• Introduces Michael Schumacher, head of macro strategy at Wells Fargo, who cites surging oil prices as the number one reason for the market move and warns inflation is a clear and present danger.
    Host
  • Michael Schumacher
    Expresses uncertainty about the duration of the oil shock, noting fixed income professionals struggle to analyze geopolitics and oil. Cites prediction markets giving a 50% chance the situation lasts until April 30th, which would be negative for bonds.
  • Asks if the fixed income market is aligned with that thesis while equity markets may not be.
    Host
  • Michael Schumacher
    Acknowledges a big disconnect. Notes S&P is down only a couple percent while bonds are taking it on the chin due to inflation fear from oil. Oil moved from sub-$60 to $90+; questions if it goes to $120. The move in bonds is evident as breakeven inflation components have gone way up, driving rates, especially at shorter maturities.
  • Asks about the dollar sell-off and when concern shifts from flight-to-quality to growth dynamics, potentially leading to more Fed involvement, especially if the Fed is more concerned about the job market.
    Host
  • Michael Schumacher
    States central bank officials need to see how high oil has to go to break their thesis, and it's quite a ways up. Reviews previous oil surges (15-75%) and finds it difficult to identify a tipping point. Listening to recent policymakers, he senses they are far from making a determination to change policy.
  • Asks directly: If you're the Fed, what do you do?
    Host
  • Michael Schumacher
    Advocates for watching and waiting. No reason to cut in March or April. With a new chair coming in, hang out and let the situation unfold for a few months. No reason to make a big splash now.
  • Asks about the surprising role of healthcare in job creation over the last five years and whether the recent pullback is a reversion to average or a COVID overhire correction.
    Host
  • Michael Schumacher
    Calls it a tough call, needing confirmation from a couple more reports. Notes it struck people that healthcare didn't step up this time, making them more nervous. Says bond market concern about the jobs report lasted only 5-10 minutes, but if weak reports happen again next month, it becomes a great story.
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