Welcome to Know More, Risk Better, a Credit Sites podcast. Across the global strategy team, we aim to make sense of the macro and the micro, highlighting opportunities and the risks facing the fixed income markets. As the macro makes headlines, we leverage our network of experts across fixed solutions to better understand economic trends, rates, gyrations, geopolitical events, and how these factors impact corporates. At Credit Sites, we understand that credit investing comes down to picking winners to generate alpha and avoiding losers.
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This is Winnie Cesar, the global head of strategy at Credit Sites. And today, I have two of my favorite guests joining me. First, we have Cedric Chahab, our chief economist at BMI. Cedric, thank you for joining.
Thanks for having me. Great to be back, and I'm so glad that I'm one of your favorite guests. You really are. And my other favorite guest and my right-hand man, Zach Griffiths, co-host of the podcast, our head of U.S.
investment grade and macro strategy. Zach, I'm glad you were able to join after your yard work this evening. I'm feeling re-energized. I'm ready to go.
Looking forward to a great conversation with you and Cedric. Excellent. It does look like you got a little bit of sunshine out there, a little red. So, you know, we are going to just continue with the energy, with the sunshine.
And we're going to talk about the things in the macro that may be going right today that feels strange all of a sudden. But, Cedric, I think that the biggest news is some pretty significant progress on trade relations, U.S., U.K., and quite notably U.S. and China. How are you reading this pretty significant de-escalation in the trade war?
Yeah, that's right, Winnie. So we're actually somewhat pleasantly surprised because we thought the outcome was better than we thought it would be in the sense that the tariffs came down much faster on China, and it was a more rapid de-escalation. But at the same time, Trump's team showed a little bit more flexibility in the Section 232s, which we thought were going to be secure. And they are secure, but they showed a little bit more flexibility with the U.K.
negotiations. And I think those two things combined together helped to send a positive signal that potentially there's more upside in terms of some progress with regard to other countries and other trade deals. And what's interesting is it shows a couple of things. So one of them is that both sides really needed a deal.
And I think that was, you know, if you're looking at it pragmatically, there's no way you can have empty shelves in the U.S. At the same time, there's no way you can have factories working only three days a week in China. So I think it's almost like political leaders took a more pragmatic approach. But the other thing is provide a little bit of an anchor at both ends of the spectrum in the sense that for the U.K., if all the deals are signed, but then most economies are going to fall somewhere maybe between 10% and 20%.
And I think that's a much better place to be. And I think investors are happy about that. You can see that from the way risk assets are moving. And, you know, could you see even a lower tariff rate on average where the tariff rate kind of comes in at around 12% to 14%?
I think the market's saying that at that level possibly it's digestible for the U.S. economy, for the global economy. So I think that's where we are now. Yeah, so I mean, this is clearly just the art of the deal in practice, right?
We're opening with a bid that is so insane that everybody's expectations went completely one way. And now as I'm looking through these numbers, you know, expecting China 40% or maybe lower than that and kind of globally 10% to 15%, those tariff numbers in November, people would not have been particularly enthused about. But all of a sudden, it seems like markets are ripping back. What does this really mean for growth?
I think it's still challenging from a broad growth perspective because some of the damage was done. But I think we certainly have to think about how this reduces kind of the left tail risk of recession in the U.S. as well as some of that downside pressure on China. So for example, our China team revised up their forecast for growth back from about 4% to 4.5%.
And that's because we still expect significant fiscal and monetary stimulus, although it might be a little bit less than before. But ultimately, Beijing still needs to get close to its 5% target. And if this makes it a little bit easier, it reduces the downside risk of the economy. And so we felt actually that's a huge reduction in the tariff rate compared to our expectations.
And it came much faster. So we felt it was the right thing to do to revise it up. In terms of the U.S., this means that the Q2, Q3, and Q4 numbers are likely to be much better than we initially thought. And that's good.
The problem with the U.S. is twofold. You've got big movements in the subcomponents, and that's causing a lot of volatility on the overall number. So if you look at kind of core GDP, excluding inventory and imports, which were a big factor, I paint a slightly stronger picture, but still it's a little bit all over the place.
The problem with U.S. growth is that Q1 growth was weak. And that means that it's going to drag the whole full year picture in the sense that the Q in the first quarter is usually the most important. So the irony is that we might be a little bit more optimistic, but because Q1 was quite bad, there are limits to how much you can revise it up.
And so that's just more of a mathematical thing, and I think people will look through it. And that's why more and more economists just look at the Q4 year-on-year numbers just to show the trajectory. So I think the challenge is that, however, investors, small businesses in particular, might stay on the sidelines still for a bit longer, and that's just because things haven't been resolved. There's still a lot of uncertainty.
Trump thrives in that uncertainty. And so in that regard, it's not all clear by any means. And what we expect to see is still a slight pickup in inflation, some, you know, a dent to real purchasing power, perhaps. And so because of those factors, it's still a bit uncertain, although the picture has improved so much.
All right, so the picture has improved. Zach, I'm curious. We had our April CPI print earlier today, came in a little bit softer than expectations, which I think the market took as a positive sign. How does April CPI prints kind of influence how you're thinking about things?
And are you aligned with Cedric's, I would say, pragmatic approach to growth expectations for the U.S. top line? Yeah, I think in terms of the April data, there's some surprising developments in there. I'd call out the outright decline in apparel prices and used cars and trucks.
But in terms of thinking about what to do with this April data and what it means to the Fed, I think it's still important because every piece of data is at least a reference point to consider what the data told us when tariffs were on, when they were off, when they were 30% versus 40% versus 145%. So I think everything is going to be relative and important to some degree, but in absolute terms, a little bit difficult to take and really use as a key indicator. It's all about the relative move in the data. And I think in terms of a pragmatic approach to our pragmatic expectation for GDP, that's kind of what we had coming into this year and consistent with our below potential expectations.
And Cedric makes a great point. You know, once you have a negative quarter over quarter print in for the year, that certainly sort of in a way caps what you can expect for full year growth. So I think in general, our stagflation light view that we have held for really six months, if not more now, it's still true. I do think that today's data on that was a little bit more encouraging in terms of maybe the underlying trend of inflation not being worse than expected coming into the height of the tariff volatility.
But with core CPI at 2.8% year over year, that's hardly something to get too excited about, especially when you consider these lower tariffs on China, at least effectively eliminates what was effectively a trade embargo before. And if those prices actually are passed on, maybe ultimately more directly inflationary for the US economy than if we shut trade down altogether. And I say directly, because if we're forced to either make our own goods or go somewhere else, that's probably going to be more expensive than it was coming from China. Yeah, it's really tricky because if you think about a number of the things that we import from China, you know, your $3 knick-knack is now $4.
Seems like I could absorb that as a consumer. I'm not going to be quite as picky about pushing back on that or finding a substitution or whatever it is. And also the Q1 negative GDP print kind of reminds me of going to college and having a really lousy first semester. You just never get your GPA out of that hole.
You would never do that though, Winnie. I would never do that. I had a very excellent GPA in undergraduate and graduate school, but I had friends who, you know, perhaps were less focused than I was. Focus can be difficult that first semester.
Focus can be very difficult that first semester of school, for sure. Sure. So, Cedric, you know, as we're talking about inflation, you did say that you think we go a bit higher from here. It seems that from last week's Fed meeting, the Fed thinks we're in kind of a wait-and-see mode as to which way does inflation go, which way does the labor market go.
Are you inclined to kind of agree with the Fed's view that patience is the right strategy right now? Yeah, I think they can't do much, right? Because there's so much volatility, there's no point making a big change to their view right now. I mean, even us, you know, we change our forecast when things change, but we're reluctant because we just know that, you know, things could turn on a dime and we have to change our forecast back.
So I think a pragmatic approach to a little bit of inflation, as you mentioned, on your $4 knick-knack. If you look at survey data, ISM, or kind of Fed surveys, they point to businesses expecting higher prices as well. And you also have some base effects coming in from last year, which on a year on your basis could see inflation pick up a little bit. So that's going to be a bit more difficult to navigate, I think.
The good news is that there was, if you look at the latest inflation print, a good number of subcomponents came below the annualized growth rate of 2%, which shows that the subcomponents of disinflation are gaining breadth. I think that was good over the short term. Some of the sticky indicators around rental prices, wages, point to softer services, inflation, which is good as well. And oil prices continue to soften.
And I think that's pretty important in terms of keeping inflation expectations anchored, which is good for the Fed. And it should also help to lower gas prices in the second half of the year. So normally, it seems that there's a bit of seasonality on gas prices at the pump, which typically rise in Q1, Q2. They haven't risen that much this year.
And so with this increased supply globally, potentially gas prices start to act as a little bit of a mitigating factor. But again, you have, you know, it's really a tug of war on inflation right now. And part of that's going to be driven by the tariffs and how much they come in at. Now, the other thing I guess is to think about is the Fed.
So I've been a little bit more on the dovish side, especially compared to you guys. I think that, of course, the Fed has to keep an eye on inflation, but ultimately, push comes to shove. I think they're going to overweight the labor market just because if you do think that this is a one-off inflation shock, and don't forget, we would be getting a kind of a negative supply shock now, which pushes prices up, but at the same time, we're getting a weaker demand story. And so it's not like COVID where you had a huge increase in demand and specifically goods demand because you had to concentrate all of your spending in just one area mostly.
So we still think that there's some cuts coming this year, probably not as much as we thought earlier. So first of all, I guess, the timing of the cut seems to be getting pushed back. So people were saying June, then July, and now September. So I think the first cut now is being priced in September.
And that's a big change from just, you know, two, three weeks ago. So the market's moving really quickly and it's quite difficult. And now only about 50 basis points is being priced in for cuts, 50 to 75 maybe, whereas before 75 to 200. And, you know, I get why the pricing has changed.
You know, maybe the US economy is not going to fall into recession or even a very sharp slowdown in terms of the next three quarters. And tariff rates are coming down. So I think markets are more comfortable with a kind of wait-and-see approach and a slower path to easing. Now, what I think is going to be really interesting is the June meeting because the FOMC is going to basically have to release their dot plot.
And that's where kind of the rubber hits the road in terms of what they're saying and what they expect. So if they were to, let's say, if the dot plot were to say, yes, we expect slower growth, we expect higher inflation and a weakening labor market, well, I think what's going to be interesting to look at is, okay, so what do you expect for the policy rate? Like, do you expect, you know, are they going to signal cuts? Are they going to signal that they don't do anything?
So I think the June meeting is really interesting as an economist because we haven't seen this type of environment for a long time. And so I really want to see what they're going to say and how the market reacts to that. Yeah, I mean, it's going to be wild because the June meeting, we won't even be at the end of the 90-day pause, right? So there is a world where the Fed is looking at April data, some May data, and having to make decisions based off of that, which feels like a pretty tall task, right?
Like, I don't think that corporates are particularly keen on making a lot of decisions right now, just given the uncertainty with so many things. So the Fed having to try to set monetary policy is really tricky. And, you know, Zach, you and I, we've been in the extended hold camp for the Fed for quite some time. It feels like the market's coming back to us a little bit, which is a nice victory.
And, you know, in general, when the market starts to get closer to our views, that's when we like to change things up. So how are you feeling about Fed on hold call today? I still feel good about it, Winnie. I think Cedric brings up a great point.
If you look at what the summary of economic projections and the dot plot did in March, you had a big markdown of growth expectations, a big uptick in inflation expectations. And while the median dot didn't move, the average dot in 25, 26, and I think even 27, shifted higher by 10 to 20 basis points, indicating to us that at least before Liberation Day, and that kind of feels like a whole different world. But coming into this period of intense volatility, the Fed's reaction functions seemed to be more focused on inflation, if you think you can use that analysis to capture the Fed's overall thinking. And so I agree with Cedric.
I think it's going to be extremely important. And within the summary of economic projections, you can see if they think uncertainty around a certain indicator have increased in which direction the risks have shifted. So I think that's going to be another thing that market participants are going to comb through more closely this time and could be a bigger driver of the ultimate market reaction when it seems very likely that policy in terms of the policy rate will ultimately be on pause. So I'm feeling good about the call for now, Winnie.
The market is effectively priced for what the Fed's been signaling. We're saying the Fed ultimately won't be able to deliver on the two cuts that it's been signaling for a while. And in terms of how that kind of factors into our overall rates view, that's probably the biggest driver of why we think rates will end the year even higher than we are today. And a big driver of how we got back to 450 on the 10-year in terms of this repricing of the path of Fed policy in the near term.
So I would say my sense is that 450 at 10-year is feeling a little bit better in terms of starting to nibble on duration. Obviously, we've had a more cautious view on duration for a while now and we're not quite to our year-end target. I do still think there's a good chance that we could move higher, but this probably isn't a terrible opportunity to start adding a little bit of duration at these levels. A little bit of duration.
You know, the thing that I'm hung up on, though, is the fiscal side, right? Like how keen is the Fed going to be to proactively ease in front of a big, beautiful bill coming our way? I don't know. I think that that's something to consider.
That's a great point. And if you think about what's really pushed yields higher, it's the real yield side. You haven't really seen break-evens move up much. And if we have growth expectations getting marked down, you have to assume that maybe there's a little bit of fiscal risk being baked into that real yield.
And so I agree with you, Winnie. I think that's probably the biggest reason why I wouldn't say now is a great time to start adding duration because as we talked about for a while, we think that is going to be a bigger driver of the path of yields on a more sustained basis versus the fleeting driver it's been at times over the past couple of years. You know, I think that over the past month, it has been a case study in the overreaction function of the markets and sell-side strategists and economists, you know, our people in general. So, Cedric, I think that you guys did something really important on the BMI side was kind of taking a look at the potential upside risk for the U.S.
We've had a bull case in place that we've kind of notched down the probabilities of occurrence because a lot of it was contingent on this immaculate disinflation. But I do think it's important to kind of revisit, like, what is the bull case for credit markets? What is the bull case for the U.S. economy?
How are you thinking about these things? Yeah, thanks for bringing that up because I think, you know, the trade and macro dynamics are moving so quickly and they're so volatile that we just wanted to think about, you know, what were the factors that we might be looking at that could surprise the upside? Particularly after, you know, we saw the U.K.-U.S. trade deal and then we had knowledge that the U.S.
administration was going to meet with the Chinese delegation. And actually, you know, a client was just saying, everybody's so bearish. Like, what could go right? Like, yeah, actually, that's a really good question.
Yeah, so it's important to keep an eye on these things, I think, when everybody's getting bearish. And look, fair, right? Like, we nunched down our forte. you have a view based on the incoming data and the policy but i think it's very helpful for clients to also chart a path out or to provide uh even if you don't have as much confidence sometimes where could we all be wrong because sometimes we are wrong yeah absolutely i mean i'm wrong all the time in fact when i was discussing with my 10 year old daughter my job i told her that i had to forecast things she said you have to predict the future that's so unfair like it is unfair but yet here we are and that's where i think having these different scenarios and kind of stress testing your own views and biases as to forecasting is really important so cedric as you're thinking through this what could go right with the u.s macro what are the factors that came to mind so the first one and the most obvious of course is the potential for tariff rates to come down to a level that doesn't cause too much of a spike in inflation or recession and that means that the u.s economy can muddle through much better with you know a little bit of discomfort but no real pain the next area is fiscal policy so we know that doge cuts might act as a little bit of a drag on growth or headwind to growth at least and we're going to see the sharp slowdown kind of also capping revenue growth which is not great for fiscal accounts there are two interesting dynamics so the first one is that tax revenue related to duties actually picked up quite a bit in the month of april so i think 7 billion to 13 billion and that could probably rise more in may just because as the tariff got implemented more that could provide some revenue to help narrow the fiscal deficit and i think for bond investors who might be worried about you know the widening fiscal deficit that could be good and the second one is you're getting some tax cuts outlined in the bill which is currently kind of going through congress as you mentioned you know these are cuts on tips overtime social security payments for seniors and these cuts you know they're only modest they only take effect later this year but they are targeted towards consumers who have a higher propensity to consume so i think you know those are some of the positive things that we're looking at then i mentioned earlier lower oil prices which is good that helps to anchor inflation expectations which of course is very good for bond deals and also acts like a tax cut for households right you're selling less on gas that's great but i would say this is a little bit less important than it used to be i think consumers spend a little bit less on energy than they used to and also the u.s is an exporter of energy so when prices are down it's not good for the exporters but generally for the consumer it's quite good yeah it's interesting the whole energy dynamic i think that consumer sentiment is really related in a lot of ways to the prices that people are seeing and paying at the pump because it's one of those kind of high frequency prices change a lot and you know materially on a regular basis and then for the markets looking at especially corporate credit it's still really energy aligned so thinking about this interplay between you know maybe these lower prices are going to be beneficial on net to the consumer but a bit of a headwind to the energy sector in the u.s though the u.s is in a fundamentally different spot in the energy sector with a lot less leverage you know free cash flow positive cash flow like all of these things are very different than in the 2014 to 2020 period which was such a struggle for energy overall and then another big area of focus i think immediately after the election was deregulation as you know a powerful unleasher of growth in the u.s and also just kind of broad-based investment you know trump was in the middle east this week announcing a lot of investments how are you thinking about kind of the realities of investment and deregulation actually flowing into economic growth yeah i think that's a good question because i think generally positive but there's a bit of a timeline there deregulation takes a bit of time so does investment so over the short term small businesses are probably going to hold on hold fire in terms of their expansion plans but there are three things we're looking at which could mitigate the impact or even provide a little bit of an upside surprise so the first one is actually the increase in semiconductor and ev related investments which came through in recent years under uh connected to the inflation reduction act basically we're seeing a lot of plans going to come online this year like late 2024 2025 and that kind of investment from before maybe that leads to a little bit more manufacturing output and you see a bit of a surprise that's actually one of the contrarian views we had last year we thought before trump basically they could manufacturing surprise the upside a little bit and although we still have we have massive headwinds to that view you know something i keep an eye out for the second one is although tariffs are negative for the wider economy the u.s did see an increase in metal production in february and march and i'm wondering if that was related to some of the tariffs that trump imposed on mexico and canada so maybe u.s producers deciding to produce more domestically because they know they're going to have more markets so that was surprising to me and then to your point about trump going around the world getting investment now he's in the middle east you know i think trade partners are going to purchase much more defense equipment the u.s is going to get more access to foreign markets as part of those trade deals right i think that's quite interesting but we've also seen announcements by the white house that you know companies and countries are going to invest something close to like four trillion dollars over the next four years now we would approach this figure with a really big pinch of salt maybe a bucket load of salt because some people are just saying it to maybe appease him others are just throwing numbers out there but even if you say only one-third of these investments will materialize so really taking a kind of conservative view that's still about maybe one percent of gdp annually over the next four years so it's just something to keep an eye out for that it'll take time to come through investment doesn't just you know happen overnight but these are the types of things from an investment perspective that could be quite meaningful and as i alluded to at the beginning deregulation could take some time but businesses might actually benefit a lot from this deregulation particularly if trade uncertainty falls at the same time what do you think in this kind of bull case scenario that you're outlining what is where's inflation because like some of these things read as disinflationary or deflationary to me on especially the energy side of things whereas like a surge in manufacturing i don't know how to how to contemplate that from an inflation perspective from a longer term perspective investment is very good for bringing down inflation because it increases productive capacity if you're producing more manufacturing activity in the us i suspect over the short term it's a bit more expensive to produce it relative to importing it from china or mexico so maybe it's a little bit inflationary but over the long term you would expect that some of these inflationary pressures would diminish if you get better economies of scale when you produce but maybe we're in a world that if you're producing a lot more at home you just don't benefit from that cheap labor abroad anymore and so you're faced with higher prices so your metal rod or your two by four is no longer you know it's 20 20 cents more expensive than it was before and it'll always be you know 20 30 cents more expensive than before i don't know so i think we have to wait and see on that i'm also curious from a labor market perspective does the us have the labor availability to you know match this investment and if not is this just all automation coming our way i mean it's just kind of a fascinating thing to think about in general and it's one of the places i've really struggled in really understanding the broader trade policy what is the ultimate goal because it seems like the administration depending on who you're talking to when you're talking to them and what they've most recently done the ultimate goal is you know flexible in a lot of ways yeah i'd agree with that that's a nice term for it i am diplomatic that rick is pragmatic zach what are you emphatic i don't know all right you are you are emphatic let's you are a bit red in the face so let's emphatically talk about the u.s rates and ig market in this goldilocks slightly inflationary but unleashing of growth investment deregulation environment where does the 10-year treasury go where's that policy and are ig spreads going to 50 well i'll start with the last one i feel like what we're discussing right now is something in between our base case and our bull case and i don't think that what we just discussed is really scenario where the fed is easing so i think rates could be something like what we have in our base case call it 475 on the 10-year maybe maybe a little bit lower because i think the scenario we're considering inflation is at least a little bit easier than what we had envisioned and then our bull case which is an immaculate disinflation as you alluded to at the outset winning we have 75 basis points on investment rate spreads that feels like with an economy outperforming outperforming deregulation and investment boosting growth but not necessarily pushing inflation out of control that kind of sounds about right just thinking about it on the fly and so i don't think that's a scenario where the fed is easing which is kind of how you get your higher rate environment i think you have to consider if all these factors come together we have a solid economy spreads tight and how long does the policy rate stay here is this really not a restricted policy rate and is this something more like neutral and it kind of reminds me of the 90s when we bounced around levels similar to this in terms of the policy rate i think inflation was even lower generally throughout that time frame and i don't know if my timing is correct but thinking about technological advances as it pertains to the internet and computers if you want to draw an analog to ai i'm sure you can poke plenty of holes in that comparison as you can pretty much any historical comparison but i think that's something worth considering i think it's an important point altogether with cedric's idea of coming up with this what could go right scenario and what does that mean when everyone is just so focused on how much volatility we've had how bad this all can be for the global economy what if we just adjust and i think rates have been higher for much longer than anyone had anticipated following covid and i think we've all sort of re-anchored our expectations to the 2010s and maybe that's the aberration relative to you know call it past 30 or 40 years maybe that's the aberration i love that so cedric let's take the conversation home with the currency markets which is admittedly not my area of expertise but i've seen a lot of headlines lately with currencies being kind of all over the place you know you've also really focused on the u.s dollar it seems like we've had a bit of a weaker u.s dollar lately which can be but in some ways bad in others you know what's kind of your take on the recent trajectory in currency markets especially that weakening in the usd yeah that's a really good question because i think a lot of people start to get bearish very quickly on the dollar and started to panic and i think our view was yes the dollar could weaken a little bit but we don't expect too much weakness given you know several factors might still provide support so you know on a fundamental basis if you were to see you know let's say another 5% like lower that would mean that the u.s dollar is now much less overvalued than it's been in a long time and a lot of that kind of short positioning or the bullish positioning would have been unwound and short positions would be quite large so a little bit one-sided again and you know historically over the past two decades or so we've had you know 10 to 15% corrections or so and that didn't lead to a dollar implosion so these moves happen i think people forget about it and the other thing to think about is like if the u.s dollar does weaken a lot then it means that other you know large trade dependent currencies and economies like the euro or the yen would have to appreciate substantially but how does a very trade dependent economy appreciate the currency appreciate substantially if the growth outlook's not very good if they're already facing weaker global demand if they're already facing tariffs like you add on more appreciation of the currency it's like i don't know that bad economy doesn't look very good to me so i think they're kind of limits to how much other countries or currencies can appreciate against the dollar that was another thing so while we could see the dollar weaken a little bit more in the absence of a large destabilizing move lower we actually see some positives and i think the issue was that the dollar moved about 10% in a very short period and i think that started to worry people and of course news headlines probably made that worse but if you think about a little bit of dollar weakness it's not too bad so about 40 to 50% of revenues for some of the largest and most profitable tech companies come from outside of the u.s or north america the smp recorded some strong earnings growth in part driven by that kind of currency factor in q1 so maybe a weaker dollar means that u.s earnings hold up a little bit better than they would otherwise i think that's that's good for corporate america at the same time a weaker u.s dollar is also typically correlated with looser global financial conditions or liquidity conditions and the pickup in trade activity so maybe the trade activity correlation doesn't hold as well this time around because of all the trade war but you know emerging market currencies are not being put under a huge amount of pressure emerging market central banks aren't having to raise interest rates in order to defend their currencies so in that regard from a liquidity perspective the weaker dollar is pretty good so for those reasons i think you know don't panic just yet in terms of you see a little bit of a weaker dollar but you know you called me pragmatic earlier so here i'll put my pragmatic hat on i would say just be mindful because a weaker u.s dollar means more important inflation at a time where tariffs are rising so just be mindful of that if we see any pass through and of course any sharp and sustained depreciation of the u.s dollar would then make us worry a little bit more of course and that would have a much broader and negative impact on confidence and growth for the u.s economy yeah really excellent points and i think that every client meeting that zach and i've had since liberation day the topic of american exceptionalism has come up as kind of the quick key question is it over is it just getting started how do we think about that and so having that kind of perspective on the dollar especially is super helpful on the exceptionalism question i think it's quite interesting because for me there are two things i like to say about that the first one is the u.s is running fiscal deficit of like 7% of gdp no wonder it's growing faster than everybody else right so that's exceptionalism it's exceptional loose fiscal policy that's what it is but the other thing is that the u.s is exceptional in the sense that the liquidity the broad liquidity of its markets the depth of its markets its governance structure from a corporate perspective its profit margins and i don't see how business businesses can really park all their money somewhere else sure you may be diversified a little bit but the u.s dollar is still the only game in town indeed the only game in town all right with that i think we can wrap up our conversation cedric and zach thank you so much for joining me it is always a delight to talk all things macro learn about the currency markets and understand the pragmatic approach to expectations for the u.s economy if anyone has any questions for me zach or cedric you can always reach out to us if you are a credit site or bmi subscriber or reach out to your sales rep thank you all for listening thanks guys thanks honey thanks cedric thank you credit sites disclaimer all face references correspond to the date of this recording this podcast should not be copied distributed or reproduced in whole board and a credit site to nor its affiliates makes any representation or 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