WEBVTT - Global Stocks Eye Records 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.000 or watch us live on YouTube. 0:00:27.360 --> 0:00:29.680 Let's just set the stage here. Kind of mid December 0:00:29.720 --> 0:00:34.040 SMP of fifteen sixteen percent, NASTAC up twenty twenty one percent, 0:00:34.880 --> 0:00:37.239 some pretty solid results out of the bond market as well, 0:00:37.320 --> 0:00:40.239 high single digit returns. Where do we go from here? 0:00:40.240 --> 0:00:43.880 Because that was a pretty solid year, despite some volatility 0:00:43.920 --> 0:00:45.720 in the beginning of the year. Ross Mayfield joins us. 0:00:45.800 --> 0:00:49.240 He's an investment strategist bear a private wealth and management. Ross, 0:00:49.320 --> 0:00:51.879 let's set the stage for twenty twenty six here, what 0:00:51.960 --> 0:00:55.280 are the conversations you're having with your clients these days? 0:00:56.960 --> 0:00:58.800 Yeah, I mean, with the market at all time highs, 0:00:59.280 --> 0:01:01.600 a lot of the typical warriors that we hear from 0:01:01.640 --> 0:01:04.240 investors have been tossed out for the moment, and the 0:01:04.280 --> 0:01:06.760 main worry is just the strength itself. 0:01:06.880 --> 0:01:10.000 Right, are we have things been too good? 0:01:10.080 --> 0:01:12.560 And are we being set up for a disappointing twenty 0:01:12.640 --> 0:01:17.280 twenty six? I think expectation management matters, right. Obviously, we 0:01:17.319 --> 0:01:22.120 can't keep printing high teens twenty percent plus years year 0:01:22.120 --> 0:01:24.399 after year, and this would be the fourth year of 0:01:24.400 --> 0:01:26.800 gains of twenty twenty six is positive, but in a 0:01:26.840 --> 0:01:28.959 bawl market that's not in common, and there are a 0:01:28.959 --> 0:01:31.880 lot of tailwinds for the market as we turn the 0:01:31.920 --> 0:01:34.440 page on twenty twenty five. So we're pretty optimistic, but 0:01:34.560 --> 0:01:36.319 just managing those expectations. 0:01:36.640 --> 0:01:39.600 I also think, guys, what's kind of encouraging about this 0:01:39.680 --> 0:01:41.760 market is yesterday we were able to hit records on 0:01:41.800 --> 0:01:43.679 the Dow, a squeezed out one for the S and 0:01:43.680 --> 0:01:46.800 P five hundred, but we did it largely without big 0:01:46.840 --> 0:01:49.840 tech names, without those big AI names. So, ross, do 0:01:49.880 --> 0:01:53.360 you think that this rally is broadening out and we 0:01:53.400 --> 0:01:56.160 could see I don't want to say a change in leadership, 0:01:56.160 --> 0:01:58.720 but at least a broader rally in twenty twenty six. 0:02:00.240 --> 0:02:03.320 Absolutely. I mean, for most of this rally, what has 0:02:03.360 --> 0:02:03.960 been one of the. 0:02:03.920 --> 0:02:07.800 Main concerns, the concentration, the potential narrowness of the rally, 0:02:07.800 --> 0:02:09.919 the focus on the AI trade and the mag seven 0:02:10.480 --> 0:02:13.079 and the reality is different. Under the surface, You've got 0:02:13.080 --> 0:02:16.240 things like financials working healthcare has staged a really nice 0:02:16.240 --> 0:02:20.240 comeback after a lot of years underwater. Industrials have held 0:02:20.240 --> 0:02:23.520 their own discretion areas breaking back out, So you have 0:02:23.639 --> 0:02:26.200 a lot of other kind of you know, real economy 0:02:26.320 --> 0:02:28.640 cyclical rate sensitive names working. 0:02:29.600 --> 0:02:32.040 Obviously, the rate cuts have helped. 0:02:31.800 --> 0:02:35.120 Spur some activity in those corners of the market, and 0:02:35.160 --> 0:02:37.160 the fundamentals are expected to brought out too. You know, 0:02:37.200 --> 0:02:39.760 even this last quarter we saw the SMP four ninety 0:02:39.760 --> 0:02:42.280 three with double digit earnings growth, and if you look 0:02:42.280 --> 0:02:44.720 at the earnings estimates for twenty twenty six, the expectation 0:02:44.840 --> 0:02:47.359 is that continued broadening in the fundamentals. So I think 0:02:47.400 --> 0:02:48.920 it would make sense for that to continue in the 0:02:48.919 --> 0:02:50.200 price action as well. 0:02:50.320 --> 0:02:53.839 Hey, Ross Corporate America has really done its part here 0:02:53.919 --> 0:02:56.520 to support this market. Earnings have come in really really 0:02:56.560 --> 0:03:01.440 strong for the last several quarters. The earnings power for 0:03:01.480 --> 0:03:03.720 twenty twenty six is enough to support this market. 0:03:05.520 --> 0:03:06.360 Yeah, absolutely. 0:03:06.400 --> 0:03:09.160 I mean we had the early part of a bullmarket 0:03:09.240 --> 0:03:12.360 rally built on multiple expansion, which is really typical coming 0:03:12.400 --> 0:03:14.880 out of a bear market low, and then earnings have 0:03:14.919 --> 0:03:17.880 taken the baton and really carried the day here in 0:03:17.880 --> 0:03:20.160 twenty twenty five, and I think that that will be 0:03:20.160 --> 0:03:23.400 the case in twenty twenty six as well. Earnings growth 0:03:23.440 --> 0:03:25.880 you know, expected broadly to be in the thirteen fourteen 0:03:25.919 --> 0:03:28.440 percent range. Even if that comes down to something like 0:03:28.480 --> 0:03:32.399 ten percent, that's more than enough to carry a bull 0:03:32.480 --> 0:03:33.960 market through. 0:03:34.040 --> 0:03:35.800 Again, maybe we manage expectations. 0:03:35.840 --> 0:03:38.920 Maybe maybe single digit returns, low double digit returns is 0:03:39.440 --> 0:03:40.040 kind of where we. 0:03:40.000 --> 0:03:40.960 Set our base case. 0:03:41.320 --> 0:03:44.680 But again, after three years of high teen or twenty 0:03:44.680 --> 0:03:47.320 percent plus growth, that's more than enough. And that's pretty 0:03:47.360 --> 0:03:49.240 typical for what a fourth to fifth year of a 0:03:49.280 --> 0:03:51.960 bull market might look like. So I think the earnings growth, 0:03:52.000 --> 0:03:54.840 the profit margin expansion, the breadth of that earnings growth 0:03:55.440 --> 0:03:57.520 is more than enough to carry the day. And I 0:03:57.560 --> 0:04:00.960 think it's the main one of the main pushbacks against 0:04:00.960 --> 0:04:03.040 the argument that we're in a bubble. The fundamentals have 0:04:03.120 --> 0:04:05.560 kept up with price by and large, and that's not 0:04:05.600 --> 0:04:07.440 the case in most real bubbles. 0:04:07.840 --> 0:04:11.600 But ross as we look to maybe rejigger their portfolio, 0:04:11.720 --> 0:04:14.600 as we you know, near these final days of the year, 0:04:15.080 --> 0:04:17.359 is it time to buy the laggards? And if so, 0:04:17.480 --> 0:04:20.599 what's sticking out to you? 0:04:20.600 --> 0:04:21.800 You know, I don't know if you need to buy 0:04:21.839 --> 0:04:23.760 the laggards. I think you can just broaden out. 0:04:23.800 --> 0:04:27.800 I mean, as we mentioned earlier, there is strength, nascent 0:04:27.839 --> 0:04:31.000 strength in some of these non tech areas. The place 0:04:31.040 --> 0:04:33.960 that I am, you know, shouting from the rooftops for 0:04:34.360 --> 0:04:38.320 investors to consider their portfolio positioning, and it's international, which 0:04:38.320 --> 0:04:40.040 has not been a laggard this year, but has been 0:04:40.080 --> 0:04:42.719 a laggard for most of the last fifteen years. And 0:04:42.720 --> 0:04:44.279 so I think a lot of investors have thrown in 0:04:44.320 --> 0:04:47.640 the towel on international and the reality is that this bullmarket. 0:04:48.120 --> 0:04:50.080 We mentioned the breadth within the US, but it's really 0:04:50.120 --> 0:04:52.279 a global bull market, and in a lot of ways, 0:04:52.279 --> 0:04:53.640 the leadership. 0:04:53.120 --> 0:04:54.160 Is outside of the US. 0:04:54.200 --> 0:04:56.280 You look to Japan, you look to Europe, you look 0:04:56.320 --> 0:04:59.080 at some of the emerging market names. A weaker dollar 0:04:59.440 --> 0:05:03.120 has been a catalyst, but there is a fundamental strength 0:05:03.160 --> 0:05:05.039 coming from abroad as well. I think a lot of 0:05:05.080 --> 0:05:09.320 investors are structurally underweight international and can do you know, 0:05:09.400 --> 0:05:10.680 could do a lot of work just to get back 0:05:10.680 --> 0:05:12.839 to kind of a marketwaight or and neutral weight international. 0:05:12.880 --> 0:05:14.960 That is one of the main things that I'm talking 0:05:14.960 --> 0:05:17.560 about with investors as we close the book on twenty five. 0:05:17.600 --> 0:05:20.440 Here russ Let's follow up on the international play there. 0:05:20.720 --> 0:05:24.400 Do you feel more comfortable than developed markets or emerging markets, 0:05:24.440 --> 0:05:27.440 because we've heard folks talking up in emerging markets more 0:05:27.440 --> 0:05:28.960 in the last three four or five months and a 0:05:29.000 --> 0:05:29.600 half in a while. 0:05:31.240 --> 0:05:33.679 Yeah, absolutely, I mean there is I think it starts 0:05:33.720 --> 0:05:35.880 and ends with a week dollars story, right, and if 0:05:35.880 --> 0:05:38.200 you look at this year, it's been it's been a 0:05:38.200 --> 0:05:38.840 week dollar story. 0:05:38.839 --> 0:05:39.760 But if you look at twenty. 0:05:39.520 --> 0:05:42.239 Twenty six, you know, you think about the FED continuing 0:05:42.279 --> 0:05:45.080 to cut rates, you think about what a new potential 0:05:45.200 --> 0:05:47.200 FED chair might want to do and continue to ease, 0:05:47.560 --> 0:05:48.840 and then you look around the world and you see 0:05:48.880 --> 0:05:54.560 global yields headed higher. Japan and Europe, Australia can a 0:05:54.560 --> 0:05:56.400 lot of central banks are talking about their next move 0:05:56.440 --> 0:05:59.120 being great hikes, and so if you think about interest 0:05:59.200 --> 0:06:01.479 rate differentials, you could really build a case for a 0:06:01.560 --> 0:06:04.840 continued weakness and the dollar that does tend to boost 0:06:04.880 --> 0:06:07.360 emerging markets more. I think I'm a little more comfortable 0:06:07.560 --> 0:06:09.880 going to some of those developed markets. You know, Japan 0:06:09.960 --> 0:06:12.760 has been an incredible story breaking out after thirty plus 0:06:12.880 --> 0:06:13.680 years underwater. 0:06:14.080 --> 0:06:15.040 But by and large, I. 0:06:14.960 --> 0:06:18.240 Think you can if you're just a typical long term investor, 0:06:18.279 --> 0:06:21.479 you can probably just buy, buy the bulk of it, 0:06:21.560 --> 0:06:25.680 you know, the MSCI All Country x US, and call 0:06:25.720 --> 0:06:27.839 it a day, because I do again. I think the 0:06:27.880 --> 0:06:29.680 main thing is you've got a home country bias and 0:06:29.720 --> 0:06:32.240 you've had fifteen years of underperformance. I think a lot 0:06:32.240 --> 0:06:35.480 of investors probably probably owned very little, if any international 0:06:35.480 --> 0:06:39.599 at all, So just a blanket ownership of a broad 0:06:39.960 --> 0:06:41.159 international index will. 0:06:41.000 --> 0:06:41.480 Do the job. 0:06:41.880 --> 0:06:43.640 Ross, thanks so much for joining us. Really appreciate it. 0:06:43.720 --> 0:06:46.920 Ross Mayfield, investment strategist at BAIRED Private Valve Management. Stay 0:06:47.000 --> 0:06:49.920 with us or from Bloomberg Surveillance. Coming up after. 0:06:49.680 --> 0:07:01.720 This, you're listening to the bloom Work Surveillance podcast. Catch 0:07:01.800 --> 0:07:04.839 us live weekday afternoons from seven to ten am Eastern. 0:07:05.000 --> 0:07:08.960 Listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:07:09.120 --> 0:07:10.800 or watch us live on YouTube. 0:07:10.920 --> 0:07:11.120 Prea. 0:07:11.160 --> 0:07:14.200 Mister Joints is here Core plus a bond etf portfolio 0:07:14.240 --> 0:07:17.200 manager at JP Morgan Asset Management Pria. Thanks so much 0:07:17.200 --> 0:07:19.440 for joining us here in studio. It's a little chilly 0:07:19.440 --> 0:07:21.840 at so we appreciate you leaving the confines of the 0:07:21.880 --> 0:07:25.040 brand new JP Morgan Tower on Park Avenue. 0:07:24.640 --> 0:07:25.520 Which is just awesome. 0:07:25.560 --> 0:07:27.520 I walk by it every day the Penn Station. They 0:07:27.520 --> 0:07:30.800 did a phenomenal job there. Love to get your thoughts 0:07:30.880 --> 0:07:35.000 on the FED here. We're seeing some comments from mister Goldsby, 0:07:35.040 --> 0:07:37.800 who was at the center, but he says, I kind 0:07:37.840 --> 0:07:42.200 of need more data, but boy, rates can come down more, 0:07:42.320 --> 0:07:44.320 he says, if the data warrants it. What did you 0:07:44.360 --> 0:07:45.840 take away from the FED meeting this week? 0:07:45.920 --> 0:07:49.400 Sure, so thanks for having me. Always enjoy the conversation. 0:07:49.480 --> 0:07:52.480 So I think what the FED did brilliantly was to 0:07:52.680 --> 0:07:53.840 retain optionality. 0:07:54.080 --> 0:07:56.000 So we have a lot of data coming up next week. 0:07:56.000 --> 0:07:56.720 We're also going to. 0:07:56.640 --> 0:08:00.840 Get another payrol report before the next jan meeting. So 0:08:00.880 --> 0:08:04.400 they created the optionality that if the data is weak, 0:08:04.480 --> 0:08:07.640 particularly on the labor front, that they can absolutely cut more. 0:08:08.200 --> 0:08:10.800 But they did sort of signal that the bar to 0:08:10.960 --> 0:08:14.040 cut any further is higher. So, you know, and I think, 0:08:14.080 --> 0:08:17.160 and you know, you you reference President goals B. I 0:08:17.160 --> 0:08:19.960 think there's a division of the FED because the risks 0:08:20.000 --> 0:08:22.000 to the labor market and the risk to inflation are 0:08:22.040 --> 0:08:25.520 both high, and different FED officials are putting more emphasis 0:08:25.520 --> 0:08:29.160 on one risk versus another. I think President Goalsby is 0:08:29.720 --> 0:08:33.079 probably in the inflation camp, you know, sort of worried 0:08:33.120 --> 0:08:37.440 that inflation has not seen much progress this year. On 0:08:37.600 --> 0:08:39.680 our end, we think that inflation, if you look at 0:08:39.720 --> 0:08:42.959 the details of inflation, service inflation is heading lower. Wage 0:08:42.960 --> 0:08:45.680 inflation is heading lower. So in our base case, we 0:08:45.760 --> 0:08:48.280 do see a couple more cuts, you know, by the 0:08:48.280 --> 0:08:51.320 time the Fed actually reaches neutral, but there's no urgency 0:08:51.360 --> 0:08:53.400 so they can cut this, you know, over the next 0:08:53.400 --> 0:08:55.959 six months. Of course, if the labor market is weak 0:08:56.000 --> 0:08:58.760 and that unemployment rate, and that's what we're watching, if 0:08:58.800 --> 0:09:01.280 that continues to move higher, I think this swead is 0:09:01.320 --> 0:09:02.480 going to be a lot more aggressive. 0:09:02.600 --> 0:09:05.240 Yeah, and Powell even signaled that right that the labor 0:09:05.280 --> 0:09:07.440 market he was saying, in not so many words, is 0:09:07.480 --> 0:09:10.600 probably weaker than we think it is. Also, we're dealing 0:09:10.600 --> 0:09:13.520 with backward looking data at the moment, so we're still 0:09:13.520 --> 0:09:16.199 waiting again for that more data to come in. But pria, 0:09:16.440 --> 0:09:19.040 we know that credit spreads are tight, but you say 0:09:19.040 --> 0:09:19.920 they're justified. 0:09:20.920 --> 0:09:24.120 Yes, If I look at fundamentals of company balance sheets, 0:09:24.160 --> 0:09:27.160 companies have not really levered up. That would make me 0:09:27.200 --> 0:09:30.600 a little nervous if the debt levels kept increasing, large 0:09:30.600 --> 0:09:33.800 debt issues done by companies that didn't have much debt. 0:09:33.920 --> 0:09:36.800 So we're not that concerned about the fundamentals of whether 0:09:36.840 --> 0:09:40.760 it's earnings or leverage or even interest coverage ratio. 0:09:40.960 --> 0:09:44.120 But spreads. So I think spreads are at the tighter 0:09:44.200 --> 0:09:46.040 end of the range right for good reason. 0:09:46.760 --> 0:09:48.480 We are a little cautious that there's going to be 0:09:48.480 --> 0:09:51.679 a lot of supply in January. There typically is, and 0:09:51.800 --> 0:09:54.640 this time if the rest of the corporate sector, beyond 0:09:54.760 --> 0:09:59.160 just the AI CAPEX companies are deciding they need to raise. 0:09:58.960 --> 0:10:02.319 Money either for investment in EI, in how. 0:10:02.160 --> 0:10:07.160 They're going to incorporate in their business, or MNA related financing, 0:10:07.320 --> 0:10:08.880 we think there could be a lot of supply and 0:10:08.920 --> 0:10:11.600 that is an opportunity. It wouldn't be worried, but we 0:10:11.640 --> 0:10:14.319 are keeping some cash on the sideline waiting to buy 0:10:14.320 --> 0:10:15.400 when that supply comes. 0:10:15.480 --> 0:10:18.920 Interesting, so does the bond market broadly defined? Are they 0:10:18.960 --> 0:10:22.320 concerned about some of this AI spending and the debt 0:10:22.400 --> 0:10:24.240 associated with the AI spending. Because I look at some 0:10:24.240 --> 0:10:26.760 of these issues, I'd buy their bonds. I mean, these 0:10:26.760 --> 0:10:29.800 are great companies, great cash flows, clean balance sheets. I 0:10:29.800 --> 0:10:31.880 mean i'd be as much as you got, I'll take it. 0:10:31.960 --> 0:10:32.800 Yeah, I think you. 0:10:32.760 --> 0:10:34.840 Know, when you come in with a very large deal, 0:10:35.200 --> 0:10:37.439 it has to be priced, so there was some I 0:10:37.480 --> 0:10:40.200 would say supply in digestion. You've got a lot of 0:10:40.200 --> 0:10:43.880 that supply in September. Look at all the posts deal pricing. 0:10:44.120 --> 0:10:46.960 What has happened to the market. All those spreads are tighter, 0:10:47.360 --> 0:10:50.160 So I mean Oracle has had their CDs widening. I 0:10:50.200 --> 0:10:53.040 think there's concerns around how much more debt they're going 0:10:53.080 --> 0:10:55.480 to need to issue, But broadly, I don't think the 0:10:55.520 --> 0:10:59.080 credit market is nervous. There's a valuation question and do 0:10:59.120 --> 0:11:00.920 I want a little bit of a new issue concession 0:11:00.920 --> 0:11:01.439 to take. 0:11:01.280 --> 0:11:03.240 Down a large part. I think there's some of that. 0:11:03.520 --> 0:11:05.800 Look at the spread curve that has not really steepened. 0:11:05.840 --> 0:11:07.839 I think there's a lot of demand for long end 0:11:07.880 --> 0:11:08.600 corporate paper. 0:11:09.160 --> 0:11:12.400 It's there all in level of yields. Those spreads are narrow, 0:11:12.840 --> 0:11:13.920 but look at all in eields. 0:11:13.960 --> 0:11:17.960 If you're getting six percent five six percent high quality 0:11:17.960 --> 0:11:21.880 investment grade debt. I think that's why we're seeing continued demand, 0:11:21.960 --> 0:11:24.160 and I don't think the supply will be an issue 0:11:24.160 --> 0:11:25.160 beyond just that week. 0:11:25.240 --> 0:11:26.760 Maybe there's a little bit of spread widening. 0:11:27.320 --> 0:11:27.560 CRIA. 0:11:28.240 --> 0:11:32.480 What's your thinking with these companies, all these big buyouts 0:11:32.520 --> 0:11:35.080 and so many companies taking on debt. Because we know 0:11:35.120 --> 0:11:38.560 that Netflix is deal to buy Warner Brothers. Discovery includes 0:11:38.600 --> 0:11:42.240 fifty nine billion dollars in bridge loans. Are you concerned 0:11:42.280 --> 0:11:44.679 at all that companies are getting these deals done by 0:11:44.720 --> 0:11:46.000 taking on such massive debt. 0:11:46.559 --> 0:11:47.840 I think that's always a concern. 0:11:47.880 --> 0:11:50.800 I gat bo activity or if there's worsening of the 0:11:50.840 --> 0:11:53.840 credit I think, you know, obviously there'll be some cases 0:11:53.880 --> 0:11:57.040 where maybe it's over down. On average, So far, we 0:11:57.160 --> 0:12:01.040 haven't seen too much of debt fueled sort of bubbles. 0:12:01.720 --> 0:12:03.400 You know, do we get there next year? 0:12:03.640 --> 0:12:06.199 If the credit markets are open and the Fed's easy, 0:12:06.280 --> 0:12:08.720 I would still say all in neils are not that 0:12:08.920 --> 0:12:13.280 low for companies not getting free money, and so we are. 0:12:13.200 --> 0:12:15.600 Not that concern. But at certain pockets. 0:12:15.840 --> 0:12:18.800 Remember the cockroach hunting a few weeks ago or months ago, 0:12:19.080 --> 0:12:19.839 we were all worried. 0:12:19.880 --> 0:12:22.160 I think you really want to minimize cockroaches. 0:12:22.200 --> 0:12:25.160 Do a lot of credit work to know that if 0:12:25.160 --> 0:12:27.680 a company is taking on debt, will they see the 0:12:27.679 --> 0:12:31.680 productivity gains? Can they see the economies of scale and MNA. 0:12:31.880 --> 0:12:33.319 That's going to be a big issue. We're going to 0:12:33.360 --> 0:12:36.600 be analyzing two companies merging. Do we think that they 0:12:36.600 --> 0:12:40.120 can keep margins, they can make those debt payments. So far, 0:12:40.240 --> 0:12:43.160 we haven't seen things that would worry us, but we 0:12:43.280 --> 0:12:44.440 have to stay vigilant. 0:12:44.960 --> 0:12:47.600 So I think a lot of folks they are fairly 0:12:47.640 --> 0:12:50.160 constructive on twenty twenty six, And it all starts with 0:12:50.800 --> 0:12:52.599 I think the economy is in pretty good shape. I 0:12:52.640 --> 0:12:54.120 think we're going to see some decent growth out of 0:12:54.120 --> 0:12:56.360 the economy. Is that kind of where you guys are 0:12:56.360 --> 0:12:57.720 of a JP Morganism management? 0:12:57.880 --> 0:12:58.240 We are. 0:12:58.320 --> 0:13:00.440 We think we're in a soft line. I think we've 0:13:00.480 --> 0:13:02.720 been in one for the last two years. A lot 0:13:02.760 --> 0:13:05.920 of that is based on bottom up company fundamentals as 0:13:05.960 --> 0:13:09.440 well as consumer fundamentals. On average, balance sheets of the 0:13:09.440 --> 0:13:12.240 corporate sector and the consumer look very strong, and I 0:13:12.240 --> 0:13:14.480 think that's why the economy has been resilient. 0:13:14.800 --> 0:13:15.840 We've had so many. 0:13:15.600 --> 0:13:20.200 Shocks this year right right from tariffs, immigration, geopolitical, and 0:13:20.280 --> 0:13:23.000 yet the economy is sort of powered through. In our 0:13:23.040 --> 0:13:26.320 base case that remains the case over the next year. 0:13:26.640 --> 0:13:28.960 I am a little concerned about the labor market, right 0:13:29.080 --> 0:13:31.720 I'm not hearing companies saying that they're going to increase hiring, 0:13:32.080 --> 0:13:35.040 so maybe this is a jobless recovery. We have to 0:13:35.080 --> 0:13:38.440 see how long does that continue to power the consumer. 0:13:38.280 --> 0:13:40.439 Layoffs, is what I'm watching. 0:13:40.480 --> 0:13:43.200 I think that would unravel some of this, but I 0:13:43.200 --> 0:13:46.079 think the FED then aggressively starts cutting rates. 0:13:46.640 --> 0:13:50.000 All right, Priyamysra of JP Morgan Asset Management, Coreplus bond 0:13:50.080 --> 0:13:53.600 ETF Portfolio Manager, thanks for taking the short walk over 0:13:53.960 --> 0:13:55.680 from JP Morgan's headquarters here to. 0:13:55.640 --> 0:13:58.720 Stay with us or from Bloomberg Surveillance coming up after this. 0:14:07.559 --> 0:14:11.160 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:11.200 --> 0:14:14.720 weekday afternoons from seven to ten am Eastern. Listen on Apple, 0:14:14.760 --> 0:14:18.120 Karplay and Android Otto with the Bloomberg Business app, or 0:14:18.240 --> 0:14:19.880 watch us live on YouTube. 0:14:20.000 --> 0:14:21.520 Let's talk about M and A because we've been talking 0:14:21.560 --> 0:14:24.280 about this big Warner Brothers trade for the last seven weeks, 0:14:24.280 --> 0:14:25.960 but it's been a pretty darn good year for M 0:14:26.000 --> 0:14:29.400 and A. It feels like and I think banks for talking. 0:14:29.200 --> 0:14:30.760 About twenty twenty six as well. 0:14:30.800 --> 0:14:32.320 So let's check in with somebody who does this stuff 0:14:32.320 --> 0:14:34.280 for a living, Samir, seeing he's co head of M 0:14:34.280 --> 0:14:37.840 and A North America for City. Samir, help just frame 0:14:37.920 --> 0:14:39.720 out how twenty twenty five has been for M and A. 0:14:40.040 --> 0:14:41.480 And then kind of how you guys are thinking about 0:14:41.480 --> 0:14:42.160 twenty twenty six. 0:14:42.240 --> 0:14:44.080 Sure, happy to do it. Thanks Ball for having us 0:14:44.120 --> 0:14:46.480 and looking forward to the conversation. Look, it's been an 0:14:46.520 --> 0:14:49.960 interesting year, right, it's been just set the stage twenty 0:14:49.960 --> 0:14:51.840 twenty five. This year is going to be the second 0:14:51.960 --> 0:14:54.600 largest year in M and A volumes after twenty one, 0:14:54.600 --> 0:14:57.160 which had a lot of spack volumes in it. Let's 0:14:57.160 --> 0:14:58.600 also keep in mind, by the way, they were a 0:14:58.640 --> 0:15:00.520 couple of months where we were in the old rooms 0:15:01.080 --> 0:15:02.920 from an M and A standpoint, right around when tire 0:15:02.920 --> 0:15:05.600 its came out. So all of this momentums really happen 0:15:05.680 --> 0:15:07.440 if you think about it in the last eight months. 0:15:08.320 --> 0:15:09.920 I think back when I say to myself, you know, 0:15:10.000 --> 0:15:13.400 since twenty twenty we had like six megadeals fifty billion 0:15:13.440 --> 0:15:17.600 plus right over the last four years. This year, in 0:15:17.640 --> 0:15:21.160 the last two quarters, we've had four. This momentum is 0:15:21.200 --> 0:15:23.840 not going away. It's been incredibly busy. And why is that. 0:15:24.480 --> 0:15:28.320 We have a kind of confluence of some perfect factors 0:15:28.320 --> 0:15:32.640 of here. Right, You've got rates coming off, growth remains strong, 0:15:32.800 --> 0:15:35.480 there is a significant amount of investments that's coming in 0:15:35.520 --> 0:15:38.800 from an AI and thus a data center infrastructure perspective. 0:15:38.840 --> 0:15:41.360 I don't discount that that's a big driver this time, 0:15:42.120 --> 0:15:45.080 and then I combine that with how strategics are looking 0:15:45.120 --> 0:15:50.440 at deals. There is greater clarity on how to get 0:15:50.480 --> 0:15:53.640 regulatory approval for the first time in half a decade 0:15:54.160 --> 0:15:56.440 this time, and I think you're going to continue to 0:15:56.440 --> 0:15:58.760 see this momentum build because people are able to think 0:15:58.760 --> 0:16:01.240 about this as deal makers. We're able to look at 0:16:01.280 --> 0:16:03.240 the landscape and say we can get an answer as 0:16:03.280 --> 0:16:07.000 to whether something's going to pass muster. The administration's much 0:16:07.040 --> 0:16:09.280 more open to looking at remedies as a solution, which 0:16:09.360 --> 0:16:12.880 was not something that was available to the buyers, and 0:16:13.000 --> 0:16:15.360 thus able to find the right way to navigate these 0:16:15.400 --> 0:16:16.400 complex environments. 0:16:16.400 --> 0:16:19.440 All right, So a more friendly regulatory environment in which 0:16:19.480 --> 0:16:22.440 to work. So we know we're seeing a lot of 0:16:22.480 --> 0:16:27.120 consolidation in media, we know we're seeing consolidation in AI. 0:16:28.480 --> 0:16:32.720 We're else outside of those sort of expected areas. Where 0:16:32.720 --> 0:16:34.440 else are you seeing consolidation in the new year. 0:16:34.600 --> 0:16:36.680 It's a great question. You know, let's talk about AI, 0:16:36.800 --> 0:16:39.320 and when we talk about AI, everyone talks about LMS, 0:16:39.520 --> 0:16:42.560 But let's actually talk about what else happens beyond AI. Right, 0:16:42.600 --> 0:16:45.600 AI is causing massive amounts of spending that's flowing into 0:16:45.680 --> 0:16:51.040 data center infrastructure that impacts industrials. You think about let's 0:16:51.080 --> 0:16:53.520 call it picks and shovels, but you think about the 0:16:53.640 --> 0:16:57.040 volume that's coming in of spend over the next five 0:16:57.120 --> 0:17:00.680 years that is having a big impact from an industry perspective. 0:17:00.720 --> 0:17:02.040 So you're going to see a lot of flow on 0:17:02.080 --> 0:17:04.480 over there. You're seeing a lot of flow on in 0:17:04.520 --> 0:17:07.040 real estate as a function of that. And then let's 0:17:07.040 --> 0:17:09.880 also consider the fact you're coming out of COVID. We've 0:17:09.920 --> 0:17:12.760 had a change in human behavior that was forced on 0:17:12.880 --> 0:17:15.880 people and as a function of that, companies have had 0:17:15.920 --> 0:17:20.200 to adapt. You take those impacts, the need to fix 0:17:20.240 --> 0:17:23.560 supply chains, you take the need to think about tariffs. 0:17:24.280 --> 0:17:26.760 I think the other place. When you combine those two factors, 0:17:26.760 --> 0:17:29.560 you're going to see a lot of changes in the 0:17:29.600 --> 0:17:32.959 consumer landscape as well. That's not going away. So in 0:17:33.000 --> 0:17:35.399 my mind, like I see it happening across the board. 0:17:35.840 --> 0:17:39.920 Let's also consider you know the GLPS, right, you think 0:17:39.960 --> 0:17:43.080 about healthcare and some of the impact that that's having. 0:17:43.359 --> 0:17:47.320 I see this happening across sectors. So AI has a 0:17:47.359 --> 0:17:50.400 flow on on industrials, real estate in a few other places. 0:17:50.960 --> 0:17:53.080 I see a lot of change in consumers, and I 0:17:53.080 --> 0:17:55.840 see a lot of momentum in the healthcare franchise as well. 0:17:56.119 --> 0:17:58.680 Smyr talked to us about the private equity clients or 0:17:58.720 --> 0:18:01.320 sponsors out there. For you guys. You know, based on 0:18:01.440 --> 0:18:04.000 my thirty year career on the street, it's easy to 0:18:04.080 --> 0:18:06.600 raise money, and it's really easy to invest money. But man, 0:18:06.680 --> 0:18:09.280 it's really hard to monetize those investments. And that's been 0:18:09.320 --> 0:18:12.520 pronounced really over the last four or five years. What 0:18:12.560 --> 0:18:14.879 are you hearing from your sponsor clients. 0:18:15.280 --> 0:18:17.520 It's gotten much better. Yes, there was a lot of 0:18:17.600 --> 0:18:20.119 noise last year because you could not exit some of 0:18:20.160 --> 0:18:22.040 these assets because of what was happening in the market. 0:18:22.119 --> 0:18:24.920 So the markets have helped, I'll tell you this year 0:18:25.040 --> 0:18:28.399 exits are at a significantly elevated level. And by the way, 0:18:28.680 --> 0:18:32.639 if you look at the sponsor wallet of exits, forty 0:18:32.680 --> 0:18:34.840 percent of the wallet is coming from one billion dollar 0:18:34.880 --> 0:18:38.840 plus exits. It typically runs twenty to twenty five percent. 0:18:38.920 --> 0:18:41.439 That's a forty percent. Well, the other thing that's happening, 0:18:41.480 --> 0:18:45.159 you talk about capital coming in. You've got strategics who 0:18:45.160 --> 0:18:47.600 are now in a position to act, but you've also 0:18:47.720 --> 0:18:50.639