1 00:00:00,040 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,800 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,960 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,320 --> 00:00:25,640 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,240 Speaker 1: us live on YouTube. 6 00:00:27,560 --> 00:00:29,480 Speaker 2: And this is a joy. It's always good to see 7 00:00:29,520 --> 00:00:35,000 Speaker 2: Joseph Lavorna, Chief Economists SMBC and Eco Securities. But even 8 00:00:35,120 --> 00:00:40,360 Speaker 2: better with the incredibly smart note you have magical thinking. 9 00:00:41,040 --> 00:00:44,280 Speaker 2: You are brutal the idea we're coming back to two 10 00:00:44,280 --> 00:00:47,800 Speaker 2: percent inflation, It's just not going to happen. You go 11 00:00:47,880 --> 00:00:51,680 Speaker 2: out to twenty twenty eight and say FED central tendencies 12 00:00:52,040 --> 00:00:55,600 Speaker 2: are still elevated. Are we running a FED policy now 13 00:00:55,800 --> 00:00:57,160 Speaker 2: for elevated inflation? 14 00:00:58,360 --> 00:01:01,000 Speaker 3: Running FED policy on three percent? Under the economy, which 15 00:01:01,040 --> 00:01:03,520 Speaker 3: is housing, it's the only area that's really weak, Tom. 16 00:01:03,640 --> 00:01:05,040 Speaker 4: Everything else is very strong. 17 00:01:05,040 --> 00:01:07,119 Speaker 3: If you look at the consumer, you're going to get 18 00:01:07,200 --> 00:01:09,280 Speaker 3: huge building and structure as commercial structures. 19 00:01:09,280 --> 00:01:10,119 Speaker 4: Because of the One Big. 20 00:01:09,959 --> 00:01:13,720 Speaker 3: Beautiful Bill, which has temporary expensing for factories, you could 21 00:01:13,760 --> 00:01:16,479 Speaker 3: expense a factory the year you break ground. 22 00:01:16,480 --> 00:01:18,080 Speaker 4: That's going to expire at the end of twenty second. 23 00:01:18,720 --> 00:01:22,360 Speaker 3: Johnson to some extent, and of course you've got massive capex. 24 00:01:22,360 --> 00:01:26,720 Speaker 3: So what's weak And the note in the history, show 25 00:01:26,720 --> 00:01:29,680 Speaker 3: if you're above tread if you're above two percent on inflation, 26 00:01:29,840 --> 00:01:32,880 Speaker 3: show me when it falls. Give me an example when 27 00:01:32,920 --> 00:01:35,560 Speaker 3: it falls. It's not going to fall unless something happens. 28 00:01:35,920 --> 00:01:37,960 Speaker 3: And in the past it's always been the Fed needs 29 00:01:37,959 --> 00:01:40,680 Speaker 3: to increase interest rates and raise the price of credit 30 00:01:40,720 --> 00:01:41,160 Speaker 3: and money. 31 00:01:41,800 --> 00:01:44,039 Speaker 4: So the magical thinking part comes. 32 00:01:44,080 --> 00:01:45,960 Speaker 3: You could say, as much as you want, it's going 33 00:01:46,000 --> 00:01:48,240 Speaker 3: to go back to two, but the words alone aren't 34 00:01:48,280 --> 00:01:48,880 Speaker 3: going to do it. 35 00:01:49,000 --> 00:01:52,440 Speaker 2: I'm going to say this with great respect. Joe Olivarne 36 00:01:52,560 --> 00:01:54,600 Speaker 2: is the only one I've seen that's worked within the 37 00:01:54,600 --> 00:02:00,840 Speaker 2: Trump administration that basically speaks English convey the president's economic 38 00:02:01,000 --> 00:02:04,240 Speaker 2: theme in Lavornia. Clarity right now. 39 00:02:04,320 --> 00:02:08,160 Speaker 3: Well, the economic theme is to have business friendly taxes, 40 00:02:08,280 --> 00:02:11,760 Speaker 3: low regulation, and put up a tariff barrier so as 41 00:02:11,800 --> 00:02:13,399 Speaker 3: to encourage foreign Catholic. 42 00:02:13,240 --> 00:02:15,240 Speaker 2: Tariffy too high. 43 00:02:15,320 --> 00:02:18,640 Speaker 4: It's not clear we're going to get back to thirteen percent. No. 44 00:02:18,639 --> 00:02:21,600 Speaker 3: Now, if tariff's been implemented the way maybe they should 45 00:02:21,600 --> 00:02:24,240 Speaker 3: have been, we could debate that. I don't have a 46 00:02:24,280 --> 00:02:26,400 Speaker 3: problem with tariffs, So tariffs are I argue are a 47 00:02:26,440 --> 00:02:28,600 Speaker 3: bipart is an issue, and in fact, regardless of what 48 00:02:28,639 --> 00:02:31,480 Speaker 3: happens in the future, if the Democrats come in, I 49 00:02:31,520 --> 00:02:33,680 Speaker 3: doubt they'll remove many of those terror to them. 50 00:02:34,200 --> 00:02:36,200 Speaker 4: We need the money, Tom, we need the money. 51 00:02:36,240 --> 00:02:40,560 Speaker 3: And look, Bill Clinton in the early nineties ran on 52 00:02:40,639 --> 00:02:43,639 Speaker 3: the possibility of essentially an industrial policy, and those were 53 00:02:43,680 --> 00:02:47,000 Speaker 3: bad words thirty odd years ago. But the pendulum politically 54 00:02:47,040 --> 00:02:51,000 Speaker 3: has switched, and China now is a peer, competitors and 55 00:02:51,080 --> 00:02:52,560 Speaker 3: a strategic adversary. 56 00:02:52,160 --> 00:02:54,880 Speaker 2: Joel in eighteen ninety working for William mckin. 57 00:02:55,480 --> 00:02:59,160 Speaker 5: I can see it, Damian says with Jill Lavorn, Joe 58 00:02:59,160 --> 00:03:01,280 Speaker 5: in your last Noe mad Thinking. You know, you mentioned 59 00:03:01,320 --> 00:03:03,519 Speaker 5: that the longer the FED weights, the higher the probability 60 00:03:03,600 --> 00:03:06,240 Speaker 5: rates will have to rise further in the future, right, 61 00:03:06,280 --> 00:03:08,960 Speaker 5: And I said that earlier on this show, earlier today, 62 00:03:08,960 --> 00:03:11,000 Speaker 5: and I agree with you. But then I've got Ryan 63 00:03:11,000 --> 00:03:13,519 Speaker 5: from Atlanta calling on me saying, how does the FED 64 00:03:13,600 --> 00:03:17,080 Speaker 5: raising rates, you know, you know, affect a supply shock? 65 00:03:17,240 --> 00:03:18,960 Speaker 5: How does that matter? And you know, how would you 66 00:03:19,000 --> 00:03:19,880 Speaker 5: respond to that? 67 00:03:20,440 --> 00:03:22,120 Speaker 3: First of all, if you go back to last year, 68 00:03:22,120 --> 00:03:24,960 Speaker 3: the FED was cutting rates seventy five bases points in 69 00:03:25,000 --> 00:03:28,520 Speaker 3: the fourth quarter, because it was almost September October December, 70 00:03:28,680 --> 00:03:31,040 Speaker 3: they were worried about downside risks to the labor market, 71 00:03:31,240 --> 00:03:34,079 Speaker 3: and the inflation outlook was still relatively benign. You could 72 00:03:34,120 --> 00:03:36,560 Speaker 3: tell the story. It was going down fast forward seven 73 00:03:36,560 --> 00:03:39,360 Speaker 3: months later. We don't need those three emergency cuts, the 74 00:03:39,440 --> 00:03:42,280 Speaker 3: last cut by Jake Powley. They were three descents against 75 00:03:42,320 --> 00:03:45,520 Speaker 3: those cuts. So if you're setting monetary policy purely to 76 00:03:45,560 --> 00:03:48,400 Speaker 3: the demand side, and then you have a supply issue 77 00:03:48,400 --> 00:03:51,600 Speaker 3: which could only further ingrain some of those concerns about inflation, 78 00:03:51,960 --> 00:03:56,040 Speaker 3: you're supposed to a minimum take back those those cuts. 79 00:03:56,120 --> 00:03:57,680 Speaker 5: I don't disagree with you. And now you look at 80 00:03:57,680 --> 00:03:59,680 Speaker 5: the bond market maybe waking up to the reality of that. 81 00:03:59,720 --> 00:04:04,280 Speaker 5: I mean not just the US treasuries market, but buns jgb's. 82 00:04:04,280 --> 00:04:06,280 Speaker 5: I mean, what are your thoughts on the rise and 83 00:04:06,360 --> 00:04:08,720 Speaker 5: nominally yields we're seeing across the whole of you know, 84 00:04:08,840 --> 00:04:12,400 Speaker 5: G three, if not the world, and what's driving that? 85 00:04:12,520 --> 00:04:14,320 Speaker 5: Is it fiscal is it something else? 86 00:04:14,480 --> 00:04:16,520 Speaker 3: It's partly the fact that for ten years we had 87 00:04:16,880 --> 00:04:19,520 Speaker 3: zero rates forward guidance that said rates for at zero 88 00:04:19,880 --> 00:04:22,800 Speaker 3: and a large swaths of the world negative interest rates. 89 00:04:22,800 --> 00:04:23,960 Speaker 4: So we're moving away from that. 90 00:04:24,480 --> 00:04:26,880 Speaker 3: In the US, the rise in reel yields reflects a 91 00:04:26,880 --> 00:04:29,359 Speaker 3: tremendous demand for capital as it relates to the AI 92 00:04:29,440 --> 00:04:32,359 Speaker 3: build out and the fact that the US economy relatively 93 00:04:32,440 --> 00:04:34,919 Speaker 3: is performing well. Rates are supposed to be higher. The 94 00:04:34,960 --> 00:04:38,040 Speaker 3: equilibrium real rate is higher, so high rates by themselves 95 00:04:38,040 --> 00:04:38,679 Speaker 3: aren't bad. 96 00:04:39,720 --> 00:04:40,560 Speaker 4: That's where we are. 97 00:04:40,760 --> 00:04:46,440 Speaker 2: To explain the politics of the K shaped economy. People 98 00:04:46,520 --> 00:04:49,479 Speaker 2: listening to this will say, Joelivorne is talking about the 99 00:04:49,600 --> 00:04:53,560 Speaker 2: halves who are prospering, so many are not discuss that 100 00:04:53,640 --> 00:04:55,080 Speaker 2: conundrum when. 101 00:04:54,960 --> 00:04:57,600 Speaker 3: You talk about the Trump policy. It is supposed to 102 00:04:57,720 --> 00:05:02,120 Speaker 3: work so that the bottom quintile are the ones that 103 00:05:02,200 --> 00:05:04,359 Speaker 3: thrive and do better in relative terms, and that's what 104 00:05:04,400 --> 00:05:07,560 Speaker 3: we saw in the first term. The situation that's in 105 00:05:07,600 --> 00:05:09,320 Speaker 3: the Middle East time, I think has really kind of. 106 00:05:09,279 --> 00:05:11,279 Speaker 4: Up ended the apple Oh, there's no question about it. 107 00:05:11,320 --> 00:05:14,040 Speaker 3: And therefore I was not I'm not a K shaped 108 00:05:14,040 --> 00:05:16,560 Speaker 3: economy person in sense because I do think that the 109 00:05:16,600 --> 00:05:20,240 Speaker 3: situation is fluid. There's income mobility, and the regulatory and 110 00:05:20,279 --> 00:05:23,720 Speaker 3: tax policy of the administration is generally pro growth for 111 00:05:23,760 --> 00:05:26,400 Speaker 3: these type of people. It's very hard to get good 112 00:05:26,480 --> 00:05:29,640 Speaker 3: data on those lower income levels. But right now it's 113 00:05:29,680 --> 00:05:32,800 Speaker 3: open debate. So the k shaped is just people struggling 114 00:05:32,839 --> 00:05:33,839 Speaker 3: because they're real income is. 115 00:05:34,080 --> 00:05:36,440 Speaker 2: I got to get to Martha Gimble, the budget lab 116 00:05:36,440 --> 00:05:40,560 Speaker 2: at Yale, who pays tariffs. The fact is Americans pay 117 00:05:41,000 --> 00:05:43,760 Speaker 2: a nine or twelve or thirteen percent tariff. Right. 118 00:05:44,800 --> 00:05:48,039 Speaker 3: It depends sometimes yes, sometimes no, It depends on the tariffs. 119 00:05:48,080 --> 00:05:50,680 Speaker 4: The idea, though, is to encourage capital to. 120 00:05:50,640 --> 00:05:54,360 Speaker 3: Come in to create high paying jobs in them. 121 00:05:55,279 --> 00:05:57,599 Speaker 4: Not yet, we don't know yet. The answers don't know. 122 00:05:58,120 --> 00:05:59,000 Speaker 4: We don't know. I mean. 123 00:06:00,520 --> 00:06:02,880 Speaker 3: Tom i Asso see Secretary Best made a good point, 124 00:06:02,920 --> 00:06:04,880 Speaker 3: like the tariffs are supposed to work like a melting 125 00:06:04,920 --> 00:06:07,320 Speaker 3: ice cube. Like you get the capital command, you build 126 00:06:07,360 --> 00:06:10,080 Speaker 3: the tax spase, you create these better jobs, and then 127 00:06:10,120 --> 00:06:12,520 Speaker 3: over time you'll lose the revenue from the tariffs. The 128 00:06:12,560 --> 00:06:15,479 Speaker 3: terraffs won't be the driver. It's the growth in the 129 00:06:15,520 --> 00:06:16,880 Speaker 3: domestic economy that drives it. 130 00:06:17,279 --> 00:06:19,160 Speaker 2: We gotta go, Joeliver, and you thank you so much 131 00:06:19,200 --> 00:06:21,320 Speaker 2: for coming in. I love when somebody comes in and 132 00:06:21,440 --> 00:06:22,160 Speaker 2: says I don't know. 133 00:06:22,240 --> 00:06:23,960 Speaker 5: I love when Joe does for me. 134 00:06:25,279 --> 00:06:27,880 Speaker 2: Everybody gets certitude, you know, you know, we believe it's 135 00:06:27,880 --> 00:06:30,520 Speaker 2: like gave fam DEVI. It's the same way. I don't know, Joeliver, 136 00:06:30,680 --> 00:06:36,159 Speaker 2: you think is psychis BC really appreciate it? Stay with us. 137 00:06:36,400 --> 00:06:39,600 Speaker 2: More from Bloomberg Surveillance coming up after this. 138 00:06:46,839 --> 00:06:50,440 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch US Live 139 00:06:50,520 --> 00:06:53,680 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 140 00:06:53,760 --> 00:06:57,400 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 141 00:06:57,560 --> 00:06:59,160 Speaker 1: watch US Live on YouTube. 142 00:07:00,200 --> 00:07:04,400 Speaker 2: Emily Rolling with us CO chief investment strategist, Manual Life 143 00:07:04,400 --> 00:07:07,680 Speaker 2: and all of the John Hancock combine as well. She 144 00:07:07,760 --> 00:07:11,600 Speaker 2: has been spectacular about saying be in the market. Emily. 145 00:07:11,680 --> 00:07:14,960 Speaker 2: I just did the fancy math using the Bloomberg Professional Service. 146 00:07:15,600 --> 00:07:19,080 Speaker 2: We have a drawdown on the SPX. We have corrected 147 00:07:19,800 --> 00:07:23,520 Speaker 2: just under three percent, two point eight percent. We've pulled back. 148 00:07:23,560 --> 00:07:26,920 Speaker 2: It's a hillacious pullback. If I'm just able to get 149 00:07:26,960 --> 00:07:29,640 Speaker 2: back to my long term moving average when I use 150 00:07:30,600 --> 00:07:33,160 Speaker 2: I need to go down another four point two percent. 151 00:07:33,800 --> 00:07:37,080 Speaker 2: Even with that back to my long term support, it's 152 00:07:37,200 --> 00:07:40,480 Speaker 2: not a correction. How much of a bullmarket is this. 153 00:07:42,080 --> 00:07:44,880 Speaker 6: It's a massive bull market that is fueled by some 154 00:07:44,960 --> 00:07:48,720 Speaker 6: of the most extraordinary earnings that we've seen in modern history. 155 00:07:49,000 --> 00:07:52,480 Speaker 6: Just looking at this quarter. This morning, reported earnings growth 156 00:07:52,520 --> 00:07:54,600 Speaker 6: for the S and P five hundred is coming in. 157 00:07:54,640 --> 00:07:56,200 Speaker 5: It's seventy percent. 158 00:07:56,720 --> 00:08:00,000 Speaker 6: You don't see that outside of coming out of a recession. 159 00:08:00,320 --> 00:08:04,120 Speaker 6: It's just been remarkable. And also, Tom, this has been 160 00:08:04,320 --> 00:08:09,200 Speaker 6: a dip buyers dream market. So what happens anytime you 161 00:08:09,240 --> 00:08:12,440 Speaker 6: see these little mini corrections that the retail investor comes 162 00:08:12,560 --> 00:08:15,920 Speaker 6: right back in and we continue to see this bullishness, 163 00:08:15,960 --> 00:08:19,320 Speaker 6: these technical momentum traders buying the dip. 164 00:08:19,520 --> 00:08:23,119 Speaker 2: So we have a select group of guests, you know, institutionally, 165 00:08:23,400 --> 00:08:26,240 Speaker 2: you know, she's like an old Jed Hancock, new John handcock, 166 00:08:26,240 --> 00:08:29,000 Speaker 2: cup and bus and I can't keep it straight. But Emily, 167 00:08:29,080 --> 00:08:31,960 Speaker 2: the bottom line is people are framing out a more 168 00:08:32,040 --> 00:08:37,160 Speaker 2: long term buoyant GDP because of all this technology. 169 00:08:36,559 --> 00:08:41,079 Speaker 6: Right yep, there's been massive spend on technology. We're also 170 00:08:41,160 --> 00:08:44,600 Speaker 6: seeing a bit of a fiscal sugar rush hitting the 171 00:08:44,640 --> 00:08:47,480 Speaker 6: economy right now. You know, outside of the World Cup, 172 00:08:47,520 --> 00:08:50,880 Speaker 6: which certainly helped, we've got terra free funds. Now we 173 00:08:51,000 --> 00:08:54,520 Speaker 6: have the one big beautiful bill that's providing tax incentives 174 00:08:54,520 --> 00:08:57,880 Speaker 6: for companies to invest in capex, which is primarily happening 175 00:08:58,240 --> 00:09:01,240 Speaker 6: on the AI and data center front. You've got the 176 00:09:01,280 --> 00:09:04,360 Speaker 6: consumer holding in while you've got this onslought of on 177 00:09:04,600 --> 00:09:09,840 Speaker 6: shoring activity helping fuel this manufacturing renaissance in the United States. 178 00:09:09,920 --> 00:09:12,920 Speaker 6: So the economy is holding in much better than was expected. 179 00:09:13,280 --> 00:09:17,040 Speaker 6: The economic surprise index is elevated right now. The biggest 180 00:09:17,160 --> 00:09:21,440 Speaker 6: challenges is there a potential hangover from this fiscal sugar 181 00:09:21,520 --> 00:09:23,600 Speaker 6: rush as we head into the back half of the year, 182 00:09:23,640 --> 00:09:26,960 Speaker 6: which would put the FED potentially off sides as being 183 00:09:27,000 --> 00:09:28,920 Speaker 6: a bit more hawkish here than expected. 184 00:09:29,080 --> 00:09:30,760 Speaker 5: Well, there we go, Emily. Back in the beginning of 185 00:09:30,760 --> 00:09:32,840 Speaker 5: this year, one of the sort of inflation hedges that 186 00:09:32,880 --> 00:09:35,560 Speaker 5: you were touting was buying utility stocks, right, and we're 187 00:09:35,600 --> 00:09:38,240 Speaker 5: in this environment where today all we're talking about is 188 00:09:38,320 --> 00:09:41,160 Speaker 5: rising global bond yields and rising inflation expectations. And then 189 00:09:41,200 --> 00:09:45,319 Speaker 5: I look at the SMP Utilities Index thirty one stops. 190 00:09:46,120 --> 00:09:47,720 Speaker 5: All but two of them are up on the year, 191 00:09:47,800 --> 00:09:50,040 Speaker 5: and most of them in double digits, so you know, 192 00:09:50,360 --> 00:09:52,040 Speaker 5: and it's a sector that's up eight point two percent 193 00:09:52,120 --> 00:09:53,760 Speaker 5: year today. Talk to us a little bit about do 194 00:09:53,960 --> 00:09:56,240 Speaker 5: utilities in your mind, after what looks to be some 195 00:09:56,320 --> 00:09:59,400 Speaker 5: fantastic performance here today, did they still hold some value 196 00:09:59,400 --> 00:09:59,840 Speaker 5: for you here. 197 00:10:00,960 --> 00:10:04,719 Speaker 6: Yeah, they do, especially now they've done well over the 198 00:10:04,760 --> 00:10:07,000 Speaker 6: course of the year. But we are facing this really 199 00:10:07,080 --> 00:10:11,559 Speaker 6: remarkable environment where there's these two sort of mega forces 200 00:10:11,640 --> 00:10:13,719 Speaker 6: that are set to collide in the back half of 201 00:10:13,800 --> 00:10:16,520 Speaker 6: the year. On one hand, you have the bond market 202 00:10:16,600 --> 00:10:19,840 Speaker 6: pricing in two FED rate hikes, one in September and 203 00:10:19,880 --> 00:10:22,960 Speaker 6: one in December, so the idea there is that liquidity 204 00:10:23,040 --> 00:10:25,480 Speaker 6: is going to get pulled out of the system. And 205 00:10:25,520 --> 00:10:29,040 Speaker 6: on the other hand, you have these massive liquidity needs 206 00:10:29,080 --> 00:10:32,559 Speaker 6: from an equity market that is frankly overvalued, has been 207 00:10:32,600 --> 00:10:36,080 Speaker 6: for a while now. So this huge AI boom, this 208 00:10:36,320 --> 00:10:40,280 Speaker 6: massive need for companies to raise liquidity, is coming at 209 00:10:40,280 --> 00:10:43,360 Speaker 6: the exact same time where central banks are actually staring 210 00:10:43,800 --> 00:10:47,600 Speaker 6: hiking down looking into the rest of the year. So 211 00:10:47,679 --> 00:10:50,120 Speaker 6: I think that could be a potential challenge, which makes 212 00:10:50,160 --> 00:10:54,440 Speaker 6: more defensive assets really in our view pretty attractive. Utilities 213 00:10:54,440 --> 00:10:57,720 Speaker 6: are an inflation hedge. They've got income and they're more defensive. 214 00:10:57,760 --> 00:10:59,160 Speaker 6: So we're still overweighting. 215 00:10:58,840 --> 00:11:01,520 Speaker 2: Emily Rowland with Daniel if John Ancock through what she 216 00:11:01,520 --> 00:11:03,600 Speaker 2: could be with us today. We welcome all of you 217 00:11:03,640 --> 00:11:06,920 Speaker 2: across America the way you choose to listen to us, 218 00:11:06,960 --> 00:11:11,560 Speaker 2: good Morning ninety nine ONEFM, Nathan Hager Radio in Washington 219 00:11:11,720 --> 00:11:15,000 Speaker 2: ninety to nine FM, The Vista from the New and 220 00:11:15,120 --> 00:11:20,040 Speaker 2: Old John Hancock extraordinary swarning. Red Sox day off yesterday, 221 00:11:20,120 --> 00:11:25,040 Speaker 2: Damien day off yesterday, needed a rest, staggering laws we 222 00:11:25,160 --> 00:11:28,679 Speaker 2: got to begin another fifteen game at wind streak, Damien 223 00:11:28,960 --> 00:11:30,840 Speaker 2: sasa or with Emily Rowland. 224 00:11:30,840 --> 00:11:33,040 Speaker 5: Well, Emily, I compare the Red Sox to mid caps, 225 00:11:33,080 --> 00:11:34,880 Speaker 5: and in your last note we were talking about the 226 00:11:34,920 --> 00:11:37,320 Speaker 5: resilience of mid cap stocks in the face of the 227 00:11:37,320 --> 00:11:39,760 Speaker 5: recent self talk to our audience a little bit about 228 00:11:39,920 --> 00:11:42,760 Speaker 5: searching for resilience amid the morass of this week. 229 00:11:43,520 --> 00:11:45,080 Speaker 6: That was a good one. I've been trying to figure 230 00:11:45,080 --> 00:11:47,520 Speaker 6: out how to fit that fifteen game winning streak into 231 00:11:47,520 --> 00:11:50,040 Speaker 6: the conversation this morning. So I know Tom is a 232 00:11:50,040 --> 00:11:52,280 Speaker 6: big Red Sox fan, So thank you for doing that 233 00:11:52,320 --> 00:11:56,640 Speaker 6: for me, Damien. So mid cap socks and industrials. First 234 00:11:56,679 --> 00:11:59,640 Speaker 6: of all, midcaps do have a large relative overweight to 235 00:11:59,679 --> 00:12:02,880 Speaker 6: the austrial sector, which we've been bullish on again given 236 00:12:02,880 --> 00:12:05,520 Speaker 6: them one big beautiful bill, given the buildout of data 237 00:12:05,520 --> 00:12:08,920 Speaker 6: centers in the United States, on shoring, et cetera. And 238 00:12:08,960 --> 00:12:12,560 Speaker 6: when we look at midcaps in inflationary environments, they actually 239 00:12:12,600 --> 00:12:15,079 Speaker 6: tend to like it. When you think about that industrial 240 00:12:15,120 --> 00:12:19,000 Speaker 6: as overweight. These are companies that have fixed operating costs. 241 00:12:19,000 --> 00:12:22,120 Speaker 6: They have large investments in property, plant and equipment, and 242 00:12:22,160 --> 00:12:26,160 Speaker 6: when inflation rises, they can actually pass those prices onto 243 00:12:26,200 --> 00:12:28,920 Speaker 6: the end consumer, which is why industrials tend to do 244 00:12:29,040 --> 00:12:32,760 Speaker 6: well in inflation around two to four percent. So we 245 00:12:32,840 --> 00:12:35,280 Speaker 6: think that's a great way to think about inflation. They 246 00:12:35,320 --> 00:12:38,720 Speaker 6: barely budge yesterday, which to us is a key signal. 247 00:12:38,880 --> 00:12:41,959 Speaker 2: Emily twenty seconds. Is real estate up in Boston so 248 00:12:42,160 --> 00:12:44,320 Speaker 2: stupid priced? Are? 249 00:12:44,880 --> 00:12:45,720 Speaker 4: We're still there? 250 00:12:46,160 --> 00:12:47,480 Speaker 5: But inventory is a problem. 251 00:12:47,480 --> 00:12:50,439 Speaker 6: We're obviously surrounded by the water, so it's more difficult 252 00:12:50,440 --> 00:12:53,000 Speaker 6: to build out around here. But I would say there 253 00:12:53,040 --> 00:12:55,080 Speaker 6: is a little bit of a softening there, just not 254 00:12:55,160 --> 00:12:55,640 Speaker 6: a ton of end. 255 00:12:55,679 --> 00:13:00,319 Speaker 2: Okay, Emily Roland, real estate agent, thank you so annual 256 00:13:00,320 --> 00:13:02,800 Speaker 2: life for Johnny. She has been great, Folks, Be in 257 00:13:02,840 --> 00:13:09,040 Speaker 2: the market. Is a message from Emily Roland. Stay with us. 258 00:13:09,240 --> 00:13:12,480 Speaker 2: More from Bloomberg Surveillance coming up after this. 259 00:13:19,720 --> 00:13:23,320 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 260 00:13:23,400 --> 00:13:26,520 Speaker 1: weekday afternoons from seven to ten am Eastern listen on 261 00:13:26,640 --> 00:13:30,040 Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app, 262 00:13:30,200 --> 00:13:32,080 Speaker 1: or watch us live on YouTube. 263 00:13:32,360 --> 00:13:35,240 Speaker 2: We start stronging. We're just talking about Nashville and Vanderbilt 264 00:13:35,240 --> 00:13:38,840 Speaker 2: with mister sass Hour Karen Murphy with us out of Austin, 265 00:13:38,960 --> 00:13:43,000 Speaker 2: and there's all these cities around the country where technologically 266 00:13:43,080 --> 00:13:46,120 Speaker 2: people can feel like there's somewhere in the vicinity of 267 00:13:46,200 --> 00:13:49,640 Speaker 2: sixth Avenue in fifty fourth Street, I mean Austin's boom 268 00:13:49,640 --> 00:13:52,520 Speaker 2: and Nashville's boomen. I'm going to talk to Stacy Vanik 269 00:13:52,559 --> 00:13:57,560 Speaker 2: about Boise at twelve noon is as well. What's the 270 00:13:57,679 --> 00:14:01,560 Speaker 2: negative of being in Austin versus is being glued into 271 00:14:01,640 --> 00:14:04,040 Speaker 2: the hub finance New York. 272 00:14:04,160 --> 00:14:06,600 Speaker 7: It's one hundred and five degrees right there, right now. 273 00:14:08,640 --> 00:14:12,160 Speaker 2: That's a serious one. I mean the temperature and all that. 274 00:14:12,240 --> 00:14:14,920 Speaker 2: But the answer is everybody's moving out to these cities 275 00:14:15,160 --> 00:14:18,160 Speaker 2: Nancy Teglers and Phoenix. I mean it's. 276 00:14:18,080 --> 00:14:19,520 Speaker 7: Booming, right yeah. 277 00:14:19,560 --> 00:14:21,240 Speaker 4: And it's a lovely city. 278 00:14:21,240 --> 00:14:23,040 Speaker 7: I mean, it's amazing. I spent most of my career 279 00:14:23,040 --> 00:14:26,280 Speaker 7: here in New York, but Austin is really wonderful, and 280 00:14:26,320 --> 00:14:29,040 Speaker 7: it's got such a great culture, wonderful music, a lot 281 00:14:29,080 --> 00:14:30,200 Speaker 7: of outdoor life. 282 00:14:30,400 --> 00:14:34,520 Speaker 2: Okay, that's fine, but to your research note it continues. 283 00:14:34,560 --> 00:14:37,440 Speaker 2: And I love this, This is original. The S and 284 00:14:37,480 --> 00:14:40,760 Speaker 2: P is not full of electric companies. It's full of 285 00:14:40,880 --> 00:14:44,920 Speaker 2: companies that use electricity. That's brilliant. I mean, that's what 286 00:14:44,960 --> 00:14:45,840 Speaker 2: we're hitging all this. 287 00:14:45,840 --> 00:14:48,640 Speaker 7: Time, right, absolutely, And I think this is such an 288 00:14:48,720 --> 00:14:52,680 Speaker 7: important lesson When we think about AI. You can believe 289 00:14:52,800 --> 00:14:55,800 Speaker 7: that AI is in the midst of a massive technological 290 00:14:55,840 --> 00:14:58,280 Speaker 7: revolution that will change the way that we work, the 291 00:14:58,320 --> 00:15:02,160 Speaker 7: way that we communicate, and you can be skeptical about 292 00:15:02,240 --> 00:15:05,400 Speaker 7: the stocks that are most closely tied to it. Ultimately, 293 00:15:05,640 --> 00:15:07,920 Speaker 7: if AI is great as we all think it is, 294 00:15:08,560 --> 00:15:11,960 Speaker 7: everyone will benefit, everyone will be using it, everyone will 295 00:15:12,000 --> 00:15:13,000 Speaker 7: become more productive. 296 00:15:14,040 --> 00:15:15,960 Speaker 5: Well, is now the time to buy AI? I mean, look, 297 00:15:16,000 --> 00:15:17,880 Speaker 5: you know a lot of these stocks have gotten hit 298 00:15:17,920 --> 00:15:19,560 Speaker 5: pretty bad. I mean you look at Nvidio. We just 299 00:15:19,600 --> 00:15:21,360 Speaker 5: had a guest on who is saying, you know, maybe 300 00:15:21,360 --> 00:15:23,160 Speaker 5: we're at a time here based on earnings, But talk 301 00:15:23,200 --> 00:15:25,680 Speaker 5: to us about you know, these valuations. At some point, 302 00:15:26,040 --> 00:15:27,840 Speaker 5: do you ever get a little bit concerned or are 303 00:15:27,840 --> 00:15:30,520 Speaker 5: these sort of long term you know, close your eyes, 304 00:15:30,560 --> 00:15:32,360 Speaker 5: put it in your portfolio. You got to own it. 305 00:15:32,920 --> 00:15:35,440 Speaker 7: I think I'm not bearish on these names, but I 306 00:15:35,520 --> 00:15:37,440 Speaker 7: do think investors need to make sure that they have 307 00:15:37,560 --> 00:15:40,840 Speaker 7: access to other parts of the market. Right, Eventually, the 308 00:15:41,280 --> 00:15:44,040 Speaker 7: benefits of all of these gains are going to distribute 309 00:15:44,080 --> 00:15:47,120 Speaker 7: to other companies as well. Now that doesn't mean that 310 00:15:47,200 --> 00:15:49,200 Speaker 7: the mag seven are going to turn down. They just 311 00:15:49,280 --> 00:15:51,280 Speaker 7: may not always be the darlings and the leaders of 312 00:15:51,280 --> 00:15:51,720 Speaker 7: the market. 313 00:15:52,760 --> 00:15:57,960 Speaker 2: This is just up Michael Gambali and Devi Barbusia for Bloomberg. 314 00:15:58,280 --> 00:16:02,280 Speaker 2: Blackrock is kicking off, I guess into next week. I 315 00:16:02,280 --> 00:16:06,480 Speaker 2: don't know. Twelve billion, okay of a data center for 316 00:16:06,640 --> 00:16:11,840 Speaker 2: Meta Facebook in El Paso, Texas. A single trench is 317 00:16:11,840 --> 00:16:15,040 Speaker 2: what gets my attention, Damien. It's like a private deal, 318 00:16:15,080 --> 00:16:18,240 Speaker 2: I guess. And it's just a signal trench out twenty 319 00:16:18,280 --> 00:16:20,960 Speaker 2: two years. I mean, that's the new finance. 320 00:16:21,160 --> 00:16:23,040 Speaker 5: Well, I mean I said it before, and I kind 321 00:16:23,080 --> 00:16:24,720 Speaker 5: of am serious when I say this, because you know, 322 00:16:24,960 --> 00:16:27,000 Speaker 5: I'm just a voyer when I look at the valuations 323 00:16:27,000 --> 00:16:29,640 Speaker 5: in the stock market generally speaking. But you know the 324 00:16:29,720 --> 00:16:32,520 Speaker 5: circular nature of the fact that you've got these hyperscalars 325 00:16:32,520 --> 00:16:34,440 Speaker 5: that are you know, getting into the business, then you 326 00:16:34,480 --> 00:16:36,920 Speaker 5: know they can actually buy it. You know, and it's 327 00:16:36,920 --> 00:16:38,760 Speaker 5: just to me, it seems, you know that the funding 328 00:16:38,800 --> 00:16:40,920 Speaker 5: is very circular and so long as the floodgates are 329 00:16:40,920 --> 00:16:42,960 Speaker 5: open and there's still a lot of dry powder out there, 330 00:16:43,160 --> 00:16:45,320 Speaker 5: you know, Bob's I'm sorry, Bruce is your uncle in 331 00:16:45,360 --> 00:16:47,320 Speaker 5: the sense that you can basically kind of go out, 332 00:16:47,440 --> 00:16:49,560 Speaker 5: I mean, correct me if I'm wrong, Cara and buy 333 00:16:49,560 --> 00:16:51,360 Speaker 5: these equities, sort of close your eyes and park them 334 00:16:51,400 --> 00:16:54,640 Speaker 5: in your portfolio. Or can't you? I mean that's the question. 335 00:16:54,680 --> 00:16:56,920 Speaker 5: If you had to be defensive in this environment, way 336 00:16:56,920 --> 00:16:57,320 Speaker 5: do you turn. 337 00:16:58,200 --> 00:16:59,480 Speaker 7: The good news is that there are a lot of 338 00:16:59,480 --> 00:17:03,600 Speaker 7: places to because this market has been so incredibly concentrated 339 00:17:03,640 --> 00:17:05,720 Speaker 7: for three and a half years, there are a lot 340 00:17:05,760 --> 00:17:08,120 Speaker 7: of areas of the market that have been largely ignored. 341 00:17:08,200 --> 00:17:10,360 Speaker 2: People's utilities, right. 342 00:17:10,240 --> 00:17:12,800 Speaker 7: Like all those kind of valuation names small and MidCap, 343 00:17:13,000 --> 00:17:15,159 Speaker 7: non us developed. I mean, these are all names that 344 00:17:15,240 --> 00:17:17,560 Speaker 7: investors have kind of left for dead but still have 345 00:17:17,760 --> 00:17:18,960 Speaker 7: researching earnings power. 346 00:17:19,080 --> 00:17:20,919 Speaker 5: But I mean a lot of those stocks also are 347 00:17:20,960 --> 00:17:23,639 Speaker 5: treating it near or at all time hives, right. I 348 00:17:23,640 --> 00:17:25,560 Speaker 5: mean we've seen that the S and P Equal Waights 349 00:17:25,680 --> 00:17:27,280 Speaker 5: is up. I think it's more than the S and 350 00:17:27,320 --> 00:17:29,119 Speaker 5: P itself, So you know, you're seeing sort of this 351 00:17:29,560 --> 00:17:32,320 Speaker 5: broadening out, you know, do you see that continuing as 352 00:17:32,359 --> 00:17:33,680 Speaker 5: we approach the second half of this year. 353 00:17:33,760 --> 00:17:36,560 Speaker 7: I think we do see that continuing. So take small 354 00:17:36,600 --> 00:17:39,800 Speaker 7: and midcaps for instance. What you see are that large 355 00:17:39,800 --> 00:17:43,000 Speaker 7: cap earnings are expected to be really high, but about 356 00:17:43,000 --> 00:17:44,879 Speaker 7: the same for the second half of the year. Okay, 357 00:17:44,920 --> 00:17:48,440 Speaker 7: small and MidCap earnings growth is much lower than large cap, 358 00:17:48,440 --> 00:17:50,680 Speaker 7: but it's accelerating into the second half of the year 359 00:17:51,000 --> 00:17:54,520 Speaker 7: and valuations to change, right exactly. So I think as 360 00:17:54,560 --> 00:17:56,800 Speaker 7: that differential narrows, you have an opportunity. 361 00:17:57,000 --> 00:18:01,080 Speaker 2: Are there people in Texas who don't want tech boom? 362 00:18:03,840 --> 00:18:06,680 Speaker 2: Governor Hokel. Governor Hokel in New York has just said, 363 00:18:06,880 --> 00:18:12,320 Speaker 2: we're not doing data centers or whatever? Is there anybody is, folks, 364 00:18:12,320 --> 00:18:13,040 Speaker 2: and for it worth. 365 00:18:13,160 --> 00:18:15,600 Speaker 7: It's very interesting in that you're getting a lot of 366 00:18:15,680 --> 00:18:19,080 Speaker 7: pushback with in Texas on data centers for similar reasons. 367 00:18:19,240 --> 00:18:21,520 Speaker 7: Water is a big issue there, right, and so a 368 00:18:21,520 --> 00:18:23,679 Speaker 7: lot of these data centers are expected to soak up 369 00:18:23,720 --> 00:18:26,199 Speaker 7: water when you have local residents who are you know, 370 00:18:26,240 --> 00:18:28,000 Speaker 7: maybe very limited or what they can use. 371 00:18:28,200 --> 00:18:31,520 Speaker 2: Caraen Murphy with US Chief Investment officer at Kestra with 372 00:18:31,800 --> 00:18:33,080 Speaker 2: Damian Sso. 373 00:18:32,920 --> 00:18:34,879 Speaker 5: So, Carrie, you know, we talk about AI and we 374 00:18:34,920 --> 00:18:36,480 Speaker 5: talk about the tech boom and all this stuff, and 375 00:18:36,520 --> 00:18:37,919 Speaker 5: we laugh about it, but when don't we look at 376 00:18:37,920 --> 00:18:40,720 Speaker 5: the funding markets, just how these hyper scalers have tapped 377 00:18:40,720 --> 00:18:42,480 Speaker 5: to the market. Tapped the markets this year alone to 378 00:18:42,480 --> 00:18:44,080 Speaker 5: the tune of something like two hundred and twenty five 379 00:18:44,119 --> 00:18:48,760 Speaker 5: billion in debt raised via the credit markets here in 380 00:18:48,800 --> 00:18:51,240 Speaker 5: the US and not only in the US in pounds 381 00:18:51,240 --> 00:18:53,800 Speaker 5: in swissy, and you know, talk to me a little 382 00:18:53,800 --> 00:18:55,680 Speaker 5: bit about all that money raised and now the fact 383 00:18:55,720 --> 00:18:58,480 Speaker 5: that these bonds. I just have robam Scottsdale emailing me 384 00:18:58,520 --> 00:19:00,359 Speaker 5: basically saying the bonds are trading it now the one 385 00:19:00,400 --> 00:19:02,240 Speaker 5: hundred year Google bonds are trading a ninety. Well, isn't 386 00:19:02,240 --> 00:19:04,399 Speaker 5: that a good thing? Doesn't that mean that Alphabet issued 387 00:19:04,400 --> 00:19:06,119 Speaker 5: bonds at the right point in time to fund the 388 00:19:06,200 --> 00:19:07,280 Speaker 5: data centerlot. 389 00:19:07,520 --> 00:19:08,680 Speaker 2: Talk to you about. 390 00:19:08,400 --> 00:19:12,080 Speaker 5: Financing differentials and what that means as these companies grow 391 00:19:12,119 --> 00:19:13,000 Speaker 5: over the long term. 392 00:19:13,200 --> 00:19:16,240 Speaker 7: So I think this is an underappreciated piece of the 393 00:19:16,280 --> 00:19:18,560 Speaker 7: whole story. And part of the reason is because it's 394 00:19:18,560 --> 00:19:22,480 Speaker 7: happened so quickly. So these companies have shifted from very 395 00:19:22,560 --> 00:19:25,760 Speaker 7: high free cash flow levels to needing a lot of cash, 396 00:19:25,800 --> 00:19:28,080 Speaker 7: and it's happened within a couple of years. What that 397 00:19:28,119 --> 00:19:30,920 Speaker 7: means is that their balance sheets have also changed significantly. 398 00:19:31,359 --> 00:19:33,879 Speaker 7: Some of these names actually look more like utilities than 399 00:19:33,920 --> 00:19:35,879 Speaker 7: they do tech companies in terms of the amount of 400 00:19:35,920 --> 00:19:38,480 Speaker 7: debt that they have on their cash. So to your question, 401 00:19:38,560 --> 00:19:42,200 Speaker 7: the important important thing is not necessarily what's happening today, 402 00:19:42,320 --> 00:19:45,320 Speaker 7: but what happens tomorrow. And if the market starts to 403 00:19:45,359 --> 00:19:48,720 Speaker 7: presume that these capex numbers need to double over the 404 00:19:48,760 --> 00:19:50,640 Speaker 7: next couple of years, and that means that they need 405 00:19:50,680 --> 00:19:51,920 Speaker 7: to come to market even more. 406 00:19:52,080 --> 00:19:55,120 Speaker 2: To your good point, Damien, part of the reason it's 407 00:19:55,160 --> 00:19:58,840 Speaker 2: priced un yield up on hyperscalers is a general higher 408 00:19:58,920 --> 00:20:02,480 Speaker 2: rate regime, right now, That's right. Nobody ever mentions. 409 00:20:02,160 --> 00:20:04,640 Speaker 5: That, right, No, it's not the fundamental tenet of why 410 00:20:04,640 --> 00:20:07,000 Speaker 5: they're investing. You know, it's more You're absolutely right, it's 411 00:20:07,040 --> 00:20:09,159 Speaker 5: more the impact from higher US treasure yields. And so 412 00:20:09,480 --> 00:20:11,159 Speaker 5: you know, I ask you this. You know, maybe it 413 00:20:11,160 --> 00:20:13,959 Speaker 5: hasn't been so great for investors in apple bonds, but 414 00:20:14,040 --> 00:20:16,160 Speaker 5: certainly you would think that it's going to be good 415 00:20:16,240 --> 00:20:18,520 Speaker 5: for equi owners over the long term if that use 416 00:20:18,560 --> 00:20:20,080 Speaker 5: of proceeds goes to the right place. 417 00:20:20,200 --> 00:20:22,840 Speaker 7: Now, that is the big question, right, So how many 418 00:20:22,880 --> 00:20:26,360 Speaker 7: of those dollars actually get put towards productive ends? And 419 00:20:26,400 --> 00:20:28,880 Speaker 7: given the size of the dollars, I think what you're 420 00:20:28,880 --> 00:20:30,640 Speaker 7: saying is the market is pushing back a bit. 421 00:20:30,840 --> 00:20:33,040 Speaker 2: Can I ask you a question at Kestra. John gallob 422 00:20:33,160 --> 00:20:36,119 Speaker 2: just publishes a brilliant note here at Seaport on the 423 00:20:36,240 --> 00:20:39,879 Speaker 2: earnings to come over the next five trading days thirty 424 00:20:39,920 --> 00:20:42,840 Speaker 2: four percent of the s and P five hundred market 425 00:20:42,960 --> 00:20:48,520 Speaker 2: cap or report explain the impact on the Ancestra investors. 426 00:20:49,119 --> 00:20:53,000 Speaker 2: I mean that sentence was foreign to me until like 427 00:20:53,080 --> 00:20:53,880 Speaker 2: five years ago. 428 00:20:54,200 --> 00:20:58,040 Speaker 7: Yeah, so, I mean our investors have very diversified portfolios. 429 00:20:58,400 --> 00:21:01,040 Speaker 7: But as we've seen the mega cat names become a 430 00:21:01,119 --> 00:21:04,080 Speaker 7: larger and larger proportion of the SMP, it's become a 431 00:21:04,200 --> 00:21:06,679 Speaker 7: much more important piece of everyone's portfolio. 432 00:21:06,800 --> 00:21:10,399 Speaker 2: It's okay, though, because they they're a larger part to 433 00:21:10,440 --> 00:21:12,520 Speaker 2: an extent, because they've. 434 00:21:12,280 --> 00:21:17,800 Speaker 7: Appreciated they're larger for good reasons, thank you, Right, it's 435 00:21:17,840 --> 00:21:18,879 Speaker 7: not because other things of. 436 00:21:18,960 --> 00:21:21,600 Speaker 2: Ken Will you come back when it's not one hundred 437 00:21:21,160 --> 00:21:24,920 Speaker 2: and five in Austin. I love to Karen Murphy, chief 438 00:21:24,960 --> 00:21:29,919 Speaker 2: investment Officer, cool Common collected to New York Keestra Investment Management. 439 00:21:29,960 --> 00:21:35,200 Speaker 2: I appreciate that. Stay with us. More from Bloomberg Surveillance 440 00:21:35,280 --> 00:21:36,600 Speaker 2: coming up after this. 441 00:21:43,880 --> 00:21:47,440 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 442 00:21:47,520 --> 00:21:50,679 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 443 00:21:50,760 --> 00:21:54,399 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 444 00:21:54,560 --> 00:21:56,080 Speaker 1: watch us live on YouTube. 445 00:21:56,480 --> 00:22:00,960 Speaker 2: Monica Burra has arguably the most do resume of anyone 446 00:22:01,040 --> 00:22:04,399 Speaker 2: I know, Morgan Stanley Wealth Management, service to the City 447 00:22:04,400 --> 00:22:07,920 Speaker 2: of New York, all sorts of abilities over the years, 448 00:22:07,920 --> 00:22:11,840 Speaker 2: including at Fitch is Well. I can't get the Monday, 449 00:22:12,440 --> 00:22:17,160 Speaker 2: call it the Monica Guerra uncertainty. Now between the markets, 450 00:22:17,359 --> 00:22:21,359 Speaker 2: the war are politics as well. Don't tell me about 451 00:22:21,359 --> 00:22:24,360 Speaker 2: twenty twenty seven. What do we look like on Monday? 452 00:22:25,160 --> 00:22:28,639 Speaker 8: On Monday, I think we're gonna look much the same, 453 00:22:28,800 --> 00:22:31,800 Speaker 8: except a little more pressured, especially in the in the 454 00:22:32,200 --> 00:22:35,320 Speaker 8: with thinking about oil prices and the potential for a 455 00:22:35,359 --> 00:22:38,359 Speaker 8: pass through to headline CPI that's the biggest thing that 456 00:22:38,400 --> 00:22:41,720 Speaker 8: I'm focusing on right now, Little Blue button. 457 00:22:41,760 --> 00:22:42,159 Speaker 4: Sorry about that. 458 00:22:42,240 --> 00:22:46,000 Speaker 5: Monica. When President Trump says that the Iranians want to 459 00:22:46,000 --> 00:22:48,480 Speaker 5: do a deal, who's he talking about? When he talks 460 00:22:48,520 --> 00:22:50,960 Speaker 5: about the Iranians. I mean, he's certainly not talking about 461 00:22:51,280 --> 00:22:54,600 Speaker 5: Kamenie or the Secretary of Nuclear Policy, and deletely over there, 462 00:22:54,640 --> 00:22:57,320 Speaker 5: he's probably talking about Parliament, right, I mean, who is 463 00:22:57,320 --> 00:22:58,520 Speaker 5: he really talking about? 464 00:22:59,160 --> 00:23:02,600 Speaker 8: So when we're thinking about who he's talking about and 465 00:23:02,640 --> 00:23:06,560 Speaker 8: the known players in the room are, our intel is 466 00:23:06,680 --> 00:23:09,200 Speaker 8: a little bit hazy, right. We all wish we had 467 00:23:09,240 --> 00:23:12,639 Speaker 8: that insight. I think that the administration is trying to 468 00:23:12,760 --> 00:23:14,920 Speaker 8: nail it down, but the players that were part of 469 00:23:14,960 --> 00:23:18,840 Speaker 8: the original JPCA on the US side are no longer 470 00:23:18,880 --> 00:23:21,600 Speaker 8: the same players. But you're still looking at, you know, 471 00:23:21,760 --> 00:23:25,520 Speaker 8: folks like Rubio and others trying to nail down those details, 472 00:23:25,560 --> 00:23:28,080 Speaker 8: at least from the US perspective. Now, who's in the room. 473 00:23:28,640 --> 00:23:29,960 Speaker 8: We don't have that information. 474 00:23:30,280 --> 00:23:32,520 Speaker 5: So you rightly point out, though that fifty nine percent 475 00:23:32,520 --> 00:23:34,960 Speaker 5: of Americans are now opposed to the conflict, And you know, 476 00:23:35,200 --> 00:23:37,280 Speaker 5: your call, Morgan Stanley's call is for one of a 477 00:23:37,320 --> 00:23:40,000 Speaker 5: gridlock Congress in twenty twenty seven. Talk to us about 478 00:23:40,000 --> 00:23:42,320 Speaker 5: the midterms, talk to us about what drives that outlook. 479 00:23:42,840 --> 00:23:45,760 Speaker 8: So when we're thinking about midterm outlook, just historically the 480 00:23:45,800 --> 00:23:49,320 Speaker 8: sitting president's party loses about thirty seats. Then you add 481 00:23:49,359 --> 00:23:52,439 Speaker 8: in the potential for an oil shock, which we have 482 00:23:52,600 --> 00:23:55,320 Speaker 8: been experiencing. So if you have an increase in gas 483 00:23:55,359 --> 00:23:59,000 Speaker 8: prices from the prior January so January twenty twenty five 484 00:23:59,440 --> 00:24:02,960 Speaker 8: to this year through this year, you're looking at average 485 00:24:02,960 --> 00:24:05,960 Speaker 8: seat losses of thirty two versus six in a normal 486 00:24:06,040 --> 00:24:08,920 Speaker 8: year where you don't have that gas price component. So 487 00:24:08,960 --> 00:24:13,959 Speaker 8: affordability is huge here. Layer in energy housing, you've got 488 00:24:14,000 --> 00:24:14,760 Speaker 8: an uphill climb. 489 00:24:14,840 --> 00:24:17,840 Speaker 2: I would suggest, Monica, we're addicted to stimulus. We've gone 490 00:24:17,880 --> 00:24:21,000 Speaker 2: through I mean some will say three stimuli with COVID, 491 00:24:21,000 --> 00:24:24,360 Speaker 2: including the back end Biden stimulus is it's called formally 492 00:24:24,440 --> 00:24:27,879 Speaker 2: in the literature, and then many other new stimuli with 493 00:24:27,880 --> 00:24:31,520 Speaker 2: with President Trump as well. Are we stimulus out? 494 00:24:32,280 --> 00:24:35,639 Speaker 8: I don't think we're stimulus out. From a political perspective, 495 00:24:36,000 --> 00:24:40,080 Speaker 8: you cannot underestimate the Congress's ability to spend the justice 496 00:24:40,480 --> 00:24:44,040 Speaker 8: is one point one trillion on NDAA, a ninety five 497 00:24:44,080 --> 00:24:47,840 Speaker 8: billion additional to the US or on more right, this 498 00:24:47,920 --> 00:24:49,439 Speaker 8: is a weird question. 499 00:24:49,960 --> 00:24:52,960 Speaker 2: If we do military spending for Iran. Do you call 500 00:24:53,040 --> 00:24:53,960 Speaker 2: that stimulus? 501 00:24:54,880 --> 00:24:57,920 Speaker 8: I definitely call it stimulus when you're thinking about who's 502 00:24:57,920 --> 00:25:00,800 Speaker 8: getting the contracts as a US based contract and so 503 00:25:00,840 --> 00:25:04,199 Speaker 8: while it doesn't have necessarily the largest economic multiplier, there 504 00:25:04,280 --> 00:25:06,240 Speaker 8: is still a multiplier there that is meaningful for the 505 00:25:06,320 --> 00:25:07,040 Speaker 8: US economy. 506 00:25:07,200 --> 00:25:09,680 Speaker 5: You know, Monica, you talk about affordability being the key 507 00:25:09,720 --> 00:25:13,280 Speaker 5: issue into these midterms, and you talk about gasoline prices specifically, 508 00:25:13,760 --> 00:25:15,600 Speaker 5: you know, and then I think about Big Oil and 509 00:25:15,640 --> 00:25:17,919 Speaker 5: they're going to be reporting earning Chevron an excellon mobile 510 00:25:17,920 --> 00:25:20,159 Speaker 5: on Friday of next week, and I think about, Wow, 511 00:25:20,240 --> 00:25:22,720 Speaker 5: what would happen if they just blow it out like 512 00:25:22,760 --> 00:25:24,480 Speaker 5: the rest of the market here. I mean, people going 513 00:25:24,560 --> 00:25:25,560 Speaker 5: to be focused on that at all. 514 00:25:26,400 --> 00:25:29,200 Speaker 8: I think they have to be right when you're thinking 515 00:25:29,240 --> 00:25:32,399 Speaker 8: about where the pressures are coming from. Let's just I mean, 516 00:25:32,440 --> 00:25:34,040 Speaker 8: even if we move away from big oil and we 517 00:25:34,080 --> 00:25:36,680 Speaker 8: just stay with an energy or you think about the 518 00:25:37,200 --> 00:25:40,119 Speaker 8: negatives for the electorate, what's necessarily good for the energy 519 00:25:40,160 --> 00:25:42,840 Speaker 8: companies isn't great for the voter. And that's a really 520 00:25:43,480 --> 00:25:46,359 Speaker 8: interesting tension, right that the GP is trying to get 521 00:25:46,359 --> 00:25:46,840 Speaker 8: a handle on. 522 00:25:47,040 --> 00:25:49,040 Speaker 5: You get one more well, I mean, look, I'm just 523 00:25:49,040 --> 00:25:51,919 Speaker 5: thinking about affordability issues. The other area is obviously housing, 524 00:25:52,080 --> 00:25:52,760 Speaker 5: right you can't. 525 00:25:52,560 --> 00:25:55,000 Speaker 2: Afford thank you, thank you, thank you, thank you. 526 00:25:55,080 --> 00:25:57,080 Speaker 5: And the real estate sector here I mean reads, what 527 00:25:57,160 --> 00:25:59,040 Speaker 5: have you? I mean, look, they're diving in yielding. They 528 00:25:59,040 --> 00:26:01,479 Speaker 5: continue to perform gas. I mean, they're not a great performer, 529 00:26:01,520 --> 00:26:03,399 Speaker 5: but certainly compared to fixed income, they haven't been so 530 00:26:03,480 --> 00:26:06,040 Speaker 5: bad right in terms of a risk adjusted return to Monica, 531 00:26:06,160 --> 00:26:07,320 Speaker 5: you know, way do you hide out? How do you 532 00:26:07,320 --> 00:26:09,440 Speaker 5: get defensive when you got two of these key sort 533 00:26:09,440 --> 00:26:11,880 Speaker 5: of well maybe not oil, but defensive sector is kind 534 00:26:11,880 --> 00:26:13,320 Speaker 5: of flashing right here or Amber, at. 535 00:26:13,320 --> 00:26:15,840 Speaker 8: Least for me when I'm thinking about where to go, 536 00:26:16,080 --> 00:26:18,800 Speaker 8: you got to look to utes because even though there's 537 00:26:18,920 --> 00:26:22,040 Speaker 8: pressure and energy, you have to remember that and the 538 00:26:22,119 --> 00:26:24,159 Speaker 8: unpopularity with data centers, you have to remember that they 539 00:26:24,160 --> 00:26:25,879 Speaker 8: are a big part of that build out that is 540 00:26:25,920 --> 00:26:30,800 Speaker 8: going to happen, regardless of the electorate being you know, unfavorable. 541 00:26:30,840 --> 00:26:34,479 Speaker 2: Right now, Michael, thinking so much Monica? Where was now 542 00:26:34,560 --> 00:26:36,960 Speaker 2: this morning? Your executive? You'red a head of headaches for 543 00:26:37,000 --> 00:26:41,440 Speaker 2: all learning Stanley Wealth Benja, we have the greatest sympathy 544 00:26:41,480 --> 00:26:44,280 Speaker 2: for you as you staggered the first Tuesday of November. 545 00:26:44,920 --> 00:26:45,680 Speaker 4: It's going to be fun. 546 00:26:46,200 --> 00:26:51,040 Speaker 2: You're working on your post Labor Day forty two page essay, right, 547 00:26:51,440 --> 00:26:52,320 Speaker 2: I definitely am. 548 00:26:52,400 --> 00:26:53,960 Speaker 4: We're already in the works. People. 549 00:26:54,400 --> 00:26:57,080 Speaker 2: People think on the street you take August off. No, 550 00:26:57,440 --> 00:27:00,440 Speaker 2: you developed for Carble Tunnel, shorty, Where did you know? 551 00:27:00,680 --> 00:27:04,000 Speaker 8: I'm grateful for August receas. But that's about all I get. 552 00:27:03,920 --> 00:27:07,680 Speaker 2: So Mondica, thank you so much. Monica Gerr with Margaret Stanley. 553 00:27:07,920 --> 00:27:12,760 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apples, Spotify, 554 00:27:12,880 --> 00:27:17,160 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 555 00:27:17,280 --> 00:27:20,760 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 556 00:27:20,840 --> 00:27:24,879 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 557 00:27:24,880 --> 00:27:28,240 Speaker 1: can also watch us live every weekday on YouTube and 558 00:27:28,480 --> 00:27:30,200 Speaker 1: always on the Bloomberg terminal