WEBVTT - A Deep Dive Into The Markets, Inflation Outlook 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.000 at Bloomberg dot com slash podcast. All right, let's bring 0:00:22.000 --> 0:00:24.520 on Katie Nix and chief investment officer for Northern Trust 0:00:24.560 --> 0:00:27.000 to Wealth Management, joining us on the phone from Ryan, 0:00:27.040 --> 0:00:29.319 New York. Kat, I love to start with earnings. You know, 0:00:29.400 --> 0:00:31.840 we've had some good tech earnings. We had some We 0:00:31.880 --> 0:00:36.280 started off the season with good bank earnings UM away 0:00:36.320 --> 0:00:38.879 through the SMP five hundred. In terms of reporting, they 0:00:38.920 --> 0:00:40.720 seem pretty good to me. Are are they enough to 0:00:40.720 --> 0:00:44.640 support this market and the folks that raise the valuation concern? 0:00:45.800 --> 0:00:47.760 So far, so good, Paul, I mean, I do think 0:00:47.760 --> 0:00:52.040 earnings across industries have come in uh stronger than analysts 0:00:52.040 --> 0:00:55.400 had anticipated um on a relative basis and on an 0:00:55.400 --> 0:00:58.200 absolute basis, just really strong. You have strong earnings from 0:00:58.480 --> 0:01:02.000 industrial companies and banks tech as you suggest, So yes, 0:01:02.040 --> 0:01:05.119 these earnings are good enough to support markets here at 0:01:05.200 --> 0:01:07.960 even these high valuations um And as we know, and 0:01:08.240 --> 0:01:11.520 I know you've mentioned this before as well, valuations are 0:01:11.520 --> 0:01:14.360 a pretty poor market timing tool over a short term period. 0:01:14.440 --> 0:01:17.360 So even though valuations are a relatively high today, it 0:01:17.400 --> 0:01:20.880 really doesn't provide a useful inforcation for investors who are 0:01:20.880 --> 0:01:22.480 trying to guess what they're going to do over the 0:01:22.520 --> 0:01:25.640 next six or twelve months. Katie. I fully understand that 0:01:25.680 --> 0:01:28.080 the earning story is looking pretty good, and that kind 0:01:28.080 --> 0:01:30.120 of feeds into a bullish narrative. But then I think 0:01:30.120 --> 0:01:31.959 about risks out there, and I can think of many. 0:01:32.000 --> 0:01:34.640 I can think of policy normalization on the behalf of 0:01:34.640 --> 0:01:38.240 monetary policy and fiscal policy. You have COVID risks still 0:01:38.240 --> 0:01:41.080 out there, inflation and never present fear in these markets. 0:01:41.640 --> 0:01:46.600 Why are earnings enough to offset all of that? Well, 0:01:46.640 --> 0:01:49.720 the fundamental backdrop is really strong, Kaylee, and I think 0:01:49.720 --> 0:01:53.120 that's really what investors are buying into right We're buying 0:01:53.160 --> 0:01:58.040 these robust, resilient company earnings and cash flows. But I 0:01:58.080 --> 0:02:00.360 do think you raise some really good issues. Probably the 0:02:00.400 --> 0:02:05.240 biggest risk for investors right now is inflation, um how 0:02:05.320 --> 0:02:08.799 persistent for how long? And maybe more important than that 0:02:08.880 --> 0:02:12.519 question is what will the FED do about it? And 0:02:12.560 --> 0:02:14.679 I think that's where we sort of differ with the 0:02:15.000 --> 0:02:18.800 market narrative UM on on that score, because our view 0:02:18.880 --> 0:02:21.320 is inflation is going to be transitory for longer. I know, 0:02:21.440 --> 0:02:24.200 that's sort of become the phrase djure um. We do 0:02:24.280 --> 0:02:26.799 think we're going to have you know, higher than than 0:02:27.440 --> 0:02:30.680 than UM target inflation probably for the next six months 0:02:30.760 --> 0:02:33.919 or so UM. But but after that point, we think 0:02:33.960 --> 0:02:36.000 we're going to normalize. I mean, at a certain point 0:02:36.440 --> 0:02:40.480 the supply chain disruptions are going to ease, and at 0:02:40.480 --> 0:02:43.000 the same time demand is also going to be easy. 0:02:43.040 --> 0:02:45.360 As we get into two. You referenced sort of the 0:02:45.400 --> 0:02:48.680 fiscal issue. Um. Not that there's necessarily a household fiscal 0:02:48.760 --> 0:02:51.880 cliff coming, but we certainly see on a relative basis, 0:02:52.160 --> 0:02:54.400 you know, far less fiscal stimulus in the system in 0:02:54.440 --> 0:03:01.040 two relative demanding just as a line is really coming 0:03:01.080 --> 0:03:04.119 on stream, and I think that will ease the inflationary concerns. 0:03:04.120 --> 0:03:06.239 And in the meantime, we don't think the FED is 0:03:06.280 --> 0:03:08.880 going to react. See that the market is pricing in 0:03:08.919 --> 0:03:11.120 a couple of FED hikes in two, and we think 0:03:11.120 --> 0:03:14.600 that's really overdoing it. Alright, So the FED is doing 0:03:14.720 --> 0:03:18.320 its job, Katie, how about our friends in Congress? How 0:03:18.480 --> 0:03:20.720 concerned are you are? How concerns tould the market be 0:03:20.880 --> 0:03:24.560 with you know, the various pieces of legislation winding the 0:03:24.560 --> 0:03:27.440 way through Congress. Is it simple enough to say, at 0:03:27.440 --> 0:03:30.080 the end of the day, they'll get something done. I 0:03:30.080 --> 0:03:32.520 think they will get something done, Paul. We're looking at 0:03:32.560 --> 0:03:35.400 you know, one point five to one point seven five trillion, 0:03:35.760 --> 0:03:38.760 which is significant. UM. So we do think that they'll 0:03:38.800 --> 0:03:41.160 get something done. And you know, the pay for is now. 0:03:41.280 --> 0:03:43.320 The good news for investors is it doesn't seem as 0:03:43.320 --> 0:03:45.640 if we're going to get a wholesale increase in the 0:03:45.760 --> 0:03:49.120 in the corporate tax rate um from one to twenty 0:03:49.120 --> 0:03:52.440 five or even we might have this fift minimum tax, 0:03:52.440 --> 0:03:55.760 which seems very manageable. UM. It's something that would obviously 0:03:55.800 --> 0:03:58.760 hit the tech sector harder than most um. But it 0:03:58.800 --> 0:04:02.240 does seem like it's a it's a more manageable uh hit. 0:04:02.320 --> 0:04:04.680 If you will for for corporate earnings to take then 0:04:04.720 --> 0:04:07.200 it would this wholesale increase in the corporate tax rate. 0:04:07.240 --> 0:04:10.440 So yeah, we'll get something. UM. I think the market 0:04:10.480 --> 0:04:14.120 will probably have no real reaction to it because the 0:04:14.440 --> 0:04:17.279 pay fors are are so far diluted from what we 0:04:17.360 --> 0:04:20.599 had feared actually coming into this. So it's that kind 0:04:20.600 --> 0:04:23.520 of policy backdrop, Katie. And given the earning story, is 0:04:23.560 --> 0:04:25.839 the US still where you want to be putting your money? 0:04:25.880 --> 0:04:29.640 Are you looking toward other regions? So we have been 0:04:29.640 --> 0:04:32.840 looking um inside the US Europe in particular, Katy, because 0:04:32.839 --> 0:04:35.000 we do think the valuation story is a little bit 0:04:35.040 --> 0:04:37.320 stronger there and that's where you really get the bank 0:04:37.400 --> 0:04:40.560 for the buck in terms of the global economic rebound. 0:04:40.680 --> 0:04:43.520 And what we see is we're sort of seeing another 0:04:44.120 --> 0:04:46.760 another second wind for the for the global economy, now 0:04:46.760 --> 0:04:49.799 that the delta wave has has really been suppressed across 0:04:50.120 --> 0:04:52.600 much of the world. We're seeing another sort of mini 0:04:52.680 --> 0:04:55.839 reopening trade and that really favors UM areas of the 0:04:55.839 --> 0:04:58.440 world like Europe that are exporters that really have that 0:04:58.560 --> 0:05:01.560 leverage UM and have more cyclical exposure in their benchmark. 0:05:01.680 --> 0:05:03.680 So we like Europe, but of course we we do 0:05:03.760 --> 0:05:05.919 like the US. I mean, the earning story here is 0:05:05.960 --> 0:05:10.400 super strong. Uh. The incredible resilience that we see across 0:05:10.480 --> 0:05:13.520 companies UM we think is going to continue into two 0:05:13.560 --> 0:05:14.840 and we think we're gonna have a pretty good year 0:05:14.839 --> 0:05:17.320 for earnings next year. As well here in the US, Katie, 0:05:17.320 --> 0:05:19.440 I'm looking at w T I crewded Northern any dollars 0:05:19.440 --> 0:05:21.919 to share any dollars in barrel. Did I miss the 0:05:22.000 --> 0:05:26.800 energy trade here? Well, I mean there's going to be 0:05:26.839 --> 0:05:29.200 support here for higher energy prices for sure, as we 0:05:29.279 --> 0:05:31.800 see demand continuing to be pretty robust, and we are 0:05:31.839 --> 0:05:34.280 all very well aware of some of the supply constraints. 0:05:34.320 --> 0:05:38.040 So we think energy and energy stocks in particular can 0:05:38.040 --> 0:05:41.239 stay pretty strong here into this uh into this second 0:05:41.240 --> 0:05:46.800 wind economic rebound um. But I think from an investor perspective, 0:05:46.800 --> 0:05:48.680 it's also important to note that you know, we're far 0:05:48.800 --> 0:05:51.040 less energy intensive than we have been in the past, 0:05:51.120 --> 0:05:54.560 So those who fear that sort of energy inflation will 0:05:54.720 --> 0:05:58.080 undermine the global economic recovery, I think are missing that 0:05:58.160 --> 0:06:02.480 really important component. Katie, thank you so much for joining us. 0:06:02.480 --> 0:06:06.000 We really appreciate your thoughts, your perspective on these markets 0:06:06.000 --> 0:06:08.599 as we make a way through the busy part of 0:06:08.680 --> 0:06:11.479 third quarter earning season. Katie Nixon, chief investment officer in 0:06:11.480 --> 0:06:15.279 Northern Trust Wealth Management, joining us on the phone from 0:06:15.480 --> 0:06:21.560 Ryan in New York. Katie, this morning on Bloomber Experience, 0:06:21.640 --> 0:06:24.120 we had Doug cass On Seabreeze Partners, and he's been 0:06:24.160 --> 0:06:26.960 notably barish, and he came out with a note today 0:06:27.040 --> 0:06:30.320 saying I've been wrong. My good friend Tom Lee has 0:06:30.360 --> 0:06:33.359 been right to be bullish. But here's my wall of 0:06:33.400 --> 0:06:35.200 worry and it's kind of all the things kind of 0:06:35.240 --> 0:06:37.520 we we know about, and he says, at some point 0:06:37.560 --> 0:06:40.320 that's gonna get this market. Let's check in with another 0:06:40.760 --> 0:06:44.719 voice here, Ross Mayfield, Investment Strategy analyst at bat Ross. 0:06:44.839 --> 0:06:46.240 Where do you come down on that? I mean, that 0:06:46.279 --> 0:06:48.760 wall of worry issues and we're all aware to whether 0:06:48.760 --> 0:06:52.640 it's inflation or stagflation, whether it's supply chain woes and 0:06:52.680 --> 0:06:55.159 so on. There's a lot of stuff out there for 0:06:55.200 --> 0:06:58.799 this market to be concerned about, yet we grind higher. 0:06:59.000 --> 0:07:01.960 How do you view the market? I care? Yeah, well, 0:07:02.000 --> 0:07:04.440 I think first and foremost, you know, a wall of 0:07:04.480 --> 0:07:08.120 worry and investor sentiment being you know, actually quite negative 0:07:08.160 --> 0:07:11.160 despite the all time eyes is a is a positive 0:07:11.160 --> 0:07:14.000 from a contrarian perspective. I mean it was earlier in 0:07:14.040 --> 0:07:18.440 the year where um, you know, enthusiasm and euphoria and 0:07:18.520 --> 0:07:21.360 everybody's you know, retail creating, and that is that is 0:07:21.400 --> 0:07:25.000 pulled back so um with investor sentiment fairly negative and 0:07:25.000 --> 0:07:27.520 consumer sentiment kind of middling. We gotta beat the other day, 0:07:27.520 --> 0:07:29.880 but it's it's still down. Um. We we think from 0:07:29.880 --> 0:07:33.200 a contraying perspective, that's good for the market, uh, the 0:07:33.240 --> 0:07:36.200 near term performance. And then more broadly, I mean we 0:07:36.000 --> 0:07:39.040 we remained bullish. I think there is a cocktail of 0:07:39.040 --> 0:07:42.680 of risks and and you know, headline risks, headwinds that 0:07:42.680 --> 0:07:45.760 that you can count towards. But you know, the couple 0:07:45.800 --> 0:07:47.920 of legs that the market stands on as far as 0:07:47.960 --> 0:07:50.480 the bull case in corporate earnings, which you're seeing, you know, 0:07:50.560 --> 0:07:54.280 tremendous resilience and strength. They're a very strong consumer picture. 0:07:54.720 --> 0:07:57.840 And then still accommodative policy. I mean it's coming, you know, 0:07:57.840 --> 0:08:01.120 it's it's definitely less accomminative than it was, but still 0:08:01.400 --> 0:08:04.320 you know versus history, still still quite easy policy. Uy. 0:08:04.400 --> 0:08:06.840 So there's a lot to like about the market as well. 0:08:07.520 --> 0:08:10.400 On the subject of easy policy, though, Bank of Canada 0:08:10.520 --> 0:08:13.760 one example today outlining the path for quicker tightening than 0:08:13.800 --> 0:08:16.040 expected in the face of inflation. We see the BOE 0:08:16.200 --> 0:08:19.640 moving in that direction as well. The Fed is trying 0:08:19.640 --> 0:08:22.040 its best to be patient, but can you foresee a 0:08:22.080 --> 0:08:27.040 scenario where it gets so uncomfortable with inflation it's forced 0:08:27.040 --> 0:08:31.960 to make a mistake. I can't see that scenario. If 0:08:32.000 --> 0:08:34.120 I were talking about the risk that I were worried about, 0:08:35.040 --> 0:08:36.800 that would be you know, near to top of the 0:08:37.679 --> 0:08:41.160 of the page. Um. I'm not worried about papering. I think, 0:08:41.240 --> 0:08:44.040 you know, that's a policy meant for kind of extraordinary circumstances, 0:08:44.080 --> 0:08:46.480 and we're certainly through that. So I think papering makes 0:08:46.480 --> 0:08:49.000 a lot of sense. Now. I think that the speed 0:08:49.040 --> 0:08:51.400 and paste, you know, it's kind of irrelevant at this point, 0:08:51.400 --> 0:08:53.200 since they've done such a good job telegraphing it to 0:08:53.240 --> 0:08:56.000 the market. But I am a little concerned that they 0:08:56.040 --> 0:09:00.440 will start to get itchy on their new inflation policy. Um, 0:09:00.480 --> 0:09:03.120 and Titan tightens too aggressively, pulled forward a rate hike 0:09:03.200 --> 0:09:07.280 or two in it's not a problem immediately, um, I mean, 0:09:07.280 --> 0:09:09.880 the first few ray hikes are never usually you know, big, 0:09:10.800 --> 0:09:13.880 big scary items for the market. But it pulls forward 0:09:13.880 --> 0:09:17.840 the whole timeline and eventually, you know, the Fed has 0:09:17.880 --> 0:09:20.080 kind of a history of tightening us into you know, 0:09:20.320 --> 0:09:23.680 either a market panic or recession or at least economic weakness. 0:09:23.760 --> 0:09:27.040 So I can't see that scenario. I hope that inflation 0:09:27.040 --> 0:09:28.480 of bates to the point where they're a little more 0:09:28.480 --> 0:09:30.760 comfortable riding it out. And they have done a good 0:09:30.840 --> 0:09:33.280 job of trying to separate papering and tightening in the 0:09:33.320 --> 0:09:37.880 mind of investors. But it's a concern. Russ UM. A 0:09:37.960 --> 0:09:40.320 lot of folks, uh thinking about how they want to 0:09:40.360 --> 0:09:42.880 play this market, how they want to be in this market, 0:09:42.920 --> 0:09:44.880 how where they want to be overweight this market. A 0:09:44.960 --> 0:09:46.960 couple of camps out there, one being I guess, you know, 0:09:47.080 --> 0:09:49.680 I'm sticking with the tried and true great growth stories. 0:09:49.720 --> 0:09:52.160 We saw some pretty good tech earnings this past week. 0:09:52.200 --> 0:09:56.160 Others just say no, that cyclical trade, um, the reopening trade. 0:09:56.240 --> 0:09:59.640 Maybe banks on the steepening yield curve, maybe some energy here. 0:10:00.240 --> 0:10:03.080 How do you think about that? Yeah, I mean if 0:10:03.160 --> 0:10:05.440 it forced into one camp the near term, you know, 0:10:05.480 --> 0:10:08.640 we remain pretty positive on the cyclical trade. So we'd 0:10:08.640 --> 0:10:12.000 liked financials for a while now. I do think the 0:10:12.040 --> 0:10:15.079 earnings are quite supportive. A lot of different factors of 0:10:15.520 --> 0:10:17.800 the businesses that big banks are doing really well, you know, 0:10:18.000 --> 0:10:21.080 you know, making M and a um, wealth management, you know, 0:10:21.160 --> 0:10:25.200 just your classic bank activity with keeping yield care about you. Note. Um, 0:10:25.280 --> 0:10:27.520 With that said, I think there's plenty room the portfolio 0:10:27.600 --> 0:10:30.680 for longer term secular growth stories as well. I mean really, 0:10:30.720 --> 0:10:33.640 at this point, um, you know, the only place that 0:10:33.720 --> 0:10:36.640 I wouldn't want to be is getting hyper defensive. I mean, 0:10:36.920 --> 0:10:39.040 you know, I kind of outlined our goal case at 0:10:39.040 --> 0:10:42.920 the beginning, but things like staples, um, which which not 0:10:43.040 --> 0:10:45.360 only are they you know, rate sensitive and defensive and 0:10:45.480 --> 0:10:48.920 uh an early cycle market. But well we'll first challenges 0:10:48.920 --> 0:10:53.000 with input costs and rising wages. UM, things like utilities, 0:10:53.000 --> 0:10:54.960 which are which are hyper rate sensitive as well, so 0:10:55.000 --> 0:10:57.199 we we expect rates to continue to move higher a 0:10:57.200 --> 0:10:59.480 little bit from here. But I think there's room for 0:10:59.520 --> 0:11:02.280 both of those trades in the portfolio, you know, force 0:11:02.360 --> 0:11:04.840 to choose one. We like cyclicals. Ross. Before we let 0:11:04.840 --> 0:11:07.120 you go, I just want to get your thoughts on inflation, 0:11:07.320 --> 0:11:12.040 because you can pick your prefects. Deflation, stagflation, hyper inflation. 0:11:12.720 --> 0:11:16.360 Do any of them sound right in this environment? Or 0:11:16.400 --> 0:11:20.400 any of them an accurate description? I think just good old, 0:11:20.400 --> 0:11:22.920 tried and true inflation is probably good. I mean, hyper 0:11:23.000 --> 0:11:28.559 enough strikes ascessilly, Um, that that's that happens when collapse. Um, 0:11:28.679 --> 0:11:32.400 that's not something we're experiencing here. Deflation and disinflation are 0:11:32.559 --> 0:11:35.160 I think, longer term still possibilities. There are a lot 0:11:35.160 --> 0:11:38.280 of structural forces out there that um have caused those 0:11:38.280 --> 0:11:41.200 phenomenons in the last couple of decades, UM. But for 0:11:41.320 --> 0:11:44.280 now this is just some some some pretty classic inflation. 0:11:44.360 --> 0:11:46.880 Too much money chasing too few goods, and the economy 0:11:46.880 --> 0:11:49.800 and companies are working on it. So um. You know, 0:11:49.800 --> 0:11:52.079 it's kind of a weird environment, but I think it's 0:11:52.200 --> 0:11:54.680 the inflation will eventually a bit maybe settle in a 0:11:54.720 --> 0:11:58.320 little higher than the last decade. But think about Ross, 0:11:58.320 --> 0:12:00.400 thanks so much for joining us, really for ship you're 0:12:00.400 --> 0:12:05.440 taking the time there, Ross Mayfield, investment strategist for Bared. 0:12:06.000 --> 0:12:09.199 Looking at this market here again, you know, kind of mixed. 0:12:09.200 --> 0:12:12.679 I got the SMP essentially unchanged a little about two 0:12:12.720 --> 0:12:14.880 tenths lower on the DAB, but we've got a little 0:12:14.880 --> 0:12:17.800 bit of strength on NASTAC, most likely reflecting some of 0:12:17.800 --> 0:12:20.080 the good numbers we saw from some of the big 0:12:20.120 --> 0:12:22.120 tech names over the past a couple of days. And 0:12:22.160 --> 0:12:25.280 getting Microsoft numbers really really jumped out at me. Some 0:12:25.280 --> 0:12:29.000 some really strong top line margin, imperiment, free cash flow, 0:12:29.120 --> 0:12:34.160 the cloud really the story there at Microsoft. Well, as 0:12:34.160 --> 0:12:37.000 we get our way through this third quarter earning season, 0:12:37.040 --> 0:12:40.480 generally the numbers are coming in quite quite good. The 0:12:40.559 --> 0:12:43.920 question is is it enough to satisfy those folks in 0:12:43.960 --> 0:12:47.400 the marketplace that do have concerns about evaluations in this marketplace. 0:12:47.640 --> 0:12:50.000 Let's check into with a professional on that topic. Another 0:12:50.080 --> 0:12:54.920 Sylvia Jablonski, chief investment officer for Defiance et S. So, Sylvia, again, 0:12:55.000 --> 0:12:57.160 some earnings have been coming through this week Big Tech, 0:12:57.559 --> 0:13:00.200 some pretty good numbers. How are you view in this 0:13:00.240 --> 0:13:02.680 third earnings period and is it enough for you to 0:13:02.720 --> 0:13:07.520 support of the valuations we're seeing out there in the market. High, 0:13:07.600 --> 0:13:10.800 Good morning. Well, I think that what the market is 0:13:11.160 --> 0:13:14.360 doing is somewhat what I expected. You know, we had 0:13:15.320 --> 0:13:18.560 a whole year worth of conversations around fear of inflation 0:13:19.280 --> 0:13:21.640 and you know, sort of fear of COVID coming back 0:13:21.640 --> 0:13:25.320 into the market and impacting stocks and um, you know, 0:13:25.360 --> 0:13:27.760 sort of fear of recession and pull back. But what 0:13:27.800 --> 0:13:30.360 we've actually seen is that, you know, a lot of 0:13:30.400 --> 0:13:33.920 companies are proving that they really are quality companies and 0:13:34.160 --> 0:13:37.920 they're exceeding not only meeting, but exceeding earnings expectations. So 0:13:37.960 --> 0:13:40.640 we haven't had a whole lot of names report just yet, 0:13:40.679 --> 0:13:42.920 but we still have a number which is pretty high, 0:13:42.960 --> 0:13:45.800 eighty five percent of them or beating expectations. So even 0:13:45.880 --> 0:13:48.760 you have, even though you have these supply chain issues, UM, 0:13:48.840 --> 0:13:50.840 a lot of these companies are sort of proving that 0:13:50.880 --> 0:13:54.000 they can pass that costs onto the consumer. And you know, 0:13:54.040 --> 0:13:57.199 in terms of valuations, I think that again it's it's 0:13:57.240 --> 0:13:59.880 the earning story, right. Earnings have delivered and they've exceeded 0:13:59.880 --> 0:14:03.160 at expectations. Were also in a seasonally strong period now, 0:14:03.240 --> 0:14:07.320 so we're past that September of folatility number. Um, there's 0:14:07.360 --> 0:14:09.840 loads of liquidity in the market, over two trillion dollars. 0:14:09.920 --> 0:14:12.559 You know, half of essentially half of GDP is sitting 0:14:12.559 --> 0:14:15.920 in is liquidity right now. Um. Race may rise in 0:14:15.960 --> 0:14:18.320 the long term, but I think that will be because 0:14:18.480 --> 0:14:21.480 we're going to see better growth and the economic recovery 0:14:21.880 --> 0:14:24.240 and the biggest part of the economy, to consumer is 0:14:24.240 --> 0:14:27.560 doing quite well. So UM. You know, we keep talking 0:14:27.600 --> 0:14:30.560 about the high demands right now and the supply issues, 0:14:30.600 --> 0:14:33.240 but I just think that these companies that are reporting now, 0:14:33.320 --> 0:14:35.960 especially the sort of the large cup companies that make 0:14:36.080 --> 0:14:38.800 up the top percentage of the SEC five hundred are 0:14:38.800 --> 0:14:41.880 going to continue to outperform and and we'll see positive 0:14:41.920 --> 0:14:45.760 margins coming in. Well, let's talk about those companies, Sylvia. Obviously, 0:14:45.880 --> 0:14:48.200 growth was not the name of the game coming into 0:14:48.240 --> 0:14:52.360 the year, and yet it has outperformed value more often 0:14:52.440 --> 0:14:54.600 than I think many people expect. It seems that we've 0:14:54.640 --> 0:14:57.520 kind of gotten out of that conversation on value versus growth, 0:14:57.520 --> 0:15:00.640 cyclicals versus defensives. How do you kind to think about 0:15:00.760 --> 0:15:05.240 the baskets in which we put equities and which ones 0:15:05.640 --> 0:15:09.520 you think will outperform? Yeah, great question, And I think 0:15:09.760 --> 0:15:12.840 it's interesting because I'm just not a big I don't 0:15:12.840 --> 0:15:15.680 trade that way. Um. So, so what I look at 0:15:15.680 --> 0:15:18.560 actually is is quality companies. You know companies. Look for 0:15:18.640 --> 0:15:22.680 quality companies that have strong balance sheets, that have you know, 0:15:22.840 --> 0:15:26.120 future earning potential that you know will not be impacted 0:15:26.800 --> 0:15:28.880 um with some of the inflation reads or will not 0:15:28.920 --> 0:15:31.560 be impacted with you know, sort of the modest growth 0:15:31.560 --> 0:15:34.600 in rates that we expect to come over time. And 0:15:34.640 --> 0:15:36.320 the companies are the ones, some of the ones that 0:15:36.360 --> 0:15:39.320 have reported last night. Um, you know Microsoft and Alpha 0:15:39.360 --> 0:15:41.360 that are two great examples. I mean, these are cash 0:15:41.400 --> 0:15:45.600 heavy companies. They're doing things like UM increasing the amount 0:15:45.680 --> 0:15:48.240 of buy back, they're increasing the amount of dividence that 0:15:48.320 --> 0:15:51.080 they pay out there, they have sort of loads of cash, 0:15:51.080 --> 0:15:53.520 and they're also just thinking about a different type of future, 0:15:53.600 --> 0:15:57.760 so they're investing in you know, disruptive technologies like the cloud, 0:15:57.880 --> 0:16:02.480 like AI, you know, virtual reality, the augmented reality UM. So, 0:16:02.480 --> 0:16:04.680 so I think that they're well positioned to do well 0:16:04.760 --> 0:16:07.120 for the next decade or so. And then you know, 0:16:07.160 --> 0:16:09.280 on the other side of it, well, you know, banks 0:16:09.280 --> 0:16:12.360 will benefit if interest rates UM go up, and they 0:16:12.400 --> 0:16:15.520 sort of have weathered COVID well and and have proven 0:16:15.520 --> 0:16:18.240 that they're sort of you know, stable and and and 0:16:18.320 --> 0:16:22.360 cash heavy too. So UM diversified portpoleio makes sense right now. 0:16:22.400 --> 0:16:25.040 But I still really like those growth names, and I've 0:16:25.040 --> 0:16:28.240 been actually pretty excited about UM the pull backs on 0:16:28.240 --> 0:16:30.640 on on the names earlier in the year, as you mentioned, 0:16:30.640 --> 0:16:34.840 when they weren't outperforming value ship gears a little bit. 0:16:34.880 --> 0:16:36.760 So yeah, I want to take advantage of your expertise 0:16:36.760 --> 0:16:40.360 and E T S and crypto because we have crypto 0:16:40.640 --> 0:16:43.560 E T F B I T O can just give 0:16:43.640 --> 0:16:45.960 us your thoughts here we have bitcoin trading off of 0:16:46.000 --> 0:16:48.920 some recent highs here today off about five percent pretty sharply. 0:16:49.160 --> 0:16:53.040 Just give us your overview today crypto, the e t 0:16:53.240 --> 0:16:59.080 F of crypto, give us your thoughts. We'd appreciate that. Sure. So, UM, 0:16:59.240 --> 0:17:01.480 first of all, I get excited when I see pullbox 0:17:01.480 --> 0:17:04.040 in crypto because the camp of it's going to do 0:17:04.200 --> 0:17:06.840 longer thousand and that's going to happen sooner than later. 0:17:07.359 --> 0:17:10.840 UM steel the same way about ETHEREUM. I think in 0:17:10.880 --> 0:17:12.600 the next year or two we're there. I don't think 0:17:12.600 --> 0:17:14.840 it's a five year trade. Yeah. And I think, you know, 0:17:14.840 --> 0:17:17.160 they're sort of various reasons for that. You have countries 0:17:17.200 --> 0:17:20.200 like Al Salvador adopting it. You have you know, companies 0:17:20.240 --> 0:17:22.320 sort of using it now as a currency to buy 0:17:22.520 --> 0:17:26.120 and sell. Um. Crypto is going to be part of 0:17:26.160 --> 0:17:28.320 this massive movement in n f T S which is 0:17:28.359 --> 0:17:30.480 just sort of take slowly taking over the universe. We 0:17:30.520 --> 0:17:33.720 don't talk about it enough, but UM, you're gonna have crypto, 0:17:33.840 --> 0:17:35.399 which is which is right now the only way to 0:17:35.440 --> 0:17:37.719 pay for for n f T S or one are 0:17:37.720 --> 0:17:39.960 the main ways to pay for n f T s. UM, 0:17:40.400 --> 0:17:44.240 and I think that you have UM, you know, you 0:17:44.280 --> 0:17:46.639 have the ability to now trade them or or or 0:17:46.720 --> 0:17:48.359 get exposure to them through an e t F to 0:17:48.440 --> 0:17:51.080 a mutual fund through a trust. So um, you know, 0:17:51.119 --> 0:17:53.879 marketmakers are going up to buy more to hedge that exposure. 0:17:54.400 --> 0:17:57.040 Uh So I'm very bullish on crypto, particularly you know, 0:17:57.160 --> 0:17:59.399 bitcoin and thee UM n F t S. But to 0:17:59.440 --> 0:18:01.240 answer your shin a little more directly about the e 0:18:01.320 --> 0:18:03.879 t F UM, you know, I think it's great. I 0:18:03.920 --> 0:18:07.560 think it's great for particularly for advisors that don't have 0:18:07.600 --> 0:18:11.200 a vehicle UM where you know, by which they can 0:18:11.280 --> 0:18:15.320 get exposure to bitcoin. Um. You know, if you ask 0:18:15.400 --> 0:18:17.480 me like, what is the best way to invest in crypto, 0:18:17.600 --> 0:18:19.959 I think it's to to get exposure to the actual 0:18:20.040 --> 0:18:22.679 physical asset. I think it's it's worth just buying it 0:18:22.760 --> 0:18:26.160 and storing in a digital wallet. But not everyone is 0:18:26.160 --> 0:18:29.280 sort of savvy enough to do that, or or perhaps 0:18:30.160 --> 0:18:34.560 uncomfortable with with doing that UM or perhaps just unable 0:18:34.600 --> 0:18:37.240 to do that based on firm restrictions and things like that. 0:18:37.320 --> 0:18:39.600 So I just think it's awesome to have these different 0:18:39.640 --> 0:18:43.040 options to get access to bitcoins, physical trust and now 0:18:43.080 --> 0:18:46.760 e t S. It's it's great for great story for investors. Sovia, 0:18:46.800 --> 0:18:48.639 thank you so much for joining us. We really appreciate it. 0:18:48.720 --> 0:18:52.719 Sovia Trablanski, chief investment officer for Defiance et s. One 0:18:52.720 --> 0:18:55.640 of the problems of getting bitcoiners if you get the code, 0:18:56.280 --> 0:19:00.080 you can for you and that is a problem for 0:19:00.200 --> 0:19:07.400 some people. We'll have more coming up. This is Bloomberg. Wait. 0:19:07.400 --> 0:19:09.879 When I was at Research Channelist, I would darken the 0:19:09.920 --> 0:19:12.320 door of tc W a couple of times a year 0:19:12.320 --> 0:19:13.879 when I was out in l A to check in 0:19:13.920 --> 0:19:16.680 with my UH analyst kind part out there and talk 0:19:16.720 --> 0:19:18.920 about some ideas. That was equities. Equities are much more 0:19:18.920 --> 0:19:21.160 fun than fixed income. But we'll check in with Lard 0:19:21.240 --> 0:19:23.440 Landman today. He's co director of Fixing Come for t 0:19:23.600 --> 0:19:26.760 c W based in l A. Uh Lard Fixing Come 0:19:26.800 --> 0:19:29.440 is a tough place to make a buck these days. 0:19:29.440 --> 0:19:31.320 I'm looking at the ten year at you know, one 0:19:31.400 --> 0:19:35.600 point five seven. What are you guys doing? Yeah, it 0:19:35.800 --> 0:19:40.200 is it is not the exciting place that has been Um. 0:19:40.240 --> 0:19:42.760 It is a bastion of stability. You know, we see 0:19:42.960 --> 0:19:48.400 problems in the the property sectors, controversy about fiscal stimulus, 0:19:48.400 --> 0:19:50.840 and you look at spreads and you know it was 0:19:51.760 --> 0:19:54.680 eight over at the end of June for investment gradity 0:19:55.040 --> 0:19:58.280 over now, um, you maybe get a basis point or 0:19:58.280 --> 0:20:01.439 two of widening hero there, but it has been uh, 0:20:01.480 --> 0:20:07.240 incredibly over liquefied, we would say, Um, but we have 0:20:07.359 --> 0:20:09.760 seen you know, obviously the market is moving ahead of 0:20:09.760 --> 0:20:11.840 the fed. Here. We've tightened since the beginning of the 0:20:11.880 --> 0:20:14.600 year a good sixty five basis points just through the 0:20:14.640 --> 0:20:17.120 market and the belly of the curve, you know, more 0:20:17.160 --> 0:20:21.680 like eighty. So markets are beginning to price rice action in. Well, 0:20:21.760 --> 0:20:25.160 let's talk about the yield curve, because we're sub eighty 0:20:25.160 --> 0:20:27.320 basis points on the five thirties curve. I mean, that's 0:20:27.359 --> 0:20:31.720 the flattest going back since April. Can that flattening persist 0:20:31.800 --> 0:20:33.960 or is the market starting to overdo it a little bit? 0:20:35.280 --> 0:20:38.960 Probably in the interim it's slightly overdone, I would say, 0:20:39.000 --> 0:20:42.440 but obviously depending on what happens on the fiscal side, 0:20:42.480 --> 0:20:45.960