WEBVTT - Earnings, Stocks, And Inflation (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.640 at Bloomberg dot com slash podcast. Let's do a little 0:00:22.680 --> 0:00:25.079 stocks round table. Let's talk some stocks here. I'm gonna 0:00:25.079 --> 0:00:27.320 throw a couple of sectors that we really like to 0:00:27.360 --> 0:00:30.120 talk about. One is technology. Uh so we do that 0:00:30.160 --> 0:00:32.400 with an a rock Rana. He's a senior anost covering 0:00:32.440 --> 0:00:35.519 all things technology for Bloomberg Intelligence. He joins us here 0:00:35.560 --> 0:00:38.559 on a Bloomberg Interactive broker studio and Debi Aikin. She 0:00:38.680 --> 0:00:42.519 covers luxury, which is right down Matt's ali, but she 0:00:42.600 --> 0:00:46.040 covers the luxury. She's based in London for Bloomberg Intelligence. 0:00:46.200 --> 0:00:48.720 Deb let's start with you here. Can you give us 0:00:48.760 --> 0:00:54.000 just an overview of how luxury spending performed during the 0:00:54.040 --> 0:00:58.360 pandemic and now today in what looks like is going 0:00:58.400 --> 0:01:04.520 to be from much of the world a recession. So um. 0:01:04.640 --> 0:01:08.119 During the pandemic so um. We saw a big shift 0:01:08.160 --> 0:01:11.280 to online. So initially we saw stores closed, we saw 0:01:11.520 --> 0:01:16.800 sales overall down around six UM. Beyond that we then 0:01:16.840 --> 0:01:23.360 saw full recovery UM and into two. If we head 0:01:23.360 --> 0:01:26.400 into recession, we don't see it yet in luxury and 0:01:26.480 --> 0:01:29.200 both the mid and the very top end. We are 0:01:29.280 --> 0:01:31.680 fearful for some of the entry points, but we're not 0:01:31.760 --> 0:01:35.640 seeing the pressure there yet for fashion items yet, but 0:01:35.760 --> 0:01:40.080 for luxury bottom men, no, and the comments that we're 0:01:40.080 --> 0:01:44.040 receiving so far with l um H haven't reported UM 0:01:44.120 --> 0:01:47.160 and also for we could also say for consumer staples 0:01:47.240 --> 0:01:50.360 brands overall as well. If you've got number one tier 0:01:50.400 --> 0:01:53.640 one positions, they're still holding up and prices have been 0:01:53.680 --> 0:01:57.280 passed through. Yeah. I notice you cover luxury like air 0:01:57.440 --> 0:02:01.080 Mares or LVMH, but also Practice and Gamble and Unilever. 0:02:01.800 --> 0:02:04.480 So I didn't know if debbikon was just stepping down. 0:02:04.520 --> 0:02:06.400 What do you call it when consumers um, you know, 0:02:06.520 --> 0:02:09.639 normally shop at Waitrose and then they go to Walmart. Yeah, exactly, 0:02:10.440 --> 0:02:12.480 it's not you know, for one like A P and 0:02:12.520 --> 0:02:16.119 G who reported this afternoon, UM, what you see there 0:02:16.200 --> 0:02:18.440 is that they have such a wide range of price 0:02:18.520 --> 0:02:23.440 points across KEYTI categories and big brands that they're able 0:02:23.480 --> 0:02:26.160 to capture the consumers they move around, whether it be 0:02:26.280 --> 0:02:29.880 that they look for ten dollar small pack or a 0:02:29.919 --> 0:02:32.440 forty dollar multi pack to feel that they're getting value 0:02:32.480 --> 0:02:35.200 for money. All right, let's spring in round to talk 0:02:35.240 --> 0:02:38.960 a little technology, another part of the economy that seems 0:02:38.960 --> 0:02:42.920 in pretty good stead much like you know, luxury, I mean, 0:02:43.000 --> 0:02:45.079 but I mean, but but the same. The worry is 0:02:45.120 --> 0:02:47.720 the same, right for investors that a downturn is going 0:02:47.760 --> 0:02:53.440 to affect um the outlook. Right. They reported the results 0:02:53.440 --> 0:02:55.680 that were in line with estimates, but we're more worried 0:02:55.680 --> 0:02:59.679 about the outlook, right one in the case of Adobe, Adobe, 0:02:59.639 --> 0:03:01.880 and we headed the analyst day last night, so they 0:03:01.880 --> 0:03:05.520 gave guidance for three and you know, in our view 0:03:05.680 --> 0:03:08.640 they talked about softness and some of their business. But 0:03:08.720 --> 0:03:11.000 the stock reaction tells me that the by side probably 0:03:11.040 --> 0:03:14.120 was expecting a lot worse than what they said. Um 0:03:14.200 --> 0:03:15.919 And I think, you know, this is a stock that's 0:03:15.919 --> 0:03:18.239 just got beaten up so badly over the last year. 0:03:18.480 --> 0:03:21.760 It's down from its peak ever since they announced the 0:03:21.800 --> 0:03:24.959 Figma deal. It's down over so I think this is 0:03:25.000 --> 0:03:27.720 a bit of a relief rally for them that you know, 0:03:27.840 --> 0:03:29.639 next year it is not going to be maybe as 0:03:29.680 --> 0:03:31.799 bad as what people were thinking. But they don't they 0:03:31.800 --> 0:03:35.880 haven't had the supply chain issues, they haven't had so 0:03:36.000 --> 0:03:40.240 much the chip problems. These are software creators, right, um, 0:03:40.280 --> 0:03:43.120 but they I guess have to pay much more for 0:03:43.160 --> 0:03:45.800 workers that aren't coming to the office anymore. So the 0:03:45.800 --> 0:03:48.480 wage inflations is an issue. But at the same time, 0:03:48.520 --> 0:03:51.680 these are products that have immense pricing power, so you know, 0:03:51.720 --> 0:03:54.080 margins really don't get hurt in the software world as 0:03:54.160 --> 0:03:56.560 much as it does in the consumer area. But the 0:03:56.560 --> 0:03:59.000 big deal for a company like Adobe would be what's 0:03:59.040 --> 0:04:01.480 the top line growth? Megin, These guys have done a 0:04:01.480 --> 0:04:03.960 phenomenal job over the last I would say seven eight 0:04:04.080 --> 0:04:08.000 years growing in plus organically. I think that's the number 0:04:08.080 --> 0:04:10.480 that's not going to happen over the next couple of years. 0:04:10.520 --> 0:04:12.720 But I think it seems like the byside is already 0:04:12.920 --> 0:04:15.520 you know, brought into that. All right. I want to 0:04:15.560 --> 0:04:21.000 talk China because it affects both onoragamous technology sector and 0:04:21.279 --> 0:04:24.039 deb and luxury and deb When I think of some 0:04:24.120 --> 0:04:29.880 of the drivers for luxury spending in Paris, in you know, Milan, 0:04:30.080 --> 0:04:34.240 in New York City. I think of the Chinese tourist 0:04:34.960 --> 0:04:38.039 that has to be totally decimated because we have China 0:04:38.320 --> 0:04:43.040 still effectively shut down. We do, But what's happened is 0:04:43.080 --> 0:04:46.440 that the if we think about the whole luxury market 0:04:46.920 --> 0:04:49.839 pre COVID, we would say that Chinese consumer was taken 0:04:49.920 --> 0:04:53.080 towards a third of the market overall, but that they 0:04:53.080 --> 0:04:55.480 would do a quote if they're spent in in China, 0:04:55.680 --> 0:04:57.760 and it's more source were opened in China and the 0:04:57.839 --> 0:05:01.960 other three quarters when he was spending. That's transition to China. 0:05:02.279 --> 0:05:04.720 It's you know, the other problem. You do have a 0:05:04.760 --> 0:05:07.960 supply chain issue. I assume I tried to buy UM 0:05:08.000 --> 0:05:11.240 and Arrow Leathers a jacket from Arrow Leathers the Highwaymen, 0:05:11.279 --> 0:05:14.880 which is their iconic horse leather chrome x L jacket. 0:05:15.240 --> 0:05:17.240 They created it forty years ago and it goes for 0:05:17.279 --> 0:05:19.400 a real premium. Can you do have any idea? What 0:05:19.600 --> 0:05:22.560 are you talking about? I have no idea. Well, well, 0:05:22.600 --> 0:05:25.880 they can't get them. They can't get the horse leather 0:05:25.960 --> 0:05:28.320 in the door, they can't get those deliveries from Chrome 0:05:28.480 --> 0:05:32.560 x L or horween. And I'm assuming that UM, you know, 0:05:33.440 --> 0:05:36.040 LVMH and air Mas had the same problems with a 0:05:36.080 --> 0:05:39.080 lot of their materials. So the thing is that they 0:05:39.120 --> 0:05:42.600 work on such long dated because of how exclusive they are, 0:05:42.640 --> 0:05:46.160 they work on such long dated, long term agreements. They 0:05:46.160 --> 0:05:48.839 don't have that issue. The issue they have is maintained 0:05:48.839 --> 0:05:52.760 in volume from demand. So for MS, we know that 0:05:52.800 --> 0:05:56.760 their model is unlimited supply and their issue, their bottleneck 0:05:56.839 --> 0:05:59.880 is that they have to open one new store, sorry, 0:06:00.000 --> 0:06:02.880 a new production plant. UM it would be there twenty 0:06:02.920 --> 0:06:05.080 three to twenty six over the next three to four 0:06:05.200 --> 0:06:08.800 years for their leather goods division, and everything has always 0:06:08.839 --> 0:06:12.680 produced out of Italy, out of UM, out of France, 0:06:13.160 --> 0:06:16.000 so they've always had a very flexible supply chain, which 0:06:16.080 --> 0:06:18.479 became even more flexible over the last couple of years. 0:06:18.800 --> 0:06:21.839 So for them, the China situation recently has been about 0:06:21.839 --> 0:06:25.640 closed stores and also close supply chain because of zero 0:06:25.880 --> 0:06:29.200 you know, the lockdown policy that has started to reopen. 0:06:29.279 --> 0:06:31.760 And even the data we just got this afternoon kind 0:06:31.760 --> 0:06:34.400 of ties in from B and G that the market 0:06:34.480 --> 0:06:37.760 is down about mid single digit overall year to date 0:06:37.960 --> 0:06:40.640 in China, but that you're getting double digit growth from 0:06:40.720 --> 0:06:45.520 June only Son On the tech side, China, both as 0:06:45.640 --> 0:06:48.760 a buyer of technology and a supplier of technology. What's 0:06:48.839 --> 0:06:51.480 kind of the the tech car. The biggest company that's 0:06:51.480 --> 0:06:53.840 exposed without is Apple. So we're gonna find out next 0:06:53.880 --> 0:06:55.960 week of how that's going to shape up, because we 0:06:56.120 --> 0:06:59.000 think that China numbers are going to be weak because 0:06:59.160 --> 0:07:02.200 of the luck outs. And the second part is China. 0:07:02.520 --> 0:07:05.560 You know, j generate over the revenue from the Greater 0:07:05.720 --> 0:07:09.000 China region, but a hundred percent of the iPhones are 0:07:09.000 --> 0:07:11.120 close to hundred percent of the iPhones are assembled in 0:07:11.160 --> 0:07:13.720 that region. So if, for example, we do get into 0:07:13.760 --> 0:07:15.880 an area, we don't envision that happening in the next 0:07:15.880 --> 0:07:18.080 six months, but let's say over the next twelve months, 0:07:18.360 --> 0:07:21.120 if there is an increase in demand for the phones, 0:07:21.480 --> 0:07:23.840 then they could be some supply chain problems. Right now, 0:07:23.960 --> 0:07:27.880 we don't see that. And is the supply chain for 0:07:28.040 --> 0:07:32.160 technology where is it? I guess are we back to 0:07:32.240 --> 0:07:35.200 normal ish or close to it? We are back to 0:07:35.280 --> 0:07:38.400 normalists because of demand reasons, but if the demand picks up, 0:07:38.480 --> 0:07:41.000 we could have some problems down the road. And you 0:07:41.080 --> 0:07:44.280 know the biggest issue is that you can't really diversify 0:07:44.360 --> 0:07:47.320 from China that easily. It's taken twenty years to build 0:07:47.360 --> 0:07:50.200 this supply chain. It's gonna take another decade of plus 0:07:50.240 --> 0:07:53.440 two even entangle it even slightly, or bringing chips back 0:07:53.480 --> 0:07:55.840 to the state of Ohio. So I mean, that's a 0:07:55.880 --> 0:07:58.400 good thing. The great exactly that they can thank you 0:07:58.440 --> 0:08:01.080 so much for joining us that they can follow retail 0:08:01.320 --> 0:08:05.120 for Bloomberg Intelligence, including a luxury from our not narrow 0:08:05.200 --> 0:08:09.280 leathers apparently but apparently not but howe or great producer 0:08:09.400 --> 0:08:12.360 of tanned leather hides sure, who doesn't know that? And 0:08:12.640 --> 0:08:14.760 on a rock Ronnie he covers all things technology for 0:08:14.920 --> 0:08:18.600 Bloomberg Intelligence, joining us here in our Bloomberg Interactive Broker 0:08:18.640 --> 0:08:22.120 studio round taping. A little uh, technology, a little luxury, 0:08:22.200 --> 0:08:23.880 a couple of areas that we like to talk about. 0:08:23.960 --> 0:08:27.680 And again both kind of dependent to varying degrees as 0:08:27.720 --> 0:08:30.440 both a supplier and a source of demand on China, 0:08:30.680 --> 0:08:36.440 and that's kind of continues to be an issue. Markets 0:08:36.480 --> 0:08:38.439 kind of mixed here. We had two ripping days on 0:08:38.520 --> 0:08:41.920 the upside, uh, and now kind of markets kind of digesting. 0:08:41.960 --> 0:08:44.200 So let's talk market. So let's do this round table 0:08:44.280 --> 0:08:46.760 thing again. We're sitting literally at a round table here 0:08:46.800 --> 0:08:49.720 in our Bloomberg for those of you listeners who haven't 0:08:49.720 --> 0:08:51.559 seen it. You should come in. Yeah, come on in 0:08:51.640 --> 0:08:53.880 and see the studio. It's awesome. Mike built us a 0:08:54.040 --> 0:08:56.600 nice studio. We appreciate it. We've got Gina Martin Adams, 0:08:56.679 --> 0:08:59.640 chief equity market strategist with Bloomberg Intelligence. She joins us 0:08:59.640 --> 0:09:02.199 in our blue Brick Interactive broker studio. And then we 0:09:02.400 --> 0:09:05.920 have Vince Signarella, a global macro strategist with Bloomberg Intelligent. No, 0:09:06.040 --> 0:09:08.959 he's not global macro strategist with Bloomberg News, And I 0:09:09.000 --> 0:09:10.800 don't know what the heck he does. But he's been 0:09:10.840 --> 0:09:13.800 trading stocks and bonds and currencies and all that kind 0:09:13.840 --> 0:09:18.280 of stuff for decades. And he is firmly ensconced in Westchester, 0:09:18.679 --> 0:09:20.520 and they will get him out of there. Uh. I 0:09:20.559 --> 0:09:23.040 don't think ever. Vince. Let's start with you here. Um, 0:09:23.200 --> 0:09:26.280 we had a couple of ripping days here in the market. 0:09:26.720 --> 0:09:29.880 What did you make of it? Well? I think what 0:09:30.000 --> 0:09:33.040 we're seeing, Um, a lot of traders are are sort 0:09:33.080 --> 0:09:34.880 of putting their finger on some of the weaker data 0:09:34.920 --> 0:09:37.560 that we've been seeing, especially in the housing market. Uh. 0:09:37.760 --> 0:09:40.599 And they now have fully priced in the November and 0:09:40.640 --> 0:09:44.760 December hikes and hoping coping that we will continue to 0:09:44.800 --> 0:09:47.640 see this weaker data, if you will, that shows inflation 0:09:47.760 --> 0:09:50.240 moderating and perhaps we get a pause from the said 0:09:50.320 --> 0:09:52.760 in the first quarter. We've also come a very, very 0:09:52.840 --> 0:09:55.480 long ways, as I'm sure Gina will be able to 0:09:55.720 --> 0:09:59.079 articulate far better than I in terms of hitting technical levels. 0:09:59.280 --> 0:10:01.200 But that had some thing to do with it. Um. 0:10:01.559 --> 0:10:04.120 We hit a fifty retracement I believe it was from 0:10:04.200 --> 0:10:08.400 the June numbers, and that triggered some machine buying and 0:10:08.559 --> 0:10:11.120 a lot to stop lost buying as well, and that's 0:10:11.160 --> 0:10:13.840 put us put a little base under us. We're right 0:10:13.880 --> 0:10:16.360 now we're following believe it or not, UK ten year 0:10:16.440 --> 0:10:20.480 guilts as the guilds fall in UH in Europe, US 0:10:20.520 --> 0:10:23.400 treasury yields dropping a touch from this morning's highs, and 0:10:23.800 --> 0:10:27.080 that's lifted the equity market initially. And as you mentioned, 0:10:27.160 --> 0:10:29.199 we're now more of a mixed place. Do you know 0:10:29.240 --> 0:10:32.600 how much do the algorithms make a difference? Everyone talks 0:10:32.920 --> 0:10:36.920 about the algorithms as it helgoes. You know, they're the 0:10:37.080 --> 0:10:40.040 you know, the evil terminators from the future coming back 0:10:40.120 --> 0:10:43.560 to kill us. Um, Is it true? Did the algories 0:10:43.679 --> 0:10:46.560 drive that crazy rally that we saw last Thursday. Are 0:10:46.600 --> 0:10:50.440 they behind what we saw um Monday and Tuesday. Look, 0:10:50.480 --> 0:10:52.959 I think anybody that pretends like they can answer that 0:10:53.120 --> 0:10:57.920 question is simply pretending nobody knows, and it's all speculation. 0:10:58.240 --> 0:11:03.439 It's all speculation, it's all assumption. We know that there 0:11:03.559 --> 0:11:06.760 is a higher degree of algorithmic trading and quantitatively driven 0:11:06.880 --> 0:11:11.760 trading in the market, so most likely it had some status, 0:11:11.840 --> 0:11:15.360 some role to play. But was this particular bottom any 0:11:15.440 --> 0:11:17.559 different than the one in June, any different than the 0:11:17.600 --> 0:11:19.679 one at the end of eighteen, any different than the 0:11:19.760 --> 0:11:23.360 one at the beginning of Nobody knows that answer. They've 0:11:23.440 --> 0:11:27.559 all been bottoms that have formed in sort of a 0:11:27.679 --> 0:11:32.319 close correlation with a rise in algorithmic trading. As as 0:11:32.320 --> 0:11:35.920 an influencer on the market, I think what matters is 0:11:36.200 --> 0:11:39.040 what is the market now valuing? How is the market 0:11:39.120 --> 0:11:42.240 trading on the outlook? What does sentiment really look like? 0:11:42.840 --> 0:11:46.320 Because these are things that will drive ultimate a sort 0:11:46.360 --> 0:11:50.000 of activity and flows in the market longer term. The 0:11:50.120 --> 0:11:54.520 algois can certainly make turning points look more vicious and 0:11:54.880 --> 0:11:58.959 surprise the consensus outlook more, but ultimately there still is 0:11:59.160 --> 0:12:02.559 our long long term underlying fundamental drivers. Two stocks that 0:12:02.600 --> 0:12:04.160 I think we want to kind of focus, but was 0:12:04.240 --> 0:12:06.360 that it was that a bottom? I mean, when we 0:12:06.480 --> 0:12:10.840 look back, are we gonna say, um, you know, uh, 0:12:11.280 --> 0:12:15.360 October what was it? October twelfth at thirty seventy seven 0:12:15.480 --> 0:12:18.079 was the bottom in the SMP. I would say that 0:12:18.200 --> 0:12:21.200 from a fundamental perspective, our model that we updated at 0:12:21.200 --> 0:12:22.800 the beginning of the year said that we would trade 0:12:22.840 --> 0:12:25.079 to thirty six hundred to price in some form of 0:12:25.240 --> 0:12:29.000 very mild recession. That is very close to the level 0:12:29.040 --> 0:12:32.400 where we bottomed in October. Our model now says there's 0:12:32.480 --> 0:12:35.640 downside to closer to thirty one to price in a 0:12:35.720 --> 0:12:40.559 more vicious normal recession. But we're still questioning whether a 0:12:40.640 --> 0:12:44.439 vicious normal recession is likely to emerge. Um. We have 0:12:44.640 --> 0:12:47.280 seen a significant loadown in economic growth, so we have 0:12:47.440 --> 0:12:51.319 very clearly and very adequately now priced the slowdown that 0:12:51.360 --> 0:12:56.000 we're experiencing in but we're still working through what looks like. 0:12:57.240 --> 0:13:00.840 I think that the market has adequately priced roughly five 0:13:00.920 --> 0:13:04.679 percent downside to earnings expectations. If we can get a 0:13:04.760 --> 0:13:07.160 turn from the FED, the market may have priced up 0:13:07.160 --> 0:13:10.120 to a fifteen percent down fifteen percent downside an EPs, 0:13:10.720 --> 0:13:13.120 but there's still a lot of outstanding question marks in 0:13:13.200 --> 0:13:15.800 the outlook, and I think that is likely to create 0:13:15.960 --> 0:13:21.720 some persistent volatility. Maybe this was the bottom. Again, from 0:13:21.760 --> 0:13:25.240 a sentiment perspective, it looks like a bottom. Our market 0:13:25.280 --> 0:13:29.200 pulse index reached very serious extremes. Most of the sentiment 0:13:29.280 --> 0:13:30.800 surveys that we're getting out of some of the cell 0:13:30.840 --> 0:13:35.360 side shops are confirming sentiment is awful, and that is 0:13:35.559 --> 0:13:40.000 usually first precondition for a bottom. But is it the 0:13:40.120 --> 0:13:43.200 only condition? Not necessarily, Vince. What's it feel like out 0:13:43.240 --> 0:13:45.120 in the trenches when you talk to the traders, they 0:13:45.360 --> 0:13:47.760 are they trading like where we are at or near 0:13:47.960 --> 0:13:50.839 or forming a bottom? Or are they like Dennis Gartman 0:13:50.840 --> 0:13:52.679 who had onto the last hour we said we got 0:13:52.760 --> 0:13:56.440 a lot more pain to go. Well, they're not trading 0:13:56.480 --> 0:13:58.079 like we have a lot more pain to go. A 0:13:58.160 --> 0:14:00.280 lot of guys are now like Gina Man, And from 0:14:00.320 --> 0:14:03.040 the sentiment standpoint, a little bit of a shift from 0:14:03.200 --> 0:14:05.439 a cellar ally to look to buy the dip. And 0:14:05.559 --> 0:14:08.760 that's mostly among the day traders. They're looking for opportunities 0:14:09.360 --> 0:14:12.120 to get in the market today, especially with the following 0:14:12.200 --> 0:14:16.400 that interest rate move and just recently um I just 0:14:16.600 --> 0:14:18.559 literally a few moments ago, had a trader tell me 0:14:18.679 --> 0:14:21.400 that he's turning his lungs into shorts, and he looks 0:14:21.480 --> 0:14:23.840 very right at the moment because the VIX was holding 0:14:23.920 --> 0:14:25.880 up and would not uh and would not go down. 0:14:26.040 --> 0:14:30.240 So uh, they are trading off these technical levels here 0:14:30.320 --> 0:14:35.080 and there, but the sentiment looks like traders want to 0:14:35.160 --> 0:14:38.240 believe that we're at least putting in a temporary low 0:14:38.520 --> 0:14:41.000 and and some of the technical support it. Um And 0:14:41.080 --> 0:14:43.200 look at the inforce correlation between the dollar and the 0:14:43.360 --> 0:14:46.160 S and P five. The dollar looks like it's putting 0:14:46.200 --> 0:14:49.840 in a technical top, but it could easily be a 0:14:49.960 --> 0:14:52.960 very temporary one and we could step, you know, a 0:14:53.000 --> 0:14:55.240 couple of months from now, step back into a major 0:14:55.320 --> 0:14:58.360 sell off if we get some kind of black Swan moment. 0:14:59.240 --> 0:15:01.880 So just quick on earnings. I know we've only had 0:15:01.920 --> 0:15:06.240 sixty two SP five companies report, but my question is 0:15:06.400 --> 0:15:09.680 its earnings is as it relates to how much lower 0:15:09.800 --> 0:15:12.360 do you think earnings will go? Should go, need to go? 0:15:12.560 --> 0:15:15.840 That kind of thing. Yeah, So in this very short 0:15:16.000 --> 0:15:19.880 term earnings expectations are actually too low. The consensus got 0:15:20.000 --> 0:15:22.920 too bearish on on third quarter, and the content census 0:15:23.000 --> 0:15:25.320 continues to get more bearish in the very short term, 0:15:25.360 --> 0:15:27.920 despite the fact that companies are actually beating third quarter 0:15:28.040 --> 0:15:31.360 expectations for the year two dollars in the most recent 0:15:31.440 --> 0:15:34.080 survey that I saw from Lou Way. So, but if 0:15:34.120 --> 0:15:37.680 you look out forward twelve months, analysts are anticipating eight 0:15:37.720 --> 0:15:40.400 percent growth still, and that number is too high. It 0:15:40.520 --> 0:15:43.400 seems very unlikely that given the macro economic conditions, we're 0:15:43.400 --> 0:15:45.520 going to get a percent growth over the next twelve months, 0:15:45.560 --> 0:15:47.480 and analysts need to bring those numbers in. I think 0:15:47.520 --> 0:15:50.880 the problem with the earning seasons right now is analysts 0:15:50.920 --> 0:15:54.240 and companies alike have very limited visibility into the quarter ahead, 0:15:54.360 --> 0:15:57.200 let alone the year ahead, and so what we're seeing 0:15:57.280 --> 0:16:00.800 is this really strong concentration of revisions in just the 0:16:00.880 --> 0:16:04.240 weeks leading into any individual earning season, with very little 0:16:04.400 --> 0:16:07.480 change to the longer term outlook. Given the degree of uncertainty. 0:16:07.640 --> 0:16:09.560 It's interesting if you look at you know, Lou Wang 0:16:09.640 --> 0:16:13.560 puts together this table of strategists. They're not completely comprehensive, 0:16:13.720 --> 0:16:16.360 but you know, we've got twenty two twenty three replies 0:16:16.360 --> 0:16:19.000 and we're looking at two or twenty two uh an 0:16:19.120 --> 0:16:21.200 estimate for EPs at the end of two and the 0:16:21.320 --> 0:16:23.800 same for an estimate at an EPs at the end 0:16:23.800 --> 0:16:26.760 of three. All right, good stuff. Gena Martin Adams, Chief 0:16:26.760 --> 0:16:30.400 equity strategist Bloomberg Intelligence. Vince Signarella, global macro strategist with 0:16:30.520 --> 0:16:33.560 Bloomberg News. You know Gene is a Florida Gator. I 0:16:33.640 --> 0:16:39.600 didn't just remember that good stuff. We had a couple 0:16:39.640 --> 0:16:42.760 of days just ripping it. Uh, kind of some indecision 0:16:42.880 --> 0:16:44.640 out there, a lot of folks, So we were just talking. 0:16:44.720 --> 0:16:47.880 Gena Martin Adams has been Signarella talking about bottoms. I 0:16:47.960 --> 0:16:51.680 don't know, um long for a long period of time. 0:16:51.720 --> 0:16:53.040 I think that's the only way to play the same. 0:16:53.080 --> 0:16:55.040 But let's talk to somebody actually does this for a living. 0:16:55.120 --> 0:16:57.360 Robert Teter. He's the head of investment policy and the 0:16:57.400 --> 0:17:00.040 strategy group at Silver Crest Asset Management, based here in 0:17:00.120 --> 0:17:03.120 New York City. Robert's in our studio because he comes 0:17:03.120 --> 0:17:05.280 into the office everyday match just like us. So, uh, 0:17:05.359 --> 0:17:07.680 it definitely gets the gold star. Robert, what are you 0:17:07.760 --> 0:17:09.399 dealing with this market here? I mean, we've got a 0:17:09.440 --> 0:17:12.320 FED raising rates. I probably have some earnings risk out there, 0:17:13.000 --> 0:17:17.600 but man, the markets off. What do I do from here? Yeah, 0:17:17.640 --> 0:17:19.920 that's a great question. It is a very confusing and 0:17:20.040 --> 0:17:23.040 complex market right here. Interesting to sort of look beyond 0:17:23.080 --> 0:17:24.639 the headlines, if you ask me so. One of the 0:17:24.720 --> 0:17:26.200 things that I've been doing is spending a lot of 0:17:26.280 --> 0:17:28.760 time looking at the message we're getting from earnings. Unless far, 0:17:28.840 --> 0:17:31.480 the message from earnings has been consumer is pretty strong, 0:17:31.600 --> 0:17:33.760 not too many problems on the consumer side. Earnings have 0:17:33.840 --> 0:17:35.640 been a little bit better than feared, and I think 0:17:35.680 --> 0:17:37.800 that sets a fairly constructive tone. Now we're still in 0:17:37.880 --> 0:17:41.000 the danger zone for inflation, but thus far the message 0:17:41.000 --> 0:17:43.560 on the economy has been reasonably sound from earnings. I mean, 0:17:43.760 --> 0:17:46.800 the problem though, is that inflation. If inflation continues, the 0:17:46.840 --> 0:17:49.520 consumer strength isn't going to hang on because wages haven't 0:17:49.600 --> 0:17:52.800 kept up with inflation, and we're starting to see more 0:17:52.920 --> 0:17:58.359 credit card usage UM still elevated accounts, according to Brian 0:17:58.400 --> 0:18:01.280 moynihan at Bank America UM, which is good news, but 0:18:02.280 --> 0:18:04.040 you have to expect, you know, as long as I 0:18:04.200 --> 0:18:06.639 pay five ten a gallon for gas, but I'm not 0:18:06.680 --> 0:18:09.760 gonna last much longer. Yeah, that's right. That's really the 0:18:09.880 --> 0:18:12.080 timeline question that I think is in focus here, and 0:18:12.119 --> 0:18:14.159 it's a matter of do we get inflation under control, 0:18:14.240 --> 0:18:16.560 do we get the Fed pausing before you start to 0:18:16.560 --> 0:18:18.600 see some of that pass through, whether it's lagged effects 0:18:18.680 --> 0:18:20.879 or otherwise, onto the consumer and onto earnings. And so 0:18:21.040 --> 0:18:22.960 that's really the race that's in place right now, is 0:18:23.280 --> 0:18:25.560 you know which which happens first, to break in inflation 0:18:26.119 --> 0:18:27.639 or a break in the economy. I think if we 0:18:27.960 --> 0:18:30.280 hold off the break in the economy and breaking earnings 0:18:30.560 --> 0:18:32.119 for another quarter or two, will be in a much 0:18:32.160 --> 0:18:34.160 better spot inflation wise and give the Fed a little 0:18:34.160 --> 0:18:36.880 more flexibility. So I mean, looking at it again, we've 0:18:36.880 --> 0:18:39.080 been talking about the two year yield here four point five. 0:18:40.400 --> 0:18:42.080 This is not a bad place to be. I mean, 0:18:42.160 --> 0:18:44.360 how do you think about that visa v equities here? 0:18:44.640 --> 0:18:46.560 That's right, it is a pretty compelling option, a lot 0:18:46.640 --> 0:18:48.479 better than it used to be. I think that's one 0:18:48.560 --> 0:18:50.119 of the big reasons that we've seen some of the 0:18:50.160 --> 0:18:52.800 outflows from equities. It's not been too painful to hide 0:18:52.840 --> 0:18:55.000 out in cash or near cash, at least in the 0:18:55.080 --> 0:18:56.760 immediate future. And I think if you take a little 0:18:56.800 --> 0:18:59.720 longer term view, with an expectation that towards the end 0:18:59.760 --> 0:19:01.840 of next year we won't have as much inflation problem, 0:19:01.920 --> 0:19:04.359 you might see rates coming down a bit. The reverse 0:19:04.440 --> 0:19:06.639 relationship reverses back to where it's been a little more 0:19:06.680 --> 0:19:09.480 upside and equities a little less upside, and fixed income 0:19:09.600 --> 0:19:13.960 everybody wants uh income, it seems right, um, And I 0:19:14.040 --> 0:19:19.359 wonder what your thought is about dividend stocks Are they safe? 0:19:20.080 --> 0:19:22.639 And also about private investments it seems like it's a 0:19:22.960 --> 0:19:26.560 bigger option even for retail. Yeah, so on both those things. 0:19:26.600 --> 0:19:29.480 On on dividends, I think generally speaking they are reasonably 0:19:29.520 --> 0:19:31.680 safe unless we go into a major recession, which I'm 0:19:31.680 --> 0:19:34.080 not looking for, and so most company balance sheets are 0:19:34.080 --> 0:19:36.480 pretty sound. It looks like dividends are pretty stable. We 0:19:36.560 --> 0:19:38.159 haven't heard the term the stretch for yield in a 0:19:38.240 --> 0:19:39.680 long time, because there is some yield. But I do 0:19:39.760 --> 0:19:42.600 think dividends are valuable here. It's a known quantity and 0:19:42.640 --> 0:19:44.520 you know what you're getting and is valuable. UM. On 0:19:44.600 --> 0:19:46.280 the private side, I think it's interesting. You know a 0:19:46.359 --> 0:19:49.359 lot of investors have been newly into privates. Is probably 0:19:49.560 --> 0:19:52.760 an awakening for them here as to how things transpire 0:19:52.840 --> 0:19:55.280 in that marketplace. I think if you have the ability 0:19:55.400 --> 0:19:57.960 to handle the time horizon, handle illiquidity, there are some 0:19:58.040 --> 0:20:01.280 great opportunities there, but important to be very, very selective 0:20:01.320 --> 0:20:03.320 it's not a not a one size fits all type 0:20:03.359 --> 0:20:05.480 of thing. A lot of noise beneath the surface in 0:20:05.600 --> 0:20:07.719 terms of how those investments play out, and so important 0:20:07.760 --> 0:20:10.479 to be selective. But good opportunities if you're careful. All right, 0:20:10.560 --> 0:20:14.360 If if we are approaching peak inflation, if we are 0:20:14.480 --> 0:20:18.200 approaching you know, maybe some type of pivot late this 0:20:18.320 --> 0:20:20.720 year early next year in rates. Are there some sectors 0:20:21.200 --> 0:20:24.480 that you're willing to kind of put some get some 0:20:25.160 --> 0:20:31.639 approaching a pivot? Maybe maybe that's been telling us for 0:20:31.720 --> 0:20:35.320 months there's no pivot coming. I'm reading between the tea leaves. 0:20:35.640 --> 0:20:37.800 I'm paid to think ahead. So early in twenty three, 0:20:37.920 --> 0:20:40.439 is there any place you want to start dipping your toe. Well, 0:20:40.480 --> 0:20:42.400 one of the things that I think looks pretty attractive 0:20:42.440 --> 0:20:44.479 here is small cap on a couple of bases. One 0:20:44.600 --> 0:20:46.520