WEBVTT - Bloomberg Surveillance TV: December 29th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.320 --> 0:00:39.000 Cameron Dawson of New Edge Wealth writing, the biggest question 0:00:39.040 --> 0:00:41.640 for twenty twenty six is whether or not everything else 0:00:41.920 --> 0:00:44.320 can strike back and deliver the earnings growth that is 0:00:44.400 --> 0:00:47.960 necessary to unseat the narrow mag seven leadership next year. Cameron, 0:00:48.000 --> 0:00:50.120 I am so pleased to say joins us now. Cameron, 0:00:50.120 --> 0:00:52.839 thank you so much for being with us, and happy holidays. 0:00:53.159 --> 0:00:55.760 Great to see you. This broadening out trade and the 0:00:55.800 --> 0:00:58.480 real question behind it, when will we get the data 0:00:58.560 --> 0:01:01.720 and the information to understand stand whether it really is valid? 0:01:02.560 --> 0:01:05.000 It really is a show me story in twenty twenty 0:01:05.040 --> 0:01:07.560 six as to whether or not the equal weight s 0:01:07.640 --> 0:01:10.600 and P five hundred can deliver on what are some 0:01:10.720 --> 0:01:13.559 pretty high expectations for earnings growth next year. 0:01:13.920 --> 0:01:16.000 If you look over the last three years. 0:01:15.680 --> 0:01:18.800 You've been in an environment where the largest parts of 0:01:18.840 --> 0:01:21.920 the market have driven the vast majority of the earnings growth, 0:01:21.959 --> 0:01:24.880 which is why you've had the vast majority of returns 0:01:25.280 --> 0:01:29.200 come from these MAG seven names. But that's expected to narrow, 0:01:29.200 --> 0:01:32.040 not quite flip, but narrow in twenty twenty six. So 0:01:32.080 --> 0:01:34.040 you can see it in something like the equal Weight 0:01:34.080 --> 0:01:37.880 sm P five hundred having expectations for revenue growth to 0:01:38.000 --> 0:01:40.839 accelerate from one and a half percent and twenty five 0:01:41.080 --> 0:01:44.200 up to five percent in twenty twenty six. So a 0:01:44.200 --> 0:01:47.880 lot is writing on this idea of EPs delivering, and 0:01:47.920 --> 0:01:50.040 of course that will be a show me story as 0:01:50.080 --> 0:01:52.200 we move through the year to see if there is 0:01:52.360 --> 0:01:55.080 upside to those numbers or if yet again we'll be 0:01:55.120 --> 0:01:58.280 in an environment where MAG seven gets revised higher and 0:01:58.360 --> 0:01:59.960 equal Weight gets revised lower. 0:02:00.200 --> 0:02:02.880 So you add to this story something that happened last week. 0:02:02.920 --> 0:02:05.080 There actually was a big piece of news last week 0:02:05.120 --> 0:02:08.280 and Nvidia had this agreement with Grock, which is a 0:02:08.400 --> 0:02:11.640 chip designer. Some twenty billion dollar valuation of this company 0:02:11.680 --> 0:02:14.400 doubling it over the past couple of months and raising 0:02:14.480 --> 0:02:18.639 questions about the dominance of Nvidia, but also whether there 0:02:18.720 --> 0:02:21.760 is a shift in narrative around the AI story to 0:02:21.800 --> 0:02:25.360 one that is more efficient, more useful, and cheaper for 0:02:25.400 --> 0:02:26.480 some of the end users. 0:02:27.520 --> 0:02:31.320 I think no better way encapsulates this idea of potentially 0:02:31.360 --> 0:02:33.800 a narrative shift is looking at some of the non 0:02:33.919 --> 0:02:38.040 profitable AI related names. They of course, were leaders coming 0:02:38.120 --> 0:02:41.560 out of the April lows and saw an absolute frenzy 0:02:41.680 --> 0:02:44.640 as we moved into the fall, with September and October 0:02:44.760 --> 0:02:49.080 rallies that were truly eyewatering. But what's been fascinating is 0:02:49.120 --> 0:02:52.320 that they have not participated in this latest move higher. 0:02:52.560 --> 0:02:55.240 If you look at something like the Golden Sachs Nonprofitable 0:02:55.280 --> 0:02:59.120 Tech Index, or look at something like ARC, those indices 0:02:59.240 --> 0:03:02.720 have not made new highs, which just suggests that maybe, 0:03:03.040 --> 0:03:06.760 just maybe there's some rationality entering into this market, which 0:03:06.800 --> 0:03:09.000 we would welcome and see is a good thing, because 0:03:09.040 --> 0:03:12.800 that kind of rally in unsustainable, unprofitable names is not 0:03:12.880 --> 0:03:15.000 something that we would see as healthy for the market. 0:03:15.280 --> 0:03:18.359 What do you expect from M and A in I 0:03:18.400 --> 0:03:21.000 mean not just the mag seven, but in AI. I 0:03:21.080 --> 0:03:24.880 was pretty stunned after seeing that Grock deal when I 0:03:24.960 --> 0:03:29.160 looked on the FA function on the Bloomberg terminal to 0:03:29.200 --> 0:03:32.640 see free cash flow at Nvidia is just gone parabolic. 0:03:32.720 --> 0:03:35.119 Right last year it was twenty seven billion. This year 0:03:35.120 --> 0:03:37.640 it's sixty billion. Next year it's expected to be ninety 0:03:37.640 --> 0:03:42.280 five billion. I mean, they are just raking in cash 0:03:42.320 --> 0:03:45.320 and are able to deploy twenty thirty forty billion dollars 0:03:45.360 --> 0:03:46.520 without even thinking about it. 0:03:46.960 --> 0:03:47.360 Yeah. 0:03:47.520 --> 0:03:49.800 I think it's a really good question, and it raises 0:03:49.840 --> 0:03:52.840 the question of where we sit in the semiconductor cycle, 0:03:52.920 --> 0:03:55.280 because we do know that the end of the day, 0:03:55.400 --> 0:03:59.240 semiconductors are a cyclical business, and if you go back 0:03:59.280 --> 0:04:03.360 to prior siteles, you typically do see earnings grow by 0:04:03.400 --> 0:04:06.920 one hundred, one hundred and twenty percent plus in up cycles. 0:04:07.080 --> 0:04:09.880 Then of course you do hit an inevitable down cycle, 0:04:10.000 --> 0:04:11.880 and we're now in an environment if you look at 0:04:11.880 --> 0:04:15.200 the overall Socks index that earnings are up about one 0:04:15.280 --> 0:04:18.400 hundred and fifty percent off of the late twenty twenty 0:04:18.440 --> 0:04:22.560 two lows, which just suggests that possibly we are closer 0:04:22.560 --> 0:04:24.800 to the end of the semi cycle than we are 0:04:24.800 --> 0:04:27.400 to the beginning. But I think it's also very arguable 0:04:27.440 --> 0:04:30.680 that this semicycle will go further and last longer than 0:04:30.800 --> 0:04:34.640 fire ones, simply because of the secular tailwinds of something 0:04:34.680 --> 0:04:37.880 like AI. But it's important to remember that it's always 0:04:37.920 --> 0:04:40.760 this time. It's different with cyclical areas. If you remember 0:04:41.000 --> 0:04:43.120 last time, it was the Internet of Things and we 0:04:43.120 --> 0:04:45.320 were putting chips in everything, and that's why we weren't 0:04:45.360 --> 0:04:48.599 going to have semicycles anymore. I think the real question 0:04:48.640 --> 0:04:50.839 will be is how much further can this go? And 0:04:51.080 --> 0:04:54.200 is that free cashualw that Nvidia's generating today something that 0:04:54.240 --> 0:04:57.760 we can extrapolate into perpetuity. Possibly not? 0:04:58.040 --> 0:05:02.719 Well, what happened Cameron to the the terror of Liberation Day? 0:05:02.880 --> 0:05:05.880 I mean the economic uncertainty that we're all wringing our 0:05:05.920 --> 0:05:10.680 hands about, right these tariffs that admittedly have been muted 0:05:10.720 --> 0:05:13.080 a bit by the drop and the dollar almost ten 0:05:13.120 --> 0:05:16.359 percent year to date. Is that is any of that 0:05:16.400 --> 0:05:19.440 a concern next year? Or have we realized that it's 0:05:19.520 --> 0:05:20.520 actually no big deal. 0:05:21.520 --> 0:05:23.799 I think that if we were to see the tariffs 0:05:23.839 --> 0:05:27.120 as a concern, it's really captured in this conflicting kind 0:05:27.120 --> 0:05:30.080 of headline. We got a headline over the weekend saying 0:05:30.120 --> 0:05:33.560 that bankruptcies are at their highest level since twenty ten. 0:05:33.800 --> 0:05:36.520 And then you pull up corporate profits in overall you 0:05:36.600 --> 0:05:39.200 in the US and they're at new highs. And so 0:05:39.320 --> 0:05:43.680 this suggests that tariffs are hitting things like smaller businesses harder. 0:05:43.880 --> 0:05:46.920 They're also hitting smaller consumers harder, who have a higher 0:05:47.000 --> 0:05:50.080 propensity to spend of their overall incomes. 0:05:50.400 --> 0:05:51.240 So when you put that. 0:05:51.279 --> 0:05:55.040 Together, it really encapsulates this idea that tariffs exacerbate the 0:05:55.120 --> 0:05:59.080 K shaped economy. They hurt lower income consumers, they hurt 0:05:59.120 --> 0:06:03.160 smaller businesses, is much more than they larger businesses and 0:06:03.240 --> 0:06:04.400 higher income consumers. 0:06:04.480 --> 0:06:06.320 I just wonder, Cameron, how well you can see this 0:06:06.440 --> 0:06:10.279 rally continue unless you get participation that does broaden out 0:06:10.400 --> 0:06:13.040 this idea that you can see an economy that's growing 0:06:13.040 --> 0:06:16.679 at the fastest pace in two years. On headline GDP, Yes, 0:06:16.760 --> 0:06:19.320 it's noisy, but a lot of its data centers. It's 0:06:19.360 --> 0:06:22.200 not actually the mom and pop stores that are declaring bankruptcy. 0:06:23.520 --> 0:06:25.840 The one thing that does give us a little bit 0:06:25.839 --> 0:06:28.640 of solace in thinking about this broadening out is contrasting 0:06:28.760 --> 0:06:32.000 where we are today in breadth measures versus where we 0:06:32.000 --> 0:06:35.120 were last year. Last year at this time, you only 0:06:35.120 --> 0:06:37.640 had about twenty percent of names trading above their fifty 0:06:37.680 --> 0:06:40.760 day moving average. It was an incredibly narrow market, which 0:06:40.800 --> 0:06:43.479 we thought made it more fragile. If you look today, 0:06:43.520 --> 0:06:47.320 that status at sixty four percent. So it doesn't necessarily 0:06:47.360 --> 0:06:49.960 mean that we are immune to everything, but it is 0:06:50.120 --> 0:06:53.880 encouraging that we are seeing broader participation in the rally, 0:06:53.920 --> 0:06:57.440 that it's not resting on just a small handful of names. So, 0:06:57.640 --> 0:07:00.840 using the banks as example, if the economy was really 0:07:00.839 --> 0:07:02.920 falling off a cliff, we don't think that we would 0:07:02.920 --> 0:07:05.600 be seeing bank earnings revised higher nearly as much as 0:07:05.640 --> 0:07:08.120 they are and banks hitting new all time highs. Some 0:07:08.200 --> 0:07:10.600 of that rally might be a little bit extended, but 0:07:10.680 --> 0:07:12.800 I think it's important to note that there are still 0:07:12.840 --> 0:07:15.800 some signs that cyclicality is being well bid in the 0:07:15.840 --> 0:07:18.600 equity market, which just give us a little bit more 0:07:18.600 --> 0:07:21.440 comfort that things aren't his extend or maybe broadening out 0:07:21.440 --> 0:07:22.120 in a better way. 0:07:24.040 --> 0:07:26.720 Stay with us more Bloomberg Savannah's coming. 0:07:26.560 --> 0:07:38.600 Up after this, Debbie Cuttingham, a federated Hermey, is writing, 0:07:38.600 --> 0:07:42.200 although Trump administration attacks in the Committee have intensified worry 0:07:42.200 --> 0:07:44.880 in the financial markets, we believe the FED will prevail. 0:07:44.960 --> 0:07:48.000 This does seem to be the preeminent belief right now 0:07:48.000 --> 0:07:50.480 in markets. Debbie joins us now from more Debbie, why 0:07:50.560 --> 0:07:52.920 do you think that the idea of FED independence is 0:07:53.000 --> 0:07:55.120 kind of behind us and that people have sort of 0:07:55.160 --> 0:07:58.040 closed that story out in twenty twenty five and looked 0:07:58.040 --> 0:08:01.320 to a sort of more normal said in twenty twenty six. 0:08:02.760 --> 0:08:05.200 Well, I think what we saw in twenty twenty five 0:08:05.560 --> 0:08:11.840 was a surprise and then ultimately a divided said, you know, 0:08:11.880 --> 0:08:15.560 we still don't know the full ending to the Lisa 0:08:15.600 --> 0:08:20.640 Cook story. We do know the ending to what the 0:08:20.680 --> 0:08:24.920 Supreme Court has thought about has FED independence and a 0:08:25.040 --> 0:08:30.160 different type of body compared to some of the other ones. 0:08:31.320 --> 0:08:35.960 We saw President Trump go from you know, supporting Chair 0:08:36.080 --> 0:08:40.040 Poal to trying to fire Chair Poal, to being told 0:08:40.080 --> 0:08:44.160 he can't fire Chair Poal, to submitting, to trying to 0:08:44.240 --> 0:08:50.439 find other replacements for him, interviewing replacement candidates for him, 0:08:50.960 --> 0:08:55.800 for you know, his exploration of his share term in 0:08:55.880 --> 0:08:58.719 twenty twenty six. So I just feel like what we've 0:08:58.800 --> 0:09:02.520 seen so far has been a bit of a you know, 0:09:03.200 --> 0:09:07.280 upheaval and turmoil within the FED that now that the 0:09:07.400 --> 0:09:11.360 independence has been you know, solidified. I think that will 0:09:12.000 --> 0:09:14.360 not be the case going into twenty twenty six. However, 0:09:14.840 --> 0:09:17.839 what I do think will be the case is that 0:09:18.000 --> 0:09:18.760 we see. 0:09:21.520 --> 0:09:24.280 Less voting that. 0:09:24.559 --> 0:09:27.840 Is all in alignment. I think we will see more descents. 0:09:28.000 --> 0:09:31.600 We've already started to see them in the last three meetings, 0:09:32.240 --> 0:09:36.280 and I think that will probably continue. And you know 0:09:36.440 --> 0:09:41.920 what we've seen historically as hawks, Centrists and doves will 0:09:41.960 --> 0:09:45.640 become even a little bit more pronounced in their voting. 0:09:46.040 --> 0:09:47.880 So do you think, Debbie, that people are overpricing with 0:09:48.000 --> 0:09:49.160 chance of ray cuts next year? 0:09:51.080 --> 0:09:52.720 I think they are, at least from what the Fed 0:09:52.840 --> 0:09:56.120 is telling us with their you know, their plot, their 0:09:56.160 --> 0:09:59.880 syrians of economic projections. You know they are looking for one. 0:10:00.200 --> 0:10:01.360 Our official call right. 0:10:01.280 --> 0:10:04.560 Now as we as we you know, transport into twenty 0:10:04.720 --> 0:10:07.319 twenty six is for two one in the first half, 0:10:07.360 --> 0:10:10.199 one in the second half. But I think ultimately, although 0:10:10.280 --> 0:10:15.640 the pace of lowering rates has modified from where it 0:10:15.960 --> 0:10:19.400 was when we started twenty twenty five, the ultimate terminal 0:10:19.520 --> 0:10:21.440 rate leases seems to be the same. I mean, it's 0:10:21.480 --> 0:10:26.200 not going below three percent, and that's where I think 0:10:26.280 --> 0:10:28.560 the bond market is settling in. That's why you see 0:10:28.760 --> 0:10:32.640 you know, the ten year rallying at various points. That's 0:10:32.720 --> 0:10:36.439 why you see a range trade that is really more 0:10:36.480 --> 0:10:40.440 indicative of actual technicals and market conditions. You know, as 0:10:40.480 --> 0:10:44.360 we head into year end, supply and demand, reco market, 0:10:46.600 --> 0:10:49.120 you know, issues all seem to have more of a 0:10:49.760 --> 0:10:52.360 influence on rates on a day to day basis for this, 0:10:52.720 --> 0:10:55.560 you know, last trading week of the year. But ultimately, 0:10:55.600 --> 0:10:58.160 when you look at the terminal rate for the FED 0:10:59.320 --> 0:11:01.679 over time still at three percent, it's just three percent 0:11:01.720 --> 0:11:02.360 a year earlier. 0:11:03.120 --> 0:11:07.800 I wonder how you view liquidity right now, given your position, 0:11:08.160 --> 0:11:13.360 and given that we're now have eclipped eight trillion dollars 0:11:13.520 --> 0:11:16.040 in money markets, it seems like there's a lot of 0:11:16.120 --> 0:11:20.839 cash slashing around the system, and we have pretty decent growth, 0:11:20.960 --> 0:11:23.400 right even though even though it's hard to look at 0:11:23.480 --> 0:11:27.560 these economic data points three point eight percent GDP, maybe 0:11:27.640 --> 0:11:29.240 only two point six percent inflation. 0:11:29.480 --> 0:11:31.720 What's your view on a sort of the macro picture, 0:11:33.120 --> 0:11:33.440 you know, I. 0:11:33.440 --> 0:11:35.400 Think the macro picture at this point is that the 0:11:35.440 --> 0:11:38.200 worst is behind us. We really when we went into 0:11:38.240 --> 0:11:42.360 twenty twenty five word toying with the potential for some 0:11:42.600 --> 0:11:46.240 sort of a you know, substantial growth slowdown into a 0:11:46.280 --> 0:11:49.680 potential recession. That's behind us now though at this point 0:11:49.720 --> 0:11:52.079 we think the worst quarter you know, obviously was the 0:11:52.120 --> 0:11:56.079 first quarter of twenty twenty five. And the consumer continues 0:11:56.120 --> 0:11:58.719 to be employed, so the consumer continues to spend. The 0:11:59.280 --> 0:12:03.480 consumer is the one driving the economy in this in 0:12:03.640 --> 0:12:07.439 this you know, recovery that we have been experiencing. So 0:12:08.040 --> 0:12:11.480 I think slow growth will be the case. I nobody, 0:12:11.720 --> 0:12:14.160 I know, not a lot of people like that. From 0:12:14.400 --> 0:12:19.160 an equity market standpoint, it doesn't get the same you know, 0:12:19.240 --> 0:12:24.400 sort of splashy results that faster growth economy do does. 0:12:24.559 --> 0:12:26.839 But but I but I believe that when you look 0:12:26.960 --> 0:12:31.079 at liquidity markets, when you look at broader term fixed income, 0:12:31.160 --> 0:12:33.560 slow growth is not a bad not a bad place 0:12:33.640 --> 0:12:36.280 to be. And we've seen that certainly in the gathering 0:12:36.320 --> 0:12:39.240 of assets in the in the liquidity market, as you said, 0:12:39.640 --> 0:12:42.319 you know, recently passing the eight trillion dollar market. 0:12:43.520 --> 0:12:46.960 Stay with us, multilanbag Savannah's coming up off to this. 0:12:55.760 --> 0:12:57.160 Bronical sark of City writing. 0:12:57.400 --> 0:13:00.960 We continue to expect another slight increase the unemployment rate 0:13:01.080 --> 0:13:03.920 to four point seven percent in December. 0:13:04.080 --> 0:13:06.480 Veronica joins us. Now, Veronica, thank. 0:13:06.320 --> 0:13:07.800 You so much, for being here, thanks for having me 0:13:08.280 --> 0:13:09.440 holiday holiday. 0:13:09.559 --> 0:13:12.800 Wondering from your perspective how much the data that we 0:13:12.880 --> 0:13:15.720 got earlier this month was actually valid and that people 0:13:15.720 --> 0:13:16.760 are discounting it too much. 0:13:16.880 --> 0:13:18.439 Yeah, I think there's a lot of that going on. 0:13:18.600 --> 0:13:21.520 And if we saw the unemployment rate next Friday, the 0:13:22.120 --> 0:13:24.880 first week back back to work, if we saw that 0:13:24.960 --> 0:13:26.640 at something like four point seven, I think people will 0:13:26.640 --> 0:13:28.560 believe it a lot more. Because, yeah, there's a lot 0:13:28.600 --> 0:13:31.040 of issues with the November October data. We don't know 0:13:31.080 --> 0:13:33.559 how much the government shut down affected new measurement of 0:13:33.760 --> 0:13:36.600 those months, but December should be relatively clean, and if 0:13:36.640 --> 0:13:38.760 it stays pretty high, I think that's a more concerning 0:13:38.800 --> 0:13:39.400 sign for people. 0:13:39.840 --> 0:13:42.960 How come this labor market is weak? 0:13:43.080 --> 0:13:48.280 I don't get it, because you've got incredible earnings growth, right, 0:13:48.440 --> 0:13:52.880 so corporate America is doing very well, and there are 0:13:53.080 --> 0:13:56.280 no new people coming into this country, right, there's no 0:13:56.480 --> 0:14:01.079 immigration the demographics trend like everyone old, there are no 0:14:01.559 --> 0:14:02.880 people like it should be. 0:14:03.679 --> 0:14:05.600 Companies are fighting for employees. 0:14:05.840 --> 0:14:08.439 Yeah, yeah, I mean there's been this issue of you know, 0:14:08.559 --> 0:14:10.640 is it labor supply, is it labor demand. We've been 0:14:10.679 --> 0:14:12.920 dealing with us for a couple of years now. You know, 0:14:13.000 --> 0:14:14.840 back in twenty twenty four, when we saw the unemployment 0:14:14.920 --> 0:14:18.040 rate increase, the excuse was also it's more immigration. I 0:14:18.080 --> 0:14:21.080 don't think we can use immigration to explain the bad data. 0:14:21.080 --> 0:14:23.640 You know, different sides of immigration to explain bad data. 0:14:24.320 --> 0:14:26.600 But I think what's happened is that labor demand has 0:14:26.640 --> 0:14:28.800 just weakened more than labor supply, and that's why you've 0:14:28.800 --> 0:14:32.080 seen the unemployment rate rising. It's this low hiring still 0:14:32.120 --> 0:14:35.320 low firing dynamic. But I would be worried that low 0:14:35.400 --> 0:14:37.480 hiring can only last for so long before maybe you 0:14:37.560 --> 0:14:38.360 do see some layoffs. 0:14:38.720 --> 0:14:43.760 Is that because technology and AI have made the few 0:14:43.880 --> 0:14:46.840 employees that companies hold on to more productive. 0:14:47.120 --> 0:14:50.240 I'm a little hesitant to conclude that that's what's happening now. 0:14:50.680 --> 0:14:52.720 That might be part of the story, absolutely, and we 0:14:52.760 --> 0:14:55.080 could see larger productivity gains from. 0:14:55.000 --> 0:14:55.920 AI longer run. 0:14:56.000 --> 0:14:58.160 But this really started a couple of years ago. This 0:14:58.280 --> 0:15:01.160 really started maybe summer of twenty twenty three when we 0:15:01.200 --> 0:15:03.480 saw this pullback and hiring, and I do worry that 0:15:04.120 --> 0:15:08.560 it started in more rate sensitive sectors like manufacturing, small businesses. 0:15:08.640 --> 0:15:10.280 The pullback has really been there, and so yeah, it 0:15:10.280 --> 0:15:13.120 doesn't necessarily matter if you know equities are doing well 0:15:13.160 --> 0:15:15.360 in earnings or find small businesses are going to be 0:15:15.440 --> 0:15:16.960 more rate sensitively bringing. 0:15:16.720 --> 0:15:19.680 Manufacturers I thought we're bringing manufacturing back, right. 0:15:20.000 --> 0:15:22.400 We have been losing manufacturing jobs I think every month 0:15:22.480 --> 0:15:24.960 this year, but that predates this year also, and it 0:15:25.080 --> 0:15:26.160 is a rate sensitive sector. 0:15:26.280 --> 0:15:28.560 Well, this sort of speaks to the question of is 0:15:28.600 --> 0:15:31.200 the FED restrictive and this is the big debate restrictive 0:15:31.240 --> 0:15:33.480 for who? Because on on one hand, you do see 0:15:33.600 --> 0:15:36.720 companies filing for bankruptcy at the fastest clip going back 0:15:36.760 --> 0:15:40.240 to twenty twenty. On the flip side, you see AI 0:15:40.400 --> 0:15:43.320 companies screaming ahead, digital Bridge being purchased for four. 0:15:43.320 --> 0:15:45.160 Billion dollars out of fifteen percent Bingham. 0:15:45.200 --> 0:15:46.400 So can you square that? 0:15:46.680 --> 0:15:49.320 Yeah, I mean there's this fifurcation across all parts of 0:15:49.360 --> 0:15:51.160 the economy, and I think there's a lot you know 0:15:51.200 --> 0:15:53.280 that has already been said about the k shape economy 0:15:53.320 --> 0:15:56.080 for consumers. You know, higher income consumers are spending, but 0:15:56.120 --> 0:15:58.520 we definitely see that in sectors also, and you know, 0:15:58.560 --> 0:16:01.080 the smaller businesses who are more sensitive. I think rates 0:16:01.120 --> 0:16:03.440 are restrictive here, so you expect. 0:16:03.280 --> 0:16:04.800 A significant number of rate cuts. 0:16:04.840 --> 0:16:08.600 Let's just postulate that we do see an increase further 0:16:08.880 --> 0:16:10.880 in the unemployment rate to four point seven percent as 0:16:10.920 --> 0:16:11.440 you expect. 0:16:11.840 --> 0:16:13.640 What does that mean for January twenty eighth. 0:16:14.040 --> 0:16:16.640 Yeah, I think they're going to be cutting really Yeah, 0:16:16.720 --> 0:16:19.480 So we are penciling in another cut in January, another 0:16:19.560 --> 0:16:21.720 one in March. And it's just this kind of idea 0:16:21.800 --> 0:16:24.640 that you've clearly gotten more concerned on the labor market 0:16:24.760 --> 0:16:26.960 side of your mandate. If the unemployment rate is something 0:16:27.000 --> 0:16:29.440 like four to seven that we think we'll see in December, 0:16:30.080 --> 0:16:33.200 we will have hopefully more inflation data by March that 0:16:33.320 --> 0:16:36.120 we trust again, you know, early twenty twenty six data. 0:16:36.960 --> 0:16:40.520 If you're seeing inflation slowing and data that you believe again, 0:16:40.680 --> 0:16:43.440 and you're less concerned on the inflation side of the mandate, 0:16:43.520 --> 0:16:46.560 you're more concerned on employment, why wouldn't you be at 0:16:46.960 --> 0:16:49.640 the midpoint of neutral, which would be cuts in January 0:16:49.680 --> 0:16:50.560 and March to get you there. 0:16:50.720 --> 0:16:53.640 The counter argument is, if you get rate cuts potentially 0:16:53.720 --> 0:16:55.960 two by the end of March, at the same time 0:16:56.040 --> 0:16:58.600 that you have the one big beautiful bill, the tax refunds, 0:16:58.640 --> 0:17:01.520 and potentially an additional two dollars stimulus or whatever else 0:17:01.600 --> 0:17:02.600 might be coming down the pike. 0:17:03.120 --> 0:17:05.720 Don't you risk reigniting inflation that never died. 0:17:05.960 --> 0:17:08.520 Yeah, I'm not so concerned about that right now. You know, 0:17:08.600 --> 0:17:13.479 the inflation driven by lower rates, more stimulative monetary policy, 0:17:13.920 --> 0:17:16.159 you'd expect to see it first in a sector like housing, 0:17:16.240 --> 0:17:18.160 and you definitely don't see that yet. You don't see 0:17:18.160 --> 0:17:21.080 those signs yet. Home prices have been slowing, new rents 0:17:21.119 --> 0:17:23.639 have been slowing a lot. We already know that in 0:17:23.720 --> 0:17:26.200 the inflation data. There is this lag issue of shelter 0:17:26.359 --> 0:17:28.480 inflation that's going to I think, be slowing all of 0:17:28.560 --> 0:17:32.240 next year. All of the potential fiscal stimulus, you know, 0:17:32.440 --> 0:17:35.680 maybe larger tax refunds of the business tax incentives that 0:17:35.720 --> 0:17:38.600 were part of the bill from the summer. Those can 0:17:38.640 --> 0:17:42.120 help support growth, But I would worry that the main 0:17:42.240 --> 0:17:44.760 determinant of if people are spending or not is if 0:17:44.800 --> 0:17:46.720 they have a job and what their labor income is, 0:17:47.400 --> 0:17:49.400 and that we have seen slowing already, and you would 0:17:49.400 --> 0:17:50.679 think consumption would slow them too. 0:17:51.800 --> 0:17:55.240 Stay with us multile impag Savannah's coming up after this. 0:18:03.880 --> 0:18:06.359 Let's stick with the consumer as focus shifts toward the 0:18:06.440 --> 0:18:09.680 new year data. Telseia with Telsey Advisory Group, writing heading 0:18:09.720 --> 0:18:13.960 into twenty twenty six. We expect events hire, REEF tax refunds, 0:18:14.040 --> 0:18:17.680 and more accommodative interest rates to drive a continued recovery 0:18:17.720 --> 0:18:21.280 and discretionary spending, especially among younger consumers. 0:18:21.400 --> 0:18:24.000 Data joins us now in person, thank you so much 0:18:24.040 --> 0:18:26.119 for being here. Thank you for having me. It's wonderful 0:18:26.160 --> 0:18:27.040 to get your insights. 0:18:27.080 --> 0:18:29.760 As we all look at our gifts from the holidays, 0:18:29.840 --> 0:18:32.400 decide which ones we need to return. What's to read 0:18:32.600 --> 0:18:36.560 on how well this season really did perform for retailers 0:18:36.720 --> 0:18:37.960 broadly across the sphere. 0:18:38.240 --> 0:18:39.760 I think holiday season was solid. 0:18:40.000 --> 0:18:42.760 I think those increases three point nine four point two 0:18:42.840 --> 0:18:47.000 percent very much in line with expectations. These ten days 0:18:47.160 --> 0:18:50.840 after Christmas are very important too, whether for returns, for 0:18:51.000 --> 0:18:53.720 gift card redemptions, all very important to see what it 0:18:53.800 --> 0:18:56.960 looks like. But the product newness drove demand. With the 0:18:57.040 --> 0:18:59.840 case shaped economy that we have, you're definitely seeing it 0:19:00.119 --> 0:19:03.200 higher end and the lower end looking for value. And 0:19:03.359 --> 0:19:05.560 that's where you saw some of the traffic. Whether it's 0:19:05.600 --> 0:19:08.879 the Walmart's, whether it's the tjx's. They were there the 0:19:09.040 --> 0:19:12.720 last ten days before Christmas, as always, is where you 0:19:12.840 --> 0:19:15.040 got the real bump up in terms of top line. 0:19:15.359 --> 0:19:20.520 I'm fascinated by the bifurcation between Walmart and Target because 0:19:20.560 --> 0:19:24.080 I had seen them previously in kind of the same box. 0:19:24.440 --> 0:19:27.520 But Walmart has done so well this year and Target 0:19:27.680 --> 0:19:29.320 has disappointed. 0:19:29.720 --> 0:19:29.880 Why. 0:19:30.359 --> 0:19:33.200 I think overall what you've seen from Walmart and Target 0:19:33.280 --> 0:19:36.480 store standards have fallen. You haven't seen the same innovation 0:19:36.640 --> 0:19:40.320 and product newness. You haven't seen the same forward momentum 0:19:40.359 --> 0:19:44.920 of movement, particularly with technology, where Walmart is anticipating what 0:19:45.040 --> 0:19:48.120 the customer needs and they really have modernized their whole 0:19:48.160 --> 0:19:51.680 store format. The Walmart of today is not the Walmart 0:19:51.760 --> 0:19:53.200 of five or even ten years ago. 0:19:53.680 --> 0:19:58.720 If we see a K shaped economy, do we get 0:19:58.960 --> 0:20:04.280 Dollar Tree? You know, these family dollar kind of discount 0:20:04.320 --> 0:20:08.720 stores doing well, because if I look at the stock performance, 0:20:09.160 --> 0:20:11.920 I don't see Dollar Tree taking off. 0:20:12.359 --> 0:20:15.359 I think overall you will see those dollar stores perform. 0:20:15.760 --> 0:20:18.240 Keep in mind that in twenty twenty five, the focus 0:20:18.359 --> 0:20:22.479 on tariffs who imports goods from China was impactful certainly 0:20:22.560 --> 0:20:25.520 to the dollar stores, and now lapping tariffs should be 0:20:25.560 --> 0:20:28.000 a benefit to them. Over time, who you saw as 0:20:28.040 --> 0:20:31.040 share gainers, it was all the off pricers. I mean, 0:20:31.119 --> 0:20:34.159 whether it was Burlington Ross Stores or TJ Max. With 0:20:34.320 --> 0:20:38.120 the diversification of the assortment that they have, they captured customers. 0:20:38.240 --> 0:20:40.000 What's fascinating to me is you're talking about how this 0:20:40.119 --> 0:20:42.480 was a solid holiday season, and yet we're talking about 0:20:42.480 --> 0:20:44.879 a bankruptcy potentially at the end of this month of 0:20:44.960 --> 0:20:47.760 one of the biggest retailers, of saxophth Avenue, which faces 0:20:48.040 --> 0:20:49.920 more than one hundred million dollars of a debt payment. 0:20:50.000 --> 0:20:52.280 A lot of people are wondering whether that will actually happen. 0:20:52.720 --> 0:20:54.920 Can you square this story the idea that we're talking 0:20:54.920 --> 0:20:58.560 about robust sales, a steady consumer i'llbeit picky or choosy 0:20:58.680 --> 0:21:00.920