Global Data Watch Weekender: Some signal, a lot of noise

Welcome to the JP Morgan weekender. I'm Bruce Kassman and this is Joe Lupton with me. Hey Joe. How you doing? Bruce, what are what are you doing on your back there? Well I just had a uh back surgery to recover from, uh, which was actually conducted during the uh

The employment report, which I think means this is the first employment report that I didn't get to see live. Well, I think it what it meant is you were you were contributing to the only rise in jobs in the country, the healthcare sector. In preparation for my surgery there was a big boost in uh Jobs in the healthcare industry in the month before I want listeners to know that the back surgery had nothing to do with me being a pain in your back.

I I should be the judge of that joke. Let's uh let's go on. So I'm framing the conversation here in the context of the the view that we have that the uh you know, US and global economy are gonna see some recoupling as we move through the first half of the year. I think there's two pieces to that, at least two pieces to it. One is the idea that we get a pickup in um hiring and non tech business spending that's connected to fading of business caution.

Um the second part of their story is that uh we don't get an acceleration or growth off of that, partly because the the tech sector, while still strong, is cooling off somewhat. That's probably a more of an Asian story in terms of actual GDP implications. But the bigger part of the story I think from growth adding up is that We had a pretty strong consumer in the second half of last year, particularly in the US. Um that um, you know, slows somewhat in a world in which uh

even though you're getting a better labor market, you're getting some desire and need to recons r to consolidate and pick pick savings rates up. And I guess my my thinking is that Um, with a lot of noise and a lot of things we can go back and forth in terms of questioning how to read data, that both of these forces are starting to come into the picture. As we make our way through the first uh Part of twenty twenty six.

So I mean we can go through the numbers and I I I don't want to get too bogged down with all the noise and the detail, but I guess from my point of view, starting on the labor market, I'll just throw out as a aside that I think we got it okay.

picture on employment growth in in the Euro area at the end of last year, certainly not the UK, but the Euro area which matters matters more. And I think that looking through a labor market report where there's clearly things that boosted that hundred and seventy thousand uh private job gain. the underlying picture, connecting the dots of the least l recent months, connecting the dots through other

uh labor market indicators um is encouraging that there's a pickup going on. And I'll just throw out as a number that I think we're probably running now back to about a hundred thousand or so on private payroll growth, which I'll remind people that a year ago I would have said is a is a stall speed, um and that is not a strong number, but it's definitely a a a nice

pick up from what we have been seeing and I I'd like to think that it's connected to the underlying moving parts of fading caution um that we've been and and the consumer that's delivered that resilience that we've expected. I could go on on the consumption side and stuff, but let me just stop there and let you kind of throw your perspective in here. Yeah. Um

Is definitely we have been seeing in the since the start of the year the the strong growth and the improvement in sentiment uh which we've attributed to fading business caution. Um and We have been noting that the important part of the job market picking up has not been seen yet. And that was

crucial to get the handoff from last year's wealth effect driven consumer spending to more sustainable uh labor income driven spending this year. And I think it's it's I think you're right to kinda highlight mixed and you can dig into all of these things, but you know, beneath the surface things are moving in the in the right direction in this week. Payrolls reports certainly um help uh move the needle in in that direction. Um I

I mean you and I could probably get into a long argument just for the sake of argument about a hundred thousand being enough. Right on this call, right? Uh I mean it I But you're gonna be kind to me because you know that you have caused me some back pain over the last year. Uh I still you really have to figure out what you want to do with this January number because I I think if you with all the revisions we've seen in the data.

Um, without the January number, you'd just be looking at a 2025 right up through the end of the year, I think. Um That you know, things were kind of churning around 50,000, 60,000, 70,000. Um, you also have a a labor market. I was joking up front that. seems to be heavily driven by uh your um health and, you know, edu private education.

group, uh, and outside that uh, you know, the numbers are pretty pretty grim. And I know the government is is a part of that story, uh, but government are jobs and that's income and that that continues to be a a a head Um, so I you know, there are ways to kind of temper that and then you get this January bounce and like, you know, that is is good. I mean, the question is how much of this is just kind of seasonal noise.

Uh I think e even you will agree the February number is probably gonna come in with a a bit of a thud and so you wanna m smooth through the strong January with what would likely be a February thought and and in your mind you think we're still gonna be averaging a hundred thousand on on private because I think it I I I I tend to to look at apparel numbers, a string of numbers that are connected to

um a few of them together and then to try and connect to other labor market indicators. And I guess what I would say is coming back to your description before is that there's no doubt that the the number we got this week revised down the profile, so that does change in some ways your metric. But I think we had a profile there through the first nine months of the year in private perils the average monthly gain was twenty five thousand a month. Uh in the last three months of twenty twenty uh

Uh five, the that number got up to something like sixty five. I don't have the number in my head, but I think that's about where it was. And then you go to one hundred seventy in January. Now the one seventy's got weather effects, it's got I think um other things that perhaps um boosted it. Uh we can get into a l messy conversation about birth death, which um our team teammate ABL wrote a a m a a messy but good piece on in terms of how to read that.

Um and I think, you know, you you take from that, even with the haircutting around that, uh, some further stepping up, especially when you align it with what is the broad message. coming from things like continuing claims going down, uh, the um survey data, which is either depending on which ones you want to focus on, have gone up or been on the on the stabilizing side. And I think it's not a easy call to make where we're gonna

kind of end up here, but I think we're we're stepping up and uh a hundred to me feels comfortable around a I mean one seventy January. The funny thing around all this is is like Tw twenty five, even even fifty thousand standard errors on on payroll numbers is is like still within rounding error, but that's what we're gonna argue about and I agree we should. So I I But I don't think that's the point. I don't think that's the point. I want to finish my point. I was just more caveating my point.

You keep saying a hundred, like private payrolls through December, I think you threw out a number that uh it sounded high to me. We we averaged 49,000 in the three months through December. On private. On private. And we averaged probably maybe a touch over fifty, maybe fifty three on Gov. Gov's complicated. I'm gonna throw out the October, which was minus one forty. Uh, you know, to but if I just took September, November, December. We were averaging about fifty thousand there as well.

So I i I I don't wanna like pour cold water. I think your point is fine that the momentum's picking up and we're seeing the sentiment pick up and and this is good. This could have been a a really bad report. Um and is not showing that. It's definitely not showing a break.

Um, I just think the January number, even when people say, Yeah, I know I need to fade that, they're still looking at the January number and using that kind of as their optical, hey, things are really accelerating here. And I think if you just look through the end of December, it's kind of fifty thousand. I you're probably I can see you're probably looking up the numbers. Am I wrong about that? I I think that's right. Well yeah, you gotta you gotta

thirteen thousand in sub in October, around the sixty eight thousand in September, seventy two thousand in November and sixty four thousand in December. If you take those four months, if you sort of say, okay, let's smooth through September And uh October, uh you're running about a fifty thousand or so pace, which is twice the pace of the free previous eight or nine months.

And then you jump up in January. Those are the kinds of things That's not twice of the previous nine months, Bruce. You had one really weak Jan and one really weak June. Otherwise you are running about sixty five, fifty thousand. I missed it. No, you're not. You're running quite a bit lower than that now. And I don't we can go I don't have the numbers in front of me, but you're certainly running

On a trend basis quite a bit lower than that uh in the in the year through sub you know, if you go through like uh the the first uh nine months of the year, it's very weak. I think I I feel like this has been a fifty to seventy thousand Growth for most of last year, and that didn't change up until December, up through December, and January got a big pop.

Well, you're you're taking out any sense that there was cyclicality in last year. I don't think that's right. I think things were as strong as we started the year. They came off pretty hard into the spring and early summer and they picked up somewhat through now. You can smooth through that stuff in a way that you can take out all of that cyclicality.

But I don't think that's right. I think there is cyclicality here. And of course, as you're saying it, a hundred thousand on payrolls is not strong. In fact, a year ago I would have call I would have called that and still do call that stall speed. Um but I think there's momentum here that is moving in the right direction. I think that's

aligning with some other data in the uh labor market stuff that is consistent with that. It's aligning with the income story on the labor market. And I don't think we can feel confident about magnitudes here, but I think we should feel comfortable about the trajectory and the and the momentum side of this. And that's that's what I all I want to say. I don't want to push the story too hard. I feel comfortable about it because it's not breaking down.

So you're you're saying what all you're feeling is that the what you're seeing is the labor market's not getting worse? Uh through December, yeah. And then I have to think about what January's telling me. And I think there are reason there's a lot of we could have an hour conversation about all the seasonal birth, death model, all this stuff. I I obviously hate those conversations.

uh whatever haircut. I think you said cut it in half. I I think if you throw in the January and it's running a hundred, sure. I I do I I mean, as I said, what do you think February is gonna be? We we could be having a very different conversation uh come uh early March. I just said I think we're gonna end the first quarter with a hundred thousand per month on payroll.

Yeah. And that's gonna have a January revised down. It's gonna have February that's gonna cut cut. That'll definitely be a step up. Uh that's that's my best judgment of what's happening here and and cross referencing it to other things.

Um and I think that's a the other part of it that we haven't talked about yet, and maybe this is the pivot, uh, is to say That you did get a disappointing reading on the consumer. Um and again it's

I mean, well I was tempted to say it's one month so you don't want to overreact, but actually the disappointment was not only about the one month, but it was the downward revisions as well. So Um, you know, coupled with January, we don't have a lot yet, but you know, car data and also the motor vehicle sales, um

uh we're soft uh you know motor vehicles is chopping. I mean here we're gonna get into an argument we've had before which is look the way I'm looking at the consumer right now is that the consumer did its job It cushioned the economy through the second half of last year. We had come into this week thinking that fourth quarter consumption was gonna be a little over three percent. We're coming out of the week thinking consumption is about two and a half percent or so.

Uh that's clearly weaker. It was a disappointment in the retail sales report. And I think the January numbers, as you say, are gonna be soft, not least of which because of weather effects that are gonna hit and we as we kinda see the retail spending in the latter part of the month. None of that takes away from the fact that a consumer that grew over two percent in the fourth quarter, grew over three percent in the third quarter, and did so in the face of this weak labor market.

Did its job of smoothing. Um it's also the case, and I think we can debate magnitudes here, that the income dynamic is is is holding up okay. So to me, a consumer that's slowing in the face of this. is a consumer that having done some cushioning now is now consolidating. That's not to my mind a significant risk factor for the economy. Um, unless we really feel like businesses are gonna take that uh

uh slow down and and lose the momentum in terms of what we've had in business sentiment and of course ultimately in hiring. But I don't think that's going to be the case. Let me just say in terms of tracking the consumer. I I'm gonna end in a end uh ultimately agreeing, but not for the reason the way you're characterizing the actual consumer spending. Because I think it's kind of disingenuous to talk about Q4. Q4 started really strong and it's ending really weak.

And we had the latest data is week for January. What that's telling me is you're gonna get a pretty soft unless it bounces back, maybe. And by the way, uh that's not till April, but Yeah, you're gonna get a weak Q one. Maybe it's gonna be one percent.

Yeah, maybe it's gonna be point five percent. I I don't know, but my I agree I agree. May I don't know, but I don't care. We're gonna hit two and a half again. Right now, I I don't know what we're forecasting for Q one, but I'll bet the risk bias is to the downside. However,

And this is the important point. This is I I think your strongest point, which is Yeah, at the end of the day, if you're telling me payroll proxy's running over five percent, um, and we haven't talked about inflation yet, but maybe the inflation numbers aren't going to deliver yet again uh uh the the what we're forecasting and w we're we're above consensus and have been on that. And if it doesn't, then yeah, real income's gonna be fine and I'm not gonna be worried uh about the consumer.

Um so I I I take that point. Um but I I don't I I my point of talking about the retail sales was partly because it came out this week and to say that was a it was a disappointment. Let me put it this way. We were forecasting. If we got our forecast, retail sales would have been running six and a half percent annually.

it came out at two percent annualized. So that's that's quite a miss on a three month run rate. Um and that, you know, they we kind of shaded a lot of the the the consumer from last quarter.

which is, you know, all last quarter started strong. That gives you a sense of the soft trajectory coming into the into the current quarter. Um it's just, you know, a bit of a uh It's interesting to me that we got a super we got a super surprise on payrolls and you're not talking about trajectory, you're not talking about momentum, you got a surprise on retail sales to the downside and you're talking about that.

You know, th to me the two are symmetric. They're both things you're supposed to be discounting and you're supposed to be looking through them to kind of get the sense of underlying trend. I don't have any doubt that the trajectory on consumer spending is gonna be weakened to the beginning of the first quarter. That

That's what I would have expected. The fact that we were running that strong in the fourth quarter was weird. It was way above what a smoothing and what the consumer fundamentals would have suggested. uh worried about this. This is not to me a sign of a consumer pulling back or behaviorally having any trouble here.

I also don't think after having had a a good run like we've had, a few months of softer numbers are gonna really spook and change the dynamic on the business sector side. But nonetheless, I do think what it is telling me More than anything Is that this is not an economy that if the labor market does start to do better and come back to the economy, that we should start to expect three percent GDP growth. I think it's an economy that's gonna rebalance itself out here

But probably deliver growth rates in the low to mid twos, which is what we've been getting for much of the last two or three years. Yeah, I I I agree.

Okay. That's good. Um let's talk inflation a little bit here, which is, you know, I think the other and b and by the way, we should say that the the there is a a a piece of the consumer story which is also global because the retail spending numbers which were pretty strong going through the early part of the

uh fourth quarter just about everywhere outside of China have also kind of slowed somewhat into the end of the year. It gets a little tricky here, especially with the uh lunar New Year stuff in Asia to read the data, but you know, nonetheless it's not just the US that has shown that that trajectory of uh

uh some some slowing at the end of the year. But let's let's turn to inflation here now. Um I mean the the US number today I think is on net a a more benign reading than we had expected, but I'm not sure how benign it is in an absolute sense in the um in the context of it still feels like it's

Holding inflation in a somewhat elevated space uh one You know, once we take out the and I don't like to take things out arbitrarily, but I think once we smooth through the used car prices and goods, you see still significant pressure. Uh, recognizing that shelter does matter. Shelter came in low, but the supercore came in pretty high. I think it was close to point six on a monthly basis for for Supercore. So I think there's a question here.

of how much of the early year bunching drives that. The seasonals were adjusted here to give you more um uh bunching built into the seasonality. So the question is, is this a cleaner reading or not? If it If it's a distorted, hey, we're gonna get higher inflation at the beginning of the year, then I think we get more um

more of a benign spin on it than if you thought about it as a clean month, uh, where you had a a point three with a big drop off in uh car sales. And then I guess the other point here which is I think quite relevant is that um The car sales and the shelter are things which get a lot less weight in the PCE basket, which is is likely

running uh out above the three percent run rate here if we get our forecast for we still don't have the December um reading. So we'll get a December and a January reading to kind of catch up to the CPIs. Yeah. The the other thing that kind of jumped out to me is that we're we're still not seeing the um kind of the health insurance. part of that, the health services part of that, which I know is gonna be bigger in the in the PCE, but I um

Yeah, the health insurance was low. Yeah. It was down actually. But I I think listeners need to realize it's kind of flaky the way the CPI, the BLS measure. Right. I mean they're they're going off insurance company profit. right as the delivery of their of their services. And so these numbers can be as much as six to twelve months lag from what consumers are really feeling.

Um and so like when you talk I mean if you look at any um any kind of uh people that look at healthcare costs, um, they're saying last year prices were up kind of strong single digit and this year these premiums, healthcare premiums are could be up as much as a little uh you know, above ten percent, ten, twelve percent. And

you know, I don't the mapping into CPI prices may not be one for one on that, but it it should look similar and you're you're getting a big acceleration in this. There's no one in the industry that doesn't know that Employees are feeling the pressure and employees are passing this on, either in the form of higher premiums or in deduct increases in uh deductible.

Uh and then that says nothing of the ACA uh effect. That is also gonna be a play, although that's not for for the inflation numbers. Um so You look at it and you say, geez, uh I don't see anything here. Health insurance prices are actually down a full percent in this and it you know, this doesn't jive with what I'm hearing, but it's it it's very lagged.

Um and it's also to say that this consumers are feeling it, right? You read the newspaper, you can see people are feeling uh these pressures here. So um Anyway, that that was another uh bit of a in the weeds element of the report that I was I was looking at. In addition, um you know W you've been pushing the inflation story, driving the Fed to have a conversation about hiking in the middle part of this year. How are you feeling about your

Your biases on that on that side of things. I think if you keep giving me, you know, above potential growth, uh I'm gonna keep saying there's gonna be no reason they need to be talking about cuts. And let's not forget the unemployment rate. We didn't talk about the unemployment rate, but the unemployment rate surprised us announce. In fact, last week I mistakenly said four three and you said, Are you forecasting that? I should have said yes.

Uh um the unemployment rate um you know obviously moved lower and is just a reminder that um this is uh you Really the the alternative is Goldilocks. And one could look at this week and say, Oh, look at this, you know, strong labor market, inflation kind of I I don't no one should look at the inflation numbers and say this is you know, we're done here. We're still uh running at higher inflation, particularly with supercore running at three and a half.

Um, but you know, it was better than expected. Um and so you can look at that and say, hey, maybe this is Goldilocks is gonna happen. I I don't I don't look at it that way because I see enough in the inflation report that um I you know, I can fade things on that. And if I'm uh you know, I lean more in in your your camp on some of the the the positives from the labor market data, that just makes me, you know, reinforces the call that the the Fed is gonna find itself

um, you know, struggling to to kind of talk the rate cut story as we move through the next several months here. Yeah, so I think I think the inflation news on the margin was constructive. Not not great, but certainly constructive. Um I think the ECI report was constructive in terms of suggesting there's some downward pressure on on uh labour costs that have come with the softening.

in job markets. Um, but I think the other side of this is, as you say, the U rate, um, the U three, the U six rate, both down, both come back now pretty close to where they were at the end of twenty four. So the

the weak job market we've had over the last year in terms of hiring, um, really didn't create much, if any, slack in the system. And I do think the idea that we're getting back possibly to a hundred thousand or more on uh job growth here is gonna be something of a problem because I think one of the messages underneath this

set of data is that the labor supply picture is just pretty darn weak and the part rate has been stable. So I obviously I think you have to attribute this to the immigration uh story. Um so Um, I think if you're the Fed, this is gonna open a divide. There's gonna be some people who are gonna feel, hey, you know, when I cut through this and that, I've got inflation, you know, the core numbers

is running about two and a half right now. You feel like you're above your your neutral rate. Let's bring things down, especially if you have a view the labor market is still uh somewhat uh troubling. And I think there's gonna be a valid argument of that type. But I think there's gonna be just as valid an argument that says we're we've got a constrained supply side on labor, labor markets are tight, things are starting to pick up.

Uh there's no reason around a pretty uncertain uh position of your policy stance to really push rates down. So I'm I'm comfortable where we are without a rate hike in our without a rate cut in our forecast. uh for this year. But I do think there is going to be a pretty substantial divide here and and how this macro picture plays out on the margin here on the inflation and the

And the growth side could make a can make a difference. So I I you know, I would say the the risks are skewed in the direction of rate cuts. Um and that doesn't go away with today's report. Uh certainly. Is that because you still see risk to growth to the downside? Well I think I think there's more um things that can happen here, including growth being soft, including uh inflation continuing to be on the softer side that can get you rate cuts.

then I can see anything in the picture that can even, you know, bring a serious conversation of rate hikes into the picture. So I think the risks are skewed in the direction. I do think the politics matter if we're in a more marginal space. Um I mean that that that's kind of almost a a give me'cause we're still above neutral, right? So the right off the bat, knowing nothing, you would say you're kinda biased towards You know, s a m a move towards towards neutral there.

You you you perhaps are although I think there's a number of people on the committee who wouldn't argue there's a really strong bias that policy rates are above. neutral here. But yeah, I think that's that's fair. Mm-hmm. So I mean I think we're we're in an interesting world because we might We our forecast has been we'd be in a clear and decided world that keeps the Fed from having um

the uh debate to to lower rates really become uh feasible. I think the inflation news is if it continues to come in somewhat better, it makes that uh debate more uh two sided. And a two sided debate given the politics can I think, you know, deliver rate cut, although it's still not my baseline. My baseline is still that the Fed's gonna stay on hold here. Um

So let's turn elsewhere. We spent a lot of time on the US and understandably given the Data Palooza this week, but maybe Ward, you've been focusing a bit more on Asia than I have this week. I've been kind of on my back.

Uh, there's been some interesting n issues around Japan after the election. There's China credit data. So why don't you just take your your best two minute take on what you want to read from where we sit in in Asia right now, um, where I think there actually are some interesting things going on.

Yeah, just let me take the the the China part quickly'cause I think Japan's maybe a little bit more more interesting. Uh you know, I mean just the news this week was on the on the credit side as you noted and Total there there was some inflation news as well. Um, you know.

continued deflation, but maybe moderating a little bit according to PPI measures. But you know, the the credit numbers I think surprised me and I'm I'm probably probably gonna get in trouble with the team a little bit'cause I think they're characterizing things a little bit different than I am. But I I felt like

I saw bank loan growth kind of pick up a bit. Um uh, you know, you've got the government uh kick that's coming and starting and you know bond growth there was pretty strong. I think overall TSF. S at least what I was looking for. Again, I apologize to the China team if I Stepping on their toes. You've already you've already thrown your uh yeah. My apologies. Yeah, you'd have to do it three times. Um

So i not a lot, but all that just is to say that I think w we have a call that policy is gonna be an important support for growth this year. It's a part of our whole global first half strength story with US kind of doing well fiscal and fiscal and Germany.

Um so I think that that story's track and I would just leave it at that. Um The Japan, of course, was the big news with the the really strong election victory um and LDP get getting over the two-thirds majority, which is gonna give them a lot of flexibility. And so now the questions are natural it's almost like the um

was it the the the dog that catches the the tire of the car? It's like what what what are they gonna do now? And I um I I I think like when you look at issues that have come to the fore, obviously the consumption tax. uh it jumps out. And that one's an interesting one because it wasn't as though Takichi, this was like a major thing with her. She kind of almost got um forced into that during the election and so now that she caught the tire so to speak.

Um, people are saying, well, what are you gonna do with this? Yeah, it kind of has to deliver something. And so is that gonna be a kind of a temporary two year consumption tax cut? Is it gonna be one percentage EDP? Is it gonna be um you know something more? Uh I think

structurally there's maybe an idea that this could turn be a a bridge to something more like uh a refundable tax credit, but that's gonna take a lot of time and it's not an easy thing to But we don't have any time any doubt that Japan Fiscal policy is gonna be stimulative here, right? We don't. I I I think there's no doubt that. But so let me say there's there's two elements. There's this consumption tax hike, which came out of the blue. Uh they'll probably get something on that. Um

And then there's just the the the kind of the budget, the fiscal spending. Now here in terms of timing, remember the the the fiscal year is just is starting soon, right, in April. Um nothing's really gonna change on that. front that's gonna kick off. But then by summer, maybe you could get some type of supplementary budget and then it's just gonna be um an an issue of is this just going to be

uh more strategic reallocation. I think there have been some comments that there aren't going to be any new J G B issuance. So I I think that uh you know, I in addition to what what is kind of in the in the budget. Um Everything's very fluid. I mean, I I tried to pin Ayako down on this and I I think she was, you know, rightfully saying like there's just too much unknown right now in terms of how this is gonna evolve. But those are the big issues, the consumption tax.

hike and then just the the the the budget uh timing, maybe something by the middle of the year uh is when you could start to uh learn something a little bit more concrete about that. What about I mean I think the Part of the issue here is they now have a lot of leverage and do they put both that to work in terms of the

uh fiscal side as well as taking taking uh you know the pressure on on the BOJ. My my gut feeling is that they're the pressure comes off the B O J here as they do what they uh feel they need to do on on fiscal, they do a bunch of other things in in the policy space outside of economic.

Yeah. That they recognize that they're gonna need to give the B.O.J. flexibility here in order to keep markets uh stable. Um and and frankly, Bruce, I I've been kind of telling people that exact same story for the Fed. You know, people kinda wanna you know, they're gonna they talk about like, Oh, when Warsh gets in there he's gonna

He's gonna have all types of problems because uh, you know, he's been promising kind of Trump rate cuts and he's gonna have to deliver on that, but he's gonna have this really strong economy through the first half. So how can he do that? Like my mind is like

The economy's super strong, doing well. I I think s Trump will probably take some of the pressure off the Fed. I mean, maybe that's naive. Trump just wants lower rates, always lower rates, but um I think if every if if labor market's giving you your hundred thousand, you uh GDP's running two two and a half percent, inflation is Goldilocks coming down.

Um, you know, d not not enough to get them to to cut, but they they still have to hold uh hold the line. Um yeah, I I The election is coming up, the the labor market's doing well, they don't have to work I back to Japan, I think what you're saying is m is sensible. I I think it's a similar thing. If the economy's doing well, you don't get the heavy handed why why mess up the Apple car? Why upset you know upset financial markets by kind of

trying to um you know threaten central bank independence. That just seems foolish. So I'm not sure I I'm I don't agree with you on the US. I mean I think there's gonna be pressure. I think we can debate whether Walsh can either deliver or will even um Will Trump pound him on that if he doesn't deliver rate cuts. And I'm saying everyone's saying yeah, Trump's gonna pound him on that. It's just a matter of whether Warsh will kind of

be able to kind of have the the the backbone to hold the the the independence of the of the Fed to do whatever is the right thing at that time. My point is I mean let me just throw out a number for you. If we're running 140,000 on jobs, uh w labor income is doing well, sentiment has fully recovered, and suddenly, you know, poly market is showing that the Republicans are gonna keep the house.

You think Trump's gonna go out there and say, Yeah, well you know, Warsh is an idiot, like we we need to we need to get rates lower. Um, you know, I don't I don't know if he's gonna call Walsh names, but I think he's gonna keep putting the pressure on rates. I think it'll be very Yeah, well yeah, again, it's whether it's whether it's performative or whether there's a substantive piece around what we've been seeing with like the cook firing and other things.

Yeah. We'll we'll see. I don't I I I I don't want to argue we're gonna go that far, but I actually think let's not let's not let's not conflate the Fed and the B. O. J. story as as one. Uh I do think the BOJ's got some degree of flexibility. I think being gradual is is gonna be Still a needed um um, you know, kind of response function here.

But I think they will have the flexibility to do two and and in under circumstances that I don't think are that extreme, I think they could end up doing a third rate hike this year. Um although that's not our call right. Um, maybe let's leave it there. Uh we've got lots of stuff uh that we talked about and lots of stuff we're gonna be uh following up on. But uh let's leave that to the weekend or next week. Thank you very much.