1 00:00:01,520 --> 00:00:03,680 Speaker 1: Thank you so much for joining us for this special 2 00:00:03,840 --> 00:00:07,280 Speaker 1: edition of Bloomberg Daybreak. US markets are closed for the 3 00:00:07,360 --> 00:00:10,639 Speaker 1: Labor Day holiday. I'm Nathan Hager coming up this hour. 4 00:00:10,760 --> 00:00:13,319 Speaker 1: As we enter the final few months of the trading year, 5 00:00:13,560 --> 00:00:16,720 Speaker 1: stocks are trading near all time highs. Will it be 6 00:00:16,760 --> 00:00:19,520 Speaker 1: a bullish close out to twenty twenty four and what 7 00:00:19,680 --> 00:00:23,320 Speaker 1: about next year? We'll speak with Cameron Dawson, chief investment 8 00:00:23,360 --> 00:00:26,120 Speaker 1: officer at New Edge Wealth Plus. It has certainly been 9 00:00:26,160 --> 00:00:29,680 Speaker 1: a volatile year for bitcoin, so what's in store for crypto? 10 00:00:29,840 --> 00:00:33,639 Speaker 1: Bloomberg Intelligence Senior commodity strategist Mike mcgloon will join us, 11 00:00:33,960 --> 00:00:36,839 Speaker 1: but we begin with the economy and the Federal Reserve. 12 00:00:37,080 --> 00:00:39,760 Speaker 1: Another key data point is on tap this week ahead 13 00:00:39,760 --> 00:00:42,800 Speaker 1: of the next rate decision later this month. August. Non 14 00:00:42,920 --> 00:00:46,360 Speaker 1: farm payrolls are due out on Friday. Ahead of it, 15 00:00:46,479 --> 00:00:50,479 Speaker 1: we're pleased to welcome Michael McKee, international economics and Policy 16 00:00:50,479 --> 00:00:54,480 Speaker 1: correspondent for Bloomberg News, and Anna Wong, chief US economist 17 00:00:54,600 --> 00:00:57,360 Speaker 1: at Bloomberg Economics. It's great to have both of you 18 00:00:57,440 --> 00:00:59,440 Speaker 1: here with us on this Labor Day. I want to 19 00:00:59,480 --> 00:01:01,680 Speaker 1: start with you, Mike, because of course you were there 20 00:01:01,760 --> 00:01:05,560 Speaker 1: in Jackson Hall for Chairman Palace famous time is Now speech, 21 00:01:05,600 --> 00:01:08,200 Speaker 1: and then you followed it up with a conversation with 22 00:01:08,280 --> 00:01:11,679 Speaker 1: the president of the San Francisco Fed, Mary Daily. Let's 23 00:01:11,720 --> 00:01:12,720 Speaker 1: see what she had to tell you. 24 00:01:12,840 --> 00:01:15,800 Speaker 2: Well, to my mind, we've been on this path of 25 00:01:16,480 --> 00:01:19,880 Speaker 2: ready to adjust policy rates for several months. We just 26 00:01:19,920 --> 00:01:22,280 Speaker 2: needed to get a little more confidence and inflation was 27 00:01:22,319 --> 00:01:25,199 Speaker 2: truly on its path to two percent, and I wanted 28 00:01:25,240 --> 00:01:27,160 Speaker 2: to see the labor market come into balance. But I 29 00:01:27,160 --> 00:01:30,000 Speaker 2: think that's completely happened, and the risk to our goals 30 00:01:30,000 --> 00:01:32,800 Speaker 2: are now balanced in the time to adjust policy is 31 00:01:32,920 --> 00:01:33,440 Speaker 2: upon us. 32 00:01:33,880 --> 00:01:36,760 Speaker 3: Is there anything that could derail a cut in September? 33 00:01:37,120 --> 00:01:39,679 Speaker 2: To my mind, that would be hard to imagine. At 34 00:01:39,680 --> 00:01:44,440 Speaker 2: this point, I do see that adjusting policy is appropriate. 35 00:01:44,560 --> 00:01:47,199 Speaker 2: We don't want to get ourselves into a situation where 36 00:01:47,200 --> 00:01:50,960 Speaker 2: we're keeping policy highly restrictive into a slowing economy. 37 00:01:51,120 --> 00:01:54,080 Speaker 1: Puts the focus right back on the jobs market, doesn't 38 00:01:54,080 --> 00:01:57,680 Speaker 1: it this idea that the labor market is coming into balance? So, Mike, 39 00:01:58,360 --> 00:01:58,640 Speaker 1: is it? 40 00:01:58,840 --> 00:02:01,520 Speaker 3: Well, it depends on who you talk to, because well, 41 00:02:01,680 --> 00:02:05,200 Speaker 3: Mary Daily thinks they're in balance, and several other members 42 00:02:05,240 --> 00:02:08,800 Speaker 3: of the Open Market Committee agree. The Chairman seems to 43 00:02:08,800 --> 00:02:11,959 Speaker 3: think that they're a little bit tilted towards the downside 44 00:02:12,120 --> 00:02:15,160 Speaker 3: for the labor market, and that it added to his 45 00:02:16,320 --> 00:02:20,040 Speaker 3: emphasis on the idea that rate cuts are coming. So 46 00:02:20,360 --> 00:02:23,280 Speaker 3: I mean, it definitely is going to be a very 47 00:02:23,360 --> 00:02:28,519 Speaker 3: important report on Friday because it will drive the discussion 48 00:02:28,560 --> 00:02:31,360 Speaker 3: about whether the Fed should cut by twenty five basis 49 00:02:31,360 --> 00:02:32,799 Speaker 3: points or fifty basis points. 50 00:02:33,240 --> 00:02:35,919 Speaker 1: Of course, Anna Loong, you've been on top of this 51 00:02:36,040 --> 00:02:39,120 Speaker 1: conversation about whether we are going to see a twenty 52 00:02:39,160 --> 00:02:43,359 Speaker 1: five basis point or a fifty basis point cut. How 53 00:02:43,360 --> 00:02:46,400 Speaker 1: do you view things when it comes to labor market 54 00:02:46,480 --> 00:02:47,600 Speaker 1: dynamics right now? 55 00:02:48,120 --> 00:02:50,600 Speaker 4: Yeah, I think we are already in the non linear 56 00:02:50,680 --> 00:02:53,600 Speaker 4: part of the climb of the unemployment rate. And I 57 00:02:53,639 --> 00:02:56,919 Speaker 4: think the reason why Powell seems to be more devish 58 00:02:57,000 --> 00:03:02,080 Speaker 4: than the median FMC partic bit is that Powell is 59 00:03:02,120 --> 00:03:05,320 Speaker 4: actually not a trained economist. He is a lawyer, and 60 00:03:05,360 --> 00:03:08,960 Speaker 4: he's more skeptical about economist models. And when you look 61 00:03:09,040 --> 00:03:13,320 Speaker 4: at how the other FOMC members view the labor markets, 62 00:03:13,320 --> 00:03:17,800 Speaker 4: for example, Mary Daily is a trained labor economist. Chris Waller, 63 00:03:17,840 --> 00:03:21,440 Speaker 4: who's an intellectual figure on the FOMC, is you know, 64 00:03:21,520 --> 00:03:25,080 Speaker 4: depending on the beverage curve. They have this excessively precise 65 00:03:25,639 --> 00:03:27,680 Speaker 4: way of looking at labor market. 66 00:03:27,680 --> 00:03:28,880 Speaker 5: But whereas Powell has this. 67 00:03:30,320 --> 00:03:33,960 Speaker 4: Very total and a holistic view of looking at things, 68 00:03:33,960 --> 00:03:36,320 Speaker 4: and the holistic views of looking at things is that 69 00:03:36,560 --> 00:03:40,160 Speaker 4: the labor market is cooling really rapidly recently, as we 70 00:03:40,200 --> 00:03:42,680 Speaker 4: could see from a lot of the regional vet surveys 71 00:03:42,760 --> 00:03:46,720 Speaker 4: that employment sub index is plunging. So I think my 72 00:03:46,880 --> 00:03:49,440 Speaker 4: view is very similar to Powell, which is that the 73 00:03:49,600 --> 00:03:53,480 Speaker 4: risks facing the economy is definitely tipped toward the downside 74 00:03:53,480 --> 00:03:54,960 Speaker 4: on unemployment. 75 00:03:55,120 --> 00:03:58,000 Speaker 1: And we certainly saw that downside risk to the unemployment 76 00:03:58,040 --> 00:04:01,680 Speaker 1: picture when preliminary benchmarker visions came out last month, that 77 00:04:01,840 --> 00:04:05,640 Speaker 1: big drop of eight hundred eighteen thousand jobs wiped out 78 00:04:05,720 --> 00:04:08,400 Speaker 1: from the labor picture. So how does that cloud things 79 00:04:08,400 --> 00:04:10,720 Speaker 1: when it comes to the labor market right now? 80 00:04:10,960 --> 00:04:14,360 Speaker 3: It's maybe a slight cloud on the horizon. The problem 81 00:04:14,400 --> 00:04:17,440 Speaker 3: with these revisions is that they get revised again, and 82 00:04:17,480 --> 00:04:20,120 Speaker 3: there's a good chance that it will be revised lower 83 00:04:21,240 --> 00:04:25,920 Speaker 3: the level of job creation. Even if you subtract. Right now, 84 00:04:26,960 --> 00:04:30,080 Speaker 3: the eight hundred and eighteen thousand goes down from two 85 00:04:30,160 --> 00:04:32,640 Speaker 3: hundred and forty two thousand average a month to one 86 00:04:32,680 --> 00:04:36,040 Speaker 3: hundred and seventy four thousand, and that's still a very 87 00:04:36,080 --> 00:04:40,279 Speaker 3: strong job creation number each month. So I don't know 88 00:04:40,320 --> 00:04:44,360 Speaker 3: that it is any kind of push for the FED 89 00:04:44,480 --> 00:04:46,080 Speaker 3: one way or the other. They're going to be looking 90 00:04:46,120 --> 00:04:48,400 Speaker 3: at what's happening now, because remember this eight hundred and 91 00:04:48,440 --> 00:04:52,960 Speaker 3: eighteen thousand that's through March of this year. Now you 92 00:04:53,000 --> 00:04:55,839 Speaker 3: can extrapolate forward, but you don't really know if that's 93 00:04:55,839 --> 00:04:59,320 Speaker 3: going to be accurate or not. And so do we 94 00:04:59,400 --> 00:05:03,279 Speaker 3: get a repeat eat of the low job creation number 95 00:05:03,839 --> 00:05:08,400 Speaker 3: last month in July when we saw only one hundred 96 00:05:08,400 --> 00:05:12,039 Speaker 3: and fourteen thousand jobs created, or do we see a 97 00:05:12,080 --> 00:05:14,960 Speaker 3: bounce back? That's going to be the real question. If 98 00:05:14,960 --> 00:05:16,599 Speaker 3: we get a bounce back, it doesn't have to go 99 00:05:16,680 --> 00:05:18,560 Speaker 3: above two hundred thousand, it doesn't even have to go 100 00:05:18,600 --> 00:05:20,320 Speaker 3: to one hundred and seventy five thousand. But you get 101 00:05:20,360 --> 00:05:23,440 Speaker 3: something one fifty or more, you're going to see people 102 00:05:23,480 --> 00:05:27,120 Speaker 3: thinking that the job market has slowed, but it's not 103 00:05:27,400 --> 00:05:28,480 Speaker 3: falling off a cliff. 104 00:05:28,640 --> 00:05:30,480 Speaker 1: I want to ask you about this as well, Anna, 105 00:05:30,560 --> 00:05:32,880 Speaker 1: Not only did we see that much lower than expected 106 00:05:32,960 --> 00:05:36,000 Speaker 1: top line number of one hundred and fourteen thousand, jobs added. 107 00:05:36,080 --> 00:05:38,440 Speaker 1: Last month, we saw a pretty big pickup in the 108 00:05:38,520 --> 00:05:41,280 Speaker 1: unemployment rate as well. Is that a one off or 109 00:05:41,400 --> 00:05:43,080 Speaker 1: could it be a sign of a trend of things 110 00:05:43,120 --> 00:05:44,320 Speaker 1: to come in the labor market. 111 00:05:44,520 --> 00:05:48,279 Speaker 4: That is the trillion dollar question, Nathan, whether the increase 112 00:05:48,320 --> 00:05:51,720 Speaker 4: in unemployment rate is do you to temporary factors or 113 00:05:52,720 --> 00:05:57,880 Speaker 4: transitory factors? Do you want to be a transit transitory 114 00:05:58,200 --> 00:06:01,360 Speaker 4: or is the im permanent factor. So into the micro 115 00:06:01,520 --> 00:06:04,720 Speaker 4: data behind the household survey that produces the unemployment rate, 116 00:06:05,360 --> 00:06:08,400 Speaker 4: really drill into the details right and what we found 117 00:06:08,600 --> 00:06:12,440 Speaker 4: is that the two most benign explanation for the increased 118 00:06:12,520 --> 00:06:17,680 Speaker 4: unemployment is not valid. The two most benign explanation is one, 119 00:06:17,760 --> 00:06:21,279 Speaker 4: it's due to layoffs related to Hurricane Barrel. Well, it 120 00:06:21,320 --> 00:06:23,720 Speaker 4: turns out that most of the temporary layoffs are not 121 00:06:23,920 --> 00:06:28,279 Speaker 4: in Texas or any of the hurricane impacted states. On 122 00:06:28,320 --> 00:06:33,160 Speaker 4: the other hand, they are concentrated in places like California, Michigan, 123 00:06:33,680 --> 00:06:38,520 Speaker 4: New Jersey, and Nevada. You know states that you know 124 00:06:38,640 --> 00:06:42,240 Speaker 4: the labor market is weakening. The second most benign is that, oh, 125 00:06:42,279 --> 00:06:45,159 Speaker 4: it's due to the Michigan auto re tooling. So every 126 00:06:45,240 --> 00:06:50,040 Speaker 4: July the car auto plants will rest to get ready 127 00:06:50,400 --> 00:06:53,280 Speaker 4: for the next season, and usually that leads to temporary 128 00:06:53,400 --> 00:06:56,240 Speaker 4: layoffs in the auto markets way. But what we found 129 00:06:56,400 --> 00:07:00,520 Speaker 4: is that that accounts for very very minute part of 130 00:07:00,600 --> 00:07:04,839 Speaker 4: the temporary layoffs, and historically they don't show up at all. 131 00:07:04,920 --> 00:07:11,080 Speaker 4: So in fact, the layoffs related to auto manufacturing is there. 132 00:07:11,360 --> 00:07:14,600 Speaker 4: In fact, it's more severe and normally, and just looking 133 00:07:14,640 --> 00:07:18,840 Speaker 4: at Bloomberg stories on Stillentis and what's going on Ford 134 00:07:18,840 --> 00:07:22,120 Speaker 4: and GM, a lot of these temporary layoffs are becoming 135 00:07:22,400 --> 00:07:24,280 Speaker 4: permanent layoffs due to lack of demand. 136 00:07:24,720 --> 00:07:25,880 Speaker 5: What we actually. 137 00:07:25,560 --> 00:07:28,280 Speaker 4: Uncovered in the driver as a driver of the rise 138 00:07:28,320 --> 00:07:35,960 Speaker 4: in unemployment rate is actually education sector and people. This 139 00:07:36,040 --> 00:07:39,160 Speaker 4: is one issue that's not on people's radar is that 140 00:07:39,720 --> 00:07:44,800 Speaker 4: one pandemic federal stimulus is expiring in September, and that 141 00:07:45,320 --> 00:07:47,840 Speaker 4: stimulus measure has been providing funding for a lot of 142 00:07:47,880 --> 00:07:51,080 Speaker 4: schools all over the country and because of its expiration, 143 00:07:51,240 --> 00:07:53,840 Speaker 4: a lot of the local schools are laying off teachers. 144 00:07:54,240 --> 00:07:57,560 Speaker 4: And so we're seeing clear signs in the August payrolls 145 00:07:57,960 --> 00:08:02,280 Speaker 4: and July perils that those layoffs are not temperate, going 146 00:08:02,320 --> 00:08:03,280 Speaker 4: to be permanent. 147 00:08:03,600 --> 00:08:06,680 Speaker 1: We're speaking with Anna Wong, chief US economist at Bloomberg 148 00:08:06,720 --> 00:08:11,880 Speaker 1: Economics and our Bloomberg Economics and Policy correspondent Michael McKee 149 00:08:11,920 --> 00:08:14,560 Speaker 1: with us as well, and Mike, let's pick up on 150 00:08:14,600 --> 00:08:16,240 Speaker 1: what Anna was talking about. There are a lot of 151 00:08:16,240 --> 00:08:20,400 Speaker 1: the seasonality baked into the last payrolls report, and what 152 00:08:20,440 --> 00:08:24,080 Speaker 1: could that mean for the Fed's planning when it comes 153 00:08:24,120 --> 00:08:28,000 Speaker 1: to whether to actually go ahead and make it clear 154 00:08:28,040 --> 00:08:30,160 Speaker 1: that the time really has come to kick off a 155 00:08:30,240 --> 00:08:30,960 Speaker 1: rate cut cycle. 156 00:08:31,320 --> 00:08:33,120 Speaker 3: Well, I think it would take it awful lot for 157 00:08:33,160 --> 00:08:35,600 Speaker 3: the FED to change its mind about kicking off the 158 00:08:35,679 --> 00:08:38,240 Speaker 3: rate cut cycle. You'd have to have a very strong 159 00:08:38,400 --> 00:08:43,160 Speaker 3: jobs report, which people are not expecting at this point. 160 00:08:43,480 --> 00:08:46,000 Speaker 3: But we are going to get more seasonal issues. A 161 00:08:46,000 --> 00:08:49,560 Speaker 3: lot of schools start around the country, so you add 162 00:08:49,559 --> 00:08:52,840 Speaker 3: a lot of teachers and also education workers, people in 163 00:08:52,880 --> 00:08:58,439 Speaker 3: the cafeteria, janitors, et cetera. And so the numbers account 164 00:08:58,440 --> 00:08:59,360 Speaker 3: for that as well. 165 00:09:00,280 --> 00:09:02,880 Speaker 1: One other question, Anna, as we think about whether the 166 00:09:02,880 --> 00:09:05,200 Speaker 1: FED is kicking off a rate cut cycle of a 167 00:09:05,200 --> 00:09:08,640 Speaker 1: lot of expectation that it is going to happen later 168 00:09:08,679 --> 00:09:12,200 Speaker 1: on this month, is the Fed behind the curve and 169 00:09:12,360 --> 00:09:16,280 Speaker 1: what can the FED do to get investors thinking that 170 00:09:16,640 --> 00:09:19,080 Speaker 1: it is on top of what's going on in a 171 00:09:19,120 --> 00:09:20,079 Speaker 1: slowing economy. 172 00:09:20,720 --> 00:09:21,959 Speaker 5: So, given the. 173 00:09:21,880 --> 00:09:25,480 Speaker 4: Fed's dual mandate, it is behind the curve. We estimate 174 00:09:25,520 --> 00:09:28,600 Speaker 4: that they are about seventy basis point behind the curve. 175 00:09:29,040 --> 00:09:31,839 Speaker 4: I think the question is how fast and how deep 176 00:09:31,920 --> 00:09:34,440 Speaker 4: are they going to cut. If they decide to go 177 00:09:34,559 --> 00:09:37,200 Speaker 4: for a twenty five basis point cut, it means that 178 00:09:37,240 --> 00:09:41,240 Speaker 4: they're still behind the curve, and I think given our 179 00:09:41,280 --> 00:09:44,559 Speaker 4: concern about the rapidly cooling of the labor market, it 180 00:09:44,600 --> 00:09:47,319 Speaker 4: would suggest that the FED well risk having to cut 181 00:09:47,400 --> 00:09:49,600 Speaker 4: more sharply down the line. 182 00:09:49,880 --> 00:09:51,760 Speaker 1: What say you, Mike, what can the FED do to 183 00:09:51,800 --> 00:09:53,920 Speaker 1: show that it's not behind the curve? 184 00:09:54,840 --> 00:09:57,000 Speaker 3: Well, it would help a lot for the FED if 185 00:09:57,640 --> 00:10:02,120 Speaker 3: we get a reasonably strong job report that will make 186 00:10:02,160 --> 00:10:05,280 Speaker 3: one difference, and also we get another CPI report before 187 00:10:05,679 --> 00:10:08,880 Speaker 3: the FED meeting on September eighteenth. But I think it's 188 00:10:08,920 --> 00:10:11,240 Speaker 3: going to come down to this statement. They've told us 189 00:10:11,280 --> 00:10:13,720 Speaker 3: they're going to cut. They generally don't want to do 190 00:10:13,840 --> 00:10:18,280 Speaker 3: fifty basis points. So given the feeling of some economists 191 00:10:18,320 --> 00:10:21,400 Speaker 3: on Wall Street, like Anawong, they're going to have to 192 00:10:21,440 --> 00:10:25,880 Speaker 3: explain themselves. And I think they'll probably note that we 193 00:10:26,040 --> 00:10:31,319 Speaker 3: have had some strength in the numbers that was kind 194 00:10:31,360 --> 00:10:35,080 Speaker 3: of not seen in July that came back in August. 195 00:10:35,200 --> 00:10:39,480 Speaker 3: If we get a rebound, and they'll point to the 196 00:10:39,480 --> 00:10:43,800 Speaker 3: fact that the economy overall is growing at a basically 197 00:10:43,920 --> 00:10:48,119 Speaker 3: a trend or above trend pace, and they're not particularly 198 00:10:48,160 --> 00:10:51,480 Speaker 3: concerned because about the labor market because jobless claims have 199 00:10:52,080 --> 00:10:56,520 Speaker 3: remained low. So they will defend themselves sort of on 200 00:10:56,559 --> 00:10:59,640 Speaker 3: that way. Of course, this all depends on eighteen days 201 00:10:59,640 --> 00:11:01,560 Speaker 3: from now, the conditions being the same. 202 00:11:02,120 --> 00:11:06,160 Speaker 1: In our last minute and long since Mike mentioned the 203 00:11:06,200 --> 00:11:10,160 Speaker 1: CPI report coming out just before the Fed decision, let's 204 00:11:10,520 --> 00:11:14,719 Speaker 1: dig into that. Can inflation get the Fed off the 205 00:11:14,800 --> 00:11:17,439 Speaker 1: rails when it comes to the time has come. 206 00:11:17,920 --> 00:11:20,719 Speaker 4: I think generally we are going to see more disinflation 207 00:11:20,920 --> 00:11:25,199 Speaker 4: in the fall, particularly from goods sectors, because it turns 208 00:11:25,240 --> 00:11:27,640 Speaker 4: out that a lot of retailers has been front running 209 00:11:28,000 --> 00:11:31,840 Speaker 4: the holiday season, and given our consumer demand is that 210 00:11:31,880 --> 00:11:34,200 Speaker 4: it's going to slow in the fall, they might find 211 00:11:34,240 --> 00:11:37,840 Speaker 4: themselves to having all these excess inventory, which means more 212 00:11:37,880 --> 00:11:41,680 Speaker 4: discounts for the consumer come holiday season. But I think 213 00:11:41,960 --> 00:11:45,200 Speaker 4: the Fed does have a base effect problem when it 214 00:11:45,200 --> 00:11:48,960 Speaker 4: comes to inflation. If inflation data just comes in pretty 215 00:11:48,960 --> 00:11:52,000 Speaker 4: good the year over year twelve month change and inflation 216 00:11:52,040 --> 00:11:56,360 Speaker 4: will actually climb throughout to December. We are expecting it 217 00:11:56,400 --> 00:11:58,440 Speaker 4: to climb to two point eight percent from the current 218 00:11:58,480 --> 00:11:59,400 Speaker 4: two point six percent. 219 00:12:00,080 --> 00:12:03,040 Speaker 1: Long Chief US economist at Bloomberg Economics, thank you for this. 220 00:12:03,080 --> 00:12:07,120 Speaker 1: Along with Michael McKee, our international economics and policy correspondent 221 00:12:07,480 --> 00:12:11,079 Speaker 1: for Bloomberg News and straight Ahead, on this special holiday 222 00:12:11,200 --> 00:12:14,439 Speaker 1: edition of Bloomberg Daybreak, we're going to talk with Mike mcglohane, 223 00:12:14,520 --> 00:12:18,560 Speaker 1: Senior commodity strategist for Bloomberg Intelligence, as we look at 224 00:12:18,600 --> 00:12:23,600 Speaker 1: the volatility that is bitcoin. That's straight Ahead. I'm Nathan Hager, 225 00:12:23,760 --> 00:12:37,000 Speaker 1: and this is Bloomberg Welcome back. Thanks for joining us 226 00:12:37,000 --> 00:12:40,360 Speaker 1: on the special edition of Bloomberg Daybreak. US markets are 227 00:12:40,400 --> 00:12:43,360 Speaker 1: closed for the Labor Day holiday. I'm Nathan Hager. Well, 228 00:12:43,360 --> 00:12:46,400 Speaker 1: it's certainly been a volatile but profitable year if you're 229 00:12:46,400 --> 00:12:51,080 Speaker 1: an investor in bitcoin, the world's most valuable cryptocurrency, started 230 00:12:51,080 --> 00:12:54,520 Speaker 1: the year above forty thousand per token. Then in March 231 00:12:54,600 --> 00:12:58,400 Speaker 1: it's soared to it all time high above seventy three thousand. 232 00:12:59,000 --> 00:13:02,200 Speaker 1: Since then, coin's been in kind of a bouncing ball mode. 233 00:13:02,200 --> 00:13:04,200 Speaker 1: If you look at a chart on the Bloomberg terminal. 234 00:13:04,280 --> 00:13:06,480 Speaker 1: So what's in store for the rest of the year. 235 00:13:06,640 --> 00:13:09,400 Speaker 1: For some answers, let's bring in Mike mcglowan and senior 236 00:13:09,400 --> 00:13:14,200 Speaker 1: commodity strategist our guy on all Things Crypto at Bloomberg Intelligence. 237 00:13:14,200 --> 00:13:17,040 Speaker 1: Thanks for joining us on the holiday Mike. So what's 238 00:13:17,120 --> 00:13:21,080 Speaker 1: been driving all this bitcoin volatility since the spring? 239 00:13:21,360 --> 00:13:24,360 Speaker 6: It had the launch of us ETFs. We've been waiting 240 00:13:24,400 --> 00:13:26,079 Speaker 6: for that for about a decade. It had to have 241 00:13:26,240 --> 00:13:27,840 Speaker 6: in where there's a cut and supply, and it had 242 00:13:28,000 --> 00:13:30,679 Speaker 6: bay to the stock market making record highs. Now it's 243 00:13:30,720 --> 00:13:33,240 Speaker 6: in and then hangover, and I think it might be enduring. 244 00:13:33,600 --> 00:13:37,079 Speaker 6: Bitcoin was the next best trade for a long time. 245 00:13:37,520 --> 00:13:39,720 Speaker 6: Now I think it's kind of transitioning to the last 246 00:13:39,840 --> 00:13:42,680 Speaker 6: best trade. And part of that is because it just 247 00:13:42,720 --> 00:13:45,120 Speaker 6: went so far so fast. And key thing you remember, 248 00:13:45,120 --> 00:13:47,920 Speaker 6: aout Bitcoin is basically trades about three times a volatile 249 00:13:48,040 --> 00:13:51,199 Speaker 6: the stock market, and it's been showing pretty significant divergent 250 00:13:51,280 --> 00:13:53,360 Speaker 6: weakness since that peak. So I like to use this 251 00:13:53,480 --> 00:13:58,439 Speaker 6: number around. It's dropped to about bitcoin s and P 252 00:13:58,520 --> 00:14:02,120 Speaker 6: five hundreds, dropped about eleven SMB five hundreds versus the 253 00:14:02,240 --> 00:14:04,240 Speaker 6: bitcoin I like to use as the ratio. The peak 254 00:14:04,280 --> 00:14:07,880 Speaker 6: in twenty twenty one was fifteen, so it's heading lower. 255 00:14:08,440 --> 00:14:10,600 Speaker 6: And if beta drops, the stock market drops, I think 256 00:14:10,600 --> 00:14:13,000 Speaker 6: Bitcoin's going to have more of a problem. I think 257 00:14:13,040 --> 00:14:14,640 Speaker 6: maybe he ill end with this. So I think the 258 00:14:14,720 --> 00:14:17,000 Speaker 6: key thing about some people have called it the fastest 259 00:14:17,000 --> 00:14:19,400 Speaker 6: horse in the race. It may be indicating the race 260 00:14:19,480 --> 00:14:19,760 Speaker 6: is over. 261 00:14:20,720 --> 00:14:23,560 Speaker 1: If Bitcoin is the last best thing, let's make that 262 00:14:23,680 --> 00:14:27,240 Speaker 1: the case here. Does that make the next best last 263 00:14:27,280 --> 00:14:31,600 Speaker 1: best thing something like ethereum, something like the doge coins? 264 00:14:32,840 --> 00:14:35,840 Speaker 6: Probably not. If Bitcoin goes down, it's beta for the 265 00:14:35,840 --> 00:14:38,840 Speaker 6: whole space, and it probably means all the other highly 266 00:14:38,960 --> 00:14:42,520 Speaker 6: much more highly speculative digital acids. It's hard to argue 267 00:14:42,560 --> 00:14:45,400 Speaker 6: Bitcoin is not a highly speculative digital acid. It's the 268 00:14:45,440 --> 00:14:47,440 Speaker 6: one that trades twenty four to seven. It's the benchmark. 269 00:14:47,480 --> 00:14:49,560 Speaker 6: If it goes down, the whole space goes down, and 270 00:14:49,600 --> 00:14:51,560 Speaker 6: to me, that's the risk is partly because it just 271 00:14:51,600 --> 00:14:53,840 Speaker 6: went up too much. But the bottom line to me 272 00:14:54,040 --> 00:14:56,960 Speaker 6: is this whole space started with bitcoin in around two 273 00:14:56,960 --> 00:15:00,640 Speaker 6: thousand and nine, was coordinated with them pretty significant rally 274 00:15:00,680 --> 00:15:03,480 Speaker 6: in US stock market, and if we're entering to recessions, 275 00:15:03,520 --> 00:15:05,920 Speaker 6: stock market's a really expensive we start rolling over a little. 276 00:15:05,920 --> 00:15:08,520 Speaker 6: Bitcoin may be leading that way, and I think that's 277 00:15:08,560 --> 00:15:11,080 Speaker 6: what's happening now. One thing that's significant is the Vix 278 00:15:11,160 --> 00:15:13,160 Speaker 6: Valtili index. It's say, the one hundred week or two 279 00:15:13,200 --> 00:15:15,400 Speaker 6: hundred week movement average is bottoming from about a six 280 00:15:15,480 --> 00:15:17,720 Speaker 6: year low. And then of course we have things like 281 00:15:17,800 --> 00:15:20,960 Speaker 6: the dis inversion of the yield curb and utrising unemployment. 282 00:15:21,680 --> 00:15:25,360 Speaker 6: To me, those are all kind of signaling that the 283 00:15:25,400 --> 00:15:27,480 Speaker 6: fastest horse and rice might be tilting lower. And the 284 00:15:27,560 --> 00:15:30,160 Speaker 6: key thing is it's been showing divergent weakness versus gold 285 00:15:30,360 --> 00:15:31,960 Speaker 6: and the stock market for quite a while. 286 00:15:32,000 --> 00:15:35,160 Speaker 1: What about if we are getting into a rate cut 287 00:15:35,240 --> 00:15:38,280 Speaker 1: cycle from the Federal Reserve. If rates do start to 288 00:15:38,400 --> 00:15:42,400 Speaker 1: come down, does that change the outlook for digital currencies? 289 00:15:42,600 --> 00:15:45,400 Speaker 6: We are we're starting, certainly from a if you look 290 00:15:45,400 --> 00:15:48,200 Speaker 6: at the curb the long bond around four percent and 291 00:15:48,240 --> 00:15:51,280 Speaker 6: Fed funds well about five percent, we're certainly indicating yields 292 00:15:51,280 --> 00:15:53,720 Speaker 6: are going lower. It does, But I think the problem 293 00:15:53,760 --> 00:15:56,280 Speaker 6: is now it's the cat and mouse game between the 294 00:15:56,640 --> 00:15:59,920 Speaker 6: stock market, which is market capitalization about two times GDP. 295 00:16:00,160 --> 00:16:02,120 Speaker 6: That's the highest since the twenties and thirties, so it's 296 00:16:02,520 --> 00:16:06,440 Speaker 6: rather expensive and the FED easing, and this, Nathan, is 297 00:16:06,480 --> 00:16:09,600 Speaker 6: the most widely anticipated FED easing I've ever seen in 298 00:16:09,640 --> 00:16:12,400 Speaker 6: my entire career, and I started in the trading pitching chericognnites, 299 00:16:12,400 --> 00:16:14,320 Speaker 6: I've just never seen it. So I think it's so 300 00:16:14,560 --> 00:16:18,960 Speaker 6: priced in that the market's so priced for the enthusiasm 301 00:16:19,080 --> 00:16:22,280 Speaker 6: of a Federal Reserve easing cycle. And we know the 302 00:16:22,280 --> 00:16:26,080 Speaker 6: Fed gets that they do not want to risk refueling 303 00:16:26,120 --> 00:16:28,640 Speaker 6: some of the inflation that really forced them to do 304 00:16:28,680 --> 00:16:31,040 Speaker 6: a lot of the aggressive hiking to the top in 305 00:16:31,080 --> 00:16:31,880 Speaker 6: twenty twenty three. 306 00:16:32,200 --> 00:16:34,240 Speaker 1: I mean, there's, as you say, there's been so much 307 00:16:34,320 --> 00:16:36,240 Speaker 1: anticipation that we are going to see a rate cut 308 00:16:36,320 --> 00:16:38,600 Speaker 1: later this month, that the cycle is going to begin. 309 00:16:38,760 --> 00:16:41,720 Speaker 1: And ahead of that, we've been seeing a lot of speculation, 310 00:16:41,880 --> 00:16:45,600 Speaker 1: a lot of thought that gold, you know, the original gold, 311 00:16:45,680 --> 00:16:48,040 Speaker 1: could get as high as three thousand dollars an ounce. 312 00:16:48,120 --> 00:16:51,480 Speaker 1: We're not seeing that same kind of thinking, or at 313 00:16:51,600 --> 00:16:54,240 Speaker 1: least as far as I can tell, when it comes 314 00:16:54,280 --> 00:16:55,520 Speaker 1: to bitcoin. Why is that. 315 00:16:55,640 --> 00:16:57,960 Speaker 6: I think it's a transition, And I'm glad you we 316 00:16:58,000 --> 00:17:00,480 Speaker 6: went to gold because to me, the old analoge digital gold, 317 00:17:00,560 --> 00:17:02,440 Speaker 6: it's just a matter of time it gets through three thousand. 318 00:17:02,680 --> 00:17:04,800 Speaker 6: It's in a bull market. Maybe it's a little bit overdone, 319 00:17:04,800 --> 00:17:06,680 Speaker 6: and the short term it's fine. But the new and 320 00:17:07,040 --> 00:17:09,120 Speaker 6: the new digital version. I like to say, it's kind 321 00:17:09,119 --> 00:17:12,159 Speaker 6: of risky to have old analog gold without some of 322 00:17:12,200 --> 00:17:14,720 Speaker 6: that digital version in space, but re memory, it's new. 323 00:17:14,760 --> 00:17:16,080 Speaker 6: And the key thing that I like to say about 324 00:17:16,080 --> 00:17:18,359 Speaker 6: bitcoins all the things I look forward to the last 325 00:17:18,400 --> 00:17:22,240 Speaker 6: five years, the having the you know, there's pretty significant 326 00:17:22,320 --> 00:17:25,359 Speaker 6: discounts in some of the ETFs like Greyscale, Bitcoin Trust, 327 00:17:25,640 --> 00:17:28,520 Speaker 6: the ETFs, and it's going to the mainstream. It's in 328 00:17:28,600 --> 00:17:31,439 Speaker 6: the mainstream. I mean even we have presidential candidates knocking 329 00:17:31,440 --> 00:17:33,400 Speaker 6: around how great it is because they want to get elected. 330 00:17:33,760 --> 00:17:37,360 Speaker 6: It's already so and it's it's so well armed out now. 331 00:17:37,400 --> 00:17:39,080 Speaker 6: So to me, the best of the days of bitcoin 332 00:17:39,080 --> 00:17:41,679 Speaker 6: appreciation are over. Yet what we're seeing now is is 333 00:17:41,680 --> 00:17:44,199 Speaker 6: pretty significant global tilt towards recession. Now, remember I'm a 334 00:17:44,200 --> 00:17:47,680 Speaker 6: commodities guy, and the tilt from commodities is severe recession. 335 00:17:47,720 --> 00:17:51,240 Speaker 6: We were seeing declines in almost all commodities, particularly things 336 00:17:51,280 --> 00:17:54,439 Speaker 6: like corn and natural gas and crude. All's just starting 337 00:17:54,520 --> 00:17:57,159 Speaker 6: till lower. And only one that's really going up is gold. 338 00:17:57,280 --> 00:17:59,040 Speaker 6: And a lot of that's because of what's happening in China, 339 00:17:59,160 --> 00:18:01,320 Speaker 6: just like at bond yields and trying to their declining. 340 00:18:01,440 --> 00:18:03,600 Speaker 6: So to me, that's what gold's picking up on the 341 00:18:03,960 --> 00:18:06,600 Speaker 6: deepest pockets on the planet. Central banks are buying gold, 342 00:18:06,840 --> 00:18:09,480 Speaker 6: and that's typically will probably accelerate. I think gold will 343 00:18:09,520 --> 00:18:11,760 Speaker 6: be more attractive if we see a little bit of 344 00:18:11,760 --> 00:18:13,959 Speaker 6: back and fill in US stock market, US rates going down. 345 00:18:13,960 --> 00:18:17,639 Speaker 6: And the problem is digital gold. Bitcoin is trades typically 346 00:18:17,680 --> 00:18:20,840 Speaker 6: about three times a voltui of analog gold and the 347 00:18:20,840 --> 00:18:22,520 Speaker 6: stock market. So if we have a little bit of 348 00:18:23,040 --> 00:18:27,359 Speaker 6: normal recessionary back and fill in the stock market, digital gold, 349 00:18:27,480 --> 00:18:30,200 Speaker 6: bitcoin will probably suffer a lot more than the analog version. 350 00:18:30,200 --> 00:18:32,879 Speaker 6: It's just such a voltal speculative asset. 351 00:18:33,200 --> 00:18:37,880 Speaker 1: Speaking with Mike mcglohon', senior commodity strategist at Bloomberg Intelligence, 352 00:18:38,080 --> 00:18:41,639 Speaker 1: and you know you talk about bitcoin as digital gold. 353 00:18:41,640 --> 00:18:44,280 Speaker 1: There's been this debate for years about whether it is 354 00:18:44,320 --> 00:18:47,439 Speaker 1: going to be the sort of hedge against inflation in 355 00:18:47,520 --> 00:18:50,120 Speaker 1: the years to come. What's it going to take for 356 00:18:50,320 --> 00:18:54,080 Speaker 1: bitcoin to get to that level. It sounds like you're 357 00:18:54,119 --> 00:18:56,199 Speaker 1: thinking that it might be a ways off before it 358 00:18:56,200 --> 00:18:56,720 Speaker 1: gets there. 359 00:18:56,840 --> 00:18:59,520 Speaker 6: In terms of some other melting currencies. I'm based in 360 00:18:59,520 --> 00:19:01,400 Speaker 6: Miami's so we hear a lot of people come from 361 00:19:01,440 --> 00:19:04,200 Speaker 6: South America and they're used to melting currencies. It has 362 00:19:04,280 --> 00:19:06,080 Speaker 6: provided some of that. But the thing is it's a 363 00:19:06,280 --> 00:19:10,160 Speaker 6: very volatile speculative digital ass and it's gone so far 364 00:19:10,440 --> 00:19:12,720 Speaker 6: so fast. I think it needs to back and filth 365 00:19:12,760 --> 00:19:14,959 Speaker 6: little well. So typically what bitcoin does when it makes 366 00:19:15,040 --> 00:19:16,679 Speaker 6: new highs like it is now, it has a fifty 367 00:19:16,680 --> 00:19:18,879 Speaker 6: percent correction, so that means it could get down the 368 00:19:19,000 --> 00:19:21,479 Speaker 6: thirty five and that's normal. But I think to be 369 00:19:21,560 --> 00:19:24,440 Speaker 6: more of a digital version of goal and an alternative, 370 00:19:24,640 --> 00:19:26,680 Speaker 6: valatility has to come way down, which means it has 371 00:19:26,720 --> 00:19:28,960 Speaker 6: to have a very boring period. Right now, it's just 372 00:19:29,000 --> 00:19:32,040 Speaker 6: a very volatile speculative digitalist. And now, in the big picture, 373 00:19:32,119 --> 00:19:34,600 Speaker 6: I'm very favorable to the price of bitcoin going higher. 374 00:19:34,720 --> 00:19:39,080 Speaker 6: It has definable diminishing supply and increasing demand and adoption, 375 00:19:39,200 --> 00:19:42,400 Speaker 6: so rozec economics means it should go up over time. 376 00:19:42,440 --> 00:19:44,879 Speaker 6: But to me, right now, the risk is it's a 377 00:19:44,880 --> 00:19:47,760 Speaker 6: little bit too extended and it's showing the virgin weakness, 378 00:19:47,760 --> 00:19:49,520 Speaker 6: and I think that's going to continue. The bottom line, 379 00:19:49,520 --> 00:19:52,000 Speaker 6: to me, the big test for bitcoin will be is 380 00:19:52,400 --> 00:19:54,879 Speaker 6: when we get that next say ten percent correction in 381 00:19:54,920 --> 00:19:58,040 Speaker 6: the stock market and see how it performs. Typically when 382 00:19:58,040 --> 00:20:01,240 Speaker 6: it trades, you know about three times a volte of beta. 383 00:20:01,320 --> 00:20:03,600 Speaker 6: It typical is down about thirty percent if the stock 384 00:20:03,600 --> 00:20:05,760 Speaker 6: market goes down around ten percent. Now that's not set 385 00:20:05,800 --> 00:20:07,359 Speaker 6: in stone, but we have to see how we can 386 00:20:07,400 --> 00:20:10,920 Speaker 6: get through that period. If bitcoin can sustain upward momentum 387 00:20:10,960 --> 00:20:13,399 Speaker 6: with stock market going down, the problem is it's showing 388 00:20:13,440 --> 00:20:17,120 Speaker 6: downward momentum Bitcoin is with the stock market still going up. 389 00:20:17,280 --> 00:20:20,960 Speaker 1: What about copper? When we think about whether we are 390 00:20:21,000 --> 00:20:24,720 Speaker 1: getting into a global economic slow down, whether the Fed 391 00:20:24,840 --> 00:20:28,960 Speaker 1: can provide some support in some way with rate cuts, 392 00:20:29,080 --> 00:20:30,920 Speaker 1: where does copper go down? 393 00:20:31,040 --> 00:20:33,760 Speaker 6: The risks for copper are down. Unfortunately, the copper did 394 00:20:33,800 --> 00:20:36,120 Speaker 6: make a new high this year at about five dollars 395 00:20:36,160 --> 00:20:39,480 Speaker 6: and twenty cents a pound. It's around four dollars and 396 00:20:39,520 --> 00:20:43,080 Speaker 6: twenty cents upon now and it has a it's highly autocorrelated. 397 00:20:43,359 --> 00:20:45,919 Speaker 6: Copper is number one. Is highly correlated to what's happening 398 00:20:45,960 --> 00:20:48,480 Speaker 6: in China. We all know China somewhat in decline. Just 399 00:20:48,520 --> 00:20:50,320 Speaker 6: look at their bond yields. The ten you notte yield 400 00:20:50,320 --> 00:20:52,399 Speaker 6: in China right now is about two point two percent. 401 00:20:52,880 --> 00:20:55,320 Speaker 6: That's well below the US ten note yield, which is 402 00:20:55,400 --> 00:20:57,720 Speaker 6: just below a four percent. So it's a sign of 403 00:20:57,920 --> 00:21:01,480 Speaker 6: deflationary recessionary force in China. So that's bad for copper. 404 00:21:01,520 --> 00:21:03,720 Speaker 6: But it's what put in that peak that we got 405 00:21:03,760 --> 00:21:08,439 Speaker 6: earlier in May was pretty significant speculative accesses in managed 406 00:21:08,480 --> 00:21:11,560 Speaker 6: running at futures positions ie hedge funds. They got way 407 00:21:11,680 --> 00:21:14,600 Speaker 6: long the commodity, up to about thirty percent of total 408 00:21:14,600 --> 00:21:17,280 Speaker 6: futures open interests and they are still somewhat long around 409 00:21:17,280 --> 00:21:20,040 Speaker 6: twenty percent of futures open interests. Typically has to drop 410 00:21:20,080 --> 00:21:22,680 Speaker 6: a lot more in terms of positions down to around 411 00:21:22,680 --> 00:21:25,679 Speaker 6: five percent of total open interests for copper to bottom. 412 00:21:25,720 --> 00:21:26,919 Speaker 6: So I think copper is going to do what it 413 00:21:26,960 --> 00:21:32,480 Speaker 6: normally does. It trades more like silver. Now Silver's nickname 414 00:21:32,560 --> 00:21:34,280 Speaker 6: kind of the devil's medal, and that is I think 415 00:21:34,280 --> 00:21:36,440 Speaker 6: it needs to get down to nearer three to put 416 00:21:36,480 --> 00:21:39,240 Speaker 6: in a good bottom. Otherwise, here's one key prerequisite for 417 00:21:39,280 --> 00:21:41,399 Speaker 6: copper to continue going higher. The US stock market has 418 00:21:41,400 --> 00:21:43,680 Speaker 6: to come to go and continue going up, and China 419 00:21:43,680 --> 00:21:45,720 Speaker 6: has to come out of this meleise. And I think 420 00:21:45,920 --> 00:21:48,200 Speaker 6: the risks are copper just was it normally does. When 421 00:21:48,200 --> 00:21:50,320 Speaker 6: it gets too high, it just goes back to around 422 00:21:50,320 --> 00:21:51,160 Speaker 6: three hours a pound. 423 00:21:51,440 --> 00:21:55,280 Speaker 1: Those are some pretty significant dynamics when it comes to 424 00:21:55,359 --> 00:21:58,280 Speaker 1: the outlook, whether the US stock market rises, whether the 425 00:21:58,400 --> 00:22:02,720 Speaker 1: Chinese economy starts to see a turnaround. Can the US 426 00:22:02,880 --> 00:22:05,280 Speaker 1: sort of outweigh what we're seeing in the world's second 427 00:22:05,320 --> 00:22:06,160 Speaker 1: biggest economy. 428 00:22:06,320 --> 00:22:09,359 Speaker 6: Well, that's the problem I think is. I think a 429 00:22:09,359 --> 00:22:13,520 Speaker 6: lot of investors are underestimating these deflationary forces, starting with China. 430 00:22:13,760 --> 00:22:16,439 Speaker 6: I mentioned their bond yields. You see it clearly happy 431 00:22:16,440 --> 00:22:20,480 Speaker 6: in commodities. Gold is up above thirty percent since commodities 432 00:22:20,480 --> 00:22:23,399 Speaker 6: peaked in twenty twenty two. The Bloomberg Commodity Index is 433 00:22:23,440 --> 00:22:26,119 Speaker 6: down about thirty percent, and I see the whole tilt 434 00:22:26,240 --> 00:22:28,760 Speaker 6: going lower unless something can change out of China. And 435 00:22:28,840 --> 00:22:30,320 Speaker 6: the thing is you have to remember, is it all 436 00:22:30,359 --> 00:22:33,240 Speaker 6: happened for a good, solid paradigm shifting reason. It said 437 00:22:33,320 --> 00:22:37,480 Speaker 6: unlimited friendship between President Zee and President Putin really shifted 438 00:22:37,520 --> 00:22:40,240 Speaker 6: the world. And then we had Russians invasion of Ukraine 439 00:22:40,400 --> 00:22:44,119 Speaker 6: that shifted all the sentiment toward kind of against China, 440 00:22:44,160 --> 00:22:47,840 Speaker 6: which is bad for commodities. So gold is good for gold. 441 00:22:47,880 --> 00:22:50,360 Speaker 6: So that's why I see crude oil around seventy five 442 00:22:50,400 --> 00:22:53,359 Speaker 6: dollars a bail has risks of going much lower. It 443 00:22:53,520 --> 00:22:56,080 Speaker 6: always has bottom they're forty for the last twenty years 444 00:22:56,200 --> 00:22:59,200 Speaker 6: or so. And one good leader is food. Look at corn. 445 00:22:59,600 --> 00:23:02,760 Speaker 6: Corn right now is about three dollars and ninety cents 446 00:23:03,600 --> 00:23:06,159 Speaker 6: a bushel that trade. That was first traded in nineteen 447 00:23:06,200 --> 00:23:08,720 Speaker 6: seventy three. That's down more than fifty percent from the 448 00:23:08,720 --> 00:23:10,520 Speaker 6: peak around eight in twenty twenty two. And a lot 449 00:23:10,560 --> 00:23:12,399 Speaker 6: of that's just on the back of the number one 450 00:23:12,600 --> 00:23:15,880 Speaker 6: force in all commodities. It's the high price queue. Prices 451 00:23:15,880 --> 00:23:18,000 Speaker 6: got too way too high and created a lot of 452 00:23:18,040 --> 00:23:20,919 Speaker 6: incentive to bring on more supply and reduce demand. And 453 00:23:20,960 --> 00:23:24,200 Speaker 6: that's what's happening. Same things happened in natural gas US. 454 00:23:24,320 --> 00:23:27,520 Speaker 6: Natural gas at about one point nine million BPUS was 455 00:23:27,560 --> 00:23:30,520 Speaker 6: first traded in futures in nineteen ninety. The high in 456 00:23:30,520 --> 00:23:33,200 Speaker 6: twenty twenty two was ten and it's dropped more than 457 00:23:33,200 --> 00:23:35,680 Speaker 6: eighty percent. That is on the back again, the high 458 00:23:35,720 --> 00:23:37,880 Speaker 6: priced cure. And that's the key thing that we remember 459 00:23:37,920 --> 00:23:41,040 Speaker 6: about all commodities. They're all probing for low price cures. 460 00:23:41,359 --> 00:23:45,040 Speaker 6: Cone corn is probably close, natural gas is probably close, 461 00:23:45,240 --> 00:23:47,600 Speaker 6: and the number one that still probably has a lot 462 00:23:47,640 --> 00:23:50,280 Speaker 6: more lower to go I'm afraid of is crude oil, 463 00:23:50,320 --> 00:23:52,119 Speaker 6: which is actually really good for consumers. 464 00:23:52,280 --> 00:23:54,320 Speaker 1: I wanted to ask about crude oil as well because 465 00:23:54,320 --> 00:23:57,159 Speaker 1: so much of that plays into what happens in geopolitics 466 00:23:57,320 --> 00:24:00,280 Speaker 1: as well. I mean, how difficult is it to frame 467 00:24:00,280 --> 00:24:03,439 Speaker 1: out an outlook for crude oil when we have so 468 00:24:03,520 --> 00:24:05,600 Speaker 1: much volatility in the rest. 469 00:24:05,520 --> 00:24:08,360 Speaker 6: Of the world. Well, that's the key thing is some 470 00:24:08,440 --> 00:24:10,640 Speaker 6: people find it difficult. I find it quite clear. There 471 00:24:10,680 --> 00:24:15,760 Speaker 6: is no sense at all of a sustainable shutdown supply 472 00:24:15,880 --> 00:24:18,280 Speaker 6: from the geopolitics in the world that's happening to crudell. 473 00:24:18,320 --> 00:24:20,800 Speaker 6: In fact, the lessons of all these type of political events, 474 00:24:20,840 --> 00:24:25,600 Speaker 6: certainly that ran Araq war and Iras invasion Kuwait is 475 00:24:25,640 --> 00:24:28,680 Speaker 6: typically the events create spikes and then massive supply in 476 00:24:28,840 --> 00:24:31,960 Speaker 6: much lower loads. The last two significant lows after those 477 00:24:32,000 --> 00:24:34,760 Speaker 6: two wars I mentioned was around ten in crude oil, 478 00:24:34,920 --> 00:24:37,120 Speaker 6: So to me, I'm looking at forty as a normal 479 00:24:37,400 --> 00:24:40,200 Speaker 6: low price cure. The bottom line is the key things 480 00:24:40,240 --> 00:24:44,359 Speaker 6: that really was pressuring crude oil before Russia's invasion in 481 00:24:44,480 --> 00:24:47,679 Speaker 6: Ukraine are accelerating. That's excess to supplying the man out 482 00:24:47,680 --> 00:24:49,680 Speaker 6: of the US and Canada. That surplus now is around 483 00:24:49,720 --> 00:24:52,480 Speaker 6: six million barrels a day before the invasion was closer 484 00:24:52,480 --> 00:24:53,560 Speaker 6: to two million barrels a day. 485 00:24:53,680 --> 00:24:56,000 Speaker 1: Really appreciate this, Mike, this broad out look on the 486 00:24:56,000 --> 00:25:00,000 Speaker 1: commodity space. Mike mcgloan with us there, senior commodity strategistic 487 00:25:00,400 --> 00:25:04,000 Speaker 1: Bloomberg Intelligence, and coming up next we'll move from commodities 488 00:25:04,040 --> 00:25:08,440 Speaker 1: to stocks. The equity outlook from Cameron Dawson of New 489 00:25:08,520 --> 00:25:11,280 Speaker 1: Edge Wealth. That says, this special Labor Day edition of 490 00:25:11,320 --> 00:25:15,480 Speaker 1: Bloomberg day Break continues. I'm Nathan Hager, and this is Bloomberg. 491 00:25:24,880 --> 00:25:27,040 Speaker 1: Thank you so much for joining us for this special 492 00:25:27,160 --> 00:25:31,040 Speaker 1: edition of Bloomberg Daybreak. I'm Nathan Hager. US markets are 493 00:25:31,119 --> 00:25:33,399 Speaker 1: closed for the Labor Day holiday, and we're going to 494 00:25:33,440 --> 00:25:36,000 Speaker 1: wrap up this hour with a closer look at the 495 00:25:36,080 --> 00:25:39,520 Speaker 1: stock market. With earning season pretty much behind us and 496 00:25:39,600 --> 00:25:42,600 Speaker 1: a rate cut pretty much coming a few weeks from now, 497 00:25:43,040 --> 00:25:45,280 Speaker 1: where is the best place to put your money? Let's 498 00:25:45,280 --> 00:25:49,160 Speaker 1: ask Cameron Dawson, the chief investment officer at New Edge Wealth. 499 00:25:49,359 --> 00:25:52,119 Speaker 1: Camerdon still great to speak with you on this holiday. 500 00:25:52,440 --> 00:25:55,840 Speaker 1: First off, what is your read on earning season and 501 00:25:55,880 --> 00:25:57,840 Speaker 1: the outlook heading into the rest of the year. 502 00:25:57,880 --> 00:26:01,240 Speaker 7: Well, earning season certainly has come in better than expected. 503 00:26:01,280 --> 00:26:04,840 Speaker 7: We've seen companies be able to beat and raise guidance. 504 00:26:05,160 --> 00:26:08,160 Speaker 7: There have been pockets of weakness, and that weakness has 505 00:26:08,320 --> 00:26:11,280 Speaker 7: really been focused on the consumer, and that's where we 506 00:26:11,480 --> 00:26:15,000 Speaker 7: started to see some jetters within markets, concerned about the 507 00:26:15,040 --> 00:26:18,119 Speaker 7: growth outlook. We're hearing from a lot of companies talking 508 00:26:18,160 --> 00:26:22,000 Speaker 7: about how pricing power is fading, how effectively they raise 509 00:26:22,080 --> 00:26:24,399 Speaker 7: prices as much as they could have hit a wall, 510 00:26:24,640 --> 00:26:26,840 Speaker 7: and now it's likely that you're going to start to 511 00:26:26,880 --> 00:26:30,760 Speaker 7: see even more discounting. That's a great story for the FED, 512 00:26:30,920 --> 00:26:33,919 Speaker 7: that's a great story for bond markets expecting rate cuts, 513 00:26:34,000 --> 00:26:37,000 Speaker 7: meaning that it reduces the risk of inflation. But it 514 00:26:37,080 --> 00:26:40,600 Speaker 7: does raise the question about twenty twenty five earnings, which 515 00:26:40,720 --> 00:26:43,679 Speaker 7: do have a big acceleration in top line growth and 516 00:26:43,760 --> 00:26:47,159 Speaker 7: margin expansion priced in. So for now it's still a 517 00:26:47,200 --> 00:26:49,879 Speaker 7: good story, but as we go into twenty twenty five, 518 00:26:49,960 --> 00:26:52,000 Speaker 7: I think we have it, we have to watch it closely. 519 00:26:52,400 --> 00:26:55,560 Speaker 1: Is it a good enough story to keep the rally going, 520 00:26:55,680 --> 00:26:59,560 Speaker 1: particularly after what we heard from Nvidio last week? 521 00:26:59,800 --> 00:27:03,399 Speaker 7: It is interesting that after Invidia reported, it didn't take 522 00:27:03,480 --> 00:27:05,639 Speaker 7: down the rest of the tech sector. You would have 523 00:27:05,720 --> 00:27:09,720 Speaker 7: normally expected when the biggest name in the index reports 524 00:27:09,720 --> 00:27:13,800 Speaker 7: a number that's slightly less extraordinary than expected, that you 525 00:27:13,840 --> 00:27:17,280 Speaker 7: would have seen kind of normal weakness within the rest 526 00:27:17,280 --> 00:27:20,679 Speaker 7: of the sector. But it was resilient. The thing that 527 00:27:20,680 --> 00:27:23,080 Speaker 7: we're watching within the tech sectors that if you look 528 00:27:23,119 --> 00:27:26,200 Speaker 7: into twenty twenty five, what you see is an acceleration 529 00:27:26,359 --> 00:27:29,760 Speaker 7: in twenty twenty five earnings as well. Earnings are expected 530 00:27:29,760 --> 00:27:33,040 Speaker 7: to go to twenty five percent, up from about mid 531 00:27:33,119 --> 00:27:36,679 Speaker 7: teens this year, all the while in Vidia, being that 532 00:27:36,760 --> 00:27:39,480 Speaker 7: biggest name of the sector, is expected to see its 533 00:27:39,520 --> 00:27:43,919 Speaker 7: earnings decelerate from one hundred and forty percent to forty percent. 534 00:27:44,320 --> 00:27:45,359 Speaker 5: So it gets us back. 535 00:27:45,240 --> 00:27:48,040 Speaker 7: To this notion that for now it's good, but we 536 00:27:48,200 --> 00:27:50,080 Speaker 7: really have to watch twenty twenty five. 537 00:27:50,520 --> 00:27:52,800 Speaker 1: So what are you going to be watching for most 538 00:27:52,880 --> 00:27:55,879 Speaker 1: closely when it comes to twenty twenty five. Is it 539 00:27:55,920 --> 00:27:58,760 Speaker 1: all about the economy? Is it all about earnings? 540 00:27:59,160 --> 00:28:02,240 Speaker 7: It is both, because we do think that the economy 541 00:28:02,320 --> 00:28:05,879 Speaker 7: will feed into earnings. So if we think about the consumer, 542 00:28:06,080 --> 00:28:08,919 Speaker 7: one thing that's really been jumping out to us is 543 00:28:08,920 --> 00:28:12,720 Speaker 7: that you've seen this deterioration in the consumer's assessment of 544 00:28:12,800 --> 00:28:15,800 Speaker 7: the labor market. So looking at things like that labor 545 00:28:15,840 --> 00:28:19,639 Speaker 7: market differential where consumers are starting to say that jobs 546 00:28:19,680 --> 00:28:23,520 Speaker 7: aren't as plentiful and they're getting harder to get, that 547 00:28:23,720 --> 00:28:27,639 Speaker 7: tends to lead things like retail sales and overall consumption 548 00:28:27,760 --> 00:28:28,800 Speaker 7: within the economy. 549 00:28:29,000 --> 00:28:31,040 Speaker 5: So if that continues. 550 00:28:30,520 --> 00:28:34,399 Speaker 7: To deteriorate, it really would raise the question of current 551 00:28:34,520 --> 00:28:37,840 Speaker 7: consensus for the S and P five hundred, which has 552 00:28:37,880 --> 00:28:40,880 Speaker 7: an acceleration in top line growth that's baked in. 553 00:28:41,320 --> 00:28:42,880 Speaker 5: So we think this all fits. 554 00:28:42,640 --> 00:28:46,040 Speaker 7: Together with the real big risk for twenty twenty five 555 00:28:46,160 --> 00:28:49,080 Speaker 7: being that earnings kind of start to level out, and 556 00:28:49,120 --> 00:28:52,200 Speaker 7: if that's the case, it would imply a shoppier kind 557 00:28:52,240 --> 00:28:54,560 Speaker 7: of market for the overall S and P five hundred 558 00:28:54,560 --> 00:28:55,280 Speaker 7: into next year. 559 00:28:55,480 --> 00:28:58,080 Speaker 1: I'm glad you mentioned the outlook for the labor market, 560 00:28:58,160 --> 00:29:01,160 Speaker 1: because of course, we do have an other jobs report 561 00:29:01,240 --> 00:29:03,680 Speaker 1: coming up later this week. It's going to be very 562 00:29:03,800 --> 00:29:06,480 Speaker 1: much in focus for the FED as it considers whether 563 00:29:06,520 --> 00:29:10,080 Speaker 1: the time really is now to start cutting rates. How 564 00:29:10,240 --> 00:29:14,640 Speaker 1: much does the stock rally depend on the FED beginning 565 00:29:14,680 --> 00:29:16,120 Speaker 1: the rate cycle this month. 566 00:29:16,320 --> 00:29:19,800 Speaker 7: Well, the surprising thing about rate cut cycles is that 567 00:29:19,840 --> 00:29:23,880 Speaker 7: they typically aren't good for markets in the very short term, 568 00:29:24,160 --> 00:29:26,960 Speaker 7: meaning that markets have tended to sell off post the 569 00:29:27,040 --> 00:29:30,720 Speaker 7: first cut, with the question mark of as to why 570 00:29:30,800 --> 00:29:33,360 Speaker 7: the FED is cutting, And this is really the big 571 00:29:33,440 --> 00:29:36,400 Speaker 7: question as we go into next year, which is that 572 00:29:36,640 --> 00:29:40,040 Speaker 7: is the FED cutting because they can just because inflation 573 00:29:40,160 --> 00:29:43,880 Speaker 7: has come down, or is the FED cutting because they should? 574 00:29:44,360 --> 00:29:47,840 Speaker 7: The latter implies a much deeper rate cutting cycle, which 575 00:29:47,960 --> 00:29:50,600 Speaker 7: in some ways is already being priced in by the 576 00:29:50,640 --> 00:29:54,320 Speaker 7: bond market. The bond market has almost three hundred basis 577 00:29:54,360 --> 00:29:57,160 Speaker 7: points priced in over the course of the next two 578 00:29:57,320 --> 00:30:00,160 Speaker 7: years of cuts, which does imply a much weaker her 579 00:30:00,200 --> 00:30:03,640 Speaker 7: growth environment. So it's a story of be careful what 580 00:30:03,720 --> 00:30:05,959 Speaker 7: you wish for. If we just get a couple of cuts, 581 00:30:06,000 --> 00:30:08,640 Speaker 7: that typically has been good for markets. On the other side, 582 00:30:08,760 --> 00:30:12,480 Speaker 7: a deeper cutting cycle has typically been consistent with weaker markets. 583 00:30:12,560 --> 00:30:15,080 Speaker 1: Well, what is your view? Is the FED cutting because 584 00:30:15,080 --> 00:30:17,200 Speaker 1: it can or because it should? 585 00:30:17,600 --> 00:30:20,160 Speaker 7: We think that the FED is cutting because it can 586 00:30:20,320 --> 00:30:23,600 Speaker 7: for now, But it's the question of the direction of travel, 587 00:30:23,680 --> 00:30:27,000 Speaker 7: meaning that if you listen to Palace comments from Jackson Hole, 588 00:30:27,120 --> 00:30:29,960 Speaker 7: he talked about how the deterioration in things like the 589 00:30:30,040 --> 00:30:34,520 Speaker 7: unemployment rate weren't because of your more nefarious drivers, things 590 00:30:34,600 --> 00:30:36,440 Speaker 7: like a big uptick and layoffs. 591 00:30:36,520 --> 00:30:38,240 Speaker 5: Instead, it was new entrance. 592 00:30:38,000 --> 00:30:40,640 Speaker 7: To the labor force as well as a slow down 593 00:30:40,640 --> 00:30:43,840 Speaker 7: in hiring. But what we've typically seen is that a 594 00:30:43,960 --> 00:30:48,560 Speaker 7: slow down in hiring leads an increase in overall firing. 595 00:30:48,760 --> 00:30:51,240 Speaker 7: So as we go through the next few months and 596 00:30:51,280 --> 00:30:54,400 Speaker 7: into twenty twenty five, it's not as much as where 597 00:30:54,440 --> 00:30:58,080 Speaker 7: we are today, which is still a relatively healthy labor market, 598 00:30:58,400 --> 00:31:01,440 Speaker 7: falling inflation, which gives the FED room to ease rate some. 599 00:31:02,120 --> 00:31:04,719 Speaker 7: It's really the question of the direction of travel and 600 00:31:04,840 --> 00:31:09,239 Speaker 7: do we get further deterioration, which again implies deeper rate 601 00:31:09,320 --> 00:31:10,240 Speaker 7: cuts from the FED. 602 00:31:10,640 --> 00:31:13,760 Speaker 1: So if we are heading into a FED rate cut cycle, 603 00:31:14,080 --> 00:31:17,680 Speaker 1: should we be looking for new leadership when it comes 604 00:31:17,800 --> 00:31:21,680 Speaker 1: to what's going to be driving the stock market? Can 605 00:31:21,840 --> 00:31:24,480 Speaker 1: tech continue to lead the way or could we see 606 00:31:24,520 --> 00:31:25,680 Speaker 1: more rotation out of tech. 607 00:31:26,120 --> 00:31:29,280 Speaker 7: This is so interesting because we have started to see 608 00:31:29,320 --> 00:31:33,520 Speaker 7: this shifting sands of leadership under the surface. Over the 609 00:31:33,600 --> 00:31:36,880 Speaker 7: last few weeks. What we've seen is Tech really start 610 00:31:36,960 --> 00:31:39,920 Speaker 7: to lag. It's traded heavy, it hasn't been able to 611 00:31:39,960 --> 00:31:42,880 Speaker 7: make a new all time high, unlike the equal way 612 00:31:43,080 --> 00:31:45,000 Speaker 7: S and P five hundred, which made a new all 613 00:31:45,040 --> 00:31:48,200 Speaker 7: time high before Tech and before the cap weighted index 614 00:31:48,280 --> 00:31:51,720 Speaker 7: did so it does signal that you're starting to see 615 00:31:51,760 --> 00:31:54,400 Speaker 7: a bit of a shift in leadership and what's coming 616 00:31:54,480 --> 00:31:55,440 Speaker 7: out as leadership. 617 00:31:55,440 --> 00:31:58,320 Speaker 5: On the other side of things are two key areas. 618 00:31:58,520 --> 00:32:02,000 Speaker 7: One, it's rate sensitive areas like reets in real estate 619 00:32:02,040 --> 00:32:05,120 Speaker 7: that typically do well in a falling rate environment, as 620 00:32:05,120 --> 00:32:08,080 Speaker 7: well as defensives. You've seen some signs of life and 621 00:32:08,120 --> 00:32:12,320 Speaker 7: things like utilities and staples, and for an overall market outlook, 622 00:32:12,480 --> 00:32:15,640 Speaker 7: you typically don't like to see utilities in staples lead. 623 00:32:15,840 --> 00:32:18,640 Speaker 7: It signals that there are growth concerns and that there's 624 00:32:18,680 --> 00:32:21,960 Speaker 7: an underlying risk off tone to the market. So we 625 00:32:22,040 --> 00:32:24,520 Speaker 7: do have to watch this very closely. Our view on 626 00:32:24,640 --> 00:32:27,480 Speaker 7: Tech is one where we think that Tech can be 627 00:32:27,800 --> 00:32:31,240 Speaker 7: neutral or flat with the market, but it cannot lag 628 00:32:31,280 --> 00:32:34,080 Speaker 7: in a meaningful way because it's just such a big 629 00:32:34,120 --> 00:32:36,440 Speaker 7: part of the index. It's about thirty percent of the 630 00:32:36,560 --> 00:32:38,840 Speaker 7: S and P five hundred, so Tech has to play 631 00:32:38,840 --> 00:32:40,920 Speaker 7: ball for the overall S and P five hundred to 632 00:32:40,960 --> 00:32:42,240 Speaker 7: continue to make new highs. 633 00:32:42,840 --> 00:32:46,280 Speaker 1: Speaking with Cameron Dosa and Chief Investment officer at New 634 00:32:46,400 --> 00:32:50,480 Speaker 1: Edge Wealth. As we think about how stocks could end 635 00:32:50,760 --> 00:32:53,800 Speaker 1: this year, Cameron, what are you looking at? What are 636 00:32:53,880 --> 00:32:56,000 Speaker 1: some of the major catalysts for you? 637 00:32:56,440 --> 00:32:59,080 Speaker 7: Well, the election is of course very top of mind, 638 00:32:59,120 --> 00:33:02,520 Speaker 7: and we have seen stocks typically trade weaker going into 639 00:33:02,560 --> 00:33:05,440 Speaker 7: the election and then a rally after that, and of 640 00:33:05,480 --> 00:33:08,080 Speaker 7: course with a little sprinkling of a Santa Claus rally 641 00:33:08,160 --> 00:33:11,240 Speaker 7: on top that. Of course all investors hope for going 642 00:33:11,240 --> 00:33:13,600 Speaker 7: into the end of the year. We're hoping to get 643 00:33:13,640 --> 00:33:17,800 Speaker 7: more indication about the policy priorities of both parties which 644 00:33:17,840 --> 00:33:20,640 Speaker 7: can help us make a better assessment about what we 645 00:33:20,720 --> 00:33:24,160 Speaker 7: think will lead coming out of the election, So things 646 00:33:24,240 --> 00:33:28,080 Speaker 7: like taxes and immigration and tariffs all being very important 647 00:33:28,080 --> 00:33:31,400 Speaker 7: things to get a sense of what can leadership be 648 00:33:31,800 --> 00:33:34,160 Speaker 7: post the election once we get the results. 649 00:33:34,520 --> 00:33:37,560 Speaker 1: Yeah, it's been interesting to see this sort of debate 650 00:33:37,760 --> 00:33:42,120 Speaker 1: about what a Trump trade looks like versus a Harris trade. 651 00:33:42,200 --> 00:33:45,200 Speaker 1: From what we've heard so far, do you see major 652 00:33:45,320 --> 00:33:49,640 Speaker 1: differences between these two candidates, who, at least as far 653 00:33:49,640 --> 00:33:52,720 Speaker 1: as the polling goes, are very different people. 654 00:33:53,080 --> 00:33:55,920 Speaker 7: Yes, and the polling is tight at this point, so 655 00:33:55,960 --> 00:33:58,440 Speaker 7: it's really hard for the market, i think to price 656 00:33:58,520 --> 00:34:01,520 Speaker 7: in the winning of one versus the other very different 657 00:34:01,560 --> 00:34:03,440 Speaker 7: than where we were in the middle of the summer 658 00:34:03,480 --> 00:34:06,800 Speaker 7: where Trump had a twenty point plus lead over the 659 00:34:06,800 --> 00:34:07,840 Speaker 7: Democratic ticket. 660 00:34:08,239 --> 00:34:10,160 Speaker 5: So then the question is how. 661 00:34:10,000 --> 00:34:12,759 Speaker 7: Will the policy priorities, of course play out, and what 662 00:34:12,800 --> 00:34:15,719 Speaker 7: does it mean for corporate earnings If we look at 663 00:34:15,760 --> 00:34:18,759 Speaker 7: the corporate tax rate and how it's being paid for, 664 00:34:18,960 --> 00:34:21,399 Speaker 7: that is a key area of difference between the two 665 00:34:21,440 --> 00:34:25,040 Speaker 7: parties about where they would raise taxes in order to 666 00:34:25,120 --> 00:34:28,360 Speaker 7: pay for the extension of the existing tax rates. We 667 00:34:28,400 --> 00:34:32,040 Speaker 7: do know that there's a lot of air between immigration policy, 668 00:34:32,080 --> 00:34:35,960 Speaker 7: which could have important implications on things like the labor 669 00:34:36,000 --> 00:34:39,240 Speaker 7: market going into twenty twenty five. And then the last 670 00:34:39,280 --> 00:34:43,359 Speaker 7: area of difference would be on tariffs and how impactful 671 00:34:43,400 --> 00:34:47,000 Speaker 7: tariffs would be potentially under a Trump presidency if he 672 00:34:47,120 --> 00:34:50,720 Speaker 7: does enact a more sweeping set of tariffs, of course, 673 00:34:50,840 --> 00:34:54,200 Speaker 7: much more sweeping than what the Harris ticket is talking about. 674 00:34:54,719 --> 00:34:58,640 Speaker 1: Wonder what you're thinking as well about certain investment themes. 675 00:34:58,719 --> 00:35:01,279 Speaker 1: Of course, this year there's been so much focus on 676 00:35:01,400 --> 00:35:04,399 Speaker 1: the AI story. There's been a lot of talk as 677 00:35:04,440 --> 00:35:08,640 Speaker 1: well about weight loss drugs, that sort of thing. What 678 00:35:08,760 --> 00:35:11,560 Speaker 1: kind of themes are you thinking about that could be 679 00:35:11,640 --> 00:35:14,600 Speaker 1: more lucrative as we think about the end of this 680 00:35:14,719 --> 00:35:16,839 Speaker 1: year and into twenty twenty five, we. 681 00:35:16,800 --> 00:35:19,480 Speaker 5: Think it'll be the application of AI. 682 00:35:19,760 --> 00:35:22,920 Speaker 7: Right now, the AI rally has been one that has 683 00:35:23,000 --> 00:35:26,600 Speaker 7: been very beneficial to the arms dealers of AI, so 684 00:35:26,760 --> 00:35:30,040 Speaker 7: the picks and shovels kind of providers of the chips 685 00:35:30,040 --> 00:35:33,200 Speaker 7: that are needed in order to apply these technologies. Where 686 00:35:33,200 --> 00:35:36,799 Speaker 7: we have seen a lot less impact is on the 687 00:35:36,920 --> 00:35:40,120 Speaker 7: users of AI and how it will actually show up 688 00:35:40,200 --> 00:35:43,960 Speaker 7: in things like margins and productivity. And so that is 689 00:35:44,000 --> 00:35:46,960 Speaker 7: the real test for this AI narrative as we go 690 00:35:47,000 --> 00:35:49,920 Speaker 7: into twenty twenty five, which is that is there a 691 00:35:50,000 --> 00:35:53,600 Speaker 7: return on investment for all of this investment spending for 692 00:35:53,719 --> 00:35:58,280 Speaker 7: those that are actually applying the AI. If that's the case, 693 00:35:58,320 --> 00:36:01,520 Speaker 7: then it does raise the likelihood that you can meet 694 00:36:01,760 --> 00:36:05,400 Speaker 7: what are already very lofty margin targets that are priced 695 00:36:05,440 --> 00:36:08,240 Speaker 7: into the S and P five hundred. But if AI 696 00:36:08,360 --> 00:36:11,920 Speaker 7: doesn't deliver, or it's just a longer time to deliver, 697 00:36:12,000 --> 00:36:14,239 Speaker 7: as we heard from some of the tech names this year, 698 00:36:14,680 --> 00:36:16,799 Speaker 7: it could set up for a little bit of disappointment. 699 00:36:16,880 --> 00:36:20,239 Speaker 7: So we see AI still remaining top of mind, but 700 00:36:20,360 --> 00:36:22,920 Speaker 7: that the story is likely to evolve as we go 701 00:36:22,960 --> 00:36:24,399 Speaker 7: into next year, and. 702 00:36:24,400 --> 00:36:27,839 Speaker 1: If we are heading into a rate cut cycle, could 703 00:36:27,880 --> 00:36:32,560 Speaker 1: we start to see more of a correlation between bond 704 00:36:32,640 --> 00:36:35,600 Speaker 1: yields and stock prices. What could that mean when it 705 00:36:35,640 --> 00:36:38,360 Speaker 1: comes to portfolio diversification. 706 00:36:38,200 --> 00:36:40,880 Speaker 7: Well, we do think that bonds are back in the 707 00:36:41,000 --> 00:36:44,080 Speaker 7: sense of being able to provide that diversification of the 708 00:36:44,120 --> 00:36:49,360 Speaker 7: classic sixty forty portfolio. That's been our expectation throughout this year, 709 00:36:49,440 --> 00:36:52,560 Speaker 7: which is that this scenario that led to bonds breaking 710 00:36:52,640 --> 00:36:55,840 Speaker 7: down as a diversifier in twenty twenty two was of 711 00:36:55,880 --> 00:36:59,880 Speaker 7: course a big rise in inflation and that concomitant right 712 00:37:00,200 --> 00:37:03,120 Speaker 7: in yields. Given the fact that we continue to see 713 00:37:03,200 --> 00:37:06,839 Speaker 7: greater downside to inflate, or greater risk that there is 714 00:37:07,239 --> 00:37:10,279 Speaker 7: downside to growth than there is upside to inflation, it 715 00:37:10,360 --> 00:37:13,800 Speaker 7: implies that bonds can be that ballast if. 716 00:37:13,640 --> 00:37:16,440 Speaker 5: You do go into a growth scare. So it leads 717 00:37:16,520 --> 00:37:17,840 Speaker 5: us to see. 718 00:37:17,600 --> 00:37:20,800 Speaker 7: Eptiics in yields, meaning when bonds sell off and yields 719 00:37:20,840 --> 00:37:24,560 Speaker 7: move higher, to use that as opportunities to extend duration 720 00:37:24,760 --> 00:37:27,640 Speaker 7: and lock in lower yield lock in those higher yields 721 00:37:27,880 --> 00:37:30,759 Speaker 7: with the expectation that it can be a great diversifier 722 00:37:30,800 --> 00:37:33,000 Speaker 7: if growth fears really do start to pick up. 723 00:37:33,239 --> 00:37:37,239 Speaker 1: Cameron Dawson, their new Edge Wealth Chief Investment Officer. Also 724 00:37:37,239 --> 00:37:39,759 Speaker 1: want to give our thanks as well to Bloomberg Intelligence 725 00:37:39,880 --> 00:37:44,279 Speaker 1: see your Commodities Analyst Mike mcgloane, Bloomberg International Economics and 726 00:37:44,360 --> 00:37:48,759 Speaker 1: Policy Correspondent Michael McKee, and Anna Wong, chief US economist 727 00:37:48,880 --> 00:37:51,640 Speaker 1: at Bloomberg Economics. Our thanks to you as well for 728 00:37:51,719 --> 00:37:54,560 Speaker 1: joining us on this Labor Day holiday. And if you're 729 00:37:54,560 --> 00:37:58,640 Speaker 1: listening to us in Boston, our new home starting September 730 00:37:58,719 --> 00:38:03,280 Speaker 1: third will be ninety two FM. That's tomorrow at noon, 731 00:38:03,880 --> 00:38:07,920 Speaker 1: Bloomberg Radio moving to ninety two nine FM in Boston. 732 00:38:08,239 --> 00:38:11,520 Speaker 1: I'm Nathan Hager. Wherever you're listening to us, stick around. 733 00:38:11,640 --> 00:38:15,080 Speaker 1: Today's top stories and global business headlines are coming up 734 00:38:15,120 --> 00:38:16,560 Speaker 1: and right now