WEBVTT - Bloomberg Surveillance TV: December 13, 2024 0:00:02.400 --> 0:00:08.600 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.400 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.640 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.680 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.360 --> 0:00:24.840 from our global headquarters in New York City. We are 0:00:24.880 --> 0:00:27.640 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.879 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:35.800 Terminal and the Bloomberg Business app. 0:00:36.320 --> 0:00:38.519 Jared Woodard of Bank of America seeing room to run 0:00:38.560 --> 0:00:42.360 in twenty twenty five, writing we favor equities given upside 0:00:42.400 --> 0:00:47.159 potential from broader earnings growth, higher productivity, and deregulation in 0:00:47.200 --> 0:00:54.560 the US prioritize cyclicals with exposure to enduring themes like defense, tech, SMID, industrials, 0:00:54.800 --> 0:00:57.440 and energy. Jared joins us now. Jered, good morning, Thank 0:00:57.480 --> 0:00:59.880 you for being with us. Happy holidays. We're launching that 0:01:00.080 --> 0:01:03.040 today a special breaking news Jared, I want to start 0:01:03.040 --> 0:01:05.320 with this idea of a broadening out at a time 0:01:05.319 --> 0:01:07.000 we're in the past couple of weeks we've seen a 0:01:07.000 --> 0:01:09.280 real stalling in that kind of activity. 0:01:09.680 --> 0:01:10.559 What makes you. 0:01:10.480 --> 0:01:12.520 Think we're going to restart and go back to that 0:01:12.640 --> 0:01:15.440 idea of all of the stocks outside of the Magnificent 0:01:15.480 --> 0:01:16.480 seven outperforming. 0:01:17.959 --> 0:01:19.920 Well, you know, history's on our side here. If you 0:01:19.920 --> 0:01:22.880 look at the long sweep of the US equity market 0:01:23.120 --> 0:01:25.640 in the twentieth century, the average weight in the S 0:01:25.680 --> 0:01:28.720 and B five hundred by market cap through real economy 0:01:28.720 --> 0:01:32.679 sectors like financials, industrial, materials, energy, those parts of the 0:01:32.720 --> 0:01:37.640 economy occupied forty five percent, sometimes more of the S 0:01:37.680 --> 0:01:39.600 and B five hundreds that was the norm. 0:01:39.640 --> 0:01:42.360 Today they're much smaller. They're in the twenties altogether. 0:01:42.400 --> 0:01:46.800 And of course it's tech and consumer discretionary and communications, 0:01:46.800 --> 0:01:50.160 these growth stocks that comprise only fifty percent of the market. 0:01:50.480 --> 0:01:53.880 Our view is that as the policy environment shifts, particularly 0:01:53.920 --> 0:01:57.840 in the United States, as sticky inflation, higher growth potential 0:01:57.880 --> 0:02:02.280 as well make the value of those real economy sectors rise, 0:02:02.720 --> 0:02:07.160 investors shill be positioned for a moderation at the sector level, 0:02:07.720 --> 0:02:11.160 at the thematic level, because we think there's a lot 0:02:11.160 --> 0:02:14.600 of potential from the regulation from earnings broughting out across 0:02:15.000 --> 0:02:18.680 the economy and for higher productivity, particularly in the United States, 0:02:18.720 --> 0:02:21.360 continuing a trend of higher productivity that started even some 0:02:21.480 --> 0:02:21.920 years ago. 0:02:22.280 --> 0:02:25.160 At a certain point, do yields have the potential to 0:02:25.200 --> 0:02:27.440 stymy this and we've seen that over the past couple 0:02:27.440 --> 0:02:30.720 of sessions. Just a question marks around the deficit, question 0:02:30.800 --> 0:02:33.720 marks just around how much stickiness there is an inflation. 0:02:34.200 --> 0:02:36.320 Where do you weigh in on that? How dependent is 0:02:36.360 --> 0:02:38.880 this theory on yields saying kind of where they are 0:02:38.880 --> 0:02:39.480 going lower? 0:02:41.120 --> 0:02:44.160 Well, as I said allocators, we think that long term 0:02:44.800 --> 0:02:48.200 fixed income, especially government bonds and even investment great corporate 0:02:48.240 --> 0:02:51.120 bonds may not be as attractive in coming years as 0:02:51.120 --> 0:02:53.280 they have been in the last few years. You know, 0:02:53.480 --> 0:02:55.600 we've had this thesis on the end of sixty forty 0:02:55.840 --> 0:02:58.760 for a number of years now. That's basically played out 0:02:58.800 --> 0:03:00.560 quite well. If you look at some of the different 0:03:00.560 --> 0:03:05.400 acid allocation approaches in the market, familiar and unfamiliar. Having 0:03:05.480 --> 0:03:09.360 big allocations to long duration fixed income has been a 0:03:09.360 --> 0:03:11.720 losing move most if you look at it across the 0:03:11.760 --> 0:03:13.720 treasury curve, many parts of the market are actually still 0:03:13.760 --> 0:03:18.960 underwater from recent years. I'm not worried about rapid rise 0:03:19.000 --> 0:03:22.080 in bond yields hurting the equity market. I do think 0:03:22.160 --> 0:03:25.680 that we may see stickier inflation and stickier bond yields 0:03:25.720 --> 0:03:27.880 in years to come, in a way that makes it 0:03:27.960 --> 0:03:31.440 more attractive to be in credit and higher yielding parts 0:03:31.440 --> 0:03:33.960 of the fixed income market, and in short duration parts 0:03:34.120 --> 0:03:37.480 of the equity market, investing in companies that have real 0:03:38.160 --> 0:03:40.920 profits today, real cash flows today that they can deploy 0:03:40.960 --> 0:03:44.240 either into their businesses or to shareholders, rather than waiting 0:03:44.320 --> 0:03:47.960 for companies that might not see tangible profits until far 0:03:48.000 --> 0:03:48.800 out into the future. 0:03:49.160 --> 0:03:52.520 Jared, So you're describing a much more active approach to 0:03:52.600 --> 0:03:55.200 not just this whole market, but the bond market included 0:03:55.200 --> 0:03:57.080 in that. And we've had plenty of people come on 0:03:57.120 --> 0:03:59.760 here and say, everybody is an indexer now, the way 0:03:59.800 --> 0:04:03.600 that people are exposed to bonds are through indices. How 0:04:03.760 --> 0:04:07.040 unprepared there then are investors in twenty twenty five for 0:04:07.120 --> 0:04:10.560 what you're describing when sixty forty target dated funds and 0:04:10.720 --> 0:04:13.040 buy the whole market kind of strategies aren't going to 0:04:13.040 --> 0:04:14.640 work as well. 0:04:14.800 --> 0:04:17.560 Yeah, this is an extremely important point because both in 0:04:17.560 --> 0:04:19.560 the equity and the fixed income markets, we look at 0:04:19.600 --> 0:04:22.720 benchmarks today and they look more unbalanced than they've ever been. 0:04:23.400 --> 0:04:25.159 The S and P five hundred is something like two 0:04:25.200 --> 0:04:29.279 thirds comprisedive of growth stocks. The US aggregate bond benchmark 0:04:29.320 --> 0:04:32.800 and other familiar bond benchmarks that many people use are 0:04:32.839 --> 0:04:36.320 weighted at something like seventy percent toward long duration assets 0:04:36.320 --> 0:04:40.200 towards assets that benefit from deflation. Now, I think a 0:04:40.240 --> 0:04:42.320 more balanced approach is going to be extremely helpful in 0:04:42.360 --> 0:04:45.280 the future. It's already been a great benefit in the 0:04:45.320 --> 0:04:48.680 last several years, as investors who can wait in a 0:04:48.720 --> 0:04:52.919 more balanced way across asset classes capture different risk factors, 0:04:52.920 --> 0:04:56.800 not just one big deflationary or pro growth stock type 0:04:56.839 --> 0:04:59.919 risk factor can achieve better returns and better risk adjusted 0:05:00.480 --> 0:05:02.680 That's our call for twenty twenty five, Jared. 0:05:02.680 --> 0:05:04.599 When it comes to broad our asset classes, we're speaking 0:05:04.640 --> 0:05:07.760 with Chris Farona, strategist earlier, who pointed out that volatility 0:05:07.800 --> 0:05:09.919 is low the bond market, volatility is low in the 0:05:09.920 --> 0:05:13.159 equity market, but where it's not is the FX market 0:05:13.200 --> 0:05:17.000 and especially pairs particularly vulnerable to fiscal policy. 0:05:17.080 --> 0:05:17.720 Going forward. 0:05:17.760 --> 0:05:21.320 How worried are you about a broader contagion that starts 0:05:21.320 --> 0:05:23.839 and stems from currency markets. 0:05:25.000 --> 0:05:27.000 Well, I think if we if we fast forward five 0:05:27.080 --> 0:05:29.160 or ten years from now, we could look at at 0:05:29.160 --> 0:05:32.039 one data point from the future that would be valuable 0:05:32.080 --> 0:05:34.680 to help us allocate across assets today, it would be 0:05:34.680 --> 0:05:37.239 the level of the US dollar on a real tradeway 0:05:37.240 --> 0:05:39.760 to basis. The US dollars at the highest since nineteen 0:05:39.760 --> 0:05:43.480 eighty five. It's too strong. It prevents American exports from 0:05:43.520 --> 0:05:46.320 being competitive on the global market. Just as importantly, it 0:05:46.360 --> 0:05:50.279 prevents consumers in places like Europe and China from benefiting 0:05:50.360 --> 0:05:53.120 from the wealth that they produce. A rebalancing in the 0:05:53.120 --> 0:05:57.479 global economy, a slightly weaker dollar, slightly stronger currencies elsewhere 0:05:57.680 --> 0:06:03.360 could create the conditions for some really incredible potential growth. Alternatively, 0:06:03.440 --> 0:06:06.320 if policy makers and leaders can't find a way toward 0:06:06.760 --> 0:06:09.159 greater balance in the global economy flows of goods and 0:06:09.160 --> 0:06:11.880 flows of capital, and the dollar remains as strong as 0:06:11.880 --> 0:06:15.799 it is, it creates the conditions for a very unpleasant, 0:06:16.040 --> 0:06:18.640 really kind of a bubble in which there's no alternative 0:06:18.760 --> 0:06:21.680 to US tech and even to US treasuries for all 0:06:21.680 --> 0:06:22.520 the capitals. 0:06:22.160 --> 0:06:22.960 Flowing around the world. 0:06:23.080 --> 0:06:25.200 I think that what happens with the dollar, and whether 0:06:25.240 --> 0:06:29.120 we can avoid competitive currency devaluation in the years to come, 0:06:29.520 --> 0:06:31.960 is one of the most important trades and questions to 0:06:32.040 --> 0:06:33.240 answer in the market today. 0:06:33.440 --> 0:06:34.120 But Jared, how. 0:06:34.000 --> 0:06:37.360 Would policies mean a weaker dollar when the ones that 0:06:37.400 --> 0:06:39.599 are coming in and being discussed right now by the 0:06:39.600 --> 0:06:43.000 Trump transition actually call for a higher dollar When you 0:06:43.000 --> 0:06:44.240 think of things like tariffs. 0:06:46.040 --> 0:06:48.760 There's a lot of debate right now on tariffs, on 0:06:48.800 --> 0:06:52.080 many other policies. I think economic history gives a much 0:06:52.120 --> 0:06:55.720 different picture than the consensus today. Our economists Bank of 0:06:55.720 --> 0:06:57.960 America have written a lot about this, and they suggest 0:06:58.279 --> 0:07:00.680 even if you take a kind of a standard view 0:07:00.720 --> 0:07:02.680 on how tariffs and some of these other policies might 0:07:02.720 --> 0:07:05.560 affect the economy, even in that case it's a one 0:07:05.560 --> 0:07:08.480 time shock rather than a persistent effect on the market, 0:07:08.640 --> 0:07:10.040 and the effects may actually prove. 0:07:09.880 --> 0:07:10.640 To be quite small. 0:07:11.400 --> 0:07:14.680 I think there's actually a lot of potential for managing 0:07:14.720 --> 0:07:18.920 trade relationships, managing flows of capital that many countries have 0:07:19.000 --> 0:07:21.200 done for a very long time. The West hasn't engaged 0:07:21.200 --> 0:07:23.920 in that very much. And so the perspective of some 0:07:24.000 --> 0:07:27.240 of these Western policy makers, including the US, is that 0:07:27.320 --> 0:07:29.000 really we're actually trying to get back to a level 0:07:29.000 --> 0:07:32.440 playing field when it comes to managing exports, industrial policy, 0:07:32.640 --> 0:07:36.600 and trade relationships. Bringing things to a level playing field 0:07:36.640 --> 0:07:39.440 that until now have been actually quite one sided. So 0:07:39.520 --> 0:07:41.680 if that's true, then it may be that the effects 0:07:41.680 --> 0:07:45.239 of these policies are much less inflationary, much less tagflationary 0:07:45.360 --> 0:07:47.960 than a lot of consensus has believed so far. 0:07:48.320 --> 0:07:50.840 Do you believe potentially we'll see a mar Lago record 0:07:50.840 --> 0:07:52.240 over the course in the next four years. 0:07:53.800 --> 0:07:54.360 I don't have. 0:07:54.280 --> 0:07:57.080 Any special insight, although I do think that there's a 0:07:57.120 --> 0:07:59.840 lot of potential for leaders around the world to get 0:07:59.880 --> 0:08:02.920 the together and find a new path, not just with 0:08:02.920 --> 0:08:06.760 their currencies but with these other bigger picture relationships, to 0:08:06.800 --> 0:08:08.920 take advantage of some of the potential. You know, in 0:08:09.000 --> 0:08:13.040 Europe and shine other parts of the world, policymakers know 0:08:13.400 --> 0:08:17.440 that overproducing a good export is not going to be 0:08:17.520 --> 0:08:19.840 a solution. They've been doing it for a while and 0:08:19.880 --> 0:08:24.680 it's not working. America knows that running massive debt epicits 0:08:24.800 --> 0:08:29.360 and increasing debt to fund unbalanced consumption is not going 0:08:29.400 --> 0:08:32.520 to be a workable path either. So it's clear there's 0:08:32.520 --> 0:08:37.120 some potential here for a broad, negotiated kind of a settlement. 0:08:37.760 --> 0:08:39.760 The open question is whether we have the right leaders 0:08:39.760 --> 0:08:41.440 for the job now and in the future. 0:08:42.520 --> 0:08:44.960 Jared, just before you go, you did make this point 0:08:45.000 --> 0:08:46.559 I do want to dig a little bit further where 0:08:46.559 --> 0:08:48.600 you said, if you could see one data point to 0:08:48.640 --> 0:08:51.080 set asset allocation into twenty thirty, it would be the 0:08:51.160 --> 0:08:53.840 level of the US dollar. Can you give us a 0:08:53.880 --> 0:08:57.160 sense of how the asset allocation would change if it 0:08:57.200 --> 0:08:58.959 were strong or if it were weak. 0:09:00.840 --> 0:09:03.600 Let's say, just you know d x Y get getting 0:09:03.640 --> 0:09:08.400 down to ninety or even to eighty, A great global 0:09:08.440 --> 0:09:11.640 rebalancing in goods and capital. I think that unlocks potential 0:09:12.520 --> 0:09:15.600 across the market, so deep value arguably value traps in 0:09:15.640 --> 0:09:18.480 the market today, Places like European and Chinese equities could 0:09:18.520 --> 0:09:22.679 suddenly become live options again for investors. Tech sectors, growth 0:09:22.679 --> 0:09:27.040 stocks suddenly become much less attractive compared to value. Real 0:09:27.080 --> 0:09:30.600 assets can perform really well. Alternatively, if there is no 0:09:30.640 --> 0:09:33.840 real policy leadership on the global stage, or there isn't 0:09:33.880 --> 0:09:36.360 a path to some kind of success, and you just 0:09:36.400 --> 0:09:40.719 see continued excessive dollar strength, let's let's think about you 0:09:40.760 --> 0:09:44.040 know d x Y at one twenty. Then the thesis 0:09:44.040 --> 0:09:46.720 theories just there simply is no alternative to the US 0:09:46.720 --> 0:09:49.600 market and the dominance of growth stocks, of tech and 0:09:49.640 --> 0:09:52.800 treasuries and so on for recent decades would be expected 0:09:52.840 --> 0:09:55.080 to continue. The danger there, of course, is that's how 0:09:55.280 --> 0:09:57.880 most investors are already allocated today. That's where the big 0:09:58.200 --> 0:10:00.559 the length is in positioning. I think that could set 0:10:00.600 --> 0:10:05.040 up some really unpleasant overvaluation even bubble light condition that 0:10:05.080 --> 0:10:07.920 can create a lot of fragility and even volatility in 0:10:07.920 --> 0:10:08.880 the market at. 0:10:08.800 --> 0:10:09.800 A generational level. 0:10:09.840 --> 0:10:14.000 I think it's an extremely important policy moment, and given 0:10:14.040 --> 0:10:18.280 how extreme positioning evaluation is becoming, markets are really exposed 0:10:18.280 --> 0:10:21.319 to what happened in these big picture policy debates. 0:10:22.440 --> 0:10:24.320 In the years dot com. It's extremely important. 0:10:24.640 --> 0:10:27.600 Jared Witard, we look forward to speaking to you sooner 0:10:27.640 --> 0:10:29.840 than that to talk through what some of these policy 0:10:29.840 --> 0:10:32.200 implications are. Jared Witdard of Bank of America. We really 0:10:32.240 --> 0:10:44.240 appreciate your time. Chris joins us now. Chris, great to 0:10:44.240 --> 0:10:47.240 see you here, Welcome back. I'm just I'm not going 0:10:47.320 --> 0:10:49.440 to go with the puns, although I kind of want to. 0:10:49.880 --> 0:10:51.320 What do you make of the fact that we're just 0:10:51.360 --> 0:10:55.720 seeing such limited breaths or bad breath in the market 0:10:55.800 --> 0:10:59.520 right now with so few stocks gaining amid the recent 0:10:59.600 --> 0:11:01.560 eating out of some of the tech socks. 0:11:01.600 --> 0:11:03.240 Yeah, frankly, I think it's a little overstated. 0:11:03.320 --> 0:11:06.160 I mean, this is two weeks of some squishy internals, 0:11:06.200 --> 0:11:10.440 it's not two months or two years. The entire year 0:11:10.600 --> 0:11:13.400 twenty twenty four, we've had between seventy and eighty five 0:11:13.400 --> 0:11:15.280 percent of stocks of the two or day moving average, 0:11:15.320 --> 0:11:18.800 so this has been relatively broad for most of the year. 0:11:19.200 --> 0:11:21.199 I think the bar has to be higher before. 0:11:20.960 --> 0:11:23.400 You say, oh, my goodness, the breadth is deterioring to 0:11:23.440 --> 0:11:25.800 such an extent where it sends this awful message about 0:11:25.840 --> 0:11:27.599 what's going on under the service of the market. I 0:11:27.640 --> 0:11:29.400 don't think we're at that point yet. We're in the 0:11:29.440 --> 0:11:31.720 middle of December. As we know, it can be a 0:11:31.760 --> 0:11:34.000 seasonally choppy period here these next two or three weeks. 0:11:34.160 --> 0:11:36.000 You tend to resume with strength in the January. 0:11:36.040 --> 0:11:38.800 I think the question, Lisa will be does the market 0:11:39.200 --> 0:11:42.839 justify or does it continue to justify the level of. 0:11:42.760 --> 0:11:43.680 Bullishness that's out there. 0:11:43.720 --> 0:11:45.440 I mean, you start the segment by talking about what 0:11:45.480 --> 0:11:47.840 the expectations are for next year. So I think as 0:11:47.880 --> 0:11:50.640 analysts we have to ask ourselves is the market still 0:11:50.640 --> 0:11:52.440 living up to the hype? And that'll be the big 0:11:52.520 --> 0:11:54.120 question for us overcoming weeks. 0:11:54.160 --> 0:11:55.040 What is the hype? 0:11:55.120 --> 0:11:56.840 And I asked this because it is it earnings, is 0:11:56.880 --> 0:11:58.960 it policy or is it fed? Which is the most 0:11:59.000 --> 0:12:01.480 important hype for this market to live up too? 0:12:01.559 --> 0:12:01.679 Well? 0:12:01.679 --> 0:12:04.280 I think there's clearly this awakening am animal spirits. 0:12:04.280 --> 0:12:05.520 You see in the targets. 0:12:05.920 --> 0:12:08.400 The attitudes from the cell side today are remarkably different 0:12:08.440 --> 0:12:09.480 than they were a year ago. 0:12:09.679 --> 0:12:11.680 We did that exact same study twelve months ago. 0:12:12.080 --> 0:12:14.480 The street was looking for basically an unchanged S and 0:12:14.520 --> 0:12:17.240 P in twenty twenty four and what are we up? 0:12:17.280 --> 0:12:17.880 Twenty five percent? 0:12:18.040 --> 0:12:20.920 Right, So there's clearly a resetting of expectations here. 0:12:21.240 --> 0:12:23.640 And I don't think that's fatal or catastrophic. 0:12:23.800 --> 0:12:26.360 But you know, what we've always tried to answer is 0:12:26.760 --> 0:12:29.600 does the market justify that level of enthusiasm. I think 0:12:29.640 --> 0:12:32.760 the good answer so far is largely yes. I don't 0:12:32.760 --> 0:12:34.959 think the internals have deteriorated to such an extent. I 0:12:35.000 --> 0:12:38.320 think the leadership is still pretty pro cyclical here. But 0:12:38.800 --> 0:12:42.120 as we write, our margin for error has to be 0:12:42.160 --> 0:12:44.640 smaller than it has been in the past because the 0:12:44.679 --> 0:12:48.000 expectations are high, you know. And I think interestingly you 0:12:48.120 --> 0:12:50.480 kind of hint at Europe here a little bit, where 0:12:50.480 --> 0:12:53.240 the setups the exact opposite is probably in Europe. Here, 0:12:53.400 --> 0:12:57.440 I think the expectations are remarkably remarkably low for something 0:12:57.559 --> 0:12:59.080 to go right here, and it could be any number 0:12:59.080 --> 0:13:00.880 of things. It could be China getting better, it could 0:13:00.880 --> 0:13:03.360 be peace, it could be any number of things. But 0:13:03.400 --> 0:13:06.719 when you're talking about forty and forty two pmis in 0:13:06.720 --> 0:13:09.640 France and Germany, the bar is really low for something 0:13:09.640 --> 0:13:10.280 to go right there. 0:13:10.360 --> 0:13:13.360 A low bar for Europe and China, high bar for 0:13:13.440 --> 0:13:16.480 the US. I found it so interesting, though, that you've 0:13:16.480 --> 0:13:18.960 just been on a tour talking to clients and a 0:13:19.040 --> 0:13:21.559 majority saw the next move being ten percent lower in 0:13:21.600 --> 0:13:22.000 the S and P. 0:13:22.080 --> 0:13:23.600 What did you think about it that it was such 0:13:23.600 --> 0:13:25.400 an outlier. We've basically been on the road every day 0:13:25.440 --> 0:13:27.240 since the election. It's been a busy six weeks. I'm 0:13:27.240 --> 0:13:30.319 happy to be back in New York. But what's been 0:13:30.400 --> 0:13:33.000 such a consistent feature of all of our client conversations 0:13:33.000 --> 0:13:35.440 for four or five weeks is this unleashing of animal spirits. 0:13:35.760 --> 0:13:38.880 And then something happened over the last week where attitudes 0:13:38.880 --> 0:13:40.719 have shifted here a little bit. They've become a bit 0:13:40.760 --> 0:13:43.040 more restrained or modest. I don't know yet if that's 0:13:43.040 --> 0:13:46.480 an outlier or if people are seeing something, But I say, 0:13:46.520 --> 0:13:48.600 on balance, if you look at all of our sentiment 0:13:48.679 --> 0:13:52.760 indicators empirically, they're falling somewhere between the eighty fifth and 0:13:52.840 --> 0:13:56.280 ninety percentile historically. So we're kind of right in the 0:13:56.360 --> 0:13:58.800 zone where you got to maybe watch your back here 0:13:58.800 --> 0:14:01.040 a little bit, because it's never what you know that 0:14:01.120 --> 0:14:01.440 hurts you. 0:14:01.520 --> 0:14:02.920 It's what you don't know that gets you. 0:14:03.040 --> 0:14:05.120 And there's probably something out there that we're not thinking 0:14:05.160 --> 0:14:06.280 about that could be an. 0:14:06.240 --> 0:14:07.360 Issue some point next year. 0:14:07.360 --> 0:14:09.200 But this is the thing, and I mean, Lisa started 0:14:09.240 --> 0:14:11.520 out with this, you so rightly call out that the 0:14:11.520 --> 0:14:14.920 forecast this time around last year was a gain of 0:14:15.000 --> 0:14:18.400 less than two percent, and it really paid off to 0:14:18.440 --> 0:14:20.280 fight the bears. It paid off to not listen to 0:14:20.360 --> 0:14:22.360 them and go fall in. How hard is it to 0:14:22.360 --> 0:14:24.600 fight the bulls? How hard is it to fight momentum 0:14:24.840 --> 0:14:27.080 like this, even if at times it seems a little 0:14:27.080 --> 0:14:28.360 bit on the edge of your flum Yeah, well. 0:14:28.320 --> 0:14:29.800 I don't think you can yet, because I still think 0:14:29.840 --> 0:14:31.640 the market's living up to the hype, and you see 0:14:31.640 --> 0:14:34.240 it in a couple places. Number one credit conditions are 0:14:34.320 --> 0:14:37.640 remarkably benign here. I think if something meaningful is going 0:14:37.720 --> 0:14:38.320 to shift out. 0:14:38.240 --> 0:14:40.640 There you're going to see a deterioration took credit. 0:14:40.920 --> 0:14:44.640 I think secondly, the leadership on balance is generally pro cyclical, right, 0:14:44.640 --> 0:14:46.680 That's been a tenet of this rally all year. So 0:14:46.720 --> 0:14:48.800 if I'm going to change the call, I need the 0:14:48.840 --> 0:14:51.720 consistent stuff to deteriorate. And neither credit nor a leadership 0:14:51.920 --> 0:14:54.760 have really to any meaningful degree. I think the three 0:14:54.800 --> 0:14:57.680 things you can kind of watch here to maybe shift opinion. 0:14:58.760 --> 0:15:03.000 Notice how post election equity vol and bondvall have collapsed, right, 0:15:03.040 --> 0:15:05.960 But what hasn't Currency vall has not. Currency vol is 0:15:06.000 --> 0:15:08.040 kind of still near the high as it was pre election. 0:15:08.120 --> 0:15:10.240 So I think if something is bubbling or brewing out 0:15:10.240 --> 0:15:12.440 there that we're not focused on, maybe an M and 0:15:12.520 --> 0:15:15.640 H from a currency markets here, a dollar SNH looks 0:15:15.680 --> 0:15:18.000 like it could be lost higher here we've obviously seen 0:15:18.040 --> 0:15:20.640 the move in the euro. I think if something or 0:15:21.200 --> 0:15:24.600 even dollar yen, I think if something's brewing that's unexpected 0:15:24.600 --> 0:15:27.520 in twenty five, it probably comes from currency, not from 0:15:27.880 --> 0:15:29.440 credit rates or equity. 0:15:29.720 --> 0:15:31.840 When you say that, potentially you're talking to these clients 0:15:31.840 --> 0:15:35.040 who think in the last week at least those final 0:15:35.080 --> 0:15:37.000 clients on your road trip around America that think we 0:15:37.000 --> 0:15:39.520 could see the ten percent pullback is the reason because 0:15:39.520 --> 0:15:41.720 of the policy uncertainty, or they just think maybe we're 0:15:41.760 --> 0:15:44.120 getting a little bit too lofty with these valuations. 0:15:43.720 --> 0:15:45.000 It's more the latter. 0:15:45.200 --> 0:15:49.080 I think, ironically, there's an embrace of kind of what 0:15:49.120 --> 0:15:51.800 the proposed policies are looking forward to. I mean, we 0:15:51.800 --> 0:15:54.480 were talking about this somewhat casually yesterday in a meeting. 0:15:55.200 --> 0:15:57.720 There's a kind of a nineteen eighties feel out there 0:15:57.840 --> 0:16:00.680 right now, and it's certainly not lost on me. I 0:16:00.720 --> 0:16:03.120 do think, you know, speaking in the context of sentiment, again, 0:16:03.200 --> 0:16:07.320 it's emblematic of an environment where the bar has certainly 0:16:07.360 --> 0:16:11.360 been raised here. I think the expectations are pretty lofty 0:16:11.400 --> 0:16:12.040 going to next year. 0:16:12.040 --> 0:16:13.560 What we've seen historically. 0:16:13.120 --> 0:16:15.760 Is when you've had a change in power, the market 0:16:15.840 --> 0:16:17.960 tends to run until the inauguration. 0:16:17.760 --> 0:16:20.040 And then the spring is just a chop. 0:16:20.920 --> 0:16:23.560 I'm not opposed to that outcome here, but we'll certainly 0:16:23.600 --> 0:16:24.640 call it as we say it. 0:16:24.720 --> 0:16:27.000 You've been constructive on China. Yeah, what do you make 0:16:27.040 --> 0:16:28.800 of the latest we've heard out of China in terms 0:16:28.840 --> 0:16:32.760 of looser fiscal policy, looser monetary policy, but still very 0:16:32.800 --> 0:16:33.840 thin on the details. 0:16:33.960 --> 0:16:36.000 Yeah, you know, we've always kind of said with China, 0:16:36.160 --> 0:16:38.440 it's not my opinion or your opinion that matters, it's 0:16:38.480 --> 0:16:41.600 the market's opinion. And I think the way the market 0:16:41.640 --> 0:16:45.880 has interpreted the hints of stimulus that you've seen over 0:16:45.880 --> 0:16:48.360 the last several months from there is different than how 0:16:48.400 --> 0:16:50.240 it interpreted everything else the last two. 0:16:50.160 --> 0:16:52.640 Or three years. I mean, the momentum surge you saw on. 0:16:52.640 --> 0:16:55.640 September was significant, and I thought the consolidation in the 0:16:55.640 --> 0:16:58.160 months that followed the last two months was pretty benign. 0:16:58.640 --> 0:17:01.160 And you get some kind of renewed signs of life 0:17:01.160 --> 0:17:04.240 this week. What's important for us in China, consumer discretionary 0:17:04.280 --> 0:17:05.679 is leading. That's odd for me. 0:17:05.760 --> 0:17:09.200 If we're still in a black hole, recessionary, apocalyptic environment. 0:17:09.240 --> 0:17:13.320 The financials act pretty well, Chinese tech is breaking out. 0:17:12.880 --> 0:17:15.359 So I think it would be silly not even to 0:17:15.440 --> 0:17:18.320 be open to the idea that something's changing out there. 0:17:18.480 --> 0:17:21.439 And what I encounter traveling and talking to clients is 0:17:21.440 --> 0:17:24.120 complete resistance to the idea that something's changing, So. 0:17:24.240 --> 0:17:27.040 Be open to it. Most people don't even know China's 0:17:27.040 --> 0:17:27.960 outperformed this year. 0:17:28.640 --> 0:17:32.640 FXI is up forty, Nasdex up twenty five, so it's 0:17:32.680 --> 0:17:36.360 already happening and there's a complete disdain or neglect for it. 0:17:36.480 --> 0:17:38.600 Not a complete disdain. We just saw the biggest influence 0:17:38.640 --> 0:17:41.000 into Chinese stocks going back to nine weeks, so we 0:17:41.080 --> 0:17:43.480 do see some sort of acceptance of this idea. But 0:17:43.520 --> 0:17:46.119 I am wondering going forward, putting all of what you 0:17:46.240 --> 0:17:48.199 just said together, and given how high the bar is 0:17:48.240 --> 0:17:49.800 in the US and how low the bar is in 0:17:49.840 --> 0:17:53.119 Europe and to some degree in China, are you overweight 0:17:53.240 --> 0:17:56.199 Europe and China and basically shifting away from some of 0:17:56.240 --> 0:17:57.520 the high calls in the US. 0:17:57.680 --> 0:18:00.320 So we're not overweight those parts of the world yet. 0:18:00.359 --> 0:18:02.600 But I do think it's a good exercise kind of 0:18:02.640 --> 0:18:04.440 at the end of the year, as the calendar gets 0:18:04.440 --> 0:18:06.760 ready to return, is to reset the chip stack and 0:18:06.920 --> 0:18:08.679 kind of get closer to the benchmark. And I want 0:18:08.720 --> 0:18:10.719 to kind of get closer to the US benchmarket smaller, 0:18:10.880 --> 0:18:13.439 and I want to get a little bigger elsewhere. I 0:18:13.480 --> 0:18:16.400 do think there's the potential for good surprises in other 0:18:16.440 --> 0:18:18.800 parts of the world. If I can make one last point, 0:18:18.920 --> 0:18:22.040 I would encourage everyone go look at the European defense contractors. 0:18:22.040 --> 0:18:24.119 They're all breaking down. When did they break out? They 0:18:24.119 --> 0:18:26.240 broke out at the start of the war. Is something 0:18:26.920 --> 0:18:29.080 imminent peace brewing in that part of the world. 0:18:29.560 --> 0:18:30.520 I want to be open to that. 0:18:31.000 --> 0:18:32.679 I want to be open to that too. Christopher Own, 0:18:32.720 --> 0:18:34.399 thank you so much for being with us. Chrispher of 0:18:34.440 --> 0:18:36.879 statigaz a bird company, always wonderful to see you, and 0:18:36.880 --> 0:18:40.400 I think that we can officially launch Happy Holidays, Happy Holidays. 0:18:50.440 --> 0:18:53.000