WEBVTT - Markets Push Through Continued Trump Tariff Uncertainty 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business app. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.120 or watch us live on YouTube. 0:00:27.480 --> 0:00:29.600 This is really good. We got some precious timingre with 0:00:29.640 --> 0:00:32.680 Sophia Drosi's working for point seventy two in New York. 0:00:32.720 --> 0:00:35.080 But you know, we've we've got to do this. I mean, 0:00:35.360 --> 0:00:39.240 it's one of the most fractious marriages out there, Steve Cohen. 0:00:39.280 --> 0:00:41.560 Of course a point seven to two has a modest 0:00:41.640 --> 0:00:45.599 New York Mets too. You have a Red Sox Mets marriage. 0:00:45.880 --> 0:00:46.640 Is that true? 0:00:47.800 --> 0:00:51.280 Yes, it's a mixed marriage LEAs. 0:00:51.560 --> 0:00:51.800 Yes. 0:00:52.240 --> 0:00:55.760 However, I did adopt the Patriots as my football team 0:00:55.840 --> 0:01:01.760 because that was also, you know, the Michigan connection. So 0:01:01.840 --> 0:01:04.200 for me, when my husband said I'm a Patriots fan, 0:01:04.319 --> 0:01:07.000 that's a deal breaker for me. I was like Tom Brady, 0:01:07.080 --> 0:01:08.720 I knew since he was number ten. 0:01:08.680 --> 0:01:13.000 How's your husband doing? I Soto in a Mets uniform 0:01:13.080 --> 0:01:16.440 is un American? Is he holding up? I mean the meds? 0:01:17.160 --> 0:01:20.360 You know, you know, the Mets nation is very welcoming. 0:01:20.600 --> 0:01:23.000 So when we do go to Cityfield, my husband will 0:01:23.040 --> 0:01:26.480 wear his red Sox hat. The Mets nation super welcoming. 0:01:26.720 --> 0:01:28.960 Very a good update there, and of course we are 0:01:29.000 --> 0:01:32.840 ready for the baseball season. We're also ready Sophia drosis 0:01:32.880 --> 0:01:35.679 for an economy and your research note says it all. 0:01:35.920 --> 0:01:38.880 I think you use the word uncertainty forty seven times. 0:01:39.200 --> 0:01:43.520 What is the character of our economic and market uncertainty? 0:01:44.200 --> 0:01:48.040 Yes, well, uncertainty is something that we haven't had to 0:01:48.040 --> 0:01:52.000 deal with until more recently on the policy front, So 0:01:52.200 --> 0:01:55.680 last year was a year where there was fiscal spending, 0:01:55.840 --> 0:01:58.960 there was a preemptive FED easing, It was very positive 0:01:59.000 --> 0:02:01.880 tailwinds for the market, and we came into this year 0:02:01.960 --> 0:02:04.880 with the markets I think for the first time in 0:02:04.920 --> 0:02:08.839 a long time, investors were looking at the glasses half 0:02:08.840 --> 0:02:12.440 full and taking kind of the upside on economic growth. 0:02:12.760 --> 0:02:19.000 And the policy uncertainty I think has permeated that a bit. 0:02:19.120 --> 0:02:21.200 So we came into the year with a lot of 0:02:21.240 --> 0:02:25.880 expectations for deregulation and animal spirits, and the sequencing has 0:02:25.960 --> 0:02:29.760 brought perhaps the more onerous parts of policy up first, 0:02:30.160 --> 0:02:34.240 with the uncertainty over trade how it will end up 0:02:34.440 --> 0:02:37.560 how will it affect the economy? And you know, we're 0:02:37.600 --> 0:02:41.280 still looking at that April to deadline and not quite 0:02:41.400 --> 0:02:44.200 sure exactly how things are going to pan out or 0:02:44.240 --> 0:02:45.760 if that will be a clearing event. 0:02:46.160 --> 0:02:48.320 So one of the issues coming into this year for 0:02:48.360 --> 0:02:50.480 the markets was the Fed's probably not going. 0:02:50.440 --> 0:02:52.120 To do a whole lot to help these markets. It's 0:02:52.120 --> 0:02:53.160 going to be earnings driven. 0:02:53.240 --> 0:02:55.840 So therefore I need my economy to be shroun How 0:02:55.840 --> 0:02:59.040 do you think about the economic outlook and how that 0:02:59.120 --> 0:03:02.840 might be it challenge potentially for the earning story. 0:03:03.000 --> 0:03:06.040 Yes, well, on the on the earnings front, we are 0:03:06.080 --> 0:03:09.400 coming off a period of time where corporate margins have 0:03:09.560 --> 0:03:13.560 been at record highs and earnings have been quite strong. 0:03:13.840 --> 0:03:16.840 And if we're coming into a period where economic growth 0:03:16.919 --> 0:03:19.639 is expected to moderate and there is a lot of 0:03:19.760 --> 0:03:24.639 uncertainty facing corporations with regard to tariffs, their input costs, 0:03:24.720 --> 0:03:28.720 and the outlook for the US consumer, it seems more 0:03:28.840 --> 0:03:32.840 likely that we're going to see a moderation in corporate profits. 0:03:32.880 --> 0:03:36.480 And I think that this first batch of earnings reports 0:03:36.520 --> 0:03:38.760 at the end of April will be very key for 0:03:38.840 --> 0:03:41.320 the market. Directionally, I look. 0:03:41.240 --> 0:03:44.120 At what you just said, clearing events folks, this is 0:03:44.160 --> 0:03:47.800 a Midwest agreed right here. Michigan and Anna Arbor was 0:03:47.840 --> 0:03:52.000 basically East Chicago. It comes back to ninety and uncertainty 0:03:52.280 --> 0:03:54.360 and the you know, it almost folds into what Friedrich 0:03:54.400 --> 0:03:57.520 Kayak would say, which is, you've got these clearing events 0:03:57.560 --> 0:04:01.960 where things clean out. So on April third, you suggest 0:04:02.040 --> 0:04:04.680 we may have enough clarity to go along. 0:04:05.720 --> 0:04:09.040 Unfortunately, I don't think we'll have the clarity on April third. 0:04:09.280 --> 0:04:13.320 So the issue has been on April second, we are 0:04:13.400 --> 0:04:16.720 anticipating to get a sense of the blueprint on the 0:04:16.760 --> 0:04:20.839 reciprocal tariffs, but the commentary from the White House has 0:04:20.960 --> 0:04:25.279 been that there's likely to be ongoing tariff threats in 0:04:25.400 --> 0:04:30.040 terms of specific industries and products. So April on April 0:04:30.080 --> 0:04:33.640 two will know a bit about this reciprocity that will 0:04:33.640 --> 0:04:36.880 be going on, but we won't know enough about what's 0:04:36.920 --> 0:04:38.720 going to happen with specific sectors. 0:04:38.760 --> 0:04:40.600 Yeah, I'm not without giving away the point seven to 0:04:40.600 --> 0:04:43.479 two cards. But the basic idea here is with this 0:04:43.640 --> 0:04:47.320 colossal uncertainty is and then this is a bit off 0:04:47.360 --> 0:04:49.679 your remit, but I'm going to ask anyways and be rude. 0:04:49.960 --> 0:04:52.400 Is cash a preferred asset right now? 0:04:53.200 --> 0:04:56.560 Well? I've been looking at things like gold and cash. 0:04:56.680 --> 0:05:00.119 Gold has been performing incredibly well, and so in an 0:05:00.200 --> 0:05:04.800 environment where investors might see some risks, ask Thatt. Allocation 0:05:04.920 --> 0:05:09.360 theory would suggest trying to increase some of your safer holdings. 0:05:09.560 --> 0:05:13.520 And there are different views on treasuries and the fiscal trajectory. 0:05:13.920 --> 0:05:17.280 So investors, I think have increasingly been looking at things 0:05:17.320 --> 0:05:18.320 like cash and gold. 0:05:18.600 --> 0:05:22.560 Oh, I mean, I mean talk about gold. Crazy Wan 0:05:22.720 --> 0:05:26.480 Sodo seventy five million dollars signing bonus for him seven 0:05:26.520 --> 0:05:30.160 hundred and sixty five thousand guarantee. Excuse me, not off 0:05:30.680 --> 0:05:34.360 seven hundred and sixty five million guaranteed and he's underpaid 0:05:34.520 --> 0:05:37.640 fifty one million a year. Sure, he's got a base 0:05:37.680 --> 0:05:38.680 of forty six. 0:05:38.560 --> 0:05:40.960 Large I can hit. 0:05:41.440 --> 0:05:45.320 I mean, Oh, it's correct. It's like there's a second 0:05:45.320 --> 0:05:48.719 coming of way backs over a little more in Power City. 0:05:48.760 --> 0:05:51.160 Feel no questions, great, Sophia, what'll be different if. 0:05:51.320 --> 0:05:53.240 We talk enough about the Mets, can we get back? 0:05:53.760 --> 0:05:55.440 We'll get six seats? 0:05:55.880 --> 0:05:57.840 Well, one more question, get it in there quick? 0:05:57.839 --> 0:06:00.400 Fixed income? Do I take credit risk or not? Here? 0:06:00.480 --> 0:06:00.839 Do you think? 0:06:01.360 --> 0:06:06.240 So it's an environment where I think we've started to 0:06:06.279 --> 0:06:08.760 see a little bit of a pickup, I think in 0:06:08.920 --> 0:06:12.800 the delinquencies and the like, but the types of credits 0:06:12.800 --> 0:06:16.159 that are in public markets are typically relatively strong. I 0:06:16.160 --> 0:06:18.560 think the bigger question is what's going to happen with 0:06:18.680 --> 0:06:21.120 the outlook for the economy and what does that mean 0:06:21.160 --> 0:06:22.960 for all us based risk assets. 0:06:22.920 --> 0:06:25.039 We go to Fenway just gaze out at the Ted 0:06:25.080 --> 0:06:29.200 Williams reds yea Sophia drosis. Thank you so much, A 0:06:29.320 --> 0:06:32.520 point as seven to just fabulous over the years with 0:06:32.600 --> 0:06:37.160 the wonderful synthesis of economics and the impact on our investment. 0:06:37.839 --> 0:06:41.720 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:06:41.800 --> 0:06:44.799 starting at seven am Eastern on Apple Corplay and Android 0:06:44.839 --> 0:06:47.880 Auto with the Bloomberg Business app. You can also listen 0:06:47.960 --> 0:06:51.200 live on Amazon Alexa from our flagship New York station, 0:06:51.760 --> 0:06:55.240 Just say Alexa Play Bloomberg eleven thirty joining. 0:06:55.040 --> 0:06:57.360 Us right now, you folks. It's like I'm a Choppoliver. 0:06:57.480 --> 0:07:00.440 I mean, I mean, it's other is to it? Sweete 0:07:00.480 --> 0:07:03.960 and Tom Keane and we are after her conversation with 0:07:04.040 --> 0:07:08.360 the legend Kenny pulcarry over at the New York Stock Exchange. 0:07:08.480 --> 0:07:11.560 That's trader talk. That was yesterday Kay, what do you 0:07:11.640 --> 0:07:13.840 say to Ken Paul Caerry that you don't say to me. 0:07:13.960 --> 0:07:17.320 I mean that's like like in and out of the market, right, Yeah. 0:07:17.400 --> 0:07:21.040 Look, it is a good reminder that there's all these 0:07:21.040 --> 0:07:24.240 short term movements in markets that are driving the volatility 0:07:24.240 --> 0:07:26.480 that we're experiencing. But you have to keep the long 0:07:26.560 --> 0:07:29.440 term in mind, which is why we've been continuously saying 0:07:29.440 --> 0:07:31.400 to clients it's not where the S and P five 0:07:31.480 --> 0:07:33.680 hundred ends at the end of this year, it's what 0:07:33.720 --> 0:07:35.480 you do with the volatility along the way. 0:07:35.480 --> 0:07:38.320 We traders getting slammed as a general statement, I mean 0:07:38.400 --> 0:07:41.760 trying to gain this market right now, is anybody making money? 0:07:41.840 --> 0:07:45.760 Well, we've certainly seen traders move from being max long 0:07:45.800 --> 0:07:48.480 equities at the beginning of this year ninety eighth percentile 0:07:48.560 --> 0:07:50.840 kind of positioning to that's now fall into the twenty 0:07:50.880 --> 0:07:54.280 six percentile, So there's probably been some pain along the way. 0:07:54.400 --> 0:07:57.240 Paul Cary looks like out of Central Casting, Game of 0:07:57.320 --> 0:07:59.960 Thrones or Outlander or one of those things. I mean, 0:08:00.120 --> 0:08:01.720 this is he retired. 0:08:02.160 --> 0:08:03.840 No, he's trucking, he's trunckling. 0:08:04.440 --> 0:08:06.720 Good morning to Ken punk Car and everybody down with 0:08:06.800 --> 0:08:07.120 the New. 0:08:07.080 --> 0:08:09.800 York Salma bum this guy back in the day. Your 0:08:09.840 --> 0:08:12.680 note is the end of US exceptionalism? Is it the 0:08:12.760 --> 0:08:14.960 end of US exceptionalism? Or do we still have room 0:08:15.000 --> 0:08:15.280 to grow? 0:08:15.320 --> 0:08:15.920 What do you think? 0:08:16.360 --> 0:08:18.760 So what we what we wrote about is this idea 0:08:18.800 --> 0:08:21.600 is that it's very easy to ascribe a narrative to 0:08:21.640 --> 0:08:24.160 price action. Everybody looks at the weakness in the US 0:08:24.240 --> 0:08:26.600 dollar year to date, they look at the outperformance of 0:08:26.640 --> 0:08:29.880 Europe versus the rest of the of the US, and 0:08:30.000 --> 0:08:32.560 they say it must be the end of US exceptionalism. 0:08:32.840 --> 0:08:34.880 But if you look it really is a function of 0:08:34.920 --> 0:08:36.800 the fact that we started the year with a massive, 0:08:37.200 --> 0:08:40.680 very very crowded dollar long position that has since been unwound. 0:08:40.760 --> 0:08:44.280 Traders are now slightly short the dollar, and we actually 0:08:44.280 --> 0:08:47.640 think that you could see some dollars stability here now 0:08:47.679 --> 0:08:50.520 that you've burned off all of that crowded positioning. 0:08:50.960 --> 0:08:52.800 Interesting, So what do I mean when you talk to 0:08:52.840 --> 0:08:56.480 your clients here again, we had that peaked to trough 0:08:56.559 --> 0:08:57.880 draw down in the S and P five hundred of 0:08:57.920 --> 0:09:01.120 about ten percent. Did they view that as a healthy 0:09:01.679 --> 0:09:04.280 pullback in an otherwise positive market or is. 0:09:04.200 --> 0:09:04.840 It something else? 0:09:05.320 --> 0:09:08.240 We'd hope that we've talked to clients enough and set 0:09:08.320 --> 0:09:11.520 up the potential for volatility that there is a degree 0:09:11.520 --> 0:09:13.800 of calm when we see it. We often talk that 0:09:13.960 --> 0:09:17.320 volatility is a feature of being an equity investor and 0:09:17.360 --> 0:09:20.200 that we should see it as opportunity. Now we think 0:09:20.200 --> 0:09:22.240 the other reason why there's been this calm is that 0:09:22.280 --> 0:09:25.800 if you look at a seventy thirty portfolio for AQUI, 0:09:25.960 --> 0:09:30.160 so that's an international balance portfolio including the US and 0:09:30.240 --> 0:09:31.560 the AGG you're still. 0:09:31.400 --> 0:09:32.040 Up on the year. 0:09:32.240 --> 0:09:35.280 So, yes, we've seen the US stock market pull in, 0:09:35.360 --> 0:09:38.439 but the end of the day, it's not been cataclysmic. 0:09:38.600 --> 0:09:41.720 Are we getting used asked Michael dart I alluded to 0:09:41.760 --> 0:09:44.920 this with Michael Data more directly with Cam Dawson. Are 0:09:44.960 --> 0:09:48.040 we needing to slot in the understanding that equities are 0:09:48.080 --> 0:09:52.240 a single digit return in our double digit return addiction? 0:09:52.600 --> 0:09:55.400 Yeah, I think that that's very very likely. Is that 0:09:56.040 --> 0:09:58.480 we've been in this world a very strong double digit 0:09:58.520 --> 0:10:02.320 returns the last two years. Investors got conditioned to expecting that, 0:10:02.400 --> 0:10:05.679 which is why you saw these estimates for seven thousand 0:10:05.720 --> 0:10:08.360 plus in the S and P. Five hundred. That's very 0:10:08.400 --> 0:10:10.520 hard to do when you start the year at twenty 0:10:10.520 --> 0:10:13.040 two point six times forward earnings you start the year 0:10:13.080 --> 0:10:15.080 at the ninetieth percent tile of positioning. 0:10:15.400 --> 0:10:16.920 So our best case. 0:10:16.720 --> 0:10:19.800 Scenario for twenty twenty five is that you get growth 0:10:20.240 --> 0:10:23.760 upside that's equivalent to earnings growth. But that assumes that 0:10:23.880 --> 0:10:27.000 multiple stay constant, and we're not sure if you get 0:10:27.120 --> 0:10:30.079 multiple stay in constant in a world where you're cutting 0:10:30.120 --> 0:10:32.640 earning sestaments and there's some risk off flavor. 0:10:33.040 --> 0:10:35.360 How about Europe's had a heck of a start to 0:10:35.400 --> 0:10:38.480 the year here and that story we had heard kind 0:10:38.520 --> 0:10:41.959 of last year where European and international money coming into 0:10:42.040 --> 0:10:44.280 the US market had a little bit of a reversal 0:10:44.320 --> 0:10:45.760 of that. How do you think about the performance of 0:10:45.800 --> 0:10:46.720 European equities? 0:10:46.800 --> 0:10:49.040 We do think that the easy part is over for 0:10:49.120 --> 0:10:52.240 European equities. You started at thirteen and a half times forward, 0:10:52.400 --> 0:10:55.840 now you're training at fifteen times. Fifteen times doesn't seem 0:10:55.880 --> 0:10:57.600 like a lot when you compare it to the twenty 0:10:57.640 --> 0:11:00.160 times in the US, but it is the high of 0:11:00.440 --> 0:11:03.080 the valuation range and the pre pandemic range for Europe. 0:11:03.120 --> 0:11:06.400 So it really comes down to earnings delivering. Quite interestingly, 0:11:06.600 --> 0:11:09.800 earnings for Europe have continuously been getting cut even as 0:11:09.840 --> 0:11:11.560 we've been seeing this rally so interesting. 0:11:11.640 --> 0:11:13.280 It's a show me story right now. 0:11:13.320 --> 0:11:15.360 The show me story is Cameron Dawson with us this 0:11:15.400 --> 0:11:17.319 morning with New Edge Wealthy. Welcome all of you in 0:11:17.360 --> 0:11:20.280 your commute across the nation. Good morning, ninety two nine 0:11:20.400 --> 0:11:25.079 FM in Boston, ninety nine one FM and Washington. Bloomberg 0:11:25.120 --> 0:11:28.040 eleven three to zero in New York. An ample conversation 0:11:28.160 --> 0:11:33.400 with Cam Dawson on YouTube. Subscribe to Bloomberg Podcast. Even 0:11:33.520 --> 0:11:35.160 Cam Dawson subscribed. 0:11:35.200 --> 0:11:38.040 It's just like savvy put us up to forty two 0:11:38.160 --> 0:11:41.160 is amazing exactly. You know, I'm looking at the relative 0:11:41.160 --> 0:11:43.640 strength index, the RSI on the Bloomberg Criminal for the 0:11:43.679 --> 0:11:47.280 S and P five hundred. Man, we kind of bottomed 0:11:47.320 --> 0:11:50.240 back just like ten days ago, but now we're moving 0:11:50.320 --> 0:11:50.760 higher here. 0:11:50.800 --> 0:11:52.880 I mean, how did these technicals feel? It feels like 0:11:53.880 --> 0:11:55.760 is the sell off? Are we done with this cell 0:11:55.800 --> 0:11:57.880 off here? Or how's that? How do you think about it? 0:11:57.920 --> 0:12:00.200 So we certainly got over sold enough to bounce, which 0:12:00.200 --> 0:12:03.119 is why we think we're bouncing today and yesterday. 0:12:03.600 --> 0:12:06.000 What the question is what happens. 0:12:05.520 --> 0:12:09.319 When you hit resistance and are you having enough momentum 0:12:09.360 --> 0:12:11.800 to break through that wall of resistance which we think 0:12:11.880 --> 0:12:14.360 is around the fifty nine hundred and six thousand level 0:12:14.600 --> 0:12:17.679 that you're downward sloping fifty day moving average. You have 0:12:17.760 --> 0:12:20.800 been losing momentum in this market really for the last 0:12:21.000 --> 0:12:24.200 nine months. If you look at things like a weekly MACD. 0:12:24.400 --> 0:12:27.480 So we do think that this is an environment that 0:12:27.600 --> 0:12:29.400 you could roll at resistance, you're going to. 0:12:29.320 --> 0:12:30.959 Go right there because I hate it. I hate I'm 0:12:31.000 --> 0:12:33.080 not a MACD fan. Folks who won't go into the 0:12:33.600 --> 0:12:37.640 nuances of it. Sixteen hundred Pennsylvania is not looking at 0:12:37.640 --> 0:12:41.160 the weekly mac D. I mean they're not. The bottom 0:12:41.200 --> 0:12:45.600 line is we can't lift until we get political clarity 0:12:45.800 --> 0:12:46.920 right exactly. 0:12:47.320 --> 0:12:49.960 Why would we trade back up to all time highs 0:12:50.000 --> 0:12:53.679 when we've cut earnings estimates since and we have valuations 0:12:53.679 --> 0:12:55.920 that would have to go to new highs to get there, 0:12:55.960 --> 0:12:58.680 Which is why we think this year at best is 0:12:58.720 --> 0:13:02.160 that wide choppy rain. Because of the degree of uncertainty 0:13:02.240 --> 0:13:05.119 and because of the potential downsides to growth, it's depressing. 0:13:05.640 --> 0:13:08.560 MAG seven. Are they still the MAG seven? Even ex Tesla. 0:13:08.800 --> 0:13:10.520 We've been raising the question if they're more like the 0:13:10.600 --> 0:13:12.880 LAG seven we talked I think last week. 0:13:12.920 --> 0:13:15.080 Do you see a lessening of their cash flow free 0:13:15.080 --> 0:13:15.600 cash flow. 0:13:16.280 --> 0:13:19.720 It is happening because of the big uptick within capex. 0:13:19.760 --> 0:13:22.679 You are seeing free cash flow margins come in. Now, 0:13:22.720 --> 0:13:25.000 these free cash flow margins are still so much better 0:13:25.040 --> 0:13:27.000 than you can get in the rest of the market exactly. 0:13:27.200 --> 0:13:29.280 So do they become a safe haven when people have 0:13:29.400 --> 0:13:32.720 questions about growth o their places? Very possibly. The valuations 0:13:32.720 --> 0:13:35.680 aren't in stretches. They are, but the market cares about 0:13:35.720 --> 0:13:38.360 second derivatives. The market cares about the slow down in 0:13:38.400 --> 0:13:41.600 earnings growth, which is inevitable when they had such massive 0:13:41.640 --> 0:13:43.000 earnings growth over the past two years. 0:13:43.040 --> 0:13:45.560 But you said the free cash flow will sustain even 0:13:45.600 --> 0:13:48.440 if earnings come down, But it is. I mean, Zuckerberg 0:13:48.520 --> 0:13:51.199 is going to manage the P and L statement right. 0:13:51.160 --> 0:13:54.360 And they're sitting on massive, huge cash balances as well 0:13:54.400 --> 0:13:56.800 that they could deploy to repurchase shares. 0:13:56.960 --> 0:13:59.680 So sore they the new Deminian Electric? You're too young 0:13:59.720 --> 0:14:02.120 to know that? Would you get me someone in here 0:14:02.320 --> 0:14:05.360 older that actually knows what D is? Are they the 0:14:05.360 --> 0:14:07.080 new utility? 0:14:07.440 --> 0:14:08.760 That is an interesting question. 0:14:08.760 --> 0:14:12.680 If they become such monopolized businesses that they are effective utilities, 0:14:12.840 --> 0:14:15.079 then it raises the question of do they get regulated 0:14:15.120 --> 0:14:18.080 like utilities do, and do we see those free cashlow 0:14:18.120 --> 0:14:22.160 margins compress over time because of the fact that they 0:14:22.240 --> 0:14:23.200 act like utilities. 0:14:23.280 --> 0:14:25.240 I mean, Paul, you're the only one to extend in 0:14:25.240 --> 0:14:27.720 this building that knows what Florida Power and Light is. 0:14:28.040 --> 0:14:29.960 Dominion Energy based in Richmond, Virginia. 0:14:29.960 --> 0:14:32.840 Home dividend grow exactly. 0:14:33.760 --> 0:14:36.280 Earnings are important for this market because I'm not sure 0:14:36.320 --> 0:14:38.080 the FED is going to give us a whole lot 0:14:38.080 --> 0:14:40.920 this year, maybe one, maybe two rate cuts, so that 0:14:40.960 --> 0:14:43.720 puts more even more pressure on earning story. And you 0:14:43.760 --> 0:14:46.720 mentioned that earnings estimates are coming down. How risk are 0:14:46.720 --> 0:14:47.600 the numbers that are out there? 0:14:47.600 --> 0:14:48.320 Do you think so? 0:14:48.480 --> 0:14:52.240 We think the biggest risk is possibly within financials. You've 0:14:52.280 --> 0:14:55.760 been seeing every sector get cut. Financials have seen less, 0:14:55.760 --> 0:14:59.360 earnings revisions lower. But think about the setup for financials 0:14:59.360 --> 0:15:02.200 coming out of the LI people said a steeper yield curve. 0:15:02.240 --> 0:15:05.720 We're getting M and A, we're getting IPOs, we're getting deregulation. 0:15:05.880 --> 0:15:07.080 We've gotten none of that. 0:15:07.320 --> 0:15:09.800 So we do wonder if that's an area of risk 0:15:09.840 --> 0:15:10.960 going into first quarter earning. 0:15:11.000 --> 0:15:14.880 Okay, Shanghai, good morning, good evening, I should say Shanghai, 0:15:15.080 --> 0:15:20.000 China this morning listening in is China the opportunity, Sophia 0:15:20.160 --> 0:15:22.600 Ross and Mike Darter, we're talking. 0:15:22.280 --> 0:15:25.880 About, well, China certainly has that valuation opportunity where it 0:15:25.960 --> 0:15:28.400 still trades such a huge discount to the US. 0:15:28.560 --> 0:15:31.240 It's underloved, it's been called on you're going back. 0:15:31.080 --> 0:15:35.160 To a textbook eight nine, twelve ten percent allocation to international. 0:15:35.640 --> 0:15:38.880 So we are neutral international. We've said, you just can't 0:15:38.920 --> 0:15:43.520 ignore the degree of outperformance in the US underperformance and international, 0:15:43.800 --> 0:15:46.320 but we don't see signs yet that justifies going to 0:15:46.400 --> 0:15:47.360 an overweight position. 0:15:47.680 --> 0:15:49.400 What are we doing in fixed income? Here? 0:15:49.440 --> 0:15:52.320 At my two year treasuries now back above four percent? 0:15:53.160 --> 0:15:54.840 Do I stay there? Do I take some credit risk? 0:15:54.880 --> 0:15:55.400 Where do I go? 0:15:55.760 --> 0:15:58.840 So we don't think again that you're getting compensated for 0:15:59.200 --> 0:16:02.120 mostly high yo credit risks. So we move to reduce 0:16:02.160 --> 0:16:05.000 some positioning within high yield just to say, you know, 0:16:05.080 --> 0:16:07.760 let's write out some of the equity volatility. But we 0:16:08.200 --> 0:16:10.480 want to be able to take some risk out of 0:16:10.520 --> 0:16:13.480 portfolios in the event that these growth fears do come 0:16:13.520 --> 0:16:14.040 to pass. 0:16:14.680 --> 0:16:17.240 So in the equity space, what screens well for you 0:16:17.280 --> 0:16:18.400 guys these days? 0:16:18.640 --> 0:16:22.280 So we are finding lots of opportunities within international markets, 0:16:22.280 --> 0:16:26.400 but very selectively in that big, beautiful quality world. We're 0:16:26.440 --> 0:16:30.160 finding opportunities within mid caps as well, and then value 0:16:30.360 --> 0:16:33.560 lots of opportunities where you still see areas of the 0:16:33.600 --> 0:16:36.520 market that create it, discounts that have good free cash flows, 0:16:36.600 --> 0:16:40.600 have good balance sheets, and it's just maintaining that valuation discipline. 0:16:40.200 --> 0:16:42.360 Which we think is absolutely critical. At one point. 0:16:42.480 --> 0:16:45.640 What's the key attribute of those opportunities. 0:16:46.240 --> 0:16:48.560 The key attribute is that they are not trading at 0:16:48.560 --> 0:16:52.160 stretch valuations, and they have stable learnings through cycles, and 0:16:52.280 --> 0:16:55.120 they have good free cash flow that is potentially seeing 0:16:55.120 --> 0:16:56.440 better free cash flow margins. 0:16:56.480 --> 0:16:58.360 So it's about being very picky. 0:16:58.520 --> 0:17:00.960 We think that there's a big divert between the winners 0:17:01.000 --> 0:17:02.760 and the losers in this kind of environment. 0:17:02.960 --> 0:17:06.159 This guy in Shanghai, it's child abuse. He's got his 0:17:06.320 --> 0:17:10.240 four year olds watching it. Look at that in Shanghai. 0:17:10.280 --> 0:17:13.000 Can you see it, folks, that's cruel and unusual. 0:17:13.119 --> 0:17:15.359 Crash man blocking shalans in the morning. 0:17:15.440 --> 0:17:18.960 Full disclosure, folks, it's my grandchildren. We send good morning 0:17:19.440 --> 0:17:23.840 to the rugrats in Shanghai this morning. But you know, 0:17:23.840 --> 0:17:26.440 agatting back to the international and Pacific rim, I got 0:17:26.440 --> 0:17:28.879 too much gloom out there. I got guest after guests 0:17:29.359 --> 0:17:33.639 read me the uncertainty act. It clears at some point. 0:17:33.840 --> 0:17:37.480 How do you prepare for the moment where the uncertainty 0:17:37.560 --> 0:17:38.200 drifts away? 0:17:38.600 --> 0:17:41.439 Well, I don't think that you can wait for necessarily 0:17:41.480 --> 0:17:44.679 confirmation from the data. The important things is that price 0:17:44.720 --> 0:17:47.280 will lead the data, and so as we're starting to 0:17:47.320 --> 0:17:50.359 see some of these turns and trends, we have to 0:17:50.400 --> 0:17:52.399 be there, which is why we move to a neutral 0:17:52.400 --> 0:17:55.920 position within international about a year ago, saying it's going. 0:17:55.720 --> 0:17:57.720 To happen, you know maybe this time. 0:17:58.720 --> 0:18:00.760 So is our federal reserve to help us this year? 0:18:00.760 --> 0:18:02.880 Are you still kind of that's a question. 0:18:02.960 --> 0:18:04.040 A couple of cuts. 0:18:03.960 --> 0:18:07.000 All this talk, folks, Sweeny, just to ask the money. 0:18:06.840 --> 0:18:09.480 Question, we're not counting on the Fed for anything. We 0:18:09.520 --> 0:18:11.359 don't think that the labor market is going to be 0:18:11.400 --> 0:18:14.400 weak enough to justify them them cutting. We don't think 0:18:14.440 --> 0:18:16.879 that inflation is going to move down fast enough to 0:18:17.000 --> 0:18:20.560 give them the degrees of freedom to cut, which means 0:18:20.600 --> 0:18:23.159 that you get used to these higher for longer rates. 0:18:23.200 --> 0:18:25.800 And that's why we think that you have this continuous 0:18:25.840 --> 0:18:29.399 pressure on weak balance sheet companies that you should fade 0:18:29.440 --> 0:18:29.959 any strength. 0:18:30.040 --> 0:18:31.720 So what's your money unemployment rate? 0:18:33.200 --> 0:18:35.040 So we don't think that the FED will cut unless 0:18:35.080 --> 0:18:39.520 we see mid fours on the unemployment rate four point four, 0:18:39.560 --> 0:18:40.400 four four five. 0:18:42.880 --> 0:18:44.040 It's not that far away. 0:18:44.200 --> 0:18:45.639 It's not that far away. 0:18:45.760 --> 0:18:49.480 But we don't see this sharp deterioration in the labor 0:18:49.520 --> 0:18:52.200 market happening at this point. Yes, we see the sentiment 0:18:52.280 --> 0:18:56.119 around labor deteriorating, but we've not seen companies move to 0:18:56.160 --> 0:19:00.280 full out, full force layoffs that you just to just 0:19:00.359 --> 0:19:03.160 that there still is that underlying stability for now. 0:19:03.640 --> 0:19:05.240 Yeah, So, I mean it's interesting. 0:19:05.280 --> 0:19:08.119 I mean one of the questions is I think for 0:19:08.160 --> 0:19:10.560 a lot of people is do I take this pullback 0:19:10.600 --> 0:19:15.040 to buy stocks here or do I just more uncertainty 0:19:15.080 --> 0:19:17.960 out there, because it's just one tweet away from another 0:19:18.000 --> 0:19:18.879 pullback in the market. 0:19:19.000 --> 0:19:20.919 If you're buying stocks because you think it's going to 0:19:20.960 --> 0:19:23.240 be a v shape recovery and is up into the 0:19:23.320 --> 0:19:26.040 right with the volatility, it's the wrong move. But if 0:19:26.080 --> 0:19:28.119 you're buying stocks to say I'm going to own this 0:19:28.160 --> 0:19:30.320 for a long time, a step into volatility, we think 0:19:30.359 --> 0:19:31.320 you can still buy weakness. 0:19:31.520 --> 0:19:35.280 All of China's listening this morning to Cam Dawson. The 0:19:35.480 --> 0:19:40.040