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Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Sweene. You,

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Speaker 1: along with my co host Lisa Brahma wits each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: Podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Well, we awoke to news this

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Speaker 1: morning of a greater geopolitical risk coming out of the midweeks,

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Speaker 1: the Mideast US air strike on Iran that killed a

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Speaker 1: Cassem Solomani, one of Rand's most powerful generals. To get

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Speaker 1: a sense of what that means for geopolitics and general

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Speaker 1: in the markets in particularly, welcome our guest Peter Chuer,

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Speaker 1: head of macro strategy at Academy Securities, joining us on

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Speaker 1: the phone from New Canaan, Connecticut. And Robert Walsh, retired

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Speaker 1: Marine Lieutenant General, Academy Securities advisory board member as well.

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Speaker 1: He's on the phone from Washington, d C. I want

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Speaker 1: to start with you, General Walsh, just give us a

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Speaker 1: sense of who this character Cassem Solomany is and what

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Speaker 1: it means for the US to take him out. Sulamani

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Speaker 1: was probably the key player in the region when you

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Speaker 1: look at the Middle East, is what our strategic objectives

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Speaker 1: really are there, I think is really to protect US

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Speaker 1: interests and UH probably avoid any type of war over there.

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Speaker 1: He's one that's been spreading influence since UM the US

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Speaker 1: was involved in Iraq. If you go back to the

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Speaker 1: Iraq war, UM, most of the many powerful I d

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Speaker 1: s that were attributed over there that killed over six

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Speaker 1: U S personnel were attributed to UM. Sulamani and his

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Speaker 1: UH I d R C or could force was over there,

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Speaker 1: and UH he has been really behind all the strategy

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Speaker 1: of Iran, developing what we call a bridge from all

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Speaker 1: the way from Iran, you know, through Iraq into Syria

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Speaker 1: and an over into um uh Lebanon, Hesbla in those

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Speaker 1: areas there. Also you've seen him behind the what UH

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Speaker 1: Iran has been doing in Yemen and UH and trying

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Speaker 1: to destabilize that area. So I think the key part

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Speaker 1: for us of taking him out was everything we were

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Speaker 1: trying to do he was countering, and he was designated

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Speaker 1: as an his organization was designated as a terrorist organization

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Speaker 1: and he was designated as a terrorist leader UM and

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Speaker 1: I think the Trump administration had been very uh trying

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Speaker 1: to hold this to economic um leverage, trying to hold

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Speaker 1: them down economically. And I think of recent we've seen

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Speaker 1: what Sulimani has done behind irand is to really start

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Speaker 1: to build us into attacking Americans, and that latest attack

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Speaker 1: on the American base that killed the Iraqi contractor wounding

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Speaker 1: several troops, I think was probably the last straw in

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Speaker 1: there to say now that that had crossed the red line.

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Speaker 1: The key thing here now, I think, with uh, with

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Speaker 1: him out of the way, is what will Iran's actions

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Speaker 1: be now? Uh, They're thoroughly limited on what they can

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Speaker 1: do in relation to what the U. S Power has.

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Speaker 1: And I think another key part of all this is

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Speaker 1: how will this play out in rapt well And I

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Speaker 1: want to pick up exactly on that point, General Walsh,

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Speaker 1: which is that what can I Ran possibly do? It

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Speaker 1: seems like markets are suggesting not all that much, even

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Speaker 1: though they have promised serious retaliation. Peter, is your sense,

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Speaker 1: uh that basically markets are saying this is not going

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Speaker 1: to be a big deal long term and isn't going

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Speaker 1: to be more than a blip. Yeah, I think markets

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Speaker 1: are really saying this is going to remain regional for now.

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Speaker 1: Um You know, when we've talked to the General's General

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Speaker 1: Walsh included, the view is that um Iran really doesn't

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Speaker 1: have the ability to project power very far outside of

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Speaker 1: the region. They're also not going to want to really

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Speaker 1: coalesce ourselves the Staudies and is real into a collesive

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Speaker 1: force against them. So we think it remains a little

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Speaker 1: bit regional. And I think the big important things to

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Speaker 1: people here to remember is we have a strong view,

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Speaker 1: at least I have a strong view that higher oil

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Speaker 1: prices are not bad for the US now that we

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Speaker 1: become energy independent. So I think from an economic standpoint,

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Speaker 1: we really haven't been involved in the Mid East in

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Speaker 1: terms of selling goods, and so we're not gonna lose

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Speaker 1: much on the consumption side. I think energy is kind

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Speaker 1: of a wash for US. I think this one thing

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Speaker 1: that it does the changes the narrative that I've been

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Speaker 1: a part of as well, where you think that Europe

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Speaker 1: and Asia might outperform the US this year. They're gonna

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Speaker 1: get hit much harder harder by higher oil prices, so

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Speaker 1: that could be a risk, especially if we see brand

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Speaker 1: versus w T I spread increased. So general, just quickly,

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Speaker 1: what kind of retaliation do you think Iran could mount here,

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Speaker 1: given that maybe some limitations in their ability to project

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Speaker 1: much out of the region. Like I said, we stepped

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Speaker 1: things up with quite a bit by now doing this

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Speaker 1: uh this uh AT taptical attack, but it was had

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Speaker 1: strategic implications. But this did cross a red line with

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Speaker 1: President Trump by by keeping this to away from economic

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Speaker 1: sanctions to now bring it to a military strike or actions.

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Speaker 1: This kind of raised the game and it put us

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Speaker 1: into a new area in our competition there with Iran

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Speaker 1: in the Middle East for influence. I think what you'll

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Speaker 1: see out of Iran is there's gonna be a pause.

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Speaker 1: They're gonna have to reassess because this did cross the

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Speaker 1: red line for the administration when we took this. I

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Speaker 1: think this is probably gonna be very surprising to Iran

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Speaker 1: that we went to this next level because as you see,

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Speaker 1: what they've been trying to do is to break down

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Speaker 1: those economic sanctions have been going on to try to

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Speaker 1: try to drive a wedge between US UH the Europeans,

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Speaker 1: between US and China, and and you saw their attacks

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Speaker 1: on the oil tankers, the Saudi oil fields, they took

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Speaker 1: down one of our drones UH and then finally attacked

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Speaker 1: the U spaces. So what I would expect is a

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Speaker 1: continuation of what they are have been doing is reaching

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Speaker 1: out across the area and trying to take attacks on

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Speaker 1: American influence interest, but keeping it down below the level

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Speaker 1: of UH conventional conflict because they really don't want to

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Speaker 1: go there. They want to try to drive a wedge

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Speaker 1: between US and the rest of the countries in the

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Speaker 1: Middle East and also across the globe. So I think

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Speaker 1: this is going to be an awakening to them that

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Speaker 1: we've taken this next step and their plan of how

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Speaker 1: they've been doing these small strategic are small tactical attacks

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Speaker 1: is really not working in the in the intent that

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Speaker 1: they wanted. Thank you to both of you, General Walsh

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Speaker 1: Robert Walsh, retired Marine Lieutenant General for Academy Securities, UH

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Speaker 1: advisory board member there on the phone from Washington to

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Speaker 1: see Peter Sheer. Thank you so much as always for

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Speaker 1: your perspective ahead of macro strategy at Academy Securities. Well,

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Speaker 1: we started trading today with a lot of news impacting

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Speaker 1: the market. Geopolitical news out of Irack that we had

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Speaker 1: the I s M number come out with the factory

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Speaker 1: gauge coming in the weakest it's been since two thousand nine.

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Speaker 1: Is this causing investors kind of reassess some of the

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Speaker 1: trades coming into two thousand and twenty. We welcome Danielle

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Speaker 1: di Martino, good friend of the show. She's a CEO

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Speaker 1: and director of Intelligence at Quill Intelligence, and she's also

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Speaker 1: a former advisor at the Dallas Feeder Reserve any Bloomberg

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Speaker 1: opinion columnst She joined us here in our Bloomberg and

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Speaker 1: Gonnactor Broker studio. So, Danielle, it's perfect timing to have

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Speaker 1: you here. A lot has arguably changed just in the

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Speaker 1: last hours. How are you kind of thinking about the

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Speaker 1: geopolitical news we had overnight plus some of the manufacturing

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Speaker 1: data we got out of the I s M this morning. So, UM,

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Speaker 1: I'm gonna be contrarian to my normal bare self and

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Speaker 1: say that we've had a lot of net positive news

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Speaker 1: come out today. Um, we saw customer inventories UH come

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Speaker 1: down significantly. That portends very well for the future of

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Speaker 1: new orders, and that's really what markets have their eye

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Speaker 1: on the most closely. We've seen new orders um sink

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Speaker 1: for five months in a row and they're at the

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Speaker 1: lowest level since April of two thousand nine, So that

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Speaker 1: on the surface looks very bad, but you saw backlogs

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Speaker 1: tick up, and backlogs is another representation of future demand.

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Speaker 1: And you know, as far as the oil price situation go,

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Speaker 1: we at Quill Intelligence, we follow every single states continuing claims,

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Speaker 1: initial jobless claims, and claims in Texas have become very problematic.

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Speaker 1: They're up year over year. You know, I think with

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Speaker 1: w t I north of sixty dollars, this is going

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Speaker 1: to cause a lot of energy patch layoff potential to

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Speaker 1: come down. So we could actually start to see a

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Speaker 1: beneficial effect in the tenth largest economy in the world,

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Speaker 1: Texas that's been really under quite a bit of stress,

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Speaker 1: as well as the country of Mexico. All Right, if

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Speaker 1: this trading environment persists for longer than just today, let's

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Speaker 1: say this isn't just a blip. Can you walk us

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Speaker 1: through how much some of the consensus trades will be

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Speaker 1: a bend? And I say that as I look at,

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Speaker 1: for example, the m s c I Emerging Markets Currency Index,

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Speaker 1: and it's having its worst day, biggest decline at one

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Speaker 1: point since August. Now at November, you're seeing the potential

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Speaker 1: for yields to increase longer term if oil prices really

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Speaker 1: shoot up, right, because it increases sort of the prospect

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Speaker 1: of that type of inflation, it pushes down the prospects

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Speaker 1: for Europe, which has been also a trade and I

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Speaker 1: mean you sort of walk us through this, So there

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Speaker 1: are there are trades that are at risk in in

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Speaker 1: two big ways. In my mind, I mean, markets came

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Speaker 1: into this year saying this is going to be a

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Speaker 1: global reflationary year. This is going to be when when

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Speaker 1: when global economic growth comes together in a good way.

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Speaker 1: And actually, if you look at the at the breadth

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Speaker 1: of the global I s M s that came out yesterday,

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Speaker 1: we're in contraction. We haven't seen south of fifty since May,

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Speaker 1: so we really are seeing um less bad and information

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Speaker 1: come out. So until today, again it was very supportive

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Speaker 1: of this idea of global reflation UM and we've seen

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Speaker 1: backlogs also be less bad, which is which is future

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Speaker 1: demand globally. But the implications of higher Brent oil prices

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Speaker 1: for China and for Europe, which rely much more on

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Speaker 1: some of the Iraqi and Iranian oil supplies. That is

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Speaker 1: not a positive. So I think again, you're starting to

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Speaker 1: put this global inflation trade at risk. At the same time,

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Speaker 1: we're seeing wage inflation tick up, especially among small businesses.

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Speaker 1: And if we see a persistent increase in energy prices

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Speaker 1: as well as wage inflation going into twenty and it

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Speaker 1: doesn't dissipate, then all of a sudden, you've got the

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Speaker 1: FED is on hold idea for the entire year come

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Speaker 1: at risk. All of a sudden, you've got a two

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Speaker 1: way trade here with trade with with with the Fed,

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Speaker 1: and investors beginning to ask the question, will J. Powell

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Speaker 1: be forced to raise interest rates? In the markets? Are

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Speaker 1: not banking on that at all. Yeah, I've rejected that.

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Speaker 1: Soul is looking looking you're looking sort of self righteous

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Speaker 1: at me. So is there again we think about the consumer?

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Speaker 1: We think about I think the consensus calls for two

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Speaker 1: percent kind of GDP growth, maybe a smidg higher than that.

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Speaker 1: Anything that you've seen in the last twenty four hours

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Speaker 1: that make you maybe step back from that a little

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Speaker 1: bit of that consensus call. Well, I'll tell you what

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Speaker 1: we uh. We studied the difference between the methodologies used

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Speaker 1: between I H S I H S market, which is

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Speaker 1: getting a lot more I think investor interest of late

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Speaker 1: because it comes out before I S M, and especially

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Speaker 1: yesterday's report. What I didn't like in the report was

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Speaker 1: that the employment index ticked down, and the correlation, the

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Speaker 1: co movement between manufacturing payrolls and that of I H

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Speaker 1: S market is point nine one. That compares to point

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Speaker 1: seven six for the I S M. In other words,

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Speaker 1: if you want to get a read on factory payrolls,

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Speaker 1: and that's been a swing factor every you know, every

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Speaker 1: non farm payroll Friday, it looks like we're going to

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Speaker 1: see continued decreases in factory payrolls. We're also seeing that

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Speaker 1: play out in some of the rail data. Um, because

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Speaker 1: we're seeing declines in auto and auto production, railrooadings, we're

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Speaker 1: seeing all kinds of ugliness at the ports as well

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Speaker 1: as in freight. This calls that idea of a manufacturing

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Speaker 1: renaissance into question. Um, So I've effectively spoken out of

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Speaker 1: both sides of my mouth. Well, well, I mean, honestly,

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Speaker 1: we're getting conflicting data and that's what the issue is,

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Speaker 1: is creating so much uncertainty. And when you talk about

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Speaker 1: the auto sector, we've been getting auto sales numbers out

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Speaker 1: of the big auto manufacturers today, they're not good for

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Speaker 1: the most. For example, Conda's December US auto sales were

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Speaker 1: down twelve percent versus an estimated gain. The GM's fourth

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Speaker 1: quarter total deliveries were down six point three percent. The

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Speaker 1: estimate was supposed to be down six percent. We're seeing

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Speaker 1: a big decline, unexpectedly big decline in toyota. I mean,

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Speaker 1: it's pretty much across the board. Despite the fact that

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Speaker 1: we saw that trucks are gaining steam and that the

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Speaker 1: prices are going up and their profits are going up.

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Speaker 1: I mean, this is concerning. No or is this a

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Speaker 1: price in It absolutely is concerning because I think that

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Speaker 1: the GM strike that the silver lining of the GM

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Speaker 1: strike was that it took down some of the anxieties

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Speaker 1: about all of these inventories that had built up because

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Speaker 1: you took these production lines down, and so the idea

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Speaker 1: was after the strike that they would be able to

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Speaker 1: fire everything back up and you know, keep moving forward

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Speaker 1: and not the risk of production cuts. Further production cuts

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Speaker 1: really came down after the GM strike. With these data

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Speaker 1: that we're seeing come out today, I question that and

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Speaker 1: whether or not GM and the Big three are going

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Speaker 1: to have to look at despite some calming in Detroit,

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Speaker 1: are going to have to look at continued production cuts.

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Speaker 1: That is not a positive for the U S economy.

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Speaker 1: How about for the consumer, what's your view of the

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Speaker 1: consumer right now? Well, I think you know, if you

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Speaker 1: looked at credit card borrowing over the holidays, I mean,

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Speaker 1: two thousand nineteen was a bang up year. And unfortunately,

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Speaker 1: we get consumer credit data out with such a lag

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Speaker 1: that every time we get a retail sales report that

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Speaker 1: beats you know, a few weeks later we get the

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Speaker 1: consumer credit report out, which is usually on non farm

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Speaker 1: Payroll Friday, and nobody pays attention to it. But we've

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Speaker 1: been getting these blockbuster figures on revolving credit. That means

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Speaker 1: that the consumers relying increasingly even as even as credit

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Speaker 1: card delinquencies increase, that the consumers are relying increasingly on

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Speaker 1: credit cards to support their consumption. And if you're seeing

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Speaker 1: weakness out of Honda, if you're seeing weakness out of Toyota,

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Speaker 1: those are some of the lowest priced vehicles out there.

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Speaker 1: That is also a sign that consumers are struggling. Daniel T.

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Speaker 1: Martino both, thank you so much for being with us today.

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Speaker 1: Thank you. Danielle den Martino Booth is chief executive officer

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Speaker 1: and chief strategist for Quill Intelligence. He's also a former

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Speaker 1: advisor to the Dallas Votual Reserve and a Bloomberg Opinion contributor. Well,

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Speaker 1: by all accounts, holiday retail sales were quite strong in US,

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Speaker 1: kind of reflecting what we think is the strength that

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Speaker 1: we hear about so consistently of the US consumer. To

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Speaker 1: get the latest, we welcome Craig Johnson. He's president of

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Speaker 1: Customer Growth Partners. So, Craig, thanks so much for joining

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Speaker 1: us here. Um, give us your sense of how the

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Speaker 1: holiday retail sales ended up in the US. Well, it

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Speaker 1: was really quite a good season. It may have us

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Speaker 1: started out that way. Um, we had a long warm

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Speaker 1: fall and even now and we're a week or two

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Speaker 1: win to winter and it's been relatively warm. So that

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Speaker 1: depressed a lot of outerwear and sweater sales. But after

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Speaker 1: a slow start and once we got near Black Friday,

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Speaker 1: things I really started picking up. And then December was

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Speaker 1: just a breakout month that was just exceptionally strong growth.

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Speaker 1: We think December month a lawn was up in access

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Speaker 1: of six percent. Super Saturday, uh, last Saturday before Christmas

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Speaker 1: was up eight percent year of the year, so really

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Speaker 1: ended up on a high note. So who benefited and

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Speaker 1: who wasn't as big of a beneficiary, Well, there were,

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Speaker 1: as often happened, some win winners and winners and losers

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Speaker 1: in the UH in the sector, and some of the

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Speaker 1: strongest ones were. First of all, online sales were just

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Speaker 1: exceptionally strong. That's across merchandise categories with online sales were

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Speaker 1: up about year of the year, and of the growth

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Speaker 1: that we saw total of five point one for the

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Speaker 1: for the entire season, UH, online sales accounted for almost

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Speaker 1: six of that five point one growth. And then when

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Speaker 1: you get into merchandise sectors, some of the strong sectors

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Speaker 1: were food and beverage, which is part of of the

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Speaker 1: mix that's you know at grocery stores and so forth,

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Speaker 1: UH liquor stores, so all that was very very strong.

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Speaker 1: And then the the other sector that was strongly sporting

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Speaker 1: goods and toys. Sporting goods UH reflecting the comeback we've

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Speaker 1: seen at places like Dick Sporting Goods UM, but also

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Speaker 1: it was very strong season for UM for toys, the

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Speaker 1: all the licensed products for for frozen to the new

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Speaker 1: Star Wars etcetera. And and so that was all quite

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Speaker 1: a strong category as well. Weaker sectors, however, were department stores,

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Speaker 1: you know, they're down the mid to high single digits,

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Speaker 1: and then apparel stores, which were down maybe a point

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Speaker 1: or two year of the year. So Craig, coming into

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Speaker 1: the holiday season, we heard a lot about o G.

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Speaker 1: There's one it's a one week shorter season compared to

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Speaker 1: last year. That didn't seem to be a problem, did it, No,

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Speaker 1: not at all. Statistically, Uh, the industry and you know,

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Speaker 1: led by the interf National Reachail Federation in ourselves, but

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Speaker 1: you know, we've we've been doing this for twenty years.

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Speaker 1: Christmas season consists of November and December. Last time I checked,

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Speaker 1: each had twenty sixty one days. It doesn't change a

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Speaker 1: year every year. Now that there may be internal changes

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Speaker 1: in which we saw as I alluded to, you know

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Speaker 1: with you know, with with the with a warm and

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Speaker 1: extended fall um, but people are spending a little bit

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Speaker 1: closer to need um. And we just saw just once

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Speaker 1: we got into December, things week by week, things accelerated

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Speaker 1: and even the retail second season, which is the week

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Speaker 1: between Christmas and New Year's that was the best ever

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Speaker 1: that was a hundred thirty billion dollars was just exceptionally

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Speaker 1: strong both Uh, the day after Christmas in England they

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Speaker 1: call it Boxing Day, that was great. And then the

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Speaker 1: weekend of the nine December, very very strong, traffic, very strong. Hey, Creig,

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Speaker 1: are we gonna let me put it to you this way.

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Speaker 1: How promotional do you think retailers were during this period.

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Speaker 1: We're gonna listen to the next quarterly conference calls from

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Speaker 1: these companies and say, yeah, we drive top line sales,

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Speaker 1: but it was the expensive margin um. Regretfully, we think

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Speaker 1: that's going to be the case. And again not across

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Speaker 1: the board, but particularly for apparel stores, and then many

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Speaker 1: of the department stores. Uh, many apparel stores were routinely,

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Speaker 1: not just on Bio Friday, but since then had been

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Speaker 1: at fift off everything. And that's you know, that's a

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Speaker 1: that's fine for Black Friday to keep it, you know,

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Speaker 1: for just you know, there's a few days of that

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Speaker 1: long weekend, but if you keep that up all the

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Speaker 1: way through December, that's is not a recipe for healthy margins.

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Speaker 1: So much of the apparel sector was a thirty percent

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Speaker 1: off UM, and department stores often got up that high.

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Speaker 1: But it was it was it was a tough season

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Speaker 1: for apparel and we're going to see clearly see now

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Speaker 1: I'm not talking about Lulu Iman. You know that rarely

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Speaker 1: goes on discount. They had a triffic season. But for

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Speaker 1: your regular line up, the usual suspects um uh farel stores,

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Speaker 1: there's going to be some margin pressure. Craig, just real

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Speaker 1: quick here thirty seconds, how much do you expect spending

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Speaker 1: by retailers on their online presences in the year ahead.

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Speaker 1: We're looking to mid teams, possibly mid to high teams.

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Speaker 1: So it was fifteen sixteen, maybe seventeen was a year

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Speaker 1: of year growth online. It's it continues to burden Virgin.

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Speaker 1: It really hasn't fallen off barely at all. Craig Johnson,

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Speaker 1: thank you so much for being with us. Craig Johnson

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Speaker 1: as president of Customer Growth Partners, talking about how good

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Speaker 1: retail sales were on the first trading day of it

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Speaker 1: was more of the same optimism everything rally. The second

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Speaker 1: day of trading in things changed a bit. Joining us now,

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Speaker 1: Jim Pulse in, chief investment strategist at the Loophole Group,

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Speaker 1: joining us my phone from Minneapolis, Minnesota. I'm wondering, Jim,

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Speaker 1: do you think if this sort of environment that we're

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Speaker 1: in right now, First of all, do you think it

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Speaker 1: could persist? But second of all, would it change your outlook?

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Speaker 1: I you know this is always you know, it's an

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Speaker 1: uncertain event and so you never know how that might go.

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Speaker 1: But I think events like this to me is why

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Speaker 1: you're diversified in the first place, and probably shouldn't do

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Speaker 1: much more than that with with this type of thing.

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Speaker 1: Um if if, if it gets a lot worse, it

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Speaker 1: could be a buying opportunity. And in my view, I

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Speaker 1: think that the odds are that this is going to

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Speaker 1: blow over as far as a big market event. Um.

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Speaker 1: But you know, there's certainly some areas where it could

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Speaker 1: become more intense. I just think the risk of too

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Speaker 1: high for I ran to you know, engage in a

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Speaker 1: full on military Uh. Reply, They'll probably get back at

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Speaker 1: us in more subtle ways. I think would be my

384
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Speaker 1: would be my guests. So UM, I think the volatility though,

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Speaker 1: he says, what's interesting and um, I think we've had

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Speaker 1: such stable markets for so long. We we we had

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Speaker 1: such a tremendous upside run not only yesterday but in

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Speaker 1: the last in the fourth quarter last year, and it's

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Speaker 1: been a while since we've had a vixed event, if

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Speaker 1: you will, and certainly a geopolitical event that was not

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Speaker 1: at all talked about our discuss coming out of the

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Speaker 1: out of left field, and and so I can understand

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Speaker 1: why the reaction was pretty strong this morning. But I

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Speaker 1: think if we settled down over the weekend, UM, I

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Speaker 1: think traders coming back in on Monday are going to

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Speaker 1: be looking a lot more at fundamental data, I think

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Speaker 1: than they will be at this So Jim, give us

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Speaker 1: your thoughts and let's put the geopolitical issue aside to

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Speaker 1: the extent that we can coming into How are you

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Speaker 1: how are you expecting markets to perform equity markets given

401
00:22:14,440 --> 00:22:19,480
Speaker 1: the performance we had in Yeah, well, you know a

402
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Speaker 1: little bit. You know we we had We didn't have

403
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Speaker 1: a bear market in two thousand eighteen, but we got

404
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Speaker 1: very close. The sp fell almost the definition of a

405
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Speaker 1: bear just shy of that. And I what I've reflected

406
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Speaker 1: on is that it is sure has felt last year

407
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Speaker 1: two felt a lot like the first year of a

408
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Speaker 1: new bull in the sense that when you have a

409
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Speaker 1: bear market, what what files after that is pessimism, spikes, recession,

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Speaker 1: fear spike um UH, and then yields come down and

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Speaker 1: you you get full on policy support as the police

412
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Speaker 1: officials get equally panicked that the economy setted down. And

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Speaker 1: we got all that last year, and market went up

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Speaker 1: despite earnings estimates coming down, despite fundamentals weakening. All the

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Speaker 1: year long, UH climbed a perpetual wall of worry, which

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Speaker 1: is typically what happens in the first year of a

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Speaker 1: new bull. The market recovers, but no one really believes it.

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Speaker 1: And that's kind of what happened last years. As you

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Speaker 1: go into the second year of a Bowl, the driver's change.

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Speaker 1: People start to accept the fact that the recession has ended,

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Speaker 1: and they start to get more optimistic about earnings improving

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Speaker 1: and fundamentals getting better. UM and I think that's kind

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Speaker 1: of what we're seeing as the drivers now UH as

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Speaker 1: we enter two thousand twenty. One of the things I

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Speaker 1: looked at recently that went back to the looked at

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Speaker 1: every first year and second year Bowl market since nineteen

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Speaker 1: fifty and last year the market UH was a huge increase,

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Speaker 1: of course, but it was right on par, just slightly

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Speaker 1: a of what you've had done on average in all

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Speaker 1: first years of postwar bowl markets. If we were to

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Speaker 1: continue this pattern for the next year, it would suggest

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Speaker 1: the average move in the second year of a bull

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Speaker 1: run would be that the stock market, the SMP five

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Speaker 1: hundred does about good rises as high as thirty five

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Speaker 1: to thirty. And I'm kind of in that camp. I

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Speaker 1: think rates are going to go up. Economy is going

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Speaker 1: to improve here in globally, but also earnings are going

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Speaker 1: to rise, and we're going to see more optimism among

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Speaker 1: investors that are under allocated to risk assets in general.

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Speaker 1: So rates are going to go up. Caught my attention

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Speaker 1: because arguably last year was unique from the other first

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Speaker 1: years of a bull market according to your historical calculations,

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Speaker 1: in that they were completely driven Some might argue by

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Speaker 1: a new wave of rate cuts and stimulus by central

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Speaker 1: banks around the world. Does that change the scenario at

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Speaker 1: all or is that just kind of a backdrop for

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00:24:59,119 --> 00:25:03,840
Speaker 1: what is otherwise a new bowl market. Well, typically the

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Speaker 1: first year of the bowlies you do get substantial rate cuts. Um,

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Speaker 1: you know, you have the collapse in the stock market. Uh,

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Speaker 1: people get fearful about economy slowing and recession coming, and

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Speaker 1: so bond yields fall and eventually the fed comes into

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Speaker 1: cut rates, and that's kind of what we got last year.

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Speaker 1: So um, you know, that's what you got at the

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Speaker 1: first year of most bowl markets is sort of an

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Speaker 1: all out panic about the economy resulting in full on

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Speaker 1: policy support. I One of the things that does keep

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Speaker 1: me emolish is just the the degree and magnitude of

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Speaker 1: of policy support coming. Uh, you know, not only in

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Speaker 1: lower bonn yields, but federal reserve cuts, the restart of

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Speaker 1: quantitative easing chronic and constant uh deaf is, federal deaths,

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Speaker 1: as spending as a percentage GDP, growing more fiscal stimulus,

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Speaker 1: and having that happened not only here but everywhere around

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Speaker 1: the globe. Two things I've point out, um, we we uh,

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Speaker 1: we have seldom had something I called the three gun gooser,

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Speaker 1: where you have falling bond yields, rising money supply, and

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Speaker 1: rising fiscal stimulus at the same time. We've had that

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00:26:13,560 --> 00:26:16,159
Speaker 1: about fifteen percent of the time in post war history.

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Speaker 1: We've got that right now and typically in the next

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Speaker 1: year when you're in that situation, that's very good for stocks.

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Speaker 1: The other thing that is pretty unique because we have

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Speaker 1: a yield environment on the tenure yield, which is below

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Speaker 1: three percent and back going all the way back to

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Speaker 1: the nine twenties when we've been when we've had a

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Speaker 1: below three percent tenure yield that also has been has

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Speaker 1: led to very good results in the stock market over

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Speaker 1: the next year, something like eighteen percent per annum average

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Speaker 1: turns UH and only having declines about sixteen percent of

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Speaker 1: the time. So I I I do agree. There's the

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Speaker 1: risk er up. We're late in the cycle, the longest

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Speaker 1: calendar recovery ever, longest bowl market ever. Um, there's fundamental

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00:27:03,480 --> 00:27:06,280
Speaker 1: weakness going on, but boy, there's some pretty good things

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Speaker 1: happening to that. I don't think you can just summaries

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Speaker 1: summarily dismiss. I think you continue to lean bolishly this year. Jim,

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Speaker 1: thanks so much for catching up with us. We appreciate

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Speaker 1: getting thoughts here as we start. Jim, Jim Paulson, his

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Speaker 1: chief investment strategies at the Luthhole Group, joining us on

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Speaker 1: the phone from Minneapolis. Thanks for listening to the Bloomberg

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Speaker 1: P and L podcast. You can subscribe and listen to

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00:27:27,600 --> 00:27:30,840
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: I'm Paul Sweeney, I'm on Twitter at pt Sweeney. I'm

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00:27:33,760 --> 00:27:36,439
Speaker 1: Lisa A. Bram Woyds. I'm on Twitter at Lisa bram Woyds.

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00:27:36,520 --> 00:27:39,359
Speaker 1: One before the podcast. You can always catch us worldwide

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00:27:39,400 --> 00:27:40,359
Speaker 1: on Bloomberg Radio