1 00:00:02,520 --> 00:00:08,160 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, basically One Wall Street. 2 00:00:08,160 --> 00:00:09,840 Speaker 1: At the moment, might Wilson of More Good Stand be 3 00:00:09,960 --> 00:00:12,440 Speaker 1: taken a very constructive view on things, writing the rates 4 00:00:12,440 --> 00:00:14,960 Speaker 1: of changes turned for the better on most fronts. This 5 00:00:15,080 --> 00:00:17,880 Speaker 1: keeps us positive on us sequities on a twelve month basis, 6 00:00:17,920 --> 00:00:21,840 Speaker 1: we expect pullbacks to be shallow and unsatisfying to those 7 00:00:21,920 --> 00:00:24,400 Speaker 1: looking for a fatter pitch. Mike joined us now for 8 00:00:24,440 --> 00:00:26,520 Speaker 1: more Mike, good morning, Good morning John. I love the 9 00:00:26,560 --> 00:00:28,760 Speaker 1: reason no don't find SI. So let's talk about don't 10 00:00:28,760 --> 00:00:31,160 Speaker 1: find one? What elements of the market move shouldn't we fight? 11 00:00:31,440 --> 00:00:32,760 Speaker 2: Well, it's kind of what we're just talking about. 12 00:00:32,800 --> 00:00:35,640 Speaker 3: I mean, the headlines remained very noisy and uncertain, and 13 00:00:35,680 --> 00:00:37,280 Speaker 3: I think you know this has been the case for 14 00:00:37,320 --> 00:00:39,400 Speaker 3: the whole year. Our view, as you know, has been 15 00:00:39,440 --> 00:00:41,599 Speaker 3: a bit different. We came in thinking the first half 16 00:00:41,640 --> 00:00:44,000 Speaker 3: would be tougher and the rate of change and a 17 00:00:44,040 --> 00:00:45,720 Speaker 3: lot of things like earnings, re visions and some of 18 00:00:45,720 --> 00:00:47,960 Speaker 3: the headline would be negative. And in fact that what 19 00:00:48,040 --> 00:00:50,960 Speaker 3: we think happens. That all got priced in the week 20 00:00:51,000 --> 00:00:53,680 Speaker 3: after Liberation Day, right, it was violent, it was a 21 00:00:53,720 --> 00:00:56,000 Speaker 3: de leveraging and so now as we look at the 22 00:00:56,040 --> 00:00:59,000 Speaker 3: data itself, it's all inflected higher and so, you know, 23 00:00:59,640 --> 00:01:02,440 Speaker 3: don't everything, but ignoring the headlines is probably a good 24 00:01:02,440 --> 00:01:05,040 Speaker 3: strategy and just focus on the data has turned up 25 00:01:05,360 --> 00:01:07,320 Speaker 3: for the most part. And I think, you know, I 26 00:01:07,319 --> 00:01:09,520 Speaker 3: don't know where the trade negotiations are going. Nobody does, 27 00:01:09,880 --> 00:01:11,440 Speaker 3: but I think it's very unlikely we're going to go 28 00:01:11,480 --> 00:01:13,280 Speaker 3: back to where we were, you know, a month and 29 00:01:13,319 --> 00:01:15,800 Speaker 3: a half ago, like we bottomed in terms of the 30 00:01:16,240 --> 00:01:19,920 Speaker 3: pain of that initial you know, announcement and how bad 31 00:01:19,920 --> 00:01:23,280 Speaker 3: those tariffs were. So unless it really re escalates in 32 00:01:23,319 --> 00:01:26,240 Speaker 3: a negative fashion, I don't think the trade issues is 33 00:01:26,280 --> 00:01:27,600 Speaker 3: even going to be enough to kind of take the 34 00:01:27,640 --> 00:01:28,319 Speaker 3: momentum out. 35 00:01:28,240 --> 00:01:29,080 Speaker 2: Of this market right now. 36 00:01:29,160 --> 00:01:30,759 Speaker 1: You know what the bad view sounds like. They would 37 00:01:30,760 --> 00:01:32,720 Speaker 1: say that maybe some of the data, some of the 38 00:01:32,720 --> 00:01:35,120 Speaker 1: earnings we've seen have been flattened by pull forward and 39 00:01:35,120 --> 00:01:36,800 Speaker 1: we'll get the bill for that later this summer. Do 40 00:01:36,840 --> 00:01:38,319 Speaker 1: you think we're priced for that kind of slowed down, 41 00:01:38,319 --> 00:01:40,360 Speaker 1: that weakness we could see in a summer months. 42 00:01:40,520 --> 00:01:41,560 Speaker 2: That's probably right. 43 00:01:41,640 --> 00:01:42,800 Speaker 3: And when we had that view too, there was a 44 00:01:42,840 --> 00:01:44,440 Speaker 3: pull forward and Q one Q we're not being better 45 00:01:44,480 --> 00:01:47,240 Speaker 3: than they feared because you know, the numbers came down 46 00:01:47,240 --> 00:01:47,640 Speaker 3: a bunch. 47 00:01:47,840 --> 00:01:48,760 Speaker 2: I think the second. 48 00:01:48,560 --> 00:01:51,280 Speaker 3: Quarter, though, is expected now to be weaker, so that's 49 00:01:51,280 --> 00:01:52,920 Speaker 3: going to be the key. I think the biggest risk 50 00:01:52,960 --> 00:01:55,000 Speaker 3: for the market's going to probably be either rates as 51 00:01:55,000 --> 00:01:56,360 Speaker 3: we've talked about in the past, you know, north of 52 00:01:56,400 --> 00:01:57,440 Speaker 3: four and a half percent. 53 00:01:57,400 --> 00:01:59,080 Speaker 2: Or we do go an earning season. 54 00:01:59,400 --> 00:02:01,880 Speaker 3: It's not as you know, people were hoping for, and 55 00:02:01,920 --> 00:02:04,240 Speaker 3: we have maybe a five to seven percent correction, but 56 00:02:04,280 --> 00:02:07,200 Speaker 3: that's not what people kind of want. People want a 57 00:02:07,320 --> 00:02:09,600 Speaker 3: ten you know, another ten to fifteen percent draw down 58 00:02:09,960 --> 00:02:12,799 Speaker 3: to get better, to get more exposure, and I just 59 00:02:12,800 --> 00:02:14,600 Speaker 3: don't think you're going to get that. I mean, I've 60 00:02:14,600 --> 00:02:17,320 Speaker 3: seen this a million times. You want it, but you're 61 00:02:17,360 --> 00:02:18,919 Speaker 3: just going to have to have a shorter trigger finger. 62 00:02:19,320 --> 00:02:22,160 Speaker 4: Well, you had seen retail largely buying the dip that 63 00:02:22,160 --> 00:02:25,200 Speaker 4: that's who participated when you got those ruptures in April. 64 00:02:25,680 --> 00:02:27,560 Speaker 4: If we're not going to get dips like that anymore, 65 00:02:27,600 --> 00:02:31,240 Speaker 4: what is the willingness of institutions to continue to put 66 00:02:31,280 --> 00:02:33,280 Speaker 4: money to work right now, especially they didn't even buy 67 00:02:33,320 --> 00:02:34,400 Speaker 4: the pass dips we saw. 68 00:02:34,680 --> 00:02:37,399 Speaker 3: Yeah, I think institutions have re risk, but there's still 69 00:02:37,440 --> 00:02:39,480 Speaker 3: more to go. The one the area that I think 70 00:02:39,520 --> 00:02:41,320 Speaker 3: that that you have to watch is the is the 71 00:02:41,360 --> 00:02:45,440 Speaker 3: systematic strategies the CTAs that price willmentum money. We saw 72 00:02:45,480 --> 00:02:48,040 Speaker 3: almost five hundred million dollars of de leveraging in that 73 00:02:48,120 --> 00:02:51,720 Speaker 3: period of early March through mid April, and they've re 74 00:02:51,880 --> 00:02:55,080 Speaker 3: risked maybe thirty forty percent of that. So that's another 75 00:02:55,160 --> 00:02:57,919 Speaker 3: bid that's sort of it's not fundamentally driven, it's just 76 00:02:58,000 --> 00:02:58,760 Speaker 3: price momentum. 77 00:02:59,000 --> 00:03:00,840 Speaker 2: So that's that's going to be kind of underlying bid. 78 00:03:00,840 --> 00:03:02,720 Speaker 3: And then I think, you know, most institutions have re 79 00:03:02,880 --> 00:03:05,280 Speaker 3: risk but one thing I haven't talked about yet is 80 00:03:05,639 --> 00:03:08,280 Speaker 3: it's people are still making the quality bet and we 81 00:03:08,360 --> 00:03:10,600 Speaker 3: agree with that, meaning this isn't the beginning of a 82 00:03:10,680 --> 00:03:14,560 Speaker 3: news cycle. It's once again an extension of the existing cycle. 83 00:03:14,960 --> 00:03:16,520 Speaker 3: And the Fed's probably going to be cutting at some 84 00:03:16,520 --> 00:03:19,800 Speaker 3: point later this year early next year, and that really 85 00:03:19,840 --> 00:03:22,800 Speaker 3: behooves the large cap quality equities. 86 00:03:23,080 --> 00:03:27,000 Speaker 4: Does it behoove companies specifically who can also weigh out 87 00:03:27,040 --> 00:03:29,040 Speaker 4: some of the tariff uncertainty because this has been a 88 00:03:29,040 --> 00:03:31,480 Speaker 4: big part of the narrative. Right no one's making decisions. 89 00:03:31,520 --> 00:03:34,400 Speaker 4: Cap X is largely stalled unless your tech is there 90 00:03:34,440 --> 00:03:37,440 Speaker 4: an element where even though we don't have terarras resolved 91 00:03:37,720 --> 00:03:39,720 Speaker 4: that you get companies who just get on with it 92 00:03:39,800 --> 00:03:41,119 Speaker 4: and start to put capital to work. 93 00:03:41,160 --> 00:03:42,320 Speaker 2: Yeah, they got to run a business. 94 00:03:42,320 --> 00:03:45,040 Speaker 3: And that's another reason why large cap quality businesses can 95 00:03:45,040 --> 00:03:47,520 Speaker 3: do this. They can mitigate some of these risks, whether 96 00:03:47,560 --> 00:03:50,240 Speaker 3: it's terriffs, whether it's you know, maybe a government cutting 97 00:03:50,240 --> 00:03:52,160 Speaker 3: back on certain types of spending. And one of the 98 00:03:52,160 --> 00:03:53,920 Speaker 3: things that is getting through this tax build that I 99 00:03:53,960 --> 00:03:57,000 Speaker 3: think is still underappreciated is the tax incentives for. 100 00:03:57,120 --> 00:03:59,200 Speaker 2: Cap X and R and D spending. 101 00:03:59,240 --> 00:04:01,320 Speaker 3: We think that could add three to five percent to 102 00:04:01,520 --> 00:04:05,560 Speaker 3: earnings growth or cash earnings for these large multinationals. That's 103 00:04:05,600 --> 00:04:07,720 Speaker 3: a big tail in addition to the weaker dollars. So 104 00:04:07,880 --> 00:04:09,640 Speaker 3: there's just a lot of tailwinds I see from an 105 00:04:09,640 --> 00:04:10,600 Speaker 3: earning standpoint. 106 00:04:10,800 --> 00:04:12,480 Speaker 2: And this is almost a perfect. 107 00:04:12,200 --> 00:04:15,400 Speaker 3: Environment to climb the wall of worry because the economic data, 108 00:04:15,640 --> 00:04:19,480 Speaker 3: the political geopolitical data is messy, it's noisy, it's scary sometimes, 109 00:04:19,680 --> 00:04:21,880 Speaker 3: but as long as the revision factors for earnings are 110 00:04:21,880 --> 00:04:24,400 Speaker 3: heading north, it's just hard for stacks to go down. 111 00:04:24,560 --> 00:04:26,480 Speaker 1: When you say capecks, I just think of a handful 112 00:04:26,480 --> 00:04:28,960 Speaker 1: of tech companies. Do you think it goes beyond just 113 00:04:29,000 --> 00:04:29,760 Speaker 1: tank leadership. 114 00:04:29,839 --> 00:04:31,919 Speaker 3: Oh absolutely. I think this is about capital goods. I 115 00:04:31,920 --> 00:04:35,000 Speaker 3: think this is not just about AI capbacks. Also, one 116 00:04:35,000 --> 00:04:37,960 Speaker 3: thing to just keep in mind, the IT cappacks that's 117 00:04:38,000 --> 00:04:41,120 Speaker 3: been good the last several years has really been concentrated 118 00:04:41,240 --> 00:04:45,599 Speaker 3: just in AI. Okay, the traditional kind of upgrades you 119 00:04:45,600 --> 00:04:48,359 Speaker 3: see in the enterprise and in the household have not 120 00:04:48,440 --> 00:04:50,640 Speaker 3: been happening because there was a giant pull forward, remember 121 00:04:50,680 --> 00:04:53,359 Speaker 3: in twenty twenty and twenty twenty one for work from home. 122 00:04:53,600 --> 00:04:55,599 Speaker 3: So if you actually look at the IT capback cycle 123 00:04:55,600 --> 00:04:57,560 Speaker 3: from twenty two to twenty four, it was kind of 124 00:04:57,600 --> 00:04:59,880 Speaker 3: a software session. And that's another part of our thea 125 00:05:00,160 --> 00:05:03,440 Speaker 3: We've been going through these rolling recessions and look, to me, 126 00:05:03,520 --> 00:05:05,760 Speaker 3: the big, the big catalyst to keep in mind for 127 00:05:05,920 --> 00:05:08,000 Speaker 3: broadening out is going to be when the Fed starts 128 00:05:08,040 --> 00:05:10,640 Speaker 3: to signal they're more dubbish. I don't know when that's 129 00:05:10,680 --> 00:05:12,520 Speaker 3: going to be, but my guess is sometime in the 130 00:05:12,560 --> 00:05:14,720 Speaker 3: third Court they're going to start to signal that, and 131 00:05:14,760 --> 00:05:16,360 Speaker 3: that's when they're going to get more broadening out to 132 00:05:16,400 --> 00:05:17,200 Speaker 3: the lower quality parts. 133 00:05:17,600 --> 00:05:20,239 Speaker 1: Is the why matter? Do we need it because inflation 134 00:05:20,360 --> 00:05:22,240 Speaker 1: is coming in? Or is it going to be because the 135 00:05:22,279 --> 00:05:23,400 Speaker 1: labor market is cracking. 136 00:05:23,680 --> 00:05:26,240 Speaker 3: Well, I mean, look at last fall, it was both right, 137 00:05:26,360 --> 00:05:29,080 Speaker 3: the labor market was cracking last summer. As soon as 138 00:05:29,080 --> 00:05:31,240 Speaker 3: they signaled they were ready to step in, the market 139 00:05:31,240 --> 00:05:33,599 Speaker 3: went up anyway. So that's why I mean, I actually 140 00:05:33,600 --> 00:05:35,960 Speaker 3: think of recession if we finally get the you know, 141 00:05:36,000 --> 00:05:38,919 Speaker 3: broad recession labor cycle, I don't think the equity markets 142 00:05:38,960 --> 00:05:41,159 Speaker 3: are going anywhere near the April lows because the FED 143 00:05:41,200 --> 00:05:44,039 Speaker 3: will be able to act quickly, and we're like Pavlovian, right, 144 00:05:44,120 --> 00:05:47,080 Speaker 3: And if retail is buying when the FED wasn't even. 145 00:05:46,920 --> 00:05:49,200 Speaker 2: Cutting, if they are cutting, there's going to. 146 00:05:49,200 --> 00:05:51,520 Speaker 3: Be a big bid there. So look, there's always risks 147 00:05:51,560 --> 00:05:53,440 Speaker 3: in the market. There's always something to be worried about. 148 00:05:53,560 --> 00:05:55,479 Speaker 3: There's always things to bearishan and there seems to be 149 00:05:55,480 --> 00:05:56,160 Speaker 3: bullish on and. 150 00:05:56,080 --> 00:05:56,680 Speaker 2: That's our job. 151 00:05:56,720 --> 00:05:58,640 Speaker 3: And I think, you know, this year we've navigated that 152 00:05:58,640 --> 00:06:00,640 Speaker 3: pretty well, being in the right place. And I think 153 00:06:00,640 --> 00:06:02,400 Speaker 3: we're going to continue to have to shift what we 154 00:06:02,440 --> 00:06:04,200 Speaker 3: want to own, not so much how much you want 155 00:06:04,200 --> 00:06:04,440 Speaker 3: to own. 156 00:06:04,560 --> 00:06:06,920 Speaker 1: You've acknowledged the one thing that could be a handwind 157 00:06:06,920 --> 00:06:09,360 Speaker 1: for equities as interest rates. He wrote about it over 158 00:06:09,400 --> 00:06:12,279 Speaker 1: the weekend. What is it about four fifty that's challenging 159 00:06:12,360 --> 00:06:14,840 Speaker 1: to this equity market because based on the running we've 160 00:06:14,839 --> 00:06:16,360 Speaker 1: seen over the past few weeks, we don't see much 161 00:06:16,360 --> 00:06:17,039 Speaker 1: of a challenge. 162 00:06:17,160 --> 00:06:18,799 Speaker 2: Well, it's stabilized at four fifty. 163 00:06:18,920 --> 00:06:21,800 Speaker 3: So we've identified this level like almost two years ago, 164 00:06:21,920 --> 00:06:25,000 Speaker 3: and it's been like a charm. I mean, as soon 165 00:06:25,000 --> 00:06:26,880 Speaker 3: as you cross four to fifty in the upside, the 166 00:06:26,880 --> 00:06:30,480 Speaker 3: correlation between stocks and rates goes negative and vice versa. 167 00:06:30,600 --> 00:06:32,400 Speaker 2: Now, I do think that we kind of went. 168 00:06:32,320 --> 00:06:35,080 Speaker 3: To four seventy in the April period and then they 169 00:06:35,120 --> 00:06:35,880 Speaker 3: calm down again. 170 00:06:35,960 --> 00:06:38,359 Speaker 2: I think the market is getting comfortable that they have 171 00:06:38,600 --> 00:06:39,719 Speaker 2: enough tools. 172 00:06:39,400 --> 00:06:41,520 Speaker 3: Because you know, the Treasury Secretary has talked about that 173 00:06:41,920 --> 00:06:44,280 Speaker 3: to keep it four to fifty or below if they 174 00:06:44,320 --> 00:06:46,159 Speaker 3: need to, And I think we talked about this last 175 00:06:46,160 --> 00:06:48,320 Speaker 3: time I was here. Four to seventy five is like 176 00:06:48,360 --> 00:06:51,200 Speaker 3: the worst place because that's where markets get really nervous. 177 00:06:51,440 --> 00:06:54,839 Speaker 3: Five percent I actually get bullish because then I know 178 00:06:55,279 --> 00:06:57,320 Speaker 3: that they're going to come and intervene with either liquidity 179 00:06:57,320 --> 00:06:59,520 Speaker 3: injections or they're going to use these other tools that 180 00:06:59,560 --> 00:07:02,480 Speaker 3: the Treasure secretaries talked about. So we're you know, we're 181 00:07:02,600 --> 00:07:05,680 Speaker 3: we're optimistic that that could be managed and in other words, 182 00:07:05,720 --> 00:07:08,159 Speaker 3: that risk could be a risk for five or seven percent, 183 00:07:08,440 --> 00:07:10,520 Speaker 3: but ultimately that risk will get managed to do you. 184 00:07:10,440 --> 00:07:12,520 Speaker 1: Get clients, hosk, can you now about the dead oceans? 185 00:07:12,800 --> 00:07:14,840 Speaker 1: Asking the equities trying to just about the dead oceans 186 00:07:14,880 --> 00:07:16,040 Speaker 1: that take place in the week. 187 00:07:16,000 --> 00:07:17,800 Speaker 3: Well, I really ask the equity folks. But I mean 188 00:07:17,840 --> 00:07:20,440 Speaker 3: people do ask about it, for sure. I mean, and 189 00:07:20,520 --> 00:07:23,960 Speaker 3: once again we have seen many auctions, soft auctions for 190 00:07:23,960 --> 00:07:26,360 Speaker 3: the last two or three years, we've seen this occur 191 00:07:26,680 --> 00:07:27,920 Speaker 3: and then they get control of it. 192 00:07:27,960 --> 00:07:28,239 Speaker 2: Again. 193 00:07:28,720 --> 00:07:30,360 Speaker 3: I don't want to dismiss the risk from the back 194 00:07:30,480 --> 00:07:33,920 Speaker 3: end of the market that is still to me. The risk, 195 00:07:34,000 --> 00:07:37,120 Speaker 3: I mean is the risk not only for markets. It's 196 00:07:37,160 --> 00:07:40,120 Speaker 3: the risk for the US, Like we have too much 197 00:07:40,160 --> 00:07:43,160 Speaker 3: debt and this is a focus. And if we don't 198 00:07:43,520 --> 00:07:45,600 Speaker 3: I mean, ultimately, if we don't you know, cut the 199 00:07:45,640 --> 00:07:47,920 Speaker 3: budget over time, like and maybe the market is now 200 00:07:47,920 --> 00:07:50,280 Speaker 3: giving them a lead like okay, we'll give you twelve months, 201 00:07:50,560 --> 00:07:53,320 Speaker 3: you know, but if we don't get serious about you know, 202 00:07:53,520 --> 00:07:56,480 Speaker 3: budget reconciliation and actually reducing the size of the budget 203 00:07:56,480 --> 00:07:58,640 Speaker 3: over time, this is an issue that's going to stay 204 00:07:58,680 --> 00:07:59,000 Speaker 3: with us. 205 00:07:59,320 --> 00:08:01,800 Speaker 1: Mike Wilson more than Stantley. Three words over the weekend. 206 00:08:02,040 --> 00:08:04,440 Speaker 1: Don't fight it. Don't fight this market, Mike, Thank you, sir. 207 00:08:04,560 --> 00:08:05,320 Speaker 1: I appreciate it.