WEBVTT - Bloomberg Surveillance: The Back to Normal Year 0:00:05.040 --> 0:00:08.639 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:08.680 --> 0:00:12.040 with Paul Sweeney. Join us each day for insight from 0:00:12.039 --> 0:00:16.240 the best in economics, finance, investment, and international relations. You 0:00:16.239 --> 0:00:19.599 can also watch the show live on YouTube. Visit the 0:00:19.600 --> 0:00:24.360 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:24.360 --> 0:00:27.400 mornings from seven to ten am Eastern from our global 0:00:27.440 --> 0:00:32.080 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:32.440 --> 0:00:36.000 or anywhere else you listen, and always on Bloomberg Radio, 0:00:36.159 --> 0:00:39.680 the Bloomberg Terminal, and the Bloomberg Business app. This is 0:00:39.720 --> 0:00:41.680 a joy with Futures up twenty because she has a 0:00:41.760 --> 0:00:45.479 courage to be in the market. You're never going to 0:00:45.560 --> 0:00:48.360 hear her say go to cash. Alicia Lavine joins us 0:00:48.440 --> 0:00:52.559 bny mellon. Right now, I want you to talk to 0:00:52.640 --> 0:00:56.080 the people. The boats left the dock. They're not on 0:00:56.120 --> 0:00:59.640 the boat. How do you catch up into February? 0:01:00.360 --> 0:01:03.000 So my line would be, never get out of the boat, 0:01:03.400 --> 0:01:05.800 and it's never too late to get in the boat. 0:01:05.959 --> 0:01:08.800 We had a sluggish start to the year, which is 0:01:08.840 --> 0:01:11.839 great because we digested the move of the fourth quarter 0:01:12.240 --> 0:01:15.000 of twenty twenty three, and I think the market's telling 0:01:15.040 --> 0:01:19.000 you that we're normalizing or have a more normalized rate situation, 0:01:19.360 --> 0:01:22.440 normalized growth situation. You got to be in. 0:01:22.720 --> 0:01:27.040 There's quiet skew, there's a quiet within the internal dynamics. 0:01:27.560 --> 0:01:30.279 But the bottom line is it's a wall of money 0:01:30.319 --> 0:01:32.000 looking for a warm spot. 0:01:32.360 --> 0:01:35.319 Is that six trillion in money market fund? Six trillion? 0:01:35.480 --> 0:01:37.920 People are saying, oh, never go to equities. I'm like, 0:01:37.959 --> 0:01:41.040 are you kidding me? Yeah? It is. In what way 0:01:41.319 --> 0:01:42.600 will it go to equities? 0:01:42.840 --> 0:01:44.880 It'll go to equities in several ways. The first is 0:01:44.920 --> 0:01:47.560 that there was a rush to money market because of 0:01:47.600 --> 0:01:50.720 the banking crisis in March, and you had folks who 0:01:50.760 --> 0:01:53.160 stayed there because they could sleep at night and it 0:01:53.200 --> 0:01:55.800 was the easiest place to be. We've been telling our 0:01:55.800 --> 0:01:58.360 clients all last year, get out of cash. It's set 0:01:58.400 --> 0:02:01.240 to underperform over the next twelve months. So we think 0:02:01.280 --> 0:02:04.120 a lot of that angst that happens about a year 0:02:04.160 --> 0:02:06.880 ago comes into equity markets, and it should be coming 0:02:06.920 --> 0:02:09.080 to the bond market as well, because you're in a 0:02:09.120 --> 0:02:12.120 world where the Fed's not hiking and it's either going 0:02:12.200 --> 0:02:15.280 to be the same or lower going forward, and that's 0:02:15.440 --> 0:02:18.200 very positive for risk assets, bonds and equities and you 0:02:18.280 --> 0:02:20.799 got to get in. I can't tell you how much 0:02:20.880 --> 0:02:22.799 of that six trillion is coming out, but a lot 0:02:22.800 --> 0:02:26.160 of that six trillion is the expression of angst over 0:02:26.200 --> 0:02:27.720 the last year of the raid environment. 0:02:28.000 --> 0:02:30.519 So alsha, if I do want to stay in that boat, 0:02:30.560 --> 0:02:34.639 if you will, do I try to chase those be 0:02:34.800 --> 0:02:37.160 kept tech stocks that work so well in twenty twenty three, 0:02:37.280 --> 0:02:39.200 or do I say miss that boat? Let me try 0:02:39.200 --> 0:02:41.600 to find some value in other sectors. What are some 0:02:41.600 --> 0:02:42.560 of the sectors you guys like? 0:02:42.840 --> 0:02:46.120 So we have said for you know, I was here 0:02:46.440 --> 0:02:49.440 a month ago talking about about our outlook and I 0:02:49.520 --> 0:02:52.360 had this phrase, dance with the one that brought you, 0:02:52.840 --> 0:02:56.240 meaning everybody wants to go to small cap or to 0:02:56.360 --> 0:02:59.000 go or to go to international em And I say, 0:02:59.160 --> 0:03:01.760 you know what, that's probably a great trade and it'll 0:03:01.800 --> 0:03:04.240 work for three to six months, but ultimately, if you're 0:03:04.280 --> 0:03:07.040 building wealth, I want to be were Capital's street the best, 0:03:07.040 --> 0:03:09.160 and I want to be in the companies that throw 0:03:09.280 --> 0:03:11.600 off cash and don't need to borrow. 0:03:11.400 --> 0:03:14.600 All first grade Insight of the Week Alicia Levine b 0:03:14.760 --> 0:03:17.560 n Y Melon. I'm going to talk my book, folks. 0:03:17.639 --> 0:03:22.480 I can't say enough how the similarity to twenty three 0:03:23.040 --> 0:03:26.280 is there. You gotta find cash flow quality, cash slow. 0:03:26.360 --> 0:03:29.200 However you determine that. To me, it's a triple leverage 0:03:29.240 --> 0:03:31.880 all cash flo something more optimistic for you. 0:03:31.960 --> 0:03:34.200 So Alisha on the fixed income business, they actually are 0:03:34.240 --> 0:03:36.960 friends to fixing them. Actually made some returns last year 0:03:37.000 --> 0:03:40.560 after getting crushed, just crushed in twenty twenty two. What 0:03:40.600 --> 0:03:41.800 do you think about this year? We're going to go 0:03:41.840 --> 0:03:44.119 in the fix income space. I was shocked that last 0:03:44.200 --> 0:03:46.200 year the best performance was high yield. 0:03:46.120 --> 0:03:48.040 That's right, and we had no recession. 0:03:48.120 --> 0:03:52.080 Yes, I guess that's the point, but no real recession. 0:03:52.400 --> 0:03:55.440 So look, we like the belly of the curve. We're 0:03:55.480 --> 0:03:57.600 not saying go out to tenure yet. We think that's 0:03:57.640 --> 0:03:59.640 just too long in duration. We like the five to 0:03:59.680 --> 0:04:03.600 seven year range for Gouviy's right here. We do like 0:04:03.680 --> 0:04:07.040 investment grade here, that's sort of a sweet spot. We 0:04:07.120 --> 0:04:10.240 don't expect a recession, and with that you're going to have, 0:04:11.320 --> 0:04:14.320 you know, a more normalized year of returns in these 0:04:14.360 --> 0:04:15.240 asset classes. 0:04:15.840 --> 0:04:19.080 So, I mean, it's interesting. We've seen a lot of 0:04:19.120 --> 0:04:21.479 issuance this year. I mean, companies are coming to the market. 0:04:21.520 --> 0:04:24.039 So when you markets are open. Markets are open. So 0:04:24.080 --> 0:04:26.200 when the one of the first calls is to you 0:04:26.200 --> 0:04:27.840 guys at the Bank of a New York Mellon, I mean, 0:04:28.520 --> 0:04:30.200 what are you looking for in some of the new 0:04:30.240 --> 0:04:32.320 issue market here for your credit teams. 0:04:32.760 --> 0:04:35.600 Look, we're looking for cash flow, We're looking for sustainability 0:04:35.640 --> 0:04:38.400 of business. We'd like to see the debt that's been 0:04:38.839 --> 0:04:43.080 termed out and not floating rate. I just think that's 0:04:43.120 --> 0:04:45.679 just a better setup. But we like the quality businesses 0:04:45.720 --> 0:04:48.479 and the fact that the market's open for issuance is 0:04:48.520 --> 0:04:50.960 really important because it's telling you investors know that the 0:04:51.400 --> 0:04:52.880 rate fear is over. Like it's done. 0:04:53.080 --> 0:04:54.960 Let's go there. I mean, I mean, to me, the 0:04:55.040 --> 0:04:58.479 ft article over the weekend of the huge issuance coming 0:04:58.480 --> 0:05:00.479 into the market in the first two three weeks of 0:05:00.520 --> 0:05:03.440 the year is valid? Does that sustain to me? I 0:05:03.480 --> 0:05:05.640 look at these big tech companies and it's, you know, 0:05:05.680 --> 0:05:08.960 on a z V body Boston University basis, they're like 0:05:09.320 --> 0:05:11.880 breaking the rule book. I mean, they have to do 0:05:12.320 --> 0:05:13.560 debt issuance. Am I wrong? 0:05:14.279 --> 0:05:17.360 The large companies don't have to do debt issuance. They 0:05:17.440 --> 0:05:20.599 could just you know, to keep themselves floating around. But 0:05:20.760 --> 0:05:22.800 I don't think it's a necessity. I think it's just 0:05:22.839 --> 0:05:24.839 an expression that nobody wants it an issue dead Last 0:05:24.880 --> 0:05:27.920 year the markets were so tight and getting while you can, 0:05:27.960 --> 0:05:29.440 and if you have the debt then of course you're 0:05:29.440 --> 0:05:31.479 going to have M and A and they're also going 0:05:31.520 --> 0:05:34.440 to have private equity deals finally getting monetized this year. 0:05:34.800 --> 0:05:38.080 So overall it's a very good setup for markets in 0:05:38.120 --> 0:05:40.200 all parts of the capital markets. I mean a lot 0:05:40.200 --> 0:05:42.880 of things can go wrong. Yes, it's starting to smell 0:05:42.920 --> 0:05:45.600 like nineteen ninety five, right, It just it has that 0:05:45.680 --> 0:05:49.800 feel of, you know, if the Fed's cutting and QT 0:05:49.960 --> 0:05:54.120 gets tapered, okay, you have the setup for liquidity in 0:05:54.160 --> 0:05:57.000 the market, and you could have a nice bull run here. 0:05:57.400 --> 0:05:59.960 And I'll say this. You know, the market's up seventy 0:06:00.040 --> 0:06:02.359 five percent of the time since World War Two. In 0:06:02.360 --> 0:06:05.400 the years where it's up double digits, the following year 0:06:05.680 --> 0:06:07.880 seventy five percent of the time is also up double 0:06:07.920 --> 0:06:11.080 digitsank you Yeah, So you know, just because we had 0:06:11.120 --> 0:06:13.480 a great year last year doesn't mean we have aversion 0:06:13.480 --> 0:06:14.360 to the meme this year. 0:06:14.640 --> 0:06:17.360 So are you you know I'm looking at the earnings 0:06:17.360 --> 0:06:19.520 for next year because I'm an old equity analyst, and 0:06:19.560 --> 0:06:21.760 I do look at earnings. I think earnings matter. I 0:06:21.800 --> 0:06:24.920 see twelve percent, eleven twelve percent earnings growth for twenty 0:06:24.920 --> 0:06:27.839 twenty four over twenty three. Does that seem like a 0:06:27.880 --> 0:06:29.359 reasonable number. Two, we're lower. 0:06:29.400 --> 0:06:32.279 We're about eight to nine percent of earnings growth. And 0:06:32.320 --> 0:06:35.640 we've done that from bottoms up analysis with our equity team. 0:06:36.040 --> 0:06:39.160 We think that's a fair place to be. I'd rather 0:06:39.600 --> 0:06:42.359 come in estimating that than come in at twelve percent, 0:06:42.400 --> 0:06:44.200 which I think is a heavy lift. Right, it's a 0:06:44.200 --> 0:06:46.919 heavy lift. But look in the end, you know, large 0:06:46.920 --> 0:06:48.839 cab tech can pull it out. All I have to 0:06:48.880 --> 0:06:51.600 do is cut, cut some headcount and all of a sudden, 0:06:51.720 --> 0:06:54.000 earnings in the SMP is up ten to eleven percent. 0:06:54.120 --> 0:06:58.080 So they can they can really affect the metrics on this. 0:06:58.440 --> 0:07:01.800 The structure of the market and the power of the 0:07:01.800 --> 0:07:05.400 top ten companies is really without precedent. And how they 0:07:05.600 --> 0:07:07.600 they can affect the entire index. 0:07:08.080 --> 0:07:10.320 Right, How the hedgephones do this year? I mean, I'm 0:07:10.360 --> 0:07:12.800 seeing bar charts that they had their most profitable year 0:07:12.800 --> 0:07:15.040 and all that. I don't buy a lot long short 0:07:15.320 --> 0:07:17.120 shorting year is brutal. 0:07:17.280 --> 0:07:19.920 It's brutal, It's brutal. It's brutal last year because even 0:07:20.120 --> 0:07:22.679 like you probably had a great year on the short 0:07:22.720 --> 0:07:24.680 side the first ten months of the year, and then 0:07:24.760 --> 0:07:26.520 you got taken out the last two months, and that's 0:07:26.560 --> 0:07:29.320 your year, and everybody's judged every twelve months and you've 0:07:29.320 --> 0:07:32.160 got to repeat it January one. So I think it 0:07:32.200 --> 0:07:33.560 was a tough year on the short side. 0:07:33.720 --> 0:07:36.400 Yeah, I mean they're going, you know, like twenty companies 0:07:36.560 --> 0:07:39.200 guests right on Macro or whatever. Great, but everybody else 0:07:39.240 --> 0:07:39.800 got hammered. 0:07:39.840 --> 0:07:42.880 So when you talk to them, your clients here twenty 0:07:42.920 --> 0:07:45.880 twenty four, what did they say? Did they say, we 0:07:46.040 --> 0:07:50.080 kind of took too much performance into fourth quarter last 0:07:50.120 --> 0:07:51.560 year and so I need to be a little bit 0:07:51.600 --> 0:07:54.760 cautious in twenty four? Are you're trying to talk them 0:07:54.800 --> 0:07:55.880 off that sideline made? 0:07:55.880 --> 0:08:00.200 So that's always a question, ok. And then we'll say 0:08:00.280 --> 0:08:05.280 that does either market timing is impossible. If you're fundamentally positive, 0:08:05.680 --> 0:08:07.400 you should get it. And that's the first question. The 0:08:07.440 --> 0:08:09.720 second one really is always about what's going on with 0:08:09.760 --> 0:08:12.840 our political situation and the election, and a lot of 0:08:12.920 --> 0:08:14.120 our clients are angst about that. 0:08:14.280 --> 0:08:17.000 Okay, the clients do, but are you just quickly here, 0:08:17.080 --> 0:08:19.640 you really think politics plays into what I should be 0:08:19.680 --> 0:08:22.560 doing on a three and five year investment. 0:08:22.160 --> 0:08:25.760 Call, No, thank you, and that's my message, just don't 0:08:25.840 --> 0:08:27.800 let your politics get in the way of investing. 0:08:28.640 --> 0:08:30.280 Thank you so much with being Y Melton. I hope 0:08:30.280 --> 0:08:33.120 to see a lot of her in two thousand trying four. 0:08:43.240 --> 0:08:45.280 All right, let's check in with our good friend Scott Crohner. 0:08:45.320 --> 0:08:49.280 He's over there at City formerly Smith Barney and I 0:08:49.280 --> 0:08:50.880 don't know where else he was, but he's been around 0:08:51.000 --> 0:08:53.000 doing this equity thing for a long time. He's out 0:08:53.000 --> 0:08:55.920 in San Francisco. Hey, Scott, thanks so much for joining 0:08:56.000 --> 0:09:00.000 us here. Boy, what a end to twenty twenty three, 0:09:00.280 --> 0:09:02.680 And I kind of felt like boy, So we spoke 0:09:02.679 --> 0:09:05.680 to a lot of investors that maybe that really rip 0:09:05.800 --> 0:09:08.000 warring ending to twenty twenty three, maybe that took some 0:09:08.040 --> 0:09:11.000 of the performance away from twenty twenty four. How are 0:09:11.000 --> 0:09:13.320 you guys thinking about this early part of the year. 0:09:14.400 --> 0:09:15.480 So that's been our view. 0:09:15.640 --> 0:09:18.000 So you know, we thought that to your point, that 0:09:18.080 --> 0:09:20.760 the rally into the end of the year was early 0:09:20.800 --> 0:09:23.040 stages of what we think will be a bigger broadening 0:09:23.160 --> 0:09:26.839 theme for twenty twenty four away from that megacap growth 0:09:26.920 --> 0:09:29.760 leadership that looked to be unfolding, and our view had 0:09:29.760 --> 0:09:32.040 been that the Q four earnings reporting period would be 0:09:32.080 --> 0:09:36.360 your premise for that, whereby you get companies beating Q 0:09:36.440 --> 0:09:39.560 four expectations but probably being a little bit more cautionary 0:09:39.880 --> 0:09:43.360 on their full twenty three Q four expectations, but more 0:09:43.360 --> 0:09:47.559 cautionary on twenty four outlooks are still early to judge that, 0:09:47.720 --> 0:09:50.360 but what's happened in the meantime is that you've gotten 0:09:50.360 --> 0:09:53.920 to think some more generative AI support for the tech spase, 0:09:54.000 --> 0:09:57.880 which is kicked the NASDAQ one hundred into overdriving. 0:09:58.040 --> 0:10:01.000 Yeah, yeah, exactly right. And I'm wondering, you know, Scott, 0:10:02.160 --> 0:10:04.520 what are your tech guys saying over at City. I mean, 0:10:04.520 --> 0:10:07.679 how bullish are they on this AI thing? Is this 0:10:07.880 --> 0:10:11.360 really incremental? Can I really use this as an investment 0:10:11.360 --> 0:10:12.440 theme in twenty twenty four? 0:10:13.160 --> 0:10:16.640 Well, and to your point, it's a really good question. 0:10:16.800 --> 0:10:19.640 The way we're arguing it, it's consistent with what our 0:10:19.640 --> 0:10:22.839 analysts are saying is that it becomes more idiosyncratic. It's 0:10:22.880 --> 0:10:26.280 not a big seven or a magnificent seven this year 0:10:26.320 --> 0:10:28.520 as it was last year. I think you're going to 0:10:28.559 --> 0:10:32.600 see different components of that megacap growth cohort that's going 0:10:32.679 --> 0:10:36.320 to have a fundamental tail wind more directly or perhaps not. 0:10:36.600 --> 0:10:40.719 We've been arguing that software should show that semiconductors are 0:10:40.760 --> 0:10:43.079 beginning to show more signs of that, but that's not 0:10:43.120 --> 0:10:45.320 true for others of the Big seven that might be 0:10:45.360 --> 0:10:48.160 held up in let's say the auto is component of 0:10:48.240 --> 0:10:48.680 the market. 0:10:48.760 --> 0:10:50.959 So we think the point here is. 0:10:50.920 --> 0:10:55.320 That that the twenty four setup for many of these 0:10:55.360 --> 0:10:57.640 companies is one where you're. 0:10:57.480 --> 0:10:58.440 Getting the news flow. 0:10:58.480 --> 0:11:00.600 You're going to need to see it translate into fundamentals 0:11:00.640 --> 0:11:01.840 to keep these stocks working. 0:11:02.480 --> 0:11:04.640 What's interesting and Alicia Levine brought this up with bn 0:11:04.760 --> 0:11:07.839 y melon of an analog back in nineteen ninety five. 0:11:08.520 --> 0:11:10.559 It's got some of us of a certain vintage, I 0:11:10.600 --> 0:11:12.600 mean an old guy like you've seen it. Pall's too 0:11:12.600 --> 0:11:16.000 young to have seen it. But the answer is we 0:11:16.040 --> 0:11:22.320 partition into quarters, we partition into annual returns. And the 0:11:22.400 --> 0:11:26.199 reality is, you know, it's like longitude latitude on a map. 0:11:26.559 --> 0:11:30.320 They're just lines, they're just calendar dates. And the answers 0:11:30.400 --> 0:11:33.280 last year can extend into this year, can it? 0:11:34.480 --> 0:11:36.560 Well? I mean yes to that point. 0:11:36.640 --> 0:11:39.040 If you look at the two year return on the SMP, 0:11:39.880 --> 0:11:43.520 it's not very meaningful. And that's true for the Nasdaq 0:11:43.559 --> 0:11:46.000 as well. So when you go back and look at 0:11:46.000 --> 0:11:49.920 the way we've come out of the pandemic lockdowns, you know, 0:11:49.960 --> 0:11:52.440 we had the big risk on rally in twenty one 0:11:52.559 --> 0:11:56.240 twenty two, big valuation reset as we were contending with 0:11:56.280 --> 0:11:58.800 an hawkish FED, and then you know, twenty three was 0:11:58.840 --> 0:12:04.040 a combination of general of AI promise kicking in as 0:12:04.040 --> 0:12:06.800 well as more evidence that you're getting at a peaking FED. 0:12:07.280 --> 0:12:10.200 Now we're about to shift at some point this year 0:12:10.320 --> 0:12:14.480 into a more dubbish FED, and for many investors this 0:12:14.640 --> 0:12:16.320 followed the FED mantra is an. 0:12:16.160 --> 0:12:17.719 Important point, I mean. 0:12:18.000 --> 0:12:20.000 And so so I think it all kind of sets 0:12:20.080 --> 0:12:23.160 up pretty well constructively as we look into full year 0:12:23.240 --> 0:12:24.720 twenty four, perhaps beyond. 0:12:24.880 --> 0:12:27.880 I mean, Lisa, to me, it's just really really crucial 0:12:27.960 --> 0:12:30.880 that people understand that we're not slaves to the calendar. 0:12:31.040 --> 0:12:33.960 And you know, you know, I look, Lisa, at the 0:12:34.040 --> 0:12:37.120 shock of November and December last year, Up up up, 0:12:37.160 --> 0:12:40.240 We continue up, up up, and everybody's sitting on the 0:12:40.320 --> 0:12:43.320 sidelines in cash. I mean, the Mateo families, they're they're 0:12:45.200 --> 0:12:47.600 charter members. When are you going to move out of cash, Lisa, 0:12:48.160 --> 0:12:49.520 never are you kidding me? 0:12:49.720 --> 0:12:49.880 No? 0:12:50.040 --> 0:12:51.720 Giving it on to the mattress. That's it. 0:12:51.800 --> 0:12:54.320 I mean, the whole keep under the mattress thing. Paul's 0:12:54.360 --> 0:12:55.440 a scar of all this. 0:12:55.679 --> 0:12:57.640 I know, and I think pandemic. It's it's one of 0:12:57.679 --> 0:12:59.640 the you know, the bullish calls out there for a 0:12:59.640 --> 0:13:02.400 lot of so Scott, you know, I know you guys 0:13:02.600 --> 0:13:04.960 you know speak of cash. I know you guys at 0:13:05.040 --> 0:13:07.160 City have been on the forefront of kind of ETF 0:13:07.200 --> 0:13:09.600 and ETF research here and just in the last few 0:13:09.640 --> 0:13:12.880 weeks we've had that Bitcoin ETF. When you're talking to 0:13:12.880 --> 0:13:15.400 your clients out there, well, where are we now and 0:13:15.520 --> 0:13:18.160 just thinking about ETFs as a as a real option. 0:13:18.280 --> 0:13:20.000 I mean I joke to Tom that we used to 0:13:20.080 --> 0:13:22.760 spend half my life up in Boston visiting the mutual 0:13:22.800 --> 0:13:24.520 funds up there. I'm not sure we do that anymore. 0:13:24.960 --> 0:13:26.240 Where are you guys with ETFs? 0:13:27.040 --> 0:13:29.600 Well, I mean, you know, we think there's a you know, 0:13:29.760 --> 0:13:33.520 an ongoing, brave new world that keeps unfolding via ETFs, 0:13:33.559 --> 0:13:35.600 and there's this sort of a new next big thing 0:13:35.640 --> 0:13:38.800 that keeps kicking in. Gone in the days where you're 0:13:38.840 --> 0:13:43.080 just simply passively, you know, replicating underlying indexes. And in 0:13:43.160 --> 0:13:45.880 are the days where almost all the new launches now 0:13:45.920 --> 0:13:48.760 have an active spind to them. So you're seeing many 0:13:48.760 --> 0:13:52.480 of the major mutual fund complexes move into ETFs. So, 0:13:52.679 --> 0:13:55.880 you know, we think that the ETF rapper continues to 0:13:55.960 --> 0:14:00.480 expand continues to reflect the underlying entrepreneurial sphere set the 0:14:00.520 --> 0:14:03.520 markets are about. And you know, we think that that's 0:14:03.720 --> 0:14:07.239 kicking into gear. When you look at the flow dynamic. 0:14:07.960 --> 0:14:10.760 It's been mostly out of mutual funds for the past 0:14:10.840 --> 0:14:13.720 year and to mostly to the benefit of ETFs. 0:14:14.160 --> 0:14:16.000 So you know, we think this is a big deal. 0:14:16.120 --> 0:14:17.920 But we think also what you have to keep in 0:14:17.920 --> 0:14:21.560 mind is that increasingly these are the tools that are 0:14:21.560 --> 0:14:24.520 being used for the model portfolios that more and more 0:14:24.560 --> 0:14:27.280 financial advisors are best in client assets. 0:14:27.440 --> 0:14:30.840 Huge, too massive, right up. I'm going to give credit 0:14:30.880 --> 0:14:33.920 to the ft you can't remember exactly Blackrock with a 0:14:34.040 --> 0:14:37.800 massive restructuring going on there, mister Fink driving just what 0:14:37.880 --> 0:14:41.480 you heard from mister cron and it just I wonder, Paul, 0:14:41.640 --> 0:14:43.640 is a death of traditional mutual funds. 0:14:44.000 --> 0:14:44.520 I tell you what. 0:14:45.040 --> 0:14:48.160 Yeah, well, I just people want this people and Eric 0:14:48.200 --> 0:14:51.480 Belchunas you know, we try to get Belchunas into seven 0:14:51.480 --> 0:14:52.120 o'clock hour. 0:14:52.240 --> 0:14:54.120 No, No, it's just too early. 0:14:54.720 --> 0:14:55.280 He's coming up. 0:14:55.480 --> 0:14:57.520 But I mean you even see mutual funds tom converting 0:14:57.520 --> 0:14:59.920 into ETFs. It's just really an extraordinary change. I know, 0:15:00.080 --> 0:15:02.360 the research folks at City have been all over this. 0:15:02.680 --> 0:15:06.280 So Scott's we step back here kind of what are 0:15:06.320 --> 0:15:08.520 some of the sectors that you guys and your team 0:15:09.000 --> 0:15:11.400 are focusing on here for twenty twenty four. 0:15:12.240 --> 0:15:14.440 Okay, so we're playing this broadening theme. 0:15:14.480 --> 0:15:16.760 The argument has been, you know, most of last year's 0:15:16.760 --> 0:15:19.520 returns was a function of this megacap growth cohort. 0:15:19.960 --> 0:15:23.360 And the view is very simple. You can't continue to premise. 0:15:23.040 --> 0:15:25.560 A broader higher market on just that you need a 0:15:25.560 --> 0:15:29.240 broadening effect aligned with this gradual pivot in the FED 0:15:29.440 --> 0:15:32.320 and what we think is happening with fundamentals from an 0:15:32.400 --> 0:15:35.760 earning's growth perspective, our view pretty simply has been that 0:15:35.800 --> 0:15:38.080 the broadening effect has to be a key driver of 0:15:38.160 --> 0:15:41.560 future upside. We began to see that in November and December, 0:15:41.640 --> 0:15:43.560 as you saw ten year nominals come off of that 0:15:43.640 --> 0:15:46.000 five percent level. We're taking a little bit of a 0:15:46.000 --> 0:15:48.840 step back to start this year, but we think that's 0:15:48.880 --> 0:15:53.080 digesting that move. So from a sector perspective, we're saying 0:15:53.600 --> 0:15:58.320 hold growth. We're overweight tech and comfortably there, but we're 0:15:58.360 --> 0:16:01.720 suggesting other sectors such as industrials, which has been a 0:16:01.720 --> 0:16:05.520 long standing favorite of ours, and recently we went overweight financials. 0:16:05.520 --> 0:16:06.760 As ways of expressing this. 0:16:06.880 --> 0:16:10.000 Goat thirty seconds. Scut Cronner, What do you do with healthcare? 0:16:10.040 --> 0:16:12.480 It was supposed to be the darling last year. It 0:16:12.600 --> 0:16:15.400 wasn't as an ugly beginning of the year of hospital 0:16:16.200 --> 0:16:18.800 non earnings, non cash flows. What do you do with healthcare? 0:16:19.560 --> 0:16:20.080 You own it. 0:16:20.160 --> 0:16:23.640 We upgraded from an underweight which we had all last year, 0:16:23.680 --> 0:16:26.680 to market weight recently. So the fundamentals aren't perfectly there 0:16:26.760 --> 0:16:28.480 yet to get us really excited. But I got to 0:16:28.520 --> 0:16:31.400 tell you, when you look at the earnings growth setup 0:16:31.440 --> 0:16:35.160 going into twenty four, healthcare is set up to have 0:16:35.480 --> 0:16:38.720 one of the more aggressive mean reversions to the positive 0:16:38.800 --> 0:16:41.840 this year, and so we want to have healthcare exposure, 0:16:41.960 --> 0:16:42.720 no question about it. 0:16:42.720 --> 0:16:49.680 Scutt Croner, Thank you so much. With City Group, Jennifer 0:16:50.120 --> 0:16:53.160 Lee joins us. She's the beamon Capital Markets far more 0:16:53.160 --> 0:16:57.480 doing a holistic view on economics as well, Jennifer, what 0:16:57.600 --> 0:17:01.360 is your queue forour call? Mike McKee was fucking two wish? 0:17:01.880 --> 0:17:03.680 Can we do better than two wish? 0:17:05.040 --> 0:17:06.960 Ooh, I'm sorry. First of all, good morning and thanks 0:17:07.000 --> 0:17:09.000 for having me on. Actually we're a little bit lower. 0:17:09.000 --> 0:17:12.399 We're at one and a half ish for GP growth. 0:17:12.560 --> 0:17:15.000 We're actually a little bit of an upgrade for we 0:17:15.040 --> 0:17:18.000 had previously thanks to that starting of that expected retail 0:17:18.040 --> 0:17:20.280 sales number. But overall we're still seeing growth, which is 0:17:20.280 --> 0:17:23.120 pretty incredible given that we've had over five hundred basis 0:17:23.160 --> 0:17:25.840 points of great tights over the past play years. So hey, 0:17:25.840 --> 0:17:27.240 this is a good news story. 0:17:27.280 --> 0:17:28.040 I think in the. 0:17:28.080 --> 0:17:31.119 Formula, what's the distinction between say two point two two 0:17:31.160 --> 0:17:33.800 point three percent and your one point five percent A 0:17:33.960 --> 0:17:37.040 cause an investment? Is it a net export dynamic? What's 0:17:37.080 --> 0:17:40.000 the variable that gets you to be more quiet? 0:17:41.400 --> 0:17:43.119 I think it's going to be on the trade side 0:17:43.160 --> 0:17:45.000 as well, just like a little bit of a of 0:17:45.080 --> 0:17:48.880 a of a hit from net exports. Overall, Bucause investments 0:17:48.880 --> 0:17:51.080 has been a little bit lower, But I mean it's 0:17:51.119 --> 0:17:53.360 going to be all about the consumer, and that's obviously 0:17:53.400 --> 0:17:56.320 the biggest part of the US economy. So the US 0:17:56.640 --> 0:17:59.560 consumer has been driving all is momentum for now. How 0:17:59.640 --> 0:18:02.400 much they can continue doing that remains to be seen. 0:18:02.440 --> 0:18:05.080 But I mean, I feel like every quarter this year 0:18:05.160 --> 0:18:07.359 we have been bumping up our forecast. You know, it's like, oh, 0:18:07.480 --> 0:18:10.399 upgrade to grow to four to the growth pecast again 0:18:10.480 --> 0:18:13.520 with again, it's not a bad thing to do at all. 0:18:13.640 --> 0:18:16.640 And Paul, this is critical. Jennifer's nails in that it's 0:18:16.680 --> 0:18:20.280 a net export mystery. That's obviously a China mystery. Yeah, 0:18:20.560 --> 0:18:22.919 maybe a Germany flat in a back mystery. I'll let 0:18:22.920 --> 0:18:26.520 you decide. If it's an EV vehicle disaster mystery. I 0:18:26.560 --> 0:18:30.000 don't know, but she's dead on that we ignore NX 0:18:30.040 --> 0:18:31.200 on the back end of the equals. 0:18:31.240 --> 0:18:33.439 I think so. And I think Jennifer, one of the 0:18:33.440 --> 0:18:36.399 things here that I think just kind of surprises a 0:18:36.440 --> 0:18:38.800 lot of observers, including myself, is the strength of the 0:18:38.920 --> 0:18:42.439 US consumer. Here. Give us your sense of kind of 0:18:42.480 --> 0:18:45.000 where the consumer is these days and kind of what 0:18:45.040 --> 0:18:47.080 are your expectations here for twenty twenty four. 0:18:48.400 --> 0:18:50.000 So as long as the job market, i mean, Joe 0:18:50.040 --> 0:18:51.960 market is actually that it's all going to be going 0:18:52.000 --> 0:18:54.159 down with the job market and job in labor demand, 0:18:55.280 --> 0:18:57.919 you know, job growth has certainly cooled from you know, 0:18:58.040 --> 0:18:59.720 do you remember that one month which with over five 0:18:59.720 --> 0:19:02.480 hundred thousand jobs, which is obviously not sustainable. So we're 0:19:02.520 --> 0:19:05.560 going down to a slower pace of job growth, which 0:19:05.600 --> 0:19:07.640 is okay. We've got the job list rate still picking 0:19:07.720 --> 0:19:09.520 up at three point seven percent, I think is the 0:19:09.600 --> 0:19:12.520 last figure that we've had. We do have an inching higher. 0:19:12.840 --> 0:19:16.600 But overall, as long as you know, broader demand for labor, 0:19:16.600 --> 0:19:19.919