00:00What's your assessment of things at the moment? Yeah, listening to you guys, Lisa, like you,
00:05my head's spinning as well. And you guys have really covered it very well. I mean,
00:09a lot of excuses, a lot of unique factors, but it is a weak report overall. And you're seeing
00:14that in the bond market. And it is this tension between the weakening in the labor market and
00:19then the near-term inflationary shock coming out of the oil price increase. One thing I would
00:23highlight, and Lisa, you kind of touched on it, is sort of the tension between the
00:29short-term impact and the long-term impact. If you look at five-year, five-year forward
00:33break-even inflation, certainly what you're seeing here is a move on the front end, about 80 basis
00:39points in the two-year. But if you look at the forward curve in terms of oil futures, you look
00:44at the forward curve in terms of inflation, the expectation here is that this is a temporary
00:50shock. And so for the Fed, when they're faced with the trade-off between a temporary shock to inflation
00:57inflation and this more sustained movement downward in payrolls, I think they're going to err on the
01:04side of the payroll and the growth side. And the other point that you highlighted, which I think is
01:09really important, is the longer and the stronger that the oil price increases, you start to bring
01:15about the thing you just mentioned, which is demand destruction and the flip side. And that makes the
01:20Treasury market move here very much on the nice edge because you could very quickly swing from a
01:27focus on inflation to a focus on the Fed's focus on the downside risk protection in terms of cutting
01:33rates. There's this real issue that a lot of people have been coming into this oil shock saying,
01:37let's look through it and the fact that there still is momentum and strength in the U.S. economy.
01:41OK, got it. That was 130,000 jobs created in January. Oh, wait a second. Maybe not. There was
01:46actually a downward revision of, I believe, retracting 67,000 jobs from that figure. And we
01:52now have a negative print that is substantial for the February read. Does that shake this narrative
01:57that the U.S. economy is plenty strong enough to look through any shock, even if it's sustained
02:02for three or four weeks in the oil market? Yeah, it's a good question, Lisa, because all of these,
02:08excuse me, all of these pieces of information, right, they operate on the margin, right? So you replace
02:14the 130 and there's a revision and and now you have a negative print. And yes, there's some some
02:19special special factors. And obviously, the big new shock to the relatively benign economic outlook
02:29for 2026 is is the is the oil shock. So so all of that is is going to undermine some
02:35of the confidence
02:35in that kind of benign macroeconomic environment. And you're seeing that you're seeing that in risk
02:42pricing, you're seeing it at some level in the overall index levels, you're seeing it in credit
02:46markets and credit spreads. So there is a reasonable, rational response there. The issue and no one
02:54knows right now is really the duration. I'd say that the market responses is is kind of short and
03:00contained. But that oil price discussion we were having, you know, that's really going to be the
03:04breakout issue, whether the market continues to price it as short and contained and more mitigated
03:09for the economic and the financial market pricing or something that is going to be much more impactful.
Comments