Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
Speaker 1: plus technology, politics, economics, all purtnising the power of Business
Speaker 1: Week reporters and editors, not to mention our journalists and
Speaker 1: analyst in more than one twenty countries. You can download
Speaker 1: Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot com. You
Speaker 1: can also listen to our radio show at two pm
Speaker 1: Eastern Time on Bloomberg Radio or watch us on YouTube
Speaker 1: search Bloomberg glovel News. Let's get your business week agenda
Speaker 1: on this midterm election day in the United States. Just
Speaker 1: metten in the house Bloomberg and director Broker's studio right
Speaker 1: to my left. She's deputy team leader for US Equities
Speaker 1: at Bloomberg News. And then we've got Red pick Heart,
Speaker 1: us economy reporter at Bloomberg News via zoom from Washington,
Speaker 1: d C. Where we're going to talk about. It's the
Speaker 1: economy stupid, So we'll get into that in just a moment,
Speaker 1: but just let's kick it off with you. We had
Speaker 1: a pretty strong rally, and yet what's happened. We've kind
Speaker 1: of run out of some steam here. We are seeing
Speaker 1: stocks coming off the highs and some that's interesting. I
Speaker 1: was looking at the volume for today, so over the
Speaker 1: past ten trading days for the SMP five hundred volumes
Speaker 1: about ten percent lower, and as you mentioned, stocks were
Speaker 1: higher or a lot higher earlier as far as just
Speaker 1: the prospects for maybe potential gridlock following the midterm elections.
Speaker 1: Also we did see treasury yields ease, so that was
Speaker 1: a big help as well as the dollar, but now
Speaker 1: you're seeing that not quite as helping as much of
Speaker 1: the broader market since it is a bit flat now.
Speaker 1: But still I was looking at as far as when
Speaker 1: it comes to a still right, still lower if you're
Speaker 1: looking at the tenure, I mean they fell as much
Speaker 1: as eight basis points today, So still it's not like
Speaker 1: there was a dramatic reversal there in yields. But again
Speaker 1: seeing sort of volume lights kind of at least making
Speaker 1: some digressions there for the markets. But again, when I'm
Speaker 1: talking to money managers, they're sort of because Paul and
Speaker 1: I saw the kids off right, because there are like
Speaker 1: schools it right, in New York, I think I end
Speaker 1: up getting closed because they use them for voting polls.
Speaker 1: I know in New Jersey, where I grew up, the
Speaker 1: school stayed open, but apparently in New York City. I
Speaker 1: guess the kids get the day off, So maybe there's
Speaker 1: a bunch of parents at home. Maybe that's why volumes like,
Speaker 1: I mean, potentially, maybe that could be one of the reasons.
Speaker 1: But also I think it has to just do what
Speaker 1: Paul and I has. I talked a lot about this
Speaker 1: this week as far as just the historical aspect of
Speaker 1: mid terms, how typically it kind of doesn't matter who
Speaker 1: you're pulling data from, whether it's see if we're a
Speaker 1: research or the Stock traders Almanac, how following midterms that
Speaker 1: typically vodes well for stocks. But when I've been talking
Speaker 1: to a lot of money managers, they've already kind of
Speaker 1: pointed out that even if there is say a Republican sweep,
Speaker 1: there already was a lot of grid luck in general
Speaker 1: with Congress, so they don't expect to see some sort
Speaker 1: of massive sort of rally following that. And I was
Speaker 1: talking to think gridlock was the norm. Well, plug out
Speaker 1: a second, let's bring in read read pickards US Economy
Speaker 1: Report Bloomberg. She's got something on the Bloomberg to about
Speaker 1: what really kind of matters, what are the most important
Speaker 1: issues for mid term voters read. So Paul's heading into
Speaker 1: the elections have shown us that the economy and inflation
Speaker 1: are ranking really high on voters concerns and higher than
Speaker 1: some of the other issues that are on the bout
Speaker 1: this year. And when we think about what the economy
Speaker 1: looks like, it's it's really this extreme scenario where on
Speaker 1: one hand, you have this really strong labor market, where
Speaker 1: the unemployment rate is near its lowest level in decades,
Speaker 1: Employers continue to add jobs at a good clip, and
Speaker 1: and wage growth has really been broad based and especially
Speaker 1: helpful for lower income workers. But then on the other hand,
Speaker 1: you have the fact that the highest inflation in a
Speaker 1: generation has essentially, you know, sucked the air out of
Speaker 1: the room. And so these rising costs from everything from
Speaker 1: you know, groceries to airline fairs has really you know,
Speaker 1: weighed on Americans. So when we think about those wage
Speaker 1: games that have come from this, you know, great jobs
Speaker 1: market adjusted for inflation, wages year or year or actually lower.
Speaker 1: So if you're a Republican running today, you're pointing at
Speaker 1: that horrible inflation, and if you're a Democrat, you're pointing
Speaker 1: at the awesome jobs market. And it's interesting read. We
Speaker 1: had Matt Miller, I'm sorry, Matt Winkler on earlier today.
Speaker 1: Matt Winkler is a founder of Bloomberg News and he
Speaker 1: has got a fascinating column out there today and he said,
Speaker 1: by just about any measure, the economy Underbiden is better
Speaker 1: than any president other than Jimmy Carter. So he the
Speaker 1: data is there. But I guess the question for um
Speaker 1: the candidates is kind of which day you're gonna focus
Speaker 1: on exactly. And from the perspective of a voter, you know,
Speaker 1: are you putting more value on the fact that you
Speaker 1: have a job right now and unemployment is really low,
Speaker 1: or are you looking at the fact that the rising
Speaker 1: cost of gasoline and groceries right and everything else is
Speaker 1: really weting on you in your household. Well, that's a
Speaker 1: good point, and you know, Jess, this is something we've
Speaker 1: seen throughout the corporate earning season, is that companies have
Speaker 1: to deal with those higher costs, and some have been
Speaker 1: able to pass it on to customers, some have been
Speaker 1: able to you know, reduce costs elsewhere. But that's a
Speaker 1: real thing, and the longer that sticks around, that's where
Speaker 1: we get into the questions of evaluation, certainly for the
Speaker 1: public markets right inequities correct and also the on going
Speaker 1: issue when it comes to margins. So that's slowly been
Speaker 1: spilling over beyond even just discretionary companies into communications services, staples,
Speaker 1: materials companies now and Gina Martin Adams and her team
Speaker 1: actually had some interesting data where they were looking at
Speaker 1: the correlation between operating margins as far as how does
Speaker 1: that mean for this process when markets bottom, and typically
Speaker 1: right now, the consensus for analyst they're thinking that margins
Speaker 1: could bottom in the third quarter, but that continues to
Speaker 1: get pushed back. So even though that could potentially past
Speaker 1: quarter correct, but that doesn't mean there's going to be
Speaker 1: a dramatic rebound because basically, if you're looking at the
Speaker 1: estimates in Bloomberg Intelligence, they're basically staying flat until the
Speaker 1: second quarter of next year. So for her, in her
Speaker 1: mind did her strategies. When we'm talking about Gena Martin Adams,
Speaker 1: they're thinking that doesn't necessarily bode well for the broader
Speaker 1: stock market because you need to see that swing higher.
Speaker 1: So say, if we do see a rebound there and
Speaker 1: more broadly with margins, that bodes well for the stock market.
Speaker 1: But if you continue to see animals keep pushing those
Speaker 1: estimates further and further back, that's going to be a
Speaker 1: challenge for stocks. Don't forget. We're gonna get important flation print. Yeah,
Speaker 1: so we'll get a little bit more in terms of
Speaker 1: how that's played out. Just Manton, thank you so much,
Speaker 1: Deputy team leader for US Equities at Bloomberg News. Here
Speaker 1: in our interactive broker's studio. Read Picker out there in Washington,
Speaker 1: d C. Via zoom She is US economy reporter Blomberg News.
Speaker 1: Be sure to check them both out at Bloomberg dot
Speaker 1: com for some of their stories dealing with peak inflation
Speaker 1: and also the US economy on election Day. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. We'll go figure it's the
Speaker 1: economy stupid again, or more specifically, it's inflation when it
Speaker 1: comes to today's midterm elections in the US. We talked
Speaker 1: about this earlier with Reid Picker. This story is this
Speaker 1: next story in the upcoming issue of Bloomberg Business Week,
Speaker 1: out on news stands later this week, already online at
Speaker 1: Bloomberg dot com, slash business Week, and on the Bloomberg terminal.
Speaker 1: So let's get into it with Nancy Cook, who wrote it,
Speaker 1: White House correspondent at Bloomberg News via zoom from our Washington,
Speaker 1: d C. Bureau. And also with us is Christina Limblad.
Speaker 1: She is echo ex editor a Bloomberg Business Week. She's
Speaker 1: here in our interactive broker studio. So Nancy, let's kick
Speaker 1: it off with you. I mean, it is really inflation, inflation,
Speaker 1: inflation right today when it comes to uh, the elections.
Speaker 1: It's amazing the narrative and coming from the Republicans versus
Speaker 1: the Democrats. Yeah, I mean, we really um over there
Speaker 1: in the closing weeks of the election, saw that inflation
Speaker 1: really has become the dominant issue. Um. You know a
Speaker 1: majority of voters say that inflation and the economy are
Speaker 1: really the most important things. And what's interesting is in
Speaker 1: the New York Times Siena College poll um that pollsters
Speaker 1: took a few weeks ago, it showed that voters, by
Speaker 1: a two to one margin, who said that the economy
Speaker 1: was a major issue of thought the Republicans were best
Speaker 1: boys to handle that. So Democrats certainly wanted the election
Speaker 1: to be about a range of issues, um, including the
Speaker 1: labor market. Uh, you know, abortion, threats to democracy, but
Speaker 1: really pull after polhos. Voters are really focused on inflation. Yeah.
Speaker 1: You guys have a great chart in here, and I
Speaker 1: like the pictures. They make it easy for me to
Speaker 1: understand things. And it's just like, you know, the list
Speaker 1: kind of what are the big issues for voters? What
Speaker 1: happened to abortion? Christina? It's number six on the list.
Speaker 1: What happened? I thought that was gonna be the Democrats
Speaker 1: calling card. Well, that was the hope in the summer
Speaker 1: that they were going to be able to energize voters
Speaker 1: along other you know, issues like abortion and gun rights
Speaker 1: because we had school shootings, um and and specifically you know,
Speaker 1: women's suburban voters. Those are going to be issues that
Speaker 1: hopefully would energize them. But it's been really hard to
Speaker 1: turn the channel on the narrative away from economic issues
Speaker 1: and about inflation. And I have to say the Republicans, Um,
Speaker 1: you know, Nancy, another great chart in the story is
Speaker 1: about ad spending. Maybe Nancy can tell us a little
Speaker 1: bit about how, you know, because that's a very clear
Speaker 1: trend lines you see. Yeah, basically, basically we saw that
Speaker 1: Republicans were outspending Democrats um four to one in ads
Speaker 1: talking about inflation, and that really became the dominant Republican message.
Speaker 1: And you know, in addition to just voters citing it,
Speaker 1: Republicans sort of really picked up the baton of that
Speaker 1: and really hammered at home and Democrats just have not
Speaker 1: been able to escape it or really come out from
Speaker 1: under that narrative. As Christina said, you know, Nancy would
Speaker 1: I really would have loved has been a fly on
Speaker 1: the wall in the White House. As Joe Biden said, hey, folks,
Speaker 1: fails smart economic people. You said this was going to
Speaker 1: be transitory. I mean it really right. He was thinking
Speaker 1: a message out there talking to the American public, and
Speaker 1: yet as it's become persistent, the White House has really
Speaker 1: kind of had to scramble and rethink its message a
Speaker 1: little bit. Absolutely. You know, I've been reporting on how
Speaker 1: the White House has been dealing with inflation really for
Speaker 1: the past year and a half, and my reporting shows
Speaker 1: that really starting last fall, when um inflation started to
Speaker 1: become a major political problem. The White House started to
Speaker 1: take it much more seriously, and the President um has
Speaker 1: privately expressed a lot of concern with the fact that
Speaker 1: his AIDS for so long kept telling him that it
Speaker 1: was so called transitory and temporary, when in fact it
Speaker 1: was not. He got angry a few times at the
Speaker 1: National Economic Council Director Brian D's for basically, the White
Speaker 1: House is handling of inflation and it's faulty messaging on
Speaker 1: it um and so it's been been a real source
Speaker 1: of tension inside the White House, even as they try
Speaker 1: to point to other great spots in the economy like
Speaker 1: the jobs market and Nancy. I guess it's a little
Speaker 1: bit of a messaging problem in a sense that when
Speaker 1: you think about inflation, it is a global issue. There's
Speaker 1: inflation all over this planet. Just go look at our
Speaker 1: good friends in the UK and across Europe and other places.
Speaker 1: Number one, Number two, A lot of the inflation was
Speaker 1: not the result of any particular policy measure, but it's
Speaker 1: simply supplying demand of global economies, think oil. But I
Speaker 1: guess that's not an easy message to get across to
Speaker 1: Middle America to everyone. Yeah, that has been a huge
Speaker 1: part of the White Houses message like, look, look at
Speaker 1: these other countries they're facing it to. UM. You know,
Speaker 1: this is a post COVID economy feature. This is also
Speaker 1: partly caused by um Putin's war in Ukraine. That is
Speaker 1: a big part of the White House this message. But
Speaker 1: the fact of the matter is Americans every day are
Speaker 1: going to the grocery store and they're seeing higher prices
Speaker 1: for things like meat and produce. They're paying more for
Speaker 1: airline tickets, are playing more for their rent or their house. UM,
Speaker 1: and Americans are just very frustrated by the rising prices
Speaker 1: and they sort of don't want these excuses. And even
Speaker 1: Democrats strategists say the White House UM and Democrats at
Speaker 1: large just have not done a good enough job talking
Speaker 1: about their economic record but also showing that they are
Speaker 1: trying to take action on inflation. So I guess the
Speaker 1: next question, uh, Nancy, it would just be simply and
Speaker 1: I will wake up tomorrow, and I guess the Democrats
Speaker 1: will have to see how it plays out. Of course,
Speaker 1: but to the extent that the polls hold true and
Speaker 1: some of the reporting today holds true, it'll be time
Speaker 1: for the Democrats to maybe re message some of their
Speaker 1: key Uh key tenants. Is that something you're hearing from
Speaker 1: some of the leaders down in Washington. Well, I think
Speaker 1: that the White House is trying to project a very
Speaker 1: optimistic view of what's going to happen at this point.
Speaker 1: I think that they're telling people that, you know, keeping
Speaker 1: the House will be very hard, that the sentiment is
Speaker 1: that the House will likely flip to Republicans. I think
Speaker 1: the question is just what happens with the Senate, And
Speaker 1: what I'll be looking for tomorrow is the exit polling,
Speaker 1: not just the results, but what voters say about why
Speaker 1: they voted and if inflation and the economy continues to
Speaker 1: be the dominant theme. Well, and the thing is, Nancy,
Speaker 1: I love. I think it's how you wrap up the story.
Speaker 1: The thing is, Republicans have been really smart in terms
Speaker 1: of ad spending and the narrative when it comes to inflation.
Speaker 1: But what's their plan for bringing inflation town? That's a
Speaker 1: great point, you know, um Rick's got the senator from
Speaker 1: Florida has talked about, you know, UM cutting Medicare and
Speaker 1: Social Security as a means of cutting in federal spending.
Speaker 1: UM as a way to fight you know, out of
Speaker 1: control government spending or out of control rising prices. But
Speaker 1: that's not really a plan that is uniformly embraced by
Speaker 1: all congressional leaders. And so the Republicans sort of don't
Speaker 1: have and across the board plan for fighting inflation. And
Speaker 1: I think that that's something to keep in mind too.
Speaker 1: So all right, Nancy, So the issue here is going
Speaker 1: to going to be the Senate. What's this state that
Speaker 1: you're really focusing on tonight? I'm focusing on a few.
Speaker 1: I mean, I'm very curious to see what happens in Pennsylvania. Um,
Speaker 1: I'm very very curious about Georgia, although I think that
Speaker 1: we we may not know the results of that tonight.
Speaker 1: And I'm really closely watching Nevada as well, just to
Speaker 1: see if Democrats that's been a really close race for
Speaker 1: a while. Um. You know, there's a lot of union
Speaker 1: workers there, um, and and also a lot of Hispanics.
Speaker 1: I'm really curious to see how Democrats fare there. Hey, Nancy,
Speaker 1: just got about thirty forty seconds left here. I was
Speaker 1: just thinking, going back to what you said about, you know,
Speaker 1: the Republicans and their plan or lack they off on inflation.
Speaker 1: Should this be an issue two years from now? And
Speaker 1: should the Republicans really make some inroads this time around.
Speaker 1: Will it work against them? Or do you think, based
Speaker 1: on what you're seeing that they're just better at messaging
Speaker 1: when it comes to things about the economy And just
Speaker 1: got about thirty seconds. I don't think they're better at messaging.
Speaker 1: I just think that the Democrats have held all the
Speaker 1: lovers of power at this point, and uh, you know
Speaker 1: Americans are very mad about inflation, so they're going to
Speaker 1: blame those in power. Yeah, it's kind of how it works, right,
Speaker 1: That is how it works. Well, really smart, really relevant,
Speaker 1: certainly to the conversations we're having today. Nancy Cook, Thank
Speaker 1: you so much, White House Correspondent, Bloomberg News via zoom
Speaker 1: from our Washington, d C. Bureau. This story in the
Speaker 1: upcoming issue of Bloomberg Business Week, but find it already
Speaker 1: on the Bloomberg terminal and online at Bloomberg dot com
Speaker 1: and or thanks to Christina Lynblad. She is the economics
Speaker 1: editor of Bloomberg Business Week magazine. Joining us in studio.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Not so smart,
Speaker 1: certainly if you're holding bitcoin, Bitcoin extending its loss UH
Speaker 1: to more than fifteen Actually it was down more than
Speaker 1: sixteen percent to below seventeen thousand, five hundred. It is
Speaker 1: bouncing around now, it's still down about twelve percent. Man,
Speaker 1: It's an area, Paul, where I feel like one man's crisis,
Speaker 1: another man's opportunity, because we definitely saw some deal making
Speaker 1: and consolidation today. This deal, you know, it's interesting, it's
Speaker 1: financed by f t X TO exchanges, it's together and
Speaker 1: news broke this this morning is Katie Greyfeld and I
Speaker 1: were on air broadcast sounds like what happened there. So
Speaker 1: we have Katie Greifeld in our studio now hopefully we've
Speaker 1: got some more reporting on this because this was odd
Speaker 1: deal that's really rocking the Cryptosy Katie Greifeld, Bloomberg News
Speaker 1: Senior markets reporter, co host of Crypto I R l
Speaker 1: on Bloomberg Crriet Take joins us here in a Bloomberg
Speaker 1: in active broker studio. Katie, what's the backstory, what's going
Speaker 1: on here? First of all, it's nice to see you again.
Speaker 1: It feels feels like we've lived in multiple lives since
Speaker 1: I last saw you in terms of more reporting. I mean,
Speaker 1: there's still so many questions about this deal number one
Speaker 1: or what are the terms? I mean, what kind of
Speaker 1: money are we talking about here? But the big headline,
Speaker 1: of course, is that the world's biggest crypto exchange by
Speaker 1: far by spot volume, is buying the second largest again
Speaker 1: by spot volume. Again a lot of question marks here.
Speaker 1: We know that f t X was having some sort
Speaker 1: of liquid tod the event. Both CEOs tweeted to that effect.
Speaker 1: We know that f t X was being hit by
Speaker 1: massive withdrawals. We do have a tweet from f t
Speaker 1: X CEO Sam Bakman freed He said that the assets
Speaker 1: will be covered one to one quote, this is one
Speaker 1: of the main reasons we've asked finance to come in.
Speaker 1: So is this just about survival? You know, it's I
Speaker 1: think it's too early to say, but I would venture
Speaker 1: that a lot of people didn't even know f t
Speaker 1: X was for sale. I mean, this is shocking, This
Speaker 1: was shocking news. It's been a really dramatic forty eight hours.
Speaker 1: We had been seeing the two CEOs tweet back and
Speaker 1: forth at each other, but given this sort of white
Speaker 1: night in the industry that SPF has played, I think
Speaker 1: a lot of people were surprised by this nude and
Speaker 1: just the magnitude of it. When Paul and I were
Speaker 1: on radio, I was like, this is the biggest thing
Speaker 1: to happen since Terra, which I think was surprising to
Speaker 1: some of our producers. Like, we're going from crisis to crisis,
Speaker 1: is exactly. I mean, in crypto time may feels like
Speaker 1: a long time ago, but in the grand scope of time,
Speaker 1: you're right. I mean, we're just rolling crises. There's been
Speaker 1: periods of lulls. I mean, the stat we were looking
Speaker 1: at this morning before this news broke was bitcoin has
Speaker 1: been way less volatile than the stock market. That's not
Speaker 1: the case right now. That's not the case. And you know,
Speaker 1: the CEO, Sam Bankman Freed SPF is the you know
Speaker 1: the crypto folks referred to him as I kind of
Speaker 1: thought he was like this jillionaire. Where did all his
Speaker 1: gaions go in terms of why was there liquidity crisis
Speaker 1: at his company? Or was his jillion's all tied up
Speaker 1: in stock that's not liquid We didn't know any of
Speaker 1: that yet. A lot of great questions. Uh, this sort
Speaker 1: of factors into stuff that we're still reporting out that
Speaker 1: comes to the f t T token that is the
Speaker 1: native token of the exchange. Binance coin is the native
Speaker 1: token of the Binance exchange. So we don't know exactly
Speaker 1: necessarily what SPF states was. We know that the Binance CEO,
Speaker 1: Shan Pan's out. He's known as c Z. Of course,
Speaker 1: everyone has their initials. The big news over the weekend
Speaker 1: was that he was selling more than five hundred million
Speaker 1: dollars worth of that token. Coined Us had reported that
Speaker 1: Alameda Research, which is a trading shop owned by SPF,
Speaker 1: had significant assets in that token. So again the direct
Speaker 1: linkage is unclear here, but it's a very interconnected world
Speaker 1: the crypto industry. A day before reaching a deal, bank
Speaker 1: and Freed sent on Twitter that assets on FTX were fine.
Speaker 1: And I mean again, we know that they were really
Speaker 1: under a lot of pressure from those withdrawals. It seems
Speaker 1: like that was a big focus here and getting this
Speaker 1: deal done. But again, the terms of the deal. Should
Speaker 1: we assume when he said fine because he knew that
Speaker 1: he had a deal coming. You know, if I could
Speaker 1: get an interview with him, Carol, I would love that.
Speaker 1: If he's listening right now, please call me. Meanwhile, let's
Speaker 1: just say crypto across the board. We've got bit coining
Speaker 1: down twelve percent, Etherorium down almost seventeen percent, binance coin
Speaker 1: is down eight percent, x rps down twenty percent, so
Speaker 1: we are just seeing Salana is down twenty eight percent,
Speaker 1: so we're just seeing mass selling. So once there's a
Speaker 1: lot of systemic question marks right now. Systemic that's like that,
Speaker 1: but it's just for this, for the ticks out there
Speaker 1: of crypto, like a Jamie time In for example, just
Speaker 1: more ammunition for kids. I told you another man I
Speaker 1: would love to talk to right now. Right, he's still
Speaker 1: watching it. We love checking with you when it comes
Speaker 1: to the crypto space. Katy gray Felt, Bloomberg New Senior
Speaker 1: Markets reporter, reporter, co host of Crypto I r l
Speaker 1: on Bloomberg Crricktakes. She does that with Tim's Tanebeck. I'm
Speaker 1: broom mac journal now. But you let me drive, no, no, please,
Speaker 1: I'll do the riding gravels. I want to drive. Its
Speaker 1: good question drive. This is the drive to the Clobell
Speaker 1: on Bloomberg Radio. Right, folks, we just got about ten
Speaker 1: minutes luck in today's trading session. Definitely bouncing around those
Speaker 1: major equity averages off our highs and lows, but green
Speaker 1: across the screen. And if I look at the eleven
Speaker 1: major industry groups in the S and P five hun
Speaker 1: did everything is higher, although consumer discretionary just barely uh
Speaker 1: in the green. So let's get to it with Marianne Bartel.
Speaker 1: She's Chief investment strategist imagining director at Sanctuary Wealth. It's
Speaker 1: a platform for a network of registered independent financial advisors. She,
Speaker 1: by the way, spent more than two decades at b
Speaker 1: of A Merrill Lynch, where she was head of technical
Speaker 1: and market Analysis, where she and I used to talk
Speaker 1: a lot over the years, so it's so great to
Speaker 1: have her back. She's joining us via zoom from Nyack,
Speaker 1: New York. Marianne, how are you. I'm doing great. Thank
Speaker 1: you so much for having me on the program. Well,
Speaker 1: it's great to have you here. Let's talk about the markets. Um.
Speaker 1: You guys do work with and support a lot of
Speaker 1: financial advisors. What are you hearing from them when it
Speaker 1: comes to this market environment? You know, Carol, it's really interesting.
Speaker 1: They've been very quiet. I haven't gotten too many questions,
Speaker 1: which is really quite interesting. You know. I could spend
Speaker 1: that both in a positive way and end a negative way.
Speaker 1: What I really feel is that our firm is very
Speaker 1: well positioned for the pisodic volatility that's been the theme
Speaker 1: that we've been talking about for both the equity market
Speaker 1: and the bond market, and I think they've really have
Speaker 1: educated their clients to kind of weather some of the
Speaker 1: moves that we've been getting in this market. Marian, This
Speaker 1: market seems to be one that's driven in large part
Speaker 1: by macro drivers. Take the federal reservant interest rates, for example,
Speaker 1: or political um contests here in the States. Are geopolitical
Speaker 1: issues in terms of maybe the you know, the war
Speaker 1: in Ukraine and so on. But earnings also matter, don't they.
Speaker 1: And we just finished up an earning seasons wondering kind
Speaker 1: of help, what were some of your takeaways from this
Speaker 1: earning season. You know, that's a great point you make.
Speaker 1: We we love to talk about the macro it's a
Speaker 1: lot of fun, but at the end of the day,
Speaker 1: stock prices respond to earnings, and you know, it's the
Speaker 1: good news this this quarter was earnings have not been
Speaker 1: a disaster, and many people were expecting a disaster. But
Speaker 1: they're not great either. Um, some companies have done well
Speaker 1: all some companies have done very poorly. If we look
Speaker 1: at where we're standing so far in earning season, we've
Speaker 1: got earnings up around two UM, which is not that great,
Speaker 1: and then if you take out energy um, you're actually
Speaker 1: down five percent. So the bulk of the earnings this
Speaker 1: quarter has actually been driven by the energy sector, which
Speaker 1: is a sector we happen to like a lot. What
Speaker 1: do you make of the mid terms today? I'm looking
Speaker 1: at our Markets Live blog and they've got a headline
Speaker 1: on a story. The US midterms will not change market
Speaker 1: direction um because when you think about things like valuations,
Speaker 1: because that's about earnings and interest rates. Is that a
Speaker 1: good point here that ultimately, at the end of the day,
Speaker 1: you've got to look at what a particular publicly traded
Speaker 1: stock is worth and how it compares to maybe its
Speaker 1: historical valuations, and how it compares to the market environment.
Speaker 1: That's that's absolutely correct. Valuations do matter, and what you've
Speaker 1: been seeing in this market is that, you know, tech
Speaker 1: stocks got very overvalued and that's where you're seeing much
Speaker 1: of the decline, especially in in the in the thanks space.
Speaker 1: And I think they're you know, rerating multiples because interest
Speaker 1: rates are going up and this is a very well
Speaker 1: known story, but we do like to talk about, you know,
Speaker 1: midterm cycles, how to markets you know, behave And if
Speaker 1: you study the average mid term election cycled with the market,
Speaker 1: you actually bottom in October, which is what we did,
Speaker 1: and rally into year end, which is what we're doing.
Speaker 1: UM and then seasonally November and December two of the
Speaker 1: strongest months in the year. So you know, when you
Speaker 1: kind of combined you know, the the seasonal behavior patterns
Speaker 1: and not having earnings a disaster, the market has actually
Speaker 1: been able to rally. But we're we are concerned that
Speaker 1: if industries continue to go up, you're still going to
Speaker 1: de rate the multiples and and that will eventually put
Speaker 1: pressure on stocks. But you know, we still think Santa
Speaker 1: Claus is going to show up this year. So in
Speaker 1: your outlook, it sounds Merrianne that you'd prefer value over growth,
Speaker 1: maybe even small caps over some of the larger ones.
Speaker 1: Is that how we should think about Is that what
Speaker 1: you're kind of trying to communicate to your folks. Yes,
Speaker 1: so that that's where you've seen the shift And something
Speaker 1: that I learned many many years ago actually from my
Speaker 1: aunt that went to Wall Street in nineteen fifty six. UM,
Speaker 1: and what she always told me, when a market is
Speaker 1: in a bear market, you eventually start seeing the leadership emerge.
Speaker 1: And that's what's happening because yes, if you own tech stocks,
Speaker 1: it feels really bad. But if you own energy, if
Speaker 1: you own some industrial stocks, if you own select healthcare,
Speaker 1: you don't feel like you're in a bear market. And
Speaker 1: that's where your new leadership is. And that's where the
Speaker 1: value is. Yes, they're they're called value. And if you
Speaker 1: look at the equally weighted SMP, it's outperforming the SMP,
Speaker 1: which is a cap weighted index, and small caps are
Speaker 1: starting to do better than large cap and UM one
Speaker 1: of your analysts actually pointed out and I thought it
Speaker 1: was a great observation, UM that small caps if you
Speaker 1: used UM twenty three earnings or treating it around fourteen times,
Speaker 1: which is very very attractive your core too. As we mentioned,
Speaker 1: when you're at b of A, you know, Marian was
Speaker 1: doing technical analysis on the markets. You talk about, you know,
Speaker 1: midterm cycles and what we've seen in historically. When you
Speaker 1: look at the technicals, how does this market seem to
Speaker 1: you or what does it say? So right now on
Speaker 1: a very short term basis, so I would say over
Speaker 1: the next three months. Yes, the markets can rally, and
Speaker 1: you know what could potentially happen is you can see
Speaker 1: ten year treasury yields maybe even fall to three and
Speaker 1: a half percent. But that's still in a context of
Speaker 1: an uptrend where we think that ten your treasure yields
Speaker 1: can still get to five and twos can also get
Speaker 1: um to five percent. But if rates can actually fall
Speaker 1: here here, I think that's going to allow equities to rally.
Speaker 1: And you know, the VIX has already rolled over and
Speaker 1: I think that can fall to around twenty. But then
Speaker 1: I expect as rates continue to go up over time,
Speaker 1: and the FETE is made it very clear that they're
Speaker 1: not done yet. Um, that is going to put pressure
Speaker 1: on the equities in the first quarter of the year. Marianne,
Speaker 1: real quick, thirty seconds. Is there a sector in the
Speaker 1: equity market that's just screaming at you right now? Um,
Speaker 1: high octane and energy. It's across the board. And this
Speaker 1: actually reminds me of the two thousand period. Now. I
Speaker 1: want to say, you know, technology stocks valuation is completely different.
Speaker 1: You're talking about two pete multiples and two thousand in
Speaker 1: the twenties now, But we got a leadership shift into
Speaker 1: value into energy, UM and commodities, and it feels very similar.
Speaker 1: So I I think the number one sector next year
Speaker 1: is going to be energy, followed by industrials being a
Speaker 1: top winner. Yeah, it's certainly been an outperformer. A little
Speaker 1: bit mellow today, but we definitely have seen some outperformance. Marianne.
Speaker 1: Thank you so much. Appreciated. Marian Bartel's chief investment strategists
Speaker 1: managing director of its Sanctuary Wealth, joining us via zoom
Speaker 1: from Nyack, New York. Thanks for listening to Bloomberg Business Week.
Speaker 1: Download the podcast on iTunes, SoundCloud, or Bloomberg dot com,
Speaker 1: and you can also listen to our radio show at
Speaker 1: two p m. Eastern on Bloomberg Radio or watch us
Speaker 1: on YouTube search Bloomberg Global News