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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Can't just live weekdays

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Speaker 2: at seven am Eastern on Apple car Player, Android Auto

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Speaker 2: with the Bloomberg Business App, Listen on demand wherever you

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Speaker 2: get your podcasts, or watch us live on YouTube.

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Speaker 3: I just go to our first guest here, Robert Teeter.

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Speaker 4: He's a chief investment strategist Silver Crest Asset Management joints

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Speaker 4: us here in our Bloomberg and Directive Brookers studio. So

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Speaker 4: it gets a double gold star coming in on right

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Speaker 4: and early exactly. Robert again just mentioning the lack of

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Speaker 4: participation may be in this marketplace when you look at

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Speaker 4: the SMP up twenty six percent, the SP equal Weighted

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Speaker 4: Index up twelve thirteen to fourteen percent, So big divergence

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Speaker 4: there is that a concern for you.

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Speaker 5: It is a bit of a concern. I think most

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Speaker 5: of it is tied to moves in interest rates. In

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Speaker 5: my view, we've had a lot of the head fakes

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Speaker 5: where you've had enthusiasm over rates coming down more quickly.

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Speaker 5: That's led to a broadening out of markets and once again,

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Speaker 5: you know we've had that rug pulled out from under

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Speaker 5: us with you know, rate expectations for next year now

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Speaker 5: being dialed back pretty significantly, and with the ten year

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Speaker 5: heading higher, and is the rate on the ten year

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Speaker 5: heads higher, people get more and more concerned about smaller companies,

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Speaker 5: and you have that narrowing of the market where the

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Speaker 5: winners keep winning and the laggards keep lagging by quite

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Speaker 5: a bit. The tide could turn for twenty twenty five,

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Speaker 5: but that's been the strongest relationship that we've seen for

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Speaker 5: that relationship between large and small has been where rates

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Speaker 5: are and where they're headed.

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Speaker 6: So how are you advising clients to position going at

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Speaker 6: in next year.

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Speaker 5: We're pretty enthusiastic about small caps for next year. One

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Speaker 5: of the key reasons is the M and A works.

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Speaker 5: It is it's almost for a long time not working. Yes,

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Speaker 5: but we do see a couple of new catalysts and

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Speaker 5: those are really with the change in Washington. So M

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Speaker 5: and A backdrop, you know, that was a very slow

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Speaker 5: environment for most of twenty twenty four.

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Speaker 7: Everything we're hearing is.

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Speaker 5: That the backlog of deal activity is picking up. People

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Speaker 5: are pretty enthusiastic. That tends to accrue to small caps.

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Speaker 5: They tend to be the acquisition target and that gets

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Speaker 5: you a premium there, and that helps a bit. We

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Speaker 5: think the broadening out will continue slowly as rates heads

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Speaker 5: slowly lower over the course.

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Speaker 7: Of twenty twenty five.

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Speaker 5: I'll probably say slowly three or four times, but we

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Speaker 5: do think that's headed lower. That alleviates a little pressure

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Speaker 5: as well. And then lastly, we see some of this

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Speaker 5: profit margin expansion that's been mainly in large caps broadening

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Speaker 5: out to the small cap space as well. Of course,

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Speaker 5: there are a lot of non earners in indices like

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Speaker 5: the Russell two thousand, but we do think there's potential

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Speaker 5: for profit margin gain as AI and productivity spreads to

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Speaker 5: a broader segment of the market.

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Speaker 6: I just pulled up in my g where I have

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Speaker 6: a lot of my charts saved. It's the Russell two

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Speaker 6: thousand relative to the S and P five hundred year

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Speaker 6: to date. So if you look at this year, it's

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Speaker 6: underperforming the S and P five hundred by fourteen percentage points,

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Speaker 6: So that would be the worst underperformance since actually nineteen

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Speaker 6: ninety eight, in the fourth consecutive year in a row

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Speaker 6: that the Russell two thousands under performed the S and

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Speaker 6: P five hundred. So when you look at an index

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Speaker 6: like that versus the S and P six hundred, better

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Speaker 6: earnings potential in the six hundred obviously than the two

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Speaker 6: thousand because of the zombie companies in the two thousand.

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Speaker 6: Which way do you play that?

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Speaker 5: Yeah, Absolutely towards the S and P six hundred, the earners.

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Speaker 5: Sometimes when you get these these quick turns, it accrues

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Speaker 5: to the whole index and some of the quote unquote

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Speaker 5: garbage rallies faster. But I think for the full twenty

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Speaker 5: twenty five, the reason we're enthusiastic about small caps it

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Speaker 5: is the higher quality, profitable companies in small cap narrowing

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Speaker 5: the gap against their large cap competitors.

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Speaker 6: Which ones do you think are more competitive and more

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Speaker 6: profitable in particular industries?

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Speaker 5: Yeah, I think it's really a stock by stock situation,

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Speaker 5: not only in small cap but in large cap as well.

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Speaker 5: So our view has been that the driver going forward

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Speaker 5: will be, you know, less from the economic side, less

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Speaker 5: from the multiple side, and more from the earnings growth side.

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Speaker 5: And the earnings growth side we see really coming from

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Speaker 5: profit margins rather than the top line. And so it's

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Speaker 5: just this case by case implementation of you know, technology

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Speaker 5: enabled efficiencies boosting margins, and that can come in any

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Speaker 5: industry or any company at any time.

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Speaker 7: So it's a harder market.

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Speaker 5: We think it is one that lends itself more to

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Speaker 5: stock selection, understanding management teams, understanding you know, how the

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Speaker 5: environment might shift from the creators of AI to the

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Speaker 5: users of AI, and those users of AI really deploying

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Speaker 5: in an effective way to boost margins.

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Speaker 3: What are we doing in the bond market here?

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Speaker 4: I can sit there in a two year treasure and

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Speaker 4: get four point three three percent.

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Speaker 3: I don't have to be a.

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Speaker 7: Hero, do I take you credit risk here? We have

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Speaker 7: not been big fans of credit risk. You're absolutely right.

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Speaker 5: You get a pretty good yield without taking on that

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Speaker 5: illiquidity premium or in private and the credit risk premium

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Speaker 5: in the credit space. So we've been pretty cautious there.

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Speaker 5: You know, we've missed out obviously. Those are areas that

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Speaker 5: have done quite well, but pretty easy to sit at

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Speaker 5: the short end of the curve and get, you know,

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Speaker 5: close to five percent and be pretty content there.

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Speaker 6: So when people want to talk about especially the annual

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Speaker 6: gains in the S and P five hundred being up

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Speaker 6: once again more than twenty percent this year, second consecutive

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Speaker 6: year in a row and the first time we've seen

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Speaker 6: that since the late nineteen nineties. How are you thinking

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Speaker 6: next year can shape out? And can that continue to

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Speaker 6: where we'll still have double digit maybe even more than

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Speaker 6: twenty percent again for potentially a third consecutive year in a row.

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Speaker 7: I see that as a pretty low probability.

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Speaker 5: So our base case is really nine percent gains, just

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Speaker 5: tracking earnings higher, holding multiples where they are. Street consensus

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Speaker 5: is more like, you know, fifteen percent fourteen percent earnings,

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Speaker 5: where at about nine you could see a case where

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Speaker 5: enthusiasm builds. We've got pretty high multiples here. You know,

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Speaker 5: most of the twenty twenty four gain, about two thirds

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Speaker 5: of it has come from multiple expansions, So we think

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Speaker 5: we've kind of pulled forward some gains. Unlikely to see

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Speaker 5: that happen, but you know, you could always push higher

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Speaker 5: to those nineties type of multiples. I think that's that's unlikely.

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Speaker 5: And the big key for us is really the economy.

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Speaker 5: If there's no recession, we think that earnings backdrop holds

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Speaker 5: and the gains continue, but only at the high single

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Speaker 5: digit level, not not much more than that.

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Speaker 3: Why did you, I mean the street, I think one

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Speaker 3: of the risks.

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Speaker 4: Perhaps in a market in twenty twenty five, is the

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Speaker 4: earnings risk because I think I've got to fed it's

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Speaker 4: going to cut maybe a couple of times, so that's.

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Speaker 3: Not really going to be a catalyst for me.

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Speaker 4: Earnings really have to come through for this market to

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Speaker 4: move higher. And again thirteen fourteen, fifteen percent earning shots,

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Speaker 4: which seems to be dialed into street consensus, that seems

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Speaker 4: pretty I'm not to say aggressive, but boy, that's a

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Speaker 4: heavy lift.

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Speaker 5: I would think I think it's a heavy lift as well,

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Speaker 5: especially when you look through at at a sector level.

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Speaker 5: You know, some of the cyclical sectors are expected to

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Speaker 5: see pretty high earnings gains. I'm not sure how that

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Speaker 5: happens unless the economy reaccelerates, and I don't see that happening.

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Speaker 5: I certainly don't see a recession. But if you're tracking

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Speaker 5: along at two two and a half percent GDP, I'm

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Speaker 5: not sure how you get an acceleration in some of

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Speaker 5: the cyclical space. So that's one reason we're a bit

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Speaker 5: more conservative on the earnings front than street consensus.

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Speaker 6: We'll leave about thirty seconds left, But what's the top

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Speaker 6: advice you'd give your clients going into twenty twenty five.

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Speaker 7: Yeah, I think it's stay the course.

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Speaker 5: You know, Paul was mentioning about the long term, you know,

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Speaker 5: compounding effect, and I think, really stay the course here.

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Speaker 5: There's no immediate you know, big recession. There's no giant

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Speaker 5: imbalance in markets right now. Economy looks okay, earnings look okay.

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Speaker 5: Just keep compounding that earnings growth going forward.

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Speaker 3: That's a message I give to my kids.

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Speaker 4: Three or humor in the working force, match your four one.

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Speaker 4: That's right.

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Speaker 7: Yeah, and I thweek they're doing it.

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Speaker 3: And I think that's going to be it. So good thing.

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Speaker 4: Robert Teeter, thank you so much for joining us. Robert Teeter,

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Speaker 4: chief investment strategy is Silver Cross Asset Men and Management,

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Speaker 4: joining us here in studio on Friday, December twenty seventh.

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Speaker 4: I mean that exactly. I mean definitely. So we appreciate that.

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Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 2: weekday afternoons from seven to ten am Easter Listen on

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Speaker 4: I know, as long as I can remember, you probably

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Speaker 4: know this better than me, But it just seems like

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Speaker 4: tech has been leading this market forever and I can't

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Speaker 4: imagine a market where tech does not lead.

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Speaker 3: I mean, is you know it doesn't lead.

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Speaker 6: Us hard all different acronyms. We've gone from things to

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Speaker 6: Matt seven's. Now people want to call it batman if

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Speaker 6: you throw in break data.

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Speaker 7: Now.

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Speaker 4: Our next guest has been on top of all this,

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Speaker 4: Melissa Auto, head of TMT Research at sp Global Visible

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Speaker 4: Alpha Joints US. Here in our our studio, Melissa, what

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Speaker 4: is your call on what are some of your.

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Speaker 3: Top picks in global tech?

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Speaker 4: Because again it feels like if this market's going to

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Speaker 4: move higher, another leg higher after two twenty plus years

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Speaker 4: in performance, technology has got to leave us yet again?

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Speaker 4: Do you think technology can lead this market yet again?

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Speaker 1: Good morning, Happy holidays twenty twenty five.

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Speaker 7: Here we call yep.

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Speaker 1: You know, I think there are a couple trends that

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Speaker 1: we're really looking at for twenty twenty five. First and foremost,

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Speaker 1: are we going to start to see an upgrade cycle?

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Speaker 1: We were looking for that this year it didn't really

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Speaker 1: pan out. Apple and Dell look very well positioned to

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Speaker 1: benefit from an upgrade cycle based on visible African census.

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Speaker 1: We're seeing that analysts haven't really taken their numbers up

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Speaker 1: for an upgrade cycle. But if we do start to

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Speaker 1: see a catalyst there, that would be an interesting theme

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Speaker 1: enterprises coming in and saying, Okay, we need to upgrade

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Speaker 1: our employees laptops, our employees iPhones, and we saw that

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Speaker 1: in mass in COVID and so you know, we haven't

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Speaker 1: really seen that cycle kick in yet. So over the

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Speaker 1: next say, six to eighteen months, that could potentially be

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Speaker 1: a window where that kicks into gear and would be positive.

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Speaker 6: It's interesting looking at Apple specifically because the stocks up

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Speaker 6: about thirty five percent year to date, and if you

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Speaker 6: think back to the first quarter of this year, that

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Speaker 6: was one of its worst underperformances relative to the S

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Speaker 6: and P five hundred since the dot com bubble bursting there.

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Speaker 6: But since made a bottom in the middle of April,

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Speaker 6: it's just continued to taken off and to fight a

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Speaker 6: lot of those expectations. Obviously, in early May it announced

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Speaker 6: that another historic buyback program that still needs to execute

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Speaker 6: a lot of that on. But when you're thinking about

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Speaker 6: more of the fundamentals versus the technicals, where do you

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Speaker 6: this is pointing in the direction when you have other

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Speaker 6: stocks like Nvidia and a very different type of chip company.

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Speaker 6: But when you're thinking about how to position into that

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Speaker 6: next year.

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Speaker 1: Indeed, we're an interesting point with Apple. They were a

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Speaker 1: bit late to the game around the whole AI theme.

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Speaker 1: They came out in June at WWDC and revealed their

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Speaker 1: Apple Intelligence and the market got very excited about that.

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Speaker 1: It drove some upside in the stock, and then you know,

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Speaker 1: it's sort of petered out. And I think we're coming

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Speaker 1: into twenty twenty five potentially with this upgrade cycle in

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Speaker 1: mind and the idea that AI may start to drive

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Speaker 1: more of an enterprise adoption, and that enterprise adoption could

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Speaker 1: potentially lead us into a broader adoption. And I think

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Speaker 1: that's what the market is, that there's some market consensus

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Speaker 1: around that theme. There's a lot of debate.

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Speaker 3: Though, AI.

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Speaker 4: How much are you buying into this AI thing? I

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Speaker 4: mean everybody's telling me. You know, Gene Munster, you know,

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Speaker 4: he put it into context of it's it's bigger than

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Speaker 4: the Internet potentially. How do you think about it? How

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Speaker 4: does that factor into your kind of your thematic research AI?

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Speaker 1: The challenge with AI is that in building AI application,

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Speaker 1: So we've seen to your point, we've seen a lot

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Speaker 1: of innovation in the chip and in the model. Where

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Speaker 1: the challenge is the is in the application layer. And

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Speaker 1: part of the reason for that is that the application

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Speaker 1: layer requires deep domain expertise, and in order to have

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Speaker 1: the application really resonate with the user and really be

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Speaker 1: useful to us, it requires a high degree of accuracy.

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Speaker 1: And I think that's where it's becoming challengeing, is that

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Speaker 1: when you have an agent or you have some sort

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Speaker 1: of generative AI bot or tool, it's not as smooth

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Speaker 1: or as streamlined or as accurate sometimes as the user

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Speaker 1: needs it to be. And so I think that's where

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Speaker 1: you know, you're getting some pushback, particularly in enterprises, where

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Speaker 1: companies are saying, hey, if we're going to have our salespeople,

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Speaker 1: if we're going to have marketing, if we're going to

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Speaker 1: have you know, the business side really leveraging this, it

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Speaker 1: needs to be very high quality. And I think that's

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Speaker 1: where you know, if you're looking for a hotel, for example,

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Speaker 1: and it's a little bit off, that's one thing, But

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Speaker 1: if you're having it write an email for a customer,

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Speaker 1: that's a different thing. So I think having the domain

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Speaker 1: expertise in the application layer is probably making it a

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Speaker 1: bit slower than the market had initially expected.

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Speaker 6: So, Paul, who do you think is the best performing

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Speaker 6: stock in the S and P five hundred this year?

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Speaker 6: Because there's one stock that comes in mind, so you

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Speaker 6: would think it was, it's actually it was for most

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Speaker 6: of the year.

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Speaker 7: It's Vistra.

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Speaker 6: Actually, so it's the power producers that are tied to

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Speaker 6: the AI play and utilities.

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Speaker 7: So actually that stocks up.

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Speaker 6: Gosh, if you look at that f VST is actually

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Speaker 6: the ticker symbol on this up two hundred and seventy

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Speaker 6: four percent. So when it comes to more of the

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Speaker 6: data center type plays, I'm wondering what's your view on

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Speaker 6: that when it's beyond even just what you think of

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Speaker 6: the cohort of the mag seven if you're thinking about

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Speaker 6: those sort of data center plays that people are investing in.

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Speaker 6: Because Nvidia actually up one hundred and eighty three percent

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Speaker 6: year today.

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Speaker 1: Right, Yeah. I mean SMP Global four or five to

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Speaker 1: one research has done a lot of work on the

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Speaker 1: energy side of it, and Vistra fits right into that.

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Speaker 1: With the potential merger of Energy Harbor, they are likely

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Speaker 1: to really benefit from the AI data center energy consumption.

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Speaker 7: I mean that it's.

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Speaker 1: The reality is that all this computation and the velocity

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Speaker 1: of power that is required for a data center is going.

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Speaker 4: To increase real quick thirty seconds. Microsoft what you call there?

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Speaker 1: You know, Microsoft's interesting. They recast their accounting lines. They

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Speaker 1: now have an AI services line, and what's amazing about

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Speaker 1: that is that we can start to really see how

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Speaker 1: AI is dropping into their P and L. And Microsoft

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Speaker 1: last year did about four billion dollars in that line,

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Speaker 1: and then based on Visible Aphric consensus, that's going to

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Speaker 1: eighteen billion dollars by fiscal year twenty six, So some

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Speaker 1: real acceleration there.

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Speaker 4: Yeah, it's just been extraordinary here. So I guess my

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Speaker 4: takeaway is AIS like a thing, and it's impacting a

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Speaker 4: lot of companies.

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Speaker 3: And we're gonna be talking about it more and more

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Speaker 3: and more.

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Speaker 4: But I remember it just you know, a couple of

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Speaker 4: quarters ago, every company, yes and P five hundred talked about.

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Speaker 6: Great Kroger was one of them too.

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Speaker 4: Yeah, I mean mcconnald's Yeah, I don't know. Melissa Auto,

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Speaker 4: thank you so much for joining us. Melissa Auto. She's

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Speaker 4: out of TMT Research, SMP Global, Visible Alpha, joining us

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Speaker 4: here in our Bloomberg Interactive Brokers Studio.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 2: starting at seven am Eastern on applecar Play and Android

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Speaker 2: Auto with the Bloomberg Business App. You can also listen

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Speaker 2: live on Amazon Alexa from our flagship New York station,

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Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 3: Jennifer Lee joins us.

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Speaker 4: She's a senior Congress She's a managing director at BMO

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Speaker 4: Capital Markets. Jennifer, as we think about twenty twenty five,

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Speaker 4: I'm not.

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Speaker 3: Even sure where tot. I mean, let's just start.

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Speaker 4: We've got a new administration coming in in the United States. Uh,

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Speaker 4: We've got a new Congress about to be seated in

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Speaker 4: the new year. What do you expect from again the

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Speaker 4: new sheriff in town. From an economic perspective, I don't

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Speaker 4: know if it's you know, tax policy, if it's if

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Speaker 4: it's you know, tariffs, if it's uh, you know, changes

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Speaker 4: in immigration policy. There's a lot of moving parts. How

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Speaker 4: does that impact your outlook for this US economy?

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Speaker 8: Well, good morning, Happy holidays to both, and thank you

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Speaker 8: very much for.

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Speaker 2: Having me on.

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Speaker 8: You know, this is a it's that key word uncertainty.

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Speaker 8: You know, expect the unexpected. There is so much unknowns

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Speaker 8: as we're heading into the new year with the new

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Speaker 8: Trump administration. He's already talked about what he plans to

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Speaker 8: do with everything that he wants to do on is

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Speaker 8: to do list. Whether or not he's going to be

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Speaker 8: checking them all off on day one, Uh, that will

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Speaker 8: be very interesting to see. But certainly tariffs are the

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Speaker 8: key uh, or is the key measure that he's planned

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Speaker 8: to play out to roll out. He's already talking about

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Speaker 8: the ten twenty percent blanket tariff on all three trillion

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Speaker 8: dollars worth of goods coming into the US, and that

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Speaker 8: will be already significant compared to what he did back

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Speaker 8: in twenty seventeen, which was, you know, targeted tariffs on

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Speaker 8: about three hundred billion dollars worth of good So this

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Speaker 8: is a bigger impact. And of course twenty five percent

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Speaker 8: tariffs on Canada and Mexico, an extra ten percent on China.

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Speaker 8: Maybe this is on top of the sixty percent, So

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Speaker 8: I'm not sure what the figure is going to be.

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Speaker 8: So there's a lot of unservedy I think heading into

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Speaker 8: into this new year. But terrorists is certainly or certainly

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Speaker 8: the key factor. Taxes corporate tax, targeted tax cuts, I think,

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Speaker 8: which would be great for corporate America, and of course

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Speaker 8: different tax relief measures for those who are you know,

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Speaker 8: are reading overtime, Social Security, and of course all those

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Speaker 8: other other issues like the biggest deportation effort ever in

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Speaker 8: the US, cleaning out all all the extra stuff that

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Speaker 8: you know doesn't need to be spent. That's where doage

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Speaker 8: comes in. And so a lot of things on his

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Speaker 8: to do list about how that is going to play

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Speaker 8: out remains to be seen, and I think this is

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Speaker 8: why we're expecting a lot of uncertainty as we start

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Speaker 8: the new year.

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Speaker 6: The latest estimate for the Atlanta Fed's GDP NOW model

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Speaker 6: for the current fourth quarter actually above three percent Paul.

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Speaker 6: And of course we were talking about earlier the economic

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Speaker 6: growth projections. If you look at the ECFC function and

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Speaker 6: the terminal that can pull it up for you on

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Speaker 6: a quarterly as well as an annual basis. So, Jennifer,

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Speaker 6: I'm curious because year after year, especially coming out of COVID,

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Speaker 6: there's so much doom and gloom even for the expectations

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Speaker 6: in twenty twenty three, twenty twenty four, that a lot

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Speaker 6: of economists ended up being on the wrong side of

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Speaker 6: that and getting it wrong. So what are people getting

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Speaker 6: wrong about next year? Because I feel like once we

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Speaker 6: wrap up a year and look ahead, we always have

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Speaker 6: these kind of anticipations that never quite come to fruition

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Speaker 6: when you look a year out.

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Speaker 8: That is true, and we have been, I think on

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Speaker 8: too low on our growth expectations. We were never in

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Speaker 8: the recession camp, thankfully, but we're you know, I think

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Speaker 8: everyone was always too low on their growth expectations. We've

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Speaker 8: got about two about two and a quarter percent, just

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Speaker 8: under two and a half percent penciled in for next year.

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Speaker 8: Where I think where the myths has been is certainly

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Speaker 8: from the US consumer. The US consumer continues to be

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Speaker 8: the big driving force of the the broader US economy.

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Speaker 8: That and of course over the past few years was

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Speaker 8: all the business investment and government spending as well. Helped

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Speaker 8: with the Chips Act in the IRA that's certainly helped

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Speaker 8: boost the economy of the US consumer continues to surprise,

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Speaker 8: and we should always say, never ever underestimate the US consumer.

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Speaker 8: Just the last November data for personal income and spending

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Speaker 8: showed continuing spending. It wasn't exactly super strong, but it

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Speaker 8: was still spent. They were still spending. And also in

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Speaker 8: those areas that if things are really tough, we wouldn't

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Speaker 8: be spending on, like regret, recreational goods and services, recreational

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Speaker 8: vehicles that area. There's a bit of a pullback on

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Speaker 8: dining out, hotel stays, but overall still decent, consumer spending,

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Speaker 8: still decent, consumer wages, savings great. So over four percent

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Speaker 8: is still pretty decent as well. So I think that's

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Speaker 8: where the mistake has been. So we'll have to see

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Speaker 8: how things go in the coming year, just given that

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Speaker 8: we are expecting inflation to take higher.

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Speaker 4: So the dollar just in this last three months is

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Speaker 4: up nearly seven percent. And for the tom Kings of

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Speaker 4: the world that like the you know, vacation over in

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Speaker 4: Rome or Parish or London, it's a good thing. What

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Speaker 4: do you make of this strong dollar, Jennifer, So the strong.

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Speaker 8: Dollar has been at the beginning, it was a function

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Speaker 8: I think of the stronger US E climbing like throughout

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Speaker 8: twenty twenty four. The mistake has I mean, I think

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Speaker 8: everyone has already underestimated the global growth as well. I

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Speaker 8: don't think there was one G seven country that had

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Speaker 8: back to back negative GDP reading, so nobody was in

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Speaker 8: an official recession. Things got revised a lot, which I

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Speaker 8: thought was very interesting. It's just on the data front.

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Speaker 8: But everyone ended up stronger, I think, than expected, especially

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Speaker 8: in the US, so a lot of that US dollar

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Speaker 8: strength was reflection of much stronger US strength relative to

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Speaker 8: everyone else. And now over the last few months it's

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Speaker 8: been a reflection of I guess at FED expectations, at

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Speaker 8: least over the last few weeks in particular, just given

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Speaker 8: how everyone's expecting the Fed to not cut as quickly

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Speaker 8: as originally had Anticipation is given again incoming Tearo's potential

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Speaker 8: income impact on inflation, and now with the last dot

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Speaker 8: plot showing only fifty bases points of rate cuts penciled in, which,

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Speaker 8: by the way, I think, let's sort of have to

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Speaker 8: take with a grain of salt, that's certainly put a

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Speaker 8: little little new fire underneath the green back, and that's

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Speaker 8: been very, very difficult to make calls good calls on

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Speaker 8: the currency market, just given all this volatility, So the

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Speaker 8: FED not cutting as quickly or as much everyone else

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Speaker 8: seeming to face slower growth as we're entering the new year,

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Speaker 8: and more rate cuts coming like from the ECB from

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Speaker 8: the Bank of England, maybe not the BAKE of Japan.

439
00:21:49,960 --> 00:21:53,040
Speaker 8: The RBA is probably going to start cutting rates in February.

440
00:21:53,480 --> 00:21:56,440
Speaker 8: That is going to also lower their weekend their currencies

441
00:21:56,480 --> 00:21:58,440
Speaker 8: and put more strengths underneath the US dollar.

442
00:21:58,960 --> 00:22:01,440
Speaker 6: I'm curious is the calendar flips to twenty twenty five.

443
00:22:01,720 --> 00:22:04,360
Speaker 6: The FED of course will have new voters. Who are

444
00:22:04,400 --> 00:22:06,920
Speaker 6: you keeping a close eye on for as we get

445
00:22:06,920 --> 00:22:10,880
Speaker 6: closer to what people are arguing debatably that neutral rate?

446
00:22:10,920 --> 00:22:12,480
Speaker 6: Who do you think is more of a close callum

447
00:22:12,520 --> 00:22:13,160
Speaker 6: to cents here?

448
00:22:14,240 --> 00:22:16,320
Speaker 8: Well, you know what I think. I think I'm going

449
00:22:16,400 --> 00:22:17,959
Speaker 8: to go back to just to see what i think.

450
00:22:18,000 --> 00:22:21,560
Speaker 8: Fedhair pal is going to be the key FED policy

451
00:22:21,600 --> 00:22:23,920
Speaker 8: maker of course, that makes the key decisions, and he's

452
00:22:23,960 --> 00:22:27,040
Speaker 8: whatever he says sort of reflects I think the broader consensus.

453
00:22:27,080 --> 00:22:28,520
Speaker 8: So I think it's just it's I'm going to keep

454
00:22:28,600 --> 00:22:30,480
Speaker 8: listening to what the FED chair says. I mean, everyone

455
00:22:30,480 --> 00:22:32,919
Speaker 8: else has their own opinion, everyone has their own dots,

456
00:22:33,119 --> 00:22:34,720
Speaker 8: but I think ultimately it's going to be up to

457
00:22:34,720 --> 00:22:36,640
Speaker 8: the FED chair to make that deciding factor. So I'm

458
00:22:36,640 --> 00:22:38,160
Speaker 8: just going to go straight to the boss and say

459
00:22:38,200 --> 00:22:39,119
Speaker 8: it's going to be a feed schair.

460
00:22:39,000 --> 00:22:41,960
Speaker 4: Pal, Jennifer, you're up there in Toronto. How are our

461
00:22:42,000 --> 00:22:45,280
Speaker 4: good friends in Canada thinking about this new administration? Maybe

462
00:22:45,320 --> 00:22:48,360
Speaker 4: some terroriffs because last I checked, we do a lot

463
00:22:48,359 --> 00:22:49,600
Speaker 4: of trading with you guys up there.

464
00:22:50,400 --> 00:22:53,080
Speaker 8: Yes, the US is our biggest trading partner, sending five

465
00:22:53,119 --> 00:22:57,080
Speaker 8: percent of our experts head down to the US. So obviously,

466
00:22:57,640 --> 00:22:59,960
Speaker 8: you know we are. We were already pretty nervous because

467
00:23:00,359 --> 00:23:03,960
Speaker 8: the us mcas up from renegotiation in May of twenty

468
00:23:04,000 --> 00:23:06,200
Speaker 8: twenty six, so we already knew that there is something

469
00:23:06,240 --> 00:23:08,360
Speaker 8: going on on that front. And now with the new

470
00:23:08,480 --> 00:23:12,399
Speaker 8: threats of a twenty five percent tariff on both of

471
00:23:12,440 --> 00:23:14,919
Speaker 8: the US's trading partners from that deal, from both Mexico

472
00:23:15,040 --> 00:23:18,119
Speaker 8: and Canada, obviously makes us very nervous. And we're going

473
00:23:18,200 --> 00:23:20,040
Speaker 8: to have to see if we are going to be

474
00:23:20,040 --> 00:23:24,080
Speaker 8: able to do some you know, decent negotiations that will hopefully,

475
00:23:24,800 --> 00:23:27,000
Speaker 8: you know, soften the blow and hopefully we won't see

476
00:23:27,040 --> 00:23:29,520
Speaker 8: this play out even if it's you know, it's also

477
00:23:29,520 --> 00:23:31,600
Speaker 8: going to depend on how long if he does do

478
00:23:31,720 --> 00:23:33,639
Speaker 8: what he threatens, which is the twenty five percent tariff

479
00:23:33,640 --> 00:23:36,760
Speaker 8: on Canadian imports, how long that's going to stick around

480
00:23:36,840 --> 00:23:38,639
Speaker 8: for and you know, hopefully it's not going to come

481
00:23:38,680 --> 00:23:41,280
Speaker 8: to fruition, but they will be very bad news for

482
00:23:41,320 --> 00:23:45,120
Speaker 8: a Canadian economy. But we've got about two percent penciled

483
00:23:45,119 --> 00:23:48,160
Speaker 8: in for Canadian GDP growth this year or for next

484
00:23:48,200 --> 00:23:52,040
Speaker 8: year at least. Ray kusters still have had a good impact,

485
00:23:52,280 --> 00:23:55,200
Speaker 8: but all that could be erased if we do see

486
00:23:55,320 --> 00:23:57,840
Speaker 8: a blanket twenty five percent tariff on all Canadian imports.

487
00:23:58,119 --> 00:23:59,960
Speaker 3: All right, we'll stay on top of that forever.

488
00:24:00,040 --> 00:24:00,159
Speaker 8: One.

489
00:24:00,240 --> 00:24:03,000
Speaker 4: Jennifer Lee, Senior e Commerce Managing Director at Pimo Capital Markets.

490
00:24:03,000 --> 00:24:04,480
Speaker 4: You appreciate getting some of your time.

491
00:24:09,080 --> 00:24:13,400
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

492
00:24:13,480 --> 00:24:16,640
Speaker 2: starting at seven am Eastern on applecar Play and Android

493
00:24:16,680 --> 00:24:19,639
Speaker 2: Auto with the Bloomberg Business app. You can also watch

494
00:24:19,720 --> 00:24:22,960
Speaker 2: us live every weekday on YouTube and always on the

495
00:24:22,960 --> 00:24:24,000
Speaker 2: Bloomberg terminal.

496
00:24:24,760 --> 00:24:25,119
Speaker 3: I don't know.

497
00:24:25,200 --> 00:24:29,359
Speaker 4: Holiday shopping done. Feels like I spent about the same.

498
00:24:29,480 --> 00:24:31,720
Speaker 3: What do you think you did more or less the same?

499
00:24:31,880 --> 00:24:34,840
Speaker 6: I spent a lot on Black Friday and cyber money.

500
00:24:34,880 --> 00:24:38,040
Speaker 7: I'm not gonna lie. That's all right. I did all

501
00:24:38,119 --> 00:24:40,480
Speaker 7: the the damage. The damage was done.

502
00:24:40,640 --> 00:24:41,240
Speaker 3: The damage was.

503
00:24:41,240 --> 00:24:43,080
Speaker 4: Done, all right, let's see how this thing's kind of

504
00:24:43,119 --> 00:24:44,520
Speaker 4: shaping at here as we kind of get a little

505
00:24:44,520 --> 00:24:46,800
Speaker 4: bit of a look back here, Julievan Allen, Chief Revenue Officer.

506
00:24:46,880 --> 00:24:50,960
Speaker 4: Racketan joins us. Julie, here we are here on December

507
00:24:50,960 --> 00:24:53,840
Speaker 4: twenty seventh. Any early sense of hell kind of how

508
00:24:53,840 --> 00:24:59,120
Speaker 4: that holiday shopping kind of panned out in dollars cents?

509
00:25:00,040 --> 00:25:00,240
Speaker 8: Yeah?

510
00:25:00,280 --> 00:25:03,240
Speaker 9: Absolutely. First of all, thanks for having me again. This

511
00:25:03,359 --> 00:25:06,440
Speaker 9: was an interesting holiday. As the whole year has been,

512
00:25:06,600 --> 00:25:10,360
Speaker 9: it has been pivots after pivots looking at consumer behavior,

513
00:25:10,920 --> 00:25:14,639
Speaker 9: and what we saw this Cyber was the developing behavior.

514
00:25:14,520 --> 00:25:16,400
Speaker 10: Of a very uncertain consumer.

515
00:25:16,480 --> 00:25:21,000
Speaker 9: I will say we monitored daily shopping pre brought Black

516
00:25:21,040 --> 00:25:25,119
Speaker 9: Friday and throughout main cyber shopping days, and what we

517
00:25:25,200 --> 00:25:27,600
Speaker 9: saw a shoppers came out very early this year.

518
00:25:28,000 --> 00:25:30,720
Speaker 10: They were really looking for the deal and not the day.

519
00:25:31,680 --> 00:25:35,480
Speaker 9: But we had done some research with Harris Poll earlier

520
00:25:35,600 --> 00:25:38,680
Speaker 9: this year, and we knew that retailers were highly confident

521
00:25:38,680 --> 00:25:40,160
Speaker 9: that they were going to be able to drive all

522
00:25:40,200 --> 00:25:43,000
Speaker 9: of their sales during peak moments like Black Friday and

523
00:25:43,080 --> 00:25:47,080
Speaker 9: Cyber Monday. And I think unfortunately many of those retailers

524
00:25:47,080 --> 00:25:49,959
Speaker 9: who took that tact missed out on a lot of

525
00:25:49,960 --> 00:25:54,600
Speaker 9: this pull forward of early shopper demand in moments where

526
00:25:54,640 --> 00:25:57,320
Speaker 9: they feel uncertain and are really willing to pull the

527
00:25:57,320 --> 00:26:00,240
Speaker 9: trigger when they get enough of an incentive to buy,

528
00:26:01,400 --> 00:26:05,480
Speaker 9: And we also saw them buying with much more specific intent.

529
00:26:05,640 --> 00:26:08,399
Speaker 10: I heard you both say that either you shop.

530
00:26:08,200 --> 00:26:11,200
Speaker 9: The same or perhaps a little bit more on those

531
00:26:11,280 --> 00:26:15,119
Speaker 9: key days, and what we saw was something similar but

532
00:26:15,280 --> 00:26:19,639
Speaker 9: much less browsing. So consumers were very clear about what

533
00:26:19,720 --> 00:26:22,520
Speaker 9: they wanted to buy, and they came to the sites.

534
00:26:22,720 --> 00:26:26,000
Speaker 9: They purchased in a very purposeful way at a very

535
00:26:26,320 --> 00:26:30,240
Speaker 9: high average order value per trip, meaning that they were ready,

536
00:26:30,280 --> 00:26:32,679
Speaker 9: they knew what they wanted, and when they got that

537
00:26:32,760 --> 00:26:34,600
Speaker 9: incentive that they needed, they bought.

538
00:26:34,960 --> 00:26:37,280
Speaker 6: What were consumers buying more or less of.

539
00:26:39,520 --> 00:26:42,320
Speaker 9: That's actually one of the most interesting trends of this

540
00:26:42,440 --> 00:26:45,199
Speaker 9: year that's certainly new to me having been in this

541
00:26:45,240 --> 00:26:49,000
Speaker 9: space for a long time, where leading up to Black Friday,

542
00:26:49,040 --> 00:26:52,080
Speaker 9: we saw a trend that I started calling first me

543
00:26:52,240 --> 00:26:55,719
Speaker 9: than you, which was to say that consumers were buying

544
00:26:55,760 --> 00:26:59,639
Speaker 9: from very non traditional gift giving categories, think things like

545
00:27:00,200 --> 00:27:04,120
Speaker 9: pet care or personal banking. And as Black Friday hit

546
00:27:04,240 --> 00:27:08,760
Speaker 9: and we're monitoring trends. We continued to see that behavior happen,

547
00:27:09,119 --> 00:27:11,360
Speaker 9: and we kept waiting for it to shift to more

548
00:27:11,400 --> 00:27:15,520
Speaker 9: traditional gift giving, and fundamentally it just kind of didn't.

549
00:27:16,040 --> 00:27:21,160
Speaker 9: And it wasn't until after prime holiday shopping, after Cyber Monday,

550
00:27:21,200 --> 00:27:26,960
Speaker 9: really that the last minute shopping started to move back

551
00:27:27,000 --> 00:27:31,240
Speaker 9: toward normal gift giving categories like gift cars, toys and games,

552
00:27:31,280 --> 00:27:32,439
Speaker 9: sports and outdoors.

553
00:27:32,960 --> 00:27:35,040
Speaker 10: But really fascinating.

554
00:27:34,359 --> 00:27:38,080
Speaker 9: And I think continues that trend of an uncertain consumer

555
00:27:38,119 --> 00:27:41,399
Speaker 9: who's using moments that they know that they're going to

556
00:27:41,400 --> 00:27:44,240
Speaker 9: get the most value to shore up themselves and their

557
00:27:44,280 --> 00:27:47,439
Speaker 9: families before they started to think about gift giving.

558
00:27:48,280 --> 00:27:52,239
Speaker 4: Trulie, how promotional were the retailers this season? What did

559
00:27:52,240 --> 00:27:54,600
Speaker 4: they have to do to get people kind of in

560
00:27:54,680 --> 00:27:56,879
Speaker 4: the door or clicking that mouse.

561
00:27:58,720 --> 00:28:00,680
Speaker 9: They knew that it was going to be a season

562
00:28:00,880 --> 00:28:02,720
Speaker 9: of value seeking consumers.

563
00:28:02,760 --> 00:28:04,320
Speaker 10: It was no secret to anyone.

564
00:28:04,480 --> 00:28:08,119
Speaker 9: So it was very much a season of stacking and

565
00:28:08,240 --> 00:28:12,320
Speaker 9: using whatever lever brands could, whether that's their own in

566
00:28:12,440 --> 00:28:17,000
Speaker 9: house deals and promotions, whether that's things like free shipping

567
00:28:17,560 --> 00:28:20,520
Speaker 9: by online pickup in the store deals as we got

568
00:28:20,520 --> 00:28:25,080
Speaker 9: closer to holiday shipping cutoffs, and also of course other

569
00:28:25,160 --> 00:28:30,160
Speaker 9: levers that will drive permission to buy things like cash back,

570
00:28:30,680 --> 00:28:34,080
Speaker 9: especially for brands who maybe don't want to do as

571
00:28:34,160 --> 00:28:36,879
Speaker 9: much discounting. We saw a lot of that happening in

572
00:28:36,880 --> 00:28:40,280
Speaker 9: the luxury space in particular, but it was really whatever

573
00:28:40,440 --> 00:28:43,400
Speaker 9: lever a brand or retailer could use in order to

574
00:28:43,440 --> 00:28:46,640
Speaker 9: be competitive in a market where they knew that consumers

575
00:28:46,640 --> 00:28:48,960
Speaker 9: were going to be much more loyal to the deal

576
00:28:49,360 --> 00:28:52,000
Speaker 9: than to the brand, which is exactly what happened.

577
00:28:52,360 --> 00:28:55,640
Speaker 6: Now that we're past the Christmas holiday, what other promotions

578
00:28:55,680 --> 00:28:57,600
Speaker 6: could we see at the end of this year and

579
00:28:57,640 --> 00:28:58,600
Speaker 6: going into January.

580
00:29:00,680 --> 00:29:02,560
Speaker 9: Well, of course, at the end of the year, you're

581
00:29:02,600 --> 00:29:06,520
Speaker 9: always going to continue to see brands offering deals to

582
00:29:06,920 --> 00:29:11,040
Speaker 9: offload any gluts of inventory that they may have. We

583
00:29:11,160 --> 00:29:15,280
Speaker 9: had a lot of interesting shipping moments leading up to

584
00:29:16,000 --> 00:29:19,120
Speaker 9: Cyber Week this year, so you'll see those deals continue

585
00:29:19,120 --> 00:29:22,040
Speaker 9: through the end of the year for certain But what

586
00:29:22,080 --> 00:29:24,920
Speaker 9: I predict going into twenty twenty five is really that

587
00:29:25,040 --> 00:29:27,640
Speaker 9: we're going to continue to see this developing habit of

588
00:29:27,680 --> 00:29:31,880
Speaker 9: a very uncertain consumer and retailers trying to meet them

589
00:29:31,920 --> 00:29:35,520
Speaker 9: in that space, which means that the deals and incentives

590
00:29:35,560 --> 00:29:40,480
Speaker 9: can't stop. However, brands and retailers need to figure out

591
00:29:40,920 --> 00:29:43,560
Speaker 9: what works for them in order to give shoppers the

592
00:29:43,600 --> 00:29:46,840
Speaker 9: most bang for their book. And one of the interesting

593
00:29:46,880 --> 00:29:49,760
Speaker 9: trends we started to see even in Black Friday and

594
00:29:49,800 --> 00:29:53,760
Speaker 9: Cyber Monday is this very delicate dance between direct to

595
00:29:53,840 --> 00:30:00,000
Speaker 9: consumer brands and retailers. Where brands were offering in many

596
00:30:00,320 --> 00:30:03,920
Speaker 9: is higher cash back than the retailers who carry them

597
00:30:04,240 --> 00:30:07,160
Speaker 9: because that's a lever that they have. They have potentially

598
00:30:07,320 --> 00:30:10,560
Speaker 9: more margin on those products to offer to the value

599
00:30:10,560 --> 00:30:15,200
Speaker 9: seeking consumer, and the retailer has other levers, perhaps things

600
00:30:15,360 --> 00:30:18,840
Speaker 9: like free shipping that they have an ability to offer

601
00:30:18,880 --> 00:30:22,520
Speaker 9: with better infrastructure to consumers. So it's really going to

602
00:30:22,520 --> 00:30:24,960
Speaker 9: be this dance to meet the consumer where they are

603
00:30:25,280 --> 00:30:28,240
Speaker 9: as they continue to focus on things like everyday items

604
00:30:28,240 --> 00:30:29,000
Speaker 9: and essentials.

605
00:30:30,080 --> 00:30:34,080
Speaker 4: Julie the pandemic it seemed to bring forward by several

606
00:30:34,160 --> 00:30:37,960
Speaker 4: years the percentage of market share for e commerce versus

607
00:30:37,960 --> 00:30:41,360
Speaker 4: bricks and mortar, and e commerce really grew. Where's that

608
00:30:41,440 --> 00:30:43,920
Speaker 4: relationship now? E commerce versus brick, bricks and mortar For

609
00:30:44,000 --> 00:30:45,320
Speaker 4: most retailers.

610
00:30:46,240 --> 00:30:49,880
Speaker 10: E commerce did grow leaps and bounds.

611
00:30:49,920 --> 00:30:52,280
Speaker 9: We took what we saw about like a five year

612
00:30:52,360 --> 00:30:54,720
Speaker 9: leap into the future in terms of e commerce growth,

613
00:30:54,760 --> 00:30:58,880
Speaker 9: and it really does continue, but we are seeing a

614
00:30:58,960 --> 00:31:02,280
Speaker 9: dramatic increase this year in terms of in store behavior.

615
00:31:02,760 --> 00:31:05,800
Speaker 9: Racketon has ability to give cash back in store as well,

616
00:31:05,880 --> 00:31:10,200
Speaker 9: so we monitor these these trends, and that piece of

617
00:31:10,240 --> 00:31:12,760
Speaker 9: our business has been one of the most dramatic areas

618
00:31:12,840 --> 00:31:15,560
Speaker 9: of growth year over year, and I think we're going

619
00:31:15,600 --> 00:31:18,880
Speaker 9: to continue to see that into next year, especially with

620
00:31:18,960 --> 00:31:24,400
Speaker 9: that very highly coveted next generation gen Z shopper continuing

621
00:31:24,480 --> 00:31:28,080
Speaker 9: to grow and bring strength to the market. They prefer

622
00:31:28,320 --> 00:31:35,280
Speaker 9: a very tactile shopping experience, worried about quality and sustainability,

623
00:31:35,960 --> 00:31:37,960
Speaker 9: so I think that we're going to continue to see

624
00:31:38,000 --> 00:31:41,840
Speaker 9: that that trend move more toward brick and mortar next year.

625
00:31:42,240 --> 00:31:45,960
Speaker 9: But again that doesn't change the fact that this is

626
00:31:46,000 --> 00:31:50,719
Speaker 9: still a value seeking consumer, so in store retailers are

627
00:31:50,720 --> 00:31:53,440
Speaker 9: going to need to find those incentives to continue to

628
00:31:53,520 --> 00:31:55,080
Speaker 9: drive shopping in store.

629
00:31:55,320 --> 00:31:57,000
Speaker 4: All right, Julie, thank you so much for joining us.

630
00:31:57,080 --> 00:31:58,960
Speaker 4: I always appreciate getting a few minutes of your time.

631
00:31:59,040 --> 00:32:02,719
Speaker 4: Julie Van Allen, she's the chief revenue officer at Racketend.

632
00:32:03,320 --> 00:32:07,760
Speaker 2: This is the Bloomberg Surveillance podcast available on Apple Spotify,

633
00:32:07,920 --> 00:32:12,040
Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,

634
00:32:12,120 --> 00:32:15,200
Speaker 2: seven to ten am Eastern on Bloomberg dot Com, the

635
00:32:15,320 --> 00:32:19,120
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You

636
00:32:19,120 --> 00:32:22,440
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637
00:32:22,600 --> 00:32:24,160
Speaker 2: always on the Bloomberg terminal