华尔街周谈：贸易改道、私募考验与债券市场风险

Bloomberg Audio Studios podcasts, radio news. [music] This is Wall Street Week. I'm David Weston bringing you stories of capitalism. The world is focused on the straight of hormuz. Well, what about the other shipping choke points at risk and what can be done before there is a crisis. Private equity has been the source of market beating returns for years. But now the [music] spread has come down and getting your money out can be a problem.

Cuba is facing yet another economic crisis in no small part because of US sanctions. President Trump says he's going to make sure the country finally opens up its economic system. We've heard [music] this story before. Could this time truly be different? But we start with the bond market caught between fears of inflation and long-term fiscal risks. Rick Reer is Black Rockck's chief investment officer of global fixed income and head of the global allocation investment team.

Rick, we got CPI numbers this week. Uh, and there was good news in the fact that they're not going up. On the other hand, it's not 2.0 the way we've been promised. So, which is more important, the good news or the bad news? Well, I will say markets have been were nervous about this number and I would think there was a collective industry-wide sigh of relief when this number came out because it wasn't, you know, this is one of those numbers if it comes in high then all of a sudden now you put the Fed in clear hiking mode and you're starting to see consistent numbers.

So, so if you go back into the last 10 numbers that we've gotten in core CPI, eight of the 10 have been 0.2 rounded or below that. So, it's still a bit elevated relative to where the Fed's long-term objective is, but I think the markets felt pretty good about woo, we got through it and it wasn't that high. And then if you go through the component parts, although it was a number pretty close to expectations in only almost every regard, you are seeing still things like lodging away from home, hotel, airlines, you're seeing in leisure experiences, think about the World Cup effect and otherwise, you're still seeing some pricing pressure around that.

But overall, it was uh it was it was an okay number. But yeah, we're not certainly not a target yet.

So pull back a little bit and give us a longer term view over the years of how it's bounced around and where we are today compared to where we've been. So I mean the the big deal for me is the Fed's mandate is price stability. It's not two, but you'd like to get it. There is real efficacy around 2% is a normalized equilibrium for what an economy should run at. So you want to get to that number. We haven't gotten there in a long time.

By the way, if you take the two decades before, it's pretty hard to get it as high as two. You're in the ballpark today and you know when you were running certainly postcoid you're running at numbers five six that was scary but if you look at inflation expectations today you think about where we've come from it's pretty stable particularly when you've got an economy that's running with a lot of debt on it that the thing you really can't have happen you can't have a deflating dynamic because it enhances the the the true cost of the debt today I would argue it's the number we'd like to see a little bit lower but it's certainly not daunting by any stretch relative to anything we've seen in history.

So take CO out of it for a moment. Go back to like 2024 for example. Where are we in core? What's the trend line?

Yeah. So you know the thing I I find interesting is chairman wars just focused on the left side of of the decimal place and the right and I think you have to take that to heart meaning if you're in and around the twos you're okay but when you actually zoom in closer what the markets tend to focus on there's this been this maniacal focus on the right side. And you know since you know over certainly over the last year or so the trend is pretty good and that it's coming down but it moves around and you know the markets tend to focus on the tenth of a percent in terms of these movements.

By the way I always get a kick out of the first thing I saw this morning while chairman Walsh talked about the left side of the decimal place on the number was it printed at 2154 and people were talking about the rounding. You think about for a broad economy like this does anybody really care about the 0.5 other than the market participants do. So, you know, part of when when you zoom out and you say, "Okay, that's a pretty good we're in a pretty good place.

We'd like to see a trend lower." For me, I actually think we are trending a bit lower. We think core PCE by the end of the year is around 28. Next year, we think it gets to 25 and core CPI is running lower than that. Core CPI is running at 1.6. The last six months, 2.4. When you strip shelter out, it's actually running at about half that. So, not bad. I, you know, I'm pretty relaxed about where we are. There are other things I worry about, but I but you know, I don't think that's going to be the thing that disrupts the markets.

And in fairness to some of the commentators and analysts, uh I understand chair wars said we care about what's left of the he also has said we're not done yet. I mean, if he really is just happy with the left side and given the numbers you just gave us, he would say mission accomplished, job done. So, I think there's a real nuance to that. I mean, I think the Fed, what the Fed needs to accomplish is get to that 2% number, but that 2% doesn't have to happen today. doesn't have time next week.

It's that is a long run number. And I think quite frankly if you are any head of any monetary policy authority, you have to be committed to that two number. The long end of the eel curve, every tick of it is dependent on how you articulate that thesis in terms of where you're trying to get to. It doesn't mean you have to raise rates to get there. And I think why these task forces are a very elegant way to get there. These are complex issues.

When people ask, are you restrictive or not? Well, in housing, you're not. You're clearly restricted. You have a you have a a dormant housing market. Then you look but then you look at the amount of spend on capex. Like that's you were not restricted to that. But but you think about what would you have to move rates for the big hyperscalers not to spend on on AI. I you'd have to raise hundreds of base ones between to get your IR to a level that didn't make sense.

So I think he is committed to it. I think he's going to think about the tools. You have the balance sheet. You have the money supply. you have a lot of thing a lot of tools at your disposal. Raising the overnight funds rate in my mind is not terribly effective way to bring that number down and I think I think if you really think about a sophisticated way which I think they will what are the tools and how do we get there and what's the time frame to to try and achieve it.

So you say the long end of the yield curve really needs to believe the Fed monetary authorities.

If you look at what happened with the 30-year yield uh during and after that news conference they were not buying it. It went up to the highest level it's been what since 2007 or something.

So I think it's a dead ride. I think there are a couple things to think about there. One, you know, he didn't say hike and I think the markets the back end of the curve was like we could get a hike here which would obviously show maybe a stronger near-term commitment to inflation. So there was a little bit of that. Second thing that I think proved it to be a bit untethered was this idea of gosh, we didn't hear a lot of the metrics.

Markets want to hear the reaction function and how are you going to interpret data and then how will you react to it. I don't think you need more forward guidance. I think actually pulling back on forward guidance is a good idea. I don't agree with the ethos that