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Speaker 2: Joining us now is Derek Halpenny on foreign exchange. It
Speaker 2: has been way too long since you otaman. He's just
Speaker 2: done a great job at MUFG for decades.
Speaker 3: Derek, Let's go right to the dollar. With the tests
Speaker 3: that are.
Speaker 2: Going on, is it dollar resilience that you observe.
Speaker 4: Well when you consider the level of expectations that were
Speaker 4: surrounding inauguration day and day one Taruff's being implemented. Yes,
Speaker 4: I think the correction weaker when you consider the scale
Speaker 4: of dollar strength in Q four of last year, I
Speaker 4: think is still pretty moderate, and for obvious reasons. You know,
Speaker 4: I think you'd be a brave man to be selling
Speaker 4: the dollar here. When he listened to Trump last night
Speaker 4: and the way he was talking about trade tariffs and
Speaker 4: how he loves them and all the advantages tariffs are coming.
Speaker 4: It's just it's just a matter of way.
Speaker 2: You are experted flows what are the flows from the
Speaker 2: continent to America and vice versa, or from the Pacific
Speaker 2: RIM to America.
Speaker 4: Well, well, speaking from an MUFG perspective, the Pacific RIM,
Speaker 4: you know, to Japan and both you know or sorry
Speaker 4: Japan to the United States from the Pacific RIM, and
Speaker 4: also in Europe, you know, there's definitely been reduced appetite
Speaker 4: for fixed income investments, and I think in that it
Speaker 4: partly reflects the increased cost of hedging for Japanese investors
Speaker 4: has curtailed their appetites because, as you know, Tom, there's
Speaker 4: an appetite for fixed income, but also hedging that to
Speaker 4: some degree, and the cost of hedging I think has
Speaker 4: brought down overall the buying of fixed income in the
Speaker 4: United States. And it's even more obvious in Europe, where
Speaker 4: Japanese investors have been outright sellers, probably on political risk
Speaker 4: in France in particular, where we've seen some heavy selling
Speaker 4: of French bonds over the last couple of months.
Speaker 5: It's interesting because Chris Fheron over at Strateiguez was pointing
Speaker 5: out yesterday that how if you're looking at the performers
Speaker 5: for technology stocks and how they peaked in July when
Speaker 5: the yen first Strengthen, if you're looking at the US
Speaker 5: dollar versus the Japanese yen still around that one fifty
Speaker 5: five level, what are you watching there and how does
Speaker 5: that kind of in relation to what we saw with
Speaker 5: China their AI model. What that means kind of more
Speaker 5: broadly when you're looking at this space.
Speaker 4: Yeah, like we had an interesting move yesterday, like the
Speaker 4: Japanese yen was the clear out performer, and I think
Speaker 4: if you look at the cost of hedging going back
Speaker 4: to that point, and by that I mean just looking
Speaker 4: at three month money spreads, because a lot of Japanese
Speaker 4: investors hedge on a three month rolling basis. You know,
Speaker 4: the cost of hedging is coming down, and it's coming
Speaker 4: down steadily, and as that happens, that obviously incentivize incentivizes
Speaker 4: Japanese investors to hedge moore, which is essentially yen buying.
Speaker 4: And if that flow dynamic continues to gradually change, then
Speaker 4: I think you get back to the old traditional type
Speaker 4: moves that we might get where you have a risk
Speaker 4: off scenario, you have a drop in yields in the
Speaker 4: United States, and you have the Japanese yen outperforming like
Speaker 4: what we had yesterday, but you know, we still have
Speaker 4: quite a substantial spread. So of course today we've seen
Speaker 4: the en rewaken again, but I think the story is
Speaker 4: slowly changed.
Speaker 2: But Derek, cut to the chase. Here, do you have
Speaker 2: a vector of disinflation and lower yields? We've got Ian
Speaker 2: Lingoln coming up here. He's in that camp. Michael will
Speaker 2: be with us and the Fed show tomorrow. I mean, Derek,
Speaker 2: are you still looking for a disinflationary tendency?
Speaker 4: Yeah, well, certainly in terms of a global perspective, I'm
Speaker 4: quite optimistic on inflation, you know, and I think that
Speaker 4: the battle is effectively close to one. But from a
Speaker 4: Japanese perspective, it's certainly different. And that's why I think
Speaker 4: that that story is going to continue, where the boj
Speaker 4: continue to raise rates, and then while the FED maybe
Speaker 4: in for a period of pause, the more favorable inflation backdrop,
Speaker 4: certainly by the second half of this year, is going
Speaker 4: to allow the Fed to continue or to restart cutting rates,
Speaker 4: and then that kind of spread dynamic becomes, you know,
Speaker 4: more favorable for Japanese and strength. But certainly in terms
Speaker 4: of the broader inflation picture, I'm more optimistic.
Speaker 3: Now.
Speaker 4: Of course, we need to assess what Trump does in
Speaker 4: terms of trade tariffs.
Speaker 5: Well, that's what I was going to ask you. Because
Speaker 5: the global battle is mostly one on inflation. What do
Speaker 5: you think is the biggest risk?
Speaker 4: Well, yeah, like come to trade tarfs obviously, because it
Speaker 4: all depends on the aggressiveness of the trade tariffs that
Speaker 4: are implemented. Now, if you if you look right now
Speaker 4: at the moment at dollar CAD, look at dollar mechs,
Speaker 4: the moves that we've had in those currencies do not
Speaker 4: reflect expectations of an implementation of a twenty five percent
Speaker 4: trade tarff. So markets are still skeptical of Trump's willingness
Speaker 4: to act aggressively given the near term inflation risks. If
Speaker 4: if we're wrong on that and he is much more
Speaker 4: aggressive and twenty five percent on what nearly one third
Speaker 4: of your imports would be very very substantial, then the
Speaker 4: inflation dynamic is obviously different very quickly.
Speaker 3: Or what's your key pair to make big figure moves?
Speaker 2: Jess Metton's got to pay back all the Texas A
Speaker 2: and m bettings she did where she went down in flames.
Speaker 2: What's what's the Derek Hallpenny pair where I can make
Speaker 2: some money over the next six months.
Speaker 4: Well, we have a dollar peak story in about three
Speaker 4: to four months, So if I do it over that period,
Speaker 4: I think the dollar still has more strength to go,
Speaker 4: but obviously not against the Japanese yam. Like I mentioned,
Speaker 4: so like we think euro can still drop below posy
Speaker 4: assuming we do get this period of you know, some
Speaker 4: adoption of trade tariffs, the fed on holes probably until
Speaker 4: the summer, the ECB continuing to cuss. I think euro
Speaker 4: dollar is heading to Parsey and potentially below.
Speaker 2: Derek, thank you so much. Derek Halpenny with us this
Speaker 2: morning with m UFG.
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Speaker 3: This is a joy.
Speaker 2: I'm going to spare the long Introdutch in the densest
Speaker 2: most read note and fixed income on Wall Street is
Speaker 2: with our question. Ian Lingoln he wandered through parchment at
Speaker 2: Yale University in Minnesota, a CFA and just absolutely iconic
Speaker 2: in terms of looking at raids. He holds court with
Speaker 2: BEMO Capital Markets. His compliance told me he is on
Speaker 2: speaking terms with Brian Belski. Belski started drinking at ten
Speaker 2: am yesterday. What did you do on the desk with
Speaker 2: correlation here? Price down, yield up? Is Ian Lnoln buying
Speaker 2: ten years yesterday?
Speaker 6: I do think that what we saw yesterday was the
Speaker 6: beginning of a repricing in of the safe haven quality
Speaker 6: of treasuries. We were reminded that there's more going on
Speaker 6: in the world than just tariffs, than just the Goldilocks economy.
Speaker 6: In fact, when things go wrong inequitizer in different parts
Speaker 6: of this system, we see a quick bid for treasuries,
Speaker 6: and that's what we saw. That's stabilizing bid.
Speaker 2: You stole a line from Carly Simon that great song
Speaker 2: she had apprehension. The apprehension is out there yesterday.
Speaker 3: I get that. But on a vecfter basis, with a FED.
Speaker 2: Meeting tomorrow, can Ian Lingoln say the disinflationary trend is
Speaker 2: still in place.
Speaker 6: The disinflationary trend is in place, but we're trading off
Speaker 6: of the potential for a forward reflationary one based on tariffs,
Speaker 6: which frankly I think is somewhat overblown. At this point,
Speaker 6: we are going to enter into a period where the
Speaker 6: data is confusing for the FED because we'll have a
Speaker 6: floor in the realized inflation data as a function of
Speaker 6: the tariffs that presumably are going to be rolled out
Speaker 6: over the course of the next several quarters, and that's
Speaker 6: going to make it very difficult for the FED to
Speaker 6: get back to normal.
Speaker 2: Do you have a magnitude adjustment of the tariff in
Speaker 2: that I guess we could. The line now is are
Speaker 2: going to ramp in tariffs. But does ian Lncoln make
Speaker 2: a distinction between three percent ish all in tariffs versus
Speaker 2: the magnitude the president's talking about. Those are two different stories, right.
Speaker 6: They're two entirely different stories. However, I think the most
Speaker 6: important aspect is whether or not it's gradual or a
Speaker 6: one off adjustment, because if it's a one off adjustment,
Speaker 6: the Fed's going to look at that and say, that's.
Speaker 3: A tax on the consumer.
Speaker 5: Let's move forward.
Speaker 6: If it's gradually brought in, which I can appreciate from
Speaker 6: a political perspective, you want to take the sticker shock
Speaker 6: out of higher prices. But that's an environment where the
Speaker 6: Fed's going to struggle to really break down the difference
Speaker 6: between true demand side inflation and tariff related inflation.
Speaker 5: Looking at the tenure, obviously it came down pretty significantly yesterday,
Speaker 5: but up about two basis points around four or five five.
Speaker 5: But what a speculative net future positioning tell us about
Speaker 5: how investors are potentially shorting the tenure.
Speaker 6: I think that this is the part of the cycle
Speaker 6: where it is a make or break moment for the
Speaker 6: bear steepening narrative, and that is that core short from
Speaker 6: the speculative community in tens and thirties that has been
Speaker 6: persistent throughout a lot of the cycle. I think that
Speaker 6: we're poised for a reversal. Everyone's been waiting for an
Speaker 6: opportunity to buy treasuries. They've been waiting for the proverbial
Speaker 6: dust to settle. Hasn't settled yet, but it's to some extent.
Speaker 6: It's the opposite of what we've seen in the equity market,
Speaker 6: which is everyone's waiting for a moment to sell. Now
Speaker 6: people are waiting for a moment to add to treasuries.
Speaker 2: Okay, they're going to add to treasuries, and we're going
Speaker 2: to get the second derive. The convexity is going to
Speaker 2: come in and yields are going to accelerate down it's
Speaker 2: away from your remit. But if tens and thirties move
Speaker 2: in an Ian Lincoln Way, do we get mortgage rate relief?
Speaker 2: Does the housing market, which we all agree is a
Speaker 2: train wreck, does it get some relief?
Speaker 6: This year, I've been very surprised at how long the
Speaker 6: mortgage basis has stayed as high as it has and
Speaker 6: why is that?
Speaker 5: Well?
Speaker 6: I think to a large extent, because of the regional
Speaker 6: banking crisis. We lost some of the core buyers in
Speaker 6: the mortgage business, which are the regional banks. They are
Speaker 6: starting to come back. They're starting to come back slowly,
Speaker 6: and I think that will compress the mortgage basis, which
Speaker 6: will at a minimum put a cap in for mortgage rates.
Speaker 6: I don't think that we're going back to a pre
Speaker 6: pre pandemic reality for the mortgage space. Hopefully at one
Speaker 6: point we will, but not at this stage. I think
Speaker 6: there's still plenty of work to be done.
Speaker 5: So where do you think the neutral rate actually is?
Speaker 5: Since we're going to have the FED meeting tomorrow and
Speaker 5: the debate surrounding that, which is kind of like the
Speaker 5: million dollar question.
Speaker 6: My key observation in that regard is that it's a
Speaker 6: moving target. It was certainly higher during the last several year,
Speaker 6: year and a half than I think the market was
Speaker 6: expecting it and the FED. I'll also note that the
Speaker 6: FED has moved up their longer run dot over the
Speaker 6: course of the last year, so they've indirected to directly
Speaker 6: acknowledge that it's fifty basis points higher at least. So
Speaker 6: that gets us to three percent. I would say it's
Speaker 6: probably three and a quarter or three and a half.
Speaker 2: The only one I know in Lingo who could say
Speaker 2: the longer run dot and keep a straight face.
Speaker 3: With BMO Capital Market.
Speaker 2: It's an extended conversation, a trait for Global. Wall Street
Speaker 2: really can't say enough about it.
Speaker 3: Reddigreen on the screen that vis comes in.
Speaker 2: Under eighty Jess met in cool Com collected today its
Speaker 2: seventeen point eight zero yields MOVI, I I look at
Speaker 2: the ten year real yield. I only do that to
Speaker 2: impress the in Lincoln two point one five percent gone
Speaker 2: two twenty to two ten, we're back halfway on the
Speaker 2: real yield. I guess it's fear missing. I will leave
Speaker 2: it at that. Just save me here for Ian Lincoln.
Speaker 5: Well, because of the backdrop, and you were mentioning about
Speaker 5: the new administration coming in in Washington under President Donald Trump.
Speaker 5: How is the market in the economy different now when
Speaker 5: he first was taken in in twenty seventeen versus what
Speaker 5: we're seeing at this point, and what does the bond
Speaker 5: market tell us about the direction of inflation.
Speaker 7: In the economy.
Speaker 6: Well, it is a decidedly different world than it was
Speaker 6: in the beginning of two thousand and seventeen when he
Speaker 6: first took the presidency or took over. But what we
Speaker 6: did see is what we are seeing is a inflationary
Speaker 6: trend that's higher on average, but moderating versus where it
Speaker 6: was a couple of years ago. We have a decidedly
Speaker 6: lower unemployment rate and the perception that we're in a
Speaker 6: Goldilock's economy that's going to continue in perpetuity. Now, that's
Speaker 6: a different departure point. One observation I will make, though,
Speaker 6: is that a lot of the Trump related trade war
Speaker 6: initiatives that he put in place during his first presidency
Speaker 6: were not wholesale unlound, a lot of the tariffs persisted,
Speaker 6: a lot of that protectionism was already in earth is
Speaker 6: still in place, and so we're starting that process from
Speaker 6: a higher plateau, which does have more potentially negative ramifications
Speaker 6: for the global economy.
Speaker 2: Look at ling in at all this, and the heart
Speaker 2: of the matter is we had a great disinflation, very
Speaker 2: low yields, negative rates.
Speaker 3: We all know the drill.
Speaker 2: Is now normal within the historic span that you are
Speaker 2: expert at. Are we back to like these are normal
Speaker 2: interest rates for Kimberly Clark or the Bank of Montreal
Speaker 2: and everybody else, Lisa Matteil, Is this normal.
Speaker 6: If we look historically. It's very tempting to say, look,
Speaker 6: we're back towards the averages, we're back at normal. But
Speaker 6: the reality is that as the real economy has evolved
Speaker 6: over the course of the last two or three decades,
Speaker 6: we have become accustomed to lower real yields and lower
Speaker 6: nominal yields. So I'll argue that we're still at the
Speaker 6: upper end, or the restrictive part of the cycle. And
Speaker 6: the nuance is that during the pandemic, everyone including corporations,
Speaker 6: we're able to lock in extremely low long term financing
Speaker 6: rack of mortgages, and we're still working through that buffer
Speaker 6: to absorb higher inflation or to drive consumption. When that
Speaker 6: gives that's when we'll realize how tight policy is.
Speaker 2: Okay, so a year from now, where's the ten year yield?
Speaker 2: Let's just start with that.
Speaker 6: Well, we're certainly going to be trading with a three
Speaker 6: handle by the beginning of next year.
Speaker 2: If somebody in the other day shocked me from Peyton,
Speaker 2: Riegal lot in La jeff Cleveland, Jeffrey Cleveland saying a
Speaker 2: three sixty, I about fell off my chair and Lncoln's
Speaker 2: not three sixty right, you're at three eighty three ninety.
Speaker 6: Yeah, I think we could easily at this time next year,
Speaker 6: we could easily be in a range between let's call
Speaker 6: it three sixty five and three ninety five.
Speaker 3: I don't think how do we get there?
Speaker 2: Brian Belski's I'm going i'd with Brian Belski, Brian, thanks
Speaker 2: for watching YouTube.
Speaker 3: He's going to ask, and how we get there? What's
Speaker 3: the hew?
Speaker 6: The FED is going to be successful in their ability
Speaker 6: or in their endeavor to re establish christ stability. That
Speaker 6: brings forward inflation expectations down. Even if real rates stay
Speaker 6: roughly where we are. We could compress tenure break evens
Speaker 6: from two sixty to one ninety five or two hundred
Speaker 6: basis points, and that gets us right up against four percent.
Speaker 2: Right now, okay, for the non global washteon, I'm going
Speaker 2: to translate that is the inflation adjusted.
Speaker 3: Yield even with stability.
Speaker 2: The other parts of the yield structure are price up
Speaker 2: yield down, right, I do. Okay, there, I only got
Speaker 2: to payos alone.
Speaker 5: Well, actually, look at the tenure. I mean it was
Speaker 5: around three six back in September. Obviously a lot of
Speaker 5: things have transpired since then, but that wasn't that long
Speaker 5: ago to your point, So how do you think it
Speaker 5: kind of builds on that?
Speaker 6: Well, we were at in let's call it three four
Speaker 6: thirty two four forty recently, and that that was with
Speaker 6: break evens at two ten. All we need to do
Speaker 6: is get forward expectations of inflation to price out the
Speaker 6: Trump reflation trade and start to price in the potential
Speaker 6: for economic damage to be done from a global trade bark.
Speaker 2: Does that happen soon as because the rents, OER and
Speaker 2: the rest of the housing complex, or is it the
Speaker 2: price of eggs finally comes in.
Speaker 6: I think at the end of the day, what we
Speaker 6: see is the supercore measure of inflation, which is core
Speaker 6: services excluding rent and OER, that printed at just point
Speaker 6: two in December and there's so there's downward potential yet
Speaker 6: to be realized there. I think we could very easily
Speaker 6: see that because that's has the high correlation with realized
Speaker 6: wages and the employment market. While ostensibly on strong footing,
Speaker 6: does we're at at the point where we would expect
Speaker 6: to see further job reduction and an increase in the
Speaker 6: unemployment rate? You have to be realized. I'll be the
Speaker 6: first acknowledge that if.
Speaker 5: You could ask FED chair pal a question at his
Speaker 5: press conference tomorrow, what would it be?
Speaker 3: I would never ask that question.
Speaker 6: Well, the biggest question on my mind, and the one
Speaker 6: that I suspect that the chair would be unwilling to answer,
Speaker 6: is we see the dispersion of the dot plot, which
Speaker 6: dot is yours? What's the chair thinking?
Speaker 3: But there's not. Come on, they're not going to answer
Speaker 3: that question. Are we done with the dots?
Speaker 2: I've been asking this since Richard Berner was at Morgan
Speaker 2: Stalley and we're both going mental about the dots? Are
Speaker 2: we done with the dot experiment? And do you get
Speaker 2: any value out of it?
Speaker 8: So?
Speaker 6: I think that that's a very very interesting observation because
Speaker 6: the FED has tried so hard to de emphasize the
Speaker 6: value of the dots and their forward predictive qualities. But
Speaker 6: at the end of the day, the algos and the
Speaker 6: CTAs they need something to trade.
Speaker 3: They need why do we care about them?
Speaker 2: We care about the efficacy of America based on a
Speaker 2: dual mandate.
Speaker 3: We don't care about the roulette.
Speaker 2: Wheel of the CTA machine, Monroe Trout because Jim Bullard,
Speaker 2: who used to work at the St. Louis, why don't
Speaker 2: we give a damn about CTAs when we're trying to
Speaker 2: create public policy here with the Fed?
Speaker 6: Well, I don't think that the Fed cares as much
Speaker 6: about the dots as the market does. And the market
Speaker 6: only cares about the dots because we need something to trade.
Speaker 6: When they updated SEP hits and we're not going to
Speaker 6: trade the growth numbers. We're not going to trade the
Speaker 6: inflation numbers because they're always overly optimistic, and they assume
Speaker 6: that the Fed's doing their job.
Speaker 5: And we won't get the dots this time because they're quarterly,
Speaker 5: so we won't get them again until March.
Speaker 3: So there you go. How do we get rid of
Speaker 3: the dots? A wise one?
Speaker 6: So I will argue that there has been a very
Speaker 6: concerted effort to increase transparency over the course of the
Speaker 6: last twenty years by monetary policy makers the FED, but
Speaker 6: globally that hasn't necessarily translated through to the best outcome.
Speaker 6: There's a case to be made for less transparency, for
Speaker 6: speaking a little bit less, given a little bit less
Speaker 6: forward guidance, and dropping the dots. I think could be
Speaker 6: a reasonable first step towards that objective. I don't think
Speaker 6: they'll do it, but I could argue that they might.
Speaker 5: Well, that's an interesting point because the communication with the
Speaker 5: Federal Reserve has changed so much, even coming out of
Speaker 5: the housing crisis with Bernaki, there used to not be
Speaker 5: pet press conferences after these statements, especially when Greenspan was
Speaker 5: FED chair, and now once Pale came into play. Would
Speaker 5: you started having them after every meeting, not even every
Speaker 5: other meeting? So how do you think what would be
Speaker 5: the sort of way that they would communicate less because
Speaker 5: it seems like the markets want to know every little detail.
Speaker 6: I think that the first step towards a more unified
Speaker 6: communityication process would be to be a bit more sparing
Speaker 6: on how the regional banking presidents speak and how the
Speaker 6: non core members of the f mc are able to
Speaker 6: air their views as it were. I don't think again,
Speaker 6: I don't think that's going to happen, but a convergence
Speaker 6: of thinking right, it would be a big key on
Speaker 6: the messaging side.
Speaker 3: But again I'm busting your chops.
Speaker 2: But we're getting a huge response on YouTube. Thank you
Speaker 2: so much. I can't say enough folks about Ian Lncoln
Speaker 2: is someone out.
Speaker 3: On YouTube set.
Speaker 2: He's the only one that makes the complexities of what
Speaker 2: Frank Forbosey rought somehow in the King's English. Ian lingoln
Speaker 2: Is with BEMO Capital Markets can't say enough about his
Speaker 2: morning note.
Speaker 3: Look for that.
Speaker 2: Get that from the Bank of Montreal BMO Capital Markets.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: We start strong with see much Cheap Global Strategist Principal
Speaker 2: Asset Management. We're going to try to talk to her
Speaker 2: without mentioning deep seek.
Speaker 3: And all the rest of it. Seman.
Speaker 2: When you see a shock like we saw yesterday for
Speaker 2: measured conservative three year time span.
Speaker 3: Do you buy the dip? Do you take a long lunch?
Speaker 3: What do you do?
Speaker 9: Hi?
Speaker 8: Tom?
Speaker 9: Yeah, Look, yesterday was a tough day, mainly.
Speaker 8: Because there's so much uncertainty.
Speaker 9: I mean, that's something that I think is we've had
Speaker 9: time to digest the impact, which makes it a little
Speaker 9: bit easier for investors.
Speaker 8: But I think, you know, giving it the jury is
Speaker 8: still out. It is a big question.
Speaker 9: You know, We've had so much money go into money
Speaker 9: market funds in the last we'll continue to go into
Speaker 9: into money market funds over the last couple of months.
Speaker 9: And when we speak to people, you know, the thing
Speaker 9: that they keep saying, well have you keep saying is
Speaker 9: that they're really concerned about equity valuations. Is this really
Speaker 9: the time to go in, particularly when they look at
Speaker 9: tech valuations and this so look, they're really really frothy.
Speaker 9: So after today, is it a buying opportunity for mag
Speaker 9: seven or do they you know, kind of keep a
Speaker 9: step back. And I think that the uncertainty still keeps
Speaker 9: them on the sidelines with regards to big tech, but
Speaker 9: it probably does improve the outlook for a broadening.
Speaker 8: Of that investment space.
Speaker 9: So I think you're going to see people come back
Speaker 9: in seeing that the productivity gains for the US economy
Speaker 9: for a number of your sectors, and globally of course
Speaker 9: that there are other opportunities. So I think it's almost
Speaker 9: like a pivot into different areas of the market, which
Speaker 9: actually should be healthier.
Speaker 2: I look seen at all this and I look at
Speaker 2: people and money market funds in the surveillance exuberant meter.
Speaker 3: Isn't ringing a bell?
Speaker 2: Are we exuberant now into this FED meeting or is
Speaker 2: there a leadness to desire to own equities?
Speaker 9: I would say that there's not that much exuberance, maybe
Speaker 9: because there's so much uncertainty. I think everyone is in
Speaker 9: agreement that the economy is looking pretty robust, the prospects
Speaker 9: of recession are very very far out, which should mean
Speaker 9: good ends growth for twenty twenty five. But I think
Speaker 9: that when you have so much uncertainty you know, firstly
Speaker 9: where the tariffs, what's going to have with the fiscal space,
Speaker 9: and now of course with deep seek, it's a difficult
Speaker 9: time I think for divestors to really put that exuberance
Speaker 9: to use, even if the macro backdrop is very constructive.
Speaker 5: Speaking of buying, the dip vand of research put out
Speaker 5: some data on retail investors specifically, and they bought a
Speaker 5: record amount of Nvidia stock during the sell off that
Speaker 5: we did see on Monday. So, Sima, when you're speaking
Speaker 5: with your clients, how are you advising them to position?
Speaker 9: So what we're saying is Ella this is this is
Speaker 9: a time when you really do emphasize not just global diversification,
Speaker 9: but diversification across sectors. There has been so much FOMO
Speaker 9: over the last couple of years. Investors who really didn't
Speaker 9: get into the MAC seven have been waiting there and
Speaker 9: so you know, if they've had anything, they've put that
Speaker 9: money to work in big tech. Now, I think this
Speaker 9: really does accelerate the point that global diversification is key.
Speaker 9: Valuations maybe a lot of across the space, and some
Speaker 9: places still look expensive, but that's not a reason to
Speaker 9: avoid them.
Speaker 8: So places like India, Japan we continue to like.
Speaker 9: And then of course you know there have been some
Speaker 9: tactical opportunities in Europe and of course.
Speaker 8: China now, so I think that's key.
Speaker 9: But also looking beyond the big tech, so sectors within
Speaker 9: the financial space particularly, we think are looking strong and
Speaker 9: potentially within industrials if you do start to see this
Speaker 9: manufacturing kind of green shoots start.
Speaker 8: To take off. So I think that's what we're invising investors.
Speaker 9: This isn't the time to sit back in cash, but
Speaker 9: you start to recognize that there are opportunities outside the
Speaker 9: spaces that everyone's been very much limited to over the
Speaker 9: last few years.
Speaker 5: There's been so much criticism over the past two years
Speaker 5: in this bull run about broadening rally. If you look
Speaker 5: at the SPW, the eco weight index for the S
Speaker 5: and P five hundred was marginally yesterday compared to one
Speaker 5: and a half percent drop in the S and P
Speaker 5: five hundred, and then of course another strong breathday with
Speaker 5: fifty seven percent of the New York Stack exchange higher
Speaker 5: training there. So when you're thinking about the broadening type rally,
Speaker 5: where do you see as far as when it comes
Speaker 5: to earnings growth and how they could translate to stock
Speaker 5: performance over the next year.
Speaker 9: Yeah, And I would say that the fact that that
Speaker 9: broadening of the rally, which has been spoken about so
Speaker 9: much as the last couple of us, hasn't really taken off,
Speaker 9: has just added to this kind of idea that actually,
Speaker 9: look the only thing to do is the big tech.
Speaker 9: So I think that that it hasn't helped, but you know,
Speaker 9: we do think this is this is going to be
Speaker 9: a fairly good year. So in terms of spaces, one
Speaker 9: of our favorites continue to be financials, you know, from
Speaker 9: a macrospace, because you've got a strong economy but a positiveylcup.
Speaker 9: Just so from a fundamental perspective, financials.
Speaker 8: Do loo good. And then you add in the deregulation
Speaker 8: that we're expecting to come through in twenty twenty five,
Speaker 8: but it looks like quite a resounding case for financials
Speaker 8: at this point.
Speaker 3: See, I've got to be quick.
Speaker 2: What kind of financials are the attraction that you see
Speaker 2: you out there? I mean, is that I load the
Speaker 2: boat on JP Morgan? Or is it big banks? Is
Speaker 2: it regionals? Am I buying?
Speaker 3: Paris? What am I doing?
Speaker 9: So we think the US big banks are still good
Speaker 9: byes and you know they're expensive, but of course we've
Speaker 9: ever seen the FEUs. Expensive doesn't mean that there's going
Speaker 9: to be a correction. We also actually like some of
Speaker 9: the European banking space fundamentally not as strong, but actually
Speaker 9: have been very much unliked and from evaluation perspective looking
Speaker 9: pretty interesting.
Speaker 2: Okay, Sema, thank you so much, greatly appreciate it. Today's
Speaker 2: Sema Show with Principal Asset Management.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
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Speaker 2: The daily look at the front page is of Lisa
Speaker 2: Matteo moment, Lisa, what do you have?
Speaker 7: Okay, So there used to be the social media trend.
Speaker 7: People would show off everything they bought, right, they would
Speaker 7: call it a haul, and they'd show off all these
Speaker 7: things they're doing. The kids were going crazy with it,
Speaker 7: showing off things that like Target and Amazon. Well, now
Speaker 7: there's a new trend. I'm excited for it because my
Speaker 7: daughter will spend less of my money. It's called no
Speaker 7: buy twenty twenty five. So they're not buying. That's the
Speaker 7: whole different trend of it. So they're making list of
Speaker 7: items that they won't buy. Some are promising to buy,
Speaker 7: like these non essential things that they used to buy
Speaker 7: all the time. But it's not just kids though. It's
Speaker 7: adults too, like they're cutting back on the hair treatment's
Speaker 7: manicures streaming platforms. So this is a new thing. People
Speaker 7: wanting to not spend as much in twenty twenty five
Speaker 7: as they did in twenty twenty four.
Speaker 3: What's a hair treatment?
Speaker 7: A hair coloring, blow dry? It costs very much. This
Speaker 7: is a very expensive upkeep.
Speaker 2: It's just the hair treatment thing is the biggest racket
Speaker 2: going see.
Speaker 3: I see it as light.
Speaker 2: I look in the phone and there's multiple We're very
Speaker 2: treatment were we're really gonna spend less?
Speaker 3: What do you think?
Speaker 5: I feel like you should try it?
Speaker 3: Yeah, Taylor, what's that?
Speaker 7: Bless to the Tiffany store. There you go. So someone
Speaker 7: who did not get this no fine memo was Taylor
Speaker 7: Swift because she's all over this, has been this insider.
Speaker 7: She had the Foo you talked about it, Yes, Siad,
Speaker 7: the Louis Vuton retails. The whole thing had to tell
Speaker 7: about sixty eight thousand dollars. Wow, there is a complete breakdown.
Speaker 7: But the thing that stands out it was kind of
Speaker 7: controversial because she had the monogram jacket, which is different
Speaker 7: because it used to be this quiet luxury trend and
Speaker 7: now she just put it all out there, and it
Speaker 7: was Louis Vauton everything and branding, branding, branding, branding. So
Speaker 7: they're saying she's going to spark back this loud luxury
Speaker 7: trend instead.
Speaker 2: But I wonder about it in the sense that so
Speaker 2: many people I know feel they can't wear luxury because
Speaker 2: of crime.
Speaker 3: This is serious. I didn't think about it, think about
Speaker 3: that stuff.
Speaker 2: And I just wonder, you know, I noticed the tailor outfit.
Speaker 2: It was wait, let me rephrase that it was it.
Speaker 3: Was noticed in the house, yes, but I really wonder.
Speaker 7: The jacket was five thousand dollars alone.
Speaker 3: Wow.
Speaker 5: Wow, she's looking at that, she's she's like a.
Speaker 7: Nice all right, since we're talking luxury. This was in
Speaker 7: Fortune magazine. Kind of interesting because it talks about Disney
Speaker 7: World and they're calling it actually a luxury experience because
Speaker 7: it's become this you know, tiered price and scale, add
Speaker 7: on fees, it's becoming unaffordable to just the average American family.
Speaker 7: So it really breaks down the price. You got to read.
Speaker 7: It's pretty interesting, but over the last ten years, Disney
Speaker 7: World ticket price has grown at almost nine times the
Speaker 7: rate of inflation. So a family of four, seven hundred
Speaker 7: and sixty six dollars pre tax for four one day
Speaker 7: peak season tickets. And they're talking about the perks. It
Speaker 7: doesn't include the extra perks like you need the lightning
Speaker 7: pass if you want to skip the line, the extended
Speaker 7: evening hour past that. Really the halves can afford in.
Speaker 7: The have nots just can't. So it's just keeps.
Speaker 3: Track of this. Yeah, you know, I don't really it
Speaker 3: is me.
Speaker 7: It's it's a lot. I think, goodness, my kids are
Speaker 7: old right now and I don't have to go through this,
Speaker 7: but it's a lot. Parents are talking about it. It's ridiculous.
Speaker 7: They're saying Universal Studios is going to cost like one
Speaker 7: hundred less if you go to Busch Garden's gonna save
Speaker 7: your family like three hundred dollars. It's just paying for
Speaker 7: the name. Yeah, Mickey Milk.
Speaker 2: Well, thank you so much, Lisa, to tell you on
Speaker 2: the newspapers today.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each
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