00:00Mark, I am sure you have had a very busy 24 hours. Bond markets globally repricing and repricing pretty quickly,
00:06which often matters a lot for other assets.
00:08What's at stake today with the U.S. CPI print? I mean, it seems almost trite to ask if there's
00:13a risk of going over 5% of the U.S. tenure because we are so close to it.
00:18Yeah, absolutely. You guys asked me on the show yesterday, are we going to see 5% this week?
00:23And I didn't think it was particularly likely. And we were all talking about would CPI be the thing that
00:28bring us there?
00:29Weirdly, we're getting to the end of the week and actually CPI is no longer the big issue.
00:34This move has been driven by what's happening in oil and out of the Middle East.
00:38It's actually funny that we've been talking about this big inflation print all week and it won't be the big
00:44decider today.
00:45You know, you could get a slightly hot CPI, but if oil prices dropped $5 again back to where they
00:52were yesterday, you probably won't see that 5% level.
00:55So it's kind of weird that it's become secondary. And actually, it's not just about oil and the straight that
01:00has become more dominant.
01:02It's also just generally the market dynamics here. This is becoming kind of self-reinforcing in terms of the higher
01:08volatility that we're getting in the market.
01:09So I'd say it's oil first. It's internal market dynamics. CPI still can move the market, obviously, if it's a
01:16big shock.
01:17But it's no longer quite as dominant as it was 24 hours ago.
01:21We don't know what Walsh is thinking about. We don't know what the markets assume that it was CPI.
01:28So, yeah, you probably if we take CPI out, there's probably other metrics which he's going to be thinking about.
01:32The market is daring Walsh to hike. That's what's priced right now.
01:37Mark, are we at the point where we need to do something to stop him hiking?
01:39Or do we need something to see him that encourages him to hike?
01:43And which way around should we be thinking about this?
01:47It's a really good question. And the reason you've asked it is precisely because the market's not very clear.
01:54Look, there's definitely a cohort. I'd say it's a very large cohort within the macro community who are convinced that,
02:01like, Walsh is actually more hawkish than people think.
02:03And you've seen that instinct a lot this year, that they've rushed to pair trades, particularly at the front end
02:10over the last few months.
02:10It's not worked out for them. Up in the summer before the CPI print, we saw that as well.
02:15There's people who believe that Walsh has given the nod to someone that he's keen to hike and will likely
02:20hike.
02:21But there's a whole other cohort of the market who's going, it's all talk. He'll never hike because, you know,
02:26that's not why Trump hired him.
02:27It's ridiculous. Of course he's never going to hike.
02:29And so the market is very divided at the moment. And it's really this meeting that will likely set the
02:37future kind of dominant narrative.
02:39But we don't know yet. And that's why it is so on edge into this FOMC.
02:44And that's why this CPI is very important. I'm just saying other things have also risen up there.
02:48It's not that CPI doesn't matter.
02:51Mark, for a lot of our guests, it still comes down to the earning strength and the equity markets continue
02:55to look through this because of the strength of earnings.
02:57Do you buy that?
03:00Yes. I mean, ultimately, long term, I'm structurally very bullish.
03:03This higher yields is volatility for stocks, but it's not going to derail stocks anytime soon.
03:08We've got high interest rates because we've ultimately got strong growth.
03:13We've got strong stock market. I do buy that.
03:15That structurally, the stocks will still go higher next year.
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