Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly
Speaker 1: Markets podcast. I'm Sarah Pantzak, a reporter on the Cross
Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets team. This week on the show, we're still
Speaker 1: catching our breath after what has felt like the busiest
Speaker 1: week of the year. Seriously, First, the Fed cut rates
Speaker 1: for the first time in a decade. Then Wednesday and
Speaker 1: Thursday saw more trading volume midday than at any other
Speaker 1: point in President Trump announced fresh tariffs, and on top
Speaker 1: of all of that, it's been the most hectic period
Speaker 1: of the second quarter earning season. Right. And if all
Speaker 1: of that is not crazy enough, uh, don't worry. We
Speaker 1: still will have our traditional the craziest thing I ever
Speaker 1: saw in markets this week? And Sarah, as you know,
Speaker 1: I get excited on podcast today, I'm especially excited today.
Speaker 1: And you know why why we have a new hotline,
Speaker 1: What goes Up Hotline. So if you saw something in
Speaker 1: crazy in markets, please give us a ring and leave
Speaker 1: a voicemail with what you saw. Sarah, I of course
Speaker 1: forgot the number. Hopefully you have the number handing, Oh
Speaker 1: have it on hand. I memorized it already it's six
Speaker 1: or six three two four three four nine zero, So
Speaker 1: feel free to give us a call, leave us a
Speaker 1: voicemail of the craziest things that you guys have seen
Speaker 1: in markets, and if it's good enough, maybe we will
Speaker 1: even play it on the show. That's right, Well, two
Speaker 1: things that are not crazy are two guests this week.
Speaker 1: First guest is joining us from Footstee Russell. He's the
Speaker 1: managing director of Global market Research, Alec Young. Welcome to
Speaker 1: the show. A great to be here, guys, And also
Speaker 1: joining us from Bloomberg Television. He's an achorman and a reporter.
Speaker 1: Romaine Bostic and Sarah. I just want to paint a
Speaker 1: picture for the listeners who don't watch TV. I think
Speaker 1: Romaine is widely considered the best stress man on on Bloomberg,
Speaker 1: no doubt. Actually like I try, I try. We don't
Speaker 1: have a hotline on our show, though, I'm already to
Speaker 1: you know, two minutes into this podcast and I'm already jealous.
Speaker 1: You're gonna have a bigger budget, not a bigger clothing budget.
Speaker 1: I'll tell you that a Romaine dresses like he belongs
Speaker 1: on TV. I dressed like I should be selling TVs
Speaker 1: down at the mall, you know, like, hey, how about
Speaker 1: a six an zenith for you? Anyway, we got notes
Speaker 1: from Alec and his people about, you know, some of
Speaker 1: the research and stuff he's been up to recently. I
Speaker 1: gotta say he really nailed it. I gotta give you
Speaker 1: a round of appause, Alec. I just want to read
Speaker 1: a couple of the talking points from from your notes here. Now,
Speaker 1: remember this is a week where the Fed cut rates,
Speaker 1: but uh, did not really signal a full on easing campaign. Uh.
Speaker 1: You know, Powell referred to it as a mid cycle
Speaker 1: adjustment kind of signaling maybe one or two cuts, not
Speaker 1: a full blown easing campaign. That disappointed a lot of people.
Speaker 1: The next day we got President up announcing new TIFFs.
Speaker 1: Let me just read you some of the notes Alec
Speaker 1: wrote before all this happened. Uh. One, don't confuse the
Speaker 1: recent US China trade truths within all clear and clearly
Speaker 1: it's not check. And also, markets maybe over extrapulating both
Speaker 1: how much the Fed will ease and how much it
Speaker 1: will help. Now they definitely over extrapolated how much power
Speaker 1: is planning to ease. Now, the question is how much
Speaker 1: will it really help? Is that sort of a top
Speaker 1: of mind thing for you, Alec is you know, will
Speaker 1: these race cuts really be what the market needs to see?
Speaker 1: This data economic data firm up? Yeah. I mean I
Speaker 1: think the markets have been such a one way bet
Speaker 1: for for months, um really buoyed by this idea that
Speaker 1: of the power put and fundamentals are a little bit shaky,
Speaker 1: but it's okay. You know, the Fed's got our back
Speaker 1: that you really have to scrutinize, you know, kid, the
Speaker 1: market be over extrapolating things. And I think on a
Speaker 1: couple of fronts, One, will the Fed just numerically cut
Speaker 1: as much as expected? If we look at Fed fund futures,
Speaker 1: they're still pricing in about one eight on the two
Speaker 1: year note in a year versus there are the two
Speaker 1: year notes at one a d excuse me, and the
Speaker 1: Fed funds is two and a quarter. So the markets
Speaker 1: pricing in about forty five basis points of additional easing
Speaker 1: over the next year. So that's that's two more cuts.
Speaker 1: And and I think Gairman Powell's statements were more like
Speaker 1: we did an insurance cut, we're gonna watch. We're not
Speaker 1: ruling out further cuts, but don't confuse this with you know,
Speaker 1: a month after month rate cutting cycle, So the market
Speaker 1: may have gotten a little ahead of not only the
Speaker 1: amount of the cuts, but then, as you said, what's
Speaker 1: the impact, because things like housing will respond very favorably
Speaker 1: to lower rates, a lot of the traditional economic metrics will,
Speaker 1: but a lack of capex due to trade related anxiety.
Speaker 1: I'm not sure that that's the kind of metric you know,
Speaker 1: um CEO CFO competence. I'm not sure that that's the
Speaker 1: kind of metric that is as sensitive to modest reduction
Speaker 1: in the FED funds rates. So, given how much markets
Speaker 1: have run on the back of one positive catalyst, there's
Speaker 1: quite a bit to lose if the markets maybe overshot
Speaker 1: at skis a little bit on the positive impacts there, Alec,
Speaker 1: you've also called this a quote unquote show me market.
Speaker 1: Some of the latest data that we've got and has
Speaker 1: been some of the I s M data which came in,
Speaker 1: it wasn't It wasn't great by any means. Mis expectations
Speaker 1: still not in contractionary territory prices paid or lower as
Speaker 1: well at this point in time for it to be
Speaker 1: a show me market, now that trade is back in
Speaker 1: play and people are waiting for the Fed to ease.
Speaker 1: Is it better if economic data is good but not
Speaker 1: that good or at this point do you need a
Speaker 1: little bit rougher rougher economic dad to come out. Yeah.
Speaker 1: I think in the current macroeconomic environment, it is safe
Speaker 1: to say that bad economic news may be interpreted in
Speaker 1: a positive way by investors, given that, you know, additional
Speaker 1: FED easing is so important to the macro backdrop right now.
Speaker 1: We even saw that with the latest I S M report.
Speaker 1: It was a little soft and stocks actually welcome that news,
Speaker 1: so that we're in a very tricky environment right now.
Speaker 1: I call it a show me market because we've run
Speaker 1: up so much on hope versus actual you know, fundamental facts.
Speaker 1: The global leading economic indicators are soft. Earnings growth. While
Speaker 1: coming in better than expect it is still pretty weak.
Speaker 1: It's only up low single digits year over year. Valuations
Speaker 1: aren't through the roof, but we're about seventeen eighteen times
Speaker 1: forward earnings, So you need to see investors want to
Speaker 1: show me these great profits because on trailing earnings the
Speaker 1: markets much more expensive. So um, I think we're in
Speaker 1: that that show me phase. To really build on this rally,
Speaker 1: we need to see that investors positive hopes are coming
Speaker 1: to fruition that their their hopes are being fulfilled. Now, Romane,
Speaker 1: you spend a good part of your day talking to
Speaker 1: really smart investors, analysts, strategies. What is sort of the
Speaker 1: consensus out there is what Alec is saying? Does that
Speaker 1: ring true to to what a lot of the people
Speaker 1: you're hearing from? You know, what is sort of the
Speaker 1: what's the word on the street from Romans? Well, I
Speaker 1: think a lot of people. I mean, the cut itself
Speaker 1: wasn't really a disappointment. I think most people weren't really
Speaker 1: expecting more than that. But I definitely think the communication
Speaker 1: that we got during the press conference, Uh, you know,
Speaker 1: it created a lot more confusion. Uh, there were a
Speaker 1: lot of folks banking on this idea that we were
Speaker 1: that this was more than an assurance cut that we
Speaker 1: were embarking on, uh a little bit more of a prolonged,
Speaker 1: if even short, but still prolonged easing cycle. Remember the
Speaker 1: communication that we were getting out of FED members even
Speaker 1: in July Bullard clarata or early July was pretty much
Speaker 1: made it clear that we could potentially get, first of all,
Speaker 1: more than twenty five basis points in one fell swoop
Speaker 1: but that we were released going to get more than
Speaker 1: twenty five basis points this year. So a lot of
Speaker 1: people walked away from Wednesday's press conference with this sense
Speaker 1: of or confusion, I should say, of whether we were
Speaker 1: going to get maybe another twenty five basis points later
Speaker 1: in this year. Something in the market is largely priced
Speaker 1: in not only a twenty five, but really they've been
Speaker 1: They were pricing in about thirty basis points uh prior
Speaker 1: to the meeting, uh, and then once the meeting ended,
Speaker 1: you kind of saw a lot of fluctuations as people
Speaker 1: were trying to figure it out. I don't know if
Speaker 1: and I want to go back to a point that
Speaker 1: Alec made too about just sort of the impact of
Speaker 1: the rate cut, because there was this sense to that,
Speaker 1: what is Powell really trying to do here? If this
Speaker 1: was about a reigniting inflation or reigniting inflation expectations, he
Speaker 1: clearly failed on that level, at least in the short term.
Speaker 1: If this is about sort of reigniting business confidence, which is,
Speaker 1: let's face it, probably the weak spot of the economy
Speaker 1: right now, what does twenty five basis points do for capex?
Speaker 1: I mean, cost a capital hasn't been really an issue
Speaker 1: for companies. This is a confidence game for companies right now,
Speaker 1: and the confidence really has nothing to do with the FED.
Speaker 1: It has to do with what's going on in the
Speaker 1: White House. And I'm not sure that monetary policy can
Speaker 1: fix that, you know, Alec. A lot of people are
Speaker 1: clearly making the connection to the mid nineties, when the
Speaker 1: mid cycle adjustments from the FED a few two or
Speaker 1: three rate cuts to sort of, uh, you know, react
Speaker 1: to the Asian financial crisis, long term capital management, that
Speaker 1: type of thing. Do you see that parallel in this case?
Speaker 1: I mean, is that a valid comparison to make? I think,
Speaker 1: to really to know if if just one or two
Speaker 1: insurance cuts is all we need, you kind of have
Speaker 1: to have the answer to how does the whole trade
Speaker 1: situation play out? How does the deterioration in Europe and China?
Speaker 1: You know, is that about to bottom or is it
Speaker 1: just sort of getting started. There's a lot of unknowns,
Speaker 1: and I think, um, you know, sometimes people do a
Speaker 1: few things when they read the FED tea leaves One
Speaker 1: they I think, over extrapolate how much more the FED
Speaker 1: knows than the rest of us. Not to take anything
Speaker 1: away from them, but at the end of the day.
Speaker 1: They all have their Bloomberg terminals and they're doing what
Speaker 1: a lot of professional investors that scrutinize them so closely
Speaker 1: and reporters are doing so. You know, they're not omniscient scions, right, UM.
Speaker 1: And the second thing is, I think, unfortunately Chairman Powell
Speaker 1: seems to be maybe overly sensitive to the markets when
Speaker 1: the markets were very volatile. The more volatile the markets are,
Speaker 1: the more devishes commentary just in currently seems to be
Speaker 1: markets had recovered. To get him in front of the microphone,
Speaker 1: he doesn't sound as dublished. I think that seems to
Speaker 1: be the pattern. He's he's very he he's not a
Speaker 1: PhD economis. He comes from a market background, very popular
Speaker 1: in the in the financial community. I think, more in
Speaker 1: tune with market dynamics than maybe some of his predecessors,
Speaker 1: less of a formally trained economist. UM. So I'm very
Speaker 1: confident that UM, if we need further insurance cuts, the
Speaker 1: FED will be there to deliver them. The problem I
Speaker 1: don't think. I think the market was getting comfortable today
Speaker 1: with the idea that the UM, the FED is still
Speaker 1: has their back, even though the communication post meeting could
Speaker 1: have been a little bit better. The wild card here
Speaker 1: is trade, which people thought was on the back burner.
Speaker 1: They're continuing to talk no imminent breakthrough, but it's not.
Speaker 1: It's not deteriorating. That's obviously changed. Um So, I think
Speaker 1: I think it's really it's not so much on the
Speaker 1: insurance side. It's on the growth side of the ledger
Speaker 1: that investors are are struggling a little bit now. You know,
Speaker 1: I wonder if you sort of put yourself in the
Speaker 1: shoes of Jeromee pal Uh and even if you're thinking, well,
Speaker 1: we really are going to do a full on easing campaign,
Speaker 1: is there a danger in signaling that right away? I mean,
Speaker 1: is it the type of thing if you have a
Speaker 1: hungry kid in front of you and you're trying to
Speaker 1: get them neath the their broccoli, you don't want to
Speaker 1: let them know that there's ice cream coming up behind it,
Speaker 1: right I mean? Is it is there a danger in
Speaker 1: cutting a quarter point now and signaling more to come
Speaker 1: where it's sort of differs that behavior that you're trying
Speaker 1: to influence down the line. It can be self fulfilling,
Speaker 1: and there's always that risk that the markets will think, well,
Speaker 1: maybe the Fed knows something we don't. Maybe it's worse
Speaker 1: than we thought. It can also you know, give false
Speaker 1: incentives and get people to take you know, undue risk
Speaker 1: in the market. So you know, there's no perfect answer.
Speaker 1: But I think the bottom line is that for most
Speaker 1: of this year, the trend and risk assets has been
Speaker 1: up because the feeling has been that the Fed is
Speaker 1: going to be very supportive. I think now the narrative
Speaker 1: is shifting to growth risks. The focus is squarely on
Speaker 1: US China trade. Both sides wanna save faced domestically. I
Speaker 1: don't see China backing down from this latest news from
Speaker 1: the President. So if we don't see that, if they
Speaker 1: don't try to diffuse this, the next conclusion is, well,
Speaker 1: maybe they do something confrontational. How would the markets take that.
Speaker 1: I think, given the markets have really priced in global
Speaker 1: growth is bottoming, trade will be favorably resolved largely because
Speaker 1: of policy accommodation. I think that has to unwind a
Speaker 1: little bit at the margin. Policy accommodation underwhelmed the little
Speaker 1: The Feds a little less deverish than expected, admittedly from
Speaker 1: a that's relative to very devish expectations, and on the
Speaker 1: trade front, clearly things are a little worse than expected.
Speaker 1: So it's sort of a double whammy for for risk assets,
Speaker 1: whether it's equities, US are globally, probably more so globally,
Speaker 1: a bigger negative globally where they have less of a
Speaker 1: strong consumer to playoff. And for credit um, for high
Speaker 1: things like high yield, it's really um. It's really an
Speaker 1: incremental negative. Your insurance isn't as strong as you thought
Speaker 1: it was going to be, and the risks the reason
Speaker 1: you need that insurance is a little greater than you
Speaker 1: thought it was gonna be. When we came into the
Speaker 1: office Thursday morning, the probability of a rate cut for
Speaker 1: September was around Then President Trump dropped the tweets saying
Speaker 1: that tariffs on three billion dollars of extra imports from
Speaker 1: China we're going to go up to as September one,
Speaker 1: and that probability shot up to more than romaine. How
Speaker 1: do you see the relationship between trade and the Fed
Speaker 1: playing out here? Well, I mean, the market was largely
Speaker 1: pricing in this idea that the best case scenario, and
Speaker 1: part of that best case scenario was predicated on two things.
Speaker 1: Is that the FED would be there as a backstop
Speaker 1: quickly if things really went south, and that the trade
Speaker 1: dispute is still largely in the hands of one man
Speaker 1: who could turn on a dime tomorrow if you really
Speaker 1: wanted to and resolve this. And so there was always
Speaker 1: this this sort of faith that the President would only
Speaker 1: go so far that if the markets, uh, you know,
Speaker 1: got two out of whack, where the economy was getting
Speaker 1: too out of whack from the trade war, that somehow
Speaker 1: Trump would pivot. Now, I think that might have been
Speaker 1: a little bit wishful thinking, and I think somewhat of
Speaker 1: the reaction that you're seeing in the market right now
Speaker 1: is this idea that they are going to try to
Speaker 1: test the FED. They are going to try to test uh,
Speaker 1: the White House and and and the legislators as well,
Speaker 1: uh to sort of, you know, create some sort of
Speaker 1: resolution to all of this. And I think this tantrum
Speaker 1: that you could potentially see in this market has the
Speaker 1: potential to sort of create a really bizarre feedback loop
Speaker 1: where Powell and companies sort of still have to sort
Speaker 1: of look at the data and not really sort of
Speaker 1: just give in and you know, give the market their
Speaker 1: pacifier every time they start whining. But at the same
Speaker 1: time you have to understand that right now, this economy
Speaker 1: is and the markets are intertwined in a way that
Speaker 1: I don't think we've really seen, at least in sort
Speaker 1: of you know, this current generation. Now it's a great
Speaker 1: point because when you think of how we started the week,
Speaker 1: it was with some Trump tweets about oh, maybe this
Speaker 1: won't be resolved until after the election, and they'll they'll
Speaker 1: deal with sleepy Joe Biden. What do you think that's
Speaker 1: just posturing or yeah, you know, I don't know what
Speaker 1: China's position is, but but I can tell you, I mean,
Speaker 1: I think Trump has made it clear what he wants.
Speaker 1: I also think you can read from the t leaves
Speaker 1: with regards to the Trump administration that they are in
Speaker 1: tune to what's going on in the markets. They are
Speaker 1: in tune to what's going on with the economy, and
Speaker 1: that potentially they would make some sort of concessions if
Speaker 1: they thought that the damage was going to be severe
Speaker 1: enough to damage the economy and obviously damage Trump's re
Speaker 1: election champers to switch gears a little bit. Uh Roman.
Speaker 1: One of the things I don't envy you is when
Speaker 1: an earnings report comes out and you're reading it live
Speaker 1: on TV. They're trying to trying to make the sense
Speaker 1: out of headlines on an earnings release right as they hit.
Speaker 1: But I'm curious if you if you step back a
Speaker 1: little bit. I mean, we have almost three quarters of
Speaker 1: the markets reported for the second quarter. Any big takeaways
Speaker 1: for you that maybe we've missed well, I mean, the
Speaker 1: big takeaway here is that we are seeing declining earnings,
Speaker 1: uh period declining earnings. We're seeing declining revenue growth. Uh.
Speaker 1: These companies are still growing, and I think you're seeing
Speaker 1: sort of almost sort of a you know, this sort
Speaker 1: of corner being sort of uh notched out into the
Speaker 1: market where you have companies that are still able to grow,
Speaker 1: they still have a healthy demand from their customer base.
Speaker 1: That's where investors are flocking to. But I don't think
Speaker 1: you see a lot of confidence amongst investors in a
Speaker 1: lot of these earnings releases that this is something that
Speaker 1: is sustainable. And I'm just talking about an aggregate. There
Speaker 1: are there are some clear exceptions to this, but an aggregate.
Speaker 1: And I think that's why you're seeing this sort of
Speaker 1: rotation into defensive and then back into cilic and then
Speaker 1: back in defensive, because people are really trying to figure
Speaker 1: it out, you know, so we're half almost halfway through
Speaker 1: the earning season, and I think you have a clearer
Speaker 1: picture that this sort of rebound that a lot of
Speaker 1: people are expecting in the second half of the year,
Speaker 1: if it does materialize, it's certainly not going to be
Speaker 1: as strong as some thought in the first half. You
Speaker 1: look at the performance that we've seen this week, and
Speaker 1: it's clear that defensives are back at the driving seat.
Speaker 1: You look at those at the top of the leaderboard.
Speaker 1: It's real estate, it's utility, is consumers, stables, communication services,
Speaker 1: alec coming back to you. A lot of strategists year
Speaker 1: and forecast. We saw Goldman Sachs raise their forecast earlier
Speaker 1: this week. Much of that is predicated on multiple expansion
Speaker 1: valuation growth because we're not seeing it in actual corporate profits.
Speaker 1: Seeing where everything with the trade situation is going, and
Speaker 1: seeing the situation that we have with the FED as
Speaker 1: it stands, do you see multiple expansion growing even further
Speaker 1: from where we're at now, not based on the current
Speaker 1: macro environment. So something would have to give, most specifically
Speaker 1: on trade. I think the one thing we should focus
Speaker 1: on and maybe tying into what romains are saying about
Speaker 1: the earning season is that the increase on September one,
Speaker 1: a new ten percent tariff on three hundred billion and
Speaker 1: currently untariffed Chinese imports will be immediately um diluted to earnings.
Speaker 1: So we have a situation where companies manage the earnings process.
Speaker 1: They're beating expectations by about two or three hundred basis points,
Speaker 1: which they do on average every quarter. The problem is
Speaker 1: that the consensus numbers out the fourth quarter, first quarter.
Speaker 1: They're kind of like icebergs. They tend to melt. As
Speaker 1: you get within a couple of months, you have a
Speaker 1: better sense of a realistic number. You know it will
Speaker 1: be beaten if you apply that type of analysis. We're
Speaker 1: in a five six percent at best earnings growth environment
Speaker 1: here and we're trading at seventeen and a half times
Speaker 1: with with the the earnings numbers naturally tend to go
Speaker 1: down for numbers as analysts get more realistic and advise them.
Speaker 1: You put the tariff um macro dilution on top of that.
Speaker 1: No way you're gonna get multiple expansion. You're getting multiple
Speaker 1: expansion when people are thinking, oh, the Fed's gonna cut,
Speaker 1: the macro is going to improve, that's over FED is
Speaker 1: disappointing or at least a poor communicator, and the macro
Speaker 1: is visibly deteriorating now via Twitter. Right, no, no, no,
Speaker 1: you're not. We We took three cracks at thirty and
Speaker 1: a quarter on the SMP and couldn't break it before
Speaker 1: this latest that we're we're done. I mean, whether we
Speaker 1: can drop back, consolidate, recharge and take another shot. You know,
Speaker 1: we all know in this business things could look very
Speaker 1: different in October November. So I think you're in targets
Speaker 1: are a little bit of of a fool's earned and
Speaker 1: but but I think Goldman would probably want to have
Speaker 1: that one back. Yeah, maybe a little bit of bad timing.
Speaker 1: But looking even deeper to this next chaunch of terras,
Speaker 1: sure it's ten percent, which is a lesser rate than
Speaker 1: the percent that we've seen on the two fifty billions
Speaker 1: so far. But considering that this next list, the three billion,
Speaker 1: is going to be more so on consumer good, does
Speaker 1: a ten percent rate on that larger amount worry you
Speaker 1: more than we've seen so far. As you said, it's
Speaker 1: going to be more consumer centric. Apple doesn't have an
Speaker 1: exemption as of yet, and we know air pods and
Speaker 1: wearables were big part of um, you know, their their growth,
Speaker 1: and that's the kind of thing that gets that gets hit.
Speaker 1: So on the other thing is the president is the
Speaker 1: ultimate poker players. So it's ten percent now there's currently
Speaker 1: in place on the old money imports that were being tariffed.
Speaker 1: He's leaving himself room to go to twenty five on
Speaker 1: the new batch, you know, in the next round of
Speaker 1: of of poker, of betting as it were. So just
Speaker 1: because we're only going to ten now doesn't mean that
Speaker 1: the final resting stop isn't um isn't twenty five. I mean,
Speaker 1: it's pretty clear that his people came back from the
Speaker 1: Chinese negotiations this week and briefed him, and he didn't
Speaker 1: like what he heard, and so he's trying to and
Speaker 1: I don't know if you read his tweet word for word,
Speaker 1: but he's trying to be very He's saying, we look
Speaker 1: forward to engaging with you and get yeah, we're gonna
Speaker 1: he said, we're gonna put a small additional tariff on you.
Speaker 1: So this is clearly um, you know, gamesmanship and deal making.
Speaker 1: So I think the market is going to be worried that, um,
Speaker 1: you know, we're not stopping at ten Luckily, there's a
Speaker 1: finite amount of imports coming from China, so there's a
Speaker 1: finite universe of the dollar amount of Chinese imports that
Speaker 1: can be tariffed. But the President's made clear he's willing
Speaker 1: to look at other places. The last point I would
Speaker 1: make on this, as you mentioned that FED fund futures
Speaker 1: once this news broke, um started a much more aggressively
Speaker 1: priced into September quarter point ease, and yet the markets
Speaker 1: still soft. So I think the smart money takeaway here
Speaker 1: is that don't get long around the FED that's priced in.
Speaker 1: That can't help you anymore. When something's been this talked
Speaker 1: about and beaten to death, that can no longer move markets.
Speaker 1: So a dovish FED can't help you. And and at
Speaker 1: the margin the growth outlook, which is the reason you
Speaker 1: need a dovish FED in the first place. You need
Speaker 1: growth to be short. That's that's melting away a little bit.
Speaker 1: And President Trump has the potential to do a lot
Speaker 1: of damage very quickly, or at least get people to
Speaker 1: extrapolate that in their minds, because he's very vocal and
Speaker 1: he's very bold. So when you add it all up,
Speaker 1: I think the momentum has shifted very quickly and violently
Speaker 1: from the bulls to the bears this week, and I
Speaker 1: think I think it's um it would behoove investors to
Speaker 1: sort of step back and not do the thing that's
Speaker 1: been working recently. The Pavlovian instinct is to just buy
Speaker 1: the dip. So Alec, you sound very cautious to me.
Speaker 1: I think that's a common, you know, feeling right now
Speaker 1: among investors. But you know, if you're someone who needs
Speaker 1: to remain invested in equities or you know, we all
Speaker 1: know the dangers of trying to time the market get
Speaker 1: in and out. It's very confusing now, as Romaine pointed out,
Speaker 1: what is a good defense to play right now? Like
Speaker 1: you you mentioned, you know, in a low rate environment,
Speaker 1: reads the bond proxies, utilities do well. But there's almost
Speaker 1: feel like a crowded trade now with utilities high pees.
Speaker 1: Another place people had always sort of assumed would be
Speaker 1: a safe haven from the trade wars small caps, just
Speaker 1: because they're more domestically focused, but as you point out
Speaker 1: your your note, they're heavily uh weighted towards financials. Large
Speaker 1: caps are more tech weighted with the larger earnings growth,
Speaker 1: So you know, boil it all down. Where is a
Speaker 1: good place to play defense if you want to stay
Speaker 1: fully engaged in the stock market right now? Sure, and
Speaker 1: just the point out, I mean, we try to give
Speaker 1: some tactical insights. So just because there's a cautious tone,
Speaker 1: certainly not suggesting major allocation changes. Most of our institutional
Speaker 1: clients do have, you know, all equity mandates or um
Speaker 1: asset allocations that they have to maintain on an evergreen basis.
Speaker 1: It's more just about expectations setting, you know. And we
Speaker 1: are still up I think nineteen and a half percent
Speaker 1: for the year. You know this is but we we
Speaker 1: do want to set expectations because a lot of people
Speaker 1: think past this prologue. There's a lot of the recency
Speaker 1: bias from the behavioral work, and we think, um that
Speaker 1: I call it a gear shifter or day. But there
Speaker 1: are times when the tone changes and the direction shifts,
Speaker 1: all those things have an inflection point, and I think
Speaker 1: we've just hit one, UM And I think if you
Speaker 1: look at the July performance, everything was clustered around up
Speaker 1: about two percent. There were a few outliers on either side,
Speaker 1: but everything is participated on the way up. I don't
Speaker 1: think there's gonna be any great place to hide on
Speaker 1: the way down, UM, other than maybe cash. And that's
Speaker 1: why people do have cash allocations is so that they
Speaker 1: can put dry powder to work in these kinds of
Speaker 1: UM situations. But again just cautioned that the biggest thing
Speaker 1: that's helped risk appetite has been the Dovish fed and
Speaker 1: I think we've stretched that rubber band as far as
Speaker 1: we can and if the margin it underwhelmed a little yesterday,
Speaker 1: I don't think that helps you. And then on the
Speaker 1: growth side, which has been the big source of anxiety, UM,
Speaker 1: the president's UM trade news flow has meant that that
Speaker 1: that's deteriorated. So when you add it all up, I
Speaker 1: think the path of least resistance tactically is is lower
Speaker 1: for for stocks. Alright, Well, on that downbeat, I think
Speaker 1: we have to end living it up a little bit,
Speaker 1: living it up a little bit with the the craziest
Speaker 1: thing we're not we're not all going triple leverage cast
Speaker 1: a right now. If I can triple casts, I think
Speaker 1: what kind of what kind of rates you get on
Speaker 1: your leverage? But Romaine, let's start with you. Have you
Speaker 1: witnessed anything? I mean, Okay, look, we witnessed, all witness
Speaker 1: a lot of crazy things, right, what's the craziest thing? Okay,
Speaker 1: aside from j Pale's press conference? Uh, you know, actually
Speaker 1: the thing I it wasn't sort of witnessed, but it
Speaker 1: was a great story actually, Uh in Bloomberg Business Week
Speaker 1: about oat milk. Are you into this this night? And
Speaker 1: I've been meaning the reading and I haven't read it. Well,
Speaker 1: it's pretty good. It's a it's a well, okay, that's all.
Speaker 1: That's a that's a matter of but but but it's
Speaker 1: a fascinating read about how this something that was pretty
Speaker 1: much obscure just a few years ago. Swedish company, uh
Speaker 1: totally makes this thing and they came to the US
Speaker 1: a couple of years ago. They just built this gigantic
Speaker 1: facility in New Jersey. They're building another facility in Utah.
Speaker 1: They can't keep this stuff in stories. And Bloomberg has
Speaker 1: this great sort of breakdown of a how it's made
Speaker 1: the milk um, which you know isn't the most appetizing process,
Speaker 1: but you know, apparently it has you know, the same
Speaker 1: mouth feel of milk apparently and uh yeah, the texture
Speaker 1: of mouth feel of milk, but you don't have, you know,
Speaker 1: if you have issues with you know, eating animal products
Speaker 1: or something, or you just or again, or you just
Speaker 1: can't tolerate arey, this gives you that alternative. And I
Speaker 1: just see this popping up everywhere. And we talk a
Speaker 1: lot about you know, plant based meats. They'll obviously the
Speaker 1: surge of you know, beyond meat and and impossible foods.
Speaker 1: It's just kind of an interesting phenomenon. And for somebody
Speaker 1: who's still you know, just drinks regular milk and eats
Speaker 1: you know, regular beef, I find it very fast. There's
Speaker 1: no oat milk in the Bloomberg pantries. If you haven't
Speaker 1: seen it yet, have seen it. I've tried it. I
Speaker 1: know I'm still a regular Burger. Read are we caveman?
Speaker 1: I mean, I don't know, We're dinosaurs? Were going, well,
Speaker 1: my crazy thing kind of ties in. But but Alec,
Speaker 1: let's go, let's go with tears first. What's your crazy
Speaker 1: thing for the I'm probably gonna stick to the market.
Speaker 1: I thought that was you guys wanted the craziest thing
Speaker 1: in the market, So that's kind of what I can.
Speaker 1: I think they did, Alec, but I just I don't
Speaker 1: read it. And that was good room and we needed
Speaker 1: to kind of, you know, lighten it up a little bit.
Speaker 1: But I would just sticking with the markets. We've had
Speaker 1: a few choices. You mentioned the press conference, which was
Speaker 1: definitely a little bit you know, offbeat. But I think
Speaker 1: the President and his tweets. I mean, he's been tweeting
Speaker 1: for years, So I think when we look back and
Speaker 1: we rank all of the praise president's wild tweets, especially
Speaker 1: related to financials markets, that's going to be quite a list.
Speaker 1: Thursdays is going to be right up there. Alright, Sarah,
Speaker 1: what do you got? Alright? So mine mine actually also
Speaker 1: in a way goes off of Romaines Oat milk because
Speaker 1: it has to do with Beyond Meat. And that is
Speaker 1: because there is an e t F and it's ticker
Speaker 1: is f n G. It's known as the Thing E
Speaker 1: t F And what its title actually is, it's the
Speaker 1: Advisor Shares New Tech and Media e t F. Now
Speaker 1: you might not expect this. It holds Amazon, but the
Speaker 1: fund no longer holds Facebook, Netflix or Google. However, this
Speaker 1: week about shares of Beyond Meat. So not quite sure
Speaker 1: how Beyond meat stock fits into a media a New
Speaker 1: Technology fund um, but they're going after it all right,
Speaker 1: Well I guess this new technology, Yeah, I guess all right,
Speaker 1: Well I'm gonna go with some old technology. You guys
Speaker 1: are familiar with the Canada Goose company. The nine Jackets.
Speaker 1: Romans probably has three of them with and it's warm
Speaker 1: and it's the best suit is Canada Goose, right right.
Speaker 1: The animal lovers up there are very upset with Canada
Speaker 1: Goose because part of their UH selling point was that
Speaker 1: they were treated the geese very fondly when they took
Speaker 1: took the feathers for the day, and they used kai
Speaker 1: odie fur, and they promised that we only hunt coyotes
Speaker 1: that are pests and and threatening pets. Well, you're gonna
Speaker 1: tell me all this is, it's not exactly so uh.
Speaker 1: Canada Goose Shares took a beating on Thursday when The
Speaker 1: New York Post got its hands on a video that
Speaker 1: the People for Ethical Treatment of Animals had UH filmed
Speaker 1: of Canada Goose suppliers basically grabbing the geese by their
Speaker 1: necks and stepping on them. This is actually probably the
Speaker 1: saddest thing in markets this week. We were livening it
Speaker 1: up and then he just had something really bring it
Speaker 1: back down. If you have a complaint about any of this,
Speaker 1: you can call us on our hotline number and uh
Speaker 1: or Stars direct number. I think it is better. Oh,
Speaker 1: no one has my direct number, so you have to
Speaker 1: stick with the hotline ring. I thought it was gonna ring.
Speaker 1: Now it's like we weren't going to get like, you know,
Speaker 1: Joe from Nassau County ask us how the Knicks are
Speaker 1: gonna do this? This that he's a real good to
Speaker 1: guy for a crazy market series. And if you want
Speaker 1: to share any of your craziest things with us, you
Speaker 1: can also tweet at us at podcasts, or you can
Speaker 1: also leave us a voicemail at our Bloomberg Podcast hotline. Also,
Speaker 1: if you have any questions for us, feel free to
Speaker 1: give us a call and ask away. That number is
Speaker 1: six or six three to four three for nine zero
Speaker 1: and we may even play your question or tip on
Speaker 1: the show. Um Alec Young, Romaine Bostick, thanks so much
Speaker 1: for joining us today, pleasure, Thank you, what goes out.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal, website and app, or wherever
Speaker 1: you get your podcasts. We'd love it if you took
Speaker 1: the time to rate and interview the show on Apple Podcasts,
Speaker 1: so more listeners can find us, and you can find
Speaker 1: us on Twitter, follow me at at Sara Ponzeck, Mike
Speaker 1: is at Reaganonymous, Romaine Bostick is at Romaine Bostic, and
Speaker 1: you can also follow up with flet See Russell at
Speaker 1: Footsie Russell and Bloomberg Podcast, as I mentioned, is at Podcasts.
Speaker 1: What Goes Up is produced by Tofur Foreheads. The head
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Speaker 1: you next time.