♪♪ ♪♪ caroline: from headquarters in new york, i'm caroline hyde. romaine: let's look at where financial markets stand for today, record highs for the s&p and the dow. joe: the question is "what'd you miss." caroline: it sounds firm, continuing to project near zero interest rates through 2023 and hold steady on asset purchases,

powell among worries in the financial market. the fed expects that a bump in inflation, and looking past retail economic data perhaps than expected given the harsh winter weather. powell and company holding course, but they will not be forced. joe: take a listen to a few highlights from fed chair powell at the press conference. >> i would like to start by noting it has been a full year since the pandemic arrived with force on our shores. the economic fallout has been real and widespread. but with the benefit of perspective, we can say that some of the very worst economic outcomes have been avoided and while we welcome these positive developments, no one should be complacent. the economic recovery is uneven and far from complete. the high level of joblessness

has been especially severe for lower wage workers in the service sector and african-americans and hispanics. the state of the economy in two or three years is highly uncertain. we're clearly on a good path with cases coming down as i mentioned, but we're not done and i would hate to see us take our eye off the ball before we actually finish the job. we said we would like to see inflation run moderately above 2% for some time. we have resisted basically generally the temptation to try to quantify that. we will begin to make faster progress on library markets and inflation as the year goes on because of the progress with the vaccines, because of the fiscal support that we're getting, fiscal policy overall will have really helped us to avoid much of the scarring that we were very, very concerned about at the beginning. joe: and there you heard there,

jay powell very consistent message. joining us with more insight, bloomberg news u.s. knicks and monetary policy reporter matt who asked a question at the press conference. it seemed very consistent from powell, i know you and your colleagues in the press tried to give powell as difficult a time as you could. it seemed like he had a pretty easy time of it and the markets responded favorably to it. what would you say was your main highlight from his performance? matt: well, yeah, i mean i think overall it was kind of just, you know, the message is not really changing even though a lot has changed in the last six weeks in markets. so we were kind of wondering what would the fed do, when howe how would it respond in the positive developments, the rise in interest rates. he didn't really. what you saw in the projections was this notion that interest rates are going to stay low, even though they see higher inflation coming down the pipe

than they did three months ago, the last time they put projection out. that is just really underscoring there is a new framework, a new fed in town and investors might still need to get used to that a little bit. romaine: so, matt, when you talk about the economic projections here, we kind of saw a little bit of a bump up in the gdp outlook, that has to be a good thing and anyone concerned about inflation, you would think that would temper some of that concern a little bit as well. did you get the sense here from powell that with regard to the economic recovery, did you get the sense from powell here that that is going to continue relatively uninterrupted? matt: yeah, he definitely did not really have much to say in terms of, you know, downside risks except he did mention some of the issues that have faded a little bit into the background in recent weeks like potential variants of the virus that could, again, present an issue, but overall, you know, it was a pretty positive outlook from him. that really reinforces the

positive outlook even with that, interest rates are going to stay low. that's kind of the central juxtaposition that we got from the fed today. caroline: many tried to push him on what might force his hand from a market perspective and he just wouldn't go there. in fact, sort of read off his script, clearly didn't want to be in any way forced off his dovish tone, matt, do you think there is an underlying concern if real yields went above? matt: yeah, that's a really interesting question. the thing is, the way the fed looks at this, they definitely take this approach that is looking at overall financial conditions, right. and so just because interest rates are rising, that's not necessarily something that they get too concerned about, right, as long as it's basically not upsetting the stock market and some of the other metrics that they look at. but, of course, you have to take into account the fact what interest rates go up, it does do other things that aren't necessarily directly relate theed to stock market, like, for

example, push up mortgage rates. that could in turn put a little bit of a damper on housing activity at a time when we're trying to keep as much economic momentum going as possible. and so that is going to be an interesting question in the coming months, do they hold to that line, are they really going to be unperturbed as long as the stock market is elevated. joe: we knew that the fed is very consistent, they said it long before today, they're not going to hike until certain things are achieved, something resembling maximum employment, some sort of sustained elevated inflation relative to what we've seen. did we get any more details on to what those thresholds actually look like, how we'll know or how the fed will know when it's there? matt: no, we didn't, that was another really interesting aspect of the press conference. that was addressed really early on. there was a question about whether they were going to incorporate some of the new indicators that they're paying attention to in terms of labor

market into, for example, the forecast that they put out and they basically said they weren't. so i think this is kind of setting the table for conversation that we are going to be having from now until the fed actually lifts off which is going to be about kind of putting more definition around those things as we get closer to the time where the rubber really meets the road and clearly right now, they're just not ready to do that, even though it's something that they do like to talk about in more general vaguer terms at this point. caroline: meanwhile, matt, i think you should start like fed reporter bans, you you're on the keys, you saw several other people in the guitars, are we going to see a rock band out of you guys? matt: i got some suggestions from tom kean after that, maybe we have some stuff to work with there. joe: get ready for an hour long discussion about amps. [laughter] caroline: we're on it, across musicality and the fed, matt, we

thank you of bloomberg. plenty more coming up. stocks rose to a record highs, we break down the market reaction to powell's comments. this is bloomberg.

romaine: welcome back to "what'd you miss" today. we are focused on that fed decision. jay powell gave us all of what we were looking for, or did he, i'm not sure. yields were treated on the decision, joe. joe: yeah, there you go. there was some expectation, you know the talk was if doesn't talk down rates, then maybe they're going to pop up, is he going to push back, is he going to push back? he didn't really do that at all and not much happening at all on the rates front. five-year yield went down.

that's because to how committed they are to keep rates lower for longer. five-year went down. 10-year went up, but barely. it was higher, it was 1.69 or 1.68, not much movement there. finally you see the power shares q.q.q., e.t.f. that has been lagging lately having a pretty good day. romaine: 1.648 on the 10-year, ominous or a good sign, one way or the other. caroline: it really crosses assets. quite remarkable how much he managed to toe that dovish line. joe: markets liking it in the sense that stocks went up and people didn't sell out treasuries. what was it about the performance that seemed that the markets were pretty well chill with it? >> the last time we were talking about powell, there were such high expectations. people had a narrative going into this meeting.

they thought there would be a rate hike, a signal, some kind of decision about tapering bonds. there was a lot going in that was negative for the market. you could just tell by the prior two days trading action, you saw a lot of derisking in anticipation of this and then buying on those comments. the big question here is what happens in the next two days, how do you see people reallocate now that they think and they see that the fed isn't changing anything, but they're also expecting the massive jumps of the underlying gdp. joe: the retreat in yields is interesting, the retreat in dollar and the dixie, pretty remarkable here. i wonder if this is a one-day knee jerk reaction type of thing or the start of a much more prolonged down trend on the dollar? >> your guess is as good as mine. it's a real test. if you start to see the dollar decline as you're seeing on your chart right now towards the tail end, a real decline on a 10-day time frame, it really shows you that the market wasn't expecting this, how much of a shock this was. i think the implications here is

what is important, not just about the dollar anymore which of course has been rising in tandem with those yields. it's going going to be impacting commodities and emerging market currencies and the other central banks around the world who are looking to the dollar for their cue. caroline: the b.o.e. tomorrow, the b.o.j. friday, so still plenty of central bank action to come, what is interesting is when bond yields go higher, textile is off. it didn't day, it was so dovish coming from chair powell. are we going to be basically full-on rotation trade once again in the future? >> it looks like that yield tech relationship is start to go falter a little bit. you saw it earlier this week as well. you saw yields rise and tech rise. that was the story earlier as well. when you see that defensively play come back into the market, i think what is important to note here is that we are talking about the cyclical rotations. that is going to be a no-brainer. the question is does tech come look for the ride. we talked about this on the show a lot. do you see that massive inflation rally which includes

the entire economy, all sectors of the economy, or is one sector coming at the expense of the other. that's really, i think, more of the question here because, of course, you do want tech on your side if you want the benchmark gains. that's what people are after. joe: let's go back to the recent backup in rates from a few weeks ago. there was that day or maybe two days where it was extremely violent or extremely messy, things have quieted down. as that sort of fades in the rear mirror and volatility ain the rates decline, is it looking for and more like a technical thing, like there were some leverage traders that got washed out, sort of sloppy, but not necessarily indicative of some new broader issue? >> it's going to be technical, of course, we talked about the 11.6% level being the key level to watch. that's where we talked about the s.o.r. and everybody being the expert, that's where the s.o.r. comes in handy. that is the new catalyst everybody is looking to now. chairman powell hasn't commented on that, but there is an

announcement coming north. now you want to see how banks in particular are positioned or are trading ahead of that announcement which he says is coming in a couple of days. romaine: real quickly, what is next, we have been obsessing what is going on with yields, particularly on that short end and we have been assessing on the correlation with stocks, now that we have gotten the message, what does the market do? >> that is key, what are they sensitive to. this is where geopolitics comes into play. you saw the comments on biden on russian's putin come out this morning. there was a major reaction. it's not a surprise that joe biden would feel that way after the last four years. it is important to know that the market did sell off on it. you have the fed staying put, the economy rallying, what does the market trade on if not earnings and fundamentals. romaine: not every day we talk about the rupal on the show, joe's second favorite currency out there. we have to talk about the housing market. housing starts stumbling in

february, of course, weather impeding momentum and the jump in builder backlog rebounding, we are talking more about the markets. this is bloomberg.

♪♪ ♪♪ caroline: of course today we're focused on the fed. what we heard out of fed chair jay powell and the central bank is kind of giving an improving outlook, very much of an improving outlook on the economy, joe. we learned that u.s. housing stocks retreated in february. everybody blames the weather, it feels like a british pastime, you do if too, it was a cooldown? joe: some of the data generally for february, a lot of it is getting dismissed due to the extreme weather, particularly that ice storm, yes, housing started dipping. on the other hand, if you look at kay schiller, that's the blue line, home prices are continuing to rally.

again, by and large, not what you would expect. nothing in the real estate market is what anyone would have expected in the last year given the massive economic upheaval. the question is whether it can continue. joining us with more to talk about real estate, ivan kaufman, founder and c.e.o. of arbor real estate trust originating more than 9 billion loans annually. thank you for joining us. let's start with the news and the story of the day, we have been talking about the fed, we have been talking about interest rates rising a little bit, particularly at the long end. do you see any pasthrough yet from your perch from that rise longer and interest rates do housing real estate activity? ivan: despite the data today, the housing market is booming, 2020 was a phenomenal year in every regard, the biggest problem is not enough inventory, homes hit market, they hit their price, they sell for hire than

their price. they're not even on a listing more than two weeks. so i think the trend is going to continue, will it be as robust as last year, 20% appreciation, i'm not sure about that, but it's going to be another phenomenal year for housing. with respect to interest rates and how it's impacted people, i think that the biggest secret during covid and the biggest stimulus package that homeowners and consumers have had are lower interest rates, created an enormous amount of wealth in savings, $4 trillion in savings for these homeowners. so i think the bump up in interest rates kind of nominal effect, but they're still in historic low places. romaine: ivan, from an investor's perspective, you're coming into this market now and looking for opportunities here, do you focus in on single family homes, do you focus in on multi-family or some other sort of segment of the market that you think provides some opportunity?

ivan: listen, other than a great investment in arbor reality trust, we have been the best performing stock in the market five years in a row, i think you have to proceed with caution. i think the multi-family sector has outperformed almost every other sector consistently and even through dislocations and recessions, still a great asset class. the single family market, if you were lucky enough to own single family homes in 2019, you did extraordinarily well, but i think the home ownership rate is good and getting better. so i think it will continue to be a very solid investment, but a lot of that is predicated on rates being within this range. if rates go up considerably, it will affect the ability for people to do well. there is no real sign that you're going to have a significant change in interest rates. so i think these, both sectors are great sectors. the sector i like more than any other sector right now is the single family build to rent

community sector. it's a new asset class. it's being done very efficiently and a lot of demand, a lot of desire. i think people kind of have a hybrid between renting in a multi-family unit versus buying in a single family community and that's the sector i like most in investment cycle. caroline: ivan, romaine does good for the audience and ask what the investor should be doing. i'm asking purely for myself. what i should be doing. thinking about going even further and now actually i want to be right back in the heart of manhattan eventually when i'm able to cross over the atlantic. is that ok right now, are rents going to remain low? are they suddenly going to skyrocket back and still remain affordable? ivan: so, it's definitely the contrarian approach, but the correct approach. so kudos to you. i mean, if you talk to anybody over the last 30 days, you've

had a rent adjustment in new york city and the number of apartments being rented at record numbers, albeit at lower rates, but people are renting and renting quickly and there is huge demand and they're disappearing. if you look at the data on condo sales in manhattan, the numbers are extraordinarily great right now, albeit at lower rates. so i really believe people will go back from florida and the sunshine states, go back to where the action is in the cities and i'm very optimistic in september that you'll see a really rapid return to normal in new york city. romaine: caroline, you got to get back here quick and lock in something if there is ever a return to normal. did sort of anticipate my question where i was going like has the view of urban real estate, i guess this is both on the residential and commercial side, how much has it changed?

six months ago or last summer, death of cities and flees the cities for the suburbs and let's get out of new york and san francisco. it doesn't feel like that's as much of a thing at least here in new york. i'm curious how much your sense is that the conversation has changed and people are sort of like, they believe in cities again. ivan: i think the conversation has changed. i think the fear factor, i think that whole dislocation of will the world ever return to normal, they all know with the vaccine, the world is returning to normal and there will be some people who remain in the suburbs. some people who relocated their families, they're not coming back, but to a large part, you're going to see people come back to the cities, especially the younger people. younger people that graduate college, they want jobs, they want to be where the action is and to a large extent, i think the attitude will be post-summer, come back to the

city, go where the action is. new york city, best city in the world and i think so everybody believes that. romaine: it's a wonderful city. ivan, i am curious on the commercial side, though, we did see a lot of retailers vacate spaces in prime real estate here in new york and other cities, obviously a lot of restaurants and services industries, businesses either shut down or suspended their businesses here. there is a sense here that some of that mite might not come back, particularly the big chains have decided that maybe they can lean out and deal with fewer locations and sell stuff online. are you worried about that part of the commercial real estate industry? ivan: so the retail sector is a tough sector. it's been a tough sector pre-covid, right, it was going through a reconfiguration. that is a sector, retail sales have been good online, but bricks and mortar will suffer. that has to be redetermined. you'll see that over the next 12 to 24 months.

i think it was happening before covid. the other sectors, the office market, although there is a little bit of adjustment for rents, the office market will be fine, quite a little different, but the retail sector for sure is going to transition. restaurants, ok, a new name on the door, people will eat out, i think everybody is going to go back to the restaurant scene. hospitality, you know, hospitality, hard hit sector, but i don't know if you tried to go somewhere and travel the last 30 days or 60 days, you can't get a reservation at a hotel. there is so much pent-up demand. when people get the vaccine and they want to go back to new york city and travel, you're going to see an enormous amount of demand in new york city for hospitality. caroline: ivan kaufman, founder of arbor reality trust. good to have sometime with you. guys, joe, you can only eat out once a night says powell. joe: that's the word. we make sure there is no inflation by making sure no one

eats out too much, everyone gets a shot at the restaurant. caroline: play nice with those restaurant reservations people. that does it for whatley whatley. joe: "bloomberg technology" next in the u.s. romaine: have a good evening. this is bloomberg.

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