louis alexander. louis, it's good to have you let's begin with next year what are the main reasons why you have done this already based on what we know and how big are the down side risks at this point? >> before the election we were talking about fiscal support well over $2 trillion. i think now realistically you're looking at a phase four deal of something like $500 billion. that's 1.5 trillion defereniffe. that matters a lot >> interesting >> but the near term effects of covid are getting worse. that's the other fact. >> yeah, absolutely. i didn't mean to jump in there i'd like to hear you explain a little bit kind inform contrast to what the markets are doing right now, which as bob said is looking through this winter and saying the vaccine is coming and we're going to kind of get back to normalcy. you know, tell me how you see the risks and kind of the if then, you know, how much of kind of the chicago style advisories do we need to see before that really starts to add up to something that's a bigger drag on growth? >> so first thing i'd say is we always expected we'd get to a point where covid was no longer a threat there's no question the vaccine is positive but it brings forward that recovery. it's not fundamentally anything different from where we thought we'd be at the end of 2022 what has changed more substantially is how much fiscal support we're going to have in the near term i just can't express we're moving into a world of divided government. if you look at how that's operated in the past, it's turned into substantial fiscal contraction. the good news about fiscal support over the last year has been it's been very large and very front loaded. that also means it rolls off very quickly so i think the net effect to us of the combination of the vaccine news and what's going on in politics is negative for 2021 look, i get it that people are more optimist ek aboic about the vaccine and i agree that's positive over the immediate term but people shouldn't lose sight over how much the fiscal outlook has changed and will into next year >> as i think through the 2 trillion and $3 trillion figures that have been put out there in terms of the next stimulus bill, i'm just thinking about the dynamic that's already played out this year. the fed is buying so much of our treasury supply. does it matter in other words, if we fast forward to 2021 and we get this magic bullet for the economy, which could be a $1 trillion or $2 trillion stimulus package, that's basically double what the fed is already supporting through its bond purchases at what point does that all have a meaningful economic effect or is it simply the larger the balance sheet, the more liquidity, the higher price in the new york city astock market we ever see about it >> the physical california is going to support spending more or less directly you have some direct spending on health care and those kind of things you're also seeing direct support from businesses and individuals. that's very important to mean t -- maintaining aggregate demand the support we had last year was great but it's rolling off a lot of unemployment benefits are scheduled to roll off at the end of this year i thisnk if we don't replace that, you're looking at a contraction in activity. i think the fed can make sure long-run rates don't constrain the recovery we've had long-run rates run up over the last several weeks or so we think they will increase or make changes in the composition. obviously when we get the vaccine, when do we get to the point where covid-19 is no longer constraining economic activity it goi it's going to be important over the medium term. for the next six months or so, these other factors will be more importa important. >> fed chair jay powell said there's a risk of longer run damage to the productive capacity of the economy and the people's lives who have been disrupted by the pandemic. he refers to women leaving the workforce, children falling behind in education, small businesses how does it manifest itself negatively in the coming months and quarters if that were to be the case >> so one question is just labor force participation. if you see people drop out of the labor force for an extended period of time, it's hard for them to get back in. we saw the risk is the longer the labor market remains depressed, the bigger the challenge it will be that's particularly an issue for women who have dropped out of the labor force more than men in part because of day care and those kinds of things. the problem with small business and the fact we're going to go through a very high level of business closures is another big could be strant. yes, there will be opportunities f on the other side of this but it takes time for those things to get going. the longer we're kind of in this hole the bigger those effects are, which is why i think the fed is so concerned about the next six months, even in an environment where you may be more optimistic about the virus. the fed has talked a lot about the important of fiscal in this and i think they recognize they can help but what we really need is more fiscal support i think that's what the election has called into question >> washington in focus big again. >> thank you, lewis alexander. we appreciate it >> thank you >> the dow is up about 11% so far in november. that means it on track for its best month since april despite rising covid risks and fears of a slower economic recovery we just spoke about let's bring in the senior adviser er to schroaders yes, thank you both for being here perhaps, brian, i'll start with you. you just heard what louis alexander had to say about the economy. is this an economy that's forecast to be able to support a higher market, three, six, 12 months down the line >> thanks for having me. and i do think this economy can support that it might be a choppy path getting there. i think that the key thing is we kind of have to get through a rather rough winter first before people start actually getting vaccinated, like pfizer is very encouraging, a lot of people revising up their expectations about not just where we can go for the next year but when that can start to happen. it's about ramping up economic activity sooner rather than later. that's one of the reasons why the markets responded so favorably to the pfizer news now we can think about with a significant amount of stimulus from the monetary side, maybe some slim down stimulus coming out on the fiscal side, that can really support a really brighter springtime for us. >> now, ron, it's been supportive for certain parts of the market, namely energ
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