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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 2: Joining us now is Derek Halpenny on foreign exchange. It

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Speaker 2: has been way too long since you otaman. He's just

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Speaker 2: done a great job at MUFG for decades.

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Speaker 3: Derek, Let's go right to the dollar. With the tests

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Speaker 3: that are.

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Speaker 2: Going on, is it dollar resilience that you observe.

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Speaker 4: Well when you consider the level of expectations that were

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Speaker 4: surrounding inauguration day and day one Taruff's being implemented. Yes,

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Speaker 4: I think the correction weaker when you consider the scale

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Speaker 4: of dollar strength in Q four of last year, I

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Speaker 4: think is still pretty moderate, and for obvious reasons. You know,

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Speaker 4: I think you'd be a brave man to be selling

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Speaker 4: the dollar here. When he listened to Trump last night

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Speaker 4: and the way he was talking about trade tariffs and

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Speaker 4: how he loves them and all the advantages tariffs are coming.

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Speaker 4: It's just it's just a matter of way.

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Speaker 2: You are experted flows what are the flows from the

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Speaker 2: continent to America and vice versa, or from the Pacific

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Speaker 2: RIM to America.

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Speaker 4: Well, well, speaking from an MUFG perspective, the Pacific RIM,

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Speaker 4: you know, to Japan and both you know or sorry

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Speaker 4: Japan to the United States from the Pacific RIM, and

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Speaker 4: also in Europe, you know, there's definitely been reduced appetite

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Speaker 4: for fixed income investments, and I think in that it

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Speaker 4: partly reflects the increased cost of hedging for Japanese investors

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Speaker 4: has curtailed their appetites because, as you know, Tom, there's

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Speaker 4: an appetite for fixed income, but also hedging that to

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Speaker 4: some degree, and the cost of hedging I think has

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Speaker 4: brought down overall the buying of fixed income in the

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Speaker 4: United States. And it's even more obvious in Europe, where

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Speaker 4: Japanese investors have been outright sellers, probably on political risk

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Speaker 4: in France in particular, where we've seen some heavy selling

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Speaker 4: of French bonds over the last couple of months.

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Speaker 5: It's interesting because Chris Fheron over at Strateiguez was pointing

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Speaker 5: out yesterday that how if you're looking at the performers

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Speaker 5: for technology stocks and how they peaked in July when

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Speaker 5: the yen first Strengthen, if you're looking at the US

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Speaker 5: dollar versus the Japanese yen still around that one fifty

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Speaker 5: five level, what are you watching there and how does

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Speaker 5: that kind of in relation to what we saw with

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Speaker 5: China their AI model. What that means kind of more

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Speaker 5: broadly when you're looking at this space.

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Speaker 4: Yeah, like we had an interesting move yesterday, like the

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Speaker 4: Japanese yen was the clear out performer, and I think

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Speaker 4: if you look at the cost of hedging going back

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Speaker 4: to that point, and by that I mean just looking

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Speaker 4: at three month money spreads, because a lot of Japanese

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Speaker 4: investors hedge on a three month rolling basis. You know,

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Speaker 4: the cost of hedging is coming down, and it's coming

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Speaker 4: down steadily, and as that happens, that obviously incentivize incentivizes

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Speaker 4: Japanese investors to hedge moore, which is essentially yen buying.

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Speaker 4: And if that flow dynamic continues to gradually change, then

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Speaker 4: I think you get back to the old traditional type

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Speaker 4: moves that we might get where you have a risk

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Speaker 4: off scenario, you have a drop in yields in the

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Speaker 4: United States, and you have the Japanese yen outperforming like

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Speaker 4: what we had yesterday, but you know, we still have

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Speaker 4: quite a substantial spread. So of course today we've seen

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Speaker 4: the en rewaken again, but I think the story is

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Speaker 4: slowly changed.

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Speaker 2: But Derek, cut to the chase. Here, do you have

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Speaker 2: a vector of disinflation and lower yields? We've got Ian

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Speaker 2: Lingoln coming up here. He's in that camp. Michael will

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Speaker 2: be with us and the Fed show tomorrow. I mean, Derek,

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Speaker 2: are you still looking for a disinflationary tendency?

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Speaker 4: Yeah, well, certainly in terms of a global perspective, I'm

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Speaker 4: quite optimistic on inflation, you know, and I think that

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Speaker 4: the battle is effectively close to one. But from a

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Speaker 4: Japanese perspective, it's certainly different. And that's why I think

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Speaker 4: that that story is going to continue, where the boj

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Speaker 4: continue to raise rates, and then while the FED maybe

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Speaker 4: in for a period of pause, the more favorable inflation backdrop,

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Speaker 4: certainly by the second half of this year, is going

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Speaker 4: to allow the Fed to continue or to restart cutting rates,

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Speaker 4: and then that kind of spread dynamic becomes, you know,

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Speaker 4: more favorable for Japanese and strength. But certainly in terms

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Speaker 4: of the broader inflation picture, I'm more optimistic.

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Speaker 3: Now.

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Speaker 4: Of course, we need to assess what Trump does in

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Speaker 4: terms of trade tariffs.

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Speaker 5: Well, that's what I was going to ask you. Because

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Speaker 5: the global battle is mostly one on inflation. What do

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Speaker 5: you think is the biggest risk?

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Speaker 4: Well, yeah, like come to trade tarfs obviously, because it

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Speaker 4: all depends on the aggressiveness of the trade tariffs that

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Speaker 4: are implemented. Now, if you if you look right now

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Speaker 4: at the moment at dollar CAD, look at dollar mechs,

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Speaker 4: the moves that we've had in those currencies do not

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Speaker 4: reflect expectations of an implementation of a twenty five percent

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Speaker 4: trade tarff. So markets are still skeptical of Trump's willingness

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Speaker 4: to act aggressively given the near term inflation risks. If

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Speaker 4: if we're wrong on that and he is much more

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Speaker 4: aggressive and twenty five percent on what nearly one third

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Speaker 4: of your imports would be very very substantial, then the

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Speaker 4: inflation dynamic is obviously different very quickly.

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Speaker 3: Or what's your key pair to make big figure moves?

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Speaker 2: Jess Metton's got to pay back all the Texas A

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Speaker 2: and m bettings she did where she went down in flames.

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Speaker 2: What's what's the Derek Hallpenny pair where I can make

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Speaker 2: some money over the next six months.

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Speaker 4: Well, we have a dollar peak story in about three

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Speaker 4: to four months, So if I do it over that period,

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Speaker 4: I think the dollar still has more strength to go,

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Speaker 4: but obviously not against the Japanese yam. Like I mentioned,

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Speaker 4: so like we think euro can still drop below posy

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Speaker 4: assuming we do get this period of you know, some

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Speaker 4: adoption of trade tariffs, the fed on holes probably until

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Speaker 4: the summer, the ECB continuing to cuss. I think euro

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Speaker 4: dollar is heading to Parsey and potentially below.

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Speaker 2: Derek, thank you so much. Derek Halpenny with us this

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Speaker 2: morning with m UFG.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 3: This is a joy.

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Speaker 2: I'm going to spare the long Introdutch in the densest

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Speaker 2: most read note and fixed income on Wall Street is

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Speaker 2: with our question. Ian Lingoln he wandered through parchment at

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Speaker 2: Yale University in Minnesota, a CFA and just absolutely iconic

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Speaker 2: in terms of looking at raids. He holds court with

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Speaker 2: BEMO Capital Markets. His compliance told me he is on

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Speaker 2: speaking terms with Brian Belski. Belski started drinking at ten

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Speaker 2: am yesterday. What did you do on the desk with

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Speaker 2: correlation here? Price down, yield up? Is Ian Lnoln buying

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Speaker 2: ten years yesterday?

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Speaker 6: I do think that what we saw yesterday was the

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Speaker 6: beginning of a repricing in of the safe haven quality

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Speaker 6: of treasuries. We were reminded that there's more going on

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Speaker 6: in the world than just tariffs, than just the Goldilocks economy.

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Speaker 6: In fact, when things go wrong inequitizer in different parts

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Speaker 6: of this system, we see a quick bid for treasuries,

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Speaker 6: and that's what we saw. That's stabilizing bid.

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Speaker 2: You stole a line from Carly Simon that great song

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Speaker 2: she had apprehension. The apprehension is out there yesterday.

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Speaker 3: I get that. But on a vecfter basis, with a FED.

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Speaker 2: Meeting tomorrow, can Ian Lingoln say the disinflationary trend is

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Speaker 2: still in place.

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Speaker 6: The disinflationary trend is in place, but we're trading off

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Speaker 6: of the potential for a forward reflationary one based on tariffs,

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Speaker 6: which frankly I think is somewhat overblown. At this point,

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Speaker 6: we are going to enter into a period where the

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Speaker 6: data is confusing for the FED because we'll have a

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Speaker 6: floor in the realized inflation data as a function of

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Speaker 6: the tariffs that presumably are going to be rolled out

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Speaker 6: over the course of the next several quarters, and that's

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Speaker 6: going to make it very difficult for the FED to

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Speaker 6: get back to normal.

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Speaker 2: Do you have a magnitude adjustment of the tariff in

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Speaker 2: that I guess we could. The line now is are

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Speaker 2: going to ramp in tariffs. But does ian Lncoln make

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Speaker 2: a distinction between three percent ish all in tariffs versus

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Speaker 2: the magnitude the president's talking about. Those are two different stories, right.

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Speaker 6: They're two entirely different stories. However, I think the most

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Speaker 6: important aspect is whether or not it's gradual or a

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Speaker 6: one off adjustment, because if it's a one off adjustment,

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Speaker 6: the Fed's going to look at that and say, that's.

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Speaker 3: A tax on the consumer.

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Speaker 5: Let's move forward.

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Speaker 6: If it's gradually brought in, which I can appreciate from

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Speaker 6: a political perspective, you want to take the sticker shock

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Speaker 6: out of higher prices. But that's an environment where the

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Speaker 6: Fed's going to struggle to really break down the difference

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Speaker 6: between true demand side inflation and tariff related inflation.

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Speaker 5: Looking at the tenure, obviously it came down pretty significantly yesterday,

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Speaker 5: but up about two basis points around four or five five.

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Speaker 5: But what a speculative net future positioning tell us about

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Speaker 5: how investors are potentially shorting the tenure.

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Speaker 6: I think that this is the part of the cycle

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Speaker 6: where it is a make or break moment for the

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Speaker 6: bear steepening narrative, and that is that core short from

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Speaker 6: the speculative community in tens and thirties that has been

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Speaker 6: persistent throughout a lot of the cycle. I think that

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Speaker 6: we're poised for a reversal. Everyone's been waiting for an

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Speaker 6: opportunity to buy treasuries. They've been waiting for the proverbial

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Speaker 6: dust to settle. Hasn't settled yet, but it's to some extent.

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Speaker 6: It's the opposite of what we've seen in the equity market,

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Speaker 6: which is everyone's waiting for a moment to sell. Now

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Speaker 6: people are waiting for a moment to add to treasuries.

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Speaker 2: Okay, they're going to add to treasuries, and we're going

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Speaker 2: to get the second derive. The convexity is going to

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Speaker 2: come in and yields are going to accelerate down it's

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Speaker 2: away from your remit. But if tens and thirties move

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Speaker 2: in an Ian Lincoln Way, do we get mortgage rate relief?

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Speaker 2: Does the housing market, which we all agree is a

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Speaker 2: train wreck, does it get some relief?

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Speaker 6: This year, I've been very surprised at how long the

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Speaker 6: mortgage basis has stayed as high as it has and

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Speaker 6: why is that?

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Speaker 5: Well?

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Speaker 6: I think to a large extent, because of the regional

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Speaker 6: banking crisis. We lost some of the core buyers in

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Speaker 6: the mortgage business, which are the regional banks. They are

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Speaker 6: starting to come back. They're starting to come back slowly,

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Speaker 6: and I think that will compress the mortgage basis, which

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Speaker 6: will at a minimum put a cap in for mortgage rates.

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Speaker 6: I don't think that we're going back to a pre

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Speaker 6: pre pandemic reality for the mortgage space. Hopefully at one

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Speaker 6: point we will, but not at this stage. I think

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Speaker 6: there's still plenty of work to be done.

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Speaker 5: So where do you think the neutral rate actually is?

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Speaker 5: Since we're going to have the FED meeting tomorrow and

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Speaker 5: the debate surrounding that, which is kind of like the

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Speaker 5: million dollar question.

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Speaker 6: My key observation in that regard is that it's a

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Speaker 6: moving target. It was certainly higher during the last several year,

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Speaker 6: year and a half than I think the market was

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Speaker 6: expecting it and the FED. I'll also note that the

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Speaker 6: FED has moved up their longer run dot over the

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Speaker 6: course of the last year, so they've indirected to directly

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Speaker 6: acknowledge that it's fifty basis points higher at least. So

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Speaker 6: that gets us to three percent. I would say it's

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Speaker 6: probably three and a quarter or three and a half.

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Speaker 2: The only one I know in Lingo who could say

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Speaker 2: the longer run dot and keep a straight face.

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Speaker 3: With BMO Capital Market.

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Speaker 2: It's an extended conversation, a trait for Global. Wall Street

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Speaker 2: really can't say enough about it.

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Speaker 3: Reddigreen on the screen that vis comes in.

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Speaker 2: Under eighty Jess met in cool Com collected today its

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Speaker 2: seventeen point eight zero yields MOVI, I I look at

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Speaker 2: the ten year real yield. I only do that to

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Speaker 2: impress the in Lincoln two point one five percent gone

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Speaker 2: two twenty to two ten, we're back halfway on the

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Speaker 2: real yield. I guess it's fear missing. I will leave

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Speaker 2: it at that. Just save me here for Ian Lincoln.

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Speaker 5: Well, because of the backdrop, and you were mentioning about

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Speaker 5: the new administration coming in in Washington under President Donald Trump.

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Speaker 5: How is the market in the economy different now when

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Speaker 5: he first was taken in in twenty seventeen versus what

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Speaker 5: we're seeing at this point, and what does the bond

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Speaker 5: market tell us about the direction of inflation.

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Speaker 7: In the economy.

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Speaker 6: Well, it is a decidedly different world than it was

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Speaker 6: in the beginning of two thousand and seventeen when he

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Speaker 6: first took the presidency or took over. But what we

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Speaker 6: did see is what we are seeing is a inflationary

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Speaker 6: trend that's higher on average, but moderating versus where it

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Speaker 6: was a couple of years ago. We have a decidedly

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Speaker 6: lower unemployment rate and the perception that we're in a

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Speaker 6: Goldilock's economy that's going to continue in perpetuity. Now, that's

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Speaker 6: a different departure point. One observation I will make, though,

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Speaker 6: is that a lot of the Trump related trade war

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Speaker 6: initiatives that he put in place during his first presidency

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Speaker 6: were not wholesale unlound, a lot of the tariffs persisted,

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Speaker 6: a lot of that protectionism was already in earth is

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Speaker 6: still in place, and so we're starting that process from

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Speaker 6: a higher plateau, which does have more potentially negative ramifications

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Speaker 6: for the global economy.

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Speaker 2: Look at ling in at all this, and the heart

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Speaker 2: of the matter is we had a great disinflation, very

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Speaker 2: low yields, negative rates.

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Speaker 3: We all know the drill.

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Speaker 2: Is now normal within the historic span that you are

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Speaker 2: expert at. Are we back to like these are normal

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Speaker 2: interest rates for Kimberly Clark or the Bank of Montreal

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Speaker 2: and everybody else, Lisa Matteil, Is this normal.

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Speaker 6: If we look historically. It's very tempting to say, look,

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Speaker 6: we're back towards the averages, we're back at normal. But

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Speaker 6: the reality is that as the real economy has evolved

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Speaker 6: over the course of the last two or three decades,

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Speaker 6: we have become accustomed to lower real yields and lower

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Speaker 6: nominal yields. So I'll argue that we're still at the

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Speaker 6: upper end, or the restrictive part of the cycle. And

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Speaker 6: the nuance is that during the pandemic, everyone including corporations,

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Speaker 6: we're able to lock in extremely low long term financing

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Speaker 6: rack of mortgages, and we're still working through that buffer

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Speaker 6: to absorb higher inflation or to drive consumption. When that

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Speaker 6: gives that's when we'll realize how tight policy is.

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Speaker 2: Okay, so a year from now, where's the ten year yield?

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Speaker 2: Let's just start with that.

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Speaker 6: Well, we're certainly going to be trading with a three

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Speaker 6: handle by the beginning of next year.

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Speaker 2: If somebody in the other day shocked me from Peyton,

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Speaker 2: Riegal lot in La jeff Cleveland, Jeffrey Cleveland saying a

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Speaker 2: three sixty, I about fell off my chair and Lncoln's

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Speaker 2: not three sixty right, you're at three eighty three ninety.

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Speaker 6: Yeah, I think we could easily at this time next year,

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Speaker 6: we could easily be in a range between let's call

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Speaker 6: it three sixty five and three ninety five.

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Speaker 3: I don't think how do we get there?

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Speaker 2: Brian Belski's I'm going i'd with Brian Belski, Brian, thanks

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Speaker 2: for watching YouTube.

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Speaker 3: He's going to ask, and how we get there? What's

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Speaker 3: the hew?

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Speaker 6: The FED is going to be successful in their ability

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Speaker 6: or in their endeavor to re establish christ stability. That

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Speaker 6: brings forward inflation expectations down. Even if real rates stay

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Speaker 6: roughly where we are. We could compress tenure break evens

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Speaker 6: from two sixty to one ninety five or two hundred

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Speaker 6: basis points, and that gets us right up against four percent.

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Speaker 2: Right now, okay, for the non global washteon, I'm going

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Speaker 2: to translate that is the inflation adjusted.

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Speaker 3: Yield even with stability.

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Speaker 2: The other parts of the yield structure are price up

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Speaker 2: yield down, right, I do. Okay, there, I only got

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Speaker 2: to payos alone.

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Speaker 5: Well, actually, look at the tenure. I mean it was

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Speaker 5: around three six back in September. Obviously a lot of

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Speaker 5: things have transpired since then, but that wasn't that long

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Speaker 5: ago to your point, So how do you think it

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Speaker 5: kind of builds on that?

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Speaker 6: Well, we were at in let's call it three four

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Speaker 6: thirty two four forty recently, and that that was with

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Speaker 6: break evens at two ten. All we need to do

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Speaker 6: is get forward expectations of inflation to price out the

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Speaker 6: Trump reflation trade and start to price in the potential

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Speaker 6: for economic damage to be done from a global trade bark.

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Speaker 2: Does that happen soon as because the rents, OER and

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Speaker 2: the rest of the housing complex, or is it the

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Speaker 2: price of eggs finally comes in.

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Speaker 6: I think at the end of the day, what we

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Speaker 6: see is the supercore measure of inflation, which is core

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Speaker 6: services excluding rent and OER, that printed at just point

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Speaker 6: two in December and there's so there's downward potential yet

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Speaker 6: to be realized there. I think we could very easily

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Speaker 6: see that because that's has the high correlation with realized

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Speaker 6: wages and the employment market. While ostensibly on strong footing,

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Speaker 6: does we're at at the point where we would expect

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Speaker 6: to see further job reduction and an increase in the

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Speaker 6: unemployment rate? You have to be realized. I'll be the

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Speaker 6: first acknowledge that if.

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Speaker 5: You could ask FED chair pal a question at his

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Speaker 5: press conference tomorrow, what would it be?

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Speaker 3: I would never ask that question.

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Speaker 6: Well, the biggest question on my mind, and the one

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Speaker 6: that I suspect that the chair would be unwilling to answer,

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Speaker 6: is we see the dispersion of the dot plot, which

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Speaker 6: dot is yours? What's the chair thinking?

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Speaker 3: But there's not. Come on, they're not going to answer

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Speaker 3: that question. Are we done with the dots?

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Speaker 2: I've been asking this since Richard Berner was at Morgan

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Speaker 2: Stalley and we're both going mental about the dots? Are

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Speaker 2: we done with the dot experiment? And do you get

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Speaker 2: any value out of it?

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Speaker 8: So?

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Speaker 6: I think that that's a very very interesting observation because

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Speaker 6: the FED has tried so hard to de emphasize the

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Speaker 6: value of the dots and their forward predictive qualities. But

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Speaker 6: at the end of the day, the algos and the

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Speaker 6: CTAs they need something to trade.

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Speaker 3: They need why do we care about them?

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Speaker 2: We care about the efficacy of America based on a

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Speaker 2: dual mandate.

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Speaker 3: We don't care about the roulette.

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Speaker 2: Wheel of the CTA machine, Monroe Trout because Jim Bullard,

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Speaker 2: who used to work at the St. Louis, why don't

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Speaker 2: we give a damn about CTAs when we're trying to

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Speaker 2: create public policy here with the Fed?

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Speaker 6: Well, I don't think that the Fed cares as much

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Speaker 6: about the dots as the market does. And the market

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Speaker 6: only cares about the dots because we need something to trade.

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Speaker 6: When they updated SEP hits and we're not going to

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Speaker 6: trade the growth numbers. We're not going to trade the

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Speaker 6: inflation numbers because they're always overly optimistic, and they assume

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Speaker 6: that the Fed's doing their job.

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Speaker 5: And we won't get the dots this time because they're quarterly,

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Speaker 5: so we won't get them again until March.

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Speaker 3: So there you go. How do we get rid of

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Speaker 3: the dots? A wise one?

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Speaker 6: So I will argue that there has been a very

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Speaker 6: concerted effort to increase transparency over the course of the

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Speaker 6: last twenty years by monetary policy makers the FED, but

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Speaker 6: globally that hasn't necessarily translated through to the best outcome.

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Speaker 6: There's a case to be made for less transparency, for

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Speaker 6: speaking a little bit less, given a little bit less

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Speaker 6: forward guidance, and dropping the dots. I think could be

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Speaker 6: a reasonable first step towards that objective. I don't think

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Speaker 6: they'll do it, but I could argue that they might.

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Speaker 5: Well, that's an interesting point because the communication with the

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Speaker 5: Federal Reserve has changed so much, even coming out of

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Speaker 5: the housing crisis with Bernaki, there used to not be

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Speaker 5: pet press conferences after these statements, especially when Greenspan was

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Speaker 5: FED chair, and now once Pale came into play. Would

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Speaker 5: you started having them after every meeting, not even every

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Speaker 5: other meeting? So how do you think what would be

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Speaker 5: the sort of way that they would communicate less because

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Speaker 5: it seems like the markets want to know every little detail.

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Speaker 6: I think that the first step towards a more unified

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Speaker 6: communityication process would be to be a bit more sparing

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Speaker 6: on how the regional banking presidents speak and how the

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Speaker 6: non core members of the f mc are able to

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Speaker 6: air their views as it were. I don't think again,

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Speaker 6: I don't think that's going to happen, but a convergence

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Speaker 6: of thinking right, it would be a big key on

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Speaker 6: the messaging side.

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Speaker 3: But again I'm busting your chops.

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Speaker 2: But we're getting a huge response on YouTube. Thank you

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Speaker 2: so much. I can't say enough folks about Ian Lncoln

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Speaker 2: is someone out.

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Speaker 3: On YouTube set.

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Speaker 2: He's the only one that makes the complexities of what

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Speaker 2: Frank Forbosey rought somehow in the King's English. Ian lingoln

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Speaker 2: Is with BEMO Capital Markets can't say enough about his

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Speaker 2: morning note.

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Speaker 3: Look for that.

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Speaker 2: Get that from the Bank of Montreal BMO Capital Markets.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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00:20:54,480 --> 00:20:57,479
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

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00:20:57,520 --> 00:21:00,560
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Speaker 1: live on Amazon Alexa from our flagship New York station.

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00:21:04,440 --> 00:21:07,159
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: We start strong with see much Cheap Global Strategist Principal

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Speaker 2: Asset Management. We're going to try to talk to her

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Speaker 2: without mentioning deep seek.

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Speaker 3: And all the rest of it. Seman.

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Speaker 2: When you see a shock like we saw yesterday for

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Speaker 2: measured conservative three year time span.

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Speaker 3: Do you buy the dip? Do you take a long lunch?

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Speaker 3: What do you do?

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Speaker 9: Hi?

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Speaker 8: Tom?

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Speaker 9: Yeah, Look, yesterday was a tough day, mainly.

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Speaker 8: Because there's so much uncertainty.

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Speaker 9: I mean, that's something that I think is we've had

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Speaker 9: time to digest the impact, which makes it a little

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Speaker 9: bit easier for investors.

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Speaker 8: But I think, you know, giving it the jury is

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Speaker 8: still out. It is a big question.

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Speaker 9: You know, We've had so much money go into money

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Speaker 9: market funds in the last we'll continue to go into

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Speaker 9: into money market funds over the last couple of months.

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Speaker 9: And when we speak to people, you know, the thing

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Speaker 9: that they keep saying, well have you keep saying is

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Speaker 9: that they're really concerned about equity valuations. Is this really

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Speaker 9: the time to go in, particularly when they look at

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Speaker 9: tech valuations and this so look, they're really really frothy.

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Speaker 9: So after today, is it a buying opportunity for mag

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Speaker 9: seven or do they you know, kind of keep a

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Speaker 9: step back. And I think that the uncertainty still keeps

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Speaker 9: them on the sidelines with regards to big tech, but

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Speaker 9: it probably does improve the outlook for a broadening.

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Speaker 8: Of that investment space.

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Speaker 9: So I think you're going to see people come back

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Speaker 9: in seeing that the productivity gains for the US economy

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Speaker 9: for a number of your sectors, and globally of course

442
00:22:33,280 --> 00:22:35,840
Speaker 9: that there are other opportunities. So I think it's almost

443
00:22:35,920 --> 00:22:39,280
Speaker 9: like a pivot into different areas of the market, which

444
00:22:39,280 --> 00:22:40,440
Speaker 9: actually should be healthier.

445
00:22:40,800 --> 00:22:43,600
Speaker 2: I look seen at all this and I look at

446
00:22:43,600 --> 00:22:47,960
Speaker 2: people and money market funds in the surveillance exuberant meter.

447
00:22:48,880 --> 00:22:50,160
Speaker 3: Isn't ringing a bell?

448
00:22:50,600 --> 00:22:53,920
Speaker 2: Are we exuberant now into this FED meeting or is

449
00:22:53,960 --> 00:22:57,040
Speaker 2: there a leadness to desire to own equities?

450
00:22:59,280 --> 00:23:02,560
Speaker 9: I would say that there's not that much exuberance, maybe

451
00:23:02,600 --> 00:23:05,080
Speaker 9: because there's so much uncertainty. I think everyone is in

452
00:23:05,160 --> 00:23:09,280
Speaker 9: agreement that the economy is looking pretty robust, the prospects

453
00:23:09,280 --> 00:23:12,480
Speaker 9: of recession are very very far out, which should mean

454
00:23:12,640 --> 00:23:16,000
Speaker 9: good ends growth for twenty twenty five. But I think

455
00:23:16,040 --> 00:23:18,119
Speaker 9: that when you have so much uncertainty you know, firstly

456
00:23:18,160 --> 00:23:21,240
Speaker 9: where the tariffs, what's going to have with the fiscal space,

457
00:23:21,840 --> 00:23:24,960
Speaker 9: and now of course with deep seek, it's a difficult

458
00:23:25,040 --> 00:23:28,800
Speaker 9: time I think for divestors to really put that exuberance

459
00:23:28,920 --> 00:23:32,400
Speaker 9: to use, even if the macro backdrop is very constructive.

460
00:23:32,160 --> 00:23:34,920
Speaker 5: Speaking of buying, the dip vand of research put out

461
00:23:34,920 --> 00:23:37,680
Speaker 5: some data on retail investors specifically, and they bought a

462
00:23:37,720 --> 00:23:40,199
Speaker 5: record amount of Nvidia stock during the sell off that

463
00:23:40,240 --> 00:23:42,399
Speaker 5: we did see on Monday. So, Sima, when you're speaking

464
00:23:42,440 --> 00:23:45,000
Speaker 5: with your clients, how are you advising them to position?

465
00:23:47,040 --> 00:23:49,000
Speaker 9: So what we're saying is Ella this is this is

466
00:23:49,040 --> 00:23:52,760
Speaker 9: a time when you really do emphasize not just global diversification,

467
00:23:52,800 --> 00:23:56,720
Speaker 9: but diversification across sectors. There has been so much FOMO

468
00:23:57,080 --> 00:23:59,320
Speaker 9: over the last couple of years. Investors who really didn't

469
00:23:59,320 --> 00:24:02,239
Speaker 9: get into the MAC seven have been waiting there and

470
00:24:02,280 --> 00:24:04,600
Speaker 9: so you know, if they've had anything, they've put that

471
00:24:04,640 --> 00:24:07,520
Speaker 9: money to work in big tech. Now, I think this

472
00:24:07,600 --> 00:24:11,040
Speaker 9: really does accelerate the point that global diversification is key.

473
00:24:11,840 --> 00:24:14,159
Speaker 9: Valuations maybe a lot of across the space, and some

474
00:24:14,800 --> 00:24:18,119
Speaker 9: places still look expensive, but that's not a reason to

475
00:24:18,359 --> 00:24:18,919
Speaker 9: avoid them.

476
00:24:18,920 --> 00:24:21,840
Speaker 8: So places like India, Japan we continue to like.

477
00:24:22,080 --> 00:24:23,600
Speaker 9: And then of course you know there have been some

478
00:24:23,600 --> 00:24:25,640
Speaker 9: tactical opportunities in Europe and of course.

479
00:24:25,520 --> 00:24:27,240
Speaker 8: China now, so I think that's key.

480
00:24:27,280 --> 00:24:30,080
Speaker 9: But also looking beyond the big tech, so sectors within

481
00:24:30,119 --> 00:24:33,639
Speaker 9: the financial space particularly, we think are looking strong and

482
00:24:33,640 --> 00:24:36,560
Speaker 9: potentially within industrials if you do start to see this

483
00:24:36,680 --> 00:24:39,040
Speaker 9: manufacturing kind of green shoots start.

484
00:24:38,800 --> 00:24:41,960
Speaker 8: To take off. So I think that's what we're invising investors.

485
00:24:41,960 --> 00:24:44,000
Speaker 9: This isn't the time to sit back in cash, but

486
00:24:44,080 --> 00:24:46,879
Speaker 9: you start to recognize that there are opportunities outside the

487
00:24:46,920 --> 00:24:49,800
Speaker 9: spaces that everyone's been very much limited to over the

488
00:24:49,880 --> 00:24:50,600
Speaker 9: last few years.

489
00:24:50,760 --> 00:24:53,240
Speaker 5: There's been so much criticism over the past two years

490
00:24:53,240 --> 00:24:56,160
Speaker 5: in this bull run about broadening rally. If you look

491
00:24:56,160 --> 00:24:58,199
Speaker 5: at the SPW, the eco weight index for the S

492
00:24:58,200 --> 00:25:02,520
Speaker 5: and P five hundred was marginally yesterday compared to one

493
00:25:02,560 --> 00:25:04,119
Speaker 5: and a half percent drop in the S and P

494
00:25:04,280 --> 00:25:07,000
Speaker 5: five hundred, and then of course another strong breathday with

495
00:25:07,119 --> 00:25:09,920
Speaker 5: fifty seven percent of the New York Stack exchange higher

496
00:25:10,000 --> 00:25:12,760
Speaker 5: training there. So when you're thinking about the broadening type rally,

497
00:25:13,040 --> 00:25:14,719
Speaker 5: where do you see as far as when it comes

498
00:25:14,800 --> 00:25:16,879
Speaker 5: to earnings growth and how they could translate to stock

499
00:25:16,920 --> 00:25:18,200
Speaker 5: performance over the next year.

500
00:25:19,560 --> 00:25:21,199
Speaker 9: Yeah, And I would say that the fact that that

501
00:25:21,240 --> 00:25:23,199
Speaker 9: broadening of the rally, which has been spoken about so

502
00:25:23,280 --> 00:25:25,560
Speaker 9: much as the last couple of us, hasn't really taken off,

503
00:25:25,840 --> 00:25:28,679
Speaker 9: has just added to this kind of idea that actually,

504
00:25:28,680 --> 00:25:30,360
Speaker 9: look the only thing to do is the big tech.

505
00:25:30,440 --> 00:25:33,119
Speaker 9: So I think that that it hasn't helped, but you know,

506
00:25:33,200 --> 00:25:34,879
Speaker 9: we do think this is this is going to be

507
00:25:35,080 --> 00:25:37,680
Speaker 9: a fairly good year. So in terms of spaces, one

508
00:25:37,680 --> 00:25:41,040
Speaker 9: of our favorites continue to be financials, you know, from

509
00:25:41,040 --> 00:25:43,800
Speaker 9: a macrospace, because you've got a strong economy but a positiveylcup.

510
00:25:43,800 --> 00:25:47,119
Speaker 9: Just so from a fundamental perspective, financials.

511
00:25:46,600 --> 00:25:48,840
Speaker 8: Do loo good. And then you add in the deregulation

512
00:25:49,400 --> 00:25:51,400
Speaker 8: that we're expecting to come through in twenty twenty five,

513
00:25:51,400 --> 00:25:55,240
Speaker 8: but it looks like quite a resounding case for financials

514
00:25:55,280 --> 00:25:55,720
Speaker 8: at this point.

515
00:25:55,840 --> 00:25:56,920
Speaker 3: See, I've got to be quick.

516
00:25:56,960 --> 00:26:00,240
Speaker 2: What kind of financials are the attraction that you see

517
00:26:00,240 --> 00:26:02,439
Speaker 2: you out there? I mean, is that I load the

518
00:26:02,440 --> 00:26:05,320
Speaker 2: boat on JP Morgan? Or is it big banks? Is

519
00:26:05,320 --> 00:26:06,600
Speaker 2: it regionals? Am I buying?

520
00:26:06,760 --> 00:26:08,000
Speaker 3: Paris? What am I doing?

521
00:26:09,240 --> 00:26:12,240
Speaker 9: So we think the US big banks are still good

522
00:26:12,280 --> 00:26:15,520
Speaker 9: byes and you know they're expensive, but of course we've

523
00:26:15,560 --> 00:26:18,240
Speaker 9: ever seen the FEUs. Expensive doesn't mean that there's going

524
00:26:18,320 --> 00:26:20,080
Speaker 9: to be a correction. We also actually like some of

525
00:26:20,080 --> 00:26:23,119
Speaker 9: the European banking space fundamentally not as strong, but actually

526
00:26:23,119 --> 00:26:25,760
Speaker 9: have been very much unliked and from evaluation perspective looking

527
00:26:25,760 --> 00:26:26,399
Speaker 9: pretty interesting.

528
00:26:26,800 --> 00:26:30,120
Speaker 2: Okay, Sema, thank you so much, greatly appreciate it. Today's

529
00:26:30,119 --> 00:26:32,959
Speaker 2: Sema Show with Principal Asset Management.

530
00:26:39,520 --> 00:26:43,440
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

531
00:26:43,480 --> 00:26:46,760
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

532
00:26:46,920 --> 00:26:49,719
Speaker 1: with the Bloomberg Business app. You can also watch us

533
00:26:49,760 --> 00:26:53,640
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.

534
00:26:53,760 --> 00:26:55,600
Speaker 2: The daily look at the front page is of Lisa

535
00:26:55,640 --> 00:26:57,600
Speaker 2: Matteo moment, Lisa, what do you have?

536
00:26:57,960 --> 00:26:59,920
Speaker 7: Okay, So there used to be the social media trend.

537
00:27:00,160 --> 00:27:02,600
Speaker 7: People would show off everything they bought, right, they would

538
00:27:02,640 --> 00:27:04,360
Speaker 7: call it a haul, and they'd show off all these

539
00:27:04,359 --> 00:27:06,280
Speaker 7: things they're doing. The kids were going crazy with it,

540
00:27:06,440 --> 00:27:09,200
Speaker 7: showing off things that like Target and Amazon. Well, now

541
00:27:09,240 --> 00:27:12,119
Speaker 7: there's a new trend. I'm excited for it because my

542
00:27:12,200 --> 00:27:14,720
Speaker 7: daughter will spend less of my money. It's called no

543
00:27:14,920 --> 00:27:19,399
Speaker 7: buy twenty twenty five. So they're not buying. That's the

544
00:27:19,440 --> 00:27:21,560
Speaker 7: whole different trend of it. So they're making list of

545
00:27:21,560 --> 00:27:24,520
Speaker 7: items that they won't buy. Some are promising to buy,

546
00:27:24,600 --> 00:27:26,640
Speaker 7: like these non essential things that they used to buy

547
00:27:26,680 --> 00:27:28,080
Speaker 7: all the time. But it's not just kids though. It's

548
00:27:28,119 --> 00:27:30,400
Speaker 7: adults too, like they're cutting back on the hair treatment's

549
00:27:30,440 --> 00:27:34,480
Speaker 7: manicures streaming platforms. So this is a new thing. People

550
00:27:34,720 --> 00:27:37,320
Speaker 7: wanting to not spend as much in twenty twenty five

551
00:27:37,560 --> 00:27:39,040
Speaker 7: as they did in twenty twenty four.

552
00:27:39,119 --> 00:27:40,200
Speaker 3: What's a hair treatment?

553
00:27:40,400 --> 00:27:47,480
Speaker 7: A hair coloring, blow dry? It costs very much. This

554
00:27:48,520 --> 00:27:50,240
Speaker 7: is a very expensive upkeep.

555
00:27:50,920 --> 00:27:53,960
Speaker 2: It's just the hair treatment thing is the biggest racket

556
00:27:54,000 --> 00:27:55,160
Speaker 2: going see.

557
00:27:55,359 --> 00:27:56,160
Speaker 3: I see it as light.

558
00:27:56,520 --> 00:27:59,480
Speaker 2: I look in the phone and there's multiple We're very

559
00:27:59,560 --> 00:28:02,520
Speaker 2: treatment were we're really gonna spend less?

560
00:28:02,800 --> 00:28:03,400
Speaker 3: What do you think?

561
00:28:04,640 --> 00:28:05,679
Speaker 5: I feel like you should try it?

562
00:28:05,760 --> 00:28:07,879
Speaker 3: Yeah, Taylor, what's that?

563
00:28:08,160 --> 00:28:11,639
Speaker 7: Bless to the Tiffany store. There you go. So someone

564
00:28:11,640 --> 00:28:15,280
Speaker 7: who did not get this no fine memo was Taylor

565
00:28:15,400 --> 00:28:18,200
Speaker 7: Swift because she's all over this, has been this insider.

566
00:28:18,240 --> 00:28:20,200
Speaker 7: She had the Foo you talked about it, Yes, Siad,

567
00:28:20,200 --> 00:28:23,000
Speaker 7: the Louis Vuton retails. The whole thing had to tell

568
00:28:23,000 --> 00:28:26,359
Speaker 7: about sixty eight thousand dollars. Wow, there is a complete breakdown.

569
00:28:26,480 --> 00:28:28,760
Speaker 7: But the thing that stands out it was kind of

570
00:28:28,840 --> 00:28:33,520
Speaker 7: controversial because she had the monogram jacket, which is different

571
00:28:33,560 --> 00:28:36,439
Speaker 7: because it used to be this quiet luxury trend and

572
00:28:36,520 --> 00:28:38,520
Speaker 7: now she just put it all out there, and it

573
00:28:38,560 --> 00:28:41,640
Speaker 7: was Louis Vauton everything and branding, branding, branding, branding. So

574
00:28:41,680 --> 00:28:44,640
Speaker 7: they're saying she's going to spark back this loud luxury

575
00:28:44,680 --> 00:28:45,640
Speaker 7: trend instead.

576
00:28:46,000 --> 00:28:49,400
Speaker 2: But I wonder about it in the sense that so

577
00:28:49,480 --> 00:28:53,880
Speaker 2: many people I know feel they can't wear luxury because

578
00:28:53,880 --> 00:28:54,400
Speaker 2: of crime.

579
00:28:54,880 --> 00:28:59,120
Speaker 3: This is serious. I didn't think about it, think about

580
00:28:59,120 --> 00:28:59,800
Speaker 3: that stuff.

581
00:28:59,520 --> 00:29:03,080
Speaker 2: And I just wonder, you know, I noticed the tailor outfit.

582
00:29:03,120 --> 00:29:05,760
Speaker 2: It was wait, let me rephrase that it was it.

583
00:29:05,720 --> 00:29:10,760
Speaker 3: Was noticed in the house, yes, but I really wonder.

584
00:29:10,680 --> 00:29:12,840
Speaker 7: The jacket was five thousand dollars alone.

585
00:29:13,240 --> 00:29:13,720
Speaker 3: Wow.

586
00:29:14,600 --> 00:29:19,640
Speaker 5: Wow, she's looking at that, she's she's like a.

587
00:29:20,240 --> 00:29:24,040
Speaker 7: Nice all right, since we're talking luxury. This was in

588
00:29:24,120 --> 00:29:27,320
Speaker 7: Fortune magazine. Kind of interesting because it talks about Disney

589
00:29:27,360 --> 00:29:31,680
Speaker 7: World and they're calling it actually a luxury experience because

590
00:29:31,720 --> 00:29:34,120
Speaker 7: it's become this you know, tiered price and scale, add

591
00:29:34,160 --> 00:29:38,080
Speaker 7: on fees, it's becoming unaffordable to just the average American family.

592
00:29:38,120 --> 00:29:40,200
Speaker 7: So it really breaks down the price. You got to read.

593
00:29:40,240 --> 00:29:42,840
Speaker 7: It's pretty interesting, but over the last ten years, Disney

594
00:29:42,840 --> 00:29:45,440
Speaker 7: World ticket price has grown at almost nine times the

595
00:29:45,520 --> 00:29:48,920
Speaker 7: rate of inflation. So a family of four, seven hundred

596
00:29:48,960 --> 00:29:52,560
Speaker 7: and sixty six dollars pre tax for four one day

597
00:29:52,720 --> 00:29:55,840
Speaker 7: peak season tickets. And they're talking about the perks. It

598
00:29:55,880 --> 00:29:58,320
Speaker 7: doesn't include the extra perks like you need the lightning

599
00:29:58,400 --> 00:30:01,120
Speaker 7: pass if you want to skip the line, the extended

600
00:30:01,200 --> 00:30:04,360
Speaker 7: evening hour past that. Really the halves can afford in.

601
00:30:04,360 --> 00:30:08,400
Speaker 7: The have nots just can't. So it's just keeps.

602
00:30:08,200 --> 00:30:11,200
Speaker 3: Track of this. Yeah, you know, I don't really it

603
00:30:11,280 --> 00:30:11,680
Speaker 3: is me.

604
00:30:11,960 --> 00:30:14,239
Speaker 7: It's it's a lot. I think, goodness, my kids are

605
00:30:14,280 --> 00:30:16,360
Speaker 7: old right now and I don't have to go through this,

606
00:30:16,800 --> 00:30:21,440
Speaker 7: but it's a lot. Parents are talking about it. It's ridiculous.

607
00:30:21,560 --> 00:30:23,880
Speaker 7: They're saying Universal Studios is going to cost like one

608
00:30:23,920 --> 00:30:26,240
Speaker 7: hundred less if you go to Busch Garden's gonna save

609
00:30:26,280 --> 00:30:29,239
Speaker 7: your family like three hundred dollars. It's just paying for

610
00:30:29,280 --> 00:30:31,320
Speaker 7: the name. Yeah, Mickey Milk.

611
00:30:31,280 --> 00:30:32,920
Speaker 2: Well, thank you so much, Lisa, to tell you on

612
00:30:32,960 --> 00:30:34,680
Speaker 2: the newspapers today.

613
00:30:35,200 --> 00:30:40,080
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

614
00:30:40,200 --> 00:30:43,960
Speaker 1: and anywhere else you get your podcasts. Listen live each

615
00:30:44,000 --> 00:30:47,840
Speaker 1: weekday seven to ten am Easter and on Bloomberg dot com,

616
00:30:48,000 --> 00:30:51,800
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

617
00:30:52,080 --> 00:30:55,200
Speaker 1: You can also Watch US live every weekday on YouTube

618
00:30:55,480 --> 00:30:57,520
Speaker 1: and always on the Bloomberg terminal