November 18, 2024 • 41 mins
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Bloomberg Businessweek National Correspondent Josh Green discusses how President-elect Trump is attempting to pull off plutocratic populism, but the math doesn’t square. Dr. Paul Offit, Director of the Vaccine Education Center at the Children’s Hospital of Philadelphia, shares his thoughts on the RFK Jr. nomination for Health & Human Services Secretary. Mike Rode, Senior Investment Director at American Century Investments talks about investing in small caps. And we Drive to the Close with Jeff McClean, CEO at Solidarity Wealth. Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Wait inside from the reporters and editors who bring you
America's most trusted business magazine, plus global business, finance and
tech news. The Bloomberg Business Week Podcast with Carol Messer
(00:23):
and Tim Stenebeck from Bloomberg Radio.
Speaker 2 (00:26):
Now, would you want to get to one thing that
is certainly toplined for world leaders at G twenty and elsewhere?
Speaker 3 (00:32):
Dj T Donald J. Trump's administration and.
Speaker 2 (00:35):
Cabinet picks chief among them, who will take the job
of US Treasury Secretary.
Speaker 4 (00:39):
Yeah, it's kind of turning into this game of thrones,
and that's where we go now to jockeying around the
selection for the nation's next treasury secretary. Bloomberg business Week
national correspondent Josh Green joins us on that and on
his BusinessWeek story on the President Elect's impossible task. Josh
is the author of Devils Bargain, Steve Bannon, Donald Trump
and the Nationalists Uprising and the Rebels, Elizabeth Warrenney Sanders,
(01:00):
Alexandria Kasia Cortez and the Struggle Free New American Politics.
Speaker 2 (01:04):
All right, Josh, great to have you here. Josh joining
us from our Bloomberg Washington DC bureau. Hey, Josh, first step,
I want to ask you about the pick for Treasury
secretary or the process in the behind the scenes, a
super important job. Wall Street is watching, the world is watching.
What are you hearing about this process?
Speaker 5 (01:20):
Yeah? Oh, I put process in quotes.
Speaker 6 (01:23):
First of all, I mean it's turned out into like
an absolute blood bath, with competing candidates stabbing each other
in the back. And what you have now is a
list of people who are under consideration. Howard Lutnick, Scott Bessant,
Robert Leitthheiser, the former trade representative. None of them has
been named. There's a lot of jockey going on behind
the scenes. Trump himself doesn't seem to be happy with
(01:45):
any of the candidates, and as we report in Bloomberg,
he's very unhappy that these fights have spilled out into
public view. So the latest we're hearing is that Trump
is sort of casting about for somebody who would fill
what he thinks is the role of Treasury attacker, meaning
somebody big, powerful, respected by Wall Street. Some of the
names we're hearing and have reported Mark Rowan of Apollo,
(02:08):
Kevin Walsh, the former Fed governor. There are other dark
horse names floating around, but right now everybody in Washington's
trying to figure out, you know, where where the musical
chairs will stop and who will wind up in that
very important position.
Speaker 4 (02:19):
Is it hard to find somebody who's respected by Wall
Street but also believes what Donald Trump believes when it
comes to tariff's Josh, yeah, I.
Speaker 6 (02:25):
Think that's exactly the tension is. You can Trump can
certainly find someone like a Lighthiveser who really believes in
the use of tariffs. But as a number of sources
told us, wall Street would would would panic if somebody
who was seen as too extreme on tariffs gets in there.
On the other hand, you have guys with stirling reputations
who would be embraced I think by wall Street both
a warsh or a best and somebody like that who
(02:48):
may not be as willing to come out and embrace,
embrace a steep tariff regime of the type that Trumps
has bandied about, knowing that the damage that that could
potentally caused to markets if they were implemented, you know,
and disrupted a lot of things in the global markets.
So it's tough to find just the right candidate who
(03:08):
has both the stature, the wealth, the name that Trump wants,
and also the willingness to do Trump's bidding.
Speaker 2 (03:15):
Hey, Josh, we have not had a chance to talk
to you about the election outcome. You really wrote the
book An Understanding Donald Trump's first run at the White
House and his win that time around. What do you
make of him running a winning excuse me, a second term?
Speaker 5 (03:31):
Well?
Speaker 6 (03:31):
Yeah, I think it was a surprise to a lot
of people, but in a lot of ways, it's a
much more impressive victory than his win in twenty sixteen,
which took a lot of people by surprise. He did
not win a majority of the popular vote that time.
Looks almost certain that he will this time. And I
think what's most important is the coalition that Trump put
together and winning the twenty twenty four election. There were
(03:52):
both the kind of high wattage billionaire supporters, people like
Howard lutt Nick and Elon Musk, But on the other hand,
Trump cobbled together a really racially diverse, working class coalition
that we hadn't seen the last time around. A lot
of voters that traditionally vote Democrat were persuaded to come
over and vote for Trump, and as a result, he
has a really big coalition. As I write about in
(04:15):
the new issue of BusinessWeek, Trump has pursued this kind
of what I call plutocratic populism, and I think the
main tension in his second presidency is going to be
how to balance the interests of working class people with
the interests of the billionaire and Wall Street crowd, who
are another important coalition form.
Speaker 4 (04:31):
So let's talk a little bit about that, Josh. Because
you came with receipts, you have the numbers here. Why
is that an impossible task? Why is he unable to
do that and make good on really every promise that
he made on the campaign trail.
Speaker 6 (04:42):
Well, if you look at exit poll numbers and just
in my own interviews with undecided voters and people were
Trump supporters, a lot of what drove Trump's support was
voter anger, especially working class voter anger over inflation high prices,
for which they blamed Kamala Harris personally. They didn't want
her back in that y. They remember the Trump era,
rightly or wrongly, as a time of lower prices, lower inflation,
(05:08):
strong paychecks for everybody, and so they voted for Trump
in the hopes that he would bring that back. But
if you look at what some of Trump is planning
to do, you know, the first item on his agenda
looks to be extending his twenty seventeen tax cuts and
maybe even cutting corporate taxes deeper than he did the
first time around, which would be very exciting to his
Wall Street contingent, to his billionaire contingent. But it could
(05:32):
certainly help exacerbate inflation, as could a steep.
Speaker 5 (05:37):
Round of tariff.
Speaker 6 (05:38):
So on the one hand, you know, you could satisfy
one half of the coalition, But if the cost of
that was for prices, inflation, and interest rates to rise again,
then a lot of the same working class voters who
supported him two weeks ago could potentially turn on him
and Republicans in the midterm elections and handpower back to
the Democrats.
Speaker 2 (05:56):
Hey, how much do you think, though Donald J. Trump
thinks about the midterms at this point? All right?
Speaker 3 (06:01):
I mean essentially, right, this is his second term, he's
a lame duck president.
Speaker 2 (06:06):
He can do a lot of stuff, and he's got
a Congress, But how much do you think he thinks
about what happens at midterms versus following through on his mandate?
Speaker 5 (06:15):
It's a great question, Carrol.
Speaker 6 (06:16):
It's one I've asked to some people around him, and
the truthful answer I got is he doesn't really care
at all. What he cares about is this approval rating.
He'd like to have a booming stock market the way
he did in his first term, and so part of
the thinking in Trump world is that even if he
did promote someone a Treasury secretary who got behind this
tariff regime and things went badly in the economy, if
(06:39):
the market were to fall, that might be a kind
of disciplining mechanism for Trump to step back a little bit,
because he really does view the stock market, the S
and P as a kind of verdict on the success
or failure of his presidency. But certainly, thinking about the
fortunes of congressional Republicans in twenty twenty six probably not
(07:00):
top of mind for Donald Trump right now.
Speaker 5 (07:02):
That's interesting to hear. Why do you think that is?
Speaker 4 (07:04):
Because it sort of does provide, to a certain extent,
a check on what he's able to do, Because if
he puts policies into place that are unpopular among his base,
then he could really pay a price in the midterms.
Speaker 5 (07:17):
Yeah, he could.
Speaker 6 (07:18):
I mean, I've gotten a couple answers from that in
my reporting. One is that Trump simply does not believe
what most mainstream economists believe, and that is that tariffs
are inflationary and the cost will be passed along to
consumers in the form of higher prices. I and my
Business We colleagues got to ask Trump about that for
a Business We Cover story cover interview we did with
Donald Trump back in July at mar A Lago, and
(07:40):
he simply disagrees. He said, well, if tariffs were inflationary,
we would have had inflation during my first presidency when
I imposed rounds of tariffs, and we didn't, and therefore
it's not going.
Speaker 5 (07:51):
To be a problem.
Speaker 6 (07:52):
A lot of people around Trump publicly surrogates, have taken
to echoing those points. So, as one of my sources
pointed out to me in my current Business Week story,
Trump doesn't believe that tariffs are inflationary. Therefore he's not
going to believe it until they're implemented and until we
see inflation. So to me, that suggests that we may
be in for a rocky ride financially economically over the
(08:14):
next four years if Trump is able to go ahead
and do what he says he's going to do. And
there are fewer guardrails and fewer breaks with Republicans controlling
all three branches of Congress now than there were last
time around. So I think I think his theories on
tariffs and everything else make it a real test run.
Speaker 2 (08:32):
I also do wonder, Josh, do you think Donald Trump
thinks about his legacy? You know two assassination tempts, you know,
one that we you know, obviously more serious it seems,
in certainly than the other one. But I do wonder
if he's an older man, right, we all get older,
we start to think about kind of our life's impact.
Is this your understanding of him?
Speaker 3 (08:54):
You think he's thinking about that?
Speaker 6 (08:56):
In this second, I'll say this, I'll say that you know,
he and I have I've never had that discussion. But
from everything I've seen from him, from everything I've heard
from people around him, Trump tends to live in the
here and now. I mean he is responsive to the
cable chirons that he sees on TV. He's responsive to
the closing price in the stock market. He's responsive to,
(09:19):
you know, whether or not the Justice Department is going
to convict him and send him to jail. Which it
doesn't look what they are now, not so much thinking
about how his obituary will look in the New York Times.
But that being said, look, all presidents like to succeed.
I'm sure Trump would like high approval numbers and a
lot of the signifiers that Trump looks to for validation,
things like the level of the stock market, the wealth
(09:42):
of the United States, the trade deficit. Those are all
measuring sticks that I think Trump is going to use
to measure his own performance. And we'll have to see
if he can get those boosted along the lines that
I know he wants to based on the policies that
he said he's going to pursue, and if he can
do it without breaking apart that broad coalition of both
Wall Street folks and working class folks that got him
(10:04):
elected on November.
Speaker 4 (10:05):
Fifth, Josh to speaking of policies, do you believe that
he will actually make good based on the folks you
talk to of deporting millions of people who are here
illegally on day one.
Speaker 6 (10:15):
He's certainly shown every sign that he intends to do that,
both from the people he's put in top level positions,
people like Stephen Miller and Tom Holmans, that would lead
that effort to some of the comments he's made more
recently about being willing to deputize US law enforcement to
help carry out this deportation. So, everything we've seen so
far suggests that yes, Trump is very serious about that
(10:37):
and intends to pursue it as president.
Speaker 2 (10:39):
Hey, just thirty seconds here to wrap up, and you've
wrap up your piece. I mean, Donald Trump may also
just be lucky in terms of timing right policies put
in place by the Body administration. He may reap the
benefits up just quickly.
Speaker 5 (10:52):
Yeah. I mean.
Speaker 6 (10:53):
The thing that galls so many Biden people and so
many Democratic sources is look at the economy Joe Biden
has bequeathed Donald Trump. Inflation coming down, the stock market
is at record highs. We have all these new jobs
in manufacturing factories being built all across the country with
money that Biden really helped put in place. And now
Donald Trump is about to take over as president and
(11:13):
reap the political benefits and credit for all of those things.
Great timing for Donald Trump, not so great timing for
Joe Biden.
Speaker 3 (11:22):
Sowa's bat timing, isn't it all right? Josh Green? Good stuff?
Thank you?
Speaker 2 (11:25):
Thank you, Bloomberg BusinessWeek National correspondent. Check out his story
on the Bloomberg and at Bloomberg dot com slash BusinessWeek.
Speaker 1 (11:32):
You're listening to the Bloomberg Business Week podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
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Bloomberg Business app, or watch US Live on YouTube.
Speaker 5 (11:46):
Robert F.
Speaker 2 (11:47):
Kennedy Junior's selection to service President like Donald Trump's top
health official, is prompting questions from policy watchers over how
the pick will handle the range of health and really
key health policies that would fall under his per.
Speaker 4 (12:00):
He's an environmental lawyer and vocal vaccine skeptic. He's publicly
taken positions against food additives and immunization recommendations, but the
nominee for Secretary of the US Department of Health and
Human Services has been relatively quiet on many of the
other issues he would oversee while leading thirteen supporting agencies
in more than eighty thousand federal employees. So let's get
to the interview we got with US doctor Paul Offitt,
(12:21):
director of the Vaccine Education Center at the Children's Hospital
of Philadelphia, who joins us from Philadelphia.
Speaker 5 (12:27):
Doctor, good to have you with us.
Speaker 4 (12:28):
How might RFK Junior impact healthcare, food, medical research and
more here in the US.
Speaker 7 (12:35):
He is a very long anti vaccine activist. He is
a science denialist, and he is a conspiracy theorist. This
is not the kind of person you want to head
health agencies. I mean he has said that no vaccine
is a benefit. He has said that the polio vaccine
killed more people than it ever saved. He thinks that
HIV human and deficiency virus is not the cause of AIDS.
(12:55):
He's an AIGs denialist. He thinks we should drink raw milk,
which will put us one once again in a position
of risking things like campelo bacer and he call I
in salmonella. He thinks that the SARS virus was created
in the laboratory and specifically designed to spare Ashkenazi Jews
in Chinese and target whites and blacks. I mean, this
is the man you want to head health agencies.
Speaker 5 (13:18):
I don't think.
Speaker 3 (13:18):
So what scares you the most, Well, what scares.
Speaker 7 (13:22):
Me the most is is that that he now has
has a bigger platform to be anti vaccine. So I
mean He's always had a platform owing to the famous name,
but now that he's even considered for this position gives
him a certain level of credibility, which he certainly doesn't deserve.
Let's suppose you have a vaccine that is submitted to
the FDA for licensure, and it's it's excellent, and it's
(13:44):
better than what we've had. I think, you know, say
I'm on the FDA Vaccine Devisory Committee. Let's say that
we recommend a licensure, and then the FDA considers that
recommendation and degrees he could say, no, I think there
needs to be more study. Similarly, he could could try
and strip away the the CDC's capacity to recommend vaccines.
He could take the advisory committees to both those agencies
(14:05):
FDA and CDC and try and stock it with people
who are similarly like minded science denialists, such as himself.
I don't understand this. And when he talks about, for example,
something that makes sense, which is trying to make our
country healthier, decrease obesity, decrease type two diabetes and the
consequences of those disorders such as strokes and heart attacks,
I'm all for that. Great idea. But there are a
(14:27):
lot of people out there who could do that job
much better than he can given his science denialism.
Speaker 2 (14:32):
Doctor offittt on vaccine specifically, Robert F. Kennedy, as you know,
has often been referred to as a vaccine skeptic. You
call yourself a vaccine skeptic.
Speaker 3 (14:40):
What's the difference.
Speaker 7 (14:43):
A skeptic is somebody who says, prove it to me,
show me you're right. So when we sit around the
table at the FDA Vaccine Advisor Committee and consider vaccines,
as we did for the COVID vaccines, for example, in
December of twenty twenty, show us the data, prove that
it's effective, prove that it's safe, so that we can
then recommend it in good conscience. That's skepticisms. Skepticism is healthy.
He's a cynic. He's a vaccine cynic. He doesn't believe
(15:05):
the data. He thinks that there are dark, evil forces
working behind the scenes that are misrepresenting data. What he
doesn't realize is that there.
Speaker 5 (15:13):
Is no hiding.
Speaker 7 (15:14):
Even a farm pharmacytical company misrepresented data on safety or
efficacy that will soon be found out because there are
post marketing studies like that can be done by the
Vaccine Safety Data Link, where you'll know if there's a
problem immediately. There is no hiding, so his whole premise
is wrong.
Speaker 4 (15:29):
One thing that I've been wondering is how different are
we than other developed countries or other wealthy countries when
it comes to vaccine schedules.
Speaker 5 (15:38):
Doctor?
Speaker 4 (15:39):
Do we do things differently than other countries around the world.
Speaker 7 (15:43):
We tend to recommend more vaccines than most other countries. So,
for example, the chicken pox vaccine, which came onto the
market in nineteen ninety five is not used in a
number of developed world countries. They're willing to have children
suffer tricken pox. In this country, obviously, there would be
millions of cases of chicken pox a year, and there
be about about seventy five two hundred people who would
(16:04):
die off chicken pox, and there would be tens of
thousands of hospitalizations. So we thought that was worth eliminating.
But you know, not all countries felt the same way.
Speaker 4 (16:13):
Other than that, though, are there aren't big differences?
Speaker 5 (16:16):
No? No, For the most.
Speaker 7 (16:17):
Part, the developed world doesn't like children, so we would.
Speaker 4 (16:20):
So if you did over end up overseeing the CDC
and changing the recommendations we'd be an outlier in this
country based on some of the recommendtions that he could make.
Speaker 7 (16:30):
Right, I think his fanatical anti vaccine activismsm has already
scared people. I mean, if you look, for example, over
the last few years, our number of cases of measles
have increased dramatically. Last year we had three thousand cases
of protesterler hooping cough. This year we have seventeen thousand.
We've had more than two hundred children less than eighteen
(16:50):
years of eight dive influenza over the pasture. That's a
high number. So you're already seeing an erosion in trust,
already seeing an erosion in vaccine rates among kindergartens, and
as a content winch, you're seeing an increase in infectious
diseases that are preventable. It's unconscionable.
Speaker 3 (17:05):
I have to say.
Speaker 2 (17:06):
I have talked with colleagues and friends and associates who
have autistic children now adults, and who are open to
the idea that maybe vaccines cause this problem. So like
there is you know, I've had these discussions. I guess
what I wonder about, are we going to maybe depending
on what comes out If RFK is indeed our next
(17:28):
top health voice.
Speaker 3 (17:29):
Here in the administration.
Speaker 2 (17:31):
That will that potentially lead to maybe some kind of
ruling or mandate that comes down that says we don't
believe in vaccines and then are they not covered by insurance? Like,
how does this potentially play out realistically?
Speaker 7 (17:44):
Right? So, so there's the Vaccine for Children's program which
was born in the nineteen nineties and the Clinton administration
which basically covers about half of the vaccines in this
country for children who are either under insured or uninsured.
I don't think he could touch that. I mean, that's
really a congressional program. The Congress would have to agree
to that.
Speaker 5 (17:58):
I can't imagine that happening.
Speaker 7 (18:00):
He could make it more difficult to get insurance generally
for vaccines, making them more expensive for the consumer, that's possible.
I mean, I think he'll do everything he can to
lessen immunization rate.
Speaker 5 (18:10):
This is what he says.
Speaker 7 (18:11):
I think that, you know, the parents should make decisions
well with their doctor and basically pull the CCC out
of it. Let let us look at the real data.
And he's going to show us the real data because
only he knows the real data, because he's a conspiracy theorist,
it's hard to watch. I do think there'll be an
erosion in vaccine rates and regarding autism, it's fair to
ask the question, my child was fine, they got a vaccine,
(18:33):
Now they're not fine. Could the vaccine have done it?
That's an answerable question, and it's been answered. There's been
eighteen studies done in seven country on three con instead
have shown vaccines don't cause autism. It's question asked unanswered.
Speaker 3 (18:46):
Is the medical community, you know, gearing up to fight back.
Speaker 7 (18:51):
Yes, but again, you know we're not good at this stuff.
I mean I think, well, fight will certainly fight back
the way we knew how, which is which is to
try and present all the day that we know supports vaccines.
But this is really becoming a political issue. So I
think it's going to have to have a political solution.
I think we're going to have to find those senators who,
assuming there is a confirmation hearing, that are reasonable enough
(19:13):
to say that this is not the guy you want
in that position.
Speaker 4 (19:16):
So after RFK was announced, the Governor of Colorado, Jared Polish,
sent a post on accident said he was excited because
of a vaccine choice and he helped push back in
Colorado when it came to this particular topic, can you
share your view as to why it's important for lots
of people to get vaccines, because if it is a
(19:37):
parent's choice, and you know that parent chooses to get
their kid vaccinate against something, it's not necessarily that that
kid is actually protected if other kids aren't protected.
Speaker 5 (19:48):
Exactly right.
Speaker 7 (19:49):
So if you step on a rusty nail and you
go to the doctor and you say I don't want
a tennis vaccine and you get tetanus, no one's going
to catch tennis from you. It's not a contagious disease.
Measles is, influenza is, and others are. So a choice
not to get a vaccine is a choice not only
for yourself, but for those with whom you come in contact.
And remember there are about nine million people in this country.
You can't be vaccinated because they're getting chemotherapy for their
(20:12):
cancer or immute suppressive therapy for the autoimmune diseases. They
depend on those around them to protect them. Do we
have any responsibility for our neighbors? It is hard to
watch if you look what happened with Stars Kobe two,
those counties that were generally under vaccinated had much higher
rates of hospitalization and death than those counties that were
highly vaccinated, and that affects the people. If you're better
(20:34):
off actually being unvaccinated living in a highly vaccinated community
than being vaccinated living in a highly unvaccinated unity.
Speaker 5 (20:41):
That's wild to hear.
Speaker 4 (20:42):
What about the power of states and local municipalities over this?
For example, I have a kid in the New York
City public school district and he has to get a
certain number of vaccines in order to actually be able
to go to school. That's a way for them to say, Okay,
well we are making this choice, or for the parent
to make this choice to vaccine back their kids against
these things. Isn't their power there at the local level.
Speaker 7 (21:04):
Yeah, Well, mandates are state run. I mean, there's not
federal mandates. I mean the school vaccine mandates are done
by states, and different states actually have different vaccines that
they mandate. But we've had school mandates from the books
for decades. There was about by nineteen sixty four to five,
about twenty five schools states had school mandates. By the
mid seventies, that went up to forty by nineteen eighty one,
(21:25):
all fifty states had school vaccine mandates, and with that,
with the enforcement of school vaccine mandates, we went from
forty seven thousand cases of measles a year, seventy five
thousand cases of measles a year, one hundred and fifty
deaths from measles a year, to eliminating that disease from
this country by the year two thousand. But it's come
back in part because the critical percentage of parents are
choosing not to vaccinate their children.
Speaker 3 (21:46):
Yeah, numbers tell a story.
Speaker 2 (21:47):
Hey, listen, speaking of choice revaccination, You know, we do
have choices what to eat, We have choices. McDonald's is
clearly a favorite a president like Donald Trump.
Speaker 3 (21:58):
During the campaign.
Speaker 2 (21:59):
He even helps serve cuss at one restaurant. I got
to say, I'm a fan of their fries.
Speaker 3 (22:03):
Full disclosure.
Speaker 2 (22:04):
We've seen Donald Trump and RFK Junior and Elon and
others chowing down on McDonald's together.
Speaker 4 (22:09):
Oh, to be fair, rfk's holding the burger. He's not
chowing yet.
Speaker 2 (22:12):
Yes, okay, so maybe he's just holding maybe the little
osmosis going on there. Just got about thirty seconds here.
I do think about the role of Donald Trump, what
impact he might have in terms of his thinking about
health and medical care and all that good stuff. I mean,
we saw what he did during his first term with
COVID and getting a vaccine, So how do you think
(22:33):
his impact might be on what goes on in this area?
Speaker 3 (22:36):
And again, just got about thirty seconds.
Speaker 6 (22:39):
Now.
Speaker 7 (22:39):
I think he's hard to predict Donald Trump. But I
think that scene though, with him sitting there and Elon
Musk and RFK Junior and Mike Johnson and others eating
eating Donald's, I think my take home from a message
from that scene was Donald Trump telling Robert Kennedy Jr.
You'll eat what I tell you to.
Speaker 5 (22:57):
I believe.
Speaker 4 (22:58):
Donald Trump Junior retweeted that and said the Make America
Healthy Again starts tomorrow.
Speaker 2 (23:03):
So I gotta say I love a happy meal as well.
Doctor Paul Offit, this was a treat a pleasure. Thank
you so much for finding time for as doctor Paul Offfitt,
director of the Vaccine Education Center the Children's Hospital of Philadelphia.
Speaker 1 (23:17):
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Speaker 4 (23:35):
Well, we talk a lot about the performance of the
S and P five hundred and the Nasdaq one hundred.
By the way, the S and P five hundred up
more than twenty three percent so far this year, the
Nasdaq one hundred up more than twenty two percent.
Speaker 5 (23:45):
Large caps and megacaps have done well this year. We
know that small caps not so much. The RUST two.
Speaker 4 (23:50):
Thousand only up around fourteen percent so far this year. Well,
Mike Road thinks that could be about to change. He's
senior investment director at American Century Investments. They've got about
and sixty billion dollars in assets under management, forty five
billion of which is invested in actively managed small cap strategies.
Mike joins us here in the Bloomberg Interactive at Brokers Studio.
Speaker 5 (24:10):
Mike welcome.
Speaker 1 (24:11):
Thanks.
Speaker 4 (24:12):
Single biggest catalyst in your view in the last few
weeks for small caps or right now for small caps,
what is it?
Speaker 8 (24:18):
Yeah, it's say the Trump election for sure, and the
red wave.
Speaker 3 (24:22):
There was an election.
Speaker 8 (24:22):
There was an election breaking news, I think, but that
really just through fuel on the fire that had already started.
Around July, you started to see a market rotation towards
small caps. What you have is expected earnings growth of
nearly eighteen percent next year. That's higher than midcaps, that's
higher than large caps. Rather magnificent seven still growing a
(24:45):
twenty percent plus next year, but that's slowing, whereas you
have accelerating earnings for small caps, which have actually had
negative earnings the last two years. So you're coming out
of a small cap earnings recession and you're getting acceleration
into next year, and we think that that's to be
a real growth driver for the ASA class.
Speaker 2 (25:01):
So the expectation what that the US economy is going
to do better, maybe tariffs push back on foreign imports,
and so that's good for those smaller cap companies that
tend to be here in the US focused on the
US doing work in the US.
Speaker 5 (25:13):
Yeah, exactly.
Speaker 8 (25:14):
So small caps get about eighty percent of the revenue
from inside the United States. So if you're positive on
the US, the best way to play that is with
small caps, and restoring has been a major positive catalyst
for small caps in terms of again bringing manufacturing back
to the US, and with Trump getting elected and tariffs
are likely kicking in. That's probably going to accelerate restoring
(25:35):
even more, and small caps are the best way to
play that.
Speaker 1 (25:37):
Mike.
Speaker 2 (25:37):
One thing I wanted to ask you since the election,
what have you seen in terms of investment flows, Because
if you look at the russell is up about two
percent since the election, it's pretty much the same as
the S and P five hundred.
Speaker 3 (25:47):
Where has money been going into since the outcome?
Speaker 8 (25:50):
Yeah, so there's been about eight billion that's flown in
float into the small cap etf since November. That's pretty good,
but you actually saw ten billion in July when the
thought was that rates where we were starting a kind
of rate cut cycle. So you still haven't seen it. Now.
If you look at how large small caps are in
terms of the percentage of the broader US equity market,
still less than four percent. That's fifty percent below average,
(26:14):
and the last time it was this low was the
nineteen thirties. So small caps have been a forgotten asset
class institutionally. And you get a lot of agreement that
small caps are the place to be over the next
twelve months, but you haven't yet seen the flows.
Speaker 3 (26:28):
I feel like we have.
Speaker 2 (26:28):
Been talking about everyone saying, here's the reason to buy
small caps for a.
Speaker 5 (26:32):
Long time, say it, yeah's international.
Speaker 2 (26:35):
Yeah, And yet you're saying it's not like everybody's running in.
Speaker 8 (26:39):
Yeah, not yet. But I think that's actually, frankly a
good thing. It's kind of the empty room. I think
now is a good time. There's a lot of expectation
out there for earnings to accelerate next year. I think
you're going to have to start to see that now.
I was at a regional bank conference two weeks ago,
was the day after Trump got elected.
Speaker 3 (26:55):
Digital banks have done really much.
Speaker 8 (26:57):
Better recently after two years of misery. Uh, and the
CEOs were literally was it literally? But like Jamie Diamond said,
dancing in the streets right doing the Trump dance because
they're they're most excited.
Speaker 2 (27:09):
About someone in the newsroom who does the Trump dance
really well.
Speaker 5 (27:12):
But I'm not gonna try.
Speaker 3 (27:13):
We're going to table that.
Speaker 8 (27:14):
But deregulation is going to really benefit regional banks, and
regional banks are also a big beneficiary of restoring right
when these big new projects get started, you need to
you need funding for those projects, and regional banks are
really going to drive the growth in these kind of
mini regional economies around the country.
Speaker 4 (27:32):
Like, what happens if the FED doesn't lower rates to
the extent that a lot of people think, they, well,
what happens if inflation doesn't come down to that two percent?
Speaker 5 (27:40):
Crazily?
Speaker 8 (27:41):
Yeah, that is that is the question I think that
I think you have to ask the next question why? Okay,
so why and what does the yield curve look like?
So if we have growth outpacing, if growth it starts
to accelerate right three percent plus next year in part
due to Trump's policies, and inflation doesn't come right down
to two percent, I think that's okay, that's good news
(28:02):
is good news and growth Trump's no pun intended inflation,
it's And then the second part of that is more
about this shape of the yield curve. So, yes, rates
not be there might not be eight rate cuts next year,
But if you have a steepening yield curve, that's a
really good environment for small caps. We had an inverted
yield curve for two years. That's really tough for banks
(28:23):
and for other spread type businesses. And as that yield
curve reinverts, that's just a really good environment. So I'd
say focus more on the shape of the yield curve
as opposed to the absolute interest rate number or how
many how many times the Fed will cut.
Speaker 3 (28:36):
So the flattening out that we've seen in the belly
of the curve not great.
Speaker 5 (28:40):
Not great, not great.
Speaker 8 (28:41):
But I think if you believe that we're going to
have an accelerating GDP over the next couple of years
because of Trump's policy, small caps are the biggest beneficiary
of that.
Speaker 2 (28:49):
But if we have an accelerating GDP and we have
too much money back in the economy, which leads to inflation,
we know from Fitcher jpow we're not quite there yet.
I do think about the implications of that and the
impact that they could have on small caps or other sectors.
Speaker 8 (29:03):
Yeah, I think it comes down to that, why do
we have inflation? Is there too much money flooding the systry?
Speaker 3 (29:09):
Do you think we have too much inflation.
Speaker 5 (29:11):
Right now or in the future? Yeah?
Speaker 8 (29:14):
Yeah, right now, I think we're still we still have
that hangover from all the COVID spending going forward. If
you have there could be an increase in inflation coming
from the tariffs, right or the threat of tariffs, and
most of these companies will probably price that through to
the end consumer.
Speaker 3 (29:31):
Or tax breaks some have said.
Speaker 2 (29:32):
I mean, what's interesting is we had actually a listener,
a Bloomberg terminal users say, listen, we got to push
back a little bit on tariffs and the impact on inflation,
because you know, maybe there have been economists and folks
on our air that have also said maybe that's not
the case.
Speaker 3 (29:46):
So we'll have to see on that one.
Speaker 2 (29:48):
But I do think about tax cuts creating more velocity
in terms of money in the system, that could be Inflationay,
we just.
Speaker 3 (29:55):
Heard that with our Josh Green.
Speaker 4 (29:56):
What about immigration policy and the labor market something I
think about a lot. According to the Center for Migration Studies,
there are about eleven point seven million undocumented.
Speaker 5 (30:09):
People here in the US.
Speaker 4 (30:11):
If they get deported in a very short period of time,
there are gonna be a lot of people who are
looking to fill jobs.
Speaker 5 (30:17):
Yeah.
Speaker 4 (30:18):
Yeah, a lot of managers looking to fill for sure.
I think I'm wondering what that does to the labor market.
Speaker 8 (30:22):
Yeah, I think the labor market is more in balance
today than it was just a couple of years ago.
So yeah, the immigration, that's that is a potential risk
to the inflation environment. But if you're getting that inflation
because the economy is growing and there's more supply chains
being built out here in the US. I think that's
a good thing if you get it in the fundamentals
(30:44):
of these small cap companies. If you're getting that ten percent,
fifteen twenty percent earnings growth, and all research shows that
dollars follows earnings growth, and I think that's going to
be viewed as a positive thing.
Speaker 2 (30:54):
Although voters have said they don't like inflation, and that
was a clear mandate. Hey, listen before you go, got
about a minute left here, Let's talk groups.
Speaker 3 (31:00):
What do you like in this environment? Which you like?
Speaker 2 (31:03):
Yeah?
Speaker 8 (31:03):
I think banks mentioned it's uh, regionals. Yeah, they've had
they've had a bit of a run since Trump was elected,
but they're still trading at a discount to where they
were when Trump was in the office the first time.
And I think the sentiment is so negative. You have
commercial real estate fears which are unfounded so far, credit
cycle unfounded so far. They're kicking off pretty good dividends,
(31:26):
and they're under owned by most institutional investors. So I
think there's still room to run in regionals.
Speaker 5 (31:31):
What about when it comes to some of the retailers
out there. Yeah, I think.
Speaker 3 (31:34):
Okay, so that's the reporting this week.
Speaker 8 (31:36):
Yeah, yeah, you know, if you look at the consumer,
I think we like to say it's trifurcated right that
the high end consumer is still doing really well. Low
in consumer if you look at the dollar stores, pretty tough.
But we believe that there's some areas that are bouncing
off of the bottom. So if you look at boats,
boats have fallen off a cliff. They're down fifty percent.
But we think there's a bottoming and we think we're
(31:57):
going to see improving numbers going forward. So it's all
about that acceleration. So we're getting that off of the bottom. Boats,
r v's potentially housing, We'll have to see what happens
with housing. That would be a good catalyst for small
caps very quickly.
Speaker 2 (32:10):
Energy you like it. If there's more drilling, there's more pumping,
more supply. Won't that be hurt?
Speaker 5 (32:15):
Yeah?
Speaker 3 (32:15):
Does that hurt the group just quickly?
Speaker 8 (32:17):
No, it's and it goes back to that really to GDP,
if you have an acceleration in demand, it should offset that.
The other biggest Yeah, yeah, well, I think the biggest
thing that we look at is the quality levels at
these E n p's and the small cap side, they're
they're much more better run than they were five or
ten years ago.
Speaker 3 (32:36):
Micro good stuff come back soon. This is this is
Bloomberg Business Week, mark.
Speaker 5 (32:46):
A journal.
Speaker 2 (32:47):
Now about you let me drive?
Speaker 1 (32:49):
No, no, honey, please, I'll.
Speaker 2 (32:55):
I want to drive. It's a good question time.
Speaker 1 (33:03):
This is the drive to the globe communing well, lad
on Bloomberg Radio.
Speaker 2 (33:11):
All right, TikTok, everybody, Just about eighteen minutes left in
today's trading session here on this Monday, we've got like
games as you just heard from Charlie and the S
and P five hundred outperformance in the Nasdaq one hundred
up about one hundred and forty five points, good for
gain of seven.
Speaker 3 (33:25):
Tens a percent. Wasn't so great for stocks last week.
Speaker 2 (33:28):
But again, earnings are going to be front and center
with Nvidian, a few others reporting us.
Speaker 4 (33:31):
Yeah, we're gonna hear from the retailers, many of the retailers,
so we've got a good read on the consumer. Let's
see what Jeff McLain has to say about this. He's
a ceover at Solidarity Wealth. It's a wealth management firm
based in Utah. They've got about six hundred million dollars
in assets under management. Jeff joined us here in the
Bloomberg Interactive Brokers studio. I'm wondering what's top of mind
for your clients right now when you're out there talking
to them.
Speaker 5 (33:52):
What are they asking you? What do they want to know?
Speaker 9 (33:55):
Yeah, I think a lot of it is election related.
I mean, what does the next four years look like
in the excitement or nervousness depending on the political backgrounds
of where they're looking at the markets From our perspective,
I mean, I think in either case, you were going
to have some consistency of the current administration continuing on
or Trump. We've we've kind of seen the show before.
It'll be different people involved, but we kind of know
(34:17):
what's coming, and you're seeing that a little bit in
the market of a bit of steadiness associated with it.
You're essentially going to have divided government with the house
being so tight, it'll be incredibly tight if anything in
the house. You think so, Yeah, I think as you
talk about the people he's named, they're going to have
to give up their spots in the house.
Speaker 5 (34:36):
You have a few lives.
Speaker 2 (34:37):
I wonder if there's somebody with a whiteboard said hey, wait,
his name is Speaker Johnson.
Speaker 9 (34:42):
Yeah, and I don't think they're being that strategic and
so divided government's good for the markets, right, nothing's crazy
going to happen.
Speaker 4 (34:50):
I would think they are being strategic because they want to,
you know, and that's stuff done. Jusie Wilds, the incoming
chief of Staff, made the point at a fundraiser last
week in Las Vegas that was basically like this, according
to New York Times, that hey, we got two years
to get everything done because the history, you know, books
show that if you have a trifecta in government, it's
not forever.
Speaker 9 (35:10):
Yeah, that's true. But at the end of the day,
special elections that are going to have to come up
to replace those seats. Republicans do terrible in special elections historically,
and so I think at the end of the day
the House will be divided, which again I think is good.
Nothing crazy can happen if you start with a proposition
like I do, that most government officials are not great
(35:31):
people and they're going to trade in their own self interest.
Divide is great.
Speaker 5 (35:35):
They can't do anything. There's a lot of places I
could go with that, because.
Speaker 4 (35:41):
Where do you want to go, well, is that a
concern to you in terms of the way that the
government has been run in the way that the government
potentially will be run in the new administration. There are
a lot of folks very close to the president who
have a lot of money.
Speaker 9 (35:56):
Yeah, and I would say that's always true, right, Whenever
there's power, money is attracted to it, and so that's
always been the case. I think long term is that
a problem?
Speaker 1 (36:04):
Yeah?
Speaker 9 (36:04):
Short term, no, I don't see any issues there. I
do think some of the changes they're going to make
do help certain sectors over others. Right. RFK Junior Pharma
has obviously traded down since that name was nominated to
the position.
Speaker 5 (36:19):
That's probably justified. We'll see if he gets confirmed.
Speaker 9 (36:22):
Yeah, that's a big if.
Speaker 2 (36:23):
All right, So the week after the election, I'm going
back to not last week. Last week's stocks were down
about two percent. If I'm looking at the S and
P five found to the prior week, they're up about
four point seven percent. So we've seen a little bit
of a correct but not all the way back. I mean,
are what we're seeing right now is all right, some enthusiasm,
but we don't really know what policies are ultimately going
to be put into effect. So hold on, everybody, kind
(36:45):
of slow your role and let's see. Yeah, it's a
long h Is there anything that you feel like you
can bank on right now in terms of a Trump
administration what it means for playing the equity term?
Speaker 9 (36:53):
Yeah, from a long term perspective, all that right now
is noise. From a short term trading perspective, volatility is
going to continue spike with every new announcement, depending on
because he's not going to nominate an you know, steady,
keep it as it is type person. He's just not
And so every new announcement's going to drive volatility and.
Speaker 3 (37:11):
A specifically it kind of did in the first term.
Speaker 5 (37:13):
Yeah, and it did, but.
Speaker 9 (37:14):
You're going to see that with the Treasury whoever he
names in the cat fighting that's involved right now, whoever
he names, you're going to see some trades based on
whoever that is, depending on if it's someone from a
traditional finance background or is it someone outside right an
unknown to the financial world.
Speaker 2 (37:31):
I got to say these conversations. I like macro, but
it's like, okay, so what do we do? Yeah, because
if you've got a portfolio you're thinking about it. I
think about investments.
Speaker 3 (37:40):
I'm like, what do I do do?
Speaker 2 (37:41):
I like, you know, things have had a nice little
run this year, but is it going to get a
little sketchy next year?
Speaker 3 (37:46):
We just don't know. So what do you say? You are,
you know, responsible for managing the wealth of your clients.
What do you do right now?
Speaker 2 (37:55):
Have you made any changes to portfolios since the election outcome?
Speaker 1 (37:59):
Yes?
Speaker 9 (38:00):
Yes?
Speaker 3 (38:00):
What have what have you done?
Speaker 9 (38:01):
And so you know, I think part of that is
trimming allocations in certain segments and areas that aren't going
to do well. So, generally speaking, defense could be a problem. If,
for example, you own Lockheed Martin, right, they are going
to be a target of what the VEC and Elon
Musk are doing. They're no bid contracts, probably not going
to be looking good here in the next couple months.
(38:22):
If Elon Musk and his team are successful. Another group
that could be.
Speaker 2 (38:27):
Until senators and members of Congress and House reps saying.
Speaker 5 (38:31):
By the way, our constituents are pretty upset about this.
Speaker 9 (38:33):
Yeah, yeah, there is part of that. But remember, from
an administrative law perspective, presidencies have enormous power to do
things independent of Congress. And both administrations, and so they
can drive significant change just changing the no bid contract
thing alone to ban any no bid contract. That's a problem.
Speaker 3 (38:53):
What does that mean? So nobody can bid?
Speaker 5 (38:55):
Right?
Speaker 9 (38:55):
So they directed directly to Lockheed Martin. If you win
this contract and it's not an open process for that
government contract, which are billions and billions.
Speaker 3 (39:04):
Of dollars, you've seen opposite of what it's You've.
Speaker 9 (39:06):
Seen Elon Musk fight this from his side of saying, hey,
we can do these things. We're doing the way cheaper
than NASA and all these other things. But yet NASA
is getting these or Boeing is getting these gigantic contracts
and are not performing.
Speaker 3 (39:18):
So tripping defense, what else have you been doing for
your clients?
Speaker 9 (39:21):
I think Boeing's and although I agree with their CEO change,
I think that's a good move. I think long term
Boeing could be good. From a short term perspective, Boeing's
problematic for a variety of reasons. That has been and
I would argue it's going to continue to be problematic
from a go forward. I think there's also some trading
opportunities and what I would call the anti ESG trade,
(39:44):
Those kind of industries that aren't favored in the EESG
where that's at times defense like pell and Teer, which
will probably be a winner from this administration. Oil and gas,
although not broadly like your Exon or Chevron, But think
of the pipeline type of producer and those actually pulling
the minerals out of the ground.
Speaker 5 (40:02):
Even if we see a decline in demand.
Speaker 9 (40:04):
Or yeah, I think from a long term they have
some great opportunities because you're more likely to find value
there because the huge part of return is what you're
buying it for. Because of the disfavored nature of those industries,
you can get better valuations than the broader market, and
so over time that's going to play out. Even if
some people want to hold their nose at it, we
(40:25):
still need oil, it funds just about everything in our society.
Speaker 2 (40:29):
You're the second person today that is looking at small caps.
Forgive me only about twenty five seconds. You like small caps,
put money there, or you are putting money there.
Speaker 9 (40:37):
We are, and I like it from a go forward perspective.
You have to be careful, right, not all small caps
are created equal, but yeah, small caps can be an
incredible opportunity right now based on valuation simply compared to
large caps.
Speaker 3 (40:50):
All right, we gotta leave it there. Of course we
had more time. Good stuff, come back. Thank you really appreciate.
Speaker 2 (40:54):
Jeff McLain's chief executive officer at Solidary Wealth.
Speaker 3 (40:57):
As we said, they're based in Utah.
Speaker 9 (40:59):
Yes, right now, all right, ski season is here, come
to Utah, skier.
Speaker 3 (41:04):
Have you ever ski in Utah?
Speaker 5 (41:05):
Of course, of course he has a crazy flight.
Speaker 1 (41:09):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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(00:23):
and Tim Stenebeck from Bloomberg Radio.
Speaker 2 (00:26):
Now, would you want to get to one thing that
is certainly toplined for world leaders at G twenty and elsewhere?
Speaker 3 (00:32):
Dj T Donald J. Trump's administration and.
Speaker 2 (00:35):
Cabinet picks chief among them, who will take the job
of US Treasury Secretary.
Speaker 4 (00:39):
Yeah, it's kind of turning into this game of thrones,
and that's where we go now to jockeying around the
selection for the nation's next treasury secretary. Bloomberg business Week
national correspondent Josh Green joins us on that and on
his BusinessWeek story on the President Elect's impossible task. Josh
is the author of Devils Bargain, Steve Bannon, Donald Trump
and the Nationalists Uprising and the Rebels, Elizabeth Warrenney Sanders,
(01:00):
Alexandria Kasia Cortez and the Struggle Free New American Politics.
Speaker 2 (01:04):
All right, Josh, great to have you here. Josh joining
us from our Bloomberg Washington DC bureau. Hey, Josh, first step,
I want to ask you about the pick for Treasury
secretary or the process in the behind the scenes, a
super important job. Wall Street is watching, the world is watching.
What are you hearing about this process?
Speaker 5 (01:20):
Yeah? Oh, I put process in quotes.
Speaker 6 (01:23):
First of all, I mean it's turned out into like
an absolute blood bath, with competing candidates stabbing each other
in the back. And what you have now is a
list of people who are under consideration. Howard Lutnick, Scott Bessant,
Robert Leitthheiser, the former trade representative. None of them has
been named. There's a lot of jockey going on behind
the scenes. Trump himself doesn't seem to be happy with
(01:45):
any of the candidates, and as we report in Bloomberg,
he's very unhappy that these fights have spilled out into
public view. So the latest we're hearing is that Trump
is sort of casting about for somebody who would fill
what he thinks is the role of Treasury attacker, meaning
somebody big, powerful, respected by Wall Street. Some of the
names we're hearing and have reported Mark Rowan of Apollo,
(02:08):
Kevin Walsh, the former Fed governor. There are other dark
horse names floating around, but right now everybody in Washington's
trying to figure out, you know, where where the musical
chairs will stop and who will wind up in that
very important position.
Speaker 4 (02:19):
Is it hard to find somebody who's respected by Wall
Street but also believes what Donald Trump believes when it
comes to tariff's Josh, yeah, I.
Speaker 6 (02:25):
Think that's exactly the tension is. You can Trump can
certainly find someone like a Lighthiveser who really believes in
the use of tariffs. But as a number of sources
told us, wall Street would would would panic if somebody
who was seen as too extreme on tariffs gets in there.
On the other hand, you have guys with stirling reputations
who would be embraced I think by wall Street both
a warsh or a best and somebody like that who
(02:48):
may not be as willing to come out and embrace,
embrace a steep tariff regime of the type that Trumps
has bandied about, knowing that the damage that that could
potentally caused to markets if they were implemented, you know,
and disrupted a lot of things in the global markets.
So it's tough to find just the right candidate who
(03:08):
has both the stature, the wealth, the name that Trump wants,
and also the willingness to do Trump's bidding.
Speaker 2 (03:15):
Hey, Josh, we have not had a chance to talk
to you about the election outcome. You really wrote the
book An Understanding Donald Trump's first run at the White
House and his win that time around. What do you
make of him running a winning excuse me, a second term?
Speaker 5 (03:31):
Well?
Speaker 6 (03:31):
Yeah, I think it was a surprise to a lot
of people, but in a lot of ways, it's a
much more impressive victory than his win in twenty sixteen,
which took a lot of people by surprise. He did
not win a majority of the popular vote that time.
Looks almost certain that he will this time. And I
think what's most important is the coalition that Trump put
together and winning the twenty twenty four election. There were
(03:52):
both the kind of high wattage billionaire supporters, people like
Howard lutt Nick and Elon Musk, But on the other hand,
Trump cobbled together a really racially diverse, working class coalition
that we hadn't seen the last time around. A lot
of voters that traditionally vote Democrat were persuaded to come
over and vote for Trump, and as a result, he
has a really big coalition. As I write about in
(04:15):
the new issue of BusinessWeek, Trump has pursued this kind
of what I call plutocratic populism, and I think the
main tension in his second presidency is going to be
how to balance the interests of working class people with
the interests of the billionaire and Wall Street crowd, who
are another important coalition form.
Speaker 4 (04:31):
So let's talk a little bit about that, Josh. Because
you came with receipts, you have the numbers here. Why
is that an impossible task? Why is he unable to
do that and make good on really every promise that
he made on the campaign trail.
Speaker 6 (04:42):
Well, if you look at exit poll numbers and just
in my own interviews with undecided voters and people were
Trump supporters, a lot of what drove Trump's support was
voter anger, especially working class voter anger over inflation high prices,
for which they blamed Kamala Harris personally. They didn't want
her back in that y. They remember the Trump era,
rightly or wrongly, as a time of lower prices, lower inflation,
(05:08):
strong paychecks for everybody, and so they voted for Trump
in the hopes that he would bring that back. But
if you look at what some of Trump is planning
to do, you know, the first item on his agenda
looks to be extending his twenty seventeen tax cuts and
maybe even cutting corporate taxes deeper than he did the
first time around, which would be very exciting to his
Wall Street contingent, to his billionaire contingent. But it could
(05:32):
certainly help exacerbate inflation, as could a steep.
Speaker 5 (05:37):
Round of tariff.
Speaker 6 (05:38):
So on the one hand, you know, you could satisfy
one half of the coalition, But if the cost of
that was for prices, inflation, and interest rates to rise again,
then a lot of the same working class voters who
supported him two weeks ago could potentially turn on him
and Republicans in the midterm elections and handpower back to
the Democrats.
Speaker 2 (05:56):
Hey, how much do you think, though Donald J. Trump
thinks about the midterms at this point? All right?
Speaker 3 (06:01):
I mean essentially, right, this is his second term, he's
a lame duck president.
Speaker 2 (06:06):
He can do a lot of stuff, and he's got
a Congress, But how much do you think he thinks
about what happens at midterms versus following through on his mandate?
Speaker 5 (06:15):
It's a great question, Carrol.
Speaker 6 (06:16):
It's one I've asked to some people around him, and
the truthful answer I got is he doesn't really care
at all. What he cares about is this approval rating.
He'd like to have a booming stock market the way
he did in his first term, and so part of
the thinking in Trump world is that even if he
did promote someone a Treasury secretary who got behind this
tariff regime and things went badly in the economy, if
(06:39):
the market were to fall, that might be a kind
of disciplining mechanism for Trump to step back a little bit,
because he really does view the stock market, the S
and P as a kind of verdict on the success
or failure of his presidency. But certainly, thinking about the
fortunes of congressional Republicans in twenty twenty six probably not
(07:00):
top of mind for Donald Trump right now.
Speaker 5 (07:02):
That's interesting to hear. Why do you think that is?
Speaker 4 (07:04):
Because it sort of does provide, to a certain extent,
a check on what he's able to do, Because if
he puts policies into place that are unpopular among his base,
then he could really pay a price in the midterms.
Speaker 5 (07:17):
Yeah, he could.
Speaker 6 (07:18):
I mean, I've gotten a couple answers from that in
my reporting. One is that Trump simply does not believe
what most mainstream economists believe, and that is that tariffs
are inflationary and the cost will be passed along to
consumers in the form of higher prices. I and my
Business We colleagues got to ask Trump about that for
a Business We Cover story cover interview we did with
Donald Trump back in July at mar A Lago, and
(07:40):
he simply disagrees. He said, well, if tariffs were inflationary,
we would have had inflation during my first presidency when
I imposed rounds of tariffs, and we didn't, and therefore
it's not going.
Speaker 5 (07:51):
To be a problem.
Speaker 6 (07:52):
A lot of people around Trump publicly surrogates, have taken
to echoing those points. So, as one of my sources
pointed out to me in my current Business Week story,
Trump doesn't believe that tariffs are inflationary. Therefore he's not
going to believe it until they're implemented and until we
see inflation. So to me, that suggests that we may
be in for a rocky ride financially economically over the
(08:14):
next four years if Trump is able to go ahead
and do what he says he's going to do. And
there are fewer guardrails and fewer breaks with Republicans controlling
all three branches of Congress now than there were last
time around. So I think I think his theories on
tariffs and everything else make it a real test run.
Speaker 2 (08:32):
I also do wonder, Josh, do you think Donald Trump
thinks about his legacy? You know two assassination tempts, you know,
one that we you know, obviously more serious it seems,
in certainly than the other one. But I do wonder
if he's an older man, right, we all get older,
we start to think about kind of our life's impact.
Is this your understanding of him?
Speaker 3 (08:54):
You think he's thinking about that?
Speaker 6 (08:56):
In this second, I'll say this, I'll say that you know,
he and I have I've never had that discussion. But
from everything I've seen from him, from everything I've heard
from people around him, Trump tends to live in the
here and now. I mean he is responsive to the
cable chirons that he sees on TV. He's responsive to
the closing price in the stock market. He's responsive to,
(09:19):
you know, whether or not the Justice Department is going
to convict him and send him to jail. Which it
doesn't look what they are now, not so much thinking
about how his obituary will look in the New York Times.
But that being said, look, all presidents like to succeed.
I'm sure Trump would like high approval numbers and a
lot of the signifiers that Trump looks to for validation,
things like the level of the stock market, the wealth
(09:42):
of the United States, the trade deficit. Those are all
measuring sticks that I think Trump is going to use
to measure his own performance. And we'll have to see
if he can get those boosted along the lines that
I know he wants to based on the policies that
he said he's going to pursue, and if he can
do it without breaking apart that broad coalition of both
Wall Street folks and working class folks that got him
(10:04):
elected on November.
Speaker 4 (10:05):
Fifth, Josh to speaking of policies, do you believe that
he will actually make good based on the folks you
talk to of deporting millions of people who are here
illegally on day one.
Speaker 6 (10:15):
He's certainly shown every sign that he intends to do that,
both from the people he's put in top level positions,
people like Stephen Miller and Tom Holmans, that would lead
that effort to some of the comments he's made more
recently about being willing to deputize US law enforcement to
help carry out this deportation. So, everything we've seen so
far suggests that yes, Trump is very serious about that
(10:37):
and intends to pursue it as president.
Speaker 2 (10:39):
Hey, just thirty seconds here to wrap up, and you've
wrap up your piece. I mean, Donald Trump may also
just be lucky in terms of timing right policies put
in place by the Body administration. He may reap the
benefits up just quickly.
Speaker 5 (10:52):
Yeah. I mean.
Speaker 6 (10:53):
The thing that galls so many Biden people and so
many Democratic sources is look at the economy Joe Biden
has bequeathed Donald Trump. Inflation coming down, the stock market
is at record highs. We have all these new jobs
in manufacturing factories being built all across the country with
money that Biden really helped put in place. And now
Donald Trump is about to take over as president and
(11:13):
reap the political benefits and credit for all of those things.
Great timing for Donald Trump, not so great timing for
Joe Biden.
Speaker 3 (11:22):
Sowa's bat timing, isn't it all right? Josh Green? Good stuff?
Thank you?
Speaker 2 (11:25):
Thank you, Bloomberg BusinessWeek National correspondent. Check out his story
on the Bloomberg and at Bloomberg dot com slash BusinessWeek.
Speaker 1 (11:32):
You're listening to the Bloomberg Business Week podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
on Apple card Play and then brought auto with a
Bloomberg Business app, or watch US Live on YouTube.
Speaker 5 (11:46):
Robert F.
Speaker 2 (11:47):
Kennedy Junior's selection to service President like Donald Trump's top
health official, is prompting questions from policy watchers over how
the pick will handle the range of health and really
key health policies that would fall under his per.
Speaker 4 (12:00):
He's an environmental lawyer and vocal vaccine skeptic. He's publicly
taken positions against food additives and immunization recommendations, but the
nominee for Secretary of the US Department of Health and
Human Services has been relatively quiet on many of the
other issues he would oversee while leading thirteen supporting agencies
in more than eighty thousand federal employees. So let's get
to the interview we got with US doctor Paul Offitt,
(12:21):
director of the Vaccine Education Center at the Children's Hospital
of Philadelphia, who joins us from Philadelphia.
Speaker 5 (12:27):
Doctor, good to have you with us.
Speaker 4 (12:28):
How might RFK Junior impact healthcare, food, medical research and
more here in the US.
Speaker 7 (12:35):
He is a very long anti vaccine activist. He is
a science denialist, and he is a conspiracy theorist. This
is not the kind of person you want to head
health agencies. I mean he has said that no vaccine
is a benefit. He has said that the polio vaccine
killed more people than it ever saved. He thinks that
HIV human and deficiency virus is not the cause of AIDS.
(12:55):
He's an AIGs denialist. He thinks we should drink raw milk,
which will put us one once again in a position
of risking things like campelo bacer and he call I
in salmonella. He thinks that the SARS virus was created
in the laboratory and specifically designed to spare Ashkenazi Jews
in Chinese and target whites and blacks. I mean, this
is the man you want to head health agencies.
Speaker 5 (13:18):
I don't think.
Speaker 3 (13:18):
So what scares you the most, Well, what scares.
Speaker 7 (13:22):
Me the most is is that that he now has
has a bigger platform to be anti vaccine. So I
mean He's always had a platform owing to the famous name,
but now that he's even considered for this position gives
him a certain level of credibility, which he certainly doesn't deserve.
Let's suppose you have a vaccine that is submitted to
the FDA for licensure, and it's it's excellent, and it's
(13:44):
better than what we've had. I think, you know, say
I'm on the FDA Vaccine Devisory Committee. Let's say that
we recommend a licensure, and then the FDA considers that
recommendation and degrees he could say, no, I think there
needs to be more study. Similarly, he could could try
and strip away the the CDC's capacity to recommend vaccines.
He could take the advisory committees to both those agencies
(14:05):
FDA and CDC and try and stock it with people
who are similarly like minded science denialists, such as himself.
I don't understand this. And when he talks about, for example,
something that makes sense, which is trying to make our
country healthier, decrease obesity, decrease type two diabetes and the
consequences of those disorders such as strokes and heart attacks,
I'm all for that. Great idea. But there are a
(14:27):
lot of people out there who could do that job
much better than he can given his science denialism.
Speaker 2 (14:32):
Doctor offittt on vaccine specifically, Robert F. Kennedy, as you know,
has often been referred to as a vaccine skeptic. You
call yourself a vaccine skeptic.
Speaker 3 (14:40):
What's the difference.
Speaker 7 (14:43):
A skeptic is somebody who says, prove it to me,
show me you're right. So when we sit around the
table at the FDA Vaccine Advisor Committee and consider vaccines,
as we did for the COVID vaccines, for example, in
December of twenty twenty, show us the data, prove that
it's effective, prove that it's safe, so that we can
then recommend it in good conscience. That's skepticisms. Skepticism is healthy.
He's a cynic. He's a vaccine cynic. He doesn't believe
(15:05):
the data. He thinks that there are dark, evil forces
working behind the scenes that are misrepresenting data. What he
doesn't realize is that there.
Speaker 5 (15:13):
Is no hiding.
Speaker 7 (15:14):
Even a farm pharmacytical company misrepresented data on safety or
efficacy that will soon be found out because there are
post marketing studies like that can be done by the
Vaccine Safety Data Link, where you'll know if there's a
problem immediately. There is no hiding, so his whole premise
is wrong.
Speaker 4 (15:29):
One thing that I've been wondering is how different are
we than other developed countries or other wealthy countries when
it comes to vaccine schedules.
Speaker 5 (15:38):
Doctor?
Speaker 4 (15:39):
Do we do things differently than other countries around the world.
Speaker 7 (15:43):
We tend to recommend more vaccines than most other countries. So,
for example, the chicken pox vaccine, which came onto the
market in nineteen ninety five is not used in a
number of developed world countries. They're willing to have children
suffer tricken pox. In this country, obviously, there would be
millions of cases of chicken pox a year, and there
be about about seventy five two hundred people who would
(16:04):
die off chicken pox, and there would be tens of
thousands of hospitalizations. So we thought that was worth eliminating.
But you know, not all countries felt the same way.
Speaker 4 (16:13):
Other than that, though, are there aren't big differences?
Speaker 5 (16:16):
No? No, For the most.
Speaker 7 (16:17):
Part, the developed world doesn't like children, so we would.
Speaker 4 (16:20):
So if you did over end up overseeing the CDC
and changing the recommendations we'd be an outlier in this
country based on some of the recommendtions that he could make.
Speaker 7 (16:30):
Right, I think his fanatical anti vaccine activismsm has already
scared people. I mean, if you look, for example, over
the last few years, our number of cases of measles
have increased dramatically. Last year we had three thousand cases
of protesterler hooping cough. This year we have seventeen thousand.
We've had more than two hundred children less than eighteen
(16:50):
years of eight dive influenza over the pasture. That's a
high number. So you're already seeing an erosion in trust,
already seeing an erosion in vaccine rates among kindergartens, and
as a content winch, you're seeing an increase in infectious
diseases that are preventable. It's unconscionable.
Speaker 3 (17:05):
I have to say.
Speaker 2 (17:06):
I have talked with colleagues and friends and associates who
have autistic children now adults, and who are open to
the idea that maybe vaccines cause this problem. So like
there is you know, I've had these discussions. I guess
what I wonder about, are we going to maybe depending
on what comes out If RFK is indeed our next
(17:28):
top health voice.
Speaker 3 (17:29):
Here in the administration.
Speaker 2 (17:31):
That will that potentially lead to maybe some kind of
ruling or mandate that comes down that says we don't
believe in vaccines and then are they not covered by insurance? Like,
how does this potentially play out realistically?
Speaker 7 (17:44):
Right? So, so there's the Vaccine for Children's program which
was born in the nineteen nineties and the Clinton administration
which basically covers about half of the vaccines in this
country for children who are either under insured or uninsured.
I don't think he could touch that. I mean, that's
really a congressional program. The Congress would have to agree
to that.
Speaker 5 (17:58):
I can't imagine that happening.
Speaker 7 (18:00):
He could make it more difficult to get insurance generally
for vaccines, making them more expensive for the consumer, that's possible.
I mean, I think he'll do everything he can to
lessen immunization rate.
Speaker 5 (18:10):
This is what he says.
Speaker 7 (18:11):
I think that, you know, the parents should make decisions
well with their doctor and basically pull the CCC out
of it. Let let us look at the real data.
And he's going to show us the real data because
only he knows the real data, because he's a conspiracy theorist,
it's hard to watch. I do think there'll be an
erosion in vaccine rates and regarding autism, it's fair to
ask the question, my child was fine, they got a vaccine,
(18:33):
Now they're not fine. Could the vaccine have done it?
That's an answerable question, and it's been answered. There's been
eighteen studies done in seven country on three con instead
have shown vaccines don't cause autism. It's question asked unanswered.
Speaker 3 (18:46):
Is the medical community, you know, gearing up to fight back.
Speaker 7 (18:51):
Yes, but again, you know we're not good at this stuff.
I mean I think, well, fight will certainly fight back
the way we knew how, which is which is to
try and present all the day that we know supports vaccines.
But this is really becoming a political issue. So I
think it's going to have to have a political solution.
I think we're going to have to find those senators who,
assuming there is a confirmation hearing, that are reasonable enough
(19:13):
to say that this is not the guy you want
in that position.
Speaker 4 (19:16):
So after RFK was announced, the Governor of Colorado, Jared Polish,
sent a post on accident said he was excited because
of a vaccine choice and he helped push back in
Colorado when it came to this particular topic, can you
share your view as to why it's important for lots
of people to get vaccines, because if it is a
(19:37):
parent's choice, and you know that parent chooses to get
their kid vaccinate against something, it's not necessarily that that
kid is actually protected if other kids aren't protected.
Speaker 5 (19:48):
Exactly right.
Speaker 7 (19:49):
So if you step on a rusty nail and you
go to the doctor and you say I don't want
a tennis vaccine and you get tetanus, no one's going
to catch tennis from you. It's not a contagious disease.
Measles is, influenza is, and others are. So a choice
not to get a vaccine is a choice not only
for yourself, but for those with whom you come in contact.
And remember there are about nine million people in this country.
You can't be vaccinated because they're getting chemotherapy for their
(20:12):
cancer or immute suppressive therapy for the autoimmune diseases. They
depend on those around them to protect them. Do we
have any responsibility for our neighbors? It is hard to
watch if you look what happened with Stars Kobe two,
those counties that were generally under vaccinated had much higher
rates of hospitalization and death than those counties that were
highly vaccinated, and that affects the people. If you're better
(20:34):
off actually being unvaccinated living in a highly vaccinated community
than being vaccinated living in a highly unvaccinated unity.
Speaker 5 (20:41):
That's wild to hear.
Speaker 4 (20:42):
What about the power of states and local municipalities over this?
For example, I have a kid in the New York
City public school district and he has to get a
certain number of vaccines in order to actually be able
to go to school. That's a way for them to say, Okay,
well we are making this choice, or for the parent
to make this choice to vaccine back their kids against
these things. Isn't their power there at the local level.
Speaker 7 (21:04):
Yeah, Well, mandates are state run. I mean, there's not
federal mandates. I mean the school vaccine mandates are done
by states, and different states actually have different vaccines that
they mandate. But we've had school mandates from the books
for decades. There was about by nineteen sixty four to five,
about twenty five schools states had school mandates. By the
mid seventies, that went up to forty by nineteen eighty one,
(21:25):
all fifty states had school vaccine mandates, and with that,
with the enforcement of school vaccine mandates, we went from
forty seven thousand cases of measles a year, seventy five
thousand cases of measles a year, one hundred and fifty
deaths from measles a year, to eliminating that disease from
this country by the year two thousand. But it's come
back in part because the critical percentage of parents are
choosing not to vaccinate their children.
Speaker 3 (21:46):
Yeah, numbers tell a story.
Speaker 2 (21:47):
Hey, listen, speaking of choice revaccination, You know, we do
have choices what to eat, We have choices. McDonald's is
clearly a favorite a president like Donald Trump.
Speaker 3 (21:58):
During the campaign.
Speaker 2 (21:59):
He even helps serve cuss at one restaurant. I got
to say, I'm a fan of their fries.
Speaker 3 (22:03):
Full disclosure.
Speaker 2 (22:04):
We've seen Donald Trump and RFK Junior and Elon and
others chowing down on McDonald's together.
Speaker 4 (22:09):
Oh, to be fair, rfk's holding the burger. He's not
chowing yet.
Speaker 2 (22:12):
Yes, okay, so maybe he's just holding maybe the little
osmosis going on there. Just got about thirty seconds here.
I do think about the role of Donald Trump, what
impact he might have in terms of his thinking about
health and medical care and all that good stuff. I mean,
we saw what he did during his first term with
COVID and getting a vaccine, So how do you think
(22:33):
his impact might be on what goes on in this area?
Speaker 3 (22:36):
And again, just got about thirty seconds.
Speaker 6 (22:39):
Now.
Speaker 7 (22:39):
I think he's hard to predict Donald Trump. But I
think that scene though, with him sitting there and Elon
Musk and RFK Junior and Mike Johnson and others eating
eating Donald's, I think my take home from a message
from that scene was Donald Trump telling Robert Kennedy Jr.
You'll eat what I tell you to.
Speaker 5 (22:57):
I believe.
Speaker 4 (22:58):
Donald Trump Junior retweeted that and said the Make America
Healthy Again starts tomorrow.
Speaker 2 (23:03):
So I gotta say I love a happy meal as well.
Doctor Paul Offit, this was a treat a pleasure. Thank
you so much for finding time for as doctor Paul Offfitt,
director of the Vaccine Education Center the Children's Hospital of Philadelphia.
Speaker 1 (23:17):
You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 4 (23:35):
Well, we talk a lot about the performance of the
S and P five hundred and the Nasdaq one hundred.
By the way, the S and P five hundred up
more than twenty three percent so far this year, the
Nasdaq one hundred up more than twenty two percent.
Speaker 5 (23:45):
Large caps and megacaps have done well this year. We
know that small caps not so much. The RUST two.
Speaker 4 (23:50):
Thousand only up around fourteen percent so far this year. Well,
Mike Road thinks that could be about to change. He's
senior investment director at American Century Investments. They've got about
and sixty billion dollars in assets under management, forty five
billion of which is invested in actively managed small cap strategies.
Mike joins us here in the Bloomberg Interactive at Brokers Studio.
Speaker 5 (24:10):
Mike welcome.
Speaker 1 (24:11):
Thanks.
Speaker 4 (24:12):
Single biggest catalyst in your view in the last few
weeks for small caps or right now for small caps,
what is it?
Speaker 8 (24:18):
Yeah, it's say the Trump election for sure, and the
red wave.
Speaker 3 (24:22):
There was an election.
Speaker 8 (24:22):
There was an election breaking news, I think, but that
really just through fuel on the fire that had already started.
Around July, you started to see a market rotation towards
small caps. What you have is expected earnings growth of
nearly eighteen percent next year. That's higher than midcaps, that's
higher than large caps. Rather magnificent seven still growing a
(24:45):
twenty percent plus next year, but that's slowing, whereas you
have accelerating earnings for small caps, which have actually had
negative earnings the last two years. So you're coming out
of a small cap earnings recession and you're getting acceleration
into next year, and we think that that's to be
a real growth driver for the ASA class.
Speaker 2 (25:01):
So the expectation what that the US economy is going
to do better, maybe tariffs push back on foreign imports,
and so that's good for those smaller cap companies that
tend to be here in the US focused on the
US doing work in the US.
Speaker 5 (25:13):
Yeah, exactly.
Speaker 8 (25:14):
So small caps get about eighty percent of the revenue
from inside the United States. So if you're positive on
the US, the best way to play that is with
small caps, and restoring has been a major positive catalyst
for small caps in terms of again bringing manufacturing back
to the US, and with Trump getting elected and tariffs
are likely kicking in. That's probably going to accelerate restoring
(25:35):
even more, and small caps are the best way to
play that.
Speaker 1 (25:37):
Mike.
Speaker 2 (25:37):
One thing I wanted to ask you since the election,
what have you seen in terms of investment flows, Because
if you look at the russell is up about two
percent since the election, it's pretty much the same as
the S and P five hundred.
Speaker 3 (25:47):
Where has money been going into since the outcome?
Speaker 8 (25:50):
Yeah, so there's been about eight billion that's flown in
float into the small cap etf since November. That's pretty good,
but you actually saw ten billion in July when the
thought was that rates where we were starting a kind
of rate cut cycle. So you still haven't seen it. Now.
If you look at how large small caps are in
terms of the percentage of the broader US equity market,
still less than four percent. That's fifty percent below average,
(26:14):
and the last time it was this low was the
nineteen thirties. So small caps have been a forgotten asset
class institutionally. And you get a lot of agreement that
small caps are the place to be over the next
twelve months, but you haven't yet seen the flows.
Speaker 3 (26:28):
I feel like we have.
Speaker 2 (26:28):
Been talking about everyone saying, here's the reason to buy
small caps for a.
Speaker 5 (26:32):
Long time, say it, yeah's international.
Speaker 2 (26:35):
Yeah, And yet you're saying it's not like everybody's running in.
Speaker 8 (26:39):
Yeah, not yet. But I think that's actually, frankly a
good thing. It's kind of the empty room. I think
now is a good time. There's a lot of expectation
out there for earnings to accelerate next year. I think
you're going to have to start to see that now.
I was at a regional bank conference two weeks ago,
was the day after Trump got elected.
Speaker 3 (26:55):
Digital banks have done really much.
Speaker 8 (26:57):
Better recently after two years of misery. Uh, and the
CEOs were literally was it literally? But like Jamie Diamond said,
dancing in the streets right doing the Trump dance because
they're they're most excited.
Speaker 2 (27:09):
About someone in the newsroom who does the Trump dance
really well.
Speaker 5 (27:12):
But I'm not gonna try.
Speaker 3 (27:13):
We're going to table that.
Speaker 8 (27:14):
But deregulation is going to really benefit regional banks, and
regional banks are also a big beneficiary of restoring right
when these big new projects get started, you need to
you need funding for those projects, and regional banks are
really going to drive the growth in these kind of
mini regional economies around the country.
Speaker 4 (27:32):
Like, what happens if the FED doesn't lower rates to
the extent that a lot of people think, they, well,
what happens if inflation doesn't come down to that two percent?
Speaker 5 (27:40):
Crazily?
Speaker 8 (27:41):
Yeah, that is that is the question I think that
I think you have to ask the next question why? Okay,
so why and what does the yield curve look like?
So if we have growth outpacing, if growth it starts
to accelerate right three percent plus next year in part
due to Trump's policies, and inflation doesn't come right down
to two percent, I think that's okay, that's good news
(28:02):
is good news and growth Trump's no pun intended inflation,
it's And then the second part of that is more
about this shape of the yield curve. So, yes, rates
not be there might not be eight rate cuts next year,
But if you have a steepening yield curve, that's a
really good environment for small caps. We had an inverted
yield curve for two years. That's really tough for banks
(28:23):
and for other spread type businesses. And as that yield
curve reinverts, that's just a really good environment. So I'd
say focus more on the shape of the yield curve
as opposed to the absolute interest rate number or how
many how many times the Fed will cut.
Speaker 3 (28:36):
So the flattening out that we've seen in the belly
of the curve not great.
Speaker 5 (28:40):
Not great, not great.
Speaker 8 (28:41):
But I think if you believe that we're going to
have an accelerating GDP over the next couple of years
because of Trump's policy, small caps are the biggest beneficiary
of that.
Speaker 2 (28:49):
But if we have an accelerating GDP and we have
too much money back in the economy, which leads to inflation,
we know from Fitcher jpow we're not quite there yet.
I do think about the implications of that and the
impact that they could have on small caps or other sectors.
Speaker 8 (29:03):
Yeah, I think it comes down to that, why do
we have inflation? Is there too much money flooding the systry?
Speaker 3 (29:09):
Do you think we have too much inflation.
Speaker 5 (29:11):
Right now or in the future? Yeah?
Speaker 8 (29:14):
Yeah, right now, I think we're still we still have
that hangover from all the COVID spending going forward. If
you have there could be an increase in inflation coming
from the tariffs, right or the threat of tariffs, and
most of these companies will probably price that through to
the end consumer.
Speaker 3 (29:31):
Or tax breaks some have said.
Speaker 2 (29:32):
I mean, what's interesting is we had actually a listener,
a Bloomberg terminal users say, listen, we got to push
back a little bit on tariffs and the impact on inflation,
because you know, maybe there have been economists and folks
on our air that have also said maybe that's not
the case.
Speaker 3 (29:46):
So we'll have to see on that one.
Speaker 2 (29:48):
But I do think about tax cuts creating more velocity
in terms of money in the system, that could be Inflationay,
we just.
Speaker 3 (29:55):
Heard that with our Josh Green.
Speaker 4 (29:56):
What about immigration policy and the labor market something I
think about a lot. According to the Center for Migration Studies,
there are about eleven point seven million undocumented.
Speaker 5 (30:09):
People here in the US.
Speaker 4 (30:11):
If they get deported in a very short period of time,
there are gonna be a lot of people who are
looking to fill jobs.
Speaker 5 (30:17):
Yeah.
Speaker 4 (30:18):
Yeah, a lot of managers looking to fill for sure.
I think I'm wondering what that does to the labor market.
Speaker 8 (30:22):
Yeah, I think the labor market is more in balance
today than it was just a couple of years ago.
So yeah, the immigration, that's that is a potential risk
to the inflation environment. But if you're getting that inflation
because the economy is growing and there's more supply chains
being built out here in the US. I think that's
a good thing if you get it in the fundamentals
(30:44):
of these small cap companies. If you're getting that ten percent,
fifteen twenty percent earnings growth, and all research shows that
dollars follows earnings growth, and I think that's going to
be viewed as a positive thing.
Speaker 2 (30:54):
Although voters have said they don't like inflation, and that
was a clear mandate. Hey, listen before you go, got
about a minute left here, Let's talk groups.
Speaker 3 (31:00):
What do you like in this environment? Which you like?
Speaker 2 (31:03):
Yeah?
Speaker 8 (31:03):
I think banks mentioned it's uh, regionals. Yeah, they've had
they've had a bit of a run since Trump was elected,
but they're still trading at a discount to where they
were when Trump was in the office the first time.
And I think the sentiment is so negative. You have
commercial real estate fears which are unfounded so far, credit
cycle unfounded so far. They're kicking off pretty good dividends,
(31:26):
and they're under owned by most institutional investors. So I
think there's still room to run in regionals.
Speaker 5 (31:31):
What about when it comes to some of the retailers
out there. Yeah, I think.
Speaker 3 (31:34):
Okay, so that's the reporting this week.
Speaker 8 (31:36):
Yeah, yeah, you know, if you look at the consumer,
I think we like to say it's trifurcated right that
the high end consumer is still doing really well. Low
in consumer if you look at the dollar stores, pretty tough.
But we believe that there's some areas that are bouncing
off of the bottom. So if you look at boats,
boats have fallen off a cliff. They're down fifty percent.
But we think there's a bottoming and we think we're
(31:57):
going to see improving numbers going forward. So it's all
about that acceleration. So we're getting that off of the bottom. Boats,
r v's potentially housing, We'll have to see what happens
with housing. That would be a good catalyst for small
caps very quickly.
Speaker 2 (32:10):
Energy you like it. If there's more drilling, there's more pumping,
more supply. Won't that be hurt?
Speaker 5 (32:15):
Yeah?
Speaker 3 (32:15):
Does that hurt the group just quickly?
Speaker 8 (32:17):
No, it's and it goes back to that really to GDP,
if you have an acceleration in demand, it should offset that.
The other biggest Yeah, yeah, well, I think the biggest
thing that we look at is the quality levels at
these E n p's and the small cap side, they're
they're much more better run than they were five or
ten years ago.
Speaker 3 (32:36):
Micro good stuff come back soon. This is this is
Bloomberg Business Week, mark.
Speaker 5 (32:46):
A journal.
Speaker 2 (32:47):
Now about you let me drive?
Speaker 1 (32:49):
No, no, honey, please, I'll.
Speaker 2 (32:55):
I want to drive. It's a good question time.
Speaker 1 (33:03):
This is the drive to the globe communing well, lad
on Bloomberg Radio.
Speaker 2 (33:11):
All right, TikTok, everybody, Just about eighteen minutes left in
today's trading session here on this Monday, we've got like
games as you just heard from Charlie and the S
and P five hundred outperformance in the Nasdaq one hundred
up about one hundred and forty five points, good for
gain of seven.
Speaker 3 (33:25):
Tens a percent. Wasn't so great for stocks last week.
Speaker 2 (33:28):
But again, earnings are going to be front and center
with Nvidian, a few others reporting us.
Speaker 4 (33:31):
Yeah, we're gonna hear from the retailers, many of the retailers,
so we've got a good read on the consumer. Let's
see what Jeff McLain has to say about this. He's
a ceover at Solidarity Wealth. It's a wealth management firm
based in Utah. They've got about six hundred million dollars
in assets under management. Jeff joined us here in the
Bloomberg Interactive Brokers studio. I'm wondering what's top of mind
for your clients right now when you're out there talking
to them.
Speaker 5 (33:52):
What are they asking you? What do they want to know?
Speaker 9 (33:55):
Yeah, I think a lot of it is election related.
I mean, what does the next four years look like
in the excitement or nervousness depending on the political backgrounds
of where they're looking at the markets From our perspective,
I mean, I think in either case, you were going
to have some consistency of the current administration continuing on
or Trump. We've we've kind of seen the show before.
It'll be different people involved, but we kind of know
(34:17):
what's coming, and you're seeing that a little bit in
the market of a bit of steadiness associated with it.
You're essentially going to have divided government with the house
being so tight, it'll be incredibly tight if anything in
the house. You think so, Yeah, I think as you
talk about the people he's named, they're going to have
to give up their spots in the house.
Speaker 5 (34:36):
You have a few lives.
Speaker 2 (34:37):
I wonder if there's somebody with a whiteboard said hey, wait,
his name is Speaker Johnson.
Speaker 9 (34:42):
Yeah, and I don't think they're being that strategic and
so divided government's good for the markets, right, nothing's crazy
going to happen.
Speaker 4 (34:50):
I would think they are being strategic because they want to,
you know, and that's stuff done. Jusie Wilds, the incoming
chief of Staff, made the point at a fundraiser last
week in Las Vegas that was basically like this, according
to New York Times, that hey, we got two years
to get everything done because the history, you know, books
show that if you have a trifecta in government, it's
not forever.
Speaker 9 (35:10):
Yeah, that's true. But at the end of the day,
special elections that are going to have to come up
to replace those seats. Republicans do terrible in special elections historically,
and so I think at the end of the day
the House will be divided, which again I think is good.
Nothing crazy can happen if you start with a proposition
like I do, that most government officials are not great
(35:31):
people and they're going to trade in their own self interest.
Divide is great.
Speaker 5 (35:35):
They can't do anything. There's a lot of places I
could go with that, because.
Speaker 4 (35:41):
Where do you want to go, well, is that a
concern to you in terms of the way that the
government has been run in the way that the government
potentially will be run in the new administration. There are
a lot of folks very close to the president who
have a lot of money.
Speaker 9 (35:56):
Yeah, and I would say that's always true, right, Whenever
there's power, money is attracted to it, and so that's
always been the case. I think long term is that
a problem?
Speaker 1 (36:04):
Yeah?
Speaker 9 (36:04):
Short term, no, I don't see any issues there. I
do think some of the changes they're going to make
do help certain sectors over others. Right. RFK Junior Pharma
has obviously traded down since that name was nominated to
the position.
Speaker 5 (36:19):
That's probably justified. We'll see if he gets confirmed.
Speaker 9 (36:22):
Yeah, that's a big if.
Speaker 2 (36:23):
All right, So the week after the election, I'm going
back to not last week. Last week's stocks were down
about two percent. If I'm looking at the S and
P five found to the prior week, they're up about
four point seven percent. So we've seen a little bit
of a correct but not all the way back. I mean,
are what we're seeing right now is all right, some enthusiasm,
but we don't really know what policies are ultimately going
to be put into effect. So hold on, everybody, kind
(36:45):
of slow your role and let's see. Yeah, it's a
long h Is there anything that you feel like you
can bank on right now in terms of a Trump
administration what it means for playing the equity term?
Speaker 9 (36:53):
Yeah, from a long term perspective, all that right now
is noise. From a short term trading perspective, volatility is
going to continue spike with every new announcement, depending on
because he's not going to nominate an you know, steady,
keep it as it is type person. He's just not
And so every new announcement's going to drive volatility and.
Speaker 3 (37:11):
A specifically it kind of did in the first term.
Speaker 5 (37:13):
Yeah, and it did, but.
Speaker 9 (37:14):
You're going to see that with the Treasury whoever he
names in the cat fighting that's involved right now, whoever
he names, you're going to see some trades based on
whoever that is, depending on if it's someone from a
traditional finance background or is it someone outside right an
unknown to the financial world.
Speaker 2 (37:31):
I got to say these conversations. I like macro, but
it's like, okay, so what do we do? Yeah, because
if you've got a portfolio you're thinking about it. I
think about investments.
Speaker 3 (37:40):
I'm like, what do I do do?
Speaker 2 (37:41):
I like, you know, things have had a nice little
run this year, but is it going to get a
little sketchy next year?
Speaker 3 (37:46):
We just don't know. So what do you say? You are,
you know, responsible for managing the wealth of your clients.
What do you do right now?
Speaker 2 (37:55):
Have you made any changes to portfolios since the election outcome?
Speaker 1 (37:59):
Yes?
Speaker 9 (38:00):
Yes?
Speaker 3 (38:00):
What have what have you done?
Speaker 9 (38:01):
And so you know, I think part of that is
trimming allocations in certain segments and areas that aren't going
to do well. So, generally speaking, defense could be a problem. If,
for example, you own Lockheed Martin, right, they are going
to be a target of what the VEC and Elon
Musk are doing. They're no bid contracts, probably not going
to be looking good here in the next couple months.
(38:22):
If Elon Musk and his team are successful. Another group
that could be.
Speaker 2 (38:27):
Until senators and members of Congress and House reps saying.
Speaker 5 (38:31):
By the way, our constituents are pretty upset about this.
Speaker 9 (38:33):
Yeah, yeah, there is part of that. But remember, from
an administrative law perspective, presidencies have enormous power to do
things independent of Congress. And both administrations, and so they
can drive significant change just changing the no bid contract
thing alone to ban any no bid contract. That's a problem.
Speaker 3 (38:53):
What does that mean? So nobody can bid?
Speaker 5 (38:55):
Right?
Speaker 9 (38:55):
So they directed directly to Lockheed Martin. If you win
this contract and it's not an open process for that
government contract, which are billions and billions.
Speaker 3 (39:04):
Of dollars, you've seen opposite of what it's You've.
Speaker 9 (39:06):
Seen Elon Musk fight this from his side of saying, hey,
we can do these things. We're doing the way cheaper
than NASA and all these other things. But yet NASA
is getting these or Boeing is getting these gigantic contracts
and are not performing.
Speaker 3 (39:18):
So tripping defense, what else have you been doing for
your clients?
Speaker 9 (39:21):
I think Boeing's and although I agree with their CEO change,
I think that's a good move. I think long term
Boeing could be good. From a short term perspective, Boeing's
problematic for a variety of reasons. That has been and
I would argue it's going to continue to be problematic
from a go forward. I think there's also some trading
opportunities and what I would call the anti ESG trade,
(39:44):
Those kind of industries that aren't favored in the EESG
where that's at times defense like pell and Teer, which
will probably be a winner from this administration. Oil and gas,
although not broadly like your Exon or Chevron, But think
of the pipeline type of producer and those actually pulling
the minerals out of the ground.
Speaker 5 (40:02):
Even if we see a decline in demand.
Speaker 9 (40:04):
Or yeah, I think from a long term they have
some great opportunities because you're more likely to find value
there because the huge part of return is what you're
buying it for. Because of the disfavored nature of those industries,
you can get better valuations than the broader market, and
so over time that's going to play out. Even if
some people want to hold their nose at it, we
(40:25):
still need oil, it funds just about everything in our society.
Speaker 2 (40:29):
You're the second person today that is looking at small caps.
Forgive me only about twenty five seconds. You like small caps,
put money there, or you are putting money there.
Speaker 9 (40:37):
We are, and I like it from a go forward perspective.
You have to be careful, right, not all small caps
are created equal, but yeah, small caps can be an
incredible opportunity right now based on valuation simply compared to
large caps.
Speaker 3 (40:50):
All right, we gotta leave it there. Of course we
had more time. Good stuff, come back. Thank you really appreciate.
Speaker 2 (40:54):
Jeff McLain's chief executive officer at Solidary Wealth.
Speaker 3 (40:57):
As we said, they're based in Utah.
Speaker 9 (40:59):
Yes, right now, all right, ski season is here, come
to Utah, skier.
Speaker 3 (41:04):
Have you ever ski in Utah?
Speaker 5 (41:05):
Of course, of course he has a crazy flight.
Speaker 1 (41:09):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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