WEBVTT - Investors Await Nvidia; FX in Focus 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.800 the Bloomberg Terminal, and the Bloomberg Business App. You got 0:00:46.800 --> 0:00:49.360 to get an audible questionnaires. Do this, as Ivan finds 0:00:49.360 --> 0:00:53.199 it perfectly timed. Senior partner grizzled veteran, first heard of 0:00:53.280 --> 0:00:57.600 at bear Sterns years ago, Tigers Financial Partners. Then I 0:00:57.600 --> 0:01:00.880 got to go to SMCAI Hindenberg puts out a short 0:01:00.920 --> 0:01:04.640 report of to stock. Twenty four hours later, the company 0:01:04.680 --> 0:01:07.679 comes out with OOPS to ten K doesn't look good. 0:01:08.080 --> 0:01:12.000 What does the fine seth radars say about SMCI going 0:01:12.040 --> 0:01:17.040 from Hindenburg tank to oops? The ten K doesn't work well? 0:01:17.080 --> 0:01:21.080 Not good, But they recently switched in twenty three, they 0:01:21.120 --> 0:01:24.039 switched to de luyteen too, so I guess they're going 0:01:24.040 --> 0:01:27.319 through the filings again to make sure that there are 0:01:27.360 --> 0:01:30.360 no issues. I mean Hiddenberg does have a short position 0:01:30.520 --> 0:01:33.399 in the stock, and then they do publish research that 0:01:33.880 --> 0:01:37.960 recommends that shortening the stock based on accounting irregularities. So 0:01:38.520 --> 0:01:45.920 I mean it is Hiddenenberg's work has been questionable. However, 0:01:46.760 --> 0:01:52.000 I do like super Micro. It is part of the 0:01:52.040 --> 0:01:56.800 AI play, So I right now feel this weakness is 0:01:56.800 --> 0:02:01.280 a buying opportunity and they are a tremendous partner with 0:02:01.520 --> 0:02:09.720 Nvidia so to manage outsourced data centers. So hopefully there 0:02:09.760 --> 0:02:12.200 are no regularities and we look back and this will 0:02:12.200 --> 0:02:13.519 have a buying opportunity. 0:02:13.680 --> 0:02:16.040 You've been doing this forever and you've got a wonderful 0:02:16.080 --> 0:02:20.760 skepticism built into your securities analysis. I got sixty six 0:02:20.840 --> 0:02:26.040 buys eight holds no cells on the juggernaut known as Nvidia. 0:02:26.639 --> 0:02:30.079 What does the ivan radars say when you see everybody 0:02:30.120 --> 0:02:30.639 on board? 0:02:32.080 --> 0:02:36.880 Well, I think back in the olden days, I used 0:02:36.880 --> 0:02:39.600 to view a lot of buy ratings as being a 0:02:39.680 --> 0:02:44.560 contrarian indicator. Yet it has not been the case with Nvidia. 0:02:45.880 --> 0:02:49.960 You can see on Bloomberg that my split adjusted initial 0:02:50.000 --> 0:02:53.880 buy rating going back, I think the twenty fifteen is 0:02:53.960 --> 0:02:59.160 now like fifty cents. But Invidia is at the core 0:02:59.320 --> 0:03:02.880 of this products of being able. Originally they were able 0:03:02.919 --> 0:03:06.920 to take digital information and turn it into visual information 0:03:07.480 --> 0:03:11.519 at a faster level through their graphics processors. And now 0:03:11.560 --> 0:03:15.359 they are taking visual information and turning it into digital information, 0:03:15.480 --> 0:03:19.160 which is really the driver of this oll AI large 0:03:19.240 --> 0:03:23.440 language or machine learning process. I mean that our brains 0:03:23.600 --> 0:03:28.959 are analog computers that see things and process visually based 0:03:28.960 --> 0:03:31.359 on an analog basis, and they give you an example, 0:03:32.440 --> 0:03:35.000 a computer learning the difference between a cat and a 0:03:35.080 --> 0:03:38.360 dog is a visual process and that's what Nvidia is 0:03:38.480 --> 0:03:44.880 enabling these computers to do as we adopt AI to 0:03:45.200 --> 0:03:46.800 handle data processing. 0:03:47.760 --> 0:03:50.720 So in terms of what Nvidia needs to do today 0:03:50.760 --> 0:03:54.680 after the closed Ivan, I guess that is it has 0:03:54.720 --> 0:03:57.080 to be another beaten raise or the stocks are. 0:03:57.040 --> 0:03:59.080 Well absolutely well. 0:03:59.080 --> 0:04:01.880 First of all, there's expectations that the revenue will be 0:04:01.960 --> 0:04:05.000 up seventy to eighty percent year over year and the 0:04:05.080 --> 0:04:08.400 earnings will be up almost one hundred percent, and that 0:04:08.440 --> 0:04:11.520 they will guide higher again for the next quarter. And 0:04:11.920 --> 0:04:15.800 more importantly, there's been this controversy around whether the next 0:04:15.840 --> 0:04:20.400 generation processor, the Blackwell, will be delayed or not, which 0:04:20.440 --> 0:04:23.560 is kind of funny because they haven't. They said it's coming, 0:04:24.040 --> 0:04:26.360 and they never gave a specific date. So I don't 0:04:26.440 --> 0:04:29.160 know if it's delayed if you don't really have a 0:04:29.240 --> 0:04:33.800 specific date, but it will be. There'll be a focus 0:04:33.839 --> 0:04:37.560 on a discussion of when the Blackwell processor will start 0:04:37.800 --> 0:04:41.480 to ship. And they already have the next generation Ruben 0:04:41.560 --> 0:04:45.800 processor that they announced in March of this year that 0:04:45.839 --> 0:04:48.320 will come out next year. So they continue to make 0:04:48.520 --> 0:04:53.680 faster and more powerful processor and combining now GPU and CPUs, 0:04:53.760 --> 0:04:58.640 so the Ruben processor is a major leap forward and 0:04:58.680 --> 0:05:01.279 they continue to drive this this whole process. 0:05:00.960 --> 0:05:03.520 Ivan, do you believe, as others have said to us, 0:05:04.440 --> 0:05:07.040 that basically Nvidia says you're not going to get the 0:05:07.120 --> 0:05:11.039 Rubin or the Blackwell unless you buy the present ship 0:05:11.600 --> 0:05:16.520 in that they're basically almost creating a luxury stock scarcity 0:05:17.040 --> 0:05:19.960 by saying you don't get the twenty twenty six chip 0:05:20.320 --> 0:05:23.119 unless you load the boat with the twenty twenty four chip. 0:05:23.400 --> 0:05:24.640 Is there veracity to that? 0:05:26.400 --> 0:05:27.359 Well, they can. 0:05:28.160 --> 0:05:31.719 They control the market, and you know there is a 0:05:31.839 --> 0:05:35.400 huge demand for processors even the CEO of super Micro, 0:05:35.839 --> 0:05:39.560 who's friends with Jason, I mean Jensen Wong, continues to 0:05:39.600 --> 0:05:42.320 ask him for more and more chips. You have Mark 0:05:42.400 --> 0:05:46.760 Zuckerberg at Meta asking for more and more processors. There's 0:05:47.040 --> 0:05:50.880 huge demand, and the data centers are being built based 0:05:50.880 --> 0:05:53.279 on each level of the processor, while you're building out 0:05:53.279 --> 0:05:56.359 the current processor based on the hopper, which is the 0:05:56.400 --> 0:06:01.760 current processor then will be followed by the blackwell the 0:06:01.360 --> 0:06:04.360 end in Nvidia has to, like any company, take care 0:06:04.360 --> 0:06:05.839 of their best customers first. 0:06:07.000 --> 0:06:11.960 Hey, i'van a very intelligent investor asked me earlier this morning, 0:06:12.160 --> 0:06:16.760 why aren't some of these other chip companies more competitive 0:06:17.000 --> 0:06:20.000 with in vidio? Why does the Nvidia have such a 0:06:20.040 --> 0:06:22.520 strong position in this part of the market. 0:06:23.520 --> 0:06:27.839 Because they're multiple steps ahead of everybody else. And you 0:06:27.839 --> 0:06:33.440 know the quote the while everybody's playing checkers, Jensen Wong 0:06:33.600 --> 0:06:40.120 is playing three D chess. So they pioneered the graphics 0:06:40.160 --> 0:06:44.560 processor and invented I'm sorry from the beginning, have pioneered 0:06:44.600 --> 0:06:48.839 it and continue to leapfrog and be just way ahead 0:06:48.960 --> 0:06:53.719 of anybody else. So and if your business is dependent 0:06:53.800 --> 0:06:56.920 on this, like the hyperscalers and the cloud service providers, 0:06:57.000 --> 0:06:59.240 businesses are you want to go with the best, the 0:06:59.240 --> 0:07:03.680 most reliable, of fastest, and even Jensen Wong has said 0:07:03.720 --> 0:07:06.400 the more you spend, the more you save, so it 0:07:06.680 --> 0:07:11.720 also has the cost in processing does present a saving, 0:07:11.920 --> 0:07:13.440 so that is a factor. 0:07:13.080 --> 0:07:16.080 There too, Ivan, thank you so much. I really appreciate 0:07:16.120 --> 0:07:20.200 the comments and smcis the news breaks of questions over 0:07:20.200 --> 0:07:24.320 their ten K filing and mister Finesith mentioning Deloyte Touche 0:07:24.640 --> 0:07:27.760 involved there as well. Evan, don't be a stranger. Thank you. 0:07:27.760 --> 0:07:43.200 With Tigris just incredibly well time. Marilyn Watson is it Blackrock? 0:07:43.840 --> 0:07:46.440 She got a fancy title. She demanded this title when 0:07:46.440 --> 0:07:50.920 she came over from JP Morgan Global Fundamental Fixed Income Strategy. 0:07:51.240 --> 0:07:53.360 Here's what you need to know, tour duty at her 0:07:53.400 --> 0:07:56.880 Bank of England and also a parchment from the University 0:07:57.320 --> 0:07:59.600 of Cambridge. Marylynd been dying to talk to you about. 0:07:59.640 --> 0:08:03.520 What I leave is a reset after the Powell speech. 0:08:03.600 --> 0:08:06.600 When I look at full faith and credit yields today, 0:08:06.760 --> 0:08:10.560 it just looks like a massive Dare I say, permanent 0:08:10.800 --> 0:08:14.040 reset to lower yields? Do you buy that idea? 0:08:15.600 --> 0:08:15.880 Well? 0:08:15.920 --> 0:08:18.800 I certainly agree that we have seen a big research 0:08:18.840 --> 0:08:23.360 in terms of the pricing obviously for you know, treasuries, 0:08:23.360 --> 0:08:26.200 but the fix income as well. When you look at 0:08:26.240 --> 0:08:29.840 the roller coaster that you know, fixed income yields have 0:08:29.880 --> 0:08:32.559 been on, prices have been on this year from pricing 0:08:32.960 --> 0:08:35.079 at the beginning of the year to then a lot 0:08:35.120 --> 0:08:37.840 of cuts, then at one point even pricing a further hike. 0:08:38.320 --> 0:08:41.800 And now I do think, you know, finally after Powell 0:08:41.840 --> 0:08:45.880 speech at Jackson Hole, then the scene is definitely you know, 0:08:45.960 --> 0:08:47.640 set for the Fed to. 0:08:47.559 --> 0:08:49.439 Start cutting rates in September. 0:08:49.679 --> 0:08:52.120 I think when you look at yields, when you look 0:08:52.120 --> 0:08:55.120 at also all in rates, you know, I do still 0:08:55.160 --> 0:08:57.560 think in this environment while we do think obviously the 0:08:57.559 --> 0:09:00.439 Federal cut in September and they will continue to cut 0:09:00.440 --> 0:09:03.680 perhaps for the next few meetings. And you know, Powell 0:09:03.679 --> 0:09:05.520 made it very clear he said that the direction of 0:09:05.559 --> 0:09:09.000 travel is that you know, rates will be going down. 0:09:09.520 --> 0:09:11.840 When you look at the all in yiels that you 0:09:11.840 --> 0:09:14.160 can also get in credit and elsewhere, then they're still 0:09:14.240 --> 0:09:16.680 very very attractive, I think, particularly when you look at 0:09:16.679 --> 0:09:20.160 an economy that is still pretty robust, when you look 0:09:20.200 --> 0:09:22.480 at obviously the labor market is softening, and the said 0:09:22.600 --> 0:09:26.400 has sort of pivoted now from focusing on prices to 0:09:26.480 --> 0:09:29.440 focusing on the labor market, and you know, the overall 0:09:29.480 --> 0:09:32.840 growth of the economy, it is softening, but the US 0:09:32.920 --> 0:09:36.040 economy is still at this point in time, still doing 0:09:36.080 --> 0:09:36.640 pretty well. 0:09:36.679 --> 0:09:38.720 So I think we have seen a big shift. 0:09:38.920 --> 0:09:42.160 We've seen a shift towards seeing lower rates, you know, 0:09:42.200 --> 0:09:45.960 commencing next month. But I do still think that now 0:09:46.000 --> 0:09:48.560 we can see some continue to see very attractive yels 0:09:48.640 --> 0:09:49.360 in fixed income. 0:09:50.080 --> 0:09:52.400 Marilyn, what do you expect from our European friends? The 0:09:52.440 --> 0:09:55.240 ECB in a Bank of England have already begun cutting rates, 0:09:55.280 --> 0:09:57.720 and will they take a little bit more confidence to 0:09:57.760 --> 0:10:01.079 continue that trend given that we've heard Chairman Jpal say 0:10:01.120 --> 0:10:04.040 that the US FED is ready to start cutting rates. 0:10:04.880 --> 0:10:07.760 Yeah, that's right. So they both already began to cut rates. 0:10:08.120 --> 0:10:09.440 Obviously, the Bank of we're going to cut them at 0:10:09.440 --> 0:10:12.000 the beginning of this month, the ECB a little bit 0:10:12.000 --> 0:10:15.199 before that, and we think that they're going to continue 0:10:15.200 --> 0:10:17.120 to cut rates, but probably in a little bit more 0:10:17.120 --> 0:10:21.160 of a gradual fashion, probably about once a quarter. So 0:10:21.160 --> 0:10:24.439 we do think in September that the ECB will cut 0:10:24.559 --> 0:10:26.720 rates again. Obviously at the end of this week, we 0:10:26.800 --> 0:10:30.600 do get the flash HICP, the inflation data coming out 0:10:30.720 --> 0:10:33.120 of the Eurozone, we think it's going to keep them 0:10:33.120 --> 0:10:38.560 on track to cut rates again in September. In terms 0:10:38.559 --> 0:10:42.319 of the Bank of England, we heard from Governor Andrew 0:10:42.320 --> 0:10:45.800 Bailey also at Jackson Hall, and he was also very 0:10:45.840 --> 0:10:48.720 clear that you know, the direction of travel is that 0:10:48.800 --> 0:10:51.440 rates will probably go lower, but again he's in no 0:10:51.559 --> 0:10:53.680 hurry and we do think that he will probably also 0:10:53.880 --> 0:10:56.560 around once a quarter. So we expect that the Bank 0:10:56.559 --> 0:10:59.600 of England may cut rates again in November. I think 0:10:59.640 --> 0:11:01.880 when you look at the starting point, as you say, 0:11:01.960 --> 0:11:05.040 both the ECB and the Bank of England already started there, 0:11:05.440 --> 0:11:08.120 you know, easing cycle. The FED I think has a 0:11:08.120 --> 0:11:10.840 little bit of catshup to do. It's a little obviously 0:11:10.840 --> 0:11:13.640 a bit later than them, and so we do think 0:11:13.640 --> 0:11:15.880 the FED maybe a little bit more aggressive aggressive in 0:11:15.960 --> 0:11:18.640 terms of the next few cuts, whereas the Bank of 0:11:18.640 --> 0:11:21.199 England the ECB will be more gradual. And also their 0:11:21.240 --> 0:11:25.360 economies are in a different place to the US as well. 0:11:25.920 --> 0:11:28.120 All right, Maryland, so you're a black rock. You guys 0:11:28.120 --> 0:11:33.320 are everywhere given that backdrop of global rate declines, where 0:11:33.320 --> 0:11:35.199 do you guys see value these days? 0:11:36.559 --> 0:11:36.839 Yeah? 0:11:36.880 --> 0:11:39.440 So we're in when you look at government once first 0:11:39.440 --> 0:11:43.400 of all, then we still like some Spanish duration. We're 0:11:43.400 --> 0:11:46.320 also long UK duration, a bit a little bit in 0:11:46.360 --> 0:11:50.000 the US, and then we're short duration in Japan because 0:11:50.080 --> 0:11:52.760 you know, we do think that the Bank of Japan 0:11:52.800 --> 0:11:55.080 is actually going to continue to hyh rate this year. 0:11:55.720 --> 0:11:58.000 But we do, like you know, at the front end 0:11:58.000 --> 0:12:01.520 of the curve, we do like attractive names in investment 0:12:01.559 --> 0:12:05.600 grade credit in Europe. In the Eurozone, for example, we 0:12:05.640 --> 0:12:08.640 still think that you can find some very attractive all 0:12:08.640 --> 0:12:12.240 in yields and some very attractive valuations, particularly when you 0:12:12.360 --> 0:12:14.440 then hedge that back into the dollar. 0:12:14.480 --> 0:12:16.240 We think that's pretty attractive. In many cases. 0:12:16.640 --> 0:12:21.680 We continue to like some securitized assets, some very liquid, 0:12:22.200 --> 0:12:24.640 very cashionative names as well, where we think, you know, 0:12:24.679 --> 0:12:28.240 you get decent yields, you know, a decent all in carry, 0:12:28.280 --> 0:12:31.040 but you also do have I think a lot of flexibility, 0:12:31.440 --> 0:12:33.200 and where we are now, we want to make sure 0:12:33.240 --> 0:12:35.760 that we really understand on a risk adjusted level, right. 0:12:35.800 --> 0:12:38.400 We also do like areas of measure markets. For example, 0:12:38.440 --> 0:12:39.840 we're long still. 0:12:39.640 --> 0:12:42.120 Too Maryland, and we've got to be quick here, but 0:12:42.200 --> 0:12:44.719 this is too important. I just put on Twitter my 0:12:44.880 --> 0:12:47.880 Marylyn Watson chart of the day. I'm going to discuss it. Marylyn. 0:12:48.320 --> 0:12:51.000 This is an adult chart. It's global Wall Street talk. 0:12:51.040 --> 0:12:51.360 Folks. 0:12:51.360 --> 0:12:54.319 Stay with me, Marylyn. I went back to Paul Voker, 0:12:54.880 --> 0:12:58.120 and I looked at the Bloomberg Corporate Total returns series 0:12:58.200 --> 0:13:01.320 not full faith in credit, and I took the regression 0:13:01.440 --> 0:13:04.720 from nineteen ninety out to the present day. The bond 0:13:04.760 --> 0:13:07.560 tobacle that you and Blackrock have lived was a three 0:13:07.640 --> 0:13:13.080 standard deviation move, really elegant. The fact is, with a 0:13:13.120 --> 0:13:17.359 power speech, I'm back to a negative two standard deviations. 0:13:17.760 --> 0:13:22.240 Can you envision price up, yield down, where we could 0:13:22.320 --> 0:13:26.360 get back to twenty and thirty year log trend on 0:13:26.400 --> 0:13:27.760 the price of bonds. 0:13:29.640 --> 0:13:32.000 So I think when you look at the corporate market, 0:13:32.160 --> 0:13:35.280 I mean, we certainly could expect to see yields come 0:13:35.280 --> 0:13:36.920 a little bit down from here. 0:13:38.200 --> 0:13:39.439 I certainly think that's possible. 0:13:39.480 --> 0:13:42.680 I think also when you look at the overall economy, 0:13:42.679 --> 0:13:45.200 when you look at what is being priced in in 0:13:45.280 --> 0:13:47.640 terms of then shear number of cuts first of all 0:13:47.760 --> 0:13:50.800 by the FED, the market is actually pricing in a 0:13:50.840 --> 0:13:53.880 lot of pretty negative news that we don't necessarily see 0:13:53.960 --> 0:13:57.080 coming through next year. We do think the lead market 0:13:57.120 --> 0:13:59.079 will continue to soften, or do you think activity will 0:13:59.080 --> 0:14:02.840 continue to soften? But we don't see a strong catalyst 0:14:03.120 --> 0:14:05.439 for certainly for any sort of like you know, sharp 0:14:05.480 --> 0:14:08.000 procession or anything like that. So when you look at 0:14:08.040 --> 0:14:10.920 the overall backdrop in terms of corporates, when you look 0:14:10.960 --> 0:14:13.560 at particularly in the US as well, we do continue 0:14:13.559 --> 0:14:17.280 to see a pretty strong backdrop in terms of economic 0:14:17.280 --> 0:14:18.600 activity when it is slowing. 0:14:18.960 --> 0:14:21.560 But again we do think you know, yields will come down. 0:14:22.040 --> 0:14:25.640 We do think that prices, however, will remain pretty pretty attractive. 0:14:25.720 --> 0:14:27.840 So is the clinic. Marilyn Watson, thank you so much, 0:14:27.880 --> 0:14:35.400 greatly appreciate it. With Black Rocket Emily Rowland Joints from 0:14:35.440 --> 0:14:39.880 the Johina Hancock Company with the clarity of her belief, Emily, 0:14:39.960 --> 0:14:44.640 you have nailed by American by MidCap. Do you still 0:14:44.640 --> 0:14:45.120 believe that? 0:14:46.720 --> 0:14:49.160 Yeah, we do, Tom, And the way we think about 0:14:49.200 --> 0:14:52.400 this is you want to identify where are the best 0:14:52.520 --> 0:14:55.960 earnings trends and where are the best economic trends, as 0:14:56.000 --> 0:14:57.840 simple as that, a lot of people will tell you 0:14:58.280 --> 0:15:01.240 the valuations are the key in but for us, we 0:15:01.280 --> 0:15:04.040 want to look at the denominator of the PE ratio. 0:15:04.320 --> 0:15:06.640 Is the key here, and the US has simply been 0:15:06.680 --> 0:15:10.240 able to generate better earnings results. Just this year. We're 0:15:10.280 --> 0:15:13.360 looking at about eleven percent in the US versus about 0:15:13.400 --> 0:15:17.720 half that in international markets. High quality stocks, guess where 0:15:17.760 --> 0:15:20.320 you find those in the United States. Those are ones 0:15:20.320 --> 0:15:23.120 with great balance sheet, They've got tons of cash. They're 0:15:23.120 --> 0:15:26.320 going to do a better job defending their margins in 0:15:26.360 --> 0:15:30.040 an environment where the late cycle dynamics continue to play 0:15:30.040 --> 0:15:31.160 out very quickly. 0:15:31.160 --> 0:15:34.160 Our SMCI opening here at nine point thirty two, Paul, 0:15:34.520 --> 0:15:37.520 I'm going to go back four days before the Hindenburg news, 0:15:37.800 --> 0:15:41.960 down twenty one percent from where it was August twenty 0:15:42.000 --> 0:15:45.080 three into a Friday of last week right now, four 0:15:45.280 --> 0:15:48.640 seventy one worse than it was pricing before the market opened. 0:15:48.680 --> 0:15:51.560 Absolutely, tom right, thank you for that, Emily. We're just 0:15:51.600 --> 0:15:54.520 finishing up earnings period here. What did you take away 0:15:54.960 --> 0:15:57.320 from the earning cycle and maybe the guidance that we 0:15:57.400 --> 0:15:58.920 saw from some of these companies. 0:15:59.760 --> 0:16:02.600 Yeah, earnings this quarter, of course, much better than expected. 0:16:02.640 --> 0:16:05.400 Of course, we have a behemoth after the close today 0:16:05.440 --> 0:16:08.960 which is going to be highly influential. Hard to forget 0:16:09.000 --> 0:16:12.480 that that's coming later on today. But better than expected. 0:16:12.560 --> 0:16:16.400 Technology in particular saw that double the earnings growth as 0:16:16.440 --> 0:16:19.360 the broad market. So I think, you know, there's so 0:16:19.440 --> 0:16:22.640 many smoking guns out there that investors are pointing to. 0:16:22.880 --> 0:16:25.720 Is as you know, negatives. You look at some of 0:16:25.720 --> 0:16:29.200 the economic data that's coming in worse than expected. You 0:16:29.280 --> 0:16:32.080 look at especially the labor market data, which is showing 0:16:32.080 --> 0:16:35.320 some cracks. Earnings is not one of them. The earnings 0:16:35.320 --> 0:16:38.040 backdrop has been robust, and again that's a key reason 0:16:38.080 --> 0:16:41.520 that we've continued to emphasize US equities given those positive 0:16:41.520 --> 0:16:42.360 earnings trends. 0:16:43.120 --> 0:16:45.560 So we heard from the Fed chairman on Friday pretty 0:16:45.560 --> 0:16:49.880 clearly looking to cut rates. They're assuming that actually takes 0:16:49.880 --> 0:16:54.160 place here, maybe beginning in September. What sector's screen well, 0:16:54.200 --> 0:16:57.720 few in a market where you know, earnings, I mean, 0:16:57.760 --> 0:16:59.160 the rates seem to be coming down. 0:17:00.400 --> 0:17:03.320 Yeah, I think you know, the Jackson role speech, by 0:17:03.320 --> 0:17:07.320 the way, was pretty interesting. You know, we saw exactly 0:17:07.359 --> 0:17:10.960 what was expected. You know, Powell obviously confirmed that cuts 0:17:10.960 --> 0:17:13.960 are coming, but I always watched the market reaction, and 0:17:14.000 --> 0:17:16.719 you know, we saw bonds move a little bit. Market 0:17:16.760 --> 0:17:20.760 expectations of a rate cut didn't change really one hundred 0:17:20.800 --> 0:17:23.720 basis points penciled in for this year, but we saw 0:17:24.000 --> 0:17:27.399 huge moves and equities and in currencies, with the dollar 0:17:27.520 --> 0:17:30.119 plunging to near two year low, So I think it 0:17:30.160 --> 0:17:34.240 was a big sort of sentiment driven mood there moved. 0:17:34.280 --> 0:17:37.080 There is nothing to me really seemed to change in 0:17:37.160 --> 0:17:39.880 terms of the expectation, So I think that was notable 0:17:40.280 --> 0:17:42.560 in terms of sectors and parts of the market that 0:17:42.600 --> 0:17:45.360 we think should do well. It's sort of the opposite 0:17:45.400 --> 0:17:48.080 of the market reaction that we've seen with areas like 0:17:48.200 --> 0:17:52.600 small cap value stocks doing the best since that day, 0:17:52.760 --> 0:17:57.400 areas like international value stocks which have benefited from that 0:17:57.920 --> 0:18:00.600 week or dollar. We actually think that the FED is 0:18:00.680 --> 0:18:05.080 probably going to be cutting because something's wrong. Maybe it's 0:18:05.080 --> 0:18:07.879 as simple as margins are getting compressed and the unemployment 0:18:07.920 --> 0:18:11.719 rates going up. You know, growth is slowly slowing, so 0:18:11.760 --> 0:18:15.199 in that case, byclical assets wouldn't be rewarded. This is 0:18:15.280 --> 0:18:18.080 like the secret life of acid allocators and the way 0:18:18.119 --> 0:18:21.040 that we think about these process that moves it doesn't 0:18:21.040 --> 0:18:24.120 really make sense. You have this odd kind of partnership 0:18:24.240 --> 0:18:29.040 right now of long dated treasuries and gold in international 0:18:29.119 --> 0:18:32.160 value and small cap stocks being the best performing things 0:18:32.200 --> 0:18:34.680 out there. It actually doesn't really make a ton of sense. 0:18:34.720 --> 0:18:37.119 When you open up your textbooks. 0:18:36.760 --> 0:18:38.959 Emily Roland, stay with us, don't go away. We've got 0:18:39.000 --> 0:18:43.600 to follow SMCI where they're having ten K issues. Thank 0:18:43.640 --> 0:18:47.639 you Ivan find such perspective her moments ago opening can't 0:18:47.680 --> 0:18:50.240 find a bid. It was a five point fifty and 0:18:50.280 --> 0:18:53.679 it's now four five nine, four fifty nine off of 0:18:54.520 --> 0:18:57.199 where it was six fourteen a couple of days ago 0:18:57.600 --> 0:19:01.040 before the Hindenburg short report. It is down twenty five 0:19:01.240 --> 0:19:03.680 up percent. Still can't find a bid four fifty six 0:19:04.560 --> 0:19:07.479 right now, Emily Rowland, when we look at the market, 0:19:07.480 --> 0:19:09.359 and this is something you can do from old John 0:19:09.400 --> 0:19:12.760 Hancock or new John Hancock in Boston, you can say, 0:19:12.800 --> 0:19:15.679 when does the money move? Are we getting near a 0:19:15.840 --> 0:19:18.679 yield as we see thirty year mortgage down? Are we 0:19:18.680 --> 0:19:23.120 getting near a cash equivalent out three months or two 0:19:23.200 --> 0:19:26.399 years where we see money supporting equities? 0:19:27.880 --> 0:19:31.040 Yeah, you know, I think we're there right now. One 0:19:31.080 --> 0:19:33.119 of the you know, we think about these sort of 0:19:33.200 --> 0:19:36.840 timely indicators in the markets that we watch, and right 0:19:36.880 --> 0:19:40.320 now to us, it's really about initial jobleslans and high 0:19:40.400 --> 0:19:43.479 yield bond spreads, initial claims. You know, they picked up 0:19:43.480 --> 0:19:45.720 a little bit last week, they're still in this range 0:19:45.720 --> 0:19:48.520 of two hundred to two hundred and sixty thousand. High 0:19:48.560 --> 0:19:51.959 yield bond spreads extremely tame at about three hundred and 0:19:51.960 --> 0:19:55.879 ten basis points over treasury. That's well below the average 0:19:55.920 --> 0:19:58.639 over the last twenty years of five hundred basis points. 0:19:58.640 --> 0:20:01.479 So I think until you see movement on that front, 0:20:02.200 --> 0:20:04.959 I think markets are going to continue to reward equities. 0:20:05.280 --> 0:20:08.920 We want to think about again leaning into higher quality stocks, 0:20:08.920 --> 0:20:12.359 maybe sprinkling in some more defensive equities. But now is 0:20:12.400 --> 0:20:15.639 the time to think about leaning into high quality bonds 0:20:15.680 --> 0:20:19.360 because once those two things happen, breads blowout and initial 0:20:19.400 --> 0:20:23.080 claims rise, it's often too late to capture the income 0:20:23.160 --> 0:20:26.600 that's available in bonds. So you probably remember, you know, 0:20:26.680 --> 0:20:30.160 down the street from John Hancock, John F. Kennedy once 0:20:30.160 --> 0:20:32.360 said that the time to repair the roof is when 0:20:32.400 --> 0:20:34.639 the sun is shining. And we think this is the 0:20:34.680 --> 0:20:37.840 time to think about emphasizing bonds, you know, before it's 0:20:37.880 --> 0:20:39.640 too late to get these great yields. 0:20:39.720 --> 0:20:40.119 She's going to. 0:20:40.200 --> 0:20:41.520 Quote Ted Williams next time. 0:20:41.600 --> 0:20:45.280 She's exactly so Emily, I mean, again, we're in a 0:20:45.280 --> 0:20:47.280 fixed income space. You can sit there in the treasury 0:20:47.400 --> 0:20:49.480 two years, get three point eight seven percent. It's not 0:20:49.520 --> 0:20:52.119 where we were just a little while ago, north of 0:20:52.160 --> 0:20:55.400 four percent, but still decent. Or do I take credit risk? 0:20:55.520 --> 0:20:57.080 How much creditrisk should I be taking here? 0:20:57.960 --> 0:21:00.639 Yeah? So our favorite areas in terms of you know, 0:21:00.680 --> 0:21:03.640 the risk return trade off right now, or investment grade 0:21:03.680 --> 0:21:07.280 corporate bonds, which you're yielding you know, four to five percent, 0:21:07.320 --> 0:21:09.760 and I'm talking about like a single a investment grade 0:21:09.800 --> 0:21:15.479 corporate bond that's very elevated versus history. We like areas 0:21:15.560 --> 0:21:19.040 like agency mortgage backed securities, which are also you know, 0:21:19.240 --> 0:21:25.240 showing solid fundamentals and good valuations there. Even treasuries, hihold's tricky. 0:21:25.359 --> 0:21:27.520 You know, when you go down the credit spectrum right 0:21:27.560 --> 0:21:30.280 now with spreads is contained as tight as they are 0:21:30.680 --> 0:21:33.560 historically when spreads have been at this level of around 0:21:33.600 --> 0:21:37.680 three hundred basis points, your twelve month forward looking return 0:21:38.240 --> 0:21:41.080 is around zero to one percent, with a range of 0:21:41.160 --> 0:21:44.679 positive ten percent to negative ten percent. To us, the 0:21:44.760 --> 0:21:46.960 risks aren't worth it there. And by the way, you 0:21:47.000 --> 0:21:49.480 don't even need to go down the credit spectrum in 0:21:49.560 --> 0:21:52.359 order to generate an elevated road right now, which we 0:21:52.400 --> 0:21:53.400 think is pretty exciting. 0:21:53.600 --> 0:21:56.199 Emily, Thank you so much, Emily Rolling with Portant up 0:21:56.280 --> 0:22:10.680 to co chief investment strategist John Hancock. People go, how 0:22:10.680 --> 0:22:12.159 do I do it? They're asking me how did to 0:22:12.160 --> 0:22:15.920 sign autographs? And that's all because of John Tucker. Because 0:22:16.000 --> 0:22:17.760 John Tucker taught me everything he knows. 0:22:18.000 --> 0:22:18.239 You know. 0:22:18.720 --> 0:22:21.240 It was great And with wind Thin it's the same 0:22:21.280 --> 0:22:24.120 way Audrey Child Freeman was in tears Yep and London. 0:22:24.160 --> 0:22:27.679 She goes, Win's on after me. We're going from Audrey 0:22:27.760 --> 0:22:30.040 Child Freeman to win Thinn. That's very cool. 0:22:30.359 --> 0:22:30.760