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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Let's

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Speaker 1: bringing Jack aveline, shall we Crescent Wealth Advises, c I

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Speaker 1: O and founder as well. Fantastic to catch up with you, Jack.

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Speaker 1: Walk us through what you're seeing in terms of policy.

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Speaker 1: Is it enough to deliver a circuit breaker for this

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Speaker 1: very volatile liquid market? Yeah? It uh, well we're waiting. Um,

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Speaker 1: you know, obviously monetary policy it was pretty factive, reasonably

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Speaker 1: effective in creating the money market liquidity. Um, you know,

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Speaker 1: maybe going off with a few bumps, but um, all

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Speaker 1: in all I think is it's pretty steady, and so

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Speaker 1: we did learn a lot at the last crisis. Now,

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Speaker 1: of course, all eyes are on fiscal the fiscal policy,

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Speaker 1: and you know, President Trump's talking about a trillion um.

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Speaker 1: You know, my back of the envelope estimate that is,

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Speaker 1: if if this is essentially call it six weeks of

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Speaker 1: you know, utter stand still, um, than that equates to

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Speaker 1: about call it a two trillion of g D p um.

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Speaker 1: If you assume that maybe third a third of the

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Speaker 1: economy is actually still operating, then maybe this is about

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Speaker 1: one point three trillion um to fill that gap um.

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Speaker 1: And you know, where does it come from? It's possible

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Speaker 1: this could be that modern monetary theory that's been you know,

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Speaker 1: bouncing around. Well, there's a question about the school response.

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Speaker 1: In the meantime, monetary policymakers have urgently been trying to

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Speaker 1: prevent a financial crisis from unfolding. As the author of

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Speaker 1: a book, Reading Minds and Markets, Minimizing risks and Maximizing

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Speaker 1: returns in a volatile global marketplace. It was published in

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Speaker 1: July two thousand nine, very apropos At this moment, which

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Speaker 1: is probably the most volatile time in markets in history,

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Speaker 1: I'm wondering, have we actually managed to stave off a

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Speaker 1: financial crisis or the wild moves we're seeing evidence that

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Speaker 1: we are seeing things absolutely spiral out of control on

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Speaker 1: the market side. Well, I think part of the you know,

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Speaker 1: a good deal, I should say, of the selling that's

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Speaker 1: going on is forced selling. That the fact is that

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Speaker 1: there are you know, I'm going to say probably call

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Speaker 1: it three to four hundred billion of institutional funds managed

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Speaker 1: UM in a programmatic way. Where volatility goes up, risk

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Speaker 1: has to come down UM. You know, if you know,

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Speaker 1: puts get essentially assigned, then the items have to be

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Speaker 1: sold um, you know, and so there there's UH option writing,

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Speaker 1: there's risk parity UM, and then there's just out an

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Speaker 1: out leverage UM, which has been you know, certainly benefited

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Speaker 1: these managers for the last several years. And I think

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Speaker 1: that's really exaggerated a lot of the moves. Jack, how

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Speaker 1: far in that leverage unwind are we? Do you have

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Speaker 1: a sense of that? I I really don't, UM, you know,

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Speaker 1: just because of these volatile were we still have these

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Speaker 1: enormously volatile sessions. So it's really hard to gauge you know,

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Speaker 1: how much of this is UM you know, is through

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Speaker 1: I would say from a risk parity point of view,

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Speaker 1: you know, does does the VIX get much higher than eighty?

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Speaker 1: You know, because it's not necessarily the level, it's the direction.

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Speaker 1: Now because assuming that all risperity traders have you know,

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Speaker 1: essentially adjusted to a VIC saved UM, you know, perhaps

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Speaker 1: if it just stays at that level and comes down,

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Speaker 1: maybe most of that behind us Jack, I believe great

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Speaker 1: cat show. You're joining us on the market in the

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Speaker 1: United States just brings a bauchari jasurists today as general

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Speaker 1: head of US Right Strategy, it's a bout of fantastic

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Speaker 1: to have you with us on the program. Walk us

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Speaker 1: through what you think is the biggest driver right now.

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Speaker 1: Is it people just selling what they can not necessarily

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Speaker 1: what they want. Is it some big technicalish out technically

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Speaker 1: issue out there, the illiquidity that we're experiencing in some

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Speaker 1: really really big parts of the market, or is this

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Speaker 1: just supply risk? What is it for you at the

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Speaker 1: longer end of the curve. Well, I think it's a

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Speaker 1: combination of all of the above. UM. I think the

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Speaker 1: last of liquidity, in my opinion, is the number one

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Speaker 1: reason for this erratic moves. That would say in treasuries,

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Speaker 1: because it's it's off twenty basis points one day and

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Speaker 1: then it rallies fifteen basis points the next. Um. If

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Speaker 1: you are a corporate bond investor, for instance, you're not

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Speaker 1: able to sell your corporate bonds, you're going to sell

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Speaker 1: perhaps other liquid assets. You have to be able to

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Speaker 1: meet your margin requirements or other purposes. Um. There's also

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Speaker 1: a lot of UH you know, demand for dollars broadly

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Speaker 1: speaking from a variety of market participants, and and the

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Speaker 1: first thing that they can sell is the most liquid

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Speaker 1: asset they have. The other fact that, like you pointed out,

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Speaker 1: is also tangible risk of higher deficits. But I, generally

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Speaker 1: and not I would be emphasize the bond vigilante characterization

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Speaker 1: because in my opinion, over time it's the e c

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Speaker 1: B as well as the FED and all global central

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Speaker 1: banks are doing q E. The trajectory has to be

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Speaker 1: for for yields to gradually move lower. So there's been

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Speaker 1: really no correlation in the last you know, two decades

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Speaker 1: between higher deficits and higher treasure yields. There's a question here.

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Speaker 1: You talk about the fundamentals, you talk about the lack

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Speaker 1: of liquidity. The lack of liquidity certainly has gotten the

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Speaker 1: attention of the Federal Reserve, and they've tried to step

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Speaker 1: in to try to stave that off by buying additional bonds,

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Speaker 1: particularly on the longer end of the curve. Why has

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Speaker 1: that not been helping more? That's a very very good questions. So,

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Speaker 1: because the lack of liquidity that I'm talking about is

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Speaker 1: has to do with the post crisis regulatory environment where

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Speaker 1: balance sheets for dealers, who are typically the ones that

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Speaker 1: are disinter mediating this risk has shrunk, so they're very

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Speaker 1: very careful about taking on risk um they have both

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Speaker 1: both on the repost side as well as on the

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Speaker 1: cash side, they're not able to rapidly grow their bound sheet. Also,

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Speaker 1: there's an issue of price discovery. When there's erratic moves

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Speaker 1: in the markets, it's very hard for market makers to

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Speaker 1: be able to know exactly where whereas things straight so

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Speaker 1: they tend to make the bid offers a lot wider

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Speaker 1: than they normally would. And adding to this problem is

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Speaker 1: the fact that people are working from home. There's not

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Speaker 1: that same levels of information flow that you would see

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Speaker 1: in a trading floor that on any given day that

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Speaker 1: you've seen right now. Bad for somebody who is hearing

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Speaker 1: these words that that that the treasury market is dysfunctional.

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Speaker 1: This is the seventeen trillion dollar market. It's crucial to

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Speaker 1: the entire global market. Can you give a little perspective

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Speaker 1: about just why that is? Just sort of how crucial

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Speaker 1: it is for the volatility in the treasury space to

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Speaker 1: decline in order for everything else to stabilize. I must

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Speaker 1: say I've been in the bond market for over two

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Speaker 1: decades and I've never seen this kind of volatility and

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Speaker 1: wide bit offers in the in the treasury market. So

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Speaker 1: I think it's extraordinarily important that the treasury market actually

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Speaker 1: functions properly. As you might know, we've had uh you know,

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Speaker 1: flash rallies in the past, and the Treasury has been

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Speaker 1: very closely monitoring PRISA and in the bond market. But

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Speaker 1: you know, the treasury market is your go to market

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Speaker 1: for for safe haven. So if you're an investor that

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Speaker 1: that wants to get out of risky acids and and

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Speaker 1: purchase a safe haven as that you're going to flock

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Speaker 1: towards treasury. So it's extraordinarily important that this market functions, uh,

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Speaker 1: you know, very efficiently. And you're seeing that this is

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Speaker 1: not just in the in the cash or TC markets.

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Speaker 1: You're seeing a liquidity in the futures market as well,

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Speaker 1: which is which is also somewhat troubling. So about you

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Speaker 1: just to wrap things up on the regulatory side, you

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Speaker 1: mentioned some of the regulation. I just wonder what you

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Speaker 1: think should be done. We just had a Bloomberg terminal

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Speaker 1: subscriber right into me, and we've had a lot of

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Speaker 1: people writing with some really really good thoughts on things,

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Speaker 1: and I think this resonates with what you're saying. As

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Speaker 1: volume goes up, volatility goes up, the risk managers will

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Speaker 1: force you to shrink the disposition. So in effect, it

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Speaker 1: forces less liquidity every time there's a crisis. So volo up.

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Speaker 1: Guess what risk managers tap you on the shoulder, pull

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Speaker 1: back your positions. Look it, he gets worse every time

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Speaker 1: we get into this situation and spatial I just wonder

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Speaker 1: what we can do about that, to cut that break,

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Speaker 1: break that link, get a circuit breaker in there. Well,

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Speaker 1: I think that the FAN has done it's part a

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Speaker 1: little bit by providing the primary dealer facility as well

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Speaker 1: as uh, you know, some of the other report facilities

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Speaker 1: that should provide liquidity to directly the primary dealers and

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Speaker 1: depository institutions. But beyond that, I would argue that the

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Speaker 1: supplementary lavage ratio requirements and the lavagator requirements that have

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Speaker 1: been imposed in the PROS post crisis period has also

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Speaker 1: vastly limited the dealer's ability to be able to take

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Speaker 1: on very large positions. This is also an issue in

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Speaker 1: corporate bonds, where the vocal rule is very much in play.

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Speaker 1: So there's there's clearly a lot of good rules that

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Speaker 1: were put in place after the financial crisis, uh to

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Speaker 1: avoid excessive risk taking among dealers, but that's also hurting

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Speaker 1: in an environment like this where you have primary dealers

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Speaker 1: are sort of your conduit for disintermediating risk. It's a

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Speaker 1: bauta great to get your thoughts. Thank you very much

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Speaker 1: for joining US avantea Jappi there stay at General's head

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Speaker 1: of the US right strategy. I want to bring in

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Speaker 1: Nathan Shakes paging fixed income economists and macro economic research

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Speaker 1: and Nathan fantastic to catch up with you. Let's just

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Speaker 1: get your thoughts on a claims number to eighty one

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Speaker 1: direction to travel not pretty. How bad you expect this

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Speaker 1: to get in the coming weeks. Well, I think your

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Speaker 1: folks have really nailed. A seventy uh increase in a

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Speaker 1: week is enormous, and uh, my expectation is that that

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Speaker 1: narboro will continue to rise. The question is how high

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Speaker 1: and that this is really our first gauge on just

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Speaker 1: how badly the really economy is going to be hit

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Speaker 1: by this saying. And I think you know to me,

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Speaker 1: it feels like we're we're standing on the edge of

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Speaker 1: it best and we just can't see the bottom. This

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Speaker 1: is this is a very scary juncture, Nathan. This is

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Speaker 1: a very scary juncture, and it's a lot of scary. Uh.

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Speaker 1: There are a lot of people who are very worried

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Speaker 1: about their own financial well being. They are seeing themselves

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Speaker 1: get laid off in mass and there's a question will

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Speaker 1: the jobs return? Do we have a sense of that?

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Speaker 1: I mean, is there sort of a trajectory here where

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Speaker 1: we could see a rapid increase the number of those

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Speaker 1: unemployed and then it all comes back online. So I'm

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Speaker 1: uncomfortable that the jobs will return some day. But that's

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Speaker 1: the problem is we don't know when that day is, uh,

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Speaker 1: And and how do we get from here to there?

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Speaker 1: That's really the key question now as I say that,

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Speaker 1: that is also a question that fiscal policy can help answer.

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Speaker 1: This is this is where fiscal policy can be the

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Speaker 1: most powerful. So these ideas that are being floated to

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Speaker 1: significantly in freeze unemployment benefits great idea to help these people, Uh,

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Speaker 1: ideas to buffer those that have lost wages, great ideas.

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Speaker 1: And I think at a time like this it even

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Speaker 1: makes sense as they're considering to just mail people mind.

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Speaker 1: But fiscal policy is going to be the key to

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Speaker 1: building this bridge from where we are today to that

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Speaker 1: someday when the jobs return. Couldn't agree more, Nathan. And

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Speaker 1: at the moment, there's a line that's going around in fact,

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Speaker 1: over the last couple of weeks, perfection is the enemy

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Speaker 1: of the good. We need this fast. It doesn't need

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Speaker 1: to be perfect, we just need this quickly. Do you

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Speaker 1: anticipate this will get done quickly enough to address some

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Speaker 1: of the issues that you're worried about right now? Mitch

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Speaker 1: McConnell told his caucus there was some pushback on the

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Speaker 1: bill that they approved yesterday. He said, just gag and

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Speaker 1: vote for it and worry about fixing it later. So

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Speaker 1: I think that I think that the Congress, the political

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Speaker 1: system is very much now in a place where we've

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Speaker 1: got to get something done. It's got to be big,

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Speaker 1: and it's got to be quick. And uh, I would

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Speaker 1: expect that we'll see something on the order of a

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Speaker 1: trillion dollars of fiscal stimulus. Let's stay over the next

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Speaker 1: week or ten days, could even be faster, Nathan. There's

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Speaker 1: also a question about the psychological impact the staying power

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Speaker 1: that that has on an economy When you have tons

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Speaker 1: of thousands, uh perhaps a million people ultimately according to

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Speaker 1: some estimates, who lose their jobs in short order, What

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Speaker 1: does that do to the economy longer term in terms

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Speaker 1: of consumer spending and saving raids and household formation. I mean,

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Speaker 1: do you have a sense of how long lasting the

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Speaker 1: psychological impact could be? You know, in in some sense,

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Speaker 1: I would say that we are still dealing with the

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Speaker 1: psychological ramifications of the global financial crisis now, more than

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Speaker 1: a decade later. And I think that this app episode

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Speaker 1: that we're going through now again, depending on how long

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Speaker 1: lived it is, how the virus evolved, is going to

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Speaker 1: leave a signature in people's thinking. And I think it's

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Speaker 1: underscoring to them that the world is a risky place. Now.

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Speaker 1: What exactly that means for the economy going forward, I

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Speaker 1: think is an open issue. But on the margin, I

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Speaker 1: think everyone will for some time be a little more

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Speaker 1: cautious and recognize that there are broad classes of risks,

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Speaker 1: some that are evident, in some that like like this

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Speaker 1: virus that just kind of emerge out of nowhere. Nathan,

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Speaker 1: We're lucky to have you this morning because your economists

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Speaker 1: that sits around some really really great fixed income portfolio

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Speaker 1: managers like Greg Peters, like Mike Collins, like others over

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Speaker 1: a PGIM and I just wonder when you all bang

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Speaker 1: your heads against each other over the last couple of

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Speaker 1: weeks many times, I'm sure how you're thinking about the

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Speaker 1: key economic question at the moment. Two weeks ago, three

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Speaker 1: weeks ago, the happy talk of a V shaped recovery

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Speaker 1: still dominated a lot of Wall Street. That's gone really

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Speaker 1: really quickly. Now they still talk of eventually coming out

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Speaker 1: of this okay, But I think the downside risk that

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Speaker 1: we keep coming back to them this particular program is

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Speaker 1: will this episode spark a period of defaults and de

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Speaker 1: leveraging that it's going to stick with us for a

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Speaker 1: long time and long after this health crisis fate. When

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Speaker 1: you will get together Nathan on that issue, what comes

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Speaker 1: out of the other side of that conversation, Well, h

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Speaker 1: for some time we've been quite worried about about debt

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Speaker 1: levels and the risks that they might pose for de

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Speaker 1: leveraging going forward, and our senses at these high levels

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Speaker 1: of debt are an element that's contributing to these historically

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Speaker 1: low interest rates now obviously right now there's a lot

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Speaker 1: of crisis related factors that have dragged rates down even lower.

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Speaker 1: But those de leveraging incentives flowing from this recognition that

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Speaker 1: the world can be risky. I think they're with us

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Speaker 1: for quite some time. And uh, and you know that

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Speaker 1: that that V shaped recession that you describe is feeling

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Speaker 1: so last week. You know, this week, I think we're

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Speaker 1: hoping for you, and Uh, I worry the next week

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Speaker 1: we may be thinking more in terms of the now, Nathan,

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Speaker 1: I'd love to dig more into the idea of deleveraging.

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Speaker 1: John is really right to keep bringing it up. There

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Speaker 1: is a question of how it looks. Does it look

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Speaker 1: like companies being more prudent and not doing as many

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Speaker 1: shared by backs and perhaps curbing certain types of executive compensation,

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Speaker 1: or does it look like bankruptcies and defaults? And those

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Speaker 1: are two very different outcomes. Do you have a sense

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Speaker 1: of that? It depends critically on how severe the economic

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Speaker 1: circumstances are. If if if we go through a period

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Speaker 1: here where CHDP falls sharply and that continues for several quarters,

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Speaker 1: I think we will see some corporate defaults. I think

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Speaker 1: that that's uh, that's unavoidable against fiscal policy can be

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Speaker 1: helpful in providing a safety net for some of those

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Speaker 1: firms and maybe delaying uh that process. But if this

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Speaker 1: is extended, I think we're going to see firms pushed

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Speaker 1: to the edge and maybe maybe beyond. If it's a

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Speaker 1: shorter term uh development that we're dealing with here, then

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Speaker 1: maybe firms will have a little bit more time and

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Speaker 1: they can do the gentle kinds of leveraging like you described,

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Speaker 1: of maybe reducing share by backs, um being a little

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Speaker 1: bit more cautious in terms of of mergers and acquisitions policy,

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Speaker 1: maybe being a little more cautious on dividends and that

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Speaker 1: kind of thing. But uh, it depends on where the

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Speaker 1: economy is headed. But you know, it is pretty clear

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Speaker 1: and even before this episode, that's the corporate it's got

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Speaker 1: the message that they had too much leverage and needed

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Speaker 1: to bring it down. Nthan Now that definitely needs a

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Speaker 1: Nthan Shakes page and fixed income economists great to catch

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Speaker 1: over the knighte and my best to the tame over

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Speaker 1: a page. There's a question going forward of what stock

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Speaker 1: investors are pricing into the market, and I want to

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Speaker 1: read you this quote from Sam Stovall Chief Investment Strategies

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Speaker 1: a CFR, A research in a Bloomberg News story recently,

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Speaker 1: what most investors are worried about is that a recession

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Speaker 1: is a foregone conclusion, and what we don't know is

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Speaker 1: the severity of the recession, whether it will be another

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Speaker 1: great recession or a shallow swoon. Sam joining us now

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Speaker 1: by phone, Sam, can you give us a sense right

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Speaker 1: now of what stocks are pricing in which of those scenarios? Well,

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Speaker 1: good morning, Lisa and Paul. I guess the question could

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Speaker 1: be what stocks are not pricing in the worst case scenario? UM.

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Speaker 1: A lot of people want to know just how bad

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Speaker 1: could it get? And if you look to valuate, and

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Speaker 1: you look to the fact that even though SMP capital

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Speaker 1: i Q consensus estimates are still pointing to a positive

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Speaker 1: two thousand and twenty UH, it's down from a near

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Speaker 1: eight percent growth at the beginning of the year. And

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Speaker 1: if you look to recessions since World War Two, basically

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Speaker 1: we have seen on average about a ten percent decline

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Speaker 1: in earnings. So if we were to see a hundred

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Speaker 1: and forty eight dollars on the SMP five hundred, not

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Speaker 1: a hundred and sixty eight dollars and if we went

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Speaker 1: down to a pe of ten times, which is where

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Speaker 1: we went in two thousand and eight, one could make

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Speaker 1: the case that we end up with a fifty six

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Speaker 1: percent bear market, so rivaling that of oh seven through

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Speaker 1: oh nine. So how much further do we have to go? Well,

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Speaker 1: looking at those kind of numbers, you know we're down

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Speaker 1: right now, so it's almost a doubling of what we've declined.

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Speaker 1: All right, Sam, So what are you thinking about? You've

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Speaker 1: been in the mar It's a long time, Sam, give us.

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Speaker 1: I mean, this is clearly unprecedented times pandemics. This is

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Speaker 1: nothing we learned in business school. This is nothing we've

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Speaker 1: seen in markets before. What is your gut view of

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Speaker 1: kind of what's happening out there? Well, good, good way

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Speaker 1: of asking that. I think investors should embrace history over hysteria. UM.

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Speaker 1: When I look to what has happened in the past,

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Speaker 1: we went from a all time high to the to

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Speaker 1: climb threshold in twenty two calendar days, which was almost

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Speaker 1: twice as quick as the second most rapid decline UM

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Speaker 1: history would then imply, but not guarantee, that UH swift

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Speaker 1: tends to be shallow that on average, those bear markets

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Speaker 1: that did occur the most quickly ended up being down

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Speaker 1: anywhere from down to the UH just barely a bear

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Speaker 1: market registration. Also, when I look to a rolling fifteen

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Speaker 1: day percent change change in the intra day high and

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Speaker 1: low of the market, we are second highest only to

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Speaker 1: October late October of two thousand and eight. So we

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Speaker 1: surpassed the U. S. Treasury debt being downgraded in two

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Speaker 1: thousand and eleven. We surpassed the capitulation that took place

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Speaker 1: UH in the end of the O two bear market UM.

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Speaker 1: And basically, I think we're at an extreme in terms

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Speaker 1: of volatility, which could imply that we are probably close

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Speaker 1: to this crescendo bottom. Yeah, essentially you mentioned the volatility.

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Speaker 1: I'm just looking at the VIX on my Bloomberg terminal

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Speaker 1: screen here eighty one point six seven. Just extraordinary levels

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Speaker 1: on the VIX. So Sam, to the extent that you know,

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Speaker 1: let's look towards the the other side of this virus

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Speaker 1: pandemic crisis. Where where do you think investors when we

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Speaker 1: do get there, where should they be looking? Initially? Well,

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Speaker 1: the first question is what makes think that we could

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Speaker 1: actually be getting close to a bottom? UH. Well, first

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Speaker 1: off is from an economic perspective, we're still only calling

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Speaker 1: for one quarter of GDP decline. Of course, it's going

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Speaker 1: to be a steep one. We think that when the

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Speaker 1: numbers finally come out, will be up one percent in

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Speaker 1: the first quarter, mainly because of a lot of hoarding

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Speaker 1: that is being taking place. Second quarter, however, we're going

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Speaker 1: to take it on the chin with a five percent decline,

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Speaker 1: but then see a dramatic bounce up six point four

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Speaker 1: percent in Q three and four point four percent in

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Speaker 1: Q four. UM looking to a simple screening of those

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Speaker 1: companies where we have BY or strong BY recommendations PE

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Speaker 1: ratios below that of the market, yet have high SMP

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Speaker 1: earnings and dividend quality rankings meaning consistency of raising earnings

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Speaker 1: and dividends. You've got a lot of names that are

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Speaker 1: fairly comfortable with investors. Comcast, Disney, General Mills, Tyson, Amera, Prise, CBS,

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Speaker 1: Health Cor, etcetera. Uh So these are companies like if

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Speaker 1: you're an investor who wants to wear both a belt

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Speaker 1: and suspenders. Uh these could be goodbyes going forward. If, however,

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Speaker 1: you say no, I want to go for those that

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Speaker 1: have fallen the most, because history says those that were

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Speaker 1: worst end up becoming first. Uh. That is true that

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Speaker 1: when the bottom does occur, usually those priced to go

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Speaker 1: out of business but did not are the ones that

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Speaker 1: tend to recover the most. We're speaking with Sam Stove,

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Speaker 1: all c f R, A chief investment strategists, and here

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Speaker 1: we were basically flat, certainly on the NASDAC when we opened,

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Speaker 1: but seven minutes into the trading day here in New York,

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Speaker 1: and we see the gravitational force is lower. The SMP

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Speaker 1: now down one point ninety two points is the level there,

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Speaker 1: the nastack down eight tens of a percent at sixty two,

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Speaker 1: And we're looking at at this sort of uncertainty Sam,

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Speaker 1: that you're talking thing about about the depth of the

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Speaker 1: potential recession, about just how long lasting it will be,

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Speaker 1: as well as which areas are going to get hit hardest.

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Speaker 1: And I'm wondering on the other side of this, and

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Speaker 1: I do want to focus on that, just because markets

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Speaker 1: do try to price in some sort of future. Um,

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Speaker 1: do you have a sense of which companies, which sectors

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Speaker 1: are likely to emerge first? Well? Uh? In their market environments. Uh.

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Speaker 1: It's traditionally your defensive that hold up the best. So UH,

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Speaker 1: consumer staples healthcare. UM. You know, when the going gets tough,

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Speaker 1: the tough go eating, smoking and drinking and if they

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Speaker 1: overdo what they have to go to the doctor. On

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Speaker 1: the flip side, however, it's usually the cyclicals that tend

408
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Speaker 1: to be the outperformers industrials, financials, technology that tend to

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Speaker 1: be those that lead on the re emergence of optimism.

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Speaker 1: So you know, I would tend to say, look to

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Speaker 1: those quality companies UH in each one of those more

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Speaker 1: cyclical sectors, and they're the ones that are likely to

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Speaker 1: lead us out. What about big tech because that was

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Speaker 1: the main driver ahead of this downturn UH for for

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Speaker 1: equity valuations. Do you think they'll continue to lead? Um, Yes,

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Speaker 1: I do. I think when you look to technology right now,

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Speaker 1: SMP capital i Q is pointing to only a one

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Speaker 1: point three percent gain and earnings in two thousand and twenty.

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Speaker 1: Yet tech is still expected to be up about seven

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Speaker 1: and a half percent, the best by far of any

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Speaker 1: of the other sectors within the five hundreds. So looking

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Speaker 1: at relatively low PE ratios for the sector, UH technology

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Speaker 1: now trading at seventeen four versus fourteen four based on

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Speaker 1: two thousand and twenty estimates, tech is one of those

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Speaker 1: four sectors that is trading at a double digit discount

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Speaker 1: to its relative pe over the last twenty years. Sam,

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Speaker 1: what do you make of the fiscal us we're starting

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Speaker 1: to hear about coming out of Washington. Do you think

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Speaker 1: is that kind of in line with where it needs

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Speaker 1: to be or do you think we need even more Well?

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Speaker 1: I think that we need to be putting a lot

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Speaker 1: of money back into the system as quickly as possible. Certainly,

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Speaker 1: you know many are complaining that it's not being done

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Speaker 1: quickly enough, but I tend to think that, based on

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Speaker 1: how slowly Congress usually works, that this is pretty much

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Speaker 1: light speed for them. Um. I think that the fiscal

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Speaker 1: stimulus won't stop any near term margin call induce selling,

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Speaker 1: but it would definitely offer a subsequent springboard to a recovery. Sam, So,

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Speaker 1: I guess I just want to just clarify if you

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Speaker 1: are you kind of in that V shaped economic scenario

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Speaker 1: where we're gonna have one down quarter and then pick

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Speaker 1: it right back up. Yes, that's where we're leaning now,

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Speaker 1: but it's obviously a very fluid situation. Our belief was

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Speaker 1: that back in just before the first US case of

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Speaker 1: COVID nineteen was reported expectations were for about a two

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Speaker 1: point four percent game in the second quarter g d P.

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Speaker 1: Then it went down to one and a half two

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Speaker 1: and now it's five UM. But still it is a

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Speaker 1: one quarter decline with a very sharp recovery in two three.

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Speaker 1: But obviously those numbers are subject to revision. Sam Stobal,

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Speaker 1: thank you so much for being with us c f R,

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Speaker 1: a chief investment strategist. Thanks for listening to the Bloomberg

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Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio.