Tech and bond trades play out. Lets dig a little deeper into the virus story in the u. S. U. S. Infectious disease official Anthony Fauci says it wont be a pandemic a lot longer because of vaccine progress. Joining us now with more is bloomberg Senior Editor drew armstrong. We all want to have the monday where we were very happy about the Pfizer Biontech results. What if the state of play in the u. S. . Drew the state of play in the u. S. Is brutal. We are sitting case records because of uncontrolled spread in huge amounts of the u. S. Hospitalizations are higher than they have been at any point during the pandemic. During thet pandemic. Depend on who you ask, 1500 sorry, 1506 to two deaths in the u. S. Yesterday, a number we havent seen since the early days of the pandemic. Numberout every single or way you look at this that you can is going in the wrong direction right now, and newman the hospitalizations and knowing that hospitalizations after that, it is going to be a grizzly picture. Guy to what extent has the United States given up on the kind of measures that europe is putting in place right now . The lockdown scum of the restrictions on the ability to gather socially. I see new york saying you cant go to a bar after 10 00. Europe tried that weeks ago and had to go significantly further. The rate of acceleration in the United States is now much greater. What is the u. S. Going to have to do . Drew i think one of the things you are seeing from local officials who are in charge of these lockdowns right now in the u. S. Is they are trying to be much more targeted in their lust efforts than they were early on. I think they believe they have a slightly better disease surveillance capability, and they know better where your real problem hotspots are. Situation here is also much worse than it was when we were doing broader lockdowns in a handful of places early on in this pandemic. So far, we are not seeing the impact, and it is going to take a little while to see if they work or if this is just using a spray bottle on a forest fire at the end of the day. Guy we will leave it there. Thank you very much, indeed. Drew armstrong for bloomberg news, a Senior Editor for health care. ,or more now is Mark MccormickTd Securities global head of fx strategy. Jon ferro has been debating this throughout the week. This is the idea that the dollar has not really reacted to the positive news on the vaccine, and is certainly continuing to react to news on the virus. I am trying to understand what is happening with the dollar. Ere why are not seeing the dollar sold like many people expected . Is it down to the fact that the u. S. Does not have control of the virus, we are likely to see to the safe haven trade . We are seeing people back into the tech trade today. Does the same thing apply to the dollar . Mark it is a great question. I think the most important way to think about this is the shortterm dynamics and longterm dynamics. The news that we got on the vaccine is great for the mediumterm story. It is great to think about reflation in 2021, some return to normalcy, and some movement back in that direction where we can start to think about the upside surprises around the economy and how things start to move back to normal. The problem with that is the reality we are living in now does not match those expectations. If you look at the covid curve, the hospitalization rates, the mortality curve, those things define the reality of what the markets have to deal with right now. If you were to look at mobility trends, one of the major drivers of the dollar in broader risk markets for the bulk of the pandemic, what we are seeing is the dollar is trading at about a 3 discount, the Biggest Discount we have seen, which means the market has been ignoring all of the negative news. The outcome for the u. S. Election was good for reduction of geopolitical uncertainty, good for risk assets, bad for the dollar. I think the market is still trying to pull that trade into the vaccine trade, but i think what we are really missing here is the mobility trends has absolutely collapsed in the last month, which is favorable for a rally in the dollar, at least over the next month, and a fullback and a pullback in the global reflation trade commode is trading too optimistically on a lot of those factors reflation trade, which is trading too optimistically on a lot of those factors. That was al like trade we talked about last april. If that is the case, who is going to win . Mark i think fx has moved away a bit from the rates trade. I think you can make the case that if you think the Global Economy is going to pick up next year, you basically want to be buying dips in the reflation trade. You want to think about steeper yield curve, higher commodity prices, weaker dollar. In the short run, you have to think about the growth impact of the Government Actions in europe, the lack of Government Action in the u. S. , and also whether or not the mobility is going to world favor one region versus the other. To faster thing we can do predict Economic Growth to see whether people are walking, driving to work. But we see is europe is in a much worse position than where we were a month ago. The u. S. Is in a bad position, but not as bad as europe. Asia looks pretty much unphased on most of those dynamics. If you were to fastforward that and think about what is the big macro driver, i think it is less Central Banks, more Economic Growth and whether Economic Growth can steepen. Push the dollar down, but i feel like all of that is on pause now because of the interaction of covid, government mobility, and Behavioral Changes that people sniff out in their local community. All of those things are really shifting to focus back to equities and growth dynamics. Guy i am not sure how closely you follow the granularity of british politics. I know a lot of people are tuned out from the brexit story, and i totally understand that. [laughter] but what is happening right now inside 10 downing street is a turf war between the hard brexiteers and the less hard brexiteers. Dominic cummings, the chief advisor to boris johnson, a hard is said to be hanging on by a thread. One of his closest advisors has just resigned. I have a quote saying that if Dominic Cummings were to depart, you would see a pop in the pound. Do you think we are getting close to a brexit resolution . Could we see the pound moving significantly higher from here . Obviously brexit dynamics are a big part of the pull and push back we have in cable. The one thing we have to think about is the global reflation trade and whether the dollar is going to rally because that will offset any news we have on brexit. But if we were to see brexiteers pushed to the side, there is some release of energy would could see in cable pushing a little higher. I wouldnt too optimistic in a short run that we are really going to make much of a break above 1. 33, largely because if you put brexit aside and think about u. K. Mobility, it is one of the worst tracking economies in the world right now behind a couple of the core countries in europe. The growth story deteriorating, but brags that improving is kind of an offsetting force. I think if it comes to an intraday if Dominic Cummings were to leave, you may be see 0. 5 pop higher, but the global macro story will override that. But i do agree on the concept that we are very close to a brexit resolution. What i think will be great about. 21 is youve got positive vaccine about 2021 is youve got positive vaccine, less uncertainty from a biden presidency, and no more brexit. At the very least, the outlook for the pound on a mediumterm basis is much higher than 1. 30. I just dont think there is that much more support we can get through given the headwinds in the next month to really chop through 1. 33. , thanks a mccormick lot. Good to talk to you. Coming up, embrace index investing. That is the focus of Standard Life aberdeens new ceo, stephen byrd. We will have an exclusive interview with him next. Dont miss it. This is bloomberg. , im live from new york alix steel, with guy johnson in london. This is bloomberg markets, Standard Life aberdeens new ceo now for and joins us exclusive interview. We will definitely get to the passive management you want to do as ceo. I just really want to focus on what is happening in the market, what is happening in the economy. You are the largest u. K. Asset manager. What are you doing right now . Stephen i think that we are certainly longterm investors, so youve got to see past the short term. The shortterm, we are in a messy transition of power. Weve got brexit uncertainty. Weve got rising case numbers in covid. Week certainlyis than we did last week. We know there is a successful vaccine for this pandemic, and we also got significant clues as to how the market reacts to that news. There is a flurry back into value stocks. A significant optimism, albeit beginning to fade right now, but if you cast your mind past this difficult vaccine and we see the being distributed successfully, then i think, and we see the transition of power in the u. S. , i think we are going to see biden is certainly going to be spending money. We think theres going to be fiscal stimulus. We think that in the longer term, there is going to be a weaker dollar. That is going to be good for emerging markets. Beenf the time, that has the case. If you look past the short term, you can still have a risk on environment, centralbank support, ample liquidity, and a search for yield in a world of low numbers. Given that context, there has never really been a better time to be an investment manager because uncertainty is high and they need for guidance is high. If you think of it this year in , now a difficult q4, i think you really have got to hold your nerve and see past the difficulty to maintain a risk on environment, and that is what we are doing. Why is active having such a tough time . I would have thought if ever there was an environment where it was doing the better, it would be now. Stephen i totally agree. In fact, 70 of equities are ahead of benchmark. Months, so a two lot of the credit for turning around the Investment Performance clearly goes to my predecessor. Said to my fund managers, as we go through the performance today, we have been andng improving performance degreasing outflows from the business. Time, my message to our team is this is thatutely the time to show active performance can outperform. We have seen high variable growth rates throughout the. Orld look at the hard numbers. Taiwansouth korea, and have all performed better in handling the pandemic, and also performed much better from an equity market standpoint. Three have driven 65 of emerging Market Growth over the last nine months. You nott tells you is to pick your spots, and if you pick your spots, that is within countries, and also within youanies sorry, alix, were going to come in. Alix all of that makes sense, but active has still had a tough time, and did you are trying to pan into passive. Why then, if you are making a strong case for active management . Stephen let me put that in context because you have to be a solutions provider. Today we Just Launched a series of passive index tracking, sustainable index trackers, tax efficient index trackers. Weve done that with our largest partner, phoenix, here in the u. K. The reason you have to have passive, a combination of active and passive, is that is what clients want. You have to be able to provide a full solution, a whole portfolio solution for your clients. As every business person knows, it is always a mistake if you can say come to me for this, but they have to go and establish a relationship with somebody else for passive. That is why we need the full suite of capabilities. That is why today, we have launched these index tracking funds. , believe that Going Forward theres a huge role for the use of technology, data, analytics, the ability to consume data and come to better judgment, better investment outcomes right across the spectrum of both active and passive. I think it is something of an old debate that it is either active or passive. It is actually both. It is a spectrum of capability, and solutions, listening intently. The radical idea that you listened intently to clients. Guy giving the customers what they want. Lets talk a little bit about scale. Scale is pretty important. I am wondering how youre going to get that kind of scale at the kind of rate that may be is required. You need to be big in this business. There are rumors that socgens passive arm is being shopped around. Are you interested there . Have you looked at any other m a . M a the way you think youre going to get scale . Stephen the first thing is you know that i am the reset guy. The two companies were being merged, and the merger is almost fully complete now in terms of the technical merger. Weve got the integration of a single management asset platform single Asset Management platform. Those things are critical. Dumb number one is to establish the single entity as a successful entity, and grow organically. The most important thing is that you grow one customer at a time. Yes, inorganic is part of our plan because there are complement tree capabilities, either there are complement or a capabilities that could actually support our growth. So we do have an m a stream. Of course, you dont expect me to comment on any individual names or anything. But we do have an m a stream, and we have tremendous financial resilience. This is a business that has got a very strong balance sheet. I joined the business because i knew we had the firepower to be able to deliver and achieve minimum efficient scale and thrive. It is a global business, but it has the firepower to be able to be a real leader in global Asset Management. I described the business as an investment and technology business. That is the business we are in. Weve got the firepower to be able to deliver on that promise, and inorganic acquisitions are part of the story, but i dont intend to do a frame breaking, giant, oldfashioned merger. That is not part of the story. Guy stephen, a pleasure to have you on the show. We greatly appreciate it. Credit suisse asset manager oak hill was amongst the biggest providers of rescue financing during the early stages of the pandemic. Bloombergs Erik Schatzker spoke exclusively with glenn august, oak Hill Advisors founder and ceo, on the bets that his firm made. Glenn theres no magical answer. I had a lot of confidence in the Scientific Community that, just like we have done before, we attack disease. I believe the effort that was made across hundreds of companies to find a vaccine, to develop better therapeutics, i happened to sit on a hospital board. I had a window into what was going on there. The treatment of covid became so much better from what we saw in the early days. So i believe it was not a matter of if, it was a matter of when. Enormous opportunity to seize on the moment. Carnival cruise went from 50 billion of value to 15 billion. They needed cash. You shut down the system. Theres no cruises. We bought a piece of paper in Carnival Cruise in an 11. 5 secured bond, secured by all of their cruise ship, at the 7 billion valuation for a company that was worth 50 billion. Savesiece of paper trading. Erik but you had to have the confidence that people would cruise again, because if they hadnt, they would be worth the scrap metal. Staying ine ended up our houses forever, i could assure you we would have less money. If the world shut down forever. But i wasnt willing to make that bet. I did have belief that at a minimum, the, nation of forget about the vaccine, but the combination of therapeutics and Government Action would overto this passing time. Do you believe people will give up the pellet on the pelotons and go back to the gym . Glenn the answer is yes. Not all of them, but not all of them have to give it up. Peloton has been an extreme area success story, although i will tell you that as positive news stock is downton materially. Jims and health clubs that gyms and health clubs, there is a communal aspect to it. I believe equinox is a really good company, and well managed. I believe in the sponsorship. Erik i get it. What happens to equinox now . Moodys says there is a highlevel probability of default. Can it avoid bankruptcy . Andn equinox has issues challenges. Companies that have been dramatically affected by covid, as obviously a health club chain would be affected, have liquidity issues. They have debt coming due in february, unless they can extend it or repay some of it. I believe longterm and equinox, and i believe the company and the investors will figure out a solution that avoids bankruptcy. Alix that was Erik Schatzker with glenn august, oak hill founder and ceo. You can watch that on your bloomberg and at bloomberg. Com. The market has really continues to compress credit spreads, which mix it difficult to see a longerterm fallout within the broader market. You are looking at 412 basis points for highyield spreads, and overall, youve got distressed debt stockpiles shrinking to the lowest since the beginning of march, just right before the u. S. Was slammed by the pandemic. That is where you see the impact of the fed and Central Banks. Coming up, president elect joe biden names his chief of staff. What does it wind up meaning for his agenda . We will talk to christina greer, associate professor of Political Science at fordham university. This is bloomberg. 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