Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Can't just live weekdays
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Speaker 3: I just go to our first guest here, Robert Teeter.
Speaker 4: He's a chief investment strategist Silver Crest Asset Management joints
Speaker 4: us here in our Bloomberg and Directive Brookers studio. So
Speaker 4: it gets a double gold star coming in on right
Speaker 4: and early exactly. Robert again just mentioning the lack of
Speaker 4: participation may be in this marketplace when you look at
Speaker 4: the SMP up twenty six percent, the SP equal Weighted
Speaker 4: Index up twelve thirteen to fourteen percent, So big divergence
Speaker 4: there is that a concern for you.
Speaker 5: It is a bit of a concern. I think most
Speaker 5: of it is tied to moves in interest rates. In
Speaker 5: my view, we've had a lot of the head fakes
Speaker 5: where you've had enthusiasm over rates coming down more quickly.
Speaker 5: That's led to a broadening out of markets and once again,
Speaker 5: you know we've had that rug pulled out from under
Speaker 5: us with you know, rate expectations for next year now
Speaker 5: being dialed back pretty significantly, and with the ten year
Speaker 5: heading higher, and is the rate on the ten year
Speaker 5: heads higher, people get more and more concerned about smaller companies,
Speaker 5: and you have that narrowing of the market where the
Speaker 5: winners keep winning and the laggards keep lagging by quite
Speaker 5: a bit. The tide could turn for twenty twenty five,
Speaker 5: but that's been the strongest relationship that we've seen for
Speaker 5: that relationship between large and small has been where rates
Speaker 5: are and where they're headed.
Speaker 6: So how are you advising clients to position going at
Speaker 6: in next year.
Speaker 5: We're pretty enthusiastic about small caps for next year. One
Speaker 5: of the key reasons is the M and A works.
Speaker 5: It is it's almost for a long time not working. Yes,
Speaker 5: but we do see a couple of new catalysts and
Speaker 5: those are really with the change in Washington. So M
Speaker 5: and A backdrop, you know, that was a very slow
Speaker 5: environment for most of twenty twenty four.
Speaker 7: Everything we're hearing is.
Speaker 5: That the backlog of deal activity is picking up. People
Speaker 5: are pretty enthusiastic. That tends to accrue to small caps.
Speaker 5: They tend to be the acquisition target and that gets
Speaker 5: you a premium there, and that helps a bit. We
Speaker 5: think the broadening out will continue slowly as rates heads
Speaker 5: slowly lower over the course.
Speaker 7: Of twenty twenty five.
Speaker 5: I'll probably say slowly three or four times, but we
Speaker 5: do think that's headed lower. That alleviates a little pressure
Speaker 5: as well. And then lastly, we see some of this
Speaker 5: profit margin expansion that's been mainly in large caps broadening
Speaker 5: out to the small cap space as well. Of course,
Speaker 5: there are a lot of non earners in indices like
Speaker 5: the Russell two thousand, but we do think there's potential
Speaker 5: for profit margin gain as AI and productivity spreads to
Speaker 5: a broader segment of the market.
Speaker 6: I just pulled up in my g where I have
Speaker 6: a lot of my charts saved. It's the Russell two
Speaker 6: thousand relative to the S and P five hundred year
Speaker 6: to date. So if you look at this year, it's
Speaker 6: underperforming the S and P five hundred by fourteen percentage points,
Speaker 6: So that would be the worst underperformance since actually nineteen
Speaker 6: ninety eight, in the fourth consecutive year in a row
Speaker 6: that the Russell two thousands under performed the S and
Speaker 6: P five hundred. So when you look at an index
Speaker 6: like that versus the S and P six hundred, better
Speaker 6: earnings potential in the six hundred obviously than the two
Speaker 6: thousand because of the zombie companies in the two thousand.
Speaker 6: Which way do you play that?
Speaker 5: Yeah, Absolutely towards the S and P six hundred, the earners.
Speaker 5: Sometimes when you get these these quick turns, it accrues
Speaker 5: to the whole index and some of the quote unquote
Speaker 5: garbage rallies faster. But I think for the full twenty
Speaker 5: twenty five, the reason we're enthusiastic about small caps it
Speaker 5: is the higher quality, profitable companies in small cap narrowing
Speaker 5: the gap against their large cap competitors.
Speaker 6: Which ones do you think are more competitive and more
Speaker 6: profitable in particular industries?
Speaker 5: Yeah, I think it's really a stock by stock situation,
Speaker 5: not only in small cap but in large cap as well.
Speaker 5: So our view has been that the driver going forward
Speaker 5: will be, you know, less from the economic side, less
Speaker 5: from the multiple side, and more from the earnings growth side.
Speaker 5: And the earnings growth side we see really coming from
Speaker 5: profit margins rather than the top line. And so it's
Speaker 5: just this case by case implementation of you know, technology
Speaker 5: enabled efficiencies boosting margins, and that can come in any
Speaker 5: industry or any company at any time.
Speaker 7: So it's a harder market.
Speaker 5: We think it is one that lends itself more to
Speaker 5: stock selection, understanding management teams, understanding you know, how the
Speaker 5: environment might shift from the creators of AI to the
Speaker 5: users of AI, and those users of AI really deploying
Speaker 5: in an effective way to boost margins.
Speaker 3: What are we doing in the bond market here?
Speaker 4: I can sit there in a two year treasure and
Speaker 4: get four point three three percent.
Speaker 3: I don't have to be a.
Speaker 7: Hero, do I take you credit risk here? We have
Speaker 7: not been big fans of credit risk. You're absolutely right.
Speaker 5: You get a pretty good yield without taking on that
Speaker 5: illiquidity premium or in private and the credit risk premium
Speaker 5: in the credit space. So we've been pretty cautious there.
Speaker 5: You know, we've missed out obviously. Those are areas that
Speaker 5: have done quite well, but pretty easy to sit at
Speaker 5: the short end of the curve and get, you know,
Speaker 5: close to five percent and be pretty content there.
Speaker 6: So when people want to talk about especially the annual
Speaker 6: gains in the S and P five hundred being up
Speaker 6: once again more than twenty percent this year, second consecutive
Speaker 6: year in a row and the first time we've seen
Speaker 6: that since the late nineteen nineties. How are you thinking
Speaker 6: next year can shape out? And can that continue to
Speaker 6: where we'll still have double digit maybe even more than
Speaker 6: twenty percent again for potentially a third consecutive year in a row.
Speaker 7: I see that as a pretty low probability.
Speaker 5: So our base case is really nine percent gains, just
Speaker 5: tracking earnings higher, holding multiples where they are. Street consensus
Speaker 5: is more like, you know, fifteen percent fourteen percent earnings,
Speaker 5: where at about nine you could see a case where
Speaker 5: enthusiasm builds. We've got pretty high multiples here. You know,
Speaker 5: most of the twenty twenty four gain, about two thirds
Speaker 5: of it has come from multiple expansions, So we think
Speaker 5: we've kind of pulled forward some gains. Unlikely to see
Speaker 5: that happen, but you know, you could always push higher
Speaker 5: to those nineties type of multiples. I think that's that's unlikely.
Speaker 5: And the big key for us is really the economy.
Speaker 5: If there's no recession, we think that earnings backdrop holds
Speaker 5: and the gains continue, but only at the high single
Speaker 5: digit level, not not much more than that.
Speaker 3: Why did you, I mean the street, I think one
Speaker 3: of the risks.
Speaker 4: Perhaps in a market in twenty twenty five, is the
Speaker 4: earnings risk because I think I've got to fed it's
Speaker 4: going to cut maybe a couple of times, so that's.
Speaker 3: Not really going to be a catalyst for me.
Speaker 4: Earnings really have to come through for this market to
Speaker 4: move higher. And again thirteen fourteen, fifteen percent earning shots,
Speaker 4: which seems to be dialed into street consensus, that seems
Speaker 4: pretty I'm not to say aggressive, but boy, that's a
Speaker 4: heavy lift.
Speaker 5: I would think I think it's a heavy lift as well,
Speaker 5: especially when you look through at at a sector level.
Speaker 5: You know, some of the cyclical sectors are expected to
Speaker 5: see pretty high earnings gains. I'm not sure how that
Speaker 5: happens unless the economy reaccelerates, and I don't see that happening.
Speaker 5: I certainly don't see a recession. But if you're tracking
Speaker 5: along at two two and a half percent GDP, I'm
Speaker 5: not sure how you get an acceleration in some of
Speaker 5: the cyclical space. So that's one reason we're a bit
Speaker 5: more conservative on the earnings front than street consensus.
Speaker 6: We'll leave about thirty seconds left, But what's the top
Speaker 6: advice you'd give your clients going into twenty twenty five.
Speaker 7: Yeah, I think it's stay the course.
Speaker 5: You know, Paul was mentioning about the long term, you know,
Speaker 5: compounding effect, and I think, really stay the course here.
Speaker 5: There's no immediate you know, big recession. There's no giant
Speaker 5: imbalance in markets right now. Economy looks okay, earnings look okay.
Speaker 5: Just keep compounding that earnings growth going forward.
Speaker 3: That's a message I give to my kids.
Speaker 4: Three or humor in the working force, match your four one.
Speaker 4: That's right.
Speaker 7: Yeah, and I thweek they're doing it.
Speaker 3: And I think that's going to be it. So good thing.
Speaker 4: Robert Teeter, thank you so much for joining us. Robert Teeter,
Speaker 4: chief investment strategy is Silver Cross Asset Men and Management,
Speaker 4: joining us here in studio on Friday, December twenty seventh.
Speaker 4: I mean that exactly. I mean definitely. So we appreciate that.
Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 4: I know, as long as I can remember, you probably
Speaker 4: know this better than me, But it just seems like
Speaker 4: tech has been leading this market forever and I can't
Speaker 4: imagine a market where tech does not lead.
Speaker 3: I mean, is you know it doesn't lead.
Speaker 6: Us hard all different acronyms. We've gone from things to
Speaker 6: Matt seven's. Now people want to call it batman if
Speaker 6: you throw in break data.
Speaker 7: Now.
Speaker 4: Our next guest has been on top of all this,
Speaker 4: Melissa Auto, head of TMT Research at sp Global Visible
Speaker 4: Alpha Joints US. Here in our our studio, Melissa, what
Speaker 4: is your call on what are some of your.
Speaker 3: Top picks in global tech?
Speaker 4: Because again it feels like if this market's going to
Speaker 4: move higher, another leg higher after two twenty plus years
Speaker 4: in performance, technology has got to leave us yet again?
Speaker 4: Do you think technology can lead this market yet again?
Speaker 1: Good morning, Happy holidays twenty twenty five.
Speaker 7: Here we call yep.
Speaker 1: You know, I think there are a couple trends that
Speaker 1: we're really looking at for twenty twenty five. First and foremost,
Speaker 1: are we going to start to see an upgrade cycle?
Speaker 1: We were looking for that this year it didn't really
Speaker 1: pan out. Apple and Dell look very well positioned to
Speaker 1: benefit from an upgrade cycle based on visible African census.
Speaker 1: We're seeing that analysts haven't really taken their numbers up
Speaker 1: for an upgrade cycle. But if we do start to
Speaker 1: see a catalyst there, that would be an interesting theme
Speaker 1: enterprises coming in and saying, Okay, we need to upgrade
Speaker 1: our employees laptops, our employees iPhones, and we saw that
Speaker 1: in mass in COVID and so you know, we haven't
Speaker 1: really seen that cycle kick in yet. So over the
Speaker 1: next say, six to eighteen months, that could potentially be
Speaker 1: a window where that kicks into gear and would be positive.
Speaker 6: It's interesting looking at Apple specifically because the stocks up
Speaker 6: about thirty five percent year to date, and if you
Speaker 6: think back to the first quarter of this year, that
Speaker 6: was one of its worst underperformances relative to the S
Speaker 6: and P five hundred since the dot com bubble bursting there.
Speaker 6: But since made a bottom in the middle of April,
Speaker 6: it's just continued to taken off and to fight a
Speaker 6: lot of those expectations. Obviously, in early May it announced
Speaker 6: that another historic buyback program that still needs to execute
Speaker 6: a lot of that on. But when you're thinking about
Speaker 6: more of the fundamentals versus the technicals, where do you
Speaker 6: this is pointing in the direction when you have other
Speaker 6: stocks like Nvidia and a very different type of chip company.
Speaker 6: But when you're thinking about how to position into that
Speaker 6: next year.
Speaker 1: Indeed, we're an interesting point with Apple. They were a
Speaker 1: bit late to the game around the whole AI theme.
Speaker 1: They came out in June at WWDC and revealed their
Speaker 1: Apple Intelligence and the market got very excited about that.
Speaker 1: It drove some upside in the stock, and then you know,
Speaker 1: it's sort of petered out. And I think we're coming
Speaker 1: into twenty twenty five potentially with this upgrade cycle in
Speaker 1: mind and the idea that AI may start to drive
Speaker 1: more of an enterprise adoption, and that enterprise adoption could
Speaker 1: potentially lead us into a broader adoption. And I think
Speaker 1: that's what the market is, that there's some market consensus
Speaker 1: around that theme. There's a lot of debate.
Speaker 3: Though, AI.
Speaker 4: How much are you buying into this AI thing? I
Speaker 4: mean everybody's telling me. You know, Gene Munster, you know,
Speaker 4: he put it into context of it's it's bigger than
Speaker 4: the Internet potentially. How do you think about it? How
Speaker 4: does that factor into your kind of your thematic research AI?
Speaker 1: The challenge with AI is that in building AI application,
Speaker 1: So we've seen to your point, we've seen a lot
Speaker 1: of innovation in the chip and in the model. Where
Speaker 1: the challenge is the is in the application layer. And
Speaker 1: part of the reason for that is that the application
Speaker 1: layer requires deep domain expertise, and in order to have
Speaker 1: the application really resonate with the user and really be
Speaker 1: useful to us, it requires a high degree of accuracy.
Speaker 1: And I think that's where it's becoming challengeing, is that
Speaker 1: when you have an agent or you have some sort
Speaker 1: of generative AI bot or tool, it's not as smooth
Speaker 1: or as streamlined or as accurate sometimes as the user
Speaker 1: needs it to be. And so I think that's where
Speaker 1: you know, you're getting some pushback, particularly in enterprises, where
Speaker 1: companies are saying, hey, if we're going to have our salespeople,
Speaker 1: if we're going to have marketing, if we're going to
Speaker 1: have you know, the business side really leveraging this, it
Speaker 1: needs to be very high quality. And I think that's
Speaker 1: where you know, if you're looking for a hotel, for example,
Speaker 1: and it's a little bit off, that's one thing, But
Speaker 1: if you're having it write an email for a customer,
Speaker 1: that's a different thing. So I think having the domain
Speaker 1: expertise in the application layer is probably making it a
Speaker 1: bit slower than the market had initially expected.
Speaker 6: So, Paul, who do you think is the best performing
Speaker 6: stock in the S and P five hundred this year?
Speaker 6: Because there's one stock that comes in mind, so you
Speaker 6: would think it was, it's actually it was for most
Speaker 6: of the year.
Speaker 7: It's Vistra.
Speaker 6: Actually, so it's the power producers that are tied to
Speaker 6: the AI play and utilities.
Speaker 7: So actually that stocks up.
Speaker 6: Gosh, if you look at that f VST is actually
Speaker 6: the ticker symbol on this up two hundred and seventy
Speaker 6: four percent. So when it comes to more of the
Speaker 6: data center type plays, I'm wondering what's your view on
Speaker 6: that when it's beyond even just what you think of
Speaker 6: the cohort of the mag seven if you're thinking about
Speaker 6: those sort of data center plays that people are investing in.
Speaker 6: Because Nvidia actually up one hundred and eighty three percent
Speaker 6: year today.
Speaker 1: Right, Yeah. I mean SMP Global four or five to
Speaker 1: one research has done a lot of work on the
Speaker 1: energy side of it, and Vistra fits right into that.
Speaker 1: With the potential merger of Energy Harbor, they are likely
Speaker 1: to really benefit from the AI data center energy consumption.
Speaker 7: I mean that it's.
Speaker 1: The reality is that all this computation and the velocity
Speaker 1: of power that is required for a data center is going.
Speaker 4: To increase real quick thirty seconds. Microsoft what you call there?
Speaker 1: You know, Microsoft's interesting. They recast their accounting lines. They
Speaker 1: now have an AI services line, and what's amazing about
Speaker 1: that is that we can start to really see how
Speaker 1: AI is dropping into their P and L. And Microsoft
Speaker 1: last year did about four billion dollars in that line,
Speaker 1: and then based on Visible Aphric consensus, that's going to
Speaker 1: eighteen billion dollars by fiscal year twenty six, So some
Speaker 1: real acceleration there.
Speaker 4: Yeah, it's just been extraordinary here. So I guess my
Speaker 4: takeaway is AIS like a thing, and it's impacting a
Speaker 4: lot of companies.
Speaker 3: And we're gonna be talking about it more and more
Speaker 3: and more.
Speaker 4: But I remember it just you know, a couple of
Speaker 4: quarters ago, every company, yes and P five hundred talked about.
Speaker 6: Great Kroger was one of them too.
Speaker 4: Yeah, I mean mcconnald's Yeah, I don't know. Melissa Auto,
Speaker 4: thank you so much for joining us. Melissa Auto. She's
Speaker 4: out of TMT Research, SMP Global, Visible Alpha, joining us
Speaker 4: here in our Bloomberg Interactive Brokers Studio.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: Jennifer Lee joins us.
Speaker 4: She's a senior Congress She's a managing director at BMO
Speaker 4: Capital Markets. Jennifer, as we think about twenty twenty five,
Speaker 4: I'm not.
Speaker 3: Even sure where tot. I mean, let's just start.
Speaker 4: We've got a new administration coming in in the United States. Uh,
Speaker 4: We've got a new Congress about to be seated in
Speaker 4: the new year. What do you expect from again the
Speaker 4: new sheriff in town. From an economic perspective, I don't
Speaker 4: know if it's you know, tax policy, if it's if
Speaker 4: it's you know, tariffs, if it's uh, you know, changes
Speaker 4: in immigration policy. There's a lot of moving parts. How
Speaker 4: does that impact your outlook for this US economy?
Speaker 8: Well, good morning, Happy holidays to both, and thank you
Speaker 8: very much for.
Speaker 2: Having me on.
Speaker 8: You know, this is a it's that key word uncertainty.
Speaker 8: You know, expect the unexpected. There is so much unknowns
Speaker 8: as we're heading into the new year with the new
Speaker 8: Trump administration. He's already talked about what he plans to
Speaker 8: do with everything that he wants to do on is
Speaker 8: to do list. Whether or not he's going to be
Speaker 8: checking them all off on day one, Uh, that will
Speaker 8: be very interesting to see. But certainly tariffs are the
Speaker 8: key uh, or is the key measure that he's planned
Speaker 8: to play out to roll out. He's already talking about
Speaker 8: the ten twenty percent blanket tariff on all three trillion
Speaker 8: dollars worth of goods coming into the US, and that
Speaker 8: will be already significant compared to what he did back
Speaker 8: in twenty seventeen, which was, you know, targeted tariffs on
Speaker 8: about three hundred billion dollars worth of good So this
Speaker 8: is a bigger impact. And of course twenty five percent
Speaker 8: tariffs on Canada and Mexico, an extra ten percent on China.
Speaker 8: Maybe this is on top of the sixty percent, So
Speaker 8: I'm not sure what the figure is going to be.
Speaker 8: So there's a lot of unservedy I think heading into
Speaker 8: into this new year. But terrorists is certainly or certainly
Speaker 8: the key factor. Taxes corporate tax, targeted tax cuts, I think,
Speaker 8: which would be great for corporate America, and of course
Speaker 8: different tax relief measures for those who are you know,
Speaker 8: are reading overtime, Social Security, and of course all those
Speaker 8: other other issues like the biggest deportation effort ever in
Speaker 8: the US, cleaning out all all the extra stuff that
Speaker 8: you know doesn't need to be spent. That's where doage
Speaker 8: comes in. And so a lot of things on his
Speaker 8: to do list about how that is going to play
Speaker 8: out remains to be seen, and I think this is
Speaker 8: why we're expecting a lot of uncertainty as we start
Speaker 8: the new year.
Speaker 6: The latest estimate for the Atlanta Fed's GDP NOW model
Speaker 6: for the current fourth quarter actually above three percent Paul.
Speaker 6: And of course we were talking about earlier the economic
Speaker 6: growth projections. If you look at the ECFC function and
Speaker 6: the terminal that can pull it up for you on
Speaker 6: a quarterly as well as an annual basis. So, Jennifer,
Speaker 6: I'm curious because year after year, especially coming out of COVID,
Speaker 6: there's so much doom and gloom even for the expectations
Speaker 6: in twenty twenty three, twenty twenty four, that a lot
Speaker 6: of economists ended up being on the wrong side of
Speaker 6: that and getting it wrong. So what are people getting
Speaker 6: wrong about next year? Because I feel like once we
Speaker 6: wrap up a year and look ahead, we always have
Speaker 6: these kind of anticipations that never quite come to fruition
Speaker 6: when you look a year out.
Speaker 8: That is true, and we have been, I think on
Speaker 8: too low on our growth expectations. We were never in
Speaker 8: the recession camp, thankfully, but we're you know, I think
Speaker 8: everyone was always too low on their growth expectations. We've
Speaker 8: got about two about two and a quarter percent, just
Speaker 8: under two and a half percent penciled in for next year.
Speaker 8: Where I think where the myths has been is certainly
Speaker 8: from the US consumer. The US consumer continues to be
Speaker 8: the big driving force of the the broader US economy.
Speaker 8: That and of course over the past few years was
Speaker 8: all the business investment and government spending as well. Helped
Speaker 8: with the Chips Act in the IRA that's certainly helped
Speaker 8: boost the economy of the US consumer continues to surprise,
Speaker 8: and we should always say, never ever underestimate the US consumer.
Speaker 8: Just the last November data for personal income and spending
Speaker 8: showed continuing spending. It wasn't exactly super strong, but it
Speaker 8: was still spent. They were still spending. And also in
Speaker 8: those areas that if things are really tough, we wouldn't
Speaker 8: be spending on, like regret, recreational goods and services, recreational
Speaker 8: vehicles that area. There's a bit of a pullback on
Speaker 8: dining out, hotel stays, but overall still decent, consumer spending,
Speaker 8: still decent, consumer wages, savings great. So over four percent
Speaker 8: is still pretty decent as well. So I think that's
Speaker 8: where the mistake has been. So we'll have to see
Speaker 8: how things go in the coming year, just given that
Speaker 8: we are expecting inflation to take higher.
Speaker 4: So the dollar just in this last three months is
Speaker 4: up nearly seven percent. And for the tom Kings of
Speaker 4: the world that like the you know, vacation over in
Speaker 4: Rome or Parish or London, it's a good thing. What
Speaker 4: do you make of this strong dollar, Jennifer, So the strong.
Speaker 8: Dollar has been at the beginning, it was a function
Speaker 8: I think of the stronger US E climbing like throughout
Speaker 8: twenty twenty four. The mistake has I mean, I think
Speaker 8: everyone has already underestimated the global growth as well. I
Speaker 8: don't think there was one G seven country that had
Speaker 8: back to back negative GDP reading, so nobody was in
Speaker 8: an official recession. Things got revised a lot, which I
Speaker 8: thought was very interesting. It's just on the data front.
Speaker 8: But everyone ended up stronger, I think, than expected, especially
Speaker 8: in the US, so a lot of that US dollar
Speaker 8: strength was reflection of much stronger US strength relative to
Speaker 8: everyone else. And now over the last few months it's
Speaker 8: been a reflection of I guess at FED expectations, at
Speaker 8: least over the last few weeks in particular, just given
Speaker 8: how everyone's expecting the Fed to not cut as quickly
Speaker 8: as originally had Anticipation is given again incoming Tearo's potential
Speaker 8: income impact on inflation, and now with the last dot
Speaker 8: plot showing only fifty bases points of rate cuts penciled in, which,
Speaker 8: by the way, I think, let's sort of have to
Speaker 8: take with a grain of salt, that's certainly put a
Speaker 8: little little new fire underneath the green back, and that's
Speaker 8: been very, very difficult to make calls good calls on
Speaker 8: the currency market, just given all this volatility, So the
Speaker 8: FED not cutting as quickly or as much everyone else
Speaker 8: seeming to face slower growth as we're entering the new year,
Speaker 8: and more rate cuts coming like from the ECB from
Speaker 8: the Bank of England, maybe not the BAKE of Japan.
Speaker 8: The RBA is probably going to start cutting rates in February.
Speaker 8: That is going to also lower their weekend their currencies
Speaker 8: and put more strengths underneath the US dollar.
Speaker 6: I'm curious is the calendar flips to twenty twenty five.
Speaker 6: The FED of course will have new voters. Who are
Speaker 6: you keeping a close eye on for as we get
Speaker 6: closer to what people are arguing debatably that neutral rate?
Speaker 6: Who do you think is more of a close callum
Speaker 6: to cents here?
Speaker 8: Well, you know what I think. I think I'm going
Speaker 8: to go back to just to see what i think.
Speaker 8: Fedhair pal is going to be the key FED policy
Speaker 8: maker of course, that makes the key decisions, and he's
Speaker 8: whatever he says sort of reflects I think the broader consensus.
Speaker 8: So I think it's just it's I'm going to keep
Speaker 8: listening to what the FED chair says. I mean, everyone
Speaker 8: else has their own opinion, everyone has their own dots,
Speaker 8: but I think ultimately it's going to be up to
Speaker 8: the FED chair to make that deciding factor. So I'm
Speaker 8: just going to go straight to the boss and say
Speaker 8: it's going to be a feed schair.
Speaker 4: Pal, Jennifer, you're up there in Toronto. How are our
Speaker 4: good friends in Canada thinking about this new administration? Maybe
Speaker 4: some terroriffs because last I checked, we do a lot
Speaker 4: of trading with you guys up there.
Speaker 8: Yes, the US is our biggest trading partner, sending five
Speaker 8: percent of our experts head down to the US. So obviously,
Speaker 8: you know we are. We were already pretty nervous because
Speaker 8: the us mcas up from renegotiation in May of twenty
Speaker 8: twenty six, so we already knew that there is something
Speaker 8: going on on that front. And now with the new
Speaker 8: threats of a twenty five percent tariff on both of
Speaker 8: the US's trading partners from that deal, from both Mexico
Speaker 8: and Canada, obviously makes us very nervous. And we're going
Speaker 8: to have to see if we are going to be
Speaker 8: able to do some you know, decent negotiations that will hopefully,
Speaker 8: you know, soften the blow and hopefully we won't see
Speaker 8: this play out even if it's you know, it's also
Speaker 8: going to depend on how long if he does do
Speaker 8: what he threatens, which is the twenty five percent tariff
Speaker 8: on Canadian imports, how long that's going to stick around
Speaker 8: for and you know, hopefully it's not going to come
Speaker 8: to fruition, but they will be very bad news for
Speaker 8: a Canadian economy. But we've got about two percent penciled
Speaker 8: in for Canadian GDP growth this year or for next
Speaker 8: year at least. Ray kusters still have had a good impact,
Speaker 8: but all that could be erased if we do see
Speaker 8: a blanket twenty five percent tariff on all Canadian imports.
Speaker 3: All right, we'll stay on top of that forever.
Speaker 8: One.
Speaker 4: Jennifer Lee, Senior e Commerce Managing Director at Pimo Capital Markets.
Speaker 4: You appreciate getting some of your time.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: I don't know.
Speaker 4: Holiday shopping done. Feels like I spent about the same.
Speaker 3: What do you think you did more or less the same?
Speaker 6: I spent a lot on Black Friday and cyber money.
Speaker 7: I'm not gonna lie. That's all right. I did all
Speaker 7: the the damage. The damage was done.
Speaker 3: The damage was.
Speaker 4: Done, all right, let's see how this thing's kind of
Speaker 4: shaping at here as we kind of get a little
Speaker 4: bit of a look back here, Julievan Allen, Chief Revenue Officer.
Speaker 4: Racketan joins us. Julie, here we are here on December
Speaker 4: twenty seventh. Any early sense of hell kind of how
Speaker 4: that holiday shopping kind of panned out in dollars cents?
Speaker 8: Yeah?
Speaker 9: Absolutely. First of all, thanks for having me again. This
Speaker 9: was an interesting holiday. As the whole year has been,
Speaker 9: it has been pivots after pivots looking at consumer behavior,
Speaker 9: and what we saw this Cyber was the developing behavior.
Speaker 10: Of a very uncertain consumer.
Speaker 9: I will say we monitored daily shopping pre brought Black
Speaker 9: Friday and throughout main cyber shopping days, and what we
Speaker 9: saw a shoppers came out very early this year.
Speaker 10: They were really looking for the deal and not the day.
Speaker 9: But we had done some research with Harris Poll earlier
Speaker 9: this year, and we knew that retailers were highly confident
Speaker 9: that they were going to be able to drive all
Speaker 9: of their sales during peak moments like Black Friday and
Speaker 9: Cyber Monday. And I think unfortunately many of those retailers
Speaker 9: who took that tact missed out on a lot of
Speaker 9: this pull forward of early shopper demand in moments where
Speaker 9: they feel uncertain and are really willing to pull the
Speaker 9: trigger when they get enough of an incentive to buy,
Speaker 9: And we also saw them buying with much more specific intent.
Speaker 10: I heard you both say that either you shop.
Speaker 9: The same or perhaps a little bit more on those
Speaker 9: key days, and what we saw was something similar but
Speaker 9: much less browsing. So consumers were very clear about what
Speaker 9: they wanted to buy, and they came to the sites.
Speaker 9: They purchased in a very purposeful way at a very
Speaker 9: high average order value per trip, meaning that they were ready,
Speaker 9: they knew what they wanted, and when they got that
Speaker 9: incentive that they needed, they bought.
Speaker 6: What were consumers buying more or less of.
Speaker 9: That's actually one of the most interesting trends of this
Speaker 9: year that's certainly new to me having been in this
Speaker 9: space for a long time, where leading up to Black Friday,
Speaker 9: we saw a trend that I started calling first me
Speaker 9: than you, which was to say that consumers were buying
Speaker 9: from very non traditional gift giving categories, think things like
Speaker 9: pet care or personal banking. And as Black Friday hit
Speaker 9: and we're monitoring trends. We continued to see that behavior happen,
Speaker 9: and we kept waiting for it to shift to more
Speaker 9: traditional gift giving, and fundamentally it just kind of didn't.
Speaker 9: And it wasn't until after prime holiday shopping, after Cyber Monday,
Speaker 9: really that the last minute shopping started to move back
Speaker 9: toward normal gift giving categories like gift cars, toys and games,
Speaker 9: sports and outdoors.
Speaker 10: But really fascinating.
Speaker 9: And I think continues that trend of an uncertain consumer
Speaker 9: who's using moments that they know that they're going to
Speaker 9: get the most value to shore up themselves and their
Speaker 9: families before they started to think about gift giving.
Speaker 4: Trulie, how promotional were the retailers this season? What did
Speaker 4: they have to do to get people kind of in
Speaker 4: the door or clicking that mouse.
Speaker 9: They knew that it was going to be a season
Speaker 9: of value seeking consumers.
Speaker 10: It was no secret to anyone.
Speaker 9: So it was very much a season of stacking and
Speaker 9: using whatever lever brands could, whether that's their own in
Speaker 9: house deals and promotions, whether that's things like free shipping
Speaker 9: by online pickup in the store deals as we got
Speaker 9: closer to holiday shipping cutoffs, and also of course other
Speaker 9: levers that will drive permission to buy things like cash back,
Speaker 9: especially for brands who maybe don't want to do as
Speaker 9: much discounting. We saw a lot of that happening in
Speaker 9: the luxury space in particular, but it was really whatever
Speaker 9: lever a brand or retailer could use in order to
Speaker 9: be competitive in a market where they knew that consumers
Speaker 9: were going to be much more loyal to the deal
Speaker 9: than to the brand, which is exactly what happened.
Speaker 6: Now that we're past the Christmas holiday, what other promotions
Speaker 6: could we see at the end of this year and
Speaker 6: going into January.
Speaker 9: Well, of course, at the end of the year, you're
Speaker 9: always going to continue to see brands offering deals to
Speaker 9: offload any gluts of inventory that they may have. We
Speaker 9: had a lot of interesting shipping moments leading up to
Speaker 9: Cyber Week this year, so you'll see those deals continue
Speaker 9: through the end of the year for certain But what
Speaker 9: I predict going into twenty twenty five is really that
Speaker 9: we're going to continue to see this developing habit of
Speaker 9: a very uncertain consumer and retailers trying to meet them
Speaker 9: in that space, which means that the deals and incentives
Speaker 9: can't stop. However, brands and retailers need to figure out
Speaker 9: what works for them in order to give shoppers the
Speaker 9: most bang for their book. And one of the interesting
Speaker 9: trends we started to see even in Black Friday and
Speaker 9: Cyber Monday is this very delicate dance between direct to
Speaker 9: consumer brands and retailers. Where brands were offering in many
Speaker 9: is higher cash back than the retailers who carry them
Speaker 9: because that's a lever that they have. They have potentially
Speaker 9: more margin on those products to offer to the value
Speaker 9: seeking consumer, and the retailer has other levers, perhaps things
Speaker 9: like free shipping that they have an ability to offer
Speaker 9: with better infrastructure to consumers. So it's really going to
Speaker 9: be this dance to meet the consumer where they are
Speaker 9: as they continue to focus on things like everyday items
Speaker 9: and essentials.
Speaker 4: Julie the pandemic it seemed to bring forward by several
Speaker 4: years the percentage of market share for e commerce versus
Speaker 4: bricks and mortar, and e commerce really grew. Where's that
Speaker 4: relationship now? E commerce versus brick, bricks and mortar For
Speaker 4: most retailers.
Speaker 10: E commerce did grow leaps and bounds.
Speaker 9: We took what we saw about like a five year
Speaker 9: leap into the future in terms of e commerce growth,
Speaker 9: and it really does continue, but we are seeing a
Speaker 9: dramatic increase this year in terms of in store behavior.
Speaker 9: Racketon has ability to give cash back in store as well,
Speaker 9: so we monitor these these trends, and that piece of
Speaker 9: our business has been one of the most dramatic areas
Speaker 9: of growth year over year, and I think we're going
Speaker 9: to continue to see that into next year, especially with
Speaker 9: that very highly coveted next generation gen Z shopper continuing
Speaker 9: to grow and bring strength to the market. They prefer
Speaker 9: a very tactile shopping experience, worried about quality and sustainability,
Speaker 9: so I think that we're going to continue to see
Speaker 9: that that trend move more toward brick and mortar next year.
Speaker 9: But again that doesn't change the fact that this is
Speaker 9: still a value seeking consumer, so in store retailers are
Speaker 9: going to need to find those incentives to continue to
Speaker 9: drive shopping in store.
Speaker 4: All right, Julie, thank you so much for joining us.
Speaker 4: I always appreciate getting a few minutes of your time.
Speaker 4: Julie Van Allen, she's the chief revenue officer at Racketend.
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