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tv   Bloomberg Markets Americas  Bloomberg  April 9, 2021 10:00am-11:00am EDT

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guy: friday the ninth of april. 3:00 p.m. in london, 10:00 a.m. in new york. from london, i'm guy johnson. alix steel is over in new york. welcome, everybody, to "bloomberg markets." the end of an era. alix: prince philip dies at 99. what is the mood over there? here, when we talk about a president or something or a world leader, it is huge news and everything sort of comes to a standstill to some respect. i am curious. guy: church bells have been ringing outside my office over the last few hours. the bbc has wall-to-wall coverage of the passing of prince philip. in some ways, he doesn't have a constitutional role here in the united kingdom, but he was part of a team that did.
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he was the man that has stood by the queens side. they have been married for 73 years. it was definitely a team game. she brought stability in so many ways to this nation, and he was always right by her side, so a hugely influential person in terms of british history, and certainly his passing does mark the end of an era. you do wonder the direction that the royal family moves in from here. obviously a huge amount of turbulence within the family, the firm as it is known, over the last few years. alix: queen elizabeth has been on the throne for so long, there are generations of people who only know that. you have to wonder, when that it didn't transition -- when that transition eventually comes, without will. they want to update you on the markets. the headline today is inflation is coming. seeing it, believing it, and thinking about it are a couple of different things when it
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comes to the market reaction. s&p hitting another high, text the underperformer of the day -- tech the underperformer of the day. we were already seeing a selloff. yields were moving higher because of what we are seeing in europe, italian btp's continue to move higher, up by about eight basis points. we are seeing inflation expectations on the fives, the 10 and the 30 we higher, and the five-year five-year forwards also moving higher as well. seeing that core 3% print kind of jars you. the dollar able to eke out a little bit of again here. -- a little bit of a gain here. guy: in some ways it has been a quiet week, but in some ways an important week. many strategists remaining incredibly bullish about the position going forward for equities. here's what they have been saying on bloomberg over the last couple of days.
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>> i am still a very bullish strategist. >> growth is going to be abundant. you want to stay away from the high-growth companies. >> our expectation is markets continue to go higher from here. >> you want exposure to the consumer. >> the recovery is coming very strongly. >> all of this is an opportunity to reposition. >> we are very carefully watching interest-rate markets. >> we expect the vexed maybe not in a linear line down, but the vix to normalize back towards levels that are in the midteens over the next several months. guy: a lot of positive people. tobias levkovich, chief u.s. equity strategist for citi, joins us now. you are a little more cautious. why? tobias: number one is our primary sentiment metric is not as bad as it was probably in march, when we were seeing levels even above the bubble levels of 2000, but we are
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seeing models suggesting losing some money. we are not seeing a bear market, but certainly 5% to 10% corrections, seeing an environment where the risk/reward isn't necessarily skewed favorably. you could make some arguments around interest rates being low, and therefore you can support it, but that brings up the whole idea of risk premiums rising. when you look at revisions momentum slowing both forward guidance and percentage of upward estimate revisions on the street, street consensus for earnings are 170 for dollars this year, and the market is probably pricing in something like 190. alix: i'm loving your photos, by the way. where do you feel like the market is most complacent? tobias: i think the market isn't necessarily complacent about the longer-term.
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many investors are worried about what happens when the fed tapers , what happens if we get more inflation data, which we think is very likely. what happens when we see tax increases, things like that. but in the meantime, as the markets are going up, i need to be involved. we are suggesting investors should be involved a little bit more judiciously. for example, our work has been much more cautious on small caps. we have been extremely bullish for about nine months. another area we are very focused on has been pricing power. it is not just commodity prices. we are starting in the labor markets as well, even with 7.5 million more people unemployed than there were in 2020. things are starting to get tighter, and the nfib is telling us the single largest problem for small business is volume of labor.
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guy: given all of that and what you said at the start, i've got a vix at 17. if i am a sophisticated investor, do i buy protection at this point? tobias: i would say yes because we do think there is some risk. we need to be a bit careful. we are not telling you there's imminent doom. it is suggesting some pullback is likely as investors don't see everything is good news. he level of sentiment and level of bullishness is there, but we can see through some of the work we do with surveys of clients for the 38th or 39th quarter in a row that we are seeing greater bullishness, where clients see the market trading well over 4100 this year, and the average expectation on a weighted basis is moved up 200 points on the s&p from where it was in
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january. alix: do you feel like investors are talking about tax increases yet? are you starting to factor that in as well? tobias: it is one of the next stories that are going to come forward. we are expecting some sort of budget proposal coming out in the next month or so, that we will begin to put the contours around it. we probably won't see a deal until maybe september. i think markets want to have clarity. it's kind of an alternative minimum tax, which is how a lot of technology companies have been able to move in electoral property offshore two different tax jurisdictions. some of this stuff is still to be worked on, and as long as investors don't have a pretty good idea of what that looks like, we will probably have a
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pretty good price here. guy: i'm wondering from where they are coming. is it cash? i does want to reference the ppi print today. i am curious to get your take on this and how sustainable this all is, which one is going to pick up in which one may fade. tobias: the bond flows really haven't changed a whole lot. you will get a week here or there, but generally speaking, we are looking for that stability and that income, as well as bond yields moving higher with a little bit more comfort to make those investments. with regards to equity flows, even if you had individual investors pulling out of bonds, you would have central banks pouring into bonds. it isn't that disruptive. on the equity side, we are
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seeing retail investors put in the earliest indicators for rallies. the other thing we saw is showing that and stretch no investors -- that international investors have been increasing their exposure to the u.s. we are seeing reopening, faster vaccination, all of that stuff. it meant for a stronger u.s. the dollar was something people were looking at also. so investors internationally are coming in, and that is also not the early investors. that into coming a little bit later to check out the sites alix: the obvious -- check out the sites. alix: the obvious question, what do you want to own? the dollar is on hold. you have reopening on hold -- you have reopening happening, but record highs on the s&p.
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tobias: we think the rotation story for value still makes sense. cyclical positions are going to be very strong. examination of reopening as a result of -- a combination of reopening as a result of vaccination. business trends are going to look pretty good on a relative basis. the financials will do better with a higher bond yield, which typically responds to perpetually higher inflation. just to give you context on that, the business price index of the manufacturing pmi leads cpi and five year breakevens consistently. we have seen a rising trend on that business price index, so at least over the next three months, we are probably going to see some upward pressure continuing on some of this data that i thing would be supportive of financials, and certainly as we reopen the leisure and hospitality area, i'll tell you,
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i was in florida last weekend, and activity is picking up when you talk to everybody in the service industry. they have seen a significant change in the last five or six weeks. alix: i am like the only person i know who doesn't want to get on an airplane. tobias, really good to see you. thanks a lot. tobias levkovich, citi chief u.s. equity strategist. coming up, when do we think the fed will think about adjusting interest rates? this is bloomberg. ♪
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♪ alix: live from new york, i'm alix steel, with guy from london. this is "bloomberg markets." core ppi was up 0.7%.
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you got a higher inflation story, plus a fed that wants to see substantial -- -- monetary policy, but we are going to be more outcome-based and less outlook based. i think that has served us well in the pandemic, and i think it will serve us well in the years ahead. >> would you characterize that as a commitment to being late rather than to being early? >> what we said in september of last year, following our framework announcement in august, is that we do not expect to lift off until three conditions are met. first, that inflation conditions
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are actually met him and we want that to be sustained. secondly, we want to be looking at labor market indicators that are consistent with a fully employed economy. third, we want that to be sustained. we think that is appropriate since we have had the effect of lower bound. inflation has been below our target for the last 10 years. but under those circumstances, that is a good policy. you are correct that in the past, the fed was more preemptive, and my research suggested that if you got good models, you want to be preemptive. but if the models are not serving you well, you are more robust if you are looking at actual data so that is the way i characterize it. >> the conversation right now is over what substantial progress actually is. you are familiar with the debate. we talk about it all most every day on programs like this. do you think it is necessary to define what substantial progress actually is? >> first of all, it is actual progress. it is not projected progress. it is hard numbers on the labor
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market and on prices. secondly, we are early on in this year. i know we have already penciled in 6% or 7% growth, but under outcome-based policy, we really want to see that. as chair powell indicated and i have indicated, as we go through the year, as the data comes in, as we release our projections based on that incoming data, we will have a sense on where we are relative to that progress, and chair powell has also indicated, as we think we are making that progress, we will communicate that to people who listen to our communication. so i think this is really where we want to be. it is actual progress, not projected progress, and as we go through the year, we will be informing the public about our views on that progress. guy: are you afraid -- tom: are you afraid of inflation? should we fear inflation? mr. clarida: the federal reserve
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, every federal reserve since paul volcker's leadership has been committed to that. the powell fed is, too. but 2% is a ceiling also does not serve our economy well. it has serious and pick the labor market and prosperity. essentially, what we have said is that we want inflation outcomes that keep inflation expectations anchored at 2%. that means sometimes it will be above 2%, and sometimes below. we focus on inflation expectations intensely. we have a new index of common inflation expectations. we have indicated that because of the nature of the pandemic shock a year ago, as we move through 2021 on a year-over-year basis, headline inflation is going to likely move above 2% because we are going to be comparing this year's prices with last year's collapsing
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prices, but we expect in our baseline most of that to be transitory and for inflation to return later this year to around 2%. that is our baseline. it may also say that around a baseline, there are risks on both sides, and in the risk case in which inflation were to begin to move above a level consistent with price stability, we would have the tools to address that, and i am confident that we would under that risk scenario. alix: said vice chair -- guy: fed vice chair richard clarida speaking a little earlier on there. macomb key is with us now. outcome-based, less outlook based. how much clarity did we get from clarida on how much data we are going to need to see for the fed to react? michael: he made a couple of contradictory points, but may one stands out, and that is that by the end of the year, we should have an idea of whether
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the inflation they expect is going to be transitory. you can see the ppi numbers that came in today. that is goods inflation. goods inflation was the real reason we got that print on a year-over-year basis for cpi. they are expecting that because they think we are going to have shortages as the economy ramps up again. if that starts to go down again, that is going to be the question. he said we want to have inflation over some time, or over a year or two. alix: i year or two is very different when it comes to investing in what happens with yields. to give you what the market needs to reprice what they have already priced in in terms of a hiking cycle? where do they need to do that? michael: probably not. they have priced in where we are today. there's going to be a lot of debate. alix: they not too aggressive? michael: we had 18 fed people, and as they speak throughout the year, we are going to debate
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this. but i think you have to look at inflation breakevens. that is what jay powell has been saying. a lot of the fed officials have been saying it is breakevens that are going to decide. if they start to rise significantly, particularly longer ones, you're going to see the fed may be move closer to reacting. five-year forwards at this point are pricing in higher inflation. 10 years, not so much. so they think they can get by for a while unless those start to move. alix: thank a lot. really appreciate it, mike mckee. let's go to kathleen hays coming out speaking with dallas fed president robert kaplan at a conference. kaplan recently saying we are not out of the woods yet, still watching the virus. >> -- undergraduate investment conference are on their seats because a lot of young people have been a lot more interested in investment lately, so they have to follow the fed. rich clarida was on bloomberg television today, vice president
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of the federal reserve. he echoed chair powell completely. we have to see hard numbers before we even think about, and i will paraphrase jay powell again, thinking about any moves away from stimulus. i assume that means starting with tapering, eventually moving on to rate hikes. is there anything about that stance that you don't agree with? you mentioned trying to balance the risks between being patient, being prudent, but not waiting too long. how do you stand on that? robert: i am going through that balancing, and yes, we are going to be less preemptive at the fed then we have been in the past, and even on asset purchases come on is clear to me that we have emerged from this virus and weathered it, i am not going to
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want to be preemptive in talking about asset purchases. having said that, i don't want to go to the other extreme of being reactive either. so i think a combination of forecasts and seeing actual results is probably the balance that i will find, so once it is clear to me that we have weathered the virus, i am going to probably want to personally err on the side of starting to remove some of these extraordinary actions sooner rather than later, and why? because i worry that they are, if we do them longer than we need to come as they are creating excess imbalances, x x risk-taking in financial markets, which is benign while you're going through it, but when things get back to normal and people need to de-risk, that can create severe tightening. if you are too reactive through this process, you could actually have the effect of shortening the business cycle. that is to the other extreme in
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creating a severe slowdown in order to get out from behind the curve. so there's no textbook for this. you don't want to be too preemptive, but i also don't want to be soap reactive -- so reactive that we are late. alix: another thing --kathleen: another thing officials are stressing right now is the jobs report. almost one million jobs in the month of march, right? but there is still a big hole in the labor market. a lot of economists are saying one million more jobs next month, a million more the month after that. we've got 6 trillion almost ash we've got $6 trillion of stimulus almost ash we've got -- we've got $6 trillion of stimulus almost passed. it is a record in history. with that view on the fed, if this hole in the labor market
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starts filling up, does the fed position have to adjust a bit to that? robert: subject to me being convinced we have broken the back of the virus, which again, i keep emphasizing we are not there yet, once i feel that way, me personally, i would rather be on our front foot because i think excessive accommodation for longer than we need to has side effects, and you don't feel them while they are going on. they are easier to see in hindsight. but i would rather move sooner rather than later, and i think it will be far healthier. again, subject to me being clear that we have weathered the virus, that is the thing that is giving the pause right here and having me hold my fire. kathleen: what is the biggest risk of not being on your front foot? robert: the issue is we are
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watching inflation, for example, and we know there's going to be a price surge this year. we are seeing it already. the year over year numbers are going to be attention-getting because they are going to be elevated. i think some of that is going to be transitory. supply chains, the semiconductor issue, it will get worked out. but we will also have a tightening labor force, so some of it may not be transitory. i am going to be monitoring that very carefully, and in addition, looking at access risk-taking in the financial markets, and both of those for me, if you let them go too far, we have some tools to deal with them, but employing them too late can cause come on the other hand, a severe tightening, which may cause undue slowing.
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so i would like to see sustainable achievement of full employment pricing. to me, that is the objective. kathleen: the fed has its tools, but the question is how they use them, right? i think what you are suggesting, they are strong tools, and you could use them away that would be destabilizing. reading the minutes from the fed meeting this week, interesting to me that when this question of upside risk and downside risk, there were only a couple of fomc participants out of 18 that were worried about the risk of financial instability. i assume you might be one of them. are you? what is it that you see that the rest of the of whimsy doesn't -- that the rest of the fomc doesn't? robert: you should assume whatever i am saying publicly, i am saying that more privately in an fomc meeting.
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i will just speak for myself here. i am very aware of the fact that equity market cap to gdp is at historically elevated levels. credit spreads are historically tight. now even the housing market, not speculative, is at historically elevated levels, and there's lots of supply demand issues around the country. secondly, i am very aware that we have very good visibility on bank capital and bank risk-taking and stress testing. we do not have good visibility on non-bank financial markets, and you have to be very aware of that. whatever risks you see going on that i hear about, it could be that and much more. that is what concerns me. kathleen: tapering. there's a lot of talk that the fed can't hike rates until it has met those goals. for employment, inflation above
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2% and staying there. they say we need substantial further progress to think about tapering. what does that mean? can i conclude that the fed is planning on tapering at some point, and that will be potentially well before it starts increasing rates? robert: my personal answer to that question would be yes. what substantial further progress means for me is there is clear evidence we have weathered the pandemic and that we have turned the corner and we are marching forward towards achieving our full employment and priced ability goals. when it is clear to me that that is happening, i will be advocating that we should start withdrawing some of this extraordinary action that we have taken, and yes, it would start with asset purchases. kathleen: when you look at the risks in the market, we have seen leverage.
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we have seen concerns about leverage. it has all really -- it was all really brought to the table by archegos, started with gamestop, and i think the question is, when you see the giant hedge fund liquidation, you look what is happening not even to a hedge fund, to a bank who is involved, it is around the world, is this a consequence of too much money, too many bond purchases, too many low rates being poured into financial markets for something that maybe now is on the point of being too long? robert: i think these individual situations we are seeing, there is a whole range of factors beyond monetary policy that goes with each one of them. but i do think it is wise for me to acknowledge that accommodation and asset purchases, monetary policy is
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one of several factors. what i am more concerned about right now is not what i can see and what is being reported. i am more concerned about what i am not seeing, and i am talking to industry contacts and getting anecdotal evidence that suggests to me people are pushing themselves to take more risks, and the reason it concerns me is one of the reasons they tell me they are is a signaling from the fed. so i'm not thrilled about that, and i would rather -- i don't waging that. kathleen: that is a pretty powerful statement. guy: you have been listening to dallas fed president robert kaplan speaking to bloomberg's kathleen hays at the undergraduate investment conference. if you want to carry on listening to that, live on bloomberg radio. now, let's pivot, and i thicket a fairly straightforward pivot, to what is happening with the banking sector. we saw the kbw index go shooting
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up. next week, and absently massive week for the banking sector in the united states, kicking off first-quarter earnings season. jp morgan morgan, goldman sachs, wells fargo all announcing results wednesday. , gil doolittle is here with m -- abigail doolittle is here with what we should watch. abigail: earnings season kicking into gear next week. it has been a very bullish year so far overall for stocks. the s&p 500 up about 9.1%, but the banks really outperforming. take a look at the s&p 500 financial sector, up 18%. the kbw bank index up a stunning 25% in just one quarter. of course, this has everything to do with the historic backup and yields we have seen. the 10 year yield right now up 75 basis points off of the highs, but the idea is this will flow right to the bottom line for the banks, rising net interest income, so this is a very bullish dynamic for the banks. another factor, because of all
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the liquidity in the system, is trading volumes. the leverage being talked about. if you go back to 2016, and the we take it all the way to 2020 and 2021, these are the trading volumes, much stronger. for some of the banks that deal with a lot of trading, this could be a bullish tailwind. interestingly, if we take a look at the first corner expectations for net income relative to the fourth quarter, not in all cases, but in some of the cases, jp morgan really stands out. it is expected to be a little bit less. bank of america and citigroup holding a little more flat. but again, the first quarter may were present a bit of a decline. finally, our banks the newtek -- finally, are banks the new tech? there's the kbw bank index being helped by rates rising, and here is the tech index come arising just a bit, but rates rising help the banks, but it also hurt
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tech as valuation comes into play. that divergence can be interesting to see how that plays out. alix: abigail, thanks very much. really appreciate it. one of the things front and center for earnings season when it comes to banks is credit suisse, planning a sweeping overall of the business at the center of the archegos capital blowup. for more, sonali basak joins us. but first, happy birthday. sonali: thank you. [laughter] alix: i remember a year ago to this day, a big birthday for you, we didn't get to celebrate it. sonali: hopefully next year we can separate a bit more, right? alix: so credit suisse, what did we learn? sam: hedge funds -- sonali: hedge funds are not thrilled about this. credit suisse is planning on tightening for its hedge funds when it comes to margins. why is that a big deal? the swaps business is a loved business because there is some flex ability of that margin pressure, and there is also a line of anonymity behind that
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position. the question behind this is will more banks do it, and will it spread to other products and asset classes? because then it is something that doesn't just impact the swaps business. it impacts many more forms of borrowing that hedge funds do to engage the stock market. guy: this is going to become a much more dynamic process. can you walk me through how that is going to work and how that is going to affect the ability of hedge funds to take risk. sonali: first, credit suisse, they are one of the egg is brokerages in europe. they are kind of a second-tier when it comes to the total wall street view. the top firms are really morgan stanley, jp morgan, and goldman sachs. how many of them start to tighten terms after this fallout? when you get to credit suisse and all of the other european banks, ubs, nomura, and many others, all of those firms, they
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are pretty big. they didn't to also be in prime brokerage alongside the biggest banks for most of the hedge fund industry worldwide. the critique over the last several years, you heard robert kaplan say it himself, was that money is free and everything was good, and things were much easier to borrow against, and banks were very easy on the terms. now is there a tightening, and will that rain back -- will that rein back the total amount of leverage they take when they are hedging their bets? are they going to be under a greater i when it comes to disclosures about what they are buying? one of my sources brought up something interesting about activists hedge funds, for example. activists love swaps because that is how you build a stake in a big company. the rules start to change because you really have been able to use this method for so long to get around traditional rules around lending. guy: you can't see regulators continuing to allow this lack of
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transparency in the banks. i think they are probably looking to make some changes, as you say. q. very much, indeed. -- thank you very much indeed. happy birthday from me. there's one thing we will be listening out for during the banks conference calls next week. for the other earnings themes we are going to be watching, betsy graseck, morgan stanley global head of banks and diversified finance research, is joining us now. thank you very much for your time. for the last few quarters, it has all been about trading. trading looks like it could be fading here, but i wonder whether m&a and spac s are going to fill -- and spac's are going to fill the gap. betsy: thank you so much for having me on. when we think about the outlook for 1q, when we started the year, we came in with an x petition that trading would be down year on year, but we have actually with an expectation that trading would be down year on year -- with an expectation that trading would be down year
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on year, but we have actually flipped that. that is in part with the very active environment that we have in the equity market regarding ipo's and spac's, etc. then you also have the benefit of those activities impacting the investment banking lines as well. alix: does that continue? not only are there signs of spac feelings cooling a little bit, but then if you do see leverage reigned in or banks take a look at their books because of the archegos situation, what do you think happens for the rest of the year? betsy: as it relates to our forecast going forward, we are anticipating that we are going to follow a traditional seasonal pattern, which is that trading is the strongest in one q, and that that stays as you go through the year. so that is what is baked into our estimates. when we think about the year on year, we are anticipating that as we move throughout the year, we will have some declines.
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we go back to what i was mentioning at the beginning, that at the beginning of the quarter we were fully anticipating the full year was going to be year on year down, now we are more in the flat range with one q being strong. guy: -- with 1q being strong. guy: how does this change the narrative around the banks? betsy: as it relates to investment, trading is one piece of the overall pie. it is not the entirety by any stretch of the imagination. when i think about my group and why i am overweight u.s. large-cap banks and consumer finance, it really hinges on three key things. one, credit is doing phenomenally well, and likely to be. two, we anticipate banks will increase their buybacks as you move through the second half of the year. we have already heard from corals that if pasties -- from quarles that if you pass the
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stress test, that is going to be the outcome effectively. third, we look for -- to increase. so you've got an outlook for better credit, more efficient balance sheet, and to beginning of green shoots in lending. those things are really the major drivers of why we are overweight. alix: let's talk about the loans. what is going to be the driver in the back half of the year? betsy: this year, back half is really a funds and of consumer spending on travel. see ni lending, not so much -- cni lending, not so much. there's a lot of technical issues around that that we can get into if you want. really, it is more about 2022 cni picking up. the fundamentals of cni, there are indeed inventory, inventory management, inventory capital
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workflow for manufacturing is actually increasing, and at the same time, if we get this infrastructure bill, you're going to see more demand coming from a much broader range of needs. but really, that is a full on 2022 impact. guy: given what you just said, can i assume that peak deposits are almost in now and will fade from here? betsy: no way. [laughter] why do i say that? because we know we are going to have a significant increase in deposits in the first quarter. you can see it in the data that comes up weekly. it is up something like midteens or so. that is coming particularly from stimulus. that said, the fed is still engaged in qe. quantitative easing is a direct injection of deposits into the banking system. so when we think about what the outlook is for bank reserves at
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the fed, which is one way of thinking about what the deposits are going to be growing, this year we are looking for $2 trillion increased bank reserves at the fed. last year was $1.5 trillion. next year we are looking for $1 trillion because we are looking for qe to end. you put that altogether, we are still going to be seeing deposit growth. your point might be what are you going to do with it, and really today, we are sitting with a loan to deposit ratio of 50% roughly. at some of the banks i cover, it is mid 60's for the industry overall. we are hovering at near 50 year lows on that. so we are flush with deposits. banks are very interested in lending, and loan demand picks up. there's definitely room to feed that loan demand. we are waiting for that to come through. alix: before we let you go, i
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know you cover a lot of consumer banks, and also when it comes to the big banks. what is your favorite topic? -- favorite top pick? betsy: we have a few. think any financial, capital one -- synchrony financial, capital one. those are the top two. the main reason is excess reserves as a percentage of market cap are extremely high, and we think that as people realize credit, the cycle is going to be very muted. you are going to see lower losses, more reserve release, and increased buybacks. that is the main reason we are above the street. guy: final quick one for me. wall street is under pressure to treat its junior people better. what is going to be the impact, both in terms of cost, job retention, and culture, do you think? betsy: this is really a question i suppose for my c-suites, but
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what i would highlight is my own personal view is i don't think that would be something that would be so significant of a cost that would force me to change my expense line. from where i look at an expense ratio perspective, i don't think that would be something that would drive a change in our view on that. alix: betsy graseck of morgan stanley, things a lot. guy come into your point, i think it was pricewaterhousecoopers now offering you money -- guy, to your point, i think it was pricewaterhousecoopers now offering you money to vic vacation -- to take vacation. guy: is this going to have a meaningful impact on the cost line? if it doesn't, you would have thought that this is something that more and more banks are going to be under pressure to do, it does become part of the norm. i thought it was fascinating she said she can't see a major impact on the cost line. alix: we are going to follow
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that story for sure. coming up, u.s. investors betting on the asian private credit market. kkr is one of them, raising the biggest fund in asia ever. we will speak to the woman behind it, alisa wood, coming up next. this is bloomberg. ♪ erg. ♪
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ritika: this is "bloomberg markets." coming up, imf first managing deputy director, at 12:30 p.m. in new york, 5:30 p.m. in london. this is bloomberg. ♪ alix: kkr just closed a record $15 billion for its asian fund number four. kkr's asia-pacific platform now has over $30 billion in assets under management in 11 countries across the region. joining us now is alisa wood, kkr head of private strategies. this is a record fund in the region. i wanted to get a take on where
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the interest come from, and who are the measures behind. alisa: thank you for having me. what is so interesting about the demand for this fund is it is really coming from global interest. it is no single part of the world really driving that demand. when you look at our fund raise for this $15 billion, about 1/4 came from local asian clients come about 40% plus came from the americas, for example. it is really global demand of trying to find ways to access the growth and some of the key themes and trends we are seeing exacerbated in asia, that we are also seeing in europe and america, but seeing at a much greater scale across the asia platform. alix: a lot of that is going to be the resurgence of the metaclass. the middle class -- of the middle class. the middle class has been dispersed and italy hit -- has
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been disproportionately hit. how does that change the outlook for you guys? alisa: obviously, the pandemic had a great human toll, and we can't forget that, but from an economic standpoint, it actually doubled down a lot of the trends and themes we were investing behind. for us, when you think about some of the disruptions that happen in the themes we were investing behind, we were able to invest behind them not only at a cheaper value, but also, they exacerbated the themes and move them ahead by five to 10 years. so when you think about technology disruption, when you think about corporate governance and roe, when you think about e-commerce in tech, smart retail and a lot of the consumption trends we are seeing, none of
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those changed during covid. what happened was it just sped them up. so we really doubled down on that. i would say the one thing that did come out of this post-covid world -- i don't know if we are totally there yet -- is this nesting trend we have seen. as we have all spent more time at home, it really has focused consumers around the world, regardless of if you are middle-class or not, to really invest behind your home, what you have in your home, and all of the things he focused around that nesting idea. we have really tried to lean in on that pretty early on, and that is one of the trends we assumed would come out of this covid period, and now we are seeing that any multiplier effect. guy: good morning. one of the trends investors are focused on at the moment are making sure that their investments do pass their esg screens.
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how does that work in asia? alisa: for us, it works the same way we would approach esg anywhere in the world. it is part of our diligence process, part of our value creation process, and part of the themes that we are investing behind. for us, we don't view esg as a check the box. we really embed it in everything we do, and we view that, whether it is environmental, social, or governance, it is really one of the key tools in our toolkit to drive returns and drive value. we have also invested behind some esg themes themselves. whether it is upgrades in education or in health care, those are some key esg trends that we are seeing really across asia, whether you are talking about developed asia or developing asia. those are very important trends, both from a consumer perspective, but also from an investor perspective. alix: let's talk about the
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specific opportunity set. kkr is seeing a lot of opportunities in asset-based strategy, a lot of money going to small businesses, plus real estate. give some specifics as to where the cash is going to flow. alisa: in asia, the cash is going to flow into a couple of key themes. one is consumption upgrades. when you look across asia, developed or developing, when you look at the rising middle class that you spoke of before, when you about the focus on the millennial population, more millennials in asia than anywhere else in the world, they want better health care, better experiences, better things. that is what we have really been investing behind. for instance, we have been one of the largest investors in the care space. we have invested in everywhere from the philippines to india to china, investing in hospitals and care facilities and bringing western practice to those
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markets. another example is investing in smart retail. we made an investment in japan and another investment in korea, and the one in japan we actually bought from walmart. this was an environment where clearly, there is an in-store retail presence, but we also at the same time one seamless transition to online, especially in environments like this, and that is something that we leaned into. this year we actually invested in reliance retail. this is one where you can look at technology disruption and how that is impacting the retail space. they have a smart mobile platform that they are rolling out in retail in india that is extremely fragmented. there are millions of mom-and-pops. what they are doing, aside from their major retail presence in grocery and fashion and
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technology, they are leaning into bringing these mom-and-pop's through their mobile platform to the consumer directly. those are some of the key trends we are investing in that are pretty interesting today. alix: we really appreciate it. thank you, alisa would. we appreciate your time. this is bloomberg. ♪
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alix: some breaking news for you. revlon received about 500 million dollars accidentally in payments. they won a court case that they could keep those funds even though citi was trying to get those back. the judge froze those assets, and now citi says another bank made larger payments in error than it did. pretty funny. we did it, sure, but they did it, too. guy: everyone is going to be trying to figure out which bank it is. we are also getting news from
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amazon, this news breaking as well. amazon clinches a win over the union. the vote count is continuing, but the number of ballots cast now looks like it has won that. we will have some analysis on that story coming up in the next hour. we will cover that fully for you. we will also continue to cover the event here in the u.k. with the passing of prince philip. all of that coming up. lots of breaking stories in the last few minutes. this is bloomberg. ♪
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guy: from london, i'm guy johnson. alix steel is over in new york. this is the european close on "bloomberg markets." germany's vaccine rate doubles. the u.k. delivers a roadmap for return to international travel with expensive testing and a traffic light system that would likely leave most of europe leave most of europe off-limits. and prince philip, the husband of queen elizabeth for more than 70 years, has died. we are seeing a selloff in the bond market. we will come back to that story.


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