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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We've been bouncing around

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Speaker 1: on the equity side of things. It feels like there's

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Speaker 1: no real conviction in the trade. But I want to

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Speaker 1: see what Lazanne Saunders has to say about that.

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Speaker 2: Yeah, very pleased to have her back with us. She

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Speaker 2: is chief investment strategist at Charles Shaw and she joins

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Speaker 2: us from Florida. Lasanne, How are you.

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Speaker 3: I'm good. How are you too?

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Speaker 2: Yeah, we're doing pretty well. We're doing pretty well. We're

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Speaker 2: not in sunny Florida, but it is kind of jealous.

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Speaker 2: It's still sunny up here.

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Speaker 3: Come on down.

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Speaker 2: Yeah, We're happy, happy, especially in the winter. We'd love to.

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Speaker 2: I want to talk a little bit about some of

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Speaker 2: the stuff you sent our producer Paul ahead of time,

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Speaker 2: because I do find it interesting given that you argue

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Speaker 2: that the pullback that we've seen just in the last

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Speaker 2: couple of weeks, last two days nowith standing, has kind

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Speaker 2: of masked some underlying declines that we've seen take place

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Speaker 2: in some of the major indices. Talk a little bit

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Speaker 2: about what you're looking at.

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Speaker 3: Sure, So there has been this focus just on the

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Speaker 3: recent weakness and the five percent or so pullback that

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Speaker 3: we saw in the S and P and the NASA,

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Speaker 3: as if that was the only underlying pressure. But the

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Speaker 3: reality was, even when the market, the S and P,

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Speaker 3: the NASDAK were at our near all time highs, you

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Speaker 3: had had a lot of churn under the surface. As

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Speaker 3: of for instance, using the Nasdaq as admittedly the most

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Speaker 3: extreme example, again you haven't had more than a five

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Speaker 3: percent draw down from a year to date high at

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Speaker 3: the index level. However, the average member within the Nasdaq

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Speaker 3: has had a maximum draw down on average of thirty

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Speaker 3: two percent, So that's bare market level declines. It just

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Speaker 3: happened through a process of rotation and churn. That's not

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Speaker 3: a bad way to correct. Sentiment access is correct concentration access.

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Speaker 3: I think probably most investors would choose a rotational correction

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Speaker 3: as opposed to the bottom falling out all at once.

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Speaker 3: But that's the real story. Is you have to peel

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Speaker 3: kind of a layer of the onion back beyond just

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Speaker 3: the index level changes.

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Speaker 1: Is that largely some of the NASDAK names or the

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Speaker 1: broader market overall.

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Speaker 3: Was that it's mostly the Nasdaq. In terms of that

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Speaker 3: kind of underlying weakness, I think it's about twenty five

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Speaker 3: percent maximum drawdown on average for members within the Russell

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Speaker 3: two thousand, so clearly it's the smaller cap. It's only

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Speaker 3: about twelve percent for the S and P five hundred,

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Speaker 3: So there's definitely been weakness heading down the cap spectrum

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Speaker 3: into where you have the most interest rates sensitivity, the

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Speaker 3: nonprofitable zombie companies. So that's that's where the pressure has

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Speaker 3: been most acute.

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Speaker 1: So what does that say to you that there's opportunity

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Speaker 1: for room to the upside or how do you see?

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Speaker 1: And I feel like you can't think about that without

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Speaker 1: thinking about, Okay, what ultimately the FED may or may

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Speaker 1: not do, as the expectations around rate cuts have come

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Speaker 1: down dramatically.

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Speaker 3: Yeah, so I think yields have been more in the

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Speaker 3: driver's seat for what the market has done versus just

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Speaker 3: expectations around FED policy. It's kind of a parlor game

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Speaker 3: that everybody's playing. Now, you know, when will they start

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Speaker 3: how many cuts? And they're data dependent, so the data

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Speaker 3: is going to dictate that. But in the meantime, the

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Speaker 3: big move down in yields started the to October last

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Speaker 3: year to the earlier in the year low of three

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Speaker 3: point eight percent. That was a huge tailwind for the

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Speaker 3: overall market for small caps, and then the move up

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Speaker 3: initially really hurt small caps because that's where there's greater

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Speaker 3: interest sensitivity, but then more recently some of the larger names.

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Speaker 3: I think the leadership that has been dominant in the

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Speaker 3: past month or so will probably restart after we go

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Speaker 3: through this choppy phase, and that's in areas like financials

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Speaker 3: and energy and materials. That doesn't mean there aren't still

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Speaker 3: opportunities and everybody's favorite sectors like tech and communications services,

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Speaker 3: but I think that cyclical leadership has got legs.

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Speaker 1: Is that financials, energy, materials, I'm trying to think how

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Speaker 1: to read that. Is that because there's economic activity? Is

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Speaker 1: that because for financials a higher rate environment can mean

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Speaker 1: good things? Is energy because of geopolitics?

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Speaker 3: Yeah, I mean they are individual reasons. You've got obviously

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Speaker 3: geopolitics and oil. With energy, you've got oversold conditions that

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Speaker 3: developed obviously in financial with last year in the MIDDI

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Speaker 3: banking crisis, materials as a play on commodities. But broadly

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Speaker 3: I think it does reflect at least some sign of

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Speaker 3: improving global growth, and you know, really the kind of

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Speaker 3: growth trio of sectors, the tech, communication services, consumer discretionary

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Speaker 3: that house the Magnificent seven. They've almost become this era's

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Speaker 3: defensive type names. And I think given the stability and

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Speaker 3: strengthen the economy, that we finally saw some money shift

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Speaker 3: to those more classic cyclicals. And again we think that

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Speaker 3: that has some legs.

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Speaker 1: You know, it's interesting. I was looking at some of

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Speaker 1: the I think you have some of the data. Was

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Speaker 1: a German confidence or consumer confidence number that came in stronger.

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Speaker 1: Maybe today, I feel like there's been some news coming

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Speaker 1: in slowly out of Europe that maybe things you know,

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Speaker 1: are not as bad. And I do wonder, at Leasanne,

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Speaker 1: if we are setting ourselves up, maybe even China, could

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Speaker 1: they possibly could it be this year that finally we

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Speaker 1: see some significant momentum. Certainly the numbers seem to suggest it,

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Speaker 1: despite the skeptics, But could we We've been kind of

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Speaker 1: ruling all of this out and saying the US is

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Speaker 1: the best game in town. But if we get more

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Speaker 1: global growth, as the IMF has suggested, you know, could

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Speaker 1: that be really a boom if you will, certainly to

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Speaker 1: the global equity story.

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Speaker 3: So it's hard to envision a boom condo scenario, especially

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Speaker 3: maybe that's China given. Yeah, But you know, Carol, the

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Speaker 3: way you asked the question initially, I think you use

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Speaker 3: some important words, which is less bad. We have to

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Speaker 3: remember that, you know, when it comes to data, economic data,

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Speaker 3: earnings data, whatever it is, and market behavior. It's human

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Speaker 3: nature to think of economic data, earnings data in good

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Speaker 3: versus bad, strong versus weak, but better or worse tends

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Speaker 3: to matter more than good or bad. And it's just

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Speaker 3: those inflection points when things stop getting worse and start

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Speaker 3: getting better that can be the launch point for sector

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Speaker 3: changes in terms of where leadership is better market performance.

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Speaker 3: You don't necessarily need to see a significant acceleration, just

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Speaker 3: that inflection from bad to less bad to maybe getting better.

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Speaker 2: So we're all eyes on meta in just a few minutes, Lizen,

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Speaker 2: and I'm wondering about what this could tell us about

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Speaker 2: the greater economy if it's any sort of bell weather

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Speaker 2: to you. Given the vassive, vast majority, I can say

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Speaker 2: all of the revenue comes from advertising at this point,

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Speaker 2: a lot of small business advertising as well, and how

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Speaker 2: you're thinking about big tech earnings as we sort of

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Speaker 2: get into the swing of earning season right now.

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Speaker 3: So, as you know, I don't cover individual stocks, not

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Speaker 3: meta any of them. I think the most important aspect

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Speaker 3: to the earnings, particularly this week some of the big

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Speaker 3: high profile names, is not just about okay, did they

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Speaker 3: beat the consensus estimate for the quarter, but the differential

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Speaker 3: between top line growth, bottom line growth, maintenance of profit margins,

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Speaker 3: and importantly the outlook, because back to the better or

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Speaker 3: worse matters more than good or bad. You know, there's

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Speaker 3: been so much enthusiasm for maybe now a subset of

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Speaker 3: the magnificence set, and the data is likely to continue

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Speaker 3: to be really good, but we're starting to appropriately ask

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Speaker 3: the question has the expectation bar, either figuratively or literally

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Speaker 3: gotten set too high? And that I think was part

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Speaker 3: of the reason for some of this volatility. So that's

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Speaker 3: what I'm paying attention to this weekend next.

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Speaker 1: So great to check in with you again, Lezambi. Well,

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Speaker 1: Lizanne Sander's chief investment strategist at Charles Schwab, joining us

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Speaker 1: from Naples, Florida,