December 12, 2025 • 27 mins
- Peter Tchir, Head of Macro Strategy at Academy Securities
- Yelena Shulyatyeva, Senior US Economist at The Conference Board
- Jason Bazinet, Global Head of Media and Entertainment at Citi
- Liz Ann Sonders, Chief Investment Strategist at Charles Schwab
Peter Tchir, Head of Macro Strategy at Academy Securities, breaks down the latest market action with global stocks as a selloff in technology shares dragged global gauges from the brink of record highs. Yelena Shulyatyeva, Senior US Economist at The Conference Board, gives her outlook for upcoming year-end US eco data. Jason Bazinet, Global Head of Media and Entertainment at Citi, joins to discuss the Disney-OpenAI deal and what it means for the entertainment industry going forward. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, gives her assessment of the macro environment heading into 2026.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 1 (00:36):
Peter Sheer of Academy Security is writing, now we can
watch the data and let the countdown to the Santa
Rally begin, and you put a little smiley emoji and
there is a real question here. Is this ultimately a
market that wants to go up and is going to
go up because there is a garth of other information
to really prevent it from doing otherwise.
Speaker 3 (00:54):
Yeah, and I think you're seeing it. The Russell two
thousands doing very well. I think there's still questions around
and you know the big tech, the AI story, but
you're seeing the equal weight S and P five hundred
do better. Russell two thousand. I think it's helpful that
the FED is buying some T bills up to forty
billion dollars a month, so you're seeing all that. I think,
you know, the Oracle earnings yesterday kind of spook the
market a little bit, and I think that's maybe the
one susceptibility is there's a lot more questions around the
(01:16):
AI data center. But it rates are coming down. I
think we're going to get rate cuts faster than markets pricing.
That should be really good for small caps and the
broad economy.
Speaker 1 (01:24):
How much better are you feeling about big tech given
the fact that you've seen such a lack of enthusiasm
following some of these earnings, you know.
Speaker 3 (01:30):
I think there's still questions about valuations there. The one
thing that's I think coming up in every conversation we
have is more and more questions about the electricity bottleneck.
How are we going to run some of these things
if we can't produce the electricity?
Speaker 4 (01:41):
So I think again we're.
Speaker 3 (01:42):
Going to see a lot of investment into electricity next year.
Speaker 4 (01:45):
That's going to be a story.
Speaker 3 (01:46):
I still think that come the next election, electricity and
electricity costs are going to be an election issue.
Speaker 5 (01:52):
Peter, how much do you look at a company like
Broadcom or Oracle as a proxy for this nascent industry
as a whole.
Speaker 3 (01:58):
There's kind of that collection looking at what they're doing.
You're also trying to figure out how, you know, again
the Disney announcement yesterday, how are starks reacting to this?
And you know, it feels that we've kind of gone
through this period. If you raise your hand say anything AI,
your stock shoots higher.
Speaker 4 (02:11):
Now there's a lot of questions.
Speaker 3 (02:12):
People are trying to figure out where's this going to work,
how's it actually going to work? And you know, again,
you know going to be somewhat facetious. If you spend
fifty million dollars and you hire ten fewer people, how
much are you paying those people?
Speaker 4 (02:21):
Maybe you shouldn't have done that.
Speaker 3 (02:22):
So I think the AI story is growing and we're
seeing the use, but now it's kind of there's a
little bit more question are you spending it, are you
getting value?
Speaker 4 (02:30):
How do you want to use it going forward?
Speaker 5 (02:31):
At LISTA mentioned the high expectations that we've had for
a lot of these companies. Is this a moment to
recalibrate or rethink what those expectations are. So I look
at a company like WORKLID, look at a company like Broadcom.
There's been a lot of happy talk. It has performed
very well quarter after quarter after quarter. Now we're a
point where maybe we just can't reach those expectations that
have been in place for so long.
Speaker 3 (02:49):
Right, it gets much more difficult. So again, one of
the trades we've liked is you are either underweight QQQ
or you know, the Nasdaq one hundred, and you overweight
either the S and P five hundred equal weight or
the Rustle two thousand. I think that's the performance is
going to come as we realize all these other companies
who are benefiting from AI, they should trade maybe at
better multiples the businesses here, And you're starting to see
rates come down again, which helps a lot of those
companies much more than it helps I think the big companies.
Speaker 4 (03:11):
We're kind of walking in tyrope. Though.
Speaker 1 (03:13):
I remember just a couple of months ago people saying
that if the AI trade doesn't work, it's going to
bring down everything, because ultimately the entire market and economy
has been propped up by AI hopes and dreams. Why
has that changed in terms of a narrative, so substantially well.
Speaker 3 (03:27):
I think we're still seeing the investing going on in
that part, so the spend is still there. So I
think if that spend really drops, that's where you start
really getting the trouble. Then we start questioning, Okay, where's
this economy had? And I'm definitely not quite saying green
about the economy. I think there are some risks there.
I think the jobs data, I think a lot of
companies are actually going to budget less spending next year.
I think it's going to start flowing through the economy
where you slowly see the upticking tears, right, is this
(03:49):
terar for revenue keeps coming in slowly but surely two
and forty two hundred and fifty three hundred billion. That's
when you start feeling the impact on that. I think
the job market's a little bit sketchy. What I did
of all the day I saw this week. I still
look at the jolts quit very very closely. To me,
that's the closest we get to crowdsourcing. We're back to
levels in the quits rate. I think it was one
point eight or something. It goes back to twenty fifteen.
(04:10):
People aren't comfortable leaving their jobs. That tells you everyone
knows the job market's a little bit sketchy than maybe.
Speaker 4 (04:15):
The data shows. I'm so glad you went there.
Speaker 1 (04:17):
Next week we get the November jobs report, which of
course is delayed, and a lot of people in very
in particular, was really annoyed that we didn't get it
before the FED meeting, and we seem to get indication
from fedcher J.
Speaker 4 (04:27):
Powell that there is.
Speaker 1 (04:28):
This weakness in the labor market that you're talking about.
How pivotal is that report to highlight that things aren't
falling off a cliff. Yes, if that's going to cut rates,
but that the economy is actually still hanging in there.
Speaker 3 (04:38):
Well, I hope it's pivotal and shows that we're not
falling off the cliff. I think there is a risk
that this data comes in much weaker than we're expecting,
and it's kind of this wake up call. Okay, we've
all been talking about this jobless recovery, and yeah, the
data center spend's been driving a lot of the economy.
Where are the jobs, who's getting the jobs? Where they come?
And again, everything I talked to and probably near and
dear to my heart your kids graduating college. The job
market looks very bleak right there, from compared to what
(05:00):
it's been a few years ago. So I think we
might be starting to get the data that really starts
confirming whoa something's not quite working, and I think everything's
been a little bit tall, and let's see how these
things play out.
Speaker 4 (05:10):
Let's see how the trade deals play out.
Speaker 3 (05:12):
Let's see now we're at that proof is in the pudding,
and I'm a little bit nervous that the job's data
is going to show this is not working the way.
Speaker 4 (05:18):
We hoped it would be.
Speaker 5 (05:19):
How are you thinking about FED timing and insurance? I
think Claire Jones are the fts to question a lot
of us had going into that meeting, which is, why
do this cut now?
Speaker 6 (05:26):
Why not wait till January?
Speaker 5 (05:28):
We would have the data that we're talking around because
we haven't had. Why not wait into Jai or did
he give you a satisfactory answer to that in that
press conference?
Speaker 4 (05:36):
You know?
Speaker 3 (05:36):
I think the ultimate reason is they are concerned about jobs,
and there's just enough out there, I think on the
jobs data and not just official data. I think it's
anecdotally right. There's no one I'm hearing talk about, oh,
there's some great underlying strength, and you.
Speaker 4 (05:49):
Know, it was kind of weird.
Speaker 3 (05:50):
They did raise the GDP forecast, but again they didn't
seem to know a company that with a big job growth,
So I think that's why they did it. And honestly,
I think you're going to see a lot of pressure.
I think the market is going to get to three
percent on FED funds way faster. I think we get
there by the summer, and market it's not pricing in
two cuts next year until September.
Speaker 4 (06:06):
I think power will have to cave. I think we're
going to have to move.
Speaker 3 (06:09):
And this is going to be an aggressive cycle where
we've been maybe a little bit tight too long, too
dependent on allowing that AI spend to maybe cloud or
cover up that there's an underlying weekly economy going on.
Speaker 5 (06:20):
Curious if you noticed something that I did during that
press conference was the Fed cheer very willing to engage
with AI in a way that he hadn't been able
to before. So there were a number of colloquies with
Howard Schneider and Neil Erwin Steve Leisman. They asked about AI,
how much he's thinking about it, and he was pretty optimistic.
You know, he talked about the prospects of AI spend
continuing here at a moment when we are candidly kind
of wondering about how long that's likely to persist. What
(06:41):
did you make of that His kind of recognition of
the fact that this is going to be rather seismic
going forward.
Speaker 4 (06:47):
I think it's good. I think it all makes sense.
Speaker 3 (06:50):
Again, we are going to continue to use AI, people
are going to refine how they use AI.
Speaker 6 (06:54):
They're going to admit it. He uses it, which I
thought was interesting.
Speaker 4 (06:56):
I think, you know, I've used it multiple different ways.
Speaker 7 (06:58):
You know.
Speaker 4 (06:58):
If I'm on Twitter, I didend to use GROCK.
Speaker 3 (07:00):
If I'm on my desktop, I tend to use chat
GTT or something like that. So I think it's important part.
But again, I think we also see some of the limitations.
And I'm still at this concern that we're basically paying
twenty thirty prices for twenty twenty five technology, and so
it's not quite where we want it to be, and
people are going to be a little bit more thoughtful
on their spend. And I keep coming back to whether
it's the dats of the digital acid treasury companies. You know,
(07:22):
when there was this you raise your hand, use raise
free money. It's going to continue as soon as you
start really questioning are we getting the value and what
are the limitations? Again, I keep thinking that it's going
to be electricity and power generation is the limitation.
Speaker 4 (07:34):
People are going to have to think twice. That's where
it's going to stall out a little bit.
Speaker 1 (07:37):
David, I'm so glad that Peter talked about this, the
idea of are we getting the value? I think about
chat EBT, I look up medical problems with GROCK. I say,
is this real? And that's what everybody does is real.
Speaker 4 (07:46):
It's real there.
Speaker 1 (07:48):
So it's sort of a certain point you can either
go to the mark manual or you could actually just
not have digital manufacturing of concepts, and then all of
a sudden you clarify those two issues. Are we actually
solving some of the issues that people think will create
the product boom that's being priced into the market.
Speaker 5 (08:02):
I've heard skeptics say you can take out a calculator
and do two plus two is four. If you do
it through chet GPT, it's going to take I don't
know how much more energy to do that. Then it
will be my little solar powered calculator.
Speaker 6 (08:10):
But this is a real issue.
Speaker 5 (08:11):
I think people are kind of I think it's emblematic
the fact that we're trying to fumble through this figuring out.
Speaker 6 (08:16):
Sort of what the best use case is.
Speaker 5 (08:17):
We're doing that individually, you with your medical interests or whatever,
and you know, but just why broadst Then there's this
whole enterprise facet of this as well, which is I
think companies are still embracing this largely, but in a
kind of blind way, not knowing how it's going to
be applicable to what they're doing.
Speaker 3 (08:31):
Yeah, and you know, I again have to jokingly say,
I think in some cases if they just ask their
employees have been there three or four years what they
should do, they'd probably get a really good answer. Maybe
we should go back to empowering our employees too. Like
people know the situation and some of this feels a
little bit like a crutch. And again, there's going to
be useful parts of it. I think the limitation is
how much data you have, How useful is your data?
You got to plug it into there so people are
(08:52):
using it. I think it's you know, makes people slightly
more productive. I don't think it's kind of this be
on end all that ultimately it should get to right.
It's going to do more and more, it's going to
get better and better. I just don't see the technology
quite at that level. And when I try and use it,
it's great until you realize, oh it hallucinated a ticker symbol,
and now I'm like, now what else do I have
to check? What else do I really need to go?
And also it's how do you learn if you kind
(09:12):
of rely on it for too much?
Speaker 2 (09:16):
Stay with us multpleinpeg. Savannah's coming up off to this.
Speaker 1 (09:28):
Here's the latest shoppers gearing up for what is expected
to be a record breaking holiday season, despite consumer confidence
tumbling to its lowest levels going back to April. Joining
us now is Elena shall get Cheva of the conference board. Lena,
could you give us some color around the retail sales
data that we're going to be getting next week as
well as this holiday shopping season?
Speaker 4 (09:48):
Is it wonderful?
Speaker 1 (09:49):
Is is people looking for deals and being picky and
just sort of back ending some of their purchases to
try to get the best bang for their buck.
Speaker 7 (09:57):
I think so. I think the latest earnings results are
telling us that consumers are shifting towards value and essentials,
and you know, clubs and value retailers doing great means
that consumers are really concerned about what is going on
in terms of prices, and they are really shifting towards
(10:21):
those savings. So I think we are looking at a
healthy holiday season, but not necessarily the best one. So
I think, you know, probably the results of the Thanksgiving
holiday was we're a little bit overstating the health of
the consumer.
Speaker 5 (10:40):
Jih and great to see you, And I'd love for
you to put in the context for us where we
are in the capacity the companies have their willingness to
absorb costs because of these tariffs. I might posit that
maybe this holiday Christmas season is kind of the last
gas for them to do this before maybe in the
new year we begin to see some of that trickling
down to consumers in anticipating that might be the case,
(11:01):
or what's the status of that sort their willingness to
do that.
Speaker 7 (11:05):
Yeah, thanks, thanks for the question. I think you're right.
I think holidays is probably going to be okay. But
our modeling and the conference board shows that the bulk
of the tariffs impact will be evident in the beginning
of twenty twenty six, so Q one, Q two, and
(11:26):
that is where we see the biggest softening in consumer demand. Actually,
so I think despite the fact that you know, the
new cycle kind of moved away from tariffs a little
bit in recent months, consumers are still feeling the burden.
They still failing, prices are elevated, and they are shifting
(11:50):
their spending patterns. Actually, at the Conference Board, we survey
consumers by different types of income, so the whole spectrum
of income groups that we reach out to, and what
I see in our consumer confidence data is a broad
based decline in income expectations. I see a broad based
(12:14):
decline in consumer confidence over the course of twenty twenty five.
This is the time to kind of like look back
at the year and assess what's called what happened? And
there was a twenty four point decline in consumer confidence
over the course of twenty twenty five. Consumers earning making
more than one hundred and twenty five thousand dollars a year,
(12:38):
the decline in their confidence was also sizable, something like
minus seventeen points.
Speaker 5 (12:46):
I'm still having a hard time kind of squaring the
sentiment data with the hard data. What we're seeing in
terms of people, yes out there spending money. I kind
of imagine Santa Claus filling is sack with gritted teeth.
He's doing it, but maybe he's not feeling good about
the crisis that he's paying. Is that reflective of what
we're seeing here? And what do you make of that
seeming disconnect between again the hard data and the sentiment
(13:07):
data that you watch so closely.
Speaker 7 (13:09):
I think it's the timing issue, and you know, to
a certain degree, we did see some softening in consumer spending.
The actual data in September already, right, So look at
the personal income and spending reports for that month. Obviously
it's very stale, but that shows that, you know, there
(13:30):
was some softening in spending on non durable butos for example, right,
and as things are getting more and more expensive. I
think we do see that. We'll get another piece of
evidence next week when retail sales data comes out. I
think it's not a collapse, it's somewhat softer growth in
(13:52):
consumer spending. But obviously a big risk is the labor market.
So what happens to the labor market going into Twined
twenty six will matter the most for the pace of
consumer spending.
Speaker 8 (14:07):
Elena, good to see you. So the labor differential which
you're highlighting, I think is key here where people if
you have a job, you're okay because they also are
not picking up. But do you think housing affordability is
another reason why consumer sentiment is that week? Because I'm
trying to see do the two hundred and one seventy
five basis points of rate cuts do they help housing affordability?
Do you think these rate cuts can actually improve consumer
(14:29):
sentiment or we continue to see this disconnect and sort
of wait for that timing to play out.
Speaker 7 (14:35):
I apre Yeah, I think that you know, you're referring
to the level of interest rates, and even if interest
rates continue to edge lower in terms of mortgage rates,
that could improve affordability. But the big part of the
affordability calculation is prices, and prices are still elevated. Well
(14:57):
maybe they're growing at a slower pace, but they're still growing.
So you have that one million dollar house and it's
now a million and five thousand, so it's still it's
still very unaffordable to a lot of people out there.
Maybe at the margin it could help, but I think
(15:18):
we just need continued growth in real wages going forward,
as Chair Powell mentioned earlier this week, to kind of
outgrow from you know, the economy needs to grow into
that kind of state where consumers will be able to
afford a little bit more and you know, be happy
(15:40):
again about how they are faring.
Speaker 2 (15:44):
Stay with us Mobilemberg Surveillance Coming up after this.
Speaker 1 (15:56):
Sticking with AI and the application of it is inking
a billion dollar steak in open AI and licensing more
than two hundred of its characters to the startup. Jason
Mazine of City Writing, we suspect Disney views the use
of its IP as a free form of marketing. The
use of these characters should help sustain and potentially build
long term brand value. Jason has a buy rating on
(16:19):
shares of Disney with one hundred and forty five dollars
price ticket. These shares are up four tens percent in
pre market trading. Jason joins us now, Jason.
Speaker 2 (16:26):
Thank you so much for being with us.
Speaker 1 (16:27):
I thought this was a fascinating move and the part
of Disney, it kind of goes to the heart of
the anxiety for content creators. Is AI going to be
a partner? Is it going to be accounibal? Is it
going to make you obsolete. What do you take from
this approach from Disney?
Speaker 9 (16:42):
Well, there's part of this deal we like, Lisa, in
part that we don't. The part that we like is
we'd rather see a commercial deal than litigation, and so
we like the idea that they've inked something. We think
Disney is going to get some cash for the use
of its IP and we like the idea that the
use case has been ring fenced these animated characters short
form video that makes a ton of sense. The part
(17:05):
I don't like is the billion dollar investment.
Speaker 5 (17:08):
And explain why. I have another question. Let me taste
that out of here a little bit. Why are you
sitt down on this investment, which I think some could
argue is sort of them you know, a solidifying a
stake here in a company that has had more than
buzz over the last couple of years, and a lot
of people are thinking it's kind of the future of tech.
Speaker 4 (17:22):
More broadly, well, Disney has.
Speaker 9 (17:26):
First of all, I've never had an investor tell me
that they invest in Disney because they haven't a stud
venture capital arm. It's just not what investors care about
that are Disney shareholders. The reason I think that is
is Disney tends to have a propensity to invest it's capital.
It's sort of the peak of the mania. And so
I could go back to, you know, the Info Seek
investments that they made in the nineties. They never went
(17:47):
anywhere a bunch of video game developers. When video games
are growing very quickly, they shut all those down. A
couple of years ago, they invested in Epic Games. I
think it was a billion and a half dollar investment.
We'll see where that goes. But that was at the
height of the metaverse. And now we have the height
of AI and we see a billion dollar equity investment.
So you know, maybe this works out really well for Disney.
(18:09):
But call me a bit skeptical, poor.
Speaker 6 (18:11):
One out for infras Seke. Haven't thought of that company
in a long time.
Speaker 5 (18:14):
But let's get back to the use case here, Jason,
because I am very curious about this. It strikes me
maybe we're closer to Ann, Marie and John being out
and Micky, you'll be sitting at the table with Lesa
or Steamboat WILLI or Donald Duck. But I want to
ask about Sora, because my sense of Sora, this product
that Open Ai has made is that it hasn't gotten
a lot of widespread adoption or interest. There's that kind
of flash at the beginning when my Twitter feed was
(18:34):
just filled with these kind of insane ten second videos
that people were making, I think just to showcase or
show off the technology that OpenEye had made. But I
don't get the sense it has a lot of cultural
currency now. And I'm curious to sort of when you
think about the way in which open ai is going
to use this, do you have a sort of satisfactory
answer from the company, a sense of sort of how
much this is going to be you know, used for
(18:55):
PR or marketing employees, you say, or just use more generally.
Speaker 9 (19:00):
I don't know, it's all very much TBD. I would
say that I had a number of investors paying me
yesterday and say that they believe that open ai is
sort of de emphasizing SOA and I would agree with
you it doesn't have a huge amount of cultural currency.
I think we're still in the early days of sort
of consumer adoption and embracing of all of these tools.
So TBD, But I can't I don't think it's going to.
Speaker 4 (19:20):
Be a bad thing.
Speaker 9 (19:21):
And you know, we've had a number of other companies
in our coverage universe that have licensed their IP and
receive checks that are you know, on the magnitude of
fifty million dollars a year. That's a that's a mix
of sort of a fixed payment and a usage based payment.
Speaker 1 (19:35):
Jason, if I were an actor in Hollywood, would I
be excited about the steal or worried about the steal?
Speaker 9 (19:43):
Well, I would say that you are, I guess excited
at one level, and that the you know, there's nothing
in here that sort of allows open AI to use
the likeness of actors or actresses. But in another level,
it doesn't answer the threshold question because this is an
(20:04):
easier deal for Disney to do because it has so
many animated characters, the two hundred or so that you
referred to, And so I think there's still an outstanding
question of how these AI tools are going to be
used for the bulk of the IP that exists in Hollywood.
Speaker 2 (20:20):
Stay with us mulblindpeg Savannah's coming up off to this.
Speaker 1 (20:32):
Global stocks pushing into record territory after the Federal Reserve's
latest interest rate cut. Lezanne Sounders of Charles Schwab remaining
cautious into twenty twenty six, saying we believe the macro
environment will continue to be unstable, but stocks can likely
churn higher given a firmer earnings backdrop. Lizanne joins us
now in Lizan, this is what a lot of people
are saying. Just watch the earnings, show me the money,
(20:53):
and the companies can do that, and then you'll start
to see gains. Just how do you think it's going
to play out in terms of a tale of two halves,
a tail of rotation, et cetera.
Speaker 10 (21:01):
Well, you know, we've been talking a lot and writing
a lot about the case shape nature of this cycle.
It's become a bit ubiquitous. But I think one place
where you're actually already starting to see convergence is in
the earnings growth rates of the tech AI, megacap tech.
You know, different cohorts their earnings progress. So if you
(21:22):
look at any of those cohorts a year and a
half ago, you were running at earnings to your earnings
growth rates of about fifty percent, But those have been decelerating,
maybe into the twenty percent rain, where the other part
of the market is actually seeing accelerating rate of earnings growth.
So I'm a big believer in the old adage about
you know better or worse can often matter more than
(21:43):
good or bad. And I think it's the trajectory of
earnings that is one of the reasons why we've seen
some dislocations within these prior leadership areas, only two of
the mag seven outperforming the S and P and opportunities
that are being found outside of those prior leadership names.
Speaker 5 (22:00):
Well, Zam, we've been having a lot of attention to
sentiment data, in part because we just haven't had the
hard data as a result of this government shut down.
But you and Kevin Gordon I have coined a new
word here. It's the vibe pression. You're warning about a
vibe pression, and I wonder if you kind of spell
out how much of a what it is first of all,
and then how much of a warrior it is for you?
Speaker 6 (22:16):
Is we move ahead here to twenty.
Speaker 10 (22:18):
Twenty six, I think you know it used to be
talked about just in the context of soft economic data
versus hard economic data. So soft data would be the
survey based data, and that's where you're still showing incredibly
dour outlooks. You look at New Michigan's consumer sentiment kind
of plumbing its cycle lows here at the same time,
as part of the Conference Board's index, their consumer confidence Index,
(22:43):
and they have different cohorts that represent the survey respond
It's Conference Board tends to skew a little bit wealthier.
But Conference Sport has a question about expectations for stock prices,
that's absolutely through the roof. You mish has a question
about expectations for the unemployment. That's through the roof. That
is one of the ultimate disconnects. That maybe is a
(23:05):
reference to this session vib pression or the way we
used to think of it as much weaker soft data
relative to hard data. You probably see a little bit
of convergence in twenty twenty six, and by convergence probably
moves in both directions.
Speaker 5 (23:22):
I'm curious when you think about dispersion, where you see
things kind of moving here in twenty twenty six. So
if we're not going to be wagging our chins about
the magnificent seven and the hyperscalers in twenty twenty six
to the three which we have in twenty twenty five,
where do you see that conversation moving in the year ahead.
Speaker 10 (23:39):
So I think as it relates to AI. The story
is certainly not in the review mirror, but I think
there's maybe an increasing focus even beyond data centers, which
was the more recent surge area relative to the hyperscalers
and the original picks and shovels companies, I think the
shift is more toward the adopters, the effective adopters, not
just in a very general set, but actually starting to
(24:01):
get meat put on the bones in terms of impact
on productivity, what it means for labor costs, can it
help improve profit margins? So I think that may be
one of the newer themes that develops within AI is
that adopter theme. But you're also seeing broader participation in
other segments of the market, healthcare having some of the
(24:22):
best breath right now.
Speaker 4 (24:24):
Now.
Speaker 10 (24:24):
We would also caution against simplistic, monolithic sector based investing
because there's a lot of dispersion within sectors, and that's
where we think you want to apply that factor based analysis,
at least as an add on to sector based analysis.
And the factors that we're focused on right now, to
(24:44):
use an old school acronym, are very garp like. So
you don't want to sacrifice growth just for value. You
want to look for value, but you want to have
those growth characteristics as well.
Speaker 8 (24:55):
Lazan is bad news good news for stocks, I mean
ahead of next week, Meaning if you get weak economic data,
well then the Fed's going to cut a lot more.
Maybe do really qy and so equities can look through
it or you think either the rotation trade or actually
equy evaluations are at risk if the uneployment rate keeps rising.
Speaker 10 (25:14):
Maybe marginally bad is okay from a FED reaction function perspective,
but really bad news, especially in the labor market, regardless
of what that means for the trajectory of monetary policy,
I think is bad news, particularly given that the support
for this economy, consumer spending resilience that has largely been
(25:35):
a function of not just health in the labor market,
but confidence about the labor market. You start to see
weaker than expected numbers to a significant degree that feeds
not just back into the consumption channels, but very quickly
back into the confidence channels.
Speaker 1 (25:49):
So, Lezana, are you buying the idea of a jobless recovery?
Can we see that in twenty twenty six fueling the
rotation or is that kind of implausible given what you
just said.
Speaker 10 (25:57):
Well, if you look at the ADP data of the
job growth has been concentrated recently in larger companies, companies
with five hundred employees or more. Anything below that is
really where you're seeing the compression. You see that divide
in terms of corporate profits to very strong SMP profits
thirteen fourteen percent. Yet NIPPA based version of profits National
(26:18):
Income and Product accounts, which is millions of companies, public companies,
private companies first half of the year and we don't
have the third quarter data yet was actually in slight
negative territory and that's being reflected in the labor market
as well. So that's where I do think the bifurcations persist.
I think the net is it looks just sluggish, but
I think you have to find tooth comment in terms
(26:40):
of size of company in particular.
Speaker 2 (26:44):
This is the Bloomberg Svendans podcast, bringing you the best
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Speaker 1 (27:07):
Mm hmm
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Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amerie Hortenn. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
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(00:34):
Terminal and the Bloomberg Business App.
Speaker 1 (00:36):
Peter Sheer of Academy Security is writing, now we can
watch the data and let the countdown to the Santa
Rally begin, and you put a little smiley emoji and
there is a real question here. Is this ultimately a
market that wants to go up and is going to
go up because there is a garth of other information
to really prevent it from doing otherwise.
Speaker 3 (00:54):
Yeah, and I think you're seeing it. The Russell two
thousands doing very well. I think there's still questions around
and you know the big tech, the AI story, but
you're seeing the equal weight S and P five hundred
do better. Russell two thousand. I think it's helpful that
the FED is buying some T bills up to forty
billion dollars a month, so you're seeing all that. I think,
you know, the Oracle earnings yesterday kind of spook the
market a little bit, and I think that's maybe the
one susceptibility is there's a lot more questions around the
(01:16):
AI data center. But it rates are coming down. I
think we're going to get rate cuts faster than markets pricing.
That should be really good for small caps and the
broad economy.
Speaker 1 (01:24):
How much better are you feeling about big tech given
the fact that you've seen such a lack of enthusiasm
following some of these earnings, you know.
Speaker 3 (01:30):
I think there's still questions about valuations there. The one
thing that's I think coming up in every conversation we
have is more and more questions about the electricity bottleneck.
How are we going to run some of these things
if we can't produce the electricity?
Speaker 4 (01:41):
So I think again we're.
Speaker 3 (01:42):
Going to see a lot of investment into electricity next year.
Speaker 4 (01:45):
That's going to be a story.
Speaker 3 (01:46):
I still think that come the next election, electricity and
electricity costs are going to be an election issue.
Speaker 5 (01:52):
Peter, how much do you look at a company like
Broadcom or Oracle as a proxy for this nascent industry
as a whole.
Speaker 3 (01:58):
There's kind of that collection looking at what they're doing.
You're also trying to figure out how, you know, again
the Disney announcement yesterday, how are starks reacting to this?
And you know, it feels that we've kind of gone
through this period. If you raise your hand say anything AI,
your stock shoots higher.
Speaker 4 (02:11):
Now there's a lot of questions.
Speaker 3 (02:12):
People are trying to figure out where's this going to work,
how's it actually going to work? And you know, again,
you know going to be somewhat facetious. If you spend
fifty million dollars and you hire ten fewer people, how
much are you paying those people?
Speaker 4 (02:21):
Maybe you shouldn't have done that.
Speaker 3 (02:22):
So I think the AI story is growing and we're
seeing the use, but now it's kind of there's a
little bit more question are you spending it, are you
getting value?
Speaker 4 (02:30):
How do you want to use it going forward?
Speaker 5 (02:31):
At LISTA mentioned the high expectations that we've had for
a lot of these companies. Is this a moment to
recalibrate or rethink what those expectations are. So I look
at a company like WORKLID, look at a company like Broadcom.
There's been a lot of happy talk. It has performed
very well quarter after quarter after quarter. Now we're a
point where maybe we just can't reach those expectations that
have been in place for so long.
Speaker 3 (02:49):
Right, it gets much more difficult. So again, one of
the trades we've liked is you are either underweight QQQ
or you know, the Nasdaq one hundred, and you overweight
either the S and P five hundred equal weight or
the Rustle two thousand. I think that's the performance is
going to come as we realize all these other companies
who are benefiting from AI, they should trade maybe at
better multiples the businesses here, And you're starting to see
rates come down again, which helps a lot of those
companies much more than it helps I think the big companies.
Speaker 4 (03:11):
We're kind of walking in tyrope. Though.
Speaker 1 (03:13):
I remember just a couple of months ago people saying
that if the AI trade doesn't work, it's going to
bring down everything, because ultimately the entire market and economy
has been propped up by AI hopes and dreams. Why
has that changed in terms of a narrative, so substantially well.
Speaker 3 (03:27):
I think we're still seeing the investing going on in
that part, so the spend is still there. So I
think if that spend really drops, that's where you start
really getting the trouble. Then we start questioning, Okay, where's
this economy had? And I'm definitely not quite saying green
about the economy. I think there are some risks there.
I think the jobs data, I think a lot of
companies are actually going to budget less spending next year.
I think it's going to start flowing through the economy
where you slowly see the upticking tears, right, is this
(03:49):
terar for revenue keeps coming in slowly but surely two
and forty two hundred and fifty three hundred billion. That's
when you start feeling the impact on that. I think
the job market's a little bit sketchy. What I did
of all the day I saw this week. I still
look at the jolts quit very very closely. To me,
that's the closest we get to crowdsourcing. We're back to
levels in the quits rate. I think it was one
point eight or something. It goes back to twenty fifteen.
(04:10):
People aren't comfortable leaving their jobs. That tells you everyone
knows the job market's a little bit sketchy than maybe.
Speaker 4 (04:15):
The data shows. I'm so glad you went there.
Speaker 1 (04:17):
Next week we get the November jobs report, which of
course is delayed, and a lot of people in very
in particular, was really annoyed that we didn't get it
before the FED meeting, and we seem to get indication
from fedcher J.
Speaker 4 (04:27):
Powell that there is.
Speaker 1 (04:28):
This weakness in the labor market that you're talking about.
How pivotal is that report to highlight that things aren't
falling off a cliff. Yes, if that's going to cut rates,
but that the economy is actually still hanging in there.
Speaker 3 (04:38):
Well, I hope it's pivotal and shows that we're not
falling off the cliff. I think there is a risk
that this data comes in much weaker than we're expecting,
and it's kind of this wake up call. Okay, we've
all been talking about this jobless recovery, and yeah, the
data center spend's been driving a lot of the economy.
Where are the jobs, who's getting the jobs? Where they come?
And again, everything I talked to and probably near and
dear to my heart your kids graduating college. The job
market looks very bleak right there, from compared to what
(05:00):
it's been a few years ago. So I think we
might be starting to get the data that really starts
confirming whoa something's not quite working, and I think everything's
been a little bit tall, and let's see how these
things play out.
Speaker 4 (05:10):
Let's see how the trade deals play out.
Speaker 3 (05:12):
Let's see now we're at that proof is in the pudding,
and I'm a little bit nervous that the job's data
is going to show this is not working the way.
Speaker 4 (05:18):
We hoped it would be.
Speaker 5 (05:19):
How are you thinking about FED timing and insurance? I
think Claire Jones are the fts to question a lot
of us had going into that meeting, which is, why
do this cut now?
Speaker 6 (05:26):
Why not wait till January?
Speaker 5 (05:28):
We would have the data that we're talking around because
we haven't had. Why not wait into Jai or did
he give you a satisfactory answer to that in that
press conference?
Speaker 4 (05:36):
You know?
Speaker 3 (05:36):
I think the ultimate reason is they are concerned about jobs,
and there's just enough out there, I think on the
jobs data and not just official data. I think it's
anecdotally right. There's no one I'm hearing talk about, oh,
there's some great underlying strength, and you.
Speaker 4 (05:49):
Know, it was kind of weird.
Speaker 3 (05:50):
They did raise the GDP forecast, but again they didn't
seem to know a company that with a big job growth,
So I think that's why they did it. And honestly,
I think you're going to see a lot of pressure.
I think the market is going to get to three
percent on FED funds way faster. I think we get
there by the summer, and market it's not pricing in
two cuts next year until September.
Speaker 4 (06:06):
I think power will have to cave. I think we're
going to have to move.
Speaker 3 (06:09):
And this is going to be an aggressive cycle where
we've been maybe a little bit tight too long, too
dependent on allowing that AI spend to maybe cloud or
cover up that there's an underlying weekly economy going on.
Speaker 5 (06:20):
Curious if you noticed something that I did during that
press conference was the Fed cheer very willing to engage
with AI in a way that he hadn't been able
to before. So there were a number of colloquies with
Howard Schneider and Neil Erwin Steve Leisman. They asked about AI,
how much he's thinking about it, and he was pretty optimistic.
You know, he talked about the prospects of AI spend
continuing here at a moment when we are candidly kind
of wondering about how long that's likely to persist. What
(06:41):
did you make of that His kind of recognition of
the fact that this is going to be rather seismic
going forward.
Speaker 4 (06:47):
I think it's good. I think it all makes sense.
Speaker 3 (06:50):
Again, we are going to continue to use AI, people
are going to refine how they use AI.
Speaker 6 (06:54):
They're going to admit it. He uses it, which I
thought was interesting.
Speaker 4 (06:56):
I think, you know, I've used it multiple different ways.
Speaker 7 (06:58):
You know.
Speaker 4 (06:58):
If I'm on Twitter, I didend to use GROCK.
Speaker 3 (07:00):
If I'm on my desktop, I tend to use chat
GTT or something like that. So I think it's important part.
But again, I think we also see some of the limitations.
And I'm still at this concern that we're basically paying
twenty thirty prices for twenty twenty five technology, and so
it's not quite where we want it to be, and
people are going to be a little bit more thoughtful
on their spend. And I keep coming back to whether
it's the dats of the digital acid treasury companies. You know,
(07:22):
when there was this you raise your hand, use raise
free money. It's going to continue as soon as you
start really questioning are we getting the value and what
are the limitations? Again, I keep thinking that it's going
to be electricity and power generation is the limitation.
Speaker 4 (07:34):
People are going to have to think twice. That's where
it's going to stall out a little bit.
Speaker 1 (07:37):
David, I'm so glad that Peter talked about this, the
idea of are we getting the value? I think about
chat EBT, I look up medical problems with GROCK. I say,
is this real? And that's what everybody does is real.
Speaker 4 (07:46):
It's real there.
Speaker 1 (07:48):
So it's sort of a certain point you can either
go to the mark manual or you could actually just
not have digital manufacturing of concepts, and then all of
a sudden you clarify those two issues. Are we actually
solving some of the issues that people think will create
the product boom that's being priced into the market.
Speaker 5 (08:02):
I've heard skeptics say you can take out a calculator
and do two plus two is four. If you do
it through chet GPT, it's going to take I don't
know how much more energy to do that. Then it
will be my little solar powered calculator.
Speaker 6 (08:10):
But this is a real issue.
Speaker 5 (08:11):
I think people are kind of I think it's emblematic
the fact that we're trying to fumble through this figuring out.
Speaker 6 (08:16):
Sort of what the best use case is.
Speaker 5 (08:17):
We're doing that individually, you with your medical interests or whatever,
and you know, but just why broadst Then there's this
whole enterprise facet of this as well, which is I
think companies are still embracing this largely, but in a
kind of blind way, not knowing how it's going to
be applicable to what they're doing.
Speaker 3 (08:31):
Yeah, and you know, I again have to jokingly say,
I think in some cases if they just ask their
employees have been there three or four years what they
should do, they'd probably get a really good answer. Maybe
we should go back to empowering our employees too. Like
people know the situation and some of this feels a
little bit like a crutch. And again, there's going to
be useful parts of it. I think the limitation is
how much data you have, How useful is your data?
You got to plug it into there so people are
(08:52):
using it. I think it's you know, makes people slightly
more productive. I don't think it's kind of this be
on end all that ultimately it should get to right.
It's going to do more and more, it's going to
get better and better. I just don't see the technology
quite at that level. And when I try and use it,
it's great until you realize, oh it hallucinated a ticker symbol,
and now I'm like, now what else do I have
to check? What else do I really need to go?
And also it's how do you learn if you kind
(09:12):
of rely on it for too much?
Speaker 2 (09:16):
Stay with us multpleinpeg. Savannah's coming up off to this.
Speaker 1 (09:28):
Here's the latest shoppers gearing up for what is expected
to be a record breaking holiday season, despite consumer confidence
tumbling to its lowest levels going back to April. Joining
us now is Elena shall get Cheva of the conference board. Lena,
could you give us some color around the retail sales
data that we're going to be getting next week as
well as this holiday shopping season?
Speaker 4 (09:48):
Is it wonderful?
Speaker 1 (09:49):
Is is people looking for deals and being picky and
just sort of back ending some of their purchases to
try to get the best bang for their buck.
Speaker 7 (09:57):
I think so. I think the latest earnings results are
telling us that consumers are shifting towards value and essentials,
and you know, clubs and value retailers doing great means
that consumers are really concerned about what is going on
in terms of prices, and they are really shifting towards
(10:21):
those savings. So I think we are looking at a
healthy holiday season, but not necessarily the best one. So
I think, you know, probably the results of the Thanksgiving
holiday was we're a little bit overstating the health of
the consumer.
Speaker 5 (10:40):
Jih and great to see you, And I'd love for
you to put in the context for us where we
are in the capacity the companies have their willingness to
absorb costs because of these tariffs. I might posit that
maybe this holiday Christmas season is kind of the last
gas for them to do this before maybe in the
new year we begin to see some of that trickling
down to consumers in anticipating that might be the case,
(11:01):
or what's the status of that sort their willingness to
do that.
Speaker 7 (11:05):
Yeah, thanks, thanks for the question. I think you're right.
I think holidays is probably going to be okay. But
our modeling and the conference board shows that the bulk
of the tariffs impact will be evident in the beginning
of twenty twenty six, so Q one, Q two, and
(11:26):
that is where we see the biggest softening in consumer demand. Actually,
so I think despite the fact that you know, the
new cycle kind of moved away from tariffs a little
bit in recent months, consumers are still feeling the burden.
They still failing, prices are elevated, and they are shifting
(11:50):
their spending patterns. Actually, at the Conference Board, we survey
consumers by different types of income, so the whole spectrum
of income groups that we reach out to, and what
I see in our consumer confidence data is a broad
based decline in income expectations. I see a broad based
(12:14):
decline in consumer confidence over the course of twenty twenty five.
This is the time to kind of like look back
at the year and assess what's called what happened? And
there was a twenty four point decline in consumer confidence
over the course of twenty twenty five. Consumers earning making
more than one hundred and twenty five thousand dollars a year,
(12:38):
the decline in their confidence was also sizable, something like
minus seventeen points.
Speaker 5 (12:46):
I'm still having a hard time kind of squaring the
sentiment data with the hard data. What we're seeing in
terms of people, yes out there spending money. I kind
of imagine Santa Claus filling is sack with gritted teeth.
He's doing it, but maybe he's not feeling good about
the crisis that he's paying. Is that reflective of what
we're seeing here? And what do you make of that
seeming disconnect between again the hard data and the sentiment
(13:07):
data that you watch so closely.
Speaker 7 (13:09):
I think it's the timing issue, and you know, to
a certain degree, we did see some softening in consumer spending.
The actual data in September already, right, So look at
the personal income and spending reports for that month. Obviously
it's very stale, but that shows that, you know, there
(13:30):
was some softening in spending on non durable butos for example, right,
and as things are getting more and more expensive. I
think we do see that. We'll get another piece of
evidence next week when retail sales data comes out. I
think it's not a collapse, it's somewhat softer growth in
(13:52):
consumer spending. But obviously a big risk is the labor market.
So what happens to the labor market going into Twined
twenty six will matter the most for the pace of
consumer spending.
Speaker 8 (14:07):
Elena, good to see you. So the labor differential which
you're highlighting, I think is key here where people if
you have a job, you're okay because they also are
not picking up. But do you think housing affordability is
another reason why consumer sentiment is that week? Because I'm
trying to see do the two hundred and one seventy
five basis points of rate cuts do they help housing affordability?
Do you think these rate cuts can actually improve consumer
(14:29):
sentiment or we continue to see this disconnect and sort
of wait for that timing to play out.
Speaker 7 (14:35):
I apre Yeah, I think that you know, you're referring
to the level of interest rates, and even if interest
rates continue to edge lower in terms of mortgage rates,
that could improve affordability. But the big part of the
affordability calculation is prices, and prices are still elevated. Well
(14:57):
maybe they're growing at a slower pace, but they're still growing.
So you have that one million dollar house and it's
now a million and five thousand, so it's still it's
still very unaffordable to a lot of people out there.
Maybe at the margin it could help, but I think
(15:18):
we just need continued growth in real wages going forward,
as Chair Powell mentioned earlier this week, to kind of
outgrow from you know, the economy needs to grow into
that kind of state where consumers will be able to
afford a little bit more and you know, be happy
(15:40):
again about how they are faring.
Speaker 2 (15:44):
Stay with us Mobilemberg Surveillance Coming up after this.
Speaker 1 (15:56):
Sticking with AI and the application of it is inking
a billion dollar steak in open AI and licensing more
than two hundred of its characters to the startup. Jason
Mazine of City Writing, we suspect Disney views the use
of its IP as a free form of marketing. The
use of these characters should help sustain and potentially build
long term brand value. Jason has a buy rating on
(16:19):
shares of Disney with one hundred and forty five dollars
price ticket. These shares are up four tens percent in
pre market trading. Jason joins us now, Jason.
Speaker 2 (16:26):
Thank you so much for being with us.
Speaker 1 (16:27):
I thought this was a fascinating move and the part
of Disney, it kind of goes to the heart of
the anxiety for content creators. Is AI going to be
a partner? Is it going to be accounibal? Is it
going to make you obsolete. What do you take from
this approach from Disney?
Speaker 9 (16:42):
Well, there's part of this deal we like, Lisa, in
part that we don't. The part that we like is
we'd rather see a commercial deal than litigation, and so
we like the idea that they've inked something. We think
Disney is going to get some cash for the use
of its IP and we like the idea that the
use case has been ring fenced these animated characters short
form video that makes a ton of sense. The part
(17:05):
I don't like is the billion dollar investment.
Speaker 5 (17:08):
And explain why. I have another question. Let me taste
that out of here a little bit. Why are you
sitt down on this investment, which I think some could
argue is sort of them you know, a solidifying a
stake here in a company that has had more than
buzz over the last couple of years, and a lot
of people are thinking it's kind of the future of tech.
Speaker 4 (17:22):
More broadly, well, Disney has.
Speaker 9 (17:26):
First of all, I've never had an investor tell me
that they invest in Disney because they haven't a stud
venture capital arm. It's just not what investors care about
that are Disney shareholders. The reason I think that is
is Disney tends to have a propensity to invest it's capital.
It's sort of the peak of the mania. And so
I could go back to, you know, the Info Seek
investments that they made in the nineties. They never went
(17:47):
anywhere a bunch of video game developers. When video games
are growing very quickly, they shut all those down. A
couple of years ago, they invested in Epic Games. I
think it was a billion and a half dollar investment.
We'll see where that goes. But that was at the
height of the metaverse. And now we have the height
of AI and we see a billion dollar equity investment.
So you know, maybe this works out really well for Disney.
(18:09):
But call me a bit skeptical, poor.
Speaker 6 (18:11):
One out for infras Seke. Haven't thought of that company
in a long time.
Speaker 5 (18:14):
But let's get back to the use case here, Jason,
because I am very curious about this. It strikes me
maybe we're closer to Ann, Marie and John being out
and Micky, you'll be sitting at the table with Lesa
or Steamboat WILLI or Donald Duck. But I want to
ask about Sora, because my sense of Sora, this product
that Open Ai has made is that it hasn't gotten
a lot of widespread adoption or interest. There's that kind
of flash at the beginning when my Twitter feed was
(18:34):
just filled with these kind of insane ten second videos
that people were making, I think just to showcase or
show off the technology that OpenEye had made. But I
don't get the sense it has a lot of cultural
currency now. And I'm curious to sort of when you
think about the way in which open ai is going
to use this, do you have a sort of satisfactory
answer from the company, a sense of sort of how
much this is going to be you know, used for
(18:55):
PR or marketing employees, you say, or just use more generally.
Speaker 9 (19:00):
I don't know, it's all very much TBD. I would
say that I had a number of investors paying me
yesterday and say that they believe that open ai is
sort of de emphasizing SOA and I would agree with
you it doesn't have a huge amount of cultural currency.
I think we're still in the early days of sort
of consumer adoption and embracing of all of these tools.
So TBD, But I can't I don't think it's going to.
Speaker 4 (19:20):
Be a bad thing.
Speaker 9 (19:21):
And you know, we've had a number of other companies
in our coverage universe that have licensed their IP and
receive checks that are you know, on the magnitude of
fifty million dollars a year. That's a that's a mix
of sort of a fixed payment and a usage based payment.
Speaker 1 (19:35):
Jason, if I were an actor in Hollywood, would I
be excited about the steal or worried about the steal?
Speaker 9 (19:43):
Well, I would say that you are, I guess excited
at one level, and that the you know, there's nothing
in here that sort of allows open AI to use
the likeness of actors or actresses. But in another level,
it doesn't answer the threshold question because this is an
(20:04):
easier deal for Disney to do because it has so
many animated characters, the two hundred or so that you
referred to, And so I think there's still an outstanding
question of how these AI tools are going to be
used for the bulk of the IP that exists in Hollywood.
Speaker 2 (20:20):
Stay with us mulblindpeg Savannah's coming up off to this.
Speaker 1 (20:32):
Global stocks pushing into record territory after the Federal Reserve's
latest interest rate cut. Lezanne Sounders of Charles Schwab remaining
cautious into twenty twenty six, saying we believe the macro
environment will continue to be unstable, but stocks can likely
churn higher given a firmer earnings backdrop. Lizanne joins us
now in Lizan, this is what a lot of people
are saying. Just watch the earnings, show me the money,
(20:53):
and the companies can do that, and then you'll start
to see gains. Just how do you think it's going
to play out in terms of a tale of two halves,
a tail of rotation, et cetera.
Speaker 10 (21:01):
Well, you know, we've been talking a lot and writing
a lot about the case shape nature of this cycle.
It's become a bit ubiquitous. But I think one place
where you're actually already starting to see convergence is in
the earnings growth rates of the tech AI, megacap tech.
You know, different cohorts their earnings progress. So if you
(21:22):
look at any of those cohorts a year and a
half ago, you were running at earnings to your earnings
growth rates of about fifty percent, But those have been decelerating,
maybe into the twenty percent rain, where the other part
of the market is actually seeing accelerating rate of earnings growth.
So I'm a big believer in the old adage about
you know better or worse can often matter more than
(21:43):
good or bad. And I think it's the trajectory of
earnings that is one of the reasons why we've seen
some dislocations within these prior leadership areas, only two of
the mag seven outperforming the S and P and opportunities
that are being found outside of those prior leadership names.
Speaker 5 (22:00):
Well, Zam, we've been having a lot of attention to
sentiment data, in part because we just haven't had the
hard data as a result of this government shut down.
But you and Kevin Gordon I have coined a new
word here. It's the vibe pression. You're warning about a
vibe pression, and I wonder if you kind of spell
out how much of a what it is first of all,
and then how much of a warrior it is for you?
Speaker 6 (22:16):
Is we move ahead here to twenty.
Speaker 10 (22:18):
Twenty six, I think you know it used to be
talked about just in the context of soft economic data
versus hard economic data. So soft data would be the
survey based data, and that's where you're still showing incredibly
dour outlooks. You look at New Michigan's consumer sentiment kind
of plumbing its cycle lows here at the same time,
as part of the Conference Board's index, their consumer confidence Index,
(22:43):
and they have different cohorts that represent the survey respond
It's Conference Board tends to skew a little bit wealthier.
But Conference Sport has a question about expectations for stock prices,
that's absolutely through the roof. You mish has a question
about expectations for the unemployment. That's through the roof. That
is one of the ultimate disconnects. That maybe is a
(23:05):
reference to this session vib pression or the way we
used to think of it as much weaker soft data
relative to hard data. You probably see a little bit
of convergence in twenty twenty six, and by convergence probably
moves in both directions.
Speaker 5 (23:22):
I'm curious when you think about dispersion, where you see
things kind of moving here in twenty twenty six. So
if we're not going to be wagging our chins about
the magnificent seven and the hyperscalers in twenty twenty six
to the three which we have in twenty twenty five,
where do you see that conversation moving in the year ahead.
Speaker 10 (23:39):
So I think as it relates to AI. The story
is certainly not in the review mirror, but I think
there's maybe an increasing focus even beyond data centers, which
was the more recent surge area relative to the hyperscalers
and the original picks and shovels companies, I think the
shift is more toward the adopters, the effective adopters, not
just in a very general set, but actually starting to
(24:01):
get meat put on the bones in terms of impact
on productivity, what it means for labor costs, can it
help improve profit margins? So I think that may be
one of the newer themes that develops within AI is
that adopter theme. But you're also seeing broader participation in
other segments of the market, healthcare having some of the
(24:22):
best breath right now.
Speaker 4 (24:24):
Now.
Speaker 10 (24:24):
We would also caution against simplistic, monolithic sector based investing
because there's a lot of dispersion within sectors, and that's
where we think you want to apply that factor based analysis,
at least as an add on to sector based analysis.
And the factors that we're focused on right now, to
(24:44):
use an old school acronym, are very garp like. So
you don't want to sacrifice growth just for value. You
want to look for value, but you want to have
those growth characteristics as well.
Speaker 8 (24:55):
Lazan is bad news good news for stocks, I mean
ahead of next week, Meaning if you get weak economic data,
well then the Fed's going to cut a lot more.
Maybe do really qy and so equities can look through
it or you think either the rotation trade or actually
equy evaluations are at risk if the uneployment rate keeps rising.
Speaker 10 (25:14):
Maybe marginally bad is okay from a FED reaction function perspective,
but really bad news, especially in the labor market, regardless
of what that means for the trajectory of monetary policy,
I think is bad news, particularly given that the support
for this economy, consumer spending resilience that has largely been
(25:35):
a function of not just health in the labor market,
but confidence about the labor market. You start to see
weaker than expected numbers to a significant degree that feeds
not just back into the consumption channels, but very quickly
back into the confidence channels.
Speaker 1 (25:49):
So, Lezana, are you buying the idea of a jobless recovery?
Can we see that in twenty twenty six fueling the
rotation or is that kind of implausible given what you
just said.
Speaker 10 (25:57):
Well, if you look at the ADP data of the
job growth has been concentrated recently in larger companies, companies
with five hundred employees or more. Anything below that is
really where you're seeing the compression. You see that divide
in terms of corporate profits to very strong SMP profits
thirteen fourteen percent. Yet NIPPA based version of profits National
(26:18):
Income and Product accounts, which is millions of companies, public companies,
private companies first half of the year and we don't
have the third quarter data yet was actually in slight
negative territory and that's being reflected in the labor market
as well. So that's where I do think the bifurcations persist.
I think the net is it looks just sluggish, but
I think you have to find tooth comment in terms
(26:40):
of size of company in particular.
Speaker 2 (26:44):
This is the Bloomberg Svendans podcast, bringing you the best
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and the Bloomberg Business app.
Speaker 1 (27:07):
Mm hmm
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