WEBVTT - Bloomberg Surveillance TV: November 19, 2024 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.200 Terminal and the Bloomberg Business app. With us around the table, 0:00:37.240 --> 0:00:39.879 Stephanie Roth of will three Search. Stephanie, good morning. And 0:00:40.000 --> 0:00:41.880 reaction to this data so far. 0:00:42.159 --> 0:00:43.559 Yeah, I mean it's an interesting one. 0:00:43.600 --> 0:00:45.239 And like Mike just said, a lot the weakness came 0:00:45.240 --> 0:00:47.760 from the Northeast, which is kind of interesting. It bounced back, 0:00:47.800 --> 0:00:50.560 it came week after a strong month in September. 0:00:51.320 --> 0:00:53.320 There's just a lot of sort of noise going on 0:00:53.360 --> 0:00:53.840 in the data. 0:00:54.240 --> 0:00:56.040 I think what we're going to see is it's the 0:00:56.080 --> 0:00:58.240 housing market's going to have trouble bouncing back with mortgage 0:00:58.280 --> 0:01:01.120 rates having increased after the even the FED has been cutting. 0:01:01.200 --> 0:01:03.160 Why do you think rights have been going up, even 0:01:03.160 --> 0:01:04.160 though the Fed's been counting. 0:01:04.880 --> 0:01:08.600 It's all about the election, and it's all about the market. Certainly, 0:01:09.400 --> 0:01:12.760 the market trades Trump as a yield curve steepener. We've 0:01:12.760 --> 0:01:15.640 seen that to some extent. There are concerns about the deficit. 0:01:15.680 --> 0:01:17.320 I don't think that's the primary driver. I think it's 0:01:17.360 --> 0:01:20.280 the market's getting excited about a better growth outlook, and 0:01:20.319 --> 0:01:23.000 for twenty twenty five, I think that's fair. For twenty 0:01:23.040 --> 0:01:25.920 twenty six, I'm worried about the tariff impact on the economy. 0:01:26.319 --> 0:01:28.120 Okay, I'm trying to understand this. 0:01:28.240 --> 0:01:31.759 So if yields go up, makes mortgage more expensive, makes 0:01:31.760 --> 0:01:35.360 it more difficult for people to afford homes because prices 0:01:35.360 --> 0:01:36.679 aren't necessarily coming down. 0:01:36.920 --> 0:01:38.839 At the same time, we saw confidence. 0:01:38.480 --> 0:01:41.880 Yesterday among homebuilders rise to the highest level going back 0:01:41.920 --> 0:01:44.480 seven months. And this whole idea is well, because of 0:01:44.520 --> 0:01:47.840 the election, regulations will be get stripped back, the economy 0:01:47.840 --> 0:01:51.000 will be going will be doing better than it otherwise 0:01:51.240 --> 0:01:52.640 had been. So which is it. 0:01:53.840 --> 0:01:56.240 I think there's an element of this animal spirits coming back. 0:01:56.280 --> 0:01:58.720 So you saw for n to be it was driven 0:01:58.760 --> 0:02:01.640 by expectations. This week we saw Empire fed increase a 0:02:01.960 --> 0:02:05.320 three standard deviation move. There's probably an element that people 0:02:05.360 --> 0:02:07.880 are feeling better about the Algho's right or wrong, but 0:02:07.920 --> 0:02:10.120 that actually has an important impact of the economy, and 0:02:10.160 --> 0:02:11.919 I think that's what's going to be driving an above 0:02:11.960 --> 0:02:14.160 trend growth for next year until we start worrying about 0:02:14.160 --> 0:02:16.480 tariffs again, probably not to the end of the year. 0:02:16.520 --> 0:02:18.400 But why do you think the worry for terriffs comes 0:02:18.400 --> 0:02:20.040 at the end of the year twenty twenty six when 0:02:20.080 --> 0:02:22.240 that is the one thing we know that Donald Trump 0:02:22.240 --> 0:02:23.320 can do unilaterally. 0:02:23.840 --> 0:02:26.760 So our base case is that one he probably wants 0:02:26.800 --> 0:02:28.480 to play this game with the number of the different 0:02:28.520 --> 0:02:30.440 countries like he did last time, having a number of 0:02:30.440 --> 0:02:33.240 meetings throughout the tariffs. We also think he'll probably wanta 0:02:33.400 --> 0:02:35.840 to attach it to some sort of investigation which will 0:02:35.880 --> 0:02:38.800 require comment period, And it makes sense for them to 0:02:38.840 --> 0:02:42.400 tie it to T to t extending TCJA, whether or 0:02:42.400 --> 0:02:44.880 not they explicitly included in a bill or he just 0:02:45.080 --> 0:02:48.120 there's a handshake deal about let's include the revenue savings 0:02:48.360 --> 0:02:49.240 for this bill. 0:02:49.240 --> 0:02:50.880 It makes sense for them to do it around the same. 0:02:50.760 --> 0:02:52.920 Time if that connected to the tax bill. What is 0:02:52.960 --> 0:02:55.320 the true objective of these tariffs? 0:02:56.440 --> 0:02:58.079 I guess it depends who you're asking. I mean, I 0:02:58.120 --> 0:03:00.760 guess they're f From Trump's perspective, there's two benefits. I 0:03:00.800 --> 0:03:03.520 think they're pretty risky, but from his perspective it's too 0:03:03.560 --> 0:03:05.440 bad if it's one you can stick it to China 0:03:05.600 --> 0:03:08.080 and and two they can raise trillions of dollars on 0:03:08.120 --> 0:03:10.760 these on these tariffs at least a the way they 0:03:10.919 --> 0:03:12.639 if you assume sort of static estimates se. 0:03:12.720 --> 0:03:14.400 So you see both the good things and the bad 0:03:14.440 --> 0:03:16.440 things that the market has to digest. When it comes 0:03:16.480 --> 0:03:20.440 to Trump policy being connected in terms of he wants 0:03:20.520 --> 0:03:22.960 to extend TCJA, he wants more tax cuts, and he's 0:03:22.960 --> 0:03:24.680 going to say I'm gonna pay for this with tariffs, 0:03:24.680 --> 0:03:26.480 so they all get rolled out at the same time, 0:03:26.560 --> 0:03:29.359 so the sequencing is actually in parallel. 0:03:30.440 --> 0:03:31.000 Yeah, kind of. 0:03:31.080 --> 0:03:33.600 I think for now it's a better growth outlook for 0:03:33.600 --> 0:03:36.920 twenty twenty five, better confidence, and then we start getting 0:03:36.960 --> 0:03:38.600 into the twenty twenty six tax cuts, and then I 0:03:38.640 --> 0:03:41.240 think it's it's a negative for the market because at. 0:03:41.120 --> 0:03:42.560 That point it's tariffs. 0:03:42.600 --> 0:03:45.600 And by the way, the tax cuts aren't really that large, right, 0:03:45.640 --> 0:03:49.080 They're expensive, but it's really just extending current policy. The 0:03:49.120 --> 0:03:51.720 incremental tax cuts that we're projecting is something like five 0:03:51.800 --> 0:03:54.520 hundred million dollars, which isn't that big. It's things like 0:03:54.560 --> 0:03:58.920 no tax on tips, or of the very narrow corporate 0:03:59.000 --> 0:04:01.360 tax rate cut which is just for domestic manufacturers. 0:04:01.360 --> 0:04:03.480 The rest of it is just a very expensive. 0:04:03.000 --> 0:04:05.400 Bill to extend TCJA, which is not a stimulus to 0:04:05.440 --> 0:04:06.000 the economy. 0:04:06.440 --> 0:04:09.680 So, before we get there and going back to home building, 0:04:09.680 --> 0:04:11.640 because I'm still trying to wrap my head around Okay, 0:04:11.680 --> 0:04:14.800 you've got the tariffs and how this affects inflation, I'm 0:04:14.840 --> 0:04:17.880 trying to get back to does this cause a revival 0:04:17.920 --> 0:04:20.599 in the housing market at a time where everything that 0:04:20.640 --> 0:04:23.920 you just painted does not suggest interest rates going down 0:04:24.000 --> 0:04:26.839 that much? At the long end, can you see a 0:04:26.920 --> 0:04:30.240 revival in housing in some of the basic staples that 0:04:30.320 --> 0:04:33.279 people have been basically complaining about that they don't have 0:04:33.320 --> 0:04:33.720 access to? 0:04:33.720 --> 0:04:33.760 You? 0:04:33.839 --> 0:04:37.480 Can you see a revival if you have mortgage rates 0:04:37.680 --> 0:04:38.880 that say at these levels? 0:04:39.720 --> 0:04:41.200 Probably not. It's a tough one. 0:04:41.279 --> 0:04:43.080 I think the part of the economy that's going to 0:04:43.120 --> 0:04:45.240 do better is on the investment capex investment. 0:04:44.920 --> 0:04:47.400 Side, so less about less about housing. 0:04:47.480 --> 0:04:48.800 I think mortgage rates are still going to be a 0:04:48.800 --> 0:04:51.120 bit of a headwind could see a bit of an improvement. 0:04:51.640 --> 0:04:54.960 The builders are excited from the regulatory front, and that's fair. 0:04:55.400 --> 0:04:57.480 But I think the bigger stimulus. 0:04:57.080 --> 0:04:58.640 For the economy is going to be on the corporate 0:04:58.680 --> 0:05:01.600 investment side, because that's where the deregulation is going to 0:05:01.600 --> 0:05:04.400 be important, and the sentiment is absolutely critical. 0:05:04.360 --> 0:05:06.360 Before you go December portal cut. 0:05:07.520 --> 0:05:10.039 It's a tough one base cases that they're gonna cut, 0:05:10.440 --> 0:05:11.640 but I think it's fair for the market to be 0:05:11.680 --> 0:05:12.479 pricing fifty fifty. 0:05:12.480 --> 0:05:13.760 The most important thing is going to be. 0:05:14.000 --> 0:05:16.280 Payrolls, and we'll get a hint of that today when 0:05:16.320 --> 0:05:17.400 we get SAT employment at ten. 0:05:17.600 --> 0:05:20.159 Payrolls coming out a little bit later December sixth, in 0:05:20.200 --> 0:05:22.400 the next few weeks, and then December eleventh for CPI 0:05:22.520 --> 0:05:25.480 that FED decision December eighteenth, Stephanie could to see you 0:05:25.560 --> 0:05:27.040 to see it as I catch a number the Stephanie 0:05:27.120 --> 0:05:39.840 Roth of Wolf Research. Let's have that conversation right now 0:05:39.839 --> 0:05:43.159 which I've found of Tawsei Advisorycruit Joe, welcome to the show. 0:05:43.400 --> 0:05:45.640 Following those numbers from Walmart, I'm gonna still lease this 0:05:45.720 --> 0:05:48.680 question to kick off the conversation. What is Walmart these days? 0:05:48.680 --> 0:05:50.120 And how much has that company changed. 0:05:51.040 --> 0:05:54.640 Yeah, So Walmart is a terrific retailer that's grown its 0:05:54.680 --> 0:05:57.560 ecosystem and it's much more than just a retailer these days. 0:05:57.560 --> 0:06:00.479 I think, you know, they have become more similar to 0:06:00.520 --> 0:06:03.919 what an Amazon is in terms of offering a marketplace, 0:06:04.080 --> 0:06:10.040 offering advertising, and effectively selling across the board online, in stores, 0:06:10.880 --> 0:06:13.600 and they've grown their whole ecosystem. As a result, They've 0:06:13.600 --> 0:06:16.799 been able to capture a more affluent consumer. They're still 0:06:16.839 --> 0:06:20.440 satisfying that lower income consumer that needs the low prices 0:06:20.480 --> 0:06:22.520 on a day to day basis, and so they're really 0:06:22.560 --> 0:06:25.800 serving the American customer very broadly right now. And this 0:06:25.920 --> 0:06:28.080 quarter was very strong and I think it just shows 0:06:28.080 --> 0:06:28.800 those results. 0:06:29.240 --> 0:06:32.599 Yeah, Walmart's online sales now represent about eighteen percent of 0:06:32.600 --> 0:06:36.560 the company's business. They also have things like coupons for 0:06:36.680 --> 0:06:40.480 loyalty members to places like Burger King. I'm just wondering, Joe, 0:06:40.680 --> 0:06:42.960 if there is still the read through from a Walmart 0:06:43.000 --> 0:06:45.039 results to the rest of retailers. Do we get a 0:06:45.040 --> 0:06:49.200 real sense of the consumer and the health therein Yeah. 0:06:49.240 --> 0:06:50.920 No, I do think there's still a good read through. 0:06:50.920 --> 0:06:53.520 I mean, Walmart is still the largest retail in the world. 0:06:53.520 --> 0:06:56.839 And you know, they are still, especially in America, the largest, 0:06:57.080 --> 0:07:00.279 and they're capturing customers day to day. I mean, over 0:07:00.560 --> 0:07:03.040 around two thirds of their businesses groceries, and so they're 0:07:03.040 --> 0:07:05.360 seeing that customer come in once a week. And their 0:07:05.400 --> 0:07:09.920 grocery business was amid single digits in the Walmart US operations, 0:07:09.920 --> 0:07:13.560 so the customer is still coming in on a regular basis. 0:07:13.560 --> 0:07:17.880 They're seeking value. Their private brands have done well. As 0:07:17.920 --> 0:07:20.200 I said, they've captured a more affluent consumer. So it 0:07:20.280 --> 0:07:22.680 just seems like I do think it's still a good 0:07:22.720 --> 0:07:25.960 read on the broader consumer. But what's really interesting here 0:07:26.000 --> 0:07:28.560 is they do so much more now than just sell 0:07:28.640 --> 0:07:31.000 stuff out of the store, and I think that's what's 0:07:31.040 --> 0:07:34.239 gotten investors very excited. And you can see the strength 0:07:34.280 --> 0:07:36.080 and the market share games that they've had with the 0:07:36.160 --> 0:07:37.760 reports that they just did this morning. 0:07:38.280 --> 0:07:41.320 Is their gain taking away from Amazon or is it 0:07:41.360 --> 0:07:45.880 basically taking away from Target from all the other retailers 0:07:45.920 --> 0:07:49.160 that are a bit smaller and less advantaged than they are. 0:07:50.040 --> 0:07:52.240 Yeah, I think that the big guys kind of go 0:07:52.320 --> 0:07:55.160 to battle with one another, but really the. 0:07:55.160 --> 0:07:59.440 Share gains are coming from all those smaller, regional, local players. 0:07:59.520 --> 0:08:01.720 I think that's where you still see a lot of it, 0:08:02.520 --> 0:08:04.840 you know, because Amazon's operating quite well. I mean, they 0:08:04.840 --> 0:08:07.480 have very good earnings recently, and they're expected to have 0:08:07.520 --> 0:08:08.640 another good fourth quarter. 0:08:08.920 --> 0:08:10.760 I think Target's been operating quite well. 0:08:10.800 --> 0:08:13.520 We'll see tomorrow for sure, but I would expect, you know, 0:08:13.600 --> 0:08:17.000 some similar directional trends that we got out of Walmart today. 0:08:18.000 --> 0:08:20.680 But it's really as you go down. You know, the 0:08:20.720 --> 0:08:22.800 dollar stores have been under a lot of pressure this year. 0:08:23.000 --> 0:08:26.560 A lot of people believe that the Walmart's taking share 0:08:26.600 --> 0:08:27.600 from some of the dollar stores. 0:08:27.640 --> 0:08:28.960 I think that's somewhat true. 0:08:29.120 --> 0:08:31.920 Again, they are capturing a more affluent consumer, so that's 0:08:31.960 --> 0:08:35.440 coming from somewhere, you know, maybe the traditional grosser out there. 0:08:35.520 --> 0:08:38.520 So the prices are so good at Walmart, they're so sharp, 0:08:38.600 --> 0:08:42.319 and what's amazing is they're driving their business with increased traffic, 0:08:42.480 --> 0:08:45.199 increased unit sales. Those are the good things you want 0:08:45.240 --> 0:08:47.640 to see. It's not just ticket. Ticket's part of it, 0:08:47.720 --> 0:08:50.280 but it's really because they're getting more people and doing 0:08:50.320 --> 0:08:51.000 more frequently. 0:08:51.280 --> 0:08:52.680 Jill, I want to talk about strategy. 0:08:52.800 --> 0:08:55.680 Is the new strategy to start Christmas shopping in October 0:08:55.679 --> 0:08:56.040 next year? 0:08:56.080 --> 0:08:57.280 Is that what we're going to be talking. 0:08:57.040 --> 0:09:00.960 About Yeah, I think we may be already happened this 0:09:01.040 --> 0:09:01.920 year quite honestly. 0:09:01.960 --> 0:09:04.559 I mean with Amazon Prime Day back in October, and 0:09:04.600 --> 0:09:07.200 then Walmart did an event right around it, Target did 0:09:07.200 --> 0:09:08.120 an event Best Buy. 0:09:08.280 --> 0:09:10.720 Everybody else in retail tried to capture that week. 0:09:11.200 --> 0:09:14.440 And you know, we've been seeing Black Friday ads for 0:09:14.559 --> 0:09:16.679 quite a while now, and you know it started to 0:09:16.760 --> 0:09:18.800 kick in even a little bit more. Just yesterday we 0:09:18.880 --> 0:09:21.719 noticed a lot more emails and pushing that. So that 0:09:21.800 --> 0:09:24.040 holiday season has definitely gotten stretched out. 0:09:24.160 --> 0:09:24.319 Now. 0:09:24.360 --> 0:09:26.319 This year is kind of unique because there are five 0:09:26.400 --> 0:09:30.360 viewers days between Thanksgiving and Christmas, so that does compress 0:09:30.400 --> 0:09:31.840 the season a little bit, and I think that a 0:09:31.840 --> 0:09:34.080 lot of the retail has tried to take advantage by 0:09:34.160 --> 0:09:37.679 elongating it on the front end. But it just seems 0:09:37.720 --> 0:09:39.959 to us that you're going to see this continue for 0:09:40.400 --> 0:09:43.679 some time now. Where you made to late October is 0:09:43.679 --> 0:09:45.760 when things start really for the holiday season. 0:09:45.920 --> 0:09:47.599 Joe, We're all living it. We're hearing the music. We 0:09:47.679 --> 0:09:49.880 start hearing the music about a month or so ago, Joe, 0:09:49.920 --> 0:09:51.360 I wanted to talk about a theme that we've been 0:09:51.360 --> 0:09:53.560 discussing on this program for quite a while now, is 0:09:53.600 --> 0:09:56.000 how battle hard and how battle test did these companies 0:09:56.040 --> 0:09:59.080 have been the retailers over the last let's say eight years. 0:09:59.120 --> 0:10:02.480 They had the pandemic in the Trump first term president 0:10:02.600 --> 0:10:04.800 like Donald Trump will get a second term, they could 0:10:04.840 --> 0:10:07.760 face the same again, the tariffs the pandemic as well 0:10:08.160 --> 0:10:12.400 when they manage inventory. Joe, how have things changed over 0:10:12.440 --> 0:10:15.000 the last several years for these retailers given the tests 0:10:15.000 --> 0:10:17.920 that they've had, the unique tests over the last decade. 0:10:18.520 --> 0:10:21.080 Yeah, one of the biggest things that's changed is that 0:10:21.200 --> 0:10:24.640 the supply chain finally normalized in the past two years, 0:10:24.720 --> 0:10:27.679 let's say, and as a result, the retailers have been 0:10:27.720 --> 0:10:29.520 able to get back to more of that just. 0:10:29.520 --> 0:10:30.920 In time ordering. 0:10:31.320 --> 0:10:34.920 And we've seen the inventories be run very lean really 0:10:34.960 --> 0:10:36.840 for the past year year and a half for many 0:10:36.840 --> 0:10:39.800 of the retailers. You saw that again today even with Walmart, 0:10:39.960 --> 0:10:43.280 where they don't need to necessarily order early. Now when 0:10:43.280 --> 0:10:46.840 events happen like you know, the East Coast port strikes 0:10:46.840 --> 0:10:48.800 that happened and by the way, we haven't resolved that 0:10:49.040 --> 0:10:51.640 the contract has not been signed in the next round 0:10:51.679 --> 0:10:54.800 is January. The retailers did bring in inventory a little 0:10:54.880 --> 0:10:57.600 bit ahead of that. I know there's concern if and 0:10:57.640 --> 0:11:00.280 when the new tariffs get put in place by the 0:11:00.320 --> 0:11:05.120 new president Electroma. I think there is some concern that 0:11:05.160 --> 0:11:08.559 we might see some inventories get accelerated prior. 0:11:08.280 --> 0:11:09.839 To those terrffs. That makes sense. 0:11:10.040 --> 0:11:13.040 The retailers have definitely gotten smarter about how they're ordering, 0:11:13.280 --> 0:11:17.040 where they're ordering from. They've shifted their distribution or their 0:11:17.080 --> 0:11:20.880 supply chains beyond China. They're much stronger in other parts 0:11:20.920 --> 0:11:23.480 of Southeast Asia at this point and other parts of 0:11:23.520 --> 0:11:25.960 the world. So there's a little less reliance than the 0:11:25.960 --> 0:11:28.280 first go around with the tariffs back in twenty eighteen 0:11:28.360 --> 0:11:30.920 twenty nineteen, but it's still going to be a big 0:11:30.920 --> 0:11:33.840 pressure and it's going to likely pass on to the consumer, 0:11:34.320 --> 0:11:36.200 and we see it as somewhat of attacks on the 0:11:36.200 --> 0:11:39.800 consumer quite honestly, because it does it's likely to raise prices. 0:11:39.840 --> 0:11:41.680 All the retailers are telling us they're going to have 0:11:41.800 --> 0:11:43.880 to raise prices at the end of the day, maybe 0:11:43.960 --> 0:11:46.320 not for the full amount of the tariff, but definitely 0:11:46.400 --> 0:11:48.440 for a good portion of that, and we see that 0:11:48.520 --> 0:11:50.760 as an inflationary impact as well. 0:11:51.559 --> 0:11:53.520 Just to build on that, there is this feeling and 0:11:53.559 --> 0:11:56.520 every time we see a tariff announcement retailers sell off 0:11:56.520 --> 0:11:59.320 the most, and there are view to sort of sort 0:11:59.320 --> 0:12:02.360 of ground zero when it comes to potential companies that 0:12:02.440 --> 0:12:05.400 are most exposed to tariffs. Are you saying that maybe 0:12:05.520 --> 0:12:08.079 that's already baked into some degree and that people have 0:12:08.200 --> 0:12:12.040 basically prepared for that and these retailers have already plans 0:12:12.080 --> 0:12:13.160 in place to offset that. 0:12:14.480 --> 0:12:17.080 I think the retailers, the better ones at least, have 0:12:17.280 --> 0:12:20.560 definitely been planning for it. It was interesting, you know, 0:12:20.600 --> 0:12:23.240 the day after the election, the way the market trade, 0:12:23.240 --> 0:12:24.800 and I know there was that the Trump trade and 0:12:24.840 --> 0:12:26.880 everything went up. I think the market was up two 0:12:26.880 --> 0:12:30.240 and a half percent that day. The retailers that have 0:12:30.400 --> 0:12:33.959 more exposure to China were down that day in a 0:12:34.000 --> 0:12:37.240 pretty big way, and so you saw that initial reaction. 0:12:37.600 --> 0:12:39.920 So I think the market is already starting to think 0:12:39.960 --> 0:12:41.839 that way, who has more exposure? 0:12:42.120 --> 0:12:43.400 Where do they have to lighten up? 0:12:43.960 --> 0:12:46.360 But we cover quite a few companies that, you know, 0:12:46.440 --> 0:12:49.560 there's one example I have where, you know, several years 0:12:49.559 --> 0:12:50.200 ago they had. 0:12:50.080 --> 0:12:52.000 Fifty percent of their product coming out of China. 0:12:52.080 --> 0:12:55.840 Today it's twenty Actually, it's probably getting close to twenty. 0:12:55.880 --> 0:12:58.079 It was twenty five percent last year. It's probably twenty 0:12:58.160 --> 0:12:58.720 ish this year. 0:12:59.080 --> 0:13:03.520 So like you see the retailers move and reposition through 0:13:03.559 --> 0:13:05.120 the past couple of years, and I think we'll see 0:13:05.160 --> 0:13:07.360 more of that accelerate over the next six months. 0:13:07.600 --> 0:13:09.320 Job, it's going to hear from you, sir, good stuff. 0:13:09.400 --> 0:13:21.120 Joe Foundman there of TAUSI Advisory Group. We'll begin this 0:13:21.200 --> 0:13:23.920 out with equity's lower and bonds running as Ukraine carries 0:13:23.960 --> 0:13:27.240 out strikes in Russia using US weapons. Joining us now 0:13:27.320 --> 0:13:30.319 is Emily Rowland of John Hancock. Emily, welcome to the program. 0:13:30.360 --> 0:13:32.120 I want to turn to a quote that came from 0:13:32.200 --> 0:13:34.800 Lori Calvicina of RBC to kick off the training wig 0:13:35.040 --> 0:13:38.360 and she said this about valuations and positioning and sentiment 0:13:38.600 --> 0:13:41.320 that the US equity market seems to have little capacity 0:13:41.400 --> 0:13:44.440 to absorb bad news. What have we learned this morning 0:13:44.720 --> 0:13:47.120 on that front, Well, we've seen the. 0:13:47.080 --> 0:13:50.440 Modest bid John, for some of the geopolitical hedges out there. 0:13:50.600 --> 0:13:53.520 You know, you're seeing the dollar strengthen you're seeing gold 0:13:53.600 --> 0:13:55.200 catch a bid here, you know. 0:13:55.280 --> 0:13:56.839 Notably, oil prices. 0:13:56.480 --> 0:13:59.959 Are still looking at WTI below seventy dollars in barrel. 0:14:00.080 --> 0:14:02.040 So we saw a big move of course yesterday that's 0:14:02.080 --> 0:14:05.080 moderated a bit today and then again a modest bid 0:14:05.120 --> 0:14:06.160 for treasuries here. 0:14:06.200 --> 0:14:08.640 I think the treasury bond market. 0:14:08.320 --> 0:14:11.040 Has been focused on nothing but the potential for pro 0:14:11.160 --> 0:14:14.520 cyclical policies under the Trump administration. So you're seeing a 0:14:14.559 --> 0:14:17.560 bit of a shift here, but it's certainly nothing that's 0:14:17.720 --> 0:14:21.680 overly notable here given the prospects for heightened geopolitical risk. 0:14:21.840 --> 0:14:23.760 When you think about all these issues on the table 0:14:23.800 --> 0:14:25.880 at the moment, emily, it just feels like it might 0:14:25.880 --> 0:14:28.160 be US driven in this case, a decision to allow 0:14:28.320 --> 0:14:32.120 Ukraine to strike Russia inside Russia with US missiles, but 0:14:32.200 --> 0:14:37.080 it's Europe's problem. Likewise with tariffs, tariffs ultimately Europe's problem. 0:14:37.280 --> 0:14:37.720 This is just. 0:14:37.760 --> 0:14:40.920 Reinforce the view of US exceptionalism. It's next year. 0:14:41.840 --> 0:14:44.000 Well, certainly that's what markets are telling us. 0:14:44.040 --> 0:14:47.400 You know, we've seen massive outperformance from US assets here 0:14:47.440 --> 0:14:51.520 again that dollar strengthening trade. We've seen this almost speculative 0:14:51.560 --> 0:14:54.880 frenzy across risk assets in the United States, everything from 0:14:54.920 --> 0:14:59.440 cryptocurrencies and crypto related assets to lower quality grows stocks. 0:14:59.680 --> 0:15:01.560 I think one of the things that we need to 0:15:01.560 --> 0:15:04.680 think about here is the consensus around the US is 0:15:04.760 --> 0:15:08.760 so overwhelmingly positive right now and when the consensus moves 0:15:08.800 --> 0:15:11.240 to one side of the boat, sometimes it can flip. 0:15:11.720 --> 0:15:14.440 We want to think about, you know, potentially fading some 0:15:14.560 --> 0:15:17.040 of the move that we've seen into more speculative assets 0:15:17.040 --> 0:15:21.400 and redeploying assets into higher quality, more defensive options here, 0:15:21.440 --> 0:15:25.800 given the massive run that we've seen in more speculative assets. 0:15:25.480 --> 0:15:27.880 So emily sell Tesla buy ten year treasure yields. 0:15:29.080 --> 0:15:30.960 Well, you know, I think you got to own some 0:15:31.040 --> 0:15:33.560 of that stuff. You know, Tesla's certainly come a long way, 0:15:33.640 --> 0:15:35.200 you know. We look at, of course, the big event 0:15:35.280 --> 0:15:38.400 after the close tomorrow with Navidia's earnings. Navidia is the 0:15:38.480 --> 0:15:42.520 number one high quality stock. So we want to continue 0:15:42.560 --> 0:15:47.000 to embrace quality, and that's according to quality indices that 0:15:47.040 --> 0:15:49.080 we look at. We want to look for companies with 0:15:49.160 --> 0:15:52.440 great balance sheets, good return on equity, a good ability 0:15:52.480 --> 0:15:54.640 to maintain margins here, but I think the name of 0:15:54.680 --> 0:15:58.120 the game right now is really quality at a reasonable price. 0:15:58.840 --> 0:16:01.800 How can we think about embracing those quality companies but 0:16:01.880 --> 0:16:05.000 not overpaying for them? And so we're following the earnings 0:16:05.000 --> 0:16:07.400 going to be really interesting to see if Navidia can 0:16:07.440 --> 0:16:08.680 once again deliver tomorrow. 0:16:08.800 --> 0:16:11.280 Are we underestimating how much of a macro story and 0:16:11.400 --> 0:16:13.840 video is going to be then basically this could be 0:16:14.160 --> 0:16:17.000 the main event of the week in a pretty significant 0:16:17.000 --> 0:16:20.400 way to send markets in a direction about if they 0:16:20.480 --> 0:16:22.960 can raise and be in the same kind of way. 0:16:23.960 --> 0:16:25.840 Yeah, I mean, I think it's just because of the 0:16:26.480 --> 0:16:27.880 sheer size of the stock. 0:16:27.960 --> 0:16:30.320 It's got to be critical. You know. I've been spending 0:16:30.360 --> 0:16:31.120 a lot of time. 0:16:30.920 --> 0:16:33.880 With investors over the course the last few weeks contending 0:16:33.920 --> 0:16:36.720 with some of the issues around, for example, emerging market 0:16:36.720 --> 0:16:39.040 equities and what to do with those positions. I've gotten 0:16:39.080 --> 0:16:41.800 a lot of questions about you know, India for example, 0:16:41.840 --> 0:16:44.360 and we've had those conversations. But it's like, look, Navidia 0:16:44.440 --> 0:16:47.119 is twenty times a side of some of these markets. 0:16:47.320 --> 0:16:50.880 So that's why it's so critical here to portfolios. Again, 0:16:50.920 --> 0:16:53.080 we want to be there because the earnings are delivered 0:16:53.120 --> 0:16:56.080 and it's high quality. We've got to think about diversifying 0:16:56.080 --> 0:16:58.280 that exposure and finding areas of the market that are 0:16:58.320 --> 0:17:01.560 still going to give us quality. Make paps industrials for example, 0:17:01.720 --> 0:17:04.880 what that actually are trading at more reasonable valuations. 0:17:05.000 --> 0:17:06.840 Emily, in your notes you talk about and you're talking 0:17:06.840 --> 0:17:09.560 about here that you push back against this consensus, this 0:17:09.680 --> 0:17:12.400 idea against higher inflation, higher growth narrative. 0:17:12.920 --> 0:17:13.600 Then what do you. 0:17:14.359 --> 0:17:17.800 Look at when you think about these policies that potentially 0:17:17.800 --> 0:17:20.760 we're going to see next year, which many say they 0:17:20.760 --> 0:17:22.560 actually could be inflationary. 0:17:23.280 --> 0:17:24.000 Well, Amory, I. 0:17:24.040 --> 0:17:26.560 Think potentially is the right word, and I think a 0:17:26.600 --> 0:17:29.080 lot of us have been paying the word potentially over 0:17:29.080 --> 0:17:30.520 the last couple of weeks. 0:17:30.520 --> 0:17:30.639 Here. 0:17:30.680 --> 0:17:33.200 You know, we looked back at the last Trump administration 0:17:33.320 --> 0:17:36.560 and yes, there were some different dynamics from a macro perspective, 0:17:36.600 --> 0:17:39.600 but core PCE, which you know is a FED preferred 0:17:39.640 --> 0:17:42.760 measure of inflation average one point seven percent in the 0:17:42.840 --> 0:17:46.560 last Trump administration. If these tariffs are more targeted, you 0:17:46.640 --> 0:17:49.760 may see the impact to inflation be much more muted, 0:17:49.840 --> 0:17:50.320 maybe a. 0:17:50.320 --> 0:17:51.440 Tenth of one percent. 0:17:51.840 --> 0:17:53.879 Per a lot of the economists that we've talked to 0:17:54.160 --> 0:17:58.880 about this issue, the impact of these potential immigration issues 0:17:58.920 --> 0:17:59.600 actually are going. 0:17:59.520 --> 0:18:02.240 To possibly way on growth. So we're looking at some 0:18:02.280 --> 0:18:02.640 of the. 0:18:02.520 --> 0:18:05.520 Things that the bond market's really not sniffing out right now. 0:18:05.640 --> 0:18:08.520 For one, wage growth that is coming down meaningfully, quits, 0:18:09.000 --> 0:18:12.280