3 Themes to Nail Your Global Markets Interview

Welcome back to the podcast. And if you're a regular listener and don't already subscribe to the channel, remember to do so. I've been meeting lots of students over the past week and lots of great comments, which is amazing. But yeah, we'd love to get this out to more people. So please do that when you have a moment. But look, in terms of the show ahead and the conversation, Piers, you and I were at Bank of America earlier this week and I had a ton of questions from students who are You know, rubbing off a little bit of anxiety towards the nature of interview season is in full flow. So did you get some of that feeling as well when you were talking to some of the students?

Yeah, definitely. You know, it's a tricky part of the assessment process, right? Or recruitment process. I mean, I guess they're all tricky parts, but it's like the next step. And so. Yeah, and I think it is daunting, the idea of going and sitting in front of, you know, someone who works in the industry, someone who works on the desk that you want to work on. And, you know, you're feeling like, wow, they, you know, what are they going to ask me? It's going to be hyper-technical questions. I need to know literally everything about everything, um, and I'm worried because I don't I know hardly anything about everything. And so it's like, oh no, well, which are the, which are the kind of super important points that I do need to be clued up on? You know, give me a summary. You know, what should I be, which points should I be hitting? Was kind of the questions I was getting.

Yeah. And so we thought we would take that, and this is all thinking about the world from a markets perspective. And so we're going to talk about 3 probably key themes to talk about at interview, that being US interest rates, the Fed, the Chinese economy, what's been going on there, and the pending US election, because that's only going to ramp up in terms of a conversation piece over the next 2 weeks or so. So what we thought we could do is I could lean on you, Piers, to— we talk about this stuff a lot on this show, week after week after week, but I guess perhaps packaging it up into a way that could compute in a nice simple format that a student could benefit from if they're about to go to interview. And what I'll do is once we've done that, I also, you know, these big bank events are, you know, kind of ticket-only gigs, but I want to spread the love and make everyone have a bit of an opportunity in terms of what was said. And there was an opening welcome by the vice chair of the UK investment banking corporate broking arm of Bank of America. She was mega senior and she unveiled like 3 key points for her kind of career takeaway that she shared with that group, but I'm going to share it with everyone. So I'll do that. Stick around at the end because it's interesting what you said. We're going to talk a little bit more. I guess this would be technical, technical on the market talk side. Everything she said was the opposite. So it's a nice complementary kind of blend, if you like, of, you A, yes, how to articulate markets, but B, actually, what are some of the other skills as well that are super meaningful for people at big banks to be successful? So yeah, perhaps we can kick it off then, Piers. Which one do you want to go with first on the market side?

The most important, which is rates. US rates.

I thought you were going to say Tesla. I thought you were going to say Tesla up 22% yesterday. I was getting nervous.

Uh, US interest rates. It's the number one game in town, uh, always is, always has been, you know, certainly will be for the, for the years ahead. So it doesn't matter what sort of desk you're thinking of going on, it doesn't matter what desk the person interviewing you is on, you know, that's a topic, key topic for, for discussion. And so let's start there. And you know, you obviously, it's a tricky one with technical interviews because you want to demonstrate you've got some knowledge, But it's dangerous trying to pretend you've got more knowledge than you actually have. You need to find that balance between going far enough down the, the road to show that you're— you haven't just read the FT this morning and that's it. But you do want to qualify it when you get further down that path. You need to start qualifying it with, you know, although I'm not an expert, you know, or, you know, I haven't been able to, you know, follow this narrative over the last 5 years, or, you know, just some qualifying statements like that, which is just saying, hey, I recognize here that whilst I know some stuff, um, you know, it's obviously way more complicated. So look, with interest rates, of course you need to know the trajectory of interest rates and what's been going on. Uh, you need, you need the COVID story let's just say, which is interest rates got chopped to zero when COVID hit back in 2020. And then as we came out of COVID you need to know about the inflation bubble and crisis that we went through as we got a supply and a demand shock at the same time where you had locked up people in their house spending loads of money online. So demand shot up, and that's because stimulus checks got handed out by the Biden government, for example. So people were just spending but at the same time the supply of goods just collapsed because shipping containers got stuck in ports around the world, goods couldn't move, and so you had this perfect storm that shot prices higher. So the Fed had to react, and we had the steepest rate hiking cycle that we've seen since the 1980s, okay? And rates went up to, you know, you need to know, right, where did rates peak? And so rates peaked at 5.5%, and they kind of got up to that level and summer of last year. And then here we are, like, we're 15 months now where we kind of flatlined at the top. And in that period, you know, inflation has been coming down, okay? And when inflation peaked at 10%, it's kind of now almost back at 2%, the target, but it's not quite back there. But it's— there's a sufficient trend that has warranted the Fed to start their cutting cycle. So we are at the very beginning of an interest rate cutting cycle, cutting from that kind of post-COVID inflation crisis high of 5.5%, and they chopped rates by 0.5%, okay, surprising everyone, you know, at their September meeting, certainly me included. And they went big, you know, a lot of people were thinking they're only going to cut 0.25%, which is kind of their modus operandi. They tend to move rates at the speed of 0.25% each time, but they went 0.5%. Okay, markets loved it. S&P new highs. And, you know, people started to get a little bit greedy about the speed of rate cuts. Okay, they started to say, well, maybe we're going to get more than 1 percentage point taken off interest rates before year end. Um, so that was kind of back in, I would say, September, but the narrative has shifted quite a lot over the last few weeks now. So that's everything I've said so far, that's just your backstory, okay? Because, and you can know about that stuff, just go and Google it. There's some, you know, you can spend an hour of your time, you know, Google searching on whatever, the FT, and, you know, you make sure you know the backstory. What's really key in these interviews, the secret sauce that's going to make you stand out, isn't you knowing what's happened. It's providing thoughtful, intelligent opinion on what you think is going to happen. You know, let's just say into year-end. I mean, we're only 2 months away now, but, you know, what do you think is going to happen with rates into year-end? Okay, and So I want to talk about that now and go through the key points that you can choose to use or not. And look, there's the great thing about markets, you know, what's going to happen into year-end? Well, no one knows. It's the future, right? No one's got a crystal ball here. Even the interviewer, they don't know. So it's just about building a story where you have an opinion that's backed up by, you know, a few points.

Yeah. And just to double down on that last comment, it's super important as a student to understand it has zero consequence on whether you're right or wrong. I mean, a lot of students get really worried and anxious about, yeah, but what if I say the market's gonna go up and it doesn't? That's gonna make me look bad. It's all about your thesis and how you articulate that thesis.

100%. No one, there's no, it's not a binary right or wrong here. It's just thoughtful opinion to showcase. And why, why is this important to have a thoughtful opinion? Because it showcases that you're interested in this stuff, you know, that you've got some passion for this field. Because look, you know, how'd you get hired? Well, obviously there's a number of reasons, but one of the ingredients for sure is you need to show that you really want it. You're hungry for this job. You're passionate about the subject matter. And the way to demonstrate that is you've got some knowledge, right? So you've been reading about this stuff. So here, here, here we go, right? Where are rates? What's going to happen to rates into year end? And you could say into like quarter one next year as well. Um, now obviously the election is a key part of that. We're going to come on and talk about that later. So for now, right, it's about the economy. So how, by how much will the Fed cut rates by year end? Depends on how strong the economy is in those 2 months. And basically, we've got 2 scenarios that we're now considering. I mean, there's 3, but one of them's off the table, right? So soft landing or no landing. Okay, the third one was the hard landing. That's pretty much gone. So let me just explain what do these terms mean then. Okay, so soft landing This is where the economic growth slows but recession is avoided. So the heat and the strength in the economy that we've seen recently just tempers off and we get a deceleration but still growth. Okay, that will result in inflation dropping down naturally, hitting target 2%. This will open the door to allow the Fed to cut rates twice. So, you know, once in their November meeting and once in their December meeting, probably 0.25% each time. So we end up at the end of this year with rates 1% below the peak where they went from 5.5% to 4.5%. Okay, that's a soft landing scenario. What's happened in the last 2 weeks? Or maybe 3 weeks now, we've been fed a lot of data that has indicated that actually the economy is stronger than we thought, and the no landing scenario, the probability of that is creeping up. Okay, so what is no landing? Well, this is where growth does not slow. Okay, growth actually either stays as strong as it has been, you know, talking like 3% growth rate, or it accelerates. Okay, now you might think on the one hand, well, that's amazing, right? If the economy is going to grow even faster, happy days. The problem is then inflation will most likely start to, well, either not go down to target because we've kind of flatlined about between 2% and 3%, right? We're kind of flatlined. So either it stays slightly above target or worst-case scenario, it actually starts to go back up. Because then the Fed have got a real problem where either they're not going to be— they'll only cut rates once, either at their November or December meeting, or they may not cut rates at all. And then when we go into next year, the no hard— the no landing scenario, depending on how strong the economy gets, they might even have to entertain raising rates. Okay, so that's your no landing scenario, and Yeah, go ahead.

Can I just ask then, so the fact that the US equity market's on record highs in that period you've described, the last 3 weeks, is that because the no landing hasn't quite got to what you're suggesting in a few months' time, which could be it starts to get even more hawkish?

There's— if you really want to show off in an interview, you can quote something that the industry often look at, okay? This is the Bank of America Fund Manager Survey, all right? Especially if you're in a Bank of America interview, but actually this is a survey that the, the whole street kind of looks at and pays quite close attention to. So they, they put out a questionnaire to their, to their, their members, their, you know, their fund manager clients, and it was simple, you know, do which, which do you think is going to happen? Soft landing, no landing, or hard landing? And they've been doing this every month for like the last 2 years. Okay. And so from this, we can kind of gauge, well, what do experts think? And right now, what's happened since in the last 4 weeks, the percentages have changed. Now look, soft landing is straight out the most likely scenario here. In fact, the probability is still 76% probable compared, you know, based on that survey. Okay. 76%. So obviously that's the main thesis. Fed cuts rates twice, you know, economy slows a little, inflation hits target, right? Now if you look at the probability of the no landing, it went— 4 weeks ago it was just 7% likely. So basically, you know, obviously single-digit probability. In fact, hard landing was, was a higher probability 4 weeks ago. It was 11%. But now that no landing scenario, the probability doubled in 4 weeks, which is a really sharp move. So it's gone from 7% chance to now 14% chance, you know, at the expense of the hard landing probability that's now gone down, right? So you can kind of quote these stats if you want to back it up, and then you can kind of go a bit further, and, or the interviewer might ask, well, okay, you know, what would be the impact of a no landing? Scenario, and you can say, right, well, you know, the Fed will not be able to cut rates, um, and worst case, they might start raising rates. So what would happen in that scenario? And you can start to talk about how, um, you know, you'll get a squeeze in, I don't know, rate-sensitive cyclical parts of the economy. You know, anybody who's got debt, for example, well, of course, the cost of that debt is going to stay high. And don't forget, where interest rates are, even though the rate-cutting cycle has started, they're still super high, you know, they're still the highest we've seen, you know, basically up at 5%, right? That's the highest since pre-financial crisis, you know, kind of 15, 20 years ago. So rates are really high, debt is really expensive relative to the last 15 years. So if rates stay high, then that's going to squeeze people with debt. Think about markets now. If you want to have some comments around financial markets, you could talk the dollar. So the dollar's value has gone up. It's had a great rally over the last sort of 4 weeks or so. And you can have— you can talk about— if you— if you could talk about things like the, the, the dollar index, for example, which has, you know, rallied quite sharply, um, like over the last 3 weeks, for example. It kind of tested the 100 level 3 weeks ago. It's bounced to over 104 now. Which is actually a really sharp move in a short space of time. So dollar strength, you could talk about fixed income if you're brave enough, and you could say how yields have gone back up on the long end of the curve. Um, and this is tied into the election as well, we'll come on to that. So yields have gone up, and then look, with the stock market, I mean, you, you're right, okay, the S&P's at its top, but it's it kind of hasn't really pushed on from there, right? And so we're, we're in a little bit of limbo, I would say, with the S&P kind of chopping up, you know, just above the 5,800 level where we've been for the last few weeks. Okay, so we're at the high, but we're not necessarily pumping further higher. We're in a holding pattern whilst we get more data. Okay, so that, so that, that That's a really good answer. You could go further. This is the thing, right? You can always go further, and the further you can go, the better. You could then start to talk about, well, how are we going to measure whether it's, you know, this, this no, this, this soft landing or no landing probability? How can we change our expectations on those probabilities as we're going along week after week after week? What kind of information are markets waiting to hear to adjust their expectations and then adjust their predictions on what the Fed might do. So here, you know, why has the dollar gone up sharply? You know, why has this no landing probability gone up? I said the economy is stronger than we thought it was. Well, what kind of data points are we using to justify that opinion? So the labor market, So back at the start of October, we had— on the first Friday of October, we had the US labor market report for the month of September. Super strong, way more jobs created, 254,000 non-farm payrolls number compared to the 140,000 that was expected. Okay, unemployment rate dropped 4.2% down to 4.1%. Average hourly earnings staying well above 4% annualized growth. Really, really, really strong labor market report. Okay, check. Right, next, retail sales. Mega number. So again, about 2 weeks ago, we had retail sales data for September where it's 5% annualized growth. And the point is retail sales is accelerating. The, the 3-month average is higher than the 6-month average. Which is higher than the 12-month average. So retail sales is actually gathering momentum. And the point there is, of course, that the US economy is like 75% consumption. So if the consumers getting jobs, if the consumers are spending money, then this is, this is a sign and a signal that the economy is going to do well. You can then sew in the big bank earnings reports that we had last week. Because look, they're the ones that can see the money flow, right? They're the ones with all the bank accounts and they can see money coming in and out and payments and all the rest of it. And JP Morgan said, and I'm quoting the CFO here on their earnings call, said spending patterns are solid and consistent with the narrative that the consumer is on a solid footing and consistent with the strong labor market and the current central case of a kind of a no-landing scenario. So JP Morgan are saying what we can see in bank accounts suggesting this no landing thing is on the cards. All right, Bank of America said similar stuff, you know, where, you know, activity is consistent with how customers are spending money in the 2016 to 2019 time frame. That's when the economy was growing and accelerating. Okay, so look, all of this information, you could go further wage growth. You could talk about how, yeah, the markets are bullish, you know, the S&P's on its highs. Um, and you could talk about how inflation has, has halted its kind of journey back to 2% and its PCE is hovering at 2.6%.

If someone wanted to say, you just mentioned PCE there, retail sales, labor reports, where should students go to find that data, those data points?

I would use tradingeconomics.com. But for me, I, I use it every day. It's, it's a free resource, um, and it's got all the economic data you could possibly want. And it also has a bit of a narrative on not only what's the number, you know, what is the non-farm payrolls number, 254,000. You've got a chart there that you can look back at. Well, how does that compare? Relatively to the months before, the years before. You can start thinking about trends, and because that's how we think about the future, you're really just analyzing data from the past and then trying to extrapolate a trend, you know, a trend into the future, right? So that's where your opinion can come from. And then, right, if my opinion is that the labor market's going to stay really strong, payrolls for you know, October will be strong, November will be strong. If that's my opinion, then I can say that, well, look, the Fed, you know, inflation's not going to come down to target. It's my opinion that the Fed are only going to be able to cut one more time this year. It's my opinion that, you know, the no landing scenario is being underpriced and the S&P is looking vulnerable here. If the Fed can't cut.

All right, good stuff. Well, look, that deserves a lot of airplay because that is probably the big theme.

Yeah.

And everything feeds into that one. So let's see if we can get through the next two in the next 10 minutes or so. So, okay, the Chinese economy and the US election. So the Chinese economy is definitely one that really dominated the headlines probably 3 weeks ago. It's a bit more quiet, but it's still a major component of understanding the global macro landscape. So how would you kind of describe what's happening in China?

Right. So again, it's about, you know, understanding the importance of China first. So second biggest economy in the world. Um, you know, obviously hugely important for the APAC region, meaning All economies in APAC are, you know, very dependent on that huge economic juggernaut that is China, right? But you can also extrapolate that the world is dependent, you know, we've, we've talked on this show recently, like the German economy's really struggling at the moment because, because the German manufacturing exporters, you know, the Volkswagens of this world, aren't selling as much stuff in China, right? And that's having a negative impact for them. So You've got to understand their standing in the world from a sort of economic point of view, second biggest, right? Then it's about understanding that the post-COVID era for China has not been good. And the economic situation has been, uh, well, let's just say underwhelming. And they've got particular specific issues around like their real estate. Market is in a lot of trouble. You can go back and have a look at Evergrande, one of their big real estate, um, one of the big home builders that kind of went bankrupt. So they've got a lot of empty real estate out there, stuff that's been built and not sold, stuff that's been partially built and not finished, land that's been bought for construction but construction hasn't started. Okay, um, so they've got big issues around their real estate, but also I would say at a broader level, the consumer's been— has underwhelmed in terms of how much they're really just getting out there and spending. Okay, so, so it is a sort of private consumption problem as well. And so their economy is vulnerable. Xi Jinping set a 5% growth target for 2024, so they set that at the start of the year, and that's their modus operandi. Start of each year they say, right, we're going to grow at X, and then right, they try and go and hit that growth rate. Okay. But what's happened as we've been traveling through 2024 is the data has been suggesting that they ain't going to be hitting their 5% target. Current trajectory. Well, it depends who you talk to. And obviously now again, back to that point about where you got to predict the future, right? But people are talking about 4.8%, maybe 4.7, 4.6%. Okay, now, so that's the, that's the current situation. So what, what's happened, you know, China, you know, from an optics point of view, missing target doesn't look good. So we've been waiting for the stimulus sort of bazooka to come in to kind of kick things back up and, right, let's try and hit that 5% target. Okay. The stimulus didn't come, it wasn't coming, it wasn't coming, and then finally— it's probably, well, what is it, it's probably like 3, 4 weeks ago now— finally there was news. And so, right, China rolled out this stimulus package. There was 4 prongs to it, which I'll cover briefly. But initially there was some optimism, like the stock market just went through the roof. I think the stock market was up like 25%. Bang, in like one day. Okay, it's kind of come back off a little bit now, but really, as those few weeks have passed, we've been wanting to hear about more detail about this package, and the detail hasn't been particularly forthcoming. So we're back into this holding pattern of, well, yeah, maybe they're not going to do enough. Maybe, you know, Xi Jinping has been a bit reluctant. He's reluctant to roll out stimulus. I would say he's more about clamping down on corruption and all this kind of stuff. So that, that kind of just, you know, flood the system with free money thing, which they basically did in the financial crisis, that seems like it's not going to happen. And so we're now worried. I'd say we're in the worried camp about Chinese growth and what that means for the rest of the world. But maybe I'll just say the 4 parts of this so you can talk about a 4-part stimulus framework. Okay, so it's about supporting the real estate, um, investment situation. It's about addressing local government debt. It's about boosting bank lending into the real economy, which then of course supports consumers. Okay, there was like a stock market part to that as well where they basically gave cheap loans to brokers and fund managers, but you can only use that money to buy stocks. So they did. So the stock market went up. But I mean, that's a sideshow in my opinion. So real estate, I mean, that's the big one, right? And so they've announced that they're going to issue bonds to local governments, and this is going to allow them, local governments now, to buy back this property, unsold property, from developers and avoid more developers going bankrupt. Because at the moment they're sat on these assets that they've spent money on, they've borrowed against, having to pay interest for these loans, but they haven't been able to sell the assets, right? So this is like toxic debt. So let's just shift the— let's just clear the system of toxic debt, basically bailing out the developers, okay? But the question is, well, how much money is that going to take? And there's wildly different opinions. I mean, one bank came up with the number of, well, you're going to need $421 billion. That's based off the one assumption that is very important, that they are able to buy back the— the local governments buy back the property at 70%, at 70% of the market rate. So the developers will have to take a haircut because Xi Jinping doesn't want to be seen to be just, here you go, here's all your money, you know, slap on the wrist, you know, don't, don't overdo it again in the future, naughty, naughty. You know, they want to make sure that they're not just doing that. So there's 70% haircut is what some people are thinking about. Okay, right, so that's on the real estate side. Local government debt, again, it's really hard, but predictions are that the amount of debt is somewhere between $7 and $11 trillion. It's a lot of money, right? And so here China are considering allocating maybe up to 6 trillion renminbi. So hang on, because you've got to think about dollars here. So $7 to $11 trillion They're thinking the package will be less than 1 trillion, which will basically be further, you know, I guess restructuring some of that debt and kind of extending it. Some of that debt's coming due in the next year and two, right? Whatever. So, so that's trying to address some of those problems in the real estate and the local government kind of side. And then it's just about more bank lending, trying to boost consumption, and ultimately These are all sticking aids, bailing out the developers, trying to restructure some of this local government debt. That, that's, that, that's fixing some issues. But the big, the big problem— consumers aren't spending. And how you, how you get them to spend, I don't know. I mean, you can obviously cut interest rates and all the rest of it, but it feels like the consumer's in a, in just in a different mindset at the moment. And so that's your bigger issue. They could put a bandaid on it to get above 5% for year end and hit that target. But then we're just gonna roll on to talk about problems in 2025. So that's my China thesis.

Yeah, it almost feels like a bit of a rock and a hard place cuz away from the technical side of talking about market and market mechanics, there's this idea more broadly about human psychology. And if you, as you're saying, they don't want to come in too heavy-handed because then the market gets too dependent and they'll be expecting you're just going to come to every beck and call of market trouble. And so you can't put too much stimulus in, and yet you're in a rock and a hard place is there's not enough stimulus. So what you end up doing is getting more in debt but never really addressing and solving the problem.

Right. Absolutely. So two final points. There is one easy option for the government. If, if it's just about optics, and I dunno if it is or not, but if it is that and they just want to hit that 5-figure, then there is an easy way. They're, they're probably about, if let's say they're at 4.8% growth now, so it's 0.2%, right? And we know how much money that is cuz we know what the size of the economy is. So 0.2% of that size, it actually works out at about $35 billion. So they could just spend an extra $35 billion on infrastructure, you know, into year end, right?

Where do I sign?

So that could be it. But then look, medium to long term, and I might get in trouble for this, I might get some bad comments. When I say this, but ultimately it doesn't address the bigger, longer-term structural issues. And we are, we are in a decelerating China era. They're struggling to hit 5%, but look, next year they're going to struggle to hit 4.5%, and the year after they're going to struggle to hit 4%. And it's— look, they are heading for a 2 to 3% economic growth rate, which is what happens to all maturing economies. And that direction of travel, as it stands, because of some of these structural issues, I can't see changing.

All right, leave your comments below. Okay, the final part, and perhaps you could probably say this is probably the— it sounds strange, it's the least important of what we've just been talking about. Probably won't feel like that when you listen to this. And certainly if you listen to this podcast episode a week from now, you'd be thinking, what on earth? How can this not be the most important thing? Uh, but the US election. So yeah, perhaps I could kick it off and then, you know, feel free to, to put in your, your view. And two ways I want to tackle this. There's the kind of intraday things that you could be mentioning, I think, when questioned about this, which is the day of the results. And what is it and how, what matters. Because we'll tackle that first, then we'll, when we'll talk about overall broader macro implications and the way to look at that. So one of the things is swing states. So much like in any political scenario, typically within a country, any country, there are areas that lean quite firmly in one political camp and others in a different one. So for example, California, you know, it's kind of Democratic, whereas the Sun Belt, for example, might be Republican. But they're not the ones we're interested in because— and this helps you when you're trading and when you're analyzing the outcomes as to, well, where do— what do I need to look at to determine as soon as possible to try and predict what the outcome might be? And so you get various signals. Now these signals can come from polling, So this is the first kind of component to talk about if you're interviewing ahead of the election is what are polls saying? Um, then there's the betting market, which can sound quite weird because you're kind of like, what, you're telling me I should look at the bookies rather than the economists? And I'm saying, yes, you should, because the bookies are more accurate for these types of things more often than not. That's not to say I disregard what an economist says, but I would certainly look in parallel to see the general consensus, uh, consensus of what's out there at the moment.

Can I just say that there is a difference between the betting markets and the, um, the polls? Because a poll, that's where you are being asked, who are you gonna vote for? Okay. A betting market, that's someone betting, who do you think's gonna win the election? That's a— there's a, there's an important difference there because who are you going to vote for doesn't then factor in all the kind of intricacies around the electrical, the Electoral College system and these swing states. And so yeah, just to say one isn't— they're not like for like, these betting markets and then, and the polls.

So you'd suggest then that the, the bookies have a better model to compete then as a prediction.

I would agree with that.

Yeah. Okay. So with these swing states, then the obvious question is, who are these swing states? And don't worry, what I'm going to do is I'm going to drop a link to a post I'm going to put out with this podcast, which is a really great research report from UBS. It's really great because it's all infographics, 4 pages long. So super short, concise, and it basically packs in all the different outcomes, things to watch, how it's going to impact markets across different asset classes, different stock sectors. It's kind of like your one-stop shop to answer an interview, I'd say. But also as an investor, it's just a nice, easy digestible way to look at this. So just to list a few: Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, Wisconsin. It's always the same ones effectively. And so actually, when you would look at this, then if you say Arizona, the betting odds have 74% Trump. So that's the most locked in for Trump at the moment. Whereas if you went down to Wisconsin and Pennsylvania, they're just above 50%. So if you wanted to again go a little bit further, you would say, okay, well, I'll take Arizona and Georgia out the equation because they're— the betting markets are putting them quite high probability for Trump. Battleground really is Pennsylvania and Wisconsin. So when do they come out? How are they looking? And what you'll see is the campaign strategists for Harris and Trump will be very much targeting the Pennsylvanias and Wisconsins of the world in the next week or two, because they know this is key.

So all of these swing states, are you saying that Harris isn't leading in any of them from the betting markets point of view?

Trump is, is leading in all betting markets. Across all swing states right now, right, as a range of, yeah, 52 to 74%.

Why?

The polls are 50/50 mixed, right? Wisconsin is Harris, Nevada, Michigan are Harris by a whisker, the rest are Trump. But, but overall, looking in summary, it's leaning Trump at the moment if you put everything together. So yeah, the battlegrounds, polling, betting markets. So just talking then a little bit about the outcomes, because I think here's— you talked about this before, this kind of pyramid of power, if you like, on Capitol Hill, the president, and you've got Congress and the composition of Congress. And so really there's, there's 4 outcomes, right? If you think about it in that way, there's a blue sweep, a Harris split Congress, a red wave, red sweep. Or a Trump with a split Congress. So what I've got here is the probabilities assigned to each one of those four outcomes by the economists at UBS from this report. What do you think is the most likely one?

Well, uh, I'd say it's going to be between a Trump, uh, red, red wave and the Trump split. It's probably red wave now, given that the momentum Trump's been building in the last couple of weeks. Is it red wave as the most probable?

Well, you know, when your mate Elon starts, you know, jumping on the bandwagon, that definitely juices it, um, for sure. Uh, red wave is 35%, uh, probability. 45% Harris with a split Congress.

45%?

The least likely is a blue sweep. That's 5%. And so a Trump split Congress is assigned at 15%. So the two greatest by a large proportion is Harris, uh, with a Republican Senate and a Democratic House. So just a very summary of what does that mean. So if Harris wins but Congress is split, UBS say they would expect much more limited policy changes and therefore a muted impact on financial markets. A Harris administration would be obliged to rely on executive action, regulatory oversight to a significant degree, but recent Supreme Court decisions will likely curtail the ability of executive branch agencies to basically interpret federal statuses. So decoding that, what that means is she doesn't have power to do anything. They can, they can use certain mechanics, legal law, to push things through. But what they're suggesting is that that's extreme scenario, which just wouldn't happen. So you get the kind of status quo scenario. So the red sweep, what would that look like? So if Trump just absolutely romps to victory, um, they talk about an extension of the 2017 tax cuts would be likely, uh, but the high price tag complicates other tax proposals, such as a further reduction in corporate tax rates. Yeah, funding for these initiatives might come from a reduction in support for green energy provisions, um, that's in this what's called the Inflation Reduction Act. You'll probably remember that, Piers. Equity markets— so this is again red sweep— equity markets would likely cheer lower taxes and lighter regulation. I think that's a good way to just summarize it, really, if you just wanted to go top level. But this could be partially offset by concerns about the costs and inflation impacts of higher tariffs and trade wars. So that's your counterbalance to articulate, I think, as domestically what might happen, but his external policies might then have ramifications on the actual domestic economy and therefore rates, as you were describing. Earlier. And then to finish, they say interest rates and the dollar would likely rise initially. Financials stand out as key potential beneficiaries in this scenario due to lighter regulation. What do you reckon?

I reckon with— so let's say Trump. I'm a little confused by that UBS probability there that they're basically saying the Harris split Congress has a higher likelihood than a Trump. The place is saying Harris is more likely to win than Trump, which doesn't really stack up when, as we were just covering the betting markets and the swing state situation. But anyway, that aside, I would say it's kind of— I, I look at this as either Trump or not, because as you said, the not, well, that's obviously Harris, but likelihood is she's going to be hamstrung by Republican kind of, um, Senate. And so she won't be able to do much, right? So it's either big Trump policy or not. And then that's increased tariffs, that's restrict immigration, and that's lower tax. Now the thing about those three, they're all inflationary. So that, that's the— that's my— if you want to kind of zoom in on one thing in an interview, you could go for that where it's Trump equals more inflation. And then you can go back to the no landing scenario and start talking about what that means for the economy and that no landing probability goes up, the Fed won't be able to cut as much, and, and so on, right? So, um, that's, that's kind of where I would go. And look, this is one of the reasons why— I mean, I took— mentioned the dollar rallying quite strongly over the last few weeks, and that's because of two things. It's number one, all those strong economic data points and the economy's stronger than we thought, that I'd already talked about. And the second one is Trump. The probability of him winning has really stepped up, um, in those weeks. And so it's that inflation— it's the Trump inflation trade that, you know, more inflation, US rates higher than we thought, that's positive for the dollar. You know, it's gonna, it's gonna send, you know, long-term bond yields up. And so, you know, if you're holding long-term treasuries, bad news because the prices are going to drop, you know, that kind of thing. And I, you know, it's a hard one with the stock market because, as you say, less regulation, you know, this, this, you know, lower tax, this could be a bit of a boom, animal spirits, right? But then how much inflation comes through as a result, and that's the big unknown. So will stock markets drive higher or not? I think you've just got to wait and see what happens to inflation if Trump gets in and is able to put through these policies because you've got a Republican Congress as well, just stepping aside and letting him do whatever he wants.

Okay, good stuff. Well, look, that, that kind of wraps up the technical side. Just the last 2 or 3 minutes then to wrap up, as I promised at the top of the show. Uh, Antonia Rowan, who was the Vice Chair of UK Investment Banking and Corporate Banking at Bank of America, and we heard her give her welcoming remarks, Piers, and I was kind of frantically jotting down. She spoke for about 6 or 7 minutes, but there were 3 kind of takeaway points that she was making about, um, starting your career and what could then lead to not just landing a job, but success long-term. Uh, just to qualify this, she's been working investment banking for 30 years, 3 zeros. So she definitely knows a thing or two about, about the space. So she basically distilled it down to 3 points. Number 1, a career you are passionate about. But she, you know, that sounds— when I hear that, I'm a bit like, it sounds a bit like generic and it sounds a bit fluffy. But she, she didn't sugarcoat it. She was like, look, this is a hard job. You've got to be committed. And if you're not passionate, you're just not going to make it because it's too hard if you're not up for it and you're not motivated. So that was point 1. Point 2, focus on communication and interpersonal skills. I think most of the students were like, what? What are you saying? Like, I thought it was all about modeling, valuations. I thought this was all technical talk time and you're telling me I need to have strong interpersonal skills. Um, but she was basically saying that it's critical for success, both operating with your colleagues, departments internally, and then externally, the relationships you generate with your clients. So she was saying the other stuff kind of comes, you learn that early in your career and you deploy it and use it. It all comes down to success on how you can communicate and really use and leverage those interpersonal skills. So I thought that was really nice. And then the third one was ask. And what she meant was, if you don't understand, ask. And you should all the time, from day 1 to year 30, be asking questions, asking questions to your colleagues about your products, about the market, about your clients' needs, your clients' desires. And so again, it seems like curiosity and resilience seem to come up so many times with different areas of finance with the people we speak to. But yeah, I thought I would share that. Anything else that you thought with her speech, Piers?

Wise advice. I think she, didn't she use the word hunger? I think I recall, like, that's part of that be passionate. But I think she was basically saying you've got to be hungry, you know. Don't do— don't just apply for this stuff because it pays you a lot of money. You've got to be all in here. You've got to love it. You've got to kind of live and breathe it. And that then comes through in an interview because you'll know a lot of stuff. Your commercial awareness will be very strong because you're reading about this stuff because it's interesting to you. And then you're just like you know, let me at it. You know, just try and show your real hunger to kind of get stuck in.

Cool. What I'll do, as I said earlier, I'm going to drop in the show notes a link to tradingeconomics.com, the resource Piers said he looks at every day and he gets some of the statistics and context over data points. And then also the UBS research note, which I've plucked out a few snippets there at the end of the show. That will also be in the show notes. So hopefully this is all super useful. Good luck with your interview. Shout us out if you have success on LinkedIn. Yes. I'd love to get the podcast out to more people so everyone can benefit. But thanks, Piers, and, uh, have a great weekend, everyone.

Enjoy the weekend.