Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: on this day and all week, as simulcast on Bloomberg Radio,
Speaker 1: Bloomberg TV, and on YouTube. We welcome all of our
Speaker 1: audiences across all of our platforms. Here Romaine Bostick, alongside
Speaker 1: Kritty Gupta and Tim Stanebek. We're gonna be walking you
Speaker 1: through all the markets as we count you down to
Speaker 1: the closing bell in just about two hours from now.
Speaker 1: Looking at SMP five, find basically unchanged on the day.
Speaker 1: It has been a good portion of the day, down
Speaker 1: in the red, now starting to tick into the green
Speaker 1: here forty seven ninety right now, up about a tenth
Speaker 1: of a percent the Dow Jones industrial laverage. If you're
Speaker 1: looking for a bright spot, that's where you're gonna find it.
Speaker 1: Thirty six thousand and four ninety if you're counting, that
Speaker 1: would be a record high. If it were to close
Speaker 1: at that level, up about two tents of a percent.
Speaker 1: You're to year yield drifting slightly lower here but still
Speaker 1: camped out at around seventy five basis points. And as
Speaker 1: far as some of the other risk assets out there,
Speaker 1: including bitcoin, you can call it flat on the day
Speaker 1: forty seven thousand, five forty six as measured by Bloomberg
Speaker 1: pricing relatively unchanged here on the day Wednesday here, uh,
Speaker 1: the third day of of the only three days left here,
Speaker 1: I should say, in uh the year for trading. All right,
Speaker 1: Let's go straight to our first guest, Timcreaty gonna be
Speaker 1: joining us in just a second. Here. We want to
Speaker 1: bring in our C Peck. He's joining us right now
Speaker 1: from Fearless Wealth Core. P is the c I O
Speaker 1: over there. R C. Great to have you here. Uh.
Speaker 1: You know we've they've been saying all week long. I mean,
Speaker 1: we of course look at the day to day moves,
Speaker 1: but a week long, we've kind of looking back and
Speaker 1: trying to extrapolate, you know, how investors should sort of
Speaker 1: feel about coming off these just phenomenal gains, gains that
Speaker 1: to some extent we're kind of unlikely. And I'm wondering
Speaker 1: just how optimistic you are about the next year. I mean,
Speaker 1: from a stock market point of view, I am very optimistic.
Speaker 1: The market sees what the Fed is doing, It is
Speaker 1: digesting it actually quite fast. Um. I love the Nasdaq
Speaker 1: one hundred. It continues to do well. It's a little
Speaker 1: under the SMP five hundred this year, but really I
Speaker 1: think is gonna be a great year, and it's gonna
Speaker 1: probably put off a lot of people because it will
Speaker 1: be such a good year. So are so you think
Speaker 1: the NASDAC outperform the SMP five hundred. I do absolutely
Speaker 1: What what what will drive those gains? So one of
Speaker 1: the things I looked at is what happens to the
Speaker 1: SMP five and the NASTIC one hundred when the Fed
Speaker 1: keeps their balance balance sheet flat or slightly down, and
Speaker 1: the lear winner is actually the Nastic one D it
Speaker 1: loves when the FED keeps its balance sheet flat. So
Speaker 1: we can only go with what's happened. Of course I
Speaker 1: could be wrong, UM, but I'm going with what what
Speaker 1: index loves a flat balance sheet? R C. Let's talk
Speaker 1: about what's in the index now, of course, is going
Speaker 1: to be the majority of tech. I really want to
Speaker 1: ask you, though, what kind of role is tech playing
Speaker 1: in this? Is it a haven? Is it an inflation hedge?
Speaker 1: Isn't your classic growth play or perhaps a value plays
Speaker 1: kind of like keep peace of someone's portfolio. What role
Speaker 1: does tech play? It's a fair question to ask because
Speaker 1: of the Nasteck one hundred is quote unquote tech, right,
Speaker 1: and the S and P is Tech. So tech is
Speaker 1: eating the world right. The largest staples company is tech, Amazon,
Speaker 1: the largest communication company is tech, and the second largest
Speaker 1: communication company is tech, Google and Facebook. So I we
Speaker 1: almost have to think of a new way or to
Speaker 1: think about what tech is. It's it's eating the world
Speaker 1: if you're in the United States. We're lucky in the
Speaker 1: fact that most of these just major major companies are
Speaker 1: in and based in the US. UM. And I think
Speaker 1: it's going to continue happening because, especially with the pandemic.
Speaker 1: It's accelerated the reach of technology companies. I can talk
Speaker 1: a little bit here about I guess how you structure
Speaker 1: or portfolio in this environment. We talk a lot, of
Speaker 1: course about how I guess you could have just kind
Speaker 1: of ridden the coattails of tech. But that's not gonna
Speaker 1: work forever. In the old days, and some of us
Speaker 1: are old enough to remember when you know you could actually,
Speaker 1: you know, buy bonds and that would actually give you
Speaker 1: some sort of return. That's not happening anymore, at least
Speaker 1: not on a nominal basis, on a real basis. Excuse me,
Speaker 1: I am curious as to whether, as folks sort of
Speaker 1: look at their portfolio going forward, whether there's a strategy
Speaker 1: they can take where they can sort of participate, I guess,
Speaker 1: and whatever sort of run up we do get in
Speaker 1: the riskier assets, but still find a way to sort
Speaker 1: of protect themselves when that eventually falters. You know, there's
Speaker 1: probably two ways you could go about that. Um One
Speaker 1: would be there is one bond that's doing well in
Speaker 1: place you protected treasuries, tips they're doing well. They're basically
Speaker 1: the only type of bond that is doing well right now.
Speaker 1: So if someone wanted a non equity, lower volatile asset.
Speaker 1: Looking at the tips is a very fair simple investment
Speaker 1: type of asset to add to the portfolio. The other is,
Speaker 1: and I don't know how heretical this sounds to people,
Speaker 1: but to own the index that is winning and has
Speaker 1: been winning for one twenty years, which is the nasdeck
Speaker 1: but or nastic one, but place some stop losses on it, right,
Speaker 1: So maybe you cut out of a quarter of your
Speaker 1: position if it closes down from peak high to low. Right,
Speaker 1: So you could use it that way and you'd still
Speaker 1: get the upside, but you could start to lower the
Speaker 1: volatility and the downside by having some kind of circuit
Speaker 1: breakers there. When it comes to equities, I know one
Speaker 1: company that you're bullish on is PayPal, despite the fact
Speaker 1: that it's down from its peak just a few months
Speaker 1: ago over the summer. What makes you so bullish on
Speaker 1: the company. I don't think it's going anywhere. It's you know,
Speaker 1: over two billion um. Clearly it had had a double top.
Speaker 1: If you look at a price chart it you know
Speaker 1: it's it's in a correction phase, ites down intra a
Speaker 1: day from the top to the bottom. It is adopting
Speaker 1: crypto it is moving in that direction. It has Venmo,
Speaker 1: which is moving faster in that direction. It is absolutely
Speaker 1: taking a hit along with other growth slash crypto leaning equities.
Speaker 1: And I don't think it's a close your eyes and buy,
Speaker 1: but I think if it breaks and stays above two,
Speaker 1: putting three of your money in it is a very
Speaker 1: good upside, you know, managed downside individual stock our c
Speaker 1: Let's talk a little bit about what's going on outside
Speaker 1: of the stock market, and that of course brings me
Speaker 1: to commodities. You mentioned cryptocurrencies for a second, but I
Speaker 1: want to go to another currency we're looking at, which
Speaker 1: is gold. I guess it's a commodity currency, whatever you
Speaker 1: wanna call it. Gold really needs to kind of respond
Speaker 1: to what's going on on the inflation front, on the
Speaker 1: fed front. Why is it not doing anything? Yeah, I
Speaker 1: completely agree. For sixteen months it's been trending down. Um,
Speaker 1: there's a couple of reasons. One maybe if you're over sixty,
Speaker 1: you still believe that gold is the hedge for inflation,
Speaker 1: for money printing, for balance sheet changes. But if you're
Speaker 1: under fifty, you're not looking at gold the same way anymore.
Speaker 1: So I think gold has lost a lot of its buyers,
Speaker 1: and has those buyers have moved to other assets. I
Speaker 1: think that's one of the biggest things. Now, Look, if
Speaker 1: it starts moving up, let's buy it. But if there
Speaker 1: was ever an environment for gold to move higher, it
Speaker 1: would have been the last sixteen months, and it hasn't. Yeah,
Speaker 1: and now you're staring down a potentially uh some degree
Speaker 1: of great normalization that could take some of the bloom
Speaker 1: off of that rose further. Here, a lot of those
Speaker 1: folks who would normally turn to gold in this environment
Speaker 1: r C i'll have turned to cryptocurrencies here. What do
Speaker 1: you say to folks who come to you and say
Speaker 1: how much should I allocate? Well, I find just find
Speaker 1: out volatility that can handle in a maybe a five
Speaker 1: or ten percent of their portfolios. So let's just take
Speaker 1: ten on the big end. Someone has a million dollars
Speaker 1: and we put ten percent into crypto. First of all,
Speaker 1: I'm probably gonna put in one of the big five cryptos,
Speaker 1: and I'm going to say to them, expect this to
Speaker 1: either be cut in half and then you have to,
Speaker 1: you know, bring it back up to ten percent, or
Speaker 1: don't be surprised if it doubles or triples and then
Speaker 1: after a year we rebalance it back down. So to
Speaker 1: answer your question, I think an annual rebouncing is going
Speaker 1: to allow that you know, that bug called volatility to
Speaker 1: be turned into a feature, and then I think it
Speaker 1: can be something that's not only survivable, but can I
Speaker 1: actually help your portfolio. R C. Peck, big thank you
Speaker 1: to you for joining us, the CEO of Fearless Wealth,
Speaker 1: thanks so much for taking the time. What is Tim
Speaker 1: Stead of Creedy, Gupta and Romaine. You own gold, Tim
Speaker 1: you're under This is Bloomberg Market's a special coverage edition
Speaker 1: here all week long, of course, Uh, welcome in and
Speaker 1: all of our audiences across all of our platforms Bloomberg TV,
Speaker 1: Bloomberg Radio, YouTube, Romain Boston Creaty Group to Temps Stanegg.
Speaker 1: Keep an eye right now on the commodities market settlement
Speaker 1: of NIMEX screwed features coming in right now above seventy
Speaker 1: six dollars a barrel. We should point out we did
Speaker 1: get that e I A data a little bit earlier
Speaker 1: today at three and a half million barrel drop in
Speaker 1: the most recent week in US inventories. That's providing a
Speaker 1: little bit of a boost here. Unfortunately, you're also seeing
Speaker 1: a little bit of a boost and gasoline futures if
Speaker 1: you're paying at the pump there. Keeping an eye here
Speaker 1: on cotton as well, we're actually seeing a lot of
Speaker 1: pressures not only on the supply side, but on the
Speaker 1: demand side as well. That continues to underpin what's shaping
Speaker 1: up to be on a phenomenal year for copper futures.
Speaker 1: If you're an investor, if you're an a buyer, that's
Speaker 1: not necessarily working out right now, And I want to
Speaker 1: bring your attention for our viewers here to the third
Speaker 1: line of your screen on coffee futures right now, US
Speaker 1: camped out right around to twenty eight year, up about
Speaker 1: one and a half percent here on the day. Based
Speaker 1: on the games that we have today, we're now up
Speaker 1: something like seventy percent, so that surpasses that seventy run
Speaker 1: we had in two thousand and ten, and that's now
Speaker 1: setting us up for what could be the biggest annual
Speaker 1: game that we've seen on a rabbit of beans, at
Speaker 1: least in the futures market. Going back to a new
Speaker 1: data out new reporting out right now by e comp
Speaker 1: Trading saying that world production may actually slide in two
Speaker 1: which of course could underpin prices further. Guys, So basically
Speaker 1: everything in the commodity space higher here. If you're buying oil,
Speaker 1: you're buying gas, you're buying coffee, you're buying cotton. Eggs
Speaker 1: even gone up, Tim, I'm told hopefully wine doesn't go
Speaker 1: up as well. Yeah, that's the question. I mean, you're
Speaker 1: talking about coffee, but I'm thinking about wine. Because joining
Speaker 1: us right now is Alex Ryan Duckhorn Portfolio, President, CEO
Speaker 1: and chairman. Duck Horn Portfolio produces luxury wine and spirits.
Speaker 1: It includes Decoy, Postmark, Klera, Canvas Back and more wine brands. Alex,
Speaker 1: thanks so much for joining us. You went public earlier
Speaker 1: this year. Shares are up more than fift since going public,
Speaker 1: though slightly off of a June peak. Give us an
Speaker 1: update on on how holiday sales were. Were they strong?
Speaker 1: All day sales are really strong. Thank you. UM. We've
Speaker 1: been working to get the UH supply chain set up.
Speaker 1: We were our partners were prepared for all of our
Speaker 1: some new innovations and our in our in our standard
Speaker 1: traditional mix and people love luxury wine UM for a
Speaker 1: lot of reasons. It's very traditional. Pulling out of the
Speaker 1: pandemic celebrating a challenging year. UH sales were excellent during
Speaker 1: the holidays. We expect that to continue into the new year.
Speaker 1: Let's talk about supply chain issues for a second one.
Speaker 1: Have you had any into how might you be dealing
Speaker 1: with them? We really haven't seen a significant impact. I
Speaker 1: know it's a it's a it's a very hot topic
Speaker 1: right now. On the incoming supply we're able to get wonderful,
Speaker 1: wonderful grapes from throughout California and the state of Washington
Speaker 1: where we're centered in those two wine growing regions, and
Speaker 1: we've been able to get the grapes we need, so
Speaker 1: kind of the incoming supply chain has has been managed
Speaker 1: very very well, and I'm confident that we're going to
Speaker 1: continue to have enough luxury wine to sell into the future.
Speaker 1: On the on the distribution side, you know, with a
Speaker 1: very diversified distribution platform with some really really good partners,
Speaker 1: and that diversification has allowed us to make sure that
Speaker 1: all the wines people want hit the market when they
Speaker 1: want them, especially around this critical fault period. So very
Speaker 1: few disruptions on our side, and it's really due to
Speaker 1: the diligent work of a of a wonderful staff. I
Speaker 1: have Alex talk a little bit about the quality of
Speaker 1: some of the grapes that you're getting. There was a
Speaker 1: lot of concern, particularly in nineteen last year and to
Speaker 1: a certain extent this year about some of the wildfires
Speaker 1: and some of the smoke and how that may or
Speaker 1: may not have affected some of the crops at least
Speaker 1: coming out of some of the Napa California regions. Here.
Speaker 1: With the latest harvest that we've gotten, the latest vintages here,
Speaker 1: how much assurance is do you have right now that
Speaker 1: what you got? I guess, uh, for lack of a
Speaker 1: better phrase, taste good. Because we're really good at what
Speaker 1: we do. For forty years, we make luxury wine. And
Speaker 1: the recent harvest, the harvest was not fire affected, uh,
Speaker 1: and we had a really great growing season. Um uh.
Speaker 1: So we're very fortunate that respect again the diversifications the
Speaker 1: name of the store for what we do to preserve
Speaker 1: the customer's best interest. So through that diversification, we're able
Speaker 1: to get the great quality and the great styles that
Speaker 1: we that we need to continue to make great wine.
Speaker 1: And so I can assure you as you asked, that
Speaker 1: they vantage is going to hit the mark and then
Speaker 1: some for this year. Alex, I know that you said
Speaker 1: that you've been able to navigate supply chain challenges pretty well.
Speaker 1: But look, you're gonna have to pay more for shipping
Speaker 1: if gasoline prices continue to go higher. Uh, wages, we
Speaker 1: all know what's happening with it with wages. Price increases
Speaker 1: for are you gonna have to make them? Uh? No,
Speaker 1: We're not gonna force to make them. We're a luxury product,
Speaker 1: as you know, a luxury premium price wine products, so
Speaker 1: um um. Traditional and planned price increases are kind of
Speaker 1: built into our long term plan and we're thinking the
Speaker 1: long term. That's kind of what the wine business about.
Speaker 1: So we will have and execute scheduled price increases accordingly.
Speaker 1: But I don't think you're gonna find up being reactionary
Speaker 1: to the market. That's just not fair to the consumer,
Speaker 1: and so we'll be very measured to how we approach that.
Speaker 1: But we do have pricing increases that you would expect
Speaker 1: over the next several years built in the long term plan.
Speaker 1: But again, we're not gonna We're not gonna do anything
Speaker 1: rash or or or a reactionary Alex. At the end
Speaker 1: of the day, wine is a luxury product has been
Speaker 1: a fantastic year when it comes to just luxury sales broadly,
Speaker 1: when it comes to wine or clothing or other luxury goods.
Speaker 1: I wonder, though, how much of that is going to
Speaker 1: continue into two. Do you see that's the momentum really
Speaker 1: sustaining into the new year? I do. That's the best
Speaker 1: question of the day. I do you know, Um, we've
Speaker 1: been taking share now for the last several years and
Speaker 1: starting to pay back wonderful dividends. People are getting exciting
Speaker 1: about our brand or divertified brand and portfolio. I think
Speaker 1: wine is a wine's a celebratory lifestyle, if you will,
Speaker 1: and I think people not only want that, but need that,
Speaker 1: and historically that's proven true. So I think that the
Speaker 1: interest in wine, especially domestic California of West Coast United
Speaker 1: States wine is going to continue. UM. I think the
Speaker 1: shares we've taken uh in in in market games over
Speaker 1: the last several years are starting to pay off. And
Speaker 1: I think people want to celebrate with friends and family
Speaker 1: and they want wine to be part of that process.
Speaker 1: So we're encouraged and we think that that that trend
Speaker 1: is going to continue into the new year and beyond.
Speaker 1: All right, great stuff, Alex, I really appreciate and you
Speaker 1: catch up with us. Alex Ryan there, of course, the
Speaker 1: CEO and chairman of the dark Horn portfolio. This is
Speaker 1: Bloomberg Market Special coverage all week long, a global simulcast
Speaker 1: Bloomberg TV, radio and YouTube. We welcome all of our
Speaker 1: audiences across all of our platforms here, Romaine Bosti, Crety
Speaker 1: Grouped Attempt Stentovic here, keep an eye on the markets.
Speaker 1: Basically a sideways day here for the SMB five hundred,
Speaker 1: the Dow actually trading at a record high. As far
Speaker 1: as some of the individual movers. You're seeing Apple slightly
Speaker 1: higher here on the day, but not really getting a
Speaker 1: whole lot of juice here. Tesla shares also moving higher
Speaker 1: by about four tenths of represent one of the big
Speaker 1: decliners today is actually Too Simple. That's company of course
Speaker 1: that makes these uh sort of technology for self driving trucks.
Speaker 1: Here the shares have been higher on the day, but
Speaker 1: they've actually flipped here in ABC slightly up marisource Burg
Speaker 1: and I should point out slightly higher here up about
Speaker 1: six tents of a percent and pretty You know, when
Speaker 1: you look at this market and you talk about how
Speaker 1: phenomenal of a trading year that we've had here, and
Speaker 1: then you look at out of the tamp down in
Speaker 1: this final week of the year. Is there anything that
Speaker 1: we can read into that as we move into well,
Speaker 1: you know, it's interesting that the investor base really kind
Speaker 1: of took the Santa rally for granted that no worries
Speaker 1: will just kind of be in cruise control for this
Speaker 1: last week of the year, and yet you are seeing
Speaker 1: hurdles that record high on Monday, but romains since then,
Speaker 1: Marcuts have been under pressure. Yeah, they certainly have um,
Speaker 1: but you know, under pressure and kind of relatively small moves,
Speaker 1: especially compared to what we've seen for much of the
Speaker 1: year and then what we've seen on Monday and last week.
Speaker 1: But if you open up the hood of the SMP
Speaker 1: five on either side, you do have some stocks making
Speaker 1: big moves. I mean Home Depot, you have Procter and Gamble,
Speaker 1: you have Micron all to the plus side, and then
Speaker 1: laggards include Amazon and Video Facebook, so tech really weighing
Speaker 1: down those gains that were pop Quiz him, what's the
Speaker 1: best performing SNP stock this month. I'm gonna stay Home
Speaker 1: Depot group just because of that, just because of the acquisition.
Speaker 1: All right, let's see, I'm gonna give Abigail do a
Speaker 1: little all right, she's standing by all right now with
Speaker 1: the up broader. Look at what's going on in the market, Abigail,
Speaker 1: what are you watching? Well, Roman, I'm watching that sideways
Speaker 1: action that you were talking about. Investors basically treading water
Speaker 1: in this final week of trading, and of course volume
Speaker 1: super light fort below the twenty day moving average to
Speaker 1: a lot of folks not at their desks, whether in
Speaker 1: the office or at home, and the NAZAC over the
Speaker 1: last two days is underperforming just a little bit. A
Speaker 1: lot of those big names that you guys were just
Speaker 1: talking about, Amazon, Google Meta are lower. However, the reason
Speaker 1: that we seem to be having a little bit of
Speaker 1: a pop here Biogen up about ten percent. Of course,
Speaker 1: on that Korean report that UH Samsung could possibly be
Speaker 1: doing a takeover. Sort of interesting because that would be
Speaker 1: a completely new vertical but definitely giving life to the NAZAC,
Speaker 1: which has been mainly lower all day and right now
Speaker 1: flipping between small gains and losses, but at least there's
Speaker 1: a gain there, and the SMP five hundred being helped
Speaker 1: to a seventieth record close, potentially, Fabio, what is holding
Speaker 1: the market back? We saw that record high on Monday.
Speaker 1: Why are we not just hitting record highs every day
Speaker 1: since then? You know? Creaty. I think that when you
Speaker 1: have a year where the SMP five dred is up
Speaker 1: almost twenty already year to date, up for a third
Speaker 1: year in a row, the third the seventh double digit
Speaker 1: year UH in the last ten years. The fact that
Speaker 1: you have a small pullback from that record high and Monday,
Speaker 1: it's not really too too big of a deal. Again,
Speaker 1: not a lot of folks at their desks right now.
Speaker 1: And Tech, even though it's a little bit weak today,
Speaker 1: it's been a real UH standout up thirty on the year,
Speaker 1: and one reason the earnings growth for this fourth quarter
Speaker 1: expected to be very strong, around twenty seven percent. So
Speaker 1: I think that there aren't any problems that investors are
Speaker 1: looking at right now. It's just a lot of the
Speaker 1: fact that a lot of people may not even actually
Speaker 1: be in their seats. Oh don't say that, Abigail, Abigail,
Speaker 1: do a little there before she's in her seats. Meet
Speaker 1: Tim and Cretty. We're here. We're not going anywhere on
Speaker 1: the SMP five hundred. Jo's industrial lavage at thirty six
Speaker 1: five eleven. That is a record high if it holds
Speaker 1: into the clothes joining us right now, Paul Christopher, head
Speaker 1: of Global market Strategy for Wells Fargo Investment Institute. Paul,
Speaker 1: let's look ahead to two. We've done all these surveys
Speaker 1: at Bloomberg and other banks have done surveys basically saying
Speaker 1: the biggest risk right now is a FED policy error
Speaker 1: of some sort. Here. Does that worry you? It does
Speaker 1: the market, and and the FED actually themselves in their
Speaker 1: survey looking at three or four rate hikes, we think
Speaker 1: that's unlikely. We're expecting one or two, as we do
Speaker 1: think that inflation will moderate as the year progresses, and
Speaker 1: that will let the FED off the hook for those
Speaker 1: other one or two great hikes. But a policy mistake
Speaker 1: can never be eliminated as a potential market mover, market disruptor.
Speaker 1: And we're also worried about COVID and how that will
Speaker 1: upset the change or the trend I should say in
Speaker 1: in the economic growth and spending for the first half
Speaker 1: of the year. Okay, well, let's start with inflation here.
Speaker 1: And when you say in flation will moderate in give
Speaker 1: us some numbers. What are you thinking, when will inflation
Speaker 1: peak and how much will it moderate? Are you talking
Speaker 1: sub two percent? Perhaps, Yeah, it's a good question. So
Speaker 1: with with the omicron variant now starting to dominate and
Speaker 1: China still locked into an approach to to to COVID
Speaker 1: that says lock everything down, Our concern is that you'll
Speaker 1: see more restraints on the supply side. That will mean
Speaker 1: will have more an imbalance between supply and demand that
Speaker 1: could fuel some further inflation pressures. We think you could
Speaker 1: see a seven handle on CPI inflation in the next
Speaker 1: couple of months. But after that, you know, there's already
Speaker 1: evidence from the p m I s that you're starting
Speaker 1: to see inventories build and order growth is starting to
Speaker 1: slack off a little bit, maybe some companies stopping their
Speaker 1: tendency to over order. And as those trends continue, you
Speaker 1: will see inventories build, you will see supply catch up
Speaker 1: with demand. You could even see a little bit of
Speaker 1: excess inventory by year end that could be disinflationary. So
Speaker 1: maybe something seven plus in the first quarter of the
Speaker 1: year heading down to something in the mid fives, maybe
Speaker 1: five three by the end of the year. And clearly
Speaker 1: with a downtrend. We think inflation heads below five into
Speaker 1: investors will take note of that, Paul. A classic post
Speaker 1: recessionary play is going to be those that small cap trade.
Speaker 1: Essentially this idea that the economy is recovering from a recession.
Speaker 1: Therefore that's going to trickle into the smallest companies. But
Speaker 1: that hasn't really been the outperformer this year. It's actually
Speaker 1: been large caps. It's been mid caps. How much of
Speaker 1: that trade continues into and we don't think that trade continues.
Speaker 1: It was one we put on early this year. It
Speaker 1: did well for a couple of months and we had
Speaker 1: to close it out. Frankly speaking, it just it's just
Speaker 1: not strong enough growth. What you're seeing, is it because
Speaker 1: of the supply and demand and balances that I mentioned.
Speaker 1: There's been an elongation. Uh, We're gonna have growth above
Speaker 1: average for longer, but it's not gonna hit those high
Speaker 1: levels of double digit economic growth that would really help
Speaker 1: small caps. It's gonna be more in that four or
Speaker 1: five six percent range. Uh that that really is still
Speaker 1: pretty good for large caps, but doesn't do enough to
Speaker 1: lift the boats uh in the small cap universe. So
Speaker 1: we got out of that trade earlier this year. All Right,
Speaker 1: we're talking a lot of stocks here, and I guess
Speaker 1: any investor uh these days, Uh, it's certainly understandable why
Speaker 1: you would be allocated pretty heavily, if not almost entirely
Speaker 1: right now to the equity market here. But you're looking
Speaker 1: at rates now starting to go back up. Do we
Speaker 1: get to a stage soon where bonds actually start to
Speaker 1: become attractive? Probably not. Uh, we'll see some upward movement
Speaker 1: in rates. We're looking for a ten year at around
Speaker 1: two and a quarter by the end of two If
Speaker 1: we saw rates higher, let's say, around three percent or
Speaker 1: just to blow three percent, that could be more interesting
Speaker 1: and would be more risky for stocks. We just don't
Speaker 1: think you're gonna get that kind of a move because
Speaker 1: there's just still gonna be so much scarned about COVID
Speaker 1: going into the year. There's going to be some concern
Speaker 1: about inflation. As that comes down, we'll see that in
Speaker 1: that concern roll off that will also help bonds. And frankly,
Speaker 1: even if the Fed tapers is still gonna have a
Speaker 1: nine trillion dollar balance sheet, that's gonna help bonds as well.
Speaker 1: To to keep some some some bid under the price there,
Speaker 1: and so it's a good it's a good sort of
Speaker 1: environment for tech stocks. I think that continues into two.
Speaker 1: Not so much for bonds. Paul Christopher, head of Global
Speaker 1: market Strategy for Wells Fargo Investment Institute, thanks so much
Speaker 1: for joining us something. Thank you. Happy yeah, Happy new
Speaker 1: year to you as well. Crety, what do you make
Speaker 1: of the call for inflation moderating and we're not talking
Speaker 1: moderating stub three step two, we're talking by the end
Speaker 1: of twenty two, he said, down to uh, you know
Speaker 1: about five. Yeah, well, it's not that surprising, right, because
Speaker 1: decelerating growth is already something that's kind of baked into markets,
Speaker 1: the idea that you're just not going to get the
Speaker 1: same kind of big post pandemic boom that you saw.
Speaker 1: So this kind of makes sounse. The question is does
Speaker 1: the FED kind of really fix or kind of tweak
Speaker 1: their approach as you start to see inflation potentially peak. Yeah, well,
Speaker 1: you're already seeing that sort of come down here at least.
Speaker 1: You mean, even when you look at short term break evens,
Speaker 1: like on a five year level, you're still something around
Speaker 1: two point eight percent. So let's say we do get
Speaker 1: say a seven percent print. What was it on January
Speaker 1: twelve here? I think right now we're tracking it's something
Speaker 1: like six point eight percent based on the economist surveys here.
Speaker 1: The general expectation is that's going to snap back pretty
Speaker 1: quickly here, maybe in two And it wasna, are you
Speaker 1: not are you not sold on that town? I'm not
Speaker 1: sold on it, just because of the virus and because
Speaker 1: so much of the inflation is based on supply chain hiccups.
Speaker 1: Look what we learned from Samsung overnight Samsung Electronics. Yeah,
Speaker 1: and and if you know if they're closing chip factories
Speaker 1: because of lockdowns in China, we know China has a
Speaker 1: really aggressive stance when it comes to the virus. If
Speaker 1: more things closed, more supply chain hiccups. This is Bloomberg
Speaker 1: Market Special coverage this week, a global simulcast across our TV,
Speaker 1: radio and YouTube platforms. We welcome all of our audiences here,
Speaker 1: Romaine Stick alongside Tim Stenovic and Pretty Gupta, counting you
Speaker 1: down to the closing bells in New York, which are
Speaker 1: just a little more than eleven minutes away here. And
Speaker 1: we started the day off and pretty much everything was
Speaker 1: in the red on the day. But as we get
Speaker 1: closer to the closing bills. Pretty much everything is now
Speaker 1: flipped into the green. Here we should just point out
Speaker 1: the DAW is at a record high, the sp as
Speaker 1: a record I the NAZAC industries now in the green.
Speaker 1: For our TV audience. Is what you're looking at on
Speaker 1: the screen there. Those are some of the indexes right now.
Speaker 1: The materials up about six tents of repercent, bank stocks
Speaker 1: up about three tents of repercent as measured of course
Speaker 1: by uh the KBW Bank Index, and pretty even homebuilders
Speaker 1: getting a nice bit here, up about one percent. One
Speaker 1: of the laggards. So today that's going to be energy, Yeah,
Speaker 1: and what's interesting with energy, you're also seeing big tech
Speaker 1: kind of fall in there on a sector basis. Communications
Speaker 1: is going to be your key laggered on a sector basis,
Speaker 1: Like I said, with energy, and when you tend to
Speaker 1: see energy and tech at the bottom of the pack,
Speaker 1: it tends to mean a pretty broad decline. But that's
Speaker 1: not what you're seeing today, Tim and Romaine. You're actually
Speaker 1: seeing a fairly broad rally with the exception of those
Speaker 1: two sectors. Yeah, but I think it is particularly no doable.
Speaker 1: Two is the smp F I've founded struggling for direction
Speaker 1: for much of the day, seeing a little bit of
Speaker 1: a leg higher towards the end of the trading session,
Speaker 1: does this count, guys as a Santa Claus rally three
Speaker 1: tenths of a percent higher from the smp F I've
Speaker 1: founded on day three of a Santa Claus rally? Because altogether, Tim,
Speaker 1: I mean that you don't believe in Santa Claus. I do,
Speaker 1: of course I do. I can hear the bell from
Speaker 1: the Polar Express. Okay, I mean I believe. I still
Speaker 1: I want to believe. All right, let's see what if
Speaker 1: our next guest believes. David Sowerby a great friend of
Speaker 1: the show here. He's a managing director and portfolio manager
Speaker 1: over at Ancre Advisors. Uh, David, let's start off. I
Speaker 1: guess what the year that was? I mean, there are
Speaker 1: a lot of gains baked into this market right now,
Speaker 1: gains that I don't think a lot of people anticipated,
Speaker 1: even some of the more bullish people here. And now
Speaker 1: there's a big question as to how far that can
Speaker 1: extend into the new year. Certainly a great two thousand
Speaker 1: twenty one, because breath was I think better than it.
Speaker 1: Certain than it wasn't two thousand twenty, you went the
Speaker 1: entire year without that once a year ten percent correction.
Speaker 1: Stocks well outperformed the bond market, which was flat to negative.
Speaker 1: And one thing I know about a single calendar year,
Speaker 1: Romaine is the rule of thumb for the last seventy
Speaker 1: five years is either bet the over it's going to
Speaker 1: or better, or bet the under it's gonna be five
Speaker 1: percent or less. We've now had three straight years of
Speaker 1: bet the over. Where since the last three years the
Speaker 1: SMP five is returned better than at least the last
Speaker 1: three calendar years. I have I have a question though, David,
Speaker 1: why why don't you think that we've gotten that correction,
Speaker 1: like a true correction, true pullback, and a reset in
Speaker 1: this market. It seems like every time we go down
Speaker 1: to three, that seems to trigger enough people to come
Speaker 1: back in and buy that tip. And there are a
Speaker 1: lot of people saying that maybe that's representative of some
Speaker 1: dysfunction in the market, and other people say, well, the
Speaker 1: market has just changed. I think fundamentally companies on a
Speaker 1: micro basis, when I look at the individual companies and
Speaker 1: how they're reporting quarterly earnings, their guidance, this has been
Speaker 1: a very robust year where guidance has continuously been raised
Speaker 1: throughout the year, and I think it's gonna get raised
Speaker 1: a bit more in two thousand twenty two. Add in
Speaker 1: that we've had this incredible monetary and fiscal stimulus for
Speaker 1: the last eighteen months, and that's why I think you
Speaker 1: haven't add a ten percent correction since March and two
Speaker 1: thousand twenty. Yeah, David, let's talk about that trend essentially,
Speaker 1: because not only have we not had this extremely long
Speaker 1: stretch of no corrections, no technical corrections of ten percent
Speaker 1: or more, but you've also had a pretty strong amount
Speaker 1: of Recordize this is gonna be the seventieth record high
Speaker 1: for today for the SMP five hundred. The last time
Speaker 1: we saw both of those records met it was in
Speaker 1: When you have this kind of global growth story, how
Speaker 1: much of that becomes a story of two as well,
Speaker 1: when you kind of have these diverging policy paths around
Speaker 1: the world in the United States versus Europe, versus China.
Speaker 1: What's your take on that? I think for two thousand
Speaker 1: twenty two is what do you do for an encore?
Speaker 1: Do you get the great Bruce Springsteen on Corn two?
Speaker 1: Would we have four consecutive years of above average growth.
Speaker 1: We haven't seen it since the late ninet nineties, even
Speaker 1: back to the World War two years of the forties.
Speaker 1: I think two thousand twenty two for that proverbial hard
Speaker 1: to guest single calendar year, it's probably gonna be a
Speaker 1: five to six percent return for the SMP five hund
Speaker 1: But that doesn't mean that you can have very good
Speaker 1: games among individual stocks, as you see a greater separation
Speaker 1: of winners and losers next year. And I think you've
Speaker 1: got a pretty good backdrop where the micro is still
Speaker 1: telling me there are plenty good buying opportunities that I
Speaker 1: can see individual names up better than ten percent next
Speaker 1: year on average, when the SMP five hundred may return
Speaker 1: five to six You know, David, that's so interesting that
Speaker 1: you bring that up that on a micro level might
Speaker 1: be sending you a different message than what the index
Speaker 1: level is sending. And that's something that we've actually already
Speaker 1: started seeing some big names like Facebook, Apple hitting those
Speaker 1: corrections even though you didn't see it on the SMP
Speaker 1: five hundred. Talked to us a little bit about where
Speaker 1: you see some of those major moves that was ten
Speaker 1: percent highers in that micro level. What areas are those
Speaker 1: concentrated in well. We saw in the second half of
Speaker 1: this year that small caps lagged, but now that we've
Speaker 1: gotten the more debilitating talk of higher taxes at least
Speaker 1: off the table for now. When when taxes go up,
Speaker 1: the last four times they have gone up meaningfully, small
Speaker 1: caps have lagged. Now that they're not likely to go higher,
Speaker 1: I think that sets the table for small caps. In
Speaker 1: an environment where GDP is going to grow better than
Speaker 1: four percent, corporate profits will probably grow between ten and
Speaker 1: twelve percent. Evaluations on small cap relative to their large
Speaker 1: gap siblings are much more attractive, and I can build
Speaker 1: individual stock portfolios where the free cash flow yield is
Speaker 1: well better than five percent, and that compares well to
Speaker 1: a ten year treasury at one and a half percent.
Speaker 1: Uh Dare I say it's going to be a good
Speaker 1: environment for the active stock manager, But I do think
Speaker 1: that we're setting the table for the tail when used
Speaker 1: to be better next year. We're in a a conversation with
Speaker 1: David Swerby, Managing director and portfolio manager at Encore Advisors.
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