1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hortenn. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:35,840 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. 10 00:00:36,360 --> 00:00:38,040 Speaker 3: All right, let's talk a little bit here about the 11 00:00:38,080 --> 00:00:40,720 Speaker 3: outlook for equities, particularly as a lot of people look 12 00:00:40,760 --> 00:00:43,480 Speaker 3: at this bullmarket and wonder whether it can continue into 13 00:00:43,520 --> 00:00:46,440 Speaker 3: twenty twenty five. Price targets are coming in for the 14 00:00:46,560 --> 00:00:48,519 Speaker 3: new year, and we should point out price targets for 15 00:00:48,600 --> 00:00:51,760 Speaker 3: the past year, well, they were light. John Sofas though 16 00:00:51,800 --> 00:00:53,680 Speaker 3: he was always bullish, and he had a good eye 17 00:00:53,720 --> 00:00:55,960 Speaker 3: on what he saw and what he thought we would 18 00:00:55,960 --> 00:00:58,280 Speaker 3: get in twenty twenty four. And now he's out with 19 00:00:58,320 --> 00:01:00,680 Speaker 3: his note for twenty twenty five, seeing that the bullmarket 20 00:01:00,720 --> 00:01:03,080 Speaker 3: has more room to run, writing that the pivot to 21 00:01:03,160 --> 00:01:07,160 Speaker 3: easier monetary policy we believe supports our vue that the 22 00:01:07,200 --> 00:01:11,280 Speaker 3: market for US equities is still mid cycle, and he 23 00:01:11,280 --> 00:01:13,520 Speaker 3: says that the technology led double digit gains of the 24 00:01:13,600 --> 00:01:16,000 Speaker 3: large cap stocks over the first three quarters of twenty 25 00:01:16,040 --> 00:01:19,720 Speaker 3: twenty four, likely to broaden out to other sectors, styles, 26 00:01:19,959 --> 00:01:22,920 Speaker 3: and market caps in twenty twenty five. Please say that 27 00:01:23,000 --> 00:01:25,319 Speaker 3: John joins us right now here on the big program, 28 00:01:25,480 --> 00:01:28,479 Speaker 3: kicking us off here on this December thirty first. Happy 29 00:01:28,480 --> 00:01:30,360 Speaker 3: new year to you, John, and let's talk about those 30 00:01:30,360 --> 00:01:33,560 Speaker 3: forecasts going forward. What supports some of these targets I'm 31 00:01:33,560 --> 00:01:36,560 Speaker 3: seeing targets come in now, including yours, into the sixes, 32 00:01:36,600 --> 00:01:39,520 Speaker 3: into the seven thousands for the S and P five hundred. 33 00:01:39,560 --> 00:01:41,720 Speaker 3: Is this all earnings driven or are we going to 34 00:01:41,720 --> 00:01:45,520 Speaker 3: see some multiple expansion as a part of that as well. 35 00:01:46,680 --> 00:01:48,880 Speaker 4: Great to be on surveillance this morning with you, and 36 00:01:48,960 --> 00:01:51,880 Speaker 4: happy new year to you and the whole Bloomberg team 37 00:01:51,960 --> 00:01:55,640 Speaker 4: as well. I must say that with US it's a combination. 38 00:01:56,160 --> 00:01:58,440 Speaker 4: It's always you want to see revenue growth. 39 00:01:58,320 --> 00:02:00,920 Speaker 5: You want to see earnings grow of that's what matters 40 00:02:00,960 --> 00:02:01,880 Speaker 5: most of the market. 41 00:02:02,160 --> 00:02:06,400 Speaker 4: But I think overall there's room for multiple expansion to 42 00:02:06,440 --> 00:02:11,040 Speaker 4: play a role in here the private investor over the 43 00:02:11,080 --> 00:02:13,280 Speaker 4: years I've been in this business for forty one years 44 00:02:13,600 --> 00:02:18,000 Speaker 4: has changed a lot over the years, and with what 45 00:02:18,040 --> 00:02:21,440 Speaker 4: has taken effect in terms of retirement planning over the 46 00:02:21,480 --> 00:02:24,080 Speaker 4: course of the last forty years in which we've seen 47 00:02:24,120 --> 00:02:26,359 Speaker 4: to find benefit pension. 48 00:02:25,960 --> 00:02:28,880 Speaker 5: Plans go by the wayside social security. 49 00:02:28,960 --> 00:02:32,400 Speaker 4: The amount of income that it can provide or what 50 00:02:32,520 --> 00:02:37,400 Speaker 4: percentage it provides an individual of income during retirement means 51 00:02:37,400 --> 00:02:40,720 Speaker 4: people have to invest more. So we think many private 52 00:02:40,760 --> 00:02:45,080 Speaker 4: investors today, instead of investing in five stocks for the 53 00:02:45,120 --> 00:02:49,440 Speaker 4: actionable idea of the day, are investing much like institutions 54 00:02:49,520 --> 00:02:53,560 Speaker 4: would for intermediate to longer term goals, and we think 55 00:02:53,600 --> 00:02:57,760 Speaker 4: that supports higher multiples. While on the other hand, we 56 00:02:57,840 --> 00:03:03,160 Speaker 4: think the effects of technology on all eleven sectors that 57 00:03:03,240 --> 00:03:06,800 Speaker 4: has been shown since the financial crisis crisis right up 58 00:03:06,800 --> 00:03:09,840 Speaker 4: to date through the pandemic and now with AI in 59 00:03:09,880 --> 00:03:13,160 Speaker 4: the process, offers a lot of opportunity here we'll see 60 00:03:13,200 --> 00:03:14,400 Speaker 4: equities move higher. 61 00:03:15,120 --> 00:03:17,480 Speaker 3: We'll expand a little bit here on that theme of AI. 62 00:03:17,600 --> 00:03:19,120 Speaker 3: That was a big part of the trade that we 63 00:03:19,120 --> 00:03:21,000 Speaker 3: saw in the market, certainly in the first half of 64 00:03:21,040 --> 00:03:23,440 Speaker 3: the year. A lot of questions though towards the second 65 00:03:23,480 --> 00:03:25,720 Speaker 3: half of the year about when we start to see 66 00:03:25,880 --> 00:03:28,160 Speaker 3: the material gains from that on the bottom line, on 67 00:03:28,200 --> 00:03:30,239 Speaker 3: the top line for that matter as well. We see 68 00:03:30,240 --> 00:03:32,960 Speaker 3: that in twenty twenty five, John, I. 69 00:03:32,880 --> 00:03:35,080 Speaker 5: Think what we'll begin to see it more and more 70 00:03:36,040 --> 00:03:36,440 Speaker 5: this year. 71 00:03:36,480 --> 00:03:40,440 Speaker 4: It's been primarily the amount of investment that has been 72 00:03:40,520 --> 00:03:45,200 Speaker 4: made in AI, both from within the technology sector itself 73 00:03:45,240 --> 00:03:48,440 Speaker 4: but in the other sectors by managements that want to 74 00:03:48,480 --> 00:03:55,120 Speaker 4: remain very vibrant and effective in attracting investors' attention in 75 00:03:55,200 --> 00:03:59,080 Speaker 4: terms of creating greater efficiencies for revenue and earnings grows 76 00:03:59,280 --> 00:04:01,480 Speaker 4: and on the other and we think it's the consumer 77 00:04:02,280 --> 00:04:04,440 Speaker 4: is going to be a big part of the upgrade 78 00:04:04,840 --> 00:04:06,680 Speaker 4: that began. 79 00:04:08,040 --> 00:04:09,200 Speaker 5: This year and. 80 00:04:09,360 --> 00:04:13,200 Speaker 4: Likely will gain some traction in twenty twenty five and 81 00:04:13,280 --> 00:04:14,000 Speaker 4: on forward. 82 00:04:14,280 --> 00:04:16,080 Speaker 5: But all this stuff takes a bit of time. 83 00:04:16,760 --> 00:04:22,760 Speaker 4: But for investors who have patients, are diversified, know what 84 00:04:22,800 --> 00:04:25,520 Speaker 4: they own, why they own it, and have right sized 85 00:04:25,600 --> 00:04:32,719 Speaker 4: expectations about how different asset classes, different sectors cyclicals versus defensive, etc. 86 00:04:33,839 --> 00:04:35,280 Speaker 5: Operate, this looks. 87 00:04:35,080 --> 00:04:39,320 Speaker 4: Like a time of both opportunity and risk, and the 88 00:04:39,320 --> 00:04:43,200 Speaker 4: main thing is to have some tolerance for fluctuation and 89 00:04:43,240 --> 00:04:47,360 Speaker 4: a tolerance for risk that is realistic and right sized. 90 00:04:49,320 --> 00:04:51,719 Speaker 1: John, how much of the bull case is dependent on 91 00:04:51,960 --> 00:04:54,680 Speaker 1: capital flows from the rest of the world and the 92 00:04:54,760 --> 00:04:57,839 Speaker 1: absence of kind of economic resilience in Europe or China. 93 00:04:58,240 --> 00:05:01,599 Speaker 1: Do you see international investors bolstering the US market maybe 94 00:05:01,600 --> 00:05:02,960 Speaker 1: more so than domestic. 95 00:05:03,360 --> 00:05:05,240 Speaker 5: Gosh, you know, that's an awfully good question. 96 00:05:05,600 --> 00:05:08,760 Speaker 4: I think over the years we've seen private investors from 97 00:05:08,760 --> 00:05:12,200 Speaker 4: abroad increase their exposure to the US. 98 00:05:12,640 --> 00:05:13,360 Speaker 5: A lot of that. 99 00:05:13,480 --> 00:05:18,719 Speaker 4: Because of the influence of the technology sector, with the 100 00:05:18,760 --> 00:05:24,520 Speaker 4: innovation that occurs here at the in the design stage 101 00:05:24,680 --> 00:05:28,520 Speaker 4: of technology. But in addition to that, you know, the 102 00:05:29,440 --> 00:05:33,279 Speaker 4: factor is in an uncertain world, the US strength of 103 00:05:33,320 --> 00:05:37,800 Speaker 4: the US dollar also attracts foreign investors to invest in 104 00:05:37,839 --> 00:05:42,640 Speaker 4: the US, while meantime central banks and sovereign wealth funds 105 00:05:42,720 --> 00:05:46,080 Speaker 4: may actually stay at home. Many of those foreign funds, 106 00:05:46,560 --> 00:05:51,000 Speaker 4: we think it's the individuals will continue to invest for 107 00:05:51,040 --> 00:05:54,919 Speaker 4: diversification in the US. But John, you. 108 00:05:54,960 --> 00:05:58,159 Speaker 1: Mentioned that point of the dollar, that it attracts international investors, 109 00:05:58,160 --> 00:06:02,480 Speaker 1: doesn't it disincentivize bid so an investor in say Japan, 110 00:06:02,640 --> 00:06:06,840 Speaker 1: hypothetically that maybe wanted that realm of safety or kind 111 00:06:06,839 --> 00:06:11,080 Speaker 1: of innovative technology technological exposure. Maybe looks at the strength 112 00:06:11,080 --> 00:06:13,239 Speaker 1: of the dollar in three months time, it says, actually, 113 00:06:13,400 --> 00:06:14,279 Speaker 1: this isn't worth it. 114 00:06:15,360 --> 00:06:18,239 Speaker 4: Well, actually, we would have to say that the strength 115 00:06:18,240 --> 00:06:21,960 Speaker 4: of the dollar is relative. And I think where with 116 00:06:22,120 --> 00:06:24,880 Speaker 4: the dollar strength where it is right now, for instance, 117 00:06:25,480 --> 00:06:30,479 Speaker 4: it almost disincentivizes US investors from investing abroad because the 118 00:06:30,520 --> 00:06:33,800 Speaker 4: foreign currencies are weak or versus the US dollar. On 119 00:06:33,839 --> 00:06:37,279 Speaker 4: the other hand, for foreign investors where their currency is 120 00:06:37,320 --> 00:06:42,440 Speaker 4: weak versus the US, investment in the US enhances dividends, 121 00:06:42,600 --> 00:06:48,599 Speaker 4: enhances gains because investing in a stronger currency helps your 122 00:06:48,600 --> 00:06:51,839 Speaker 4: performance if you're a foreign investor with a weaker currency 123 00:06:52,360 --> 00:06:55,600 Speaker 4: when you reconcile your trades, or you don't get a 124 00:06:55,640 --> 00:06:58,560 Speaker 4: loss in translation but gaining in translation. 125 00:06:59,320 --> 00:07:01,080 Speaker 3: I am curious on here if you can talk a 126 00:07:01,120 --> 00:07:04,120 Speaker 3: little bit here about how some of the policy decisions 127 00:07:04,320 --> 00:07:08,000 Speaker 3: that we're expecting out of Washington could affect the performance 128 00:07:08,040 --> 00:07:11,400 Speaker 3: of financial markets. And I want to start specifically on 129 00:07:11,440 --> 00:07:14,040 Speaker 3: the teriff's side, because there are some concerns about the 130 00:07:14,080 --> 00:07:18,320 Speaker 3: bottom line effects on corporations and obviously the inflationary effects 131 00:07:18,360 --> 00:07:19,040 Speaker 3: on consumers. 132 00:07:20,440 --> 00:07:24,679 Speaker 4: I have to say, Romaine that the greatest concern relating 133 00:07:24,720 --> 00:07:28,720 Speaker 4: to tariffs, of course, is on the traditional sense of tariffs. 134 00:07:28,720 --> 00:07:34,720 Speaker 4: Everybody can remember tariffs presaging the Great Depression at all. 135 00:07:35,320 --> 00:07:38,960 Speaker 4: But the effect of tariffs during the first Trump administration 136 00:07:39,200 --> 00:07:42,960 Speaker 4: and during the Biden administration, when he actually kept many 137 00:07:43,000 --> 00:07:47,880 Speaker 4: of the Trump tariffs and even increased them, was not 138 00:07:48,040 --> 00:07:52,240 Speaker 4: anywhere near as concern as might have been expected. We 139 00:07:52,320 --> 00:07:56,880 Speaker 4: think the idea of some of the numbers that are 140 00:07:56,920 --> 00:07:59,840 Speaker 4: thrown around by the President elect in terms of what 141 00:08:00,160 --> 00:08:03,360 Speaker 4: might impose on tariffs, much of this, we would think 142 00:08:03,480 --> 00:08:07,040 Speaker 4: is part of that art of the deal approach that 143 00:08:07,680 --> 00:08:12,960 Speaker 4: the President elect takes when negotiating. But the other side 144 00:08:12,960 --> 00:08:15,800 Speaker 4: of it is, if you consider the US economy versus 145 00:08:16,200 --> 00:08:19,640 Speaker 4: producing economies, of all the goods that our consumers buy, 146 00:08:19,760 --> 00:08:24,360 Speaker 4: both businesses consumers as well as individuals, we're buyers of 147 00:08:24,480 --> 00:08:28,640 Speaker 4: size and so we're a very attractive place to sell 148 00:08:28,680 --> 00:08:31,400 Speaker 4: your goods to, which might mean there's more wiggle room 149 00:08:32,120 --> 00:08:35,960 Speaker 4: for countries that want to sell into our country or 150 00:08:36,600 --> 00:08:41,320 Speaker 4: be export goods to us to win our import dollars. 151 00:08:40,880 --> 00:08:43,240 Speaker 5: So to speak. And we think it'll be interesting to 152 00:08:43,240 --> 00:08:44,360 Speaker 5: see how that works out. 153 00:08:44,480 --> 00:08:46,840 Speaker 4: But we think most of the talk on the tariffs 154 00:08:47,520 --> 00:08:51,560 Speaker 4: based on the cabinet and the experience of the cabinet, 155 00:08:51,559 --> 00:08:56,040 Speaker 4: as well as the president's experience after having had four 156 00:08:56,120 --> 00:08:59,680 Speaker 4: years in office prior to this. We think it'll be 157 00:09:00,120 --> 00:09:05,280 Speaker 4: more of the bark, will be louder and much more 158 00:09:06,520 --> 00:09:09,720 Speaker 4: create more fear than the actual bite. And we also 159 00:09:09,760 --> 00:09:13,720 Speaker 4: think the negotiations will probably work out better because countries 160 00:09:13,760 --> 00:09:15,800 Speaker 4: are going to look to want to keep the US 161 00:09:16,160 --> 00:09:17,680 Speaker 4: as a major source of. 162 00:09:20,040 --> 00:09:21,680 Speaker 5: Their exports. 163 00:09:21,960 --> 00:09:25,560 Speaker 3: John great stuff as always always insightful all year long, 164 00:09:25,640 --> 00:09:27,760 Speaker 3: and we expect that as well in twenty twenty five. 165 00:09:27,880 --> 00:09:30,120 Speaker 3: Have a happy new year. John Stolf is there over 166 00:09:30,240 --> 00:09:34,240 Speaker 3: at Oppenheimer Bloomberg survey showing that right now, the average 167 00:09:34,320 --> 00:09:36,400 Speaker 3: the median price target right now for the S and 168 00:09:36,440 --> 00:09:39,600 Speaker 3: P to end next year right around sixty six hundred. 169 00:09:39,679 --> 00:09:42,200 Speaker 3: The highest estimate in that survey came from the man 170 00:09:42,200 --> 00:09:45,679 Speaker 3: we were just talking to, seventy one hundred Chrety. We 171 00:09:45,720 --> 00:09:49,480 Speaker 3: talk about this idea here of whether expectations heading into 172 00:09:49,520 --> 00:09:52,360 Speaker 3: twenty twenty five are going to match up in the 173 00:09:52,400 --> 00:09:54,920 Speaker 3: same way that we saw with those low to high 174 00:09:54,960 --> 00:10:07,920 Speaker 3: expectations in twenty twenty two. We do want to turn 175 00:10:07,960 --> 00:10:10,600 Speaker 3: our attention right now to the commodity space. And specifically 176 00:10:10,760 --> 00:10:14,120 Speaker 3: energy oil markets. Well, they're pushing higher here in the 177 00:10:14,200 --> 00:10:17,240 Speaker 3: last trading session of the year, this after we got 178 00:10:17,280 --> 00:10:20,480 Speaker 3: a report that factory activity in China did expand for 179 00:10:20,600 --> 00:10:24,760 Speaker 3: a third straight month. Pablo mulchinoff over at Raymond James. 180 00:10:24,840 --> 00:10:27,640 Speaker 3: He's looking ahead to next year. He says that, well, 181 00:10:27,640 --> 00:10:31,800 Speaker 3: they're forecasting oil prices to be largely range bound. However, 182 00:10:32,160 --> 00:10:35,320 Speaker 3: the main energy story of twenty twenty five, which was 183 00:10:35,400 --> 00:10:38,320 Speaker 3: also the main story of twenty twenty four, is set 184 00:10:38,360 --> 00:10:42,280 Speaker 3: to be electricity rather than oil. Pablo joins us right 185 00:10:42,320 --> 00:10:44,520 Speaker 3: now to talk a little bit more about that, and Pablo, 186 00:10:44,800 --> 00:10:46,560 Speaker 3: let's talk about it here. I mean, if you had 187 00:10:46,559 --> 00:10:48,120 Speaker 3: told me coming into this year that some of the 188 00:10:48,160 --> 00:10:51,600 Speaker 3: biggest gains in the equity market would be utility and 189 00:10:51,640 --> 00:10:54,079 Speaker 3: power companies, I would have said you're crazy. But here 190 00:10:54,120 --> 00:10:56,320 Speaker 3: we are at the end of twenty twenty four talking 191 00:10:56,360 --> 00:11:00,200 Speaker 3: about utilities and power companies that continue to continue to 192 00:11:00,200 --> 00:11:01,079 Speaker 3: be the story next year. 193 00:11:02,440 --> 00:11:07,040 Speaker 6: Yeah, and this is the derivative trade on AI. So 194 00:11:07,160 --> 00:11:12,080 Speaker 6: the euphoria around AI touches what we might call the 195 00:11:12,200 --> 00:11:16,760 Speaker 6: picks and shovels of the electric power industry. So the 196 00:11:16,880 --> 00:11:22,840 Speaker 6: utility stocks, the equipment provider, So everything from you know, 197 00:11:22,920 --> 00:11:29,640 Speaker 6: guest turbindes, wind turbines, solar panels, battery systems, and also 198 00:11:29,800 --> 00:11:34,520 Speaker 6: the construction companies that are physically building all of this 199 00:11:35,480 --> 00:11:41,000 Speaker 6: energy infrastructure to accommodate the boom in electric power consumption. 200 00:11:41,679 --> 00:11:44,080 Speaker 3: Well, we talk about the building of this infrastructure, and 201 00:11:44,080 --> 00:11:46,680 Speaker 3: you have obviously new infrastructure coming on here in the US, 202 00:11:46,720 --> 00:11:50,520 Speaker 3: we have old infrastructure, old nuclear plants coming back online. Here. 203 00:11:51,240 --> 00:11:54,240 Speaker 3: Is there enough out there, I guess if you will 204 00:11:54,960 --> 00:11:57,080 Speaker 3: for these companies to draw on or are we going 205 00:11:57,120 --> 00:12:01,880 Speaker 3: to be facing significant shortages in power given some of 206 00:12:01,920 --> 00:12:04,360 Speaker 3: the demand needs out there that we know of, at 207 00:12:04,400 --> 00:12:06,480 Speaker 3: least when it comes to all computing and AI. 208 00:12:07,679 --> 00:12:12,000 Speaker 6: Well, our listeners do not need to worry about, you know, 209 00:12:12,160 --> 00:12:16,520 Speaker 6: physically running out of electricity. You know at any point 210 00:12:16,600 --> 00:12:19,760 Speaker 6: in the foreseeable future that that's not going to happen. 211 00:12:20,520 --> 00:12:25,719 Speaker 6: What is true is that power prices are already trending up. 212 00:12:25,800 --> 00:12:29,000 Speaker 6: In fact, they've been up since pre COVID by about 213 00:12:29,040 --> 00:12:33,600 Speaker 6: twenty five percent, and we should expect power prices to 214 00:12:33,760 --> 00:12:38,400 Speaker 6: continue moving higher in part because of the additional demand 215 00:12:38,640 --> 00:12:42,319 Speaker 6: from the data center build out. And look, let's also 216 00:12:42,400 --> 00:12:47,000 Speaker 6: keep in mind the geographic differences here, the bulk of 217 00:12:47,120 --> 00:12:49,760 Speaker 6: the data center, or the largest portion of the data 218 00:12:49,760 --> 00:12:55,479 Speaker 6: center buildout is happening around Washington, d C, Northern Virginia, Maryland, 219 00:12:56,160 --> 00:12:59,200 Speaker 6: a little bit into Ohio. You know, there's not as 220 00:12:59,280 --> 00:13:03,000 Speaker 6: much happening in the western half of the US. There's also, 221 00:13:03,040 --> 00:13:07,280 Speaker 6: by the way, data center build out AI related in Europe, 222 00:13:07,480 --> 00:13:08,760 Speaker 6: in parts of China. 223 00:13:09,160 --> 00:13:10,800 Speaker 7: So this is a global story. 224 00:13:11,160 --> 00:13:15,920 Speaker 6: By nor did Virginia has the largest portion, so naturally 225 00:13:16,080 --> 00:13:21,240 Speaker 6: that's where the infrastructure needs to move forward at the 226 00:13:21,280 --> 00:13:24,560 Speaker 6: fastest pace pavel. 227 00:13:24,640 --> 00:13:27,760 Speaker 1: When I first learned about how utility grids worked, I 228 00:13:27,800 --> 00:13:29,800 Speaker 1: was pretty surprised to learn that you can use both 229 00:13:29,800 --> 00:13:32,600 Speaker 1: oil and natural gas, and sometimes natural gas can be 230 00:13:32,679 --> 00:13:36,440 Speaker 1: cheaper in utility grids as well. There's a big conversation 231 00:13:36,480 --> 00:13:39,080 Speaker 1: in the US right now about exporting a lot of 232 00:13:39,160 --> 00:13:42,120 Speaker 1: extra natural gas and energy to Europe. But if you 233 00:13:42,200 --> 00:13:45,800 Speaker 1: see this AI data center buildout in the US, do 234 00:13:45,880 --> 00:13:47,200 Speaker 1: those flows get redirected? 235 00:13:49,679 --> 00:13:54,400 Speaker 6: Natural gas going to Europe will be limited not so 236 00:13:54,640 --> 00:14:00,560 Speaker 6: much by the ability of American gas for NEWS to 237 00:14:00,720 --> 00:14:05,840 Speaker 6: pump as much as they want, but rather by Europe's need. 238 00:14:05,520 --> 00:14:07,400 Speaker 7: To import LNG. 239 00:14:07,640 --> 00:14:11,840 Speaker 6: And here's why I say that since Russian invaded Ukraine 240 00:14:11,840 --> 00:14:17,760 Speaker 6: three years ago, Europe's consumption of natural gas is down 241 00:14:17,920 --> 00:14:21,520 Speaker 6: by fifteen percent. I'm not talking about down fifteen percent 242 00:14:21,560 --> 00:14:26,560 Speaker 6: from Russia. I mean that's practically at zero. By overall, 243 00:14:26,720 --> 00:14:29,760 Speaker 6: Europe is using fifteen percent less natural gas. 244 00:14:29,800 --> 00:14:31,520 Speaker 7: So guess what that means? 245 00:14:31,840 --> 00:14:37,480 Speaker 6: Less need for natural gas from any source you know, US, Katar, 246 00:14:37,800 --> 00:14:42,320 Speaker 6: Norway and Azerbaijan and so forth. So that's really where 247 00:14:42,360 --> 00:14:44,920 Speaker 6: the constraint is going to come from. 248 00:14:45,360 --> 00:14:48,360 Speaker 1: So there's no necessarily relationship between the natural gas needs 249 00:14:48,360 --> 00:14:51,120 Speaker 1: of Europe or the natural gas needs of other folks 250 00:14:51,200 --> 00:14:53,840 Speaker 1: in the United States versus say, the AI build out. 251 00:14:54,960 --> 00:15:00,600 Speaker 6: We have plenty of natural gas in North America to both. 252 00:15:01,160 --> 00:15:06,080 Speaker 6: So natural gas will certainly play a role, particularly in 253 00:15:06,120 --> 00:15:10,360 Speaker 6: the eastern half of the US to support the data 254 00:15:10,360 --> 00:15:13,640 Speaker 6: center boom. Now in the western half of the contraries, 255 00:15:13,720 --> 00:15:16,800 Speaker 6: I said, AI is less of a factor. But keep 256 00:15:16,800 --> 00:15:19,840 Speaker 6: in mind we also need to replace cold planks that 257 00:15:19,880 --> 00:15:22,760 Speaker 6: are being retired, and this is why we're going to 258 00:15:22,760 --> 00:15:26,960 Speaker 6: be following an all of the above strategy for the 259 00:15:27,040 --> 00:15:34,160 Speaker 6: electricity mix natural gas, wind, solar, and in certain cases, 260 00:15:35,080 --> 00:15:38,200 Speaker 6: but also long lead times nuclear as well. 261 00:15:38,760 --> 00:15:41,080 Speaker 3: I am curious though, Pavel, do you think that at 262 00:15:41,120 --> 00:15:44,600 Speaker 3: least here in the US, that government policies coming out 263 00:15:44,640 --> 00:15:47,360 Speaker 3: of this new administration will be supportive of some of 264 00:15:47,440 --> 00:15:51,360 Speaker 3: those renewable energy initiatives like wind, nuclear, et cetera. 265 00:15:53,760 --> 00:15:57,040 Speaker 6: Number one thing we need to understand about government policy 266 00:15:57,120 --> 00:15:59,560 Speaker 6: as it relates to electric power is that it is 267 00:15:59,600 --> 00:16:01,880 Speaker 6: preductinently at the state. 268 00:16:01,640 --> 00:16:03,600 Speaker 7: Level rather than the federal level. 269 00:16:03,800 --> 00:16:09,440 Speaker 6: Electric utilities are regulated by state level utility commissions. There 270 00:16:09,520 --> 00:16:12,960 Speaker 6: is a little bit of a role played by FERK 271 00:16:13,720 --> 00:16:17,080 Speaker 6: and the Department of Energy in Washington, but number one 272 00:16:17,480 --> 00:16:20,000 Speaker 6: is the state level regulation. 273 00:16:20,240 --> 00:16:23,560 Speaker 7: So here's an interesting fact for some of your listeners. 274 00:16:24,040 --> 00:16:32,200 Speaker 6: Twenty nine states have a renewable portfolio mandate for electric utilities, including, 275 00:16:32,280 --> 00:16:38,680 Speaker 6: by the way, some red states like Texas, Missouri, and Montana. 276 00:16:39,720 --> 00:16:42,840 Speaker 3: Yeah, and abition to see whether that holds and how 277 00:16:42,840 --> 00:16:46,280 Speaker 3: that interplay between those states and the federal government goes forward. 278 00:16:46,400 --> 00:16:48,200 Speaker 3: I do want to ask you a much more straightforward 279 00:16:48,280 --> 00:16:52,120 Speaker 3: question about the oil market, and particularly about the mobility 280 00:16:52,440 --> 00:16:55,720 Speaker 3: of oil. Obviously, there are a lot of concerns about 281 00:16:55,760 --> 00:16:59,480 Speaker 3: geopolitical issues and the disruption flows of oil. You have 282 00:16:59,520 --> 00:17:02,000 Speaker 3: the wars obviously going on in the Middle East, and 283 00:17:02,080 --> 00:17:05,720 Speaker 3: elsewhere that have also disrupted the flow of oil. Do 284 00:17:05,800 --> 00:17:09,080 Speaker 3: you see any sort of right sizing in that next 285 00:17:09,160 --> 00:17:11,359 Speaker 3: year or are these sort of I guess issues that 286 00:17:11,359 --> 00:17:13,680 Speaker 3: are going to just remain lingering for a good portion 287 00:17:13,760 --> 00:17:14,160 Speaker 3: of the year. 288 00:17:16,280 --> 00:17:19,639 Speaker 6: For the past twelve months, we have had two major 289 00:17:19,720 --> 00:17:22,360 Speaker 6: wars Russia Ukraine and of course. 290 00:17:22,160 --> 00:17:23,800 Speaker 7: What's happening in the Middle East. 291 00:17:24,880 --> 00:17:30,520 Speaker 6: Despite that, oil prices have barely moved since January twenty 292 00:17:30,560 --> 00:17:34,320 Speaker 6: twenty four. Or why because we also have to take 293 00:17:34,359 --> 00:17:37,320 Speaker 6: into account what's going on with demand, and demand has 294 00:17:37,400 --> 00:17:41,119 Speaker 6: been weaker than expected, in large part because of China. 295 00:17:41,640 --> 00:17:46,479 Speaker 6: So number one question for next year is not so 296 00:17:46,600 --> 00:17:52,000 Speaker 6: much geopolitics, it's good old fashioned supplying demand. What's going 297 00:17:52,040 --> 00:17:55,560 Speaker 6: on in China with the economy, and by the way, 298 00:17:55,680 --> 00:17:59,360 Speaker 6: with electric vehicle sales. Half of China's auto sales are 299 00:17:59,400 --> 00:18:03,399 Speaker 6: now electric. That's a big deal. We're also watching the dollar, 300 00:18:04,000 --> 00:18:09,280 Speaker 6: strengthening dollar as we have seen pressures commodity prices across 301 00:18:09,280 --> 00:18:10,600 Speaker 6: the board, including oil. 302 00:18:11,440 --> 00:18:14,000 Speaker 7: And the third thing we're watching is OPAK. 303 00:18:14,160 --> 00:18:20,000 Speaker 6: Opak has been very disciplined since COVID with supply. At 304 00:18:20,040 --> 00:18:24,040 Speaker 6: some point in twenty twenty five, OPAK will begin to 305 00:18:24,600 --> 00:18:30,280 Speaker 6: unwind its production cuts, which means more barrels on the market, 306 00:18:30,680 --> 00:18:34,040 Speaker 6: and that may put some pressure on the price of 307 00:18:34,119 --> 00:18:34,920 Speaker 6: oil as well. 308 00:18:35,800 --> 00:18:39,000 Speaker 3: All Right, Pablo Krits Pablo Mulchanov over at Raymond James 309 00:18:39,040 --> 00:18:41,360 Speaker 3: a closer look here at the energy market the outlook 310 00:18:41,400 --> 00:18:53,199 Speaker 3: for twenty twenty five. We begin this hour, though, with 311 00:18:53,280 --> 00:18:56,400 Speaker 3: equity futures sitting on modest gains, stops hoping to snap 312 00:18:56,440 --> 00:18:59,679 Speaker 3: a three day losing streak. Here on the final trading 313 00:18:59,760 --> 00:19:03,760 Speaker 3: day of twenty twenty four, the SMP having a wonderful year, 314 00:19:03,800 --> 00:19:06,760 Speaker 3: a blistering year, the index up about twenty four percent. 315 00:19:07,320 --> 00:19:09,960 Speaker 3: Matt miskin O of John Hancock seen a limit though, 316 00:19:10,320 --> 00:19:12,800 Speaker 3: to further gains, writing that it's going to be hard 317 00:19:12,880 --> 00:19:16,480 Speaker 3: for equities to stomach much more upside. While we still 318 00:19:16,520 --> 00:19:19,360 Speaker 3: prefer US equities based on the better fundamentals, we recognize 319 00:19:19,400 --> 00:19:22,399 Speaker 3: the magnitude of outperformance in twenty twenty four is not 320 00:19:22,720 --> 00:19:26,000 Speaker 3: likely to be replicated. Matt joined us right now to 321 00:19:26,040 --> 00:19:28,280 Speaker 3: talk a little bit more about that outlook. And Matt, 322 00:19:28,960 --> 00:19:31,960 Speaker 3: maybe we don't see the same gains we saw in 323 00:19:32,000 --> 00:19:34,760 Speaker 3: twenty twenty three and in twenty twenty four, but should 324 00:19:34,800 --> 00:19:38,080 Speaker 3: we expect at least some meaningful gains in twenty twenty five. 325 00:19:39,400 --> 00:19:42,199 Speaker 8: It's certainly possible romaine, but what we're seeing here is 326 00:19:42,280 --> 00:19:46,119 Speaker 8: heavy is the crown really for US equity leadership and 327 00:19:46,400 --> 00:19:51,400 Speaker 8: US economic leadership. Frankly, after certain stints like this where 328 00:19:51,600 --> 00:19:55,760 Speaker 8: US economy is just blown past most global economies, the 329 00:19:55,880 --> 00:19:58,320 Speaker 8: US stallar has strengthened a lot, so it's up about 330 00:19:58,359 --> 00:20:01,520 Speaker 8: six percent in twenty twenty four. A stronger dollar makes 331 00:20:01,600 --> 00:20:04,359 Speaker 8: US less competitive on a global basis. It helps actually 332 00:20:04,400 --> 00:20:07,639 Speaker 8: bring down inflation because we're buying stuff from abroad, but 333 00:20:07,760 --> 00:20:12,160 Speaker 8: it is difficult to stomach for economic purposes. Then rates 334 00:20:12,200 --> 00:20:14,520 Speaker 8: have been higher, so we have high quality bond yields 335 00:20:14,560 --> 00:20:16,920 Speaker 8: ten ye yields higher on the year. That's a bit 336 00:20:16,960 --> 00:20:21,080 Speaker 8: of a slowdown. And then there's massive expectations out of 337 00:20:21,119 --> 00:20:24,760 Speaker 8: the US economy and markets into twenty twenty five. So 338 00:20:24,800 --> 00:20:26,960 Speaker 8: the earnings estimates for twenty twenty five for the S 339 00:20:27,000 --> 00:20:29,879 Speaker 8: and P five hundred are still about fifteen percent, so 340 00:20:29,920 --> 00:20:32,960 Speaker 8: there's a lot of optimism. One of the biggest assets 341 00:20:33,000 --> 00:20:34,760 Speaker 8: the S and P five hundred and US large cap 342 00:20:34,800 --> 00:20:37,240 Speaker 8: stocks have had over the last several years has been 343 00:20:37,800 --> 00:20:43,080 Speaker 8: conservative and more kind of bearish sentiment the sentiment dial 344 00:20:43,160 --> 00:20:46,760 Speaker 8: has been turned up significantly to end twenty twenty four. 345 00:20:47,040 --> 00:20:49,119 Speaker 8: We think that's becoming a bit of a liability as 346 00:20:49,119 --> 00:20:50,200 Speaker 8: we walk into next year. 347 00:20:50,240 --> 00:20:52,760 Speaker 3: Well, that's what I am confused about here. We talk 348 00:20:52,800 --> 00:20:55,160 Speaker 3: about how crowded some of these trades are. We talk 349 00:20:55,200 --> 00:20:57,280 Speaker 3: about the lack of hedging that we're seeing in the 350 00:20:57,280 --> 00:21:01,000 Speaker 3: equity space, and the idea that you have valuations at 351 00:21:01,080 --> 00:21:03,080 Speaker 3: least to some of these companies that at least by 352 00:21:03,119 --> 00:21:05,439 Speaker 3: historical standards, would be stretched. I know there are some 353 00:21:05,440 --> 00:21:08,879 Speaker 3: people that want to reinterpret history, But what do you 354 00:21:09,000 --> 00:21:12,200 Speaker 3: do in that situation? Do you reallocate, do you stand 355 00:21:12,200 --> 00:21:14,360 Speaker 3: by your conviction that maybe some of those stocks can 356 00:21:14,440 --> 00:21:15,040 Speaker 3: go high or what? 357 00:21:16,359 --> 00:21:21,000 Speaker 8: Yeah, momentum is not a fundamental factor, and momentum was 358 00:21:21,040 --> 00:21:24,240 Speaker 8: the number one way to outperform, the only way to outperform, 359 00:21:24,280 --> 00:21:27,080 Speaker 8: frankly in twenty twenty four. So what is momentum. It 360 00:21:27,119 --> 00:21:29,240 Speaker 8: means you look at the best performing stocks of the 361 00:21:29,280 --> 00:21:31,840 Speaker 8: last six to twelve months and you allocate. 362 00:21:31,400 --> 00:21:35,440 Speaker 7: The most of those. So basically, chasing performance was rewarded 363 00:21:35,480 --> 00:21:36,320 Speaker 7: in twenty twenty four. 364 00:21:36,640 --> 00:21:39,560 Speaker 8: But to your point, Romain, there's other things that drive 365 00:21:39,640 --> 00:21:43,840 Speaker 8: stock markets, whether it's valuations, whether it's earnings, and that 366 00:21:44,119 --> 00:21:46,800 Speaker 8: those parts of the market have been left behind this year, 367 00:21:46,840 --> 00:21:48,880 Speaker 8: and there's a bit of a dog's of the Dow 368 00:21:49,480 --> 00:21:53,639 Speaker 8: type formula where usually the worst performers can sometimes become 369 00:21:53,680 --> 00:21:57,000 Speaker 8: the best performers in the subsequent year this year ending 370 00:21:57,080 --> 00:22:00,439 Speaker 8: this year, the dogs of the Dow kind of mantra 371 00:22:00,560 --> 00:22:04,320 Speaker 8: looks more realistic as a potential turnaround or catalyst into 372 00:22:04,320 --> 00:22:05,800 Speaker 8: twenty twenty five because. 373 00:22:05,600 --> 00:22:08,920 Speaker 7: We are so stretched on the valuations. We're at about. 374 00:22:08,760 --> 00:22:10,720 Speaker 8: Twenty two times on four pe on the S and 375 00:22:10,720 --> 00:22:13,080 Speaker 8: P five hundred, the highest in history at least the 376 00:22:13,160 --> 00:22:16,040 Speaker 8: last thirty years has been twenty four not there's about 377 00:22:16,119 --> 00:22:19,160 Speaker 8: nine percent upside we can get on valuations. Earnings estimate's 378 00:22:19,160 --> 00:22:22,200 Speaker 8: already great. Dimmiting yields are the lowest in history. So 379 00:22:22,359 --> 00:22:24,879 Speaker 8: to your point, it's hard to eke out gains in 380 00:22:24,960 --> 00:22:26,240 Speaker 8: the more expensive stuff. 381 00:22:26,359 --> 00:22:28,520 Speaker 7: The better value stuff come around. 382 00:22:28,600 --> 00:22:31,880 Speaker 9: Yeah, sorry, why do you believe that In the essence 383 00:22:31,960 --> 00:22:34,960 Speaker 9: of when you see sell offs happening, you're seeing a 384 00:22:34,960 --> 00:22:37,600 Speaker 9: lot of babies thrown out with the bathwater here. And 385 00:22:37,680 --> 00:22:40,520 Speaker 9: if you believe that maybe some of these underperformers can 386 00:22:40,560 --> 00:22:43,760 Speaker 9: come back next year, how much of a risk is 387 00:22:43,800 --> 00:22:48,120 Speaker 9: there that just risk appetite alone goes along with it. 388 00:22:48,840 --> 00:22:51,280 Speaker 8: Yeah, that's the tie that lifts all boats and the 389 00:22:51,359 --> 00:22:54,320 Speaker 8: risk appetite. But what we're seeing look is into next 390 00:22:54,359 --> 00:22:58,080 Speaker 8: year there's just hard to get more valuation upside on 391 00:22:58,119 --> 00:23:00,879 Speaker 8: the other parts. It's not necessarily call that they're bad 392 00:23:01,040 --> 00:23:03,080 Speaker 8: companies that there are going to see this, you know, 393 00:23:03,119 --> 00:23:06,080 Speaker 8: really bad performance. It's more just saying the multiples can 394 00:23:06,119 --> 00:23:07,560 Speaker 8: expand in more like mid. 395 00:23:07,400 --> 00:23:09,639 Speaker 7: Cap stocks and small cap stocks first. 396 00:23:09,720 --> 00:23:13,800 Speaker 8: Large cap stocks internationally also has been really a tough 397 00:23:13,800 --> 00:23:17,560 Speaker 8: performance year. European equities are only up about two percent 398 00:23:17,600 --> 00:23:21,280 Speaker 8: and US dollar basis, they're very cheap still, so what 399 00:23:21,320 --> 00:23:24,159 Speaker 8: we could see is just a rotation or even I 400 00:23:24,200 --> 00:23:27,280 Speaker 8: would say downside protection because the valuations are so much 401 00:23:27,320 --> 00:23:30,320 Speaker 8: more attractive. See, those are the types. We're just trying 402 00:23:30,320 --> 00:23:32,639 Speaker 8: to manage risk the best we can. And frankly, the 403 00:23:32,720 --> 00:23:34,560 Speaker 8: high flyers don't look good to us because of the 404 00:23:34,640 --> 00:23:37,240 Speaker 8: valuations and part of the value space that's deep value, 405 00:23:37,280 --> 00:23:39,840 Speaker 8: the earnings aren't is good. We're trying to apply quality 406 00:23:39,920 --> 00:23:43,400 Speaker 8: at a reasonable price as our mantra into twenty twenty five. 407 00:23:43,480 --> 00:23:45,560 Speaker 9: So then is the best way to hedge the equity market, 408 00:23:45,600 --> 00:23:48,159 Speaker 9: in essence, the equity market, because if you're looking at 409 00:23:48,160 --> 00:23:50,560 Speaker 9: the volatility in the bond market, is that really a 410 00:23:50,600 --> 00:23:51,720 Speaker 9: place to go hide. 411 00:23:52,800 --> 00:23:55,440 Speaker 8: We think it will be into twenty twenty five. Inflation 412 00:23:55,760 --> 00:23:58,800 Speaker 8: is likely to come down. Inflation is the nemesis of 413 00:23:58,840 --> 00:24:03,359 Speaker 8: that bond market inverse correlation. Really that hasn't been around 414 00:24:03,400 --> 00:24:06,640 Speaker 8: for the last year or two. But inflation has come 415 00:24:06,680 --> 00:24:08,400 Speaker 8: back a bit to end the year. We think that's 416 00:24:08,440 --> 00:24:11,080 Speaker 8: more sentiment driven. Do you think that comes back down? 417 00:24:11,160 --> 00:24:14,560 Speaker 8: It's twenty twenty five, and really it goes back to housing. 418 00:24:14,600 --> 00:24:16,800 Speaker 8: I mean, we're going to get some housing price data today. 419 00:24:16,880 --> 00:24:21,000 Speaker 8: We're really dialed into mortgage apps housing price data. Housing 420 00:24:21,080 --> 00:24:23,640 Speaker 8: made up about sixty to seventy percent of the inflation 421 00:24:23,800 --> 00:24:26,400 Speaker 8: narrative over the last several years. If that can slow 422 00:24:26,480 --> 00:24:29,840 Speaker 8: down it into twenty twenty five, inflation comes down, bonds 423 00:24:29,960 --> 00:24:33,200 Speaker 8: act like bonds again, and if that happens, a balanced 424 00:24:33,280 --> 00:24:38,000 Speaker 8: portfolio really can look much better from a diversification benefit 425 00:24:38,080 --> 00:24:39,440 Speaker 8: standpoint into next year. 426 00:24:40,280 --> 00:24:42,080 Speaker 3: Matt, I want to go back to something you just said. 427 00:24:42,080 --> 00:24:43,520 Speaker 3: It kind of startled me. One of the great things 428 00:24:43,520 --> 00:24:45,280 Speaker 3: about having a Bloomberg termo in front of me is 429 00:24:45,280 --> 00:24:47,000 Speaker 3: I can kind of check everything on the fly. 430 00:24:47,080 --> 00:24:48,080 Speaker 7: About dogs of the Dow. 431 00:24:48,359 --> 00:24:50,600 Speaker 3: They were dogs all year long here, I mean, I 432 00:24:50,640 --> 00:24:52,359 Speaker 3: was just taking a look at the dogs coming into 433 00:24:52,400 --> 00:24:56,680 Speaker 3: this year. We're talking about underperformance by about what twenty 434 00:24:56,680 --> 00:24:59,119 Speaker 3: five percentage points relative to the S and P five hundred, 435 00:24:59,160 --> 00:25:01,200 Speaker 3: just to use that as a comparison. And I'm looking 436 00:25:01,240 --> 00:25:02,919 Speaker 3: at some of the ones that will probably be the 437 00:25:02,960 --> 00:25:05,199 Speaker 3: dogs going into next year. I guess the ones with 438 00:25:05,200 --> 00:25:08,560 Speaker 3: the highest dividend yields, like of Verizon, Chevron, am Jen 439 00:25:08,640 --> 00:25:10,880 Speaker 3: and Johnson and Johnson to say the least. I mean, 440 00:25:11,040 --> 00:25:13,040 Speaker 3: some of these names were the same dogs coming into 441 00:25:13,200 --> 00:25:15,600 Speaker 3: this year. And I am curious as to whether this 442 00:25:15,680 --> 00:25:18,320 Speaker 3: is also about sentiment and attention. If all the attention 443 00:25:18,640 --> 00:25:21,680 Speaker 3: is on tech and AI and other things, like, why 444 00:25:21,680 --> 00:25:24,760 Speaker 3: should I expect anyone to really embrace a healthcare stock 445 00:25:24,880 --> 00:25:28,120 Speaker 3: or even just a consumer staple stock or a telecom stock. 446 00:25:29,440 --> 00:25:32,080 Speaker 8: Yeah, so momentum, like I said, was the best performer, 447 00:25:32,119 --> 00:25:34,679 Speaker 8: and all the other other factors did not work, so 448 00:25:34,720 --> 00:25:37,720 Speaker 8: you had to chase performance. If this is not a 449 00:25:37,800 --> 00:25:40,679 Speaker 8: year of a rotation, it's got to be the nineteen nineties. 450 00:25:40,680 --> 00:25:43,840 Speaker 8: Oliver again, So there's only been three other times where 451 00:25:43,840 --> 00:25:47,200 Speaker 8: there's been double digit or sorry, twenty five percent back 452 00:25:47,240 --> 00:25:51,439 Speaker 8: to back games like we're looking at here. Potentially the 453 00:25:51,480 --> 00:25:53,679 Speaker 8: only time it went three years in a row was 454 00:25:53,760 --> 00:25:56,480 Speaker 8: in nineteen ninety nine. So we're gonna have to kind 455 00:25:56,480 --> 00:25:59,040 Speaker 8: of bring out the popcorn and watch maybe some Jurassic 456 00:25:59,119 --> 00:26:02,520 Speaker 8: Park or Friends, or we're gonna have to get our 457 00:26:02,600 --> 00:26:06,080 Speaker 8: nineties culture back. But nineteen ninety nine. You gotta be 458 00:26:06,080 --> 00:26:07,920 Speaker 8: careful what you wish for because if we do get 459 00:26:07,920 --> 00:26:12,520 Speaker 8: that third year where it's another moment, sorry, oh, another 460 00:26:12,560 --> 00:26:16,359 Speaker 8: moment go ahead some year, it's going to be tough 461 00:26:16,480 --> 00:26:18,280 Speaker 8: because then you got to be careful what you wish for, 462 00:26:18,320 --> 00:26:20,880 Speaker 8: because then we got the last decade after that, so 463 00:26:20,920 --> 00:26:23,679 Speaker 8: we would start to peel back that momentum trade and 464 00:26:23,760 --> 00:26:26,960 Speaker 8: rotate into higher quality but value parts of the market. 465 00:26:27,040 --> 00:26:29,159 Speaker 3: I mean one thing though, too, about those comparison with 466 00:26:29,200 --> 00:26:31,680 Speaker 3: the nineties, and a lot of people will make this comparison, 467 00:26:31,680 --> 00:26:33,720 Speaker 3: which is the idea that in the nineties you were 468 00:26:33,760 --> 00:26:35,399 Speaker 3: dealing with a lot of companies that just did not 469 00:26:35,560 --> 00:26:40,200 Speaker 3: necessarily have the fundamentals to support those valuations. We talk 470 00:26:40,240 --> 00:26:42,439 Speaker 3: about a market and I checked it this morning, seventy 471 00:26:42,440 --> 00:26:44,720 Speaker 3: percent of the gains, the point gains in the S 472 00:26:44,720 --> 00:26:48,720 Speaker 3: and P five hundred attributed pretty much now to about 473 00:26:49,000 --> 00:26:51,359 Speaker 3: nine socks, basically the MAG seven and a couple on 474 00:26:51,400 --> 00:26:53,439 Speaker 3: top of that. But all of these are names that 475 00:26:53,480 --> 00:26:59,280 Speaker 3: are just cash monsters. In Vidia, Apple, Amazon, broc On, Meta, Tesla, Microsoft, Alphabet, JP, Morgan, Netflix, 476 00:26:59,480 --> 00:27:01,840 Speaker 3: those are man I. 477 00:27:01,800 --> 00:27:04,719 Speaker 8: Agree, No, we've been overweight tech. We've got that, but 478 00:27:04,920 --> 00:27:07,720 Speaker 8: it's just hard to see the same kind of return 479 00:27:07,960 --> 00:27:10,560 Speaker 8: stream that we've gotten out of them into next year. 480 00:27:10,640 --> 00:27:13,760 Speaker 8: You know, you can only do outsize return. There is 481 00:27:13,840 --> 00:27:16,399 Speaker 8: reversion of the mean over time usually with markets, and 482 00:27:16,440 --> 00:27:19,719 Speaker 8: we're in the most concentrated market in history by a 483 00:27:20,040 --> 00:27:24,280 Speaker 8: huge factor. So forty percent of the market is just 484 00:27:24,320 --> 00:27:26,520 Speaker 8: in those top ten stocks. And I'm talking about the 485 00:27:26,560 --> 00:27:28,960 Speaker 8: SMP five pointer. That's never happened before. It's never even 486 00:27:28,960 --> 00:27:31,840 Speaker 8: been close to this high before. So reversion of the 487 00:27:31,840 --> 00:27:34,639 Speaker 8: mean would suggest that at some point those trillion dollar 488 00:27:34,760 --> 00:27:37,639 Speaker 8: megacap companies have already built in the valuation. So that 489 00:27:37,720 --> 00:27:40,520 Speaker 8: was great cash flows. I'm not saying, look, we've got 490 00:27:40,600 --> 00:27:42,560 Speaker 8: it in the portfolio. We've got a bit of an 491 00:27:42,560 --> 00:27:44,520 Speaker 8: overweight relative to other parts of the market. 492 00:27:44,640 --> 00:27:47,679 Speaker 7: Yeah, but going into next year chasing it doesn't make 493 00:27:47,720 --> 00:27:48,560 Speaker 7: a lot of sense to us. 494 00:27:48,720 --> 00:27:52,359 Speaker 8: Finding other opportunities cross a portfolio, other acid classes makes 495 00:27:52,359 --> 00:27:53,000 Speaker 8: more sense. 496 00:27:52,840 --> 00:27:53,320 Speaker 5: In our view. 497 00:27:53,480 --> 00:27:56,159 Speaker 3: Matt Miskan over at John Hancock. Happy New Year to you. 498 00:27:56,240 --> 00:27:58,240 Speaker 3: We'll catch up with you in twenty twenty five. 499 00:27:59,119 --> 00:28:02,680 Speaker 2: This is the burg Surveillance Podcast, bringing you the best 500 00:28:02,720 --> 00:28:06,040 Speaker 2: in markets, economics, angio politics. You can watch the show 501 00:28:06,080 --> 00:28:09,040 Speaker 2: live on Bloomberg TV weekday mornings from six am to 502 00:28:09,160 --> 00:28:12,920 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 503 00:28:13,080 --> 00:28:15,280 Speaker 2: or anywhere else you listen, and as always, on the 504 00:28:15,320 --> 00:28:17,760 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.