1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,880 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,000 Speaker 1: or watch us live on YouTube. 6 00:00:27,320 --> 00:00:28,120 Speaker 2: Checking with Jay Hatho. 7 00:00:28,240 --> 00:00:33,040 Speaker 3: He's the CEO CIO Infrastructure Capital Management. 8 00:00:33,960 --> 00:00:36,040 Speaker 2: Jay, how do you think about twenty twenty six year? 9 00:00:36,080 --> 00:00:39,040 Speaker 3: Because we're coming out of twenty twenty five, I mean 10 00:00:40,040 --> 00:00:43,920 Speaker 3: great equity returns, really solid returns in the fix, the 11 00:00:43,920 --> 00:00:47,440 Speaker 3: come space off hearing commodities, gold, silver, platinum plated bore. 12 00:00:47,479 --> 00:00:50,160 Speaker 3: You're looking good there. How do you think about twenty 13 00:00:50,159 --> 00:00:50,640 Speaker 3: twenty six? 14 00:00:52,680 --> 00:00:56,360 Speaker 4: Good morning, Paul Alexis. Hey, I'm happy to hear. Well. 15 00:00:56,560 --> 00:01:00,480 Speaker 4: You know, we remain bullish. We are bullish this year still. 16 00:01:00,000 --> 00:01:03,800 Speaker 5: We have a seven thousand target, which, by the way, 17 00:01:03,920 --> 00:01:06,800 Speaker 5: you should sell targets now just buy them. So it's 18 00:01:06,840 --> 00:01:09,600 Speaker 5: okay if we fade a little bit before seven thousand. 19 00:01:09,920 --> 00:01:12,640 Speaker 5: So we use the same methodology that we did this year, 20 00:01:13,280 --> 00:01:18,800 Speaker 5: twenty three times twenty seven earnings consensus and we get 21 00:01:18,840 --> 00:01:22,480 Speaker 5: to an eight thousand target. So that's almost fifteen percent 22 00:01:22,520 --> 00:01:26,280 Speaker 5: from here. So we're bullish and this is normal the 23 00:01:26,400 --> 00:01:29,399 Speaker 5: rally and metals as well as normal when you come 24 00:01:29,440 --> 00:01:30,880 Speaker 5: out of a FED tidening cycle. 25 00:01:32,959 --> 00:01:34,559 Speaker 6: And I'm going to ask you what I've been asking 26 00:01:34,600 --> 00:01:36,760 Speaker 6: all of our guests today, and that is leadership in 27 00:01:36,800 --> 00:01:39,080 Speaker 6: this market in the new year. We know that we've 28 00:01:39,120 --> 00:01:42,480 Speaker 6: seen a rotation into value. Is that going to continue 29 00:01:42,520 --> 00:01:45,080 Speaker 6: to the extent that it becomes the new leader for 30 00:01:45,120 --> 00:01:47,760 Speaker 6: this market and tech maybe takes a bit of a backseat. 31 00:01:49,440 --> 00:01:54,560 Speaker 5: Ali So we have what we call GARP models of 32 00:01:54,720 --> 00:01:59,360 Speaker 5: the magate, so includes Broadcom and last time when we 33 00:01:59,360 --> 00:02:03,200 Speaker 5: had sixty nine, the upside of those eight companies is 34 00:02:03,200 --> 00:02:07,000 Speaker 5: only two percent, so they're fully valued, even assuming they're 35 00:02:07,040 --> 00:02:10,040 Speaker 5: pretty high growth rates. And if we look, we have 36 00:02:10,120 --> 00:02:13,200 Speaker 5: dividend funds, so we have every sector and a lot 37 00:02:13,240 --> 00:02:16,080 Speaker 5: of those companies are super cheap, pay great dividends, have 38 00:02:16,160 --> 00:02:19,520 Speaker 5: good growth, and trade a really low market pay ratios. 39 00:02:19,880 --> 00:02:20,800 Speaker 4: So that's normal. 40 00:02:21,000 --> 00:02:24,080 Speaker 5: Same thing normal when you have a FED loosening cycle, 41 00:02:24,160 --> 00:02:28,960 Speaker 5: there's rotation into other sectors, including small caps. So we 42 00:02:29,040 --> 00:02:32,120 Speaker 5: do think that'll continue, and we're happy about it. Benefits 43 00:02:32,120 --> 00:02:34,799 Speaker 5: our funds because we have small allocations towards tech and 44 00:02:34,880 --> 00:02:36,000 Speaker 5: our income funds. 45 00:02:36,680 --> 00:02:39,680 Speaker 3: Jay, we came into twenty twenty five with a new 46 00:02:39,720 --> 00:02:43,320 Speaker 3: administration here thinking that financials would be an area that 47 00:02:43,320 --> 00:02:47,400 Speaker 3: would really benefit from, if nothing else, a lighter regulatory 48 00:02:47,639 --> 00:02:49,799 Speaker 3: touch here. Talk to us about financials, how you look 49 00:02:49,800 --> 00:02:50,720 Speaker 3: at that sector. 50 00:02:52,400 --> 00:02:55,560 Speaker 5: We had a little bit different take on it in 51 00:02:55,600 --> 00:02:58,079 Speaker 5: that you know, I used to be an investment. 52 00:02:57,639 --> 00:03:00,000 Speaker 4: Banker, so I can kind of that's too best since when. 53 00:03:00,280 --> 00:03:03,320 Speaker 5: Heat up and so we were super bold up about 54 00:03:03,360 --> 00:03:07,560 Speaker 5: the big investment banks early in the Trump administration, and 55 00:03:07,680 --> 00:03:11,680 Speaker 5: that was a great call. The regular banks have lagged 56 00:03:11,720 --> 00:03:15,760 Speaker 5: because the FED is lagged. So we think this year 57 00:03:15,880 --> 00:03:18,120 Speaker 5: there'll be a rotation. Not the investment banks won't do 58 00:03:18,160 --> 00:03:20,399 Speaker 5: well because they're blowing out their earnings, but they're very 59 00:03:20,400 --> 00:03:25,600 Speaker 5: fully valued. But we're recommending investors rotating into what I 60 00:03:25,639 --> 00:03:30,320 Speaker 5: call boring banks or standard banks like CFG. We hold 61 00:03:30,320 --> 00:03:35,080 Speaker 5: that in my cap our dividend fund. And we're even 62 00:03:35,120 --> 00:03:38,240 Speaker 5: more bulled up about the private equity firms because they've 63 00:03:38,240 --> 00:03:42,680 Speaker 5: been unfairly punished by this irrational fear about private credit. 64 00:03:43,240 --> 00:03:46,240 Speaker 5: So we would recommend rotating from the investment banks into 65 00:03:47,920 --> 00:03:51,640 Speaker 5: standard banks and into private equity. 66 00:03:51,760 --> 00:03:54,760 Speaker 6: And I want to bring up we started this conversation 67 00:03:54,880 --> 00:04:01,120 Speaker 6: talking about commodities, Copper topping thirteen thousand, got silver and 68 00:04:01,200 --> 00:04:04,600 Speaker 6: gold add on near all time highs. What do you 69 00:04:04,640 --> 00:04:06,640 Speaker 6: do with the commodities trade next year? 70 00:04:08,320 --> 00:04:09,640 Speaker 5: Well, I think I have to be a little bit 71 00:04:09,640 --> 00:04:12,360 Speaker 5: costious because if you look at charts, they're pretty far 72 00:04:12,480 --> 00:04:15,200 Speaker 5: away from their moving averages, and gold did break down 73 00:04:15,200 --> 00:04:18,599 Speaker 5: when it blew out well above its moving averages. I 74 00:04:18,640 --> 00:04:21,520 Speaker 5: think a bigger question is really oil. Oil has been horrible, 75 00:04:22,440 --> 00:04:25,159 Speaker 5: which is great for inflation. By the way, you know, 76 00:04:25,200 --> 00:04:29,200 Speaker 5: the seventies inflation was really eighty percent caused by oil, 77 00:04:29,760 --> 00:04:34,680 Speaker 5: So if super bolish for inflation, we're modestly constructive on 78 00:04:34,760 --> 00:04:38,000 Speaker 5: oil fifty five to sixty five this year. We think 79 00:04:38,279 --> 00:04:41,600 Speaker 5: that ope's not going to increase production as much as 80 00:04:41,640 --> 00:04:46,320 Speaker 5: it did last year, so we're more constructive on oil. 81 00:04:46,520 --> 00:04:49,440 Speaker 5: There will continue to be rallied, particularly silver and copper. 82 00:04:49,920 --> 00:04:53,200 Speaker 5: You know, have an AI electricity play, but just be 83 00:04:53,200 --> 00:04:56,239 Speaker 5: a little bit costious because it has a momentum element 84 00:04:56,320 --> 00:04:58,960 Speaker 5: to it as well, whereas oil has negative momentum. 85 00:04:59,400 --> 00:05:00,680 Speaker 2: Jay, you mentioned dividends here. 86 00:05:00,680 --> 00:05:03,720 Speaker 3: We don't talk that much about dividends because it's all 87 00:05:03,760 --> 00:05:06,440 Speaker 3: about big tech and most of the tech players don't 88 00:05:06,440 --> 00:05:10,840 Speaker 3: pay dividends here, what's your dividend strategy? How do you 89 00:05:10,880 --> 00:05:12,560 Speaker 3: think investors should think about dividends. 90 00:05:14,080 --> 00:05:17,160 Speaker 5: Well, I think, particularly for more conservative investors, it's good 91 00:05:17,160 --> 00:05:21,200 Speaker 5: to have a substantial amount of dividends that can cover 92 00:05:22,440 --> 00:05:27,919 Speaker 5: a significant portion of your cash needs, and then the 93 00:05:27,960 --> 00:05:31,080 Speaker 5: rest of it your portfolio can have a higher higher 94 00:05:31,160 --> 00:05:36,320 Speaker 5: volatility companies. So we love preferred stocks pffas our flagship fond, 95 00:05:36,360 --> 00:05:39,400 Speaker 5: has a great yield, has a good total return. We 96 00:05:39,440 --> 00:05:42,560 Speaker 5: do like highyal bonds if we're right about the market 97 00:05:42,600 --> 00:05:43,960 Speaker 5: going to eight thousand, and you want to be in 98 00:05:44,000 --> 00:05:47,880 Speaker 5: the riskier part of bonds. And as I briefly alluded to, 99 00:05:47,960 --> 00:05:52,520 Speaker 5: there's a ton of really high quality companies like Philip Morris, 100 00:05:52,560 --> 00:05:57,560 Speaker 5: next Era. They're not overvalued, have strong dividends, good dividend growth. 101 00:05:58,080 --> 00:06:00,400 Speaker 4: So we do think that you'll actually get paid for that. 102 00:06:00,400 --> 00:06:03,560 Speaker 5: It's usually kind of a thankless proposition that you'll get 103 00:06:03,560 --> 00:06:05,960 Speaker 5: paid for that, because when there is a rotation, those 104 00:06:05,960 --> 00:06:08,479 Speaker 5: stocks tend to do better because when you get money 105 00:06:08,520 --> 00:06:10,839 Speaker 5: flowing in, they're looking for bargains versus just looking for 106 00:06:10,880 --> 00:06:12,840 Speaker 5: the latest AI trade. 107 00:06:13,080 --> 00:06:16,280 Speaker 6: So well, small cap stocks continue to get some love 108 00:06:16,360 --> 00:06:18,000 Speaker 6: next year, because I was looking at the Russell two 109 00:06:18,040 --> 00:06:21,480 Speaker 6: thousand up about thirteen and a half percent year to date. 110 00:06:22,040 --> 00:06:24,800 Speaker 6: There aren't They're sort of not the sexy index, right, 111 00:06:24,880 --> 00:06:27,719 Speaker 6: the Russell two thousand. But do you see there? Do 112 00:06:27,760 --> 00:06:29,280 Speaker 6: you see support for it next year? 113 00:06:30,279 --> 00:06:30,520 Speaker 4: We do. 114 00:06:30,720 --> 00:06:34,719 Speaker 5: We have a small cap fund, Desk Cap, and I 115 00:06:34,720 --> 00:06:37,640 Speaker 5: would urge investors, whether you do yourself or hire people 116 00:06:37,680 --> 00:06:41,560 Speaker 5: like ourselves, focus on the money making companies because that's 117 00:06:41,560 --> 00:06:45,159 Speaker 5: where you stop gambling and you start investing. So if 118 00:06:45,200 --> 00:06:49,240 Speaker 5: you invest in profitable companies, they retain earnings, grow earnings. 119 00:06:49,960 --> 00:06:52,040 Speaker 4: So small caps are. 120 00:06:51,920 --> 00:06:56,159 Speaker 5: Attracted if you if you curate them for being profitable. 121 00:06:56,680 --> 00:06:59,440 Speaker 5: And what's the biggest trade you're making there is it 122 00:06:59,520 --> 00:07:02,840 Speaker 5: is a notch and that's so the value part of 123 00:07:02,880 --> 00:07:05,720 Speaker 5: it's on about ten percent tech, So it's really part 124 00:07:05,760 --> 00:07:08,880 Speaker 5: of that whole trade. It's not that small caps borrow 125 00:07:08,960 --> 00:07:12,360 Speaker 5: way more much more money or have superig amount. 126 00:07:12,040 --> 00:07:12,680 Speaker 4: Of floating rate. 127 00:07:13,040 --> 00:07:17,600 Speaker 5: It's just the normal rotation out of tech into other sectors. 128 00:07:18,040 --> 00:07:22,320 Speaker 5: And although the small cap sectors are do have slightly 129 00:07:22,400 --> 00:07:26,120 Speaker 5: lower valuations and do have upside like Digital Bridge you 130 00:07:26,160 --> 00:07:28,800 Speaker 5: know you mentioned earlier, right, it is smaller cap stock. 131 00:07:29,080 --> 00:07:31,320 Speaker 5: So that you do benefit from M and A as well. 132 00:07:31,640 --> 00:07:33,960 Speaker 5: So we do think it's going to be a good 133 00:07:34,000 --> 00:07:35,920 Speaker 5: place to be next year, you know, and it has 134 00:07:35,960 --> 00:07:38,239 Speaker 5: been since the FED became more dubbish. 135 00:07:38,280 --> 00:07:39,600 Speaker 4: It's worked this year as well. 136 00:07:39,960 --> 00:07:41,960 Speaker 3: Jay, thanks so much for joining us. Always appreciate getting 137 00:07:41,960 --> 00:07:44,280 Speaker 3: a few minutes of your time. Jay Haffield, CEO CIO 138 00:07:44,840 --> 00:07:49,120 Speaker 3: Infrastructure Capital Advisors also reformed investment Banker did substance of 139 00:07:49,160 --> 00:07:53,280 Speaker 3: Morgan Stanley, CIBC, Oppenheimer, all those haunts down there in 140 00:07:53,680 --> 00:07:54,160 Speaker 3: the city. 141 00:07:56,040 --> 00:07:59,160 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 142 00:08:05,360 --> 00:08:08,960 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 143 00:08:09,040 --> 00:08:12,200 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 144 00:08:12,280 --> 00:08:15,920 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 145 00:08:16,080 --> 00:08:17,600 Speaker 1: watch us live on YouTube. 146 00:08:17,920 --> 00:08:19,679 Speaker 6: You know, Paul, when you look at it, we're heading 147 00:08:19,680 --> 00:08:21,160 Speaker 6: into the new year with a lot of the same 148 00:08:21,200 --> 00:08:25,160 Speaker 6: old problems and concerns. Right, We've got Tariff's inflation debt, 149 00:08:25,320 --> 00:08:28,880 Speaker 6: we still have global wars going on. Yep, the vix 150 00:08:29,480 --> 00:08:31,920 Speaker 6: is pretty low compared to all that. So our next 151 00:08:32,000 --> 00:08:35,160 Speaker 6: guest is that might mean the market a little complacent, 152 00:08:35,280 --> 00:08:37,679 Speaker 6: maybe we're ignoring the risks. Joy Yang, head of index 153 00:08:37,760 --> 00:08:41,600 Speaker 6: product management at market Vector Index's, joins us in studio. Joy, 154 00:08:41,640 --> 00:08:42,680 Speaker 6: good morning, Good to have you. 155 00:08:42,600 --> 00:08:44,240 Speaker 7: Here, mining thanks for having me. 156 00:08:44,440 --> 00:08:46,800 Speaker 6: Is this market getting a little too comfortable and are 157 00:08:46,800 --> 00:08:48,160 Speaker 6: we ignoring the risks? 158 00:08:48,360 --> 00:08:48,600 Speaker 4: Yeah? 159 00:08:48,679 --> 00:08:50,520 Speaker 7: I think it's a good time for us to just 160 00:08:50,640 --> 00:08:53,319 Speaker 7: step back and look at what's happening. 161 00:08:53,480 --> 00:08:53,679 Speaker 4: You know. 162 00:08:53,760 --> 00:08:57,800 Speaker 7: So we're looking at another twenty percent year in the markets, 163 00:08:58,240 --> 00:09:00,840 Speaker 7: and I think we've just gotten used to twenty percent 164 00:09:00,880 --> 00:09:02,439 Speaker 7: because we saw it last year, we saw it the 165 00:09:02,520 --> 00:09:06,520 Speaker 7: year before. But we now have over one hundred years 166 00:09:06,760 --> 00:09:09,840 Speaker 7: of data on the markets, and do you know how 167 00:09:09,880 --> 00:09:13,640 Speaker 7: many times that we see the markets deliver over twenty 168 00:09:13,640 --> 00:09:15,480 Speaker 7: percent three years in a row. 169 00:09:15,600 --> 00:09:16,640 Speaker 6: It's got to be pretty low. 170 00:09:16,880 --> 00:09:20,640 Speaker 7: It's very low. We've only seen it twice and the 171 00:09:20,720 --> 00:09:23,360 Speaker 7: last time was the lead up to the dot com bubble, 172 00:09:23,440 --> 00:09:27,880 Speaker 7: So that was three years of positive twenty percent returns 173 00:09:27,920 --> 00:09:32,360 Speaker 7: followed by three years of negative returns. So I think 174 00:09:32,400 --> 00:09:36,280 Speaker 7: we investors have to be careful because on average we 175 00:09:36,360 --> 00:09:41,280 Speaker 7: only see the markets deliver about eleven percent returns per year. 176 00:09:41,600 --> 00:09:44,280 Speaker 7: But we never see eleven. Sometimes we'll see twenty, which 177 00:09:44,320 --> 00:09:47,120 Speaker 7: means next year we'll see maybe negative ten, but on 178 00:09:47,200 --> 00:09:51,600 Speaker 7: average you get eleven, twelve, thirteen percent returns. So what's 179 00:09:51,679 --> 00:09:57,479 Speaker 7: unusual is we've seen twenty percent returns this year, low volatility, 180 00:09:58,080 --> 00:10:02,520 Speaker 7: everything else, rising gold copy, silver, even value, as you 181 00:10:02,600 --> 00:10:05,800 Speaker 7: mentioned before. So this has got to be a little 182 00:10:05,800 --> 00:10:09,280 Speaker 7: bit kind of you know, uncomfortable. And yet you know, 183 00:10:09,440 --> 00:10:13,840 Speaker 7: people are euphoric about AI. And again, where did we 184 00:10:13,880 --> 00:10:16,199 Speaker 7: come off At the beginning of the year. We had 185 00:10:16,280 --> 00:10:22,160 Speaker 7: tariff uncertainty, we had fed policy uncertainty, we had high 186 00:10:22,240 --> 00:10:25,160 Speaker 7: government debt, we had AI is it you know, is 187 00:10:25,200 --> 00:10:28,360 Speaker 7: it a bubb all? And we had geopolitical tensions. We 188 00:10:28,440 --> 00:10:31,960 Speaker 7: have all those things right now exactly nothing has changed. 189 00:10:32,120 --> 00:10:34,640 Speaker 7: And yet you know, the market still seems to be 190 00:10:34,720 --> 00:10:38,160 Speaker 7: going up. You know, you get market returns for taking 191 00:10:38,200 --> 00:10:41,840 Speaker 7: on risk, and the risks are still out there. But 192 00:10:41,920 --> 00:10:44,079 Speaker 7: that said, does that mean people should get out? 193 00:10:44,640 --> 00:10:45,559 Speaker 4: You know? Right? 194 00:10:45,640 --> 00:10:46,880 Speaker 2: You know, time diversifying? 195 00:10:47,400 --> 00:10:50,000 Speaker 3: How about diversifying? Maybe we saw even a little bit 196 00:10:50,000 --> 00:10:53,120 Speaker 3: earlier in twenty twenty five people diversifying outside of the US, 197 00:10:53,200 --> 00:10:56,760 Speaker 3: maybe going to European equities, and we weren't sure whether 198 00:10:56,800 --> 00:10:58,680 Speaker 3: that was is a short term trade maybe a longer 199 00:10:58,760 --> 00:11:02,559 Speaker 3: term rotation. How do you look at diversification outside the US. 200 00:11:02,640 --> 00:11:06,480 Speaker 7: So I think price still matters, and then US earlier, 201 00:11:06,520 --> 00:11:10,560 Speaker 7: you know, everything seems expensive. Well, I say, look outside 202 00:11:10,600 --> 00:11:12,480 Speaker 7: of the US, because I think we tend to think 203 00:11:12,600 --> 00:11:17,000 Speaker 7: of you know, just US markets. You know, markets outside 204 00:11:17,040 --> 00:11:19,880 Speaker 7: of the US still look like they have good valuation. 205 00:11:20,040 --> 00:11:24,400 Speaker 7: So international markets, emerging markets this year, they already had 206 00:11:24,400 --> 00:11:27,320 Speaker 7: a strong rally, but that's on the back of being 207 00:11:27,559 --> 00:11:32,319 Speaker 7: under allocated and undernoticed. You know, in the previous years. 208 00:11:32,760 --> 00:11:34,920 Speaker 6: You mentioned we didn't have a lot of volatility. This 209 00:11:34,920 --> 00:11:37,520 Speaker 6: past year is twenty twenty sixth the year that comes back. 210 00:11:37,559 --> 00:11:39,800 Speaker 6: And why well, something's got to give. 211 00:11:39,960 --> 00:11:43,479 Speaker 7: You can't have high returns low volatility, So either returns 212 00:11:43,520 --> 00:11:46,280 Speaker 7: have to come down or volatility has to go up. 213 00:11:46,360 --> 00:11:49,240 Speaker 7: And I think one thing that's interesting about the VICS 214 00:11:49,480 --> 00:11:53,400 Speaker 7: is because it doesn't seem like it's telling us the 215 00:11:53,440 --> 00:11:57,160 Speaker 7: fear of you know, what investors are really feeling, because 216 00:11:57,160 --> 00:11:59,520 Speaker 7: if you ask anybody, they are thinking about is this 217 00:11:59,559 --> 00:12:02,720 Speaker 7: above all? But it's not reflected in the you know VIX. 218 00:12:02,840 --> 00:12:05,800 Speaker 7: So I think we tend to look at crypto markets 219 00:12:05,800 --> 00:12:08,200 Speaker 7: and bitcoin. We have the crypto heat Index, which is 220 00:12:08,240 --> 00:12:12,360 Speaker 7: telling us fear is high. You know, we saw bitcoin crash, 221 00:12:12,880 --> 00:12:16,000 Speaker 7: and you know, it's still hanging around that fear indicators. 222 00:12:16,120 --> 00:12:19,240 Speaker 7: So it feels like the VIX is just holding its breadth, 223 00:12:19,760 --> 00:12:23,560 Speaker 7: whereas you know, crypto markets are really measuring the pulse 224 00:12:23,720 --> 00:12:24,679 Speaker 7: of investors. 225 00:12:25,040 --> 00:12:25,240 Speaker 4: Yep. 226 00:12:25,280 --> 00:12:28,480 Speaker 3: Looking at bitcoin here for tom Keen, just under eighty 227 00:12:28,520 --> 00:12:31,720 Speaker 3: seven thousand dollars per token. We've been anywhere from seventy 228 00:12:31,760 --> 00:12:34,240 Speaker 3: thousand to one hundred and twenty seven thousand this year 229 00:12:34,320 --> 00:12:35,240 Speaker 3: on topic. 230 00:12:35,080 --> 00:12:36,360 Speaker 2: Volatility exactly right. 231 00:12:36,440 --> 00:12:39,360 Speaker 7: Yeah, but that's also interesting because you know Bitcoin is 232 00:12:39,400 --> 00:12:44,320 Speaker 7: negative this year, but for you know, bitcoin holders and ETFs, 233 00:12:44,400 --> 00:12:46,920 Speaker 7: you know, it started back in January twenty twenty four, 234 00:12:47,160 --> 00:12:52,000 Speaker 7: it's up, it's delivered still one hundred percent returns for investors. 235 00:12:51,520 --> 00:12:57,000 Speaker 3: Absolutely absolutely, Alternatives, private equity, private credit, you know, I 236 00:12:57,040 --> 00:12:59,320 Speaker 3: don't know hedge funds. How do you guys think about 237 00:12:59,120 --> 00:13:00,000 Speaker 3: all these days? 238 00:13:00,600 --> 00:13:03,000 Speaker 7: I think it's interesting because we're seeing this, you know, 239 00:13:03,120 --> 00:13:06,679 Speaker 7: the launch of the number of ETSS indexes that are 240 00:13:06,720 --> 00:13:11,320 Speaker 7: trying to measure this space for kind of daily flows 241 00:13:11,360 --> 00:13:14,640 Speaker 7: into an area that's meant to be a long term 242 00:13:14,679 --> 00:13:17,480 Speaker 7: buy and hold strategy. So what's the right price? You know, 243 00:13:17,760 --> 00:13:21,480 Speaker 7: you can't look at it every single day and it's 244 00:13:21,559 --> 00:13:25,200 Speaker 7: meant to be a diversified holding for investors. So I 245 00:13:25,200 --> 00:13:28,440 Speaker 7: think investors should allocate to alternative. 246 00:13:27,920 --> 00:13:30,959 Speaker 3: What percentage do you think. I've talked to registered investment 247 00:13:30,960 --> 00:13:34,240 Speaker 3: advisors and I would have thought either they're not really 248 00:13:34,240 --> 00:13:37,440 Speaker 3: in all they are, and I would have thought maybe 249 00:13:37,440 --> 00:13:40,760 Speaker 3: the allocation would five percent. They're talking much higher than that. 250 00:13:40,800 --> 00:13:41,880 Speaker 3: How do you guys think about it? 251 00:13:42,160 --> 00:13:45,200 Speaker 7: Well, I think with everything you should really it's really 252 00:13:45,400 --> 00:13:48,920 Speaker 7: based on your own risk allocation. You know, people say 253 00:13:49,679 --> 00:13:52,640 Speaker 7: even twenty percent gold. Now you know, but that seems 254 00:13:52,679 --> 00:13:55,000 Speaker 7: quite a hot and that seems like nobody's up there 255 00:13:55,040 --> 00:13:57,720 Speaker 7: at twenty percent. It should never be a core portion 256 00:13:58,240 --> 00:14:00,240 Speaker 7: of your holdings. And if you have twenty percent cent 257 00:14:00,240 --> 00:14:03,680 Speaker 7: to gold, five percent to private equity, you know, it 258 00:14:03,720 --> 00:14:06,599 Speaker 7: builds up. You know, what does that leave your core holdings? 259 00:14:06,920 --> 00:14:08,320 Speaker 6: I'm going to put you on the spot, Joy and 260 00:14:08,360 --> 00:14:11,040 Speaker 6: ask where are we going to see leadership in twenty 261 00:14:11,080 --> 00:14:12,800 Speaker 6: twenty six? Make place your bat. 262 00:14:12,920 --> 00:14:15,720 Speaker 7: Okay, that is on this spot, and I would say, 263 00:14:15,800 --> 00:14:20,360 Speaker 7: still look at a diversified global allocation to all assets, 264 00:14:20,600 --> 00:14:24,360 Speaker 7: but adjust it to you know, their weight in the markets, 265 00:14:24,400 --> 00:14:27,400 Speaker 7: which is still have a you know, solid portion in 266 00:14:27,640 --> 00:14:32,400 Speaker 7: equities and bonds, but also think about your allocation to 267 00:14:32,560 --> 00:14:35,920 Speaker 7: whether it's gold, bigcoin, private equity, so you know, be 268 00:14:35,920 --> 00:14:38,920 Speaker 7: be strategic and long term about it rather than what's 269 00:14:39,080 --> 00:14:40,000 Speaker 7: driving next year. 270 00:14:40,480 --> 00:14:42,600 Speaker 3: How about just just in terms of leadership in the 271 00:14:42,640 --> 00:14:44,960 Speaker 3: equity markets. Boy, it's been AI has been really the 272 00:14:45,040 --> 00:14:48,640 Speaker 3: story for I don't know three years now, is that 273 00:14:48,840 --> 00:14:49,400 Speaker 3: still me? 274 00:14:49,480 --> 00:14:51,920 Speaker 2: Hang your hat on that big cap tech trade? 275 00:14:51,920 --> 00:14:52,280 Speaker 8: Do you think? 276 00:14:52,320 --> 00:14:56,840 Speaker 7: I think AI is a disruptive innovation, but you know, 277 00:14:56,920 --> 00:15:00,320 Speaker 7: can it come from a five trillion dollar company? You know, 278 00:15:00,360 --> 00:15:04,320 Speaker 7: people have been People haven't noticed the leadership that's building 279 00:15:04,400 --> 00:15:07,760 Speaker 7: up in Asia. You know, China's coming up with really innovative, 280 00:15:07,800 --> 00:15:12,040 Speaker 7: disruptive companies, and I think people should be more diversified 281 00:15:12,160 --> 00:15:13,560 Speaker 7: in their AI holdings. 282 00:15:13,800 --> 00:15:14,920 Speaker 3: Joy, thanks so much for joining us. 283 00:15:14,960 --> 00:15:15,600 Speaker 4: Really appreciated. 284 00:15:15,640 --> 00:15:16,160 Speaker 2: Joey Yang. 285 00:15:16,440 --> 00:15:20,960 Speaker 3: She's a head of index product management at market Vector Indexes. 286 00:15:22,960 --> 00:15:26,120 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 287 00:15:32,320 --> 00:15:35,920 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 288 00:15:35,960 --> 00:15:39,120 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 289 00:15:39,200 --> 00:15:42,880 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 290 00:15:43,040 --> 00:15:44,680 Speaker 1: watch us live on YouTube. 291 00:15:45,000 --> 00:15:46,280 Speaker 3: Well you go out to side, you go to over 292 00:15:46,280 --> 00:15:49,800 Speaker 3: to Europe. The eurostock index justin for currencies up thirty 293 00:15:49,840 --> 00:15:50,360 Speaker 3: three percent? 294 00:15:50,360 --> 00:15:50,960 Speaker 4: How about that? 295 00:15:51,520 --> 00:15:55,960 Speaker 3: Asian indexes up, you know, mid twenties returns. Everybody's making 296 00:15:56,000 --> 00:15:57,520 Speaker 3: money in the equity markets here, what do we do 297 00:15:57,560 --> 00:16:01,200 Speaker 3: for twenty twenty six? Chris camp pitsis joins us here. 298 00:16:01,240 --> 00:16:05,720 Speaker 3: He's a managing partner Barnum Financial Group. Chris, you know, 299 00:16:05,920 --> 00:16:09,520 Speaker 3: investors had a really good three year run in equities. 300 00:16:09,520 --> 00:16:11,040 Speaker 3: They made a lot of money in the bond market 301 00:16:11,040 --> 00:16:14,240 Speaker 3: in twenty twenty five. What's the conversations you're having with 302 00:16:14,280 --> 00:16:17,280 Speaker 3: your clients is to expectations for twenty six. 303 00:16:18,200 --> 00:16:19,280 Speaker 4: Yeah, that's a great question. 304 00:16:19,520 --> 00:16:23,200 Speaker 9: And expectations I think as we look to go forward 305 00:16:23,200 --> 00:16:24,040 Speaker 9: into the new year. 306 00:16:25,240 --> 00:16:25,640 Speaker 4: You know, the. 307 00:16:25,600 --> 00:16:28,120 Speaker 9: Reality is if we look at how the last time 308 00:16:28,160 --> 00:16:31,640 Speaker 9: we had four double digit up years in a row, 309 00:16:32,280 --> 00:16:34,320 Speaker 9: that didn't end so well, right, that ended with the 310 00:16:34,360 --> 00:16:37,720 Speaker 9: dot com bubble burst. And so if we're going to 311 00:16:37,800 --> 00:16:42,200 Speaker 9: see another double digit, high momentum, high growth kind of year, 312 00:16:42,840 --> 00:16:47,000 Speaker 9: we're going to need some kind of goldilocks economic and 313 00:16:47,080 --> 00:16:49,560 Speaker 9: stock performance in order to do that. So what has 314 00:16:49,600 --> 00:16:52,040 Speaker 9: to happen for that to be the case. Well, First, 315 00:16:52,520 --> 00:16:55,560 Speaker 9: we need to see those accommodative interest rate cuts from 316 00:16:55,640 --> 00:17:00,840 Speaker 9: the FED to unemployment. Obviously can't get two out of control. 317 00:17:01,760 --> 00:17:02,760 Speaker 4: And third, we. 318 00:17:02,800 --> 00:17:05,480 Speaker 9: Can't have any AI bubble bursts, and that means we 319 00:17:05,560 --> 00:17:08,879 Speaker 9: need technology companies to really show and prove when earning 320 00:17:08,920 --> 00:17:13,280 Speaker 9: season comes along. The market didn't react too positively to 321 00:17:13,320 --> 00:17:15,960 Speaker 9: the last couple earning seasons, even though these big tech 322 00:17:16,000 --> 00:17:20,159 Speaker 9: companies delivered great results, and so that leaves us a 323 00:17:20,240 --> 00:17:22,040 Speaker 9: little cautious headed into the new year. 324 00:17:22,600 --> 00:17:25,240 Speaker 6: So if you're cautious and you talked about tech, Chris, 325 00:17:25,880 --> 00:17:28,479 Speaker 6: if you're widening out, I see in your note you 326 00:17:28,640 --> 00:17:31,439 Speaker 6: like utilities, which makes a lot of sense because in 327 00:17:31,480 --> 00:17:34,400 Speaker 6: an environment of lower rates, but also all the electricity, 328 00:17:34,480 --> 00:17:37,919 Speaker 6: all the data centers right that are being built to support. 329 00:17:37,560 --> 00:17:40,800 Speaker 9: AI exactly right, So we think of that as almost 330 00:17:40,880 --> 00:17:45,240 Speaker 9: an AI adjacent play, if you will, what are the sectors, 331 00:17:45,240 --> 00:17:47,480 Speaker 9: what are the industries? What are the companies that are 332 00:17:47,520 --> 00:17:51,280 Speaker 9: going to benefit from artificial intelligence but aren't necessarily the 333 00:17:51,320 --> 00:17:57,280 Speaker 9: semiconductor of companies themselves and thematically, if we can see 334 00:17:57,560 --> 00:18:01,320 Speaker 9: real companies start to increase their profit margins and their 335 00:18:01,359 --> 00:18:06,080 Speaker 9: earnings as a result of actually implementing artificial intelligence into 336 00:18:06,119 --> 00:18:09,600 Speaker 9: their businesses. Well, that's going to change the conversation from 337 00:18:09,800 --> 00:18:13,080 Speaker 9: is this a bubble? To how high can we go? 338 00:18:13,640 --> 00:18:16,040 Speaker 9: You know, in a positive and healthy manner. 339 00:18:16,400 --> 00:18:18,720 Speaker 3: Chris, talk to us about how you think about investing 340 00:18:18,720 --> 00:18:22,040 Speaker 3: in the US versus non US, and maybe that's developing 341 00:18:22,080 --> 00:18:23,200 Speaker 3: markets and merging markets. 342 00:18:23,240 --> 00:18:23,920 Speaker 2: How do you think about that? 343 00:18:24,840 --> 00:18:27,959 Speaker 9: So, you know, if you look at the typical investors 344 00:18:28,240 --> 00:18:32,160 Speaker 9: US based investors portfolio, it's extremely S and P five 345 00:18:32,240 --> 00:18:35,679 Speaker 9: hundred centric S and P five hundred almost has a 346 00:18:35,680 --> 00:18:39,880 Speaker 9: monopoly on the average investor's portfolio. And twenty twenty five 347 00:18:40,040 --> 00:18:42,800 Speaker 9: was a year in which the international markets, you know, 348 00:18:42,840 --> 00:18:45,119 Speaker 9: waved their hands and said, hey, take a look at me, 349 00:18:45,280 --> 00:18:51,320 Speaker 9: because we're here too. And meanwhile, you have governments who 350 00:18:51,600 --> 00:18:54,639 Speaker 9: are evaluating their trading partners, right. We saw that with 351 00:18:54,760 --> 00:18:57,840 Speaker 9: Liberation Day and the tariffs and the tariff negotiations that 352 00:18:57,880 --> 00:19:01,399 Speaker 9: have taken place since then. So as countries are looking 353 00:19:01,480 --> 00:19:06,400 Speaker 9: to really re establish their trading relationships, and then companies 354 00:19:06,400 --> 00:19:10,919 Speaker 9: are looking to similarly diversify their supply chains. And then 355 00:19:10,960 --> 00:19:14,560 Speaker 9: on top of that you have this weakening dollar. It 356 00:19:14,720 --> 00:19:18,520 Speaker 9: begs investors to start to take a look at other economies. 357 00:19:18,520 --> 00:19:22,400 Speaker 9: And other markets as complements to their US portfolio. 358 00:19:23,200 --> 00:19:27,120 Speaker 6: Where I'm curious where you're looking in the world. I mean, 359 00:19:27,240 --> 00:19:29,359 Speaker 6: I know, we say Europe, we say emerging markets, but 360 00:19:30,320 --> 00:19:31,920 Speaker 6: when you sort of drill down. 361 00:19:32,040 --> 00:19:36,000 Speaker 9: Sure, So one country that we find very attractive right 362 00:19:36,000 --> 00:19:40,560 Speaker 9: now is Japan. In general, companies in Japan have very 363 00:19:41,160 --> 00:19:44,879 Speaker 9: cash rich balance sheets. There's been a renewed focus in 364 00:19:44,960 --> 00:19:48,800 Speaker 9: Japan about delivering shareholder value. You're seeing a big increase 365 00:19:48,840 --> 00:19:51,800 Speaker 9: in buybacks, You're seeing a big increase in dividend hikes, 366 00:19:52,480 --> 00:19:55,520 Speaker 9: and then you have a much more accommodative fiscal policy 367 00:19:55,600 --> 00:20:00,199 Speaker 9: the last couple of years. And what's interesting about Japan is, 368 00:20:00,680 --> 00:20:02,800 Speaker 9: you know, the knock on them for a long time 369 00:20:02,840 --> 00:20:07,639 Speaker 9: has been an aging population. But an aging population also 370 00:20:07,760 --> 00:20:12,160 Speaker 9: lends itself to automation and technology enhancements. So we think 371 00:20:12,200 --> 00:20:16,119 Speaker 9: it's a perfect opportunity for Japanese equities. And then, of course, 372 00:20:16,160 --> 00:20:20,480 Speaker 9: with the strengthening yen weakening dollar for US dollar based returns, 373 00:20:20,560 --> 00:20:23,720 Speaker 9: that's a real positive for the US consumer and investor. 374 00:20:23,880 --> 00:20:27,280 Speaker 3: We haven't talked about Japan for thirty years, but it's 375 00:20:27,359 --> 00:20:29,480 Speaker 3: back in vogue here. I mean, is this something that's 376 00:20:30,520 --> 00:20:32,639 Speaker 3: a longer term trend, and my son's about to do 377 00:20:32,680 --> 00:20:35,359 Speaker 3: a semester brought in Japan, and he's all in on Japan. 378 00:20:35,440 --> 00:20:37,560 Speaker 3: But I'm like, all right, that was in nineteen eighty 379 00:20:37,600 --> 00:20:38,480 Speaker 3: that would have been a good call. 380 00:20:38,680 --> 00:20:40,159 Speaker 2: But maybe it's coming back here. I don't know. 381 00:20:41,359 --> 00:20:43,919 Speaker 9: I think it is because ultimately, well, we have the 382 00:20:44,000 --> 00:20:47,560 Speaker 9: volatility of what's happening with AI and a little bit 383 00:20:47,560 --> 00:20:51,159 Speaker 9: of political uncertainty in the US and of course conflict 384 00:20:51,240 --> 00:20:55,360 Speaker 9: and tensions with China. People are looking for a consistent 385 00:20:55,440 --> 00:20:59,200 Speaker 9: story and Japan looks to deliver that here and they've 386 00:20:59,240 --> 00:21:01,919 Speaker 9: got a lot of characteristics of what could present a 387 00:21:01,920 --> 00:21:05,080 Speaker 9: big opportunity. That started in twenty five, and I think 388 00:21:05,119 --> 00:21:07,240 Speaker 9: the momentum will continue into twenty twenty six. 389 00:21:08,200 --> 00:21:10,199 Speaker 3: Just crossing the tape here in the Bloomberg terminal, red 390 00:21:10,240 --> 00:21:14,080 Speaker 3: headlines SoftBank to buy Digital Bridge for sixteen. 391 00:21:13,720 --> 00:21:15,399 Speaker 2: Dollars per share in cash. 392 00:21:15,480 --> 00:21:18,760 Speaker 6: So they still speaking about Monday Bank h exactly even 393 00:21:18,800 --> 00:21:21,600 Speaker 6: on a holiday weeks. Back to the US for a minute, 394 00:21:21,640 --> 00:21:24,639 Speaker 6: Chris and we talked about we ticked some boxes, talking 395 00:21:24,640 --> 00:21:28,720 Speaker 6: about utilities, talking about tech, what about consumer staples, what's 396 00:21:28,800 --> 00:21:31,440 Speaker 6: the outlook the prognosis for them in twenty twenty six. 397 00:21:32,520 --> 00:21:36,800 Speaker 9: I love that question because what happens is technology has 398 00:21:36,880 --> 00:21:39,080 Speaker 9: been driving the market, both in the short term and 399 00:21:39,200 --> 00:21:42,280 Speaker 9: long term. I think most people would agree AI has 400 00:21:42,320 --> 00:21:44,520 Speaker 9: a tremendous long term. 401 00:21:44,320 --> 00:21:45,200 Speaker 4: Thesis, right. 402 00:21:45,880 --> 00:21:50,680 Speaker 9: But as we see these valuations reach these highs, we 403 00:21:50,760 --> 00:21:53,239 Speaker 9: want to start to look to take some profits off 404 00:21:53,320 --> 00:21:56,320 Speaker 9: of the table. And then the question becomes where am 405 00:21:56,359 --> 00:22:00,040 Speaker 9: I putting that portion of my portfolio if I'm trimming 406 00:22:00,119 --> 00:22:03,440 Speaker 9: slightly from my technology and my growth story. And so 407 00:22:03,760 --> 00:22:09,919 Speaker 9: consumer staples provides a tremendous contrarian almost allocation, one that 408 00:22:10,040 --> 00:22:14,639 Speaker 9: is inflation friendly, one that provides a consistent dividend in 409 00:22:14,720 --> 00:22:18,400 Speaker 9: a lowering interest rate environment, that in essence pays us 410 00:22:18,440 --> 00:22:22,120 Speaker 9: to wait. And we saw this in April, right when 411 00:22:22,200 --> 00:22:26,520 Speaker 9: the tariff craziness took place and the market reacted. SMP 412 00:22:26,720 --> 00:22:29,520 Speaker 9: was negative fifteen percent for the year at one point. 413 00:22:30,320 --> 00:22:36,240 Speaker 9: Sectors like consumer staples really really were a bright spot 414 00:22:36,320 --> 00:22:40,200 Speaker 9: in a stormy stock market. And I think consumer staples 415 00:22:40,200 --> 00:22:44,280 Speaker 9: will perform exceptionally well going into the new year should 416 00:22:44,320 --> 00:22:46,120 Speaker 9: we see the pullback in technology. 417 00:22:46,400 --> 00:22:47,560 Speaker 2: What are you doing in Chris? 418 00:22:47,640 --> 00:22:49,280 Speaker 3: In the bond market here, we had some nice high 419 00:22:49,320 --> 00:22:51,600 Speaker 3: single digit returns in twenty twenty five, and if you 420 00:22:51,640 --> 00:22:54,760 Speaker 3: took some credit risk, you know, doing pretty well rewarded there. 421 00:22:54,800 --> 00:22:55,880 Speaker 2: How about in twenty six. 422 00:22:57,600 --> 00:23:00,600 Speaker 9: If I'm going to take on risk to get that 423 00:23:00,760 --> 00:23:04,879 Speaker 9: risk through dividends rather through yield at the moment, especially 424 00:23:04,960 --> 00:23:09,840 Speaker 9: because the biggest risk to twenty twenty six is stock 425 00:23:09,880 --> 00:23:13,399 Speaker 9: market volatility and a worsening economy. Right, those are the 426 00:23:13,440 --> 00:23:16,960 Speaker 9: traditional concerns around what could the end of a bull 427 00:23:17,040 --> 00:23:21,600 Speaker 9: market be as we potentially go into theoretically a recession. Right, 428 00:23:21,680 --> 00:23:24,320 Speaker 9: So I don't want to own the types of bonds 429 00:23:24,400 --> 00:23:26,639 Speaker 9: that are going to act like stocks if the stock 430 00:23:26,680 --> 00:23:29,000 Speaker 9: market's going down. So if I'm going to own bonds, 431 00:23:29,000 --> 00:23:31,280 Speaker 9: I want quality. I want a little bit of a 432 00:23:31,359 --> 00:23:34,760 Speaker 9: duration in a lowering interest rate environment. So I would 433 00:23:34,800 --> 00:23:39,240 Speaker 9: favor obviously sovereign debt, and I would favor cash and 434 00:23:39,320 --> 00:23:40,160 Speaker 9: dividend stocks. 435 00:23:40,400 --> 00:23:42,000 Speaker 2: Very good, Chris, thanks so much, appreciate it. 436 00:23:42,040 --> 00:23:45,679 Speaker 3: Chris Campittsis He's a managing partner for Barnum Financial Group of. 437 00:23:47,400 --> 00:23:50,560 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 438 00:23:56,760 --> 00:24:01,399 Speaker 1: You're listening to the Bloomberg Surveillance podcast live weekday afternoons 439 00:24:01,400 --> 00:24:04,560 Speaker 1: from seven to ten am Eastern listen on Applecarplay and 440 00:24:04,560 --> 00:24:07,920 Speaker 1: Android Otto with the Bloomberg Business app, or watch us 441 00:24:07,960 --> 00:24:09,119 Speaker 1: live on YouTube. 442 00:24:09,520 --> 00:24:11,440 Speaker 6: I want to talk a little more fixed income because 443 00:24:11,440 --> 00:24:13,320 Speaker 6: what a year it was for fixed income and can 444 00:24:13,320 --> 00:24:16,639 Speaker 6: twenty twenty six continue that run. Vanessa McMichael, head of 445 00:24:16,680 --> 00:24:21,400 Speaker 6: Corporate and Public Entity Strategy at Wells Fargo. Vanessa, I'm 446 00:24:21,400 --> 00:24:23,880 Speaker 6: going to jump right in here with something you call 447 00:24:24,040 --> 00:24:27,760 Speaker 6: cash segmentation because we are expecting, or at least the 448 00:24:27,760 --> 00:24:31,120 Speaker 6: markets expecting two interest rate cuts from the Fed next year. 449 00:24:31,119 --> 00:24:35,000 Speaker 6: And you said in that scenario, cash segmentation is important 450 00:24:35,000 --> 00:24:36,359 Speaker 6: and will be back in style. 451 00:24:36,440 --> 00:24:39,199 Speaker 8: What do you mean by that, Well, thank you for 452 00:24:39,240 --> 00:24:41,960 Speaker 8: having me this morning. Yes, So, for the clients that 453 00:24:42,000 --> 00:24:45,200 Speaker 8: I cover are corporate and public entity investors, they're using 454 00:24:45,280 --> 00:24:49,480 Speaker 8: fixed income markets to enhance their cash management process overall, 455 00:24:49,520 --> 00:24:54,120 Speaker 8: and so they're typically not chasing yield. They're more interested 456 00:24:54,200 --> 00:24:57,080 Speaker 8: in liquidity and safety above all else. And why am 457 00:24:57,080 --> 00:24:58,920 Speaker 8: I kind of rambling about this at the beginning of 458 00:24:59,400 --> 00:25:02,720 Speaker 8: Manchester in the conversation is because for the past couple 459 00:25:02,760 --> 00:25:05,800 Speaker 8: of years, it's been really easy to do very little 460 00:25:06,200 --> 00:25:10,080 Speaker 8: and generate really nice income for your organization. If you've 461 00:25:10,080 --> 00:25:13,719 Speaker 8: been camped out in cash instruments, and so prior to 462 00:25:14,119 --> 00:25:17,720 Speaker 8: this inverted yield environment that we've been living for at 463 00:25:17,800 --> 00:25:20,920 Speaker 8: least if you'r a front end investor organizations, they would 464 00:25:20,920 --> 00:25:23,320 Speaker 8: bucket their cash. Right, do you have your operating cash, 465 00:25:23,359 --> 00:25:26,040 Speaker 8: you have some strategic cash, maybe you have some cash 466 00:25:26,160 --> 00:25:29,280 Speaker 8: set aside for a specific project, and then you're using 467 00:25:29,320 --> 00:25:32,439 Speaker 8: fixed income markets to invest that cash until you need it. 468 00:25:33,720 --> 00:25:36,639 Speaker 8: But again, because of the yield curve, because of the 469 00:25:36,680 --> 00:25:38,760 Speaker 8: way last year or this year, we're still in twenty 470 00:25:38,800 --> 00:25:41,200 Speaker 8: twenty five, I'm already trying to get into twenty twenty six. 471 00:25:41,600 --> 00:25:46,400 Speaker 8: The way this year started, liquidity was the number one 472 00:25:46,480 --> 00:25:49,399 Speaker 8: conversation we were having with clients, and how do you 473 00:25:49,560 --> 00:25:51,959 Speaker 8: satisfy that liquidity golob Well, you camp out in a 474 00:25:51,960 --> 00:25:55,920 Speaker 8: cash instrument. So it's just time for organizations to reframe 475 00:25:56,000 --> 00:25:59,080 Speaker 8: how we're thinking about using fixed income markets and in 476 00:25:59,119 --> 00:26:03,199 Speaker 8: this cat in their case, managing process. Because we're in 477 00:26:03,240 --> 00:26:06,000 Speaker 8: an environment where the front end of the curve should 478 00:26:06,119 --> 00:26:10,280 Speaker 8: no longer be inverted if expectations come to fruition by 479 00:26:10,280 --> 00:26:11,680 Speaker 8: the end of this year, and so we do need 480 00:26:11,680 --> 00:26:14,200 Speaker 8: to think about segmenting and putting cash on different parts 481 00:26:14,200 --> 00:26:14,560 Speaker 8: of the curve. 482 00:26:14,600 --> 00:26:15,399 Speaker 4: So that's what I mean. 483 00:26:15,280 --> 00:26:18,280 Speaker 3: By that, Vanessa, I mean if your job now, I 484 00:26:18,280 --> 00:26:20,679 Speaker 3: know you went to Chicago Business School, which means you 485 00:26:20,760 --> 00:26:23,199 Speaker 3: like math. So right right off the beat, I got 486 00:26:23,200 --> 00:26:26,199 Speaker 3: a problem here. How about it to your treasury? I 487 00:26:26,200 --> 00:26:29,480 Speaker 3: mean three and a half percent isn't your job kind 488 00:26:29,480 --> 00:26:31,800 Speaker 3: of done? You could say, put yourself in to your 489 00:26:31,840 --> 00:26:34,240 Speaker 3: treasuries for three and a half percent. That seems like 490 00:26:34,280 --> 00:26:34,919 Speaker 3: a nice return. 491 00:26:36,080 --> 00:26:37,920 Speaker 8: Well, and you bring up a really good point because 492 00:26:37,960 --> 00:26:40,680 Speaker 8: we're still in an environment and we're going to be, 493 00:26:40,720 --> 00:26:43,960 Speaker 8: at least for the foreseeable future for this particular investor 494 00:26:44,000 --> 00:26:46,280 Speaker 8: base that I cover that invests so short on a 495 00:26:46,359 --> 00:26:49,240 Speaker 8: yield curve where you don't have to take a lot 496 00:26:49,240 --> 00:26:53,639 Speaker 8: of credit risk to continue to enhance your yield and 497 00:26:54,640 --> 00:26:57,879 Speaker 8: stabilize some income generation. So we are in our seats. 498 00:26:57,920 --> 00:27:00,720 Speaker 8: We are encouraging those clients that can and invest out 499 00:27:00,720 --> 00:27:04,040 Speaker 8: on the belly of the curve because of their investment policy. 500 00:27:04,119 --> 00:27:07,200 Speaker 8: Then because they can, they have the cash that they 501 00:27:07,280 --> 00:27:10,199 Speaker 8: may not need immediately right for the foreseeable future. To 502 00:27:10,240 --> 00:27:11,720 Speaker 8: look at that part of the curve, because a three 503 00:27:11,760 --> 00:27:14,000 Speaker 8: and a half percent yield over a couple of years 504 00:27:14,359 --> 00:27:17,760 Speaker 8: is still really decent income particularly for this investor base. 505 00:27:18,880 --> 00:27:22,080 Speaker 6: What's going on with money market fund assets, Vanessa? Because 506 00:27:22,400 --> 00:27:24,480 Speaker 6: they reached record highs, there was all this talk about 507 00:27:24,520 --> 00:27:26,400 Speaker 6: we're going to see a bunch of outflows that never 508 00:27:26,440 --> 00:27:29,760 Speaker 6: really came to fruition. So what's your outlook for MMF 509 00:27:30,040 --> 00:27:30,800 Speaker 6: asset growth? 510 00:27:32,200 --> 00:27:34,240 Speaker 8: We think they're going to continue to grow. I mean, 511 00:27:34,280 --> 00:27:37,000 Speaker 8: this year we kind of hit two new records seven 512 00:27:37,040 --> 00:27:40,639 Speaker 8: trillion excuse me, and then eight trillion. We think growth 513 00:27:40,680 --> 00:27:43,720 Speaker 8: going forward may be a bit more incremental. Our clients, 514 00:27:43,720 --> 00:27:47,160 Speaker 8: our corporate public entity clients are using money market funds 515 00:27:47,240 --> 00:27:50,679 Speaker 8: as a substitute for bank deposits, and so they're going 516 00:27:50,720 --> 00:27:53,480 Speaker 8: to continue to do that. And I think even if 517 00:27:53,480 --> 00:27:56,800 Speaker 8: the FED does execute two cuts, so we're fifty basis 518 00:27:56,840 --> 00:27:59,040 Speaker 8: points lower on the front end at some point fifty 519 00:27:59,040 --> 00:28:01,840 Speaker 8: basis points lower and money market funds, that still puts 520 00:28:01,880 --> 00:28:04,280 Speaker 8: us at about a three percent yield, and that's still 521 00:28:04,320 --> 00:28:07,960 Speaker 8: really attractive for these clients. Remember just a few years ago, 522 00:28:07,960 --> 00:28:10,200 Speaker 8: and I'm saying a few maybe it was four where 523 00:28:10,359 --> 00:28:13,480 Speaker 8: rates for zero and we were only earning call it 524 00:28:13,520 --> 00:28:15,560 Speaker 8: one of two basis points and these sort of funds, 525 00:28:15,560 --> 00:28:19,480 Speaker 8: So to earn three percent, to be honest, is still 526 00:28:19,640 --> 00:28:23,600 Speaker 8: really decent guild, and it's going to generate decent income, 527 00:28:23,600 --> 00:28:26,679 Speaker 8: and so we expect to continue to see clients heavily 528 00:28:26,760 --> 00:28:28,840 Speaker 8: utilize those instruments going forward. 529 00:28:29,200 --> 00:28:31,200 Speaker 3: Hi, Vanessa, thank you so much for joining us. Really 530 00:28:31,280 --> 00:28:34,199 Speaker 3: appreciate it. Vanessa Michael. She is head of Corporate and 531 00:28:34,280 --> 00:28:39,320 Speaker 3: Public Entity Strategy at Wells Fargo, advising her public clients 532 00:28:39,440 --> 00:28:43,040 Speaker 3: on the fixed income market and word to allocate capital there. 533 00:28:43,280 --> 00:28:48,080 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 534 00:28:48,200 --> 00:28:52,480 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 535 00:28:52,640 --> 00:28:55,840 Speaker 1: seven to ten am Easter and on Bloomberg dot Com, 536 00:28:56,000 --> 00:28:59,840 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 537 00:29:00,120 --> 00:29:03,200 Speaker 1: You can also watch us live every weekday on YouTube 538 00:29:03,520 --> 00:29:05,520 Speaker 1: and always on the Bloomberg terminal