John, Andrew Sheets, New York City discussed on Bloomberg Surveillance


The city of New York and we have to say, 19 years on. There are very few events in life like this one where every single person you meet, knows exactly where they were when it happened. Family, friends, strangers if they're old enough if you ask them They know where they were that day. 11 is one of those rare moments of perhaps one of the only moments Tom like it 19 years on, and of course in Washington, with a plain ascending no doubt out of Reagan, the Pentagon here in the West Wall of the Pentagon with a flag and furl, the secretary of defense, Mr Asper, the Joint Chiefs staff chairman. Mark Miley will have ceremonies at the Pentagon at 7 30 this morning. And then John, as you say, we moved to New York City. But what a decidedly different 19th year of remembrances is John. With this pandemic. It will be a very different set of images this morning. We will observe those moments of silence through the next several hours right here on Bloomberg TV and on Bloomberg Radio program. It's give us the day ahead place. Yeah, we're going to be getting at 8 30 some consumer price data given us the fact that we're talking about a potential dynamite pillow as we are. From Alberto Gallo. Will we see a resurgence of inflation will get that 8 32 PM How big is the U. S deficit will get that August budget statement And then today, President Trump and former Vice President Biden will be marking the 9 11 anniversary and I do just have to say On a personal note. I grew up in New York City in the eighties and nineties. I lived through 9 11 and the rebuilding after that today, we're going to be hearing John so much about resilience and unity, and it's going to resonate that much more this year. Hopefully, 2020 marks a turning point toward a new era of rebuilding globally, John I think we all agree on their sentiment. Absolutely, Lisa. Thank you. Get to the price action shall weigh two hours and 28 minutes away from the opening bell in New York City. The price action shaping up as follows with equity futures. Nicely firma positive up 8/10 of 1% s and P 500. We advanced 25 points in the FX market euro strengthen the does not know what to do with it. 1 18 63. 4/10 of 1%, Tom. We'll talk about it a little bit like this morning. Christine Lagarde tried didn't try that hard. Mr laid. The chief economist came out this morning with a block he tried harder. And know much has happened since I am thunderstruck John and you know it's a somber day, but to the business side of things I'm absolutely thunderstruck that this discussion in a 1 18 1 19 handle I expected 1 20 to 1 23, and it has come early. This discussion of two strong euro. Once when he got it done, it got it done last week in a conversation continues. Joining us now is Andrew Sheets, Morgan Stanley, chief Cross assets strategist and her and familiar with the research and you've made the case continually. The fundamentals. Matter. We all agree on that. But where you come out differently on this is that you think the fundamentals are shaping this market house. Yeah, So thanks and good morning. It's nice to be with you. I think that what we see is that while it's very easy, I think to describe a lot of the summer's strength, too easy Central bank policy and continued easing globally. I do think of major story of the summer strength has been surprisingly strong economic data that surprised really a historically elevated degree. And I think that means that continued strength of the data is really central going forward. We're not simply we can't simply coast on an expectation of That central banks will solve all problems and I think this is what makes the debate around US fiscal policy. So important is that I think we're facing a really key decision point. For how the economic growth in the U S like going forward, And we think that would matter for markets. Even if the Fed keeps policy easy, and she's what does the decline in oil signal? It seems to be the one Statistic removed from all the gyrations of feds. Central Bank UCB fiscal in that what does Morgan Stanley say of $37 a barrel West Texas Intermediate. Get the oil market and I think it's very interesting at the moment because I think what you see across commodities and you think this also goes back to the idea that the fundamentals matter. Is that the supply dynamics really differ. You know, you have very different supply dynamics and something like copper vs vs Oil where I think the challenge the oil has is that as soon as you move up around $40 a barrel You have increased incentives for us shale producers to hedge and it's probably harder for Oh pep to continue. Tio push for its members. Are you cutting supply? Yeah, well, this is important. I don't mean to cut you off from the microeconomics is brilliant. But are you suggesting loyal is not indicating global slowdown? I don't think so. I do think that supply issues are are a major factor behind that, because a lot of the other economic data that we follow the gold my data ah lot of other global retail sales data. That'll still looks pretty good. So we still think the global economic picture is strong and that what's happening in oil is a bit more to do with some of the micro fundamentals of supply in that market, so fundamental still matter, Andrew, how do you price in what people are expecting which they slow down and consumer spending? Possibly a downturn in the economic data. If we don't get another round of fiscal support, which looks quite likely at this point Yeah. So I do think this is a dilemma for investors. I think this is a reason why investors need to know hold lighter positions. I think in this month because you know, as you mentioned, this is a very binary outcome know the difference between another kind of cares? Package passing and not is the difference of of trillions for You know us? Ah, GDP over the coming months. And that is the difference between you know better than expected growth and growth starting to decline again. So you know, I think this is one of those issues where you know our base cases is that you know, another aid package will pass, but it's inherently uncertain. And because of that uncertainty, I think we need to tread a little bit more cautiously than we would otherwise in September. Look for more clarity, and then at that point, I think then it's easier to re engage more aggressively. Well, Andrew when you say lighting up, lighting up where Yeah, so I think it means running lower overall exposure to equity markets. We've also reduce exposure and emerging markets, You know, emerging market Foreign exchange, I think could potentially suffer from the fact that Just the The extra Carrie you're getting in those markets is historically quite quite weak. And you know, as you look across a lot of different asset classes, it's quite hard to find hedges at the moment, given how low bond yields are given how high volatility is So potentially emerging markets could could suffer some. They look maybe more attractive as a hedge, and we've also dialed back from exposure. Emerging market credit again. Those markets have I've gotten closer to our targets. So I think it's generally about not abandoning a early cycle thesis but generally holding kind of less of what you would otherwise and and looking for. A better opportunity of some of the uncertainties is Andrew, This is the story that you on the team along with my words that have been telling now since we came out of the crisis, or at least the immediate start of the crisis in marches that the recession playbook will play out as it always played out. Is that? Still the case and a question asked Mike Early this week, Andrew, I'll ask it of you. What are you learning? Is this journey continues? Yes, way do still believe in that We still believe that this will be kind of a more normal cycle. Then that may be expected. Despite all the obvious abnormality of it, and by normal that AA lot of the usual strategies that were coming out of a recession can work again. I think we know one thing that has surprised us. Certainly surprised me is that I think that the bond market has remained far more skeptical of of the recovery than other parts of the market has, and I do think you still have a fundamental tension. In the fact that you know some things that benefit from normalization have benefited, you know, small cap stocks have rallied a lot off the lows, but a lot of things that you would buy if you expected things to remain abnormal for a long period of time..

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