Bloomberg World Headquarters, Abigail Doolittle, FED discussed on TuneInPOC

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From Bloomberg world headquarters in New York to our television and radio audiences worldwide. Welcome to balance of power. We're going to start today once again with a check on the markets and where they are today. Joining us is Abigail Doolittle. So Abigail, what are we seeing today that's different? Very interesting action, in fact, I divergence between the growth and cyclical trade today in favor of value or the cyclical trade and not tech. We have the S&P 500 at this point actually down earlier putting in an all time high. The Dow is leading. It is up at this point about 7 tenths of 1%. On the other hand, the tech heavy index is, they are down, down, down, more than 1%. This has everything to do with rising yields. Over the last two days, the ten year yield backing up about 15 basis points may be a delayed reaction to the fed's message in December as folks seem to be a little bit less worried about omicron. So here we are putting 2% back in play. I know you have a thing you were talking about 2% and I'd give you a tough time and I'm not making it 2%. 1.7 if we get there, it's closer to 2%, no question about it. But at the same time, what's the volume like? Because obviously through the holidays, it was very thin. Yeah, it's really interesting. It is 50% above the 20 day moving average. So if you factor in last week that, of course, would take down the average, but even so, it is way, way above. So the little bit of selling that we're seeing today means that those investors are fairly serious, especially in terms of selling tech and apple is still down. It's down 1.2%. So not making that $3 trillion market again, at least today. I'm worried about Apple being under $3 trillion. Thank you so much to have go do a little for that report on the markets. As we enter 2022, rebounding economy is facing a good deal uncertainty over jobs or inflation of the fed pace of fed tapering. Take us through it all. We welcome now, Stephanie kelton. Professor of economics, the state university of New York at stony brook. Doctor kelton earlier serves as the chief economist to the Senate budget committee. So doctor kelton, thank you so much for being with us. As you look at the possible risks out into 2022, what's got your attention the most? Well, you look, you're looking for the headwinds, right? I mean, in terms of the economic outlook, it is always a foot race between the tailwinds that you hope are strong enough to propel you forward and keep you keep the economy expanding, allow us to continue to add jobs at the sort of pace that we've been adding over the last number of months now. It's been very strong, but the risks are obviously, you know, what you're coming up against in terms of headwinds. And David, for me, the big headwind has been from the very beginning of this. The virus itself. And as we got vaccines, and as we got more of the population vaccinated and we began the reopening, we started to see just how resilient the economy had been through this. And then, of course, we get hit with Delta. And then here comes omicron. So, you know, if we are lucky and what we're hearing from a lot of the experts turns out to be correct, that omicron is more transmissible, but less difficult to deal with in terms of the health impacts and so forth. And we're going to see maybe after the next three weeks or so will be, this will be kind of rearview mirror in terms of omicron. So if there's not another mutation and another variant that we have to deal with, and I think the outlook looks pretty good to me. The big headwind is the virus. Yeah, from your mouth to God's ears, basically vaccine really taking care of problems for us. We're getting past the omicron. At the same time, as you look back at what we saw last year, is the virus hitting the supply side of the equation of the demand side more because I think one thing that surprised some people was how much it hit the supply side, which really drove inflation. Oh, I think that's absolutely correct. I mean, there are both things are at play here, right? It is the case that we had extremely robust fiscal support this time, unlike after the financial crisis and the fiscal fiscal response from Congress after the 2008 economic downturn, this time was much different. We had much more robust fiscal support. People had more money. They had more income to spend coming out of, you know, the sort of reopening part of all of this. And so there were demand impulses there at play that helped to allow consumers to go racing back in. And it's really been a question of what people are trying to spend money on. You know, it isn't the case. I don't believe that what we have is just a generalized case of too much money chasing too much, too few of everything else, right? Goods and services. People have been trying to buy a lot of goods. And we still have been reluctant to go back into restaurants and on airplanes and hotels and the vacations. And all the other things. So, you know, the supply side has revealed a lot of vulnerabilities. And we've seen it at the ports and we've seen it with freight and trucking and all the rest of it. And so the supply side, I think, overwhelms the demand side, contributors to the inflationary pressure that we're currently dealing with. And of course, it's not just goods and services that there's a lot of demand for it, not a lot of supply. And there's also workers. We've had some difficulty with that. What do you make of the job picture right now looking forward to those jobs numbers on Friday? And the increasing wages we're seeing across the country. Yeah, so, you know, we got some numbers out today with the jolts report. Now this is a look back, right? These are November numbers. So this is really pre omicron, but these numbers look really good. I mean, this is a labor market that continues to, I think, display a great deal of strength, you continue to see high levels of quits. That's true about four and a half million workers quit jobs in November. But we added 6.7 million hires. And so while quits are really near historic highs, it's also the case that on balance, we are adding tons and tons of jobs in this recovery. And so that's a really good news. Most of the people who are quitting are quitting because they're taking more different jobs, right? They're not quitting and leaving the labor force. In fact, the labor force is continuing to grow. The labor force is growing by 1.8 million over the last 9 months. So we're adding back jobs. We've got a lot of strength in the labor market. Yes, some workers are enjoying by virtue of having a little bit of additional bargaining power. The ability to leave a job, they didn't like move into a better job, a better paying job and to the extent that this labor market is allowing people to enjoy that sort of increase in wages, along with an improving economy. I think that's a good thing. What does this all say to the fed is we enter this new year, the feds indicated they're going to they are in the process of tapering their bond buying purchases we don't know yet about the rate hikes. What do you anticipate in 2022? Well, look, I think we know that the fed would really like to be able to raise rates. Probably would like to be able to get in three hikes. This year, whether that turns out to be possible or not, I think, again, we got to come back to the virus. I think ultimately the virus is going to drive where the fed goes with rates because the virus is going to drive where we go with the economy. So yes, the fed has moved up the pace of the tapering of the bond buying and there is some talk among some at the fed that if they begin to allow the bonds to roll off, they've got a portfolio that's close to 9 trillion. So if they do some sort of measured rolling off of bonds, some at the fed have made the argument that this could be done in lieu of more aggressive rate hikes, which they believe would possibly help to address inflationary pressures. So if the virus allows it, I think some combination of rate hikes and or.

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