WEBVTT - Bloomberg Businessweek Weekend: November 7th, 2025 0:00:00.880 --> 0:00:05.199 This is Bloomberg Business Week, Daily reporting from the magazine 0:00:05.240 --> 0:00:09.840 that helps global leaders stay ahead with insight on the people, companies, 0:00:09.880 --> 0:00:14.760 and trends shaping today's complex economy. Plus global business, finance 0:00:14.800 --> 0:00:18.360 and tech news as it happens. Bloomberg Business Week Daily 0:00:18.680 --> 0:00:22.680 with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:23.880 --> 0:00:27.000 Hi, everyone, welcome to a special edition of Bloomberg Business Week. 0:00:27.240 --> 0:00:29.640 We are looking at some of our favorite guests from 0:00:29.640 --> 0:00:32.360 the Schwab Impact twenty twenty five event held this past 0:00:32.400 --> 0:00:36.360 week in Denver, Colorado. This event brings together advisors from 0:00:36.479 --> 0:00:40.120 around the country and those in the industry that support 0:00:40.159 --> 0:00:41.720 them with services and tools. 0:00:41.920 --> 0:00:44.159 Coming up, we're going to hear from some familiar names 0:00:44.240 --> 0:00:47.560 folks like Liz Anne Saunders and Kevin Gordon and more. 0:00:47.920 --> 0:00:51.360 Plus so look at how AI is changing the investing landscape. 0:00:51.400 --> 0:00:53.640 Yeah, we're going to talk about AI a lot. We 0:00:53.680 --> 0:00:57.280 begin with Schwab CEO Rick Wurster. Well some deal flow, 0:00:57.400 --> 0:01:00.320 Charles Schwab agreeing to buy Forge Global Holdings. It's a 0:01:00.320 --> 0:01:03.160 marketplace for buying and holding shares at private companies. It's 0:01:03.200 --> 0:01:05.399 about a six hundred and sixty million dollars deal we're 0:01:05.440 --> 0:01:08.400 talking about forty five dollars a share, that's about seventy 0:01:08.440 --> 0:01:11.640 two percent above the closing price on Wednesday. So delighted. 0:01:11.680 --> 0:01:13.360 I didn't expect to be talking to you so soon, 0:01:13.400 --> 0:01:16.039 but I'm delighted that you made time for us. Rick Worster, 0:01:16.120 --> 0:01:19.080 of course, president CEO of Charles Schwab here at Impact 0:01:19.080 --> 0:01:23.839 twenty twenty five. It is your annual event for independent advisors, 0:01:23.840 --> 0:01:26.679 and I'm sure that they're kind of curious about this deal. 0:01:27.000 --> 0:01:28.920 Why now and why this company? 0:01:29.280 --> 0:01:32.600 Well, we're thrilled to be able to democratize access to 0:01:32.680 --> 0:01:35.759 private investing. This is a market that forever has been 0:01:35.800 --> 0:01:37.720 for the high net worth and the ultra high networth, 0:01:37.959 --> 0:01:40.319 and with the acquisition of Forge, we'll be able to 0:01:40.360 --> 0:01:43.840 bring access to private companies to every investor. And so 0:01:43.880 --> 0:01:47.160 we're thrilled about that. Second, it continues our history of innovation, 0:01:47.520 --> 0:01:50.880 and our innovation has always centered around what we what 0:01:50.920 --> 0:01:53.920 can we do to provide more access, more opportunity to 0:01:53.960 --> 0:01:56.680 our clients so they can grow and improve their net worth. 0:01:56.960 --> 0:01:59.640 So we're just thrilled about this. And Forge was to 0:02:00.200 --> 0:02:01.400 the firm we really wanted to work with. 0:02:01.440 --> 0:02:03.480 It's been a lot of speculation about this company. 0:02:03.560 --> 0:02:05.880 Yes, as you know, yes, well, you know there's stock 0:02:05.920 --> 0:02:08.560 who's down ninety percent off its highs and at the 0:02:08.600 --> 0:02:11.600 same time, they're the leader in the private company marketplace, 0:02:11.639 --> 0:02:13.440 and so for us to be able to acquire the 0:02:13.560 --> 0:02:14.880 leading company that has. 0:02:14.960 --> 0:02:17.079 The deepest relationships with the private. 0:02:16.760 --> 0:02:20.640 Companies and who have the stock opportunity, it's just phenomenal 0:02:20.639 --> 0:02:20.920 for us. 0:02:21.040 --> 0:02:22.760 Rick, was it a bit competitive? And I'm just thinking 0:02:22.760 --> 0:02:25.200 about the premium that you guys paid. I'm thinking of 0:02:25.360 --> 0:02:27.960 was it Morgan Stanley just did a deal to buy 0:02:28.000 --> 0:02:31.560 equity Zen, which is another similar platform, So it does 0:02:31.600 --> 0:02:34.960 feel like big firms are jockeying to provide this access 0:02:35.000 --> 0:02:37.360 to their investors. So was there pressure to do this 0:02:37.400 --> 0:02:38.320 deal and get it done now? 0:02:38.880 --> 0:02:41.800 Well, as a public company, Forge has to run a 0:02:41.840 --> 0:02:44.360 process and so absolutely this was a competitive process. 0:02:44.360 --> 0:02:46.520 They've been pretty I think transparent about this. 0:02:46.760 --> 0:02:46.919 Yes. 0:02:47.160 --> 0:02:50.160 From our standpoint though, we think we're paying a very 0:02:50.160 --> 0:02:53.880 reasonable price where it's five times revenue less than what 0:02:53.960 --> 0:02:57.320 we trade on a revenue basis, and the opportunity for 0:02:57.440 --> 0:03:00.400 us in private markets is so much bigger than what 0:03:00.440 --> 0:03:02.200 we're paying for the company. We're paying six hundred and 0:03:02.240 --> 0:03:06.240 sixty million dollars for the company. This market could be huge, 0:03:06.680 --> 0:03:08.800 and when we bring our forty six million clients to 0:03:08.840 --> 0:03:12.280 this marketplace, I think the opportunity to grow our economics 0:03:12.400 --> 0:03:14.480 is significant. But most importantly and why we did this 0:03:14.560 --> 0:03:16.720 deal was not about making money. 0:03:16.440 --> 0:03:17.640 Relative to the purchase price. 0:03:17.919 --> 0:03:22.080 It was about democratizing access to private investing and to 0:03:22.400 --> 0:03:23.880 helping our clients grow their wealth. 0:03:24.120 --> 0:03:26.840 Will this only be for accredited investors or what's the 0:03:26.880 --> 0:03:30.560 plan in terms of new product placement or product offerings 0:03:30.880 --> 0:03:32.880 to offer it up to the retail investor. 0:03:33.520 --> 0:03:35.240 What I'm so excited about is we're going to have 0:03:35.280 --> 0:03:38.960 an opportunity for every type of investor to invest in 0:03:39.000 --> 0:03:41.960 alternatives with this acquisition. Well, three ways that clients can 0:03:41.960 --> 0:03:44.840 invest today. We already have for both our rias and 0:03:44.880 --> 0:03:48.920 retail clients a menu of alternative managers, the leaders that 0:03:48.960 --> 0:03:50.960 you're aware of, some of the big names in private 0:03:50.960 --> 0:03:53.880 equity and venture capital. That's one way our clients can invest. 0:03:54.240 --> 0:03:56.720 The second way is through this acquisition of Forge, which 0:03:56.720 --> 0:03:59.760 owns an asset management company, we will in the first 0:03:59.760 --> 0:04:02.960 core of next year, launch an indexed fund that is 0:04:03.200 --> 0:04:07.240 an index of the sixty biggest private companies and any 0:04:07.280 --> 0:04:09.520 investor with any wealth if they have interests in that, 0:04:09.560 --> 0:04:13.160 we'll be able to invest. And then third, for accredited investors, 0:04:13.160 --> 0:04:16.599 we will have a marketplace opportunity for those investors to 0:04:16.720 --> 0:04:20.600 buy individual private companies and invest in those companies directly. 0:04:20.839 --> 0:04:24.080 That does require you being an accredited investor. 0:04:24.120 --> 0:04:25.720 A couple of questions I want to ask you, So, 0:04:25.800 --> 0:04:27.640 how does it kind of improve your ability to win 0:04:28.200 --> 0:04:32.400 more wallet share when it comes specifically to clients. We 0:04:32.520 --> 0:04:36.720 know that retail investors have been clamoring for more access 0:04:37.000 --> 0:04:38.000 to private markets. 0:04:38.600 --> 0:04:40.240 I think we've gone I. 0:04:40.120 --> 0:04:43.320 Know it's not about money, yeah, or I know it's 0:04:43.360 --> 0:04:45.440 not about in terms of the price you paid, but 0:04:45.839 --> 0:04:48.000 it is about right, Like you want to make sure 0:04:48.040 --> 0:04:50.960 your clients are happy and they're getting all the offerings. 0:04:51.000 --> 0:04:52.640 So I'm just curious, how does it help you win 0:04:52.640 --> 0:04:53.160 more share? 0:04:53.360 --> 0:04:56.320 Over the last ten years, we've become a premier destination 0:04:56.480 --> 0:04:59.039 for high net worth and alternate high networth clients. And 0:04:59.120 --> 0:05:01.400 the reason for that is we have a product offer 0:05:01.440 --> 0:05:04.760 that can't be matched, whether it's access to privates, lending 0:05:04.800 --> 0:05:09.440 capabilities that are straightforward, fast efficient with great rates, wealth 0:05:09.440 --> 0:05:12.839 support on their tax, trust and estate needs, and access 0:05:12.880 --> 0:05:15.320 to live individuals to speak to. They can walk into 0:05:15.360 --> 0:05:18.080 one of our four hundred branches all across the country, 0:05:18.279 --> 0:05:20.400 have a conversation with a real life person about their 0:05:20.440 --> 0:05:23.600 financial needs, have a discussion about financial planning and what's 0:05:23.600 --> 0:05:26.000 going on in their life. And so we really have 0:05:26.160 --> 0:05:28.960 become over the last decade a premier destination for high 0:05:28.960 --> 0:05:32.440 network clients. And this acquisition just adds to our capabilities. 0:05:32.560 --> 0:05:34.520 What about from your rias? And I think about all 0:05:34.520 --> 0:05:36.760 the independent advisors who are here. This is what this 0:05:36.839 --> 0:05:39.280 event is all about. So how much does this kind 0:05:39.320 --> 0:05:41.360 of help them in their pitch to clients? And I'm 0:05:41.360 --> 0:05:44.000 just curious, is this to some extent in response to 0:05:44.040 --> 0:05:45.839 what you've been hearing from independent advisors? 0:05:45.920 --> 0:05:47.839 It absolutely is, And this is a game changer for 0:05:47.920 --> 0:05:50.680 us in the RIA space. Today, we have five trillion 0:05:50.720 --> 0:05:54.039 dollars of RIA assets that we custody. One point two 0:05:54.080 --> 0:05:56.960 percent of them sit in alternatives. We know there's more 0:05:57.000 --> 0:05:59.560 demand that number probably should be closer to five, six 0:05:59.640 --> 0:06:02.599 or seven percent, And with this acquisition, we've now given 0:06:02.640 --> 0:06:05.159 them three different ways to get invested, and I expect 0:06:05.240 --> 0:06:07.360 over the coming years we'll see that one percent grow 0:06:07.440 --> 0:06:10.400 more towards the five percent. So the rias are thrilled. 0:06:10.640 --> 0:06:12.440 They've wanted us to do more and alternatives, and I 0:06:12.480 --> 0:06:13.920 think with this acquisition. 0:06:13.440 --> 0:06:14.040 We've nailed it. 0:06:14.120 --> 0:06:16.160 And you said the new client offering, it's next year, 0:06:16.240 --> 0:06:17.880 we'll see it early part of next year. 0:06:18.000 --> 0:06:20.520 Well, Forge is up and going today, so hopefully some 0:06:20.560 --> 0:06:22.920 of our clients will go find it and start getting 0:06:22.960 --> 0:06:24.240 invested if that's what they want to do. 0:06:24.279 --> 0:06:25.080 But but I. 0:06:25.120 --> 0:06:26.760 Have non accredited I think about like. 0:06:27.240 --> 0:06:29.240 That will We're going to launch the fund in the 0:06:29.279 --> 0:06:31.440 first quarter of next year, that's the current plan, and 0:06:31.480 --> 0:06:34.040 then we'll continue to roll out their services in the 0:06:34.080 --> 0:06:34.520 coming months. 0:06:34.560 --> 0:06:36.320 Again, you know, the other side of this rick is, 0:06:36.560 --> 0:06:39.640 you know, concerns about hurdles in terms of transparency and 0:06:39.720 --> 0:06:43.119 investors really understanding what they're buying when they tap into 0:06:43.200 --> 0:06:45.520 anything in the private markets. So are there any kind 0:06:45.560 --> 0:06:48.200 of hurdles that you anticipate, regulatory or otherwise. 0:06:48.480 --> 0:06:50.640 That's why we really wanted to work with Forge, Okay, 0:06:50.880 --> 0:06:54.560 because Forge is the market leader in providing robust research 0:06:54.600 --> 0:06:57.480 to clients, and so clients will be able to access 0:06:57.560 --> 0:07:01.240 that level of research through four. In addition to that, 0:07:01.279 --> 0:07:05.359 we've also stood up a team of alternative investment experts 0:07:05.400 --> 0:07:07.719 at our firm that any client can call and talk 0:07:07.760 --> 0:07:10.480 to about, you know, a question they have about a 0:07:10.520 --> 0:07:13.920 type of alternative or a particular investment that they want 0:07:13.960 --> 0:07:15.640 to make. And so we really are trying to do 0:07:15.720 --> 0:07:18.240 everything we can to support clients. This is a great 0:07:18.240 --> 0:07:21.600 opportunity for clients to be diversified, to grow their wealth 0:07:21.840 --> 0:07:24.200 in a new asset class. But at the same time, 0:07:24.440 --> 0:07:26.720 we want to make sure we do everything we can 0:07:27.400 --> 0:07:29.240 that they for them to be able to do this 0:07:29.280 --> 0:07:31.480 in a thoughtful, well researched way. 0:07:32.120 --> 0:07:34.400 Is there a company you're most excited about that's on 0:07:34.440 --> 0:07:37.120 the Forge platform or that might be on the Forge platform. 0:07:36.800 --> 0:07:37.320 At some point? 0:07:37.360 --> 0:07:40.920 I mean, there's opening, there's anthropic. Is there any company 0:07:40.920 --> 0:07:41.880 that you're really excited about? 0:07:42.160 --> 0:07:44.240 Not a particular one I'm interested in, but I am 0:07:44.320 --> 0:07:46.320 thrilled that there are a lot of people on our 0:07:46.320 --> 0:07:47.960 platform and a lot of people that listen to your 0:07:48.000 --> 0:07:51.160 show that are active in markets and they want to 0:07:51.200 --> 0:07:53.880 get into cracking because they love crypto or you know, 0:07:53.920 --> 0:07:56.320 they love el On Musk and want to get into SpaceX. 0:07:56.360 --> 0:07:58.320 So that sex is another one. 0:07:58.480 --> 0:07:58.640 Yeah. 0:07:59.080 --> 0:08:01.560 I think that's what so interesting is that we find 0:08:01.560 --> 0:08:04.080 a lot of our investors do have these passions and 0:08:04.160 --> 0:08:06.080 now they're going to be able to invest in them 0:08:06.160 --> 0:08:07.560 through private companies. 0:08:07.680 --> 0:08:09.760 So we know you took over in January, this is 0:08:09.800 --> 0:08:11.800 your first deal. Is there more em and a to come? 0:08:11.920 --> 0:08:11.960 Like? 0:08:12.040 --> 0:08:14.280 How are you thinking about what else you need to 0:08:14.320 --> 0:08:15.560 bring under the Schwab umbrella. 0:08:15.840 --> 0:08:18.600 Well, with forty six million clients on our platform, we 0:08:18.720 --> 0:08:22.280 have an incredible opportunity to continue to add capabilities to 0:08:22.480 --> 0:08:25.280 serve and meet more of their financial life. The average 0:08:25.320 --> 0:08:28.000 fifty year older than fifty year old client has seven 0:08:28.080 --> 0:08:31.480 financial services relationships in their life, so we want to 0:08:31.560 --> 0:08:34.840 add more and more capabilities so they can handle more 0:08:34.880 --> 0:08:37.439 of their financial life at Schwab. And as we add 0:08:37.480 --> 0:08:40.679 those capabilities, we'll either build them, we can partner, or 0:08:40.800 --> 0:08:42.280 we can buy and so we'll look at all three 0:08:42.320 --> 0:08:44.160 of those. But we want to round out our capabilities 0:08:44.360 --> 0:08:47.400 and do everything we can to stand behind our clients 0:08:47.440 --> 0:08:48.839 and make a difference in their financial life. 0:08:48.840 --> 0:08:51.160 And just one last question, mostly small, probably tack ons. 0:08:51.160 --> 0:08:53.560 I mean, you guys already have digested a large company, 0:08:53.800 --> 0:08:56.000 so I'm just curious or could it be a pretty 0:08:56.040 --> 0:08:57.520 significant and an a deal. 0:08:57.720 --> 0:09:00.199 You know it's going to depend when again and we'll 0:09:00.240 --> 0:09:03.439 look at build by partner based on what capabilities we 0:09:03.520 --> 0:09:05.240 want to add, but I think we're open to just 0:09:05.280 --> 0:09:07.559 about anything. We want to grow our company. We want 0:09:07.600 --> 0:09:09.320 to do the best job we can serve in clients. 0:09:09.360 --> 0:09:10.800 We want to make a difference in their lives, and 0:09:10.880 --> 0:09:13.400 if there's a company or capability out there that we 0:09:13.480 --> 0:09:16.920 can add to our platform that's going to make a difference, 0:09:17.240 --> 0:09:18.000 we're going to do it well. 0:09:18.040 --> 0:09:20.280 The market environment right now, we want to dive right 0:09:20.320 --> 0:09:23.280 in there, because really this week we've heard from different 0:09:23.320 --> 0:09:26.319 Wall Street executives that an overdue collection of weighed on 0:09:26.440 --> 0:09:29.760 the market this week so reduced expectations at that rate, cuts, 0:09:29.760 --> 0:09:32.800 a prolonged government shutdown. Michael Burry added to the negative 0:09:32.840 --> 0:09:35.280 tone with his disclosure of farish wagers on talent here 0:09:35.360 --> 0:09:38.280 and Nvidia. How do you see today's environment from sort 0:09:38.280 --> 0:09:39.600 of a risk reward perspective. 0:09:40.760 --> 0:09:42.760 We try to focus our clients on the long term. 0:09:43.080 --> 0:09:46.600 I think that owning securities and assets over long periods 0:09:46.640 --> 0:09:49.640 of time will generally go up. It's really hard to 0:09:49.720 --> 0:09:52.439 get the timing of markets down because you have to 0:09:52.480 --> 0:09:53.720 make two correct calls. 0:09:54.120 --> 0:09:54.320 First. 0:09:54.360 --> 0:09:55.920 You got to nail it to get out at the 0:09:56.000 --> 0:09:59.319 right time, which is really hard. In the strength of 0:09:59.360 --> 0:10:01.199 the kind of market we've had in the momentum, we've 0:10:01.240 --> 0:10:03.160 had to get out at the right times incredibly hard, 0:10:03.840 --> 0:10:05.199 and then you've got to be able to get back 0:10:05.240 --> 0:10:07.319 in at the right time or you miss out. I 0:10:07.480 --> 0:10:10.760 was down in Charlotte, North Carolina, visiting with some clients 0:10:11.160 --> 0:10:14.240 and I heard from one client who back in twenty 0:10:14.520 --> 0:10:18.240 sixteen didn't like the presidential administration and so had sold 0:10:18.280 --> 0:10:20.600 out of stocks. And this was back when we were 0:10:20.640 --> 0:10:22.199 having a pullback, and they said, would now be a 0:10:22.240 --> 0:10:24.920 good time to get back in the market, and they'd 0:10:24.960 --> 0:10:27.440 set out a huge amount of gains over a short 0:10:27.520 --> 0:10:29.880 term point of view. We try to have clients avoid that. 0:10:30.480 --> 0:10:32.760 Clients can stay in the market and tolerate some volatility. 0:10:32.800 --> 0:10:35.000 We think over the long run that gets rewarded because 0:10:35.040 --> 0:10:37.079 it is so hard to call the markets both when 0:10:37.120 --> 0:10:37.840 to get out and when. 0:10:37.760 --> 0:10:38.280 To get back in. 0:10:38.679 --> 0:10:41.240 So as you walk around the floor and you're talking 0:10:41.280 --> 0:10:44.719 to advisors, I mean, what are they talking about, you know, 0:10:45.920 --> 0:10:49.520 in terms of timely advice that you're getting maybe from 0:10:49.679 --> 0:10:52.360 the advisors and what they are kind of hearing from 0:10:52.360 --> 0:10:53.000 their clients. 0:10:53.280 --> 0:10:56.680 I think one of the most pressing topics from investors 0:10:56.720 --> 0:11:00.920 today is how to navigate concentrated positions, the S and 0:11:01.000 --> 0:11:02.760 p's as it's concentrated, as it's. 0:11:02.640 --> 0:11:06.280 Ever been right, the mag seven, the big tech, Yes. 0:11:06.240 --> 0:11:09.439 And it's created a tremendous wealth for lots of retail investors, 0:11:09.880 --> 0:11:12.520 and now they're wondering how to diversify their portfolio and 0:11:12.600 --> 0:11:15.000 to do so in a way to minimize their tax burden. 0:11:15.240 --> 0:11:17.160 And there's all kinds of strategies that they can work 0:11:17.200 --> 0:11:21.080 with their advisor on to create a more diversity portfolio 0:11:21.120 --> 0:11:23.479 without having to pay a tremendous amount in capitalating. 0:11:23.600 --> 0:11:26.000 How hard is it, though, that when clients are like, 0:11:26.080 --> 0:11:28.040 but why would I want to get out of Nvidia 0:11:28.160 --> 0:11:30.400 when I've seen what they've been doing for how many years? 0:11:30.440 --> 0:11:30.480 Like? 0:11:30.920 --> 0:11:34.360 How tough is that? Because we constantly have conversations of 0:11:34.400 --> 0:11:36.559 people saying it's time to you know, broad nab back 0:11:36.600 --> 0:11:38.560 off the big tech, and then it's the big tech 0:11:38.640 --> 0:11:39.600 with so much momentum. 0:11:39.720 --> 0:11:41.840 Well, you're absolutely right, and it's a really hard conversation 0:11:41.960 --> 0:11:43.959 to have and oftentimes we don't win it, but we 0:11:44.040 --> 0:11:47.079 want to make sure the client is cognizant of the 0:11:47.200 --> 0:11:49.920 risk and the choice that they're making and to be 0:11:50.080 --> 0:11:53.319 fair to those investors, they've been right by sticking with 0:11:53.400 --> 0:11:55.960 their concentrated position for the most part, because the names 0:11:55.960 --> 0:11:58.360 that have driven the market higher have been the same 0:11:58.400 --> 0:12:01.200 ones here for a while, and so many people are 0:12:01.200 --> 0:12:03.160 stuck with it and they are sitting on more gains 0:12:03.200 --> 0:12:04.440 and they might have anticipated. 0:12:04.720 --> 0:12:07.120 So let's go further into the retail trader, because they've 0:12:07.120 --> 0:12:09.760 grown about twenty percent of the US equity market today. 0:12:09.800 --> 0:12:13.360 I'm curious about sentiment trends, like how the structure of 0:12:13.480 --> 0:12:18.000 this trend, how resilient are retail traders in an eventual downturn. Why. 0:12:18.000 --> 0:12:20.839 I think retail traders have been the ones leading the 0:12:20.920 --> 0:12:22.880 market higher and have been the ones buying the ditch. 0:12:22.880 --> 0:12:24.440 And I think they were out actually in many ways, 0:12:24.840 --> 0:12:27.079 out ahead of the institutional buyers. And so I think 0:12:27.120 --> 0:12:31.079 you have a retail buyer that has strong hands and 0:12:31.559 --> 0:12:34.319 we'll stick through the market. So we'll see how it 0:12:34.360 --> 0:12:36.760 all plays out. But markets go up and down, and 0:12:36.840 --> 0:12:40.439 retail investors will inevitably, you know, make some decisions in 0:12:40.480 --> 0:12:41.679 there that's best for them. 0:12:41.840 --> 0:12:45.840 That's Rick Worster, president and CEO of Schwab, coming up 0:12:45.960 --> 0:12:48.840 more from our conversations at the Schwab Impact twenty twenty 0:12:48.880 --> 0:12:50.760 five events in Denver, Colorado. 0:12:51.040 --> 0:12:53.800 Up next, we hear from Schwab Chief Investment Strategist Liz 0:12:53.800 --> 0:12:56.640 Anne Saunders and what she expects in markets for the 0:12:56.679 --> 0:12:57.319 rest of the year. 0:12:57.920 --> 0:12:59.079 This is Bloomberg. 0:13:02.240 --> 0:13:06.319 This is Bloomberg Business Week Daily with Carol Masser and 0:13:06.480 --> 0:13:09.000 Tim Steneveek on Bloomberg Radio. 0:13:09.960 --> 0:13:12.000 We are back here on a special edition of Bloomberg 0:13:12.080 --> 0:13:14.520 Business Week. It's all about some of the highlights from 0:13:14.559 --> 0:13:17.600 Schwab Impact twenty twenty five. It was held this past 0:13:17.640 --> 0:13:21.240 week in Denver, Colorado. It's all about bringing together financial 0:13:21.280 --> 0:13:24.720 advisors from around the country. Those in the industry too 0:13:24.840 --> 0:13:30.160 that support them with various applications, services and tools. And 0:13:30.280 --> 0:13:32.160 up next we hear from a voice that has followed 0:13:32.240 --> 0:13:34.440 financial markets, Tim for a long long time. 0:13:34.600 --> 0:13:38.720 Our conversation on markets with Schwab Chief Investment Strategist Liz 0:13:38.760 --> 0:13:39.520 and Saunders. 0:13:39.800 --> 0:13:40.800 I'm so glad you're here. 0:13:40.880 --> 0:13:41.120 Thank you. 0:13:41.600 --> 0:13:44.800 Welcome to our cozy, little event. 0:13:45.120 --> 0:13:45.920 Five people. 0:13:46.200 --> 0:13:48.240 It's not cozy and it's not little, but we are 0:13:48.280 --> 0:13:50.160 happy to be here. It's a huge event. It was 0:13:50.240 --> 0:13:53.520 huge last year in San Francisco. It was huge before 0:13:53.559 --> 0:13:57.559 that in Philadelphia, you were shaking your head when I 0:13:57.679 --> 0:13:58.760 was saying everything is awesome. 0:14:00.559 --> 0:14:01.520 Well, it's it's a. 0:14:01.520 --> 0:14:02.760 Bit of a tale of two markets. 0:14:02.800 --> 0:14:07.199 You've got cap weighted index returns and the lack of 0:14:07.280 --> 0:14:10.720 any significant downside, particularly since the April eighth closing low. 0:14:10.840 --> 0:14:12.679 But here's an example. 0:14:12.840 --> 0:14:16.839 The average member within the SMP just since April eight 0:14:16.920 --> 0:14:19.840 has had a sixteen percent now actually seventeen percent draw down. 0:14:20.280 --> 0:14:23.560 The average member within the Nasdaq since April eighth, when 0:14:23.600 --> 0:14:26.680 the nasdac's up fifty some odd percent, has had a 0:14:26.960 --> 0:14:28.720 average maximum drawdown of thirty six. 0:14:28.760 --> 0:14:29.760 So this breath isn't there. 0:14:30.040 --> 0:14:32.040 The breath isn't there, But there's a lot of churn 0:14:32.120 --> 0:14:35.160 and rotation going on under the surface that you don't 0:14:35.200 --> 0:14:40.240 pick up if you're only looking at the index level returns. 0:14:40.400 --> 0:14:42.720 Are we starting to see signs where investors are kind 0:14:42.720 --> 0:14:45.400 of questioning some of the valuations that are out there, 0:14:46.520 --> 0:14:48.720 the AI spend and whether we're getting the return on 0:14:48.840 --> 0:14:51.040 investment on it. Tell us you're thinking. 0:14:50.920 --> 0:14:54.320 OK, I think the margin of era has narrowed a bit. 0:14:54.400 --> 0:14:59.840 There's obviously sensitivity, whether it is diminution in return on 0:15:00.080 --> 0:15:04.120 US capital, whether you're seeing pressure on margins obviously, the 0:15:04.200 --> 0:15:06.960 concern about the circularity of financing and the fact that 0:15:07.600 --> 0:15:09.040 so far that's a real thing. 0:15:09.760 --> 0:15:12.320 I mean, we are kind of blown away. What feels 0:15:12.360 --> 0:15:13.280 like it's all in the family. 0:15:13.400 --> 0:15:15.440 Yeah, here's five billion dollars, so you can buy five 0:15:15.440 --> 0:15:17.800 billion dollars with the stuff from us, right, You guys. 0:15:17.680 --> 0:15:22.320 Like Bloomberg had this incredible visual that I think made 0:15:22.360 --> 0:15:24.920 it on Michael Burry's post. 0:15:26.640 --> 0:15:29.720 Yes, but it's that is such a great visual. 0:15:29.760 --> 0:15:34.000 I've seen more simplistic ones of a power strip with 0:15:34.160 --> 0:15:36.360 the plug plugged into the power strip. 0:15:37.120 --> 0:15:38.880 Yeah, but that's exactly true, right. 0:15:38.880 --> 0:15:41.040 And I think you know, the boom so far has 0:15:41.080 --> 0:15:44.160 been financed out of cash flows. It's been largely equity financed. 0:15:44.200 --> 0:15:47.400 But now you've got as to just pick on the 0:15:47.720 --> 0:15:51.680 MAG seven cohort MAG seven free cash low growth has 0:15:51.760 --> 0:15:54.960 gone from more than sixty percent year over year six 0:15:55.080 --> 0:15:57.240 quarters ago to now two quarters in a row of 0:15:57.480 --> 0:16:01.520 negative and so you're starting to see more deals financed 0:16:01.560 --> 0:16:01.800 with that. 0:16:02.000 --> 0:16:05.920 That's not necessarily a bad thing. It's just a different environment. 0:16:06.080 --> 0:16:07.840 But that I do want met in alpha that right, 0:16:07.920 --> 0:16:10.480 didn't they just recently do with oversubscribe, Like there's lots 0:16:10.480 --> 0:16:12.880 of investor interests, but I do like, I don't know, 0:16:13.160 --> 0:16:15.000 Liz what we just have to keep an eye. 0:16:14.920 --> 0:16:18.160 On it, or I think you evaluation is a is 0:16:18.240 --> 0:16:21.440 a tough one. I think valuations and I'm going to 0:16:21.480 --> 0:16:24.760 say this generally, not just specific to AI stocks or 0:16:24.840 --> 0:16:30.160 Max seven. It's not a market timing tool. It's more 0:16:30.400 --> 0:16:33.560 it's more a temperature gauge than it is a timing gauge. 0:16:34.280 --> 0:16:36.920 It's almost an indicator of sentiment. There are times where 0:16:37.040 --> 0:16:40.720 valuations can get stretched, and they can get more ridiculously stretched, 0:16:40.760 --> 0:16:42.880 and the market still has a long runway ahead of it. 0:16:43.040 --> 0:16:46.680 So I think it represents some of the anks that's 0:16:46.760 --> 0:16:47.680 coming into the. 0:16:47.760 --> 0:16:48.640 Narrative right now. 0:16:49.280 --> 0:16:53.680 But it doesn't necessarily pretend impending doom. It's just a 0:16:54.000 --> 0:16:57.480 it's a cost saver AI and it boosts margins. So 0:16:57.880 --> 0:17:01.720 we had we had the really focus solely on the 0:17:01.920 --> 0:17:04.840 hyperscalers and the chips, and then more recently it's gone. 0:17:04.680 --> 0:17:07.000 Into the energy usage in the data centers. 0:17:07.640 --> 0:17:09.720 Now, I think where you're actually getting meat on the 0:17:09.800 --> 0:17:14.639 bones in terms of productivity statistics, in terms of the 0:17:14.800 --> 0:17:18.800 beneficial to costs is the users of AI. 0:17:19.040 --> 0:17:21.320 And I think that is likely to continue. 0:17:21.440 --> 0:17:24.399 But then does it create this destructive element in our 0:17:24.480 --> 0:17:28.480 society as a result of those entry level jobs, those 0:17:28.680 --> 0:17:31.679 white collar jobs, those blue collar jobs that end up 0:17:31.720 --> 0:17:35.000 being completely eliminated. I mean, I know we're talking about 0:17:35.240 --> 0:17:37.480 a future that none of us can see. But we 0:17:37.520 --> 0:17:39.680 had an interesting conversation with David Weston last week and 0:17:39.840 --> 0:17:44.400 he was basically like, how do we have this payoff 0:17:44.560 --> 0:17:47.520 without the money savings from getting rid of all these employees. 0:17:47.560 --> 0:17:49.399 Basically, I think that we're. 0:17:49.320 --> 0:17:53.000 In a moment of creative destruction to quote Trumpeter. Yeah, 0:17:53.040 --> 0:17:55.720 and that happens anytime we have a major innovation or 0:17:55.760 --> 0:17:58.240 we've shifted our economy from being an ag economy to 0:17:58.359 --> 0:18:00.200 industrial industrial to innovate. 0:18:00.240 --> 0:18:04.720 And that happens. But ultimately new types of jobs are created. 0:18:04.840 --> 0:18:09.840 I actually think that companies that don't adopt AI are 0:18:09.880 --> 0:18:12.639 going to have more job losses. I think what we 0:18:12.760 --> 0:18:16.000