1 00:00:02,520 --> 00:00:08,039 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:12,480 --> 00:00:16,560 Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays 3 00:00:16,560 --> 00:00:19,880 Speaker 2: at seven am Eastern on Apple CarPlay or Android Auto 4 00:00:19,880 --> 00:00:23,159 Speaker 2: with the Bloomberg Business App. Listen on demand wherever you 5 00:00:23,239 --> 00:00:26,440 Speaker 2: get your podcasts, or watch us live on YouTube. 6 00:00:26,840 --> 00:00:29,600 Speaker 3: Front Exchange Market is the litmus paper. The system has 7 00:00:29,600 --> 00:00:33,159 Speaker 3: been very important. We saw the whiplash yesterday. We had 8 00:00:33,159 --> 00:00:35,960 Speaker 3: a great story out in the Bloomberg. Thank you Ted Man, 9 00:00:36,360 --> 00:00:39,840 Speaker 3: Liz Kepa McCormick and Esha Day for a really sharp 10 00:00:40,000 --> 00:00:43,360 Speaker 3: article about the roller coaster they call it that we 11 00:00:43,400 --> 00:00:46,960 Speaker 3: saw in Dollar Dynamics yesterday. Right now, we recalibate with 12 00:00:47,040 --> 00:00:52,320 Speaker 3: Barkley's and their Skyler Montgomery counning their FX strategists out 13 00:00:52,320 --> 00:00:56,840 Speaker 3: of the United Kingdom. Skyler, good morning. Can Barkley's bet 14 00:00:57,000 --> 00:01:01,000 Speaker 3: resilient and strong dollar or do you a just on 15 00:01:01,040 --> 00:01:01,800 Speaker 3: this Tuesday. 16 00:01:03,400 --> 00:01:05,440 Speaker 1: I don't think we've heard anything in the last couple 17 00:01:05,480 --> 00:01:08,640 Speaker 1: of days to really adjust our view. I think broadly 18 00:01:08,680 --> 00:01:11,800 Speaker 1: it's accepted that the current environment is dollar positive. We've 19 00:01:11,840 --> 00:01:14,520 Speaker 1: had such a large move that the question we're consistently 20 00:01:14,520 --> 00:01:17,920 Speaker 1: getting from clients is how far can this strength instead? 21 00:01:18,040 --> 00:01:20,200 Speaker 1: And for US, we wouldn't fade the dollar strength and 22 00:01:20,240 --> 00:01:23,440 Speaker 1: particularly the reference to euro dollar. The move we've seen, 23 00:01:23,480 --> 00:01:26,640 Speaker 1: it's not been exclusively driven by terriffs, right, It's also 24 00:01:26,680 --> 00:01:30,160 Speaker 1: been by growth and rate differentials. US growth continues to 25 00:01:30,200 --> 00:01:33,680 Speaker 1: be stronger than it's DXY counterparts, and that's meant higher 26 00:01:33,720 --> 00:01:35,720 Speaker 1: yields in the US than elsewhere, and that's also played 27 00:01:35,760 --> 00:01:38,160 Speaker 1: a role here. So it's not just teriff threats alone 28 00:01:38,319 --> 00:01:40,280 Speaker 1: that point to more dollar upside. 29 00:01:40,520 --> 00:01:40,920 Speaker 4: Skyler. 30 00:01:41,000 --> 00:01:43,479 Speaker 5: I mean, I'm looking at the Bloomberg Dollar Index up 31 00:01:43,560 --> 00:01:47,039 Speaker 5: over seven percent just since late September. Call it is 32 00:01:47,080 --> 00:01:49,600 Speaker 5: there a bear case for the US dollar. 33 00:01:51,320 --> 00:01:52,960 Speaker 1: So we get asked this quite a lot as well, 34 00:01:53,080 --> 00:01:55,960 Speaker 1: kind of what are the reasons or catalysts that you 35 00:01:55,960 --> 00:01:59,200 Speaker 1: could see for dollar downside? And certainly there are options, right, 36 00:01:59,280 --> 00:02:04,080 Speaker 1: you know, there's not a complete regardless of that in 37 00:02:04,160 --> 00:02:06,560 Speaker 1: terms of you could see more fiscal cohesion and you're up. 38 00:02:06,560 --> 00:02:08,160 Speaker 1: That would be more positive. If you could get more 39 00:02:08,200 --> 00:02:11,440 Speaker 1: super sized stimulus out of China, that would also be 40 00:02:11,480 --> 00:02:14,880 Speaker 1: more positive. If you just had less hawkishness on trade again, 41 00:02:14,960 --> 00:02:18,440 Speaker 1: that would be more positive for those DXY counterparts. I 42 00:02:18,440 --> 00:02:20,280 Speaker 1: think the issue is just one of those baselines are 43 00:02:20,280 --> 00:02:22,880 Speaker 1: coming through, and they're certainly not our baseline. 44 00:02:23,600 --> 00:02:26,280 Speaker 5: How about in Asia here, what is the Bank of 45 00:02:26,360 --> 00:02:28,440 Speaker 5: Japan doing? What do they need to do? How do 46 00:02:28,480 --> 00:02:30,720 Speaker 5: you guys think about the yen here? 47 00:02:31,840 --> 00:02:32,040 Speaker 2: Yeah? 48 00:02:32,040 --> 00:02:35,040 Speaker 1: Absolutely so for the end it's near turn. Upside seems 49 00:02:35,080 --> 00:02:39,440 Speaker 1: more limited, especially versus the dollar. The January Banka Japan meeting, 50 00:02:39,480 --> 00:02:42,079 Speaker 1: it's pretty much completely priced in for a twenty five 51 00:02:42,080 --> 00:02:44,960 Speaker 1: basis point hike. I think top side and dollars yen 52 00:02:45,040 --> 00:02:47,200 Speaker 1: at seven point you get some kind of cap because 53 00:02:47,200 --> 00:02:51,880 Speaker 1: of Japanese authority's reaction function to FX weakness, but given 54 00:02:51,919 --> 00:02:54,520 Speaker 1: we've had this spate of yen strength recently, we're not 55 00:02:54,600 --> 00:02:57,359 Speaker 1: quite at levels where that comes into the picture. More 56 00:02:57,400 --> 00:03:00,240 Speaker 1: medium term, though, we do like buying yen on the crosses. 57 00:03:00,400 --> 00:03:02,720 Speaker 1: I think the direction of policy is clear. Obviously we're 58 00:03:02,760 --> 00:03:05,239 Speaker 1: expecting a hike this week, but we also expect a 59 00:03:05,280 --> 00:03:07,880 Speaker 1: hike later in this year that gets due to a 60 00:03:07,919 --> 00:03:10,320 Speaker 1: policy rate at zero point five percent or sorry, zero 61 00:03:10,400 --> 00:03:13,920 Speaker 1: point seven to five percent, and certainly neutral expectations for 62 00:03:14,040 --> 00:03:16,560 Speaker 1: Japan are kind of drifting more towards the one percent 63 00:03:16,639 --> 00:03:19,240 Speaker 1: level in markets, and then they're also less vulnerable to 64 00:03:19,320 --> 00:03:22,160 Speaker 1: teriff risks and the volatility of a trade work could 65 00:03:22,200 --> 00:03:23,680 Speaker 1: be more positive for safe have instatu. 66 00:03:24,040 --> 00:03:26,120 Speaker 3: Is there a big figure trade out there? I mean, 67 00:03:26,160 --> 00:03:30,200 Speaker 3: forget about all the sixty thousand feet stuff, Tyler. I 68 00:03:30,280 --> 00:03:33,440 Speaker 3: lost money on the Detroit Lions. I know it means 69 00:03:33,760 --> 00:03:36,680 Speaker 3: it's like losing money on Manu. No, it's actually it's not. 70 00:03:36,720 --> 00:03:39,560 Speaker 3: It's like losing money on somebody good. But the answer 71 00:03:39,680 --> 00:03:41,640 Speaker 3: is I got to make it back in the next 72 00:03:41,680 --> 00:03:45,160 Speaker 3: six months, Skyler. Where's the big figure bet for Barclays? 73 00:03:46,760 --> 00:03:48,200 Speaker 1: I mean, in terms of places that you'll get the 74 00:03:48,280 --> 00:03:50,760 Speaker 1: largest move, I think CNY is where you should be looking, 75 00:03:50,840 --> 00:03:54,040 Speaker 1: especially versus the dollar. There's been a mispricing in terms 76 00:03:54,040 --> 00:03:56,720 Speaker 1: of where tariff risk is really showing up. It's showing 77 00:03:56,800 --> 00:03:59,200 Speaker 1: up in Europe so far, but not so much in China. 78 00:03:59,560 --> 00:04:01,920 Speaker 1: And the growth backdrop as well as just fundamentally the 79 00:04:01,920 --> 00:04:03,600 Speaker 1: backdrop or c and Y is for a week or 80 00:04:03,640 --> 00:04:06,240 Speaker 1: CNY even if you don't account for tariff threats, and 81 00:04:06,320 --> 00:04:08,880 Speaker 1: so that tariff threat should be more reflected in that cross. 82 00:04:08,880 --> 00:04:10,880 Speaker 1: And for us, we're looking at seven to fifty originally 83 00:04:10,880 --> 00:04:11,720 Speaker 1: ONND dollars CNY. 84 00:04:11,720 --> 00:04:13,120 Speaker 4: Wow, how about that? 85 00:04:13,480 --> 00:04:16,480 Speaker 5: We've had just the last twenty four hour Skyler, uh 86 00:04:17,279 --> 00:04:20,680 Speaker 5: Padre a pretty clear commentary out of the new administration 87 00:04:20,760 --> 00:04:25,919 Speaker 5: about tariffs on Mexico and Canada. How do you play 88 00:04:25,920 --> 00:04:28,680 Speaker 5: that in the currency markets? Do you in fact trade that? 89 00:04:28,839 --> 00:04:30,280 Speaker 5: You try to set it aside? How do you think 90 00:04:30,320 --> 00:04:30,720 Speaker 5: about that? 91 00:04:32,160 --> 00:04:33,479 Speaker 1: I mean, I think you have to trade it. You 92 00:04:33,520 --> 00:04:36,839 Speaker 1: have to seriously take these threats. Unto consideration, Canada and 93 00:04:36,920 --> 00:04:39,839 Speaker 1: Mexico are very exposed to the US in a relative way. 94 00:04:39,920 --> 00:04:42,599 Speaker 1: So seventy five percent of Canadian exports go to the US. 95 00:04:42,640 --> 00:04:46,279 Speaker 1: It's not recipiable by any means, and most of Canadian 96 00:04:46,360 --> 00:04:48,520 Speaker 1: GDP are a significant portion of it at least is 97 00:04:48,560 --> 00:04:51,560 Speaker 1: generated by those exports. And so it's much more worrying 98 00:04:51,600 --> 00:04:53,800 Speaker 1: for those economies that you have the threat of tariffs 99 00:04:53,800 --> 00:04:56,920 Speaker 1: and that supersedes anything else that you have domestically. But domestically, 100 00:04:56,960 --> 00:04:59,839 Speaker 1: particularly in Canada, the backdrops not great easier. You're gonna 101 00:04:59,839 --> 00:05:03,240 Speaker 1: p period where parliament's burrowed. There's not a lot of 102 00:05:03,240 --> 00:05:06,560 Speaker 1: political legitimacy behind the current government, and that is an 103 00:05:06,600 --> 00:05:08,720 Speaker 1: opportunity for Trump, I think. 104 00:05:08,720 --> 00:05:14,120 Speaker 3: Skyler, what's the shadow out there for Dollar's certitude? Unfortunately, 105 00:05:14,240 --> 00:05:17,440 Speaker 3: Paul was away on a sabbatical and I was inflicted 106 00:05:17,520 --> 00:05:21,080 Speaker 3: Damien Sassaur upon me Skyler, and of course he's em 107 00:05:21,160 --> 00:05:25,880 Speaker 3: em em ei eio. What's the shadow out there in 108 00:05:26,000 --> 00:05:28,040 Speaker 3: em Barclays is worried about. 109 00:05:29,680 --> 00:05:32,440 Speaker 1: I think really the threat of hikes returning to the table. 110 00:05:32,560 --> 00:05:35,159 Speaker 1: It's something that we definitely need to consider in twenty 111 00:05:35,240 --> 00:05:38,159 Speaker 1: twenty five. If you look at the extory experience, there's 112 00:05:38,160 --> 00:05:40,880 Speaker 1: this natural tendency for the market to look for hikes 113 00:05:40,920 --> 00:05:43,400 Speaker 1: ahead of the end of the cutting cycle. And typically 114 00:05:43,480 --> 00:05:45,760 Speaker 1: in soft landings, the cutting cycle and the pause that 115 00:05:45,839 --> 00:05:49,440 Speaker 1: follows it's much shorter than in recessionary periods. So that 116 00:05:49,480 --> 00:05:51,359 Speaker 1: implies that in twenty twenty five we need to be 117 00:05:51,360 --> 00:05:53,200 Speaker 1: thinking about this. And if you look back at the 118 00:05:53,200 --> 00:05:56,520 Speaker 1: soft landings of ninety eight and ninety five, there was 119 00:05:56,560 --> 00:06:00,000 Speaker 1: some concern over energy inflation, but core inflation actually declined 120 00:06:00,120 --> 00:06:02,800 Speaker 1: in between the last cut and the next hike of 121 00:06:02,839 --> 00:06:06,200 Speaker 1: the next cycle. And so while the Fed's mandate is 122 00:06:06,200 --> 00:06:08,960 Speaker 1: more semetrical now there's more relative weight put on unemployment. 123 00:06:09,000 --> 00:06:10,880 Speaker 1: I think if you had that comeback to the fore 124 00:06:10,960 --> 00:06:13,360 Speaker 1: and certainly it's something markets are thinking about, that would 125 00:06:13,360 --> 00:06:14,080 Speaker 1: be very negative. 126 00:06:14,080 --> 00:06:16,240 Speaker 3: Free Scott I got a run on breaking news this 127 00:06:16,279 --> 00:06:18,880 Speaker 3: has been great. Don't be a stranger, Skyler. If you're 128 00:06:19,040 --> 00:06:23,320 Speaker 3: in New York, we have to do an extended Skyler 129 00:06:23,440 --> 00:06:28,480 Speaker 3: Montgomery coning interview FX strategist with Berkley. Thank you so much, Skyler. 130 00:06:34,400 --> 00:06:38,120 Speaker 2: You're listening to the Bloomberg Surveillance podcast. Catch US Live 131 00:06:38,200 --> 00:06:41,520 Speaker 2: weekday afternoons from seven to ten am Eastern Listen on 132 00:06:41,600 --> 00:06:44,920 Speaker 2: Apple CarPlay and Android Auto with the Bloomberg Business app, 133 00:06:45,160 --> 00:06:47,080 Speaker 2: or watch US Live on YouTube. 134 00:06:47,200 --> 00:06:50,680 Speaker 3: She was outstanding the last time she was on. She 135 00:06:50,720 --> 00:06:53,279 Speaker 3: has to put up with Brian Belski on a daily basis. 136 00:06:53,279 --> 00:06:58,400 Speaker 3: With Demo Capital Markets, their senior economist, Jennifer Lee joins us. Jennifer, 137 00:06:58,560 --> 00:07:02,080 Speaker 3: just open question. After the pageantry of the last three 138 00:07:02,240 --> 00:07:05,800 Speaker 3: four days, what are you writing about this morning? What 139 00:07:05,839 --> 00:07:09,960 Speaker 3: does a Jennifer Lee focus on a post inaugural Tuesday. 140 00:07:11,080 --> 00:07:12,920 Speaker 6: Well, good morning, and thank you very much for having 141 00:07:12,960 --> 00:07:16,480 Speaker 6: me on. And I still love mister Belski. This morning 142 00:07:16,600 --> 00:07:18,600 Speaker 6: was the focus. All the focus was on, of course, 143 00:07:18,640 --> 00:07:22,680 Speaker 6: the US dollar index and the volatility in the currency market, 144 00:07:23,480 --> 00:07:25,920 Speaker 6: and that was in sharp display. You know, of course 145 00:07:25,960 --> 00:07:30,840 Speaker 6: after the shotgun comments that he was made almost off handish, 146 00:07:30,880 --> 00:07:32,840 Speaker 6: you know, I was sort of wondering last night, you know, 147 00:07:33,000 --> 00:07:35,559 Speaker 6: would he had brought up tariffs if he wasn't asked, 148 00:07:35,600 --> 00:07:39,160 Speaker 6: you know, legitimate question obviously, So you know, and I 149 00:07:39,240 --> 00:07:41,080 Speaker 6: was talking to myself and I was thinking, why was 150 00:07:41,080 --> 00:07:44,200 Speaker 6: I surprised? You know, you know, he said he's doing 151 00:07:44,200 --> 00:07:46,400 Speaker 6: everything that he said he was going to do during 152 00:07:46,400 --> 00:07:49,040 Speaker 6: the campaign. So you know, this shouldn't come as a shot. 153 00:07:49,080 --> 00:07:50,360 Speaker 6: You know, it's just whether or not it's going to 154 00:07:50,400 --> 00:07:53,240 Speaker 6: come to fruition. And that's anyone's guess at this point. 155 00:07:53,320 --> 00:07:56,720 Speaker 3: What will Canada, dude is, does the Bank of Montreal 156 00:07:57,440 --> 00:07:59,400 Speaker 3: have Well, first of all, does the Bank of Montreal 157 00:07:59,400 --> 00:08:03,080 Speaker 3: have any side whether the Canadians can outlast the Bruins. 158 00:08:03,120 --> 00:08:04,680 Speaker 3: I mean we'll have to say I haven't said that 159 00:08:04,720 --> 00:08:08,239 Speaker 3: in like eight years. But Jennifer Lee, how will Canada 160 00:08:08,440 --> 00:08:13,120 Speaker 3: respond to tariffs from America? Do you have any perspective 161 00:08:13,160 --> 00:08:15,000 Speaker 3: there from the Bank of Montreal Hall. 162 00:08:16,160 --> 00:08:18,440 Speaker 6: So, you know, there's it's this is more you're coming 163 00:08:18,480 --> 00:08:21,480 Speaker 6: from the political side. You know, all the provinces have 164 00:08:21,760 --> 00:08:24,560 Speaker 6: gotten together and all but one has you know, there 165 00:08:24,600 --> 00:08:29,280 Speaker 6: everyone's talking about retaliation and and having also targeted TIFFs 166 00:08:29,280 --> 00:08:33,040 Speaker 6: as well on us on US products. You know, again, 167 00:08:33,120 --> 00:08:34,720 Speaker 6: it's you know, we're gonna have to see how this 168 00:08:34,800 --> 00:08:38,400 Speaker 6: plays out. It's all about the art of negotiation, you know, 169 00:08:38,440 --> 00:08:42,240 Speaker 6: as President Trump is always talking about again, I don't know, 170 00:08:42,320 --> 00:08:44,320 Speaker 6: I'm not sure why whether or not we're going to 171 00:08:44,320 --> 00:08:47,520 Speaker 6: see from the US side of things, twenty five percent 172 00:08:47,559 --> 00:08:51,880 Speaker 6: tariffs on all you are, all Canadian products? You know, 173 00:08:51,880 --> 00:08:54,000 Speaker 6: I call it like the W five W five right, 174 00:08:54,080 --> 00:08:55,960 Speaker 6: like the who? You know we're talking right now about 175 00:08:56,000 --> 00:08:59,040 Speaker 6: Canada and Mexico. When when will this happen you know 176 00:08:59,280 --> 00:09:03,480 Speaker 6: first a hard date or are we just going to 177 00:09:03,480 --> 00:09:05,679 Speaker 6: talk about it first? Is just throwing it out there 178 00:09:05,720 --> 00:09:08,160 Speaker 6: as a possibility, you know, the ware of this. 179 00:09:08,080 --> 00:09:08,720 Speaker 7: Like the who? 180 00:09:09,960 --> 00:09:13,160 Speaker 6: And how is this going to play out? Especially again, 181 00:09:13,480 --> 00:09:16,760 Speaker 6: will there be a lengthy period of negotiations? And are 182 00:09:16,760 --> 00:09:19,040 Speaker 6: we targeting every single thing? Are we only looking at 183 00:09:20,320 --> 00:09:22,800 Speaker 6: or sorry, are we looking at all Canadian products? Or 184 00:09:22,840 --> 00:09:25,520 Speaker 6: are we targeting certain ones only? And these are all 185 00:09:25,600 --> 00:09:27,800 Speaker 6: questions that you need to be answered before we can 186 00:09:27,800 --> 00:09:29,120 Speaker 6: figure out what we are going to do. 187 00:09:29,320 --> 00:09:33,760 Speaker 3: Good Morning out on YouTube from London, Ontarios, which is 188 00:09:33,800 --> 00:09:38,880 Speaker 3: the absolute speaking as an ugly American is the absolute 189 00:09:39,160 --> 00:09:43,320 Speaker 3: epicenter of good ice hockey and also exports to the 190 00:09:43,440 --> 00:09:44,920 Speaker 3: United States exports. 191 00:09:45,320 --> 00:09:48,720 Speaker 5: So, Jennifer, you're based in Toronto there, what's the feeling 192 00:09:49,280 --> 00:09:53,480 Speaker 5: in Canada in Toronto about maybe some of what you 193 00:09:53,520 --> 00:09:55,400 Speaker 5: guys can do, what Canadians can do in terms of 194 00:09:55,880 --> 00:09:58,559 Speaker 5: on tariffs on your side. 195 00:09:58,880 --> 00:10:02,319 Speaker 6: So it's overall, you know, obviously it's a feeling of unease. 196 00:10:03,000 --> 00:10:06,600 Speaker 6: You know, this is something that you know, nobody wants obviously. Uh, 197 00:10:06,679 --> 00:10:09,360 Speaker 6: the US is the destination of seventy five percent of 198 00:10:09,400 --> 00:10:13,240 Speaker 6: our exports, and we import most of our imports, you know, 199 00:10:13,400 --> 00:10:16,480 Speaker 6: come from the US as well, and from the US. 200 00:10:16,520 --> 00:10:19,120 Speaker 6: I mean that most of the US exports head to 201 00:10:19,240 --> 00:10:22,120 Speaker 6: both Mexico and Canada. So this is like something that 202 00:10:22,160 --> 00:10:24,640 Speaker 6: you know that is not something that we would relish. 203 00:10:25,400 --> 00:10:28,240 Speaker 6: But uh, in terms of preparation, I don't know if 204 00:10:28,240 --> 00:10:30,760 Speaker 6: there is a set plan right now, but you know, 205 00:10:30,920 --> 00:10:34,000 Speaker 6: almost you know, just being prepared for much slower growth 206 00:10:34,000 --> 00:10:35,959 Speaker 6: than what we have pencils in right now. We've got 207 00:10:36,080 --> 00:10:38,800 Speaker 6: just under two percent pencils in for twenty twenty five 208 00:10:38,880 --> 00:10:42,319 Speaker 6: GDP growth for Canada this year, and of course that 209 00:10:42,360 --> 00:10:47,400 Speaker 6: could be potentially erased if we launch into a protracted 210 00:10:47,440 --> 00:10:49,520 Speaker 6: trade war with the US. And again it will depend 211 00:10:49,559 --> 00:10:52,200 Speaker 6: on what products are targeted at? What you know, is 212 00:10:52,240 --> 00:10:53,960 Speaker 6: it going to be twenty five percent for a long 213 00:10:54,000 --> 00:10:56,480 Speaker 6: long time. You know, there are a lot of uncoan 214 00:10:56,520 --> 00:10:58,280 Speaker 6: answered questions, so we don't know how this is going 215 00:10:58,280 --> 00:11:00,440 Speaker 6: to play. Oh, there's so much uncertainty. And this is 216 00:11:00,440 --> 00:11:02,480 Speaker 6: what also makes by the way, if I just segue, 217 00:11:03,000 --> 00:11:04,679 Speaker 6: this also makes you know, the jobs for not only 218 00:11:04,720 --> 00:11:07,680 Speaker 6: economists very difficult, but it makes jobs for central makers 219 00:11:07,720 --> 00:11:09,720 Speaker 6: extremely difficult as well. You know, whether or not they're 220 00:11:09,720 --> 00:11:11,400 Speaker 6: going to tighten or they're going to hold and they're 221 00:11:11,400 --> 00:11:13,560 Speaker 6: going to cut. You know, all things are on the 222 00:11:13,559 --> 00:11:14,400 Speaker 6: table right now. 223 00:11:15,080 --> 00:11:17,160 Speaker 5: So I guess the two of the themes coming out 224 00:11:17,160 --> 00:11:21,400 Speaker 5: of President Trump yesterday were migration policy. Immigration policy and 225 00:11:21,440 --> 00:11:25,920 Speaker 5: the tariffs, both some economists say could be quite inflationary. 226 00:11:26,200 --> 00:11:28,200 Speaker 5: How do you did you hear anything yesterday that maybe 227 00:11:28,280 --> 00:11:30,800 Speaker 5: change your thoughts of US inflation outlook? 228 00:11:32,080 --> 00:11:34,880 Speaker 6: No, just again, there is some relief, you know, obviously 229 00:11:35,440 --> 00:11:38,000 Speaker 6: during his noginal speech when he did not mention teriffs 230 00:11:38,080 --> 00:11:40,400 Speaker 6: and so, but at the same time, you know, we 231 00:11:40,760 --> 00:11:44,079 Speaker 6: do know that terriffs are inflationary. It's going to be 232 00:11:44,080 --> 00:11:45,960 Speaker 6: the US importers that are going to be bearing the 233 00:11:46,000 --> 00:11:49,200 Speaker 6: costs initially, and then they're going to probably pass it 234 00:11:49,240 --> 00:11:53,040 Speaker 6: on to the consumers. In terms of the immigration and 235 00:11:53,240 --> 00:11:55,480 Speaker 6: the migration, you know, first, I mean obviously it's going 236 00:11:55,520 --> 00:11:58,079 Speaker 6: to be targeting a legal you know, the illegal migrants, 237 00:11:58,240 --> 00:12:01,800 Speaker 6: the criminals, you know, but in terms of broader how 238 00:12:01,880 --> 00:12:03,520 Speaker 6: much further he's going to go. You know, it's going 239 00:12:03,559 --> 00:12:06,200 Speaker 6: to have inflationary impact on the because of the labor market, 240 00:12:06,559 --> 00:12:11,440 Speaker 6: and we know how dependent US agricultural sector is on 241 00:12:11,559 --> 00:12:17,959 Speaker 6: illegal citizens and construction as well. So we see those people, 242 00:12:17,960 --> 00:12:21,000 Speaker 6: those workers unable to work or not able to work. 243 00:12:21,520 --> 00:12:23,280 Speaker 6: You know, that could put a lot more tightness on 244 00:12:23,320 --> 00:12:26,560 Speaker 6: the labor market. Means higher wages, it means higher inflation. 245 00:12:26,840 --> 00:12:29,079 Speaker 3: Jennifer, thank you so much. Jennifer Lee with a brief 246 00:12:29,080 --> 00:12:32,680 Speaker 3: there on terraff So with unique perspective on Canada from 247 00:12:32,679 --> 00:12:34,560 Speaker 3: Beama Capital Marcus. 248 00:12:34,720 --> 00:12:38,560 Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday 249 00:12:38,640 --> 00:12:41,440 Speaker 2: starting at seven am Eastern on Apple car Play and 250 00:12:41,480 --> 00:12:44,120 Speaker 2: the Android Auto with the Bloomberg Business app. You can 251 00:12:44,160 --> 00:12:47,360 Speaker 2: also listen live on Amazon Alexa from our flagship New 252 00:12:47,440 --> 00:12:51,400 Speaker 2: York station, Just Say Alexa played Bloomberg eleven thirty. 253 00:12:51,320 --> 00:12:54,439 Speaker 3: Our ecumenical tradition is to get as long a conversation 254 00:12:54,480 --> 00:12:58,160 Speaker 3: as we can with Laurie Kelvissina. She read Graham, Dot 255 00:12:58,160 --> 00:13:01,160 Speaker 3: and Coddle on the law of the University of Virginia 256 00:13:01,640 --> 00:13:06,960 Speaker 3: ages ago. Is security analysis dead? Is everybody turned into 257 00:13:07,000 --> 00:13:07,880 Speaker 3: a strategist? 258 00:13:08,920 --> 00:13:10,200 Speaker 8: Well, I think there are a lot of people who 259 00:13:10,280 --> 00:13:12,360 Speaker 8: try to do my job for me, and so so, 260 00:13:12,840 --> 00:13:15,080 Speaker 8: you know, maybe to some extent, but look, I think 261 00:13:15,080 --> 00:13:17,360 Speaker 8: we are in sort of a more macro driven world 262 00:13:17,960 --> 00:13:19,400 Speaker 8: at this point in time, and I think this is 263 00:13:19,480 --> 00:13:21,400 Speaker 8: going to be very much a year where the top 264 00:13:21,440 --> 00:13:24,239 Speaker 8: dawn tailwinds are informing a lot of decisions. 265 00:13:24,679 --> 00:13:28,960 Speaker 3: From where you are. Is it an active management stock 266 00:13:29,040 --> 00:13:32,520 Speaker 3: selection year, particularly in your expertise of mid cap or 267 00:13:32,559 --> 00:13:34,920 Speaker 3: small cap or is it an index year? 268 00:13:35,040 --> 00:13:37,880 Speaker 8: Well, I'll tell you what's fascinating Tom. And we often 269 00:13:37,920 --> 00:13:41,000 Speaker 8: you will see funds flows turn in January, but we 270 00:13:41,080 --> 00:13:43,880 Speaker 8: actually saw back in December we started to see some 271 00:13:44,000 --> 00:13:46,840 Speaker 8: inflows to actively managed funds in both small cap and 272 00:13:46,920 --> 00:13:50,240 Speaker 8: large cap US equity funds emerged. Now that has occurred 273 00:13:50,280 --> 00:13:55,040 Speaker 8: alongside passive outflows, so that hasn't sort of taken you 274 00:13:55,080 --> 00:13:57,840 Speaker 8: into negative territory. And large cap you have seen overall 275 00:13:57,880 --> 00:14:00,720 Speaker 8: negative flows in small cap but it's really really interesting 276 00:14:00,760 --> 00:14:03,280 Speaker 8: to see that divergence so far. The people who buy 277 00:14:03,320 --> 00:14:05,560 Speaker 8: funds seem to be betting more on the stock pickers 278 00:14:05,640 --> 00:14:06,000 Speaker 8: right now. 279 00:14:06,960 --> 00:14:09,520 Speaker 5: We had it the inauguration yesterday. 280 00:14:09,960 --> 00:14:11,280 Speaker 4: Did you guys change. 281 00:14:10,960 --> 00:14:14,840 Speaker 5: Your outlook for risk assets for stocks based upon this 282 00:14:14,920 --> 00:14:18,840 Speaker 5: new administration, a new Congress being seated. A lot of 283 00:14:19,080 --> 00:14:22,080 Speaker 5: people feel like animal spirits on the economic front. 284 00:14:22,200 --> 00:14:23,440 Speaker 4: Maybe you're being loosened a little bit. 285 00:14:23,800 --> 00:14:25,640 Speaker 8: Yeah, you know, I think what we did when we 286 00:14:25,640 --> 00:14:28,080 Speaker 8: put our year ahead outlook together, and we did this 287 00:14:28,120 --> 00:14:31,160 Speaker 8: around Thanksgiving, so we already knew the outcome, and we 288 00:14:31,200 --> 00:14:33,760 Speaker 8: had been sort of updating our models heading into that 289 00:14:33,880 --> 00:14:36,360 Speaker 8: well ahead of the November election. But what we did 290 00:14:36,400 --> 00:14:38,200 Speaker 8: do with one of our sort of five sets of 291 00:14:38,240 --> 00:14:41,080 Speaker 8: back tests, we were able to more discreetly model in 292 00:14:41,120 --> 00:14:44,400 Speaker 8: the political environment. So our political back test, actually I 293 00:14:44,400 --> 00:14:46,800 Speaker 8: think it's like around an eleven to twelve percent type 294 00:14:46,800 --> 00:14:49,760 Speaker 8: annual return we added into to the targeting mix, but 295 00:14:49,760 --> 00:14:53,160 Speaker 8: that's the return you typically see when Republicans run the 296 00:14:53,160 --> 00:14:56,160 Speaker 8: White House, the Senate, and the House, and so we 297 00:14:56,240 --> 00:14:58,360 Speaker 8: thought that sort of did a good job of capturing 298 00:14:58,360 --> 00:15:02,160 Speaker 8: the idea of a better animal spirit, environment, better vibes, 299 00:15:02,200 --> 00:15:03,840 Speaker 8: and a more kind of business friendly climate. 300 00:15:04,440 --> 00:15:07,280 Speaker 5: So how do we think about it for twenty twenty five. 301 00:15:07,400 --> 00:15:09,320 Speaker 5: One of the areas that I feel like there might 302 00:15:09,360 --> 00:15:11,960 Speaker 5: be a risk to the market is maybe even more 303 00:15:12,000 --> 00:15:13,880 Speaker 5: dependent than usual earnings. 304 00:15:13,920 --> 00:15:14,680 Speaker 4: Earnings really need to. 305 00:15:14,680 --> 00:15:16,080 Speaker 5: Come through because I don't think the Fed's going to 306 00:15:16,120 --> 00:15:17,880 Speaker 5: do a whole lot for us in twenty twenty five. 307 00:15:18,040 --> 00:15:20,480 Speaker 5: What's your concern or confidence in the earnings out look? 308 00:15:20,600 --> 00:15:21,880 Speaker 4: Well, so, look, I've been lucky. 309 00:15:21,880 --> 00:15:24,360 Speaker 8: The rate strategist that I work with has been calling 310 00:15:24,400 --> 00:15:26,520 Speaker 8: for an early end to the cutting cycle for about 311 00:15:26,560 --> 00:15:28,800 Speaker 8: six months now, and so he did finally just pull 312 00:15:28,840 --> 00:15:30,840 Speaker 8: out the January cut. But the January cut was the 313 00:15:30,880 --> 00:15:32,960 Speaker 8: only one he had in this year for quite some time. 314 00:15:33,480 --> 00:15:35,840 Speaker 8: So what that translated to for us is in our 315 00:15:35,920 --> 00:15:38,080 Speaker 8: valuation model. So this is another one of the five 316 00:15:38,120 --> 00:15:40,040 Speaker 8: things that goes into our target mix as we come 317 00:15:40,120 --> 00:15:42,400 Speaker 8: up with a target pe and look at that in 318 00:15:42,440 --> 00:15:44,840 Speaker 8: the context of our earnings forecast and then get a 319 00:15:44,840 --> 00:15:47,160 Speaker 8: fair value for the S and p SO bottom line. 320 00:15:47,160 --> 00:15:50,040 Speaker 8: Because of his FED view, he also was pretty aggressive on. 321 00:15:50,040 --> 00:15:50,920 Speaker 4: The ten year yield. 322 00:15:51,560 --> 00:15:54,320 Speaker 8: We haven't really had any multiple expansion baked into our outlook, 323 00:15:54,360 --> 00:15:55,600 Speaker 8: and I think that's the right answer. 324 00:15:55,800 --> 00:16:01,040 Speaker 3: Barn kelviseinor with this folks with RBC thrilled. She's here today, conversation. 325 00:16:01,520 --> 00:16:04,720 Speaker 3: Is a MidCap still a MidCap? Lori Kelvicina, I got 326 00:16:04,720 --> 00:16:10,360 Speaker 3: off the Vanguard platform, Pallunteer, Amphanol, Well Towered, Motorola, Constellation. 327 00:16:10,920 --> 00:16:13,920 Speaker 3: In a bull market, if those market caps go up, 328 00:16:14,280 --> 00:16:17,040 Speaker 3: do the mid capies become more large capies? 329 00:16:17,400 --> 00:16:17,800 Speaker 4: I think so? 330 00:16:17,960 --> 00:16:20,760 Speaker 8: And you look, I've covered small and mccap stocks for 331 00:16:20,800 --> 00:16:24,880 Speaker 8: a long time. What's always been apparent to me is 332 00:16:24,920 --> 00:16:28,080 Speaker 8: that mid cap managers don't really live and die by 333 00:16:28,080 --> 00:16:30,400 Speaker 8: their benchmarks the way that say small cap managers do 334 00:16:30,520 --> 00:16:32,760 Speaker 8: or large cap managers do. They tend to be sort 335 00:16:32,800 --> 00:16:35,600 Speaker 8: of benchmark aware, but don't really get caught up in 336 00:16:35,640 --> 00:16:36,880 Speaker 8: these same market cap bands. 337 00:16:37,080 --> 00:16:39,800 Speaker 3: So how do you buy midcaps? I mean, you're a strategist. 338 00:16:39,840 --> 00:16:42,120 Speaker 3: I get that. I don't want to ask you individual stocks. 339 00:16:42,480 --> 00:16:44,840 Speaker 3: But then are you looking at free cash flow? Is 340 00:16:44,880 --> 00:16:47,360 Speaker 3: the is it revenue growth? What's the game for you? 341 00:16:47,680 --> 00:16:49,400 Speaker 8: I tend to not look at free cash flow just 342 00:16:49,400 --> 00:16:51,600 Speaker 8: because I find databases don't do a good job of 343 00:16:51,640 --> 00:16:54,479 Speaker 8: allowing me to model. It's very lumpy data. The forecasts 344 00:16:54,480 --> 00:16:56,880 Speaker 8: are very you know, kind of messy. Pms love to 345 00:16:56,920 --> 00:16:58,760 Speaker 8: look at it, right, It's something they live and die by, 346 00:16:58,800 --> 00:17:00,640 Speaker 8: but as a macro person, it does don't really work. 347 00:17:01,040 --> 00:17:02,680 Speaker 8: I think we tend to define it in terms of 348 00:17:02,760 --> 00:17:04,359 Speaker 8: market cap. I think if you want to go from 349 00:17:04,359 --> 00:17:06,639 Speaker 8: like maybe ten up to fifty, that's a pretty safe, 350 00:17:06,760 --> 00:17:08,600 Speaker 8: you know, kind of range that I think most people 351 00:17:08,640 --> 00:17:11,119 Speaker 8: can live in. But some people will tell you it 352 00:17:11,160 --> 00:17:13,080 Speaker 8: starts a little lower, and a lot of people will 353 00:17:13,160 --> 00:17:15,879 Speaker 8: let those names ride ride and take them a bit higher. 354 00:17:16,640 --> 00:17:19,679 Speaker 5: Leadership in a market, Lorie, it just seems like, as 355 00:17:19,720 --> 00:17:22,920 Speaker 5: long as we can remember, it's been technology, technology, technology 356 00:17:23,000 --> 00:17:27,359 Speaker 5: driving these markets higher. A do you believe in market 357 00:17:27,400 --> 00:17:30,280 Speaker 5: leadership and if so, do we have tex still as 358 00:17:30,280 --> 00:17:31,119 Speaker 5: a leader in this market? 359 00:17:31,240 --> 00:17:33,760 Speaker 8: Well, look, I'll tell you, Paul, I've been in the 360 00:17:33,760 --> 00:17:36,280 Speaker 8: broadening camp, but I would say, you know ya. 361 00:17:36,400 --> 00:17:38,439 Speaker 4: A centimeter, not by a mile. 362 00:17:39,160 --> 00:17:41,240 Speaker 8: I do think this broadening thesis has become one of 363 00:17:41,280 --> 00:17:44,720 Speaker 8: the most consensus things strategists have talked about coming into 364 00:17:44,720 --> 00:17:45,040 Speaker 8: the show. 365 00:17:45,080 --> 00:17:45,919 Speaker 3: Are you're observing it? 366 00:17:47,200 --> 00:17:49,280 Speaker 8: I mean you can see it to some extent, right, 367 00:17:49,320 --> 00:17:51,120 Speaker 8: But every time I have a weekly and every time 368 00:17:51,160 --> 00:17:53,480 Speaker 8: I update my charts right like one week I'm saying 369 00:17:53,480 --> 00:17:55,760 Speaker 8: growth is fighting back, and then another week I'm saying 370 00:17:55,800 --> 00:17:58,479 Speaker 8: the value finally looks like it's trying to assert itself. 371 00:17:58,480 --> 00:18:02,000 Speaker 8: So it's been very, very and I think there are 372 00:18:02,040 --> 00:18:05,320 Speaker 8: good reasons to rotate. I think you've got valuation problems 373 00:18:05,359 --> 00:18:07,919 Speaker 8: in the megacap growth names. I think you've got crowding problems, 374 00:18:07,920 --> 00:18:09,840 Speaker 8: and I think you give out decelerating earnings growth. And 375 00:18:09,880 --> 00:18:11,600 Speaker 8: I think there is an itch in this market among 376 00:18:11,680 --> 00:18:16,160 Speaker 8: pms to rotate. But relative pees of MAG seven versus 377 00:18:16,280 --> 00:18:19,480 Speaker 8: rest of market is a function. It's really tracking very 378 00:18:19,480 --> 00:18:23,480 Speaker 8: closely relative long term earnings growth dynamics, and MAG seven 379 00:18:23,520 --> 00:18:26,440 Speaker 8: earnings growth keeps surprising to the upside. So I keep 380 00:18:26,440 --> 00:18:28,760 Speaker 8: telling people, you know that the case for the rotation 381 00:18:29,480 --> 00:18:31,800 Speaker 8: it's there, But it feels like the rest of the 382 00:18:31,840 --> 00:18:34,200 Speaker 8: market is just whipping on its opportunity and just can't 383 00:18:34,200 --> 00:18:35,680 Speaker 8: reclaim that earnings leadership. 384 00:18:36,359 --> 00:18:38,800 Speaker 5: What are some of the sectors that screen well for 385 00:18:38,880 --> 00:18:40,679 Speaker 5: you guys these days going to I think. 386 00:18:40,560 --> 00:18:42,000 Speaker 4: Financial still has some room. 387 00:18:42,160 --> 00:18:44,120 Speaker 8: I don't think it has as much room as it did. 388 00:18:44,160 --> 00:18:46,520 Speaker 8: I think the capital markets names are getting expensive, but 389 00:18:46,560 --> 00:18:49,560 Speaker 8: the bank's insurance companies still look pretty good on valuation, 390 00:18:49,720 --> 00:18:53,720 Speaker 8: have good earnings revision trends, and I think financials in general, 391 00:18:53,800 --> 00:18:55,760 Speaker 8: you've got a lot of policy tailwinds. 392 00:18:55,840 --> 00:18:57,200 Speaker 4: You don't really have any headwinds. 393 00:18:57,920 --> 00:19:00,159 Speaker 8: COMM services looks really good, so you got a lot 394 00:19:00,200 --> 00:19:01,320 Speaker 8: of big tech type. 395 00:19:01,200 --> 00:19:01,880 Speaker 4: Names in there. 396 00:19:01,920 --> 00:19:06,720 Speaker 8: They're more consumer oriented. Again, I think more policy tailwinds 397 00:19:06,760 --> 00:19:10,200 Speaker 8: than headwinds. Good valuations, good revisions. We upgraded that one 398 00:19:10,240 --> 00:19:12,000 Speaker 8: back in December and got a lot of good feedback 399 00:19:12,400 --> 00:19:13,200 Speaker 8: from investors. 400 00:19:13,400 --> 00:19:16,560 Speaker 3: So this is great with Lori Calvalcino, folks, because she's 401 00:19:16,600 --> 00:19:20,080 Speaker 3: from a distance. On MAG seven, how do you perceive 402 00:19:20,240 --> 00:19:25,080 Speaker 3: MAG seven? When I see Delta Airlines surprise? Schwab today's surprise? 403 00:19:25,359 --> 00:19:27,600 Speaker 3: Why are they going to get surprises? So Mag seven 404 00:19:27,840 --> 00:19:30,480 Speaker 3: and everybody goes on their concentrated portfolio. 405 00:19:30,560 --> 00:19:32,879 Speaker 8: Way, what I've been seeing with the MAG seven if 406 00:19:32,880 --> 00:19:34,520 Speaker 8: I look back over the past year, is you know, 407 00:19:34,560 --> 00:19:36,800 Speaker 8: we'll kind of go into earnings, right, and the banks 408 00:19:36,840 --> 00:19:39,040 Speaker 8: come in and they have good numbers, and then you'll 409 00:19:39,040 --> 00:19:41,359 Speaker 8: get some of these other cyclical, kind of overlooked parts 410 00:19:41,400 --> 00:19:43,840 Speaker 8: of the market working, and then you might have like 411 00:19:43,880 --> 00:19:45,960 Speaker 8: one of these MAG seven names kind of stumble a 412 00:19:46,000 --> 00:19:47,879 Speaker 8: little bit and it feels like in the middle of 413 00:19:47,920 --> 00:19:50,240 Speaker 8: that reporting season, you're seeing the leadership shift and the 414 00:19:50,240 --> 00:19:52,520 Speaker 8: earnings dynamic shift. And then I feel like all the 415 00:19:52,560 --> 00:19:55,399 Speaker 8: worker bees around Wall Street go back after reporting season 416 00:19:55,480 --> 00:19:58,760 Speaker 8: winds down, you know, they go to conferences, they've had 417 00:19:58,760 --> 00:20:00,720 Speaker 8: all their callbacks, they go you know, on their bus 418 00:20:00,800 --> 00:20:04,000 Speaker 8: stores and things, and suddenly I noticed the mag seven 419 00:20:04,080 --> 00:20:05,359 Speaker 8: numbers start coming up again. 420 00:20:05,920 --> 00:20:07,960 Speaker 4: And so it feels like in. 421 00:20:07,880 --> 00:20:11,159 Speaker 8: The moment, you know, there's there's a reaction to fade it, 422 00:20:11,200 --> 00:20:13,360 Speaker 8: but when people really start to give it some serious 423 00:20:13,400 --> 00:20:16,439 Speaker 8: thought and reflect, the strength comes back. So it's a 424 00:20:16,520 --> 00:20:19,840 Speaker 8: really really odd dynamic to be fair, Tom and I've been. 425 00:20:19,800 --> 00:20:22,400 Speaker 5: Talking a lot about ETFs. How does that impact your 426 00:20:22,440 --> 00:20:24,320 Speaker 5: world as a strategist, Like when I was on the 427 00:20:24,359 --> 00:20:27,879 Speaker 5: south side, those mutual funds and hedge funds, Yeah, those. 428 00:20:27,760 --> 00:20:28,440 Speaker 4: Are my clients. 429 00:20:28,480 --> 00:20:32,520 Speaker 5: Do I now go see ETF managers set and I. 430 00:20:32,600 --> 00:20:35,200 Speaker 4: See ETF managers per se. But a lot of my. 431 00:20:35,240 --> 00:20:39,600 Speaker 8: Hedge funds will use ETFs or ETF like instruments. And 432 00:20:39,600 --> 00:20:41,720 Speaker 8: then if you think about sort of the not so 433 00:20:41,800 --> 00:20:44,800 Speaker 8: much the actively managed funds, occasionally maybe they might you know, 434 00:20:44,840 --> 00:20:47,320 Speaker 8: buy something like a biotech ETF to put cash in, 435 00:20:47,400 --> 00:20:49,960 Speaker 8: or a small cap manager might buy an IWM, you 436 00:20:50,000 --> 00:20:53,280 Speaker 8: know type instrument to to put cash in. That's very 437 00:20:53,359 --> 00:20:56,840 Speaker 8: rare and few and far between. But generally, you know, 438 00:20:56,880 --> 00:20:59,280 Speaker 8: you'll see sort of the wealth management community, you know, 439 00:20:59,440 --> 00:21:01,800 Speaker 8: does sort of defer to ETF so they care a 440 00:21:01,880 --> 00:21:04,840 Speaker 8: lot about sector calls. I think that, you know, sort 441 00:21:04,880 --> 00:21:09,000 Speaker 8: of wealth management type money moves a little slower. You 442 00:21:09,040 --> 00:21:11,520 Speaker 8: see big reallocations at the beginning of the year. But 443 00:21:11,560 --> 00:21:13,159 Speaker 8: the hedge funds, you know, if I think about my 444 00:21:13,240 --> 00:21:17,200 Speaker 8: small caps, they've been hedge funds have been dialing up 445 00:21:17,240 --> 00:21:20,119 Speaker 8: and down their bolishness on small caps when they've been 446 00:21:20,119 --> 00:21:20,800 Speaker 8: dialing up and. 447 00:21:20,720 --> 00:21:22,120 Speaker 4: Down their red dubbishness. 448 00:21:22,400 --> 00:21:24,560 Speaker 8: And then to some extent, the election morphed into those 449 00:21:24,600 --> 00:21:26,399 Speaker 8: trades at the end of last year. So they're playing. 450 00:21:26,560 --> 00:21:28,680 Speaker 8: It's not they're not the only instruments they're playing, but 451 00:21:28,720 --> 00:21:29,240 Speaker 8: they did an. 452 00:21:29,200 --> 00:21:29,800 Speaker 4: Awful lot of it. 453 00:21:29,920 --> 00:21:32,679 Speaker 3: Are we going to see roll ups? Nobody in the 454 00:21:32,720 --> 00:21:36,080 Speaker 3: room is is old enough to remember this, but there's 455 00:21:36,119 --> 00:21:38,520 Speaker 3: like every eight or nine years at the old days, 456 00:21:39,280 --> 00:21:42,080 Speaker 3: industries would go through this mental fake m and a 457 00:21:42,320 --> 00:21:46,080 Speaker 3: phrase where everything would roll into one company. Are roll 458 00:21:46,160 --> 00:21:48,440 Speaker 3: ups debt or is that going to be the catalyst 459 00:21:48,800 --> 00:21:50,080 Speaker 3: for the calvaccino world. 460 00:21:50,080 --> 00:21:52,960 Speaker 4: You know, I honestly from my small cap pms. 461 00:21:52,680 --> 00:21:54,840 Speaker 8: Are a great read on this because you know, they 462 00:21:55,160 --> 00:21:57,439 Speaker 8: want their companies right to be bought and then they 463 00:21:57,480 --> 00:22:00,239 Speaker 8: also want new interesting supply to come into so they 464 00:22:00,240 --> 00:22:01,960 Speaker 8: have their ear to the ground on this issue. I've 465 00:22:01,960 --> 00:22:04,200 Speaker 8: not been hearing from them so much about roll ups. 466 00:22:04,480 --> 00:22:07,520 Speaker 8: I've been hearing more interest from them on divestitures, like 467 00:22:07,560 --> 00:22:10,000 Speaker 8: with the bigger cap companies spinning some things off that 468 00:22:10,080 --> 00:22:12,440 Speaker 8: might prove to be you know, sort of interesting opportunities 469 00:22:12,440 --> 00:22:12,760 Speaker 8: for them. 470 00:22:12,880 --> 00:22:14,720 Speaker 4: That's where I've heard more conversation. 471 00:22:14,840 --> 00:22:18,680 Speaker 3: To be honest, interesting you expected that's that's called a bolton. 472 00:22:18,880 --> 00:22:19,600 Speaker 3: I know I learned that. 473 00:22:19,720 --> 00:22:20,560 Speaker 4: Okay, very good. 474 00:22:20,640 --> 00:22:22,600 Speaker 3: I read the Duke Business Journal this week. 475 00:22:23,920 --> 00:22:27,920 Speaker 5: Do you expect bigger, better, more IPO activity this year? 476 00:22:28,119 --> 00:22:29,760 Speaker 5: I've heard the Jamie Diamonds of the world and Brian 477 00:22:29,800 --> 00:22:32,199 Speaker 5: Mornian's talking about that. Do you expect to see that? 478 00:22:32,240 --> 00:22:33,879 Speaker 5: I mean, you've got your ear to the ground. 479 00:22:34,040 --> 00:22:34,240 Speaker 4: Yeah. 480 00:22:34,240 --> 00:22:37,600 Speaker 8: And look, I've been reading through earnings call transcripts my 481 00:22:37,640 --> 00:22:39,800 Speaker 8: team and I and last week it was mostly financials 482 00:22:39,840 --> 00:22:42,200 Speaker 8: and we're certainly seeing you know, a lot of optimism 483 00:22:42,400 --> 00:22:45,399 Speaker 8: around both I POS and M and A, and I 484 00:22:45,640 --> 00:22:47,680 Speaker 8: do think there's some pent up demand. I mean, they're 485 00:22:47,720 --> 00:22:50,199 Speaker 8: talking about the pipelines. There were some indications in the 486 00:22:50,200 --> 00:22:52,760 Speaker 8: commentary last week that things are getting started, and certainly 487 00:22:52,880 --> 00:22:54,840 Speaker 8: we all see the announcements, you know when we come. 488 00:22:55,080 --> 00:22:57,400 Speaker 3: But do you have to I interrupt, but we're out 489 00:22:57,440 --> 00:22:59,600 Speaker 3: of time? Do you have to do you have to 490 00:22:59,680 --> 00:23:05,000 Speaker 3: ip anymore? Can't you liquefy and make gajillions? I think, 491 00:23:05,240 --> 00:23:08,680 Speaker 3: like Paul Sweeney, gagillions by not ipo ing now. 492 00:23:08,760 --> 00:23:10,639 Speaker 8: Well, I think there are alternatives, to be sure, and 493 00:23:10,680 --> 00:23:13,800 Speaker 8: I think that's one of the things small cap managers struggle. 494 00:23:13,440 --> 00:23:15,600 Speaker 4: With is that, you know, sort of the get access 495 00:23:15,680 --> 00:23:15,919 Speaker 4: well the. 496 00:23:16,200 --> 00:23:18,800 Speaker 8: Lack of size appropriate IPOs right, and that a lot 497 00:23:18,840 --> 00:23:20,600 Speaker 8: of things that come out are too big for them 498 00:23:20,640 --> 00:23:20,960 Speaker 8: to buy. 499 00:23:20,960 --> 00:23:21,840 Speaker 4: Again, going back to. 500 00:23:21,760 --> 00:23:24,399 Speaker 8: Our mid cap or large cap type discussions, look, I 501 00:23:24,640 --> 00:23:28,159 Speaker 8: think that certainly the activity has been heralded or you know, 502 00:23:28,280 --> 00:23:32,720 Speaker 8: anticipated I'm sort of telling people I'm optimistic, but they've 503 00:23:32,720 --> 00:23:34,359 Speaker 8: got really until too Q to pull it off, or 504 00:23:34,400 --> 00:23:36,080 Speaker 8: people are going to be skeptical it's never coming. 505 00:23:36,200 --> 00:23:40,320 Speaker 3: This is great, This is great. Laura Calvinsena our extended interview. 506 00:23:40,640 --> 00:23:46,120 Speaker 3: It's nine o'clock ours. She's the RBC Capital Markets. 507 00:23:51,640 --> 00:23:55,520 Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday 508 00:23:55,600 --> 00:23:58,160 Speaker 2: starting at seven a m. Eastern an Apple car Play 509 00:23:58,280 --> 00:24:01,080 Speaker 2: and Android Auto with the Bloomberg Business app. You can 510 00:24:01,119 --> 00:24:04,680 Speaker 2: also watch us live every weekday on YouTube and always 511 00:24:04,760 --> 00:24:06,000 Speaker 2: on the Bloomberg Terminal. 512 00:24:06,280 --> 00:24:10,399 Speaker 3: The food in Davos, Happy Valley, this is really not reported, 513 00:24:11,440 --> 00:24:15,400 Speaker 3: is horrific. The great the great reason. The JP Morgan 514 00:24:16,200 --> 00:24:20,760 Speaker 3: Cocktail Hour, which is usually Thursday, now maybe it's Wednesday. 515 00:24:21,560 --> 00:24:24,560 Speaker 3: The JP Moore they bring in the horse divorce from 516 00:24:24,640 --> 00:24:28,159 Speaker 3: like London or Milan or whatever. The only place you 517 00:24:28,200 --> 00:24:33,359 Speaker 3: can get a decent dinner in Davos is the Postly Restaurant. 518 00:24:34,119 --> 00:24:37,480 Speaker 3: And I mean the hitters. This is where they stay. 519 00:24:37,600 --> 00:24:42,080 Speaker 3: It's the Morrisani Schweizerkoff It's like the hotel because you 520 00:24:42,080 --> 00:24:45,720 Speaker 3: can actually have decent food and not leftover cold pizza. 521 00:24:46,080 --> 00:24:49,679 Speaker 3: He's never had leftover cold pizza in Davos. Joining us. 522 00:24:49,760 --> 00:24:53,560 Speaker 3: Dan Tanaba from the Morrisani This Morning of course with 523 00:24:53,800 --> 00:24:58,000 Speaker 3: Oliver Wyman is well, let's cut to it. Dan Tanabam, 524 00:24:58,160 --> 00:25:01,280 Speaker 3: the President will do a virtual with people like you. 525 00:25:01,440 --> 00:25:06,040 Speaker 3: Up Happy Valley. What will they listen for from Donald Trump? 526 00:25:08,119 --> 00:25:12,560 Speaker 7: Well, Tom, I think people are wanting to hear more 527 00:25:12,680 --> 00:25:17,400 Speaker 7: specifics about how President Trump's trade policy and foreign policy 528 00:25:17,400 --> 00:25:20,200 Speaker 7: agenda will work out. We obviously have gotten a preview 529 00:25:20,600 --> 00:25:24,600 Speaker 7: over the last few weeks in his inaugural address yesterday 530 00:25:24,640 --> 00:25:27,399 Speaker 7: as well as the evening press conference. But I think 531 00:25:27,560 --> 00:25:30,040 Speaker 7: whether it's more of the same in terms of kind 532 00:25:30,040 --> 00:25:34,840 Speaker 7: of threats for kind of trade deals or anything new. 533 00:25:34,880 --> 00:25:38,280 Speaker 7: Maybe there's another country he wants to invade, But I 534 00:25:38,320 --> 00:25:42,600 Speaker 7: think there's certainly an air of pessimism until we understand 535 00:25:42,640 --> 00:25:45,680 Speaker 7: more specifics of how this policy was unfold. 536 00:25:45,960 --> 00:25:48,800 Speaker 3: You're double barreled at Oliver Wyman. You got the wonderful 537 00:25:48,880 --> 00:25:52,639 Speaker 3: Hugh vannsteinas well when you toured together. What are you 538 00:25:52,800 --> 00:25:57,920 Speaker 3: talking about about this new era of Trump in Europe? 539 00:25:58,040 --> 00:26:00,280 Speaker 3: And of course it's challenges with China. You know, what 540 00:26:00,280 --> 00:26:01,879 Speaker 3: do you and Hugh focus on? 541 00:26:03,240 --> 00:26:07,280 Speaker 7: And Hugh and I had lunch today, he sends his regards. 542 00:26:07,359 --> 00:26:11,440 Speaker 7: We're focused on really trying to understand how this new 543 00:26:11,480 --> 00:26:16,000 Speaker 7: world order unfolds. You've already seen the new Trump administration 544 00:26:16,160 --> 00:26:20,560 Speaker 7: threatened tariffs, You've seen retaliatory tariffs, threatened by some country, 545 00:26:20,920 --> 00:26:24,000 Speaker 7: and there's a lot of nations and companies that are 546 00:26:24,000 --> 00:26:28,159 Speaker 7: frankly worried about being collateral damaged. So really trying to 547 00:26:28,280 --> 00:26:31,840 Speaker 7: understand whether the unintended consequences of some of these policy 548 00:26:31,880 --> 00:26:34,240 Speaker 7: moves are really baked into the calculus. 549 00:26:35,359 --> 00:26:38,520 Speaker 5: So how do you feel. What's the feeling in Davos 550 00:26:38,600 --> 00:26:43,080 Speaker 5: about maybe just global trade going forward over the next 551 00:26:43,119 --> 00:26:48,159 Speaker 5: four years. Are people rethinking the near shoring, friendshoring, that 552 00:26:48,240 --> 00:26:48,760 Speaker 5: type of thing. 553 00:26:49,920 --> 00:26:52,680 Speaker 7: I think there's cautious optimism. I don't think there's any 554 00:26:52,920 --> 00:26:56,680 Speaker 7: immediate change in near shoring and friendshoring, but I think 555 00:26:56,760 --> 00:26:59,320 Speaker 7: certainly the posture and change from the Biden to the 556 00:26:59,320 --> 00:27:01,960 Speaker 7: Trump administry is a marked one in terms of how 557 00:27:02,000 --> 00:27:05,399 Speaker 7: trade related issues are settled. So I think there is, 558 00:27:05,800 --> 00:27:08,320 Speaker 7: you know, certainly a view that this administration is more 559 00:27:08,359 --> 00:27:11,800 Speaker 7: pro business. However, the means with which they attempt to 560 00:27:11,840 --> 00:27:16,040 Speaker 7: push that agenda could have some potential consequences down the road. 561 00:27:17,040 --> 00:27:19,160 Speaker 5: So what's the feeling there in Davas about this whole 562 00:27:19,200 --> 00:27:21,840 Speaker 5: tariff situation, Because you see, I guess there's a little 563 00:27:21,880 --> 00:27:23,600 Speaker 5: bit of relief in the market that President Trump did 564 00:27:23,640 --> 00:27:25,920 Speaker 5: not announced tariff's on day one that in fact, he 565 00:27:25,960 --> 00:27:29,640 Speaker 5: will study them and you know, maybe Canada and Mexico. 566 00:27:29,320 --> 00:27:29,800 Speaker 4: Will be first. 567 00:27:29,800 --> 00:27:33,639 Speaker 5: What's the feeling in Davas about how global financial of 568 00:27:33,680 --> 00:27:36,240 Speaker 5: global you know, kind of CEO should react. 569 00:27:37,160 --> 00:27:40,480 Speaker 7: Now, And being with a lot of global banking CEOs today, 570 00:27:40,560 --> 00:27:42,600 Speaker 7: I mean, look, we all had practice in the first 571 00:27:42,640 --> 00:27:46,479 Speaker 7: Trump administration, so I think people are being careful not 572 00:27:46,560 --> 00:27:48,720 Speaker 7: to jump to any conclusions based on some of the 573 00:27:48,720 --> 00:27:51,600 Speaker 7: statements he makes until we really start to see the 574 00:27:51,680 --> 00:27:54,479 Speaker 7: policy shakeout. And that's really important is that the market 575 00:27:54,560 --> 00:27:57,640 Speaker 7: not overreact to some of these statements as we begin 576 00:27:58,000 --> 00:28:01,800 Speaker 7: reactlimate essentially to the tenor this new administration. 577 00:28:01,680 --> 00:28:04,480 Speaker 3: Jan with the context of we've got a minute here, 578 00:28:04,600 --> 00:28:08,440 Speaker 3: maybe two minutes to go into it. He's your expertise. 579 00:28:08,560 --> 00:28:12,560 Speaker 3: And sanctions are we beginning to affect mister Putin in 580 00:28:12,640 --> 00:28:16,160 Speaker 3: mister Putin's Russian domestic economy. 581 00:28:17,000 --> 00:28:20,440 Speaker 7: So that's the question. The sanctions that President Biden imposed 582 00:28:20,520 --> 00:28:24,199 Speaker 7: a week ago Friday, we're fairly significant and further restricting 583 00:28:24,400 --> 00:28:28,439 Speaker 7: access for countries to buy Russian oil by beginning to 584 00:28:28,440 --> 00:28:32,400 Speaker 7: close the loophole that allowed certain legal purchases. Now there's 585 00:28:32,480 --> 00:28:36,119 Speaker 7: actually a moment for the new Trump administration to leverage 586 00:28:36,160 --> 00:28:39,240 Speaker 7: authorities that the Biden administration imposed at the end of 587 00:28:39,280 --> 00:28:43,480 Speaker 7: twenty three on secondary sanctions by really trying to force 588 00:28:43,560 --> 00:28:46,440 Speaker 7: third country actors that continue to trade with Russia and 589 00:28:46,520 --> 00:28:49,600 Speaker 7: the US to make a choice more aggressively. And those 590 00:28:49,600 --> 00:28:54,080 Speaker 7: sanctions cost very little to the American taxpayer versus military 591 00:28:54,120 --> 00:28:56,640 Speaker 7: aid and other sorts of aid that are provided. So 592 00:28:56,720 --> 00:29:00,760 Speaker 7: there is a certain mechanism that can be applied. And 593 00:29:01,080 --> 00:29:02,880 Speaker 7: you know, with Russia, it was always going to be 594 00:29:02,920 --> 00:29:05,560 Speaker 7: the long game in terms of sanctions to really isolate 595 00:29:05,560 --> 00:29:07,920 Speaker 7: the economy. But there is more that can be done, 596 00:29:08,160 --> 00:29:09,800 Speaker 7: and there is more that could be done in the 597 00:29:09,840 --> 00:29:11,800 Speaker 7: coming weeks by the Trump administration. 598 00:29:13,200 --> 00:29:15,920 Speaker 5: So Dana, just real quickly, is there an expectation that 599 00:29:16,520 --> 00:29:19,240 Speaker 5: this Trump administration will move to end this war in 600 00:29:19,360 --> 00:29:20,200 Speaker 5: Ukraine quickly? 601 00:29:21,440 --> 00:29:24,920 Speaker 7: Well, I think you've already heard President Trump begin to 602 00:29:24,960 --> 00:29:30,320 Speaker 7: say the challenges in ending this quickly, whether President Zelensky 603 00:29:30,440 --> 00:29:33,200 Speaker 7: agrees to whatever terms exist. I mean, this is not 604 00:29:33,400 --> 00:29:37,000 Speaker 7: the simplest thing to end with the snap of fingers. 605 00:29:38,000 --> 00:29:40,080 Speaker 7: There's a lot of questions on the table in terms 606 00:29:40,120 --> 00:29:44,160 Speaker 7: of what peace ultimately looks like. But I mean reinforcing 607 00:29:44,200 --> 00:29:46,800 Speaker 7: the Western Coalition, I mean in the inaugural address. There 608 00:29:46,880 --> 00:29:50,560 Speaker 7: was no mention of Ukraine. President Zelenski speaks here this 609 00:29:50,680 --> 00:29:54,480 Speaker 7: afternoon in Davos, and it will be helpful to hear 610 00:29:54,840 --> 00:29:58,560 Speaker 7: beyond what Scott Bessen said in his confirmation hearing next week, 611 00:29:58,600 --> 00:30:01,360 Speaker 7: how sanctions will play a role this foreign policy agenda. 612 00:30:01,840 --> 00:30:04,400 Speaker 3: Ten tennemum. Thank you so much. With Oliver Wyman from 613 00:30:04,480 --> 00:30:07,640 Speaker 3: Davos this morning. Perhaps we can catch up with them 614 00:30:07,680 --> 00:30:10,200 Speaker 3: on the backside of Davos as well. 615 00:30:10,320 --> 00:30:14,800 Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 616 00:30:14,840 --> 00:30:18,640 Speaker 2: and anywhere else you get your podcasts. Listen live each weekday, 617 00:30:18,720 --> 00:30:21,720 Speaker 2: seven to ten am Eastern on Bloomberg dot com, the 618 00:30:21,800 --> 00:30:25,520 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 619 00:30:25,560 --> 00:30:28,720 Speaker 2: can also watch us live every weekday on YouTube and 620 00:30:28,840 --> 00:30:30,760 Speaker 2: always on the Bloomberg terminal.