WEBVTT - Holiday Shopping And 2021 Market Outlook 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.640 at Bloomberg dot com Slash podcast. A couple of days ago, 0:00:22.640 --> 0:00:25.400 was driving by the Short Hills Mall in New Jersey 0:00:25.520 --> 0:00:28.960 and it was packed, leading me to think that consumers 0:00:28.960 --> 0:00:31.000 are out there spending. Let's get some more color on 0:00:31.120 --> 0:00:33.720 all of that, because I haven't done any holiday shopping. 0:00:33.800 --> 0:00:37.200 But Mary Shore, senior equity analysts for Columbia Thread Needle 0:00:37.240 --> 0:00:41.839 Investments Joints, is, Marie, how's this holiday shopping season shaping 0:00:41.920 --> 0:00:45.519 up for the retailers? Thanks so much for having me. 0:00:45.880 --> 0:00:51.400 The holiday shopping season has turned out very positive so far. 0:00:51.479 --> 0:00:55.040 We heard that from companies as they reported through November 0:00:55.600 --> 0:00:59.080 and over all of you on the consumer remains very positive. 0:00:59.600 --> 0:01:03.000 Um the headline trends over Black Friday were a little 0:01:03.040 --> 0:01:05.880 more mixed, but I think what we're seeing is that 0:01:05.920 --> 0:01:08.920 the shape of the season this year is smoother than 0:01:08.959 --> 0:01:13.520 what we've seen in the past as consumers have prioritized 0:01:13.560 --> 0:01:17.000 their shopping earlier. But this is not necessarily a bad 0:01:17.080 --> 0:01:21.360 thing because that does help maximize full price selling and 0:01:21.440 --> 0:01:27.600 reduces operational stress for the retailers. So are they getting 0:01:27.600 --> 0:01:31.200 all the stuff that consumers need, our consumers finding the 0:01:31.280 --> 0:01:35.440 stuff they're searching for, or is there really this um 0:01:35.440 --> 0:01:41.560 you know, lack of goods and a rise in prices. 0:01:41.600 --> 0:01:44.559 That's a great question because we've heard so much about 0:01:44.640 --> 0:01:49.560 the supply chain disruption and congestion that continues. But all 0:01:49.640 --> 0:01:52.880 things considered, I think the companies have done a very 0:01:52.920 --> 0:01:56.360 good job, except for a couple of companies with large 0:01:56.400 --> 0:02:01.360 exposure to Vietnam, companies have been able to build inventory 0:02:01.400 --> 0:02:04.560 into the holiday and they're confident in their ability to 0:02:04.640 --> 0:02:07.600 meet demand. Of course, this is all coming at a cost, 0:02:08.040 --> 0:02:11.360 and the companies have now built extended lead times and 0:02:11.480 --> 0:02:14.200 higher freight costs into their plans through the first half 0:02:14.240 --> 0:02:16.440 of the year. But I would say outside for a 0:02:16.480 --> 0:02:21.000 couple of key items like maybe some gaming consoles, consumers 0:02:21.000 --> 0:02:24.000 should still be able to find what they're looking for 0:02:24.080 --> 0:02:27.760 as we move into the final stretch. So Mari, am 0:02:27.760 --> 0:02:30.880 I going to get any deals when I start shopping here, 0:02:30.880 --> 0:02:35.960 How let's the promotional environment out there? That's another great question. 0:02:36.000 --> 0:02:40.200 Throughout the pandemic, we have seen the retailers reduce their 0:02:40.320 --> 0:02:45.080 overall promotional activity as they have planned inventory in a 0:02:45.160 --> 0:02:48.400 very detail, in a very discipline way. And now I 0:02:48.440 --> 0:02:51.360 think they all realize that they tend do more with 0:02:51.560 --> 0:02:57.480 less and actually drive higher margin dollars with less inventory. 0:02:57.560 --> 0:03:00.720 And so the net results of that will the lower 0:03:00.760 --> 0:03:05.960 promotional activity I believe for the foreseeable future, and that 0:03:06.040 --> 0:03:10.000 really should be across category, and it's a reflection of 0:03:11.000 --> 0:03:14.400 not just the near term supply chain congestion, but also 0:03:14.440 --> 0:03:16.840 the fact that retailers are just doing a much better 0:03:17.000 --> 0:03:22.640 job of managing inventory. Alright, so what kind of inflation 0:03:22.680 --> 0:03:24.760 are we seeing? I know, Friday, we're going to get 0:03:24.800 --> 0:03:29.040 the CPI UM numbers out, so we'll find out soon 0:03:29.160 --> 0:03:34.040 enough that basket of goods. But in terms of you know, um, 0:03:34.160 --> 0:03:38.680 what what consumers are really feeling? How high is it? Well, 0:03:38.720 --> 0:03:40.640 it is hard to measure, and of course it does 0:03:40.760 --> 0:03:44.880 vary by category. There are certain categories like food where 0:03:45.000 --> 0:03:48.200 we're seeing inflation currently running in the load to mid 0:03:48.240 --> 0:03:52.960 single digit range, but in other more discretionary categories where 0:03:53.000 --> 0:03:57.280 there is limited supply, their strong demands driven by strong 0:03:57.400 --> 0:04:02.440 product innovation and low or promotional activity. As we discussed, 0:04:02.760 --> 0:04:06.800 you could see inflation um or you know, net pricing 0:04:07.000 --> 0:04:10.400 rising above those mid single digit levels, but it is 0:04:10.440 --> 0:04:13.800 hard to measure because some of these categories the consumer 0:04:13.920 --> 0:04:18.160 is not buying as frequently, so it's in some cases 0:04:18.240 --> 0:04:22.839 more difficult to notice the pricing increases. But overall, the 0:04:23.040 --> 0:04:26.679 companies have seen a really positive response to the pricing 0:04:26.720 --> 0:04:29.400 that they have taken, and there really has not been 0:04:29.520 --> 0:04:32.920 very much pushed back from the com humor. So mar again, 0:04:32.920 --> 0:04:34.760 when I drove by my local shopping mall a couple 0:04:34.800 --> 0:04:37.919 of days ago, it was full with shoppers. But I 0:04:37.960 --> 0:04:43.680 still have that question, is the United States still overstored? 0:04:43.800 --> 0:04:47.080 Is there still too much you know, kind of too 0:04:47.080 --> 0:04:48.599 many stores out there, and we've got to reduce the 0:04:48.600 --> 0:04:52.120 footprint even more. It's a great question. I think that 0:04:52.440 --> 0:04:56.640 really coming out of the recession, the companies has tried 0:04:56.760 --> 0:04:59.800 to take a closer look at their store basis and 0:05:00.040 --> 0:05:04.400 close on profitable stores. Um. During the pandemic, we heard 0:05:04.400 --> 0:05:07.120 about like the department stores for instance, coming out and 0:05:07.160 --> 0:05:10.360 closing hundreds of stores. So what I would say in 0:05:10.480 --> 0:05:14.400 terms of the store rationalization that still needs to happen, 0:05:14.600 --> 0:05:17.680 I think a lot of the heavy lifting has already 0:05:17.720 --> 0:05:21.279 been done. But going forward, we will continue to see 0:05:21.800 --> 0:05:27.200 select and strategic store closures as companies focus on their 0:05:27.360 --> 0:05:31.440 most profitable doors. All right, So that's what we that's 0:05:31.440 --> 0:05:35.599 what we see UM, certainly in the car industry where 0:05:35.600 --> 0:05:41.280 they focus selling the highest margin products UM and leave 0:05:41.320 --> 0:05:42.919 the other ones aside. And that's what we're seeing, I 0:05:42.920 --> 0:05:46.840 guess across other industries as well, right Mari, Yes, absolutely, 0:05:46.960 --> 0:05:50.520 As as I said, the companies are very focused on 0:05:50.839 --> 0:05:56.640 maximizing margin rate and margin dollars, and so they are 0:05:57.640 --> 0:06:01.880 doing a better job of streamline not just their store bases, 0:06:01.920 --> 0:06:06.200 but also they are assortment their product assortments UM to 0:06:06.360 --> 0:06:11.480 focus on the most productive and the highest margin skews. Mary, 0:06:11.520 --> 0:06:13.440 thank you so much for joining us. We really appreciate 0:06:13.440 --> 0:06:16.000 getting your perspective here on retail sales as we head 0:06:16.000 --> 0:06:21.159 into the whining days of the holiday selling season. Mary Shore, 0:06:21.240 --> 0:06:30.719 senior equity analysts for Colombia Thread Needle Investments. You know, 0:06:30.720 --> 0:06:34.720 when the Omnicom news broke, the markets obviously sold off 0:06:34.720 --> 0:06:39.680 pretty significantly. They bounced back with a vengeance, vengeance, very 0:06:39.839 --> 0:06:41.680 very quickly. And it's kind of getting to the point 0:06:41.680 --> 0:06:44.720 now where the investors are almost immune to some of 0:06:44.720 --> 0:06:48.440 this uh pandemic news flow that we've been dealing with 0:06:48.440 --> 0:06:50.320 for our past twenty months. And see what we're hearing 0:06:50.640 --> 0:06:53.520 down in the trenches. Shawn Snyder, head of investment Strategy 0:06:53.560 --> 0:06:58.640 for US Wealth Management Group at City UH Sean, thanks 0:06:58.640 --> 0:07:00.680 so much for joining us here. As you talk to 0:07:00.800 --> 0:07:05.640 your clients, what are they saying about how they're digesting 0:07:05.640 --> 0:07:08.120 all this pandemic news because it doesn't seem like it 0:07:08.279 --> 0:07:12.760 has the same effect that it used to. Thanks for 0:07:12.800 --> 0:07:15.240 having me. I really appreciate it. I do think that 0:07:15.480 --> 0:07:19.960 investors have developed some sort of herd immunity against COVID 0:07:20.040 --> 0:07:22.560 news um. You know, I know we retired the word 0:07:22.600 --> 0:07:24.760 transitory when it comes to inflation, but you know, it 0:07:24.800 --> 0:07:27.080 seems like they're kind of looking at omnicrom is maybe 0:07:27.160 --> 0:07:30.680 something that's transitory. And you know, there has been some 0:07:30.880 --> 0:07:33.800 positive news, you know, about the variant. It's hard to 0:07:33.800 --> 0:07:36.920 say the variant is positive, but you know there's some 0:07:37.040 --> 0:07:41.320 news and antibodio therapies appear to be effective against omnicrom um. 0:07:41.360 --> 0:07:44.720 You know, hospitalizations appear to be held in check so far, 0:07:45.320 --> 0:07:47.280 you know, got a lot of the suspeculative, it's not 0:07:47.400 --> 0:07:50.560 you know, actual confirmed data, you know, and the symptoms 0:07:50.560 --> 0:07:53.400 seemed to be more mild. And I think, you know, 0:07:53.440 --> 0:07:56.920 we heard about the third dose regime potentially neutralizing the 0:07:57.000 --> 0:08:00.280 variant this morning. But I think perhaps even more importantly 0:08:01.280 --> 0:08:05.000 is that it looks like the current vaccines may protect 0:08:05.080 --> 0:08:08.240 against severe disease. And I think that's a really important 0:08:08.240 --> 0:08:11.520 point that we need to consider. Yeah. Absolutely, I mean, 0:08:11.960 --> 0:08:14.560 as long as all all it does is infect a 0:08:14.560 --> 0:08:17.800 bunch of people and um doesn't put very many in 0:08:17.800 --> 0:08:20.920 the hospital, then it's not as scary, right, all right. 0:08:20.960 --> 0:08:22.640 And Plus, if you think the United States has a 0:08:23.120 --> 0:08:25.800 you know, sixty percent of its vaccination or six pc 0:08:25.920 --> 0:08:29.640 of it's population, uh fully vaccinated, you know that, then 0:08:30.080 --> 0:08:33.480 you know, we're the real problem that happens with these 0:08:33.480 --> 0:08:39.479 waves is the surgeon hospitalizations and seeing healthcare systems overwhelmed. 0:08:39.600 --> 0:08:42.240 And that's really why you need to enter lockdowns and 0:08:42.600 --> 0:08:44.319 that type of scenario. But if we're not seeing the 0:08:44.360 --> 0:08:48.720 surgeon hospitalizations, UM, and we're not seeing seeing severe disease 0:08:48.720 --> 0:08:51.800 because people have at least some protection, UM, then they're 0:08:51.840 --> 0:08:54.760 you're less likely to go back into that renewed lockdown scenario. 0:08:55.040 --> 0:08:57.760 It's less likely to have a large impact on the economy, 0:08:58.280 --> 0:09:01.480 and I think that's why markets are know, have sense 0:09:01.520 --> 0:09:03.480 to recover it in just eight days. I do have 0:09:03.559 --> 0:09:06.240 to say that I was planning on working from London 0:09:06.280 --> 0:09:07.920 next week and I and now I am no longer 0:09:07.960 --> 0:09:11.920 going to. Even though I was going to work in 0:09:11.960 --> 0:09:15.240 London next week, but now I'm not going to. Why not? 0:09:16.080 --> 0:09:19.920 Because the omicron variant is spreading like wildfire. And even 0:09:19.960 --> 0:09:24.280 though I'm vaccinated, um, and even though I'm not afraid 0:09:24.400 --> 0:09:28.720 I would get seriously ill, I don't feel like getting it. 0:09:29.400 --> 0:09:31.120 You know, I would have to sit on a plane 0:09:31.120 --> 0:09:33.080 with a bunch of people. I'd have to wear a 0:09:33.120 --> 0:09:35.800 mask the whole time. You know how much I hate that. Um, 0:09:35.840 --> 0:09:37.679 I probably have to wear a mask in the London 0:09:37.720 --> 0:09:40.280 office everywhere I go. I don't want to deal with that. 0:09:40.360 --> 0:09:44.240 I'd much rather just stay home. So at least, you know, anecdotally, 0:09:45.000 --> 0:09:47.800 some people are changing their plans like me. Interesting, all right, 0:09:47.840 --> 0:09:50.480 So Sean, given that kind of backdrop, what are you 0:09:50.480 --> 0:09:54.600 telling your clients these days? Well, we're actually focusing on 0:09:54.640 --> 0:09:57.720 a couple of things. We're telling our clients to essentially 0:09:57.800 --> 0:10:01.080 upgrade the quality of their portfolios. And you know, we've 0:10:01.120 --> 0:10:03.880 sort of bucketed that into two different core themes. One 0:10:04.080 --> 0:10:06.120 is long term Leaders and then the other one is 0:10:06.600 --> 0:10:08.440 uh sort of be where the cash thief. And so 0:10:08.559 --> 0:10:11.400 long term Leaders is focused on companies that are our 0:10:11.520 --> 0:10:14.640 leaders in their industry, ones that tend to have um 0:10:14.760 --> 0:10:20.119 long term growth prospect growth prospects and you know, stable revenues. 0:10:20.600 --> 0:10:23.960 And it happens to be the technology, health care, and 0:10:24.000 --> 0:10:26.960 consumer staples are the three sectors that often pop up 0:10:26.960 --> 0:10:31.080 the most in that quality bias type bucket. So we 0:10:31.160 --> 0:10:33.760 like that those areas and when it comes to beat 0:10:33.800 --> 0:10:36.560 the cash thief, what that really means is that, you know, 0:10:36.640 --> 0:10:39.520 their clients often think that if inflation is going to 0:10:39.600 --> 0:10:42.000 be high, you know, then maybe that's bad for the 0:10:42.000 --> 0:10:44.560 equity market and that I should move into cash. But 0:10:44.640 --> 0:10:46.959 that's the wrong thing to do because what happens is 0:10:46.960 --> 0:10:50.640 when you move into cash, you're effectively losing uh six 0:10:51.920 --> 0:10:54.200 of your net worth, right if it's all in cash. 0:10:54.520 --> 0:10:56.400 So what you should do is you should actually be 0:10:56.480 --> 0:11:00.160 into equities because they tend to beat inflation over a 0:11:00.240 --> 0:11:04.280 long creative time and earnings. Corporate profits are the key 0:11:04.400 --> 0:11:08.520 driver financial markets, and that outpaces inflation more often than not. 0:11:08.600 --> 0:11:10.120 Just look at this year. We have a six point 0:11:10.120 --> 0:11:14.199 two percent inflation rate currently come Friday, maybe closer to seven. 0:11:15.280 --> 0:11:18.760 But equity to return. So you know, in some ways, 0:11:18.800 --> 0:11:20.880 if you want to maintain your net worth, you you 0:11:20.960 --> 0:11:23.960 actually should move into equities. All right, John, We're gonna 0:11:23.960 --> 0:11:26.280 have to leave it there. Um. I really appreciate your 0:11:26.280 --> 0:11:29.200 thoughts there. Sean Snyder, he's head of UH Investment Strategy 0:11:29.240 --> 0:11:32.320 at City's US Wealth Management CD. You point out his 0:11:32.800 --> 0:11:36.280 previous experience as well. Previous experience former he was a 0:11:36.320 --> 0:11:39.480 budget analyst at the White House. Wow, very cool, that 0:11:39.920 --> 0:11:45.640 exactly all right. Let's check in with Mike Vogelsan, chief 0:11:45.679 --> 0:11:49.160 investment Officer and managing director for Cap Trust. I'm gonna 0:11:49.160 --> 0:11:51.240 get his thoughts in these markets, but I want to start, 0:11:51.360 --> 0:11:54.600 Mike with your thoughts on you know, the pivot we 0:11:54.679 --> 0:12:00.600 saw from the Federal Reserve last week, accelerating tapering, talking putting. 0:12:00.640 --> 0:12:03.920 You know, interest rate increases right front and center here. 0:12:05.160 --> 0:12:07.679 How do you view that given your outlook for two 0:12:07.679 --> 0:12:12.160 how did that shape or reshape your outlook? Yeah? You know, 0:12:12.400 --> 0:12:15.720 it's um good question. First of all, I think it 0:12:15.800 --> 0:12:17.800 is a really important pivot point in the market and 0:12:17.840 --> 0:12:20.760 the psychology of the market. Uh. You know, understand that 0:12:20.800 --> 0:12:24.360 the the our opinion is that the while the economy 0:12:24.400 --> 0:12:27.400 is doing terrifically well, most of the upside has in 0:12:27.480 --> 0:12:29.920 the in the stock market, and certainly the high valuations 0:12:29.960 --> 0:12:34.839 were in have come from from excessive and very abundant 0:12:34.880 --> 0:12:37.959 liquidity is a better word, um, from the Fed of course, 0:12:38.040 --> 0:12:41.400 and and and stimulus and so on, but specifically the Fed. 0:12:41.520 --> 0:12:45.200 And you know, I think I think once we saw H. J. 0:12:45.360 --> 0:12:48.320 Pow as we like to call him, um get you know, 0:12:48.720 --> 0:12:52.520 clear up his nomination and renomination for the position. Uh, 0:12:52.600 --> 0:12:55.080 you know, the fact they became a little more um, 0:12:55.400 --> 0:12:57.600 a little more hawkish on on interest rates, I think 0:12:57.720 --> 0:13:01.280 is uh it tells you what he's really feeling. We 0:13:01.360 --> 0:13:03.480 think it's a it's a it is a pivot, and 0:13:03.480 --> 0:13:06.559 it is a bit of a signal change here to say, 0:13:07.320 --> 0:13:10.600 you know, the going is going to be tougher. Um. 0:13:10.720 --> 0:13:14.400 He clearly thinks that, you know, things are too easy 0:13:14.559 --> 0:13:18.160 and too loose, and so we fully expect to be 0:13:18.440 --> 0:13:22.480 a little more difficult market. Not saying there's anything major. 0:13:22.480 --> 0:13:25.840 We're not calling a massive correction, but I just think 0:13:25.840 --> 0:13:28.280 the easy money has gone, and I think it would 0:13:28.280 --> 0:13:30.559 make some sense to pay attention to what the Federal 0:13:30.559 --> 0:13:32.800 Reserve chair says when he when he starts to think 0:13:32.840 --> 0:13:37.440 about about tapering and raising interest rates faster. You know, 0:13:38.240 --> 0:13:43.800 I think back to our interview UM yesterday on Floomberg 0:13:43.920 --> 0:13:50.439 Radio with one of the big investment legends, Peter Lynch, 0:13:50.640 --> 0:13:54.040 who said, those of you who are going all passive 0:13:54.280 --> 0:13:56.120 are going to really miss out here. And I know 0:13:56.160 --> 0:13:58.800 this is something that's cyclical, right, active versus passive, But 0:13:58.840 --> 0:14:01.280 are you saying is a year to be active as well? 0:14:02.160 --> 0:14:05.080 I think things exactly right. We we we like that 0:14:05.120 --> 0:14:08.000 trade a lot. It's been a it's been a megacap 0:14:08.320 --> 0:14:13.800 saying lead stock market, and most managers have been systematically underweight, uh, 0:14:13.800 --> 0:14:17.400 you know, the entire array of super super large cap 0:14:17.440 --> 0:14:20.600 MEGACP stocks and and so you know, we think, you know, 0:14:20.640 --> 0:14:24.000 the valuation disparity there is also exceptionally high. So we 0:14:24.080 --> 0:14:26.760 think that that um, a lot of the action is 0:14:26.760 --> 0:14:28.920 going to come from the active side of the equation. 0:14:29.680 --> 0:14:32.840 We we we uh, just just because the market is 0:14:33.120 --> 0:14:36.040 likely to be broader and there will be opportunity in places, 0:14:36.680 --> 0:14:40.360 whether it's cyclicals or whether reopening trade or whatever. Uh, 0:14:40.360 --> 0:14:42.360 that that will allow us to take some take some 0:14:42.400 --> 0:14:45.440 market share back in the active space as opposed to 0:14:45.480 --> 0:14:47.960 the passive led by the megacap stocks. Right, the passive, 0:14:48.320 --> 0:14:52.840 the passive valuate, the passive geminy, if you will, is 0:14:52.840 --> 0:14:56.480 really dominated and driven by by the megacap stocks doing 0:14:56.520 --> 0:14:58.600 so well. Because it's just hard as an active manager 0:14:58.600 --> 0:15:00.680 and I've been an active manager for tw through two years, 0:15:01.120 --> 0:15:03.640 it's really hard to get enough of that stuff in 0:15:03.680 --> 0:15:08.160 your portfolio, uh, to to overweight the benchmark that you're 0:15:08.440 --> 0:15:10.400 that you're trying to beat, right, and so it's a 0:15:10.840 --> 0:15:14.320 it's been a hard situation. I think it's going to reverse. Uh. 0:15:14.400 --> 0:15:18.680 Going into going to I will say one thing. You know, 0:15:19.440 --> 0:15:24.520 the market normally anticipates economic activity by you know, six, twelve, 0:15:24.720 --> 0:15:28.400 eighteen months or whatever happens to be. Um. I think 0:15:28.480 --> 0:15:31.320 one of the really interesting patterns in today's market is 0:15:31.360 --> 0:15:35.760 that is that it has been trading coincidentally with COVID, 0:15:36.000 --> 0:15:39.920 with COVID rumors, right, UM, I mean it's so so 0:15:40.200 --> 0:15:46.840 making making projections for it's really hardly a well that's 0:15:46.840 --> 0:15:48.520 why that's why we have smart guys like like you 0:15:48.560 --> 0:15:50.480 on to try to give us a little bit of guidance. Here, 0:15:50.480 --> 0:15:52.840 we're gonna be actually leave it there, Mike. Mike Vocals, 0:15:53.000 --> 0:15:56.760 chief investment Officer and managing director at Cap Trust based 0:15:56.800 --> 0:16:04.920 in Boston, Massachusetts. Kind, we've had some tremendous, you know, 0:16:05.000 --> 0:16:07.000 kind of one to three, two and a half percent 0:16:07.120 --> 0:16:09.240 moves in these markets. As a markets try to discount 0:16:09.240 --> 0:16:11.400 this new variant out there and what it means for 0:16:11.760 --> 0:16:15.160 the economic recovery. Let's check in with a professional if 0:16:15.280 --> 0:16:19.400 in debt, Chief investment officer of Manetta Group Efan, Thanks 0:16:19.400 --> 0:16:21.920 so much for joining us here. Boy, let's just take 0:16:21.960 --> 0:16:25.440 the last seven days when we really started to get 0:16:25.480 --> 0:16:30.960 some news on this omicron variant. How do you think 0:16:30.960 --> 0:16:33.960 the market kind of reacted to it? Did it? Did 0:16:34.000 --> 0:16:36.200 it feel any different than what we've been dealing with 0:16:36.320 --> 0:16:41.400 or the past twenty months? It did? This downturn we 0:16:41.440 --> 0:16:44.520 saw on markets definitely sounds a little more chilling um 0:16:44.560 --> 0:16:46.880 it sells. We saw a lot more severe drop off 0:16:46.960 --> 0:16:49.400 and some of the stocks that perhaps had been leveraged 0:16:49.440 --> 0:16:52.080 to the economy reopening. And I like the way it 0:16:52.120 --> 0:16:54.680 was described in something I read recently as a debate. 0:16:54.800 --> 0:16:56.800 It's almost as if the market is having a debate. 0:16:57.160 --> 0:17:00.000 It's debasing what the impact of omecon is gonna be. Um, 0:17:00.000 --> 0:17:03.000 it's debating whether inflation is transitory or not. And in 0:17:03.040 --> 0:17:05.199 a way, the way we see the volatility markets, we 0:17:05.240 --> 0:17:09.560 see each side of that debate making their case. It's 0:17:09.600 --> 0:17:13.000 interesting that we well, we're looking for six point seven 0:17:13.000 --> 0:17:18.280 percent inflation on Friday, the highest since when Olivia Newton 0:17:18.359 --> 0:17:22.520 John was topping the charts. Um, is this you know? 0:17:22.880 --> 0:17:25.000 Is this going to come back down next year? We're 0:17:25.040 --> 0:17:29.119 all riled up right now about Powell's pivot hawk is 0:17:29.200 --> 0:17:31.760 pivot um, but are we going to see inflation coming 0:17:31.760 --> 0:17:36.359 back down to the threes two? It's really interesting on 0:17:36.480 --> 0:17:38.600 six point seven is certainly going to just from an 0:17:38.640 --> 0:17:41.400 optical soundpoint for the shop markets, because we already had 0:17:41.440 --> 0:17:44.000 the highest level of thirty one years of the last 0:17:43.880 --> 0:17:45.760 at the last time where we lived at the numbers 0:17:45.760 --> 0:17:47.720 of six point two. So what I think would be 0:17:47.760 --> 0:17:50.919 really interesting is to look beyond that this this week's results, 0:17:50.960 --> 0:17:53.520 because well, we have seen a drop in oil prices 0:17:53.560 --> 0:17:55.480 and that's why I think the week, the week we've 0:17:55.520 --> 0:17:58.720 seen has been more notable in terms of market fragility, 0:17:59.119 --> 0:18:00.919 and I think making the hate that markets have been 0:18:00.920 --> 0:18:03.439 stubbornly resilience up to now. They seems to have been 0:18:03.440 --> 0:18:08.400 resilient around any news, the potential government shutdown, geo political news, 0:18:08.440 --> 0:18:11.680 even the news of the delta variance. They were relatively 0:18:11.680 --> 0:18:14.639 resilient around that. The travel curbs that came in and 0:18:14.680 --> 0:18:16.200 the fact that we're right in the middle of winter 0:18:16.600 --> 0:18:19.320 that certainly did and more of a chilling message to 0:18:19.560 --> 0:18:22.159 true markets. UM on the frigility. So, just as I 0:18:22.240 --> 0:18:24.959 mentioned the debate, I asked myself the question whether markets 0:18:24.960 --> 0:18:27.680 can be resilient and fragile at the same time. But 0:18:27.800 --> 0:18:30.679 to where we see inflation going into next year. Certainly 0:18:30.680 --> 0:18:33.800 there was some of the the acute supply tinch cane 0:18:33.840 --> 0:18:38.200 shortages and bottlenecks should be easing. Um, we will probably 0:18:38.200 --> 0:18:40.600 see after the summer and easing of demands which would 0:18:40.720 --> 0:18:43.640 should also bring prices after the holiday season, and using 0:18:43.640 --> 0:18:46.520 of demands which should bring prices in. And again the 0:18:46.520 --> 0:18:49.440 oil price and energy prices filtering through will have a 0:18:49.520 --> 0:18:52.280 more muted effect going forward. But it was interesting that 0:18:52.359 --> 0:18:55.960 the timing of German powers, the discussion of the removing 0:18:56.000 --> 0:18:58.639 the bird transitory and who suggestions that they would be 0:18:58.680 --> 0:19:02.680 speeding up the papering that actually was what was probably 0:19:03.040 --> 0:19:05.960 the worst timing given where markets were feeling anyway, given 0:19:06.000 --> 0:19:08.880 the Omicon news. So because of that, we think that's 0:19:08.880 --> 0:19:12.080 already been based in now because that essentially have we 0:19:12.280 --> 0:19:14.399 now have a sense that the said maybe moving faster 0:19:14.520 --> 0:19:17.200 than we thought they are getting concerned. There's point of 0:19:17.240 --> 0:19:19.840 that before, kind of trying to control inflation from the top, 0:19:20.400 --> 0:19:22.760 and that has actually now been built in. I don't 0:19:22.800 --> 0:19:26.960 expect further pronouncence of that nature to shop markets, um 0:19:27.080 --> 0:19:29.520 and we most likely will be looking at a lower 0:19:29.600 --> 0:19:32.200 rate than six point seven percent going forward, but certainly 0:19:32.280 --> 0:19:34.600 higher than we've been used to enjoying around that two 0:19:34.600 --> 0:19:38.240 percent historically. All Right, so given that backdrop ethan, what 0:19:38.400 --> 0:19:45.439 is your outlook? We believe that this will continue to 0:19:45.440 --> 0:19:47.840 be a good market. With stock pickers, we're focused not 0:19:47.920 --> 0:19:50.640 only on the fundamental nature of eclonic markets from where 0:19:50.640 --> 0:19:53.680 they are at today, but also some of the technical factors. 0:19:53.760 --> 0:19:56.359 We cannot ignore the vast amounts of money that have 0:19:56.440 --> 0:19:59.600 been pumped into the system globally, but particularly in the US, 0:19:59.720 --> 0:20:01.960 where that money has not been safe but has instead 0:20:02.000 --> 0:20:04.840 been touched into risk gasses. So there is a record 0:20:04.920 --> 0:20:07.760 amounts of money and money market funds who saw them 0:20:07.760 --> 0:20:10.960 in the reverse repo markets, record amount of transactions that 0:20:11.080 --> 0:20:13.840 that suggests that there is money on the sidelines and 0:20:13.920 --> 0:20:15.800 as a results, when we did have gips like we 0:20:15.840 --> 0:20:18.400 did this week, even chilling ones that were a little 0:20:18.440 --> 0:20:21.119 more severe than we were used to, they close up 0:20:21.200 --> 0:20:23.720 melatively quickly. There is a desire not to miss ouse, 0:20:24.080 --> 0:20:25.960 to to buy on the dip. There is a lot 0:20:25.960 --> 0:20:29.080 of retail activity and all of that is focused now 0:20:29.160 --> 0:20:31.800 around and propping up equity markets. I see that that 0:20:31.960 --> 0:20:34.159 technical factor is not going to go away because that 0:20:34.200 --> 0:20:37.639 should supports equity markets going into two to what I 0:20:37.720 --> 0:20:41.080 see in terms of sectors and very focused um because 0:20:41.080 --> 0:20:43.000 of my European routes on on what we saw coming 0:20:43.000 --> 0:20:46.080 out of a Glassgow in top twenty six, so where 0:20:46.119 --> 0:20:48.919 we saw, now what's the road from Glasgow. We're definitely 0:20:48.920 --> 0:20:52.639 going to see more capital flowing through to renewable energy, 0:20:53.000 --> 0:20:57.400 to climate change focus strategies, to e f G focused funds, 0:20:57.440 --> 0:21:00.800 and those sectors such as electric vehicles. We seeing the 0:21:01.040 --> 0:21:04.560 huge momentum that it's surrounded. It stops to Tesla as 0:21:04.560 --> 0:21:06.879 well as the car rental companies when they simply say 0:21:06.920 --> 0:21:09.480 they're going to add evs to their fleet. So that's 0:21:09.520 --> 0:21:13.480 kind of almost Meanlike momentum indicates that there is clearly 0:21:14.080 --> 0:21:15.639 a sense that this is going to be a sector 0:21:15.680 --> 0:21:17.359 that will have a lot more focus in the future. 0:21:17.560 --> 0:21:19.560 So I'm looking at all those factors that are likely 0:21:19.600 --> 0:21:21.920 to benefit from what came out of cost PTY six. 0:21:23.000 --> 0:21:25.600 All right, Evan, thanks so much for joining us. Ethan Devitt. 0:21:25.720 --> 0:21:29.320 There is actually the last five years in a row 0:21:29.520 --> 0:21:32.880 ranked in the top ten by barons among independent pretty 0:21:32.880 --> 0:21:37.560 registered investment advisors. Thanks for listening to the Bloomberg Markets podcast. 0:21:37.960 --> 0:21:41.159 You can subscribe and listen to interviews of Apple podcasts 0:21:41.280 --> 0:21:45.200 or whatever podcast platform you prefer. I'm Matt Miller. I'm 0:21:45.240 --> 0:21:49.399 on Twitter at Matt Miller three. On false Sweeney, I'm 0:21:49.440 --> 0:21:52.080 on Twitter at pt Sweeney. Before the podcast, you can 0:21:52.119 --> 0:21:54.320 always catch us worldwide at Bloomberg Radio.