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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: Nike shares rising after the apparel maker reported quarterly profit

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Speaker 1: that beat analyst expectations. It comes after the company reported

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Speaker 1: a drop in its inventory stockpile. That's a sign that

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Speaker 1: Nike is making some progress in moving out older merchandise

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Speaker 1: for newer, more profitable items. Nike revenue, however, did fall

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Speaker 1: two percent in North America, just below expectations, and sales

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Speaker 1: in the Greater China region cooled as well, with growth

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Speaker 1: of four point eight percent, falling short of estimates. We

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Speaker 1: heard from Michael Wolfe, CEO of consulting firm.

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Speaker 3: Activate Largely, they've had way excess inventories which they've had

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Speaker 3: to burn off. As a result, they've increased their SG

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Speaker 3: and A because they're advertising. To get rid of it

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Speaker 3: in China is a huge challenge for them. And it's

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Speaker 3: not just about the Chinese economy. They have a strong

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Speaker 3: competitor in Leaning, which is a Chinese brand, and in

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Speaker 3: a lot of cases it's for a lot of Chinese consumers,

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Speaker 3: it's preferred.

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Speaker 1: That's Michael Wolfe's CEO of consulting firm Activate Now. Nike

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Speaker 1: shares are currently up seven point five percent in late trading.

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Speaker 1: But it has been a very rough year year to

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Speaker 1: date for Nike shares, but the investors gave it a

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Speaker 1: pop in after hours today.

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Speaker 2: Doug, Well, let's get to some of the FED speak

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Speaker 2: from today. We'll begin with the head of the Richmond FED,

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Speaker 2: Tom Bark and he was saying it's too soon to

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Speaker 2: know if another rate hike will be necessary, and he

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Speaker 2: said headwinds from a potential government shutdown could create even

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Speaker 2: more uncertainty. Here's Barkin speaking earlier with Bloomberg.

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Speaker 4: I think they're a wide range of possible outcomes. You

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Speaker 4: could argue for a resurgence based on the numbers we've

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Speaker 4: been saying. You could argue for a downturn. You could

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Speaker 4: argue for a return to the pre COVID economy. I

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Speaker 4: think all of those are in sight.

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Speaker 2: Tom Barkin there, he is the head of the Richmond FED.

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Speaker 2: He went on to say he's expecting to learn more

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Speaker 2: about the trajectory of the economy and inflation over the

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Speaker 2: next several weeks and months. We also heard today from

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Speaker 2: the head of the Chicago FED, Austin Goolsby. He was

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Speaker 2: saying policymakers shouldn't be placing too much weight on the

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Speaker 2: idea that steep job losses are necessary as a way

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Speaker 2: of controlling inflation. He said that could lead officials to

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Speaker 2: raise rates that would be unnecessarily too high.

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Speaker 1: Right, and as we alluded to earlier, striking auto workers

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Speaker 1: are pulling back a bit on their wage demands. We

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Speaker 1: get that story from Bloomberg's Tom Busby.

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Speaker 5: The United Auto Workers union is bending a little now,

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Speaker 5: looking for a thirty percent pay race from gm Ford

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Speaker 5: and Stallantis. That's down from a forty percent demand last week.

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Speaker 5: The idea is to appease current union members with a

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Speaker 5: sizeable wagehike and generate interest from non unionized auto workers

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Speaker 5: to join the uaw's ranks and get paid more. Still,

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Speaker 5: the strike could get a lot bigger on Friday, with

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Speaker 5: the union promising walkouts will expand as the job action

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Speaker 5: enters its third week if the union says no major

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Speaker 5: progress is made in ongoing negotiations. Tom Buzzy, Bloomberg Radio.

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Speaker 2: Well. The popularity of a JP Morgan's blockbuster ETF has

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Speaker 2: spurred a wave of copycat funds, and the latest seems

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Speaker 2: to be coming from Blackrock. We have more from Bloomberg's

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Speaker 2: Erica Hirschkewitz.

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Speaker 6: Blackrock is the latest exchange traded fund issuer to take

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Speaker 6: aim at the runaway success of JP Morgan Chase's biggest

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Speaker 6: active strategy, the actively managed Blackrock Advantaged Large Cap Income ETF,

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Speaker 6: which began trading Thursday and charges thirty five bases points,

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Speaker 6: tracks dividend paying stocks in addition to selling s and

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Speaker 6: P five hundred call options to generate additional payout streams.

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Speaker 6: The new Blackrock fund resembles the twenty nine billion dollar

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Speaker 6: JP Morgan Equity Premium Income ETF, which also tracks US

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Speaker 6: stocks and uses a call writing strategy to produce a

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Speaker 6: steady stream of income. In addition to Blackrock, gold Mint

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Speaker 6: Sacks and reck shares have also applied for lookalike funds.

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Speaker 6: As JP Morgan Chases ETF continues to attract billions of

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Speaker 6: dollars Perkaherskowitz, Bloomberg Radio.

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Speaker 1: And to News out of China Now China, Evergrand says

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Speaker 1: it's billionaire founder Hue Ka Yan is suspected of committing crimes.

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Speaker 1: That story from Bloomberg's Joan Wong in Hong Kong.

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Speaker 7: Evergrand says it was notified by authorities that Hoi is

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Speaker 7: under police control and is suspected of crimes. A statement

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Speaker 7: by Evergrant to the Hong Kong Exchange did not say

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Speaker 7: what the crimes might entail. Bloomberg had reported earlier this

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Speaker 7: week that Hoy had been placed under residential surveillance. Meantime,

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Speaker 7: The China Business News reports that Peter Schu, one of

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Speaker 7: Hoy's sons, had also been detained, and other reports this

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Speaker 7: week suggest that former executives had also been taken into custody.

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Speaker 7: Evergrand Shares will remain suspended in Hong Kong until further notice.

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Speaker 7: In Hong Kong, Join Wang Bloomberg Radio.

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Speaker 1: Well, let's get two Global News. Congress is running out

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Speaker 1: of time to avert a government shut down this weekend.

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Speaker 1: Head Baxter has Global News in the nine sixty newsroom

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Speaker 1: in San Francisco. Ed.

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Speaker 8: Yeah, exactly right, Brian, And the rhetoric is getting stronger.

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Speaker 8: As a matter of fact, Minority Leader Hakim Jeffrey says,

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Speaker 8: the right wing of the Republican Party is saying.

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Speaker 9: Unless you cut social security, slash public school funding, criminalize

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Speaker 9: abortion care, and do a whole host of other extreme

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Speaker 9: right wing things that they want to jam down the

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Speaker 9: throat to the American people, but we are setting down

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Speaker 9: the government.

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Speaker 8: One of those holding up the process, Matt Gates says,

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Speaker 8: it's time to resolve some long festering problems.

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Speaker 10: My frustration is that we're thirty three trillion dollars in debt,

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Speaker 10: running two trillion dollars annual deficits with no real end

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Speaker 10: in sight.

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Speaker 4: That's my frustration.

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Speaker 8: And he says McCarthy doesn't have the votes to get

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Speaker 8: anything done before the deadline and Bloomberg's down. Flatley says

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Speaker 8: Ukraine funding has again become a major issue in the battles.

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Speaker 10: I mean this has become a very much a political

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Speaker 10: football for the House Republican Conference. The question of how

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Speaker 10: to fund you fighting in Ukraine, When to fund it,

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Speaker 10: how to go about that, whether it should be a

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Speaker 10: clean cr or include the this supplemental funding.

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Speaker 8: There's a last moment attempt to forge a deal, but

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Speaker 8: that is expected to fail. Meanwhile, former Vice President Mike

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Speaker 8: Pence today is accusing Donald Trump of abandoning his commitment

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Speaker 8: to conservative values and lowering taxes. Pens On Bloomberg Today

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Speaker 8: says Trump is talking high terraces.

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Speaker 11: Whatever his rhetoric was back in the day, and his

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Speaker 11: rhetoric has remained the same. The policies that he's advancing now,

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Speaker 11: which included a ten percent tax on all imports into

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Speaker 11: the United States that the Tax Foundation said would cost

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Speaker 11: five hundred thousand jobs, is directly opposite of our administration

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Speaker 11: and the Reagan legacy of cutting taxes for individuals and businesses.

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Speaker 8: Pence says, is could take the US back to the

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Speaker 8: days of Herbert Hoover and the Great Depression. Well, there

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Speaker 8: may be an alternative bid for the PGA to one

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Speaker 8: of the Saudi Arabia. Bloomberg reporting the Endeavor and Fenway

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Speaker 8: groups are milling getting together. So what form, Well Bloomberg's

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Speaker 8: got this could be.

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Speaker 2: An alternative transaction.

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Speaker 6: It could be that these folks end up working alongside

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Speaker 6: piece who actually have.

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Speaker 11: A ride at first refusal.

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Speaker 6: So that's really hard to see them not being involved

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Speaker 6: at all.

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Speaker 11: But yet it certainly an interesting development.

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Speaker 8: That's been a serious concern about the PGA being under

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Speaker 8: control of Saudi Arabia. UAW boss Sean Fain is threatening

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Speaker 8: a widening strike tomorrow if progress is not made. Bloomberg's

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Speaker 8: David Wells says this one's expected to have larger impact

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Speaker 8: if it does indeed happen.

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Speaker 12: This is very crucial again because I figured he was

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Speaker 12: going to continue the strike no matter what last time.

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Speaker 12: Now we've been out longer. He scored a big public

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Speaker 12: relation's coup getting Joe Biden to come to the picket

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Speaker 12: line this week, so you know, he can really focus

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Speaker 12: on getting down and negotiating, getting down to brass tacks

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Speaker 12: at this point, So big day, big data, marmon.

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Speaker 2: Yeah.

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Speaker 8: At the same time, UAW is saying it needs to

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Speaker 8: come out of a strike with thirty percent pay increase.

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Speaker 8: His initial ask was for forty Taiwan unveil a prototype

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Speaker 8: of its first summer in assemble at home as it

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Speaker 8: prepares to off a potential invasion by China Defense Ministry

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Speaker 8: staging the first sea trial of the diesel electric vessel.

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Speaker 8: Global News Power by more than twenty seven hundred journalist

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Speaker 8: and analysts in over one hundred and twenty countries. In

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Speaker 8: San Francisco, I'm Ed Baxter, and this is Bloomberg.

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Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong

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Speaker 1: Kong along with Steven Engel, and our guest is Rob Hey,

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Speaker 1: We're a senior investment strategist at US Bank Asset Management

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Speaker 1: ROB So it feels like consensus at the moment is

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Speaker 1: the tenure yield drifts up toward five percent, you get

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Speaker 1: weakness in the stock market until sometime in October, then

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Speaker 1: you get a good finish to the year, and then

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Speaker 1: next year is too tough to call. Does your thinking

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Speaker 1: align with that or if not, how are you looking

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Speaker 1: into the next few months.

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Speaker 13: Well, I have to admit we're probably a little more

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Speaker 13: cautious on the rest of the year because I think

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Speaker 13: what we're seeing collide is yes, usually we have a

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Speaker 13: good seasonal run once we get through the middle of

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Speaker 13: October and the rest of the year. But we're also

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Speaker 13: looking at an economy that's been doing quite well so

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Speaker 13: far here in the US, and the consumer appears to

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Speaker 13: be under some strain here as we head into year

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Speaker 13: end with tougher lending conditions. They've worked through a lot

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Speaker 13: of their pandemic savings, and we're seeing a restart or

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Speaker 13: a loss of some programs and a restart of student

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Speaker 13: loan repayments. So it seems like it's going to be

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Speaker 13: tough for the consumer to really hold sway here in

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Speaker 13: the back half of the year and keep the market

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Speaker 13: going up. That said, I think it's tough to make

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Speaker 13: a case that the market goes down a lot because

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Speaker 13: we've already seen some pretty significant retrenchment and earnings expectations

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Speaker 13: are already starting to take higher.

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Speaker 14: Here, Hi, Rob steven Engel here jumping in. So what

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Speaker 14: as we enter the fourth quarter, what does a model

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Speaker 14: portfolio look like to you?

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Speaker 13: Yeah, we're really trying to hold the line towards long

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Speaker 13: term goals, and again that depends upon very much on

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Speaker 13: risk tolerance. But if we start with a simple sixty

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Speaker 13: five thirty five equity mix, we'd still be slightly tilted

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Speaker 13: towards the US like we normally are, avoiding a little

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Speaker 13: bit of foreg and not not a lot. So it's

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Speaker 13: still important to own. Within the fixed income side of

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Speaker 13: the portfolio, there's probably some more interesting things to do

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Speaker 13: because we've certainly seen good performance from highyield corporate credit

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Speaker 13: and there's probably there's I think there's still room and

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Speaker 13: we've got some yield that we're getting from lower quality

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Speaker 13: credits across the across the fixed income spectrum. And then

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Speaker 13: we'd even look towards reinsurance and catastrophe bonds as a

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Speaker 13: unique way to decouple ourselves from the business cycle but

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Speaker 13: still benefit from the from the rising cash flow streams

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Speaker 13: from reinsurance. At this point, so we know that, we'd

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Speaker 13: say for investors, it's time to hold tight, think about

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Speaker 13: your long term plan and look for some improvements in

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Speaker 13: the economy as we move through the quarter.

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Speaker 4: Yeah.

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Speaker 1: On that point about diversification, it would seem I mean,

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Speaker 1: if you just go by what you hear from people

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Speaker 1: when you go to dinner, parkies and out for a

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Speaker 1: drink with friends, they're all talking about, you know, how

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Speaker 1: excited they are collecting five and a half percent in

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Speaker 1: short term treasure yields. It would almost seem like we're

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Speaker 1: getting a little bit overloaded on that side and that

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Speaker 1: people have lost sight a little bit on diversification. Do

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Speaker 1: you think that that bodes well for the equity market

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Speaker 1: at least sometime in the near future.

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Speaker 13: I think it's certainly helpful, right, and we're really going

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Speaker 13: to look for earnings expectations to tick higher. We think

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Speaker 13: the next if there is a next leg up in

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Speaker 13: this market, and our year end price target on the

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Speaker 13: S and P five hundred is forty six hundred, But

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Speaker 13: that's really going to require earnings to tick higher rather

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Speaker 13: than sentiment or price earnings multiples. That's a lot of

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Speaker 13: the games we've seen so far this year has been

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Speaker 13: all about sentiment and price earnings multiples, and we really

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Speaker 13: need earnings and fundamentals to take hold here. I think

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Speaker 13: it is hard for investors to turn down the five

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Speaker 13: five and a half percent in cash. I think the

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Speaker 13: interesting thing is we've seen better better returns and other

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Speaker 13: segments of the fixed income market and the equity market

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Speaker 13: this year so far. So even though it looks like

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Speaker 13: a great place to grab hold and stay safe the challenges,

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Speaker 13: we've already seen better performance out of other segments of

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Speaker 13: the market equities obviously, but then as I mentioned, high

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Speaker 13: yield corporate debt and things like reinsurance, more unique fixed

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Speaker 13: income exposures, and so that. You know, it's always two sides,

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Speaker 13: but there's room for significant improvement in portfolio returns and

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Speaker 13: other segments of the market as well.

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Speaker 14: So, Rob, we had our colleague Getbax to talk about

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Speaker 14: the looming potential government shutdown. What does history tell us

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Speaker 14: about the impact or the risks that that poses to markets.

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Speaker 13: Yeah, we've pulled together our own data around this, looking

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Speaker 13: at the S and P. Five hundred, and there's not

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Speaker 13: really a consistent pattern around shutdowns of markets doing better

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Speaker 13: or poor or more poorly, either coming into through the

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Speaker 13: shut down or coming out of it. Then again, we

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Speaker 13: haven't had many instances of long shutdowns. It's really three

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Speaker 13: or four instances where we've had more than a week

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Speaker 13: that the government has been shut down, So there's not

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Speaker 13: a lot of data to point to, and coming out

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Speaker 13: of that no consistency. We've seen instances where the market

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Speaker 13: has done well during the shutdown and done well post

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Speaker 13: the shutdown. It's done, you know, kind of poorly or

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Speaker 13: muddled through during the shutdown when it's been shorter. So

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Speaker 13: I think a lot here depends upon what is the

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Speaker 13: impact on the economy and how long does this shutdown persist,

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Speaker 13: What does it do to consumer sentiment, what does it

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Speaker 13: do for the people who would unfortunately be furloughed and

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Speaker 13: going without pay for some time until the government does reopen,

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Speaker 13: And so duration here matters quite a bit, how long

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Speaker 13: it shuts down, and what is that impact on corporate earnings?

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Speaker 1: Here in the fourth quarter, rob what is something you

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Speaker 1: know that the market doesn't which I guess is just

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Speaker 1: a different way of saying, do you have a contrarian

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Speaker 1: call you'd like to share with us?

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Speaker 13: Great question, I think I think that's that's kind of hard.

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Speaker 13: I think we're most concerned and we're trying to understand

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Speaker 13: really kind of this battle between It looks like the

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Speaker 13: economy is slowing, right, that's what the that's what the

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Speaker 13: consumer data looks like. That's some of what we heard

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Speaker 13: from the final revision of second quarter GDP. Right, we're

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Speaker 13: seeing tighter lending conditions and yet we've seen a market

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Speaker 13: that's really held up fairly well. And for us, we're

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Speaker 13: really trying to discern between these two things of what's

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Speaker 13: going to hold sway? Is the slow town and the

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Speaker 13: consumer going to be sufficient to dampen them?

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Speaker 4: Mark?

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Speaker 1: Okay, Rob, very good stuff. Thank you very much for

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Speaker 1: joining us. Rob Hey, we're a senior investment strategist US

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