WEBVTT - Soft Jobs Data, Market Selloff, Tech Earnings 0:00:00.600 --> 0:00:10.799 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Apple car Playing and Broyd Auto with the 0:00:17.520 --> 0:00:21.520 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:23.360 or watch us live on YouTube. 0:00:23.440 --> 0:00:26.279 But we're also going to talk about jobs and the 0:00:26.280 --> 0:00:28.320 economic fundamentals and all that fun stuff. And for that, 0:00:28.480 --> 0:00:32.000 Michael McKee is joining us. Bloomberg Economics. No, you're not 0:00:32.040 --> 0:00:35.560 Bloomberg Economics. What your policy correspondent? 0:00:35.800 --> 0:00:36.600 Well, economics. 0:00:37.479 --> 0:00:37.879 It is a. 0:00:39.360 --> 0:00:40.319 Title like that's the. 0:00:40.320 --> 0:00:43.320 Thing red Sox analysts for I mean there's that too. 0:00:45.320 --> 0:00:48.000 I gotta ask, are you surprised about the depth of 0:00:48.040 --> 0:00:50.200 the reaction, like people trying to talk about a fifty 0:00:50.200 --> 0:00:53.800 bases point cut in September, terminal rates being revised, lower 0:00:53.960 --> 0:00:55.120 the bond rally. 0:00:55.480 --> 0:00:56.080 I don't. 0:00:56.760 --> 0:00:59.560 I don't ever get surprised by market reactions. I love 0:00:59.560 --> 0:01:02.360 it said this. I've said this before and I'll say 0:01:02.400 --> 0:01:05.800 it again. The fat has a reaction function. The markets 0:01:06.040 --> 0:01:08.640 have an overreaction function, and they always go too far, 0:01:08.760 --> 0:01:10.920 too fast, and then they come back a little bit 0:01:10.959 --> 0:01:13.400 to sanity at some point. Because you get a hurt 0:01:13.480 --> 0:01:17.440 instinct when some kind of news breaks and the markets 0:01:17.440 --> 0:01:21.560 were leaning towards a bad report, and so this just 0:01:21.840 --> 0:01:25.320 you know, pushed them in a direction they already wanted 0:01:25.360 --> 0:01:28.600 to go. And I'll leave it to smarter people like 0:01:28.760 --> 0:01:31.080 just to tell you why they want to do that, 0:01:31.360 --> 0:01:34.800 but and whether or not lower rates are going to 0:01:34.880 --> 0:01:37.959 be good for equities or not. But at this point, 0:01:38.040 --> 0:01:42.080 I think it's today you just kind of look past 0:01:42.360 --> 0:01:44.920 what happened in the markets, and Monday. 0:01:44.560 --> 0:01:44.960 You come back. 0:01:45.000 --> 0:01:46.520 Can't do that, this is the fun part for us. 0:01:46.600 --> 0:01:49.480 But go ahead, well Monday, Monday, you come in and 0:01:49.520 --> 0:01:51.760 you start thinking about what does this mean for the 0:01:51.760 --> 0:01:54.680 overall economy. I'm telling everybody takes Saturday and Sunday just. 0:01:58.320 --> 0:01:58.600 Well. 0:01:58.680 --> 0:02:04.200 Have actually Austin Goulsby will be on Bloomberg Television noon. 0:02:04.320 --> 0:02:06.680 I believe that's on our Eco go page here. So 0:02:07.360 --> 0:02:10.640 when it comes to someone like that, who's obviously on 0:02:10.680 --> 0:02:14.280 the federal reserve, what are you looking to potentially hear 0:02:14.360 --> 0:02:15.800 from him? And what do you want to kind of 0:02:15.800 --> 0:02:18.560 gauge here now coming out of obviously the Fed decision, 0:02:18.600 --> 0:02:21.000 and because he at the beginning of July, he was 0:02:21.080 --> 0:02:23.080 kind of one of the first people that really, we 0:02:23.120 --> 0:02:25.800 know he's dubbish, but he started indicating that he felt 0:02:25.840 --> 0:02:27.880 like cuts were coming pretty soon. Yeah. 0:02:27.960 --> 0:02:33.200 Well, the chairman was very certain during his news conference 0:02:33.280 --> 0:02:36.440 that everybody was in agreement that they should pause, and 0:02:36.480 --> 0:02:39.680 I'm wondering if that's exactly true or if he was 0:02:39.960 --> 0:02:43.600 maybe seeing what he wanted to see. And obviously, the 0:02:43.639 --> 0:02:47.600 market is saying today that the FED made a mistake, 0:02:48.120 --> 0:02:52.720 So do they think how do they defend themselves to 0:02:52.800 --> 0:02:56.359 the idea of a mistake? And does this lock in September? 0:02:56.919 --> 0:02:59.919 And obviously what do they think of a fifty basis point. 0:03:00.200 --> 0:03:02.480 I don't think it's something that they want to do, 0:03:02.639 --> 0:03:04.399 so I don't think that'll be a big deal. 0:03:04.480 --> 0:03:06.760 I mean, I know that the markets overreact and the 0:03:06.760 --> 0:03:09.800 FED onder I get all that, But if the market 0:03:09.800 --> 0:03:13.000 has to price in a fifty bases point cut or 0:03:13.080 --> 0:03:17.280 even an intermeting cut, then the FED has the enviable 0:03:17.360 --> 0:03:20.480 job of having to walk back expectations to kind of 0:03:20.520 --> 0:03:21.960 get that out of the market. 0:03:22.160 --> 0:03:23.920 How did they do that when they also have to 0:03:23.919 --> 0:03:25.280 acknowledge like things are going to beeker. 0:03:25.400 --> 0:03:28.160 That's why they don't want to do that. They they 0:03:28.240 --> 0:03:32.160 wouldn't do an intermeding cut unless there was some real 0:03:32.240 --> 0:03:34.880 collapse in the economy. And we did get one hundred 0:03:34.880 --> 0:03:40.920 and fourteen thousand jobs. It's what the Fed had been 0:03:40.960 --> 0:03:45.080 looking for. They'd been looking for a more gradual ratchet down. 0:03:46.000 --> 0:03:49.840 This was a fairly dramatic move, but it's not out 0:03:49.880 --> 0:03:55.600 of It's not an abnormal result for the economy. And 0:03:55.640 --> 0:04:00.640 the unemployment rate is four point three percent and that's 0:04:00.680 --> 0:04:06.480 still historically low. So yes, things deteriorated, perhaps more quickly 0:04:06.520 --> 0:04:09.000 than they anticipated, but they're not going to panic at 0:04:09.000 --> 0:04:09.440 this point. 0:04:09.560 --> 0:04:12.120 Okay, Mike, Actually stay with us, Hank tight for this segment, 0:04:12.120 --> 0:04:14.120 we're going to bring in Jonny Bailey. She's chief workforce 0:04:14.160 --> 0:04:17.839 analyst at employee Bridge, joining us now from Florida. Jony, 0:04:18.160 --> 0:04:22.080 give us your take on the numbers, Like they weren't terrible. 0:04:22.120 --> 0:04:25.280 I understand the job market's slowing, but what's your take. 0:04:28.480 --> 0:04:32.520 If you can see that we have a cooling job market, 0:04:33.000 --> 0:04:35.320 you know, and it's been coming for some time, you know, 0:04:35.360 --> 0:04:39.359 over the last really even eighteen months. Most of the 0:04:39.480 --> 0:04:42.960 job growth has been in the healthcare sector, in the 0:04:42.960 --> 0:04:44.360 government sector. 0:04:44.320 --> 0:04:46.000 And in leisure and hospitality. 0:04:46.279 --> 0:04:49.640 But there's been many sectors that haven't been adding that 0:04:49.880 --> 0:04:55.760 robust job growth. Manufacturing, professional business services has been struggling. 0:04:56.200 --> 0:05:00.200 The temporary help sector has really been struggling. So I 0:05:00.200 --> 0:05:04.040 think we're seeing more of the same. But this report 0:05:04.560 --> 0:05:08.200 showed some signs of real weakening when you look at 0:05:08.200 --> 0:05:12.360 the unemployment numbers. That is certainly what concerns me the most. 0:05:12.720 --> 0:05:15.760 That we tipped up to four point three percent. We're 0:05:15.839 --> 0:05:19.919 up to seven point one million unemployed people in the 0:05:20.040 --> 0:05:24.640 United States and right now, I can't tell you that 0:05:24.640 --> 0:05:27.360 that's going to change very quickly. I think we're going 0:05:27.400 --> 0:05:30.480 to see more of that for the rest of this year. 0:05:31.600 --> 0:05:34.200 What if any When it comes to inflationary costs or 0:05:34.320 --> 0:05:37.680 driving people to go back into the workforce. 0:05:38.200 --> 0:05:41.400 Oh, I think you are spot on when it comes 0:05:41.440 --> 0:05:46.080 to that. We are seeing people enter back into the workforce, 0:05:46.160 --> 0:05:50.200 so that that is a good sign. Even labor participation 0:05:51.000 --> 0:05:54.840 tipped up to sixty two point seven percent, so people 0:05:54.920 --> 0:05:57.800 are coming back. They have to come back to work, 0:05:58.360 --> 0:06:02.240 and that is due to inflationationary costs. You know, we're 0:06:02.279 --> 0:06:06.479 seeing people not only you know, need both parents maybe 0:06:06.520 --> 0:06:10.640 to work in a family, but some taking second jobs, 0:06:11.360 --> 0:06:14.599 looking for part time work or maybe gig work to 0:06:14.720 --> 0:06:20.839 kind of supplement their incomes. So yes, unemployment will continue 0:06:20.880 --> 0:06:24.040 to grow as we start to see more people participating 0:06:24.279 --> 0:06:29.880 in the overall workforce. And unfortunately, job openings are starting 0:06:29.920 --> 0:06:33.039 to decline month over month. I think we're down to 0:06:33.080 --> 0:06:37.400 about eight point one million job openings and now we 0:06:37.520 --> 0:06:42.080 have seven point one million unemployed workers. So you know, 0:06:42.120 --> 0:06:46.359 there's still more jobs than there are unemployed people, but 0:06:46.560 --> 0:06:50.880 that gap is really narrowing, and it could reverse that. 0:06:50.920 --> 0:06:54.400 We will have more unemployed people than we do have 0:06:54.480 --> 0:06:58.120 open jobs in the US in the next couple months. 0:06:58.720 --> 0:07:02.120 One thing we saw in the report today that would 0:07:02.200 --> 0:07:06.159 be ordinarily even a red flag is a drop in 0:07:06.320 --> 0:07:12.080 temporary health services hiring. Basically, are you finding that companies 0:07:13.520 --> 0:07:16.320 don't want to add anybody at this point? 0:07:17.520 --> 0:07:22.200 Yes, you know, unfortunately the temporary help sector has been 0:07:22.280 --> 0:07:25.400 hit the hardest over the last two years. 0:07:26.160 --> 0:07:28.320 We've been seeing declines. 0:07:27.840 --> 0:07:33.200 In you know, job growth for gosh, I think since 0:07:33.400 --> 0:07:37.640 March of twenty twenty two, so again this month is concerning. 0:07:37.720 --> 0:07:40.280 There was a loss of twenty two thousand jobs in 0:07:40.320 --> 0:07:44.560 this sector, and you know, it really points to employers 0:07:44.600 --> 0:07:48.320 are going to let their temporary workers go first and 0:07:48.360 --> 0:07:51.520 try to hold on to their permanent staff before they 0:07:51.560 --> 0:07:56.040 need to lay them off, and it has a profound 0:07:56.560 --> 0:08:00.520 impact on the overall temporary health industry. Has been a 0:08:00.560 --> 0:08:05.000 softness across the board. Certainly, I see it at Employee Bridge. 0:08:05.080 --> 0:08:07.320 I'm also the chair of the board for the American 0:08:07.360 --> 0:08:11.120 Staffing Association, and I can tell you the entire industry 0:08:11.280 --> 0:08:12.920 is feeling it across the board. 0:08:13.120 --> 0:08:14.720 We're hopeful, you know. 0:08:14.720 --> 0:08:17.600 As we look at coming into the holiday and the 0:08:17.720 --> 0:08:21.720 peak season, that employers are going to start adding to 0:08:21.800 --> 0:08:25.360 their payrolls and hopefully twenty twenty five is a much 0:08:25.400 --> 0:08:30.760 better year, but it would point to a challenging economic 0:08:30.880 --> 0:08:35.360 climate right now and certainly concerns because employers are not 0:08:35.720 --> 0:08:39.359 adding temporary workers, you know, to their payrolls. 0:08:39.679 --> 0:08:42.839 Where are we still seeing bright spots within the labor force? 0:08:42.920 --> 0:08:48.640 Jny, Well, you know, bright spots, I will say, can 0:08:49.320 --> 0:08:52.960 still be in that healthcare sector. There's a tremendous amount 0:08:53.000 --> 0:08:57.600 of job growth in healthcare and I expect those trends 0:08:57.600 --> 0:08:58.520 to continue. 0:08:59.320 --> 0:09:02.320 You know, we have been seeing construction jobs start to 0:09:02.360 --> 0:09:03.520 come back, and. 0:09:03.520 --> 0:09:06.960 If you look at the horizon, I do expect that 0:09:07.040 --> 0:09:10.720 we will see a resurgence in manufacturing. We're just not 0:09:11.000 --> 0:09:14.200 seeing that right now, but many plants are being you 0:09:14.240 --> 0:09:17.840 know built across the country and those jobs will come 0:09:17.880 --> 0:09:21.400 back in the US. I also think if you look 0:09:21.559 --> 0:09:28.200 at the breakdown of unemployment, certainly having education, college degree, 0:09:28.920 --> 0:09:31.560 you know, put you in a much better position. 0:09:32.320 --> 0:09:33.640 My concern in this. 0:09:33.600 --> 0:09:38.240 Month's report was actually those lower wage jobs, you know, 0:09:38.360 --> 0:09:41.240 really not coming back and being eliminated. And when you 0:09:41.280 --> 0:09:45.920 look at unemployment, we saw the largest jump in unemployment 0:09:46.720 --> 0:09:51.880 in twenty five years of age and older. For individuals 0:09:51.920 --> 0:09:56.560 that have not completed their high school diploma. It went 0:09:56.640 --> 0:09:59.400 almost it went up almost a full point. We saw 0:09:59.440 --> 0:10:02.920 that up to six point seven percent. So those low 0:10:03.000 --> 0:10:09.120 wage jobs are certainly being impacted. College degree it's still 0:10:09.160 --> 0:10:12.280 down to about three and a half percent unemployment, so 0:10:12.480 --> 0:10:16.320 certainly lower than that four point three percent, So education 0:10:16.760 --> 0:10:22.440 skills experience, those jobs are still out there and in demand. 0:10:23.280 --> 0:10:26.559 Is this something the situation we have now with employment 0:10:26.880 --> 0:10:28.600 that a FED rate cut is going to fix? 0:10:29.960 --> 0:10:32.160 It will certainly help, you know. 0:10:32.200 --> 0:10:36.800 I think most employers right now are being very focused 0:10:37.040 --> 0:10:41.360 on you know, cost containment and where they're investing, and 0:10:41.440 --> 0:10:44.920 with where interest rates are right now, you know, their 0:10:45.000 --> 0:10:48.959 purse strings are just a bit tighter. So when when 0:10:49.000 --> 0:10:53.079 we talk to our customers at employee Bridge and certainly 0:10:53.760 --> 0:10:56.880 employers across the board, you know, they are saying that 0:10:56.920 --> 0:11:00.600 they are waiting, you know, for the FED to cut 0:11:00.679 --> 0:11:05.080 rights and that they're hopeful that when that happens, things 0:11:05.120 --> 0:11:07.440 will start to pick up and they will start to 0:11:07.520 --> 0:11:10.960 make those hiring decisions. 0:11:09.840 --> 0:11:11.199 Again and move forward. 0:11:11.400 --> 0:11:14.240 So I would say, from everything we're hearing on the 0:11:14.280 --> 0:11:16.680 front lines, yes, that will help. 0:11:16.800 --> 0:11:18.840 You know, Jenny willly have about twenty seconds left. But 0:11:19.240 --> 0:11:21.400 we've seen when it comes to women in entering the 0:11:21.440 --> 0:11:23.679 labor force coming out of COVID, it's been a bit 0:11:23.720 --> 0:11:26.320 of a struggle, more so compared to prior to that. 0:11:26.320 --> 0:11:28.000 But what do we sing on that front? 0:11:28.679 --> 0:11:33.040 Yeah, you know, I think that there's more flexibility for 0:11:33.440 --> 0:11:36.360 women in the workforce right now than there's probably ever 0:11:36.480 --> 0:11:41.679 been before. Employers want to hire, you know, a device workforce, 0:11:41.800 --> 0:11:45.520 they want women to come back, and they're offering more flexibility. 0:11:45.679 --> 0:11:48.760 So options are out there, and I do think we're 0:11:48.760 --> 0:11:51.040 seeing women enter back as well. 0:11:51.120 --> 0:11:55.080 Great to hear Jenny Bailey, chief Work Analysts here and 0:11:55.160 --> 0:11:57.959 apparently the chair of the American Staffing Association. Of course, 0:11:58.000 --> 0:11:59.959 Mike McKee over our own at Bloomberg. 0:12:00.320 --> 0:12:06.400 Here you're listening to the Bloomberg Intelligence Podcast. Catch us 0:12:06.440 --> 0:12:09.839 live weekdays at ten am Eastern on applecar Play and 0:12:09.840 --> 0:12:12.760 Android Auto with the Bloomberg Business app. You can also 0:12:12.840 --> 0:12:16.320 listen live on Amazon Alexa from our flagship New York station, 0:12:16.720 --> 0:12:21.679 Just say Alexa play Bloomberg eleven thirty Bloomberg. 0:12:21.240 --> 0:12:24.080 Intelligence Radio, Alex Steele, Paul Sweeny's off on the beach 0:12:24.280 --> 0:12:26.480 just mentioned is here, as well as John Tucker. Yeah, 0:12:26.480 --> 0:12:28.800 we haven't seen those chunky moves in the bond market 0:12:28.840 --> 0:12:31.640 in the front end since guess when, oh twenty twenty 0:12:31.679 --> 0:12:34.760 three March, the less VB action there, So let's for 0:12:35.160 --> 0:12:38.200 a perspective on like the type of sort of panic 0:12:38.240 --> 0:12:40.000 buying if you will, coming into the front end. 0:12:40.040 --> 0:12:42.720 Also, the Atlanta Fed GDP now for the third quarter 0:12:42.760 --> 0:12:44.720 coming in around two and a half percent, and then 0:12:44.720 --> 0:12:46.920 the ECFS you function in the terminot's where you can 0:12:46.960 --> 0:12:49.640 see the economic forecast for GDP annually as well as 0:12:49.720 --> 0:12:52.400 quarter over quarter, still seeing strong growth here. So I 0:12:52.440 --> 0:12:55.360 know people are potentially spooked by this job number coming 0:12:55.360 --> 0:12:58.839 in below one hundred and fifty thousand, But again, when 0:12:58.840 --> 0:13:01.160 you're looking at some of the economic projections here, still 0:13:01.160 --> 0:13:03.240 pretty strong growth here overall for the US. 0:13:03.080 --> 0:13:05.839 It's such a good perspective, which begs the question, then 0:13:06.080 --> 0:13:07.880 when you have a sell off that's triggered by that 0:13:07.960 --> 0:13:10.520 growth scare, what do you do then when the underlying 0:13:10.600 --> 0:13:13.640 data is still okay? Well Matt Stuckey is chief portfolio 0:13:13.720 --> 0:13:16.560 manager of equities at Northwestern a mutual Wealth Management and 0:13:16.600 --> 0:13:19.000 he joins US now, So to that point, when you 0:13:19.000 --> 0:13:22.079 see the NASDAC off three percent, do you buy the dip? 0:13:23.679 --> 0:13:26.920 Well, good morning, thanks for having me. Look, I think 0:13:26.920 --> 0:13:29.320 before you rush into any kind of buying and selling 0:13:29.360 --> 0:13:32.840 activity on a day like today, revisiting kind of where 0:13:32.840 --> 0:13:35.080 you're at from a risk allocation is probably where you 0:13:35.120 --> 0:13:37.720 need to start. And so if your way underweight risk assets, 0:13:37.800 --> 0:13:41.480 maybe today's a better entry point. But again, I think 0:13:41.520 --> 0:13:44.840 it's it's important to always kind of center whatever trading 0:13:44.840 --> 0:13:47.400 activity you make based on kind of your long term 0:13:47.440 --> 0:13:49.400 risk tolerance, because that's likely to be tested in the 0:13:49.440 --> 0:13:50.080 coming months. 0:13:50.600 --> 0:13:53.719 So how are you advising clients to position? What are 0:13:53.720 --> 0:13:56.440 you suggesting that they buy? What are you suggesting that 0:13:56.480 --> 0:13:59.560 they sell? When it comes to equities. 0:14:00.160 --> 0:14:04.680 With inequities, Look, I mean we we have been somewhat 0:14:04.720 --> 0:14:08.079 vocal about our concern about concentration building in the S 0:14:08.160 --> 0:14:10.640 and P for the last year or so, and and 0:14:10.720 --> 0:14:13.160 to kind of counteract a little bit of that growing risk, 0:14:13.640 --> 0:14:16.280 you know, we've recommended clients kind of use a little 0:14:16.280 --> 0:14:18.440 bit of a value tilt within their portfolio in the 0:14:18.520 --> 0:14:22.200 S and P space, maybe an equal weighted exposure as 0:14:22.200 --> 0:14:25.840 well to mix in some diversification. You know, we also 0:14:25.920 --> 0:14:28.920 have been somewhat positive about the optionality that we think 0:14:29.320 --> 0:14:32.280 exists in US small caps and midcaps, where you know, 0:14:32.400 --> 0:14:36.440 from evaluation perspective prior to July, you know, things were 0:14:36.520 --> 0:14:39.880 fairly compressed and dislocated versus the S and P, and 0:14:39.920 --> 0:14:42.560 we thought it could work in a variety of economic outcomes, 0:14:42.600 --> 0:14:45.520 one being a mild recession which kind of catalyzes some 0:14:45.600 --> 0:14:49.600 aggressive FED rate cuts, or you know, a soft landing 0:14:49.600 --> 0:14:52.040 scenario which still allows the FED to cut maybe just 0:14:52.120 --> 0:14:55.960 by less that broadens out the economic participation into its economy. 0:14:56.720 --> 0:14:56.880 You know. 0:14:57.120 --> 0:14:59.480 At this point now, though, you know, I think we 0:14:59.560 --> 0:15:03.960 got to have longer term horizon for that to play out, 0:15:04.000 --> 0:15:07.080 because it does look like incrementally the labor market is 0:15:07.120 --> 0:15:09.160 accelerat to the downside, and we're likely to be in 0:15:09.160 --> 0:15:11.200 some chocolate of waters here for the next few months. 0:15:11.400 --> 0:15:13.320 So you mentioned the Russell, and now we're looking at 0:15:13.320 --> 0:15:15.880 the Rustle down over four percent. We haven't seen this 0:15:16.040 --> 0:15:18.120 kind of slide since June of twenty twenty two. 0:15:18.840 --> 0:15:21.640 I mean, I appreciate that it's looking for value. Is interesting. 0:15:21.800 --> 0:15:24.960 How do you manage? Then we had a minor run up. 0:15:24.800 --> 0:15:26.920 And then here we are down again, the most in 0:15:26.960 --> 0:15:28.160 two years. 0:15:28.720 --> 0:15:32.320 Well, you know, we're talking about our within equity allocation. 0:15:32.360 --> 0:15:34.680 I think it's important for your listeners to understand that 0:15:34.720 --> 0:15:39.040 within the global context of our portfolios, our aggregate equity 0:15:39.080 --> 0:15:43.600 position has been underweight with a preference for high quality 0:15:43.600 --> 0:15:46.360 fixed income, and so we're thinking about a little bit 0:15:46.400 --> 0:15:49.120 of offense in that part of the equity portfolio because 0:15:49.160 --> 0:15:53.280 we have a defensive position in fixed income, which is 0:15:53.560 --> 0:15:55.560 in a day like today, you know, really proving it's 0:15:55.600 --> 0:15:59.680 worth from a diversification perspective. So, you know, our message 0:15:59.720 --> 0:16:01.680 to CLI clients on days like today is that this 0:16:01.880 --> 0:16:04.760 is likely to be the environment we deal with for 0:16:04.800 --> 0:16:08.320 the next few months of volatility back and forth, especially 0:16:08.320 --> 0:16:13.400 in areas like small caps, which not only have higher cyclicality, 0:16:13.440 --> 0:16:15.840 but also higher beta associated with them. 0:16:16.720 --> 0:16:16.960 Matt. 0:16:17.000 --> 0:16:20.120 Something I'm curious about is whether or not, especially because 0:16:20.160 --> 0:16:22.480 PAL did signal that rate cuts could come as soon 0:16:22.520 --> 0:16:26.120 as that September eighteenth rate decision here. But Bank of 0:16:26.160 --> 0:16:28.200 America actually had some interesting data that they put in 0:16:28.240 --> 0:16:30.960 their flow show for Michael Hartnett this morning, where the 0:16:31.000 --> 0:16:33.040 S and P five hundred has advanced more than thirty 0:16:33.240 --> 0:16:35.280 percent in the past nine months, compared to an average 0:16:35.280 --> 0:16:38.720 gain of just two percent and a dozen prior occasions 0:16:38.720 --> 0:16:42.400 since nineteen seventy nine leading up to a first rate cut. 0:16:42.480 --> 0:16:44.320 So I'm kind of wondering when you have such a 0:16:44.320 --> 0:16:47.360 big run like that in risk assets, how much of 0:16:47.400 --> 0:16:50.000 that was they sell the news, especially because of small caps, 0:16:50.000 --> 0:16:52.320 and that run up to what FED was signaling there, Matt. 0:16:53.640 --> 0:16:58.080 You know, I thinking through kind of prior cycles and 0:16:58.480 --> 0:17:02.800 kind of connecting that to what the FED has been doing. Look, 0:17:02.800 --> 0:17:05.760 it's not uncommon prior to the first rate cut for 0:17:05.920 --> 0:17:10.120 for markets to corrally and make new all time highs. However, 0:17:10.880 --> 0:17:13.480 to your point earlier about you know, the sell the 0:17:13.520 --> 0:17:18.240 news kind of message here. You know, rate cuts when 0:17:18.240 --> 0:17:22.040 they happen for you know, a response to a decline 0:17:22.080 --> 0:17:25.560 macroeconomic situation which looks like you know, indeed, if it 0:17:25.600 --> 0:17:27.480 starts in September, that's what the FED is going to 0:17:27.480 --> 0:17:31.840 be using as the rationale have a very different equity 0:17:31.880 --> 0:17:34.919 outcome versus rate cuts that are company with the soft landing, 0:17:35.600 --> 0:17:37.720 and so we'll have to wait and see which economic 0:17:37.720 --> 0:17:40.760 outcome we get, but it certainly kind of ratchets up 0:17:40.760 --> 0:17:44.000 the risk profile and the skew of outcomes if we've 0:17:44.040 --> 0:17:46.280 had so much for a run up into that first cut, 0:17:47.359 --> 0:17:50.520 And from my perspective, it is somewhat of evaluation driven 0:17:51.160 --> 0:17:52.000 rebalance there. 0:17:52.600 --> 0:17:56.040 When you mentioned fixed income, where on the curve do 0:17:56.119 --> 0:17:59.520 you think still provides the most value on a price 0:17:59.600 --> 0:18:01.400 appreciateciation basis? 0:18:02.040 --> 0:18:04.320 Sure, I mean this is kind of the more recent 0:18:04.480 --> 0:18:06.879 kind of area that we've changed our fixed income allocation. 0:18:07.960 --> 0:18:11.000 You know, for the last four or five years, we've 0:18:11.040 --> 0:18:15.240 been under rate duration wise. During twenty twenty three, we 0:18:15.400 --> 0:18:18.119 moved our duration back into kind of alignment with the 0:18:18.480 --> 0:18:21.040 Bloomberg Barclays Act in between that you know, five and 0:18:21.119 --> 0:18:25.000 six kind of year range, and most recently a couple 0:18:25.080 --> 0:18:28.600 of months ago, we extended even further to an access 0:18:28.680 --> 0:18:33.360 duration position in our fixed income portfolios. With a very 0:18:33.440 --> 0:18:37.280 high credit rating of double a plus in that position. 0:18:37.560 --> 0:18:39.639 And we accomplish that just with a small position in 0:18:39.720 --> 0:18:42.840 TLT in our model portfolios, which moved our duration out 0:18:42.880 --> 0:18:46.120 a year or so. And you know, the thought there 0:18:46.280 --> 0:18:48.639 is is that, you know, as the Fed is starting 0:18:48.680 --> 0:18:51.840 to ease policy, as inflation is less of a headwind 0:18:51.920 --> 0:18:54.439 to fixed income pricing, you know, this is a position 0:18:54.480 --> 0:18:56.800 that's a really nice diversify in an environment like we're 0:18:56.800 --> 0:18:57.520 dealing with today. 0:18:58.040 --> 0:19:00.119 All Right, Matt, thanks so much for joining us. The 0:19:00.119 --> 0:19:03.480 great getting your perspective, especially on a volatile day like today. 0:19:03.520 --> 0:19:07.199 So Matt Stucky, chief portfolio manager and of equities at 0:19:07.240 --> 0:19:11.480 Northwestern Mutual Wealth Management, joining us on zoom from Milwaukee, Wisconsin. 0:19:13.000 --> 0:19:16.879 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:16.960 --> 0:19:20.040 weekdays at ten am Eastern on Appo card playing Android 0:19:20.040 --> 0:19:23.160 Auto with the Bloomberg Business app. Listen on demand wherever 0:19:23.200 --> 0:19:27.040 you get your podcasts, or watch us live on YouTube. 0:19:27.680 --> 0:19:29.480 So let's get to the economic part of this. 0:19:29.720 --> 0:19:32.080 Bill Lee is chief economist in Milkan Institute and he 0:19:32.160 --> 0:19:34.720 is joining us. Now, Hi, Bill, the market is taking 0:19:34.760 --> 0:19:37.159 this job. Support is like a total disaster, like a 0:19:37.200 --> 0:19:39.600 complete growth scare, is that the right way of looking 0:19:39.640 --> 0:19:39.919 at it. 0:19:40.840 --> 0:19:44.040 I spend my entire career warning people not to overreact 0:19:44.080 --> 0:19:46.000 to one data point, and it looks like the markets 0:19:46.040 --> 0:19:49.000 that continuing to do that market is never disappointed and 0:19:49.119 --> 0:19:51.800 always overreacting in right now, all I can say is 0:19:51.840 --> 0:19:54.200 that how can you have a recession when the entrepreneur 0:19:54.280 --> 0:19:56.400 rate is between four and four and a half, which 0:19:56.440 --> 0:19:58.520 most people think is where the natural rate is supposed 0:19:58.560 --> 0:19:58.720 to be. 0:19:59.440 --> 0:20:01.159 The second thing is that the. 0:20:02.680 --> 0:20:05.760 Numbers are showing that the unapployment rate has gone up 0:20:05.800 --> 0:20:08.920 because the labor force has grown more than the population. 0:20:09.920 --> 0:20:13.600 The layoffs are starting to mount up this month, but 0:20:13.680 --> 0:20:16.040 this is the first month of layoffs that we've seen, 0:20:16.359 --> 0:20:19.560 So for me, I think the recession calls and your 0:20:19.600 --> 0:20:21.320 fears in the markets are way overreaction. 0:20:21.840 --> 0:20:24.080 And I'm glad you brought that up, Bill, because Alex 0:20:24.119 --> 0:20:26.360 and I earlier were talking about the latest alien fed 0:20:26.400 --> 0:20:29.160 GDP NOW number for the third carter coming in at 0:20:29.200 --> 0:20:30.520 two and a half percent, and as you know that 0:20:30.520 --> 0:20:32.560 those numbers can be volatile, but still, when you're looking 0:20:32.600 --> 0:20:34.680 at kind of the trajector you're here for, economic growth 0:20:34.680 --> 0:20:37.520 still looks pretty solid when you're talking about the dynamics 0:20:37.520 --> 0:20:40.240 within the labor market and particularly the participation rate. 0:20:40.280 --> 0:20:42.440 How much does that plan into. 0:20:42.320 --> 0:20:44.239 Especially when you see a number drop like that, as 0:20:44.240 --> 0:20:47.600 far as who's coming into the workforce and who's leaving it, that's. 0:20:47.440 --> 0:20:49.520 Really critical, Jess, And I'm glad you brought that up, 0:20:49.640 --> 0:20:52.240 because as much as people point to the SAM rule 0:20:52.280 --> 0:20:55.320 and the unopplanneer rate rising as being a recession indicator, 0:20:55.560 --> 0:20:57.919 a lot of indicators and historical relationships like that have 0:20:58.080 --> 0:21:00.720 just not worked so well long as the you'll curb 0:21:00.720 --> 0:21:02.840 been inverted, for example, and people have said, oh my god, 0:21:02.880 --> 0:21:05.639 that's always a good indicator that in a receect. So 0:21:05.800 --> 0:21:08.520 so I think we have to look at carefully at 0:21:08.520 --> 0:21:11.840 that composition of the labor force. And what we see 0:21:11.880 --> 0:21:14.800 is that immigration and other factors have and people just 0:21:14.840 --> 0:21:17.359 wanted to work now because it's easier to get to 0:21:17.440 --> 0:21:20.520 work uh, and there are more jobs readily available, so 0:21:20.560 --> 0:21:24.320 people are encouraged to participate and try to try to 0:21:24.359 --> 0:21:25.320 try to get more jobs. 0:21:25.520 --> 0:21:25.680 Now. 0:21:25.720 --> 0:21:28.800 The bad part about this is that consumers have been 0:21:28.800 --> 0:21:31.560 spending like crazy, as we know, uh, and savings rates 0:21:31.560 --> 0:21:33.680 have been dropping. Now the rich people have been dipping 0:21:33.680 --> 0:21:38.040 into savings. But you know, median worker and the lower 0:21:38.080 --> 0:21:40.760 half the population have really been resilting to a lot 0:21:40.760 --> 0:21:43.280