that you get the biggest physicist boost in that situation, Mr Jasus. The votes are in in

the judiciary, and I believe we have nine justices. At some point here is the clerks get ready to help justice Cony Barrett. Great, what about the Affordable Care Act? What does a Morgan Stanley view on where the Affordable Care Act is, say in March of two thousand twenty two. Again,

I think this is very past dependent. So, um, if we generalize a bit, not specific to the Affordable Care Act, but whether or not in one you're going to have the same level of government spending on the healthcare or greater. The situation that makes that true is the Democrats taking the White House in the Senate, regardless of what the Supreme Court outcome is, because one could expect a pretty uh quick response legislatively should the Supreme Court overturn the

Affordable Care Act. Uh. In the situation where the Democrats take the White House Republicans keep control of the Senate, I think it gets quite a bit trickier and obviously gets trickier, um if the Republicans maintain the White House.

So to the extent that you're looking for and certainly are healthcarectly team looking at managed care organizations thinks the Affordable Care Act has largely been beneficial for the bottom line of large m c o s. The configuration that gets you the best outcome there is the Democrats winning the White House and the Senate. Michael, appreciate your time, says, send up best to the team at Morgan Stanley. Why do you Michael zesus that of Morgan Stanley right now

James Sweeney joins us with Credit Sweete. And this is an important conversation because in the mix of the political pundantry and frankly the financial pundantry. Mr Sweeney has been very clear of a cautious view on American economic growth. James Hugh still continue with the view that it will be a struggle forward. Well, I I think it largely

depends on the stimulus outlook. And and so you know what I'll be looking for today is do we get a clean, sweep scenario where the stimulus expectations become clear, or do you have something in a lot more modeled I think effectively, what's happened in recent months is that the big increase in deposit balances of a lot of households and the fact that people have bought a lot of physical goods while they haven't been buying a lot of services has hidden some problems that the household sector

has with cash flows. If we don't get that stimulus there are quite a few things that are going to restrict household cash flows and incomes in the month's ahead without new help from the government. It James, when you say problems, can you be more specific about those problems and why you think they are sure? Well, first, you remember the unemployment insurance which we had supplementary unemployment insurance during the worst part of the pandemic. It expired in

August UM. People said there would be a cliff. There was a cliff, it fell UM. But there's another cliff at the end of December UM, so there's more. Basically, unemployment payments from the government will be reduced further. There's also forbearance measures that many households have benefited from, which will expire at the end of the year. UM. If you look at labor income, it's very unlikely we're going to continue to see six d to a million in

jobs growth per month. So jobs growth should be good, but it should continue to slow. Wage growth should slow because wage growth has been driven up by an odd composition effect in the in the jobs data, and and the hours worked per week should slow due to a similar effect. So if you're in the nerdy details, UM, a lot of them point south in the near term

in terms of the cash flows of of of households. James, I've got to say, you just don't sound as constructive as you were maybe a month or so ago on this recovery. Is that a fair characterization of your development of your ideas in the last month or so? Uh? Well, I think I think I just see it as very stimulus dependent in the in the near term. I name, recently, we we are in a little bit of a slowdown relatives to the sharp acceleration that we had in Q three,

But economy is not contracting. The economy is growing right now. But I do think, uh, stimulus in the very short term, something like the package that was negotiated between July and this month is very important. And and so you know, if you have an election outcome that makes that stimulus likely, and I think we can be in pretty good shape. But otherwise I think there's there's trouble also the virus.

I mean, the virus is picking up again and that's a new headwind, and the virus is probably picking up a little more than a lot of people expected. So um, so we're just skittish, I would say, rather than actually forecasting a major problem, James. That's where I wanted to go. The virus and how much it's spreading. What high frequency data are you looking at to gauge the response if it isn't lockdowns. There's a lot of people expect the US to avoid some of the lockdowns that we're seeing

in Europe. What are the measures you're looking had to determine how much people's behavior is sort of acting in a restrictive way on the economy. Well, sure, so, I mean on the virus side, we we just look at the positivity rates and the spread and you know, the direct virus data. On the economy side, I think a lot of this new data that we have on on

foot traffic to establishments on point of sales data. I don't think the macro data are all that helpful, and I think the market is somewhat accustomed to looking at the same old indicators. But but but you can get thrown off pretty easily. So, for instance, people have been excited about retail sales being strong. Retail sales are goods. Consumption consumption is GDP, but only that is actually good services are the problem here. So looking at foot traffic

into restaurants, foot traffic into airports. Things like that, um and and related spending numbers are what we're watching. James Sweedie Junklat loves word diffusion, except he says it with a fancy French accent. I don't have. And right now the major question is if we have the haves doing better or even prospering in this pandemic, could any of their prosperity diffuse over to a large body of Americans

who are, to be kind economically anxious. Is there any ability to see a diffusement of that prosperity, that income, that wealth. Well, the problem isn't just that the income trends are different, but the concentration of people working in lower wage services sectors while having lost their unemployment or their extra unemployment and you know, about to potentially be

losing their their forbearance. Um, that's trouble. So the fact that people are buying big ticket durable goods largely imported are not necessarily helpful, you know, to a waitress who who isn't working, James, quite kind of shop, sir, James Sweeney, that of credit sway. 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

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