WEBVTT - AI Jitters Return as Market Plunge Baffles Traders 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App, Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.160 or watch us live on YouTube. 0:00:27.160 --> 0:00:28.520 Gotta make sense of it all exactly. 0:00:28.600 --> 0:00:30.720 We can do that with Cam Dawson, chief investment officer 0:00:30.920 --> 0:00:31.680 at New Edgewells. 0:00:31.680 --> 0:00:33.720 She joins us here in our Bloomberg Interactive Broker studio. 0:00:33.960 --> 0:00:36.240 Cam, what did you make of the trading activity yesterday? 0:00:36.240 --> 0:00:37.440 It was really a whip saw. 0:00:37.600 --> 0:00:40.839 Yeah, yesterday is an was an outside reversal or what 0:00:40.880 --> 0:00:44.080 we call in show business a bearish in golfing, So 0:00:44.479 --> 0:00:47.720 when you have price action like this, it usually does 0:00:47.840 --> 0:00:51.680 proceed more volatility, which just means that we should get 0:00:51.760 --> 0:00:54.000 used to seeing some more of this chop. We're looking 0:00:54.040 --> 0:00:56.480 for the sixty five hundred level where we're trading right 0:00:56.520 --> 0:00:57.280 now to hold. 0:00:57.320 --> 0:00:58.280 That's really important. 0:00:58.320 --> 0:01:01.320 That's your one hundred day moving average. If that doesn't hold, 0:01:01.440 --> 0:01:04.280 it brings sixty one hundred in play your two hundred 0:01:04.360 --> 0:01:07.920 day moving average, which would also be the peak back 0:01:07.959 --> 0:01:11.000 in February. So if you got to those levels, you'd 0:01:11.000 --> 0:01:14.760 certainly see more oversold conditions. Notably, today the market is 0:01:14.840 --> 0:01:18.000 not over sold yet externally on something like an RSI. 0:01:18.160 --> 0:01:22.400 It's also not oversold internally, meaning breadth hasn't been totally 0:01:22.520 --> 0:01:25.360 washed out yet, So all of us put together probably 0:01:25.400 --> 0:01:26.520 accept more chop and churn. 0:01:26.880 --> 0:01:29.680 So yeah, because the S and P five hundred finished 0:01:29.760 --> 0:01:32.240 yesterday well just below it's one hundred day moving average, 0:01:32.240 --> 0:01:33.600 we haven't seen that happen in months. I think the 0:01:33.680 --> 0:01:36.039 last time was when President Trump announced the tariffs back 0:01:36.040 --> 0:01:37.040 in April, right. 0:01:37.040 --> 0:01:40.000 Yeah, And I think it's fascinating that just a couple 0:01:40.000 --> 0:01:42.800 of weeks ago we had had the longest streak above 0:01:42.800 --> 0:01:45.559 the fifty day moving average since two thousand and seven. 0:01:45.600 --> 0:01:45.880 Wow. 0:01:46.040 --> 0:01:49.960 So we were in this environment of incredibly low volatility, which, 0:01:50.000 --> 0:01:53.720 of course we know low volatility tends to breed complacency, 0:01:54.160 --> 0:01:57.280 and we saw complacency in many places, with fineral margin 0:01:57.360 --> 0:02:01.480 loan balances surging higher by thirty five percentiment retail traders 0:02:01.520 --> 0:02:05.120 were going all in adding leverage. All of this suggested 0:02:05.240 --> 0:02:07.240 is that people were thinking that the good times were 0:02:07.280 --> 0:02:09.440 going to keep on rolling. But of course, as we know, 0:02:10.080 --> 0:02:13.280 what's the law of perversity, is that the market will 0:02:13.360 --> 0:02:15.239 work to make the greatest fool out of the greatest 0:02:15.320 --> 0:02:17.360 number of people to the greatest possible extent. 0:02:17.960 --> 0:02:18.959 Yesterday was a day. 0:02:19.360 --> 0:02:22.959 You know, we had the Nvidia numbers Wednesday evening, setting 0:02:23.000 --> 0:02:25.600 up for good trading on Thursday because it seemed like 0:02:25.680 --> 0:02:27.560 the AI play was still very. 0:02:27.520 --> 0:02:30.200 Much in play, but then it wasn't. 0:02:30.480 --> 0:02:34.359 Yeah, so how important is that AI theme as a 0:02:34.400 --> 0:02:37.040 growth driver for the overall market? 0:02:37.120 --> 0:02:38.040 How important is that? 0:02:38.080 --> 0:02:38.360 Still? 0:02:38.480 --> 0:02:41.160 It's still incredibly important, And we think that there's an 0:02:41.160 --> 0:02:45.040 important nuance to the Nvidia numbers, which is that In 0:02:45.160 --> 0:02:50.359 Video's strong earnings actually makes the questions around AI overspending 0:02:50.560 --> 0:02:54.480 even louder. Okay, because the AI questions were not whether 0:02:54.560 --> 0:02:55.720 or not companies were spending. 0:02:55.800 --> 0:02:56.320 We knew that. 0:02:56.400 --> 0:02:58.560 We knew that by the Capex guidance, so we knew 0:02:58.600 --> 0:03:01.520 in Video results would be good. The big question was 0:03:01.680 --> 0:03:04.760 are the people who are spending on AI Capex are 0:03:04.760 --> 0:03:07.240 they earning a return on it that is justified to 0:03:07.280 --> 0:03:10.440 different shareholders, not just their equity shareholders, but now all 0:03:10.480 --> 0:03:12.079 of this death that they're raising as well. 0:03:12.360 --> 0:03:14.680 So then what's it going to take for the market 0:03:14.720 --> 0:03:17.720 to feel better? I guess about all the capex spending 0:03:17.760 --> 0:03:18.120 and AI. 0:03:18.440 --> 0:03:21.840 Yeah, it's an interesting question. 0:03:22.280 --> 0:03:24.680 If you were to see somebody like Meta come out 0:03:24.720 --> 0:03:27.680 and say we're reducing our capex spend next year, potentially 0:03:27.680 --> 0:03:30.200 because the stock has done so much, how would. 0:03:30.000 --> 0:03:30.920 The market react. 0:03:31.080 --> 0:03:33.920 Would they be supportive of that or would it cause 0:03:33.919 --> 0:03:38.480 a further unwind of all of these earnings expectations as 0:03:38.520 --> 0:03:40.640 well as valuations that are built on this idea that 0:03:40.680 --> 0:03:43.520 you're going to see trillions of dollars of spend. So 0:03:43.600 --> 0:03:45.520 I think that that is the big question as we 0:03:45.560 --> 0:03:48.200 go into twenty twenty six, is that do they continue 0:03:48.240 --> 0:03:51.600 to wraphet up capex expectations in the face of a 0:03:51.680 --> 0:03:54.640 market that seems to have lost its tolerance for it. 0:03:55.440 --> 0:03:57.080 So we did get a lot of economic data today, 0:03:57.080 --> 0:03:59.040 We're going to get some more today with some pmis. 0:03:59.040 --> 0:04:01.920 We're going to get the EU mission data as well. Here, 0:04:02.840 --> 0:04:05.920 how do you think the FED is kind of ingesting 0:04:05.960 --> 0:04:07.520 all this data we're starting to get? 0:04:07.560 --> 0:04:07.720 Then? 0:04:07.920 --> 0:04:10.920 Yeah, well the data is now so backward looking, and 0:04:10.960 --> 0:04:13.400 important to note that when they meet next in December, 0:04:13.440 --> 0:04:16.800 they're not going to have the October or November jobs report, 0:04:17.080 --> 0:04:19.880 so they're still going to be in this flying blind, 0:04:20.000 --> 0:04:23.320 which means that it's likely that they lean towards this 0:04:23.440 --> 0:04:26.279 hawkish side of things in the unknowing of what the 0:04:26.360 --> 0:04:29.200 jobs market is doing. I would say, though, is that 0:04:29.680 --> 0:04:33.400 if we see this equity market volatility continue, it actually 0:04:33.480 --> 0:04:36.400 likely pushes them more towards a rate cut, because the 0:04:36.400 --> 0:04:39.320 best argument that you have for not cutting rates was 0:04:39.360 --> 0:04:42.599 looking at broad financial conditions. But if broad financial conditions, 0:04:42.640 --> 0:04:46.520 which include equities, include credit, and include volatility, if those 0:04:46.680 --> 0:04:49.400 move to titan, that actually could push the FED to 0:04:49.480 --> 0:04:52.720 delivering a cut because of what it could be implying 0:04:52.760 --> 0:04:54.720 about the underlying economy. 0:04:55.080 --> 0:04:58.880 So I'm just curious how much of this aggressive selling 0:04:59.040 --> 0:05:03.080 that we've been seeing is really about technical dynamics. 0:05:03.480 --> 0:05:05.480 I think it's a large part of it because when 0:05:05.520 --> 0:05:08.440 we look at the trading in September in October, it 0:05:08.600 --> 0:05:11.960 really wasn't justified for as much as high as things 0:05:12.000 --> 0:05:15.120 had moved, you had over a thirty percent rally in 0:05:15.160 --> 0:05:18.400 the socks in those two months alone, the semiconductor index, 0:05:18.760 --> 0:05:22.200 So there was a frothiness, a speculative nature of the 0:05:22.200 --> 0:05:25.000 way that we saw things trade back in those two months. 0:05:25.279 --> 0:05:27.800 So we've effectively now reversed. 0:05:27.400 --> 0:05:30.719 Most of that of that rally higher, and the question 0:05:30.800 --> 0:05:33.040 is do you have to shake out any further hands 0:05:33.040 --> 0:05:35.279 because you saw so much leverage being added and you 0:05:35.320 --> 0:05:37.440 saw people really trying to add on to risk. 0:05:37.839 --> 0:05:39.560 Some of that is just getting the air taken out 0:05:39.560 --> 0:05:39.760 of it. 0:05:40.680 --> 0:05:43.840 Earnings, we had a good, solid earnings this season. We 0:05:43.839 --> 0:05:45.599 have still have some more retailers to go here, but 0:05:45.960 --> 0:05:48.200 double digit growth in the third quarter, double digit growth 0:05:48.240 --> 0:05:50.200 in the second quarter. How do you feel about the 0:05:50.240 --> 0:05:53.400 earnings power this market? Is it enough to support this market? 0:05:53.560 --> 0:05:53.800 Yeah? 0:05:54.240 --> 0:05:57.280 We continue to come back to looking at Ford earnings 0:05:57.320 --> 0:06:00.320 expectations and say, look, twenty five and twenty twenty six 0:06:00.440 --> 0:06:04.400 estimates are still moving higher. That is usually broadly supportive 0:06:04.440 --> 0:06:08.200 of risk assets. The caveat to that is that earnings 0:06:08.320 --> 0:06:12.400 do lag overall prices, meaning that the street consensus will 0:06:12.440 --> 0:06:14.880 always be late to the game. We've been using the 0:06:14.920 --> 0:06:18.080 song the Deep track from Britney Spears first album, Don't 0:06:18.120 --> 0:06:21.800 let Me be the last to know, because earnings usually 0:06:21.839 --> 0:06:23.880 are the last to know when you see a turn. 0:06:24.320 --> 0:06:27.880 Go back to year like twenty twenty two, you had a. 0:06:27.800 --> 0:06:30.120 Peak in the market that was actually four to five 0:06:30.160 --> 0:06:33.039 months before the peak and earnings estaments. So what we 0:06:33.080 --> 0:06:35.880 continuously have to do is really test earning sestments to 0:06:35.960 --> 0:06:39.240 think are they continuing to be revised higher or potentially 0:06:39.520 --> 0:06:41.120 are their rooms for revisions lower. 0:06:41.200 --> 0:06:43.520 You read those tea leaves. This is what we try to. 0:06:43.520 --> 0:06:45.320 Do, all to a soundtrack of Britney Spears. 0:06:45.360 --> 0:06:47.800 Yes h Hi, Cameron, thank you so much for joining us. 0:06:47.800 --> 0:06:48.360 Really appreciated. 0:06:48.400 --> 0:06:51.600 Cameron Dawson, Chief investment Officer, New Edge Wealth, trying to 0:06:51.600 --> 0:06:53.280 get a handle on this market today with us. 0:06:53.320 --> 0:06:55.840 More from Bloomberg Surveillance coming up after this. 0:07:05.240 --> 0:07:08.839 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:07:08.880 --> 0:07:12.040 weekday afternoons from seven to ten am Eastern Listen on 0:07:12.120 --> 0:07:15.800 Applecarplay and Android Otto with the Bloomberg Business app, or 0:07:15.960 --> 0:07:17.440 watch us live on YouTube. 0:07:17.480 --> 0:07:20.440 We know we got that much delayed September job support yesterday. 0:07:20.520 --> 0:07:23.320 It was a mixed bag at best, and it was 0:07:23.400 --> 0:07:26.280 just part of the story that we saw that volatility 0:07:26.320 --> 0:07:29.240 yesterday in the stock market. So let's talk econ data, 0:07:29.280 --> 0:07:30.880 which now we're getting more and more of it now 0:07:30.880 --> 0:07:35.040 that the government shutdown is over. We've got Lena shul Yativa, 0:07:35.200 --> 0:07:37.760 senior economist at the Conference Board, with us here live 0:07:37.880 --> 0:07:41.720 in studio Elena, what did you make of I want 0:07:41.720 --> 0:07:43.880 to ask what did you make of the reaction to 0:07:43.960 --> 0:07:46.520 the job support yesterday, given the fact that it was 0:07:46.560 --> 0:07:47.600 two months old. 0:07:47.880 --> 0:07:50.240 It's two months old, but that's what we have. It 0:07:50.400 --> 0:07:54.360 was so exciting to finally have the data, right. Well, 0:07:54.880 --> 0:07:59.680 it's kind of the last clear data ahead of the shutdown. 0:08:00.560 --> 0:08:03.480 So and already you see a pickup in the unemployment 0:08:03.560 --> 0:08:07.920 rate even before the shutdown. Is probably going to affect 0:08:08.040 --> 0:08:12.040 the data on the private jobs, right it will also 0:08:12.280 --> 0:08:15.160 we will probably also see a pickup in the unemployment 0:08:15.240 --> 0:08:20.559 rate given that a lot of federal government employees are 0:08:20.920 --> 0:08:25.240 running rolling off from the payroll in October. So that's 0:08:25.280 --> 0:08:29.040 a signal that the risks to the labor side of 0:08:29.120 --> 0:08:32.920 the dual mandate for the Fed are actually rising. So 0:08:33.559 --> 0:08:36.480 to me, the market reaction yesterday makes a lot of 0:08:36.520 --> 0:08:40.440 sense with the odds of a cut rising, right, But 0:08:41.480 --> 0:08:46.160 I think it's still very undecided territory. You know, there's 0:08:46.240 --> 0:08:51.280 a lot of discussion about you know, payrolls itself. The reading, 0:08:51.320 --> 0:08:55.240 the headline reading was pretty solid, so whatever you want. 0:08:55.120 --> 0:08:55.760 To make of it. 0:08:56.920 --> 0:08:58.920 I have a follow up on this unemployment rate though, 0:08:58.920 --> 0:09:01.120 going up second month in a row, right, Well, we're 0:09:01.160 --> 0:09:03.560 talking about September now to four point four percent, highest 0:09:03.559 --> 0:09:05.640 in four years. What do you make of some people 0:09:05.679 --> 0:09:07.240 going but wait a minute, it rose for the right 0:09:07.360 --> 0:09:10.520 quote unquote right reasons because workers who were on the 0:09:10.520 --> 0:09:12.839 sidelines came back in and were actively looking for work. 0:09:12.840 --> 0:09:15.640 And I guess that's when you're considered unemployed, right, is 0:09:15.640 --> 0:09:18.040 when you're actively looking for work. You're part of that survey. 0:09:18.280 --> 0:09:19.160 What do you make of that? 0:09:19.480 --> 0:09:23.640 I agree that you know, unemployment rate rising because people 0:09:23.720 --> 0:09:28.760 cannot find jobs and they're looking is better than outright layoffs. 0:09:29.280 --> 0:09:34.160 But you know, permanent layoffs also increased in the report yesterday, 0:09:34.400 --> 0:09:38.199 So again there's a lot of mixed signals there. And yes, 0:09:38.360 --> 0:09:42.520 the unemployment rate increased since it's droughed back in twenty 0:09:42.559 --> 0:09:46.880 twenty three, has been driven by long term unemployment people 0:09:47.000 --> 0:09:49.480 not able to find jobs. At the end of the day, 0:09:49.800 --> 0:09:53.080 whatever the reason is, right, the increase in the unemployment 0:09:53.160 --> 0:09:57.280 rate is a bad thing, and if anything, it increases 0:09:57.360 --> 0:10:01.360 the risks that things could deteriorate. So I think it's 0:10:01.400 --> 0:10:04.640 still unclear what's going to happen on decemb tenth. 0:10:05.120 --> 0:10:07.280 Elena, Is there an unemployment rate? 0:10:07.400 --> 0:10:10.920 Is there a headline rate that the Fed says, oh boy, 0:10:11.160 --> 0:10:13.360 we got to do something here in terms of maybe 0:10:13.400 --> 0:10:15.400 getting a little bit more aggressive. Is there a rate 0:10:15.440 --> 0:10:16.960 out there they think is a trigger rate? 0:10:17.720 --> 0:10:21.760 Well, they do have a summer of economic projections, right 0:10:21.880 --> 0:10:26.480 so I'd say that that should be our kind of 0:10:26.559 --> 0:10:31.040 like goal in terms of seeing what they think is 0:10:31.080 --> 0:10:34.400 better and good. And if unemployment rate continues to rise, 0:10:34.520 --> 0:10:37.480 and probably in October and November it will rise for 0:10:37.559 --> 0:10:41.200 the reasons that I mentioned, that would go above the 0:10:41.440 --> 0:10:46.320 projection of what they see as a predicament for three 0:10:46.400 --> 0:10:49.880 rate cuts this year. So that should be our guide, 0:10:49.960 --> 0:10:53.000 I think. But in terms of like an absolute value, 0:10:53.200 --> 0:10:54.800 there is no such thing. 0:10:55.240 --> 0:10:56.840 It depends on the supply side. 0:10:57.000 --> 0:10:59.320 Right now, as we start to get more economic data, 0:10:59.360 --> 0:11:01.800 we're going to start to get reports where the government 0:11:01.800 --> 0:11:04.600 shutdown you can really see it play out in the numbers. 0:11:05.080 --> 0:11:07.480 My question is how much should we hang our hat 0:11:07.520 --> 0:11:10.400 on those numbers because the government shutdown was just a 0:11:10.440 --> 0:11:11.640 moment in time and now it's over. 0:11:12.120 --> 0:11:18.080 Well, you have government federal government employees leaving for all 0:11:18.200 --> 0:11:20.920 kinds of different reasons. Are they going to be able 0:11:20.960 --> 0:11:23.559 to find a job that easily in the private set 0:11:23.559 --> 0:11:28.480 that when the hiring rate is so low. So yes, okay, 0:11:28.720 --> 0:11:32.440 I understand the shutdown is over. I don't think that 0:11:32.720 --> 0:11:34.120 the rebound will be. 0:11:34.200 --> 0:11:35.920 You know, because you don't think you'll be really quick. 0:11:36.040 --> 0:11:37.280 You don't think it's going to be a full one. 0:11:37.440 --> 0:11:38.760 So you think we're going to take a big hit 0:11:38.800 --> 0:11:41.720 to GDP because this was the forty three day shutdown. 0:11:41.840 --> 0:11:45.439 We estimate half a percentage point in Q four, so 0:11:45.480 --> 0:11:49.800 it's lower than say CBO's estimate. You know, we still 0:11:50.080 --> 0:11:53.640 have some time in the fourth quarter to recuperate some losses, 0:11:54.280 --> 0:11:57.960 so probably half a percentage point, which wire is significant 0:11:58.400 --> 0:11:59.679 by historical standards. 0:12:00.080 --> 0:12:04.640 It appears in this labor market there's there's some layoffs, 0:12:04.679 --> 0:12:06.640 but there's not like a mass layoffs, but there's certainly 0:12:06.720 --> 0:12:08.640 not a big hiring out there. 0:12:08.760 --> 0:12:10.680 Is that Is that a typical. 0:12:10.280 --> 0:12:13.920 Environment for a labor market or they're not letting people go, 0:12:14.000 --> 0:12:14.839 but they're not hiring them. 0:12:14.920 --> 0:12:18.240 It's quite typical. Well, when the economy is kind of 0:12:18.240 --> 0:12:21.680 a full employment, so you know, it's a good spot 0:12:21.760 --> 0:12:24.960 to be. It doesn't mean that things are deteriorating, but 0:12:25.040 --> 0:12:28.280 it's a risky situation because you know, what's the next 0:12:28.320 --> 0:12:30.920 step for a company. If you need to cut costs, 0:12:31.080 --> 0:12:34.960 if something you know happens, some exogenous shock happens, you 0:12:35.000 --> 0:12:38.640 don't have that cursion when you can kind of like 0:12:38.760 --> 0:12:42.480 slow down. You're hiring to cut costs. The next step 0:12:42.559 --> 0:12:46.360 is layoffs if something happens. But so far it's been 0:12:46.760 --> 0:12:47.760 relatively healthy. 0:12:48.120 --> 0:12:51.120 Were there any signs in this job support that raised 0:12:51.200 --> 0:12:53.960 inflation flags for you? I know, wages went up, not 0:12:54.080 --> 0:12:56.600 buy a lot, and you know, is it keeping up 0:12:56.600 --> 0:12:58.080 with inflation? I don't think. 0:12:57.960 --> 0:13:01.560 It's still elevated. It's still elevated, but it takes time. 0:13:02.080 --> 0:13:05.920 And I always look at Atlanta FED numbers. You know, 0:13:06.080 --> 0:13:11.440 job switches, job stairs. There's no big margin between those 0:13:11.480 --> 0:13:15.520 two right now. So to me, it says that labor 0:13:15.520 --> 0:13:19.560 market wage inflation is subsiding, so it should not be 0:13:20.040 --> 0:13:24.120 a big source of inflation going forward, which actually Chia 0:13:24.200 --> 0:13:25.800 Powell mentioned a few times. 0:13:26.040 --> 0:13:28.120 You know, it's one of the greatest functions I think 0:13:28.240 --> 0:13:31.320 on the Bloberg terminal, and again there's a gazillion functions. 0:13:31.200 --> 0:13:33.240 FED go FD GO. 0:13:33.360 --> 0:13:36.600 It just gives you everything you need to know about 0:13:36.679 --> 0:13:38.959 the FED and the data points in the next meetings 0:13:39.000 --> 0:13:40.480 and the news and all that kind of stuff. So 0:13:40.480 --> 0:13:43.320 wherever did the FED go had on the back there? 0:13:43.679 --> 0:13:46.160 December tenth? It tells me is the next meeting? What 0:13:46.240 --> 0:13:48.200 do you think the FED will do? 0:13:49.200 --> 0:13:53.400 They'll wait till the last minute. The basebook even matters 0:13:53.440 --> 0:13:55.640 like the one that we are getting ahead of the 0:13:55.720 --> 0:14:00.880 Thanksgiving holiday. So how bad or how good it is? It? 0:14:00.920 --> 0:14:01.120 Is it? 0:14:01.160 --> 0:14:03.920 The state of the labor market? Where is it? And 0:14:04.040 --> 0:14:07.040 what a company is saying about inflation and passing the 0:14:07.200 --> 0:14:08.600 cost onto the consumer? 0:14:08.840 --> 0:14:10.720 Elen, know where is it written in stone that the 0:14:10.720 --> 0:14:12.679 Fed has to have a meeting on a particular day? 0:14:12.720 --> 0:14:14.440 I mean, if the government saying, look, we're going to 0:14:14.480 --> 0:14:16.439 put out the November job support, which is going to 0:14:16.480 --> 0:14:19.040 have a little bit of the October job support December sixteenth, 0:14:19.360 --> 0:14:20.960 why isn't the FED just going, okay, well we'll move 0:14:21.000 --> 0:14:22.680 on meeting into like December seventeenth. 0:14:23.080 --> 0:14:25.720 Well that's going to be a havoc in the markets. Okay, 0:14:25.760 --> 0:14:28.720 So that's probably not a good idea to do. There 0:14:28.720 --> 0:14:31.520 are a lot of different things. You know, the FED 0:14:31.560 --> 0:14:34.240 is data dependent, but they don't have to be like 0:14:34.600 --> 0:14:38.360 literally data dependent. There's still a lot of alternative data. 0:14:38.720 --> 0:14:41.600 And you know, you guys have this al t go 0:14:42.720 --> 0:14:45.440 thing on the terminal. So there's still a lot of 0:14:45.840 --> 0:14:49.920 good data out there to for us to understand what's 0:14:49.960 --> 0:14:53.080 going on. I think the thing is that the risks 0:14:53.120 --> 0:14:56.400 to the labor market are still elevated. Is still true, 0:14:56.880 --> 0:15:01.000 and that's why the FED cut to time in the fall. 0:15:01.120 --> 0:15:04.000 So all right, so we've beaten this labor thing to death. 0:15:04.080 --> 0:15:07.400 Just give us your quick call on the inflation environment 0:15:07.440 --> 0:15:07.880 out there. 0:15:08.280 --> 0:15:11.240 Oh so hard to tell without the data. We do 0:15:11.680 --> 0:15:15.640 have good data on the labor mars, it's very difficult 0:15:15.720 --> 0:15:18.160 to kind of try to gauge what's happening on the 0:15:18.200 --> 0:15:21.960 inflation side. Stephen Myron, the Governor, was on Bloomberg TV 0:15:22.200 --> 0:15:26.320 just just a few minutes ago, yes, and he was 0:15:26.360 --> 0:15:30.720 saying that, you know, this housing inflation is probably a 0:15:30.760 --> 0:15:34.920 reflection of what happened in the past. So we cannot 0:15:34.960 --> 0:15:39.200 really look at three percent inflation and say, okay, this 0:15:39.320 --> 0:15:42.520 is the true state of affairs. Housing inflation is subsiding, 0:15:42.880 --> 0:15:46.040 the data is not reflecting that. The labor market inflation 0:15:46.160 --> 0:15:51.080 is probably also subsiding. So this sector inflation is moving 0:15:51.120 --> 0:15:53.760 in the right direction. We probably have a little bit 0:15:53.800 --> 0:15:58.480 of a tariff inflation in the goods prices, but that 0:15:58.600 --> 0:16:01.720 will too subside. It will just take some time. It 0:16:01.760 --> 0:16:05.040 will be a temporary increase in inflation. But I think 0:16:05.440 --> 0:16:08.200 in a big scheme of things, inflation is probably going 0:16:08.280 --> 0:16:09.360 to subside next year. 0:16:09.520 --> 0:16:11.200 All Rylena, thank you so much for joining us. 0:16:11.400 --> 0:16:14.840 Alan issues Tiava, senior US economists at the Conference Board, 0:16:14.960 --> 0:16:18.160 one of our favorite former economists at Bloomberg. 0:16:18.160 --> 0:16:19.680 We appreciate getting some of your time. 0:16:19.560 --> 0:16:20.120 To stay with us. 0:16:20.240 --> 0:16:22.600 More from Bloomberg Surveillance coming up after this. 0:16:32.120 --> 0:16:35.680 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:16:35.760 --> 0:16:38.880 weekday afternoons from seven to ten am Eastern. Listen on 0:16:39.000 --> 0:16:42.640 Applecarplay and Android Otto with the Bloomberg Business app, or 0:16:42.800 --> 0:16:44.280 watch us live on YouTube. 0:16:44.520 --> 0:16:46.320 Let's go to a professional here when we think about 0:16:46.320 --> 0:16:48.400 these markets. Jeff Crumpleman, and he's CIO and head of 0:16:48.440 --> 0:16:53.360 Equities at Mariner Wealth Advisors, located in Cincinnati, Ohio, one 0:16:53.360 --> 0:16:55.160 of my favorite towns. I used to go there all 0:16:55.200 --> 0:16:57.440 the time to see a couple of institutional investor accounts. 0:16:57.680 --> 0:16:58.520 We try to go see a. 0:16:58.520 --> 0:17:02.360 Ballgame when I was Thereolute for you, Jeff, thanks for 0:17:02.480 --> 0:17:05.240 joining us here. What's your call here? We've had a 0:17:05.680 --> 0:17:08.120 you look back on twenty twenty five. Equities it done well, Yes, 0:17:08.200 --> 0:17:11.520 it's been volatile. Fixed income has done well. We've got 0:17:11.560 --> 0:17:14.680 some solid high single digit returns there. What are you 0:17:15.000 --> 0:17:16.920 thinking about as you think about twenty twenty six. 0:17:17.720 --> 0:17:21.800 So our thesis going into this year was clear air turbulence, 0:17:21.920 --> 0:17:24.800 which I think pretty well describes what's going on. I 0:17:24.840 --> 0:17:27.679 think that's still apropos as we go into the end 0:17:27.720 --> 0:17:29.960 of the year, and you know, as people try and 0:17:30.320 --> 0:17:33.639 prophesize and they're trying to find reasons for what happened 0:17:33.720 --> 0:17:37.800 yesterday with some mixed news. You know, the thing about 0:17:37.840 --> 0:17:41.080 clear air turbulence is there's no radar systems to detect it. 0:17:41.560 --> 0:17:42.880 It just happens in clear sky. 0:17:43.080 --> 0:17:46.639 So in terms of what we do think will play out, 0:17:46.760 --> 0:17:49.040 we had a target of sixty six hundred on the 0:17:49.200 --> 0:17:53.119 S and P four calendar year twenty twenty five. I 0:17:53.200 --> 0:17:54.960 think we're going to be, you know, pretty close, and 0:17:55.040 --> 0:17:58.320 that's that's a pretty nice outcome, albeit with a bit 0:17:58.400 --> 0:18:01.560 of air flocking in there. Our kind of theme and 0:18:01.680 --> 0:18:05.080 thesis as we think about twenty twenty six is the 0:18:05.240 --> 0:18:09.280 year of risk awareness and diversification two point zero. So 0:18:09.400 --> 0:18:12.080 I think you want to avoid concentrations. I think you 0:18:12.200 --> 0:18:15.320 do want to be a little more balanced than we've 0:18:15.359 --> 0:18:19.440 seen this year, and I think that we're going to 0:18:19.520 --> 0:18:23.040 have healthy result, but the market's kind of tired as 0:18:23.119 --> 0:18:24.080 we go into the year. 0:18:24.880 --> 0:18:26.160 We would be just fine. 0:18:26.200 --> 0:18:30.080 As people talk about bubbles and troubles, which we don't 0:18:30.600 --> 0:18:34.600 agree with, but to see the market kind of rest 0:18:34.680 --> 0:18:37.440 and digest the strong earnings for a quarter or so 0:18:38.359 --> 0:18:40.639 I think would be very realistic. 0:18:41.480 --> 0:18:44.760 Probably a healthy thing, I think, yes, So let's talk 0:18:44.840 --> 0:18:48.000 valuation because a lot of what the volatility we've been 0:18:48.040 --> 0:18:51.840 seeing has been centered around are these stretched valuations we're seeing, 0:18:51.880 --> 0:18:56.240 particularly an AI But you say valuation is a poor 0:18:56.400 --> 0:18:59.240 timing tool for investors, Sure, what do you mean by that? 0:18:59.280 --> 0:19:00.920 And then what would be a good timing tool? 0:19:01.280 --> 0:19:04.160 Well, you know people, it's funny they're all wiggy about valuation. 0:19:04.359 --> 0:19:04.479 Now. 0:19:04.840 --> 0:19:07.680 We've been at twenty two times earnings for a long time. 0:19:08.040 --> 0:19:10.160 We were twenty two times going into this year. We're 0:19:10.400 --> 0:19:13.840 a little less than that right now. So the advance 0:19:13.880 --> 0:19:17.600 has been earnings growth, not valuation. I think the AI 0:19:17.800 --> 0:19:20.960 trade has made people more old this is like two 0:19:21.040 --> 0:19:24.240 thousand and just more sensitive to valuation now. 0:19:24.400 --> 0:19:28.920 It's always been there, and it's a terrible timing tool. 0:19:29.480 --> 0:19:32.359 So whether you talk about Alan Greenspan irrational exuberance in 0:19:32.440 --> 0:19:35.440 ninety six before it doubled in one, or you talk 0:19:35.480 --> 0:19:38.400 about questions I've been getting going all the way back 0:19:38.480 --> 0:19:42.200 to twenty seventeen eighteen when people said, hey, Jeff, twenty 0:19:42.280 --> 0:19:43.320 two times is rich. 0:19:43.680 --> 0:19:44.840 How can we go up from here? 0:19:44.920 --> 0:19:46.680 And you have double digit targets on the S and 0:19:46.720 --> 0:19:49.919 P five hundred, So it's just a very terrible it's 0:19:50.040 --> 0:19:56.200 fundamentals and valuation can remain elevated if fundamentals are strong. 0:19:56.240 --> 0:19:58.760 And I'll add this, this is not your grandfather's index 0:19:59.320 --> 0:20:02.159 when people compare this to the fifty year average of 0:20:02.480 --> 0:20:07.040 fifteen sixteen times earnings. You know, back forty years ago industrials, 0:20:07.080 --> 0:20:09.320 financials and energy were fifty percent of the S and 0:20:09.400 --> 0:20:12.639 P five hundred market cap. Today they're twenty percent. Return 0:20:12.680 --> 0:20:16.280 on equity was sixteen today it's twenty two. Margins were 0:20:16.400 --> 0:20:19.800 nine percent profit margins that profit margins today they're fourteen. 0:20:20.560 --> 0:20:23.640 It is not your grandfather's in dex So, yeah, that's 0:20:23.640 --> 0:20:24.040