1 00:00:02,360 --> 00:00:04,560 Speaker 1: Thank you so much for joining us on the special 2 00:00:04,720 --> 00:00:08,760 Speaker 1: edition of Bloomberg Daybreak. Merry Christmas, everybody. Markets are closed 3 00:00:08,800 --> 00:00:12,160 Speaker 1: for this holiday. I'm Nathan Hager coming up this hour. 4 00:00:12,360 --> 00:00:14,800 Speaker 1: It has been another banner year for the bulls on 5 00:00:14,880 --> 00:00:17,280 Speaker 1: Wall Street. Will the new year bring as many happy 6 00:00:17,320 --> 00:00:20,400 Speaker 1: returns for equity investors as twenty twenty four We will 7 00:00:20,400 --> 00:00:23,680 Speaker 1: bring you a special stock round table with Lori Calvacina, 8 00:00:23,720 --> 00:00:26,960 Speaker 1: head of US Equity Strategy at RBC Capital Markets, and 9 00:00:27,040 --> 00:00:30,880 Speaker 1: Cameron Dawson, chief investment officer at New Edge Wealth Plus. 10 00:00:30,880 --> 00:00:33,120 Speaker 1: We're wrapping up the most wonderful time of the year 11 00:00:33,159 --> 00:00:36,280 Speaker 1: for retailers, So who were the big winners? We'll ask 12 00:00:36,320 --> 00:00:41,640 Speaker 1: retail analyst Bert Flickinger, managing director at Strategic Resource Group. First, 13 00:00:41,680 --> 00:00:44,280 Speaker 1: we want to focus on the economy as a whole. 14 00:00:44,479 --> 00:00:47,240 Speaker 1: The Federal Reserve is coming off its final rate cut 15 00:00:47,240 --> 00:00:50,760 Speaker 1: of the year. J. Powell and Company surprised Wall Street 16 00:00:50,800 --> 00:00:53,720 Speaker 1: not with the interest rate reduction, but when they changed 17 00:00:53,760 --> 00:00:58,040 Speaker 1: gears and put their policy focus back on inflation once again. 18 00:00:58,280 --> 00:01:00,960 Speaker 2: We you know, we've had a a year on projection 19 00:01:01,480 --> 00:01:03,880 Speaker 2: for inflation and it's kind of fallen apart. As we've 20 00:01:03,920 --> 00:01:06,920 Speaker 2: approached at the end of the year. So that is 21 00:01:06,959 --> 00:01:09,680 Speaker 2: certainly a large factor in people's thinking. I can tell 22 00:01:09,680 --> 00:01:12,399 Speaker 2: you that might be the single biggest factor. Is inflation 23 00:01:12,480 --> 00:01:17,039 Speaker 2: has once again underperformed relative to expectations. It's still you know, 24 00:01:17,200 --> 00:01:19,440 Speaker 2: going to be between two and a half and three. 25 00:01:19,480 --> 00:01:21,560 Speaker 2: It's way below where it was. But you know, we 26 00:01:21,600 --> 00:01:24,720 Speaker 2: really want to see progress on inflation. 27 00:01:24,760 --> 00:01:27,600 Speaker 1: And that was fair Chair J. Powell last week following 28 00:01:27,640 --> 00:01:31,039 Speaker 1: the Central Banks final policy decision of twenty twenty four. 29 00:01:31,280 --> 00:01:34,600 Speaker 1: So what's in store for next year? To answer that, 30 00:01:34,680 --> 00:01:38,200 Speaker 1: we're pleased to welcome Tom Porcelli, chief US economist at 31 00:01:38,280 --> 00:01:41,680 Speaker 1: PGIM Fixed Income. Tom. Great to have you with us 32 00:01:41,920 --> 00:01:46,000 Speaker 1: on this holiday. And I hate to say inflation's been persistent, 33 00:01:46,160 --> 00:01:49,080 Speaker 1: but are we going to see progress? 34 00:01:49,360 --> 00:01:52,200 Speaker 3: Well, good to be with you, Nathan as always, and 35 00:01:53,000 --> 00:01:55,560 Speaker 3: I think, you know, let'st I would reframe it a 36 00:01:55,600 --> 00:01:58,360 Speaker 3: little bit. We have seen a lot of progress. I mean, 37 00:01:58,400 --> 00:02:00,480 Speaker 3: if you just look at you know, a pick your 38 00:02:00,520 --> 00:02:04,480 Speaker 3: flavor of inflation, but if you just look at core PCEE, 39 00:02:05,000 --> 00:02:07,280 Speaker 3: core PC with what as high as nearly six percent 40 00:02:07,440 --> 00:02:10,120 Speaker 3: and we're down to what two point eight percent now, 41 00:02:10,200 --> 00:02:12,400 Speaker 3: So there's been quite a lot of progress from an 42 00:02:12,440 --> 00:02:16,320 Speaker 3: inflation perspective. And you know what was interesting about about 43 00:02:16,320 --> 00:02:19,920 Speaker 3: Powell's press conference at the recent FOMC meeting was he 44 00:02:20,000 --> 00:02:23,400 Speaker 3: acknowledged I think a number of the things that that 45 00:02:23,560 --> 00:02:27,280 Speaker 3: are challenges from inflation perspective that we can exclude from inflation, right, Like, 46 00:02:27,320 --> 00:02:30,239 Speaker 3: so shelter is a great example. You know, they they 47 00:02:30,320 --> 00:02:34,360 Speaker 3: and we all recognize that there are these calculation challenges 48 00:02:34,400 --> 00:02:37,440 Speaker 3: from a shelter perspective, so you remove it, and you know, 49 00:02:37,480 --> 00:02:39,760 Speaker 3: this is how the whole supercre idea sort of came 50 00:02:39,880 --> 00:02:42,440 Speaker 3: came to be. Well, what I would say is I'm 51 00:02:42,480 --> 00:02:44,400 Speaker 3: not a huge fan of supercore because I think it 52 00:02:44,440 --> 00:02:46,679 Speaker 3: also strips out the things that are deflating. And I 53 00:02:46,720 --> 00:02:49,520 Speaker 3: don't know why you do. That's part of the consumable basket, 54 00:02:50,000 --> 00:02:54,120 Speaker 3: So that that to me just seems a little intellectually disingenuous. 55 00:02:54,280 --> 00:02:57,079 Speaker 3: So what I would say is this, just take headline inflation, 56 00:02:57,520 --> 00:03:00,800 Speaker 3: take core inflation, strip out shelter, and when you do that, 57 00:03:00,800 --> 00:03:02,639 Speaker 3: what you see is that inflation is actually pretty tame. 58 00:03:02,720 --> 00:03:02,840 Speaker 4: Right. 59 00:03:02,840 --> 00:03:05,280 Speaker 3: So if we just use CPI as as an example 60 00:03:05,320 --> 00:03:08,560 Speaker 3: of that, you know, like headline CPI is running out 61 00:03:08,560 --> 00:03:12,600 Speaker 3: well one point six percent pace x shelter and core 62 00:03:12,720 --> 00:03:15,760 Speaker 3: CPI is running out a two point one percent pace 63 00:03:16,000 --> 00:03:16,440 Speaker 3: x shelter. 64 00:03:16,600 --> 00:03:17,800 Speaker 5: So you know, I. 65 00:03:19,320 --> 00:03:21,480 Speaker 3: Was, I was, I was a little bothered by by 66 00:03:21,520 --> 00:03:24,519 Speaker 3: the idea of this notion of sticky inflation. I mean, 67 00:03:24,560 --> 00:03:26,680 Speaker 3: I think I think a lot of us expected inflation 68 00:03:26,720 --> 00:03:30,440 Speaker 3: would remain relatively elevated relative to target, but we continue 69 00:03:30,480 --> 00:03:32,600 Speaker 3: to drift in the right direction. And I'm sorry, I'll 70 00:03:32,600 --> 00:03:34,280 Speaker 3: say one last thing on this, Nathan, and then and 71 00:03:34,320 --> 00:03:37,040 Speaker 3: then I'll stop. You know, I think about not just 72 00:03:37,080 --> 00:03:40,040 Speaker 3: the not just the idea of of of stripping out shelter, 73 00:03:40,280 --> 00:03:45,200 Speaker 3: but let's acknowledge that in real time shelter prices are slowing, 74 00:03:45,280 --> 00:03:48,440 Speaker 3: so that will will continue to act as a sort 75 00:03:48,440 --> 00:03:50,760 Speaker 3: of a as a weight on inflation as that continues 76 00:03:50,760 --> 00:03:53,560 Speaker 3: to slow down. But maybe more important, when I look 77 00:03:53,600 --> 00:03:56,760 Speaker 3: at wages, the direction of travel for wages I think 78 00:03:56,840 --> 00:03:58,880 Speaker 3: is pretty clear. I mean, just look at quit rates 79 00:03:59,240 --> 00:04:02,440 Speaker 3: that that are, you know, sort of getting clobbered. You know, 80 00:04:02,680 --> 00:04:05,160 Speaker 3: that's that's yet another factor that I think we do 81 00:04:05,280 --> 00:04:08,440 Speaker 3: not have to worry about because wages will continue to slow. 82 00:04:08,520 --> 00:04:11,120 Speaker 3: So I think the inflation story is is is at 83 00:04:11,200 --> 00:04:14,160 Speaker 3: least a bit more benign than what Powell suggested, So. 84 00:04:14,160 --> 00:04:17,040 Speaker 1: Are you thinking then that the Fed could be more 85 00:04:17,120 --> 00:04:21,160 Speaker 1: open to accelerating the pace of rate cuts more than 86 00:04:21,200 --> 00:04:24,279 Speaker 1: they said they were planning to last week when they 87 00:04:24,839 --> 00:04:27,839 Speaker 1: surprised the market with this expectation of just two cuts 88 00:04:27,839 --> 00:04:28,760 Speaker 1: for all of next year. 89 00:04:29,600 --> 00:04:31,160 Speaker 3: Yeah. I think this is the one thing that I 90 00:04:31,240 --> 00:04:34,400 Speaker 3: actually did agree with Powell on. I think that, you know, look, 91 00:04:34,880 --> 00:04:37,960 Speaker 3: as as a as a central banker, you know, you 92 00:04:37,960 --> 00:04:41,080 Speaker 3: you relish optionality and and and I think you're and 93 00:04:41,120 --> 00:04:44,520 Speaker 3: you're supposed to because you want the flexibility to be 94 00:04:44,520 --> 00:04:48,839 Speaker 3: able to adjust as as the backdrop sort of evolved. 95 00:04:48,880 --> 00:04:51,440 Speaker 3: So I have a ton of sympathy for that. So 96 00:04:51,520 --> 00:04:55,080 Speaker 3: the short answer is, yes, I think you're you're absolutely 97 00:04:55,080 --> 00:04:58,080 Speaker 3: supposed to acknowledge that you could see a faster pace 98 00:04:58,200 --> 00:05:00,279 Speaker 3: of of rate cuts and and and indeed you could 99 00:05:00,279 --> 00:05:02,600 Speaker 3: certainly see a slower pace depending how the data evolved. 100 00:05:02,960 --> 00:05:05,440 Speaker 3: But I think again the problem for me is he 101 00:05:05,520 --> 00:05:08,520 Speaker 3: kept on, pal kept on talking about, you know, data dependency, 102 00:05:08,960 --> 00:05:12,039 Speaker 3: but I don't know if that's quite what it is. 103 00:05:12,680 --> 00:05:15,160 Speaker 3: And I don't want to split hairs on this, but 104 00:05:15,240 --> 00:05:19,520 Speaker 3: it really strikes me more as data point dependency, and 105 00:05:19,560 --> 00:05:21,920 Speaker 3: that to me is a problem. And it's a problem 106 00:05:22,000 --> 00:05:24,360 Speaker 3: because we all know this, right, I mean, we could 107 00:05:24,360 --> 00:05:26,400 Speaker 3: all we could do an entire segment on this from 108 00:05:26,600 --> 00:05:30,119 Speaker 3: one point alone. The data have been very volatile, more 109 00:05:30,680 --> 00:05:34,039 Speaker 3: so than than what we've seen certainly pre pre COVID. 110 00:05:34,760 --> 00:05:37,159 Speaker 3: And so think about the coming you know, in the 111 00:05:37,200 --> 00:05:40,040 Speaker 3: next couple of weeks, we're gonna get what, We're gonna 112 00:05:40,040 --> 00:05:41,400 Speaker 3: get a payroll report, and then we're going to get 113 00:05:41,400 --> 00:05:43,880 Speaker 3: a CPI report. What if you get a clunker, right, 114 00:05:43,920 --> 00:05:46,000 Speaker 3: what if you get a clunker of a payroll report, 115 00:05:46,640 --> 00:05:49,120 Speaker 3: the market is then going to immediately start to sort 116 00:05:49,120 --> 00:05:51,280 Speaker 3: of build in the idea of, oh well maybe if 117 00:05:51,320 --> 00:05:52,760 Speaker 3: it is going to have to do more. So I 118 00:05:52,839 --> 00:05:54,440 Speaker 3: think this is this is part of the problem with 119 00:05:54,520 --> 00:05:55,520 Speaker 3: data point dependency. 120 00:05:55,960 --> 00:06:01,080 Speaker 1: Speaking with Tom Porcelli, chief US economist at PGM Fixed Income, 121 00:06:01,680 --> 00:06:04,160 Speaker 1: So what should the FED be focusing on then, Tom, 122 00:06:04,200 --> 00:06:06,560 Speaker 1: I mean, at the meeting last week it seemed as 123 00:06:06,600 --> 00:06:10,800 Speaker 1: though FED Chair pal was really laser focused now on 124 00:06:10,960 --> 00:06:15,680 Speaker 1: inflation as opposed to potential risks to the labor market. 125 00:06:15,800 --> 00:06:18,000 Speaker 1: Should be they be taking a more holistic approach. 126 00:06:19,160 --> 00:06:22,240 Speaker 3: I think that's exactly right. I mean, look, they are 127 00:06:22,400 --> 00:06:25,599 Speaker 3: a dual mandate Central bank, I think that you're supposed 128 00:06:25,640 --> 00:06:29,120 Speaker 3: to be focused on both of these. Now, both of 129 00:06:29,160 --> 00:06:31,000 Speaker 3: these are parts of the mandate. Now, of course, we 130 00:06:31,080 --> 00:06:34,640 Speaker 3: all recognize that there are points where you know one 131 00:06:34,680 --> 00:06:36,479 Speaker 3: will be fine and the other will be, you know, 132 00:06:36,800 --> 00:06:39,560 Speaker 3: sort of deteriorating or accelerating, and so you know, you 133 00:06:39,600 --> 00:06:41,600 Speaker 3: might want to sort of shift your focus to some extent. 134 00:06:42,000 --> 00:06:45,160 Speaker 3: But I think what we have to acknowledge is that 135 00:06:45,520 --> 00:06:48,560 Speaker 3: from a labor market perspective, right, because it's clear that 136 00:06:48,600 --> 00:06:50,920 Speaker 3: he is shifted, right, he's starting the process of shifting 137 00:06:50,920 --> 00:06:52,719 Speaker 3: away from labor, which is what they had been focused 138 00:06:52,760 --> 00:06:55,520 Speaker 3: on over the prior few meetings, which is why they've 139 00:06:55,560 --> 00:06:59,800 Speaker 3: delivered one hundred basis points of cuts at this point. 140 00:07:00,320 --> 00:07:03,719 Speaker 3: But it's pretty clear that they're shifting back toward inflation. Now, 141 00:07:04,480 --> 00:07:08,400 Speaker 3: I would caution against doing that too forcefully, because what 142 00:07:08,800 --> 00:07:11,360 Speaker 3: we know is that there are some cracks that are 143 00:07:11,360 --> 00:07:13,640 Speaker 3: forming in the labor backdrop. Now, again, I would hasten 144 00:07:13,680 --> 00:07:17,160 Speaker 3: to add just because I'm saying cracks does not mean 145 00:07:17,160 --> 00:07:18,480 Speaker 3: that I think the floor is going to fall out 146 00:07:18,520 --> 00:07:20,360 Speaker 3: from from beneath labor. In fact, I don't think that's 147 00:07:20,360 --> 00:07:21,520 Speaker 3: going to be the case at all. I think labor 148 00:07:21,560 --> 00:07:24,240 Speaker 3: will be fine. I mean, you know, the continued economic 149 00:07:24,280 --> 00:07:27,960 Speaker 3: expansion is is and has been our call over the 150 00:07:28,000 --> 00:07:30,840 Speaker 3: coming and for the coming year, So you know, I 151 00:07:30,840 --> 00:07:32,920 Speaker 3: want to sort of level set for everyone on that. 152 00:07:33,000 --> 00:07:37,320 Speaker 3: But that does not, you know, mean that we should 153 00:07:37,320 --> 00:07:40,360 Speaker 3: take our eyes off the fact that quit rate is 154 00:07:42,520 --> 00:07:48,440 Speaker 3: getting cloppered, the hiring rate is slowing down. Confidence toward 155 00:07:49,480 --> 00:07:55,080 Speaker 3: labor has deteriorated, right per the Conference boards labor differential, 156 00:07:55,520 --> 00:07:58,920 Speaker 3: and that has a very good relationship with the unemployment rate, 157 00:07:59,080 --> 00:08:01,760 Speaker 3: which is up what amost a hundred basis points from 158 00:08:01,840 --> 00:08:04,480 Speaker 3: from the nearby low. So so you know, these are 159 00:08:04,480 --> 00:08:07,520 Speaker 3: our realities. I mean, labor has slowed down. Demand at 160 00:08:07,600 --> 00:08:10,280 Speaker 3: large has really slowed down. So I don't think we 161 00:08:10,280 --> 00:08:12,320 Speaker 3: should take our eye and I don't think the Fed should, 162 00:08:12,360 --> 00:08:14,400 Speaker 3: and I don't think that they will take their eye 163 00:08:14,440 --> 00:08:18,920 Speaker 3: off of labor. I just think that shifting these focuses 164 00:08:19,000 --> 00:08:21,080 Speaker 3: from like one mandate to the other, I think just 165 00:08:21,160 --> 00:08:24,160 Speaker 3: lent itself to volatility, particularly as it relates to volatile 166 00:08:24,320 --> 00:08:26,600 Speaker 3: economic reports, which is what we've been getting. 167 00:08:26,880 --> 00:08:30,760 Speaker 1: One potential possibility of volatility here we haven't talked about 168 00:08:30,880 --> 00:08:35,040 Speaker 1: just yet is the incoming Trump administration and how policy 169 00:08:35,320 --> 00:08:39,120 Speaker 1: could affect the economic trajectory going forward, How do you 170 00:08:39,200 --> 00:08:41,439 Speaker 1: factor that in? How does the FED factor that in? 171 00:08:42,000 --> 00:08:44,079 Speaker 3: Yeah, I think I think Powell had it quite right 172 00:08:44,120 --> 00:08:46,679 Speaker 3: when when he said, you know, they just they can't 173 00:08:46,679 --> 00:08:50,440 Speaker 3: build it into their forecasts at this point. And I 174 00:08:50,440 --> 00:08:53,000 Speaker 3: have nothing but sympathy for that. The reality is we 175 00:08:53,120 --> 00:08:56,240 Speaker 3: just don't know what these policies are actually going to be, 176 00:08:56,480 --> 00:08:59,360 Speaker 3: So for better or for worse, you know, the FED 177 00:08:59,440 --> 00:09:00,920 Speaker 3: is going to have to be reactionary. 178 00:09:01,320 --> 00:09:04,199 Speaker 1: How do you expect the FED to react then? Given 179 00:09:04,240 --> 00:09:07,520 Speaker 1: to how what kind of uncertainty we have for Trump 180 00:09:07,520 --> 00:09:08,600 Speaker 1: administration policy? 181 00:09:09,280 --> 00:09:11,880 Speaker 3: Carefully? I mean, I think that you know, we have 182 00:09:11,960 --> 00:09:16,520 Speaker 3: to recognize there are extremes from a tariff perspective and 183 00:09:16,559 --> 00:09:20,600 Speaker 3: from an immigration perspective that could do some damage. From 184 00:09:20,760 --> 00:09:25,080 Speaker 3: from an economic perspective, if you get more modest versions 185 00:09:25,880 --> 00:09:29,680 Speaker 3: of tariff and immigration policy, then it probably you know, 186 00:09:29,760 --> 00:09:31,640 Speaker 3: doesn't turn out to be nearly as bad. 187 00:09:31,720 --> 00:09:31,880 Speaker 6: Right. 188 00:09:31,920 --> 00:09:35,319 Speaker 3: So my view is that I think people are putting 189 00:09:35,360 --> 00:09:37,240 Speaker 3: a little too much emphasis on the negative, and I 190 00:09:37,240 --> 00:09:39,360 Speaker 3: think they're putting a little too much emphasis on the positive. 191 00:09:40,120 --> 00:09:44,079 Speaker 3: And I think ultimately, if we get more modest versions 192 00:09:44,520 --> 00:09:47,920 Speaker 3: of immigration and tariff policy. I think that our view 193 00:09:48,000 --> 00:09:49,120 Speaker 3: that this is going to be you know, sort of 194 00:09:49,200 --> 00:09:52,760 Speaker 3: a roughly two percent year in twenty twenty five, I 195 00:09:52,760 --> 00:09:54,920 Speaker 3: think we'll remain firmly intact. 196 00:09:55,800 --> 00:09:59,840 Speaker 1: Is a two percent inflation target still realistic for this FED? 197 00:10:00,240 --> 00:10:01,720 Speaker 3: I mean I don't know if it was ever really 198 00:10:01,960 --> 00:10:06,160 Speaker 3: totally realistic to I mean just just sort of thinking 199 00:10:06,200 --> 00:10:09,600 Speaker 3: over history. I mean, look, the central banks want an 200 00:10:09,640 --> 00:10:13,120 Speaker 3: anchor and two percent is just the sort of the 201 00:10:13,600 --> 00:10:16,280 Speaker 3: number that they landed on. So in that context, I 202 00:10:16,360 --> 00:10:19,680 Speaker 3: have sympathy for a target. Is this supposed to be 203 00:10:19,720 --> 00:10:24,360 Speaker 3: two point zero percent? That's a completely debatable point. I mean, 204 00:10:24,360 --> 00:10:28,240 Speaker 3: there's nothing empirical that really drives home that two point 205 00:10:28,360 --> 00:10:30,319 Speaker 3: zero percent is the right number. And if you think about, 206 00:10:30,520 --> 00:10:32,920 Speaker 3: you know, where inflation spends most of its time, it's 207 00:10:32,960 --> 00:10:36,400 Speaker 3: not at two point zero percent, So you know, look, 208 00:10:37,360 --> 00:10:39,360 Speaker 3: should the FED go to a range sort of like 209 00:10:39,400 --> 00:10:42,200 Speaker 3: the RBA, the Reserve Bank of Australia like they do. 210 00:10:42,520 --> 00:10:46,120 Speaker 3: I mean, I think that that is a reasonable discussion, 211 00:10:46,440 --> 00:10:49,199 Speaker 3: but the FED has been pretty clear that that's not 212 00:10:49,280 --> 00:10:51,079 Speaker 3: going to be part of any of the debate that's 213 00:10:51,080 --> 00:10:54,040 Speaker 3: happening internally, and two point zero percent is going to 214 00:10:54,080 --> 00:10:56,120 Speaker 3: be the target for the foreseeable future. 215 00:10:56,800 --> 00:10:59,559 Speaker 1: Where do you put FED credibility right now? Given that 216 00:10:59,720 --> 00:11:03,200 Speaker 1: they kicked off the rate cut cycle so quickly slowed 217 00:11:03,240 --> 00:11:06,040 Speaker 1: down just a bit, now we're projecting so much fewer 218 00:11:06,520 --> 00:11:08,040 Speaker 1: rate cuts into next year. 219 00:11:08,559 --> 00:11:08,839 Speaker 5: Yeah. 220 00:11:08,920 --> 00:11:12,000 Speaker 3: I mean, look, I've been speaking with a number of folks, 221 00:11:12,120 --> 00:11:15,480 Speaker 3: you know, post the fom C meeting, and I think 222 00:11:15,480 --> 00:11:18,120 Speaker 3: a lot of them are sort of scratching their head. Okay, 223 00:11:18,160 --> 00:11:21,040 Speaker 3: you know what exactly just happened, and not just at 224 00:11:21,120 --> 00:11:25,120 Speaker 3: the FOC meeting that just passed, but over the last 225 00:11:25,160 --> 00:11:28,360 Speaker 3: few fo C meetings, So you know, is credibility being 226 00:11:28,480 --> 00:11:31,400 Speaker 3: tarnished or dinged up here? No, I don't think that's 227 00:11:31,400 --> 00:11:35,240 Speaker 3: the case. I think the FED has really very very 228 00:11:35,320 --> 00:11:39,560 Speaker 3: much earned the credibility that they do have. But I 229 00:11:39,600 --> 00:11:42,840 Speaker 3: do think people are are are wondering aloud about you know, 230 00:11:42,960 --> 00:11:46,920 Speaker 3: do they have it right? So there's I wouldn't call 231 00:11:46,960 --> 00:11:49,079 Speaker 3: it a crisis of confidence, not by a long shot, 232 00:11:49,640 --> 00:11:52,679 Speaker 3: but I do think people are are wondering if they 233 00:11:52,720 --> 00:11:53,600 Speaker 3: have the right take on this. 234 00:11:54,040 --> 00:11:56,559 Speaker 1: Really appreciate this, Tom, thanks for coming on with us 235 00:11:56,600 --> 00:11:59,719 Speaker 1: on the Christmas holiday. That's Tom Porcelli with us here 236 00:12:00,240 --> 00:12:05,280 Speaker 1: us economist at PGIM Fixed Income. And as we continue 237 00:12:05,360 --> 00:12:08,640 Speaker 1: on the special holiday edition of Bloomberg Daybreak, we're going 238 00:12:08,640 --> 00:12:11,800 Speaker 1: to bring you a special roundtable looking at stocks in 239 00:12:11,880 --> 00:12:14,960 Speaker 1: twenty twenty five. We're going to speak with Lori Calvacina, 240 00:12:15,120 --> 00:12:19,000 Speaker 1: head of US Equity Strategy at RBC Capital Markets, along 241 00:12:19,000 --> 00:12:22,800 Speaker 1: with Cameron Dawson, chief investment officer at New Edge. Well, 242 00:12:22,920 --> 00:12:25,680 Speaker 1: so stay with us. It's twenty minutes past the hour. 243 00:12:25,920 --> 00:12:41,199 Speaker 1: I'm Nathan Hager, and this is Bloomberg. Thanks for being 244 00:12:41,240 --> 00:12:44,240 Speaker 1: here on this special edition of Bloomberg Daybreak. Markets are 245 00:12:44,280 --> 00:12:47,559 Speaker 1: closed for the Christmas holiday. I'm Nathan Hager. We now 246 00:12:47,600 --> 00:12:50,240 Speaker 1: turn from the economy in twenty twenty five. So the 247 00:12:50,280 --> 00:12:53,440 Speaker 1: stock market twenty twenty four has certainly been a good year. 248 00:12:53,480 --> 00:12:55,880 Speaker 1: If you are a bull on Wall Street, will it 249 00:12:55,960 --> 00:12:59,320 Speaker 1: be even more happy returns in the new year. For that, 250 00:12:59,480 --> 00:13:02,400 Speaker 1: we're please welcome two of our favorite analysts on this market, 251 00:13:02,440 --> 00:13:06,480 Speaker 1: Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, 252 00:13:06,679 --> 00:13:09,920 Speaker 1: and New Edge Wealth chief investment officer Cameron Dawson, for 253 00:13:09,960 --> 00:13:12,840 Speaker 1: a holiday stock roundtable. Thanks to both of you for 254 00:13:12,880 --> 00:13:14,800 Speaker 1: being here. I mean, we've had a more than twenty 255 00:13:14,880 --> 00:13:17,319 Speaker 1: percent gain I think for the SMP five hundred year 256 00:13:17,400 --> 00:13:19,600 Speaker 1: to date, I'll start with you, Lourie. Can the market 257 00:13:19,679 --> 00:13:22,400 Speaker 1: keep up that kind of momentum into twenty twenty five? 258 00:13:23,320 --> 00:13:25,320 Speaker 6: So thanks for having me, Nathan, And look, you know, 259 00:13:25,400 --> 00:13:27,800 Speaker 6: I've got a ten percent target on the market for 260 00:13:27,880 --> 00:13:30,319 Speaker 6: twenty twenty five, at least where the market closed when 261 00:13:30,320 --> 00:13:32,360 Speaker 6: we put our numbers out. So we've been looking for 262 00:13:32,400 --> 00:13:35,040 Speaker 6: sixty six hundred, and we think that's going to be 263 00:13:35,040 --> 00:13:37,800 Speaker 6: another solid year of gains in the US eclby market, 264 00:13:37,880 --> 00:13:40,200 Speaker 6: probably a little bit slower than what we saw this year, 265 00:13:40,559 --> 00:13:42,240 Speaker 6: and we do think that we are going to have 266 00:13:42,320 --> 00:13:45,240 Speaker 6: you know, what some of my colleagues term is potholes, right, 267 00:13:45,320 --> 00:13:48,080 Speaker 6: some bounce of five to ten percent type drawdowns. So 268 00:13:48,120 --> 00:13:50,760 Speaker 6: we don't necessarily think it's going to be a completely 269 00:13:50,800 --> 00:13:52,520 Speaker 6: smooth ride. But at the end of the day, we 270 00:13:52,559 --> 00:13:55,160 Speaker 6: think a continued moderation in inflation is going to help 271 00:13:55,240 --> 00:13:59,320 Speaker 6: keep PE multiples elevated, and we think a solid earnings 272 00:13:59,320 --> 00:14:02,560 Speaker 6: grows back and a solid economy are also going to 273 00:14:02,559 --> 00:14:05,560 Speaker 6: help propel this market higher. But there may be some 274 00:14:05,880 --> 00:14:07,880 Speaker 6: volatility here and there that we have to deal with. 275 00:14:08,160 --> 00:14:10,920 Speaker 1: Cameron. We have seen a lot of analysts raise their 276 00:14:10,960 --> 00:14:14,560 Speaker 1: price targets for the SMP five hundred, particularly after the 277 00:14:14,600 --> 00:14:17,680 Speaker 1: election of President elect Donald Trump. Where are you sitting 278 00:14:17,720 --> 00:14:20,120 Speaker 1: at this point. 279 00:14:19,320 --> 00:14:22,320 Speaker 7: Well, it does create an interesting scenario where we're now 280 00:14:22,440 --> 00:14:26,240 Speaker 7: seeing that overall in the market we have stretch positioning, 281 00:14:26,400 --> 00:14:31,400 Speaker 7: stretch sentiments, stretched valuations, as well as pretty lofty growth 282 00:14:31,440 --> 00:14:35,920 Speaker 7: expectations depending on where you're looking at earning vestiments. All 283 00:14:35,960 --> 00:14:38,440 Speaker 7: of those things don't have to be a death knell 284 00:14:38,520 --> 00:14:42,040 Speaker 7: for forward returns. They're usually not good timing tools, but 285 00:14:42,240 --> 00:14:44,440 Speaker 7: it could be that we have to spend some time 286 00:14:44,640 --> 00:14:48,440 Speaker 7: growing into those higher valuations, which lead. 287 00:14:48,360 --> 00:14:50,160 Speaker 4: Us to expect two. 288 00:14:49,720 --> 00:14:53,160 Speaker 7: Distinct scenarios for the market in twenty twenty five. We 289 00:14:53,160 --> 00:14:55,680 Speaker 7: think we're either going to have a talking heads market, 290 00:14:55,800 --> 00:14:59,080 Speaker 7: a road to nowhere kind of sideways chopped that looks 291 00:14:59,120 --> 00:15:02,560 Speaker 7: like twenty fifteen or twenty eighteen, giving us time to 292 00:15:02,600 --> 00:15:06,720 Speaker 7: grow into those high valuations, or we have a prints 293 00:15:06,720 --> 00:15:09,520 Speaker 7: market where we sing, let's go crazy, let's party like 294 00:15:09,560 --> 00:15:12,240 Speaker 7: it's nineteen ninety nine, and we actually have a bubble 295 00:15:12,280 --> 00:15:15,680 Speaker 7: scenario where we have another strong year of returns driven 296 00:15:15,720 --> 00:15:18,840 Speaker 7: by valuation expansion, but of course we know what comes 297 00:15:18,880 --> 00:15:21,280 Speaker 7: on the other side. Of melt ups, which is typically 298 00:15:21,400 --> 00:15:24,600 Speaker 7: melt down. So in either scenario, we think that we 299 00:15:24,720 --> 00:15:28,040 Speaker 7: could have this increase in volatility instead of that low 300 00:15:28,120 --> 00:15:31,160 Speaker 7: volatility up into the right market that we've been in 301 00:15:31,240 --> 00:15:32,360 Speaker 7: for the last two years. 302 00:15:32,680 --> 00:15:36,000 Speaker 1: Love the eighties metaphors. Is this a nineteen eighties moment 303 00:15:36,080 --> 00:15:37,000 Speaker 1: for you, Laurie? 304 00:15:37,800 --> 00:15:37,960 Speaker 5: Oh? 305 00:15:38,000 --> 00:15:40,360 Speaker 6: Look, I do agree that we're going to have more 306 00:15:40,400 --> 00:15:42,720 Speaker 6: of that volatility, and I think one thing that makes 307 00:15:43,040 --> 00:15:47,080 Speaker 6: things so challenging is just this idea of animal spirits 308 00:15:47,120 --> 00:15:49,840 Speaker 6: being so strong post election and taking us into the 309 00:15:49,880 --> 00:15:52,480 Speaker 6: new year, and so on the one hand, we do 310 00:15:52,520 --> 00:15:54,560 Speaker 6: think that those good vibes get us off to a 311 00:15:54,600 --> 00:15:57,400 Speaker 6: good start. We heard a lot about companies in particular, 312 00:15:57,960 --> 00:16:01,280 Speaker 6: just seeing activity being frozen quarters and months ahead of 313 00:16:01,320 --> 00:16:03,360 Speaker 6: the election, so we expect some of that to be 314 00:16:03,480 --> 00:16:06,960 Speaker 6: unlocked and to really give us some good vibes. And 315 00:16:07,000 --> 00:16:09,800 Speaker 6: we've also seen consumer sentiment improve post election, and that 316 00:16:09,880 --> 00:16:13,880 Speaker 6: is something that's very normal after elections, including changings of 317 00:16:13,920 --> 00:16:17,040 Speaker 6: the guard. I do sort of sympathize with that possibility 318 00:16:17,080 --> 00:16:18,880 Speaker 6: of the prince market. I think that one of the 319 00:16:18,920 --> 00:16:22,360 Speaker 6: things that's tough for forecasters in twenty twenty five is 320 00:16:22,400 --> 00:16:24,240 Speaker 6: that you know, we all put out forecasts and we 321 00:16:24,320 --> 00:16:27,480 Speaker 6: have to articulate a base case, but the bear case 322 00:16:27,480 --> 00:16:30,400 Speaker 6: and the bull case sort of the tails around that forecast. 323 00:16:30,720 --> 00:16:33,680 Speaker 6: It seems like those are higher probability on both sides 324 00:16:33,720 --> 00:16:36,040 Speaker 6: of the equation, and those tales are just fatter in 325 00:16:36,120 --> 00:16:39,120 Speaker 6: the new year. And so I think the idea of 326 00:16:39,160 --> 00:16:42,240 Speaker 6: you know, kind of twelve month visibility, I'm not entirely 327 00:16:42,280 --> 00:16:44,240 Speaker 6: sure that we have it right now, to be honest, 328 00:16:44,280 --> 00:16:46,360 Speaker 6: I think we do our best as forecasters, but we 329 00:16:46,440 --> 00:16:48,680 Speaker 6: have to admit that things are going to be changing 330 00:16:48,760 --> 00:16:50,640 Speaker 6: quite rapidly in the year ahead. There's going to be 331 00:16:50,720 --> 00:16:53,760 Speaker 6: policy developments out of DC, and I think Cameron hit 332 00:16:53,760 --> 00:16:55,880 Speaker 6: the nail on the head in terms of stretched sentiment 333 00:16:55,920 --> 00:16:59,760 Speaker 6: and stretched valuation, and those things can last. It's very 334 00:16:59,760 --> 00:17:02,240 Speaker 6: hard to predict exactly when they pop out, but they 335 00:17:02,280 --> 00:17:04,920 Speaker 6: do tend to invoke some pain on the other side, 336 00:17:05,320 --> 00:17:07,399 Speaker 6: and I think that makes it very very tricky to 337 00:17:07,480 --> 00:17:08,720 Speaker 6: time everything next year. 338 00:17:09,040 --> 00:17:11,040 Speaker 1: So if we have this kind of froth in the 339 00:17:11,080 --> 00:17:14,240 Speaker 1: market right now, this lack of clarity, what do you 340 00:17:14,320 --> 00:17:18,040 Speaker 1: need to see, Cameron to bring more clarity? What are 341 00:17:18,080 --> 00:17:20,119 Speaker 1: you going to be looking for in the next couple 342 00:17:20,119 --> 00:17:22,119 Speaker 1: of months for us. 343 00:17:22,160 --> 00:17:25,359 Speaker 7: It all comes down to earning sestiments, and if you 344 00:17:25,400 --> 00:17:28,600 Speaker 7: look at what has been the key underpinning driver of 345 00:17:28,640 --> 00:17:31,160 Speaker 7: the last two years of the bull market has been 346 00:17:31,200 --> 00:17:35,159 Speaker 7: that twelve months forward earning sestiments continue to rise. And 347 00:17:35,200 --> 00:17:37,800 Speaker 7: we think in the next month, when we start the 348 00:17:37,920 --> 00:17:41,520 Speaker 7: fourth quarter earning season at the end of January, we're 349 00:17:41,520 --> 00:17:44,520 Speaker 7: going to start putting some of these earning vestments to the. 350 00:17:44,520 --> 00:17:47,480 Speaker 4: Test, because this is the first quarter that you had. 351 00:17:47,320 --> 00:17:51,200 Speaker 7: The expectation that the four ninety three, those non NAG 352 00:17:51,320 --> 00:17:52,360 Speaker 7: seven names. 353 00:17:52,320 --> 00:17:54,000 Speaker 4: Will really start picking up the. 354 00:17:54,000 --> 00:17:57,679 Speaker 7: Slack and earnings growth and pulling their weight. The question 355 00:17:57,880 --> 00:18:00,399 Speaker 7: is is that a bar that's too high. What you 356 00:18:00,520 --> 00:18:02,960 Speaker 7: have in the four ninety three going into next year 357 00:18:03,040 --> 00:18:06,960 Speaker 7: is a big reacceleration in earnings growth, and so we. 358 00:18:07,000 --> 00:18:08,920 Speaker 4: Have to ask the question of can that. 359 00:18:09,040 --> 00:18:12,119 Speaker 7: Part of the market truly deliver or are we still 360 00:18:12,160 --> 00:18:15,280 Speaker 7: having to fall back on this small subset of MAG 361 00:18:15,359 --> 00:18:18,320 Speaker 7: seven names that have been such a key underpinning of 362 00:18:18,359 --> 00:18:21,600 Speaker 7: the overall earnings estimates. So we're watching that twelve month 363 00:18:21,680 --> 00:18:25,159 Speaker 7: forward number on EPs estimates very closely because if that 364 00:18:25,320 --> 00:18:28,680 Speaker 7: starts the flatten oute market returns likely flatten out as well. 365 00:18:29,040 --> 00:18:32,960 Speaker 1: We're speaking with Cameron Dawson, the chief investment officer at 366 00:18:33,040 --> 00:18:36,159 Speaker 1: new Edge Wealth, and Lori Calvacina, head of US equity 367 00:18:36,200 --> 00:18:39,760 Speaker 1: strategy at RBC Capital Markets. Laurie, how do you view 368 00:18:39,800 --> 00:18:42,800 Speaker 1: the earnings backdrop heading into twenty twenty five? What do 369 00:18:42,880 --> 00:18:43,600 Speaker 1: you need to say? 370 00:18:44,440 --> 00:18:47,160 Speaker 6: Well, look, I think Cameron raised some excellent points, and 371 00:18:47,400 --> 00:18:49,680 Speaker 6: if I think about, you know, the earnings environment, I 372 00:18:49,720 --> 00:18:51,800 Speaker 6: would say sort of three things have been coming up 373 00:18:51,800 --> 00:18:55,200 Speaker 6: in my conversations. I am looking for two seventy one 374 00:18:55,240 --> 00:18:59,000 Speaker 6: on smp EPs next year. The consensus is about two 375 00:18:59,119 --> 00:19:01,639 Speaker 6: seventy five, so we're a little bit below, you know, 376 00:19:01,720 --> 00:19:04,480 Speaker 6: kind of that bottom up consensus, but kind of putting 377 00:19:04,520 --> 00:19:07,359 Speaker 6: that aside, you know, I would say three things is 378 00:19:07,840 --> 00:19:10,440 Speaker 6: number one. If you look at this past year twenty 379 00:19:10,480 --> 00:19:13,080 Speaker 6: twenty four, there was an enormous amount of download guidance 380 00:19:13,080 --> 00:19:16,240 Speaker 6: that happened before reporting season actually kicked off, So companies 381 00:19:16,280 --> 00:19:19,159 Speaker 6: really tried to keep the bar very low, and I 382 00:19:19,160 --> 00:19:21,080 Speaker 6: think that set them up very well for this year. 383 00:19:21,119 --> 00:19:23,399 Speaker 6: So I'm very curious to see if companies try to 384 00:19:23,440 --> 00:19:26,480 Speaker 6: pull that rabbit out of a hat again in twenty 385 00:19:26,520 --> 00:19:29,239 Speaker 6: twenty five. So you know, I'm not expecting, frankly, the 386 00:19:29,280 --> 00:19:31,720 Speaker 6: tone to be all that great when that reporting seasons 387 00:19:31,800 --> 00:19:34,480 Speaker 6: kicks off in late January. The second thing is I 388 00:19:34,480 --> 00:19:37,040 Speaker 6: want to see what companies say about the dollar. We've 389 00:19:37,080 --> 00:19:39,480 Speaker 6: seen an increase in the dollar a year over a year, 390 00:19:39,560 --> 00:19:42,280 Speaker 6: and that does tend to push earning's revisions down. We 391 00:19:42,359 --> 00:19:44,800 Speaker 6: haven't really seen that yet, but it does tend to 392 00:19:44,840 --> 00:19:47,760 Speaker 6: hit most sectors in the market, aside from things like financials, 393 00:19:47,800 --> 00:19:50,840 Speaker 6: reads and utilities. So we're watching to see if we 394 00:19:50,880 --> 00:19:53,520 Speaker 6: might get some truing up there. And then the last thing, 395 00:19:53,600 --> 00:19:55,560 Speaker 6: you know, that I'm really focused on when we get 396 00:19:55,560 --> 00:19:58,480 Speaker 6: that January reporting season starting up is what are companies 397 00:19:58,520 --> 00:20:01,320 Speaker 6: saying about margins and costs. Bloomberg does a great job 398 00:20:01,440 --> 00:20:04,080 Speaker 6: of the Bloomberg Intelligence folks of tracking the bottom up 399 00:20:04,119 --> 00:20:06,720 Speaker 6: sell side consensus estimates, and what they're showing in their 400 00:20:06,760 --> 00:20:09,640 Speaker 6: margin stats is that we've been seeing twenty twenty five 401 00:20:09,680 --> 00:20:12,879 Speaker 6: operating margins for the S and P really coming down 402 00:20:12,960 --> 00:20:15,800 Speaker 6: since the middle of twenty twenty four, and that's really 403 00:20:15,880 --> 00:20:20,119 Speaker 6: coincided in my work with just increased concerns about cost 404 00:20:20,240 --> 00:20:22,800 Speaker 6: and inflation. We really do think that we're going to 405 00:20:22,840 --> 00:20:25,520 Speaker 6: need to see sort of what companies are saying about 406 00:20:25,520 --> 00:20:28,800 Speaker 6: that cost environment because strong margins have really been keeping 407 00:20:28,840 --> 00:20:31,679 Speaker 6: earnings forecasts aloft, and if that story ends, I think 408 00:20:31,720 --> 00:20:33,280 Speaker 6: it could be problematic for stocks. 409 00:20:33,600 --> 00:20:35,800 Speaker 1: It's really interesting to bring up those points about the 410 00:20:35,880 --> 00:20:41,080 Speaker 1: dollar and about margins the potential for higher costs. That 411 00:20:41,200 --> 00:20:45,480 Speaker 1: raises the issue of what policy could mean for companies 412 00:20:45,560 --> 00:20:49,160 Speaker 1: going forward in terms of FED policy and fiscal policy 413 00:20:49,160 --> 00:20:51,640 Speaker 1: out of Washington, d C. How much does that affect 414 00:20:52,160 --> 00:20:57,080 Speaker 1: how stocks could travel in twenty twenty five For you, Cameron, Well. 415 00:20:56,880 --> 00:20:59,359 Speaker 7: It's been very interesting over the last couple of years 416 00:20:59,359 --> 00:21:03,439 Speaker 7: how resilient stocks have been to changes and expectations for 417 00:21:03,520 --> 00:21:07,000 Speaker 7: FED policy. If we contrast how we started twenty twenty 418 00:21:07,000 --> 00:21:09,920 Speaker 7: four with six cuts priced in six and a half 419 00:21:09,960 --> 00:21:13,000 Speaker 7: cuts actually into the beginning of the year, and at 420 00:21:13,000 --> 00:21:15,360 Speaker 7: the end of the day we only got four cuts, 421 00:21:15,400 --> 00:21:18,119 Speaker 7: and that we had a more hawkish FED than expected. 422 00:21:18,520 --> 00:21:20,880 Speaker 4: Stocks had this ability to shake that off. 423 00:21:21,000 --> 00:21:23,920 Speaker 7: The question is can they continue to do that if 424 00:21:23,960 --> 00:21:27,480 Speaker 7: the Fed does not deliver on those cuts in twenty 425 00:21:27,520 --> 00:21:31,000 Speaker 7: twenty five that are now projecting to be two cuts 426 00:21:31,000 --> 00:21:34,200 Speaker 7: for next year. If we think about how that translates 427 00:21:34,240 --> 00:21:36,840 Speaker 7: inn into the dollar, If the Fed continues to be 428 00:21:37,040 --> 00:21:40,080 Speaker 7: in this position where they're seen as more hawkish, more 429 00:21:40,080 --> 00:21:43,080 Speaker 7: restrictive in their policy than the rest of the world, 430 00:21:43,119 --> 00:21:46,080 Speaker 7: which is having to cut because their economies are weaker. 431 00:21:46,440 --> 00:21:48,919 Speaker 7: The end result is that you have that continued upward 432 00:21:48,920 --> 00:21:51,560 Speaker 7: pressure on the dollar, which, of course, as Lori pointed out, 433 00:21:51,920 --> 00:21:56,080 Speaker 7: could mean challenges for company earnings that are relying on 434 00:21:56,200 --> 00:21:59,440 Speaker 7: overseas revenues. So if we think then in the context 435 00:21:59,440 --> 00:22:02,040 Speaker 7: of financial conditions, we still are in a place where 436 00:22:02,080 --> 00:22:05,919 Speaker 7: financial conditions are very loose, very easy, and considered to 437 00:22:05,960 --> 00:22:09,800 Speaker 7: be supportive or even stimulative for growth. The question for 438 00:22:09,840 --> 00:22:12,960 Speaker 7: twenty twenty five is how that progresses. If the FED 439 00:22:13,000 --> 00:22:16,119 Speaker 7: continues to remain relatively hawkish to the rest of the world, 440 00:22:16,359 --> 00:22:19,959 Speaker 7: could we see financial conditions tighten and thus feed into 441 00:22:20,080 --> 00:22:21,240 Speaker 7: risk asset prices. 442 00:22:21,560 --> 00:22:23,880 Speaker 1: What's your view on that, Laurie, Do you think financial 443 00:22:23,880 --> 00:22:27,199 Speaker 1: conditions are going to tighten and can companies continue to 444 00:22:27,240 --> 00:22:31,080 Speaker 1: sort of look past some of the hawkishness that is 445 00:22:31,119 --> 00:22:32,320 Speaker 1: starting to build up in the FED. 446 00:22:32,920 --> 00:22:35,679 Speaker 6: Well, it's a great question, Nathan, And I'll tell you know, 447 00:22:35,920 --> 00:22:38,040 Speaker 6: after this last FED meeting, you know, there were sort 448 00:22:38,080 --> 00:22:40,280 Speaker 6: of two things that jumped into my mind based on 449 00:22:40,359 --> 00:22:43,520 Speaker 6: you know, sort of said conversations and said policy impact 450 00:22:43,560 --> 00:22:46,720 Speaker 6: on data from the past year. And the first one was, 451 00:22:46,800 --> 00:22:48,720 Speaker 6: if I think back to what I was reading from 452 00:22:48,720 --> 00:22:51,760 Speaker 6: companies in our transcript reviews, you know, really earlier on 453 00:22:51,840 --> 00:22:54,679 Speaker 6: in the year, one of the big points of uncertainty 454 00:22:54,680 --> 00:22:56,919 Speaker 6: that companies were struggling with was just the sort of 455 00:22:57,000 --> 00:22:59,679 Speaker 6: uncertainty over the path of interest rates. And so to 456 00:22:59,760 --> 00:23:02,240 Speaker 6: the then that we're bringing some of that uncertainty back, 457 00:23:02,960 --> 00:23:04,760 Speaker 6: I do worry a little bit that it could weigh 458 00:23:04,800 --> 00:23:08,120 Speaker 6: on corporate confidence. The second thing is if I think 459 00:23:08,119 --> 00:23:11,120 Speaker 6: about my own modeling for S and P earnings. I've 460 00:23:11,119 --> 00:23:12,800 Speaker 6: been talking about this a lot in my meetings with 461 00:23:12,880 --> 00:23:16,600 Speaker 6: investors lately. It's not that the debt burdens are unmanageable, 462 00:23:17,000 --> 00:23:19,159 Speaker 6: but I have, you know, one line item in my 463 00:23:19,240 --> 00:23:22,320 Speaker 6: earnings model where we try to forecast interest expense relatives 464 00:23:22,320 --> 00:23:25,280 Speaker 6: to sales, and it's based on a variety of macro indicators. 465 00:23:25,640 --> 00:23:27,520 Speaker 6: And you know, long story short, that part of my 466 00:23:27,600 --> 00:23:31,120 Speaker 6: model always behaves very very well, and the interest expense 467 00:23:31,200 --> 00:23:34,440 Speaker 6: has tended to be pretty low. What I've noticed the 468 00:23:34,520 --> 00:23:38,040 Speaker 6: last couple quarters is that the interest expense line item 469 00:23:38,080 --> 00:23:40,399 Speaker 6: has been coming in a bit hotter than my forecast. 470 00:23:41,119 --> 00:23:43,480 Speaker 6: And then I also, you know, recently took a look 471 00:23:43,480 --> 00:23:45,320 Speaker 6: at the effect of interest rates that S and P 472 00:23:45,440 --> 00:23:48,080 Speaker 6: five hundred companies are paying on the debt they have outstanding, 473 00:23:48,119 --> 00:23:51,200 Speaker 6: and that's moved out pretty meaningfully. So overall, I look 474 00:23:51,240 --> 00:23:53,520 Speaker 6: at this as it just seems like it's getting a 475 00:23:53,520 --> 00:23:57,159 Speaker 6: little bit harder for companies to manage other debt burdens 476 00:23:57,160 --> 00:23:59,960 Speaker 6: from an interest rate perspective, and so I do want 477 00:24:00,080 --> 00:24:02,600 Speaker 6: under if maybe that could dampen corporate confidence just a 478 00:24:02,640 --> 00:24:03,640 Speaker 6: little bit in the new year. 479 00:24:04,000 --> 00:24:06,400 Speaker 1: And Cameron, what do you see as potentially the biggest 480 00:24:06,600 --> 00:24:09,360 Speaker 1: headwind to the rally as we get into twenty five. 481 00:24:10,560 --> 00:24:12,000 Speaker 4: I would certainly agree with Lori. 482 00:24:12,320 --> 00:24:14,880 Speaker 7: The idea is that a lot of companies were banking 483 00:24:14,920 --> 00:24:17,240 Speaker 7: on the FED bailing them out in twenty twenty five. 484 00:24:17,400 --> 00:24:20,720 Speaker 7: It was a survived to twenty twenty five kind of mentality, 485 00:24:21,160 --> 00:24:24,160 Speaker 7: mostly within the small and mid cap line of things, 486 00:24:24,160 --> 00:24:28,280 Speaker 7: where we tend to see less profitable companies, more reliance 487 00:24:28,320 --> 00:24:31,800 Speaker 7: on short term debt and higher overall debt levels. And 488 00:24:31,880 --> 00:24:34,439 Speaker 7: so if we think about the FED staying tighter and 489 00:24:34,680 --> 00:24:38,560 Speaker 7: interest rates staying higher, that would certainly create a challenge 490 00:24:38,560 --> 00:24:41,720 Speaker 7: for companies that we're expecting the exact opposite to happen, 491 00:24:42,080 --> 00:24:45,679 Speaker 7: So that could effectively weigh on some of this hope 492 00:24:45,680 --> 00:24:48,919 Speaker 7: and dream for a cyclical recovery because you're not getting 493 00:24:48,920 --> 00:24:52,280 Speaker 7: the support from lower interest rates, and just create an 494 00:24:52,280 --> 00:24:55,440 Speaker 7: earnings headwind that is not contemplated in the market that's 495 00:24:55,520 --> 00:24:59,240 Speaker 7: trading still at twenty two times forward earnings. So it 496 00:24:59,320 --> 00:25:02,360 Speaker 7: certainly would be a challenge and potentially something that would 497 00:25:02,400 --> 00:25:04,440 Speaker 7: come right into terms with this high valuation. 498 00:25:04,960 --> 00:25:07,199 Speaker 1: Stay with us. We're going to continue this conversation with 499 00:25:07,280 --> 00:25:10,439 Speaker 1: Cameron Dawson of New Edge Wealth and RBC Capital Markets 500 00:25:10,480 --> 00:25:13,280 Speaker 1: Lori Calvacina. See what areas of the markets you two 501 00:25:13,520 --> 00:25:17,280 Speaker 1: like in twenty twenty five. As this special Christmas edition 502 00:25:17,359 --> 00:25:21,440 Speaker 1: at Bloomberg Daybreak continues, I'm Nathan Hager, and this is Bloomberg. 503 00:25:29,760 --> 00:25:32,160 Speaker 1: Thanks again for being with us on this special edition 504 00:25:32,240 --> 00:25:35,560 Speaker 1: of Bloomberg Daybreak. I'm Nathan Hager. Markets are closed for 505 00:25:35,560 --> 00:25:38,800 Speaker 1: the Christmas holiday, but we continue our market roundtable now 506 00:25:38,840 --> 00:25:42,280 Speaker 1: with Cameron Dawson, chief investment officer at New Edge Wealth 507 00:25:42,600 --> 00:25:46,679 Speaker 1: and RBC Capital Markets, Head of US Equity Strategy, Lori Calvcina, 508 00:25:46,720 --> 00:25:49,280 Speaker 1: And as we wrap up this conversation, let's talk about 509 00:25:49,320 --> 00:25:51,959 Speaker 1: some areas of the stock market that you both like 510 00:25:52,119 --> 00:25:55,320 Speaker 1: in twenty twenty five. How about we start with you, Cameron, Well, we. 511 00:25:55,359 --> 00:25:59,520 Speaker 7: Are looking more at value areas going into twenty twenty five. 512 00:26:00,200 --> 00:26:02,640 Speaker 7: Buying value broadly. We think that there are a lot 513 00:26:02,680 --> 00:26:07,199 Speaker 7: of low quality and value traps within the overall value style, 514 00:26:07,640 --> 00:26:11,200 Speaker 7: but the degree of underperformance has been so pronounced versus 515 00:26:11,240 --> 00:26:13,439 Speaker 7: growth that we think a lot of companies are just 516 00:26:13,480 --> 00:26:16,919 Speaker 7: simply being ignored. If you look over the last two years, 517 00:26:17,000 --> 00:26:20,840 Speaker 7: growth or value has underperformed growth by over sixty percent, 518 00:26:21,280 --> 00:26:25,120 Speaker 7: which just leaves rooms for more valuation kind of buffer 519 00:26:25,240 --> 00:26:27,720 Speaker 7: for those lower, lower priced companies. 520 00:26:28,040 --> 00:26:29,080 Speaker 4: So we're being selective. 521 00:26:29,119 --> 00:26:32,600 Speaker 7: We're putting a quality overlay on that value side of things, 522 00:26:32,640 --> 00:26:35,720 Speaker 7: looking for good cash flow, good return on invested capital, 523 00:26:36,080 --> 00:26:38,480 Speaker 7: but looking for names that are trading at a discount 524 00:26:38,480 --> 00:26:41,600 Speaker 7: simply because they have been left behind over the last 525 00:26:41,600 --> 00:26:42,240 Speaker 7: two years. 526 00:26:42,359 --> 00:26:44,960 Speaker 1: It feels like growth has been the place to be 527 00:26:45,119 --> 00:26:49,040 Speaker 1: though for quite a while. Laurie, what's your view look, 528 00:26:49,080 --> 00:26:49,640 Speaker 1: I would. 529 00:26:49,440 --> 00:26:51,919 Speaker 6: Just say on growth versus value. You know, in our 530 00:26:51,960 --> 00:26:55,000 Speaker 6: year head outlook, we gave value a tiny edge just 531 00:26:55,040 --> 00:26:58,679 Speaker 6: because growth has been so crowded and so overvalued. But 532 00:26:58,720 --> 00:27:00,280 Speaker 6: one of the things that has come up up in 533 00:27:00,359 --> 00:27:02,960 Speaker 6: conversations over the last few weeks has just been there's 534 00:27:02,960 --> 00:27:05,200 Speaker 6: not as much opportunity and value as there was six 535 00:27:05,240 --> 00:27:08,240 Speaker 6: months ago, and growth has really been fighting back in 536 00:27:08,320 --> 00:27:11,880 Speaker 6: terms of defending its earnings dominance. So I wouldn't completely 537 00:27:11,880 --> 00:27:14,480 Speaker 6: give up on things like the mag seven, you know, 538 00:27:14,480 --> 00:27:16,760 Speaker 6: I would look for opportunities on the value side of 539 00:27:16,800 --> 00:27:19,200 Speaker 6: the market. But I do think until we really see 540 00:27:19,240 --> 00:27:23,240 Speaker 6: the earnings growth leadership seeded from growth to value, I 541 00:27:23,240 --> 00:27:25,120 Speaker 6: think that growth is going to continue to fight back 542 00:27:25,160 --> 00:27:27,960 Speaker 6: and you're going to see volatile trends. I will say 543 00:27:28,000 --> 00:27:31,040 Speaker 6: in that context, one of my favorite sectors has a 544 00:27:31,040 --> 00:27:33,320 Speaker 6: good mix of growth and value within it, And so 545 00:27:33,800 --> 00:27:36,240 Speaker 6: our fresh money idea for twenty twenty five at the 546 00:27:36,280 --> 00:27:40,920 Speaker 6: sector level is communications services. It's cheap, it's had positive 547 00:27:40,920 --> 00:27:43,280 Speaker 6: earnings revision trends. There has not been a lot of 548 00:27:43,359 --> 00:27:46,159 Speaker 6: talk about politics in this sector, which I frankly like, 549 00:27:46,400 --> 00:27:48,639 Speaker 6: just given how a number of things could go in 550 00:27:48,720 --> 00:27:52,000 Speaker 6: multiple directions. And when I look at my industry work, 551 00:27:52,000 --> 00:27:55,119 Speaker 6: there's pretty broad based appeal by industry within that sector. 552 00:27:55,240 --> 00:27:58,040 Speaker 6: So that's really the one we're emphasizing, you know, on 553 00:27:58,119 --> 00:28:00,439 Speaker 6: more of the value side, I see opportunity and smaller 554 00:28:00,440 --> 00:28:03,080 Speaker 6: cap financial especially regional banks, and on more of the 555 00:28:03,119 --> 00:28:06,200 Speaker 6: growth a side. Areas we've been highlighting have been things 556 00:28:06,240 --> 00:28:08,960 Speaker 6: like software and IT services, which still have pretty reasonable 557 00:28:09,040 --> 00:28:11,560 Speaker 6: valuations and very strong earning trovision trends. 558 00:28:11,680 --> 00:28:13,680 Speaker 1: That's going to be interesting to see which, if any 559 00:28:13,720 --> 00:28:17,920 Speaker 1: sectors can stay politically agnostic heading into twenty twenty five. 560 00:28:17,920 --> 00:28:19,879 Speaker 1: But in terms of the sector level, Cameron, what are 561 00:28:19,920 --> 00:28:21,000 Speaker 1: you looking at? 562 00:28:21,600 --> 00:28:25,480 Speaker 7: Well, we find opportunities across sectors, and we're more focused 563 00:28:25,560 --> 00:28:29,680 Speaker 7: on the quality factor quality style of investing. 564 00:28:29,480 --> 00:28:31,160 Speaker 4: Which is just to say that if we look over 565 00:28:31,200 --> 00:28:31,960 Speaker 4: the last. 566 00:28:31,640 --> 00:28:34,480 Speaker 7: Three months, there has been a big deterioration in the 567 00:28:34,600 --> 00:28:39,240 Speaker 7: performance of quality names versus low quality, high beta, high 568 00:28:39,240 --> 00:28:42,440 Speaker 7: momentum parts of the market. But what's interesting is that 569 00:28:42,560 --> 00:28:45,600 Speaker 7: high beta, high momentum, low quality are all in the 570 00:28:45,720 --> 00:28:49,920 Speaker 7: ninety ninethis percentile of outperformance. So we think that this 571 00:28:50,080 --> 00:28:52,880 Speaker 7: is the time to not chase that part of the market, 572 00:28:52,920 --> 00:28:55,680 Speaker 7: but instead look for those names as I mentioned earlier, 573 00:28:56,040 --> 00:28:57,160 Speaker 7: with good balance. 574 00:28:56,880 --> 00:28:59,680 Speaker 4: Sheets, with good free cash flow that simply. 575 00:28:59,360 --> 00:29:02,280 Speaker 7: Have been left behind in the last few months of 576 00:29:02,320 --> 00:29:05,360 Speaker 7: the low quality rally and using that as an opportunity 577 00:29:05,400 --> 00:29:07,960 Speaker 7: to build into positions that we would consider Crown. 578 00:29:07,800 --> 00:29:10,480 Speaker 1: Jewels and Laurie, I know you said that you wouldn't 579 00:29:10,520 --> 00:29:13,240 Speaker 1: count growth out just yet, but can the MAG seven 580 00:29:13,280 --> 00:29:15,960 Speaker 1: continue the kind of momentum that we've seen over the 581 00:29:16,040 --> 00:29:17,640 Speaker 1: last several months. 582 00:29:17,720 --> 00:29:19,719 Speaker 6: You know, it's a great question, and I think one 583 00:29:19,760 --> 00:29:23,000 Speaker 6: of the reasons why this rotation has gotten started. It 584 00:29:23,040 --> 00:29:26,720 Speaker 6: hasn't really been smooth. But one thing you're seeing in 585 00:29:26,760 --> 00:29:30,000 Speaker 6: the MAG seven names is a acceleration of garning's growth 586 00:29:30,000 --> 00:29:32,480 Speaker 6: in terms of expectations that are embedded in the market 587 00:29:32,800 --> 00:29:36,720 Speaker 6: and the individual companies for twenty twenty five. So whenever 588 00:29:36,760 --> 00:29:40,040 Speaker 6: we see hot growth momentum, ayas with accelerating Earning's growth, 589 00:29:40,120 --> 00:29:41,920 Speaker 6: you know, if I think back over the last couple 590 00:29:41,960 --> 00:29:44,800 Speaker 6: decades in my career, it tends to make investors very 591 00:29:44,800 --> 00:29:47,280 Speaker 6: skittish and it tends to make you know, any sort 592 00:29:47,280 --> 00:29:51,960 Speaker 6: of misstep really magnified in terms of negative price reaction. 593 00:29:52,440 --> 00:29:54,440 Speaker 6: So I do think that that is a high hurdle. 594 00:29:55,040 --> 00:29:57,280 Speaker 6: That being said, the value part of the market is 595 00:29:57,320 --> 00:30:01,160 Speaker 6: just not stepping up and taking over leadership. And so 596 00:30:01,280 --> 00:30:04,120 Speaker 6: when we look at twenty twenty five, earnings growth expectations. 597 00:30:04,120 --> 00:30:06,600 Speaker 6: The MAG seven, you know, is I believe it's down 598 00:30:06,640 --> 00:30:10,000 Speaker 6: in the single digits, but so is sort of the 599 00:30:10,040 --> 00:30:11,920 Speaker 6: rest of the market, and it's not. The rest of 600 00:30:11,920 --> 00:30:15,240 Speaker 6: the market is not able to surpass that MAG seven 601 00:30:15,240 --> 00:30:17,520 Speaker 6: earnings growth. And when I look, you know, take a 602 00:30:17,520 --> 00:30:19,400 Speaker 6: look at it slightly differently, and I look at the 603 00:30:19,400 --> 00:30:22,800 Speaker 6: relative PE between a basket of top ten market cap 604 00:30:22,880 --> 00:30:24,840 Speaker 6: names in the S and P, and I compare that 605 00:30:25,440 --> 00:30:27,360 Speaker 6: with the rest of the market, and then I do 606 00:30:27,440 --> 00:30:30,880 Speaker 6: the same analysis on long term earnings growth expectations. The 607 00:30:30,960 --> 00:30:34,600 Speaker 6: relative pe is tracking the relative long term earnings growth expectations. 608 00:30:34,600 --> 00:30:37,880 Speaker 6: They're almost an identical chart. So MAG seven is getting 609 00:30:37,880 --> 00:30:42,080 Speaker 6: that superior valuation because the earnings growth expectations longer term 610 00:30:42,120 --> 00:30:44,600 Speaker 6: are still vastly superior to the rest of the market. 611 00:30:44,960 --> 00:30:47,960 Speaker 6: And until you see something change in terms of long 612 00:30:48,040 --> 00:30:51,200 Speaker 6: term earnings growth expectations, that could be MAG seven falling apart, 613 00:30:51,240 --> 00:30:54,240 Speaker 6: that could be rest of market really surging. But until 614 00:30:54,280 --> 00:30:56,800 Speaker 6: something changes, I think that you're going to be stuck 615 00:30:56,840 --> 00:31:01,080 Speaker 6: in elevated relative valuations for that top ten seven cohorts. 616 00:31:01,880 --> 00:31:04,440 Speaker 6: And they basically the bottom line is they deserve the 617 00:31:04,440 --> 00:31:07,240 Speaker 6: premium valuations that they're getting from an earnings perspective. 618 00:31:07,840 --> 00:31:09,520 Speaker 1: Thanks for this, Laurie, and great to have you with 619 00:31:09,600 --> 00:31:13,120 Speaker 1: us on as well. Cameron Dawson. That's new Edge Wealth 620 00:31:13,200 --> 00:31:16,920 Speaker 1: Chief investment Officer, Cameron Dawson with us along with Lori Calvacina, 621 00:31:17,040 --> 00:31:20,760 Speaker 1: had of US Equity Strategy at RBC Capital Markets. And 622 00:31:20,840 --> 00:31:23,480 Speaker 1: we're going to wrap up our Daybreak Christmas special with 623 00:31:23,560 --> 00:31:27,040 Speaker 1: a focus on the retailers this holiday season. Who better 624 00:31:27,080 --> 00:31:29,840 Speaker 1: to do that with than Bert Flick and Jert managing 625 00:31:29,840 --> 00:31:34,240 Speaker 1: director at Strategic Resource Group. Happy Holidays. Bert, I think 626 00:31:34,280 --> 00:31:37,080 Speaker 1: it was a pretty happy holiday kickoff in terms of 627 00:31:37,160 --> 00:31:40,800 Speaker 1: shopping season. So how the retailers do good kickoff? 628 00:31:40,840 --> 00:31:45,480 Speaker 5: If you said, Nathan, in as stable finished, adjusted for inflation, 629 00:31:45,960 --> 00:31:49,480 Speaker 5: November December sales should be up about one percent. Given 630 00:31:49,520 --> 00:31:53,360 Speaker 5: the two thirds of American consumers is reported on the 631 00:31:53,360 --> 00:31:58,040 Speaker 5: Bloomberg terminal or living paycheck to paycheck, good results for retail. 632 00:31:57,680 --> 00:32:02,520 Speaker 1: Overall percent sounds pretty tepid. What does that tell us 633 00:32:02,520 --> 00:32:03,640 Speaker 1: about twenty twenty. 634 00:32:03,400 --> 00:32:07,200 Speaker 5: Five concerns ahead in twenty twenty five, Nathan, We're already 635 00:32:07,240 --> 00:32:11,760 Speaker 5: seeing it in the wipeout of chain drug Chain, Dollar Specialty, 636 00:32:12,360 --> 00:32:16,080 Speaker 5: Best Buy, Consumer Electronics, The only ones that are really winning, Nathan, 637 00:32:16,200 --> 00:32:20,040 Speaker 5: is food and off price, and the rest are struggling 638 00:32:20,080 --> 00:32:25,920 Speaker 5: and choice as many consumers for Thanksgiving, Christmas, Sonica, New 639 00:32:26,000 --> 00:32:31,880 Speaker 5: Year's are buying buy now, pay for part of it now, 640 00:32:32,000 --> 00:32:33,320 Speaker 5: pay for the rest of it later. 641 00:32:34,000 --> 00:32:36,239 Speaker 1: Does that tell you that we're going to see a 642 00:32:36,280 --> 00:32:40,160 Speaker 1: downturn getting into twenty twenty five if the consumer continues 643 00:32:40,200 --> 00:32:43,720 Speaker 1: to be selective as it has been throughout twenty twenty. 644 00:32:43,440 --> 00:32:47,600 Speaker 5: Four, Nathan, Yes, to your present point, we're expecting a 645 00:32:47,680 --> 00:32:52,600 Speaker 5: strategic resource group downturn. The XRT on the Bloomberg terminal, 646 00:32:52,680 --> 00:32:55,240 Speaker 5: the S and P retail indexes at an all time 647 00:32:55,320 --> 00:33:00,520 Speaker 5: high going into this last week of December, and Walmart's 648 00:33:00,560 --> 00:33:05,800 Speaker 5: pretty heavily valued targets probably undervalued with the Taylor Swift 649 00:33:05,840 --> 00:33:08,880 Speaker 5: tailwind that will really help them the rest of this 650 00:33:08,960 --> 00:33:12,240 Speaker 5: month and into the new year, but most of retail struggling. 651 00:33:12,600 --> 00:33:16,160 Speaker 5: What's really a leading indicator on the terminal, Nathan, is 652 00:33:16,280 --> 00:33:21,280 Speaker 5: the restaurant sales on a cash on cash basis were 653 00:33:21,360 --> 00:33:25,880 Speaker 5: negative last month for the first time in about four years. 654 00:33:26,280 --> 00:33:29,960 Speaker 1: So where do you see consumers concentrating their spending in 655 00:33:30,040 --> 00:33:32,120 Speaker 1: twenty twenty five? Is it just going to be all 656 00:33:32,160 --> 00:33:35,600 Speaker 1: about staples or is there room for some of those 657 00:33:35,640 --> 00:33:38,000 Speaker 1: big ticket items to get a little bit of a 658 00:33:38,040 --> 00:33:39,000 Speaker 1: look at least. 659 00:33:39,680 --> 00:33:44,480 Speaker 5: Well big ticket items. Nathan has Bloomberg's reported, well, since 660 00:33:45,360 --> 00:33:51,080 Speaker 5: Black Friday is Triple A is expecting record travel, close 661 00:33:51,120 --> 00:33:54,400 Speaker 5: to one hundred and ten million travelers, most by power. 662 00:33:55,040 --> 00:33:57,440 Speaker 5: But they're going to be spending on experience. This is 663 00:33:57,480 --> 00:34:01,360 Speaker 5: seventy percent of the expenditure to your question, is going 664 00:34:01,400 --> 00:34:05,480 Speaker 5: to be on an experiences thirty percent on retail. Retail 665 00:34:05,600 --> 00:34:10,280 Speaker 5: people say is the best, Well, they're great bargains between 666 00:34:10,360 --> 00:34:15,200 Speaker 5: today Christmas and Hanika Day into New Year's the smart shoppers, 667 00:34:15,200 --> 00:34:17,480 Speaker 5: a lot of smart the stores and wait till Calendar 668 00:34:17,920 --> 00:34:21,359 Speaker 5: twenty twenty five for desperation discounting. As the retail ice 669 00:34:21,440 --> 00:34:25,360 Speaker 5: age accelerates and more retailers contract or some even collapse 670 00:34:25,400 --> 00:34:28,440 Speaker 5: into bankruptcy and they have to liquidate more and more inventory. 671 00:34:29,000 --> 00:34:32,480 Speaker 1: Wonder if that points to an opportunity for some retailers 672 00:34:32,520 --> 00:34:35,000 Speaker 1: on an aspect that we've talked about in the past, 673 00:34:35,040 --> 00:34:38,600 Speaker 1: providing more of an experience on the brick and mortar side. 674 00:34:38,719 --> 00:34:41,920 Speaker 1: Is that something that's a possibility into next year? So 675 00:34:41,960 --> 00:34:45,759 Speaker 1: does that point to an opportunity for retailers to provide 676 00:34:46,200 --> 00:34:49,720 Speaker 1: more of an experience along the lines of an aspect 677 00:34:49,719 --> 00:34:51,400 Speaker 1: of retail that we've talked about in the Passport. 678 00:34:52,520 --> 00:34:55,960 Speaker 5: Nathan, you're raising a really important point about experiences, and yes, 679 00:34:56,000 --> 00:35:00,759 Speaker 5: they're doing it well in London, Dubai, Paris, Toronto and 680 00:35:00,880 --> 00:35:04,160 Speaker 5: throughout the Asia Pacific region. They're not doing it in 681 00:35:04,200 --> 00:35:07,320 Speaker 5: the US, and we're seeing sax Fifth Avenue not investing 682 00:35:07,320 --> 00:35:10,200 Speaker 5: in windows for the first time in their history, and 683 00:35:10,880 --> 00:35:15,440 Speaker 5: we're seeing the ones who have experiences are winning. Specifically, 684 00:35:15,560 --> 00:35:20,000 Speaker 5: Target wall the Wall on Taylor's Swift's eras tour release 685 00:35:20,040 --> 00:35:25,200 Speaker 5: of her book, her music, her licensed merchandising. Big win 686 00:35:25,280 --> 00:35:29,480 Speaker 5: for Target. Kroger Company always a big partner of Disney, 687 00:35:29,920 --> 00:35:34,759 Speaker 5: big winner experientially Wall the Wall from Disney to societal 688 00:35:34,840 --> 00:35:39,399 Speaker 5: good for people from all walks of life, especially for 689 00:35:39,760 --> 00:35:44,080 Speaker 5: people who are nutritionally and economically target challenged. So win 690 00:35:44,200 --> 00:35:47,680 Speaker 5: for Kroger, win for Target, not a win for the 691 00:35:47,680 --> 00:35:50,440 Speaker 5: rest of retail in terms of experiential, which is so 692 00:35:50,520 --> 00:35:51,759 Speaker 5: important this time of year. 693 00:35:52,080 --> 00:35:55,319 Speaker 1: How do you see retailers making that kind of investment 694 00:35:55,560 --> 00:35:58,759 Speaker 1: in an experience? Do they have the wherewithal to do it? 695 00:36:00,080 --> 00:36:06,360 Speaker 5: Nathan, it's ironically or radiosyncratically, it's an investment, as you said, 696 00:36:06,840 --> 00:36:10,680 Speaker 5: rather than an expense. It's almost analogous to retail crime. 697 00:36:11,200 --> 00:36:16,840 Speaker 5: The Kroger company, in Costco and Target invest in crime 698 00:36:16,920 --> 00:36:21,640 Speaker 5: prevention for shopper, worker and vendor security the same way 699 00:36:21,680 --> 00:36:29,000 Speaker 5: they invest in experiences to really excite and delight shoppers 700 00:36:29,000 --> 00:36:34,000 Speaker 5: of all ages, where Walmart treats everything as an expense. 701 00:36:34,640 --> 00:36:37,719 Speaker 5: And one of the things in the attachments we sent 702 00:36:37,840 --> 00:36:42,600 Speaker 5: for Another day another time is Walmart fails worldwide where 703 00:36:42,600 --> 00:36:47,160 Speaker 5: they don't get subsidies and in the US, taxpayers subsidized 704 00:36:47,200 --> 00:36:51,800 Speaker 5: Walmart target, Amazon, Aldi and Costco at the expense of 705 00:36:52,000 --> 00:36:56,640 Speaker 5: retailers that pay their own way like Kroger, CBS, etc. 706 00:36:57,080 --> 00:37:01,160 Speaker 5: So the retailers that are subsidized do not invest in 707 00:37:01,280 --> 00:37:05,440 Speaker 5: experiences and oftentimes do not invest insecurity, which is the 708 00:37:05,520 --> 00:37:09,160 Speaker 5: ultimate consumer and commercial irony across America. 709 00:37:09,719 --> 00:37:13,160 Speaker 1: It sounds like a challenging backdrop heading into twenty twenty 710 00:37:13,200 --> 00:37:15,839 Speaker 1: five for retail. Thank you for this, Bert, really appreciate it. 711 00:37:16,040 --> 00:37:19,799 Speaker 1: Thanks to Bert Flickinger, Managing director at Strategic Resource Group, 712 00:37:20,080 --> 00:37:23,359 Speaker 1: along with Lori Calvacina of RBC Capital Markets, New Edge 713 00:37:23,360 --> 00:37:27,480 Speaker 1: Wells Cameron Dawson and Tom Porcelli at PGIM Fixed Income. 714 00:37:27,520 --> 00:37:29,440 Speaker 1: And thanks to you as well for listening on this 715 00:37:29,560 --> 00:37:32,760 Speaker 1: Christmas Day. I'm Nathan Hager, wishing you a very happy 716 00:37:32,800 --> 00:37:36,640 Speaker 1: and healthy holiday season. But stay with us. Today's top 717 00:37:36,680 --> 00:37:49,640 Speaker 1: stories and global business headlines are coming up right now