1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,919 Speaker 1: at Bloomberg dot com. Well, US equity indices are very 8 00:00:23,920 --> 00:00:27,120 Speaker 1: close to reattaining the all time high levels as global 9 00:00:27,160 --> 00:00:30,040 Speaker 1: trade tensions received, at least temporarily. To get a sense 10 00:00:30,040 --> 00:00:31,760 Speaker 1: of where we move to next or we go to 11 00:00:31,920 --> 00:00:35,080 Speaker 1: next with the markets, we welcome Christina Hooper. Christina is 12 00:00:35,159 --> 00:00:38,400 Speaker 1: chief Global market strategist for invest Goo. She joins us 13 00:00:38,440 --> 00:00:41,280 Speaker 1: live from the Phoenix Convention Center at the b n 14 00:00:41,400 --> 00:00:44,920 Speaker 1: Y Melon Pershing Insight Conference. Christina, thanks so much for 15 00:00:45,000 --> 00:00:49,199 Speaker 1: being with us. It really does appear that certainly one 16 00:00:49,240 --> 00:00:53,640 Speaker 1: of the main drivers for investors sentiment is trade. Is 17 00:00:53,680 --> 00:00:57,480 Speaker 1: that your sense absolutely and what I would say, more 18 00:00:57,520 --> 00:01:03,320 Speaker 1: specifically economic policy on certainty created by the current tariff 19 00:01:03,360 --> 00:01:06,840 Speaker 1: situation and the threats of more tariffs. So right now 20 00:01:06,840 --> 00:01:11,160 Speaker 1: we're looking at markets that are broadly expecting rate cuts 21 00:01:11,160 --> 00:01:14,520 Speaker 1: that I put that in plural. Before the end of 22 00:01:14,560 --> 00:01:17,319 Speaker 1: this year, PIMCO came out and so that there could 23 00:01:17,319 --> 00:01:21,440 Speaker 1: be a fifty basis point rate cut in July if 24 00:01:21,480 --> 00:01:24,800 Speaker 1: economic conditions deteriorate. Do you agree with that assessment. I 25 00:01:24,840 --> 00:01:28,440 Speaker 1: think that is extremely unlikely. I think the FED wants 26 00:01:28,480 --> 00:01:31,959 Speaker 1: to certainly be very careful and thoughtful about any rate 27 00:01:31,959 --> 00:01:34,600 Speaker 1: cuts it makes, and so what we're more likely to 28 00:01:34,680 --> 00:01:40,399 Speaker 1: see is communication around standing ready to ease. But I 29 00:01:40,440 --> 00:01:42,960 Speaker 1: would be very, very surprised to see a fifty basis 30 00:01:42,959 --> 00:01:46,760 Speaker 1: point rate cut in one fell swoop. So I guess Christina, 31 00:01:46,800 --> 00:01:48,680 Speaker 1: one of the things that Lisa and I discussed back 32 00:01:48,720 --> 00:01:52,000 Speaker 1: and forth is you know, what does or what do 33 00:01:52,120 --> 00:01:55,560 Speaker 1: multiple rate cuts tell us? Does it really suggest that 34 00:01:55,600 --> 00:02:00,640 Speaker 1: this economy perhaps is weaker than maybe the markets are discounting? Well, 35 00:02:00,680 --> 00:02:03,120 Speaker 1: it really all depends on how the FED frames this, 36 00:02:03,320 --> 00:02:06,240 Speaker 1: because keep in mind, we've heard a lot of chatter 37 00:02:06,480 --> 00:02:10,400 Speaker 1: from FED members over the last several months around inflation 38 00:02:10,480 --> 00:02:13,520 Speaker 1: targeting and the idea that we could potentially see the 39 00:02:13,560 --> 00:02:17,200 Speaker 1: FED changing its inflation target raising it so to speak. 40 00:02:17,639 --> 00:02:20,480 Speaker 1: Um that would mean that essentially the FED could cut 41 00:02:20,600 --> 00:02:23,920 Speaker 1: rates without any changing economic conditions and it would be 42 00:02:23,960 --> 00:02:29,359 Speaker 1: a really easy way to ease without causing alarm. So 43 00:02:29,480 --> 00:02:32,560 Speaker 1: if the Fed does not cut rates, what happens to 44 00:02:32,600 --> 00:02:36,239 Speaker 1: equity markets? If the Fed does not cut rates, It's 45 00:02:36,280 --> 00:02:39,120 Speaker 1: all about the language. It's all about what we see 46 00:02:39,160 --> 00:02:43,240 Speaker 1: in the announcement. If they take out the patient language, 47 00:02:43,360 --> 00:02:46,280 Speaker 1: I think that will matter a lot to markets and 48 00:02:46,720 --> 00:02:49,880 Speaker 1: won't cause any kind of sell off because I don't 49 00:02:49,919 --> 00:02:52,360 Speaker 1: know if we're going to see any rate cut in June. 50 00:02:52,440 --> 00:02:54,680 Speaker 1: But it's all about the language and perhaps what we 51 00:02:54,720 --> 00:02:56,679 Speaker 1: see in the dot plot. But I mean, for example, 52 00:02:56,919 --> 00:03:00,480 Speaker 1: because right now markets, if you look at FED funds 53 00:03:00,480 --> 00:03:03,040 Speaker 1: futures contracts, they are except pricing in two and a 54 00:03:03,080 --> 00:03:06,920 Speaker 1: half rate cuts by December. Let's say the Federal Reserve 55 00:03:07,240 --> 00:03:10,160 Speaker 1: signals or just doesn't cut rates at all, or cuts 56 00:03:10,240 --> 00:03:12,520 Speaker 1: rates once. I mean, does that does that's for a 57 00:03:12,560 --> 00:03:15,919 Speaker 1: big sell off. It all depends on how this plays out, right, 58 00:03:15,960 --> 00:03:19,720 Speaker 1: because we can see FED funds futures change quite rapidly, 59 00:03:20,040 --> 00:03:22,520 Speaker 1: and so expectations might change by the end of the year. 60 00:03:22,520 --> 00:03:26,519 Speaker 1: But let's assume in that scenario that Fed funds expectations 61 00:03:26,560 --> 00:03:29,840 Speaker 1: remain the same um FED funds futures remain the same 62 00:03:30,040 --> 00:03:32,320 Speaker 1: in that kind of kind of environment, we would likely 63 00:03:32,360 --> 00:03:36,760 Speaker 1: see disappointment in markets, at least temporarily. So, Christina, one 64 00:03:36,800 --> 00:03:39,000 Speaker 1: thing that I guess that Lisa and I are hearing 65 00:03:39,000 --> 00:03:41,760 Speaker 1: more and more from economists and from strategists that that 66 00:03:41,880 --> 00:03:45,120 Speaker 1: appear on our show is the you know, the expectation 67 00:03:45,200 --> 00:03:49,000 Speaker 1: that maybe mid quite likely to see a recession. Is 68 00:03:49,040 --> 00:03:52,920 Speaker 1: that something you think is reasonable? Well, we're certainly following 69 00:03:52,920 --> 00:03:55,920 Speaker 1: it closely, but from our perspective where we stand today, 70 00:03:55,960 --> 00:03:59,600 Speaker 1: we don't think, um that a recession is the base 71 00:03:59,640 --> 00:04:03,200 Speaker 1: case for now. A lot can happen between now and then, 72 00:04:03,480 --> 00:04:06,760 Speaker 1: and some of it is certainly dependent upon UH trade 73 00:04:06,800 --> 00:04:09,760 Speaker 1: policy and where that goes. But it seems as though 74 00:04:10,040 --> 00:04:14,480 Speaker 1: major central banks stand ready to provide accommodation. We've already 75 00:04:14,520 --> 00:04:17,680 Speaker 1: seen financial conditions ease in just the last few weeks, 76 00:04:17,960 --> 00:04:20,560 Speaker 1: and I would suggest that this is going to be 77 00:04:20,600 --> 00:04:24,120 Speaker 1: an environment where once again UH central banks step in 78 00:04:24,160 --> 00:04:26,919 Speaker 1: and save the day. UH. We could certainly see a 79 00:04:26,960 --> 00:04:30,160 Speaker 1: deceleration in growth, but at this stage it seems unlikely 80 00:04:30,240 --> 00:04:33,600 Speaker 1: that we actually see a recession by mid Christina, are 81 00:04:33,600 --> 00:04:36,520 Speaker 1: you seeing your clients making big allocation shifts at this point? 82 00:04:37,279 --> 00:04:41,200 Speaker 1: We are not, um clients understand, and what we stress 83 00:04:41,360 --> 00:04:44,600 Speaker 1: is taking that long term perspective. Now, that doesn't mean 84 00:04:44,640 --> 00:04:48,680 Speaker 1: there aren't small tactical shifts, and I certainly think that 85 00:04:48,760 --> 00:04:52,360 Speaker 1: what we're likely to see going forward is continued to 86 00:04:52,480 --> 00:04:56,200 Speaker 1: focus on a growth tilt within US equities, and I'm 87 00:04:56,200 --> 00:04:59,520 Speaker 1: hoping that will also see something of a tilt towards 88 00:04:59,560 --> 00:05:03,440 Speaker 1: more income producing asset classes, given that we're likely to 89 00:05:03,440 --> 00:05:05,600 Speaker 1: be in a lower for longer environment. We're talking high 90 00:05:05,600 --> 00:05:09,000 Speaker 1: old bonds, well, not necessarily high yeld bonds specifically, but 91 00:05:09,160 --> 00:05:12,120 Speaker 1: an array of higher yielding asset classes that would include 92 00:05:12,279 --> 00:05:16,440 Speaker 1: high yield bonds, um munis, including higher yielding munis, but 93 00:05:16,680 --> 00:05:21,200 Speaker 1: also convertible bonds as well as dividend paying stocks. Sometimes 94 00:05:21,200 --> 00:05:23,320 Speaker 1: they get overlooked, and I think many of them have 95 00:05:23,440 --> 00:05:26,800 Speaker 1: been overlooked in the recent rally. So, Christina, we are 96 00:05:26,839 --> 00:05:29,880 Speaker 1: more than ten years into this economic cycle. So as 97 00:05:29,920 --> 00:05:33,559 Speaker 1: you think about where you're allocating money in the equity markets, 98 00:05:33,600 --> 00:05:36,479 Speaker 1: are there certain sectors that, just given where we are 99 00:05:36,520 --> 00:05:39,960 Speaker 1: in the cycle, appeal more to you than some others. Well, 100 00:05:40,000 --> 00:05:45,080 Speaker 1: we see this cycle continuing, although of course decelerating, and 101 00:05:45,160 --> 00:05:49,800 Speaker 1: so that would suggest uh and overweighting towards the growth 102 00:05:49,880 --> 00:05:52,560 Speaker 1: style in this kind of environment, and so I would 103 00:05:52,600 --> 00:05:56,719 Speaker 1: favor technology and to a certain extent, healthcare names as 104 00:05:56,760 --> 00:05:59,240 Speaker 1: being quite attractive. Now. Of course, that doesn't mean there 105 00:05:59,279 --> 00:06:03,200 Speaker 1: aren't headwind for those sectors. In particular, tech is likely 106 00:06:03,240 --> 00:06:06,359 Speaker 1: to face more regulation. But this is more of um uh, 107 00:06:06,400 --> 00:06:10,600 Speaker 1: you know, two year to three year outlook, um, And 108 00:06:10,880 --> 00:06:13,480 Speaker 1: right now tech looks attractive despite some of the head 109 00:06:13,480 --> 00:06:16,040 Speaker 1: winds we could see. So I just I'm curious, given 110 00:06:16,040 --> 00:06:19,120 Speaker 1: the fact that you're bullish on risk assets over the 111 00:06:19,160 --> 00:06:22,440 Speaker 1: near to long term or certainly the even the near term, 112 00:06:22,560 --> 00:06:25,080 Speaker 1: do you think that treasury yields are too low? Tenure 113 00:06:25,160 --> 00:06:28,400 Speaker 1: yields right now two point one per cent, and if so, 114 00:06:28,440 --> 00:06:31,840 Speaker 1: how much could they rise? Well, treasury yields UM are 115 00:06:31,920 --> 00:06:35,599 Speaker 1: definitely low relative to where they have been, but that 116 00:06:35,640 --> 00:06:37,920 Speaker 1: doesn't mean that that's going to change. And what it 117 00:06:38,000 --> 00:06:41,279 Speaker 1: does mean, though, is that it makes equities look more attractive. 118 00:06:41,320 --> 00:06:44,240 Speaker 1: It makes dividend paying stocks look more attractive. So I 119 00:06:44,279 --> 00:06:47,680 Speaker 1: think we could continue in this situation for a while, UM, 120 00:06:47,720 --> 00:06:51,280 Speaker 1: because I think the bond market is accurately reflecting the 121 00:06:51,320 --> 00:06:53,719 Speaker 1: fear in the market that we're not seeing being reflected 122 00:06:53,720 --> 00:06:57,960 Speaker 1: in stocks. Christina has the global trade tensions. I guess 123 00:06:58,000 --> 00:07:00,880 Speaker 1: the escalation of some trade tensions is that caused you 124 00:07:00,880 --> 00:07:03,320 Speaker 1: guys to rethink maybe your allocation to emerging markets. Is 125 00:07:03,360 --> 00:07:05,760 Speaker 1: it just too risky to to maybe be a little 126 00:07:05,760 --> 00:07:09,240 Speaker 1: bit too aggressive there. Well, what it's encouraging us to 127 00:07:09,320 --> 00:07:12,040 Speaker 1: do and what we've what we've been advocating for some 128 00:07:12,080 --> 00:07:15,320 Speaker 1: times to be very discerning and emerging markets. There's no 129 00:07:15,400 --> 00:07:19,000 Speaker 1: reason to change your overall waiting to emerging markets, but 130 00:07:19,040 --> 00:07:22,720 Speaker 1: it's important to be selective within emerging markets, focusing on 131 00:07:22,800 --> 00:07:26,440 Speaker 1: those areas that are actually benefiting UM from what's going 132 00:07:26,520 --> 00:07:30,440 Speaker 1: on in in uh the larger macro environment, including trade wars, 133 00:07:30,640 --> 00:07:34,040 Speaker 1: as well as the FED turning more accommodative. UH. So 134 00:07:34,120 --> 00:07:37,240 Speaker 1: I would favor in general Asia e M in this environment. 135 00:07:37,840 --> 00:07:40,560 Speaker 1: Christina Hooper, thank you so much as always for being 136 00:07:40,600 --> 00:07:43,240 Speaker 1: with us. We love getting your insights. Christina Hooper is 137 00:07:43,320 --> 00:07:46,280 Speaker 1: chief Global Market Strategistic invest Go, which overseas nearly a 138 00:07:46,320 --> 00:08:06,119 Speaker 1: trillion dollars. Facebook uncovered emails that may indicate the chief 139 00:08:06,160 --> 00:08:12,240 Speaker 1: executive officer Mark Zuckeenberg. Zuckenberg knew of quote questionable privacy practices. 140 00:08:12,480 --> 00:08:16,960 Speaker 1: That comes as scrutiny continues to mount with respect to 141 00:08:17,080 --> 00:08:20,600 Speaker 1: big tech and their privacy as well as just UH 142 00:08:20,720 --> 00:08:24,440 Speaker 1: their size issues, their dominance of different markets. This is 143 00:08:24,480 --> 00:08:27,240 Speaker 1: definitely one of the focuses here at the b n 144 00:08:27,400 --> 00:08:31,280 Speaker 1: Y Mel and Pershing Insight Conference, especially given the fact 145 00:08:31,920 --> 00:08:35,640 Speaker 1: that big tech has accounted for a good proportion of 146 00:08:35,679 --> 00:08:38,920 Speaker 1: the incredible rally that we've seen in US equities over 147 00:08:38,920 --> 00:08:42,520 Speaker 1: the past few years. Joining me here on site, Phil Orlando, 148 00:08:42,800 --> 00:08:45,880 Speaker 1: chief equity market strategist and head of Client portfolio Management 149 00:08:45,880 --> 00:08:50,960 Speaker 1: that Federated Investors overseeing about five billion dollars in assets. 150 00:08:51,120 --> 00:08:54,880 Speaker 1: You are going to be on a panel delayed gratification? 151 00:08:55,480 --> 00:08:58,600 Speaker 1: Are we going to see delayed gratification for all of 152 00:08:58,640 --> 00:09:03,160 Speaker 1: the naysayers of big tech? How much do these rising 153 00:09:03,720 --> 00:09:07,880 Speaker 1: issues of regulation around big tech cloud your view or 154 00:09:07,960 --> 00:09:11,400 Speaker 1: affect your view when it comes to how to allocate 155 00:09:11,440 --> 00:09:14,360 Speaker 1: two tech shares? I think we could have some chopped 156 00:09:14,440 --> 00:09:17,480 Speaker 1: this summer, and certainly this technology issue that has just 157 00:09:17,559 --> 00:09:20,959 Speaker 1: popped up on the wires could certainly contribute to that. 158 00:09:21,080 --> 00:09:24,880 Speaker 1: You look at UH sort of the political environment that's 159 00:09:24,920 --> 00:09:27,160 Speaker 1: going on in Washington right now. You're hearing a lot 160 00:09:27,200 --> 00:09:30,680 Speaker 1: of populism in terms of technology is getting too big. 161 00:09:30,720 --> 00:09:33,960 Speaker 1: It's unregulated. We need to break them up, put some 162 00:09:34,040 --> 00:09:37,360 Speaker 1: more laws in place. UH. And then you think about 163 00:09:37,400 --> 00:09:40,040 Speaker 1: the fact that we've got the democratic primaries coming up, 164 00:09:40,080 --> 00:09:41,960 Speaker 1: I think the right at the end of this month, 165 00:09:42,880 --> 00:09:46,719 Speaker 1: I'm absolutely positive this will be a topic of discussion 166 00:09:47,000 --> 00:09:49,040 Speaker 1: in terms of the Q and A with the candidates 167 00:09:49,080 --> 00:09:54,360 Speaker 1: and the and the moderators. So the the noise, the fewer, 168 00:09:54,679 --> 00:09:57,840 Speaker 1: the headline risk associated with this issue is likely to 169 00:09:57,880 --> 00:10:01,560 Speaker 1: get bigger rather than smaller over the next couple of months. 170 00:10:01,760 --> 00:10:04,520 Speaker 1: Our view is maybe the you know, the market UH 171 00:10:04,840 --> 00:10:07,880 Speaker 1: could could have some chop over the over the summer months, 172 00:10:07,880 --> 00:10:10,800 Speaker 1: and and you know, the technology issue could certainly be 173 00:10:10,920 --> 00:10:14,280 Speaker 1: one of the issues that contributes to that chop. So, Phil, 174 00:10:14,360 --> 00:10:17,000 Speaker 1: one of the things that's clearly been UH, you know, 175 00:10:17,080 --> 00:10:20,679 Speaker 1: impacting markets over the last several months is trade concerns, 176 00:10:20,720 --> 00:10:23,760 Speaker 1: first with China UH and then with Mexico, and of 177 00:10:23,800 --> 00:10:27,920 Speaker 1: course the Mexico trade issues very tightly tied to immigration 178 00:10:28,480 --> 00:10:30,640 Speaker 1: UH and how that should evolve. I know you recently 179 00:10:30,640 --> 00:10:33,800 Speaker 1: put out a note on how you think UH immigration 180 00:10:34,280 --> 00:10:37,360 Speaker 1: UM rules should be amended. Give us your thoughts on that. 181 00:10:38,400 --> 00:10:41,040 Speaker 1: So the immigration issue is has been a hot button 182 00:10:41,040 --> 00:10:43,320 Speaker 1: issue for me for a couple of years now. And 183 00:10:43,320 --> 00:10:46,360 Speaker 1: and uh, the note that I just put out this week, 184 00:10:46,800 --> 00:10:49,440 Speaker 1: uh looks at a couple of the big macro issues. 185 00:10:49,480 --> 00:10:51,920 Speaker 1: On the one hand, you just got the Jolts report 186 00:10:51,920 --> 00:10:54,400 Speaker 1: on Monday, the JULTU reports pretty good, seven and a 187 00:10:54,400 --> 00:10:57,880 Speaker 1: half million new jobs. We've got more new jobs that 188 00:10:57,920 --> 00:11:00,320 Speaker 1: we're creating in this country then we've got them ployed 189 00:11:00,320 --> 00:11:02,960 Speaker 1: people on the sidelines that could possibly fill them, all right, 190 00:11:03,320 --> 00:11:05,800 Speaker 1: So that's a good thing and a bad thing. On 191 00:11:05,840 --> 00:11:10,080 Speaker 1: the other hand, our for our organic fertility in this 192 00:11:10,200 --> 00:11:14,079 Speaker 1: country is at a cyclical trough. Are are women are 193 00:11:14,200 --> 00:11:18,079 Speaker 1: only having an average of one point seven children per woman? 194 00:11:18,200 --> 00:11:21,400 Speaker 1: That that's half of what the rate of fertility was 195 00:11:21,440 --> 00:11:23,600 Speaker 1: when I was born in the fifties. I love the 196 00:11:23,600 --> 00:11:27,320 Speaker 1: clinical terms for this, the organic fertility rates people having 197 00:11:27,360 --> 00:11:30,480 Speaker 1: babies go on. Yeah, And and we understand what's going on. 198 00:11:30,559 --> 00:11:33,199 Speaker 1: Women are focused more in their careers and their education, 199 00:11:33,360 --> 00:11:35,280 Speaker 1: and and with a trillion and a half dollars of 200 00:11:35,320 --> 00:11:37,680 Speaker 1: student loan dead couples, I think are making a conscious 201 00:11:37,720 --> 00:11:41,040 Speaker 1: decision to have smaller families rather than larger families. It's expensive. 202 00:11:43,240 --> 00:11:45,640 Speaker 1: I know, my kids, my youngest as a junior at 203 00:11:45,679 --> 00:11:51,680 Speaker 1: Penn State right now. So I'm well, exactly exactly. So, 204 00:11:51,679 --> 00:11:55,360 Speaker 1: So the point is that that we're we're producing less kids, 205 00:11:56,000 --> 00:11:58,920 Speaker 1: and yet the labor market is strong enough that we 206 00:11:59,000 --> 00:12:01,560 Speaker 1: need more workers. The solution, the way to bridge that 207 00:12:01,600 --> 00:12:05,360 Speaker 1: gap is have an intelligent immigration policy, and and intelligence 208 00:12:05,400 --> 00:12:07,560 Speaker 1: is sort of the key word here. That is an 209 00:12:07,600 --> 00:12:11,720 Speaker 1: oxymoron when when referring to our leaders in Washington right now, 210 00:12:11,920 --> 00:12:13,400 Speaker 1: they can't get out of their way. There's like the 211 00:12:13,440 --> 00:12:17,520 Speaker 1: Keystone Cops trying to solve what should be a slam 212 00:12:17,559 --> 00:12:20,679 Speaker 1: dunk issue in terms of making sure that we've got 213 00:12:20,800 --> 00:12:23,920 Speaker 1: enough qualified workers coming in from from outside of the 214 00:12:23,920 --> 00:12:26,040 Speaker 1: country in order to fill these jobs. So I think 215 00:12:26,040 --> 00:12:29,200 Speaker 1: it's a legitimate question. It's one that that's been bothering me. 216 00:12:29,280 --> 00:12:31,360 Speaker 1: I I so much so that I probably read about 217 00:12:31,360 --> 00:12:33,640 Speaker 1: it every six months, you know. So it uh and 218 00:12:33,679 --> 00:12:37,080 Speaker 1: so I wrote about it this week. So aside from 219 00:12:37,200 --> 00:12:39,640 Speaker 1: fertility issues, and this is actually a very important one. 220 00:12:39,640 --> 00:12:40,880 Speaker 1: I don't mean to diminish it. I mean it's one 221 00:12:40,920 --> 00:12:42,920 Speaker 1: of the major drivers that people point to in Japan 222 00:12:42,960 --> 00:12:46,400 Speaker 1: and why that abum. But I want to shift to 223 00:12:46,600 --> 00:12:50,079 Speaker 1: one other area that's stagnant, and that is a US inflation. 224 00:12:50,200 --> 00:12:52,160 Speaker 1: It does not appear to be going up, and we 225 00:12:52,240 --> 00:12:55,760 Speaker 1: are seeing up markets price in increasingly. The Federal Reserve 226 00:12:56,040 --> 00:13:00,160 Speaker 1: will cut rates next week and certainly thereafter. Do you 227 00:13:00,240 --> 00:13:03,920 Speaker 1: think that's the right call? Inflation is benign? There's no question. 228 00:13:04,000 --> 00:13:07,480 Speaker 1: The core Personal Consumption Expenditure Index, which is the FEDS 229 00:13:08,200 --> 00:13:11,120 Speaker 1: preferred measure of inflation, is sitting at one point six 230 00:13:11,160 --> 00:13:13,760 Speaker 1: percent as of the latest reading. Then we got a 231 00:13:13,760 --> 00:13:16,840 Speaker 1: CPI number this morning. I think the core PC, the 232 00:13:16,920 --> 00:13:19,440 Speaker 1: core c p I year a year, came down two 233 00:13:19,440 --> 00:13:22,360 Speaker 1: percent even, Is that right, Lisa, Yeah, so it was 234 00:13:22,840 --> 00:13:25,719 Speaker 1: core I'll look it up. I think it was two percent. Now, 235 00:13:25,720 --> 00:13:28,319 Speaker 1: the spread the relationship between the PC and the CPI 236 00:13:28,400 --> 00:13:32,160 Speaker 1: tends to be about a half percent. So that's consistent 237 00:13:31,320 --> 00:13:35,319 Speaker 1: with Okay, that's consistent with the one point six pc 238 00:13:35,440 --> 00:13:39,040 Speaker 1: numbers we are now. The market, I think, has built 239 00:13:39,120 --> 00:13:41,840 Speaker 1: up in its mind that that inflation is too low 240 00:13:41,920 --> 00:13:43,400 Speaker 1: and that the Fed is going to ride to the 241 00:13:43,440 --> 00:13:46,240 Speaker 1: rescue at next week's f O m C meeting and 242 00:13:46,280 --> 00:13:49,560 Speaker 1: start a rate cutting cycle. We disagree with that, and 243 00:13:49,600 --> 00:13:52,480 Speaker 1: I think if, if, if we're right, that the Fed 244 00:13:52,640 --> 00:13:55,280 Speaker 1: is not going to start cutting rates next week. That 245 00:13:55,400 --> 00:13:58,080 Speaker 1: could represent some disappointment for the market, because the market 246 00:13:58,120 --> 00:14:00,800 Speaker 1: has rallied pretty strongly here over the a couple of weeks. 247 00:14:00,960 --> 00:14:02,800 Speaker 1: And there are a couple of issues. So issue number 248 00:14:02,800 --> 00:14:05,240 Speaker 1: one is that inflation. I don't think it's a problem. 249 00:14:05,240 --> 00:14:08,000 Speaker 1: I think it's benign, but I don't think we're risking 250 00:14:08,120 --> 00:14:12,080 Speaker 1: a deflation or disinflationary sort of the environment. Point number two, 251 00:14:12,120 --> 00:14:15,640 Speaker 1: We've got the G twenty meeting coming up in Osaka, Japan, 252 00:14:15,720 --> 00:14:17,480 Speaker 1: at the end of the month. That's a very important 253 00:14:17,520 --> 00:14:20,880 Speaker 1: meeting because we're expecting that she and Trump are gonna 254 00:14:20,920 --> 00:14:24,360 Speaker 1: get together, uh and and you know, shake hands and 255 00:14:24,360 --> 00:14:26,800 Speaker 1: and have a nice conversation, much like they did in 256 00:14:26,840 --> 00:14:29,560 Speaker 1: Buenos Aires last year. And what that will do is 257 00:14:29,600 --> 00:14:33,960 Speaker 1: not create a deal, but allow the the the beginning 258 00:14:34,120 --> 00:14:37,160 Speaker 1: of a series of conversations between our minions and their 259 00:14:37,200 --> 00:14:40,760 Speaker 1: minions too. I think get a trade deal back on track, 260 00:14:41,360 --> 00:14:44,400 Speaker 1: let's say by Thanksgiving. Uh. And then the third issue 261 00:14:44,560 --> 00:14:46,680 Speaker 1: is that that I wrote about this last week. The 262 00:14:47,160 --> 00:14:50,000 Speaker 1: job's number we saw last Friday was terrible, and everyone's 263 00:14:50,000 --> 00:14:52,240 Speaker 1: freaking out that we're going into recession. And I don't 264 00:14:52,240 --> 00:14:54,400 Speaker 1: think that's the case. I think we had a bad number. 265 00:14:54,640 --> 00:14:56,240 Speaker 1: I think it's an aberrant number, and I think the 266 00:14:56,280 --> 00:14:59,640 Speaker 1: FED would be prudent to wait for another job's report 267 00:14:59,760 --> 00:15:04,440 Speaker 1: or who before they they change policy dramatically. So my 268 00:15:04,520 --> 00:15:07,680 Speaker 1: best guess is a cut from the FED, maybe at 269 00:15:07,680 --> 00:15:11,000 Speaker 1: the July thirty one meeting at the earliest, and I 270 00:15:11,040 --> 00:15:13,560 Speaker 1: think the market may be disappointed next week. What FED 271 00:15:13,640 --> 00:15:17,400 Speaker 1: should do next week is take the dot off the 272 00:15:17,440 --> 00:15:20,840 Speaker 1: board and then give us some happy talk about needing 273 00:15:20,840 --> 00:15:22,680 Speaker 1: to come in, wanting to come in if they need 274 00:15:22,680 --> 00:15:25,440 Speaker 1: to later in the cycle. Very good, Phil Orlando, Thank 275 00:15:25,480 --> 00:15:27,760 Speaker 1: you so much for joining us. Phil Orlando, chief equity 276 00:15:27,800 --> 00:15:48,800 Speaker 1: market strategist ahead of client portfolio management from Federated Investors. Well, 277 00:15:48,840 --> 00:15:52,280 Speaker 1: the prospect of the U s slapping tariffs on Mexican 278 00:15:52,320 --> 00:15:55,080 Speaker 1: goods is off the table for now, but it does 279 00:15:55,080 --> 00:15:59,720 Speaker 1: appear that President Trump's patients with Mexico hinges on what 280 00:16:00,040 --> 00:16:03,520 Speaker 1: may be an undeliverable promise, and that is to reduce 281 00:16:03,600 --> 00:16:06,760 Speaker 1: some of the stream of immigration UH that the US 282 00:16:06,840 --> 00:16:09,920 Speaker 1: is seeing at its southern border. Here to explain more 283 00:16:10,000 --> 00:16:12,400 Speaker 1: about this is Josh wind Grove, a White House reporter 284 00:16:12,480 --> 00:16:15,560 Speaker 1: joining us from Washington, d C. Josh, can you give 285 00:16:15,640 --> 00:16:18,640 Speaker 1: us a sense of how much President Trump is sort 286 00:16:18,680 --> 00:16:21,720 Speaker 1: of watching the flow of migration at the border in 287 00:16:21,800 --> 00:16:23,840 Speaker 1: order to gauge whether or not to ramp up the 288 00:16:23,920 --> 00:16:27,520 Speaker 1: rhetoric here with Mexico. I mean, he he has indicated 289 00:16:27,600 --> 00:16:29,920 Speaker 1: that it is all about that, and that if those 290 00:16:30,040 --> 00:16:32,680 Speaker 1: numbers don't go down it was a hundred and thirty 291 00:16:32,760 --> 00:16:36,280 Speaker 1: three thousand apprehensions in May at the US Mexico border, 292 00:16:36,720 --> 00:16:39,480 Speaker 1: then he's going to reserve the right to essentially do more, 293 00:16:39,880 --> 00:16:45,760 Speaker 1: including maybe unsuspend those tariff threats. And we seem primed 294 00:16:46,160 --> 00:16:48,040 Speaker 1: to kind of come to a head on it again, 295 00:16:48,120 --> 00:16:49,600 Speaker 1: because of course there's a lot of reasons that the 296 00:16:49,680 --> 00:16:52,720 Speaker 1: number is so high, and even those close to the 297 00:16:52,720 --> 00:16:55,920 Speaker 1: presidents say that it's not there's no way that Mexico 298 00:16:56,000 --> 00:16:59,160 Speaker 1: can do it on its own. Is a mix of factors, 299 00:16:59,160 --> 00:17:02,880 Speaker 1: and Trump supporters would say that does include the need 300 00:17:02,920 --> 00:17:06,400 Speaker 1: for changes in Congress. Refugee advocates would say it also 301 00:17:06,440 --> 00:17:10,800 Speaker 1: includes addressing the root causes of the unrest in Central 302 00:17:10,840 --> 00:17:13,280 Speaker 1: America that's sending these migrants on the road in the 303 00:17:13,359 --> 00:17:17,560 Speaker 1: first place. So, Josh, is there any expectation that the 304 00:17:17,640 --> 00:17:20,800 Speaker 1: plans that Mexico has initiated in terms of sending troops 305 00:17:20,800 --> 00:17:25,040 Speaker 1: to its southern border. Can meaningfully have an effect. Yeah, 306 00:17:25,080 --> 00:17:27,440 Speaker 1: I think most people think it would meaningful have an effect. 307 00:17:27,520 --> 00:17:31,199 Speaker 1: I spoke yesterday with Barack Obama's former ambassador to Mexico, 308 00:17:31,240 --> 00:17:34,720 Speaker 1: who thought it was a good framework. You know, everyone thinks, 309 00:17:34,720 --> 00:17:36,920 Speaker 1: I think that this might be a good step. It's 310 00:17:36,920 --> 00:17:40,320 Speaker 1: a question more of is it enough to really cut 311 00:17:40,359 --> 00:17:42,919 Speaker 1: down that number? A hundred thirty three thousand is more 312 00:17:42,960 --> 00:17:46,320 Speaker 1: than triple the same month a year ago. And I 313 00:17:46,320 --> 00:17:48,679 Speaker 1: guess time will tell. One wrinkle on this though, is 314 00:17:48,680 --> 00:17:52,080 Speaker 1: these numbers normally fall in the summertime. It's hot. People 315 00:17:52,119 --> 00:17:54,399 Speaker 1: don't want to be, you know, walking a long distance 316 00:17:54,400 --> 00:17:57,320 Speaker 1: in the United States as much. So if we do 317 00:17:57,400 --> 00:17:59,960 Speaker 1: see those numbers drop, it could simply be be because 318 00:18:00,000 --> 00:18:03,040 Speaker 1: as a seasonality. And then the question is, does take 319 00:18:03,080 --> 00:18:04,800 Speaker 1: credit for that and you know, call his plan to 320 00:18:04,840 --> 00:18:07,600 Speaker 1: win and move on? Uh? And even if he does 321 00:18:07,640 --> 00:18:10,560 Speaker 1: do that, when they start rising again traditionally in the fall, 322 00:18:10,680 --> 00:18:13,440 Speaker 1: as one would expect, does he get angry? Does he 323 00:18:13,520 --> 00:18:16,639 Speaker 1: call it Mexicogan and say you're not doing enough? So, Josh, 324 00:18:16,680 --> 00:18:18,800 Speaker 1: the reason why markets are so focused on that, and 325 00:18:18,800 --> 00:18:21,439 Speaker 1: that's certainly one of the questions here at the b 326 00:18:21,560 --> 00:18:24,280 Speaker 1: N Y Melon Pershing's inside conference point N team, where 327 00:18:24,320 --> 00:18:27,320 Speaker 1: we are in Phoenix. The reason why people are focused 328 00:18:27,320 --> 00:18:30,320 Speaker 1: on this is because US trade with Mexico is so 329 00:18:30,440 --> 00:18:34,560 Speaker 1: fundamental to certain industries, in particularly the auto industry. I'm 330 00:18:34,640 --> 00:18:37,879 Speaker 1: just wondering how companies can even make plans right now. 331 00:18:37,920 --> 00:18:41,240 Speaker 1: I mean, basically, given that this all kind of hinges 332 00:18:41,480 --> 00:18:44,920 Speaker 1: on a flow of migration here, what are the prospects 333 00:18:45,119 --> 00:18:47,119 Speaker 1: for the U. S m c A to get past 334 00:18:47,400 --> 00:18:49,920 Speaker 1: and some sort of longer lasting deal to give people 335 00:18:49,960 --> 00:18:52,480 Speaker 1: conviction at this point? Yeah, I mean you raise a 336 00:18:52,520 --> 00:18:54,479 Speaker 1: great point. Let me try to do with one point one. 337 00:18:54,760 --> 00:18:57,560 Speaker 1: The scale of this is really difficult to overstate. Aside 338 00:18:57,560 --> 00:18:59,679 Speaker 1: from China, the US buys more goods from Mexico than 339 00:18:59,720 --> 00:19:02,520 Speaker 1: any the country. A five percent tariff across the board 340 00:19:02,520 --> 00:19:04,600 Speaker 1: would affect a ton of stuff, and it would also 341 00:19:04,600 --> 00:19:06,480 Speaker 1: affect a ton of stuff that crosses the border a 342 00:19:06,520 --> 00:19:09,160 Speaker 1: bunch of times, like an auto production as you mentioned, 343 00:19:09,359 --> 00:19:11,840 Speaker 1: So that tariff could compound pretty quickly in some of 344 00:19:11,840 --> 00:19:14,080 Speaker 1: these companies to get into the weeds a bit a bit. 345 00:19:14,280 --> 00:19:16,280 Speaker 1: Don't even have systems set up like the way they 346 00:19:16,280 --> 00:19:19,960 Speaker 1: collect tariffs as his own you know, the whole gauntlet 347 00:19:20,000 --> 00:19:22,040 Speaker 1: to run, you can imagine. And so if you've never 348 00:19:22,119 --> 00:19:24,000 Speaker 1: been paying any you you you don't even know where 349 00:19:24,000 --> 00:19:28,399 Speaker 1: to begin. So the potential headache for exporters, importers the 350 00:19:28,440 --> 00:19:32,280 Speaker 1: economy is difficult to overstate. On the other side of 351 00:19:32,480 --> 00:19:35,439 Speaker 1: the President simply likes tariffs. He believes that they are 352 00:19:35,480 --> 00:19:38,600 Speaker 1: both an effective tool in negotiation and he believes that 353 00:19:38,640 --> 00:19:41,359 Speaker 1: they're an effective thing generally. So I don't think you 354 00:19:41,359 --> 00:19:43,879 Speaker 1: would ever rule out the chance that he would do it. 355 00:19:44,000 --> 00:19:46,400 Speaker 1: He does want that U. S m C a trade deal. 356 00:19:46,680 --> 00:19:49,119 Speaker 1: A lot of analysts think it's very difficult to imagine 357 00:19:49,400 --> 00:19:52,359 Speaker 1: the Mexican government ratifying that deal. Is they still have 358 00:19:52,440 --> 00:19:54,560 Speaker 1: to do. Of course, Congress also needs to ratify it 359 00:19:54,880 --> 00:19:57,960 Speaker 1: if those tariffs are in place, So maybe we'll see 360 00:19:57,960 --> 00:20:00,280 Speaker 1: if Congress can move on in the summer. So, Josh, 361 00:20:00,280 --> 00:20:03,880 Speaker 1: you mentioned that hundred thirty thousand number of crossings recently. 362 00:20:04,000 --> 00:20:08,760 Speaker 1: Is there a number that the Trump administration would find acceptable? Um, 363 00:20:08,840 --> 00:20:11,120 Speaker 1: is there something we should be looking for? Well, yeah, 364 00:20:11,119 --> 00:20:12,919 Speaker 1: it's a good question. I mean, they were we were 365 00:20:12,920 --> 00:20:15,040 Speaker 1: down sort of the fifty thousand range just at the 366 00:20:15,040 --> 00:20:16,840 Speaker 1: beginning of the year. I think if they got it 367 00:20:16,840 --> 00:20:19,280 Speaker 1: back there, they'd be happy to claim victory. It's also 368 00:20:19,359 --> 00:20:21,640 Speaker 1: noteworthy to say that this isn't the highest it's ever been. 369 00:20:22,240 --> 00:20:25,480 Speaker 1: Diane fine Scene, a Democrat from California's noted this in 370 00:20:25,520 --> 00:20:28,960 Speaker 1: a hearing yesterday. Was around one point six million coming 371 00:20:28,960 --> 00:20:32,280 Speaker 1: around across the border annually, uh in and around two 372 00:20:32,400 --> 00:20:34,960 Speaker 1: thousand Right now, we're on pace or nine hundred thousand, 373 00:20:35,000 --> 00:20:37,399 Speaker 1: maybe a million, so a high number, higher than in 374 00:20:37,440 --> 00:20:40,800 Speaker 1: recent years, much higher than in recent years, still fairly 375 00:20:40,960 --> 00:20:43,879 Speaker 1: well below the highs that the US has scene in 376 00:20:44,040 --> 00:20:47,840 Speaker 1: the past. So I guess that I'm wondering what are 377 00:20:47,840 --> 00:20:51,200 Speaker 1: we looking for going forward in terms of some kind 378 00:20:51,200 --> 00:20:54,680 Speaker 1: of guidance of the progress being made here. I think 379 00:20:54,720 --> 00:20:58,399 Speaker 1: all I should be in July on that June number. 380 00:20:59,000 --> 00:21:02,879 Speaker 1: Uh The US releases CDP releases annual or sort of 381 00:21:02,880 --> 00:21:07,159 Speaker 1: monthly excuse me, monthly numbers of apprehensions at the border. 382 00:21:07,240 --> 00:21:10,160 Speaker 1: If that June number is, you know, fair a bit 383 00:21:10,200 --> 00:21:13,560 Speaker 1: lower than one thirties three, that's probably a good sign. 384 00:21:13,720 --> 00:21:16,719 Speaker 1: If it is higher than, you know, I think all 385 00:21:16,800 --> 00:21:18,920 Speaker 1: eyes will be on the President to react. And if 386 00:21:18,960 --> 00:21:20,480 Speaker 1: it is lower and we get through a summer and 387 00:21:20,640 --> 00:21:23,320 Speaker 1: we don't hear much about this again, investors might want 388 00:21:23,320 --> 00:21:26,160 Speaker 1: to look again back and if that number starts rising 389 00:21:26,160 --> 00:21:28,680 Speaker 1: in the fall, Traditionally, as I said, fall the weather 390 00:21:28,680 --> 00:21:31,960 Speaker 1: gets a little more reasonable people, those numbers tend to 391 00:21:32,080 --> 00:21:35,640 Speaker 1: rise again. Regardless of these measures, those numbers could rise again, 392 00:21:35,680 --> 00:21:37,280 Speaker 1: in which case we could be back to square one. 393 00:21:37,840 --> 00:21:40,080 Speaker 1: Josh Wyn Grove, thank you so much. Josh wyn Grove 394 00:21:40,240 --> 00:21:44,040 Speaker 1: is a White House reporter for Bloomberg News, reporting from Washington, 395 00:21:44,160 --> 00:22:02,199 Speaker 1: d C. It is going to reach more than a 396 00:22:02,280 --> 00:22:04,960 Speaker 1: hundred and five degrees where we are, which is the 397 00:22:04,960 --> 00:22:08,120 Speaker 1: Phoenix Convention Center at b and Y Melon Pershing Insights 398 00:22:08,160 --> 00:22:12,879 Speaker 1: Conference for nineteen and one. Area of focus is the 399 00:22:12,880 --> 00:22:15,560 Speaker 1: ongoing debate man versus machine, at least that's how it's 400 00:22:15,560 --> 00:22:17,919 Speaker 1: been cast, the rise of E t f S, the 401 00:22:18,080 --> 00:22:22,440 Speaker 1: cannibalization of the active management industry. Joining us now to 402 00:22:22,520 --> 00:22:24,679 Speaker 1: sort of give us some real talk on where we 403 00:22:24,760 --> 00:22:28,159 Speaker 1: are in this evolution is Jeff McCarthy, chief executive officer 404 00:22:28,320 --> 00:22:31,480 Speaker 1: of E t F S Exchange Traded Funds at BNY Melon, 405 00:22:31,960 --> 00:22:35,879 Speaker 1: here with us at the Phoenix Convention Center. So, Jeff, 406 00:22:36,400 --> 00:22:39,439 Speaker 1: let's start with just sort of a state of play. 407 00:22:39,520 --> 00:22:44,000 Speaker 1: How much has money flowed out of active into passive 408 00:22:44,040 --> 00:22:46,320 Speaker 1: into e t f s. How far are we in 409 00:22:46,359 --> 00:22:49,480 Speaker 1: this evolution? Yeah, thanks Lisa. So I think when you 410 00:22:49,520 --> 00:22:52,440 Speaker 1: look at active funds, we've seen a continuous outflow over 411 00:22:52,480 --> 00:22:55,680 Speaker 1: the last ten years of these funds. Now, the trick 412 00:22:55,800 --> 00:22:58,720 Speaker 1: is you've seen the active fund market grow largely because 413 00:22:58,720 --> 00:23:02,120 Speaker 1: of capital appreciation, but they've had negative inflows. On the inverse, 414 00:23:02,160 --> 00:23:04,680 Speaker 1: E t s have a positive inflows year after year. 415 00:23:05,000 --> 00:23:07,760 Speaker 1: This year year today, for the first four months of 416 00:23:07,800 --> 00:23:10,720 Speaker 1: two thousand nineteen, we've seen eighty six billion flow into 417 00:23:10,760 --> 00:23:15,760 Speaker 1: these products in the US. Last year two thousand seventeen 418 00:23:16,240 --> 00:23:19,000 Speaker 1: over four hundred. So it's definitely an asset class or 419 00:23:19,040 --> 00:23:21,159 Speaker 1: a structure I should say, I don't want to call 420 00:23:21,200 --> 00:23:25,480 Speaker 1: it an asset class that's gaining momentum and gaining investor flows. So, Jeff, 421 00:23:25,520 --> 00:23:28,880 Speaker 1: is there any end in sight to this trend? From 422 00:23:28,880 --> 00:23:31,920 Speaker 1: your perspective, I think it's going to continue. And one 423 00:23:31,920 --> 00:23:34,119 Speaker 1: of the things to look at is how big is 424 00:23:34,160 --> 00:23:36,240 Speaker 1: the mutual fund market in the US. It's an over 425 00:23:36,520 --> 00:23:39,399 Speaker 1: It's over twenty trillion in assets, and the E t 426 00:23:39,520 --> 00:23:41,679 Speaker 1: F market is just at four trillion, So there's a 427 00:23:41,680 --> 00:23:43,680 Speaker 1: lot of room to grow. There's a lot of aspects 428 00:23:43,680 --> 00:23:46,480 Speaker 1: that are uncovered, especially when you look at the defined 429 00:23:46,520 --> 00:23:50,160 Speaker 1: benefit to find contribution the four oh one k universe 430 00:23:50,600 --> 00:23:53,119 Speaker 1: that's largely not penetrated by e t f s, And 431 00:23:53,200 --> 00:23:56,080 Speaker 1: when e t f s make more headways into that area, 432 00:23:56,119 --> 00:23:58,359 Speaker 1: I think you're going to see an asset growth pop 433 00:23:58,400 --> 00:24:01,160 Speaker 1: in the e t F industry. So my impression is 434 00:24:01,240 --> 00:24:04,720 Speaker 1: that in US equities, e t f s have already 435 00:24:04,800 --> 00:24:07,800 Speaker 1: gotten a substantial share. Is that is that correct? I mean, 436 00:24:07,800 --> 00:24:12,840 Speaker 1: do ETFs count for a significant proportion of retail investments 437 00:24:12,960 --> 00:24:15,760 Speaker 1: and say the s yeah, I mean e t F 438 00:24:15,840 --> 00:24:18,760 Speaker 1: today the market is seventy eight percent held in equity 439 00:24:18,800 --> 00:24:21,880 Speaker 1: products sixtent and fixed income right, and then the list 440 00:24:21,880 --> 00:24:25,320 Speaker 1: goes down, so they're largely held as equities strategies. But 441 00:24:25,359 --> 00:24:27,800 Speaker 1: I don't think you know the end is in sight. 442 00:24:28,080 --> 00:24:31,399 Speaker 1: I think you know ETFs continue to be, especially on 443 00:24:31,480 --> 00:24:36,119 Speaker 1: the passive strategy, a product of choice. I mean institutional 444 00:24:36,200 --> 00:24:39,080 Speaker 1: investors and retail investors use these products, and I think 445 00:24:39,160 --> 00:24:42,800 Speaker 1: that's key to having a healthy investor access market. And 446 00:24:42,920 --> 00:24:46,480 Speaker 1: seventy eight percent of investors by Greenwich Associates say that 447 00:24:46,600 --> 00:24:49,560 Speaker 1: e t f s are their preferred vehicle for index strategies, 448 00:24:49,920 --> 00:24:52,560 Speaker 1: and and Jeff, is it what to what extent? Is 449 00:24:52,640 --> 00:24:54,879 Speaker 1: it just the lower fees that are driving e t 450 00:24:55,119 --> 00:24:57,080 Speaker 1: f s? What's from your perspective some of the key 451 00:24:57,200 --> 00:25:00,560 Speaker 1: drivers share? Well, I think low fees is the number one, right, 452 00:25:01,000 --> 00:25:04,720 Speaker 1: all investors, institutional, retail, they're all price sensitive, right. And 453 00:25:04,800 --> 00:25:08,359 Speaker 1: if you look at the flows into these products, of 454 00:25:08,400 --> 00:25:11,480 Speaker 1: the flows going to products with expense ratios at twenty 455 00:25:11,520 --> 00:25:14,639 Speaker 1: basis points or less, but then sixty of those are 456 00:25:14,880 --> 00:25:18,000 Speaker 1: products at nine basis points and less. So there's really 457 00:25:18,119 --> 00:25:21,840 Speaker 1: no reason why an investor should pay more than single 458 00:25:21,920 --> 00:25:24,840 Speaker 1: digit from an expense ratio for product to get broad 459 00:25:24,920 --> 00:25:28,439 Speaker 1: exposure into the US market. Because e t s are liquid, liquid, 460 00:25:28,840 --> 00:25:31,760 Speaker 1: they are available, and they're transparent vehicles. Okay, So when 461 00:25:31,760 --> 00:25:35,480 Speaker 1: you're talking to prospective investors in e t f s, 462 00:25:36,359 --> 00:25:38,920 Speaker 1: is the low fee kind of the key aspect Because 463 00:25:38,960 --> 00:25:42,720 Speaker 1: we've seen Fidelity, for example, have a negative a negative 464 00:25:42,840 --> 00:25:45,679 Speaker 1: fee type of fund right that's been introduced to try 465 00:25:45,720 --> 00:25:48,280 Speaker 1: to lure people in. We've seen cut fees cut to 466 00:25:48,359 --> 00:25:50,879 Speaker 1: zero and at a certain point, uh, you have to 467 00:25:50,960 --> 00:25:53,280 Speaker 1: wonder the viability of some of these of these companies 468 00:25:53,320 --> 00:25:56,000 Speaker 1: of fund manager companies and where they're actually getting their money. 469 00:25:56,560 --> 00:25:59,480 Speaker 1: Are people paying in other ways? I mean they are 470 00:25:59,520 --> 00:26:01,879 Speaker 1: paying other ways. Now, I'm never gonna say, you know, 471 00:26:02,280 --> 00:26:04,399 Speaker 1: Fidelity isn't gonna be viable, right, It's a it's a 472 00:26:04,480 --> 00:26:06,760 Speaker 1: powerhouse asset manager. And I think if you look at 473 00:26:06,800 --> 00:26:10,080 Speaker 1: Fidelity strategy, they have so much to offer investors, and 474 00:26:10,200 --> 00:26:14,440 Speaker 1: so they'll offer investors products at zero, right. But to 475 00:26:14,600 --> 00:26:17,240 Speaker 1: customers of Fidelity, why because they bring them into the 476 00:26:17,280 --> 00:26:20,200 Speaker 1: Fidelity family, They leverage and they cross sell other products 477 00:26:20,520 --> 00:26:23,399 Speaker 1: that are necessary for those investors. You have seen some 478 00:26:23,520 --> 00:26:26,439 Speaker 1: ETFs come to market this year at zero or negative right, 479 00:26:26,560 --> 00:26:30,280 Speaker 1: pain investors to invest. But you have to look at 480 00:26:30,280 --> 00:26:34,120 Speaker 1: the fine details of those products. Right. They have disclosures, 481 00:26:34,240 --> 00:26:37,960 Speaker 1: meaning they're waving their fee for the first year or 482 00:26:38,040 --> 00:26:40,240 Speaker 1: until the fund gets to a hundred million in assets, 483 00:26:40,280 --> 00:26:42,200 Speaker 1: and then the expense ratio goes up to nine team 484 00:26:42,240 --> 00:26:46,040 Speaker 1: basis points. So it's not necessarily free. And I think 485 00:26:46,200 --> 00:26:48,639 Speaker 1: you know the broad lesson of the best things in 486 00:26:48,720 --> 00:26:51,200 Speaker 1: life are never free. You should apply that to investing. 487 00:26:51,520 --> 00:26:53,199 Speaker 1: And I think you have to look at the product, 488 00:26:53,359 --> 00:26:57,040 Speaker 1: the characteristics, What is the investment objective, what is the 489 00:26:57,080 --> 00:27:01,480 Speaker 1: components of the index versus just the cost. But going 490 00:27:01,560 --> 00:27:04,720 Speaker 1: back to my previous set statement, investors are price sensitive 491 00:27:04,800 --> 00:27:08,520 Speaker 1: and cost is a large factor into asset allocation selection. 492 00:27:09,080 --> 00:27:11,280 Speaker 1: Jeff McCarthy, thank you so much. Jeff as the chief 493 00:27:11,320 --> 00:27:15,399 Speaker 1: executive officer of exchange traded Funds at b n Y Melon. 494 00:27:16,240 --> 00:27:18,440 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 495 00:27:18,640 --> 00:27:21,240 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 496 00:27:21,320 --> 00:27:24,359 Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on 497 00:27:24,440 --> 00:27:27,080 Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on 498 00:27:27,119 --> 00:27:29,880 Speaker 1: Twitter at Lisa A. Bram wits one. Before the podcast, 499 00:27:29,960 --> 00:27:32,520 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.