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Speaker 3: I think one of the big changes for twenty twenty
Speaker 3: five for investors is we're gonna have a new administration here,
Speaker 3: We're gonna have public in Congress, and what does that
Speaker 3: mean for policy? What does that mean for markets? Our
Speaker 3: next guest maybe can help us think about that a
Speaker 3: little bit, amongst other topics.
Speaker 4: Sarah Hunt.
Speaker 3: She's a partner chief market strategist at Alpine Saxon Woods. Sarah,
Speaker 3: thanks so much for joining us here in our studio.
Speaker 3: When you and your team woke up the day after
Speaker 3: the election in November, did you change your outlook or
Speaker 3: think differently about twenty twenty five at all?
Speaker 5: I think we definitely got a lot of incoming from
Speaker 5: clients about what that was going to mean and what
Speaker 5: was that going to mean for markets and their portfolios.
Speaker 6: I think clearly the equity.
Speaker 5: Markets took that as a positive signal and in terms
Speaker 5: of what they think they might get out of a
Speaker 5: new administration. I think what's happened in the last month
Speaker 5: is that started to temper a little bit. I think
Speaker 5: you saw, with both the Fed becoming more hawkish and
Speaker 5: the fight over the cr that it might not be
Speaker 5: so easy to get as much done as people thought
Speaker 5: they could get done out of the gate.
Speaker 6: So the question then.
Speaker 5: Becomes, how is that going to play out and to
Speaker 5: what extent do we have to think about that in
Speaker 5: the way of positioning. But it wasn't like a major
Speaker 5: positioning shift that happened right after the election.
Speaker 7: I know we'll talk about the Federal Reserve a little
Speaker 7: bit in a minute, but I want to pick up
Speaker 7: on something you said there, which is what happened with
Speaker 7: the Continuing Resolution And there were so many odd dynamics
Speaker 7: that play there. Chief among them, perhaps you have a
Speaker 7: president elect who was kind of very actively involved in
Speaker 7: that debate. In that conversation, what did that tell you
Speaker 7: about what these next four years are likely to be?
Speaker 5: Like?
Speaker 7: Are you are you expecting kind of a redux of
Speaker 7: his first term in office or do you feel like
Speaker 7: you have a playbook from that that's going to make
Speaker 7: navigating those next four years a little easier.
Speaker 5: I'm not sure that there's a true playbook from the
Speaker 5: first administration, just because there was a lot of chaos
Speaker 5: going on then too, except maybe the chaos is part
Speaker 5: of that. But I would say that what that cr
Speaker 5: fight taught showed us with clarity was you don't have
Speaker 5: a unified party on a lot of despite the majority,
Speaker 5: despite the majority in Congress, which is there was some
Speaker 5: concern that a majority, right, but it's a very slight majority,
Speaker 5: especially in the House, and it doesn't seem to be
Speaker 5: particularly unified. And this seems to be a theme on
Speaker 5: the Republican side that the Democrats have a better ability
Speaker 5: to unify than the Republicans do, and they votes well,
Speaker 5: they can count votes, and they can get those votes together,
Speaker 5: and they can and they can get people to stay
Speaker 5: in one place, whereas it's sort of like hurting cats
Speaker 5: in the Republican side, and that doesn't seem to be
Speaker 5: It seems to be an issue if what you're hoping
Speaker 5: for is an immediate policy response right out of the gate.
Speaker 3: I guess we don't know a whole lot about the
Speaker 3: incoming Trump administration in their economic policies. I guess what
Speaker 3: we do know is tariffs, some of their immigration policies,
Speaker 3: and a lot of folks are concerned that.
Speaker 4: That we do know could be inflationary. Is that something
Speaker 4: that concerns you.
Speaker 5: I think it's definitely part of the questions that need
Speaker 5: to be answered in twenty twenty five, and it's going
Speaker 5: to be part of the playbook. And the question is
Speaker 5: going to be do these things get enacted to the
Speaker 5: extent that they're being discussed right now? Can things move
Speaker 5: again as quickly as people thought they would? And do
Speaker 5: we have if we change the immigration policy from a
Speaker 5: basically an open door to a less open door and
Speaker 5: we start deporting people, does that push wages up? And
Speaker 5: I don't think we know the answer to that yet.
Speaker 5: But we also are seeing a big strain on resources
Speaker 5: because of people that are here, So does that balance
Speaker 5: itself out at all?
Speaker 6: I think it's unclear at the moment.
Speaker 7: You mentioned the calls you got from clients after the election.
Speaker 7: Imagine there's some calls just on this point sort of
Speaker 7: what those potential policy changes might mean. And we heard
Speaker 7: from the Fed char to room Powell that he and
Speaker 7: his colleagues are now beginning to entertain various counterfactuals. What
Speaker 7: might happen if this trade policy comes through or that,
Speaker 7: or if the immigration policy is implemented. Dovetail that with
Speaker 7: analysis that you're doing, how do you think through all
Speaker 7: of those potential eventualities. How much is that preoccupying you?
Speaker 7: And Paul bring up the fact that some of these
Speaker 7: things are inherently inflationary, how do you sort of think
Speaker 7: through what that might mean for portfolios?
Speaker 5: So from an equity market perspective, the biggest issue is
Speaker 5: going to be earnings growth and margins, and to the
Speaker 5: extent that any of those things are impacting that in
Speaker 5: a negative way, that pulls some of the positive expectations
Speaker 5: that people have going into earnings for this year, it
Speaker 5: can take some of that away. We don't know what
Speaker 5: those puts in takes are entirely yet, but I think
Speaker 5: that to the extent that there are some concerns that
Speaker 5: those things will happen, you have to look at your
Speaker 5: earnings forecast more carefully, and you have to be very
Speaker 5: careful about your balance sheets and where I'm looking at
Speaker 5: multiples because I think that you've got a market that's
Speaker 5: also at quite elevated levels relatively speaking to history.
Speaker 3: And you talk about the elevated aspect are the levels
Speaker 3: of these markets. It really puts a lot of pressure,
Speaker 3: I guess on earnings, and I think the earnings outlook
Speaker 3: for twenty twenty five is, you know, pretty aggressive. I
Speaker 3: would argue, Man, I'm hearing twelve thirteen percent type of
Speaker 3: earnings growth.
Speaker 4: Is that a material risk? Do you think to this
Speaker 4: market or do you feel comfortable with those kinds of orders.
Speaker 5: So I would have argued that the expectations for this
Speaker 5: year were somewhat aggressive last year, and yet we.
Speaker 6: Managed to get through that fairly well.
Speaker 5: And I think this is where having those big themes
Speaker 5: like both AI and now quantum computing help you, because.
Speaker 6: The AI came through this year.
Speaker 5: If you hadn't seen that come through in earnings, and
Speaker 5: you hadn't seen the growth, and you hadn't seen non
Speaker 5: tech companies start picking up AI and using it, that says, okay,
Speaker 5: we've got more spending in that area.
Speaker 6: So if you've got a driver like that, it's very helpful.
Speaker 5: Whether or not that is taken apart by some of
Speaker 5: the other things we were just talking about remains to
Speaker 5: be seen.
Speaker 6: But the thematic goal is there.
Speaker 4: Does that continue?
Speaker 7: I mean, we have focused so much on AI and
Speaker 7: its prospects, not just this last year, but the year
Speaker 7: before that as well, and what it might do, how
Speaker 7: it could be implemented by companies. You say some have
Speaker 7: been using it so far. Where do you see that
Speaker 7: story going as we enter into the new year. Is
Speaker 7: that still the overarching narrative when we look a kind
Speaker 7: of thematic stories for the market, or is it tapering
Speaker 7: off a little bit or is it changing? How do
Speaker 7: you see it progressing here in the new year.
Speaker 5: I think it's changing in terms of where that spend
Speaker 5: is coming from. Right, So the semiconductor industry, which was
Speaker 5: driving a lot of that because the spend was coming
Speaker 5: from chips, has had a rougher time in the second
Speaker 5: half of the year, but the software industries have started
Speaker 5: to do better. So the implementation now and how companies
Speaker 5: can use it is becoming as important as building the
Speaker 5: backbone in the infrastructure. And the backbone and the infrastructure,
Speaker 5: we're on the semiconductor side, so if you look at
Speaker 5: where that's it's spreading out in technology, which is a
Speaker 5: benefit because again, where am I going to get my
Speaker 5: earnings growth? It better be coming from more than just
Speaker 5: in VideA and I think you're starting to see that,
Speaker 5: and the fact that companies can use it to help
Speaker 5: their own margins is something that is an important part
Speaker 5: of that spend going forward fixed income.
Speaker 3: I'm sitting on my tiear treasury four point three five percent.
Speaker 3: I don't feel like I need to be a hero
Speaker 3: and take credit risk.
Speaker 4: What do you think?
Speaker 5: I think the fact that you've got spreads compressed so much,
Speaker 5: I don't necessarily think you want to take a bunch
Speaker 5: of credit risk here either. And I think that the
Speaker 5: discussion now about what's going to happen with the FED
Speaker 5: and how and how much rates are going to come
Speaker 5: down again this year is now up in the air
Speaker 5: post that last meeting, which was much more hawkish. So
Speaker 5: whether or not, I mean, the market has been absolutely
Speaker 5: wrong about their forecasts in terms of warp how many
Speaker 5: rates cuts we were going to get.
Speaker 6: That's been shifting around, But yeah, looking at.
Speaker 5: That on a two year there's that's a reasonable outcome
Speaker 5: at the moment, given that we don't know where fixed
Speaker 5: thing come is going to go.
Speaker 3: Sarah, unlike Tom Keen who owns the mag seven, I
Speaker 3: missed that trade.
Speaker 4: Do I chase that trade here? In twenty twenty five.
Speaker 3: Or do I try to find some value, whether it's
Speaker 3: financials or consumer or energy.
Speaker 4: How are you talking to your clients about twenty twenty five?
Speaker 5: So I would say that that's one of those questions,
Speaker 5: the answer to which is yes, which is yes, I
Speaker 5: have to have some tech. Yes, I'm going to look
Speaker 5: for some value in other places. It's difficult with the
Speaker 5: tax docs specifically, because every time you say, oh, they
Speaker 5: look expensive, I want to wait for a pullback. Sometimes
Speaker 5: you get a small pullback, sometimes you don't, but it's
Speaker 5: really hard to jump on it when you do psychologically,
Speaker 5: just because it's the concern is if it's going down,
Speaker 5: is going to keep going down?
Speaker 8: Right?
Speaker 5: So I think that if you are tempered in that
Speaker 5: and you say, okay, I need to start with some
Speaker 5: you can start positions. If you're going from zero, right,
Speaker 5: you start positions and you sort of see how things
Speaker 5: go and you give it a couple of months. But
Speaker 5: I think you have to look at both sides of
Speaker 5: the equation, because I don't think that tech is going
Speaker 5: to be one of those areas that people are willing
Speaker 5: to rotate out of anytime that we can see in
Speaker 5: the near future.
Speaker 7: We talked a bit about this at the top. That
Speaker 7: is the way that markets reacted to the election, the
Speaker 7: enthusiasm exuberance we saw there at the beginning, and how
Speaker 7: that's sort of becoming tempered, I think was the word
Speaker 7: that you used. Has that process finished its course or
Speaker 7: are people still sort of trying to understand where the
Speaker 7: prospects are going to be higher than otherwise going forward here?
Speaker 5: Well, I think that the hard thing you have is
Speaker 5: that November was such a strong month, and I think
Speaker 5: that people are always looking for things to be a
Speaker 5: little bit less expensive, and all it did was get
Speaker 5: more expensive. And December has come down a bit in
Speaker 5: certain areas, but it hasn't really come.
Speaker 6: Down a whole lot. And I don't I'm not saying
Speaker 6: that because I want it to.
Speaker 5: I'm just saying that because that's where we are, and
Speaker 5: I think going into next year, it's going to depend
Speaker 5: on a lot of different things that, like I said,
Speaker 5: we still don't know yet. But I think that the
Speaker 5: enthusiasm for equities is still there, and especially enthusiasm for
Speaker 5: US equities versus other parts of the world.
Speaker 3: Yeah, that's one of the things I've heard just in
Speaker 3: the last several months. International money increasingly coming to the
Speaker 3: US market, and that is maybe one of the drivers
Speaker 3: of twenty twenty four performance in the US markets.
Speaker 4: Are you seeing that?
Speaker 6: Is that a thing?
Speaker 4: I mean, is people just putting more and more of
Speaker 4: their allocation global allocation into the US.
Speaker 5: Well, I think that there's I mean, there's an expanded
Speaker 5: pool of money to be invested right because there's still
Speaker 5: a lot of money scrolling around in the system.
Speaker 6: I think that the.
Speaker 5: Concerns what's going on in Europe and the concerns of
Speaker 5: how that plays out over the next year so does
Speaker 5: make the US look more attractive. And I think that's
Speaker 5: been the case for quite some time, but we keep
Speaker 5: getting these enthusiasms and it's going to be better for
Speaker 5: markets outside. The stronger dollar makes emerging markets a little
Speaker 5: bit more challenging here, and.
Speaker 6: I think that.
Speaker 5: But there's just some structural issues that are going on
Speaker 5: in Europe that are very difficult to fix, and with
Speaker 5: what's going on in China, the automobile industry is under.
Speaker 6: A lot of pressure. That's a big driver for parts
Speaker 6: of Europe.
Speaker 5: So I think that there are some reasons that are
Speaker 5: not wrong for people to be concerned about other markets
Speaker 5: outside of the US.
Speaker 7: I promise we'd come back to the FED, and I'm
Speaker 7: eager to get your sense of sort of where things
Speaker 7: are headed. I'm curious if you were one of the
Speaker 7: many you had your head in your hands as that
Speaker 7: press conference happened.
Speaker 4: With j Aublet a couple of days ago.
Speaker 7: What did you take away from what he had to say?
Speaker 7: What was in that statement, was in that plot about
Speaker 7: the path forward here? And maybe you can dovetail that
Speaker 7: with kind of your outlook for the US economy in
Speaker 7: the your head.
Speaker 5: Well, Interestingly, I don't think it was a shock that
Speaker 5: they took the number of cuts down into this year.
Speaker 5: I think what surprised people the most, including ourselves, was
Speaker 5: that they took up the inflation forecasts while they were
Speaker 5: cutting rates, which is not necessarily something that you would expect.
Speaker 5: But I think that you had such I mean, I
Speaker 5: say that the market's been wrong about what they've got
Speaker 5: baked in.
Speaker 6: But no one likes a very quick surprise.
Speaker 5: So the fact that the December cut was sort of
Speaker 5: really very much expected. I think that potentially market reaction
Speaker 5: could have been worse if they had not cut in
Speaker 5: December and said everything that they did. But they were
Speaker 5: hawkish enough that the market reacted pretty negatively. So, yes,
Speaker 5: my head was in my hands because no one likes
Speaker 5: to see the market do that on any day.
Speaker 3: So how much of our twenty twenty five outlook is
Speaker 3: predicated upon the fediing versus earnings, like kind of the
Speaker 3: basics of the fundamentals here?
Speaker 4: How much?
Speaker 1: So?
Speaker 5: I think that there's a lot of noise right now
Speaker 5: about the politics, but I think ultimately it's going to
Speaker 5: come down to earnings and it's going to come down.
Speaker 6: To the economy.
Speaker 5: So where do how do those two things play out?
Speaker 5: I think that there was a huge concern when rates
Speaker 5: went up so fast that higher rates were going to
Speaker 5: be super detrimental. It hasn't been as bad as people
Speaker 5: thought it was.
Speaker 6: Going to be.
Speaker 5: Those lags long and variable lags are still lagging, and
Speaker 5: so now do we need to cut as much as
Speaker 5: people were baking in? I don't know what the answer is.
Speaker 5: I think that there was a period of time posted
Speaker 5: those financial global financial crisis with unusual monetary policy. I
Speaker 5: don't think we're going back there. So people are going
Speaker 5: to have to learn to live with some kind of rates.
Speaker 5: I think it's really going to depy and on just
Speaker 5: general levels of economic activity, and there's some influence from politics,
Speaker 5: but it's not entirely politically influenced.
Speaker 7: You've came in here and Paul and I were grousing
Speaker 7: about the housing market, and you talk about the reaction
Speaker 7: to rates. We've been monitoring, of course what's been happening
Speaker 7: with savings and credit card use as well. When you
Speaker 7: look at that, just sort of generalate the health of
Speaker 7: the consumer. What's your takeaway? How does that shape what
Speaker 7: you may or may not be interested in here in
Speaker 7: the end of your head.
Speaker 6: Well, I think that that's a big part.
Speaker 5: Of why the economy is still doing so well, because
Speaker 5: without that you would see a much slower economy. And
Speaker 5: I think that that's where that tension between the FED
Speaker 5: and wanting to cut rates but looking out at some
Speaker 5: of the things that they're concerned about is also a problem.
Speaker 5: I think that we got some good numbers on inflation
Speaker 5: post that FED meeting, and that helped a lot, because
Speaker 5: without that fall in the PCE, I think that markets
Speaker 5: would have started to be continually concerned that no more
Speaker 5: rate cuts were coming. But I think that there is
Speaker 5: some room for that to look okay next year. It's
Speaker 5: really going to depend on a lot of other things.
Speaker 5: But yes, the fact that people are spending is a
Speaker 5: huge benefit.
Speaker 3: What's kind of your theme for twenty twenty five and
Speaker 3: you talk to your clients these days, is there a theme?
Speaker 4: Is it just stay the stay steady here, stay in
Speaker 4: the market.
Speaker 5: I think that after two years of strong gains, what
Speaker 5: we are telling people and what we talk about internally
Speaker 5: is we don't think that there's some giant tragedy on
Speaker 5: the horizon, but the volatility should be a bit higher,
Speaker 5: given the fact that we have had less so in
Speaker 5: the last year or so, and because we're coming from
Speaker 5: a definite cycle where we're going to be cutting to
Speaker 5: maybe a cycle where we're slowing those cuts and or
Speaker 5: we might move into a more neutral phase that could
Speaker 5: possibly have some volatility on the equity side as well.
Speaker 5: But as long as the economy stays, it's like it's
Speaker 5: in pretty good shape. And to the extent that again
Speaker 5: this is the US is benefiting from a lot of
Speaker 5: the spending patterns. We're not overly concerned that it's going
Speaker 5: to be terrible. It's just don't get don't get used
Speaker 5: to twenty percent plus twenty percent returns on a year
Speaker 5: of a year basis, Oh my kids, that.
Speaker 7: Four one, dude, it's not like sweet as advice exactly.
Speaker 7: In the minute we have left here, what do you
Speaker 7: say to your more conservative clients who maybe have a
Speaker 7: lot of cash still aren't in the market. What's the
Speaker 7: what's the case you're making to them to get into
Speaker 7: this market and to allay some of the nervousness that
Speaker 7: they might have.
Speaker 5: Well, I think that to some of the For the
Speaker 5: more conservative people, you're also looking at some more fixed
Speaker 5: incoming because rates haven't dropped as much. That gives you
Speaker 5: some room to be more balanced. So we're looking for
Speaker 5: folks like that to look at balanced accounts because you
Speaker 5: don't want to not participate in the equity markets. But
Speaker 5: at the same time, if we're a little bit worried
Speaker 5: about volatility, then you probably want to temper that a
Speaker 5: bit with some bonds.
Speaker 6: And I think you can do that here.
Speaker 5: And I think that was a big question where to
Speaker 5: bond sit in your portfolio given what's going on, And
Speaker 5: I think that that's a place where people are finding
Speaker 5: a little bit more comfort from a stability standpoint. But
Speaker 5: I still think that the equity markets are not a
Speaker 5: bad place to be ultimately Yeah, I agree.
Speaker 3: Sarah Hunt, thank you so much for joining us. Really
Speaker 3: appreciate you coming into our studio today.
Speaker 7: Good to see a real person here at the studio.
Speaker 3: She did some double duty on Bloomberg Television and now radio.
Speaker 3: We appreciate it, Sarah Hunt. She's a partner and a
Speaker 3: chief market strategist at Alpine Saxon Woodsone.
Speaker 2: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 3: Talk about that discussion of all things coming out of Washington, DC.
Speaker 3: We head up to Providence, Rhode Island. Wendy Schiller, professor
Speaker 3: at Brown University.
Speaker 4: Joins us.
Speaker 3: Wendy, I guess there's a million ways we can go here,
Speaker 3: but I just want to start about I'm wondering how
Speaker 3: this When we initially had the election, the news flow
Speaker 3: is really about the nominations for cabinet positions for President
Speaker 3: elect Trump. And now I'm kind of wondering, as these
Speaker 3: things have kind of stewed for several weeks, we're going
Speaker 3: to be getting towards confirmation hearings later on in January.
Speaker 4: Is there a feel how.
Speaker 3: These things are going to go because there are some
Speaker 3: nominations for cabinet positions that are a little bit more
Speaker 3: more controversial than others.
Speaker 8: Well, I'm more in bog Miran David.
Speaker 9: I think that in general, I don't think we know
Speaker 9: from history that presidential nominations for cabinet positions generally go through.
Speaker 9: There are a couple of really well known examps bulls
Speaker 9: where they went down, so John Tower many years ago.
Speaker 9: Bill Clinton had a very difficult time getting Attorney General
Speaker 9: nominee through through some vetting mistakes I think early on.
Speaker 9: But in general you don't lose too many of them
Speaker 9: as you go through. You know, there are still vulnerabilities
Speaker 9: associated with the Hexeth nomination at Defense in the Armed
Speaker 9: Services Committee and Telsea Gabbard.
Speaker 8: I think those are the two that I'm watching.
Speaker 9: I'm not sure Trump gets both of them, and if
Speaker 9: you had to put money down, I think Hegseth seems
Speaker 9: to be getting enough votes to get fifty one get
Speaker 9: through the Senate. I'm not sure about Gabbard, but some
Speaker 9: of the other ones are quite standard sort of what
Speaker 9: you'd expect from a Republican president, and I don't think
Speaker 9: they're going to have any problems. And Trump wants these
Speaker 9: people in place as soon as possible. He's already dictating
Speaker 9: policy for particular departments. You can see this in Foreign
Speaker 9: Affairs and other areas border security, So you know he
Speaker 9: wants them in, but it's difficult to move the bureaucracy
Speaker 9: even when they do get in in a timely fashion.
Speaker 7: Were I a senior demo crowd on, say, the Senate
Speaker 7: Foreign Affairs Committee or the Armed Services Committee? Were I
Speaker 7: Elizabeth Warren on the Financial Services Committee? I've got Scott
Speaker 7: Bestont coming before me. What is the job of a
Speaker 7: senior Democratic senator in these hearings? Recognizing the fact that,
Speaker 7: as you point out, most of these nominees are going
Speaker 7: to get through. How much hay should I, again, Senior
Speaker 7: Democratic Senator, how much hay should I be making here
Speaker 7: about those particular nominees and their problems, just to sort
Speaker 7: of make it into a spectacle and to sort of
Speaker 7: raise alarm or concern about some of the folks that
Speaker 7: President LEC. Trump has put forward.
Speaker 9: Well, David, I think the messaging coming out of the
Speaker 9: twenty four elections whe the Democratic Party is losing or
Speaker 9: has lost a portion of working class Americans or middle
Speaker 9: class Americans.
Speaker 8: So the messaging should.
Speaker 9: Be continuous across all of these committees is what will
Speaker 9: you do to protect the average American, the consumer, the employee,
Speaker 9: and also for personal security and safety in a humane way.
Speaker 9: And I think that's the thing where Democrats had the
Speaker 9: upper hand, and now they don't seem to have that
Speaker 9: upper hand, at least at the presidential level. But the
Speaker 9: congressional elections, probably the House elections show the Democrats they
Speaker 9: do have traction on sort of the worst of what
Speaker 9: government can be under an administration that doesn't show sort
Speaker 9: of compassion for people or isn't concerned about working Americans,
Speaker 9: everything from your right to unionize to whether you have
Speaker 9: workplace safety, to how you treat people who come here undocumented.
Speaker 9: So I think there's a lot of ground to be
Speaker 9: gained by Democrats focusing on those aspects of these really
Speaker 9: important issues that Trump has brought to the fore, but
Speaker 9: of course has run into trouble in his first administration
Speaker 9: in the way that he executed his policies.
Speaker 3: Wendy, what do you expect from the first one hundred
Speaker 3: days of the Trump administration.
Speaker 9: Well, we've talked about whether, you know, we should think
Speaker 9: about these and twenty days, fifty.
Speaker 8: Days, one hundred days.
Speaker 9: You know, it's interesting to have a president who was
Speaker 9: president lost and come back.
Speaker 8: We haven't seen that in more than one hundred years.
Speaker 9: And so the question is what will be a continuation,
Speaker 9: what will be the sort of Trump personal vengeance actions,
Speaker 9: and what will be new in Trump too?
Speaker 8: And I think that's the thing that's a little bit uncertain.
Speaker 9: He seems to want to do what other presidents like
Speaker 9: to do bypass Congress, even if you have.
Speaker 8: A trifecta, even if you control Congress.
Speaker 9: We saw from last week's budget negotiations that it doesn't
Speaker 9: mean you're going to get what you want. So I
Speaker 9: think the Trump inistration will focus on doing as much
Speaker 9: as they can through executive power and not relying on Congress.
Speaker 9: With the exception, of course, of the Trump tax cuts,
Speaker 9: which I think Trump would rather see passed sooner rather
Speaker 9: than later. There's a disagree between the House and the
Speaker 9: Senate Republican leadership on how fast that can go.
Speaker 7: We saw all the dysfunctions surrounding the Continuing Resolution. Then
Speaker 7: earlier this week we got That report from the House
Speaker 7: Ethics Committee on Matt Gates, the person that President elect
Speaker 7: Trump had put forward to be the Attorney general first
Speaker 7: through the nomination, a pretty damning report by all accounts,
Speaker 7: and I think one that in past administration's past eras
Speaker 7: would have created a lot of story. Again, Matt Gates
Speaker 7: no longer in the Congress, How did you read that report?
Speaker 7: How do you think about the investigation that took place,
Speaker 7: the report that came out of it, What it says
Speaker 7: about Congress's attitude towards transgressions, to put it mildly by
Speaker 7: by a member of the House, former member of the House,
Speaker 7: What does it say about the state of Congress today?
Speaker 9: Well, I mean, you know, Matt Gates wasn't the most
Speaker 9: popular member of Congress enough fair enough here, So when
Speaker 9: you try to interpret what happened here, it's hard to
Speaker 9: make generalizations. But I think in general, those two actions
Speaker 9: coupled together, says the House Republican Party, there's a line
Speaker 9: you can't cross. In other words, they're going to stand
Speaker 9: up for some of their constitutional power. And they are
Speaker 9: of course looking immediately to twenty twenty six, and they
Speaker 9: know what happened in twenty eighteen.
Speaker 8: They just loose power, They lost a lot of seats.
Speaker 9: They understand that Trump has you know, some really good cotails,
Speaker 9: but some very dangerous coattails for them looking ahead. So
Speaker 9: they want to assert their power and stay you know,
Speaker 9: on their platform.
Speaker 8: And that's what the budget deal was.
Speaker 9: It was saying, we're not going to just give you
Speaker 9: the debt ceiling for two more years. We actually promised
Speaker 9: we'd cut the budget. So I think that's the signaling
Speaker 9: that the Trump administration should be taking. And we're seeing
Speaker 9: that Trump is starting to talk more unilaterally because he
Speaker 9: sees that this road will not be so smooth for him,
Speaker 9: even in a Republican House with you know, some very
Speaker 9: very small margins, and with Gates. I think a lot
Speaker 9: of people are looking to open the door, you know,
Speaker 9: for exiting for Matt Gates. And I think they all
Speaker 9: joined forces to.
Speaker 8: Make that happen.
Speaker 3: Elon musk En doge, is that really going to be
Speaker 3: a thing going forward?
Speaker 4: Do you believe?
Speaker 9: Well, Cabinet departments have to be created by Congress. You know,
Speaker 9: under George W. Bush created the Department of Homeland Security,
Speaker 9: and response to a lot of the failings that led
Speaker 9: to nine to eleven, So you know, there's a reason
Speaker 9: to create a cabinet department in Congress? Does that without
Speaker 9: that infrastructure, It's just unclear to me how they implement
Speaker 9: what they're talking about, you know. And if you want
Speaker 9: to fire a civil servant with legal protections, that's going
Speaker 9: to take some time and some court battles. So it's
Speaker 9: just unclear how quickly they can do what they want
Speaker 9: to do and what kind of author are your legitimacy
Speaker 9: to have. And let's all watch the relationship between Musk
Speaker 9: and President elect Trump. The Democrats are already calling him
Speaker 9: co president or President Musk. It's bothering Donald Trump already.
Speaker 9: Let's just see how long they last as a partnership.
Speaker 9: And then those two things combine institutional sort of sluggishness
Speaker 9: and also sort of interpersonal relations.
Speaker 8: I think that's going to really have a lot.
Speaker 9: Of impact on what kind of influence they can have
Speaker 9: and reducing the size and scope of the federal government.
Speaker 4: All right, Wendy, thank you so much. We appreciate that.
Speaker 3: Wendy Schiller, she's a professor at Brown University.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 4: I am proud to say I don't think I went
Speaker 4: to a store. This is that right. I did a
Speaker 4: couple of clicks, you know, buying stuff.
Speaker 3: But a couple of days ago, I drove past the
Speaker 3: Short Hills Mall in New Jersey.
Speaker 4: Line of cars you couldn't even get into the parking.
Speaker 7: Still a mecca for consumerism.
Speaker 3: Still, So, if I had to say, I would think
Speaker 3: retail sales would be pretty solid during this holiday season.
Speaker 4: I don't know. Let's check in with Nicole Larson. She
Speaker 4: does this stuff for a living.
Speaker 3: She's a national research manager retail services as a Colliers Nicole. Again,
Speaker 3: I kind of take it as a badge of honor
Speaker 3: that I did not go to a store this holiday season,
Speaker 3: but I know a lot of people did.
Speaker 4: How are retail sales looking for the holiday season?
Speaker 1: Well, I will say you are probably one of the
Speaker 1: few that did not get a store. I don't know
Speaker 1: how you managed to do that, but honestly, I was
Speaker 1: very impressed. We were pretty conservative with our holiday spend forecast.
Speaker 1: What we saw and this was as of Tuesday, Visa's
Speaker 1: spend monitors said that holidays sales are a four point
Speaker 1: eight percent and that doesn't include Christmas Eve sales. So
Speaker 1: I'm actually really interested to see the final number come
Speaker 1: out once everything is you know, tabulated. I'm sure the
Speaker 1: returns are going to be factored in there as well.
Speaker 1: But what we saw was that in source spending for
Speaker 1: holiday accounted for seventy seven percent, while the twenty three
Speaker 1: percent was for online.
Speaker 10: So, like I said, I don't know how you managed
Speaker 10: to do it.
Speaker 1: But we also did see a pretty big increase during
Speaker 1: the Thanksgiving.
Speaker 10: Shopping weekend as well for mobile shopping.
Speaker 1: So it said about sixty three percent of shoppers use
Speaker 1: their phone to shop during the Thanksgiving weekend, and that
Speaker 1: was up from fifty five percent last year.
Speaker 7: You're going right where I want to go, which is
Speaker 7: I see this blurring now between Black Friday and Cyber Monday,
Speaker 7: and I was getting inundated with these push alerts to
Speaker 7: buy all kinds of stuff on my mobile phone. I
Speaker 7: mean that started before Thanksgiving, certainly continued into Friday, and
Speaker 7: there were you know, more entreaties on Monday as well.
Speaker 7: We had these kind of discrete days. Friday was for
Speaker 7: going to stores. Maybe that's not the case as much
Speaker 7: as it was. It does seem like we're kind of
Speaker 7: moving to this more morphous, kind of long weekend of
Speaker 7: online shopping. Is that a fair read of how things proceeded.
Speaker 1: Yeah, I mean, and you have to remember too, this
Speaker 1: Thanksgiving fell a lot later than it usually does, so
Speaker 1: I think retailers are really trying to push. I mean,
Speaker 1: we saw so many sales that were already happening in
Speaker 1: September and October, so the spend, the holiday spend was
Speaker 1: really spread out for a longer period, I would say
Speaker 1: this year. Yes, I know a lot of people were
Speaker 1: not a fan of all the crazy texts and emails
Speaker 1: that we were receiving. I still am receiving them even today.
Speaker 10: But it's really interesting.
Speaker 1: I think, you know, retailers are really trying to push,
Speaker 1: really trying to stress consumers to make sure that they
Speaker 1: get their purchases in because I don't think a lot
Speaker 1: of people realize until Thanksgiving came that we had such
Speaker 1: a short holiday window.
Speaker 3: Nicole talk to us about kind of the relationship between
Speaker 3: bricks and mortar and e commerce. What's the It seems like,
Speaker 3: you know, during the pandemic, it seems like we brought
Speaker 3: forward by maybe three, four or five years the amount
Speaker 3: of e commerce shift. Where are we today with bricks
Speaker 3: and order versus e commerce?
Speaker 1: Yeah, so obviously in twenty twenty we saw huge you know,
Speaker 1: we really saw the peak of the online sales as
Speaker 1: a share of total retail sales. We're actually at that
Speaker 1: same point right now. We're about at sixteen point two
Speaker 1: percent is what I think the total share of e
Speaker 1: commerce sales is right now for the US. I only
Speaker 1: see that continuing to grow. But in store is still
Speaker 1: super vital to consumers. I mean, we're even talking about
Speaker 1: this now with returns. I'll give you guys a new
Speaker 1: little phrase. It's called boris, which is by online return
Speaker 1: in store. So many consumers feel a lot more comfortable
Speaker 1: when a retailer actually has a physical store because they
Speaker 1: know that even though they may be shopping online, that
Speaker 1: they can go back into the store and you know,
Speaker 1: just feel more safe and more secure when they're able
Speaker 1: to return that product.
Speaker 7: You've mentioned returns a couple of times. I've got a
Speaker 7: pair of shoes, we got for my daughter. They're too
Speaker 7: small for I got to take care of that today
Speaker 7: or tomorrow. I'm going to go to the store to
Speaker 7: do that. It's it's help us understand how the process
Speaker 7: of returning has changed.
Speaker 2: Here.
Speaker 7: You mentioned folks going back to stores to do it.
Speaker 7: I was at Whole Foods a few days ago and
Speaker 7: I had to return something from Zappo's and I walked
Speaker 7: upstairs and it was like a shipping center in its
Speaker 7: own right where the cafe used to be in that store.
Speaker 7: But talk a bit just about how that's changed, that
Speaker 7: process of returning has changed, and the way that companies,
Speaker 7: the way that the stores are trying to make that
Speaker 7: go a little more seamlessly.
Speaker 1: I mean, yeah, retailers lost one hundred billion dollars last
Speaker 1: year in return fraud, so I think retailers are starting
Speaker 1: to restrategize their return policies. I would not be surprised
Speaker 1: if a lot of consumers are maybe a little bit
Speaker 1: upset by some of the retailer return policies that they'll
Speaker 1: be seeing this holiday season. I think it's really important. Hopefully,
Speaker 1: when the consumers were buying their their Christmas gifts, they
Speaker 1: were aware of the return policy but I think the
Speaker 1: return windows are going to be a lot shorter. I
Speaker 1: think these brands are also going to start becoming more
Speaker 1: strict and start looking at those consumers who may be
Speaker 1: you know, doing return fraud or things like that. It's
Speaker 1: a very small percentage compared to the rest of the
Speaker 1: country who is just you know, returning products that maybe
Speaker 1: don't fit them or maybe they can't use it any longer.
Speaker 10: So the percentage is very small.
Speaker 1: But I do think retailers already starting to you know,
Speaker 1: sort of look out for that in their internal systems
Speaker 1: and make sure that nobody's abusing the system.
Speaker 4: In New York City, talk to us about neighborhood retail.
Speaker 4: Where are we today versus pre pandemic.
Speaker 1: Oh yeah, I mean the local retail has really rebounded
Speaker 1: to pre COVID levels, and we've even seen some retail
Speaker 1: rents surpassing twenty nineteen. One area that I found really
Speaker 1: interesting was Flat Iron is actually you know, commanding about
Speaker 1: three hundred to five hundred per square foot. So I
Speaker 1: thought that was absolutely amazing and it just really shows
Speaker 1: like the resurgence of the area.
Speaker 7: Paul just a moment ago mentioning that that giant mall
Speaker 7: in Millburn, New Jersey. How well are malls doing and
Speaker 7: what is the as we look ahead here to twenty
Speaker 7: twenty five and beyond. What does the future of the
Speaker 7: American shopping mall look like today?
Speaker 1: I mean, you know, honestly, whether it's mall or even
Speaker 1: if it's you know, neighborhood shopping center, lifestyle centers, what
Speaker 1: I'm really noticing is that consumers want to be wowed
Speaker 1: at every sense of their shopping journey. So whether that's
Speaker 1: even going to a fast food joint, whether that's even
Speaker 1: going to a grocery store. Now, consumers are really looking for,
Speaker 1: you know, that next Instagrammable moment, or they want to
Speaker 1: see some cool technology, or they want to be really
Speaker 1: wowed by the product mix. So I think that's going
Speaker 1: to be a really big trend going into the new year,
Speaker 1: is that retailers are going to have to stay on
Speaker 1: their toes just like they did during twenty twenty and
Speaker 1: moving forward to continue to you know, just really match
Speaker 1: the consumer's energy.
Speaker 4: What is return fraud? Is that a big number.
Speaker 1: It was the one hundred billion that I mentioned and
Speaker 1: that was just for twenty twenty three, So yeah, I mean.
Speaker 10: It is large.
Speaker 1: Like I said, it is a really small percentage of
Speaker 1: a group of people that are doing it, but unfortunately
Speaker 1: this is pushing some of the costs back to consumers.
Speaker 7: We've talked a lot over the course of the last
Speaker 7: year about where people are spending their moneys, if it's
Speaker 7: on experiences or goods themselves. Have we noticed any kind
Speaker 7: of shift and that have you noticed any kind of
Speaker 7: shift away from experiences back to traditional goods, be they
Speaker 7: luxury goods or just you know, other kinds of goods
Speaker 7: people are buying.
Speaker 1: We definitely saw during this holiday season that experiential was
Speaker 1: top of mind for consumers, whether that was you know,
Speaker 1: going to concerts or plays, even if it was going
Speaker 1: out to eat.
Speaker 10: We actually were expecting foot traffic to boost about six
Speaker 10: percent during the holiday season.
Speaker 1: So again still kind of waiting for those final numbers
Speaker 1: to come out, but I just find that really interesting that,
Speaker 1: you know, people just want.
Speaker 10: To gather again, people want to get together.
Speaker 1: They're not so focused on revenge spend anymore like we
Speaker 1: were just a few years ago. So I find that
Speaker 1: really exciting, and again I think we're going to see
Speaker 1: that going into the new year. Also, another category we
Speaker 1: saw that did really well during the holidays was appliances
Speaker 1: and electronics.
Speaker 10: And that goes again with.
Speaker 1: The trend that people are buying now to prepare for later,
Speaker 1: especially with the unknown with these expected tariffs to come.
Speaker 1: Maybe within the next few weeks, maybe within the next
Speaker 1: few months.
Speaker 10: So we'll see how that goes.
Speaker 1: But consumers definitely did stock up on those items during
Speaker 1: the holiday season under.
Speaker 4: Spending, Yes, exactly exactly.
Speaker 3: Nicole LARTs and National Research Manager Retail Services for Colliers.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
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Speaker 3: All right, what are we doing in these markets here?
Speaker 3: Don't stocks, bonds, commodities, alternatives, no idea?
Speaker 4: Tally leisure? He might have an idea.
Speaker 3: He's a chief market strategist for the Wealth consulting group, Tally.
Speaker 4: What are you telling your clients here? As you think
Speaker 4: about twenty twenty five? What are you telling your clients?
Speaker 11: So look, I think, Paul, in the very near term,
Speaker 11: the US is still looking like the best house in
Speaker 11: a bad neighborhood, you know, just looking at what's going
Speaker 11: on in the rest of the world. Given the political
Speaker 11: and economic problems in Europe as well as some challenges
Speaker 11: in Russia in Syria, I think we could benefit, talking
Speaker 11: about US dollar denominated assets from some flight to safety
Speaker 11: and quality flows in the near term, which should help
Speaker 11: keep US buoyant.
Speaker 7: You rattled off a couple of those geopolitical risks. What
Speaker 7: are you most worried about or what are you paying
Speaker 7: the closest attention to. Obviously there has been this promise
Speaker 7: from the incoming president that on day one, maybe day two,
Speaker 7: we'll see a lot it takes, you know, it can
Speaker 7: resolve these wars that are taking place in the Middle
Speaker 7: East and in Ukraine. What are you sort of watching
Speaker 7: most closely as you think about what the market impact
Speaker 7: might be into the new year.
Speaker 11: So, I mean, I'm not really a geopolitical strategist, but
Speaker 11: as we know as practitioners, these events can create bouts
Speaker 11: of near term volatility that I'm personally trained to look past.
Speaker 11: So look, this year twenty twenty four has been devoid
Speaker 11: of any meaningful correction in stocks. So I think if
Speaker 11: we do get some kind of flare up in those
Speaker 11: geopolitical events or even more importantly, a growth or jobs
Speaker 11: related scare here at home, I'd be looking to buy
Speaker 11: some of those cyclicals that could bear the brunt of
Speaker 11: such a pullback.
Speaker 4: Tally, how do you think about evaluation here?
Speaker 3: I mean, we've had just big, big moves higher in
Speaker 3: the markets, We've had some good earnings growth, and I'm
Speaker 3: not sure the ernest growth has been commensurate with the
Speaker 3: moves in the stocks, which I know for a lot
Speaker 3: of folks that raises some valuation concerns.
Speaker 4: How do you deal with that with your clients?
Speaker 11: Well, I think, Paul, the point is well taken, and valuations,
Speaker 11: especially in the larger growthier techy areas of the market,
Speaker 11: have been expanding for good reasons. So I think there's
Speaker 11: a couple of ways to answer that. We're at a
Speaker 11: stage in the market cycle where earnings are picking up here,
Speaker 11: so I think we can grow into some of those
Speaker 11: loftier valuations. But you really don't have to look very
Speaker 11: far just beyond the biggest, most magnificent companies of the
Speaker 11: market to find immediately better relative value opportunities. So in
Speaker 11: the five hundred that could be equal weighted concepts or
Speaker 11: coming down the size curve to mid and small caps
Speaker 11: and even back to the international points that we were
Speaker 11: making earlier.
Speaker 7: Let's talk a bit about sort of where AI is headed.
Speaker 7: Of course, this has been big story in twenty twenty four,
Speaker 7: as it wasn't in twenty twenty three. You bring up
Speaker 7: Magnificent seven. We've talked a little bit this morning just
Speaker 7: about the extent to which the market has broadened out
Speaker 7: so much as it has focusing on AI, that part
Speaker 7: of technology and inspecific Are there facets of it that
Speaker 7: you're watching for in the new year, wherein that enthusiasm
Speaker 7: might lead to other companies doing well on the heels
Speaker 7: of those names that we've mentioned so many times here
Speaker 7: in twenty twenty four.
Speaker 11: Yeah, well, I think some listeners might be surprised to
Speaker 11: know that Semiconductors as a group actually witnessed a bear
Speaker 11: market decline from July into August. I think they fell
Speaker 11: something like twenty three percent just looking at the socks
Speaker 11: for example, And we're still in corrective territory there, even
Speaker 11: though we've balanced somewhat. But I think conceptually technology including
Speaker 11: this AI theme or may yeah, that's what it's kind
Speaker 11: of building up to. Be I think itself could help
Speaker 11: the rest of the market to catch up. So with
Speaker 11: a little bit of patience, we need to allow the
Speaker 11: other companies of the market that are making these AI
Speaker 11: investments time for them to pay off.
Speaker 3: So I mean, let's assume that you know, we're not
Speaker 3: all like Tom Keen and we've been long the Magnificent
Speaker 3: seven and we're just clipping coupons here. If we haven't
Speaker 3: been there, where do we go now for value here?
Speaker 3: If it's wethink about twenty twenty five, are there some
Speaker 3: sectors that screen well for you guys?
Speaker 11: Yeah, So again I might sound like a bit of
Speaker 11: a broken clock here, but I still like the domestic
Speaker 11: cyclicals like financials and consumer discretionary, So those would be
Speaker 11: the third and fourth best performing sectors. Again, might be
Speaker 11: a bit of a surprise to some listeners year today,
Speaker 11: So I'm sticking with those views. But my biggest surprise
Speaker 11: looking ahead to twenty twenty five is probably the most contrariant.
Speaker 11: It's the sector that performed the worst, and that would
Speaker 11: be some of the global cyclical materials names. And as
Speaker 11: a contrarian, I think the starting point for that sector
Speaker 11: is looking pretty good.
Speaker 7: Talk a bit more about that. I'm intrigued by what
Speaker 7: you're saying that what do you see in that sector
Speaker 7: that other investors, other market participants maybe haven't seen over
Speaker 7: the last year.
Speaker 11: So if there's one thing that I do know, it's
Speaker 11: whatever the market themes and narratives are at present, they're
Speaker 11: probably going to look very different one year. Hence, so
Speaker 11: again I like the setup as a contrarian. It's the
Speaker 11: worst performing sector. But again another nice surprise heading into
Speaker 11: twenty twenty five here Lo and Behold, we've got a
Speaker 11: Chinese manufacturing sector that is now expanding once again. Why well,
Speaker 11: I think it's getting some help from near one hundred
Speaker 11: percent of global central banks that have been cutting rates.
Speaker 11: I think the two exceptions are maybe Brazil and Russia
Speaker 11: they've been raising rates. But by and large, I think
Speaker 11: the policy stimulus is starting to show some grassroots there
Speaker 11: and that's helping, I think, lay the foundation for a
Speaker 11: better year ahead for that particular sector.
Speaker 3: Hey, Tylly, let's switch gears. Talk a little bit about
Speaker 3: the fixed income space here to your treasury. I mean,
Speaker 3: I could just park myself into two your treasury four
Speaker 3: point three five percent, clip that coupon.
Speaker 4: I'll sleep well at night. Do I do that or
Speaker 4: do I take some credit risk?
Speaker 11: So I think it is probably an environment where you
Speaker 11: are clipping coupons here, Paul, the credit spreads, I'm not
Speaker 11: seeing any signs of turbulence there. That's another reason why
Speaker 11: I think that the cycle can continue for the equity market.
Speaker 11: But the valuations there are looking a little bit stretched.
Speaker 11: We were talking about that across the cap spectrum earlier.
Speaker 11: But I would be pretty selective in the credits when
Speaker 11: I think about government bonds though, Paul, and this is
Speaker 11: interesting cutting you clipping coupons, as you say, Look, we're
Speaker 11: coming off a couple of really challenging years for treasuries.
Speaker 11: The starting point for yields is higher, better, and the
Speaker 11: relative valuations compared to stocks, I think are much more attractive.
Speaker 11: So if we keep getting this disinflationary trend and the
Speaker 11: housing market softens, helps continue that decline and overall prices
Speaker 11: in the economy, I think yields could soften, and by
Speaker 11: the way, that supports the bottom of the capital structure
Speaker 11: that stocks as well.
Speaker 4: Tally. Are you based in Vegas, No, that's.
Speaker 11: Where HQ is. I live here in Central New Jersey.
Speaker 4: Keyboard to see Jersey. That's where it's all comes back
Speaker 4: to keyboard.
Speaker 3: I mean, I'm sinking that I see my notes here
Speaker 3: says it's Vegas, but he's in keyboard.
Speaker 8: I mean earl of the base.
Speaker 4: I will be on.
Speaker 7: Fox you when it comes to I would be going to.
Speaker 3: Cast keyboard on my train down to the Jersey shore.
Speaker 3: Here today, Tally Leisure, chief market strategist, the Wealth Consulting Group,
Speaker 3: joining us here from the Swamp Happy Leader.
Speaker 4: We appreciate that.
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