GAMF Shanghai Summit – The World Economy and Key Industry Trends
David Hunt provides the keynote speech at the Global Asset Management Forum’s Shanghai Summit and discusses the world economy and trends across the industry.
David Hunt, President and Chief Executive Officer at PGIM, joined CNBC’s “Squawk Box Asia” to discuss the outlook for global markets over the next few months and the sustainability of current asset level prices. During the conversation Hunt also shares what he believes the Federal Reserve wants to see in the jobs market and inflation reports before the central bank eases its current monetary policy.
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>> Let's bring in David Hunt, president and chief executive officer, CEO at the PGIM Assets Under Management, AUM, one and a half trillion dollars, that's with a T folks, don't usually get that on the show at last count. He's joining us live out of New York. David, good to see you and appreciate your time. Hope you're keeping safe where you are. So here's the thing, we could look ahead to Jackson Hole next week. I'm wondering first off whether you think the conversation is going to be much less aggressive now simply because, you know, in just the last couple of days we've had that big miss on retail sales, dramatic drop in consumer sentiment as well, plus of course obviously a surge in Delta.
>> No, it's a great point, Martin, there's no question that your colleague I think got it exactly right. Today's minutes as they came out were right on top of the expectations of the market and you saw really no big movement. But going forward and this is where I think Jackson Hole and the discussion in the fall is going to be really important, the focus is going to be on the labor market. There's going to be lots of noise the inflation numbers, lots of noise in some of the demand and sentiment indicators that you talked about. But I would say the thing to focus on is the labor market. If we do see the labor market continue to cure through the fall and we continue to see, you know, upwards of a million jobs begin to be added, you will see tapering in the fourth quarter and you will begin to see rate rises we think in the first quarter. On the other hand, I can absolutely argue that there will be a different scenario and that is where actually the jobless numbers don't get better, that actually companies are fundamentally changing the way that they work. Many companies are more productive now than they ever have been and they don't actually bring a lot of these jobs back. And so then the FED is going to be in a situation where they actually have to decide whether they're going to tolerate a hotter level of inflation for longer in order to really get some of those workers back. And that's going to be, I think, a longer term proposition into next year if it happens. But watch the labor market.
>> OK. So David, the last jobs sprint, 943K non-farm jobs created.
>> The month that just was. Unemployment dipped down to five-four. What sorts of numbers do you think or sequencing of numbers would the FED need to see to change their minds right now?
>> So I think the FED is really focused not only on the total numbers and they're going to want to see numbers that start with a seven and an eight. I don't [inaudible] it will hit nine as come out of it. We clearly have seen peak growth and which now going to come down from here but those are the kind of numbers that you'd see a couple of more million jobs created before they're going to be willing to take their foot off the accelerator. As I say, I can imagine a scenario where that doesn't happen because the companies simply have decided that they don't need that many workers coming back in. But we're not there yet. Unfilled vacancies remain at an all time high so we've got a lot of work to cure the labor market yet to go.
>> Where does this put the FED, David, in September and is FOMC then a live event with a taper announcement or does this run recently off disappointing data, take that off the table?
>> I think that's going to depend a lot on what we see in terms of jobs coming into that. I think that we're going to see talk about tapering no matter what. That's going to start in Jackson Hole. You can see the signal beginning to come out and then whether or not they actually are going to try to announce a date, they've said they're going to give a lot of advance warning. I take them at face value on that. And so could see that happening in September [inaudible]
>> David, a number of FED officials have said that it takes one more solid labor report to do the trick. Do you buy that?
>> I certainly would vote for two more but I think one more if we got a really good number would certainly help those who want to get back to a more normalized policy situation for sure.
>> David, there is a lot of noise as you said in the inflationary numbers, are we heading into a stagflationary environment and to what degree does that complicate the job of central bankers in the policy path?
>> Well I think it's a great complication indeed. Our view absolutely is that the current round of inflation that we're seeing, even if we take out the base effects that are just the math of it are transitory. We agree with the FED and we agree with the ACD on this. And so we don't see us going back to a much higher number on that and we do see growth beginning again to moderate after we have strong growth this year and probably again a good year in 2022, we will go back to a lower growth environment with low rates and that's we think the long-term outlook not just for the US but for the global developed economy.
>> David, very quickly just to wrap this all up, as investors, do we de-risk because of Delta and has the narrative changed?
>> No, I don't think it has but it's obviously very different in different parts of the world. I mean we manage $300 billion in Asia and I can tell you our view on the ground in China is very different from our view of a number of the ASEAN economies. And so we really do take a very local view but we don't think at this point that the Delta variant is going to take us off a path of very significant and attractive growth right across the world for this year and for the first half of next year.
>> David, excellent. Thank you very much indeed for clarifying especially in investment position which is very challenging right now. David Hunt there from PGIM.