Bloomberg Markets (01/06/2022)

Bloomberg Markets (01/06/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It is 30 minutes into the U.S. trading day on this Thursday January 6th here at the top market stories that we're following for you at this hour. It's the Fed fallout funds battered markets with risk parity under pressure as investors reprice a

more hawkish Fed. Is tech trashed in 2022. And is it full employment or just too much churn. Several Fed officials believe the economy is near maximum employment. We're just moments away from the latest real time read on the economy with services ISDN. And Biden claims Trump the current president accuses the former president directly for the violence during last year's capital insurrection. From New York. I'm Alix Steel my co-host in London Guy Johnson. Welcome to Bloomberg Markets. Got a break

in those numbers right now. Absolutely. The ISE Services Index comes through significantly weaker than anticipated through its 62. Now 62 is a pretty punchy number. It is still incredibly elevated. Remember 50s the kind of contraction line you want to look at. If we dip below that. So we're at 62. But last time we were at sixty nine point

one the survey was sixty seven Alex. So this looks like a weak number. Is this the OMA chronic effect that we are seeing in the services sector. I look at the factory orders. This is for November. So it doesn't really account for a crime but factory orders overall up one point six percent. But you back out transportation were up just eight tenths of a percent. That was

definitely a myth. But then again you know it's two months backward reads. It's hard to really put that into the real time economy when it comes to then the virus. Yeah we're also getting details of what is happening in the mortgage market. This is the post that the market is looking for higher rates. We are seeing much more mortgage rates. Mortgage rates surging to their highest level since May 2020. When did you fix Alex. Oh no. Oh I fixed in November of 20 20 and I fixed it. Three. No two and

three quarters. Thank you very much. Phillip pretty happy about that. Let's dig into the details of all of these numbers. This one place to do that we're not going to gloat too much on that number. Bloomberg's Mike McKee over the year. What are we learning here. Well we're learning that Alex better to give out her address or a lot of people who are trying to get mortgages today are going to be really upset with her. That's something that the Fed has been expecting and it is something to keep an eye on because it may start to cool the red hot housing market and that might start to cool a little bit of inflation. But the inflation number in the ISF services index is interesting because it went up even though the overall index

went down. We're seeing prices paid at 82 5 from 80 to three. So there are still inflation pressures in services and this may be paying for some of those employees higher salaries to get them to come back to work. But interestingly enough and Alex pointed out this is a December number. It comes when Omicron was in place. Employment drops 54 9 from 56 5. It still means that we are hiring but we're hiring at a slower pace. And that does not

match up with what we saw from the ADP number yesterday. So that's going to be really interesting going forward. All right Mike hang with us because we have a question of the day which is is tech trash in 2022. And we ask that question because the Nasdaq is now up another seven tenths of one percent. It has been a terrible four days for tech stocks particularly the Nasdaq 100. I am Romaine Bostick co-host of Bloomberg Markets The Closing. Also joining us. Hey. I know you guys were all over

this yesterday too. What. What are we looking at here. Like are we looking at like NASDAQ DAX off its highs here and this is normal or are we looking at something more shifty here. It's a little bit more structural a little bit more fundamental. And I think the key word is fundamental. Remember we've been basically ignoring fundamentals at least most market participants have now for the last couple of years because of that sort of full on embrace by the Fed whether it's real or by perception here. But now of course as that accommodation is perceived to be lifted it's coming down in 2022. You have to look at some of those multiple some of those valuations a lot of these tech stocks they have no earnings. So if you're trying to look for a P E

there is no E to measure that P E and those that do have an E. Well think about this. You're paying 30 40 50 times earnings for some of these names in the Nasdaq 100. In fact some of the big names in there have triple digit price to earnings ratio ratios. And if you look at it on a price to sales basis it's not much better. You're basically paying almost 10 years out for some of

these names on a price to sales basis. And that's really what's concerning people with a higher rate environment and a less accommodative Fed. Kendall's multiple stand up. It's all about high how high rates go. Ultimately I think that's the question the market's trying to figure out here. Remain. Yeah. Mike let me come to you on that issue.

If we do Cootie if the Fed decides to reduce its balance sheet does that mean that the terminal rate doesn't go as high. And if so is that maybe a silver lining here for the tech sector. Well it could be. The problem is nobody knows at this point exactly what impact the Fed's rate moves are going to have or balance sheet moves are going to have. They can anticipate that it will slow the economy and bring interest rates down some. But how much. We don't know. Part of it because of all this fiscal stimulus that went into the economy over the last 18 months we're waiting to see what happens with consumers. Do they really really pull back. The minutes yesterday didn't add anything new to that debate. But for some reason the markets decided it did.

They gave us the prediction for three interest rate moves back in the dot plot at that meeting and December 15th. And they also suggested that interest rates are going to be going or inflation rather is going to be higher than they had thought back in September. Here can I. Can I just interject though because I think one part of the reaction that we saw yesterday had to do with the perception Mike that the Fed was moving faster than I think what a lot of people thought they were. I think there seem to be some people in this market that thought this was going to be much more of a gradual process. You have of course the taper. Then you have some sort of rate hike cycle and then maybe potentially a run off in the balance sheet. And there seems to

be whether fair or not sort of a reassessment here that maybe all this is going to be packed in much more towards the first half of the year rather than drawn out over maybe a two year period. And which raises the question guys is that how can someone come in and buy the dip. Goldman Sachs talking to how hedge funds were selling technology pretty hard. I just want to point out some market action for today guys. You got really down 12 percent. They were it really was already getting hammered with stocks. GameStop down another 6 percent. AMC also down by 6 percent. And I'm just curious it's like the positioning right in the market from the hedge funds and the retail investors remain. Yeah the positioning. And look I mean partly to Mike's point and

partly to your point though is that there are still economic fundamentals here that do suggest a stable economy and one that's going to be stable enough to support some of those companies. All the names you just mentioned I guess they would fall for lack of a better word into some sort of degree of instability with regards to their fundamentals. Why are bank stocks still getting big. The wire material stocks still getting big. There's still a bet here that you are going to have a strong economy. The Fed is going to spook a lot of people. But I think people feel that when you get to the other side of this tightening cycle or at least you start to get the start of it here maybe people will reassess and find something to actually buy the dip from. Romney What do people do though if they're selling tech that I think it's one of the key questions. Do we just do what we've been doing which is rotating through other parts of the market.

And does that rotation have the same effect that an index level the market had got very narrow into tech big name tag has really been the place to be. And the only place to be in so many ways. But below that we've had this ongoing churn within the markets. Yeah. Is that what persists. If tech is trashed for 2022. Is that meaning that money goes elsewhere. Or does it or does it go to cash as it go to bonds. Yeah I don't get to alternative. That's a great question. I don't have a definitive answer. But I'll tell you this. I mean you know what we saw last year was basically a rotation. Money wasn't necessarily flowing out of

the market. It was just rotating around. I think what we've seen in the first few days of this year and even the last week of last year is money coming out. You see that reflected not only in some of the ETF to track equities but some of the ETF to of course attract bonds as well. The question is how long does that money sit on the proverbial sidelines before it comes back into the market. That question I don't know. I think you may have to wait until January 26 before people maybe feel a little bit more

comfortable coming back. Mike which I think then brings us full circle back to the Fed here. And just for some insight we're looking at Nasdaq 100 off another eight tenths of one percent for Nasdaq slipping really hard after that services number I missed but inflation still higher. That equity index now down by 1 percent. How much of a tech tumble is the Fed going to be able to handle. Oh quite a bit. As Robin said we've got some elevated asset prices shall we say. And the Fed knows that. And they know that those stocks are probably going to go down. But as he put it out of bank stocks a benefit from higher interest rates and some bank stocks are going up. It's not going to be the overall market. We may get a correction but the overall market isn't going to die because the Fed moves 25 50 75 basis points this year. It's

the financial stability aspect of it. They are they're watching but they're not too concerned about it. OK. But just worth pointing out how much he is I see it. Come onto my screen really. And now down 16 it's below 78 which the IPO price. So we're getting some fairly punchy price action particularly at the less profitable end of the tech spectrum. Let's put it that way. Mike what about financial conditions. If the market falls out of bed we get a 10 percent correction. So we get a 15 percent correction that's going to have an impact on the African function on my Bloomberg screen. How does the Fed react to that. Is it less focused on financial conditions in the way that it will say 12 months ago. Yes it's less focus because

financial conditions have improved a lot and we are still extraordinarily loose in terms of conditions. There is a lot of cash out there. The Fed is going to obviously follow that. And Jay Powell talked about this at the December 15th meeting press conference when he said if the economy comes out slower or starts to slow down then we'll adjust our pace of monetary policy as well. The Fed is not promising you they're going to do three rate hikes starting in March although the mark the market may want to think that today. They're saying that we think the way the economy will evolve you'll probably have three rate moves over the course of the year. But if the economy is faster we could raise the bar. If the economy is slower. We could raise less. Yeah we're nearly pricing for at this point but we're not too

far away from it. Guys thanks very much indeed. Really appreciate the time. As ever Bloomberg's Mike NIKKEI and Romaine Bostick. We're gonna carry on the conversation Alex. Next we'll be putting this question to our guest is tech trash in 2022. Julie Bill joining us Kayne Anderson Rudnick portfolio manager. That conversation is next. Stay tuned. This is Bloomberg. Powell said during the press conference very clearly they were going to go. Is this a meaningful shift to the place where the Federal Reserve is going to raise interest rates so rapidly they don't think that they'll be as hawkish as they were in December.

This is the early stages of a tightening cycle. And as we know it's usually not the first rate hike that matters. It's usually the last one a few hikes with real rates still being quite low and likely to remain quite low. It's still a broadly accommodative backdrop. Will the Fed really permit real yields to get back into positive territory. And how the markets respond. They're trying to do to create a policy that that gets them on the right side of the curve. And I think that came as a little bit of a shock to the markets. We should expect volatility to return to markets. We're seeing orderly volatility

in the marketplace. We're in the early stages of sort of a rerating if you will on where we're treasuries are based upon a new appreciation of Fed policy. No kidding. Look at two year now at the highest level since March 20 20. We've seen a 22 basis point move in the 10 year real yield in just the last two days. Those were lots of market voices of the last 24 hours. Reacting to the Fed minutes would lead us to the question of the day tack being taken out to the

woodshed and looking at the tech down by about one percentage point is tech trash for this year. Joining us now Julie Beal Ken Anderson Rudnick portfolio manager. Julie that's the question is tech trash. That's like saying like are all brunettes brilliant. And no they're not like that it's one isn't so. You know you're all

Haidi Lun. I believe you. That's what I'm saying. Right. So I think I think you have to show some discretion in being able to choose what you're investing in. Companies that a software business that has strong fundamentals high levels of recurring revenue strong profitability. That's a great business. I want to own that business. An evil company is not really a tech company. Right. It produces batteries and cars. So there's no reason it should be valued like a software business. And I think that's

what's going to happen is it's not tech writ large. It's being choosy among the businesses that have strong fundamentals versus those that just have high flying valuations. But big tech even big tech. Even some of those software names are long duration assets. The valuation of Apple Microsoft. These are these are stable businesses yet they have seen so much

money pour into them. Julie And as a result of which how exposed are they to market volatility. I think anything that's been super over owned and has seen a very strong recovery in its share price is vulnerable right. We are all looking for the opportunities. And when we buy a business it's with the expectation that the earnings can compound from here. And when you have these software businesses that are trading at very very high valuations that takes away from your earnings potential. Right. Because you're not going to get multiple expansion from here. So I think it's really

important to focus on the fundamentals relative to the valuation. There is no asset that's so fantastic. That price doesn't matter. Price always matters. Well then let's ask the reverse question. Do you need to buy the dip. So my cash flow over at UBS he had a note out saying a dip in stock seems a bit overdone. The normalization of Fed policy shouldn't end the

outlook for corporate profit growth which remains on solid footing due to strong consumer spending rising wages and still easy access to capital. If you agree what are you buying a day like today. Well I think I don't but I don't fundamentally agree. I think 20 22 is actually pretty challenging. If you're the average CEO you have rising input costs you have rising wages you have it's going to be more expensive to borrow capital. So I think it's actually a pretty challenging economy. Looking ahead we don't have the level of fiscal support that we have had over the last two years. So I don't I don't think it's just a slam dunk that the economy is going to be on great footing. I think you have to be very choosy and find businesses that are going to be able to look through this uncertainty because they have strong fundamental drivers and their businesses. Do you have to be choosy and do you have to be nimble. Julie this looks like a

year in which volatility is going to pick up. We keep hearing day after day will certainly over the last few days. People talking about this is going to be the year when we could actually see a proper correction. I'm not sure we had one last year. If you do get that do you need to pick your entry points. Is that when you get to the end of this year is it all going to be about your entry point as well as what you own. Well your entry point really matters when you're talking about

your exit point so if your exit point is like be on average every five years your entry point is a little bit less important. But if you're trying to move in and out you're in you're out and turn over your entire portfolio then yes your entry point really matters. So I think it just depends what your goals are. As an investor for us as long term investors we're looking for fair prices. We're not trying to be smarter than the market. We're just trying to find fair prices on very high quality businesses. So what are those. Julie. Because I feel like now it's where do people want to hide out. And we've seen

such a solid move into value. Where do you still find the opportunity. I think it's less about a focus on value versus growth. And I think it's more a focus on the structure of your business. So I still like software businesses particularly on the small and mid-cap side because they're a little bit more or less owned than the big cap tech and they tend to really dominate their small niche market. So you know talking about like for example supply chain we know that's a place that investment has to happen. So a company like a Manhattan Associates or an SBA commerce that serves modernizing supply chain and automation around that that's a place where investment is going to continue for a long time. And so they have strong fundamental drivers. That's the type of business that I think is more compelling to me than an easy business or a deep cyclical. Where do you stand on the consumer.

I think the consumer outlook is pretty mixed. On the one hand you have higher wages at the low end which is great for the economy because those lower end consumers they tend to spend that incremental dollar much more quickly. But that has implications for inflation right the volatility of money working through the system. So I think at the low end there's opportunities for the consumer. I would look at some of the close out retailers. I think they have a good position particularly with supply chain disruptions. And then at the high end we know that the consumer is pretty strong. And as long as

asset prices remain strong they'll continue to buy. Yeah. Speaking of consumer you've got fed back up like 8 percent. I was up at one point fifteen percent before we let you go. Energy of 8 percent in four days. Financials of almost three percent in four days. Are you betting on any of those cars. Values. DAX. For us I think those are the names that have the least amount of differentiation and while they may be great buys in the near term over the long term it's really hard to be confident owning an undifferentiated bank or an undifferentiated energy company. Companies that are serving those businesses I think have a

better position than the core banks and energy stocks. The brilliant Julie Beal thank you very much indeed. We greatly appreciate your time. At the start of 2022 Billy Kane Anderson Rudnick thank you very much indeed. All right. All we got next. Coming up President Biden blaming Donald Trump directly for last year's riots on Capitol Hill. We'll have more on those remarks next. This is Bloomberg. For the first time in our history the president had not just lost an election. He tried to prevent the peaceful

transfer of power as a violent mob reached the capital but they failed. President Biden in the last hour speaking on the first anniversary of the riots on Capitol Hill Bloomberg's Washington correspondent Amari Hole done at the Capitol Hill. Joining us now. What is the view at the capital. Any surprise at how strongly the president went off to Donald Trump today. I think a lot of people were very surprised and shocked because we'd never seen President Joe Biden directly and squarely attack the former president the way in which he did today. I mean he

had number of times is that he's defeated president. He also said he has a bruised ego. Got a little bit personal. He really attacked the former president without mentioning him by name. And you can see it likely struck a chord with former President Don Trump because just following the speech we immediately got a press release of a statement on the forum president. And in a few minutes later another press release from the former president who was also supposed to speak this evening from his estate in Mar a Lago. But he's punted that to next week. Speaking at a rally in Arizona. But clearly the big takeaway

from this speech from President Joe Biden was really that he laid the blame on the former president for what took place and the imagery this president painted. He really took us back to the Confederate flags we saw in this in the scenes of the capital across all of our TV screens the capital police that were stomped on and just the breach of the capital. He brought those scenes into Americans memories and then put the blame squarely at the former president. And what did the Democrats now

do today to kind of keep whatever unity they can within the party to push their agenda forward but still be able to reach out to Republicans. How do they use today. Yeah unity within the Democratic Party has it's been foreign few between these moments. Right because they've been grappling themselves. But how are they going to decide on what to put in a massive legislative package build back better how they're going to go ahead with potentially getting through voting rights legislation given the Republicans are against it in the filibuster rule in the Senate. So they're going to use today there's a full slate of events. Speaker Pelosi will be speaking. There'll be a prayer ceremony. And really a lot about today likely for the Democrats is gearing up as well for November those midterm elections. We know that Democrats are voters and

independents came out in droves when it was about making president down. Trump really a centerpiece of why they should vote against Republicans. But it's going to be a tough fight from here on out until November because many analysts are predicting a red wave when it comes to congressional seats. Yes some Senate seats. What are the chances of Donald Trump facing consequences as a result of what happened this time one year ago. It's a question and no one knows what. We did hear from the attorney general yesterday Merrick Garland who talked about

that. Not one person no matter how powerful they are can escape the law. So some are viewing that as whether or not this potentially means the former president could become in the eye of the A.G. or whether or not he's just making a very blanket statement. Yeah. All right Emery thanks. I really appreciate great reporting this morning. Bloomberg's family harder and joining us. I kind of you got U.S. hospitals facing their worst shut staff shortage in a year. We're gonna get more on the efforts to contain the virus. This is Bloomberg.

We are one hour into U.S. trading in this really interesting trading session. Memories Abigail Doolittle is here with the movers. I mean first you're looking at a steep tech sell off down 1 percent and now the Nasdaq 100 in positive territory. I know it really is a very choppy jittery day. Investors not really knowing what to make of this week's rotation into cyclicals in value out of tech. And right now we have the S&P 500 down slightly. It had been down sharply earlier. That NASDAQ

100 to your point Alex up just slightly after being down up. Here we go. A small decline. But the bigger point for both of these indexes down on the week NASDAQ 100 down about 3 percent on the week heading to its worst week since the beginning of October at one point heading to the worst week since February. That was the degree of the selling. But look at the buying in the banks and energy. So that's a cyclical trade money coming out of tech. Those higher valuation companies. The reason. Well of course that has everything to do with rates. We'll take a look at what's happening with the benchmark yield the 10 year yield on the week. This is extraordinary. Now at one point seven two percent backing up 21 basis points in just two days of

course. Yesterday those Fed minutes seen as being more hawkish as the Fed is indicating they may move more quickly than previously thought. So a bit of a catch up move to the early indications of that in December taking yields higher and again pressuring tech stocks because of valuation in fact. Let's take a look at some of the big names. Apple off of its lows but nonetheless down seven tenths of one percent revision down nine point four percent dropping below its IPO price. This of course on competition. And then Tesla one of the big stocks that's been down recently in video. Now this stock has really flopped

flipped higher. It had been down 1 percent more. Now up one point six percent. So lots of moving parts to keep an eye on here. And of course if we take a look at the big declines this week relative to tech this is extraordinary. Tesla losing one hundred and sixty billion dollars with a market cap this week. Microsoft one hundred and forty three the same for Apple

and then Alphabet in video and metal platforms all losing between twenty two and eighty five billion dollars in market cap. Huge huge numbers guy. Let's see how today and tomorrow round out. Yes in terms of what's happening around this kind of volatility we are seeing the volatility is obviously fairly extreme. Is there an expectation that this is a move that can continue for a while or is the sense maybe from a technical point of view that we're nearing the end of it. What does it look like. I would say that the technicals do not support that. We're near the end of

it. If you recall last year we took a look at the Apple chart which the stock very extended above that 200 day moving average and the RSI. The momentum was ramping down at this point. We do have averages flipping to the upside. But the Apple technicals and that of course is the biggest weighting to these major averages suggests that there could be a little bit of an issue. And also guy. This is something very interesting on on Apple last year growth for the top line I believe was 33 percent. The top the bottom line growth 72 percent on a year over year basis. This year it's estimated to be low single digits. That could be a problem. So that's it. That's a stock to definitely keep in mind as we go forward. Abigail great stuff. As ever. Thank you

very much indeed. Bloomberg's Abigail Doolittle. Let's turn to one of the stocks that Abigail was mentioning revered. Huge move. It's not just today. We are all follows. We were trading a few moments ago below the IPO price over the last three days. The stock is down currently by just over 20 percent at Ludlow has been covering this stock really since the get go and was certainly very plugged in on the IPO day. Ed let's talk about what is happening here. You've got a couple of things. One of

which is you're getting this this kind of big picture macro move as a result of the Fed. But we also had this to Lance's news yesterday with Amazon. This looks like a double whammy for revision. It's a double whammy. There's been a pullback from stocks generally. Remember these have stretched valuations which is being kind. If we're being honest and there's growing competition you know there's not only one option now in Tesla there are many. And investors are trying to wade through that.

But the reaction is directly to the scientists Amazon tie up which is surprising because we've known for months that Amazon is able to do deals with other automakers. It was spelled out explicitly in Radians S1 in October. It's not a surprise to anyone. I've put it in dozens of columns and stories on the Bloomberg terminal. So so the reaction is sharp and it and it is a little surprising. Well and that brings the question to me. Is it who was invested in it to begin with. I mean someone was really looking through all the numbers like you're talking about. You knew the disclosures. You knew what

you were buying. So my right. I'm wondering if it's just all a lot of retail guys and they're now trading it up. We won't know for certain. I don't have a concrete answer but this was a really oversubscribed IPO. Retail investors were desperate to get in on the act. A lot of shares were held for in big blocks for institutional

investors big name institutional investors. You remember that they offered just zero point four percent of the offering on so PHI. And in some cases so far I was only able to give those retail investors a single share. So they may have requested 10 or 100. And that's how they did it equitably. They said sorry guys we're way over describes his a single review share. Imagine that holding just one share and getting involved in an IPO that way. Yeah I think I literally know

someone who wanted to do that. And Phil I really appreciate it. Bloomberg Real Yield. Thanks for the hustle. Really. You know Arthur closed down his 9 percent super with the action for a tech stock today. Something out there are watching her. The latest developments with the virus guy. It felt like the Fed kind of looked through all of that. But on a real time basis it's going to impact the day to day and the economy. Absolutely and maybe we saw some evidence of that within the

numbers we got on the ESM or the top of the hour. Maybe some evidence starting to creep into the services side where we're having problems there. Certainly if you take a look at the wage component there the inflationary component there. There is certainly evidence that they were having to pay out more but there are less people in the workforce. And I think this is going to be something that shows up in the data tomorrow. And countries around the world are getting kind of much more

militant is maybe the right word on what is happening here. You look at you look at the story out of Italy for instance the over 50s. It is now mandated that they have to be vaccinated. The French president in Parisian just a couple of days ago talking about peeing off the unvaccinated countries are turning much more telling much more hostile to those that are unvaccinated. And the obvious kind of the lightning rod here is is Novak Djokovic. Look at what is happening with him in Australia. He went down to try and play in the open. He's now been detained. He's is in

detention effectively. This after a court ruled in that country against his legal challenge asking for a vaccine exemption. He is unvaccinated. He was going to the country to defend his Australian Open Championship. The country requires all visitors to be vaccinated. The prime minister really not giving any ground here and certainly not prepared to give special

treatment. On the issue of Mr. Djokovic rules are rules. And there are no special cases. Rules are rules. It's what I said yesterday. That's the policy the government the rules are really clear particularly for the no but tolerance Covid policy numbers. And it really comes down to vaccinations. And Bloomberg crunched the numbers and found it's not great heat map of the whole world in terms of vaccinations. More than nine billion doses of the Covid 19 vaccine habit administers across 184 countries. That's one hundred twenty shots for every 100

people worldwide. Still many are resisting the vaccine. Still we can't get the vaccine to different areas. You can see the darker the green the more vaccination take up there is. Well joining us now more to discuss is Sandro Gayla a Boston University School of Public Health. Dean do we need a carrot or a stick to get people vaccinated. Professor.

We probably need a bit of both and I think many countries are doing a bit of both. I think the carrots are the opportunities to do more and more things if you're vaccinated to be able to attend events and all that. And some places are also doing six which is actively keeping people from going places they're vaccinated or even employers not the people of being able to have particular employment or in some cases fines are being considered.

There seems to be the sense that the unvaccinated are crazy that they are out there to defeat society. When you look at your research is that the case. We seem to be treating them as this kind of unified body. How should we be segmenting that group. I don't think that's a fair sentence. I think there have been. There has been people who are against vaccinations since we

introduce vaccinations. There were protests and riots in London about the smallpox vaccination. This has extended all throughout history and there are many different groups of people who are unvaccinated. You have people who are IBEX because of religious beliefs. There's a group of people who are unvaccinated because of mistrust in authority and mistrust in government. There's a group of people who are not don't don't want to be vaccinated because they're contrarian by disposition. These are very different groups. And of course we shouldn't forget the fact that when you look at the global map a lot of the vaccine the areas where there is low vaccination is not because of hesitancy but actually because of limited access. And

those are very different issues. Exactly as I wanted to get to that latter point. It feels like until we get real vaccination take up the mutations for the virus are going to keep happening. And we don't kind of know what the next one's going to bring. How do we get more vaccines to emerging markets that need it. Yeah so the emerging markets are really complicated story and

you should you show them a map. sub-Saharan Africa has been particular bold but 5 to 10 percent vaccination. And even in sub-Saharan Africa it's not a it's not a single block. There are countries where there is tremendous vaccine hesitancy largely due to mistrust of Western medicines tradition that has decades of proto deep history and some of it is actually due to lack of access. So this is a country by country region by region district by district city by city approach.

Fundamentally I think we need to make sure that vaccines are available to everybody at the local level as much as possible. And then we can tackle some of these really difficult issues of groups who for religious reasons or for political reasons have been resistant to being vaccinated even if they're available to them. And you know Djokovic which you discuss the second goes a really interesting example. Here is the most prominent tennis player in the world who has complicated reasons as best as one can read religious as well as health reasons as he states them why he doesn't want to get vaccinated. I think it really

exemplifies how complicated some of these reasons for people not wishing to get vaccinated are. The French president's making clear his views over the last few days on the unvaccinated. What effect do you think vilifying the unvaccinated will have. Yeah it's it's been it's been entertaining watching the I'm sure of that vilifying anybody ever has a positive effect. Frankly I actually think that's the approach that the more productive approach is a more big tent approach that tries to understand where people are and really really leans into providing the reason. And the reasons are both selfish and selfless. There are reasons to get vaccinated both to protect yourself but to

protect others to protect yourself and to make sure that the system is available for others. But I also think there's a bigger question here which is what happens. Not now but what happens with the next pandemic when we also need vaccines. And what we're learning now is that trying to deal with issues of trust on the fly when there's pandemic happening is really impossible to do. And we need to make sure we invest in trust and systems before the next pandemic. And what we do now will influence what happens next pandemic. Where do we have the best shot globally of getting more vaccines in harm's. Well the from from a simple denominator point of view the countries where there is low vaccine uptake so far are stand to gain quite a bit by making a bigger effort. So that would be principally the African countries. But the point you made

earlier about the fact that we're going to have more different strains emerging if we do not vaccinate more people even in Western countries in high income countries is also a valid point. So I do think that one needs different efforts and efforts in countries where it's been low uptake and efforts in countries where there is ever to be very high uptake. You know I do want to get lost in this conversation but the global vaccine effort actually has been overwhelmingly a success. You mentioned

correctly nine billion doses have been administered with less than nine billion doses of a drug for a disease that we had never heard of as recently as two years ago. Within less than a year period that actually is quite remarkable. So we absolutely should be talking about the challenges of getting vaccines to everybody. But I don't want to lose in that. The fact that at from one level and I think perhaps the dominant level the global vaccination effort has been an extraordinary success. Sandra Yeah I think it's a point well worth making the effort has been Herculean.

We really appreciate the smart insight. Thank you very much indeed for joining us today. Sandra Galea Boston University School of Public Health. Dean thank you very much indeed. Coming up in around 24 hours we'll get the latest read on the U.S. labor markets. December jobs numbers out tomorrow. We got some great coverage lined up. We're going to set you up for that

number. Nicholas Bloom of the Stanford Institute for Economic Policy Research. Joining us next. This is Bloomberg. This is Bloomberg Markets can get through and you're looking at a live shot of the principal room coming up Council on Foreign Relations President Richard Haass says at 12:00 p.m. and you 5 p.m. in London. This is Glenn Beck. Let's check in on the Bloomberg Markets what news I'm talking up to. Russia and its allies have sent troops to help quell protests in Kazakhstan. The demonstrations were triggered by fuel prices and they're seen as the biggest threat to the former Soviet Republic leadership in decades. Police said that dozens of anti-government protesters were killed by security forces.

Applications for USDA unemployment benefits rose last week but they still say that need strike. Those jobless claims go to two hundred and seven thousand. That was up seven thousand from the previous week and was higher than expected. Claims have been hovering around a five a decade low in recent weeks but beneath 24 hours a day on air on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries you could get better than that guy. Thank you much indeed Vertica. Let's pick up where we left off the labor market. Economists forecasting 440000 jobs being added in the United States in December. Looking at the data tomorrow. Now according to the Fed's latest minutes which of course such a

stir. The U.S. is definitely moving in the right direction. This is one of the quotes from the statement yesterday quotes acknowledging that the maximum level of employment is consistent with price stability may evolve over time. Betty. That's code for we haven't got a clue for where our star is. Many participants saw the U.S. economy making rapid progress towards the committee's maximum employment goal. Well let's talk about this ahead of the payrolls numbers tomorrow. Nicholas Bloom Professor Nicholas Gruen Stanford Institute for Economic Policy Research professor and senior fellow. Joining us now.

Nicholas great to see you. Happy New Year. Are we at full employment. Well you know as they said it's one of these things that moves over time. I would say right now as in you know the next six months to a year it's looking like we are in the US. So to be clear unemployment is an incredibly low levels.

You saw earlier in the week quit rates are an all time high levels. Those are pretty good indicators of hitting full employment. So we've lost about 5 million employees since before the pandemic. But those five million don't look like they want to come back to work anytime soon. So amongst everyone else I think we're close to full employment. Well what I keep getting confused about is the signals in the job market that to me make no sense. Like job openings remain really high. But in some workers are still reporting like 13 weeks to land a new job and then quit. Rates were the highest in years. How does all of this make sense. How do we learn that this is full employment.

Well nothing makes sense. Post pandemic. I mean this is you know it's one of those science fiction movies we've landed on an alien planet and everything is different. You know we're doing the best we can. And I think the best indicators or the best story is really there are about 5 million people who have just given up wanting to work out roughly 2 million may have retired early maybe another 3 million don't want to work in conditions that are on offer. You know they don't wear a mask. They're

worried about infection risk as a result. You know that 5 million gap is not going away. And those that want to work they are receiving typically multiple offers. And that's why quit rates are at incredibly high rates. Unemployment's very low. Now there may be some people out there that can't find the job they want but that possibly because the job they want doesn't exist.

So you think you want a pre pandemic job in retail without wearing a mask with that action risk without social distancing. That kind of job is just not out there. So some of these folks are waiting. They may come back later in the year next year but in the next few months it doesn't look like they're about to start working again. So what kind of labor market inflation should we be expecting this year in the United States. I mean I'm worried when you see quit rates all time highs. I talked to a lot of firms. They are struggling to hire people. It suggests that you know wage inflation is starting to take off. I am not surprised the Fed is thinking about pretty rapidly putting up. Right. I mean one

thing I hear over and over again from employers is they have to sweeten the deal. So when they can they often work from home. A lot of firms probably many employees of firms listening are offering in addition this one month walk from every anywhere. You know things like that are ways to try and attract people in a very tight labor market. Yeah exactly. Which is also sort of like do we really need to measure wages or is it the ECI that makes the most sense employment cost index you to factor in all of these kind of things. So tomorrow we get the numbers. What's gonna be the most important thing for you. You know it's the overall employment numbers in some ways is the key thing to look at. To bear in mind before the pandemic we

were gaining about two to three hundred thousand jobs a month. If it turns up to 450 there's some healing going on. But remembering we're short of 5 million jobs you know growing 450. That's one hundred and fifty thousand extra jobs. That's not going to eat much into the big gap. So you know we're in a very weird. Well we got two amazing levels of employment in 2019. Long run. We'll go back to that. Work from home for example is very good at bringing people marginal people into the labor market. But it's going to take time. I think we have to see this now is we're in a much slower healing phase from the pandemic. And you know we have to go back to normal interest rates and normal market.

Is working from home now a permanent feature. I read your notes a little bit earlier on this morning 40 percent probably going forward from here. We'll have some sort of hybrid work. Is that something that we just now have to get used to. And how different is analyzing the labor market going to be as a result of that. So yes it's permanent. I mean it seems like a win win.

To be clear hybrid which is for example you come into the office Tuesday Wednesday. Those that you work from home Monday Friday appears to improve productivity and keeps employees much happier. So you know it's become the dominant the dominant strain of working patterns for those that can. So that's here permanently. I don't think it you know it's not going to affect labor markets too much in the short run. In the long run it's probably going to increase participation. So there are a lot of people older workers maybe people with young kids some folks with disabilities I talk to that say you know if I can work from home two maybe three days a week I'm gonna stay working or I'm going to work full time. So you know it's great. Marriage is great in the long run that you know that's one of the few good things to

come out of the pandemic is that work from home has really taken off. That's a really interesting take. I don't think I heard that one before about future participation. NIKKEI thanks a lot. We really appreciate it. Nicholas Bloom on the Stanford Institute for Economic Policy Research. Thank you very much. We are about 40 minutes away from the European close on this

mystery wimpy market action. Dana NASDAQ. One hundred now up by three tenths of one percent. This is no. 34 minutes the European close. Let's check the price action on this side of the Atlantic. European stocks off their lows. We get lower first thing this morning quite sharply in reaction to the Fed minutes. We climbed a little bit but the stock 600. Now

for 87 down by one point three two percent. Luxury stocks are under pressure. Tech stocks are under pressure. Brent crude though climbing up by one point seventy three per cent with north of eighty convincingly now 82 16. I just kind of flirting with that 80 level and the dollar's back in charge. We're below 130 euro dollar trading 112 ninety five. The virus continues to dominate much of the news flow but it is now obviously competing with the Fed for the markets attention. Rasmus Back Hanson of Affinity is going to update us on the latest data on Omicron next. This is Bloomberg.

2022-01-08 12:50

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