Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. I want to bring
Speaker 1: in Brent Shooty. He's the chief investment strategist over at
Speaker 1: Northwestern Mutual Wealth Management. They got two five billion dollars
Speaker 1: in retail assets under management. Brent, I love the way
Speaker 1: you guys have been writing about UM the market about
Speaker 1: investors by dividing them into three camps. You've got the
Speaker 1: too much camp worried about UM you know this inflationary boom,
Speaker 1: the two little camp worried that I guess growth has peaked.
Speaker 1: And then the too expensive camp UM that is concerned
Speaker 1: about valuations. Let's start there, because we're so deep into
Speaker 1: the e UH season right now of the pe what's
Speaker 1: your view on the value of the market. Well, to me,
Speaker 1: value is a relative term, and so it's not an
Speaker 1: absolute call. And so yes, stocks are more expensive, But
Speaker 1: when you look at it compared to the alternatives the
Speaker 1: tenure treagury, for example, at one fifty and change, they
Speaker 1: still look cheap. In the nineteen twenty Times earnings does
Speaker 1: not appear to be overly expensive, just given us back drop,
Speaker 1: and I do think there aren't areas of the market
Speaker 1: that are cheaper and they're going to benefit from still
Speaker 1: strong economic growth. Things like small camps, things like value stocks.
Speaker 1: I think those areas will do well in the coming
Speaker 1: quarters as economic growth remains strong. So print does that
Speaker 1: suggests that you're perhaps a little bit overweight those types
Speaker 1: of reopening trades or cyclical trades, and perhaps a little
Speaker 1: bit underweight some of the more growthy technical areas or
Speaker 1: healthcare are those types of things. Yeah, we've scared our
Speaker 1: portfolio towards that direction, and so we were much more
Speaker 1: overweight in that area post April of last year, and
Speaker 1: we took it back a bit. But still in general,
Speaker 1: we do think that even tying in the peak commentary,
Speaker 1: I think economic growth is more like a plateau, and
Speaker 1: it's all this talk about stag flash and I think
Speaker 1: ignores the fact that economic momentment is still really strong.
Speaker 1: So you have the six month annualized l a I
Speaker 1: up thirteen point one per cent, which means there's a
Speaker 1: lot of momentum still the economy. If you look at
Speaker 1: the underlying fument fundamentals of the consumer, they are still
Speaker 1: in fantastic shape. And so I think that as you
Speaker 1: continue to see the economic growth remains strong, those areas
Speaker 1: of the market do much better when economic growth is strong.
Speaker 1: In here now technology is more of a secular grower. Um.
Speaker 1: I just think it takes a little bit of pause
Speaker 1: here to reflect the fact that you do have some
Speaker 1: reopening going on, you do have some strength and cyclical
Speaker 1: areas like energy stocks, and I think that's the way
Speaker 1: that we're gonna move forward in the coming quarters. People
Speaker 1: have been defining stagflation in ways that I never would
Speaker 1: have thought of. Um. You know, as as a kid
Speaker 1: who grew up in the seventies, I always learned it
Speaker 1: was contraction in growth and uh and uh, you know,
Speaker 1: runaway inflation, the likes of which we experienced around the
Speaker 1: time of the oil shortages. Um, what we're what we're
Speaker 1: hearing now is people are thinking growth is not going
Speaker 1: to be enough, only three or four percent, which is
Speaker 1: far from contraction, whereas inflation we're actually seeing measured at
Speaker 1: more than five. Are you concerned about inflation? Does it?
Speaker 1: I mean I heard the term today persistent le transitory,
Speaker 1: and I thought that was just there you go, Um,
Speaker 1: are you concerned about inflation? Yeah, so this is something's
Speaker 1: waning about and something we've been hedging against and actually
Speaker 1: are recommending to own commodities and tips and have been
Speaker 1: for some time. And so inflation to me, during this
Speaker 1: cycle is going to be more of a worry. So
Speaker 1: you think about the last economic cycle, we woke up
Speaker 1: every day and we wondered about deflation. I think this
Speaker 1: cycle is going to be the opposite, because policy makers
Speaker 1: are going to continue to push on demand. The question
Speaker 1: will be can supply keep up with it? Right now?
Speaker 1: I do believe this is transitory, but my definition, I
Speaker 1: think is perhaps a bit different than others. They think
Speaker 1: of transitory only as time. I think of it as
Speaker 1: what is the underlying root cause? And to me, you
Speaker 1: still have labor markets black, you still have manufacturing capacity
Speaker 1: slack that I think will come into the into kind
Speaker 1: of the forefront. Here. You're going to see people have
Speaker 1: to come back to work because extended unemployment benefits are ending. Um,
Speaker 1: you're gonna see some of these supply chains begin to heal.
Speaker 1: You're seeing some actions right now being taken to do so,
Speaker 1: and certainly it's going to stick around for a while.
Speaker 1: But I don't think this has got the permanent type,
Speaker 1: because I do think that as covid um cases hopefully
Speaker 1: continue to roll over, I think you'll see ports open
Speaker 1: more often. I think some of the supply chains will
Speaker 1: come back to normal. You're certainly going to see a
Speaker 1: push back more from the good side, which is what
Speaker 1: is imported back to service sector spending, as people come
Speaker 1: back on public once again. I'll give you an anecdotal
Speaker 1: point on inflation. A gallon of gas in New York
Speaker 1: City now is north of five dollars. That's the first
Speaker 1: time that's been there in about seven years. So, uh,
Speaker 1: that's inflation for a lot of folks that are looking
Speaker 1: to fill up their car. So, Brent, talk to us
Speaker 1: about the Federal Reserve here. You know, a lot of
Speaker 1: observers I think, say, hey, this Fed has done a
Speaker 1: pretty darn good job here. Are you confident that this
Speaker 1: that is going to navigate this tapering and these rate
Speaker 1: increases in a way that a week, you know, not
Speaker 1: shocking on a negative basis to the markets. Yeah, I mean,
Speaker 1: I think that's where they're lined up. They want to
Speaker 1: try to do everything that possibly can to get more
Speaker 1: economic growth and to get those people that are still
Speaker 1: in the sidelines back into the labor market. And I
Speaker 1: think they're gonna be as patient as they possibly can be.
Speaker 1: You're seeing that right now. And it's funny you mentioned
Speaker 1: talking about Hockey she Fed. I've heard that term a
Speaker 1: few times. I heard it used yesterday for someone who
Speaker 1: moved their rate hikes into November of next year. Yeah,
Speaker 1: that's hardly hawkish. Um, You're talking about a FED that
Speaker 1: put on a sheet of paper and I know it's
Speaker 1: just the dot plot. They put one point seven is
Speaker 1: their medium expected rate at the end of If inflation
Speaker 1: is two point one, then that means we're still gonna
Speaker 1: have negative real rates in which is still stimulative. Now
Speaker 1: that's not a promise by any means, but I don't
Speaker 1: I do think it shows that the FED, despite all
Speaker 1: the talk that's out there right now, is going to
Speaker 1: do everything that possibly can to be measured in patient.
Speaker 1: And they certainly have a viewpoint towards the market because
Speaker 1: remember at the zero bound, the way they impact the economy. Um,
Speaker 1: they don't have much downside for room to lower rates.
Speaker 1: Where they impact it is by um lowering treasury yields
Speaker 1: longer term, which pushes people towards equities. And so certainly
Speaker 1: if you think back to nineteen, they were expecting to
Speaker 1: hike three times and they lower grip three times, not
Speaker 1: because their forecast changed, but because they quote unquote, we're
Speaker 1: listening to the market, all right, Brent, thank you so
Speaker 1: much for joining us. Always appreciate getting your perspective. Brent Shooty,
Speaker 1: chief investment strategists for Northwestern Mutual Wealth Management, joining us
Speaker 1: on the phone from Milwaukee, giving us his thoughts, continuing
Speaker 1: to be bullish on these markets going forward, and again
Speaker 1: major move up in the markets today, the S and
Speaker 1: P up one point three. This is Bloomberg. We've still
Speaker 1: got a lot coming up in the program. Liz Young
Speaker 1: joins us chief investment strategists from Sophi to get us
Speaker 1: her market outlook and investment strategy. And what a day
Speaker 1: to do it on as I was saying Liz or earlier,
Speaker 1: the best day that we've had in markets since July.
Speaker 1: Because the E is rising in the price earnings ratio.
Speaker 1: What's your outlook in terms of value valuations. Yeah, hi,
Speaker 1: I'm so excited to be here. Um, it's a great
Speaker 1: day in the market. I actually just came out with
Speaker 1: a column today that says my outlook for the fourth
Speaker 1: quarter is maybe not quite as rosy. So as much
Speaker 1: as I love a rally in the markets, especially a
Speaker 1: day like today where we've had quite a few days
Speaker 1: of down or maybe flat markets, UM, it's nice to
Speaker 1: see this, and especially after we get positive earnings news.
Speaker 1: So um outlook though into the end of the year.
Speaker 1: Here a couple of points I would make. We made
Speaker 1: our most recent high on September two in the S
Speaker 1: and P and we haven't seen another new high since then.
Speaker 1: So this is actually a pretty long stretch, um, that
Speaker 1: we've gone without a new high. Relatively speaking, We're used
Speaker 1: to hitting new highs. It seemed like on a weekly
Speaker 1: basis for a while there, so we've we've had a
Speaker 1: longer stress to without a new high, and I don't
Speaker 1: think that we're going to see another new one into
Speaker 1: the end of the year. But that does not mean
Speaker 1: that we are going to be negative. So if we
Speaker 1: just look at some of the numbers here, if we
Speaker 1: and the SMP went back down and just kind of
Speaker 1: sniffed at the two day moving average. That would be
Speaker 1: about five and a half percent from where we are
Speaker 1: right now. Even if we ended the year at that
Speaker 1: two d day moving average, we'd still be up about
Speaker 1: eleven for the calendar year. So this has been a
Speaker 1: tremendously strong year. It's been. It was a tremendously strong
Speaker 1: first half and then obviously a rotation, but still a
Speaker 1: strong summer. So a lot of the games have happened
Speaker 1: in the earlier part of the year. I think that
Speaker 1: there are some headwinds in the market, the first of
Speaker 1: which is that we do have a little bit of
Speaker 1: a slowing and momentum on that macro data. We've seen
Speaker 1: a lot of GDP forecasts be revised downward. We have
Speaker 1: earnings coming in reasonably strong. But I think what we're
Speaker 1: going to start hearing once we get past these bank
Speaker 1: earnings is from the companies that are dealing with supply
Speaker 1: chain issues, that are dealing with inflationary issue you that
Speaker 1: maybe they haven't entirely passed through yet, and they're dealing
Speaker 1: with labor shortages. And the big issue that I think
Speaker 1: we're going to face this year that's different from last
Speaker 1: year is that in the title of my column this
Speaker 1: week is no ace left in the hole, is that
Speaker 1: we don't have a catalyst on the calendar. So last
Speaker 1: year we got past the presidential election, that was a positive.
Speaker 1: We got really positive vaccine news about a week after that,
Speaker 1: another huge positive that drove a market rally. I don't
Speaker 1: know that we're going to have a catalyst like that
Speaker 1: this year, Liz. You know, you mentioned how we're hitting,
Speaker 1: you know, seemingly new highs on a daily basis a
Speaker 1: little bit earlier in this in this quarter here, it
Speaker 1: feels like for a lot of the bulls, they come
Speaker 1: back and they're just saying, basically, this is a market
Speaker 1: that just has to move higher or will move higher
Speaker 1: because there really are no other places to put meaningful
Speaker 1: capital to work. That that's not a very rigorous analysis,
Speaker 1: but boy, it certainly seems to be right on many days.
Speaker 1: But you're not buying that, are you? No? I mean
Speaker 1: I am buying that. And so I want to be clear,
Speaker 1: even if we don't hit new highs and to the
Speaker 1: end of the year, I'm not saying get out of equities,
Speaker 1: because that's absolutely true. There isn't another good option. And
Speaker 1: even if the ten year rises up, let's say it
Speaker 1: goes above two, it's still not that good of an
Speaker 1: option compared to equities because you don't have price appreciation
Speaker 1: potential that matches that of the equity market. And even
Speaker 1: a ten year yielding two isn't that much above a
Speaker 1: lot of dividend paying stocks. So you can still get
Speaker 1: dividends in the equity market and more price potential in
Speaker 1: the equity market. I absolutely think that that's where investors
Speaker 1: should be. I just think that we've seen much of
Speaker 1: the strong gains for the year already this year. So
Speaker 1: if you're an investor and you have money on the sidelines,
Speaker 1: if you have cash on the sidelines, then the question becomes, Okay,
Speaker 1: if the question isn't should I put it in stocks?
Speaker 1: I mean, yes, you should put it in stocks, But
Speaker 1: then the question is where in stocks? Right? And what
Speaker 1: I would say to that is, let's say we go
Speaker 1: down a little bit further from here. Who knows what
Speaker 1: the pattern is going to look like. But if if
Speaker 1: I'm right and we go down a little bit further
Speaker 1: from here, and then we have maybe a mediocre bounce
Speaker 1: into the end of the year, I think it is
Speaker 1: those cyclical sectors that are going to lead in that bounce.
Speaker 1: So here's another This is I don't want to get
Speaker 1: too in the weeds here, but if you look at
Speaker 1: what's happened through summer and rallies that were driven through summer,
Speaker 1: they were really driven by those big cap tech stocks,
Speaker 1: or at least the the top heavy part of the
Speaker 1: SMP five hundred. If those aren't the stocks that are
Speaker 1: leading us, all the other stocks have to work a
Speaker 1: lot harder in order to bring the overall index up
Speaker 1: because they make up a smaller percentage. So if those
Speaker 1: cyclical sectors do well into the end of the year,
Speaker 1: it's still going to feel like a lot of hard
Speaker 1: work to get there. But I would be looking at financials,
Speaker 1: I'd be looking at industrials, I would be looking at
Speaker 1: dividend paying stocks, because there is some inflation protection built
Speaker 1: in in the overall market, and we just got about
Speaker 1: thirty seconds left. I don't want to take your Garth
Speaker 1: Brooks quote too far, but if all your cards are
Speaker 1: on the table and you've got no ace left in
Speaker 1: the holes, I mean, we don't have to worry about
Speaker 1: too much volatility or start Garth quote as far as
Speaker 1: you want. I've got Guarth quotes all day long. Um,
Speaker 1: so I think I think there is more volatility that
Speaker 1: would come. But here's the thing. Volatility is not a
Speaker 1: bad thing. And volatility happens when we're going through a rotation.
Speaker 1: So that the line about all my cards are on
Speaker 1: the table, that's sort of there isn't any really big
Speaker 1: positive news catalyst coming right. All we have to do
Speaker 1: now is kind of trudge through the mud, hope that
Speaker 1: earnings come in strongly and that nothing goes wrong. I
Speaker 1: think the FED continues to taper and we have to
Speaker 1: really hand the baton back to fundamentals. Liz, thank you
Speaker 1: so much for joining us. We really appreciate you taking
Speaker 1: the time here, Liz Young, Chief Investment Strategists for so
Speaker 1: far and reminding us about all of the great lyrics
Speaker 1: from out of Brooks. I just you know, went through
Speaker 1: back through what the Cattle when I was reading her notes,
Speaker 1: and uh, the double live album is so good. I'm
Speaker 1: gonna go back and listen to it later on. All right,
Speaker 1: We had some Mr James Gorman on our radio and
Speaker 1: TV airways just earlier this morning, and he generated a
Speaker 1: lot of headlines on the Bloomberg terma. One of them
Speaker 1: is he's not buying this whole inflations transitory thing so much.
Speaker 1: And uh, I'm want to bring that up with our
Speaker 1: next guest, Pete Earl, economist at the American Institute for
Speaker 1: Economic Research located in Massachusetts. So Pete again, James Gorman's
Speaker 1: CEO of Morgan Stanley, kind of saying he's seeing some
Speaker 1: more pronounced and profound inflation out there in the economy.
Speaker 1: How do you see it? Good morning? Yeah, thanks for
Speaker 1: having me, so um, yeah, I mean so so. First,
Speaker 1: I find the whole transitory story a little irksome, to
Speaker 1: be honest, because first, because we had Powell earlier this
Speaker 1: year Chairman Palace that he didn't see any unwelcome inflation
Speaker 1: in April, and he said we were likely to see
Speaker 1: more pressure and they would be temporary. So it's a
Speaker 1: somewhat self serving narrative at this point. But the more
Speaker 1: important thing I think is that anyone who knows or
Speaker 1: studied monetary economics knows that we have what are called
Speaker 1: injection effects, right there can't a lot effects and other
Speaker 1: um schools of beacon offers call them, and it means
Speaker 1: that the disproportioned impact that new money has makes permanent distortions.
Speaker 1: So even if this inflation is transitory, whether that's in
Speaker 1: three months or five years, the higher prices, paid, allocation decisions,
Speaker 1: all that sort of thing and other outcomes are gonna
Speaker 1: be baked in. They're gonna be permanent. Um. I'm way
Speaker 1: more concerned if we're gonna bring up the ugliest word
Speaker 1: in economics and one of the ugliest words in English,
Speaker 1: stag inflation. I'm way more concerned about the inflation than
Speaker 1: the stag you know, I'm totally feeling you that. Um.
Speaker 1: The transitory thing was annoying, but it's also been a
Speaker 1: gift for people interested in economics. I took a deep
Speaker 1: dive into Kine's long run again the other day, UM,
Speaker 1: just just for fun, because you know, in the long run, um,
Speaker 1: everything is transitory. Also, Mohammad al Harrian pointed out today
Speaker 1: that he hurt someone, um, someone serious say persistently transitory,
Speaker 1: which I really appreciated. UM. On on the stagflation side
Speaker 1: of things, Deutsche Bank had a great report out a
Speaker 1: couple of days ago showing that UH clients had at
Speaker 1: least three different definitions for what stagflation is how would
Speaker 1: you define stagflation? Yes, I mean the basic definition is
Speaker 1: again the really nasty portmanteau, is that we have stagnation,
Speaker 1: which is of course slowing or negative growth, and we
Speaker 1: have inflation, and there's a there's a I think there's
Speaker 1: some pretty good arguments against stagflation occurring right now. Um,
Speaker 1: but I also think that what stagflation looks like today
Speaker 1: for those of us who were in my case of
Speaker 1: kid in the seventies, you know, I don't think even
Speaker 1: if we did have definition, uh, definitional stagflation, it doesn't
Speaker 1: mean we're gonna see eighteen or twenty percent interest rates.
Speaker 1: I mean from here six percent interest rates are elevated
Speaker 1: and growth of two point five percent is down. So
Speaker 1: it doesn't mean it's better, but it does mean that
Speaker 1: I think people are looking at the seventies and they're
Speaker 1: thinking of it the same way they think of disco
Speaker 1: balls as they do. You know, the actual economic numbers,
Speaker 1: it would look different. But um, basically, you know, right now,
Speaker 1: households have and end businesses have very high levels of cash,
Speaker 1: actually record levels in some cases, and publicly traded companies
Speaker 1: have highest the highest operating margins they've had in almost
Speaker 1: thirty years. Um. So both of those speak to a
Speaker 1: level of savings and potential consumption that I think puts
Speaker 1: the idea of slowing growth to rest, at least at
Speaker 1: the at the current time. Pepe, how about some of
Speaker 1: these global supply chain issues that so many companies in
Speaker 1: so many different industries are experiencing. We hear them on
Speaker 1: these quarterly conference calls, that the management teams talk about them.
Speaker 1: How do you think that's going to impact global growth
Speaker 1: in remainder of this year going into next year. Yeah,
Speaker 1: so it's definitely a drag. But I mean, I think
Speaker 1: what the recent step that was taken and I don't
Speaker 1: I don't think it necessarily needed, um government devention, but
Speaker 1: the fact that the ports are gonna be working seven
Speaker 1: in many cases, um, some of the things being done
Speaker 1: by private firms, which include buying fleets of aircraft, chartering
Speaker 1: or purchasing ships. I think I think that right now
Speaker 1: is the big link that will serve to to to
Speaker 1: sort of relax some of these Uh, if you can
Speaker 1: find anyone to work there, right Yeah. I mean, that's
Speaker 1: that's the big issue, is that we have this great
Speaker 1: reconsideration whereby people are saying that I really enjoy what
Speaker 1: I was doing, you know, can I take some time off,
Speaker 1: retrain myself whatever. I think that's that's an issue too,
Speaker 1: And that's that's very difficult because that's not economics, that's
Speaker 1: that's that's sociological, that's psychological. But I mean what we've
Speaker 1: seen in the last two days and c p I
Speaker 1: and p p I is really what we would would
Speaker 1: expect um the retail prices, the the the five point
Speaker 1: three percent year over here. I think most of that
Speaker 1: it's not really monetary so much as it is shipping problems.
Speaker 1: What we see in pp I and producers where you
Speaker 1: have capital intensive industries where things are produced, they're seeing
Speaker 1: actual inflation, you know, where you have four dollars competing
Speaker 1: for the same number of things, whether it's materials, oil, etcetera.
Speaker 1: That's where I think shipping containers. I think the monetary
Speaker 1: part is shipping containers. Yeah, you know, in one case exactly,
Speaker 1: I mean the CEO Fastenal was talking about how thirty
Speaker 1: five percent of their containers that would normally be sent
Speaker 1: across the country by rail of the United States, that is,
Speaker 1: have to be now manually offloaded and put on eighteen
Speaker 1: wheelers and that quadruples the cost in some cases drives
Speaker 1: it up six times where it would normally be. So
Speaker 1: I thought it was incredibly fascinating. Pete. Great to get
Speaker 1: some time with you. I hope we can get you
Speaker 1: back on again. Pete Earl is an economist for the
Speaker 1: American Institute for Economic Research, coming to us from Great Barrington, Massachusetts.
Speaker 1: This is Bloomberg. Certainly, the hardest working analyst at bloom
Speaker 1: Bring Intelligence this week has to be Alison Williams, Senior
Speaker 1: Global Banks Analysts. She joins us here in interactive Broker
Speaker 1: studio in between bank earnings conference calls and Allison, tons
Speaker 1: of companies reporting this week in your space. You know,
Speaker 1: as I listened to some of the commentary from these
Speaker 1: management teams, they've remain pretty confident in the outbook as well.
Speaker 1: What are your takeaways they do? It's a strong quarter,
Speaker 1: strong equities trading, huge M and A fees. Those are
Speaker 1: sort of the highlights for the banks. And then on that, um,
Speaker 1: you know the other side of the house and interesting
Speaker 1: coming coming in line. I think there's sort of enough
Speaker 1: to hope for in terms of um, you know, green shoots,
Speaker 1: uh for loan's next year. There is some variation in
Speaker 1: results of Bank of America. You can see trading positively today, um,
Speaker 1: you know. And part of this is really just a
Speaker 1: strategy and how they're managing their bound sheet there, you know,
Speaker 1: deploying excess liquidity, so that's helping their not interesting come
Speaker 1: a bit Jamie Diamond saying he's you know, waiting to
Speaker 1: do that um, and so he has a excess cash
Speaker 1: sitting there. So maybe just a little bit different strategies.
Speaker 1: What do you mean by that? The point their liquidity
Speaker 1: in terms of lending money not lending, so basically all
Speaker 1: the money they have because no one's borrowing, so all
Speaker 1: the money they have so key. So if you think
Speaker 1: about their bounty, we have tremendous deposit growth, we've had
Speaker 1: that since the pandemic began. Um. We don't have people borrowing.
Speaker 1: So the cash can either sit there or you can
Speaker 1: buy securities. So that the risk of doing the ladder
Speaker 1: right is that you're taking duration risk. You're buying um
Speaker 1: securities when rates are extremely low to get a little
Speaker 1: bit of income, and so it can depend a little
Speaker 1: bit on your interest rate views UM. And that also
Speaker 1: takes away when we look at interest rate sensitivity. So
Speaker 1: Bank of America traditionally has had a lot of exposure
Speaker 1: to long rates rising. But because of their change in strategy,
Speaker 1: you know, that's come down a little little bit, but
Speaker 1: you're seeing it come through in the interest income. All right,
Speaker 1: let's go to the area that's most near and dear
Speaker 1: to my heart, which is are my friends on Walsh.
Speaker 1: You're going to have a big pay day this year.
Speaker 1: Let's like it. I mean, you know, first of all,
Speaker 1: as I said, you know, the M and A fees
Speaker 1: were talking record fees. I p O super strong. Competition
Speaker 1: is very strong. So what we're um expecting is that
Speaker 1: bankers are going to get paid, traders are going to
Speaker 1: get paid. It's going to be a very good year
Speaker 1: for compensation. And it's going to be a good year
Speaker 1: next year. We're already looking at that. And so if
Speaker 1: you think about the banks, actually last year they were
Speaker 1: able to hold the compensation ratio down. A lot of
Speaker 1: that was just because you know, the massive surge. A
Speaker 1: lot of that was electronic trading. Um, I think a
Speaker 1: lot of people did not expect, you know, this year
Speaker 1: to be as good as it was, so um, you know,
Speaker 1: perhaps there was everyone expected normalization that really hasn't happened.
Speaker 1: Things have come in a little bit, but we're still
Speaker 1: above where we were a couple of years ago. And
Speaker 1: to the extent that there's still a positive outlook going forward. Um,
Speaker 1: you know, that's going to keep the market competitive. Goldman
Speaker 1: Sachs tomorrow, Um, what are you expecting? Goldman Sachs has
Speaker 1: has a really high bar now, Um, I mean the
Speaker 1: numbers were getting the read across should be really positive
Speaker 1: right there. The leader in M and A revenue, they're
Speaker 1: not always the leader on transactions, but they far outweigh everyone,
Speaker 1: you know, basically forever in terms of revenue, so that
Speaker 1: bar is raised. JP Morgan is sort of the one
Speaker 1: to beat there in terms of dollars, even though Morgan
Speaker 1: Stanley had the biggest increase. Um. Uh, well Morgan Stanley
Speaker 1: up there as well. And on the equity trading side, Uh,
Speaker 1: you know, go, you know, Morgan Stanley is the one
Speaker 1: to beat there there. We expect they keep their lead
Speaker 1: in this quarter, but Goldman could you know, take their
Speaker 1: leadership for the year, which is something they haven't done
Speaker 1: in a while. And so to some extent that sort
Speaker 1: of bragging rights because they're both really big, they're both
Speaker 1: profitable in that business, and as we talked about, compass higher.
Speaker 1: But the returns this year because of the revenue surge,
Speaker 1: are are really strong, and so um really raising the
Speaker 1: bar in terms of expectations for Goldman Tomorrow Now, Alison,
Speaker 1: thanks very much for joining us. Alison Williams, Senior Global
Speaker 1: Banks analyst and incredibly busy woman this week from Bloomberg Intelligence,
Speaker 1: as we get just an absolute slew of bank earnings.
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