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Speaker 2: Malex Steel alongside Paul Sweeney. Happy Friday. Everyone made it
Speaker 2: the end of the week. Yes, we did that. Lots
Speaker 2: to go through over the next couple hours. We want
Speaker 2: to kick off with more on that you mished sentiment.
Speaker 2: It is the final read for November, but I'm interested
Speaker 2: to see sort of what that brings in when it
Speaker 2: comes to the election result. So Joe Anshu, University of
Speaker 2: Michigan Surveys of Consumer Director joins us sentiment coming in
Speaker 2: at about seventy three point nine, a little bit better
Speaker 2: current condition sixty four point four, also better expectations, also
Speaker 2: a touch better. Does this encapsulate the election?
Speaker 3: Yes it does so.
Speaker 4: Our preliminary read that we released two weeks ago did
Speaker 4: not encapsulate the election, but today's release includes two weeks,
Speaker 4: four and two weeks after the election. Essentially, what we
Speaker 4: saw was that after Trump was elected, sentiment lost about
Speaker 4: half of the gains that it had seen in the
Speaker 4: first two weeks of the month. But on net, we're
Speaker 4: still a little bit better than we were in October,
Speaker 4: and we are now at four straight months of incremental gains.
Speaker 5: Johan, talk to us about inflation out look. I know
Speaker 5: you guys at Michigan take a look at that in
Speaker 5: your survey. How are people thinking about the inflation netlook?
Speaker 4: In the short run, people are expecting inflation to continue stabilizing.
Speaker 4: We saw the year ahead inflation expectations edged down by
Speaker 4: one tenth of percent, likely supported by lower gas prices
Speaker 4: at this time of year. That being said, we actually
Speaker 4: saw long run inflation expectations go from three point zero
Speaker 4: to three point two. That's kind of on the high
Speaker 4: side of the range we've been seeing for the last
Speaker 4: couple of years. Consumers are perceiving quite a bit of
Speaker 4: uncertainty over long run inflation, which is consistent with the
Speaker 4: fact that we don't really know exactly Trump's economic agenda
Speaker 4: is going to look like over the next four years,
Speaker 4: So that uncertainty seems quite reasonable.
Speaker 5: All right, Joe, and thank you so much. We appreciate it.
Speaker 5: I appreciating a couple of minutes of your time joined shoe.
Speaker 5: She's at the University of Michigan Surveys of consumer She
Speaker 5: directs to that whole business here and again the you
Speaker 5: missurveyed numbers just a headline number. I'm gonna go with that.
Speaker 5: It came in at seventy one point eight contentius seventy
Speaker 5: three point nine and also is down a little bit
Speaker 5: from last period as well.
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Speaker 2: Let's get to the other big news of the day,
Speaker 2: and that was European PMIS. They were terrible and you
Speaker 2: definitely then saw rerating in terms of cuts, maybe a
Speaker 2: fifty basis point cut from the ECB. So we wanted
Speaker 2: to break it down a little bit more for you
Speaker 2: with David Powell Senior. You're area economist for Bloomberg Economics.
Speaker 2: David was so bad about these numbers. What stood out
Speaker 2: to you, Well.
Speaker 6: Actually they were bad all around, and that's really what
Speaker 6: stood out. There was no bright spots here, so the
Speaker 6: composite figure for the your area declined and the numbers
Speaker 6: for both the services and manufacturing sectors were weak. In
Speaker 6: addition to that, we get a national breakdown at the
Speaker 6: first release which shows the numbers for France and Germany,
Speaker 6: and it showed both of the your areas to largest
Speaker 6: economies experience weakness. So it's not something that's just isolated
Speaker 6: to one country or one sector. It's this broad based weakness.
Speaker 5: Again, it's interesting that we woke up to this data
Speaker 5: here in the States, David, and we kind of said
Speaker 5: we knew there was you know, it was softer in
Speaker 5: across Europe, but some of this data came in and
Speaker 5: just really, I think, surprise the markets here. What's the
Speaker 5: expectation for the next you know, six to twelve months
Speaker 5: as reached in European economic activity.
Speaker 6: Well, I think the market is bracing for deterioration in
Speaker 6: the economic numbers coming out out of coming out of
Speaker 6: the EUR area, and that's because of the electoral victory
Speaker 6: of Donald Trump. One of his campaign promises was to
Speaker 6: impose tariffs not only on China, but smaller tariffs on
Speaker 6: other trading partners and one country that really stands out
Speaker 6: in that list is Germany given its huge trade surplus
Speaker 6: with the United States, and it's a country that Donald
Speaker 6: Trump specifically referred to on many occasions during the campaign.
Speaker 6: And we have run the numbers and our estimate is
Speaker 6: if those tariffs turn out to be as high as
Speaker 6: Trump promised during the campaign, that could knock in the
Speaker 6: short term about one percent off of GDP in the
Speaker 6: EU area. And we've also had estimates come from the
Speaker 6: Bundesbank Germany Central Bank, and they have a similar estimate
Speaker 6: for the German economy. And that's going to be a
Speaker 6: big shock to demand in the your era, which will
Speaker 6: require the ECB in all likelihood to respond the form
Speaker 6: of lower interest rates. And that comes on top of
Speaker 6: what was already a weak economy before any of this happened.
Speaker 2: Okay, so do you think fifty basis points coming up?
Speaker 6: I don't think they'll cut by fifty basis points in December.
Speaker 6: It will certainly introduce that topic for discussion. I think
Speaker 6: the more likely outcome is you just see a longer
Speaker 6: period of twenty five basis point cuts. So we look
Speaker 6: for a cut of twenty five basis points in December,
Speaker 6: and we think the ECB will keep with these back
Speaker 6: to back cuts being cut at every meeting until until
Speaker 6: they reached neutral, which is about two percent. So we're
Speaker 6: going to have numerous cuts coming up throughout the start
Speaker 6: of twenty twenty five. And like I said, more frequent
Speaker 6: cuts is more likely than larger cuts.
Speaker 5: David, thank you so much for joining us. We appreciate
Speaker 5: getting a few minutes of your time. David Powell, he's
Speaker 5: a senior Euro Area economist for Bloomberg Economics. That joining
Speaker 5: us from via zoom thing.
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Speaker 2: So and video is built as like the biggest event
Speaker 2: for the end of the year. And so my question
Speaker 2: over the last twenty four hours has been, Okay, well
Speaker 2: we're done with that, so then then what? And I
Speaker 2: keep getting notes in my inbox about how the rally
Speaker 2: is broadening out and then I hear, ooh, we might
Speaker 2: be topping out in tech. Go diversify. So let's get
Speaker 2: someone whose job is to actually understand all this. Grace Lee,
Speaker 2: senior portfolio manager for Columbia thread Needle, joins us. Now, Grace,
Speaker 2: what is the right strategy now that we're done with Nvidia?
Speaker 6: Now? What?
Speaker 8: Well? I think we always have to pay attention to
Speaker 8: in video and I think what in videos earnings showed
Speaker 8: us this week is that the AI theme is still
Speaker 8: alive and well, and so I think we can't ignore that.
Speaker 8: That said, there are plenty of other sectors and I
Speaker 8: think we're starting to see DOT. You know, we've started
Speaker 8: to see it all year. You know, you've seen a
Speaker 8: stealth rally in utilities and banks, especially post elections. You know,
Speaker 8: there has been definitely a people taking a second look
Speaker 8: at financials and other sectors that might have been a
Speaker 8: little bit more ignored during the year because of maybe
Speaker 8: regulatory concerns and things which have certainly eased post elections.
Speaker 5: Grace, what did the election mean to you and your
Speaker 5: team when you woke up that Wednesday morning? Did it
Speaker 5: alter your outlook or how you're thinking about allocation or sectors?
Speaker 5: How did you think about that?
Speaker 8: No, I think mostly it was a huge clearing event
Speaker 8: that it was decisive. It didn't take days or weeks
Speaker 8: to count the votes or anything, and then I think
Speaker 8: that it really is probably more of a positive I
Speaker 8: think for the for the markets. The one takeaway I
Speaker 8: would say is that at this point I probably don't
Speaker 8: want to be more defensive. You know, I think I
Speaker 8: think business leaders, company managements that we've met with since
Speaker 8: the elections, they are more optimistic about what might happen
Speaker 8: under a Trump administration and with the Republican Congress.
Speaker 2: What are your favorite top companies right now? Let's give
Speaker 2: me a couple that really float your boat.
Speaker 8: Well, I think in terms of I would broaden it
Speaker 8: out to maybe some sectors I think, you know, I
Speaker 8: would say utilities is actually an interesting one. As much
Speaker 8: as I say, don't get more defensive, there are some
Speaker 8: some actual secular themes going on in in the utility sector.
Speaker 8: And by by utilities, I'm not talking certainly the power
Speaker 8: producers have done very well this year. But you know,
Speaker 8: when when you think of Plaine Vanilla regulated utilities, I
Speaker 8: would say that if there's ever a time to get
Speaker 8: excited about about these companies, now is that time. And
Speaker 8: you know, these are companies like Excel Energy, Southern Company,
Speaker 8: the ones that maybe your you know, grandmother might have
Speaker 8: been clipping the dividends. But at this point, what we've
Speaker 8: seen is that we've had flat power demand for probably
Speaker 8: over twenty years, and that is now changing for the
Speaker 8: next several years where it's not just AI data centers,
Speaker 8: it's just broader electrification, these crypto mining and resuring. That's
Speaker 8: going to drive a lot more power demand, which means
Speaker 8: that the regulated utilities will have to invest, and that
Speaker 8: means that their earnings growth takes up higher. And we've
Speaker 8: started seeing that in reality this quarter, where you've seen
Speaker 8: some really interesting stock reactions, you know, maybe even double
Speaker 8: digit price gains in a day off of just slightly
Speaker 8: higher long term earnings outlooks. And I think that can
Speaker 8: continue within the c Hey grace.
Speaker 5: As a former banker, when I woke up that Wednesday morning,
Speaker 5: I said, uh, oh, M and A. I think that
Speaker 5: could be back on the front burner here. The regulators
Speaker 5: have been really really tough on M and A or
Speaker 5: list several years. That might change. Does that factor into
Speaker 5: how you think about what sectors to get exposure to.
Speaker 8: I think broadly M and A should pick up. People
Speaker 8: have been waiting for this for a long time. I
Speaker 8: think you know, financials are obviously front and center there.
Speaker 8: You know, we're we're certainly involved in some of the
Speaker 8: capital market stocks, some of the alternative investment managers which
Speaker 8: we think we will will certainly see benefits there. But
Speaker 8: you know, I think broadly and possibly you know, we
Speaker 8: don't traffic in small caps a ton, but I think
Speaker 8: some of the smaller mid cap companies might might also
Speaker 8: be a little bit more interesting in this environment as
Speaker 8: potential targets.
Speaker 2: Yeah, profitable small camp that's really been out performing. All right,
Speaker 2: thanks so much, Grace, really appreciate it. Grace Lee, Senior
Speaker 2: portfolio manager for Columbia Thread Needle. Joining us.
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Speaker 2: Another story that we're following today concerns oil and JP
Speaker 2: Morgan and Iran. So apparently the US Treasury Department is
Speaker 2: examining JP Morgan's relationship with a hedge fund that is
Speaker 2: said to be part of a network that's overseen by
Speaker 2: Iranian oil trader hosting Chamkani. We want to understand sort
Speaker 2: of more on this. What might this violate in terms
Speaker 2: of sanctions or not. So we're here to break us
Speaker 2: down for us as Elliott Stein Bloomberg intelligence litigation analyst.
Speaker 2: Can you just give us the facts first?
Speaker 3: Yeah?
Speaker 9: So, I mean the investigations early, the reporting is early.
Speaker 9: A lot of unknowns, both known and unknown at this point.
Speaker 9: But it sounds like the Treasury Department is investigating JP
Speaker 9: Morgan in relation to its connection to this hedge fund
Speaker 9: that's based in London and Dubai and the hedge funds
Speaker 9: connection to an oil trader, And it sounds like the
Speaker 9: overall investigation is focused on the oil trader, but the
Speaker 9: Treasury departments also looking at JP Morgan to make sure
Speaker 9: that it followed its you know, due diligence and did
Speaker 9: its KYC and know your customer and AML compliance processes.
Speaker 5: And I guess I'm just looking at the Bloomberg reporting.
Speaker 5: I guess folks there say JP Morgan feels like they
Speaker 5: don't need to do anything here because neither the Shimkhani
Speaker 5: guy nor the company appear in any sanctions list.
Speaker 3: I guess, right, yeah, and this may be you know,
Speaker 3: this may be a nothing burger. There may be nothing there.
Speaker 9: And you know, best case scenario, or one possible scenario
Speaker 9: where JP Morgan has no exposure, is that maybe it
Speaker 9: did all its due diligence and it was misled by
Speaker 9: you know, the the companies that was doing its due
Speaker 9: diligence on That's just one possibility. But worst case scenario,
Speaker 9: it didn't do it's due diligence or it ignored red
Speaker 9: flags and we've seen, you know, recently with TD Bank
Speaker 9: what that can amount to.
Speaker 2: So if this oil trader did have a relationship with
Speaker 2: this individual from Iran, what does that potentially violate? What
Speaker 2: are the sanctions and the rules currently that would make
Speaker 2: that a problem, right, So, you.
Speaker 9: Know, banks should not be doing business with companies that
Speaker 9: are under sanctions or on you know, special lists, you know,
Speaker 9: And so it's unclear what the connection is though to
Speaker 9: this oil trader.
Speaker 3: Apparently he is the son of someone who was.
Speaker 9: In the Ayatolla's like inner circle, so there may be
Speaker 9: some connections. But we've seen in the past that banks
Speaker 9: have paid billions of dollars for doing transactions with the
Speaker 9: Iranian government or other Iranian entities that are on sanctions lists.
Speaker 3: So it can be very costly. But it's not clear
Speaker 3: that the investigation is even focused on that, and may
Speaker 3: be sort of just to make sure that JP Morgan
Speaker 3: was doing its due diligence.
Speaker 5: And doing through that. The training here at Bloomberg about
Speaker 5: this type of issues, yeah, the type of training that
Speaker 5: the same thing we receive and I'm sure everybody across
Speaker 5: the industry, to various degrees receives about Hey, if you're
Speaker 5: doing business with somebody that may or may not be
Speaker 5: on a list, just stop, call your boss, call complaints,
Speaker 5: see what the gig is before you move forward.
Speaker 2: Well, it sounds like this could be like a third derivative.
Speaker 9: Exactly, And that's why there's a lot of unknowns here.
Speaker 9: The bank may have no exposure, but anytime you're talking
Speaker 9: about sanctions on Iran and you know banks doing transactions
Speaker 9: you know indirectly as well, you know, your eyebrows get
Speaker 9: raised and banks have paid.
Speaker 3: A lot of money in the past for failures related
Speaker 3: to this.
Speaker 2: Do we feel that sanctions could get more strenuous under
Speaker 2: President Trump? Like, what are you thinking about?
Speaker 3: Certainly possible, right I mean, yeah, I would expect that.
Speaker 5: I would expect it, all right, So I'm going to
Speaker 5: a JP Moore stocks up one percent today, up forty
Speaker 5: five percent year to date, so I'm assuming the market's
Speaker 5: discounting this is a non risk issue. How about other
Speaker 5: litigation that your work? What else are you working on?
Speaker 5: Because you do the litigation that companies have the deal
Speaker 5: with that can move stocks.
Speaker 9: Absolutely and actually in this arena, there are several other
Speaker 9: banks that are under investigation for either AML violations or
Speaker 9: potentially sanctions violations. UBS is being investigated with in connection
Speaker 9: with clients that have took over from Credit Sue who
Speaker 9: may be in violation of sanctions on Russia. There's a
Speaker 9: swedest Sweat Bank that has been under investigation for AML
Speaker 9: violations for years now, so I'm waiting for a penalty there.
Speaker 9: There's a Turkish bank, Hawkbank, that was indicted by the
Speaker 9: US government for violating sanctions on Irun.
Speaker 3: So that's one area I'm looking at.
Speaker 9: Another big area right now is all these rules and
Speaker 9: regulations that the SEC and other regulators have put into
Speaker 9: place under the Biden administration. There's a lot of lawsuits
Speaker 9: over them, and so we're waiting to see what is
Speaker 9: going to happen with the rules and with the lawsuits.
Speaker 2: What else would a Trump victory mean for your world?
Speaker 9: Right, So, in connection with these rules and regulations that
Speaker 9: the SEC has promulgated during the Biden administration and the
Speaker 9: CFPB as well, we're expecting a lot of the rules
Speaker 9: and regulations to maybe be paused in terms of enforcing them,
Speaker 9: and then the regulators will probably go back and revisit
Speaker 9: the rules, but that takes a while. I'm also you know,
Speaker 9: I'm attuned to the courts as well, and I'm particularly
Speaker 9: interested in seeing whether.
Speaker 3: The two oldest justices on the Supreme Court.
Speaker 9: Clarence Thomas and Sam Alito, retire, probably at some point
Speaker 9: during this next Trump administrator life, in which case he
Speaker 9: would name the replacements and you'll have a conservative majority
Speaker 9: for at least another generation on the Supreme Court.
Speaker 7: Interesting.
Speaker 5: Wow, because you started off fine going to Stanford, then
Speaker 5: you went to get a law degree. It all turns
Speaker 5: south Man. What were you thinking?
Speaker 3: Have you marked your calendar for the Stanford Duke basketball game?
Speaker 5: No, because we're now in the same conference, right, Yeah,
Speaker 5: when is that?
Speaker 3: I don't have a car, but I think I think
Speaker 3: it's in January, maybe February.
Speaker 5: I want to check it outre Stanford is in the
Speaker 5: Atlantic Coast Conference. That makes sense.
Speaker 3: Yeah, big game this weekend.
Speaker 5: My Duke Field hockey team had a little problem getting
Speaker 5: out to the Bay Area for their games against it
Speaker 5: because you have to Drham, you have to transfer and connect,
Speaker 5: and I'm like, why are my kids going out to
Speaker 5: San Francisco for It's just the whole thing's a mess.
Speaker 5: Elliot Stein Bloomberg Intelligence litigation analysts joining us here in
Speaker 5: our Bloomberg Interactive Brokers Studio.
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Speaker 2: Happy for Friday. We made it to the end of
Speaker 2: the week. I'm Alex d alongside Paul swe Need. This
Speaker 2: is Bloomberg Intelligence Radio. We bring you all the top
Speaker 2: news and business, economics and finance through our lens of
Speaker 2: our Bloomberg Intelligence folks. We also tap an amazing network
Speaker 2: of resources outside of Bloomberg Intelligence, and we're going to
Speaker 2: tap one right now. Jessica Kriegel is chief strategy Officer
Speaker 2: of Workforce and Labor at Culture Partner. She joins US
Speaker 2: now from Sacramento, California. So the headline from this week
Speaker 2: that we didn't really get to digest as much was
Speaker 2: Elon Musk and Vivek Ramaswami outlining a plan for large
Speaker 2: scale firings of the federal workforce, in part, guys, get
Speaker 2: your butt backs in the office five days a week.
Speaker 2: You don't want to do it, and then you're going
Speaker 2: to quit. Is this realistic? What's your take on something
Speaker 2: like this?
Speaker 10: Well, they argue that it is absolutely realistic, and you've
Speaker 10: already seen a precedent set in the corporate world where
Speaker 10: people are forcing employees back into the office five days
Speaker 10: a week. What is a little bit different or maybe
Speaker 10: even refreshing, you could argue, is that they are being
Speaker 10: straightforward about the fact that they anticipate by forcing people
Speaker 10: back into the office five days a week, that people
Speaker 10: will quit, and they welcome that. I think that's probably
Speaker 10: true for a lot of CEOs who make that decision
Speaker 10: because they know their workforce values flexibility, and yet they're
Speaker 10: forcing them to go back into the office. So they
Speaker 10: are being in some ways at least transparent that there
Speaker 10: is an alternative motivation for forcing people back into the office.
Speaker 10: It's not about quote unquote culture, it's not about quote
Speaker 10: unquote collaboration. It's really about we want to reduce the workforce,
Speaker 10: and this is one of the many tools that we
Speaker 10: will use.
Speaker 5: So I guess in the federal government again, Elon musk
Speaker 5: vivek Ramaswani, what do you think they could do?
Speaker 3: Should do?
Speaker 5: When you think about I don't know, waste inefficiency bureaucracy.
Speaker 5: Is there a preferred way to kind of go about
Speaker 5: this or you just take a you know, a clever
Speaker 5: and lop off ten percent?
Speaker 3: Well, should do?
Speaker 10: Can? I'll leave that up to the political analysts. But
Speaker 10: what I will say is they're arguing that the bureaucracy
Speaker 10: is wildly inefficient, and they're not wrong because if you
Speaker 10: look at accountability in bureaucracies as compared to the free markets,
Speaker 10: there is less accountability, right, There's less consequences for failure
Speaker 10: in a bureaucracy. There's less competition, and so accountability necessarily
Speaker 10: goes down. And they're saying we need to address that.
Speaker 10: It's not necessarily a problem the size of the federal government.
Speaker 10: The federal government is the largest employer in America with
Speaker 10: three million employees. But size isn't in and of itself
Speaker 10: the problem, right Look at Amazon. Amazon has one point
Speaker 10: five million employees, and they could deliver a band book
Speaker 10: to your doorstep in the next eight hours. Right. The
Speaker 10: problem is the lack of accountability, and that is in
Speaker 10: particular what they are wanting to address with. Yes, it
Speaker 10: sounds like a cleaver, Uh, how do they do that if?
Speaker 2: Okay, so let's say that they didn't just do the clever.
Speaker 2: How do you transform culture and help productivity in a
Speaker 2: government agency.
Speaker 10: Well, what we know from helping companies transform culture is
Speaker 10: that culture does not go down without a fight. So
Speaker 10: this is going to be incredibly disruptive. And here's the
Speaker 10: pros and cons of disruption. Innovation comes from disruption. You
Speaker 10: cannot have innovation without disruption. But disruption does not in
Speaker 10: and of itself create innovation, right, Disruption can simply be
Speaker 10: catastrophic to culture. And so what they are doing is
Speaker 10: they are creating an opportunity, but they are also creating
Speaker 10: a potential massive headache. And I do believe from the
Speaker 10: federal workers and also from the public, there will be
Speaker 10: resistance to change. There's always resistance to massive change like this,
Speaker 10: And what we've also seen is the best things come
Speaker 10: from the organizations that embrace change. So the extent to
Speaker 10: which the federal workers and the public are able to
Speaker 10: embrace this change will probably have a lot to do
Speaker 10: with how well this is going to end up.
Speaker 5: I feel like I have to ask us for a
Speaker 5: while there this was a big issue for me, but
Speaker 5: where is the US private sector economy in terms of
Speaker 5: work from home, hybrid that type of thing. Have we
Speaker 5: settled into a new normal or are the sands still
Speaker 5: shifting there?
Speaker 10: They're still shifting, so we see various plateaus in what
Speaker 10: normal is year over year. I believe I'm coming out
Speaker 10: soon with an article on the workplace trends of twenty
Speaker 10: twenty five. The year twenty twenty five is going to
Speaker 10: be the year of forcing people back into the office
Speaker 10: five days a week. Usually what happens is there's a
Speaker 10: lot of press about one big deal CEO forcing people
Speaker 10: back into the office, which has already happened, and now
Speaker 10: it's happening again with this announcement from Bavek and elon.
Speaker 10: And so next year that empowers other leaders who wish
Speaker 10: their employees were back in the office to get back
Speaker 10: into the office. And you're going to continue to see
Speaker 10: a push. We had plateaued it around three days a week,
Speaker 10: but it's going to go even more back into the
Speaker 10: office next year.
Speaker 2: Okay that this means then that my commute in on
Speaker 2: Fridays and Mondays now will be more trafficked. I don't
Speaker 2: love that. I don't love that for me, Like we're
Speaker 2: already here five days a week, when I've been here
Speaker 2: five days a week since June and twenty twenty, so
Speaker 2: it's like, yeah, whatever, but don't make traffic back. That's
Speaker 2: a bummer. Exactly all right, We really appreciate it. Thank
Speaker 2: you so much for all your insight on this. Jessica
Speaker 2: Kriegel as Chief Strategy Officer of Workforce and Labor for
Speaker 2: Culture Partners, joining us on that, speaking of I don't
Speaker 2: know nothing in culture.
Speaker 5: But it's interesting, Like I talked to my twenty eight
Speaker 5: year old daughter who has only worked really during the
Speaker 5: started working kind of in a pandemic era. It's not
Speaker 5: even I guess they can reprogram, but for a while there.
Speaker 5: It wasn't even in her DNA to do that, to
Speaker 5: come in five days a week, I mean, she feels crazy. Yeah.
Speaker 5: So I think they're getting reprogrammed back because they're now
Speaker 5: in four days a week at her employer, which will
Speaker 5: likely go to five. But for a while, it just
Speaker 5: wasn't in her DNA to think about that.
Speaker 2: I mean, I understand having a flex day here and there, like, hey,
Speaker 2: my kids said, I got to work from home. Okay, great,
Speaker 2: but like that's that feels like an exceptions, right.
Speaker 7: It does.
Speaker 5: And I think Jessica was saying, it's slowly been going
Speaker 5: back to work from home, but I mean work from
Speaker 5: the office. But we'll see how that plays out. I
Speaker 5: still see a lot of vacant commercial space here in
Speaker 5: a city, oh my god.
Speaker 2: Yeah, although across the street on Lex it looks like
Speaker 2: they're doing some construction on that massive retail space. Yes, anyway,
Speaker 2: that's just food for thought.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: All right, let's get back to the market here and
Speaker 2: sort of what's next. I'm getting all the research about
Speaker 2: twenty twenty five and what to expect. Christina Hooper, chief
Speaker 2: Global market strategist at Invesco, joins US now, I feel
Speaker 2: like every strategist is now sixty five hundred and sixty
Speaker 2: six hundred on the S ANDP for next year? Is
Speaker 2: this the right metric for us to be looking at
Speaker 2: right now? So, Alex, we.
Speaker 11: Actually don't give a set target, but I do think
Speaker 11: directionally it's appropriate to assume that we see stocks go
Speaker 11: up next year. I think we shouldn't just be looking
Speaker 11: at the S and P five hundred. We should be
Speaker 11: looking at markets outside the US, and I think directionally
Speaker 11: they're likely to move higher as well. And I actually
Speaker 11: think we could see UK equities, for example, outperform US
Speaker 11: equities next year. I think there are opportunities in emerging
Speaker 11: markets equities, so there is a lot more out there
Speaker 11: than just focusing on US large cap stocks.
Speaker 2: I feel sacriligious, Christina, I thought it was the whole
Speaker 2: US exceptionalism kind of thing. Well, I don't know if.
Speaker 11: It's necessarily US exceptionalism. We had a few things going
Speaker 11: in our favor over the last few years that made
Speaker 11: the US economy more resilient. Namely, I think first and
Speaker 11: foremost would be long term fixed rate mortgages. That meant
Speaker 11: the transmission mechanism for monetary policy wasn't as strong in
Speaker 11: the US. We just didn't have as negative an impact
Speaker 11: from aggressive tightening as some other Western developed economies, and
Speaker 11: that certainly was helpful. The other key factor I think
Speaker 11: was the amount of fiscal stimulus thrown at the US
Speaker 11: economy by the federal government. A lot of governments put
Speaker 11: stimulus into their economies, but not at the level that
Speaker 11: the US did.
Speaker 5: Christina, When you woke up two weeks ago Wednesday and
Speaker 5: we've got you know, we saw the new presidential election
Speaker 5: results and now we know that Congress is firmly in
Speaker 5: the hands of Republicans. Has that changed kind of how
Speaker 5: you guys at investco think about asset allocation, how much
Speaker 5: risk you want to take? Did the elections change anything
Speaker 5: for you guys?
Speaker 11: Not very much, because we think it's far more important.
Speaker 11: The more important factor is who is sitting at the
Speaker 11: helm of the Fed than who was sitting in the
Speaker 11: White House. I think the reality is that monetary policy
Speaker 11: matters more for markets. Now that doesn't mean that policy
Speaker 11: coming out of the White House has no impact. We
Speaker 11: think of it as something akin to swing factors. We
Speaker 11: have to be concerned about tariffs that certainly the first
Speaker 11: time around created more volatility and created some selloffs for
Speaker 11: the stock market. We also have to think about, for example,
Speaker 11: immigration policy and the potential for it to impact inflation.
Speaker 11: But those are really eclipsed by monetary policy and by
Speaker 11: all the factors that have gone into the US economy
Speaker 11: thus far that have enabled it to have essentially a
Speaker 11: soft landing and what I think prepares us for reacceleration
Speaker 11: next year.
Speaker 2: When we take a look at the central bank cutting cycle,
Speaker 2: let's leave Japan out of it. Do you need to
Speaker 2: think about the areas where you might see more cuts?
Speaker 2: So I'm just looking at the data from Europe in
Speaker 2: terms of the pmis, they were terrible. Now we're talking about, oh,
Speaker 2: we're going to see a fifty basis point cut. Is
Speaker 2: that a good indication of kind of where to go
Speaker 2: by how much the bank can cut?
Speaker 6: Well?
Speaker 11: I certainly think that is one helpful factor to consider.
Speaker 11: I think it certainly matters in terms of currencies, and
Speaker 11: I do think that the more easing that comes, certainly
Speaker 11: that can be a powerful catalyst for economies. We also
Speaker 11: have to recognize that part of the equation for investing
Speaker 11: is how much negative sentiment is priced in, and so
Speaker 11: when we do have a scenario where there's some negative
Speaker 11: data coming out, there is the potential for positive surprise,
Speaker 11: especially if we have significant easing. So I am excited
Speaker 11: about European equities. I also think the valuations are attractive.
Speaker 11: I think dividend yields are solid, So that's certainly. Those
Speaker 11: are all factors that I would consider that make for
Speaker 11: investors make a compelling case for investors to at least
Speaker 11: have some exposure to European equities fixed income space.
Speaker 5: Christina, do I sit with my two year Treasury at
Speaker 5: four point three six percent or do I take some
Speaker 5: credit risk out there?
Speaker 11: I think you need to take some credit risk. The
Speaker 11: US economy is in rather good shape and there's the
Speaker 11: potential for I think there's a very good likelihood that
Speaker 11: we see a reacceleration in the US economy next year.
Speaker 11: So in this environment, you want to take credit risk.
Speaker 11: You want to have exposure to high quality, high yield,
Speaker 11: investment grade bank loans. This is an environment where there
Speaker 11: are many attractive asset classes within the fixed income space.
Speaker 2: What happens to all the money and money market funds?
Speaker 2: Do you think eventually that winds up taking on more risk?
Speaker 2: How long does that take?
Speaker 6: So?
Speaker 11: I think it absolutely eventually goes into both equities and
Speaker 11: fixed income. And I think that as we see continued
Speaker 11: easing by the FED, that's certainly a helpful catalyst. As
Speaker 11: well as the psychological impact of FOMO. I think we're
Speaker 11: likely to see stocks move higher from here, and not
Speaker 11: just stocks in the US elsewhere, and so I think
Speaker 11: those are all reasons why and drivers for money start
Speaker 11: to come out of cash.
Speaker 2: I'm thinking about it, thinking about it, liad it. If
Speaker 2: I'm thinking about it, that means stuff. I definitely have
Speaker 2: some viewers that pin me all the time. You're like,
Speaker 2: what are you doing? Get into high yeld ETFs? Come
Speaker 2: on now, all right, Christina, thanks a lot, We really
Speaker 2: appreciate it. Christina Hooper joining us from Investco. She's the
Speaker 2: chief of Global market strategist over on that side.
Speaker 5: This is the.
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