WEBVTT - Stocks Head for First 2026 Drop 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.400 --> 0:00:31.920 I've never ever ever said this before. How about making 0:00:31.920 --> 0:00:34.360 a book of the year, a book that's eighteen months 0:00:34.360 --> 0:00:39.520 old and now two years old. Rushia Sharma in twenty 0:00:39.560 --> 0:00:42.839 four took every award for What Went Wrong with Capitalism? 0:00:43.040 --> 0:00:45.000 This is the book you throwed a twenty one year 0:00:45.040 --> 0:00:48.040 old brat, Paul. I'm talking to you, and you say, 0:00:48.120 --> 0:00:51.280 shut up and read this Rushia Sharma and the President's 0:00:51.280 --> 0:00:54.920 here are going to Fdr Nixon, Reagan, Biden and on 0:00:55.120 --> 0:00:59.640 to President Trump, ever more important, two years down the road. 0:00:59.640 --> 0:01:02.840 I can't say enough about it. Rich here, thank you 0:01:02.880 --> 0:01:05.759 so much for joining us this morning. If you were 0:01:05.800 --> 0:01:09.440 to write a new epilogue for What Went Wrong with Capitalism? 0:01:09.480 --> 0:01:10.319 How would you write it? 0:01:11.680 --> 0:01:11.800 Well? 0:01:11.880 --> 0:01:14.000 Tom First, thank you so much for your kind words, 0:01:14.040 --> 0:01:18.000 because nothing warms the heart of an author more than 0:01:18.040 --> 0:01:21.440 to hear it from someone like you. But yeah, that's 0:01:21.480 --> 0:01:23.679 exactly been the aim of this book, which is to 0:01:23.760 --> 0:01:27.360 sort of show that how the capitalism we have today 0:01:27.920 --> 0:01:30.959 is a very distorted form of capitalism we have can. 0:01:30.840 --> 0:01:31.760 We even call it that? 0:01:32.920 --> 0:01:35.199 And the main reason I wrote the book is something 0:01:35.200 --> 0:01:37.520 that you tease just now in your introduction, which is 0:01:37.560 --> 0:01:40.560 that so many young people today, when they are polled 0:01:40.560 --> 0:01:45.039 in America, say that they're disillusioned with capitalism, and in fact, 0:01:45.440 --> 0:01:48.440 many of them, particularly progressives, say that they would rather 0:01:48.520 --> 0:01:52.200 have socialism. Now, that tells you about what is the 0:01:52.280 --> 0:01:54.600 disenchantment with the cutting system. 0:01:54.640 --> 0:01:55.320 That we have. 0:01:55.840 --> 0:01:57.920 And what I've tried to do in the book, and 0:01:57.960 --> 0:01:59.880 I don't think I would change anything from what I 0:02:00.120 --> 0:02:02.600 wrote about this eighteen months ago when it was published, 0:02:03.480 --> 0:02:06.600 is that you've seen more of that, which is that 0:02:07.000 --> 0:02:11.520 we're seeing much wider income inequality, wealth inequality, and we 0:02:11.560 --> 0:02:15.440 are seeing a lot of the incumbents get much more entrenched. 0:02:15.720 --> 0:02:16.800 And my point is that. 0:02:16.720 --> 0:02:20.120 Capitalism is not supposed to work this way. Capitalism is 0:02:20.160 --> 0:02:23.760 supposed to be pro churn. It's supposed to be pro competition, 0:02:24.480 --> 0:02:26.880 and we are supposed to weed out a lot of 0:02:26.919 --> 0:02:29.960 the old players rather than have this kind of system 0:02:30.200 --> 0:02:31.160 where it gets cleroossos. 0:02:31.200 --> 0:02:32.720 That's right, where I wanted to go wead out the 0:02:32.720 --> 0:02:36.359 old players post Trump. Whatever your politics, folks, I don't care. 0:02:36.720 --> 0:02:41.600 Russhier is great about that. Post Trump. What happens to 0:02:41.680 --> 0:02:44.840 populism is all of this solved at the ballot box. 0:02:46.520 --> 0:02:48.920 Well, I think that, you know, the main issue that 0:02:48.960 --> 0:02:52.840 Americans have today is one of affordability, and the affordability 0:02:53.320 --> 0:02:56.680 crisis that we're facing in America, A lot of that 0:02:56.760 --> 0:02:59.720 comes because of home prices, and that goes to the 0:02:59.800 --> 0:03:03.440 heart of what went wrong with capitalism. Why are home 0:03:03.520 --> 0:03:06.960 price is so unaffordable for so many Americans that so 0:03:07.040 --> 0:03:09.840 many twenty year olds today cannot afford to buy a 0:03:09.840 --> 0:03:12.720 home and are prefering to living in with their parents. Well, 0:03:12.720 --> 0:03:17.240 the main reason for that is that the amount of 0:03:17.600 --> 0:03:21.080 regulation we have had in the system that has made 0:03:22.639 --> 0:03:27.040 home supply in very short supply. In fact, so the 0:03:27.160 --> 0:03:30.040 number of new homes we're building in America today is 0:03:30.160 --> 0:03:33.720 roughly the same level as it was thirty forty years ago, 0:03:34.040 --> 0:03:37.920 when the population was a lot less. The kind of 0:03:38.000 --> 0:03:41.720 regulation we have today makes it very difficult to build 0:03:41.760 --> 0:03:47.040 new homes, so keeps going up, but supply just doesn't 0:03:47.080 --> 0:03:48.920 come on the market. So I think that this is 0:03:48.960 --> 0:03:50.880 what we need to do that how do we get 0:03:50.920 --> 0:03:54.840 capitalism back to functioning the way it was, closer to 0:03:54.880 --> 0:03:57.280 what the founders had in mind. I'm not saying we 0:03:57.360 --> 0:03:59.880 return to the Dicxanian form of capitalism that we had 0:04:00.280 --> 0:04:04.440 the nineteen twenties without a welfare state. But this capitalism 0:04:04.480 --> 0:04:08.320 where you have, at least for the rich, capitalism on 0:04:08.360 --> 0:04:10.880 the upside, and then socialism on the downside, where the 0:04:10.960 --> 0:04:12.240 losses are socialized. 0:04:12.520 --> 0:04:14.280 The government's there how to protect you. 0:04:14.760 --> 0:04:17.440 I think that that distorted form of capitalism is something 0:04:17.480 --> 0:04:20.640 which we'll keep producing these perverse outcomes that we're getting 0:04:20.640 --> 0:04:21.960 today across America. 0:04:22.160 --> 0:04:26.720 Rusher Shearmer with us of course, chairman at Rockefeller International, 0:04:27.400 --> 0:04:29.719 can't say enough about his work, including my book of 0:04:29.720 --> 0:04:32.200 the Year, What Went Wrong with Capitalism? 0:04:32.200 --> 0:04:34.600 Paul Sweeney with Russier Sharma. 0:04:34.839 --> 0:04:37.400 Sure, I think we all grew up, most of our listeners, 0:04:37.440 --> 0:04:43.480 have yourers with globalism? Is globalism dead these days? 0:04:43.480 --> 0:04:43.800 Really? 0:04:43.839 --> 0:04:45.640 Because if you look at what's happening in the world 0:04:45.720 --> 0:04:49.080 over the past year, the yes that America is withdrawing 0:04:49.120 --> 0:04:52.800 from the global trade system, but the rest of the 0:04:52.839 --> 0:04:55.520 world is learning to trade without America. So if you 0:04:55.560 --> 0:04:59.200 see what's happened to trade volumes over the last few quarters. 0:05:00.000 --> 0:05:03.600 America's share is declining in global trade volumes, but the 0:05:03.640 --> 0:05:06.240 rest of the world, the trade volumes are actually going up. 0:05:06.600 --> 0:05:09.039 And as I travel the world, what I find is 0:05:09.080 --> 0:05:12.360 that more and more countries are trading with each other, 0:05:12.560 --> 0:05:16.200 signing trade agreements with each other Europe and Latin America. 0:05:16.600 --> 0:05:17.640 Even countries that it. 0:05:17.600 --> 0:05:20.600 Turned quite protectionous like India, are signing more trade deals 0:05:21.560 --> 0:05:23.480 with the Middle East or with New Zealands. 0:05:23.520 --> 0:05:25.320 So at least on the trade front, what I. 0:05:25.320 --> 0:05:31.440 Find is that globalization outside of America continues. Now, of 0:05:31.440 --> 0:05:35.360 course globalism is more imperiled has to do with immigration, 0:05:35.839 --> 0:05:37.560 and this is one of the top trains of my 0:05:37.680 --> 0:05:40.640 year that we are seeing this backlash against immigration, not 0:05:40.680 --> 0:05:44.200 only in America but across the Western hemisphere. So therefore 0:05:44.200 --> 0:05:48.800 immigration rates have collapsed in much of Europe as well, 0:05:48.880 --> 0:05:51.799 not just in America. But as far as trade is concerned, 0:05:52.120 --> 0:05:54.640 the world is really learning to trade without America. 0:05:54.640 --> 0:05:57.159 Increasingly China. 0:05:57.240 --> 0:05:59.560 That's one of the big wild cards I think as 0:05:59.600 --> 0:06:02.960 we think about global trade here here, what's your view 0:06:03.000 --> 0:06:06.719 on China in the West over the next several years. 0:06:07.760 --> 0:06:11.679 I think the single biggest story of twenty twenty six 0:06:11.760 --> 0:06:16.920 which could emerge is the fact that China's dumping is 0:06:16.960 --> 0:06:20.680 causing so much pain to so many countries around the world. 0:06:21.080 --> 0:06:23.760 What exactly is going on here, which is that China's 0:06:23.839 --> 0:06:27.000 always known to be an export powerhouse, but over the 0:06:27.040 --> 0:06:29.719 last decade or so, this is beginning to shift in 0:06:29.760 --> 0:06:32.600 one very important way. In the past, yes, China would 0:06:32.640 --> 0:06:35.680 export a lot, and it would also increase prices over 0:06:35.760 --> 0:06:38.560 time last few years, what's begun to happen and this 0:06:38.600 --> 0:06:40.839 has become more acute in the last couple of years 0:06:41.160 --> 0:06:45.000 that China's export volumes have surged, but it is done 0:06:45.040 --> 0:06:49.520 so by cutting prices. So Chinese export prices are declining 0:06:49.560 --> 0:06:53.279 by twenty percent a year, whereas export volumes are surging 0:06:53.320 --> 0:06:57.000 by forty percent, and that is leading to a flood 0:06:57.160 --> 0:06:59.920 of Chinese goods around the world, which is hurting them 0:06:59.880 --> 0:07:04.479 manufacturing sector in places from Europe to Southeast Asia. And 0:07:04.560 --> 0:07:09.680 I suspect that that backlash will really become more intense 0:07:09.760 --> 0:07:12.360 in twenty twenty six because a lot of these countries 0:07:12.360 --> 0:07:17.000 were so focused on fighting Trump's trade battle in twenty 0:07:17.080 --> 0:07:20.960 twenty five, but that seems to have peaked now I 0:07:21.000 --> 0:07:23.760 think the attention is going to turn to what China does, 0:07:24.160 --> 0:07:27.240 and I think that the backlash against this China dumping 0:07:27.320 --> 0:07:28.720 is going to get pretty intense this year. 0:07:28.840 --> 0:07:33.320 Rushier Sharma with a Sirockefeller International celebrating his top ten 0:07:33.480 --> 0:07:36.640 trends for twenty twenty six, published of course by the 0:07:36.680 --> 0:07:40.680 Financial at Times. Sure you got a beautiful sentence here, 0:07:41.120 --> 0:07:43.280 and I just want to get to this for twenty six, 0:07:43.760 --> 0:07:48.280 for twenty seven, for twenty eight, until the money dries up? 0:07:49.240 --> 0:07:53.320 What's the Rushier Sharma timeline? Asking for a friend? Rush 0:07:53.320 --> 0:07:57.400 here is what is the Rushier Sharma X axis look 0:07:57.560 --> 0:08:00.920 like for quote until the dries up? 0:08:02.520 --> 0:08:05.520 Well, I think that the world is very sensitive to 0:08:05.600 --> 0:08:08.200 higher interest rates. I know that some of the previous 0:08:08.240 --> 0:08:11.600 guests are forecasting lower interest rates this year, but I 0:08:11.760 --> 0:08:14.080 think that the real surprise could be that by the 0:08:14.160 --> 0:08:16.960 end of this year we get higher interest rates, particularly 0:08:16.960 --> 0:08:20.000 long term interest rates. And when interest rates go up, 0:08:20.320 --> 0:08:22.240 that's when money really starts to dry up. 0:08:22.280 --> 0:08:24.320 So I think that what you're alluding to here, Tom 0:08:24.480 --> 0:08:26.080 is the fact that I wrote that. 0:08:26.000 --> 0:08:28.840 We have some sort of an AI bubble, but the 0:08:28.880 --> 0:08:32.480 bubble can keep inflating until interest rates go up and 0:08:32.559 --> 0:08:35.880 money dries up. I think that that happens possibly by 0:08:35.880 --> 0:08:38.120 the end of the year, when you end up getting 0:08:38.160 --> 0:08:43.240 higher interest rates as inflation remains sticky, and the fact 0:08:43.240 --> 0:08:46.280 that we still have, you know, like a lot of 0:08:46.320 --> 0:08:49.880 this liquidity propping up financial assets. But the moment interest 0:08:49.920 --> 0:08:52.520 rates go up particually long term interest rates, that's when 0:08:52.559 --> 0:08:53.360 money dries up. 0:08:53.600 --> 0:08:55.960 Don't go away. Because Paul Sweet's gonna save here? Did 0:08:56.040 --> 0:08:57.000 you save me from this? 0:08:57.120 --> 0:08:59.280 I can save good time because he's got ten big 0:08:59.360 --> 0:09:02.640 themes for twenty twenty six, and number ten jumps out 0:09:02.640 --> 0:09:04.600 of me peak alcohol. 0:09:05.200 --> 0:09:06.000 What's going on there? 0:09:06.040 --> 0:09:08.000 Was shre Yeah. 0:09:08.040 --> 0:09:09.760 You know, this is one of the things which surprised 0:09:09.800 --> 0:09:12.640 me too, which is the fact that when I looked 0:09:12.679 --> 0:09:18.320 at the latest Gallop survey of the posters asking Americans 0:09:18.640 --> 0:09:21.600 that how much are they drinking? You know that since 0:09:22.080 --> 0:09:24.360 they've been asking this question since I think nineteen thirty 0:09:24.400 --> 0:09:30.520 eight or something, the lowest share of Americans today are 0:09:30.600 --> 0:09:33.760 drinking alcohol than before, right, So, which is that what 0:09:33.760 --> 0:09:37.880 you're seeing is that people's alcohol consumption is dropping. In 0:09:37.920 --> 0:09:41.880 places like UK even Russia, alcohol consumption is close to 0:09:41.920 --> 0:09:43.160 a record low. 0:09:43.520 --> 0:09:45.160 So I think that that's what's really going. 0:09:44.960 --> 0:09:47.480 On, which is that there's a lot of awareness about 0:09:47.520 --> 0:09:52.080 the negative consequences of alcohol. Even the old line, which 0:09:52.120 --> 0:09:54.199 is that a drink a day is good for you. 0:09:54.600 --> 0:09:55.440 I think that that. 0:09:55.440 --> 0:09:58.880 Myth has also been busted, and so a lot of 0:09:58.960 --> 0:10:02.200 young people in particular are turning off alcohol, and so 0:10:02.240 --> 0:10:02.920 therefore we see the. 0:10:02.920 --> 0:10:05.240 Consequences of that. Then, even as global. 0:10:04.920 --> 0:10:08.319 Stocks continue to rally, one of the worst performing subsectors 0:10:08.400 --> 0:10:10.760 in the world over the last few years have been 0:10:10.800 --> 0:10:14.479 alcohol stocks, and these include wineries, distilleries. 0:10:14.720 --> 0:10:16.280 So you know, we've seen this across the. 0:10:16.240 --> 0:10:20.200 Board, right, So there's a negative, you know, sort of 0:10:20.480 --> 0:10:24.840 attitude towards alcohol leading to lower consumption of alcohol. Some 0:10:24.920 --> 0:10:28.480 of it is getting cannibalized by cannabis as people switch 0:10:28.559 --> 0:10:30.960 to that. But I think that that's a small part 0:10:30.960 --> 0:10:33.280 of the story. The biggest story is that due to 0:10:33.360 --> 0:10:36.679 health awareness, people are turning off alcohol, just like they 0:10:36.720 --> 0:10:37.840 did with cigarettes before that. 0:10:38.240 --> 0:10:39.800 We have Lisametery to help us with that. 0:10:40.040 --> 0:10:42.480 Richard Sharma, my book of the year, What Went Wrong 0:10:42.520 --> 0:10:46.320 with Capitalism, can't say enough about it, but stay with us. 0:10:46.559 --> 0:10:49.760 More from Bloomberg Surveillance coming up after this. 0:10:57.040 --> 0:11:01.040 You're listening to the Bloomberg Surveillance Podcast just live weekday 0:11:01.080 --> 0:11:04.679 afternoons from seven to ten am Eastern Listen on Applecarplay 0:11:04.720 --> 0:11:08.000 and Android Otto with the Bloomberg Business app, or watch 0:11:08.040 --> 0:11:09.240 us live on YouTube. 0:11:09.559 --> 0:11:13.080 John Bilton had a global multi asset strategy at JP 0:11:13.200 --> 0:11:14.520 Morgan Asset Management. 0:11:14.559 --> 0:11:17.120 We're thrilled you could be with us. Thank you this morning. 0:11:17.440 --> 0:11:24.200 You nail the risk of disinflation and outright deflation. There 0:11:24.400 --> 0:11:29.360 is a raging battle now in the zeitgeist over if 0:11:29.360 --> 0:11:34.600 this disinflation is just lowering inflation or does it lead to. 0:11:34.800 --> 0:11:39.920 Dampened output in Europe and around the world. Does Kasmin 0:11:40.000 --> 0:11:43.800 and Feroli do they see dampened output from the disinflation 0:11:43.960 --> 0:11:45.080 you talk about. 0:11:45.200 --> 0:11:47.480 Well, I think what it does is having seen the 0:11:47.559 --> 0:11:51.720 ECB firmly on Holt probably for most of the years, 0:11:51.720 --> 0:11:53.000 some manly, some of the dates we've seen in the 0:11:53.040 --> 0:11:57.120 past couple of days suggests that just maybe, Jess, maybe 0:11:57.120 --> 0:11:59.560 the ECB might have a Midsummer gift for folks. 0:11:59.640 --> 0:12:01.920 Adding Europe, they've done a lot. 0:12:01.720 --> 0:12:05.040 To bring to bring rates down to what they are 0:12:05.280 --> 0:12:09.000 effectively close to zero in real terms. That's important. Remember 0:12:09.160 --> 0:12:11.439 this is the biggest consumer block on the world. I 0:12:11.440 --> 0:12:15.520 apologies to American consumers. European consumer block is twice as big. 0:12:15.880 --> 0:12:20.520 They just don't spend, they save, So it's really important 0:12:20.559 --> 0:12:24.719 how it feeds through the ECB policy. The European households 0:12:24.880 --> 0:12:28.800 are saving fifteen point three percent of their income each year. 0:12:28.840 --> 0:12:31.439 That's the same thing docimal point, we're saving one point 0:12:31.480 --> 0:12:32.600 five exactly. 0:12:32.960 --> 0:12:35.200 So the point is, but we just need a little 0:12:35.200 --> 0:12:38.080 bit of impetus to set some spending in train. 0:12:38.160 --> 0:12:39.880 There Europe can look pretty good. 0:12:39.920 --> 0:12:44.040 So these these disinflationary forces give the ECB a lot 0:12:44.040 --> 0:12:46.679 of wiggle room. But remember there's a lot of capex 0:12:46.720 --> 0:12:49.160 coming as well through into Europe over the course of 0:12:49.440 --> 0:12:51.800 twenty six, twenty seven, twenty eight under the Made for 0:12:51.880 --> 0:12:54.440 Germany plan, but also on some of the defense spending 0:12:54.600 --> 0:12:57.480 et cetera that's yet to hit the system. So do 0:12:57.559 --> 0:13:00.400 we see a return to the bad old days of 0:13:00.440 --> 0:13:03.880 disinflation even flirting with deflation? Probably not, because this is 0:13:03.920 --> 0:13:06.840 a different picture. We've got fiscal as well as monetary 0:13:06.920 --> 0:13:07.320 right now. 0:13:08.360 --> 0:13:11.480 We had use markets equitym marks perform very well in 0:13:11.520 --> 0:13:13.839 twenty twenty five, but rest of the world did a 0:13:13.920 --> 0:13:16.360 lot better. So what are we doing in twenty six 0:13:16.400 --> 0:13:19.320 to expect than our performance to continue. 0:13:19.480 --> 0:13:20.679 So it's kind of an interesting one. 0:13:20.720 --> 0:13:23.400 There's been some real changes in terms of what's driven 0:13:23.400 --> 0:13:26.079 the equity markets within If we look at the actual 0:13:26.160 --> 0:13:29.520 indices themselves in local currency terms, they're kind of level 0:13:29.520 --> 0:13:32.520 pegging if we take develop markets versus us later on 0:13:32.600 --> 0:13:35.120 the currency. And of course this has been a great period. 0:13:35.120 --> 0:13:40.080 If you've been an American investor buying European, Eurozone, UK, Swiss, 0:13:40.200 --> 0:13:42.600 you've done pretty well because of the currency move as well. 0:13:42.880 --> 0:13:44.520 We think the currency's got a bit further to go, 0:13:44.559 --> 0:13:48.400 but the balance is changing. The differential over the long 0:13:48.480 --> 0:13:51.360 term in terms of what we see as dollar weakening 0:13:51.400 --> 0:13:54.480 against the euro, maybe about fifty sixty basis points a year. 0:13:55.080 --> 0:13:57.559 It could be two percent against the end. It could 0:13:57.600 --> 0:13:59.560 be two point two percent on average over the next 0:13:59.559 --> 0:14:02.720 ten years against the ranimby in the end. So it's 0:14:02.720 --> 0:14:05.200 really the Asian markets we're beginning to get that potential 0:14:05.200 --> 0:14:06.360 for that currency pickup. 0:14:06.640 --> 0:14:08.960 This is what, John, I'm so happy you're here for 0:14:09.000 --> 0:14:11.000 this red sticky. This is what when we do a 0:14:11.040 --> 0:14:14.520 fancy headline Bloomberg, we color it red. Sweety demands ad 0:14:14.800 --> 0:14:19.000 Alaska Air is buying one hundred and ten Boeing aircraft 0:14:19.480 --> 0:14:24.360 in global growth push. We my currency is gloom. People 0:14:24.360 --> 0:14:26.760 don't tune in, they don't listen, they don't watch on 0:14:26.800 --> 0:14:29.760 YouTube unless Lisa, am I right, Unless we're worried. 0:14:30.240 --> 0:14:33.400 What about our children? Yes, we're worried. We're worried. 0:14:33.600 --> 0:14:37.200 Here's Alaska Air betting on global growth. I mean, what 0:14:37.280 --> 0:14:41.600 does your bank see of the optimists just saying no, 0:14:41.640 --> 0:14:43.200 we're not going to worry about this, We're not going 0:14:43.280 --> 0:14:47.040 to worry about disinflation. Let's go what's the John built 0:14:47.080 --> 0:14:48.640 and let's go meet right now? 0:14:48.840 --> 0:14:51.680 Well, I think par it back to pay back to 0:14:51.680 --> 0:14:55.800 basic fundamentals. If we look from nineteen seventy three to 0:14:55.840 --> 0:14:59.360 present day, we can count the NBA recessions. We look 0:14:59.400 --> 0:15:01.960 at the economic data today, it is not pointing to 0:15:02.000 --> 0:15:04.920 a recession in the US, and we've got fiscal stimulus 0:15:04.920 --> 0:15:07.360 and monetary support in the rest of the world. Take 0:15:07.400 --> 0:15:10.600 a look at S and P total returns over those periods. 0:15:10.640 --> 0:15:11.360 In a non. 0:15:11.240 --> 0:15:14.560 Recession year, nine times out of ten, the S and 0:15:14.600 --> 0:15:17.840 P five hundred gives a positive total return. So the 0:15:17.920 --> 0:15:21.200 idea that one would better against the economic momentum today 0:15:21.280 --> 0:15:26.640 when you've got everything aligned, fiscal stimulus, regulatory easing, the 0:15:26.680 --> 0:15:29.720 glagg defect of monetary stimulus all coming together in twenty 0:15:29.760 --> 0:15:33.600 twenty six, I would be betting on equity markets continuing 0:15:33.600 --> 0:15:35.280 to climb a wall of worry and some of the 0:15:35.360 --> 0:15:38.840 investments spending from companies needing to play catch up in 0:15:38.960 --> 0:15:43.400 order to stay relevant in terms of a growing global economy. 0:15:45.080 --> 0:15:51.960 Allocations, stocks, barns, alternatives, thirty thousand foot view. Where's JP 0:15:52.080 --> 0:15:53.800 Morgan asset management these days? 0:15:53.840 --> 0:15:55.440 So we're a little bit overweight equity. 0:15:56.120 --> 0:15:59.000 We're conscious that valuations are kind of peaky, but at 0:15:59.000 --> 0:16:01.280 the same time we think fundamentals are good. We think 0:16:01.320 --> 0:16:04.440 broadening out is important. We're not talking about sort of 0:16:04.440 --> 0:16:06.800 going and playing around in small caps here. We're talking 0:16:06.840 --> 0:16:09.720 broadening out globally across some of those bigger, you know, 0:16:10.040 --> 0:16:14.800 recipients of that capital spending. So broadening out overweight equity. 0:16:14.880 --> 0:16:17.600 We like Hong Kong because of the Asia play. We 0:16:17.800 --> 0:16:20.000 like the UK because we've gone continuing to see some 0:16:20.080 --> 0:16:23.600 decent yield there. We like Japan in terms of bonds. 0:16:23.920 --> 0:16:26.680 You know, we're looking for further steepening in curves. They're 0:16:26.800 --> 0:16:29.240 better likely to cut rates. We think one more time 0:16:29.280 --> 0:16:31.680 this year, and then in terms of the other markets, 0:16:31.880 --> 0:16:34.400 we're getting a little bit tight on credit, so we 0:16:34.400 --> 0:16:36.520 think it's probably equity over credit as we move into 0:16:36.560 --> 0:16:37.320 the ladder stage. 0:16:37.480 --> 0:16:39.440 If you moved to New York or are you based 0:16:39.480 --> 0:16:39.920 in London? 0:16:39.960 --> 0:16:40.920 So I'm based in London. 0:16:41.960 --> 0:16:44.040 Can we take a note? Can you get mister Damon 0:16:44.120 --> 0:16:47.080 on the phone? We need God to come over there, 0:16:48.080 --> 0:16:48.600 over there. 0:16:49.080 --> 0:16:53.400 And there are slights both ways. 0:16:53.440 --> 0:16:56.200 Thank you so much for joining us. Thanks with the 0:16:56.280 --> 0:16:58.640 JP morgan a Bank. 0:16:59.400 --> 0:17:03.600 Stay with those More from Bloomberg Surveillance coming up after this. 0:17:10.840 --> 0:17:14.440 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:17:14.480 --> 0:17:17.639 weekday afternoons from seven to ten am Eastern Listen on 0:17:17.760 --> 0:17:21.399 Applecarplay and Android Otto with the Bloomberg Business app, or 0:17:21.560 --> 0:17:23.000 watch us live on YouTube. 0:17:23.320 --> 0:17:25.840 This is the most important conversation of the day because 0:17:25.960 --> 0:17:29.600 you're not paying attention to your four oh one k cam. 0:17:29.680 --> 0:17:34.320 Dawson is I haven't said this in ages OMG rotation. 0:17:34.880 --> 0:17:38.720 What is the character of the rotation going on in 0:17:38.760 --> 0:17:39.880 the markets right now? 0:17:40.040 --> 0:17:41.240 I think we have to appreciate it. 0:17:41.280 --> 0:17:43.359 At the start of the year, we typically do see 0:17:43.480 --> 0:17:46.320 some of this last shall be first kind of rotation 0:17:46.480 --> 0:17:49.679 where the names that had lagged start to lead, at 0:17:49.800 --> 0:17:52.480 least for a short period of time. What's interesting is 0:17:52.480 --> 0:17:56.320 that actually started back in November. The rotation really kicked 0:17:56.320 --> 0:17:59.320 off in November, because that's when we saw the blowoff 0:17:59.320 --> 0:18:02.359 top and some growth shares. They'se traded to an eighty 0:18:02.480 --> 0:18:06.080 five percent premium to value at the peak in October, 0:18:06.359 --> 0:18:08.760 so there was a lot of room for valuations to 0:18:08.800 --> 0:18:12.200 come in. And I think the character of this rotation 0:18:12.400 --> 0:18:15.199 has been one that's been very pro cyclical. If you 0:18:15.240 --> 0:18:18.320 look at what's leading, its things like banks, and you 0:18:18.400 --> 0:18:22.719 have industrials doing better, industrial commodities doing better. So it 0:18:22.760 --> 0:18:26.520 appears that this pro cyclical rotation is coming with a 0:18:26.600 --> 0:18:30.679 narrative of global reacceleration, which I think remains to be 0:18:30.720 --> 0:18:32.439 seen if the data actually supports that. 0:18:33.480 --> 0:18:35.639 Boy, I'm thinking about my inbox over the last i 0:18:35.680 --> 0:18:38.440 don't know, six weeks from the cell side, and their 0:18:38.440 --> 0:18:45.359 twenty six outlooks almost universally positive bullish ten percent, twelve percent, 0:18:45.400 --> 0:18:50.680 fifteen percent expectations for SMP stock performance in twenty twenty six. 0:18:51.160 --> 0:18:51.920 That makes me nervous? 0:18:51.960 --> 0:18:53.160 Does that make you nervous at all? 0:18:53.200 --> 0:18:56.120 There's not a single strategist who's expecting a down year 0:18:56.160 --> 0:18:57.480 in twenty twenty six. 0:18:58.280 --> 0:19:02.760 No, do you expect I gotta make some news this Well, Look, 0:19:03.119 --> 0:19:05.600 we think that we'll have volatility along the way, but 0:19:05.680 --> 0:19:08.040 that there's still room for the markets to press higher 0:19:08.080 --> 0:19:09.000 through the end of the year. 0:19:09.040 --> 0:19:12.520 But here the key point is that in the fourth 0:19:12.560 --> 0:19:15.720 year of the bull market. We've had twenty three bull 0:19:15.760 --> 0:19:18.680 markets that have been three years over the last fifty 0:19:18.760 --> 0:19:21.359 years fifty sixty years or so, and the conclusion is 0:19:21.359 --> 0:19:23.880 about fifty percent of the time they're able to get 0:19:23.880 --> 0:19:27.639 to that fourth year of positive returns. So we have 0:19:27.680 --> 0:19:29.919 a fifty to fifty chance of being able to deliver 0:19:30.000 --> 0:19:31.920 positive returns in twenty twenty six. 0:19:32.760 --> 0:19:36.880 Earnings, I guess that's the good news for bulls out 0:19:36.920 --> 0:19:39.560 there because of the expectations are in twenty twenty six, 0:19:39.800 --> 0:19:42.800 again double digit growth in earning twelve thirteen percent growth 0:19:42.800 --> 0:19:46.359 in earnings. Is that enough to support this valuation this market? 0:19:46.440 --> 0:19:49.160 That has been what has supported the valuation through twenty 0:19:49.200 --> 0:19:52.760 twenty five, the fact that you saw the vast majority 0:19:52.760 --> 0:19:56.119 of returns in twenty five driven by earnings growth, and 0:19:56.160 --> 0:19:58.720 that's expected to continue in twenty six. So if we 0:19:58.800 --> 0:20:01.600 break down the twenty twenty six earnings number, it's three 0:20:01.640 --> 0:20:04.960 hundred and ten dollars a share. That implies an acceleration 0:20:05.080 --> 0:20:08.080 in the top line. That's interesting because if you look 0:20:08.080 --> 0:20:12.800 at consensus forecasts for GDP, consensus is expecting a deceleration 0:20:13.040 --> 0:20:17.040 in nominal GDP growth. Remember, sales are nominal. The other 0:20:17.080 --> 0:20:19.720 important point is that you have over two hundred basis 0:20:19.720 --> 0:20:23.720 points of Martian expansion that's already been baked into current forecasts. 0:20:23.720 --> 0:20:27.080 So we think if we're if we're thinking about what 0:20:27.320 --> 0:20:30.480 drive drive markets over the course of the next couple 0:20:30.520 --> 0:20:33.000 of months, it's whether or not you take the over 0:20:33.200 --> 0:20:34.280 under on that earnings number. 0:20:34.359 --> 0:20:36.320 Karon Dawson with New ed We we welcome all of 0:20:36.359 --> 0:20:38.479 you across the nation, including her Florida. 0:20:38.480 --> 0:20:39.480 We're doing Florida. 0:20:39.280 --> 0:20:42.639 Music today for Cameron Dawson. Do you know who Leonards 0:20:42.640 --> 0:20:43.199 Skinner is? 0:20:43.280 --> 0:20:43.399 Oh? 0:20:43.440 --> 0:20:45.400 I was thinking you're gonna go with Tom Petty, but yeah. 0:20:46.920 --> 0:20:48.560 Yeah, I just thought you were too young to know 0:20:48.680 --> 0:20:49.440 Leonard Skinner. 0:20:49.920 --> 0:20:52.000 Yeah, yes, folks, we're gonna play free Bird. 0:20:52.040 --> 0:20:52.680 Get over it. 0:20:53.600 --> 0:20:54.640 I'm going to have a simple man. 0:20:54.880 --> 0:20:56.280 Yes, yeah, okay. 0:20:56.440 --> 0:21:00.960