December 24, 2025 • 38 mins
On this special Christmas edition of Bloomberg Daybreak, host Nathan Hager speaks with:
- Cameron Dawson, Chief Investment Officer at Newedge Wealth and Brian Levitt, Global Market Strategist at Invesco discuss what we should expect from markets in 2026
- Amanda Agati, Chief Investment Officer at PNC, breaks down the cost of the 12 days of Christmas.
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Episode Transcript
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Speaker 1 (00:01):
Merry Christmas and happy holidays everyone. I'm Nathan Hager, welcoming
you to a special edition of Bloomberg Daybreak. Markets are
closed for the Christmas Day holiday, but we've got a
lot coming up for you this hour, including holiday cheer
at a premium. Don't you know if you noticed, but
this year the twelve Days of Christmas got just a
bit more expensive. We're going to break it down with
(00:23):
Amanda Agatti, chief investment officer at PNC. But first we
want to take a look at the stock market because
by some estimations, that got a little bit expensive as well,
with twenty twenty five certainly turning profits for the bulls,
but not without a little bit of pain along the way.
So for more on what to expect in twenty twenty six,
we're very pleased to bring you a special holiday roundtable
(00:45):
on equities. Cameron Dawson is with us on this holiday program,
chief investment officer at New Edge Wealth. And joining us
as well is Brian Levitt, global market strategist at Investco.
Really appreciate both of you taking the time out of
your holiday to join us. But before we look at
head to stocks for twenty six, let's just quickly assess
the year gone by. What did you make of the
(01:06):
downs and ups of twenty twenty five camera, Does it
feel like that April low if the back of the
tariff announcement is way back in the rearview mirror now?
Speaker 2 (01:17):
Well, Mary Christmas Nathan, certainly it does seem that way.
And I think one of the most important things about
that April low is just how bearish most investors got
during that Liberation Day period. We saw impositioning indicators that
we got all the way down to the first percentile,
meaning only one percent percent of the time in the
(01:37):
last fifteen years have investors been more underweight the market
than they were in early April. So that created an
incredible wall of money that could be pulled into this
market over the course of the last eight months. That
just meant that all dips got bought rather quickly. We
saw very little volatility, and that allowed us to levitate,
(01:57):
as as you mentioned, at these very high valuations. But
it's important to note we started the year at high valuations,
we're ending the year at high valuations. But the real
source of returns all came from earnings growth. You had
a really solid ten eleven percent earning growth for twenty
twenty five, and it's also important to note that consensus
expects that to continue with thirteen percent earnings growth for
(02:20):
twenty twenty six. So it certainly seems that investors are
expecting the good times to keep on rolling.
Speaker 1 (02:26):
Let's turn to you now, Brian, what did you make
of the market moves this year and where do you
see things going into twenty six?
Speaker 3 (02:35):
The markets were volatile around periods of policy uncertainty, and
that's almost always the case, So I often get asked,
you know, when it's too good to be true, or
people think it's too good to be true, When does
volatility come? When do market drawdowns come? Well, they almost
always come during periods of policy uncertainty. And as we
got towards that peak policy uncertainty, historically in this time
(03:00):
as well, you tend to do, markets tend to perform
well in the aftermath of that. Again, this time was
no different. So as we came through that, it was
important that the administration start to provide greater clarity on
where the tariffrights were going, and as inflation expectations stay contained,
we started to get better clarity on where the Federal
(03:20):
Reserve might be going and so that created the recipe
for a bottom and an improving advance. Now, the reality
is this was the year where the markets did broaden out,
not to the extent that we may have hoped for
at the beginning of the year, and I think tariffs
(03:40):
and policy uncertainty had something to do with that, but
nonetheless a year in which most parts of the market
did well. Expectation as we head into twenty twenty six
is lower interest rates from the FED. An emergence out
of this global mid cycle slowdown could help to continue
(04:01):
to support other parts of the market, which may not
be as disconcerting from evaluation perspective as some people fear.
Speaker 1 (04:09):
And to Brian's point, Cameron, we are starting to see
a little bit of that rotation happening out of big
tech as we head into twenty twenty six. But thinking
about the idea of policy certainty now, is there still
a risk of policy uncertainty around what the tariff regime
could be after the Supreme Court rules sometime next year.
Speaker 2 (04:32):
Oh, this is very important as we think about not
just in the context of what it means for American
businesses with certainty about how trade will be treated, but
really how the bond market digests this, because what we've
seen is that the collection of tariffs have eased some
pressure on Treasury to issue more debt to fund these big,
(04:52):
huge deficits that we know that we have. And so
the question would be is that if there is pushback
by the Supreme Court where it looks as if those
tariffs cannot be collected going forward, you start to have
bigger holes in the budget that will need to be
filled by more treasury issuance. So it could be one
of the reasons why we're seeing a little bit of
(05:13):
perkiness in the long end of the yield curve. Tenures
are still very well contained, but the thirty year bond
has been able to break above resistance, potentially starting to
price in some of these fears about fiscal doant dominance
and the need for more treasury supply. But I would
note that this is much more of a global phenomenon.
You're seeing a lot of movement hiring yields as we move,
(05:36):
as we look at places like Japan and Germany and France,
all just suggesting that even though there might be policy
certainty about expectations for more FED cuts, so we look globally,
it's not necessarily that certain.
Speaker 1 (05:50):
What do you think, Brian, about the possibility of some
policy uncertainty around tariffs in the new year. Is that
something that investors need to keep in mind? Could there
be something of a push pull between the Treasury and
the equity markets?
Speaker 3 (06:03):
No, I don't think investors need to be concerned about it.
Regardless of what the Supreme Court rules. The Trump administration
has steps that they can take to continue to impose tariffs,
whether that's Section one twenty two of the Trade Act
of nineteen seventy four, they can use Section two thirty
two of the Trade Expansion Act of sixty two, section
(06:24):
three oh one of the Trade Act of nineteen seventy four.
So they're going to figure out a way to continue
to collect tariff for revenue, whether that's for better or
for worse. So I wouldn't put that as the big
policy uncertainty as we head into the year. I think
that one of the risks you have is what will
(06:47):
ultimately happen with the FED in terms of FED independence.
To me, that would be a bigger tail risk, And
I want to be clear, Nathan, I categorize it as
a tail risk because I continue to believe that this
is a FED that is going to maintain its autonomy
and independence. I do believe it's important to this FOMC.
If you start to get whiffs of that changing, then
(07:11):
you may have some challenges at the long end of
the yeal curve, and that would be a very different
environment where if the US Treasury starts US Treasury bond
start to trade more like a credit, that's a very
different outcome than we've dealt with for years. Short of that,
I continue to expect US Treasury bond to trade like
(07:34):
a US Treasury bond, and what I mean by that
is not based on its corporate it's credit fundamentals, but
more based on the growth and inflation potential of the
US and I expect it to be a pretty reasonable
year from a growth and inflation perspective without substantial treasury
(07:55):
rate volatility.
Speaker 1 (07:56):
We're speaking with Brian Levity's Global market strategistic and investco
along with New Edge Wealth Chief investment Officer Cameron Dawson. Cameron,
I want to take the conversation more specifically to the
stock market now, because you know, looking ahead at twenty
twenty six, a lot of the twelve month forward targets
for the S and P five hundred are pretty bullish.
(08:17):
There seems like a lot of optimism baked into this
market about where stocks are going to go in the
new year. What do you think, is this going to
be the year we see something like an S and
P eight thousand As we hover close to seven thousand
right now.
Speaker 2 (08:32):
Yeah, there's certainly some estimates out there that we get
to S and P eight thousand. I think what's interesting
is that if you look at the collection of strategists,
there's not one single strategist who is expecting a down
year in twenty twenty six. And of course that makes
sense when you start thinking about some of the things
that Brian mentioned earlier. You talk about a supportive FED,
(08:53):
you talk about supportive fiscal policy, continued earnings growth driven
by things like the AI infrastructure build out. It is
hard to be bearish, and so thus there aren't any
bearish estimates in those strategists forecasts. One of the things
we'd know is that because you are starting the year
at twenty two and a half times forward earnings on
a valuation basis for the S and P five hundred
(09:16):
and thirteen percent earnings growth that a lot of this
bullishness is already well contemplated in the price, so we
wouldn't expect a lot of further multiple expansion going into
twenty twenty six, and likely that the returns that we
get are closer to what we get as far as
earnings growth. That would actually be very similar to what
happened this year in twenty twenty five, where the majority
(09:38):
of returns did come from earnings growth. So a lot
of bullish is out there. Very tough to find bears
simply because the narrative doesn't support it, But that doesn't
mean that we won't experience volatility along the way.
Speaker 3 (09:50):
Yeah.
Speaker 1 (09:50):
To Cameron's point, Brian, you look at the an R
function on the SMB five hundred, is really tough to
find anybody who's looking very bearish on this market. Given
that with so much bollishness bake, then could that be
a bearish indicator?
Speaker 3 (10:05):
I don't think so. I think in most years you
tend to see most analyst expectations being positive. You don't
last in this industry very long putting out bearish outlooks
on the S and P five hundred each year. I
guess there's a couple of prominent perma bears. But for
the most part, markets tend to go up far more
(10:28):
often than they tend to go down. And that's because
in most years things get better rather than get worse.
I mean, twenty twenty two, if you want to think
about it, was a year in which things got worse
relative to expectations. That's a down year. Inflation when higher,
the Fed had to raise rates more. In most years,
things get better, And when you look at twenty twenty six,
(10:50):
the setup is for things to get better. As Cameron
also mentioned, so by better a lower discount rate, there's
an opportunity unity for improving global growth. Investors shure, remember
we've been in a little bit of a soft patch here.
That's what trade wars will do, or that's what you
know trade conflict will do. So what you have now
(11:12):
European Central Bank has already lowered rates significantly, and the
Europeans are committed to fiscal investment. China needs to combat
deflationary impulses. The US is probably a little bit too
restrictive on policies. So all of that creates a backdrop
of what should be an improving economic activity. And on
(11:34):
top of all of that, it should start to be
a year where more of the gains and efficiencies of
artificial intelligence start to approve to other parts of the market.
And so you know that all creates a reasonably good backdrop.
If you're expecting a bad year for markets, what you
(11:58):
really would have to assume, Boom, is that something's going
to happen to cause the US economy to roll over meaningfully,
or the Chinese economy for that matter, or the FED
to have to reverse course. And it's difficult right now
to see what that could be.
Speaker 1 (12:15):
We're going to continue this special conversation on the stock
market looking ahead to twenty twenty six, the backdrop for
equities in the new year, along with the central bank
policy possibilities, as we continue this special market roundtable with
Invesco's Brian Levitt and Cameron Dawson of New Edge Wealth
on the special edition of Bloomberg Daybreak for Christmas. I'm
(12:40):
Nathan Hager, and this is Bloomert. Thanks for being here
on this special festive edition of Bloomberg day Break. Markets
are closed for the Christmas holiday, Ethan Hager, and we
(13:00):
want to continue our special holiday roundtable on the stock
market with Cameron Dawson, chief investment officer at new Edge Wealth,
and Brian Levitt, global market strategist at Investco. And I
want to pick up on some points you both made
at the beginning of this program focused on the FED,
because investors, it's safe to say, are betting on at
least a couple more rate cuts in the new year
(13:23):
after J. Powell Company ended twenty twenty five with three
in a row. This is how Powell explained the latest
cut just a couple of weeks ago at the December meeting.
Speaker 4 (13:32):
Why did we move today? You know, I would say
point to a couple things. First of all, gradual cooling
in the labor market has continued. Unemployment is now up
three tenths from June through September, payroll jobs averaging forty
thousand per month since April. We think there's an overstatement
in these numbers by about sixty thousand, so that would
(13:53):
be negative twenty thousand per month.
Speaker 1 (13:56):
So still clearly a lot of focus on vulnerability in
the labor market. Cameron, I'll start with you. Does this
make the case for cuts sooner maybe than the market
might be expecting.
Speaker 2 (14:08):
We do think it does, simply because if you look
at what market expectations are baking in right now. It's
about two point four cuts through the end of the year,
which would get us just to neutral based on the
FED funds median doot in their dot plot for the
long run neutral rate. So that just suggests that the
market isn't expecting a lot of incremental weakness within labor
(14:29):
market data. But as we saw in the recent payrolls
print from November that we now already have an employment
rate at four point six percent, so we think that
there is room for unemployment to move higher that could
potentially pull those FED cuts sooner. And that raises a
really important question for risk assets like credit and equity markets,
(14:51):
which is that the last one hundred and seventy five
basis points of cuts that we got for the FED
came with a backdrop where forecasters were actually raising their
estimates for both EPs and GDP growth, which just meant
that even though we were getting FED cuts, people were
becoming more optimistic about the growth backdrop. That is a
fantastic backdrop for risk assets to continue to rally. So
(15:15):
if we continue to see weakness within the labor market,
could it potentially challenge growth forecast consensus? Has two percent
growth expected for twenty twenty six, and could that be
an environment where instead of celebrating rate cuts as they
have the last two years, we see markets take it
as more of a negative sign that this economy needs
FED support. So it definitely will be a data dependent
(15:36):
FED and a data dependent market.
Speaker 1 (15:39):
Brian, let's turn to you. What's your view on where
the FED goes in the first half of twenty twenty six.
Could we see those cuts sooner than later and what
could that mean for the equity market?
Speaker 3 (15:50):
I think we could. And the things I watch, you know,
just like the fedhair is looking at payrolls and yes
they've weakened substantially, unemployment rate up a bit. The other
thing that I've been so laser focused on is the
inflation expectations in the bond market. And if you look
at a three year break even, it has really rolled
(16:11):
over in the last days. So you're looking at a
bond market that's expecting about two and a quarter inflation
over the next three years. Now, a lot of people
may look at that and say, what's wrong with that?
That's right in the fed's comfort zone, but it's starting
to move down fairly rapidly. So I would watch it closely.
(16:34):
From from my perspective, We're sitting here or have been
sitting here with a relatively flat yel curve. That feels
too restrictive to me in an environment where the economy's
just not going gangbusters from a job's perspective. So if
it were me, if I were running the FED, yeah,
I would want to have the short rate down closer
(16:56):
to three percent. That all else being equal, gives you
of one hundred to one hundred and twenty five basis
points spread between short rates and the ten year treasury.
That's historical average. To me, that seems far more appropriate
for the environment that were in in terms of what
(17:16):
that means. Typically, that's a good backdrop for risk assets,
particularly smaller capitalization stocks, but also as the ill curve steepens,
more value oriented parts of the market, and so for
investors that may have some concerns about valuations in the
top heavy part of the market, FED cuts and a
(17:37):
pick up an activity from that could give you the
backdrop where more value oriented parts of the market perform well.
And quite frankly, some of the biggest value markets were
outside of the United States, and you saw some of
that performance already this year.
Speaker 1 (17:55):
That does raise the question cam about whether the market
is possibly depending on rate cuts from the Federal Reserve
to keep that rotation or broadening away from big tech
going into small and medium cap stocks.
Speaker 2 (18:10):
Certainly it is dependent the rally in smaller meeting cap
stocks on the FED remaining supportive, because smaller cap stocks
need two key things. They need a resilient economy in
order to drive earnings growth, and they also need lower
interest rates in order to ease some pressure on balance sheets.
Small cap stocks tend to have a lot more debt
(18:31):
and a lot more floating rate debt, So if there's
any cohort that celebrates FED rate cuts more than others,
it would be those small cap stocks. Now it should
be noted, though, is that if we look at consensus
for the Russell two thousand, there is a very industrious
sixty percent earnings growth that is forecasted for twenty twenty six.
(18:52):
And that might look encouraging to investors because it's well
higher than what we see in the large cap portion
of the market, but it should be taken with a
grain of salt. If we look at the beginning of
twenty twenty five, there was an estimated fifty percent earnings
growth coming into this year, but the actual returns on
earnings growth ended up being just three percent. So those estimates,
(19:14):
just because they are expected by consensus, does not guarantee
that they will be delivered. But certainly more rate cuts
of resilient economy a cyclical uplift could help those those
smaller capsized stocks. But just note the bar is already
pretty darn high.
Speaker 1 (19:29):
Yeah, it seems to be the case, And I'll turn
back to you, Brian, thinking about your role as a
global market strategist. With the FED considering further rate cuts
into twenty twenty six, we've got a European central bank
that seems to be on pause, a Bank of Japan
that's starting to hike interest rates for the first time
(19:49):
in years. Talk to me a little bit more about
the global central bank dynamics and what that could mean
for equities more broadly.
Speaker 3 (19:57):
Yeah, the US is expected to lower rates more than
any other developed central bank, and I think that that
is critical. Typically, as the FED lowers rates and those
rates converge towards the rest of the world, you tend
not to see a very strong dollar environment. Investors aren't
used to that we haven't seen a gradual easing cycle
(20:20):
in the US in decades because we ran into crises
and then the US stimulated the economy better than the
rest of the world did in eight and twenty twenty.
So this is the first gradual rate easing cycle that
most investors in the United States have seen, at least
for a very long while. So what that usually means
(20:41):
is you don't have a strong dollar, may even mean
that the dollar goes sideways or moderates, and in that
type of a backdrop, that's when capital can start to
look to other parts of the world where valuations are
more compelling. You saw a lot of that this year.
If you look at the MSCI AQUIXUS total return, it
(21:02):
significantly outperformed the S and P five hundred. So that's
something that can continue, particularly when you think to the
emerging markets. If you look at emerging economies, they tend
to perform best when the dollar is either going sideways
or weakening, and as the US lowers rates, that gives
(21:27):
some more flexibility to central banks in the emerging world.
So that's a place that investors could look if they're
trying to diversify out of the US. Take advantage of
better valuations and take advantage of what could be a
better global macro backdrop.
Speaker 1 (21:45):
We're speaking with Brian Levitt, Global Market Strategistic Investco and
New Edge Wealth Chief investment Officer Cameron Dawson. In the
minutes we have left, let's talk about the US markets
more specifically in twenty twenty six. A lot of quests
about whether the tech trade can continue with the valuations
it's at right now. Cameron, What sectors are you looking
(22:09):
at that could provide a little bit more return in
twenty twenty six.
Speaker 2 (22:13):
Well, one of the things that we're watching really closely
is that over the last couple of months you have
seen a big rotation into some left behind sectors over
the last few years. If you look at places like healthcare,
for example, going from being a laggard into now a
leading sector in the market, which is really more of
a valuation story and somewhat of an earning's recovery story
(22:37):
because of depressed earnings over the course of the last
couple of years. The other thing that we're watching closely
is you're starting to see some signs that very cyclical
sectors are turning up. In addition to industrial commodities, So
look at copper soaring, and all of this suggests that
maybe the market is starting to bacon expectations of that
(22:59):
cyclical uft after we've had this mid cycle slow down.
The question, of course, is that optimism warranted. Will we
see some of that cyclicality actually deliver. It should be
noted that November through May are typically really strong times
for cyclicality, and that those trades tend to fade as
we get towards the middle of the year. So for now,
(23:20):
it seems like a good time as we start to
see some of that cyclicality come back into markets.
Speaker 1 (23:25):
Brian, you're looking at cyclicals, what kind of sectors are
you considering into the new year.
Speaker 3 (23:31):
I couldn't agree more And Cameron is spot on with this.
When we look at our leading indicators of the economy,
it's giving us a three to six month view of
the global economy returning more to a trend like environment.
It had been globally below trend, and so what that
means is a more environment that favors more cyclical assets.
(23:55):
Now that's generally a three to six month view, so
we'll have to see the carry through from that. Do
we come from a do we go from a recovery
to more of an expansion. I agree with Cameron's timing
a lot. We will reassess monthly, certainly six months from
now see where we are with it. But when you're
thinking about cyclical sectors, yeah, financials, industrial, commodities, energy, those
(24:19):
tend to be materials, those tend to be the our performers.
And what I also like what Cameron mentioned.
Speaker 5 (24:25):
Is this idea of perhaps even rotating within growthier parts
of the market, and you know, perhaps biotech is an
example of that.
Speaker 1 (24:36):
In our last minute, Cameron, what are some potential risks
that investors should keep in mind into the new year.
Speaker 2 (24:44):
The big wild card for US is oil prices. We
should not underestimate or underappreciate just how powerful falling oil
prices have been for the disinflation move of lower headline inflation,
as well as helping consumers effectively acting as a tax cut.
Oil prices are very low, Gasoline prices are very low,
but a turn in that trend towards more of an
(25:06):
uptrend could certainly be a shock. It's not our base case,
but something we're watching closely as it is very important.
Speaker 1 (25:12):
Thanks to both of you for being with us on
this Christmas holiday. That's Brian Levitt, global market strategist at
Invesco and New Edge Wealth Chief investment Officer Cameron Dawson.
And up next, the twelve Days of Christmas got a
little pricier this year. We'll break it down with Amanda
Agatti of PNC. I'm Nathan Hagar, and this is Bloombern.
Speaker 3 (25:44):
On the first day of Christmas. My true love sent
to me a park hygeen, a pear tree.
Speaker 1 (25:52):
Welcome back to this special edition of Bloomberg Daybreak. The
markets are closed for the Christmas holiday. I'm Nathan Hager.
But if you're talent up the cost of Christmas, it
might not be music to everybody's ears, especially if you
go that full twelve days. So how much will a
partridge in a partree and all those turtle doves and
gold rings set you back this Christmas season? Joining us
(26:15):
is someone who knows. Every year PNC Chief Investment Officer
Amanda Agatti publishes PNC's Christmas Price Index, a festive indicator
that turns the twelve days of Christmas into a holly
jolly reid on the US economy. And Amanda is here
with us to break it down, Amanda. So great to
have you on this Christmas holiday. So let's get the
(26:37):
top line number. What's the twelve days of Christmas cost
and Christmas twenty twenty five.
Speaker 6 (26:43):
Well, Merry Christmas, Nathan, I'm so thrilled to be with
you celebrating the holiday here. Believe it or not, True
Love's gifts wrap up at a tree topping fifty one thousand,
four hundred and seventy six dollars. It's up about four
and a half percent year over year. So the cost
of Christmas continues to be on the rise.
Speaker 1 (27:04):
Out pacing the FEDS two percent target more than doubles.
Should we go day by day, how do you think
about the cost of a partridge in a pear tree
on the first day?
Speaker 6 (27:17):
Well, yeah, I mean we could spend all day talking
about you know how we're trying to tie the analysis
to what's happening in the real world. I think what's
notable about the partridge in a pear tree is not
so much the partridge. The cost of the partridge itself
didn't move on a year over yr basis. I can't
(27:38):
imagine why True Love doesn't want a partridge, but the
pear tree is really the driver for that combo gift,
and so we always tie the pear tree to sort
of a proxy for housing costs, which continue to increase
year after year. There's a lot of sort of interesting
(27:59):
supplying dynamics as it relates to housing in this country.
But I think what's interesting this year is even though
mortgage rates have sort of fallen off the rooftop, as
they say, by more than one hundred bases points, as
the Fed's been lowering rates, it really hasn't made much
of a difference in terms of affordability. So I don't
(28:19):
know if the partridge needs to rent that pear tree
or what, but it's going to cost true love a
lot this holiday season.
Speaker 2 (28:26):
Wow.
Speaker 1 (28:26):
Okay, so we're not thinking about the pairs necessarily either,
looping in fruit prices maybe, But we do have a
lot of birds in the next few days of the
twelve days, turtle doves, calling birds, French hens. Are we
thinking about chicken and eggs here?
Speaker 6 (28:45):
We certainly can be. We can think of a lot
of fun bird puns and references, there's no question. But
I just I think it's I think it's notable that
the two turtle doves, the three French hens, and the
four calling birds are all flat year over year basis.
It's that recurring theme with that darn partridge. I can't
(29:05):
imagine why people don't want birds as pets this holiday season,
So there hasn't been a whole lot of demand on
a year over year basis for the birds. Let's call
it a silent night of okay for those birds.
Speaker 1 (29:17):
Well, maybe a new year's resolution to get back to
the pet store. But in the meantime, I got to
think that the most eye popping sector in this analysis
has to be the five gold rings. When we think
about the record levels that gold has been hitting in
just the last couple of months.
Speaker 6 (29:37):
Here, yeah, single largest increase by far on a year
over year basis a heartbreaker for me as it's my
all time favorite gift. My true love is going to
have a tough time this holiday season shopping for me.
There's no question, but the five Golden rings are up
about thirty two and a half percent year over year.
It's a little bit of a bargain. This is small, constantly,
(30:00):
but a little bit of a bargain compared to the
move in gold commodity prices, which are up forty five
plus percent over the same time period, So you know
what's going on here. I mean, it's certainly a function
of concern and the macro backdrop investors have been flocking.
There's a bird pun for you two precious metals this
(30:23):
year with some of the macro uncertainty, the geopolitical concerns,
we've had some inflationary pressures that have been sort of
consistent throughout the year, and even more recently fed rate
cuts one would think would be helpful, but it's effectively
lowering the opportunity cost of holding gold, so on a
(30:43):
relative basis, it's a bit more attractive than yield bearing assets.
Speaker 1 (30:48):
Yeah, you certainly have to wonder where those five gold
rings are going to go next Christmas, given the crazy
track that gold has taken in just the last few months.
Moving further along into the next couple of verses, here,
six geese laying, seven swans of swimming. I think we're
back into birds that we find maybe a little bit
(31:10):
in the grocery aisle.
Speaker 6 (31:12):
Well, let's just be relieved that the six geese did
not lay golden eggs this holiday season. There increases there's
a little bit of a move on a year of
your basis up about three point three percent, so a
little bit closer to broader inflationary trends. So let's just
say true love doesn't have to sweat it out buying
(31:34):
the six geese a laying this year. It's not too
bad relatively teame on a year over year basis. Those
seven Swans, though, I think that one's really interesting. It's
one of the biggest dollar values in the entire index,
but it didn't move on a year over year basis,
And so what's great about that, I think for investors
(31:55):
is you know, black no black swan sightings over the
course of Yeah, so that's how we think about that
one and sort of a key to perhaps the market
rally continuing in the new year.
Speaker 1 (32:08):
Okay, yeah, I'll hope springs eternal, especially this time of year.
Here we go into eight Maids of Milking? Where do
where do they fit? In Amanda?
Speaker 6 (32:22):
The Eight Maids of Milking are sort of a frustrating
line item for many because the analysis is always tied
to the minimum wage in this country, and so it's
always flat on a year over year basis unless we
see Washington take steps to adjust the minimum wage. And
(32:42):
it's been a very very long time since we've seen that,
So I don't know whether you know Washington wants to
take that up in twenty twenty six from a policy
stance or not. But it's been also a silent night
on a year of your basis for those eight maids.
Speaker 1 (32:57):
Okay, well maybe another new years as depending on where
you stand on that going to nine Ladies Dancing, ten
Lords of Leaping. Things start to get a little bit
more interesting in this part of the index.
Speaker 6 (33:12):
Yeah, The performers, or let's just call it the services
components of the index are always kind of an interesting
driver on a year of ear basis. There's a little
bit of a distinction between the different types of performers
this year, whereas in past years we've seen it running
really red hot Rudolph's red nose hot on a year
(33:34):
of your basis, And it lines up very I think
nicely with how consumer behavior and consumer spending has shifted
from goods and things and stuff to services and experiences.
So we're definitely seeing the services side of the index
kind of transform over time to be a bigger driver
(33:55):
in alignment with how the economy is evolving. I think
the one that's the standout for me is the ten
Lords a Leaping. It's the single biggest services or performer
increase on a year over year basis. And I have
to say, though this is not part of the analysis,
that it's got to be a reflection of Oasis concert tickets.
(34:15):
It's the hottest ticket in town all year. Maybe you
could refer to them as the ten Lords of Rock
as opposed to Lord's a Leaping, but I think that's
that's probably the closest comparison we could make to ten
Lords a Leaping. Concert tickets still very, very hot this
holiday season.
Speaker 1 (34:33):
And we certainly saw Powerhouse Lady dancing this year with
the Taylor Swift effect as well. Were talking about that
pretty much throughout twenty twenty five long.
Speaker 6 (34:44):
That's exactly right.
Speaker 1 (34:46):
I think we're probably keeping it in the entertainment realm
as well, with the eleven pipers piping and twelve drummers drumming.
All those Lords of Leaping, I guess need backup bands
as well.
Speaker 6 (34:55):
Huh, Yes, I think you know, there isn't something in
particular that's notable relative to the ten Lords. For eleven
and twelve, they're all sort of sitting in that same
category of consumers are just willing to pay up for
services and experiences. The translation is there's a lot of
(35:16):
pricing power in the services and the experiences and the
entertainment side of the equation, Whereas I would say, for
sadly the five Golden Rings jewelers are losing on a
relative basis. They're feeling the margin squeeze. There's not that
much pricing power to push through higher input costs, so
the services are still running red hot, There's no question
(35:36):
about it.
Speaker 1 (35:37):
So I guess if we were to put this all
together with that price tag we mentioned at the beginning,
north of fifty five thousand, if I'm remembering right, that
tells us I think a lot about maybe how consumers
might be feeling squeezed is certainly at the lower end
of the income spectrum around this holiday sees. Is that
something that you're seeing reflected in this report?
Speaker 6 (36:00):
Absolutely? You know this is with this is a very
whimsical fun analysis that we do every year to try
and make sense of, you know, broader inflationary and economic trends.
But the reality is that this is such a specialty
gift basket of goods and services that it skews higher
end in terms of gauging what the higher end consumer
(36:22):
might be facing. In terms of trends, we know without
a shadow of a doubt that the lower end consumer
has been feeling the squeeze really all year and really
over the last few years. We don't see a lot
of relief on that front at all. I think the
challenge in twenty twenty six will be how does the
consumer on balance? How does the US consumer hang in
(36:45):
there on a relative basis. We've seen retail sales trends
hang in there. I think back to school shopping season
was pretty strong. Black Friday trends looked really good. Twenty
twenty five holiday shopping season, it's again it's early, but
indications are that consumers continue to spend, which is the
(37:05):
good news. But at what point does the consumer exhaust itself.
We've been worrying about it for the last few years.
It hasn't materialized. So I think a key question for
twenty twenty six is does the consumer start to fade
a bit and what does that do to the trajectory
for growth, which all for all intents and purposes, look
still quite solid as we round out twenty twenty five.
Speaker 1 (37:26):
And I think as we mentioned at the top here.
This index is something that P and C has been
doing for quite a few years now. In the time
that you've been putting out this twelve days analysis, what
do you feel like you've learned about the trajectory of
the US economy.
Speaker 6 (37:43):
Well, it's a great question, and believe it or not,
we've been at this analysis for forty two years, so
the evolution of the US economy has really seen a
lot of change over the decades, for sure, and I
think the big notable shift is that even though this
(38:03):
is a specialty gift basket of goods and services, again
very whimsical and lighthearted.
Speaker 1 (38:09):
Thank you, Amanda, This is great. Really appreciate you coming
on with us. Amanda Gotti with us there, chief investment
officer at PNC. Thanks as well to Investo Global market
Strategist Brian Levitch and New Edgewelth Chief investment Officer Cameron
Dawson for being here. Thanks to you as well for
spending a little bit of your holiday with us. Merry Christmas.
I'm Nathan Hager.
Speaker 3 (38:30):
Stay with US.
Speaker 1 (38:31):
Top stories and global business headlines are coming up right now.
Merry Christmas and happy holidays everyone. I'm Nathan Hager, welcoming
you to a special edition of Bloomberg Daybreak. Markets are
closed for the Christmas Day holiday, but we've got a
lot coming up for you this hour, including holiday cheer
at a premium. Don't you know if you noticed, but
this year the twelve Days of Christmas got just a
bit more expensive. We're going to break it down with
(00:23):
Amanda Agatti, chief investment officer at PNC. But first we
want to take a look at the stock market because
by some estimations, that got a little bit expensive as well,
with twenty twenty five certainly turning profits for the bulls,
but not without a little bit of pain along the way.
So for more on what to expect in twenty twenty six,
we're very pleased to bring you a special holiday roundtable
(00:45):
on equities. Cameron Dawson is with us on this holiday program,
chief investment officer at New Edge Wealth. And joining us
as well is Brian Levitt, global market strategist at Investco.
Really appreciate both of you taking the time out of
your holiday to join us. But before we look at
head to stocks for twenty six, let's just quickly assess
the year gone by. What did you make of the
(01:06):
downs and ups of twenty twenty five camera, Does it
feel like that April low if the back of the
tariff announcement is way back in the rearview mirror now?
Speaker 2 (01:17):
Well, Mary Christmas Nathan, certainly it does seem that way.
And I think one of the most important things about
that April low is just how bearish most investors got
during that Liberation Day period. We saw impositioning indicators that
we got all the way down to the first percentile,
meaning only one percent percent of the time in the
(01:37):
last fifteen years have investors been more underweight the market
than they were in early April. So that created an
incredible wall of money that could be pulled into this
market over the course of the last eight months. That
just meant that all dips got bought rather quickly. We
saw very little volatility, and that allowed us to levitate,
(01:57):
as as you mentioned, at these very high valuations. But
it's important to note we started the year at high valuations,
we're ending the year at high valuations. But the real
source of returns all came from earnings growth. You had
a really solid ten eleven percent earning growth for twenty
twenty five, and it's also important to note that consensus
expects that to continue with thirteen percent earnings growth for
(02:20):
twenty twenty six. So it certainly seems that investors are
expecting the good times to keep on rolling.
Speaker 1 (02:26):
Let's turn to you now, Brian, what did you make
of the market moves this year and where do you
see things going into twenty six?
Speaker 3 (02:35):
The markets were volatile around periods of policy uncertainty, and
that's almost always the case, So I often get asked,
you know, when it's too good to be true, or
people think it's too good to be true, When does
volatility come? When do market drawdowns come? Well, they almost
always come during periods of policy uncertainty. And as we
got towards that peak policy uncertainty, historically in this time
(03:00):
as well, you tend to do, markets tend to perform
well in the aftermath of that. Again, this time was
no different. So as we came through that, it was
important that the administration start to provide greater clarity on
where the tariffrights were going, and as inflation expectations stay contained,
we started to get better clarity on where the Federal
(03:20):
Reserve might be going and so that created the recipe
for a bottom and an improving advance. Now, the reality
is this was the year where the markets did broaden out,
not to the extent that we may have hoped for
at the beginning of the year, and I think tariffs
(03:40):
and policy uncertainty had something to do with that, but
nonetheless a year in which most parts of the market
did well. Expectation as we head into twenty twenty six
is lower interest rates from the FED. An emergence out
of this global mid cycle slowdown could help to continue
(04:01):
to support other parts of the market, which may not
be as disconcerting from evaluation perspective as some people fear.
Speaker 1 (04:09):
And to Brian's point, Cameron, we are starting to see
a little bit of that rotation happening out of big
tech as we head into twenty twenty six. But thinking
about the idea of policy certainty now, is there still
a risk of policy uncertainty around what the tariff regime
could be after the Supreme Court rules sometime next year.
Speaker 2 (04:32):
Oh, this is very important as we think about not
just in the context of what it means for American
businesses with certainty about how trade will be treated, but
really how the bond market digests this, because what we've
seen is that the collection of tariffs have eased some
pressure on Treasury to issue more debt to fund these big,
(04:52):
huge deficits that we know that we have. And so
the question would be is that if there is pushback
by the Supreme Court where it looks as if those
tariffs cannot be collected going forward, you start to have
bigger holes in the budget that will need to be
filled by more treasury issuance. So it could be one
of the reasons why we're seeing a little bit of
(05:13):
perkiness in the long end of the yield curve. Tenures
are still very well contained, but the thirty year bond
has been able to break above resistance, potentially starting to
price in some of these fears about fiscal doant dominance
and the need for more treasury supply. But I would
note that this is much more of a global phenomenon.
You're seeing a lot of movement hiring yields as we move,
(05:36):
as we look at places like Japan and Germany and France,
all just suggesting that even though there might be policy
certainty about expectations for more FED cuts, so we look globally,
it's not necessarily that certain.
Speaker 1 (05:50):
What do you think, Brian, about the possibility of some
policy uncertainty around tariffs in the new year. Is that
something that investors need to keep in mind? Could there
be something of a push pull between the Treasury and
the equity markets?
Speaker 3 (06:03):
No, I don't think investors need to be concerned about it.
Regardless of what the Supreme Court rules. The Trump administration
has steps that they can take to continue to impose tariffs,
whether that's Section one twenty two of the Trade Act
of nineteen seventy four, they can use Section two thirty
two of the Trade Expansion Act of sixty two, section
(06:24):
three oh one of the Trade Act of nineteen seventy four.
So they're going to figure out a way to continue
to collect tariff for revenue, whether that's for better or
for worse. So I wouldn't put that as the big
policy uncertainty as we head into the year. I think
that one of the risks you have is what will
(06:47):
ultimately happen with the FED in terms of FED independence.
To me, that would be a bigger tail risk, And
I want to be clear, Nathan, I categorize it as
a tail risk because I continue to believe that this
is a FED that is going to maintain its autonomy
and independence. I do believe it's important to this FOMC.
If you start to get whiffs of that changing, then
(07:11):
you may have some challenges at the long end of
the yeal curve, and that would be a very different
environment where if the US Treasury starts US Treasury bond
start to trade more like a credit, that's a very
different outcome than we've dealt with for years. Short of that,
I continue to expect US Treasury bond to trade like
(07:34):
a US Treasury bond, and what I mean by that
is not based on its corporate it's credit fundamentals, but
more based on the growth and inflation potential of the
US and I expect it to be a pretty reasonable
year from a growth and inflation perspective without substantial treasury
(07:55):
rate volatility.
Speaker 1 (07:56):
We're speaking with Brian Levity's Global market strategistic and investco
along with New Edge Wealth Chief investment Officer Cameron Dawson. Cameron,
I want to take the conversation more specifically to the
stock market now, because you know, looking ahead at twenty
twenty six, a lot of the twelve month forward targets
for the S and P five hundred are pretty bullish.
(08:17):
There seems like a lot of optimism baked into this
market about where stocks are going to go in the
new year. What do you think, is this going to
be the year we see something like an S and
P eight thousand As we hover close to seven thousand
right now.
Speaker 2 (08:32):
Yeah, there's certainly some estimates out there that we get
to S and P eight thousand. I think what's interesting
is that if you look at the collection of strategists,
there's not one single strategist who is expecting a down
year in twenty twenty six. And of course that makes
sense when you start thinking about some of the things
that Brian mentioned earlier. You talk about a supportive FED,
(08:53):
you talk about supportive fiscal policy, continued earnings growth driven
by things like the AI infrastructure build out. It is
hard to be bearish, and so thus there aren't any
bearish estimates in those strategists forecasts. One of the things
we'd know is that because you are starting the year
at twenty two and a half times forward earnings on
a valuation basis for the S and P five hundred
(09:16):
and thirteen percent earnings growth that a lot of this
bullishness is already well contemplated in the price, so we
wouldn't expect a lot of further multiple expansion going into
twenty twenty six, and likely that the returns that we
get are closer to what we get as far as
earnings growth. That would actually be very similar to what
happened this year in twenty twenty five, where the majority
(09:38):
of returns did come from earnings growth. So a lot
of bullish is out there. Very tough to find bears
simply because the narrative doesn't support it, But that doesn't
mean that we won't experience volatility along the way.
Speaker 3 (09:50):
Yeah.
Speaker 1 (09:50):
To Cameron's point, Brian, you look at the an R
function on the SMB five hundred, is really tough to
find anybody who's looking very bearish on this market. Given
that with so much bollishness bake, then could that be
a bearish indicator?
Speaker 3 (10:05):
I don't think so. I think in most years you
tend to see most analyst expectations being positive. You don't
last in this industry very long putting out bearish outlooks
on the S and P five hundred each year. I
guess there's a couple of prominent perma bears. But for
the most part, markets tend to go up far more
(10:28):
often than they tend to go down. And that's because
in most years things get better rather than get worse.
I mean, twenty twenty two, if you want to think
about it, was a year in which things got worse
relative to expectations. That's a down year. Inflation when higher,
the Fed had to raise rates more. In most years,
things get better, And when you look at twenty twenty six,
(10:50):
the setup is for things to get better. As Cameron
also mentioned, so by better a lower discount rate, there's
an opportunity unity for improving global growth. Investors shure, remember
we've been in a little bit of a soft patch here.
That's what trade wars will do, or that's what you
know trade conflict will do. So what you have now
(11:12):
European Central Bank has already lowered rates significantly, and the
Europeans are committed to fiscal investment. China needs to combat
deflationary impulses. The US is probably a little bit too
restrictive on policies. So all of that creates a backdrop
of what should be an improving economic activity. And on
(11:34):
top of all of that, it should start to be
a year where more of the gains and efficiencies of
artificial intelligence start to approve to other parts of the market.
And so you know that all creates a reasonably good backdrop.
If you're expecting a bad year for markets, what you
(11:58):
really would have to assume, Boom, is that something's going
to happen to cause the US economy to roll over meaningfully,
or the Chinese economy for that matter, or the FED
to have to reverse course. And it's difficult right now
to see what that could be.
Speaker 1 (12:15):
We're going to continue this special conversation on the stock
market looking ahead to twenty twenty six, the backdrop for
equities in the new year, along with the central bank
policy possibilities, as we continue this special market roundtable with
Invesco's Brian Levitt and Cameron Dawson of New Edge Wealth
on the special edition of Bloomberg Daybreak for Christmas. I'm
(12:40):
Nathan Hager, and this is Bloomert. Thanks for being here
on this special festive edition of Bloomberg day Break. Markets
are closed for the Christmas holiday, Ethan Hager, and we
(13:00):
want to continue our special holiday roundtable on the stock
market with Cameron Dawson, chief investment officer at new Edge Wealth,
and Brian Levitt, global market strategist at Investco. And I
want to pick up on some points you both made
at the beginning of this program focused on the FED,
because investors, it's safe to say, are betting on at
least a couple more rate cuts in the new year
(13:23):
after J. Powell Company ended twenty twenty five with three
in a row. This is how Powell explained the latest
cut just a couple of weeks ago at the December meeting.
Speaker 4 (13:32):
Why did we move today? You know, I would say
point to a couple things. First of all, gradual cooling
in the labor market has continued. Unemployment is now up
three tenths from June through September, payroll jobs averaging forty
thousand per month since April. We think there's an overstatement
in these numbers by about sixty thousand, so that would
(13:53):
be negative twenty thousand per month.
Speaker 1 (13:56):
So still clearly a lot of focus on vulnerability in
the labor market. Cameron, I'll start with you. Does this
make the case for cuts sooner maybe than the market
might be expecting.
Speaker 2 (14:08):
We do think it does, simply because if you look
at what market expectations are baking in right now. It's
about two point four cuts through the end of the year,
which would get us just to neutral based on the
FED funds median doot in their dot plot for the
long run neutral rate. So that just suggests that the
market isn't expecting a lot of incremental weakness within labor
(14:29):
market data. But as we saw in the recent payrolls
print from November that we now already have an employment
rate at four point six percent, so we think that
there is room for unemployment to move higher that could
potentially pull those FED cuts sooner. And that raises a
really important question for risk assets like credit and equity markets,
(14:51):
which is that the last one hundred and seventy five
basis points of cuts that we got for the FED
came with a backdrop where forecasters were actually raising their
estimates for both EPs and GDP growth, which just meant
that even though we were getting FED cuts, people were
becoming more optimistic about the growth backdrop. That is a
fantastic backdrop for risk assets to continue to rally. So
(15:15):
if we continue to see weakness within the labor market,
could it potentially challenge growth forecast consensus? Has two percent
growth expected for twenty twenty six, and could that be
an environment where instead of celebrating rate cuts as they
have the last two years, we see markets take it
as more of a negative sign that this economy needs
FED support. So it definitely will be a data dependent
(15:36):
FED and a data dependent market.
Speaker 1 (15:39):
Brian, let's turn to you. What's your view on where
the FED goes in the first half of twenty twenty six.
Could we see those cuts sooner than later and what
could that mean for the equity market?
Speaker 3 (15:50):
I think we could. And the things I watch, you know,
just like the fedhair is looking at payrolls and yes
they've weakened substantially, unemployment rate up a bit. The other
thing that I've been so laser focused on is the
inflation expectations in the bond market. And if you look
at a three year break even, it has really rolled
(16:11):
over in the last days. So you're looking at a
bond market that's expecting about two and a quarter inflation
over the next three years. Now, a lot of people
may look at that and say, what's wrong with that?
That's right in the fed's comfort zone, but it's starting
to move down fairly rapidly. So I would watch it closely.
(16:34):
From from my perspective, We're sitting here or have been
sitting here with a relatively flat yel curve. That feels
too restrictive to me in an environment where the economy's
just not going gangbusters from a job's perspective. So if
it were me, if I were running the FED, yeah,
I would want to have the short rate down closer
(16:56):
to three percent. That all else being equal, gives you
of one hundred to one hundred and twenty five basis
points spread between short rates and the ten year treasury.
That's historical average. To me, that seems far more appropriate
for the environment that were in in terms of what
(17:16):
that means. Typically, that's a good backdrop for risk assets,
particularly smaller capitalization stocks, but also as the ill curve steepens,
more value oriented parts of the market, and so for
investors that may have some concerns about valuations in the
top heavy part of the market, FED cuts and a
(17:37):
pick up an activity from that could give you the
backdrop where more value oriented parts of the market perform well.
And quite frankly, some of the biggest value markets were
outside of the United States, and you saw some of
that performance already this year.
Speaker 1 (17:55):
That does raise the question cam about whether the market
is possibly depending on rate cuts from the Federal Reserve
to keep that rotation or broadening away from big tech
going into small and medium cap stocks.
Speaker 2 (18:10):
Certainly it is dependent the rally in smaller meeting cap
stocks on the FED remaining supportive, because smaller cap stocks
need two key things. They need a resilient economy in
order to drive earnings growth, and they also need lower
interest rates in order to ease some pressure on balance sheets.
Small cap stocks tend to have a lot more debt
(18:31):
and a lot more floating rate debt, So if there's
any cohort that celebrates FED rate cuts more than others,
it would be those small cap stocks. Now it should
be noted, though, is that if we look at consensus
for the Russell two thousand, there is a very industrious
sixty percent earnings growth that is forecasted for twenty twenty six.
(18:52):
And that might look encouraging to investors because it's well
higher than what we see in the large cap portion
of the market, but it should be taken with a
grain of salt. If we look at the beginning of
twenty twenty five, there was an estimated fifty percent earnings
growth coming into this year, but the actual returns on
earnings growth ended up being just three percent. So those estimates,
(19:14):
just because they are expected by consensus, does not guarantee
that they will be delivered. But certainly more rate cuts
of resilient economy a cyclical uplift could help those those
smaller capsized stocks. But just note the bar is already
pretty darn high.
Speaker 1 (19:29):
Yeah, it seems to be the case, And I'll turn
back to you, Brian, thinking about your role as a
global market strategist. With the FED considering further rate cuts
into twenty twenty six, we've got a European central bank
that seems to be on pause, a Bank of Japan
that's starting to hike interest rates for the first time
(19:49):
in years. Talk to me a little bit more about
the global central bank dynamics and what that could mean
for equities more broadly.
Speaker 3 (19:57):
Yeah, the US is expected to lower rates more than
any other developed central bank, and I think that that
is critical. Typically, as the FED lowers rates and those
rates converge towards the rest of the world, you tend
not to see a very strong dollar environment. Investors aren't
used to that we haven't seen a gradual easing cycle
(20:20):
in the US in decades because we ran into crises
and then the US stimulated the economy better than the
rest of the world did in eight and twenty twenty.
So this is the first gradual rate easing cycle that
most investors in the United States have seen, at least
for a very long while. So what that usually means
(20:41):
is you don't have a strong dollar, may even mean
that the dollar goes sideways or moderates, and in that
type of a backdrop, that's when capital can start to
look to other parts of the world where valuations are
more compelling. You saw a lot of that this year.
If you look at the MSCI AQUIXUS total return, it
(21:02):
significantly outperformed the S and P five hundred. So that's
something that can continue, particularly when you think to the
emerging markets. If you look at emerging economies, they tend
to perform best when the dollar is either going sideways
or weakening, and as the US lowers rates, that gives
(21:27):
some more flexibility to central banks in the emerging world.
So that's a place that investors could look if they're
trying to diversify out of the US. Take advantage of
better valuations and take advantage of what could be a
better global macro backdrop.
Speaker 1 (21:45):
We're speaking with Brian Levitt, Global Market Strategistic Investco and
New Edge Wealth Chief investment Officer Cameron Dawson. In the
minutes we have left, let's talk about the US markets
more specifically in twenty twenty six. A lot of quests
about whether the tech trade can continue with the valuations
it's at right now. Cameron, What sectors are you looking
(22:09):
at that could provide a little bit more return in
twenty twenty six.
Speaker 2 (22:13):
Well, one of the things that we're watching really closely
is that over the last couple of months you have
seen a big rotation into some left behind sectors over
the last few years. If you look at places like healthcare,
for example, going from being a laggard into now a
leading sector in the market, which is really more of
a valuation story and somewhat of an earning's recovery story
(22:37):
because of depressed earnings over the course of the last
couple of years. The other thing that we're watching closely
is you're starting to see some signs that very cyclical
sectors are turning up. In addition to industrial commodities, So
look at copper soaring, and all of this suggests that
maybe the market is starting to bacon expectations of that
(22:59):
cyclical uft after we've had this mid cycle slow down.
The question, of course, is that optimism warranted. Will we
see some of that cyclicality actually deliver. It should be
noted that November through May are typically really strong times
for cyclicality, and that those trades tend to fade as
we get towards the middle of the year. So for now,
(23:20):
it seems like a good time as we start to
see some of that cyclicality come back into markets.
Speaker 1 (23:25):
Brian, you're looking at cyclicals, what kind of sectors are
you considering into the new year.
Speaker 3 (23:31):
I couldn't agree more And Cameron is spot on with this.
When we look at our leading indicators of the economy,
it's giving us a three to six month view of
the global economy returning more to a trend like environment.
It had been globally below trend, and so what that
means is a more environment that favors more cyclical assets.
(23:55):
Now that's generally a three to six month view, so
we'll have to see the carry through from that. Do
we come from a do we go from a recovery
to more of an expansion. I agree with Cameron's timing
a lot. We will reassess monthly, certainly six months from
now see where we are with it. But when you're
thinking about cyclical sectors, yeah, financials, industrial, commodities, energy, those
(24:19):
tend to be materials, those tend to be the our performers.
And what I also like what Cameron mentioned.
Speaker 5 (24:25):
Is this idea of perhaps even rotating within growthier parts
of the market, and you know, perhaps biotech is an
example of that.
Speaker 1 (24:36):
In our last minute, Cameron, what are some potential risks
that investors should keep in mind into the new year.
Speaker 2 (24:44):
The big wild card for US is oil prices. We
should not underestimate or underappreciate just how powerful falling oil
prices have been for the disinflation move of lower headline inflation,
as well as helping consumers effectively acting as a tax cut.
Oil prices are very low, Gasoline prices are very low,
but a turn in that trend towards more of an
(25:06):
uptrend could certainly be a shock. It's not our base case,
but something we're watching closely as it is very important.
Speaker 1 (25:12):
Thanks to both of you for being with us on
this Christmas holiday. That's Brian Levitt, global market strategist at
Invesco and New Edge Wealth Chief investment Officer Cameron Dawson.
And up next, the twelve Days of Christmas got a
little pricier this year. We'll break it down with Amanda
Agatti of PNC. I'm Nathan Hagar, and this is Bloombern.
Speaker 3 (25:44):
On the first day of Christmas. My true love sent
to me a park hygeen, a pear tree.
Speaker 1 (25:52):
Welcome back to this special edition of Bloomberg Daybreak. The
markets are closed for the Christmas holiday. I'm Nathan Hager.
But if you're talent up the cost of Christmas, it
might not be music to everybody's ears, especially if you
go that full twelve days. So how much will a
partridge in a partree and all those turtle doves and
gold rings set you back this Christmas season? Joining us
(26:15):
is someone who knows. Every year PNC Chief Investment Officer
Amanda Agatti publishes PNC's Christmas Price Index, a festive indicator
that turns the twelve days of Christmas into a holly
jolly reid on the US economy. And Amanda is here
with us to break it down, Amanda. So great to
have you on this Christmas holiday. So let's get the
(26:37):
top line number. What's the twelve days of Christmas cost
and Christmas twenty twenty five.
Speaker 6 (26:43):
Well, Merry Christmas, Nathan, I'm so thrilled to be with
you celebrating the holiday here. Believe it or not, True
Love's gifts wrap up at a tree topping fifty one thousand,
four hundred and seventy six dollars. It's up about four
and a half percent year over year. So the cost
of Christmas continues to be on the rise.
Speaker 1 (27:04):
Out pacing the FEDS two percent target more than doubles.
Should we go day by day, how do you think
about the cost of a partridge in a pear tree
on the first day?
Speaker 6 (27:17):
Well, yeah, I mean we could spend all day talking
about you know how we're trying to tie the analysis
to what's happening in the real world. I think what's
notable about the partridge in a pear tree is not
so much the partridge. The cost of the partridge itself
didn't move on a year over yr basis. I can't
(27:38):
imagine why True Love doesn't want a partridge, but the
pear tree is really the driver for that combo gift,
and so we always tie the pear tree to sort
of a proxy for housing costs, which continue to increase
year after year. There's a lot of sort of interesting
(27:59):
supplying dynamics as it relates to housing in this country.
But I think what's interesting this year is even though
mortgage rates have sort of fallen off the rooftop, as
they say, by more than one hundred bases points, as
the Fed's been lowering rates, it really hasn't made much
of a difference in terms of affordability. So I don't
(28:19):
know if the partridge needs to rent that pear tree
or what, but it's going to cost true love a
lot this holiday season.
Speaker 2 (28:26):
Wow.
Speaker 1 (28:26):
Okay, so we're not thinking about the pairs necessarily either,
looping in fruit prices maybe, But we do have a
lot of birds in the next few days of the
twelve days, turtle doves, calling birds, French hens. Are we
thinking about chicken and eggs here?
Speaker 6 (28:45):
We certainly can be. We can think of a lot
of fun bird puns and references, there's no question. But
I just I think it's I think it's notable that
the two turtle doves, the three French hens, and the
four calling birds are all flat year over year basis.
It's that recurring theme with that darn partridge. I can't
(29:05):
imagine why people don't want birds as pets this holiday season,
So there hasn't been a whole lot of demand on
a year over year basis for the birds. Let's call
it a silent night of okay for those birds.
Speaker 1 (29:17):
Well, maybe a new year's resolution to get back to
the pet store. But in the meantime, I got to
think that the most eye popping sector in this analysis
has to be the five gold rings. When we think
about the record levels that gold has been hitting in
just the last couple of months.
Speaker 6 (29:37):
Here, yeah, single largest increase by far on a year
over year basis a heartbreaker for me as it's my
all time favorite gift. My true love is going to
have a tough time this holiday season shopping for me.
There's no question, but the five Golden rings are up
about thirty two and a half percent year over year.
It's a little bit of a bargain. This is small, constantly,
(30:00):
but a little bit of a bargain compared to the
move in gold commodity prices, which are up forty five
plus percent over the same time period, So you know
what's going on here. I mean, it's certainly a function
of concern and the macro backdrop investors have been flocking.
There's a bird pun for you two precious metals this
(30:23):
year with some of the macro uncertainty, the geopolitical concerns,
we've had some inflationary pressures that have been sort of
consistent throughout the year, and even more recently fed rate
cuts one would think would be helpful, but it's effectively
lowering the opportunity cost of holding gold, so on a
(30:43):
relative basis, it's a bit more attractive than yield bearing assets.
Speaker 1 (30:48):
Yeah, you certainly have to wonder where those five gold
rings are going to go next Christmas, given the crazy
track that gold has taken in just the last few months.
Moving further along into the next couple of verses, here,
six geese laying, seven swans of swimming. I think we're
back into birds that we find maybe a little bit
(31:10):
in the grocery aisle.
Speaker 6 (31:12):
Well, let's just be relieved that the six geese did
not lay golden eggs this holiday season. There increases there's
a little bit of a move on a year of
your basis up about three point three percent, so a
little bit closer to broader inflationary trends. So let's just
say true love doesn't have to sweat it out buying
(31:34):
the six geese a laying this year. It's not too
bad relatively teame on a year over year basis. Those
seven Swans, though, I think that one's really interesting. It's
one of the biggest dollar values in the entire index,
but it didn't move on a year over year basis,
And so what's great about that, I think for investors
(31:55):
is you know, black no black swan sightings over the
course of Yeah, so that's how we think about that
one and sort of a key to perhaps the market
rally continuing in the new year.
Speaker 1 (32:08):
Okay, yeah, I'll hope springs eternal, especially this time of year.
Here we go into eight Maids of Milking? Where do
where do they fit? In Amanda?
Speaker 6 (32:22):
The Eight Maids of Milking are sort of a frustrating
line item for many because the analysis is always tied
to the minimum wage in this country, and so it's
always flat on a year over year basis unless we
see Washington take steps to adjust the minimum wage. And
(32:42):
it's been a very very long time since we've seen that,
So I don't know whether you know Washington wants to
take that up in twenty twenty six from a policy
stance or not. But it's been also a silent night
on a year of your basis for those eight maids.
Speaker 1 (32:57):
Okay, well maybe another new years as depending on where
you stand on that going to nine Ladies Dancing, ten
Lords of Leaping. Things start to get a little bit
more interesting in this part of the index.
Speaker 6 (33:12):
Yeah, The performers, or let's just call it the services
components of the index are always kind of an interesting
driver on a year of ear basis. There's a little
bit of a distinction between the different types of performers
this year, whereas in past years we've seen it running
really red hot Rudolph's red nose hot on a year
(33:34):
of your basis, And it lines up very I think
nicely with how consumer behavior and consumer spending has shifted
from goods and things and stuff to services and experiences.
So we're definitely seeing the services side of the index
kind of transform over time to be a bigger driver
(33:55):
in alignment with how the economy is evolving. I think
the one that's the standout for me is the ten
Lords a Leaping. It's the single biggest services or performer
increase on a year over year basis. And I have
to say, though this is not part of the analysis,
that it's got to be a reflection of Oasis concert tickets.
(34:15):
It's the hottest ticket in town all year. Maybe you
could refer to them as the ten Lords of Rock
as opposed to Lord's a Leaping, but I think that's
that's probably the closest comparison we could make to ten
Lords a Leaping. Concert tickets still very, very hot this
holiday season.
Speaker 1 (34:33):
And we certainly saw Powerhouse Lady dancing this year with
the Taylor Swift effect as well. Were talking about that
pretty much throughout twenty twenty five long.
Speaker 6 (34:44):
That's exactly right.
Speaker 1 (34:46):
I think we're probably keeping it in the entertainment realm
as well, with the eleven pipers piping and twelve drummers drumming.
All those Lords of Leaping, I guess need backup bands
as well.
Speaker 6 (34:55):
Huh, Yes, I think you know, there isn't something in
particular that's notable relative to the ten Lords. For eleven
and twelve, they're all sort of sitting in that same
category of consumers are just willing to pay up for
services and experiences. The translation is there's a lot of
(35:16):
pricing power in the services and the experiences and the
entertainment side of the equation, Whereas I would say, for
sadly the five Golden Rings jewelers are losing on a
relative basis. They're feeling the margin squeeze. There's not that
much pricing power to push through higher input costs, so
the services are still running red hot, There's no question
(35:36):
about it.
Speaker 1 (35:37):
So I guess if we were to put this all
together with that price tag we mentioned at the beginning,
north of fifty five thousand, if I'm remembering right, that
tells us I think a lot about maybe how consumers
might be feeling squeezed is certainly at the lower end
of the income spectrum around this holiday sees. Is that
something that you're seeing reflected in this report?
Speaker 6 (36:00):
Absolutely? You know this is with this is a very
whimsical fun analysis that we do every year to try
and make sense of, you know, broader inflationary and economic trends.
But the reality is that this is such a specialty
gift basket of goods and services that it skews higher
end in terms of gauging what the higher end consumer
(36:22):
might be facing. In terms of trends, we know without
a shadow of a doubt that the lower end consumer
has been feeling the squeeze really all year and really
over the last few years. We don't see a lot
of relief on that front at all. I think the
challenge in twenty twenty six will be how does the
consumer on balance? How does the US consumer hang in
(36:45):
there on a relative basis. We've seen retail sales trends
hang in there. I think back to school shopping season
was pretty strong. Black Friday trends looked really good. Twenty
twenty five holiday shopping season, it's again it's early, but
indications are that consumers continue to spend, which is the
(37:05):
good news. But at what point does the consumer exhaust itself.
We've been worrying about it for the last few years.
It hasn't materialized. So I think a key question for
twenty twenty six is does the consumer start to fade
a bit and what does that do to the trajectory
for growth, which all for all intents and purposes, look
still quite solid as we round out twenty twenty five.
Speaker 1 (37:26):
And I think as we mentioned at the top here.
This index is something that P and C has been
doing for quite a few years now. In the time
that you've been putting out this twelve days analysis, what
do you feel like you've learned about the trajectory of
the US economy.
Speaker 6 (37:43):
Well, it's a great question, and believe it or not,
we've been at this analysis for forty two years, so
the evolution of the US economy has really seen a
lot of change over the decades, for sure, and I
think the big notable shift is that even though this
(38:03):
is a specialty gift basket of goods and services, again
very whimsical and lighthearted.
Speaker 1 (38:09):
Thank you, Amanda, This is great. Really appreciate you coming
on with us. Amanda Gotti with us there, chief investment
officer at PNC. Thanks as well to Investo Global market
Strategist Brian Levitch and New Edgewelth Chief investment Officer Cameron
Dawson for being here. Thanks to you as well for
spending a little bit of your holiday with us. Merry Christmas.
I'm Nathan Hager.
Speaker 3 (38:30):
Stay with US.
Speaker 1 (38:31):
Top stories and global business headlines are coming up right now.
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