WEBVTT - Year End Markets Outlook 0:00:02.400 --> 0:00:06.720 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.920 --> 0:00:16.320 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.320 --> 0:00:19.600 at seven am Eastern on applecar Player or Android Auto 0:00:19.720 --> 0:00:23.080 with the Bloomberg Business app. Listen on demand wherever you 0:00:23.120 --> 0:00:26.360 get your podcasts, or watch us live on YouTube. 0:00:26.680 --> 0:00:29.200 It's always important to have a worse weather in Milwaukee. 0:00:29.440 --> 0:00:33.160 We do that now. They have Maleetti of Allspring Global Investments, 0:00:33.240 --> 0:00:37.360 head of Equity where winter is really winter, and I 0:00:37.440 --> 0:00:42.000 really want to talk about the future of value investing. 0:00:42.120 --> 0:00:45.200 I know Allspring is a venerable I think of John 0:00:45.320 --> 0:00:49.440 Carriet pioneer, or I mentioned John Templeton earlier with this 0:00:49.640 --> 0:00:54.040 measurement of the Templeton Global Growth Fund years ago. What's 0:00:54.120 --> 0:00:58.280 the future look like of value investing for Ann Maleetti? 0:00:58.920 --> 0:01:01.280 Is you shift the ETF world? 0:01:02.840 --> 0:01:05.520 It's a great question, Tom, thanks for having me on 0:01:05.600 --> 0:01:09.360 and Merry Christmas to you and Paul. Look, I think 0:01:09.400 --> 0:01:14.720 that I like underdogs, not just the Green Bay packers. 0:01:14.840 --> 0:01:18.800 I also I also like a small and mid cap 0:01:18.880 --> 0:01:22.520 here and I think when we look toward the future, 0:01:23.080 --> 0:01:26.800 that's where I really see the most value. Certainly those 0:01:26.840 --> 0:01:31.360 indexes have more financials in them and more you know, 0:01:31.440 --> 0:01:35.560 cyclical names, but they also have some very profitable companies 0:01:35.840 --> 0:01:38.520 that have been kind of just ignored by the rest 0:01:38.560 --> 0:01:39.240 of the market. 0:01:39.080 --> 0:01:41.479 As the Meg seven areas really taken off. 0:01:41.720 --> 0:01:45.000 I mentioned John Carrey and back at Pioneer of Boston 0:01:45.040 --> 0:01:48.559 to the Phil creat Or, you'd have a value fund 0:01:48.600 --> 0:01:50.680 with one hundred and one hundred and fifty dare I 0:01:50.760 --> 0:01:56.760 say two hundred stocks? Are you less diversified now in 0:01:56.880 --> 0:02:01.640 trying to succeed at value versus zoning for growth stocks? 0:02:02.400 --> 0:02:07.280 Yeah, I think we're focused on trying to get investors 0:02:07.280 --> 0:02:10.160 to think more about diversification now. 0:02:10.600 --> 0:02:12.200 We still are really cautious. 0:02:12.280 --> 0:02:15.000 You don't want to be everywhere in this market, but 0:02:15.040 --> 0:02:17.880 there are some really high quality companies out there. And 0:02:18.320 --> 0:02:20.200 one of the things, you know, I followed small and 0:02:20.280 --> 0:02:23.440 mid cap stocks for most of my career, which is 0:02:23.680 --> 0:02:26.040 dating me much longer than I want right now. But 0:02:27.480 --> 0:02:30.520 what people will often associate what small cap companies with 0:02:30.800 --> 0:02:32.480 is that they're unprofitable. 0:02:32.760 --> 0:02:34.120 But there's a lot of. 0:02:34.040 --> 0:02:37.480 Small and mid cap companies that are quite profitable. And 0:02:37.520 --> 0:02:41.120 when you look at the earnings multiples of those companies 0:02:41.240 --> 0:02:45.280 versus the SMP five hundred, they are almost at trough 0:02:45.440 --> 0:02:49.720 levels and So it's those types of companies tom cash 0:02:49.720 --> 0:02:55.560 flow positive in many cases earnings positives, really good management 0:02:55.600 --> 0:02:58.560 teams operating these companies, but just can't get out of 0:02:58.600 --> 0:03:02.720 their own way. So diversific, but looking for high quality still. 0:03:03.080 --> 0:03:05.760 And I know you and your teams at all Spring 0:03:05.840 --> 0:03:09.480 you do a lot of real bottoms up research analysis. 0:03:09.480 --> 0:03:12.960 Are there sectors that screen well for you guys in 0:03:13.000 --> 0:03:14.320 that small to mid cap world? 0:03:15.440 --> 0:03:19.000 There definitely are, Paul, And we have seen financials start 0:03:19.080 --> 0:03:22.320 to outperform. That is one of the areas that our 0:03:22.360 --> 0:03:28.079 managers were highlighting earlier, certainly with rates coming down, other 0:03:28.120 --> 0:03:31.080 pressures coming off that area, and not just the banks, 0:03:31.080 --> 0:03:33.560 but more broadly other financials as well. 0:03:34.200 --> 0:03:35.640 But I would also. 0:03:35.440 --> 0:03:38.240 Say healthcare, and this is an area that a lot 0:03:38.280 --> 0:03:40.480 of the market has been kind of scared away from. 0:03:40.840 --> 0:03:44.960 But the tools in diagnostic space in particular is an 0:03:45.040 --> 0:03:49.280 area that has been underutilized. Where you see earnings expected 0:03:49.320 --> 0:03:52.320 to really ramp in twenty five and twenty six, and 0:03:52.360 --> 0:03:55.800 so where you see that earnings acceleration that can actually 0:03:56.080 --> 0:03:58.760 bring really good returns for shareholders as well. 0:03:58.880 --> 0:04:01.320 We get lucky, as we did yesterday with Dana Telsey 0:04:01.480 --> 0:04:04.120 on Nordstrom's going private. We have a Malletti with us 0:04:04.200 --> 0:04:07.760 from all Spring and Strong and Milwaukee, and this is 0:04:07.840 --> 0:04:12.360 Joshua Franklin in the Financial Times. Pretty much moments ago 0:04:12.560 --> 0:04:16.240 this was rumored and now the ft reports. The US 0:04:16.279 --> 0:04:21.240 Banking Lobby Group has said they filed a lawsuit against 0:04:21.320 --> 0:04:26.359 the FED over the Central banks stress testing, and of 0:04:26.400 --> 0:04:29.400 course the quote here from Greg Bear. We appreciate the 0:04:29.400 --> 0:04:34.039 board's announcement is a first step towards transparency. Are we 0:04:34.200 --> 0:04:36.320 beyond stress tests and Malletti? 0:04:36.360 --> 0:04:36.800 When you look? 0:04:36.839 --> 0:04:39.320 I mean, I get JP Morgan's wonderful, but come on, 0:04:39.800 --> 0:04:41.919 if you look at the top twenty banks after what 0:04:42.040 --> 0:04:46.440 we went through eighteen months ago, can we really get 0:04:46.440 --> 0:04:51.479 beyond stress tests? Stress tests? That's a mouthful. Stress tests 0:04:51.520 --> 0:04:52.719 of our banking lobby? 0:04:54.160 --> 0:04:58.680 You know, Thomas is a really interesting article in a 0:04:58.760 --> 0:05:02.720 comment as well as you know, where have we seen 0:05:02.760 --> 0:05:08.119 concentration grow. It's with banks, and there may be more 0:05:08.240 --> 0:05:13.400 risk out there longer term than less. But I think 0:05:13.440 --> 0:05:17.680 others would point to private credit and private equity soaking 0:05:17.760 --> 0:05:19.960 up some of the slack on the other ends, and 0:05:20.040 --> 0:05:23.080 those areas also funding many businesses. 0:05:23.200 --> 0:05:26.719 But I don't know. We'll have to see what happens 0:05:26.760 --> 0:05:27.960 with that lawsuit. 0:05:28.279 --> 0:05:30.720 Hey, and a lot of folks with the new Trump 0:05:30.720 --> 0:05:34.440 administration coming and are expecting mn A to really pick up. 0:05:34.880 --> 0:05:38.840 Is that something you guys thematically think about for twenty 0:05:38.920 --> 0:05:40.279 twenty five maybe beyond. 0:05:41.080 --> 0:05:44.440 Absolutely, I think we're already starting to see it. You know, 0:05:44.480 --> 0:05:47.880 the IPO market is starting to show signs of opening up. 0:05:48.240 --> 0:05:50.880 But I think M and A is real there. You know, 0:05:51.000 --> 0:05:54.560 as you both know, company balance sheets are strong, there's 0:05:54.600 --> 0:05:56.720 a lot of cash on the sidelines when it comes 0:05:56.800 --> 0:06:00.599 to what companies have been kind of holding out, waiting 0:06:00.640 --> 0:06:02.920 to do, waiting to see what the future looks like. 0:06:03.400 --> 0:06:07.880 With A with a lower regulatory environment, with rates continuing 0:06:07.920 --> 0:06:10.400 to come down, maybe not as low as people expect it, 0:06:10.680 --> 0:06:13.120 that's a good environment for M and A. It's another 0:06:13.240 --> 0:06:16.159 reason we like that small and mid cap space. You know, 0:06:16.279 --> 0:06:20.360 these names are kind of ripe and valuations are attractive, 0:06:20.440 --> 0:06:22.719 and so I think M and A will heat up. 0:06:22.760 --> 0:06:25.279 It will be being into twenty five. 0:06:25.440 --> 0:06:28.359 You Paul Sweeney, I look at we mentioned Ben Laidler 0:06:28.400 --> 0:06:31.560 and Christmas Eve twenty eighteen with this great bullmarket call 0:06:31.960 --> 0:06:34.160 at the time at HSBC. I think I set up 0:06:34.160 --> 0:06:37.560 one hundred and fifty four percent. I can't remember the number, folks, 0:06:37.800 --> 0:06:41.719 but I got JP Morgan from that same holiday season 0:06:41.880 --> 0:06:46.040 six years ago. Fortress Diamond is up one hundred and 0:06:46.040 --> 0:06:50.080 sixty one percent, seventeen percent per year. I thought banks 0:06:50.120 --> 0:06:52.200 made nominal GDP and you went home. 0:06:52.480 --> 0:06:56.120 Now great returns and they're building a phenomenal headquarters on 0:06:56.160 --> 0:06:58.240 Park Avenue, which I can't wait to see. Hey, And 0:06:58.440 --> 0:07:00.640 one of the things I'm trying to figure out where 0:07:00.640 --> 0:07:02.839 the performance in twenty twenty five could come from. After 0:07:03.000 --> 0:07:06.400 two just stellar years of north with twenty percent returns, 0:07:06.440 --> 0:07:08.440 I feel like it's got to be driven by earnings. 0:07:08.440 --> 0:07:10.520 And sure enough, you know, the earnings growth out there 0:07:10.600 --> 0:07:12.560 is twelve to fourteen percent. 0:07:12.600 --> 0:07:14.880 But boy, that seems yeah, pretty high? 0:07:14.920 --> 0:07:16.800 Is Is there earnings risk out there for you guys? 0:07:16.840 --> 0:07:17.640 Are you thinking about that? 0:07:18.600 --> 0:07:18.840 Paul? 0:07:18.880 --> 0:07:20.840 I agree with you, it seems high. 0:07:20.960 --> 0:07:21.120 It. 0:07:21.920 --> 0:07:24.880 I would have probably said that coming into last year 0:07:25.320 --> 0:07:28.640 although or this past year, but we didn't see tremendous 0:07:28.640 --> 0:07:33.000 earnings growth outside of you know, a real concentrated number of. 0:07:33.000 --> 0:07:34.720 Names this year. 0:07:34.760 --> 0:07:37.040 I think we need to see real earnings growth in 0:07:37.120 --> 0:07:39.840 order to get the market to accelerate. But you know, 0:07:40.160 --> 0:07:43.200 the equity market will continue to surprise. I looked at 0:07:43.200 --> 0:07:46.480 some data going back to nineteen twenty six, so ninety 0:07:46.560 --> 0:07:50.640 nine years. Seventy one of those years, if we can 0:07:50.680 --> 0:07:54.800 count this year, which hopefully we can, have produced positive returns, 0:07:54.800 --> 0:07:59.520 seventy one of ninety six years and thirty two of 0:07:59.560 --> 0:08:03.080 those years have produced returns of over twenty percent. Five 0:08:03.160 --> 0:08:06.200 years in a row of twenty percent. Ernian's Paul, you 0:08:06.240 --> 0:08:09.040 will remember this. This was in the fun times of 0:08:09.120 --> 0:08:12.480 TMT for both of us. Ninety five, ninety six, ninety seven, 0:08:12.640 --> 0:08:16.640 ninety eight, and ninety nine were all plus twenty percent, 0:08:17.040 --> 0:08:20.000 So you know, you'll never know. Maybe we can get 0:08:20.000 --> 0:08:21.000 three this time around. 0:08:21.280 --> 0:08:26.080 Emlodious Apple of value stuck, you know, Tom. 0:08:26.200 --> 0:08:28.880 The way I love to think about this is value 0:08:29.240 --> 0:08:32.240 is what you gain, not what you pay. And so 0:08:32.480 --> 0:08:34.920 I think it all depends on what you paid for 0:08:35.000 --> 0:08:37.320 Apple and how much more game we can get. 0:08:37.360 --> 0:08:39.600 I'm going to use the old buffet phrase for that one. 0:08:39.960 --> 0:08:43.400 Didn't you mention, Paul, like this year, I still I 0:08:43.440 --> 0:08:46.120 need to buy my first year thirty three percent, thirty 0:08:46.160 --> 0:08:48.640 three percent This year I thought they were doing terrible. 0:08:48.679 --> 0:08:52.000 It's like tim kone, you know, it's terrible. Stop the 0:08:52.040 --> 0:08:54.800 road show? Remember those, Yeah, the developer shows. 0:08:54.920 --> 0:08:57.880 Yeah, they still haven't. They're still big, big, big events. 0:08:58.000 --> 0:08:59.840 So is this like a home run for Dan and I? 0:09:00.720 --> 0:09:02.199 He's had a lot of home runs this year. 0:09:02.200 --> 0:09:04.760 He can be sitting back in this ugly clothing that 0:09:04.840 --> 0:09:07.319 he tends to wear, or loud clothing that he. 0:09:07.280 --> 0:09:08.920 Tends to wear for him. 0:09:08.920 --> 0:09:10.480 I know I'm all over him on that, but he's 0:09:10.520 --> 0:09:13.120 a Penn State fan, So okay, we forgive him. 0:09:13.400 --> 0:09:16.360 Okay, So there you go, am Melodia on value, Let 0:09:16.440 --> 0:09:19.360 us continue a couple more questions here on television and 0:09:19.480 --> 0:09:23.840 radio worldwide, Emilidi, I go back to value, and on 0:09:23.880 --> 0:09:27.360 an international basis, the number one failure has been strong dollar, 0:09:27.400 --> 0:09:32.200 resilient dollar international stocks. At some point it's going to 0:09:32.200 --> 0:09:33.880 be a moonshot. When is that? 0:09:34.960 --> 0:09:36.240 You know? Tom? 0:09:36.320 --> 0:09:38.640 I think if we had to pick a dark horse 0:09:38.760 --> 0:09:42.440 going into twenty five and twenty six, we'd probably take 0:09:42.480 --> 0:09:46.719 a shot at having some allocation toward emerging markets. And 0:09:46.880 --> 0:09:50.080 it's exactly you know what you're pointing out. The dollar 0:09:50.120 --> 0:09:55.319 has been so strong it's really pushed back ourmerging markets. 0:09:55.040 --> 0:09:56.880 You know, on top of other things. 0:09:57.360 --> 0:10:01.200 But you know, I think there is real value to 0:10:01.240 --> 0:10:04.440 be had when you look at the MSCI em and 0:10:05.360 --> 0:10:07.600 index versus the S and P five hundred. We're at 0:10:07.640 --> 0:10:11.760 a twenty year trough, and so any kind of positive 0:10:11.800 --> 0:10:15.200 surprise or weakness in the dollar could really cause that 0:10:15.320 --> 0:10:16.760 area of the marketing surge. 0:10:17.240 --> 0:10:19.160 Okay, im Altdi, thank you so much. You have a 0:10:19.200 --> 0:10:22.520 wonderful season. Merry Christmas. Q m Aletti. Is it all 0:10:22.559 --> 0:10:28.640 spring in Milwaukee? 0:10:29.760 --> 0:10:33.640 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:10:33.720 --> 0:10:37.040 weekday afternoons from seven to ten am. Easter. Listen on 0:10:37.080 --> 0:10:40.319 Apple car Play and Android Auto with a Bloomberg Business app, 0:10:40.440 --> 0:10:42.199 or watch US live on YouTube. 0:10:42.840 --> 0:10:45.480 Joining us now, someone who has tried many agnes. Stuart 0:10:45.520 --> 0:10:49.400 Kaiser joins Uskin American Airlines down four percent is well, 0:10:49.440 --> 0:10:51.640 thank you so much for joining us in study on Christmas. 0:10:51.880 --> 0:10:54.240 Really really appreciate it. 0:10:54.360 --> 0:10:54.840 Good morning. 0:10:55.000 --> 0:10:59.480 The number one thing we got wrong was growthiness. You 0:10:59.520 --> 0:11:04.319 had the image of Andrew Hollenhorst saying we will have growthiness, 0:11:04.400 --> 0:11:09.679 we will have higher rates. Does the growthiness continue and 0:11:09.760 --> 0:11:11.920 make your life in equity markets better? 0:11:12.840 --> 0:11:13.600 I certainly hope so. 0:11:13.720 --> 0:11:15.560 The Fed seems to think so too, which I think 0:11:15.720 --> 0:11:19.480 was was, you know, a friendly reminder from the SEP 0:11:19.679 --> 0:11:21.720 that it wasn't all about inflation risks that they also 0:11:21.720 --> 0:11:23.319 think the unemployment ra is going to calm down and 0:11:23.360 --> 0:11:24.640 growth is going to remain solid. 0:11:24.640 --> 0:11:27.000 But to be honest, I think that's the biggest risk. 0:11:27.080 --> 0:11:31.120 Early next year with that unemployment report on January tenth, 0:11:31.280 --> 0:11:33.320 we're going to get a very quick test of whether 0:11:33.360 --> 0:11:35.960 the Fed's view of flattening out of unemployment. 0:11:35.440 --> 0:11:36.760 Is the case or not. 0:11:37.160 --> 0:11:39.559 If we do get it, then look, I think equity 0:11:39.559 --> 0:11:41.880 markets are in good shape. If we get an inflection 0:11:41.920 --> 0:11:43.959 point higher, it's going to be a tough start of 0:11:43.960 --> 0:11:44.199 the year. 0:11:44.200 --> 0:11:44.560 I think. 0:11:45.080 --> 0:11:48.200 So what is the twenty twenty five call? Here, we 0:11:48.240 --> 0:11:51.600 had twenty twenty three, twenty twenty four, twenty percent plus 0:11:51.640 --> 0:11:52.480 gains in each. 0:11:52.360 --> 0:11:53.240 Of those years. 0:11:54.559 --> 0:11:56.280 How often do we get a thirty year of a 0:11:56.440 --> 0:11:57.800 performance after that. 0:11:58.200 --> 0:12:00.880 I've seen people say it's only happened once, that doesn't 0:12:00.920 --> 0:12:01.840 mean it can't happen again. 0:12:02.120 --> 0:12:04.640 But look, I think I think the issue is. 0:12:04.880 --> 0:12:07.240 You have about call it fifteen fourteen to fifteen percent 0:12:07.280 --> 0:12:09.240 EPs growth price for next year, which is a pretty 0:12:09.240 --> 0:12:09.800 solid number. 0:12:10.120 --> 0:12:12.440 Is that seems almost aggressive to me? 0:12:12.559 --> 0:12:14.400 But yeah, you're gonna need to see a broadening out. 0:12:14.440 --> 0:12:16.959 I think for that to happen, you've got valuation that's 0:12:16.960 --> 0:12:18.960 obviously quite extended. So I think if you take those 0:12:18.960 --> 0:12:21.320 two things together, you're gonna say, yes, I might have 0:12:21.360 --> 0:12:24.000 another double digit year. But the risk reward around that 0:12:24.040 --> 0:12:27.560 forecast is really really tricky here going into going into 0:12:27.600 --> 0:12:28.520 twenty twenty five. 0:12:28.679 --> 0:12:30.360 What are some of the sectors? How are you playing it? 0:12:30.400 --> 0:12:35.080 Either from sector perspective a factor perspective. Are we looking 0:12:35.120 --> 0:12:37.360 for broadening out of performance in twenty twenty five? 0:12:37.960 --> 0:12:40.319 I think sector wise, the area we've seen the most 0:12:40.360 --> 0:12:43.560 consistent sponsorship is in financials and banks, so that seems 0:12:43.559 --> 0:12:46.560 to be the easier trade. You know, obviously tech, you 0:12:46.640 --> 0:12:49.080 need to be in tech. Then you've got things like 0:12:49.080 --> 0:12:51.160 healthcare and energy, which I think have a lot more 0:12:51.240 --> 0:12:52.800 moving parts and are a lot more tricky and you 0:12:52.840 --> 0:12:54.280 need to be nuanced about it. 0:12:54.320 --> 0:12:55.559 From a factor perspective. 0:12:56.160 --> 0:12:58.240 If you believe the Fed's forecast, which is kind of 0:12:58.240 --> 0:13:01.040 a higher for longer profile did well in the first 0:13:01.040 --> 0:13:03.600 half of twenty twenty four. When we traded higher for longer, 0:13:03.640 --> 0:13:05.760 it was large cap, it was tech, and it was growth. 0:13:05.920 --> 0:13:07.880 So I think that has to be your base case 0:13:07.920 --> 0:13:10.480 to start the year, and to get the broadening, you're 0:13:10.480 --> 0:13:12.439 gonna need to see that in earnings like we did 0:13:12.440 --> 0:13:13.280 back in the third quarter. 0:13:13.440 --> 0:13:15.960 My tweet of the day here, everybody's working on Christmas Eve. 0:13:16.000 --> 0:13:19.199 They're all at home having their Kirklin eggnug with a 0:13:19.280 --> 0:13:24.000 twenty nine proof. According to Lisa Mateo's reporting, Lawrence McDonald, 0:13:24.040 --> 0:13:27.839 who had my essay two years ago walking through the 0:13:27.880 --> 0:13:30.280 wall of money that's out there, the six trillion, whatever 0:13:30.320 --> 0:13:33.320 the number is, I can't remember. He lists over the 0:13:33.400 --> 0:13:37.880 last ten years the thirty year bond two point seven, 0:13:38.760 --> 0:13:42.840 mid point two point three, down, COVID one point nine, 0:13:43.280 --> 0:13:45.199 and we're back out to like a four point eight 0:13:45.240 --> 0:13:48.559 percent in the thirty year bond. Have you been surprised 0:13:48.600 --> 0:13:51.920 we've had this great bull market with a migration up 0:13:51.960 --> 0:13:52.440 and yield. 0:13:53.160 --> 0:13:54.600 Yeah, we have been a little bit. 0:13:54.600 --> 0:13:57.080 And I do think the term premium, particularly that thirty 0:13:57.120 --> 0:13:58.079 year point in the yield. 0:13:57.920 --> 0:14:00.880 To find that for people like Lisa Mantaeo having your 0:14:00.960 --> 0:14:04.480 third Kirkland Egnie, what God's name. 0:14:04.400 --> 0:14:07.840 Is term previous term premium, just how steep the bond 0:14:07.920 --> 0:14:10.320 term structure is. So in this case, a steepening of 0:14:10.320 --> 0:14:12.240 the term structure, and our view would mean the thirty 0:14:12.320 --> 0:14:15.880 year yield is rising substantially. I think if that happens, 0:14:15.600 --> 0:14:18.680 it's a significant risk for US equity markets. And the 0:14:18.720 --> 0:14:21.280 reason is this. We could talk about the ten year yield, 0:14:21.280 --> 0:14:23.080 which you mentioned at four point six percent. We can 0:14:23.120 --> 0:14:25.160 come up with a good reason the ten year yield 0:14:25.240 --> 0:14:26.640 might go to five or five and a half if 0:14:26.680 --> 0:14:28.600 we've got a very positive growth impulse. 0:14:28.800 --> 0:14:29.840 It's very hard to come up. 0:14:29.720 --> 0:14:32.360 With a positive reason the thirty year yield would really 0:14:32.400 --> 0:14:34.680 move higher. So that is probably going to come from 0:14:34.680 --> 0:14:37.720 inflation and deficit spending and things of that nature. So 0:14:37.960 --> 0:14:39.680 if there's a part of the yield curve that we 0:14:39.720 --> 0:14:42.080 are concerned about, it would definitely be really at the 0:14:42.480 --> 0:14:43.480 very long end of things. 0:14:43.840 --> 0:14:47.040 What are your clients telling you about this new Trump 0:14:47.080 --> 0:14:49.880 administration coming in later in January? 0:14:49.920 --> 0:14:51.440 Are they positioning around that? 0:14:51.680 --> 0:14:54.240 Are they treating it as a non event or are 0:14:54.240 --> 0:14:56.320 they becoming more bullish on the margin. 0:14:56.360 --> 0:14:57.520 What are you hearing from your clients. 0:14:57.720 --> 0:14:59.960 I would say definitely not treating it some non event. 0:15:00.360 --> 0:15:00.520 You know. 0:15:00.520 --> 0:15:02.040 I would say, if you think of the election, you 0:15:02.080 --> 0:15:05.240 had a sentiment response early, then you had a response 0:15:05.280 --> 0:15:09.520 to kind of policy proposals next year is implementation, and 0:15:09.920 --> 0:15:11.760 the implementation part I think carris a. 0:15:11.720 --> 0:15:12.360 Lot of risk to it. 0:15:12.440 --> 0:15:12.560 Right. 0:15:12.600 --> 0:15:14.400 You know, it's easy to talk about tariffs, but now 0:15:14.440 --> 0:15:16.760 let's implement tariffs. It's easy to talk about, you know, 0:15:16.880 --> 0:15:20.600 reigning and government spending. We saw with the Continuing Resolution 0:15:20.720 --> 0:15:22.440 the market got a little bit concerned with that, and 0:15:22.440 --> 0:15:25.720 I think I think the market's response to that Continuing 0:15:25.760 --> 0:15:28.840 Resolution is a shot across the bow that when you 0:15:28.920 --> 0:15:32.280 actually go to implement these policies, it can create volatility. 0:15:32.480 --> 0:15:34.560 I actually think a lot of clients are holding trades 0:15:34.680 --> 0:15:37.720 like let's say, long dollar long US equities, and as 0:15:37.760 --> 0:15:40.400 we get closer to that January twentieth, it wouldn't surprise 0:15:40.520 --> 0:15:42.200 me to see some of that risk kind of trimmed 0:15:42.200 --> 0:15:45.120 a little bit, whether as the uncertainty or slash the 0:15:45.160 --> 0:15:48.480 reality of policy implementation really really hits them in the face. 0:15:49.400 --> 0:15:51.760 Is there anything that concerns you in terms of valuation here? 0:15:51.800 --> 0:15:53.720 I'm just not sure how to get comfortable with evaluation. 0:15:54.080 --> 0:15:56.280 Maybe I can pull out the mag seven get a 0:15:56.320 --> 0:15:58.960 little bit more comfortable there. I mean, what are you 0:15:58.960 --> 0:16:01.720 guys doing on your desk, your clients thinking about, you. 0:16:01.680 --> 0:16:04.200 Know, valuation? That we think of that as potential energy. 0:16:04.320 --> 0:16:06.360 So yeah, there is a risk you can sell off 0:16:06.400 --> 0:16:08.560 from a high valuation point, but you need a catalyst 0:16:08.560 --> 0:16:08.920 to do it. 0:16:09.520 --> 0:16:09.640 You know. 0:16:09.720 --> 0:16:11.840 The other thing about valuation is unless you have a 0:16:11.880 --> 0:16:15.800 holding period of twenty four months or beyond, valuation probably 0:16:15.800 --> 0:16:18.320 shouldn't be your number one consideration. So I would say 0:16:18.400 --> 0:16:20.720 right here, if you get the earnings growth that the 0:16:20.760 --> 0:16:24.160 market's forecasting, the valuation is going to be fine. If 0:16:24.200 --> 0:16:28.160 you start to get Ernie's growth decelerated, unemployment rate rising 0:16:28.240 --> 0:16:30.040 all of a sudden, now you're selling off from a 0:16:30.080 --> 0:16:33.160 much higher level. So I think it's a risk reward discussion. 0:16:33.440 --> 0:16:35.520 So we're very aware of it, but we're kind of 0:16:35.520 --> 0:16:37.280 looking for what could activate that risk. 0:16:37.320 --> 0:16:39.720 And Stuart, thank you so much for coming in. I 0:16:39.760 --> 0:16:42.360 love your segments on industry. I just think they're really 0:16:42.400 --> 0:16:44.840 really great when they show you in the trading before 0:16:44.920 --> 0:16:49.040 keeping the young Turks come, mister Kaiser, is the city Grilled? 0:16:53.520 --> 0:16:57.800 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:16:57.920 --> 0:17:01.400 starting at seven am Eastern Our play in Android Auto 0:17:01.520 --> 0:17:04.359 with the Bloomberg Business app. You can also listen live 0:17:04.480 --> 0:17:07.639 on Amazon Alexa from our flagship New York station. Just 0:17:07.720 --> 0:17:10.320 say Alexa playing Bloomberg eleven thirty. 0:17:10.800 --> 0:17:13.159 We're going to spend some time here on the politics 0:17:13.160 --> 0:17:14.840 of the moment. There's no one better to do that 0:17:14.880 --> 0:17:19.280 with a Gautamcunda, yes, a professor at Yale's School of Management, 0:17:19.320 --> 0:17:23.399 but far more his book Picking Presidents really alludes to 0:17:23.480 --> 0:17:27.560 the follow up I'm kidding in jest picking Billionaires. Gotta 0:17:27.640 --> 0:17:34.280 mccundan now on Elon Musk into twenty twenty five. Professor, 0:17:34.359 --> 0:17:36.200 thank you so much for joining in one of your 0:17:36.520 --> 0:17:40.280 side notes. You say, the tension within the Trump administration 0:17:41.000 --> 0:17:45.199 of Secretary of State Rubio and the newly minted Elbridge 0:17:45.200 --> 0:17:49.399 Coldby versus business types that need to do business in 0:17:49.480 --> 0:17:53.160 Shanghai like Musk is tangible. Is that what we need 0:17:53.200 --> 0:17:57.000 to look forward to as a raging Chinese debate at 0:17:57.040 --> 0:17:59.000 sixteen hundred Pennsylvania Avenue. 0:18:00.160 --> 0:18:01.919 It's hard to see how that won't happen. 0:18:02.000 --> 0:18:04.240 I mean, the big chunk of the Trump administration is 0:18:04.280 --> 0:18:08.280 people who have defined their foreign policy stance around conflict 0:18:08.280 --> 0:18:12.000 with China, hopefully not armed, but still remark levels of hostility, 0:18:12.000 --> 0:18:14.199 though they are just a new part of the relationship, 0:18:14.760 --> 0:18:17.040 and some of the major players in the Trump administration, 0:18:17.119 --> 0:18:20.560 Elon Musk in particular, more than anyone else, are enormously 0:18:20.600 --> 0:18:23.560 dependent on trade with China. Must wants to put billions 0:18:23.600 --> 0:18:26.040 of dollars of investment into China, and most of Jesscol's 0:18:26.040 --> 0:18:28.680 profits seem to come from China. It's hard to see 0:18:28.680 --> 0:18:30.320 how those two won't be at loggerheads. 0:18:31.480 --> 0:18:33.280 What do you think, how do you think this is 0:18:33.280 --> 0:18:34.600 going to play out here? I mean, I think a 0:18:34.600 --> 0:18:36.400 lot of folks in Washington, DC, a lot of folks 0:18:36.440 --> 0:18:40.880 who think about policy matters for this incoming administration trying 0:18:40.880 --> 0:18:44.560 to figure out what role Elon Musk is going to 0:18:44.600 --> 0:18:47.320 play and for how long do you have any insight 0:18:47.359 --> 0:18:47.679 into that? 0:18:48.600 --> 0:18:52.440 So this is something new in American politics. There has 0:18:52.560 --> 0:18:56.399 never been a civilian as powerful as Elon Musk. For 0:18:57.119 --> 0:18:59.280 in American history. It's hard to find anyone in sort 0:18:59.280 --> 0:19:02.320 of like British history or who's most comparable. If we 0:19:02.359 --> 0:19:04.199 go through he's not just the wealthiest person in the 0:19:04.200 --> 0:19:08.320 world and maybe the single most important media figure, he's 0:19:08.480 --> 0:19:13.440 also America's single most irreplaceable defense contractor. Right, you could 0:19:13.920 --> 0:19:16.240 swap out going for Locke Martin, You couldn't swap out 0:19:16.240 --> 0:19:20.520 SpaceX for anyone. So that level of stature is just 0:19:20.640 --> 0:19:24.520 astonishing and hard to I mean any He would be 0:19:24.560 --> 0:19:26.640 a major player in any government. 0:19:27.320 --> 0:19:27.920 But at the. 0:19:27.920 --> 0:19:30.200 Same time, at the same time, he's sort of showed 0:19:30.240 --> 0:19:33.280 a willingness to kind of conduct his own foreign policy. 0:19:33.400 --> 0:19:34.639 He's you know, he had pair. 0:19:34.560 --> 0:19:36.760 Peers to speak with Vladimir Putin on a regular basis 0:19:37.040 --> 0:19:39.359 and then turns around and kind of tweets out stuff 0:19:39.359 --> 0:19:42.600 that looks a lot like Russian propaganda. He has enormous 0:19:42.640 --> 0:19:45.480 financial interests in China that swamp. You know, they may 0:19:45.480 --> 0:19:48.359 be larger financial interests in China than those of any 0:19:48.400 --> 0:19:49.840 other person in the United States. 0:19:50.000 --> 0:19:50.200 Yep. 0:19:50.600 --> 0:19:53.919