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Speaker 2: Wonderful segment of the program nationwide into the original San
Speaker 2: Francisco of Charles Schwab, Lizzy, Ane Saunders, and Kevin Gordon join.
Speaker 3: Us this morning.
Speaker 2: David Rosenberg published up in Toronto and emphasized the word hope.
Speaker 2: You lead in your note with the word hope. Lizzie
Speaker 2: Sanders gauge the hope em out there right now.
Speaker 4: Well, yesterday there was a lot of it. I think
Speaker 4: it's impossible, given the instability of how we get information
Speaker 4: and narrative changes and headlines, to look at a day
Speaker 4: like yesterday thing akin to what we saw last April ninth.
Speaker 4: I think there's still a lot of unanswered questions, even
Speaker 4: just you know, you're reporting on Trump's comment about the
Speaker 4: ceasefire being contingent upon the straight orform moves opening. Yet
Speaker 4: yesterday it was you know, we might end this thing
Speaker 4: even if the strait doesn't open.
Speaker 5: So here we go again.
Speaker 6: Exactly, Kevin, given those crosswinds out there, when you're talking
Speaker 6: to your clients, what's the message is it to look
Speaker 6: past all this craziness and focus on the fundamentals. What's
Speaker 6: a conversation?
Speaker 7: I mean, especially with any conflict like this, you never
Speaker 7: want to make a knee jerk reaction. I mean, we've
Speaker 7: adjusted how we think about markets and the economy responding
Speaker 7: to this as it's continued.
Speaker 3: To drag on.
Speaker 7: Clearly we've taken you know, we've dialed back expectations for
Speaker 7: what growth is supposed to look like. But I often think,
Speaker 7: you know, in terms of an investor's reaction, I can't
Speaker 7: help but think about the Jack Bocal quote, don't just
Speaker 7: do something? Stand there, and I think in this moment,
Speaker 7: you know, it kind of feels act because you don't
Speaker 7: want to make you can't have a high conviction view
Speaker 7: on any particular asset class. I think right now you
Speaker 7: can have some maybe on something like commodities that's somewhat obvious,
Speaker 7: but I think for the equity market, you know, to
Speaker 7: Lazand's point about how we get information these days, I
Speaker 7: mean that gap between Washington and markets is narrowing every
Speaker 7: single day in terms of policy makings impact on day
Speaker 7: to day equity moves. So I think that needs to
Speaker 7: be taken into consideration.
Speaker 3: I mean, let me do this.
Speaker 2: Paul Kevin Gordon out with an incredible chart. You know,
Speaker 2: les Anne Saunders hasn't seen it, so let's cover it
Speaker 2: right now.
Speaker 8: Well, you know, Lysanne Sanders didn't create it.
Speaker 3: Hark.
Speaker 2: You see the standard four or five hundreds forward twelve months,
Speaker 2: pe was a lofty twenty three point one and has
Speaker 2: come in. I'm gonna go stan Fisher on you here
Speaker 2: is coming. I'm popping fifteen or twenty percent from twenty
Speaker 2: three point one into nineteen point six as well. Does
Speaker 2: that scream opportunity with you? For you a sub twenty
Speaker 2: s and P multiple?
Speaker 4: This has been pure multiple contraction in this corrective phase
Speaker 4: because earnings estimates have continued to go higher. I think
Speaker 4: the answer to that will be better defined once we
Speaker 4: actually start earning season. We know why energy sector estimates
Speaker 4: have gone up. Tech sector estimates have gone up, but
Speaker 4: with a concentration and just a couple of names, the
Speaker 4: analysts really haven't done must adjusting to estimates for a
Speaker 4: calendar year, maybe because they're waiting you know, for as
Speaker 4: much time as possible to get up to the eve
Speaker 4: of reporting season and or wait till they get commentary
Speaker 4: from companies.
Speaker 6: Kevin, we had a rotation I think, kind of late
Speaker 6: last year, coming into prior to the war, maybe coming
Speaker 6: out of some of the high growth, high multiple stuff
Speaker 6: that have been the drivers's market, and maybe in some
Speaker 6: more cyclical stuff small and midcaps. Was that just a
Speaker 6: short term trading thing or is that something longer to
Speaker 6: you guys.
Speaker 7: Yeah, you know what's been interesting is that even on
Speaker 7: a day like yesterday, when you had tech having its
Speaker 7: best day, the tech sector having its best day since
Speaker 7: twenty twenty five, that was to me, in response to
Speaker 7: what had become the momentum trade in favor of energy,
Speaker 7: you know, not in favor of tech. What interesting, though,
Speaker 7: is even with that significant bounce, you didn't really see
Speaker 7: any material pickup in flows, particularly in the retail cohort
Speaker 7: into that sector. I think that that response mechanism, or
Speaker 7: lack thereof, is pretty important because even in advance of
Speaker 7: the war, there was a lot of de risking in
Speaker 7: that particular sector for that cohort, where they were starting
Speaker 7: to put money to work in outside of that and
Speaker 7: having a little bit higher conviction in areas of you know,
Speaker 7: whether it was industrials, whether it was you know, parts
Speaker 7: of consumer of discretionary and staples, or whether it was
Speaker 7: even financials. So I think that that dynamic, the fact
Speaker 7: that hasn't really shifted, it does tell me that there's
Speaker 7: still probably more to that broadening out trade, if you
Speaker 7: want to think about it that way. But I just
Speaker 7: think it's been a little bit more delayed, not necessarily derailed.
Speaker 7: But we're sort of in the camp that it can happen.
Speaker 7: It's just, of course now, at the mercy of these
Speaker 7: headlines every day, it's probably not going to happen as
Speaker 7: fast as we had thought.
Speaker 2: Lizianne Saunders, Kevin Gordon with this with Charles Schwab together,
Speaker 2: we just loved doing this huge response last time. Thank
Speaker 2: you for listening across Liziane Saunder's nation. I want to
Speaker 2: talk process here. Did you guys, like, on something as
Speaker 2: basic as the adjustment of fear of missing ouse?
Speaker 3: Is he allowed to disagree with you?
Speaker 5: I mean he's allowed one?
Speaker 3: Are you doing, Steve Roach? One on one where you
Speaker 3: fight like cats and dogs?
Speaker 4: You know, seven years ago when I hired this guy,
Speaker 4: I think he not that I ever put fear in anybody,
Speaker 4: but I.
Speaker 8: Think you were. It was your a natural thing for you. Yep.
Speaker 4: I agree. Now he can say whatever he wants, but
Speaker 4: we're pretty consistently aligned.
Speaker 3: Where are you on.
Speaker 2: Fear missing out right now? Gauging it after the shock
Speaker 2: of this war.
Speaker 4: You know, I think that the retail trader did slightly
Speaker 4: shift their tack throughout the course of this war. They
Speaker 4: became a little bit less enthusiastic at the individual stock
Speaker 4: lever level with the sort of the buy the dip
Speaker 4: and you know, chasing performance on the upside. So I
Speaker 4: think there's been a little bit of a little less
Speaker 4: complacency being expressed in some of the moves by the
Speaker 4: retail trader. I really, though, think what's going on here is,
Speaker 4: given the inability to gauge what the next headline is
Speaker 4: going to be, what the next narrative shift is going
Speaker 4: to be, what we can glean and.
Speaker 5: Understand is positioning.
Speaker 4: Where I think there's so much short term money in
Speaker 4: the market, whether it is the retail trader.
Speaker 5: Or systematic hedge funds or the CTA.
Speaker 4: World, and there's a lot of focus on what are
Speaker 4: the crowded trades, what are the desolate trades, and either
Speaker 4: playing a momentum there or looking for the potential inflection
Speaker 4: point where you see a shift. So if you can
Speaker 4: understand the positioning, even though you can't anticipate the headlines,
Speaker 4: it helps you staying gear.
Speaker 6: I mean, I guess what I've learned over the last
Speaker 6: I don't know, ten fifteen years a little bit more
Speaker 6: is that your retail investors are They're pretty good. I
Speaker 6: mean they buy the dips, they're pretty I mean I
Speaker 6: haven't seen any, I haven't felt any. I don't know
Speaker 6: panic selling.
Speaker 4: Retail used to be called the dumb money exactly allocating
Speaker 4: IPOs like.
Speaker 8: I always used to say investors.
Speaker 7: Yes, it's kind of lesand and I are sort of
Speaker 7: on this campaign to get rid of that moniker, you know,
Speaker 7: the dumb money, because it really isn't and it hasn't been.
Speaker 7: And I think to your point Paul, about you know
Speaker 7: this cohort of investors, particularly post pandemic, and you talked
Speaker 7: about the past ten to fifteen years. Yes, the retail
Speaker 7: share has gone up. It's sort of the only class
Speaker 7: of investors that has gone up by as much as
Speaker 7: it has almost doubling in percentage, you know, terms of
Speaker 7: in terms of the volume of the market. But if
Speaker 7: you look particularly the past six years, five to six years, yeah,
Speaker 7: there hasn't really been number one what I would think
Speaker 7: of as a real bear market, certainly not when associated
Speaker 7: with a recession. And I think that is sort of
Speaker 7: conditioned investors in particularly this new cohort who you know,
Speaker 7: especially for those who are younger in the you know,
Speaker 7: whether it's Gen Z or young millennial. I think it
Speaker 7: has kind of conditioned them to think that this will
Speaker 7: sort of always work as a strategy, but also having
Speaker 7: a longer time prise and that's not always associated with
Speaker 7: having a high risk tolerance.
Speaker 6: So do you guys have your events and you guys
Speaker 6: go all over the way country? What's the I mean,
Speaker 6: is there people like me walking in the door or
Speaker 6: they're younger people walking because it seems like Mike depends
Speaker 6: on on their phone gauged.
Speaker 5: Yeah, depends on where we are, but I know are
Speaker 5: in Brooklyn.
Speaker 4: You know what we find Incline events a lot the
Speaker 4: bigger ones are are multi generations. Yes, so it'll be
Speaker 4: you know, a retired couple that in some cases they're
Speaker 4: there with a child, and maybe even a grandchild.
Speaker 2: So interesting.
Speaker 8: It's the whole it's the whole age mix.
Speaker 4: When you have twelve trillion dollars in assets, you have
Speaker 4: a little bit of everything age wise.
Speaker 2: Losing signers, Kevin Gordon or this week continue your futures
Speaker 2: up twenty seven. The VIC slides from the angst thirty
Speaker 2: one level where Kevin said, go to cash for sure,
Speaker 2: they're twenty five nine. Here we are fifty minutes away
Speaker 2: from US scheduled President Trump at the Supreme Court. I
Speaker 2: just saw it on Fox triak out. He had a
Speaker 2: substantial number of people below the steps of the Supreme
Speaker 2: Court in Washington. We'll give you video of that on
Speaker 2: YouTube as we can here. Don't see that quite right now.
Speaker 2: So I've got another quote here. This is some Kevin
Speaker 2: Gordon's research. I believe factor focus, high interests, coverage, strong
Speaker 2: balance sheet, positive earnings, revision trends, and stable improving profit
Speaker 2: margins Kevin ze mag seven.
Speaker 7: Not all of them, but I think that over the
Speaker 7: long term that has proven to be number one. That's
Speaker 7: been where the stability has been in consistency of returns.
Speaker 7: Post pandemic, we really have been in a more sort
Speaker 7: of factor dominated world because it's just harder to make
Speaker 7: these monolithic sector calls. It's getting harder. It's not impossible,
Speaker 7: but it's getting harder because of the concentration in a
Speaker 7: lot of these areas. I mean, communication services is such
Speaker 7: a standout for that because it's essentially two names that
Speaker 7: are sometimes close to eighty percent of that sector. But no,
Speaker 7: we still believe in that up in quality sort of story,
Speaker 7: and I would say actually that that's moved the I
Speaker 7: think what's been one of the more beneficial elements of
Speaker 7: this market year to date is that's moved down the
Speaker 7: cap spectrum a little bit, so the percentage of unprofitable companies.
Speaker 7: Even in an index like the Russell two thousand that
Speaker 7: has rolled over a year to date, it's still relatively high.
Speaker 7: But I think that there's been a benefit now spread
Speaker 7: throughout the market, not necessarily just in your classic SMP five.
Speaker 6: Hundred, Lizanne, you and I started in the business kind
Speaker 6: of around the same time. One of the things that's
Speaker 6: really changed, I think is the whole alternative investment opportunities
Speaker 6: for everybody, including retail investors. Yes, how do you guys
Speaker 6: at Schwab position alternative investments, whether it's ed's phones, private equity,
Speaker 6: private credit, real estate, all that kind of stuff, and
Speaker 6: you guys position that.
Speaker 8: And you know we are.
Speaker 4: We have been big democratizers over the past fifty plus years,
Speaker 4: and I think we're part of that process now in
Speaker 4: helping to bring alternative asset classes into the asset allocation discussion.
Speaker 4: The most important thing is that you around it and
Speaker 4: also fit making sure the clients who are bringing, whether
Speaker 4: it's private credit or private equity or hedge funds, that
Speaker 4: they understand how it fits and what is hopefully a
Speaker 4: well planned strategic acid allocation portfolio. Where are the correlations,
Speaker 4: What is the willingness to give up some of that transparency,
Speaker 4: to give up some of that liquidity. Don't just think
Speaker 4: of it as the shiny new object. I need to
Speaker 4: get some of this. It's the education that sits behind it.
Speaker 4: And most of the investors that we talk to who
Speaker 4: want to add that into the mix are those that
Speaker 4: take what we call an advised approach where they're working
Speaker 4: with one of our advisors, one of our financial consultants
Speaker 4: in developing a long term actual plan.
Speaker 2: I have to ask this to close out, Lazaann, you
Speaker 2: did a real public service for the nation. I brought
Speaker 2: this up before on our fiscal policy. You must be
Speaker 2: getting questions on our debt and.
Speaker 8: Deficit every single solsarial day.
Speaker 2: Is it any different from the time of Pete Peterson,
Speaker 2: Paul Sungas and the Senator from Georgia? Is the same old,
Speaker 2: same old.
Speaker 4: The questions are a little bit more. They have a
Speaker 4: little bit more of a calamitous tone to them. Oftentimes,
Speaker 4: when we get questions, it's not just what do you
Speaker 4: think of the you know, high rising burden of debt
Speaker 4: or you know, how long are we going to run
Speaker 4: deficits this big? It's what is the tipping point? And
Speaker 4: then it's often got to follow on like is the
Speaker 4: dollar going to lose its reserve currency status? Is the
Speaker 4: US going to default? Is China going to literally figuratively
Speaker 4: wake up one day and just decide to dump all
Speaker 4: of its treasury? So there's a little bit more of that. Boy,
Speaker 4: I feel like we're at a tipping point tone to
Speaker 4: the questions.
Speaker 2: Can we move on from the NCAA tournament? Please please
Speaker 2: Kevin explain Pepperdine playing u c l A back to
Speaker 2: back in Stanford and volleyball, it's like.
Speaker 7: Players, Yeah, my favorite school to follow.
Speaker 3: Is anyone under six five?
Speaker 7: No, there were only me, but I wasn't on the team.
Speaker 3: Is it like a.
Speaker 2: Conduit from poona Ho in Hawaii? You just go to
Speaker 2: and say we want six Thomas kids, let's.
Speaker 7: Not Thomas tallest. But no, it's an amazing They're they're
Speaker 7: they're killing it. I I love following that sport. It
Speaker 7: was beach volleyball was my favorite to follow.
Speaker 8: The beaches.
Speaker 3: The beach.
Speaker 8: We had an area called the beach.
Speaker 4: It was like a quad and it didn't even have
Speaker 4: grass though, so yeah, I kind of looked like.
Speaker 7: It was a little different.
Speaker 3: Though.
Speaker 7: Yeah, I think the water in Malibu is a little.
Speaker 2: Bit better, you know this, better than we've done way
Speaker 2: too much West Coast today we had Harvey.
Speaker 7: I know, Clara, there's never too much West Coast and
Speaker 7: Clara Broncos Baby, there we go. Pepperdine has just consistently
Speaker 7: across over the years, that's been one of, if not
Speaker 7: our best sports, I mean in our tournament rankings and
Speaker 7: that it's amazing.
Speaker 6: So that was really Malibu.
Speaker 7: Yes, California.
Speaker 8: You've got to look up a picture.
Speaker 9: I know.
Speaker 2: Let me let me translate this for you. And this
Speaker 2: involves Jenny Kremail April second. Pepperdine's playing U C l
Speaker 2: A and volleyball April second.
Speaker 3: In Western New York. You get up and you've got a.
Speaker 2: Biochemistry class at eight am, and you have to walk
Speaker 2: what's called the quarter mile west into the wind coming
Speaker 2: in from Buffalo.
Speaker 7: Not to mention in Malibu, though, you've got to wake
Speaker 7: up and climb one hundred stairs because we call it Stepperdine's.
Speaker 8: Violins playing just for you over here.
Speaker 3: I'll bring out my mind your volleyball updates. We do
Speaker 3: it all here, We do it all. Kevin Gordon, thank
Speaker 3: you so much for bringing listen. Thank you sounders with you.
Speaker 3: You're both wearing black. Kathy Jones retiring, extraordinary.
Speaker 8: Career, amazing. We will We will miss her a lot.
Speaker 2: As she did a taco tweet on President Trump. It
Speaker 2: was totally outside compliance.
Speaker 8: It was MI so it begins.
Speaker 7: I'll put the compliance. Plus she did mention yesterday on
Speaker 7: Twitter that this is now her personal account.
Speaker 2: So very personal. We wait there from Kevin Gordon as well,
Speaker 2: Liza and Sanders. Kevin Gordon forever at Charles Schwatt, stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after.
Speaker 1: This, you're listening to the Bloomberg Surveillance podcast. Catch us
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Speaker 3: I do this.
Speaker 2: Because you should see my new Philson Fishing Guide vest
Speaker 2: Twitter eighty nine dollars.
Speaker 3: Wow, it's very good.
Speaker 2: It's designed for anglers to organize gear for a full
Speaker 2: day out on the tundra as well. On April first,
Speaker 2: we always speak with Ellen because they said to Lisa Shallaton,
Speaker 2: I'm sorry, I gotta do fly fishing here. There's the
Speaker 2: pre runoff window. Yeah, like like the winter waters. Yeah,
Speaker 2: the streams are like what clearer?
Speaker 5: The fish have been starving all winter and you get
Speaker 5: them before the runoff, and so they're pretty excited about that.
Speaker 5: And you don't get a lot of pressure. You don't
Speaker 5: see a lot of other anglers out there. And actually
Speaker 5: some of the best fly fishing is going out for
Speaker 5: Mother's Day, which is actually just before the runoff, but
Speaker 5: won't make you very popular with mom.
Speaker 2: Okay, is this the Arkansas and South Platt Is it
Speaker 2: the yellowst the jelly Stone in Missouri?
Speaker 3: Rivers. Where does Ellen Zetner.
Speaker 5: Go, Well, Tom, you really you're really struggling with this
Speaker 5: this this morning.
Speaker 2: Yeah, well you know it's I think this is important,
Speaker 2: like where where is your chosen April.
Speaker 3: River in America?
Speaker 5: Well, look, we don't have or give away the rivers
Speaker 5: that we liked. Fish, you don't.
Speaker 3: Do that and platter.
Speaker 5: Yeah, but Montana is still a big favorite, a big
Speaker 5: favorite of ours.
Speaker 2: Driving so much at Morgan Stanley, Ellen Xander with us today?
Speaker 2: How was the American consumer? This is how you and
Speaker 2: I first met, I know, do.
Speaker 5: You know talking about Apple's fiftieth the anniversary. There's a
Speaker 5: big anniversary for us, Tom. It is twenty three years
Speaker 5: ago that I was first on radio with you. Very
Speaker 5: twenty three years ago.
Speaker 3: You were three years old?
Speaker 8: Exactly, Yes, no, exactly.
Speaker 2: Well seriously, this is she was sixteen years old out
Speaker 2: of some high school in Texas.
Speaker 3: That's what I read.
Speaker 5: It was you and Ken Pruitt and I in the studio.
Speaker 3: Was the only reason you got on?
Speaker 2: Was you and Ken talk and fly fishing Paul Sweety
Speaker 2: with elsator Ellen, what do you.
Speaker 6: What are the conversations you're having with your clients as
Speaker 6: you do travel around the US.
Speaker 3: Talking to your US.
Speaker 6: Clients here, do they want you to really help them
Speaker 6: think about on the other side of this war?
Speaker 3: What do we do here?
Speaker 6: Is that? What are the conversations you're having these days?
Speaker 5: I tell you what. There's so much volatility and so
Speaker 5: much uncertainty out there that it has made the conversations
Speaker 5: all that much more interesting because they're much more longer
Speaker 5: term focused. So not necessarily when are we going to
Speaker 5: get beyond this? But it's more of what does this
Speaker 5: mean in the bigger picture of long term national security
Speaker 5: and resource nationalism and resource scarcity and defense spending and
Speaker 5: all of those things. And so it makes those topics
Speaker 5: really top of mind for clients because you can't it
Speaker 5: really gets exhausting trying to figure out when is this
Speaker 5: thing going to end? Am I supposed to time it?
Speaker 5: What should I do here? And so it just opens
Speaker 5: the door to some really interesting conversations. I don't think
Speaker 5: anyone knows when we're going to be out of this
Speaker 5: and what does out of this even mean?
Speaker 6: And I think we're seeing that maybe in the oil
Speaker 6: marketings we're seeing stocks reb Okay, that's fine, maybe it
Speaker 6: goes to the growth issue, but you know, oil still
Speaker 6: holding very high levels. That suggests maybe the market saying
Speaker 6: I'm not sure it is straight up where moose things
Speaker 6: ever going to clear up in the near term.
Speaker 5: Yeah, well, even if I mean, what does it mean
Speaker 5: to open the straight tomorrow, I mean, let's just assume
Speaker 5: that's a thing, and that that could happen. You still
Speaker 5: got all of these price effects and shortages in the pipeline,
Speaker 5: and businesses have to absorb that, households have to absorb that,
Speaker 5: and some countries are going to be able to absorb
Speaker 5: it better than others. There are countries that will step
Speaker 5: in with food subsidies and other assistants like that, but
Speaker 5: there will be pain. Now does that mean recession? Not necessarily,
Speaker 5: but I think the probability of recession here is higher
Speaker 5: than people think, and I would put it around forty percent,
Speaker 5: which is meaningful. It's uncomfortable, right helping.
Speaker 2: You're again with the consumer and that you know, the
Speaker 2: modern statement is the case shape. You literally invented this
Speaker 2: as a cottage industry at unit credit.
Speaker 3: I think it was years ago.
Speaker 2: I mean, help us here with a fifteen hundred dollars
Speaker 2: disposable income lift and cost due to a gallon of gas.
Speaker 2: It crushes how much of America?
Speaker 5: Yeah, so it always falls more heavily. It's very regressive,
Speaker 5: so it falls more heavily on lower income households. They
Speaker 5: also have to commute and drive to work, especially in
Speaker 5: the big driving states. You'll see the bigger impacts and
Speaker 5: you'll see them change their behavior, but it takes time.
Speaker 2: Wait, wait a minute, Morgan Stanley, where everybody grew up
Speaker 2: in three zip codes and your country girl fishing and
Speaker 2: all that, we don't understand those driving times.
Speaker 5: Those are big driving states.
Speaker 2: Yeah, you know, children from the East just don't get it.
Speaker 3: Now.
Speaker 6: I spent half my life on New year'sy transit, so
Speaker 6: that's not kind of.
Speaker 5: So you don't understand. But many of your listeners will
Speaker 5: know the obsession that you have Florida, Texas, California, these
Speaker 5: big driving states. It is a family obsession talking about
Speaker 5: gas prices around dinner table. You pass by a gas station,
Speaker 5: you look at every single sign to see what the
Speaker 5: gas price is. You comment on how it's gone up,
Speaker 5: when was the last time you saw that price, Like
Speaker 5: it's a pastime. Just like for New Yorkers talking about
Speaker 5: the weather, it's talking about gas prices for much of
Speaker 5: the rest of the country, and so this is meaningful.
Speaker 5: You can first, if you weren't buying the cheapest unleaded gasoline,
Speaker 5: you'll switch to the cheapest. Then after time maybe you
Speaker 5: start to commute. We did this in two thousand and eight.
Speaker 5: We started, we started car pooling together. We started changing
Speaker 5: our altering our behavior on the types of vehicles we
Speaker 5: were buying. You've seen all the reports of people now
Speaker 5: inquiring about evs, for instance, but it takes time to
Speaker 5: change those behaviors, and so you have to suck it
Speaker 5: up and pay it at the pump and till you
Speaker 5: can cut costs elsewhere.
Speaker 6: That being said, what's your view on a consumer, because
Speaker 6: it seems like the consumers more than hanging in there.
Speaker 5: I guess well, I mean this has been like how
Speaker 5: many years in a row we've been talking about this.
Speaker 5: The low income consumer has been in and out of recession.
Speaker 5: The first recession they went to was when they worked
Speaker 5: through the excess savings that had been built up during
Speaker 5: COVID from the stimulus and not just not being able
Speaker 5: to spend income. So they've been in and out of recession. Luckily,
Speaker 5: wage growth has at least for a time been outpacing inflation.
Speaker 5: But the wealthy consumer. We don't need the wealthy consumer
Speaker 5: to just stop spending. It's slowing spending. And of course,
Speaker 5: if you've already met a lot of pent up demand,
Speaker 5: you've been out there spending for years now. With this
Speaker 5: amazing run up in financial assets, you're sitting on a
Speaker 5: lot of equity in your home, but you're not seeing
Speaker 5: further gains. It can cause you to pull back on spending.
Speaker 5: And that's all it takes.
Speaker 2: Let I get to send quickly, what's investment look like?
Speaker 2: We never talk about the eye of C plus I
Speaker 2: pluts and ACTSECTC. What's investment looked like?
Speaker 3: Forward?
Speaker 5: So business investment had been very tech tech and infrastructure
Speaker 5: related to AI related last year. The big optimism around
Speaker 5: this year has been with the One Big Beautiful Bill Act.
Speaker 5: As we turned the corner into this year, there were
Speaker 5: nascent signs of business investments starting to broaden out. Because
Speaker 5: it's really hard to not want to take advantage of that.
Speaker 5: We've done one hundred percent bonus appreciation, but sorry, fifty
Speaker 5: percent before we've not done one hundred percent, and it's
Speaker 5: on infrastructure as well. It's really hard to not take
Speaker 5: advantage of that. But is this a false start because
Speaker 5: now you have the conflict in Iran, You've got energy prices,
Speaker 5: food input prices for businesses, and they're going to have
Speaker 5: to eat a good chunk of that. Does that negate
Speaker 5: some of your decisions that you were going to make
Speaker 5: to invest I think they will still take advantage of
Speaker 5: the One Big Beautiful Bill Act. But this is what
Speaker 5: as soon as we're able to look beyond the conflict
Speaker 5: and the Strait of Hormuz, here's what the next concern
Speaker 5: is the cliff that we will fall off from having
Speaker 5: pulled forward all of the demand and tax breaks and
Speaker 5: everything else from the One Big Beautiful Bill Act.
Speaker 2: We have to run. Ellen Zettner, thank you so much.
Speaker 2: I learned so much today about trout fishing.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 3: Studio Martin Norton.
Speaker 2: That's what you could join as chief investment strategists at
Speaker 2: Empower I should mention that Empower Services Tom Kenes non retirement. Yeah,
Speaker 2: here the caskets out, caskets all back, A sigh in
Speaker 2: the studio thank you quote. Throw the twenty twenty six
Speaker 2: playbook out the wind. The first one I've seen is
Speaker 2: actually said this, what's the new Martin Norton playbook look like?
Speaker 9: Well?
Speaker 10: Remember, pre war, the whole focus was on broadening out,
Speaker 10: really predicated on this idea that earnings could drive momentum
Speaker 10: away from taking to these other areas of the market.
Speaker 10: And now the question mark that we're looking at is
Speaker 10: what do earnings look like post spike in oil prices
Speaker 10: and everything else. We'll get some read on that pretty soon.
Speaker 10: We'll get some guidance on that pretty soon. But I
Speaker 10: think the other question we have to ask ourselves is
Speaker 10: valuations were not that accommodative pre oil spike, and now
Speaker 10: I think valuations play a pretty big role because there's
Speaker 10: still those negative surprises out there. So if you don't
Speaker 10: have much margin of safety, that's something that matters to
Speaker 10: how these markets perform. I will say though, that some
Speaker 10: of the themes that were in place before, like the AI theme,
Speaker 10: the transformation, the creative destruction, that's still in the background.
Speaker 6: How about the rotation we saw in the market kind
Speaker 6: of starting late last year into this year before the war,
Speaker 6: out of some of the high tech high valuation maybe
Speaker 6: into some more value sensitive, very small and mid captins.
Speaker 3: Yeah, is that still a thing?
Speaker 10: Well, that's that's what I'm struggling with a bit. And
Speaker 10: what I've liked about that rotation when we've left tech
Speaker 10: behind is I think getting a piece of that AI
Speaker 10: trade is a really valuable thing. But did you really
Speaker 10: want to be doing it in September when we had
Speaker 10: valuations where they are? And now what we do when
Speaker 10: we look at valuations is we look at them in deciles,
Speaker 10: because when they matter is at extremes. And when we're
Speaker 10: looking at the mag seven and it's decile going back
Speaker 10: to twenty fifteen, it's in its lowest decile, which is
Speaker 10: a ken to where it was post liberation day. So
Speaker 10: to me, that's a better opportunity than it was six
Speaker 10: months ago. With the fundamental still intact software also very cheap,
Speaker 10: maybe rightly so, but maybe some opportunities emerging there too.
Speaker 2: Given an empowered timeframe, three years is tomorrow, five years,
Speaker 2: ten years, are we overdiversified or underdiversified in for own.
Speaker 10: Case, it depends on the person in question. Now, a
Speaker 10: lot of folks, what you see with the four to
Speaker 10: one case space in particular is a default into target
Speaker 10: date funds. So your your multi asset have they been successful?
Speaker 2: Have they been actually a sessional like sharp ratio successful?
Speaker 10: I think what you've seen is really good behavior out
Speaker 10: of the investors who've been in the target date funds.
Speaker 10: You know, one thing people always say about individual investors
Speaker 10: is you know, how emotional they are, how silly they are,
Speaker 10: And that's target date takes the emotion out of it.
Speaker 10: And I think that's been a big win. You can
Speaker 10: you can argue, you know, different asset classes that are included,
Speaker 10: but I think the big win has been the emotional
Speaker 10: win on the target date side.
Speaker 6: How's the conversation with your clients, you know, changed since
Speaker 6: we went into this war and Iran. Has it been
Speaker 6: de risking, has it been trying to buy the dips?
Speaker 6: What are the conversations?
Speaker 10: You know, it's been really interesting because when we went
Speaker 10: through Liberation Day and tear Us, emotions were very, very
Speaker 10: high on the individual investors side. When we're looking today,
Speaker 10: there are still high emotions, but there's almost like a
Speaker 10: certain measure of resignation. But the environment and the surprises,
Speaker 10: so yeah, we're still getting questions and we still you know,
Speaker 10: people are having very big picture questions these days, but
Speaker 10: there's not a sense of panic.
Speaker 3: I would sugg knee deep in the Ragget one quick question.
Speaker 2: Are Wroth's over sold this whole Wroth conversion thing.
Speaker 3: Does Empower say it's overdone?
Speaker 10: No Empower or view on that particular question. I mean,
Speaker 10: I think what Empower's biggest perspective is is get engaged,
Speaker 10: get participating, regardless of account type, get saving, and it
Speaker 10: makes an enormous difference.
Speaker 2: Brilliant Martinton, Thank you so much in studio with us
Speaker 2: today with Empowered Don't be Bronco.
Speaker 10: Tickets to come on Good Bene Good, Better, Best is
Speaker 10: where I am Sarta d Hurt.
Speaker 3: Thank you so much, greatly, greatly appreciate it. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app. Or
Speaker 1: watch us live on YouTube.
Speaker 2: We welcome all of you across the nation, across America
Speaker 2: and original site Tyler Kendall in front of the nineteen
Speaker 2: thirty five Supreme Court building where history will be made. Tyler,
Speaker 2: thank you so much for joining us for an extended
Speaker 2: conversation as simple as I can. There's no cameras in
Speaker 2: the court room. How do you suggest Chief Justice Roberts
Speaker 2: will attend this history moment?
Speaker 9: Well, Tom, you're exactly right. This is really unprecedented for
Speaker 9: a modern sitting US president president to be inside the
Speaker 9: Supreme Court for oral arguments while they are discussing one
Speaker 9: of his signature policies that he's trying to push through.
Speaker 9: Of course, this case stemming from President Trump's executive order
Speaker 9: that he signed on the very first day in office
Speaker 9: barring US born children of undocumented immigrants from obtaining US citizenship.
Speaker 9: This is going to be a very interesting room to
Speaker 9: be a fly on the wall, because, as you're right,
Speaker 9: we're not going to get those photos of it, but
Speaker 9: we will get, of course, the reporter's descriptions inside the rooms,
Speaker 9: and also those sketches, because you well know, President Trump
Speaker 9: has really taken aim at this Supreme Court recently considering
Speaker 9: that ruling that we got up ending the president's broad
Speaker 9: based care policies.
Speaker 3: Will there be bodied language?
Speaker 2: I mean, I mean, if he's playing to three justices
Speaker 2: is experts advises Tyler, do we assss he's going to
Speaker 2: sit in the front row and squirm around like Paul
Speaker 2: or I would squirm around in a tennis lesson with you.
Speaker 9: Well, as you all know, Preston Trump often makes his
Speaker 9: views very well known, so perhaps that will come in
Speaker 9: body language. But I wanted to point out to you
Speaker 9: Tom and Paul that we've actually already gotten some signals
Speaker 9: from some of these conservative justices, including Brett Kavanaugh, for example,
Speaker 9: that they may already be skeptical about the administration's argument
Speaker 9: when it comes to essentially changing the view of how
Speaker 9: the citizenship clause in the Fourteenth Amendment is viewed. We
Speaker 9: heard what court watchers called signals that they may not
Speaker 9: totally agree with what the US Solicitor General John Sower
Speaker 9: has already outlined in what his arguments are going to
Speaker 9: be today. So expected to be to be a tense room,
Speaker 9: considering we already know that at least three lower courts
Speaker 9: had already blocked the President's executive orders leading to what
Speaker 9: ultimately was the Supreme Court appeal.
Speaker 6: Tyler, help us just kind of paint a picture in
Speaker 6: our minds of kind of what this room may look like.
Speaker 6: Do we know how many people will be in this courtroom?
Speaker 8: How big is it?
Speaker 6: How close potential would the president be to the justices?
Speaker 6: What do we know about this actually how this unfold today?
Speaker 9: It's an incredibly close courtroom of the stand at Supreme
Speaker 9: Court behind me. We're expecting oral arguments to go a
Speaker 9: little over an hour, maybe an hour and a half
Speaker 9: is how it typically works straight at ten am Eastern,
Speaker 9: So we're really just moments away. I can't pay you
Speaker 9: a better picture what it's like outside here. Our listeners
Speaker 9: can probably hear there are dueling protests happening here. You
Speaker 9: also may hear helicopters warring around. We're right across from
Speaker 9: the US Capitol building. Just to add to the backdrop there,
Speaker 9: we know, of course, this is marking the President doubling
Speaker 9: down on his hardline immigration stands. We should probably keep
Speaker 9: in mind, I can see the Capitol rotunda where I'm standing.
Speaker 9: The Department of Homeland Security right now is shut down
Speaker 9: over his hardline immigration policies with CHET. This moment shows
Speaker 9: that there's no sign that it's going to abate and resolve.
Speaker 2: Tyler, You're like us, let's be humble. We're not experts
Speaker 2: at this. You have the advantage of Greg's store, June
Speaker 2: Grosso Paul coming up at the ten o'clock our.
Speaker 3: Tyler Kendall.
Speaker 2: When you listen to the experts, what do they say
Speaker 2: about this historic moment?
Speaker 9: Well, Tom, they say that this case is going to
Speaker 9: come down to literally five words in the Citizenship Clause.
Speaker 5: Of the fourteenth Amendment.
Speaker 9: You also may hear there is a marching band that
Speaker 9: is about to enter onto First to Avenue. But I
Speaker 9: was actually having this conversation with Greg Store earlier this morning, so.
Speaker 5: I'm glad that you brought up his name.
Speaker 9: He is a resident expert. And that is the line
Speaker 9: in the Citizenship Clause of the fourteenth Amendment that the
Speaker 9: right is quote subject to the jurisdiction thereof. We're willing
Speaker 9: to hear those high words over and over again, and
Speaker 9: whether or not the jurisdiction extends.
Speaker 2: Is that the marching band for the University of Connecticut,
Speaker 2: because you have three of the four final four in
Speaker 2: your bracket pick is that the Yukon Marching band. I hear.
Speaker 9: It is not the Yukon Marching band. I can't actually
Speaker 9: quite make it out, but they have huge drum like.
Speaker 8: You's helping you.
Speaker 3: That's great, Tyler Kendall. You were a truer.
Speaker 2: Thanks so much. She is outside the Supreme Court building.
Speaker 2: I wasn't going to bring it up, but she's killing
Speaker 2: the bracket this year. She's like number twelve or saws
Speaker 2: on for her thousands and thousands. We should have claimed.
Speaker 2: She has a huge Connecticut affiliation. Sterling at tennis for
Speaker 2: the State of Connecticut in high school. Tyler Kendall outside
Speaker 2: the Supreme Court truly an historic moment.
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