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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple car Play or Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Jobsay, folks who begin our coverage here, we are thrilled

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Speaker 2: to bring in Claudia, some chief economists, News Century advisors.

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Speaker 2: As we go into the report, it's a jump condition

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Speaker 2: five basis points four five two on the ten year

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Speaker 2: five point zero one and a thirty year bond based

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Speaker 2: what pria misers said, you know X number of minutes ago,

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Speaker 2: Like you're one third of the way to her tension.

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Speaker 3: Exactly for sure.

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Speaker 4: And on the short end, Tom, which is kind of

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Speaker 4: reflects worth. Maybe the Fed's thinking about up six basis

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Speaker 4: points on a TI your treasury four point one percent

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Speaker 4: and futures spy five times.

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Speaker 2: Claudias, I'm with us here for a few minutes of perspective. Claudia,

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Speaker 2: I get the idea that non firm payrolls are tough

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Speaker 2: to call, but I got a ninety three thousand plus

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Speaker 2: two month payroll revision, and what really pauses me is

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Speaker 2: even the under employment rate came down from eight point

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Speaker 2: two to eight point one percent. How does a chairman

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Speaker 2: respond to this when he's cutting the curtains for the new.

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Speaker 5: Office, right, Well, I mean, you know it's good news

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Speaker 5: on adding jobs. I think one for the FED, this

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Speaker 5: isn't such a worrisome print in that wage growth was

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Speaker 5: still pretty moderate. We're still seeing slowing in wage growth,

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Speaker 5: so you know, the Fed is not anti jobs, they're

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Speaker 5: anti inflation, right like, So you know, if you're not

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Speaker 5: seeing those cost pressures push in, you know this can be.

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Speaker 5: These are still pretty modest numbers in terms of adding payrolls.

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Speaker 5: They're much better than what we saw last year. But

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Speaker 5: so I think this is this looks like solid report,

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Speaker 5: right Unemployment stays low, like you said, underemployment ticks down

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Speaker 5: a bit, and wage growth is still slowing. So you know,

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Speaker 5: in terms of this, you know, being some inflationary pressure,

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Speaker 5: I just don't see it here.

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Speaker 2: Unfair here with you know, two minutes into this to

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Speaker 2: parse it in all, but I got a three months

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Speaker 2: moving average of non farm payrolls folks from another time

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Speaker 2: in place one hundred and eighty eight thousand. Do you

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Speaker 2: assume doctor some that this will be revised down in

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Speaker 2: six months or twelve months.

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Speaker 5: No, and I don't think we should, even though we've

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Speaker 5: seen in the last few years our annual revisions have

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Speaker 5: been pretty substantial down revisions. There's you know, research coming

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Speaker 5: out of Cleveland FED that says, you know, these aren't anomalies.

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Speaker 5: We haven't broken the model in terms of these surveys

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Speaker 5: always being you know, prone towards down revision. And actually

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Speaker 5: we've gotten some indication from administrative data that we might

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Speaker 5: actually get an upward revision for last year when that

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Speaker 5: comes in in the in the spring. So so I

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Speaker 5: think we can take these numbers for what they are.

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Speaker 5: And in particular, if you look past three months averaging

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Speaker 5: around one hundred thousand, we saw some upward revisions. I mean,

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Speaker 5: this really does look if nothing else, really puts the

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Speaker 5: exclamation point on a stabilization in the labor market relative.

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Speaker 3: To last year.

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Speaker 2: How can I do a shout out to our selective

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Speaker 2: set of guests, Yeah, that they have been talking for

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Speaker 2: two or three weeks, the directional tone of this report.

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Speaker 4: Yeah, the labor market sensus are pretty solid there. So Claudi,

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Speaker 4: you called out wages three point four percent kind of

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Speaker 4: annualized growth. But then I look at next Wednesday, we're

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Speaker 4: going to get a CPI print. It senses theres for

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Speaker 4: like four point two percent growth in CPI. So wages

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Speaker 4: are not keeping up with inflation. What's the thought there?

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Speaker 5: Right, So wages are not keeping up with inflation, that's

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Speaker 5: going to limit the purchasing power. I mean what when

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Speaker 5: I talk about this not having the inflationtionary risk is

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Speaker 5: often that it might be concerned about kind of second

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Speaker 5: round effects workers bargaining up their wages to try and

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Speaker 5: cover those prices, and that creates another round of inflation.

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Speaker 5: Like that's you know, that's not what we're seeing in

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Speaker 5: this data. So and what we're really concerned about is,

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Speaker 5: you know, does this inflation have legs of its own?

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Speaker 5: Does it really start to kind of feed on itself?

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Speaker 5: And that's not the sign here from this data. Of course,

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Speaker 5: the flip side of that is this is, you know,

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Speaker 5: puts a hardship, puts puts the screws on workers that

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Speaker 5: are seeing their paychecks be eaten up, and it limits

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Speaker 5: the ability of businesses to pass on some of these costs. So, yeah,

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Speaker 5: limits inflation. But like there's kind of pain being fed

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Speaker 5: into the system. It's going to go somewhere.

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Speaker 3: The negative real way is going to be the heart

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Speaker 3: of the matter. Claudia, we got to go.

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Speaker 2: Shan emails in, says Claudia, thank you so much for

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Speaker 2: mentioning Granville, Ohio. Sean went to Dennison, played Lacrosse. Go

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Speaker 2: big Red, Sean, Thank you so much, Go big Red, Claudia,

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Speaker 2: Thank you so much, Claudia. Some our definitive market economists

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Speaker 2: across this nation and all over work at the FED,

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Speaker 2: at Michigan, at New Century Advisors, and as well in

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Speaker 2: a studio right now with equity perspective on this summing

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Speaker 2: in the total market working with Lazanne Saunders. Is Kevin

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Speaker 2: Gordon here, what's the chart you put together this morning?

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Speaker 2: I want to get out front of the Kevin Gordon tweet.

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Speaker 3: What's on your mind?

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Speaker 6: Well for the equity market.

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Speaker 7: What's been on our mind and this was sort of

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Speaker 7: essential to the equity component of our midyear.

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Speaker 6: Outlook that we just published.

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Speaker 7: Is this divergence that you're seeing in breadth, the fact

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Speaker 7: that you know the average stock when you look at

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Speaker 7: the percentage of companies above their two hundred day moving average,

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Speaker 7: when you look at percentage of companies outperforming the S

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Speaker 7: and P five hundred on a rolling three month basis.

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Speaker 7: That's remained pretty weak because you've gone through, you know,

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Speaker 7: another kind of out of AI hype, especially within the semiconductors.

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Speaker 7: So that in and of itself is not a horrible

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Speaker 7: omen for the market. We've seen it actually resolve itself.

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Speaker 7: Those divergences resolve themselves in a positive way over the

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Speaker 7: past couple of years when they have happened.

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Speaker 3: Yeah, I like even in the past three days.

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Speaker 2: I mean I had when I got the Dow move

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Speaker 2: it up, but I see some of the mutual funds

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Speaker 2: giving me better returns than Broadcom.

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Speaker 3: Yes, yeah, there's something.

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Speaker 6: Going on out there is Yeah, and the new and

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Speaker 6: I will say the new norm.

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Speaker 7: You know, the last time that you actually saw a

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Speaker 7: lower percentage of that metric I mentioned the percentage of

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Speaker 7: companies that are outperforming the index on a rolling three

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Speaker 7: month basis. The last time you saw a lower percentage

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Speaker 7: so sub twenty three percent was twenty three and twenty four.

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Speaker 7: Before that, you have to go back to nineteen seventy three,

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Speaker 7: so of course, very different market backdrops. Seventy three the

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Speaker 7: start of a horrible bear market twenty three and twenty

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Speaker 7: four more consistent with correction. So it is more of

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Speaker 7: the norm these days, you know, given the concentrated market.

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Speaker 3: Well, let's just say future is negative fifty right now.

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Speaker 4: Kevin, We're in a time here are very active equity

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Speaker 4: new issuance in the marketplace. We had this monster megadeal

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Speaker 4: from Goldman, I mean, from Google this week, from Alphabet.

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Speaker 4: The market took it in seemingly very well. And then

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Speaker 4: of course we've got all these IPOs that are tuned

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Speaker 4: up SpaceX on the road as we speak. Then maybe

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Speaker 4: some of these AI plays come huge transactions. What does

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Speaker 4: that tell you about this market? How do you guys

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Speaker 4: think about it?

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Speaker 3: So?

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Speaker 7: I think it does underscore, of course that the sentiment

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Speaker 7: environment is certainly getting frothier. You know, whether you think

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Speaker 7: of it as frothy or not, I think that's always

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Speaker 7: just kind of up for you know, whoever's whatever the

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Speaker 7: person's perspective is. I will say, you know, I've been

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Speaker 7: traveling the past four weeks almost NonStop all over the country,

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Speaker 7: also in Korea, but you know, in the US when

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Speaker 7: I've been speaking with our investors, there's actually been a

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Speaker 7: sort of an elevated degree of skittishness or hesitation around

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Speaker 7: just the environment of megacap IPOs in general. So the

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Speaker 7: attitudinal sentiment is not necessarily matching up with the behavioral

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Speaker 7: sentiment that we've been seeing in terms of really stretched

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Speaker 7: fun flows and how much you know, has been going

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Speaker 7: into tech and how well semis have been doing. So

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Speaker 7: to me, that sort of lays the framework, I think,

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Speaker 7: or the groundwork for maybe a little bit more room

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Speaker 7: for sentiment to get stretched to the upside. Of course,

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Speaker 7: you know, well, I think the game will change a

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Speaker 7: little bit after we do get a lot of these

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Speaker 7: companies coming online into public markets. But I haven't yet

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Speaker 7: felt at least that on the attitudinal side, there's been

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Speaker 7: a lot of that hype that has matched what we've

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Speaker 7: been seeing with people, you know, what they've been doing

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Speaker 7: with their actual dollars.

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Speaker 4: And I guess, you know, if you want to take

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Speaker 4: the bullish side here, which is probably the right way

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Speaker 4: to be, earnings have been there. Earnings have supported this market,

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Speaker 4: you know, it seems like, and how do you think

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Speaker 4: about that going forward?

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Speaker 7: I mean, I think, you know, of course, the breadth

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Speaker 7: of earnings is actually if you just want to look

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Speaker 7: at the number of industries that are seeing their earnings grow. Yes,

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Speaker 7: the breadth is there, of course, the magnitude in terms

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Speaker 7: of concentration, it is a little bit more skewed towards

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Speaker 7: the large caps and the megacaps.

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Speaker 6: Take the I do take the optimistic.

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Speaker 7: Side and angle of that where if you look over

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Speaker 7: the past several decades, the growth and that earning share

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Speaker 7: for that cohort has grown, so it's not like it's

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Speaker 7: been totally unjustified. But on the flip side, you do

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Speaker 7: have more reliance on a smaller share of companies, so

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Speaker 7: to the extent that they can't keep up with expectations,

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Speaker 7: to the extent there is a disappointing you know quarter

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Speaker 7: a series of quarters where CAPEX estimates for some reason

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Speaker 7: have to come down. Earnings estimates, you know, get revised,

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Speaker 7: get revised lower. Of course, you always run the risk.

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Speaker 7: But that's why we make the case for a diversification

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Speaker 7: within the equity market, because you've been able to you

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Speaker 7: know that that's been the best way to play this,

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Speaker 7: especially with even a sector like healthcare.

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Speaker 2: Over the past couple of weeks on the road way

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Speaker 2: and with the new Schwab commitment to wealth advisors and

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Speaker 2: all that huge announcements from Schwab over the last ten

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Speaker 2: days on this on the road in the trenches, Paul

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Speaker 2: and I it's cushion. You know, Paul gets in the

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Speaker 2: Gulf stream again. You know, he goes out to San

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Speaker 2: Francisco and you know, he takes the ferry home and

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Speaker 2: sits there with a beverage of his choice.

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Speaker 3: It's kind of Budweiser.

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Speaker 2: And you know, I'm in the Bentley going up Madison

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Speaker 2: Avenue complaining about the traffic.

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Speaker 3: You're in the real world.

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Speaker 2: Yeah, how do you respond to people who raise their

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Speaker 2: hand and say, I love all your optimism, we love

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Speaker 2: liz Ane Saunders, but we're scared stiff. How do you

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Speaker 2: respond to them?

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Speaker 7: Well, frankly, you know, we don't get a lot of

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Speaker 7: clients who exhibit a lot of fear, especially if they're

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Speaker 7: working with an advisor and taking an advised approach. I mean,

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Speaker 7: you know, I've always been a believer that is the

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Speaker 7: ben fit of working with somebody taking your personal emotion

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Speaker 7: out of it. But seriously, I mean that is that

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Speaker 7: is actually the biggest split I see, especially when I

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Speaker 7: talk to people, you know, who are newer to markets.

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Speaker 7: This kind of newer retail cohort that you know just

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Speaker 7: is getting still getting into this, still getting into investing

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Speaker 7: and learning it, not necessarily working with somebody. That's where

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Speaker 7: you see some skittishness around. You know, what do I

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Speaker 7: do with a big drop in the market. What do

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Speaker 7: I do when I see a particular stocker industry go

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Speaker 7: up by twenty or thirty percent.

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Speaker 6: You know in a day.

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Speaker 7: So I haven't been met with as much fear, but

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Speaker 7: as my you know, to my point around some of

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Speaker 7: these larger IPOs and just the sentiment environment, that is

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Speaker 7: where there's been some I guess concern over whether this

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Speaker 7: is you know, too hyped up.

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Speaker 6: And I think it comes back to I mean.

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Speaker 7: My favorite quote ever about markets is from the late

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Speaker 7: great John Templetons or John Templeton, you know, bull markets

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Speaker 7: being born out of pessimism, growing on skepticism, maturing on optimism,

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Speaker 7: dying on euphoria.

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Speaker 6: I mean that is I think.

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Speaker 7: The perfect way to sort of the perfect overlay that

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Speaker 7: you can apply to really any cycle doesn't say anything

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Speaker 7: about her, doesn't say anything about valuation.

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Speaker 4: When you're on the road seeing your clients, are they

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Speaker 4: looking to embrace these markets here or like as Tom said,

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Speaker 4: maybe a little bit skittish. Are they looking to make

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Speaker 4: you reposition? Maybe I should own some more bonds, Maybe

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Speaker 4: I should own some gold, Maybe I should made a

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Speaker 4: little bit more cash.

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Speaker 3: Yeah.

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Speaker 7: I haven't seen the willingness to embrace markets fade materially.

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Speaker 7: If anything, I think the bigger concern has been more

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Speaker 7: on the economic side, and actually the dominant question I've

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Speaker 7: been getting in the first question I've been getting at

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Speaker 7: every event is the concerns over AI and the labor market.

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Speaker 7: That has actually been and from from all age groups

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Speaker 7: across the whole spectrum, from gen Z you know, to

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Speaker 7: people who have been investing for decades, that has been

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Speaker 7: the dominant question that, of course nobody knows the answer to.

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Speaker 7: I tend to have a relatively optimistic view, you know,

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Speaker 7: in the end, you know, the endgame of this not

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Speaker 7: necessarily being tens of million jobs just fading, you know,

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Speaker 7: out of the economy.

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Speaker 6: But that has definitively been the main question.

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Speaker 2: I got to go seventy three to seventy five to

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Speaker 2: forty five.

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Speaker 3: Percent on the Dow. The percentage of people in this

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Speaker 3: country they have not enjoyed that, ye or Bob Seeger

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Speaker 3: at the time, huge amount. Kevin Gordon, thank you so much.

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Speaker 3: I really really appreciate it.

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Speaker 2: We take huge advantage of the way all of our

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Speaker 2: guests travel, travel, the romance, the romance of the business.

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Speaker 2: Let me tell you Christina camp Manny is out traveling,

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Speaker 2: got to get home. Her children are well mannered somewhat,

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Speaker 2: but you know she's stuck at DFW and can't get

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Speaker 2: home for a six hour delay. I mean that's the room,

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Speaker 2: the romance of working for Invesco across this great nation.

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Speaker 3: Right.

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Speaker 6: Of course, of course the travel's brutal.

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Speaker 3: I mean it's just it's just you get one delay

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Speaker 3: and yeah, three days are ruined.

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Speaker 8: At least we've moved past our tsa expedition at the

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Speaker 8: beginning of the year with all those lines feel their now.

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Speaker 8: I was very fortunate my mom missed a flight going

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Speaker 8: back and leaving my house. I don't think she was

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Speaker 8: too happy with me.

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Speaker 3: Thank you for joining us.

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Speaker 2: Christina cat Many, senior portfolio manager at Invesco. Let me

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Speaker 2: ask a Paul Sweeney question off of this, I got

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Speaker 2: a yield shift, price down, yield up. Kevin mentioned, Sir

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Speaker 2: John Templeton, are bonds on sale today?

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Speaker 8: You've definitely seen a bit of a reprice across the

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Speaker 8: front end, and I think, I mean, we keep chopping

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Speaker 8: in these ranges.

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Speaker 9: Right in the last month.

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Speaker 8: We thought maybe four fifty would contain tens and five percent,

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Speaker 8: and we pushed to five excuse me, five twenty and

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Speaker 8: four seventy, and then you saw very quickly money get

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Speaker 8: put back to work there. And I think once we've

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Speaker 8: tested those levels, we'll probably repush them. And it does

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Speaker 8: keep changing the narrative. Right before we thought it was

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Speaker 8: somewhat balanced. If we've had this energy shock and we

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Speaker 8: have an inflation shock, but we're still a little bit

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Speaker 8: concerned about are there going to be cracks in the

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Speaker 8: labor market when we're talking about payroll break even maybe

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Speaker 8: zero to fifty K and you have one hundred and

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Speaker 8: seventy or one hundred and eighty plus positive revisions, Like

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Speaker 8: it's hard to say that there is weakness in the

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Speaker 8: labor market, but right, like, where where does it feed through?

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Speaker 2: Right?

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Speaker 8: You still have a consumer led economy, And I think we,

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Speaker 8: I mean, we're all sick of talking about this case shape,

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Speaker 8: but it's so true, Like there I feel like there

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Speaker 8: is pain out there in kind of Oh this is

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Speaker 8: certainly the bottom half.

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Speaker 3: Do you get We get lucky here, folks.

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Speaker 2: When you have Christina Kantmany in the turret, she can

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Speaker 2: respond Traders fully price in quarter.

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Speaker 3: Point FED rate hike by year end. That changes.

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Speaker 2: That changed?

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Speaker 8: Yeah, yeah, I mean again, when we had this flip

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Speaker 8: in post the Middle East shock, we flipped from an

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Speaker 8: easy bias pricing to a hiking bias pricing, and I

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Speaker 8: think it's very hard to go back. I think the

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Speaker 8: market is grappling. Whereas other global central banks, like we

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Speaker 8: expect the ECB hikes next week, I think it's clear

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Speaker 8: that the BOJ is still going to hike. I think

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Speaker 8: the market is pricing for the Fed to go. We

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Speaker 8: have priced more and we've taken out a little bit

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Speaker 8: of it, and now we're retesting that again with a

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Speaker 8: five six seven basis point sell off in the front end.

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Speaker 8: But I don't know that where anyone has high, high

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Speaker 8: conviction that the Fed is certainly going because it's just

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Speaker 8: still this shift. I think even they want they don't

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Speaker 8: want to make the mistakes that they made with the

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Speaker 8: inflation shock post COVID, but they also want to see

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Speaker 8: like is it more broad based? Are you going to

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Speaker 8: see wage pressures materialized and we haven't seen that bit yet.

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Speaker 4: What do you think about just the opportunities globally in

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Speaker 4: your credit markets?

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Speaker 6: Where do you see the value these days?

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Speaker 8: Credit or rates are both both sure, So I think

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Speaker 8: when we look at credit, credit still remains really tight.

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Speaker 8: So it's hard to get really excited. But you look

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Speaker 8: at it and you say, there is clearly and I

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Speaker 8: think you guys spoke about it earlier. Today there's clearly

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Speaker 8: money going into credit funds more so than rates, And

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Speaker 8: I think that there's that question out there of spreads

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Speaker 8: are so tight, but like what's your comfort with the

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Speaker 8: with there's more government fiscal issues than some of these

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Speaker 8: big hyperscalers and that people are comfortable putting money with,

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Speaker 8: So I think money will continue to go there. So

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Speaker 8: within credit we probably have a bias for the US

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Speaker 8: over Europe and shorter higher quality paper and shorter demand paper.

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Speaker 8: Within global rates markets, I think there is still value

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Speaker 8: in the front end across course, even in the US

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Speaker 8: right because we're not so convinced that the FED really

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Speaker 8: goes on a massive hiking cycle, because I think the

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Speaker 8: financial markets don't tell you. But but but there are

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Speaker 8: other places that are interesting Australia, Canada, Okay.

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Speaker 2: Before before we go, I think it's just so important.

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Speaker 2: Is your market functioning functioning normally? I got a SpaceX

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Speaker 2: I p O. Fortunately I don't have to ask you

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Speaker 2: about that, you know, I mean she's in the balls bracket, yes,

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Speaker 2: Christina JP, Morgan.

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Speaker 3: Stanley and Christina kampmany there, you know, but it's a

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Speaker 3: it's a crazy time. Is your when you sit at

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Speaker 3: the desk, is operationally the huge international bond space that

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Speaker 3: you're in charge of? Is it working quote unquote normally?

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Speaker 8: I think the markets themselves are functioning.

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Speaker 9: There's liquidity.

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Speaker 8: But when you say, like are things and I guess

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Speaker 8: it goes it is your question about is it logical

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Speaker 8: or is it like functioning? Because to say, with all

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Speaker 8: of the macroeconomic things that have developed in the last

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Speaker 8: three months and stocks are where they are, you would

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Speaker 8: it's like a head scratcher of how are we here?

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Speaker 8: It feels like we live in two different worlds and

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Speaker 8: there's a lot of complacency about even what goes on

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Speaker 8: with this Middle East situation. But we're all sitting here

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Speaker 8: with the expectation was that this would be resolved in

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Speaker 8: three weeks and here we are three months later, and

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Speaker 8: even from when we speak to commodity experts across the street,

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Speaker 8: it feels like it's been this rolling three weeks out.

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Speaker 8: We're going to have this severe pressure point. Should all

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Speaker 8: of these things matter, like should there be flow through

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Speaker 8: to the US consumer? They're absolutely should, but we're not

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Speaker 8: seeing it. Yeah, and that could just be the AI

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Speaker 8: capex spend is just overwhelming it for now, but I

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Speaker 8: think it does have to show up.

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Speaker 3: Can you come back more often than just job stay?

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Speaker 3: I would love to. Okay, can we figure that out?

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Speaker 6: We can work with it.

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Speaker 8: Can we can talk markets, we can talk over next.

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Speaker 2: Can we get one all our interns from Villanova like

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Speaker 2: the next?

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Speaker 6: That's how it works?

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Speaker 3: Is that how it rolls?

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Speaker 6: They'll nev has taken over New York, no question.

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Speaker 3: It's just unbelievable. Christy Keviny, thank you so much with

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Speaker 3: Investco stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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00:18:43,560 --> 00:18:45,119
Speaker 1: watch us live on YouTube.

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Speaker 2: Do we get beyond lucky, you get this big move,

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Speaker 2: yields move.

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Speaker 3: You know the story, folks, futures Decada fifty three.

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Speaker 2: But we need to reset is Francis donald Will with

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Speaker 2: their exo spreadsheets at RBC Capital Markets.

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Speaker 3: They're chief economists.

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Speaker 2: He says, I don't want you to take the one report,

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Speaker 2: but the compendium here of a better labor economy, the

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Speaker 2: compendium here of our various stimuli. The bottom line is

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Speaker 2: you have to reset real GDP and out front of

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Speaker 2: that nominal GDP.

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Speaker 3: Are you in that process right now?

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Speaker 10: Well, we already felt the economy was doing just fine,

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Speaker 10: and you've heard me say many times America needs workers,

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Speaker 10: not jobs, and this is a good report of that.

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Speaker 10: But I really appreciate Tom how you frame this. You say,

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Speaker 10: it's not about this one report exactly. It's about what

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Speaker 10: this report and the labor market is telling us about

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Speaker 10: the broad economy. And there's so many interesting stories within

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Speaker 10: this May job report that are really synonymous with other

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Speaker 10: trends that we're seeing. So, for example, there's some cyclical

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Speaker 10: momentum forming underneath. The gains that we saw today were

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Speaker 10: pretty broad across all the sectors, not just about healthcare,

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Speaker 10: there are signs the consumer is okay. So leisure and

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Speaker 10: hospitality having a big number, we watch that not because

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Speaker 10: we're trying to forecast the next leisure and hospitality number,

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Speaker 10: but because we want to know what the consumer's doing.

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Speaker 10: We're looking for evidence of tariffs impacting the job market,

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Speaker 10: and so far that seems okay as well. Looks like

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Speaker 10: businesses are passing on those price pressures through the inflation channel,

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Speaker 10: not through the jobs channel. And we still got a

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Speaker 10: hearty support from those healthcare added jobs. So when I

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Speaker 10: put that story together, you know, for a long time,

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Speaker 10: the goal of the economist was to get that non farm.

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Speaker 9: Payroll number right. You know, you were sort of measured

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Speaker 9: by how well you could forecast that.

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Speaker 10: I don't know if it's just because I'm getting older,

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Speaker 10: but now I use the NFP number to help me

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00:20:42,400 --> 00:20:44,200
Speaker 10: forecast where the economy is going to be in six

440
00:20:44,240 --> 00:20:46,639
Speaker 10: to twelve months. And when I do that, it tells

441
00:20:46,640 --> 00:20:48,359
Speaker 10: me that our view that we're going to come in

442
00:20:48,440 --> 00:20:51,119
Speaker 10: around two percent growth this year is right on track.

443
00:20:51,720 --> 00:20:54,439
Speaker 4: Hey, francis the marketplace here and I look at the

444
00:20:54,440 --> 00:20:57,480
Speaker 4: work function in Bloomberg had this red headline pressing in

445
00:20:57,520 --> 00:21:00,919
Speaker 4: a twenty five percent hike in by the end of

446
00:21:00,960 --> 00:21:02,960
Speaker 4: this year decent. How does that jog with you?

447
00:21:04,880 --> 00:21:07,920
Speaker 10: Well, I can't help but think about all those dissenters

448
00:21:07,960 --> 00:21:10,640
Speaker 10: at the last FED meeting who said, hey, we should

449
00:21:10,720 --> 00:21:13,639
Speaker 10: not have an easing bias in this statement. I have

450
00:21:13,720 --> 00:21:16,080
Speaker 10: to believe that they are smiling this morning, that they

451
00:21:16,119 --> 00:21:19,800
Speaker 10: were indeed right. Let's start by removing the easing bias,

452
00:21:19,880 --> 00:21:22,879
Speaker 10: which when you're looking at you know, stable employment and

453
00:21:22,960 --> 00:21:25,320
Speaker 10: unemployment rate of four point three percent and if you

454
00:21:25,359 --> 00:21:28,959
Speaker 10: go out the double or triple decimal improving on that front,

455
00:21:29,600 --> 00:21:32,000
Speaker 10: and inflation that's probably on headline base is going to

456
00:21:32,080 --> 00:21:35,119
Speaker 10: come in about four percent this month. There's no reason

457
00:21:35,280 --> 00:21:38,680
Speaker 10: for an easing bias. The data is simply not providing that. However,

458
00:21:38,960 --> 00:21:41,520
Speaker 10: a hiking bias, I'm just not there yet. There's no

459
00:21:41,640 --> 00:21:46,040
Speaker 10: wage spiral evidence in the data, and core inflation is

460
00:21:46,040 --> 00:21:48,200
Speaker 10: still okay, so that gives them some time to wait

461
00:21:48,280 --> 00:21:51,080
Speaker 10: out another few reports. But if you're asking me where

462
00:21:51,160 --> 00:21:54,760
Speaker 10: our bias is, it's absolutely a hold or hike conversation

463
00:21:54,840 --> 00:21:56,480
Speaker 10: as we think through what the next move from the

464
00:21:56,520 --> 00:21:58,800
Speaker 10: FED will be over the next six to twelve months.

465
00:21:59,400 --> 00:22:02,200
Speaker 10: But the enter has got it right, is the headline

466
00:22:02,280 --> 00:22:03,520
Speaker 10: to me this morning.

467
00:22:03,320 --> 00:22:06,560
Speaker 2: Fransis Donald with US was RBC Capital Markets off this

468
00:22:06,680 --> 00:22:08,199
Speaker 2: big jobs reported?

469
00:22:08,240 --> 00:22:09,960
Speaker 3: Of course right into next week.

470
00:22:10,160 --> 00:22:13,600
Speaker 2: So if I got two percent real GDP, okay, let's

471
00:22:13,600 --> 00:22:16,399
Speaker 2: say you're wrong two point two percent whatever the number

472
00:22:16,960 --> 00:22:19,800
Speaker 2: I add on an inflation. Do I have a Banana

473
00:22:19,880 --> 00:22:24,440
Speaker 2: Republic nominal of five or dare I say six percent

474
00:22:25,320 --> 00:22:26,440
Speaker 2: nominal GDP?

475
00:22:28,720 --> 00:22:30,320
Speaker 9: Well, that's the map of it.

476
00:22:31,119 --> 00:22:35,760
Speaker 10: This is an economy that's really hard to bet against now.

477
00:22:36,000 --> 00:22:38,360
Speaker 10: Up until now, it's been hard to bet against it

478
00:22:38,880 --> 00:22:42,840
Speaker 10: because of structural factors. And there's been these three heavy

479
00:22:43,000 --> 00:22:47,879
Speaker 10: pillars AI government and then sort of that healthcare sector

480
00:22:47,920 --> 00:22:51,159
Speaker 10: that's providing support underneath the US economy, and it was

481
00:22:51,240 --> 00:22:51,920
Speaker 10: really hard to.

482
00:22:51,880 --> 00:22:52,720
Speaker 9: See those shaking.

483
00:22:53,200 --> 00:22:55,840
Speaker 10: What's moving now in the last two to three weeks

484
00:22:55,960 --> 00:22:59,480
Speaker 10: is that structural support overlaid with some cyclical momentum.

485
00:22:59,520 --> 00:23:01,520
Speaker 9: Now, Tom, it's still early, not going to make a

486
00:23:01,520 --> 00:23:02,320
Speaker 9: big bold.

487
00:23:02,080 --> 00:23:05,639
Speaker 10: Call here, but when you layer in structural guard rails

488
00:23:06,040 --> 00:23:09,360
Speaker 10: with some sickle cical support coming from slightly better consumer

489
00:23:09,480 --> 00:23:12,800
Speaker 10: than maybe we were expecting some relief on tariffs, then

490
00:23:12,880 --> 00:23:15,400
Speaker 10: you start to get towards a different sort of paradigm

491
00:23:15,680 --> 00:23:17,560
Speaker 10: and yet I say it's early because.

492
00:23:17,400 --> 00:23:19,240
Speaker 9: There's still some things we need to be watching.

493
00:23:19,560 --> 00:23:22,560
Speaker 10: We need to see how much inflation producers can pass

494
00:23:22,600 --> 00:23:25,399
Speaker 10: on to consumers. Real wages are going negative for the

495
00:23:25,480 --> 00:23:28,520
Speaker 10: second month in a row. Looks pretty clear from today's

496
00:23:28,520 --> 00:23:31,200
Speaker 10: average hourly waitings. So there's going to be a limit

497
00:23:31,280 --> 00:23:34,280
Speaker 10: to that. And we are in temporary relief with tariffs,

498
00:23:34,320 --> 00:23:35,960
Speaker 10: and then we don't talk about tariffs anymore, but it's

499
00:23:36,000 --> 00:23:38,639
Speaker 10: very clear to us that this is producing pressure on

500
00:23:38,840 --> 00:23:40,000
Speaker 10: businesses in America.

501
00:23:40,040 --> 00:23:41,439
Speaker 9: We got that AIPA hold.

502
00:23:41,840 --> 00:23:44,080
Speaker 10: Now just this week you've seen Section three oh one

503
00:23:44,119 --> 00:23:46,680
Speaker 10: tariffs coming through, So we have to be a little.

504
00:23:46,440 --> 00:23:47,120
Speaker 9: Bit conscious here.

505
00:23:47,400 --> 00:23:49,440
Speaker 10: I of course have been optimistic, because I say, really

506
00:23:49,480 --> 00:23:51,480
Speaker 10: hard to beg it against the US economy, but we

507
00:23:51,520 --> 00:23:53,480
Speaker 10: also have to manage the risks, and there are risks

508
00:23:53,520 --> 00:23:56,120
Speaker 10: on both side right now. It's just that we spent

509
00:23:56,200 --> 00:23:58,760
Speaker 10: so long talking about the downside risks, we've avoided talking

510
00:23:58,800 --> 00:24:01,119
Speaker 10: about the upside risks, and clear least there are some

511
00:24:01,160 --> 00:24:02,320
Speaker 10: of those as well.

512
00:24:02,480 --> 00:24:05,560
Speaker 4: I'm glad you caught out the wages here, Francis, because

513
00:24:05,560 --> 00:24:09,200
Speaker 4: we did have average avergly earnings rise three point four percent.

514
00:24:09,240 --> 00:24:11,240
Speaker 4: That was lower than the last period. But I look

515
00:24:11,240 --> 00:24:13,919
Speaker 4: ahead the next week in CPI and the core your

516
00:24:14,000 --> 00:24:16,119
Speaker 4: year's four point two percent, So it looks like the

517
00:24:16,160 --> 00:24:20,040
Speaker 4: consumer visa v inflation struggling. How do you think about

518
00:24:20,040 --> 00:24:21,040
Speaker 4: the consumer these days?

519
00:24:22,400 --> 00:24:23,639
Speaker 9: Yeah, it's such a great point.

520
00:24:23,840 --> 00:24:26,239
Speaker 10: For years, you know, when you were taught as an

521
00:24:26,240 --> 00:24:29,280
Speaker 10: economist to look at the US economy, you were told,

522
00:24:29,520 --> 00:24:33,640
Speaker 10: the US's economy is the US consumer, and the US consumer.

523
00:24:33,400 --> 00:24:34,919
Speaker 9: Is do they have jobs or not?

524
00:24:35,000 --> 00:24:37,040
Speaker 10: And as long as the job market was doing well,

525
00:24:37,240 --> 00:24:38,720
Speaker 10: then the US consumer was doing.

526
00:24:38,560 --> 00:24:40,160
Speaker 9: Well and the US economy was doing well.

527
00:24:40,160 --> 00:24:42,159
Speaker 10: And that's why I said earlier the whole goal of

528
00:24:42,160 --> 00:24:44,920
Speaker 10: the economist was to predict the non farm payrolls number.

529
00:24:45,240 --> 00:24:47,840
Speaker 10: The challenge now is that if you're an American then

530
00:24:47,920 --> 00:24:50,320
Speaker 10: you want a job, you probably have one, especially if

531
00:24:50,320 --> 00:24:52,120
Speaker 10: you're over the age of twenty five. It's not if

532
00:24:52,119 --> 00:24:54,200
Speaker 10: you have a job in America that matters anymore. It's

533
00:24:54,200 --> 00:24:57,439
Speaker 10: whether it pays you enough to afford the cost of living.

534
00:24:57,680 --> 00:25:00,800
Speaker 10: And that's just an out of wages story, Paul. It's

535
00:25:00,840 --> 00:25:04,240
Speaker 10: also an hour's worked a number. So today what I

536
00:25:04,320 --> 00:25:07,280
Speaker 10: was looking at most closely wasn't just the average hourly earnings,

537
00:25:07,280 --> 00:25:10,000
Speaker 10: which is decelerating. It's did we see any decline in

538
00:25:10,000 --> 00:25:11,960
Speaker 10: the amount of hours of employment worked?

539
00:25:11,960 --> 00:25:12,959
Speaker 9: And no, we didn't see that.

540
00:25:13,040 --> 00:25:16,040
Speaker 10: We actually saw a nice stable element of that. So

541
00:25:16,440 --> 00:25:18,960
Speaker 10: for me, we really have to shift our perception away

542
00:25:18,960 --> 00:25:21,680
Speaker 10: from what's that unemployment rate that's going to stay low

543
00:25:22,040 --> 00:25:23,639
Speaker 10: to is it providing enough?

544
00:25:23,680 --> 00:25:25,880
Speaker 9: And we know from the numbers it's not. And there'll

545
00:25:25,920 --> 00:25:27,960
Speaker 9: be a limit to how long the consumer can hold.

546
00:25:27,840 --> 00:25:30,320
Speaker 2: On a gift to you across the nation. Francis Donald

547
00:25:30,400 --> 00:25:33,280
Speaker 2: with us. We continue with Francis Donald of rb A.

548
00:25:33,480 --> 00:25:36,199
Speaker 2: See here off the jobs report. All you need to

549
00:25:36,240 --> 00:25:39,679
Speaker 2: know is a massive shift in the Sweeney yield. The

550
00:25:39,720 --> 00:25:42,800
Speaker 2: two year was up ten basis points.

551
00:25:42,920 --> 00:25:43,960
Speaker 3: It is up now in.

552
00:25:44,119 --> 00:25:49,520
Speaker 2: Explosive thirteen basis points four point one three excuse me,

553
00:25:49,600 --> 00:25:53,119
Speaker 2: nine basis points four point one three percent on the

554
00:25:53,200 --> 00:25:57,960
Speaker 2: two year yield thirty year bond five point zero one percent. Francis,

555
00:25:58,600 --> 00:26:01,200
Speaker 2: I think the CACA, even dow is and of course

556
00:26:01,240 --> 00:26:05,840
Speaker 2: the war. In all that, we're looking at the algebraic function,

557
00:26:06,160 --> 00:26:08,919
Speaker 2: and there's a lot of stuff we're not talking about,

558
00:26:09,640 --> 00:26:12,919
Speaker 2: Like we're not talking about the massive changes in immigration,

559
00:26:13,320 --> 00:26:18,040
Speaker 2: we're not talking about this massive delta of declining government

560
00:26:18,560 --> 00:26:22,879
Speaker 2: employment as well. Do you have clarity out into twenty

561
00:26:23,000 --> 00:26:23,760
Speaker 2: twenty seven?

562
00:26:26,119 --> 00:26:30,200
Speaker 10: So what we never know what policies will be around

563
00:26:30,280 --> 00:26:33,879
Speaker 10: things like immigration or even what government employment will look like,

564
00:26:33,960 --> 00:26:36,760
Speaker 10: but we do spend an enormous amount of time Tom

565
00:26:36,800 --> 00:26:39,920
Speaker 10: talking about retirements. You've heard me talk about this before,

566
00:26:40,359 --> 00:26:43,000
Speaker 10: and how critical they've been to the decline in labor

567
00:26:43,040 --> 00:26:47,120
Speaker 10: force participation rates which has sharply declined through twenty twenty six,

568
00:26:47,760 --> 00:26:49,639
Speaker 10: and just what this means for the general state of

569
00:26:49,680 --> 00:26:52,879
Speaker 10: the US economy. So our estimate of break even employment

570
00:26:52,920 --> 00:26:56,040
Speaker 10: in the US is twenty thousand. The US only needs

571
00:26:56,080 --> 00:26:59,040
Speaker 10: to add twenty thousand jobs per month now to keep

572
00:26:59,040 --> 00:27:02,520
Speaker 10: the unemployment rate stable, and that is largely driven by

573
00:27:02,600 --> 00:27:06,480
Speaker 10: retirements more than changes in immigration policy. But it so

574
00:27:06,680 --> 00:27:10,600
Speaker 10: clearly contributes to our view that again America needs workers,

575
00:27:10,600 --> 00:27:11,240
Speaker 10: not jobs.

576
00:27:11,440 --> 00:27:13,760
Speaker 9: But Tom also impacts income.

577
00:27:13,880 --> 00:27:16,120
Speaker 10: Twenty percent of income in the United States right now

578
00:27:16,320 --> 00:27:20,399
Speaker 10: is government transfers money from Washington into the households across

579
00:27:20,440 --> 00:27:24,240
Speaker 10: the country. And the larger that becomes, the less cyclical

580
00:27:24,280 --> 00:27:26,480
Speaker 10: the US economy will be. Because if you're getting a

581
00:27:26,520 --> 00:27:29,399
Speaker 10: paycheck every month as inflation adjusted, and doesn't matter if

582
00:27:29,400 --> 00:27:31,840
Speaker 10: there's a recession in play, the economy operates differently.

583
00:27:31,960 --> 00:27:34,679
Speaker 2: See like if Francis, if the Canadians had gone to

584
00:27:34,720 --> 00:27:37,280
Speaker 2: the finals, Francis would be on our way to Las Vegas.

585
00:27:38,000 --> 00:27:42,960
Speaker 2: Neil Datta this living large. He's down in Spurs Country

586
00:27:43,480 --> 00:27:46,800
Speaker 2: seeing back to back Knicks games his screen. His Bloomberg

587
00:27:46,920 --> 00:27:50,800
Speaker 2: terminal tells me he's working to graph this morning. I'm

588
00:27:50,800 --> 00:27:53,240
Speaker 2: not buying it. I think his massive work from San

589
00:27:53,320 --> 00:27:57,600
Speaker 2: Antonio Francis. I love this single sentence from Neil Duda

590
00:27:57,600 --> 00:28:00,959
Speaker 2: of Renmack. I want you to comment on this. Stagflation

591
00:28:01,320 --> 00:28:05,560
Speaker 2: is bad for stocks, and inflationary.

592
00:28:04,800 --> 00:28:05,960
Speaker 6: Boom is not.

593
00:28:06,920 --> 00:28:10,040
Speaker 3: So the ambiguity here is there can be a good

594
00:28:10,160 --> 00:28:15,640
Speaker 3: side stacks up to equality boom economy. Right.

595
00:28:17,520 --> 00:28:19,919
Speaker 10: So the way that we think about that is that

596
00:28:20,080 --> 00:28:22,879
Speaker 10: think about growth and inflation like a two by two matrix.

597
00:28:22,960 --> 00:28:26,880
Speaker 10: You've got growth up or down, inflation up or down. Now,

598
00:28:26,960 --> 00:28:30,280
Speaker 10: when you have growth down and inflation up, that's one

599
00:28:30,400 --> 00:28:33,520
Speaker 10: quadrant quadrant. We call that stagflation. But when you have

600
00:28:33,680 --> 00:28:37,800
Speaker 10: growth higher and inflation higher, that's a heating up economy

601
00:28:37,800 --> 00:28:41,480
Speaker 10: that we typically call reflation. There's an enormous amount of

602
00:28:41,480 --> 00:28:43,840
Speaker 10: work coming from the cell side on where we are

603
00:28:43,840 --> 00:28:46,200
Speaker 10: in those four quadrants and just how different in an

604
00:28:46,320 --> 00:28:49,520
Speaker 10: environment they are. But one of the big challenges is reflation.

605
00:28:50,040 --> 00:28:52,440
Speaker 10: Very clear FED response, they know what to do in

606
00:28:52,440 --> 00:28:55,080
Speaker 10: that type of environment. Usually your labor market's getting real

607
00:28:55,120 --> 00:28:57,960
Speaker 10: tight and inflation is high, you can hike rates, which

608
00:28:58,000 --> 00:29:00,840
Speaker 10: is why you get different market responses to really rate hikes.

609
00:29:01,160 --> 00:29:03,920
Speaker 10: But when you have a stagflation environment, that's the FEDSI

610
00:29:03,960 --> 00:29:07,239
Speaker 10: dual mandate pulling in opposite directions. Not only does that

611
00:29:07,280 --> 00:29:10,720
Speaker 10: create a bad environment for businesses just everyday folks operating

612
00:29:10,760 --> 00:29:13,160
Speaker 10: on the ground trying to run their companies, it's also

613
00:29:13,400 --> 00:29:15,280
Speaker 10: enormously challenging for central banks.

614
00:29:15,280 --> 00:29:18,320
Speaker 9: So even though right now, probably you know new.

615
00:29:18,160 --> 00:29:20,360
Speaker 10: Fetcher orsh is sitting there saying, oh my goodness, it

616
00:29:20,400 --> 00:29:23,160
Speaker 10: probably can't cut. At least he doesn't have the mandate

617
00:29:23,160 --> 00:29:26,040
Speaker 10: pulling in opposite directions. That would be a much harder

618
00:29:26,080 --> 00:29:29,520
Speaker 10: for feeding. This one, at least from a traditional lens

619
00:29:29,840 --> 00:29:31,800
Speaker 10: excluding the politics of it is fairly.

620
00:29:31,600 --> 00:29:34,800
Speaker 2: Straightforward, really well said versus New Zealand and a few

621
00:29:34,840 --> 00:29:36,200
Speaker 2: other choice geographies.

622
00:29:36,480 --> 00:29:39,520
Speaker 3: Francis Donald, thank you, thank you so much. Stay with us.

623
00:29:39,760 --> 00:29:43,120
Speaker 2: More from Bloomberg Surveillance coming up after.

624
00:29:42,840 --> 00:29:53,520
Speaker 1: This you're listening to the Bloomberg Surveillance podcast. Catch us

625
00:29:53,600 --> 00:29:56,920
Speaker 1: live weekday afternoons from seven to ten am Eastern. Listen

626
00:29:57,000 --> 00:30:00,800
Speaker 1: on Applecarplay and Android Otto with the Bloomberg Up, or

627
00:30:00,960 --> 00:30:02,600
Speaker 1: watch us live on YouTube.

628
00:30:02,880 --> 00:30:07,440
Speaker 2: I'm jealous because Paul and Scarlett Bloomberg Intelligence get to

629
00:30:07,480 --> 00:30:09,000
Speaker 2: do individual stocks.

630
00:30:09,560 --> 00:30:12,680
Speaker 3: David saweryby with us, and he's expecting us to say,

631
00:30:13,040 --> 00:30:16,440
Speaker 3: what's the FED gonna do? There you go, David, you

632
00:30:16,520 --> 00:30:17,920
Speaker 3: are expert.

633
00:30:18,440 --> 00:30:23,560
Speaker 2: IT companies on burn Boat Road in Bismarck, North Dakota.

634
00:30:24,440 --> 00:30:29,440
Speaker 2: They're building data centers evere ECG, Paul. It's up one

635
00:30:29,520 --> 00:30:32,720
Speaker 2: hundred percent a year, like over the last two or

636
00:30:32,760 --> 00:30:35,440
Speaker 2: three years. All right, it's forty two people. They all

637
00:30:35,440 --> 00:30:38,560
Speaker 2: look well fed, like they played for North Dakota State

638
00:30:38,600 --> 00:30:47,200
Speaker 2: and ice hockey. David Sowerby tell us about ECG Everest.

639
00:30:45,760 --> 00:30:49,160
Speaker 11: Tom it's a it's the second derivative of playing the

640
00:30:49,280 --> 00:30:54,160
Speaker 11: AI infrastructure build out in the data centers. Ever's construction

641
00:30:54,320 --> 00:30:56,920
Speaker 11: is about an eight billion dollar market camp. There's only

642
00:30:57,080 --> 00:31:01,080
Speaker 11: seven or so analysts who follow the companympany, So you

643
00:31:01,120 --> 00:31:04,440
Speaker 11: could play at the large camp way like eaton Great

644
00:31:04,480 --> 00:31:06,920
Speaker 11: Cleveland firm. But you can also play it in a

645
00:31:07,000 --> 00:31:11,040
Speaker 11: less followed everest construction that's growing their revenues at double

646
00:31:11,080 --> 00:31:16,120
Speaker 11: digit pace cash flow double digit pace. The semiconductor build

647
00:31:16,120 --> 00:31:21,320
Speaker 11: out in these data centers is EVERSU is a direct beneficiary,

648
00:31:21,520 --> 00:31:23,760
Speaker 11: and I like it because it's in the smaller camp

649
00:31:23,800 --> 00:31:28,840
Speaker 11: area where it gets less noticed, but certainly significant price

650
00:31:28,880 --> 00:31:31,040
Speaker 11: potential to a company.

651
00:31:30,680 --> 00:31:32,560
Speaker 2: Like that, like if they had a red herring out.

652
00:31:32,600 --> 00:31:36,400
Speaker 2: Now for secondary, what's the risk factor here? Is it

653
00:31:36,600 --> 00:31:42,160
Speaker 2: just like management shocks or a competitor comes in. What's

654
00:31:42,240 --> 00:31:45,400
Speaker 2: the risk factor to a company that's popped one hundred

655
00:31:45,440 --> 00:31:48,040
Speaker 2: per year for the last two years?

656
00:31:49,400 --> 00:31:55,239
Speaker 11: To me, it would be that earnings don't keep up

657
00:31:55,280 --> 00:31:59,000
Speaker 11: with high expectations. If I look at a ratio of

658
00:31:59,080 --> 00:32:03,440
Speaker 11: the valuation relative to their free cash flow margin, it's

659
00:32:03,480 --> 00:32:09,200
Speaker 11: still appealing to me. The risk would be valuation is stretched,

660
00:32:09,320 --> 00:32:11,360
Speaker 11: free cash flow margin peaks.

661
00:32:11,720 --> 00:32:12,920
Speaker 3: That would be the risk to me.

662
00:32:13,000 --> 00:32:14,240
Speaker 11: But it's not in play yet.

663
00:32:15,480 --> 00:32:18,320
Speaker 4: David, we said, we have what has become once again

664
00:32:19,000 --> 00:32:21,880
Speaker 4: a very narrow market here.

665
00:32:21,960 --> 00:32:23,280
Speaker 9: How do you guys think about that?

666
00:32:23,400 --> 00:32:24,600
Speaker 4: Is it a concern for you?

667
00:32:25,240 --> 00:32:27,240
Speaker 6: What's you're called well?

668
00:32:27,320 --> 00:32:30,960
Speaker 11: As an active manager? It's absolutely a concern because it

669
00:32:31,280 --> 00:32:35,360
Speaker 11: presents more headwind in this narrow market. It isn't just

670
00:32:35,440 --> 00:32:38,200
Speaker 11: the S and P five hundred, it's the small cap

671
00:32:38,240 --> 00:32:42,360
Speaker 11: indexes as well. It's permeated to large cap growth stocks,

672
00:32:42,440 --> 00:32:46,000
Speaker 11: large cap value stocks. It's the narrowest market I've seen

673
00:32:46,040 --> 00:32:49,719
Speaker 11: in twenty five years. Now, as an active investor, we

674
00:32:49,760 --> 00:32:52,400
Speaker 11: can lament about it, we can cry about it. Even

675
00:32:53,000 --> 00:32:56,840
Speaker 11: what's going to change it is when valuations in some

676
00:32:56,920 --> 00:33:01,880
Speaker 11: of these very narrowly lead market get pe and their

677
00:33:02,760 --> 00:33:05,920
Speaker 11: profits don't grow as fast. I think the quarter we're

678
00:33:05,960 --> 00:33:09,680
Speaker 11: sitting in today, in Q two, small cap earnings will

679
00:33:09,720 --> 00:33:13,160
Speaker 11: now exceed large cap earnings and the MAG seven. It's

680
00:33:13,160 --> 00:33:15,280
Speaker 11: starting to unfold right now. I think it's going to

681
00:33:15,320 --> 00:33:19,360
Speaker 11: persist into twenty twenty seven, where small cap profits grow

682
00:33:19,520 --> 00:33:23,120
Speaker 11: eighteen to nineteen percent, large cap profits grow fourteen to

683
00:33:23,120 --> 00:33:26,200
Speaker 11: fifteen percent, when many of these companies trade at a

684
00:33:26,240 --> 00:33:30,040
Speaker 11: twenty to twenty five percent discount. That's where the market

685
00:33:30,080 --> 00:33:33,760
Speaker 11: can broaden out more breath, and that's what we really need,

686
00:33:33,800 --> 00:33:35,280
Speaker 11: I think for all investors.

687
00:33:35,480 --> 00:33:37,360
Speaker 2: David, you know, I think of the giant out at

688
00:33:37,440 --> 00:33:41,520
Speaker 2: Washington University, at Saint Louis Douglas North, and his keyword

689
00:33:41,680 --> 00:33:45,080
Speaker 2: was ambiguity and that could be a number of things, folks,

690
00:33:45,120 --> 00:33:51,160
Speaker 2: institutional economics, it can be microeconomics in that, but it's ambiguous.

691
00:33:51,240 --> 00:33:57,160
Speaker 2: David Sowerby that if rates lift or sustain in a

692
00:33:57,240 --> 00:34:00,720
Speaker 2: five percent thirty year bond, just as one, it can

693
00:34:00,760 --> 00:34:05,400
Speaker 2: cut both ways. Higher rates can be good for stocks

694
00:34:05,880 --> 00:34:09,000
Speaker 2: and good for revenues of American companies Right.

695
00:34:10,600 --> 00:34:15,960
Speaker 11: The time, the higher rates are reflect that ism index

696
00:34:16,280 --> 00:34:19,320
Speaker 11: well above fifty. We've got a good job support this morning.

697
00:34:19,840 --> 00:34:22,680
Speaker 11: One of the most untold stories in the economy is

698
00:34:22,719 --> 00:34:25,840
Speaker 11: the two and a half to three percent growth and productivity.

699
00:34:26,280 --> 00:34:29,920
Speaker 11: That's why rates are modestly higher. So they're not a

700
00:34:29,960 --> 00:34:35,120
Speaker 11: threat to the market yet. Pick your point this point.

701
00:34:35,600 --> 00:34:37,879
Speaker 11: I think it's five percent yield on a ten year

702
00:34:37,920 --> 00:34:40,680
Speaker 11: treasury that I get a little worried that the six

703
00:34:40,760 --> 00:34:43,279
Speaker 11: percent free cash flow yield I can build in a

704
00:34:43,320 --> 00:34:47,839
Speaker 11: stock portfolio becomes somewhat less compelling. But the higher rates

705
00:34:47,880 --> 00:34:50,759
Speaker 11: right now are not a threat to the economy, Nor

706
00:34:50,800 --> 00:34:52,800
Speaker 11: are they, I think a threat threat to the market

707
00:34:53,080 --> 00:34:54,879
Speaker 11: companies cost capital is still low.

708
00:34:55,719 --> 00:34:57,440
Speaker 4: Are they a threat to the consumer? I see you

709
00:34:57,480 --> 00:35:01,400
Speaker 4: guys like Marriott Marriott Vacation. Do you think the consumer

710
00:35:01,560 --> 00:35:04,440
Speaker 4: was going to remain. I guess vibrant out there in

711
00:35:04,520 --> 00:35:05,200
Speaker 4: terms of spending.

712
00:35:06,440 --> 00:35:11,080
Speaker 11: Paul my mantra for twenty plus years is the US

713
00:35:11,120 --> 00:35:15,080
Speaker 11: consumer defies gravity. Never under estimate the US consumer. So

714
00:35:15,560 --> 00:35:19,600
Speaker 11: travel is still important from a discretionary spend. It can

715
00:35:19,640 --> 00:35:23,359
Speaker 11: be directly with Marriott, who has over seven hundred properties

716
00:35:23,400 --> 00:35:26,760
Speaker 11: within thirty miles of a World Cup game. This summer,

717
00:35:26,800 --> 00:35:30,400
Speaker 11: they're going to be a beneficiary Marriot Vacations, which was

718
00:35:30,440 --> 00:35:33,920
Speaker 11: the spinout a number of years ago for the rentals.

719
00:35:34,000 --> 00:35:38,000
Speaker 11: The Time shares another play on travel and leisure. I

720
00:35:38,040 --> 00:35:42,160
Speaker 11: think the consumer is still faring quite well, even with

721
00:35:42,480 --> 00:35:44,680
Speaker 11: somewhat higher gas prices. But I did fill up my

722
00:35:45,000 --> 00:35:48,160
Speaker 11: car yesterday my GM at four dollars and fifteen cents

723
00:35:48,160 --> 00:35:48,600
Speaker 11: a gallon.

724
00:35:49,400 --> 00:35:51,879
Speaker 3: David, Thank you so much, David Saw. We really appreciate that.

725
00:35:51,880 --> 00:35:55,640
Speaker 2: Prageically evers ecg out of Bismarck, North Dakota.

726
00:35:56,120 --> 00:36:00,960
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727
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728
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729
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730
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