WEBVTT - Target, Energy, Debt Ceiling, and Doximity (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.000 you listen to podcasts, and at Bloomberg dot com slash 0:00:20.040 --> 0:00:23.720 podcast turning stories. As Bailey was just talking about, it's 0:00:23.720 --> 0:00:28.640 on the retailers, it's Target, it's TJX. Some decent numbers, 0:00:28.720 --> 0:00:30.240 kind of in line, I guess you'd call it, but 0:00:30.320 --> 0:00:33.040 definitely some cautious outlooks. Let's kind of get a sense 0:00:33.040 --> 0:00:34.920 of what that means for these retailers and what it 0:00:34.960 --> 0:00:38.080 means for the consumer overall. Sor't going to round table 0:00:38.159 --> 0:00:40.960 this same a couple of smart voices. Jen Bartashi's senior 0:00:40.960 --> 0:00:44.960 industry analysts with Bloomberg Intelligence. She joins us, as does 0:00:45.040 --> 0:00:48.680 Bloomberg macro strategist Vince Cignarella, both on the phone here. 0:00:48.760 --> 0:00:51.080 So Jen, let's start with you here. What's your takeaway 0:00:51.159 --> 0:00:54.200 from a couple of big retailers, Target and TJX. 0:00:54.880 --> 0:00:58.600 Yeah, it's good morning, Paul. Really, the takeaway is that 0:00:58.680 --> 0:01:02.160 there's no news good news actually in this market, and 0:01:02.280 --> 0:01:06.319 that everybody understands that the consumer discretionary spending is continuing 0:01:06.319 --> 0:01:09.399 to soften. I think that one of the things that 0:01:09.440 --> 0:01:11.360 we're looking at with Target is how well they're going 0:01:11.400 --> 0:01:12.880 to be able to manage that, And one of the 0:01:12.920 --> 0:01:16.399 positives this morning was really about how they've reduced their 0:01:16.440 --> 0:01:19.120 inventory and they seem to be positioned to be able 0:01:19.160 --> 0:01:21.280 to respond a little bit more quickly than they have 0:01:21.480 --> 0:01:23.720 historically to changes in that consumer spending. 0:01:24.400 --> 0:01:27.840 Well, Jen, the inventory story seemed to be this overhanging 0:01:28.040 --> 0:01:31.480 for both Target and tj MAX for the entirety of 0:01:31.640 --> 0:01:35.080 last year. Is that problem in the past now or 0:01:35.160 --> 0:01:36.240 is there any remnants of it? 0:01:37.040 --> 0:01:41.120 Really that pattern that that problem is really in the past. 0:01:41.160 --> 0:01:45.000 I think both of the retailers have really reduced their inventory, 0:01:45.160 --> 0:01:49.040 especially in critical areas. So for example, with Target, their 0:01:49.080 --> 0:01:51.720 inventory is down sixteen percent, but it's down twenty five 0:01:51.760 --> 0:01:56.280 percent in discretionary categories, and TJX is also really worked 0:01:56.600 --> 0:02:00.560 to offload the excess inventory that they had, so the board, 0:02:00.680 --> 0:02:05.000 I think in the retail space, inventory is really pretty 0:02:05.000 --> 0:02:07.680 well positioned as we go into the summer months and 0:02:08.120 --> 0:02:10.320 more importantly into the critical back to school and back 0:02:10.360 --> 0:02:13.480 to college seasons, which it's hard to talk about already, 0:02:13.520 --> 0:02:14.840 but it is just around the corner. 0:02:15.360 --> 0:02:18.920 My last back to college is starting at Start in 0:02:18.919 --> 0:02:21.760 the fall after four. This is my fourth and last. 0:02:21.760 --> 0:02:25.280 Thank goodness, Vince Agnirella, love to get your thoughts here. 0:02:25.320 --> 0:02:27.000 What are you hearing out there on the street? You know, 0:02:27.280 --> 0:02:31.519 we see these retailers today and they're to me reasonably cautious. 0:02:31.200 --> 0:02:33.880 That drives of some of the ego data we've seen. 0:02:33.919 --> 0:02:35.440 And there, what are you hearing out there as it 0:02:35.440 --> 0:02:39.040 relates to the consumer inflation? How's everybody doing? 0:02:40.720 --> 0:02:42.880 Everybody's sort of so so to be honest, I mean, 0:02:43.480 --> 0:02:45.640 I think the interesting point when you're talking about the 0:02:45.639 --> 0:02:49.680 retailers and you're talking about reducing inventories, think about just 0:02:49.720 --> 0:02:52.679 a short time ago we were talking supply chain and 0:02:52.760 --> 0:02:56.120 balances and people couldn't get product. One of the things 0:02:56.160 --> 0:03:00.000 that's troubling, and I think just the whole economic space 0:03:00.040 --> 0:03:02.560 and what people are talking about is their huge search 0:03:02.639 --> 0:03:08.680 and consumer credit outstanding. We're seeing very large consumer credit balances. 0:03:08.400 --> 0:03:11.720 It's positive for the credit card companies and when you 0:03:11.720 --> 0:03:15.840 see big games for people like MasterCard, Annex, etc. And visa. 0:03:16.600 --> 0:03:20.320 You know, in normal times that's a positive, but in 0:03:20.400 --> 0:03:22.080 times like this, I think we look at that as 0:03:22.080 --> 0:03:25.800 a negative, and that consumers are stretched in terms of 0:03:25.840 --> 0:03:30.000 disposable income visa, the inflation, and more and more purchases 0:03:30.040 --> 0:03:36.000 are being basically bought on time, if you will, and 0:03:35.600 --> 0:03:39.000 that's just borrowing from economic growth in the future. And 0:03:39.120 --> 0:03:42.480 you know, I think markets and traders are still thinking 0:03:43.640 --> 0:03:46.960 that we are potentially going to see a recession before 0:03:46.960 --> 0:03:47.640 this year's out. 0:03:48.600 --> 0:03:52.360 Vince, following up on that story, the timeline here is 0:03:52.400 --> 0:03:55.240 really interesting because and Jen correct me if I'm wrong here, 0:03:55.240 --> 0:03:58.920 but both Home Depot and Target kind of said, look, 0:03:59.080 --> 0:04:02.480 we're expecting some sort of pullback in the consumer. It's 0:04:02.480 --> 0:04:05.760 not here yet, but it's coming, and it feels like 0:04:05.800 --> 0:04:07.440 it's a narrative we've heard from last year. So in 0:04:07.520 --> 0:04:09.920 terms of timing, e Vince, we know a lot of 0:04:09.960 --> 0:04:12.280 people are pricing in that final economic recession by the 0:04:12.400 --> 0:04:15.080 end of the year. But where are the signs of 0:04:15.120 --> 0:04:16.200 the consumer pullback. 0:04:17.200 --> 0:04:21.840 Well, I mean we're naturally not seeing them in I mean, 0:04:21.839 --> 0:04:23.240 if you look across the board, you look at the 0:04:23.240 --> 0:04:25.840 housing market, especially in the tri State there, it's off 0:04:25.920 --> 0:04:31.559 the charts. Where there's no inventory, so pricing it's totally 0:04:31.600 --> 0:04:34.000 a seller's market. People are paying well above ask and 0:04:34.040 --> 0:04:37.640 they're continuing to do that simply just to get a home. 0:04:38.000 --> 0:04:41.240 We're not seeing inventory because of high interest rates. So 0:04:41.440 --> 0:04:44.800 in a way, you know, I am a major critic 0:04:44.800 --> 0:04:47.520 of that said, because I think they've totally missed the 0:04:47.560 --> 0:04:51.239 whole idea of monetary policy. Just raising interest rates without 0:04:51.279 --> 0:04:54.440 reducing money is not being more than changing the price 0:04:54.480 --> 0:04:57.920 of money. It's not actually reducing demand, so that money 0:04:57.960 --> 0:04:59.920 is still out there and the consumers are still spent. 0:05:01.000 --> 0:05:02.680 But I think we're getting to a point where they're 0:05:02.680 --> 0:05:05.039 reaching the end of their rope. And until we get 0:05:05.080 --> 0:05:07.040 to that point, we're not going to see the pullback 0:05:07.080 --> 0:05:10.400 and spending that you know that people are talking about. 0:05:11.400 --> 0:05:14.760 You know when that happens. Timing is everything, but I 0:05:15.200 --> 0:05:19.320 wouldn't dare to try to call it necessarily and say 0:05:19.320 --> 0:05:20.880 at the end of this year or early next year 0:05:20.960 --> 0:05:23.479 or whatever. But it does come eventually. It does come. 0:05:23.560 --> 0:05:26.200 You run out of you just run out of places 0:05:26.480 --> 0:05:28.400 where you have income to spend. 0:05:29.720 --> 0:05:33.240 Jen both T tj X and Target called out, as 0:05:33.279 --> 0:05:35.880 have other other retailers recently, that the rise in shrink. 0:05:35.960 --> 0:05:40.719 What is shrink and how problematic is it for the retailers. 0:05:41.120 --> 0:05:44.440 Yeah, so shrink is is really loss of goods either 0:05:44.520 --> 0:05:48.040 due to cesser damage, and it's really as simple as that. 0:05:48.120 --> 0:05:51.039 And it's it's an issue that has always been around retail, 0:05:51.080 --> 0:05:55.479 but has been amplified significantly in the last year or so. 0:05:56.240 --> 0:05:59.120 And we've actually even heard retailers like Kroger talk about 0:06:00.320 --> 0:06:05.159 retail shrink and theft of you know, of actual retail 0:06:05.240 --> 0:06:09.560 gangs coming in and stealing products. It's something that is 0:06:09.680 --> 0:06:13.279 always there because you know, people you know, pocket things 0:06:13.320 --> 0:06:16.040 as they're in the stores. But when people are under 0:06:16.080 --> 0:06:19.479 economic stress, it sort of leads an opening, leads an 0:06:19.520 --> 0:06:22.280 opening to an increase in theft. And that's what we're 0:06:22.279 --> 0:06:24.720 seeing across the industry when we. 0:06:24.720 --> 0:06:28.360 Talk about the theft story, though, Jen, I mean, what, 0:06:28.360 --> 0:06:30.919 what is what's driving that exactly? Because has that target 0:06:31.000 --> 0:06:33.640 always kind of had this issue to some extent. 0:06:34.320 --> 0:06:36.880 Well, all retailers have this issue to some extent. It's 0:06:36.920 --> 0:06:39.520 it's it's a matter of how well it's being managed. 0:06:40.160 --> 0:06:42.479 And and when you think about, you know, where the 0:06:42.520 --> 0:06:46.279 consumer sits, especially consumers who shop in the lower to 0:06:46.400 --> 0:06:51.159 mid tier stores, they've seen their discretionary income start to 0:06:51.440 --> 0:06:57.039 be under more pressure, and it lends itself to more 0:06:57.080 --> 0:06:59.960 of that that type of theft than we see when 0:07:00.040 --> 0:07:03.479 people have free or spending capabilities. And it is something 0:07:03.480 --> 0:07:05.560 that is it goes in cycles, and we've seen it 0:07:05.600 --> 0:07:07.800 in the past with retail when we were in other 0:07:07.839 --> 0:07:12.080 recessionary type environments, and so it's nothing new, but it 0:07:12.200 --> 0:07:15.840 is a new issue, and it's remarkable in targets respect 0:07:15.880 --> 0:07:18.200 and that they're calling out a five hundred million dollars 0:07:18.240 --> 0:07:19.920 potential impact of profits this year. 0:07:20.080 --> 0:07:22.000 Yeah, that's that's the number that kind of trumps out 0:07:22.000 --> 0:07:25.360 at me. Hey, Vince, what are the next data points 0:07:25.560 --> 0:07:27.600 that you'll be looking for that the market's really focusing 0:07:27.640 --> 0:07:28.280 on you, abilieity. 0:07:29.120 --> 0:07:32.080 You know, not a lot this week, unfortunately, for us 0:07:32.120 --> 0:07:35.640 to really get our hands on where we get the 0:07:35.720 --> 0:07:39.440 usual jobless claims weekly number Philly FED is probably going 0:07:39.520 --> 0:07:42.400 to be interesting following what we saw in New York 0:07:42.920 --> 0:07:46.960 home sales. I don't think anyone's expecting any any major surprises. 0:07:47.640 --> 0:07:49.840 I think until we get to the f MC minutes 0:07:50.160 --> 0:07:55.520 on the twenty fourth, there's there's nothing amazingly substantial I 0:07:55.520 --> 0:07:58.480 think to really shift market sentiment. It's all going to 0:07:58.520 --> 0:08:01.560 be given taken. When I'm watching markets now, which you know, 0:08:01.600 --> 0:08:03.960 we're just we're in a bit of a seesaw trend 0:08:03.960 --> 0:08:07.640 that it simply feels like the day traders are ruling 0:08:07.960 --> 0:08:10.920 the roost and just just moving things back and forth 0:08:11.000 --> 0:08:14.720 and just taking taking advantage of enter day trends. But 0:08:15.000 --> 0:08:18.640 we're not seeing a really good feel I think for 0:08:18.720 --> 0:08:20.680 a market trend. I think it's that's going to come, 0:08:21.280 --> 0:08:24.520 hopefully with the statement that follows the f O MC 0:08:24.680 --> 0:08:28.120 or maybe they'll give us that word that everyone's looking for, 0:08:28.440 --> 0:08:30.640 which is pause, right. 0:08:30.680 --> 0:08:32.200 The P word, the pause were okay? 0:08:32.400 --> 0:08:32.680 All right? 0:08:32.760 --> 0:08:35.480 Jen Bartash is a senior industry anasal with Bloomberg Intelligence 0:08:35.520 --> 0:08:39.360 and Vince Cignerella, Bloomberg macro strategist. Thanks you guys for 0:08:39.480 --> 0:08:43.360 stepping in here talking about these big retailer starting reportant earnings. 0:08:43.400 --> 0:08:45.720 We've got Walmart tomorrow, so I'm sure we'll be talking 0:08:45.720 --> 0:08:48.360 to Jen again about that. We had TJ Max and 0:08:48.440 --> 0:08:53.360 Target reporting today. You know, cautious that that's the word there. 0:08:54.520 --> 0:08:55.680 You're listening to the team. 0:08:56.040 --> 0:09:00.240 Ken's a line program Bloomberg Markets weekdays at ten am Eastern. 0:09:00.080 --> 0:09:01.320 On Bloomberg dot com. 0:09:01.440 --> 0:09:04.560 The iHeartRadio app and the Bloomberg Business app, or listen 0:09:04.640 --> 0:09:06.680 on demand wherever you get your podcast. 0:09:09.480 --> 0:09:11.240 Pretty it seems like we kind of joke about this 0:09:11.360 --> 0:09:15.520 that every company in every industry, what did they all 0:09:15.559 --> 0:09:18.679 talk about on their conference? Cause AI? I mean your 0:09:18.880 --> 0:09:21.960 dog make dog food maker. You're talking AI and how 0:09:21.960 --> 0:09:23.520 that's going to drive your business. I think it's a 0:09:23.520 --> 0:09:27.240 scam approaching scam like levels. But how does it imply 0:09:27.320 --> 0:09:29.680 to investing? Our next guests can help us out there, 0:09:29.760 --> 0:09:32.840 Hugh Roberts, head of analytics at quant Insight. The name 0:09:33.000 --> 0:09:35.520 says it all, Hugh, I got to ask you AI. 0:09:35.559 --> 0:09:38.720 It's all over the place. How does it apply, if 0:09:38.760 --> 0:09:42.480 at all, to investing. You're the guy to have an answer. 0:09:42.480 --> 0:09:45.679 I think, yeah, Well, we think it massively does. The 0:09:46.240 --> 0:09:48.560 key difference to what we do is we don't have 0:09:48.600 --> 0:09:51.839 a kind of a large language model. It's obviously making 0:09:51.960 --> 0:09:55.760 all the hype around chat, gbt Bard and all the others, 0:09:56.200 --> 0:09:59.800 so we've not gone down the natural language processing route. Instead, 0:10:00.080 --> 0:10:02.880 we used the smart machine and just basically trained it 0:10:02.960 --> 0:10:08.360 on a range of financial securities single stocks, equity indices, yields, 0:10:08.520 --> 0:10:11.800 FX crosses and the like, and the macro environment, because 0:10:11.800 --> 0:10:14.440 the problem with macro more often than not, is not 0:10:14.640 --> 0:10:18.320 that we're we don't know what the mysterious X factor 0:10:18.440 --> 0:10:22.080 is it's driving ten new yields or dollar yen or spoos. 0:10:22.679 --> 0:10:24.959 It's that we don't know what the right pattern and 0:10:25.000 --> 0:10:27.839 the right jigsaw is. You know, our FX trading off 0:10:27.840 --> 0:10:31.480 interest rate differentials, are spoos trading off the strength or 0:10:31.480 --> 0:10:33.840 weakness of the dollars. You know, it's putting the different 0:10:33.880 --> 0:10:39.199 moving parts of growth, inflation, financial conditions, risk, appetite together 0:10:39.400 --> 0:10:42.199 in the right order. And that's exactly what AI can 0:10:42.240 --> 0:10:47.160 help with. So AI can help, but not necessarily the 0:10:47.240 --> 0:10:51.320 natural language processing the LLM models, more just using to 0:10:51.360 --> 0:10:55.160 train it on smart data, on understanding the patterns of 0:10:55.200 --> 0:10:59.720 association between financial markets and the broader macro environment. 0:11:00.640 --> 0:11:04.520 Does that apply to every asset class though, I mean, 0:11:05.559 --> 0:11:07.760 or is this just a stock market kind of thing? 0:11:09.120 --> 0:11:11.800 Well, we train that on everything, but it's a really 0:11:11.800 --> 0:11:15.679 fair question because obviously you do see discrepancies within that. 0:11:15.840 --> 0:11:19.520 So sometimes you know, commodities get driven exclusively by a 0:11:19.559 --> 0:11:21.480 supply squeeze, in which case, you know, you've got to 0:11:21.480 --> 0:11:24.040 get into the weeds in terms of you know, is 0:11:24.080 --> 0:11:28.640 it a weather event that's impacting crop production levels, for example, 0:11:29.160 --> 0:11:31.079 or within the equity space. You know, there are certain 0:11:31.160 --> 0:11:33.800 sectors and I think even the most bottom up company 0:11:33.800 --> 0:11:37.200 fundamental guy would acknowledge a macro place. They're typically the 0:11:37.200 --> 0:11:42.720 interest rates sensitive sectors like finance like housing, et cetera, 0:11:43.400 --> 0:11:45.560 or even growth versus value thinking about the level that 0:11:45.600 --> 0:11:49.000 bond yields play in that kind of style allocation. But 0:11:49.040 --> 0:11:50.800 then we'd be the first to admit, you know, if 0:11:50.800 --> 0:11:56.719 you're talking about a new biotech stock where it come 0:11:56.800 --> 0:11:59.839 up with a new prescriptive drug of some kind, and 0:12:00.080 --> 0:12:02.840 it's about their R and D capabilities, it's about their 0:12:02.880 --> 0:12:05.640 ability to patent it so they can monetize it properly. 0:12:06.000 --> 0:12:09.319 But that's always be more radiosyncratic. So there are variances 0:12:09.400 --> 0:12:13.720 across the entire kind of capital market structure. If you 0:12:13.720 --> 0:12:18.800 think about it, what financial asset is completely impervious to inflation? 0:12:19.200 --> 0:12:23.959 The fed financial conditions, risk appetites, these are just truisms 0:12:23.960 --> 0:12:24.680 in our life. 0:12:25.240 --> 0:12:27.760 So Hugh, right now, what are some of the data points, 0:12:28.200 --> 0:12:31.240 data sets that you guys at quant Insights are really 0:12:31.280 --> 0:12:32.080 focusing on now? 0:12:33.640 --> 0:12:35.600 Yeah, So what we're lediting is is a little bit 0:12:35.640 --> 0:12:39.880 of a regime change for US equity markets. I mean, 0:12:40.000 --> 0:12:41.880 it is a little bit self evident, because obviously the 0:12:41.960 --> 0:12:44.960 narrative has been out there for some time, but we're 0:12:45.000 --> 0:12:48.840 seeing that while everyone's talking. Obviously all these amazing stats 0:12:48.880 --> 0:12:51.440 about Apple being the size of the russel. Two thousand 0:12:51.600 --> 0:12:54.880 or half dozen stocks explain the entire performance for twenty 0:12:54.920 --> 0:12:58.160 twenty three, and you can ascribe that to AI, you 0:12:58.200 --> 0:13:00.600 can ascribe it to a little bit of safety status, 0:13:00.600 --> 0:13:02.959 and also maybe the moving yields as the bond market 0:13:03.000 --> 0:13:06.200 starts for discount and easier fed. You've got to be 0:13:06.200 --> 0:13:08.079 more nuanced than that, we would argue if you're actually 0:13:08.080 --> 0:13:10.560 trading this stuff. So it's not actually the level of 0:13:11.160 --> 0:13:15.120 bond yields and that is driving US tech stocks on 0:13:15.200 --> 0:13:18.040 our models. It's actually a the shape of the yield 0:13:18.040 --> 0:13:22.559 curve and b bond revolve interstrate volatility that is more important. 0:13:23.240 --> 0:13:25.040 And what we're finding at the moment is that the 0:13:25.120 --> 0:13:27.880 move lower. We actually use Swatch involve rather than the 0:13:27.880 --> 0:13:30.240 move index, but the move index tends to be more 0:13:30.280 --> 0:13:32.800 well known. The fall in the move index over the 0:13:32.880 --> 0:13:35.439 last month or so has been a huge tailwind. That's 0:13:35.440 --> 0:13:38.199 been a positive, and that's raising model value for spoos, 0:13:38.320 --> 0:13:39.960 NAVVAC XLK. 0:13:40.200 --> 0:13:40.959 All this stuff. 0:13:41.840 --> 0:13:44.840 A steeper yield curve is also a big tail wind, 0:13:44.880 --> 0:13:50.120 and that's helping move model value higher against that given 0:13:50.120 --> 0:13:53.880 that we finally feels it's most eagerly anticipated recession in 0:13:53.920 --> 0:13:55.720 a long time, and it feels like everyone's been waiting 0:13:55.760 --> 0:13:57.920 for it. For the data in the last month or so, 0:13:58.000 --> 0:13:59.720 it's felt like it is starting to roll over, but 0:13:59.760 --> 0:14:03.240 at the margin, both in the States and Europe and China, 0:14:04.760 --> 0:14:08.520 and that's been a headwind to macro warranted serve value 0:14:08.679 --> 0:14:11.400 for all this stuff. So what we do is obviously 0:14:11.400 --> 0:14:14.280 balance up the tailwinds and the headwinds. And at the moment, 0:14:14.320 --> 0:14:16.480 the moves in the bond market are more than offsetting 0:14:17.679 --> 0:14:22.200 the negative drag from gross the negative drag from inflation expectations. 0:14:22.640 --> 0:14:24.680 But the trouble is is that markets have moved equity 0:14:24.680 --> 0:14:26.720 markets have leaved ahead of that. So we've got the nowsack, 0:14:26.840 --> 0:14:28.760 for example, about five percent rich. 0:14:30.160 --> 0:14:31.400 To where it should. 0:14:31.200 --> 0:14:34.680 Be at the moment. So the good moves is macro warranted, 0:14:34.960 --> 0:14:38.600 macro momentum is moving higher, but the health warning is 0:14:38.880 --> 0:14:40.120 the market's ahead of itself. 0:14:40.920 --> 0:14:42.800 Well, it's interesting that we say the market's ahead of 0:14:42.840 --> 0:14:46.400 itself when it's kind of been stuck range bound for 0:14:47.480 --> 0:14:50.760 two months now, how much of the kind of carnage 0:14:50.800 --> 0:14:55.560 of last year is almost a tailwind as well to 0:14:56.680 --> 0:14:59.160 the stock market this year around, even as we're staring 0:14:59.200 --> 0:14:59.880 at a recession. 0:15:00.120 --> 0:15:01.560 Does it? Is it just up from here? 0:15:02.680 --> 0:15:05.400 Yeah? I think that's really fair comment, at least for 0:15:05.880 --> 0:15:08.320 justifying price action in January. And it did feel like 0:15:08.360 --> 0:15:10.960 a lot of last year's losers, the ones that got 0:15:11.000 --> 0:15:15.080 beaten up the most, did see a reallocation towards them 0:15:15.160 --> 0:15:16.560 at the beginning of the year. And I think that's 0:15:16.560 --> 0:15:18.640 a really fair comment, and there is flow evidence to 0:15:18.720 --> 0:15:21.360 back that up as well. But it has to be 0:15:21.400 --> 0:15:23.040 more than that when you look at the price action, 0:15:23.640 --> 0:15:25.680 and I think what started off was a twenty twenty 0:15:25.680 --> 0:15:29.920 two losers reallocating into twenty twenty three winners morphed into 0:15:29.920 --> 0:15:31.880 a bit of a bond yeel trade and more in 0:15:31.920 --> 0:15:33.680 the last whatever it is six to eight weeks, is 0:15:33.720 --> 0:15:37.280 morphed into a generative AI trade. But our point would be, 0:15:37.360 --> 0:15:40.320 is it interestingly if we look at the nasdak so 0:15:40.360 --> 0:15:43.640 we have we compute and our squared steps, that's just 0:15:43.680 --> 0:15:45.800 goodness of fit how good a job are our macro 0:15:45.920 --> 0:15:49.480 factors doing of explaining price action from whatever we're looking at. 0:15:49.880 --> 0:15:53.000 If we looked at the Nasdak from January up until 0:15:53.000 --> 0:15:56.880 about ten days ago, our our squared was below our 0:15:56.960 --> 0:15:59.720 threshold for macro regime, So that would speak to the 0:15:59.720 --> 0:16:03.160 fact in January now that was driving off flow and 0:16:03.200 --> 0:16:05.920 in February and March it was trading off the generative 0:16:06.040 --> 0:16:09.400 AI hype. Now it's back above our threshold. We explained 0:16:09.480 --> 0:16:12.520 seventy percent of price action in the Nasdak and we 0:16:12.600 --> 0:16:15.240 have a five percent rich So our message to people 0:16:15.280 --> 0:16:18.640 at the moment is the generative AI hypeer taking us 0:16:18.640 --> 0:16:21.240 this far. But it's not the only game in town anymore. 0:16:21.400 --> 0:16:25.480 There's also macro factors at work, and that's the headwind 0:16:25.560 --> 0:16:28.000 that you're seeing from growth and the reflation dynamic and 0:16:28.040 --> 0:16:31.200 lower commodity markets. But the tail when they're getting from 0:16:31.240 --> 0:16:34.480 moves in boon vol and the yield curve, and you've 0:16:34.480 --> 0:16:36.560 got to try and weigh all those up. And that's 0:16:36.600 --> 0:16:40.000 what that's where back to the original conversation where AI 0:16:40.080 --> 0:16:41.600 can help Q. 0:16:41.800 --> 0:16:44.280 I know you guys are are macro focused. Do you 0:16:44.360 --> 0:16:46.880 care at all about the micro like do you care 0:16:46.920 --> 0:16:48.680 the fact that you know we're finishing up earning the 0:16:48.720 --> 0:16:51.480 season here, and do you even look at that kind 0:16:51.480 --> 0:16:52.240 of stuff. 0:16:52.720 --> 0:16:55.440 Well, our clients do. I mean, we don't have any 0:16:56.160 --> 0:16:59.880 kind of bottom up variable so that we model. And 0:17:00.080 --> 0:17:02.360 that's simply a commercial division, to be completely honest, it's 0:17:02.400 --> 0:17:06.040 because that area of the research world is incredibly well covered. 0:17:06.040 --> 0:17:08.240 If there are so many people looking at company fundamental, 0:17:08.359 --> 0:17:10.359 there's just no edge there as far as we can tell. 0:17:10.800 --> 0:17:14.399 But the way our equity clients would use us is 0:17:14.440 --> 0:17:16.439 they would still do their bottom up analysis. They'd look 0:17:16.440 --> 0:17:20.160 at the target earnings, the home depot yesterday and they'll 0:17:20.200 --> 0:17:20.840 do their kind. 0:17:20.720 --> 0:17:21.960 Of bottom up analysis. 0:17:22.160 --> 0:17:24.399 But then they'd say, well, we know we're in macro 0:17:24.520 --> 0:17:26.439 markets as well, so we need to put a macro 0:17:26.680 --> 0:17:28.800 overlay on top of this as well. And then you 0:17:28.840 --> 0:17:31.520 get the holistic picture. It's where bottom up meets top down. 0:17:31.800 --> 0:17:33.719 But we only provide one half of that equation. 0:17:33.800 --> 0:17:34.960 To be honest, h. 0:17:34.960 --> 0:17:38.760 You about thirty seconds here in your analysis, where does 0:17:38.760 --> 0:17:41.359 the currency picture fall of How much of a ripple 0:17:41.400 --> 0:17:46.119 effect is the dollars well stagnation for now going to 0:17:46.160 --> 0:17:48.480 have on the rest of the markets? 0:17:48.680 --> 0:17:51.600 YEA, the most interesting thing on the FX models at 0:17:51.600 --> 0:17:54.639 the moment is actually that you're a dollar, and factually 0:17:54.640 --> 0:17:58.440 this speaks to equities as well European assets, both European 0:17:58.440 --> 0:18:03.280 equities relative to the S and euro dollar. Europe is 0:18:03.280 --> 0:18:06.000 the highbe to growth play. It is most sensitive to 0:18:06.840 --> 0:18:10.960 global GDP improving to commodity market rallying, and euro dollar 0:18:11.000 --> 0:18:15.280 screens is very slightly rich and eased you. The Eurozone 0:18:15.280 --> 0:18:19.000 ETF screens is very slightly rich relative to spy. So 0:18:19.160 --> 0:18:21.560 if you think we are about to get the recession 0:18:21.560 --> 0:18:23.560 we've all been waiting for and global growth is going 0:18:23.600 --> 0:18:26.920 to turn aggressively lower YEP, then all those trades that 0:18:26.960 --> 0:18:29.200 have over what Europe might need to be reconsidered. 0:18:29.960 --> 0:18:33.000 You always good to chat with you a different perspective, 0:18:33.160 --> 0:18:36.880 refreshing perspective from the macro side of the equation. Hugh Roberts, 0:18:37.000 --> 0:18:40.399 head of analytics at Quat Insights. They are based in 0:18:40.720 --> 0:18:42.080 the UK in London. 0:18:42.400 --> 0:18:45.520 You're listening to the tape can Tour live program Bloomberg 0:18:45.600 --> 0:18:49.199 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:18:49.240 --> 0:18:51.320 tune in app, Bloomberg dot Com, and the. 0:18:51.280 --> 0:18:52.480 Bloomberg Business app. 0:18:52.520 --> 0:18:55.320 You can also listen live on Amazon Alexa from our 0:18:55.359 --> 0:19:01.000 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:19:02.040 --> 0:19:03.840 The next guest I really want to talk to because 0:19:03.840 --> 0:19:06.879 I'm really interested in this fund. Here Savina Risova, global 0:19:06.920 --> 0:19:11.119 head of Research for Dimensional Fund Advisors. Now I'm a 0:19:11.119 --> 0:19:13.439 little I'm a little nervous here because she has her 0:19:13.560 --> 0:19:17.000 MBA and PhD from the University of Chicago, which means 0:19:17.080 --> 0:19:19.040 they really like numbers. And I was told that there 0:19:19.080 --> 0:19:21.840 would not be math on this show. But we'll see 0:19:21.880 --> 0:19:24.280 what we can do here, Savina. I see Dimensional. Why 0:19:24.280 --> 0:19:28.520 I pull up the stockholders list. I see Dimensional as 0:19:28.640 --> 0:19:32.000 top top, top shareholder and a number of big companies 0:19:32.040 --> 0:19:34.280 tell us about Dimensional First, what do you guys do? 0:19:34.359 --> 0:19:37.200 What's your strategy? Sure? 0:19:37.480 --> 0:19:40.919 Yeah. They Mentional as combining the best of kind of 0:19:40.960 --> 0:19:44.879 two words or two ways of investing, the best of indexing, 0:19:45.160 --> 0:19:50.680 low costs, broad diversification, transparency with the best of her 0:19:50.880 --> 0:19:54.680 active systematic active investing, which is pursuit of premiums and 0:19:54.880 --> 0:20:00.960 a daily, flexible implementation process. And we offer kind of 0:20:01.200 --> 0:20:04.280 that type of approach both in equities and fixed income. 0:20:04.680 --> 0:20:09.000 One investment philosophy, many investment solutions, and. 0:20:09.000 --> 0:20:13.920 It sounds like though you favor kind of the indexing overactive. 0:20:14.040 --> 0:20:15.200 Is that right? Based on your. 0:20:15.119 --> 0:20:19.960 Note, it's a combination essentially of the benefits of both. 0:20:20.440 --> 0:20:24.760 Indexing has a lot of nice features with it, as 0:20:24.760 --> 0:20:27.800 they mentioned, broad diversification and low costs are the first 0:20:27.800 --> 0:20:30.920 that come to mind, but also it has costs, and 0:20:31.000 --> 0:20:33.119 I think in the last few years we've seen the 0:20:33.200 --> 0:20:36.560 pandulum swing a lot away from traditional active to indexing, 0:20:36.600 --> 0:20:39.639 which journey has been a great trend, but people have 0:20:39.880 --> 0:20:42.920 also started to perceive indexing as a free lunch out there. 0:20:43.240 --> 0:20:46.320 It has its own costs. There are regiditis associated with 0:20:46.400 --> 0:20:49.320 indexing and also lack of pursuit of premiums in general 0:20:49.520 --> 0:20:52.439 when it comes to playing market index solutions. So we 0:20:52.520 --> 0:20:55.639 try to basically deliver the benefits of indexing, but also 0:20:55.960 --> 0:21:00.800 go beyond indexing by focusing on pursuit of premium systematically, 0:21:00.920 --> 0:21:04.400 day and daily in our investment solutions. 0:21:04.560 --> 0:21:07.640 So, Sabine, I know you at Dimensional to really take 0:21:07.680 --> 0:21:10.879 a look at the retirement business, and you've got to 0:21:10.880 --> 0:21:14.919 paper out entitled A Little Goes a Long Way. What 0:21:14.920 --> 0:21:15.640 do you mean by that? 0:21:17.240 --> 0:21:20.040 What do you mean by that is that if people 0:21:20.320 --> 0:21:24.560