00:00Skylar, so this time yesterday we talked about limited reaction in markets to the Fed narrative, as dramatic as it was.
00:06By the end of the day in the States, we'd seen almost no reaction, really, net-net, to what was happening.
00:11Is this a story on pause now because of the substantial pushback that we've seen from parts of the administration, from Congress and from senators?
00:21I mean, I think with this administration, you can never say something is completely gone in terms of we could get another headline.
00:26But in terms of the news that we've had so far, I think it's largely been digested by the market as no different from other threats to the Fed's credibility that we've had previously,
00:34that proved to be not standing the test of time in terms of not having a long-term market impact, not deterring people from buying U.S. assets, certainly.
00:43And I think the clearest line you can see of that is the front end of the yield curve in terms of if you were seriously considering threats to the Fed's independence that forced them to cut more aggressively,
00:52you'd expect that to be priced a little bit in the front end, but it's not at all.
00:56You didn't see movement in where those cuts were priced.
00:59So I think it's kind of on to the next thing, although, you know, we could certainly get more headlines around this, and we probably will.
01:05And the next thing being more inflation or less inflation?
01:08Yes.
01:08So we'll get the inflation data today.
01:11The way I'm thinking about it is there's a relatively high bar for it to be dovish.
01:16And I'll give you two reasons for that.
01:17The first is the kind of shift we've seen in the emphasis on the Fed's mandate in terms of inflation's kind of been pushed to the back burner.
01:25Powell's talked about it being transitory.
01:27It's not something that's been considered as strongly.
01:30So it's something that's not mattering as much.
01:33And I think, too, because we got employment data last week, it did kind of skew more to the strong side.
01:38Yes, it was a bit mixed in terms of non-farm perils coming in a bit weaker than expectations,
01:43but the important bit was unemployment ticked down.
01:45So that's a positive sign in terms of you can't price in a lot of dovishness under that labor market context.
01:51I thought equity markets just priced it.
01:52I thought equity markets only did dovishness.
01:55Isn't it?
01:55Well, they either do growth is positive, which is great for equities because earnings are positive,
02:00or you do, oh, no, it's a little bit soft in the data, and that means we can get some dovishness,
02:05and that's great because you're great to get revaluated.
02:08Skylar, what are you watching for when it comes to Japan that could make Japan not just a Japan story but a global story?
02:14Yeah, I think there's a couple things in terms of the long-end yield.
02:18If that kind of continues to creep higher, I think because that's acted as a lower bound on where G10 yields are,
02:24if that moves up, it pushes everything else up as well.
02:27And I'm very seriously considering Japanese intervention as well from an FX perspective.
02:32So what you've seen happening right now...
02:34Is that a 160 level, 161?
02:35Yeah, well, this is it.
02:37There's this talk around you can't have Japanese intervention in the FX market because that would weaken the equity market,
02:43and you don't want that if you are actually having an election.
02:46But it's also not good to have FX weakness because it's essentially a consumption tax.
02:50So it's not a good thing from that perspective either.
02:52So I think it's something you need to watch, certainly, as you head to those psychologically important levels.
02:56As you're mentioning, 160, you've been disconnected from fundamentals for a while.
03:01And generally, the precursor is verbal intervention, and we've had some of that already.
03:06Even this morning, there's been comments about it being disconnected.
03:08So I think certainly something to watch and not ignore just because you're worried about the equity market.
03:13Just one quick question.
03:15Staples went up yesterday in America.
03:19What's going on?
03:20This should be recessionary indicators, yet Walmart was flying.
03:25Is it because Trump's trying to help the bottom of the K, or is it because there's a recession coming?
03:29I mean, I think it would be more because Trump's trying to help the bottom of the K.
03:32We've had big fiscal headlines out there, so that's what I'd point to.
03:35But also, it could just be, you know, you have weird days where positioning kind of moves things,
03:40and it's a bad reason for something.
03:41But, like, if you don't have the fundamental reason, then it's not fair to kind of come up with one.
03:46I'm just looking for a narrative.
03:48Guy continuing to prod the health of the U.S. economy with big question marks.
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