WEBVTT - Surveillance: Too Early To Get Bearish, Slimmon Says 0:00:05.120 --> 0:00:09.320 Welcome to the Bloomberg Surveillance Podcast Downtown Keene. Along with 0:00:09.440 --> 0:00:13.080 Jonathan Ferroll and Lisa A. Brownwitz jay Leie, we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance and Apple Podcast SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.400 dot Com, and of course, on the Bloomberg terminal. Let 0:00:29.480 --> 0:00:32.240 us talk to Andrew slim And, a senior portfolio manager 0:00:32.280 --> 0:00:35.159 at Morgan Stanley Investment Management, about his outlook as we 0:00:35.200 --> 0:00:40.000 head into twenty two, what strategy looks appropriate to him. Andrew, 0:00:40.080 --> 0:00:41.920 very good to speak to you. I won't ask you 0:00:41.920 --> 0:00:44.000 about the specifics around the Turkish liver, will leave that 0:00:44.040 --> 0:00:45.599 for another day. But let me ask you about your 0:00:45.640 --> 0:00:50.000 expectations for equity returns given what we're expecting now from 0:00:50.000 --> 0:00:53.720 the Fed, Given how fast our expectations of the FED 0:00:53.880 --> 0:00:55.920 are changing and shifting and the market is having to 0:00:56.000 --> 0:00:58.480 price in higher interest rates a little bit sooner, what 0:00:58.520 --> 0:01:01.240 does that do to your expectation is full equity reserves 0:01:01.480 --> 0:01:06.480 returns and how do you position appropriately? Good morning, Yes, 0:01:06.680 --> 0:01:08.920 so you know, look, I've been on the show a 0:01:08.959 --> 0:01:12.320 lot and I've been pretty optimistic from from the lows. 0:01:12.480 --> 0:01:16.200 Uh simply because I said was going to be ultra accommodative, 0:01:16.240 --> 0:01:19.640 and as the central banks begin to move off that 0:01:21.120 --> 0:01:25.520 accommodative pivot, it means that equity returns are still going 0:01:25.560 --> 0:01:27.920 to be positive, but they're going to be lower. And 0:01:27.959 --> 0:01:31.959 in that environment, I simply think that it requires a 0:01:32.000 --> 0:01:35.039 little bit more of a balance between risk on stocks 0:01:35.080 --> 0:01:38.480 and risk off stocks, i e. Controlling you know, kind 0:01:38.480 --> 0:01:42.440 of debate of your portfolio. And so we've just had 0:01:42.520 --> 0:01:45.640 this extreme risk off move he has to market is 0:01:45.640 --> 0:01:50.120 only down three percent, but uh staples are up eight percent, 0:01:50.320 --> 0:01:53.160 and you know, financials energies are down on the month, 0:01:53.360 --> 0:01:55.800 and so you've had an extreme move and I think 0:01:55.880 --> 0:01:58.960 that's going to be the story going forward, more so 0:01:59.400 --> 0:02:02.280 than it's really been since the lows of March two 0:02:02.320 --> 0:02:05.280 thousand twenty, which has really been a period of risk 0:02:05.360 --> 0:02:07.680 on and so I think it's just simply going to 0:02:07.800 --> 0:02:11.200 require a little bit more of a Bell's portfolio. But 0:02:11.280 --> 0:02:14.160 what I wouldn't do right now is I would not 0:02:14.360 --> 0:02:19.320 chase the defensive risk off socks. They've just had a 0:02:19.480 --> 0:02:22.839 very big move on a relative basis, and I think 0:02:22.840 --> 0:02:25.840 that's gonna be the story over the next year, which 0:02:25.880 --> 0:02:28.640 is you're gonna have these periods of big risk off 0:02:29.000 --> 0:02:31.000 and then the market is gonna come roaring back. So 0:02:31.360 --> 0:02:34.000 I think you can take advantage of it. And in 0:02:34.040 --> 0:02:36.440 this environment you have to start to scratch your heads 0:02:36.440 --> 0:02:38.200 and ge maybe I should be looking around some of 0:02:38.200 --> 0:02:40.839 these banks or energy socks or small caps are down 0:02:40.840 --> 0:02:43.840 a lot, and then waiting for a better period to 0:02:43.880 --> 0:02:47.280 add to defenses. If in fact you're under right there 0:02:47.600 --> 0:02:49.680 and that's you know, that's really hurt you the last 0:02:50.240 --> 0:02:53.720 last three weeks. But I wouldn't chase them here. Andrew, 0:02:53.800 --> 0:02:55.959 you say, you're not getting em barished, You're just getting 0:02:56.040 --> 0:02:58.480 less bullish. Can we dig into the nuances of that 0:02:58.680 --> 0:03:01.320 and provide some definitions. What is the difference between a 0:03:01.320 --> 0:03:06.960 barish outlook and a decreasingly fullish one. Sure, so what 0:03:07.040 --> 0:03:11.640 you see is obviously the first year offlo like we 0:03:11.720 --> 0:03:13.480 had in the last two thousand and twenty, you have 0:03:13.560 --> 0:03:16.840 a very strong market because the Feds just pouring money in. 0:03:17.639 --> 0:03:20.920 And the second year, which is this year, the market continues. 0:03:21.080 --> 0:03:25.640 It happens every time because you have a combination of 0:03:25.720 --> 0:03:30.960 big earnings recovered by corporate fundamental and the essential banks 0:03:30.960 --> 0:03:34.520 pumping liquidity. It is typically in the third year that 0:03:34.560 --> 0:03:39.360 we're going into where returns remain positive, but they're not 0:03:39.440 --> 0:03:42.600 as strong because you have kind of a battle between 0:03:43.040 --> 0:03:45.840 still good corporate fundamentals, and I think that's gonna be 0:03:45.840 --> 0:03:49.080 the story next year. But you don't get the p expansion, 0:03:49.160 --> 0:03:51.800 you don't get the liquidity pump from the FED. So 0:03:51.840 --> 0:03:54.160 the result is a little bit more of a you know, 0:03:54.200 --> 0:03:58.120 the fence tends to throw cold water on kind of 0:03:58.200 --> 0:04:01.200 strong corporate funals. Look what's going on today. We've got 0:04:01.200 --> 0:04:05.240 more companies reporting great earnings, but you don't have that 0:04:05.400 --> 0:04:09.640 further injection coming from the FED. And the result is 0:04:09.640 --> 0:04:12.760 is positive returns for equties in the third year, which 0:04:12.800 --> 0:04:15.480 would be too down just not as good as you 0:04:15.560 --> 0:04:18.120 see in the past. I think it's way too early 0:04:18.400 --> 0:04:22.080 to get barished to think the market's going down because 0:04:22.320 --> 0:04:26.400 corporate fundamentals are going to continue to come in strong. 0:04:26.839 --> 0:04:29.159 It's just not as good as what we've seen off 0:04:29.160 --> 0:04:31.760 the law. So, Andrew is essentially what you're saying that, 0:04:31.880 --> 0:04:35.520 regardless of what happens with monetary policy, earnings growth can 0:04:35.600 --> 0:04:40.960 carry equities higher. Yeah, it's not just earnings growth, clearly, 0:04:41.120 --> 0:04:48.440 it's surprises, earnings revisions, and you know this year, uh, 0:04:48.480 --> 0:04:51.520 this year, everyone thinks, oh, it's you know, the FED 0:04:51.600 --> 0:04:54.560 pumped the market up. There's a lot of speculation. The 0:04:54.720 --> 0:04:58.560 market is only up this year by the magnitude of 0:04:58.640 --> 0:05:02.880 earnings revisions. So it's not the PEED that's gone up, 0:05:02.960 --> 0:05:06.440 it's the E that has gone up, and the E 0:05:06.680 --> 0:05:10.040 has repriced the P higher. So the key question is 0:05:10.080 --> 0:05:13.000 as we go into next year, and the estmim it 0:05:13.120 --> 0:05:15.960 for the consensus for the SMP earnings next year is 0:05:16.000 --> 0:05:19.919 two seven. Is that going to be too high or 0:05:19.960 --> 0:05:22.839 too low or just right? And if it's too high, 0:05:23.120 --> 0:05:27.039 markets going down. And if it's just right, I think 0:05:27.040 --> 0:05:29.320 the market also goes down because you have the FED 0:05:29.440 --> 0:05:33.280 pulling piece, that probably weighing on piece. But I don't 0:05:33.279 --> 0:05:35.000 think that's the case. I think it's going to be 0:05:35.120 --> 0:05:39.839 yet again too low because classically, coming out of an 0:05:40.080 --> 0:05:44.040 of a recession, Wall Street tends to be too cautious initially. 0:05:44.040 --> 0:05:45.920 And what we hear from companies, and you know, I'm 0:05:45.960 --> 0:05:48.520 not I'm not a strategist on portfolio management. I listened 0:05:48.560 --> 0:05:51.800 companies all day long. I hear corporate balance sheets, strong 0:05:52.640 --> 0:05:54.560 liquidity is there. I think it's going to be a 0:05:54.680 --> 0:05:58.800 very active year for companies buybacks, M and A S. 0:05:58.920 --> 0:06:00.479 I think it will be a good year, and I 0:06:00.560 --> 0:06:04.479 think that number to seven for next year will come 0:06:04.480 --> 0:06:07.760 in way too low. But again, the Fed's got a 0:06:07.800 --> 0:06:12.240 cold throw a little cold water on too much enthusiasm. Andrew, 0:06:12.240 --> 0:06:14.479 if you don't mind, I'd love to dig into sort 0:06:14.480 --> 0:06:17.400 of your factor strategy and maybe your capitalization strategy and 0:06:17.440 --> 0:06:20.320 that kind of environment. You mentioned that low volatility stocks 0:06:20.360 --> 0:06:24.760 have really surged off of extremely oversold levels back in 0:06:24.839 --> 0:06:28.360 October and that may not continue into the year ahead. 0:06:28.680 --> 0:06:32.719 What factor do you like for two? And then further, 0:06:33.120 --> 0:06:35.360 what do you do about small caps? And obviously the 0:06:35.440 --> 0:06:38.160 large cap in next has held on significantly better than 0:06:38.200 --> 0:06:40.960 small caps. Small caps now testing the bottom of a 0:06:41.000 --> 0:06:44.520 pretty significant range. Trade. Is that an opportunity or a risk? 0:06:45.800 --> 0:06:49.560 It's an opportunity at this juncture. Okay, So the key 0:06:49.640 --> 0:06:54.040 thing is small caps, uh, like you know, value stocks, 0:06:54.839 --> 0:07:00.599 cyclic coals, emerging markets, uh, cryptocurrencies you aim it. They're 0:07:00.600 --> 0:07:04.599 all risk assets. So they've been hit over the last month, 0:07:05.000 --> 0:07:07.719 and so if you want to tow in now the 0:07:07.760 --> 0:07:10.360 opportunity to do it. But I think they will come 0:07:10.360 --> 0:07:13.640 a time when they will have big bounces and that 0:07:13.800 --> 0:07:16.520 then the point is don't chase them because in a 0:07:16.640 --> 0:07:21.800 lower and return environment you're gonna have bigger swings in 0:07:22.000 --> 0:07:24.680 risk on risk off. So what's our strategy. I'm a 0:07:24.680 --> 0:07:29.600 core manager. We've been overweight value stocks, right and so 0:07:29.680 --> 0:07:34.400 that worked great until you know, around Thanksgiving. But fortunately 0:07:34.400 --> 0:07:38.080 what we've done starting this summer is we started to 0:07:38.160 --> 0:07:42.560 layer in more of the risk off, low bated defensive 0:07:42.640 --> 0:07:46.520 stocks to offset that valuating. So, Um, the reason we 0:07:46.600 --> 0:07:51.160 like value is simply because those stocks have not repriced 0:07:51.200 --> 0:07:54.600 back to where they should coming out of recession. And 0:07:54.640 --> 0:07:57.560 I think the reason there's been this fits and starts 0:07:57.600 --> 0:08:01.480 is simply because, unlike previous sessions, we keep having the 0:08:01.520 --> 0:08:04.880 problem of the recession coming back and hitting us again. 0:08:04.920 --> 0:08:07.880 It's called COVID, and when that happens, it seems to 0:08:07.960 --> 0:08:11.120 derail the value trade. But I don't think it's over yet. 0:08:11.200 --> 0:08:14.360 So again, in in a period like we've just seen 0:08:14.400 --> 0:08:16.720 the last three weeks, now is the time to buy 0:08:16.880 --> 0:08:21.480 value stocks. But I think you bounced that with this, 0:08:21.960 --> 0:08:28.240 you know, staples, the utilities, reads, defenses, and uh, if 0:08:28.280 --> 0:08:32.120 we have a risk back on period, which I think 0:08:32.240 --> 0:08:36.320 is very possible starting today, Um, then I think those 0:08:36.320 --> 0:08:39.280 socks will underperform, and we'll go back and say, what's 0:08:39.360 --> 0:08:41.400 you know, what stocks should we look to add to? 0:08:41.559 --> 0:08:44.920 And I when I run through my list of my portfolio, 0:08:44.960 --> 0:08:48.280 I say, well, what stocks have been hammered recently? Well, 0:08:48.320 --> 0:08:50.719 it's the banks, it's the energy, And what stocks have 0:08:50.840 --> 0:08:55.120 really done well? Well? Staples and uh, you know a 0:08:55.160 --> 0:08:57.959 couple of low risk insurance companies. You don't want to 0:08:58.000 --> 0:09:00.720 buy those? Those are the wants to trip. So I 0:09:00.720 --> 0:09:03.000 think there's gonna be a lot of opportunity to take 0:09:03.040 --> 0:09:06.400 advantage of what the market offers, but you have to 0:09:06.440 --> 0:09:09.719 be willing to go against the grain, and against the 0:09:09.760 --> 0:09:11.760 grain means to take a little bit more risk. Right 0:09:11.760 --> 0:09:15.000 here today, interesting stuff. Thank you so much for joining us, ANDREWS. 0:09:15.040 --> 0:09:24.520 Lemon of Morgan Stanley, appreciate your time. Dr amish Adalgia, 0:09:24.600 --> 0:09:27.360 Senior Scholar at the Johns Hopkins Center for How Security 0:09:27.400 --> 0:09:30.960 is joining us now, Dr Adulgia, Clearly this is spreading 0:09:31.520 --> 0:09:34.760 quite rapidly, and it is doing so even in people 0:09:34.800 --> 0:09:38.880 who are fully vaccinated and boosted. If that is the case, 0:09:39.000 --> 0:09:41.560 can we vaccinate our way out of the wave of 0:09:41.559 --> 0:09:44.880 this variant? Or is the only answer here more restrictive measures. 0:09:46.280 --> 0:09:48.680 It's sort of neither. We can't vaccinate our way out, 0:09:48.760 --> 0:09:50.720 But I think we have to start to think about 0:09:51.200 --> 0:09:53.360 what we're what are our goals with this pandemic. What 0:09:53.440 --> 0:09:55.200 are our goals with COVID nineteen. And this is not 0:09:55.240 --> 0:09:58.040 a disease that can be eradicated or eliminated. Our goal 0:09:58.240 --> 0:10:01.240 is to decouple cases from hospit fitalizations. And when you 0:10:01.280 --> 0:10:04.000 look at the cases that are occurring in vaccinated individuals 0:10:04.000 --> 0:10:07.480 and boosted individuals, they are mild. They usually don't even 0:10:07.600 --> 0:10:10.360 require a call to the doctor. That's a good thing, 0:10:10.440 --> 0:10:13.080 that's a victory. So I think we have to emphasize 0:10:13.160 --> 0:10:16.840 the severity of illness. So if vaccinated people have mild illnesses, 0:10:16.920 --> 0:10:19.040 I think that's a victory for the vaccines and a 0:10:19.120 --> 0:10:21.480 victory for us. What we're seeing in the hospitals, and 0:10:21.559 --> 0:10:23.440 I last weekend I worked in the hospital of the 0:10:23.440 --> 0:10:26.640 whole weekend. What you're seeing our unvaccinated individuals that are 0:10:26.679 --> 0:10:30.240 occupying I see you beds occupying other beds and stressing, 0:10:30.640 --> 0:10:33.559 stressing the staff. So I think we have to draw separation. 0:10:33.600 --> 0:10:36.280 Their cases are always going to be there, especially with 0:10:36.360 --> 0:10:39.360 a variant likeness it's all about making sure our hospitals 0:10:39.640 --> 0:10:41.599 don't go over capacity. And they think you're going to 0:10:41.679 --> 0:10:43.560 hear some of that in the President's speech today about 0:10:43.559 --> 0:10:46.000 how they're going to to shore up those hospitals, and 0:10:46.040 --> 0:10:47.960 I think that's how we move forward, this kind of 0:10:47.960 --> 0:10:50.360 two track pandemic, one for the vaccinated and one for 0:10:50.440 --> 0:10:53.840 the unvaccinated. Well, speaking of our hospital systems and the 0:10:53.920 --> 0:10:57.920 possibility that they get overwhelmed, given the trajectory of cases already, 0:10:57.960 --> 0:11:01.880 how quickly could we see that happen. It's likely going 0:11:01.920 --> 0:11:03.760 to be in the next couple of weeks where we 0:11:03.800 --> 0:11:06.280 see stress on hospitals, and some hospitals will be able 0:11:06.280 --> 0:11:08.320 to absorb it, but others are going to have a 0:11:08.320 --> 0:11:11.760 lot of difficulty because even though O Macron is the 0:11:11.760 --> 0:11:15.280 cases sequence, Delta is probably the predominant version of the 0:11:15.360 --> 0:11:18.640 virus that's hitting hospitals right now and has a lot 0:11:18.679 --> 0:11:21.400 of patients with Delta inside them, So they're going to 0:11:21.440 --> 0:11:23.680 be dealing with Delta and then O Macron on top 0:11:23.720 --> 0:11:26.880 of it. Delta will eventually fade away, but if they 0:11:26.880 --> 0:11:29.080 get too many patients at one time, it can be very, 0:11:29.160 --> 0:11:31.040 very difficult. And they think this is going to be 0:11:31.040 --> 0:11:33.480 a regional rather than a systemic problem, and we have 0:11:33.880 --> 0:11:37.200 healthcare coalitions hospitals that work together. They have to really 0:11:37.240 --> 0:11:39.680 do that for real. They can't just check a box 0:11:39.679 --> 0:11:41.440 that they're part of a coalition. They have to load 0:11:41.480 --> 0:11:43.960 balance and make sure that no hospital is going down. 0:11:44.120 --> 0:11:46.319 And hopefully the coordination from the federal government with the 0:11:46.400 --> 0:11:49.240 National Disaster Medical System, with the Department of Defense, they'll 0:11:49.280 --> 0:11:52.559 be able to do that in a much more efficient way. 0:11:52.679 --> 0:11:55.679 But this is not the same thing as December. We're 0:11:55.679 --> 0:11:58.080 in a much better place, even though there are scary headlines, 0:11:58.120 --> 0:11:59.959 even though we have this new variant, We've got a 0:12:00.040 --> 0:12:03.599 lot more tools and a lot more knowledge. So Tosa 0:12:03.640 --> 0:12:05.880 a good morning. So we have a lot more tools. 0:12:05.920 --> 0:12:08.440 This isn't a December tweency twenty. It's not the same 0:12:08.880 --> 0:12:12.560 situation at all. We're we're very vaccinated in wealthy countries 0:12:12.600 --> 0:12:14.720 around the world. Of course, you did through a distinction 0:12:14.720 --> 0:12:18.079 there between the load place on hospitals by the vaccinated 0:12:18.080 --> 0:12:20.040 and the unvaccinated. Is that going to be evident you 0:12:20.040 --> 0:12:22.440 think in the President's speech later on. Is it possible 0:12:22.440 --> 0:12:26.640 to craft different policies for these different parts of society 0:12:26.679 --> 0:12:30.920 that will be palatable to to U S citizens. I 0:12:30.960 --> 0:12:34.560 do hope the President places the blame squarely where it is, because, 0:12:34.800 --> 0:12:37.120 like I said, it's not people that lack of booster shot. 0:12:37.200 --> 0:12:39.800 It's not people who who who are fully vaccinated that 0:12:39.800 --> 0:12:42.320 are getting hospitalized. It's people who lack any shots. And 0:12:42.360 --> 0:12:45.199 in the United States that's being done willfully. People are 0:12:45.280 --> 0:12:48.240 choosing not to get vaccinated and then choosing to destroy 0:12:48.280 --> 0:12:51.040 their community hospitals. And I do think that we should 0:12:51.120 --> 0:12:54.240 draft policies different from the vaccinated and the unvaccinated, because 0:12:54.320 --> 0:12:57.320 if you are vaccinated, the virus treats you very differently, 0:12:57.400 --> 0:13:00.560 so other people should treat you very differently. That how 0:13:00.600 --> 0:13:02.600 I think we have to move forward because what we 0:13:02.640 --> 0:13:05.000 see is the vaccinated that have done everything they can 0:13:05.040 --> 0:13:09.040 to preserve hospital capacity by getting vaccinated, by following the science. 0:13:09.320 --> 0:13:11.440 But then you have this group of people and they're 0:13:11.480 --> 0:13:14.720 concentrated in certain parts of the country, in certain regions, 0:13:15.080 --> 0:13:18.480 they are not vaccinated by choice, and what they're doing 0:13:18.559 --> 0:13:20.560 is crushing their own community hospitals. And I think we 0:13:20.600 --> 0:13:23.080 have to call that out because this is being this 0:13:23.160 --> 0:13:24.960 is something that didn't have to be. These are all 0:13:25.040 --> 0:13:29.360 vaccine preventable hospitalizations. Vaccine preventable deaths, and these people are 0:13:29.440 --> 0:13:32.040 choosing to do this, and I think that's something that 0:13:32.120 --> 0:13:34.559 needs to be called out, even if it angers people. 0:13:34.720 --> 0:13:38.040 I think it's the truth. Doctor. I'd like to talk 0:13:38.080 --> 0:13:40.600 a little bit about the variant itself and what we've 0:13:40.679 --> 0:13:44.000 learned so far from O Macron and about the virus 0:13:44.080 --> 0:13:47.200 and it's various mutations. Um. Over the last couple of weeks, 0:13:47.200 --> 0:13:49.680 some of the rumors have come out that potentially the 0:13:49.760 --> 0:13:55.080 nature of Omicron itself suggests that this virus will die 0:13:55.160 --> 0:13:58.600 out supposedly cloth faster than other viruses have in the past. 0:13:58.760 --> 0:14:01.960 Is that true what we learned about O Macron itself, 0:14:02.080 --> 0:14:05.559 and with respect to what to expect about future variants 0:14:05.559 --> 0:14:10.160 and the longevity of the virus overallad overall, well, the 0:14:10.160 --> 0:14:12.520 Stars Kobe Too virus is with us. It's not going 0:14:12.559 --> 0:14:15.280 to magically go back into baths. And some of these 0:14:15.360 --> 0:14:17.720 variants come and go as the virus is put under 0:14:18.000 --> 0:14:21.360 Darwinian selection pressure to be able to transmit more efficiently 0:14:21.400 --> 0:14:24.840 to get around immunity. And with O Macron, it's unclear 0:14:24.880 --> 0:14:27.520 how long this surge of cases is going to last. 0:14:27.680 --> 0:14:29.320 If you look at South Africa, if you look at 0:14:29.520 --> 0:14:32.120 Denmark in the UK. It seems to be following in 0:14:32.200 --> 0:14:35.160 different pattern than than Delta. For example, Delta went in 0:14:35.240 --> 0:14:37.840 kind of two month waves. This seems to be shorter. 0:14:38.160 --> 0:14:39.920 Hopefully that's the case, but I don't know that we 0:14:39.960 --> 0:14:42.760 have enough information or understanding. What it might be is 0:14:42.800 --> 0:14:46.520 that this virus variant is exploiting network effects. It's infecting 0:14:46.520 --> 0:14:48.520 people that are out there doing things, and then it 0:14:48.560 --> 0:14:51.200 basically runs out of those types of people and everybody 0:14:51.200 --> 0:14:52.920 else is a little bit more careful, so it doesn't 0:14:52.920 --> 0:14:55.880 have new people to infect. It's unclear if that's going 0:14:55.920 --> 0:14:57.280 to be the case, but I think we have to 0:14:57.320 --> 0:14:59.440 all be prepared for the fact that, oh, Macron and 0:14:59.520 --> 0:15:01.880 other down the line are going to become part of 0:15:01.880 --> 0:15:05.320 our daily lives, but they're going to be a less 0:15:05.360 --> 0:15:08.280 a less severe version of COVID. As we get more 0:15:08.320 --> 0:15:12.080 tools by being vaccinated, monocloni, l antibodies, anti virals, rapid test, 0:15:12.360 --> 0:15:14.800 that's going to tame this virus and shift illness towards 0:15:14.880 --> 0:15:17.360 the mild side of the spectrum. And that's exactly where 0:15:17.440 --> 0:15:19.560 we where we wanted, and that's been the goal of 0:15:19.560 --> 0:15:22.760 this whole public health endeavor from the beginning. All Right, 0:15:22.760 --> 0:15:25.280 Thank you so much for your really valuable insight this morning. 0:15:25.320 --> 0:15:27.400 Thank you so much for joining us. Dr amish adalgia 0:15:27.680 --> 0:15:30.400 of Johns Hopkins and of course the Johns Hopkiness School 0:15:30.400 --> 0:15:32.720 of Public Health is supported by Michael Are Bloomberg, who 0:15:32.760 --> 0:15:41.480 is the foundering majority owner of Bloomberg LP. Sarah Hunt 0:15:41.480 --> 0:15:45.480 poorfilio manager Alpine Woods Capital Investors, joining us now. Sarah, 0:15:45.560 --> 0:15:47.960 great to see you. Um, I want to paraphrase Gina 0:15:47.960 --> 0:15:50.320 from a little earlier on in the hour, we are 0:15:50.400 --> 0:15:53.640 buying the dip. Once again, the mentality is still intact. 0:15:54.040 --> 0:15:57.400 What does it take to change that mentality? And does 0:15:57.440 --> 0:16:01.240 that happen next year? Okay, while I was watching Bloomberg 0:16:01.320 --> 0:16:03.120 before I came on this morning, so I'm going to 0:16:03.200 --> 0:16:05.480 have to agree with James Affy and say that it 0:16:05.560 --> 0:16:07.520 has to be that the market continues to go down 0:16:07.560 --> 0:16:09.200 after you've what that dip, and it starts to have 0:16:09.400 --> 0:16:11.280 and it starts to be a pain trade. It has 0:16:11.320 --> 0:16:13.280 not yet been a pain trade. And every time that 0:16:13.320 --> 0:16:16.480 the market has had some weakness and people start looking 0:16:16.480 --> 0:16:18.800 for protection, they also end up earning money on that 0:16:18.840 --> 0:16:21.720 protection as well. And that has become such a it's 0:16:21.760 --> 0:16:23.880 become such a pattern that I think it's difficult for 0:16:23.920 --> 0:16:26.560 people to remember what it's like when markets don't just 0:16:26.800 --> 0:16:31.280 have a recovery every time there's a down draft. So Sarah, 0:16:31.280 --> 0:16:33.560 talk to us a little bit about your ELOK for two. 0:16:33.600 --> 0:16:35.520 I know you see things changing a little bit as 0:16:35.560 --> 0:16:38.680 financial conditions become slightly more rational as the FED starts 0:16:38.720 --> 0:16:42.440 to scale back on their on their input. Where do 0:16:42.480 --> 0:16:44.760 you see equities headed in the year ahead and how 0:16:44.880 --> 0:16:48.840 will things be different next year relative to the last two. Well, 0:16:48.880 --> 0:16:50.480 I think that there is going to be more of 0:16:50.480 --> 0:16:53.720 a focus on cash generation and earnings instead of some 0:16:53.880 --> 0:16:56.840 of the loftier price of sales kind of ratios that 0:16:56.880 --> 0:16:59.440 you've seen in some of the areas where that sort 0:16:59.480 --> 0:17:03.040 of FED backstop has really helped companies that don't yet 0:17:03.040 --> 0:17:05.320 have earnings or don't yet have really a good balance sheet. 0:17:05.359 --> 0:17:07.880 I think that that's going to start to make a difference. Um. 0:17:08.000 --> 0:17:10.240 I also don't disagree with the fact that macro factors 0:17:10.320 --> 0:17:12.800 drive a lot of investing, and so it's not going 0:17:12.880 --> 0:17:14.639 to be the only thing. I would also love a 0:17:14.680 --> 0:17:16.680 world where we could count on valuations and we could 0:17:16.680 --> 0:17:18.639 do that kind of fundamental work that we all started 0:17:18.640 --> 0:17:20.679 out doing, but that's just not the world that we 0:17:20.720 --> 0:17:23.320 live in. I do, however, think that growth is going 0:17:23.400 --> 0:17:25.960 to continue to be important, but it has to be 0:17:26.040 --> 0:17:28.600 profitable growth, and I think that's where you're going to 0:17:28.720 --> 0:17:32.000 have a bifurcation in some of the tech sectors, Whereas 0:17:32.040 --> 0:17:34.320 the stocks that are able to make money and grow 0:17:34.640 --> 0:17:36.639 and actually put up earnings and have a decent balance 0:17:36.680 --> 0:17:39.800 sheet are going to be able to withstand the pressures 0:17:39.800 --> 0:17:42.440 of the concerns about technology versus some of the stocks 0:17:42.640 --> 0:17:44.840 that don't quite have the earnings or anything else yet 0:17:44.920 --> 0:17:46.760 they are. I think that's going to be a little 0:17:46.760 --> 0:17:50.480 bit different going into two. This strong balance sheet story 0:17:50.480 --> 0:17:53.680 has been such a big part of the US outperformance 0:17:53.680 --> 0:17:55.800 relative to the rest of the world for years. Now, 0:17:56.040 --> 0:18:00.800 are you seeing opportunities emerge elsewhere into as the fails, 0:18:00.800 --> 0:18:03.520 as the FED scales back, as we see valuations come 0:18:03.600 --> 0:18:06.400 under some degree of pressure in the US naturally, Where 0:18:06.400 --> 0:18:10.200 are you looking for the opportunities globally? Well? I think, 0:18:10.200 --> 0:18:11.920 I mean a lot of US companies have a huge 0:18:11.920 --> 0:18:14.520 global presence, so you can be we tend to have 0:18:14.640 --> 0:18:17.919 mostly domestic based companies in our portfolios, but there are 0:18:17.920 --> 0:18:19.960 a lot of them with the big international presence, so 0:18:20.000 --> 0:18:22.040 you start to look with the places where you think 0:18:22.080 --> 0:18:23.880 you might get a benefit from what's going to happen 0:18:23.880 --> 0:18:26.480 in two Unfortunately, a lot of the rest of the 0:18:26.520 --> 0:18:28.840 world is suffering, not just from COVID, but you know, 0:18:28.880 --> 0:18:31.879 Europe still is having some problems with economic growth. The 0:18:31.960 --> 0:18:34.240 US is still a reasonably good growth space, and I 0:18:34.280 --> 0:18:37.439 think that part of China's problem with growth and what 0:18:37.480 --> 0:18:39.720 they're trying to do to fix it with dropping the 0:18:39.720 --> 0:18:42.440 reserve ratio and everything else, makes other parts of the 0:18:42.480 --> 0:18:44.879 world a little riskier at the moment. So, you know, 0:18:44.920 --> 0:18:46.800 we still think the United States is a good market, 0:18:46.840 --> 0:18:49.400 and we think that companies within it that have international 0:18:49.440 --> 0:18:53.160 reach can perform fairly well going into well Sarah I, 0:18:53.160 --> 0:18:55.639 I continue to talk about how the year has shaken 0:18:55.640 --> 0:18:58.200 out far from what consensus thought it would. Part of 0:18:58.240 --> 0:19:01.280 the call was international versus us, part of it was 0:19:01.280 --> 0:19:03.760 shifted value over grow, small caps over large None of 0:19:03.760 --> 0:19:06.320 those trades really worked out as we were expecting. And 0:19:06.320 --> 0:19:08.480 that also applies to the yield curve. While we saw 0:19:08.520 --> 0:19:10.879 that steeper curve in the beginning of the year, what 0:19:10.960 --> 0:19:14.000 we have gotten since March really is just a persistently 0:19:14.040 --> 0:19:16.960 flatter curve. Do you expect that is going to continue 0:19:16.960 --> 0:19:18.720 to be the case and can you be a buyer 0:19:18.840 --> 0:19:22.800 financials in that kind of environment. Well, you know, some 0:19:22.880 --> 0:19:25.240 of the financials were doing fairly well in a in 0:19:25.280 --> 0:19:28.080 the yield curve environment before it's steepened. I think the problem, 0:19:28.520 --> 0:19:30.639 the knee jerk reaction to a flatter yield curve for 0:19:30.680 --> 0:19:32.879 financials is that it's going to be much harder for 0:19:32.880 --> 0:19:34.399 them to make money. But I think that in the 0:19:34.480 --> 0:19:36.719 last you know, since the financial crisis, they've all been 0:19:36.760 --> 0:19:39.199 fairly clever about ways to make money that are not 0:19:39.320 --> 0:19:41.960 only yield curve dependent. So I think I think that 0:19:42.000 --> 0:19:44.439 they can end up performing better. But I think that 0:19:44.520 --> 0:19:47.040 the playbook says the old curve is flattening, then sell 0:19:47.040 --> 0:19:49.800 the financials. And I'm not sure that that actually is 0:19:49.840 --> 0:19:53.480 something that's going to be helpful in terms of, you know, 0:19:53.480 --> 0:19:55.439 whether or not those stocks can actually perform. But it's 0:19:55.440 --> 0:19:57.159 going to take the market a while to realize that 0:19:57.200 --> 0:19:59.600 they can perform even with a flatter yield curve. Okay, 0:19:59.600 --> 0:20:01.960 so Sarah, can we get some specific picks? I mean, 0:20:02.000 --> 0:20:04.560 what what are your favorite stocks in your portfolio right now? 0:20:04.560 --> 0:20:08.040 What would you be looking to add positions to well. 0:20:08.080 --> 0:20:09.960 I think the pull back and the financials gives you 0:20:10.160 --> 0:20:11.960 an opportunity in some of the stocks we like, like 0:20:12.040 --> 0:20:14.760 JP Morgan, UM, We like City because they've got a 0:20:14.800 --> 0:20:16.920 real self help story. The stock is not performed well 0:20:16.920 --> 0:20:19.120 this year, but we think it's got some real ability 0:20:19.200 --> 0:20:22.679 to improve its own underlying performance without so much of 0:20:22.680 --> 0:20:24.800 a market help. So I think that those are some 0:20:24.840 --> 0:20:27.359 interesting places that we like. There's some places in the 0:20:27.359 --> 0:20:30.399 technology space that we like. I mean, we've owned Oracle 0:20:30.480 --> 0:20:32.720 for some time UM, and I think that there are 0:20:32.800 --> 0:20:36.680 some other areas where you've got real earnings, You've got 0:20:36.680 --> 0:20:38.679 some earnings growth, You've got acam I, You've got some 0:20:38.720 --> 0:20:41.080 other companies where there's going to be some growth there 0:20:41.359 --> 0:20:44.240