00:00Experience suggests that labor market deterioration can occur quickly and non-linearly and be difficult to reverse.
00:06In part because monetary policy lags several quarters, a quicker pace of easing policy, as I have advocated, would appropriately move us closer to a neutral stance.
00:18Meanwhile, valuation concerns are bleeding into the emerging market space.
00:22MSCI's gauge of EM equities selling the most in three weeks.
00:26So let's get more market action now with Andrew Slimmon, Senior Portfolio Manager and Head of Applied Equity Advisors at Morgan Stanley Investment Management.
00:35Andrew, thanks so much for joining us today.
00:36I do just want to start with those remarks from Stephen Meyer and get your reaction there.
00:41He says rates are too restrictive, jobs are at risk, but it comes back to that age-old debate.
00:47What's the bigger concern at the moment? Is it jobs or is it sticky inflation? What's your view?
00:53I'm worried about both, Paul.
00:54Sometimes I worry about the jobs and sometimes inflation.
00:59Look, I think there's something else going on here, which is we're in a technology revolution.
01:07And if you look at the history of when there's big technology advancements, jobs tend to stall out.
01:13So I'm not totally convinced that this is just a matter of high rates.
01:19And if we lower rates, it's going to cause jobs growth to accelerate.
01:24A lot of companies, as a portfolio manager, I'm out talking to companies all the time,
01:28and they're saying their CapEx budget's going towards technology, not new jobs.
01:35And so I just question that.
01:37And then to your second point, I worry that a lot of liquidity is coming in monetary policy cuts,
01:44but also fiscal policy.
01:46We've got one big, beautiful bill tax cuts, and that's a lot of liquidity.
01:50And that could bring back inflation at some point.
01:54So I am worried that too much liquidity will sow the seeds of inflation down the road.
02:00Now, I don't know if I'm being fair or not, but I feel like that when we hear from Stephen
02:07Myron, we kind of have an asterisk there.
02:09He is a Trump appointee, and he is there to a degree reflect, well, the policy longings
02:15of President Trump.
02:17I'm just wondering if you feel the same way, how much confidence you're feeling right now
02:21in Fed independence, especially with a new Trump-appointed chair coming.
02:25Sure.
02:26Never forget, Paul, that every Fed chair is appointed by the president.
02:31So this whole comment that the Fed is truly independent, I think, you know, you're not
02:36going to get appointed a Fed chair if you don't have some favorable, you know, the president
02:42doesn't have some favorable view of you.
02:44So I do think there is that.
02:47But ultimately, I do think they operate as a group.
02:52The Fed chair doesn't dictate things.
02:54He's got to have an agreement.
02:57And I'm I don't think that's a major concern.
03:02When I list all my things, I'm worried about, you know, Fed independence is not one of them.
03:08But I do worry, again, going back to this comment of too much liquidity, not near term, but I'm
03:15worried it's going to cause another inflation spike down the road.
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