Speaker 1: Welcome to What Goes Up, a weekly markets podcast. I'm
Speaker 1: Moldana Hirich, a market reporter at Bloomberg.
Speaker 2: And I'm Emily Graffeo across asset reporter at Bloomberg. Mike
Speaker 2: Reagan is out this week.
Speaker 1: And this week on the show, our stock's in a
Speaker 1: new bull market or not? There's a raging debate on
Speaker 1: Wall Street as both the S and P five hundred
Speaker 1: and the NAZAQ one hundred continued to search. We'll get
Speaker 1: into it with the chief global strategist for a major
Speaker 1: asset manager. But first, Emily, welcome back to the show.
Speaker 1: We're so happy to have you, Thank you, thank you
Speaker 1: for having me Mike Reagan. On last week's show, Katie
Speaker 1: filled in and she told us one of her deepest
Speaker 1: dark secrets, which is what she's very, very deathly afraid
Speaker 1: of the dark. The dark, So that can't be your
Speaker 1: answer to.
Speaker 2: This isn't really a secret. But I'm very afraid of birds, flying, birds,
Speaker 2: out of control birds, How do you live life? So
Speaker 2: it's when I went to a conference a few months
Speaker 2: ago in Miami for ETFs. I was having a business
Speaker 2: lunch with a source and I was trying to be
Speaker 2: really serious and professional, and there was a bird and
Speaker 2: it kept flying towards us and I was being really
Speaker 2: fantastic and freaking out. But the source was very kind
Speaker 2: about it and he would show it off.
Speaker 1: But I don't beget it though, because there's so many
Speaker 1: birds everywhere.
Speaker 2: The New York City pigeons are different, harmless, they mind
Speaker 2: their own business. It's it's other birds.
Speaker 1: I see you. I don't see our guest this week
Speaker 1: is laughing, so I do want to bring her in.
Speaker 1: It's Sema Sha, chief global strategist for Principal Asset Management. Sima,
Speaker 1: I'm so happy to have you back.
Speaker 3: On the show. Oh, it's great to be here. Thank you.
Speaker 1: Yeah, we have you here in person, which is really great.
Speaker 3: Yeay, it's fun to be hit. Although just twenty four hours.
Speaker 1: Maybe let's just start with some of your views on
Speaker 1: what you're expecting from the economy and from markets. You
Speaker 1: said that a recession is not imminent, but you're still
Speaker 1: forecasting one, so maybe just tell us about your projections.
Speaker 3: Yeah, so we are still expecting a recession, maybe increasingly
Speaker 3: in the minority and actually expecting a full recession to
Speaker 3: come through, but we are expecting it start in Q four.
Speaker 3: I know a lot of people out there who are
Speaker 3: expecting recesion expected to come in Q three. I look
Speaker 3: at the labor market the strength of it, and I
Speaker 3: say that that's almost impossible. But Q four we would
Speaker 3: expect fairly mild negative growth, and then in Q one
Speaker 3: a deeper downturn, but then by Q two this is
Speaker 3: back to recovery. So this is historically a very short
Speaker 3: recession and historically very very mild recession.
Speaker 2: So unlike some strategists on the street that have been
Speaker 2: pushing out their expectations for when this recession is finally
Speaker 2: going to get here, it seems like for a while
Speaker 2: you have been thinking that it's not going to come.
Speaker 2: It's not going to be an imminent recession. How is
Speaker 2: your view though, shifted from the beginning of the year
Speaker 2: to now.
Speaker 3: Yeah, So we have had this expectation for recession in
Speaker 3: the second half of twenty twenty three, since the early
Speaker 3: part of twenty twenty two. So this is a long
Speaker 3: held view for recession. I'm really based on this idea
Speaker 3: of the long and variable aggs all based around fad
Speaker 3: policy is going to trigger a recession. But since the
Speaker 3: beginning of this year, I should actually, even in the
Speaker 3: last two or three months, with this continued outperformance strength
Speaker 3: of the labor market. The one thing that we have
Speaker 3: changed is that we have reduced the duration of recession
Speaker 3: from three quarters to two quarters. I almost wonder if
Speaker 3: this is even going to feel like a recession. You know,
Speaker 3: if you look around, are you going to say, Wow,
Speaker 3: the usism recession probably not beca It's that mild. So
Speaker 3: I think maybe the more important part of this, at
Speaker 3: least from an ass allocation perspective, is what the impact
Speaker 3: on earnings is going to be. And you can already
Speaker 3: see that downward trend. You get into recession, earnings will
Speaker 3: continue to come down, and that's really what's going to
Speaker 3: weigh on asset prices if you don't get a labor market.
Speaker 3: And what we're expecting, I mean, we're you're projecting unemployment
Speaker 3: to rise to four point one percent by year end.
Speaker 3: That is still essentially full employment. So it's not I
Speaker 3: don't think going to be a very very tough recession
Speaker 3: for the population.
Speaker 1: Okay, but that's super interesting. The thing you said about
Speaker 1: is it going to feel like a recession? So what
Speaker 1: will it feel like for the everyday American?
Speaker 3: I wonder if it's going to feel any different to
Speaker 3: when you know, almost over the last year, with living
Speaker 3: costs being quite oppressive, maybe you find out more and
Speaker 3: more people around you are losing their jobs. But then
Speaker 3: that will be a very much of a rolling recession.
Speaker 3: I mean, I do buy into this idea that some
Speaker 3: sectors will continue to be very strong, other sectors will
Speaker 3: be really feeling the pain and almost a continuation of
Speaker 3: what you've seen since actually since last year when housing
Speaker 3: was struggling. Now it's manufacturing, energy struggling at least in
Speaker 3: the earning side, and you're probably going to see rolling
Speaker 3: sectors which are struggling, but maybe just a few more
Speaker 3: of them are feeling the effects by year end.
Speaker 2: What does that mean for what it's going to feel
Speaker 2: like for investors?
Speaker 3: Equity investors, Well, as we've seen already, I mean very
Speaker 3: equally investors, it's confusing. Now it's probably going to become
Speaker 3: even more confusing, and it becomes a very very important
Speaker 3: case if you have to pick your sector very wisely.
Speaker 3: You have to think about your styles very carefully as well,
Speaker 3: and just having a blanket view of the broad equity
Speaker 3: market is simply not going to be enough I want
Speaker 3: to make the plug for active management. I mean, this
Speaker 3: is really the environment that active management should start to
Speaker 3: thrive when you have specific sectors which are struggling.
Speaker 1: And can you say more about what's behind your calculation
Speaker 1: for your projections. Is it that you're just thinking about
Speaker 1: how strong the labor marketers or are there other factors
Speaker 1: at play?
Speaker 2: Two?
Speaker 3: Yeah, so there's a couple of things at place.
Speaker 1: I mean.
Speaker 3: One of the reasons that we expect this to be
Speaker 3: fairly mild and actually not coming through in fact till
Speaker 3: you know, towards the end of this year is back
Speaker 3: to that consumer back to that excess saving story. I
Speaker 3: think we are all very familiar with that story. But
Speaker 3: I think at some point last year there was an
Speaker 3: expectation that at least for some of the household's low
Speaker 3: income households, excess savings have been completely exhausted already. But
Speaker 3: if you look at the data now, and we've just
Speaker 3: done a kind of a rejuvenation of those numbers, and
Speaker 3: it looks like they're still half a trillion to go,
Speaker 3: and that should sustain households at least until your end,
Speaker 3: potentially even longer if they start to change their behavior
Speaker 3: a little bit, so that is what really continues to
Speaker 3: support the broader economy. The thing is with the labor
Speaker 3: market is it is very tight today, but it is
Speaker 3: typically the most lagging indicator of any recession. So it
Speaker 3: stays strong. It's stays strong, and then suddenly it drops
Speaker 3: and then it spirals fairly quickly. So although it looks
Speaker 3: good today, it doesn't mean it's going to stay like
Speaker 3: this forever, which I think a lot of people making
Speaker 3: that mistake. So we are anticipating. Q four is when
Speaker 3: you start to see job losses and it does spiral.
Speaker 3: You've also seen actually the interest rates sensitivity of the
Speaker 3: US economy is considerably lower than it was previously, partly
Speaker 3: because actually debt levels for consumers, households, businesses is lower
Speaker 3: than in previous times. So those are the kind of
Speaker 3: the key factors which are driving this not imminent recession
Speaker 3: but also mild recession.
Speaker 2: What is really interesting in your note about the interest
Speaker 2: rates sensitivity, could you talk a little bit more about
Speaker 2: why in this current cycle we're a little bit less
Speaker 2: sensitive to higher interest rates than prior downturns.
Speaker 3: Yeah. So one of the interesting things, and I say
Speaker 3: this coming from the UK, where actually interest rates sensitivity
Speaker 3: there is a lot higher than the US, and one
Speaker 3: of the reasons is is back to the housing mark
Speaker 3: and back to mortgages. So for example, the United Kingdom,
Speaker 3: you have a majority of mortgages are on the variable
Speaker 3: right side, right, so it's rates have gone up. People
Speaker 3: have really started to see that mortgage costs are fullibility fall,
Speaker 3: whereas in the US there's a greater percentage of fixed
Speaker 3: rate mortgages. So the implication is is that people just
Speaker 3: simply don't feel that pain of these FED rate hikes
Speaker 3: which have been incredibly aggressive. But if you're not feeling it,
Speaker 3: then actually it almost doesn't exist. So that's one thing.
Speaker 3: And then once you start to look at the corporate
Speaker 3: debt imbalances, they are lower than what you see certainly
Speaker 3: during the GFC, but also during previous recession. So as
Speaker 3: interest rates rise, that debt servicing cost is not as
Speaker 3: oppressive as maybe it had been in previous times. So
Speaker 3: that is really the key reason, and I think that
Speaker 3: has actually been a process of I guess, of understanding
Speaker 3: for a lot of economists out there. That history. Of course,
Speaker 3: we look to it as a guide, but it cannot
Speaker 3: be the rule. For as we look forward.
Speaker 2: So what does that mean for the FMC meeting next
Speaker 2: week if we get another rate hike, does it even
Speaker 2: matter that much?
Speaker 3: It's a very good point, I would say, Look, once
Speaker 3: you're getting into just additional twenty five BIPs, no, No,
Speaker 3: I don't think it's it's a thing that's It's not
Speaker 3: like it's it's going to suddenly push the economy over.
Speaker 3: I think the interesting part of that twenty five basis
Speaker 3: point hike is the implication to the market expectations, and
Speaker 3: that's really where you're seeing liquidity conditions, or so I
Speaker 3: should say, financial conditions have been very easy, actually have
Speaker 3: eased in fact over the last couple of months, because
Speaker 3: markets have been so certain that the FAD is going
Speaker 3: to stop hiking, that there's going to be rate cuts.
Speaker 3: But once you start to introduce another rate hike, well
Speaker 3: potentially that could reverse a lot of this easy and
Speaker 3: financial conditions. And alongside that increase in rate hike, potentially
Speaker 3: in June, potentially in July, alongside that you should see
Speaker 3: a continued pricing out of rate cuts. And if I
Speaker 3: think about the broad equity market, one of the reasons
Speaker 3: I think why there is some optimism still is just
Speaker 3: this idea that the food will come to the rescue.
Speaker 3: So the more and more they intervene, then I think
Speaker 3: the less that becomes the truth.
Speaker 1: Okay, before we talk more about what you're expecting down
Speaker 1: the line, what do you think we do get from
Speaker 1: the Fed? Because the market is anticipating in the pause
Speaker 1: in June potentially hike in July. What are you foresee happening?
Speaker 3: So we have had a forecast, I think since last
Speaker 3: October when Powell I'd come out with a fairly hawkish
Speaker 3: commentary that the third will peak at five twenty five
Speaker 3: to five fifty, right, So that for us means that
Speaker 3: there is one more rate hike, I would have said
Speaker 3: June suddenly, looking at the labor market data from from April,
Speaker 3: suddenly there is another rate hike to come. But just
Speaker 3: going by the commentary, the kind of words that are
Speaker 3: coming out from so many the FMC members, they are
Speaker 3: very reluctant, and quite rightly so, in wanting to look
Speaker 3: for the evidence of economic slowdown. You know we talk
Speaker 3: about those long and veriable lags. Well, that means that
Speaker 3: they need to take the time to see how the
Speaker 3: economy is responding to the hikes so far, so I
Speaker 3: think from that perspective, it's more likely that they stop
Speaker 3: in June and then they start again in July. The
Speaker 3: one thing that concerns me, though, to be honest, is
Speaker 3: this is now becoming another consensus forecast for one more
Speaker 3: rate hike. When this a consensus, there's always a little
Speaker 3: bit of a concern around it, because if you do
Speaker 3: get a continuation of hikes, maybe another one in September,
Speaker 3: that is where you start to see some negative surprises.
Speaker 3: And when you've got a market which is doing so well,
Speaker 3: that is where the rest really come from.
Speaker 1: What is behind the June pause? Is it also some
Speaker 1: of the banking sector turmoil that we've seen that they
Speaker 1: are really needing to still figure out and think about.
Speaker 3: Yeah, absolutely so, as well as as you said, you know,
Speaker 3: as well as just looking at the broader economy, how
Speaker 3: is the unemployment rate and how is of course, how
Speaker 3: is inflation behaving. One of the key things that we've
Speaker 3: heard the FMC talk about repeatedly over the last couple
Speaker 3: of months is what the impact of the banking crisis
Speaker 3: is going to be, and the difficulty of the banking
Speaker 3: crisis is is actually a lot of it is down
Speaker 3: to behavioral behavioral economics almost how do people respond, how
Speaker 3: do businesses respond, and how to banks respond. It's one
Speaker 3: of those things that's very very difficult to model for us,
Speaker 3: but also for the FAT too, So they are having
Speaker 3: to track the data and see how lending behavior is continuing.
Speaker 3: Up till this point actually has been fairly healthy, so
Speaker 3: that shouldn't really stand in their way. But I think
Speaker 3: they are looking for as much evidence as they can
Speaker 3: gather before they do a hike, which you know, could
Speaker 3: really unsettle financial markets.
Speaker 2: What about inflation. There's a lot of people that doubt
Speaker 2: we can get to the two percent for quite some time.
Speaker 2: Do you think the Fed would ever redefine the two
Speaker 2: percent target?
Speaker 3: Well, first thing is they cannot redefine a two percent
Speaker 3: target until they've hit two percent, because otherwise they lose
Speaker 3: complete credibility. So would they do it this year. Absolutely not,
Speaker 3: because I am studying the camp that they cannot hit
Speaker 3: two percent in twenty twenty three. If you get a recession,
Speaker 3: well that's probably going to be your process which brings
Speaker 3: it down to two percent, And then maybe at that
Speaker 3: point they can say right, looking at the broader set
Speaker 3: of features, looking at the next ten years, or the
Speaker 3: various structural secular inflationary forces. Maybe we want to shift
Speaker 3: it maybe a little bit more flexible two and a
Speaker 3: half to three percent, but study until they've hit two percent.
Speaker 3: I think that they really risk losing credibility.
Speaker 1: We've had a slew of strategists come out in the
Speaker 1: last couple of weeks and they've been upping their SMP targets. Obviously,
Speaker 1: the market's been rallying quite a bit tax talks and
Speaker 1: the broader market as well. But what are your first see.
Speaker 1: It sounds like you would first see a very charpy
Speaker 1: path for stocks through the end of the year.
Speaker 3: Well, so this is where they think the picture becomes
Speaker 3: extremely confusing because this recession forecast, and even if you
Speaker 3: don't expect recession, but you just anticipate slow down, that
Speaker 3: should suggest that the S and P five hundred is
Speaker 3: going to be under downward pressure. Right, the broad equity
Speaker 3: market is underd downward pressure. That makes sense, But then
Speaker 3: you throw in the tech side and actually everything goes
Speaker 3: completely out the window because a math just doesn't add up.
Speaker 3: So if you believe in the strength of AI and sudden,
Speaker 3: maybe there's a bit of froth in the market. But
Speaker 3: if you believe that AI can continue to push tech
Speaker 3: companies forward, it's actually very difficult to see how you
Speaker 3: get the S and B five hundred back below four thousand,
Speaker 3: and certainly down to the previous September of tow belows.
Speaker 3: So I think that has been one of the reasons
Speaker 3: why you have seen so many strategies upping their S
Speaker 3: and B five hundred forecasts just because of the text
Speaker 3: that the math just doesn't add up cerny. For us,
Speaker 3: we are believers in the text. Last year we were
Speaker 3: in the underweight because of the FED hiking cycle. February
Speaker 3: this year we raised our exposure, mainly for cyclical reasons timely,
Speaker 3: very timely. I can't pretend to have known that in
Speaker 3: video would do what it's doing, but said we had
Speaker 3: a cyclical view on it in terms of there's a
Speaker 3: slowdown coming, the FED is nearing the end of its
Speaker 3: hiking path, and the broader global economy is going to
Speaker 3: do better than the US, and typically large cap has
Speaker 3: a greater international revenue exposure than the middle small caps.
Speaker 3: So that was the reason why we went overweight in February.
Speaker 3: But now you've got, of course, this amazing secular discussion
Speaker 3: around around AI and the potential profits for the sector.
Speaker 3: I have to say, I think it's very difficult to
Speaker 3: see this completely collapse back to what it was last year.
Speaker 1: What is the ballcase on AI? Is it that companies
Speaker 1: have a bunch of cash and they're balance sheets and
Speaker 1: they're going to be spending it towards AI development? Or
Speaker 1: is it and I've seen this slightly gloomier review, which
Speaker 1: is that people are thinking about AI as replace seeing
Speaker 1: a lot of jobs. So they're jumping into the market
Speaker 1: because they want to at least take advantage of the
Speaker 1: market upside, and they want to be part of the rally,
Speaker 1: even if it means that AI is, you know, potentially
Speaker 1: displacing tons of jobs.
Speaker 3: Yeah, AI could be the emotional hedge. So I think
Speaker 3: it's a little bit of both, right. I think the
Speaker 3: rationale for having that special to companies which are investing
Speaker 3: in AI is, you know, I think it's it's not
Speaker 3: just like you having the dot com boom. I think
Speaker 3: it's almost a fundamental change in and I guess that
Speaker 3: the way people live their lives do business is that
Speaker 3: AI is probably something which is here to stay. It's
Speaker 3: not like the metaverse, right, this is something which is
Speaker 3: a lot more meaningful. And these companies have the cash
Speaker 3: and the balanceches and I have the same kind of leverage.
Speaker 3: They have the brand. I mean, there's so many reasons
Speaker 3: to have a positive view for AI, but I also
Speaker 3: I mean one of my lingering concerns for the broader
Speaker 3: market is, you know, one of the consensus views is
Speaker 3: that the next ten years is going to be a
Speaker 3: lot more inflationary than the past ten years, and that
Speaker 3: people point to deglobalization, aging, the shift to green energy.
Speaker 3: But what about AI? I mean AI and the potential
Speaker 3: job loss. And we've already heard from places like IBM
Speaker 3: in the United Kingdom. We heard from British Telecom, which
Speaker 3: is saying that they could I think come almost like
Speaker 3: a third of their workforce within the next few years.
Speaker 3: That is deflationary and that could potentially turn that whole
Speaker 3: discussion of the next ten years and how you really
Speaker 3: want an investment as a strategic perspective upside down. But
Speaker 3: at least for the near term, I think AI technology
Speaker 3: you need to have some kind of exposure to that
Speaker 3: in new portfolios.
Speaker 2: How resilient are these AI linked stocks for the next
Speaker 2: six months from an impending recession and earnings downturn.
Speaker 3: I think they are fairly resilient to the broader economic story,
Speaker 3: simply because they are typically the companies that should thrive
Speaker 3: when things get a little more challenging. It's not like
Speaker 3: they're going to completely avoid the downflow that you see
Speaker 3: for the border economy, but I would expect them to outperform.
Speaker 3: The reason I'm hesitating is because there is clearly a
Speaker 3: little froth in the market. You know, valuations have just
Speaker 3: gone to extreme levels. We would anticipate that there's going
Speaker 3: to be a bit of a pullback. Once you get
Speaker 3: their pullback, increase your exposure because I think this is
Speaker 3: a long term trade. But I do think that maybe
Speaker 3: the next six months could be very, very choppy for
Speaker 3: a lot of things in the market. The other thing
Speaker 3: is is that if you don't see a pullback in
Speaker 3: the market, at least pull back in the AI side,
Speaker 3: does it drag the rest of the market up with it?
Speaker 3: Do you get this kind of melt up, this momentum,
Speaker 3: this improved investor sentiment, And I think that would be
Speaker 3: dangerous because all that happens then is that you get
Speaker 3: the liquidity financial conditions continuing to ease, you get a
Speaker 3: new reburst of inflation, kind of like what you saw
Speaker 3: in the nineteen seventies. You got new FED hikes to come,
Speaker 3: and then you essentially get a deeper downturn. So from
Speaker 3: a recession standpoint, you want to get out this way
Speaker 3: sooner the later it comes, the deeper it's going to be.
Speaker 1: I'm really interested in your super long term view, which
Speaker 1: is you're expecting lower returns and higher volatility. I think
Speaker 1: over the next decade. Maybe we can say, like, can
Speaker 1: you talk about that very long term view.
Speaker 3: So if we think about the last ten years, you've
Speaker 3: had an environment of very low volatility and higher rates.
Speaker 3: And one of the key reasons for that was because
Speaker 3: there was a low rate environment, you had low inflation,
Speaker 3: you had central banks not just a FED, but around
Speaker 3: the world keeping equidity conditions extremely easy. And as a result,
Speaker 3: if you're an investor, it wasn't too hard to make
Speaker 3: a positive for ten your portfolio. But now if you
Speaker 3: look at the next ten years, and for the reasons
Speaker 3: of the globalization, aging society shifted to green energy, you're
Speaker 3: probably looking at a time where inflation is going to
Speaker 3: be I mean not meaningfully higher than what you've had
Speaker 3: over the last ten years. But maybe if you think
Speaker 3: that for the US, inflation has averaged about one point
Speaker 3: two percent over the last ten year period, maybe it
Speaker 3: goes up to about two and a half to three
Speaker 3: percent over the next ten years. That is an environment
Speaker 3: where you are moving away from quantitactive easing. So you
Speaker 3: haven't got zero rate environment anymore. And as long as
Speaker 3: you have that, and it's actually more expensive for companies,
Speaker 3: well then you need to make harder decisions. You need
Speaker 3: to have better analysis. But ultimately that is an environment
Speaker 3: where you have lower returns and higher volatility. You need
Speaker 3: to be a little bit more exotic. I think in
Speaker 3: terms of how you're thinking about investing, can you just
Speaker 3: stick to the traditionalist classes or do you need to
Speaker 3: start thinking a little bit outside of the box. So
Speaker 3: I think that the next ten years is going to
Speaker 3: be harder, but potentially more interesting as well.
Speaker 2: I like that word exotic. What's your highest conviction exotic
Speaker 2: for the long term?
Speaker 3: Yeah, okay, now this is not going to sound exotic
Speaker 3: at all.
Speaker 1: But treasury, Yeah, treasure cash.
Speaker 3: You know, if you want to get any kind of
Speaker 3: strong returns in your portfolio, beyond beyond I think study
Speaker 3: what you can make on any kind of traditional equities,
Speaker 3: public equities, public fixed income. Then you have to start
Speaker 3: considering about considering privates. And ideally you want to combine
Speaker 3: two things together, that's emerging markets and privates. And I
Speaker 3: think there is a lot of potential there. But you
Speaker 3: have to look beyond the next year or so because
Speaker 3: there will I think be a lot of cyclical concerns
Speaker 3: as maybe the public weakness catches up with the private
Speaker 3: catch up for the private market. But then, if you're
Speaker 3: taking a ten year perspective, don't you want to have
Speaker 3: a position in some new found companies which are going
Speaker 3: to be benefiting from a growing middle class, a catch
Speaker 3: up economy, and ideally based something on technology.
Speaker 1: Well, I was going to ask you to give us
Speaker 1: your overview what you are seeing internationally as well, and
Speaker 1: maybe what areas you're concerned about or what you are
Speaker 1: currently liking.
Speaker 3: So at the moment, we have had I think generally
Speaker 3: constructive view on China. We are disappointed, of course by
Speaker 3: the economic story in the last couple of months has
Speaker 3: really has been quite disappointing. And yet if you look
Speaker 3: out over a longer term, perspective. So again, maybe the
Speaker 3: next six months are tough, but if you're looking out
Speaker 3: maybe over two to three and obviously a longer term horizon,
Speaker 3: I actually think the China story is quite a constructive
Speaker 3: one again, and the reason is is that what we've
Speaker 3: learned from the Chinese government over I think the last
Speaker 3: five years but it's kind of gone a little bit
Speaker 3: behind the scenes because of COVID and the various lockdowns,
Speaker 3: is that they are aiming for a more stable economy.
Speaker 3: They don't want to have the boom bus cycle. They
Speaker 3: don't want to have an economy which is addicted to leverage,
Speaker 3: and as a result, their stimulus policies are not going
Speaker 3: to be driving incredible growth rates and then sharp drops,
Speaker 3: So we are not anticipating very significant stimnus in the
Speaker 3: second half of this year. This is a government which
Speaker 3: is aiming for fairly stable and I guess a little
Speaker 3: bit boring growth. But the benefit for an invest over
Speaker 3: the next over a year, longer term horizon is that
Speaker 3: this is a more stable economy which avoids a lot
Speaker 3: of the pitfalls and I think investors have fallen into
Speaker 3: previous years, so we do, like China, guess from a
Speaker 3: longer term perspective.
Speaker 1: Well, Sima Shaw, chief Global Strategists for Principal Asset Management.
Speaker 1: We want to thank you for coming in, but you're
Speaker 1: not free to go yet. I call this the taking
Speaker 1: our guests for hostage part of the show, because we're
Speaker 1: going to be playing some games.
Speaker 3: I think games.
Speaker 1: Yeah, I have a game for PROTECTI yes. But first,
Speaker 1: I think both of you have come very well prepared
Speaker 1: for craziest things we saw in market. So Emily, I'll
Speaker 1: have you go first.
Speaker 2: Okay, So the relatively new Amazon CEO Andy Jasse is
Speaker 2: cutting a number of projects side projects that Amazon during
Speaker 2: the Jeff Bezos era came up with. Bloomberg had an
Speaker 2: article last week about thirty seven of the projects that
Speaker 2: they have over the last few years. The craziest one
Speaker 2: I saw was Amazon Books. It was a physical bookstore
Speaker 2: by Amazon.
Speaker 1: Oh, I think I remember this.
Speaker 2: So they closed this last year, so I'm a little
Speaker 2: late to it, but I didn't see it until the
Speaker 2: article last week. But how ironic is that that Amazon?
Speaker 1: Are there any actual physical bookstores or they were just planning?
Speaker 2: They had twenty four physical bookstores and then close them down.
Speaker 1: Were any of them in New York.
Speaker 2: I'm not sure about that. I know one was in Seattle,
Speaker 2: I believe. I think that was the first one.
Speaker 1: I've still never been to one of those stores where
Speaker 1: you just grab stuff and leave.
Speaker 3: You just steal it.
Speaker 1: Yeah, you just steal? Is that what you do?
Speaker 2: Just bring a big bag? And I don't think I've
Speaker 2: ever been in one of those either.
Speaker 1: There's one across the street from us, actually from the office,
Speaker 1: and I've never been. We should go, Sima, what about you?
Speaker 3: Okay, So this one is maybe it's a little bit concerning,
Speaker 3: I think. So we know that Europe is ahead, I
Speaker 3: think with regards to the ESG discussion, maybe taken a
Speaker 3: bit of a backfoot in the US. But so recently
Speaker 3: and I saw this on the Bloomberg terminal, it was
Speaker 3: I did a bit of a double take when I
Speaker 3: saw this and ended up clicking on it. And it
Speaker 3: turns out that one of the German states, as one
Speaker 3: of the richest states, has decided that under its new
Speaker 3: ESG legislation, they are putting US treasuries on the investing blacklist.
Speaker 3: Oh because of America's failure to ratify a number of
Speaker 3: treaties anything like women's rights, controversial weapons, and probably down
Speaker 3: to the ESG perspective.
Speaker 1: Which state was it?
Speaker 3: I wish I could pronounce it. Now you're putting me
Speaker 3: on the spot.
Speaker 1: This is why I did.
Speaker 3: Yeah, but Wittemberg with an English accent.
Speaker 1: That's really interesting. I think see Must is better than yours.
Speaker 3: Sorry, I liked mine.
Speaker 2: It was an ironic business. You know, business is coming
Speaker 2: from simple mm hmm.
Speaker 1: Okay, it's time to play The Price is Precise, which
Speaker 1: I have such a hard time pronouncing. The rules are
Speaker 1: exactly the same as a little game called the Price
Speaker 1: is Right, but we can't call it that, so we
Speaker 1: call it the Price is Precise. Okay, we all know
Speaker 1: Taylor Swift has been on tour for a couple months now.
Speaker 1: I didn't get tickets, super hard to get.
Speaker 3: Did you get tickets?
Speaker 1: You're not a big Tailor Swift fan.
Speaker 3: But I want to play.
Speaker 1: I want to ask both of you to guess how
Speaker 1: much she the concert is expected to gross, and then
Speaker 1: how much she of that gross amount actually gets to keep. Emily,
Speaker 1: you go.
Speaker 2: First, Oh my gosh, I have no idea the whole
Speaker 2: like the whole tour or one single concert, the whole
Speaker 2: tour crickets, I don't know five hundred million, and then
Speaker 2: how much she.
Speaker 1: Makes how much she keeps?
Speaker 3: Fifty million? Seema, So I should do what I used
Speaker 3: to do with my brother, Just go like one dollar higher?
Speaker 1: Yeah or no? If you go over then you lose,
Speaker 1: you lose. Supposed to go one dollar lower, I think?
Speaker 1: But what if it's more like unless you're super sure?
Speaker 3: Ah, now you've made it more complicated restrategizing everything with
Speaker 3: my brother over they is. Okay, I'm going to go
Speaker 3: with four hundred and fifty million, and I reckon she
Speaker 3: makes more of it because didn't Tanna Swift take back
Speaker 3: control over all of her records. So I'm going to
Speaker 3: say she made like fifty aggressive maybe thirty percent.
Speaker 1: Is she a big deal in the UK?
Speaker 3: Oh? Yes, yeah, absolutely, Yeah. Okay, alexa Is is very
Speaker 3: much accustomed to playing test.
Speaker 1: Oh that's nice for you. Hope she gets a lot.
Speaker 3: For you, right, yea for my daughter.
Speaker 1: Okay, you were both actually very close. It's expected to
Speaker 1: grow six hundred and twenty million dollars. I tricked you
Speaker 1: a little.
Speaker 3: You did. Sorry, I had to.
Speaker 1: I had to spice it up a little.
Speaker 2: You helped me a lot.
Speaker 1: However, she's keeping five hundred million of it. Oh wow,
Speaker 1: good for her, But you guess ten billion at.
Speaker 2: First, it's early in the morning.
Speaker 1: Ten billion.
Speaker 2: Well, I know some people have been paying a lot
Speaker 2: for the tickets.
Speaker 1: Ten billion.
Speaker 3: Katie last week.
Speaker 2: Was saying the ice cream was going to cost like
Speaker 2: five hundred thousand dollars first.
Speaker 1: Oh my god. Okay, Sima, thank you so much for
Speaker 1: coming in. It's been great to have you. Thank having
Speaker 1: back on and actually see you in person too.
Speaker 3: Thank you very much.
Speaker 2: What Goes Up will be back next week and so
Speaker 2: then you can find us on the Bloomberg Terminal, website
Speaker 2: and app or wherever you get your podcasts.
Speaker 3: We'd love it if you took the time to rate
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Speaker 3: can find us, and you can find us on Twitter.
Speaker 3: Follow me at Reaganonymous, Wildna Hiric is at Fildona Hirich.
Speaker 2: You can also follow Bloomberg Podcasts at Podcasts.
Speaker 3: What Goes Up is produced by Stacey Wong. Thanks for listening,
Speaker 3: See you next time.