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00:00JARED: WE DON ' T THINK THE DIVERGENCE BETWEEN THE U.S. AND THE REST OF THE WORLD CAN CONTINUE. THERE ARE TWO SCENARIOS PLAUSIBLE FOR RE-COUPLING. THE BULLISH ONE IS THAT EMERGING-MARKET FX WEAKNESS AND THE STIMULUS IN THE PIPELINE FOR CHINA GIVES A RALLY. THE BEARISH SCENARIO IS MAYBE A LITTLE MORE PLAUSIBLE IS THAT WAGE INFLATION KEEPS THE FED HAWKISH. TIGHTER CREDIT CONDITIONS SQUEEZE AND WE WILL SEE AN EXTREMELY OVERLEVERAGED CORPORATE SECTOR. ROMAINE: DO YOU HAVE TO BE CONCERNED THE RE-COUPLING WILL COME AT THE EXPENSE OF U.S. STOCKS OR WILL THIS RE-COUPLE IN SOME SORT OF -- > > OUR MOST PROBABLE SCENARIO IS THE U.S. SLOWS DOWN RATHER THAN CONTINUING FOREVER. THE EIGHTH STRAIGHT MONTH IN OUR SURVEY, INVESTORS SAID TECH WAS THE MOST CROWDED PART OF THE MARKET. WE HAVE BEEN SHORT IN TECH THIS YEAR. THINK ABOUT IT THIS WAY, IF YOU TAKE THE FAANG STOCKS AND ALIBABA, TENCENT, BAIDU, HALF HAVE SEEN THEIR MARKETS. GLOBAL EQUITIES, EXCLUDING U.S. TECH, IS DOWN SEVEN OR 8%. ROMAINE: I WILL BREAK IN HERE AS WE GET REDHEAD EARNINGS. -- RED HAT EARNINGS. THEY ' RE COMING IN AT $.85 PER SHARE AND THE ESTIMATE WAS $.82 PER SHARE. REVENUE IS SLIGHTLY BELOW ESTIMATES AT 823 MILLION. THEY ARE ALSO GIVING A FORECAST THAT APPEARS TO BE SLIGHTLY BELOW THE ANALYST ESTIMATE FOR 862 MILLION FOUR THIRD-QUARTER REVENUE. YOU SEE THE SHARES GOING LOWER AT 5%. CAROLINE: WE TALK TECH AND THEY ARE A SOFTWARE COMPANY FEELING THE PAIN. WHERE ELSE ARE WE FEELING THE PAIN? EMERGING MARKETS. I WANT TO GET YOUR TAKE ON THE SLIGHT CALM AND WHETHER OR NOT WE WILL SEE MONEY. DOES MONEY GO BACK INTO EMERGING MARKETS WHEN THE DOLLAR GOES UP? JARED: IF IT IS A WEAK DOLLAR. IF IT IS A BENEFIT TO EXPORTS WE GET OR A STIMULUS ALREADY IN THE PIPELINE FOR CHINA, OUR CHINA ECONOMIST ' S NO PRESSURE GIVES YOU MUCH MORE -- MUCH BIGGER PHYSICAL STIMULUS -- FISCAL STIMULUS. THEY CAN GET THINGS DONE ON THE FISCAL SIDE THAT U.S. HAS STRUGGLED TO DO. WE THINK THERE IS A GREAT RISK WILL IN CHINESE EQUITIES. INVESTORS HAD UNDERWEIGHT IN EMERGING MARKETS ON OUR SURVEY. IT IS GETTING PRETTY ATTRACTIVE. JOE: YOU MENTIONED WAGE INFLATION AS A POTENTIAL FACTOR OF WHY THE FED MIGHT BE HAWKISH -- MORE HAWKISH THAN EXPECTED. WHAT ABOUT INFLATION OVER ALL? AT THE BEGINNING OF THE YEAR, IT WAS THE BIGGEST DEBATE AND FADED. COULD WE SEE BROUGHT INFLATION PRESSURE? JARED: IF YOU SAW THE LATEST RELEASE OF QUIT RATE , AND THINKING MORE LONG-TERM, ONE OF THE BIG THINGS WE HAVE FOR THE 20 20 ' S IS THE RISE OF INFLATION TO ADDRESS INEQUALITY. THAT HAS BEEN THE MOST IMPORTANT POLITICAL STORY OF THE LAST COUPLE OF YEARS. JOE: SO INFLATION WILL BE USED AS A TOOL OR WILL BE ALLOWED TO RUN HOT AS A WAY TO AMELIORATE EQUALITY -- INEQUALITY? JARED: THAT ' S RIGHT. YOU HAVE TO OWN VALUE STOCKS OVERGROWTH AND MARKETS OUTSIDE OF THE U.S. AS POLICYMAKERS RESPOND. CAROLINE: IT HAS BEEN GREAT

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Emerging Market Divergence Resurrects Recoupling Question

Jared Woodard, Bank of America Merrill Lynch investment strategist, discusses the divergence between U.S. and emerging markets with Bloomberg's Joe Weisenthal, Caroline Hyde and Romaine Bostick on "Bloomberg Markets: What'd You Miss?" (Source: Bloomberg)

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