Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
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Speaker 2: let's go to a pro here. Quincy Crosby, chief Global
Speaker 2: strategist at olpl Financial. Quincy, thank you so much for
Speaker 2: joining us here. What do you make of what transpired
Speaker 2: from the close on Thursday to where we are here?
Speaker 3: Well, you know, you could attribute it to the.
Speaker 4: Unemployment number jumping. Its skipped four point two, went right
Speaker 4: to four point three. Expectations were that it would remain
Speaker 4: at four point one, and there have been concerns. Even
Speaker 4: Powell mentioned at the press conference that they are I
Speaker 4: don't know if you use the word monitoring, but it
Speaker 4: was close to that the employment landscape, and he has
Speaker 4: been invoking the maximum employment mandate over and over again
Speaker 4: over the last month or two months. And now he's
Speaker 4: got a situation in which the market believes that the
Speaker 4: push in the unemployment rate, which in and of itself
Speaker 4: isn't But he even talked about four point one was
Speaker 4: still a strong, a resilient labor market. While we jump
Speaker 4: up to four point three. The question is is this
Speaker 4: the harbinger of a labor market that is going to
Speaker 4: weaken at a faster clip, because that's what the historical
Speaker 4: pattern suggests that once you start moving up higher, it
Speaker 4: continues to move up higher. The other thing with the
Speaker 4: initial unemployment claims and also the continuing claims, and that
Speaker 4: is worrisome because you can argue about the participation rate
Speaker 4: all of that, but when you see that people cannot
Speaker 4: get jobs, it's harder and harder for them to get jobs.
Speaker 4: You have to look at this employment landscape and wonder
Speaker 4: is there something deeper going on? And you don't have
Speaker 4: to be a PhD economist to figure it out. Yes,
Speaker 4: there is.
Speaker 3: Companies may not be late.
Speaker 4: So therefore you had that and that was by the way,
Speaker 4: in conjunction with the manufacturing ISM manufacturing report that has
Speaker 4: been deteriorating. Even at a faster clip. Today we'll have
Speaker 4: a bigger picture on the services you.
Speaker 5: Have to get those ISM services at ten o'clock, which
Speaker 5: I love that indicator as well. You know, it didn't
Speaker 5: take Wall Street banks a lot to jump on this.
Speaker 5: I mean, within like hours we got GP Morgan, we
Speaker 5: have City Look, fifty basis point cuts for September and November,
Speaker 5: and then twenty five basis point cut in December. Other
Speaker 5: banks sort of added on to that, is are those
Speaker 5: kind of calls justified?
Speaker 4: They'll only be justified if the numbers continue to deteriorate.
Speaker 4: You know, the mart the market has wanted as you know,
Speaker 4: what was it seven rate cuts this year. They're lucky
Speaker 4: and then they thought, oh, maybe we'll get one in September.
Speaker 4: But the fact of the matter is that finally they
Speaker 4: have an economic rationale for suggesting that the FED has
Speaker 4: got to come in and offer more help, and the
Speaker 4: Fed is going to have to do it. The worry is,
Speaker 4: and you know, I don't need to be looking at
Speaker 4: what they did wrong at the beginning. They waited too
Speaker 4: long to raise rates and then they are looking as
Speaker 4: if they're behind the curve already.
Speaker 2: Emergency rate cuts. Put that into context. When do they happen?
Speaker 2: Why do they happen? Should should emergency rate cut be
Speaker 2: on the table?
Speaker 4: Well, it should always be on the table, and it
Speaker 4: is always on the table because the fake could come
Speaker 4: in at any time to raise race or cut race.
Speaker 4: And I think if they do see that the unemployment
Speaker 4: rate is going to rise again, if we start to
Speaker 4: see a host of data releases that suggest even more deterioration,
Speaker 4: such as what we're going to have this morning with
Speaker 4: the ISM service sector report, they may have to do that.
Speaker 4: They don't want to do that. There's always a suggestion,
Speaker 4: now this is what's ironic, that it'll scare the market.
Speaker 4: We'll take a look at the market today, take a
Speaker 4: look at it on Friday. The market is already scared.
Speaker 4: They're not going to cave unless they really believe that
Speaker 4: they are behind the curve. And the other thing is
Speaker 4: there are rumors that at the last FED meeting there
Speaker 4: were those who suggested that they needed to cut rates
Speaker 4: at that meeting. The Fed is waiting an awfully long
Speaker 4: time until September eighteenth. The market is clearly not waiting
Speaker 4: that long.
Speaker 5: So that brings the question into the actual market action.
Speaker 5: If you look at the S and B futures, we're
Speaker 5: down by three percent, NASA future is off by over four.
Speaker 5: I mean, it's ugly, right, And this raises the question
Speaker 5: of selling. The gets selling, like once you trigger stops,
Speaker 5: then you have to sell more. You have a systemic
Speaker 5: funds that'll come in at nine point thirty when the
Speaker 5: cash market opens, and they're going to have to be
Speaker 5: selling more like CTA's. You have the en carry trade unwinding.
Speaker 5: How much of that is playing in versus the fundamentals?
Speaker 4: Well that you know this is this is the This
Speaker 4: is the basic argument, because you can make an argument
Speaker 4: on both sides of the equation. Right now, the labor
Speaker 4: market with the numbers that we have, suggest that there
Speaker 4: is still some resilience. The fact that the GDP report
Speaker 4: for the second quarter, the first streat came in at
Speaker 4: what was a two point eight percent, the fact that
Speaker 4: consumers continue to spend. But the question is the market
Speaker 4: is supposed looking ahead. That's the market's job. And by
Speaker 4: the way, I should point out that the economists of
Speaker 4: the FED should also be looking ahead, because that's the
Speaker 4: a in this job as well. And then the concern
Speaker 4: is that again selling begets selling, buying begets buying. That's
Speaker 4: the way it is, you know, margins, margin calls are
Speaker 4: coming in. It creates a war text of the Vix
Speaker 4: climbing higher. We haven't seen the Vix climb this hire
Speaker 4: in a long time. But the fact of the matter
Speaker 4: is the FED is going to be very careful about
Speaker 4: coming in and suggesting that we need an emergency move. However,
Speaker 4: I do want to point this out. I will never
Speaker 4: forget a Christmas Eve on twenty eighteen, as that market
Speaker 4: just tanked and the FED that that December meeting raced
Speaker 4: rates suggests that we would have rate hikes in twenty nineteen.
Speaker 4: The first Friday in January, the FED called it off.
Speaker 4: Remember that before the market opened, right, Fed's going to
Speaker 4: be patient.
Speaker 2: End of story, all right, Quincy, fantastic perspective. Thank you
Speaker 2: so much for joining us, Quincy Crosby. She's the chief
Speaker 2: global strategist for LPL Financial Boy, the economic narrative really
Speaker 2: seemed to pivot on Friday, with that weeker than expected
Speaker 2: jobs data really calling into question the health of the
Speaker 2: US economy and of the US consumers. Let's get some
Speaker 2: color on that right now. We can do that with
Speaker 2: Angie Solonk, National director of Retail Services for the US
Speaker 2: at Collier's. Angie, thanks so much for joining us here.
Speaker 2: What's your view aerie of kind of the US consumer
Speaker 2: right now?
Speaker 6: You know, it's really interesting when we look at the
Speaker 6: US consumer. I mean we've actually seen a slight you know,
Speaker 6: gain compared to June twenty four to twenty three by
Speaker 6: two point three percent, although from prior month it's been
Speaker 6: relatively unchanged. Now I'm forecasting or we're forecasting at two
Speaker 6: percent at your end, and we're trying to kind of
Speaker 6: put our wrap our hands, you know, around what's going
Speaker 6: on the consumer. Paul, I'll just let you know. You know,
Speaker 6: we're really seeing the consumer having so much convenience and
Speaker 6: ease of shopping with online or in store. I mean,
Speaker 6: it's really a frictional less type of shopping experience, so
Speaker 6: they're spending more.
Speaker 3: All right.
Speaker 2: So I'm not into this back to school thing because
Speaker 2: my kids are grown. But my youngest he's gonna be
Speaker 2: starting a sophomore year in college and we bought him
Speaker 2: his first suit yesterday. So that is my back to
Speaker 2: school shopping scenario. But Angie, I know it's a thing
Speaker 2: for the retail space. Back to school. How's that looking
Speaker 2: so far?
Speaker 7: It's looking actually quite well.
Speaker 6: You've actually seen an early start to back to school,
Speaker 6: so right now it's about eight percent of compared to
Speaker 6: what we've seen in the past. And I think people
Speaker 6: are refreshing their closets, just like your son with this suit.
Speaker 6: I mean, people are taking pride in what they're wearing.
Speaker 5: Do you feel like we're going to see a value
Speaker 5: war though for back to school? Similar to say fast
Speaker 5: food chains like McDonalds, Burger King, Wendy's. It's all about
Speaker 5: that value, right, how's that transmitting itself into the retail space.
Speaker 6: Definitely, You're you know, you're still seeing value. Look, there's
Speaker 6: still a discrepancy as it relates to wage in job
Speaker 6: growth and unemployment. So people are still managing their funds,
Speaker 6: they're being conscientious, they're taking their time and understanding how
Speaker 6: much to buy, where to buy, and how much time
Speaker 6: they're spending. So there is a value driven component, but
Speaker 6: there still is that middle class and higher income you know,
Speaker 6: where they're still spending and not thinking too much about it,
Speaker 6: you know, So there is still that hyper spend occurring.
Speaker 2: How about it? Some of it at the lower end.
Speaker 2: I'm thinking some of the dollar stores, how do they
Speaker 2: fare in this environment where again we really see a
Speaker 2: disparity in income and a disparity in retail spending, savings
Speaker 2: rates at credit card delinquencies. How are the dollar stores
Speaker 2: kind of seeing business today?
Speaker 7: I think they're asally going to do quite well.
Speaker 6: You know, with some changes that we've seen with ninety
Speaker 6: nine cent store closing, there's still a need and therefore
Speaker 6: you're going to see them actually kind of rechange their
Speaker 6: merchandise and their product mix.
Speaker 7: And their stores.
Speaker 6: So with that, there will be an increase in terms
Speaker 6: of their the people going into that store spending because
Speaker 6: at this point, you know, with the ninety nine cent
Speaker 6: no longer around, people have nowhere to go other than
Speaker 6: they're going to maybe shop into the targets and walmarts.
Speaker 6: But that ninety nine cent store and that dollar store
Speaker 6: is still bringing value. So you're still able to buy produce,
Speaker 6: You're still able to get you know, quick, you know,
Speaker 6: grab and go items, batteries, household goods, napkins, et cetera.
Speaker 6: So I think there's still definitely going to be an
Speaker 6: increase foot traffic in those types of value stores.
Speaker 5: What would you be telling what area of retail has
Speaker 5: the most problems and how would you tell them to
Speaker 5: solve that problem right now?
Speaker 6: You know, when you look at retail overall, you know,
Speaker 6: the grocery sector has been pretty steady. And what I
Speaker 6: really have noticed in terms of the grocery spend is
Speaker 6: that it's been seen in actually a very you know
Speaker 6: slide increase about one point seven percent. And so when
Speaker 6: you stop and think about that, it has to do
Speaker 6: with a the cost of the product and the goods
Speaker 6: within the stores. Also, I think if you're stopping think
Speaker 6: about it, you can go into a quick service. Yes,
Speaker 6: it's a little more expensive in terms of you know,
Speaker 6: the per person spend, but if you look at that
Speaker 6: versus you know, grocery, cooking at home, making your meals,
Speaker 6: doing the dishes, all of that, it might be a
Speaker 6: little more convenience. So, you know, the quick serve restaurants,
Speaker 6: the fast food restaurants, although seeing a bit of a slowdown,
Speaker 6: it's still you know, there's still seeing.
Speaker 7: Quite a bit of pace.
Speaker 6: We're actually from a retail perspective, in terms of leasing,
Speaker 6: we're actually seeing more quick service restaurants looking for space,
Speaker 6: looking to expand, So it hasn't slowed down in that part.
Speaker 6: But I would say groceries starting to still trying to
Speaker 6: figure itself out.
Speaker 2: About luxury. We've seen some of the luxury retailers report
Speaker 2: some sluggish results of the most recent quarter, citing in part,
Speaker 2: you know, the sluggish Chinese economy and lack really of
Speaker 2: outward bound travel by Chinese. How's the luxury space look
Speaker 2: to you?
Speaker 7: It has slowed down.
Speaker 6: I would say that it's slowed down if you're comparing
Speaker 6: it to kind of the peak we had, you know, right,
Speaker 6: you know, during COVID and slightly after that. I wouldn't
Speaker 6: say it's completely you know, it's less than twenty nineteen.
Speaker 6: It's it's still you know, ramping, it's still in I
Speaker 6: would say, you know, maybe fifteen to twenty percent from
Speaker 6: twenty nineteen. So we are seeing a slowdown there. Definitely
Speaker 6: has been a slowdown. As it relates to just the overseas.
Speaker 6: I think people are still looking at luxury. They've kind
Speaker 6: of spent during the last few years and of you know,
Speaker 6: kind of identified and purchased what they needed. So we
Speaker 6: are seeing a bit of that occurring at the moment.
Speaker 6: And also I think we're seeing, you know, kind of
Speaker 6: that Chinese Asian consumer going elsewhere to spend in luxury.
Speaker 7: Maybe not in the US.
Speaker 5: That's interesting, Yeah, exactly like Chinese going to Japan. I
Speaker 5: think because of that exchange rate, you have to wonder
Speaker 5: what happens at the last couple of days. But I
Speaker 5: want to just I know this might be a little
Speaker 5: off field for a second, but in terms of EVS,
Speaker 5: we've had a lot of the Carmakers report, and it's
Speaker 5: been really ugly out there, particularly when it comes to
Speaker 5: sales weather in China or in Europe when it comes
Speaker 5: to EVS. However, can retailers though capitalize on this shift
Speaker 5: that we are eventually going to see.
Speaker 6: I would say yes for a couple of reasons. So
Speaker 6: what was really interesting when we started digging into these
Speaker 6: numbers was when we saw that foot traffic, so the
Speaker 6: actual footfall in stores was starting to you know draw
Speaker 6: We started to dig why why is this happening? This
Speaker 6: is really for your large major you know retailers, big
Speaker 6: box retailers. Well, because they made it so easy to
Speaker 6: shop online, pickup in store, curbside pickup et cetera. They
Speaker 6: started to notice that people were not spending as much
Speaker 6: time in the store. So by putting a or getting
Speaker 6: involved in that kind of retail or EV sector, you're
Speaker 6: really creating another reason for that consumer to come into
Speaker 6: the store and spend more time.
Speaker 7: So it's not a fifteen minute in and out.
Speaker 6: But if I'm charging my car, if you have an
Speaker 6: EV car or vehicle, you can actually go in and
Speaker 6: you're going to you know, you may start buying things
Speaker 6: that you didn't even think about. So you're spending thirty minutes,
Speaker 6: forty five minutes, or even an hour in a store,
Speaker 6: you're going to be accumulating just things to purchase.
Speaker 7: So I think it's a little bit of that.
Speaker 6: Plus it could be another additional revenue channel. They may
Speaker 6: be able to advertise specials. If you're sitting in your
Speaker 6: car charging your car and waiting, you might see something
Speaker 6: that pops up that's going to drive you into the
Speaker 6: store to make a purchase.
Speaker 2: Angie, thanks so much for joining us. Always appreciate getting
Speaker 2: your thoughts on the retail side of the business. Anchie Slank,
Speaker 2: National director of Retail Services for the United States for
Speaker 2: Colliers Lissa Auto Joints is here, head of TMT Research,
Speaker 2: simply Global Visible Alpha. Melissa, we're just hearing Lissa Miteo
Speaker 2: rattle off some of these pre market trading numbers for
Speaker 2: somebody's big tech names like Apple, like Nvidia. Are these
Speaker 2: entry points? I think if you had told somebody, you know,
Speaker 2: Thursday afternoon, hey, I can give you in Nvidia thirty
Speaker 2: percent off its recent highs, I think most of the
Speaker 2: people in the mark would jump at that opportunity. You
Speaker 2: have that opportunity here pre market. What do you think
Speaker 2: about some of these big tech names?
Speaker 1: Melissa, good morning, Thank you. It's a wild one on
Speaker 1: this Monday morning. You know, it's all about expectations, and
Speaker 1: Nvidia is certainly a company that has very high expectations.
Speaker 1: So it's critical to believe in the direction of that
Speaker 1: company and where it's going. And the Blackwell series is
Speaker 1: expected over the next couple of years to generate sales
Speaker 1: of over one hundred million dollars one hundred billion dollars,
Speaker 1: so you know, ultimately the company has to deliver on
Speaker 1: those fundamentals for the expectations to meet where they are.
Speaker 5: So does that mean that if we have reports there
Speaker 5: were reports that in Nvidia had some production delays. Okay,
Speaker 5: if they can't produce the stuff, even if the demand
Speaker 5: is there, they can't book the revenue. So could part
Speaker 5: of the Sellouf and Nvidia actually be fundamental at this
Speaker 5: point or no, it may be.
Speaker 1: I mean, we haven't had an official statement from the
Speaker 1: company to verify that, but that that's certainly something that
Speaker 1: could impact their numbers.
Speaker 2: Let's just kind of look into review mirror just a
Speaker 2: little bit here some of the recent earnings we've had
Speaker 2: out of some of the tech folks. Apple generally in line, Microsoft, Amazon, Alphabet, Netflix,
Speaker 2: I don't know. I mean, I guess this smidge disappointing
Speaker 2: me a little bit. What do you make of the
Speaker 2: earnings of these big tech names.
Speaker 1: It's again it goes back to expectations coming into the quarter.
Speaker 1: Expectations were high about both what the companies were going
Speaker 1: to deliver and what the outlooks were going to be like.
Speaker 1: So companies, in order to generate an additional leg of
Speaker 1: alpha to justify the valuations and what's actually priced into
Speaker 1: the stock, companies needed to exceed that. And if they're not,
Speaker 1: then it's disappointing to the market, it's disappointing to investors
Speaker 1: and they will look for opportunities elsewhere where they can
Speaker 1: get a better valuation and more upside.
Speaker 5: How do you think technology companies need to relate to
Speaker 5: the market their capex investment versus their profitability? Like Meta
Speaker 5: clearly did a good job of that, Like they show
Speaker 5: that AI was helping to impact the amount of money
Speaker 5: they could make per ad that they sold. How do
Speaker 5: other companies that don't have that avenue deal with that?
Speaker 3: Yeah?
Speaker 1: Absolutely, This cash dimension to the megacaps is an absolutely
Speaker 1: critical one because we've been in an environment where rates
Speaker 1: have been rising. So if you're sitting on cash, your
Speaker 1: cash is getting a really nice return. So it gives
Speaker 1: companies a lot more freedom to invest it, and it
Speaker 1: makes that cash flow potential a lot stronger. And the
Speaker 1: megacap tech companies have enormous cash positions. So now in
Speaker 1: an environment where that is potentially reversing, coupled with the
Speaker 1: fact that they're accelerating capex, it presents some interesting questions
Speaker 1: about what their cash flow positions are going to look
Speaker 1: like over the next twelve to twenty four months.
Speaker 2: So, Melissa, given some of the pullback we've seen in
Speaker 2: some of these tech names, what are some of the
Speaker 2: best opportunities in your coverage universe.
Speaker 3: Overall.
Speaker 1: One of the things we're looking at really carefully is
Speaker 1: what is going to really trigger broad adoption of generative AI.
Speaker 1: We know there's an an AI revolution out there happening,
Speaker 1: but there needs to be a trigger point where these
Speaker 1: companies are either internally adopting generative AI in a way
Speaker 1: that's giving them a competitive advantage, or they're crafting and
Speaker 1: creating an application that is going to revolutionize the way
Speaker 1: users enterprises interact and become more productive. So that is
Speaker 1: really the critical nexus point. I think, you know, where
Speaker 1: we're looking at what companies are actually going to be
Speaker 1: doing that, And that's really I think where we are
Speaker 1: with the generative AI revolution right now and where megacap
Speaker 1: and just tech stocks in general really are going going
Speaker 1: into the second half of the year and next year.
Speaker 5: So anecdotally, let me tell you the story. So yesterday,
Speaker 5: my best friends moving to Costa Rico or their family
Speaker 5: for a year. So it's like a going away party,
Speaker 5: YadA YadA. One of my friends is a consultant. One
Speaker 5: of my other friends also has deeply involved in the market,
Speaker 5: and guess what the conversation was between the two of them, Yes,
Speaker 5: how much AWS comprises their budget and how much that's
Speaker 5: going to continue to go with AI and doubt that
Speaker 5: they're really going to see the benefit of that kind
Speaker 5: of money. And I'm wondering that at what point to customers,
Speaker 5: Like one of my friends pushes back and says, you
Speaker 5: know what, Amazon Web Service, I'm not going to pay
Speaker 5: you that money. I don't want to do that. I
Speaker 5: don't see the benefit to AI in that sense.
Speaker 1: That's a million dollar question. I mean, Amazon was an
Speaker 1: interesting one this quarter because their AWS business was very robust.
Speaker 1: It was it basically carried the whole company. It beat
Speaker 1: the quarter, and it had a strong outlook. Their margin
Speaker 1: beat by over three hundred basis points. There was an
Speaker 1: adjustment in there of two hundred basis point, but still
Speaker 1: it came in over thirty five percent. But when we
Speaker 1: look at the other side of the Amazon's story on
Speaker 1: the North America retail margin that came in soft. That
Speaker 1: business coming into the quarter was expected to generate a
Speaker 1: five point nine percent margin, but it came in a
Speaker 1: five point seven percent, and the company said, well, you know,
Speaker 1: as we look out at our guidance, we you know,
Speaker 1: kind of don't really see the profitability coming in that strong,
Speaker 1: and it actually came in below where the consensus was.
Speaker 1: Consensus was about fifteen point seven billion dollars in operating
Speaker 1: profit and they're the top of their range was around
Speaker 1: fifteen billion. So it was like, whoa wait a second.
Speaker 1: You know, you know you've got AWS doing really well,
Speaker 1: but what else is in there that's potentially diluting it?
Speaker 1: Or is AWS to your point, potentially slowing down a
Speaker 1: little bit, or we're not seeing the profitability that we
Speaker 1: have been seeing.
Speaker 2: All right, this is a lot to think about here
Speaker 2: in the big tech space. Melissa Auto, head of TMT
Speaker 2: Research sp Global Visible Appha, we need some perspective on
Speaker 2: this market in a big way. With some of those
Speaker 2: futures readings at least was just reporting. And for that
Speaker 2: we go to the lawn in Charlottesville, Virginia, Lori calvacin
Speaker 2: ahead of US Equity Strategy RBC Capital Markets. If you
Speaker 2: know what that means, you know, Laurie, what do you
Speaker 2: make of the last couple of trading days here in
Speaker 2: the futures market here today? The market kind of turned
Speaker 2: on a dime there on that Job's number.
Speaker 3: It did look I think the biggest takeaway we have
Speaker 3: right now is people like Tom Keane going on vacation.
Speaker 3: I think everyone's going to be afraid to take vacation
Speaker 3: in August now. But I think the reality is that
Speaker 3: we have to take the last couple days in context,
Speaker 3: and that's what we really tried to remind people of
Speaker 3: in our Weekly this morning. We're not sitting here saying
Speaker 3: recession fears didn't escalate, that there weren't some signals in
Speaker 3: the jobs report, in the ism report on Thursday, but
Speaker 3: we do think people need to bear in mind that
Speaker 3: we had I think I came up with like six
Speaker 3: or seven different reasons that market should be selling off
Speaker 3: right now. This includes valuations that were full, a tendency
Speaker 3: for the stock market to sell off after first rate cuts,
Speaker 3: a curse, and maybe we're pulling that forward. We had
Speaker 3: extremely elevated positioning on the CFTC data for US equity futures,
Speaker 3: Nasdaq futures S and P futures. Aai I was sending
Speaker 3: us a cell signal. The last couple of weeks. We've
Speaker 3: got the election, where dynamics are shifting that typically produces
Speaker 3: a pullback in September, and maybe we're pulling that up.
Speaker 3: And by the way, markets have been correlated with Trump
Speaker 3: and now he's lagging behind Harris. So there's a lot
Speaker 3: of stuff going on. And by way, add the facts
Speaker 3: that seasonality the last five years has been really really
Speaker 3: poor time to be in the stock market August through October,
Speaker 3: I think, including specifically twenty twenty two and twenty twenty three.
Speaker 3: So there have been a lot of reasons this market
Speaker 3: has needed to take a bit of a pullback in here.
Speaker 5: So Lorii, it's Alex and I love reading all your notes,
Speaker 5: is like first must read on Monday. Got to set
Speaker 5: you up right. When does though, a healthy correction become
Speaker 5: an unhealthy one?
Speaker 3: So I think the biggest thing I'm worried about in here,
Speaker 3: and I'm trying to tell everybody keep it calm head today,
Speaker 3: Like I do think we need to dig into the
Speaker 3: BLS report a bit more, you know, find out exactly
Speaker 3: what the weather impact was there. But I do think
Speaker 3: that the rule of thumb I always use is five
Speaker 3: to ten percent is a typical correction if you look
Speaker 3: from peak, So that would kind of take us down
Speaker 3: to sort of the fifty one hundred marks. We have
Speaker 3: to watch markets closely in here. If you look at
Speaker 3: sort of the ten to twenty percent range, that's typically
Speaker 3: you know, in the coast GFC world where the growth
Speaker 3: scares settle in.
Speaker 4: Now.
Speaker 3: Twenty twenty two was a little bit different. It wasn't
Speaker 3: a recession. We fell twenty five percent, but generally anything
Speaker 3: more than twenty percent is an actual recession. And I
Speaker 3: think one of the reasons why it's so jarring, you know,
Speaker 3: kind of the move from Wednesday to Thursday Friday, is
Speaker 3: that if you go back to corporate earnings and equity investors,
Speaker 3: we've all had our heads stuck in these corporate reports
Speaker 3: the last couple of weeks. What we're seeing in that
Speaker 3: jobs data, it's not really syncing up with what we're
Speaker 3: hearing from companies right now. So I do think we
Speaker 3: need to sort of take it one step at a time.
Speaker 2: In here, Llie, what do you think the Federal Reserve
Speaker 2: is going to do here? There were some discussion over
Speaker 2: the weekend, maybe an emergency rate cut. What do you
Speaker 2: think they're going to do here?
Speaker 3: So I have no idea, you know, I think we
Speaker 3: have to talk to the rates crop, we have to
Speaker 3: talk We have to talk to some of the reporters,
Speaker 3: but the true that they don't. And you know, I
Speaker 3: get a little bit of frustrated with the fed guessing
Speaker 3: game that people play on Wall Street all the time.
Speaker 3: I think, you know, they're looking at data, they're trying
Speaker 3: to make the best decisions that they can. But what
Speaker 3: I can tell you if this question has come up
Speaker 3: a few times since Friday, and even frankly since the
Speaker 3: CPI report, that's when my rate strategist was telling me
Speaker 3: he was first getting questions about fifty basis points. And
Speaker 3: you know, I kind of went and dug up some
Speaker 3: of my work from SVB, looked through some of my files,
Speaker 3: and we found that in at least kind of my
Speaker 3: time on Wall Street I started in two thousand, when
Speaker 3: you either get sort of the big chunky cuts or
Speaker 3: you get the emergency cuts. You know, generally they don't
Speaker 3: tend to happen in isolation. They tend to happen in bunches.
Speaker 3: So I worry a little bit that if we get
Speaker 3: some sort of emergency action, if we get some sort
Speaker 3: of big chunky cut, it could further spook the market.
Speaker 3: That's just my opinion, though there's certainly people out there
Speaker 3: smarter on this than me. No.
Speaker 5: I mean it's a fair point, and there are a
Speaker 5: lot of people out there who are trade equities who
Speaker 5: are in kind of your boat, right, So right, based
Speaker 5: on all of that, when and where do you buy
Speaker 5: the dip?
Speaker 3: So I think we've got to take it one day
Speaker 3: at a time, you know, I want to see sort
Speaker 3: of how the market reacts if we get down to
Speaker 3: that ten percent threshold, you know, I think that's sort
Speaker 3: of where we could look to see if there's a
Speaker 3: line in the sand. The other thing that's come up
Speaker 3: a bit this morning is just you know, sort of
Speaker 3: looking at valuations. You know, we've been very elevated. For example,
Speaker 3: on those top ten names in the broader market in SMP,
Speaker 3: you've been traded. You got up to thirty two times
Speaker 3: on a medium pe. Actually it's now fallen down as
Speaker 3: of last Wednesday to around twenty seven. Who knows where
Speaker 3: it is today. Well, we'll see tomorrow. But I do
Speaker 3: think you want to sort of watch for some additional
Speaker 3: relief on those valuations. And I've noticed just in my
Speaker 3: career a lot of times you don't have to get
Speaker 3: super cheap on things for the bleeding to stop. Sometimes
Speaker 3: you just need to go get back to the average,
Speaker 3: get a little bit below average. Small caps, for example,
Speaker 3: it's the opposite phenomenon right now. They keep getting up
Speaker 3: to average and then the trade sort of peters out.
Speaker 3: So I think watching when we get back to average
Speaker 3: valuations on certain things is going to be critical.
Speaker 2: So, Laurie, I'm just looking at Nvidia here in pre
Speaker 2: market trading. The level suggests a you know, a thirty
Speaker 2: percent pullback from its recent high.
Speaker 4: Wow.
Speaker 2: I mean, that's that gets your attention. I mean, if
Speaker 2: you've told somebody you could buy I'll give you Nvidia
Speaker 2: a thirty percent discount to it's high. If you said
Speaker 2: that to them on Thursday, I think they grab it
Speaker 2: both hands. What do you think about some of these
Speaker 2: big tech names that have led the market higher in
Speaker 2: which we're now taking the big brunt.
Speaker 3: So when I think about the basket as a whole,
Speaker 3: I think that we've just we've sort of hit evaluation ceiling.
Speaker 3: I mentioned, you know, we kind of got up to
Speaker 3: thirty two times on those top ten names on a
Speaker 3: media and pe when it's it's hit sort of you know,
Speaker 3: the upper twenties thirty in the past, that's really been
Speaker 3: the ceiling. So I think we kind of hit the
Speaker 3: ceiling on valuations. If you look at the growth rates
Speaker 3: on the MAG seven versus the rest of the market,
Speaker 3: We've had a accelerating growth advantage, and so you know,
Speaker 3: those MAG seven names had just ferocious earnings growth last year,
Speaker 3: but it's expected to celerate both this year and next.
Speaker 3: It's hard to sustain the premium valuations when you've got
Speaker 3: a growth rate that's accelerating off peak, even if everything
Speaker 3: is fine. So I do think the valuations are really
Speaker 3: the key to the story here. We just need to
Speaker 3: see some additional relief.
Speaker 5: The VIX has jumped an insane amount in two days.
Speaker 5: The curve is super inverted at this point. What kind
Speaker 5: of damage does a VIX that's moved the most in
Speaker 5: thirty years due to the equity market.
Speaker 3: So look, I think it's a question of where does
Speaker 3: it settle out. You know, I actually called someone this morning.
Speaker 3: I noted I got to the office pretty early and
Speaker 3: it was around fifty and I called someone to say,
Speaker 3: this is real, you know, you know, it's actually the
Speaker 3: real data point. So I'm glad you guys are reporting
Speaker 3: it as well, But I think the reality is it
Speaker 3: just tells me that we have a sentiment problem in
Speaker 3: the market, that sentiment needs to unwind. I mean, if
Speaker 3: you look at the CFTC data alex, the broader US
Speaker 3: equity futures positioning across all of the byside, so we
Speaker 3: add up three different categories together, it's been sitting above
Speaker 3: January twenty eighteen levels, it's been sitting above February twenty
Speaker 3: twenty levels, and also above the levels of twenty twenty
Speaker 3: one twenty twenty two, though frankly those weren't nearly as
Speaker 3: high as what we saw back in the twenty eighteen
Speaker 3: and twenty twenty time frames. So there has just been
Speaker 3: you know, I don't think people necessarily have sounded raw
Speaker 3: raw when you've talked to them, but if you've looked
Speaker 3: at the actual positioning data in the futures market, you know,
Speaker 3: these are some of the levels that have historically just
Speaker 3: caused a tremendous amount of volatility, and we need to
Speaker 3: let that play.
Speaker 7: Out in here, all right.
Speaker 2: Lori Calasina, thank you so much for joining us, for
Speaker 2: you know, you're super busy today. Lori Calvalsina. She's head
Speaker 2: of US equity strategy at RBC Capital Markets. This is
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