WEBVTT - US Consumer Sentiment Rises to Six Month High 0:00:00.120 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.240 --> 0:00:15.320 weekdays at ten am Eastern on Apple Cardplay and Android 0:00:15.320 --> 0:00:18.440 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:18.480 --> 0:00:22.320 you get your podcasts, or watch us live on YouTube. 0:00:23.360 --> 0:00:25.600 John Talker sitting in for Alex Deal and Paul Sweeney. 0:00:25.600 --> 0:00:27.960 You're live here in our Bloomberg Interactive Broker Studio streaming 0:00:27.960 --> 0:00:30.400 live on YouTube as well. John, look at that you 0:00:30.440 --> 0:00:32.320 missed data a little bit better and expected. And what's 0:00:32.360 --> 0:00:35.080 also interesting to me is the one year inflation outlook. 0:00:35.520 --> 0:00:37.639 The consensus was two point nine percent, came in two 0:00:37.680 --> 0:00:39.519 point seven, so maybe people feel a little bit better 0:00:39.560 --> 0:00:40.599 about inflation. 0:00:40.840 --> 0:00:43.360 And of course this is the pulse that we take 0:00:43.720 --> 0:00:44.880 just before the election. 0:00:44.680 --> 0:00:45.360 The last one. 0:00:45.400 --> 0:00:48.720 Oh that's right, So uh, we're gonna have to put 0:00:48.720 --> 0:00:50.040 on our politics. 0:00:49.560 --> 0:00:50.920 Hasty as well. Yeah, exactly. 0:00:51.000 --> 0:00:53.720 Let's break this data down with Joan shut She is 0:00:54.120 --> 0:00:58.520 Surveys of Consumers Director at the University of Michigan. Joanna, 0:00:58.520 --> 0:01:00.720 it seems like some pretty solid numbers here. 0:01:00.720 --> 0:01:02.640 What is your takeaway Over. 0:01:02.520 --> 0:01:04.640 The last few months, consumers have been inching up in 0:01:04.680 --> 0:01:07.840 their level of confidence in the economy. They haven't really 0:01:07.880 --> 0:01:11.320 been seeing major swings up or down. A lot of 0:01:11.360 --> 0:01:16.000 people are kind of reserving judgment until the election because 0:01:16.000 --> 0:01:18.000 for a lot of people, the trajectory of the economy 0:01:18.040 --> 0:01:21.119 depends on which candidate wins the presidential race. 0:01:21.640 --> 0:01:25.840 But what does it say about their feelings about which 0:01:25.840 --> 0:01:28.200 way they're going to vote, Because the economy, we're told 0:01:28.480 --> 0:01:31.400 time and time again, is the number one issue. 0:01:32.240 --> 0:01:35.640 You know, consumers overall are feeling much better about the 0:01:35.680 --> 0:01:39.960 economy than they were two years ago. Business conditions, expectations 0:01:40.240 --> 0:01:43.400 are near their historical or at their historical average, so 0:01:43.440 --> 0:01:46.479 people are not feeling as dismal about the economy as 0:01:46.520 --> 0:01:48.640 they did a year ago two years ago. At the 0:01:48.640 --> 0:01:50.680 same time, they continue to tell us how much high 0:01:50.720 --> 0:01:53.720 prices are weighing on their personal finances. 0:01:54.560 --> 0:01:56.600 So people don't necessarily feel. 0:01:56.360 --> 0:01:59.440 Like they're thriving now, but they really have seen quite 0:01:59.480 --> 0:02:02.520 a bit of amp since since the peak of inflation 0:02:02.560 --> 0:02:03.279 a couple of years. 0:02:03.160 --> 0:02:06.559 Ago, Joanne, how much, if any, is the recent FED 0:02:06.640 --> 0:02:11.240 rate cut factor into these results for consumers? 0:02:11.280 --> 0:02:14.639 They are, they're they're absolutely expecting. 0:02:14.680 --> 0:02:17.560 They welcomed the rate cuts, and when we ask people 0:02:17.600 --> 0:02:20.880 about buying conditions for large purchases like cars or homes 0:02:20.960 --> 0:02:25.320 or durable goods, those those have all improved on the 0:02:25.320 --> 0:02:30.400 wake of these rate cuts and and continue consumers expect 0:02:30.400 --> 0:02:33.040 that to continue going forward. We have over half of 0:02:33.080 --> 0:02:35.760 consumers expecting rake further rate cuts in the year ahead. 0:02:36.360 --> 0:02:39.079 So it is helping a little bit. It's not helping dramatically. 0:02:39.360 --> 0:02:43.079 Home buying conditions still near historic lows, but consumers absolutely 0:02:43.120 --> 0:02:44.120 welcome these rate cuts. 0:02:44.360 --> 0:02:46.440 Before you go, who are the people that you survey? 0:02:46.480 --> 0:02:50.280 Are they whacked out lefties or hardcore right wingers. 0:02:50.880 --> 0:02:51.720 All of the above. 0:02:52.160 --> 0:02:56.040 We get a random sample of American consumers. We get 0:02:56.080 --> 0:03:01.160 all ages, all political stripes, all educational payment levels, and 0:03:01.280 --> 0:03:02.840 it absolutely comes through in our data. 0:03:03.200 --> 0:03:04.920 All right, Joyanne, thank you so much for joining us. 0:03:04.960 --> 0:03:07.480 We appreciate checking in with you on these you miss days. 0:03:07.720 --> 0:03:12.320 Joan Shoe, She's Surveys of Consumers Director at the University 0:03:12.400 --> 0:03:13.280 of Michigan. 0:03:14.760 --> 0:03:18.640 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:03:18.720 --> 0:03:22.239 weekdays at ten am Eastern on applecar Play and Android 0:03:22.280 --> 0:03:25.040 Auto with the Bloomberg Business app. You can also listen 0:03:25.160 --> 0:03:28.280 live on Amazon Alexa from our flagship New York station. 0:03:28.639 --> 0:03:31.400 Just say Alexa playing Bloomberg eleven thirty. 0:03:32.800 --> 0:03:34.920 It's all about the election, John, It's all about DC. 0:03:35.520 --> 0:03:38.440 The good news for us is we got Bloomberg intelligence 0:03:38.440 --> 0:03:41.120 people down in DC and their job is to figure 0:03:41.160 --> 0:03:45.520 out what's going to happen in DC in Congress and 0:03:45.560 --> 0:03:47.960 how's it going to impact various industries and various markets. 0:03:48.080 --> 0:03:50.480 We actually pay them to do this stuff and they're 0:03:50.520 --> 0:03:53.440 really really good at it. Nathan Dean is our go 0:03:53.520 --> 0:03:55.560 to person and all things Washington, and he makes sense 0:03:55.600 --> 0:03:59.040 out of it all. Nathan Dean, Bloomberg Intelligence Senior policy analyst, 0:03:59.680 --> 0:04:02.360 joined here. Hey, Nathan, I'm sure you're getting this question 0:04:02.480 --> 0:04:07.840 one thousand times a day. What will a Harris administration 0:04:07.960 --> 0:04:10.400 look like? And what will a Trump administration look like 0:04:10.840 --> 0:04:14.280 across basically everything? And how will impact the markets? How 0:04:14.320 --> 0:04:17.240 do you kind of synthesize that question to our clients? 0:04:17.640 --> 0:04:20.760 Yeah, So I think we're saying that there's four, maybe 0:04:20.800 --> 0:04:23.200 five key themes. Let's go with five for next year 0:04:23.240 --> 0:04:25.960 in terms of a Harris or a Trump presidency, and 0:04:26.000 --> 0:04:28.039 you can see where both presidencies are going to have 0:04:28.040 --> 0:04:29.520 to play out in these themes. The first is, like 0:04:29.600 --> 0:04:31.960 you just mentioned tariffs, Now we have a seventy percent 0:04:32.040 --> 0:04:35.000 chance of tariff's coming no matter what next year. It's 0:04:35.080 --> 0:04:37.480 just whether or not they are broad tariff like sixty 0:04:37.480 --> 0:04:40.400 percent on all goods coming from China, or a subsector 0:04:40.400 --> 0:04:42.720 of tariff like what we've seen in the Biden administration 0:04:42.839 --> 0:04:45.839 with on automobiles, for example. Tariffs are somewhat popular, so 0:04:45.880 --> 0:04:48.320 tariffs are coming. The second is tax. The Trump era 0:04:48.480 --> 0:04:50.640 tax cuts expires at the end of twenty twenty five 0:04:50.680 --> 0:04:53.440 for individuals, so we're going to see a robust tax debate, 0:04:53.480 --> 0:04:55.839 and specifically you're going to see a debate on whether 0:04:55.920 --> 0:04:58.000 or not that corporate tax rate changes from twenty one 0:04:58.040 --> 0:05:00.920 percent to something else to help pay for these tax cuts. 0:05:01.040 --> 0:05:03.760 You're going to see a regulation effort or a deregulation effort, 0:05:03.760 --> 0:05:05.880 depending on who you are. This is certainly important to 0:05:05.920 --> 0:05:08.160 the investment banks. You're going to see the debt sealing 0:05:08.200 --> 0:05:10.520 return probably in the second to third quarter next year. 0:05:10.520 --> 0:05:12.719 You're going to see a debt ceiling fight if Kamala 0:05:12.760 --> 0:05:15.479 Harris wins the presidency. And finally, a lot of people 0:05:15.480 --> 0:05:18.000 have questions on the Inflation Reduction Act because there's a 0:05:18.040 --> 0:05:21.400 lot of capex coming into the United States on renewable industry. 0:05:21.400 --> 0:05:24.560 For example, will the IRA either be cemented under Harris 0:05:24.560 --> 0:05:27.200 presidency or tweaked or altered to help pay for those 0:05:27.200 --> 0:05:28.920 tax cuts under a Trump presidency. 0:05:29.760 --> 0:05:34.480 For banks, I go right to the capital requirements under 0:05:34.760 --> 0:05:39.240 Bozel three. How do the candidate stand on that and 0:05:39.279 --> 0:05:41.840 how would that impact the sector? 0:05:42.520 --> 0:05:45.000 Yeah, so you're talking about the Basle three endgame. It's 0:05:45.040 --> 0:05:48.360 a proposed rule which, if outlined as by the FED, 0:05:48.400 --> 0:05:51.120 would increase capital requirements for the American gesips. So think 0:05:51.200 --> 0:05:52.880 of the Bank of America as the JP Morgans and 0:05:52.920 --> 0:05:55.640 the city groups around nine percent. You're looking around a 0:05:55.640 --> 0:05:57.680 three to four percent increase in terms of the mid 0:05:57.720 --> 0:06:00.680 sized regionals like P and C. Tryst If Kamlin Harrison 0:06:00.680 --> 0:06:03.839 wins the presidency, we think this proposal will be reproposed 0:06:04.120 --> 0:06:06.039 in the early part of next year, and they'll try 0:06:06.040 --> 0:06:08.640 and finalize it towards the end of twenty twenty five, 0:06:08.960 --> 0:06:12.040 maybe the beginning of twenty twenty six, and then implementation 0:06:12.080 --> 0:06:14.320 would begin the next three years after that or over 0:06:14.320 --> 0:06:17.600 the next three years. If President Trump wins, I think 0:06:17.640 --> 0:06:19.279 you're going to see the work on this just stop. 0:06:19.320 --> 0:06:21.400 And I don't think these capital requirements are ever going 0:06:21.480 --> 0:06:24.200 to be implemented, at least not within the next few years. 0:06:24.640 --> 0:06:26.760 And this is where it could actually turn global in 0:06:26.839 --> 0:06:30.560 terms of its impact. The European regulators have already implemented this, 0:06:30.640 --> 0:06:33.440 they call it Basil four. It's already been implemented, and 0:06:33.480 --> 0:06:36.400 we've seen steps, for example, in the UK for the 0:06:36.520 --> 0:06:40.400 UK regulators to delay the implementation because they're concerned the 0:06:40.440 --> 0:06:42.800 Americans are never going to fallow suit. So if the 0:06:42.839 --> 0:06:45.039 American regulators say no, we're not going to move forward 0:06:45.080 --> 0:06:47.280 with the Bass of three endgame under the Trump presidency, 0:06:47.640 --> 0:06:50.000 you could see but the potential start of a global 0:06:50.080 --> 0:06:52.520 race to the bottom in terms of capital as Europe 0:06:52.520 --> 0:06:55.640 begins to actually pull back some of their stuff as well. 0:06:55.839 --> 0:06:57.720 Nathan, you're down there in DC. 0:06:57.839 --> 0:06:59.680 You're knee deep in this stuff, and I know you've 0:06:59.680 --> 0:07:03.440 got great sources down there. Is there any consensus to 0:07:03.520 --> 0:07:06.960 how Congress may play out in this election or houses flipping? 0:07:07.000 --> 0:07:08.479 Are they staying the same or we can have a 0:07:08.520 --> 0:07:11.560 split type of thing? Is there any consensus? 0:07:12.120 --> 0:07:12.360 Yeah? 0:07:12.400 --> 0:07:15.000 So, I think most Washingtonians think that the Republicans have 0:07:15.000 --> 0:07:17.000 a really good shot of taking the Senate. And the 0:07:17.040 --> 0:07:18.760 reason being is is that this is not a good 0:07:18.840 --> 0:07:21.840 race for the Democrats. They're playing. They're defending twenty three 0:07:22.000 --> 0:07:25.800 against thirty four in states in total, and with Senator 0:07:25.840 --> 0:07:28.560 Joe Manchin retiring in West Virginia most likely going to 0:07:28.600 --> 0:07:31.920 replace him with a Republican. You know, the Democrats are 0:07:31.960 --> 0:07:33.960 essentially going to have to run the gauntlet and have 0:07:34.000 --> 0:07:35.960 a really good night in order to keep the Senate. 0:07:35.960 --> 0:07:38.800 Now why do we care about this, Because the Senate 0:07:39.080 --> 0:07:41.840 is there's a filibuster in the Senate for legislation. There's 0:07:41.880 --> 0:07:45.000 no filibuster for nominations. So if Kamala Harris wins and 0:07:45.040 --> 0:07:48.200 the Senate Republicans take the Senate, they'll effectively be able 0:07:48.200 --> 0:07:50.000 to jam a lot of her nominees, a lot of 0:07:50.040 --> 0:07:53.040 her regulatory leadership in place for the first half of 0:07:53.080 --> 0:07:55.400 the year. If President Trump wins, he's going to be 0:07:55.400 --> 0:07:57.480 able to get a lot of his nominees in place 0:07:57.520 --> 0:07:59.760 and be able to move much quicker on a deregulatory 0:07:59.760 --> 0:08:01.920 after Now, when it comes to the House, pulling is 0:08:01.920 --> 0:08:04.320 a little bit more difficult. You know, it's extremely tight. 0:08:04.680 --> 0:08:07.040 Our general thought is is that whoever wins the presidency 0:08:07.160 --> 0:08:09.680 most likely win the House. And the reason why investors 0:08:09.680 --> 0:08:11.600 should care about who wins the House is because of 0:08:11.640 --> 0:08:14.640 the tax debate that I mentioned next year. Tax policy 0:08:14.800 --> 0:08:17.320 historically starts in the House, So whoever controls the House 0:08:17.680 --> 0:08:20.280 controls the House of Ways and Means Committee, and therefore 0:08:20.360 --> 0:08:23.120 controls a very important person in Washington who's going to 0:08:23.200 --> 0:08:26.280 decide what those tax negotiations will look like next year. 0:08:26.520 --> 0:08:26.720 Ah. 0:08:26.800 --> 0:08:28.760 Can I just jump back to some of the sectors, 0:08:28.800 --> 0:08:34.000 specifically with electric vehicles, Harris, They would support subsidies for 0:08:34.280 --> 0:08:38.400 electric vehicles or tax breaks, which I find curious because 0:08:38.440 --> 0:08:41.120 Elon Musk is the guy stumping for Donald Trump at 0:08:41.160 --> 0:08:44.079 this point, then he stands to be well, Tesla stands 0:08:44.120 --> 0:08:45.880 to be impacted quite a bit by this. 0:08:46.520 --> 0:08:49.640 Yeah, you know, we've heard anecdotally that, you know, because Tesla, 0:08:49.880 --> 0:08:52.960 you know, the Tesla vehicle is pretty expensive, and so 0:08:53.040 --> 0:08:55.120 whether or not a seventy five hundred dollars tax credit 0:08:55.440 --> 0:08:58.040 would change the buying habits over Tesla. You know, I've 0:08:58.040 --> 0:09:00.160 been talking to our auto's Annal Steve Man about this 0:09:00.240 --> 0:09:02.199 quite a bit. So there's some thought out there that 0:09:02.280 --> 0:09:05.680 Tesla's somewhat protected. We've also seen through Steve's work that 0:09:05.760 --> 0:09:07.760 some of the other automakers are looking to try and 0:09:07.800 --> 0:09:10.480 put out low cost evs as a way to combat that. 0:09:10.640 --> 0:09:12.720 But the reason why the EV tax credit is so 0:09:12.760 --> 0:09:15.360 important is because it's part of the Inflation Reduction Act. 0:09:15.520 --> 0:09:17.439 And if you're going to try and figure out how 0:09:17.440 --> 0:09:19.640 to pay for three and a half four trillion dollars 0:09:19.640 --> 0:09:22.120 worth of tax cuts to extend those, you know, the 0:09:22.120 --> 0:09:24.000 IRA is certainly something they're going to be looking at. 0:09:24.000 --> 0:09:24.160 Now. 0:09:24.320 --> 0:09:26.320 I think the IRA, for most part is going to 0:09:26.320 --> 0:09:29.360 be cemented. It's really popular in Republican states in terms 0:09:29.360 --> 0:09:31.760 of that capex that's coming in and building plants. But 0:09:31.840 --> 0:09:34.360 that EV tax credit is one of those provisions that 0:09:34.400 --> 0:09:36.679 could potentially be on the chopping block to help pay 0:09:36.679 --> 0:09:37.560 for those tax cuts. 0:09:38.040 --> 0:09:41.160 John John, If I were elected president, my first phone 0:09:41.160 --> 0:09:43.640 call would be get this Nathan Dean guy in my 0:09:43.720 --> 0:09:46.560 White House, just to get stuff done. He knows everything, 0:09:46.600 --> 0:09:48.679 and I feel like he knows everybody, and he just 0:09:49.520 --> 0:09:52.120 explains stuff so well, and just get stuff done. 0:09:52.440 --> 0:09:56.040 Why isn't anybody talking about the fiscal deficits at this point? 0:09:56.160 --> 0:09:59.079 I guess I guess it's just, you know, it's just. 0:09:59.120 --> 0:10:01.760 It's not good, not popular, it's not good politics. 0:10:03.120 --> 0:10:07.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:07.080 --> 0:10:09.800 weekdays at ten am Eastern on Apple car Playing and 0:10:09.920 --> 0:10:12.760 Broud Auto with the Bloomberg Business App. Listen on demand 0:10:12.840 --> 0:10:17.679 wherever you get your podcasts, or watch us live on YouTube. 0:10:18.600 --> 0:10:20.040 Let's step back and take a look at these broader 0:10:20.040 --> 0:10:21.840 markets share. We do have, you know, some green on 0:10:21.840 --> 0:10:24.520 the screen here today, we've got the SMP of fifty points. 0:10:24.520 --> 0:10:26.600 That's nine tens to one percent. The tech heavy NASDAC 0:10:26.880 --> 0:10:28.600 up about one and a half percent here, So that's 0:10:28.679 --> 0:10:29.400 good news there. 0:10:29.600 --> 0:10:30.920 Victoria Fernandez joins us. 0:10:30.920 --> 0:10:36.120 He's a chief market strategist at cross Mark Global Investments. Victoria, 0:10:36.160 --> 0:10:38.760 we had some pretty good economic data today. I know, 0:10:38.840 --> 0:10:42.720 durable goods orders came in better than expected. We had 0:10:42.720 --> 0:10:46.040 the You Mission Sentiment survey come in better than expected. 0:10:46.720 --> 0:10:49.120 If I'm the Federal Reserve, I can actually think about 0:10:49.160 --> 0:10:51.920 maybe I don't have to cut come November. 0:10:52.240 --> 0:10:54.480 How do you guys think about it over their cross Mark? 0:10:55.800 --> 0:10:58.920 It's really been our thought process all along that we 0:10:58.960 --> 0:11:02.440 would only get two cuts from the September through the 0:11:02.480 --> 0:11:04.960 December meetings. We thought we would get a twenty five 0:11:05.000 --> 0:11:08.520 basis point cut in September, they would skip November, and 0:11:08.559 --> 0:11:11.280 then we would get another twenty five in December. For 0:11:11.360 --> 0:11:14.040 the exact reasons that you're talking about. We've seen some 0:11:14.080 --> 0:11:17.360 of the growth components of the economy continue to do 0:11:17.440 --> 0:11:19.200 pretty well. I mean, you look back at the end 0:11:19.240 --> 0:11:23.320 of August, the City Economic Surprise Index was one of 0:11:23.360 --> 0:11:26.439 the worst levels it's been in years, but it has 0:11:26.520 --> 0:11:29.480 come up significantly since then. It's one of the reasons 0:11:29.480 --> 0:11:32.920 we've seen ten your treasury yields come up because they 0:11:32.920 --> 0:11:35.920 have a pretty high correlation. So I think it does 0:11:36.080 --> 0:11:38.760 give the FED a little bit of wiggle room if 0:11:38.760 --> 0:11:41.320 they don't want to do anything the week of the election, 0:11:42.240 --> 0:11:44.600 because I have a feeling we probably won't know who 0:11:44.600 --> 0:11:47.800 the president is come Fed day when they're ready to 0:11:49.000 --> 0:11:51.480 have their press conference. It gives them a little bit 0:11:51.520 --> 0:11:53.920 of cover to hold off and then maybe do another 0:11:54.000 --> 0:11:54.960 cut in December. 0:11:55.720 --> 0:11:59.040 We get ahead of ourselves by the markets by pricing 0:11:59.080 --> 0:12:00.240 FED cuts. 0:12:00.920 --> 0:12:04.160 I think we absolutely did. It's no different than at 0:12:04.160 --> 0:12:06.120 the end of last year, or when the market was 0:12:06.160 --> 0:12:10.440 pricing in what was it, six seven rate cuts by March, 0:12:10.880 --> 0:12:13.560 and we were having the conversation with clients going there's 0:12:13.640 --> 0:12:15.400 no way that we're going to do that. The FED 0:12:15.480 --> 0:12:18.240 has worked too hard and too long to get us 0:12:18.280 --> 0:12:19.839 to the point where we are. They're not going to 0:12:19.920 --> 0:12:23.000 start cutting that quickly, and we saw the market reprice 0:12:23.080 --> 0:12:25.880 at that point in time. They did the same thing here. 0:12:25.920 --> 0:12:28.720 I think they thought, okay, we're going to hit September. 0:12:29.120 --> 0:12:32.840 Labor market is weakening. We had that one payroll report, 0:12:33.080 --> 0:12:35.960 was it July that really kind of unnerved the market 0:12:36.000 --> 0:12:38.679 a little bit, and the markets just ran with that. 0:12:38.840 --> 0:12:42.520 And again here we are pricing some of those cuts out. 0:12:42.600 --> 0:12:45.920 You look at where the neutral rate is priced. A 0:12:45.960 --> 0:12:49.480 couple months ago, that neutral rate was around two and 0:12:49.559 --> 0:12:52.480 three quarters two and a half. Now we're back up 0:12:52.640 --> 0:12:55.280 over three. We're closer to like a three point six. 0:12:55.559 --> 0:12:58.680 So they basically cut in half the number of cuts 0:12:58.720 --> 0:13:02.200 that they're expecting over the next twelve eighteen months. So yes, 0:13:02.240 --> 0:13:04.199 I think the market got a little bit ahead of itself. 0:13:04.240 --> 0:13:08.080 It's correcting itself now, which again plays into the Fed's 0:13:08.640 --> 0:13:12.040 hand of being able to be a little more cautious Victoria. 0:13:12.120 --> 0:13:14.560 We're kind of in the teeth of the earning season 0:13:14.640 --> 0:13:16.520 right now. We've had obviously the big banks put us 0:13:16.520 --> 0:13:19.080 some really good numbers lot last week, and we're starting 0:13:19.080 --> 0:13:20.880 to see some more What do you make of this 0:13:20.960 --> 0:13:23.360 earnings season here so far, and what do you think 0:13:23.400 --> 0:13:27.040 the market needs from earnings this period. 0:13:28.480 --> 0:13:32.560 So we saw expectations get really lowered right coming in 0:13:33.440 --> 0:13:37.560 to this earning season. It's really the lowest earnings growth 0:13:37.600 --> 0:13:40.840 season that we've had since the second quarter of twenty three, 0:13:40.960 --> 0:13:43.520 so a little bit over a year, and it was 0:13:43.600 --> 0:13:46.360 negative back then. We're not expecting anything negative here. But 0:13:46.400 --> 0:13:49.760 you're looking at maybe three to four percent earnings growth 0:13:49.760 --> 0:13:53.040 for the third quarter, and you might say, Okay, we're 0:13:53.080 --> 0:13:57.360 starting to see things come through from a weakening labor market. 0:13:57.400 --> 0:14:00.679 Maybe we start to see less hiring wages, or off 0:14:01.000 --> 0:14:04.120 margins are being compressed. All of that would make sense 0:14:04.200 --> 0:14:10.200 to see a lower earnings bar being set right going 0:14:10.240 --> 0:14:12.880 into next quarter and into the four quarters of next year, 0:14:13.000 --> 0:14:16.320 expectations are right back for double digits. So it seems 0:14:16.320 --> 0:14:20.520 like the market thinks earnings are continuing to be strong. Obviously, 0:14:20.520 --> 0:14:22.520 I don't have a crystal ball to tell us whether they. 0:14:22.400 --> 0:14:22.880 Will or not. 0:14:22.960 --> 0:14:25.800 But if they don't, then I don't know how we 0:14:25.880 --> 0:14:30.000 support a twenty two times evaluation on the equity market. 0:14:30.160 --> 0:14:33.320 So earnings better pull through if we want to see 0:14:33.320 --> 0:14:35.760 the stock market continue on the trend that it's been 0:14:35.800 --> 0:14:36.240 on all. 0:14:36.240 --> 0:14:38.400 Right, So how do we what should I buy? How 0:14:38.400 --> 0:14:39.640 do we position ourselves? 0:14:41.160 --> 0:14:43.040 So the one thing we don't want to do is 0:14:43.080 --> 0:14:45.200 get in the way of the momentum of the market. 0:14:45.200 --> 0:14:47.400 And we know we have this kind of momentum play 0:14:47.440 --> 0:14:51.000 going right now because you're seeing yields and stocks. Except 0:14:51.000 --> 0:14:53.040 for the last couple of days, yields and stocks have 0:14:53.160 --> 0:14:56.200 been trending higher together. But we do think you need 0:14:56.200 --> 0:14:58.520 to be a little bit guarded because there are yellow 0:14:58.560 --> 0:15:01.880 flags that are out there, whether it's you know, Jolt's report, 0:15:01.960 --> 0:15:06.640 whether it's temporary hiring declining, whether it's hiring rates across 0:15:06.680 --> 0:15:09.120 the board declining, all of these different kind of yellow 0:15:09.120 --> 0:15:12.040 flags we've been seeing in the economy. So we want 0:15:12.080 --> 0:15:15.640 to have a pretty balanced portfolio. We like financials because 0:15:15.640 --> 0:15:18.560 of the yield curve we think will be resteepening. They've 0:15:18.600 --> 0:15:21.200 gone as you've mentioned, they had really good earnings, so 0:15:21.200 --> 0:15:24.280 they've gone up. Maybe wait for a little pullback industrials 0:15:24.440 --> 0:15:27.480 or showing leadership right now versus the rest of the market. 0:15:27.640 --> 0:15:30.480 But find some of those areas that have pulled back 0:15:30.520 --> 0:15:34.640 as of late, healthcare, staples, even some of the tech names. 0:15:34.920 --> 0:15:36.640 That's where I think you need to go in and 0:15:36.640 --> 0:15:38.760 start looking. You look at a name like Signa that 0:15:38.800 --> 0:15:42.400 we own, doesn't have exposure to Medicare and Medicaid like 0:15:42.440 --> 0:15:44.720 some of the other HMOs and has been holding its 0:15:44.720 --> 0:15:47.040 own but it's had a pullback. You can go in 0:15:47.080 --> 0:15:49.560 there and even a name like Qualcom. I think within 0:15:49.600 --> 0:15:51.720 the tech industry. We know we've got the mag seven 0:15:51.760 --> 0:15:54.880 reporting next week. You can find some other areas within 0:15:55.040 --> 0:15:58.680 tech to add some exposure. So make sure you're diversified. 0:15:58.720 --> 0:16:00.680 And we would add a little bit of fixed income 0:16:00.720 --> 0:16:03.360 to have steady cash flow with yields as high as 0:16:03.360 --> 0:16:04.080 they are right now. 0:16:04.200 --> 0:16:06.120 All right, Victoria, thank you so much for joining us. 0:16:06.160 --> 0:16:09.480 Victoria Fernandez Folks. She's chief market strategist at cross Mark 0:16:09.640 --> 0:16:13.040 Global Investments, joining us via zoom from Houston, Texas. She's 0:16:13.080 --> 0:16:16.160 a Houston native born and raised in Houston. When undergraduate 0:16:16.200 --> 0:16:19.000 school at Rice, which is one of the great universities 0:16:19.040 --> 0:16:19.880 in this country. 0:16:20.160 --> 0:16:22.080 Wish I looked at Rice back. I don't even think 0:16:22.080 --> 0:16:22.440 about that. 0:16:22.520 --> 0:16:24.360 That would have been such a cool thing to be 0:16:24.400 --> 0:16:26.480 in Houston, Texas. At Rice didn't even think about it. 0:16:27.960 --> 0:16:31.840 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:31.920 --> 0:16:35.440 weekdays at ten am Eastern on applecar Play and Android 0:16:35.440 --> 0:16:38.240 Auto with the Bloomberg Business app. You can also listen 0:16:38.360 --> 0:16:41.440 live on Amazon Alexa from our flagship New York station 0:16:41.800 --> 0:16:44.560 Just Say Alexa playing Bloomberg eleven thirty. 0:16:45.760 --> 0:16:46.360 All right, John. 0:16:46.600 --> 0:16:48.680 One of the new stories today was a deal that's 0:16:48.720 --> 0:16:51.360 not going to happen, Tapestries eight point five billion dollars 0:16:51.400 --> 0:16:54.640 deal for Capri that's halted by a judge. In a 0:16:54.640 --> 0:16:56.880 big win for the Federal Trade Commission, not such a 0:16:56.920 --> 0:16:59.240 big win for the shareholders of Capriga. I might add 0:16:59.400 --> 0:17:02.720 deb Acon, she is our go to person for everything 0:17:03.600 --> 0:17:07.240 Luxury Debate and Bloomberg Intelligence Luxury goods analyst deb I 0:17:07.280 --> 0:17:10.480 have to admit I'm kind of surprised by this ruling 0:17:10.480 --> 0:17:13.240 by the judge. I think the market is too judging 0:17:13.240 --> 0:17:15.960 by the big decline and cappreciares what's going on there 0:17:15.960 --> 0:17:16.440 with this deal? 0:17:17.800 --> 0:17:23.080 I think so too, Hi, So yeah. I would say 0:17:23.080 --> 0:17:26.720 there was a sixty to seventy percent swing of expectation 0:17:26.840 --> 0:17:28.879 of this deal going ahead, and it's all about the 0:17:29.000 --> 0:17:32.280 coming together taps use eight and a half billion bid 0:17:32.520 --> 0:17:37.159 four Capri could have brought together two very big brands 0:17:37.160 --> 0:17:42.399 in aspirational luxury, aspirational fashion, entry level luxury, however you 0:17:42.600 --> 0:17:49.000 like to name with Coach under Tapestry and Michael Cars 0:17:49.160 --> 0:17:52.480 under Capri as well as their four of the brands combined, 0:17:53.080 --> 0:17:55.560 and the idea, you know what was found by the 0:17:55.640 --> 0:17:58.120 judges that actually there would be too much of an 0:17:58.119 --> 0:18:02.760 overlap and that there was a commission clash. So there's 0:18:02.760 --> 0:18:06.000 been a rule against the expectation when we looked at 0:18:06.000 --> 0:18:07.800 all the data sets as well as many of us 0:18:07.800 --> 0:18:10.159 who've done the due diligence, and there are reams and 0:18:10.240 --> 0:18:13.440 reams of data taken to court where that actually there's 0:18:13.520 --> 0:18:17.919 so much fragmentation across the space, particularly in the US, 0:18:18.200 --> 0:18:21.560 which is the biggest market for both brands, across so 0:18:21.640 --> 0:18:26.159 many price points online and offline, in department stores, in 0:18:26.320 --> 0:18:29.240 owned stores, that this was seen as possibly a deal 0:18:29.280 --> 0:18:30.280 that could have gone ahead. 0:18:31.080 --> 0:18:34.400 Yeah, it's what were the regulators afraid of, Like handbag prices. 0:18:34.440 --> 0:18:37.520 Would you know there'd be a monopoly and price go 0:18:37.680 --> 0:18:39.240 up so I couldn't afford Yeah. 0:18:40.080 --> 0:18:47.840 Absolutely, the expectation, the expectation that over time price rises 0:18:48.800 --> 0:18:52.040 would be seen to be taking place in the industry. 0:18:52.080 --> 0:18:54.000 Once the two brands were together and it was seen 0:18:54.000 --> 0:18:57.880 that they could have fifty nine percent of that aspirational marketplace, 0:18:58.320 --> 0:19:01.320 which I find difficult to understand and as does know 0:19:01.400 --> 0:19:03.120 much of the market, given that we did a lot 0:19:03.160 --> 0:19:06.960 of work on that and there is the deadline on 0:19:07.000 --> 0:19:09.240 this deal was actually the tenth of feb Speaking to 0:19:09.400 --> 0:19:14.240 one of our specialists last night, there's an understanding of 0:19:14.320 --> 0:19:20.440 course that Tapestry will appeal, that Capri will follow and 0:19:20.560 --> 0:19:24.880 go along with that appeal, but that actually to get 0:19:24.960 --> 0:19:29.119 the FTC to come up with their findings by the 0:19:29.160 --> 0:19:32.919 tenth of February would be difficult, and then an extension 0:19:32.960 --> 0:19:36.000 beyond which would be difficult. And at that point, if 0:19:36.040 --> 0:19:38.080