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Speaker 3: The SMP is down by over one percent. A big
Speaker 3: part of this was the Bloomberg report overnight that we
Speaker 3: could potentially see severe trade restrictions if companies like Tokyo
Speaker 3: Electron and ASML continue to give China access to advance
Speaker 3: to semiconductor technology, and that whole situation.
Speaker 4: Is weighing on the chip stocks.
Speaker 3: And the current Bloomberg Global Economy reporter is joining us,
Speaker 3: and can you walk us through the potential what the
Speaker 3: Biden administration is thinking about.
Speaker 5: So it's a pretty draconian next step. Essentially, what the
Speaker 5: administration talking about is making use all of something calledly
Speaker 5: foreign Direct Product Rule, and in essence that means that
Speaker 5: gives the US leverage over any kind of technology that
Speaker 5: includes any kind of US input or material or technology
Speaker 5: in any way. So it would be a big next
Speaker 5: step if the word to go around this route and
Speaker 5: try and put the clampers down on ASML and on
Speaker 5: Tokyo Electron, Like you mentioned. Now, the thing about this
Speaker 5: is it raises questions in two ways. It's delicate dance
Speaker 5: for the US in terms of how it approaches this
Speaker 5: with allies. Could be diplomatic tension between both Japan and
Speaker 5: the Netherlands. Companies in the middle of this already say
Speaker 5: that they've been hit hard enough. And then on the
Speaker 5: other side, it raises the questions about, well, just how
Speaker 5: effective have the US policies been Because it was back
Speaker 5: towards late twenty twenty two when the US announces sweeping
Speaker 5: measures on chip technology export restrictions to China. Back then
Speaker 5: it was expected to be a big deal and will.
Speaker 5: Clearly it's not necessarily having the impact that they wanted.
Speaker 5: So it's a potential major set, but raised lots of
Speaker 5: questions about where policy is going.
Speaker 6: The same time, realistically, what do you hear from I
Speaker 6: guess the industry about the ability to continue or to
Speaker 6: try to really make a change in where chips come from,
Speaker 6: how they're manufactured, the trade flows on shoring friends shoring,
Speaker 6: How realistic is that?
Speaker 5: Well, we know there is some shifting or production manufacturing
Speaker 5: going on of not just a chip chain, but other
Speaker 5: production chains as well. We know, of course that the
Speaker 5: big subsidies that the US have Roulette has attracted a
Speaker 5: lot of investment in the semi conductor space, So things
Speaker 5: are moving around, but there's still a lot of reliance,
Speaker 5: as you say, on some key, key kind of nodes
Speaker 5: in that and key companies like ASML and like in
Speaker 5: Taiwan and the like. But the other sort of feeling
Speaker 5: I think among the macroeconomic side of this is that
Speaker 5: people are kind of on pause now with investment and
Speaker 5: spending plans until see where the US election goes in
Speaker 5: a few months. So, you know, the one hand, it
Speaker 5: could either be broadly speaking, continuity with current administration, or
Speaker 5: if it's a chaine of administration, it could be quite
Speaker 5: a different approach, maybe even more hokish. That's what all
Speaker 5: the signals are, That's what our own interviewed former President
Speaker 5: Trump signals. So there's a lot open the air here,
Speaker 5: and I think this kind of potentially big step of
Speaker 5: the administration so late in the political cycle, I think
Speaker 5: is giving people poses just ask questions about where is
Speaker 5: US policies Ward Shawna going in the near to medium term.
Speaker 3: I mean, of course, It's always hard to understand the
Speaker 3: stock reaction with these kind of headlines because political hedging
Speaker 3: has not really worked, and also you have some of
Speaker 3: these stocks that have had a huge run up anyway,
Speaker 3: so we have to sort of take that with a.
Speaker 4: Grain of salt.
Speaker 3: Do we understand though, what more trade restrictions will do
Speaker 3: to the global economy? I know the President Trump's team
Speaker 3: says that it's okay because we'll have lower taxes and
Speaker 3: more consumption, and it's going to be the other countries and
Speaker 3: companies that will pay for it, not the United States.
Speaker 4: What do you think? What's your research tell you?
Speaker 5: I think people are starting to focus on this now,
Speaker 5: alex in the way that they were during the last
Speaker 5: few weeks. The political cycle in the US has changed
Speaker 5: a lot, and I think both in the US and
Speaker 5: globally now people are saying, if there is a change
Speaker 5: of administration, what would it mean for the trade and
Speaker 5: flow of goods and capital and services. Obviously US China
Speaker 5: is a center of it. It's red hot, but it's
Speaker 5: not just US China. Former President Trump is talking about putting,
Speaker 5: you know, raising tariffs and driving hard bargains with all
Speaker 5: trading partners who have a deficit with the US, So
Speaker 5: it's it's just cementing this idea of heading for deeper protectionism,
Speaker 5: maybe deeper mercantilism, certainly less kind of cooperation on the
Speaker 5: world stage. And then how does that flow through the
Speaker 5: prices and people at home consumers. It probably means more
Speaker 5: expensive productions are more more expensive goods to buy, and
Speaker 5: that's the whole inflationary story. So I think there's a
Speaker 5: lot of uncertainty about where this is all going, but
Speaker 5: at the same time, people now are starting to focus
Speaker 5: hard on it in case of there is a change
Speaker 5: of administration in a few months in the US.
Speaker 6: Certainly having an impact on the market, that is for sure.
Speaker 7: End of current.
Speaker 6: Thank you so much for joining us in the current.
Speaker 6: Is a global economy reporter for Bloomberg News, joining us
Speaker 6: from Washington, DC. And as you mentioned, Alex, really having
Speaker 6: an impact on the market. The S and P off
Speaker 6: one percent, but the NASDAK off two point three percent,
Speaker 6: so that's where you're seeing it. I saw the van
Speaker 6: k Etf Semiconductor ETF fun lost about four percent of
Speaker 6: its value today, so kind of across the board. But
Speaker 6: as you mentioned, Alex, we're coming off of those all
Speaker 6: time highs. So this market was certainly looking for a
Speaker 6: little bit of a reason to pull back, and I
Speaker 6: think a little bit of political policy uncertainty that's kind
Speaker 6: of crypt into the market that would be the thing.
Speaker 5: Here.
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Speaker 3: So Alex Deeal alongside paulse we need. This is Bloomberg
Speaker 3: Intelligence Radio. We bring you all the top news and business,
Speaker 3: economics and finance and sometimes in politics with our lens
Speaker 3: of our Bloomberg Intelligence folks. They cover two thousand companies
Speaker 3: in one hundred and thirty industries worldwide. It was the
Speaker 3: business Week piece that has now been heard around the world.
Speaker 3: It was an incredible front page on what Trump would
Speaker 3: do with taxes, teariff, the Fed, and more. It's a
Speaker 3: real deep dive into trumpanomics in a way that I
Speaker 3: have not seen yet. It's actionable, it feels realistic, and
Speaker 3: it's really boiled down. So we can really get a
Speaker 3: grasp on what a Trump two point zero and trumpanomics
Speaker 3: actually means. And we can thank Bradstone, the editor of
Speaker 3: BusinessWeek for Bloomberg to kind of put all this together
Speaker 3: for us. He joins us now from San Francisco to California.
Speaker 3: Brad I found this to be an extremely helpful piece
Speaker 3: because if you listen or you read excerpts from interviews
Speaker 3: with Trump, it's very difficult to get to concrete ideas.
Speaker 3: And you guys did an amazing job of doing that.
Speaker 4: How hard was it?
Speaker 8: Yeah, thank you, alex Well. I mean, look, he wanted
Speaker 8: to talk. We'd actually put queries out to both campaigns.
Speaker 8: We heard first from from former President Trump. You know,
Speaker 8: this is Business Week, so our mandate is business obviously,
Speaker 8: economics the world order, and we went there to interrogate
Speaker 8: him about an economic plan that many economists think is
Speaker 8: a bit contradictory. I mean, President Trump talks about lowering inflation.
Speaker 8: The agenda is, you know, higher tariffs, less immigration, you know,
Speaker 8: which which potentially raises wages. He talks a lot about
Speaker 8: lowering interest rates and then bringing members of the business
Speaker 8: community into his administration. So this is a topic he
Speaker 8: wanted to talk about. To put it in context, we
Speaker 8: talked to him two days before the first presidential debate
Speaker 8: and about two weeks before the assassination attempt. But even then,
Speaker 8: I think, you know, he is writing what he believes,
Speaker 8: at least and his campaign believes, is a heightened sense
Speaker 8: of momentum.
Speaker 6: So Brad, that's there's a lot of areas here in
Speaker 6: the terms of economics to explore. Talk about taxes. How
Speaker 6: does he feel about taxes these days? He certainly had
Speaker 6: some big tax legislation in his first term, that's right.
Speaker 8: And one part of his plan is to extend the
Speaker 8: Trump tax cuts. Another part, which he told us, was
Speaker 8: to lower the corporate tax rate. He told the Business
Speaker 8: roundtable that he wanted to bring it down to twenty
Speaker 8: percent from twenty one percent, if for no other reason
Speaker 8: that he likes big, large numbers. But then he said
Speaker 8: he would even get it down to fifteen percent if
Speaker 8: he could. You know, the challenge here, of course, is
Speaker 8: you know that there's no they don't delineate any way
Speaker 8: to pay for this, to make the numbers partial out
Speaker 8: and do anything other than raise the federal deficit. And
Speaker 8: there's real there is really I think a paucity of
Speaker 8: specifics here, which is one reason why proxies have kind
Speaker 8: of tried to fill the void with things like Project
Speaker 8: twenty twenty five, which then Trump really distanced himself from.
Speaker 9: But you know, I think, I think, you know, with
Speaker 9: the broad.
Speaker 8: Brushstrokes we got is Trump wants to lower taxes and
Speaker 8: extend his tax cuts.
Speaker 3: I also felt was very interesting is the myriad of views.
Speaker 4: In relation to the tech industry.
Speaker 3: So in the one hand of Klawer Tax's ya tech industry,
Speaker 3: he seems to embrace crypto clearly.
Speaker 4: With JD.
Speaker 3: Vans, there's sort of an embrace of vcs, but big
Speaker 3: tech is very complicated, and how did you parse through that?
Speaker 8: There's some contradictions here, Alex. I mean, the first is,
Speaker 8: you know, he's he's he's obviously very pro American business,
Speaker 8: and yet he's he's turned on TikTok and believes that
Speaker 8: banning TikTok would only empower Mark Zuckerberg and Facebook. The
Speaker 8: second thing is, you know, in the in the first term,
Speaker 8: he talked a lot about cryptocurrency.
Speaker 9: And how it might engender fraud.
Speaker 8: He wasn't wrong about that, obviously, but now he's flipped
Speaker 8: on that as well. The bottom line here and the
Speaker 8: way I interpreted, is that for Trump it's all about
Speaker 8: personal relationships.
Speaker 9: And he went and talked.
Speaker 8: A lot about Tim Cook and how smart he thought
Speaker 8: Tim Cook was, in large part because Tim Cook went
Speaker 8: to the White House to ask for relief from the
Speaker 8: first set of tariffs. You know, he likes it when
Speaker 8: people come and you know, pay their respects or at
Speaker 8: least visibly look to be on what he considers to
Speaker 8: be Team Trump. And so, you know, in terms of
Speaker 8: Crypto and a lot of people in that community are
Speaker 8: now pro Trump, and you know, in terms of TikTok
Speaker 8: where he's very popular on TikTok, and of course jeff
Speaker 8: yass one of the backers of Byte Dance as a
Speaker 8: Trump supporter. You can kind of see why these contradictions
Speaker 8: are sort of bundled into his views on technology.
Speaker 6: Tariffs, certainly, it seems to be the topic, at least
Speaker 6: in the trading today. We've had both sides of the
Speaker 6: aisle talking about tariffs and tough tariff talk.
Speaker 7: Mister Trump used tariffs.
Speaker 6: Quite you know, liberally liberally in the first term words.
Speaker 7: How's you think about tariffs these days?
Speaker 8: It's interesting, Paul, you know, I have not spent much
Speaker 8: time thinking about President William McKinley, the twenty fifth president.
Speaker 8: He's from my he was from my former state of Ohio,
Speaker 8: and Trump brought him up repeatedly because you know, here's
Speaker 8: this nineteenth century president who, before the age of a
Speaker 8: federal income tax, was raising the raising tariffs and bringing
Speaker 8: in money.
Speaker 9: And he said that McKinley is overlooked. Who knows what
Speaker 9: book club.
Speaker 8: He's part of, but clearly they've been reading histories and
Speaker 8: he wants to raise tariffs. He thinks tariffs are underrated.
Speaker 8: He's talking about a ten percent across the board tariff.
Speaker 8: He's talking about raising the tariff on Chinese goods to
Speaker 8: sixteen percent or even one hundred percent.
Speaker 9: And you know, he says they're a great negotiating ployee.
Speaker 8: You know, he tried that in the first term, and
Speaker 8: obviously then you know, a lot of US companies, particularly
Speaker 8: tech companies, complained, and they did. They were quite generous
Speaker 8: in their carve outs. But this is a big part
Speaker 8: of Trumpanomics. And most economists think that companies don't pay
Speaker 8: those tariffs, they turn around and pass them to customers
Speaker 8: in the form of higher prices. So there. We pressed
Speaker 8: him on it, and I think there are some unresolved
Speaker 8: contradictions and tensions there.
Speaker 3: What's also interesting, I was reading a JP Morgan note
Speaker 3: about commodities and what the Trump administration would do to commodities.
Speaker 3: Obviously that's my beat, but what they made the point
Speaker 3: is it really depends on the sequencing. So if you
Speaker 3: go to corporate taxes first, tariffs come later. Like the
Speaker 3: sequencing of how all of this works will really depend
Speaker 3: then on what the market reaction is. Did you get
Speaker 3: any sense of that.
Speaker 9: In terms of how we would do it. I didn't,
Speaker 9: But I mean, one thing.
Speaker 8: That impressed us, or is impressed upon us, is that
Speaker 8: in twenty sixteen, you know, he was unprepared to win,
Speaker 8: and he surrounded himself with people, maybe a bit impulsively,
Speaker 8: and he says that he would do it differently this time,
Speaker 8: that he knows who's loyal and who's not, and he's experienced,
Speaker 8: and he knows everybody this time, and it just seemed
Speaker 8: to us that they were you know, that he is
Speaker 8: prepared to move quickly in what order I don't know,
Speaker 8: but particularly if he controls both houses in Congress, that
Speaker 8: they have an agenda that they're pretty much willing to
Speaker 8: implement that.
Speaker 6: Blitz Creed Speed Jamie Diamond as Secretary of Treasury thirty
Speaker 6: seconds spread.
Speaker 8: Yeah yeah, what did he call him an overrated globalist once?
Speaker 9: Look, he's courting the business community.
Speaker 8: I you know, who knows if Diamond would do that,
Speaker 8: particularly considering how former members of Trump's administration often ended
Speaker 8: up being treated somewhat badly or breaking with him. But yeah,
Speaker 8: I mean, I think Trump wants to go and it's
Speaker 8: very important to him that business leaders like him. I
Speaker 8: mean that comes through in the interview, and so he's
Speaker 8: doing it, but to court them as well.
Speaker 4: Brad, thank you so much. Really, it was a great piece.
Speaker 3: It was so helpful and it helps to bring perspective
Speaker 3: then to market reactions as well. Bradstone, he is editor
Speaker 3: of Bloomberg Business Week. So usually I have a routine.
Speaker 3: I have a routine on the way in, I'm like
Speaker 3: when I'm reading and how fast I have to it
Speaker 3: to get rid in?
Speaker 4: And this article just messed up everything it does.
Speaker 6: And the New Business Week gets a monthly now keeping
Speaker 6: the Business Week name because it's got some brand value
Speaker 6: and it's cool.
Speaker 1: It is like thick, yeah yeah.
Speaker 6: Yeah, And The first cover was Arnault talking about luxury.
Speaker 6: The second issue Trump. So they're killing it here, so
Speaker 6: twelve times a year.
Speaker 4: Yeah, So definitely check it out. Guys, It's definitely worth it.
Speaker 4: If you're interested in anything Trump related.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on fo CarPlay and then
Speaker 2: Broid Auto with the Bloomberg Business App. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: Joining us now for the market take is Sarah Ponzik,
Speaker 3: a financial advisor at UBS Private Wealth Management, and she's
Speaker 3: joining us from Local Rich in Florida. Sarah, it's so
Speaker 3: fun to chat with you. So I understand we're seeing
Speaker 3: a decline the NASDAK. I understand the S and P
Speaker 3: is selling off. I also see that small caps are
Speaker 3: still holding their own here. Is this real about Trump?
Speaker 3: Is this really about trade restrictions? Or is this the
Speaker 3: continued rotation?
Speaker 10: Well, Alex, really quickly, I can tell you it's todder
Speaker 10: here than it is in New York right now, So
Speaker 10: whenever you sticking where you're at. But as for the rotation, look, yes,
Speaker 10: we've seen some political headlines come out. Yes, we are
Speaker 10: seeing semiconductors still off and we're seeing.
Speaker 1: Another tech fell off.
Speaker 10: But to your question, no, I don't think it's solely
Speaker 10: about headlines that you know, came out over the last
Speaker 10: twenty four hours.
Speaker 1: Rather, what we're seeing.
Speaker 10: Is a continuation of this rotation that really caught steam.
Speaker 10: And really we saw fuel added to the fire last
Speaker 10: week after CPI surprised to the downside for the third
Speaker 10: string month. So we're seeing, you know, this changing of
Speaker 10: the guards within the markets.
Speaker 1: There's been talk.
Speaker 10: For a while how long can the magnificent seven or
Speaker 10: large cap tech or semiconductors continue to fuel the way higher?
Speaker 10: And it seems like last week we did see not
Speaker 10: only a bend but a break with.
Speaker 1: A really swi lift rotation.
Speaker 10: I mean, you just look at small caps over the
Speaker 10: last five days of twelve percent. Meanwhile the Nazac's flack
Speaker 10: that just shows you the rotation, you know, right there
Speaker 10: and then so now the question becomes, all right, well
Speaker 10: is this going to continue?
Speaker 6: So what is the thought here, Shrek, because I think
Speaker 6: you know, one of the concerns I'm sure you hear
Speaker 6: from your clients is that how healthy can it be
Speaker 6: for this stock? Market to be anchored by six seven
Speaker 6: eight names in terms of the performance a year to date,
Speaker 6: that doesn't sound like a healthy market.
Speaker 7: How much of a risk is that for you?
Speaker 1: Right, We do hear that question all the time.
Speaker 10: And to give you an idea of just you know,
Speaker 10: how consolidated the rally has been. If you look at
Speaker 10: the amount of companies that have outperformed the S and
Speaker 10: P five hundred year to date on an individual basis,
Speaker 10: it's only twenty four percent, So not even a quarter
Speaker 10: of companies within the index are outperforming the index, which
Speaker 10: just shows you how important a few companies have been
Speaker 10: so really dragging the games higher. Now, is it a Yes,
Speaker 10: there's always concern over narrowness in the markets.
Speaker 1: But at the same time, when we think about why
Speaker 1: there has been this narrowness in.
Speaker 10: The markets, it's because these you know, large cap tech
Speaker 10: companies have been or become the epitome of quality. You know,
Speaker 10: investors have been flocking to quality names with high earnings
Speaker 10: growth over the past year and a half, let's say,
Speaker 10: and that's what's driven this.
Speaker 1: Narrowness in the market.
Speaker 11: So it hasn't been too large of a concern for
Speaker 11: us in particular, and we actually are still most preferred
Speaker 11: on technology, and we still think technology companies have a
Speaker 11: very important place in a portfolio.
Speaker 1: But yes, seeing a broadening.
Speaker 10: Out, seeing small taps perform, seeing some cypical areas of
Speaker 10: the market, like industrials start to catch up and perform
Speaker 10: better as well, that's definitely a well taken sign.
Speaker 1: We are glad to see the broadening.
Speaker 10: Of the markets, and it's very possible that what you
Speaker 10: could see then is this you know, internal rotation of
Speaker 10: the markets.
Speaker 1: We're sure we might see tech pull back of it.
Speaker 10: That's only natural and healthy given the fact that look
Speaker 10: look at semiconductors for example, this year, semi conductors are
Speaker 10: up about thirty and twenty twenty four alone and up
Speaker 10: for fifty percent over the last year.
Speaker 1: So it would be healthy for us to.
Speaker 10: See a rotation in the markets, see the old guards
Speaker 10: start to you know, hold back a little bit. But
Speaker 10: as possible, we could see the market continue, you know,
Speaker 10: if you look.
Speaker 1: At the index level, continue to at least move sideways
Speaker 1: or move higher from here.
Speaker 10: If we see other areas of the market that have
Speaker 10: underperformed start to outperform.
Speaker 4: Going forwards, Yeah, that was kind of my question.
Speaker 3: It's like is it a cell tech by small caps,
Speaker 3: which is sort of the narrative that we were starting
Speaker 3: to see yesterday. And if we get some impulse where
Speaker 3: small caps can't sustain this move that we've seen in
Speaker 3: the last five trading days, m tech still sells off,
Speaker 3: and it feels like we're in for a different, u
Speaker 3: different kind of sell off right right.
Speaker 10: And when we think about this rotation that we're seeing,
Speaker 10: there's really four factors that we feel as though need
Speaker 10: to happen in order for this rotation to continue in
Speaker 10: a healthy way for the market to continue to prove hire.
Speaker 10: And what those four factors are are, you know, One,
Speaker 10: inflation needs to be contained, which for the CPI data
Speaker 10: we got last week, looks like as possible to The
Speaker 10: Federal Reserve needs to start cutting rates. You know, we've
Speaker 10: been talking about it for a long time now, but
Speaker 10: we are as close as we have ever been, and
Speaker 10: we're finally seeing the whites of the eyes potentially of
Speaker 10: interest rate cuts and the market's fully pricing and a
Speaker 10: cut starting.
Speaker 1: In September and to this year and continuing into next year.
Speaker 10: The last two factors are probably more so where the
Speaker 10: risk is. So the third factor is that you know,
Speaker 10: economic growth needs to remain resilient here.
Speaker 1: Sure, we had great retail sales data this.
Speaker 10: Week, but if we see any signs that the economy
Speaker 10: is veering off, we could easily see investors, you know,
Speaker 10: start to flock back again to those high quality growth companies.
Speaker 1: So there is a little bit of a risk there.
Speaker 1: And then the last one that I.
Speaker 10: Would say is that we need to see earnings growth
Speaker 10: converge between you know, these seven companies and then the
Speaker 10: S and P five.
Speaker 1: Hundred, actually seven companies.
Speaker 10: It might sound surprising because we have seen you know,
Speaker 10: fantastic stock you know runs over the last year and
Speaker 10: a half.
Speaker 1: Two years, but we're actually about to see in the second.
Speaker 10: Quarter if you look at SMP earnings and you remove
Speaker 10: you strip out those magnificent seven, the large seven companies,
Speaker 10: this is actually going to be the first time since
Speaker 10: twenty twenty two that we're going to see earnings.
Speaker 1: For shared growth for the rest of the S and
Speaker 1: P five hundred.
Speaker 10: So we need to see that continue, and we need
Speaker 10: to see those earnings catch up, you know, with the
Speaker 10: earnings growth, continual double digit earnings growth that we've seen
Speaker 10: from those seven companies.
Speaker 6: Alone, So you know, it feels like for this market,
Speaker 6: earnings are going to matter at this season. You know,
Speaker 6: it's not just the FED and the Fed's going to
Speaker 6: lift this market. Earnings have to come through. How are
Speaker 6: you guys thinking about this earning season that we're just
Speaker 6: kind of in your early stages, zo right, Earnings?
Speaker 10: Earnings absolutely do have to come through. Well, I mean
Speaker 10: there's a couple of things that we'll be paying attention to.
Speaker 10: You look at the first quarter earning season, the amount
Speaker 10: of companies that mentioned artificial intelligence NAI and their earnings
Speaker 10: calls was just through the room. So are we going
Speaker 10: to continue to see them talking up AI? That'll certainly
Speaker 10: be an interesting trend at least to watch from the
Speaker 10: numbers perspective. For us, it's really seeing, okay, are we
Speaker 10: going to see EPs growth for cyclical sectors and say,
Speaker 10: for consumer discretionaries start to move higher? If you look
Speaker 10: at where expectations currently are for the fourth quarter of
Speaker 10: this year, so not you know, not where we currently are,
Speaker 10: but future looking out a little bit further into the year.
Speaker 1: The expectation is that we're going to.
Speaker 10: See you know, year over year earnings growth for those
Speaker 10: four hundred and ninety three companies so again strip out
Speaker 10: those large seven of about eleven percent.
Speaker 1: So double digit earnings growth.
Speaker 10: Is the expectation for you know, the majority of S
Speaker 10: and P five hundred companies, not including those you know, tech.
Speaker 1: And you know the large companies that have continued to
Speaker 1: do what.
Speaker 10: They've continued to do best and make money and you know,
Speaker 10: produce earnings. So yes, starting this quarter, we need to
Speaker 10: see that that's actually going to be a reality and
Speaker 10: that we are going to see earning's growth come to
Speaker 10: fruition because like I said.
Speaker 1: You know, we really haven't seen that since twenty twenty two.
Speaker 4: Do you guys like the Smalls right now?
Speaker 1: We do? We do. We see.
Speaker 10: Look, if if you're someone who believes that interest rates
Speaker 10: are going to come down, which we are, you know,
Speaker 10: our economist prediction is that we'll see a FED break
Speaker 10: cut in September, another one later in the year will
Speaker 10: continue through the year. We're also you know, our our
Speaker 10: chief Investment office expects that ten year treasure fields will
Speaker 10: probably end the year some around three eighty five. One
Speaker 10: of you know, the most pure ways to play a
Speaker 10: decline in interest rates is small caps, because those companies
Speaker 10: that have higher debt burdens are you know, at the
Speaker 10: forefront of the deck game given that they just have
Speaker 10: more debt on their balance sheets. So yes, we do
Speaker 10: feel as though right now, you know, if you don't
Speaker 10: have any small cap exposure in your portfolio, it could
Speaker 10: be time to add some as the tactical play. But
Speaker 10: you know, small caps in general have more risks than
Speaker 10: large caps, so making sure you and take on that risk.
Speaker 10: But yes, we do, you know, see potential for small
Speaker 10: caps to outperform, you know, from here on out.
Speaker 6: All right, Sarah, thank you so much for joining us.
Speaker 6: Always great to catch up with you. Sarah Ponsek, Financial Advisor,
Speaker 6: UBS Private Wealth Management. Full disclosure I am a client
Speaker 6: of UBS Private Wealth Management.
Speaker 4: Tonio c full disclosure. I'm a fan of Sarah Ponzicks.
Speaker 7: I know she's great. Yeah, Bloomberg News, Bloomberg Radio TV
Speaker 7: back in the day, and now she's at UBS, so.
Speaker 4: You both have our biases there.
Speaker 7: Yes, fair going down to down at Booler, Florida. So
Speaker 7: very good.
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Speaker 7: All right, twenty twenty four. It's an election.
Speaker 6: We all know that, and that means an election is
Speaker 6: certain to be pivotal catalysts for markets and companies in
Speaker 6: terms of legislation, regulations, enforcement, and other government actions.
Speaker 7: Let's put some numbers on that.
Speaker 6: Twenty five billion of health insured revenue that's at risk
Speaker 6: as subsidies expire, five to nineteen percent potential increase in
Speaker 6: required capital for large banks. Twenty eight percent corporate tax
Speaker 6: rate possible if Democrats sweep. So there are just a
Speaker 6: million variables out there that will be impacted by this election.
Speaker 7: So what do you do. You go to Bloomberg Intelligence.
Speaker 6: They've got a definitive research report on this election, the
Speaker 6: two candidates, the two policies, and what it can mean
Speaker 6: for banks and all types of companies around this country.
Speaker 6: Nathan Dean joints us here he's the mastermind of this report.
Speaker 6: Forty two pages. It is Bloomberg Intelligence senior policy analysts. Nathan,
Speaker 6: I don't know where to start here because you've got
Speaker 6: the Republican Party and the Democratic Party clearly have different
Speaker 6: priorities as it relates to economic policy, regulatory policy.
Speaker 7: Where did you start?
Speaker 5: So?
Speaker 12: I think what we did is we started with the
Speaker 12: report by looking at what are the key sectors to watch,
Speaker 12: and we really had five of them. The first one
Speaker 12: was investment banks, as you mentioned earlier, if President Biden wins,
Speaker 12: you know, you could see somewhere between seven to ten
Speaker 12: eight percent increase in capital requirements. If President Trump wins,
Speaker 12: that could be off the table. We looked at electric vehicles.
Speaker 12: You know, the tax credits for the electric vehicles could
Speaker 12: be at risk during a tax reform debate next year.
Speaker 12: Like you mentioned, in terms of tax global manufacturers, President
Speaker 12: Trump has called for a fifteen percent corporate tax rate.
Speaker 12: In just a few minutes ago, Representative Steve Scalise said
Speaker 12: he's going to make the tax cuts for individuals permanent.
Speaker 12: So tax reform and the impact of manufacturing, and the
Speaker 12: other two were healthcareacter that twenty five billion dollar subsidies
Speaker 12: that's really for seventeen and United Health. And then finally
Speaker 12: it was big tech, because whether you get President Biden
Speaker 12: or President Trump, more likely than not you're going to
Speaker 12: get a very skeptical Washington towards big tech, certainly both
Speaker 12: in Congress and also in the four side.
Speaker 4: Nay.
Speaker 3: Then the question then becomes what can he and this
Speaker 3: has been the question throughout his four years. Also what
Speaker 3: can he do on his own and what would he
Speaker 3: need a Republican Congress for?
Speaker 12: Yeah, So, you know, I think one of the biggest
Speaker 12: questions we get from clients is what does the executive
Speaker 12: order landscape look like if President Trump wins? And I'd
Speaker 12: say about ninety percent of the time, an executive order
Speaker 12: is a fancy way of the president picking up the
Speaker 12: phone and saying to his staff, I expect you to
Speaker 12: do X, Y and Z. But there's a difference there.
Speaker 12: The difference is for trade, tariffs and foreign relations. The
Speaker 12: power of the presidency is a lot more powerful when
Speaker 12: it comes to that. So when President Trump uses words
Speaker 12: like nasty calling the European Union, as he did in
Speaker 12: this Business Week interview that I recommend everybody read, you know,
Speaker 12: that's something that investors have to pay attention to. Now
Speaker 12: when it comes to tariffs, the President can certainly go
Speaker 12: out there and say I want to do this, but
Speaker 12: then it's going to be up for Congress and the
Speaker 12: business community and so forth. But todentially try and influence
Speaker 12: the White House to either get to the appropriate amount
Speaker 12: or try in some cases stop it from even happening.
Speaker 6: So are there certain industries that you know, I think
Speaker 6: about the healthcare industry. I'm trying to think about regulated industries,
Speaker 6: and healthcare is certainly one of them. And you mentioned
Speaker 6: the subsidies. But are the Republicans and the Democrats think
Speaker 6: differently about the economics of healthcare?
Speaker 12: Yeah, it does. And this is really where the process
Speaker 12: comes into play, because that's subsidies. That twenty five billion
Speaker 12: dollars subsidies is Obamacare subsidies, and that requires an Act
Speaker 12: of Congress. And I think you don't need to be
Speaker 12: a Washington expert to know that gridlock is going to
Speaker 12: continue no matter who wins the presidency. So look for
Speaker 12: subdued actions from Congress when it comes to healthcare. Now,
Speaker 12: the difference is on the regulatory side. On the regulatory side,
Speaker 12: and this is where you look at the FDA and
Speaker 12: a lot of the actions they've been doing. You can
Speaker 12: bypass democratic opposition and just implement your own policies, but
Speaker 12: it takes time, and so I would say just general
Speaker 12: rule of thumb for a lot of the healthcare issues
Speaker 12: that are going out at the agencies after President Trump,
Speaker 12: if he wins, where the input input is new regulatory leadership,
Speaker 12: at that point, you probably have another eighteen months and
Speaker 12: twenty four month window for any regulatory change. So for
Speaker 12: the healthcare industry, there's a lot of time to prepare
Speaker 12: for any changes. You'll know exactly what's going to happen
Speaker 12: well before it does.
Speaker 3: Going back to the EV point, it definitely feels like
Speaker 3: solar EV's stuff like hydrogen from the IRA, like those
Speaker 3: are the stuff maybe potentially on the chopping block potentially
Speaker 3: where the President Trump win. But then the Musk thing
Speaker 3: is weird because President President Musk, what does that mean?
Speaker 3: Elon Musk has definitely become a big supporter of President
Speaker 3: Trump donating to super packs, and I'm wondering if that
Speaker 3: relationship will change the calculus to how President Trump sees
Speaker 3: electric vehicles.
Speaker 12: Absolutely, you hit it right on the head. And we
Speaker 12: even say this in the report. There's a difference between
Speaker 12: headline risk and reality. So if you look at the
Speaker 12: electric vehicles, you can look at statements that President Trump
Speaker 12: and other Republicans have said saying they do not like
Speaker 12: these electric vehicle tax credits out there and so forth.
Speaker 12: But then you balance it with the Elon Musk and
Speaker 12: even taking it to grander scale on the Inflation Reduction Act.
Speaker 12: A lot of the benefits of the IRA are going
Speaker 12: to gop led states. So what you have to do
Speaker 12: here is a take the statement. Okay, if President Trump
Speaker 12: says I want to do away with the electric vehicle
Speaker 12: tax credit, how am I going to do that? Most
Speaker 12: likely I'll do that as part of tax reform and
Speaker 12: via the reconciliation process, which means I probably won't have
Speaker 12: any Democrats going aboard with me, so I need all
Speaker 12: Republicans on board at that point. If the Elon Musk
Speaker 12: starts whispering saying, hey, we like these tax credits for
Speaker 12: the eb world, then that change may not even be
Speaker 12: a high priority anymore. So I would just say that
Speaker 12: for a lot of the statements, you have to remember
Speaker 12: short term risk versus long term risk. And as we
Speaker 12: see with every single election, politicians of both parties love
Speaker 12: to go out there and say I'm going to do X,
Speaker 12: Y and Z, but then when they get into power,
Speaker 12: it's XYZ minus a whole bunch of other stuff because
Speaker 12: I'm going to be a little bit more moderate now.
Speaker 6: And Nathan, how about for our good friends on Wall Street,
Speaker 6: M and A bankers and lawyers. Under this administration, the
Speaker 6: regulator has been pretty tough, and it's been pretty tough
Speaker 6: to get big M and.
Speaker 7: A deals approved. Presumably that would.
Speaker 6: Be more Wall Street friendly M and A friendly with
Speaker 6: a Republican administration.
Speaker 12: It really depends on the leadership that President Trump again,
Speaker 12: if he were to win, would put in place at
Speaker 12: the FTC and the DOJ. Because you have one side,
Speaker 12: you have the Republican business friendly view, the stereotypical Republican
Speaker 12: business friendly view. If you get somebody like Jamie Diamond,
Speaker 12: I'm just picking on the banking execs. If you get
Speaker 12: somebody from Wall Street, like a Gary Cohne individual that
Speaker 12: was in his last administration, then you could just reasonably
Speaker 12: say that M and A activity will get a little
Speaker 12: bit earlier or a little bit easier. But if you
Speaker 12: get somebody that comes from the economic populist side of
Speaker 12: the party, for example, Senator Vance, the vice presidential candidate,
Speaker 12: spoke in favor of the FDAC chair will Lim and
Speaker 12: Kahn and said that she was one of Biden's best picks.
Speaker 12: And so if President Trump comes out and picks it,
Speaker 12: e I'm a populist for the heads of the FTC
Speaker 12: and the DOJ, M and A made very difficult for
Speaker 12: the next few years. It really just depends who's going
Speaker 12: to get that nod, and that would come right after
Speaker 12: the election or right after inauguration at President Trumpe wins.
Speaker 3: Now, obviously, what we're seeing in the market today is
Speaker 3: a steep reaction to tech selling off, but also the
Speaker 3: news that potentially President Biden administration is looking for other
Speaker 3: ways to curb foreign technology chips making it into Chinese things. So,
Speaker 3: ASML took you Electric Electron getting hit, are these kind
Speaker 3: of companies in this sector going to be hurt like
Speaker 3: no matter what, like either way, both administrations are going
Speaker 3: to crack down even harder on China. And how do
Speaker 3: we think about that?
Speaker 12: So the answer is at a high level, yes. So
Speaker 12: the Biden administration has already even put out a proposal
Speaker 12: on Treasury at the Treasury Department has put it on
Speaker 12: a proposal limitating private equity investments into Semiconductor's artificial intelligence
Speaker 12: quantum computing in China being seen as tough on China's
Speaker 12: good politics no matter who you are. But the one
Speaker 12: thing that we're seeing from statements from the White House,
Speaker 12: but whether it's Trump or Biden, is that there's always
Speaker 12: chances for flexibility down the line. Because the way this
Speaker 12: works is that the president goes out and makes a
Speaker 12: statement and then it's up to his staff to actually
Speaker 12: implement it. And as you go through this implementation, you
Speaker 12: often see instances where the president dials back because look,
Speaker 12: whether it's President Biden or President Trump, they have to
Speaker 12: look Jiji being in the face and say we're going
Speaker 12: to do this. So I would just say that, you know,
Speaker 12: starting it right now, the answer would be yes, no
Speaker 12: matter who you are as president, it's going to be
Speaker 12: seen is difficult. But let's look at the geopolitical tensions
Speaker 12: as we get into twenty twenty five, and let's see
Speaker 12: if the president's stance has changes ending because ultimately what
Speaker 12: we could face with and say twenty twenty six could
Speaker 12: be dramatically different.
Speaker 7: All Right, Nathan Deane, thank you so much. We appreciate it.
Speaker 6: Nathan Deane, Senior Policy on also Bloomberg Intelligence. If you
Speaker 6: have a Bloomberg terminal BI Laws laws Is takes you
Speaker 6: to the takes you to the dashboard that has all
Speaker 6: the policy research from Bloomberg Intelligence, and they got it
Speaker 6: neatly laid out there, and you can click on the
Speaker 6: election matrix and they got all the election research that's
Speaker 6: been written by all the BI analysts across Bloomberg Intelligence
Speaker 6: how different administrations would impact their individual industry. So it's
Speaker 6: a great place see all that research in one place.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just say Alexa play Bloomberg eleven thirty.
Speaker 6: Alex Steel and Paul Sweeney. We're live here in our
Speaker 6: Bloomberg and are Active Brokers Studio. We're streaming live on
Speaker 6: YouTube as well. To check us out on YouTube, good
Speaker 6: over there and search Bloomberg Podcast and that's where you'll
Speaker 6: find us. I'm just looking at the chart of Tesla
Speaker 6: all over the place. I mean it stocks flat year
Speaker 6: to date, but it's up seventy five percent from an
Speaker 6: April twenty twenty four low here, So it's just been
Speaker 6: all over the place. I think it reflects the uncertainty
Speaker 6: in the market as to ultimate demand for electric vehicles
Speaker 6: on a global scale. Taly Miller joins us. She's a
Speaker 6: chief business officer at Re Automotive, joining us via Zoom
Speaker 6: from Tel Aviv, Israel. Tally, thanks so much for joining us.
Speaker 6: I wonder in your business, because your company is in.
Speaker 7: This EV business.
Speaker 6: What's your view of kind of what we're seeing in
Speaker 6: maybe some waxing and waning in demand around the world
Speaker 6: for evs.
Speaker 7: What's your view?
Speaker 13: Hi, good morning, and thanks so much for having me.
Speaker 13: What we see as we are focused on the EV
Speaker 13: commercial market and I can tell you that we see
Speaker 13: more and more demand driven on the one hand by
Speaker 13: fleet asking for electric trucks as well as the infrastructure
Speaker 13: being ready steadily, So we do see a growing demand
Speaker 13: on our side.
Speaker 4: So why is that?
Speaker 1: So?
Speaker 3: Why will the commercial vehicles and fleets be easier to
Speaker 3: move over than like all buying an EV.
Speaker 13: Sure, So the commercial EV market has been growing, I
Speaker 13: would say slower or started picking up slower than the
Speaker 13: passenger EV but we've seen more and more demand recently,
Speaker 13: and it's mostly due to the fact that the fleets
Speaker 13: understand that there is a strong side on the total
Speaker 13: cost of ownership, so the overall unit economics, that makes
Speaker 13: a lot of sense for them to transfer into EV
Speaker 13: In addition to that, the infrastructure is being put in place,
Speaker 13: and therefore this combination makes it more attractive for them,
Speaker 13: and that's the reason we see this growing demand in
Speaker 13: the IVY commercial space.
Speaker 6: So I mean, but I think one of the challenges,
Speaker 6: just certainly in the in the automotive and personal use
Speaker 6: space is cost and the relative high cost of evs
Speaker 6: and the inability to bring those cost down.
Speaker 7: And profitably build vehicles at a lower price point.
Speaker 6: Is that how do you view that issue overall and
Speaker 6: how do you think that'll play out.
Speaker 13: That's a very good point, and indeed, this is one
Speaker 13: of the elements that is key for our customers. They
Speaker 13: call it overall the total cost of ownership or overall
Speaker 13: it's not only the acquisition costs, but then it's what
Speaker 13: does it take when you use the vehicle. So commercial
Speaker 13: fleets are being used most of the day, so let's
Speaker 13: say ninety five of the percent of the time the
Speaker 13: vehicle is being used, and therefore the fact that it's
Speaker 13: electric rather than internal combustion makes it more favorable overall
Speaker 13: on the TCO. This is a feelback that we get
Speaker 13: from our customers fleet customers such as pens Key and
Speaker 13: you Haul with which we work.
Speaker 3: There's other ways to sort of also move away from
Speaker 3: fossil fuels, right there's hydrogen, maybe hydrogen cars at some point,
Speaker 3: fuel cell batteries, biofuels, e gasoline. Are you noticing a
Speaker 3: rise in any of those options when it comes to
Speaker 3: commercial fleets.
Speaker 13: Overall? What we see from again from a reperspective, is
Speaker 13: we are really agnostic to power. The first trucks that
Speaker 13: we put on place are in the medium duty sector
Speaker 13: are electric trucks, and this is where we see a
Speaker 13: lot of demand right now. But eventually we are completely agnostic.
Speaker 13: Since our corner technology the core of what we're doing.
Speaker 13: The technology can be applicable to any source of power.
Speaker 6: Are you seeing different demand in different parts of the world,
Speaker 6: And I know your company is in the US, They're in.
Speaker 7: China and other parts of the world.
Speaker 6: It just feels like in the US might be behind
Speaker 6: some other parts of the world in terms of consumer
Speaker 6: demand or just user demand.
Speaker 13: Yeah, so overall, indeed, there is a difference between the
Speaker 13: different locations in the world. So we have started our
Speaker 13: activities in the US market and this is where we
Speaker 13: see a lot of demand right right now. We have
Speaker 13: certified that We're vehicles in the beginning of the year,
Speaker 13: were actually the first vehicle to have certify the full
Speaker 13: by wire and see a lot of demands for that.
Speaker 13: In Europe there is demand but for a slightly different
Speaker 13: vehicle than the ones we see in the US on
Speaker 13: the commercial space, and China is is that, I would say,
Speaker 13: a different market in this space. So we are currently
Speaker 13: focused on US.
Speaker 4: In Canada, we talk.
Speaker 3: A lot here about traditional car companies and then sort
Speaker 3: of the upstarts, right, I mean Tesla that an upstart,
Speaker 3: but Rivian, Lucid et cetera. Volkswagen plowing but five billion
Speaker 3: dollars into a tie up with Rivian Automotive. What are
Speaker 3: your thoughts about that they're going to jointly develop a
Speaker 3: battery powered vehicle and software. It helps the German carmaker
Speaker 3: get a boost to US company technology and Ravine gets
Speaker 3: a lifeline basically, what are your thoughts from your perspective
Speaker 3: on this deal.
Speaker 13: So I think it's a brilliant deal for these two companies.
Speaker 13: But also this indicates the market about the readiness of
Speaker 13: legacy OEMs to integrate proven and superior technologies. So from
Speaker 13: a VW point of view, indeed, they integrate that the
Speaker 13: technology the software defined vehicles and and for even is
Speaker 13: great because they can tap into the supply chain of
Speaker 13: VW and they're together they can bring an attractive vehicle
Speaker 13: from a technology and cost standpoint for the market. What
Speaker 13: it shows is shows that legacy OEMs are ready to
Speaker 13: integrate now uh technologies, exteriory technologies that are proven and
Speaker 13: that are superior into the core of what they're doing.
Speaker 13: And therefore it's very relevant for us at a re audibilive.
Speaker 6: All Right, Talley Miller, thank you so much for joining us. A.
Speaker 6: Tally Miller is the chief business officer for Re Automotive.
Speaker 6: It's a public trade company on the nasdack.
Speaker 7: R EE is the ticker.
Speaker 6: She joined us via Zoom from tel Aviv.
Speaker 7: Is your worth company is based here.
Speaker 6: But it just goes, you know, we saw some news,
Speaker 6: you know, just really our the last six nine months,
Speaker 6: the us OEM's auto companies just dialing back their EV rollout,
Speaker 6: either timetable volume targets, things like that, and they're basically
Speaker 6: saying that they don't see the demand. And that's kind
Speaker 6: of been the issue, you know, and so.
Speaker 7: Is it price?
Speaker 6: Is it the fact that you know, you can't charge
Speaker 6: it as efficiently as you can, as a lot of
Speaker 6: people would like, what's really holding the demand back?
Speaker 4: Yeah?
Speaker 3: And interestingly enough, when Bloomberg reporters talked to President Trump
Speaker 3: and editors and they spoke with them, they asked about
Speaker 3: EV's and President Prum said, I have no objection to the.
Speaker 4: Electric vehicle, the EV.
Speaker 3: I think it's great, and that sort of in response
Speaker 3: to if President Joe Biden's done anything with respect to
Speaker 3: the economy.
Speaker 4: And then he says the cars don't go far enough.
Speaker 3: They're really expensive, they're also very heavy, and this is
Speaker 3: all in that great Bloomberg BusinessWeek p So it's hard
Speaker 3: to like, that's different, Like that's different than saying, like
Speaker 3: EV stink, we got to go back.
Speaker 4: To internal internal combustion enders. They don't go far enough,
Speaker 4: Like what does that mean?
Speaker 6: Yeah, So it's just you know, it's kind of what
Speaker 6: I think a lot of people tell you performance versus cost,
Speaker 6: versus reliability versus preserving value in terms of the resale market.
Speaker 6: So there's a lot of issues out there, and you know,
Speaker 6: a lot of.
Speaker 7: The bulls are still saying it's a bump.
Speaker 3: In the road.
Speaker 7: We're still going to move towards electric.
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