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Speaker 2: cut rates fifty basis points? Was that the right move
Speaker 2: was twenty five?
Speaker 3: I don't know.
Speaker 2: Let's talk to somebody who does this stuff for a living.
Speaker 2: Lauren Goodman at Chief market Strategist and Economists at New
Speaker 2: York Life. She joins us here in studio. Thank you
Speaker 2: very much, Lauren for coming in our studio.
Speaker 1: What do you think?
Speaker 2: What do you make of the FED? Was that the
Speaker 2: right move at fifty basis points?
Speaker 4: Yeah?
Speaker 5: I do think it was the right move. I mean,
Speaker 5: this first cut, it's really just the first step back
Speaker 5: to neutral and so moving as quickly back to neutral,
Speaker 5: where the FED policy isn't constraining the economy is the
Speaker 5: right move if the economy is what you're thinking about,
Speaker 5: and and a labor market that has slowed significantly starting
Speaker 5: to move in that direction, I think makes sense. Now
Speaker 5: when it comes to what is then the next question
Speaker 5: for the markets, I think how far can the FED go?
Speaker 6: What is neutral?
Speaker 5: Is really the next question? And the statement of economic
Speaker 5: projections had a range of just about two to four percent.
Speaker 5: That is the entire range of the US economy, and
Speaker 5: so it's a lot of uncertainty around what happens next.
Speaker 7: And then if you just take a look at that,
Speaker 7: So if you go to four percent, what's the next
Speaker 7: cycle look like? If you get a two percent, what's
Speaker 7: the next cycle look like? And those are very different economies.
Speaker 5: Very different economies. And what I'm seeing among our clients
Speaker 5: is that fifty basis point cut reinvestment risk is now
Speaker 5: the most important, most urgent thing that investors need to
Speaker 5: be thinking about for everything else, Why would you make
Speaker 5: a ton of moves, including FED voting members who are
Speaker 5: making these estimates until you know the outcome of the election. Now,
Speaker 5: election isn't typically the pivot point on how to invest.
Speaker 5: But what we're looking at is an environment where a
Speaker 5: sweep in either direction is likely to mean more spending,
Speaker 5: more inflation, probably more durable rates, also probably more volatility
Speaker 5: as markets are concerned about the level of deficit in
Speaker 5: the US economy. A mixed congress again with whoever's on top,
Speaker 5: that economic trajectory over the next four years looks really different,
Speaker 5: and so the rates environment looks really different.
Speaker 2: All right, So I've got a FED that's cutting What
Speaker 2: do I do to my asset?
Speaker 6: A patient?
Speaker 2: Am I still sixty forty? What am I doing here?
Speaker 5: From my perspective fifty basis point cut? The FED has
Speaker 5: started an easing cycle, and as I mentioned, reinvestment risk
Speaker 5: is an investor's number one priority. So the first thing
Speaker 5: you're doing is thinking about moving out of cash, where
Speaker 5: five five and a half percent easy earning just isn't
Speaker 5: going to be the case anymore, and so moving from
Speaker 5: cash into short duration fixed income really just buying bonds
Speaker 5: in general, I think is where most investors will be
Speaker 5: focused when it comes to equity, though, do you take
Speaker 5: equity risk off the table and also activate that in bonds?
Speaker 5: I think it can make sense for investors who are
Speaker 5: concerned about valuations, you know which sectors are likely to
Speaker 5: win as a result of the election, whatever the case
Speaker 5: may be, taking some of that equity risk and activating
Speaker 5: it in high yield, which is equity like where you
Speaker 5: have a coup bus.
Speaker 2: It's performing fix the come sector this year right.
Speaker 5: Well, precisely, and it's it's because you have an economic
Speaker 5: environment that's constructive and asset class that's higher quality. And
Speaker 5: again investors that are concerned about both valuations and cash rates,
Speaker 5: which are liable to move lower.
Speaker 7: So you've mentioned high yield, but like where on the like,
Speaker 7: how low do you go?
Speaker 5: Oh, strictly high quality?
Speaker 7: When it come high quality high yield precisely, Okay, So
Speaker 7: then what kind of distress might we see in the
Speaker 7: low end. And that's just my other way of asking
Speaker 7: what kind of fault cycle we going to look like?
Speaker 7: Or has that been saved or slash pushed off?
Speaker 5: Again, I'm not convinced that we've reset the cycle. And
Speaker 5: so when it comes to what does a default cycle
Speaker 5: look like for the consumer for companies, mild as a
Speaker 5: result of the support that the economy is seen over
Speaker 5: the past four years, and by that I don't just
Speaker 5: mean strong economic growth, but also the pandemic era programs.
Speaker 5: But in order for lower quality elements of the market,
Speaker 5: your triple c's, and also for small caps asset classes
Speaker 5: that really need a cyclical overturn to outperform, I don't
Speaker 5: think we have seen that reset in the cycle that
Speaker 5: will stoke durable performance.
Speaker 6: In these asset classes.
Speaker 5: Doesn't mean you won't get boosts on days when you know,
Speaker 5: good economic news is good news, but the fact that
Speaker 5: the FED is now focused on the labor market over
Speaker 5: inflation means that we are going to continue to see
Speaker 5: a reactive market where out performance in those asset classes
Speaker 5: I think is short lived.
Speaker 2: All Right, So, as a chief market strategist and economists
Speaker 2: at an insurance company, how much risk do you guys
Speaker 2: take in your equity portfolio or do you just stick
Speaker 2: with the really blue chips? How do you guys allocate?
Speaker 5: Well, just to clarify, I work in the asset manager
Speaker 5: of the insurance company, and so we look, you know,
Speaker 5: we're really looking at a broad client based, institutional, retail,
Speaker 5: et cetera. But when it comes to how do you
Speaker 5: think about you know, let's say, twenty thirty year risks
Speaker 5: this is an environment where you know, you have to
Speaker 5: expect the best you can do. That interest rates inflation
Speaker 5: have reset themselves as a result of the pandemic. That's
Speaker 5: a seed chain, a major change when it comes to
Speaker 5: asset management relative to the conversations we were having five
Speaker 5: years ago. And so the dynamic of you know, in
Speaker 5: a phase of reglobalization, capital intensivity, electrification, that's an environment
Speaker 5: that over the next ten years is likely to lean
Speaker 5: higher inflation, higher rates than.
Speaker 7: That, which also raises the question in the short term though,
Speaker 7: do we expect a resurgence of inflation or demand because
Speaker 7: of the cuts, Like I appreciate that one side of
Speaker 7: the economy will still be struggling, but on the other side,
Speaker 7: does that kind of reignite.
Speaker 5: It's one of the key risk to the market activity
Speaker 5: that we're seeing today, but it's not one that I'm
Speaker 5: worried about yet. And there's a couple of reasons for that.
Speaker 5: The first, you know, the Fed's cutting but still restrictive.
Speaker 5: They weigh, if anything, they may be a little bit
Speaker 5: behind the curve they see inflation really under control. But
Speaker 5: also when I think about you know, we can all
Speaker 5: name different catalysts for growth going sideways or downward. But
Speaker 5: when I think about what would be the catalyst for
Speaker 5: really reaccelerating the economy, We've had revenge spending. We've had
Speaker 5: an incredibly tight labor market. We've had a housing market that,
Speaker 5: despite higher rates, house prices are really high. And so
Speaker 5: though I can see an enormous benefit of rates moving
Speaker 5: lower four variable rate borrowers, household and companies, if you're
Speaker 5: sitting on the precipice of trouble, maybe not even default,
Speaker 5: but just trouble, rates moving lower don't send you off
Speaker 5: on a spending or a capital investments free They have
Speaker 5: you feeling a little bit of relief.
Speaker 7: I don't like fire everybody and like pair back on
Speaker 7: my spending program exactly.
Speaker 5: But the source of reacceleration from my perspective is elusive.
Speaker 2: Do you think that?
Speaker 8: Do you?
Speaker 2: Guys? Look outside of the US and so.
Speaker 5: Where everywhere globally Until the Bank of Japan started its
Speaker 5: rate hiking cycle, this is one of the areas where
Speaker 5: we were the most focused because we see such interesting
Speaker 5: structural change there happening after a couple of decades. Reinvigorating
Speaker 5: capital investment from their companies really a beneficiary of reglobalization.
Speaker 5: But when it comes to the broader global perspective, what
Speaker 5: I think is most important is that here in the
Speaker 5: US and globally, how we think about supply chains. It's
Speaker 5: not a new story, but it's a really, really important
Speaker 5: one because it's one where not just technology, which has
Speaker 5: been such a huge beneficiary of capital investment over the
Speaker 5: last couple of years, but increasingly building repetitive supply chain
Speaker 5: has been a big surge in construction in many countries
Speaker 5: as a result. This is one of the themes. Really
Speaker 5: it's about infrastructure that we're highly interested in globally.
Speaker 6: How bad is China right now? It's not looking great.
Speaker 6: The Mercedes news yesterday really got to me.
Speaker 5: Yeah, it's the Chinese economic model is struggling. It's very,
Speaker 5: very difficult to do what the Chinese government is trying
Speaker 5: to do, which is switch from capital intensivity and more
Speaker 5: towards a consumer driven economy. It takes time, and the
Speaker 5: idea that that could happen without any sort of ebbs
Speaker 5: and flows is unlikely, and we're seeing one of those
Speaker 5: ebbs at the moment. It's a It's one of the
Speaker 5: reasons why when we think about inflation risk especially for
Speaker 5: countries like Europe or regions rather like you up. It's
Speaker 5: difficult to see where that real reacceleration comes from when
Speaker 5: you have a disinflationary or even deflationary pressure from one
Speaker 5: of your, if not your biggest buyer.
Speaker 2: All right, Lauren, thank you so much for joining us.
Speaker 2: Really appreciate it. Lauren Goodwin, chief markets strategists and economist
Speaker 2: at New York Liith. They're not in Madison Square Park
Speaker 2: where I used to work down there, so pretty my
Speaker 2: first shake check I wrote was Madison Square Park.
Speaker 6: It all comes full circle fulla.
Speaker 7: I love focusing on oil as well as the energy transition,
Speaker 7: and the next guest is well positioned to talk about both,
Speaker 7: joining us as Jonathan Maxwell, CEO and co founder of
Speaker 7: Sustainable Development Capital. That firm was found in two thousand
Speaker 7: and seven and is really associated in the sustainability markets
Speaker 7: and it's dedication to move unefficient and decentralized energy solutions.
Speaker 7: My take away in that is that it's investing in
Speaker 7: the energy transition and trying to do all of that profitably,
Speaker 7: which a lot of firms and companies are having a
Speaker 7: hard time doing.
Speaker 6: Jonathan, it's great to have you here. Thanks for joining us.
Speaker 7: You guys have projects pretty much everywhere. You've led energy
Speaker 7: efficiency project investment funds in the UK, Ireland, Singapore, and
Speaker 7: New York, and you operate across many regions of the world.
Speaker 7: What's the favorite thing that you have right now in
Speaker 7: the space that you're most excited about?
Speaker 9: Right So, first of all, great thanks for having me on.
Speaker 9: The favorite thing I have is dealing with the world's
Speaker 9: biggest problem in the energy sector, the dirtiest secrets it
Speaker 9: is that most of it's wasted, Paul, and I've spoken
Speaker 9: about this many times before. So in the US, just
Speaker 9: to give you the numbers, roughly two third, seventy sixty
Speaker 9: seven percent of the US's energy is rejected somewhere through
Speaker 9: the generation of energy, the transmission, the distribution. So things
Speaker 9: I like to do the best is to basically to
Speaker 9: solve that problem. And what we do, for example, most
Speaker 9: of that energy gets lost as heat. So we take
Speaker 9: when we go into industrial process It's like steel mills
Speaker 9: in Indiana. We capture the waste heat that's coming out
Speaker 9: of industrial processes and we recycle it back into power
Speaker 9: and steam so that those that heat doesn't go to
Speaker 9: waste but is instead recycled. We put we instead of
Speaker 9: just capturing carbon from natural gas facilities, we capture the
Speaker 9: heat and we use that to provide heat services. The
Speaker 9: world needs as much heat as it does electricity, in
Speaker 9: fact quite a lot more. So that's my favorite type
Speaker 9: of project. It's basically generating energy for buildings, industry, and transport,
Speaker 9: largely using waste heat or waste gas. And we've got,
Speaker 9: as you say, investments now in ten countries about fifty
Speaker 9: five thousand buildings and industrial facilities connected to our projects.
Speaker 9: It works, it's profitable, and the fuel is effectively recycled
Speaker 9: waste a lot of the time, and that for me
Speaker 9: is one of the greatest, largest, fastest, cheapest sources of
Speaker 9: greenhouse gas emission reductions and sustainable investment.
Speaker 2: Jonathan, We've spoken to you several times now about this,
Speaker 2: you know, kind of recapturing or just limiting wasted energy.
Speaker 2: Where do you find the most receptivity to your arguments,
Speaker 2: to your business thoughts.
Speaker 9: Here, So, the biggest market in the world for US
Speaker 9: is actually the United States. It might sound counterfactual because
Speaker 9: you know, I think there is obviously a split debate
Speaker 9: over this. You know, do you go green or the
Speaker 9: United States is the world's largest oil and gas producer
Speaker 9: in the world, now bigger than Saudi or Iran. But
Speaker 9: the reason I think it works well in the United
Speaker 9: States is because of the economic focus, right, you know
Speaker 9: why cutting waste in other words, doing the same or
Speaker 9: more just using less energy, not because you're trying to
Speaker 9: skimp and save or degrowth. It because you're just being
Speaker 9: more competitive and more productive. It's a basic American commercial value.
Speaker 9: So we see huge take up to try and deliver
Speaker 9: energy services cheaper, cleaner, more reliable, so on site generation
Speaker 9: being more efficient. The America is by miles our biggest market.
Speaker 9: Europe after the Rushi Ukraine crisis having said that suddenly
Speaker 9: had to wake up to energy security crisis, very high
Speaker 9: prices and trying to do something about carbon and the
Speaker 9: European Commission came up with a policity three words energy
Speaker 9: efficiency first. So I think we're starting to see the
Speaker 9: the idea catch on, not just in America but around
Speaker 9: now around the world.
Speaker 7: What part of this, though, is dictated on policy, because
Speaker 7: clearly this is most definitely in the crosshairs for the
Speaker 7: US presidential election. How much of what you do is
Speaker 7: dependent on what governments do.
Speaker 9: So what we do typically is focus on projects that
Speaker 9: are commercially sustainable. So, going back to the point I made,
Speaker 9: if the grid is wasting two thirds of the energy,
Speaker 9: and we can solve that problem by building energy services
Speaker 9: at the point of use and actually being efficient, it's cheaper.
Speaker 9: It's not just cleaner and more reliable, it's also cheaper. Now,
Speaker 9: these are again fundamental core values, right, energy security, cost, efficiency.
Speaker 9: And you know, if you're into it decarbonization and you
Speaker 9: say that we're in the cross hairs, well, you know
Speaker 9: there are things that are in the cross hairs. You know,
Speaker 9: the Republican movement now looking at potentially getting rid of
Speaker 9: the power plant Rule, the vehicle efficiency Rule, the Inflation
Speaker 9: Reduction Act, and so on coming out of the Paris Agreement.
Speaker 9: That will set back renewable energy production. But renewable energy
Speaker 9: is a relatively small part of the US economy energy economy.
Speaker 9: The biggest part, which I think is we're not in
Speaker 9: the cross hairs. The biggest part is what's going on
Speaker 9: still today. Most of it's fossil fuels and most of
Speaker 9: it's being wasted. So I think this is a bipartisan
Speaker 9: basic commercial imperative. In fact, what an Earth is going
Speaker 9: on if companies as well as governments are wasting so
Speaker 9: much energy.
Speaker 2: So Johnson, what's a typical client for your firm? Is
Speaker 2: it an oil and gas companies, that utility.
Speaker 7: Or big office building?
Speaker 2: Exactly?
Speaker 9: I am. So most energy is used by buildings, industry,
Speaker 9: and transport. Most people think of the energy sector as
Speaker 9: if it's a big utility or the grid, which is
Speaker 9: the customer, But actually they're not the customers. The customers
Speaker 9: are buildings, industry and transport. That's where the energy goes.
Speaker 9: So those are our customers. Now who are customers? The biggest,
Speaker 9: fastest growing sector, and this is interesting, is obviously the
Speaker 9: data center market, particularly given the rise of AI. Why
Speaker 9: does AI matter because it requires eight to ten times
Speaker 9: as much energy as the data center, typical cloud data center,
Speaker 9: and these things are growing, proliferating. It's a very fast
Speaker 9: moving market, one of the largest demand centers for energy
Speaker 9: in the world and very very fast growing. So that's
Speaker 9: one key area. By the way, recent report this week
Speaker 9: saying that potentially that could increase overall electricity consumption in
Speaker 9: the US by nine percent of the next four years.
Speaker 9: Second big area is commercial sorry, public buildings, government forty
Speaker 9: forty five percent of GDP. Typically in most countries like
Speaker 9: the United States or government is a massive energy zer, hospitals, universities, municipalities,
Speaker 9: and then the last is steel, cement, chemicals, plastics, ie
Speaker 9: the industry. So it's actually heavy industry. It's public buildings
Speaker 9: and its data centers. That's where most of the action is.
Speaker 9: But that's where you can create investible deals and investible
Speaker 9: solutions that cut costs, improve productivity, and deliver investment returns.
Speaker 6: All right, Jonathan, thanks a lot.
Speaker 7: We very much appreciated Jonathan Maxwell's CEO and co founder
Speaker 7: of Sustainable Development Capital. I've be't told it's forty sixties
Speaker 7: until the US presidential election. Bloomberg Television, Emory Hordern will
Speaker 7: be live in North Carolina. She's speaking to the governor
Speaker 7: later on today at three thirties. Who don't miss that interview.
Speaker 7: But it's a good time to check in with Wendy Schiller.
Speaker 7: She is a Brown professor, Brown University professor, and she
Speaker 7: joins US now. She covers political sounds, international and public affairs,
Speaker 7: et cetera. Hey, Wendy, we had this really interesting town
Speaker 7: hall with Vice presidential Vice President Kamala Harris along with
Speaker 7: Oprah and all other Hollywood AID listers. Is that the
Speaker 7: tact that her campaign is going to take versus like
Speaker 7: a formal sit down, meet the press kind of interview.
Speaker 8: Well, I mean, I think the Harris campaign in that
Speaker 8: particular instance recognizes the vital importance of the black vote
Speaker 8: to the success of that campaign. We saw that it
Speaker 8: underperformed for Hillary Clinton, got out a little bit better
Speaker 8: for Joe Biden, but still, you know, has.
Speaker 3: Not reached the Obama turnout levels.
Speaker 8: And you know, if you want to win North Carolina,
Speaker 8: which looks much tighter than it did even for Biden
Speaker 8: and Trump.
Speaker 3: In twenty twenty, you're going to need, you know, a
Speaker 3: really good portion of those million black voters to get
Speaker 3: out the door.
Speaker 8: So I don't know if the format was really the
Speaker 8: most important thing about that interview as much as really
Speaker 8: appealing to a core constituency in this election for the
Speaker 8: Democrat Party, Wendy.
Speaker 2: For the I guess the middle of the road investors
Speaker 2: that each campaign is trying to get to their side,
Speaker 2: is there an issue or two that is the most important,
Speaker 2: do you think, Well, it's interesting.
Speaker 3: While that you say investor, right, you know, we can
Speaker 3: think about all no, I mean it's it's not a
Speaker 3: slip up. It's actually that's what that's how we think
Speaker 3: about politics.
Speaker 8: You know, voters think, I am giving my commodity, my
Speaker 8: vote to a candidate, and I'm investing in what I
Speaker 8: think they're going to do.
Speaker 3: For the next four years.
Speaker 8: And to the point about interviewing, the problem for Harris
Speaker 8: among independent voters or you know, educated investors is that
Speaker 8: she hasn't given quite enough detail about what she'll do.
Speaker 3: She's getting a little.
Speaker 8: Bit better, and that's where you know, some of these
Speaker 8: smaller but high profile interviews would help her define her
Speaker 8: message on taxes, on the economy, even gun control, which
Speaker 8: you know she's been emphasizing a little bit more that
Speaker 8: she's a gun owner and that she would use.
Speaker 3: Her gun in certain circumstances.
Speaker 8: This, you know, this strategy of avoiding that can also
Speaker 8: loser the opportunity to really shape her, you know, her policy,
Speaker 8: what what she's selling to voters who want to invest
Speaker 8: in her.
Speaker 7: So then the fifty basis point cut from the FED
Speaker 7: and sort of the trajectory as we go here, who
Speaker 7: does that help slash hurt it?
Speaker 3: Certainly?
Speaker 8: I mean we expect you know it takes a little
Speaker 8: while for credit card rates to adjust, and they're pretty
Speaker 8: high when you carry a balance.
Speaker 3: But of course if you have a high balance.
Speaker 8: And that cuts, you know, that's going to save you
Speaker 8: some money, either in your minimum payment or you know
Speaker 8: how you're trying to catch up and really pay down
Speaker 8: that debt.
Speaker 3: So voters will see that, but will they see it
Speaker 3: in time? You know, we're getting, as you said, very
Speaker 3: close selection day.
Speaker 8: Early voting starts in a lot of states just in
Speaker 8: a couple of weeks.
Speaker 3: It's already started in a couple of states now.
Speaker 8: So that's the problem for the you know, sort of
Speaker 8: the economic outlook, which looks really pretty good with inflation
Speaker 8: and unemployment right now, is that the window is closing
Speaker 8: for people to feel the sort of upswing the economy
Speaker 8: before they cast their vote.
Speaker 2: When you were gonna have a vice presidential debate coming up,
Speaker 2: should people pay attention to that?
Speaker 8: You know, it's an interesting thing with this debate because
Speaker 8: you've got Tim Waltz and you've got jd Vance and
Speaker 8: now Trump's age is still an issue with some voters.
Speaker 8: You know, he's seventy eight, and he's always projected more
Speaker 8: energy than Biden did. But you still have to consider
Speaker 8: the possibility that he may not serve out his entire term,
Speaker 8: and that means jd.
Speaker 3: Vance will be president of the United States.
Speaker 8: So I think the Democrats want to really emphasize that
Speaker 8: isn't just VP, it's that this guy could be president
Speaker 8: of the United States sooner than you think.
Speaker 3: Do you really want that? And that's I think going
Speaker 3: to the aim of the Waltz team to.
Speaker 8: Really push that that theme that jd Vance could become president.
Speaker 3: And you know, is that a Sarah Palin effect from
Speaker 3: two thousand and eight is that is he ready? And
Speaker 3: will he be good?
Speaker 6: I wonder how much we're gonna hear about cats and dogs.
Speaker 6: I'm actually not entirely kidding on that.
Speaker 7: And also, but in those seriousness, like Trump said he
Speaker 7: he wants to go to Springfield, like how much of
Speaker 7: this really? Is this an actual important issue in the
Speaker 7: way that swing voters need to be looking at these candidates.
Speaker 8: Well, you know, the Trump campaign, I have to say,
Speaker 8: seems to be a little bit zig zaggy this past week,
Speaker 8: and you know, thinking, oh, maybe I do want to reinstate,
Speaker 8: state and local tax deductions, which you know, you can
Speaker 8: argue Trump, you know, punitively put in the tax bill
Speaker 8: to punish states like Illinois and California, New York because
Speaker 8: they didn't vote for him.
Speaker 3: So it's just and now he's like, he wants to
Speaker 3: go to Springfield. You're not gonna win Illinois. You know,
Speaker 3: you should be in Pennsylvania and.
Speaker 8: North Carolina, in Arizona, Nevada, and Wisconsin, not Illinois.
Speaker 3: So I don't know what's going on with the Trump.
Speaker 8: Campaign thinking, but you know, these are not the states
Speaker 8: he needs to be And he doesn't even have to
Speaker 8: get involved in this.
Speaker 3: His rhetoric can be inflammatory.
Speaker 8: And the one thing Independence you know, did when they
Speaker 8: didn't vote for him in twenty twenty was get turned
Speaker 8: off by his rhetoric. So I think it's the exact
Speaker 8: wrong thing to do for the Trump camp. Not that
Speaker 8: they'll necessarily listen to me.
Speaker 2: All Right, Wendy, thank you so much. We appreciate it
Speaker 2: as always. Wendy Shulder, professor at Brown University.
Speaker 7: Remember options, expiration index rebalancing, this is all going to
Speaker 7: add to the flow, particularly within the tech market today,
Speaker 7: So watching those things. Melissa Auto is head of TMT
Speaker 7: research over Visible Alpha and she joins US now. Melissa
Speaker 7: I know it's like a moment of question, but with
Speaker 7: the index rebalancing and then you get the options expiration, like,
Speaker 7: how seriously am I taking the moves in tech?
Speaker 6: Say over forty eight hours?
Speaker 1: Happy Friday, Happy Friday. It's been an exciting week. With
Speaker 1: the FED fifty basis points is significant. It will be
Speaker 1: interesting to see what the path is and how the
Speaker 1: market starts to think about rate cuts into the rest
Speaker 1: of this year and into next year. Ultimately, I think
Speaker 1: it's going to be very interesting to see what happens
Speaker 1: in the FX markets and how our non US investors
Speaker 1: start to think about potentially taking profits in some of
Speaker 1: these megacap tech stocks that have done very well this
Speaker 1: year and really in the past twelve months.
Speaker 2: So, Melissa, I think we've all kind of seems like
Speaker 2: growing up over the last decade plus with technology really
Speaker 2: being the market leader as goes tech as goes the market.
Speaker 2: Is that still the case from your perspective.
Speaker 1: It's something we're watching very closely because we have been
Speaker 1: in a macro environment that has been very supportive of growth,
Speaker 1: and there you know, there is a question, is you know,
Speaker 1: what about the rest of the economy, the rest of
Speaker 1: the industries and sectors out there. You know, how do we,
Speaker 1: you know, support and get the fundamentals of those companies
Speaker 1: going in a way that excites the invent community, And
Speaker 1: that is an open question. It's hard to resist the
Speaker 1: fundamentals of these megacap text dogs. I mean some of
Speaker 1: them are generating margins north of fifty percent and growing
Speaker 1: at double digits.
Speaker 4: Those are fantastic numbers.
Speaker 7: What about like mid cap small cap tech stocks.
Speaker 1: Yes, so that's that's an interesting area. You know, as
Speaker 1: as interest rates come down, there may be some rotation
Speaker 1: out of large cap megacap into smaller mid cap names.
Speaker 1: We have seen some evidence of that in the Visible
Speaker 1: Alpha AI monitor. Since July, we've seen an uptake and
Speaker 1: performance in the smaller and MidCap stocks in our monitor.
Speaker 2: So I'm pre ordered my iPhone sixteen, Melissa, How important
Speaker 2: is any new product launch for Apple these days? It
Speaker 2: just seems like it's not the needle mover it used
Speaker 2: to be.
Speaker 4: Yeah, I think you're right about that.
Speaker 1: You know, the September ninth event, I have to admit
Speaker 1: it was a bit underwhelming, and we've certainly seen that
Speaker 1: reflected in the consensus data where iPhone units for Q
Speaker 1: four and four next year have ticked down for next year.
Speaker 1: Actually they've ticked down by almost ten percent, So that
Speaker 1: indicates that overall sentiment is, you know, being a little
Speaker 1: bit more conservative around that outlook for the iPhone.
Speaker 7: Yeah. And you saw though, Paul, that we had that
Speaker 7: report from an analyst over in Asia that said that
Speaker 7: is channel text and Apple got hit pretty hard as
Speaker 7: well as its suppliers. So it's like, I guess it
Speaker 7: still winds it mattering if we're looking at a supercycle
Speaker 7: on that end. The other thing that's interesting right now
Speaker 7: in the market that I haven't talked about with as
Speaker 7: much clarity as i'd like to is the dollar, and
Speaker 7: it feels like the direction of travel is just a
Speaker 7: weeker dollar as the FED wine up cutting rates. What
Speaker 7: does that mean for mega tech multinational companies.
Speaker 1: Yeah, I mean the megacap tech names are pretty significantly
Speaker 1: held overseas, and it's been a fantastic investment because not
Speaker 1: only have non US investors benefited from a strengthening dollars
Speaker 1: since early twenty twenty three, they've also benefited from the
Speaker 1: extraordinary growth coming from AI and the cloud. So I think,
Speaker 1: you know, they may be looking at their portfolios and saying, Okay,
Speaker 1: we've had a fantastic twenty four months, maybe it's time
Speaker 1: to take a little bit off the table.
Speaker 2: So Melissa, in your coverage area here, what's the best
Speaker 2: what's what's your top call right here? These days?
Speaker 1: Yeah, we're really looking at the next six to twelve
Speaker 1: months and really trying to understand what companies are going
Speaker 1: to dominate the application of AI.
Speaker 4: So we've seen a lot of innovation in the.
Speaker 1: Model and the chips, and what we really have not
Speaker 1: seen is the innovation in the application. And I think
Speaker 1: that's really going to be the next area where the
Speaker 1: market could get really excited. So we're watching that very closely.
Speaker 1: I mean, in theory, Apple should be front and center there,
Speaker 1: although it does seem like they're off to a bit
Speaker 1: of a slow start. Does Apple Intelligence serve as a
Speaker 1: catalyst for a replacement cycle and pause broad adoption or
Speaker 1: is it a different player? So I think that's the
Speaker 1: area that I'm looking at very carefully to see, you know,
Speaker 1: who that's going to be, what's going to be that
Speaker 1: catalyst and what's ultimately going to get the market.
Speaker 6: Excited and what do you think.
Speaker 4: We don't know yet? A collar question. There hasn't been
Speaker 4: any data or evidence suggesting it either way, but I
Speaker 4: think that's where the opportunity is. When there's when we know.
Speaker 1: When we see that, then the opportunity has already been
Speaker 1: fairly well understood. When we don't know, we're watching it,
Speaker 1: we're like, Okay, this is where the monitor can be
Speaker 1: really valuable. Let's take a look and see what new
Speaker 1: names start to emerge over the next couple of months,
Speaker 1: and then I think we can get really excited.
Speaker 6: Melissa.
Speaker 2: One of the things as it releads to AI that
Speaker 2: I'm trying to get my hand head around is how
Speaker 2: much of that spending on AIS incremental or how much
Speaker 2: does this maybe just switched from other parts of the
Speaker 2: tech stack, like I know, information technology or something like that.
Speaker 2: How do you think about spending AI in general?
Speaker 4: Yeah, I mean.
Speaker 1: The tapax has been absolutely incredible at the cloud service providers.
Speaker 1: I mean they have just spent billions and that ultimately
Speaker 1: has translated into great growth that companies like in Nvidia
Speaker 1: for example, as they look to transform their data centers
Speaker 1: to accelerated computing, which is ultimately what lays the groundwork
Speaker 1: for generative AI. And I think companies themselves are really
Speaker 1: trying to figure out. Okay, we we want to be first.
Speaker 1: We want to we want to make sure that we
Speaker 1: integrate generative AI into our enterprises. But it's kind of expensive,
Speaker 1: it's difficult, Our data is in a lot of different silos.
Speaker 1: We it's going to take probably longer than we originally anticipated.
Speaker 4: My guess is it's going to continue to There's going
Speaker 4: to continue to be spent there.
Speaker 7: So so do you think that the real monetization that
Speaker 7: of AI is going to come from the consumer side,
Speaker 7: like Paul finally turning on his AI features when it
Speaker 7: finally comes out in his new blackboring iPhone. Or is
Speaker 7: it going to come from more enterprise use and companies
Speaker 7: using it for efficiency. Where's going to be that big
Speaker 7: money maker?
Speaker 1: Yeah, that's I mean, that's the MILLI you know, that's
Speaker 1: that's the question. You know, I think because we haven't
Speaker 1: seen any real.
Speaker 4: Meaningful innovation at the application level. So you know, so
Speaker 4: who is it a chicken or the egg situation?
Speaker 1: Is it going to come from these enterprises that are
Speaker 1: spending so much and trying to figure it out from
Speaker 1: an internal consumer perspective, or is it going to make
Speaker 1: them more productive? Efficient in a way that helps support
Speaker 1: earnings and margins in these organizations. Or is it something
Speaker 1: like a broad adoption that comes from an installed base
Speaker 1: that already exists, something like a smartphone or an iPhone
Speaker 1: that is helping to propel that.
Speaker 4: It really isn't clear.
Speaker 2: Melissa, thank you so much for joining us. Really appreciate
Speaker 2: getting your thoughts here. Melissa Atto, she's head of t
Speaker 2: MT that's Technology, Media and Telecommunications. On a page, I
Speaker 2: think she's head of T and T research. This is
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