Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanobek. We're here every day bringing
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Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. Well Kitty Gratfield and Tim
Speaker 1: Stanobeck live in the Bloomberg Interactive Broker Studio in New York. Katie,
Speaker 1: we talked about the World Economic Forum postponing its annual
Speaker 1: meeting in Davos that had been slated for January, this
Speaker 1: amid fresh waves of coronavirus across Switzerland and the globe.
Speaker 1: Just as you and I were speaking, just now, or
Speaker 1: as Doug was speaking, I got a notification that more
Speaker 1: events in my own life have been canceled in the
Speaker 1: coming days. And it certainly makes sense that we're starting
Speaker 1: to see that absolutely, And I mean there were the
Speaker 1: headlines crossing the terminal this morning. That's cool. Closing surging too.
Speaker 1: So it's conferences, it's schools, it's workplaces, it's everywhere. All
Speaker 1: of this happening when we expect millions of Americans to
Speaker 1: be traveling to see one another for the holidays coming up.
Speaker 1: Let's talk to about it with Dr Peter alperand vice
Speaker 1: president of doc Simity. It's a platform for medical professionals.
Speaker 1: Dr Alburn joins us once again on the phone from Austin, Texas.
Speaker 1: Dr Alburn, how how are things in Austin, Texas right now? Uh? Well,
Speaker 1: thanks for having me on the broadcast. You know, things
Speaker 1: in Austin are going pretty well. Um, we are seeing
Speaker 1: an upticking cases, but in general people are being careful. Um.
Speaker 1: I think people are you know what to do in
Speaker 1: terms of masking and uh yeah, it's it's not the
Speaker 1: Christmas we had all hoped for. Um, but you've got
Speaker 1: to be vigilant. We'll help us understand what it looks
Speaker 1: like on the ground there because I think a lot
Speaker 1: of people are really stuck in their universes right now.
Speaker 1: And if you live in New York City, here's what
Speaker 1: you know. You have to wait in line for hours
Speaker 1: to get a COVID test, and if you want to
Speaker 1: get a rapid test, you have to go to you
Speaker 1: try to get one at a pharmacy and they're all
Speaker 1: sold out. Are you seeing in Austin right now? Yeah,
Speaker 1: we're definitely seeing pressure on the on the places where
Speaker 1: you would go to get tests, as well as the
Speaker 1: home test that you would get in UM in the
Speaker 1: pharmacy as well as you know, and a lot of
Speaker 1: people have gone online those are also very much sold
Speaker 1: out so bad I was going to ask for me
Speaker 1: and send him send him my way. Now, I'm just kidding, doctor.
Speaker 1: I am curious to hear your perspective on the sort
Speaker 1: of inevitability feeling that is percolating, at least in New
Speaker 1: York City. I mean, I've heard time and time again
Speaker 1: over the past few weeks that, oh, well, I'm going
Speaker 1: to get it anyway. And I mean does the data
Speaker 1: that we have on this variant stack up against that?
Speaker 1: I mean we've heard a lot about how much more
Speaker 1: easily transmissible it is, for example, Yeah, I think, um,
Speaker 1: you know, inevitability is a pretty strong word. I'm here's
Speaker 1: what we know right, we know that on thecron is
Speaker 1: indeed very contagious and very easily transmissible. UM. The early
Speaker 1: data seems to suggest that there is the potential that
Speaker 1: the disease caused by omicron might be a little bit
Speaker 1: more mild than some of the previous variants, particularly delta.
Speaker 1: But the the answer is, you know, this variant, we've
Speaker 1: only really discovered a couple of weeks ago, and we
Speaker 1: don't know a ton about it. UM. I think inevitability
Speaker 1: is strong. Um is probably too strong, because I think
Speaker 1: we all need to do the things that we know
Speaker 1: that are helpful. Wearing masks, you know, when you're in
Speaker 1: a tight group, trying to social distance to the best
Speaker 1: that you can. And please go out and get your
Speaker 1: booster shot or your first vaccine if you haven't had one. Yeah,
Speaker 1: and we're all we are seeing here in the United
Speaker 1: States a lot of people going out and getting those boosters,
Speaker 1: which is some encouraging news. Hey, you mentioned South Africa
Speaker 1: and the idea that we we learned about this a
Speaker 1: couple of weeks ago. UM, we did learn today at
Speaker 1: one pm New York time that infections are slowing in
Speaker 1: South Africa. Daily coronavirus cases they're almost having amid a
Speaker 1: fourth wave of infections fueled by the omicron variant. How
Speaker 1: should we read into that and if course, with the
Speaker 1: caveat that it's pretty much summer in South Africa, so
Speaker 1: it's a different environment than in the United States. Yeah,
Speaker 1: I think we have to be really careful with that data.
Speaker 1: I think that, um, first of all, the population in
Speaker 1: terms of the total number of people vaccinated is very different.
Speaker 1: The amount of time they're spending outdoors, given that at
Speaker 1: summer versus winter is different. Um. And I think that,
Speaker 1: you know, you've got to be really careful about getting
Speaker 1: whipsode in multiple directions with the data here, UM, I
Speaker 1: think it takes some time for us to put together
Speaker 1: that information. It's certainly um. You know, we see all
Speaker 1: sorts of discussion on our network as well, with physicians
Speaker 1: talking about the latest and greatest data on on our
Speaker 1: on our news feed that we that we monitor. But
Speaker 1: I think the bottom line is is that this is
Speaker 1: a time for us to go back to what we
Speaker 1: know is no works, which is being you know, just
Speaker 1: being careful and doing the things that we know to
Speaker 1: be true and not necessarily you know, I don't know,
Speaker 1: no one' davocating for the complete return to the lockdowns
Speaker 1: like we had in April of last year. But we
Speaker 1: just need to be careful, so maybe not at can
Speaker 1: fleet return to lockdown. But you know, as some and
Speaker 1: I were just talking about, you are starting to see
Speaker 1: a lot of events get canceled, whether it's you know,
Speaker 1: school closing or companies telling their workers that they can
Speaker 1: return home and work from home. I mean, would you
Speaker 1: expect to see more of that type of behavior in
Speaker 1: the coming weeks, especially since we are talking on December
Speaker 1: twenty and a lot of people have holiday travel planned. Yeah,
Speaker 1: I think we probably will see more of that. You know,
Speaker 1: school closures is such a complicated and fraud issue. Um,
Speaker 1: you know, parents aren't justifiably exasperated and um, you know
Speaker 1: it's really tough out there, uh for for those families.
Speaker 1: But I do think you're going to see probably no
Speaker 1: slightly restrictions around large gatherings of big events where you
Speaker 1: could see that that would be the first thing. Um.
Speaker 1: You know, again, like I said, school closures are complicated.
Speaker 1: Dr Albn, just in the last forty seconds we have
Speaker 1: what advice can you give for getting together safely with
Speaker 1: family and friends and loved ones during the holidays. Yeah,
Speaker 1: you know, it is important to see your family and UM,
Speaker 1: we know that it's going to happen. So my recommendations
Speaker 1: are to do like I said, do the things we
Speaker 1: know to be true. Please, please go get vaccinated if
Speaker 1: you haven't, If you can test yourself for corona before
Speaker 1: you have that gathering of everybody, that's important, particularly if
Speaker 1: you're going to be seeing your your grandparents or other
Speaker 1: people who might be UM you know, more at risk
Speaker 1: from a severe infection UM. And you know, try to
Speaker 1: limit it so that it's not a gathering of people.
Speaker 1: But maybe you know eight to ten. All right, some
Speaker 1: very good advice as we do head into the final
Speaker 1: week before Christmas and of course New Year's as well.
Speaker 1: Dr Peter Alperin, we love having you on the program,
Speaker 1: Vice president of dox Simity. It's a digital platform for
Speaker 1: medical professionals. He's joining us on the phone from Austin, Texas.
Speaker 1: President Biden's job approval ratings stands at just above forty
Speaker 1: three percent. That's according to an average of approval poles
Speaker 1: from eight In fact, Biden is less popular at this
Speaker 1: point in his presidency than any other president except President Trump.
Speaker 1: Going all the way back to President Jimmy Harder. But
Speaker 1: here's the thing. America's economy improved more in Joe Biden's
Speaker 1: first twelve months than any other president during the past
Speaker 1: fifty years, so writes Bloomberg Editor in Chief Emeritus Matt
Speaker 1: Winkler in a column for Bloomberg Opinion. Matt Winkler joins
Speaker 1: us now live in the Bloomberg Interactive Broker studio. Matt,
Speaker 1: Great to have you you with us. What were the
Speaker 1: metrics that you used to measure President Biden's first year
Speaker 1: in office? Great to be with you and their ten
Speaker 1: And they're known to all of us, gross domestic product,
Speaker 1: profit growth s and P five hundred performance, consumer credit,
Speaker 1: non farm payrolls, manufacturing jobs, business productivity, the dollars appreciation,
Speaker 1: and the SMP relative to UH the benchmarks around the world,
Speaker 1: as well as per capita disposable income. And so, Matt,
Speaker 1: I'd love to hear your thoughts on that mismatch that
Speaker 1: if you know, you look at those measures, you just
Speaker 1: lied out that the economy is doing really well. But
Speaker 1: yet President Joe Biden's approval ratings not as hot. I mean,
Speaker 1: does that all just boil down to inflation or what's
Speaker 1: going on. Well, you know what's so often missing in
Speaker 1: the day to day reporting from everywhere is context, and uh,
Speaker 1: this is the context which is the most important, you
Speaker 1: could argue subject in our lives is the economy. And
Speaker 1: given that we are in unprecedented circumstances with COVID nineteen,
Speaker 1: context is easily misplaced or just not available. So if
Speaker 1: one wanted to understand, okay, where did we come from
Speaker 1: since Biden was inaugurated, probably the best way to do it,
Speaker 1: which is what we did at Bloomberg with my colleague Shenpei,
Speaker 1: is take a look at all of the measures of
Speaker 1: the economy that are most relevant, give them equal waiting,
Speaker 1: and say, how did he do? Now? What motivated us
Speaker 1: to do that? We did get right away in the
Speaker 1: Biden administration a very rigorous vaccination program which did a
Speaker 1: lot of good you could say, in the first three
Speaker 1: or four months of the year. And then on top
Speaker 1: of that, there was the unprecedented American Relief Act, which
Speaker 1: cut the poverty rate in half and put you know,
Speaker 1: thirty billion dollars into American households. So you look at
Speaker 1: those two things, and those were policy initiatives, What did
Speaker 1: the economy do and as uh you noted, Biden comes
Speaker 1: out one or two, number one or number two in
Speaker 1: the ranking all the way back to Carter saved for
Speaker 1: per capita disposable income and it's not even close. He's
Speaker 1: way ahead of everybody. You know. The final thing is
Speaker 1: that since you mentioned inflation, uh, and we're talking about context.
Speaker 1: You know, when everybody talks about inflation, nobody mentions the
Speaker 1: market doesn't agree with them. The bond market is saying, no,
Speaker 1: we still think it's transitory. The simplest context is to
Speaker 1: just say the yield on the benchmark ten year treasury
Speaker 1: is still fluctuating, way below one point seven percent. And
Speaker 1: you know, back in the seventies, when inflation was very high,
Speaker 1: the yield, whether it was a tenure or a thirty year,
Speaker 1: was over twelve. So we're not there yet. The people
Speaker 1: with the most at stake and the bond market are
Speaker 1: saying the Biden economy, so far, so good. So we
Speaker 1: have the context for for what happened in one and
Speaker 1: the benchmarks for what is all of this portend though
Speaker 1: for two, especially on a day like today going into
Speaker 1: New Year, where we you know, have Senator Joe Mansion yesterday,
Speaker 1: essentially torpedoing President Biden's Build Back Better program, as well
Speaker 1: as rising coronavirus cases throughout the country. COVID nineteen is,
Speaker 1: without a doubt, the variable that is going to probably
Speaker 1: befuddle us most because we still don't understand everything there
Speaker 1: is to know about the pandemic. Having said that, even
Speaker 1: with this new variant, fewer people are dying if they
Speaker 1: are vaccinated. That's a fact. We know that, and so
Speaker 1: that's cause for some hope. The other part of this
Speaker 1: is that the Infrastructure Act, which was a bipartisan piece
Speaker 1: of legislation, is going to benefit the job market, is
Speaker 1: going to benefit municipalities, UH, states everywhere coast to coast,
Speaker 1: north to south, east to west, as far as the
Speaker 1: eye can see. It's not gonna abate anytime soon. In fact,
Speaker 1: it's just gonna get going in twenty two. So, uh,
Speaker 1: those are some good things that should keep things going
Speaker 1: in as far as the Build Back Better, Biden himself said, look,
Speaker 1: I'm not done with this. I'm going to come back
Speaker 1: to it in twenty two. Uh. Larry Summers told David Weston,
Speaker 1: I think a week ago he thought that whatever does
Speaker 1: emerge from Build Back Better, whatever you know, Uh, politics
Speaker 1: are involved, it will be better not worse. So, uh,
Speaker 1: those are some things we can anticipate. And now you've
Speaker 1: got some great stats on here on corporate America. One
Speaker 1: that jumped out to me is that profit margins are
Speaker 1: around fifteen percent, which is the widest sense. How is
Speaker 1: the consumer doing in all of this? Though? Consumer is
Speaker 1: doing great, and we know that because consumer credit is
Speaker 1: with Biden number one of all the presidents. Now what
Speaker 1: that means is that Americans are are obviously feeling good,
Speaker 1: otherwise they wouldn't be taking on credit. One of the
Speaker 1: reasons why they are taking on credit is because interest rates,
Speaker 1: even with the acceleration of inflation, are still relatively low
Speaker 1: when you compare where interest rates have been over the
Speaker 1: past fifty years. The reason why corporate America is booming
Speaker 1: and doing as well as it is is because the
Speaker 1: debt ratios, that's what you were referring to, which makes
Speaker 1: it possible for companies to get more out of literally
Speaker 1: their borrowing than they ever have before. So their profit
Speaker 1: margins are much bigger, fatter than it goes all the
Speaker 1: way back to. So, um, you know, the consumer and uh,
Speaker 1: corporate America both are in a very good place right
Speaker 1: now from a historical perspective. It's so interesting though, because
Speaker 1: we don't we don't see this playing out politically. Either
Speaker 1: Democrats aren't doing a great job of of of hammering
Speaker 1: this message, or Republicans are doing a really good job
Speaker 1: of essentially comparing President Biden to President Carter. Who. Well,
Speaker 1: that's our that's our job. It's called news judgment, and
Speaker 1: journalists are supposed to do more than just simply report
Speaker 1: what people say and what they do. They're supposed to
Speaker 1: provide the context and say here's what it means. And unfortunately,
Speaker 1: our profession just isn't there, which is why we are
Speaker 1: doing this column. So what what would you I mean,
Speaker 1: what would you like to see from from news media
Speaker 1: when reporting a ren reporting on the president? Well, I think,
Speaker 1: for one, every time we bring up inflation, it would
Speaker 1: be nice to see a parenthetical clause everywhere that says yes,
Speaker 1: But the market doesn't agree with that. And the market
Speaker 1: is twenty nine trillion of US Treasury securities, you know,
Speaker 1: it's a big market. It's the market that tells every
Speaker 1: other market what to do. That's that's a start. At
Speaker 1: least that provides some context and understanding that. Why Janet Yellen,
Speaker 1: for one, the Treasury Secretary, who is arguably, you know,
Speaker 1: one of the smartest people to be in that position,
Speaker 1: has said that most of the inflation that we are
Speaker 1: experiencing still is related to what you would call supply
Speaker 1: shortcomings bottlenecks that result from UH people being immobilized by
Speaker 1: the pandemic UM. So, yeah, I mean I think that
Speaker 1: it's very important. Is something we do at Bloomberg, which
Speaker 1: is what does the market tell you that is relevant
Speaker 1: to whatever people are saying politically. Oftentimes the market is
Speaker 1: saying something that's very different from what the politics are.
Speaker 1: And you know, you can expect politicians to say whatever
Speaker 1: they can because it suits their interests. But the market
Speaker 1: is not ideological, it's not political. It's just looking for
Speaker 1: relative value. And I'm curious. I mean, you mentioned the
Speaker 1: bond market in terms of what the market is saying. Clearly,
Speaker 1: the bond market, when you look at those long term rates,
Speaker 1: doesn't seem too stressed about inflation. When you look across
Speaker 1: the asset picture and you look at the stock market,
Speaker 1: do you see a similar message there? Yeah, for the
Speaker 1: same reason. Look, when you have interest rates as low
Speaker 1: as we have UH stocks have been the right investment
Speaker 1: that's been proven over the past decade or more, and UM,
Speaker 1: unless that changes, that equation changes, UM, it's likely that
Speaker 1: stocks will continue to hold their value. Now. One of
Speaker 1: the other parts of this is, remember when began, very
Speaker 1: few people thought we would have the vaccine that would
Speaker 1: prevent UH infection of COVID nineteen, and yet we did
Speaker 1: have not just one, but several vaccines. That's called innovation.
Speaker 1: Innovation is very much a part of the stock market. UM.
Speaker 1: That's where you've seen companies simply become household names practically
Speaker 1: overnight because they've created value where there was not. You know,
Speaker 1: whether it's a Twilio, which is relatively recent, or it's
Speaker 1: a Tesla or even going back further Amazon, all of
Speaker 1: these companies are creating value, and that's why the stock
Speaker 1: market is so attractive. The column is Biden's economic performance
Speaker 1: is unbeatable. Matt Winkler as editor in Chief emeritus for
Speaker 1: Bloomberg News. He wrote this piece for Bloomberg Opinion. Be
Speaker 1: sure to check it out on the Bloomberg terminal and
Speaker 1: at Bloomberg dot com. Well. In recent years, we've seen
Speaker 1: US organizations that have ties to China come under increased scrutiny.
Speaker 1: Among those in recent years and especially in recent weeks
Speaker 1: has been Ray Dalio, of course, and Bridgewater Associates. We're
Speaker 1: joining us now to talk all about Dahlio's China fascination
Speaker 1: and when it started. Is Andy Brown, editorial director at
Speaker 1: Bloomberg New Economy. He joins us on the phone from
Speaker 1: New York City. Andy, before we get into the history here,
Speaker 1: why are we talking about this right now? I think
Speaker 1: why we're talking about this right now is because Ray Dahio,
Speaker 1: perhaps more than other Wall Street billionaires, has remained um
Speaker 1: very publicly and very volubly pro China in his views
Speaker 1: at a time when political sentiment in Washington, d c.
Speaker 1: And public sentiment in the United States more broadly has
Speaker 1: turned decisively anti China. And so it makes it seem
Speaker 1: as though he is somewhat out of step. And so Andy,
Speaker 1: let's dig into that. Why Why is Dahlio, like you say,
Speaker 1: still probably publicly pro China when a lot of you know,
Speaker 1: his his peers on Wall Street have taken or at
Speaker 1: least backed away from their support. Well, I think most
Speaker 1: fundamentally because China is where the money is and where
Speaker 1: the opportunities are now for Wall Street giants like Bridgewater,
Speaker 1: like black Stone, black Rock and and so on. I mean,
Speaker 1: there's there's been a lot of very negative focus on
Speaker 1: the collapsing price of Chinese equities as presidentigen Thing cracks
Speaker 1: down on property and big tech platforms and after school
Speaker 1: tutoring and so on. But you know, don't forget the
Speaker 1: Chinese economy actually is motoring along quite well. Reason that
Speaker 1: it's reasonably healthy. It's attracted, um, it actually attracted more
Speaker 1: attracts more direct foreign investment in the United States now,
Speaker 1: UM companies are investing more and more. Despite all the
Speaker 1: talk about supply chains retreating from China, US companies continue
Speaker 1: to invest there um and in the Chinese companies were
Speaker 1: investing more in the United States. So, you know, big picture,
Speaker 1: there are opportunities plus and here's the decisive things for
Speaker 1: Wolf Street. China needs the technical expertise. Doesn't necessarily need
Speaker 1: the money. He's got plenty of money, but what it
Speaker 1: needs is expertise to help develop a sophisticated financial uh industry. Well, Andy,
Speaker 1: there's a great new piece published today on the Bluebirg
Speaker 1: Terminal by our colleague Catherine Burton that talks about Dahio's
Speaker 1: China fascination and that it predates ties to Beijing's billions,
Speaker 1: that is the money that Bridgewater handles for China. So
Speaker 1: take us back years ago, decades ago to really understand
Speaker 1: Dahlio's connection to China. Yeah. Look, I got to say
Speaker 1: that there's nothing particularly unusual in Ray Dalio's history with China.
Speaker 1: I mean, it's pretty much par for the course. Is
Speaker 1: this is what Wall Street billionaires do. Um Over the years,
Speaker 1: they've invested millions and millions of dollars and charitable good
Speaker 1: works in China. Ray Dalio himself apparently invests something like,
Speaker 1: according to our stories, something like a hundred and fifty
Speaker 1: million dollars. Well, you know, Steve Schwartzman, founder of black Stone,
Speaker 1: kicked in a hundred million dollars of his own money
Speaker 1: into a scholarship program at Chinhua University, which is President
Speaker 1: che Ching Ping's almintor um. You know, the Gates Foundation
Speaker 1: over the years has put in four hundred million dollars
Speaker 1: to fight disease in China. I mean, this is just
Speaker 1: what people, what billionaires do in order to win influence,
Speaker 1: one might say, curry favor with with Chinese uh, leaders
Speaker 1: and Andy, like you just laid out, I mean across
Speaker 1: Wall Street, both firms and billionaires courting China. What does
Speaker 1: that mean for their relationship with Washington? Because if you
Speaker 1: think of the climate in both parties right now, it
Speaker 1: seems like the sentiment against you know, money flowing into China,
Speaker 1: it's pretty negative right now. Yeah, it sort of puts
Speaker 1: Wall Street on a collision course with Washington. I mean,
Speaker 1: the real hoops in Washington d C. Essentially believe that
Speaker 1: pumping money into China is giving comfort and support to
Speaker 1: the enemy. Now, the Biden administration, of course, wouldn't go
Speaker 1: nearly um that far, although it is moving in a
Speaker 1: generally that direction. It inherited tariffs, trade tariffs on China,
Speaker 1: it inherited sanctions from the Trump administration, and indeed it's
Speaker 1: adding to them. Just the other day, at blacklisted the
Speaker 1: company d j I, which is the world's largest manufacturer
Speaker 1: of all drones. So increasingly there is a tension between
Speaker 1: wool Street's ambition for China and Washington's ambition to put
Speaker 1: economic relations with China into a ball. Andy, Well, we
Speaker 1: have you. I don't know if it's gonna be the
Speaker 1: last time we have you before the end of the year.
Speaker 1: Just in the last thirty seconds we have with you,
Speaker 1: what is the main thing we need to watch between
Speaker 1: the US and China going into Look, the big issue
Speaker 1: I think is is Taiwan. Um that you have a
Speaker 1: lot of uh military activity now in the Taiwan straight
Speaker 1: and both the Chinese and US leaders to recognize that, um,
Speaker 1: it's dangerous and UM there need to be Godrail. Andy Brown,
Speaker 1: editorial director at Bloomberg New Economy, knows all things China,
Speaker 1: spent years living in China. Andy, thank you so much
Speaker 1: for taking the time and joining us on Bloomberg Business Week.
Speaker 1: Oh no, no, no, this is not a honey Please,
Speaker 1: I'll do the riding revels to good question. This is
Speaker 1: the drive to the Globe on Bloomberg Radio, where we
Speaker 1: are just under ten minutes away from the close of
Speaker 1: trading on this Monday, December one, Tim Statue and Kitty
Speaker 1: grabbed up live in the Bloomberg Interactive Broker studio. Let's
Speaker 1: get into it with Michael Sheldon, executive director and chief
Speaker 1: investment Officer at High Tower r d M Financial Group.
Speaker 1: He joins us on the phone from Westport, Connecticut. High
Speaker 1: Tower r d M Financial Group has one point two
Speaker 1: billion dollars in assets under management that as of October one. Michael,
Speaker 1: how are you good? Thanks very much, appreciate your having me.
Speaker 1: We'll help us understand what's going on in the trade today.
Speaker 1: We are bouncing off of session lows, but still we're
Speaker 1: seeing a see if red across the screen, a three
Speaker 1: day to kline uh out to close at a three
Speaker 1: day declient. I'm wondering if this is more about omicrons
Speaker 1: fears and the virus spiking, or more about what what's
Speaker 1: happening and or what's not happening in Washington, d C. Yeah,
Speaker 1: I think it's a combination of factors. Obviously, the markets
Speaker 1: are more unsettled than they have been in some time.
Speaker 1: I think the main factors are the ones you just mentioned,
Speaker 1: but to just sort of delve into those, if you
Speaker 1: look at the FED, the FED has really provided a
Speaker 1: tremendous amount of accommodation over the past couple of years
Speaker 1: or so, and they're slowly shifting gears towards removing some
Speaker 1: of that accommodation. So they're sort of tapping on the
Speaker 1: brakes just a little bit. But I think it's also
Speaker 1: important to keep in mind that historically, at least in
Speaker 1: the first twelve months when the Fed does start raising
Speaker 1: rates and there's still some ways away from that, equity
Speaker 1: markets have posted solid returns in that first twelve month period.
Speaker 1: So that's that's one thing. And also the Federal Reserve
Speaker 1: can shift policy, They can adjust policy if need be. Uh.
Speaker 1: The second is obviously the virus. We've had a surge
Speaker 1: in cases over the past several over the past several weeks,
Speaker 1: and right now there's a lot of uncertainty about what's
Speaker 1: going on in the viru lens of the virus. If
Speaker 1: you look at some of the data over the weekend
Speaker 1: from South Africa, it looks like this virus spreads more
Speaker 1: easily but may not be as virulent. And then lastly,
Speaker 1: it's inflation. And obviously we're seeing some of the highest
Speaker 1: rates in terms of inflation that we've seen in decades.
Speaker 1: We think there's going to probably be some moderation inflation
Speaker 1: as we go through the year. And I would just
Speaker 1: keep an eye on very simple things like the number
Speaker 1: of tankers off the coast of California, or for example,
Speaker 1: the Baltic Try Freight Index, which measures freight rates, and
Speaker 1: both of those have started to come up. So I
Speaker 1: think those are the main factors that investors are watching.
Speaker 1: And Michael, I'd love to hear your thoughts on what
Speaker 1: the virus means for inflation and expect expectations going forward,
Speaker 1: because obviously, if you look at global supply chains already
Speaker 1: very stressed. I mean, if this adds even more stress,
Speaker 1: if you have people going back to spending their money
Speaker 1: on goods, I would love to hear your thoughts on
Speaker 1: whether that, you know, could cause inflation concerns to even
Speaker 1: become more of a focus. Yeah, I think it's that's
Speaker 1: a great question. And you know what's interesting if you
Speaker 1: step back for this was this was no we've been
Speaker 1: a no normal economic sort of cycle. If you go
Speaker 1: back to early two thousand twenty when the economy shut down,
Speaker 1: basically people were at home and they were spending money
Speaker 1: on things like their home, their home office, and their
Speaker 1: homes and things of that nature. So if you look
Speaker 1: at goods, spending on goods surged very high. Spending on
Speaker 1: services actually came down dramatically. People weren't going out to restaurants,
Speaker 1: they weren't traveling, and so you had a surgeon spending
Speaker 1: on consumer goods now. I think what you'll start to
Speaker 1: see as we get into two thousand twenty two, if
Speaker 1: we can get past the virus and that starts to
Speaker 1: settle down, I think you'll start to see a pick
Speaker 1: up and spending on services and some of the spending
Speaker 1: on goods, which is really above the historical levels, will
Speaker 1: start to cool down. And if that's the case, then
Speaker 1: you should start to see some of the supply chain
Speaker 1: is you start to gradually moderate. And we're also seeing
Speaker 1: a number of people getting back into the labor force.
Speaker 1: We're not where we were beforehand. We're still several million
Speaker 1: jobs short, but I think that's heading in the right
Speaker 1: direction as well. So overall those two, that sort of
Speaker 1: combination should eventually help to reduce inflationary pressures over time.
Speaker 1: I'm wondering what if, and the look I hate to
Speaker 1: be so dismal here, but I'm I'm wondering what happens
Speaker 1: if we don't get the variant under control. Well, I
Speaker 1: think that certainly could be a problem. And I think
Speaker 1: I'm sorry, go ahead, or there's another variant. Yeah, I
Speaker 1: think we have to. I think we're living in a
Speaker 1: world right now where there are going to be variations
Speaker 1: to the original virus that we had. I think, unfortunately,
Speaker 1: that's just the world we're living in. It seems from
Speaker 1: the science that the more people who get vaccinated and
Speaker 1: protect themselves, the more the country can sort of get
Speaker 1: back on track. And we may not be living in
Speaker 1: the same world we were pre two thousand and twenty,
Speaker 1: but I think the economy has learned to adapt. And
Speaker 1: I don't see I don't see closures the way we
Speaker 1: had them in early two thousand twenty coming back anytime soon.
Speaker 1: We could have localized shutdowns and closures, but I don't
Speaker 1: see anything at a national level. And Michael, how do
Speaker 1: you position a portfolio around that uncertainty, the uncertainty about
Speaker 1: what kind of world we will be living income, Well,
Speaker 1: that's a good question. And importantly to preface that, I
Speaker 1: would say that, Uh, for investors, it's important to point
Speaker 1: out that economic cycles typically last a number of years
Speaker 1: as opposed to months or quarters. When you have a
Speaker 1: bear market, a bear market of or more decline in
Speaker 1: the market, that's typically caused by the Federal Reserve raising
Speaker 1: rates significantly, and they do that when they have to
Speaker 1: slow down the economy, or sometimes there's an exogen exogeneous
Speaker 1: event like a surgeon oil prices, if oil prices were
Speaker 1: to go up more than over a six to twelve
Speaker 1: month period. So from our perspective, you know, we are
Speaker 1: seeing some some choppiness in the markets, and the markets
Speaker 1: are lacking a bit of leadership right now. But I
Speaker 1: think if you look at some of the economic indicators.
Speaker 1: For example, the Leading Economic Index came out this morning,
Speaker 1: it's up nine months in a row, and it's up
Speaker 1: eighteen of the last nineteen months. So I think that
Speaker 1: suggests that looking ahead over the next six to twelve months,
Speaker 1: the economy is likely to grow but remain choppy. So
Speaker 1: to get back to your question, I think you want
Speaker 1: to be diversified in your portfolio. UM. I think you
Speaker 1: want to have some technology in your portfolio, even though
Speaker 1: um there's been news about the concentration in that. But
Speaker 1: you need some growth in your portfolio to meet your
Speaker 1: long term investment objectives. We're looking at healthcare. We think
Speaker 1: that's one of the forgotten sectors and sort of a
Speaker 1: a GARP or growth at a reasonable price sector. And
Speaker 1: then you also want to have some exposure to the
Speaker 1: areas that are likely to benefit when the economy eventually
Speaker 1: starts to reopen. I guess you could call it reopening
Speaker 1: two point oh as we head through the through the
Speaker 1: spring into the summer, and Michael, just quickly, I am
Speaker 1: curious to hear your thoughts on tech when you think
Speaker 1: about the market in terms of sectors we have you
Speaker 1: know us about thirty seconds. Yeah, we're big believers in tech.
Speaker 1: There is a lot of disruptive technology going on, uh,
Speaker 1: in areas like the cloud and areas like artificial intelligence
Speaker 1: and five G. You do want to have some broad
Speaker 1: exposure in those areas. Uh. These kind of companies are
Speaker 1: very innovative and they're likely to generate the kind of
Speaker 1: returns within your portfolio. But you do want to have
Speaker 1: some very You do want to have some diversification, and
Speaker 1: you just want to be wary of the the weight
Speaker 1: if you have of technology winning your overall portfolio. Michael Sheldon,
Speaker 1: executive director and chief investment Officer at High Tower r
Speaker 1: DM Financial Group, joining us on the phone from Westport, Connecticut.
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