Brevan Howard's Top Economist Sees Three Huge Macro Turning Points Under Way

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you know what actually surprises me a little bit about 2024, maybe 2023?

Tracy Alloway (0:23)

We're only two weeks in, so go on.

Joe Weisenthal (0:28)

Or maybe it's 2023 So here's what surprised me when I think about this. Like we've had this huge increase in raids. We're coming to the end, you know, the pandemic shook up the world, but by and large, like things have normalized.

In some level, I'm surprised that things aren't more different than they are. And in fact, like, you know, we have the NASDAQ surging. I was just looking at it, it's like the NASDAQ was surging back in the day. Crypto is back. Like I thought the world was going to change or turned up upside down. And yet, like, I'm kind of surprised that we have this seemingly different macro environment.

And I'm a little surprised by how many themes actually did not go away or did not change.

Tracy Alloway (1:07)

It's kind of crazy. So rates have basically like tripled or at least funding costs tripled for companies. And yet, as far as I can tell, we're sort of heading back into 2022 territory. I know the S&P 500 has been wobbling a bit. We're recording this on January 17th.

So it's been down for the past couple of days or so. But we did have a really big rally going into the end of 2023 A lot of the tech companies, the usual culprits, the ones you would recognize from 2021-2022 were sort of leading the way.

It is strange that we are in a new regime of higher interest rates, and yet the new regime looks a lot like the old regime.

Joe Weisenthal (1:46)

And then throw in some of these huge things. So I mentioned the pandemic, which had this huge disruptive effect on society.

But then there's multiple wars happening right now. The war in Ukraine remains ongoing. The war against Gaza, the firing against the ships in the Red Sea, et cetera. So geopolitics is back in a big way.

We just had the Taiwanese election. We did a recent episode on sort of thinking about some of the geopolitical risks outside of China. Like, there's a lot going on. Also, speaking of China today, did you see the population numbers?

Tracy Alloway (2:22)

I did. Pretty staggering statistics.

Joe Weisenthal (2:25)

Yeah. So, the second year in a row that the population in China actually shrank, birth rates continue to fall. There's just a lot of stuff going on, you know, throwing stuff like AI, you know, they're probably talking about, I think they're talking about that in Davos right now. Like, there is a lot going on.

Tracy Alloway (2:40)

I bet they're talking about demographics, too, Joe, and geopolitical risk. I guarantee you there's someone in Davos talking about the big risk for 2024 is geopolitical.

Joe Weisenthal (2:49)

They're probably talking about elections and elections in the US.

There is a lot going on and it's like, yeah, maybe we're in an all time high and stocks are close enough. But it still feels like everything feels very unsettled or easily unsettled at this point.

Tracy Alloway (3:06)

Well, I think the issue is there's an unease about the current economy, which is that we have seen this incredibly dramatic run up in rates. And yet, it feels like we haven't really seen, I guess, the full result of it or the shoe dropping just yet. We've had three banks failed in 2023 It's definitely not nothing. But compared to how people were talking about 10 years of ultra low interest rates after the 2008 financial crisis, this idea that central banks were distorting markets, there were all these zombie companies, everything was artificial because of low rates.

It feels like something more should have changed in sort of 2023

Joe Weisenthal (3:49)

Should we have a big picture macro conversation?

Tracy Alloway (3:51)

Let's do it.

Joe Weisenthal (3:52)

All right. Well, I am really excited. We have a perfect guest. I'm thrilled that we have him here in studio. We're going to be speaking with Jason Cummins. He is the head of research and chief economist at Brevan Howard Asset Management.

Been there for a long time. He's also previously an economist at the Federal Reserve Board.

So really the perfect guest to be speaking about some of these big macro issues. Jason, thank you so much for coming on Odd Lots.

Jason Cummins (4:18)

Thank you, Joe. Thanks, Tracy.

Joe Weisenthal (4:19)

All right. I'm going to ask an embarrassing question, but maybe hopefully it's something that our listeners will find useful. What is a chief economist and a head of research at an asset manager like Brevan, or specifically Brevan, what do you do? And what is your role within the company and within the investment process?