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Speaker 2: We have great analysis now, particularly picking up the pieces
Speaker 2: of a Federal Reserve present and a Federal Reserve future.
Speaker 2: Joining a Sema Shah, she's chief Global Strategist, principal asset Management.
Speaker 2: To me, Seema, the heart of the debate whatever anyone
Speaker 2: thinks is a humility on the part of a central bank,
Speaker 2: including the Bank of England, of getting out front of
Speaker 2: the debate or waiting to see what the data hands you.
Speaker 2: That's called X post. How X post are central banks
Speaker 2: right now?
Speaker 3: Tom? Yeah, Look, it was an interesting interview and I
Speaker 3: think that you know, as you said, what we've seen
Speaker 3: from central banks everywhere is that they become very, very
Speaker 3: responsive to the data, which when you're confronting shocks like
Speaker 3: we've had in the last five to six years, it
Speaker 3: does make their job really difficult and it creates the risk,
Speaker 3: the higher risk of policy errors. I think what John
Speaker 3: was saying at the end of the interview there about
Speaker 3: the importance of creating discussion is absolutely right. I mean,
Speaker 3: in every single company, from an investors standpoint, we try
Speaker 3: and revisit the framework that we've created for our portfolio decisions.
Speaker 3: That's normal, particularly in a time where the circumstances, when
Speaker 3: the backdrop of the economy of the market is shifting,
Speaker 3: and I think for the last five sixes that is
Speaker 3: exactly what we're seeing, the kind of the increase in
Speaker 3: geopolitical risks, the focus and supply chains, things are shifting
Speaker 3: really really rapidly, and so we do need to revisit
Speaker 3: the framework, even if it's just a decide to stick
Speaker 3: with the same thing.
Speaker 2: And you are a wonderfully qualified for this question, then
Speaker 2: is it just simply that the US Central Bank has
Speaker 2: to move towards the heritage of a younger bank of
Speaker 2: England where there is more debate and more descent.
Speaker 3: I think that there is there's a line in this
Speaker 3: stand there. You know, we don't want to get to
Speaker 3: a point where there's so much disagreevent that actually is
Speaker 3: very difficult for markets to get to a point where
Speaker 3: they know the kind of direction that central banks are
Speaker 3: moving in. But at the same time having that active debate.
Speaker 3: I think I think it is important for vested at
Speaker 3: this time. We need to try and think through, for example,
Speaker 3: what is the impact of population growth, the impact of AI.
Speaker 3: Is it going to be disinflation or is it going
Speaker 3: to be inflationary? These are really really key questions that
Speaker 3: we ourselves are grappling with. They're trying to get an
Speaker 3: idea and understanding of how the Federal Reserve, the Bank
Speaker 3: of England, et cetera. Are considering it. I think is
Speaker 3: important as long as it doesn't spill into significantly greater volatility,
Speaker 3: which makes it difficult to understand how your portfolio decisions
Speaker 3: going to be impacted.
Speaker 4: Suma, We're about to get a new chairman of the
Speaker 4: US Federal Reserve. How do you think the Federal Reserve
Speaker 4: will change its behavior if at all, or it's view
Speaker 4: as to interest rates, if at all going forward.
Speaker 3: Well, so there's a guess there's two parts of the conversation.
Speaker 3: There's going to be the cyclical the short term, and
Speaker 3: then there is so focusing mainly on the cyclicals. So
Speaker 3: what happens in the next six six to twelve months,
Speaker 3: just as there always has been, there has to be
Speaker 3: a focus on what are the economic conditions. So there
Speaker 3: may be this inclination, for example, as has been suggested,
Speaker 3: of kind of a move towards a preference for lower rates,
Speaker 3: but the economic conditions need to support that. And certainly
Speaker 3: where we are today with an economy which continues to
Speaker 3: be really strong, where the labor market has been surprising
Speaker 3: to the upside most recently, and then of course inflationary
Speaker 3: conditions both on the consumer side and on the producer
Speaker 3: side surprising to the upside. I think it's a really
Speaker 3: difficult environment for a central bank to be cutting interest
Speaker 3: rates with in mind, staying on hold and really taking
Speaker 3: the time to see how this plays out is probably
Speaker 3: the most likely, which suggests that even with the new
Speaker 3: head of the Fed, actually the policy impact is going
Speaker 3: to be quite minimal, at least in the near term.
Speaker 4: Sema, given that backdrop here, with all the crosswinds out
Speaker 4: there for investors to negotia, whether it's geopolitical issues in
Speaker 4: the Middle Easter or Ukraine, we've got the President Trump
Speaker 4: in China. What's the message you have for your global
Speaker 4: clients these days.
Speaker 3: Yeah, as you said, there's a number of different cross currents.
Speaker 3: So for investments what we've been pointing to is that, look,
Speaker 3: we do have confidence in the global economy. We can
Speaker 3: see pockets and weakness, and there is divergence with the
Speaker 3: US surprising to the upside and maybe Europe and Asia
Speaker 3: as any more exposed to the negative impact from the
Speaker 3: geolitical conflict. So global diversification is still key. Though There's
Speaker 3: going to be companies in Europe and in Asia who
Speaker 3: are going to be well positioned for this environment as
Speaker 3: well as take into account, of course, that very important
Speaker 3: secular force of AI. It is still a question of
Speaker 3: global diversification, both regions style gies and of course asset costs,
Speaker 3: because investors need to be open to the idea that
Speaker 3: there is a lot of volatility. We don't know what's
Speaker 3: going to come, so we need have that diversification, but
Speaker 3: also positioned for strength because the economic backdrop is still
Speaker 3: pretty resilient.
Speaker 2: All I know, Seman, you're lifting the market. Semashaw, thank
Speaker 2: you so much, Chief Global Strategist, Principal asset manager. Stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 5: This is a joy.
Speaker 2: Pop Quincy is a really wonderful perspective for JP Morgan,
Speaker 2: as mister Diamond has made clear he desires to build
Speaker 2: out Europe and build out are huge plans for the
Speaker 2: London platform Global adad of equities JP Morgan Asset Management.
Speaker 2: I'm going to steal some thunder from Sweeney because Sweeney
Speaker 2: nailed this fourteen months ago. A shift to emerging markets,
Speaker 2: a shift out of America that's not popular right now.
Speaker 6: Is no, the emerging markets have shown tremendous signs of life.
Speaker 6: When I look around our investment team, the most optimism
Speaker 6: I find is on our emerging market desks. Really yeah, So, look,
Speaker 6: you've got markets that massively underperform the US and the
Speaker 6: cumulative underperformance from the peak in twenty ten to the
Speaker 6: trough it was only eighteen months ago. Is there around
Speaker 6: eighty percent and we made back I don't know ten
Speaker 6: fifteen percent of that so a little bit. So there's
Speaker 6: just based on historical comparisons, is a long way to go.
Speaker 6: But look, investing in stocks is about earnings fundamentally, and
Speaker 6: earnings growth in emerging markets was really strong last year.
Speaker 5: It's even stronger this year.
Speaker 6: We've got earnings up fort north of forty percent for
Speaker 6: the emerging market for zero for zero, and you're not
Speaker 6: paying particularly high price for that. So there's a lot
Speaker 6: to be excited about in emerging markets right now.
Speaker 4: Where in particular, I mean, when I think emerging markets,
Speaker 4: I feel like I have to start with China.
Speaker 7: I know it's a big part of the MSCI.
Speaker 4: The biggest where in emerging markets it gets the attention
Speaker 4: of the GP Moorgan asset.
Speaker 6: Actually, China is no longer the biggest part of the MCI,
Speaker 6: so Taiwan has.
Speaker 5: A higher I did not know that well.
Speaker 6: And in that statistic you see, of course, the trade
Speaker 6: that's dominating just about everything in global equities at the moment,
Speaker 6: which is the AI investment boom. Now that is having
Speaker 6: a huge impact on emerging markets, particularly this year as
Speaker 6: the boom has sort of spilled away from the hyperscalers
Speaker 6: into the memory stocks, semiconductors. They're obviously very highly represented
Speaker 6: in emerging markets. They're booming, But there's more to emerging
Speaker 6: markets than just technology.
Speaker 4: So let me just go back to Taiwan in the
Speaker 4: MSCI is bigger than China.
Speaker 8: Yeah.
Speaker 4: Wow, So that must be an interesting discussion with President
Speaker 4: Trump and President in g It's like, wait a minute,
Speaker 4: I mean, Taiwan can stand on its own in many
Speaker 4: different ways. So from an investment perspective, how do you
Speaker 4: think about some of the other parts of the globe,
Speaker 4: Because we saw in twenty twenty five, while the US
Speaker 4: secondary markets did very well, a lot of the rest
Speaker 4: of the world did a lot better. Here is that
Speaker 4: trade still on? Is that rest of the world trades
Speaker 4: still play.
Speaker 6: Yeah, so there was a big catch up last year.
Speaker 6: As you point out. I think what happened last year
Speaker 6: is that European investors remembered they have a European market
Speaker 6: they have to pay attention to. And you know what
Speaker 6: we've seen really from many investors in Europe over the
Speaker 6: last fifteen years, understandably, is all the attention being on
Speaker 6: the United States when US stocks dropped in the first
Speaker 6: half of last year in euro terms, when European markets
Speaker 6: started doing better, then attention switched back to Europe. We
Speaker 6: saw Europeans keeping some more of their money at home,
Speaker 6: and we saw the same thing in Asia as well.
Speaker 2: How's the dollar linkage here? What's the correlation? You're off
Speaker 2: dxy or bbdxy or you guys handled the ADXY and
Speaker 2: X I believe, I mean, what's the correlation here? Of
Speaker 2: I need I need to see a weaker dollar to
Speaker 2: make this equation work.
Speaker 5: Yeah, you need at least a flat dollar.
Speaker 6: I think our emerging markets team would say that the
Speaker 6: macro indicator that they pay the most attention to is
Speaker 6: a dollar. A really strong dollar just sucks the life
Speaker 6: out of the emerging markets. So as long as it's
Speaker 6: flat or down, then that then that's fine, and the
Speaker 6: other other fundamentals come into play.
Speaker 2: You're too young to remember this, but in my youth,
Speaker 2: emerging markets was a concrete company and maybe the telephone company.
Speaker 2: Total discussion in a given say South East Asia country,
Speaker 2: how do you diversify across them? You don't buy just
Speaker 2: two stocks, do you? No?
Speaker 5: Look, I think first of all, we look at emerging
Speaker 5: US state.
Speaker 8: Yeah.
Speaker 6: Look, you look at things by industry, not country. Primarily
Speaker 6: in the emerging markets a little more. Country factors can
Speaker 6: play into But and at the moment, of course, it's
Speaker 6: about AI and tech and then the and then the rest.
Speaker 6: But the rest, there's a defense theme. There's a recovery
Speaker 6: in the financial sector of Latin America. There's more going
Speaker 6: on across the emerging markets than just a boom in
Speaker 6: memory set in conductor stocks.
Speaker 7: Energy. I got oil on one hundred bucks around the world.
Speaker 2: Here.
Speaker 4: What are you guys doing with energy? I know it's
Speaker 4: a small part of the S and P five hundred,
Speaker 4: but the way we've had a monster move in energy, Yeah.
Speaker 5: Well it's a growing part of the S and P
Speaker 5: five hundred.
Speaker 6: Again, we've got profits, you know what, up sixty seventy
Speaker 6: percent this year. One of the things that we focus
Speaker 6: on in energy and gives us sort of more comfort.
Speaker 6: It's not so much excited about the commodity price itself,
Speaker 6: because to the extent we know anything, and it's very
Speaker 6: hard to know a lot about commodity prices. We wouldn't
Speaker 6: be that excited about that. But the companies themselves these
Speaker 6: days just do such a better job of generating cash,
Speaker 6: looking after the balance sheets, returning money to shareholders, and
Speaker 6: that discipline's still there even in the face of this
Speaker 6: big move we've seen in oil prices. You look at
Speaker 6: the statements from the first quarter they're staying conservative and
Speaker 6: that's good for long term shareholder returns.
Speaker 2: Can I ask about an individual start?
Speaker 9: Yeah, I'm to answer it, but we'll give it so afterthought,
Speaker 9: I'm trying to teach you about the equity market, and
Speaker 9: I'm like, after the come on, buy shares, Apple, buy Microsoft,
Speaker 9: buy this, you know by.
Speaker 2: Netflix or whatever she wants. Jolly Bee in the Philippines
Speaker 2: down fifty three percent from the peak. How do you
Speaker 2: avoid the jolly bees of the emerging market?
Speaker 6: There's always going to be a couple of jolly bees
Speaker 6: in any portfolio, right, That's part of that, That's part
Speaker 6: of the life.
Speaker 5: As an equity investor. I mean, I think where we
Speaker 5: would be look. One of the big things.
Speaker 6: We're looking out for, obviously, is when you see this
Speaker 6: level of enthusiasm we've got for semiconductors at the moment,
Speaker 6: are we setting ourselves up for a giant jolly be
Speaker 6: type experience? And the thing that we when you get
Speaker 6: a big momentum move like this, we think there's three
Speaker 6: things to watch for. Stretch valuations, rising volatility, and peaking
Speaker 6: earnings estimates. So far valuations sort of mixed, price to
Speaker 6: earnings low actually, but anything else high price, the sales
Speaker 6: price to boom. The companies are making so much money,
Speaker 6: they're earning the valuations. Most of the memory stocks are
Speaker 6: still on digit multiples. Volatility, Yes, going up, earningamentum so strong.
Speaker 2: I got to do a sales job here. Yeah. One
Speaker 2: hundred and fourteen percent of Americans go to Saint Andrews
Speaker 2: up in Scotland's right because that's where the Prince of
Speaker 2: Wales met the Princess of Coxine. Give us a sales
Speaker 2: job and you were. University of Durham. It's spectacular, isn't it.
Speaker 8: The history.
Speaker 6: Look, it's a great university in an absolutely beautiful town.
Speaker 6: If you haven't visited Durham, anyone visiting the UK, it
Speaker 6: is Durham. Yes, you can see the city in a day.
Speaker 6: There's a Norman cathedral, a Norman castle. It's just a
Speaker 6: beautiful place to visit.
Speaker 2: It leads worldwide in Arabic studies.
Speaker 7: I believe this one too.
Speaker 2: Yeah, this is great, Paul, Thank you so much. Foquency
Speaker 2: with a small bank, JP Morgan, asset Manager, Global Ahead
Speaker 2: of Equities. Wonderful for you to visit us, stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after.
Speaker 1: This you're listening to the Blue Blomberg Surveillance Podcast. Catch
Speaker 1: us live weekday afternoons from seven to ten am Eastern
Speaker 1: Listen on Apple Karplay and Android Otto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 2: She is definitive out of Michigan with her view of China.
Speaker 2: We look back to the giants of Jonathan Spence, orable Shell,
Speaker 2: and so wonderfully all of that has been taken by
Speaker 2: Elizabeth Economy holding court at the Hoover Institution, Hargrove, Senior Fellow,
Speaker 2: this of course at Stanford University. I'm really taken back,
Speaker 2: Elizabeth by the cursory review of President Xi and his
Speaker 2: moment in China. You wrote of a third revolution, Ji
Speaker 2: Jimping and the new Chinese state. How's he doing?
Speaker 10: Okay, So we're starting off with the big, big question.
Speaker 11: Look, I think Shedenping is doing very well given Shedenping's ambitions.
Speaker 11: I think if you look at what he started off
Speaker 11: to do, you know when he came into power back
Speaker 11: at the end of twenty twelve, and you fast forward
Speaker 11: to today, you know he has consolidated power in his
Speaker 11: own hands. He's increased the role of the party. He
Speaker 11: certainly has set out major Chinese ambitions on the global
Speaker 11: stage and has made progress on achieving them. He wanted
Speaker 11: China to be a leading technology and economic power on
Speaker 11: the global stage, and he's achieved that as well. So
Speaker 11: I think when he looks back again, according to his
Speaker 11: own metrics, he's done extremely well.
Speaker 2: I've studied the geography of Taiwan. How does a pro
Speaker 2: like you respond to his stridency over Taiwan being the
Speaker 2: major issue? How does that is it ninety miles? I
Speaker 2: don't know. It's like from here, it's like from here
Speaker 2: to downtown Elizabeth economy. How do you respond to the
Speaker 2: Chinese discussion of Taiwan.
Speaker 11: So I'm actually quite relieved by the fact that, yes,
Speaker 11: Tgenping has raised this as sort of the central issue
Speaker 11: for Beijing, which we already knew. But the response from
Speaker 11: the United States has been very muted, and so all
Speaker 11: we've seen thus far coming out of the summit is
Speaker 11: a statement by the Chinese side. There's been no acknowledgment
Speaker 11: by the US side that we take this on board
Speaker 11: and somehow are going to change our position or our
Speaker 11: approach to Taiwan. And I think that's something that many
Speaker 11: people in the national security space. Many in Congress, even
Speaker 11: probably members of the president's own cabinet, were concerned about
Speaker 11: So I think it's fine that she didn'tin raises this
Speaker 11: as the number one issue for China.
Speaker 10: What's critical is how we then address.
Speaker 7: It, Elizabeth.
Speaker 4: Typically when a US president goes to China in particular,
Speaker 4: the expectations are fairly high that there's going to be
Speaker 4: some material agreements, some material discussions. Do we have any
Speaker 4: of those expectations for this summit? We haven't heard much
Speaker 4: so far.
Speaker 10: I mean, I'm actually pretty pleased by what's come out.
Speaker 11: I think we went in with sort of three big
Speaker 11: buckets of issues. You know, First, we wanted some mechanisms
Speaker 11: for stabilizing the relationship, and I think here the two
Speaker 11: countries were aligned, and there's the talk about the Board
Speaker 11: of Trade and the Board of Investment. I think Board
Speaker 11: of Trade is further along than the Board of Investment.
Speaker 11: But basically this is going to be an area where
Speaker 11: the two sides will come together and try to make
Speaker 11: progress in nonsensitive areas of trade.
Speaker 10: So fine, check that box.
Speaker 11: Second, I think you know, the President wanted big short
Speaker 11: term purpose purchases, and I think you know we've seen,
Speaker 11: there's going to be soybeans, there's going to be planes,
Speaker 11: there's going.
Speaker 10: To be beef, maybe energy. He'll get these big purchases.
Speaker 11: And then finally, and I think this is the most
Speaker 11: important area, the bigger strategic areas so Iran, Ai and
Speaker 11: again on the Taiwan front. No acknowledgement on our side
Speaker 11: that we're prepared to change our position, but we did
Speaker 11: get the Chinese to acknowledge on Iran that they want
Speaker 11: the Straight or wormos open. They don't think Iran should
Speaker 11: profit once the Straight is open, and they don't think
Speaker 11: you're wrong should have a nuclear weapon. So we have
Speaker 11: to see whether or not we can make China actually
Speaker 11: translate that agreement into action to pressure pressure Iran. But
Speaker 11: I think it's a very positive, very positive turn of events.
Speaker 2: We welcome all of you across America, around the world.
Speaker 2: It is Bloomberg Surveillance on YouTube. Subscribe to Bloomberg Podcast
Speaker 2: Air a Marie Horden coming up from Beijing. But we're
Speaker 2: thrilled to bring you. Elizabeth Economy of Stanford University and
Speaker 2: their Hoover Institution. Her book years ago, The River Runs Black,
Speaker 2: was a definitive graduate school study that was hugely successful
Speaker 2: on the environmental impact of China. Liz, in your wonderful
Speaker 2: effort of a few years ago, the world according to China,
Speaker 2: you close with a China reset. How does China reset
Speaker 2: after President Trump?
Speaker 11: So, I think the thing to bear in mind with
Speaker 11: this and the sort of meeting between presidency and President
Speaker 11: Trump is that I think Secretary of State Rubio really
Speaker 11: defined the relationship pretty well when he said, look, we're
Speaker 11: going to look for areas of cooperation, but we each
Speaker 11: have our own areas of interest. They're going to conflict,
Speaker 11: They're going to continue to conflict, and we want to
Speaker 11: manage the relationship.
Speaker 10: And so I think the.
Speaker 11: Goal here is largely the same as it's been, you know,
Speaker 11: for two decades or more, which is sort of a
Speaker 11: managed competition, managed strategic competition. The only question is whether
Speaker 11: or not the conflict they're sort of greater occupies a
Speaker 11: greater amount of space than the areas of cooperation.
Speaker 10: You know, we're going to continue.
Speaker 11: To have a lot of frictions, and President she is
Speaker 11: going to continue to do just what presidentc wants to
Speaker 11: advance Chinese interests how he defines Chinese national interests, irrespective
Speaker 11: of whatever the United states says or does during this summit.
Speaker 4: Elizabeth, I think for many of our viewers, many of
Speaker 4: our listeners, President she is the only leader that they've
Speaker 4: are known in China. Give us just a sense of
Speaker 4: what his position is today. How do you think about
Speaker 4: that position three, five, ten years from now.
Speaker 11: So, I mean, what makes presidency different from a number
Speaker 11: of leaders who have come before him in China is
Speaker 11: just the degree of power that he's managed to consolidate
Speaker 11: into his own hands and the extent to which he's
Speaker 11: managed to translate the vision for China both at home
Speaker 11: and on the global stage that you know, he articulated
Speaker 11: fourteen years ago.
Speaker 10: I think critically, he's.
Speaker 11: Coming upon you know, what will be probably his fourth
Speaker 11: five year term as General Secretary of the Communist Party,
Speaker 11: likely president of the country, and so you know, this
Speaker 11: is he's you know.
Speaker 10: People will say he's president for life.
Speaker 11: I think he will step back probably and won't have
Speaker 11: a fifth five year term, but will remain as sort
Speaker 11: of chairman of the party so he can continue to
Speaker 11: exert control. But really the degree to which he's concer
Speaker 11: validated power I think was unexpected by people either outside
Speaker 11: China or frankly inside China.
Speaker 2: I look, Liza, where we are, and I go back
Speaker 2: to our misjudgment of our intelligence of the Soviet Union
Speaker 2: years ago. Do we have intelligence on China? Or are
Speaker 2: we as blind looking at Beijing, Shanghai and the rest.
Speaker 2: There's submarine threat, et cetera. Are we as blind as
Speaker 2: we were with Gorbashev?
Speaker 10: I mean, I think are we as blind?
Speaker 11: I think the challenge now is Chijinping has made China
Speaker 11: more opaque rather than less of paque as his tenure
Speaker 11: has progressed. So it takes more effort to sort of
Speaker 11: get inside China to understand what's happening. It's also more
Speaker 11: difficult because we don't have as many journalists on the ground.
Speaker 11: It's much harder for scholars and students to go to
Speaker 11: China to spend time to do research. So our intelligence
Speaker 11: in that respect is more challenging than it was, you know,
Speaker 11: a decade and a half ago. At the same time,
Speaker 11: I think we do see evidence if you look closely enough,
Speaker 11: we do see evidence of fractures within Chinese society. We
Speaker 11: see the evidence of it in the fact that the
Speaker 11: Chinese consumer is not buying. You know that there's a
Speaker 11: sort of the lie flat movement, the youth saying we
Speaker 11: don't want to work, the high rates of youth unemployment,
Speaker 11: concerns over what AI is going to do to labor
Speaker 11: in China, just as there are concerns in the United States.
Speaker 11: So you have to spend more time and more energy
Speaker 11: looking and maybe have a little more expertise to get
Speaker 11: at what's going on inside China outside of the incredible
Speaker 11: skyrocking exports and the technology accomplishments and everything that we're
Speaker 11: kind of sort of fed on a daily basis from
Speaker 11: the Chinese media and frankly from our own media. But
Speaker 11: it's there if you look look for it. You know,
Speaker 11: we can get at the impatience, but it's tough, Liz.
Speaker 2: Thank you so much, Elizabeth. Economy that we were institutions.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: Mark Howard with us and we start strong with Multi
Speaker 2: Asset Strategiest BMP at.
Speaker 5: Peterbut I love your note.
Speaker 2: You're getting ready for the bmb barer By Global Markets Conference,
Speaker 2: and the tone out there has shifted. In what way
Speaker 2: is it shifted?
Speaker 8: Tom, It's a dichotomy, it's a dispersion of views. But
Speaker 8: clearly market participants have discounted private credit concerns. That's not
Speaker 8: that's not front and center for them to the same
Speaker 8: degree as it was just a month or two ago.
Speaker 8: They're not overly concerned with the situation the Middle East.
Speaker 8: You see in the market today not a lot of
Speaker 8: focus per se on some more strident language coming out
Speaker 8: of a Visa VI Taiwan. Those are not affecting risk
Speaker 8: appetite today. What is affecting risk appetite is uber bullish
Speaker 8: outlook for AI and the ability to access compute well
Speaker 8: into the future, which I think there's some questions on,
Speaker 8: but people are not asking those questions. I think very
Speaker 8: bullish on earnings. We just came off a fantastic Q
Speaker 8: one and they're extrapolating that into the future, even though
Speaker 8: as you just talk about retail sales and real incomes.
Speaker 8: Real incomes are starting to come under pressure from the
Speaker 8: higher inflation we saw earlier this week, and real businesses
Speaker 8: are coming under some pressure from higher yields. That's why
Speaker 8: we've seen such a monster wave of new issuance companies
Speaker 8: getting ahead of higher yields.
Speaker 2: Are you able to ask questions this morning?
Speaker 4: Are think I'm good shape. I'm looking to discuss you
Speaker 4: guys have for your global markets conference? Great, great lineup here.
Speaker 4: How are you guys thinking about the US versus non US?
Speaker 4: Because we did have a rotation twenty twenty five, non
Speaker 4: US equity markets really outperformed the US, which did very well,
Speaker 4: but some of the non US markets did even better.
Speaker 4: How are you guys thinking about the geographic allocation these days?
Speaker 8: Well, I think I think there's a more there's a
Speaker 8: mixed view on rates outside the US, which affects the
Speaker 8: relative attractiveness of their equity markets. There's also a lesser
Speaker 8: connection to the overriding positive, which is the AI tech
Speaker 8: wave that just does not exist to the same degree
Speaker 8: in Europe, in Japan, in emerging equity markets. So I
Speaker 8: think it's there's a constructive tone. We don't see we
Speaker 8: don't see recession anywhere around the globe. But and there's
Speaker 8: usually better valuation parameters, as you know, lower multiples, but
Speaker 8: the outlook for growth, and frankly, the capital allocation. The
Speaker 8: capital flow continues to come to the US, and that's
Speaker 8: the you know, that's the that's the real catalyst. Everybody
Speaker 8: is getting set up for these big IPOs later this year.
Speaker 4: I think Tom might actually be thinking about getting out
Speaker 4: of the triple all leverage cash thing. He's looking at
Speaker 4: the thirty year bond five percent, how much creditis Do
Speaker 4: you think investors should be taking that there? Or can
Speaker 4: they just hide out in the US treasure market and
Speaker 4: make a nice gupon.
Speaker 8: I think, whether it's treasuries or higher quality corporates. I
Speaker 8: think last time I was on, I talked about mortgages YEP,
Speaker 8: another part of the spread market that can get you
Speaker 8: the required yield to be safe and to get incremental
Speaker 8: yield over triple leverage cash. Those are all decent opportunities,
Speaker 8: but don't expect big returns out of a five percent
Speaker 8: thirty or four and a half percent tenure. Don't expect
Speaker 8: you know, high yield is it seven percent? Investment grade
Speaker 8: is just around five percent. You know, you're not going
Speaker 8: to get big returns out of those, but you'll have safety.
Speaker 2: You and I are going back and forth that we
Speaker 2: lost a giant this week and Martin Leebowitz I was
Speaker 2: instrumental in bringing Inside the Yield book back, which was
Speaker 2: absolutely definitive, folks. I can't say enough about it. I'll
Speaker 2: do it out on LinkedIn and Twitter. In the set
Speaker 2: of diversification that we learned from Marty Leebuwitz, what is
Speaker 2: Mark Howard's diversification lesson right now?
Speaker 8: Given this equity madness, Well, Tom, I think it's it's
Speaker 8: a great message. And you know, I was thinking about
Speaker 8: what's a what's a word? And it's heading into sailing season,
Speaker 8: so trimming the sales, but also you know, spreading your
Speaker 8: risk and being thoughtful about it. So it's by geography,
Speaker 8: it's by product, by liquidity type, by structure. There are
Speaker 8: many different variants of that depending on how your portfolio
Speaker 8: is constructed. But clearly having a broad footprint and diversification
Speaker 8: also includes you know, a tilt towards quality in this environment.
Speaker 8: So that's another part of our recommendation.
Speaker 4: Mark this year, we had just had a huge IPO
Speaker 4: price today service. You know, another AI story. We're going
Speaker 4: to get some just some monster deals coming down the pipe.
Speaker 7: Is that a good thing? Is it a sign of
Speaker 7: frothiness in the market.
Speaker 4: Is it a sign of just a healthy market when
Speaker 4: you see some where to get just some monster deals
Speaker 4: from SpaceX, Anthropic, you know, open AI, some of the
Speaker 4: deals we've never seen in terms of size.
Speaker 7: Does that tell you anything about the broader market, do
Speaker 7: you think?
Speaker 8: I think it tells us about the private market and
Speaker 8: about the blending of the public and private markets and
Speaker 8: how they're becoming more synonymous with one another. I think
Speaker 8: that's the bigger statement, to be honest, Paul, the fact
Speaker 8: that they're coming to the public market and they're really big,
Speaker 8: you know, it's kind of a I don't think that's
Speaker 8: such a big deal. I do think though, that the
Speaker 8: multiples that they're proposing is a big deal, and that
Speaker 8: to me is what's worried.
Speaker 4: I haven't seen any numbers so that I can't wait
Speaker 4: to see some of these ifspectuses for these big deals
Speaker 4: because I don't know how they're going to value these companies.
Speaker 10: Yeah.
Speaker 8: Well, it goes back to the Facebook many years ago, right,
Speaker 8: and a huge at the time. It was a huge point,
Speaker 8: but on very low profitability mark.
Speaker 2: Thank you so much for coming in today. Good luck
Speaker 2: with your conferences on Paul, you were mentioning you thought
Speaker 2: it was a brave list A line up Awesome with
Speaker 2: bm P Perry by Mark Howard with his senior Multi
Speaker 2: Asset as Strategist.
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