The Trading Floor: Barclays’ Turnaround, EU Equities Rally & US Inflation Risks
42:51 Share

Forever!

After 30 gigabytes, customers may experience slower speeds. Customers will pay $25 a month as long as they remain active on the Boost Unlimited plan. Getting engaged can be stressful. Getting the right ring won't be at BlueNile.com. The jewelers at BlueNile.com have sparkled down to a science with beautiful lab-grown diamonds worthy of your most brilliant moments.

Their lab-grown diamonds are independently graded and guaranteed identical to natural diamonds and ready to ship to your door. Get $50 off your purchase of $500 or more with code LISTEN at BlueNile.com. That's BlueNile.com, code LISTEN for $50 off.

If you're a facilities manager at a university, you know students rely on the cafeteria for breakfast, lunch, dinner, and the occasional late night snack. So when a dishwasher breaks down and dirty plates pile up, the mess hall can turn messy in the blink of an eye. Enter Grainger. With over a million industrial grade products and fast delivery, the product you need now is never far away. So you can turn that dishwasher back into a lean, clean washing machine. Call.

Click ranger.com or just stop by. Ranger, for the ones who get it done. Welcome to the Market Maker podcast, hosted by me, Anthony Chung, where every Friday I talk to a member of the team about what happened in markets this week. From macro themes and single stock news to cryptocurrencies and careers in finance, our aim is simple, to make finance interesting and easy to understand for everyone. So let's get to it.

Hello and welcome back to The Trading Floor. We've got three topics as ever to discuss today. We're going to start with Barclays. They've just come out this morning and they've delivered strong results and launched a £1 billion buyback. They are, of course, in the midst of a quite dramatic three-year turnaround story. So we can dive into what's driving their performance at the moment. And that will lead us nicely into talking about something I want to speak to you about, Piers, is we've been reading lots of headlines this week about

quoting various press articles saying about how attractive European equities are looking. And indeed, they have been performing phenomenally well. But I think if you weren't watching Markets Day today, you'd probably think, well, how on earth is that happening? Because all I'm thinking is that tariffs are coming.

Trump's trying to broker peace deals with Russia behind Europe's back. There's all sorts going on here. And yet it's actually transpiring. It's the other way around. And European stocks are looking pretty good right now. So good to unpack that. And then finally, the big kind of data point and market movement that we've seen midweek this week, of course, was the release of the latest US CPI print, where the core reading jumped 0.4% on the month, the highest reading since March.

That did see in its immediate reaction stocks dump, but they recovered pretty quick snap. But the fixed income market didn't respond quite so dramatically in terms of the secondary move. So I'd love to also get some rationale behind that. But yeah, Piers, how are you? And let's kick it off with Barclays.

Yeah, good. Thanks, Sam. Barclays, you know, these are, yeah, good. Well, good numbers. Share price down four and a half percent. So we'll kind of get on to that in a sec. But yeah, look, on the face of it, strong numbers. I find this quite ironic in a way. So the chief executive, do you want to say his name?

I was just about to say, I'm waiting for this. Go on, you go for it. After you. Well, the chief exec, Venkatakrishnan. I think I nailed that. You've got to say it a few times to get it in your head. Anyway, that guy, he set out a three-year plan. So there's a few of these banks that have been on turnaround stories. I think on this podcast, we've talked quite a bit about Citigroup, for example.

over the last sort of two years or so. So Barclays have kind of been on their own sort of, you know, turnaround, just a refocus on the core elements of their business and just trying to get back profitable. You know, they ended, you know, if we talk about this time last year, they're losing money. And so it was like, okay, let's set about a plan. And so the CEO set about what, you know, he kind of had a three-year

Three-point plan, okay? One of them was to kind of increase focus on the UK market, right? Double down. What are our roots? You know, what are we good at? Have we kind of extended ourselves too much in various projects that are not kind of core to our business? So it's like doubling down on UK, the boring stuff.

UK retail, UK corporate, UK private banking. All right. And that was because this time last year, the risky, sexy side of the bank, that's the investment bank, wasn't doing well. Okay. So, all right, let's pivot. Let's pivot. The great irony, of course, here we are a year later, you know, really bumper numbers here. Profits managed to break above the £1 billion mark for quarter four.

Revenue's up 24%, you know, really solid stuff. But the main reason why is because of the investment bank and how the investment bank has performed. So it's that classic story of, you know, when the volatile part of your business is going badly, everyone points to it. It's like, oh God, why are we even bother doing that? You know, it's really damaging our overall performance. When the volatile bit's doing really well,

Everyone's like, well, why aren't we doubling down and doing more of that? So there's an element of that here. But on the investment bank side, like equity trading, that part of the business had a phenomenal quarter, up 40% year on year. So the equity trading division posted £604 million in revenues, fixed income up 29%.

So not as big a climb, although 29% is obviously very strong. But actually, it's a much bigger part. It's 50% bigger than the equities trading part. So fixed income trading delivered $934 million. Investment banking fees up 22%. You know, this is why Barclays have posted a very strong performance in line, you know, with the other banks, really. It's the kind of same old stuff we're hearing as all of these big banks report.

So, yeah, two other things that I'd say with Barclays. One was the timing and the timing given, you know, one within, I guess, the UK banking scene. There's kind of different pockets of types of banks. And HSBC is one who last month announced that it was preparing to exit its M&A and equity capital markets businesses in Europe, the UK and US. Stephen and I talked about this.

So, yeah, I just wonder whether somewhat counterintuitive, as you said, it's almost time to double down in that space because there could be a little bit of a land grab, some open market share in the domestic space that they could sweep up. So that was one point. The other thing, I did have a very quick skim on the train this morning because obviously the results only came out an hour or so ago of their earnings presentation.

And I did see a bullet point on one part. I'm assuming it's talking about lending. I know you've talked before about net interest, income margins, these sorts of things. And they were talking about, I guess, because this was a retrospective 2024 as a whole, how we started the year anticipating several rate cuts in the UK. And we didn't have even half of that. So would that have also benefited the bank against its initial forecasting from looking on a year basis?

Yeah. I mean, you're talking about the year ahead, 2025 rate cuts, right? Are you talking about? No, I'm talking even in 2024, if you remember where we were. Yeah, I understand. Yeah, fine. I mean, that's right. So yeah, rate cuts, rate cuts didn't, well, they did happen. Actually, the Bank of England, I'm just looking now to remind myself, but the Bank of England cut in July, one quarter percentage point. Then they waited until November to do another cut.

And they've just cut again, of course, start of February. So yeah, there were two small cuts in the second half of last year. But you're right, back at the start of 2024, we were expecting a lot more cuts than that. And so look, yeah, the loan book side of the bank performs really well when interest rates are high. And so yes, you could say less cuts

meant that that loan book side of the bank performed better in 2024, including right into the end of quarter four here. So yes, you are right. Higher rates for longer has been a good thing. Okay, so that's UK. What about Europe then? So what's going on with some of these European banks? Because you've had a lot of those also report. Yeah, well, same comment.

Again, higher rates for longer are good for banks, right? But here's a stat. I was reading some, just reading some stuff this morning ahead of this podcast and I read something and I, you know, like when you read something, you're like, hang on that. I must have, I must have misread a word in that sentence. There's got to be a word in there that entirely flips the meaning of the sentence that I took the first time I read it and then I read it back and it was like, what? So here's a stat.

So since the start of 2022, the MAG7, right, which have been the darlings of the last couple of years in terms of stock market performance, the MAG7 have returned. So remember, just as a reminder, that's the US big tech stocks, right? You're in videos and Microsoft's and Apple's and your Meta's and the rest of it, Amazon, Google. But they returned 190%, 1-9-0% returns.

Since the start of 2022. Okay. There is one category of stock. There's one European stock sector. We're talking large cap here. There's one European stock sector that beat it since the start of 2022 was up 200%. And your answer. I'm just racking my brains. I'm like 200. Yeah.

I have no idea. EU banks. Okay. Up 200% since the start of 2022. Now, if you're a clever statistician, then you can get your time period perfect to dramatically make a point, right? So since the start of 2022. If you got your time period right, if you go from the start of 2015 till now,

Same two categories, Mag7. Well, the Mag7's up 2,700% since the start of 2015. EU banks since the start of 2015, zero, flat. That is such a good lesson. Yeah. Because...

I think what you hear about financial markets typically comes from sell-side institutions. And they have an agenda, i.e. typically they're selling an investment idea or opportunity. But I think as someone consuming this content, you are 100% right. It's like two different data sets over two different viewpoints to serve two different agendas. It's incredible. You're right. It's a good general point. Like when I read something and I'm like,

Really? I often think, right, hang on, there's got to be something behind this. They've spun it somehow. And so, yeah, I was just looking back a bit further. And right, so EU banks. There's a lot of FOMO. There's a lot of FOMO in EU banks, basically. And so they can sweep up some business, I'm sure.

Yeah, absolutely. But look, they've obviously performed incredibly well. And I mean, we could broaden it out. I mean, EU stocks generally have had a great year. I'm going to give you some stats here. If we talk about, well, let's talk about

year to date right so here we are what's the date 13th of february so obviously a month and a half into this year so this is six weeks how have the major stock indices performed and look let's start us they've been dominant um over recent years but s&p is up 2.8 percent okay that's just all right for six weeks not too bad uh nasdaq's up four percent

Pretty good. Oh, sorry. NASDAQ's up 3.3. It's the Dow Jones that's up 4%. So that's actually straight there. That's interesting. So the Dow Jones industrial average has beaten the heavy NASDAQ. But then we go to that Nikkei 225 is down minus 1.5%. Then we get into Europe, right? And I'm going down a kind of global list here. In Europe, the DAX, what do you reckon? First six weeks of the year. Well, what's interesting about that is...

There's so much negativity around the German economy at the moment, which makes me feel like probably the market is forward-looking, share prices are probably incredibly depressed, so coming from a low base. So I'm assuming it's up a lot. 12%.

Yeah. And actually, that's the leader. I'm looking at a list of, just on my list here of global stock indices. I can see probably about 40 different stock indices here. The DAX is number one.

So the German stock market has moved up more than any other kind of major market in the first six weeks of the year. But look, you look at the Spanish stock market up 11.5%. Italy's up 10. France is up 9.8. Even France are up 9.8. The FTSE 100's up 7%. So look, Europe is punching here and is outperforming. Can I just ask a question then, just from stepping back and not talking...

details because we'll get to that. But from an investing perspective, so people who listen to this, a lot of people are early career professionals or have disposable income that they want to then explore investing. Can you just explain to me very simply about, I know you love picking bottoms. I'll leave that open to interpretation, but I know you're a man that likes to pick bottoms. And what's the difference between that

and trying to find value in short-term opportunity over longer-term investing. And when we're looking about the, to take what you talked about with that 2022-2015 example, extrapolate that over an entire career of earnings over 40, 50 years. Yeah, well, maybe a good example, because we're going to go on to talk about US inflation in a minute.

trading versus investing you know i'd say trading right i'm going to trade the u.s inflation data right this is news that is going to be announced at a specific time and we can prepare for it right we know what's forecasted we can look back at patterns and write what was this data in previous months what are the trends blah blah blah then the number hits and it's like right

Is it different? Is it different to what was expected? Which way? Higher? Lower? And lots of different elements to the inflation report, which makes it complicated. But look, you're trying to react and trade to the immediate price reactions. Immediate meaning over the seconds, minutes, hours following the data. So that's kind of what I would call trading. Investing is, yeah, certainly picking...

more medium-term themes you know and you want to find like secular trends if possible I mean like right now the gap well actually not right now sorry at the start of the year the gap in valuation that's just simple price to earnings ratios the gap between the S&P 500 and

so the US's biggest companies and the European 350 index, the 350 biggest European companies, US companies were trading at a 65% premium with regards to valuations. That is the largest gap, that's the biggest divergence in price to earnings ratios between the two continents ever on record. So relatively US super expensive companies

europe bargain bucket cheap okay so ultimately but that trend's been in place for years right i mean the the divergence i like if you go back to 2015 that was kind of where it bottomed and the difference was about five percent from 2015 till now it has trended one way and it's gone from five percent gap to 65 percent

So my point is, well, is this the moment that you're going to start the sort of conversion, the reversion back to the mean? Is that journey now going to begin? The problem is it's been every time you've chosen that decision in the last decade, you've always been wrong. And the gaps just widened and wider. And this is what we talk about, you know, the kind of the American...

Economy being super strong, super resilient, doesn't matter, rates are really high, we'll talk about inflation stubbornly high, so doesn't matter. US exceptionalism has driven this trend. So you're really asking the question, do you think US exceptionalism has peaked?

And is it now going to revert? Okay. And that's tied into this buying Europe instead of the US. It's just that for the whole of the last decade, even though this trend has been going all-time highs, all-time highs, all-time highs, all-time highs for like five years, you've been wrong every time if you've called the end of this. So I'm just saying. And that convergence doesn't necessarily need to be US exceptionalism weakening and Europe coming back. It could be...

Other global forces improving, which is pulling back the US and closing the gap, right? Like China, Japan or whomever. One reason why now, 2025, one powerful reason why this kind of gap is now going to start to converge is interest rates.

Because for the whole of that time, interest rates have been high. Now we're getting a divergence in interest rate expectations because in Europe, interest rates are being cut. I just said the Bank of England cut rates last week.

The Fed are not cutting and we're going to come on to inflation. Really bad January inflation for the Fed, you know, staying stubbornly high. The Fed aren't going to cut. Europe are going to carry on cutting. That's a really powerful divergence when it comes to thinking about economic performance. And then if stocks are super cheap.

If you've been a beneficiary of this US exceptionalism and you've been wedged into US stocks for the last decade, well, Trump is many things, but one thing he's definite is volatile, unpredictable. So that's a risk premium, right? So you're thinking, well, I don't know what Trump's going to do, but it's been a great run in the US here. The dollar's strong.

Europe's looking really weak. Sorry, I should say cheap. That's going to cut rates. Right, I'm going to switch. So it's an asset rotation out of the US and into Europe, which is kind of driving some of that sort of divergence in performance. And for the sake of sounding boring, then, this is a perfect, again, putting it in the investment wrapper, the idea of diversification is key for longer term returns.

Yeah, I mean, that's a great line that they'll always roll out, the asset managers and the fund managers. And it's generally, it's true, just from a risk perspective, diversification is key. But, you know, those, well, fortune favors the brave, right? So... Uh-oh, rein it in, Piers, come on. We'll get compliance on the, and risk starts sniffing around if you start saying stuff like that.

Anyway, look, it's been a great run for six weeks. All right, let's not get carried away. The US have had a great run for 10 years. All right, Europe, they've taken the last six weeks, but is it sustainable is the big question. And I would say from an interest rate expectation point of view that you get a tick in that box. We'd expect rates to come down relative to US interest rates through this year, for sure. But, you know,

What's Trump going to do? Is he going to slap big tariffs on the EU? German economy is weak, but look, it's coming from a low base. If the euro devalues, that's great for Germany. If the China economic story is going to turn around, look, has China troughed in terms of their economic performance? If they start to improve, that's great for Germany and Europe, right?

Obviously, there's still the geopolitical side of things. But look, yeah, there's quite, I'd say it's been a great six weeks. There's no reason why it can't continue. But yeah, there's always plenty of risks. I was just thinking, if I was to ask you to rank in order over the long term, one, two, three, US, Europe or China, who's going to win the AI race that could consequently improve economic productivity and so on and so forth?

So, right, that's another curveball. Who's absolutely bottom of that? Europe. Exactly.

Yeah, that's a good point. So that's a really good argument against this idea that, you know, you're going to get a sustained mean reversion now in this valuation gap between the US and Europe. And actually, this is just a temporary blip, but actually the AI story is going to force US exceptionalism versus Europe to continue. If you're enjoying the episode and are new to the channel, don't forget to drop us a rating and review. It really helps get the show out to as many people as possible.

Okay, back to the show. All right, well, let's move on. We've kind of slightly touched on it, but let's dive into the nuts and bolts of the US CPI print because ultimately in the short term, as you said, for trading, it certainly was quite a volatile event. It was a shocker, really. I mean, so this is the January inflation data. Okay, so what the US do, they announce their inflation figures. It's normally midway through the month.

for the previous month, right? So midway through Feb here. So they dropped their inflation numbers for January yesterday afternoon. And look, it's just not good. It's not good if you're wanting inflation to continue to drop. I say continue. It stopped dropping. If you want inflation to get back on the kind of downward trajectory to get to 2%, which is the Fed's target, and enable the Fed to cut interest rates, if that's what you want, this is really bad news.

It's great news. I'm long European equities, Piers. What are you saying? There you go. Well, it's good news. I mean, look, let's just go through some of the headline figures first.

So there's the inflation. So this is CPI, right? So Consumer Price Index, which tracks inflation with a basket of goods. In the basket is loads of all the stuff you buy on a kind of day-to-day basis as a consumer in the US. So US CPI, if we look on year-on-year basis, so the average prices in January 2025 versus average prices January 2024, up 3%.

There's all sorts of things wrong with that. We were hoping for 2.9%, so it was higher than expected. It also has now continued what is one, two, three, it's five months in a row of inflation going up. We're used to saying that inflation is stubbornly stuck and it's not coming down. Forget that, it's going up.

It's gone up five months in a row. 3%, that's the highest we've seen since April of last year. So obviously that's not good news. When you go shorter term now, because we look year on year, but then we look month on month. So looking for those much shorter term sort of price behaviors. I mean, there it's shocking because it was plus 0.5%. So prices in January versus December, plus 0.5. We had expected just 0.2%.

And 0.5% as a month-on-month reading, that is joint, that matched the August 2023. So actually, the last time we had a higher month-on-month print, January 2023. We've just got a two-year high on the month-on-month inflation print. That is not what the doctor ordered.

We'll talk about maybe why in a sec. But that's the headline inflation. We then kind of go to what's called the core inflation. Now, this is taking out some of that volatile, the volatile elements, food and energy, which are often unpredictable and quite volatile. They take those out of the basket to try and get a better feel and read for like,

Just all the rest of the stuff that's a bit more stable because that food and energy can often distort that headline CPI figure. So the core inflation, it's not much better news. So it came in at 3.3%. Basically, last month, the December number was 3.2%, right? Which is the equal lowest...

since inflation peaked and has been trending down for the last two years. All right, 3.2. We were hoping and expecting the forecast was 3.1. We were expecting another tick lower for another new low in this downward trajectory. Not only did it not go down, it actually went up to 3.3. So from a kind of trend perspective,

We're now at that. Basically, core inflation has not moved for now nine months. All right. We've been stuck at either 3.2 or 3.3 for nine months. We were hoping for a tick down to get the downtrend back on. Didn't happen. Went up. Not good news. And then similarly on the month on month for the core, it was plus 0.4 percent higher than the expected plus 0.3. So no matter where you look here in this report.

It's higher than expected and not what we wanted. Okay, so talk to me then. That's the top level, if you like, the outer of the car. Let's get under the bonnet. So to determine whether or not you said these are multi-month patterns emerging, are we coming to the end of that pattern? Is this pattern expected to begin? What signals are we getting from the components that comprise of the CPI report?

Yeah, and look, the Fed always say, you know, we never look at one single month's worth of data in isolation. We're looking at multiple months and longer-term trends. So there is stuff in here. There are elements of the basket that certainly...

popped and actually had a quite a dramatic impact. And so you've got things such as, well, I say that, I will caveat, there was a broad, it's not all about these singular items I'm about to say, it was relatively broad based. It's not like everything went down apart from these one or two things that went up massively. Nothing went down, but a few things went up quite strongly. And so things like used cars,

Airline tickets, car insurance are certainly being blamed here for a kind of big rise in January. And then there's one item on the sort of food category, which is grabbing a lot of the headlines, eggs. And the price of eggs, well, went up 15% month on month, year on year. That's up 53%.

Right, so on that point then, one of the things I always think, just being a fairly curious individual, I'm like, what eggs have reached eight bucks in wholesale markets this week? That is, for context, more than double the price of a year ago. It's the highest ever on record. So again, you kind of think, okay, why is that happening? And much like...

any type of food, it reminds me actually the reason here being flu related makes me think of China and the pig flu that they had where pork prices a few years ago skyrocketed and were going up 20, 30%. And as a key staple of that kind of cultural cuisine and being a low cost typical meat source that caused all kinds of inflationary havoc.

And actually what you've got here is a similar thing. So yeah, this is all down to ovarian flu. And to give you some numbers, farmers have lost about 46 million laying hens in the past four months. Wow. What percentage do you think that is of the national flock of hens who lay eggs in the US? What do you reckon?

46 million have been culled, essentially. Well, I would look at the price here. And as you said, it's kind of doubled, right? So I'm thinking supply-wise, I mean, you can't say suppliers halved. That doesn't quite work like that. If it had have done, the prices would have gone up way higher. So I'm thinking it might be something like 20%. See, this is why you're the former head of trading.

15% of the national flock, 304 million. So my next thing that I think, given that, you know, my previous career as an analyst, I think, okay, so we're trying to solve this puzzle of egg prices have skyrocketed and that's feeding into food inflation, which is a part of the puzzle of calculating inflation. Okay, so how quickly can you replace and replenish

these 46 million hens that have died. So now you start looking at farmyard analysis and looking at practices of how hens get reared. And so here's some stats for you. Wow, you went deep here. Yeah, I'm a boring guy, you know. You have kids, your life gets less fun. Egg to laying hen timeline.

So a newly hatched chick to reaching egg-laying maturity. How many weeks or months or years? Well, you've already said weeks now. I'm giving you a tip. You've accidentally slipped that in there. They've obviously, I would assume, have thrown a lot of science at speeding this up as fast as they can. I don't know. 12 weeks? Yeah, 18. If you get it right, you can hit 18. 18 to 22 weeks.

Do you have this stat? How long does a laying hen, how long do they lay eggs for? Okay, so here's some hatchery capacity statistics for you that I've managed to procure. US commercial hatcheries can produce millions of chicks per week. An example, a large hatchery can produce around one to two million chicks a week.

The scaling up, if an industry capacity is fully utilized, the 15 million replacement hens could theoretically be replaced or be hatched, that is, in two to three weeks, which means that you would yield them those laying eggs in four to five months.

Right. Okay. So we've got a four to five month supply shock in the egg market. Basically, long story short, I could have just, you can delete the last two minutes of the podcast. Yes, you're right. There you go. Well, look, back to inflation, because this was a component of the, so remember, this is a food type, obviously. So that's in one of the volatile segments. So when we talk about core inflation, eggs aren't in that.

So actually, even though eggs are grabbing the headlines here and sure, we're not 15%, which is massive. But even when you take that out, inflation generally did still rise, which is why people are just like, oh God, this inflation thing is just won't go away. But it was quite interesting. I mean, there's three things to talk about here. Caveats. Well, is there anything that we can point to

That means we shouldn't get overly concerned about this data. We need to talk about the Fed. So what does this mean for the Fed with regards to their ambitions to cut rates in 2025? And then finally, what was the market reaction to all of this? And maybe let's do the market reaction first, because that might nicely feed into caveats and then we can talk about the Fed. But because the market reaction was, well, I'd call it muted in that

Well, obviously, this data always drives volatility. Muted's the right word if what you're doing is you're looking at the closing positions of these markets at the end of the day. All right. And what happened was the S&P closed down. So remember, higher than expected inflation, meaning less rate cuts, normally bad news for stocks. Stocks sell off. Right. And they did.

But the S&P finished down just 0.3%, which is modest. The NASDAQ finished higher on the day. Now, that's when you're looking at the closing prices. Obviously, this stuff triggers a lot of volatility. So actually, the S&P immediately dropped 1.1%.

straight out of the gate, off the back of the data, and then steadily kind of recovered most of that as the kind of rest of the session wore on. So that was the pattern. Short term, sharp drop. Oh my God, another panic. You know, the algos are all over this. So the algo trading systems and the hedge funds out there are geared up for, right, if inflation is higher than expected, sell stocks. That's the algorithm.

And then, right, the algo executes that trade. Bang, stocks drop. Then you get the kind of more considered slower human being coming in and going, well, hmm, is that right? You know, is it actually as bad as that? And often it can provide a bit of a buying opportunity. But let me just finish because it's not just stocks, right? The dollar...

didn't really move finished the day you know pretty much and in fact marginally lower so the dollar very marginally the dollar index finished down which is quite remarkable if you'd have asked me one second after the data will the dollar finish down on the day i would have i would have put on a big trade to say no it would not finish down on the day and i would have lost money

but I didn't make that trade but yeah the dollar didn't really move and then the yield curve the bond markets were a bit weird the yield curve this is going to get a bit technical so I'll only mention it briefly but the yield curve steepened this data is a classic curve flattener trade I'll explain inflation is higher than expected two things you should think that interest rates will stay higher for longer

meaning the short end of the curve, let's say two-year bond yields, should go up as they price out interest rate cuts. Two years should go up separately. Well, what does that mean for economic growth expectations? Well, if rates are going to stay high for longer, bad news for growth. So actually, there should be a bit of safe haven buying of the longer end, which means those yields often come down. So you should get a curve flattener.

of higher than expected inflation like this, except the opposite happened, which I find very interesting. And that tells me that the bond market, at least, and you could say the FX market because of the dollar, and you could say the stock market because of the NASDAQ finishing up, they're basically saying, yeah, yeah, looks bad, but we're not too bothered. And that could be for a few reasons. Number one, they could think that

We've had high inflation. As I said a minute ago, inflation has been flat for nine months, still flat. So in the meantime, actually, our economy is on fire and it's doing really well. And, you know, so it's just going to be more of the same, more of the same, meaning actually really good.

from a kind of markets point of view. Obviously, you can look on the positive side of all the Trump policy that he's promised and that might come, tax cuts, deregulation, that kind of stuff, to help to fuel it. You've already mentioned the AI thing. Maybe 2025 is going to be the year where it really hits the kind of front line of industry and we start to get a tick up in productivity. So these are kind of all the positives that you can spin out of it, right?

But then obviously there are negatives. Trump tariffs. Inflation, I said on the headline, has gone up five months in a row. Is it going to continue? Are the Fed going to have to hike? So at the moment, to conclude maybe, the market reaction is basically, well, yeah, it's higher than expected, but it's not bad enough that the Fed might need to think about hiking. So is status quo...

We know we're not going to get cuts, but that's fine because the economy is really, really strong. And anyway, January inflation data is normally higher than expected. And I've got a stat, 14 out of the last 15 years, January inflation data surprised to the upside. You mean talking to your mate Jim Reid again?

Is that what he was banging? I haven't actually read his report, but is that what he was talking about? Yeah. Well, I know it makes sense, right? If you're a business, you run a business, you know, a new year, you know, you often do a lot of strategizing and so often you get price rises at the start of the year. Now, there are models that are supposed to smooth out seasonal effects. I don't know who's built these models.

And I don't know when they were built, but they're crap because they don't work. 14 out of the last 15 years, inflation's surprised to the upside. That tells me the model is rubbish. So I think a lot of people are going, well, yeah, yeah, it's high. These numbers don't look great, but it's January. So unless February data's bad, and until that moment, I'm going to just, I'm operating as I was before, thanks.

And just to be clear then, because several months ago we were talking about when inflation was decreasing, it looked like we'd got over that battle of stickiness, if you like. The focus was shifting to the labour market. So right now, is it a 50-50, we need to monitor both or have we moved back to inflation again? I think this report, I think it means we've moved back to inflation as the primary number we're monitoring. And that February...

So we're going to get that in the middle of March. So we've got to wait four weeks, right? So the middle of March, we'll get the February inflation data. That I think now is the number one piece of information in quarter one.

we're halfway through quarter one, but you know, for the rest of this quarter, that's number one on the, on the list of importance, I would say. All right, cool. We'll, we'll wrap it up there. Thanks very much as ever, Piers, for sharing those insights. Can I just finish? I've got, I've got one other thing to say because Powell was talking yesterday. Um,

So I think it was his biannual testimony in front of the Senate. And so he's been talking to the politicians this week. I got a funny one. So basically, he was, you know, all his soundbites, usual stuff. So I'll quote a few here. I would say we're close, but not there yet on inflation. That's what Powell said. He said, today's inflation print says the same thing. Right. So that's another reason why markets were quite calm about it.

Powell's not freaking out here. He said, we've made great progress, but we're not quite there yet. So we want to keep policy restrictive for now. Right. And so that's it. He then threw in, we are doing our job and staying out of politics. Right. Because obviously Trump has been.

not shy about his opinion on the direction of where interest rates should be going and basically telling Powell you're doing a rubbish job you need to cut rates cut rates cut rates so here's Powell's kind of return doing our job and staying out of politics do you know what Trump tweeted kind of in response and after the inflation data Trump said interest rates should be lowered

Something which would go hand in hand with upcoming tariffs. Exclamation mark, exclamation mark, exclamation mark. Let's rock and roll America. Exclamation mark, exclamation mark, exclamation mark. So the argument continues. Yeah, let's not unpack that tweet and why that makes no sense. But here we go. This is the intersection of politics and economics that we live in.

Absolutely. Yeah. Amid the, well, stay tuned, in fact, because Stephen and I are recording later this week for a Monday drop, and it's going to be entitled Musk versus Altman. Oh, yes. Okay, I'm all over that. We'll do a deep dive into Batman versus Superman. Who will be triumphant? It's Marvel against DC.

love it yeah all right thanks very much everyone have a great weekend thanks pierce yep thanks a lot

The new Boost Mobile Network is offering unlimited talk, text, and data for just $25 a month for life. That sounds like a threat. Then how do you think we should say it? Unlimited talk, text, and data for just $25 a month for the rest of your life? I don't know. Until your ultimate demise. What if we just say forever? Okay. $25 a month forever. Get unlimited talk, text, and data for just $25 a month with Boost Mobile forever.

After 30 gigabytes, customers may experience slower speeds. Customers will pay $25 a month as long as they remain active on the Boost Unlimited plan.

If you're a facilities manager at a university, you know students rely on the cafeteria for breakfast, lunch, dinner, and the occasional late night snack. So when a dishwasher breaks down and dirty plates pile up, the mess hall can turn messy in the blink of an eye. Enter Grainger. With over a million industrial grade products and fast delivery, the product you need now is never far away. So you can turn that dishwasher back into a lean, clean washing machine. Call.

Click ranger.com or just stop by. Ranger, for the ones who get it done. If you wear glasses, you know how hard it is to find the perfect pair. But step into a Warby Parker store and you'll see it doesn't have to be. Not only will you find a great selection of frames, you'll also meet helpful advisors and friendly optometrists. Yep, not only that,

Yep, many Warby Parker locations also offer eye exams. So the next time you need glasses, sunglasses, contact lenses, or a new prescription, you know where to look. To find a Warby Parker store near you or to book an eye exam, head over to warbyparker.com slash retail.