1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordernt. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,760 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,360 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,320 --> 00:00:37,440 Speaker 3: The economy very. 11 00:00:37,400 --> 00:00:40,640 Speaker 2: Much in focus investors awaiting the delayed September jobs report 12 00:00:40,880 --> 00:00:43,600 Speaker 2: due out on Thursday. Towson's slock of Apollo making the 13 00:00:43,640 --> 00:00:46,200 Speaker 2: case for a rebound in the economy, writing Liberation Day 14 00:00:46,520 --> 00:00:50,000 Speaker 2: was almost eight months ago. Fiscal and monetary policy are easy, 15 00:00:50,080 --> 00:00:54,160 Speaker 2: and easy financial conditions point to a re acceleration. Tawson 16 00:00:54,240 --> 00:00:56,520 Speaker 2: joins us now for more toast and welcome back, sir. 17 00:00:56,720 --> 00:00:59,280 Speaker 2: Are you expecting to see some of that in the 18 00:00:59,320 --> 00:01:01,520 Speaker 2: September job data or is that too early? 19 00:01:02,840 --> 00:01:05,320 Speaker 4: That is too early, because the risk, of course is 20 00:01:05,360 --> 00:01:06,959 Speaker 4: that in October we had to go home and shut 21 00:01:06,959 --> 00:01:09,600 Speaker 4: down and of course, the chances that that werefore might 22 00:01:09,640 --> 00:01:12,600 Speaker 4: be some weaker data for the month of potentially in 23 00:01:12,600 --> 00:01:14,920 Speaker 4: November also once we do get that. But I do 24 00:01:14,959 --> 00:01:17,360 Speaker 4: expect that once we look into next year, we have 25 00:01:17,720 --> 00:01:21,399 Speaker 4: still relatively easy financial conditions, with of course the stock 26 00:01:21,440 --> 00:01:24,480 Speaker 4: markets some wabbles more recently, but still very supportive. ITG spreads, 27 00:01:24,560 --> 00:01:27,480 Speaker 4: higher spreads, loan spreads very supportive. You also, at the 28 00:01:27,520 --> 00:01:30,600 Speaker 4: same time have that you have tailwinds because deperation days 29 00:01:30,680 --> 00:01:33,559 Speaker 4: now eight months ago. And finally we also have general 30 00:01:33,600 --> 00:01:36,119 Speaker 4: tail wins because we are going into an election gem 31 00:01:36,200 --> 00:01:38,080 Speaker 4: and therefore if we do get the two thousand dollars 32 00:01:38,080 --> 00:01:40,280 Speaker 4: stimulus checks that you just talked about, that will certainly 33 00:01:40,319 --> 00:01:43,000 Speaker 4: also be helpful. So in total, I do think that 34 00:01:43,040 --> 00:01:45,240 Speaker 4: the market is too negative on the economic outlook and 35 00:01:45,280 --> 00:01:49,200 Speaker 4: the risks actually rising that we may have some reacceleration. 36 00:01:48,760 --> 00:01:50,360 Speaker 5: Once we get into twenty twenty six. 37 00:01:50,440 --> 00:01:53,440 Speaker 3: Toston. Is that reacceleration that comes with jobs growth or not. 38 00:01:55,200 --> 00:01:57,360 Speaker 4: I do think that it will come to job growth. 39 00:01:57,400 --> 00:01:59,840 Speaker 4: It is actually very impressive when we think about it 40 00:02:00,080 --> 00:02:02,320 Speaker 4: that over the last eight months, think about what we've 41 00:02:02,320 --> 00:02:05,200 Speaker 4: been through, the shocks that the US economy has been facing, 42 00:02:05,600 --> 00:02:08,360 Speaker 4: not only when it comes to of course trademark, also 43 00:02:08,440 --> 00:02:11,040 Speaker 4: the shocks coming from immigration. And as you just mentioned, Jonathan, 44 00:02:11,360 --> 00:02:14,200 Speaker 4: the non fund payroll equilibrium is now down at fifty thousand, 45 00:02:14,200 --> 00:02:16,560 Speaker 4: accing to the Dallas fit is as low as thirty thousand. 46 00:02:16,880 --> 00:02:19,680 Speaker 4: So therefore the bar has been lowered, and therefore I 47 00:02:19,720 --> 00:02:21,600 Speaker 4: do think that if we get numbers that are in 48 00:02:21,639 --> 00:02:24,040 Speaker 4: that range, then we should look at that and say 49 00:02:24,080 --> 00:02:26,519 Speaker 4: this is exactly where we should be. So in that sense, 50 00:02:26,600 --> 00:02:29,280 Speaker 4: I do think that the economy has been remarkably resilient 51 00:02:29,520 --> 00:02:31,120 Speaker 4: for the last eight months, and I do think that 52 00:02:31,160 --> 00:02:33,639 Speaker 4: as the trademark gets more and more behind us, I do. 53 00:02:33,520 --> 00:02:35,440 Speaker 5: Think that a lot of the fog will be lifting. 54 00:02:35,600 --> 00:02:38,080 Speaker 6: Towardst And to Emory's point earlier, how important are the 55 00:02:38,080 --> 00:02:41,079 Speaker 6: retail earnings this week, the walmarts, the targets, the lows. 56 00:02:43,160 --> 00:02:45,360 Speaker 4: They are very important and they do fit into the 57 00:02:45,360 --> 00:02:47,840 Speaker 4: broader conversation about the k shape recovery. So it is 58 00:02:47,880 --> 00:02:50,880 Speaker 4: still the case that high income households continue to benefit 59 00:02:50,960 --> 00:02:53,760 Speaker 4: from ASER prices having been higher, and of course alsore 60 00:02:53,840 --> 00:02:56,560 Speaker 4: very importantly because the level of yeals is higher. That 61 00:02:56,639 --> 00:02:59,400 Speaker 4: means that not only are high income households benefiting from 62 00:02:59,520 --> 00:03:02,040 Speaker 4: as is going up, but they also benefiting from the 63 00:03:02,120 --> 00:03:04,880 Speaker 4: cash flow they get in fixed income is at the 64 00:03:04,960 --> 00:03:08,040 Speaker 4: highest level in decades, both when it comes to public 65 00:03:08,040 --> 00:03:11,520 Speaker 4: credit but also private credit. So therefore the tailwind through 66 00:03:11,600 --> 00:03:14,760 Speaker 4: high income household continues to be strong. Low income households 67 00:03:14,800 --> 00:03:17,400 Speaker 4: have been suffering from interest rates going up. They've also 68 00:03:17,440 --> 00:03:19,920 Speaker 4: been suffering from weight growth being weaker than what you 69 00:03:19,919 --> 00:03:22,800 Speaker 4: see for high income households. But probably speaking again, with 70 00:03:22,919 --> 00:03:26,080 Speaker 4: job growth still steady and stable, and again the trade 71 00:03:26,080 --> 00:03:28,840 Speaker 4: one certainty more and more behind us, and especially now 72 00:03:28,919 --> 00:03:30,639 Speaker 4: think about the one big bult of a bill. The 73 00:03:30,720 --> 00:03:33,480 Speaker 4: CBO is estimating that that will lift GDP growth next 74 00:03:33,560 --> 00:03:36,560 Speaker 4: year by zero point nine percent. That's a very significant 75 00:03:36,560 --> 00:03:39,280 Speaker 4: tale in for fiscal policy. So all those things combined 76 00:03:39,640 --> 00:03:41,800 Speaker 4: argue for the economy beginning to look better as we 77 00:03:41,840 --> 00:03:43,080 Speaker 4: get into twenty twenty six. 78 00:03:43,120 --> 00:03:43,520 Speaker 1: Interesting. 79 00:03:43,560 --> 00:03:45,560 Speaker 6: Conceivably, this could argue for the Fed not to cut 80 00:03:45,600 --> 00:03:47,600 Speaker 6: race and explains why there has been a more hawkish 81 00:03:47,640 --> 00:03:49,320 Speaker 6: tilt to some of the communication that we've gotten from 82 00:03:49,320 --> 00:03:52,360 Speaker 6: Fed officials recently. What do you think the consequences would 83 00:03:52,360 --> 00:03:54,480 Speaker 6: be if the Fed cuts by another fifty to seventy 84 00:03:54,480 --> 00:03:56,480 Speaker 6: five basis points by mid year next year. 85 00:03:57,480 --> 00:03:59,720 Speaker 4: Oh, that would be very serious, because think about it, 86 00:04:00,040 --> 00:04:02,520 Speaker 4: we already have an outlook. If I time ECFC, go 87 00:04:02,640 --> 00:04:04,760 Speaker 4: on my Bloomberg screen and look at the quarterly profile, 88 00:04:05,000 --> 00:04:07,800 Speaker 4: it is already the case that the consensus expects inflation 89 00:04:07,880 --> 00:04:10,680 Speaker 4: to be three percent for the next eighteen months, while 90 00:04:10,720 --> 00:04:13,040 Speaker 4: at the same time growth is slowing down. So to 91 00:04:13,120 --> 00:04:15,560 Speaker 4: your point here, Lisa, if we now see that growth 92 00:04:15,600 --> 00:04:18,400 Speaker 4: is actually not slowing down and we already have inflation 93 00:04:18,440 --> 00:04:20,919 Speaker 4: at three in a slowdown scenario, the risk is of 94 00:04:20,960 --> 00:04:23,640 Speaker 4: course that inflation could be even higher than three percent, 95 00:04:23,839 --> 00:04:26,560 Speaker 4: So cutting into that would of course be a major mistake. 96 00:04:26,720 --> 00:04:28,520 Speaker 4: So I do think that the risks are rising that 97 00:04:28,600 --> 00:04:31,480 Speaker 4: we are again under estimating that inflation has a lot 98 00:04:31,480 --> 00:04:33,880 Speaker 4: more tailwind over the next slevel quarters. 99 00:04:33,960 --> 00:04:36,320 Speaker 7: With that as a potential backdrop, what would it mean 100 00:04:36,320 --> 00:04:39,520 Speaker 7: that if the government gave everyone two thousand dollars? 101 00:04:40,520 --> 00:04:43,159 Speaker 4: Oh, that of course would provide even more fuel here 102 00:04:43,240 --> 00:04:45,640 Speaker 4: to the economy. So if we already have the one 103 00:04:45,680 --> 00:04:47,880 Speaker 4: big bill for bill, lifting GDP by almost of four 104 00:04:47,880 --> 00:04:50,640 Speaker 4: Percenter's point, we have trade more uncertainty beginning to be 105 00:04:50,720 --> 00:04:51,400 Speaker 4: more behind us. 106 00:04:51,600 --> 00:04:53,360 Speaker 5: If we still have stock prices. 107 00:04:53,600 --> 00:04:56,240 Speaker 4: We are discussing the AI bubble all of us very 108 00:04:56,240 --> 00:04:59,440 Speaker 4: intensely at the moment, but given that there's still tailwind 109 00:04:59,520 --> 00:05:01,560 Speaker 4: in the stock mart that's supporting of course high in 110 00:05:01,640 --> 00:05:05,599 Speaker 4: consumer households in particular, all those things combined, they definitely 111 00:05:05,720 --> 00:05:07,799 Speaker 4: argue that if you send out two thousand dollars checks, 112 00:05:07,920 --> 00:05:10,039 Speaker 4: then you just run the risk that you will overheat 113 00:05:10,080 --> 00:05:11,080 Speaker 4: the economy even more. 114 00:05:11,200 --> 00:05:14,080 Speaker 2: Austin Tilst And then we're introducing a new FED chair 115 00:05:14,160 --> 00:05:15,920 Speaker 2: on top of all of this as well in May 116 00:05:15,960 --> 00:05:17,320 Speaker 2: of next year, and I just want to toast on 117 00:05:17,360 --> 00:05:19,320 Speaker 2: how difficult it is right now to offer any kind 118 00:05:19,320 --> 00:05:22,359 Speaker 2: of outlook on FED policy for next year, including that 119 00:05:22,480 --> 00:05:25,440 Speaker 2: second half of next year, which includes the new FED chair. 120 00:05:27,120 --> 00:05:29,159 Speaker 4: That's right, Jonathan, and that's exactly why I think that 121 00:05:29,240 --> 00:05:31,960 Speaker 4: the firm CEA members are really coming up with quite strong, 122 00:05:32,160 --> 00:05:34,760 Speaker 4: strong voices at the moment. Laurie Logan and first of 123 00:05:34,800 --> 00:05:36,839 Speaker 4: all saying that she did vote for the cut, and 124 00:05:36,880 --> 00:05:39,320 Speaker 4: then subsequently saying well I didn't really want a cut, 125 00:05:39,480 --> 00:05:41,680 Speaker 4: and now also on Friday, it really begins to emphasize 126 00:05:41,680 --> 00:05:44,279 Speaker 4: more that will we still need to get inflation under control, 127 00:05:44,520 --> 00:05:46,640 Speaker 4: and whereas you have of course, other inform C members 128 00:05:46,680 --> 00:05:48,560 Speaker 4: deem be run in particular, of course, saying that we 129 00:05:48,560 --> 00:05:51,240 Speaker 4: should be cutting shol around the later. The dots are 130 00:05:51,560 --> 00:05:54,880 Speaker 4: really moving in very opposite directions here, and it's becoming 131 00:05:55,080 --> 00:05:58,240 Speaker 4: much more outspoken from the firm SEA members what exactly 132 00:05:58,279 --> 00:06:01,160 Speaker 4: that the abuse are because this debate, to your point, Jonathan, 133 00:06:01,480 --> 00:06:04,719 Speaker 4: is really still very very early, in particular when you 134 00:06:04,760 --> 00:06:07,600 Speaker 4: have these very strong opinions about what are the tailwinds 135 00:06:07,600 --> 00:06:08,479 Speaker 4: and what are the headwinds at the. 136 00:06:08,480 --> 00:06:10,680 Speaker 2: Moment, sosten g think this is a new era for 137 00:06:10,720 --> 00:06:13,400 Speaker 2: the Federal Reserve where we're going to see greater dispersion 138 00:06:13,560 --> 00:06:17,160 Speaker 2: at least publicly from policymaker to policy maker. And ultimately, 139 00:06:17,440 --> 00:06:20,280 Speaker 2: what do you think the consequences are for financial markets. 140 00:06:21,960 --> 00:06:23,680 Speaker 4: I think it is a new error because we do 141 00:06:23,920 --> 00:06:26,200 Speaker 4: make it, by definition, of course, a new fetchure in 142 00:06:26,240 --> 00:06:28,720 Speaker 4: May of next year, because that's when Japal has to 143 00:06:28,760 --> 00:06:31,039 Speaker 4: step down, and then we will of course figure out 144 00:06:31,120 --> 00:06:33,800 Speaker 4: if that Fitchuair of course, is going to take the 145 00:06:33,839 --> 00:06:36,120 Speaker 4: same view as the Iran or if that pitcher is 146 00:06:36,120 --> 00:06:38,560 Speaker 4: going to have the view of Laurie Logan, and if 147 00:06:38,560 --> 00:06:40,440 Speaker 4: the risk is of course that that Fitchair comes in 148 00:06:40,480 --> 00:06:43,320 Speaker 4: and then begins to say, well, interest rates could begin 149 00:06:43,440 --> 00:06:47,400 Speaker 4: to go down because maybe the economy can handle lower rates. Then, 150 00:06:47,440 --> 00:06:49,240 Speaker 4: of course the fear could be that inflation is going 151 00:06:49,279 --> 00:06:52,120 Speaker 4: to be high. So they debate exactly to your point, Jonathan, 152 00:06:52,200 --> 00:06:54,760 Speaker 4: year around what should we put weight on, especially in 153 00:06:54,839 --> 00:06:56,960 Speaker 4: the dual mandate. Should we put weight on inflation still 154 00:06:56,960 --> 00:06:59,039 Speaker 4: being a three percent? Should we put an eight on 155 00:06:59,360 --> 00:07:01,760 Speaker 4: challenge a great Christmas showing that there are maybe a 156 00:07:01,800 --> 00:07:04,280 Speaker 4: bit more announced job cuts. I mean, this is still 157 00:07:04,279 --> 00:07:06,359 Speaker 4: a very very important debate and we will not know 158 00:07:06,480 --> 00:07:09,119 Speaker 4: the answers to this before we get into January. Remember also, 159 00:07:09,240 --> 00:07:13,160 Speaker 4: the non found payroll numbers for November are normally collected 160 00:07:13,200 --> 00:07:15,360 Speaker 4: in the month I'm sorry, in the month the week 161 00:07:15,400 --> 00:07:17,240 Speaker 4: of the twelfth, and in the month of November, the 162 00:07:17,240 --> 00:07:19,640 Speaker 4: week of the twelfth was last week, so that means. 163 00:07:19,440 --> 00:07:21,280 Speaker 5: The week closer to Thanksgiving. 164 00:07:21,480 --> 00:07:23,280 Speaker 4: That means that even there may be some distortions on 165 00:07:23,280 --> 00:07:25,400 Speaker 4: the data for November. So that means that we may 166 00:07:25,440 --> 00:07:27,280 Speaker 4: get all the way into next year before we really 167 00:07:27,360 --> 00:07:29,760 Speaker 4: have a better handle at how strong is the US 168 00:07:29,840 --> 00:07:32,840 Speaker 4: labor market. So that's why we still have a fairly 169 00:07:33,000 --> 00:07:35,800 Speaker 4: foggy situation for the next several months. 170 00:07:37,240 --> 00:07:50,280 Speaker 2: Stay with us Mulblindberg surveillance coming up after this stock 171 00:07:50,360 --> 00:07:52,880 Speaker 2: sent chin KaiA ahead of keley earnings from Nvidia. Sarah 172 00:07:52,920 --> 00:07:55,960 Speaker 2: Hunt of vampind saxon Words, writing earnings estimates still seem 173 00:07:56,040 --> 00:07:59,120 Speaker 2: to be faring well and absent any bad news from Nvidia, 174 00:07:59,200 --> 00:08:01,680 Speaker 2: markets could stay on track for a positive end to 175 00:08:01,760 --> 00:08:04,280 Speaker 2: the year. Sarah joined Just Now for more Sarah good Mornick. 176 00:08:04,320 --> 00:08:06,760 Speaker 2: If morning, what are the lessons from the recent volatility, 177 00:08:07,040 --> 00:08:08,720 Speaker 2: If there are any lessons at all. 178 00:08:09,640 --> 00:08:11,400 Speaker 8: I think that there was a whole lot of things 179 00:08:11,400 --> 00:08:13,880 Speaker 8: that were going on that created some of that downdraft. 180 00:08:13,920 --> 00:08:15,720 Speaker 8: And I think I mean, there was an earlier question 181 00:08:15,760 --> 00:08:17,920 Speaker 8: about what's the most important thing that's coming up this week. 182 00:08:17,920 --> 00:08:20,360 Speaker 8: I think it's a question of timing. If the payrolls 183 00:08:20,440 --> 00:08:22,680 Speaker 8: was coming before in video, i'd say payrolls. But because 184 00:08:22,680 --> 00:08:25,119 Speaker 8: in video's coming first, that's going to set a tone 185 00:08:25,160 --> 00:08:27,320 Speaker 8: and either payrolls are going to help that or hurt that. 186 00:08:27,760 --> 00:08:29,840 Speaker 8: And I think that, you know, if you get any 187 00:08:29,840 --> 00:08:32,000 Speaker 8: more downdraft in technology, it's going to be hard to 188 00:08:32,080 --> 00:08:33,480 Speaker 8: rally through the end of the year because there is 189 00:08:33,520 --> 00:08:35,600 Speaker 8: some concern there and there's some concerns about valuation. 190 00:08:35,640 --> 00:08:37,680 Speaker 2: We've been speaking for years about the K shaped economy. 191 00:08:37,760 --> 00:08:40,559 Speaker 2: This week's the K shape market. Consumer's been struggling. You've 192 00:08:40,600 --> 00:08:42,640 Speaker 2: seen that in some of the restaurant earnings. We're going 193 00:08:42,679 --> 00:08:45,000 Speaker 2: to see in the retailer's potentially later this week, and 194 00:08:45,000 --> 00:08:47,880 Speaker 2: then it's in video. Can we close that K anytime soon? 195 00:08:47,920 --> 00:08:50,640 Speaker 2: In the equity market, never mind the economy. 196 00:08:51,040 --> 00:08:54,040 Speaker 8: It's a bit tough because people are if the technology 197 00:08:54,040 --> 00:08:56,360 Speaker 8: story stays on track, people stay away from some of 198 00:08:56,360 --> 00:08:59,160 Speaker 8: the retail areas where you've seen weakness. If there's a wobble, 199 00:08:59,200 --> 00:09:01,120 Speaker 8: then people start looking at staples. Like you saw that 200 00:09:01,160 --> 00:09:03,360 Speaker 8: downdraft day, there was some of the stocks that were 201 00:09:03,360 --> 00:09:07,240 Speaker 8: doing okay, we're the more value oriented, more divinend oriented, 202 00:09:07,280 --> 00:09:10,120 Speaker 8: more cat like those kind of stocks did better. I 203 00:09:10,120 --> 00:09:12,520 Speaker 8: think there's an argument to be made that going into 204 00:09:12,559 --> 00:09:15,400 Speaker 8: next year, with valuations where they are, there should definitely 205 00:09:15,400 --> 00:09:17,400 Speaker 8: be a balance in the portfolio, and you should have 206 00:09:17,559 --> 00:09:20,480 Speaker 8: some of that because if you get volatility, that's going 207 00:09:20,520 --> 00:09:22,360 Speaker 8: to act better than some of the technology. And I 208 00:09:22,360 --> 00:09:24,319 Speaker 8: think the volatility is just going to stay and get 209 00:09:24,360 --> 00:09:26,000 Speaker 8: moved around from data point to data point. 210 00:09:26,200 --> 00:09:29,040 Speaker 6: Is it Vidia the last tech company to actually feel 211 00:09:29,080 --> 00:09:32,280 Speaker 6: the pain if AI isn't delivering on some of the 212 00:09:32,320 --> 00:09:33,720 Speaker 6: promise that people expect. 213 00:09:34,360 --> 00:09:36,160 Speaker 8: Well, it's interesting to see the number of people who 214 00:09:36,200 --> 00:09:39,720 Speaker 8: are going publicly talking about getting out of their Nvidia stakes, 215 00:09:39,880 --> 00:09:41,680 Speaker 8: and I'm not sure if that's one of those we 216 00:09:41,720 --> 00:09:43,640 Speaker 8: want to move on to the next thing, or we 217 00:09:43,679 --> 00:09:45,920 Speaker 8: think that's the top for Nvidia. I think in Nvidia 218 00:09:46,040 --> 00:09:47,960 Speaker 8: is in a good spot in terms of being able 219 00:09:48,000 --> 00:09:49,199 Speaker 8: to keep bringing money in. 220 00:09:49,160 --> 00:09:50,680 Speaker 1: Because people still need these chips. 221 00:09:50,840 --> 00:09:53,360 Speaker 8: There is, to your point earlier, also a big depreciation 222 00:09:53,480 --> 00:09:55,480 Speaker 8: cycle on those chips, so there is a round robin. 223 00:09:55,679 --> 00:09:57,120 Speaker 8: It's not like you buy it once and you don't 224 00:09:57,120 --> 00:09:59,120 Speaker 8: have to buy them again. So I don't know that 225 00:09:59,240 --> 00:10:01,959 Speaker 8: Nvidia is going to be the problem there. I think 226 00:10:02,000 --> 00:10:03,880 Speaker 8: the issue is going to be who's making money with 227 00:10:03,920 --> 00:10:06,120 Speaker 8: those chips and how is that return coming, because that 228 00:10:06,240 --> 00:10:08,760 Speaker 8: is the big question into the next iteration of AI. 229 00:10:08,920 --> 00:10:11,280 Speaker 6: This is the reason why Oracle has been so interesting, 230 00:10:11,320 --> 00:10:14,320 Speaker 6: why OpenAI has been so interesting, why the CDs spreads 231 00:10:14,320 --> 00:10:16,640 Speaker 6: and how much they've been blowing out has been so interesting, 232 00:10:16,679 --> 00:10:19,400 Speaker 6: because there is a question about whether the rank and 233 00:10:19,440 --> 00:10:24,000 Speaker 6: file company in the average economy is seeing the monetization 234 00:10:24,440 --> 00:10:26,880 Speaker 6: from some of the new AI tools that they've been getting, 235 00:10:26,880 --> 00:10:29,840 Speaker 6: and whether that's enough to justify the massive spending and investment. 236 00:10:30,400 --> 00:10:33,360 Speaker 6: Is anything that you're seeing seeming to suggest that, yes, 237 00:10:33,520 --> 00:10:35,440 Speaker 6: we are getting to a place where we will see 238 00:10:35,559 --> 00:10:38,880 Speaker 6: massive c change kinds of earnings from the rank and 239 00:10:38,880 --> 00:10:41,319 Speaker 6: file companies that could lead to that broadening out and 240 00:10:41,360 --> 00:10:43,319 Speaker 6: a justification for AI valuations. 241 00:10:43,679 --> 00:10:45,959 Speaker 8: I think the hard thing is that to believe that 242 00:10:45,960 --> 00:10:48,120 Speaker 8: that is going to be the case in the near term, 243 00:10:48,200 --> 00:10:51,360 Speaker 8: it has to be about to some degree productivity, which 244 00:10:51,400 --> 00:10:53,320 Speaker 8: has to be about not having as many people on 245 00:10:53,360 --> 00:10:55,760 Speaker 8: the payrolls. And that's not a great thing right now 246 00:10:55,800 --> 00:10:58,720 Speaker 8: because we don't want to see that happen. I don't 247 00:10:58,720 --> 00:11:02,080 Speaker 8: know that we are yet understanding exactly how those tools 248 00:11:02,080 --> 00:11:05,280 Speaker 8: are going to play into a variety of things, including 249 00:11:05,280 --> 00:11:08,160 Speaker 8: productivity and better earnings, except to get rid of people. 250 00:11:08,240 --> 00:11:09,880 Speaker 8: And so I think that you need to see some 251 00:11:10,800 --> 00:11:13,520 Speaker 8: work cases where it's very clear that this is less 252 00:11:13,520 --> 00:11:15,520 Speaker 8: about getting rid of people and more about making them 253 00:11:15,520 --> 00:11:16,240 Speaker 8: more productive. 254 00:11:16,400 --> 00:11:19,160 Speaker 1: And I think that's still not quite clear. 255 00:11:18,920 --> 00:11:22,040 Speaker 8: Enough from the investment side to say, oh, I can 256 00:11:22,080 --> 00:11:23,920 Speaker 8: see this going into this industry in that industry and 257 00:11:23,920 --> 00:11:24,480 Speaker 8: that industry. 258 00:11:24,679 --> 00:11:26,480 Speaker 1: That's what people are hoping for. I don't know that 259 00:11:26,520 --> 00:11:27,040 Speaker 1: we're there yet. 260 00:11:27,120 --> 00:11:29,240 Speaker 7: At least I mentioned this earlier about how some FED 261 00:11:29,320 --> 00:11:31,760 Speaker 7: members are talking about the structural changes in the economy, 262 00:11:31,840 --> 00:11:35,800 Speaker 7: like immigration, like these technology changes, which is why potentially 263 00:11:36,080 --> 00:11:38,000 Speaker 7: there are shifts in a labor market. How does the 264 00:11:38,040 --> 00:11:40,199 Speaker 7: FED address that. 265 00:11:40,200 --> 00:11:42,720 Speaker 8: That's another question that having a whole bunch of six 266 00:11:42,760 --> 00:11:45,440 Speaker 8: weeks of not having data does not help you at all, 267 00:11:45,679 --> 00:11:47,760 Speaker 8: because that is trying to figure out what the right 268 00:11:47,880 --> 00:11:51,040 Speaker 8: number is to tourist and slacks point with given all 269 00:11:51,080 --> 00:11:53,760 Speaker 8: the things that are going on, is very difficult. When 270 00:11:53,800 --> 00:11:56,320 Speaker 8: you don't have enough data, you don't see weekly claims either, 271 00:11:56,360 --> 00:11:58,000 Speaker 8: which also sort of informs you. 272 00:11:58,080 --> 00:11:58,800 Speaker 1: Even if it's not. 273 00:11:58,880 --> 00:12:01,320 Speaker 8: That week, that average of that starts to inform you. 274 00:12:01,800 --> 00:12:03,800 Speaker 8: I think that's going to be one of the things 275 00:12:03,800 --> 00:12:06,800 Speaker 8: that into twenty twenty six. You need to see some 276 00:12:06,840 --> 00:12:09,000 Speaker 8: earnings growth because that's what's being built in, but you 277 00:12:09,080 --> 00:12:11,440 Speaker 8: also need to see a data market that people I 278 00:12:11,440 --> 00:12:13,480 Speaker 8: mean a labor market that people feel comfortable with. And 279 00:12:13,520 --> 00:12:15,880 Speaker 8: I think that we just don't have enough information right now, 280 00:12:16,160 --> 00:12:18,640 Speaker 8: and that's where the timing of that data coming in 281 00:12:18,800 --> 00:12:21,680 Speaker 8: versus other things starts to be an issue, and the 282 00:12:21,760 --> 00:12:23,840 Speaker 8: faster we get some of it, the better off we are. 283 00:12:24,040 --> 00:12:25,640 Speaker 1: But it's going to be about what's happening now. 284 00:12:25,679 --> 00:12:28,079 Speaker 8: I don't know that September is that informative because people 285 00:12:28,080 --> 00:12:29,920 Speaker 8: were looking at the ADP numbers for October. 286 00:12:30,120 --> 00:12:32,440 Speaker 7: Two pillars coming out this week in terms of Wall 287 00:12:32,440 --> 00:12:35,800 Speaker 7: Street for Nvidia earnings and then Main Street for when 288 00:12:35,800 --> 00:12:38,920 Speaker 7: it comes to Walmart. Could Wall Street continue to do 289 00:12:38,960 --> 00:12:40,760 Speaker 7: well if the consumer's really struggling. 290 00:12:41,760 --> 00:12:43,800 Speaker 8: It's managed to do it so far this year, and 291 00:12:43,840 --> 00:12:46,360 Speaker 8: the consumer has been struggling for a while, especially in 292 00:12:46,400 --> 00:12:48,000 Speaker 8: the lower end. I mean you've seen some of that 293 00:12:48,360 --> 00:12:51,079 Speaker 8: delinquencies on the lower end in auto loans, delinquencies on 294 00:12:51,080 --> 00:12:52,640 Speaker 8: the lower end in credit cards, but not on the 295 00:12:52,720 --> 00:12:55,679 Speaker 8: upper end. That upper end spend has really been able 296 00:12:55,720 --> 00:12:58,440 Speaker 8: to carry things. Not so much for the retail sector 297 00:12:58,480 --> 00:13:00,480 Speaker 8: because as a whole, they need more more than just 298 00:13:00,520 --> 00:13:02,680 Speaker 8: the upper end, except the very high luxury stuff. 299 00:13:02,880 --> 00:13:04,680 Speaker 1: So it depends on where that goes. 300 00:13:04,720 --> 00:13:06,880 Speaker 8: And that's also where the labor market comes into play, 301 00:13:06,920 --> 00:13:09,080 Speaker 8: because if you feel comfortable that you're keeping your job, 302 00:13:09,280 --> 00:13:10,120 Speaker 8: it's easier. 303 00:13:09,840 --> 00:13:11,640 Speaker 1: To spend the money as it comes in. But if 304 00:13:11,640 --> 00:13:13,360 Speaker 1: you don't. That's where people start to get a little 305 00:13:13,360 --> 00:13:16,480 Speaker 1: bit more in the saving site stay with us. 306 00:13:16,800 --> 00:13:28,920 Speaker 3: Multiple IMBERG surveillance coming up after this. We've heard this. 307 00:13:28,960 --> 00:13:31,199 Speaker 2: It's been building for a while, the push against Russia, 308 00:13:31,320 --> 00:13:34,360 Speaker 2: the push against countries economies doing business with them, notably 309 00:13:34,480 --> 00:13:37,160 Speaker 2: China India who asked this to supply too well. 310 00:13:37,240 --> 00:13:39,560 Speaker 7: I think really it's about China and India because this 311 00:13:39,720 --> 00:13:42,560 Speaker 7: is going to really force China to either have to 312 00:13:42,640 --> 00:13:45,120 Speaker 7: go around some of the sanctions or deal the blow 313 00:13:45,160 --> 00:13:47,360 Speaker 7: from the United States. At the same time, at the 314 00:13:47,360 --> 00:13:49,480 Speaker 7: Treasury Secretary over the weekend talked about the fact that 315 00:13:49,559 --> 00:13:53,040 Speaker 7: they don't have the final agreement in ink fully in 316 00:13:53,080 --> 00:13:55,960 Speaker 7: place and they expect that to happen by Thanksgiving. Is 317 00:13:56,000 --> 00:13:59,199 Speaker 7: this now another point of leverage Washington is trying to 318 00:13:59,280 --> 00:13:59,520 Speaker 7: use it. 319 00:13:59,600 --> 00:14:02,480 Speaker 2: Joining us as Terry Hynes of Pangaea Policy Terry, welcome 320 00:14:02,480 --> 00:14:05,080 Speaker 2: to the program. What is the president's big effort around 321 00:14:05,120 --> 00:14:07,400 Speaker 2: Russia all about and will he actually follow through? 322 00:14:08,720 --> 00:14:12,480 Speaker 9: Good morning all I'm on Team Ann Marie this morning. 323 00:14:12,720 --> 00:14:15,920 Speaker 9: The pick up on that point about leverage. This is 324 00:14:15,920 --> 00:14:18,040 Speaker 9: about a lot of things, but one thing it is 325 00:14:18,040 --> 00:14:21,800 Speaker 9: is exactly about that. What you can read between the 326 00:14:21,840 --> 00:14:26,000 Speaker 9: lines from Secretary Bessett yesterday in a long interview, is 327 00:14:26,040 --> 00:14:30,560 Speaker 9: that the supposed current deal that's happening between the United 328 00:14:30,600 --> 00:14:33,120 Speaker 9: States and China is now taking a lot longer to 329 00:14:33,160 --> 00:14:37,320 Speaker 9: paper than was widely thought even the best had said. 330 00:14:37,640 --> 00:14:38,560 Speaker 5: So it's about that. 331 00:14:39,280 --> 00:14:43,160 Speaker 9: It's about pushing India, I think, on getting a trade 332 00:14:43,160 --> 00:14:46,560 Speaker 9: deal done. Secondly, Thirdly, I think it's about pushing the 333 00:14:46,560 --> 00:14:51,800 Speaker 9: Europeans on getting serious on Russia as well. The President 334 00:14:51,840 --> 00:14:57,600 Speaker 9: has long said that the United States policy only works 335 00:14:57,640 --> 00:15:02,160 Speaker 9: well if the Europeans are willing to to pull equal 336 00:15:02,160 --> 00:15:06,720 Speaker 9: weight here, and Europeans have been tapped dancing on core 337 00:15:06,840 --> 00:15:11,360 Speaker 9: questions around Russia and frozen Russian assets for years literally, 338 00:15:11,480 --> 00:15:14,920 Speaker 9: and either they're going to get serious or the Ukraine 339 00:15:14,960 --> 00:15:16,920 Speaker 9: thing is going to drag on for even longer. 340 00:15:17,160 --> 00:15:19,520 Speaker 7: Terry, the administration is going to use this leverage as 341 00:15:19,560 --> 00:15:21,560 Speaker 7: part of the destination. But when we get to the 342 00:15:21,560 --> 00:15:24,680 Speaker 7: final destination, do you think Congress will end up passing 343 00:15:24,720 --> 00:15:26,120 Speaker 7: this bill? 344 00:15:27,080 --> 00:15:32,400 Speaker 9: I think the I think they can sure the willingness exists, 345 00:15:33,280 --> 00:15:36,480 Speaker 9: the votes exist. This is a lot more up to 346 00:15:37,040 --> 00:15:39,120 Speaker 9: what the President wants to do in terms of how 347 00:15:40,280 --> 00:15:43,640 Speaker 9: he wants to use that particular pressure point one thing 348 00:15:43,680 --> 00:15:49,720 Speaker 9: I saw in Trump's impromptu remarks there, frankly, was an 349 00:15:49,760 --> 00:15:51,960 Speaker 9: ability to take the thing off and put it back, 350 00:15:52,320 --> 00:15:54,080 Speaker 9: take the thing off the back burner and put it. 351 00:15:54,040 --> 00:15:54,840 Speaker 5: On the front burner. 352 00:15:56,240 --> 00:15:59,480 Speaker 9: Russia may may dismiss that, but I think they probably 353 00:15:59,560 --> 00:16:03,520 Speaker 9: dismissed at their peril, considering that the president has the ability, 354 00:16:04,760 --> 00:16:07,640 Speaker 9: thanks to Congress, to actually get this thing done if 355 00:16:07,640 --> 00:16:08,160 Speaker 9: he chooses. 356 00:16:08,240 --> 00:16:10,720 Speaker 7: The Treasure Secretary seems to be throwing cold water on 357 00:16:10,720 --> 00:16:13,040 Speaker 7: a Wall Street General report that says China is trying 358 00:16:13,080 --> 00:16:17,280 Speaker 7: to ratchet back rare earth minerals that go to companies 359 00:16:17,280 --> 00:16:21,040 Speaker 7: that help the US military. Do you think China will 360 00:16:21,080 --> 00:16:24,200 Speaker 7: amend that or is this something that they're going to 361 00:16:24,240 --> 00:16:24,760 Speaker 7: stick with. 362 00:16:26,080 --> 00:16:30,040 Speaker 9: I think the track record here is that China has 363 00:16:30,120 --> 00:16:33,320 Speaker 9: been I think best referred to April sixth in that 364 00:16:33,440 --> 00:16:36,720 Speaker 9: interview as being the date in which the high drinks 365 00:16:36,760 --> 00:16:39,880 Speaker 9: started on rare earths. I think they've been doing this 366 00:16:39,920 --> 00:16:41,920 Speaker 9: for six or seven months. I think the base case 367 00:16:41,960 --> 00:16:44,440 Speaker 9: has to be that they'll continue to do it. So 368 00:16:44,600 --> 00:16:47,400 Speaker 9: what you know from a markets perspective, you have to 369 00:16:47,440 --> 00:16:49,160 Speaker 9: take that into account, and you also have to take 370 00:16:49,200 --> 00:16:51,440 Speaker 9: into account that the United States is going to continue 371 00:16:51,480 --> 00:16:55,880 Speaker 9: to redouble and redouble every effort it can to get 372 00:16:55,960 --> 00:16:58,920 Speaker 9: rare earths and start rare earths that are not of 373 00:16:59,000 --> 00:16:59,800 Speaker 9: Chinese origin. 374 00:17:00,120 --> 00:17:02,160 Speaker 6: Darry, how much of a conflict is there between trying 375 00:17:02,200 --> 00:17:04,720 Speaker 6: to get leverage some of these trade talks and trying 376 00:17:04,760 --> 00:17:07,720 Speaker 6: to get cost of living gains for the United States 377 00:17:07,720 --> 00:17:10,760 Speaker 6: and for average consumers, given the fact that that seems 378 00:17:10,800 --> 00:17:12,879 Speaker 6: to be a renewed push by the president, is there 379 00:17:12,880 --> 00:17:13,680 Speaker 6: a conflict here? 380 00:17:14,800 --> 00:17:17,199 Speaker 9: I think there's an order of precedence here, and the 381 00:17:17,280 --> 00:17:20,560 Speaker 9: order of precedence from the administration's point of view is 382 00:17:20,560 --> 00:17:23,480 Speaker 9: that they need to get the trade deals done as 383 00:17:23,600 --> 00:17:27,320 Speaker 9: many and as much as possible and move forward from there. 384 00:17:27,440 --> 00:17:31,800 Speaker 9: And they will, you know, they tend to put their 385 00:17:31,840 --> 00:17:34,399 Speaker 9: stake out kind of you know, far and in a 386 00:17:34,960 --> 00:17:38,200 Speaker 9: in a pure sense, and when work back and cut 387 00:17:38,240 --> 00:17:40,080 Speaker 9: back as they need to. And I think that's a 388 00:17:40,080 --> 00:17:42,000 Speaker 9: lot of what you saw with the food stuff's tariffs 389 00:17:42,080 --> 00:17:46,280 Speaker 9: last weekend or last week Besson talked about this as 390 00:17:46,359 --> 00:17:49,720 Speaker 9: being mostly a matter of existing trade deals coming in 391 00:17:49,800 --> 00:17:51,440 Speaker 9: or new trade deals coming into force. 392 00:17:52,080 --> 00:17:54,000 Speaker 5: I don't think that's quite the case. It's part of 393 00:17:54,040 --> 00:17:56,119 Speaker 5: the case. But what they'll. 394 00:17:55,880 --> 00:17:58,800 Speaker 9: Continue to do is continue to work on the trade 395 00:17:58,840 --> 00:18:02,480 Speaker 9: deals with the idea that they can calibrate them pretty 396 00:18:02,560 --> 00:18:04,840 Speaker 9: much in real time as they need to. 397 00:18:05,119 --> 00:18:07,320 Speaker 6: Terry, just to circle back full circle to the beginning 398 00:18:07,359 --> 00:18:11,520 Speaker 6: of the conversation, how much can this administration go really 399 00:18:11,560 --> 00:18:14,760 Speaker 6: hard on China with sanctions on oil if it raises 400 00:18:14,840 --> 00:18:17,640 Speaker 6: gasoline prices in the United States at a time where 401 00:18:17,680 --> 00:18:19,560 Speaker 6: there's a real cost of living focus. 402 00:18:20,480 --> 00:18:24,240 Speaker 9: I think the priority for the administration. There's a balance here, 403 00:18:24,480 --> 00:18:26,639 Speaker 9: but the priority for the administration is going to be 404 00:18:27,280 --> 00:18:30,480 Speaker 9: making sure that China understands that it will use the 405 00:18:30,640 --> 00:18:33,960 Speaker 9: leverage of it that the United States has, and that's 406 00:18:33,960 --> 00:18:36,840 Speaker 9: certainly a big part of it. I think the President 407 00:18:36,920 --> 00:18:41,000 Speaker 9: cares a lot about gasoline prices, but one reason why 408 00:18:41,040 --> 00:18:46,280 Speaker 9: he talks up so much the price of gasoline coming down, frankly, 409 00:18:46,280 --> 00:18:48,119 Speaker 9: I think is he wants to buy himself some wiggle 410 00:18:48,200 --> 00:18:51,320 Speaker 9: room with the public to make sure that if he 411 00:18:51,440 --> 00:18:55,159 Speaker 9: ends up having to drop a dime on China on oil, 412 00:18:56,000 --> 00:18:58,159 Speaker 9: that people understand the Watson whis. 413 00:19:00,119 --> 00:19:03,600 Speaker 3: Stay with us. More Bloomberg surveillance coming up after this. 414 00:19:13,160 --> 00:19:17,200 Speaker 2: Profitability of the AI narrative whipsawing tech stocks as valuation 415 00:19:17,280 --> 00:19:20,920 Speaker 2: concerns rise JP Morgan's twenty twenty six global Investments outlook 416 00:19:20,920 --> 00:19:25,520 Speaker 2: remaining bullish, writing artificial intelligence remains the defining force in 417 00:19:25,600 --> 00:19:28,760 Speaker 2: financial markets. Stephen Parker, the co head of Global Investment 418 00:19:28,800 --> 00:19:31,480 Speaker 2: Strategy at JP Morgan Private Bank, joined us now for more. 419 00:19:31,520 --> 00:19:32,520 Speaker 3: Stephen, good morning, Good to see you. 420 00:19:32,600 --> 00:19:33,000 Speaker 5: Good to see you. 421 00:19:33,000 --> 00:19:34,280 Speaker 3: Should we talk about a three pogey man? 422 00:19:34,440 --> 00:19:34,760 Speaker 5: Want to do? 423 00:19:34,960 --> 00:19:38,560 Speaker 2: Have a capacity, leverage, valuations? Your words? How concerned should 424 00:19:38,600 --> 00:19:39,840 Speaker 2: we be into next year? 425 00:19:40,119 --> 00:19:41,920 Speaker 10: Yeah, Look, we think that there's still a long way 426 00:19:41,960 --> 00:19:44,600 Speaker 10: to run in this AI trade. If you look back 427 00:19:44,600 --> 00:19:47,399 Speaker 10: since the launch of chat GPT, seventy five percent of 428 00:19:47,400 --> 00:19:49,960 Speaker 10: the returns, eighty percent of the earnings and ninety percent 429 00:19:50,040 --> 00:19:51,760 Speaker 10: of the capital spending growth of the S and P 430 00:19:51,920 --> 00:19:54,560 Speaker 10: has been driven by AI related companies. And so the 431 00:19:54,640 --> 00:19:56,840 Speaker 10: question now is are we facing a bubb one? As 432 00:19:56,840 --> 00:20:00,320 Speaker 10: you said, it's really those three factors. It's over capacity city, 433 00:20:00,720 --> 00:20:04,080 Speaker 10: its leverage in the system, and its valuations that we 434 00:20:04,119 --> 00:20:06,440 Speaker 10: need to focus on. And we think that we're still 435 00:20:06,760 --> 00:20:08,800 Speaker 10: in the early stages of this story. 436 00:20:08,960 --> 00:20:12,280 Speaker 6: How much do you think that the extra editions of 437 00:20:12,600 --> 00:20:15,439 Speaker 6: this story, the extra chapters, really will come from a 438 00:20:15,440 --> 00:20:18,840 Speaker 6: FED rate policy or fiscal policy or some sort of 439 00:20:18,960 --> 00:20:22,480 Speaker 6: more accommodative backdrop that can allow valuations to get even 440 00:20:22,480 --> 00:20:23,040 Speaker 6: more heady. 441 00:20:23,440 --> 00:20:23,680 Speaker 5: Yeah. 442 00:20:23,720 --> 00:20:26,000 Speaker 10: Look, I think we're in a world where there is 443 00:20:26,040 --> 00:20:28,160 Speaker 10: still a lot of capital that is looking for a home. 444 00:20:28,240 --> 00:20:31,560 Speaker 10: Investors are willing to make investments. But importantly, what we're 445 00:20:31,600 --> 00:20:34,440 Speaker 10: seeing now is that these investments in AI don't look 446 00:20:34,440 --> 00:20:36,760 Speaker 10: speculative like bubbles of the past. If you go back 447 00:20:36,800 --> 00:20:40,359 Speaker 10: to the dot com era in the late nineties, there 448 00:20:40,440 --> 00:20:43,359 Speaker 10: was forty million miles of fiber that were laid to 449 00:20:43,400 --> 00:20:46,280 Speaker 10: help support the Internet, and by mid two thousand and one, 450 00:20:46,600 --> 00:20:48,760 Speaker 10: only about one percent of that was being used. It 451 00:20:48,800 --> 00:20:51,960 Speaker 10: was supply in search of demand AI, the story is reversed. 452 00:20:52,359 --> 00:20:54,520 Speaker 10: The vacancy rates and data centers today is at an 453 00:20:54,520 --> 00:20:57,240 Speaker 10: all time low one and a half percent, and three 454 00:20:57,400 --> 00:20:59,720 Speaker 10: quarters of the demand for the new construction and data 455 00:20:59,720 --> 00:21:02,680 Speaker 10: center is already preleased. So we're not seeing those signs 456 00:21:02,720 --> 00:21:06,399 Speaker 10: of speculation, particularly from a capacity perspective, that gets us nervous. 457 00:21:06,520 --> 00:21:08,520 Speaker 6: So your base case for next year is seventy two 458 00:21:08,640 --> 00:21:10,280 Speaker 6: hundred to seventy four hundred, and the S and P 459 00:21:10,359 --> 00:21:13,600 Speaker 6: five hundred, Your bull case is eight thousand to eighty 460 00:21:13,640 --> 00:21:18,240 Speaker 6: two hundred. What makes you either constructive or uber bullish. 461 00:21:18,400 --> 00:21:20,600 Speaker 10: Yeah, I think it all comes down to earnings, and 462 00:21:20,640 --> 00:21:24,560 Speaker 10: we've seen a tremendous run of successful earnings results. 463 00:21:24,600 --> 00:21:26,440 Speaker 5: Five of the last six quarters. 464 00:21:26,080 --> 00:21:29,440 Speaker 10: We've seen double digit SMP earnings growth, despite the fact 465 00:21:29,440 --> 00:21:33,920 Speaker 10: that we've had policy uncertainty, economic uncertainty, trade uncertainty. There's 466 00:21:33,960 --> 00:21:37,159 Speaker 10: perhaps never been a bigger disconnect between the stock market, 467 00:21:37,200 --> 00:21:40,280 Speaker 10: particularly large cap stocks, and the broader economy. We think 468 00:21:40,320 --> 00:21:42,600 Speaker 10: that continues and we see another year of double digit 469 00:21:42,640 --> 00:21:44,520 Speaker 10: earnings growth, which is going to support that upside that 470 00:21:44,520 --> 00:21:45,119 Speaker 10: you talked about. 471 00:21:45,160 --> 00:21:46,600 Speaker 7: How do you think about all of this in an 472 00:21:46,640 --> 00:21:49,320 Speaker 7: age when globalization is out of fashion? 473 00:21:49,880 --> 00:21:52,920 Speaker 10: Yeah, I mean we're launching today our new twenty twenty 474 00:21:52,960 --> 00:21:56,000 Speaker 10: six market outlook, Promise and Pressure, and one of the 475 00:21:56,119 --> 00:21:59,400 Speaker 10: key themes this is idea of global fragmentation. 476 00:22:00,080 --> 00:22:01,600 Speaker 5: Post the Cold War, we were in. 477 00:22:01,520 --> 00:22:05,480 Speaker 10: A multi decade period where it was all about globalization, 478 00:22:06,000 --> 00:22:10,600 Speaker 10: cost control, efficient supply chains that kept inflation down, it 479 00:22:10,680 --> 00:22:14,280 Speaker 10: kept margins up increasingly over the last couple of years 480 00:22:14,480 --> 00:22:19,879 Speaker 10: as a result of the pandemic, conflict in Europe trade policy. 481 00:22:20,119 --> 00:22:23,200 Speaker 10: We're now in a world where countries are looking in 482 00:22:23,400 --> 00:22:27,320 Speaker 10: they're more focused on security and reliability both in terms 483 00:22:27,359 --> 00:22:30,879 Speaker 10: of defense but also of supply chains and infrastructure, and 484 00:22:30,920 --> 00:22:32,879 Speaker 10: that has ramifications. 485 00:22:32,560 --> 00:22:35,360 Speaker 2: US versus China. That's what this feels like. What does 486 00:22:35,400 --> 00:22:37,880 Speaker 2: Europe fit in in the US versus China? 487 00:22:37,960 --> 00:22:40,960 Speaker 10: So Europe is an interesting sort of pivot point in 488 00:22:41,000 --> 00:22:44,639 Speaker 10: the global landscape. When we looked this year, the announcements 489 00:22:44,640 --> 00:22:46,639 Speaker 10: that we saw out of Germany in terms of the 490 00:22:46,680 --> 00:22:51,680 Speaker 10: shift in fiscal spend, the willingness to embrace positive fiscal 491 00:22:51,720 --> 00:22:53,720 Speaker 10: impetus is a huge change. 492 00:22:53,760 --> 00:22:53,879 Speaker 5: You know. 493 00:22:53,920 --> 00:22:55,600 Speaker 10: One of the key themes when we talk about this 494 00:22:55,720 --> 00:22:59,679 Speaker 10: idea of increasing fragmentation and a focus on security is 495 00:22:59,720 --> 00:23:01,760 Speaker 10: what's going on in Europe as it relates to the 496 00:23:01,760 --> 00:23:04,760 Speaker 10: spending on their infrastructure and their defense. We think that's 497 00:23:04,800 --> 00:23:07,960 Speaker 10: both an important macro trend but also an investable opportunity. 498 00:23:08,000 --> 00:23:09,600 Speaker 2: I think people have the sense they know how to 499 00:23:09,640 --> 00:23:11,719 Speaker 2: play the US story if they want to play it. 500 00:23:12,080 --> 00:23:14,879 Speaker 2: I think they feel comfortable playing the China story if 501 00:23:14,920 --> 00:23:17,080 Speaker 2: they want to play it. After the first half of 502 00:23:17,080 --> 00:23:19,240 Speaker 2: this year, I think they're sitting here looking at Europe 503 00:23:19,240 --> 00:23:21,600 Speaker 2: into twenty six and thinking, well, maybe that was the 504 00:23:21,640 --> 00:23:23,439 Speaker 2: trait that was just sort of like last year, and 505 00:23:23,480 --> 00:23:24,800 Speaker 2: now we're done with it, and we should move on 506 00:23:24,840 --> 00:23:25,440 Speaker 2: to other things. 507 00:23:25,480 --> 00:23:27,040 Speaker 3: What is the trait twenty six? 508 00:23:27,119 --> 00:23:30,240 Speaker 10: We still think there's opportunities in Europe. A lot of 509 00:23:30,240 --> 00:23:32,560 Speaker 10: the fiscal policy that was announced this year isn't actually 510 00:23:32,640 --> 00:23:34,600 Speaker 10: going to be put into place until next year, so 511 00:23:34,640 --> 00:23:37,199 Speaker 10: there is a growth dynamic there, and in fact, we 512 00:23:37,200 --> 00:23:40,040 Speaker 10: think from an economic perspective, we're probably going to see 513 00:23:40,040 --> 00:23:42,960 Speaker 10: a convergence, meaning that a smaller discount of growth in 514 00:23:43,040 --> 00:23:45,760 Speaker 10: places like Germany versus the US. But when you think 515 00:23:45,760 --> 00:23:48,120 Speaker 10: about how you want to play the story, we continue 516 00:23:48,119 --> 00:23:50,960 Speaker 10: to think that the European defense names are probably the 517 00:23:51,080 --> 00:23:54,000 Speaker 10: most interesting opportunity that we're seeing. 518 00:23:54,119 --> 00:23:56,200 Speaker 6: Based on the framework that you just laid out, how 519 00:23:56,200 --> 00:23:58,959 Speaker 6: are you looking at diversification? Is it from a regional 520 00:23:59,000 --> 00:24:01,400 Speaker 6: basis or is it from an asset class basis? 521 00:24:01,560 --> 00:24:03,920 Speaker 10: Yeah, So we talked about the outlook, We talked about AI, 522 00:24:04,040 --> 00:24:07,280 Speaker 10: we talked about increasing global fragmentation. The third theme that 523 00:24:07,280 --> 00:24:09,119 Speaker 10: we think is really going to drive markets in the 524 00:24:09,160 --> 00:24:12,359 Speaker 10: years to come is inflation. And these factors that we 525 00:24:12,440 --> 00:24:17,800 Speaker 10: talked about increasing fragmentation, increasing fiscal policy means that inflation 526 00:24:17,920 --> 00:24:20,560 Speaker 10: is likely to be more volatile and the floor is 527 00:24:20,640 --> 00:24:22,320 Speaker 10: likely to be higher, and so when you think about 528 00:24:22,320 --> 00:24:25,880 Speaker 10: building portfolios, the playbook of the past has to evolve. 529 00:24:26,160 --> 00:24:28,600 Speaker 10: Stocks and bonds on their own are not going to 530 00:24:28,600 --> 00:24:31,280 Speaker 10: be enough. Stocks can help you when you get recession 531 00:24:31,280 --> 00:24:34,320 Speaker 10: fears and growth scares, but increasingly in a world where 532 00:24:34,359 --> 00:24:37,119 Speaker 10: inflation is going to be part of the narrative, you 533 00:24:37,200 --> 00:24:40,720 Speaker 10: need to look at things like infrastructure, real assets, and gold, 534 00:24:41,080 --> 00:24:42,800 Speaker 10: not just on a tactical basis, but on a more 535 00:24:42,840 --> 00:24:43,719 Speaker 10: strategic basis. 536 00:24:43,720 --> 00:24:46,040 Speaker 2: So sticking with the gold trde even after a big 537 00:24:46,040 --> 00:24:47,800 Speaker 2: boom over the last year, we are. 538 00:24:47,720 --> 00:24:49,520 Speaker 5: We continue to see upside. 539 00:24:49,520 --> 00:24:51,640 Speaker 10: We think we can get over five thousand dollars an 540 00:24:51,640 --> 00:24:54,280 Speaker 10: ounce on gold, and that has to do a lot 541 00:24:54,359 --> 00:24:57,800 Speaker 10: both with some of these concerns around geopolitical issues, the 542 00:24:57,840 --> 00:25:01,760 Speaker 10: concerns around the dollar, but most iportantly and from a 543 00:25:01,840 --> 00:25:05,879 Speaker 10: sticky perspective, central banks around the world are continuing to 544 00:25:05,960 --> 00:25:07,879 Speaker 10: realize that they need to diversify, and a lot of 545 00:25:07,880 --> 00:25:11,240 Speaker 10: these central banks are still under exposed to the long 546 00:25:11,320 --> 00:25:13,600 Speaker 10: term targets that they're trying to achieve, which means more 547 00:25:13,640 --> 00:25:15,639 Speaker 10: demand in a supply constrained world. 548 00:25:16,800 --> 00:25:20,359 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 549 00:25:20,359 --> 00:25:23,680 Speaker 2: in markets, economics, and geopolitics. You can watch the show 550 00:25:23,760 --> 00:25:26,679 Speaker 2: live on Bloomberg TV weekday mornings from six am to 551 00:25:26,840 --> 00:25:30,600 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 552 00:25:30,720 --> 00:25:33,000 Speaker 2: or anywhere else you listen, and as always, on the 553 00:25:33,000 --> 00:25:35,400 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.