1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,839 Speaker 2: Terminal and the Bloomberg Business App. We begin with our 10 00:00:36,840 --> 00:00:38,839 Speaker 2: top story, the S and P five hundred posts and 11 00:00:38,880 --> 00:00:41,320 Speaker 2: its best day in more than a month. As investors 12 00:00:41,320 --> 00:00:44,479 Speaker 2: look through messy politics, Brian Leavitt of Investco rights in 13 00:00:44,479 --> 00:00:46,920 Speaker 2: this I don't believe that these markets will be trading 14 00:00:46,960 --> 00:00:50,320 Speaker 2: based on Trump's or Harris's prospects, but rather on the 15 00:00:50,400 --> 00:00:53,360 Speaker 2: direction of the economy and FED action. I find the 16 00:00:53,440 --> 00:00:56,600 Speaker 2: talk of the Trump trade versus the non Trump trade 17 00:00:56,800 --> 00:00:58,800 Speaker 2: to be much ado about nothing. 18 00:00:58,880 --> 00:01:01,040 Speaker 3: Frank, good morning. That's music to the ears of a 19 00:01:01,040 --> 00:01:01,600 Speaker 3: lot of people. 20 00:01:01,640 --> 00:01:04,680 Speaker 2: After politics has dominated the conversation in this country, in 21 00:01:04,760 --> 00:01:06,760 Speaker 2: this market as well, for the last few weeks, what 22 00:01:06,880 --> 00:01:09,600 Speaker 2: do you think is the number one issue right now. 23 00:01:10,280 --> 00:01:12,119 Speaker 4: I think it's the direction of the economy. 24 00:01:12,160 --> 00:01:14,319 Speaker 5: And so you may remember I was here about a 25 00:01:14,360 --> 00:01:15,880 Speaker 5: week ago and I said, for the first time in 26 00:01:15,920 --> 00:01:18,280 Speaker 5: a while, I'm getting a little bit more defensive. Then 27 00:01:18,319 --> 00:01:19,960 Speaker 5: you have a big rally in small caps. In my 28 00:01:20,040 --> 00:01:21,520 Speaker 5: thought as oh, these folks are never going to have 29 00:01:21,600 --> 00:01:25,240 Speaker 5: me back. But I still continue to believe that we 30 00:01:25,319 --> 00:01:27,039 Speaker 5: want to be a little bit more defensive. It doesn't 31 00:01:27,040 --> 00:01:29,280 Speaker 5: mean equities can't do well. But to what you were 32 00:01:29,319 --> 00:01:31,840 Speaker 5: talking about earlier, it's the larger cap, it's the higher. 33 00:01:31,720 --> 00:01:32,840 Speaker 4: Qualities because growth slowly. 34 00:01:33,160 --> 00:01:37,080 Speaker 5: Now, ultimately, I think the Federal Reserve pivots. So for 35 00:01:37,200 --> 00:01:39,400 Speaker 5: the week after I was on the show, the focus 36 00:01:39,480 --> 00:01:41,680 Speaker 5: was on the FED cutting rates. Now the focus is 37 00:01:41,720 --> 00:01:45,000 Speaker 5: a back towards growth slowing. We'll get to the point 38 00:01:45,000 --> 00:01:47,280 Speaker 5: where the focus is again on the FED. We've priced 39 00:01:47,280 --> 00:01:49,160 Speaker 5: in the couple of right cuts now and things. 40 00:01:48,960 --> 00:01:49,760 Speaker 4: Will broaden out. 41 00:01:49,960 --> 00:01:52,400 Speaker 5: But in the near term it's more of a defensive 42 00:01:52,480 --> 00:01:54,120 Speaker 5: environment as the economy slows. 43 00:01:54,160 --> 00:01:56,160 Speaker 2: I've got a quite in front of me from Morgan Stanley, 44 00:01:56,200 --> 00:01:57,680 Speaker 2: and I think it might resonate with you. It's from 45 00:01:57,720 --> 00:02:01,120 Speaker 2: Lisa Shanna she said, I'm like sickle and unlike cycles. 46 00:02:01,160 --> 00:02:05,240 Speaker 2: When fed rate cuts procede, recession and reaccelerating economic growth 47 00:02:05,440 --> 00:02:08,720 Speaker 2: sustainably impacts the high bit of small cap cohort. This time, 48 00:02:08,760 --> 00:02:11,560 Speaker 2: a goldilock soft landing is apt to reward large cap 49 00:02:11,639 --> 00:02:16,640 Speaker 2: quality names that can deliver margin gains despite modest economic growth. 50 00:02:16,800 --> 00:02:18,200 Speaker 3: Is that how you're thinking about things? 51 00:02:18,200 --> 00:02:21,120 Speaker 5: It is, although I wouldn't say that it doesn't involve 52 00:02:21,240 --> 00:02:23,360 Speaker 5: the small caps because if you can get through this 53 00:02:23,440 --> 00:02:26,640 Speaker 5: period with as without a recession, I agree, then large 54 00:02:26,680 --> 00:02:27,480 Speaker 5: caps should do well. 55 00:02:27,520 --> 00:02:30,440 Speaker 4: The broad market should do well. But typically, if you look. 56 00:02:30,320 --> 00:02:33,400 Speaker 5: Historically, when the yell curve normalizes the ill curve normalizing, 57 00:02:33,440 --> 00:02:36,600 Speaker 5: you tend to see more participation from small and value 58 00:02:36,639 --> 00:02:38,399 Speaker 5: and investors have been wondering why. 59 00:02:38,240 --> 00:02:39,440 Speaker 4: This market's been so narrow. 60 00:02:39,480 --> 00:02:41,840 Speaker 5: We've had twenty months of an inverted yell curve, maybe 61 00:02:41,960 --> 00:02:43,960 Speaker 5: twenty one months of an inverted yell curve now, so. 62 00:02:44,240 --> 00:02:48,640 Speaker 4: That's a challenge. This will change as we normalize the curb. 63 00:02:49,000 --> 00:02:51,160 Speaker 5: But the problem in the short term is that we've 64 00:02:51,160 --> 00:02:53,080 Speaker 5: priced in the ray cuts in the economy slowly. 65 00:02:53,240 --> 00:02:54,679 Speaker 4: You know, we've priced in a couple. 66 00:02:54,440 --> 00:02:56,960 Speaker 5: So we'll need to see more carried through and more 67 00:02:57,000 --> 00:03:00,720 Speaker 5: signs that this economy can be resilient before before things 68 00:03:00,720 --> 00:03:01,720 Speaker 5: start to broaden again. 69 00:03:01,800 --> 00:03:03,880 Speaker 6: I like that the market message and the political message 70 00:03:03,919 --> 00:03:06,000 Speaker 6: is the same. It's the economy stupid, and look at 71 00:03:06,040 --> 00:03:10,440 Speaker 6: what's going on with respect to consumers and their happiness level. 72 00:03:10,680 --> 00:03:13,560 Speaker 6: Are we getting a signal from the likes of vps, from. 73 00:03:13,360 --> 00:03:15,000 Speaker 4: The likes of the airlines, from some. 74 00:03:14,919 --> 00:03:17,120 Speaker 6: Of the commentary that we've heard early coming. 75 00:03:16,880 --> 00:03:19,240 Speaker 4: Out in this earning season that. 76 00:03:19,440 --> 00:03:21,840 Speaker 6: Highlights just how quickly growth is slowing. 77 00:03:21,840 --> 00:03:24,360 Speaker 4: To you, yeah, I think so. And look, we have 78 00:03:24,440 --> 00:03:26,080 Speaker 4: to remember that was the wish. 79 00:03:26,360 --> 00:03:28,079 Speaker 5: You know, it was a year ago when things were 80 00:03:28,200 --> 00:03:31,880 Speaker 5: robust and everybody was worried about inflation, and we heard 81 00:03:31,919 --> 00:03:36,600 Speaker 5: things like hyper inflation and stagflation, and everyone was trying 82 00:03:36,640 --> 00:03:38,720 Speaker 5: to be hyperbolic on these things. I was never going 83 00:03:38,760 --> 00:03:40,600 Speaker 5: to be the case. The reality was the Fed was 84 00:03:40,600 --> 00:03:43,600 Speaker 5: going to slow the economy, the fiscal stimulus was going 85 00:03:43,640 --> 00:03:46,600 Speaker 5: to moderate, and consumers we're going to start to slow down. 86 00:03:46,680 --> 00:03:48,600 Speaker 5: Inflation was going to come back into the comfort zone. 87 00:03:48,640 --> 00:03:49,720 Speaker 4: So that's where we are. 88 00:03:49,880 --> 00:03:53,040 Speaker 5: So we can't wish for something and then when it happens, 89 00:03:53,360 --> 00:03:55,640 Speaker 5: be disappointed that it's happening. 90 00:03:56,520 --> 00:03:58,880 Speaker 4: And so, yeah, things are slowing in the US. The 91 00:03:58,880 --> 00:04:01,320 Speaker 4: global economy slowing. The US is a big part of that. 92 00:04:01,400 --> 00:04:03,960 Speaker 6: Right now, how do you assess whether this is just 93 00:04:04,240 --> 00:04:07,720 Speaker 6: one data point on a different kind of trajectory downward 94 00:04:07,760 --> 00:04:11,200 Speaker 6: that's perhaps a little more traumatic versus simply the Goldilocks 95 00:04:11,240 --> 00:04:13,040 Speaker 6: softening that everybody was hoping for. 96 00:04:13,240 --> 00:04:15,640 Speaker 5: Well, if you look for the guideposts on a path 97 00:04:15,720 --> 00:04:17,839 Speaker 5: to recession, usually see cyclical access. 98 00:04:17,920 --> 00:04:19,479 Speaker 4: We don't have that. 99 00:04:19,520 --> 00:04:21,640 Speaker 5: We do have the inverted you'll curve, so so far 100 00:04:21,720 --> 00:04:23,200 Speaker 5: we we're one out of two. 101 00:04:23,360 --> 00:04:24,960 Speaker 4: You see signs that the economy is. 102 00:04:24,960 --> 00:04:28,159 Speaker 5: Slowing, you look at survey data. It's not great, but 103 00:04:28,240 --> 00:04:31,120 Speaker 5: it's not collapsing. And then the most important one is 104 00:04:31,120 --> 00:04:34,240 Speaker 5: our credit spreads widening and our bankers tightening lending stand 105 00:04:34,240 --> 00:04:36,840 Speaker 5: there's not really so you would look at that and 106 00:04:36,920 --> 00:04:39,880 Speaker 5: say the economy is in reasonably good shape. It doesn't 107 00:04:39,920 --> 00:04:46,360 Speaker 5: suggest a recession, but the survey data suggests things are 108 00:04:46,360 --> 00:04:47,320 Speaker 5: certainly slowing down. 109 00:04:47,760 --> 00:04:49,720 Speaker 7: If you don't think right now, the Trump first non 110 00:04:49,760 --> 00:04:52,760 Speaker 7: Trump trains much ado about nothing. When does it become 111 00:04:52,839 --> 00:04:54,040 Speaker 7: something to do about something? 112 00:04:54,440 --> 00:04:55,480 Speaker 4: I'm not sure it does. 113 00:04:55,520 --> 00:04:59,320 Speaker 5: I know my big north star and that I've been watching. 114 00:04:59,000 --> 00:04:59,960 Speaker 4: It the entire time. 115 00:05:00,120 --> 00:05:02,880 Speaker 5: From the day Trump was elected through the day Biden 116 00:05:02,920 --> 00:05:05,279 Speaker 5: was elected, the market was up seventy percent. Since Biden's 117 00:05:05,279 --> 00:05:07,479 Speaker 5: been elected, the market's up seventy something percent. So I'm 118 00:05:07,480 --> 00:05:10,520 Speaker 5: not sure why people focus on this that much. And 119 00:05:10,720 --> 00:05:13,840 Speaker 5: I'll give you an example. When it looked after the debate, 120 00:05:13,920 --> 00:05:17,159 Speaker 5: post debate, and Trump's numbers are going up, probability of winning. 121 00:05:17,400 --> 00:05:20,760 Speaker 5: I'm getting these notes in my inbox that say, okay, here's. 122 00:05:20,520 --> 00:05:21,440 Speaker 4: The Trump trade. 123 00:05:21,560 --> 00:05:25,920 Speaker 5: Crypto goes up, European defense companies go up. You want 124 00:05:25,920 --> 00:05:28,720 Speaker 5: to be short Chinese equities, And I'm scratching my head saying, 125 00:05:28,880 --> 00:05:29,400 Speaker 5: wasn't that the. 126 00:05:29,440 --> 00:05:32,920 Speaker 4: Last four years? Right? That's exactly what happened over the 127 00:05:33,000 --> 00:05:33,920 Speaker 4: last four years. 128 00:05:34,160 --> 00:05:36,000 Speaker 5: The other thing is, if I were to have been 129 00:05:36,080 --> 00:05:39,160 Speaker 5: here in November twenty sixteen when Trump won and I 130 00:05:39,200 --> 00:05:42,599 Speaker 5: said what would win, traditional energy or clean energy, everyone 131 00:05:42,600 --> 00:05:43,880 Speaker 5: would have said traditional energy. 132 00:05:43,880 --> 00:05:45,400 Speaker 4: Clean energy won by a lot. 133 00:05:45,720 --> 00:05:49,719 Speaker 5: The exact opposite happened under Biden, where. 134 00:05:49,760 --> 00:05:51,080 Speaker 4: Traditional energy one by Latin. 135 00:05:51,120 --> 00:05:53,760 Speaker 5: I have people saying to me, you know, drill, baby, drill, 136 00:05:54,240 --> 00:05:57,159 Speaker 5: If Trump wins, surely we're going to get back to drilling. 137 00:05:57,480 --> 00:05:59,520 Speaker 5: We're drilling more barrels of oil right now than ever 138 00:05:59,560 --> 00:06:02,320 Speaker 5: before you US history. So I think people are looking 139 00:06:02,360 --> 00:06:04,640 Speaker 5: at this wrong. I think people have their own perceptions, 140 00:06:04,680 --> 00:06:07,680 Speaker 5: their own confirmation biases that they bring to it. 141 00:06:07,800 --> 00:06:10,080 Speaker 4: But when you dig deeper, right. 142 00:06:09,960 --> 00:06:12,880 Speaker 5: The Trump traders energy and financials, Energy and financials did 143 00:06:12,880 --> 00:06:14,760 Speaker 5: better under Biden than they did under Trump. So it 144 00:06:14,880 --> 00:06:17,080 Speaker 5: just doesn't add up when you look deeper into it. 145 00:06:17,160 --> 00:06:20,120 Speaker 2: Let's park history, and let's focus one specific thing, policy 146 00:06:20,400 --> 00:06:22,440 Speaker 2: and where we are right now. If you come in 147 00:06:22,520 --> 00:06:26,640 Speaker 2: now and cut immigration and put up tariffs and put 148 00:06:26,760 --> 00:06:29,800 Speaker 2: wolves around the United States of America, do you not 149 00:06:29,880 --> 00:06:32,359 Speaker 2: see how that would be inflationary? If you extend the 150 00:06:32,400 --> 00:06:35,240 Speaker 2: twenty seventeen tax cuts, do you not see that that 151 00:06:35,320 --> 00:06:38,080 Speaker 2: would be boosting the deficit at a time at a 152 00:06:38,120 --> 00:06:40,760 Speaker 2: time where actually they are things that people are nervous about, 153 00:06:40,800 --> 00:06:44,200 Speaker 2: the prospect of inflation reaccelerating the ability of the treasury 154 00:06:44,240 --> 00:06:45,880 Speaker 2: market to handle that additional supply. 155 00:06:46,160 --> 00:06:48,000 Speaker 5: Well, it may also be happening at the same time 156 00:06:48,000 --> 00:06:50,680 Speaker 5: that the consumer's slowing a bit in here, so you know, 157 00:06:50,680 --> 00:06:53,880 Speaker 5: the u of counteracting forces against inflation, things like AI, 158 00:06:54,080 --> 00:06:57,920 Speaker 5: things like older population. So I wouldn't necessarily say it's 159 00:06:57,960 --> 00:07:00,599 Speaker 5: inflationary to the market. What's going to mapp most on 160 00:07:00,640 --> 00:07:04,040 Speaker 5: all these things as clarity give us some understanding of 161 00:07:04,080 --> 00:07:06,320 Speaker 5: what this looks like, rather than when we did it 162 00:07:06,360 --> 00:07:09,720 Speaker 5: in twenty eighteen, there was uncertainty, and so business investment 163 00:07:09,800 --> 00:07:12,120 Speaker 5: dried up for a while with the lack of understanding 164 00:07:12,120 --> 00:07:13,720 Speaker 5: of what it was going to look like. So long 165 00:07:13,760 --> 00:07:16,760 Speaker 5: as there's clarity, the business environment will be able to 166 00:07:16,800 --> 00:07:22,760 Speaker 5: handle its, consumers will be able to handle it and 167 00:07:22,840 --> 00:07:26,200 Speaker 5: look the realities. Both sides seem to want to pursue 168 00:07:26,240 --> 00:07:29,640 Speaker 5: somewhat of an American First agenda, So there's not a 169 00:07:29,800 --> 00:07:34,920 Speaker 5: substantial amount of difference with regards to this America First approach. 170 00:07:35,000 --> 00:07:37,360 Speaker 2: All those conversations about politics you've been having on Wall 171 00:07:37,400 --> 00:07:40,960 Speaker 2: straight frasing cub Water, Oh life from Brian Levitt, I'm 172 00:07:41,000 --> 00:07:51,320 Speaker 2: investco Bran is going to see it. 173 00:07:53,120 --> 00:07:53,880 Speaker 3: Here's the latest. 174 00:07:53,960 --> 00:07:57,560 Speaker 2: An unofficial ap tally has harrised, passing the number of 175 00:07:57,560 --> 00:08:00,880 Speaker 2: pledge delegates needed to secure the top of ticket. President 176 00:08:00,960 --> 00:08:04,480 Speaker 2: Joe Biden calling into campaign headquarters to offer his support. 177 00:08:04,760 --> 00:08:07,680 Speaker 2: In his first public comments since ending his campaign, Isa 178 00:08:07,720 --> 00:08:11,160 Speaker 2: Bortansky Btig says, this, we continue to believe it will 179 00:08:11,160 --> 00:08:13,480 Speaker 2: be a close race, and we maintain our view that 180 00:08:13,520 --> 00:08:16,400 Speaker 2: Trump is the slight favorite. Isaac joins us now for 181 00:08:16,440 --> 00:08:18,840 Speaker 2: more is so let's start with the numbers. Follow the money. 182 00:08:18,920 --> 00:08:21,520 Speaker 2: Eighty one million dollars race in twenty four hours, more 183 00:08:21,560 --> 00:08:25,160 Speaker 2: than one hundred million dollars donated for the campaign since someday, 184 00:08:25,200 --> 00:08:29,320 Speaker 2: and yet your fundamental view hasn't changed, Isaac White. 185 00:08:30,440 --> 00:08:31,000 Speaker 8: So look the. 186 00:08:30,960 --> 00:08:34,240 Speaker 9: Money that came in for the Harris campaign, I think 187 00:08:34,320 --> 00:08:38,440 Speaker 9: is a representation of the relief that's washed over the 188 00:08:38,920 --> 00:08:42,080 Speaker 9: Democratic Party given that Biden is stepping aside, and they 189 00:08:42,080 --> 00:08:44,439 Speaker 9: think that they have someone who can prosecute the Kese 190 00:08:44,800 --> 00:08:48,320 Speaker 9: against Donald Trump in this election. But our review of 191 00:08:48,360 --> 00:08:52,040 Speaker 9: this is that we still have probably seven or eight 192 00:08:52,120 --> 00:08:56,760 Speaker 9: different narrative changes between now and November fifth. And when 193 00:08:56,800 --> 00:08:59,439 Speaker 9: I peel back that onion, I look at the swing 194 00:08:59,520 --> 00:09:01,840 Speaker 9: seats that are going to define this right, the ones 195 00:09:01,880 --> 00:09:04,240 Speaker 9: that are going to actually decide this election, and you 196 00:09:04,280 --> 00:09:08,000 Speaker 9: look at those six states. The issues that animate voters 197 00:09:08,040 --> 00:09:10,760 Speaker 9: the most in those six states thus far have been 198 00:09:10,880 --> 00:09:14,360 Speaker 9: immigration and inflation. And if that's still the case on 199 00:09:14,400 --> 00:09:16,720 Speaker 9: November fifth, I think that Donald Trump is going to 200 00:09:16,760 --> 00:09:18,520 Speaker 9: be the next president. 201 00:09:18,960 --> 00:09:20,200 Speaker 8: The caveat here is. 202 00:09:20,400 --> 00:09:22,200 Speaker 9: No one knows what we're going to be talking about 203 00:09:22,240 --> 00:09:24,520 Speaker 9: in one hundred and five days. If I keep in mind, 204 00:09:24,559 --> 00:09:27,199 Speaker 9: it was just twenty five days ago or so when 205 00:09:27,240 --> 00:09:30,040 Speaker 9: the debate happened and it reset. 206 00:09:29,280 --> 00:09:30,760 Speaker 8: The entire election. 207 00:09:31,000 --> 00:09:33,600 Speaker 9: So we're going to have to deal with these narratives 208 00:09:33,640 --> 00:09:36,920 Speaker 9: changing and during that time of great uncertainty. I'm just 209 00:09:36,960 --> 00:09:39,600 Speaker 9: going to keep going back to what animates the swing 210 00:09:39,640 --> 00:09:41,240 Speaker 9: state voter when you look. 211 00:09:41,080 --> 00:09:41,840 Speaker 4: At the issues. 212 00:09:41,880 --> 00:09:45,080 Speaker 7: This is why a recent poll showed that actually majority 213 00:09:45,080 --> 00:09:49,640 Speaker 7: of Americans thought Trump's presidency was excess versus Biden's. If 214 00:09:49,640 --> 00:09:52,839 Speaker 7: that's the case, then how does Harris differentiate herself from 215 00:09:52,920 --> 00:09:55,120 Speaker 7: Joe Biden? He said there he wants to go on 216 00:09:55,160 --> 00:09:56,360 Speaker 7: the campaign trail with her. 217 00:09:56,760 --> 00:09:59,720 Speaker 4: Does she want him there? Yeah? 218 00:09:59,760 --> 00:10:02,599 Speaker 8: Look, I think that in certain places. Absolutely. 219 00:10:02,640 --> 00:10:04,839 Speaker 9: I think that President Biden's going to spend a whole 220 00:10:04,880 --> 00:10:07,760 Speaker 9: lot of time in Pennsylvania over the next few months. 221 00:10:07,800 --> 00:10:10,000 Speaker 9: But I think that the Biden and excuse me, the 222 00:10:10,000 --> 00:10:12,120 Speaker 9: Heritage campaign got to get used to saying that now 223 00:10:13,160 --> 00:10:16,800 Speaker 9: is going to enjoy some of those contrasts emory Like, 224 00:10:16,960 --> 00:10:20,400 Speaker 9: I really think I don't think there's any example in 225 00:10:20,480 --> 00:10:26,920 Speaker 9: modern political history of a vulnerability like age becoming weaponized 226 00:10:27,080 --> 00:10:29,600 Speaker 9: this quickly with the switch in the top of the 227 00:10:29,600 --> 00:10:33,679 Speaker 9: Democratic ticket. Age was their greatest weakness. It is now 228 00:10:33,960 --> 00:10:36,840 Speaker 9: the cudgel that they're going to use to push back 229 00:10:36,920 --> 00:10:37,600 Speaker 9: against Trump. 230 00:10:37,640 --> 00:10:39,480 Speaker 8: So that's what you're going to hear a fair amount about. 231 00:10:39,559 --> 00:10:41,320 Speaker 9: You're going to hear the fact that Trump is a 232 00:10:41,360 --> 00:10:45,160 Speaker 9: convicted felon, the vice president is a former prosecutor. 233 00:10:45,200 --> 00:10:47,880 Speaker 8: And of course we're going to hear an enormous amount about. 234 00:10:47,760 --> 00:10:50,439 Speaker 9: Reproductive rights, given that that's the one area that you've 235 00:10:50,440 --> 00:10:54,559 Speaker 9: seen Democrats have success with animating voters in those swing states. 236 00:10:54,400 --> 00:10:56,439 Speaker 7: And she's been the face of that for this administration. 237 00:10:56,640 --> 00:11:00,040 Speaker 7: But beyond reproductive rights, she was a prosecutor, but he 238 00:11:00,160 --> 00:11:02,960 Speaker 7: was a vice president and a senator. But we haven't 239 00:11:03,000 --> 00:11:05,840 Speaker 7: really understood what her core values aren't a lot of 240 00:11:05,880 --> 00:11:08,160 Speaker 7: policy issues what differentiates herself. 241 00:11:09,240 --> 00:11:10,400 Speaker 8: Look at at the moment. 242 00:11:10,440 --> 00:11:13,400 Speaker 9: The way that I'm thinking about this is I'm telling 243 00:11:13,440 --> 00:11:17,520 Speaker 9: clients that there really isn't much daylight between Biden and Harris. 244 00:11:17,920 --> 00:11:20,880 Speaker 9: I think that a Harris one administration would look a 245 00:11:20,880 --> 00:11:25,360 Speaker 9: whole lot like Biden won. There is good reason to 246 00:11:25,400 --> 00:11:29,840 Speaker 9: believe that Harris is more progressive ideologically than Biden, but 247 00:11:30,240 --> 00:11:34,000 Speaker 9: this has been a relatively progressive administration the past few years, 248 00:11:34,000 --> 00:11:36,760 Speaker 9: so I don't see much of a shift there. Furthermore, 249 00:11:36,760 --> 00:11:39,120 Speaker 9: we've got to keep in mind presidents are often limited 250 00:11:39,240 --> 00:11:42,280 Speaker 9: by the other side of Pennsylvania Avenue, right, and we 251 00:11:42,360 --> 00:11:44,600 Speaker 9: still firmly believe that the Senate is going to switch 252 00:11:44,640 --> 00:11:48,199 Speaker 9: to Republican control, So what can be done there is limited. 253 00:11:48,960 --> 00:11:50,680 Speaker 9: I do think that there are going to be subtle 254 00:11:50,720 --> 00:11:53,880 Speaker 9: areas of difference in terms of trade policy and in 255 00:11:53,960 --> 00:11:58,000 Speaker 9: terms of how they would push forward on the issue 256 00:11:58,040 --> 00:12:02,160 Speaker 9: of fiscal fiscal policy in these firing tax cuts, but 257 00:12:02,200 --> 00:12:04,520 Speaker 9: it's all very subtle when you compare it to how 258 00:12:04,520 --> 00:12:05,800 Speaker 9: Trump would do those things. 259 00:12:05,960 --> 00:12:08,440 Speaker 6: Isaac markets would agree with you, and betting markets seem 260 00:12:08,480 --> 00:12:12,160 Speaker 6: to suggest that generally people do believe that Trump still has. 261 00:12:12,040 --> 00:12:14,400 Speaker 4: The edge, although it has narrowed to slightly. 262 00:12:14,480 --> 00:12:17,160 Speaker 6: I am wondering though, about the bigger issue some people 263 00:12:17,200 --> 00:12:20,000 Speaker 6: are saying, which is there is new energy in terms 264 00:12:20,000 --> 00:12:22,320 Speaker 6: of bringing out voters that potentially that could affect the 265 00:12:22,360 --> 00:12:27,160 Speaker 6: down ballot races for a congressional House, House and Senate. 266 00:12:28,000 --> 00:12:31,880 Speaker 8: See do you buy that argument for the moment? 267 00:12:31,960 --> 00:12:34,920 Speaker 9: Yeah, I mean, look, the most surprising stat of many 268 00:12:35,520 --> 00:12:39,360 Speaker 9: over the past few months has been the yawning enthusiasm gap. 269 00:12:40,040 --> 00:12:42,080 Speaker 9: When Biden was at the top of the ticket, seventy 270 00:12:42,120 --> 00:12:45,200 Speaker 9: seven percent of Republicans were happy with their candidate. Only 271 00:12:45,200 --> 00:12:47,600 Speaker 9: about a third of the Democrats were happy with their 272 00:12:47,800 --> 00:12:49,679 Speaker 9: candidate when Biden was at the top of the ticket. 273 00:12:49,880 --> 00:12:52,240 Speaker 8: You're going to see that normalized and you're going to. 274 00:12:52,200 --> 00:12:54,400 Speaker 9: See that gap close, and I think that will have 275 00:12:54,440 --> 00:12:57,280 Speaker 9: an impact on the House races. And this is something 276 00:12:57,440 --> 00:12:59,400 Speaker 9: that I think is important to hit. The House is 277 00:12:59,440 --> 00:13:01,840 Speaker 9: going to be closed no matter what. That is the 278 00:13:01,880 --> 00:13:04,880 Speaker 9: reality from the gerrymanderd system that we all live in. 279 00:13:05,160 --> 00:13:07,120 Speaker 9: So the House is going to be plus ten or 280 00:13:07,200 --> 00:13:09,120 Speaker 9: fifteen seats one way or the other. So it will 281 00:13:09,160 --> 00:13:11,760 Speaker 9: be very very close. And in that instance, I do 282 00:13:11,840 --> 00:13:15,000 Speaker 9: believe that you're going to have an impact from this, 283 00:13:15,120 --> 00:13:17,880 Speaker 9: and I think that it pushes back against the red 284 00:13:17,960 --> 00:13:21,079 Speaker 9: wave narrative that we had all been seeing over the 285 00:13:21,120 --> 00:13:21,800 Speaker 9: past few weeks. 286 00:13:21,840 --> 00:13:23,880 Speaker 8: I think the House is going to be very very close. 287 00:13:24,280 --> 00:13:25,400 Speaker 8: My bed is the house. 288 00:13:25,200 --> 00:13:27,480 Speaker 9: Goes whichever way the White House does, but it will 289 00:13:27,480 --> 00:13:29,840 Speaker 9: be within a few seats. 290 00:13:29,880 --> 00:13:32,480 Speaker 2: I want to speak to what you're telling your client base, 291 00:13:32,679 --> 00:13:35,640 Speaker 2: specifically the client base in the domestic community. When you 292 00:13:35,679 --> 00:13:38,040 Speaker 2: put out the note over the weekend following this decision, 293 00:13:38,320 --> 00:13:39,960 Speaker 2: there's a line that jumped off the page to all 294 00:13:39,960 --> 00:13:43,000 Speaker 2: of us around this table, you said, focus on electability 295 00:13:43,520 --> 00:13:46,080 Speaker 2: and not policy. Just build on that a little bit more. 296 00:13:46,120 --> 00:13:47,600 Speaker 2: What have you been telling clients about that? 297 00:13:48,760 --> 00:13:52,520 Speaker 9: Well, I think after the disastrous debate, the performance, I 298 00:13:52,520 --> 00:13:55,640 Speaker 9: think everyone was trying to parse where the policy differences 299 00:13:55,640 --> 00:13:58,400 Speaker 9: would be between Harris and Biden, right, And we were 300 00:13:58,440 --> 00:14:01,040 Speaker 9: all going through her Senate record, We're going back to 301 00:14:01,080 --> 00:14:04,200 Speaker 9: her actions as age in California, And I just don't 302 00:14:04,200 --> 00:14:06,960 Speaker 9: think that there's much value in that because they replace 303 00:14:07,040 --> 00:14:09,400 Speaker 9: the top of the ticket on the Democratic side, not 304 00:14:09,520 --> 00:14:12,960 Speaker 9: because of policy, but because of age and cognitive capacity. 305 00:14:13,360 --> 00:14:13,520 Speaker 4: Right. 306 00:14:13,600 --> 00:14:16,720 Speaker 9: And I think that the similarity between Harris and Biden 307 00:14:16,840 --> 00:14:18,960 Speaker 9: is a feature, not a bug. 308 00:14:19,400 --> 00:14:21,040 Speaker 8: And so to me, it's just really. 309 00:14:20,880 --> 00:14:24,440 Speaker 9: A question of how she impacts this race rather than 310 00:14:24,480 --> 00:14:27,040 Speaker 9: the policy substance. So is she able to change the 311 00:14:27,120 --> 00:14:31,720 Speaker 9: dynamics in Georgia and get voter turned out within the 312 00:14:31,760 --> 00:14:35,240 Speaker 9: black population, which is unclear that Biden was able to 313 00:14:35,240 --> 00:14:37,400 Speaker 9: do in Georgia. It's unclear if that would have been there. 314 00:14:37,480 --> 00:14:41,560 Speaker 9: How is she going to impact women and independent voters 315 00:14:42,280 --> 00:14:44,280 Speaker 9: in some of those swing states in the Sunbelt. Those 316 00:14:44,320 --> 00:14:46,720 Speaker 9: are the things that I think matter way more for 317 00:14:46,840 --> 00:14:48,440 Speaker 9: markets and all of us trying to get our arms 318 00:14:48,440 --> 00:14:53,000 Speaker 9: around this election than subtle differences between them between Biden 319 00:14:53,000 --> 00:14:54,880 Speaker 9: and Harris and their policy perspectives. 320 00:14:54,960 --> 00:14:55,240 Speaker 3: Isaac. 321 00:14:55,280 --> 00:14:57,520 Speaker 7: With that being said, was JD Vance the right pick 322 00:14:57,560 --> 00:14:59,680 Speaker 7: for Trump at. 323 00:14:59,600 --> 00:15:02,080 Speaker 9: The moment, But it sure doesn't look like it was right. 324 00:15:02,120 --> 00:15:07,200 Speaker 9: I mean, I think that hindsight is something that really 325 00:15:07,640 --> 00:15:10,240 Speaker 9: underscores the humility that all of us should have here. 326 00:15:10,280 --> 00:15:12,880 Speaker 9: But at that moment, I think that Trump wanted to 327 00:15:12,920 --> 00:15:15,840 Speaker 9: run up the score with his base, right. He wanted 328 00:15:15,840 --> 00:15:18,800 Speaker 9: this to run up the score in Ohio and Pennsylvania 329 00:15:19,120 --> 00:15:25,000 Speaker 9: and Michigan and Wisconsin with white, non college educated voters. 330 00:15:25,200 --> 00:15:27,320 Speaker 9: And I think that at that moment he didn't worry 331 00:15:27,360 --> 00:15:31,880 Speaker 9: too much about some of the other subsets. And Jade 332 00:15:31,920 --> 00:15:35,840 Speaker 9: Vance really does not help you with many other voter groups, 333 00:15:35,880 --> 00:15:37,200 Speaker 9: and so at the moment, it. 334 00:15:37,160 --> 00:15:38,720 Speaker 8: Sure doesn't look like the right one. 335 00:15:38,760 --> 00:15:41,280 Speaker 9: But I think A Marie really underscores the importance of 336 00:15:41,840 --> 00:15:44,640 Speaker 9: who the vice president picks as her running mate, and 337 00:15:44,680 --> 00:15:47,040 Speaker 9: I think that she is going to focus intently on 338 00:15:47,080 --> 00:15:49,120 Speaker 9: someone that can help her in one of those swing 339 00:15:49,200 --> 00:15:52,280 Speaker 9: states to broaden the base. That's why you're looking at Joshapiro, 340 00:15:52,400 --> 00:15:55,720 Speaker 9: the governor of Pennsylvania, or even Andy Bisheer. 341 00:15:56,400 --> 00:15:57,440 Speaker 3: Isaac, thank you, sir. 342 00:15:57,640 --> 00:15:59,040 Speaker 2: Just want to flo over the last couple of days 343 00:15:59,040 --> 00:16:12,160 Speaker 2: on at both times Kid of BTIG. With earning season 344 00:16:12,240 --> 00:16:14,760 Speaker 2: ramping up, Jill Careyhole of Bank of America writing this, 345 00:16:14,880 --> 00:16:17,400 Speaker 2: we still think pockets of small caps are poised for 346 00:16:17,440 --> 00:16:20,720 Speaker 2: continued down performance. Be selective near term, focus on value 347 00:16:20,760 --> 00:16:24,600 Speaker 2: stocks where we'd still stick with quality or profitable value. 348 00:16:24,840 --> 00:16:25,480 Speaker 3: Jill Joonice. 349 00:16:25,520 --> 00:16:28,200 Speaker 2: Now for more, Jill, good morning, this is your turf, 350 00:16:28,480 --> 00:16:30,560 Speaker 2: this is your world, so let's get straight into it. 351 00:16:30,880 --> 00:16:31,520 Speaker 3: Small caps. 352 00:16:31,560 --> 00:16:34,400 Speaker 2: When I buy the Russell, what am I buying and 353 00:16:34,440 --> 00:16:36,080 Speaker 2: why should I be buying it at the moment? 354 00:16:36,800 --> 00:16:39,280 Speaker 1: Well, I think you know, we had gotten more cautious 355 00:16:39,320 --> 00:16:41,400 Speaker 1: on the Russell two thousand as an index back in 356 00:16:41,440 --> 00:16:45,120 Speaker 1: April when the inflation data had continued to come in stronger, 357 00:16:45,600 --> 00:16:48,080 Speaker 1: and you know, really we highlighted there was two things 358 00:16:48,120 --> 00:16:49,880 Speaker 1: that we need to see to get more bullish on 359 00:16:49,920 --> 00:16:52,600 Speaker 1: the Russell as an index, and one is you know, 360 00:16:52,800 --> 00:16:54,640 Speaker 1: more confidence of the FED will be able to begin 361 00:16:54,760 --> 00:16:57,240 Speaker 1: that cutting cycle, which now is what we've started to 362 00:16:57,280 --> 00:16:59,320 Speaker 1: see in what was a big driver of the rally 363 00:16:59,320 --> 00:17:01,840 Speaker 1: we've seen over the past week or two. I think 364 00:17:01,880 --> 00:17:06,000 Speaker 1: the other is fundamentals and profitability, and that's where you know, 365 00:17:06,040 --> 00:17:09,640 Speaker 1: the Russell does have a high proportion of unprofitable stocks 366 00:17:09,640 --> 00:17:12,119 Speaker 1: that saw much bigger earnings recession than the S and 367 00:17:12,160 --> 00:17:14,919 Speaker 1: P five hundred, And that's where I think investors are 368 00:17:14,960 --> 00:17:17,280 Speaker 1: a little bit worried because when you look at the 369 00:17:17,280 --> 00:17:19,879 Speaker 1: beginning of the year, investors were expecting that by this 370 00:17:19,960 --> 00:17:23,040 Speaker 1: earning season, small cap profits would have come back, recovered 371 00:17:23,160 --> 00:17:25,760 Speaker 1: been better than large cap profits growth, and that's not 372 00:17:25,840 --> 00:17:28,199 Speaker 1: what we've seen. We've seen, you know, a lot of 373 00:17:28,200 --> 00:17:30,400 Speaker 1: hope held out for fourth quarter this year, a very 374 00:17:30,440 --> 00:17:33,320 Speaker 1: strong recovery, but the first, second and third quarters of 375 00:17:33,359 --> 00:17:36,919 Speaker 1: this year estimates have gotten revised down significantly. So I 376 00:17:36,920 --> 00:17:39,320 Speaker 1: think that's what you know, we really need to see 377 00:17:39,359 --> 00:17:41,800 Speaker 1: if we want to see if this rally sustainable. Is 378 00:17:42,040 --> 00:17:44,320 Speaker 1: you know, can we get good earnings day to this 379 00:17:44,400 --> 00:17:47,159 Speaker 1: earning season not only surprises to the upside, but the 380 00:17:47,240 --> 00:17:51,360 Speaker 1: guidance that supports that the fundamental backdrop is healthy for sus. 381 00:17:51,160 --> 00:17:53,000 Speaker 2: So let's pick a sector, a dominant sector on the RUSS, 382 00:17:53,359 --> 00:17:55,719 Speaker 2: the financials. We can talk about a financials. The regions 383 00:17:55,760 --> 00:17:57,040 Speaker 2: have been a big part of the story. Now for 384 00:17:57,080 --> 00:17:58,960 Speaker 2: the best part of twelve months, we've had a big 385 00:17:59,040 --> 00:18:01,600 Speaker 2: rally there. Do you think this reason to believe earnings 386 00:18:01,640 --> 00:18:04,400 Speaker 2: will pick up and reaccelerate as we start to interest 387 00:18:04,480 --> 00:18:06,399 Speaker 2: rates at a federal reserve, that things get better for 388 00:18:06,440 --> 00:18:08,480 Speaker 2: that cohort of companies, right? 389 00:18:08,760 --> 00:18:10,879 Speaker 1: Yeah, I mean financials has definitely been a big leader 390 00:18:10,920 --> 00:18:13,720 Speaker 1: of the rally recently, and certainly, you know, if we 391 00:18:13,760 --> 00:18:16,640 Speaker 1: see an outlook where we're looking for FED cuts, where 392 00:18:16,640 --> 00:18:20,960 Speaker 1: we're looking for soft landing, you know, no significant deterioration 393 00:18:21,040 --> 00:18:24,560 Speaker 1: in the economy that should be supportive for financials. I think, 394 00:18:24,680 --> 00:18:27,400 Speaker 1: you know, when you look at factors like the regionals 395 00:18:27,480 --> 00:18:30,800 Speaker 1: and credit conditions, that's still a risk that's out there. 396 00:18:30,840 --> 00:18:33,400 Speaker 1: So you know, if we're in a backdrop where where 397 00:18:33,440 --> 00:18:37,840 Speaker 1: the Feds cutting because economic conditions have deteriorated significantly, credit 398 00:18:37,880 --> 00:18:41,040 Speaker 1: spreads are rising, that would be more negative versus a 399 00:18:41,080 --> 00:18:46,400 Speaker 1: backdrop where the econ is still supportive. But certainly for financials, 400 00:18:46,440 --> 00:18:48,320 Speaker 1: you know, I think we've been due for a catch up, 401 00:18:48,920 --> 00:18:51,840 Speaker 1: you know, especially within small caps. You know, looking out, 402 00:18:51,880 --> 00:18:54,040 Speaker 1: I think we still would be more cautious on some 403 00:18:54,080 --> 00:18:56,200 Speaker 1: of the regionals in its scenario where you want to 404 00:18:56,240 --> 00:18:59,560 Speaker 1: be selective in relative to the large caps, which you know, 405 00:18:59,640 --> 00:19:03,840 Speaker 1: large already got regulated, they saw their multiples contract for 406 00:19:03,880 --> 00:19:07,000 Speaker 1: a number of years after the financial crisis. Regionals still 407 00:19:07,040 --> 00:19:10,320 Speaker 1: could be subject to that. You know, if we see 408 00:19:10,440 --> 00:19:13,720 Speaker 1: greater focus on some of these regional banks that haven't 409 00:19:13,760 --> 00:19:16,320 Speaker 1: had the regulation that the larger cities. 410 00:19:16,000 --> 00:19:18,280 Speaker 6: Have, there's sort of a tortured relationship a lot of 411 00:19:18,280 --> 00:19:21,040 Speaker 6: investors have with these names is simply because they have 412 00:19:21,119 --> 00:19:24,040 Speaker 6: gotten so beaten up that on a valuation perspective, they 413 00:19:24,040 --> 00:19:26,119 Speaker 6: look great, and then you look under the hood and 414 00:19:26,160 --> 00:19:28,200 Speaker 6: you start to see a lot of concerns. One of 415 00:19:28,200 --> 00:19:30,600 Speaker 6: these numbers, I'm talking more generally, not just the financials, 416 00:19:30,880 --> 00:19:34,920 Speaker 6: more generally. You put this out that only thirteen percent 417 00:19:35,200 --> 00:19:38,399 Speaker 6: of second quarter reporters of small cap companies have beaten 418 00:19:38,520 --> 00:19:41,119 Speaker 6: on earnings for share and sales. That compares to fifty 419 00:19:41,160 --> 00:19:43,320 Speaker 6: one percent of large caps. Can you give us a 420 00:19:43,359 --> 00:19:46,640 Speaker 6: sense of why why smaller companies are struggling to really 421 00:19:46,680 --> 00:19:49,880 Speaker 6: meet some of the expectations even as large caps continue 422 00:19:49,880 --> 00:19:50,560 Speaker 6: to outperform. 423 00:19:50,960 --> 00:19:53,440 Speaker 1: Yeah, I mean it's been still pretty broad based, where 424 00:19:53,600 --> 00:19:57,240 Speaker 1: just that that overall profits recovery has been much much 425 00:19:57,280 --> 00:20:00,040 Speaker 1: slower to come to fruition in small caps, and the 426 00:20:00,320 --> 00:20:02,760 Speaker 1: earnings decline was pretty much across the board, And when 427 00:20:02,760 --> 00:20:05,680 Speaker 1: you look at second quarter expectations, pretty much most sectors 428 00:20:05,680 --> 00:20:08,960 Speaker 1: are expected to still see negative earnings growth this quarter. So, 429 00:20:09,320 --> 00:20:12,680 Speaker 1: you know, smaller companies have been more challenged. And when 430 00:20:12,720 --> 00:20:14,800 Speaker 1: you look at the large caps, obviously a lot of 431 00:20:14,800 --> 00:20:17,639 Speaker 1: the Magnificent seven, some of the big tech stocks have 432 00:20:17,720 --> 00:20:20,679 Speaker 1: been the drivers of earnings growth. We do expect that 433 00:20:20,760 --> 00:20:23,880 Speaker 1: to slow and see a broadening out to the rest 434 00:20:23,920 --> 00:20:26,000 Speaker 1: of the you know, other four ninety three of the 435 00:20:26,040 --> 00:20:28,320 Speaker 1: SMP of five hundred. So it's a similar story for 436 00:20:28,359 --> 00:20:31,320 Speaker 1: small caps. But a lot of these smaller company companies 437 00:20:31,320 --> 00:20:34,880 Speaker 1: have still been challenged. You've had less profitable companies within 438 00:20:34,920 --> 00:20:38,560 Speaker 1: the index. You've had sectors like healthcare where you know, 439 00:20:38,640 --> 00:20:40,399 Speaker 1: that's been one of the sectors that's all the biggest 440 00:20:40,400 --> 00:20:43,680 Speaker 1: decline and now is expected to see among the biggest recoveries. 441 00:20:44,119 --> 00:20:47,160 Speaker 1: So I think when you're thinking about buying the fundamentals 442 00:20:47,160 --> 00:20:49,920 Speaker 1: of these companies, that's why we've been you know, still 443 00:20:49,920 --> 00:20:52,840 Speaker 1: more cautious on the overall index, but I think in 444 00:20:53,320 --> 00:20:55,720 Speaker 1: pockets of small caps there's still a lot of opportunity. 445 00:20:55,760 --> 00:20:59,440 Speaker 1: And you know, as you've pointed out, the valuation backdrop, 446 00:20:59,800 --> 00:21:02,960 Speaker 1: the positioning backdrop is very supportive. Investors have been very 447 00:21:03,040 --> 00:21:06,720 Speaker 1: underweeks under allocated to small caps. You know, we've seen 448 00:21:06,760 --> 00:21:09,480 Speaker 1: investors want to get more more bullish on small caps. 449 00:21:09,480 --> 00:21:12,800 Speaker 1: They've they've been such a laggard for such a long time. 450 00:21:13,640 --> 00:21:16,679 Speaker 1: So I think the areas that are you know, perhaps 451 00:21:16,800 --> 00:21:20,240 Speaker 1: less sensitive to to refinancing risk if there's still some 452 00:21:20,320 --> 00:21:22,399 Speaker 1: uncertainty on the FED could be a good area. Areas 453 00:21:22,400 --> 00:21:26,199 Speaker 1: that are sensitive to you know, still cheap but have 454 00:21:26,359 --> 00:21:29,280 Speaker 1: positive estimate revisions. If we're in a backdrop where that's still. 455 00:21:29,119 --> 00:21:30,840 Speaker 6: Uncertain, you went to the area that I wanted to 456 00:21:30,840 --> 00:21:35,120 Speaker 6: go to. At the three pillars of economy, earnings, and politics, 457 00:21:35,119 --> 00:21:37,760 Speaker 6: we're focusing on the first two. We've talked about earnings, 458 00:21:37,920 --> 00:21:39,639 Speaker 6: but what is the read through to the economy This 459 00:21:39,760 --> 00:21:44,120 Speaker 6: question of small caps ostensibly have more floating rate debt, 460 00:21:44,440 --> 00:21:48,240 Speaker 6: are more sensitive to perhaps higher rates by the Federal Reserve. 461 00:21:48,600 --> 00:21:49,560 Speaker 3: Is that a key. 462 00:21:49,440 --> 00:21:53,160 Speaker 6: Reason why you're not seeing earnings increase at a faster pace. 463 00:21:53,200 --> 00:21:55,440 Speaker 6: Akin to some of the larger companies, they were able 464 00:21:55,480 --> 00:21:57,359 Speaker 6: to lock in some of those funding costs that were 465 00:21:57,400 --> 00:21:58,679 Speaker 6: really cheap earlier on. 466 00:21:59,160 --> 00:22:02,160 Speaker 1: Right, Yeah, small caps definitely have a lot more as 467 00:22:02,200 --> 00:22:04,960 Speaker 1: you pointed out, floating rate short term debt. About almost 468 00:22:05,040 --> 00:22:08,199 Speaker 1: about half of their debt falls into that profile, whereas 469 00:22:08,280 --> 00:22:10,240 Speaker 1: large caps about eighty percent of their debt is that 470 00:22:10,520 --> 00:22:13,320 Speaker 1: you know, long term fixed rate debt. So, you know, 471 00:22:13,359 --> 00:22:15,840 Speaker 1: I think the fact that we've seen inflation start to 472 00:22:15,880 --> 00:22:19,040 Speaker 1: come down and the Fed could be on track to 473 00:22:19,400 --> 00:22:22,360 Speaker 1: begin cutting rates. Our expectation is in December of this year, 474 00:22:22,359 --> 00:22:25,000 Speaker 1: but obviously the risks have been pulled forth that maybe 475 00:22:25,119 --> 00:22:27,960 Speaker 1: maybe a cut in Septembers possible, So you know that 476 00:22:27,960 --> 00:22:30,760 Speaker 1: that eases some of the risk. The fact that we've 477 00:22:30,760 --> 00:22:33,840 Speaker 1: seen credit spreads have been low. You know, some companies 478 00:22:33,880 --> 00:22:36,640 Speaker 1: have been willing to refinance even though rates are high 479 00:22:36,680 --> 00:22:39,960 Speaker 1: because you know, credits backdrop has been supportive. So you know, 480 00:22:40,040 --> 00:22:42,800 Speaker 1: that's the risk as if we see credit spreads you know, 481 00:22:42,840 --> 00:22:45,240 Speaker 1: start to rise again, that that could become a headwind 482 00:22:45,320 --> 00:22:48,040 Speaker 1: to the to the profitability as well. So you know, 483 00:22:48,080 --> 00:22:50,040 Speaker 1: I think this is a backdrop where you want to 484 00:22:50,080 --> 00:22:52,520 Speaker 1: be selective within small caps and not just by the 485 00:22:53,000 --> 00:22:55,760 Speaker 1: rustle which you know, we think further clarity on the 486 00:22:56,320 --> 00:22:59,840 Speaker 1: profitability backdrop could help. But for now, you know, our 487 00:23:00,000 --> 00:23:01,920 Speaker 1: and also be AVAG cover about a thousand small and 488 00:23:02,000 --> 00:23:04,480 Speaker 1: mid cap stocks. I think there's a lot of opportunities 489 00:23:04,560 --> 00:23:07,080 Speaker 1: for for alpha if you can focus on you know, 490 00:23:07,119 --> 00:23:09,320 Speaker 1: like I said, the names that actually just have positive 491 00:23:09,400 --> 00:23:12,400 Speaker 1: Estimer revisions and a backdropper revisions have still been coming down. 492 00:23:12,440 --> 00:23:15,399 Speaker 1: Guidance has been weaker in small caps some of the 493 00:23:15,480 --> 00:23:18,760 Speaker 1: value stocks. But you know, we're watching what companies are 494 00:23:18,800 --> 00:23:22,840 Speaker 1: saying this earning season. If if guidance can can get 495 00:23:22,840 --> 00:23:24,919 Speaker 1: a bit better, it's still been a bit weak, you know, 496 00:23:25,160 --> 00:23:28,600 Speaker 1: within small caps. Then you know, companies beating and raising 497 00:23:28,640 --> 00:23:30,879 Speaker 1: I think could be supportive of a broader you know 498 00:23:31,000 --> 00:23:33,560 Speaker 1: index rally and you know, similar to the risk rally 499 00:23:33,600 --> 00:23:34,840 Speaker 1: we saw over the past week or two. 500 00:23:35,000 --> 00:23:36,560 Speaker 7: Joe, I have to ask about the third camp that 501 00:23:36,640 --> 00:23:39,919 Speaker 7: Lisa alluded to, the politics. How much is small caps 502 00:23:40,000 --> 00:23:41,840 Speaker 7: a bet on Trump vance? 503 00:23:42,400 --> 00:23:43,960 Speaker 1: Well, I think when you look at you know, the 504 00:23:44,320 --> 00:23:46,639 Speaker 1: rally over the past week, really some of the initial 505 00:23:46,720 --> 00:23:50,240 Speaker 1: drivers were more on positioning and you know, risk on 506 00:23:50,600 --> 00:23:54,280 Speaker 1: We saw financials as a big rally deep value stocks. 507 00:23:54,560 --> 00:23:57,560 Speaker 1: We saw stocks with high short interest rally as we 508 00:23:57,600 --> 00:24:01,480 Speaker 1: saw some initial short covering, and what we've looked back really, 509 00:24:01,640 --> 00:24:04,920 Speaker 1: you know, while while certain political factors or political policies 510 00:24:05,000 --> 00:24:07,720 Speaker 1: can certainly impact small caps when you're looking at tax 511 00:24:07,800 --> 00:24:11,280 Speaker 1: rates or when you're looking at policies that could impact growth, overall, 512 00:24:11,320 --> 00:24:14,280 Speaker 1: we found that profits tend to matter more than politics 513 00:24:14,320 --> 00:24:17,040 Speaker 1: for small caps and for equities. So, you know, I 514 00:24:17,080 --> 00:24:20,159 Speaker 1: think what's going on with GDP and interest rates is 515 00:24:20,160 --> 00:24:23,240 Speaker 1: going to be a bigger driver of the index than 516 00:24:23,320 --> 00:24:25,240 Speaker 1: necessarily which political parties in office. 517 00:24:25,359 --> 00:24:27,240 Speaker 3: That's the piece of a story we're waiting for. Jill. 518 00:24:27,280 --> 00:24:29,159 Speaker 2: Let's try to catch up Joe caerry Hill there of 519 00:24:29,240 --> 00:24:33,520 Speaker 2: Bank for America. This is the Bloomberg Surveillance Podcast, bringing 520 00:24:33,560 --> 00:24:37,159 Speaker 2: you the best in markets, economics, angiot politics. You can 521 00:24:37,200 --> 00:24:39,959 Speaker 2: watch the show live on Bloomberg TV weekday mornings from 522 00:24:40,000 --> 00:24:43,280 Speaker 2: six am to nine am Eastern. Subscribe to the podcast 523 00:24:43,320 --> 00:24:46,520 Speaker 2: on Apple, Spotify or anywhere else you listen, and as 524 00:24:46,520 --> 00:24:49,440 Speaker 2: always on the Bloomberg Terminal and the Bloomberg Business app.