Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
Speaker 2: at seven am Eastern on applecar Player, Android Auto with
Speaker 2: the Bloomberg Business App. Listen on demand wherever you get
Speaker 2: your podcasts, or watch us live on YouTube.
Speaker 3: Laura Rain joins it. She's the Chief ECONOMOCE at FS Investments.
Speaker 1: Lare given some of.
Speaker 3: The economic data we've seen recently. I guess most recently
Speaker 3: was a strong retail sales. It seems like this economy's
Speaker 3: doing fairly well, if not better than fairly well. How
Speaker 3: do you think about it?
Speaker 4: I think what we're seeing is a little bit of
Speaker 4: a difference between the growth data that you alluded to
Speaker 4: with the retail sales numbers, and the employment data, which
Speaker 4: does seem like the trajectory is slowing more notably. I
Speaker 4: think all of this adds up to a soft landing.
Speaker 4: But I think you bring up something really important. If
Speaker 4: you look at the GDP data, it still looks like
Speaker 4: there's no landing. We're still growing at a pace that's
Speaker 4: well above potential, and I think really reflects a consumer
Speaker 4: that just is truly unstoppable when we look ahead. However,
Speaker 4: I think we are in for an incremental slowdown in
Speaker 4: GDP growth. We're probably going to see a business investment
Speaker 4: take a pause, a lot of uncertainty right now about
Speaker 4: regulation around the election, and I think we're going to
Speaker 4: see government spending also downshift to neutral from being a
Speaker 4: pretty powerful tailwind. But you add it all up, I
Speaker 4: think today where you see the soft landing, more specifically
Speaker 4: as in the labor market data, where we are starting
Speaker 4: to see a cooling picture, not cold, a cooling.
Speaker 5: Laurie, you walk us through sort of how you're thinking
Speaker 5: about all of this as you listen to FED policymakers
Speaker 5: walk us through the way that they were approaching this
Speaker 5: next meeting, which is going to take place just a
Speaker 5: day or two after the presidential election. What are you
Speaker 5: listening for? I'll note that Chris Waller is speaking today.
Speaker 5: I think in Vienna, Austria, we're gonna hear from Neil
Speaker 5: kshk sorry as well. Is the is the commentary there?
Speaker 5: Commentary that we're getting is a cacophonists. Are we hearing
Speaker 5: some of that unanimity that a lot of people thought
Speaker 5: was eroding after the last meeting? What stands out to you?
Speaker 5: What are you listening for when when these policy makers.
Speaker 4: Speak, I think the only thing that they're unanimous about
Speaker 4: is that they're going to have to be data dependent
Speaker 4: when they're looking ahead to twenty twenty five. Listen, the
Speaker 4: inflation data has absolutely come down enough to open a
Speaker 4: window of opportunity for the FED to correct rates down
Speaker 4: and sort of keep them in line with real FED
Speaker 4: funds rates. You know, when we see inflation coming down,
Speaker 4: just the nominal FEDS funds rates starts to look a
Speaker 4: little bit more restrictive.
Speaker 1: So I think that's the.
Speaker 4: Adjustment that they're making today, and to twenty five basis
Speaker 4: point rate cuts at the next two meetings has always
Speaker 4: been my forecast. I think where I deviate more significantly
Speaker 4: is into next year because I think they're going to
Speaker 4: really take a pause. They're going to wait and see
Speaker 4: how the economy is evolving. And I feel like they
Speaker 4: take flak for having this sort of data dependent view,
Speaker 4: but I think they have to because I don't think
Speaker 4: inflation's totally gone. I think it's you know.
Speaker 3: I think the boogeyman's under the bed.
Speaker 4: I don't think it's just gone for good.
Speaker 3: Lauren, let's talk in the labor market here. You know,
Speaker 3: from my perspective, this is a fully employed economy because
Speaker 3: all of the Sweeney offspring are gainfully employed. So to me,
Speaker 3: that's very good well employed economy. What does numbers tell
Speaker 3: you about kind of where the labor market is today
Speaker 3: and where there might be some risks.
Speaker 4: You know, it's interesting that it's evolved into almost a
Speaker 4: two speed labor market because when you look at the
Speaker 4: hiring data, it's declined, it's looking weaker than it was
Speaker 4: before the pandemic, and it's eroding somewhat. But when you
Speaker 4: look at the layoffs data, it's also very low, so
Speaker 4: you know, people aren't losing their job en mass, which
Speaker 4: is really just what's so critical to keep household consumption
Speaker 4: going and consumer confidence where it is. But when you
Speaker 4: look at job opportunities, you know clearly that churn that
Speaker 4: we saw after the pandemic is really gone now, and
Speaker 4: you're seeing the hiring side of things looking cooler.
Speaker 1: But you know, to me, the can area.
Speaker 4: And the coal mine is always the weekly initial jobless claims.
Speaker 4: You know, we are seeing some elevation there because of
Speaker 4: the hurricanes that have devastated some local communities, but overall,
Speaker 4: outside of that, they're still fairly low, and of course,
Speaker 4: you know, nothing gets the market's attention like the monthly
Speaker 4: payroll report, which I think is going to continue to
Speaker 4: show a steady unemployment rate at round four four point
Speaker 4: one percent and hiring that's strong enough to keep that
Speaker 4: unemployment rate steady where it is.
Speaker 5: You know, bearing in mind what you're saying about how
Speaker 5: the Fed's going to be data driven and we have
Speaker 5: to be as well. Let me just ask you about
Speaker 5: some of the softer data. And we had that consumer
Speaker 5: confidence number a few weeks back, which I think spooked
Speaker 5: a lot of people. Consumers less confident in the economy
Speaker 5: where it is now and where it's headed. How do
Speaker 5: you factor that into the way that you were forecasting
Speaker 5: and thinking about the economy. Just the sense that consumers
Speaker 5: have about the US economy directionally, I noted in the
Speaker 5: last Confidence Board Report conference report, this sort of heightened
Speaker 5: interest in what the FED is doing and where interest
Speaker 5: rates are going.
Speaker 4: You know, you bring up to such an important point
Speaker 4: because the consumer confidence data have been lackluster, have been
Speaker 4: weak really since the pandemic. And that's despite you know,
Speaker 4: a very strong on a labor market, and despite the
Speaker 4: fact that while consumers say they're a little more downbeat
Speaker 4: on the on the economy, they're still out spending like gangbusters.
Speaker 4: So it's hard for me to connect those dots today
Speaker 4: given that the data has just sent such mixed signal.
Speaker 4: You know, we read the consumer confidence data closely because
Speaker 4: it comes out early, But of course what really matters
Speaker 4: for all of us is what their consumers are actually
Speaker 4: doing now, what they say they're worried about. That said,
Speaker 4: we cannot just ignore it. So it's something I think
Speaker 4: that I'm hoping we'll get better after the election. I
Speaker 4: think that's weighing on sentiment, just the uncertainty. And I
Speaker 4: think that, you know, as consumers slowly get used to
Speaker 4: interest rates at a higher for longer place, some of
Speaker 4: that concern around what they're able to do afford and
Speaker 4: what houses they're able to buy is going to normalize
Speaker 4: a little bit. I just think a lot of people
Speaker 4: are waiting for us to come back to a very
Speaker 4: low rate environment that I don't think it's going to happen.
Speaker 3: All right, because I'm not refinancing my mortgage, is what
Speaker 3: you're telling me anytime soon. Lara Ram, thanks so much
Speaker 3: for joining us loa Rain Chief economists at FS Investments.
Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 2: weekday afternoons from seven to ten am Easter Listen on
Speaker 2: Apple car Play and Androut Auto with a Bloomberg Business app,
Speaker 2: or watch US live on YouTube.
Speaker 3: I want to bring a Nancy Curtain, Partner, Global CIO,
Speaker 3: head of Investment Advisory at alt It Tiedament Global. Hey, Nancy,
Speaker 3: We're just kind of getting into the teeth of the earnings,
Speaker 3: but we have some good numbers out of American Express today.
Speaker 3: The big banks put up some really good numbers. I mean,
Speaker 3: Morgan Stanley JP Morgan, What do you take away so
Speaker 3: far from what we've seen coming out of Corporate America
Speaker 3: earnings wise?
Speaker 1: Okay, so we're early innings in the third quarter, but like,
Speaker 1: so far, so good banks. As you said, we're pretty
Speaker 1: strong trading, they're benefiting from the volatility and markets. We
Speaker 1: think investment banking will probably pick up, and I think
Speaker 1: they indicated quite nicely on improvement net interest margins. We
Speaker 1: have Netflix Overnight TSMC rather just spelled the fact that
Speaker 1: there's a problem in demand for jen Ai, So I
Speaker 1: think that reads well into Nvidia earnings that's coming towards
Speaker 1: the end of November. As you know, look, there's a
Speaker 1: lull bar for the third quarter. Expectations are four percent,
Speaker 1: and I think companies are going to leap right over it.
Speaker 1: So we think this quarter will be strong. But really
Speaker 1: what's important for our clients and our positioning is looking
Speaker 1: ahead to the fourth quarter and twenty twenty five, where
Speaker 1: we still expect earnings to continue to accelerate as Central
Speaker 1: Bank's ease.
Speaker 5: Well, Nas, let's talk about that as you try to
Speaker 5: look ahead to the fourth quarter. And obviously there's an
Speaker 5: election between now and then looming large, and I'm curious
Speaker 5: just about kind of the panoply of risks that you
Speaker 5: see here. Yes, there's the election results, there's this Federal
Speaker 5: Reserve meeting that we were talking about just a few
Speaker 5: moments ago. I'm looking at just sort of how much
Speaker 5: gold has gone up in price here in recent days.
Speaker 5: How are you thinking about risk and how is that
Speaker 5: kind of shaping your perspective as you look ahead to
Speaker 5: the fourth quarter.
Speaker 1: Well, first of all, it's important to remain diversified, which
Speaker 1: is what we do. We don't just have equities. We've
Speaker 1: got things like private credit and infrastructure and gold, gold
Speaker 1: as you mentioned, hit twenty seven hundred overnight. That's been
Speaker 1: a really really nice diversifier and ballast in client portfolio.
Speaker 1: So it's not just about equities. And I think given
Speaker 1: the strength and market that we've seen already year today,
Speaker 1: a pullback on any of those event type things and
Speaker 1: data things that you said coming ahead. We've got a PCE,
Speaker 1: we've got a jobs number that's going to be a
Speaker 1: bit mixed up with the hurricane and bowing and so
Speaker 1: on and so forth, and then we got the election,
Speaker 1: and then we've got the FED. So you know, short term,
Speaker 1: you never know with markets could easily pull back. They've
Speaker 1: been super strong. But remember last Saturday we celebrated Happy Birthday,
Speaker 1: two year anniversary. You know, typically when you make it
Speaker 1: to two years, you make it to three years seventy
Speaker 1: percent of the time, and data going back to like
Speaker 1: nineteen forty nine, and remember the average length of a
Speaker 1: bullmark in the United States is five years and one
Speaker 1: hundred percent. We've done sixty and two years. So we
Speaker 1: got to look forward to twenty twenty five at all
Speaker 1: things being equal, unless there's some big resurgence of inflation,
Speaker 1: Middle East upset, whatever, we are still constructive positive on
Speaker 1: the outlook.
Speaker 3: Hey, Nancy, we had some I guess some conflicting results
Speaker 3: coming out of some of the big chip makers over
Speaker 3: the last week. ASML had a little bit of a
Speaker 3: warning there, actually a big warning, let's be honest. But
Speaker 3: then Taiwan Semika doctor came back strong yesterday. As someone
Speaker 3: who thinks of the chip business as kind of a
Speaker 3: proxy for this whole AI trade here, I'm not sure
Speaker 3: if it's a trader, it's a long term theme. How
Speaker 3: did you kind of deal with those two earnings announcement?
Speaker 3: How do you think about the tech space in AI
Speaker 3: given what we've seen from the chip makers.
Speaker 1: So look, ASML is a bit of a howler there,
Speaker 1: that's for sure. But you know, and we haven't gotten
Speaker 1: full clarification, but the press release from the company talked
Speaker 1: about the fact that it's really not in the A side,
Speaker 1: it's more in what I call you know doubt, you know,
Speaker 1: easier electronics, et cetera, some weakness in end markets of
Speaker 1: where they sell some of their less advanced so called
Speaker 1: you know, chip equipment into. So we don't think that
Speaker 1: plays into at all that there's going to be weakness
Speaker 1: in nvideo. Jensen Wang has made it pretty clear demand
Speaker 1: is on fire. TSMC is forecasting thirty percent growth and revenue,
Speaker 1: So we think the gen Ai and demand for chips
Speaker 1: is very much alive and well so much so, so
Speaker 1: much so that there could be some near term shortages
Speaker 1: as we head into twenty twenty five in components, chips,
Speaker 1: et cetera. And funny enough, before we get to the
Speaker 1: big productivity boom of jen Ai, we're gonna have a
Speaker 1: bit of inflation that comes from these shortages, So something
Speaker 1: we're keeping an eye on, Nancy.
Speaker 5: I think the last time that you and I spoke,
Speaker 5: China had unveiled maybe the first of these initiatives to
Speaker 5: do fiscal stimulus monetary stimulus. There was great excitement about
Speaker 5: that than that ebbed is. There is some skepticism about
Speaker 5: what that actually meant and how China might implement it.
Speaker 5: We got these new growth figures today, which I think
Speaker 5: are on the low end for the last six quarters,
Speaker 5: but some more clarity from the Chinese Central Bank this morning.
Speaker 5: How are you looking at China as you kind of
Speaker 5: look at the investment landscape globally and processing what we've
Speaker 5: heard both from policymakers there on the fiscal side and
Speaker 5: monetary policy side.
Speaker 1: So the good news is in China it's kind of Houston.
Speaker 1: We have a problem, right, So finally China is dealing
Speaker 1: with both the deflation and slow down in the economy.
Speaker 1: But we believe the fiscal and stimulus so far is
Speaker 1: not kind of in the Dragy school of whatever it takes, right,
Speaker 1: we think China probably needs a trillion and a half
Speaker 1: of stimulus fiscal and monetary combined with an emphasis on
Speaker 1: the fiscal. They've done about a third of that, or
Speaker 1: at least hinted at something like that, so we don't
Speaker 1: think it's enough. More importantly, China has some big strugruel issues, right.
Speaker 1: It's got a very high savings rate, it's got an
Speaker 1: aging demographic, unemployment and double digit and lack of the
Speaker 1: social safety net. So that is really a problem for consumption,
Speaker 1: particularly as a lot of those consumers but their money
Speaker 1: and the property market which isn't doing too well. And
Speaker 1: then they've got a strategy for export growth, right, let's
Speaker 1: be manufacturer of a naissance, be the world's leader in manufacturing.
Speaker 1: And the problem is if their domestic economy is weak,
Speaker 1: that creates excess capacity that they want to ship to
Speaker 1: the rest of the world. The rest of the world
Speaker 1: doesn't want it, and so that brings tariffs and trade
Speaker 1: tensions and the like. So look, we think there are
Speaker 1: some cheap Chinese shares, there is some value in the market,
Speaker 1: but overall we think the combination of structural and cyclical
Speaker 1: not yet dealt with by the Chinese authorities. But the
Speaker 1: good news is it's removed what I call the tail
Speaker 1: risk of China kind of dragging the world lower width.
Speaker 1: So in that sense, the monetary and fiscal stimulus is
Speaker 1: a positive from an overall global growth perspective.
Speaker 3: Nancy, thanks so much for joining us, as I always
Speaker 3: appreciate getting your thoughts and your perspective. Nancy Curtin, Folks,
Speaker 3: she's a partner, she's a global CIO. She's the head
Speaker 3: of Investment advisory at alt Ittaman Global. Nancy's been on
Speaker 3: Global Wall Street four decades and we appreciate getting hurt.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station.
Speaker 2: Just say, Alexa playing Bloomberg eleven thirty.
Speaker 3: Our next guest, we need to get right to Gatham Maconda.
Speaker 3: He's a lecturer of management practice at the Yale School
Speaker 3: of Management is also the author of Picking Presidents. Gatham,
Speaker 3: thanks so much for joining us here on our studio.
Speaker 3: I don't think anybody knows how we're going to pick
Speaker 3: this president come three weeks time. What's your view of
Speaker 3: this election? In these campaigns kind of where we are today.
Speaker 6: Always a pleasure to be here. Anyone who tells you
Speaker 6: they know what's going to happen is immediately demonstrating that
Speaker 6: they do not know what is going to at So
Speaker 6: when people say it's too close to call, that's basically true.
Speaker 6: I think the Harris campaign seems to feel that they'd
Speaker 6: rather be them than the other guy. I observed that
Speaker 6: the Trump campaign seems to feel that the Harris campaign
Speaker 6: is right because they're acting in a few ways that
Speaker 6: don't seem like someone who thinks that they can tip it.
Speaker 6: Trump has pulled out of four interviews Major interviews CNBC
Speaker 6: sixteen minutes in the last few days. That's kind of
Speaker 6: striking and surprising. For twenty some days to go to
Speaker 6: an election. But the other thing that the big change
Speaker 6: that has happened since Harris came in, and this is
Speaker 6: incredibly static race since you came in, right all these
Speaker 6: people the polls are swinging. No, they're not.
Speaker 3: This is just stable.
Speaker 6: The big changes there's been a convergence in the swing states.
Speaker 6: When Biden was the candidate, he had a path through
Speaker 6: the Midwest and that was it. What's happened since Harris
Speaker 6: is that Arizona, North Carolina, They've all kind of converged.
Speaker 6: And so you do have this odd prospect where what
Speaker 6: is objectively a very close race could become not that
Speaker 6: close in the electoral college on after election day, just
Speaker 6: because all the swing states correlate, and so they carrelate
Speaker 6: for whom That's what no one knows.
Speaker 3: Yeah, that's make sure I was missing something there.
Speaker 5: Okay, you know you bring up polling, and I wanted
Speaker 5: to ask you about this because it's something Paul and
Speaker 5: I have talked about off mic, and that is, there
Speaker 5: are so many polls. We were getting so many of them.
Speaker 5: You look at them in compliment, What did they tell you?
Speaker 5: How do you approach them? I know that there's so
Speaker 5: much skepticism about what they've said in the past, how
Speaker 5: they've been right and wrong. Here we have them at
Speaker 5: such a granular level. So much of what we know
Speaker 5: about these swing states comes from them, and we know
Speaker 5: kind of what issues are most important to voters, how
Speaker 5: much faith do you put into them, and how do
Speaker 5: you look at them kind of holistically.
Speaker 6: Right, So, the polling data in twenty sixteen was actually
Speaker 6: pretty good. The essumate of the popular vote was only
Speaker 6: off by one percent. The polling data in twenty twenty
Speaker 6: was really bad. The estimate of the popular vote was
Speaker 6: off by four percent. What was bad in twenty sixteen
Speaker 6: was the swing state polling, right, which is why the estimates.
Speaker 3: Is two one.
Speaker 6: We're so old, but caveat to that.
Speaker 3: Right now.
Speaker 6: The thing that makes me really question the polls right
Speaker 6: now is how consistent they are. Interesting just polling our
Speaker 6: statistical instruments, normal statistical variation, you should see numbers that
Speaker 6: jump around all the time. Right if Harris is legitimately
Speaker 6: up two percent, let's say she actually is up two percent,
Speaker 6: you should expect to see a fair number of polls
Speaker 6: where Donald Trump is up one We are not seeing that.
Speaker 6: We are just seeing poll after poll after pole coming
Speaker 6: in with roughly the same data over and over again.
Speaker 6: To me, that suggests that the polling companies are hurting
Speaker 6: that nobody wants to explain that.
Speaker 5: What does that mean? When there's hurting polls.
Speaker 6: There's a lot of judgment involved in how you weight
Speaker 6: different populations, how you assess right, are you going to
Speaker 6: use recollections of how people voted four years ago? For example?
Speaker 6: A lot of polls will ask how did you vote
Speaker 6: to four years ago and use that to assess, like,
Speaker 6: you know, to wait the reweight their sample. The problem
Speaker 6: is people don't actually remember that as well as you think.
Speaker 6: If you ask people a few years after the race,
Speaker 6: who did you vote for, on average, more than sixty
Speaker 6: percent will say they voted for the winning side blocked
Speaker 6: it out. This seems unlikely. Yeah, So when you add
Speaker 6: in there are enough subjective factors into polling that it
Speaker 6: just seems to me like the polling companies might be thinking,
Speaker 6: but nobody wants to be embarrassingly wrong, and they're converging
Speaker 6: on a number which you know, like, look, it might
Speaker 6: be right, but it's not normal for it to be
Speaker 6: this type. This consistent across.
Speaker 4: All the polls.
Speaker 3: One of the other shows that I think a lot
Speaker 3: of people are concerned about is we may not know
Speaker 3: the evening of election day who the winner is. We
Speaker 3: may not know the next day or the day after,
Speaker 3: and then oh boy, it could get messy and it's
Speaker 3: two thousand and all over again. But on steroids. What
Speaker 3: is the risk there of that type of scenario developing?
Speaker 6: Quite significant, But it also depends on your definition of noe.
Speaker 6: We did not get the networks who somehow we have
Speaker 6: outsourced the job of calling who wins an election too.
Speaker 6: We did not get the networks to declare until several
Speaker 6: days after the election in twenty twenty. But by eleven
Speaker 6: pm on election night, I was texting people saying one
Speaker 6: hundred percent Biden is going to win, Like I am,
Speaker 6: you know, I will bet my condo right now any
Speaker 6: odds you want Biden's gonna win. So we knew, right,
Speaker 6: we just didn't officially know. Okay, this election I suspect
Speaker 6: will look more like twenty twenty, where we'll have a
Speaker 6: really good sense just because I expect the swing states
Speaker 6: to correlate. I expect you know where what we'd have
Speaker 6: to say is, well, there have to be flips in
Speaker 6: like multiple states to reverse it. That doesn't seem.
Speaker 2: Likely to me.
Speaker 6: But but that doesn't mean that we'll have official knowledge
Speaker 6: because if look, if Harris loses, she's gonna she's gonna
Speaker 6: say I lost them. That will be the end of it.
Speaker 6: But if Trump loses, I don't think there's any chance
Speaker 6: that he'll do anything other than claim it was stolen.
Speaker 6: He'll legally he'll do that, and then we're off to
Speaker 6: the races we really have We really don't have a race, son,
Speaker 6: So what's going to happen after that?
Speaker 5: We have been through this week when both of these
Speaker 5: candidates had made overtures to populations you'd think would not
Speaker 5: be natural supporters and them. So for Kamala Harris, it's
Speaker 5: Republican Republican women voters in Pennsylvania. For Donald Trump, it
Speaker 5: was going down to Miami to speak to this audience
Speaker 5: of Latino voters from the Univision studios there. I'm curious
Speaker 5: sort of what you make of that outreach that they're doing.
Speaker 5: And so when you look at the game plan going
Speaker 5: from here to November, the fifth is the should the
Speaker 5: game be to reach out to those undecided voters, how
Speaker 5: few of them there may be, or is it simply
Speaker 5: to focus on that get out the vote effort to
Speaker 5: make sure that those are committed to these candidates make
Speaker 5: it to the polls on election day.
Speaker 6: True undecided voters last time I was on I said
Speaker 6: three percent true undercided voters is probably under two percent. Well,
Speaker 6: at this point, we're talking about really tiny margins. A
Speaker 6: lot of what people are looking at which seems like
Speaker 6: going to undecided voters. I don't think it's actually about that.
Speaker 6: Right If in North Carolina Harris is going to win
Speaker 6: the cities and lose the rural areas, but if she
Speaker 6: cuts into Trump's margin in the rural areas, the cities
Speaker 6: will take her right in Pennsylvania's you know, it's the
Speaker 6: same thing. So what we're seeing is what my code
Speaker 6: as undecided voters actually to me looks a lot more
Speaker 6: like we're trying to do essentially a covert turnout, get
Speaker 6: out the vote margin in areas where we're going to
Speaker 6: get blown out. We just don't want to get blown
Speaker 6: out by that much.
Speaker 3: So it is I've heard from folks get out the
Speaker 3: vote kind of election. Does one side or the other
Speaker 3: have an advantage in that?
Speaker 6: So from people on the ground in Pennsylvania that I
Speaker 6: talk to. That's where I've been focusing my attention. It
Speaker 6: certainly feels like the Harris operation is a lot more
Speaker 6: sophisticated it. What we've seen is is the Trump campaign
Speaker 6: is essentially outsourced. There get out the vote operation essentially
Speaker 6: with Elon Musk and his superpag. Obviously, that's lavishly funded.
Speaker 6: He puts seventy five million dollars in just just recently there,
Speaker 6: but we don't see them on the ground. I'm not
Speaker 6: totally certain where this money is going. Frankly. The question
Speaker 6: is that the Trump people have a theory of victory,
Speaker 6: and it is not a dumb theory of victory, right.
Speaker 6: This is not the amateur hour campaign we saw twenty
Speaker 6: sixteen and twenty These people know what they're doing, okay,
Speaker 6: And the theory of victory is that they can get
Speaker 6: people who do not normally vote to vote for Donald Trump.
Speaker 6: If they're right about that, then they win.
Speaker 3: This lecture, okay, Gotham, thank you so much, back big
Speaker 3: with you. Yeah, great stuff, Gotham, Maconda. He's a lecture
Speaker 3: of the management practice. Now it's at the Yale School
Speaker 3: of Management.
Speaker 2: Now.
Speaker 3: He walks into Gotham with a very nice three piece suit.
Speaker 3: But he's got this pin on his lapel. It's got
Speaker 3: the American flag, also the flag of Harvard, and you
Speaker 3: walk into your classroom at Yale with that.
Speaker 6: The only time in my life I ever wear Harvard
Speaker 6: gear is when I'm on yellow.
Speaker 3: YEA, All right, stuff there. We'd like to see that
Speaker 3: rivalry still in full tech. That's good to see.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also watch
Speaker 2: us live every weekday on YouTube and always on the
Speaker 2: Bloomberg terminal.
Speaker 3: Well, let's get a sense of this M and A
Speaker 3: business for the remainder this year and kind of what
Speaker 3: the big banks you're looking for next year. Carol Striker
Speaker 3: joins us. She is America's regional head of Deal Advisory
Speaker 3: for KPMG. Carol, thanks so much for joining us here.
Speaker 3: Talk to us about M and A in twenty twenty four,
Speaker 3: how's the business been for Global Wall Street? And then
Speaker 3: we'll talk about next year. But how's twenty four been?
Speaker 7: Yeah, twenty four has been a better year than twenty three.
Speaker 7: We are seeing deals increasing in twenty four. We've seen
Speaker 7: them in preasing, but you know, twenty three with a
Speaker 7: really low year, so it's it's not a robust twenty
Speaker 7: four if you kind of look at the last year
Speaker 7: that deal makers kind of look as the last year
Speaker 7: of normality was twenty and nineteen, and twenty four is
Speaker 7: still lower than twenty nineteen. So better than last year,
Speaker 7: but still not a super robust deal market.
Speaker 5: I'll take the follow up picking up on what Paul said. So,
Speaker 5: looking ahead to twenty twenty five, what in gender's optimism
Speaker 5: in bankers and lawyers in your clients about how the
Speaker 5: market is.
Speaker 3: Going to look.
Speaker 7: Yeah, I think the sentiment around from everyone we're talking to.
Speaker 7: I was with a one hundred and fifty deal maker
Speaker 7: yesterday talking about the M and A market, and the
Speaker 7: sentiment everywhere is that twenty five is going to be
Speaker 7: a more robust year and twenty six. We're talking about
Speaker 7: kind of the next.
Speaker 1: Couple of years.
Speaker 7: And you know, there's a few things that we're looking
Speaker 7: at that are going to be you know, things that
Speaker 7: are headwinds and tailwinds in the deal market. Some of
Speaker 7: the things that are positive, it's interest rates that you
Speaker 7: guys know are coming down and that is an important
Speaker 7: factor in deal making. The election hopefully will be behind us,
Speaker 7: and some certainty will be back into the market, and
Speaker 7: I think that will be something that will also help
Speaker 7: with the M and A market. I think this next quarter,
Speaker 7: the remainder of the year is still going to be
Speaker 7: on the light or side given the election. I think
Speaker 7: what deal makers want is that certainty. And so those
Speaker 7: are some of the things that we're looking at for twenty.
Speaker 3: Five private equity where they in this deal market here?
Speaker 3: I know there's just tons of capital on the sidelines
Speaker 3: for these private equity folks. They're always in fundraising mode,
Speaker 3: it seems, but we haven't seen them maybe back in
Speaker 3: the market and the size. Maybe some of the bankers
Speaker 3: would like to see. Where's the private equity sector as
Speaker 3: a driver?
Speaker 7: Yeah, you're exactly right. There is so much dry powder
Speaker 7: out there. The private equity firms need to put that
Speaker 7: money to work. And I think the thing that is
Speaker 7: most impactful that we see from a private equity perspective
Speaker 7: is the interest rates coming down. So especially those LBOs
Speaker 7: as leveraged by interest rates needing to come down to
Speaker 7: be able to make those deals. A little less costly
Speaker 7: for that cost of capital. And so when we did
Speaker 7: our M and A survey of deal makers, it came
Speaker 7: out very clear that in the first half of twenty five,
Speaker 7: PE is more bullish around having a more robust M
Speaker 7: and A market, driven again by those interest rates. It
Speaker 7: was interesting in our corporate clients in contrast, so that
Speaker 7: they thought it would be the latter part of twenty
Speaker 7: five where they'd be more robust deal market for them.
Speaker 5: I wanted to ask you about regulatory clarity. So you
Speaker 5: mentioned the election at this obstacle. I think for a
Speaker 5: lot of CEOs as they look at the prospects of
Speaker 5: M and A, and I wonder, as you listen to
Speaker 5: these two candidates on the campaign trail, how throw their
Speaker 5: policy on regulation seems to be. So Obviously, we've lived
Speaker 5: through a Trump administration before, and even though Vice President
Speaker 5: Harris has tried to draw a distinction between what her
Speaker 5: presidency would be like compared to the one that she's
Speaker 5: in now with under Joe Biden, do we have a
Speaker 5: good sense of what the regulatory environment would be like
Speaker 5: under each of these candidates.
Speaker 1: Yeah.
Speaker 7: So here's what I would say is that there has
Speaker 7: been increased scrutinity from an antitrust perspective for several years.
Speaker 7: That's not just been within this administration, and I think
Speaker 7: that as we think about the future and what we're
Speaker 7: hearing from our clients is that that scrutiny is not
Speaker 7: going to go away in the next term of whoever's
Speaker 7: in office. I think they're working closely with their lawyers
Speaker 7: to assess what scrutiny might be there for that in
Speaker 7: particular deal in working closely on that, and so that's
Speaker 7: what I would You know, there's not a clear one
Speaker 7: path leads one way and one one path leads another way.
Speaker 3: Carol, If I want to go out and buy a company,
Speaker 3: Who's going to lend me the money because I'm going
Speaker 3: to want to use some leverage to leverage my equity returns.
Speaker 3: Are the banks still there or where am I going
Speaker 3: to get the money?
Speaker 4: Yeah?
Speaker 7: Absolutely, great question. You can only get deals done if
Speaker 7: you've got the money. So a couple thingsly, for those
Speaker 7: that are using debt to finance the acquisition, the banks
Speaker 7: are open. You know, if you rewind gosh, around six
Speaker 7: eight months ago, that was not the case. And so
Speaker 7: there is money out there. It's a little bit more
Speaker 7: expensive than it was, you know, several years ago, but
Speaker 7: it is available, and there's also the opportunity for some
Speaker 7: of our corporates to be using their stock as well
Speaker 7: as they're flushed with cash on their balance sheets as well.
Speaker 3: Let me just ask you.
Speaker 5: You talked about the Federal Reserve and the path of
Speaker 5: rate cutting, and I'm curious to sort of how catalytic
Speaker 5: that's going to be. So we've you know, joked about
Speaker 5: refinancing mortgages and the housing market and all of that
Speaker 5: in this space in particular, how much of a catalyst
Speaker 5: how much did the dam break when you saw the
Speaker 5: FED cut by fifty basis points, just kind of when
Speaker 5: we saw the start of what we anticipate to be
Speaker 5: a cycle of rate cuts.
Speaker 7: Yeah, it's really interesting because when that rate hit cut hit,
Speaker 7: it's also all the election stuff is going on, and
Speaker 7: so it's hard to biper kate, if you will, what's
Speaker 7: happening with the different things interest rates and election because
Speaker 7: oftentimes in election years we see a depressed m and
Speaker 7: a market. That's what we've seen for the last several
Speaker 7: election years. All that being said, your question is around
Speaker 7: those interest rates, and it is a catalyst for M
Speaker 7: and A we haven't seen the DM break if you will.
Speaker 7: We at kpmgr our chief economist is predicting another fifty
Speaker 7: basis points drop twenty five basis points in November twenty
Speaker 7: five in December, and when we look at our M
Speaker 7: and A survey, what our deal makers said is that
Speaker 7: a fifty basis point drop would spur them into doing
Speaker 7: activity like it was in twenty twenty one. Now this
Speaker 7: is deal makers who that's what they do for a living, right, but.
Speaker 5: It is to get back in the game.
Speaker 6: Yes, absolutely.
Speaker 7: I always say it's like a kid asking a kid
Speaker 7: in a candy store if they want a candy, of
Speaker 7: course going to say yes, let's go Carol.
Speaker 3: Are there any sectors or what are the sectors that
Speaker 3: you think might be your clients think might be active
Speaker 3: over the next year or two.
Speaker 7: Well, you know, what we've seen so far is that
Speaker 7: TMT has been a sector that's been extremely busy. On
Speaker 7: the contrast, healthcare has been significantly down. We're starting to
Speaker 7: see that pop up a little bit from a sector perspective.
Speaker 7: But you know, of course, I think there's things around
Speaker 7: our energy, energy needs energy clean energy is another one
Speaker 7: where we're seeing some uptick in the deal market as well.
Speaker 3: Carol, thanks so much for joining us. I really appreciate
Speaker 3: getting your perspective on the global M and A business.
Speaker 3: Twenty four better than twenty three. Expectations twenty five might
Speaker 3: be pretty solid as well. That's certainly what we hear
Speaker 3: from the big investment banks that have reported their earnings
Speaker 3: so far. Carol Striker, she's America's regional head of Deal
Speaker 3: Advisory KPMG. Her clients are the big M and A
Speaker 3: bankers around global Wall Street, so it's good to check
Speaker 3: in with Carol and get a sense of kind of
Speaker 3: where her clients think this business may go.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 2: seven to ten am Eastern on Bloomberg dot com, the
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 2: can also watch us live every weekday on YouTube and
Speaker 2: always on the Bloomberg terminal.