December 17, 2025 • 31 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Volatility lashed Wall Street, pushing high-valuation technology shares and crypto lower while bonds pared losses after a senior Federal Reserve official signaled room for rate cuts.
A tech rout hit stocks amid growing skepticism about the artificial-intelligence trade. Nvidia Corp. sank 3.8%. Losses accelerated as the S&P 500 breached a key technical level, with the index down 1.2%. The Nasdaq 100 slid 1.9%. In late hours, Micron Technology Inc. gave an upbeat forecast.
Even the slightest hint of trouble around data centers is enough to spook investors banking on the AI boom. The latest hiccup revolved around Oracle Corp.’s financing for a data center in Michigan. While it’s largely moving along, Blue Owl Capital, a longtime partner in its AI infrastructure build-out, is not contributing equity. The shares sank.
For years, investing in big techs has been a no brainer, given their stalwart balance sheets. Now, there’s concern over whether the sector — which has soared during the bull market — can keep justifying its lofty valuations and ambitious AI spending.
Today's show features:
- Matthew Luzzetti, Chief US Economist for Deutsche Bank, on the labor market, inflation and the economic outlook
- Alli McCartney, Managing Director of Wealth Management with Alignment Partners at UBS, on key market indicators as the new year approaches
- Mike Bellin, US IPO Leader at PwC, on the IPO market outlook for 2026 and Bloomberg News Equities Reporter Natalia Kniazhevich on Medline’s first day of trading
- Katie Hubbard, President of US Capital Markets at Walton Global on earnings from Lennar and the US real estate landscape
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business Week,
Daily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy. Plus global business finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2 (00:32):
All right, so let's talk about the next era of
the essential bank and more here with us once again
in studio Matt Lazetti, he's chief US Economist, head of
US economic research over at Deutsche Bank. Good to have
you back with us. It does feel like we're trying
to figure out who's next. You do actually write specifically
about a Warsh nomination and what it would mean for
the Fed. Does it really matter who ultimately will be
(00:54):
as FED share since it is one vote and.
Speaker 3 (00:56):
An important vote.
Speaker 4 (00:57):
Yeah, So you know, we've had to as this news
of alls of right just about everybody that's a front runner.
So we were at a hasset piece before, you know,
months ago, I think we were talking about Governor Waller
and why we thought he could have been a very
good candidate for FED chair. But so the question of
does it matter, I mean the market is pricing it
like it does matter. There's a premium in the June
FOMC meeting. We're building in more rate cuts at that
meeting than the surrounding meeting. So the market is pricing
(01:19):
something happening as that transition takes place. I think we're
a little bit more skeptical of how much it can matter,
you know, clearly, I think Chairpal has mattered recently. I
think you don't get the December rate cut without Chairpal
essentially pushing it through what is a very hawkish committee
at this point in time. But I think he built
up that confidence, the credibility within the committee of a
period of time. Just somebody coming in from the outside
(01:42):
with a more dubbish view is not going to be
able to get this hawkers leaning committee to cut rates
aggressively upfront.
Speaker 5 (01:47):
Of the candidates who are the reported front runners. Is
there one who would send a signal to you, or
maybe send a signal to the markets that the Fed's
independence is at stake.
Speaker 4 (01:59):
Yeah, I think that there's you know, lots of questions
around this. I think when you kind of see surveys
Kevin Hassett raises some of the most concerns around FED
independence and kind of commitment to get inflation back down
to target. And I think that's somewhat quite natural. I mean,
he's been in the President's orbit for a period of
time here, he's been an economic advisor for the president.
He's been calling for aggressive ray cuts at this point
(02:21):
in time. All these candidates are doing so at this point,
as we heard from Governor Waller recently. And so I
think whoever it is the next FED chair is going
to have to earn the market's trust that they are
going to commit it to bring inflation back down to target.
And I expect the market to challenge that a little bit.
Speaker 2 (02:37):
Hey, Matt, you know the New York Times rights next
FED share in a no win scenario selection process draws
to a close and they go on to say the
person pick to replace Jerome Powell will be thrust into
a credibility problem that will be difficult to escape. Is
that the case? And I also wonder, you know, sometimes
you get into a position and you realize the weight
of a position, and we know what the FED does
(02:58):
means a lot, not just to the un less markets,
but to global markets.
Speaker 4 (03:02):
Yeah, so, you know, I think it is the case
that there's going to be a challenge for this this
next FED chair coming in. They come in almost with
a mandate to cut rates meaningfully. The President has called
for the FED funds right to be down close to
one percent, near the lowest in the world. And yet
even though Governor Waller said that inflation is under control,
core PC inflation is at two point eight percent, it's
still eighty basis points above their target. We're now four
(03:23):
and a half years in well above target inflation, and
all the market's pretty sanguine about the inflation outlook. You know,
we do have a stronger growth outlook next year. We
have fiscal stimulus that's coming through the pipelines.
Speaker 6 (03:35):
It's great.
Speaker 4 (03:36):
It actually looks like a pretty good outlook from a
growth perspective, and then a question of does that feed
through into higher inflation pressures?
Speaker 5 (03:41):
What about the labor market in your view? We got
some data yesterday. It was weird to say jobs Tuesday
over and over. It's partial data, and we'll get some
inflation data tomorrow. But the jobs market, how does it
look into you?
Speaker 4 (03:52):
So so the way we've been describing it, and I
think yesterday was another case of this. It's a rorshack
chest for how you think about the labor market. Each
of the these reports has good elements and bad elements.
I think yesterday's report had strong job gains. It had
a broadening out.
Speaker 7 (04:05):
Of job growth.
Speaker 4 (04:06):
We've seen the private sector rebound. We had negative job
gains in June. Past three months have been seventy five
thousand plus in terms of private sector job growth, so
that's all quite solid. The weakness was in the household survey.
You saw the unemployment rate rise to four point six percent.
Broader measures of labor Marcus Slack actually picked up more.
I think importantly. At the December meeting, Chairpal highlighted why
(04:26):
we should discount that data. It's coming right around the
government shutdown. We thought that there's gonna be distortions to
that household survey, so FED pricing hasn't really moved all
that much on the data. I think far more important
will be the December job support that we get in
early January.
Speaker 2 (04:40):
So the worst case scenario is we've got inflationary pressures
which sound like they could be coming in the new
year because of some of the stimulus measures that we're
certainly getting from the White House, Matt. But if we
have more inflationary pressures, but we continue, if we get
some confirmation the December numbers that yes and d there
is job weakness and maybe it's continued, that's a tough predicament.
Speaker 6 (05:03):
It is.
Speaker 4 (05:03):
I think it's, you know, a direction of travel towards
stagflationary type impulses for the economy. It is what most
economists and we thought you would get out of very
large tariff increases. And so I think it is beginning
to work its way through the economy. I think what
we've learned though, however, is you know this FED under
chair pal and undoubtedly I think the next SPED. If
you have weakness in the labor market, they will respond.
(05:25):
They've responded last year by cutting by one hundred basis points.
They responded this year by cutting by seventy five basis points.
Our base cases that the labor market stabilizes enough over
the next seven months that the FED does not cut
in the first half of the year. But look, if
you get confirmation that the entreplane rate is four point
six percent are above, I think the FED cuts in
the first quarter.
Speaker 2 (05:42):
All right, good stuff getting ready for twenty twenty six.
Speaker 5 (05:45):
Come hanging out with us in the first quarter.
Speaker 4 (05:47):
I would love to be comeback.
Speaker 2 (05:48):
We would love to have you back, Matt. Thank you
so much, Thank you. Happy holiday is, Happy New Year.
Matt Lazetti. He's chief US Economist, head of US economic
research for Deutsche Bank.
Speaker 5 (05:57):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (06:05):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
US live weekday afternoons from two to five East during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch US Live on YouTube.
Speaker 5 (06:19):
So we just saw about the least Deutsche Banks. Is
Matt Lazetti all about the Federal Reserve and his view
on what the next fedshair has in front of him
or her, depending on who it is. I'm guessing our
next guest has some thoughts on the FED and what
it means for financial markets. Back with us. Ali McCartney,
Managing director of wealth management and private wealth advisor with
Alignment Partners at UBS just over a billion dollars in
(06:41):
assets under management. She joins us. Here in the studio,
we're going to talk about the markets and today's moves
and sort of big picture what you're looking at. But
we got to start just with the FED and how
you're thinking about the next FED.
Speaker 3 (06:51):
Shair next year.
Speaker 8 (06:54):
And the Fed is going to depend all about It's
going to be policy and politics, right I'm not sure
comes first. Market seems to be about fifty to fifty
on whether we have a cut in January. We think
you see two cuts next year, one in the first
half of the year, one in the second. I think
it will be largely dependent on who's in charge, what
(07:16):
the inflation is that we see coming into the market,
whether it's from healthcare. We were talking in makeup chairs
about the increase in cost of healthcare for you know,
average people going up almost one hundred percent, as well
as as tariffs pushed through from like later this year.
But it is, in a sense, it is anyone's guess.
(07:36):
The market seem to be pricing and playing as if
they know there are further cuts. It's just not clear
when or how profound. You know, if you look at
the last Federal Reserve dot plot, you could sort of
drive a truck through whatever neutral is.
Speaker 3 (07:52):
I think it was two to four percent was about
of a range, you know.
Speaker 8 (07:55):
So I think you basically have tailwinds that are we
know that earnings are going to be you know, decent
to good. We know those are going to broaden out
a lot just from the IT trade. So that's you know,
one of the things. Fiscal policy, especially in the first quarter,
is going to be major as a result of both
income tax sort of rebates as well as corporate spending
(08:19):
initiatives and accounting issues that are going to propel both
earnings and cash on balance sheets.
Speaker 3 (08:25):
And then again you know the FED will be part
of this for sure, Allie.
Speaker 2 (08:29):
When you look at twenty twenty six, yeah, and I
just think about I want to think about this year,
like how we thought things were going to go initially
when President Trump came back to the White House, how
it played out April Liberation Day, Like, I think we
were all whipsawed in terms of our expectations and ultimately
kind of how it all laid out. And I think
(08:51):
we thought this was going to be a disastrous year,
and yet I look at the major equity averages not
so shabby. Certainly again if you're a bull in this market.
So I mean, and I don't know, is this a
reminder that it's going to be maybe hard to get
next year to make calls or is it different.
Speaker 8 (09:06):
Well, was it hard to make calls this year? So
you had to get two things right. You had to
understand two things. You had to understand what AI was
going to become in terms of a movement from the
chief constraint being chips to the chief constraint where we
now sit. And I think what's moving the market today,
which is energy and land for data centers.
Speaker 3 (09:30):
And you had to get Trump right.
Speaker 2 (09:33):
So okay, not those are difficult.
Speaker 8 (09:35):
Those are very difficult. You also could have simply been
long beta on the concept.
Speaker 5 (09:41):
Of earnings, meaning you just throw money in the meaning.
Speaker 2 (09:44):
Exactly and tough moments, but you would have done exactly
next year.
Speaker 8 (09:49):
I think it becomes I think actually, if i'm if
I'm thinking back to where I was a year ago,
it becomes a little easier in the following. While I
can't say that I or we can get Trump right,
I think we can get directionality and maybe short term
(10:09):
volatility we can dampen because we know it largely leads
to what he wants he gets, which is mid or
longer term markets up. I think he does care about
market dec does care very much about market direction. I think,
you know, the craziest thing about getting Trump right or
wrong was he told us exactly what he was going
to do. You know, he told us via press conferences,
(10:32):
via other people, the uh you know, social media, and
so if you went with him, you got things right.
I think this year things are going to be a
little so I think they're going to be a little
easier in the broadening out of earnings.
Speaker 9 (10:47):
Right.
Speaker 8 (10:47):
So if you look at, for example, the S and
P five hundred or the Nasdaq this year, what you
got was the AI trade contributed to about seventy five
percent or eighty percent of what ultimately became the upside.
So if you look at the next best contributor is
financials at one point seven percent.
Speaker 3 (11:05):
Right next year, I think you're going to get some
broadening in that.
Speaker 8 (11:08):
I think industrials, materials, financials, healthcare are going.
Speaker 3 (11:13):
To play into that.
Speaker 5 (11:14):
What happens if the promise of AI doesn't come to pass.
Speaker 8 (11:19):
That's the biggest risk case. I think the biggest risk
case for next year is for investors, or economists or
policy makers, is that we got AI wrong. The infrastructure
it's not if you build it they will come. It's
not that we start to democratize and deepen.
Speaker 5 (11:34):
It's a big bet.
Speaker 3 (11:35):
It's a big bet.
Speaker 8 (11:35):
And today that bet in terms of what's been coming
out around blue out and financing, because one of my
biggest takeaway from a four day AI conference two weeks
ago that ubs through is that this is all about
debt financing. There is not enough private debt and there
is not enough capital on the balance sheets of the
(11:58):
non hyperscalers to get us where we need to be
in terms.
Speaker 3 (12:02):
Of AI, and so it has to be debt. Capital
markets Oracle is Exhibit A.
Speaker 8 (12:08):
This is so to me, this is I literally left
there going, oh, I understand what the constraint is.
Speaker 9 (12:13):
Now.
Speaker 8 (12:13):
I understand the difference between a let's say, a core
we even how they talk about how they finance right
asset backed you know, triple A companies, and how the
market has been responding to that finance. I understand the
private debt market and the private equity market saying we
can only do so much in terms of what's needed,
(12:36):
and so capital markets and public individuals have to come in.
Speaker 3 (12:40):
And so I do think that's the biggest risk.
Speaker 8 (12:42):
But I can also tell you from that conference and
the conversations I've been having that this is truly revolutionary
and moving to the bottom line in a way we've
never seen before, and that whether it's creativity in the
financial markets in the structural markets, that the the productivity
increases and the changes to both costs and revenue generation
(13:07):
are are you know, we really are an inflection point
that can support different multiples.
Speaker 2 (13:11):
And the Oracle story is oracles financing for data center
in Michigan progressing, but Blue Owl Capital, which has been
a longtime partner in Oracle's rapid AI infrastructure build out,
opted not to contribute equity.
Speaker 3 (13:25):
So it's so that's.
Speaker 8 (13:27):
Exactly what we're talking about right now. It is a closed,
finite ecosystem right and in order to get where we
need to be going, it has to.
Speaker 3 (13:34):
Get much bigger.
Speaker 2 (13:35):
Ally McCartney, Managing director of Wealth Management and private wealth
advisor for Alignment Partners over at UBS.
Speaker 3 (13:41):
Thank you so much.
Speaker 5 (13:43):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 6 (13:52):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2 (14:11):
All right, everybody, another ipo, getting it in just under
the deadline of twenty twenty five, I mean the end
of the year. It's the biggest initial public offering of
this year. We're talking about Medline. It makes and distributes
medical supplies such as gloves, gowns, exam tables. You've all
warned them probably at one time or another. It's used
by hospitals and doctors. I mean, it's just kind of
(14:32):
like playing Vanilla in terms.
Speaker 10 (14:33):
Of a company.
Speaker 5 (14:34):
Yeah, but this one is widely anticipated. The stock just
surging in its first day of trading, was up earlier
more than twenty percent. Carol now thirty one percent higher.
Speaker 3 (14:42):
Yeah, like out like just out of the gates, you know.
Speaker 2 (14:45):
Here, So we wanted to talk a little bit about it.
There you can see the real trade thirty two percent
to the episode. Bloomberg News Equities reporter Natalia Kidney Javich
is with us, why we're investors just so interested in
this IPO? I mean it was oversubscribed according to the
in the now many times over exactly.
Speaker 7 (15:02):
I think like every IPO, most of IPOs are over subscribed,
but this one in particular shows that investors really want
to see established businesses with clear profitability.
Speaker 1 (15:14):
Of course, it is a.
Speaker 7 (15:14):
Profitable business, it's been here for a while. The company
was founded in nineteen sixty six, so yes, it was
over subscribed. Demand was really strong across long Gonel investors
as well, and the company marketed shares between twenty six
and thirty dollars priced at twenty nine. Now it is
trading in thirty seven. It is a pretty successful story.
Speaker 5 (15:35):
Yeah, a lot of big name Wall Street firms, private
equity investors involved in this one, the backers and firms
who were involved. It's pretty much everybody exactly.
Speaker 7 (15:46):
Yes. And this is also a very good signal of
for twenty twenty six because many people expect more private
equity back a company is going public again. Of course,
it depends on stock market polatility and other actors, but
this is a very good signal for the stock market
and IPO for twenty two.
Speaker 2 (16:04):
You know, we hopes that those PE firms go public.
Private equity firms, right, because they have been trying to
exit for a while. I tell you staying with us,
Let's bring in Mike Bellan. He's the USIPO leader at PwC.
He joins us from Denver. Mike, good to have you here.
The IPO year overall, give us some numbers how we're
ending up and how it compares two years past, because
(16:24):
I think the peaks are back in what twenty twenty,
twenty twenty one, back in the pandemic days.
Speaker 9 (16:30):
Yeah, well, thanks for having me, and I would say
twenty twenty five was the first true reopening of the
IPO window in several years, but it was selective. One year.
To date, we've seen about seventy five IPOs, including the
one you were just talking about. That sounds good compared
to the sixty two, thirty five and twenty eight IPOs
that we've seen in twenty four, twenty three, and twenty two, respectively.
(16:50):
But a good IPO year in the US is anywhere
between one hundred and one hundred and fifty IPOs, so
we're well behind that. But overall, twenty twenty five we've
we've been largely aligned with expectations, and in some areas
it's exceeded. Then we've seen activity spread across sectors rather
than concentrated in just one area. That kind of dispersion
is a strong sign and speaks to improving investor confidence.
(17:13):
I would say the performance has been differentiated. Higher quality
companies like the one you're just talking about, with strong fundamentals,
solid revenue growth, past the profitable or a path to profitability,
reasonable leverage, and a compelling long term story have generally
performed well in this market. On the flip side, IPOs
with higher debt loads, more aggressive pricing, they've struggled in
(17:36):
this market, especially in a volatile macro environment. So that
outcome has not been surprising, but it reinforced how selective
investors are.
Speaker 5 (17:44):
Right now, Okay, Mike, everyone just wants to talk about
with regretd to twenty twenty six SpaceX and what that
IPO could look like if the company decides to go
public next year. Does that make or break twenty twenty six?
Speaker 9 (17:59):
Well, look, I think we look at the IPO pipeline
for twenty twenty six, we see over two hundred potential
issuers in line that could go public in twenty twenty six.
The SEC shutdown that took place in October November pushed
a lot of companies that may have had the opportunity
to issue in twenty five into twenty six. So Number one,
I think there's a deep pipeline of quality companies that
(18:21):
are looking to go. In addition to some of the
big names, for example, I think I think we've read
them all in the headlines, some of the you know,
hyper scalers that are out there supporting the strong markets.
In addition to those, there's a lot of pe back
companies that you know the one today, they got a
lot of attention, they priced well, they're trading well, as
you noted, and I think that the backlog of pe
(18:43):
back companies sponsor back companies in the market is as
stronger than ever. They have been a quieter part of
the IPO court for the last couple of years. So
I think twenty twenty six is right for strong sponsor
back companies that have been creating value in the background
through M and M, through scaling, et cetera. So I
think we'll have a very active IPO market in twenty
(19:05):
twenty six.
Speaker 7 (19:05):
Mike, If we look at performance of IPOs in twenty
twenty five, it was really mixed and overall people think
that AI names or crypto names have the biggest kind
of the best case for success for twenty twenty six.
What kinds of sectors you think would benefit Where you
see the biggest potential if we set aside some fundamentals
(19:30):
or leverage, like where do you think investors should focus on.
Speaker 9 (19:34):
I think it's can a pretty wide wide sector representation.
In twenty twenty six. You mentioned AI. I think that
entire ecosystem, despite the last few weeks or a month
where there's been some pressure against it, there's a deep
pipeline of strong companies in that area from a data center,
from a fiber perspective, and then just broader the energy
ecosystem that's required to power the data centers, and we
(19:56):
need to catch up in that area. I think that's
going to be very active as we look to twenty
twenty six.
Speaker 10 (20:02):
Insurance.
Speaker 9 (20:02):
Insurance was an active asset in twenty twenty five, dependable
cash loows, which investors like in the volatile market. We'll
continue to see strong performing cash generating companies like an insurance.
Speaker 10 (20:14):
Company go well.
Speaker 9 (20:16):
And then I think other areas you mentioned crypto fintech,
with the rise of digital assets and some healthy regulation,
you know, in the tailwinds in that sector, we expect
that to continue to move.
Speaker 10 (20:28):
Forward a lot.
Speaker 9 (20:28):
So again, I think it would be a broad sector representation,
which to me represents a really strong IPO market.
Speaker 2 (20:34):
All right, it's a strong IPO market maybe to come.
In twenty twenty six, I looked at the IPO index
and I think it was at five six seven percent.
Speaker 5 (20:42):
I mean, it's.
Speaker 2 (20:43):
Definitely underperforming the broader market. I mean, we had dismal
debuts of stub Hub, Navingemini space station, and so they
have all contributed to IPOs underperforming as an asset class,
certainly compared to something like the S and P five hundred.
Speaker 10 (20:59):
You know.
Speaker 2 (20:59):
It kind of sits with the notion that companies that
go public are supposed to have cheaper valuations than they're listed.
Peers getting pricing like will be key in twenty twenty six.
Speaker 9 (21:11):
I'm with you when you look at the cohort of
twenty twenty five, about fifty percent of the IPOs priced
at the top end or above the Rangeills initially said,
so some pretty aggressive pricing there. I think many of
the companies that have struggled in twenty twenty five are
companies with you know, debt that's you know, above four
times even a leverage, which is tough in a dynamic
(21:32):
environment when there is uncertainty still in the marketplace. So
I do think companies that are going out in twenty
six have to be conservative on valuations. They have to
look at their debt loads going in and some of
those key metrics that I mentioned earlier around revenue growth,
customer growth, some of those key metrics that really show
a powerful return will be important. When you look at
(21:54):
again the court of twenty twenty five, sixty five percent
of the companies that went out had positive That's a
stark difference than we back up over the last five years.
So the quality has definitely been raised.
Speaker 2 (22:06):
Hey, Mike, ten seconds, SpaceX gonna happen in the first
half of the year.
Speaker 3 (22:09):
Do we even know?
Speaker 6 (22:10):
Have we heard anything?
Speaker 3 (22:11):
Do you hear anything?
Speaker 10 (22:12):
Oh?
Speaker 9 (22:12):
Quickly, I see the same things you see in the headlines.
I think twenty six will continue to be an exciting
year and okay, hopefully we'll see some really big names.
Speaker 2 (22:20):
Go Mike bellin USIPO, leader of our pw C Bloomberg
News Equities reporter in Italia, Katy Javich, thank you so much.
Speaker 5 (22:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (22:35):
You're listening to the Bloomberg Business Week Daily podcast. Catch
US Live weekday afternoons from two to five East during
this listen on Apple Karplay and Android Auto with the
Bloomberg Business app, or watch US Live on YouTube.
Speaker 5 (22:49):
Well in our shares lower today, down right now by
four point eight percent. This after the home Builder Reporter
justined innings for share for the fourth quarter that missed
the average analyst estimate, and Polti Group Toll Brothers also
lower in after hours trading.
Speaker 2 (23:03):
Yeah, and we're seeing the home builders as a whole.
Most names in that index are down today. I'm just
looking at the index. It's down about one point eight
percent in today's session. So that Lenar news, no doubt
about it. Tim definitely dragging down the trade.
Speaker 1 (23:17):
Yes, it was.
Speaker 5 (23:17):
That was like that was the write up last night,
like down and after hours down today too, Like that
can carry over to today's trade.
Speaker 3 (23:23):
Yeah, totally.
Speaker 5 (23:24):
Also I mentioned this aspiring home buyer should find the
US housing market slightly more affordable in twenty twenty six,
even without the benefit of lower mortgage rates. We're going
to bring in Kati Hubbard, she's president of US capital markets.
Over at Walton Global. It's the privately owned asset and
real estate investment company. More than four and a half
billion dollars of land assets under management and administration and
more than eighty nine thousand acres of land under ownership
(23:46):
and management throughout North America, close to eighty nine percent
located here in the US. Remember Walton Global. They operate
in retail, industrial, and commercial sectors. Katie joins us this afternoon. Katie,
Good to have you on the program. How are you.
Speaker 10 (24:00):
I'm doing well, Thanks, great to be here.
Speaker 5 (24:01):
I don't know if it's too early to say Happy
New Year?
Speaker 3 (24:03):
Happy yeah this point year, Happy new Year? Okay, new year?
Speaker 10 (24:06):
You know.
Speaker 5 (24:07):
So what the first question I always like to ask
you is is like, are things better worse than we
last spoke to you in terms of you know, and
we do get to check in with you every couple
of months, and we're grateful you take the time to
do that. Are they better in your world than they
were a couple months ago?
Speaker 10 (24:21):
Yeah? Speaking of you know, Lenard's earnings that you guys
opened up with, I mean, the market read their headline
financials as a profit and margin miss. Although they have
a revenue beat and as you saw their stock drop
five percent, and the demand is there, so are things
better or worse? The demand is still there, but while
at a much lower profitability, and as we see from
(24:43):
their earnings, their Q four warnings came in at four
hundred and ninety million, and same quarter last year they
were at one point one billion. However, they delivered more
homes this year, and the reason that their earnings are
down so much is because they are having to offer
major incentives. So are things better? It's really the same
where in order to get the volume for the top builders,
(25:05):
they're having to offer incentives and drop their prices.
Speaker 2 (25:08):
So okay, so what does that mean then? I don't
know how do you describe them? The housing market?
Speaker 8 (25:14):
Is it good?
Speaker 1 (25:14):
Is it bad?
Speaker 2 (25:15):
Is it still kind of trying to find its way
struggling a little bit?
Speaker 6 (25:19):
Yeah?
Speaker 10 (25:20):
I mean the overall fundamentals are there where people want
to own homes and demand it there. So the builders
that are able to meet buyers where they're at and
offer the incentives, the mortgage rate, buy downs, building smaller homes,
they're doing fine. So the housing market's doing well there. However,
it's just it's an affordability constraint problem right now, as
Lennard talked about quite a bit on their earnings called
(25:40):
affordability is the challenge. The mortgage payment for people has
increased eighty two percent since twenty twenty, well incomes only
of twenty six percent, So people are really sensitive to
those monthly payments. And if the builders can get those down,
then then they're doing fine and they're able to sell
the homes on the resale market. Seventy five percent of
mortgages are still walked in at five percent or lower,
(26:03):
well k five percent of people.
Speaker 3 (26:05):
That's where I have a hard time.
Speaker 2 (26:07):
Like I have family members and I remember working with
someone who's like, listen, I remember the seventies and my
mortgage rate it was like a seventeen percent, you know,
something high. I have a sister who often talks about
like her first mortgage in the teens. So what's different
because it is still hystorically low.
Speaker 10 (26:26):
Huh okay, it can come has not kept up with that, and.
Speaker 5 (26:30):
Everything else has gotten more expensive too, Like if you
were to look at the cost of healthcare back then,
the cost of educating or paying student loans, or like
what it costs actually get a four year degree. All
those costs have gone up too.
Speaker 10 (26:43):
Exactly. So it's just it's really affordability where people are
spending forty percent of their income on their on their
mortgage payments, and that's just it's keeping a lot of
people out of the market. If we could get rates
to five percent, that would mean an additional eight million
people could afford a four hundred thousand dollars house, which
is just about what the average of the media and
the new home prices.
Speaker 5 (27:03):
I don't what who who was on our program this week.
It might have been it might I don't want to
say a name because I don't want to get it wrong.
But we're talking about high prices and economists, and economists said, well,
we like to hear about high prices because then it'll
bring in more people into the into the market. And
Mike mcloughan intelligence always likes to he always likes to
say the cure for high prices is high prices. But
(27:25):
that's not necessarily the case when it comes to our
home right, like Uber.
Speaker 2 (27:28):
The whole metric is when prices start to go up
for rides, right, you bring more drivers into the market.
Speaker 5 (27:33):
Think it's the concept, but the problem is in real estate,
and Katie, you can you know correct me where I'm wrong.
It's such a local issue that has to do with
with zoning and has to do with finding people to
actually do the building. It has to do with materials costs.
I mean, if if housing, if we have such a shortage,
why isn't it being solved by the free market?
Speaker 10 (27:55):
And so what is happening is people are moving to
move into secondary markets and builders are moving to secondary markets.
So if you're in Austin, you're going to San Antonio.
If you're in Denver, you might go to Colorado Springs.
Here in San Francisco you'll go to Sacramento because the
housing is significantly cheaper there. And so that is one
of the solutions is to go further out. And so
it's not like the end all solution, but going to
(28:18):
where the governments are pro development and houses are more affordable.
It's making it palpable for some people to be able
to buy homes.
Speaker 6 (28:25):
Okay.
Speaker 2 (28:26):
One of the things I wanted to ask you and
Alan McCartney, who we just had on over at Alignment
Partners at UBS, she talked about kind of the land
grab for data centers versus I think home builders is
that part of the problem, part of the issue.
Speaker 10 (28:41):
I would not say that's really an issue, because in
order to have land for a data center, you have
to have a significant size of land, but you also
have to have extreme amount of energy and a substandaloont
of water, which most people don't think about. So to
find the land that fits the data center model, that
has the energy and the water far enough that you're
not going to have the Nimbi mentality that they don't
(29:02):
want the data centers. It's a limited there's limited resources
for data center sites. Wolten has some sites that are
allocated for data centers, but it's not really the same
land that would necessarily be alternatively for residential housing.
Speaker 5 (29:18):
I mean that's a good thing.
Speaker 2 (29:19):
Well you open the door though, So the land demand
for data centers, is there any kind of trailing off
or weakness that you're seeing.
Speaker 10 (29:29):
Now? We are getting calls every day from people that
are wanting to look at the land that we have
earmarked for data centers. So I think the demand is there.
Whether it's you know, a bubble and what we're going
to see from the fallout of that, you know, there
is definitely the demand for the land is there because
it takes a long time to get the zoning and
the infrastructure in place, the local government, municipalities, utilities, everything
(29:49):
in line. That can take years. So people that are
starting now are not going to have data centers on
those sites for you know, probably four plus years.
Speaker 5 (29:57):
Wow, if you can get them hooked up to the grid.
Speaker 2 (30:00):
Get it.
Speaker 5 (30:00):
Yeah, that's the key.
Speaker 2 (30:01):
Well, it might take four years to build out the
grid and have the power.
Speaker 5 (30:04):
There, or they could be done in just sitting there
like those in Silicon Valley.
Speaker 2 (30:07):
Unbelievable. Katie, always get some insight when you join us.
Thank you so much, Happy holidays, Happy New Year, and
look forward to continuing our conversations with you into twenty
twenty six. Katie Ubard, president of u HAS Capital Markets
over at Walton Global.
Speaker 5 (30:21):
I'm looking at chairs of Nvidia down more than three
percent right now, trying of dragging megacaps lower, down more
than seventeen percent from those all time highs back in October.
Speaker 2 (30:30):
Yeah, there's definitely been kind of a rewrite when it
comes to some of these AI plays.
Speaker 3 (30:33):
Don't go anywhere.
Speaker 2 (30:34):
This is Bloomberg Business Weekday.
Speaker 1 (30:36):
This is the Bloomberg Business Week daily podcast, available on Apple, Spotify,
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(30:57):
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(00:23):
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Speaker 2 (00:32):
All right, so let's talk about the next era of
the essential bank and more here with us once again
in studio Matt Lazetti, he's chief US Economist, head of
US economic research over at Deutsche Bank. Good to have
you back with us. It does feel like we're trying
to figure out who's next. You do actually write specifically
about a Warsh nomination and what it would mean for
the Fed. Does it really matter who ultimately will be
(00:54):
as FED share since it is one vote and.
Speaker 3 (00:56):
An important vote.
Speaker 4 (00:57):
Yeah, So you know, we've had to as this news
of alls of right just about everybody that's a front runner.
So we were at a hasset piece before, you know,
months ago, I think we were talking about Governor Waller
and why we thought he could have been a very
good candidate for FED chair. But so the question of
does it matter, I mean the market is pricing it
like it does matter. There's a premium in the June
FOMC meeting. We're building in more rate cuts at that
meeting than the surrounding meeting. So the market is pricing
(01:19):
something happening as that transition takes place. I think we're
a little bit more skeptical of how much it can matter,
you know, clearly, I think Chairpal has mattered recently. I
think you don't get the December rate cut without Chairpal
essentially pushing it through what is a very hawkish committee
at this point in time. But I think he built
up that confidence, the credibility within the committee of a
period of time. Just somebody coming in from the outside
(01:42):
with a more dubbish view is not going to be
able to get this hawkers leaning committee to cut rates
aggressively upfront.
Speaker 5 (01:47):
Of the candidates who are the reported front runners. Is
there one who would send a signal to you, or
maybe send a signal to the markets that the Fed's
independence is at stake.
Speaker 4 (01:59):
Yeah, I think that there's you know, lots of questions
around this. I think when you kind of see surveys
Kevin Hassett raises some of the most concerns around FED
independence and kind of commitment to get inflation back down
to target. And I think that's somewhat quite natural. I mean,
he's been in the President's orbit for a period of
time here, he's been an economic advisor for the president.
He's been calling for aggressive ray cuts at this point
(02:21):
in time. All these candidates are doing so at this point,
as we heard from Governor Waller recently. And so I
think whoever it is the next FED chair is going
to have to earn the market's trust that they are
going to commit it to bring inflation back down to target.
And I expect the market to challenge that a little bit.
Speaker 2 (02:37):
Hey, Matt, you know the New York Times rights next
FED share in a no win scenario selection process draws
to a close and they go on to say the
person pick to replace Jerome Powell will be thrust into
a credibility problem that will be difficult to escape. Is
that the case? And I also wonder, you know, sometimes
you get into a position and you realize the weight
of a position, and we know what the FED does
(02:58):
means a lot, not just to the un less markets,
but to global markets.
Speaker 4 (03:02):
Yeah, so, you know, I think it is the case
that there's going to be a challenge for this this
next FED chair coming in. They come in almost with
a mandate to cut rates meaningfully. The President has called
for the FED funds right to be down close to
one percent, near the lowest in the world. And yet
even though Governor Waller said that inflation is under control,
core PC inflation is at two point eight percent, it's
still eighty basis points above their target. We're now four
(03:23):
and a half years in well above target inflation, and
all the market's pretty sanguine about the inflation outlook. You know,
we do have a stronger growth outlook next year. We
have fiscal stimulus that's coming through the pipelines.
Speaker 6 (03:35):
It's great.
Speaker 4 (03:36):
It actually looks like a pretty good outlook from a
growth perspective, and then a question of does that feed
through into higher inflation pressures?
Speaker 5 (03:41):
What about the labor market in your view? We got
some data yesterday. It was weird to say jobs Tuesday
over and over. It's partial data, and we'll get some
inflation data tomorrow. But the jobs market, how does it
look into you?
Speaker 4 (03:52):
So so the way we've been describing it, and I
think yesterday was another case of this. It's a rorshack
chest for how you think about the labor market. Each
of the these reports has good elements and bad elements.
I think yesterday's report had strong job gains. It had
a broadening out.
Speaker 7 (04:05):
Of job growth.
Speaker 4 (04:06):
We've seen the private sector rebound. We had negative job
gains in June. Past three months have been seventy five
thousand plus in terms of private sector job growth, so
that's all quite solid. The weakness was in the household survey.
You saw the unemployment rate rise to four point six percent.
Broader measures of labor Marcus Slack actually picked up more.
I think importantly. At the December meeting, Chairpal highlighted why
(04:26):
we should discount that data. It's coming right around the
government shutdown. We thought that there's gonna be distortions to
that household survey, so FED pricing hasn't really moved all
that much on the data. I think far more important
will be the December job support that we get in
early January.
Speaker 2 (04:40):
So the worst case scenario is we've got inflationary pressures
which sound like they could be coming in the new
year because of some of the stimulus measures that we're
certainly getting from the White House, Matt. But if we
have more inflationary pressures, but we continue, if we get
some confirmation the December numbers that yes and d there
is job weakness and maybe it's continued, that's a tough predicament.
Speaker 6 (05:03):
It is.
Speaker 4 (05:03):
I think it's, you know, a direction of travel towards
stagflationary type impulses for the economy. It is what most
economists and we thought you would get out of very
large tariff increases. And so I think it is beginning
to work its way through the economy. I think what
we've learned though, however, is you know this FED under
chair pal and undoubtedly I think the next SPED. If
you have weakness in the labor market, they will respond.
(05:25):
They've responded last year by cutting by one hundred basis points.
They responded this year by cutting by seventy five basis points.
Our base cases that the labor market stabilizes enough over
the next seven months that the FED does not cut
in the first half of the year. But look, if
you get confirmation that the entreplane rate is four point
six percent are above, I think the FED cuts in
the first quarter.
Speaker 2 (05:42):
All right, good stuff getting ready for twenty twenty six.
Speaker 5 (05:45):
Come hanging out with us in the first quarter.
Speaker 4 (05:47):
I would love to be comeback.
Speaker 2 (05:48):
We would love to have you back, Matt. Thank you
so much, Thank you. Happy holiday is, Happy New Year.
Matt Lazetti. He's chief US Economist, head of US economic
research for Deutsche Bank.
Speaker 5 (05:57):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (06:05):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
US live weekday afternoons from two to five East during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch US Live on YouTube.
Speaker 5 (06:19):
So we just saw about the least Deutsche Banks. Is
Matt Lazetti all about the Federal Reserve and his view
on what the next fedshair has in front of him
or her, depending on who it is. I'm guessing our
next guest has some thoughts on the FED and what
it means for financial markets. Back with us. Ali McCartney,
Managing director of wealth management and private wealth advisor with
Alignment Partners at UBS just over a billion dollars in
(06:41):
assets under management. She joins us. Here in the studio,
we're going to talk about the markets and today's moves
and sort of big picture what you're looking at. But
we got to start just with the FED and how
you're thinking about the next FED.
Speaker 3 (06:51):
Shair next year.
Speaker 8 (06:54):
And the Fed is going to depend all about It's
going to be policy and politics, right I'm not sure
comes first. Market seems to be about fifty to fifty
on whether we have a cut in January. We think
you see two cuts next year, one in the first
half of the year, one in the second. I think
it will be largely dependent on who's in charge, what
(07:16):
the inflation is that we see coming into the market,
whether it's from healthcare. We were talking in makeup chairs
about the increase in cost of healthcare for you know,
average people going up almost one hundred percent, as well
as as tariffs pushed through from like later this year.
But it is, in a sense, it is anyone's guess.
(07:36):
The market seem to be pricing and playing as if
they know there are further cuts. It's just not clear
when or how profound. You know, if you look at
the last Federal Reserve dot plot, you could sort of
drive a truck through whatever neutral is.
Speaker 3 (07:52):
I think it was two to four percent was about
of a range, you know.
Speaker 8 (07:55):
So I think you basically have tailwinds that are we
know that earnings are going to be you know, decent
to good. We know those are going to broaden out
a lot just from the IT trade. So that's you know,
one of the things. Fiscal policy, especially in the first quarter,
is going to be major as a result of both
income tax sort of rebates as well as corporate spending
(08:19):
initiatives and accounting issues that are going to propel both
earnings and cash on balance sheets.
Speaker 3 (08:25):
And then again you know the FED will be part
of this for sure, Allie.
Speaker 2 (08:29):
When you look at twenty twenty six, yeah, and I
just think about I want to think about this year,
like how we thought things were going to go initially
when President Trump came back to the White House, how
it played out April Liberation Day, Like, I think we
were all whipsawed in terms of our expectations and ultimately
kind of how it all laid out. And I think
(08:51):
we thought this was going to be a disastrous year,
and yet I look at the major equity averages not
so shabby. Certainly again if you're a bull in this market.
So I mean, and I don't know, is this a
reminder that it's going to be maybe hard to get
next year to make calls or is it different.
Speaker 8 (09:06):
Well, was it hard to make calls this year? So
you had to get two things right. You had to
understand two things. You had to understand what AI was
going to become in terms of a movement from the
chief constraint being chips to the chief constraint where we
now sit. And I think what's moving the market today,
which is energy and land for data centers.
Speaker 3 (09:30):
And you had to get Trump right.
Speaker 2 (09:33):
So okay, not those are difficult.
Speaker 8 (09:35):
Those are very difficult. You also could have simply been
long beta on the concept.
Speaker 5 (09:41):
Of earnings, meaning you just throw money in the meaning.
Speaker 2 (09:44):
Exactly and tough moments, but you would have done exactly
next year.
Speaker 8 (09:49):
I think it becomes I think actually, if i'm if
I'm thinking back to where I was a year ago,
it becomes a little easier in the following. While I
can't say that I or we can get Trump right,
I think we can get directionality and maybe short term
(10:09):
volatility we can dampen because we know it largely leads
to what he wants he gets, which is mid or
longer term markets up. I think he does care about
market dec does care very much about market direction. I think,
you know, the craziest thing about getting Trump right or
wrong was he told us exactly what he was going
to do. You know, he told us via press conferences,
(10:32):
via other people, the uh you know, social media, and
so if you went with him, you got things right.
I think this year things are going to be a
little so I think they're going to be a little
easier in the broadening out of earnings.
Speaker 9 (10:47):
Right.
Speaker 8 (10:47):
So if you look at, for example, the S and
P five hundred or the Nasdaq this year, what you
got was the AI trade contributed to about seventy five
percent or eighty percent of what ultimately became the upside.
So if you look at the next best contributor is
financials at one point seven percent.
Speaker 3 (11:05):
Right next year, I think you're going to get some
broadening in that.
Speaker 8 (11:08):
I think industrials, materials, financials, healthcare are going.
Speaker 3 (11:13):
To play into that.
Speaker 5 (11:14):
What happens if the promise of AI doesn't come to pass.
Speaker 8 (11:19):
That's the biggest risk case. I think the biggest risk
case for next year is for investors, or economists or
policy makers, is that we got AI wrong. The infrastructure
it's not if you build it they will come. It's
not that we start to democratize and deepen.
Speaker 5 (11:34):
It's a big bet.
Speaker 3 (11:35):
It's a big bet.
Speaker 8 (11:35):
And today that bet in terms of what's been coming
out around blue out and financing, because one of my
biggest takeaway from a four day AI conference two weeks
ago that ubs through is that this is all about
debt financing. There is not enough private debt and there
is not enough capital on the balance sheets of the
(11:58):
non hyperscalers to get us where we need to be
in terms.
Speaker 3 (12:02):
Of AI, and so it has to be debt. Capital
markets Oracle is Exhibit A.
Speaker 8 (12:08):
This is so to me, this is I literally left
there going, oh, I understand what the constraint is.
Speaker 9 (12:13):
Now.
Speaker 8 (12:13):
I understand the difference between a let's say, a core
we even how they talk about how they finance right
asset backed you know, triple A companies, and how the
market has been responding to that finance. I understand the
private debt market and the private equity market saying we
can only do so much in terms of what's needed,
(12:36):
and so capital markets and public individuals have to come in.
Speaker 3 (12:40):
And so I do think that's the biggest risk.
Speaker 8 (12:42):
But I can also tell you from that conference and
the conversations I've been having that this is truly revolutionary
and moving to the bottom line in a way we've
never seen before, and that whether it's creativity in the
financial markets in the structural markets, that the the productivity
increases and the changes to both costs and revenue generation
(13:07):
are are you know, we really are an inflection point
that can support different multiples.
Speaker 2 (13:11):
And the Oracle story is oracles financing for data center
in Michigan progressing, but Blue Owl Capital, which has been
a longtime partner in Oracle's rapid AI infrastructure build out,
opted not to contribute equity.
Speaker 3 (13:25):
So it's so that's.
Speaker 8 (13:27):
Exactly what we're talking about right now. It is a closed,
finite ecosystem right and in order to get where we
need to be going, it has to.
Speaker 3 (13:34):
Get much bigger.
Speaker 2 (13:35):
Ally McCartney, Managing director of Wealth Management and private wealth
advisor for Alignment Partners over at UBS.
Speaker 3 (13:41):
Thank you so much.
Speaker 5 (13:43):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 6 (13:52):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern up on Apple
car Play and Troit Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our
flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 2 (14:11):
All right, everybody, another ipo, getting it in just under
the deadline of twenty twenty five, I mean the end
of the year. It's the biggest initial public offering of
this year. We're talking about Medline. It makes and distributes
medical supplies such as gloves, gowns, exam tables. You've all
warned them probably at one time or another. It's used
by hospitals and doctors. I mean, it's just kind of
(14:32):
like playing Vanilla in terms.
Speaker 10 (14:33):
Of a company.
Speaker 5 (14:34):
Yeah, but this one is widely anticipated. The stock just
surging in its first day of trading, was up earlier
more than twenty percent. Carol now thirty one percent higher.
Speaker 3 (14:42):
Yeah, like out like just out of the gates, you know.
Speaker 2 (14:45):
Here, So we wanted to talk a little bit about it.
There you can see the real trade thirty two percent
to the episode. Bloomberg News Equities reporter Natalia Kidney Javich
is with us, why we're investors just so interested in
this IPO? I mean it was oversubscribed according to the
in the now many times over exactly.
Speaker 7 (15:02):
I think like every IPO, most of IPOs are over subscribed,
but this one in particular shows that investors really want
to see established businesses with clear profitability.
Speaker 1 (15:14):
Of course, it is a.
Speaker 7 (15:14):
Profitable business, it's been here for a while. The company
was founded in nineteen sixty six, so yes, it was
over subscribed. Demand was really strong across long Gonel investors
as well, and the company marketed shares between twenty six
and thirty dollars priced at twenty nine. Now it is
trading in thirty seven. It is a pretty successful story.
Speaker 5 (15:35):
Yeah, a lot of big name Wall Street firms, private
equity investors involved in this one, the backers and firms
who were involved. It's pretty much everybody exactly.
Speaker 7 (15:46):
Yes. And this is also a very good signal of
for twenty twenty six because many people expect more private
equity back a company is going public again. Of course,
it depends on stock market polatility and other actors, but
this is a very good signal for the stock market
and IPO for twenty two.
Speaker 2 (16:04):
You know, we hopes that those PE firms go public.
Private equity firms, right, because they have been trying to
exit for a while. I tell you staying with us,
Let's bring in Mike Bellan. He's the USIPO leader at PwC.
He joins us from Denver. Mike, good to have you here.
The IPO year overall, give us some numbers how we're
ending up and how it compares two years past, because
(16:24):
I think the peaks are back in what twenty twenty,
twenty twenty one, back in the pandemic days.
Speaker 9 (16:30):
Yeah, well, thanks for having me, and I would say
twenty twenty five was the first true reopening of the
IPO window in several years, but it was selective. One year.
To date, we've seen about seventy five IPOs, including the
one you were just talking about. That sounds good compared
to the sixty two, thirty five and twenty eight IPOs
that we've seen in twenty four, twenty three, and twenty two, respectively.
(16:50):
But a good IPO year in the US is anywhere
between one hundred and one hundred and fifty IPOs, so
we're well behind that. But overall, twenty twenty five we've
we've been largely aligned with expectations, and in some areas
it's exceeded. Then we've seen activity spread across sectors rather
than concentrated in just one area. That kind of dispersion
is a strong sign and speaks to improving investor confidence.
(17:13):
I would say the performance has been differentiated. Higher quality
companies like the one you're just talking about, with strong fundamentals,
solid revenue growth, past the profitable or a path to profitability,
reasonable leverage, and a compelling long term story have generally
performed well in this market. On the flip side, IPOs
with higher debt loads, more aggressive pricing, they've struggled in
(17:36):
this market, especially in a volatile macro environment. So that
outcome has not been surprising, but it reinforced how selective
investors are.
Speaker 5 (17:44):
Right now, Okay, Mike, everyone just wants to talk about
with regretd to twenty twenty six SpaceX and what that
IPO could look like if the company decides to go
public next year. Does that make or break twenty twenty six?
Speaker 9 (17:59):
Well, look, I think we look at the IPO pipeline
for twenty twenty six, we see over two hundred potential
issuers in line that could go public in twenty twenty six.
The SEC shutdown that took place in October November pushed
a lot of companies that may have had the opportunity
to issue in twenty five into twenty six. So Number one,
I think there's a deep pipeline of quality companies that
(18:21):
are looking to go. In addition to some of the
big names, for example, I think I think we've read
them all in the headlines, some of the you know,
hyper scalers that are out there supporting the strong markets.
In addition to those, there's a lot of pe back
companies that you know the one today, they got a
lot of attention, they priced well, they're trading well, as
you noted, and I think that the backlog of pe
(18:43):
back companies sponsor back companies in the market is as
stronger than ever. They have been a quieter part of
the IPO court for the last couple of years. So
I think twenty twenty six is right for strong sponsor
back companies that have been creating value in the background
through M and M, through scaling, et cetera. So I
think we'll have a very active IPO market in twenty
(19:05):
twenty six.
Speaker 7 (19:05):
Mike, If we look at performance of IPOs in twenty
twenty five, it was really mixed and overall people think
that AI names or crypto names have the biggest kind
of the best case for success for twenty twenty six.
What kinds of sectors you think would benefit Where you
see the biggest potential if we set aside some fundamentals
(19:30):
or leverage, like where do you think investors should focus on.
Speaker 9 (19:34):
I think it's can a pretty wide wide sector representation.
In twenty twenty six. You mentioned AI. I think that
entire ecosystem, despite the last few weeks or a month
where there's been some pressure against it, there's a deep
pipeline of strong companies in that area from a data center,
from a fiber perspective, and then just broader the energy
ecosystem that's required to power the data centers, and we
(19:56):
need to catch up in that area. I think that's
going to be very active as we look to twenty
twenty six.
Speaker 10 (20:02):
Insurance.
Speaker 9 (20:02):
Insurance was an active asset in twenty twenty five, dependable
cash loows, which investors like in the volatile market. We'll
continue to see strong performing cash generating companies like an insurance.
Speaker 10 (20:14):
Company go well.
Speaker 9 (20:16):
And then I think other areas you mentioned crypto fintech,
with the rise of digital assets and some healthy regulation,
you know, in the tailwinds in that sector, we expect
that to continue to move.
Speaker 10 (20:28):
Forward a lot.
Speaker 9 (20:28):
So again, I think it would be a broad sector representation,
which to me represents a really strong IPO market.
Speaker 2 (20:34):
All right, it's a strong IPO market maybe to come.
In twenty twenty six, I looked at the IPO index
and I think it was at five six seven percent.
Speaker 5 (20:42):
I mean, it's.
Speaker 2 (20:43):
Definitely underperforming the broader market. I mean, we had dismal
debuts of stub Hub, Navingemini space station, and so they
have all contributed to IPOs underperforming as an asset class,
certainly compared to something like the S and P five hundred.
Speaker 10 (20:59):
You know.
Speaker 2 (20:59):
It kind of sits with the notion that companies that
go public are supposed to have cheaper valuations than they're listed.
Peers getting pricing like will be key in twenty twenty six.
Speaker 9 (21:11):
I'm with you when you look at the cohort of
twenty twenty five, about fifty percent of the IPOs priced
at the top end or above the Rangeills initially said,
so some pretty aggressive pricing there. I think many of
the companies that have struggled in twenty twenty five are
companies with you know, debt that's you know, above four
times even a leverage, which is tough in a dynamic
(21:32):
environment when there is uncertainty still in the marketplace. So
I do think companies that are going out in twenty
six have to be conservative on valuations. They have to
look at their debt loads going in and some of
those key metrics that I mentioned earlier around revenue growth,
customer growth, some of those key metrics that really show
a powerful return will be important. When you look at
(21:54):
again the court of twenty twenty five, sixty five percent
of the companies that went out had positive That's a
stark difference than we back up over the last five years.
So the quality has definitely been raised.
Speaker 2 (22:06):
Hey, Mike, ten seconds, SpaceX gonna happen in the first
half of the year.
Speaker 3 (22:09):
Do we even know?
Speaker 6 (22:10):
Have we heard anything?
Speaker 3 (22:11):
Do you hear anything?
Speaker 10 (22:12):
Oh?
Speaker 9 (22:12):
Quickly, I see the same things you see in the headlines.
I think twenty six will continue to be an exciting
year and okay, hopefully we'll see some really big names.
Speaker 2 (22:20):
Go Mike bellin USIPO, leader of our pw C Bloomberg
News Equities reporter in Italia, Katy Javich, thank you so much.
Speaker 5 (22:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (22:35):
You're listening to the Bloomberg Business Week Daily podcast. Catch
US Live weekday afternoons from two to five East during
this listen on Apple Karplay and Android Auto with the
Bloomberg Business app, or watch US Live on YouTube.
Speaker 5 (22:49):
Well in our shares lower today, down right now by
four point eight percent. This after the home Builder Reporter
justined innings for share for the fourth quarter that missed
the average analyst estimate, and Polti Group Toll Brothers also
lower in after hours trading.
Speaker 2 (23:03):
Yeah, and we're seeing the home builders as a whole.
Most names in that index are down today. I'm just
looking at the index. It's down about one point eight
percent in today's session. So that Lenar news, no doubt
about it. Tim definitely dragging down the trade.
Speaker 1 (23:17):
Yes, it was.
Speaker 5 (23:17):
That was like that was the write up last night,
like down and after hours down today too, Like that
can carry over to today's trade.
Speaker 3 (23:23):
Yeah, totally.
Speaker 5 (23:24):
Also I mentioned this aspiring home buyer should find the
US housing market slightly more affordable in twenty twenty six,
even without the benefit of lower mortgage rates. We're going
to bring in Kati Hubbard, she's president of US capital markets.
Over at Walton Global. It's the privately owned asset and
real estate investment company. More than four and a half
billion dollars of land assets under management and administration and
more than eighty nine thousand acres of land under ownership
(23:46):
and management throughout North America, close to eighty nine percent
located here in the US. Remember Walton Global. They operate
in retail, industrial, and commercial sectors. Katie joins us this afternoon. Katie,
Good to have you on the program. How are you.
Speaker 10 (24:00):
I'm doing well, Thanks, great to be here.
Speaker 5 (24:01):
I don't know if it's too early to say Happy
New Year?
Speaker 3 (24:03):
Happy yeah this point year, Happy new Year? Okay, new year?
Speaker 10 (24:06):
You know.
Speaker 5 (24:07):
So what the first question I always like to ask
you is is like, are things better worse than we
last spoke to you in terms of you know, and
we do get to check in with you every couple
of months, and we're grateful you take the time to
do that. Are they better in your world than they
were a couple months ago?
Speaker 10 (24:21):
Yeah? Speaking of you know, Lenard's earnings that you guys
opened up with, I mean, the market read their headline
financials as a profit and margin miss. Although they have
a revenue beat and as you saw their stock drop
five percent, and the demand is there, so are things
better or worse? The demand is still there, but while
at a much lower profitability, and as we see from
(24:43):
their earnings, their Q four warnings came in at four
hundred and ninety million, and same quarter last year they
were at one point one billion. However, they delivered more
homes this year, and the reason that their earnings are
down so much is because they are having to offer
major incentives. So are things better? It's really the same
where in order to get the volume for the top builders,
(25:05):
they're having to offer incentives and drop their prices.
Speaker 2 (25:08):
So okay, so what does that mean then? I don't
know how do you describe them? The housing market?
Speaker 8 (25:14):
Is it good?
Speaker 1 (25:14):
Is it bad?
Speaker 2 (25:15):
Is it still kind of trying to find its way
struggling a little bit?
Speaker 6 (25:19):
Yeah?
Speaker 10 (25:20):
I mean the overall fundamentals are there where people want
to own homes and demand it there. So the builders
that are able to meet buyers where they're at and
offer the incentives, the mortgage rate, buy downs, building smaller homes,
they're doing fine. So the housing market's doing well there. However,
it's just it's an affordability constraint problem right now, as
Lennard talked about quite a bit on their earnings called
(25:40):
affordability is the challenge. The mortgage payment for people has
increased eighty two percent since twenty twenty, well incomes only
of twenty six percent, So people are really sensitive to
those monthly payments. And if the builders can get those down,
then then they're doing fine and they're able to sell
the homes on the resale market. Seventy five percent of
mortgages are still walked in at five percent or lower,
(26:03):
well k five percent of people.
Speaker 3 (26:05):
That's where I have a hard time.
Speaker 2 (26:07):
Like I have family members and I remember working with
someone who's like, listen, I remember the seventies and my
mortgage rate it was like a seventeen percent, you know,
something high. I have a sister who often talks about
like her first mortgage in the teens. So what's different
because it is still hystorically low.
Speaker 10 (26:26):
Huh okay, it can come has not kept up with that, and.
Speaker 5 (26:30):
Everything else has gotten more expensive too, Like if you
were to look at the cost of healthcare back then,
the cost of educating or paying student loans, or like
what it costs actually get a four year degree. All
those costs have gone up too.
Speaker 10 (26:43):
Exactly. So it's just it's really affordability where people are
spending forty percent of their income on their on their
mortgage payments, and that's just it's keeping a lot of
people out of the market. If we could get rates
to five percent, that would mean an additional eight million
people could afford a four hundred thousand dollars house, which
is just about what the average of the media and
the new home prices.
Speaker 5 (27:03):
I don't what who who was on our program this week.
It might have been it might I don't want to
say a name because I don't want to get it wrong.
But we're talking about high prices and economists, and economists said, well,
we like to hear about high prices because then it'll
bring in more people into the into the market. And
Mike mcloughan intelligence always likes to he always likes to
say the cure for high prices is high prices. But
(27:25):
that's not necessarily the case when it comes to our
home right, like Uber.
Speaker 2 (27:28):
The whole metric is when prices start to go up
for rides, right, you bring more drivers into the market.
Speaker 5 (27:33):
Think it's the concept, but the problem is in real estate,
and Katie, you can you know correct me where I'm wrong.
It's such a local issue that has to do with
with zoning and has to do with finding people to
actually do the building. It has to do with materials costs.
I mean, if if housing, if we have such a shortage,
why isn't it being solved by the free market?
Speaker 10 (27:55):
And so what is happening is people are moving to
move into secondary markets and builders are moving to secondary markets.
So if you're in Austin, you're going to San Antonio.
If you're in Denver, you might go to Colorado Springs.
Here in San Francisco you'll go to Sacramento because the
housing is significantly cheaper there. And so that is one
of the solutions is to go further out. And so
it's not like the end all solution, but going to
(28:18):
where the governments are pro development and houses are more affordable.
It's making it palpable for some people to be able
to buy homes.
Speaker 6 (28:25):
Okay.
Speaker 2 (28:26):
One of the things I wanted to ask you and
Alan McCartney, who we just had on over at Alignment
Partners at UBS, she talked about kind of the land
grab for data centers versus I think home builders is
that part of the problem, part of the issue.
Speaker 10 (28:41):
I would not say that's really an issue, because in
order to have land for a data center, you have
to have a significant size of land, but you also
have to have extreme amount of energy and a substandaloont
of water, which most people don't think about. So to
find the land that fits the data center model, that
has the energy and the water far enough that you're
not going to have the Nimbi mentality that they don't
(29:02):
want the data centers. It's a limited there's limited resources
for data center sites. Wolten has some sites that are
allocated for data centers, but it's not really the same
land that would necessarily be alternatively for residential housing.
Speaker 5 (29:18):
I mean that's a good thing.
Speaker 2 (29:19):
Well you open the door though, So the land demand
for data centers, is there any kind of trailing off
or weakness that you're seeing.
Speaker 10 (29:29):
Now? We are getting calls every day from people that
are wanting to look at the land that we have
earmarked for data centers. So I think the demand is there.
Whether it's you know, a bubble and what we're going
to see from the fallout of that, you know, there
is definitely the demand for the land is there because
it takes a long time to get the zoning and
the infrastructure in place, the local government, municipalities, utilities, everything
(29:49):
in line. That can take years. So people that are
starting now are not going to have data centers on
those sites for you know, probably four plus years.
Speaker 5 (29:57):
Wow, if you can get them hooked up to the grid.
Speaker 2 (30:00):
Get it.
Speaker 5 (30:00):
Yeah, that's the key.
Speaker 2 (30:01):
Well, it might take four years to build out the
grid and have the power.
Speaker 5 (30:04):
There, or they could be done in just sitting there
like those in Silicon Valley.
Speaker 2 (30:07):
Unbelievable. Katie, always get some insight when you join us.
Thank you so much, Happy holidays, Happy New Year, and
look forward to continuing our conversations with you into twenty
twenty six. Katie Ubard, president of u HAS Capital Markets
over at Walton Global.
Speaker 5 (30:21):
I'm looking at chairs of Nvidia down more than three
percent right now, trying of dragging megacaps lower, down more
than seventeen percent from those all time highs back in October.
Speaker 2 (30:30):
Yeah, there's definitely been kind of a rewrite when it
comes to some of these AI plays.
Speaker 3 (30:33):
Don't go anywhere.
Speaker 2 (30:34):
This is Bloomberg Business Weekday.
Speaker 1 (30:36):
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