1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,880 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,040 Speaker 1: or watch us live on YouTube. 6 00:00:27,360 --> 00:00:31,080 Speaker 2: Brent Kenwell joins US here US Investment and Options analysts 7 00:00:31,080 --> 00:00:31,240 Speaker 2: for E. 8 00:00:31,440 --> 00:00:32,400 Speaker 3: Trou Brett. 9 00:00:32,640 --> 00:00:34,800 Speaker 2: You look back on twenty twenty five, heck of a 10 00:00:34,920 --> 00:00:37,120 Speaker 2: performance across the equity markets here. 11 00:00:37,560 --> 00:00:39,040 Speaker 3: What are the key drivers. 12 00:00:38,680 --> 00:00:40,680 Speaker 4: For you for twenty twenty six? What are you looking at? 13 00:00:40,720 --> 00:00:43,160 Speaker 4: What are your expectations are for twenty twenty six? 14 00:00:44,400 --> 00:00:47,760 Speaker 5: Yeah, thanks for having me to start. 15 00:00:47,200 --> 00:00:47,720 Speaker 3: Off the hour. 16 00:00:48,360 --> 00:00:50,560 Speaker 5: You know, when we look at equity markets for twenty 17 00:00:50,560 --> 00:00:52,920 Speaker 5: twenty six, at this point almost actually feels a little 18 00:00:52,920 --> 00:00:55,240 Speaker 5: bit more of a concern that so many people are 19 00:00:55,320 --> 00:00:58,480 Speaker 5: constructive on equities as we look to the next twelve months, 20 00:00:58,480 --> 00:01:02,360 Speaker 5: But we are amongst those who are also constructive on equities. 21 00:01:02,400 --> 00:01:06,880 Speaker 5: We expect US markets to do another have another solid year, 22 00:01:06,959 --> 00:01:11,280 Speaker 5: driven by really multiple catalysts, three of which include a 23 00:01:11,360 --> 00:01:15,840 Speaker 5: continued AI trade, expanding and accelerating earnings growth in the 24 00:01:15,880 --> 00:01:17,960 Speaker 5: S and P five hundred and a fed that is 25 00:01:18,000 --> 00:01:22,600 Speaker 5: not looking to be hawkish or derail equities from a 26 00:01:22,640 --> 00:01:23,720 Speaker 5: monetary perspective. 27 00:01:23,800 --> 00:01:26,520 Speaker 3: So when we look at kind of those I. 28 00:01:26,440 --> 00:01:29,800 Speaker 5: Think bigger drivers of the market, we still see that 29 00:01:29,800 --> 00:01:32,560 Speaker 5: there's room for expansion there and we expect those to 30 00:01:32,560 --> 00:01:34,000 Speaker 5: be positive drivers for next year. 31 00:01:34,440 --> 00:01:37,680 Speaker 6: So given all of that, why does invent investor sentiment 32 00:01:37,800 --> 00:01:40,200 Speaker 6: remain subdued? What do you think could be contributing to 33 00:01:40,240 --> 00:01:43,160 Speaker 6: this cautious approach and how do you anticipate this sentiment 34 00:01:43,200 --> 00:01:44,440 Speaker 6: to evolve throughout the year. 35 00:01:45,440 --> 00:01:48,360 Speaker 5: Yeah, that's such a good question, and I think it 36 00:01:48,440 --> 00:01:52,280 Speaker 5: really speaks to sort of the division we're seeing in 37 00:01:52,320 --> 00:01:55,280 Speaker 5: so many ways between Wall Street and Main Street. You know, 38 00:01:55,320 --> 00:01:58,360 Speaker 5: when we look at you know, and we include ourselves 39 00:01:58,360 --> 00:02:00,240 Speaker 5: in this observation too, but when we look at like 40 00:02:00,320 --> 00:02:04,080 Speaker 5: the streets, the firms on Wall Street, they remained pretty 41 00:02:04,080 --> 00:02:06,800 Speaker 5: optimistic for next year. But when we look at sentiment, 42 00:02:06,920 --> 00:02:10,519 Speaker 5: like various sentiment measures or surveys or gauges, they remain 43 00:02:11,000 --> 00:02:15,440 Speaker 5: fairly subdued. Really, and they they that happened in you know, 44 00:02:15,520 --> 00:02:17,600 Speaker 5: late Q one, early Q two of last year when 45 00:02:17,639 --> 00:02:20,200 Speaker 5: we had you know, the tariff sell off and about 46 00:02:20,240 --> 00:02:22,639 Speaker 5: twenty percent correction the sp we never really saw that 47 00:02:22,720 --> 00:02:26,200 Speaker 5: sentiment come back to life. There's always been this I 48 00:02:26,200 --> 00:02:28,720 Speaker 5: would almost argue a healthy amount of skepticism in the 49 00:02:28,720 --> 00:02:33,160 Speaker 5: market rally, But nevertheless, we haven't seen that confidence really 50 00:02:33,200 --> 00:02:36,560 Speaker 5: come back. And that's consumer confidence, that's investor sentiment. So 51 00:02:37,120 --> 00:02:39,800 Speaker 5: you know, I don't know if that will maybe actually. 52 00:02:39,600 --> 00:02:41,720 Speaker 3: End up being a positive as we pushed through the year. 53 00:02:41,880 --> 00:02:43,560 Speaker 3: I'm hoping it acts as a positive. 54 00:02:43,600 --> 00:02:46,079 Speaker 5: But yeah, you're to your point, we haven't really seen 55 00:02:46,280 --> 00:02:49,120 Speaker 5: sentiment make the types of rebound that we've seen in 56 00:02:49,480 --> 00:02:51,160 Speaker 5: you know, whether it's GDP or the S and P 57 00:02:51,840 --> 00:02:55,040 Speaker 5: hasn't really followed followed those measures higher. So twenty twenty 58 00:02:55,040 --> 00:02:57,360 Speaker 5: six will be interesting in that respect, Brett. 59 00:02:57,440 --> 00:03:00,480 Speaker 2: We have not really seen to any meaningful degree of 60 00:03:00,520 --> 00:03:04,200 Speaker 2: broadening out in participation in this market. It has remained 61 00:03:04,840 --> 00:03:08,200 Speaker 2: fairly concentrated in a handful of technology names, and a 62 00:03:08,240 --> 00:03:11,480 Speaker 2: lot of folks will call that out as a potential headwind. 63 00:03:11,040 --> 00:03:12,880 Speaker 7: For this market or concern. How do you guys think 64 00:03:12,880 --> 00:03:13,280 Speaker 7: about that? 65 00:03:14,639 --> 00:03:17,000 Speaker 5: Yeah, you know, I think, well, I think there was 66 00:03:17,000 --> 00:03:19,160 Speaker 5: a couple of ways of looking at first. To your point, 67 00:03:19,800 --> 00:03:22,440 Speaker 5: I do think we see some broadening in twenty twenty six, 68 00:03:23,320 --> 00:03:26,520 Speaker 5: not only our SMP earnings expected to accelerate next year, 69 00:03:27,120 --> 00:03:30,120 Speaker 5: but all eleven sectors in the SMP are expected. 70 00:03:29,760 --> 00:03:30,840 Speaker 7: To post earnings growth. 71 00:03:30,919 --> 00:03:33,520 Speaker 5: We haven't seen that in five years, you know, twenty 72 00:03:33,560 --> 00:03:35,280 Speaker 5: twenty one being the last time we had. It was 73 00:03:35,480 --> 00:03:37,960 Speaker 5: pretty low bar to a hurdle at that time, coming 74 00:03:37,960 --> 00:03:39,680 Speaker 5: out of you know, the first year out of COVID. 75 00:03:39,840 --> 00:03:43,840 Speaker 5: So we're expected to see fairly broad earnings growth next year. 76 00:03:43,880 --> 00:03:47,120 Speaker 5: That should act as a positive catalyst. But we're also seeing, 77 00:03:47,200 --> 00:03:50,240 Speaker 5: you know, we might finally see small caps come to life. 78 00:03:50,280 --> 00:03:52,360 Speaker 5: You know, I have to put might in there because 79 00:03:53,200 --> 00:03:55,440 Speaker 5: you know, last year I expected the Russell to do 80 00:03:55,480 --> 00:03:58,720 Speaker 5: and it did do better last year, but certainly you know, 81 00:03:58,920 --> 00:04:03,440 Speaker 5: didn't lead need the charge higher necessarily. But you know, 82 00:04:03,600 --> 00:04:06,040 Speaker 5: we do think that small caps could finally have their 83 00:04:06,120 --> 00:04:08,280 Speaker 5: moment in twenty twenty six. Maybe they start to show 84 00:04:08,320 --> 00:04:12,040 Speaker 5: they have the very strong expectations for revenue, cash flow 85 00:04:12,080 --> 00:04:13,960 Speaker 5: and earnings growth next year. So we're hoping to see 86 00:04:13,960 --> 00:04:17,360 Speaker 5: that takeoff. But you know, even within tech, I think 87 00:04:17,400 --> 00:04:20,920 Speaker 5: there's this concern that we're approaching this AI bubble. 88 00:04:20,960 --> 00:04:23,080 Speaker 3: We're in the depths of the bubble. 89 00:04:23,080 --> 00:04:26,200 Speaker 5: And I mean, I think it's reasonable to question are 90 00:04:26,200 --> 00:04:28,840 Speaker 5: we in a bubble or even speculate that we are. 91 00:04:28,960 --> 00:04:31,320 Speaker 5: But it's it's too hard for us at this point 92 00:04:31,360 --> 00:04:33,719 Speaker 5: to say that we're in a late stage bubble, and 93 00:04:33,760 --> 00:04:36,480 Speaker 5: I think we need point to certain observations within the space, 94 00:04:36,600 --> 00:04:42,359 Speaker 5: whether that's analytical, like looking at directly at Nvidia stock trades, 95 00:04:42,360 --> 00:04:45,560 Speaker 5: about twenty five twenty six times forward earnings is expected 96 00:04:45,600 --> 00:04:48,159 Speaker 5: to grow fifty percent on the top and bottom line. 97 00:04:48,800 --> 00:04:50,960 Speaker 5: That's very difficult for us to look at that and 98 00:04:50,960 --> 00:04:54,920 Speaker 5: say that's a bubble like valuation, you know, less analytical. 99 00:04:54,960 --> 00:04:57,920 Speaker 5: You look at something like Meta and Oracle. Investors are 100 00:04:57,960 --> 00:05:00,719 Speaker 5: punishing these names because of the con urns over cash 101 00:05:00,760 --> 00:05:02,080 Speaker 5: flows and their balance sheets. 102 00:05:02,120 --> 00:05:03,440 Speaker 7: So these are not. 103 00:05:03,400 --> 00:05:05,760 Speaker 5: Behaviors that we see in late stage bubbles. Is they're 104 00:05:05,800 --> 00:05:08,120 Speaker 5: not valuations we see in late stage bubbles. So from 105 00:05:08,160 --> 00:05:11,120 Speaker 5: those perspectives, we still think that there's room to go 106 00:05:11,160 --> 00:05:11,880 Speaker 5: in that trade. 107 00:05:12,279 --> 00:05:15,200 Speaker 6: What about downside risks. You've highlighted the labor market as 108 00:05:15,240 --> 00:05:17,920 Speaker 6: one of those. How crucial do you think the stabilization 109 00:05:18,000 --> 00:05:21,119 Speaker 6: of that is to the continuation of really this record 110 00:05:21,120 --> 00:05:24,200 Speaker 6: bill market We've seen double digit gains in the past 111 00:05:24,200 --> 00:05:24,760 Speaker 6: three years. 112 00:05:26,640 --> 00:05:29,559 Speaker 5: Yeah, the jobs, you know, sort of like the mantra 113 00:05:29,640 --> 00:05:33,760 Speaker 5: we've adopted for you know, sort of, the macro environment 114 00:05:33,880 --> 00:05:37,080 Speaker 5: is messy but manageable. We're seeing so many moving parts, 115 00:05:37,120 --> 00:05:39,839 Speaker 5: and whether that's you know, whether that's to do with 116 00:05:40,000 --> 00:05:43,400 Speaker 5: economic policy, or whether it's what's going on at the FED. 117 00:05:43,440 --> 00:05:45,400 Speaker 5: There's a lot of moving parts at the FED right now, 118 00:05:45,560 --> 00:05:47,800 Speaker 5: one of which of course being a new FED share 119 00:05:47,800 --> 00:05:50,520 Speaker 5: coming in twenty twenty six. But even when we just 120 00:05:50,640 --> 00:05:53,039 Speaker 5: broadly look at macro, there's a lot of moving parts. 121 00:05:53,080 --> 00:05:56,039 Speaker 5: You have the labor market is cooling but not collapsing. 122 00:05:56,480 --> 00:06:01,159 Speaker 5: Inflation is taking higher but not you know, you know, 123 00:06:01,240 --> 00:06:03,719 Speaker 5: going out at at a pace that is not controlled 124 00:06:03,839 --> 00:06:07,480 Speaker 5: or well anchored, to put it in FED speak. But 125 00:06:07,520 --> 00:06:10,720 Speaker 5: then you have this consumer that's strained but resilient. And 126 00:06:10,800 --> 00:06:13,919 Speaker 5: same with GDP, it continues to come in above expectations. 127 00:06:13,920 --> 00:06:16,560 Speaker 5: So overall, when we look at the space, I think 128 00:06:16,600 --> 00:06:20,640 Speaker 5: the foundation is constructive for equities to continue hire, for 129 00:06:20,680 --> 00:06:23,080 Speaker 5: the economy to continue along in twenty twenty six. But 130 00:06:23,160 --> 00:06:26,640 Speaker 5: to your point, the labor market is the biggest concern. 131 00:06:26,960 --> 00:06:29,680 Speaker 5: The consumer in the US is responsible for a little 132 00:06:29,680 --> 00:06:32,760 Speaker 5: more than two thirds of GDP. The consumer does not 133 00:06:32,880 --> 00:06:35,559 Speaker 5: have very much spending ability if they lose their jobs. 134 00:06:35,600 --> 00:06:36,480 Speaker 7: So if we. 135 00:06:36,480 --> 00:06:39,279 Speaker 5: See that, you know, the cooling and the labor market 136 00:06:39,360 --> 00:06:43,440 Speaker 5: kind of accelerate or really get to a concerning level 137 00:06:43,520 --> 00:06:45,760 Speaker 5: interior to a concerning level in twenty twenty six, that's 138 00:06:45,760 --> 00:06:48,600 Speaker 5: going to have a really negative impact on equity markets. 139 00:06:48,920 --> 00:06:51,400 Speaker 5: Some investors, you know, might be out there kind of 140 00:06:51,480 --> 00:06:54,320 Speaker 5: rooting for continued cooling in the labor market to push 141 00:06:54,400 --> 00:06:56,760 Speaker 5: the FED along to be a bit more accommodative, but 142 00:06:57,279 --> 00:06:59,320 Speaker 5: you know, we don't think that that's the right approach. 143 00:07:00,160 --> 00:07:03,640 Speaker 5: Labor market is a very healthy thing, and we believe 144 00:07:03,640 --> 00:07:05,040 Speaker 5: a very healthy thing for equities. 145 00:07:05,920 --> 00:07:07,680 Speaker 7: Ratt thanks so much for journeys. Really appreciate it. 146 00:07:07,880 --> 00:07:11,800 Speaker 2: Brent Kenwell joining us a US investment and options analyst 147 00:07:11,920 --> 00:07:12,640 Speaker 2: for e Toro. 148 00:07:14,640 --> 00:07:17,800 Speaker 4: Stay with us. More from Bloomberg Surveillance coming up after this. 149 00:07:24,000 --> 00:07:27,600 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 150 00:07:27,640 --> 00:07:30,800 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 151 00:07:30,920 --> 00:07:34,320 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 152 00:07:34,480 --> 00:07:36,200 Speaker 1: or watch US live on YouTube. 153 00:07:36,360 --> 00:07:38,560 Speaker 2: The Russell Price Joints is here, chief economist at a 154 00:07:38,600 --> 00:07:42,520 Speaker 2: merit prize financial here. Russell I love to get your 155 00:07:42,560 --> 00:07:45,760 Speaker 2: thoughts about kind of how you view this economic backdrop 156 00:07:47,080 --> 00:07:50,520 Speaker 2: for twenty twenty six here. What do you think investors 157 00:07:50,520 --> 00:07:51,600 Speaker 2: should be focusing on here? 158 00:07:53,280 --> 00:07:55,200 Speaker 8: Well, I think we have a pretty good year ahead 159 00:07:55,200 --> 00:07:57,640 Speaker 8: of us from an economic perspective. We come into the 160 00:07:57,720 --> 00:08:02,600 Speaker 8: year with consumers and pretty financial shape and aggregate. We 161 00:08:02,640 --> 00:08:05,440 Speaker 8: also should see some pluses and minuses in the first 162 00:08:05,480 --> 00:08:07,680 Speaker 8: half of the year for investors to watch out for. 163 00:08:08,240 --> 00:08:11,000 Speaker 8: On the plus side, we should get a little bit 164 00:08:11,040 --> 00:08:15,040 Speaker 8: more consumer income from the no tax on tips, the 165 00:08:15,480 --> 00:08:20,040 Speaker 8: no tax on overtime, plus the six thousand dollars senior 166 00:08:20,480 --> 00:08:25,000 Speaker 8: tax credit or deduction excuse me. And also against that 167 00:08:25,480 --> 00:08:28,840 Speaker 8: you'll have some consumers that are negatively affected by the 168 00:08:28,840 --> 00:08:37,400 Speaker 8: ACA subsidy elimination, and also the student loan payments repayments 169 00:08:38,200 --> 00:08:41,960 Speaker 8: been forced for stringently. So but other than that, the 170 00:08:42,000 --> 00:08:44,240 Speaker 8: economy is going into the twenty twenty six with pretty 171 00:08:44,280 --> 00:08:47,200 Speaker 8: good momentum. We should also continue to see pretty good 172 00:08:47,520 --> 00:08:51,760 Speaker 8: business investment spending related to AI and other growth initiatives, 173 00:08:52,320 --> 00:08:54,200 Speaker 8: so we expect the pace to be a little bit 174 00:08:54,240 --> 00:08:56,760 Speaker 8: better this year than it was last year, and last 175 00:08:56,800 --> 00:08:58,440 Speaker 8: year was a pretty decent year. 176 00:08:58,880 --> 00:09:01,560 Speaker 6: So those are the pros you've also highlighted labor market. 177 00:09:01,559 --> 00:09:04,680 Speaker 6: That's a key risk. What improvements are needed to avoid 178 00:09:04,679 --> 00:09:06,520 Speaker 6: a slowdown? Maybe in consumer spending. 179 00:09:08,000 --> 00:09:11,760 Speaker 8: Yeah, we've certainly seen a big decline in overall consumer 180 00:09:11,840 --> 00:09:16,400 Speaker 8: centiment that hasn't really translated yet into lower consumer spending. 181 00:09:16,800 --> 00:09:19,000 Speaker 8: But if we were to continue to see a further 182 00:09:19,400 --> 00:09:26,080 Speaker 8: deceleration or degradation and the job market, those weaker sentiment 183 00:09:26,160 --> 00:09:29,920 Speaker 8: levels likely would translate into reduce spending. So what we 184 00:09:30,000 --> 00:09:32,800 Speaker 8: need to see is for hiring to regain a little 185 00:09:32,840 --> 00:09:37,040 Speaker 8: bit more traction. Recent data suggests that that might be happening, 186 00:09:37,080 --> 00:09:40,520 Speaker 8: but it's still very early and it's not by any 187 00:09:40,559 --> 00:09:46,240 Speaker 8: means conclusive. So we just need to see businesses alleviate 188 00:09:46,320 --> 00:09:48,960 Speaker 8: some of their concerns or lose some of their concerns. 189 00:09:49,040 --> 00:09:52,720 Speaker 8: Is related to how much the terroriffs mighty negatively impact 190 00:09:52,760 --> 00:09:56,920 Speaker 8: the economy, what that might do to company profit margins, 191 00:09:57,240 --> 00:09:59,719 Speaker 8: and from a small business perspective, where much of the 192 00:09:59,800 --> 00:10:03,920 Speaker 8: job hiring has fallen off, we need to see small 193 00:10:03,960 --> 00:10:07,400 Speaker 8: businesses to become more accustomed to dealing with all of 194 00:10:07,440 --> 00:10:11,920 Speaker 8: the added paperwork involved with tariffs and the additional expense 195 00:10:11,960 --> 00:10:12,439 Speaker 8: as well. 196 00:10:13,600 --> 00:10:16,760 Speaker 2: So, Russell, what do you think the fetter reserve should 197 00:10:16,840 --> 00:10:19,319 Speaker 2: do in twenty twenty six. Right now, the market is 198 00:10:19,360 --> 00:10:22,880 Speaker 2: kind of discounting maybe two quarter point rate cuts during 199 00:10:22,880 --> 00:10:23,120 Speaker 2: the year. 200 00:10:23,160 --> 00:10:24,040 Speaker 7: What do you think they should do. 201 00:10:25,720 --> 00:10:28,719 Speaker 8: Well. I think we could see a little bit more 202 00:10:28,760 --> 00:10:34,040 Speaker 8: than that, probably around three primarily because inflation has been 203 00:10:35,440 --> 00:10:39,520 Speaker 8: not been nearly as strong as people have predicted a 204 00:10:39,520 --> 00:10:44,920 Speaker 8: few months ago when the terriffs were first announced. So 205 00:10:45,600 --> 00:10:49,600 Speaker 8: the inflation situation has been a lot better. Of course, 206 00:10:50,480 --> 00:10:53,960 Speaker 8: that is a big caveat that the data is incomplete 207 00:10:54,000 --> 00:10:57,480 Speaker 8: and a little bit suspicious related to the most recent 208 00:10:58,360 --> 00:11:02,280 Speaker 8: Labor Department report because of the government shutdown that we 209 00:11:02,320 --> 00:11:06,160 Speaker 8: had in October in the first half of November, but 210 00:11:06,240 --> 00:11:09,600 Speaker 8: we do expect inflation to peak maybe at three point 211 00:11:09,640 --> 00:11:12,960 Speaker 8: two percent in the first quarter. That might actually be 212 00:11:12,960 --> 00:11:15,400 Speaker 8: a little bit too high. We could see the number 213 00:11:15,760 --> 00:11:18,760 Speaker 8: be a little bit weaker than that, offsetting some of 214 00:11:18,800 --> 00:11:23,240 Speaker 8: the ongoing tier if upside pressures were seeing in inflation, 215 00:11:24,000 --> 00:11:28,080 Speaker 8: is a steady deceleration in shelter costs, and shelters are 216 00:11:28,120 --> 00:11:30,600 Speaker 8: thirty five percent of the total costs of the consumer 217 00:11:30,679 --> 00:11:34,720 Speaker 8: price index, so that's a pretty strong downward pressure. So 218 00:11:34,800 --> 00:11:40,840 Speaker 8: with that backdrop and still some relatively weak hiring activity. 219 00:11:41,320 --> 00:11:44,000 Speaker 8: We expect by the second quarter the Federal Reserve should 220 00:11:44,040 --> 00:11:48,079 Speaker 8: resume their pace of quarter point cuts, So. 221 00:11:48,080 --> 00:11:50,320 Speaker 6: You expect three rate cuts in twenty twenty six. How 222 00:11:50,320 --> 00:11:53,240 Speaker 6: do you see those impacting inflation and economic growth? 223 00:11:54,720 --> 00:11:58,600 Speaker 8: Well, I think the impact on inflation should be relatively benign, 224 00:11:59,400 --> 00:12:01,880 Speaker 8: as I should mention that over the last two and 225 00:12:01,880 --> 00:12:06,640 Speaker 8: a half years, if you strip out just shelter costs, 226 00:12:07,920 --> 00:12:11,200 Speaker 8: which are again our thirty five percent of the index CPI, 227 00:12:11,320 --> 00:12:14,960 Speaker 8: inflation has been at or below two percent for those 228 00:12:15,000 --> 00:12:17,839 Speaker 8: two and a half years. So it's really the cooperation 229 00:12:17,960 --> 00:12:21,319 Speaker 8: of that shelter component that matters much. And those are 230 00:12:21,480 --> 00:12:24,120 Speaker 8: very long term trends based on the way they measure 231 00:12:24,160 --> 00:12:27,440 Speaker 8: it and based on the way rental rates are changed 232 00:12:28,120 --> 00:12:32,679 Speaker 8: over time in the marketplace. So we should see further 233 00:12:32,800 --> 00:12:38,120 Speaker 8: deceleration CPI even without the cuts. The cuts they should 234 00:12:38,160 --> 00:12:42,640 Speaker 8: stabilize economic growth that above trend growth, but still not 235 00:12:42,920 --> 00:12:47,280 Speaker 8: enough to really give corporations a lot of pricing power, 236 00:12:47,920 --> 00:12:52,400 Speaker 8: Nor are we likely to see supply and demand imbalances 237 00:12:52,440 --> 00:12:55,880 Speaker 8: that would continue to push inflation higher. 238 00:12:57,080 --> 00:12:57,480 Speaker 4: Russell. 239 00:12:57,600 --> 00:13:00,200 Speaker 2: In terms of the labor market, we've got it just 240 00:13:00,240 --> 00:13:03,920 Speaker 2: a headline print four point six percent and that's by 241 00:13:03,960 --> 00:13:06,880 Speaker 2: all measures pretty darn good close to full employments you're 242 00:13:06,880 --> 00:13:10,520 Speaker 2: probably going to get. But still people are concerned about 243 00:13:10,600 --> 00:13:12,319 Speaker 2: underlying trends in the labor market. 244 00:13:12,520 --> 00:13:13,600 Speaker 7: How do you view the labor market? 245 00:13:15,559 --> 00:13:18,079 Speaker 8: Yeah, I think the concerns about the underlying labor market 246 00:13:18,120 --> 00:13:22,200 Speaker 8: are certainly justifiable. We've seen weakness in places that were 247 00:13:22,240 --> 00:13:25,760 Speaker 8: typically not all that used to seeing weakness. Not only 248 00:13:25,760 --> 00:13:28,920 Speaker 8: are we seeing weakness, and some of the lower segments 249 00:13:28,960 --> 00:13:33,559 Speaker 8: of the marketplace where AI may be AI implementations may 250 00:13:33,559 --> 00:13:36,760 Speaker 8: be having an influence. Certainly, we've seen most of the 251 00:13:37,000 --> 00:13:41,520 Speaker 8: job decline and hiring, I should say in the small 252 00:13:41,559 --> 00:13:44,880 Speaker 8: business sector in our view that that is primarily the 253 00:13:45,040 --> 00:13:49,000 Speaker 8: reflection of the terror related challenges. But also we've seen 254 00:13:50,400 --> 00:13:55,920 Speaker 8: certainly a considerably weaker environment for recent college graduates, so 255 00:13:56,280 --> 00:14:01,199 Speaker 8: that also may be influenced by artificial intelligence. People's concerns 256 00:14:01,200 --> 00:14:03,360 Speaker 8: about the labor market, at least over the near term, 257 00:14:03,760 --> 00:14:08,559 Speaker 8: I think are legitimate. But now that the terror situation 258 00:14:08,760 --> 00:14:14,559 Speaker 8: is becoming the standard, becoming business as usual to some degree, 259 00:14:14,960 --> 00:14:21,280 Speaker 8: we think that the hiring should recover modest modestly and 260 00:14:21,320 --> 00:14:24,520 Speaker 8: we should see the unemployment rate this year decline a 261 00:14:24,520 --> 00:14:26,760 Speaker 8: little bit from that four point six percent rate that 262 00:14:26,800 --> 00:14:30,480 Speaker 8: we've seen most recently. So with that a little bit 263 00:14:30,520 --> 00:14:34,920 Speaker 8: of decline in the total number of available workers, which 264 00:14:34,920 --> 00:14:37,320 Speaker 8: should put a little bit downward pressure on the rate 265 00:14:37,400 --> 00:14:37,920 Speaker 8: as well. 266 00:14:40,360 --> 00:14:43,440 Speaker 6: Great and with slightly lower mortgage read what's your outlook 267 00:14:43,440 --> 00:14:46,800 Speaker 6: for housing in twenty twenty six, especially regarding existing home sales? 268 00:14:46,920 --> 00:14:49,080 Speaker 6: I asked, because I'm a renter and I always tell 269 00:14:49,080 --> 00:14:50,480 Speaker 6: everyone here asking as a. 270 00:14:50,440 --> 00:14:55,920 Speaker 8: Renter, sure, well, existing home sales we have seen we 271 00:14:56,000 --> 00:14:59,440 Speaker 8: have been seeing over the last several quarters some improvements 272 00:14:59,520 --> 00:15:03,360 Speaker 8: and the bailability of housing available for sale. That reversed 273 00:15:03,400 --> 00:15:06,480 Speaker 8: a little bit late in the second half of twenty 274 00:15:06,480 --> 00:15:09,600 Speaker 8: twenty five, but that's fairly normal as well as far 275 00:15:09,640 --> 00:15:14,280 Speaker 8: as a seasonality basis. So as we go into twenty 276 00:15:14,360 --> 00:15:17,080 Speaker 8: four and twenty five, twenty twenty four to twenty twenty 277 00:15:17,080 --> 00:15:21,760 Speaker 8: five were very weak years for existing home sales. Twenty 278 00:15:21,760 --> 00:15:25,720 Speaker 8: twenty four was as weak as it's been since nineteen 279 00:15:25,760 --> 00:15:29,560 Speaker 8: ninety five. We expect to see a little bit better performance, 280 00:15:29,640 --> 00:15:33,040 Speaker 8: maybe about five to eight percent improvement and transactions, but 281 00:15:33,280 --> 00:15:37,239 Speaker 8: we should finally actually see some weakness and housing prices 282 00:15:37,680 --> 00:15:38,840 Speaker 8: around flat all. 283 00:15:38,800 --> 00:15:40,240 Speaker 7: Right, Russell, thanks so much for joining us. 284 00:15:40,280 --> 00:15:42,120 Speaker 2: Really appreciate getting your thoughts here as we start off 285 00:15:42,400 --> 00:15:45,400 Speaker 2: twenty twenty six. Russell Price, chief economist at Americ Price Financial. 286 00:15:47,080 --> 00:15:50,240 Speaker 4: Stay with us. More from Bloomberg Surveillance coming up after this. 287 00:15:56,440 --> 00:15:59,920 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Lie 288 00:16:00,120 --> 00:16:03,240 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 289 00:16:03,320 --> 00:16:06,760 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 290 00:16:06,920 --> 00:16:08,640 Speaker 1: or watch us live on YouTube. 291 00:16:08,840 --> 00:16:14,000 Speaker 2: Adam Turnquist Joints is here cheap technical strategies for LPL Financial. Adam, 292 00:16:14,000 --> 00:16:16,640 Speaker 2: thanks for joining us here. I'd love to get your 293 00:16:16,680 --> 00:16:19,760 Speaker 2: thoughts from a technical perspective. Where do you see real 294 00:16:19,840 --> 00:16:22,440 Speaker 2: opportunities here in the beginning of twenty twenty six. 295 00:16:23,360 --> 00:16:25,280 Speaker 3: Hey, good morning and happy new year. Thanks for having 296 00:16:25,320 --> 00:16:25,600 Speaker 3: me on. 297 00:16:26,000 --> 00:16:28,280 Speaker 9: So as we look ahead to twenty twenty six, we're 298 00:16:28,320 --> 00:16:30,640 Speaker 9: pretty constructive on the market when you look at things 299 00:16:30,680 --> 00:16:33,480 Speaker 9: technically right now, the SMP just kind of stuck in 300 00:16:33,520 --> 00:16:36,800 Speaker 9: this consolidation range it's really been in since October, and 301 00:16:36,840 --> 00:16:40,920 Speaker 9: no surprise, we're consolidating here after this big recovery rally off. 302 00:16:40,760 --> 00:16:42,200 Speaker 3: Those liberation Day lows. 303 00:16:42,600 --> 00:16:44,920 Speaker 9: But when you have an uptrend in a bowl market, 304 00:16:44,960 --> 00:16:47,440 Speaker 9: the most likely scenario as you break out to the 305 00:16:47,560 --> 00:16:50,360 Speaker 9: upside of that consolidation range for the S and P 306 00:16:50,480 --> 00:16:53,080 Speaker 9: five hundred, we're watching kind of the sixty nine hundred area, 307 00:16:53,200 --> 00:16:54,480 Speaker 9: so not far from current. 308 00:16:54,360 --> 00:16:55,800 Speaker 3: Levels for a breakout. 309 00:16:56,160 --> 00:16:58,800 Speaker 9: If we see that, the measured technical move would be 310 00:16:58,840 --> 00:17:02,280 Speaker 9: around seventy two in terms of a price target. So 311 00:17:02,320 --> 00:17:04,600 Speaker 9: we think the bull market will continue. And I think 312 00:17:04,600 --> 00:17:07,480 Speaker 9: most importantly what we've seen over the last couple months 313 00:17:07,520 --> 00:17:11,440 Speaker 9: is a shift from more defensive leadership with healthcare utilities 314 00:17:11,480 --> 00:17:15,160 Speaker 9: outperforming in November, to more cyclical leadership. That to us 315 00:17:15,240 --> 00:17:18,000 Speaker 9: suggests more of a durable, sustainable bull market here. 316 00:17:18,280 --> 00:17:22,240 Speaker 6: And you also emphasize the versification. What alternative assets or 317 00:17:22,400 --> 00:17:24,760 Speaker 6: sectors are you bullish on? Especially this year. 318 00:17:25,720 --> 00:17:29,400 Speaker 9: Our favorite sector, and it has been for almost two 319 00:17:29,480 --> 00:17:32,440 Speaker 9: years now, has been communication services. Is the best performing 320 00:17:32,560 --> 00:17:35,520 Speaker 9: sector last year, and I think in the previous year. 321 00:17:35,600 --> 00:17:38,160 Speaker 9: It's got very good fundamental story. When you look at 322 00:17:38,320 --> 00:17:41,520 Speaker 9: Earning's growth double digits, margins double digits, and I think 323 00:17:41,560 --> 00:17:44,280 Speaker 9: even revenues are expected to grow double digits next year, 324 00:17:44,560 --> 00:17:47,639 Speaker 9: so a solid backdrop. You get some hyperscalers in there 325 00:17:47,920 --> 00:17:50,359 Speaker 9: with meta and alphabet, but then you also get some 326 00:17:50,400 --> 00:17:52,840 Speaker 9: telecom names some more defensive areas, so we think of 327 00:17:52,880 --> 00:17:55,520 Speaker 9: it as more of a bar Bell type strategy which 328 00:17:55,760 --> 00:17:56,840 Speaker 9: could serve well. 329 00:17:56,640 --> 00:17:57,520 Speaker 3: In twenty twenty six. 330 00:17:57,560 --> 00:17:59,520 Speaker 9: We do think volatility is going to come back here 331 00:17:59,560 --> 00:18:02,560 Speaker 9: from really low levels in the vicks. I think it's 332 00:18:02,600 --> 00:18:04,520 Speaker 9: going to be more of a policy driven market, and 333 00:18:04,520 --> 00:18:07,000 Speaker 9: when you have that type of backdrop, we expect volatility 334 00:18:07,200 --> 00:18:09,439 Speaker 9: to remain at least a little bit higher than we 335 00:18:09,480 --> 00:18:10,120 Speaker 9: are right now. 336 00:18:10,960 --> 00:18:13,880 Speaker 2: Adam, I'm looking at the Relative Strength Index the RSI 337 00:18:14,000 --> 00:18:16,160 Speaker 2: on the S and P five hundred and sitting right 338 00:18:16,160 --> 00:18:19,119 Speaker 2: at fifty one, and typically at a reading of thirty, 339 00:18:19,200 --> 00:18:21,440 Speaker 2: the markets tend to be over sold. At a reading 340 00:18:21,480 --> 00:18:24,159 Speaker 2: of seventy tends to be a little overbought. We're sitting 341 00:18:24,240 --> 00:18:27,960 Speaker 2: right smack in the middle. What do I do with that? 342 00:18:28,080 --> 00:18:30,000 Speaker 9: We call that the midline, and that's a good spot 343 00:18:30,080 --> 00:18:33,640 Speaker 9: for the SMP. We've reset from some of these overbought conditions. 344 00:18:33,640 --> 00:18:36,199 Speaker 9: When you flash back to earlier in the year and 345 00:18:36,240 --> 00:18:39,639 Speaker 9: earlier in the fall, when the market was getting a 346 00:18:39,640 --> 00:18:40,560 Speaker 9: little bit overbought. 347 00:18:41,119 --> 00:18:42,280 Speaker 3: We've since corrected. 348 00:18:42,280 --> 00:18:45,560 Speaker 9: There's been some consolidation here really to get to the 349 00:18:45,680 --> 00:18:46,880 Speaker 9: overbought levels as well. 350 00:18:46,920 --> 00:18:47,600 Speaker 3: In a bull market. 351 00:18:47,600 --> 00:18:50,080 Speaker 9: You want to see that go through against seventy, as 352 00:18:50,080 --> 00:18:52,879 Speaker 9: you mentioned, and I think getting overbought in a bull market, 353 00:18:52,880 --> 00:18:54,040 Speaker 9: we view that as a bullish sign. 354 00:18:54,119 --> 00:18:55,159 Speaker 3: That's what you want to see. 355 00:18:55,320 --> 00:18:58,080 Speaker 9: You don't want to see divergences with price making higher 356 00:18:58,119 --> 00:19:01,000 Speaker 9: highs and then that RSI indicator may making lower highs. 357 00:19:01,320 --> 00:19:04,840 Speaker 9: That suggests maybe some buyer enthusiasm fading a little bit. 358 00:19:04,880 --> 00:19:06,800 Speaker 9: We haven't quite seen that yet, but look for that 359 00:19:06,840 --> 00:19:09,040 Speaker 9: to expand it to overbought levels if we do get 360 00:19:09,040 --> 00:19:09,520 Speaker 9: a breakout. 361 00:19:09,720 --> 00:19:13,119 Speaker 6: You're also constructive in commodities, especially precious metals. How do 362 00:19:13,160 --> 00:19:17,000 Speaker 6: you see geopolitical tensions and maybe trade policy affecting your 363 00:19:17,040 --> 00:19:18,360 Speaker 6: outlook for twenty twenty six. 364 00:19:19,160 --> 00:19:21,560 Speaker 9: I think it's going to complicate the story for precious 365 00:19:21,600 --> 00:19:24,480 Speaker 9: metals as it did in twenty twenty five, and it 366 00:19:24,520 --> 00:19:27,600 Speaker 9: wasn't necessarily a bearish catalyst when you look at price 367 00:19:27,640 --> 00:19:29,360 Speaker 9: action and some of the commodities that you were talking 368 00:19:29,400 --> 00:19:32,640 Speaker 9: about earlier, Silver up one hundred and fifty plus percent, 369 00:19:32,720 --> 00:19:36,640 Speaker 9: gold up significantly as well. But we do think it's 370 00:19:36,680 --> 00:19:38,600 Speaker 9: going to lead to volatility when you look at just 371 00:19:38,640 --> 00:19:41,880 Speaker 9: what's happened in copper markets, for example, over the last 372 00:19:41,920 --> 00:19:45,919 Speaker 9: several months, there's been a surge in copper moving to 373 00:19:45,960 --> 00:19:49,359 Speaker 9: the US from London. Same thing in silver because the 374 00:19:49,880 --> 00:19:52,200 Speaker 9: critical Minerals list in the US continues to grow. I 375 00:19:52,200 --> 00:19:55,639 Speaker 9: think there's over sixty different metals on that list, so 376 00:19:55,680 --> 00:19:58,679 Speaker 9: that brings the potential threat of tariffs. I know the 377 00:19:58,960 --> 00:20:02,239 Speaker 9: administration is going to view some of those tariffs in 378 00:20:02,520 --> 00:20:05,000 Speaker 9: June and July, so we'll maybe get an announcement there. 379 00:20:05,040 --> 00:20:08,240 Speaker 9: But traders are wasting no time in investing and moving 380 00:20:08,280 --> 00:20:11,119 Speaker 9: some of that metal back to the US just in 381 00:20:11,200 --> 00:20:13,520 Speaker 9: case we get any type of tariffs. So we do 382 00:20:13,600 --> 00:20:16,240 Speaker 9: think the demand side as well for a commodity like 383 00:20:16,280 --> 00:20:17,840 Speaker 9: silver or copper, remains strong. 384 00:20:18,320 --> 00:20:20,119 Speaker 3: Like the macro backdrop. 385 00:20:19,640 --> 00:20:22,919 Speaker 9: It's it's an AI play as well, but also in 386 00:20:22,960 --> 00:20:26,199 Speaker 9: the green energy transition some of the infrastructure buildouts. We 387 00:20:26,240 --> 00:20:28,600 Speaker 9: think copper and silver are going to be important metals 388 00:20:28,640 --> 00:20:30,679 Speaker 9: to watch in twenty twenty six, and we think the 389 00:20:30,720 --> 00:20:32,160 Speaker 9: trend will continue higher for both. 390 00:20:32,800 --> 00:20:35,399 Speaker 2: Adam, what does the technical trend or what does the 391 00:20:35,440 --> 00:20:38,240 Speaker 2: technical marketing look like for the US dollar. We saw 392 00:20:38,280 --> 00:20:40,600 Speaker 2: a sell off earlier in the year on some of 393 00:20:40,600 --> 00:20:44,040 Speaker 2: the concerns about the implementation of tariffs. It's since stabilized, 394 00:20:44,040 --> 00:20:46,320 Speaker 2: but still you know, eight nine percent lower than where 395 00:20:46,320 --> 00:20:47,160 Speaker 2: it started the year. 396 00:20:47,800 --> 00:20:49,000 Speaker 7: How do you view the dollar here? 397 00:20:49,680 --> 00:20:52,040 Speaker 9: This is going to be a big one for this year, 398 00:20:52,720 --> 00:20:55,399 Speaker 9: and this is the trend we've been watching carefully. As 399 00:20:55,560 --> 00:20:58,440 Speaker 9: Paul you mentioned, this may be a bottom developing. That's 400 00:20:58,440 --> 00:21:01,480 Speaker 9: what we view this as. If you zoom back on 401 00:21:01,480 --> 00:21:04,520 Speaker 9: the dollar index kind of to the nine lows and 402 00:21:04,560 --> 00:21:06,239 Speaker 9: you draw a trend line, that's we call it a 403 00:21:06,240 --> 00:21:08,000 Speaker 9: secular uptrend that's been in place. 404 00:21:08,359 --> 00:21:10,720 Speaker 3: The dollar has not broke that uptrend. 405 00:21:10,800 --> 00:21:13,840 Speaker 9: So the level that we're watching technically is ninety six 406 00:21:13,880 --> 00:21:15,040 Speaker 9: on the US Dollar index. 407 00:21:15,240 --> 00:21:16,480 Speaker 3: We start breaking. 408 00:21:16,200 --> 00:21:19,440 Speaker 9: Below that on a sustainable way, that would suggest the 409 00:21:19,480 --> 00:21:21,760 Speaker 9: resumption of this downtrend that's been in place for the 410 00:21:21,760 --> 00:21:25,560 Speaker 9: dollars since early last year. Will resume that to us 411 00:21:25,600 --> 00:21:29,280 Speaker 9: would suggest start to kick the tires international, especially emerging markets. 412 00:21:29,320 --> 00:21:32,199 Speaker 9: But for now we're giving that secular uptrend the benefit 413 00:21:32,200 --> 00:21:35,320 Speaker 9: of the doubt. Maybe we'll see a bounce here, need 414 00:21:35,359 --> 00:21:38,119 Speaker 9: a clear kind of one hundred, just over one hundred 415 00:21:38,160 --> 00:21:40,400 Speaker 9: to get through some resistance and actually have a breakout 416 00:21:40,400 --> 00:21:41,000 Speaker 9: from the bottom. 417 00:21:41,080 --> 00:21:43,560 Speaker 3: But certainly an important chart to watch as we move 418 00:21:43,560 --> 00:21:44,240 Speaker 3: into the new year. 419 00:21:44,560 --> 00:21:47,439 Speaker 6: Technically speaking, bitcoin has traded in an hour range between 420 00:21:47,440 --> 00:21:50,439 Speaker 6: eighty five thousand to ninety thousand in recent weeks. What 421 00:21:50,600 --> 00:21:52,840 Speaker 6: is a price action you were seeing it? It looks like 422 00:21:52,880 --> 00:21:56,200 Speaker 6: there's a build up in some latent volatility, but who 423 00:21:56,280 --> 00:21:59,879 Speaker 6: knows because such squeezes happened historically preceded sharp direction on the. 424 00:22:00,960 --> 00:22:03,639 Speaker 3: It's been a tough one for bitcoin bowls. 425 00:22:03,640 --> 00:22:05,920 Speaker 9: It started to break its up trend back below the 426 00:22:06,000 --> 00:22:09,280 Speaker 9: tun or day moving average. It's kind of consolidating another 427 00:22:09,359 --> 00:22:11,680 Speaker 9: one that maybe is a short term bottom here. I 428 00:22:11,720 --> 00:22:13,560 Speaker 9: think there is risk you get back down to the 429 00:22:13,600 --> 00:22:16,560 Speaker 9: April lows. When you look at just the overall trend, 430 00:22:16,680 --> 00:22:19,640 Speaker 9: the story, at least on the chart has been broken. 431 00:22:19,920 --> 00:22:22,840 Speaker 9: You're seeing that momentum start to roll over a little bit. 432 00:22:23,160 --> 00:22:25,760 Speaker 9: Maybe you get some relief rallies off these oversold levels, 433 00:22:25,800 --> 00:22:29,040 Speaker 9: but certainly I think there's still downside risk for the 434 00:22:29,240 --> 00:22:30,040 Speaker 9: bitcoin market. 435 00:22:30,680 --> 00:22:30,960 Speaker 7: Adam. 436 00:22:30,960 --> 00:22:33,639 Speaker 2: How about the precious metals, Boy, we saw gold and 437 00:22:33,680 --> 00:22:36,640 Speaker 2: then really silver, you know, more than double last year, 438 00:22:36,680 --> 00:22:39,960 Speaker 2: some really big moves and precious metals here, Now what 439 00:22:40,000 --> 00:22:40,320 Speaker 2: do we do? 440 00:22:41,560 --> 00:22:44,080 Speaker 9: I think you by the dip to keep it simple, 441 00:22:44,160 --> 00:22:47,320 Speaker 9: right when we're certainly getting some dips over the last 442 00:22:47,359 --> 00:22:50,919 Speaker 9: few days, very volatile, especially in silver markets. With the 443 00:22:50,920 --> 00:22:54,800 Speaker 9: CME Group raising margins, there were some restrictions on pure 444 00:22:54,800 --> 00:22:57,359 Speaker 9: place silver funds in China, and I think, look, the 445 00:22:57,400 --> 00:22:59,800 Speaker 9: market was just simply overbought, so we had some profit 446 00:23:00,000 --> 00:23:00,640 Speaker 9: making pressure. 447 00:23:00,760 --> 00:23:03,639 Speaker 3: That's normal. Even when you see these big moves, when. 448 00:23:03,520 --> 00:23:06,040 Speaker 9: You have one hundred and sixty hundred and fifty percent move, 449 00:23:06,080 --> 00:23:09,240 Speaker 9: as silver did, you should expect pullbacks, and maybe they're 450 00:23:09,280 --> 00:23:12,360 Speaker 9: double digits. That comes with the territory of these parabolic trends. 451 00:23:12,560 --> 00:23:14,879 Speaker 9: When they end, you tend to get a pretty big retracement. 452 00:23:14,920 --> 00:23:17,520 Speaker 9: Maybe we'll see that in the first first part of 453 00:23:17,600 --> 00:23:20,160 Speaker 9: twenty twenty six with silver. But I do think it 454 00:23:20,240 --> 00:23:23,080 Speaker 9: is more of a buy theedit market the fundamentals and 455 00:23:23,119 --> 00:23:26,160 Speaker 9: the macro story, especially for gold, with central bank buying 456 00:23:26,200 --> 00:23:29,320 Speaker 9: being such a big factor in that trade. I think 457 00:23:29,359 --> 00:23:31,639 Speaker 9: that's going to continue. I think that's starting to broaden 458 00:23:31,680 --> 00:23:33,760 Speaker 9: out to silver as maybe the central banks get a 459 00:23:33,800 --> 00:23:36,639 Speaker 9: little bit of sticker shock with these higher gold prices 460 00:23:36,480 --> 00:23:40,120 Speaker 9: in twenty twenty five, so we're seeing maybe a diversification there, 461 00:23:40,160 --> 00:23:43,720 Speaker 9: but certainly a supportive trend. I think the geopolitical environment 462 00:23:43,840 --> 00:23:46,720 Speaker 9: is another one that supports sports of the market. And 463 00:23:46,760 --> 00:23:50,359 Speaker 9: then we have the Fed continuing to reduce interest rates 464 00:23:50,400 --> 00:23:52,480 Speaker 9: another one that should help gold as well. 465 00:23:52,600 --> 00:23:53,600 Speaker 3: All right, Adam, thanks so much. 466 00:23:53,640 --> 00:23:57,280 Speaker 2: Appreciate it as always, Adam Turnquist, chief technical strategist for 467 00:23:57,560 --> 00:23:58,960 Speaker 2: LPL Financial. 468 00:24:00,920 --> 00:24:04,080 Speaker 4: Stay with us. More from Bloomberg Surveillance coming up after this. 469 00:24:10,280 --> 00:24:13,879 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 470 00:24:13,920 --> 00:24:17,119 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 471 00:24:17,160 --> 00:24:20,840 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 472 00:24:21,000 --> 00:24:22,600 Speaker 1: watch US live on YouTube. 473 00:24:22,920 --> 00:24:26,840 Speaker 2: Looking at the work function WRP on the Bloomberg terminal, 474 00:24:27,240 --> 00:24:30,760 Speaker 2: suggest that the market's discounting maybe two more rate cuts 475 00:24:30,800 --> 00:24:32,920 Speaker 2: by the Federal Reserve in a twenty twenty six. What 476 00:24:32,920 --> 00:24:35,840 Speaker 2: does that mean for the bond market, which experienced a 477 00:24:35,960 --> 00:24:38,200 Speaker 2: very strong twenty twenty five in terms of high single 478 00:24:38,200 --> 00:24:38,920 Speaker 2: digit returns. 479 00:24:39,119 --> 00:24:41,320 Speaker 4: Let's talk about development markets. 480 00:24:41,000 --> 00:24:41,879 Speaker 7: And emerging markets. 481 00:24:41,880 --> 00:24:44,520 Speaker 2: We can do that with Jack McIntyre, portfolio manager at 482 00:24:44,560 --> 00:24:45,840 Speaker 2: brand New Heine Global. 483 00:24:46,000 --> 00:24:47,880 Speaker 7: Jack, thanks so much for joining us here. 484 00:24:47,960 --> 00:24:51,200 Speaker 2: Solid solid returns in the bond market in twenty twenty five. 485 00:24:51,640 --> 00:24:54,960 Speaker 2: How do you frame out your outlook for twenty twenty six? 486 00:24:56,080 --> 00:24:58,920 Speaker 10: So you know, my starting point is that I actually 487 00:24:58,960 --> 00:25:01,720 Speaker 10: think it's going to be sort of this year of hey, 488 00:25:01,760 --> 00:25:04,960 Speaker 10: earning the coupon. Don't have huge expectations. You know, last 489 00:25:05,040 --> 00:25:08,080 Speaker 10: year was unique in the sense that the economy did 490 00:25:08,080 --> 00:25:11,000 Speaker 10: well from a growth standpoint, yet the labor market showed 491 00:25:11,040 --> 00:25:12,760 Speaker 10: signs of weakness, and this is a little bit of 492 00:25:12,760 --> 00:25:15,840 Speaker 10: a quandary, and then you know it's gonna I don't 493 00:25:15,880 --> 00:25:17,840 Speaker 10: think that's going to be the case for this year. 494 00:25:17,880 --> 00:25:21,639 Speaker 10: We're going to see either hey, the labor market do 495 00:25:21,800 --> 00:25:25,320 Speaker 10: better because we've got to see more hiring pickup, or 496 00:25:25,359 --> 00:25:28,000 Speaker 10: the economy is going to slow. So given that sort 497 00:25:28,040 --> 00:25:32,160 Speaker 10: of backdrop, my mindset is a little bit earned a coupond. 498 00:25:32,359 --> 00:25:35,160 Speaker 10: And having said that, I don't want to have one 499 00:25:35,280 --> 00:25:38,560 Speaker 10: view for the entire year, because I actually think coming 500 00:25:38,600 --> 00:25:41,760 Speaker 10: into the year, maybe the first half, first third, we 501 00:25:41,800 --> 00:25:45,400 Speaker 10: could see an upward bias and yield. So obviously from 502 00:25:45,400 --> 00:25:48,760 Speaker 10: a return standpoint, that's going to eat into that coupon return. 503 00:25:48,960 --> 00:25:52,000 Speaker 10: But once we move, you know, the second half of 504 00:25:52,000 --> 00:25:53,840 Speaker 10: the year, I actually think you're going to get a 505 00:25:53,840 --> 00:25:56,600 Speaker 10: little bit of price appreciation along with that coupon and treasuries. 506 00:25:56,760 --> 00:25:59,959 Speaker 10: But Rangebout is kind of my mindset coming into this year. 507 00:26:00,840 --> 00:26:04,400 Speaker 6: So you like emerging markets, particularly Latin America, What specific 508 00:26:04,440 --> 00:26:07,280 Speaker 6: factors there make bonds stand out in twenty twenty six. 509 00:26:07,800 --> 00:26:10,360 Speaker 10: So a couple of things. One, if you think fundamentally, 510 00:26:10,880 --> 00:26:13,280 Speaker 10: I like their balance sheets. You know, if we have 511 00:26:13,880 --> 00:26:17,359 Speaker 10: kind of a budget crisis somewhere in the world is 512 00:26:17,400 --> 00:26:19,159 Speaker 10: going to come out of the developing market. It's not 513 00:26:19,200 --> 00:26:22,440 Speaker 10: going to come out of the developing the emerging sort 514 00:26:22,480 --> 00:26:27,159 Speaker 10: of markets. I've got inflation expectations embedded in the price 515 00:26:27,680 --> 00:26:32,600 Speaker 10: of lat Ham bonds still elevated, although actual inflation is 516 00:26:32,760 --> 00:26:36,840 Speaker 10: continues to decline. I like that that means real yields 517 00:26:36,920 --> 00:26:40,480 Speaker 10: or positive so that's a good backdrop. And then away 518 00:26:40,480 --> 00:26:43,879 Speaker 10: from that, I still think that that theme for the 519 00:26:44,040 --> 00:26:47,440 Speaker 10: entire year, US dollar is going to weakend my mindset 520 00:26:47,520 --> 00:26:51,399 Speaker 10: is that this American exceptionalism, which is dominated for a 521 00:26:51,440 --> 00:26:54,480 Speaker 10: decade plus, it's going to just that the margins continue 522 00:26:54,640 --> 00:26:59,720 Speaker 10: to leak. Foreigners own a huge amount of US assets. 523 00:27:00,040 --> 00:27:01,960 Speaker 10: I think you're going to start to see a reversal 524 00:27:02,240 --> 00:27:05,600 Speaker 10: of that in latam which in a world that still 525 00:27:05,640 --> 00:27:08,399 Speaker 10: has very attractive yields, is going to attract some of 526 00:27:08,440 --> 00:27:09,080 Speaker 10: that capital. 527 00:27:09,920 --> 00:27:14,320 Speaker 2: How do you think about evaluation stocks versus bonds this year, Jack, 528 00:27:14,400 --> 00:27:14,720 Speaker 2: I mean. 529 00:27:14,640 --> 00:27:16,720 Speaker 7: Both performed well in twenty twenty five. 530 00:27:16,960 --> 00:27:20,760 Speaker 10: Yeah, yeah, I think so, you know, a little bit 531 00:27:20,800 --> 00:27:24,480 Speaker 10: of a Goldilocks' type environment, you know, meaning that, hey, 532 00:27:24,480 --> 00:27:27,800 Speaker 10: the economy has done well from a gross standpoint, inflation 533 00:27:28,040 --> 00:27:30,600 Speaker 10: you know, sticky, but it you know, it's not really 534 00:27:31,000 --> 00:27:31,919 Speaker 10: surging higher. 535 00:27:32,160 --> 00:27:34,080 Speaker 7: And I don't think that will be the case. 536 00:27:34,400 --> 00:27:36,240 Speaker 10: You know again coming in this year, I do think 537 00:27:36,280 --> 00:27:40,240 Speaker 10: bonds from evaluation standpoint look more attractive. But to be honest, 538 00:27:40,400 --> 00:27:42,080 Speaker 10: I could have said that last year and probably the 539 00:27:42,160 --> 00:27:45,720 Speaker 10: year before that. So at some point, you know, we're 540 00:27:45,720 --> 00:27:47,080 Speaker 10: going to start to see bonds do well. 541 00:27:47,440 --> 00:27:48,320 Speaker 7: You know, it's interesting. 542 00:27:48,359 --> 00:27:51,399 Speaker 10: I mean we're going into a mid term election year 543 00:27:51,600 --> 00:27:55,200 Speaker 10: and historically volatility starts to uptick, you know, particularly in 544 00:27:55,240 --> 00:27:57,159 Speaker 10: the in the equity space. You know, you've got to 545 00:27:57,160 --> 00:27:59,640 Speaker 10: be open to a draw down. And then coming into 546 00:27:59,640 --> 00:28:02,520 Speaker 10: this year or since I mentioned volatility, I mean you've 547 00:28:02,560 --> 00:28:06,080 Speaker 10: got when you look at implied volatility, so kind of 548 00:28:06,119 --> 00:28:12,680 Speaker 10: what option traders expect across asset classes, across bonds, currencies, equities, 549 00:28:13,040 --> 00:28:15,239 Speaker 10: it's low. You know, I kind of view that as 550 00:28:15,280 --> 00:28:18,520 Speaker 10: sort of being a sign of complacency, and I suspect, 551 00:28:18,600 --> 00:28:20,639 Speaker 10: you know, it's we're at the end of the when 552 00:28:20,680 --> 00:28:23,439 Speaker 10: we have this conversation this time next year, that you know, 553 00:28:23,560 --> 00:28:26,199 Speaker 10: maybe complacency isn't going to be the primary theme in 554 00:28:26,200 --> 00:28:29,159 Speaker 10: the markets in twenty twenty six. So again I like bonds. 555 00:28:29,240 --> 00:28:31,800 Speaker 10: Having said that, you know, it depends on what kind 556 00:28:31,840 --> 00:28:34,320 Speaker 10: of bonds. So I do like that em in Latam. 557 00:28:35,160 --> 00:28:37,639 Speaker 10: But maybe at some point, you know, you have a 558 00:28:37,680 --> 00:28:41,000 Speaker 10: little bit more defensive allocation into some higher quality of treasuries, 559 00:28:41,000 --> 00:28:45,840 Speaker 10: but again not overweight, just you know, the idea being 560 00:28:45,920 --> 00:28:48,160 Speaker 10: is that, hey, if we do get enough pick in volatility, 561 00:28:48,480 --> 00:28:50,120 Speaker 10: there might be a little bit of a flight to 562 00:28:50,200 --> 00:28:51,800 Speaker 10: quality and some of the developed markets. 563 00:28:52,440 --> 00:28:53,200 Speaker 3: What about the FED? 564 00:28:53,240 --> 00:28:55,880 Speaker 6: That also remains to be essential focus because of the 565 00:28:55,960 --> 00:28:58,240 Speaker 6: uncertainty around it, especially with the new FED chair and 566 00:28:58,280 --> 00:29:01,160 Speaker 6: the ongoing debate about cut. So what do you believe 567 00:29:01,160 --> 00:29:04,000 Speaker 6: will be the most important factor in determining whether the 568 00:29:04,000 --> 00:29:08,560 Speaker 6: Fed's actions will support either equities or bonds or create 569 00:29:08,600 --> 00:29:09,400 Speaker 6: more volatility. 570 00:29:10,160 --> 00:29:11,800 Speaker 7: So this is a little bit in lined with that 571 00:29:11,880 --> 00:29:12,400 Speaker 7: kind of idea. 572 00:29:12,480 --> 00:29:15,200 Speaker 10: I think volatility is under price because you do have 573 00:29:15,240 --> 00:29:17,040 Speaker 10: a point out of the FED, and this is not 574 00:29:17,200 --> 00:29:20,080 Speaker 10: your normal cycle for the FED looking at just strictly 575 00:29:20,240 --> 00:29:23,400 Speaker 10: labor market and inflation. We've got the political influences a 576 00:29:23,480 --> 00:29:27,800 Speaker 10: new chair that we should find out this month. I suspect, 577 00:29:28,600 --> 00:29:30,560 Speaker 10: you know, again I struggle a little bit. And part 578 00:29:30,560 --> 00:29:33,400 Speaker 10: of being a little more cautious on the long end 579 00:29:33,400 --> 00:29:35,880 Speaker 10: of the treasury curve is that the FED has been 580 00:29:35,920 --> 00:29:40,640 Speaker 10: cutting into environment, cutting you know, easing into neutral, but 581 00:29:40,760 --> 00:29:43,440 Speaker 10: doing that in environment where inflation is still running above 582 00:29:44,000 --> 00:29:46,479 Speaker 10: their target. And then you marry that with the idea 583 00:29:46,520 --> 00:29:49,040 Speaker 10: that we're going to have at least six percent budget 584 00:29:49,040 --> 00:29:52,000 Speaker 10: deficits for the foreseeable future. And then we also get 585 00:29:52,040 --> 00:29:56,640 Speaker 10: a little bit more fiscal in impulse impacting the US 586 00:29:56,680 --> 00:30:00,320 Speaker 10: consumer first second quarter of this year. 587 00:30:00,400 --> 00:30:02,640 Speaker 7: So, uh, you know, the pressure is on. 588 00:30:02,680 --> 00:30:05,520 Speaker 10: For the FED to ease. I think, you know, Pale said, 589 00:30:05,560 --> 00:30:08,280 Speaker 10: we're in the range of neutral. So that tells me that, 590 00:30:08,360 --> 00:30:11,280 Speaker 10: you know, maybe they can ease another one more, maybe 591 00:30:11,280 --> 00:30:13,400 Speaker 10: two more, and still be in the range of neutral. 592 00:30:13,480 --> 00:30:16,000 Speaker 7: But beyond that, uh, they're going to have. 593 00:30:16,000 --> 00:30:20,600 Speaker 10: To be, you know, shifting towards running stimulative monetary policy. 594 00:30:20,640 --> 00:30:24,120 Speaker 10: And I'm actually not sure that's good for for equities 595 00:30:24,160 --> 00:30:26,479 Speaker 10: because if they do that, it means something is on 596 00:30:26,520 --> 00:30:30,120 Speaker 10: the cusp of breaking. The labor market is showing signs 597 00:30:30,160 --> 00:30:34,520 Speaker 10: of deteroration that that could be an overall barometer for Hey, 598 00:30:34,600 --> 00:30:38,480 Speaker 10: the consumer retrenching, profit margins getting squeeze, and that might 599 00:30:38,520 --> 00:30:41,440 Speaker 10: not be good for equities right. Conversely, it actually could 600 00:30:41,480 --> 00:30:42,880 Speaker 10: be good for bonds. 601 00:30:42,800 --> 00:30:43,240 Speaker 7: Hey, Jack. 602 00:30:43,320 --> 00:30:46,680 Speaker 2: The AI story has certainly been a dominant theme within 603 00:30:46,720 --> 00:30:48,640 Speaker 2: the equity markets for the last several years, but it's 604 00:30:48,640 --> 00:30:50,920 Speaker 2: really become relevant for the bond market as a lot 605 00:30:50,960 --> 00:30:53,680 Speaker 2: of these tech companies come to the bond market with 606 00:30:53,880 --> 00:30:56,880 Speaker 2: sizable debt offerings to raise capital to fund a lot 607 00:30:56,920 --> 00:30:57,600 Speaker 2: of this stuff. 608 00:30:57,640 --> 00:30:58,680 Speaker 7: How do you how do you view that? 609 00:30:59,680 --> 00:31:03,040 Speaker 10: Yeah's you know, it's an interesting point because it's no 610 00:31:03,120 --> 00:31:05,520 Speaker 10: longer hey, funding out of sort of cash flows, et cetera. 611 00:31:05,560 --> 00:31:07,440 Speaker 10: And that was that's great that you know, the market 612 00:31:07,440 --> 00:31:09,880 Speaker 10: doesn't have an issue with that. But now you know 613 00:31:09,920 --> 00:31:13,640 Speaker 10: you're competing for uh, you know, funds that are already 614 00:31:13,640 --> 00:31:16,600 Speaker 10: you know, allocating or thinking about allocating to this massive 615 00:31:16,840 --> 00:31:19,640 Speaker 10: government bond debt. You know, issuance is not going away. 616 00:31:19,920 --> 00:31:22,640 Speaker 10: It's going to continue to be elevated. And now you've 617 00:31:22,680 --> 00:31:26,440 Speaker 10: got more corporate issuance competing for that, so you know 618 00:31:26,440 --> 00:31:28,760 Speaker 10: a little bit of a kind of a crowding out sort. 619 00:31:28,560 --> 00:31:29,520 Speaker 7: Of impact as well. 620 00:31:29,560 --> 00:31:32,040 Speaker 10: It's just means those yields have to probably move a 621 00:31:32,080 --> 00:31:35,840 Speaker 10: little bit higher, uh, you know, to compete with you know, 622 00:31:35,920 --> 00:31:38,400 Speaker 10: the treasury yields, which is again I mean turned premia 623 00:31:38,720 --> 00:31:40,360 Speaker 10: is going to be elevated this year. 624 00:31:41,080 --> 00:31:41,200 Speaker 9: Uh. 625 00:31:41,360 --> 00:31:43,000 Speaker 7: And the bond vigilantes you know. 626 00:31:43,000 --> 00:31:45,760 Speaker 10: We're on her, you know, kind of trigger fingers because 627 00:31:46,280 --> 00:31:50,040 Speaker 10: again I go back midterm the sitting president. You know, 628 00:31:50,080 --> 00:31:53,360 Speaker 10: they want Republicans to do well, They want growth, and 629 00:31:53,440 --> 00:31:55,880 Speaker 10: do they make a mistake of doing a little too 630 00:31:55,960 --> 00:31:59,800 Speaker 10: much fiscal stimulus and environment where the economy is already 631 00:31:59,840 --> 00:32:04,920 Speaker 10: doing well and inflation is still above the Fed's target. 632 00:32:04,960 --> 00:32:08,320 Speaker 10: So you know, again turn premik could move higher YEP 633 00:32:09,040 --> 00:32:09,480 Speaker 10: this year. 634 00:32:09,880 --> 00:32:11,800 Speaker 4: Jack, thanks so much for giving us some of your time. 635 00:32:11,800 --> 00:32:12,440 Speaker 4: We appreciated. 636 00:32:12,480 --> 00:32:17,080 Speaker 2: Jack McIntyre's portfolio manager, Brandywine Global. Down there in the 637 00:32:17,120 --> 00:32:19,960 Speaker 2: City of Brotherly Love, down there in Philly. 638 00:32:20,280 --> 00:32:25,120 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 639 00:32:25,240 --> 00:32:29,520 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 640 00:32:29,640 --> 00:32:33,120 Speaker 1: seven to ten am Eastern on Bloomberg dot Com. The 641 00:32:33,200 --> 00:32:37,239 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business App. You 642 00:32:37,240 --> 00:32:40,640 Speaker 1: can also watch us live every weekday on YouTube and 643 00:32:40,840 --> 00:32:42,560 Speaker 1: always on the Bloomberg terminal