WEBVTT - Where the Equity Rally Goes in 2025 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.200 --> 0:00:29.320 Two years ago, he used my economist to the yere. 0:00:29.320 --> 0:00:33.720 He had an optimism about the American economy. Admitst recession 0:00:34.159 --> 0:00:37.120 at gloom. Neil Doutta takes a continued victory lap. He's 0:00:37.120 --> 0:00:40.920 with Renaissance at Macro this morning, stop by the FED show. 0:00:41.000 --> 0:00:43.720 He was so wound up about the FED meeting was 0:00:43.760 --> 0:00:46.800 he he called my people and said, I demand to 0:00:46.840 --> 0:00:49.680 come on. Okay, joining us now because he demanded to 0:00:49.680 --> 0:00:51.800 come on, Neil dota. Neil, let's go back to the 0:00:51.880 --> 0:00:54.760 last FED meeting. Why did you go mental? Why did 0:00:54.800 --> 0:00:55.920 you say I gotta come on? 0:00:55.960 --> 0:01:01.000 The FED decides, Well, thanks for having me on, Tom, 0:01:01.040 --> 0:01:04.880 Happy New Year. Well, I would just say that it 0:01:04.920 --> 0:01:08.440 was a complete one eighty from the meeting right before 0:01:08.520 --> 0:01:12.360 that when they said they wouldn't prejudge policy outcomes right 0:01:12.400 --> 0:01:14.600 after the election, and what do they do in December? 0:01:15.440 --> 0:01:19.880 They prejudged policy outcomes before anything even happened, basically taking 0:01:19.920 --> 0:01:26.200 out insurance some potential tariffs before you know, Trump even 0:01:26.760 --> 0:01:27.880 takes the oath of office. 0:01:28.000 --> 0:01:29.360 I thought that was quite revealed. 0:01:30.120 --> 0:01:33.720 So, you know, this idea that the fedily responding to 0:01:33.760 --> 0:01:37.800 the data and adjusting their forecasts, I don't really think 0:01:37.840 --> 0:01:41.200 that washes if you look at how much the data 0:01:41.200 --> 0:01:43.640 surprised on the upside with respect to March. I mean, 0:01:43.680 --> 0:01:46.680 it would make more sense to push off raid cuts 0:01:46.680 --> 0:01:50.200 at that meeting, but in December, you know, rasing two 0:01:50.240 --> 0:01:53.480 cuts given the forecast revisions I thought was a little 0:01:53.480 --> 0:01:55.560 bit much. So this was really about a balance of 0:01:55.640 --> 0:02:00.560 risks story that they explicitly said that wouldn't do. 0:02:01.000 --> 0:02:04.880 The higher yields and the attendance strong dollar. Does that 0:02:05.200 --> 0:02:07.320 force or cause a slowdown? 0:02:09.120 --> 0:02:10.480 I think so. I mean, when you look at the 0:02:10.560 --> 0:02:13.000 nature of why interest rates had been going up, it 0:02:13.040 --> 0:02:15.320 has very little to do with a rerating of nominal 0:02:15.320 --> 0:02:17.840 growth expectations. I mean, if you look at the data, 0:02:18.800 --> 0:02:21.040 you know, the your own Bloomberg Surprise Index has been 0:02:21.120 --> 0:02:25.320 weakening in recent weeks, so the economic data has been slowing. 0:02:25.880 --> 0:02:28.360 You know, if you look at inflation expectations, both of 0:02:28.440 --> 0:02:31.960 surveys of consumers and businesses, they've been falling. So you know, 0:02:32.040 --> 0:02:34.200 my sense is that this has something to do that's 0:02:34.240 --> 0:02:37.720 not related to the data. I think it has to 0:02:37.720 --> 0:02:40.240 do with term premiums. Maybe that's a function of QT. 0:02:40.440 --> 0:02:42.560 Maybe that's a function of what's going on globally. You're 0:02:42.560 --> 0:02:46.880 seeing rates go up in Japan for example. You know, 0:02:46.960 --> 0:02:50.440 maybe there's a you know, risk around deficits and so 0:02:50.720 --> 0:02:52.880 you know there's going to be more treasury issues relative 0:02:52.880 --> 0:02:54.799 to the demand for treasuries. I mean, these are all 0:02:54.840 --> 0:02:57.560 things that push up the term premium, but it doesn't 0:02:57.600 --> 0:03:01.040 really have to do with growth expectations. And that the 0:03:01.080 --> 0:03:05.040 term premium is going up, that's a tightening of financial conditions, right, 0:03:05.040 --> 0:03:08.040 I mean, the declining term premium was a big driver 0:03:08.240 --> 0:03:10.800 of you know, sort of risk appetite, you know, stronger 0:03:10.800 --> 0:03:15.680 equity private you know in recent decades, frankly, and you know, 0:03:15.720 --> 0:03:17.640 to the extent that's going away, that's going to be 0:03:17.639 --> 0:03:19.360 a headwind for stocks. 0:03:19.800 --> 0:03:22.040 Neil, Neil, I'm at an equity guy. All I know 0:03:22.040 --> 0:03:24.280 about the bond market is bond prices go up, yields 0:03:24.360 --> 0:03:24.840 go down. 0:03:24.880 --> 0:03:25.679 That's mailed that. 0:03:26.960 --> 0:03:29.639 But I got my fetter reserved cutting interest rates. Why 0:03:29.639 --> 0:03:33.400 are my yields in this bond market thing going up? 0:03:33.440 --> 0:03:34.920 I thought the yield should be going down. 0:03:36.800 --> 0:03:38.160 Yeah, I mean it's a good question. 0:03:38.400 --> 0:03:41.840 I think. You know, obviously some rates are coming down. 0:03:41.960 --> 0:03:45.360 Some private sector borrowing rates have been coming down alongside 0:03:45.400 --> 0:03:48.000 the FEEDI using so for example, helock rates have been 0:03:48.040 --> 0:03:52.360 coming down, Auto loan rates have been coming down. You know, 0:03:52.720 --> 0:03:55.200 prime rates obviously have been coming down because those are 0:03:55.280 --> 0:03:58.840 very much keyed off what the FED is doing. But 0:03:59.200 --> 0:04:02.960 you know, things like more rates, those have been high elevated, 0:04:03.240 --> 0:04:07.440 and yeah, and as I mentioned, I mean that's you know, 0:04:07.520 --> 0:04:11.440 to some extent, it's it's out of the fed's control. 0:04:11.520 --> 0:04:13.640 I mean, I think one reason why they're going up 0:04:13.800 --> 0:04:16.960 is because, you know, at some level, the economy has 0:04:17.000 --> 0:04:19.359 been doing a little bit better, at least initially after 0:04:19.440 --> 0:04:23.159 the September meeting, somewhat better than expected. But I don't 0:04:23.160 --> 0:04:26.480 think that goes far enough to explain why interest rates 0:04:26.480 --> 0:04:28.320 have backed up. So I think that's part of the reason, 0:04:28.320 --> 0:04:30.400 but it's not really the bulk of the reason. 0:04:30.520 --> 0:04:33.279 What's the FED focusing on here, Neil, do you think 0:04:33.400 --> 0:04:37.760 is it? Is it the absolute inflation number? Is it 0:04:37.839 --> 0:04:40.719 the labor market? What is the FED focusing on these days? 0:04:40.760 --> 0:04:42.159 Do you think? Well? 0:04:42.160 --> 0:04:44.000 I mean, I think to the extent that the September 0:04:44.040 --> 0:04:46.159 meeting was a focus on the labor market, I think 0:04:47.000 --> 0:04:50.240 December one kind of put inflation back in the driver's seat. 0:04:50.279 --> 0:04:52.680 I mean, they're clearly all you have to do is 0:04:52.760 --> 0:04:56.880 go through the document that they release with, you know, 0:04:56.880 --> 0:04:59.440 with the Summary of economic projections, and go to the 0:04:59.480 --> 0:05:04.320 balance of risks. Right, you have a overwhelming majority of 0:05:04.760 --> 0:05:07.760 participants on the f MC seeing that the balance of 0:05:07.839 --> 0:05:10.160 risk to core inflation are skewed to the upside. It 0:05:10.279 --> 0:05:13.240 completely flipped from where they were in September. So I 0:05:13.279 --> 0:05:16.000 think the real life of inflation data has taken on 0:05:16.040 --> 0:05:19.880 a lot more importance than it did, you know, maybe 0:05:19.880 --> 0:05:20.560 three months ago. 0:05:20.640 --> 0:05:22.719 And Neil done it with the Renaissance Macro. He'll be 0:05:22.760 --> 0:05:25.200 with us for the entire half hour. I do want 0:05:25.240 --> 0:05:27.800 to point out that he works with Jeffrey Degraph, who 0:05:27.800 --> 0:05:30.920 had a better than good two thousand and four. We're 0:05:30.920 --> 0:05:33.600 hoping to get mister mister de Graph is very tough 0:05:33.600 --> 0:05:36.080 to me, you know, it sounds like it we can 0:05:36.080 --> 0:05:38.760 get done anytime we want. Jeff to Graph is just 0:05:38.800 --> 0:05:42.160 like absolutely impossible to get what do you learn from 0:05:42.240 --> 0:05:44.520 Jeff to graph right now, Neil dout it when you 0:05:44.680 --> 0:05:48.160 tie in is world class equity coverage into your call 0:05:48.200 --> 0:05:51.240 of a slowing economy, how do you synthesize those two? 0:05:52.839 --> 0:05:56.400 Well, I mean I would say that the market has 0:05:56.520 --> 0:05:59.560 been is over sold, you know, so that's you know, 0:05:59.640 --> 0:06:02.240 reasonably good setup going in uh, you know, into the 0:06:02.279 --> 0:06:04.880 new year, so you're sort of probably due for a bounce. 0:06:06.240 --> 0:06:08.440 But I do think interest rates up at these levels 0:06:08.480 --> 0:06:12.160 concern him, and so you know, that's something to keep 0:06:12.200 --> 0:06:14.800 in and keep in mind, you know. For my own part, 0:06:14.839 --> 0:06:17.760 I mean I would say that, you know, really, to me, 0:06:17.960 --> 0:06:22.880 the big the big story, frankly, is the performance of housing, right. 0:06:22.920 --> 0:06:24.880 I mean, this is why you know, you made Economist 0:06:24.880 --> 0:06:26.400 of the Year back in twenty twenty three. 0:06:26.800 --> 0:06:28.840 I didn't get that. I didn't I didn't get that back. 0:06:28.880 --> 0:06:31.240 I didn't get it for twenty twenty four time, unfortunately. 0:06:33.000 --> 0:06:35.280 But you know, I would just say that one of 0:06:35.320 --> 0:06:37.159 the reasons why I made that, made the calls I 0:06:37.200 --> 0:06:39.320 made in twenty for twenty you know, twenty twenty three, 0:06:39.600 --> 0:06:42.200 is because at the end, you know, two years ago, 0:06:42.320 --> 0:06:45.000 at the end of twenty twenty two, you know, the 0:06:45.080 --> 0:06:49.760 FED was dialing back kind of the hikes, and housing 0:06:49.800 --> 0:06:52.320 stocks were outperforming. So that's kind of a you know, 0:06:52.600 --> 0:06:56.040 an interesting Now you have the FED cutting and housing 0:06:56.040 --> 0:06:58.920 stocks are underperforming, so you know, I think that the 0:06:59.200 --> 0:07:01.839 underperformance of home building is I think an important kind 0:07:01.839 --> 0:07:03.320 of Yeah, Neil, I. 0:07:03.320 --> 0:07:08.240 Got a fiery response out on YouTube and the housing market. 0:07:08.320 --> 0:07:12.120 What is your insight of where the housing market goes 0:07:12.120 --> 0:07:13.640 for twenty twenty five. 0:07:15.400 --> 0:07:19.320 Well, I think it's not going to look particularly good 0:07:19.400 --> 0:07:21.720 as we go into the spring selling season because mortgage 0:07:21.760 --> 0:07:24.400 rates are running plose to seven percent. I mean, with 0:07:24.440 --> 0:07:26.880 the labor markets cooling, the math doesn't work for a 0:07:26.880 --> 0:07:29.880 lot of people. And I think that's the primary issue 0:07:29.960 --> 0:07:32.240 right now with respect to housing. 0:07:32.320 --> 0:07:33.280 I mean, if you look at. 0:07:33.120 --> 0:07:38.680 Home building, new builders, new housing, if you look at 0:07:38.800 --> 0:07:42.120 single family homes for sale that have been completed, that 0:07:42.240 --> 0:07:45.320 number is up over fifty percent against last year. So 0:07:45.360 --> 0:07:47.760 there's slack building in the new housing market. I think 0:07:47.800 --> 0:07:52.040 Paul mentioned sort of the increasing inventory situation in parts 0:07:52.080 --> 0:07:53.360 of the South and. 0:07:55.640 --> 0:07:56.120 The West. 0:07:56.160 --> 0:07:58.360 I mean, remember that's like the meat of the market, 0:07:58.480 --> 0:08:01.480 right so if inventories are going up in those places, 0:08:02.320 --> 0:08:05.760 that means that construction is going to be coming down. Yeah, 0:08:05.800 --> 0:08:07.360 that's where most construction happens. 0:08:07.400 --> 0:08:11.040 Frankly, you know this is important. Eruption. 0:08:11.120 --> 0:08:12.600 Employment is at risk. 0:08:12.640 --> 0:08:15.160 Now I want to go to Neldata and Paul Sweeney 0:08:15.160 --> 0:08:18.840 Lisa jump in on this. This is important. Isn't where 0:08:18.880 --> 0:08:22.360 we live in aberration? Paul Sweeney like, where we live 0:08:22.480 --> 0:08:23.200 isn't normal? 0:08:23.320 --> 0:08:26.120 No, because I think the density we have here in 0:08:26.200 --> 0:08:29.400 the metro New York area is so crazy. That and 0:08:29.440 --> 0:08:32.360 Lisa's looking for a new are you looking for. 0:08:32.240 --> 0:08:35.400 Six thousand square Now that's the backyard. 0:08:35.679 --> 0:08:38.000 But it's like getting out bid by these offers. That 0:08:38.120 --> 0:08:39.880 is crazy. Like a house goes on the market for 0:08:39.920 --> 0:08:41.920 six hundred thousand in New Jersey and. 0:08:41.880 --> 0:08:44.160 It sells for seven forty. It's me and it's like, 0:08:44.200 --> 0:08:44.839 how do you get it? 0:08:45.000 --> 0:08:47.720 But that's not the rest of the world here, So hey, Neil, 0:08:47.760 --> 0:08:50.559 so let's stop back. You know, we got the labor market, 0:08:50.559 --> 0:08:53.959 the real estate market. How's the consumer doing out there? 0:08:53.960 --> 0:08:56.640 How do you think about the consumer here in twenty 0:08:56.640 --> 0:08:57.160 twenty five. 0:08:59.600 --> 0:09:01.280 I mean, I think it's going to be tough to 0:09:01.320 --> 0:09:04.480 sustain the kind of consumption pace we saw last year, right, 0:09:04.520 --> 0:09:06.959 I mean, if the labor markets are slowing and wage 0:09:06.960 --> 0:09:09.640 growth is cooling, which I think is clearly happening because 0:09:10.000 --> 0:09:12.400 you know, things like hiring rates are down, puts rates 0:09:12.440 --> 0:09:14.280 are down. You know, there's not really much need for 0:09:14.360 --> 0:09:16.440 firms to be paying up and bidding up the wages 0:09:16.480 --> 0:09:19.880 of their workers. So with the slack in the labor market, 0:09:20.320 --> 0:09:22.280 that's you know, slowly building. I mean, you know, the 0:09:22.360 --> 0:09:24.960 labor market's not collapsing, but it's hard to be bullish 0:09:25.040 --> 0:09:27.880 on the consumer given that environment. And I also think 0:09:27.920 --> 0:09:30.240 there's probably a bit of an asymmetry, right, I mean, 0:09:30.559 --> 0:09:33.240 you know, the thing that's been supporting I think consumption 0:09:33.360 --> 0:09:38.160 has been you know, rising wealth, you know, sort of 0:09:38.800 --> 0:09:41.280 equity prices going up, home price is going up. And 0:09:41.280 --> 0:09:43.679 to the extent that that doesn't continue, I mean, we've 0:09:43.720 --> 0:09:46.560 seen some slowing in stocks. I mean there's probably an 0:09:46.600 --> 0:09:49.280 asymmetry there right where modest slowing gets you maybe an 0:09:49.320 --> 0:09:52.079 outsized slow down in right. 0:09:52.160 --> 0:09:54.560 So that shape and K shaped Tokany, here's. 0:09:54.320 --> 0:09:56.520 The second time you've mentioned I like it. It makes. 0:09:58.200 --> 0:10:01.480 Exactly the K shaped to Kanya. It kind of makes 0:10:01.480 --> 0:10:04.240 sense to me. So what should the FED do given that? Here? 0:10:04.280 --> 0:10:05.720 I mean again, I guess if you look at the 0:10:05.760 --> 0:10:09.280 warp function w I RP go on the Bloomberg Terminal 0:10:09.960 --> 0:10:12.880 suggests maybe a couple of rate cuts this year. Should 0:10:12.880 --> 0:10:13.720 the Fed do more? 0:10:13.840 --> 0:10:14.240 Do you think? 0:10:16.360 --> 0:10:21.040 I mean, I think they will do more because I 0:10:21.040 --> 0:10:23.560 think the data is going to slow and inflation. I mean, 0:10:23.920 --> 0:10:26.720 to me, the most notable thing that's happened, frankly is 0:10:26.760 --> 0:10:30.640 the slowing in rental in rental inflation, housing rental inflation. 0:10:30.720 --> 0:10:35.360 That's been really the main shortfall relative to the Fed's 0:10:35.720 --> 0:10:38.200 longer run inflation objectives, and now that appears to be 0:10:38.480 --> 0:10:43.560 working right, I mean in the favor of disinflation. So 0:10:43.640 --> 0:10:46.640 I think that's important. Obviously we're all watching what's going 0:10:46.640 --> 0:10:50.160 on with the dollar, but that's going to weigh on 0:10:50.240 --> 0:10:53.560 the prices for imported goods, I think so. No, I 0:10:53.559 --> 0:10:55.360 think the Fed's going to be ending up. If I 0:10:55.360 --> 0:10:56.960 had to pick, I'd say that they're going to cut 0:10:57.000 --> 0:11:00.199 more than twice. So I think that the front the 0:11:00.240 --> 0:11:03.480 Yeld Curve is a pretty good place to park your 0:11:03.520 --> 0:11:04.280 money at the moment. 0:11:04.640 --> 0:11:06.440 Neil da I wanted to go there in a dollar 0:11:06.520 --> 0:11:09.200 kitschooks joining us in about two hours, folks with socchin 0:11:09.280 --> 0:11:12.000 and you're just brilliant, but let's let's do let's talk 0:11:12.000 --> 0:11:15.679 to foreign exchange trader Neil Dutta here as well. Are 0:11:15.720 --> 0:11:19.800 the dollar movements Neil Dotta nonlinear or linear like d 0:11:20.080 --> 0:11:24.400 x y one O seven, one o eight, one oh nine, 0:11:25.040 --> 0:11:27.440 or is there a Neil Doutta tip point where things 0:11:27.480 --> 0:11:28.559 begin to unravel? 0:11:31.720 --> 0:11:34.160 I mean, I think there's probably something to the idea 0:11:34.200 --> 0:11:36.280 that you know, at a certain point, like more things 0:11:36.280 --> 0:11:38.520 start breaking. But you know, let's I mean, when you 0:11:38.559 --> 0:11:42.240 have like one percent currency moves, that's a big deal, right, 0:11:42.320 --> 0:11:45.320 I mean, so I think the dollar is concerning across 0:11:45.440 --> 0:11:48.400 multiple dimensions. I mean, Number one, obviously, it weighs on 0:11:48.520 --> 0:11:50.920 US exporters, particularly manufacturing. 0:11:50.960 --> 0:11:51.640 That's number one. 0:11:51.720 --> 0:11:55.160 Number two, going back to the equity market discussion, it 0:11:55.200 --> 0:11:58.920 weighs on earnings, right, particularly for tech companies that are 0:11:58.920 --> 0:12:01.839 global in nature, and because that's been a big driver 0:12:01.960 --> 0:12:05.000 of US stock prices. I think the fact that the 0:12:05.040 --> 0:12:07.439 dollar has been strengthening is going to weigh on earnings 0:12:07.480 --> 0:12:11.800 and by extension way on stocks. And I think it 0:12:11.880 --> 0:12:16.079 matters for the rest of the world, obviously, particularly emerging markets, 0:12:16.120 --> 0:12:18.600 because they have lots of dollar denominated debts, so the 0:12:18.640 --> 0:12:21.760 cost of financing that goes up, and then you have 0:12:21.800 --> 0:12:24.840 to start worrying about balance of payment problems in em 0:12:25.080 --> 0:12:28.720 which obviously of their slowing that creates a negative feedback loop, 0:12:28.840 --> 0:12:32.040 pushing the dollar up even more. So you know, I think, 0:12:32.679 --> 0:12:36.400 you know, because of safe haven consideration. So yeah, I 0:12:36.400 --> 0:12:40.079 think it's concerning. But again, that's not really a world 0:12:40.160 --> 0:12:43.200 where the Fed can just kind of sit back in 0:12:43.280 --> 0:12:46.560 its chair and say, oh, we're gonna cut twice this year, right, 0:12:46.679 --> 0:12:50.760 So to me, the dollar represents an unambiguous tightening of 0:12:50.800 --> 0:12:52.160 financial market connections. 0:12:52.200 --> 0:12:54.880 Neil Donna, thank you so much. Here's you valuable generous time. 0:12:54.920 --> 0:12:58.319 Here on a Friday morning to start the year. 0:12:58.160 --> 0:13:07.079 Of you're listening to the Bloomberg Surveillance Podcast. Catch us 0:13:07.120 --> 0:13:10.439 live weekday afternoons from seven to ten am Eastern Listen 0:13:10.520 --> 0:13:14.079 on Applecarplay and Android Auto with the Bloomberg Business app, 0:13:14.240 --> 0:13:15.960 or watch us live on YouTube. 0:13:16.080 --> 0:13:18.760 A bond person comes in, Paul, you nailed early. What 0:13:18.800 --> 0:13:19.240 did you say? 0:13:19.320 --> 0:13:22.240 Price up up, yields down, nail down. 0:13:22.400 --> 0:13:24.560 Okay, there we go, We're not going to do that. 0:13:24.679 --> 0:13:27.599 Joining us now. Pria isra with a Friday get the 0:13:27.679 --> 0:13:31.520 year started discussion, and everybody's sitting in their kitchen this 0:13:31.600 --> 0:13:35.080 weekend discussing how much they've lost betting on football and 0:13:35.280 --> 0:13:38.880 also their portfolio. You and I are going to talk 0:13:39.679 --> 0:13:45.559 Jensen trainer sharp right now. Adults in the business say 0:13:46.000 --> 0:13:49.440 how much did I make? But how much risk did 0:13:49.440 --> 0:13:53.360 I make making what I made? And William Sharp out 0:13:53.400 --> 0:13:59.199 at Stanford identified this explain to mere mortals worldwide what 0:13:59.240 --> 0:14:01.720 the sharp rate is and why it matters. 0:14:02.320 --> 0:14:04.440 I love that you're talking about sharp ratio. 0:14:04.600 --> 0:14:06.679 It's great you and I can bring up bar conversation 0:14:07.520 --> 0:14:08.559 on two people here. 0:14:09.520 --> 0:14:10.200 I love it. 0:14:10.679 --> 0:14:14.320 They're sitting at their their table this weekend and they're like, 0:14:14.480 --> 0:14:16.680 why are we not making money? Sharp ratio? 0:14:16.840 --> 0:14:16.920 Go. 0:14:17.440 --> 0:14:19.360 So there's a lot of well I should start with 0:14:19.400 --> 0:14:21.040 happy new Year, thank you for having me. 0:14:21.280 --> 0:14:22.200 I have children. 0:14:22.320 --> 0:14:27.560 Continue. The focus typically is on the return. It's what 0:14:27.720 --> 0:14:30.720 return am I getting? You're getting that return taking risks 0:14:30.720 --> 0:14:33.120 and you know, but you know you're talking about have 0:14:33.200 --> 0:14:34.400 we not made money? 0:14:34.480 --> 0:14:35.000 Enough money? 0:14:35.080 --> 0:14:37.880 I think bond people who thought the Fed starting to 0:14:37.880 --> 0:14:40.280 cut trades, and that was where we were a year ago. 0:14:40.520 --> 0:14:42.640 The Fed's going to cut trades. They typically cut two 0:14:42.720 --> 0:14:44.840 hundred three hundred basis points. You're gonna make a lot 0:14:44.840 --> 0:14:47.640 of money in bonds. I don't think, well that that's 0:14:47.640 --> 0:14:50.360 where they lost money. They put money in stocks. They 0:14:50.360 --> 0:14:53.000 did well. We're in a soft landing. Pretty much every 0:14:53.120 --> 0:14:56.800 risk asset did well. Credit did great. Now you take 0:14:56.840 --> 0:14:59.760 stock and look at the uncertainty. You have the FED 0:15:00.320 --> 0:15:02.640 with an army of PhDs saying we. 0:15:02.640 --> 0:15:03.560 Have a lot of uncertainty. 0:15:03.600 --> 0:15:06.400 We don't know how to manage the cyclical and the structure. 0:15:06.440 --> 0:15:09.560 So we're pausing. And so that's where that shop comes in. 0:15:09.840 --> 0:15:13.040 Let's look at the risk and return. So let's look 0:15:13.040 --> 0:15:15.040 at the return relative to the risk, which is what 0:15:15.400 --> 0:15:17.920 you will you do to sharp ratio. That's where I 0:15:17.920 --> 0:15:20.840 think fixed income. You're getting six seven percent in high 0:15:20.960 --> 0:15:24.800 quality fixed income with not a lot of risk because 0:15:24.800 --> 0:15:28.240 I don't think exactly, and so that your denominator, if 0:15:28.240 --> 0:15:30.600 it's lower, suddenly fixed income makes a lot of sense. 0:15:30.600 --> 0:15:33.440 And I'm one more than one question, folks, and Sweeney's 0:15:33.440 --> 0:15:35.640 going to bring us back to normal. You have a 0:15:35.760 --> 0:15:39.880 superior sharp ratio and the JP Morgan core bond versus 0:15:39.880 --> 0:15:43.440 your peers and versus the index. That's a one year 0:15:43.520 --> 0:15:46.880 sharp ratio. There's a three year look back, there's a 0:15:46.960 --> 0:15:50.760 five year lookback. I'm wedded to the three year sharp ratio. 0:15:50.840 --> 0:15:53.400 Folks of whatever four oh one k plan you've got, 0:15:53.640 --> 0:15:56.520 which duration is the most value to prea miser? 0:15:57.520 --> 0:15:59.840 So I would say I think I do wonder Bob Michael, 0:16:01.120 --> 0:16:03.400 I would say that we look at five year, ten 0:16:03.480 --> 0:16:07.160 year consistency is such a big part of it's our DNA. 0:16:07.520 --> 0:16:10.400 So just making sure that we can consistently outperform it. 0:16:10.520 --> 0:16:11.960 You know, how do you do this? 0:16:12.160 --> 0:16:15.320 You diversify a lot so that the risks are not 0:16:15.560 --> 0:16:18.880 You're not, you know, wedded to one particular risk, and 0:16:18.920 --> 0:16:22.160 you do your research. In a high cost of capital world, 0:16:22.240 --> 0:16:25.960 dispersion is going to be high, meaning some sectors will 0:16:25.960 --> 0:16:28.040 do well and others will not. And I wish I 0:16:28.040 --> 0:16:29.960 could say we know exactly which sectors are going to 0:16:29.960 --> 0:16:32.920 do well. If you diversify well and you do that research, 0:16:33.160 --> 0:16:34.720 that's where you get that superior shock. 0:16:34.960 --> 0:16:39.520 You'll sharp ninety years old out of stay. Is that right? Yeah? Okay, good, 0:16:39.600 --> 0:16:41.760 bring us back to some sense of normal. 0:16:42.120 --> 0:16:45.240 Twenty twenty four fixed income investors got paid to take 0:16:45.280 --> 0:16:50.080 some risk, high yield leverage loans by far the best performers. 0:16:51.040 --> 0:16:53.080 Is that going to spill over into twenty twenty five 0:16:53.080 --> 0:16:53.320 do you. 0:16:53.280 --> 0:16:56.800 Think I think so, and yes, why let's look at fundamentals. 0:16:56.840 --> 0:17:00.200 Fundamentals of the corporate sector is still very wrong. 0:17:00.200 --> 0:17:02.520 It was strong a year ago. It's still strong. 0:17:02.680 --> 0:17:06.280 You're looking at strong balance sheets, strong business models, earnings 0:17:06.280 --> 0:17:08.560 are decent. We're also looking at what a company is 0:17:08.600 --> 0:17:10.879 doing with their debt. Are they re levering up? That 0:17:10.880 --> 0:17:14.119 would make me a little nervous. Mostly they're not. I 0:17:14.160 --> 0:17:16.480 will say, since you talk about high yield and leverage, 0:17:16.720 --> 0:17:19.960 I mean high yield default rates including the restructuring, has 0:17:20.000 --> 0:17:22.399 been one and a half percent. It's low leverage loans 0:17:22.400 --> 0:17:24.119 a little higher. So I think you have to be 0:17:24.160 --> 0:17:26.880 careful what you buy. We like high quality, high yel 0:17:26.920 --> 0:17:30.440 we like parts of leverage loans. I think fundamentals are strong. 0:17:30.600 --> 0:17:34.200 Then let's look at technicals. Technical is extremely strong. People 0:17:34.200 --> 0:17:36.200 are looking at the returns they had in equities and 0:17:36.240 --> 0:17:37.840 they're saying, maybe we should rebalance. 0:17:38.160 --> 0:17:40.440 You look at fixed income. If you're getting or in. 0:17:40.440 --> 0:17:43.720 High yeld, you're getting seven eight percent with lower volatility. 0:17:44.240 --> 0:17:46.760 That's why we're seeing continued inflows into bond funds. So 0:17:46.800 --> 0:17:50.320 I would say technical fundamental very positive for fixed income. 0:17:50.520 --> 0:17:52.199 I think you have another good year as long as 0:17:52.240 --> 0:17:53.760 that soft landing is maintained. 0:17:54.040 --> 0:17:57.280 Are there some industries sectors that are attractive to that 0:17:57.359 --> 0:17:59.280 screen well for you guys in terms of maybe taking 0:17:59.280 --> 0:17:59.920 some credit risk. 0:18:00.720 --> 0:18:02.960 So I would say financials is an area that we like. 0:18:03.160 --> 0:18:07.040 Utilities is another one in investment grade within high yield 0:18:07.040 --> 0:18:10.320 as parts of media and telecom that have been beaten 0:18:10.440 --> 0:18:14.080 up and they've actually started to perform well. And that's 0:18:14.080 --> 0:18:16.640 where but I would say rather than sectors even look 0:18:16.680 --> 0:18:20.479 at companies, you have to drill down into balance sheets 0:18:20.520 --> 0:18:22.960 to make sure you know what you own, particularly as 0:18:22.960 --> 0:18:25.680 you sort of go down that risk spectrum. 0:18:26.119 --> 0:18:28.560 New issuance. We've seen a ton of new issuance in 0:18:28.600 --> 0:18:30.320 the bond market. I mean, did they call you up 0:18:30.359 --> 0:18:32.879 when Morgan standing a Goldman Sachs. They've got new issues, 0:18:32.920 --> 0:18:36.080 so they called JP Morgan Asset Management to buy new issues. 0:18:36.119 --> 0:18:38.840 Are you guys known as Hey, we'll buy pretty much 0:18:38.880 --> 0:18:40.960 anything you got for sale? How do you guys do that? 0:18:41.320 --> 0:18:42.920 Not everything that's for sale. 0:18:42.920 --> 0:18:45.320 We absolutely look at the new issue market, sometimes as 0:18:45.320 --> 0:18:47.520 a new issue premium. As there was we started to 0:18:47.560 --> 0:18:50.119 see the new issue market sort of begin yesterday. We 0:18:50.160 --> 0:18:52.520 would love to buy something with a premium because you're 0:18:52.560 --> 0:18:55.000 getting paid to buy that new bond, which is actually 0:18:55.040 --> 0:18:57.320 going to be more liquid, and you can get out 0:18:57.320 --> 0:18:59.399 of some of your older bonds. We're getting in flows, 0:18:59.400 --> 0:19:00.000 so we're invested. 0:19:00.520 --> 0:19:01.200 I mean, I think. 0:19:01.160 --> 0:19:05.080 January tends to be seasonally a higher issuance month, so 0:19:05.119 --> 0:19:08.280 we expect more issuance. What I'm looking at is net issuance. 0:19:08.720 --> 0:19:12.840 So five years ago, when COVID hit or four five 0:19:12.920 --> 0:19:17.360 years ago, you have this big burst of issuance, And 0:19:17.520 --> 0:19:20.840 what we're seeing now is that issuance is being refinanced. 0:19:21.160 --> 0:19:23.200 If net issuance was picking up a lot, that means 0:19:23.240 --> 0:19:24.720 a corporate sector is getting levered up. 0:19:25.119 --> 0:19:27.199 I might hesitate to buy. 0:19:27.240 --> 0:19:29.639 This is still net issuance we think will be actually 0:19:29.680 --> 0:19:32.640 lower this year compared to last year. Gross issuance will 0:19:32.680 --> 0:19:35.200 be high, but people have two Companies have to refinance, 0:19:35.280 --> 0:19:36.520 Investors have to refinance. 0:19:36.600 --> 0:19:39.520 So Tim Cook watches a new episode of Silo tonight 0:19:39.600 --> 0:19:43.679 on Apple TV, goes mental over the dystopian destruction of 0:19:43.760 --> 0:19:46.679 the world, and he goes out and issues thirty billion 0:19:46.720 --> 0:19:49.520 dollars of bonds. Do you want to buy Meg seven paper? 0:19:51.040 --> 0:19:54.240 I like the fundamentals of the Mac seven what I 0:19:54.280 --> 0:19:57.200