WEBVTT - Markets Cautious Ahead of Jackson Hole 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.040 or watch us live on YouTube. 0:00:27.120 --> 0:00:29.680 All right, let's direct to Michael McKee's out there in 0:00:30.000 --> 0:00:35.360 Jackson Hole. Hey, Michael, as we get into FED Chairman 0:00:35.400 --> 0:00:39.159 Pal's speech tomorrow, how have expectations been changing. What do 0:00:39.159 --> 0:00:42.519 you think is going to drive his commentary tomorrow. 0:00:42.760 --> 0:00:46.000 Well, probably people are starting to change their expectations based 0:00:46.000 --> 0:00:48.920 on the minutes that were released yesterday of the July 0:00:49.080 --> 0:00:52.440 thirtieth meeting, because it emphasized the fact that almost all 0:00:52.520 --> 0:00:54.920 of the members of the Open Market Committee, except for 0:00:55.000 --> 0:00:58.120 Chris Waller and Mickey Bowman, were more focused on inflation 0:00:58.280 --> 0:01:00.520 than they were on the labor market. Now, that was 0:01:00.560 --> 0:01:04.280 before we got the bad revision to the July payroll report. 0:01:04.560 --> 0:01:07.800 But if we get another payroll report that's similar, even 0:01:07.800 --> 0:01:09.520 if we're not getting a lot of hiring but the 0:01:09.600 --> 0:01:13.119 unemployment rate stays low, then the focus really does stay 0:01:13.200 --> 0:01:16.160 on inflation. So it'll be interesting to see what Powell 0:01:16.400 --> 0:01:20.640 emphasizes tomorrow because today, of course, we got the Walmart 0:01:20.720 --> 0:01:23.319 news that was mixed in terms of earnings, but they 0:01:23.319 --> 0:01:26.240 did say prices are going up because of tariffs, and 0:01:26.240 --> 0:01:31.520 then we saw the Philadelphia Fed Index prices paid rise significantly. 0:01:31.640 --> 0:01:34.160 So we are seeing some inflation effects out there in 0:01:34.200 --> 0:01:38.279 the economy. And if Powell leans towards inflation, then maybe 0:01:38.319 --> 0:01:41.040 the heavy lean in the markets towards the rate cut 0:01:41.080 --> 0:01:42.520 in September backs off a little. 0:01:43.200 --> 0:01:46.440 Hey, Mike, as far as what is the market betting 0:01:46.720 --> 0:01:49.960 that Powell will say versus in reality what we will 0:01:50.040 --> 0:01:52.320 likely cure him end up saying. 0:01:52.840 --> 0:01:55.720 Well, right now, when you look at the WRP function 0:01:55.800 --> 0:01:58.920 on the terminal, you see we're in the eighty percent range. 0:01:58.960 --> 0:02:02.080 Eighty and higher. Depending on the headlines of the moment 0:02:02.600 --> 0:02:05.120 that people think that the Fed will cut rate wants 0:02:05.360 --> 0:02:08.680 twenty five basis points. The fifty basis points has probably 0:02:08.680 --> 0:02:11.760 gone out the window. But as I say, there are 0:02:11.919 --> 0:02:15.840 probably going to be some people reconsidering after what we 0:02:15.919 --> 0:02:18.120 got yesterday in the minutes, and then of course you 0:02:18.200 --> 0:02:22.760 read about the options trade on the fifty basis point cut. 0:02:22.800 --> 0:02:25.320 I think if you're holding those options, you're probably sitting 0:02:25.320 --> 0:02:28.560 there thinking now that we're probably they're probably going to 0:02:28.600 --> 0:02:31.560 expire without hitting the mark. 0:02:32.160 --> 0:02:36.359 Hey, micro starting, we do have some dissent on this FOMC. 0:02:36.880 --> 0:02:40.120 Talk to us about that. Historically, should we care? When 0:02:40.160 --> 0:02:42.680 does it become problematic? How should we think about that? 0:02:44.240 --> 0:02:49.800 Well, there's a lot going on, it's not necessarily problematic 0:02:49.880 --> 0:02:53.200 for a while. You'd have to have a significant turnover 0:02:53.440 --> 0:02:57.079 at the Open Market Committee to have anybody really be concerned. 0:02:57.120 --> 0:03:01.359 There is what we've called the Tinfoil Hack conspiracy theory, 0:03:01.400 --> 0:03:04.800 but it's a little bit less of that than it 0:03:05.080 --> 0:03:10.080 was that because the Board of Governors has the power 0:03:10.160 --> 0:03:13.000 over the FED presidents, they can dismiss them at will. 0:03:13.720 --> 0:03:16.920 That maybe Trump could take control of the entire FOMC, 0:03:17.120 --> 0:03:19.000 But that would be very difficult to do because I 0:03:19.000 --> 0:03:21.640 don't think Chris Waller and maybe not Mickey Bowmen would 0:03:21.639 --> 0:03:22.000 even go. 0:03:22.000 --> 0:03:22.720 Along with that. 0:03:23.120 --> 0:03:26.080 So Trump just getting a majority on the board doesn't 0:03:26.120 --> 0:03:29.240 mean a significant change in policy. Also, I think our 0:03:29.320 --> 0:03:31.919 friends down on Wall Street would have a conniption fit 0:03:32.040 --> 0:03:34.680 over something like that, and that might cause the President 0:03:34.720 --> 0:03:37.240 to back off. What he may get out of it 0:03:37.320 --> 0:03:40.560 is more people on the board who are more inclined 0:03:40.960 --> 0:03:43.520 to lower interest rates, but once you get in there, 0:03:43.920 --> 0:03:46.600 you are very afraid of inflation, and I think that 0:03:46.680 --> 0:03:48.080 culture will hold for a while. 0:03:48.400 --> 0:03:50.560 Mike, or there are other members on the board beyond 0:03:51.040 --> 0:03:53.920 Mickey and Chris Waller that you think potentially could also 0:03:54.000 --> 0:03:56.320 be a descent voter at that's September decision. 0:03:57.360 --> 0:03:59.440 I don't think we'll have any other descents unless you 0:03:59.480 --> 0:04:03.200 get a Steve Myron world record confirmation from the Senate 0:04:03.240 --> 0:04:06.760 and get him in there by September seventeenth. Pretty much 0:04:06.800 --> 0:04:09.040 what we've heard from everybody is even the ones who 0:04:09.120 --> 0:04:13.720 are looking to the possibility of September based on the data, 0:04:13.840 --> 0:04:17.080 if the data suggests that there's no cut in the 0:04:17.120 --> 0:04:21.120 offing because inflation is rising, those people aren't going to dissent. 0:04:21.320 --> 0:04:24.880 They may withhold votes, they may vote with the group, 0:04:24.920 --> 0:04:28.039 but anticipate that they will cut rates in the future. 0:04:28.279 --> 0:04:29.920 But I don't think we'll get more than two descents 0:04:30.000 --> 0:04:32.279 unless Myron is added to the cast. 0:04:32.920 --> 0:04:35.599 Mike, what's the latest scuttle butt out there in Jackson 0:04:35.640 --> 0:04:38.000 Hall about President Trump's campaign to ask for a Reserve 0:04:38.040 --> 0:04:39.040 Governor Lisa Cook? 0:04:39.960 --> 0:04:42.240 Well, there's nothing really new. Overnight. Cook put out her 0:04:42.279 --> 0:04:44.680 statement at the end of the Day yesterday saying she 0:04:44.760 --> 0:04:48.120 will not be bullied into resigning, and she noted that 0:04:48.160 --> 0:04:51.720 she is gathering all the documents necessary. So unless the 0:04:51.720 --> 0:04:55.120 President tweets something again, we're all keeping our eyes on 0:04:55.200 --> 0:04:59.680 his truth social account. It's probably gets moved off to 0:04:59.680 --> 0:05:02.280 the side for a while until we get some more information. 0:05:02.800 --> 0:05:07.680 The FA director has gone after Senator Adam Schiff and 0:05:08.360 --> 0:05:12.200 the head of the Attorney General for New York State, 0:05:12.279 --> 0:05:15.640 Letitia James, and we haven't heard much about that lately. 0:05:16.240 --> 0:05:19.400 The things, you know, the charges are out there. The 0:05:19.480 --> 0:05:21.760 Justice Department is either looking into them or not. They 0:05:21.760 --> 0:05:26.040 don't comment, and until we get something new, it probably fades. 0:05:27.000 --> 0:05:28.839 All right, Mike, thanks so much for joining us. Appreciate 0:05:28.839 --> 0:05:30.279 it out there. Let us know when there's a Tom 0:05:30.360 --> 0:05:32.880 Keene citing. That would be a thing to see, a 0:05:32.880 --> 0:05:36.320 psyche to see. Michael McKee, international economics and policy correspondent 0:05:36.360 --> 0:05:37.320 for Bloomberg, whose. 0:05:38.839 --> 0:05:43.039 Stay with us. More from Bloomberg Surveillance coming up after this. 0:05:50.279 --> 0:05:53.840 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:05:53.920 --> 0:05:57.440 weekday afternoons from seven to ten am Eastern Listen on Apple, 0:05:57.480 --> 0:06:01.240 Karplay and Android Otto with the Bloombergs up or watch 0:06:01.279 --> 0:06:02.400 us live on YouTube. 0:06:02.560 --> 0:06:05.360 Well, let's get the latest what's happening down in Washington 0:06:05.640 --> 0:06:08.559 at DC. And for that we always turned to Wendy Schiller. 0:06:08.640 --> 0:06:12.440 She's a professor Brown University. Wendy, it seems like the 0:06:12.480 --> 0:06:15.839 White House is turned its attention at least for the 0:06:15.880 --> 0:06:18.719 timing over the last couple of days on the Federal 0:06:18.760 --> 0:06:23.560 Reserve with some allegations against Governor Lisa cookel what do 0:06:23.600 --> 0:06:24.599 you think is going on here? 0:06:25.680 --> 0:06:27.479 Well, I mean, I think this is just part of 0:06:27.560 --> 0:06:31.479 Trump's sustained attack on the Federal Reserve and trying to 0:06:31.520 --> 0:06:35.760 sort of exert more executive and direct power over the 0:06:35.760 --> 0:06:39.000 Federal Reserve. And in some ways for pr purposes, He's 0:06:39.000 --> 0:06:42.600 got the advantage because I think most Americans don't know 0:06:42.680 --> 0:06:44.360 the structure of the Federal Reserve. They don't know how 0:06:44.360 --> 0:06:46.360 it works, they don't know why it exists, they don't 0:06:46.400 --> 0:06:48.400 know that it was created by an Act of Congress, 0:06:49.120 --> 0:06:52.000 and they don't understand it, and they don't understand why 0:06:52.040 --> 0:06:56.200 it is so powerful visa the elected branches of government. 0:06:57.000 --> 0:06:59.400 And talk to us about the motivation here, because to 0:06:59.440 --> 0:07:02.800 your point, of resignation would create another opening for Trump 0:07:02.800 --> 0:07:05.760 to fill the FED board as president because basically piling 0:07:05.760 --> 0:07:07.920 on that pressure for the Central Bank to lower rates. 0:07:09.200 --> 0:07:12.040 Yeah, and it's just curious he's targeting this member and 0:07:12.120 --> 0:07:15.200 not any other member. And I think that's sort of 0:07:15.240 --> 0:07:19.320 part of the Trump administration strategy. 0:07:19.440 --> 0:07:21.000 When they go after people. 0:07:20.720 --> 0:07:23.920 They tend to try to pick off the weakest links 0:07:23.960 --> 0:07:25.520 in a lot of the organizations that they want to 0:07:25.520 --> 0:07:28.040 exert more influence over. You know, he went after Powell, 0:07:28.040 --> 0:07:30.800 but it was clear even though he tried that in 0:07:30.880 --> 0:07:35.320 general he can't probably can't fire Powell, and that Powell 0:07:35.320 --> 0:07:36.040 stood his ground. 0:07:36.080 --> 0:07:38.160 But Powell essentially only has a year left. 0:07:38.560 --> 0:07:41.240 So I think that's this is part and parcel of 0:07:41.240 --> 0:07:42.480 what the Trump agganization does. 0:07:42.520 --> 0:07:43.800 And you know, Trump is. 0:07:43.800 --> 0:07:47.600 Exercising executive power and people can like it or not 0:07:47.800 --> 0:07:50.520 like it. But for twenty twenty five years, Congress has 0:07:50.560 --> 0:07:53.640 allowed presidents to do this, Democrat or Republican. It's not 0:07:53.720 --> 0:07:56.960 just Trump, it's other presidents as well. So you know, 0:07:57.080 --> 0:07:59.640 Congress either has to step up or other branches of 0:07:59.680 --> 0:08:02.040 government have to step up and say no, you're you're 0:08:02.120 --> 0:08:03.400 overstepping your power. 0:08:03.720 --> 0:08:07.440 But so far we haven't seen that. 0:08:06.680 --> 0:08:08.440 You know, it leads me to the question I always 0:08:08.440 --> 0:08:09.760 ask you, Wendy, and I think we kind of get 0:08:09.760 --> 0:08:13.520 the same answer. But is there anybody in Congress that, 0:08:13.560 --> 0:08:16.239 at any point in time cares to stand up against 0:08:16.280 --> 0:08:18.720 President Trump for any of these types of issues? Or 0:08:18.800 --> 0:08:21.360 is it just or we passed that well? 0:08:21.400 --> 0:08:22.680 I mean, I think if you were, if you're a 0:08:22.680 --> 0:08:24.360 remember of Congress and you're in a comment and you're 0:08:24.360 --> 0:08:26.760 planning on running for reelection, if you're a Republican, you're 0:08:26.880 --> 0:08:28.880 all in on Trump. That's just he's taking over the 0:08:28.920 --> 0:08:32.160 Republican parties, and most presidents do try. Obama was a 0:08:32.160 --> 0:08:34.600 little bit of an exception. We didn't do as much 0:08:34.640 --> 0:08:36.840 in terms of taking over the messaging of the entire 0:08:36.840 --> 0:08:40.120 Democratic Party, which is more diverse in general and harder 0:08:40.160 --> 0:08:41.719 to sort of become more uniform. 0:08:41.840 --> 0:08:42.760 But Trump has done that. 0:08:43.040 --> 0:08:45.240 So you are tagged with Trump, whether you like it 0:08:45.320 --> 0:08:47.600 or you're not, as a Republican congressman going to twenty six. 0:08:48.080 --> 0:08:49.480 So they're not going to revolt. 0:08:49.920 --> 0:08:52.040 But the Democrats have to figure out something other than 0:08:52.080 --> 0:08:54.360 we're not Trump because it didn't work for them in 0:08:54.400 --> 0:08:56.720 twenty twenty four. And we're going to see in Virginia 0:08:56.840 --> 0:08:59.400 and in New Jersey coming up relatively soon. You know 0:08:59.440 --> 0:09:02.640 what those meanssages do and how well they play and 0:09:02.679 --> 0:09:05.320 if it looks good after November for the Democrats in 0:09:05.320 --> 0:09:07.440 those states, and I expect the national Democrats will pick 0:09:07.520 --> 0:09:08.480 up on some of that messaging. 0:09:08.800 --> 0:09:11.400 So what's the next big thing that you're obviously keeping 0:09:11.440 --> 0:09:13.560 a close eye on here when it's related to these 0:09:13.600 --> 0:09:15.520 types of issues and how this plays out on a 0:09:15.520 --> 0:09:16.439 timetable basis? 0:09:17.240 --> 0:09:18.160 Government shutdown? 0:09:18.400 --> 0:09:20.800 I mean, you know, I think I said on this show, 0:09:21.080 --> 0:09:23.720 you know, the election has already started for twenty twenty six. 0:09:23.840 --> 0:09:25.520 We know that with the redistricting efforts. 0:09:25.559 --> 0:09:28.720 And by the way, you know mid ten year redustering 0:09:28.920 --> 0:09:32.240 is not new and original. A lot of states did 0:09:32.280 --> 0:09:34.520 this in the nineteenth century and always bringing up history, 0:09:34.800 --> 0:09:37.720 so it's not unprecedented for a state to decide mid 0:09:37.760 --> 0:09:40.360 course that they want to redistrict. So we'll see what 0:09:40.400 --> 0:09:42.960 the courts do with that, especially the Supreme Court. But 0:09:43.160 --> 0:09:45.960 really I'm looking at the budget shutdown about the government, right, 0:09:45.960 --> 0:09:48.000 we got to go through this all over again. Do 0:09:48.040 --> 0:09:50.120 we appropriate what do the Democrats want, what do the 0:09:50.120 --> 0:09:51.000 Republicans want? 0:09:51.200 --> 0:09:54.000 You know, what does Trump want? And then the government. 0:09:53.640 --> 0:09:56.360 Still has to get US budget done by September thirtieth 0:09:56.400 --> 0:09:58.679 October first the fiscal year, and we'll have to see 0:09:58.720 --> 0:10:01.120 if they can do it keep the government running. And 0:10:01.160 --> 0:10:04.239 if there's a shutdown fight, then that's when the Democrats 0:10:04.280 --> 0:10:07.480 have an opportunity, as Clinton did against Gingridge, to make 0:10:07.600 --> 0:10:10.839 their points about the way the Trump administration is operating. 0:10:11.200 --> 0:10:14.240 So we'll have to see which side blinks on the shutdown. 0:10:13.880 --> 0:10:18.920 Question real quickly. Ukraine Russia, what's the next steps here? 0:10:18.920 --> 0:10:21.439 From your perspective, well, I mean, you. 0:10:21.400 --> 0:10:23.000 Know, you have to say to yourself. 0:10:23.040 --> 0:10:27.120 Trump gave Putin more time to do more damage in Ukraine, 0:10:27.400 --> 0:10:30.600 which puts more pressure on Zelenski to give some territory 0:10:30.679 --> 0:10:32.080 up for peace. 0:10:32.600 --> 0:10:35.160 And that's what Trump did. I don't think it's indefinite. 0:10:35.240 --> 0:10:37.040 I don't think Trump will just sit by and wait 0:10:37.160 --> 0:10:40.640 indefinitely for Putin to do, you know, destroy the country. 0:10:40.640 --> 0:10:43.400 But certainly he gave Putin the opportunity to go in 0:10:43.440 --> 0:10:46.920 and keep pounding, and that will continue to exert pressure 0:10:46.960 --> 0:10:50.160 on Zelenski if he wants to save Ukrainian lives, And 0:10:50.440 --> 0:10:52.880 you know, is there an opening for a compromise. I 0:10:52.880 --> 0:10:55.079 think the President is still committed to that he wants 0:10:55.120 --> 0:10:57.240 to be the guy who ends this war. 0:10:57.520 --> 0:10:59.240 All right, Wendy, thank you so much. We appreciate that. 0:10:59.280 --> 0:11:05.040 Wendy Shoulder for us are at Brown University. Stay with us. 0:11:05.040 --> 0:11:08.280 More from Bloomberg Surveillance coming up after this. 0:11:15.520 --> 0:11:19.120 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:11:19.160 --> 0:11:22.320 weekday afternoons from seven to ten am Eastern Listen on 0:11:22.400 --> 0:11:26.080 Applecarplay and Android Auto with the Bloomberg Business app, or 0:11:26.240 --> 0:11:27.679 watch us live on YouTube. 0:11:27.760 --> 0:11:29.560 Let's check out with the next guest we always love 0:11:29.640 --> 0:11:32.040 to speak with to get sense of kind of where 0:11:32.160 --> 0:11:35.360 these markets going, where valuation may be, how we should 0:11:35.360 --> 0:11:37.600 be thinking about both equities and fixed income market. And 0:11:37.600 --> 0:11:42.320 that's Karen Murphy. She's a CIO at Kestra Investment Management. Caro, 0:11:42.559 --> 0:11:46.719 we've had just a phenomenally crazy ride so far here 0:11:46.720 --> 0:11:48.800 to date in equities with that twenty percent sell off 0:11:48.800 --> 0:11:51.199 in April. Then, boy, that was quick on the way down, 0:11:51.200 --> 0:11:53.400 but it was even quicker on the way back up here. 0:11:53.880 --> 0:11:55.800 What are you telling your clients here as they think 0:11:55.840 --> 0:11:58.120 about equity markets going forward? 0:12:00.200 --> 0:12:00.720 First of all, I. 0:12:00.679 --> 0:12:02.719 Would agree with you that it's been a wild ride 0:12:02.760 --> 0:12:05.360 in the markets this year and We've described Q two 0:12:05.400 --> 0:12:08.320 as the Rip van Winkle quarter, where if you looked 0:12:08.320 --> 0:12:10.199 at your portfolio in the beginning of the quarter and 0:12:10.200 --> 0:12:11.760 then went to sleep and woke up at the end 0:12:11.800 --> 0:12:13.600 of the quarter and looked at your values, you would 0:12:13.640 --> 0:12:14.760 have been like great. 0:12:14.600 --> 0:12:16.280 Great, and pat yourself on the back. 0:12:16.880 --> 0:12:18.480 But we all know that it didn't feel like that 0:12:18.559 --> 0:12:21.400 as we went through it, and interestingly, like after this 0:12:21.559 --> 0:12:24.760 massive rally, we have many of the same risks that 0:12:24.800 --> 0:12:27.880 we started the year with, namely, you suggested a very 0:12:27.960 --> 0:12:32.439 high valuations really concentrated markets. But what we've seen, especially 0:12:32.440 --> 0:12:34.720 coming out of second quarter earnings, is that many of 0:12:34.720 --> 0:12:37.360 those companies continue to deliver and that's really been able 0:12:37.400 --> 0:12:40.160 to fuel this momentum. Now it sort of makes us 0:12:40.200 --> 0:12:42.840 a bit more cautious going forward because of the very, 0:12:42.920 --> 0:12:46.360 very high expectations in these names, But for now, signs 0:12:46.360 --> 0:12:47.280 are looking pretty good. 0:12:47.520 --> 0:12:48.040 Pretty good. 0:12:48.360 --> 0:12:52.360 Yeah, those guidance momentum scores from Bluebird Intelligence for the 0:12:52.480 --> 0:12:56.079 current third quarter for companies that are putting out quarterly guidance, 0:12:56.640 --> 0:12:58.640 it's a basically the heist in a year and second 0:12:58.679 --> 0:13:00.680 highest in a couple of years. There, So that look 0:13:00.920 --> 0:13:02.600 a little better than it was coming into this year. 0:13:02.640 --> 0:13:04.600 I'm kind of wondering your thoughts on when it comes 0:13:04.679 --> 0:13:07.200 to a lot of people arguing about the run we've 0:13:07.240 --> 0:13:09.280 seen since April and the mag seven. I mean, you 0:13:09.280 --> 0:13:11.720 have stocks like Apple, which is still down close to 0:13:11.760 --> 0:13:13.920 ten percent this year, it's obviously little bit more than 0:13:13.960 --> 0:13:16.800 thirty percent since those April lows, but you have certain 0:13:16.840 --> 0:13:19.640 big names that you weren't necessarily part. 0:13:19.400 --> 0:13:21.319 Of all of the rally this year. 0:13:21.640 --> 0:13:24.520 I mean, how could people argue about anything being bubbly 0:13:24.559 --> 0:13:27.080 when some of these big tech naus weren't necessarily all 0:13:27.120 --> 0:13:27.680 a part of that. 0:13:29.000 --> 0:13:30.040 Yeah, And I think you're right. 0:13:30.080 --> 0:13:33.200 The market has distinguished, right, So in some ways we've 0:13:33.240 --> 0:13:35.600 seen what we would call an everything rally coming off 0:13:35.640 --> 0:13:38.680 the bottom, and that you've had really wide range of 0:13:38.720 --> 0:13:41.240 types of stocks that have been rallying. But as you suggested, 0:13:41.280 --> 0:13:43.000 some of the big winners of the last couple of 0:13:43.040 --> 0:13:45.319 years haven't participated in the same way. 0:13:45.720 --> 0:13:46.360 So I think in. 0:13:46.280 --> 0:13:48.680 General what you're seeing is the market is reward like 0:13:48.760 --> 0:13:51.040 going back taking risk off tarifs aren't going to be 0:13:51.080 --> 0:13:54.920 as punitive as we thought. That kind of raises everything. 0:13:55.280 --> 0:13:57.480 But then the clear winners are those who are able 0:13:57.520 --> 0:14:00.440 to demonstrate a benefit from AI and that's you start 0:14:00.440 --> 0:14:01.560 to see some differentiation. 0:14:02.880 --> 0:14:05.000 Is it valuation concerned for you here? 0:14:06.240 --> 0:14:09.440 Yeah, absolutely, but it has been for a long time 0:14:09.480 --> 0:14:11.480 and it doesn't mean that the market's going to turn down. 0:14:11.880 --> 0:14:14.240 So what it is is we're constantly looking. 0:14:14.000 --> 0:14:16.880 For is there some sign that there's going to be 0:14:16.920 --> 0:14:19.480 a chink in the armor of this like forward earnings picture, 0:14:19.880 --> 0:14:22.880 and so far the momentum is pretty much up as 0:14:22.960 --> 0:14:25.800 those like all that cap X mending that's being put 0:14:25.800 --> 0:14:28.720 to work now. As that starts to come do in 0:14:28.760 --> 0:14:31.160 the next year or so, I think that's when you 0:14:31.200 --> 0:14:33.160 start to have the market take a much harder look 0:14:33.200 --> 0:14:35.120 and saying, are we actually getting returns on all this 0:14:35.280 --> 0:14:38.080 cap X? But for now, there's so much money going 0:14:38.160 --> 0:14:40.520 into this, we need to give it time to actually 0:14:40.600 --> 0:14:43.040 show those returns. So I think the market can actually 0:14:43.040 --> 0:14:45.000 handle these high valuations for some time. 0:14:45.360 --> 0:14:49.000 We are speaking with Kara Murphy, CIO Kestra Investment Management 0:14:49.080 --> 0:14:53.120 KRA as a recovering equity analyst. Earnings matter to me, 0:14:53.440 --> 0:14:56.200 and I think Corporate America is doing a great job, 0:14:56.240 --> 0:14:58.640 better than expected. Talk to us about kind of what 0:14:58.680 --> 0:15:00.920 your takeaway was for second quarter earnings that we just 0:15:00.960 --> 0:15:02.440 finished up and kind of maybe the outlook. 0:15:03.600 --> 0:15:07.000 Yeah, I am also a recovering equity analyst, so I 0:15:07.040 --> 0:15:09.640 know exactly what you're talking about. And they think when 0:15:09.720 --> 0:15:11.880 we look at the earnings reports that are coming out 0:15:11.880 --> 0:15:14.640 of the second quarter, they're quite different than what we're 0:15:14.680 --> 0:15:17.880 hearing on like Main Street, right, So particular, as we 0:15:17.880 --> 0:15:20.440 look at the largest companies, we had I think earnings 0:15:20.440 --> 0:15:23.680 expectations bottom for the second quarter around five percent. 0:15:24.080 --> 0:15:26.800 They came in around twelve percent, so more than. 0:15:26.760 --> 0:15:28.880 Double kind of where they had bottomed at the worst 0:15:28.880 --> 0:15:32.160 of the tariff fares. And these companies are also doing 0:15:32.160 --> 0:15:35.520 it on better revenues, better margins, So we're seeing really 0:15:35.560 --> 0:15:38.400 really good reports out of these. But then that stands 0:15:38.440 --> 0:15:41.360 and start contrast to some things like we're hearing about, 0:15:41.600 --> 0:15:44.840 you know, more cautious consumer spending, more worries about a 0:15:44.880 --> 0:15:47.720 title labor market, and of course a housing market that 0:15:47.760 --> 0:15:50.760 remains quite frozen, partly because of affordability. 0:15:50.840 --> 0:15:52.840 So it's very much a sort of like tale of 0:15:52.880 --> 0:15:53.480 two cities. 0:15:53.520 --> 0:15:56.680 But if you're a large company today, chances are your 0:15:56.920 --> 0:15:58.680 earnings picture looks pretty good. 0:15:59.000 --> 0:16:02.160 So, Kara, what companies are you telling investors from a 0:16:02.160 --> 0:16:04.520 stockbas is to buy or sell at this point. 0:16:05.720 --> 0:16:08.040 So we've been calling twenty twenty five the Year. 0:16:08.000 --> 0:16:12.360 Of the diversified portfolio, which is not terribly sexy. But 0:16:12.480 --> 0:16:14.160 what we've seen is that for the first time in 0:16:14.240 --> 0:16:17.240 quite a while, even with the mag seven doing really 0:16:17.280 --> 0:16:20.680 well and having this great rally, owning things outside of 0:16:20.720 --> 0:16:22.960 those that area has actually. 0:16:22.600 --> 0:16:24.120 Been beneficial to your portfolio. 0:16:24.280 --> 0:16:27.320 So, for instance, like non US stocks, it's been years 0:16:27.320 --> 0:16:28.960 that the S and P five hundred has sort of 0:16:29.000 --> 0:16:32.040 trounced non US stocks. Now so far this year we're 0:16:32.040 --> 0:16:34.600 seeing much much better goes outside the US. 0:16:35.000 --> 0:16:36.960 And how much is of a week dollar, right? 0:16:37.000 --> 0:16:39.240 I was going to say, Also, when you have indexes 0:16:39.280 --> 0:16:41.200 like the S and P five hundred coming off of 0:16:41.240 --> 0:16:44.120 two back to back years of twenty percent gains, I mean, 0:16:44.120 --> 0:16:46.120 even though it's up you know, eight nine percent this year, 0:16:46.160 --> 0:16:48.320 is it just kind of just a smaller cooling off 0:16:48.320 --> 0:16:50.240 period before potentially more gains from here? 0:16:51.000 --> 0:16:53.040 I mean, I think that would be very healthy, right. 0:16:53.080 --> 0:16:55.560 We can't put up twenty five percent gains every year, 0:16:56.000 --> 0:16:58.640 And even given that, as you suggested, like the returns 0:16:58.640 --> 0:17:00.000 that we've had in the S and P five hundred 0:17:00.080 --> 0:17:00.880 this year are. 0:17:00.760 --> 0:17:01.680 Still pretty good. 0:17:02.160 --> 0:17:03.800 But I think what happens is that when you have 0:17:03.880 --> 0:17:05.840 a single asset class like the S and P five 0:17:05.960 --> 0:17:08.919 hundred doing so well year after year, a lot of 0:17:09.000 --> 0:17:11.040 investors then sort of forget that they need to have 0:17:11.119 --> 0:17:14.960 exposure elsewhere. And so often when we talk with investors 0:17:15.000 --> 0:17:17.440 is like, remember these sort of like long term approaches 0:17:17.480 --> 0:17:19.000 to investing where you want to be able to have 0:17:19.040 --> 0:17:21.480 exposure some of these areas outside the world. 0:17:21.800 --> 0:17:24.440 Fixed income, what's the play here, stick when the belly 0:17:24.480 --> 0:17:25.560 of the treasury curve or takes some. 0:17:25.560 --> 0:17:28.920 Credit risk, a little bit of both. 0:17:29.359 --> 0:17:31.800 So when we look at, for instance, like high yield, 0:17:31.840 --> 0:17:33.920 if you go pretty far out on the credit curve, 0:17:34.280 --> 0:17:36.239 I think there we would have like a little bit 0:17:36.280 --> 0:17:39.360 of concern only because you're not being paid to take 0:17:39.400 --> 0:17:42.760 that much risk. Right, credit spreads are really really tight. 0:17:43.119 --> 0:17:45.240 When we look at corporate credit, that's where we have 0:17:45.440 --> 0:17:50.000 some really nice absolute yields. Yes, like you know, spreads 0:17:50.000 --> 0:17:52.240 are tight, but it still feels very comfortable, and we 0:17:52.240 --> 0:17:54.920 don't see a lot of stress within corporates. So I think, 0:17:55.080 --> 0:17:57.080 you know, we're willing to take some credit risk. And 0:17:57.119 --> 0:17:59.280 then as you suggested, like staying within the belly of 0:17:59.320 --> 0:18:01.600 the curve, so and sort of stay out of some 0:18:01.640 --> 0:18:04.040 of the volatility at the very long end of the curve, 0:18:04.640 --> 0:18:06.679 and then you can find some really good absolute yields 0:18:06.680 --> 0:18:07.240 there as well. 0:18:07.640 --> 0:18:09.600 Cara, thanks so much for joining us. We always appreciate 0:18:09.760 --> 0:18:12.000 getting a few minutes of your time. Caraen Murphy. She's 0:18:12.040 --> 0:18:15.920 the CIO of Kestra Investment Management, a lot of experience 0:18:16.280 --> 0:18:19.560 in the investment game. We always appreciate talking to Carolyn. 0:18:21.080 --> 0:18:21.760 Stay with us. 0:18:22.000 --> 0:18:32.679 More from Bloomberg Surveillance coming up after this. 0:18:32.680 --> 0:18:36.560 This is the Bloomberg Surveillance podcast. Listen live each weekday 0:18:36.600 --> 0:18:39.600 starting at seven am Eastern on Apple, Cocklay and Android 0:18:39.640 --> 0:18:42.680 Auto with the Bloomberg Business app. You can also watch 0:18:42.720 --> 0:18:45.679 us live every weekday on YouTube and always on the 0:18:45.680 --> 0:18:48.119 Bloomberg Terminal newspapers. 0:18:48.640 --> 0:18:51.480 But Lisa the best, Lisa, what do you have for 0:18:51.600 --> 0:18:52.000 us today? 0:18:52.119 --> 0:18:52.439 Okay? 0:18:52.520 --> 0:18:54.840 This is actually a look into the struggles that older 0:18:54.880 --> 0:18:58.800 Americans are having because their savings accounts are starting to deplete. 0:18:58.840 --> 0:19:00.840 So they're like, how are are going to make money 0:19:00.920 --> 0:19:04.240 when I'm win my eighties? Okay, So Business Insider they 0:19:04.280 --> 0:19:05.840 spoke with one couple who are in the eighties. 0:19:05.880 --> 0:19:06.639