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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: Russ Mayfield with us right now and vest strategists Bared Ross. I love your note where you say, Okay, they're selling this, but they're not running from the market. Describe.

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Speaker 3: Yeah, So the S and P is within a percent of the all time high, and the momentum index is down some twenty five percent. So you've had this big rotation out of the darlings of the first half, and there's a lot there to pick up the slack. You know, equal weights in you an all time high, small caps in you an all time high. And it's you know, some defensives and that's to be expected. Healthcare utilities catching a bid, but financials industrial is doing well. You don't see that if it's a you know, investors fleeing the asset class because they're worried more of a rotation, which you know, I think is healthy, So we'll take it.

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Speaker 2: It's healthy, and it's not a correction, is it. I mean, we're just simply on a blended basis. There's a lot of carnage out there, but we're nowhere near like quote unquote a correction. No, not even close.

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Speaker 3: I mean the one thing you could worry about is, you know, where, where's the leverage in the system, and if there's enough of a momentum unwind, do leverage players you know, have to start selling other things, you know, to meet margin calls or whatever it is. So maybe there's some technical pressure down the pipe. But again, the indexes are within a percent or two of an all time high. I mean they'll be down a little bit today. But yeah, correction, not even close. Rotation, healthy, consolidation, whatever you want to call it, it's it's not a reason to get to get scared of things here.

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Speaker 4: Well we're els.

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Speaker 5: Let's talk about you know, rotation, right, I mean, let's talk about those factors that do drive the equity market, lowvall value growth. You tell me the second half of this year, which of those factors do you think do you expect to do the best?

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Speaker 3: I think value could catch a bid, right, I think financial is industrials, some of those classic value stocks, energy is obviously going to move with oil, but that's been good lately.

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Speaker 2: To me.

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Speaker 3: The strength or the robustness of that move depends on what happens in Iran. If we get yields down and oil down, I think value has legs. If we don't, you know, it's more of a mixed bag.

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Speaker 2: Okay for us, We've all got experience here. Henry's in the studio today, Rocket, he listens every morning. Henry's ten. For the kids out there, Ross, how do you begin to learn about your game with all these different narratives going on? What's your advice to Henry about starting an investment account?

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Speaker 3: Well, I would say get started now, Henry. The best time to buy stocks was ten years ago. The next best time is today. I think this is a perfect time to learn about stocks because we're about to enter an earning season where the thing that really drives stocks over the long term takes center stage. A lot of times, it's easy to forget what the main driver of stock prices is. And we're about to see a great quarter of earnings. So Henry, pay attention to what these companies are saying. That's the house, that's the game.

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Speaker 2: Yeah, I'm read now. You know, justin Bear's great, great book and Damien, there's always an excuse to say no.

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Speaker 5: Right, well, I mean there is always an excuse to say now. I think look, I think you're making a good point here, Ross about position sizing, or at least that's the way I'm reading what you're saying, right, I mean, you can take risk in this market, but it's about you know, it's about how you position within the broader portfolio. And you know, instead of getting defensive outright and buying you know, I don't know what are defensive Stucker, staples, utilities, energy to a lesser extent, you know, maybe you just have to kind of, you know, take a little bit off the table here.

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Speaker 3: Yeah, And one of the things we've been talking about to clients is, you know, there's a lot of passive investors out there who might not know how concentrated their portfolios have gotten, especially in the AI trade, and so it's a good time to be proactive about looking to those other sectors. It's not necessarily a repudiation of AI trade, but more just as you mentioned, kind of risk management, diversification, and I think a lot of people don't know how concentrated the SMP is even if it's you know, talking about all the time.

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Speaker 5: That's the correct I mean even internationally, right, you can make an argument like what we're seeing in China with their stock market is heavily tied to the AI trade one hundred percent.

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Speaker 3: I mean, the EM indexes now are so weighted in China, Korea and Taiwan that they're basically AI indexes. They're not plays on you know, demographic growth or stronger economic growth in the emerging market world. So you just have to know what you own and then like you said, those positions accordingly and kind of just play the game. You know, risk management is important here.

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Speaker 2: With Bart Russ Mayfield with this is when you thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this.

00:05:02
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.

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Speaker 2: Last time, Tiffany Wilding was on for like a minute and twelve seconds. Going along here today for the Pacific Investment Management Company. They're economists for all of North America, Tiffany Wilding. Tiffany, what are you thinking about for the PIMCO manager brief on Monday morning. What's the thing that matters right now?

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Speaker 6: You know, Well, I.

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Speaker 7: Think we're clearly focused on on how Federal Reserve official communication is evolving. You know. Obviously, we're also very close focused on on the data. And I think there's an interesting, you know, sort of bifurcation that's happened because, on the one hand, you know, Federal Reserve officials you know, appear to be setting the markets up for potential rate hikes if inflation doesn't start.

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Speaker 6: To moderate here, you know.

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Speaker 7: On the other hand, we got good news on the inflation data this week, both the CPI and the pp I coming in under expectations, you know, in our own forecast is is that you will see some moderation in core inflation, which is the important one for the Fed, you know. But I've been saying this, you know, even on this program with you, Tom, that you have to keep in mind that headline inflation, you know, and thus we're going back to pre war levels on commodity prices. Headline inflation is actually likely going to dip below two percent next year. You know, so all of that sort of suggests to us that we have a fed on hold. But nevertheless, officials, you know, are certainly preparing the markets for a couple of potential.

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Speaker 2: Okay, so the first derivative, inflation's coming down. There's a lot of people agree with what Tiffany just said. There are we going to see lower prices or dare I say even are we going to see level prices as we go along in time?

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Speaker 7: Well, we've already seen the national app average retail gasoline price come down off of its recent peak. Now over the last few days it's it's up again as the Middle East conflict as has kind of flared up, but we are down off of the wartime peak levels. You know, we're also seeing some various food prices that are actually falling. But in general, you know, when we say inflation is coming down, you know that is the price change. And so you know, we're not expecting overall inflation in the United States to you know, to dip in a negative territory go into deflation. But we do think moderating inflation is a completely reasonable outlook to have.

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Speaker 2: I mean, Tiffany gets everything, you know, she's at a restaurant seven days a week. What's the grocery shop? And look like at the satsau.

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Speaker 4: Rouse, Tiffany, I have to ask you this.

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Speaker 5: You know, obviously you were watching I was watching Kevin Warsh's testimony to Congress this week, and you know, some of the questionings, specifically the questioning I saw from Senator Warren regarding one hundred million dollar payments, there's some craziness. I mean, is there any validitity to that? I mean, she just kind of muck raking. I mean, what's going on, you know, underneath the surface here in terms of you know, the Senate's real acceptance of the new newfait Chairman, Well, you know.

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Speaker 7: I mean certainly, you know, I mean Senator Warren, you know, will will have will have her peace to say. You know, I think what we're and certainly there could be some more that comes out on that, but I think what we're focused on at least is you know, what what sort of signals is chairwah sending in terms of how he's going to conduct monetary policy? You know, And I think the biggest emphasis that's come out since he's become chair, you know, is that he's very focused on price stability, you know, and I think that's very consistent with the other communication that we've seen from other officials to say that if you're not getting inflation that's moderating, you know that the Federal Reserve is is prepared to act, you know, and I think that, you know, this is a good focus to have, you know, in terms of the markets, you know, anchoring longer term inflation expectations are ensuring that they're anchored, you know, with this commitment to act. If inflation you know, doesn't moderate as we all expect, should actually keep longer dated interest rates anchored, right because you don't have inflation risk premiums that are getting priced into the long end of the interest rate curve.

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Speaker 6: So so everything that we've heard.

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Speaker 7: From Warsh in terms of his commitment to price stability, we actually think is a good thing for the bond market. You know. Now, of course, you know, there will be other questions that senators have. We'll continue to watch that as well.

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Speaker 5: And Tiffany, what about the size of the Fed's balance sheet? I mean, I know we didn't really get into the thick of it during the testimony, but you know, did you get any takeaways on that on where that's headed.

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Speaker 7: Well, I mean, I think there's I think this is now an open question. So the FED stopped at so called QT program quantitative tightening, where it gradually reduces its balance sheet at the end of last year, you know, and as because we saw front end interest rates, overnight rates and things like that, you know, start to start to increase to suggest that you know, reserves were coming more scarce. But ultimately we think they probably the Federals are probably can further reduce its balance sheet.

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Speaker 6: And the reason is just because you have.

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Speaker 7: Michelle Bowman and other bank regulators within her team that are laying the groundwork to try to relax some of the liquidity regulations and liquidity stress tests for banks and how they're implemented, and that should result in them, you know, effectively hoarding reserves less and that can mean that the Federal reserve can drain, you know. So we actually think that the Fed will probably start to reduce its balance sheet again next year as some of these policies.

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Speaker 6: You know, sort of reduce bank demand for real.

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Speaker 2: Okay, before you go frame up the calendar for me, I got July twenty nine with just tomorrow, and then I go to September sixteenth, which is a million years away, October twenty eighth, December nine, which meeting is Tiffany Wilding focused on done.

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Speaker 7: I mean, obviously we're we're focused on all of the meetings, you know, and I think I think September, you know, is certainly one to focus on. You know. I think the interesting thing from FED speak more recently, Governor Waller in particular, you know, sort of suggested that regardless of the drivers of inflation, you know, whether they're their supply or demand related, that if they see one more strong firm inflation print, then they're sort of ready to act. So that suggests to us that even if our view is ultimately right that inflation moderates, you know, if you get one more strong print here, you know, you could certainly see them hiking as early as September, you know, But again we take a step back. We're not in a twenty two a twenty twenty two type of environment, and ultimately, you know, we think the funeral reserve, you know, isn't on course to you know, to hike dramatically here. Maybe a few if they do it. But inflation, I think is is certainly in a good place and hopefully we'll get more data, you know, to that regard moving forward.

00:11:54
Speaker 2: Really wonderful tivity. Well, thank you so much to pimcod this morning. Stay with us more from Bloomberg. So thats coming up after this.

00:12:09
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple Karplay and Android Otto with the Bloomberg Business app, or watch us live on.

00:12:20
Speaker 2: YouTube in our studios in New York. Simona Macuda joins US with State Street Investment Management, their chief economist. You were in school in Romania, right, I was here, so I got to do an audible here it's Friday. I get used to it, okay, when it's when we talk about the Black Sea. What is the number one misconception Americans get wrong? Strevetas Admiral Stravitas tells me, Mania is arguably the most important territory in Eastern Europe for America.

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Speaker 8: It is pretty strategic, and I think the interest in making that, you know, strategic and strong is coming from both sides.

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Speaker 2: Because the water up on the seat, the naval basins and all that.

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Speaker 4: Daniebe absolutely yeah.

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Speaker 2: The Daniu, the Danube tour.

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Speaker 5: I'm not done the Danube tour out of Romania. But here here's the thing about Romania. I mean, yields are pretty high now. I mean they've had a hike pretty pretty aggressively to offset some of the things that we've seen on the ground there domestically and real yields and Romania have collapsed. I think they're one of the few now in EM then have actually a negative real yield on to your basis. But we're not going to talk about Romania pemonia. Let's let's talk about Japan. Let's talk about funding those carry trades. And EM talked to us about the end, talk to us about you know, do you see any potential buying of jgb's by locals, repatriation of all those assets on shore?

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Speaker 8: You know, that's been the story for so long. We've been talking about this, We've been afraid about this happening, and so far it's been a very slow moving kind of anyone here, right, and I think it will continue to be that incrementally, yes, because obviously you look at Japanese yields being at the levels not seen in a very very long time. There is an attraction there. But you know, these things don't happen overnight.

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Speaker 5: No, they don't. But I mean, look, I'm just I'm Tom. I don't know if you caught this. The latest tik date out of the US, I mean the foreign bid specifically the bit out of Japan has collapsed, not collapsed, but it's gone down pretty pretty significantly. And so you know, these are the things that I get concerned about, right, who's going to be buying all this debt, all this issues, all this coupon, you know, issues that were expected to see from the US Treasury. And so when I ask about, you know, the Fed's balance sheet, that's the place that I think most investors, myself and are looking for if there's going to be a black swan event.

00:14:34
Speaker 4: Would you agree with that?

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Speaker 8: I don't expect that. I mean, the concerns are valid.

00:14:38
Speaker 7: Right.

00:14:38
Speaker 8: You look around the world and tell me, where do you see a fiscal picture that actually looks good?

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Speaker 4: The worst maybe Germany?

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Speaker 8: And there your target. It's almost the opposite where it's almost too good for their own benefit. Right, It's a problem across the board. It's something that I think incrementally the prices get squeezed and the pen gets intensified by it's It's gonna take a while.

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Speaker 6: And you know.

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Speaker 8: One of the biggest lessons I learned when I came to stage draman economist. Right, I don't manage money, but I'm surrounded by all these people who do. We have six trillion under management, lots of people who manage money.

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Speaker 4: There.

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Speaker 8: One of the best lessons I learned from a colleague was when I was told Simona, I cannot hate everything, right, you have to own something, and in the restive.

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Speaker 2: Things state Japan, because they're going to get their act together.

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Speaker 8: I wouldn't say so. I would say the view is that the US dollar as a whole is in a multier depreciation cycle, and that comes from a number of places, including fixed incomon locations.

00:15:43
Speaker 2: I don't see that.

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Speaker 8: Well, no, that's the irony of it, right, Sometimes you're the trigger of the geopolitical risk event, and yet you are the safe asset. So that's a reminder though that these things, there is value in what the US dollar offers, so incrementally it can shift in a direction, but it's going to be a slow process.

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Speaker 2: I got to ask this, Can I do an audible on a Friday. Okay, you went to graduate school in a place with two of the most spiritual libraries in America. It's Suffolk in Boston, the Moakly Law Library, and there's also the ninth floor Study Lounge just down Tremont Street. Did you study in those libraries? Yes, I literally studied for half the CFA between BU and there. But they're the folks in Boston at Suffolk University. In Tremont they have built modern architecture in the old Street, these spectacularly gorgeous libraries. Nobody knows about them. Yeah.

00:16:41
Speaker 8: No, they are beautiful. And it's like the location, it's amazing, right, Like I always say, like, oh my god, I'm walking on history.

00:16:47
Speaker 2: Yeah, you're with all this history is you're with all this history in the atheneum there, and you're trying to study Friedrich Hayek out an LC over to Chicago because that's what Simona and I did. And then there's a damn sunset in your way, you know, across the Pardinal. So this is great. Can you come back again once a decade?

00:17:09
Speaker 8: It's not that far.

00:17:12
Speaker 2: On Romania her Romanian also all of her effort at State Street Investment management as well Samonama Coda, their chief economist. Stay with us more from Bloomberg Surveillance coming up after this.

00:17:31
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch US Live on YouTube.

00:17:44
Speaker 2: And it's a good time to talk to David Katz, president's CIO Matrix Asset Advisors, because he says there's no fog to Comcast, it's the one to buy. David. Top of your list is CMCSA discuss.

00:17:58
Speaker 9: Basically, the company has been under some very negative trends for the last few years in terms of subscribers. Management is doing everything that they can to try to maximize or enhance shareold of value. They're going to be splitting the company up in the next twelve to eighteen months. We think the two pieces are worth well above what the combined entity is worth. We think the stock is easily worth in the mid thirties. You're getting into twenty four. You get a very good dividend while you wait, and you have a very motivated and very competent management team. To enhance shareold of value, and the stock's at about seven and a half to eight times earning, so it's just dirt cheap right Link.

00:18:33
Speaker 2: That over then to Netflix. I mean, mister Roberts has taken a different path as any Netflix has been a great company.

00:18:42
Speaker 9: They've really done well, you know, in terms of subscriber growth and in terms of revenue growth, and in light of the problems that they're having. The stock is now down to about sixteen and a half to seventeen times next year's earning.

00:18:54
Speaker 2: So it's on our radar.

00:18:55
Speaker 9: We think it's still a little bit early, but at this price you're getting a lot of the negatives in it. We think if you have a eighteen month time or is it probably is going to be okay. We're not ready to step in here.

00:19:06
Speaker 2: Giza rogenosin with us in a few moments here on Netflix. David Katz of Matrix Asset Advisors with Damian Sasaur.

00:19:13
Speaker 5: Dude, I know you think it's going to be a pretty healthier earning seasons, but you're also expecting significant volatility.

00:19:18
Speaker 4: Talk to us about that.

00:19:19
Speaker 5: I mean, is that a little bit of a taste I guess this week in terms of what we shoul can expect for the balance of July and August.

00:19:26
Speaker 9: We think it is We think that the numbers are going to buy and large come through good. But you're seeing stock price moves of three to seven percent if the market thinks still a little bit better than expected or a little bit worse than expected. HCA pre announced, IBM pre announced, those stocks got taken out and shot. The flip side is Avid said business wasn't as bad as people had expected, and their outlook was a little bit better than expected, and the stock was up about five or six percent. So unless you have a great conviction about what a company is going to do before they report earnings, we would not step in front of any companies this are season, assess what's happened afterwards, take a longer term perspective, but we wouldn't try to trade around or trade before our needs.

00:20:08
Speaker 4: What do you think about tech here?

00:20:09
Speaker 5: I mean, is this really a great rotation out of AI related stocks? Is there any legs to this?

00:20:13
Speaker 2: Is this just a thank you because Apple's hitting the record high when the rest of tech is flat on its back?

00:20:19
Speaker 6: Right? I mean?

00:20:20
Speaker 4: Is this broad based in nature?

00:20:21
Speaker 6: I mean?

00:20:22
Speaker 5: Or is as you brightly point out, is this just a little bit of blood letting, a little bit of momentum.

00:20:26
Speaker 9: Well, what's happened this year is the hyperscalers, the MAC seven, which had a great year last year, had a horrible six month period and actually we're down three to seven percent. Companies like Microsoft and Google and Amazon and Meta. The flip side is semiconductor companies basically melted up. That was actually the best quarter for semiconductor companies in the second quarter ever, So basically after these huge gains, the stocks are giving back some. Our expectation for the year is a lot of rotation. So you're getting rotations into Semis, out of Semis, into the hyper seeds in the Max seven. Expect that to continue. We think the best way to approach this market is take a longer term view. If you like Semis and they just sold off twenty five percent, you could add into that weakness. We actually think that the Max seven, many of them, the hyperscalers, are going to have a very good back half of the year, so we had been buying into that weakness. Then there are other sectors that you know, the consumer stables has done poorly, healthcare had done poorly. We'd be buying a number of companies there because we think when the market falls out of love with that, it's going to put that money else.

00:21:32
Speaker 2: Jamian one more.

00:21:33
Speaker 5: Yeah, I mean, look, with equity is near record levels, David, I mean, you know, market breadth has actually turned negative here, right. I mean we've seen a lot of stocks making more new lows than new highs. We've seen a lot of members trading, you know, below their fifteen two hundred day DMAs. I mean talk to us a little bit about you know, technicals here.

00:21:49
Speaker 9: Well, we're fundamental shops, so we can't get great insight into technicals. But on a fundamental basis, we think the market is fully priced, but there are many, many pockets of undervalue socks, and we think the key is to buy those undervalued socks with a good long term perspective. Get a lot of consumer staples like PEPSI announced startings. They were a little bit light in terms of their outlook, but it's at sixteen and a half time s earning with a four percent yield. Put money and things like that, you're going to do very well in the next twelve months.

00:22:18
Speaker 2: David Katz, thank you so much. Matrix Asset Advisor.

00:22:20
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