Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Ferrill and Lisa are Brownwitz Jay Leye. We
Speaker 1: bring you insight from the best and economics, finance, investment
Speaker 1: and international relations. Fine Bloomberg Surveillance, an Apple podcast, Suncloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg terminal.
Speaker 1: Quite in the morning came from Stuart Kaiser. Came actually
Speaker 1: yesterday evening as I was sitting there on the Bloomberg.
Speaker 1: It dropped from City in the inbox and it read
Speaker 1: as follows. Timing is the key word for markets. He
Speaker 1: went on to say, for data, will inflation crest before
Speaker 1: growth deteriorates? And let the FMC deal with those risks
Speaker 1: to its mandates separately? For markets, how long an investible
Speaker 1: window is there between those two waves of economic risk?
Speaker 1: To which joins us? Right now? Just do awesome to
Speaker 1: catch up. Let's start there. I think it's really important.
Speaker 1: I've heard a couple of times after last week. Now
Speaker 1: the sequencing of what happens growth and inflation and what
Speaker 1: rolls over more quickly and what rolls over first? Where
Speaker 1: are we now? It's a great question. Good morning, you
Speaker 1: know I think the challenge here is I think when
Speaker 1: the Fed started hiking, they were hoping inflation would sort
Speaker 1: of already have crusted by now and they would sort of,
Speaker 1: you know, be able to deal with the growth weaknesses.
Speaker 1: It came at Leasta mentioned housing you started to slow down.
Speaker 1: That's kind of one of those early indicators that growth
Speaker 1: is going to slow it down in the future. You know.
Speaker 1: I think what the Fed is hoping and markets are
Speaker 1: hoping is we had a softer print last week. We'll
Speaker 1: get a softer print hopefully in December, and that will
Speaker 1: be evidence that that inflation started to come down at
Speaker 1: the time when unemployment still sub four percent, right, And
Speaker 1: that's kind of a really nice balance for the Fed,
Speaker 1: especially because based on lags of monetary policy, we haven't
Speaker 1: seen their rate hikes really hit the economy yet, right,
Speaker 1: So they really need this inflation problem to get under
Speaker 1: control before that starts to happen. You mentioned that investable window.
Speaker 1: Is that basically the window before growth collapses essentially? Yeah,
Speaker 1: I mean I think it is right. It's it's the
Speaker 1: window between Hey, inflation looks like it's peak, the FED
Speaker 1: can back off on rate hikes and oh, you know,
Speaker 1: the unemployment rate is rising in other other forms of
Speaker 1: economic growth are slowing. Exactly how well can you actually
Speaker 1: time this market though, if you're looking at something that's
Speaker 1: flip flopped by you know, ten percent in a week.
Speaker 1: I mean, I don't think you can. And I think
Speaker 1: that's why the investable windows are really really short. Um,
Speaker 1: that's why you know you're not taking victory laps, are
Speaker 1: kind of riding positions too long. I think clients are
Speaker 1: in and out of position as quickly as possible, you know,
Speaker 1: just for that reason. Um, it does feel like the
Speaker 1: markets moving data point to data point at this at
Speaker 1: this time, And I think that's why right now are
Speaker 1: people are already asking what are non fond payroll is
Speaker 1: going to look like in early December? What is that
Speaker 1: inflation pretty going to look like? In December? The markets
Speaker 1: are pricing almost at two point eight percent SMP move
Speaker 1: on the CPI in the middle of December, So it
Speaker 1: just gives you a sense of how much risk is
Speaker 1: priced for that day already, you know, sitting here and
Speaker 1: we're not even Thanksgiving, is it easier to look longer term,
Speaker 1: especially at the leadership and we're talking to Lori Calvacina
Speaker 1: about the leadership and the rally that we've seen in
Speaker 1: big tech recently over the past couple of sessions, and
Speaker 1: she sees that it could be sustainable to you agree
Speaker 1: that there is some sort of return the rise of
Speaker 1: the big tech behemoth as leaders. You know, I don't
Speaker 1: think we're I don't think I'm behind that fully. Yet
Speaker 1: there could be, it could not be. I think it's
Speaker 1: just it's impossible to tell me. Look, tech should work
Speaker 1: if the pressure from rates eases a bit. I think
Speaker 1: the challenge with tech for me at this point, it's
Speaker 1: the beginning of the year. This was a valuation discussion, right,
Speaker 1: We're gonna push yields higher, that's gonna push PE's down.
Speaker 1: For the NASTAC third quarter earnings were not about valuation, right.
Speaker 1: Those are about actual fundamentals and what's going on in growth,
Speaker 1: what's going on with Amazon, Facebook, everybody laying off employees.
Speaker 1: Seeing The question here for tech is if I take
Speaker 1: that pressure off from rates, do I get evaluation rerating
Speaker 1: or do people take a step back and say, I
Speaker 1: need to see how this this cost cutting initiative plays out,
Speaker 1: Which is why it's I think tech is a really
Speaker 1: tricky trade right here, just for that reason. I keep
Speaker 1: going back to this Brian Chesky tweet. John, I mean,
Speaker 1: you brought this up, and I keep thinking about it. Yeah,
Speaker 1: it feels like we were in a nightclub and the
Speaker 1: light's just turned on, And I keep thinking about this
Speaker 1: in terms to tell me what happens when Yeah, because
Speaker 1: you have no idea clearly so obviously very true. I'm curious, though,
Speaker 1: what else is there that's going to get exposed? John? Well?
Speaker 1: How how big is the iceberg? Is basically what I'm
Speaker 1: trying to work out and everybody's trying to work out.
Speaker 1: And I saw all those comments over Twitter over the weekend.
Speaker 1: How big is the iceberg? Let's talk about crypto for instance,
Speaker 1: And I think this is the big question right now,
Speaker 1: to what degree if we had widespread institutional adoption with
Speaker 1: that in mind, how much scope is there for contagion
Speaker 1: from that asset class across to traditional asset classes. And
Speaker 1: the number one question I'm filled in right now is
Speaker 1: for people that never touched crypto, never touch bitcoin, and
Speaker 1: they want to understand what does it mean for me?
Speaker 1: What does it mean for me? And what are the
Speaker 1: risks around these stories right now? What are they? What
Speaker 1: are your telling clients, well, I think I think that
Speaker 1: question rule relates to what is the FED going to break? Essentially,
Speaker 1: you had ten years of easy monetary policy. You've now
Speaker 1: hiked massively over a short period of time, and I
Speaker 1: think a lot of clients are think, well, if they're
Speaker 1: able to hike this motor over a short time, not
Speaker 1: create a hard lending in the economy and not break
Speaker 1: any asset classes, that's gonna be you ouplishment of a lifetime. So,
Speaker 1: you know, Crypto was one of that people have pointed
Speaker 1: to and that was a beneficiary of easy money. Um,
Speaker 1: you know, is that is that the evidence? Is it
Speaker 1: something like again, is it? Is it easy credit? Is
Speaker 1: it housing? And this is why it's it's just very
Speaker 1: hard to sort of step in and say, over a
Speaker 1: medium term horizon, I'm comfortable owning risk here because we
Speaker 1: haven't had sort of that moment, right, that moment where
Speaker 1: an asset class that you didn't expect to kind of
Speaker 1: come under pressure has So it's it's a great question
Speaker 1: how big is it? I mean, you've you've seen the
Speaker 1: size of the balanty. You know, you've seen you know,
Speaker 1: negative rates in Europe, um, you've seen Cryptogo where it went.
Speaker 1: You've seen tech performance where it was. I mean, if
Speaker 1: there's an iceberg, it's fairly big, right, because all of
Speaker 1: these trends have been extremely powerful and for an extended
Speaker 1: period of time. So I think that's why a lot
Speaker 1: of clients haven't fully re risked and why they're not
Speaker 1: fully bought in yet, because there's a sense that there's
Speaker 1: something out there that that hasn't worked itself out yet.
Speaker 1: We hear from economists that we haven't built up that
Speaker 1: much access. We've been asking on this program, what are
Speaker 1: you talking about the excess of the last two years
Speaker 1: or the excess of the last decade? What is the
Speaker 1: excess we need to unwind the last two years or
Speaker 1: the last ten? I mean I has to I would
Speaker 1: say it's the last ten, right, I mean those are
Speaker 1: two two separate times. It ain't the last two years
Speaker 1: to me is much more a fiscal discussion of how
Speaker 1: much money the government spent the last ten years. Is
Speaker 1: much more monetary discussion in terms of in terms of
Speaker 1: you know, easier monetary policy. So I mean you have
Speaker 1: to unwind all of that. Probably not, but you do
Speaker 1: have to unwind I think a portion of it. And
Speaker 1: the question I think they're for equities. That was a
Speaker 1: discussion about valuation, particularly of growth stocks and tech, and
Speaker 1: a lot of that got sort of dealt with earlier
Speaker 1: in the year. I think what a lot of clients
Speaker 1: struggle with is who have been the biggest beneficiaries of
Speaker 1: easy monetary policy? Um, you know, what have they invested in?
Speaker 1: And have we seen what they've invested in? Kind of
Speaker 1: re rate itself, and there's some questions out there. Real
Speaker 1: estate in particular, I think is one people are really
Speaker 1: really focused on UM And ultimately, yeah, we're just gonna
Speaker 1: have to see how this plays out. But again, this
Speaker 1: is why I think it's hard to say, yeah, all
Speaker 1: clear once inflation peaks were good to go, because again,
Speaker 1: if monetary policy acts with somewhere between the six and
Speaker 1: eighteen month leg depending on who you talk to, what
Speaker 1: was the FED doing twelve months ago? Right? The Fed
Speaker 1: was at zero twelve months ago and they were buying bonds. So,
Speaker 1: you know, while we've hiked a bit, the real estate
Speaker 1: market has weakened a bit. You know, there's a case
Speaker 1: to be made that a very small partition of this
Speaker 1: portion of this tightening has hit the markets. Um, other
Speaker 1: than maybe f c I, which is just the market
Speaker 1: itself anyways, thought, um, if it wasn't holiday season, it
Speaker 1: won't you know, I was just gonna say, I think
Speaker 1: that he hasn't written his review and he's not going
Speaker 1: to and he's just basically coming on. He would explain
Speaker 1: why you're ahead of you is not necessary and he
Speaker 1: can go home and enjoy his holidays. Right the year
Speaker 1: I had outlook in March, I say all the time.
Speaker 1: Just at the end of the first quarter, the new
Speaker 1: poecasts Stuart Kister City, Stuart's great to see you again
Speaker 1: in person in the studio. Doan Swamp Chief Economists the
Speaker 1: KPMG and charts with following some of the Fed speak Dank.
Speaker 1: We start with Governor Walla yesterday evening in Australia. What
Speaker 1: did you make of these lightest comments and a pushback
Speaker 1: seemingly against the market action. I think we're going to
Speaker 1: see more of it. I think what you see with
Speaker 1: the Fed is, you know, they've agreed to do more
Speaker 1: measured rate hikes, but there as they close in on
Speaker 1: a terminal rate, but they still think that terminal rate,
Speaker 1: the peak in short term rates is higher than they
Speaker 1: did just a few months ago. And they're going to
Speaker 1: stick to that kind of language for some time. I
Speaker 1: think we're going to also see when we see the
Speaker 1: PC index because of that weird medical cost deceleration in
Speaker 1: the c p I, the PC index, which is a
Speaker 1: day before the FED meets in December, that when that's released,
Speaker 1: it's going to show a little hotter corese c p I,
Speaker 1: and the Fed's going to feel pretty justified about continuing
Speaker 1: to raise rates, although at a fifty basis point pace
Speaker 1: instead of a seventy five basis point pace. And the
Speaker 1: FED also doesn't like to see financial market conditions easy
Speaker 1: right now when they're still trying to tighten I know
Speaker 1: that sounds strange, but the bottom line is this is
Speaker 1: undoing much of the forward guidance that the FED has
Speaker 1: worked so hard to establish. It was like that summer
Speaker 1: rally on repeat, and I think Governor want to alluded
Speaker 1: to the problems that come about from that. We put
Speaker 1: some numbers just on the SEP that might come out
Speaker 1: in the middle of December. In fact, it will come
Speaker 1: out in the middle of December. We put some numbers
Speaker 1: on that. Diane. We saw the SEP and the dot
Speaker 1: three moved from three to four sixty I thought that
Speaker 1: was a major jump. It was a big jump. Are
Speaker 1: you expecting something similar, something similar in the December meeting
Speaker 1: four sixty two? What Well, we did have six participants
Speaker 1: at that meeting that had five percent as the high
Speaker 1: end of that um that range, and so I would
Speaker 1: expect to see those six participants to move above five
Speaker 1: And we could see that SEP the high end of
Speaker 1: that rate move slightly above five percent as well. Our
Speaker 1: expectation now is that the high end of the range
Speaker 1: is five and a quarter percent, which is five point
Speaker 1: one to five in the middle of the target range.
Speaker 1: But I think that's important to remember is that we
Speaker 1: already had six participants at the meeting in September are
Speaker 1: looking to go higher than what the SCP was telling us.
Speaker 1: Ian you mentioned the medical costs, and I don't want
Speaker 1: to get too far in the weeds, but there was
Speaker 1: a glitch or a strange confluence of numbers in the
Speaker 1: latest CPI report. If you back out that health care
Speaker 1: and component, what does cp I look like? But the
Speaker 1: cp I, certainly the underlying inflation members numbers look like
Speaker 1: they're beginning to peak, which is the good news. And
Speaker 1: I'm actually much more optimistic that we're going to see
Speaker 1: a disorderly or a welcome sort of deceleration in shelter
Speaker 1: costs as we get into three much more quickly than
Speaker 1: the Federal Reserve expects. That said, this is still a
Speaker 1: number that's too hot for the FED and not low
Speaker 1: enough for the Fed to feel like, you know, the
Speaker 1: war is over. And I think that's very important that
Speaker 1: the Fed still feels like they still have to go
Speaker 1: higher on rates to cool inflation, and it's still too
Speaker 1: hot of an inflation right for them to stop thinking
Speaker 1: about the pain that might accompany it, which is a
Speaker 1: rise in the unemployment rate. We're just talking with drum
Speaker 1: Schneider of PIMCO about how this feels like it could
Speaker 1: be a prolonged downturn, even if it's shallow, it's going
Speaker 1: to last a long time. Do you adhere to that
Speaker 1: kind of view that perhaps the worst case scenario of
Speaker 1: a severe downturn seems taken off the table a little
Speaker 1: bit more, but that it could be a very long
Speaker 1: time before we see meaningful growth at levels that we've
Speaker 1: seen over the past decade. I think it's going to
Speaker 1: be you know, every recession is different. Our own expectations
Speaker 1: are for a moderate recession of a couple of quarters
Speaker 1: without a robust rebound in the second half of three,
Speaker 1: and then really gaining momentum in the end of four.
Speaker 1: So as a prolonged period of weakness, that is what
Speaker 1: we are seeing. That said, we're only talking about high
Speaker 1: in the unemployment rate, nipping close to six percent. That
Speaker 1: is really low for an unemployment rate for recession. There's
Speaker 1: a lot of reasons for that and none the list
Speaker 1: of which is the aging of the population and the
Speaker 1: loss of participation by those over sixty five. Those are
Speaker 1: going to be holding the participation ratedown and the overall
Speaker 1: unemployment rate down. But this is a very different kind
Speaker 1: of recession, disproportionately hitting housing, some spill over into consumer spending,
Speaker 1: business investment will be hit, but unevenly. We've got the
Speaker 1: ramp up of electric via electric battery pants going on.
Speaker 1: We've got subsidies for chip plants going on. Those are
Speaker 1: ramping up much more quickly than the infrastructure spending bill,
Speaker 1: which was passed sooner, and that's not going to hit
Speaker 1: until we get into well into and just out of interest.
Speaker 1: If the Democrats hold onto the House, and they may
Speaker 1: well to do. I've got no idea what happens here.
Speaker 1: Everyone's still talking about gridlock, but ultimately things have shifted
Speaker 1: the other way more recently. But that changed your round
Speaker 1: look at all. I think the biggest change in the
Speaker 1: outlook is the risks of battle over the debt ceiling
Speaker 1: and what that would mean at a time when the
Speaker 1: Fed still raising rates. You know, we already had the
Speaker 1: debacle of two thousand eleven and the debt ceiling debate
Speaker 1: back then. To take that off the table, I think
Speaker 1: is good news now. Whether or not it means more
Speaker 1: stimulus or more stimulus if we hit a downturn. I
Speaker 1: still think that we're limited in fiscal space, so I'm
Speaker 1: not sure that it actually means more steamless out there.
Speaker 1: It's certainly I don't think they're going to have an
Speaker 1: easy path to any kind of changes in policy, which
Speaker 1: is a bit unfortunate because we need to make some
Speaker 1: major decisions on policy that I believe need to be
Speaker 1: bipartisan in scope, and I don't see that no matter
Speaker 1: what the outcome is either way, Dian, fantastic as a
Speaker 1: white to catch up with you. Dian Swunk, the of
Speaker 1: KPMG Prams rejoins us now they had a level of
Speaker 1: right strategy of TV securities prayer. It's the question that
Speaker 1: every strategist face right now. Has the twenty three outlook
Speaker 1: coming along? Oh gosh, you know every year it's tough,
Speaker 1: but I would say this year we're debating economic outload,
Speaker 1: inflation growth. I actually think that the growth outlook will
Speaker 1: become more interesting as we go into twenty three, and
Speaker 1: the FED reaction function. We normally don't have uncertainty on
Speaker 1: all these aspects, plus a fairly liquid market positioning. I mean,
Speaker 1: just look at the reaction on Thursday. I think it
Speaker 1: tells you it's It's never easy, but I think this
Speaker 1: year is particularly hard. You're supposed to take these outlooks
Speaker 1: with a pinch of salt or a fistful of salt
Speaker 1: and be nimble. So but but we're all going to
Speaker 1: be writing it over the next you know, a couple
Speaker 1: of weeks. Do you have any convictions whatsoever prere you know?
Speaker 1: I do think I think liquidity is important, um, you know,
Speaker 1: so I think making sure that you've got enough liquid
Speaker 1: assets so that you're not forced to sell what you
Speaker 1: don't want to sell. I think that is I would
Speaker 1: say a theme that we've had this year. I think
Speaker 1: that continues. The other big conviction I have is I
Speaker 1: know that the data right now is still strong. Um,
Speaker 1: you know, we think inflation is going to be it's
Speaker 1: it's less about the peak, it's how quickly it's going
Speaker 1: to decline. So I think we're going to move from
Speaker 1: whether we speak to that pace of decline. If the
Speaker 1: pace of decline is shallow, which is actually our our
Speaker 1: call here, the fat's going to stay restrictive for longer,
Speaker 1: and and so a recession is almost a done deal.
Speaker 1: So we've got these views around sticky inflation, recession. It's
Speaker 1: timing that, treating that that's going to be hard. I
Speaker 1: still like ten your treasuries. I mean, I don't know
Speaker 1: why we move thirty basis points on Thursday. So that
Speaker 1: can absolutely be undone a little bit. But I think
Speaker 1: owning some duration risks, which has been shunned by investors
Speaker 1: all through this year, I think it's actually it actually
Speaker 1: makes sense to start to position for duration coming back. Um,
Speaker 1: you know, the tenure should not be around four percent
Speaker 1: if you're heading into a recession. I'm not going to
Speaker 1: let that go. I have no idea why it rallied
Speaker 1: thirty basis points on Friday or on Thursday rather Friday
Speaker 1: the bottom market was closed. So what do you do
Speaker 1: with these types of moves? How do you understand them
Speaker 1: in terms of positioning a liquidity standpoint and what that
Speaker 1: means in terms of coming up with some sort of trade. So,
Speaker 1: as Governor Wallace said, you know, to become to to
Speaker 1: breathe that. I think that's actually good advice. The market
Speaker 1: has been extremely volatile. You know, when we track standard
Speaker 1: deviation of tenure changes, this is the highest we've seen
Speaker 1: including the seventies in terms of how much the tenure.
Speaker 1: When the risk free rate moves that much, you can
Speaker 1: just imagine positioning the importance of flows. I think understanding
Speaker 1: that the market is not as liquid, dealers have constrained capacity.
Speaker 1: I think that's important, which is why you're supposed to
Speaker 1: keep some cash. I think bills are actually attractive. You
Speaker 1: keep money in the front end, UH to make sure
Speaker 1: that if the moves are excessive, you don't have to sell.
Speaker 1: There's no fire sale. You can potentially put money to work.
Speaker 1: I think being nimble, I think all of this is
Speaker 1: you know, we shouldn't see this as a one off
Speaker 1: maybe positioning was was particularly exaggerated. I see it as
Speaker 1: a structural issue and something I think we have to
Speaker 1: get used to, particularly because we have a data dependent FED.
Speaker 1: It's very different from when forward guidance was there. You
Speaker 1: could actually expect volatility to stay low. I think volatility
Speaker 1: stays high all through next day. It's just the market
Speaker 1: focus will shift from in lation to growth. With that
Speaker 1: in mind, prayer how much influence that this FED have
Speaker 1: on the long end, on the ten year? You know,
Speaker 1: I actually think they do. I don't know why they
Speaker 1: don't talk as much about QT. They're letting about a
Speaker 1: hundred billion of treasuries and mortgages run off the balance
Speaker 1: sheet every single month. I think that's the reason why
Speaker 1: the long end of the treasury CLUVE has underperformed. There's
Speaker 1: a lot more supply, there's mortgages, which also long duration,
Speaker 1: and the market is looking for that marginal buyer. So
Speaker 1: I do think that they have control. Um. You know,
Speaker 1: at some point, I do think QUT is going to
Speaker 1: end once they start to ease. We actually have them
Speaker 1: starting to ease. I know, I just talked about sticky inflation,
Speaker 1: but if the unemployment rate is at five percent or
Speaker 1: higher and inflation is getting down to three percent. We
Speaker 1: actually think then the tradeoff will look will start to
Speaker 1: skew the FED towards rate cuts. And I think if
Speaker 1: the Fed starts to put trade, they're going to stop QUT.
Speaker 1: And so while people think that's really a front end trade. Now,
Speaker 1: if quantitative tightening stops, I think the tenure has a
Speaker 1: lot more room to go. So I do think that
Speaker 1: they have control over along end. They just don't talk
Speaker 1: about that control a whole lot. When you press send
Speaker 1: on the outlook, come and see us right, premisra of
Speaker 1: TV Securities, Thank you. Lori Canvassino had a US acurity
Speaker 1: strategy at NBC Capital Markets. Laurie, Mike Wilson, and Morgan
Speaker 1: Stanley talking about the volatile path back to thirty after
Speaker 1: maybe testing something like three K in the first quarter. Laurie,
Speaker 1: earnings risk. Can you walk us through where you see
Speaker 1: the earnings risk in the economy right now for corporate
Speaker 1: America and why you expect that to land? Sure, it's
Speaker 1: a great question, John, and let me let me say, Look,
Speaker 1: I don't think we're out of the woods on earning yet.
Speaker 1: That being said, I do think it's possible that markets
Speaker 1: put in the ultimate low in October because three to
Speaker 1: six months before you get the final earnings downgrades is
Speaker 1: typically when the stock market bottoms and big sort of
Speaker 1: challenge periods. But just kind of backing up from that,
Speaker 1: I think we're at too oh wait for next year
Speaker 1: on earnings. I think the consensus is still tracking around,
Speaker 1: say to thirty three. Um, you know, what we really
Speaker 1: have baked in is moderating inflation, which is really taking
Speaker 1: our of a new number. It doesn't really end up
Speaker 1: helping margins. We find that margins are really more of
Speaker 1: a function of wages, where we've still got some wage
Speaker 1: growth baked in on things like productivity pricing. I think
Speaker 1: as inflation moderates, that hurts pricing power as well. So
Speaker 1: we've really got a ratcheting down of earnings and kind
Speaker 1: of you know, flatish the slightly down levels with what
Speaker 1: we saw last year in the SMP five hundred. This
Speaker 1: is very similar in our minds to the backdrop where
Speaker 1: we just kind of don't really go anywhere on earnings
Speaker 1: for a few years. Um. But I think honnestly, John,
Speaker 1: I don't think the street really has a good understanding
Speaker 1: of how much moderating inflation is going to hurt earnings
Speaker 1: because of that link to revenues. How much are we
Speaker 1: going to see the leadership change, Laurie in a sustainable
Speaker 1: way over the next year. So I think this is
Speaker 1: a great question, Lisa, and I think that's probably, you know,
Speaker 1: one of the bigger challenges to figure out for next year. Frankly,
Speaker 1: typically when you are in a sluggish economic growth backdrop
Speaker 1: growth stocks outperformed, so that would point you to things
Speaker 1: like technology, communication services, consumer discretionary. And one of the
Speaker 1: things our economists have been talking about is that if
Speaker 1: you when you kind of get out of the short
Speaker 1: shallow recession, we're going to see pretty sluggish GDP for
Speaker 1: a while. I do think though, that there's a big
Speaker 1: leadership change of foot here, so I'd be very very
Speaker 1: selected in looking at some of those growthy parts of
Speaker 1: the market. We like tech, but we don't like the others.
Speaker 1: If you think though about kind of the value oriented sectors,
Speaker 1: we're starting to hear some people make a growth case
Speaker 1: for them, things like energy, things like industrials, and you're
Speaker 1: starting to see some pretty good out performance in sectors
Speaker 1: like that over the past month or so. Freely energy
Speaker 1: has been doing great all year, but now we're starting
Speaker 1: to see that broaden out to some of the other
Speaker 1: value oriented sectors. So I would say, stay pretty balanced,
Speaker 1: have a little bit of growth, have some value exposure.
Speaker 1: I think that's gonna work better in the near term anyway,
Speaker 1: Be balanced and try to be more selected within those
Speaker 1: buckets as opposed to just leaning into one big bucket
Speaker 1: for the longer term. Lore you, it brought up something
Speaker 1: about how you are leaning into big tech potentially, and
Speaker 1: this is one of the big questions over the past week.
Speaker 1: With the tremendous rally. Does it have legs? Can it
Speaker 1: reassert itself? Are you really in the camp that it
Speaker 1: can in terms of the rally? You know, look, I
Speaker 1: would say i'd probably share Wilson's view that we're going
Speaker 1: to be volatile for a bit longer on One of
Speaker 1: the things we've pointed out is that markets in two
Speaker 1: are really trading on the two thousand two paths um
Speaker 1: and if you look at you know sort of what
Speaker 1: happened back then. We had a January peak, a summer low,
Speaker 1: a big October low. We rallied back pretty fiercely into Thanksgiving,
Speaker 1: and then we turned around and gave most of it
Speaker 1: back going into a new low in March, and so.
Speaker 1: On the one hand, I do see the potential for
Speaker 1: the rally to continue a little bit in the longer term.
Speaker 1: I think, frankly on things like the election that's already
Speaker 1: baked in. Um. You know, I think there's a lot
Speaker 1: of people who think the FED moves have been exaggerated.
Speaker 1: We can save that for another segment. Um. But I
Speaker 1: do think that we're going to chop around, and I
Speaker 1: think you know, whether or not you think the rally
Speaker 1: can continue, Sure, I think I can continue a bit
Speaker 1: in the short term, but I do think there's a
Speaker 1: tremendous risk that we do give a lot of it
Speaker 1: back in the first quarter. We won't save it for
Speaker 1: another segment. You can't bring up the FED and not
Speaker 1: talk about already. Let's talk about it now. Jennis Monic
Speaker 1: of The New York Times yesterday was life blocking Governor
Speaker 1: Water speech down in Australia, and this is what Governor
Speaker 1: Water had to say. The markets seems to have gotten
Speaker 1: way out in front. We're going to need to see
Speaker 1: a continued run of this kind of behavior before we
Speaker 1: really start to think about taking off foot off the break, Laurie,
Speaker 1: is the FED still in charge of where this market
Speaker 1: goes and how far this rally can go to the upside? Well, look,
Speaker 1: I think I think it was really interesting. You know,
Speaker 1: we said in our weekly, John that you know, we
Speaker 1: liked what we saw in the CPI print, but the
Speaker 1: thing we didn't like is we knew the FED was
Speaker 1: going to come out and quite a quation with harsh rhetoric,
Speaker 1: and that's exactly what we ended up getting with waller Um.
Speaker 1: And look, I think that, you know, to some extent,
Speaker 1: maybe they are losing a little bit of control. Um.
Speaker 1: I think that they are trying their best to clamp
Speaker 1: down on the enthusiasm. But I'll tell you, John, I
Speaker 1: don't think the peak inflation, peak FED narrative ever really
Speaker 1: went away. I think that those people just got really
Speaker 1: really quiet over the last month or so because they
Speaker 1: were tired of having their heads ripped off. So I
Speaker 1: think when we yeah, where they're allowed now. Because when
Speaker 1: we saw that CPI print came out, there was a
Speaker 1: massive sigh of relief. There was a massive sort of
Speaker 1: uncoiling of enthusiasm. And I sympathize with those who say
Speaker 1: the market went too far but at the same time,
Speaker 1: having talked to a lot of usters that you know,
Speaker 1: have been doing work on used car prices, another all
Speaker 1: the all these other components of inflation coming down. You know,
Speaker 1: I understand the release that happened. I understand that relief
Speaker 1: valve that occurred. Lorie. Final question, what are you telling
Speaker 1: clients about what's happening in crypto and what it means
Speaker 1: for them, even if they're not in the asset class. Yeah,
Speaker 1: so it's a great question, John. You know, I don't
Speaker 1: cover it. Um We we sort of leave that to
Speaker 1: other people at the firm. But one of the things
Speaker 1: we have talked about is the extent to which the
Speaker 1: average retail investor, you know, is involved. And I know
Speaker 1: I saw a Good Morning consult pole recently that said
Speaker 1: about nineteen percent of those that they surveyed owned crypto, um,
Speaker 1: you know, which tells me that perhaps it's not as
Speaker 1: pervasive as some fear in terms of the impact to
Speaker 1: the average investor. We're going to have to see. We're
Speaker 1: getting a lot of information right now. But as I've
Speaker 1: talked to some of my friends sort of in the
Speaker 1: wealth management community. Remember I speak mostly with institutions, but
Speaker 1: as I've talked to some of my friends in the
Speaker 1: wealth management community over the past year or so. You know,
Speaker 1: I've heard things like, well, my clients aren't really involved
Speaker 1: in crypto. Their kids and grandkids have tried to get
Speaker 1: them involved, um, but they said no. So, you know,
Speaker 1: for the moment, I still view this as a contained implosion,
Speaker 1: but we do have to watch it. There's a tremendous
Speaker 1: correlation between the SNP and bitcoin, and we do view
Speaker 1: bitcoin as a risk barometer for stock stocks have been
Speaker 1: sort of defined the carnage that we've seen in that
Speaker 1: space recently, but we'll have to keep an eye and
Speaker 1: you know, frankly, just just see how bad this is.
Speaker 1: It's something we've got to watch. Laurie Bridians catch up
Speaker 1: as always that's told before year end Laurie campass into
Speaker 1: that of MBC Capital Markets. This is the Bloomberg Surveillance Podcast.
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