Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
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Speaker 3: Front Exchange Market is the litmus paper. The system has
Speaker 3: been very important. We saw the whiplash yesterday. We had
Speaker 3: a great story out in the Bloomberg. Thank you Ted Man,
Speaker 3: Liz Kepa McCormick and Esha Day for a really sharp
Speaker 3: article about the roller coaster they call it that we
Speaker 3: saw in Dollar Dynamics yesterday. Right now, we recalibate with
Speaker 3: Barkley's and their Skyler Montgomery counning their FX strategists out
Speaker 3: of the United Kingdom. Skyler, good morning. Can Barkley's bet
Speaker 3: resilient and strong dollar or do you a just on
Speaker 3: this Tuesday.
Speaker 1: I don't think we've heard anything in the last couple
Speaker 1: of days to really adjust our view. I think broadly
Speaker 1: it's accepted that the current environment is dollar positive. We've
Speaker 1: had such a large move that the question we're consistently
Speaker 1: getting from clients is how far can this strength instead?
Speaker 1: And for US, we wouldn't fade the dollar strength and
Speaker 1: particularly the reference to euro dollar. The move we've seen,
Speaker 1: it's not been exclusively driven by terriffs, right, It's also
Speaker 1: been by growth and rate differentials. US growth continues to
Speaker 1: be stronger than it's DXY counterparts, and that's meant higher
Speaker 1: yields in the US than elsewhere, and that's also played
Speaker 1: a role here. So it's not just teriff threats alone
Speaker 1: that point to more dollar upside.
Speaker 4: Skyler.
Speaker 5: I mean, I'm looking at the Bloomberg Dollar Index up
Speaker 5: over seven percent just since late September. Call it is
Speaker 5: there a bear case for the US dollar.
Speaker 1: So we get asked this quite a lot as well,
Speaker 1: kind of what are the reasons or catalysts that you
Speaker 1: could see for dollar downside? And certainly there are options, right,
Speaker 1: you know, there's not a complete regardless of that in
Speaker 1: terms of you could see more fiscal cohesion and you're up.
Speaker 1: That would be more positive. If you could get more
Speaker 1: super sized stimulus out of China, that would also be
Speaker 1: more positive. If you just had less hawkishness on trade again,
Speaker 1: that would be more positive for those DXY counterparts. I
Speaker 1: think the issue is just one of those baselines are
Speaker 1: coming through, and they're certainly not our baseline.
Speaker 5: How about in Asia here, what is the Bank of
Speaker 5: Japan doing? What do they need to do? How do
Speaker 5: you guys think about the yen here?
Speaker 2: Yeah?
Speaker 1: Absolutely so for the end it's near turn. Upside seems
Speaker 1: more limited, especially versus the dollar. The January Banka Japan meeting,
Speaker 1: it's pretty much completely priced in for a twenty five
Speaker 1: basis point hike. I think top side and dollars yen
Speaker 1: at seven point you get some kind of cap because
Speaker 1: of Japanese authority's reaction function to FX weakness, but given
Speaker 1: we've had this spate of yen strength recently, we're not
Speaker 1: quite at levels where that comes into the picture. More
Speaker 1: medium term, though, we do like buying yen on the crosses.
Speaker 1: I think the direction of policy is clear. Obviously we're
Speaker 1: expecting a hike this week, but we also expect a
Speaker 1: hike later in this year that gets due to a
Speaker 1: policy rate at zero point five percent or sorry, zero
Speaker 1: point seven to five percent, and certainly neutral expectations for
Speaker 1: Japan are kind of drifting more towards the one percent
Speaker 1: level in markets, and then they're also less vulnerable to
Speaker 1: teriff risks and the volatility of a trade work could
Speaker 1: be more positive for safe have instatu.
Speaker 3: Is there a big figure trade out there? I mean,
Speaker 3: forget about all the sixty thousand feet stuff, Tyler. I
Speaker 3: lost money on the Detroit Lions. I know it means
Speaker 3: it's like losing money on Manu. No, it's actually it's not.
Speaker 3: It's like losing money on somebody good. But the answer
Speaker 3: is I got to make it back in the next
Speaker 3: six months, Skyler. Where's the big figure bet for Barclays?
Speaker 1: I mean, in terms of places that you'll get the
Speaker 1: largest move, I think CNY is where you should be looking,
Speaker 1: especially versus the dollar. There's been a mispricing in terms
Speaker 1: of where tariff risk is really showing up. It's showing
Speaker 1: up in Europe so far, but not so much in China.
Speaker 1: And the growth backdrop as well as just fundamentally the
Speaker 1: backdrop or c and Y is for a week or
Speaker 1: CNY even if you don't account for tariff threats, and
Speaker 1: so that tariff threat should be more reflected in that cross.
Speaker 1: And for us, we're looking at seven to fifty originally
Speaker 1: ONND dollars CNY.
Speaker 4: Wow, how about that?
Speaker 5: We've had just the last twenty four hour Skyler, uh
Speaker 5: Padre a pretty clear commentary out of the new administration
Speaker 5: about tariffs on Mexico and Canada. How do you play
Speaker 5: that in the currency markets? Do you in fact trade that?
Speaker 5: You try to set it aside? How do you think
Speaker 5: about that?
Speaker 1: I mean, I think you have to trade it. You
Speaker 1: have to seriously take these threats. Unto consideration, Canada and
Speaker 1: Mexico are very exposed to the US in a relative way.
Speaker 1: So seventy five percent of Canadian exports go to the US.
Speaker 1: It's not recipiable by any means, and most of Canadian
Speaker 1: GDP are a significant portion of it at least is
Speaker 1: generated by those exports. And so it's much more worrying
Speaker 1: for those economies that you have the threat of tariffs
Speaker 1: and that supersedes anything else that you have domestically. But domestically,
Speaker 1: particularly in Canada, the backdrops not great easier. You're gonna
Speaker 1: p period where parliament's burrowed. There's not a lot of
Speaker 1: political legitimacy behind the current government, and that is an
Speaker 1: opportunity for Trump, I think.
Speaker 3: Skyler, what's the shadow out there for Dollar's certitude? Unfortunately,
Speaker 3: Paul was away on a sabbatical and I was inflicted
Speaker 3: Damien Sassaur upon me Skyler, and of course he's em
Speaker 3: em em ei eio. What's the shadow out there in
Speaker 3: em Barclays is worried about.
Speaker 1: I think really the threat of hikes returning to the table.
Speaker 1: It's something that we definitely need to consider in twenty
Speaker 1: twenty five. If you look at the extory experience, there's
Speaker 1: this natural tendency for the market to look for hikes
Speaker 1: ahead of the end of the cutting cycle. And typically
Speaker 1: in soft landings, the cutting cycle and the pause that
Speaker 1: follows it's much shorter than in recessionary periods. So that
Speaker 1: implies that in twenty twenty five we need to be
Speaker 1: thinking about this. And if you look back at the
Speaker 1: soft landings of ninety eight and ninety five, there was
Speaker 1: some concern over energy inflation, but core inflation actually declined
Speaker 1: in between the last cut and the next hike of
Speaker 1: the next cycle. And so while the Fed's mandate is
Speaker 1: more semetrical now there's more relative weight put on unemployment.
Speaker 1: I think if you had that comeback to the fore
Speaker 1: and certainly it's something markets are thinking about, that would
Speaker 1: be very negative.
Speaker 3: Free Scott I got a run on breaking news this
Speaker 3: has been great. Don't be a stranger, Skyler. If you're
Speaker 3: in New York, we have to do an extended Skyler
Speaker 3: Montgomery coning interview FX strategist with Berkley. Thank you so much, Skyler.
Speaker 2: You're listening to the Bloomberg Surveillance podcast. Catch US Live
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Speaker 3: She was outstanding the last time she was on. She
Speaker 3: has to put up with Brian Belski on a daily basis.
Speaker 3: With Demo Capital Markets, their senior economist, Jennifer Lee joins us. Jennifer,
Speaker 3: just open question. After the pageantry of the last three
Speaker 3: four days, what are you writing about this morning? What
Speaker 3: does a Jennifer Lee focus on a post inaugural Tuesday.
Speaker 6: Well, good morning, and thank you very much for having
Speaker 6: me on. And I still love mister Belski. This morning
Speaker 6: was the focus. All the focus was on, of course,
Speaker 6: the US dollar index and the volatility in the currency market,
Speaker 6: and that was in sharp display. You know, of course
Speaker 6: after the shotgun comments that he was made almost off handish,
Speaker 6: you know, I was sort of wondering last night, you know,
Speaker 6: would he had brought up tariffs if he wasn't asked,
Speaker 6: you know, legitimate question obviously, So you know, and I
Speaker 6: was talking to myself and I was thinking, why was
Speaker 6: I surprised? You know, you know, he said he's doing
Speaker 6: everything that he said he was going to do during
Speaker 6: the campaign. So you know, this shouldn't come as a shot.
Speaker 6: You know, it's just whether or not it's going to
Speaker 6: come to fruition. And that's anyone's guess at this point.
Speaker 3: What will Canada, dude is, does the Bank of Montreal
Speaker 3: have Well, first of all, does the Bank of Montreal
Speaker 3: have any side whether the Canadians can outlast the Bruins.
Speaker 3: I mean we'll have to say I haven't said that
Speaker 3: in like eight years. But Jennifer Lee, how will Canada
Speaker 3: respond to tariffs from America? Do you have any perspective
Speaker 3: there from the Bank of Montreal Hall.
Speaker 6: So, you know, there's it's this is more you're coming
Speaker 6: from the political side. You know, all the provinces have
Speaker 6: gotten together and all but one has you know, there
Speaker 6: everyone's talking about retaliation and and having also targeted TIFFs
Speaker 6: as well on us on US products. You know, again,
Speaker 6: it's you know, we're gonna have to see how this
Speaker 6: plays out. It's all about the art of negotiation, you know,
Speaker 6: as President Trump is always talking about again, I don't know,
Speaker 6: I'm not sure why whether or not we're going to
Speaker 6: see from the US side of things, twenty five percent
Speaker 6: tariffs on all you are, all Canadian products? You know,
Speaker 6: I call it like the W five W five right,
Speaker 6: like the who? You know we're talking right now about
Speaker 6: Canada and Mexico. When when will this happen you know
Speaker 6: first a hard date or are we just going to
Speaker 6: talk about it first? Is just throwing it out there
Speaker 6: as a possibility, you know, the ware of this.
Speaker 7: Like the who?
Speaker 6: And how is this going to play out? Especially again,
Speaker 6: will there be a lengthy period of negotiations? And are
Speaker 6: we targeting every single thing? Are we only looking at
Speaker 6: or sorry, are we looking at all Canadian products? Or
Speaker 6: are we targeting certain ones only? And these are all
Speaker 6: questions that you need to be answered before we can
Speaker 6: figure out what we are going to do.
Speaker 3: Good Morning out on YouTube from London, Ontarios, which is
Speaker 3: the absolute speaking as an ugly American is the absolute
Speaker 3: epicenter of good ice hockey and also exports to the
Speaker 3: United States exports.
Speaker 5: So, Jennifer, you're based in Toronto there, what's the feeling
Speaker 5: in Canada in Toronto about maybe some of what you
Speaker 5: guys can do, what Canadians can do in terms of
Speaker 5: on tariffs on your side.
Speaker 6: So it's overall, you know, obviously it's a feeling of unease.
Speaker 6: You know, this is something that you know, nobody wants obviously. Uh,
Speaker 6: the US is the destination of seventy five percent of
Speaker 6: our exports, and we import most of our imports, you know,
Speaker 6: come from the US as well, and from the US.
Speaker 6: I mean that most of the US exports head to
Speaker 6: both Mexico and Canada. So this is like something that
Speaker 6: you know that is not something that we would relish.
Speaker 6: But uh, in terms of preparation, I don't know if
Speaker 6: there is a set plan right now, but you know,
Speaker 6: almost you know, just being prepared for much slower growth
Speaker 6: than what we have pencils in right now. We've got
Speaker 6: just under two percent pencils in for twenty twenty five
Speaker 6: GDP growth for Canada this year, and of course that
Speaker 6: could be potentially erased if we launch into a protracted
Speaker 6: trade war with the US. And again it will depend
Speaker 6: on what products are targeted at? What you know, is
Speaker 6: it going to be twenty five percent for a long
Speaker 6: long time. You know, there are a lot of uncoan
Speaker 6: answered questions, so we don't know how this is going
Speaker 6: to play. Oh, there's so much uncertainty. And this is
Speaker 6: what also makes by the way, if I just segue,
Speaker 6: this also makes you know, the jobs for not only
Speaker 6: economists very difficult, but it makes jobs for central makers
Speaker 6: extremely difficult as well. You know, whether or not they're
Speaker 6: going to tighten or they're going to hold and they're
Speaker 6: going to cut. You know, all things are on the
Speaker 6: table right now.
Speaker 5: So I guess the two of the themes coming out
Speaker 5: of President Trump yesterday were migration policy. Immigration policy and
Speaker 5: the tariffs, both some economists say could be quite inflationary.
Speaker 5: How do you did you hear anything yesterday that maybe
Speaker 5: change your thoughts of US inflation outlook?
Speaker 6: No, just again, there is some relief, you know, obviously
Speaker 6: during his noginal speech when he did not mention teriffs
Speaker 6: and so, but at the same time, you know, we
Speaker 6: do know that terriffs are inflationary. It's going to be
Speaker 6: the US importers that are going to be bearing the
Speaker 6: costs initially, and then they're going to probably pass it
Speaker 6: on to the consumers. In terms of the immigration and
Speaker 6: the migration, you know, first, I mean obviously it's going
Speaker 6: to be targeting a legal you know, the illegal migrants,
Speaker 6: the criminals, you know, but in terms of broader how
Speaker 6: much further he's going to go. You know, it's going
Speaker 6: to have inflationary impact on the because of the labor market,
Speaker 6: and we know how dependent US agricultural sector is on
Speaker 6: illegal citizens and construction as well. So we see those people,
Speaker 6: those workers unable to work or not able to work.
Speaker 6: You know, that could put a lot more tightness on
Speaker 6: the labor market. Means higher wages, it means higher inflation.
Speaker 3: Jennifer, thank you so much. Jennifer Lee with a brief
Speaker 3: there on terraff So with unique perspective on Canada from
Speaker 3: Beama Capital Marcus.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: Our ecumenical tradition is to get as long a conversation
Speaker 3: as we can with Laurie Kelvissina. She read Graham, Dot
Speaker 3: and Coddle on the law of the University of Virginia
Speaker 3: ages ago. Is security analysis dead? Is everybody turned into
Speaker 3: a strategist?
Speaker 8: Well, I think there are a lot of people who
Speaker 8: try to do my job for me, and so so,
Speaker 8: you know, maybe to some extent, but look, I think
Speaker 8: we are in sort of a more macro driven world
Speaker 8: at this point in time, and I think this is
Speaker 8: going to be very much a year where the top
Speaker 8: dawn tailwinds are informing a lot of decisions.
Speaker 3: From where you are. Is it an active management stock
Speaker 3: selection year, particularly in your expertise of mid cap or
Speaker 3: small cap or is it an index year?
Speaker 8: Well, I'll tell you what's fascinating Tom. And we often
Speaker 8: you will see funds flows turn in January, but we
Speaker 8: actually saw back in December we started to see some
Speaker 8: inflows to actively managed funds in both small cap and
Speaker 8: large cap US equity funds emerged. Now that has occurred
Speaker 8: alongside passive outflows, so that hasn't sort of taken you
Speaker 8: into negative territory. And large cap you have seen overall
Speaker 8: negative flows in small cap but it's really really interesting
Speaker 8: to see that divergence so far. The people who buy
Speaker 8: funds seem to be betting more on the stock pickers
Speaker 8: right now.
Speaker 5: We had it the inauguration yesterday.
Speaker 4: Did you guys change.
Speaker 5: Your outlook for risk assets for stocks based upon this
Speaker 5: new administration, a new Congress being seated. A lot of
Speaker 5: people feel like animal spirits on the economic front.
Speaker 4: Maybe you're being loosened a little bit.
Speaker 8: Yeah, you know, I think what we did when we
Speaker 8: put our year ahead outlook together, and we did this
Speaker 8: around Thanksgiving, so we already knew the outcome, and we
Speaker 8: had been sort of updating our models heading into that
Speaker 8: well ahead of the November election. But what we did
Speaker 8: do with one of our sort of five sets of
Speaker 8: back tests, we were able to more discreetly model in
Speaker 8: the political environment. So our political back test, actually I
Speaker 8: think it's like around an eleven to twelve percent type
Speaker 8: annual return we added into to the targeting mix, but
Speaker 8: that's the return you typically see when Republicans run the
Speaker 8: White House, the Senate, and the House, and so we
Speaker 8: thought that sort of did a good job of capturing
Speaker 8: the idea of a better animal spirit, environment, better vibes,
Speaker 8: and a more kind of business friendly climate.
Speaker 5: So how do we think about it for twenty twenty five.
Speaker 5: One of the areas that I feel like there might
Speaker 5: be a risk to the market is maybe even more
Speaker 5: dependent than usual earnings.
Speaker 4: Earnings really need to.
Speaker 5: Come through because I don't think the Fed's going to
Speaker 5: do a whole lot for us in twenty twenty five.
Speaker 5: What's your concern or confidence in the earnings out look?
Speaker 4: Well, so, look, I've been lucky.
Speaker 8: The rate strategist that I work with has been calling
Speaker 8: for an early end to the cutting cycle for about
Speaker 8: six months now, and so he did finally just pull
Speaker 8: out the January cut. But the January cut was the
Speaker 8: only one he had in this year for quite some time.
Speaker 8: So what that translated to for us is in our
Speaker 8: valuation model. So this is another one of the five
Speaker 8: things that goes into our target mix as we come
Speaker 8: up with a target pe and look at that in
Speaker 8: the context of our earnings forecast and then get a
Speaker 8: fair value for the S and p SO bottom line.
Speaker 8: Because of his FED view, he also was pretty aggressive on.
Speaker 4: The ten year yield.
Speaker 8: We haven't really had any multiple expansion baked into our outlook,
Speaker 8: and I think that's the right answer.
Speaker 3: Barn kelviseinor with this folks with RBC thrilled. She's here today, conversation.
Speaker 3: Is a MidCap still a MidCap? Lori Kelvicina, I got
Speaker 3: off the Vanguard platform, Pallunteer, Amphanol, Well Towered, Motorola, Constellation.
Speaker 3: In a bull market, if those market caps go up,
Speaker 3: do the mid capies become more large capies?
Speaker 4: I think so?
Speaker 8: And you look, I've covered small and mccap stocks for
Speaker 8: a long time. What's always been apparent to me is
Speaker 8: that mid cap managers don't really live and die by
Speaker 8: their benchmarks the way that say small cap managers do
Speaker 8: or large cap managers do. They tend to be sort
Speaker 8: of benchmark aware, but don't really get caught up in
Speaker 8: these same market cap bands.
Speaker 3: So how do you buy midcaps? I mean, you're a strategist.
Speaker 3: I get that. I don't want to ask you individual stocks.
Speaker 3: But then are you looking at free cash flow? Is
Speaker 3: the is it revenue growth? What's the game for you?
Speaker 8: I tend to not look at free cash flow just
Speaker 8: because I find databases don't do a good job of
Speaker 8: allowing me to model. It's very lumpy data. The forecasts
Speaker 8: are very you know, kind of messy. Pms love to
Speaker 8: look at it, right, It's something they live and die by,
Speaker 8: but as a macro person, it does don't really work.
Speaker 8: I think we tend to define it in terms of
Speaker 8: market cap. I think if you want to go from
Speaker 8: like maybe ten up to fifty, that's a pretty safe,
Speaker 8: you know, kind of range that I think most people
Speaker 8: can live in. But some people will tell you it
Speaker 8: starts a little lower, and a lot of people will
Speaker 8: let those names ride ride and take them a bit higher.
Speaker 5: Leadership in a market, Lorie, it just seems like, as
Speaker 5: long as we can remember, it's been technology, technology, technology
Speaker 5: driving these markets higher. A do you believe in market
Speaker 5: leadership and if so, do we have tex still as
Speaker 5: a leader in this market?
Speaker 8: Well, look, I'll tell you, Paul, I've been in the
Speaker 8: broadening camp, but I would say, you know ya.
Speaker 4: A centimeter, not by a mile.
Speaker 8: I do think this broadening thesis has become one of
Speaker 8: the most consensus things strategists have talked about coming into
Speaker 8: the show.
Speaker 3: Are you're observing it?
Speaker 8: I mean you can see it to some extent, right,
Speaker 8: But every time I have a weekly and every time
Speaker 8: I update my charts right like one week I'm saying
Speaker 8: growth is fighting back, and then another week I'm saying
Speaker 8: the value finally looks like it's trying to assert itself.
Speaker 8: So it's been very, very and I think there are
Speaker 8: good reasons to rotate. I think you've got valuation problems
Speaker 8: in the megacap growth names. I think you've got crowding problems,
Speaker 8: and I think you give out decelerating earnings growth. And
Speaker 8: I think there is an itch in this market among
Speaker 8: pms to rotate. But relative pees of MAG seven versus
Speaker 8: rest of market is a function. It's really tracking very
Speaker 8: closely relative long term earnings growth dynamics, and MAG seven
Speaker 8: earnings growth keeps surprising to the upside. So I keep
Speaker 8: telling people, you know that the case for the rotation
Speaker 8: it's there, But it feels like the rest of the
Speaker 8: market is just whipping on its opportunity and just can't
Speaker 8: reclaim that earnings leadership.
Speaker 5: What are some of the sectors that screen well for
Speaker 5: you guys these days going to I think.
Speaker 4: Financial still has some room.
Speaker 8: I don't think it has as much room as it did.
Speaker 8: I think the capital markets names are getting expensive, but
Speaker 8: the bank's insurance companies still look pretty good on valuation,
Speaker 8: have good earnings revision trends, and I think financials in general,
Speaker 8: you've got a lot of policy tailwinds.
Speaker 4: You don't really have any headwinds.
Speaker 8: COMM services looks really good, so you got a lot
Speaker 8: of big tech type.
Speaker 4: Names in there.
Speaker 8: They're more consumer oriented. Again, I think more policy tailwinds
Speaker 8: than headwinds. Good valuations, good revisions. We upgraded that one
Speaker 8: back in December and got a lot of good feedback
Speaker 8: from investors.
Speaker 3: So this is great with Lori Calvalcino, folks, because she's
Speaker 3: from a distance. On MAG seven, how do you perceive
Speaker 3: MAG seven? When I see Delta Airlines surprise? Schwab today's surprise?
Speaker 3: Why are they going to get surprises? So Mag seven
Speaker 3: and everybody goes on their concentrated portfolio.
Speaker 8: Way, what I've been seeing with the MAG seven if
Speaker 8: I look back over the past year, is you know,
Speaker 8: we'll kind of go into earnings, right, and the banks
Speaker 8: come in and they have good numbers, and then you'll
Speaker 8: get some of these other cyclical, kind of overlooked parts
Speaker 8: of the market working, and then you might have like
Speaker 8: one of these MAG seven names kind of stumble a
Speaker 8: little bit and it feels like in the middle of
Speaker 8: that reporting season, you're seeing the leadership shift and the
Speaker 8: earnings dynamic shift. And then I feel like all the
Speaker 8: worker bees around Wall Street go back after reporting season
Speaker 8: winds down, you know, they go to conferences, they've had
Speaker 8: all their callbacks, they go you know, on their bus
Speaker 8: stores and things, and suddenly I noticed the mag seven
Speaker 8: numbers start coming up again.
Speaker 4: And so it feels like in.
Speaker 8: The moment, you know, there's there's a reaction to fade it,
Speaker 8: but when people really start to give it some serious
Speaker 8: thought and reflect, the strength comes back. So it's a
Speaker 8: really really odd dynamic to be fair, Tom and I've been.
Speaker 5: Talking a lot about ETFs. How does that impact your
Speaker 5: world as a strategist, Like when I was on the
Speaker 5: south side, those mutual funds and hedge funds, Yeah, those.
Speaker 4: Are my clients.
Speaker 5: Do I now go see ETF managers set and I.
Speaker 4: See ETF managers per se. But a lot of my.
Speaker 8: Hedge funds will use ETFs or ETF like instruments. And
Speaker 8: then if you think about sort of the not so
Speaker 8: much the actively managed funds, occasionally maybe they might you know,
Speaker 8: buy something like a biotech ETF to put cash in,
Speaker 8: or a small cap manager might buy an IWM, you
Speaker 8: know type instrument to to put cash in. That's very
Speaker 8: rare and few and far between. But generally, you know,
Speaker 8: you'll see sort of the wealth management community, you know,
Speaker 8: does sort of defer to ETF so they care a
Speaker 8: lot about sector calls. I think that, you know, sort
Speaker 8: of wealth management type money moves a little slower. You
Speaker 8: see big reallocations at the beginning of the year. But
Speaker 8: the hedge funds, you know, if I think about my
Speaker 8: small caps, they've been hedge funds have been dialing up
Speaker 8: and down their bolishness on small caps when they've been
Speaker 8: dialing up and.
Speaker 4: Down their red dubbishness.
Speaker 8: And then to some extent, the election morphed into those
Speaker 8: trades at the end of last year. So they're playing.
Speaker 8: It's not they're not the only instruments they're playing, but
Speaker 8: they did an.
Speaker 4: Awful lot of it.
Speaker 3: Are we going to see roll ups? Nobody in the
Speaker 3: room is is old enough to remember this, but there's
Speaker 3: like every eight or nine years at the old days,
Speaker 3: industries would go through this mental fake m and a
Speaker 3: phrase where everything would roll into one company. Are roll
Speaker 3: ups debt or is that going to be the catalyst
Speaker 3: for the calvaccino world.
Speaker 4: You know, I honestly from my small cap pms.
Speaker 8: Are a great read on this because you know, they
Speaker 8: want their companies right to be bought and then they
Speaker 8: also want new interesting supply to come into so they
Speaker 8: have their ear to the ground on this issue. I've
Speaker 8: not been hearing from them so much about roll ups.
Speaker 8: I've been hearing more interest from them on divestitures, like
Speaker 8: with the bigger cap companies spinning some things off that
Speaker 8: might prove to be you know, sort of interesting opportunities
Speaker 8: for them.
Speaker 4: That's where I've heard more conversation.
Speaker 3: To be honest, interesting you expected that's that's called a bolton.
Speaker 3: I know I learned that.
Speaker 4: Okay, very good.
Speaker 3: I read the Duke Business Journal this week.
Speaker 5: Do you expect bigger, better, more IPO activity this year?
Speaker 5: I've heard the Jamie Diamonds of the world and Brian
Speaker 5: Mornian's talking about that. Do you expect to see that?
Speaker 5: I mean, you've got your ear to the ground.
Speaker 4: Yeah.
Speaker 8: And look, I've been reading through earnings call transcripts my
Speaker 8: team and I and last week it was mostly financials
Speaker 8: and we're certainly seeing you know, a lot of optimism
Speaker 8: around both I POS and M and A, and I
Speaker 8: do think there's some pent up demand. I mean, they're
Speaker 8: talking about the pipelines. There were some indications in the
Speaker 8: commentary last week that things are getting started, and certainly
Speaker 8: we all see the announcements, you know when we come.
Speaker 3: But do you have to I interrupt, but we're out
Speaker 3: of time? Do you have to do you have to
Speaker 3: ip anymore? Can't you liquefy and make gajillions? I think,
Speaker 3: like Paul Sweeney, gagillions by not ipo ing now.
Speaker 8: Well, I think there are alternatives, to be sure, and
Speaker 8: I think that's one of the things small cap managers struggle.
Speaker 4: With is that, you know, sort of the get access
Speaker 4: well the.
Speaker 8: Lack of size appropriate IPOs right, and that a lot
Speaker 8: of things that come out are too big for them
Speaker 8: to buy.
Speaker 4: Again, going back to.
Speaker 8: Our mid cap or large cap type discussions, look, I
Speaker 8: think that certainly the activity has been heralded or you know,
Speaker 8: anticipated I'm sort of telling people I'm optimistic, but they've
Speaker 8: got really until too Q to pull it off, or
Speaker 8: people are going to be skeptical it's never coming.
Speaker 3: This is great, This is great. Laura Calvinsena our extended interview.
Speaker 3: It's nine o'clock ours. She's the RBC Capital Markets.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: The food in Davos, Happy Valley, this is really not reported,
Speaker 3: is horrific. The great the great reason. The JP Morgan
Speaker 3: Cocktail Hour, which is usually Thursday, now maybe it's Wednesday.
Speaker 3: The JP Moore they bring in the horse divorce from
Speaker 3: like London or Milan or whatever. The only place you
Speaker 3: can get a decent dinner in Davos is the Postly Restaurant.
Speaker 3: And I mean the hitters. This is where they stay.
Speaker 3: It's the Morrisani Schweizerkoff It's like the hotel because you
Speaker 3: can actually have decent food and not leftover cold pizza.
Speaker 3: He's never had leftover cold pizza in Davos. Joining us.
Speaker 3: Dan Tanaba from the Morrisani This Morning of course with
Speaker 3: Oliver Wyman is well, let's cut to it. Dan Tanabam,
Speaker 3: the President will do a virtual with people like you.
Speaker 3: Up Happy Valley. What will they listen for from Donald Trump?
Speaker 7: Well, Tom, I think people are wanting to hear more
Speaker 7: specifics about how President Trump's trade policy and foreign policy
Speaker 7: agenda will work out. We obviously have gotten a preview
Speaker 7: over the last few weeks in his inaugural address yesterday
Speaker 7: as well as the evening press conference. But I think
Speaker 7: whether it's more of the same in terms of kind
Speaker 7: of threats for kind of trade deals or anything new.
Speaker 7: Maybe there's another country he wants to invade, But I
Speaker 7: think there's certainly an air of pessimism until we understand
Speaker 7: more specifics of how this policy was unfold.
Speaker 3: You're double barreled at Oliver Wyman. You got the wonderful
Speaker 3: Hugh vannsteinas well when you toured together. What are you
Speaker 3: talking about about this new era of Trump in Europe?
Speaker 3: And of course it's challenges with China. You know, what
Speaker 3: do you and Hugh focus on?
Speaker 7: And Hugh and I had lunch today, he sends his regards.
Speaker 7: We're focused on really trying to understand how this new
Speaker 7: world order unfolds. You've already seen the new Trump administration
Speaker 7: threatened tariffs, You've seen retaliatory tariffs, threatened by some country,
Speaker 7: and there's a lot of nations and companies that are
Speaker 7: frankly worried about being collateral damaged. So really trying to
Speaker 7: understand whether the unintended consequences of some of these policy
Speaker 7: moves are really baked into the calculus.
Speaker 5: So how do you feel. What's the feeling in Davos
Speaker 5: about maybe just global trade going forward over the next
Speaker 5: four years. Are people rethinking the near shoring, friendshoring, that
Speaker 5: type of thing.
Speaker 7: I think there's cautious optimism. I don't think there's any
Speaker 7: immediate change in near shoring and friendshoring, but I think
Speaker 7: certainly the posture and change from the Biden to the
Speaker 7: Trump administry is a marked one in terms of how
Speaker 7: trade related issues are settled. So I think there is,
Speaker 7: you know, certainly a view that this administration is more
Speaker 7: pro business. However, the means with which they attempt to
Speaker 7: push that agenda could have some potential consequences down the road.
Speaker 5: So what's the feeling there in Davas about this whole
Speaker 5: tariff situation, Because you see, I guess there's a little
Speaker 5: bit of relief in the market that President Trump did
Speaker 5: not announced tariff's on day one that in fact, he
Speaker 5: will study them and you know, maybe Canada and Mexico.
Speaker 4: Will be first.
Speaker 5: What's the feeling in Davas about how global financial of
Speaker 5: global you know, kind of CEO should react.
Speaker 7: Now, And being with a lot of global banking CEOs today,
Speaker 7: I mean, look, we all had practice in the first
Speaker 7: Trump administration, so I think people are being careful not
Speaker 7: to jump to any conclusions based on some of the
Speaker 7: statements he makes until we really start to see the
Speaker 7: policy shakeout. And that's really important is that the market
Speaker 7: not overreact to some of these statements as we begin
Speaker 7: reactlimate essentially to the tenor this new administration.
Speaker 3: Jan with the context of we've got a minute here,
Speaker 3: maybe two minutes to go into it. He's your expertise.
Speaker 3: And sanctions are we beginning to affect mister Putin in
Speaker 3: mister Putin's Russian domestic economy.
Speaker 7: So that's the question. The sanctions that President Biden imposed
Speaker 7: a week ago Friday, we're fairly significant and further restricting
Speaker 7: access for countries to buy Russian oil by beginning to
Speaker 7: close the loophole that allowed certain legal purchases. Now there's
Speaker 7: actually a moment for the new Trump administration to leverage
Speaker 7: authorities that the Biden administration imposed at the end of
Speaker 7: twenty three on secondary sanctions by really trying to force
Speaker 7: third country actors that continue to trade with Russia and
Speaker 7: the US to make a choice more aggressively. And those
Speaker 7: sanctions cost very little to the American taxpayer versus military
Speaker 7: aid and other sorts of aid that are provided. So
Speaker 7: there is a certain mechanism that can be applied. And
Speaker 7: you know, with Russia, it was always going to be
Speaker 7: the long game in terms of sanctions to really isolate
Speaker 7: the economy. But there is more that can be done,
Speaker 7: and there is more that could be done in the
Speaker 7: coming weeks by the Trump administration.
Speaker 5: So Dana, just real quickly, is there an expectation that
Speaker 5: this Trump administration will move to end this war in
Speaker 5: Ukraine quickly?
Speaker 7: Well, I think you've already heard President Trump begin to
Speaker 7: say the challenges in ending this quickly, whether President Zelensky
Speaker 7: agrees to whatever terms exist. I mean, this is not
Speaker 7: the simplest thing to end with the snap of fingers.
Speaker 7: There's a lot of questions on the table in terms
Speaker 7: of what peace ultimately looks like. But I mean reinforcing
Speaker 7: the Western Coalition, I mean in the inaugural address. There
Speaker 7: was no mention of Ukraine. President Zelenski speaks here this
Speaker 7: afternoon in Davos, and it will be helpful to hear
Speaker 7: beyond what Scott Bessen said in his confirmation hearing next week,
Speaker 7: how sanctions will play a role this foreign policy agenda.
Speaker 3: Ten tennemum. Thank you so much. With Oliver Wyman from
Speaker 3: Davos this morning. Perhaps we can catch up with them
Speaker 3: on the backside of Davos as well.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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