WEBVTT - Trump Hails 'Historic Dawn' for Middle East 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.960 us live on YouTube. 0:00:27.160 --> 0:00:29.840 Let's go to Galit Alstein. She is a Bloomberg News reporter. 0:00:29.880 --> 0:00:32.919 She is based in Tel Aviv, Ghale. Thanks so much 0:00:32.960 --> 0:00:36.479 for joining us here. What's the feeling in Israel today 0:00:36.520 --> 0:00:38.640 as these hostages come home? 0:00:38.880 --> 0:00:42.199 I think for almost everyone in Israel, this is a 0:00:42.320 --> 0:00:45.760 very happy day. We've been seeing tens of thousands of 0:00:45.800 --> 0:00:50.519 Israelis flock since early this morning to Tel Aviv's Hostage Square, 0:00:50.920 --> 0:00:54.520 which has become a sort of gathering point over the 0:00:54.560 --> 0:00:57.080 past two years for those who have been advocating for 0:00:57.120 --> 0:01:00.960 the release of the hostages. And it was quite a 0:01:01.000 --> 0:01:05.160 sight today seeing about, like I said, sixty seventy thousand 0:01:05.160 --> 0:01:08.800 people in the square and then all the surrounding streets 0:01:09.240 --> 0:01:12.560 with a big stage that Tom kept broadcasting the images 0:01:12.600 --> 0:01:16.000 of the hostages coming out. People were chanting and clapping 0:01:16.040 --> 0:01:20.560 their hands and singing and cheering, and it was indeed 0:01:20.560 --> 0:01:23.480 a very happy day and I think a sense of 0:01:23.560 --> 0:01:25.800 relief for a lot of Israelis here. 0:01:26.360 --> 0:01:26.640 Glik. 0:01:26.680 --> 0:01:29.000 There was a moment in that speech when President Trump 0:01:29.560 --> 0:01:31.880 was talking to Prime Minister Netniahoo directly and he said 0:01:31.880 --> 0:01:33.959 he had a lot of guts for knowing when to 0:01:34.000 --> 0:01:36.640 stop the fighting and for stopping the fighting when he did. 0:01:37.480 --> 0:01:38.840 Just get us up to speed here on what these 0:01:38.920 --> 0:01:41.440 last few days have been like. We had President Trump 0:01:41.520 --> 0:01:45.399 unveiling this peace plan a couple of weeks ago. The 0:01:45.440 --> 0:01:47.040 devil is in the details, of course, we were talking 0:01:47.040 --> 0:01:48.520 about that just a few moments ago. What's going to 0:01:48.520 --> 0:01:51.680 happen here in Egypt and going forward, But just explain 0:01:51.760 --> 0:01:54.120 what President Trump was able to do, how he was 0:01:54.160 --> 0:01:56.800 able to convince Prime Minister net Yahoo to stop that 0:01:56.800 --> 0:01:58.800 assault on Gaza City that was underway. 0:02:00.240 --> 0:02:03.880 Yeah, so we to be very honest and transparent. I 0:02:03.920 --> 0:02:06.120 think we only know like part of the question, the 0:02:06.160 --> 0:02:10.680 answer to that question at this stage. But overall, you know, 0:02:10.760 --> 0:02:15.400 Natan Yao has generally insisted that Israel cannot stop fighting 0:02:15.400 --> 0:02:18.000 in Gaza and cannot stop fighting Hamas until it is 0:02:18.200 --> 0:02:22.840 totally defeated, until it's completely out of power, and until 0:02:22.960 --> 0:02:27.000 all of its military capabilities are taken out. And what 0:02:27.160 --> 0:02:31.960 happened here is that Trump, I think, along you know, 0:02:32.040 --> 0:02:35.880 with Im, Steve Whitkoff and Jared Kushner, they managed to 0:02:35.960 --> 0:02:38.720 do a few things. On the one hand, they managed 0:02:39.000 --> 0:02:44.440 to convince Hamas by themselves, through mediators, that to give 0:02:44.520 --> 0:02:46.840 up all the hostages at once, at least all the 0:02:46.880 --> 0:02:50.520 living hostages, because there are still twenty eight dead hostages 0:02:50.560 --> 0:02:53.560 that remain in Gaza, and we understand that only about 0:02:53.639 --> 0:02:56.440 four of them are going to be brought back today. 0:02:57.360 --> 0:02:59.959 So that's one thing they managed to do. But in terms, 0:03:00.480 --> 0:03:04.080 what Hamas wanted was guaranteed that the war will in 0:03:04.120 --> 0:03:07.240 fact end after that happens, and that Israel doesn't just 0:03:07.280 --> 0:03:09.840 get all the hostages back and then goes back to fighting. 0:03:10.360 --> 0:03:15.240 And you know, Trump has basically personally guaranteed that this 0:03:15.280 --> 0:03:17.560 will happen and that the war will end. And we've 0:03:17.600 --> 0:03:20.080 heard him say multiple times today on the way to 0:03:20.200 --> 0:03:22.440 Israel and Air Force one when he came to the 0:03:22.480 --> 0:03:26.120 Israeli parliament, that this is the end of war and 0:03:26.160 --> 0:03:29.600 that the US will make sure that's what happens. So 0:03:29.639 --> 0:03:31.639 I think these are, you know, the two things that 0:03:32.360 --> 0:03:35.520 made a difference. You know, the biggest sticking point moving 0:03:35.600 --> 0:03:39.760 forward will be whether Hamas some agrees to disarm. Trump's 0:03:39.760 --> 0:03:42.800 twenty point Plans says that that's what Hamas has to do. 0:03:42.840 --> 0:03:45.600 Hamas hasn't agreed to do that yet, and that's what 0:03:45.720 --> 0:03:49.560 Israeli system. So we'll have to see how that plays out. 0:03:49.640 --> 0:03:52.840 But the sense is that the war, at least as 0:03:52.880 --> 0:03:55.640 if we as we've known it in the past two years, 0:03:56.040 --> 0:03:59.960 has in fact come to an end that sort of 0:04:00.120 --> 0:04:00.920 looks like today. 0:04:01.560 --> 0:04:03.480 Glee, thank you so much for joining us. Really appreciate 0:04:03.520 --> 0:04:07.960 your reporting from Israel. Gleed Alstein Bloomberg News in our 0:04:08.000 --> 0:04:09.760 Tel Aviv euro Stay with us. 0:04:09.840 --> 0:04:12.320 More from Bloomberg Surveillance coming up after this. 0:04:18.480 --> 0:04:22.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:04:22.160 --> 0:04:25.279 weekday afternoons from seven to ten am Eastern Listen on 0:04:25.400 --> 0:04:28.799 Apple Karplay and Android Auto with the Bloomberg Business app, 0:04:28.960 --> 0:04:30.520 or watch us live on YouTube. 0:04:30.600 --> 0:04:33.680 Let's check out with Lori Calvacina ahead of US equity 0:04:33.720 --> 0:04:38.279 strategy for RBC Capital Markets. Laurie, it's kind of seems 0:04:38.279 --> 0:04:40.880 to be trade as one of the drivers of kind 0:04:40.920 --> 0:04:43.960 of market sentiment these days. We got maybe a little 0:04:44.000 --> 0:04:46.480 bit of a softening of tone from President Trump as 0:04:46.520 --> 0:04:48.479 it relates to China, and I guess that's what the 0:04:48.520 --> 0:04:50.080 market likes to see here. What are you making of 0:04:50.160 --> 0:04:51.760 today's pre market action? 0:04:52.960 --> 0:04:54.760 Well, thanks for having me, Paul. Look, I mean, it's 0:04:54.760 --> 0:04:57.040 not unexpected to get a bit of a bounce right 0:04:57.120 --> 0:04:59.279 after kind of the big drop that we saw on Friday. 0:04:59.480 --> 0:05:01.520 I think it's gon to be really interesting to see 0:05:01.520 --> 0:05:03.600 how the S and P five hundred trades today. The 0:05:03.680 --> 0:05:06.160 kids are out of school in New York City, I'm 0:05:06.160 --> 0:05:09.919 guessing other parts of the country as well. They're thankfully 0:05:09.920 --> 0:05:12.719 not running around here for me, but the you know, 0:05:12.800 --> 0:05:15.320 it is a quiet day on Wall Street, right, so 0:05:15.440 --> 0:05:17.280 let's see what we get in terms of the price action. 0:05:17.400 --> 0:05:20.359 But I think tomorrow is really going to be, you know, 0:05:20.440 --> 0:05:22.159 kind of the day where I think we start to 0:05:22.200 --> 0:05:25.000 hear a bit more from folks, you know, in terms 0:05:25.040 --> 0:05:27.840 of how they're digesting this. And look, i'll tell you, Paul, 0:05:28.040 --> 0:05:30.440 as I think back over the last three weeks i've 0:05:30.480 --> 0:05:32.960 been in the UK, I've been running around the US 0:05:33.080 --> 0:05:35.200 to more cities than I can count and keep track 0:05:35.240 --> 0:05:38.120 of at this point, and I heard a whole lot 0:05:38.160 --> 0:05:41.720 of things about people that they were worried about valuations, 0:05:41.800 --> 0:05:45.040 AI capex, right cut pricing got pulled forward in the 0:05:45.040 --> 0:05:49.120 stock market, labor inflation, you know, is that going to 0:05:49.200 --> 0:05:50.839 start to percolate soon or are we going to see 0:05:50.839 --> 0:05:53.520 more of a growth response to tariffs in the market. 0:05:53.640 --> 0:05:55.800 But the one thing I was not hearing about was 0:05:55.880 --> 0:05:58.839 that things could you know, start escalating again with China. 0:05:58.960 --> 0:06:01.480 So I think what we learned on Friday was that 0:06:01.800 --> 0:06:04.279 a fair amount of you know, we're on a good path, 0:06:04.720 --> 0:06:06.880 things are headed in the right direction. That was really 0:06:07.000 --> 0:06:09.200 kind of a firm underpinning of this market. So we 0:06:09.240 --> 0:06:10.520 need to see how that plays out. 0:06:11.360 --> 0:06:15.200 It seems like quarter after quarter, Laurie, going into earning season, 0:06:15.320 --> 0:06:18.240 financials are held up as a bell weather is something 0:06:18.240 --> 0:06:19.800 that's going to tell us about the health of the market. 0:06:19.839 --> 0:06:21.560 It's going to give us some insight into the economy 0:06:21.560 --> 0:06:24.440 as well. So tomorrow we've got JP Morgan Goldben Sachs, 0:06:24.440 --> 0:06:26.560 City Group on the heels of that, We've got Bank 0:06:26.600 --> 0:06:31.320 of America and Morgan Stanley on Wednesday. In this odd economy, 0:06:31.400 --> 0:06:33.960 in this moment, what are those particular companies going to 0:06:34.040 --> 0:06:34.400 tell us? 0:06:35.760 --> 0:06:37.719 So, you know what, we'll see what they have to say. 0:06:37.760 --> 0:06:41.240 Earnings revisions have been pretty resilient there. So my guess 0:06:41.279 --> 0:06:43.040 is that we're going to have, you know, some pretty 0:06:43.040 --> 0:06:44.839 good messaging coming out of them, but we'll have to 0:06:44.880 --> 0:06:48.360 see the reality though. You're common about the bell weather. 0:06:48.400 --> 0:06:50.400 This was something we wrote about in our weekly today. 0:06:50.440 --> 0:06:52.640 And if I go back the last couple reporting seasons, 0:06:52.880 --> 0:06:54.880 you know, I could summarize, you know, what we've been 0:06:54.920 --> 0:06:57.360 hearing from the banks, and especially the Big Bank says, 0:06:57.560 --> 0:07:00.000 don't worry about the consumer. Everything's fine, the stats all 0:07:00.080 --> 0:07:02.800 look good. You know, we're really you know, proud of 0:07:02.800 --> 0:07:05.680 our consumers for being more choiceful in their purchases. 0:07:06.320 --> 0:07:07.799 But don't worry. Things aren't cracking. 0:07:08.160 --> 0:07:10.840 And that's that's not wrong, right, I mean, that's what 0:07:10.920 --> 0:07:11.920 they're seeing in the data. 0:07:12.000 --> 0:07:13.120 That's one perspective. 0:07:13.480 --> 0:07:15.640 But the problem is that you have a lot of 0:07:15.640 --> 0:07:18.280 people in the financial community that go around saying that 0:07:18.400 --> 0:07:21.280 as evidence of there's nothing to worry about. And if 0:07:21.320 --> 0:07:23.800 you actually go and listen to the consumer companies who 0:07:23.840 --> 0:07:26.000 have the boots on the ground, feel you know, there's 0:07:26.040 --> 0:07:28.880 some really you know, not troubling. That's not quite the 0:07:28.880 --> 0:07:30.840 word I want to use, but there are some problems. 0:07:31.160 --> 0:07:33.600 And so for example, what we've noticed in the recent 0:07:33.640 --> 0:07:36.840 consumer companies kind of those late cycle off cycle reporters, 0:07:36.880 --> 0:07:38.320 kind of that came at the last tail end of 0:07:38.320 --> 0:07:40.920 the reporting season. They were talking not just about the 0:07:40.960 --> 0:07:43.880 low income consumer being stressed, but the middle income consumer 0:07:43.920 --> 0:07:45.920 being stressed. There was one company over the last few 0:07:45.920 --> 0:07:49.120 weeks that said they were seeing stressed in the consumer worldwide. 0:07:49.120 --> 0:07:51.920 We had another company that was talking about how socioeconomic 0:07:51.960 --> 0:07:56.080 issues are pressuring consumers across cohorts. So I think that 0:07:56.160 --> 0:07:58.240 we really need to take the financials with a grain 0:07:58.280 --> 0:08:00.800 of salt. It's an important perspective, it's one that we 0:08:00.840 --> 0:08:03.560 absolutely want to have and find valuable. But at the 0:08:03.560 --> 0:08:05.520 same time, they're not able to give us the full 0:08:05.560 --> 0:08:08.120 picture because only the consumer companies are really able to 0:08:08.120 --> 0:08:10.880 tell us about the composition of the spend under the surface. 0:08:11.640 --> 0:08:15.440 So, Laurie, given that earnings are kicking off here, let's 0:08:15.440 --> 0:08:17.840 put that in context of valuation. Here, what are the 0:08:17.840 --> 0:08:20.400 discussions you're having with your clients these days about valuation 0:08:20.920 --> 0:08:21.760 across the market. 0:08:22.760 --> 0:08:26.160 Everyone's worried, everyone's got sticker shock. And if you just 0:08:26.200 --> 0:08:28.600 look at our charts on just say the SMP five 0:08:28.680 --> 0:08:30.960 hundred market cap weighted PE you can do the same 0:08:30.960 --> 0:08:33.280 thing on the Nasdaq one hundred, either cap weighted or 0:08:33.280 --> 0:08:35.280 equal weighted. And we also look at the top ten 0:08:35.360 --> 0:08:37.160 names in the S and P five hundred, and you've 0:08:37.200 --> 0:08:40.959 basically got forward pe levels that are sitting in line 0:08:41.080 --> 0:08:44.000 with the recent highs. Not necessarily tech bubble highs, not 0:08:44.040 --> 0:08:47.240 necessarily all time highs, but highs that in recent years 0:08:47.280 --> 0:08:50.200 have been difficult for the market to move past. So 0:08:50.240 --> 0:08:53.360 you're not getting any valuation expansion in this market, and 0:08:53.440 --> 0:08:55.720 I think that's something you know, the bottom up stock 0:08:55.760 --> 0:08:58.120 pickers I talked to Frankly are picking up on and 0:08:58.160 --> 0:08:59.839 I think there's somewhat alarmed at some of the levels 0:08:59.840 --> 0:09:03.120 that they're scene in some of their portfolios. So I 0:09:03.160 --> 0:09:05.959 do think that earnings are really the big driver here, 0:09:06.040 --> 0:09:08.320 and we have seen a fade in earning sentiment. Now 0:09:08.360 --> 0:09:09.959 that doesn't mean earnings are going to be a disaster, 0:09:10.360 --> 0:09:13.320 but the big pop in earning surprises that we got 0:09:13.320 --> 0:09:15.560 in the last reporting season, I don't think that we're 0:09:15.559 --> 0:09:16.559 set up to repeat that. 0:09:17.400 --> 0:09:18.959 Paul, you weren't here. I was filming in for you. 0:09:19.080 --> 0:09:20.840 Laurie was on, and I brought up the fact that 0:09:20.880 --> 0:09:23.960 it seemed like analyst after Analysts and strategist after Strategists 0:09:24.360 --> 0:09:27.000 was touting how this was a moment for small caps, 0:09:27.000 --> 0:09:29.600 and I asked Laurie if she agreed with that, and 0:09:29.640 --> 0:09:32.000 Laurie rightly brought out her CV and touted her bona 0:09:32.040 --> 0:09:35.920 fides when it comes to her experience analyzing small caps 0:09:36.080 --> 0:09:39.520 in her previous life, and she was skeptical. I think 0:09:39.520 --> 0:09:41.599 I could say about the prospects for small caps and 0:09:41.640 --> 0:09:43.080 I would invite her to take a bit of a 0:09:43.160 --> 0:09:46.200 victory lap here, Laurie, what is your sense of where 0:09:46.240 --> 0:09:47.679 small caps are head and what does that tell you 0:09:47.720 --> 0:09:48.880 about the market more broadly? 0:09:50.040 --> 0:09:52.240 Well, look, David, I mean I always describe small caps 0:09:52.240 --> 0:09:54.400 as my first professional child. So there's no one more 0:09:54.480 --> 0:09:56.640 than me who wants them to succeed and wants them 0:09:56.640 --> 0:09:58.240 to have that moment in the sun, and wants them 0:09:58.240 --> 0:10:01.440 to have that leadership shift. Frankly, you know, I felt 0:10:01.440 --> 0:10:03.280 a little bit like I was shouting into the abyss 0:10:03.360 --> 0:10:05.400 over the last few months while the street was just 0:10:05.480 --> 0:10:08.720 going bananas on talking about small caps and calling for 0:10:08.760 --> 0:10:11.439 the beginning of this big outperformance cycle. And based on 0:10:11.480 --> 0:10:13.840 what I'm seeing in the recent trading data, it looks like, 0:10:14.240 --> 0:10:16.000 you know, it's kind of fizzled out once again. And 0:10:16.040 --> 0:10:19.040 that's not to say there's not incremental upside and absolute terms, 0:10:19.040 --> 0:10:20.880 but we're no longer seeing this part of the market 0:10:21.000 --> 0:10:24.280 outperform the SMP or outperform the Nasdaq one hundred. It 0:10:24.280 --> 0:10:26.160 looks like it may have just been another rate cut 0:10:26.200 --> 0:10:28.880 bet that fizzled out pretty quickly, you know. 0:10:29.000 --> 0:10:29.520 I think as we. 0:10:29.559 --> 0:10:31.800 Kind of head into earning season, one of the interesting 0:10:31.800 --> 0:10:34.280 things on small caps that's been coming up recently is 0:10:34.679 --> 0:10:37.960 whatever challenges they're out there, you know, whether it's you know, 0:10:38.160 --> 0:10:40.720 tariffs for example, back when we had the tight labor 0:10:40.800 --> 0:10:44.440 market post COVID, small caps just have a difficult time 0:10:44.800 --> 0:10:48.000 managing around those challenges relative to their big cap companies. 0:10:48.360 --> 0:10:49.840 So that's one of the things I'm going to be 0:10:49.840 --> 0:10:52.079 looking for in this reporting season is to see how 0:10:52.080 --> 0:10:55.160 small caps are managing through relative to their big cap counterparts. 0:10:55.800 --> 0:10:59.760 So, Laurie, given that backdrop, what screens well for you, 0:11:00.200 --> 0:11:02.320 I'm not sure if you do it by sector or 0:11:02.360 --> 0:11:04.800 by factor, something jumping out of you, guys that kind 0:11:04.800 --> 0:11:05.560 of gets your interest. 0:11:06.480 --> 0:11:08.960 So we mostly focus on sectors, and we continue to 0:11:09.040 --> 0:11:11.319 like the financial sector. You know, Frankly, if we get 0:11:11.320 --> 0:11:13.120 a pullback in the market, they may not, you know, 0:11:13.160 --> 0:11:15.560 sort of hold up better on the way down. They 0:11:15.600 --> 0:11:19.000 are cyclical in nature, but we're not really concerned about that. 0:11:19.040 --> 0:11:20.600 What we've said is we like them on a six 0:11:20.640 --> 0:11:23.120 to twelve month view, so as there is incremental weakness 0:11:23.120 --> 0:11:24.880 on a relative basis in a short term, we'd still 0:11:24.960 --> 0:11:27.960 use that as a buying opportunity. Earnings revisions have been 0:11:28.080 --> 0:11:30.800 very resilient relative to other sectors. We're basically seeing the 0:11:30.880 --> 0:11:33.920 rate of upward revisions fade for most sectors in the 0:11:33.960 --> 0:11:37.079 S and P five hundred x. Technology Financials has had 0:11:37.080 --> 0:11:38.360 a little bit of a fade, but it's kind of 0:11:38.360 --> 0:11:42.240 paled in comparison to what we've seen elsewhere. Banks, consumer finance, 0:11:42.640 --> 0:11:46.079 insurance all screen well on our valuation in Earning's work, and. 0:11:46.080 --> 0:11:47.080 I didn't upgrade it. 0:11:47.120 --> 0:11:49.320 But one of the things we have been talking about 0:11:49.360 --> 0:11:51.839 in recent reports, and we actually said this specifically in 0:11:51.880 --> 0:11:54.600 the weekly we put out this morning, is that healthcare 0:11:54.679 --> 0:11:56.800 is starting to look a bit more interesting, especially if 0:11:56.840 --> 0:11:59.280 you think there's a market pullback that's already started, or 0:11:59.320 --> 0:12:02.280 maybe on the We are neutral all four of the 0:12:02.320 --> 0:12:05.360 defensive sectors, but healthcare's one that's been coming up in 0:12:05.400 --> 0:12:08.880 conversation recently. Valuations look good, Earnings revisions have been a 0:12:08.920 --> 0:12:11.160 touch more resilient than other sectors, and the flows look 0:12:11.160 --> 0:12:13.560 pretty good. Policy risk is still a big overhang, but 0:12:13.600 --> 0:12:16.319 we've had some developments on that, so maybe investors will 0:12:16.360 --> 0:12:18.160 be able to wrap their heads around that a little 0:12:18.160 --> 0:12:19.400 bit better than they have in the past. 0:12:19.520 --> 0:12:22.360 Laurie very quickly here. I'm curious what your processes as 0:12:22.400 --> 0:12:24.720 we get into earning season in earnest, and I know 0:12:24.800 --> 0:12:27.080 a lot of that involves you kind of going through 0:12:28.120 --> 0:12:31.920 call transcripts looking for phrases that stand out. Paul asked 0:12:31.960 --> 0:12:34.840 about tariffs, I asked, he asked about valuations as well. 0:12:34.880 --> 0:12:36.199 What are you going to learn from those calls, do 0:12:36.240 --> 0:12:37.360 you think, or what are you hoping to learn from 0:12:37.360 --> 0:12:39.040 those calls with executives here in the weeks ahead. 0:12:39.960 --> 0:12:41.880 So look, we do use tools, you know, sort of 0:12:41.960 --> 0:12:44.480 help point us in the right places and earning's call transcripts, 0:12:44.520 --> 0:12:46.120 but a lot of that's done after the fact. My 0:12:46.200 --> 0:12:48.560 team we like to read top to bottom and we 0:12:48.600 --> 0:12:51.160 do speed read, but we tend to divide up different sectors. 0:12:51.240 --> 0:12:53.360 We have some knowledge that we've built up over time 0:12:53.400 --> 0:12:56.080 of which companies tend to be more insightful than others, 0:12:56.240 --> 0:12:58.199 and we look at the price action frankly to figure 0:12:58.200 --> 0:13:01.080 out what transcripts we want to focus on. I'm really 0:13:01.120 --> 0:13:03.719 curious to know more about inventory, so how much pre 0:13:03.800 --> 0:13:06.840 tiff inventories are companies still sitting on. Another thing I 0:13:06.880 --> 0:13:09.320 really want to understand in both the corporate and consumer 0:13:09.360 --> 0:13:12.560 world is how much demand was or frankly, was not, 0:13:12.679 --> 0:13:14.920 pulled forward from the back half of the year into 0:13:14.920 --> 0:13:18.480 the second quarter as companies and consumers were trying to get. 0:13:18.360 --> 0:13:19.200 Ahead of tariffs. 0:13:19.360 --> 0:13:21.800 I don't think we got good indications about either of 0:13:21.840 --> 0:13:24.520 those in the last reporting seasons. Companies were a bit 0:13:24.600 --> 0:13:27.319 vague analysts. Frankly, I don't think we're pushing hard enough 0:13:27.360 --> 0:13:29.640 to get answers to those questions. And on the issue 0:13:29.640 --> 0:13:31.720 of pull forward, a lot of companies said they also 0:13:31.800 --> 0:13:34.280 just they couldn't quite tell yet. So I think those 0:13:34.280 --> 0:13:36.800 are some of my big questions. I'm also curious about 0:13:36.840 --> 0:13:40.760 twenty twenty six. So far, companies are deferring, declining to 0:13:40.800 --> 0:13:43.680 answer when asked about twenty twenty six tariff impacts. But 0:13:43.760 --> 0:13:45.320 any clues we can get there I think are going 0:13:45.400 --> 0:13:45.959 to be helpful. 0:13:46.320 --> 0:13:47.959 Laurie, thank you so much for joining us. We always 0:13:47.960 --> 0:13:50.359 appreciate getting a few minutes of your time, Lorie Cavalcina, 0:13:50.679 --> 0:13:55.280 she said of a US equity strategy for OURBC capital markets, 0:13:55.320 --> 0:13:57.559 and we appreciate getting some time from. 0:13:57.440 --> 0:14:00.240 LORI stay with us. More from Bloomberg Surveillance coming up 0:14:00.520 --> 0:14:01.000 after this. 0:14:07.160 --> 0:14:10.760 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:10.800 --> 0:14:13.960 weekday afternoons from seven to ten am Eastern. Listen on 0:14:14.080 --> 0:14:17.720 Applecarplay and Android Auto with the Bloomberg Business app, or 0:14:17.880 --> 0:14:19.240 watch us live on YouTube. 0:14:19.320 --> 0:14:21.880 Let's talk about the residential real estate market here. Sma 0:14:22.040 --> 0:14:25.760 joins here. She's the chief economist for Totality. She joins 0:14:25.800 --> 0:14:30.200 us here, some of the the big issue in residential 0:14:30.200 --> 0:14:34.520 real estate is just affordability, or the lack thereof. Is 0:14:34.560 --> 0:14:37.880 there a solution to this affordability issue? I think about 0:14:37.920 --> 0:14:39.960 the folks in their late twenties, early thirties looking to 0:14:39.960 --> 0:14:40.480 buy a house. 0:14:41.200 --> 0:14:42.120 That's tough out there. 0:14:43.720 --> 0:14:45.800 Yeah, it's very tough. Well, first of all, thanks for 0:14:45.800 --> 0:14:49.320 having me. I'm also happy to be here today. You know, 0:14:49.440 --> 0:14:52.880 it's really a lot it is right now about mortgage rates, 0:14:53.160 --> 0:14:56.240 and mortgage rates have retreated from recent highs, they are 0:14:56.240 --> 0:14:59.000 now averaging between six and a quarter and six point 0:14:59.120 --> 0:15:02.080 four for thirty years fixed, and that is the lowest 0:15:02.520 --> 0:15:06.040 in about a year, which means that affordability is that 0:15:06.160 --> 0:15:08.800 it's best now that it's been in over two and 0:15:08.880 --> 0:15:13.280 a half years. So affordability is improving, and honestly, in 0:15:13.320 --> 0:15:16.880 some markets you do have quite a bit, relatively quite 0:15:16.880 --> 0:15:19.840 a bit more affordability than than other markets. So in Midwest, 0:15:19.920 --> 0:15:25.040 for example, and also parts of Northeast, it's it is 0:15:25.440 --> 0:15:29.080 clearly more affordable than markets coastal markets such as you know, 0:15:29.160 --> 0:15:32.640 New York, Miami and LA and so in these markets 0:15:32.680 --> 0:15:36.160 you do now continue to see relatively stronger rate of 0:15:36.200 --> 0:15:41.520 compress appreciation despite all of these affordability challenges. So you know, 0:15:41.600 --> 0:15:47.880 markets in Indianapolis, Chicago for example, uh, even even Boise 0:15:48.040 --> 0:15:51.440 City at this point again are seeing relatively more appreciation 0:15:51.760 --> 0:15:55.160 over the course of this summer h than other markets 0:15:55.160 --> 0:15:59.320 where for example, in Florida and markets that have seen 0:15:59.440 --> 0:16:02.320 culative so much more appreciation since Joan sort of the 0:16:02.360 --> 0:16:06.200 pandemic and have as a result becomes so unaffordable and 0:16:06.200 --> 0:16:08.560 how home prices are in those markets are declining, So 0:16:08.840 --> 0:16:12.680 it just really depends where you are in the country. Somem, 0:16:12.680 --> 0:16:13.360 I want to just ask. 0:16:13.200 --> 0:16:15.920 You another question about consumer behavior here, Paul asking about 0:16:15.920 --> 0:16:17.600 twenty year olds and thirty year olds. And I got 0:16:17.600 --> 0:16:19.800 to give Lisa Mateo credit for this. She flagged the 0:16:19.800 --> 0:16:21.680 piece in the Wall Street Journal for us this morning 0:16:21.680 --> 0:16:25.400 about how young people in particular, faced with these higher 0:16:25.400 --> 0:16:28.720 than we're accustomed to mortgage rates, have opted not to 0:16:28.720 --> 0:16:31.880 buy and see is more promising putting money in the 0:16:31.880 --> 0:16:33.800 stock market where you can get you know, nine ten 0:16:33.840 --> 0:16:36.280 percent return over time, and that's just a better deal 0:16:36.360 --> 0:16:39.400 for them as they pursue renting. Is that bearing out 0:16:39.480 --> 0:16:41.680 sort of what you see in terms of consumer behavior? 0:16:41.760 --> 0:16:43.920 What are young people doing if they're not buying homes 0:16:43.920 --> 0:16:45.520 and what's it going to take for them to once 0:16:45.560 --> 0:16:49.200 again consider home buying to be so integral to our 0:16:49.240 --> 0:16:50.680 notion of what the American dream is. 0:16:52.040 --> 0:16:54.560 Yeah, I mean, I think American dream is still alive 0:16:54.640 --> 0:16:57.440 and well, you know, it's just been a little bit postponed. 0:16:58.160 --> 0:17:00.640 And with the returns that they're getting in the talk market, 0:17:00.680 --> 0:17:03.560 it allows them to make larger down payments down the road. 0:17:03.680 --> 0:17:07.600 So we do see the median age of first time 0:17:07.600 --> 0:17:10.760 home buyer and be higher than it's been previously. And 0:17:10.840 --> 0:17:12.880 you know, they're now tend to be about ten years 0:17:12.960 --> 0:17:15.480 older when they buy their first home than they used 0:17:15.520 --> 0:17:17.960 to be. But I think survey after survey shows that 0:17:18.240 --> 0:17:21.879 again American dream is live and well. And so what 0:17:21.880 --> 0:17:24.119 they're doing is, you know, and the fact that we 0:17:24.200 --> 0:17:28.760 can in many ways still work remotely or don't have 0:17:28.800 --> 0:17:32.040 to go to offices five days a week. People are 0:17:32.160 --> 0:17:35.239 moving to areas that are more affordable. They don't have 0:17:35.320 --> 0:17:38.080 to be in central cities, especially if they have families, 0:17:38.119 --> 0:17:41.280 and you know, they're looking for good school districts. You know, 0:17:41.320 --> 0:17:44.040 they tend to move a little bit further outside the cities. 0:17:44.160 --> 0:17:46.520 They tend to stay with their parents for longer to 0:17:46.640 --> 0:17:50.520 save for down payments. But again, you know, in our survey, 0:17:50.600 --> 0:17:54.399 in our data, for example, of mortgage applications, areas that 0:17:54.560 --> 0:17:58.199 are more affordable in Midwest, for example, the share of 0:17:58.280 --> 0:18:00.960 first time home buyer is really high. It's fifty or 0:18:01.040 --> 0:18:04.280 sixty percent. So you know, it just again depends where 0:18:04.280 --> 0:18:07.040 you are in a country and where it's more affordable 0:18:07.080 --> 0:18:10.080 to buy. People are buying, and the younger buyers are buying, 0:18:10.480 --> 0:18:10.679 and so. 0:18:11.000 --> 0:18:13.120 Here again in the New York metro area. 0:18:13.160 --> 0:18:15.760 We're dealing with the Northeastern here today, which just once 0:18:15.800 --> 0:18:20.520 again highlights the cost of insurance, if people can even 0:18:20.560 --> 0:18:24.240 get insurance, whether it's for hurricanes or fire or whatever. 0:18:24.280 --> 0:18:26.240 Talk to us about insurance costs. I mean, we've been 0:18:26.280 --> 0:18:28.960 hearing a lot about that is really oppressed on a 0:18:29.040 --> 0:18:29.600 lot of people. 0:18:30.720 --> 0:18:33.439 Yeah, insurance costs have been a big constraint on the market. 0:18:33.520 --> 0:18:37.159 And in markets that have work costs have gone up 0:18:37.200 --> 0:18:40.720 a lot or have higher risk of natural disasters, you've 0:18:40.760 --> 0:18:44.520 seen home sales being impacted. So in those markets, home 0:18:44.560 --> 0:18:47.760 sales do tend to fall out a contract because people 0:18:47.800 --> 0:18:52.880 cannot get insurance. Overall, insurance costs have gone up about 0:18:52.920 --> 0:18:56.680 forty to fifty percent again in some markets significantly more, 0:18:56.720 --> 0:19:00.360 particularly in Florida and actually parts of Midwest to where 0:19:00.400 --> 0:19:03.360 you don't think about insurance costs being high, but there are. 0:19:03.480 --> 0:19:08.040 Because there's persistent tornadoes for example, or Hell and so 0:19:08.200 --> 0:19:11.800 not big natural disasters, but more persistent natural disaster that's 0:19:12.280 --> 0:19:16.000 where we see large increases in insurance costs. Again, it's 0:19:16.080 --> 0:19:18.600 it's it is a big concern, but you do see 0:19:18.600 --> 0:19:21.639