WEBVTT - Equities Enter Correction as Tariffs Weigh Down Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.400 --> 0:00:30.840 Joining us right now, and this is a timely conversation 0:00:30.880 --> 0:00:33.320 because we're like the stock market, We're all gonna die. 0:00:33.400 --> 0:00:36.080 And maybe we look at gold mac Dasic joins us. 0:00:36.240 --> 0:00:38.640 How to fixed income strategy from Maryland for Bank of 0:00:38.680 --> 0:00:43.480 America private bank? What's the level of sweat among your clients? 0:00:43.680 --> 0:00:45.720 And don't give me the Brian Mooyn and answer blah 0:00:45.800 --> 0:00:48.720 blah blah. Okay, what's the level of panic out there 0:00:48.760 --> 0:00:51.199 on a Friday? Not that bad, Not that bad at all. 0:00:51.240 --> 0:00:51.800 That's what we're here. 0:00:51.880 --> 0:00:57.600 Retail has been surprisingly resilient, looking to put capital to work. 0:00:57.640 --> 0:00:57.840 Week. 0:00:57.920 --> 0:01:00.800 You are not seeing panic, specially they're going to the 0:01:00.800 --> 0:01:04.440 equity markets from most of the two legged Vidiuser clients 0:01:04.480 --> 0:01:07.200 that they're directing very maturely to this market environment. 0:01:07.400 --> 0:01:10.120 Ran listens every morning, So don't sweat. But is it 0:01:10.200 --> 0:01:14.679 just because they think things and systems will adjust? The 0:01:14.720 --> 0:01:17.800 Trump message from the White House and we'll move forward. 0:01:17.920 --> 0:01:20.360 I think they have a very good ability and they 0:01:20.400 --> 0:01:22.320 have out of the past couple of years to sort 0:01:22.319 --> 0:01:24.640 of look through the noise. And at the end of 0:01:24.680 --> 0:01:28.120 the day, there is that's obviously economic uncertainty here, and 0:01:28.160 --> 0:01:30.840 I know outside a certain sectors, certain geographies, there are 0:01:30.880 --> 0:01:34.520 not a lot of massive layoffs. Right the corporate sector 0:01:34.600 --> 0:01:36.000 is still not laying people off. 0:01:36.040 --> 0:01:36.679 So even if there's a. 0:01:36.600 --> 0:01:40.319 Slight uptaket unemployment from the lows, until you actually start 0:01:40.360 --> 0:01:42.400 to let people go into you're afraid of your own job, 0:01:42.480 --> 0:01:44.199 your brother in law loses his job, your wife loses 0:01:44.240 --> 0:01:47.680 their job. Until that happens, people are still relatively sanguine. 0:01:47.680 --> 0:01:51.320 And again we're not seeing any sentiment, significant sentiment changes 0:01:51.720 --> 0:01:54.040 from retail with regards to the equity markets, which is impressive. 0:01:54.080 --> 0:01:56.000 All right, Well, how about in fixed income space here? 0:01:56.040 --> 0:01:57.280 I mean, you can sit there at a two your 0:01:57.280 --> 0:01:59.840 treasure and get darn your four percentiest. Do you do 0:01:59.880 --> 0:02:01.880 that that's not a bad living or do you take 0:02:01.920 --> 0:02:02.560 some credit risk? 0:02:03.200 --> 0:02:04.640 So we don't think you need to take a lot 0:02:04.640 --> 0:02:07.920 of credit risk, but we would like people to certainly 0:02:08.000 --> 0:02:10.880 be longer duration than a sort of two to three 0:02:11.000 --> 0:02:13.280 or on average, right the radio clients should be around 0:02:13.320 --> 0:02:15.760 probably think five to six years. It depends individual client, 0:02:15.800 --> 0:02:17.680 But end of the day, the bomb market average duration 0:02:17.760 --> 0:02:20.200 is just over six. We really don't want clients to 0:02:20.200 --> 0:02:23.640 be too short to whatever their strategic duration target is 0:02:23.960 --> 0:02:26.440 without a good reason. Again, a lot of clients are 0:02:26.480 --> 0:02:29.359 actually still where you do have some concerns from retail 0:02:29.360 --> 0:02:31.360 clients is actually the fixed income side. They get more 0:02:31.400 --> 0:02:34.160 worried about that, having seen that bond bear market, the 0:02:34.240 --> 0:02:38.240 eighteen percent drop twenty twenty one, twenty two from the highs, 0:02:38.480 --> 0:02:41.720 that's concerned, though that's obviously a lot more likely from 0:02:41.760 --> 0:02:44.040 a yield of negative two percent real rates than it 0:02:44.120 --> 0:02:48.080 is at a roughly plus two percent real yields across the. 0:02:48.080 --> 0:02:49.960 Current It's interesting, I mean, over the last couple of years, 0:02:49.960 --> 0:02:53.040 when I look at the Bloomberg fixed income total return screen, 0:02:53.400 --> 0:02:55.720 where I've seen the best returns has been with risk 0:02:56.280 --> 0:02:59.919 high yield leverage loans actually, and those two are actually 0:03:00.200 --> 0:03:04.400 underperforming this year. That's kind of a change, at least 0:03:04.480 --> 0:03:05.400 definitely underperforming. 0:03:05.440 --> 0:03:09.119 Again, not surprising to see credit both high and IG 0:03:09.720 --> 0:03:13.000 underperform the index. With equities, they have a higher correlation 0:03:13.080 --> 0:03:15.359 to equities, But again for the retail client, depends on 0:03:15.400 --> 0:03:18.080 your time frame where you might see some market value 0:03:18.160 --> 0:03:21.440 changing in your corporate bounds relative to treasuries spread widening. 0:03:21.639 --> 0:03:25.040 If you're strategically long credit year in and year out, 0:03:25.080 --> 0:03:27.160 you're getting that extra yel over credit losses, you'll get 0:03:27.200 --> 0:03:29.880 a better portfolio performance. So right now we're actually just 0:03:29.960 --> 0:03:32.760 kind of pulling our horns in on our sector tilts 0:03:32.800 --> 0:03:35.200 neutral across sectors and fixed income. 0:03:35.280 --> 0:03:39.000 Are you throwing a brick? It's some you know advisor 0:03:39.400 --> 0:03:42.240 at Bank of America who goes back to road sixty 0:03:42.360 --> 0:03:46.280 forty strategy. Is it like a dinosaur or is it 0:03:46.360 --> 0:03:47.200 germane today? 0:03:47.360 --> 0:03:49.200 No, no, no, we do not think it's a dinosaur 0:03:49.200 --> 0:03:50.960 at all. Maybe I'm the dinosaur, but we don't think 0:03:50.960 --> 0:03:53.720 it's a dinosaur at all. We had a lot of 0:03:53.800 --> 0:03:59.280 concerns obviously that bonds were no longer doing their jobs. 0:03:59.560 --> 0:04:04.480 You needed something else to replace. Equid to replace bonds 0:04:04.520 --> 0:04:06.800 as diverse for equities, commodities was given as a particularly 0:04:06.800 --> 0:04:10.200 good one. We were never buyers of that at those valuations. 0:04:10.240 --> 0:04:13.160 We had a couple of years back again negative real yields. Yeah, 0:04:13.200 --> 0:04:16.840 it's probably hard for bonds to work the way I've 0:04:16.880 --> 0:04:18.600 described it for a retail client, as you're in a 0:04:18.640 --> 0:04:21.760 former meter race. If you're two percent behind inflation, well 0:04:21.800 --> 0:04:24.479 you're fifty meters behind the starting line versus commodities. Combody 0:04:24.560 --> 0:04:27.080 are gonna track inflation. The bonds are below inflation, you're 0:04:27.080 --> 0:04:29.400 not starting in a good place. You're having fifty yards back. 0:04:29.400 --> 0:04:31.839 You're sitting in the stands. Now, we've got bonds that 0:04:31.880 --> 0:04:35.719 are two percent on average real above inflation. So they're 0:04:35.760 --> 0:04:39.400 already beating inflation, and so they're ahead in the race. 0:04:39.680 --> 0:04:41.600 That's why they're diverse fied. That's why they diverse filed 0:04:41.640 --> 0:04:44.640 in August. That's why they're diversifying. Now they have the 0:04:44.680 --> 0:04:47.760 evaluations where they can come down with any uncertainty. 0:04:47.880 --> 0:04:52.560 What's the biggest mistake high networth retail makes and fixed income. 0:04:53.720 --> 0:04:54.360 Historically? 0:04:54.480 --> 0:04:56.279 Blog? Is it just that simple? 0:04:56.400 --> 0:04:59.240 It's been the opposite. It's been the opposite again for 0:04:59.320 --> 0:05:02.320 the past seven years. The issue has not been yield hoggy, 0:05:02.400 --> 0:05:07.640 it's been afraid of duration. So scarred, so scarred by 0:05:07.680 --> 0:05:12.040 those double digit losses in terms of high quality fixed income. 0:05:12.360 --> 0:05:13.479 That's one of the. 0:05:13.880 --> 0:05:17.240 Rough I mean historically rough. In twenty twenty two. 0:05:17.120 --> 0:05:17.640 It was very rough. 0:05:17.720 --> 0:05:20.040 Again, when you're in when you're negative two percent real yields, 0:05:20.279 --> 0:05:22.680 there are not a lot of good things that can happen, right, 0:05:22.920 --> 0:05:25.080 but that that negative two to two percent move, that 0:05:25.320 --> 0:05:28.839 four hundred basis point move and real rates. Our opinion, 0:05:28.960 --> 0:05:31.159 generally speaking, that was the bond fair market. 0:05:31.320 --> 0:05:31.560 Yep. 0:05:32.120 --> 0:05:35.279 How about I mean mortgage backed securities. I'm seeing some 0:05:35.360 --> 0:05:38.320 of the best returns in fixed income and mortgage backed securities. 0:05:38.320 --> 0:05:39.279 What's going on in that market? 0:05:39.360 --> 0:05:41.800 We like mortage backed securities generally speaking. Again, we're neutral 0:05:41.839 --> 0:05:45.320 cross sectors, but within sectors we do like mortgage backs 0:05:45.520 --> 0:05:47.680 because what's the rest of the mortgage back. You're always 0:05:47.680 --> 0:05:49.440 going to get your principle and your interest payment back. 0:05:49.560 --> 0:05:52.640 You just don't know when. If people prepay, you get 0:05:52.640 --> 0:05:54.560 more cash using your rates are lower. You don't want 0:05:54.560 --> 0:05:57.080 it rates go up. The bonds extend, you get less 0:05:57.080 --> 0:05:58.920 cash flow, and you'd like to reinvest in higher yields. 0:05:59.120 --> 0:06:01.680 The bonds have already extended, hopefully some of you have 0:06:01.800 --> 0:06:05.760 two percent mortgages on whatever properties you have. The bonds 0:06:05.760 --> 0:06:08.880 have extended already, you're still getting a cash flow, so 0:06:08.880 --> 0:06:11.480 you're almost basically a flat yield on mortgage backs to 0:06:11.480 --> 0:06:14.839 investigreate corporate right now, that makes mortgage backs look relatively attractive, 0:06:15.080 --> 0:06:16.919 especially at a alta equity environment. 0:06:16.920 --> 0:06:19.280 With all the politics that's going on, folks, we're waiting 0:06:19.279 --> 0:06:23.039 for a conversation or rehoarded in conversation with a gentleman 0:06:23.040 --> 0:06:27.280 from the Netherlands, mister Routie now at NATO, the new 0:06:27.360 --> 0:06:29.360 leader of NATO, and we're looking forward to that here 0:06:29.400 --> 0:06:32.720 in about four minutes. We hope we're lining up the 0:06:32.760 --> 0:06:37.080 antennae in the satellites starlink Matt Disick with US with 0:06:37.160 --> 0:06:41.640 Bank of America. I look at this and the number 0:06:41.640 --> 0:06:44.800 one thing has been the gift of cash. If you 0:06:44.920 --> 0:06:48.479 believe disinflation's in order, not the fear of deflation. But 0:06:49.160 --> 0:06:54.400 after the sticky inflation, there's a settlement of GDP, we 0:06:54.440 --> 0:06:59.040 get a disinflationary trend. Can you model cash back under 0:06:59.120 --> 0:07:02.520 four percent? I believe you can. 0:07:02.960 --> 0:07:06.839 And if you maintain the idea that the FED is 0:07:06.880 --> 0:07:10.400 focused on getting back to two percent inflation or very 0:07:10.440 --> 0:07:15.520 close to it, well then you know, no matter how 0:07:15.560 --> 0:07:19.720 aggressive fiscal policy is, it can't really change demographics. It's 0:07:19.880 --> 0:07:23.240 very tough to change the population dynamics, and so real 0:07:23.360 --> 0:07:25.160 rates again that they have to be you know, fifty 0:07:25.200 --> 0:07:27.960 base points above inflation. Probably not in that range of 0:07:28.000 --> 0:07:30.160 fifty to one hundred and fifty one percent on average, 0:07:30.760 --> 0:07:34.000 one percent over inflation, right, So then a three percent 0:07:34.040 --> 0:07:36.680 fit of funds right, two percent inflation plus one percent reel. 0:07:36.840 --> 0:07:38.280 Sounds like a reasonable place. 0:07:38.040 --> 0:07:40.400 To be really valuable on a Friday. Thank you so much. 0:07:40.440 --> 0:07:43.120 Mentisic for this will be with us here again. Next 0:07:43.160 --> 0:07:51.440 time we'll talk rugby at University of Pennsylvania. 0:07:52.560 --> 0:07:56.160 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:07:56.240 --> 0:07:59.880 weekday afternoons from seven to ten am Eastern Listen on Applecar, 0:08:00.080 --> 0:08:03.320 playing Android otto with the Bloomberg Business app, or what 0:08:03.600 --> 0:08:04.760 Us Live on YouTube. 0:08:05.000 --> 0:08:07.720 This is a joy, as we had Sam Stova earlier. 0:08:08.520 --> 0:08:12.760 Now we're really gonna dive into the adjustments of someone 0:08:12.800 --> 0:08:18.000 who's got in the market so right. John Stolfiz in correction, 0:08:18.640 --> 0:08:23.760 half correction, partial correction, has said be comfortable on equities. 0:08:23.760 --> 0:08:28.760 He's chief investment strategists at Oppenheimer. This morning, are you 0:08:29.000 --> 0:08:31.040 still a bull? Yes? 0:08:31.120 --> 0:08:35.280 I am Tom still a bull? Why very much? Because 0:08:35.280 --> 0:08:39.440 when we look at the way business is navigating these waters, 0:08:39.720 --> 0:08:42.960 the earning season that just ended Q four earning season. 0:08:43.280 --> 0:08:46.360 You've got double digit gains and seven out of nine 0:08:46.400 --> 0:08:51.360 sectors only two sectors negative. One was double digit earnings negative. 0:08:51.760 --> 0:08:54.439 That was energy. We're figures because we're a wash in 0:08:54.520 --> 0:08:58.480 oil right now. But the seven sectors that were double 0:08:58.520 --> 0:09:02.400 digit gains, it wasn't just and communications services. It was 0:09:02.640 --> 0:09:07.000 you had good, strong value stocks in there and values 0:09:07.040 --> 0:09:10.000 out performing growth right now. And we think it's you 0:09:10.000 --> 0:09:11.600 know the market is dynamic. 0:09:11.760 --> 0:09:14.160 Okay, well, let's be dynamic. Let's pretend we're on a 0:09:14.200 --> 0:09:17.520 couch forty years ago. I'll do my lur Rukaiser imitation 0:09:18.000 --> 0:09:21.360 and you do your John Stolfi's imitation. It's seven eight 0:09:21.520 --> 0:09:25.240 thirty at night, the world's turned upside down, and Uncle 0:09:25.280 --> 0:09:29.960 Lou's they're having us calm down. How will corporations adapt 0:09:30.440 --> 0:09:35.240 to this Maelstrom? What does securities research at Oppenheimer's say, Well. 0:09:35.280 --> 0:09:37.920 I think what what is generally the thought here is 0:09:37.960 --> 0:09:41.960 that corporations have been under due rest now for over 0:09:42.080 --> 0:09:46.080 sixteen years. In many points we had the great financial writing. 0:09:46.120 --> 0:09:48.079 It has been under duress. Now come out. 0:09:48.160 --> 0:09:50.199 You don't know them recently, but if you look at 0:09:50.200 --> 0:09:53.080 it over the last few years. I mean, it had 0:09:53.120 --> 0:09:56.640 tough times, and some of the other texts did. But 0:09:56.679 --> 0:09:59.840 when you look at the markets and managements, how they've 0:10:00.040 --> 0:10:04.800 operated across the sectors, it's great financial crisis, the pandemic, 0:10:05.240 --> 0:10:10.800 the disruption of the global supply chain, the levels of 0:10:10.840 --> 0:10:15.160 inflation that were hit, the FED policy tightening, no recession. 0:10:15.400 --> 0:10:20.080 The consumer is still spending. It's the resilience Tom, That's 0:10:20.120 --> 0:10:23.439 what gives us the courage of our convictions. At this point. 0:10:23.679 --> 0:10:26.560 Some are concerned about the consumer there, John. We had 0:10:26.559 --> 0:10:28.960 some of the airlines earlier this week take their earnings down. 0:10:28.960 --> 0:10:32.199 We had some retailers like Coals take their guidance down 0:10:32.240 --> 0:10:34.719 here maybe suggesting that all this uncertainty out there in 0:10:34.720 --> 0:10:35.839 the marketplace. 0:10:35.360 --> 0:10:36.880 The news, the noise. 0:10:37.040 --> 0:10:39.400 Maybe impacting the consumer. How do you think about that. 0:10:39.320 --> 0:10:41.520 Well, Paul, without a doubt. You know, we had the 0:10:41.520 --> 0:10:44.440 FED raise eleven times and then on pause at nine 0:10:44.480 --> 0:10:47.680 at the higher end and just started to cut last September. 0:10:48.160 --> 0:10:51.480 Just what fifty bip September, a pair of twenty five 0:10:51.880 --> 0:10:56.280 BIPs in November and December. So very much. It's no 0:10:56.400 --> 0:10:58.960 doubt you're going to feel the slowing because people are 0:10:59.000 --> 0:11:02.880 feeling a pinch but American consumers tend to move towards 0:11:02.920 --> 0:11:06.880 discount stores, private labels. We tend to keep shopping. The 0:11:06.880 --> 0:11:10.160 world criticizes for all life of consuming. 0:11:10.360 --> 0:11:15.360 But what if whatever the percentage is fortif the fancy 0:11:15.440 --> 0:11:20.160 people in America are keeping American consumption going, does Oppenheimer 0:11:20.240 --> 0:11:23.760 think that is dented and that will push into a 0:11:23.800 --> 0:11:25.520 diminished revenue growth. No? 0:11:25.760 --> 0:11:27.880 Not at this point, We're still looking where we. 0:11:27.960 --> 0:11:31.679 Get into, say such a negative error. Come on, I mean, 0:11:32.320 --> 0:11:34.880 I need some negativity from Stolfus. 0:11:34.960 --> 0:11:38.000 Well, to me, it looks like guitar prices are up. 0:11:38.880 --> 0:11:44.160 Actually, you know, you know, hold on, let's stop the show, 0:11:44.200 --> 0:11:48.000 folks right now. We go to Paul Sweeney disciplinarian. Should 0:11:48.040 --> 0:11:51.160 we have a joint guitar purchase this weekend where Stulfus 0:11:51.160 --> 0:11:54.080 and I both purchase separate crutches? 0:11:54.280 --> 0:11:55.520 I think you jump right in there. 0:11:55.720 --> 0:11:58.000 There we go. Okay, continue with John. 0:11:59.240 --> 0:12:00.600 There's a child oil. 0:12:00.920 --> 0:12:02.239 Now there's a challenge. 0:12:02.559 --> 0:12:05.480 But we have seen and what happens if the tariffs 0:12:05.480 --> 0:12:09.680 affect Sitku spruce, you know, coming in from Canada. There's 0:12:09.720 --> 0:12:12.640 all kinds of issues there the one thinks of. But 0:12:12.679 --> 0:12:15.760 the realistic thing is we think that we're moving towards 0:12:15.920 --> 0:12:19.440 a new globalization. We think probably a point where with 0:12:19.600 --> 0:12:22.360 all this pressure that's been put on by the tariffs, 0:12:22.559 --> 0:12:25.040 the fact that we are the consumer of the world 0:12:25.120 --> 0:12:28.040 in size, the rest of the world has over capacity 0:12:28.080 --> 0:12:31.000 because over the last forty years they've been building capacity. 0:12:32.280 --> 0:12:34.280 We think we'll come out of this. Okay, I think 0:12:34.360 --> 0:12:37.319 that you know, Schumer, for all I've heard, there's plenty 0:12:37.360 --> 0:12:41.040 of criticism today, I think he recognizes the fact that 0:12:41.080 --> 0:12:43.800 we need to move together to try to avoid a 0:12:43.880 --> 0:12:47.720 shutdown and come to some kind of negotiation. We're looking 0:12:47.760 --> 0:12:50.839 for cooler heads to prevail, and you know, in this case, 0:12:51.000 --> 0:12:53.000 I think Schuber's showed you a cooler head. 0:12:53.120 --> 0:12:56.400 I mean, Paul, the sophistication of YouTube live chat is 0:12:56.480 --> 0:13:00.840 killing me. Tanner, Good morning epiphones for everyone. 0:13:00.960 --> 0:13:03.400 Oh yeah, there you go here, Hey, John, I know 0:13:03.720 --> 0:13:06.240 at one point you had an SMP target of around 0:13:06.320 --> 0:13:09.080 seventy one hundred, I think the highest on the street. 0:13:09.360 --> 0:13:10.760 You sure know how to hurt a guy. 0:13:10.920 --> 0:13:12.720 So what are we doing here with this call? 0:13:12.840 --> 0:13:15.320 Oh that's a great one, Paul. What we're going to 0:13:15.360 --> 0:13:19.280 do with that is that it's under review at this time, 0:13:19.600 --> 0:13:22.520 but we've got to figure. It's very early in the year. Yep, 0:13:22.679 --> 0:13:27.760 this has been a very the dark pitch book. The 0:13:27.840 --> 0:13:31.840 negative thought really has over been overly projected. Likely, so 0:13:31.960 --> 0:13:34.480 let's take a look. But we'll probably look at it 0:13:34.720 --> 0:13:36.240 and see how we go. And we got into the 0:13:36.240 --> 0:13:36.959 second quarter. 0:13:37.480 --> 0:13:39.959 John Sulfas for this Lapko were thrillies with us. We're 0:13:39.960 --> 0:13:43.480 going to continue with mister Solphus, a lengthy conversation this morning. 0:13:43.480 --> 0:13:45.720 Good morning on your commute. I know it's a Friday. 0:13:45.960 --> 0:13:48.880 People are starting to look at March madness, and Sweeney's 0:13:48.920 --> 0:13:52.800 totally unfocused. What's his name sprained his ankle, Cooper Flag, 0:13:52.880 --> 0:13:56.520 Cooper Flag sprained his ankles. Sweeney had to be medicated 0:13:56.559 --> 0:13:59.439 with a double tang mimosa this morning just to get 0:13:59.480 --> 0:14:02.960 to the show. Oh, there's lots of distractions with John Stolfus. 0:14:03.000 --> 0:14:06.160 There's no distraction, John, I'm going to cut to the 0:14:06.280 --> 0:14:08.280 chase and we're gona do. This is a global Wall 0:14:08.280 --> 0:14:11.480 Street right now. So you got a fan distribution and 0:14:11.600 --> 0:14:15.160 a bull like you extend your X axis. We come down. 0:14:15.480 --> 0:14:17.280 You're going to get back to s and P seventy 0:14:17.320 --> 0:14:20.640 one hundred. I get it. You extend your x axis 0:14:20.720 --> 0:14:24.520 out Everybody in the game understands this. David Costin and 0:14:24.560 --> 0:14:29.560 Goldman Sachs did a fan distribution of outcomes where they 0:14:29.560 --> 0:14:33.440 got down to a low single digit probability a center 0:14:33.720 --> 0:14:38.680 tendency out there. You pushed against that. Do you still 0:14:38.720 --> 0:14:41.720 push against a single digit equity world? 0:14:42.360 --> 0:14:45.040 I do. I'd still push against it. And I think 0:14:45.120 --> 0:14:47.800 that the reason why is where we are today is 0:14:47.840 --> 0:14:51.480 we are at a watershed period of innovation that is 0:14:51.560 --> 0:14:55.360 driving that can drive all sectors here. And it's not 0:14:55.520 --> 0:14:57.720 just about tech. It's about what tech can do for 0:14:57.760 --> 0:15:00.440 the utes. It's what it can do for healthcare. It's 0:15:00.480 --> 0:15:04.280 what it can do for repurposing buildings and real estate, 0:15:05.160 --> 0:15:10.680 for finding resources in consumer staples, designing products for consumer 0:15:10.760 --> 0:15:14.680 discretionary This is a very this is you know, it's 0:15:14.960 --> 0:15:17.440 what is it the Chinese curses. May you live in 0:15:17.440 --> 0:15:20.760 interesting times, but the other side of it, for the optimists, 0:15:20.760 --> 0:15:24.560 interesting times can produce not just risks, but can also 0:15:24.680 --> 0:15:27.920 produce opportunities. And we you know, when we look in hindsight, 0:15:28.200 --> 0:15:30.200 because as you know, I've been in this business for 0:15:30.240 --> 0:15:32.400 over forty years. It's going to be forty two. Sometime 0:15:32.440 --> 0:15:33.680 between Maine and May and July. 0:15:34.040 --> 0:15:34.840 Oh you're a new kid. 0:15:34.880 --> 0:15:38.080 God bless me on that way. The thing is, I've 0:15:38.080 --> 0:15:41.120 been through every boombust and recovery cycle, and generally, when 0:15:41.160 --> 0:15:45.160 we look back hindsight, I perfection says, gosh, if only 0:15:45.200 --> 0:15:47.640 we bought more, if only we backed up the truck. 0:15:47.880 --> 0:15:49.280 When people get so negative. 0:15:49.600 --> 0:15:52.360 Crash of eighty seven, which was, we don't need to 0:15:52.360 --> 0:15:54.640 go into it now, folks, there's too much valuable time here. 0:15:54.640 --> 0:15:57.640 With John Stolfiz Crash of eighty seven. I walked in 0:15:57.720 --> 0:15:59.840 the door and she handed me a triple my. 0:16:00.680 --> 0:16:01.160 There you go. 0:16:01.320 --> 0:16:03.200 She took it, She took it off of a normal 0:16:03.240 --> 0:16:06.520 Martini class and put it in a Rocks class. Yeah. 0:16:06.560 --> 0:16:08.800 October nineteenth, we walked out of ne York Stock Exchange. 0:16:08.800 --> 0:16:11.800 I went to the pig and poke or something. 0:16:12.240 --> 0:16:15.280 Yeah, that's what we did. And guess what, life went on? 0:16:15.480 --> 0:16:17.920 Life went on exactly three months later? Where were we 0:16:18.120 --> 0:16:19.080 exactly back on? 0:16:19.240 --> 0:16:22.200 My aunt had turned eighty that year in August, and 0:16:22.240 --> 0:16:25.000 I learned a lot about investing from her. Her first 0:16:25.040 --> 0:16:27.840 phone call to me was the first words were, Johnny, 0:16:27.840 --> 0:16:30.800 what should we be buying today? So that's that's where 0:16:30.840 --> 0:16:31.880 I come, folks. 0:16:32.320 --> 0:16:35.080 Bronze it what you just heard there. What was her name? 0:16:35.400 --> 0:16:39.880 Mary Stolfer's aunt Mary, Aunt Mary. Okay, in the cannon 0:16:39.920 --> 0:16:43.760 of Bloomberg surveillance bronze it to the memory of Aunt Mary. 0:16:44.000 --> 0:16:44.800 What did she say? 0:16:44.960 --> 0:16:47.960 She said, Johnny, what should we be buying today? That 0:16:48.120 --> 0:16:50.600 was our exact words. 0:16:50.920 --> 0:16:52.800 I'll go to Aunt Mary again, what should we be 0:16:52.800 --> 0:16:54.760 buying here? If? If you feel like the world's not 0:16:54.800 --> 0:16:55.560 coming to an end here? 0:16:55.640 --> 0:16:57.800 Great question was you know ap and I doesn't let 0:16:57.840 --> 0:17:01.120 me talk individual stocks because I managed my the Friday. 0:17:01.120 --> 0:17:03.040 I can give you. I can give you the sectors, 0:17:03.080 --> 0:17:06.040 the worst performance, sectors the worst performance I want to 0:17:06.040 --> 0:17:13.640 own consumer discretionary, infotech, communications services, financials, industrials, those look 0:17:13.680 --> 0:17:15.520 good to me. You know, they are at the bottom 0:17:15.560 --> 0:17:19.520 of performance from the peak coming down there. And you know, 0:17:19.880 --> 0:17:23.080 when it comes to healthcare, the utes, real estate, and staples, 0:17:23.240 --> 0:17:25.920 I think they've had the run. Now they've had it. 0:17:26.480 --> 0:17:28.959 I think it's a little late to get defensive, right. 0:17:29.280 --> 0:17:30.920 I mean, a lot of folks are feeling like this 0:17:31.359 --> 0:17:33.760 pullback in the market is kind of a self inflicted 0:17:35.080 --> 0:17:37.680 problem here with all the talks about tariffs and what 0:17:37.720 --> 0:17:41.840 that means for potentially growth and inflation. But that talk 0:17:42.200 --> 0:17:44.880 in that environment. I don't see that changing anytime soon. 0:17:45.440 --> 0:17:48.080 Well, you know, I think it incrementally it can begin 0:17:48.200 --> 0:17:50.880 to change. I think the first thing is hopefully fingers 0:17:50.880 --> 0:17:53.800 crossed today we don't see a government shutdown when they 0:17:53.800 --> 0:17:56.640 take that vote, that gets taken off the table. Then 0:17:56.720 --> 0:17:59.479 beyond that, you've got to figure that. You know, it 0:17:59.520 --> 0:18:02.520 was Bloomber intelligence that I think about a month ago 0:18:02.640 --> 0:18:06.399 said that if twenty five percent tariffs were put in 0:18:06.480 --> 0:18:10.280 against Mexico and Canada, both of those countries would go 0:18:10.280 --> 0:18:14.000 into recession pretty quickly. And the thing is, the pressure 0:18:14.040 --> 0:18:17.439 of the constituencies here, whether it's from business or the 0:18:17.520 --> 0:18:21.600 consumers in all countries around the world to different effects 0:18:21.600 --> 0:18:25.240 with these tariffs will likely, we think, once again, bring 0:18:25.440 --> 0:18:28.160 cooler heads to the table, some kind of a deal 0:18:28.200 --> 0:18:31.600 to come out of it. And it's it's it's just 0:18:31.720 --> 0:18:34.239 that it's time for it. You know, it's not at 0:18:34.240 --> 0:18:37.600 this moment, but it looks like there's too much at 0:18:37.640 --> 0:18:40.120 stake to let things go to hell? 0:18:40.480 --> 0:18:46.240 Right Valuation? Did this pullback here hasn't made valuation attractive 0:18:46.320 --> 0:18:48.679 or maybe just less egregious for some people? 0:18:48.880 --> 0:18:51.440 Well, I think for those who were thinking it was egregious, 0:18:51.480 --> 0:18:53.840 it's less egregious. And for those who thought that it 0:18:53.920 --> 0:18:57.560 was primarily because demand for stocks had gone up so 0:18:57.720 --> 0:19:00.840 broadly and people, you know, it's no longer bucktail party 0:19:01.520 --> 0:19:04.880 stocks that people that the private investor is doing. They're 0:19:04.920 --> 0:19:08.960 looking to replace what used to come from social security 0:19:09.000 --> 0:19:12.240 and corporate pension plans. Yeah, and with you know, with 0:19:12.560 --> 0:19:14.560 a four oh one K, you just get x amount 0:19:14.600 --> 0:19:18.240 in terms of that contribution that goes into the things. 0:19:18.320 --> 0:19:21.440 So people have to invest like institutions, and that gives 0:19:21.480 --> 0:19:22.600 a lot of support to the market. 0:19:22.720 --> 0:19:24.600 Question. Didn't we have Sam Stovall a couple of times 0:19:24.600 --> 0:19:29.080 this week? John, It's just simple if with things beaten down, 0:19:29.640 --> 0:19:32.800 do you buy things that have gone down less or 0:19:32.840 --> 0:19:35.240 do you buy things that have been beaten up? 0:19:35.720 --> 0:19:38.600 I think it depends upon the quality more than anything else. 0:19:38.640 --> 0:19:41.640 So if it's something that has been really battered, happens 0:19:41.640 --> 0:19:45.600 to be good quality, good management, good prospects for the balance. 0:19:46.080 --> 0:19:49.720 Otherwise one thing you want to really emphasize quality here. 0:19:49.760 --> 0:19:52.359 It's so overused these days, but we do believe that 0:19:52.720 --> 0:19:56.320 quality of leadership and a corporation and ideas, and you 0:19:56.359 --> 0:20:00.800 can find those across market capitalizations, whether it's large, mid 0:20:00.880 --> 0:20:05.560 or small, with the large likely favored by the largest 0:20:05.600 --> 0:20:06.439 investor community. 0:20:06.800 --> 0:20:08.320 I got to get this in. We've got a huge 0:20:08.359 --> 0:20:11.360 response on YouTube this Thank you so much. I mean, 0:20:11.400 --> 0:20:15.080 come on the epiphone for thirty five hundred bucks with 0:20:15.240 --> 0:20:19.919 the P ninety pickups. Explain to Joe Pass what the 0:20:19.960 --> 0:20:25.040 great jazz guitars. Joe Pass explained what P nineties do 0:20:25.160 --> 0:20:29.160 because all these kids out there, they're like Seymour Duncan Rocker, rocker, 0:20:29.600 --> 0:20:32.159 What a P nineties do that give you that sound? 0:20:32.880 --> 0:20:36.560 The P nineties is a single coil a type pickup 0:20:36.600 --> 0:20:38.879 instead of a dual coil, so it'll be more prone 0:20:38.920 --> 0:20:42.119 to buzzing and hum. But that said, it has a 0:20:42.119 --> 0:20:45.560 really good fat tone when he's rolled around us. There's 0:20:45.600 --> 0:20:48.800 a roundness and a very rich sound that you get. 0:20:49.160 --> 0:20:53.480 But I prefer a PAF type pickup, you know, whether 0:20:53.480 --> 0:20:57.199 it was built by DiMarzio or Seymour Duncan. 0:20:57.480 --> 0:20:59.160 John Stoles, thank you so much. 0:20:59.560 --> 0:21:03.480 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:03.480 --> 0:21:06.800