Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: The FMC began it's today FED meeting. Of course, we
Speaker 2: get the decision tomorrow. So let's see what doctor Stephen
Speaker 2: Skanky has to say. He's back with US Chief Economic
Speaker 2: Advisor at Keele Point. He's a former US Treasury in
Speaker 2: White House National Security Council member. He's on Zoom in Washington,
Speaker 2: DC and Steve Matthews writing about the FED and the
Speaker 2: clash of FED hawks and doves deepening Steve, of course
Speaker 2: his Bloomberg News economics reporter, Steve Matthews in our DC bureau.
Speaker 2: And let's just set the backdrop, doctor Skanky. Let me
Speaker 2: start with you. What are you anticipating or what's important
Speaker 2: about the FED meeting to mar because we pretty much
Speaker 2: expect we're going to get another quarter point rate hike
Speaker 2: unanimous or not.
Speaker 3: Yeah, I think that's right, Carol, And it is great
Speaker 3: to have you back, Tim, and congratulations, thank you, you know,
Speaker 3: on your family.
Speaker 2: He's helping out the economy. He's helping out the economy.
Speaker 3: That's wonderful. That's exactly what we need. And you know,
Speaker 3: build up that later force potential down the way, all.
Speaker 4: At the service of the economy.
Speaker 5: Thank you.
Speaker 6: Also, truly, though, Carrol, you make a funny point on
Speaker 6: supporting a local economy. I mean, I really saw the
Speaker 6: balance of spending shift from being in midtown right to
Speaker 6: being in low local neighborhood where it's like, you know,
Speaker 6: Tuesday through Friday is like a weekend during the week.
Speaker 2: I bet right. Because of all this the stuff you
Speaker 2: guys were all right, So doctor Skanky, Steve Skanky, what
Speaker 2: do you expect the Fed? What's important about tomorrow's decision?
Speaker 3: Well, I think the twenty five basis point increase, which
Speaker 3: which takes it to a twenty two year high on
Speaker 3: the FED funds rate, is baked in, and I think
Speaker 3: it's also probably highly likely that they're going to continue
Speaker 3: to indicate a bias toward further increases. This is the
Speaker 3: hawkish view coming out absence significant improvement on inflation. And
Speaker 3: the thing is they can do that. I mean, they
Speaker 3: truly are emboldened. The hawks in particular are inbolded by
Speaker 3: the fact that we stick out a robust labor market.
Speaker 3: We still have about a two to one ratio of
Speaker 3: vacancies to unemployed. There's a positive earnings outlook. Over the
Speaker 3: next twelve months, the earnings decline typically in this this
Speaker 3: sort of environment would be earnings growth would be down
Speaker 3: eighteen percent. It's down about six strong consumer balance sheet.
Speaker 3: You probably saw that the consumer net worth is bounced
Speaker 3: back up to one hundred and fifty two trillion, which
Speaker 3: is what it was at its eye, and the S
Speaker 3: and B is up eighteen percent year to date. What
Speaker 3: has the FED got to lose by not getting head
Speaker 3: faked again on declining inflation?
Speaker 4: Okay, so sure they're going to be.
Speaker 3: Hawkysh there's no percentage for them to look like their sophety.
Speaker 6: Well, let's talk about that divide. And for that we
Speaker 6: turned to Bloomberg News economics reporter Steve Matthews. From Steven
Speaker 6: to Steve, he's in our DC bureau. Steve, you wrote
Speaker 6: about the cracks inside the FED deepening. Right now, what
Speaker 6: are the doves saying?
Speaker 7: So?
Speaker 5: I think the big picture here is everyone was hawkish
Speaker 5: over really the last year and really last year in
Speaker 5: three months because we had high inflation, we had low unemployment,
Speaker 5: and so there was great unity around the FOMC table.
Speaker 5: And now as we're reaching the end of the hiking cycle,
Speaker 5: which you know, a lot of Wall Street believes that
Speaker 5: tomorrow's hike is going to be the very last one,
Speaker 5: you're starting to see a split. On the side of
Speaker 5: the hawks, people like Chris Waller, the governor, and Jim Bullard,
Speaker 5: who's retiring, Loretta Mester of Cleveland. They are saying, you know,
Speaker 5: we want to avoid the nineteen seventies inflation again, and
Speaker 5: we're going to do whatever's necessary, and we'd rather err
Speaker 5: on the side of doing too much, and we have
Speaker 5: too hot of a labor market, and until that starts
Speaker 5: to show some cracks, we're going to have too much inflation.
Speaker 5: On the side of the doves, people like Raphael Bostick
Speaker 5: and Austin Goules. Bostick from the Atlanta Fed, Gulesby from
Speaker 5: the Chicago Fed are saying, basically, let's not overdo it.
Speaker 5: And you know what, the problem with the inflation over
Speaker 5: the last two years is not that we've had too
Speaker 5: much demand. It that, you know, we've had a pandemic
Speaker 5: and the pandemic has changed the economy, and you've had
Speaker 5: all supply disruptions and all these you know, disruptive changes,
Speaker 5: and that's what inflation is about. So we don't really
Speaker 5: need necessarily have to overdo it.
Speaker 2: It feels like Goldilocks and the three Feds, to be
Speaker 2: quite honest with you, I mean, what's great is too
Speaker 2: I don't know if you guys read the editorial by
Speaker 2: Bloomberg editors. It's a Bloomberg opinion piece, but they remind
Speaker 2: us that if you look at the so called core CPO,
Speaker 2: still four point eight percent higher in June than a
Speaker 2: year ago. Right, And so if you know, Steve Skanky,
Speaker 2: if the FED is truly committed to two percent, and
Speaker 2: this opinion piece says, the FED shouldn't settle for above
Speaker 2: target inflation. If two percent is the real target, then
Speaker 2: we have to be careful, or the FED has to
Speaker 2: be careful about pulling off the brakes right too early
Speaker 2: and then inflation rearing its ugly head again, Housing starting
Speaker 2: to come back again, wage pressures, wage inflation still an issue.
Speaker 3: Well, that's right, but when we look at the June
Speaker 3: CPI number of core prices were up only zero point
Speaker 3: one six month over a month, which is equivalent to
Speaker 3: slightly less than two percent on an annualized basis, And
Speaker 3: I'd be the first to caution against trying to extrapolate
Speaker 3: too much from a one month move, but it's an
Speaker 3: indication that they can actually achieve their goal, and as
Speaker 3: I said, there's no gain for them to back off
Speaker 3: from it at this point, and given how well other
Speaker 3: things are doing, I think they will air on the
Speaker 3: side of certainly hawkish rhetoric now. I also happen to
Speaker 3: think that the twenty five BIPs announced tomorrow will be
Speaker 3: their last, but I don't think that they're going to
Speaker 3: say that it's their last. They want to keep the
Speaker 3: attention focused on their mandate and their plan to bring
Speaker 3: it down, and so I think that's why. Notwithstanding and
Speaker 3: I don't disagree with Steve Matthew's observations about the split,
Speaker 3: we even saw a little bit of that with the
Speaker 3: San Francisco FED president in pointing out how much the
Speaker 3: Fed had done already when you add the quantitative tightening
Speaker 3: on top of the interest rate increases. But they don't
Speaker 3: want to look like they're giving up on it yet,
Speaker 3: even though I don't think we're going to see any
Speaker 3: more interest rate increases.
Speaker 2: So Steve Matt oh sorry, ah, no, no, no, go ahead,
Speaker 2: just quickly.
Speaker 7: Yeah.
Speaker 3: The other thing that's out there is over the last
Speaker 3: felve months we've had M two money supply down four percent.
Speaker 3: We haven't seen that since the nineteen thirties now, and
Speaker 3: we know that that has on average an eighteen percent lag.
Speaker 3: There's in the economics profession, there's a lot of folks
Speaker 3: that say, oh, money supply doesn't matter anymore. But I
Speaker 3: don't think it's a coincidence that after we raise the
Speaker 3: money supply thirty four percent in the immediate post pandemic period,
Speaker 3: that we got inflation at nine percent, you know, fifteen
Speaker 3: months ago. Yeah, and when you look at when this
Speaker 3: basically started, about March or April of next year, is
Speaker 3: is when we would expect when we could expect that
Speaker 3: to start to bite.
Speaker 2: Right, Hey, hang on a six, Steve, just twenty five seconds.
Speaker 2: I say for you, unemployment doesn't it have to go
Speaker 2: up though for inflation to come down very quickly.
Speaker 5: There's a debate about that. You know, certainly the center
Speaker 5: of the committee, including Chair Pale, believes it does have
Speaker 5: to go up, that it's that we've overshot full employment
Speaker 5: and we need to get at least back to maybe
Speaker 5: four percent unemployment. Right, but you know, there are certainly
Speaker 5: people on the committee who say, you know, the Phillips
Speaker 5: curve relationship between unemployment and inflation is dad. We'll have
Speaker 5: to see.
Speaker 2: All right, Well, great story to Steve Matthews, economics reporter
Speaker 2: at Bloomberg News, doctor Steve Skanky, chief economic advisor at
Speaker 2: kel Point, and you are listening and watching Bloomberg Radio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 2: All right, we want to go back though to Microsoft.
Speaker 2: We just talked about their earnings coming out. As remain
Speaker 2: reminded me the guidance on the earnings call, that's pretty
Speaker 2: typical for the company. The stock now call it pretty
Speaker 2: much flat in the aftermarket, but we've seen it bouncing
Speaker 2: around in a big way with us right now to
Speaker 2: talk about it is CFR a Research senior equity analyst.
Speaker 2: Angelo's you know on zoom in New York City. And
Speaker 2: then Bloomberg Intelligence Senior Tech Analyst Ana Agrana Our Bloomberg
Speaker 2: Interactive Brokers Studio Anraag. I want to go straight to
Speaker 2: you first. I was listening kind of glued to surveillance
Speaker 2: this morning. What do you make of Microsoft?
Speaker 8: I think everything is slightly above what people were expecting.
Speaker 8: But the big question is what is going to be
Speaker 8: the cloud guidance for next quarter? And you know, does
Speaker 8: it mark the I would say, the bottom in the
Speaker 8: declining root of cloud? Or are we going to look
Speaker 8: at another quarter or so of declining growth and then
Speaker 8: we see a U turn because of all the AI
Speaker 8: workloads that are going to come up.
Speaker 2: Remind us what's going on with cloud in terms of
Speaker 2: is it business spending just pulling back or what?
Speaker 8: Yeah, it is? That is what it is. A law
Speaker 8: of larger numbers added with very pessimistic corporate tite spending
Speaker 8: last year. As you grow forty six percent this year,
Speaker 8: now it seems you know, it is around the twenty
Speaker 8: seven percent mark. The question is the next quarter is
Speaker 8: it going to be twenty eight or is it going
Speaker 8: to be twenty five and below? So that's where we
Speaker 8: are at this point.
Speaker 6: I just give us an idea hon rog of what
Speaker 6: happens with with Microsoft and AI and what that looks
Speaker 6: like from a user perspective. I mean, we've all been
Speaker 6: there and I think played with Chatchip. We see the
Speaker 6: way when we're typing email on Gmail, it does autocomplete.
Speaker 6: But when you power services and software for so many
Speaker 6: Fortune five hundred companies, how do you integrate AI seamlessly
Speaker 6: into those products?
Speaker 8: So first and foremost, when you look at anything generative AI,
Speaker 8: Microsoft is the number one choice for a lot of
Speaker 8: the software venders. I mean when you look at the
Speaker 8: when you want to play AI in generative AI. You know,
Speaker 8: when you want a hard when you want the chip,
Speaker 8: you're going to go to Nvidia. But when you come
Speaker 8: to software, Microsoft has a lead in terms of intellectual capacity.
Speaker 8: What they have shown no matter compared to everybody else.
Speaker 8: Now they have to show that they can add revenue
Speaker 8: to it, they can add more cloud usage to it,
Speaker 8: et cetera. In the long run, what you mentioned, companies
Speaker 8: are going to use this technology to power their internal productivity.
Speaker 8: But again that could take a while. So we really
Speaker 8: are looking today to see whether we are seeing an
Speaker 8: increase in workloads on their cloud portfolio. Or are we
Speaker 8: looking at corporate spending going down and offsetting any of
Speaker 8: those positives?
Speaker 2: Right, Angela's you know, come on in on the conversation.
Speaker 2: In terms of what we saw from Microsoft.
Speaker 9: Yeah, no, I think as far as Microsoft is concerned,
Speaker 9: it was pretty much in line with expectations. I mean,
Speaker 9: of course, you know, what we're all kind of interested
Speaker 9: about is kind of how AI is progressing right here
Speaker 9: with with the company. I mean, clearly when you kind
Speaker 9: of think of, you know, the super seven that are
Speaker 9: out there in terms of the biggest bell weathers, you know,
Speaker 9: we think the best ways to play the AI story
Speaker 9: right now continue to be in video as well as
Speaker 9: as Microsoft because those are the ones that have been
Speaker 9: able to kind of really show the ability to monetize
Speaker 9: more kind of you know, near term in nature. So
Speaker 9: you know, clearly it's all going to be about, you know,
Speaker 9: the story that Microsoft tells on the earnings call here today.
Speaker 9: But that being set, I mean, our view here as
Speaker 9: far as my Microsoft is concerned, is they've got so
Speaker 9: many drivers as far as the AI story is concerned.
Speaker 9: Their tentacles aren so many different things that you know,
Speaker 9: if you see any type of significant pullback here after hours,
Speaker 9: you definitely want to be a buyer of the shares.
Speaker 6: Angel Who should we be concerned about in terms of
Speaker 6: losing not market share, but not being on AI bandwagon.
Speaker 6: I mean, I hear of Microsoft Azure. I wonder, okay, well,
Speaker 6: who's the biggest cloud player? We know, Amazon's Amazon Web
Speaker 6: Services is do they have what it takes to compete
Speaker 6: when it comes to AI?
Speaker 9: Yeah, listen, and I don't personally cover Amazon, but I
Speaker 9: will tell you this. I mean, we do think that
Speaker 9: you know, Microsoft as well as Alphabet, has a distinct advantage,
Speaker 9: you know, given kind of you know, their exposure within
Speaker 9: the enterprise space and some of the tools that they're
Speaker 9: kind of rolling out on the AI side, I think
Speaker 9: relative to maybe you know, what AWS has to offer
Speaker 9: out there, and just given the size of AWS relative
Speaker 9: to the others, specifically on Alphabet side of things, we
Speaker 9: do think the other two in terms of Alphabet and Microsoft,
Speaker 9: are likely going to be shared takers here over the
Speaker 9: next twelve months at least. I'm a cloud side of things.
Speaker 2: Anreg you mentioned about, you know, the cloud growth that
Speaker 2: we're seeing, and they're talking about a twenty six percent number,
Speaker 2: the number that we got a year ago. Was that
Speaker 2: just off the charts, So that's not a fair comparison
Speaker 2: or no.
Speaker 8: No, no, they have been growing much faster than the
Speaker 8: year before, and that's and that's also a function of
Speaker 8: Microsoft's cloud portfolio is much smaller than Amazon's, so it's
Speaker 8: just a matter of them catching up increasing, you know,
Speaker 8: moving a lot more of the on premise workloads onto
Speaker 8: their portfolio. So it's the growth story for Microsoft Cloud
Speaker 8: has been there. Last year we saw an unusual slow
Speaker 8: down or the last twelve months. The question is how
Speaker 8: long is this slowdown going to last? You know, in
Speaker 8: our view, it's going to be either this quarter or
Speaker 8: next and then we should start see a U turn.
Speaker 2: What I don't get is, I mean everything's in the cloud.
Speaker 2: I throw more stuff in the cloud. Everybody throws more
Speaker 2: stuff in the cloud. So when we see a little
Speaker 2: bit so help me.
Speaker 8: So the consumer side, I get it. All my pictures
Speaker 8: are in cloud, right, But when you.
Speaker 2: Look at corporate, it like another expansion.
Speaker 8: When you look at corporatite spending less than twenty percent
Speaker 8: of the workloads, less than thirty percent of the workloads,
Speaker 8: depending on how you you know, define it, the majority
Speaker 8: of corporatite spending is on premise. So we have a
Speaker 8: decade of growth over.
Speaker 6: Here, which is does it stay on premise for security reasons?
Speaker 6: Does it stay on premise?
Speaker 7: No?
Speaker 8: No, No, it's just it's just lethargy. It's just legacy.
Speaker 8: I you spend twenty thirty billion dollars off you know,
Speaker 8: I'm just saying, let's say a big bank over the
Speaker 8: years just to develop a lot of these applications in house,
Speaker 8: it's just going to take time for that to move.
Speaker 2: Hey, Angela, what's the number one question or come on
Speaker 2: in on the conversation.
Speaker 9: Yeah, No, I mean as far as kind of what
Speaker 9: we're looking for, at least for Microsoft here, it's really
Speaker 9: kind of, you know, to the extent to what extent
Speaker 9: are they going to be able to monetize you know,
Speaker 9: the AI revenue here in the September quarter as well
Speaker 9: as December quarter if you're kind of you know, more
Speaker 9: near term oriented in nature, and you know, our view
Speaker 9: again is when you kind of look at the some
Speaker 9: of the commentary they provided in terms of co pilot
Speaker 9: last week, in terms of it, you know, coming in
Speaker 9: at a price point about thirty dollars per seed, as
Speaker 9: well as kind of again those cloud opportunities kind of
Speaker 9: you know, even potential to the search extension potential that
Speaker 9: they've got on that side of things as well. We
Speaker 9: do expect revenue to accelerate here in the September quarter
Speaker 9: and therefore and you know also in the December quarter.
Speaker 9: If you don't see that, I think really you know,
Speaker 9: that's where the stock could really take a hit. And
Speaker 9: you know, so that's what we're really kind of looking
Speaker 9: for as far as you know, what to expect and
Speaker 9: how to kind of look at the stock here going
Speaker 9: you know, through this their news.
Speaker 2: Yeah, I mean before I mean at the close, the
Speaker 2: stock was up forty six percent so far this year.
Speaker 2: Right now we're seeing shares of Microsoft just trending a
Speaker 2: little bit lower in the aftermarket, down about one point
Speaker 2: five percent. All right, guys, thank you so much, So
Speaker 2: appreciate it. Angelo Zino, Senior Equity analyst evert CFR Research,
Speaker 2: joining us in New York City and Agrana right here
Speaker 2: in our studio. He is senior technology analyst of Bloomberg Intelligence.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: So we're gonna shift a little bit from earnings, you know, Tim,
Speaker 2: We've been talking a lot about the current cur cover
Speaker 2: of Bloomberg Business Week. It's all about WW weight Watchers
Speaker 2: and their new strategy where they are really banking big
Speaker 2: time on this kind of new class of weight loss
Speaker 2: drugs that we're talking about ZEBEK and WEGOV wegovy Am
Speaker 2: I saying it right, I was going to ask you, Yeah,
Speaker 2: And so we wanted to take a little bit of
Speaker 2: a bigger look at what's going on with obesity because
Speaker 2: we have definitely seen the economic worldwide economic impact of
Speaker 2: obesity and excess body weight expected to more than double
Speaker 2: to four point two seven trillion and twenty thirty five
Speaker 2: from twenty twenty levels. I mean, there is a big
Speaker 2: cost healthcare wise, productivity wise, and just you know, health
Speaker 2: wise for individuals.
Speaker 6: Fortunately, this afternoon, we've got doctor Angela Fitch with us,
Speaker 6: the co founder and chief medical officer at the Boston
Speaker 6: based healthcare practice known well President of the Obesity Medicine
Speaker 6: Association OMA. It's a network and networking group for healthcare providers.
Speaker 6: Doctor Fitch is an assistant professor of medicine at Harvard.
Speaker 6: Joined us via zoom from Boston. It's good to have
Speaker 6: you with us. Doctor, Thank you so much for joining us.
Speaker 6: So talk a little bit about Carol laid this out
Speaker 6: for us, but obesity not just a problem for health
Speaker 6: and the problem for healthcare. Lay out the problem why
Speaker 6: it's just such a problem for society and not just
Speaker 6: America right now.
Speaker 7: Yes, I think Carol did an amazing job of highlighting that.
Speaker 7: Not only that, you know, so many people are focusing
Speaker 7: on the cost of medication right now, but there's a
Speaker 7: huge cost to not treating obesity as well. The WHO
Speaker 7: a few months ago published the World Health Organization published
Speaker 7: a announcement saying that we are spending as much on
Speaker 7: obesity as we did on COVID every year. So, in
Speaker 7: other words, the COVID pandemic, the cost of the COVID
Speaker 7: pandemic across the world is what is also spent on
Speaker 7: the disease of obesity. So it's not trivial. And now
Speaker 7: that we finally have effective treatment for it, we really
Speaker 7: need to find a way to work together. They're at
Speaker 7: all levels to try to help people get access to
Speaker 7: this care.
Speaker 2: What do you think of these weight loss drugs? O Zebek?
Speaker 2: I know people individuals who are taking them. Some are
Speaker 2: diabetics and it's a game changer in terms of their
Speaker 2: levels really kind of evening out and they're losing weight.
Speaker 2: And then we know the celebrity stories and all these
Speaker 2: people who are taking it to just lose a lot
Speaker 2: of weight. But what do you think of this class
Speaker 2: of drugs?
Speaker 7: So in our OBC treatment space, you know the five
Speaker 7: thousand clinicians that are members of our OBSCD Medicine Association
Speaker 7: that I'm the president of right now and honored to be.
Speaker 7: So you know, all of us are very excited about
Speaker 7: today and the future of weight management. And we like
Speaker 7: to talk about these drugs as antiobesit pharmacotherapy too, right
Speaker 7: because they're not just about weight loss. We're talking about
Speaker 7: treating a disease of obesity, which isn't just focused on
Speaker 7: a number on the scale. There's many reasons why people
Speaker 7: want to lose weight, to be able to be more mobile,
Speaker 7: to be able to do better at their jobs. For
Speaker 7: some people their livelihood depends on it. So again it's
Speaker 7: a very important thing to consider them as antiobesc pharmace
Speaker 7: what there be, and that is really the week gov
Speaker 7: right because we govy is approved for weight management, while
Speaker 7: ozembic is a proved for diabetes treatment. And so again
Speaker 7: we do want to focus on the right language. You know,
Speaker 7: as we talk about these treatment strategies, Well, this.
Speaker 6: Is just one strategy when it comes to treatment strategies.
Speaker 6: What are other treatment But it's one that's getting a
Speaker 6: lot of attention right now for a lot of reasons.
Speaker 6: What are the other strategies that people should be focused on.
Speaker 2: Well, again, this.
Speaker 7: Is all part of a comprehensive care pathway, right for
Speaker 7: any chronic disease, whether that's diabetes, hypertension, heart disease. You know,
Speaker 7: we've always focused in medicine on not just the one
Speaker 7: pillar of treatment, which is a medication option, but on
Speaker 7: other lifestyle factors as well, and for other chronic diseases.
Speaker 7: We've always focused on this, but we've never made people
Speaker 7: necessarily jump through the same hoops that we make them
Speaker 7: jump through. And we talk about obesity because there still
Speaker 7: is a large societal feeling that obesity should be able
Speaker 7: to be treated by oneself, that we can somehow overcome
Speaker 7: this disease by our own will power or our own accord.
Speaker 2: I have a colleague, you set, that's exactly what this
Speaker 2: individual says to me. It's like it's just a choice,
Speaker 2: you know, just don't pick up the ice cream kind
Speaker 2: of the case.
Speaker 7: Right, We find scientifically, actually that that's not the case
Speaker 7: at all, That this is a multifactorial disease. And certainly
Speaker 7: lifestyle changes are very important for all of us. The
Speaker 7: environment we live in is not healthful today, and we
Speaker 7: need to work to change that also, right at at
Speaker 7: the higher levels.
Speaker 6: Right of government government, Yes, so talk about the talk
Speaker 6: about what you think the government should do.
Speaker 7: Well, you know, that's always hard to say exactly because
Speaker 7: it goes back and forth, you know, depending, But I
Speaker 7: do believe that we have to make changes, even you know,
Speaker 7: at the society level where we can make choices, right,
Speaker 7: so we can choose to vote people into office that
Speaker 7: are going to support more broader treatments for obesity as
Speaker 7: we look towards the future too, and also you know,
Speaker 7: making our lives more healthful as well, you know, providing
Speaker 7: more access to fruits, vegetables, providing more access to whole
Speaker 7: foods instead of process.
Speaker 2: You know what, I feel like, I've heard that, just
Speaker 2: like a couple of other things about diversity and so
Speaker 2: on and so forth. I've been doing this a long time.
Speaker 2: Tim has too. It's like the idea about a healthier diet.
Speaker 2: I get it. And then you know, you have a
Speaker 2: massive processed food industry, you know.
Speaker 4: Sugar, you desert yea many cities.
Speaker 2: So how it's hard to manage? Well, so how do
Speaker 2: we fix it?
Speaker 3: Well?
Speaker 7: I think we fix it. I mean, I think that's
Speaker 7: the that's the multi trillion dollar question. I'm not sure
Speaker 7: how we fix it as a society. We have to
Speaker 7: move towards some of the things that that higher level
Speaker 7: you know, people have talked about in this sort of
Speaker 7: This is not my level of expertise as well as
Speaker 7: far as food policy goes. But I do think that
Speaker 7: the more we as consumers as well, you know, at
Speaker 7: the grocery stores, can make those choices as much as
Speaker 7: we can. And again, we recognize it's hard for a
Speaker 7: lot of people, but we're also improving that at local environments.
Speaker 7: At the Mass General Weight Center where I used to work,
Speaker 7: and at Mass General in general, we have a food
Speaker 7: bank now that provides fruits and vegetables to people who
Speaker 7: live in food deserts. So there's a lot of these
Speaker 7: sort of ground swell of things that are cropping up
Speaker 7: across communities. I think to help in the community setting
Speaker 7: to improve access to nutrition.
Speaker 2: Now all part of this important conversation. As we said,
Speaker 2: the cover story of Bloomberg BusinessWeek is all about what
Speaker 2: WW is doing with these drugs and their new strategy.
Speaker 2: Doctor Angela Fitch, thank you so much, really enjoyed it.
Speaker 2: A co founder and chief medical officer at Known Well and,
Speaker 2: as we said, and president of the OBCD Medicine Association.
Speaker 1: Amarcle a journal.
Speaker 5: Now about you let me drive, No, no, no, honey, please,
Speaker 5: I'll do the driving gravels East.
Speaker 2: I want to try it.
Speaker 6: It's a good question time.
Speaker 1: This is the drive to the Globe on Bloomberg Radio.
Speaker 2: All right, TikTok, everybody under eighteen minutes left in today's
Speaker 2: trading session. It's a big day. We know the FAE
Speaker 2: kicked off. It's two day meeting. But what we're really
Speaker 2: focusing focusing on, tim is the Microsoft and Alphabet earnings
Speaker 2: after the closing snap.
Speaker 4: Are we focusing on the FED decision.
Speaker 2: No, it's earnings right now.
Speaker 6: But you know, remember we remember, I mean think back
Speaker 6: to six months ago. I know what what was driving
Speaker 6: the market. Was it what the FED was doing or
Speaker 6: was it the earnings of one or two companies.
Speaker 2: I feel like it was, you know, the big Macro
Speaker 2: for exactly.
Speaker 6: But I just like you read a nice little article
Speaker 6: earlier in the day.
Speaker 7: I want to know.
Speaker 2: About fundamental I know, I want to know. I also
Speaker 2: want to know what Michael Sheldon has to say. He's
Speaker 2: executive director and chief investment officer at the registered investment
Speaker 2: advisor High Tower RDM Financial Group, joining us once again
Speaker 2: on Zoom in Westport, Connecticut. It is a big day, Michael.
Speaker 2: Good to have you here with Tim and my big
Speaker 2: tech earnings, the FED decision. What's more important to you
Speaker 2: and what are your clients most ask you about?
Speaker 10: Well, there's a lot going on this week. We have
Speaker 10: one hundred and sixty six companies and the S and
Speaker 10: P five hundred reporting. None more important than some of
Speaker 10: these big tech stocks. I think for this full week,
Speaker 10: the three things we're watching the most are One is
Speaker 10: all the earnings that are coming out. Two is the
Speaker 10: FED meeting. Tomorrow and on Friday is the PC inflation index,
Speaker 10: which the FED has been watching pretty closely. So I
Speaker 10: think overall investors are wondering what the outlook for the
Speaker 10: market is in the second half of the year. We
Speaker 10: came into this year with a lot of pessimism. I mean,
Speaker 10: there were some reasons to be negative. There were a
Speaker 10: lot of the traditional historical sort of economic indicators, like
Speaker 10: the shape of the yield curve and the leading Economic index,
Speaker 10: which historically a forecast recession. So there's a lot of
Speaker 10: pessimism in the markets. Fast forward to today, things are
Speaker 10: sort of in a better place. I think investors are
Speaker 10: looking at the market with a sort of a glass
Speaker 10: half empty is a glass half fall, excuse me, as
Speaker 10: opposed to glass half empty right now. So we don't
Speaker 10: think we're completely out of the woods, but things are
Speaker 10: a little bit better than they were starting the year.
Speaker 6: I mean, if you look at the S and P
Speaker 6: five hundred, things are a lot better than the start
Speaker 6: of the year, up close to twenty percent. The big
Speaker 6: question is what could derail this rally?
Speaker 10: Yeah, so that's a good question. I think the thing
Speaker 10: that has stood out to us for a while is
Speaker 10: one is if the FED overdoes things Historically, Unfortunately, the
Speaker 10: FED has a tendency to crash the party. So if
Speaker 10: they raise rates more than expected tomorrow, there's like a
Speaker 10: ninety nine percent chance of a quarter point rate hike,
Speaker 10: and then following that, there are three more rate three
Speaker 10: more meetings this year, So interestingly, at each of the
Speaker 10: next three meetings, there's about a twenty to thirty five
Speaker 10: percent chance that the FED raises rates by another quarter point.
Speaker 10: So if they raise rates too much, that would be
Speaker 10: a factor. Second would be if inflation does not continue
Speaker 10: to come down as expected, that would be a problem
Speaker 10: because that was sort of factored into a lot of decisions,
Speaker 10: a lot of after sort of outlooks that the FED
Speaker 10: wouldn't be able to move the sidelines. And third, most
Speaker 10: importantly is since stocks follow tend to follow the direction
Speaker 10: of corporate profits over time, if corporate profits don't follow
Speaker 10: through and rise starting in the fourth quarter of this
Speaker 10: year in early next year, that could be a problem.
Speaker 2: Can I want to jump in for a second, because
Speaker 2: you said the FED could crash the party. Sometimes you
Speaker 2: have to crash a party. Sometimes you have to do
Speaker 2: the unthinkable. Just ask, you know, Paul Volker, what he
Speaker 2: had to do, right. You know, there is a lot
Speaker 2: of writing going on that if the Fed is true
Speaker 2: to that two percent rate, as you said that one
Speaker 2: of the things that you are watching, of three is
Speaker 2: the PCE inflation index. So if that the core or
Speaker 2: whatever metric that the FED really watches that is still
Speaker 2: above two percent, if that's what we've got to focus on,
Speaker 2: then maybe the FED has to keep raising rates. Do
Speaker 2: you agree with that?
Speaker 10: Yeah, the Fed's walking a tough line here In some
Speaker 10: of the speeches that Greens that sorry excuse me, that
Speaker 10: Powell has given, He's been firm about bringing inflation down
Speaker 10: to two percent, but it is possible that if inflation
Speaker 10: gets downsay below three percent, and we start to see
Speaker 10: weaker economically.
Speaker 2: Which inflation though? Which inflation? Because there's so many different
Speaker 2: ways to dice and slice it.
Speaker 10: A good point, So the real inflation rate that he's
Speaker 10: watching is the core PCEE index. You could also throw
Speaker 10: in the core core CPI index, but the core pc index,
Speaker 10: which is much higher than two percent right now, is
Speaker 10: sort of what he's looking for. So, you know, just
Speaker 10: to put things in perspective, the overall CPI inflation rate
Speaker 10: was nine point one percent a year ago this month
Speaker 10: and nounce down to three point three percent. The core
Speaker 10: PC index is currently I believe at four point eight percent,
Speaker 10: and that was either in the mid fives or mid
Speaker 10: six it's about a year ago. So inflation is coming
Speaker 10: down the core numbers not as quickly as expected, although
Speaker 10: based on a number of trends, it does look like
Speaker 10: those numbers should continue to sort of move lower as
Speaker 10: we go through the end of the year.
Speaker 4: Is this is this rally? Is this rally warranted? Michael?
Speaker 10: I think I think we're starting to see a little
Speaker 10: bit of exuberance in the market, or maybe you could
Speaker 10: look at some of the sentiment indicators which are starting
Speaker 10: to get a little bit maybe maybe the sentiment indicators
Speaker 10: starting to eat up a little bit, just a bit.
Speaker 10: For example, if you look at the American Association of
Speaker 10: Individual Investors survey, we almost have thirty percent more bulls
Speaker 10: than bears, which is the highest we've seen in some time.
Speaker 10: In addition, if you look at valuation levels for the
Speaker 10: forward twelve months for the earning earnings for the S
Speaker 10: and P five hundred, we started the year at a
Speaker 10: little over seventeen times and now we're over twenty one times,
Speaker 10: so we've seen some We've seen a lot of positive
Speaker 10: momentum in the market. Some of it's warranted because it
Speaker 10: looks like a recession. The possibility of recession or downturn
Speaker 10: in the economy has been put off till later this
Speaker 10: year or early next year. I think the rate of
Speaker 10: increase in the markets will probably start to ebb a
Speaker 10: little bit. But one last thing I think is important
Speaker 10: is that we're starting to see some broadening in different
Speaker 10: parts of the market. So for example, so far this quarter,
Speaker 10: the equal weighted S and P five hundred is outperforming
Speaker 10: the S and P five hundred, and areas of the
Speaker 10: market like financials and energies are outperforming tech. So that's
Speaker 10: a healthy thing for the market to continue to move higher.
Speaker 2: Would you be buying big tech like your Microsoft or
Speaker 2: your Meta, or your Amazon or Netflix at this.
Speaker 10: Point, we're big believers in technology. You need to have
Speaker 10: some growth in your portfolios. We're financial advisors, so we're
Speaker 10: trying to make sure that clients meet their long term
Speaker 10: investment objectives, whatever those may be. So you want to
Speaker 10: have some technology in your portfolios. We own the big
Speaker 10: cap tech stocks, not all of them, but we own them.
Speaker 10: I think the important thing is to size them appropriately
Speaker 10: within client portfolios.
Speaker 6: So just about thirty seconds left, Michael, what would you
Speaker 6: say to somebody who sat on the sidelines with a
Speaker 6: lot of cash over the last few months and missed
Speaker 6: out on this one?
Speaker 10: Sorry? No, sorry, Well, I think the important thing is
Speaker 10: this to understand that client's long term investment of jasives.
Speaker 10: Obviously you have to think about their risk tolerance levels.
Speaker 10: But it seems like the markets are likely to continue
Speaker 10: to sort of grind higher into the end of the year.
Speaker 10: There are a lot of investors sitting on the sidelines.
Speaker 10: We have more than five trillion dollars in money markets.
Speaker 10: Not all of that's going to come out because cash
Speaker 10: now has an attractive yield. But as long as the
Speaker 10: outlook for the economy is stuff that it's so resilient
Speaker 10: and the outlook for a recession is put up till
Speaker 10: next year, I think the odds of further upside in
Speaker 10: the markets is positive. Although we certainly will have some
Speaker 10: sort of pullback or correction before too long.
Speaker 2: It does get.
Speaker 4: Are calling it.
Speaker 2: It feels like so much of the chasm out there.
Speaker 2: Michael Shelvin, executive director and a team investment officer are
Speaker 2: at Financial Group. Once you're from West Park at again,
Speaker 2: you're listing and launching Bloomberg Business Week from Boomberg Radio.
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