WEBVTT - Yen Intervention and Market Drivers 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.800 --> 0:00:17.600 Surveillance Podcast. Catch us live weekdays at seven am e's 0:00:17.680 --> 0:00:20.560 durn on Apple, car Play or Android Atto with the 0:00:20.600 --> 0:00:24.840 Bloomberg Business app. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:26.960 or watch us live on YouTube. 0:00:27.120 --> 0:00:29.360 Sonya Martin joins us Use, the chief economist for d 0:00:29.520 --> 0:00:32.120 Z Bank Sonia. What do you make of this move 0:00:32.159 --> 0:00:35.760 here by Japan in the US to kind of support 0:00:35.800 --> 0:00:37.280 the Japanese in here. What's your take? 0:00:38.720 --> 0:00:40.360 Actually, I think it's a pretty clever move. 0:00:40.400 --> 0:00:42.360 I mean, the back of Japan has been trying to, 0:00:42.960 --> 0:00:44.600 you know, to manage the end. 0:00:44.600 --> 0:00:46.760 They've been trying to support the currency for some time. 0:00:46.800 --> 0:00:49.480 They happen to be time and again, and every time 0:00:49.520 --> 0:00:53.280 then dolentus ended up going higher afterwards. So it wasn't 0:00:53.320 --> 0:00:57.720 a particularly successful intervention story. So moving in together with 0:00:57.800 --> 0:01:01.320 the Americans is a much more smarter move, and it's 0:01:01.440 --> 0:01:03.560 much more likely to have some success in it. So 0:01:03.680 --> 0:01:07.200 far is that it may well serve to draw a 0:01:07.280 --> 0:01:09.640 limit to the upside dot a en. It's not going 0:01:09.680 --> 0:01:11.720 to change the fact that the en is a week currency, 0:01:12.160 --> 0:01:14.560 but it might be more successful and it's a very 0:01:14.680 --> 0:01:17.440 very strong signal to the marketing, particularly because it seems 0:01:17.440 --> 0:01:19.400 to be the case that they might be further intervention 0:01:19.560 --> 0:01:20.080 if need be. 0:01:20.840 --> 0:01:23.240 Investors were heavily positioned though for a week or en 0:01:23.319 --> 0:01:26.480 before the intervention, and maybe early to tell. But how 0:01:26.560 --> 0:01:28.280 much of the move we're seeing, in your view is 0:01:28.280 --> 0:01:32.640 about a policy shift versus maybe an unwind in positioning. 0:01:33.920 --> 0:01:36.320 Yeah, well, we'll have to wait a week until we 0:01:36.360 --> 0:01:39.640 get some data on this, but I suspect strongly that 0:01:40.040 --> 0:01:42.280 quite a few of these positions have been wiped out, 0:01:43.200 --> 0:01:45.520 and that is a good thing because it's a clear 0:01:45.600 --> 0:01:48.920 signal to investors that speculating against the end is no 0:01:49.000 --> 0:01:51.840 longer going to be sort of a free lunch as 0:01:51.840 --> 0:01:54.360 it were. I mean, we have been having these problems 0:01:54.400 --> 0:01:57.280 that investors have been speculating heavily against the currency, and 0:01:57.320 --> 0:02:01.560 maybe this move will at least curtail this happening in 0:02:01.600 --> 0:02:02.080 the future. 0:02:03.160 --> 0:02:06.640 One of the interesting mechanics here of this potential intervention 0:02:06.760 --> 0:02:10.040 have been reports that the US Treasury used euros rather 0:02:10.080 --> 0:02:12.720 than dollars to fund its purchases. Talk to us about that. 0:02:12.720 --> 0:02:17.440 Yeah, well, it's very unusual, certainly, don't expected. I wonder 0:02:17.480 --> 0:02:19.760 whether they called the ECB to at least let them know, 0:02:19.919 --> 0:02:22.560 you know, a courtesy call, that this was going to happen. 0:02:23.400 --> 0:02:26.080 So yeah, a bit unusual. There's a lot of speculation 0:02:26.160 --> 0:02:28.000 about why they might have done this, and I think 0:02:28.040 --> 0:02:30.840 that the current consensus seems to be that they didn't 0:02:30.880 --> 0:02:33.880 want to open the Pandora's box of the strong dollar policy, 0:02:34.280 --> 0:02:36.920 so by intervening in EUROPEA and this circumvented having to 0:02:37.000 --> 0:02:40.520 use to sell dollars, which again may have raised questions 0:02:40.520 --> 0:02:44.040 about the official strong dollar policy that US governments have 0:02:44.120 --> 0:02:48.040 held for decades. So maybe that's why they did this. 0:02:48.639 --> 0:02:52.239 That's the I think the most logical explanation. We'll see 0:02:52.240 --> 0:02:54.560 if they have to intervene again, whether they stick to that, 0:02:55.160 --> 0:02:57.080 and if they do, what the ECB might have to 0:02:57.120 --> 0:02:58.040 say about that as well? 0:02:58.600 --> 0:02:59.520 And what about the FED? 0:02:59.560 --> 0:03:02.760 I mean, we have cher Kevin Waash signaling a different 0:03:02.800 --> 0:03:05.760 approach to FED communication with less forward guidance, and we 0:03:05.760 --> 0:03:07.920 have the New York Times reporting that it may even 0:03:07.960 --> 0:03:10.600 be I think six times a year, And how is 0:03:10.600 --> 0:03:13.000 that going to change the way fixed income investors think 0:03:13.000 --> 0:03:13.519 about risk? 0:03:13.600 --> 0:03:17.600 More broadly, I think Kevin Whash is a big challenge 0:03:17.800 --> 0:03:20.480 for the bond market right now. He's very different than 0:03:20.480 --> 0:03:23.280 his predecessor or predecessors, I should say. 0:03:24.000 --> 0:03:25.680 He obviously has plans with the FED. 0:03:25.680 --> 0:03:28.400 There's all these working groups that you know, are active 0:03:28.520 --> 0:03:30.720 trying to change certain things about the way that the 0:03:30.760 --> 0:03:33.320 FED does business. Then there's to talk about less meetings. 0:03:33.400 --> 0:03:35.400 He is a bit of a closed book when it 0:03:35.400 --> 0:03:38.600 comes to communicating with the market. You know, it's very different, 0:03:38.600 --> 0:03:40.840 and I think people are sort of not sure how 0:03:40.920 --> 0:03:44.520 to read the FED, and that ultimately creates more volatility, 0:03:44.600 --> 0:03:48.080 I think, because it leaves much more room, you know, 0:03:48.080 --> 0:03:50.680 for speculation, and given the fact that there's so much 0:03:50.720 --> 0:03:53.120 political pressure on the FED from the White House, I 0:03:53.120 --> 0:03:55.400 think personally, I'm not sure if this is the right 0:03:55.440 --> 0:03:58.720 moment to sort of, you know, scale down the communication 0:03:58.800 --> 0:04:01.920 with the market, because that could be interpreted as something 0:04:02.000 --> 0:04:05.560 rather unfavorable. So more volatility, more uncertainty, I think. And 0:04:05.680 --> 0:04:07.839 maybe over time we'll get to know Kevin Walsh better 0:04:07.880 --> 0:04:08.920 and you can read them better. 0:04:08.960 --> 0:04:11.360 But for now, it's a bit of a black box, sonya. 0:04:11.400 --> 0:04:12.840 A lot of folks are trying to get their handle 0:04:12.960 --> 0:04:16.599 on underlying inflation out there in the marketplace. Today's a 0:04:16.680 --> 0:04:20.360 day where we've got oil down five six percent here, 0:04:20.400 --> 0:04:22.720 but it can just as easily up five to six 0:04:22.760 --> 0:04:27.200 percent given the social media activity out there. What's your 0:04:27.279 --> 0:04:30.240 view of kind of underlying inflation out there in the marketplace. 0:04:32.160 --> 0:04:34.159 Well, I think, you know, ever since this trade of 0:04:34.160 --> 0:04:36.680 hamuse was effective at closed with the beginning of the war, 0:04:36.800 --> 0:04:39.360 with what we were basically witnessing is this big wave 0:04:39.440 --> 0:04:41.960 of inflation that every day it just gets a little 0:04:41.960 --> 0:04:44.000 bit taller and it builds up a little bit further, right, 0:04:44.640 --> 0:04:48.440 and and so that is still happening, even if the 0:04:48.440 --> 0:04:51.120 op price goes down temporarily, even after we had the 0:04:51.200 --> 0:04:52.840 MoU and there was some you. 0:04:52.800 --> 0:04:54.960 Know, ship traffic going through the strait of Hormus. 0:04:55.480 --> 0:04:59.160 Ultimately, the factors that are pushing inflation higher are still 0:04:59.279 --> 0:05:02.200 very much in place, and it is of course predominantly energy. 0:05:02.560 --> 0:05:04.760 But the longer this is going on, the more you're 0:05:04.800 --> 0:05:06.640 going to have other effects. I mean, I always the 0:05:06.680 --> 0:05:09.120 best example, I think is food prices. I mean food 0:05:09.960 --> 0:05:13.800 is expensive energyized to store, to cool, to transport. 0:05:13.880 --> 0:05:15.479 You know, we're going to see that effect that we have. 0:05:15.560 --> 0:05:17.800 Of course, the issue with wheak prices being higher because 0:05:17.839 --> 0:05:21.440 of what's happening in the Ukraine so there are a 0:05:21.480 --> 0:05:25.160 lot of inflation factors still in the pipeline as it were, 0:05:25.880 --> 0:05:28.040 and those aren't going to disappear just because the ore 0:05:28.120 --> 0:05:30.480 price falls by five or six percent, or because we 0:05:30.560 --> 0:05:35.680 maybe get a resolution in Iran. Potentially we'll see that's 0:05:35.680 --> 0:05:37.679 still very much in place. I think that's what central 0:05:37.680 --> 0:05:39.080 banks we need to focus on. 0:05:39.839 --> 0:05:44.600 Between FED policy, Sonya and coordinated ethics invention throwing geopolitics 0:05:44.600 --> 0:05:47.240 there and maybe even oil. What do you think is 0:05:47.279 --> 0:05:50.480 the biggest macro risk that markets are underestimating at the moment. 0:05:52.600 --> 0:05:55.680 Well, I think, okay, so I mean a risk that 0:05:55.720 --> 0:05:57.840 could be a negative or if we think about focasting 0:05:57.839 --> 0:06:00.159 a positive event. But I think on the downside, I 0:06:00.160 --> 0:06:02.840 think the big unknown and the big risk is probably 0:06:02.880 --> 0:06:07.120 the question of when we will get physical shortages of goods, 0:06:07.240 --> 0:06:09.599 including including potentially oil. I mean, one of the reasons 0:06:09.640 --> 0:06:12.920 why we've fared so reasonably well for the last five 0:06:12.960 --> 0:06:14.919 months despite what's happening in Iron is the fact that 0:06:14.960 --> 0:06:18.200 strategic reserves have been drawn down. But that is not 0:06:18.320 --> 0:06:21.279 an that will end at some point. At some point, 0:06:21.320 --> 0:06:24.760 you cannot draw down strategic reserves more. Some countries like 0:06:24.760 --> 0:06:26.919 the US or China still have a lot other countries 0:06:26.960 --> 0:06:29.320 have less. So this is I think a major risk. 0:06:29.360 --> 0:06:31.280 And I think when I look at how the market 0:06:31.320 --> 0:06:33.640 is behaving in this environment, you know, the equity market. 0:06:33.680 --> 0:06:35.840 I mean the Ducks just posted a new record high. 0:06:36.320 --> 0:06:38.680 Clearly, this is a risk that I think is heavily 0:06:38.760 --> 0:06:39.880 underpriced in the market. 0:06:41.200 --> 0:06:43.040 H Right, very good, Sonia, Thank you so much for 0:06:43.120 --> 0:06:45.479 really appreciate gating a few minutes of your time, Sonia Martin. 0:06:45.560 --> 0:06:49.800 She's the chief economist at Easy Bang. There to stay 0:06:49.839 --> 0:06:52.680 with us. More from Bloomberg Surveillance coming up after this. 0:07:01.360 --> 0:07:04.960 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:07:05.000 --> 0:07:08.039 weekday afternoons from seven to ten am. E's durn Listen 0:07:08.080 --> 0:07:11.680 on Applecarplay and Android Otto with the Bloomberg Business app, 0:07:11.840 --> 0:07:13.520 or watch us live on YouTube. 0:07:13.720 --> 0:07:16.320 Ryan Mittrion joins us. She's a founding partner of the 0:07:16.400 --> 0:07:19.360 Callan Family Office. Hey, Ray, and we're about sixty percent 0:07:19.360 --> 0:07:21.720 of the way through the S and P five hundred 0:07:21.760 --> 0:07:24.840 earning so far this quarter here seems to be pretty 0:07:24.920 --> 0:07:26.560 darn good. What do you make of it? 0:07:28.160 --> 0:07:28.920 Good morning, Paul. 0:07:29.040 --> 0:07:32.640 Yeah, absolutely, we're off to another really strong start for 0:07:32.720 --> 0:07:36.840 this earning season. We have eighty six percent of companies 0:07:36.840 --> 0:07:39.920 are beating on earnings, seventy seven percent are beating on revenues. 0:07:40.000 --> 0:07:42.760 You have ten of eleven sectors that. 0:07:42.680 --> 0:07:45.640 Have year over year growth in earnings, and eight of 0:07:45.640 --> 0:07:49.160 those have double digit growth. So we're really seeing broad 0:07:49.200 --> 0:07:52.080 based strength across the board. And earnings growth is now 0:07:52.080 --> 0:07:54.800 expected to come in for the quarter at around forty 0:07:54.840 --> 0:07:57.200 seven percent, which is more than double the twenty three 0:07:57.240 --> 0:08:01.200 percent expectation coming in into the quarters. So we've really 0:08:01.320 --> 0:08:04.080 seen we're really pleased to continue seeing that the strength 0:08:05.000 --> 0:08:05.679 is still there. 0:08:06.200 --> 0:08:09.040 How are you interpreting the earning season so far? Because 0:08:09.080 --> 0:08:10.760 I feel like this is the earning season where AI 0:08:10.840 --> 0:08:14.440 spending stopped being enough on its own, and maybe investors 0:08:14.480 --> 0:08:17.880 were really really looking for when they'll see the ROI 0:08:17.880 --> 0:08:20.240 And you see investors really seeing rising costs or delayed 0:08:20.280 --> 0:08:22.000 payoffs and really punishing them. 0:08:23.080 --> 0:08:25.720 That's absolutely true, I mean, and you're seeing companies that 0:08:25.760 --> 0:08:29.160 are coming out with phenomenal results and are selling off 0:08:29.200 --> 0:08:31.680 on that news. But a lot of it, I mean, 0:08:31.760 --> 0:08:34.120 especially what we saw last week with some of those 0:08:34.200 --> 0:08:37.679 hyperscaler earnings, that there are very different outcomes in the 0:08:37.720 --> 0:08:41.000 stocks based based on what we're seeing and it's not. 0:08:41.080 --> 0:08:42.280 Enough to just be spending. 0:08:42.360 --> 0:08:45.080 We need to see that there is potentially some ROI 0:08:45.160 --> 0:08:47.560 coming from that, and we saw that last week with 0:08:47.840 --> 0:08:52.120 Microsoft with the Azure and Copilot businesses and Amazon with 0:08:52.200 --> 0:08:55.040 AWS and the growth that they're both seeing. But then 0:08:55.080 --> 0:08:57.640 the opposite, the market didn't feel as good about what 0:08:57.880 --> 0:09:00.920 came out from the Meta report at the free cash 0:09:00.960 --> 0:09:04.880 flow dropping significantly weaker than expected results. So we are 0:09:04.920 --> 0:09:07.480 going to need to start seeing more tangible results I 0:09:07.480 --> 0:09:10.480 think for the stocks to continue moving up on these 0:09:10.520 --> 0:09:11.920 high expectations and all. 0:09:11.840 --> 0:09:15.199 This cash that's being spent to fund these investments. 0:09:15.840 --> 0:09:18.280 Hey, Ryan, I know a lot of investors are probably 0:09:18.920 --> 0:09:22.480 looking for some diversification away from the AI trade here, 0:09:22.520 --> 0:09:25.360 which seems to be impacting a lot of different sectors 0:09:25.360 --> 0:09:28.160 across the marketplace. Where where do you guys look for 0:09:28.200 --> 0:09:29.200 a little diversification. 0:09:30.880 --> 0:09:32.440 That's a really important thing. 0:09:32.520 --> 0:09:36.280 I mean, we believe strongly in diversified portfolios, and you know, 0:09:36.320 --> 0:09:38.600 even within the equity markets, trying to find some of 0:09:38.600 --> 0:09:42.080 that diversification outside of the tech sector. Even though to 0:09:42.120 --> 0:09:44.559 your point, you are having a lot of the AI 0:09:44.600 --> 0:09:47.439 trade is you know, you're seeing it in the power 0:09:47.559 --> 0:09:49.640 gen you're seeing it in the industrials with the data 0:09:49.640 --> 0:09:51.960 center build out, You're seeing it in small caps with 0:09:52.000 --> 0:09:55.640 smaller semiconductor companies and emerging markets. But we do want 0:09:55.679 --> 0:09:59.079 to have that spread out of exposure across the board, 0:09:59.120 --> 0:10:01.800 and you know, leaning into some more of that value, 0:10:01.840 --> 0:10:05.160 more of the international, especially the emerging markets, the small caps, 0:10:05.720 --> 0:10:08.160 and just getting some of that diversified exposure, as well 0:10:08.200 --> 0:10:10.520 as looking into other parts in the market, whether it's 0:10:10.840 --> 0:10:14.640 fixed income or alternatives where appropriate for different investors, just 0:10:14.679 --> 0:10:16.679 to have a little bit of diversification. 0:10:17.200 --> 0:10:18.400 So when we get into these. 0:10:18.280 --> 0:10:20.800 Periods where you see some volatility in the markets like 0:10:20.840 --> 0:10:23.640 we've seen this past month, your portfolio can still hold up. 0:10:25.640 --> 0:10:28.840 What about semiconductors. We saw, for instance, of Philadelphia Semiconductor 0:10:28.920 --> 0:10:31.720 index see it's worst month since a great financial crisis. 0:10:32.280 --> 0:10:34.280 Do you view that as a buying opportunity or do 0:10:34.320 --> 0:10:37.240 you think that maybe it's a sign that expectations got 0:10:37.280 --> 0:10:39.120 a little too far ahead of reality. 0:10:40.679 --> 0:10:43.440 There's no question that the momentum has pushed up those 0:10:43.440 --> 0:10:46.080 stocks so high. I mean, they were up over eighty 0:10:46.120 --> 0:10:49.440 percent for the year, so it's not that surprising to 0:10:49.440 --> 0:10:51.240 see it take a little bit of a breather and 0:10:51.640 --> 0:10:54.800 have some of that profit taking and rotation into other sectors. 0:10:54.800 --> 0:10:58.600 We saw dollars going to value and more defensive sectors 0:10:58.640 --> 0:11:03.000 financials and staples, healthcare. But we do think if if 0:11:03.040 --> 0:11:05.800 you're under allocated in that area, we do think, you know, 0:11:05.840 --> 0:11:08.360 some of those valuations have now come down, even though 0:11:08.400 --> 0:11:09.839 the group as a whole is. 0:11:09.760 --> 0:11:11.120 Still up about sixty percent. 0:11:11.400 --> 0:11:14.000 There are still some good names and good buying opportunities 0:11:14.000 --> 0:11:17.280 in there as well if you're under allocated, But we're 0:11:17.280 --> 0:11:19.760 not looking to overweight that sector given where we are 0:11:19.800 --> 0:11:20.240 in the market. 0:11:21.000 --> 0:11:23.840 And how about the fixing come side of the world here, boy, 0:11:23.840 --> 0:11:26.600 you can clip some very nice coupons in the treasury 0:11:26.600 --> 0:11:28.600 market one and a quarter percent on the two year 0:11:29.920 --> 0:11:32.559 you know for sixty five, four, seventeen to ten year. 0:11:33.080 --> 0:11:35.320 Is that where we should be hanging out or you 0:11:35.320 --> 0:11:37.360 suggest some of your clients take credit risk on top 0:11:37.400 --> 0:11:39.680 of that, we. 0:11:39.640 --> 0:11:44.200 Keep most of our fixed income allocations primarily in high 0:11:44.280 --> 0:11:47.480 quality investment grade, but we do think that there is 0:11:47.559 --> 0:11:50.480 some opportunity as well in the below investment grade space, 0:11:50.559 --> 0:11:53.880 and some of that we're leaning in some on private credit. 0:11:54.200 --> 0:11:57.200 We do have some unique high yield exposure as well, 0:11:57.480 --> 0:12:00.160 but you know, some spreads are spreads are still pretty tight, 0:12:00.320 --> 0:12:02.520 so we want to be careful about where we're taking 0:12:02.559 --> 0:12:03.720 that and being very deliberate. 0:12:03.760 --> 0:12:06.240 And that's why we like the private markets for some 0:12:06.280 --> 0:12:06.920 of that as well. 0:12:07.480 --> 0:12:08.680 And what about the Fed? 0:12:08.720 --> 0:12:10.920 I mean, the Fed remains focused on inflation, but markets 0:12:10.960 --> 0:12:13.680 are pricing and a possible rate hike. What data point 0:12:13.720 --> 0:12:15.880 to you matters the most when it comes to the 0:12:15.920 --> 0:12:17.840 next move and interest rates. 0:12:19.440 --> 0:12:21.760 I think we really need to be They're very focused 0:12:21.800 --> 0:12:24.920 on inflation and what direction that's going to go in. 0:12:24.960 --> 0:12:28.360 I mean, the labor market really has been incredibly resilient 0:12:28.440 --> 0:12:30.040 and looks pretty healthy. 0:12:29.800 --> 0:12:32.720 So we'll get some more data obviously on that this week. 0:12:32.880 --> 0:12:36.319 So unless we see some surprise in one direction or 0:12:36.320 --> 0:12:38.800 the other, we think the focus will continue to remain 0:12:38.880 --> 0:12:41.720 on the inflation picture, since we're still pretty far above 0:12:41.760 --> 0:12:43.120 that two percent target. 0:12:44.000 --> 0:12:47.040 If we get softer than expected. 0:12:46.760 --> 0:12:50.280 Employment picture picture, then maybe the Fed stays on pause 0:12:50.320 --> 0:12:52.880 a little bit longer. But if we see a surprisingly 0:12:52.920 --> 0:12:55.920 strong report, then we may see yields jump on the 0:12:55.960 --> 0:12:59.240 expectation that they may make a hike sooner rather than later. 0:13:00.160 --> 0:13:03.360 And what's the appetite from your clients? For alternative investments, 0:13:03.480 --> 0:13:08.040 whether it's private credit, private equity, hedge funds. What's the 0:13:08.080 --> 0:13:10.040 appetite and kind of how do you deal with that? 0:13:11.240 --> 0:13:13.360 Yeah, I mean we work with ultra high net worth 0:13:13.440 --> 0:13:17.679 investors with pretty multi generational time horizons, so there's certainly 0:13:17.720 --> 0:13:22.080 in most cases the ability to take that ill liquidity. 0:13:22.080 --> 0:13:23.160 Into their portfolios. 0:13:24.240 --> 0:13:26.520 But we want to make sure we're evaluating each case 0:13:26.559 --> 0:13:28.400 by case and that the willingness is there and it's 0:13:28.400 --> 0:13:31.080 appropriate for the client. But we do think that there 0:13:31.240 --> 0:13:34.800 is the ability to enhance your returns over the long 0:13:34.880 --> 0:13:37.400 term if you take some of that illiquidity and invest 0:13:37.440 --> 0:13:39.880 in private markets. I mean, so many companies are staying 0:13:39.920 --> 0:13:42.160 private for so much longer now. I mean we saw it, 0:13:42.200 --> 0:13:45.320 you know, for example with SpaceX, with Anthropic, of these 0:13:45.360 --> 0:13:47.920 companies that are seeing so much growth in the private markets. 0:13:48.040 --> 0:13:50.520 So it does open up the opportunity set if you 0:13:50.600 --> 0:13:53.040 go in that area, and we like it on the. 0:13:53.080 --> 0:13:55.200 Private credit, private real estate as well. 0:13:55.400 --> 0:13:57.600 We think that helps to add some diversification to the 0:13:57.640 --> 0:14:00.760 portfolio and most of our clients to to take advantage 0:14:00.760 --> 0:14:02.080 of those opportunities as well. 0:14:02.520 --> 0:14:04.520 Ray, And thank you so much. Always appreciate getting a 0:14:04.520 --> 0:14:07.040 few minutes of your time. Ray and Mittrion founding partner 0:14:07.040 --> 0:14:11.440 in Callen Family offices down there in West Palm Beach, Florida, 0:14:11.440 --> 0:14:14.320 which is kind of ground zero for high network families 0:14:14.360 --> 0:14:16.120 and individuals. So that's a good place to have a 0:14:17.040 --> 0:14:19.680 family office of business here to stay with us. More 0:14:19.680 --> 0:14:21.960 from Bloomberg Surveillance coming up after this. 0:14:30.600 --> 0:14:34.200 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:14:34.280 --> 0:14:37.440 weekday afternoons from seven to ten am Eastern Listen on 0:14:37.520 --> 0:14:41.160 Applecarplay and Android Auto with the Bloomberg Business app, or 0:14:41.320 --> 0:14:42.800 watch us live on YouTube. 0:14:42.960 --> 0:14:45.400 Sarah Hunt joins his partner and chief market strategist at 0:14:45.440 --> 0:14:47.520 Alpine Saxson Woods joins us here in studio. 0:14:47.960 --> 0:14:48.240 Sarah. 0:14:48.320 --> 0:14:51.080 Last week we had a lot of tech earnings and 0:14:51.160 --> 0:14:53.480 there were some winners and some losers. And when you 0:14:53.480 --> 0:14:55.920 look at the stock market performance after they reported, how 0:14:55.960 --> 0:14:58.640 does that influence how you think about the AI trade? 0:14:58.720 --> 0:15:01.680 Where is the market in terms of how it wants 0:15:01.720 --> 0:15:03.280 to be exposed to AI? How do you guys think 0:15:03.280 --> 0:15:03.680 about that? 0:15:04.040 --> 0:15:05.720 Well, if you look at where we were, you know 0:15:05.760 --> 0:15:08.320 a year ago, everybody was raising capex and they were 0:15:08.320 --> 0:15:10.960 getting rewarded for raising capex almost across the board, and 0:15:11.040 --> 0:15:13.880 I think that that's obviously changed dramatically. I think you 0:15:13.920 --> 0:15:16.600 saw in the results this week that where you start 0:15:16.600 --> 0:15:18.880 to see that acceleration and growth which you saw for 0:15:19.080 --> 0:15:22.040 Microsoft and Amazon, versus where you have issues like you 0:15:22.080 --> 0:15:24.680 saw with Meta. Apple's got different issues because I think 0:15:24.680 --> 0:15:26.440 that's much more about the supply chain and the fact 0:15:26.440 --> 0:15:28.640 that memory prices are so high. But I don't think 0:15:28.640 --> 0:15:31.520 it's a demand problem. So for something like Apple, I 0:15:31.560 --> 0:15:34.240 would be less concerned about that in the near term, 0:15:34.240 --> 0:15:36.720 but a longer term or medium term. But I think 0:15:36.720 --> 0:15:38.920 that it really shows you you're starting to get bifurcation 0:15:39.080 --> 0:15:41.800 on how people are accepting the kind of spending that's happening, 0:15:42.040 --> 0:15:44.320 and what people hope for on the return side. 0:15:44.680 --> 0:15:47.320 So this is definitely the earning season where AI spending 0:15:47.320 --> 0:15:49.720 stop being enough on its own, but we're seeing companies 0:15:49.720 --> 0:15:52.600 spend billions and billions on AI infrastructure. Are there key 0:15:52.640 --> 0:15:55.160 signs that you're looking at to see whether those investments 0:15:55.200 --> 0:15:57.840 will actually pay off? That might be a tricky question, 0:15:57.880 --> 0:15:59.520 but I know you look at these closely well. 0:15:59.720 --> 0:16:01.280 I think I mean, I think that this was where 0:16:01.320 --> 0:16:03.840 the earnings were very important, because had you not seen 0:16:03.880 --> 0:16:06.560 the acceleration in demand that Microsoft was talking about and 0:16:06.600 --> 0:16:08.040 that AWS was talking about. 0:16:08.040 --> 0:16:08.800 On that side, I. 0:16:08.760 --> 0:16:11.600 Think that that question would be even more in focus. 0:16:11.800 --> 0:16:13.840 But I think the fact that also you've seen a 0:16:13.840 --> 0:16:16.320 little bit of moderation on that raise of capex. Yes, 0:16:16.360 --> 0:16:18.640 the capex is still strong, but we're not talking about 0:16:18.640 --> 0:16:20.800 doubling it again and again and again. And I think 0:16:20.800 --> 0:16:23.080 that that's important. And I also think that you know, 0:16:23.120 --> 0:16:25.480 the issue with what's going on in China and some 0:16:25.560 --> 0:16:29.000 of those models that are cheaper, that also brings into question, Okay, 0:16:29.040 --> 0:16:30.800 maybe the capex moderates a little bit, and I think 0:16:30.800 --> 0:16:33.760 the market starts to reward that moderation to some degree, 0:16:33.800 --> 0:16:35.560 because it's not just you have to get there first, 0:16:35.600 --> 0:16:37.760 it's how do we integrate this, what's actually going to happen, 0:16:37.760 --> 0:16:38.760 and what are you going to get paid for? 0:16:39.320 --> 0:16:42.080 Overall? What's your take so far of earnings? Because what 0:16:42.120 --> 0:16:44.320 we had a really high bar to clear and we 0:16:44.360 --> 0:16:47.560 had fantastic earnings in the first quarter, pretty big expectations 0:16:47.560 --> 0:16:48.440 for Q two as well. 0:16:48.760 --> 0:16:50.720 I think that the earnings, you know, you're still seeing 0:16:50.720 --> 0:16:53.120 earnings growth in the places where you expect to see it, 0:16:53.120 --> 0:16:55.960 and the information technology side you're STI also seeing it industrials. 0:16:56.080 --> 0:16:58.000 What you're starting to see, like Tyson and like Pocter 0:16:58.080 --> 0:17:01.120 and Gamble, is some real issues on thensumer side because 0:17:01.160 --> 0:17:03.680 consumer staples are having trouble with that pricing. You're starting 0:17:03.680 --> 0:17:05.439 to hit a wall with pricing. You don't see that 0:17:05.520 --> 0:17:07.320 yet in the technology space, but you, I mean, this 0:17:07.400 --> 0:17:10.080 is the whole. This is why you saw such volatility. 0:17:10.160 --> 0:17:13.240 Is that that adding to China with a cheaper potential 0:17:13.359 --> 0:17:16.199 mix into there makes it question how much you can 0:17:16.240 --> 0:17:18.440 continue to raise price on the technology side. I think 0:17:18.480 --> 0:17:20.720 that's going to be the tension going into twenty twenty seven. 0:17:20.880 --> 0:17:22.920 I can't believe I'm saying that we're going into twenty 0:17:22.920 --> 0:17:24.719 twenty seven, but there you are, and I think that 0:17:24.720 --> 0:17:26.320 that's how people are going to be looking at things 0:17:26.359 --> 0:17:28.639 as are am. I seeing that acceleration in demand and 0:17:28.680 --> 0:17:31.080 can I count on some returns from all that spending 0:17:31.080 --> 0:17:32.000 that I'm doing Right now? 0:17:32.119 --> 0:17:34.400 We are heading into twenty twenty seven and it's August, 0:17:34.480 --> 0:17:36.880 which is for me hard to believe. What about the FED, 0:17:36.880 --> 0:17:40.240 They're balancing stubborn inflation against concerns about consumer pressure. Do 0:17:40.280 --> 0:17:43.440 you think there's a risk that maybe keeping rates high 0:17:43.480 --> 0:17:46.600 for longer may create more economic damage than maybe some 0:17:46.680 --> 0:17:47.440 brief relief. 0:17:48.080 --> 0:17:50.240 I think the problem is that where we're seeing the 0:17:50.280 --> 0:17:52.640 inflation coming from, it's hard to see how higher rates 0:17:52.680 --> 0:17:54.359 are going to solve that problem. If you have a 0:17:54.400 --> 0:17:56.359 supply shock on oil, it's hard to see how higher 0:17:56.440 --> 0:17:59.119 rates help you unless you just kill demand, and that 0:17:59.320 --> 0:18:02.399 has lary effects that they don't necessarily want. So I 0:18:02.400 --> 0:18:04.960 think it's more about keeping things elevated as opposed to 0:18:05.000 --> 0:18:07.359 elevating them further. Although that argument is going to continue 0:18:07.359 --> 0:18:09.199 into the summer and we'll see what happens both with 0:18:09.240 --> 0:18:12.240 the employment report and what happens with inflation, because that 0:18:12.320 --> 0:18:15.159 oil shock that was getting better is now it's now 0:18:15.160 --> 0:18:16.840 gotten worse. I mean today you're down a little, you're 0:18:16.880 --> 0:18:19.119 down four box five. There's a lot more volatility there, 0:18:19.119 --> 0:18:21.160 and I think people were expecting a one way trip down, 0:18:21.359 --> 0:18:23.080 and I think that's going to complicate things for the 0:18:23.080 --> 0:18:24.360 FED once again. 0:18:24.400 --> 0:18:26.400 Twenty twenty six is shaping up to be a year 0:18:26.680 --> 0:18:33.159 driven by information technology communication services. Are there areas outside 0:18:33.160 --> 0:18:35.240 of there that maybe investors should be looking for, whether 0:18:35.240 --> 0:18:37.800 it's financials, healthcare, I'm not sure absolutely. 0:18:37.800 --> 0:18:39.880 I think that there are places in healthcare. I think 0:18:39.920 --> 0:18:42.000 that there are places in industrials. This is really a 0:18:42.040 --> 0:18:43.520