WEBVTT - US Consumer Sentiment Rises, Boeing Strike 0:00:02.400 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.119 --> 0:00:13.320 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.320 --> 0:00:15.800 Eastern on Apple car Playing and Broud Auto with the 0:00:15.800 --> 0:00:19.720 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:19.920 --> 0:00:22.280 or watch us live on YouTube. 0:00:23.480 --> 0:00:25.000 Let's get more on you missed. 0:00:25.040 --> 0:00:27.400 So it was really that one year inflation expectation following 0:00:27.440 --> 0:00:30.400 at two point seven percent, the lowest in December twenty twenty. 0:00:30.560 --> 0:00:33.760 Johanna Sho's University of Michigan Surveys of Consumer director and 0:00:33.800 --> 0:00:36.640 she joins us now walk us through the increase in 0:00:36.720 --> 0:00:39.960 sentiment and the decline in those one year inflation expectations. 0:00:41.080 --> 0:00:44.440 Consumers actually now have had several months of general improvements 0:00:44.479 --> 0:00:46.960 and how they feel about the economy, and clearly the 0:00:47.080 --> 0:00:49.600 drop in one year inflation expectations is a huge part 0:00:49.640 --> 0:00:52.760 of it. Consumers are one hundred percent aware and have 0:00:52.880 --> 0:00:56.720 noticed that inflation has slowed down quite a bit, not 0:00:56.840 --> 0:00:58.600 just this year, but over the course of the last 0:00:58.600 --> 0:01:02.440 two Yearsnsumers are starting to feel a bit more optimistic 0:01:02.480 --> 0:01:04.880 about the future. You know, with one year business conditions, 0:01:04.880 --> 0:01:07.800 we've had four or five consecutive months of increases at 0:01:07.800 --> 0:01:10.480 this point, I think they are recovering a bit from 0:01:10.520 --> 0:01:12.480 the malays that we were saying earlier in the summer. 0:01:13.400 --> 0:01:17.119 So the headline, Joanne cam in it you've missed sentiment 0:01:17.240 --> 0:01:20.319 sixty nine versus consensus sixty eight point five and sixty 0:01:20.319 --> 0:01:22.520 seven point nine last period. Can you frame that give 0:01:22.560 --> 0:01:25.080 us a sense of context there? Like, for example, for im, 0:01:25.440 --> 0:01:29.720 above fifties means economies are expanding. Below fifty means it's contracting. 0:01:29.880 --> 0:01:32.800 What does a number of sixty nine mean to you? 0:01:32.880 --> 0:01:34.039 Put that in context for us? 0:01:34.080 --> 0:01:34.319 Please? 0:01:35.200 --> 0:01:38.039 So overall it's still below the historical average that we've 0:01:38.040 --> 0:01:40.360 seen since nineteen seventy eight. But I think what's more 0:01:40.360 --> 0:01:43.560 important than just the number itself is the overall trend. 0:01:43.840 --> 0:01:48.240 And now we've had two consecutive months of increases in 0:01:48.440 --> 0:01:51.800 in sentiment. We're at the highest level since in several 0:01:51.880 --> 0:01:54.440 months now, and so you know, I think the thing 0:01:54.480 --> 0:01:58.160 to notice that consumers are starting to feel a bit 0:01:58.200 --> 0:02:01.279 more upbeat, and that's the or trend that we've been seeing. 0:02:01.760 --> 0:02:04.720 How does it go on party lines, Republican versus Democrat? 0:02:04.760 --> 0:02:08.760 Because is this the first survey that really encapsulates Biden 0:02:08.840 --> 0:02:09.960 out Harrison. 0:02:10.720 --> 0:02:13.360 Yeah, We saw a bit of that at the with 0:02:13.400 --> 0:02:17.320 the August reading, and we saw kind of a continuation 0:02:17.400 --> 0:02:20.520 of that. So it's very clear that democrats are seeing 0:02:21.160 --> 0:02:25.240 both Democrats and Republicans are now increasingly expecting a Harris 0:02:25.280 --> 0:02:29.480 win relative to last month and certainly relative to when 0:02:29.520 --> 0:02:32.120 it was Biden versus Trump. Now, Democrats think that's a 0:02:32.160 --> 0:02:36.120 good thing, and we see that in their economic expectations 0:02:36.520 --> 0:02:39.600 that really surged in August, and we were continuing to see, 0:02:39.680 --> 0:02:42.680 you know, this higher level in September as well. Republicans, 0:02:42.720 --> 0:02:44.480 on the other hand, think that the potential of a 0:02:44.520 --> 0:02:48.120 Harris presidency is bad news, and their their sentiment, their 0:02:48.160 --> 0:02:52.440 expectations have declined. And so we saw a widening of 0:02:52.480 --> 0:02:58.320 the normal partisan gap in August, with Democrats improving, but 0:02:58.400 --> 0:03:01.960 that was offset by Republicans. I'm getting worse, And we 0:03:02.000 --> 0:03:03.960 saw a little bit more of that, not as dramatic 0:03:04.000 --> 0:03:07.120 as last month, but that partisan gap is continuing to widen. 0:03:08.040 --> 0:03:10.000 All right, Thanks so much to really appreciate Joanne Joan 0:03:10.080 --> 0:03:13.320 Chu University of Michigan Surveys of Consumers Director joining us 0:03:13.320 --> 0:03:15.840 there on. You mish solely grinding its way higher and 0:03:15.960 --> 0:03:18.680 at that one year and Blanche expectation falling as well. 0:03:20.200 --> 0:03:24.080 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:03:24.160 --> 0:03:27.679 weekdays at ten am Eastern on applecar Play and Android 0:03:27.720 --> 0:03:30.480 Auto with the Bloomberg Business app. You can also listen 0:03:30.600 --> 0:03:33.720 live on Amazon Alexa from our flagship New York station. 0:03:34.080 --> 0:03:36.840 Just say Alexa playing Bloomberg eleven thirty. 0:03:38.480 --> 0:03:40.520 All right, let's go to our friends at Boeing here, 0:03:40.600 --> 0:03:43.600 I mean, stockdown two point seven percent. They got to 0:03:43.680 --> 0:03:47.600 strike up there in that Pacific Northwest region of the world, 0:03:48.120 --> 0:03:51.000 which is where they are generally based. I think the 0:03:51.040 --> 0:03:53.880 heart and souls certainly there. George Ferguson joins us. He'son 0:03:53.880 --> 0:04:00.640 Bloomberg Intelligence, Senior aerospace analyst for Bloomberg Intelligence. George, how 0:04:00.720 --> 0:04:03.400 is it so we've got we've got to strike affecting 0:04:03.720 --> 0:04:08.480 Boeing up there in the Seattle area. How impactful is 0:04:08.520 --> 0:04:10.240 this strike to them? What do they need to do? 0:04:11.480 --> 0:04:11.640 Yeah? 0:04:11.720 --> 0:04:15.160 So it's super impactful, right because it's on there seven 0:04:15.240 --> 0:04:18.000 thirty seven Max, I mean, it's going to be on 0:04:18.080 --> 0:04:20.240 the programs that are out of the Pacific Northwest, I 0:04:20.240 --> 0:04:23.120 should say first once you're going to be seven sixty seven, 0:04:23.600 --> 0:04:26.320 Triple seven and the seven thirty seven max. 0:04:26.800 --> 0:04:29.000 The seven thirty seven max is what matters most. 0:04:28.880 --> 0:04:31.520 Right, that's the revenue generator. 0:04:31.600 --> 0:04:35.040 That's the that's the cash flow generator. That's part of 0:04:35.760 --> 0:04:36.760 that's not even part of. 0:04:37.120 --> 0:04:40.640 That's the largest part of their recovery plan for the 0:04:40.680 --> 0:04:44.080 back half, so super important. Look, we'll see how long 0:04:44.600 --> 0:04:46.760 the strike lasts, but if they can't get seven thirty 0:04:46.800 --> 0:04:51.040 sevens delivered, this bat half recovery isn't bad shape. 0:04:51.160 --> 0:04:52.599 So let me get this straight. You were in the 0:04:52.640 --> 0:04:56.159 city yesterday then there was this huge Bloomberg Intelligence celebrating 0:04:56.160 --> 0:04:59.239 fifteen year party where you all are like struggling to focus, 0:04:59.279 --> 0:05:01.800 and it somehow you wind up back at home this morning. 0:05:01.839 --> 0:05:02.520 What is this? 0:05:04.160 --> 0:05:04.640 It's been a. 0:05:04.600 --> 0:05:06.800 Busy twenty four hours. They wish they could have time 0:05:07.440 --> 0:05:08.520 a strike differently, but. 0:05:09.360 --> 0:05:11.760 I definitely thought it'd be showing up very tired. But 0:05:11.800 --> 0:05:13.560 in the studio, all right, what's the TikTok? 0:05:13.600 --> 0:05:16.679 Now? So what's the schedule of events? 0:05:18.080 --> 0:05:19.800 Well, I mean, I think you know, Boeing and the 0:05:19.839 --> 0:05:21.720 machinists have to get back together at the table and 0:05:21.720 --> 0:05:24.400 figure out what the machinists want so they can get 0:05:24.440 --> 0:05:26.560 them back on the job and start delivering airplanes and 0:05:26.560 --> 0:05:30.680 generating cash right the meanest machinists sounded like they were 0:05:30.680 --> 0:05:33.080 a little bit coy about it too. I heard one 0:05:33.080 --> 0:05:34.320 of them saying, you know what, as soon as we 0:05:34.360 --> 0:05:36.240 have a chance, we'll get back together to talk about it, 0:05:36.320 --> 0:05:39.360 or something like that. So it sounds like they think 0:05:39.400 --> 0:05:42.200 they've got a bit of the upper hand, which I 0:05:42.240 --> 0:05:45.360 think they do. I think, you know, Boeing probably has 0:05:45.400 --> 0:05:48.640 to go back and look in their pockets and figure 0:05:48.640 --> 0:05:52.880 out how much more, how much more of a pay increase. 0:05:52.600 --> 0:05:53.000 They can give. 0:05:53.120 --> 0:05:56.680 Right the Spirit Aero Systems folks got a mid thirties 0:05:56.720 --> 0:05:59.640 pay increase, So I suspect the machinists are looking at 0:05:59.640 --> 0:06:03.160 that thinking, hey, we probably deserve something close to that. 0:06:04.640 --> 0:06:08.120 And I think that they want some better guarantees on 0:06:08.160 --> 0:06:08.679 an airplane. 0:06:08.680 --> 0:06:09.760 They want to be guaranteed. 0:06:10.480 --> 0:06:13.960 I think that the next generation seven thirty seven, it's 0:06:14.000 --> 0:06:16.760 the most important airplane for Boeing. So if the machinist 0:06:16.800 --> 0:06:20.000 union has sort of longevity in their sites, they want 0:06:20.279 --> 0:06:21.320 to be building that. 0:06:21.279 --> 0:06:24.440 Seven thirty seven successor. And they don't want just the 0:06:24.480 --> 0:06:26.760 commitment to be able to build it to last for 0:06:26.839 --> 0:06:28.839 the four years of this contract. But they wanted to 0:06:28.920 --> 0:06:31.800 last longer, if not forever. 0:06:32.080 --> 0:06:35.200 And George, just refresh our memory. Where does Boeing actually 0:06:35.320 --> 0:06:37.520 make their planes? I know they do it up in Seattle, 0:06:37.520 --> 0:06:39.400 but did they do it in the question maybe some 0:06:39.480 --> 0:06:41.720 areas of the country that are not unionized. 0:06:43.320 --> 0:06:47.560 Well, so they do make the seven eighty seven in 0:06:47.839 --> 0:06:51.760 South Carolina down by Charleston, and that's a non union plan, 0:06:51.880 --> 0:06:55.320 So I expect that seven eighty seven production will continue. 0:06:55.960 --> 0:06:58.599 Everything else is made up in the Pacific Northwest from 0:06:58.640 --> 0:07:02.400 a commercial airplane stand point, and so seven sixty sevens, 0:07:02.720 --> 0:07:06.320 triple sevens, they're made in Everett, Washington, north of Seattle, 0:07:06.960 --> 0:07:09.920 and the seven thirty seven has made is final assembled 0:07:10.280 --> 0:07:13.080 at a single plant in rent in Washington, which kind 0:07:13.080 --> 0:07:15.080 of southeast of Seattle. 0:07:15.320 --> 0:07:17.840 Those are all union shops. I expect them all to 0:07:17.880 --> 0:07:19.840 be doing little to know work today. 0:07:20.080 --> 0:07:22.520 And then of course the fuselage comes out of Wichita, 0:07:22.640 --> 0:07:25.280 which is owned by Spirit Air Systems, which Boeing. 0:07:25.080 --> 0:07:26.800 Is buying, Whichita, Kansas. 0:07:27.320 --> 0:07:30.360 But again, they had a strike earlier this year, got 0:07:30.560 --> 0:07:34.679 mid thirties pay increase and they should be continuing to work. 0:07:35.400 --> 0:07:39.080 So I guess then the question becomes how long? 0:07:39.600 --> 0:07:41.520 Now I know we talked about that yesterday and you're like, look, 0:07:41.560 --> 0:07:43.560 it can't go on more than like two weeks. One 0:07:43.600 --> 0:07:46.800 analyst I was mentioning fifty days was what they were 0:07:46.880 --> 0:07:49.160 kind of looking at, which is a significant cash burn 0:07:49.240 --> 0:07:50.440 for Boeing. 0:07:50.520 --> 0:07:51.600 What's your best guess? 0:07:53.440 --> 0:07:55.160 Yeah, I mean, I think there's a lot of people 0:07:55.200 --> 0:07:58.200 out there saying fifty days because that's the average strike 0:07:58.240 --> 0:08:00.480 blah blah blah. I just don't, you know, I don't 0:08:00.640 --> 0:08:04.120 subscribe to that being the right logic here. I'm saying 0:08:04.160 --> 0:08:07.000 a couple of weeks because I think Boeing really needs 0:08:07.040 --> 0:08:10.680 these workers back on the job. There is no substitute 0:08:10.840 --> 0:08:14.880 for these workers, period, and so I think they've got 0:08:14.920 --> 0:08:19.800 to go engage the union intently and figure out what's 0:08:19.840 --> 0:08:22.280 going to take to put them back, you know, back 0:08:22.320 --> 0:08:24.680 on the job. I mean we think what we you know, 0:08:24.840 --> 0:08:28.920 our analysis was that it would cost an extra billion 0:08:28.960 --> 0:08:31.720 dollars a year or something like that for wages right 0:08:31.760 --> 0:08:35.880 around there at the twenty five percent increase, that would 0:08:35.880 --> 0:08:39.880 probably trim Boeing commercial margins one hundred and seventy two 0:08:39.920 --> 0:08:40.960 hundred basis points. 0:08:41.360 --> 0:08:42.160 Do you like that? 0:08:42.840 --> 0:08:44.640 No, But it's not the end of the world, right, 0:08:44.679 --> 0:08:47.840 They back in back pre pandemic, this was a company 0:08:47.840 --> 0:08:52.920 that was making thirteen percent ish margins in that business 0:08:52.960 --> 0:08:53.720 ten to thirteen. 0:08:54.240 --> 0:08:56.960 So can you bear that and be profitable? You can? 0:08:57.000 --> 0:08:57.720 Can you bear more? 0:08:57.760 --> 0:08:58.000 You can? 0:08:58.080 --> 0:09:01.080 So I think that means that Boeing has the leeway. 0:09:01.720 --> 0:09:04.240 They got to get the building airplanes in volume again. 0:09:04.600 --> 0:09:06.360 So they got to engage the union and get it done. 0:09:06.400 --> 0:09:08.520 That's why I'm saying, I think less than a couple 0:09:08.559 --> 0:09:09.920 of weeks, I think they got to get it done. 0:09:10.120 --> 0:09:11.640 Hey, George, I mean, I know in the past you 0:09:11.760 --> 0:09:14.120 talked to us about, you know, the labor shortages and 0:09:14.200 --> 0:09:18.840 aerospace industry. Where are we where's the industry in terms 0:09:18.840 --> 0:09:22.040 of getting past that is that's still a challenge getting 0:09:22.080 --> 0:09:23.720 good folks in the factory floors. 0:09:24.600 --> 0:09:27.080 I think it's totally still a challenge, right, And so 0:09:28.000 --> 0:09:31.120 we saw a pretty decent turnover in the aerospace workers, 0:09:32.240 --> 0:09:33.960 you know, coming out of the pandemic. I think some 0:09:34.000 --> 0:09:37.920 of them watched their industry. It looked like the collapse, right. 0:09:38.200 --> 0:09:40.720 Air travel went to zero for a couple of quarters, 0:09:40.800 --> 0:09:44.480 or almost zero, so you know, demand for airplanes. People 0:09:44.600 --> 0:09:47.360 looked at it and thought, hey, you know, the industry 0:09:47.360 --> 0:09:49.920 I'm in is horrible and if you are, I think 0:09:50.000 --> 0:09:52.440 near retirement age, you said let's cast it in and 0:09:52.480 --> 0:09:55.240 moved to Jacksonville, Florida or something like that, right, So 0:09:55.280 --> 0:09:57.280 it's hard to get those folks back to the line 0:09:57.320 --> 0:10:00.600 from Jacksonville and backfill. 0:10:01.720 --> 0:10:02.920 Part of the backfield challenges. 0:10:02.960 --> 0:10:06.000 The backfield came out of some of the suppliers, so 0:10:06.040 --> 0:10:09.200 they kind of hurt their own ecosystem as they pulled 0:10:09.200 --> 0:10:11.760 some of the backfill in. And they're in the middle 0:10:11.760 --> 0:10:16.560 of training that we even't heard CEO Calhoun say the 0:10:16.640 --> 0:10:19.079 old CEO Calhoun say. I think at one of his 0:10:19.160 --> 0:10:23.160 congressional testimonies he talked about people coming in the door 0:10:23.200 --> 0:10:26.760 having experience bending metal and you know, working with their hands, 0:10:26.760 --> 0:10:28.600 and I think, you know, he said something like in 0:10:28.640 --> 0:10:31.240 the old days, and this isn't exactly right, but it's close. 0:10:31.720 --> 0:10:33.679 You know, maybe seventy five percent of people that came 0:10:33.679 --> 0:10:37.040 to the door had experience working with their hands metalworking. 0:10:37.640 --> 0:10:39.440 Now twenty five percent. 0:10:39.920 --> 0:10:42.439 So they're in the middle of trying to train that 0:10:42.480 --> 0:10:46.280 next generation of aerospace workers and the supply chain is 0:10:46.360 --> 0:10:50.640 still trying to backfill. I think it's it's been getting better, Yeah, 0:10:50.679 --> 0:10:52.600 but that training and backfill is still going there. 0:10:52.880 --> 0:10:54.560 All right, Hey George, we appreciate it. 0:10:54.960 --> 0:10:58.680 George ferguson Bloomberg Intelligence and your aerospace, defense and Airlines analyst. 0:10:58.760 --> 0:11:01.199 Great stuff. Good to see you there. 0:11:02.640 --> 0:11:06.559 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:06.640 --> 0:11:09.720 weekdays at ten am Eastern on Apple CarPlay and Android 0:11:09.720 --> 0:11:12.840 Auto with the Bloomberg Business App. Listen on demand wherever 0:11:12.880 --> 0:11:17.239 you get your podcasts, or watch us live on YouTube. 0:11:17.840 --> 0:11:21.040 I'm Alex you alongside pauls. We need this Bloomberg Intelligence Radio. 0:11:21.480 --> 0:11:23.240 We bring you all the top news and business and 0:11:23.280 --> 0:11:26.079 finance economics. So there are lens of our Bloomberg Intelligence folks. 0:11:26.120 --> 0:11:28.839 They cover two thousand companies and one hundred and thirty 0:11:28.880 --> 0:11:31.040 industries worldwide. They're a little tired today. They had a 0:11:31.080 --> 0:11:33.400 fifteen year anniversary party yesterday, so you. 0:11:33.360 --> 0:11:34.760 Know, cut it loose a little bit. 0:11:35.000 --> 0:11:37.040 Yeah, yeah, yeah, yeah. I mean Paul got some sleep, 0:11:37.040 --> 0:11:38.680 but the other guys, I'm not sure. All right, But 0:11:39.080 --> 0:11:41.040 so we want to go outside of Bloomberg Intelligence now 0:11:41.080 --> 0:11:43.640 for a look on how to market is positioned into 0:11:43.679 --> 0:11:46.800 the FED. Mohagman is head of Solutions and Multi Asset 0:11:46.880 --> 0:11:50.640 Strategies over at Invesco and he joins us, Now, what 0:11:50.960 --> 0:11:54.040 is this setup like in terms of asset allocation headed 0:11:54.080 --> 0:11:54.800 into Wednesday? 0:11:56.600 --> 0:11:58.720 Well, Alex, thanks for having me, nice to be here 0:11:58.760 --> 0:12:01.520 with you and Paul. I think, you know, we are 0:12:01.600 --> 0:12:04.400 continuing to maintain a bit of a defensive posture, and 0:12:04.440 --> 0:12:07.559 we have been defensive for about a couple of months now, 0:12:08.200 --> 0:12:11.559 and really this is around what we're seeing in economic 0:12:11.600 --> 0:12:14.840 growth expectations, both from the market and from the data. 0:12:15.520 --> 0:12:17.600 We are very benchmark aware, so you know, I think 0:12:17.640 --> 0:12:21.280 that underweight isn't something that's significant at this point, just 0:12:21.320 --> 0:12:24.600 given how the economy has been incredibly resilient and the 0:12:24.640 --> 0:12:27.240 market has been incredibly resilient. But what we're seeing in 0:12:27.280 --> 0:12:29.840 the labor market and what we're seeing with economic growth 0:12:30.480 --> 0:12:32.800 over the several last several quarters is something that we're 0:12:32.800 --> 0:12:33.760 watching very closely. 0:12:34.640 --> 0:12:34.679 Mo. 0:12:35.000 --> 0:12:38.040 And how about being defensive, what does that mean fixed 0:12:38.080 --> 0:12:39.479 and come versus equities. 0:12:39.080 --> 0:12:42.679 Here, Yeah, so that means we have a little bit 0:12:42.679 --> 0:12:45.480 of a longer duration profile versus our benchmark, So we're 0:12:45.520 --> 0:12:49.079 you know, favoring fixed income over equity. So and within equities, 0:12:49.160 --> 0:12:51.040 you know, there's a bit of a tilt towards more 0:12:51.040 --> 0:12:56.400 defensive sector, so think healthcare, consumer staples, information technology. You know, 0:12:56.440 --> 0:12:58.800 these are the areas that are a bit more defensive. 0:12:58.840 --> 0:13:01.679 These are companies that are higher quality and lower volatility, 0:13:02.160 --> 0:13:05.559 generally cash flow rich and can weather an economic downturn 0:13:05.640 --> 0:13:06.680 or a slow down in growth. 0:13:07.559 --> 0:13:09.400 So does that mean that you think that the bond market, 0:13:09.440 --> 0:13:10.959 if we look at the equity in the bond market, 0:13:11.000 --> 0:13:13.320 is being on different pages in that we're making like 0:13:13.400 --> 0:13:16.080 another run in the smp here versus the bond bowl 0:13:16.080 --> 0:13:17.600 appears to be very sticky. 0:13:18.120 --> 0:13:20.240 Does that mean that the economic. 0:13:19.760 --> 0:13:22.920 Situation is geared more towards a recession than a soft 0:13:22.960 --> 0:13:23.800 landing in your view? 0:13:25.600 --> 0:13:27.880 I don't think so. I think we're still probably base 0:13:27.960 --> 0:13:30.880 case soft landing. But you know, what we're thinking about 0:13:31.040 --> 0:13:33.280 is just in the shorter term period, so from a 0:13:33.280 --> 0:13:37.920 tactical perspective, just given how far extended the equity markets are, 0:13:38.120 --> 0:13:40.760 and you know, in our opinion, yields are very attractive 0:13:40.760 --> 0:13:43.320 at these levels they have been, although they've you know, 0:13:43.400 --> 0:13:46.200 come back a little bit. You know, we're kind of 0:13:46.200 --> 0:13:50.320 extending that duration profile getting underweight equity slightly relative to 0:13:50.320 --> 0:13:53.120 our benchmarks. And again this is all around growth and 0:13:53.160 --> 0:13:56.720 growth expectations. Although we don't necessarily see a recession in 0:13:56.720 --> 0:13:57.760 the next couple of quarters. 0:13:58.679 --> 0:14:00.760 So, MO, how about on the pick income side, are 0:14:00.760 --> 0:14:03.200 we sitting here in to your treasures at three point 0:14:03.280 --> 0:14:04.800 six percent or are we going out there and taking 0:14:04.840 --> 0:14:08.760 some credit risk? What are we doing there in fixingcome So. 0:14:09.120 --> 0:14:12.640 In credit we favor again higher quality credit, so you know, 0:14:12.720 --> 0:14:15.360 credit spreads continue to be incredibly tight, you know, relative 0:14:15.360 --> 0:14:18.160 to equities. I think credit is a very attractive risk 0:14:18.200 --> 0:14:22.680 adjusted allocation. But we're probably not right now favoring kind 0:14:22.680 --> 0:14:26.480 of the lower quality high yield sectors and we're taking 0:14:26.520 --> 0:14:26.920 a bit more. 0:14:27.240 --> 0:14:27.920 It's posteros. 0:14:28.000 --> 0:14:30.280 So the best performance this year and fixing them has 0:14:30.320 --> 0:14:32.640 been and by far has been in US corporate high. 0:14:32.520 --> 0:14:36.400 Yield exactly, and I think that's part of the reason 0:14:37.000 --> 0:14:39.000 that we've gotten a bit defensive. So just to kind 0:14:39.040 --> 0:14:41.160 of backtrack a little bit, you know, we have been 0:14:41.560 --> 0:14:45.800 pretty risk gone in portfolios for the last several years. 0:14:45.800 --> 0:14:48.640 You know, post COVID, we took a little bit more 0:14:48.680 --> 0:14:50.880 of an aggressive stance versus our benchmarks. We kind of 0:14:50.920 --> 0:14:54.560 maintained that stance over the last several years, and now 0:14:54.600 --> 0:14:57.200 what we're seeing is just that softening of the economic data. 0:14:57.240 --> 0:14:59.760 We're seeing some softening in the labor markets, and that's 0:15:00.040 --> 0:15:02.400 that's kind of what's informing a bit of a defensive posture. 0:15:02.600 --> 0:15:04.880 But I don't really want to overdo that, right. You know, 0:15:04.920 --> 0:15:08.920 we're not kind of underweight equities to a significant magnitude. 0:15:08.920 --> 0:15:12.800 We're not suggesting that people move into cash. It's actually 0:15:12.880 --> 0:15:15.880 quite the opposite. We're telling investors and clients to get 0:15:15.920 --> 0:15:19.200 out of cash. We've seen elevated cash balances now for 0:15:19.800 --> 0:15:22.120 a long time, and the yields on offer if you 0:15:22.160 --> 0:15:24.840 extend that duration, seem to be very attractive to us, 0:15:24.880 --> 0:15:27.400 especially as we're moving into an easing cycle and those 0:15:27.400 --> 0:15:29.000 short term rates are going to be coming down. 0:15:29.320 --> 0:15:29.520 Yeah. 0:15:29.800 --> 0:15:32.280 JP Morgan was saying that usually the rate cut cycle 0:15:32.320 --> 0:15:34.840 needs to get underway more significantly for than the money 0:15:34.880 --> 0:15:36.480 to move, But you're right, I mean over six tillion 0:15:36.520 --> 0:15:40.400 dollars ready to roll. Hey, I'm curious as to dollar yen. 0:15:40.880 --> 0:15:42.920 It has a pretty significant rerating at this point. I 0:15:42.960 --> 0:15:45.840 think we're at one forty right. There was some reports 0:15:45.880 --> 0:15:48.360 on Bloomberg that we're seeing some bullish bets on the 0:15:48.440 --> 0:15:51.040 yen right now. What's your take on where that currency 0:15:51.080 --> 0:15:55.280 goes and is the carry trade unwind situation. 0:15:55.200 --> 0:16:00.240 Over So from a currency perspective, just kind of consist 0:16:00.280 --> 0:16:02.920 with my comments earlier around equities and fixed income, we 0:16:03.080 --> 0:16:04.800 have a bit more of a defensive posture, So that 0:16:04.840 --> 0:16:10.160 means overweights and dollar, GBP, euro versus international currencies, you know, 0:16:10.280 --> 0:16:12.880 especially if you kind of think about the more emerging 0:16:12.880 --> 0:16:18.160 market currencies. You know, I think right now the defensive 0:16:18.160 --> 0:16:20.720 posture is probably warranted just given we're kind of going 0:16:20.800 --> 0:16:23.200 into election season. September and October tend to be more 0:16:23.280 --> 0:16:27.120 volatile months for the market overall, and that home country bias, 0:16:27.480 --> 0:16:29.480 at least for US is kind of an important factor 0:16:29.520 --> 0:16:31.240 as we get through the next few months. 0:16:31.760 --> 0:16:34.760 In terms of the equity market, where's evaluation for you guys? 0:16:34.800 --> 0:16:37.280 Do you feel like this market is fully valued at 0:16:37.280 --> 0:16:38.560 this point? How do you guys think about that? 0:16:40.360 --> 0:16:42.560 I would say fully valued to maybe a little extended, 0:16:42.600 --> 0:16:45.920 just given what we've seen here to date. So for us, 0:16:46.440 --> 0:16:51.880 there's no real concerns around earnings or earnings projections. There 0:16:51.880 --> 0:16:54.480 has been some revisions that we're taking a close look at, 0:16:54.480 --> 0:16:56.920 but for now, you know, I would I would say 0:16:56.920 --> 0:17:00.320 probably well priced or maybe a little bit extent did 0:17:01.120 --> 0:17:03.200 relative to what we see kind of on offer in 0:17:03.280 --> 0:17:05.399 other places outside of the US, and I think my 0:17:05.480 --> 0:17:08.320 comments are very much on the US side, and the 0:17:08.320 --> 0:17:10.560 equity market in the US is pretty concentrated. That's another 0:17:10.680 --> 0:17:14.560 topic that we're having a lot of conversations on with clients. 0:17:15.359 --> 0:17:18.199 You know, we expect to see that broadening if the 0:17:18.240 --> 0:17:21.239 economy continues to be resilient, but if we are going 0:17:21.320 --> 0:17:25.440 to go into a prolonged downturn or a growth kind 0:17:25.440 --> 0:17:30.920 of scare, you know, actually the defensive sectors should perform better. 0:17:30.960 --> 0:17:33.480 And I've talked about this a little bit on the 0:17:33.520 --> 0:17:38.280 show before. In the past the relationship between equity sectors 0:17:38.320 --> 0:17:41.800 and rates was was really when when wastes were going up, 0:17:42.480 --> 0:17:44.840 you know that that was not necessarily a good thing 0:17:45.040 --> 0:17:48.280 for sectors that had more duration exposure or more interest 0:17:48.359 --> 0:17:51.800 rates sensitivity, So technology, healthcare we've kind of seen the 0:17:51.840 --> 0:17:54.159 opposite of that. So you know, it's a little bit 0:17:54.160 --> 0:17:56.879 of a weird dynamic at the moment, but I do 0:17:56.920 --> 0:18:00.000 think that should renormalize. So what the catalyst needs to 0:18:00.160 --> 0:18:02.920 be for small cap value stocks to really get going again, 0:18:03.000 --> 0:18:06.399 I think is a little bit of a change in 0:18:06.400 --> 0:18:10.200 the regime and an economy that kind of reaccelerates because 0:18:10.200 --> 0:18:13.080 those companies small cap companies, value companies. They tend to 0:18:13.080 --> 0:18:16.639 have more operating leverage, they tend to be more geared 0:18:16.680 --> 0:18:19.240 to the business cycle, and I do think longer term 0:18:19.240 --> 0:18:20.640 that relationship will still hold. 0:18:20.880 --> 0:18:22.760 All right, Well, thanks a lot, We really appreciate thanks 0:18:22.760 --> 0:18:25.600 for stopping by mo Hagman joining us. There was his 0:18:25.640 --> 0:18:28.240 call on acid allocation. He had of solutions and multi 0:18:28.240 --> 0:18:29.800 asset strategies. Over at Invesco. 0:18:31.359 --> 0:18:35.240 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:18:35.320 --> 0:18:38.840 weekdays at ten am Eastern on applecar Play and Android 0:18:38.880 --> 0:18:41.639 Auto with the Bloomberg Business App. You can also listen 0:18:41.760 --> 0:18:44.879 live on Amazon Alexa from our flagship New York station 0:18:45.240 --> 0:18:48.280 Just Say Alexa, playing Bloomberg eleven thirty. 0:18:49.359 --> 0:18:52.520 Alex Steel alongside Paul Sweeney for Bloomberg Intelligence Radio. We're 0:18:52.520 --> 0:18:55.800 broadcasting to live from Interactive Broker Studio right here in 0:18:55.840 --> 0:18:58.199 midtown Manhattan. I saw that though for the Weimo thing 0:18:58.600 --> 0:19:00.840 that like a driverless car like show up even if 0:19:00.880 --> 0:19:03.480 you didn't order one, that'd be kind of weird, right, 0:19:03.600 --> 0:19:05.760 and yeah, like like, I mean, what if you don't. 0:19:05.600 --> 0:19:09.560 Want to get into car? The perfect stranger about it, 0:19:09.800 --> 0:19:10.520 no one at all? 0:19:10.600 --> 0:19:12.520 Yeah, Okay, well, it's an adjustment period for us. 0:19:12.560 --> 0:19:14.080 All all right? Joining us now is Dan. 0:19:14.119 --> 0:19:17.840 I was managing director and senior equity analyst at Wedbush Securities. 0:19:17.840 --> 0:19:19.760 I bet you he's probably bullish on WEIMO and would 0:19:19.760 --> 0:19:22.000 totally get into a driverless car, no worries, Am I right? 0:19:22.080 --> 0:19:27.040 Dan? I mean I've done it. Look, I think I 0:19:27.040 --> 0:19:29.240 think end of the decade, I think twenty percent of 0:19:29.359 --> 0:19:31.640 ride share are going to be no drivers. 0:19:32.040 --> 0:19:33.560 But isn't it weird that they would show up? You 0:19:33.560 --> 0:19:34.359 wouldn't have a choice. 0:19:34.400 --> 0:19:36.280 It would just be like, here's your driverless car, even 0:19:36.320 --> 0:19:37.040 if you don't want it. 0:19:38.320 --> 0:19:41.960 Yeah. Look, there's gonna be clearly kings to work out here. 0:19:42.000 --> 0:19:45.359