1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast 5 00:00:15,560 --> 00:00:18,479 Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,640 Speaker 1: at Bloomberg dot com Slash podcast. A couple of days ago, 7 00:00:22,640 --> 00:00:25,400 Speaker 1: was driving by the Short Hills Mall in New Jersey 8 00:00:25,520 --> 00:00:28,960 Speaker 1: and it was packed, leading me to think that consumers 9 00:00:28,960 --> 00:00:31,000 Speaker 1: are out there spending. Let's get some more color on 10 00:00:31,120 --> 00:00:33,720 Speaker 1: all of that, because I haven't done any holiday shopping. 11 00:00:33,800 --> 00:00:37,200 Speaker 1: But Mary Shore, senior equity analysts for Columbia Thread Needle 12 00:00:37,240 --> 00:00:41,839 Speaker 1: Investments Joints, is, Marie, how's this holiday shopping season shaping 13 00:00:41,920 --> 00:00:45,519 Speaker 1: up for the retailers? Thanks so much for having me. 14 00:00:45,880 --> 00:00:51,400 Speaker 1: The holiday shopping season has turned out very positive so far. 15 00:00:51,479 --> 00:00:55,040 Speaker 1: We heard that from companies as they reported through November 16 00:00:55,600 --> 00:00:59,080 Speaker 1: and over all of you on the consumer remains very positive. 17 00:00:59,600 --> 00:01:03,000 Speaker 1: Um the headline trends over Black Friday were a little 18 00:01:03,040 --> 00:01:05,880 Speaker 1: more mixed, but I think what we're seeing is that 19 00:01:05,920 --> 00:01:08,920 Speaker 1: the shape of the season this year is smoother than 20 00:01:08,959 --> 00:01:13,520 Speaker 1: what we've seen in the past as consumers have prioritized 21 00:01:13,560 --> 00:01:17,000 Speaker 1: their shopping earlier. But this is not necessarily a bad 22 00:01:17,080 --> 00:01:21,360 Speaker 1: thing because that does help maximize full price selling and 23 00:01:21,440 --> 00:01:27,600 Speaker 1: reduces operational stress for the retailers. So are they getting 24 00:01:27,600 --> 00:01:31,200 Speaker 1: all the stuff that consumers need, our consumers finding the 25 00:01:31,280 --> 00:01:35,440 Speaker 1: stuff they're searching for, or is there really this um 26 00:01:35,440 --> 00:01:41,560 Speaker 1: you know, lack of goods and a rise in prices. 27 00:01:41,600 --> 00:01:44,559 Speaker 1: That's a great question because we've heard so much about 28 00:01:44,640 --> 00:01:49,560 Speaker 1: the supply chain disruption and congestion that continues. But all 29 00:01:49,640 --> 00:01:52,880 Speaker 1: things considered, I think the companies have done a very 30 00:01:52,920 --> 00:01:56,360 Speaker 1: good job, except for a couple of companies with large 31 00:01:56,400 --> 00:02:01,360 Speaker 1: exposure to Vietnam, companies have been able to build inventory 32 00:02:01,400 --> 00:02:04,560 Speaker 1: into the holiday and they're confident in their ability to 33 00:02:04,640 --> 00:02:07,600 Speaker 1: meet demand. Of course, this is all coming at a cost, 34 00:02:08,040 --> 00:02:11,360 Speaker 1: and the companies have now built extended lead times and 35 00:02:11,480 --> 00:02:14,200 Speaker 1: higher freight costs into their plans through the first half 36 00:02:14,240 --> 00:02:16,440 Speaker 1: of the year. But I would say outside for a 37 00:02:16,480 --> 00:02:21,000 Speaker 1: couple of key items like maybe some gaming consoles, consumers 38 00:02:21,000 --> 00:02:24,000 Speaker 1: should still be able to find what they're looking for 39 00:02:24,080 --> 00:02:27,760 Speaker 1: as we move into the final stretch. So Mari, am 40 00:02:27,760 --> 00:02:30,880 Speaker 1: I going to get any deals when I start shopping here, 41 00:02:30,880 --> 00:02:35,960 Speaker 1: How let's the promotional environment out there? That's another great question. 42 00:02:36,000 --> 00:02:40,200 Speaker 1: Throughout the pandemic, we have seen the retailers reduce their 43 00:02:40,320 --> 00:02:45,080 Speaker 1: overall promotional activity as they have planned inventory in a 44 00:02:45,160 --> 00:02:48,400 Speaker 1: very detail, in a very discipline way. And now I 45 00:02:48,440 --> 00:02:51,360 Speaker 1: think they all realize that they tend do more with 46 00:02:51,560 --> 00:02:57,480 Speaker 1: less and actually drive higher margin dollars with less inventory. 47 00:02:57,560 --> 00:03:00,720 Speaker 1: And so the net results of that will the lower 48 00:03:00,760 --> 00:03:05,960 Speaker 1: promotional activity I believe for the foreseeable future, and that 49 00:03:06,040 --> 00:03:10,000 Speaker 1: really should be across category, and it's a reflection of 50 00:03:11,000 --> 00:03:14,400 Speaker 1: not just the near term supply chain congestion, but also 51 00:03:14,440 --> 00:03:16,840 Speaker 1: the fact that retailers are just doing a much better 52 00:03:17,000 --> 00:03:22,640 Speaker 1: job of managing inventory. Alright, so what kind of inflation 53 00:03:22,680 --> 00:03:24,760 Speaker 1: are we seeing? I know, Friday, we're going to get 54 00:03:24,800 --> 00:03:29,040 Speaker 1: the CPI UM numbers out, so we'll find out soon 55 00:03:29,160 --> 00:03:34,040 Speaker 1: enough that basket of goods. But in terms of you know, um, 56 00:03:34,160 --> 00:03:38,680 Speaker 1: what what consumers are really feeling? How high is it? Well, 57 00:03:38,720 --> 00:03:40,640 Speaker 1: it is hard to measure, and of course it does 58 00:03:40,760 --> 00:03:44,880 Speaker 1: vary by category. There are certain categories like food where 59 00:03:45,000 --> 00:03:48,200 Speaker 1: we're seeing inflation currently running in the load to mid 60 00:03:48,240 --> 00:03:52,960 Speaker 1: single digit range, but in other more discretionary categories where 61 00:03:53,000 --> 00:03:57,280 Speaker 1: there is limited supply, their strong demands driven by strong 62 00:03:57,400 --> 00:04:02,440 Speaker 1: product innovation and low or promotional activity. As we discussed, 63 00:04:02,760 --> 00:04:06,800 Speaker 1: you could see inflation um or you know, net pricing 64 00:04:07,000 --> 00:04:10,400 Speaker 1: rising above those mid single digit levels, but it is 65 00:04:10,440 --> 00:04:13,800 Speaker 1: hard to measure because some of these categories the consumer 66 00:04:13,920 --> 00:04:18,160 Speaker 1: is not buying as frequently, so it's in some cases 67 00:04:18,240 --> 00:04:22,839 Speaker 1: more difficult to notice the pricing increases. But overall, the 68 00:04:23,040 --> 00:04:26,679 Speaker 1: companies have seen a really positive response to the pricing 69 00:04:26,720 --> 00:04:29,400 Speaker 1: that they have taken, and there really has not been 70 00:04:29,520 --> 00:04:32,920 Speaker 1: very much pushed back from the com humor. So mar again, 71 00:04:32,920 --> 00:04:34,760 Speaker 1: when I drove by my local shopping mall a couple 72 00:04:34,800 --> 00:04:37,919 Speaker 1: of days ago, it was full with shoppers. But I 73 00:04:37,960 --> 00:04:43,680 Speaker 1: still have that question, is the United States still overstored? 74 00:04:43,800 --> 00:04:47,080 Speaker 1: Is there still too much you know, kind of too 75 00:04:47,080 --> 00:04:48,599 Speaker 1: many stores out there, and we've got to reduce the 76 00:04:48,600 --> 00:04:52,120 Speaker 1: footprint even more. It's a great question. I think that 77 00:04:52,440 --> 00:04:56,640 Speaker 1: really coming out of the recession, the companies has tried 78 00:04:56,760 --> 00:04:59,800 Speaker 1: to take a closer look at their store basis and 79 00:05:00,040 --> 00:05:04,400 Speaker 1: close on profitable stores. Um. During the pandemic, we heard 80 00:05:04,400 --> 00:05:07,120 Speaker 1: about like the department stores for instance, coming out and 81 00:05:07,160 --> 00:05:10,360 Speaker 1: closing hundreds of stores. So what I would say in 82 00:05:10,480 --> 00:05:14,400 Speaker 1: terms of the store rationalization that still needs to happen, 83 00:05:14,600 --> 00:05:17,680 Speaker 1: I think a lot of the heavy lifting has already 84 00:05:17,720 --> 00:05:21,279 Speaker 1: been done. But going forward, we will continue to see 85 00:05:21,800 --> 00:05:27,200 Speaker 1: select and strategic store closures as companies focus on their 86 00:05:27,360 --> 00:05:31,440 Speaker 1: most profitable doors. All right, So that's what we that's 87 00:05:31,440 --> 00:05:35,599 Speaker 1: what we see UM, certainly in the car industry where 88 00:05:35,600 --> 00:05:41,280 Speaker 1: they focus selling the highest margin products UM and leave 89 00:05:41,320 --> 00:05:42,919 Speaker 1: the other ones aside. And that's what we're seeing, I 90 00:05:42,920 --> 00:05:46,840 Speaker 1: guess across other industries as well, right Mari, Yes, absolutely, 91 00:05:46,960 --> 00:05:50,520 Speaker 1: As as I said, the companies are very focused on 92 00:05:50,839 --> 00:05:56,640 Speaker 1: maximizing margin rate and margin dollars, and so they are 93 00:05:57,640 --> 00:06:01,880 Speaker 1: doing a better job of streamline not just their store bases, 94 00:06:01,920 --> 00:06:06,200 Speaker 1: but also they are assortment their product assortments UM to 95 00:06:06,360 --> 00:06:11,480 Speaker 1: focus on the most productive and the highest margin skews. Mary, 96 00:06:11,520 --> 00:06:13,440 Speaker 1: thank you so much for joining us. We really appreciate 97 00:06:13,440 --> 00:06:16,000 Speaker 1: getting your perspective here on retail sales as we head 98 00:06:16,000 --> 00:06:21,159 Speaker 1: into the whining days of the holiday selling season. Mary Shore, 99 00:06:21,240 --> 00:06:30,719 Speaker 1: senior equity analysts for Colombia Thread Needle Investments. You know, 100 00:06:30,720 --> 00:06:34,720 Speaker 1: when the Omnicom news broke, the markets obviously sold off 101 00:06:34,720 --> 00:06:39,680 Speaker 1: pretty significantly. They bounced back with a vengeance, vengeance, very 102 00:06:39,839 --> 00:06:41,680 Speaker 1: very quickly. And it's kind of getting to the point 103 00:06:41,680 --> 00:06:44,720 Speaker 1: now where the investors are almost immune to some of 104 00:06:44,720 --> 00:06:48,440 Speaker 1: this uh pandemic news flow that we've been dealing with 105 00:06:48,440 --> 00:06:50,320 Speaker 1: for our past twenty months. And see what we're hearing 106 00:06:50,640 --> 00:06:53,520 Speaker 1: down in the trenches. Shawn Snyder, head of investment Strategy 107 00:06:53,560 --> 00:06:58,640 Speaker 1: for US Wealth Management Group at City UH Sean, thanks 108 00:06:58,640 --> 00:07:00,680 Speaker 1: so much for joining us here. As you talk to 109 00:07:00,800 --> 00:07:05,640 Speaker 1: your clients, what are they saying about how they're digesting 110 00:07:05,640 --> 00:07:08,120 Speaker 1: all this pandemic news because it doesn't seem like it 111 00:07:08,279 --> 00:07:12,760 Speaker 1: has the same effect that it used to. Thanks for 112 00:07:12,800 --> 00:07:15,240 Speaker 1: having me. I really appreciate it. I do think that 113 00:07:15,480 --> 00:07:19,960 Speaker 1: investors have developed some sort of herd immunity against COVID 114 00:07:20,040 --> 00:07:22,560 Speaker 1: news um. You know, I know we retired the word 115 00:07:22,600 --> 00:07:24,760 Speaker 1: transitory when it comes to inflation, but you know, it 116 00:07:24,800 --> 00:07:27,080 Speaker 1: seems like they're kind of looking at omnicrom is maybe 117 00:07:27,160 --> 00:07:30,680 Speaker 1: something that's transitory. And you know, there has been some 118 00:07:30,880 --> 00:07:33,800 Speaker 1: positive news, you know, about the variant. It's hard to 119 00:07:33,800 --> 00:07:36,920 Speaker 1: say the variant is positive, but you know there's some 120 00:07:37,040 --> 00:07:41,320 Speaker 1: news and antibodio therapies appear to be effective against omnicrom um. 121 00:07:41,360 --> 00:07:44,720 Speaker 1: You know, hospitalizations appear to be held in check so far, 122 00:07:45,320 --> 00:07:47,280 Speaker 1: you know, got a lot of the suspeculative, it's not 123 00:07:47,400 --> 00:07:50,560 Speaker 1: you know, actual confirmed data, you know, and the symptoms 124 00:07:50,560 --> 00:07:53,400 Speaker 1: seemed to be more mild. And I think, you know, 125 00:07:53,440 --> 00:07:56,920 Speaker 1: we heard about the third dose regime potentially neutralizing the 126 00:07:57,000 --> 00:08:00,280 Speaker 1: variant this morning. But I think perhaps even more importantly 127 00:08:01,280 --> 00:08:05,000 Speaker 1: is that it looks like the current vaccines may protect 128 00:08:05,080 --> 00:08:08,240 Speaker 1: against severe disease. And I think that's a really important 129 00:08:08,240 --> 00:08:11,520 Speaker 1: point that we need to consider. Yeah. Absolutely, I mean, 130 00:08:11,960 --> 00:08:14,560 Speaker 1: as long as all all it does is infect a 131 00:08:14,560 --> 00:08:17,800 Speaker 1: bunch of people and um doesn't put very many in 132 00:08:17,800 --> 00:08:20,920 Speaker 1: the hospital, then it's not as scary, right, all right. 133 00:08:20,960 --> 00:08:22,640 Speaker 1: And Plus, if you think the United States has a 134 00:08:23,120 --> 00:08:25,800 Speaker 1: you know, sixty percent of its vaccination or six pc 135 00:08:25,920 --> 00:08:29,640 Speaker 1: of it's population, uh fully vaccinated, you know that, then 136 00:08:30,080 --> 00:08:33,480 Speaker 1: you know, we're the real problem that happens with these 137 00:08:33,480 --> 00:08:39,479 Speaker 1: waves is the surgeon hospitalizations and seeing healthcare systems overwhelmed. 138 00:08:39,600 --> 00:08:42,240 Speaker 1: And that's really why you need to enter lockdowns and 139 00:08:42,600 --> 00:08:44,319 Speaker 1: that type of scenario. But if we're not seeing the 140 00:08:44,360 --> 00:08:48,720 Speaker 1: surgeon hospitalizations, UM, and we're not seeing seeing severe disease 141 00:08:48,720 --> 00:08:51,800 Speaker 1: because people have at least some protection, UM, then they're 142 00:08:51,840 --> 00:08:54,760 Speaker 1: you're less likely to go back into that renewed lockdown scenario. 143 00:08:55,040 --> 00:08:57,760 Speaker 1: It's less likely to have a large impact on the economy, 144 00:08:58,280 --> 00:09:01,480 Speaker 1: and I think that's why markets are know, have sense 145 00:09:01,520 --> 00:09:03,480 Speaker 1: to recover it in just eight days. I do have 146 00:09:03,559 --> 00:09:06,240 Speaker 1: to say that I was planning on working from London 147 00:09:06,280 --> 00:09:07,920 Speaker 1: next week and I and now I am no longer 148 00:09:07,960 --> 00:09:11,920 Speaker 1: going to. Even though I was going to work in 149 00:09:11,960 --> 00:09:15,240 Speaker 1: London next week, but now I'm not going to. Why not? 150 00:09:16,080 --> 00:09:19,920 Speaker 1: Because the omicron variant is spreading like wildfire. And even 151 00:09:19,960 --> 00:09:24,280 Speaker 1: though I'm vaccinated, um, and even though I'm not afraid 152 00:09:24,400 --> 00:09:28,720 Speaker 1: I would get seriously ill, I don't feel like getting it. 153 00:09:29,400 --> 00:09:31,120 Speaker 1: You know, I would have to sit on a plane 154 00:09:31,120 --> 00:09:33,080 Speaker 1: with a bunch of people. I'd have to wear a 155 00:09:33,120 --> 00:09:35,800 Speaker 1: mask the whole time. You know how much I hate that. Um, 156 00:09:35,840 --> 00:09:37,679 Speaker 1: I probably have to wear a mask in the London 157 00:09:37,720 --> 00:09:40,280 Speaker 1: office everywhere I go. I don't want to deal with that. 158 00:09:40,360 --> 00:09:44,240 Speaker 1: I'd much rather just stay home. So at least, you know, anecdotally, 159 00:09:45,000 --> 00:09:47,800 Speaker 1: some people are changing their plans like me. Interesting, all right, 160 00:09:47,840 --> 00:09:50,480 Speaker 1: So Sean, given that kind of backdrop, what are you 161 00:09:50,480 --> 00:09:54,600 Speaker 1: telling your clients these days? Well, we're actually focusing on 162 00:09:54,640 --> 00:09:57,720 Speaker 1: a couple of things. We're telling our clients to essentially 163 00:09:57,800 --> 00:10:01,080 Speaker 1: upgrade the quality of their portfolios. And you know, we've 164 00:10:01,120 --> 00:10:03,880 Speaker 1: sort of bucketed that into two different core themes. One 165 00:10:04,080 --> 00:10:06,120 Speaker 1: is long term Leaders and then the other one is 166 00:10:06,600 --> 00:10:08,440 Speaker 1: uh sort of be where the cash thief. And so 167 00:10:08,559 --> 00:10:11,400 Speaker 1: long term Leaders is focused on companies that are our 168 00:10:11,520 --> 00:10:14,640 Speaker 1: leaders in their industry, ones that tend to have um 169 00:10:14,760 --> 00:10:20,119 Speaker 1: long term growth prospect growth prospects and you know, stable revenues. 170 00:10:20,600 --> 00:10:23,960 Speaker 1: And it happens to be the technology, health care, and 171 00:10:24,000 --> 00:10:26,960 Speaker 1: consumer staples are the three sectors that often pop up 172 00:10:26,960 --> 00:10:31,080 Speaker 1: the most in that quality bias type bucket. So we 173 00:10:31,160 --> 00:10:33,760 Speaker 1: like that those areas and when it comes to beat 174 00:10:33,800 --> 00:10:36,560 Speaker 1: the cash thief, what that really means is that, you know, 175 00:10:36,640 --> 00:10:39,520 Speaker 1: their clients often think that if inflation is going to 176 00:10:39,600 --> 00:10:42,000 Speaker 1: be high, you know, then maybe that's bad for the 177 00:10:42,000 --> 00:10:44,560 Speaker 1: equity market and that I should move into cash. But 178 00:10:44,640 --> 00:10:46,959 Speaker 1: that's the wrong thing to do because what happens is 179 00:10:46,960 --> 00:10:50,640 Speaker 1: when you move into cash, you're effectively losing uh six 180 00:10:51,920 --> 00:10:54,200 Speaker 1: of your net worth, right if it's all in cash. 181 00:10:54,520 --> 00:10:56,400 Speaker 1: So what you should do is you should actually be 182 00:10:56,480 --> 00:11:00,160 Speaker 1: into equities because they tend to beat inflation over a 183 00:11:00,240 --> 00:11:04,280 Speaker 1: long creative time and earnings. Corporate profits are the key 184 00:11:04,400 --> 00:11:08,520 Speaker 1: driver financial markets, and that outpaces inflation more often than not. 185 00:11:08,600 --> 00:11:10,120 Speaker 1: Just look at this year. We have a six point 186 00:11:10,120 --> 00:11:14,199 Speaker 1: two percent inflation rate currently come Friday, maybe closer to seven. 187 00:11:15,280 --> 00:11:18,760 Speaker 1: But equity to return. So you know, in some ways, 188 00:11:18,800 --> 00:11:20,880 Speaker 1: if you want to maintain your net worth, you you 189 00:11:20,960 --> 00:11:23,960 Speaker 1: actually should move into equities. All right, John, We're gonna 190 00:11:23,960 --> 00:11:26,280 Speaker 1: have to leave it there. Um. I really appreciate your 191 00:11:26,280 --> 00:11:29,200 Speaker 1: thoughts there. Sean Snyder, he's head of UH Investment Strategy 192 00:11:29,240 --> 00:11:32,320 Speaker 1: at City's US Wealth Management CD. You point out his 193 00:11:32,800 --> 00:11:36,280 Speaker 1: previous experience as well. Previous experience former he was a 194 00:11:36,320 --> 00:11:39,480 Speaker 1: budget analyst at the White House. Wow, very cool, that 195 00:11:39,920 --> 00:11:45,640 Speaker 1: exactly all right. Let's check in with Mike Vogelsan, chief 196 00:11:45,679 --> 00:11:49,160 Speaker 1: investment Officer and managing director for Cap Trust. I'm gonna 197 00:11:49,160 --> 00:11:51,240 Speaker 1: get his thoughts in these markets, but I want to start, 198 00:11:51,360 --> 00:11:54,600 Speaker 1: Mike with your thoughts on you know, the pivot we 199 00:11:54,679 --> 00:12:00,600 Speaker 1: saw from the Federal Reserve last week, accelerating tapering, talking putting. 200 00:12:00,640 --> 00:12:03,920 Speaker 1: You know, interest rate increases right front and center here. 201 00:12:05,160 --> 00:12:07,679 Speaker 1: How do you view that given your outlook for two 202 00:12:07,679 --> 00:12:12,160 Speaker 1: how did that shape or reshape your outlook? Yeah? You know, 203 00:12:12,400 --> 00:12:15,720 Speaker 1: it's um good question. First of all, I think it 204 00:12:15,800 --> 00:12:17,800 Speaker 1: is a really important pivot point in the market and 205 00:12:17,840 --> 00:12:20,760 Speaker 1: the psychology of the market. Uh. You know, understand that 206 00:12:20,800 --> 00:12:24,360 Speaker 1: the the our opinion is that the while the economy 207 00:12:24,400 --> 00:12:27,400 Speaker 1: is doing terrifically well, most of the upside has in 208 00:12:27,480 --> 00:12:29,920 Speaker 1: the in the stock market, and certainly the high valuations 209 00:12:29,960 --> 00:12:34,839 Speaker 1: were in have come from from excessive and very abundant 210 00:12:34,880 --> 00:12:37,959 Speaker 1: liquidity is a better word, um, from the Fed of course, 211 00:12:38,040 --> 00:12:41,400 Speaker 1: and and and stimulus and so on, but specifically the Fed. 212 00:12:41,520 --> 00:12:45,200 Speaker 1: And you know, I think I think once we saw H. J. 213 00:12:45,360 --> 00:12:48,320 Speaker 1: Pow as we like to call him, um get you know, 214 00:12:48,720 --> 00:12:52,520 Speaker 1: clear up his nomination and renomination for the position. Uh, 215 00:12:52,600 --> 00:12:55,080 Speaker 1: you know, the fact they became a little more um, 216 00:12:55,400 --> 00:12:57,600 Speaker 1: a little more hawkish on on interest rates, I think 217 00:12:57,720 --> 00:13:01,280 Speaker 1: is uh it tells you what he's really feeling. We 218 00:13:01,360 --> 00:13:03,480 Speaker 1: think it's a it's a it is a pivot, and 219 00:13:03,480 --> 00:13:06,559 Speaker 1: it is a bit of a signal change here to say, 220 00:13:07,320 --> 00:13:10,600 Speaker 1: you know, the going is going to be tougher. Um. 221 00:13:10,720 --> 00:13:14,400 Speaker 1: He clearly thinks that, you know, things are too easy 222 00:13:14,559 --> 00:13:18,160 Speaker 1: and too loose, and so we fully expect to be 223 00:13:18,440 --> 00:13:22,480 Speaker 1: a little more difficult market. Not saying there's anything major. 224 00:13:22,480 --> 00:13:25,840 Speaker 1: We're not calling a massive correction, but I just think 225 00:13:25,840 --> 00:13:28,280 Speaker 1: the easy money has gone, and I think it would 226 00:13:28,280 --> 00:13:30,559 Speaker 1: make some sense to pay attention to what the Federal 227 00:13:30,559 --> 00:13:32,800 Speaker 1: Reserve chair says when he when he starts to think 228 00:13:32,840 --> 00:13:37,440 Speaker 1: about about tapering and raising interest rates faster. You know, 229 00:13:38,240 --> 00:13:43,800 Speaker 1: I think back to our interview UM yesterday on Floomberg 230 00:13:43,920 --> 00:13:50,439 Speaker 1: Radio with one of the big investment legends, Peter Lynch, 231 00:13:50,640 --> 00:13:54,040 Speaker 1: who said, those of you who are going all passive 232 00:13:54,280 --> 00:13:56,120 Speaker 1: are going to really miss out here. And I know 233 00:13:56,160 --> 00:13:58,800 Speaker 1: this is something that's cyclical, right, active versus passive, But 234 00:13:58,840 --> 00:14:01,280 Speaker 1: are you saying is a year to be active as well? 235 00:14:02,160 --> 00:14:05,080 Speaker 1: I think things exactly right. We we we like that 236 00:14:05,120 --> 00:14:08,000 Speaker 1: trade a lot. It's been a it's been a megacap 237 00:14:08,320 --> 00:14:13,800 Speaker 1: saying lead stock market, and most managers have been systematically underweight, uh, 238 00:14:13,800 --> 00:14:17,400 Speaker 1: you know, the entire array of super super large cap 239 00:14:17,440 --> 00:14:20,600 Speaker 1: MEGACP stocks and and so you know, we think, you know, 240 00:14:20,640 --> 00:14:24,000 Speaker 1: the valuation disparity there is also exceptionally high. So we 241 00:14:24,080 --> 00:14:26,760 Speaker 1: think that that um, a lot of the action is 242 00:14:26,760 --> 00:14:28,920 Speaker 1: going to come from the active side of the equation. 243 00:14:29,680 --> 00:14:32,840 Speaker 1: We we we uh, just just because the market is 244 00:14:33,120 --> 00:14:36,040 Speaker 1: likely to be broader and there will be opportunity in places, 245 00:14:36,680 --> 00:14:40,360 Speaker 1: whether it's cyclicals or whether reopening trade or whatever. Uh, 246 00:14:40,360 --> 00:14:42,360 Speaker 1: that that will allow us to take some take some 247 00:14:42,400 --> 00:14:45,440 Speaker 1: market share back in the active space as opposed to 248 00:14:45,480 --> 00:14:47,960 Speaker 1: the passive led by the megacap stocks. Right, the passive, 249 00:14:48,320 --> 00:14:52,840 Speaker 1: the passive valuate, the passive geminy, if you will, is 250 00:14:52,840 --> 00:14:56,480 Speaker 1: really dominated and driven by by the megacap stocks doing 251 00:14:56,520 --> 00:14:58,600 Speaker 1: so well. Because it's just hard as an active manager 252 00:14:58,600 --> 00:15:00,680 Speaker 1: and I've been an active manager for tw through two years, 253 00:15:01,120 --> 00:15:03,640 Speaker 1: it's really hard to get enough of that stuff in 254 00:15:03,680 --> 00:15:08,160 Speaker 1: your portfolio, uh, to to overweight the benchmark that you're 255 00:15:08,440 --> 00:15:10,400 Speaker 1: that you're trying to beat, right, and so it's a 256 00:15:10,840 --> 00:15:14,320 Speaker 1: it's been a hard situation. I think it's going to reverse. Uh. 257 00:15:14,400 --> 00:15:18,680 Speaker 1: Going into going to I will say one thing. You know, 258 00:15:19,440 --> 00:15:24,520 Speaker 1: the market normally anticipates economic activity by you know, six, twelve, 259 00:15:24,720 --> 00:15:28,400 Speaker 1: eighteen months or whatever happens to be. Um. I think 260 00:15:28,480 --> 00:15:31,320 Speaker 1: one of the really interesting patterns in today's market is 261 00:15:31,360 --> 00:15:35,760 Speaker 1: that is that it has been trading coincidentally with COVID, 262 00:15:36,000 --> 00:15:39,920 Speaker 1: with COVID rumors, right, UM, I mean it's so so 263 00:15:40,200 --> 00:15:46,840 Speaker 1: making making projections for it's really hardly a well that's 264 00:15:46,840 --> 00:15:48,520 Speaker 1: why that's why we have smart guys like like you 265 00:15:48,560 --> 00:15:50,480 Speaker 1: on to try to give us a little bit of guidance. Here, 266 00:15:50,480 --> 00:15:52,840 Speaker 1: we're gonna be actually leave it there, Mike. Mike Vocals, 267 00:15:53,000 --> 00:15:56,760 Speaker 1: chief investment Officer and managing director at Cap Trust based 268 00:15:56,800 --> 00:16:04,920 Speaker 1: in Boston, Massachusetts. Kind, we've had some tremendous, you know, 269 00:16:05,000 --> 00:16:07,000 Speaker 1: kind of one to three, two and a half percent 270 00:16:07,120 --> 00:16:09,240 Speaker 1: moves in these markets. As a markets try to discount 271 00:16:09,240 --> 00:16:11,400 Speaker 1: this new variant out there and what it means for 272 00:16:11,760 --> 00:16:15,160 Speaker 1: the economic recovery. Let's check in with a professional if 273 00:16:15,280 --> 00:16:19,400 Speaker 1: in debt, Chief investment officer of Manetta Group Efan, Thanks 274 00:16:19,400 --> 00:16:21,920 Speaker 1: so much for joining us here. Boy, let's just take 275 00:16:21,960 --> 00:16:25,440 Speaker 1: the last seven days when we really started to get 276 00:16:25,480 --> 00:16:30,960 Speaker 1: some news on this omicron variant. How do you think 277 00:16:30,960 --> 00:16:33,960 Speaker 1: the market kind of reacted to it? Did it? Did 278 00:16:34,000 --> 00:16:36,200 Speaker 1: it feel any different than what we've been dealing with 279 00:16:36,320 --> 00:16:41,400 Speaker 1: or the past twenty months? It did? This downturn we 280 00:16:41,440 --> 00:16:44,520 Speaker 1: saw on markets definitely sounds a little more chilling um 281 00:16:44,560 --> 00:16:46,880 Speaker 1: it sells. We saw a lot more severe drop off 282 00:16:46,960 --> 00:16:49,400 Speaker 1: and some of the stocks that perhaps had been leveraged 283 00:16:49,440 --> 00:16:52,080 Speaker 1: to the economy reopening. And I like the way it 284 00:16:52,120 --> 00:16:54,680 Speaker 1: was described in something I read recently as a debate. 285 00:16:54,800 --> 00:16:56,800 Speaker 1: It's almost as if the market is having a debate. 286 00:16:57,160 --> 00:17:00,000 Speaker 1: It's debasing what the impact of omecon is gonna be. Um, 287 00:17:00,000 --> 00:17:03,000 Speaker 1: it's debating whether inflation is transitory or not. And in 288 00:17:03,040 --> 00:17:05,199 Speaker 1: a way, the way we see the volatility markets, we 289 00:17:05,240 --> 00:17:09,560 Speaker 1: see each side of that debate making their case. It's 290 00:17:09,600 --> 00:17:13,000 Speaker 1: interesting that we well, we're looking for six point seven 291 00:17:13,000 --> 00:17:18,280 Speaker 1: percent inflation on Friday, the highest since when Olivia Newton 292 00:17:18,359 --> 00:17:22,520 Speaker 1: John was topping the charts. Um, is this you know? 293 00:17:22,880 --> 00:17:25,000 Speaker 1: Is this going to come back down next year? We're 294 00:17:25,040 --> 00:17:29,119 Speaker 1: all riled up right now about Powell's pivot hawk is 295 00:17:29,200 --> 00:17:31,760 Speaker 1: pivot um, but are we going to see inflation coming 296 00:17:31,760 --> 00:17:36,359 Speaker 1: back down to the threes two? It's really interesting on 297 00:17:36,480 --> 00:17:38,600 Speaker 1: six point seven is certainly going to just from an 298 00:17:38,640 --> 00:17:41,400 Speaker 1: optical soundpoint for the shop markets, because we already had 299 00:17:41,440 --> 00:17:44,000 Speaker 1: the highest level of thirty one years of the last 300 00:17:43,880 --> 00:17:45,760 Speaker 1: at the last time where we lived at the numbers 301 00:17:45,760 --> 00:17:47,720 Speaker 1: of six point two. So what I think would be 302 00:17:47,760 --> 00:17:50,919 Speaker 1: really interesting is to look beyond that this this week's results, 303 00:17:50,960 --> 00:17:53,520 Speaker 1: because well, we have seen a drop in oil prices 304 00:17:53,560 --> 00:17:55,480 Speaker 1: and that's why I think the week, the week we've 305 00:17:55,520 --> 00:17:58,720 Speaker 1: seen has been more notable in terms of market fragility, 306 00:17:59,119 --> 00:18:00,919 Speaker 1: and I think making the hate that markets have been 307 00:18:00,920 --> 00:18:03,439 Speaker 1: stubbornly resilience up to now. They seems to have been 308 00:18:03,440 --> 00:18:08,400 Speaker 1: resilient around any news, the potential government shutdown, geo political news, 309 00:18:08,440 --> 00:18:11,680 Speaker 1: even the news of the delta variance. They were relatively 310 00:18:11,680 --> 00:18:14,639 Speaker 1: resilient around that. The travel curbs that came in and 311 00:18:14,680 --> 00:18:16,200 Speaker 1: the fact that we're right in the middle of winter 312 00:18:16,600 --> 00:18:19,320 Speaker 1: that certainly did and more of a chilling message to 313 00:18:19,560 --> 00:18:22,159 Speaker 1: true markets. UM on the frigility. So, just as I 314 00:18:22,240 --> 00:18:24,959 Speaker 1: mentioned the debate, I asked myself the question whether markets 315 00:18:24,960 --> 00:18:27,680 Speaker 1: can be resilient and fragile at the same time. But 316 00:18:27,800 --> 00:18:30,679 Speaker 1: to where we see inflation going into next year. Certainly 317 00:18:30,680 --> 00:18:33,800 Speaker 1: there was some of the the acute supply tinch cane 318 00:18:33,840 --> 00:18:38,200 Speaker 1: shortages and bottlenecks should be easing. Um, we will probably 319 00:18:38,200 --> 00:18:40,600 Speaker 1: see after the summer and easing of demands which would 320 00:18:40,720 --> 00:18:43,640 Speaker 1: should also bring prices after the holiday season, and using 321 00:18:43,640 --> 00:18:46,520 Speaker 1: of demands which should bring prices in. And again the 322 00:18:46,520 --> 00:18:49,440 Speaker 1: oil price and energy prices filtering through will have a 323 00:18:49,520 --> 00:18:52,280 Speaker 1: more muted effect going forward. But it was interesting that 324 00:18:52,359 --> 00:18:55,960 Speaker 1: the timing of German powers, the discussion of the removing 325 00:18:56,000 --> 00:18:58,639 Speaker 1: the bird transitory and who suggestions that they would be 326 00:18:58,680 --> 00:19:02,680 Speaker 1: speeding up the papering that actually was what was probably 327 00:19:03,040 --> 00:19:05,960 Speaker 1: the worst timing given where markets were feeling anyway, given 328 00:19:06,000 --> 00:19:08,880 Speaker 1: the Omicon news. So because of that, we think that's 329 00:19:08,880 --> 00:19:12,080 Speaker 1: already been based in now because that essentially have we 330 00:19:12,280 --> 00:19:14,399 Speaker 1: now have a sense that the said maybe moving faster 331 00:19:14,520 --> 00:19:17,200 Speaker 1: than we thought they are getting concerned. There's point of 332 00:19:17,240 --> 00:19:19,840 Speaker 1: that before, kind of trying to control inflation from the top, 333 00:19:20,400 --> 00:19:22,760 Speaker 1: and that has actually now been built in. I don't 334 00:19:22,800 --> 00:19:26,960 Speaker 1: expect further pronouncence of that nature to shop markets, um 335 00:19:27,080 --> 00:19:29,520 Speaker 1: and we most likely will be looking at a lower 336 00:19:29,600 --> 00:19:32,200 Speaker 1: rate than six point seven percent going forward, but certainly 337 00:19:32,280 --> 00:19:34,600 Speaker 1: higher than we've been used to enjoying around that two 338 00:19:34,600 --> 00:19:38,240 Speaker 1: percent historically. All Right, so given that backdrop ethan, what 339 00:19:38,400 --> 00:19:45,439 Speaker 1: is your outlook? We believe that this will continue to 340 00:19:45,440 --> 00:19:47,840 Speaker 1: be a good market. With stock pickers, we're focused not 341 00:19:47,920 --> 00:19:50,640 Speaker 1: only on the fundamental nature of eclonic markets from where 342 00:19:50,640 --> 00:19:53,680 Speaker 1: they are at today, but also some of the technical factors. 343 00:19:53,760 --> 00:19:56,359 Speaker 1: We cannot ignore the vast amounts of money that have 344 00:19:56,440 --> 00:19:59,600 Speaker 1: been pumped into the system globally, but particularly in the US, 345 00:19:59,720 --> 00:20:01,960 Speaker 1: where that money has not been safe but has instead 346 00:20:02,000 --> 00:20:04,840 Speaker 1: been touched into risk gasses. So there is a record 347 00:20:04,920 --> 00:20:07,760 Speaker 1: amounts of money and money market funds who saw them 348 00:20:07,760 --> 00:20:10,960 Speaker 1: in the reverse repo markets, record amount of transactions that 349 00:20:11,080 --> 00:20:13,840 Speaker 1: that suggests that there is money on the sidelines and 350 00:20:13,920 --> 00:20:15,800 Speaker 1: as a results, when we did have gips like we 351 00:20:15,840 --> 00:20:18,400 Speaker 1: did this week, even chilling ones that were a little 352 00:20:18,440 --> 00:20:21,119 Speaker 1: more severe than we were used to, they close up 353 00:20:21,200 --> 00:20:23,720 Speaker 1: melatively quickly. There is a desire not to miss ouse, 354 00:20:24,080 --> 00:20:25,960 Speaker 1: to to buy on the dip. There is a lot 355 00:20:25,960 --> 00:20:29,080 Speaker 1: of retail activity and all of that is focused now 356 00:20:29,160 --> 00:20:31,800 Speaker 1: around and propping up equity markets. I see that that 357 00:20:31,960 --> 00:20:34,159 Speaker 1: technical factor is not going to go away because that 358 00:20:34,200 --> 00:20:37,639 Speaker 1: should supports equity markets going into two to what I 359 00:20:37,720 --> 00:20:41,080 Speaker 1: see in terms of sectors and very focused um because 360 00:20:41,080 --> 00:20:43,000 Speaker 1: of my European routes on on what we saw coming 361 00:20:43,000 --> 00:20:46,080 Speaker 1: out of a Glassgow in top twenty six, so where 362 00:20:46,119 --> 00:20:48,919 Speaker 1: we saw, now what's the road from Glasgow. We're definitely 363 00:20:48,920 --> 00:20:52,639 Speaker 1: going to see more capital flowing through to renewable energy, 364 00:20:53,000 --> 00:20:57,400 Speaker 1: to climate change focus strategies, to e f G focused funds, 365 00:20:57,440 --> 00:21:00,800 Speaker 1: and those sectors such as electric vehicles. We seeing the 366 00:21:01,040 --> 00:21:04,560 Speaker 1: huge momentum that it's surrounded. It stops to Tesla as 367 00:21:04,560 --> 00:21:06,879 Speaker 1: well as the car rental companies when they simply say 368 00:21:06,920 --> 00:21:09,480 Speaker 1: they're going to add evs to their fleet. So that's 369 00:21:09,520 --> 00:21:13,480 Speaker 1: kind of almost Meanlike momentum indicates that there is clearly 370 00:21:14,080 --> 00:21:15,639 Speaker 1: a sense that this is going to be a sector 371 00:21:15,680 --> 00:21:17,359 Speaker 1: that will have a lot more focus in the future. 372 00:21:17,560 --> 00:21:19,560 Speaker 1: So I'm looking at all those factors that are likely 373 00:21:19,600 --> 00:21:21,920 Speaker 1: to benefit from what came out of cost PTY six. 374 00:21:23,000 --> 00:21:25,600 Speaker 1: All right, Evan, thanks so much for joining us. Ethan Devitt. 375 00:21:25,720 --> 00:21:29,320 Speaker 1: There is actually the last five years in a row 376 00:21:29,520 --> 00:21:32,880 Speaker 1: ranked in the top ten by barons among independent pretty 377 00:21:32,880 --> 00:21:37,560 Speaker 1: registered investment advisors. Thanks for listening to the Bloomberg Markets podcast. 378 00:21:37,960 --> 00:21:41,159 Speaker 1: You can subscribe and listen to interviews of Apple podcasts 379 00:21:41,280 --> 00:21:45,200 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 380 00:21:45,240 --> 00:21:49,399 Speaker 1: on Twitter at Matt Miller three. On false Sweeney, I'm 381 00:21:49,440 --> 00:21:52,080 Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can 382 00:21:52,119 --> 00:21:54,320 Speaker 1: always catch us worldwide at Bloomberg Radio.