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Mohamad how this is kind of played out the idea that we're so focused on the details I don't think the markets gonna sway anything from that but that's also because I think the Fed did it the right way and got the statement out there yeah it's really important that this happened this week and not last week because had it happened before before the pivot we would be having a completely different conversation having said that I think as Steve said this is normal it's happened before and I think it's important I always feel it's important for two sides to hear each other and it reduces doesn't eliminate but reduces the probability of misunderstanding in the future so I think you know net net this is neutral to slightly favorable to the market but it's not a big deal so what what is a big deal to the markets right now if we've got the Fed essentially on hold for the next six months there are all kinds of other things to distract the market but earnings have been the one focus that we've seen kind of so far what do you think about what I think last week was a big deal yeah okay because I think of distributions and whether you look at the distribution of expected returns or the distribution of volatility what the Fed did is it would use the left tail that's what it did it didn't guaranteed the white tail everything everything going well but it would use the left tail which means the expected return goes up while expected volatility comes down when you say well you mean the possibility will make a mistake tighten Jim I know I just wanted no bail for the markets that they do not feel that they've got responsive liquidity behind them and the left tail for the market in feeling that they have to sell every rally I think that that's what the Fed did it played on expectations that liquidity would be accommodated if needed and therefore you can be more comfortable going back to the old view that yeah look at dips as perhaps buying opportunities so that's really importantly now what's important is the whitetails depends on things that the Fed does not control it depends mainly on growth in Europe and China and we got some pretty concerning PMI numbers again today out of Italy out of the UK so so it's important to understand what the Fed does and what the Fed doesn't do reduces left-tail doesn't increase the right there and and that's really important we had a guest who joined us a little earlier who just pointing out that our nation and the North American region is much more isolated from the rest of the globe in terms of trading in terms of where we used to be how the economy there may or may not impact us do you think that's a correct assumption he pointed out that the the Asian nations have been trading a lot more with each other over the last 20 years or so and that's why they were a little more isolated from the financial the Great Recession that we dealt with here that it didn't wash up as much on their Shores can we say the same that their problems won't necessarily wash up on our shores so certainly what happens in the US is mainly a function of the u.s.
we're relatively closed economy we are much more flexible and agile than the rest of the world but our companies sell abroad right our companies got a lot of the profits abroad so I think you have to make the distinction between the economy which i think is relatively isolated in the market Mohamed would you take our CNBC Fed survey live on air here let's go when is the next the next move of the Fed will be a to tighten policy or B to loosen policy I suspect it will be to do nothing this year all year oh yeah Xero's all year probably and next year will more likely to be loosened than the next tight and when will that when will this cut come sometime next year and what probability do you put on that cut happening call it 50 55 percent okay on the balance sheet right will the Federal Reserve alter its current plan to reduce the balance sheet this year by up to six hundred billion dollars it certainly will go off autopilot it's certainly what it will alter it yes it will alter it and it will alter both the notion of the destination and the page say that's the next question you're jumping the gun I'm a muhammad what is the total the current balance sheet is four trillion dollars where will the Fed get their when will they get their it's data dependent no give me a number no you're like power because these numbers are meaningless did the balance sheet is one of other tools so so you've got it it's gonna solve simultaneously it's not gonna solve oh this is fixed one this is what the Fed has learned giving me a multivariate equation is what you do what has the Fed Leonor to that okay is that there was a time when autopilot was the right signal to give to the markets right but there's this is the time to give the signal to the market that all its policy tools are in play that's what the market wants to hear that the Fed is responsive and has a range of policy tools alright last question in the survey grade Powell ABCDE ABCD or F hey you Bonet I'll give them an at you because because I think that anybody would have had enormous challenges navigating this environment it's a very fluid environment it's incredibly fluid and they're learning as they go along so this is interesting because there's a there's a you know the two main ideas of theories of history which is the great man or woman theory or the great times theory and and and the question was whether or not Powell was the right person for the job or whether or not you know the times dictated what he does and I kind of liked your explanation I he had the egg the next hundred basis points was a lot harder than the first one and the balance sheet was okay on autopilot for a while until it wasn't and then he was faced with a choice I'm not sure he blew it as much as he was forced to react and also the most difficult environment to navigate is when economic prospects around the world are no longer correlated when they are divergent which is what's the case now that is a very difficult environment to navigate if you're a policy maker and that is what he has inherited this he didn't create this he inherited it and you say right now he's fostered this idea that investors don't have to sell rallies because there was this idea that okay fine if the S&P goes up to 2800 again and all of a sudden financial conditions no longer tight the Fed is back in play this year you don't think that's the no I think he fundamentally changed psychology I think he changed it in a negative way initially when they signals two things I first signaling for wait heights for last year I said at a time that was a mistake and signaling and repeating and repeating autopilot that told Marcus no longer buy every dip but think about selling rallies and now we've had a correction have we asked Mohamed if is going to be effect governor no you
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