1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,160 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:26,520 Speaker 2: can also watch the show live on YouTube. Visit the 6 00:00:26,520 --> 00:00:31,280 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 7 00:00:31,280 --> 00:00:34,320 Speaker 2: mornings from seven to ten am Eastern from our global 8 00:00:34,360 --> 00:00:39,000 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 9 00:00:39,360 --> 00:00:42,920 Speaker 2: or anywhere else you listen and always I'm Bloomberg Radio, 10 00:00:43,080 --> 00:00:46,800 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app. She's been 11 00:00:46,800 --> 00:00:49,800 Speaker 2: speaking to Jerome poll all morning. We speak Claudia Sam 12 00:00:50,240 --> 00:00:54,840 Speaker 2: of Michigan about this report. Claudia, this changes the dialogue 13 00:00:55,120 --> 00:00:57,840 Speaker 2: for the Chairman of the Federal Reserve System. 14 00:00:59,080 --> 00:01:01,520 Speaker 3: The FED is going to look at one month and 15 00:01:01,880 --> 00:01:04,880 Speaker 3: just kind of take it in context of what we've 16 00:01:04,920 --> 00:01:08,000 Speaker 3: seen recently. Yeah, this month, you know, these are not 17 00:01:08,319 --> 00:01:11,120 Speaker 3: great numbers. It's a disappointment. I certainly looked at that 18 00:01:11,200 --> 00:01:15,400 Speaker 3: unemployment rate and yet we have seen solid gains. This 19 00:01:15,480 --> 00:01:18,040 Speaker 3: does not change the story. And honestly, at the FED 20 00:01:18,120 --> 00:01:20,240 Speaker 3: and a lot of places, all eyes are still on 21 00:01:20,280 --> 00:01:23,400 Speaker 3: the CPI and the inflation prints. We still have an 22 00:01:23,440 --> 00:01:26,000 Speaker 3: economy that's really moving in a labor market that's still 23 00:01:26,040 --> 00:01:29,360 Speaker 3: working well, although not in the way that we've seen 24 00:01:29,920 --> 00:01:32,240 Speaker 3: last year where it was still just going really strong. 25 00:01:32,360 --> 00:01:33,880 Speaker 2: I know they're going to be day dependent, but I 26 00:01:33,920 --> 00:01:37,280 Speaker 2: know that everybody listening across the nation and watching it 27 00:01:37,360 --> 00:01:42,800 Speaker 2: on YouTube wants to know from Claudia Sam the recession metric. Now, 28 00:01:42,800 --> 00:01:45,320 Speaker 2: you haven't had time to go out state by state 29 00:01:45,360 --> 00:01:48,960 Speaker 2: and readjust your acclaimed rule. But we had a number 30 00:01:48,960 --> 00:01:52,840 Speaker 2: of people this morning suggesting part of America is in recession. 31 00:01:53,000 --> 00:01:53,760 Speaker 2: Is that true? 32 00:01:55,120 --> 00:01:59,480 Speaker 3: No, that's not true. The recession indicator that I put 33 00:01:59,480 --> 00:02:03,240 Speaker 3: together this is you know, it's calibrated. It's you know, 34 00:02:03,800 --> 00:02:08,000 Speaker 3: looking at the national recessions that we've seen, there are 35 00:02:08,000 --> 00:02:11,280 Speaker 3: times where we have disruptions at you know, local levels. 36 00:02:11,320 --> 00:02:14,560 Speaker 3: Industry bases can be really important in an area like 37 00:02:14,600 --> 00:02:17,840 Speaker 3: California with teg and so you can see states or 38 00:02:17,880 --> 00:02:20,000 Speaker 3: localities move in one way that the rest of the 39 00:02:20,040 --> 00:02:23,640 Speaker 3: economy isn't. It's important to look at increases in unemployment rate. 40 00:02:23,680 --> 00:02:26,960 Speaker 3: These are not good and yet we don't we shouldn't 41 00:02:27,000 --> 00:02:30,160 Speaker 3: think of that as a recession a problem. 42 00:02:30,840 --> 00:02:33,480 Speaker 2: Claudia, sign with us right now. With markets moving, we 43 00:02:33,520 --> 00:02:35,079 Speaker 2: had a lot of red on the screen. We've now 44 00:02:35,120 --> 00:02:38,760 Speaker 2: lifted constructively. Small caps go up four tenths of a 45 00:02:38,800 --> 00:02:42,120 Speaker 2: percent of Russell two thousand. Lorii Calvacina to join us 46 00:02:42,200 --> 00:02:44,960 Speaker 2: later about now, in this eight o'clock hour, we come 47 00:02:45,000 --> 00:02:48,480 Speaker 2: to you commercial free across Apple, car play and YouTube, 48 00:02:48,600 --> 00:02:50,639 Speaker 2: Bloomberg podcasts. 49 00:02:50,000 --> 00:02:50,520 Speaker 4: And Claudia. 50 00:02:50,639 --> 00:02:53,320 Speaker 5: Just again, from the headline perspective, I think what's jumping 51 00:02:53,320 --> 00:02:55,320 Speaker 5: out for a lot of people just looking at various 52 00:02:55,560 --> 00:02:58,239 Speaker 5: reporting here is that headline unemployment rate of three point 53 00:02:58,360 --> 00:02:58,960 Speaker 5: nine percent. 54 00:02:59,040 --> 00:02:59,720 Speaker 4: And there's an. 55 00:02:59,720 --> 00:03:02,720 Speaker 5: Argument to me that the FED would, in fact, you know, 56 00:03:02,840 --> 00:03:05,440 Speaker 5: doesn't mind seeing that number go up because that may 57 00:03:05,440 --> 00:03:07,400 Speaker 5: give them some maybe more ammunition. 58 00:03:06,960 --> 00:03:09,280 Speaker 4: To cut rates. How do you think about that argument? 59 00:03:10,440 --> 00:03:14,359 Speaker 3: Well, first, it's not a flashing red number. The recession indicator. 60 00:03:14,400 --> 00:03:16,880 Speaker 3: The SSAM rule takes the three month average. I mean 61 00:03:16,880 --> 00:03:18,720 Speaker 3: this is, you know, conceptually we should do this on 62 00:03:18,800 --> 00:03:21,720 Speaker 3: any data release. And right now that SAM rule is 63 00:03:21,840 --> 00:03:25,320 Speaker 3: up twenty six bases points and the trigger is fifty yeah. Right, 64 00:03:25,400 --> 00:03:28,359 Speaker 3: so we are still far away from you know, red 65 00:03:28,400 --> 00:03:30,440 Speaker 3: alert territory. You never want to see it go up. 66 00:03:30,480 --> 00:03:32,920 Speaker 3: We saw sometimes last year where it did and then 67 00:03:32,960 --> 00:03:35,800 Speaker 3: it got revised away. So this is not good news. 68 00:03:35,800 --> 00:03:39,440 Speaker 3: But this is not just you know, hair on fire 69 00:03:39,560 --> 00:03:41,720 Speaker 3: kind of news, and it shouldn't change anything the Fed 70 00:03:41,800 --> 00:03:45,040 Speaker 3: is thinking today. That's just how they look at the data. 71 00:03:45,120 --> 00:03:48,200 Speaker 2: So let me translate it for you out on YouTube 72 00:03:48,560 --> 00:03:52,560 Speaker 2: live chat, doctor Sam just said Tom Keene was wrong. 73 00:03:52,680 --> 00:03:53,800 Speaker 6: Okay, just relax. 74 00:03:54,160 --> 00:03:57,000 Speaker 5: Hey, how about these revisions here to the prior month. 75 00:03:57,040 --> 00:03:59,920 Speaker 5: I mean it's almost almost a forty percent revision down 76 00:04:00,720 --> 00:04:03,560 Speaker 5: in that headline change in non farm payrolls. 77 00:04:04,160 --> 00:04:06,280 Speaker 4: Did their spreadsheets just not work last month? 78 00:04:08,160 --> 00:04:11,560 Speaker 3: No, the Bureau Labor Statistics knows what they're doing. You know, 79 00:04:11,640 --> 00:04:15,240 Speaker 3: it's hard. We have an over twenty five trillion dollar economy, 80 00:04:15,240 --> 00:04:17,960 Speaker 3: we have hundreds of millions of people working. It's really 81 00:04:18,000 --> 00:04:20,040 Speaker 3: tough to get a good read. And when you think 82 00:04:20,080 --> 00:04:22,120 Speaker 3: about it, we get that first read on the labor 83 00:04:22,160 --> 00:04:26,080 Speaker 3: market like within weeks of the Beuer of Labor Statistics 84 00:04:26,120 --> 00:04:30,440 Speaker 3: doing those surveys. So this we're gonna have noise. These 85 00:04:30,440 --> 00:04:33,760 Speaker 3: are not I mean again downward revisions taking away a 86 00:04:33,760 --> 00:04:36,320 Speaker 3: big number. That's not good, right. We'd like to see, 87 00:04:36,560 --> 00:04:39,919 Speaker 3: you know, big numbers going all the way forward, and 88 00:04:40,040 --> 00:04:44,080 Speaker 3: yet it's not surprising. Measurement has been very hard throughout 89 00:04:44,080 --> 00:04:48,960 Speaker 3: this whole cycle, and frankly, we get revisions like this, it's. 90 00:04:48,920 --> 00:04:52,120 Speaker 2: Not unusual on a death stile basis. Or I'll let 91 00:04:52,120 --> 00:04:54,320 Speaker 2: you go. You can divide by fists or ten so 92 00:04:54,440 --> 00:04:57,080 Speaker 2: death style, folks, is ten percent of the people out there, 93 00:04:57,200 --> 00:04:59,960 Speaker 2: is the way I'm using this here. Are we lump 94 00:05:00,760 --> 00:05:05,680 Speaker 2: and polarized in our labor economy, Claudia or can you 95 00:05:05,760 --> 00:05:08,479 Speaker 2: say it's one America and you can aggregate as Allan 96 00:05:08,560 --> 00:05:10,440 Speaker 2: Meltzer lectured me years ago. 97 00:05:13,200 --> 00:05:16,200 Speaker 3: It really depends what you're looking at. I will say 98 00:05:16,279 --> 00:05:19,039 Speaker 3: this labor market has worked for more of the death 99 00:05:19,080 --> 00:05:23,839 Speaker 3: styles than usual. The recovery has been and the wage 100 00:05:23,920 --> 00:05:26,520 Speaker 3: gains that have been made, there's a lot of it 101 00:05:26,800 --> 00:05:29,200 Speaker 3: at the bottom. Yeah, they were starting from a very 102 00:05:29,240 --> 00:05:31,720 Speaker 3: low place, so that's not necessarily saying a lot. But 103 00:05:31,760 --> 00:05:35,880 Speaker 3: this has been a more quote unquote inclusive recovery than 104 00:05:35,920 --> 00:05:38,880 Speaker 3: we have seen in a very very long time. And 105 00:05:38,920 --> 00:05:41,159 Speaker 3: the labor market is still in a very good place 106 00:05:41,920 --> 00:05:46,680 Speaker 3: for low wage workers, women, immigrants, people in marginalized groups. 107 00:05:46,720 --> 00:05:48,839 Speaker 3: I mean, you name it. This has been a very inclusive. 108 00:05:49,400 --> 00:05:50,839 Speaker 3: There's a lot of winds to go around. 109 00:05:50,880 --> 00:05:51,000 Speaker 5: Now. 110 00:05:51,040 --> 00:05:53,920 Speaker 3: If you ask people, they may not be feeling the winds, 111 00:05:54,160 --> 00:05:56,520 Speaker 3: and you ask businesses, they may not be feeling the winds. 112 00:05:56,600 --> 00:06:00,479 Speaker 3: This has been very disruptive. This has been a real slog, Paul. 113 00:06:00,520 --> 00:06:03,359 Speaker 2: I'm looking here and it's unfair to you and Claudia, 114 00:06:03,400 --> 00:06:05,159 Speaker 2: but I got the Bloomberg termine in front of me 115 00:06:05,200 --> 00:06:10,279 Speaker 2: doing fancy mathematics and the moving averages to doctor, doctor, 116 00:06:10,400 --> 00:06:14,560 Speaker 2: some folks is correct. I use three moving averages. I'm 117 00:06:14,560 --> 00:06:16,640 Speaker 2: not going to go into the math of it. And 118 00:06:16,720 --> 00:06:19,880 Speaker 2: they're not gloomy down the world's coming to an end. 119 00:06:20,600 --> 00:06:24,560 Speaker 2: The operative word is their flat flattering. We're just moving 120 00:06:24,640 --> 00:06:30,159 Speaker 2: along on a summed moving average basis, as Claudia. Sam 121 00:06:30,240 --> 00:06:31,640 Speaker 2: nailed there at eight thirty one. 122 00:06:32,080 --> 00:06:32,520 Speaker 4: Claudia. 123 00:06:32,520 --> 00:06:36,920 Speaker 5: We also saw the labor four participation rate. It's kind 124 00:06:36,920 --> 00:06:39,200 Speaker 5: of come in at sixty two point five percent, kind 125 00:06:39,200 --> 00:06:42,240 Speaker 5: of steady. Give us context for that number. 126 00:06:44,680 --> 00:06:47,960 Speaker 3: That number is so important, like that's the piece of 127 00:06:48,120 --> 00:06:51,320 Speaker 3: coming out of the big disruptions. I mean, I think 128 00:06:51,320 --> 00:06:54,400 Speaker 3: four years ago we had millions of people leaving the 129 00:06:54,480 --> 00:06:58,480 Speaker 3: labor market because of the pandemic, because of care responsibility, 130 00:06:58,520 --> 00:07:00,760 Speaker 3: I mean it just that was so justive and we 131 00:07:00,920 --> 00:07:05,159 Speaker 3: have not on the population as a whole, gotten back 132 00:07:05,160 --> 00:07:08,680 Speaker 3: to where we were four years ago. And yet we've 133 00:07:08,680 --> 00:07:10,840 Speaker 3: made a lot of progress. Prime age people in their 134 00:07:10,880 --> 00:07:13,280 Speaker 3: prime working years, they're back. We've made a lot of 135 00:07:13,480 --> 00:07:16,840 Speaker 3: really turning the corner last year on the recovery was 136 00:07:16,920 --> 00:07:20,520 Speaker 3: coming from more workers. We solved a labor shortage with 137 00:07:20,600 --> 00:07:24,080 Speaker 3: more labor and not fewer customers. The FED can only 138 00:07:24,160 --> 00:07:26,480 Speaker 3: do the second one, and we got workers back. So 139 00:07:26,520 --> 00:07:28,720 Speaker 3: that's one that's really important, and we have to keep 140 00:07:28,720 --> 00:07:31,000 Speaker 3: building on those games, and we absolutely have to keep 141 00:07:31,040 --> 00:07:35,560 Speaker 3: them so steady as she goes. There's that's very important, 142 00:07:35,680 --> 00:07:37,960 Speaker 3: and the FED is very much watching that number. 143 00:07:38,040 --> 00:07:40,000 Speaker 2: We got the luxury here. We can do this out 144 00:07:40,040 --> 00:07:43,240 Speaker 2: of Michigan with Claudia. Some it's International Women's Day. Some 145 00:07:43,280 --> 00:07:47,760 Speaker 2: people talk, others do, and Claudia sam is one of 146 00:07:47,760 --> 00:07:51,440 Speaker 2: those that has not talked but done, and also someone 147 00:07:51,520 --> 00:07:55,600 Speaker 2: named Bee Stevenson Betsy Stevenson as well at Michigan. Claudia 148 00:07:55,680 --> 00:08:00,240 Speaker 2: review the boom that we saw on women's employment i'll 149 00:08:00,240 --> 00:08:03,480 Speaker 2: say thirty years ago and the changes now and how 150 00:08:03,480 --> 00:08:07,760 Speaker 2: that folds into Paul's good question on labor participation. What's 151 00:08:07,800 --> 00:08:11,920 Speaker 2: the women dynamic that we've seen pre pandemic, into this 152 00:08:12,000 --> 00:08:14,640 Speaker 2: awful pandemic and now out of it. 153 00:08:16,200 --> 00:08:20,080 Speaker 3: We saw gains for women before the pandemic. I remember 154 00:08:20,120 --> 00:08:22,240 Speaker 3: that was a really good expansion. We were in a 155 00:08:22,280 --> 00:08:24,800 Speaker 3: good place and COVID took a lot away from us. 156 00:08:25,200 --> 00:08:27,920 Speaker 3: And what we've seen is we've come into this recovery, 157 00:08:28,000 --> 00:08:32,360 Speaker 3: particularly the past few years. We're back on track and 158 00:08:32,559 --> 00:08:36,400 Speaker 3: we are at a point. Last year women's employment women 159 00:08:36,440 --> 00:08:40,800 Speaker 3: in their prime working years hit all time highs. This 160 00:08:40,840 --> 00:08:44,160 Speaker 3: has been a generation's long progress to give women the 161 00:08:44,200 --> 00:08:48,600 Speaker 3: opportunity those who want to to work, and we're seeing 162 00:08:48,600 --> 00:08:51,240 Speaker 3: it and it's really important. There were some thin silver 163 00:08:51,320 --> 00:08:54,120 Speaker 3: linings that came out of COVID. It's very clear from 164 00:08:54,160 --> 00:08:57,120 Speaker 3: research that the work from home technology has helped open 165 00:08:57,200 --> 00:09:00,360 Speaker 3: up flexibility for women to be working. We have an 166 00:09:00,360 --> 00:09:02,640 Speaker 3: economy with a lot of we're getting more and more 167 00:09:02,679 --> 00:09:06,559 Speaker 3: part time jobs. People with caregiving responsibilities often need flexibility. 168 00:09:06,920 --> 00:09:11,040 Speaker 3: They're getting it, wages, I mean, you name it. We're 169 00:09:11,040 --> 00:09:14,240 Speaker 3: making progress. It's been slow, right, shouldn't be a twenty 170 00:09:14,320 --> 00:09:17,520 Speaker 3: twenty three story, but we are making progress and that's 171 00:09:17,520 --> 00:09:21,120 Speaker 3: a real testament to an economy that is working. 172 00:09:21,559 --> 00:09:24,000 Speaker 5: So we had a red headline just crossing tape. Recently, 173 00:09:24,240 --> 00:09:28,040 Speaker 5: FED swaps priced an additional FED easing in twenty twenty 174 00:09:28,080 --> 00:09:32,080 Speaker 5: four on jobs data, Claudia, does that seem reasonable to you? 175 00:09:32,360 --> 00:09:33,880 Speaker 4: Maybe a little bit of an overreaction. 176 00:09:35,760 --> 00:09:37,760 Speaker 3: My heart goes out to people that really need to 177 00:09:37,760 --> 00:09:40,400 Speaker 3: get this right because of their jobs. I mean, this 178 00:09:40,480 --> 00:09:43,080 Speaker 3: is the FED does not know what the FED is 179 00:09:43,080 --> 00:09:47,400 Speaker 3: going to do right because they do not have the data. Jpowe. 180 00:09:47,559 --> 00:09:50,000 Speaker 3: Every FED official has told us over and over again 181 00:09:50,080 --> 00:09:52,520 Speaker 3: they are not confident yet they need more data. Now. 182 00:09:52,559 --> 00:09:55,240 Speaker 3: There are subtle differences in what they tell us about 183 00:09:55,280 --> 00:09:58,000 Speaker 3: how close they are to confident or not. It's reading 184 00:09:58,040 --> 00:10:00,000 Speaker 3: the tea leaves. If you don't have a really good 185 00:10:00,040 --> 00:10:03,080 Speaker 3: FED speak Dakota ring, good luck right, Like this is 186 00:10:03,160 --> 00:10:05,600 Speaker 3: not again like we were talking about. I look at 187 00:10:05,600 --> 00:10:06,560 Speaker 3: these numbers and. 188 00:10:06,440 --> 00:10:08,960 Speaker 2: I'm like, whoa, whoa, whoa. Do you have a Dakota 189 00:10:09,080 --> 00:10:10,040 Speaker 2: ring for the Fed? 190 00:10:11,400 --> 00:10:13,880 Speaker 3: Well that's what working over a decade at the FED 191 00:10:13,920 --> 00:10:15,880 Speaker 3: gets you. I mean, you know, like you listen to 192 00:10:15,880 --> 00:10:19,160 Speaker 3: the FED speak right. When yesterday j Powell said not 193 00:10:19,240 --> 00:10:21,920 Speaker 3: too far right from getting confident. I was like, eh, 194 00:10:22,520 --> 00:10:24,840 Speaker 3: I mean, I was happy to hear it, but not 195 00:10:24,960 --> 00:10:28,000 Speaker 3: too far in FED land can be many months. 196 00:10:28,280 --> 00:10:28,920 Speaker 4: Is he is? 197 00:10:29,000 --> 00:10:33,400 Speaker 2: He is he wobbly need? Pardon me, he's wobbling need. 198 00:10:33,559 --> 00:10:37,960 Speaker 2: Senator Warrant Warren went after regulation that he's weak need 199 00:10:38,040 --> 00:10:41,200 Speaker 2: or wobblely need or right or whatever. I mean, they 200 00:10:41,240 --> 00:10:42,600 Speaker 2: really went after him yesterday. 201 00:10:42,600 --> 00:10:46,200 Speaker 3: Claudia, Yeah, no, it's but that's their job. I mean, 202 00:10:46,240 --> 00:10:48,760 Speaker 3: those hearings are for Congress to hold the FED accountable. 203 00:10:49,200 --> 00:10:51,360 Speaker 3: They should be asking the Fed tough questions. If they're not, 204 00:10:51,400 --> 00:10:54,439 Speaker 3: we have a big problem in terms of FED accountability. 205 00:10:54,679 --> 00:10:56,880 Speaker 4: Then there was Senator Kennedy from Louisiana. 206 00:10:57,000 --> 00:11:00,240 Speaker 2: Yes, Claudia, thank you so much. Claudia's I'm very I 207 00:11:00,320 --> 00:11:14,280 Speaker 2: love doing this right now. And this goes, folks to 208 00:11:14,320 --> 00:11:18,000 Speaker 2: how we piece the show together. Three four or five 209 00:11:18,080 --> 00:11:20,360 Speaker 2: days ago, I said, to the great team we've got 210 00:11:20,440 --> 00:11:23,560 Speaker 2: working twenty four to seven, just get Calvisina. I just 211 00:11:23,600 --> 00:11:26,000 Speaker 2: want to talk to her about the markets. And I 212 00:11:26,080 --> 00:11:30,160 Speaker 2: get that twenty years trailing, ten years trailing the Russell 213 00:11:30,200 --> 00:11:32,880 Speaker 2: two thousand is underperformed in video. I mean as a 214 00:11:32,920 --> 00:11:37,360 Speaker 2: generalization or the magnificent whatever. But I said, get the 215 00:11:37,400 --> 00:11:40,960 Speaker 2: magnificent Calvisina on because if you go back to twenty nineteen, 216 00:11:41,480 --> 00:11:43,920 Speaker 2: if the Russell two thousand just gives me a seventeen 217 00:11:43,960 --> 00:11:47,640 Speaker 2: percent pop or right back to record his Laurie, thank 218 00:11:47,640 --> 00:11:50,440 Speaker 2: you so much for joining us with RBC Capital Markets. 219 00:11:50,840 --> 00:11:53,640 Speaker 2: To me, small caps are sort of malign. Now they're 220 00:11:53,679 --> 00:11:56,520 Speaker 2: actually doing better than the zeitgeist? Do I have that right? 221 00:11:57,920 --> 00:11:59,959 Speaker 7: You're right, Tom, And you know, look, I was travel 222 00:12:00,320 --> 00:12:03,280 Speaker 7: I've been prouding pretty much since the last week of January, 223 00:12:03,440 --> 00:12:06,440 Speaker 7: and I got to the end of February, wrote my weekly, 224 00:12:06,840 --> 00:12:09,400 Speaker 7: and I realized that actually in February, small cats had 225 00:12:09,400 --> 00:12:11,560 Speaker 7: outperform large caps, and if you looked at the relative 226 00:12:11,640 --> 00:12:15,520 Speaker 7: ratio between small and large, it bottomed on February seventh, 227 00:12:15,600 --> 00:12:17,680 Speaker 7: And I would not have known that. And I didn't 228 00:12:17,679 --> 00:12:20,200 Speaker 7: know that just purely based on all the conversations I 229 00:12:20,280 --> 00:12:22,840 Speaker 7: was having with investors in February, because it was like 230 00:12:22,880 --> 00:12:24,880 Speaker 7: small caps are stuck in the dumps. After that great 231 00:12:24,960 --> 00:12:27,880 Speaker 7: November and December, they've gone right back in the toilet again, 232 00:12:28,320 --> 00:12:31,800 Speaker 7: and all the while they were slowly and stealthily crawling 233 00:12:31,800 --> 00:12:32,880 Speaker 7: their way off to the bottom. 234 00:12:33,200 --> 00:12:35,320 Speaker 2: Is there a leg here, folks, By the way, without 235 00:12:35,320 --> 00:12:39,559 Speaker 2: commercial interruption here or thrilled dev Lori Kelvissina here to 236 00:12:39,640 --> 00:12:44,560 Speaker 2: get us forward, Laurie, when everything's said and done, is 237 00:12:44,720 --> 00:12:47,880 Speaker 2: now the time for Russell two thousand? After this nice 238 00:12:48,000 --> 00:12:51,079 Speaker 2: leg up? Can you say you've got the energy the 239 00:12:51,840 --> 00:12:54,680 Speaker 2: bid to get out to record highs on Russell two 240 00:12:54,679 --> 00:12:56,640 Speaker 2: thousand up seventeen percent from here? 241 00:12:57,880 --> 00:13:00,320 Speaker 7: So I think we can if a couple of things 242 00:13:00,360 --> 00:13:02,960 Speaker 7: fall into place. So I think November and December, I 243 00:13:02,960 --> 00:13:06,840 Speaker 7: think that trade was all about anticipating the FED rate cut. 244 00:13:06,920 --> 00:13:08,719 Speaker 7: So I think that part of the story is done. 245 00:13:08,800 --> 00:13:11,480 Speaker 7: Small caps were maligned last year for their you know what, 246 00:13:11,520 --> 00:13:14,160 Speaker 7: aren't really that bad, but we're perceived as being bad 247 00:13:14,240 --> 00:13:17,280 Speaker 7: balance sheets and fears the FED was never going to cut. Well, 248 00:13:17,360 --> 00:13:20,240 Speaker 7: that expectation has shifted. If you look at positioning data, 249 00:13:20,280 --> 00:13:22,920 Speaker 7: if you look at Russell two thousand PE data, we're 250 00:13:22,920 --> 00:13:25,720 Speaker 7: basically back up to either you know, kind of averages 251 00:13:25,880 --> 00:13:28,559 Speaker 7: on the PE or three year highs on the positioning. 252 00:13:28,600 --> 00:13:30,480 Speaker 7: But we're not at all time highs. We're kind of 253 00:13:30,480 --> 00:13:33,480 Speaker 7: a middle endings trade just on a basis of valuation 254 00:13:33,600 --> 00:13:37,160 Speaker 7: and positioning. I think what's very interesting is that today, 255 00:13:37,240 --> 00:13:40,319 Speaker 7: with this jobs report, you've seen small cap futures actually 256 00:13:40,400 --> 00:13:43,880 Speaker 7: respond more sharply to the upside than large cap futures, 257 00:13:43,880 --> 00:13:46,920 Speaker 7: at least initially off the print. I think what small 258 00:13:46,960 --> 00:13:49,440 Speaker 7: caps are starting to react to in February is the 259 00:13:49,559 --> 00:13:53,280 Speaker 7: idea that the economy is just hotter than anticipated. And 260 00:13:53,320 --> 00:13:56,199 Speaker 7: typically we see that when the economy is running about trend, 261 00:13:56,240 --> 00:13:58,720 Speaker 7: and trend is about two point six percent on real GDP. 262 00:13:59,160 --> 00:14:02,240 Speaker 7: When you're above that two point six percent threshold, small 263 00:14:02,280 --> 00:14:05,679 Speaker 7: caps beat large caps. And if we're we've been kind 264 00:14:05,679 --> 00:14:07,800 Speaker 7: of around two percent. If we can get closer to 265 00:14:07,840 --> 00:14:10,439 Speaker 7: trend and convince the market that we're in a sustainably 266 00:14:10,480 --> 00:14:12,520 Speaker 7: hot economy, I think small caps. 267 00:14:12,240 --> 00:14:14,800 Speaker 5: Are really going to shine, all right, So small caps 268 00:14:14,800 --> 00:14:16,600 Speaker 5: are going to shine any sectors that we should be 269 00:14:16,679 --> 00:14:19,400 Speaker 5: focused on here, if in fact the economy is going 270 00:14:19,400 --> 00:14:21,360 Speaker 5: to hang in there, we're going to have, you know, 271 00:14:21,520 --> 00:14:22,960 Speaker 5: kind of some reduction rates. 272 00:14:24,520 --> 00:14:26,960 Speaker 7: So one of the sectors that does tend to do 273 00:14:27,120 --> 00:14:30,000 Speaker 7: well when we see consumer confidence improving if you look 274 00:14:30,000 --> 00:14:32,640 Speaker 7: at the Michigan sentiment data, and this is really true 275 00:14:32,680 --> 00:14:34,640 Speaker 7: across the market. Caps struck him, But I would say 276 00:14:34,680 --> 00:14:38,600 Speaker 7: financials and if you think about small cap in particular, 277 00:14:38,760 --> 00:14:41,200 Speaker 7: we've been talking about two areas that are more on 278 00:14:41,240 --> 00:14:44,520 Speaker 7: the cyclical side. One is consumer discretionary. It is a 279 00:14:44,560 --> 00:14:46,800 Speaker 7: sector that tends to do well coming off of a 280 00:14:46,840 --> 00:14:48,960 Speaker 7: recession low and I am not in the recession camp 281 00:14:49,040 --> 00:14:51,160 Speaker 7: by any stretch, but if you sort of think about 282 00:14:51,200 --> 00:14:54,800 Speaker 7: the zeitgeist of you know, just having a better economic outlook, 283 00:14:55,280 --> 00:14:58,360 Speaker 7: consumer discretionary stocks tend to do well. And we've also 284 00:14:58,480 --> 00:15:00,920 Speaker 7: just seen they're very cheap and small cap relative to 285 00:15:01,040 --> 00:15:03,640 Speaker 7: large cap. I also have been talking to people a 286 00:15:03,680 --> 00:15:06,920 Speaker 7: lot about how consumers, you know, our economis have done 287 00:15:06,920 --> 00:15:09,000 Speaker 7: a very good job of showing how the economy and 288 00:15:09,120 --> 00:15:11,680 Speaker 7: consumers at large, especially the high end or less sensitive 289 00:15:11,720 --> 00:15:14,040 Speaker 7: to short to short term rates. But I do think 290 00:15:14,040 --> 00:15:17,240 Speaker 7: the lower end consumer is still affected by short term 291 00:15:17,320 --> 00:15:19,480 Speaker 7: rates being high, and so if you get some relief there, 292 00:15:19,520 --> 00:15:21,400 Speaker 7: I think that should help lower end consumers, and I 293 00:15:21,400 --> 00:15:24,360 Speaker 7: think that should also help the small cap consumer discretionary companies. 294 00:15:24,920 --> 00:15:27,120 Speaker 5: So I know from your notes in the past or 295 00:15:27,160 --> 00:15:30,560 Speaker 5: you had a fifty one, fifty twenty twenty four SMP 296 00:15:30,720 --> 00:15:34,200 Speaker 5: five hundred target, we're pretty much there right now a 297 00:15:34,240 --> 00:15:36,040 Speaker 5: little bit higher than there. Does it need to take 298 00:15:36,080 --> 00:15:38,440 Speaker 5: a look at that and maybe think about where that 299 00:15:38,560 --> 00:15:39,720 Speaker 5: possibly could go higher. 300 00:15:41,000 --> 00:15:43,360 Speaker 7: Yeah, so it's a great question. We've been talking about 301 00:15:43,360 --> 00:15:45,240 Speaker 7: that a lot as well in our recent meeting. So 302 00:15:45,280 --> 00:15:47,360 Speaker 7: the fifty one to fifty is basically the median and 303 00:15:47,440 --> 00:15:50,280 Speaker 7: the average of five different models that we use. The 304 00:15:50,320 --> 00:15:53,960 Speaker 7: most conservative one of those models is rapidly improving, and 305 00:15:54,000 --> 00:15:57,120 Speaker 7: that's basically our GDP test, which says, you know, historically 306 00:15:57,280 --> 00:16:00,200 Speaker 7: stocks don't do that great and kind of flat to 307 00:16:00,280 --> 00:16:02,680 Speaker 7: two percent type GDP years. But of course we're right 308 00:16:02,720 --> 00:16:04,760 Speaker 7: on the cusp of that of two percent. So that 309 00:16:04,800 --> 00:16:07,480 Speaker 7: model is starting to improve and head in a better direction. 310 00:16:07,840 --> 00:16:10,640 Speaker 7: Our sentiment work has also been restraining our enthusiasm a 311 00:16:10,640 --> 00:16:13,800 Speaker 7: little bit. Aaii net bowls have been seeing right around 312 00:16:13,840 --> 00:16:16,520 Speaker 7: one standard deviation. You're usually flat over the next three 313 00:16:16,560 --> 00:16:18,200 Speaker 7: months when you get that, and so I keep looking 314 00:16:18,200 --> 00:16:22,120 Speaker 7: for this pullback that hasn't happened. But frankly, our valuation 315 00:16:22,240 --> 00:16:24,520 Speaker 7: model is what we've been talking about most in meetings. 316 00:16:24,640 --> 00:16:26,760 Speaker 7: This one was spot on last year. It was telling 317 00:16:26,760 --> 00:16:28,600 Speaker 7: you to look for twenty one to twenty two times 318 00:16:28,600 --> 00:16:31,360 Speaker 7: trailing pe in the market and forty seven to forty 319 00:16:31,400 --> 00:16:33,680 Speaker 7: eight hundred. I did not listen to it enough. Maybe 320 00:16:33,680 --> 00:16:35,400 Speaker 7: I'm going to be guilty of that again this year. 321 00:16:36,280 --> 00:16:39,080 Speaker 7: Right now, that model, which bakes in forecasts for inflation 322 00:16:39,240 --> 00:16:42,800 Speaker 7: interest rates in GDP, is anticipating about fifty four hundred 323 00:16:42,840 --> 00:16:44,840 Speaker 7: and a pe of over twenty three times on the 324 00:16:44,880 --> 00:16:46,120 Speaker 7: S and P at the end of this year. So 325 00:16:46,160 --> 00:16:49,080 Speaker 7: that's the one that points you to the bowl case, Laurie. 326 00:16:49,080 --> 00:16:52,400 Speaker 5: I was just wondering, in terms of leadership here, the 327 00:16:52,440 --> 00:16:54,800 Speaker 5: technology as long as we can remember, technology has been 328 00:16:54,840 --> 00:16:56,640 Speaker 5: the leadership here and Tom's been calling. 329 00:16:56,360 --> 00:16:59,360 Speaker 4: Out in Nvidia and what a tremendous move it's had there. 330 00:17:00,120 --> 00:17:03,080 Speaker 5: Still the case is, do we need technology to continue 331 00:17:03,120 --> 00:17:04,560 Speaker 5: to be the market leader here? 332 00:17:06,240 --> 00:17:08,920 Speaker 7: I don't think you do. And I've actually been debating 333 00:17:08,920 --> 00:17:11,320 Speaker 7: this with one of my colleagues internally, and this kind 334 00:17:11,320 --> 00:17:13,320 Speaker 7: of goes back to the idea of small cap versus 335 00:17:13,359 --> 00:17:15,600 Speaker 7: large cap. And look, I'm not going to make a 336 00:17:15,600 --> 00:17:17,440 Speaker 7: comment on anyone's stock. You know, some of my clients 337 00:17:17,480 --> 00:17:19,199 Speaker 7: have joke that the Mag seven is turning to the 338 00:17:19,200 --> 00:17:22,359 Speaker 7: Mag one. But the reality is that if you just 339 00:17:22,440 --> 00:17:25,520 Speaker 7: take a little bit of market cap out of those 340 00:17:25,640 --> 00:17:27,720 Speaker 7: top seven names, out of that Mag seven, you know, 341 00:17:27,800 --> 00:17:31,000 Speaker 7: just take a rain drop. It's a blood if you 342 00:17:31,119 --> 00:17:32,600 Speaker 7: take that, you know, think of it as water you 343 00:17:32,640 --> 00:17:34,400 Speaker 7: take that you put into the Rustle two thousand. It's 344 00:17:34,440 --> 00:17:37,400 Speaker 7: really enormous in percentage terms, and I think that's what 345 00:17:37,480 --> 00:17:39,160 Speaker 7: the way we have to think about it. I don't 346 00:17:39,160 --> 00:17:41,639 Speaker 7: think you have to get bearish on the prior leadership, 347 00:17:41,720 --> 00:17:43,439 Speaker 7: just say, hey, there are some other parts of the 348 00:17:43,480 --> 00:17:46,199 Speaker 7: market that deserve a bit of a catch up trade. 349 00:17:46,240 --> 00:17:48,560 Speaker 7: And one chart we've been having a lot of luck with. 350 00:17:48,720 --> 00:17:49,960 Speaker 7: I know I talked to you guys about this a 351 00:17:49,960 --> 00:17:53,000 Speaker 7: few weeks ago. It's just some bloomberg data that your 352 00:17:53,000 --> 00:17:57,040 Speaker 7: team is put together that tracks mag seven expectations on 353 00:17:57,119 --> 00:17:59,800 Speaker 7: earnings and compares those to the rest of the S 354 00:17:59,840 --> 00:18:03,040 Speaker 7: and P and that gap on consensus forecast. And these 355 00:18:03,080 --> 00:18:04,840 Speaker 7: are not my numbers, this is just what's south there 356 00:18:04,880 --> 00:18:07,119 Speaker 7: from the stock pickers is shrinking to less than three 357 00:18:07,160 --> 00:18:09,560 Speaker 7: percent for twenty twenty five. I continue to show that 358 00:18:09,720 --> 00:18:13,000 Speaker 7: chart in most meetings, and I'm finding clients are kind 359 00:18:13,040 --> 00:18:15,280 Speaker 7: of coming around to the idea of the earnings growth 360 00:18:15,280 --> 00:18:17,800 Speaker 7: advantage is just dissipating. And if you continue to boost 361 00:18:17,880 --> 00:18:21,159 Speaker 7: GDP forecasts Rustle two thousand, rest of the S and P, 362 00:18:21,280 --> 00:18:22,919 Speaker 7: those earnings forecasts are going to pick up. 363 00:18:23,280 --> 00:18:30,439 Speaker 2: Thanks, So much, Lori Kelvisina with this, Ellen Zetner joins us. 364 00:18:30,520 --> 00:18:32,159 Speaker 2: Right now, I'm going to cut to the chase my 365 00:18:32,280 --> 00:18:34,679 Speaker 2: chart of the week from many people, including your shop. 366 00:18:35,080 --> 00:18:39,480 Speaker 2: It's suddenly indications of a decline in wage growth. Are 367 00:18:39,480 --> 00:18:44,679 Speaker 2: we going to see in this report tangible lessening of 368 00:18:44,760 --> 00:18:48,320 Speaker 2: wage growth that rolls over into it ECI wages and 369 00:18:48,359 --> 00:18:52,040 Speaker 2: benefits that finally falls back to twenty nineteen levels? 370 00:18:52,160 --> 00:18:55,400 Speaker 8: Yes, I think we continue to see wage growth under pressure. 371 00:18:56,480 --> 00:18:59,200 Speaker 8: You know, in average hourly earnings, it's the mix effect, 372 00:18:59,240 --> 00:19:02,280 Speaker 8: who's who are we creating jobs for that that can 373 00:19:02,359 --> 00:19:07,040 Speaker 8: bounce that around. But you know, we're not expecting a 374 00:19:07,119 --> 00:19:12,960 Speaker 8: material slowing on the year over year. But you create 375 00:19:13,000 --> 00:19:16,520 Speaker 8: a lot more service sector jobs than expected at lower wages, 376 00:19:16,560 --> 00:19:20,680 Speaker 8: and you will get a further decline in growth and 377 00:19:20,720 --> 00:19:23,320 Speaker 8: average hourly earnings. But as you said, the employment cost 378 00:19:23,400 --> 00:19:26,440 Speaker 8: index is what really matters, and labor compensation is slowing, 379 00:19:26,960 --> 00:19:30,360 Speaker 8: and that means that your buying power for consumers are slowing. 380 00:19:31,040 --> 00:19:33,280 Speaker 8: It means that your wage pressures that companies would be 381 00:19:33,320 --> 00:19:36,800 Speaker 8: concerned about continues to recede. And so I think you 382 00:19:36,840 --> 00:19:40,560 Speaker 8: know that underpins what should be a slowing economy. This year, 383 00:19:40,600 --> 00:19:42,960 Speaker 8: But I do still think that we're set up for 384 00:19:43,840 --> 00:19:46,840 Speaker 8: probably stronger growth than people are expecting, even though. 385 00:19:46,640 --> 00:19:49,280 Speaker 5: Slower unemployment rate of three point seven percent, that's kind 386 00:19:49,280 --> 00:19:52,480 Speaker 5: of the headline that feels like full employment. Is that 387 00:19:52,560 --> 00:19:54,960 Speaker 5: kind of misleading on I mean, if I'm the President Biden, 388 00:19:55,040 --> 00:19:56,680 Speaker 5: I'm taking a huge victory lapp here. 389 00:19:56,880 --> 00:19:59,199 Speaker 8: Yeah. Well, all of these jobs numbers are something that 390 00:19:59,240 --> 00:20:02,320 Speaker 8: the president can take victory lap around, and I'm sure 391 00:20:02,359 --> 00:20:04,600 Speaker 8: he'll take advantage of that. I mean, we do have 392 00:20:04,680 --> 00:20:07,480 Speaker 8: a lot of people employed while still creating a lot 393 00:20:07,520 --> 00:20:10,240 Speaker 8: more jobs. And I think when you've got the population 394 00:20:10,359 --> 00:20:13,000 Speaker 8: growing this fast, I think when you've got immigration growing 395 00:20:13,000 --> 00:20:16,439 Speaker 8: this fast and the labor force growing this fast, you 396 00:20:16,520 --> 00:20:19,120 Speaker 8: can create a lot of jobs and keep the unemployment 397 00:20:19,200 --> 00:20:22,240 Speaker 8: rate lower than what normally would be the case. 398 00:20:22,680 --> 00:20:26,320 Speaker 5: There's been some concerns raised about where the jobs are 399 00:20:26,320 --> 00:20:30,399 Speaker 5: being created here. Maybe they're in they're concentrated in healthcare 400 00:20:30,440 --> 00:20:32,960 Speaker 5: and some other areas. Is that a viable concern here, 401 00:20:33,000 --> 00:20:36,600 Speaker 5: that maybe there's not a greater dispersion of workforce creation. 402 00:20:36,960 --> 00:20:42,680 Speaker 8: Yeah, So we like to see diffusion across broad sectors, right. Typically, 403 00:20:42,760 --> 00:20:45,439 Speaker 8: later in a cycle, you start to get diffusion to 404 00:20:45,480 --> 00:20:47,639 Speaker 8: come in and you're only you're putting all your eggs 405 00:20:47,680 --> 00:20:50,359 Speaker 8: in one basket, so to speak. I've not been as 406 00:20:50,440 --> 00:20:57,720 Speaker 8: concerned about diffusion coming in as some others. I think 407 00:20:57,760 --> 00:21:02,040 Speaker 8: a lot of the job surprises or in sectors where 408 00:21:02,080 --> 00:21:05,520 Speaker 8: we should be having surprises, where supply still we still 409 00:21:05,560 --> 00:21:07,959 Speaker 8: needed to backfill a lot of labor, and a lot 410 00:21:08,040 --> 00:21:11,119 Speaker 8: of it is, you know, immigration flows that are going 411 00:21:11,160 --> 00:21:16,879 Speaker 8: into the top sectors that they typically go into, manufacturing, construction, retail, 412 00:21:16,920 --> 00:21:18,040 Speaker 8: and leisure and hospitality. 413 00:21:18,200 --> 00:21:20,639 Speaker 2: You had a modeled recession a million years ago. It 414 00:21:20,680 --> 00:21:23,800 Speaker 2: seems now not that long ago, but there it was. 415 00:21:24,040 --> 00:21:27,000 Speaker 2: And the great credit to Ellen Zetner and your team 416 00:21:27,600 --> 00:21:31,400 Speaker 2: is you change that way before anybody else did and said, 417 00:21:31,440 --> 00:21:35,320 Speaker 2: you know what, it's just not as gloomy as we thought, 418 00:21:35,359 --> 00:21:39,639 Speaker 2: and we've seen this huge prosperity. Why have we seen 419 00:21:40,080 --> 00:21:43,959 Speaker 2: this prosperity? Is it just stimulus or is there another answer? 420 00:21:45,280 --> 00:21:48,000 Speaker 8: Well, the five trillion dollars in stimulus doesn't hurt. 421 00:21:48,760 --> 00:21:50,560 Speaker 2: I strongly support. 422 00:21:50,160 --> 00:21:54,719 Speaker 8: That it doesn't hurt, but that fiscal impulse doesn't last forever. 423 00:21:55,200 --> 00:21:58,480 Speaker 8: But as that fiscal impulse was fading, what we had 424 00:21:58,520 --> 00:22:02,000 Speaker 8: put in place, sound Pol sees to boost infrastructure spending, 425 00:22:02,119 --> 00:22:08,800 Speaker 8: to boost efficiencies in manufacturing facilities, to boost you know, 426 00:22:09,040 --> 00:22:14,320 Speaker 8: clean green energy spending, and so it's been another type 427 00:22:14,320 --> 00:22:17,800 Speaker 8: of fiscal impulse as opposed to just what we think 428 00:22:17,840 --> 00:22:21,040 Speaker 8: of as traditional stimulus. And so that's still flowing through 429 00:22:21,080 --> 00:22:25,040 Speaker 8: the economy. At the same time, we've had incredible flows 430 00:22:25,680 --> 00:22:31,800 Speaker 8: of immigration, and yes, undocumented immigration, but they work and 431 00:22:31,840 --> 00:22:36,000 Speaker 8: they earn and they demand and the economy is benefiting 432 00:22:36,160 --> 00:22:39,800 Speaker 8: from that as well. And so the Fed has had 433 00:22:39,800 --> 00:22:41,840 Speaker 8: to raise rates much further and faster than I think 434 00:22:41,880 --> 00:22:47,719 Speaker 8: anyone had expected. We have survived that, and largely because 435 00:22:47,720 --> 00:22:50,919 Speaker 8: of the gradual transformation of household balance sheets into a 436 00:22:51,000 --> 00:22:53,480 Speaker 8: very low fixed rate from years and years and years 437 00:22:53,560 --> 00:22:56,560 Speaker 8: of near zero interest rates. And so it's just this 438 00:22:56,680 --> 00:23:00,399 Speaker 8: confluence of factors that means that the cycle cann and 439 00:23:00,480 --> 00:23:03,960 Speaker 8: I didn't even mention productivity, which is, you know, all 440 00:23:04,000 --> 00:23:07,800 Speaker 8: of this is culminated into a twenty twenty three that 441 00:23:07,960 --> 00:23:12,240 Speaker 8: was much stronger growth than expected, a larger deceleration in 442 00:23:12,280 --> 00:23:15,359 Speaker 8: inflation than expected, and that can continue to a lesser degree. 443 00:23:15,359 --> 00:23:16,720 Speaker 8: That can continue this year. 444 00:23:17,040 --> 00:23:20,359 Speaker 2: And now, folks, with the sun up every longer day 445 00:23:20,520 --> 00:23:24,760 Speaker 2: and looking at NCAA March bandits and all we go 446 00:23:24,800 --> 00:23:28,800 Speaker 2: to Ellen Zetner for what matters In April? Do you 447 00:23:28,880 --> 00:23:32,320 Speaker 2: fish the Yellowstone River in Montana? I mean, have you 448 00:23:32,400 --> 00:23:34,880 Speaker 2: done that? You've done every other river in the West. 449 00:23:36,000 --> 00:23:37,600 Speaker 4: It's like prime season we. 450 00:23:37,640 --> 00:23:42,840 Speaker 8: Do like the pre runoff season that's closer to Mother's Day. 451 00:23:42,920 --> 00:23:45,119 Speaker 8: When you want to hit that, it means that Mom 452 00:23:45,240 --> 00:23:48,000 Speaker 8: is angry. But mom understands. 453 00:23:48,080 --> 00:23:49,560 Speaker 2: Mom understands if. 454 00:23:49,400 --> 00:23:51,760 Speaker 8: Fly fishing is important, but you have to hit it 455 00:23:51,880 --> 00:23:53,040 Speaker 8: just before the runoff. 456 00:23:53,560 --> 00:23:55,200 Speaker 4: The run off the st So the runoff. 457 00:23:54,920 --> 00:23:58,080 Speaker 8: Is when the snow melts and the rivers blow out. 458 00:23:58,359 --> 00:24:00,200 Speaker 8: So you got to hit it before the runoff off 459 00:24:00,280 --> 00:24:02,600 Speaker 8: and then you have to wait and then you come 460 00:24:02,680 --> 00:24:03,919 Speaker 8: back after everything received. 461 00:24:03,920 --> 00:24:06,280 Speaker 2: Are you like Canson? When did you call up you 462 00:24:06,280 --> 00:24:08,440 Speaker 2: know Ted and the rest of the crew at Morgan 463 00:24:08,480 --> 00:24:10,760 Speaker 2: Stanley And so I'm sorry the seer has got the 464 00:24:11,040 --> 00:24:13,120 Speaker 2: twelve feet of snow and is that like the best 465 00:24:13,160 --> 00:24:14,440 Speaker 2: fishing every. 466 00:24:14,400 --> 00:24:17,800 Speaker 8: Unfortunately it's a heavy conference time and in April May 467 00:24:17,960 --> 00:24:20,320 Speaker 8: that's very heavy conference times. 468 00:24:20,880 --> 00:24:21,119 Speaker 7: You know. 469 00:24:21,400 --> 00:24:24,960 Speaker 8: So uh no, so I but but you know what, 470 00:24:25,080 --> 00:24:27,080 Speaker 8: believe me, I'll get a lot. I'll get a lot 471 00:24:27,119 --> 00:24:30,200 Speaker 8: done this summer. Okay, jackson holl Well, I see you 472 00:24:30,280 --> 00:24:31,240 Speaker 8: around Jacksonville. 473 00:24:32,560 --> 00:24:34,760 Speaker 2: Is a snow good for fly fishing. 474 00:24:35,119 --> 00:24:37,320 Speaker 8: Snow is excellent for fly fishing. You need a lot 475 00:24:37,359 --> 00:24:38,840 Speaker 8: of it so that in the summer there's a lot 476 00:24:38,840 --> 00:24:41,120 Speaker 8: of runoff and the river stay healthy. 477 00:24:41,680 --> 00:24:42,680 Speaker 4: It should be good this year. 478 00:24:42,680 --> 00:24:48,120 Speaker 2: Then on the podcast, I want fly fishing on the podcast. 479 00:24:48,200 --> 00:24:50,120 Speaker 2: I don't care what she says about the job. 480 00:24:50,240 --> 00:24:51,680 Speaker 8: I don't know. You and I came on when I 481 00:24:51,720 --> 00:24:54,720 Speaker 8: started doing radio in two thousand and three with you, Tom, 482 00:24:54,920 --> 00:24:57,680 Speaker 8: You and Ken Ken and I would talk fly fish. 483 00:24:57,760 --> 00:24:58,439 Speaker 2: You talked about it. 484 00:24:58,480 --> 00:25:00,639 Speaker 8: He also loved it, and you gave us the stink 485 00:25:00,640 --> 00:25:01,400 Speaker 8: guy because you did. 486 00:25:01,320 --> 00:25:02,439 Speaker 4: Not like that at that right. 487 00:25:02,600 --> 00:25:03,040 Speaker 6: I don't know. 488 00:25:03,119 --> 00:25:04,960 Speaker 8: I don't know if folks have noticed, but Tom does 489 00:25:05,000 --> 00:25:07,200 Speaker 8: not like the attention being taken away from him. 490 00:25:07,600 --> 00:25:14,720 Speaker 2: No, trout, the size of your leg? Are they really 491 00:25:14,760 --> 00:25:15,160 Speaker 2: that big? 492 00:25:15,840 --> 00:25:17,080 Speaker 8: They can be, yeah, they can. 493 00:25:17,320 --> 00:25:19,040 Speaker 2: Like, what's the biggest fish you've ever caught? 494 00:25:19,440 --> 00:25:22,840 Speaker 8: Oh, gosh, I've only I've caught up to twenty four inches, 495 00:25:22,960 --> 00:25:25,240 Speaker 8: but you can get up to thirty two, which would 496 00:25:25,280 --> 00:25:27,200 Speaker 8: be really trophy size. Yeah. 497 00:25:27,800 --> 00:25:28,800 Speaker 6: Yeah. 498 00:25:28,840 --> 00:25:31,240 Speaker 2: Do you have like fish plastic up in the walls? 499 00:25:31,240 --> 00:25:33,480 Speaker 2: Like the whole living room fish. 500 00:25:33,520 --> 00:25:36,200 Speaker 8: No, No, we don't. Yeah, I don't have a lot 501 00:25:36,240 --> 00:25:40,080 Speaker 8: of fishing decorations, but we have an entire We took 502 00:25:40,160 --> 00:25:45,080 Speaker 8: a kitchen and turned it into a fly fishing closet, okay, 503 00:25:45,119 --> 00:25:47,200 Speaker 8: and so all of our equipment is in there. 504 00:25:47,320 --> 00:25:50,360 Speaker 2: Yeah. Ellen, thank you so much. There's a user can use. 505 00:25:50,880 --> 00:25:53,040 Speaker 2: Folks coming up. She'll be in the nine o'clock hour 506 00:25:53,080 --> 00:25:55,040 Speaker 2: in a week or two as we look a tour 507 00:25:55,200 --> 00:25:58,720 Speaker 2: of her fly fishing kitchen. Ellen's that on this job's day. 508 00:25:59,040 --> 00:26:12,399 Speaker 2: Really interesting there about the productivity of the nation. Joining 509 00:26:12,480 --> 00:26:15,440 Speaker 2: us right now, Cameron Dawson, she is with new Age's 510 00:26:15,920 --> 00:26:19,919 Speaker 2: new Edge Wells. She's given us just wonderful perspective on 511 00:26:20,000 --> 00:26:23,160 Speaker 2: the equity markets, and we're all nodding. On another day 512 00:26:23,160 --> 00:26:27,479 Speaker 2: of Nvidia up. I looked at price to sales and 513 00:26:27,840 --> 00:26:30,600 Speaker 2: we're at the sill. It's it's surreal. 514 00:26:31,680 --> 00:26:34,760 Speaker 1: The key thing with Nvidia, though, and this is the exception, 515 00:26:34,960 --> 00:26:37,719 Speaker 1: is that it's earning Sestiments for twenty twenty five are 516 00:26:37,800 --> 00:26:41,080 Speaker 1: up by four x over the last year, which has 517 00:26:41,119 --> 00:26:43,720 Speaker 1: been a key driver of why the stock has moved 518 00:26:43,800 --> 00:26:46,600 Speaker 1: up so much. You can't say the same thing about 519 00:26:46,640 --> 00:26:50,320 Speaker 1: all the other semi condition Apple, You certainly can't. Their 520 00:26:50,640 --> 00:26:53,119 Speaker 1: estimates have been flat. But even a name like Broadcom, 521 00:26:53,200 --> 00:26:56,600 Speaker 1: its estimates are up twenty five percent for twenty twenty five, 522 00:26:57,000 --> 00:26:59,479 Speaker 1: And so it does raise the point that some names 523 00:26:59,560 --> 00:27:01,960 Speaker 1: are going up because earnings are going up a lot. 524 00:27:02,160 --> 00:27:05,480 Speaker 1: Other names have that multiple expansion. That's part of the 525 00:27:05,760 --> 00:27:08,760 Speaker 1: of the lift, and that's where things could become more 526 00:27:08,800 --> 00:27:12,760 Speaker 1: precarious if the earnings estimate revisions slow down. But we're 527 00:27:12,760 --> 00:27:15,440 Speaker 1: not seeing that slow down in estimate revisions yet. 528 00:27:15,560 --> 00:27:17,399 Speaker 5: All right, let's brought it out to the market camera. 529 00:27:18,520 --> 00:27:20,720 Speaker 5: Do we need these big tech names to drive this 530 00:27:20,840 --> 00:27:24,960 Speaker 5: market higher? Or can other parts financials, industrials, other parts 531 00:27:24,960 --> 00:27:26,919 Speaker 5: of the market move this market higher? 532 00:27:27,000 --> 00:27:27,920 Speaker 4: Who's going to lead this. 533 00:27:28,160 --> 00:27:30,440 Speaker 1: The lesson from twenty twenty two is that you need 534 00:27:30,480 --> 00:27:33,200 Speaker 1: the biggest weights in the index to work if the 535 00:27:33,200 --> 00:27:35,679 Speaker 1: index overall is going to work. There were pockets in 536 00:27:35,720 --> 00:27:38,439 Speaker 1: twenty twenty two that did very well, stuff like energy, 537 00:27:38,760 --> 00:27:41,240 Speaker 1: but tech was down a lot, and thus the market 538 00:27:41,280 --> 00:27:43,280 Speaker 1: was down. So when it is such a big weight 539 00:27:43,320 --> 00:27:45,520 Speaker 1: in the index, it has to participate. 540 00:27:45,800 --> 00:27:48,800 Speaker 5: So do we do we stick with these names? Do 541 00:27:48,840 --> 00:27:50,960 Speaker 5: we add to these names? Do we start new positions 542 00:27:50,960 --> 00:27:53,600 Speaker 5: in these names? How do we get some exposure here. 543 00:27:53,920 --> 00:27:56,600 Speaker 1: I think that you respect the momentum, but we have 544 00:27:56,680 --> 00:28:00,000 Speaker 1: to be very aware that we're seeing parabolic moves higher. 545 00:28:00,359 --> 00:28:03,520 Speaker 1: I'd add a book to your book of the Summer List, 546 00:28:03,560 --> 00:28:07,040 Speaker 1: which is Walter Demer's sometime when it comes out to buy, 547 00:28:07,720 --> 00:28:10,560 Speaker 1: you won't want to. He has a page in there 548 00:28:10,600 --> 00:28:15,760 Speaker 1: that says parabolic advances do not end by moving sideways. 549 00:28:15,840 --> 00:28:19,360 Speaker 1: They end by the reverse parabolic down or straight lines down. 550 00:28:19,440 --> 00:28:22,520 Speaker 1: It's a quote from Bob Ferrell. So I think that 551 00:28:22,600 --> 00:28:24,560 Speaker 1: we have to keep that in mind. When you see 552 00:28:24,560 --> 00:28:29,840 Speaker 1: advances this sharp, they typically don't end in a nice way. 553 00:28:30,480 --> 00:28:31,560 Speaker 4: Okay, but not yet. 554 00:28:31,880 --> 00:28:35,880 Speaker 2: Yeap, and good morning to mister Demer. Of course, esteemed 555 00:28:36,000 --> 00:28:39,080 Speaker 2: in a Putnam investments over the years. This is ancient 556 00:28:39,160 --> 00:28:42,800 Speaker 2: history Putnam up in Boston. I got to ask you 557 00:28:42,880 --> 00:28:45,200 Speaker 2: about Samu I brought this up twice this week. I'm 558 00:28:45,200 --> 00:28:47,520 Speaker 2: gonna bring you in. I'm giving Samuel Way too much love. 559 00:28:47,600 --> 00:28:50,760 Speaker 2: I mean, he doesn't deserve it. He had a spectacular 560 00:28:50,960 --> 00:28:54,400 Speaker 2: essay that went beyond the normal blah blah blah about 561 00:28:54,440 --> 00:28:58,640 Speaker 2: active versus passive, and particularly the time continue in which Cameron, 562 00:28:58,640 --> 00:29:03,200 Speaker 2: You've been wonderful one, not short term idiocy, getting out 563 00:29:03,240 --> 00:29:06,080 Speaker 2: one year, getting up two year. Why should I be 564 00:29:06,120 --> 00:29:08,600 Speaker 2: in an active fun if I've got a four toh 565 00:29:08,600 --> 00:29:11,480 Speaker 2: one K and a three year five year perspective. 566 00:29:11,960 --> 00:29:15,720 Speaker 1: I think that the active versus pass passive debate should 567 00:29:15,760 --> 00:29:18,480 Speaker 1: be one that is on a spectrum instead of a 568 00:29:18,520 --> 00:29:20,680 Speaker 1: black and white. And what I mean by that is 569 00:29:20,680 --> 00:29:24,200 Speaker 1: that there are certain indices where passive makes a lot 570 00:29:24,200 --> 00:29:27,200 Speaker 1: of sense because they are so concentrated. Look at the 571 00:29:27,280 --> 00:29:30,320 Speaker 1: Russell one thousand growth, where fifty percent is in the 572 00:29:30,320 --> 00:29:33,480 Speaker 1: top ten names. You look to the value index, though 573 00:29:33,600 --> 00:29:35,920 Speaker 1: only twenty percent is in the top ten names, even 574 00:29:36,000 --> 00:29:40,120 Speaker 1: smaller for small caps, even smaller for international. What that 575 00:29:40,320 --> 00:29:42,479 Speaker 1: tells you is that you have a lot more shots 576 00:29:42,520 --> 00:29:46,440 Speaker 1: on goal to add value through stock selection in less 577 00:29:46,520 --> 00:29:49,640 Speaker 1: concentrated indices. And so I think that when we think 578 00:29:49,680 --> 00:29:52,760 Speaker 1: about active versus passive, that's where you're saying, let's pick 579 00:29:52,760 --> 00:29:56,040 Speaker 1: our spots carefully and use that fee budget carefully if 580 00:29:56,040 --> 00:29:58,640 Speaker 1: we're going to be paying up for active management, all. 581 00:29:58,560 --> 00:30:00,680 Speaker 5: Right, So for me paying up for active management, what's 582 00:30:00,680 --> 00:30:02,720 Speaker 5: an active manager going to tell me about valuation? 583 00:30:02,840 --> 00:30:03,040 Speaker 2: Here? 584 00:30:03,120 --> 00:30:06,080 Speaker 5: It feels like the stocks really all those October loaves 585 00:30:06,080 --> 00:30:07,520 Speaker 5: have moved so dramatically. 586 00:30:07,600 --> 00:30:09,840 Speaker 4: Yet, so I think about the earnings over that period 587 00:30:09,840 --> 00:30:12,560 Speaker 4: of time. I let's see a commenser increase in earnings. 588 00:30:12,760 --> 00:30:15,280 Speaker 6: No, it has been all valuation expansion. 589 00:30:15,280 --> 00:30:17,120 Speaker 1: I guess the good thing about earnings is that they're 590 00:30:17,160 --> 00:30:20,440 Speaker 1: not being cut, so flat is the new up. But 591 00:30:20,520 --> 00:30:23,360 Speaker 1: even if we look out over the two year forward, 592 00:30:23,600 --> 00:30:26,160 Speaker 1: and this is important because when you look two year forwarde, 593 00:30:26,160 --> 00:30:29,760 Speaker 1: you're effectively encapsulating all the hopes and dreams of earnings 594 00:30:29,960 --> 00:30:31,680 Speaker 1: growth over the next two years. 595 00:30:32,040 --> 00:30:34,320 Speaker 6: There we're trading at eighteen times. 596 00:30:34,320 --> 00:30:36,880 Speaker 1: That's the highest level that we've been at since twenty 597 00:30:36,920 --> 00:30:40,720 Speaker 1: twenty one, obviously a very different monetary policy environment. So 598 00:30:40,920 --> 00:30:44,920 Speaker 1: valuations are stretched, which is why in our active funds 599 00:30:45,000 --> 00:30:47,160 Speaker 1: we are looking for names. 600 00:30:46,800 --> 00:30:48,480 Speaker 6: That traded a discount to the market. 601 00:30:48,600 --> 00:30:51,840 Speaker 1: We're trading at about a twenty percent discount to our 602 00:30:51,920 --> 00:30:55,719 Speaker 1: underlying indices, and we think the purpose that that serves 603 00:30:55,800 --> 00:30:57,880 Speaker 1: is that when the market eventually turns, and we know 604 00:30:57,920 --> 00:31:00,680 Speaker 1: at some point it will, there's simply as air to 605 00:31:00,720 --> 00:31:02,840 Speaker 1: come out of those names because they haven't seen the 606 00:31:02,920 --> 00:31:04,240 Speaker 1: kind of HEADI valuations. 607 00:31:04,760 --> 00:31:08,040 Speaker 2: I'm fascinated by how quickly we've come. I'm looking at 608 00:31:08,040 --> 00:31:12,680 Speaker 2: close SPX yesterday fifty one fifty seven. How do you 609 00:31:12,800 --> 00:31:16,680 Speaker 2: frame out in your weekend note a reset to fifty 610 00:31:16,680 --> 00:31:19,240 Speaker 2: two hundred and fifty three hundred a yard anny fifty 611 00:31:19,280 --> 00:31:22,520 Speaker 2: four hundred and up, up and away to six thousand. 612 00:31:23,120 --> 00:31:25,120 Speaker 2: How do you sit down with a quill in your 613 00:31:25,160 --> 00:31:26,920 Speaker 2: hand and write the note? 614 00:31:27,120 --> 00:31:30,800 Speaker 1: Yeah, Look, I think that when we all cast aside 615 00:31:30,480 --> 00:31:34,120 Speaker 1: the expectation that you could see any downside and that 616 00:31:34,160 --> 00:31:36,800 Speaker 1: there is no fear in the market, we always say 617 00:31:36,880 --> 00:31:40,000 Speaker 1: that the only thing to fear is greed itself, which 618 00:31:40,040 --> 00:31:45,960 Speaker 1: is this idea that eventually crowded positioning, eventually stretched valuations 619 00:31:46,000 --> 00:31:48,720 Speaker 1: become a bigger issue for the market. The problem with 620 00:31:48,840 --> 00:31:53,360 Speaker 1: the though, is that complacency needs some kind of catalyst, 621 00:31:53,600 --> 00:31:56,640 Speaker 1: meaning that you can have a complacent market that persists 622 00:31:56,680 --> 00:31:59,920 Speaker 1: like ninety eight through two thousand. You need a catalyst 623 00:32:00,080 --> 00:32:03,600 Speaker 1: for that unwind to happen. So let's say growth estimates 624 00:32:03,600 --> 00:32:06,360 Speaker 1: start to come in. That's where your crowded positioning, your 625 00:32:06,400 --> 00:32:09,760 Speaker 1: stretch valuations, and you're chasing of all the strategies saying, oh, 626 00:32:09,800 --> 00:32:12,160 Speaker 1: let's ratchet up the numbers in our targets. 627 00:32:12,280 --> 00:32:14,640 Speaker 6: That's when that becomes an issue. 628 00:32:14,200 --> 00:32:16,120 Speaker 5: And it's interring time. You probably saw this in your 629 00:32:16,160 --> 00:32:18,280 Speaker 5: inbox as well. But Torstin Slock from Apollo is out 630 00:32:18,280 --> 00:32:20,400 Speaker 5: with a note this morning saying the strong uptrend and 631 00:32:20,440 --> 00:32:23,120 Speaker 5: inflation expectations is forcing the Fed to be more hawk 632 00:32:23,800 --> 00:32:26,480 Speaker 5: more hawkish. That could be a headwind for a off 633 00:32:26,560 --> 00:32:28,960 Speaker 5: job saying, yeah, we'll see that off the job side. 634 00:32:28,960 --> 00:32:30,840 Speaker 2: I got them. I can't remember where you are and 635 00:32:31,000 --> 00:32:34,240 Speaker 2: it's not your remit, but to me, there's a massive 636 00:32:34,280 --> 00:32:37,720 Speaker 2: ambiguity about eight thirty this morning. Nobody basically, you know, 637 00:32:37,800 --> 00:32:39,160 Speaker 2: as a sophisticate, i'd say. 638 00:32:39,000 --> 00:32:41,440 Speaker 1: Nobody has a clue, right, Nobody has a clue, and 639 00:32:41,480 --> 00:32:44,000 Speaker 1: then how do you interpret it right? And there's been 640 00:32:44,040 --> 00:32:46,040 Speaker 1: a lot of reasons to say, hey, let's ignore some 641 00:32:46,120 --> 00:32:46,920 Speaker 1: of these numbers. 642 00:32:47,160 --> 00:32:49,720 Speaker 6: I think the one thing to watch is that economic. 643 00:32:49,320 --> 00:32:53,600 Speaker 1: Surprises have rolled over over the last few weeks, which 644 00:32:53,640 --> 00:32:54,640 Speaker 1: is the reason. 645 00:32:54,320 --> 00:32:56,760 Speaker 6: Why yields have been moving a little bit lower. 646 00:32:57,440 --> 00:33:00,440 Speaker 1: But if they've not rolled over enough to see GDP 647 00:33:00,640 --> 00:33:03,320 Speaker 1: estimates get pat You've gone from one point two percent 648 00:33:03,400 --> 00:33:06,360 Speaker 1: expectations to two point one percent for twenty twenty four 649 00:33:06,680 --> 00:33:09,360 Speaker 1: this year already, and I think that's been another key 650 00:33:09,440 --> 00:33:10,960 Speaker 1: reasons by behind the lift of. 651 00:33:11,040 --> 00:33:12,920 Speaker 2: We I said, Okay, if we leave you without asking 652 00:33:12,960 --> 00:33:16,560 Speaker 2: you about Duke and UNC, please don't. Okay, good Cavin Dawson, 653 00:33:16,600 --> 00:33:19,320 Speaker 2: thank you so much for Duke and UNC Free with KEM. 654 00:33:19,400 --> 00:33:23,400 Speaker 2: Dawson of New Edge Wealth Management. This is a Bloomberg 655 00:33:23,480 --> 00:33:27,880 Speaker 2: Surveillance podcast, bringing you the best in economics, finance, investment, 656 00:33:28,080 --> 00:33:31,680 Speaker 2: and international relations. You can also watch the show live 657 00:33:31,920 --> 00:33:36,240 Speaker 2: on YouTube. Visit the Bloomberg Podcast channel on YouTube to 658 00:33:36,360 --> 00:33:39,760 Speaker 2: see the show weekday mornings from seven to ten am 659 00:33:39,800 --> 00:33:43,840 Speaker 2: Eastern from our global headquarters in New York City. Subscribe 660 00:33:43,840 --> 00:33:47,600 Speaker 2: to the podcast on Apple, Spotify, or anywhere else you listen, 661 00:33:47,920 --> 00:33:51,560 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 662 00:33:51,600 --> 00:33:53,160 Speaker 2: Bloomberg Business app.