October 2, 2025 • 30 mins
- Nela Richardson, Chief Economist & ESG Officer at ADP
- John Stoltzfus, Chief Investment Strategist at Oppenheimer
- Sarah Hunt, Chief Market Strategist at Alpine Saxon Woods
- Binky Chadha, Chief Global Strategist & Head of Asset Allocation at Deutsche Bank
Nela Richardson, Chief Economist at ADP and Bloomberg contributor, joins to discuss what the lack of economic data could mean for Fed monetary policy as the US government shutdown enters its second day. John Stoltzfus, Chief Investment Strategist at Oppenheimer, shares his outlook for equities after US stocks ended Wednesday’s session higher, notching a new record and seemingly shrugging off the first government shutdown in nearly seven years. Sarah Hunt, Chief Market Strategist at Alpine Saxon Woods, talks tech as that sector drove global indexes to fresh highs after a deal catapulted OpenAI to the world’s most valuable startup. Binky Chadha, Chief Global Strategist and Head of Asset Allocation at Deutsche Bank, explains his bullish market outlook and why growth - not rates - is the primary driver to focus on.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
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
with Lisa Bromwitz and Amrie Hordern. 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
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always, on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App. Naila Richardson of ADP
joins us now for more. Following the lowest ADP we've seen,
I believe since March twenty twenty three, Neil, good to
see you great to see is almost behind it. How
much weakness are we actually seeing?
Speaker 3 (00:46):
First off, I think it's important to underline the prominent
trend in the ADP data, which is a slowdown in
hiring momentum that's been from January through this year. That
has been consistently valid every single month. What we did
this month, though, was a statistical regularity.
Speaker 1 (01:05):
We do it every year.
Speaker 3 (01:07):
We announce it in February with the January release, which
is to do an annual benchmarking. Normally this does not
make news this month, it did. But what it does
is it reattaches the ADP numbers to the source of
truth that we have in the United States, which is
this benchmark that comes from state Unemployment Insurance data, this
(01:31):
kind of data that we see weekly with the jobless
claims numbers. And the importance of that is, if you
really want the perfect data set, you would have the
comprehensiveness of the state UI data covering ninety five percent
of US employees and the granularity of ADP data. We
don't have that, So we make this trade off of
ADP estimating that state data that comes out with a
(01:54):
six month lag, we reattached to it every single year.
Speaker 4 (01:57):
So was it as bad as it looked yesterday? I mean,
that's really what people want to know. This all sounds
very complicated, and it sounds like, you know, there are
a lot of things at play, But the granular data.
Speaker 1 (02:06):
Does it display the same kind.
Speaker 4 (02:07):
Of negativity if the bond market took notice of it yesterday?
Speaker 1 (02:11):
Yeah, it does.
Speaker 3 (02:12):
This is our best estimate of what hiring was in September.
Negative thirty two thousand. That is our best estimate. It
is our most robust estimate. It's rigorous, it's tied to
the QCW. So no, you don't need to dismiss the number. Now,
if you look at the series, we don't fully rebnchmark
the year until February with the January release, but that
(02:34):
September number is the number. So what it tells you
Even if you look at the pre benchmarked series, which
I did, of course you see the same trend. And
this is what I want to underscore to your audience,
because the takeaway is qualitative and the takeaway is firm
validated that hiring momentum has slowed since the beginning of
the year to a point where it is a week
(02:56):
labor market in terms of hiring. It is not a
week labor market in terms of layoffs. Very important to
hold these two ideas together. The stock of the labor
market is strong, the flow into the labor market is weak.
The flow out of the labor market is weak.
Speaker 4 (03:14):
So is the market breaking or is it just an
ongoing stagnation of the low fire, low higher that still
has not broken in one way or another.
Speaker 1 (03:22):
We have a stagnant labor market.
Speaker 3 (03:24):
And all of that consumer spending that fueled Q two
a three point eight percent growth rate we just saw
was built on the backs of the labor market, because
the labor market is supporting the consumer. So in that way,
it's strength. But that strength is not strong enough in
terms of consumer spending to create new jobs.
Speaker 1 (03:44):
That's a different level of.
Speaker 3 (03:46):
Economic productivity that we still need to see in the economy.
That's missing the dynamism that leads to consistent job creation.
Speaker 1 (03:55):
We don't have it in the September number. This time
tomorrow we.
Speaker 5 (03:58):
Would be debating and looking at the data. When it
comes to the BLS report, we're not going to get it.
What do you make of the shutdown? How much of
an impact is it's going to have on the economy.
Speaker 3 (04:07):
You know, it depends on how long the government stays
shut But what I will say is that the shutdown
doesn't just affect federal workers. It does affect federal workers,
but not just. If you think about all those private
contract workers, the ones that operate the cafeterias, the ones
in the national parks, the ones that drive government officials
(04:30):
here and there, they are also without work as the
government shuts down. So it's these reciprocal effects that I'll
be watching in the private sector data to see if
this leads to even more weakness and hiring because of
all those private contractors in.
Speaker 5 (04:45):
The past, did you see it bleed into the private sector.
Speaker 3 (04:48):
Yeah, but it was always temporary. We know that the
longest shut down that we've seen recently, it was thirty
five days. That's a long time to be without a paycheck.
I don't care who you are, it's a long time
to be without a paycheck. And so that is going
to have an effect in the labor market. It's going
to have effect in consumer spending. But if we can
(05:09):
get a reopening that's much shorter than that, we won't
see such a strong pushback in the labor market when
it comes to hired. I also will note that this
just adds to the malaise of uncertainty that we've seen
all year long. It's not just the data, it's not
just the conditions. It's the fact that companies are going
to operate through fog. If you're a private contractor, do
(05:32):
you hire right now? And how much do you hire?
That's the question before them. As the government is.
Speaker 4 (05:37):
Shut the entire morning, we've been talking to people who
say that the US economy can keep running at this
very slow pace and we can still see the incredible
dynamism that's reflected in equity market pricing. Do you see
the same relationship or do you think that there is
a greater warning flag in the labor market and the
dynamic that you're seeing there for the other side of
the equation.
Speaker 3 (05:58):
You know, I feel like we are at this traffic
light right now that is out You know what happens
to traffic when the light is out right, You fall
back on this, You take your turn.
Speaker 1 (06:08):
I'll take my turn.
Speaker 3 (06:09):
Sometimes we get that confused and we go at the
same time, and once we're past the light, we're fine.
That's where we are in the economy. We don't have
the data we're used to seeing. There's some uncertainty about
who goes next. We won't get the flow. There's bottlenecks.
That's what comes up economic activity. But if you can
get pass that into some clarity, we have all the
(06:30):
ingredients in this economy to push forward with strong GDP
growth as we saw in the second quarter. So some
of this is just getting the lights literally back on
and the data is still flowing. So we can keep
that dynamism flowing.
Speaker 6 (06:44):
That's the data.
Speaker 4 (06:44):
But when it comes to hiring plans, if there is
a greater degree of mergers and acquisitions and certainty at
least from the economic trajectory, maybe not in the tariffs,
do you expect the hiring to reaccelerate. Do you think
this is going to break to the upside rather than
further to the downside.
Speaker 3 (06:58):
I think there's a potential, but right now it is
not clear where that trigger of dynamism comes from.
Speaker 1 (07:06):
For employers to hire, what do they need.
Speaker 3 (07:08):
They need clarity, they need strong consumer demand, and they
need the ability to invest long term. So they have
some of those elements in place. I think we're still
missing the clarity, and that's a really important component of
whether or not you can add to your headcount, which
is a long term people investment. Now, one thing I'm
(07:28):
hearing employers say is now, if we can't hire our workforce,
let's make sure those workers we have are more engaged.
And when I talk to big companies especially, there has
been more attention on how to upscale their workers, train
their workers, engage their workers, have more connection to get
the most out of the people they have right now,
(07:49):
even if they can't add to the headcount in a
significant way.
Speaker 2 (07:52):
Keep your payper happy. That's what it's all about. A
place are getting back to that.
Speaker 1 (07:56):
That's good.
Speaker 6 (07:57):
Yeah, did you hear it? Keep your people happy.
Speaker 4 (07:59):
I will get more out of them and milk them
for all you can.
Speaker 1 (08:02):
And you can keep them happy.
Speaker 6 (08:04):
Whichever way you do it.
Speaker 1 (08:05):
Happy people are more productive.
Speaker 7 (08:06):
Are you there?
Speaker 8 (08:08):
Yeah?
Speaker 2 (08:08):
Stay with us. More Bloomberg Surveillance coming up after this.
With stocks rising after closing at record highs, John Stolfis
of Oppenheimer calling for a street high seventy one hundred
on the S and P by year Rent, writing this
(08:28):
economic resilience, along with revenue, earnings growth and innovation across
the sectors, remains key in our view to the market's
ability to continue climbing the proverbial wall of worry. John
joins us now for more. John and Mornig, good morning.
It's that government shut down just another brick in that
wall of worry.
Speaker 9 (08:44):
I think it's another brick in the wall, to quote
Pink Floyd. But that said, we've seen the markets really
overcome at traverse hurdles all along this year, and it
is indeed it's the innovation, it's the rezillions, and it's
a different structure in terms of the market itself. We
(09:04):
believe in terms of participants.
Speaker 7 (09:06):
You know, the market is.
Speaker 9 (09:07):
Not just the guy with the monocle from the Monopoly game.
You know, it's all kinds of people. And in the
US it's multi generational people investing for longer term goals.
So the disturbances that are caused by the potential for
a short term or intermediate or longer term shutdown of
(09:29):
less concern to them right away as opposed to getting
money positioned for goals that maybe three, five, seven years.
Speaker 2 (09:37):
Can I build on that, John, Do you think some
tension between different generations and how they have this market
should be valued, Some tension between the boomers and what
they think the appropriate multiple is for this stock market
with a different sectimics.
Speaker 9 (09:48):
Most certainly, I think you know, when you look at
people who've been the Boomer generation, stocks are cheap at
the sixteen forward multiple. As you go forward in generationally,
people are willing to pay higher multiples for growth. And
I believe the reason why a lot of it comes
from Ed Yardini, who's for years said that the what
(10:10):
is it the Wilshire five thousand. There aren't enough stocks
to really qualify that are publicly traded anymore. For that
indicaes anymore because it's what is it about thirty five
hundred stocks at thirty four hundred that you actually have
to choose from? And the thought is here is it's
supply and demand. It's the basic thing of economics, the
(10:30):
demand for your technology, your hyper growers, the ones who
are well established, deeply embedded in the lives of both
business and the consumer, where we're all on the upgrade.
Speaker 7 (10:41):
Cycle whether we like it or not.
Speaker 9 (10:43):
As I always like to say, this is what's driving
this market in many ways, and it differentiates not just generationally,
but the difference between traders who are looking at at
risk to capital a capital put at risk on a
day to day, minute to minute basis, and intermediate to
longer term investors. When I started in this business forty
(11:05):
two years ago, hard to believe. It's not that I
didn't think I'd lived this long. I didn't know how
longyr would happened, but it was the retail investor would
always come into the market, usually about once the market
was up twenty percent and everybody knew it, and the
cab driver was asking you for a hot tip if
you saw you had a copy of the Wall Street
Journal under your arm. Today people are very well informed
(11:28):
by the financial media.
Speaker 7 (11:30):
They have all the arguments.
Speaker 9 (11:31):
You get to see the players actually express themselves and
you see what is it the body language that people
are using, you know, and it makes it it's actually
it's remarkably more intimate than it was ever before, and
people are better informed and better able to work. We'd
like to think with financial advisors who are working as fiduciaries.
Speaker 4 (11:51):
They also are better sold in the story of the
hopes and dreams of just how much AI can do.
And there is a lot of truth to it. And
history doesn't repeat, but it does rhyme. Back inthe dot
com bubble boom and bust, there was aol you've got mail.
Speaker 1 (12:05):
We don't do that anymore. I mean some people still do,
and you know, go bless you.
Speaker 4 (12:08):
But I'm just wondering going forward, how do you identify
all of the money that's going to be wasted at
a time where there's a lot of projections and not
a lot of data, and what ultimately will happen or
how it's going to be applied.
Speaker 7 (12:19):
Well, I think, for.
Speaker 9 (12:20):
One, is if we just go back to if we
just go back to as recently as the tech bubble,
things were practically primitive versus where we are today.
Speaker 7 (12:28):
I can remember working at another well.
Speaker 9 (12:30):
Known firm headquarters on Broadway in nineteen ninety seven, and
suddenly you would find the internet would go out, you know,
and when you would go home to connect to the corp,
you'd have, you know.
Speaker 7 (12:43):
Sometimes a little device would be and all that stuff.
Speaker 9 (12:46):
Today's we still have problems with technology, but it's very
well established and the ideas you know, well, I can
remember putting dimes in a payphone.
Speaker 7 (12:56):
People don't even know what a payphone used to look like.
Speaker 9 (12:58):
I can see sometimes I see an old architecture in
our building which another firm had before us.
Speaker 7 (13:04):
There's actually a group of things and no phone anymore.
But what are these things for.
Speaker 9 (13:08):
They're for the press as they exit exited, to write
things down. But where we are today, I think a
lot of the stuff will likely prove disappointing, but the
core will be it's already being invested in and utilized
to create greater efficiencies.
Speaker 4 (13:23):
I guess you talk about the babies being.
Speaker 1 (13:25):
Thrown out with the bathwater.
Speaker 4 (13:27):
I don't see any babies, and I don't see any
bathwater being thrown out either.
Speaker 1 (13:30):
Nothing's being thrown out.
Speaker 4 (13:31):
So how do you identify what that means?
Speaker 7 (13:33):
Well, I'd say actually, on a day to day basis.
You know, I'm not solely a strategist.
Speaker 9 (13:38):
I also manage money for the firm, both ETF portfolio
with passive indices and then individual stock portfolio. And we've
seen a considerable broadening of the rally that has suddenly
rewarded sectors like industrials. We've seen better attention played to utilities,
(13:59):
both on as it looks like the FED is going
to be cutting rates going forward, not necessarily enthusiastically, but
on a down payment kind of basis, to show.
Speaker 7 (14:09):
That the rate hike cycle is over.
Speaker 9 (14:12):
What you have effectively is you've got utilities are no
longer considered as much of a risk as a bomb
proxy because it looks like interest rates are coming down.
Healthcare has caught a bid as a result of one
company's efforts to reduce prices in the last couple of days.
I'd mentioned the name of the company because I manage money.
(14:32):
The firm doesn't let me.
Speaker 7 (14:34):
I want to be pitching stocks that I might or
might not own.
Speaker 5 (14:37):
Saying on the FED, how difficult is the end of
October's meeting going to be? If this government shutdown is prolonged.
We know we're not likely going to get tomorrow's perils report,
but then what about CPI on October fifteenth as well?
They might not have all the most relevant up to
date data.
Speaker 9 (14:51):
I think, you know, I think it's close enough to
the September meeting that I think we kind of got
a fairly good idea that the the dot plots showed
that there would likely be a cut in October, and
I think we're close enough in terms of the data.
I think the question would be to December, what's going
to happen there? And hopefully by then this will be
(15:12):
behind us, this whole question of the shot.
Speaker 2 (15:14):
Jo'll never mind the Bathwart said, this has been a
pool party now for six months, and it's getting wilder.
I think spring Break don't want to go there. Look
at the valuations we're seeing in private markets, five hundred
billion dollars on the startup now, John, I'm just trying
to work out, you know, never mind the risk a version.
I don't see any I saw a bunch of dead
issuents in September, and people start to get pretty excited
(15:35):
about the future. Still on top of that, when do
you start to get concerned?
Speaker 9 (15:39):
Well, you know, I play in the public markets as
opposed to the private markets, so one to inform the other.
That's well, I think to some extent with the selectivity
there and what is chosen to move into the private
equity market is not necessarily everything that play, I think
that's something to look at as we go forward, and that,
(16:00):
as you mentioned, the money that's being thrown at this
one particular deal is like the valuation is rather worrisome,
except if you consider how much is already developed. This
is much, you know, This isn't the primitive stage of
people saying someday we will have a million eyeballs on
our website. This is companies that know you need billions
(16:23):
of eyeballs and you need to be well capitalized. And
there is it's not just well capitalized, but the likelihood
of cash flow generation pretty quickly from here to there.
Speaker 7 (16:34):
Because this week I was at a due diligence.
Speaker 9 (16:37):
Meeting in an ETF firm management firm that has ETFs
right and they're technology people just talking about all the
investment that's being made here, but by smart people who
are educated and deeply involved in tech for maybe forty
or fifty years.
Speaker 2 (16:54):
Stay with us, Multilinpex Savannas coming up off to this,
stocks reaching record highs despite the chaos on Capitol Hill.
Sarah Hunt of Alpine Saxon words, writing, the government shutdown
may or may not impact a raft of data for investors.
(17:16):
This may be the trickiest part, at least in the
net term. Sarah joins us now for more. Sarah, good
morning morning. Do you think this will hold back risk
appetite this month? No sound of that just yet. Do
you think it will?
Speaker 10 (17:26):
It depends a lot on how long everything takes and
what kind of data comes out in the interim and
sort of and the kickoff of Q three earning season, right,
so all these things are going to be important. Earning
season is going to take on even more importance if
we have a lack of government data because people want
to see what companies say. But I think this morning
the news on chat TBT was one of those open ai.
It was one of those things that certainly helps the
(17:48):
situation and doesn't hurt it.
Speaker 2 (17:49):
It just built on that a little bit more, Why
does it how the situation sitting here this morning and
understanding that you've got this private company staying private worth
five hundred billion dollars, what is the help?
Speaker 10 (18:00):
Because the question has been all along this AI has
been fueling this rally. Right, you take that out and
all of a sudden, the statistics do not look nearly
as good. And if you see cracks in that story
with the other problems that are going on, I think
you have issues the fact that you saw a.
Speaker 6 (18:13):
Data point that's positive.
Speaker 10 (18:15):
Take it as you want, whether or not that's too bubbly,
or whether or not it's anything else. The bottom line
is people are willing to put up some serious money
to be a part of that story.
Speaker 6 (18:23):
And that's still the case.
Speaker 10 (18:24):
That is going to help the equity markets just because
it underlies that foundation and it gives it more confidence.
Speaker 1 (18:29):
So don't fight AI.
Speaker 4 (18:30):
Is there increasingly a feeling in your mind, don't fight
the FED in terms of supporting the rest of the
non AI universe that hasn't fared as well well.
Speaker 10 (18:39):
I think the FED had a very tough has a
very tough job going into the next couple of months.
A lack of data doesn't help it at all. And
to your point, the ADP numbers, people are going to
look at that, They're going to look at any non
government data that comes out, because until we get government
data out, you don't have enough information. But directionally speaking,
I think that that one of the reasons you saw
that happen yesterday is that people thought, well, this is
another excuse to cut rais whether or not that actually
(19:00):
solves any problems or does what it's supposed to do
is another question. But the idea that it's coming is
still positive for equity markets.
Speaker 4 (19:07):
I just wonder how long you can turbocharge growth before
inflation becomes a problem.
Speaker 1 (19:11):
A lot of people have said it's not.
Speaker 4 (19:13):
And at the same time, you start thinking, if we're
already above that two percent target and you add juice
to it, already is a strong economy, albeit concentrated in AI.
Speaker 1 (19:23):
Doesn't that become a real concern later this year?
Speaker 10 (19:25):
Well, I still don't think that we've seen the true
dynamics of the tariff pricing in pricing right, So whether
or not that's going to come in as the price
level raised or it's inflation, I don't think that that's
really come through. You've seen big waves of inventory every
time there's been a pullback in timing on those tariffs.
So the companies have been absorbing a lot. There's a
point at which that flips, that script flips, and I
don't know where we are with that yet, But as
(19:47):
that sort of comes in, I don't see.
Speaker 6 (19:49):
How it can be beneficial.
Speaker 1 (19:50):
So what are you worried about now?
Speaker 5 (19:51):
Because you don't sound like you're that worried about a
bubble when it comes to AI, you don't sound that
worried about a government shutdown.
Speaker 10 (19:58):
I worry about a lot of things. I wouldn't go
so far as to say I'm not worried about a bubble.
But the problem with that is that bubbles can go
on a lot longer than we can think about whether
or not they should. And if there is enough real
money chasing that right now, as opposed to the whole
argument about debt and debt or financing that came back
around with that big.
Speaker 6 (20:15):
Deal right So, as long as there is, as long as.
Speaker 10 (20:18):
People are putting up money to help solve that problem,
I think it's less of an issue. I think it
becomes one when people start to worry about whether or
not there's any actual productivity that's going to come out
of this efficiency that's going to come out of this,
and I think that that's still one of those questions that.
Speaker 6 (20:31):
We're struggling with.
Speaker 5 (20:32):
It's a good point the end of the nineties when
Greenspan talked about rational xuberances. We had a bull market
run for four years.
Speaker 1 (20:38):
But how do you time it?
Speaker 10 (20:40):
That is a great question, and that is the problem
because you only see that in retrospect when people finally
start to look back and go, you know what, we
were wrong at X point, at why point, at Z point.
Right now, we're still looking at that and saying there's
still a lot of promise. We collectively as investors. I'm
not speaking about us just generally personally, but the investment
community is willing to look at that and say that
there's a whole wave coming and even though you know
(21:00):
they will be inefficiencies in that way, if people aren't
sure where they're going to be yet, so at some
point it starts to be cluegy where you don't get
some people coming out and saying this is helping our margins,
this is doing that for us. We need to see
that come through and that's still a promise right now,
and market loves a good story.
Speaker 2 (21:15):
There seems to be some great division over the balance
of risk. I think the Fed's got one view and
the market's got another. The Federal Reserve believes the biggest
risk right now is downside risk to employment, and a
lot of people in markets are coming around to the
idea that the biggest risk might be upside risk to inflation,
and they're chasing that because the Fed's going to respond
to one and not the other. This is what Tawson's
lack of Apollo said just yesterday. Upside risk to inflation
(21:35):
are growing, particularly if the FED continues to cut interest rates,
and he believes his whole profession continue to underestimate this
economy and the resilience of it. Are you coming round
to that side of things as well.
Speaker 8 (21:47):
Well.
Speaker 10 (21:47):
It's interesting because the resilience of the economy also bakes
in a number of things, you know. So Kelsey Vera
was just talking about the difference between big corporations and
small corporations, So it bakes in a lot of positive
movements across the entire strata. I don't know that the
entire strata is performing that well but from markets perspective,
it doesn't really matter. Lower and consumers aren't doing that well,
stock market doesn't mind. They don't spend the most money anyway.
(22:10):
If you can continue to see cash flow in those
big companies, it's less of an issue than if Main
Street is struggling on the smaller side.
Speaker 6 (22:16):
So it really does depend.
Speaker 10 (22:18):
But I do think that inflation is an issue, and
I do think that it could be a.
Speaker 6 (22:21):
Bigger issue going forward.
Speaker 10 (22:22):
But if we're not going to get some of that data,
it makes it easier to ignore. On the other hand,
I think that it is definitely something that continues to
flow through, and that's going to be tricky because what
happens with that is you fix margins by getting rid
of people, and then the labor question becomes even more problematic,
and then the FED is in a very difficult place,
which I sort of think they are anyway.
Speaker 4 (22:39):
I'm looking at where to buy gold bars right now,
and I'm one s There's crossco. There are places though
they limit how much you can buy. You have to
be a member, and then it's only one bar per person.
I'm looking at this, how much is that sort of
the solution increasingly for people I know that you say
that personally is one thing, but increasingly how mainstream is
that type of investing really becoming?
Speaker 10 (23:00):
Well, I think that gold and to some degree bitcoin,
and I wouldn't call gold a bitcoin, you know, digital
gold or anything else, but they are ways to express
an opinion that the system itself is going to have
some problems and that government all currencies are going to
have to value against something. Right, So gold is one
of those things that people look at and say, I
can buy gold. It's going to It doesn't matter if
(23:20):
it's a year US thing or if it's a japan
US thing.
Speaker 6 (23:24):
I know that if currencies.
Speaker 10 (23:25):
Are going to be devalued, i've got something that should
rise in value. And whether or not that's a truism
or people argue it, or it's just you know, people
are chasing it. Central banks are going back to buying
gold to some degree. They certainly seem to have been
on the non oecd side. So I think that there
is room for that to move because it hasn't moved
in so very long, and we just topped inflation adjusted
(23:47):
gold prices in the seventies and eighties, and that is
one of those technical markers that people look for.
Speaker 4 (23:54):
Well, is that something where you're starting to credibly look
at that as a real slice of the sort of
more risk averse side of portfolio in a way that
you hadn't before.
Speaker 10 (24:03):
Well, I think the tricky thing is that after it's
had such a big run, it almost seems difficult to say,
now this is the time to go ahead and say
that this should be a part of your portfolio.
Speaker 6 (24:10):
If it was before, you're feeling pretty good about it.
Speaker 10 (24:13):
If it isn't, now you're looking at that going can
I jump in here and buy something that's elevated so much?
And I think this goes back to all risk assets
are going in one direction and whether or not that
can continue. And it's difficult to jump in and say, yes,
I want to put a chunk of something in the
asset that's run that much. But you could certainly layer
in a little bit and see what happens so that
it gives you a chance to layer in a little
(24:33):
bit more, just because it's an opposite to larger financial systems.
Speaker 2 (24:36):
Stay with us more Bloomberg surveillance coming up after this,
Sticking with Marcus Spinky shadotoutsche Bank is one of the
most polish on the street with a year rend target
of seven k.
Speaker 7 (24:54):
He writes.
Speaker 2 (24:55):
In our reading, however, equity positioning is only moderately overweight,
and we see gross not rate as the primary driver.
To focus on banking joints us now for more banking.
Speaker 8 (25:03):
Good morning, good morning. Let's get into this.
Speaker 2 (25:06):
A lot of people would look at this market and say, well,
everyone must be very, very long and overweight.
Speaker 8 (25:11):
What do you read?
Speaker 6 (25:12):
What are you looking at?
Speaker 2 (25:13):
That's howsually something different.
Speaker 11 (25:15):
So overall equity market positioning in our reading.
Speaker 8 (25:19):
Is clearly overweight.
Speaker 11 (25:21):
So if you think about it on a Z score basis,
normally we are in a range between minus one and
plus one, or read in round numbers, would be that
the market's position basically at plus a half foero point.
Speaker 8 (25:34):
Five, So clearly overweight, but not extreme.
Speaker 11 (25:39):
But the related point that I would make is that
that overweight is coming in our reading entirely from the
positioning of systematic strategies. So if you think back to April,
then well there's April the second, which is lead into
April the ninth, and you have had basically on April
the second, you know what I would describe really as
(26:01):
a volved shock so you have the victim the fifties,
and then you have the relent on policies on April
the ninth, and vol starts to basically come down. You
get a strong recovery, and so the trend and volve
basically coming down is pushing up by rules the positioning
of systematic strategies. I would say the much larger part
(26:23):
of the investor base the discretionary investors as opposed to
systematic investors, and discretionary investors you want to think about
as basically fundamentals based investors. Their positioning is basically at
neutral by early July, and in our reading continues basically
to hug neutral.
Speaker 8 (26:43):
So I would argue.
Speaker 11 (26:45):
That actually positioning today despite the run up in the market,
is a source of upside because if you look at
the positioning of discretionary investors and what drives it historically,
it's exactly what you would think it.
Speaker 8 (26:59):
Is, which is earnings growth.
Speaker 11 (27:01):
And so if you look at the relationship between discretionary
investor positioning historically and S and P five hundred earnings growth,
it's a pretty compelling relationship. There are, of course, disconnects
from time to time when other things are in focus.
And if you look at their neutral positioning today, it's
positioned for growth in the very low single digits one
(27:24):
two three percent. It moves around we and their positioning.
Like I said, you know, it's been this way since July.
That's when we were getting second quarter earnings which came
in at ten percent year and year growth nine and
a half percent. And if you think about what we're
going to start getting in a couple of weeks, our.
Speaker 8 (27:45):
Take or preview would be that we're likely.
Speaker 11 (27:49):
To get, you know, actually somewhat of a pickup in
growth in earnings growth closer to sort of eleven percent,
and so the pressure is on. I would argue for
discretionary investors to buy in basically to this recovery, where
they haven't. They've only been focused on the risks, is
(28:09):
what we would argue.
Speaker 4 (28:10):
So this is the reason why you upgraded your target
for the S and P four year end two seven thousand,
that was earlier in September. I'm just wondering how much
you see that continuing through twenty twenty six to lead
to some of the real ball cases that we've heard
of seventy seven, seventy eight hundred on the S and p.
Speaker 1 (28:26):
Five hundred.
Speaker 11 (28:27):
Yeah, so you know, our target for this year end
is seven thousand, and the way I would put it is,
actually it's a reinstating of our target. At the beginning
of the year, we cut our numbers, our earnings numbers,
and our market view. We remain sort of constructive that
we would get a relent on policies and we would
go a lot higher. But at the end of the day,
(28:49):
I mean, I think the simple fact is, and as
some of the guests earlier were saying, basically, you know,
you just don't.
Speaker 8 (28:55):
See a lot of stuff with the data.
Speaker 11 (28:57):
I mean if you think about I mean, the reason
for cutting the tariffs, and they look to be having,
you know, a much more modest impact than.
Speaker 8 (29:04):
We basically thought.
Speaker 11 (29:07):
If I look at earnings, you know, so you started
with macro growth. I mean, we got the second quarter
of recovery. We could say the three point eight percent
is partly a recovery from you know, slow down in
Q one, but we're in Q three now and the
Atlanta FED at last read was pretty close to four percent.
Speaker 8 (29:25):
So on macro growth, you know, not much is showing up.
Speaker 11 (29:30):
And I would actually argue that a lot of negativity
and sort of the macro consensus that we would get,
you know, pretty significant slowing. That's that's a that's.
Speaker 8 (29:41):
A positive catalyst.
Speaker 11 (29:43):
And it's a mini version really of what happened in
twenty twenty three, when the macro consensus, you know, persistently
looked basically for a recession that didn't come. And so
what you've got is basically fifteen months of positive macro
data surprises, and markets are not necessarily go down when
you're getting continuously positive surprises. We're having a mini version
(30:05):
of the same thing. If you look at the City
Group data surprise index kind of went vertical late last week,
and so, I mean, you know, discretionary investor positioning is
exactly actually in line with the macro consensus of a
slowdown in growth and a slowdown in earnings growth.
Speaker 8 (30:23):
But we're not getting those things.
Speaker 2 (30:26):
This is the Bloomberg Sevendics podcast, bringing you the best
in markets, economics, angient politics. You can watch the show
live on Bloomberg TV weekday mornings from six am to
nine am Eastern. Subscribe to the podcast on Apple, Spotify
or anywhere else you listen, and as always on the
Bloomberg Terminal and the Bloomberg Business Out
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. 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
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always, on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App. Naila Richardson of ADP
joins us now for more. Following the lowest ADP we've seen,
I believe since March twenty twenty three, Neil, good to
see you great to see is almost behind it. How
much weakness are we actually seeing?
Speaker 3 (00:46):
First off, I think it's important to underline the prominent
trend in the ADP data, which is a slowdown in
hiring momentum that's been from January through this year. That
has been consistently valid every single month. What we did
this month, though, was a statistical regularity.
Speaker 1 (01:05):
We do it every year.
Speaker 3 (01:07):
We announce it in February with the January release, which
is to do an annual benchmarking. Normally this does not
make news this month, it did. But what it does
is it reattaches the ADP numbers to the source of
truth that we have in the United States, which is
this benchmark that comes from state Unemployment Insurance data, this
(01:31):
kind of data that we see weekly with the jobless
claims numbers. And the importance of that is, if you
really want the perfect data set, you would have the
comprehensiveness of the state UI data covering ninety five percent
of US employees and the granularity of ADP data. We
don't have that, So we make this trade off of
ADP estimating that state data that comes out with a
(01:54):
six month lag, we reattached to it every single year.
Speaker 4 (01:57):
So was it as bad as it looked yesterday? I mean,
that's really what people want to know. This all sounds
very complicated, and it sounds like, you know, there are
a lot of things at play, But the granular data.
Speaker 1 (02:06):
Does it display the same kind.
Speaker 4 (02:07):
Of negativity if the bond market took notice of it yesterday?
Speaker 1 (02:11):
Yeah, it does.
Speaker 3 (02:12):
This is our best estimate of what hiring was in September.
Negative thirty two thousand. That is our best estimate. It
is our most robust estimate. It's rigorous, it's tied to
the QCW. So no, you don't need to dismiss the number. Now,
if you look at the series, we don't fully rebnchmark
the year until February with the January release, but that
(02:34):
September number is the number. So what it tells you
Even if you look at the pre benchmarked series, which
I did, of course you see the same trend. And
this is what I want to underscore to your audience,
because the takeaway is qualitative and the takeaway is firm
validated that hiring momentum has slowed since the beginning of
the year to a point where it is a week
(02:56):
labor market in terms of hiring. It is not a
week labor market in terms of layoffs. Very important to
hold these two ideas together. The stock of the labor
market is strong, the flow into the labor market is weak.
The flow out of the labor market is weak.
Speaker 4 (03:14):
So is the market breaking or is it just an
ongoing stagnation of the low fire, low higher that still
has not broken in one way or another.
Speaker 1 (03:22):
We have a stagnant labor market.
Speaker 3 (03:24):
And all of that consumer spending that fueled Q two
a three point eight percent growth rate we just saw
was built on the backs of the labor market, because
the labor market is supporting the consumer. So in that way,
it's strength. But that strength is not strong enough in
terms of consumer spending to create new jobs.
Speaker 1 (03:44):
That's a different level of.
Speaker 3 (03:46):
Economic productivity that we still need to see in the economy.
That's missing the dynamism that leads to consistent job creation.
Speaker 1 (03:55):
We don't have it in the September number. This time
tomorrow we.
Speaker 5 (03:58):
Would be debating and looking at the data. When it
comes to the BLS report, we're not going to get it.
What do you make of the shutdown? How much of
an impact is it's going to have on the economy.
Speaker 3 (04:07):
You know, it depends on how long the government stays
shut But what I will say is that the shutdown
doesn't just affect federal workers. It does affect federal workers,
but not just. If you think about all those private
contract workers, the ones that operate the cafeterias, the ones
in the national parks, the ones that drive government officials
(04:30):
here and there, they are also without work as the
government shuts down. So it's these reciprocal effects that I'll
be watching in the private sector data to see if
this leads to even more weakness and hiring because of
all those private contractors in.
Speaker 5 (04:45):
The past, did you see it bleed into the private sector.
Speaker 3 (04:48):
Yeah, but it was always temporary. We know that the
longest shut down that we've seen recently, it was thirty
five days. That's a long time to be without a paycheck.
I don't care who you are, it's a long time
to be without a paycheck. And so that is going
to have an effect in the labor market. It's going
to have effect in consumer spending. But if we can
(05:09):
get a reopening that's much shorter than that, we won't
see such a strong pushback in the labor market when
it comes to hired. I also will note that this
just adds to the malaise of uncertainty that we've seen
all year long. It's not just the data, it's not
just the conditions. It's the fact that companies are going
to operate through fog. If you're a private contractor, do
(05:32):
you hire right now? And how much do you hire?
That's the question before them. As the government is.
Speaker 4 (05:37):
Shut the entire morning, we've been talking to people who
say that the US economy can keep running at this
very slow pace and we can still see the incredible
dynamism that's reflected in equity market pricing. Do you see
the same relationship or do you think that there is
a greater warning flag in the labor market and the
dynamic that you're seeing there for the other side of
the equation.
Speaker 3 (05:58):
You know, I feel like we are at this traffic
light right now that is out You know what happens
to traffic when the light is out right, You fall
back on this, You take your turn.
Speaker 1 (06:08):
I'll take my turn.
Speaker 3 (06:09):
Sometimes we get that confused and we go at the
same time, and once we're past the light, we're fine.
That's where we are in the economy. We don't have
the data we're used to seeing. There's some uncertainty about
who goes next. We won't get the flow. There's bottlenecks.
That's what comes up economic activity. But if you can
get pass that into some clarity, we have all the
(06:30):
ingredients in this economy to push forward with strong GDP
growth as we saw in the second quarter. So some
of this is just getting the lights literally back on
and the data is still flowing. So we can keep
that dynamism flowing.
Speaker 6 (06:44):
That's the data.
Speaker 4 (06:44):
But when it comes to hiring plans, if there is
a greater degree of mergers and acquisitions and certainty at
least from the economic trajectory, maybe not in the tariffs,
do you expect the hiring to reaccelerate. Do you think
this is going to break to the upside rather than
further to the downside.
Speaker 3 (06:58):
I think there's a potential, but right now it is
not clear where that trigger of dynamism comes from.
Speaker 1 (07:06):
For employers to hire, what do they need.
Speaker 3 (07:08):
They need clarity, they need strong consumer demand, and they
need the ability to invest long term. So they have
some of those elements in place. I think we're still
missing the clarity, and that's a really important component of
whether or not you can add to your headcount, which
is a long term people investment. Now, one thing I'm
(07:28):
hearing employers say is now, if we can't hire our workforce,
let's make sure those workers we have are more engaged.
And when I talk to big companies especially, there has
been more attention on how to upscale their workers, train
their workers, engage their workers, have more connection to get
the most out of the people they have right now,
(07:49):
even if they can't add to the headcount in a
significant way.
Speaker 2 (07:52):
Keep your payper happy. That's what it's all about. A
place are getting back to that.
Speaker 1 (07:56):
That's good.
Speaker 6 (07:57):
Yeah, did you hear it? Keep your people happy.
Speaker 4 (07:59):
I will get more out of them and milk them
for all you can.
Speaker 1 (08:02):
And you can keep them happy.
Speaker 6 (08:04):
Whichever way you do it.
Speaker 1 (08:05):
Happy people are more productive.
Speaker 7 (08:06):
Are you there?
Speaker 8 (08:08):
Yeah?
Speaker 2 (08:08):
Stay with us. More Bloomberg Surveillance coming up after this.
With stocks rising after closing at record highs, John Stolfis
of Oppenheimer calling for a street high seventy one hundred
on the S and P by year Rent, writing this
(08:28):
economic resilience, along with revenue, earnings growth and innovation across
the sectors, remains key in our view to the market's
ability to continue climbing the proverbial wall of worry. John
joins us now for more. John and Mornig, good morning.
It's that government shut down just another brick in that
wall of worry.
Speaker 9 (08:44):
I think it's another brick in the wall, to quote
Pink Floyd. But that said, we've seen the markets really
overcome at traverse hurdles all along this year, and it
is indeed it's the innovation, it's the rezillions, and it's
a different structure in terms of the market itself. We
(09:04):
believe in terms of participants.
Speaker 7 (09:06):
You know, the market is.
Speaker 9 (09:07):
Not just the guy with the monocle from the Monopoly game.
You know, it's all kinds of people. And in the
US it's multi generational people investing for longer term goals.
So the disturbances that are caused by the potential for
a short term or intermediate or longer term shutdown of
(09:29):
less concern to them right away as opposed to getting
money positioned for goals that maybe three, five, seven years.
Speaker 2 (09:37):
Can I build on that, John, Do you think some
tension between different generations and how they have this market
should be valued, Some tension between the boomers and what
they think the appropriate multiple is for this stock market
with a different sectimics.
Speaker 9 (09:48):
Most certainly, I think you know, when you look at
people who've been the Boomer generation, stocks are cheap at
the sixteen forward multiple. As you go forward in generationally,
people are willing to pay higher multiples for growth. And
I believe the reason why a lot of it comes
from Ed Yardini, who's for years said that the what
(10:10):
is it the Wilshire five thousand. There aren't enough stocks
to really qualify that are publicly traded anymore. For that
indicaes anymore because it's what is it about thirty five
hundred stocks at thirty four hundred that you actually have
to choose from? And the thought is here is it's
supply and demand. It's the basic thing of economics, the
(10:30):
demand for your technology, your hyper growers, the ones who
are well established, deeply embedded in the lives of both
business and the consumer, where we're all on the upgrade.
Speaker 7 (10:41):
Cycle whether we like it or not.
Speaker 9 (10:43):
As I always like to say, this is what's driving
this market in many ways, and it differentiates not just generationally,
but the difference between traders who are looking at at
risk to capital a capital put at risk on a
day to day, minute to minute basis, and intermediate to
longer term investors. When I started in this business forty
(11:05):
two years ago, hard to believe. It's not that I
didn't think I'd lived this long. I didn't know how
longyr would happened, but it was the retail investor would
always come into the market, usually about once the market
was up twenty percent and everybody knew it, and the
cab driver was asking you for a hot tip if
you saw you had a copy of the Wall Street
Journal under your arm. Today people are very well informed
(11:28):
by the financial media.
Speaker 7 (11:30):
They have all the arguments.
Speaker 9 (11:31):
You get to see the players actually express themselves and
you see what is it the body language that people
are using, you know, and it makes it it's actually
it's remarkably more intimate than it was ever before, and
people are better informed and better able to work. We'd
like to think with financial advisors who are working as fiduciaries.
Speaker 4 (11:51):
They also are better sold in the story of the
hopes and dreams of just how much AI can do.
And there is a lot of truth to it. And
history doesn't repeat, but it does rhyme. Back inthe dot
com bubble boom and bust, there was aol you've got mail.
Speaker 1 (12:05):
We don't do that anymore. I mean some people still do,
and you know, go bless you.
Speaker 4 (12:08):
But I'm just wondering going forward, how do you identify
all of the money that's going to be wasted at
a time where there's a lot of projections and not
a lot of data, and what ultimately will happen or
how it's going to be applied.
Speaker 7 (12:19):
Well, I think, for.
Speaker 9 (12:20):
One, is if we just go back to if we
just go back to as recently as the tech bubble,
things were practically primitive versus where we are today.
Speaker 7 (12:28):
I can remember working at another well.
Speaker 9 (12:30):
Known firm headquarters on Broadway in nineteen ninety seven, and
suddenly you would find the internet would go out, you know,
and when you would go home to connect to the corp,
you'd have, you know.
Speaker 7 (12:43):
Sometimes a little device would be and all that stuff.
Speaker 9 (12:46):
Today's we still have problems with technology, but it's very
well established and the ideas you know, well, I can
remember putting dimes in a payphone.
Speaker 7 (12:56):
People don't even know what a payphone used to look like.
Speaker 9 (12:58):
I can see sometimes I see an old architecture in
our building which another firm had before us.
Speaker 7 (13:04):
There's actually a group of things and no phone anymore.
But what are these things for.
Speaker 9 (13:08):
They're for the press as they exit exited, to write
things down. But where we are today, I think a
lot of the stuff will likely prove disappointing, but the
core will be it's already being invested in and utilized
to create greater efficiencies.
Speaker 4 (13:23):
I guess you talk about the babies being.
Speaker 1 (13:25):
Thrown out with the bathwater.
Speaker 4 (13:27):
I don't see any babies, and I don't see any
bathwater being thrown out either.
Speaker 1 (13:30):
Nothing's being thrown out.
Speaker 4 (13:31):
So how do you identify what that means?
Speaker 7 (13:33):
Well, I'd say actually, on a day to day basis.
You know, I'm not solely a strategist.
Speaker 9 (13:38):
I also manage money for the firm, both ETF portfolio
with passive indices and then individual stock portfolio. And we've
seen a considerable broadening of the rally that has suddenly
rewarded sectors like industrials. We've seen better attention played to utilities,
(13:59):
both on as it looks like the FED is going
to be cutting rates going forward, not necessarily enthusiastically, but
on a down payment kind of basis, to show.
Speaker 7 (14:09):
That the rate hike cycle is over.
Speaker 9 (14:12):
What you have effectively is you've got utilities are no
longer considered as much of a risk as a bomb
proxy because it looks like interest rates are coming down.
Healthcare has caught a bid as a result of one
company's efforts to reduce prices in the last couple of days.
I'd mentioned the name of the company because I manage money.
(14:32):
The firm doesn't let me.
Speaker 7 (14:34):
I want to be pitching stocks that I might or
might not own.
Speaker 5 (14:37):
Saying on the FED, how difficult is the end of
October's meeting going to be? If this government shutdown is prolonged.
We know we're not likely going to get tomorrow's perils report,
but then what about CPI on October fifteenth as well?
They might not have all the most relevant up to
date data.
Speaker 9 (14:51):
I think, you know, I think it's close enough to
the September meeting that I think we kind of got
a fairly good idea that the the dot plots showed
that there would likely be a cut in October, and
I think we're close enough in terms of the data.
I think the question would be to December, what's going
to happen there? And hopefully by then this will be
(15:12):
behind us, this whole question of the shot.
Speaker 2 (15:14):
Jo'll never mind the Bathwart said, this has been a
pool party now for six months, and it's getting wilder.
I think spring Break don't want to go there. Look
at the valuations we're seeing in private markets, five hundred
billion dollars on the startup now, John, I'm just trying
to work out, you know, never mind the risk a version.
I don't see any I saw a bunch of dead
issuents in September, and people start to get pretty excited
(15:35):
about the future. Still on top of that, when do
you start to get concerned?
Speaker 9 (15:39):
Well, you know, I play in the public markets as
opposed to the private markets, so one to inform the other.
That's well, I think to some extent with the selectivity
there and what is chosen to move into the private
equity market is not necessarily everything that play, I think
that's something to look at as we go forward, and that,
(16:00):
as you mentioned, the money that's being thrown at this
one particular deal is like the valuation is rather worrisome,
except if you consider how much is already developed. This
is much, you know, This isn't the primitive stage of
people saying someday we will have a million eyeballs on
our website. This is companies that know you need billions
(16:23):
of eyeballs and you need to be well capitalized. And
there is it's not just well capitalized, but the likelihood
of cash flow generation pretty quickly from here to there.
Speaker 7 (16:34):
Because this week I was at a due diligence.
Speaker 9 (16:37):
Meeting in an ETF firm management firm that has ETFs
right and they're technology people just talking about all the
investment that's being made here, but by smart people who
are educated and deeply involved in tech for maybe forty
or fifty years.
Speaker 2 (16:54):
Stay with us, Multilinpex Savannas coming up off to this,
stocks reaching record highs despite the chaos on Capitol Hill.
Sarah Hunt of Alpine Saxon words, writing, the government shutdown
may or may not impact a raft of data for investors.
(17:16):
This may be the trickiest part, at least in the
net term. Sarah joins us now for more. Sarah, good
morning morning. Do you think this will hold back risk
appetite this month? No sound of that just yet. Do
you think it will?
Speaker 10 (17:26):
It depends a lot on how long everything takes and
what kind of data comes out in the interim and
sort of and the kickoff of Q three earning season, right,
so all these things are going to be important. Earning
season is going to take on even more importance if
we have a lack of government data because people want
to see what companies say. But I think this morning
the news on chat TBT was one of those open ai.
It was one of those things that certainly helps the
(17:48):
situation and doesn't hurt it.
Speaker 2 (17:49):
It just built on that a little bit more, Why
does it how the situation sitting here this morning and
understanding that you've got this private company staying private worth
five hundred billion dollars, what is the help?
Speaker 10 (18:00):
Because the question has been all along this AI has
been fueling this rally. Right, you take that out and
all of a sudden, the statistics do not look nearly
as good. And if you see cracks in that story
with the other problems that are going on, I think
you have issues the fact that you saw a.
Speaker 6 (18:13):
Data point that's positive.
Speaker 10 (18:15):
Take it as you want, whether or not that's too bubbly,
or whether or not it's anything else. The bottom line
is people are willing to put up some serious money
to be a part of that story.
Speaker 6 (18:23):
And that's still the case.
Speaker 10 (18:24):
That is going to help the equity markets just because
it underlies that foundation and it gives it more confidence.
Speaker 1 (18:29):
So don't fight AI.
Speaker 4 (18:30):
Is there increasingly a feeling in your mind, don't fight
the FED in terms of supporting the rest of the
non AI universe that hasn't fared as well well.
Speaker 10 (18:39):
I think the FED had a very tough has a
very tough job going into the next couple of months.
A lack of data doesn't help it at all. And
to your point, the ADP numbers, people are going to
look at that, They're going to look at any non
government data that comes out, because until we get government
data out, you don't have enough information. But directionally speaking,
I think that that one of the reasons you saw
that happen yesterday is that people thought, well, this is
another excuse to cut rais whether or not that actually
(19:00):
solves any problems or does what it's supposed to do
is another question. But the idea that it's coming is
still positive for equity markets.
Speaker 4 (19:07):
I just wonder how long you can turbocharge growth before
inflation becomes a problem.
Speaker 1 (19:11):
A lot of people have said it's not.
Speaker 4 (19:13):
And at the same time, you start thinking, if we're
already above that two percent target and you add juice
to it, already is a strong economy, albeit concentrated in AI.
Speaker 1 (19:23):
Doesn't that become a real concern later this year?
Speaker 10 (19:25):
Well, I still don't think that we've seen the true
dynamics of the tariff pricing in pricing right, So whether
or not that's going to come in as the price
level raised or it's inflation, I don't think that that's
really come through. You've seen big waves of inventory every
time there's been a pullback in timing on those tariffs.
So the companies have been absorbing a lot. There's a
point at which that flips, that script flips, and I
don't know where we are with that yet, But as
(19:47):
that sort of comes in, I don't see.
Speaker 6 (19:49):
How it can be beneficial.
Speaker 1 (19:50):
So what are you worried about now?
Speaker 5 (19:51):
Because you don't sound like you're that worried about a
bubble when it comes to AI, you don't sound that
worried about a government shutdown.
Speaker 10 (19:58):
I worry about a lot of things. I wouldn't go
so far as to say I'm not worried about a bubble.
But the problem with that is that bubbles can go
on a lot longer than we can think about whether
or not they should. And if there is enough real
money chasing that right now, as opposed to the whole
argument about debt and debt or financing that came back
around with that big.
Speaker 6 (20:15):
Deal right So, as long as there is, as long as.
Speaker 10 (20:18):
People are putting up money to help solve that problem,
I think it's less of an issue. I think it
becomes one when people start to worry about whether or
not there's any actual productivity that's going to come out
of this efficiency that's going to come out of this,
and I think that that's still one of those questions that.
Speaker 6 (20:31):
We're struggling with.
Speaker 5 (20:32):
It's a good point the end of the nineties when
Greenspan talked about rational xuberances. We had a bull market
run for four years.
Speaker 1 (20:38):
But how do you time it?
Speaker 10 (20:40):
That is a great question, and that is the problem
because you only see that in retrospect when people finally
start to look back and go, you know what, we
were wrong at X point, at why point, at Z point.
Right now, we're still looking at that and saying there's
still a lot of promise. We collectively as investors. I'm
not speaking about us just generally personally, but the investment
community is willing to look at that and say that
there's a whole wave coming and even though you know
(21:00):
they will be inefficiencies in that way, if people aren't
sure where they're going to be yet, so at some
point it starts to be cluegy where you don't get
some people coming out and saying this is helping our margins,
this is doing that for us. We need to see
that come through and that's still a promise right now,
and market loves a good story.
Speaker 2 (21:15):
There seems to be some great division over the balance
of risk. I think the Fed's got one view and
the market's got another. The Federal Reserve believes the biggest
risk right now is downside risk to employment, and a
lot of people in markets are coming around to the
idea that the biggest risk might be upside risk to inflation,
and they're chasing that because the Fed's going to respond
to one and not the other. This is what Tawson's
lack of Apollo said just yesterday. Upside risk to inflation
(21:35):
are growing, particularly if the FED continues to cut interest rates,
and he believes his whole profession continue to underestimate this
economy and the resilience of it. Are you coming round
to that side of things as well.
Speaker 8 (21:47):
Well.
Speaker 10 (21:47):
It's interesting because the resilience of the economy also bakes
in a number of things, you know. So Kelsey Vera
was just talking about the difference between big corporations and
small corporations, So it bakes in a lot of positive
movements across the entire strata. I don't know that the
entire strata is performing that well but from markets perspective,
it doesn't really matter. Lower and consumers aren't doing that well,
stock market doesn't mind. They don't spend the most money anyway.
(22:10):
If you can continue to see cash flow in those
big companies, it's less of an issue than if Main
Street is struggling on the smaller side.
Speaker 6 (22:16):
So it really does depend.
Speaker 10 (22:18):
But I do think that inflation is an issue, and
I do think that it could be a.
Speaker 6 (22:21):
Bigger issue going forward.
Speaker 10 (22:22):
But if we're not going to get some of that data,
it makes it easier to ignore. On the other hand,
I think that it is definitely something that continues to
flow through, and that's going to be tricky because what
happens with that is you fix margins by getting rid
of people, and then the labor question becomes even more problematic,
and then the FED is in a very difficult place,
which I sort of think they are anyway.
Speaker 4 (22:39):
I'm looking at where to buy gold bars right now,
and I'm one s There's crossco. There are places though
they limit how much you can buy. You have to
be a member, and then it's only one bar per person.
I'm looking at this, how much is that sort of
the solution increasingly for people I know that you say
that personally is one thing, but increasingly how mainstream is
that type of investing really becoming?
Speaker 10 (23:00):
Well, I think that gold and to some degree bitcoin,
and I wouldn't call gold a bitcoin, you know, digital
gold or anything else, but they are ways to express
an opinion that the system itself is going to have
some problems and that government all currencies are going to
have to value against something. Right, So gold is one
of those things that people look at and say, I
can buy gold. It's going to It doesn't matter if
(23:20):
it's a year US thing or if it's a japan
US thing.
Speaker 6 (23:24):
I know that if currencies.
Speaker 10 (23:25):
Are going to be devalued, i've got something that should
rise in value. And whether or not that's a truism
or people argue it, or it's just you know, people
are chasing it. Central banks are going back to buying
gold to some degree. They certainly seem to have been
on the non oecd side. So I think that there
is room for that to move because it hasn't moved
in so very long, and we just topped inflation adjusted
(23:47):
gold prices in the seventies and eighties, and that is
one of those technical markers that people look for.
Speaker 4 (23:54):
Well, is that something where you're starting to credibly look
at that as a real slice of the sort of
more risk averse side of portfolio in a way that
you hadn't before.
Speaker 10 (24:03):
Well, I think the tricky thing is that after it's
had such a big run, it almost seems difficult to say,
now this is the time to go ahead and say
that this should be a part of your portfolio.
Speaker 6 (24:10):
If it was before, you're feeling pretty good about it.
Speaker 10 (24:13):
If it isn't, now you're looking at that going can
I jump in here and buy something that's elevated so much?
And I think this goes back to all risk assets
are going in one direction and whether or not that
can continue. And it's difficult to jump in and say, yes,
I want to put a chunk of something in the
asset that's run that much. But you could certainly layer
in a little bit and see what happens so that
it gives you a chance to layer in a little
(24:33):
bit more, just because it's an opposite to larger financial systems.
Speaker 2 (24:36):
Stay with us more Bloomberg surveillance coming up after this,
Sticking with Marcus Spinky shadotoutsche Bank is one of the
most polish on the street with a year rend target
of seven k.
Speaker 7 (24:54):
He writes.
Speaker 2 (24:55):
In our reading, however, equity positioning is only moderately overweight,
and we see gross not rate as the primary driver.
To focus on banking joints us now for more banking.
Speaker 8 (25:03):
Good morning, good morning. Let's get into this.
Speaker 2 (25:06):
A lot of people would look at this market and say, well,
everyone must be very, very long and overweight.
Speaker 8 (25:11):
What do you read?
Speaker 6 (25:12):
What are you looking at?
Speaker 2 (25:13):
That's howsually something different.
Speaker 11 (25:15):
So overall equity market positioning in our reading.
Speaker 8 (25:19):
Is clearly overweight.
Speaker 11 (25:21):
So if you think about it on a Z score basis,
normally we are in a range between minus one and
plus one, or read in round numbers, would be that
the market's position basically at plus a half foero point.
Speaker 8 (25:34):
Five, So clearly overweight, but not extreme.
Speaker 11 (25:39):
But the related point that I would make is that
that overweight is coming in our reading entirely from the
positioning of systematic strategies. So if you think back to April,
then well there's April the second, which is lead into
April the ninth, and you have had basically on April
the second, you know what I would describe really as
(26:01):
a volved shock so you have the victim the fifties,
and then you have the relent on policies on April
the ninth, and vol starts to basically come down. You
get a strong recovery, and so the trend and volve
basically coming down is pushing up by rules the positioning
of systematic strategies. I would say the much larger part
(26:23):
of the investor base the discretionary investors as opposed to
systematic investors, and discretionary investors you want to think about
as basically fundamentals based investors. Their positioning is basically at
neutral by early July, and in our reading continues basically
to hug neutral.
Speaker 8 (26:43):
So I would argue.
Speaker 11 (26:45):
That actually positioning today despite the run up in the market,
is a source of upside because if you look at
the positioning of discretionary investors and what drives it historically,
it's exactly what you would think it.
Speaker 8 (26:59):
Is, which is earnings growth.
Speaker 11 (27:01):
And so if you look at the relationship between discretionary
investor positioning historically and S and P five hundred earnings growth,
it's a pretty compelling relationship. There are, of course, disconnects
from time to time when other things are in focus.
And if you look at their neutral positioning today, it's
positioned for growth in the very low single digits one
(27:24):
two three percent. It moves around we and their positioning.
Like I said, you know, it's been this way since July.
That's when we were getting second quarter earnings which came
in at ten percent year and year growth nine and
a half percent. And if you think about what we're
going to start getting in a couple of weeks, our.
Speaker 8 (27:45):
Take or preview would be that we're likely.
Speaker 11 (27:49):
To get, you know, actually somewhat of a pickup in
growth in earnings growth closer to sort of eleven percent,
and so the pressure is on. I would argue for
discretionary investors to buy in basically to this recovery, where
they haven't. They've only been focused on the risks, is
(28:09):
what we would argue.
Speaker 4 (28:10):
So this is the reason why you upgraded your target
for the S and P four year end two seven thousand,
that was earlier in September. I'm just wondering how much
you see that continuing through twenty twenty six to lead
to some of the real ball cases that we've heard
of seventy seven, seventy eight hundred on the S and p.
Speaker 1 (28:26):
Five hundred.
Speaker 11 (28:27):
Yeah, so you know, our target for this year end
is seven thousand, and the way I would put it is,
actually it's a reinstating of our target. At the beginning
of the year, we cut our numbers, our earnings numbers,
and our market view. We remain sort of constructive that
we would get a relent on policies and we would
go a lot higher. But at the end of the day,
(28:49):
I mean, I think the simple fact is, and as
some of the guests earlier were saying, basically, you know,
you just don't.
Speaker 8 (28:55):
See a lot of stuff with the data.
Speaker 11 (28:57):
I mean if you think about I mean, the reason
for cutting the tariffs, and they look to be having,
you know, a much more modest impact than.
Speaker 8 (29:04):
We basically thought.
Speaker 11 (29:07):
If I look at earnings, you know, so you started
with macro growth. I mean, we got the second quarter
of recovery. We could say the three point eight percent
is partly a recovery from you know, slow down in
Q one, but we're in Q three now and the
Atlanta FED at last read was pretty close to four percent.
Speaker 8 (29:25):
So on macro growth, you know, not much is showing up.
Speaker 11 (29:30):
And I would actually argue that a lot of negativity
and sort of the macro consensus that we would get,
you know, pretty significant slowing. That's that's a that's.
Speaker 8 (29:41):
A positive catalyst.
Speaker 11 (29:43):
And it's a mini version really of what happened in
twenty twenty three, when the macro consensus, you know, persistently
looked basically for a recession that didn't come. And so
what you've got is basically fifteen months of positive macro
data surprises, and markets are not necessarily go down when
you're getting continuously positive surprises. We're having a mini version
(30:05):
of the same thing. If you look at the City
Group data surprise index kind of went vertical late last week,
and so, I mean, you know, discretionary investor positioning is
exactly actually in line with the macro consensus of a
slowdown in growth and a slowdown in earnings growth.
Speaker 8 (30:23):
But we're not getting those things.
Speaker 2 (30:26):
This is the Bloomberg Sevendics podcast, bringing you the best
in markets, economics, angient politics. You can watch the show
live on Bloomberg TV weekday mornings from six am to
nine am Eastern. Subscribe to the podcast on Apple, Spotify
or anywhere else you listen, and as always on the
Bloomberg Terminal and the Bloomberg Business Out
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.