WEBVTT - McDonalds Sales Fall, Bitcoin Latest 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Apple car Playing and broyd Otto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.000 or watch us live on YouTube. 0:00:24.920 --> 0:00:27.560 All right, let's get back to McDonald's. Michael Halen is 0:00:27.560 --> 0:00:30.600 Bloomberg Intelligence senior restaurant and food service analyst and joining 0:00:30.640 --> 0:00:32.080 us on McDonald's earning sate. 0:00:32.120 --> 0:00:34.040 Michael, what was your bigger takeaway here? 0:00:36.040 --> 0:00:38.280 Yeah, I guess you know, the biggest takeaway is that 0:00:38.320 --> 0:00:41.560 they still have work to do. You know, the stocks 0:00:41.560 --> 0:00:44.159 performed pretty well here. I guess results weren't as bad 0:00:44.200 --> 0:00:47.199 as expected. You know, July data that we've seen is 0:00:47.479 --> 0:00:49.880 pretty bad, so the fact that they're still negative isn't 0:00:49.920 --> 0:00:51.960 really surprising. 0:00:52.680 --> 0:00:54.080 But they definitely still have work to do. 0:00:54.120 --> 0:00:56.320 The five dollars meal deal seems to be bringing in 0:00:56.360 --> 0:00:59.320 some traffic. They're hopeful that, you know, the sales will follow, 0:00:59.360 --> 0:01:02.480 but it hasn't happened yet, you know, and they talked 0:01:02.520 --> 0:01:04.959 about the US really needing a revamp of its one 0:01:04.959 --> 0:01:08.320 two three dollar value meal. But we see this stock 0:01:08.360 --> 0:01:11.080 doing well, and it's for a good reason. This company 0:01:11.120 --> 0:01:13.440 has scale that nobody else does. They can offer price 0:01:13.480 --> 0:01:17.440 points that nobody else can. You know, they have a 0:01:17.480 --> 0:01:20.920 ton of marketing might So for those reasons in this 0:01:21.040 --> 0:01:24.200 really competitive market where where chains are fighting hard to 0:01:24.640 --> 0:01:30.959 track low income consumers, you know, McDonald's definitely has the tools. 0:01:31.000 --> 0:01:31.280 For me. 0:01:31.360 --> 0:01:34.360 The McDonald's experience was always an airport experience because I 0:01:34.440 --> 0:01:37.040 always say I could justified for say, hey, I'm rushed 0:01:37.040 --> 0:01:38.800 for time to gonna make my flake hits something quick. 0:01:39.160 --> 0:01:41.919 But now all the new airports and like the renovated 0:01:42.040 --> 0:01:44.759 Newark Airport, there's no fast food in those things anymore 0:01:44.800 --> 0:01:46.440 that you have to sit down and order and do 0:01:46.480 --> 0:01:47.199 all that kind of stuff. 0:01:47.360 --> 0:01:48.880 So that's why that's interesting. 0:01:48.960 --> 0:01:51.040 Isn't there fast food? But you it's like nice stuff 0:01:51.080 --> 0:01:52.040 like wraps. 0:01:51.680 --> 0:01:53.560 Well you get that stuff to go, But I mean 0:01:53.640 --> 0:01:56.560 you could always get like some fast food, serious fast food. 0:01:56.600 --> 0:01:56.920 All right. 0:01:57.000 --> 0:01:59.840 So, Mike, so what's the story for McDonald's here. 0:02:00.560 --> 0:02:03.680 Do they open stores, do they rationalize their footprint, what's 0:02:03.720 --> 0:02:06.200 kind of the strategy there in terms of managing their 0:02:06.200 --> 0:02:07.320 footprint these days? 0:02:07.840 --> 0:02:11.399 Yeah, well they're there and they're investedtily late last year 0:02:11.440 --> 0:02:15.240 they pushed for more aggressive store openings, right, and so 0:02:15.600 --> 0:02:17.919 that's going to continue to be the focus. They're they're 0:02:17.919 --> 0:02:21.680 gonna push hard to grow internationally. China obviously is a 0:02:21.680 --> 0:02:24.840 big point of focus for them. But yeah, it's gonna 0:02:24.840 --> 0:02:27.320 be it's going to be to open stores. But in 0:02:27.440 --> 0:02:31.520 order to motivate their franchisees to open stores, they're going 0:02:31.600 --> 0:02:34.320 to have to, you know, have a strong marketing program 0:02:34.320 --> 0:02:37.000 that's going to pull people into the into the restaurants, 0:02:37.040 --> 0:02:41.960 the existing restaurants, grow same store sales, improve profitability, and 0:02:42.000 --> 0:02:45.320 make it just a more attractive proposition for their international 0:02:45.320 --> 0:02:47.440 and US franchisees to open new stores. 0:02:47.639 --> 0:02:50.720 Didn't They unveil like a five dollars meal thingy, But 0:02:50.760 --> 0:02:52.080 that was at the end of the quarter, right, so 0:02:52.120 --> 0:02:54.559 we don't really know the full impact of that for McDonald's. 0:02:55.520 --> 0:02:59.560 Yes, yes, so on on on the call, management said 0:02:59.560 --> 0:03:02.720 that it it's driving traffic but not price, but not 0:03:02.800 --> 0:03:05.480 sales yet. So it seems like there's some trade down 0:03:05.560 --> 0:03:08.640 from current customers saying, you know, well five dollars, I 0:03:08.639 --> 0:03:10.200 get a lot of food for that five dollars, So 0:03:10.240 --> 0:03:12.520 maybe instead of getting a big mcnial, I'll get this 0:03:12.600 --> 0:03:17.240 five dollars meal deal, but so it hasn't really impacted 0:03:17.800 --> 0:03:20.920 results yet, but they said that, you know, historically traffic 0:03:20.960 --> 0:03:25.360 comes before the sales boost, and so they seem positive 0:03:25.480 --> 0:03:28.480 on it in this near term. You know, they said 0:03:28.560 --> 0:03:31.000 ninety three percent of franchisees in the US have agreed 0:03:31.040 --> 0:03:33.920 to extend this offer deeper into the summer. 0:03:34.800 --> 0:03:39.800 So they seem positive on it. But it's their real 0:03:39.880 --> 0:03:41.440 focus is going to have to be on the one 0:03:41.480 --> 0:03:43.080 two three dollars value menu. 0:03:43.200 --> 0:03:49.520 That menu isn't resonating with customers, right, and it seems 0:03:49.520 --> 0:03:52.520 like a full revamp is in the cards. You know, 0:03:52.560 --> 0:03:54.800 they've they've been They've received a lot of shade on 0:03:54.840 --> 0:03:58.920 social media that you can't find anything on that menu 0:03:59.000 --> 0:04:02.600 for a buck, right, and so some reengineering is going 0:04:02.680 --> 0:04:05.240 to be necessary necessary here in the United States. 0:04:05.320 --> 0:04:07.640 All right, dumb question of the day comes from me. 0:04:07.880 --> 0:04:12.080 Never at McDonald's, Burger King, even Starbucks the drive through 0:04:12.160 --> 0:04:15.960 line or they're like twenty cars deep. I walk inside, 0:04:16.120 --> 0:04:18.679 I walk right up to the counter and boom, I'm served. 0:04:18.960 --> 0:04:22.640 What is it about Americans that they into this drive 0:04:22.680 --> 0:04:24.719 through thing? And if I'm a McDonald's, isn't that a 0:04:24.720 --> 0:04:26.440 source of opportunity for me to figure out how to 0:04:26.480 --> 0:04:27.239 get them through faster. 0:04:28.720 --> 0:04:32.159 Yeah, well, I guess we're lazy, that's the problem, right, 0:04:32.200 --> 0:04:36.200 But uh no, to your point, you know, a big percentage. 0:04:36.200 --> 0:04:40.080 You know, historically that the counter was like say fifteen 0:04:40.120 --> 0:04:43.479 percent of a drive through restaurant sales, and historically that's 0:04:43.520 --> 0:04:46.400 really just been used when the drive through line is 0:04:46.440 --> 0:04:48.200 too long and people say, you know, I don't want 0:04:48.200 --> 0:04:50.400 to wait that long. I'm gonna I'm gonna, I'm gonna 0:04:50.440 --> 0:04:54.240 go inside and pick up my stuff. So there is 0:04:54.279 --> 0:04:56.400 an opportunity, there's and it's a it's a point of 0:04:56.440 --> 0:04:58.800 focus for all of the quick service restaurants we cover. 0:04:58.920 --> 0:05:02.359 Everybody is constantly trying to improve their throughput, you know, 0:05:02.440 --> 0:05:06.320 decrease the time waiting in line because they know, if 0:05:06.320 --> 0:05:10.080 there's you know, at a certain number of cars for McDonald's, 0:05:10.120 --> 0:05:12.120 historically it's been you know, say five or six cars 0:05:12.160 --> 0:05:14.560 in the drive through, people will draw either you know, 0:05:14.720 --> 0:05:17.039 drive past the restaurant or maybe they'll say, you know what, 0:05:17.080 --> 0:05:20.160 I'll park and come in. But uh that's that's potentially 0:05:20.600 --> 0:05:24.120 business loss, right, So you know, improving throughput at the 0:05:24.200 --> 0:05:27.000 drive through, in at the counter is constantly a point. 0:05:29.960 --> 0:05:31.760 I mean in theory, right, you get like an I 0:05:32.080 --> 0:05:35.760 thing to do the drive through, right, but that has 0:05:35.800 --> 0:05:38.719 been really tough to manage right now, right, it's not 0:05:38.760 --> 0:05:40.000 really the best. 0:05:40.279 --> 0:05:42.839 It's not working. I mean, people have they're having a 0:05:42.839 --> 0:05:47.520 lot of trouble with with accents not only from you know, 0:05:47.760 --> 0:05:51.640 international customers, but also dialects across the United States, so 0:05:52.760 --> 0:05:56.080 voice ordering and a lot of these AI initiatives. You know, 0:05:56.120 --> 0:05:58.560 there's a lot of potential with them, but they haven't 0:05:58.600 --> 0:06:00.440 been able to really pay dividends just yet. 0:06:01.000 --> 0:06:04.520 All right, So what is the investment call here, Mike 0:06:04.600 --> 0:06:08.800 for some of these you know, fast service, McDonald's, Burger King, 0:06:08.880 --> 0:06:11.240 what's the investment call here for these names? 0:06:11.960 --> 0:06:14.160 Well, they're looking at you know, it's interesting because the 0:06:14.480 --> 0:06:17.120 year over your comparisons, base effects get easier into the 0:06:17.160 --> 0:06:20.600 second half, but the consumer's weakening, right and so you know, 0:06:20.920 --> 0:06:24.640 McDonald said they expect you know, more consumer weakness over 0:06:24.680 --> 0:06:30.360 the next few quarters, right, And so there's definitely concern 0:06:30.480 --> 0:06:33.159 about about restaurants spending here in the second half. You know, 0:06:33.240 --> 0:06:36.640 I think I mentioned it at the top. McDonald's is 0:06:36.680 --> 0:06:40.760 well positioned though in uh in you know periods of distress. 0:06:40.800 --> 0:06:43.560 You know, during the Great Recession, they outperform by offering 0:06:43.680 --> 0:06:47.880 value that competitors couldn't match, right, And so it's a 0:06:47.960 --> 0:06:51.159 very tough environment. But we think McDonald's is positioned pretty 0:06:51.160 --> 0:06:53.200 well for such a tough environment. 0:06:54.040 --> 0:06:57.440 In the value war where everyone's chasing a smaller part 0:06:57.480 --> 0:07:01.240 of everyone's wallet. How do these guys remain profitable? I'm 0:07:01.279 --> 0:07:03.440 not just saying McDonald's, but like all its competitors too, 0:07:03.600 --> 0:07:05.320 Like it's sort of a race to the bottom to 0:07:05.360 --> 0:07:07.120 some perspective, how does that play out? 0:07:07.839 --> 0:07:09.200 It's not just a race to the bottom. 0:07:09.279 --> 0:07:11.560 So so in terms of the low and they're trying 0:07:11.600 --> 0:07:15.400 hard to keep that low income consumer business, and there's 0:07:15.440 --> 0:07:18.640 no doubt that that's a big focus right now, but 0:07:18.680 --> 0:07:22.280 they're also bringing in you know, middle income and higher 0:07:22.280 --> 0:07:25.560 income consumers into the fold. Right, so you also get 0:07:25.560 --> 0:07:28.880 this traded down effect where you know, yeah, sure, low 0:07:28.920 --> 0:07:32.040 income consumers are trading down into grocery store. But McDonald's 0:07:32.040 --> 0:07:34.440 and some of their competitors, Jack in the Box being one, 0:07:34.680 --> 0:07:37.560 you know, Chipotle, have been able to attract these higher 0:07:37.560 --> 0:07:40.760 income consumers that actually come in and buy premium items 0:07:40.800 --> 0:07:43.280 and spend more when they come the problem is they're 0:07:43.360 --> 0:07:47.000 just a much lower percentage of the overall traffic. But 0:07:47.560 --> 0:07:50.480 that's been that's what we've seen over the last year 0:07:50.480 --> 0:07:52.240 and a half or so. It's chains that have been 0:07:52.240 --> 0:07:55.240 able to attract these higher income consumers are definitely outperforming. 0:07:55.640 --> 0:07:59.320 So we're in your overall space there, MIC on the 0:07:59.320 --> 0:08:02.320 restaurant side, is the best place to be these days? 0:08:04.040 --> 0:08:07.560 Uh, you know it's it's it's companies that provide a 0:08:07.600 --> 0:08:11.440 lot of value and a and a very good price point, right, 0:08:11.480 --> 0:08:16.200 And so you know, like like most earning seasons and industries, 0:08:16.240 --> 0:08:18.200 you know, a lot of the top performers end up 0:08:18.440 --> 0:08:19.720 reporting earnings first. 0:08:19.760 --> 0:08:22.239 And we've seen that Chipotle, UH. 0:08:22.080 --> 0:08:26.520 And Texas Roadhouse or two, they outperform everybody on seamsore 0:08:26.560 --> 0:08:28.600 sales over the last five years and it's not even 0:08:28.800 --> 0:08:31.080 there's not even a close second. And a big reason 0:08:31.120 --> 0:08:34.720 why they've outperformed so by so much is that customers 0:08:34.760 --> 0:08:37.000 see a lot of value on that plate for the 0:08:37.000 --> 0:08:39.679 price that they pay, right, and they're and they're provided 0:08:39.679 --> 0:08:43.360 a pretty good customer experience, and that's what's bringing people 0:08:43.360 --> 0:08:47.079 in the door. If you're providing very strong everyday value 0:08:47.120 --> 0:08:50.920 and and a good in restaurant experience. You know, clean restaurants, 0:08:50.920 --> 0:08:54.080 good service, whatever that you know and everything that that entails. 0:08:54.480 --> 0:08:55.120 Then you're winning. 0:08:55.640 --> 0:08:58.439 Got it eat civil business, but a tough business, that's 0:08:58.440 --> 0:09:01.160 for sure. Michael Halen, Seniors, running food service analysts for 0:09:01.160 --> 0:09:04.240 Bloomberg Intelligence. Bring us up to date on You're good 0:09:04.240 --> 0:09:05.480 friends at McDonald's. 0:09:05.480 --> 0:09:05.640 Here. 0:09:07.120 --> 0:09:11.000 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:09:11.080 --> 0:09:13.800 weekdays at ten am Eastern on Apple car Playing and 0:09:13.920 --> 0:09:16.800 broud Otto with the Bloomberg Business app. Listen on demand 0:09:16.840 --> 0:09:21.160 wherever you get your podcasts, or watch us live on YouTube. 0:09:22.320 --> 0:09:23.040 Busy week here. 0:09:23.080 --> 0:09:26.840 Economic data of plenting including the FED on Wednesday. Lots 0:09:26.880 --> 0:09:29.400 of earnings, particularly for some of the big tech names 0:09:29.400 --> 0:09:30.359 which you think. 0:09:30.440 --> 0:09:32.320 Are going to be critical for this market. 0:09:32.400 --> 0:09:34.160 Let's check in with a professional who does this stuff 0:09:34.200 --> 0:09:39.640 for living, Marion Bartel's, chief investment strategist at Sanctuary Wealth. Marian, 0:09:39.720 --> 0:09:42.960 thanks so much for joining us here. What's your just 0:09:43.080 --> 0:09:45.720 your thirty thousand foot market call that you have to 0:09:45.800 --> 0:09:48.080 your clients? What are you telling your clients that they 0:09:48.120 --> 0:09:49.520 should be thinking about here as we head into the 0:09:49.559 --> 0:09:50.400 back half of this year. 0:09:51.240 --> 0:09:53.920 Well, as you pointed out, it is the alphabet soup 0:09:54.000 --> 0:09:56.319 of news this week. You know, the markets can go 0:09:56.480 --> 0:10:00.280 either way. But how we're telling clients to position is 0:10:00.280 --> 0:10:03.160 we actually think that we can actually rally this week. 0:10:03.520 --> 0:10:07.800 Markets are as over sold as they were back in April. Well, 0:10:07.800 --> 0:10:09.760 we commit to this year. We called it the Year 0:10:09.800 --> 0:10:12.440 of the Bucking Bull. And we've seen some bucks and 0:10:12.480 --> 0:10:14.719 we just got through some Bucks. But we don't think 0:10:14.760 --> 0:10:17.520 we're done with that yet. We think we can rally 0:10:17.760 --> 0:10:20.600 one more time and then I think the market bucks 0:10:20.600 --> 0:10:23.679 again in the fall in September and October, the traditional 0:10:23.760 --> 0:10:27.680 seasonal very week period for the market, but then having 0:10:27.679 --> 0:10:30.960 a year in rally, we're still expecting markets by the 0:10:31.040 --> 0:10:33.000 S and P five hundred to be up about twenty 0:10:33.000 --> 0:10:35.720 percent this year. We still think the leadership of the 0:10:35.760 --> 0:10:40.440 market is intact. That's the Magnificent seven, it's technology and 0:10:40.480 --> 0:10:43.640 that semis are still the leaders. Remember, if we're going 0:10:43.679 --> 0:10:47.800 to go towards AI, you can't have AI without semiconductor chips. 0:10:48.280 --> 0:10:50.640 So if the AI trade is still in place, the 0:10:50.679 --> 0:10:52.920 tech trade is still in place, how do you get 0:10:52.920 --> 0:10:56.280 comfortable with valuation in some of those names are just 0:10:56.280 --> 0:10:57.439 within SMP five hundred. 0:10:57.440 --> 0:10:59.360 In general, you know. 0:10:59.400 --> 0:11:02.480 That's a great question. I mean, obviously, the valuations were 0:11:02.600 --> 0:11:06.520 very high. You know, the markets were up by Nasdaq's 0:11:06.559 --> 0:11:10.080 representation twenty percent, where a lot of the tech names are. 0:11:10.280 --> 0:11:15.360 So between the market being extremely overbought, valuations extended, it 0:11:15.400 --> 0:11:17.920 was time for like a mean reversion kind of trade. 0:11:18.000 --> 0:11:20.880 Let's bring part of that in. But the reason why 0:11:20.920 --> 0:11:24.440 these tech names have such high valuation is because they 0:11:24.480 --> 0:11:28.240 have the strongest growth within the market. Although we're expecting 0:11:28.280 --> 0:11:33.080 good earnings this year, the market is not abundant with earnings. 0:11:33.080 --> 0:11:35.880 And when you don't have an abundance of earnings, you 0:11:36.000 --> 0:11:39.840 have a growth market. Fund managers and investors are willing 0:11:39.880 --> 0:11:42.760 to pay up for those earnings, So those stocks have 0:11:42.920 --> 0:11:47.040 higher multiples. So I'm comfortable with higher valuations. But maybe 0:11:47.040 --> 0:11:50.040 they just got a little bit too stretched. They've corrected 0:11:50.480 --> 0:11:52.440 and we're still buyers of this market. 0:11:53.520 --> 0:11:57.200 So how do you think about sectors outside of technology? 0:11:57.200 --> 0:12:00.000 Where do you see opportunities there outside of this big 0:12:00.080 --> 0:12:00.720 tech names. 0:12:01.320 --> 0:12:04.679 Well, there's a couple of spaces we like infrastructure. You know, 0:12:04.800 --> 0:12:08.120 Biden has passed a lot of pieces of legislation that 0:12:08.200 --> 0:12:11.640 are really supporting the growth of the infrastructure of our economy. 0:12:11.920 --> 0:12:14.320 You're really going to see a lot of stocks within 0:12:15.520 --> 0:12:20.160 the industrial sector. Defense is also in their defense is 0:12:20.280 --> 0:12:24.160 behaving well. With interest rates coming down and with the 0:12:24.920 --> 0:12:28.079 FED expected to cut rates in September, which we also 0:12:28.200 --> 0:12:31.720 anticipate by twenty five basis points. You're starting to see 0:12:31.760 --> 0:12:34.640 some of the intrasensitive parts of the market that have 0:12:34.880 --> 0:12:40.280 not done well, like utilities and rets we think have bottomed. 0:12:41.280 --> 0:12:45.840 Pockets of healthcare are doing better, Biotech has broken out. 0:12:46.200 --> 0:12:49.520 The breadth of the market has expanded, especially with that 0:12:49.679 --> 0:12:53.080 rally in July, and we actually hit a new high 0:12:53.160 --> 0:12:57.600 with breath indicators and the volume confirmed that. That's what 0:12:57.760 --> 0:13:00.600 really gives us confidence that we're still in a bull 0:13:00.640 --> 0:13:03.079 market and that we still want to be buying stocks here. 0:13:03.400 --> 0:13:05.120 Well, that's kind of where I wanted to go, Marian. 0:13:05.280 --> 0:13:07.320 We had, as you mentioned, kind of over the last 0:13:07.720 --> 0:13:09.480 several weeks, kind of a little bit of a rotation, 0:13:09.600 --> 0:13:12.640 maybe out of some of those magnificent seven names, maybe 0:13:12.640 --> 0:13:15.000 into some other areas of market, like small caps. We 0:13:15.040 --> 0:13:17.640 saw the Russell two thousand outperformed the S and P 0:13:17.920 --> 0:13:18.880 by the most on. 0:13:18.960 --> 0:13:22.280 Record over a two or three week period. Is that trade? 0:13:22.960 --> 0:13:25.920 Is that for real? Is it a flash in a pan? 0:13:25.960 --> 0:13:26.800 How do you think about that? 0:13:27.960 --> 0:13:31.240 So we're not fans of small cap. It has been 0:13:31.400 --> 0:13:34.640 a very impressive rally, and we think the reason why 0:13:34.720 --> 0:13:38.880 it was so impressive is that fast money typically called 0:13:38.960 --> 0:13:43.800 hedge fund CTAs, many of them had short positions within 0:13:43.880 --> 0:13:46.600 small cap. But we think some of those positions were covered, 0:13:46.679 --> 0:13:49.360 not all of them, but some. We just don't think 0:13:49.440 --> 0:13:52.800 the earnings power is there for small cap to take 0:13:52.840 --> 0:13:57.920 over leadership. So we think it's impressive. If you've been there, 0:13:58.040 --> 0:14:00.880 it's it's been great, but it's not where we really 0:14:00.920 --> 0:14:02.960 want to be positioning our clients right now. 0:14:03.760 --> 0:14:06.880 How about the fix income here? You know you can 0:14:06.880 --> 0:14:09.439 see here into your treasure and get four point four percent. 0:14:09.880 --> 0:14:11.760 It's not a bad way to make a living here, 0:14:11.760 --> 0:14:13.280 and if I want to maybe take some credit risk, 0:14:13.320 --> 0:14:14.160 I can do better than that. 0:14:14.600 --> 0:14:16.000 How do you think about fix income? 0:14:17.200 --> 0:14:19.880 Yes, what we've been saying for a while is that 0:14:20.000 --> 0:14:22.840 interest rates have peaked, both at the short end and 0:14:22.920 --> 0:14:25.280 the long end of the curve. We think they're going 0:14:25.360 --> 0:14:28.600 to continue to come down. For clients that are in 0:14:28.680 --> 0:14:32.040 cash that are getting five percent or even above five percent, 0:14:32.480 --> 0:14:35.400 we're warning them that can go away, especially if the 0:14:35.400 --> 0:14:39.880 FED begins a rate cutting cycle. So we've been telling 0:14:39.920 --> 0:14:43.680 clients to come out of short duration assets and take 0:14:43.720 --> 0:14:46.360 a little bit more duration risk, go a little bit 0:14:46.360 --> 0:14:48.200 more in the middle of the curve, which is called 0:14:48.240 --> 0:14:50.840 the belly of the curve. And as you pointed out, 0:14:51.000 --> 0:14:54.160 you can take credit risk, but we are stressing to 0:14:54.240 --> 0:14:55.800 stay with quality. 0:14:56.200 --> 0:14:59.080 When you take a look at quality, though, does it matter, 0:14:59.160 --> 0:15:02.320 like why the is cutting as in ooh, the economy 0:15:02.360 --> 0:15:04.280 is getting a lot weaker, we're looking ahead to the 0:15:04.320 --> 0:15:07.440 jobs number. Everyone's worried about the Kaldiasom rule being triggered 0:15:07.840 --> 0:15:09.120 versus inflation coming down. 0:15:10.600 --> 0:15:13.080 I think it is. You know, the market thinks that 0:15:13.160 --> 0:15:16.320 cutting rates can be a negative, and historically it is 0:15:16.360 --> 0:15:19.360 a negative because we're cutting for the wrong reasons. The 0:15:19.440 --> 0:15:22.600 economy is still growing a little bit slower. The consumer 0:15:22.680 --> 0:15:26.640 is still spending, but a lot slower. We're seeing manufacturing 0:15:27.720 --> 0:15:33.240 slow down. So I think in order to balance like unemployment, 0:15:33.360 --> 0:15:36.360 which as you pointed out, the unemployment rate is going out, 0:15:36.760 --> 0:15:40.240 it's important to actually try not to have a recession. 0:15:40.720 --> 0:15:43.920 And with these warning signs that the economy is slowing, 0:15:44.000 --> 0:15:46.200 I think it would be very appropriate for the Fed 0:15:46.240 --> 0:15:49.760 to cut rates, But the market's not to negatively react, 0:15:49.840 --> 0:15:53.520 because there's really nothing negatively wrong. In fact, what most 0:15:53.520 --> 0:15:55.560 people are not talking about is that the FED has 0:15:55.600 --> 0:15:59.880 already started easing. They change their position on their balance sheet, 0:16:00.160 --> 0:16:03.440 They started to have less run off their balance sheet, 0:16:03.440 --> 0:16:07.120 which is actually a form of easing. So I think 0:16:07.160 --> 0:16:10.320 the FED has already been in easing mode. Now it 0:16:10.360 --> 0:16:12.920 will be official with them cutting rates if they do 0:16:13.040 --> 0:16:13.760 in September. 0:16:14.920 --> 0:16:17.320 Would it be a problem for this market if they 0:16:17.760 --> 0:16:20.880 surprised us and did not cut in twenty twenty four. 0:16:21.640 --> 0:16:23.600 Yes, absolutely, that'd be huge. 0:16:24.120 --> 0:16:26.800 That would be a big surprise, both for equities and fixing. 0:16:26.840 --> 0:16:29.520 Come talk about a buck and bull, it's going to 0:16:29.520 --> 0:16:32.400 be buck and running the wrong way. So I don't 0:16:32.440 --> 0:16:35.760 think you'd want to do that to the markets. I 0:16:35.800 --> 0:16:39.000 know people have been speculating that maybe they'll cut at 0:16:39.040 --> 0:16:42.120 this meeting, but that would be a surprise as well, 0:16:42.160 --> 0:16:44.760 and I think that would be interpreted as negative as 0:16:44.800 --> 0:16:48.040 the FED is panicking over some of the recent data. 0:16:48.120 --> 0:16:51.080 So I don't think they'll be cutting here. Pal has 0:16:51.160 --> 0:16:54.280 been pretty traditional in telling markets what he's going to 0:16:54.320 --> 0:16:57.160 be doing, and he pretty much sticks to that, so 0:16:57.560 --> 0:17:01.080 I think he's kind of hinted pretty strong that it's September. 0:17:01.200 --> 0:17:01.720 It's going to be. 0:17:01.840 --> 0:17:04.919 Very interesting, uh, to see what they say in the 0:17:04.960 --> 0:17:08.600 meeting this week, But I'm still betting that it's twenty 0:17:08.640 --> 0:17:10.040 five basis points in September. 0:17:10.119 --> 0:17:12.640 Well, before you for we let you go, what language 0:17:12.640 --> 0:17:14.359 are you looking at to sort of firm that up? 0:17:14.400 --> 0:17:16.679 Because You're right, if Poll doesn't want us to surprise 0:17:16.760 --> 0:17:18.720 the market, it either has to be clear in the 0:17:18.760 --> 0:17:21.440 statement in some way or clear in the press conference 0:17:21.440 --> 0:17:21.920 in some way. 0:17:23.520 --> 0:17:26.160 Yes, so I you know the fact, I mean, Pal 0:17:26.359 --> 0:17:28.879 has sounded a little bit more dubvish, that's kind of 0:17:28.920 --> 0:17:32.440 the tone, not as hawkish as his words and language 0:17:32.480 --> 0:17:35.080 have been a little bit softer and a little bit 0:17:35.119 --> 0:17:39.760 more open that things are potentially weakening. So it'll be 0:17:39.880 --> 0:17:44.040 interesting to see exactly what they say. And I think 0:17:44.080 --> 0:17:46.440 what I'm going to be looking for. Are they so 0:17:46.520 --> 0:17:48.960 dubbish that the market really starts pricing in a rate 0:17:49.000 --> 0:17:52.199 cut also for either November or December. Right now, it 0:17:52.240 --> 0:17:55.679 looks like one hundred percent for September. Some are estimating 0:17:56.040 --> 0:17:58.760 it could happen in November and December. But that's what 0:17:58.800 --> 0:18:01.320 I'm really focused on. Do they hint that they cut 0:18:01.400 --> 0:18:02.359 more than once. 0:18:02.520 --> 0:18:04.399 All right, Mary, and thank you so much for joining us. 0:18:04.400 --> 0:18:08.040 Marion Bartel's she's a chief investment strategist as Sanctuary Wealth, 0:18:08.119 --> 0:18:10.760 joining us from New York via that Zoom thing. 0:18:10.960 --> 0:18:14.560 Appreciate it. There's another bull for you. I'm still out there. 0:18:14.960 --> 0:18:16.680 She was talking about a twenty percent total move in 0:18:16.680 --> 0:18:18.600 the S and P five hundred for twenty twenty four, 0:18:18.720 --> 0:18:21.159 so still got some work to do. Although she's one 0:18:21.160 --> 0:18:23.119 of those folks which I'm in that camp as well, 0:18:23.160 --> 0:18:25.480 which is you know, you've been in the market so long, 0:18:25.560 --> 0:18:28.880 you really get a sense of seasonality during the year, 0:18:29.040 --> 0:18:30.680 and I don't want to be anywhere. 0:18:30.280 --> 0:18:32.320 Near these markets in September or October. 0:18:32.600 --> 0:18:34.320 But that's just because my first year on Wall Street 0:18:34.320 --> 0:18:38.240 I was September nineteen eighty seven, and that was October 0:18:38.280 --> 0:18:39.080 nineteen eighty seven. 0:18:39.200 --> 0:18:40.399 Oh my, that was grim. 0:18:40.440 --> 0:18:43.160 So it's a traumatizing since. 0:18:43.080 --> 0:18:45.040 You know you don't want to be anywhere near these markets. 0:18:46.440 --> 0:18:50.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:18:50.400 --> 0:18:53.440 weekdays at ten am Eastern on Apple car Play and 0:18:53.440 --> 0:18:56.320 androyd Outo with the Bloomberg Business App. You can also 0:18:56.440 --> 0:18:59.880 listen live on Amazon Alexa from our flagship New York station. 0:19:00.320 --> 0:19:03.080 Just say, Alexa, playing Bloomberg eleven thirty. 0:19:04.600 --> 0:19:05.919 One of the things to look at in the market 0:19:05.960 --> 0:19:09.480 is Bitcoin up by just one point two percent, but 0:19:09.520 --> 0:19:11.920 it's actually up eight hundred and twenty six dollars. That's 0:19:11.920 --> 0:19:14.960 the highest level earlier today since mid June. In the 0:19:15.040 --> 0:19:20.639 latest catalyst was Donald Trump expanding his pro crypto agenda. 0:19:20.680 --> 0:19:22.879 Plus you got those expectations that affet's going to be 0:19:22.920 --> 0:19:25.080 inching its way towards a cut probably in the fall, 0:19:25.080 --> 0:19:28.080 and that's also helping investor sentiment. So we needed to 0:19:28.080 --> 0:19:30.000 get the read on that as well as other commodities. 0:19:30.000 --> 0:19:34.040 With Mike mcloon, Bloomberg Intelligence Senior Commodity strategist, do you 0:19:34.280 --> 0:19:36.920 buy the theory that President Trump comes out and says 0:19:36.960 --> 0:19:39.479 he's going to fire Gary Gensler and he loves all 0:19:39.480 --> 0:19:41.879 crypto things. It's going to be number one in the US. Therefore, 0:19:41.920 --> 0:19:43.080 thus bitcoin goes up. 0:19:44.680 --> 0:19:47.520 I impressed how you phrased the question, Alex is most 0:19:47.560 --> 0:19:49.920 people seem to be believing that, but I look at 0:19:49.920 --> 0:19:51.919 it as there's no and then the lesson you'll learn 0:19:52.000 --> 0:19:54.240 is Nozell like a convert. Obviously he's converted because he 0:19:54.359 --> 0:19:57.160 ate the crypto before, but I think he's finally realizing 0:19:57.240 --> 0:19:59.760 things we wrote five years ago. This space is nothing 0:19:59.760 --> 0:20:03.119 but good for America. It's most widely track crypto is 0:20:03.119 --> 0:20:06.000 not Bitcoin. It's actually tether. The US dollar trades more 0:20:06.040 --> 0:20:09.119 than bitcoin double on a daily basis. But it's impressive 0:20:09.520 --> 0:20:12.320 what he's doing insane to get elected, and I think 0:20:12.359 --> 0:20:14.120 that's the number one thing. He's saying, whatever you can 0:20:14.200 --> 0:20:17.040