Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. We begin with our
Speaker 2: soft story, stocks rebounding from a three day global slump,
Speaker 2: Jim Carron and Morgan Stanley saying the self is a
Speaker 2: correction rather than the start of a bear market, writing,
Speaker 2: the magnitude is not unusual, but the speed at which
Speaker 2: is happening is. As long as we have a soft landing,
Speaker 2: then we think the self represents a reset of prices,
Speaker 2: a buying opportunity. But cautiously patiently, Jim joins us. Now
Speaker 2: cautiously patiently, Jim, let's get into this. If we learn
Speaker 2: more about positioning than we did about fundamentals in the
Speaker 2: last couple of days.
Speaker 3: Absolutely I think that this move in the market has
Speaker 3: a lot more to do with positioning over leverage in
Speaker 3: some cases volatility then it does the economic fundamentals. And look,
Speaker 3: you were just talking about it on the show. I mean,
Speaker 3: we have a yen carry trade that's going through, we
Speaker 3: have you know, other crowded positions. Now we have to
Speaker 3: recognize that the markets were in a period of very
Speaker 3: low volatility. I mean the Vicks you know, just a
Speaker 3: month ago was somewhere around you know, eleven or twelve.
Speaker 4: Twenty four hours ago it went.
Speaker 3: To sixty five, and effectively that is a significant move
Speaker 3: which causes people.
Speaker 4: To de risk very quickly.
Speaker 3: So many the low volatility period allowed people to build
Speaker 3: very crowded positions and actually get rewarded for them.
Speaker 4: So I think what stops this, and this.
Speaker 3: Is always the question mark, is when an asymmetry starts
Speaker 3: to appear, meaning that at there's more upside risks than
Speaker 3: downside risk, or the upside and downside risk components bounce.
Speaker 4: Where is that level in the market.
Speaker 3: It's hard to say, because, like you were saying, that
Speaker 3: there are many of these positions still probably need to
Speaker 3: get unwowed. So yes, we may have a reprieve today. Yes,
Speaker 3: we may bounce back today, but that only may give
Speaker 3: people the opportunity to sell again in order to get
Speaker 3: their positions and their volatility more squared. Even if you
Speaker 3: look at the put call ratios in the equity markets
Speaker 3: and everything, we're talking about moves. I mean you said
Speaker 3: it earlier. I mean we had nineteen eighty seven, you know,
Speaker 3: for the Nikai, you know, type of the move, and
Speaker 3: then two thousand and eight. This is like the stock
Speaker 3: market crash of eighty seven. This is a financial crisis
Speaker 3: in two thousand and eight. These are the types of
Speaker 3: moves we're having today. I don't think the economic fundamentals
Speaker 3: justify nineteen eighty seven or two thousand and eight, to
Speaker 3: justify these moves. And I think what people are looking
Speaker 3: at is they're looking at these moves and they're extrapolating
Speaker 3: from these moves a fundamental economic story. I think the
Speaker 3: fundamental component of this is very slow moving. Yes, things
Speaker 3: are slowing down, Yes, policy rates are high. Yes the
Speaker 3: Fed's likely to cut rates this year, But I don't
Speaker 3: think it necessarily derails you know where we were before.
Speaker 3: So I think that this is somewhat overdone. Doesn't mean
Speaker 3: that we can't go down. But if it does, I
Speaker 3: still think that we.
Speaker 4: Are in more of a secular bull market. This is
Speaker 4: not the.
Speaker 3: Start of a bear market, and we are going to
Speaker 3: be looking at opportunities to add to risk. In fact,
Speaker 3: what we're doing on our team at Morgan Stanley Investment
Speaker 3: Management is we are going on a you know, you know,
Speaker 3: we're creating our list right We want to shop on sale.
Speaker 3: We want to find many of the positions that we
Speaker 3: weren't able to get into that have run away from
Speaker 3: us to high prices, that might be on sale and
Speaker 3: might be looking interesting. So there are opportunities out there,
Speaker 3: but you've got to be cautious, patient, don't do it
Speaker 3: all at once.
Speaker 2: Let's unpack some of that. Then, what's some sale right
Speaker 2: now has been on sale over the last few days
Speaker 2: that you've dipped a toWin soup, but you like him
Speaker 2: as starts to.
Speaker 3: Well, I mean one of them has just been broadly
Speaker 3: the you know, the Nikai Japanese equities. I mean that,
Speaker 3: you know that's one and now we were along that
Speaker 3: now you know, don't get me wrong, I mean you
Speaker 3: know we got along that in March of twenty twenty three,
Speaker 3: so we've been riding that up quite a bit. But
Speaker 3: you know, like anything else that goes up, we weren't
Speaker 3: long enough. So you know, with some of the set back,
Speaker 3: these are things that we started to take a look
Speaker 3: at other things like some of the semiconductor stocks and
Speaker 3: and those and those sectors start to look start to
Speaker 3: look relatively interesting to us. Looking at factors, so thinking
Speaker 3: about quality. So we like to think about buying quality
Speaker 3: but at a reasonable price. So this is you know,
Speaker 3: these are balance sheet factors, strong balance sheet companies and
Speaker 3: in high quality factors, interest coverage, things like that are
Speaker 3: are still are just looking more attractive today, where even
Speaker 3: if we want to broaden out our portfolio, diversify it
Speaker 3: more away from large cap and big tech, I think
Speaker 3: that I think that there are some some good sect
Speaker 3: sgments of the market and some good quality factors that
Speaker 3: are out there that actually represent you know that you
Speaker 3: know that can actually represent an opportunity. Now, what I
Speaker 3: do think is a little bit overdone though. To fund
Speaker 3: some of this is a bit of the move in
Speaker 3: the interest rate markets. I think the bond yields have
Speaker 3: priced in, you know, FED cuts going down to four percent,
Speaker 3: maybe even maybe even three and a half percent, depending
Speaker 3: on how you want to look at it. I think
Speaker 3: the bond market has moved quite aggressively. And you know,
Speaker 3: even if you look at the bond market from point
Speaker 3: to point, if we if we look at the start
Speaker 3: of the year this year, ten year treasury yields are
Speaker 3: about four percent on January first, today they're at three
Speaker 3: eighty five.
Speaker 4: Okay, So there's.
Speaker 3: Been now clearly there's been moved up and yielding between
Speaker 3: then and now it's come back down and the speed
Speaker 3: of the move. But point to point, the bond market
Speaker 3: is actually relatively steady. It's it's giving you, it's giving
Speaker 3: you a nice little coupon, and returns are up around
Speaker 3: three percent in fixed income, which is okay, right, you know,
Speaker 3: and this is kind of what you want. But the
Speaker 3: point though there is that most of this right now,
Speaker 3: most of the return is now coming from is now
Speaker 3: coming from the yield move lower. And I think that
Speaker 3: that might be a little bit on the overdone side.
Speaker 3: So we may fund some of our equity positions by
Speaker 3: selling some of our bond positions because interest rates went
Speaker 3: down so much.
Speaker 5: And the price is appreciated quite rapidly, so okay, So
Speaker 5: if we're in the secular bowl market for equities, bonds
Speaker 5: have moved too far to three point five? What is
Speaker 5: more reasonable, Jim? What sort of an analogous trade to
Speaker 5: what you see on equities?
Speaker 3: So I mean, you know, the way that I kind
Speaker 3: of think of it is as a range type of trade.
Speaker 3: So for me, the level fifty two hundred and the
Speaker 3: S and P five hundred, you know, represents the beginning
Speaker 3: levels that you would want to start to think about buying.
Speaker 3: And the reason I say that is, I hee everything
Speaker 3: off of what I believe is a level that's more
Speaker 3: fair for equities today. If I look at the SMP
Speaker 3: of around fifty three fifty, and that's roughly nineteen and
Speaker 3: a half, you know, pe that's a nineteen point five
Speaker 3: multiple on two seventy five earnings pulling forward from twenty
Speaker 3: twenty five. So if I think about the overshoot that
Speaker 3: we've recently had, you know that went up to fifty
Speaker 3: five hundred, fifty six hundred, and I think about that
Speaker 3: more symmetrically, it tells me that fifty one fifty to
Speaker 3: fifty two hundred on the downside, from that fifty three
Speaker 3: to fifty center actually.
Speaker 4: Starts to look relatively attractive. So today it would look
Speaker 4: like we're a little above that.
Speaker 3: But like I was saying earlier, with this rally in
Speaker 3: the market, what this may do is it may give
Speaker 3: some of those positions that still needs to be unwound
Speaker 3: the opportunity to sell it to some of the strength,
Speaker 3: and they could push prices back down. But that's where
Speaker 3: the asymmetry begins around fifty two hundred, around fifty one
Speaker 3: to fifteen in the S and P five hundred.
Speaker 4: I believe the upside potential for markets relative to.
Speaker 3: The downside, even if you have a deeper correction, inequities
Speaker 3: becomes more symmetrical. So that's where I start to pull
Speaker 3: out the buy tickets. And that's what we're looking to
Speaker 3: do at this point.
Speaker 4: Now.
Speaker 3: If I thought we were in a secular bear market,
Speaker 3: and if I thought this was going to be the
Speaker 3: start of something really big now, then I wouldn't do it.
Speaker 3: I mean I would think that, you know, the downside
Speaker 3: has a lot more room to go, But that's not
Speaker 3: where we are in my view. I think we're you know,
Speaker 3: the economy is cooling, it's not collapsing. Yes, you know,
Speaker 3: earnings may start to slow as forecasts come out, unemployment
Speaker 3: great rises, there's less strength from the consumer.
Speaker 4: Certainly, that's going to be a little bit of a drag.
Speaker 3: But you know, in many cases, I still think that
Speaker 3: the jobs market is going to maintain, you know, relative strength.
Speaker 4: The people who are very bearish.
Speaker 3: On the bond, I should say, on the equity markets
Speaker 3: are people who believe that the unemployment rate is going
Speaker 3: to five six percent, right that we're going to have
Speaker 3: this major adjustment higher.
Speaker 4: There's going to be this big layoff spree that's going
Speaker 4: to come through.
Speaker 3: Right now, layoffs aren't actually showing any real meaningful acceleration, yes,
Speaker 3: you know, I mean temporary workers aren't being hired, is
Speaker 3: you know, rehired as quickly. And there is some softening
Speaker 3: in the labor market. That's good for the FAD because
Speaker 3: it lowers wages in lowering wage inflation keeps inflation down.
Speaker 3: But I don't think necessarily it's an overall collapse in
Speaker 3: the market. I view it more as a normalization, and
Speaker 3: we have to draw that distinction. Is this a significant
Speaker 3: negative change or are we just normalizing? And I think
Speaker 3: we're more or less.
Speaker 4: Normalizing at this point.
Speaker 3: But there's going to be overshoots to the downside, and
Speaker 3: I think those overshoots can represent buying opportunities.
Speaker 2: And yet, Jim, here we are. I want to squeaze
Speaker 2: this in because I think this is so important. You
Speaker 2: say that what we've learned in the last few days
Speaker 2: is we've learned more about positioning than we have about fundamentals,
Speaker 2: and I think a lot of people might agree with you.
Speaker 2: I just want to reflect on what another gym said
Speaker 2: earlier this morning over at Deutsche Bank. Jim read what
Speaker 2: a once in a lifetime GFC period could not do,
Speaker 2: and a liquid August day in twenty twenty four with
Speaker 2: one band weather related pay print for fuel did with
Speaker 2: Sumi's for a period of time yesterday. What would have
Speaker 2: happened if we'd seen a negative payroll print? Jim, I've
Speaker 2: got to ask this because I just wonder how franchile
Speaker 2: this market actually is. So if you're saying this is
Speaker 2: just normalization and nothing nefarious, I wonder what happens to
Speaker 2: this market when we do have to confront something more nefarious.
Speaker 2: Just how unstable are things?
Speaker 4: Jim, Yeah, listen, I think it's a good point.
Speaker 3: I mean, if we have a material deterioration in the data,
Speaker 3: then I would argue that, yes, I mean, maybe there
Speaker 3: is something bigger that's going on. So if I compare
Speaker 3: that to the you know, to many of the crowded
Speaker 3: positions that are likely still out there, you know, look,
Speaker 3: you know, we could have another five to seven percent
Speaker 3: downside correction. It's not uncommon to have about a ten
Speaker 3: percent correction in the equity markets. I mean, this is
Speaker 3: kind of a normal thing that you know, that happens
Speaker 3: on a regular basis. But but that you know, I
Speaker 3: think that kind of misses the point. I mean, if
Speaker 3: we start to get something inex of a twenty percent correction,
Speaker 3: that's typically.
Speaker 4: The signal where you know where a bear.
Speaker 3: Market might be starting, or there might be something bigger
Speaker 3: that's actually taking place.
Speaker 4: But right now, when you look at.
Speaker 3: Corrections eight, ten percent, eleven percent, you know, which is
Speaker 3: what we've which is what we've roughly had over the
Speaker 3: past forty eight hours, let's say, you know, Monday and Friday.
Speaker 4: This isn't something that is overly unusual.
Speaker 3: And I think that we as investors need to be
Speaker 3: patient and we need to take this in.
Speaker 4: Stride a little bit.
Speaker 3: And that's why I keep going back to this right
Speaker 3: We have to ask ourselves a fundamental question. Are is
Speaker 3: this the start of something bigger? And is this a
Speaker 3: bear market? Is that what's happening right now? Are we
Speaker 3: going to see an absolute collapse at this point in
Speaker 3: sudden stop and economic activity? Is that what's happening right now?
Speaker 3: If it's not, then I still think that the bull
Speaker 3: trend is intact and we want to be able to
Speaker 3: find places to buy.
Speaker 6: Good at Jim enjoyed this.
Speaker 2: Thank you, said Neil Data of Renmack right in the following.
Speaker 2: The time for debate is over. The FED needs to
Speaker 2: recalibrate policy now. Our call is that the FED delivers
Speaker 2: a fifty basis point cut in September, with at least
Speaker 2: another fifty basis points of cut spread across the next
Speaker 2: two meetings. Going more in September makes up for not
Speaker 2: going in July. Neil joins us now for more. Neil,
Speaker 2: I said the Fed's being cool, calm and collected. Some
Speaker 2: people watching might say cool, calm and complacent. But you
Speaker 2: say the following, and I think you note in the
Speaker 2: last week following payrolls on Friday is an important one.
Speaker 2: You said they've stepped on a nail, not a bed
Speaker 2: of nails, and you went on to say this is
Speaker 2: easy to fix, Neil, Why is this so easy to fix?
Speaker 7: Well, thanks for having me on, John. I think it's
Speaker 7: easy to fix because there's nothing structurally wrong with the
Speaker 7: US economy. Everything that ails the economy is a function
Speaker 7: of tight monetary policy. I mean, nobody's talking about a
Speaker 7: troubled asset relief program. No one's talking about a resolution
Speaker 7: trust corporation. So, you know, I think that that's important
Speaker 7: to keep in mind. What we're dealing with is simply
Speaker 7: a function of the FED keeping rates too high, and
Speaker 7: that means that lower rates can be the solution to
Speaker 7: what ails the economy. You know, I think for the
Speaker 7: FED it's important. You know, they talk about not wanting
Speaker 7: to make one data point too important, but it feels
Speaker 7: like that's what they're doing. I mean, you already see
Speaker 7: this with the debate between fifty or twenty five in September. Well,
Speaker 7: you know, if the job's number comes in strong for
Speaker 7: the for the August reading, we'll go twenty five. But
Speaker 7: if it does what it did last month, will go fifty.
Speaker 7: I mean, that's that's ridiculous. We already know the revisions
Speaker 7: to these numbers are negative, right, So whatever the number is,
Speaker 7: it's going to it's gonna be weaker, you know, in hindsight.
Speaker 7: And the unemployment rate continues to march higher, and we
Speaker 7: know that the momentum under the economy is weak, and
Speaker 7: we know that there's an asymmetry with respect to how
Speaker 7: you know, firms deal with bouts of market volatility. Higher
Speaker 7: market volatility spooks them a lot more than lower volatility
Speaker 7: makes them feel good typically, So you know, I just
Speaker 7: think they I've been saying it, they need to get
Speaker 7: on with it. But I think the longer they wait,
Speaker 7: the more they'll end up having to do, which is
Speaker 7: why I say that not only will they go fifty,
Speaker 7: but I do think they'll go at least fifty more
Speaker 7: in the final two meetings of the year. So that's
Speaker 7: sort of how I'm thinking about it. But as I say,
Speaker 7: I mean, I do think the markets will respond reasonably
Speaker 7: well to lower interest rates, and I think that that will,
Speaker 7: you know, help stabilize the economy.
Speaker 2: Credit to you, Neil, You've been calling for this for
Speaker 2: a while. I just want to pick up on an
Speaker 2: important distinction I hear from you loud and clear, what
Speaker 2: you think they should do do you think they are
Speaker 2: dependent on that job support in August on going twenty
Speaker 2: five versus fifty? Do you think it comes down to that?
Speaker 7: I mean it seems that way. Look at the Wall
Speaker 7: Street Journal this morning. You know, they had an article
Speaker 7: talking about how the next employment report is going to
Speaker 7: basically determine whether or not they go fifty or twenty five.
Speaker 7: But you know, Powell has also talked about how it's
Speaker 7: the totality of the data. What if core inflation comes
Speaker 7: out very soft in the next report for July. You know,
Speaker 7: I think that there's a reasonably good chance of that happening.
Speaker 7: Giving what we know about the deflation in cars, the
Speaker 7: cracking in housing, rental inflation, and the ongoing weakness and
Speaker 7: non housing services, there's good reason to think that we'll
Speaker 7: get another dud on core inflation. So now not only
Speaker 7: is the employment figures weakening, but core inflation is converging
Speaker 7: on to two percent more rapidly than they thought after
Speaker 7: the first quarter. So it's also about the outlook, right John,
Speaker 7: I mean, what's the upside case for why employment will
Speaker 7: pick up we get a weather bounce back. I mean,
Speaker 7: it's crazy housing is slowing. If you look at the
Speaker 7: number of new homes that have been sold that haven't
Speaker 7: been started that's down over thirty percent against last year.
Speaker 7: That's going to bleed into single family residential construction. It's
Speaker 7: unlikely that we get the kind of inventory investment rebound
Speaker 7: that we got in Q two in the back half
Speaker 7: of the year. That's going to weigh on manufacturing and
Speaker 7: total hours worked in manufacturing already slowing over the last
Speaker 7: three months, and the fact that the labor markets have
Speaker 7: slowed means what incomes are slowing, which will take some
Speaker 7: of the upward momentum out of consumer spending, which the
Speaker 7: FED has been optimistic about. So it's not about just
Speaker 7: waiting for this data to come out. It's also about
Speaker 7: thinking about what the outlook might be. You know, in
Speaker 7: my mind, the data already justify a fifty basis point move.
Speaker 7: I mean, the fact that the unemployment rate is up
Speaker 7: to four point three percent, that's thirty basis points higher
Speaker 7: than where they think it's going to be by year end.
Speaker 7: You put that into a standard kind of tail rom model,
Speaker 7: you get at least an additional sixty basis points worth
Speaker 7: of rate cuts. So it's not about just the data
Speaker 7: as it's come in. Though they keep wanting to make
Speaker 7: it about that, it's also about the economic outlook, and
Speaker 7: you know, I don't think there's really a right tail
Speaker 7: for growth. I think the distribution of risks is skewed
Speaker 7: to the downside, and it's important for the FED to
Speaker 7: neutralize those downside risks by easing monetary policy.
Speaker 5: Yet Neil mary Daily yesterday saying that risks are equal
Speaker 5: between employment and inflation. That does not sound like a
Speaker 5: woman who's ready to cut fifty basis points in September.
Speaker 7: Well, so I said, And I mean, you're right, and
Speaker 7: I do think the FED has a role to play
Speaker 7: here and trying to get on the right side of
Speaker 7: the eight ball. But what's happening in the markets? I mean,
Speaker 7: leaving aside the sort of unwind of positionings and things,
Speaker 7: I mean, the big move in yields happened in the
Speaker 7: two days following the meeting. Why because the data was weak.
Speaker 7: You know, the risks aren't balanced. As much as they
Speaker 7: want to say, this is really about them. It's not
Speaker 7: about them knowing something the market doesn't know. This is
Speaker 7: about them realizing something the market and most investors already
Speaker 7: do know. And that's why I think you know you're
Speaker 7: in this point now where if you get bad data,
Speaker 7: it's going to lead to bad market outcomes, because anything
Speaker 7: at this point that looks weak in terms of the
Speaker 7: economy will kind of fuel these bets at the Fed's behind.
Speaker 4: The curve bad news.
Speaker 7: The markets already know. The markets already know that the
Speaker 7: that the risk aren't balanced. Whether they say it or
Speaker 7: not is another matter.
Speaker 2: Just waiting for the FED to catch up. Neil, it's
Speaker 2: going to hear from you nil down to that. Td
Speaker 2: camon raising its price target on shares of Walmart eighty
Speaker 2: from seventy five, and miss Oliver Chen saying the company
Speaker 2: is well positioned to continue momentum across a leading retail
Speaker 2: tech ecosystem that stuck is up by quarter of one percent,
Speaker 2: and we're lucky. Oliver Chen's in a studio with us, Oliver, good.
Speaker 6: To see you, sir Green being here. Thanks John.
Speaker 2: Does Walmart win and everyone loses? Is that what's handling here.
Speaker 1: We're excited about Walmart because it's both defensive and offensive.
Speaker 1: On the defense side, it's a leading grosser every day.
Speaker 6: Low price is a key strategy.
Speaker 1: On the technology side, there's a lot happening to compete
Speaker 1: against Amazon, including digital marketing as well as advertising and
Speaker 1: marketplace models and platforms. So thinking about technology married with
Speaker 1: the basics of retail and features such as curbside pickup
Speaker 1: and getting a higher household income customer, and it's a
Speaker 1: low beta, defensive idea in this very choppy market.
Speaker 5: I wonder as people trade down, if they trade down
Speaker 5: even more, and how big of a thread is you know, Teamu,
Speaker 5: she In some of those kinds of names to Walmart's business.
Speaker 6: Yeah, you're bringing up a great point.
Speaker 1: So consumer discretionary, unfortunately has been in a recession for.
Speaker 6: Over a year.
Speaker 1: Timu and Sheen are spending a lot on advertising that's
Speaker 1: impacting Amazon. And the consumer discretionary trends are negative at
Speaker 1: both Walmart and Target, but it's a smaller percentage of
Speaker 1: total because Walmart is about sixty percent food. So we're
Speaker 1: watching that and that's been happening. Target is more vulnerable.
Speaker 1: Target is also less expensive at thirteen times relative to
Speaker 1: Walmart at twenty five times. But there's a revolution taking
Speaker 1: place ultra fast fashion and what these new business models
Speaker 1: are doing are something the whole retail industry is watching.
Speaker 5: Do they have the capability to catch up to that
Speaker 5: to go on these trends that seem to change week
Speaker 5: by week of what people tell you to wear on TikTok.
Speaker 1: Walmart's getting more fashionable, doing movies and upgrading the fashion.
Speaker 6: They have a huge opportunity to.
Speaker 1: Sell you more than just basics, more than just underwear
Speaker 1: and fashion. They're also upgrading private labels, so new labels
Speaker 1: like better goods as a cauliflower crusted pizza.
Speaker 6: We're just looking at that.
Speaker 1: And so we're seeing Walmart really intensely focused on merchandising.
Speaker 6: That's a big positive too.
Speaker 1: Also, they're getting a higher household income customer and we
Speaker 1: see that in our survey data too, because you don't
Speaker 1: even have to go in the store. You can get
Speaker 1: on the marketplace. You can also get Apple.
Speaker 6: Products and Burberry Goddess the fragrance.
Speaker 1: So we're seeing this whole transformation with merchandising getting more competitive,
Speaker 1: but Walmart really rising to the occasion.
Speaker 8: If Walmart is taking some of these higher end consumers,
Speaker 8: where are they leaving to go to Walmart?
Speaker 1: Well, they're taking share from many places. So I think
Speaker 1: trade down is occurring as our customers think about value
Speaker 1: and appreciate value. What's happening generally in supermarkets. It's quite fragmented,
Speaker 1: so the most pressure is at local chains and non
Speaker 1: national and others.
Speaker 2: Are we starting to see this stress migrates a high
Speaker 2: income earnest because we're starting to see some bad results
Speaker 2: from luxury and I'm not convinced it's just execution from
Speaker 2: the guccies of this world. It seems to be pretty broad.
Speaker 2: What are you seeing from the luxury pliers?
Speaker 1: Now, we're cautious, so our only big idea here is LVMH,
Speaker 1: which is a ninety billion dollar revenue company. But the
Speaker 1: big caution factors and the property market and that customer
Speaker 1: is so important. The other factor correlations are quite tight
Speaker 1: to the S and P five hundred performance. So the
Speaker 1: negative headwinds from the wealth effect on this pullback are
Speaker 1: going to be something to watch for sure. And we
Speaker 1: see weakness and bridal trends, so we're cautiously optimistic. However,
Speaker 1: we're out this morning with a note on retail's reset,
Speaker 1: and we like structural long term growth opportunities on the pullback,
Speaker 1: including LVMH, ELF beauty and Alta.
Speaker 6: Beauty has been a good sector.
Speaker 2: I'm just thinking of certain consumers, certain companies that have
Speaker 2: started to pivot to premium over the last few years.
Speaker 2: It's always heard about coming down to the pandemic and
Speaker 2: which company is going to be caught offside the demands
Speaker 2: just not going to be there.
Speaker 6: Who's vulnerable?
Speaker 1: Well, we're still watching caring. You know a lot about
Speaker 1: the Gucci brand. That's a brand and transition, and we've
Speaker 1: talked about this before. Stealth, wealth, quiet luxury.
Speaker 6: These no logo.
Speaker 1: Trends, they're really working. There's winners and losers. We're most
Speaker 1: excited about LVMH, the powerhouse brands Dior and Louis Baton.
Speaker 1: They spend ten billion dollars in marketing that really matters.
Speaker 1: And Arna really protects his brands for the long, long
Speaker 1: term with very little discounting. Gucci's a brand and transition,
Speaker 1: so we're hopeful, and Cardier we're not recommending Richemont. But
Speaker 1: hard luxury has been more timeless generally, and thinking about
Speaker 1: timelessness is a key factor of what new generations really
Speaker 1: care about.
Speaker 8: Do you like LVMH because they have a service component.
Speaker 8: It's not just luxury goods, they also have hotels.
Speaker 1: Yeah, I think the future is experiential and thinking beyond
Speaker 1: just collecting stuff. The core of the business is fashion
Speaker 1: and lever leather, but service and these fabulous stores that
Speaker 1: are much like churches around the world. To these brands
Speaker 1: are part of the magic. And luxury does have to
Speaker 1: be and offer you really that post purchase, pre purchase
Speaker 1: and the whole transaction being very special to really overpay
Speaker 1: a lot for great stuff.
Speaker 2: People not getting married. What's up with bridal trends.
Speaker 1: It's been a tough compare so Brail's been tough, and
Speaker 1: that's been tough on Tiffany.
Speaker 6: I was just going to say it all happen. I mean,
Speaker 6: people will love.
Speaker 1: Each other and get married, Thanks so much, But people
Speaker 1: are younger generations are generally getting married a little bit later.
Speaker 6: Yeah, it's something we're watching.
Speaker 1: In many ways to express love, from travel to other things.
Speaker 6: Very true. And the blueberry pound cake at Costco. We
Speaker 6: love Costco. That's another way of expressing love.
Speaker 2: People will still love each other. Thank you. All of
Speaker 2: a chance A TV count This is the Bloomberg Seventans podcast,
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Speaker 2: Business out
Speaker 6: Mm hmm