1 00:00:03,080 --> 00:00:19,720 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:20,040 --> 00:00:23,280 Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast. 3 00:00:23,360 --> 00:00:25,160 Speaker 2: I'm Tracy Alloway and I'm Joe. 4 00:00:25,320 --> 00:00:26,040 Speaker 3: Wasn't thal Joe? 5 00:00:26,040 --> 00:00:29,280 Speaker 2: Look at the screen. That's that's painful. 6 00:00:29,320 --> 00:00:32,559 Speaker 3: So if you're just tuning in right now, we are 7 00:00:32,600 --> 00:00:35,840 Speaker 3: recording this. It is four to twenty one pm at 8 00:00:35,880 --> 00:00:38,360 Speaker 3: twelve on twelve, eighteen, twenty twenty four. So we just 9 00:00:38,360 --> 00:00:40,879 Speaker 3: had a FED decision. They cut raids, but you know, 10 00:00:40,960 --> 00:00:44,280 Speaker 3: they call it a hawkish cut because various reasons which 11 00:00:44,280 --> 00:00:48,000 Speaker 3: we'll get into, and Stockscott, cloudbird s andp ended down 12 00:00:48,040 --> 00:00:51,279 Speaker 3: two point nine to five percent. Again that we're doing this, 13 00:00:51,600 --> 00:00:53,360 Speaker 3: we're recording this after the bell on Wednesday. 14 00:00:53,560 --> 00:00:56,800 Speaker 2: Yeah, I guess maybe we fixed that breadth problem at 15 00:00:56,840 --> 00:01:00,720 Speaker 2: a minimum. But yeah, everything is read bonds down too 16 00:01:01,120 --> 00:01:03,600 Speaker 2: as well, which is kind of interesting to see them 17 00:01:03,680 --> 00:01:07,039 Speaker 2: go in the same direction. All of which means we 18 00:01:07,120 --> 00:01:09,080 Speaker 2: need to talk about markets. It's been a while since 19 00:01:09,080 --> 00:01:11,200 Speaker 2: we've had like a chunky market discussion. 20 00:01:12,000 --> 00:01:14,479 Speaker 3: It has been a while since we've just talked about markets. 21 00:01:14,480 --> 00:01:16,640 Speaker 3: I mean, we sort of talked about them. We did 22 00:01:16,680 --> 00:01:19,600 Speaker 3: an episode with the top strategist at Goldman recently, but 23 00:01:19,720 --> 00:01:22,440 Speaker 3: what I would say, the sort of defining aspect of 24 00:01:22,480 --> 00:01:26,000 Speaker 3: markets right now and you hinted at them, is how 25 00:01:26,160 --> 00:01:29,600 Speaker 3: narrow this You know, we've had extraordinary gains inequity markets 26 00:01:29,640 --> 00:01:33,800 Speaker 3: in twenty twenty four, but the gains have become incredibly narrow. 27 00:01:33,920 --> 00:01:36,280 Speaker 3: So basically, if you looked outside of anything that is 28 00:01:36,319 --> 00:01:40,160 Speaker 3: an AI, chips, crypto and quantum computing, things have been 29 00:01:40,200 --> 00:01:43,679 Speaker 3: sputtering for a while. A lot was really writing on 30 00:01:43,720 --> 00:01:47,000 Speaker 3: a handful of sort of hot momentum names. You sort 31 00:01:47,000 --> 00:01:49,520 Speaker 3: of wondered how long that could last. And again, if 32 00:01:49,560 --> 00:01:51,120 Speaker 3: you look at the NAS deck as of right now, 33 00:01:51,200 --> 00:01:53,840 Speaker 3: up twenty nine percent on the air dowd Jones as 34 00:01:53,840 --> 00:01:56,680 Speaker 3: we're talking about ten straight days, longest sellout since nineteen 35 00:01:56,760 --> 00:01:57,400 Speaker 3: seventy four. 36 00:01:57,560 --> 00:01:58,880 Speaker 2: That's a crazy stat I know. 37 00:01:58,840 --> 00:02:01,240 Speaker 3: It's a great statu isn't it only up twelve percent 38 00:02:01,240 --> 00:02:01,600 Speaker 3: for the year. 39 00:02:01,680 --> 00:02:03,320 Speaker 2: It's one of those days where we get to trot 40 00:02:03,360 --> 00:02:06,559 Speaker 2: out all these superlainness because everything's moving all at once. 41 00:02:06,640 --> 00:02:08,720 Speaker 2: But we need to talk about why this is happening, 42 00:02:08,760 --> 00:02:10,960 Speaker 2: how long it might last, and what it means for 43 00:02:11,160 --> 00:02:14,040 Speaker 2: next year. Obviously, and we do have the perfect guests 44 00:02:14,040 --> 00:02:16,480 Speaker 2: to be talking to. We are speaking with Jim Karn, 45 00:02:16,800 --> 00:02:20,960 Speaker 2: the Chief investment Officer of the Multi Asset Portfolio Solutions 46 00:02:20,960 --> 00:02:25,120 Speaker 2: Group at Morgan Stanley Investment Management. It's quite a title, Jim, 47 00:02:25,440 --> 00:02:26,320 Speaker 2: Welcome to the show. 48 00:02:26,560 --> 00:02:27,919 Speaker 4: Thank you, Thank you for having me. 49 00:02:28,200 --> 00:02:30,639 Speaker 2: So let's start with the basics. You know, Joe described 50 00:02:30,680 --> 00:02:33,359 Speaker 2: it as a sort of hawkish cut. Was that your 51 00:02:33,400 --> 00:02:34,200 Speaker 2: takeaway as well? 52 00:02:34,840 --> 00:02:37,680 Speaker 4: Well, yeah, I mean I would say that it was 53 00:02:37,720 --> 00:02:41,200 Speaker 4: even more than that. So, for example, we have to 54 00:02:41,240 --> 00:02:45,480 Speaker 4: put this into context. Right, so today December the FED meeting, 55 00:02:45,520 --> 00:02:47,880 Speaker 4: we have to go back to the September FED meeting. 56 00:02:48,320 --> 00:02:51,400 Speaker 4: That's when the Fed basically laid out the plan that 57 00:02:51,440 --> 00:02:53,800 Speaker 4: they were on a mission to cut interest rates, that 58 00:02:53,880 --> 00:02:56,320 Speaker 4: the terminal policy rate, that they were on a mission 59 00:02:56,360 --> 00:02:58,919 Speaker 4: to get down towards a three percent fund FED funds rate, 60 00:02:59,320 --> 00:03:04,480 Speaker 4: possibly even lower than that. Today they reverse course to 61 00:03:05,000 --> 00:03:07,560 Speaker 4: an extent that they actually if when we look at 62 00:03:07,600 --> 00:03:11,200 Speaker 4: their dot plots, that they actually raise the dots by 63 00:03:11,240 --> 00:03:14,799 Speaker 4: about fifty basis points across the board. Let me say 64 00:03:14,840 --> 00:03:17,680 Speaker 4: that again, they raise the dots by fifty basis points 65 00:03:17,680 --> 00:03:19,640 Speaker 4: across the board, and the dots are really just an 66 00:03:19,760 --> 00:03:22,800 Speaker 4: estimation of what many of the of the Fed governors 67 00:03:22,800 --> 00:03:25,480 Speaker 4: are thinking. The voting members on the FED are actually 68 00:03:25,520 --> 00:03:28,880 Speaker 4: thinking about policy going into the future. So instead of 69 00:03:28,919 --> 00:03:34,359 Speaker 4: having about four or five rate cuts in twenty twenty five, 70 00:03:34,560 --> 00:03:38,200 Speaker 4: now it's closer to two rate cuts in twenty twenty five, 71 00:03:38,240 --> 00:03:41,480 Speaker 4: so they've cut that in half. This is probably I've 72 00:03:41,480 --> 00:03:44,080 Speaker 4: been doing this for thirty two years. This is probably 73 00:03:45,200 --> 00:03:48,680 Speaker 4: one of the sharpest reversals, or I should say adjustments. 74 00:03:48,760 --> 00:03:51,960 Speaker 4: Not really a reversal, but an adjustment. The FED still 75 00:03:52,200 --> 00:03:55,240 Speaker 4: cutting interest rates, so it's not a reversal to that extent. 76 00:03:55,280 --> 00:03:57,840 Speaker 4: They're not going from cutting to hiking, but it is 77 00:03:58,080 --> 00:04:02,720 Speaker 4: significant in that they've really made a big adjustment from 78 00:04:02,880 --> 00:04:05,920 Speaker 4: just where they were three months ago. They typically are 79 00:04:05,960 --> 00:04:08,400 Speaker 4: a little bit more longer term thinking, but I guess 80 00:04:08,400 --> 00:04:11,840 Speaker 4: they're reacting to some of the inflation data, some of 81 00:04:11,880 --> 00:04:17,040 Speaker 4: the equity market performance, and potentially even President Alec Donald Trump. 82 00:04:17,400 --> 00:04:19,480 Speaker 3: It's a tricky moment. You know, there was a good summary. 83 00:04:19,520 --> 00:04:21,160 Speaker 3: I'm just going to read it real quickly from the 84 00:04:21,200 --> 00:04:24,359 Speaker 3: Bloomberg Tea live blog from end of current. You know, 85 00:04:24,680 --> 00:04:26,720 Speaker 3: he says there are a few different needles in this 86 00:04:26,800 --> 00:04:30,719 Speaker 3: press conference to thread explaining why disinflation remains on track, 87 00:04:30,800 --> 00:04:33,040 Speaker 3: but why they will slow their cuts, explaining why the 88 00:04:33,120 --> 00:04:35,640 Speaker 3: job market is not a source of inflation even though 89 00:04:35,680 --> 00:04:39,440 Speaker 3: it's strong, Explaining why they're thinking about Trump's new policies yet, 90 00:04:39,800 --> 00:04:42,240 Speaker 3: even though they don't know the specifics. These are all 91 00:04:42,360 --> 00:04:45,000 Speaker 3: tricky questions. It occurs to me. I was thinking about 92 00:04:45,040 --> 00:04:47,440 Speaker 3: late twenty eighteen when we had a very intense sell 93 00:04:47,480 --> 00:04:50,000 Speaker 3: off at the time, but they was kind of simple. 94 00:04:50,360 --> 00:04:52,039 Speaker 3: Paul had said, oh, we're a long way from neutro. 95 00:04:52,080 --> 00:04:53,520 Speaker 3: I started getting this sell off at the end of 96 00:04:53,520 --> 00:04:55,280 Speaker 3: the year. All they had to do was say, we're 97 00:04:55,279 --> 00:04:57,760 Speaker 3: actually not going to hike as much as we thought. 98 00:04:58,120 --> 00:04:59,880 Speaker 3: There really are a lot of crosswinds. 99 00:05:00,200 --> 00:05:04,120 Speaker 4: Now, yeah, there are. And I think that comment on 100 00:05:04,279 --> 00:05:07,560 Speaker 4: the jobs market is really what the key is, because look, 101 00:05:07,600 --> 00:05:09,880 Speaker 4: you can make the argument. You can basically say that 102 00:05:09,960 --> 00:05:12,760 Speaker 4: wait a minute, and inflation's coming down, but it's really 103 00:05:12,839 --> 00:05:15,200 Speaker 4: kind of stalling out at this point. It's making some 104 00:05:15,279 --> 00:05:18,200 Speaker 4: progress lower but not a lot, so that might be 105 00:05:18,240 --> 00:05:21,200 Speaker 4: a concern. You could potentially look at the equity markets 106 00:05:21,200 --> 00:05:23,120 Speaker 4: and say, well, equity markets have done pretty you know, 107 00:05:23,160 --> 00:05:25,920 Speaker 4: pretty pretty well. Credit markets, credit spreads have been very 108 00:05:26,000 --> 00:05:29,600 Speaker 4: very tight, so financial conditions are are very easy, So 109 00:05:29,640 --> 00:05:33,279 Speaker 4: why would the FED continue to cut interest rates in 110 00:05:33,400 --> 00:05:37,360 Speaker 4: this environment, albeit at a slower pace. And I think 111 00:05:37,440 --> 00:05:40,760 Speaker 4: the answer is actually in the jobs market. So my 112 00:05:40,920 --> 00:05:45,680 Speaker 4: suspicion is that the jobs market is actually much weaker 113 00:05:46,120 --> 00:05:49,520 Speaker 4: than what the published data is suggesting. Now that's an 114 00:05:49,520 --> 00:05:51,880 Speaker 4: outlier view because I can't back that up with the data, 115 00:05:51,920 --> 00:05:54,000 Speaker 4: because look, I'm not the BLS. I don't have the 116 00:05:54,080 --> 00:05:57,680 Speaker 4: information all the information. But what I do know is 117 00:05:57,720 --> 00:06:01,560 Speaker 4: that the QCEW data, which as a quarterly census of 118 00:06:01,600 --> 00:06:06,120 Speaker 4: employment in wages, that data is a longer term series 119 00:06:06,720 --> 00:06:10,359 Speaker 4: of jobs that are created in What it's been showing 120 00:06:10,880 --> 00:06:14,240 Speaker 4: over the past eighteen months is that on a monthly basis, 121 00:06:14,240 --> 00:06:18,479 Speaker 4: there's been significant downward revisions to the non farm payroll 122 00:06:18,520 --> 00:06:21,200 Speaker 4: data that gets released every single month. So I think 123 00:06:21,240 --> 00:06:26,080 Speaker 4: the FED believes that the jobs data is actually or 124 00:06:26,080 --> 00:06:29,480 Speaker 4: the job environment is actually weaker than what's actually being 125 00:06:29,520 --> 00:06:33,440 Speaker 4: stated by the economic statistics. It will eventually come out 126 00:06:33,440 --> 00:06:36,560 Speaker 4: into the future, and what they're worried about is an 127 00:06:36,640 --> 00:06:40,640 Speaker 4: accelerated rise in the unemployment rate, which they call reflexivity, 128 00:06:41,200 --> 00:06:45,520 Speaker 4: which could create a more severe downturn. So why are 129 00:06:45,560 --> 00:06:48,960 Speaker 4: they still cutting interest rates? Is really an exercise and 130 00:06:49,080 --> 00:06:52,440 Speaker 4: risk management. They'd rather get closer to their neutral policy 131 00:06:52,520 --> 00:06:56,920 Speaker 4: rate at this stage because it might avoid them having 132 00:06:56,920 --> 00:06:57,920 Speaker 4: to move faster later. 133 00:06:58,720 --> 00:07:01,680 Speaker 2: But then, what does that mean for the inflation outlook, 134 00:07:02,000 --> 00:07:06,479 Speaker 2: because you think, I hear weaker job numbers and maybe 135 00:07:06,520 --> 00:07:09,000 Speaker 2: the official data is hiding some weakness, and we have 136 00:07:09,080 --> 00:07:11,960 Speaker 2: seen those big revisions that you just talked about. But 137 00:07:12,040 --> 00:07:14,560 Speaker 2: on the other side, you know, inflation still very much 138 00:07:14,760 --> 00:07:16,640 Speaker 2: stubbornly above the two percent target. 139 00:07:17,280 --> 00:07:20,000 Speaker 4: Yeah, look, it's a great question. So really it's a tradeoff. 140 00:07:20,440 --> 00:07:23,120 Speaker 4: It's a trade off of basically saying that they are 141 00:07:23,160 --> 00:07:27,760 Speaker 4: willing to tolerate slightly higher inflation above target. They're willing 142 00:07:27,800 --> 00:07:32,280 Speaker 4: to tolerate it's stalling, not rising, but stalling out right now, 143 00:07:32,480 --> 00:07:35,720 Speaker 4: just to make sure that the jobs market will be 144 00:07:36,240 --> 00:07:40,040 Speaker 4: hopefully a bit stronger going forward. Because still what they're 145 00:07:40,080 --> 00:07:43,120 Speaker 4: looking for in their forecasts are about four point two 146 00:07:43,160 --> 00:07:45,640 Speaker 4: percent unemployment rates. That's a pretty low rate. That's where 147 00:07:45,640 --> 00:07:47,000 Speaker 4: we are right now. They don't have a lot of 148 00:07:47,080 --> 00:07:50,960 Speaker 4: room for error. So I would say that as long 149 00:07:51,000 --> 00:07:53,960 Speaker 4: as inflation doesn't start to move higher, that they're going 150 00:07:54,000 --> 00:07:58,480 Speaker 4: to continue on a slow path and pace of of 151 00:07:59,200 --> 00:08:02,880 Speaker 4: rate cuts, and they're going to be laser focused on 152 00:08:03,000 --> 00:08:04,360 Speaker 4: that labor market. 153 00:08:05,080 --> 00:08:07,360 Speaker 3: The real thing that we all noticed, Tracy mentioned it 154 00:08:07,400 --> 00:08:09,560 Speaker 3: is just that big move in the equity market. But 155 00:08:10,040 --> 00:08:12,320 Speaker 3: as we talked about, you know, there's been this like 156 00:08:12,480 --> 00:08:14,640 Speaker 3: I would hate to be a portfolio manager. I would 157 00:08:14,720 --> 00:08:17,280 Speaker 3: hate to even in an up year, because I'm only 158 00:08:17,320 --> 00:08:20,280 Speaker 3: beating the market if I were more concentrated in tech 159 00:08:20,360 --> 00:08:23,000 Speaker 3: than the market, which is already heavily concentrated in tech. 160 00:08:23,400 --> 00:08:26,440 Speaker 3: And if our portfolio manager, I'd probably consider myself to 161 00:08:26,480 --> 00:08:30,000 Speaker 3: be a very intelligent, intellectual person and I would swim 162 00:08:30,040 --> 00:08:32,560 Speaker 3: away from the crowd. So I probably was not overly 163 00:08:32,720 --> 00:08:35,760 Speaker 3: invested in tech. And so I'm in this situation which 164 00:08:35,800 --> 00:08:38,280 Speaker 3: is middle of December, and the only thing that's doing 165 00:08:38,320 --> 00:08:41,600 Speaker 3: well up until the century today has been tech. Talk 166 00:08:41,640 --> 00:08:43,960 Speaker 3: to us just about the dynamics and how tricky that 167 00:08:44,120 --> 00:08:47,080 Speaker 3: is for an investor here in mid December of twenty 168 00:08:47,120 --> 00:08:47,560 Speaker 3: twenty four. 169 00:08:48,120 --> 00:08:51,160 Speaker 4: Yeah, this really gets to the heart of portfolio management. 170 00:08:51,280 --> 00:08:53,600 Speaker 4: So in many of the portfolios that we manage, we 171 00:08:53,679 --> 00:08:56,600 Speaker 4: come across this risk a lot. We call it concentration risks. 172 00:08:56,640 --> 00:08:58,800 Speaker 4: So what you're referring to is that it's a very 173 00:08:58,880 --> 00:09:02,160 Speaker 4: narrow breath, meaning that the several tech names, big big 174 00:09:02,240 --> 00:09:04,920 Speaker 4: names that are out there that have really been responsible 175 00:09:04,920 --> 00:09:07,719 Speaker 4: for driving a lot of the performance this year. So 176 00:09:07,800 --> 00:09:10,360 Speaker 4: if you want to have a more diversified portfolio, which 177 00:09:10,400 --> 00:09:13,480 Speaker 4: is a good thing to do, what that meant is 178 00:09:13,480 --> 00:09:16,480 Speaker 4: that you actually slightly underperform the market because the tech 179 00:09:16,480 --> 00:09:18,720 Speaker 4: sector and those and those and those seven names, the 180 00:09:18,760 --> 00:09:22,120 Speaker 4: Magnificent seven as we call them, have actually done really 181 00:09:22,160 --> 00:09:25,440 Speaker 4: really well. So what has those started to happen? And 182 00:09:25,480 --> 00:09:27,440 Speaker 4: I think will happen. And this is what our view 183 00:09:27,559 --> 00:09:30,720 Speaker 4: is going into twenty twenty five is we're starting to 184 00:09:30,800 --> 00:09:34,320 Speaker 4: look away from those big mag seven names. We're not 185 00:09:34,360 --> 00:09:37,400 Speaker 4: going underweight, we're going more neutral weight like those top 186 00:09:37,520 --> 00:09:41,160 Speaker 4: ten performers, but we're starting to broaden out and we're 187 00:09:41,160 --> 00:09:43,120 Speaker 4: starting to go into more of the MidCap sectors. So 188 00:09:43,160 --> 00:09:47,160 Speaker 4: when we look at MidCap, MidCap is an area that 189 00:09:47,400 --> 00:09:50,199 Speaker 4: we're looking at pe multiples that are around sixteen or 190 00:09:50,280 --> 00:09:54,080 Speaker 4: seventeen versus the twenty two or twenty three forward pees 191 00:09:54,160 --> 00:09:56,880 Speaker 4: that the that you know that the index sits at around. Now, 192 00:09:57,600 --> 00:10:00,079 Speaker 4: these are companies that you've know. These are companies know 193 00:10:00,160 --> 00:10:04,720 Speaker 4: anywhere between five billion in twenty billion in market cap 194 00:10:05,240 --> 00:10:09,640 Speaker 4: that have better earnings potential, and essentially, especially in the 195 00:10:09,720 --> 00:10:13,360 Speaker 4: new administration that is seemingly more business friendly. If you 196 00:10:13,480 --> 00:10:17,040 Speaker 4: get some deregulation, this can also feed down to the 197 00:10:17,160 --> 00:10:20,400 Speaker 4: MidCap sectors that get better access to capital, cheaper access 198 00:10:20,480 --> 00:10:24,560 Speaker 4: to capital that were maybe under banked, and can also 199 00:10:25,080 --> 00:10:27,720 Speaker 4: lead to better performance there as well as the cyclic 200 00:10:28,000 --> 00:10:31,079 Speaker 4: cyclicality of the economy, meaning that we're not forecasting a 201 00:10:31,160 --> 00:10:33,800 Speaker 4: recession in twenty twenty five. As long as there's some 202 00:10:33,880 --> 00:10:36,800 Speaker 4: decent growth, we think that the MidCap sector will actually 203 00:10:36,880 --> 00:10:41,360 Speaker 4: do better, so that diversification may start to pay dividends 204 00:10:41,440 --> 00:10:42,000 Speaker 4: going forward. 205 00:10:42,400 --> 00:10:45,160 Speaker 2: Why didn't it this year though, Because markets, we are 206 00:10:45,240 --> 00:10:49,040 Speaker 2: told at nauseum are always forward looking, presumably they could 207 00:10:49,040 --> 00:10:53,000 Speaker 2: see this positive MidCap environment coming. But if you look 208 00:10:53,040 --> 00:10:54,719 Speaker 2: at the performance so far this year, I think the 209 00:10:54,840 --> 00:10:57,599 Speaker 2: SMP four hundred is up, well, this was before the 210 00:10:57,640 --> 00:10:59,920 Speaker 2: big drop today, but it was up something like sixteen 211 00:11:00,200 --> 00:11:03,079 Speaker 2: percent versus like the twenty seven percent jump in the 212 00:11:03,200 --> 00:11:04,079 Speaker 2: S and P five hundred. 213 00:11:04,280 --> 00:11:06,600 Speaker 4: Yeah, well, it didn't happen this year. That's a great question, 214 00:11:06,760 --> 00:11:10,760 Speaker 4: and the one word answer is earnings. Effectively, when we 215 00:11:10,880 --> 00:11:13,240 Speaker 4: talk about the Magnificent seven and we talk about those 216 00:11:13,280 --> 00:11:17,079 Speaker 4: great performers. They've also had great earnings, and really the 217 00:11:17,160 --> 00:11:20,880 Speaker 4: earnings growth rate was down to those magnificent few stocks 218 00:11:20,920 --> 00:11:23,079 Speaker 4: that were out there, and that's what really stood out 219 00:11:23,120 --> 00:11:28,200 Speaker 4: this year. So they've earned the title of being magnificent 220 00:11:28,400 --> 00:11:31,719 Speaker 4: just through their earnings. The earnings, though, have been in 221 00:11:31,880 --> 00:11:35,160 Speaker 4: much more of a lagged space in the mid cap sector. So, 222 00:11:35,280 --> 00:11:37,120 Speaker 4: for example, if you look at the S and P 223 00:11:37,280 --> 00:11:39,520 Speaker 4: five hundred, that index is going to have a very 224 00:11:39,600 --> 00:11:43,160 Speaker 4: very large weighting towards those large cap tech stocks. When 225 00:11:43,200 --> 00:11:45,720 Speaker 4: you look at the SMP four hundred or the SNP 226 00:11:46,000 --> 00:11:49,920 Speaker 4: six hundred, those indices are going to have a more 227 00:11:50,000 --> 00:11:54,200 Speaker 4: diversified weighting towards the mid cap sectors. If you look 228 00:11:54,240 --> 00:11:56,040 Speaker 4: at the earnings trend of the S and P five 229 00:11:56,120 --> 00:11:58,240 Speaker 4: hundred over the past two years, it's been straight up. 230 00:11:58,320 --> 00:12:01,559 Speaker 4: It's been absolutely magnificent. But if you look at the 231 00:12:01,679 --> 00:12:03,880 Speaker 4: earnings trend in the S and P four hundred or 232 00:12:03,920 --> 00:12:05,640 Speaker 4: the S and P six hundred, it would look like 233 00:12:05,679 --> 00:12:07,880 Speaker 4: the economy was in a mild recession or a slowdown. 234 00:12:07,880 --> 00:12:11,079 Speaker 4: It's been very very flatlined. So what we think is 235 00:12:11,160 --> 00:12:14,800 Speaker 4: that as these as these multiples and as the earnings 236 00:12:14,880 --> 00:12:18,720 Speaker 4: growth rates for these bigger tech stocks have really reached 237 00:12:18,800 --> 00:12:21,079 Speaker 4: maturity at this point that there's going to be a 238 00:12:21,160 --> 00:12:25,640 Speaker 4: shift in a reallocation into these better earning potential sectors 239 00:12:25,679 --> 00:12:26,880 Speaker 4: and stocks in the marketing. 240 00:12:42,840 --> 00:12:44,920 Speaker 3: Over the years. You know, there are these hot names 241 00:12:45,200 --> 00:12:49,280 Speaker 3: for baskets of stocks these days. It's the Meg seven now, 242 00:12:49,440 --> 00:12:50,959 Speaker 3: the old days used to be. You know, there was 243 00:12:51,000 --> 00:12:53,079 Speaker 3: the dot com stocks, there was the nifty to fifty, 244 00:12:53,160 --> 00:12:55,760 Speaker 3: there were the radio stocks, and the nineteen twenties things going. 245 00:12:56,080 --> 00:12:59,920 Speaker 3: First of all, has there ever been the historical parallel 246 00:13:00,240 --> 00:13:03,120 Speaker 3: to what we see in the Mag seven of such 247 00:13:03,240 --> 00:13:06,480 Speaker 3: big companies also putting up such big year over year 248 00:13:06,559 --> 00:13:07,600 Speaker 3: EPs growth numbers? 249 00:13:08,360 --> 00:13:10,719 Speaker 4: The answer is not, really, it is it is a 250 00:13:10,800 --> 00:13:14,959 Speaker 4: pretty rare event to see this type of deviation or 251 00:13:15,280 --> 00:13:19,400 Speaker 4: just distinction of a handful of stocks really performing so 252 00:13:19,679 --> 00:13:23,560 Speaker 4: well relative to their peers for this long of a period, And. 253 00:13:23,640 --> 00:13:26,280 Speaker 3: What's going to happen in twenty Why do we why 254 00:13:26,360 --> 00:13:28,439 Speaker 3: do more people seem to think that in twenty twenty 255 00:13:28,520 --> 00:13:30,439 Speaker 3: five something is going to pivot on this? 256 00:13:31,360 --> 00:13:33,920 Speaker 4: You know, it's really not that people are turning negative 257 00:13:34,080 --> 00:13:36,880 Speaker 4: on these on these on these mag seven stocks as 258 00:13:37,280 --> 00:13:40,280 Speaker 4: we're talking about it. It's just that when you look 259 00:13:40,320 --> 00:13:43,280 Speaker 4: at their earnings growth rates, it is starting to and 260 00:13:43,400 --> 00:13:45,960 Speaker 4: we've seen this in the recent you know, the fourth 261 00:13:46,040 --> 00:13:48,400 Speaker 4: quarter and it's right third quarter earnings and you'll probably 262 00:13:48,400 --> 00:13:50,480 Speaker 4: see in the fourth quarter earnings too. Is that what 263 00:13:50,640 --> 00:13:52,920 Speaker 4: you've started to see is that the earnings growth rate 264 00:13:53,120 --> 00:13:56,520 Speaker 4: is now starting to flatline. So, as I was saying earlier, 265 00:13:56,920 --> 00:14:00,440 Speaker 4: what made these stocks magnificent was that their growth rates, 266 00:14:00,720 --> 00:14:05,760 Speaker 4: We're magnificent. If their growth rate is just average, well 267 00:14:05,800 --> 00:14:07,880 Speaker 4: then I'm not willing to pay a thirty pe a 268 00:14:07,960 --> 00:14:11,200 Speaker 4: high multiple for these things anymore. And as long as 269 00:14:11,440 --> 00:14:13,920 Speaker 4: as long as you believe their earnings growth rate will 270 00:14:13,920 --> 00:14:16,079 Speaker 4: be fantastic, well then yes, maybe, you know, maybe a 271 00:14:16,120 --> 00:14:19,000 Speaker 4: thirty pe multiple for many of these stocks is worth it. 272 00:14:19,480 --> 00:14:21,720 Speaker 4: But if it just turns out that it's more of 273 00:14:21,760 --> 00:14:24,120 Speaker 4: a flat, flatter trajectory in their growth rate, I mean, 274 00:14:24,200 --> 00:14:27,800 Speaker 4: still a good, solid, you know, growth rate, but nothing magnificent, 275 00:14:28,240 --> 00:14:30,680 Speaker 4: you're not going to pay those high valuations, and the 276 00:14:30,760 --> 00:14:33,600 Speaker 4: markets are going to turn towards these other sectors that 277 00:14:33,760 --> 00:14:34,600 Speaker 4: have been left behind. 278 00:14:35,400 --> 00:14:37,920 Speaker 2: So a bunch of the outperformance from you know, the 279 00:14:38,000 --> 00:14:41,080 Speaker 2: mag seven stocks, the big tech stocks has come as 280 00:14:41,120 --> 00:14:45,120 Speaker 2: a result of enthusiasm around AI, and we have seen 281 00:14:45,160 --> 00:14:47,560 Speaker 2: this bifurcation in the market where it seems like anything 282 00:14:47,600 --> 00:14:50,600 Speaker 2: that is attached to AI or chips or something like 283 00:14:50,680 --> 00:14:53,880 Speaker 2: that has seen this massive outperformance and then everything else 284 00:14:53,960 --> 00:14:56,960 Speaker 2: is sort of doing fine but kind of left in 285 00:14:57,080 --> 00:15:00,440 Speaker 2: the dust relatively. Is there a moment and would it 286 00:15:00,520 --> 00:15:02,760 Speaker 2: be next year where you would assume that, like some 287 00:15:03,200 --> 00:15:07,520 Speaker 2: of the productivity gains from AI would eventually leach into 288 00:15:07,960 --> 00:15:11,320 Speaker 2: smaller companies or companies that are not directly at the 289 00:15:11,400 --> 00:15:13,280 Speaker 2: sort of forefront of that technology. 290 00:15:13,680 --> 00:15:16,000 Speaker 4: This is the big opportunity. This is a big opportunity 291 00:15:16,080 --> 00:15:20,400 Speaker 4: going forward. So what AI effectively can do is it 292 00:15:20,480 --> 00:15:24,000 Speaker 4: can ring out inefficiencies in many sectors of the market 293 00:15:24,120 --> 00:15:27,960 Speaker 4: that are more inefficient. Let's take healthcare for example. The 294 00:15:28,040 --> 00:15:32,680 Speaker 4: healthcare sector is doing very poorly this year and even 295 00:15:32,760 --> 00:15:36,440 Speaker 4: last year, I mean historically, very very poorly. This is 296 00:15:36,480 --> 00:15:39,720 Speaker 4: a segment of the market that we think that AI 297 00:15:40,120 --> 00:15:42,280 Speaker 4: can bring in a lot of efficiencies. Whether it's on 298 00:15:42,360 --> 00:15:45,360 Speaker 4: the healthcare side. We have to be very very very 299 00:15:45,440 --> 00:15:48,040 Speaker 4: very careful because sometimes you bring in pharma and big 300 00:15:48,080 --> 00:15:50,480 Speaker 4: pharma with this, and that's not exactly what I'm talking about, 301 00:15:50,800 --> 00:15:54,920 Speaker 4: but essentially, you know more in the medical services, you know, 302 00:15:55,120 --> 00:15:57,520 Speaker 4: segments of this. If you're very specific and if you're 303 00:15:57,600 --> 00:16:00,400 Speaker 4: very active in how you manage this, and you're a 304 00:16:00,480 --> 00:16:02,920 Speaker 4: stock picker, not just building in a big index with 305 00:16:03,040 --> 00:16:05,680 Speaker 4: just a bunch of pharmaceutical names, you can actually do 306 00:16:05,760 --> 00:16:10,040 Speaker 4: pretty well. You know, other areas like materials, industrials. You know, 307 00:16:10,160 --> 00:16:12,160 Speaker 4: these are other areas that you know a little bit 308 00:16:12,200 --> 00:16:15,600 Speaker 4: far afield from healthcare, but still can get the benefits 309 00:16:15,800 --> 00:16:18,680 Speaker 4: of some of the AI technologies coming in. And what 310 00:16:18,760 --> 00:16:20,680 Speaker 4: you're going to find is that more and more brick 311 00:16:20,720 --> 00:16:23,600 Speaker 4: and mortar types of companies are going to start to 312 00:16:23,680 --> 00:16:27,720 Speaker 4: incorporate it. The impact of AI is to really bring 313 00:16:27,800 --> 00:16:30,800 Speaker 4: in higher productivity, which is higher growth with lower inflation, 314 00:16:31,400 --> 00:16:34,440 Speaker 4: into sectors that are relatively inefficient. So people look at 315 00:16:34,520 --> 00:16:37,760 Speaker 4: like tech and they look at like financials. Yes, absolutely, 316 00:16:37,760 --> 00:16:40,800 Speaker 4: but you know what financials. Financial companies are already pretty 317 00:16:40,800 --> 00:16:43,320 Speaker 4: efficient just by definition, I mean they're financial companies and 318 00:16:43,400 --> 00:16:47,320 Speaker 4: that's what it effectively operates on. Tech is the engine 319 00:16:47,360 --> 00:16:49,360 Speaker 4: that creates a lot of these things, but again a 320 00:16:49,440 --> 00:16:51,360 Speaker 4: lot of that is in the price. So we have 321 00:16:51,480 --> 00:16:53,240 Speaker 4: to start to move to areas that have been the 322 00:16:53,360 --> 00:16:56,920 Speaker 4: laggards that we think that there could be some technology 323 00:16:57,040 --> 00:16:59,600 Speaker 4: gains that can really drive the earning cycle. 324 00:17:00,320 --> 00:17:02,720 Speaker 3: So one of the things that comes up a lot 325 00:17:02,800 --> 00:17:06,800 Speaker 3: of times when we talk about multisset portfolios is that 326 00:17:07,000 --> 00:17:10,440 Speaker 3: really the only thing. I mean, yeah, you can maybe 327 00:17:10,520 --> 00:17:13,240 Speaker 3: diverse away from big tech into medium tech or medium 328 00:17:13,280 --> 00:17:16,040 Speaker 3: tech into small cap tech. But there's been no jews 329 00:17:16,200 --> 00:17:20,080 Speaker 3: in em There's been no jews in Europe. There's no 330 00:17:20,280 --> 00:17:23,000 Speaker 3: juice really even in treasuries. They haven't done anything to 331 00:17:23,080 --> 00:17:26,600 Speaker 3: even head you on a day like December eighteenth, twenty 332 00:17:26,760 --> 00:17:30,320 Speaker 3: twenty four, what is the role for non US equity 333 00:17:30,600 --> 00:17:33,440 Speaker 3: right now in a multiset portfolio? 334 00:17:33,720 --> 00:17:36,840 Speaker 4: So so non US equity and many people will. 335 00:17:36,760 --> 00:17:40,000 Speaker 3: And no, we're non equity at all. So international equity. 336 00:17:39,840 --> 00:17:43,560 Speaker 4: Or fixing Yeah, okay, okay, Well let's start with international 337 00:17:43,640 --> 00:17:47,080 Speaker 4: equity first of all, and let's start with Europe. Europe 338 00:17:47,200 --> 00:17:49,679 Speaker 4: is really a large cap value play. And what has 339 00:17:49,800 --> 00:17:52,440 Speaker 4: large cap value done? Not so well, right, because the 340 00:17:52,520 --> 00:17:55,160 Speaker 4: growth sectors and the tech sectors have done really, really well. 341 00:17:55,680 --> 00:17:58,879 Speaker 4: So I would say that that the role that international 342 00:17:58,960 --> 00:18:03,600 Speaker 4: equity plays as a large cap value style of looking 343 00:18:03,680 --> 00:18:08,160 Speaker 4: at the markets is it's really more of it's more 344 00:18:08,200 --> 00:18:11,960 Speaker 4: of a stabilizer so it's a diversifier in that when 345 00:18:12,040 --> 00:18:15,480 Speaker 4: you typically have these downturns in markets, those large cap 346 00:18:15,640 --> 00:18:19,520 Speaker 4: value segments actually outperform. They do better than the higher 347 00:18:19,640 --> 00:18:23,080 Speaker 4: beta growth sectors in the marketplace. So there is a 348 00:18:23,160 --> 00:18:25,840 Speaker 4: positive cash flow there. There are dividends there, you know, 349 00:18:25,920 --> 00:18:28,639 Speaker 4: there is there are some opportunities we can move to 350 00:18:28,680 --> 00:18:31,760 Speaker 4: places like Japan. Japanese equities one of my favorite markets. 351 00:18:31,920 --> 00:18:35,119 Speaker 4: So here we are, we have some inflation. Inflation is 352 00:18:35,160 --> 00:18:37,399 Speaker 4: going to drive earnings, and I think the inflation is 353 00:18:37,480 --> 00:18:40,639 Speaker 4: sustainable and durable in Japan. Plus you have changes to 354 00:18:40,680 --> 00:18:44,520 Speaker 4: the corporate governance. It's becoming much more dividend friendly, shareholder 355 00:18:44,600 --> 00:18:49,399 Speaker 4: friendly buybacks, all of the various components there. Pension funds 356 00:18:49,440 --> 00:18:52,880 Speaker 4: are turning into less savings plans which is fixed income, 357 00:18:53,240 --> 00:18:56,320 Speaker 4: and more into investment plans, which is more equity. And 358 00:18:56,680 --> 00:18:58,720 Speaker 4: if the world is going to on shore, particularly in 359 00:18:58,760 --> 00:19:01,959 Speaker 4: the US, and you know Japan is larvae is very 360 00:19:02,040 --> 00:19:05,040 Speaker 4: very well leveraged to large scale cap X. So I 361 00:19:05,080 --> 00:19:06,720 Speaker 4: think there's a lot of things that are pointing in 362 00:19:06,800 --> 00:19:10,000 Speaker 4: the direction to you know, to Japanese equities in the 363 00:19:10,080 --> 00:19:12,399 Speaker 4: long term. I know we've had three bad decades, but 364 00:19:12,680 --> 00:19:14,720 Speaker 4: I think that's this is the decades, this is the decade, 365 00:19:14,800 --> 00:19:16,880 Speaker 4: this is the decade. That's that's going to happen. Let's 366 00:19:16,920 --> 00:19:20,360 Speaker 4: try to fixed income. One thing that you said right 367 00:19:20,440 --> 00:19:24,440 Speaker 4: in the beginning of this podcast is that that there's 368 00:19:24,640 --> 00:19:27,320 Speaker 4: you know, fixed income and equity. There's no place to hide, right. 369 00:19:27,960 --> 00:19:30,760 Speaker 4: If we look at the screens today, everything's read bonds 370 00:19:30,800 --> 00:19:32,920 Speaker 4: and equities. When the bond when the equity markets go 371 00:19:33,040 --> 00:19:35,320 Speaker 4: down two or three percent like they're doing today right 372 00:19:35,359 --> 00:19:38,160 Speaker 4: after the FED, you would expect to get some safe 373 00:19:38,200 --> 00:19:41,879 Speaker 4: harbor from bonds. Bonds should definitely do well typically, but 374 00:19:42,000 --> 00:19:44,399 Speaker 4: they're not. And this is the big issue with acid 375 00:19:44,400 --> 00:19:48,639 Speaker 4: allocation going forward, is that the correlation of returns between 376 00:19:48,760 --> 00:19:52,280 Speaker 4: fixed income and equities is very high. It's at multi 377 00:19:52,359 --> 00:19:55,440 Speaker 4: decade highs. What that means is that if the correlation 378 00:19:55,520 --> 00:19:58,160 Speaker 4: of returns are high between bonds and stocks, that means 379 00:19:58,200 --> 00:20:01,159 Speaker 4: it's hard to have a diversified portfolios. Right, It's hard 380 00:20:01,200 --> 00:20:04,440 Speaker 4: to own stocks and bonds, and that hopefully bonds bail 381 00:20:04,480 --> 00:20:07,320 Speaker 4: you out or help you when the equity market turns lower. 382 00:20:07,880 --> 00:20:10,720 Speaker 4: So essentially, what that means is that we all have 383 00:20:10,880 --> 00:20:14,680 Speaker 4: to think very very differently going forward because what's happened 384 00:20:15,000 --> 00:20:17,800 Speaker 4: is that the markets become very complacent on the fact 385 00:20:17,840 --> 00:20:20,080 Speaker 4: that from nineteen eighty one to twenty twenty one we 386 00:20:20,160 --> 00:20:22,440 Speaker 4: were in a forty year bull market in fixed income, 387 00:20:22,880 --> 00:20:25,040 Speaker 4: all you had to be is a passive investor, buy 388 00:20:25,119 --> 00:20:27,359 Speaker 4: and hold, and you did really, really well. It diversified 389 00:20:27,359 --> 00:20:31,840 Speaker 4: your portfolio perfectly. What if today interest rates just move sideways. 390 00:20:32,440 --> 00:20:34,480 Speaker 4: That would be a structural shift in the way that 391 00:20:34,520 --> 00:20:37,480 Speaker 4: we think about a diversified portfolio. That means some years 392 00:20:37,560 --> 00:20:39,840 Speaker 4: bonds do well, some Eurobs bonds don't. They correlate with 393 00:20:39,920 --> 00:20:43,160 Speaker 4: equities many times in many cases. So that would suggest 394 00:20:43,240 --> 00:20:46,680 Speaker 4: that when we think about acid allocating across fixed income 395 00:20:47,160 --> 00:20:49,960 Speaker 4: and equities in a multi acid portfolio, and let's not 396 00:20:50,000 --> 00:20:53,280 Speaker 4: forget about alternatives too, that now we have to think 397 00:20:53,280 --> 00:20:56,359 Speaker 4: about being much more actively managed, particularly in fixed income, 398 00:20:57,080 --> 00:21:01,120 Speaker 4: as opposed to passively, meaning by passive means active managers 399 00:21:01,160 --> 00:21:04,520 Speaker 4: as opposed to passive. Same thing with equities. It's less 400 00:21:04,520 --> 00:21:06,200 Speaker 4: going to be about the beta, it's going to be 401 00:21:06,760 --> 00:21:09,440 Speaker 4: less going to be about multiple expansion and these mag seven, 402 00:21:09,800 --> 00:21:11,679 Speaker 4: and it's going to be much more about sector rotation. 403 00:21:11,720 --> 00:21:15,080 Speaker 4: It's much more about the alpha and picking sectors and 404 00:21:15,160 --> 00:21:19,080 Speaker 4: even picking stocks. So again, more active management versus passive 405 00:21:19,160 --> 00:21:24,160 Speaker 4: management is a big change. Alternatives Alternatives are another way 406 00:21:24,240 --> 00:21:28,520 Speaker 4: to diversify your portfolio because essentially, when we look at that, 407 00:21:28,640 --> 00:21:34,320 Speaker 4: these are longer term investment profiles that typically aren't necessarily 408 00:21:34,640 --> 00:21:37,639 Speaker 4: just trying to track the economic cycle like fixed income 409 00:21:38,480 --> 00:21:43,800 Speaker 4: inequities do. They're really looking at valuations, mergers and acquisitions LBOs. 410 00:21:44,280 --> 00:21:46,879 Speaker 4: They're looking at a very very different timeframe, and your 411 00:21:46,960 --> 00:21:49,719 Speaker 4: returns are coming from different areas. In other words, it's 412 00:21:49,880 --> 00:21:54,080 Speaker 4: orthogonal to your stock and bond portfolio, and that's what 413 00:21:54,200 --> 00:21:56,800 Speaker 4: creates a lot of the diversification. So going forward, you're 414 00:21:56,800 --> 00:21:59,879 Speaker 4: going to have to mix alternatives into this multi assets. 415 00:22:00,240 --> 00:22:01,560 Speaker 4: It's not just stocks and bonds. 416 00:22:02,680 --> 00:22:05,159 Speaker 2: Just out of curiosity, I mean, you are. I'm going 417 00:22:05,240 --> 00:22:07,080 Speaker 2: to say your title one more time, even though it 418 00:22:07,160 --> 00:22:09,760 Speaker 2: is a mouthful, Chief Investment Officer of the Multi Asset 419 00:22:09,800 --> 00:22:13,200 Speaker 2: Portfolio Solutions Group at Morgan Stanley Investment Management. On a 420 00:22:13,320 --> 00:22:16,239 Speaker 2: day like today, when bonds are going down, stocks are 421 00:22:16,280 --> 00:22:18,440 Speaker 2: going down, it feels like just about everything is going down. 422 00:22:18,520 --> 00:22:21,080 Speaker 2: Maybe private credit is doing okay because it's not marked 423 00:22:21,080 --> 00:22:23,600 Speaker 2: to market on a daily basis. Yeah, there we go. 424 00:22:23,760 --> 00:22:26,320 Speaker 2: There's your safe haven. What is a day like today 425 00:22:26,680 --> 00:22:29,520 Speaker 2: actually like for you? Like, what are you doing other 426 00:22:29,640 --> 00:22:31,439 Speaker 2: than here in the studio talking to us. 427 00:22:31,760 --> 00:22:33,920 Speaker 4: Look, I'm excited about today, and I'll tell you why. 428 00:22:34,160 --> 00:22:37,520 Speaker 4: I'm not just saying that because we've been looking for 429 00:22:37,840 --> 00:22:40,480 Speaker 4: a good entry point into the markets. We are not 430 00:22:40,800 --> 00:22:44,000 Speaker 4: bearish going into twenty twenty five. We think the economic 431 00:22:44,080 --> 00:22:47,160 Speaker 4: fundamentals are going to be good. Why is the Fed 432 00:22:47,400 --> 00:22:51,040 Speaker 4: increasing potentially not cutting interest rates as much. It's not 433 00:22:51,119 --> 00:22:53,200 Speaker 4: because of the economy's weakening. It's because I think the 434 00:22:53,240 --> 00:22:56,600 Speaker 4: economy is stronger, so that should be a positive for equities. 435 00:22:56,720 --> 00:22:58,560 Speaker 4: So when I look at equities today and they're down 436 00:22:58,720 --> 00:23:02,000 Speaker 4: almost three percent on the day, I'm pulling out my 437 00:23:02,119 --> 00:23:04,240 Speaker 4: shopping list, right, you know, and I hope you know, 438 00:23:04,320 --> 00:23:06,560 Speaker 4: I'm checking it twice, and I'm going after all these things, 439 00:23:06,600 --> 00:23:09,879 Speaker 4: all the Christmas references. But effectively, this is a very 440 00:23:09,960 --> 00:23:12,440 Speaker 4: interesting opportunity. The other thing, too, is that bond yields 441 00:23:12,480 --> 00:23:14,359 Speaker 4: have spiked. You know, ten year yeels have gotten up 442 00:23:14,359 --> 00:23:16,760 Speaker 4: to four and a half percent. Well, guess what that means. 443 00:23:17,080 --> 00:23:19,720 Speaker 4: As I look at my shopping list for equities, and 444 00:23:19,920 --> 00:23:21,520 Speaker 4: I can look at this, and I can I can 445 00:23:21,680 --> 00:23:25,000 Speaker 4: increase my equity allocation. I can also buy bonds at 446 00:23:25,000 --> 00:23:28,280 Speaker 4: a good yield to actually hedge that. So this is 447 00:23:28,400 --> 00:23:31,560 Speaker 4: actually as long as we're in the context, as long 448 00:23:31,600 --> 00:23:34,040 Speaker 4: as this is not the start of something bigger where 449 00:23:34,080 --> 00:23:36,800 Speaker 4: the FED is now completely going to pivot. They're going 450 00:23:36,880 --> 00:23:39,640 Speaker 4: to surprise the market and start hiking interest rates, which 451 00:23:39,680 --> 00:23:42,520 Speaker 4: is not our forecast, not our base case. That all 452 00:23:42,600 --> 00:23:45,480 Speaker 4: they're making is an adjustment. By the way, this adjustment 453 00:23:45,520 --> 00:23:47,920 Speaker 4: that the Fed made one hundred percent in the price 454 00:23:48,520 --> 00:23:50,960 Speaker 4: bond market was already anticipating this. This is not a 455 00:23:51,000 --> 00:23:52,000 Speaker 4: surprise to the bond mark. 456 00:23:52,119 --> 00:23:54,760 Speaker 2: Yet this actually confused me a little because when I 457 00:23:54,880 --> 00:23:57,560 Speaker 2: saw the headlines, Joe and I were doing some stuff, 458 00:23:57,600 --> 00:23:59,120 Speaker 2: but when I saw the headlines, it was like, okay, 459 00:23:59,200 --> 00:24:02,879 Speaker 2: they cut and then to for next year, Like okay, 460 00:24:03,040 --> 00:24:05,640 Speaker 2: that's pretty much what was expected. And then a little 461 00:24:05,720 --> 00:24:07,800 Speaker 2: while later you had the big reaction. It was like, what, 462 00:24:08,040 --> 00:24:09,240 Speaker 2: how did the press conference go? 463 00:24:09,280 --> 00:24:11,200 Speaker 3: What didn't they say, Racy, I'm going to sell some 464 00:24:11,400 --> 00:24:13,919 Speaker 3: stocks so I have some cash to buy the market. 465 00:24:15,480 --> 00:24:17,360 Speaker 3: That's my plan twenty twenty five. 466 00:24:17,840 --> 00:24:20,600 Speaker 2: All right, all right, well, Jim, I'm so glad that 467 00:24:20,800 --> 00:24:22,920 Speaker 2: we wanted to have you on the show for a 468 00:24:23,040 --> 00:24:25,199 Speaker 2: long time and it just kind of happened to be. 469 00:24:25,320 --> 00:24:26,920 Speaker 3: A perfect time, perfect guest. 470 00:24:27,040 --> 00:24:29,800 Speaker 2: Yeah, absolutely great timing. Thank you so much for coming 471 00:24:29,880 --> 00:24:30,399 Speaker 2: on all thoughts. 472 00:24:30,520 --> 00:24:31,600 Speaker 4: Oh, thank you very much to. 473 00:24:44,680 --> 00:24:48,560 Speaker 2: Joe. I feel better about my my crazy bye like 474 00:24:49,200 --> 00:24:53,200 Speaker 2: terribly inefficient European stocks thesis on the back of AI. 475 00:24:53,600 --> 00:24:57,200 Speaker 2: Oh idea, that's that's my big twenty twenty five trade. 476 00:24:57,520 --> 00:25:01,280 Speaker 3: I like that thesis that basically that you know, some 477 00:25:01,520 --> 00:25:04,920 Speaker 3: random chemical company in Germany they've never heard of, is 478 00:25:05,000 --> 00:25:06,879 Speaker 3: going to be the big winner because they will be 479 00:25:06,960 --> 00:25:10,480 Speaker 3: the users of AI to make their processes more streamlined 480 00:25:10,880 --> 00:25:13,480 Speaker 3: and will does benefit from the rotation to value and 481 00:25:13,840 --> 00:25:16,720 Speaker 3: AI itself very intriguing, very intriguing. 482 00:25:16,800 --> 00:25:19,879 Speaker 2: I'm going to build that index you'll see. Uh No, 483 00:25:20,040 --> 00:25:21,959 Speaker 2: I thought that was great, I mean, truly the perfect 484 00:25:22,040 --> 00:25:24,480 Speaker 2: guest for the perfect moment in time, and it is. 485 00:25:24,880 --> 00:25:27,040 Speaker 2: It is kind of crazy, you know. You you brought 486 00:25:27,119 --> 00:25:29,880 Speaker 2: up that great point of how often we have seen 487 00:25:30,040 --> 00:25:33,479 Speaker 2: in recent years bonds and stocks moving in the same direction, 488 00:25:33,800 --> 00:25:36,320 Speaker 2: and even on a daylight today, that's a pretty big 489 00:25:36,359 --> 00:25:37,679 Speaker 2: move in the SP five hundred, so. 490 00:25:37,800 --> 00:25:40,399 Speaker 3: Gold got hammered today. I don't know if you know 491 00:25:40,480 --> 00:25:43,320 Speaker 3: the really really, there's no really, yeah, for real, there was. Right, 492 00:25:43,400 --> 00:25:46,080 Speaker 3: Let's see how much did gold fall today? Gold was 493 00:25:46,119 --> 00:25:50,280 Speaker 3: down two point two percent, Bitcoin got clavered, it clovered. 494 00:25:50,320 --> 00:25:53,360 Speaker 3: It was like at one hundred and seven thousand yesterday 495 00:25:53,440 --> 00:25:55,760 Speaker 3: or something, down four point nine percent on the day, 496 00:25:55,800 --> 00:25:58,520 Speaker 3: all the other coins truly a day. The only line 497 00:25:59,040 --> 00:26:02,560 Speaker 3: it's really going up the entire world right now is BBDXY, 498 00:26:02,640 --> 00:26:06,720 Speaker 3: the Bloomberg Dollars Spot Index. It is the dollar wrecking ball. 499 00:26:06,800 --> 00:26:10,040 Speaker 2: As they say, America wins again. Yeah, all right, shall 500 00:26:10,040 --> 00:26:10,560 Speaker 2: we leave it there. 501 00:26:10,680 --> 00:26:11,320 Speaker 3: Let's leave it there. 502 00:26:11,560 --> 00:26:14,360 Speaker 2: This has been another episode of the Authoughts podcast. I'm 503 00:26:14,400 --> 00:26:16,960 Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway. 504 00:26:17,119 --> 00:26:19,760 Speaker 3: And I'm Joe Wisenthal. You can follow me at the Stalwart. 505 00:26:20,160 --> 00:26:23,399 Speaker 3: Follow our producers Kerman Rodriguez ed Kerman Armann, dash Ol 506 00:26:23,400 --> 00:26:26,440 Speaker 3: Bennett at Dashbod and kel Brooks at Kelbrooks. Thank you 507 00:26:26,520 --> 00:26:29,480 Speaker 3: to our producer Moses Ondem. From our Odd Lags content, 508 00:26:29,560 --> 00:26:32,280 Speaker 3: go to Bloomberg dot com slash odd Lots. We have transcripts, 509 00:26:32,280 --> 00:26:34,520 Speaker 3: a blog in the newsletter, and you can chat about 510 00:26:34,560 --> 00:26:36,880 Speaker 3: all of these topics. Twenty four to seven in our 511 00:26:37,040 --> 00:26:40,640 Speaker 3: discord Discord dot gg slash outlines. 512 00:26:40,359 --> 00:26:42,480 Speaker 2: And if you enjoy au thoughts. If you like it 513 00:26:42,680 --> 00:26:45,639 Speaker 2: when we do these markets episodes, then please leave us 514 00:26:45,720 --> 00:26:49,280 Speaker 2: a positive review on your favorite podcast platform. And remember, 515 00:26:49,400 --> 00:26:52,399 Speaker 2: if you are a Bloomberg subscriber, in addition to getting 516 00:26:52,440 --> 00:26:55,359 Speaker 2: our new daily newsletter, you can also listen to all 517 00:26:55,440 --> 00:26:58,359 Speaker 2: of our episodes absolutely ad free. All you need to 518 00:26:58,400 --> 00:27:01,119 Speaker 2: do is find me Bloomberg channel on Apple podcast and 519 00:27:01,280 --> 00:27:03,840 Speaker 2: follow the instructions there. Thanks for listening.