WEBVTT - Bloomberg Surveillance TV: October 7, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.760 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.239 Terminal and the Bloomberg Business app. We begin this out 0:00:37.320 --> 0:00:40.080 with markets on hold, as a strong September payrolls report 0:00:40.120 --> 0:00:42.720 put stocks on a four week winning street. Edgardenny, I 0:00:42.720 --> 0:00:44.840 of Yourdenny Research things the Fed can take the rest 0:00:44.840 --> 0:00:48.280 of the year off. Following Friday's strong September employment report, 0:00:48.600 --> 0:00:51.720 Federal fun Futures Markets predicts five or six ray cuts 0:00:51.720 --> 0:00:54.360 over the next twelve months. We're predicting none and done 0:00:54.560 --> 0:00:57.040 for the rest of this year. Edgar Denny joined us 0:00:57.040 --> 0:00:59.600 now for more EDGM Danny, let's talk about that. Is 0:00:59.600 --> 0:01:02.560 that one jobs report enough to say they're done for 0:01:02.600 --> 0:01:02.880 the year. 0:01:04.319 --> 0:01:06.839 I think it wasn't just the jobs report. We also 0:01:06.880 --> 0:01:12.080 had a very strong purchasing manager's index for the services economy, 0:01:12.520 --> 0:01:15.800 and that's where the strengthen the economy has been. Initial 0:01:15.920 --> 0:01:20.440 unemployment claims have remained very low, and so I think 0:01:20.440 --> 0:01:23.080 there have been actually quite a few numbers. As you know, 0:01:23.160 --> 0:01:28.800 the City Group Economic Surprise indexes positive again, and that's 0:01:28.840 --> 0:01:30.880 one of the reasons the body yield is back up. 0:01:30.920 --> 0:01:34.520 It's a good indicator of the direction of the body yield. 0:01:34.880 --> 0:01:37.039 And if you're right and they are done, and we 0:01:37.080 --> 0:01:40.000 reprice this yield curve higher and we reduce how many 0:01:40.000 --> 0:01:42.320 interest rate cuts a price for the next twelve months. 0:01:42.560 --> 0:01:45.320 How well does this equity market perform in your opinion? 0:01:46.520 --> 0:01:49.960 Well, I think it performs differently. I think we've currently 0:01:50.080 --> 0:01:53.760 seen that this bull market has been led by the pe. 0:01:53.920 --> 0:01:57.760 The evaluation multiple has gone up dramatically. Earnings have also 0:01:58.000 --> 0:01:59.840 been going up, which she wouldn't really have a bull 0:02:00.080 --> 0:02:03.920 market unless you really had the earnings trending higher. And 0:02:04.000 --> 0:02:06.560 for the S and P five hundred, five hundred that 0:02:06.600 --> 0:02:08.680 are all time record high, that's not the case for 0:02:08.720 --> 0:02:12.959 this midcaps, the small and MidCap SMP four hundred and 0:02:13.000 --> 0:02:15.840 six hundred, their earnings have actually been flat. I think 0:02:15.880 --> 0:02:18.639 the market continues to broaden, but instead of broadening out 0:02:18.880 --> 0:02:22.720 to the Rustle two thousand, which would would be correlated 0:02:22.800 --> 0:02:25.440 with interest rates going down, if interest rates stay here, 0:02:25.720 --> 0:02:28.520 I think it broadens out from the Magnificent seven to 0:02:28.560 --> 0:02:30.960 the S and P four hundred and ninety three. 0:02:31.639 --> 0:02:33.800 It's something as different though, this time for this earning 0:02:33.840 --> 0:02:36.240 season than it was in August. In August, we were 0:02:36.280 --> 0:02:39.120 talking about the high bar that equities had to reach. 0:02:39.200 --> 0:02:41.960 This time, it's somewhere below five percent that we're expecting 0:02:42.000 --> 0:02:43.200 earnings growth for this quarter. 0:02:43.280 --> 0:02:46.200 The bar is certainly lower. What does that mean? 0:02:46.240 --> 0:02:48.480 Earning season is about to be upon us? Can this 0:02:48.639 --> 0:02:51.400 not be the leg of the next bowl market rally? 0:02:51.560 --> 0:02:53.320 Whether or not rates are being cut. 0:02:54.520 --> 0:02:59.360 Well, my preference is exactly what's happening here. I would 0:02:59.360 --> 0:03:01.799 prefer that the market goes up on earnings from here 0:03:02.080 --> 0:03:04.880 rather than on valuation. This is not a cheap market. 0:03:04.960 --> 0:03:07.839 We've got the buffet ratio. I think it's two point eight. 0:03:07.880 --> 0:03:09.880 It's in an all time record high. That's the price 0:03:09.960 --> 0:03:13.080 to sales ratio. The forward pe for the S and 0:03:13.120 --> 0:03:16.720 P five hundred is about twenty two, with a Magnificent 0:03:16.800 --> 0:03:19.520 seven selling at almost thirty and the rest of the 0:03:19.560 --> 0:03:22.880 market at nineteen, So you know, you're not getting any 0:03:22.880 --> 0:03:26.760 bargains here. But what the market, I think will do 0:03:26.880 --> 0:03:29.440 is go up on earnings, and we're going to have 0:03:29.520 --> 0:03:31.680 another quarter. Earnings are going to go to a record 0:03:31.760 --> 0:03:32.840 high in the third quarter. 0:03:33.520 --> 0:03:35.560 It has been a market, though, that has been able 0:03:35.600 --> 0:03:38.400 to rally without the mag seven, without the megacaps for 0:03:38.440 --> 0:03:40.480 the most part. In the second half of the year 0:03:40.520 --> 0:03:42.840 so far, only two point nine percent of the rally 0:03:42.920 --> 0:03:46.680 is attributed to those mag seven stocks, according to bespoke. 0:03:47.320 --> 0:03:49.880 Is it a market that, even though it is overvalued, 0:03:50.000 --> 0:03:54.720 at least is more healthy, at least is more broad Well. 0:03:54.560 --> 0:03:58.240 I think it's healthier if the stocks that go up 0:03:58.280 --> 0:04:01.040 that it broadens out to the rest of the market, 0:04:01.440 --> 0:04:03.520 the abreast of the S and P five hundred, beyond 0:04:04.000 --> 0:04:08.960 the Magnificent seven. But again, you know, those multiples which 0:04:08.960 --> 0:04:12.920 are at nineteen could easily get over twenty here very quickly. 0:04:13.440 --> 0:04:16.720 And so I think the health of the stock market's 0:04:16.760 --> 0:04:18.880 going to depend on earnings. I'm a little nervous that 0:04:18.920 --> 0:04:21.960 everybody's turning so bullish and all of a sudden, everybody's 0:04:21.960 --> 0:04:24.760 talking about six thousand. I started out the year talking 0:04:24.800 --> 0:04:26.560 at fifty four hundred for the S and P five 0:04:26.600 --> 0:04:29.240 hundred by year end, and that was an outlier. I 0:04:29.279 --> 0:04:31.680 had to raise that to fifty eight hundred. And now 0:04:31.960 --> 0:04:35.560 you know that's a kind of number where people are 0:04:35.600 --> 0:04:37.600 talking about six thousand. So I think there's a little bit, 0:04:38.520 --> 0:04:40.200 you know, I had a steam here building up that 0:04:40.440 --> 0:04:42.160 could be disappointed. 0:04:42.040 --> 0:04:43.080 Ed you were ahead of the curve. 0:04:43.160 --> 0:04:45.320 In your note today, you also talk about before we 0:04:45.360 --> 0:04:47.160 get too cocky, you say we should know it that 0:04:47.200 --> 0:04:51.200 we aren't completely rolling out the possibility of recession. What 0:04:51.279 --> 0:04:54.480 could trigger a recession for the US economy right now? 0:04:55.000 --> 0:04:57.080 Yeah, Well, we had been thinking that the economy was 0:04:57.160 --> 0:04:59.200 surprise to the upside. We've been saying that for two 0:04:59.240 --> 0:05:03.320 and a half years. Don't underestimate the economy, don't underestimate 0:05:03.600 --> 0:05:08.560 the consumer. Looking ahead here, we're thinking that the economy 0:05:08.640 --> 0:05:12.520 is going to continue to perform quite well. And so 0:05:12.720 --> 0:05:15.599 I think that's consistent with where the bond yield is. 0:05:15.640 --> 0:05:18.640 I think interest rates have normalized. I think the Fed 0:05:18.960 --> 0:05:22.080 really has to reconsider what is the neutral rate, which, 0:05:22.120 --> 0:05:24.400 by the way, I think is a fairy tale number. 0:05:25.160 --> 0:05:29.640 It doesn't exist. It's totally a theoretical construct. But all 0:05:29.680 --> 0:05:33.120 in all, I think the market goes higher on earnings. 0:05:33.680 --> 0:05:36.520 Okay, but what about the geopolitics. You also have one 0:05:36.600 --> 0:05:37.640 eye looking at. 0:05:38.200 --> 0:05:40.960 Yeah, well twenty percent. You know, I don't want to 0:05:40.960 --> 0:05:43.960 get cocky about this thing. As I wrote, I think 0:05:44.000 --> 0:05:45.960 there is a chance of a recession here, which is 0:05:46.000 --> 0:05:49.200 a twenty percent probability in our minds, and it is 0:05:49.240 --> 0:05:53.560 geopolitically related. I know it's a little bit hard to believe, 0:05:53.600 --> 0:05:56.480 but you look at the history of geopolitical crises, and 0:05:56.560 --> 0:06:00.040 more often than that they've actually been buying opportunities. The 0:06:00.120 --> 0:06:04.040 reality is this geopolitical crisis so far really hasn't given 0:06:04.040 --> 0:06:07.400 anybody a buying opportunity. So there's still a possibility that 0:06:08.120 --> 0:06:12.720 with this war between Iran and between Iran and Israel 0:06:12.800 --> 0:06:15.560 getting to be a more direct confrontation, that there could 0:06:15.640 --> 0:06:17.640 be a sell off related to that. 0:06:18.360 --> 0:06:19.720 Youthin is a part of the market, then there's a 0:06:19.720 --> 0:06:22.880 little bit too stretch. Is an index level coal a sector? Coal? 0:06:23.279 --> 0:06:27.479 What is it? Well? I think that it's stretched in 0:06:27.560 --> 0:06:30.760 terms of valuation, and I think that part of that 0:06:30.880 --> 0:06:35.400 is because we do have a very passive investment orientation 0:06:35.520 --> 0:06:38.360 in the marketplace when people get into the market. More 0:06:38.400 --> 0:06:42.039 often than not, they're getting into ETFs, and ETFs really 0:06:42.080 --> 0:06:46.720 don't get very concerned about diversification. If you know, if 0:06:46.720 --> 0:06:48.520 you have an S and P five hundred ETF and 0:06:48.560 --> 0:06:51.400 thirty percent of that is the magnificence of and that's 0:06:51.400 --> 0:06:55.640 what you're buying, whereas managed portfolios might be more conservative, 0:06:55.680 --> 0:06:57.520 and so that's not enough diversification. 0:06:57.800 --> 0:06:59.480 I just want to walk away with the right impression 0:06:59.480 --> 0:07:01.279 of where you stay, and I don't want to mischaracterize 0:07:01.320 --> 0:07:03.039 you for the rest of the weekend. At the moment, 0:07:03.080 --> 0:07:04.680 it sounds like you're bearish. Is that fair? 0:07:06.080 --> 0:07:10.320 No, I'd say that our view is that it's we're 0:07:10.360 --> 0:07:13.000 at the right place in the market relative to evaluation 0:07:13.760 --> 0:07:17.680 and earnings. I think we're we could get to six thousand. 0:07:18.280 --> 0:07:20.240 I guess what I'm saying is I hope we don't 0:07:20.240 --> 0:07:22.400 see a melt up here because I don't like melt ups. 0:07:23.200 --> 0:07:24.840 They forced me to have to figure out when to 0:07:24.840 --> 0:07:27.800 tell people to sell. And I think earnings are going 0:07:27.880 --> 0:07:30.840 to continue to drive the market higher at a slower pace. 0:07:31.480 --> 0:07:34.480 So ed if you think that we can continue to 0:07:34.480 --> 0:07:38.240 move forward, but there's some distortions in the market, it's overvalued. 0:07:38.360 --> 0:07:41.200 Are you in the Cliff Assness camp of AQR that 0:07:41.320 --> 0:07:44.280 this is a less efficient market and that these types 0:07:44.320 --> 0:07:47.600 of mispricings can continue on for longer because of forces 0:07:47.880 --> 0:07:48.880 like passive management. 0:07:50.120 --> 0:07:52.520 I think that's a very good point, you know, I 0:07:52.560 --> 0:07:55.480 agree with that. But at the end of the day, 0:07:56.200 --> 0:08:00.760 that's the theoretical notion. And the line is is this 0:08:00.880 --> 0:08:04.520 market going higher? And I think it is going higher. Look, 0:08:04.560 --> 0:08:08.480 we've got six trillion dollars sitting in money market mutual funds. 0:08:08.680 --> 0:08:10.800 They are all time record high, and so is the 0:08:10.840 --> 0:08:12.840 stock market. In other words, the stock market got to 0:08:12.880 --> 0:08:16.200 a record high without people actually panicking out of money 0:08:16.240 --> 0:08:18.800 market funds and getting into the stock market. So there's 0:08:18.840 --> 0:08:21.960 a tremendous amount of liquidity in the system and there's 0:08:22.000 --> 0:08:24.320 a lot of buying. On a global basis, I would 0:08:24.320 --> 0:08:27.320 continue to overweight the US on a global portfolio. I 0:08:27.320 --> 0:08:29.800 think the China things kind of running out of steam here, 0:08:30.240 --> 0:08:32.440 and I think people are going to go back to overweighting. 0:08:32.480 --> 0:08:35.760 The US's kind of the safe haven in the global 0:08:35.960 --> 0:08:36.960 stock market. Arena. 0:08:37.160 --> 0:08:39.079 John Danny, let's finish there. What is it about Shina 0:08:39.120 --> 0:08:39.839 you dounbelieve in? 0:08:41.520 --> 0:08:44.560 Well, they've got some major structural problems they created. The 0:08:44.600 --> 0:08:48.720 government created its own mess here with the demographics. They 0:08:48.840 --> 0:08:54.400 got very rapidly aging demographic profile. The consumers are stretched. 0:08:55.240 --> 0:08:58.319 I don't think they're going to be going buying additional apartments. 0:08:59.080 --> 0:09:02.040 So even if they managed to stop the debacle in 0:09:02.080 --> 0:09:04.480 the property market, that's not going to be a source 0:09:04.520 --> 0:09:07.880 of economic growth. All in all, it's a it's a 0:09:07.960 --> 0:09:12.040 government run. It's an autocratic government running an economy that's 0:09:12.240 --> 0:09:15.560 done extremely well when they capitalism flourish. Now they're not. 0:09:16.640 --> 0:09:28.679 If your Anny research, i'd appreciate itself between the down 0:09:28.720 --> 0:09:30.920 to a Franklin template of right, we continue to believe 0:09:30.920 --> 0:09:33.560 in a self landing, which is bullish for equities compared 0:09:33.600 --> 0:09:37.520 with the more bearish expectations of an imminent recession. Katrina 0:09:37.600 --> 0:09:38.960 is whether it's around a table here in New York 0:09:39.000 --> 0:09:41.240 KA training co Mornic, good morning, let's start on Friday. 0:09:41.280 --> 0:09:43.280 It's like Friday never ended. What did you make of that? 0:09:43.920 --> 0:09:46.920 I think that we've had We've had some bullish momentum 0:09:47.000 --> 0:09:49.440 in the market. We have been in the self landing 0:09:49.480 --> 0:09:52.280 camp for a long period of time in terms of 0:09:52.360 --> 0:09:54.320 we think that there are so many tools that have 0:09:54.400 --> 0:09:56.600 been available to be able to kind of land this 0:09:56.679 --> 0:09:59.920 economy on that landing strip and do something in terms of, 0:10:00.240 --> 0:10:03.040 you know, managing the inflation and getting that down, which 0:10:03.080 --> 0:10:04.679 I think we can kind of check mark on that. 0:10:04.760 --> 0:10:07.080 We'll see the data that comes later this week. You 0:10:07.120 --> 0:10:10.360 look at the employment outlook, it's been bullish. People are good, 0:10:10.720 --> 0:10:12.559 and so I think that the Fed has actually done 0:10:12.600 --> 0:10:13.800 a very very good job here. 0:10:13.880 --> 0:10:15.560 There's a feedling on Friday that good news is still 0:10:15.559 --> 0:10:17.880 good news. Equities will hire. Bond yards were two, They're 0:10:17.960 --> 0:10:19.959 up again this morning by seven basis points at the 0:10:19.960 --> 0:10:22.360 front end on a ten year, up by three. Should 0:10:22.400 --> 0:10:24.760 they be anxious? Should equity bills be anxious about what's 0:10:24.800 --> 0:10:25.839 developing in the bond market? 0:10:25.840 --> 0:10:28.439 Again, I think that we've all I grew up where 0:10:28.480 --> 0:10:30.200 we used to look at the bond market and it 0:10:30.200 --> 0:10:32.760 would inform us as equity investors, And now I think 0:10:32.800 --> 0:10:35.000 that the narrative has shifted. I think that we've got 0:10:35.040 --> 0:10:38.160 so many indicators coming out of equity markets, and I 0:10:38.200 --> 0:10:40.480 think that the equity markets have been at the forefront 0:10:40.480 --> 0:10:41.640 of some of the bond markets. 0:10:41.640 --> 0:10:44.640 So, Katrina, you also, though mentioned some of the bearishness 0:10:44.679 --> 0:10:47.520 and the technical backdrop, the fact that hedge funds need 0:10:47.559 --> 0:10:50.240 to take down their exposure with the volatility that corporates 0:10:50.240 --> 0:10:52.800 are in a blackout period, how much does that weigh 0:10:53.000 --> 0:10:55.040 on a potential rally in this equity market. 0:10:55.080 --> 0:10:57.280 I think if you combine those two things, which are 0:10:57.320 --> 0:10:59.480 the kind of the hedge fund exposure, you look at 0:10:59.520 --> 0:11:01.600 the fact that that we've got this blackout period and 0:11:01.640 --> 0:11:04.360 buybacks have been a big driver of some of the 0:11:04.400 --> 0:11:07.320 earnings growth as well as the incremental buyer in the market. 0:11:07.520 --> 0:11:10.520 And then we cannot forget about the election. The election 0:11:10.720 --> 0:11:13.640 is causing uncertainty because we actually don't know who's going 0:11:13.679 --> 0:11:14.480 to win this time. 0:11:14.800 --> 0:11:16.800 And for a lot of people that's. 0:11:16.600 --> 0:11:19.000 Good news because it means it's still up in the 0:11:19.040 --> 0:11:21.960 air and there's still a chance for one candidate to 0:11:22.000 --> 0:11:25.280 pull ahead. But when you have uncertainty, the market doesn't 0:11:25.400 --> 0:11:27.360 like it. You'll see, you know, the kind of those 0:11:27.400 --> 0:11:30.960 spikes in volatility, and you'll see that uncertainty get priced in. 0:11:31.120 --> 0:11:34.920 But for risk with a really strong backdrop, how much 0:11:35.000 --> 0:11:36.400 does the election really matter? 0:11:36.520 --> 0:11:37.679 Besides the rhetoric? 0:11:38.000 --> 0:11:41.280 The potential volatility doesn't really change the long term outcome 0:11:41.280 --> 0:11:44.120 when you have earnings and expectations are really low, a 0:11:44.160 --> 0:11:45.040 potential bar to. 0:11:45.000 --> 0:11:47.160 Be and again a labor market that's very strong. 0:11:47.360 --> 0:11:49.360 I think in terms of the election, First of all, 0:11:49.400 --> 0:11:52.640 I think on tariffs, we're in agreement that both parties 0:11:52.640 --> 0:11:56.120 have got incentives to continue that tariff regime. So I 0:11:56.120 --> 0:11:58.480 think that way we can kind of say, doesn't matter 0:11:58.559 --> 0:12:02.080 which side. But think about taxes, that is the area 0:12:02.120 --> 0:12:04.880 and taxes. I always look at an income statement. It's 0:12:04.920 --> 0:12:08.400 a big number, and so if you have any discs, 0:12:08.559 --> 0:12:12.000 you've got a lot of disparity in policy, particular as 0:12:12.040 --> 0:12:15.120 it relates to corporate taxes. And obviously if you have 0:12:15.200 --> 0:12:17.840 a regime where there's a reduction in the corporate tax rate, 0:12:17.880 --> 0:12:21.160 that is bullish for equities and the offset. So I 0:12:21.200 --> 0:12:24.160 think that that's the unknown that we have. And no, 0:12:24.320 --> 0:12:26.800 I don't think we're going to have the next day 0:12:26.920 --> 0:12:30.319 change in tax rates, but it could happen fairly quickly, 0:12:30.360 --> 0:12:32.640 particularly if you get a Republican's fleite. 0:12:32.840 --> 0:12:36.360 Well, also because TCJA is expiring next year, so taxes 0:12:36.400 --> 0:12:38.880 are completely in focus. But if you're concerned about the 0:12:38.920 --> 0:12:40.960 corporate tax rate, do you care more about the composition 0:12:41.040 --> 0:12:42.920 of Congress than you care about who's in the White House. 0:12:43.120 --> 0:12:45.040 I still do care about who is in the White 0:12:45.040 --> 0:12:47.439 House because I think that that is the driving force, 0:12:47.440 --> 0:12:50.800 that is a representation of America, and I think that 0:12:50.800 --> 0:12:53.560 they're the person who kind of drives where we end 0:12:53.640 --> 0:12:56.720 up as a policy. I think, you know, as a country, 0:12:56.800 --> 0:12:58.800 we have this kind of tension in that we do 0:12:58.880 --> 0:13:00.920 believe that lower taxes. 0:13:00.559 --> 0:13:03.400 Are good for America. They're good for American business. 0:13:03.440 --> 0:13:07.120 But we do obviously have some fairly high deficits out there. 0:13:07.200 --> 0:13:09.520 We do, and there's new projections actually what those deficits 0:13:09.559 --> 0:13:13.320 would look like from Washington from the Grecial Budget Office. 0:13:13.679 --> 0:13:17.280 About whether tariffs or Trump. You mentioned inflation and tariffs. 0:13:17.600 --> 0:13:20.560 If you think both of these candidates are interested in 0:13:20.640 --> 0:13:23.560 using tariffs as a policy, and we just got data 0:13:23.600 --> 0:13:27.640 that showed wage growth accelerated by next year, shouldn't we 0:13:27.679 --> 0:13:28.960 be concerned again with inflation? 0:13:29.679 --> 0:13:32.880 I think on the wage growth that's a really big 0:13:32.960 --> 0:13:35.880 lagging indicator in terms of the inflation outlook. So I 0:13:35.880 --> 0:13:39.800 would say that any kind of job related inflation lags 0:13:39.840 --> 0:13:42.720 what we expect to see. In terms of how do 0:13:42.760 --> 0:13:46.160 we expect tariffs to impact It really depends on how 0:13:46.240 --> 0:13:49.200 we respond to them. If I have a company, a 0:13:49.200 --> 0:13:53.319 small company and the alternative is to buy something domestically 0:13:53.400 --> 0:13:57.600 versus a cheaper Chinese import that suddenly gets inflated up. 0:13:58.360 --> 0:14:00.880 It's good for America because I'm you doing. 0:14:00.679 --> 0:14:03.480 That in house. So I think that the inflation number 0:14:03.559 --> 0:14:03.920 is not. 0:14:03.880 --> 0:14:07.679 Directly a collery of the fact that I'm increasing tariffs 0:14:07.720 --> 0:14:10.000 and then suddenly I'm going to see inflation in America. 0:14:10.080 --> 0:14:12.040 I think it really is going to depend on what 0:14:12.040 --> 0:14:14.839 that adjustment is. And I think a lot of companies 0:14:15.080 --> 0:14:18.240 have been doing a lot of actions where they're matching 0:14:18.640 --> 0:14:21.960 they're manufacturing to where they're selling, so that these tariffs 0:14:22.000 --> 0:14:24.240 may not be as impactful as we initially thought. 0:14:24.400 --> 0:14:26.440 Let's get your equity calls the US versus the rest 0:14:26.440 --> 0:14:28.760 of the world, within the US large versus small, How 0:14:28.760 --> 0:14:29.720 are you thinking about things? 0:14:29.960 --> 0:14:33.400 I think in terms of the US market, the momentum 0:14:33.440 --> 0:14:36.360 of the US market, and that is something that we're 0:14:36.440 --> 0:14:40.880 bullish on. We are concerned about that concentration. We've looked 0:14:40.880 --> 0:14:44.760 at the concentration and there's no necessary research that kind 0:14:44.760 --> 0:14:47.560 of says, well, a highly concentrated market will sell off 0:14:47.720 --> 0:14:51.880 x percent because you have different situations. So on the concentration, though, 0:14:51.920 --> 0:14:54.480 that is something that worries US. We do see a 0:14:54.560 --> 0:14:58.320 situation where you can have some of these large companies 0:14:58.640 --> 0:15:01.800 flatish means that they're going to grow their ownings, which 0:15:01.840 --> 0:15:03.960 is what the market's expecting, and they're going to grow. 0:15:04.040 --> 0:15:07.200 The valuation will decline as the earnings increase, and you 0:15:07.320 --> 0:15:10.280 kind of had a kind of tempered market return, and 0:15:10.320 --> 0:15:13.400 that's good for the overall equity market. What we're seeing 0:15:13.440 --> 0:15:15.880 is that that now that bullishness in the top of 0:15:15.880 --> 0:15:18.720 the market is starting to filter down, where I think 0:15:18.800 --> 0:15:21.800 people are focused is going straight to small caps. But 0:15:22.000 --> 0:15:24.560 I think that there's actually a really big middle in 0:15:24.640 --> 0:15:27.840 America that is getting ignored, and that's the part of 0:15:27.880 --> 0:15:30.600 the market that I actually like at the moment. The 0:15:30.680 --> 0:15:35.520 small caps in a regime where you're anti FTC may 0:15:35.560 --> 0:15:38.320 not have that takeout premium, so there's a little risk there. 0:15:38.560 --> 0:15:40.720 But that mid part of the market I think could 0:15:40.720 --> 0:15:41.440 actually be where. 0:15:41.280 --> 0:15:43.400 Opperation is to apect a preference within the mid caps. 0:15:44.320 --> 0:15:46.840 In terms of sector preference, I would go towards some 0:15:46.880 --> 0:15:49.560 of the industrial names, where I think that they've got 0:15:49.600 --> 0:15:53.040 that resiliency to be able to take advantage of moving 0:15:53.080 --> 0:15:55.080 things around that they're not going to be hurt by 0:15:55.120 --> 0:15:59.120 that rising tariff regim and maybe they've got some ability 0:15:59.160 --> 0:16:00.760 to benefit from new policy. 0:16:01.280 --> 0:16:03.520 There has been some of that the mag seven, it's 0:16:03.600 --> 0:16:06.000 thirty percent weighted in the S and P. Bespoth points out, 0:16:06.080 --> 0:16:08.360 it's only accounted for two point nine percent of the 0:16:08.400 --> 0:16:10.320 index has gained so far in the second half. 0:16:10.880 --> 0:16:13.720 Is it a healthier market now? I don't think it's 0:16:13.760 --> 0:16:14.600 quite yet healthy. 0:16:14.720 --> 0:16:18.520 I think you've still got those Magnificent seven still dominating. 0:16:19.520 --> 0:16:20.760 Even the numbers you. 0:16:21.040 --> 0:16:24.560 Quote sound very small, but it's still dominating returns and 0:16:24.640 --> 0:16:28.040 dominating the narrative. I think that what we're seeing, however, 0:16:28.120 --> 0:16:30.880 is people starting to look at what are the second 0:16:30.920 --> 0:16:33.440 derivatives of say the AI, and that's where they're going 0:16:33.480 --> 0:16:36.840 into the MidCap names. I also think that some of 0:16:36.880 --> 0:16:40.760 the exposure that you're looking at in the Magnificent seven, 0:16:41.600 --> 0:16:43.800 people are starting to say, well, maybe I don't want 0:16:43.840 --> 0:16:46.280 an in video, I want an in VideA that you know, 0:16:46.520 --> 0:16:48.480 the second deriva, So the picks and shovels. 0:16:48.760 --> 0:16:51.600 Do you understand at this point how big cap tech 0:16:51.720 --> 0:16:54.720 reacts to lack of FED cuts lack of magnitude of 0:16:54.720 --> 0:16:56.760 FED cuts at this point. 0:16:56.560 --> 0:16:58.920 In terms of understanding, I think that we have to 0:16:59.000 --> 0:17:02.560 go back to find that's one oh one. I'm so sorry, 0:17:02.600 --> 0:17:04.760 but you know the problem with some of these names 0:17:04.760 --> 0:17:08.160 when you've got such high earnings growth expectation which they're 0:17:08.160 --> 0:17:11.160 delivering on. Let's to be very clear, you know, any 0:17:11.200 --> 0:17:13.840 type of movement in interest rates, you have so much 0:17:13.880 --> 0:17:16.560 of the value as sitting in that terminal number that 0:17:16.640 --> 0:17:19.520 you know, interest rates become something that they're very, very 0:17:19.560 --> 0:17:22.840 sensitive to, even though you would say they're probably the 0:17:22.920 --> 0:17:25.560 least leathered companies and they would have the least short 0:17:25.640 --> 0:17:29.760 term exposure, but the valuation component and that terminal formula 0:17:29.960 --> 0:17:31.160 is what's really driving them. 0:17:31.400 --> 0:17:33.720 Katrina, it's going to see you as always to catch 0:17:33.720 --> 0:17:46.840 another there's Katrina Downte there. Franklin Sempleton. Bobdah A cross 0:17:46.880 --> 0:17:49.760 Mark Global Investment suggests it's hard to be bearish monetary 0:17:49.800 --> 0:17:52.760 policy is now easing, even though there is limited evidence 0:17:52.840 --> 0:17:54.760 that had been a major drag for the US economy 0:17:54.880 --> 0:17:58.400 to begin with. Any caution towards equities has admittedly been 0:17:58.440 --> 0:18:01.240 wrong or at least premature. Bob Doe John just now 0:18:01.320 --> 0:18:03.280 for more, but welcome back to the program, buddy. Let's 0:18:03.320 --> 0:18:05.800 just pick it up where we left things on Friday payrolls. 0:18:05.920 --> 0:18:09.199 Big blowout jobs report is good news, good news when 0:18:09.240 --> 0:18:11.560 you're seeing this repricing in the bond market. 0:18:12.480 --> 0:18:15.239 First of all, it was one month. Look at all 0:18:15.280 --> 0:18:18.120 the prior months. How many downward revisions have we had. 0:18:18.680 --> 0:18:20.359 I'm not saying it wasn't a good number. It was 0:18:20.359 --> 0:18:23.280 an outstanding number, no question about it. But when you 0:18:23.400 --> 0:18:27.280 look at the unemployment data around the isms, both manufacturing 0:18:27.680 --> 0:18:28.840 and services. 0:18:28.440 --> 0:18:32.040 They were weak. So which is it? Which has it? Right? Time? 0:18:32.080 --> 0:18:32.480 Will tell? 0:18:33.200 --> 0:18:36.320 Put the inflation question, as you've all we've just been discussing, 0:18:36.600 --> 0:18:37.640 is back on the table. 0:18:37.800 --> 0:18:40.159 So Bobby, just raise an important question. Which one was 0:18:40.200 --> 0:18:44.120 the headfake? The summer deceleration or the re acceleration coming 0:18:44.160 --> 0:18:44.760 out of the summer. 0:18:46.760 --> 0:18:47.880 I think they're both true. 0:18:47.920 --> 0:18:52.240 Economies don't move in one direction NonStop. So where I 0:18:52.240 --> 0:18:54.480 think we're going to have this fits and starts. Some 0:18:54.640 --> 0:18:57.400 people call it a bumpy landing. I like that term, 0:18:58.280 --> 0:18:59.600 and I think that's what we're in for. 0:18:59.720 --> 0:19:01.560 It be a good number and that are not so 0:19:01.720 --> 0:19:03.959 good number, and they'll confuse all of us. 0:19:05.040 --> 0:19:07.760 Yeah, great, wonderful, Great to hear that, Bob. I know 0:19:07.920 --> 0:19:11.360 in the meantime, you are looking for a significant economic 0:19:11.400 --> 0:19:14.000 slow down or mild recession that had been at least 0:19:14.040 --> 0:19:17.560 your base case scenario. If this is just one month, 0:19:17.640 --> 0:19:19.199 does it change it at all? 0:19:19.320 --> 0:19:19.560 Bob? 0:19:20.680 --> 0:19:24.040 It certainly lowers the probability of us getting that right. 0:19:24.600 --> 0:19:27.960 When I look at all the statistics over several months, 0:19:28.680 --> 0:19:32.320 to me, it's still pretty clear that the economy is slowing. 0:19:33.200 --> 0:19:35.560 We're seeing that in many of the employment numbers, not 0:19:35.680 --> 0:19:39.560 we're standing last Fridays. We're seeing that in ability to 0:19:39.640 --> 0:19:43.280 find jobs, people trying to find full time jobs, settling 0:19:43.359 --> 0:19:47.040 for part time jobs. Economy slowing. We just don't know 0:19:47.160 --> 0:19:51.639 how fast that's happening. And of course the FED has 0:19:51.720 --> 0:19:54.320 seen some of that too, we got fifty basis points. 0:19:54.720 --> 0:19:57.160 But you know there are numbers still very high relative 0:19:57.200 --> 0:19:59.399