WEBVTT - The Fed's Path Ahead & Minnesota ICE Shooting Fallout 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 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 --> 0:00:27.040 us live on YouTube. 0:00:27.360 --> 0:00:30.000 Seth Carpenter joins us right now, global head of macro 0:00:30.080 --> 0:00:33.879 research at Margaret Stanley as well. I think I mentioned 0:00:33.880 --> 0:00:37.159 once this morning, Seth that there's a FED meeting. I 0:00:37.159 --> 0:00:41.600 think Ellen Beson, Zetner and others would say, you know, 0:00:41.600 --> 0:00:44.040 at Morgan Stanley they're going to pause or this or that, 0:00:44.240 --> 0:00:48.640 but what's the Morgan Stanley nuance forward when you research 0:00:48.840 --> 0:00:49.880 our Central Bank? 0:00:52.360 --> 0:00:54.760 Yeah, I mean, I think, to be quite fair to 0:00:54.840 --> 0:00:58.200 the set, they're in an extraordinarily difficult situation. If you 0:00:58.200 --> 0:01:01.960 look at the aggregate spending numbers are coming in pretty solid, 0:01:02.360 --> 0:01:04.280 and then you look at the employment numbers and the 0:01:04.360 --> 0:01:06.840 non farm barrels numbers are coming in really really soft, 0:01:06.920 --> 0:01:10.479 and that combination is pretty a historic and so they 0:01:10.480 --> 0:01:13.480 have cut rates several times over the past call it 0:01:13.520 --> 0:01:16.520 six months or so. They're trying to figure out how 0:01:16.560 --> 0:01:18.600 close are they the neutral. They're trying to figure out, 0:01:18.920 --> 0:01:21.560 is the soft labor market the signal or is it 0:01:21.680 --> 0:01:24.160 the noise? Is the strong spending the signal or is 0:01:24.160 --> 0:01:29.000 it the noise? And judging from the commentary across the committee, 0:01:29.080 --> 0:01:31.560 there is not a single view. When I worked at 0:01:31.560 --> 0:01:33.400 the Feed, as you know, Tom, I was there for 0:01:33.400 --> 0:01:37.400 fifteen years, one of my bosses would say the SEC 0:01:37.600 --> 0:01:39.880 are nineteen people that don't agree on the color of 0:01:39.880 --> 0:01:42.800 an orange, and right now they've got every right to 0:01:42.920 --> 0:01:45.080 have a disagreement in terms of the outlooks of the 0:01:45.120 --> 0:01:48.000 economy given the noise, and so I think that's where 0:01:48.040 --> 0:01:50.840 they are. I think they will be pausing this week. 0:01:51.080 --> 0:01:54.000 I think sure Powell will have a very difficult messaging 0:01:54.880 --> 0:01:57.880 job to do at the press conference, both because it's 0:01:57.880 --> 0:02:01.440 a tricky macroeconomic situation and because every single journalist is 0:02:01.440 --> 0:02:04.800 going to be asking him about, you know, the political 0:02:04.800 --> 0:02:06.560 side of things, which I suspect you will want to 0:02:06.600 --> 0:02:07.440 stay far away from. 0:02:07.640 --> 0:02:09.440 So this is like when you roll at Princeton. 0:02:09.840 --> 0:02:11.720 I mean, did you see the pony put in there 0:02:12.320 --> 0:02:15.160 about the color orange? And some people would allude that 0:02:15.200 --> 0:02:18.480 to the President of the United States. I mean, you 0:02:18.520 --> 0:02:21.160 can't get through a meeting at Morgan Stanley without a 0:02:21.200 --> 0:02:24.320 Seth carp illusion upon Seth. 0:02:25.160 --> 0:02:26.840 You know, we think about twenty twenty five and the 0:02:26.960 --> 0:02:30.160 US equity markets performed very very well, but with a 0:02:30.200 --> 0:02:32.280 lot of the performance in the rest of the world 0:02:32.440 --> 0:02:36.440 was superior to that of the US. Here, what's that 0:02:36.680 --> 0:02:39.680 US non US outlook for twenty twenty six in your mind? 0:02:41.919 --> 0:02:44.280 Yeah, no, I think that's that's right. You know, at 0:02:44.320 --> 0:02:47.880 Morgan Stanley Bradley, we're still pretty bullish on the outlook 0:02:47.919 --> 0:02:51.639 in the US, but also globally, we think US equity's 0:02:51.680 --> 0:02:54.280 probably unperformed. And my colleague Mike Wilson, who's our chief 0:02:54.320 --> 0:02:58.520 equity strategist, is really constructive and he's pointed out that 0:02:58.760 --> 0:03:01.360 in times where we don't have a recession, where interest 0:03:01.440 --> 0:03:03.040 rates are looking like they're going to come down a 0:03:03.040 --> 0:03:06.000 little bit, you don't usually have too much in the 0:03:06.040 --> 0:03:08.720 way of multiple compression. And so even though a lot 0:03:08.720 --> 0:03:12.040 of people have commented on how stretched multiples are, the 0:03:12.080 --> 0:03:15.120 macro backdrop, if everything goes according to plan, seems like 0:03:15.160 --> 0:03:19.639 it's favorable. Moreover, part of what's looking stretched to the 0:03:19.680 --> 0:03:24.320 index overall is the top end, the hyperscalers especially, and 0:03:24.400 --> 0:03:27.519 so if we have a broadening of growth in the economy, 0:03:27.560 --> 0:03:29.600 then maybe the rest of the equity market gets to 0:03:29.639 --> 0:03:32.640 catch up a little bit. So in that regard, we're 0:03:32.680 --> 0:03:36.080 pretty pretty constructive. Now again, I said, if everything goes 0:03:36.120 --> 0:03:40.280 according to plan, the assumption was that all of the 0:03:40.400 --> 0:03:44.080 uncertainty about tariffs were in the background, all of the 0:03:44.160 --> 0:03:47.520 uncertainty about geopolitical risk, we're going to start to fade. 0:03:47.840 --> 0:03:51.400 I think that question remains to be answered, judging from 0:03:51.400 --> 0:03:53.520 the news cycle over the past couple of weeks, in. 0:03:53.480 --> 0:03:55.080 The time we got less seth we got to go 0:03:55.080 --> 0:03:57.120 to some breaking news here given the storm and all. 0:03:57.200 --> 0:04:01.840 But doctor Carpenter, your thoughts on what's percolating over the weekend. 0:04:02.000 --> 0:04:06.160 It's less about the Japanese yen and it's more about 0:04:06.200 --> 0:04:10.920 gold at fifty one hundred, the phrase dollar debasement DXY 0:04:11.040 --> 0:04:13.480 and the Bloomberg Dollar Index coming down. 0:04:13.960 --> 0:04:17.120 Is it a new week dollar trend? And what does 0:04:17.160 --> 0:04:18.320 that signal for the nation? 0:04:21.000 --> 0:04:23.960 Yeah, So we have been actually here at Morgan Stanley 0:04:24.600 --> 0:04:28.360 pretty much consistently calling for the dollar to weekend over 0:04:28.440 --> 0:04:30.800 time coming into twenty twenty five. So we'd go back 0:04:30.800 --> 0:04:33.799 a year ago, we were the outliers saying the dollar 0:04:33.880 --> 0:04:35.839 was going to sell off. Everybody else was looking for 0:04:35.880 --> 0:04:38.000 a dollar rally with the prospect of tariff and that 0:04:38.080 --> 0:04:40.040 sort of thing, and so, you know, we were right. 0:04:40.200 --> 0:04:42.119 First half of the year, we got about ten percent 0:04:42.200 --> 0:04:45.520 or so depreciation in the dollar broadly, we were looking 0:04:45.560 --> 0:04:47.080 for a little bit more. It didn't come down quite 0:04:47.120 --> 0:04:49.920 as much as we thought. The US economy held up 0:04:50.040 --> 0:04:52.760 just a little bit more. The Feds sort of pushed 0:04:52.800 --> 0:04:55.640 off just a little bit more. We do think there's 0:04:55.680 --> 0:04:58.360 some fundamental reasons though, why you should see a little 0:04:58.400 --> 0:05:00.599 bit more in the way of a dollar weakening. I 0:05:00.600 --> 0:05:04.400 think the yen cross is just one specific, you know, 0:05:04.480 --> 0:05:09.039 special example, and the sharp moves that we saw at 0:05:09.080 --> 0:05:12.440 the end of last week were notable. But for all, 0:05:12.480 --> 0:05:14.800 we do think there's room for continued correction. 0:05:15.000 --> 0:05:17.360 Let's go Neurder Good, Damian Sasa or with this later. 0:05:17.440 --> 0:05:20.360 But I do think Seth, this is important to mention 0:05:20.400 --> 0:05:24.280 because I take great umbrage about it. I really disagreed 0:05:24.480 --> 0:05:28.120 with the allusions to the Plaza Accord this weekend. 0:05:28.279 --> 0:05:31.040 I just don't see the out of. 0:05:31.040 --> 0:05:35.520 Whack in twenty twenty six that we saw forty years 0:05:35.520 --> 0:05:37.839 ago in the Plaza Accord of the Louver Accord. 0:05:38.000 --> 0:05:38.839 Am I right on that. 0:05:41.279 --> 0:05:43.440 Yeah, I guess I'm sympathetic to your view. We think 0:05:43.480 --> 0:05:47.680 there's some very fundamental market driven reasons for you to 0:05:47.720 --> 0:05:50.359 get a bit more depreciation in the dollar, sort of 0:05:50.400 --> 0:05:55.000 a persistent, consistent, coordinated move because there's a fundamental disconnect 0:05:55.000 --> 0:05:57.480 in the world sort of trading order. I think that's 0:05:57.520 --> 0:05:59.360 a little bit more open to interpretation. 0:06:00.760 --> 0:06:02.840 So one of the things we're dealing with over the 0:06:02.839 --> 0:06:06.440 weekend and certainly here in early trading is the US 0:06:06.640 --> 0:06:11.160 dollar the yen here. What's your thought here as we 0:06:11.160 --> 0:06:13.359 think about currencies here in this January morning. 0:06:15.560 --> 0:06:17.880 Yeah, I mean, so we have thought, especially for the 0:06:18.040 --> 0:06:21.560 dollar yen cross, we have thought that on fundamentals, there 0:06:21.640 --> 0:06:24.599 was room for the end to strengthen against the dollar. 0:06:25.760 --> 0:06:27.760 The sharp moves that we saw again at the end 0:06:27.800 --> 0:06:33.200 of last week were you know, a bit very very 0:06:33.240 --> 0:06:37.320 striking obviously, and they made headlines. Everyone paid attention to it. 0:06:38.000 --> 0:06:41.080 I think directionally, it makes sense to us exactly how 0:06:41.080 --> 0:06:43.080 we get from point A to point B. That's going 0:06:43.080 --> 0:06:45.919 to be the tricky part. I think the Bank of 0:06:46.000 --> 0:06:49.360 Japan right when they're looking at things, they've been more 0:06:49.400 --> 0:06:53.840 comfortable perhaps with gradual moves in the end. So they 0:06:53.880 --> 0:06:56.320 haven't been raising industrates aggressively. 0:06:55.880 --> 0:06:58.640 To revalue the end. 0:06:58.800 --> 0:07:02.200 In that regard, remember after twenty five years of essentially 0:07:02.480 --> 0:07:07.080 stagnant's nominal GP growth that they're building in this cycle 0:07:07.120 --> 0:07:10.520 of reflation, and so softer yen at the margin can 0:07:10.560 --> 0:07:12.880 help them a little bit. But once it goes too far, 0:07:13.120 --> 0:07:15.040 especially if we're to move quickly, then it starts to 0:07:15.080 --> 0:07:18.840 have domestic repercussions in terms of important food and energy. 0:07:19.200 --> 0:07:21.239 So I think the dollar yen is a very special 0:07:21.280 --> 0:07:24.200 case of the dollar situation. 0:07:24.280 --> 0:07:26.360 More broadly, doctor Carpenter, thank you so much. 0:07:26.360 --> 0:07:29.720 Seth Carpenter, Glove ahead of Macro Research, and Morgan Stanley. 0:07:30.080 --> 0:07:30.760 Stay with us. 0:07:31.000 --> 0:07:34.240 More from Bloomberg Surveillance coming up after this. 0:07:41.480 --> 0:07:45.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:07:45.120 --> 0:07:48.280 weekday afternoons from seven to ten am Eastern Listen on 0:07:48.360 --> 0:07:51.800 Apple Karplay and Android Auto with the Bloomberg Business app, 0:07:51.960 --> 0:07:53.880 or watch us live on YouTube. 0:07:54.200 --> 0:07:56.360 One of the best best photos in the history of 0:07:56.400 --> 0:08:00.400 the Republican Party is younger Bush George Bush, where a 0:08:00.480 --> 0:08:02.760 kid who couldn't shave. I don't think Patrick behind me 0:08:02.840 --> 0:08:05.600 when he first was photographed with Bush could shave twice 0:08:05.640 --> 0:08:08.600 a week. He has gone out to a sterling career, 0:08:09.080 --> 0:08:12.040 twenty years of public service and he's still holding at 0:08:12.120 --> 0:08:14.840 forty nine years old. Joining us this morning the former 0:08:14.960 --> 0:08:18.400 Chair House Financial Services and all of his duties to 0:08:18.440 --> 0:08:19.360 the Grand Old Party. 0:08:19.400 --> 0:08:21.560 Patrick mckenry Carson, Good morning. 0:08:21.640 --> 0:08:22.800 You have no better introduction. 0:08:22.920 --> 0:08:25.080 Thank you, well, it's good to have you with us. 0:08:25.080 --> 0:08:28.760 How fractured is the GOP this morning, given the events 0:08:29.000 --> 0:08:30.320 of Minneapolis. 0:08:31.680 --> 0:08:36.199 Quite Look, this is a Trump's stance on immigration was 0:08:36.240 --> 0:08:40.480 his greatest political strength, and given what has happened in 0:08:40.480 --> 0:08:43.800 Minneapolis in the last two weeks, it's become a weakness. 0:08:44.360 --> 0:08:48.679 And so there's great concern about the specifics, the loss 0:08:48.679 --> 0:08:53.760 of life in Minneapolis, the care and training that those 0:08:54.360 --> 0:09:00.000 ice officers have for the population, and the overall tactic here. 0:09:00.720 --> 0:09:01.640 But let's step back. 0:09:01.920 --> 0:09:07.880 The concerning Congress is the implementation of the laws. Congress 0:09:07.880 --> 0:09:10.880 needs to step in and actually change the immigration laws. 0:09:10.920 --> 0:09:13.800 I think that's what the Trump administration is trying to 0:09:13.880 --> 0:09:16.760 draw out, and that's what we've seen in this shifting 0:09:16.760 --> 0:09:18.200 debate over the last two weeks. 0:09:18.200 --> 0:09:19.199 In fact, I have the. 0:09:19.160 --> 0:09:23.480 Clearest memory of a real effort to change our immigration laws. 0:09:23.520 --> 0:09:28.319 Were Senator Kennedy and others. The Republicans went down in flames. 0:09:28.320 --> 0:09:31.440 I'm going to say a long fifteen to twenty years ago. Now, 0:09:31.720 --> 0:09:36.280 does the Senate block a rational immigration strategy because so 0:09:36.360 --> 0:09:39.560 many people, including in the Carolinas, say we've got the 0:09:39.600 --> 0:09:41.720 power in the Senate, we're not changing. 0:09:43.920 --> 0:09:46.440 In fact, yes, because both sides think that they have 0:09:46.480 --> 0:09:49.440 a poltical advantage on immigration, and therefore you haven't seen 0:09:49.440 --> 0:09:50.119 a compromise. 0:09:50.160 --> 0:09:51.280 It's a serious problem. 0:09:52.160 --> 0:09:55.640 The Congress over twenty years has attempted immigration reform three 0:09:55.679 --> 0:09:59.680 times in a major way. The last time was during 0:09:59.840 --> 0:10:03.200 the first Trump administration, and we had a bill, two 0:10:03.200 --> 0:10:05.680 bills in fact, that almost made it out of the 0:10:05.679 --> 0:10:11.720 House by very very narrow margins lost on the House floor, 0:10:12.640 --> 0:10:14.920 but that was the last go of it. In fact, 0:10:15.200 --> 0:10:19.120 we have a mess of an immigration policy, and the 0:10:19.120 --> 0:10:22.040 substance of our immigration policy is unpopular with the people. 0:10:23.000 --> 0:10:26.720 Enforcement is very popular with the people if broadly done 0:10:26.920 --> 0:10:30.840 and focus on the criminal element, the most egregious criminal 0:10:30.840 --> 0:10:34.000 element in our society. When you're picking up random people 0:10:34.480 --> 0:10:38.480 and having rough ups with protesters, it becomes far less 0:10:38.520 --> 0:10:41.480 popular and far more questioned by the average voter. 0:10:42.080 --> 0:10:45.960 You know, I think what's surprised some people is a 0:10:46.000 --> 0:10:48.840 lot of people don't care. I just I don't see 0:10:48.880 --> 0:10:53.520 the uproar coming out of Minneapolis. Here. Some people trying 0:10:53.559 --> 0:10:56.400 to equate it to Kent State. I don't sense that 0:10:56.840 --> 0:10:59.760 out there. Is there in the halls of Congress. Is 0:10:59.800 --> 0:11:03.160 there sense that this is a significant issue. 0:11:05.360 --> 0:11:08.600 The questioning of Congress is around the training of ice 0:11:08.720 --> 0:11:15.160 officers and the tactic of going into specific localities for 0:11:15.320 --> 0:11:16.600 major enforcement action. 0:11:17.559 --> 0:11:19.800 The Congress and I think Republicans broadly. 0:11:19.960 --> 0:11:22.520 In fact, Democrats would like the focus to be on 0:11:22.800 --> 0:11:24.880 the criminal gang element and the border. 0:11:25.320 --> 0:11:27.000 Those things are very, very popular. 0:11:27.679 --> 0:11:32.360 But these desktops with average, everyday citizens, that's the stuff 0:11:32.400 --> 0:11:33.960 that gets questioned across society. 0:11:34.120 --> 0:11:36.480 Patrick McKendry with us with his public service to the 0:11:36.480 --> 0:11:39.640 Grand Old Party. He's a contributor to Bloombergers. Thrilled he 0:11:39.640 --> 0:11:42.319 could give us perspective here given the uproar, I got 0:11:42.320 --> 0:11:44.559 eight ways to go here. I'm going to always call 0:11:44.600 --> 0:11:47.880 you a congressman. I got eight ways to go congressman 0:11:47.960 --> 0:11:51.000 in no time. So let me talk about this. You know, 0:11:51.120 --> 0:11:53.960 very publicly you've taken funds of different re election bids 0:11:54.000 --> 0:11:55.800 from the national Rifle Association. 0:11:56.440 --> 0:11:58.040 We have a bedrock. 0:11:57.640 --> 0:12:00.520 Idea in this country of the right to bear arms. 0:12:01.240 --> 0:12:04.960 We have someone dead up in Minneapolis, with or without Again, 0:12:04.960 --> 0:12:07.800 I don't want to get into the debate, folks, but 0:12:08.120 --> 0:12:15.079 tell me how we juxtapose our colonial mythology with the 0:12:15.120 --> 0:12:18.079 idea of what we see in Minneapolis. What is the 0:12:18.080 --> 0:12:21.840 next step beyond in this emotion of a Second Amendment. 0:12:22.920 --> 0:12:25.680 Oh, well, this is where the left has come out 0:12:25.760 --> 0:12:30.120 in defense of Second Amendment rights because the activist here 0:12:30.280 --> 0:12:35.880 was a liberal and had open carry and many Minnesota 0:12:35.880 --> 0:12:41.120 has an open carry law, and so you know, then 0:12:41.120 --> 0:12:43.319 we have some on the rights saying well, because he 0:12:43.480 --> 0:12:49.320 had a weapon, that was justification for the for the 0:12:49.360 --> 0:12:52.840 actions of the ice officers. So both sides have flipped 0:12:52.960 --> 0:12:55.600 on when it comes to Second Amendment rights in this 0:12:55.840 --> 0:13:02.200 exact circumstance, and it tells you help polarizing Donald Trump 0:13:02.520 --> 0:13:05.960 is to the body politic. I don't mean polarizing. I 0:13:05.960 --> 0:13:10.720 mean he is the most influence over every political discussion 0:13:10.800 --> 0:13:13.120 right now. And if Trump's on one side, then the 0:13:13.160 --> 0:13:16.800 Democratic Party must be on the other side. The left 0:13:16.880 --> 0:13:20.000 must hold strong even if he agrees with him on 0:13:20.040 --> 0:13:24.880 certain issues. It's quite an atmosphere we have right now. 0:13:25.240 --> 0:13:30.439 Congressman, we saw many Minnesota CEOs they're seeking de escalation 0:13:30.520 --> 0:13:32.920 after the border police shooting. Is there a role here, 0:13:33.240 --> 0:13:37.160 a meaningful role for corporate America to play a role 0:13:37.160 --> 0:13:38.680 in some of these debates. 0:13:39.840 --> 0:13:42.040 Well over the last ten years when they've done this, 0:13:42.120 --> 0:13:44.480 it's been a huge mistake for them. Then you stay 0:13:44.480 --> 0:13:47.600 out of politics. What you saw with these Minneapolis and 0:13:47.679 --> 0:13:51.199 Minnesota CEOs as they said we need to de escalate, 0:13:51.200 --> 0:13:53.560 They're not getting into the substance of it. They're just saying, 0:13:53.840 --> 0:13:56.000 we want calm in our city and we want peace 0:13:56.000 --> 0:13:58.800 in our city. That is a message not just to 0:13:58.840 --> 0:14:01.680 the President or to ICE or the Border Patrol, but 0:14:02.120 --> 0:14:06.800 to the mayor and the governor. The cooler heads need 0:14:06.800 --> 0:14:10.400 to prevail here. The governor stands to say, well, actually, 0:14:10.400 --> 0:14:12.240 we just need Ice out of our state is an 0:14:12.240 --> 0:14:17.400 absurd one within forced federal immigration laws. But both sides 0:14:17.440 --> 0:14:19.840 should be actually able to come to the table and 0:14:20.040 --> 0:14:23.800 have a rule of law approach here that cools the 0:14:23.840 --> 0:14:26.200 populace and restores order. 0:14:26.480 --> 0:14:29.600 Patrick Mahinry, thank you so much for joining Bloomberg Surveillance, 0:14:29.840 --> 0:14:32.160 and this morning you're forty nine and holding the youngest 0:14:32.160 --> 0:14:34.520 member of Congress just a few. 0:14:34.720 --> 0:14:36.840 Few years ago. Stay with us. 0:14:37.080 --> 0:14:40.360 More from Bloomberg Surveillance coming up after this. 0:14:47.560 --> 0:14:51.160 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:51.240 --> 0:14:54.360 weekday afternoons from seven to ten am Eastern Listen on 0:14:54.480 --> 0:14:57.880 Apple Karplay and Android Otto with the Bloomberg Business app, 0:14:58.040 --> 0:14:59.680 or watch US live on YouTube. 0:15:00.160 --> 0:15:04.440 Bilski finally with a series the Chief Executive Officer and 0:15:04.520 --> 0:15:10.400 CIO Humillis investment strategies. Brian earnings just seem to be 0:15:10.480 --> 0:15:13.280 obscured and I don't buy it for a minute. Does 0:15:13.360 --> 0:15:17.720 double digit earnings mean by the bid ear in the market. 0:15:19.120 --> 0:15:21.360 I think this is thank you so much for having us. 0:15:21.360 --> 0:15:24.160 I think the market is going to be having a 0:15:24.200 --> 0:15:29.840 hard time transitioning from this really momentum multiple driven upside 0:15:29.840 --> 0:15:32.560 that we've for all intentsive purposes seen since the fourth 0:15:32.600 --> 0:15:37.359 quarter of twenty twenty two, when the current bull cycle started. 0:15:37.640 --> 0:15:42.320 Our work shows historically that earnings driven markets are still positive, 0:15:42.360 --> 0:15:45.480 but they're not as positive as multiple driven markets. I 0:15:45.480 --> 0:15:47.800 think that's why this week is such a huge week, 0:15:47.880 --> 0:15:50.640 because we see some of the biggest tech companies come 0:15:50.640 --> 0:15:54.600 out with earnings number one, number two We've had tremendous 0:15:54.640 --> 0:15:58.440 performance and outperformance the last week or two weeks from 0:15:58.440 --> 0:16:01.000 the small MidCap area, which we've been talking about for 0:16:01.040 --> 0:16:03.640 a couple of years. We were pretty early, but at 0:16:03.640 --> 0:16:05.240 the end of the day, we think of broadening out 0:16:05.240 --> 0:16:07.640 of the market to more small midcaps is actually quite 0:16:07.680 --> 0:16:12.200 positive for the longer term breath and positive nature of 0:16:12.240 --> 0:16:15.080 the overall secular bull market that we continue to call for. 0:16:15.520 --> 0:16:20.640 Paul, that's a Nasdaq up eighteen percent one year, SMP 0:16:20.840 --> 0:16:24.520 up thirteen percent one year, down up eleven percent one year. 0:16:24.720 --> 0:16:26.360 I believe that's double digit performance. 0:16:26.480 --> 0:16:29.800 Double digit performance. Brian Thomas has calling out some solid 0:16:29.920 --> 0:16:32.520 returns for US equities. But and you think about twenty 0:16:32.600 --> 0:16:35.040 twenty five, and even to start here at twenty twenty six, 0:16:35.600 --> 0:16:38.520 rest of world, other markets have done a lot better 0:16:38.520 --> 0:16:40.240 outside the US. How do you think about the US 0:16:40.320 --> 0:16:41.640 versus rest of world? 0:16:42.520 --> 0:16:43.760 It's a great question, Paul. 0:16:44.320 --> 0:16:46.800 You know, twenty twenty five was a snapback year, principally 0:16:46.880 --> 0:16:48.960 because I think a lot of political side of things 0:16:49.000 --> 0:16:52.320 in the fear trade leaving the United States. Then you 0:16:52.400 --> 0:16:54.560 also have the currency weakening, and then you've had the 0:16:54.560 --> 0:16:58.600 currency strengthening in other areas. And we do think that 0:16:58.680 --> 0:17:02.880 the value proposition, certainly of Europe and some merging markets 0:17:03.720 --> 0:17:06.600 was an attractive play. And then you talk about our. 0:17:06.440 --> 0:17:08.480 Brethren in Canada with yall. 0:17:08.560 --> 0:17:12.080 Canada had its greatest net out performance on a local 0:17:12.160 --> 0:17:15.080 currency basis since nineteen ninety relative to the US, mostly 0:17:15.119 --> 0:17:18.400 because of gold. But even though gold gets a lot 0:17:18.400 --> 0:17:21.520 of headlines, the banks in Canada really rocked it in 0:17:21.600 --> 0:17:25.720 twenty twenty five, especially considering the reserves that they had 0:17:25.760 --> 0:17:30.480 been quite frankly building over the last several years. So 0:17:30.800 --> 0:17:32.920 I think the Canada trade is going to be tougher 0:17:32.960 --> 0:17:34.960 this year. I think in terms of the other markets, 0:17:35.280 --> 0:17:36.760 I think it's going to be tougher. I think we're 0:17:36.760 --> 0:17:40.080 going to have a little bit more balanced across all markets, 0:17:40.160 --> 0:17:43.240 especially given the fact that now we need to see 0:17:43.280 --> 0:17:47.560 fundamental growth going forward for emerging markets, that going forward 0:17:47.960 --> 0:17:49.680 for Europe, and it's not just going to be all 0:17:49.720 --> 0:17:51.800 about the materials and the energy side. 0:17:53.080 --> 0:17:55.720 And look, Brian, at the makeup here. 0:17:55.920 --> 0:17:57.720 I want you to talk to people in their four 0:17:57.760 --> 0:18:00.720 oh one k you know, like me, it's stumbled into 0:18:00.760 --> 0:18:02.240 decent returns over. 0:18:02.040 --> 0:18:03.359 The last number of years. 0:18:03.800 --> 0:18:07.960 Should they reallocate, should they rebalance or is it just static. 0:18:08.200 --> 0:18:09.240 Keep it the way it is. 0:18:09.600 --> 0:18:13.680 Patients forward, Patients forward has always been our line. We're 0:18:13.680 --> 0:18:16.040 not the we're not the smartest person on this call 0:18:16.160 --> 0:18:19.439 right now, by the way, or on this on this broadcast. 0:18:18.800 --> 0:18:21.679 And I know Michael just entered the room. Yeah, well 0:18:21.720 --> 0:18:22.520 then there you go. 0:18:23.400 --> 0:18:25.359 But at the end of the day, we have a 0:18:25.400 --> 0:18:28.720 report coming out today on our website under our new 0:18:28.800 --> 0:18:32.000 moniker called Belski Briefs, and we talk about the importance 0:18:32.040 --> 0:18:35.440 of remaining longer term invested. If you missed the best 0:18:35.520 --> 0:18:37.800 days in the market, then you try to trade the 0:18:37.800 --> 0:18:41.280 market out. Since nineteen ninety, the average and your return 0:18:41.400 --> 0:18:43.840 is eight point six percent. But when you missed the 0:18:43.840 --> 0:18:46.040 best days of the market, which typically, oh, by the way, 0:18:46.359 --> 0:18:49.520 follow the worst days in the market, your annual compound 0:18:49.640 --> 0:18:52.159 ary growth rate in terms of your portfolio is me 0:18:52.200 --> 0:18:57.199 four point five percent. So just it sounds mundane, but 0:18:57.440 --> 0:18:58.280 be invested. 0:18:58.680 --> 0:19:00.360 But what we think is you. 0:19:00.320 --> 0:19:02.520 Want to broaden out what you're owning Tom in your 0:19:02.520 --> 0:19:04.840 four oh one k Let's call it more value, more 0:19:04.880 --> 0:19:08.239 small MidCap, more dividend growth, not at the expense of 0:19:08.359 --> 0:19:10.480 selling the meg seven. And we still think you need 0:19:10.520 --> 0:19:13.880 to have some exposure in tech, and we're equal weight 0:19:13.920 --> 0:19:15.920 tech in our work. But at the end of the day, 0:19:15.920 --> 0:19:18.879 you want to be invested US stocks. Now is not 0:19:19.080 --> 0:19:21.679 the time to run away based on fear or rhetoric, 0:19:21.720 --> 0:19:25.000 and especially with respect what's going on in terms of politics. 0:19:25.560 --> 0:19:27.320 Ran, how about the bond market here? The two year 0:19:27.359 --> 0:19:31.119 treasure yielding three spots sixty here, that's a nice living 0:19:31.160 --> 0:19:33.399 there for a lot of folks. But should we be 0:19:33.440 --> 0:19:35.359 taking some credit risk above and beyond that? 0:19:36.640 --> 0:19:38.840 You know, we think the bonds still remain an important 0:19:38.840 --> 0:19:41.080 part of anyone's longer term portfolio. I think the bond 0:19:41.160 --> 0:19:45.640 market has really been kind of a forgotten asset. We're 0:19:45.640 --> 0:19:48.359 thinking and talking more about private equity. I like the 0:19:48.359 --> 0:19:51.080 bond market here, especially around this his own and we've 0:19:51.119 --> 0:19:53.840 been talking now for the last two or three years 0:19:53.840 --> 0:19:56.200 that this three p fifty to four fifty range, it's 0:19:56.200 --> 0:19:59.800 a wide range, but that is returning to more normalcy 0:19:59.840 --> 0:20:02.480 that we've seen in markets for the last thirty years. 0:20:02.760 --> 0:20:05.320 And I think that's where we're going and within that range, Paul, 0:20:05.359 --> 0:20:08.000 I really think that's an area where we should own bonds. 0:20:08.480 --> 0:20:10.800 Brian Belski with this with Humillison, of course, You've got 0:20:10.800 --> 0:20:12.639 a Segui here into the reality as. 0:20:12.520 --> 0:20:15.199 Well, Brian. I mean, there's no one we speak to. 0:20:15.440 --> 0:20:18.880 It was more attuned to the ability of Sam Darnold 0:20:18.960 --> 0:20:21.800 to come over his shoulder and pop that puppy down 0:20:21.920 --> 0:20:24.560 forty yards. I mean, you go back to when the 0:20:24.680 --> 0:20:28.600 Vikings lost him to Seattle. You go back to Seattle 0:20:28.600 --> 0:20:31.480 winning twenty six to zero against the Vikings this year. 0:20:31.840 --> 0:20:34.840 Brian Belski on Donald and the Patriots. 0:20:36.000 --> 0:20:38.520 Oh my gosh, well, I'm going through the rosters here 0:20:38.560 --> 0:20:40.840 of the ex Vikings in the Super Bowl, which is 0:20:40.960 --> 0:20:43.960 kind of you know, like so you think about Stefan 0:20:44.080 --> 0:20:47.879 Diggs and the Patriots and Sam Darnold, who obviously in 0:20:47.920 --> 0:20:51.120 Minnesota Sports Radio, which we'll be listening to on the 0:20:50.880 --> 0:20:55.760 on these interweb things www Dot thing. It's gonna be 0:20:55.840 --> 0:20:59.000 crazy in Minnesota sports radio today because you know, we're 0:20:59.000 --> 0:21:01.720 a bunch of massacrests in Minnesota sports. So I'm sure 0:21:01.720 --> 0:21:04.600 that people are going to be mad that Seattle is 0:21:04.640 --> 0:21:06.800 in Super Bowl. I think it's amazing on what Sam 0:21:06.840 --> 0:21:08.720 Darnold's been able to do, and they played a great 0:21:08.760 --> 0:21:09.640 game yesterday. 0:21:09.680 --> 0:21:12.520 They did they moved down the field like nobody Brian Belski, 0:21:12.600 --> 0:21:15.800 thank you so much, and I must really editorialized, folks. 0:21:15.880 --> 0:21:20.960 He has said that great study, classic Good Morning, Capitol Guardian. 0:21:20.600 --> 0:21:21.919 Trust in Los Angeles. 0:21:22.160 --> 0:21:24.199 If you miss the ten top days in the market, 0:21:24.560 --> 0:21:26.760 you don't get a trophy at the end of the day. 0:21:26.800 --> 0:21:29.680 Brian Belski, thank you so much. With you Millist, stay 0:21:29.720 --> 0:21:30.120 with us. 0:21:30.359 --> 0:21:33.600 More from Bloomberg Surveillance coming up after this. 0:21:40.840 --> 0:21:44.440