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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney, along

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Speaker 2: with Tom Keene. Join us each day for insight from

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Speaker 2: the best in economics, geopolitics, finance, and investment. You can

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Speaker 2: also watch the show live on YouTube. Visit the Bloomberg

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Speaker 2: Podcast channel on YouTube to see the show weekday mornings

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Speaker 2: or anywhere else you listen, and as always on Bloomberg Radio,

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Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app. All right,

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Speaker 2: let's go to a pro here. Quincy Crosby, chief Global

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Speaker 2: strategist at olpl Financial. Quincy, thank you so much for

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Speaker 2: joining us here. What do you make of what transpired

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Speaker 2: from the close on Thursday to where we are here?

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Speaker 3: Well, you know, you could attribute it to the.

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Speaker 4: Unemployment number jumping. Its skipped four point two, went right

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Speaker 4: to four point three. Expectations were that it would remain

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Speaker 4: at four point one, and there have been concerns. Even

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Speaker 4: Powell mentioned at the press conference that they are I

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Speaker 4: don't know if you use the word monitoring, but it

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Speaker 4: was close to that the employment landscape, and he has

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Speaker 4: been invoking the maximum employment mandate over and over again

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Speaker 4: over the last month or two months. And now he's

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Speaker 4: got a situation in which the market believes that the

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Speaker 4: push in the unemployment rate, which in and of itself

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Speaker 4: isn't But he even talked about four point one was

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Speaker 4: still a strong, a resilient labor market. While we jump

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Speaker 4: up to four point three. The question is is this

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Speaker 4: the harbinger of a labor market that is going to

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Speaker 4: weaken at a faster clip, because that's what the historical

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Speaker 4: pattern suggests that once you start moving up higher, it

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Speaker 4: continues to move up higher. The other thing with the

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Speaker 4: initial unemployment claims and also the continuing claims, and that

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Speaker 4: is worrisome because you can argue about the participation rate

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Speaker 4: all of that, but when you see that people cannot

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Speaker 4: get jobs, it's harder and harder for them to get jobs.

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Speaker 4: You have to look at this employment landscape and wonder

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Speaker 4: is there something deeper going on? And you don't have

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Speaker 4: to be a PhD economist to figure it out. Yes,

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Speaker 4: there is.

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Speaker 3: Companies may not be late.

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Speaker 4: So therefore you had that and that was by the way,

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Speaker 4: in conjunction with the manufacturing ISM manufacturing report that has

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Speaker 4: been deteriorating. Even at a faster clip. Today we'll have

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Speaker 4: a bigger picture on the services you.

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Speaker 5: Have to get those ISM services at ten o'clock, which

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Speaker 5: I love that indicator as well. You know, it didn't

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Speaker 5: take Wall Street banks a lot to jump on this.

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Speaker 5: I mean, within like hours we got GP Morgan, we

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Speaker 5: have City Look, fifty basis point cuts for September and November,

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Speaker 5: and then twenty five basis point cut in December. Other

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Speaker 5: banks sort of added on to that, is are those

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Speaker 5: kind of calls justified?

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Speaker 4: They'll only be justified if the numbers continue to deteriorate.

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Speaker 4: You know, the mart the market has wanted as you know,

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Speaker 4: what was it seven rate cuts this year. They're lucky

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Speaker 4: and then they thought, oh, maybe we'll get one in September.

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Speaker 4: But the fact of the matter is that finally they

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Speaker 4: have an economic rationale for suggesting that the FED has

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Speaker 4: got to come in and offer more help, and the

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Speaker 4: Fed is going to have to do it. The worry is,

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Speaker 4: and you know, I don't need to be looking at

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Speaker 4: what they did wrong at the beginning. They waited too

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Speaker 4: long to raise rates and then they are looking as

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Speaker 4: if they're behind the curve already.

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Speaker 2: Emergency rate cuts. Put that into context. When do they happen?

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Speaker 2: Why do they happen? Should should emergency rate cut be

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Speaker 2: on the table?

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Speaker 4: Well, it should always be on the table, and it

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Speaker 4: is always on the table because the fake could come

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Speaker 4: in at any time to raise race or cut race.

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Speaker 4: And I think if they do see that the unemployment

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Speaker 4: rate is going to rise again, if we start to

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Speaker 4: see a host of data releases that suggest even more deterioration,

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Speaker 4: such as what we're going to have this morning with

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Speaker 4: the ISM service sector report, they may have to do that.

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Speaker 4: They don't want to do that. There's always a suggestion,

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Speaker 4: now this is what's ironic, that it'll scare the market.

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Speaker 4: We'll take a look at the market today, take a

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Speaker 4: look at it on Friday. The market is already scared.

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Speaker 4: They're not going to cave unless they really believe that

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Speaker 4: they are behind the curve. And the other thing is

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Speaker 4: there are rumors that at the last FED meeting there

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Speaker 4: were those who suggested that they needed to cut rates

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Speaker 4: at that meeting. The Fed is waiting an awfully long

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Speaker 4: time until September eighteenth. The market is clearly not waiting

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Speaker 4: that long.

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Speaker 5: So that brings the question into the actual market action.

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Speaker 5: If you look at the S and B futures, we're

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Speaker 5: down by three percent, NASA future is off by over four.

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Speaker 5: I mean, it's ugly, right, And this raises the question

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Speaker 5: of selling. The gets selling, like once you trigger stops,

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Speaker 5: then you have to sell more. You have a systemic

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Speaker 5: funds that'll come in at nine point thirty when the

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Speaker 5: cash market opens, and they're going to have to be

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Speaker 5: selling more like CTA's. You have the en carry trade unwinding.

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Speaker 5: How much of that is playing in versus the fundamentals?

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Speaker 4: Well that you know this is this is the This

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Speaker 4: is the basic argument, because you can make an argument

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Speaker 4: on both sides of the equation. Right now, the labor

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Speaker 4: market with the numbers that we have, suggest that there

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Speaker 4: is still some resilience. The fact that the GDP report

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Speaker 4: for the second quarter, the first streat came in at

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Speaker 4: what was a two point eight percent, the fact that

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Speaker 4: consumers continue to spend. But the question is the market

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Speaker 4: is supposed looking ahead. That's the market's job. And by

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Speaker 4: the way, I should point out that the economists of

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Speaker 4: the FED should also be looking ahead, because that's the

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Speaker 4: a in this job as well. And then the concern

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Speaker 4: is that again selling begets selling, buying begets buying. That's

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Speaker 4: the way it is, you know, margins, margin calls are

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Speaker 4: coming in. It creates a war text of the Vix

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Speaker 4: climbing higher. We haven't seen the Vix climb this hire

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Speaker 4: in a long time. But the fact of the matter

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Speaker 4: is the FED is going to be very careful about

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Speaker 4: coming in and suggesting that we need an emergency move. However,

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Speaker 4: I do want to point this out. I will never

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Speaker 4: forget a Christmas Eve on twenty eighteen, as that market

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Speaker 4: just tanked and the FED that that December meeting raced

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Speaker 4: rates suggests that we would have rate hikes in twenty nineteen.

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Speaker 4: The first Friday in January, the FED called it off.

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Speaker 4: Remember that before the market opened, right, Fed's going to

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Speaker 4: be patient.

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Speaker 2: End of story, all right, Quincy, fantastic perspective. Thank you

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Speaker 2: so much for joining us, Quincy Crosby. She's the chief

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Speaker 2: global strategist for LPL Financial Boy, the economic narrative really

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Speaker 2: seemed to pivot on Friday, with that weeker than expected

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Speaker 2: jobs data really calling into question the health of the

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Speaker 2: US economy and of the US consumers. Let's get some

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Speaker 2: color on that right now. We can do that with

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Speaker 2: Angie Solonk, National director of Retail Services for the US

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Speaker 2: at Collier's. Angie, thanks so much for joining us here.

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Speaker 2: What's your view aerie of kind of the US consumer

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Speaker 2: right now?

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Speaker 6: You know, it's really interesting when we look at the

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Speaker 6: US consumer. I mean we've actually seen a slight you know,

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Speaker 6: gain compared to June twenty four to twenty three by

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Speaker 6: two point three percent, although from prior month it's been

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Speaker 6: relatively unchanged. Now I'm forecasting or we're forecasting at two

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Speaker 6: percent at your end, and we're trying to kind of

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Speaker 6: put our wrap our hands, you know, around what's going

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Speaker 6: on the consumer. Paul, I'll just let you know. You know,

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Speaker 6: we're really seeing the consumer having so much convenience and

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Speaker 6: ease of shopping with online or in store. I mean,

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Speaker 6: it's really a frictional less type of shopping experience, so

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Speaker 6: they're spending more.

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Speaker 3: All right.

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Speaker 2: So I'm not into this back to school thing because

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Speaker 2: my kids are grown. But my youngest he's gonna be

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Speaker 2: starting a sophomore year in college and we bought him

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Speaker 2: his first suit yesterday. So that is my back to

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Speaker 2: school shopping scenario. But Angie, I know it's a thing

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Speaker 2: for the retail space. Back to school. How's that looking

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Speaker 2: so far?

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Speaker 7: It's looking actually quite well.

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Speaker 6: You've actually seen an early start to back to school,

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Speaker 6: so right now it's about eight percent of compared to

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Speaker 6: what we've seen in the past. And I think people

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Speaker 6: are refreshing their closets, just like your son with this suit.

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Speaker 6: I mean, people are taking pride in what they're wearing.

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Speaker 5: Do you feel like we're going to see a value

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Speaker 5: war though for back to school? Similar to say fast

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Speaker 5: food chains like McDonalds, Burger King, Wendy's. It's all about

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Speaker 5: that value, right, how's that transmitting itself into the retail space.

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Speaker 6: Definitely, You're you know, you're still seeing value. Look, there's

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Speaker 6: still a discrepancy as it relates to wage in job

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Speaker 6: growth and unemployment. So people are still managing their funds,

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Speaker 6: they're being conscientious, they're taking their time and understanding how

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Speaker 6: much to buy, where to buy, and how much time

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Speaker 6: they're spending. So there is a value driven component, but

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Speaker 6: there still is that middle class and higher income you know,

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Speaker 6: where they're still spending and not thinking too much about it,

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Speaker 6: you know, So there is still that hyper spend occurring.

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Speaker 2: How about it? Some of it at the lower end.

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Speaker 2: I'm thinking some of the dollar stores, how do they

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Speaker 2: fare in this environment where again we really see a

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Speaker 2: disparity in income and a disparity in retail spending, savings

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Speaker 2: rates at credit card delinquencies. How are the dollar stores

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Speaker 2: kind of seeing business today?

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Speaker 7: I think they're asally going to do quite well.

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Speaker 6: You know, with some changes that we've seen with ninety

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Speaker 6: nine cent store closing, there's still a need and therefore

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Speaker 6: you're going to see them actually kind of rechange their

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Speaker 6: merchandise and their product mix.

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Speaker 7: And their stores.

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Speaker 6: So with that, there will be an increase in terms

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Speaker 6: of their the people going into that store spending because

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Speaker 6: at this point, you know, with the ninety nine cent

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Speaker 6: no longer around, people have nowhere to go other than

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Speaker 6: they're going to maybe shop into the targets and walmarts.

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Speaker 6: But that ninety nine cent store and that dollar store

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Speaker 6: is still bringing value. So you're still able to buy produce,

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Speaker 6: You're still able to get you know, quick, you know,

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Speaker 6: grab and go items, batteries, household goods, napkins, et cetera.

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Speaker 6: So I think there's still definitely going to be an

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Speaker 6: increase foot traffic in those types of value stores.

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Speaker 5: What would you be telling what area of retail has

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Speaker 5: the most problems and how would you tell them to

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Speaker 5: solve that problem right now?

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Speaker 6: You know, when you look at retail overall, you know,

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Speaker 6: the grocery sector has been pretty steady. And what I

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Speaker 6: really have noticed in terms of the grocery spend is

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Speaker 6: that it's been seen in actually a very you know

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Speaker 6: slide increase about one point seven percent. And so when

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Speaker 6: you stop and think about that, it has to do

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Speaker 6: with a the cost of the product and the goods

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Speaker 6: within the stores. Also, I think if you're stopping think

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Speaker 6: about it, you can go into a quick service. Yes,

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Speaker 6: it's a little more expensive in terms of you know,

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Speaker 6: the per person spend, but if you look at that

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Speaker 6: versus you know, grocery, cooking at home, making your meals,

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Speaker 6: doing the dishes, all of that, it might be a

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Speaker 6: little more convenience. So, you know, the quick serve restaurants,

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Speaker 6: the fast food restaurants, although seeing a bit of a slowdown,

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Speaker 6: it's still you know, there's still seeing.

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Speaker 7: Quite a bit of pace.

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Speaker 6: We're actually from a retail perspective, in terms of leasing,

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Speaker 6: we're actually seeing more quick service restaurants looking for space,

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Speaker 6: looking to expand, So it hasn't slowed down in that part.

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Speaker 6: But I would say groceries starting to still trying to

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Speaker 6: figure itself out.

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Speaker 2: About luxury. We've seen some of the luxury retailers report

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Speaker 2: some sluggish results of the most recent quarter, citing in part,

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Speaker 2: you know, the sluggish Chinese economy and lack really of

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Speaker 2: outward bound travel by Chinese. How's the luxury space look

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Speaker 2: to you?

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Speaker 7: It has slowed down.

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Speaker 6: I would say that it's slowed down if you're comparing

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Speaker 6: it to kind of the peak we had, you know, right,

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Speaker 6: you know, during COVID and slightly after that. I wouldn't

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Speaker 6: say it's completely you know, it's less than twenty nineteen.

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Speaker 6: It's it's still you know, ramping, it's still in I

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Speaker 6: would say, you know, maybe fifteen to twenty percent from

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Speaker 6: twenty nineteen. So we are seeing a slowdown there. Definitely

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Speaker 6: has been a slowdown. As it relates to just the overseas.

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Speaker 6: I think people are still looking at luxury. They've kind

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Speaker 6: of spent during the last few years and of you know,

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Speaker 6: kind of identified and purchased what they needed. So we

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Speaker 6: are seeing a bit of that occurring at the moment.

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Speaker 6: And also I think we're seeing, you know, kind of

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Speaker 6: that Chinese Asian consumer going elsewhere to spend in luxury.

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Speaker 7: Maybe not in the US.

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Speaker 5: That's interesting, Yeah, exactly like Chinese going to Japan. I

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Speaker 5: think because of that exchange rate, you have to wonder

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Speaker 5: what happens at the last couple of days. But I

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Speaker 5: want to just I know this might be a little

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Speaker 5: off field for a second, but in terms of EVS,

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Speaker 5: we've had a lot of the Carmakers report, and it's

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Speaker 5: been really ugly out there, particularly when it comes to

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Speaker 5: sales weather in China or in Europe when it comes

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Speaker 5: to EVS. However, can retailers though capitalize on this shift

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Speaker 5: that we are eventually going to see.

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Speaker 6: I would say yes for a couple of reasons. So

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Speaker 6: what was really interesting when we started digging into these

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Speaker 6: numbers was when we saw that foot traffic, so the

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Speaker 6: actual footfall in stores was starting to you know draw

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Speaker 6: We started to dig why why is this happening? This

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Speaker 6: is really for your large major you know retailers, big

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Speaker 6: box retailers. Well, because they made it so easy to

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Speaker 6: shop online, pickup in store, curbside pickup et cetera. They

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Speaker 6: started to notice that people were not spending as much

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Speaker 6: time in the store. So by putting a or getting

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Speaker 6: involved in that kind of retail or EV sector, you're

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Speaker 6: really creating another reason for that consumer to come into

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Speaker 6: the store and spend more time.

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Speaker 7: So it's not a fifteen minute in and out.

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Speaker 6: But if I'm charging my car, if you have an

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Speaker 6: EV car or vehicle, you can actually go in and

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Speaker 6: you're going to you know, you may start buying things

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Speaker 6: that you didn't even think about. So you're spending thirty minutes,

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Speaker 6: forty five minutes, or even an hour in a store,

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Speaker 6: you're going to be accumulating just things to purchase.

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Speaker 7: So I think it's a little bit of that.

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Speaker 6: Plus it could be another additional revenue channel. They may

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Speaker 6: be able to advertise specials. If you're sitting in your

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Speaker 6: car charging your car and waiting, you might see something

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Speaker 6: that pops up that's going to drive you into the

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Speaker 6: store to make a purchase.

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Speaker 2: Angie, thanks so much for joining us. Always appreciate getting

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Speaker 2: your thoughts on the retail side of the business. Anchie Slank,

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Speaker 2: National director of Retail Services for the United States for

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Speaker 2: Colliers Lissa Auto Joints is here, head of TMT Research,

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Speaker 2: simply Global Visible Alpha. Melissa, we're just hearing Lissa Miteo

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Speaker 2: rattle off some of these pre market trading numbers for

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Speaker 2: somebody's big tech names like Apple, like Nvidia. Are these

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Speaker 2: entry points? I think if you had told somebody, you know,

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Speaker 2: Thursday afternoon, hey, I can give you in Nvidia thirty

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Speaker 2: percent off its recent highs, I think most of the

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Speaker 2: people in the mark would jump at that opportunity. You

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Speaker 2: have that opportunity here pre market. What do you think

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Speaker 2: about some of these big tech names?

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Speaker 1: Melissa, good morning, Thank you. It's a wild one on

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Speaker 1: this Monday morning. You know, it's all about expectations, and

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Speaker 1: Nvidia is certainly a company that has very high expectations.

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Speaker 1: So it's critical to believe in the direction of that

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Speaker 1: company and where it's going. And the Blackwell series is

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Speaker 1: expected over the next couple of years to generate sales

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Speaker 1: of over one hundred million dollars one hundred billion dollars,

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Speaker 1: so you know, ultimately the company has to deliver on

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Speaker 1: those fundamentals for the expectations to meet where they are.

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Speaker 5: So does that mean that if we have reports there

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Speaker 5: were reports that in Nvidia had some production delays. Okay,

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Speaker 5: if they can't produce the stuff, even if the demand

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Speaker 5: is there, they can't book the revenue. So could part

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Speaker 5: of the Sellouf and Nvidia actually be fundamental at this

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Speaker 5: point or no, it may be.

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Speaker 1: I mean, we haven't had an official statement from the

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Speaker 1: company to verify that, but that that's certainly something that

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Speaker 1: could impact their numbers.

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Speaker 2: Let's just kind of look into review mirror just a

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Speaker 2: little bit here some of the recent earnings we've had

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Speaker 2: out of some of the tech folks. Apple generally in line, Microsoft, Amazon, Alphabet, Netflix,

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Speaker 2: I don't know. I mean, I guess this smidge disappointing

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Speaker 2: me a little bit. What do you make of the

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Speaker 2: earnings of these big tech names.

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Speaker 1: It's again it goes back to expectations coming into the quarter.

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Speaker 1: Expectations were high about both what the companies were going

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Speaker 1: to deliver and what the outlooks were going to be like.

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Speaker 1: So companies, in order to generate an additional leg of

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Speaker 1: alpha to justify the valuations and what's actually priced into

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Speaker 1: the stock, companies needed to exceed that. And if they're not,

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Speaker 1: then it's disappointing to the market, it's disappointing to investors

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Speaker 1: and they will look for opportunities elsewhere where they can

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Speaker 1: get a better valuation and more upside.

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Speaker 5: How do you think technology companies need to relate to

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Speaker 5: the market their capex investment versus their profitability? Like Meta

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Speaker 5: clearly did a good job of that, Like they show

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Speaker 5: that AI was helping to impact the amount of money

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Speaker 5: they could make per ad that they sold. How do

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Speaker 5: other companies that don't have that avenue deal with that?

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Speaker 3: Yeah?

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Speaker 1: Absolutely, This cash dimension to the megacaps is an absolutely

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Speaker 1: critical one because we've been in an environment where rates

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Speaker 1: have been rising. So if you're sitting on cash, your

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Speaker 1: cash is getting a really nice return. So it gives

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Speaker 1: companies a lot more freedom to invest it, and it

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Speaker 1: makes that cash flow potential a lot stronger. And the

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Speaker 1: megacap tech companies have enormous cash positions. So now in

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Speaker 1: an environment where that is potentially reversing, coupled with the

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Speaker 1: fact that they're accelerating capex, it presents some interesting questions

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Speaker 1: about what their cash flow positions are going to look

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Speaker 1: like over the next twelve to twenty four months.

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Speaker 2: So, Melissa, given some of the pullback we've seen in

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Speaker 2: some of these tech names, what are some of the

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Speaker 2: best opportunities in your coverage universe.

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Speaker 3: Overall.

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Speaker 1: One of the things we're looking at really carefully is

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Speaker 1: what is going to really trigger broad adoption of generative AI.

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Speaker 1: We know there's an an AI revolution out there happening,

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Speaker 1: but there needs to be a trigger point where these

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Speaker 1: companies are either internally adopting generative AI in a way

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Speaker 1: that's giving them a competitive advantage, or they're crafting and

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Speaker 1: creating an application that is going to revolutionize the way

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Speaker 1: users enterprises interact and become more productive. So that is

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Speaker 1: really the critical nexus point. I think, you know, where

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Speaker 1: we're looking at what companies are actually going to be

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Speaker 1: doing that, And that's really I think where we are

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Speaker 1: with the generative AI revolution right now and where megacap

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Speaker 1: and just tech stocks in general really are going going

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Speaker 1: into the second half of the year and next year.

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Speaker 5: So anecdotally, let me tell you the story. So yesterday,

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Speaker 5: my best friends moving to Costa Rico or their family

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Speaker 5: for a year. So it's like a going away party,

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Speaker 5: YadA YadA. One of my friends is a consultant. One

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Speaker 5: of my other friends also has deeply involved in the market,

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Speaker 5: and guess what the conversation was between the two of them, Yes,

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Speaker 5: how much AWS comprises their budget and how much that's

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Speaker 5: going to continue to go with AI and doubt that

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Speaker 5: they're really going to see the benefit of that kind

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Speaker 5: of money. And I'm wondering that at what point to customers,

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Speaker 5: Like one of my friends pushes back and says, you

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Speaker 5: know what, Amazon Web Service, I'm not going to pay

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Speaker 5: you that money. I don't want to do that. I

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Speaker 5: don't see the benefit to AI in that sense.

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Speaker 1: That's a million dollar question. I mean, Amazon was an

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Speaker 1: interesting one this quarter because their AWS business was very robust.

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Speaker 1: It was it basically carried the whole company. It beat

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Speaker 1: the quarter, and it had a strong outlook. Their margin

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Speaker 1: beat by over three hundred basis points. There was an

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Speaker 1: adjustment in there of two hundred basis point, but still

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Speaker 1: it came in over thirty five percent. But when we

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Speaker 1: look at the other side of the Amazon's story on

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Speaker 1: the North America retail margin that came in soft. That

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Speaker 1: business coming into the quarter was expected to generate a

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Speaker 1: five point nine percent margin, but it came in a

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Speaker 1: five point seven percent, and the company said, well, you know,

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Speaker 1: as we look out at our guidance, we you know,

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Speaker 1: kind of don't really see the profitability coming in that strong,

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Speaker 1: and it actually came in below where the consensus was.

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Speaker 1: Consensus was about fifteen point seven billion dollars in operating

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Speaker 1: profit and they're the top of their range was around

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Speaker 1: fifteen billion. So it was like, whoa wait a second.

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Speaker 1: You know, you know you've got AWS doing really well,

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Speaker 1: but what else is in there that's potentially diluting it?

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Speaker 1: Or is AWS to your point, potentially slowing down a

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Speaker 1: little bit, or we're not seeing the profitability that we

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Speaker 1: have been seeing.

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Speaker 2: All right, this is a lot to think about here

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Speaker 2: in the big tech space. Melissa Auto, head of TMT

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Speaker 2: Research sp Global Visible Appha, we need some perspective on

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Speaker 2: this market in a big way. With some of those

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Speaker 2: futures readings at least was just reporting. And for that

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Speaker 2: we go to the lawn in Charlottesville, Virginia, Lori calvacin

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Speaker 2: ahead of US Equity Strategy RBC Capital Markets. If you

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Speaker 2: know what that means, you know, Laurie, what do you

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Speaker 2: make of the last couple of trading days here in

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Speaker 2: the futures market here today? The market kind of turned

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Speaker 2: on a dime there on that Job's number.

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Speaker 3: It did look I think the biggest takeaway we have

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Speaker 3: right now is people like Tom Keane going on vacation.

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Speaker 3: I think everyone's going to be afraid to take vacation

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Speaker 3: in August now. But I think the reality is that

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Speaker 3: we have to take the last couple days in context,

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Speaker 3: and that's what we really tried to remind people of

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Speaker 3: in our Weekly this morning. We're not sitting here saying

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Speaker 3: recession fears didn't escalate, that there weren't some signals in

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Speaker 3: the jobs report, in the ism report on Thursday, but

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Speaker 3: we do think people need to bear in mind that

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Speaker 3: we had I think I came up with like six

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Speaker 3: or seven different reasons that market should be selling off

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Speaker 3: right now. This includes valuations that were full, a tendency

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Speaker 3: for the stock market to sell off after first rate cuts,

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Speaker 3: a curse, and maybe we're pulling that forward. We had

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Speaker 3: extremely elevated positioning on the CFTC data for US equity futures,

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Speaker 3: Nasdaq futures S and P futures. Aai I was sending

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Speaker 3: us a cell signal. The last couple of weeks. We've

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Speaker 3: got the election, where dynamics are shifting that typically produces

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Speaker 3: a pullback in September, and maybe we're pulling that up.

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Speaker 3: And by the way, markets have been correlated with Trump

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Speaker 3: and now he's lagging behind Harris. So there's a lot

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Speaker 3: of stuff going on. And by way, add the facts

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Speaker 3: that seasonality the last five years has been really really

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Speaker 3: poor time to be in the stock market August through October,

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Speaker 3: I think, including specifically twenty twenty two and twenty twenty three.

435
00:23:40,880 --> 00:23:43,119
Speaker 3: So there have been a lot of reasons this market

436
00:23:43,160 --> 00:23:45,560
Speaker 3: has needed to take a bit of a pullback in here.

437
00:23:46,000 --> 00:23:48,400
Speaker 5: So Lorii, it's Alex and I love reading all your notes,

438
00:23:48,480 --> 00:23:50,440
Speaker 5: is like first must read on Monday. Got to set

439
00:23:50,480 --> 00:23:53,360
Speaker 5: you up right. When does though, a healthy correction become

440
00:23:53,359 --> 00:23:54,320
Speaker 5: an unhealthy one?

441
00:23:56,040 --> 00:23:58,160
Speaker 3: So I think the biggest thing I'm worried about in here,

442
00:23:58,200 --> 00:24:00,560
Speaker 3: and I'm trying to tell everybody keep it calm head today,

443
00:24:00,680 --> 00:24:02,639
Speaker 3: Like I do think we need to dig into the

444
00:24:02,640 --> 00:24:05,880
Speaker 3: BLS report a bit more, you know, find out exactly

445
00:24:05,880 --> 00:24:08,760
Speaker 3: what the weather impact was there. But I do think

446
00:24:08,800 --> 00:24:11,600
Speaker 3: that the rule of thumb I always use is five

447
00:24:11,640 --> 00:24:13,920
Speaker 3: to ten percent is a typical correction if you look

448
00:24:13,960 --> 00:24:16,280
Speaker 3: from peak, So that would kind of take us down

449
00:24:16,280 --> 00:24:18,359
Speaker 3: to sort of the fifty one hundred marks. We have

450
00:24:18,359 --> 00:24:21,080
Speaker 3: to watch markets closely in here. If you look at

451
00:24:21,119 --> 00:24:23,760
Speaker 3: sort of the ten to twenty percent range, that's typically

452
00:24:23,840 --> 00:24:26,000
Speaker 3: you know, in the coast GFC world where the growth

453
00:24:26,080 --> 00:24:27,280
Speaker 3: scares settle in.

454
00:24:27,400 --> 00:24:27,520
Speaker 4: Now.

455
00:24:27,560 --> 00:24:29,880
Speaker 3: Twenty twenty two was a little bit different. It wasn't

456
00:24:29,880 --> 00:24:32,840
Speaker 3: a recession. We fell twenty five percent, but generally anything

457
00:24:32,840 --> 00:24:35,159
Speaker 3: more than twenty percent is an actual recession. And I

458
00:24:35,160 --> 00:24:38,399
Speaker 3: think one of the reasons why it's so jarring, you know,

459
00:24:38,480 --> 00:24:41,119
Speaker 3: kind of the move from Wednesday to Thursday Friday, is

460
00:24:41,119 --> 00:24:43,800
Speaker 3: that if you go back to corporate earnings and equity investors,

461
00:24:43,800 --> 00:24:45,920
Speaker 3: we've all had our heads stuck in these corporate reports

462
00:24:46,000 --> 00:24:48,359
Speaker 3: the last couple of weeks. What we're seeing in that

463
00:24:48,440 --> 00:24:51,200
Speaker 3: jobs data, it's not really syncing up with what we're

464
00:24:51,240 --> 00:24:53,359
Speaker 3: hearing from companies right now. So I do think we

465
00:24:53,440 --> 00:24:55,360
Speaker 3: need to sort of take it one step at a time.

466
00:24:55,400 --> 00:24:57,800
Speaker 2: In here, Llie, what do you think the Federal Reserve

467
00:24:57,880 --> 00:25:00,160
Speaker 2: is going to do here? There were some discussion over

468
00:25:00,200 --> 00:25:03,680
Speaker 2: the weekend, maybe an emergency rate cut. What do you

469
00:25:03,680 --> 00:25:04,560
Speaker 2: think they're going to do here?

470
00:25:06,200 --> 00:25:08,080
Speaker 3: So I have no idea, you know, I think we

471
00:25:08,119 --> 00:25:10,159
Speaker 3: have to talk to the rates crop, we have to

472
00:25:10,200 --> 00:25:12,200
Speaker 3: talk We have to talk to some of the reporters,

473
00:25:12,200 --> 00:25:13,680
Speaker 3: but the true that they don't. And you know, I

474
00:25:13,720 --> 00:25:16,800
Speaker 3: get a little bit of frustrated with the fed guessing

475
00:25:16,840 --> 00:25:18,920
Speaker 3: game that people play on Wall Street all the time.

476
00:25:19,000 --> 00:25:21,000
Speaker 3: I think, you know, they're looking at data, they're trying

477
00:25:21,000 --> 00:25:23,159
Speaker 3: to make the best decisions that they can. But what

478
00:25:23,200 --> 00:25:24,879
Speaker 3: I can tell you if this question has come up

479
00:25:24,920 --> 00:25:28,000
Speaker 3: a few times since Friday, and even frankly since the

480
00:25:28,000 --> 00:25:31,359
Speaker 3: CPI report, that's when my rate strategist was telling me

481
00:25:31,400 --> 00:25:34,359
Speaker 3: he was first getting questions about fifty basis points. And

482
00:25:34,400 --> 00:25:35,719
Speaker 3: you know, I kind of went and dug up some

483
00:25:35,760 --> 00:25:39,080
Speaker 3: of my work from SVB, looked through some of my files,

484
00:25:39,080 --> 00:25:41,119
Speaker 3: and we found that in at least kind of my

485
00:25:41,240 --> 00:25:43,880
Speaker 3: time on Wall Street I started in two thousand, when

486
00:25:43,920 --> 00:25:46,040
Speaker 3: you either get sort of the big chunky cuts or

487
00:25:46,080 --> 00:25:49,280
Speaker 3: you get the emergency cuts. You know, generally they don't

488
00:25:49,280 --> 00:25:51,920
Speaker 3: tend to happen in isolation. They tend to happen in bunches.

489
00:25:52,600 --> 00:25:55,000
Speaker 3: So I worry a little bit that if we get

490
00:25:55,000 --> 00:25:57,000
Speaker 3: some sort of emergency action, if we get some sort

491
00:25:57,000 --> 00:25:59,280
Speaker 3: of big chunky cut, it could further spook the market.

492
00:25:59,480 --> 00:26:01,600
Speaker 3: That's just my opinion, though there's certainly people out there

493
00:26:01,640 --> 00:26:02,840
Speaker 3: smarter on this than me. No.

494
00:26:02,920 --> 00:26:04,760
Speaker 5: I mean it's a fair point, and there are a

495
00:26:04,760 --> 00:26:06,439
Speaker 5: lot of people out there who are trade equities who

496
00:26:06,440 --> 00:26:09,520
Speaker 5: are in kind of your boat, right, So right, based

497
00:26:09,560 --> 00:26:12,240
Speaker 5: on all of that, when and where do you buy

498
00:26:12,280 --> 00:26:12,600
Speaker 5: the dip?

499
00:26:14,240 --> 00:26:15,760
Speaker 3: So I think we've got to take it one day

500
00:26:15,760 --> 00:26:17,200
Speaker 3: at a time, you know, I want to see sort

501
00:26:17,200 --> 00:26:19,119
Speaker 3: of how the market reacts if we get down to

502
00:26:19,160 --> 00:26:22,120
Speaker 3: that ten percent threshold, you know, I think that's sort

503
00:26:22,160 --> 00:26:23,480
Speaker 3: of where we could look to see if there's a

504
00:26:23,480 --> 00:26:25,560
Speaker 3: line in the sand. The other thing that's come up

505
00:26:25,600 --> 00:26:27,320
Speaker 3: a bit this morning is just you know, sort of

506
00:26:27,320 --> 00:26:31,880
Speaker 3: looking at valuations. You know, we've been very elevated. For example,

507
00:26:31,920 --> 00:26:34,600
Speaker 3: on those top ten names in the broader market in SMP,

508
00:26:34,840 --> 00:26:36,640
Speaker 3: you've been traded. You got up to thirty two times

509
00:26:36,680 --> 00:26:38,719
Speaker 3: on a medium pe. Actually it's now fallen down as

510
00:26:38,720 --> 00:26:40,800
Speaker 3: of last Wednesday to around twenty seven. Who knows where

511
00:26:40,800 --> 00:26:43,640
Speaker 3: it is today. Well, we'll see tomorrow. But I do

512
00:26:43,640 --> 00:26:45,720
Speaker 3: think you want to sort of watch for some additional

513
00:26:45,720 --> 00:26:48,119
Speaker 3: relief on those valuations. And I've noticed just in my

514
00:26:48,280 --> 00:26:50,159
Speaker 3: career a lot of times you don't have to get

515
00:26:50,200 --> 00:26:52,719
Speaker 3: super cheap on things for the bleeding to stop. Sometimes

516
00:26:52,760 --> 00:26:54,600
Speaker 3: you just need to go get back to the average,

517
00:26:54,640 --> 00:26:58,000
Speaker 3: get a little bit below average. Small caps, for example,

518
00:26:58,000 --> 00:27:00,840
Speaker 3: it's the opposite phenomenon right now. They keep getting up

519
00:27:00,840 --> 00:27:03,280
Speaker 3: to average and then the trade sort of peters out.

520
00:27:03,400 --> 00:27:05,399
Speaker 3: So I think watching when we get back to average

521
00:27:05,480 --> 00:27:07,480
Speaker 3: valuations on certain things is going to be critical.

522
00:27:08,320 --> 00:27:11,000
Speaker 2: So, Laurie, I'm just looking at Nvidia here in pre

523
00:27:11,080 --> 00:27:13,320
Speaker 2: market trading. The level suggests a you know, a thirty

524
00:27:13,359 --> 00:27:15,320
Speaker 2: percent pullback from its recent high.

525
00:27:15,600 --> 00:27:15,879
Speaker 4: Wow.

526
00:27:16,320 --> 00:27:18,280
Speaker 2: I mean, that's that gets your attention. I mean, if

527
00:27:18,280 --> 00:27:20,240
Speaker 2: you've told somebody you could buy I'll give you Nvidia

528
00:27:20,320 --> 00:27:22,400
Speaker 2: a thirty percent discount to it's high. If you said

529
00:27:22,400 --> 00:27:24,080
Speaker 2: that to them on Thursday, I think they grab it

530
00:27:24,160 --> 00:27:26,040
Speaker 2: both hands. What do you think about some of these

531
00:27:26,080 --> 00:27:28,879
Speaker 2: big tech names that have led the market higher in

532
00:27:28,880 --> 00:27:30,520
Speaker 2: which we're now taking the big brunt.

533
00:27:31,480 --> 00:27:33,879
Speaker 3: So when I think about the basket as a whole,

534
00:27:34,040 --> 00:27:37,040
Speaker 3: I think that we've just we've sort of hit evaluation ceiling.

535
00:27:37,080 --> 00:27:38,480
Speaker 3: I mentioned, you know, we kind of got up to

536
00:27:38,520 --> 00:27:40,480
Speaker 3: thirty two times on those top ten names on a

537
00:27:40,560 --> 00:27:42,960
Speaker 3: media and pe when it's it's hit sort of you know,

538
00:27:43,000 --> 00:27:45,400
Speaker 3: the upper twenties thirty in the past, that's really been

539
00:27:45,440 --> 00:27:47,199
Speaker 3: the ceiling. So I think we kind of hit the

540
00:27:47,200 --> 00:27:49,760
Speaker 3: ceiling on valuations. If you look at the growth rates

541
00:27:49,800 --> 00:27:52,080
Speaker 3: on the MAG seven versus the rest of the market,

542
00:27:52,320 --> 00:27:55,480
Speaker 3: We've had a accelerating growth advantage, and so you know,

543
00:27:55,520 --> 00:27:59,120
Speaker 3: those MAG seven names had just ferocious earnings growth last year,

544
00:27:59,160 --> 00:28:01,639
Speaker 3: but it's expected to celerate both this year and next.

545
00:28:02,359 --> 00:28:05,600
Speaker 3: It's hard to sustain the premium valuations when you've got

546
00:28:05,840 --> 00:28:08,600
Speaker 3: a growth rate that's accelerating off peak, even if everything

547
00:28:08,720 --> 00:28:12,040
Speaker 3: is fine. So I do think the valuations are really

548
00:28:12,040 --> 00:28:13,679
Speaker 3: the key to the story here. We just need to

549
00:28:13,680 --> 00:28:14,800
Speaker 3: see some additional relief.

550
00:28:15,320 --> 00:28:18,800
Speaker 5: The VIX has jumped an insane amount in two days.

551
00:28:19,440 --> 00:28:23,000
Speaker 5: The curve is super inverted at this point. What kind

552
00:28:23,000 --> 00:28:26,520
Speaker 5: of damage does a VIX that's moved the most in

553
00:28:26,600 --> 00:28:30,240
Speaker 5: thirty years due to the equity market.

554
00:28:30,840 --> 00:28:33,400
Speaker 3: So look, I think it's a question of where does

555
00:28:33,440 --> 00:28:36,760
Speaker 3: it settle out. You know, I actually called someone this morning.

556
00:28:36,800 --> 00:28:38,440
Speaker 3: I noted I got to the office pretty early and

557
00:28:38,520 --> 00:28:40,400
Speaker 3: it was around fifty and I called someone to say,

558
00:28:40,440 --> 00:28:42,600
Speaker 3: this is real, you know, you know, it's actually the

559
00:28:42,640 --> 00:28:44,520
Speaker 3: real data point. So I'm glad you guys are reporting

560
00:28:44,560 --> 00:28:47,680
Speaker 3: it as well, But I think the reality is it

561
00:28:47,800 --> 00:28:50,280
Speaker 3: just tells me that we have a sentiment problem in

562
00:28:50,320 --> 00:28:52,800
Speaker 3: the market, that sentiment needs to unwind. I mean, if

563
00:28:52,840 --> 00:28:55,400
Speaker 3: you look at the CFTC data alex, the broader US

564
00:28:55,480 --> 00:28:58,200
Speaker 3: equity futures positioning across all of the byside, so we

565
00:28:58,240 --> 00:29:01,640
Speaker 3: add up three different categories together, it's been sitting above

566
00:29:01,880 --> 00:29:05,360
Speaker 3: January twenty eighteen levels, it's been sitting above February twenty

567
00:29:05,400 --> 00:29:08,160
Speaker 3: twenty levels, and also above the levels of twenty twenty

568
00:29:08,160 --> 00:29:10,480
Speaker 3: one twenty twenty two, though frankly those weren't nearly as

569
00:29:10,560 --> 00:29:13,000
Speaker 3: high as what we saw back in the twenty eighteen

570
00:29:13,040 --> 00:29:15,440
Speaker 3: and twenty twenty time frames. So there has just been

571
00:29:15,840 --> 00:29:17,959
Speaker 3: you know, I don't think people necessarily have sounded raw

572
00:29:18,040 --> 00:29:19,520
Speaker 3: raw when you've talked to them, but if you've looked

573
00:29:19,560 --> 00:29:22,360
Speaker 3: at the actual positioning data in the futures market, you know,

574
00:29:22,640 --> 00:29:25,200
Speaker 3: these are some of the levels that have historically just

575
00:29:25,320 --> 00:29:27,680
Speaker 3: caused a tremendous amount of volatility, and we need to

576
00:29:27,760 --> 00:29:28,520
Speaker 3: let that play.

577
00:29:28,320 --> 00:29:29,440
Speaker 7: Out in here, all right.

578
00:29:29,440 --> 00:29:31,480
Speaker 2: Lori Calasina, thank you so much for joining us, for

579
00:29:31,480 --> 00:29:33,960
Speaker 2: you know, you're super busy today. Lori Calvalsina. She's head

580
00:29:33,960 --> 00:29:38,080
Speaker 2: of US equity strategy at RBC Capital Markets. This is

581
00:29:38,080 --> 00:29:42,240
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582
00:29:42,280 --> 00:29:45,920
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583
00:29:46,080 --> 00:29:48,760
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584
00:29:48,800 --> 00:29:51,719
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585
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586
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