August 4, 2025 • 32 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyJuly 31st, 2025
Featuring:
1) Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, offers her S&P target and talks about risks to the market and whether US government data can be trusted. Stocks clawed back some of last week’s steep losses as equity investors pinned their hopes on the Federal Reserve to ride to the rescue with interest-rate cuts following Friday’s dismal US jobs data.
2) Kathy Jones, Chief Investment Strategist, Fixed Income at Charles Schwab, on how the bond market could punish President Trump for firing the BLS chief, or whether the warnings will go unheeded and the market will continue to rally. Treasuries pared last week’s gains, with yields on the 10-year climbing three basis points to 4.25%. The US 10-year yield had dropped 16 basis points Friday, while policy-sensitive two-year yields fell 28 basis points.
3) Kara Murphy, CIO at Kestra Investment Management, brings us into the market open and talk about asset allocation and the equity outlook. Friday’s tumble on Wall Street — sparked by rising US unemployment and slower job creation — boosted bets on a Fed rate cut to support the economy. Traders rushed into Treasuries despite worries about the inflationary effect of President Trump’s tariffs, which have kept policy makers in hawkish mode.
4) Sevasti Balafas, CEO at GoalVest Advisory, discusses the true risks to the market following a big week of eco moves last week and how clients are positioning.
5) Lisa Mateo joins with the latest headlines in newspapers across the US, including a WSJ story on graduate school and the New York Times' story on Curtis Sliwa's appearance as he runs for NYC mayor.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
Lorid Cavalcina Drench.
Speaker 3 (00:28):
She's said of US equity strategy for RBC Capital Markets, Larie,
what have you seen so far in earnings that you
like maybe.
Speaker 4 (00:35):
Don't like it?
Speaker 2 (00:36):
How's the guide in shaping up for you?
Speaker 5 (00:37):
It's a great question. I'm going to get over the
fact that you said it's only been three hundred and
thirty five companies, which means we still have ways to go.
That's our depressing thought for the morning. But now look,
I think the tagline we've been using is fine but
not fabulous, and I might put a comma after that.
Now after having gone through last week where I think
we had one hundred and fifty five companies, and I
would say, comma starting to look messy? Okay, And you know,
(01:00):
I think the overall headline stats are fine. The rate
of upward revisions to F y one and f y
two is like sixty one sixty two percent. That's moved
up from the mid fifties. That's all well and good.
You know, we watch very closely the Bloomberg Intelligence data
where they track the bottom up consensus estimates, and those
have crept up for both twenty twenty five and twenty
twenty six. If you think about guidance, we've also been
(01:22):
looking at some Bloomberg data for this as well, and
so the guidance stats look pretty good. The problem is,
I think a lot of this was well anticipated, and
so you know, coming into reporting season, I heard clients
talking about FX tailwinds. Guess what stocks aren't reacting all
that well to beats on FX. I've been hearing that
from my analysts. And if you think about, you know,
some of these adjustments to guidance, because hey, the tariff
(01:44):
rate isn't as bad as we initially baked in. Clients
knew that was coming as well. So you know, I
think some of this is falling flat. And when we're
looking at you know, the demand discussion, frankly, was their
push in, was their you know pull forward? Were their delays?
I mean, it still sort of seems to be all
of the above. The tech companies sound pretty good. I
don't think there's been too much interruption on the AI story.
(02:07):
But outside of that, it seems like there's a lot
of confusion as to how much you know, kind of
pull in actually happened. You're seeing some companies say there's
a little bit, you know, of improvement. You know, some
of that paralysis is alleviating. But frankly, Paul, I mean,
the level of uncertainty still seems very, very high, and
that that is concerning me right now.
Speaker 6 (02:26):
Well, even though we've had roughly forty percent of the
market cap by the S and P five hundred reporting,
now that we're past most of the tech earnings, we
still have Nvidia on August twenty seventh. But of course,
I mean you've noted in your notes declinents. We still
have a number of consumer names coming in the next
few weeks. So obviously Paul and I were talking about
earlier when it comes to McDonald's, Disney, but then you
still have in a few weeks Walmart and Targets. So
(02:47):
what are you expecting when it comes to the consumer front,
and specifically what you might hear about tariffs from them?
Speaker 5 (02:52):
So look, I don't think it's going to be awful,
but it might be a little bit of cold water.
And the reason I say that is if you think
about sort of how reporting sea and unfold. We always
start out with the financials, and we even saw a
couple of the credit card companies, you know, I think
last week and the week before echoed this as well.
The financial like, hey, everything's fine. Spending is still good,
and you know, like the delinquencies are low, and people
(03:13):
are still paying their credit card bills, and you know,
we're just not seeing anything wrong.
Speaker 7 (03:17):
And then you go and.
Speaker 5 (03:18):
Actually listen to the consumer companies that watch what the
consumer is actually doing, and you know, maybe the word
cracks is too strong, but I would say the composition
of the spend is reflecting a concerned behavior. You know,
one of the food companies last week actually referred to
the idea of people stress eating chocolate, right that, which
was probably one of my favorite quotes from last week.
(03:41):
But you know, we saw other companies say the consumer
is under stress and that doesn't result in a collapse
in consumer spending, but there are some concerning things going on,
not just from the high end, but the low end
as well. And the Michigan survey on Friday actually showed
a downtick and consumer sentiment for low end and lowly
educated consumers. So there is something amiss We're going to
(04:02):
hear more about, that is my guess.
Speaker 6 (04:03):
And also promotions, because consumer package good companies, especially coming
into this year, we're talking so much about those types
of at the grocery store, buy one, get one fifty
percent off. What are you hearing so far with any
of that?
Speaker 5 (04:14):
So I haven't been paying quite as much attention to
the promotion conversation. But this whole idea of the value
seeking consumer ranging from like the high end to the
low end is still very much, you know, present, and
you know, I've noticed some of the food companies have
been talking about things like smaller pack sizes. I mean,
this is sort of going with my own lived experience
as the model like two little boys to just eat
(04:34):
and eat and eat. So I think that that value
consciousness is still translating into behavior and you're seeing it,
you know, especially for these food companies. There's another company
I forget who it was, but they were talking about
how food has just become so much more expensive that
it's radiating in terms of other purchase decisions, and so
(04:55):
they can really see where consumers are prioritizing their.
Speaker 2 (04:58):
Spend small bit stocks, what's the call these days?
Speaker 5 (05:02):
So, you know, it's interesting with all these developments in
the last like forty eight trading hours. You know, I
think the FED meeting last week through some cold water
on the small cap trade and Friday was a little
bit of a mix, right because on the one hand,
you know, we got this jobs report that said, Okay,
there may be some deterioration in the labor market that's
beyond what people had assumed. That is bad for small caps.
(05:24):
You needs, you need jobs growth to be ramping, to
be getting better for small caps to outperform. Typically flat
to decelerating jobs growth doesn't work for them. That being said,
small caps have become the hedge fund communities one of
their favorite ways to express FED bets. And so you know,
when people sort of settled down, you know, and started
to think about, you know, okay, maybe the cuts are
(05:45):
coming sooner. That feels we'll see how they trade today,
but that feels like it should breathe a little bit
of life into markets and a little bit of life
into small caps. So I would not be short small caps,
but I'm not I don't have enough conviction to go
a long yet either, I'd be neutral.
Speaker 6 (05:58):
If you go to the S and P five hundred
and then the A our function in the terminal, you
can see where those consensus estimates are for cell site targets.
And I know, LORI yours is a sixty two to
fifty for year end right now. That actually just in
play about a two tenths of a percent increase from
where the S and P five hundred closed on Friday.
So what's your view for the second half of the
year when we're in what's historically the most seasonally weak
(06:18):
time period in August and September for equities.
Speaker 5 (06:21):
Yeah, so look, we you know, targets have been tough
this year, right And I think for us it's designed
to articulate the path that we think the market is on,
and the path that we think the market is on.
We feel like it's a fairly neutral one. We see
risks on both sides. I do think the sentiment rally
we've seen since April eighth, that's been consistently our most
bullish modeling, and that feels like it's kind of done
(06:42):
at the recent highs about what it's supposed to do.
It feels like we're ahead of twenty twenty five fundamentals,
and it feels like we've already priced in a lot
of good news from twenty twenty six. And my concern
is that maybe twenty twenty six, while not terrible, ends
up not being crie as rosy as everybody thinks. So
that could create some volatility. And as you mentioned, Jess,
I mean, this is seasonal. If you even just look
the last five years, August is kind of mixed, September
(07:03):
and October tend to be bad. And if you went
back and looked at the twenty eighteen trade war, that
post Labor Day period was when investors really started to
get concerned based on what they were hearing from companies
about the ripple effects of that trade war. So I've
got all that in the back of my head. I
don't feel bearish. I know, when you're not as bullish
as everybody else, that's the box people want to put
you in. But I feel very neutral, and so that's
(07:26):
really what the target's trying to express.
Speaker 2 (07:28):
Lloyd, thank you so.
Speaker 3 (07:28):
Much for joining us.
Speaker 2 (07:29):
Really appreciate you coming in to our studio.
Speaker 3 (07:30):
Lori Cavacina, head of US equity strategy at RBC Capital Markets.
Speaker 1 (07:40):
You're listening to the Bloomberg Surveillance Podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Otto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (07:52):
You know what he wanted to talk to, fixing come people,
cockpit parties. I mean the one in the corner. Nobody
would be talking to them, no yield, no return. Now
there's some of the cool kids.
Speaker 6 (08:02):
Now everybody wants to talk to that.
Speaker 3 (08:03):
One of the cool kids is Kathy Jones, chief fixed
income strategists at Charles Schwab. Kathy, what's the overall called
here in fixed again? What's Charles Schwab saying these days
about getting how we should have some exposure to fixed income?
Speaker 4 (08:20):
Good morning, Paul, And no I'm not one of the
cool kids yet, but I'm trying. How's sad? You know?
I think that we have been in the camp since
late last year keeping an intermediate term duration on average,
meaning somewhere in that five to seven year area for
an average duration in higher credit quality bonds. We've now
(08:41):
considered going a little bit longer term. We think that
these jobs numbers, combined with some of the other numbers
we've seen lately, do suggest to slow down and activity
the greater likelihood of FED ray cuts coming, and that
suggests us that it's not too risky now to extend
duration a little bit. For I'm here a ten year yield,
(09:02):
probably not going back to four and a half five
percent area, probably staying under that four and a half
And if the FED does end up cutting rates, which
we think they will in September, then you'll see the
whole curve shift down, but you probably do a little
bit better in the intermediate to longer term duration because
it will be a cut as a result of slower
(09:24):
economic growth.
Speaker 6 (09:26):
When you're looking at the ten year treasury yield, are
we in a world we're four and a half percent?
Maybe the new normal for that?
Speaker 4 (09:34):
Well, I think it's probably at this moment in time,
the upper end of normal. But yeah, I think you know,
when we look at where rates were for that long
period of time, when you know, we couldn't get a
conversation at a cocktail party because there were so low.
Now we're going back to you know, what is considered
(09:55):
more normal. If our normal growth rate is between one
and a half and two percent. Then a more and
a half percent ten year yield given two percent inflation, say,
is probably a more normal kind of standard really yield
that you would get relative to history. So I think
that four and a half probably the upper bound for
(10:15):
the time being, but somewhere around four percent and a
ten year is probably the new normal.
Speaker 2 (10:21):
Katy, I got credit risk here.
Speaker 3 (10:22):
I'm looking at then GO function on the Bloomberg terminal,
and I see that the best performance in US fixed
income has been US corporate high yield. So it looks
like the market's okay taking some credit risk.
Speaker 2 (10:34):
How do you think about that?
Speaker 4 (10:36):
Yeah, you know, we're a little bit wary of going
too far down the risk spectrum, the credit spectrum and
fixing inkin just because you don't get paid for it.
It doesn't you know, it doesn't give you much spread.
And the economic fundamentals showing softness means that will probably
see those default rates go up on the lowest credit
(10:57):
quality bonds. They're a little bit careful of that. But
look high yield. As long as there's no recession, you
get a lot of yield in that yield is what
gives you the total return. It's been a very calm market,
and that's a lot of people to hang in there
in high yield. So our perspective is it's okay to
(11:18):
have some allocation to high yield. We wouldn't over allocate
to it, but you have to be ready to ride
the ups and downs in that. From a long term perspective,
those yields are pretty attractive and you compound them over
time and that that gives you a decent total return.
But you're going to have a lot more volatility there
and a lot more correlation with equities, So allocation matter,
(11:39):
Sizing the position in high yield is really important.
Speaker 6 (11:43):
What's top of mind for you on the economic calendar
this week? I know we have durable goods orders coming
out at ten a m. New York time later this morning.
Speaker 4 (11:52):
Oh, jobless claims, you know, anything to do with the
labor market right now is really top of mind for
us because we've seen such big revisions. We've seen so
much attention now to the job market. It is a
bell weather for the FAD obviously because it's part of
their mandate. So we'll really those weekly jobless claims take
(12:12):
on a lot more importance now.
Speaker 3 (12:14):
Hey, Kathy, as a bond investor, what's this week dollar
mean for you guys. I mean, we've seen the stocks
bounce back, a lot of other risk assets that bounced
back after the sell off earlier in the year from Liberation.
Speaker 2 (12:26):
Day, but the dollar really hasn't still down.
Speaker 3 (12:28):
The Bloomberg dollar in next is still down about eight
and a half percent this year.
Speaker 2 (12:32):
What does that mean for bond investors?
Speaker 4 (12:35):
Well, I think it's a good I mean, it's a
good indication that the market expects those interest rate differentials
to narrow visa the say Europe and some of the
other major countries. It makes international investing in bonds a
bit more attractive. It's been a good ten fifteen years
since that's really been an attractive option for a lot
of investors, particularly in developed markets. But now if we're
(12:58):
going to see the dollar go down, it's a big
component of return when you invest in international developed market bonds,
So it means diversification actually is an opportunity. Now you
still still get somewhat lower yield, but the play on
the currency side, if we're right that it continues to
go down, can give you pretty good returns. And actually
(13:19):
year to date, the strongest performing sub asset class in
fixed income is international developed market bonds. Because of that
dropping the.
Speaker 6 (13:28):
Dollar, where do you see the long end of the
treasury yield curve headed and do you think that will
remain more stable when you're thinking compared with the short
end that could potentially rally the Fed does begin to
lean more dubbish into year end.
Speaker 4 (13:43):
Yeah, we're still looking for a steeper yield curve with
a short end kind of leaning leading rates down and
the long end kind of hanging in there coming down.
Seeing yields come down at the long end, But I
think given that inflation is still elevated, we have components
of policy that are bearish for long term bonds or
(14:05):
at least limit the decline and yields in long term bonds.
So between deficit financing that's coming up and the inflationary
impact of tariffs, most likely what we'll see is that
steeper yield curve, so the whole thing shifts down, but
much more at the short end that at the longer end.
Speaker 2 (14:26):
Kathy, thank you so much for joining us. Appreciate it
as always.
Speaker 3 (14:28):
Kathy Jones, chief fixed income strategist at Charles Schwab.
Speaker 1 (14:33):
This is the Bloomberg Surveillance podcast. Listen live each weekday
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Speaker 3 (14:50):
Kara Murphy joins is she's a CIO of Kestrip Investment Management. Caar,
what's the call to your clients these days? Here we've
got the earning coming in. We've got to fed that
I guess is going to cut once or twice this year.
Is that enough to be supportive of risk assets these days?
Speaker 7 (15:09):
I think that's the That's the important question. And what
we've seen is this like battling narrative between policy uncertainty
and big changes when it comes to things like tariffs.
But then underlying, when you look at companies earning potential,
it continues to come in quite strong. So obviously we've
seen a lot of noise from tariffs coming into you know,
you saw GDP much weaker in the second quarter. You've
(15:31):
seen earnings take a slow down in the second quarter.
Late last week we had their revised jobs numbers coming down.
So it's definitely taking an impact. But then when you
hear companies talk about their outlooks for the second half,
those are still coming in pretty good, and so those
will continue to support stock prices.
Speaker 4 (15:48):
Well.
Speaker 6 (15:48):
City Group was pointing out Stukeiser how they're crunching some
of the numbers here. The S and P five hundred
average stock has moved about five point two percent in
either direction for the second quarter earning season, and that's
the and their data history going back to twenty twelve
at this point in the earning season cycle. So I'm
actually curious when you're looking at these kind of names, Kara,
(16:09):
as far as when you're having more volatility within some
of these single stocks, where are you seeing those types
of opportunities and what are you buying?
Speaker 8 (16:16):
What are you selling?
Speaker 7 (16:17):
Yeah, And I think it's very interesting to point to that,
because when you look at, say, like the percentage of
companies who are beating estimates relative to what you typically
see in history, we're pretty much on the nose with
long term averages. So in terms of like the overall
earnings power of the S and P five hundred companies,
they are about like where we had expected them to be.
(16:39):
But you're right, and that what we've seen that's different
this particular season is that investors are rewarding those who
beat and punishing more those who miss. So I think
part of this is that as you think about the
rebound that we had off of the low in the
market in late April, it was sort of a buy
everything type of rally. Now, as we're seeing numbers or
under standing a little bit more how individual companies are impacted,
(17:03):
you're seeing the market really differentiate between those who can
earn and those who are struggling.
Speaker 5 (17:07):
Parah.
Speaker 3 (17:08):
This is an equity market that increasingly is concentrated in
you know, a handful a dozen names, big tech names,
and I don't know, I learned in business school that's
not necessarily a good thing. How do you think about
that as a risk, maybe as an opportunity, I'm not sure.
Speaker 7 (17:25):
I think this is definitely a risk for broad market investors.
And this is one of the main risks that we
had pointed to at the beginning of the year. So
this high valuations and policy uncertainty. So we saw policy
on uncertainty rear its ugly head in the second quarter.
But then with this rebound in the market, we are
back to like a super concentrated market, and as long
(17:45):
as those like Magnificent seven names or whatever's leading the market,
as long as those names continue to be able to
show earning's power, I think we're okay. That said, that
concentration combined with really high valuations make a market more vulnerable.
That doesn't mean it's going to turn down, but if
that earnings picture starts to change, then the whole index
is really at risk. So we've been, you know, big advocates.
(18:08):
We think twenty twenty five is the year of the
diversification trade, which hasn't been a very sort of sexy
thing to talk about, but we've seen it actually work.
So bonds suddenly matter, Owning things outside the US suddenly matters.
We think it's important to own things outside of those
big names, and that's going to provide you the cushion
that you need over the next couple of years.
Speaker 6 (18:27):
Of course, we have Palenteer reporting after the Bell today,
another big name that has moved markets and especially had
been added to the S and P five hundred most
recently too. When you're thinking about some of these names
that are coming up, what's the most important company names
to you that you're going to be keeping a close
eye on as far as waitings and what could move
markets more so so.
Speaker 7 (18:45):
I think, you know, we've talked a lot about the
AI trade, and obviously that's been a really important mover
of the markets over the last couple of years, and
it's important not just for those individual companies, but what
it means for things like productivity of the US economy,
you know, for the foreseeable future. Think that's going to
continue to be a trend. So being able to hear
not just about the capital investments being made there that's
(19:05):
almost easy to do, but what are the actual returns
on those capital investments?
Speaker 3 (19:10):
Ker fixed income? What's the play here for you? Because
I look at the returns on the Bloomberg Total Return
in next I see corporate high yield has been the
best returner this year.
Speaker 7 (19:19):
Yeah, and typically that's like the most correlated with equity returns.
So it kind of makes sense is you have a
big rallying market that that's going to perform well. That said,
we have some of the same issues in that asset
class that we do in some of the really large
equities in that there's not a lot of risk priced
into those markets. So you have extremely tight credit spreads.
(19:40):
That said, when we look at like corporate America overall,
we think it's fairly healthy, and so we be biased
towards more higher grade corporates where you can get a
little bit more absolute yield, but you're not as vulnerable
to say it turned down in credit.
Speaker 6 (19:54):
So when you're speaking with clients, what are their top
concerns whenever they're speaking with you right now.
Speaker 7 (20:01):
Well, it often depends what side of the aisle they're on.
So folks on the left of the aisle are very
concerned about policy risk, political encroachment of you know, sort
of economic institutions. If you're on the right side of
the market, I think you feel or sorry, right side
of the political isle, I think you feel a lot
better generally about the market. And they're focusing more on
(20:22):
some of the things like the policy changes that we
got with the one big beautiful bill, accelerating capital investments,
that sort of thing.
Speaker 2 (20:29):
Karen, thanks so much for joining us.
Speaker 3 (20:31):
Appreciate it as always, Kara Murphy, cio of Kestre Investment Management.
Speaker 1 (20:42):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple cockplay and Android
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Speaker 3 (20:56):
S a best day All office CEO O Wes Advisory.
She's in our studio here, which is a very good thing.
What are you doing with these markets here? I mean, boy,
we've had an unbelievable volatility to get to hear the
early parts of August. Now we're up eight nine percent.
It's like nothing happened. But it's obviously been a very challenging,
(21:17):
volatile year to date.
Speaker 2 (21:19):
How do you reset for your clients here in August.
Speaker 9 (21:21):
We're having lots of conversations, but to be honest, we're optimistic.
We're excited about the markets moving forward. They are vulnerable, right,
so we're paying attention to that. But we're having a
lot of conversations with clients. For clients that don't need
to have as much stock exposure, we're rebalancing, we're pulling back.
We have our cash set asides. First things first, what's
(21:43):
your cash flow need for the next twelve eighteen months,
So we have that cash aside, But for the rest
of it, we're excited on equities, not only public equities,
but private markets as well.
Speaker 6 (21:53):
When we last spoke in June, you were neutral weight equities.
Are you still neutral?
Speaker 8 (21:58):
Still neutral weight?
Speaker 9 (21:59):
We still have the same mix of public equity exposure,
quality growth companies and some dividend stocks. That's the primary
focus of our portfolio. We did increase also our international
exposure slightly since then, but for the most part, our portfolio,
our public equity portfolios are intact.
Speaker 8 (22:18):
Over the last few.
Speaker 6 (22:19):
Months, we're internationally, do you see opportunities mainly Europe?
Speaker 9 (22:23):
It's mostly Europe exposure. That we have a little bit
of emerging markets, but it's mainly Europe that we added
to that.
Speaker 8 (22:30):
You know, the defense spending that the German Germans or
were committed to.
Speaker 9 (22:36):
That takes some time to play in, but we expect
that going forward. So you're is the biggest international exposure.
Speaker 3 (22:43):
How much cash are you holding now versus maybe, I
don't know, kind of an average for you.
Speaker 9 (22:47):
Guys, we're pretty fully invested for the clients that don't
need cash, Okay, okay, So for anyone that doesn't need
cash or doesn't expect.
Speaker 8 (22:57):
To need cash, we're pretty fully invested.
Speaker 9 (22:59):
Having said that, we do have some fixed income set
asides because life happens, and of course unexpected cash needs
come up.
Speaker 8 (23:08):
But for those that have.
Speaker 9 (23:09):
A monthly or annual distribution, I have twelve to eighteen
months of cash aside. For everybody else, I want to
be fully invested. And you know that doesn't mean we
can't take advantage of the dips with our fixed income exposure,
but I want to be fully invested.
Speaker 6 (23:25):
One of the defensive names that you had brought up
the last time we were speaking was Lockheed Martin. When
you're looking more specifically in the US, how are you
viewing that stock now?
Speaker 9 (23:34):
So you know, going back to the European theme, the
European defense spending that I think will play out, Lockheed
Martin has a good percentage of their of their revenues
coming from overseas. So still positive on that name. Even
more so, I'll say, you know that's a defense company,
of course, Defense.
Speaker 8 (23:51):
Tech shield AIE. So I'm looking more so in the
private market.
Speaker 9 (23:54):
So we have our public exposure with Lockheed, but looking
at some private markets as well, So and or Ill
you may have heard of Defense Tex Shield AI. That's
another exciting one. So again looking at defense not only
in public but private market's more interesting.
Speaker 7 (24:08):
It's kind of where I.
Speaker 3 (24:08):
Want to go because in your notes you say you
like venture growth. What is venture growth and how do
you get your client's exposure to venture growth?
Speaker 9 (24:16):
Yes, great question. So venture growth private companies. They're not
early stage venture. These are companies that are closed to
profitability or at profitability or in line of sight of
profitability two to three years out from an IPO or
an M and a liquidity event. But venture growth companies
(24:36):
have been you know, we saw the peak of venture
bubble in twenty twenty one. Since then, valuations have been
pretty muted, so posed to public markets where valuations are
on the higher end. And we have a concentration in
the SNP right, forty percent of the s and P
made up of ten names looking at private markets. So
(24:56):
how do we get access It's it's a lot of work.
We do have a fund set up. That first fund
is closed. I mentioned Andreil shield Ai that fund is closed,
but we have a fund. We bring investors together and
we do a lot of networking, deal making, talking to
a lot of different people to get access to some
of these private companies.
Speaker 6 (25:17):
And speaking of those private companies, something you brought up
in recent months was Recess when it comes to those
alternative soft drink makers, talk to us more about that
for people who might not know enough about that and
why you see those types of opportunities there.
Speaker 8 (25:30):
Sure, So Recess is a beverage company.
Speaker 9 (25:34):
You may have heard magnesium helps us sleep that night,
makes us calm down, relax, So maybe you want to
try some Recess drinks. What's been interesting is the growth
rate of beverages Better for You beverages and all non
alcoholic beverages. That growth rate has been faster than alcoholic beverages.
(25:55):
So Recess is one of those companies that that has
that magnesem and more calming effects. So if you don't
want an alcoholic beverage because you don't want the effects
the next day, this is a healthier.
Speaker 8 (26:07):
And you know a lot of the younger generation looking
at you.
Speaker 9 (26:11):
Know, wellness and health care. How are we more healthy?
So this plays right into that space.
Speaker 2 (26:15):
It's like when I'm thirsty, I get some water to drink.
The kids hydrate. That's the difference.
Speaker 3 (26:22):
I'm like, why are you filling up a jug of
water when I need to get back to the studio
in thirty seconds to fill up my little cup of water.
Speaker 5 (26:29):
You're never draating.
Speaker 2 (26:30):
They are okay, all right, very good alternatives. So ASTI,
how do you guys think about alternatives?
Speaker 3 (26:35):
Like as an allocation? Is it five percent, is it
zero or is it something more?
Speaker 9 (26:40):
It's more so alternatives broad category. So there are different
kinds of alternatives. But let's say in our typical portfolio
of a seventy percent equity or what was thought of
as a typical seventy thirty portfolio, we have a good
ten to fifteen percent of alternative investments, not only private
(27:00):
equity and venture growth, but structures as well.
Speaker 2 (27:03):
Interesting.
Speaker 3 (27:04):
I mean, there's a lot of ways to go out there, folks,
and smart people like Sevesti Balafas they figure it out
for you. Sevesti Balafas, CEO of Goal West Advisory, joining
us here in our Bloomberg Arrecti Broker studio. We appreciate
getting a few minutes of time here.
Speaker 2 (27:19):
Up.
Speaker 1 (27:20):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (27:37):
Newspapers, Lisa Miteo, what do you have for us today?
This one?
Speaker 10 (27:40):
Actually I want to ask you a question before I
get this, because this one is have any of you
how many of your kids have gone to grad school?
Have they gone?
Speaker 8 (27:46):
None?
Speaker 2 (27:48):
They're all working? Okay, Okay, I have one more to go.
So that's it.
Speaker 10 (27:50):
Yeah, so that ties into like this next story. That's
why I want to ask you about it. So this
is in the Wall Street Journal. It's talking about how
the tough job market, like a good case for college
grads is to do that so that it makes you
stand out. But now they're saying, is the extra debt
worth it? And that's what these kids are facing. So
you know, they had the unemployment rate for graduates fell
in May. AI is taking out some roles, uncertainty around
(28:14):
the impact of higher tariff so companies cutting back or
slowing hiring, those are the things that they're facing. So
now experts are telling the Wall Street Journal, here's what
you need to do. You have to look at how
much of a salary boost you can expect to get
from that advanced degree, and then how much of a
burden that total debt load is going to be, and
that's what they should be asking themselves.
Speaker 2 (28:32):
I don't know.
Speaker 3 (28:33):
My dad told me I'll pay through undergrad and then
anything after that, you guys pay.
Speaker 2 (28:37):
So my sister went to law school, she paid. I
went to business school. I paid. I thought that was
a pretty good deal. That's to my kids, Okay. But
if number four comes up to me and says, hey,
I want to do something, I might, I might.
Speaker 6 (28:48):
You might feeling this cost for a master's degree is skyrocketing.
Speaker 10 (28:53):
Well, that's what changes in the in the spending and
the spending.
Speaker 2 (28:58):
So for a lot of people like I get. I
was on the board of the Duke Business School for
twelve years. For still a lot of kids today, if
you want to make a career change, it's still a
good way to go. There you go. Okay.
Speaker 10 (29:10):
This one was from the New York Times. So Curtis
leewall right, you know, the Republican nominee from mayor.
Speaker 2 (29:15):
He's been sporting.
Speaker 10 (29:16):
This new look lately. He's been ditching that Guardian Angels
red beret. You know, he's known for wearing it the
red jacket for a suit, especially when he meets with
like business leaders. Union officials things like that. He's also
said he will keep it off permanently if he is
elected in November. So he's telling The New York Times
that some people are turned off by it because they
say it has this revolutionary look to it. So if
(29:39):
it takes you know, him taking it off to have
people listen to him, he wants to do.
Speaker 3 (29:43):
We interviewed him three weeks ago here at Bloomberg in
this studio.
Speaker 2 (29:48):
I interviewed him. He had he had it on, Yeah,
but had the suit on. I don't know. It's just
to me, I've always known him with it. It's just
like his trademark shown him.
Speaker 10 (29:59):
It's like up Tom he always has the bow type,
but sometimes he has And it's funny because people are saying, Oh,
didn't recognize.
Speaker 4 (30:06):
Him right without the bridge wearing. So that's a different sector.
Speaker 10 (30:11):
And so this one is up your alley Wall Street Journal.
This is the AI struggles for Hollywood studios. So what
they're doing, especially Disney as an example of they give
it says bounce over how to use AI in the
filmmaking process and then how to protect themselves.
Speaker 4 (30:24):
Against it at the same time.
Speaker 10 (30:26):
So Disney, I didn't even realize this when it began
working on that live action version of Mowana, they actually
considered whether to clone Dwayne Johnson for it. So apparently
Johnson has a cousin who.
Speaker 8 (30:37):
Looks just like him.
Speaker 10 (30:38):
He's six foot three, he's two hundred and fifty pounds, Okay,
so yeah, so he would fill in as this body
double for a few shots. Disney would work with like
this AI company to make these like deep fakes of
his face that would be layered on top of his
cousin's body.
Speaker 4 (30:54):
So, but the problem that.
Speaker 10 (30:56):
Disney attorneys were like, I don't know about this because
they can't claim ownership over every element of that that
the firm if it's AI generated in part. So this
is like that struggle they're dealing with. We want to
do this technology, but you know, do we still own
it or what are the repercussions from using it? And
what are the fans going to say? You know, like
that's not the real rock. I mean, come on, you
(31:17):
would know.
Speaker 2 (31:19):
No, I don't know.
Speaker 3 (31:21):
I mean this whole AI and the content creation thing,
I don't know how that's all gonna.
Speaker 4 (31:25):
Work movie studios.
Speaker 2 (31:26):
It's going to be a change.
Speaker 10 (31:27):
But it's this back and forth struggle for that.
Speaker 2 (31:29):
Very good lisha mateo with the newspapers.
Speaker 1 (31:32):
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Easter and on Bloomberg dot Com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(31:52):
and always on the Bloomberg terminal
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
Lorid Cavalcina Drench.
Speaker 3 (00:28):
She's said of US equity strategy for RBC Capital Markets, Larie,
what have you seen so far in earnings that you
like maybe.
Speaker 4 (00:35):
Don't like it?
Speaker 2 (00:36):
How's the guide in shaping up for you?
Speaker 5 (00:37):
It's a great question. I'm going to get over the
fact that you said it's only been three hundred and
thirty five companies, which means we still have ways to go.
That's our depressing thought for the morning. But now look,
I think the tagline we've been using is fine but
not fabulous, and I might put a comma after that.
Now after having gone through last week where I think
we had one hundred and fifty five companies, and I
would say, comma starting to look messy? Okay, And you know,
(01:00):
I think the overall headline stats are fine. The rate
of upward revisions to F y one and f y
two is like sixty one sixty two percent. That's moved
up from the mid fifties. That's all well and good.
You know, we watch very closely the Bloomberg Intelligence data
where they track the bottom up consensus estimates, and those
have crept up for both twenty twenty five and twenty
twenty six. If you think about guidance, we've also been
(01:22):
looking at some Bloomberg data for this as well, and
so the guidance stats look pretty good. The problem is,
I think a lot of this was well anticipated, and
so you know, coming into reporting season, I heard clients
talking about FX tailwinds. Guess what stocks aren't reacting all
that well to beats on FX. I've been hearing that
from my analysts. And if you think about, you know,
some of these adjustments to guidance, because hey, the tariff
(01:44):
rate isn't as bad as we initially baked in. Clients
knew that was coming as well. So you know, I
think some of this is falling flat. And when we're
looking at you know, the demand discussion, frankly, was their
push in, was their you know pull forward? Were their delays?
I mean, it still sort of seems to be all
of the above. The tech companies sound pretty good. I
don't think there's been too much interruption on the AI story.
(02:07):
But outside of that, it seems like there's a lot
of confusion as to how much you know, kind of
pull in actually happened. You're seeing some companies say there's
a little bit, you know, of improvement. You know, some
of that paralysis is alleviating. But frankly, Paul, I mean,
the level of uncertainty still seems very, very high, and
that that is concerning me right now.
Speaker 6 (02:26):
Well, even though we've had roughly forty percent of the
market cap by the S and P five hundred reporting,
now that we're past most of the tech earnings, we
still have Nvidia on August twenty seventh. But of course,
I mean you've noted in your notes declinents. We still
have a number of consumer names coming in the next
few weeks. So obviously Paul and I were talking about
earlier when it comes to McDonald's, Disney, but then you
still have in a few weeks Walmart and Targets. So
(02:47):
what are you expecting when it comes to the consumer front,
and specifically what you might hear about tariffs from them?
Speaker 5 (02:52):
So look, I don't think it's going to be awful,
but it might be a little bit of cold water.
And the reason I say that is if you think
about sort of how reporting sea and unfold. We always
start out with the financials, and we even saw a
couple of the credit card companies, you know, I think
last week and the week before echoed this as well.
The financial like, hey, everything's fine. Spending is still good,
and you know, like the delinquencies are low, and people
(03:13):
are still paying their credit card bills, and you know,
we're just not seeing anything wrong.
Speaker 7 (03:17):
And then you go and.
Speaker 5 (03:18):
Actually listen to the consumer companies that watch what the
consumer is actually doing, and you know, maybe the word
cracks is too strong, but I would say the composition
of the spend is reflecting a concerned behavior. You know,
one of the food companies last week actually referred to
the idea of people stress eating chocolate, right that, which
was probably one of my favorite quotes from last week.
(03:41):
But you know, we saw other companies say the consumer
is under stress and that doesn't result in a collapse
in consumer spending, but there are some concerning things going on,
not just from the high end, but the low end
as well. And the Michigan survey on Friday actually showed
a downtick and consumer sentiment for low end and lowly
educated consumers. So there is something amiss We're going to
(04:02):
hear more about, that is my guess.
Speaker 6 (04:03):
And also promotions, because consumer package good companies, especially coming
into this year, we're talking so much about those types
of at the grocery store, buy one, get one fifty
percent off. What are you hearing so far with any
of that?
Speaker 5 (04:14):
So I haven't been paying quite as much attention to
the promotion conversation. But this whole idea of the value
seeking consumer ranging from like the high end to the
low end is still very much, you know, present, and
you know, I've noticed some of the food companies have
been talking about things like smaller pack sizes. I mean,
this is sort of going with my own lived experience
as the model like two little boys to just eat
(04:34):
and eat and eat. So I think that that value
consciousness is still translating into behavior and you're seeing it,
you know, especially for these food companies. There's another company
I forget who it was, but they were talking about
how food has just become so much more expensive that
it's radiating in terms of other purchase decisions, and so
(04:55):
they can really see where consumers are prioritizing their.
Speaker 2 (04:58):
Spend small bit stocks, what's the call these days?
Speaker 5 (05:02):
So, you know, it's interesting with all these developments in
the last like forty eight trading hours. You know, I
think the FED meeting last week through some cold water
on the small cap trade and Friday was a little
bit of a mix, right because on the one hand,
you know, we got this jobs report that said, Okay,
there may be some deterioration in the labor market that's
beyond what people had assumed. That is bad for small caps.
(05:24):
You needs, you need jobs growth to be ramping, to
be getting better for small caps to outperform. Typically flat
to decelerating jobs growth doesn't work for them. That being said,
small caps have become the hedge fund communities one of
their favorite ways to express FED bets. And so you know,
when people sort of settled down, you know, and started
to think about, you know, okay, maybe the cuts are
(05:45):
coming sooner. That feels we'll see how they trade today,
but that feels like it should breathe a little bit
of life into markets and a little bit of life
into small caps. So I would not be short small caps,
but I'm not I don't have enough conviction to go
a long yet either, I'd be neutral.
Speaker 6 (05:58):
If you go to the S and P five hundred
and then the A our function in the terminal, you
can see where those consensus estimates are for cell site targets.
And I know, LORI yours is a sixty two to
fifty for year end right now. That actually just in
play about a two tenths of a percent increase from
where the S and P five hundred closed on Friday.
So what's your view for the second half of the
year when we're in what's historically the most seasonally weak
(06:18):
time period in August and September for equities.
Speaker 5 (06:21):
Yeah, so look, we you know, targets have been tough
this year, right And I think for us it's designed
to articulate the path that we think the market is on,
and the path that we think the market is on.
We feel like it's a fairly neutral one. We see
risks on both sides. I do think the sentiment rally
we've seen since April eighth, that's been consistently our most
bullish modeling, and that feels like it's kind of done
(06:42):
at the recent highs about what it's supposed to do.
It feels like we're ahead of twenty twenty five fundamentals,
and it feels like we've already priced in a lot
of good news from twenty twenty six. And my concern
is that maybe twenty twenty six, while not terrible, ends
up not being crie as rosy as everybody thinks. So
that could create some volatility. And as you mentioned, Jess,
I mean, this is seasonal. If you even just look
the last five years, August is kind of mixed, September
(07:03):
and October tend to be bad. And if you went
back and looked at the twenty eighteen trade war, that
post Labor Day period was when investors really started to
get concerned based on what they were hearing from companies
about the ripple effects of that trade war. So I've
got all that in the back of my head. I
don't feel bearish. I know, when you're not as bullish
as everybody else, that's the box people want to put
you in. But I feel very neutral, and so that's
(07:26):
really what the target's trying to express.
Speaker 2 (07:28):
Lloyd, thank you so.
Speaker 3 (07:28):
Much for joining us.
Speaker 2 (07:29):
Really appreciate you coming in to our studio.
Speaker 3 (07:30):
Lori Cavacina, head of US equity strategy at RBC Capital Markets.
Speaker 1 (07:40):
You're listening to the Bloomberg Surveillance Podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Otto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (07:52):
You know what he wanted to talk to, fixing come people,
cockpit parties. I mean the one in the corner. Nobody
would be talking to them, no yield, no return. Now
there's some of the cool kids.
Speaker 6 (08:02):
Now everybody wants to talk to that.
Speaker 3 (08:03):
One of the cool kids is Kathy Jones, chief fixed
income strategists at Charles Schwab. Kathy, what's the overall called
here in fixed again? What's Charles Schwab saying these days
about getting how we should have some exposure to fixed income?
Speaker 4 (08:20):
Good morning, Paul, And no I'm not one of the
cool kids yet, but I'm trying. How's sad? You know?
I think that we have been in the camp since
late last year keeping an intermediate term duration on average,
meaning somewhere in that five to seven year area for
an average duration in higher credit quality bonds. We've now
(08:41):
considered going a little bit longer term. We think that
these jobs numbers, combined with some of the other numbers
we've seen lately, do suggest to slow down and activity
the greater likelihood of FED ray cuts coming, and that
suggests us that it's not too risky now to extend
duration a little bit. For I'm here a ten year yield,
(09:02):
probably not going back to four and a half five
percent area, probably staying under that four and a half
And if the FED does end up cutting rates, which
we think they will in September, then you'll see the
whole curve shift down, but you probably do a little
bit better in the intermediate to longer term duration because
it will be a cut as a result of slower
(09:24):
economic growth.
Speaker 6 (09:26):
When you're looking at the ten year treasury yield, are
we in a world we're four and a half percent?
Maybe the new normal for that?
Speaker 4 (09:34):
Well, I think it's probably at this moment in time,
the upper end of normal. But yeah, I think you know,
when we look at where rates were for that long
period of time, when you know, we couldn't get a
conversation at a cocktail party because there were so low.
Now we're going back to you know, what is considered
(09:55):
more normal. If our normal growth rate is between one
and a half and two percent. Then a more and
a half percent ten year yield given two percent inflation, say,
is probably a more normal kind of standard really yield
that you would get relative to history. So I think
that four and a half probably the upper bound for
(10:15):
the time being, but somewhere around four percent and a
ten year is probably the new normal.
Speaker 2 (10:21):
Katy, I got credit risk here.
Speaker 3 (10:22):
I'm looking at then GO function on the Bloomberg terminal,
and I see that the best performance in US fixed
income has been US corporate high yield. So it looks
like the market's okay taking some credit risk.
Speaker 2 (10:34):
How do you think about that?
Speaker 4 (10:36):
Yeah, you know, we're a little bit wary of going
too far down the risk spectrum, the credit spectrum and
fixing inkin just because you don't get paid for it.
It doesn't you know, it doesn't give you much spread.
And the economic fundamentals showing softness means that will probably
see those default rates go up on the lowest credit
(10:57):
quality bonds. They're a little bit careful of that. But
look high yield. As long as there's no recession, you
get a lot of yield in that yield is what
gives you the total return. It's been a very calm market,
and that's a lot of people to hang in there
in high yield. So our perspective is it's okay to
(11:18):
have some allocation to high yield. We wouldn't over allocate
to it, but you have to be ready to ride
the ups and downs in that. From a long term perspective,
those yields are pretty attractive and you compound them over
time and that that gives you a decent total return.
But you're going to have a lot more volatility there
and a lot more correlation with equities, So allocation matter,
(11:39):
Sizing the position in high yield is really important.
Speaker 6 (11:43):
What's top of mind for you on the economic calendar
this week? I know we have durable goods orders coming
out at ten a m. New York time later this morning.
Speaker 4 (11:52):
Oh, jobless claims, you know, anything to do with the
labor market right now is really top of mind for
us because we've seen such big revisions. We've seen so
much attention now to the job market. It is a
bell weather for the FAD obviously because it's part of
their mandate. So we'll really those weekly jobless claims take
(12:12):
on a lot more importance now.
Speaker 3 (12:14):
Hey, Kathy, as a bond investor, what's this week dollar
mean for you guys. I mean, we've seen the stocks
bounce back, a lot of other risk assets that bounced
back after the sell off earlier in the year from Liberation.
Speaker 2 (12:26):
Day, but the dollar really hasn't still down.
Speaker 3 (12:28):
The Bloomberg dollar in next is still down about eight
and a half percent this year.
Speaker 2 (12:32):
What does that mean for bond investors?
Speaker 4 (12:35):
Well, I think it's a good I mean, it's a
good indication that the market expects those interest rate differentials
to narrow visa the say Europe and some of the
other major countries. It makes international investing in bonds a
bit more attractive. It's been a good ten fifteen years
since that's really been an attractive option for a lot
of investors, particularly in developed markets. But now if we're
(12:58):
going to see the dollar go down, it's a big
component of return when you invest in international developed market bonds,
So it means diversification actually is an opportunity. Now you
still still get somewhat lower yield, but the play on
the currency side, if we're right that it continues to
go down, can give you pretty good returns. And actually
(13:19):
year to date, the strongest performing sub asset class in
fixed income is international developed market bonds. Because of that
dropping the.
Speaker 6 (13:28):
Dollar, where do you see the long end of the
treasury yield curve headed and do you think that will
remain more stable when you're thinking compared with the short
end that could potentially rally the Fed does begin to
lean more dubbish into year end.
Speaker 4 (13:43):
Yeah, we're still looking for a steeper yield curve with
a short end kind of leaning leading rates down and
the long end kind of hanging in there coming down.
Seeing yields come down at the long end, But I
think given that inflation is still elevated, we have components
of policy that are bearish for long term bonds or
(14:05):
at least limit the decline and yields in long term bonds.
So between deficit financing that's coming up and the inflationary
impact of tariffs, most likely what we'll see is that
steeper yield curve, so the whole thing shifts down, but
much more at the short end that at the longer end.
Speaker 2 (14:26):
Kathy, thank you so much for joining us. Appreciate it
as always.
Speaker 3 (14:28):
Kathy Jones, chief fixed income strategist at Charles Schwab.
Speaker 1 (14:33):
This is the Bloomberg Surveillance podcast. Listen live each weekday
starting at seven am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (14:50):
Kara Murphy joins is she's a CIO of Kestrip Investment Management. Caar,
what's the call to your clients these days? Here we've
got the earning coming in. We've got to fed that
I guess is going to cut once or twice this year.
Is that enough to be supportive of risk assets these days?
Speaker 7 (15:09):
I think that's the That's the important question. And what
we've seen is this like battling narrative between policy uncertainty
and big changes when it comes to things like tariffs.
But then underlying, when you look at companies earning potential,
it continues to come in quite strong. So obviously we've
seen a lot of noise from tariffs coming into you know,
you saw GDP much weaker in the second quarter. You've
(15:31):
seen earnings take a slow down in the second quarter.
Late last week we had their revised jobs numbers coming down.
So it's definitely taking an impact. But then when you
hear companies talk about their outlooks for the second half,
those are still coming in pretty good, and so those
will continue to support stock prices.
Speaker 4 (15:48):
Well.
Speaker 6 (15:48):
City Group was pointing out Stukeiser how they're crunching some
of the numbers here. The S and P five hundred
average stock has moved about five point two percent in
either direction for the second quarter earning season, and that's
the and their data history going back to twenty twelve
at this point in the earning season cycle. So I'm
actually curious when you're looking at these kind of names, Kara,
(16:09):
as far as when you're having more volatility within some
of these single stocks, where are you seeing those types
of opportunities and what are you buying?
Speaker 8 (16:16):
What are you selling?
Speaker 7 (16:17):
Yeah, And I think it's very interesting to point to that,
because when you look at, say, like the percentage of
companies who are beating estimates relative to what you typically
see in history, we're pretty much on the nose with
long term averages. So in terms of like the overall
earnings power of the S and P five hundred companies,
they are about like where we had expected them to be.
(16:39):
But you're right, and that what we've seen that's different
this particular season is that investors are rewarding those who
beat and punishing more those who miss. So I think
part of this is that as you think about the
rebound that we had off of the low in the
market in late April, it was sort of a buy
everything type of rally. Now, as we're seeing numbers or
under standing a little bit more how individual companies are impacted,
(17:03):
you're seeing the market really differentiate between those who can
earn and those who are struggling.
Speaker 5 (17:07):
Parah.
Speaker 3 (17:08):
This is an equity market that increasingly is concentrated in
you know, a handful a dozen names, big tech names,
and I don't know, I learned in business school that's
not necessarily a good thing. How do you think about
that as a risk, maybe as an opportunity, I'm not sure.
Speaker 7 (17:25):
I think this is definitely a risk for broad market investors.
And this is one of the main risks that we
had pointed to at the beginning of the year. So
this high valuations and policy uncertainty. So we saw policy
on uncertainty rear its ugly head in the second quarter.
But then with this rebound in the market, we are
back to like a super concentrated market, and as long
(17:45):
as those like Magnificent seven names or whatever's leading the market,
as long as those names continue to be able to
show earning's power, I think we're okay. That said, that
concentration combined with really high valuations make a market more vulnerable.
That doesn't mean it's going to turn down, but if
that earnings picture starts to change, then the whole index
is really at risk. So we've been, you know, big advocates.
(18:08):
We think twenty twenty five is the year of the
diversification trade, which hasn't been a very sort of sexy
thing to talk about, but we've seen it actually work.
So bonds suddenly matter, Owning things outside the US suddenly matters.
We think it's important to own things outside of those
big names, and that's going to provide you the cushion
that you need over the next couple of years.
Speaker 6 (18:27):
Of course, we have Palenteer reporting after the Bell today,
another big name that has moved markets and especially had
been added to the S and P five hundred most
recently too. When you're thinking about some of these names
that are coming up, what's the most important company names
to you that you're going to be keeping a close
eye on as far as waitings and what could move
markets more so so.
Speaker 7 (18:45):
I think, you know, we've talked a lot about the
AI trade, and obviously that's been a really important mover
of the markets over the last couple of years, and
it's important not just for those individual companies, but what
it means for things like productivity of the US economy,
you know, for the foreseeable future. Think that's going to
continue to be a trend. So being able to hear
not just about the capital investments being made there that's
(19:05):
almost easy to do, but what are the actual returns
on those capital investments?
Speaker 3 (19:10):
Ker fixed income? What's the play here for you? Because
I look at the returns on the Bloomberg Total Return
in next I see corporate high yield has been the
best returner this year.
Speaker 7 (19:19):
Yeah, and typically that's like the most correlated with equity returns.
So it kind of makes sense is you have a
big rallying market that that's going to perform well. That said,
we have some of the same issues in that asset
class that we do in some of the really large
equities in that there's not a lot of risk priced
into those markets. So you have extremely tight credit spreads.
(19:40):
That said, when we look at like corporate America overall,
we think it's fairly healthy, and so we be biased
towards more higher grade corporates where you can get a
little bit more absolute yield, but you're not as vulnerable
to say it turned down in credit.
Speaker 6 (19:54):
So when you're speaking with clients, what are their top
concerns whenever they're speaking with you right now.
Speaker 7 (20:01):
Well, it often depends what side of the aisle they're on.
So folks on the left of the aisle are very
concerned about policy risk, political encroachment of you know, sort
of economic institutions. If you're on the right side of
the market, I think you feel or sorry, right side
of the political isle, I think you feel a lot
better generally about the market. And they're focusing more on
(20:22):
some of the things like the policy changes that we
got with the one big beautiful bill, accelerating capital investments,
that sort of thing.
Speaker 2 (20:29):
Karen, thanks so much for joining us.
Speaker 3 (20:31):
Appreciate it as always, Kara Murphy, cio of Kestre Investment Management.
Speaker 1 (20:42):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple cockplay and Android
auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal.
Speaker 3 (20:56):
S a best day All office CEO O Wes Advisory.
She's in our studio here, which is a very good thing.
What are you doing with these markets here? I mean, boy,
we've had an unbelievable volatility to get to hear the
early parts of August. Now we're up eight nine percent.
It's like nothing happened. But it's obviously been a very challenging,
(21:17):
volatile year to date.
Speaker 2 (21:19):
How do you reset for your clients here in August.
Speaker 9 (21:21):
We're having lots of conversations, but to be honest, we're optimistic.
We're excited about the markets moving forward. They are vulnerable, right,
so we're paying attention to that. But we're having a
lot of conversations with clients. For clients that don't need
to have as much stock exposure, we're rebalancing, we're pulling back.
We have our cash set asides. First things first, what's
(21:43):
your cash flow need for the next twelve eighteen months,
So we have that cash aside, But for the rest
of it, we're excited on equities, not only public equities,
but private markets as well.
Speaker 6 (21:53):
When we last spoke in June, you were neutral weight equities.
Are you still neutral?
Speaker 8 (21:58):
Still neutral weight?
Speaker 9 (21:59):
We still have the same mix of public equity exposure,
quality growth companies and some dividend stocks. That's the primary
focus of our portfolio. We did increase also our international
exposure slightly since then, but for the most part, our portfolio,
our public equity portfolios are intact.
Speaker 8 (22:18):
Over the last few.
Speaker 6 (22:19):
Months, we're internationally, do you see opportunities mainly Europe?
Speaker 9 (22:23):
It's mostly Europe exposure. That we have a little bit
of emerging markets, but it's mainly Europe that we added
to that.
Speaker 8 (22:30):
You know, the defense spending that the German Germans or
were committed to.
Speaker 9 (22:36):
That takes some time to play in, but we expect
that going forward. So you're is the biggest international exposure.
Speaker 3 (22:43):
How much cash are you holding now versus maybe, I
don't know, kind of an average for you.
Speaker 9 (22:47):
Guys, we're pretty fully invested for the clients that don't
need cash, Okay, okay, So for anyone that doesn't need
cash or doesn't expect.
Speaker 8 (22:57):
To need cash, we're pretty fully invested.
Speaker 9 (22:59):
Having said that, we do have some fixed income set
asides because life happens, and of course unexpected cash needs
come up.
Speaker 8 (23:08):
But for those that have.
Speaker 9 (23:09):
A monthly or annual distribution, I have twelve to eighteen
months of cash aside. For everybody else, I want to
be fully invested. And you know that doesn't mean we
can't take advantage of the dips with our fixed income exposure,
but I want to be fully invested.
Speaker 6 (23:25):
One of the defensive names that you had brought up
the last time we were speaking was Lockheed Martin. When
you're looking more specifically in the US, how are you
viewing that stock now?
Speaker 9 (23:34):
So you know, going back to the European theme, the
European defense spending that I think will play out, Lockheed
Martin has a good percentage of their of their revenues
coming from overseas. So still positive on that name. Even
more so, I'll say, you know that's a defense company,
of course, Defense.
Speaker 8 (23:51):
Tech shield AIE. So I'm looking more so in the
private market.
Speaker 9 (23:54):
So we have our public exposure with Lockheed, but looking
at some private markets as well, So and or Ill
you may have heard of Defense Tex Shield AI. That's
another exciting one. So again looking at defense not only
in public but private market's more interesting.
Speaker 7 (24:08):
It's kind of where I.
Speaker 3 (24:08):
Want to go because in your notes you say you
like venture growth. What is venture growth and how do
you get your client's exposure to venture growth?
Speaker 9 (24:16):
Yes, great question. So venture growth private companies. They're not
early stage venture. These are companies that are closed to
profitability or at profitability or in line of sight of
profitability two to three years out from an IPO or
an M and a liquidity event. But venture growth companies
(24:36):
have been you know, we saw the peak of venture
bubble in twenty twenty one. Since then, valuations have been
pretty muted, so posed to public markets where valuations are
on the higher end. And we have a concentration in
the SNP right, forty percent of the s and P
made up of ten names looking at private markets. So
(24:56):
how do we get access It's it's a lot of work.
We do have a fund set up. That first fund
is closed. I mentioned Andreil shield Ai that fund is closed,
but we have a fund. We bring investors together and
we do a lot of networking, deal making, talking to
a lot of different people to get access to some
of these private companies.
Speaker 6 (25:17):
And speaking of those private companies, something you brought up
in recent months was Recess when it comes to those
alternative soft drink makers, talk to us more about that
for people who might not know enough about that and
why you see those types of opportunities there.
Speaker 8 (25:30):
Sure, So Recess is a beverage company.
Speaker 9 (25:34):
You may have heard magnesium helps us sleep that night,
makes us calm down, relax, So maybe you want to
try some Recess drinks. What's been interesting is the growth
rate of beverages Better for You beverages and all non
alcoholic beverages. That growth rate has been faster than alcoholic beverages.
(25:55):
So Recess is one of those companies that that has
that magnesem and more calming effects. So if you don't
want an alcoholic beverage because you don't want the effects
the next day, this is a healthier.
Speaker 8 (26:07):
And you know a lot of the younger generation looking
at you.
Speaker 9 (26:11):
Know, wellness and health care. How are we more healthy?
So this plays right into that space.
Speaker 2 (26:15):
It's like when I'm thirsty, I get some water to drink.
The kids hydrate. That's the difference.
Speaker 3 (26:22):
I'm like, why are you filling up a jug of
water when I need to get back to the studio
in thirty seconds to fill up my little cup of water.
Speaker 5 (26:29):
You're never draating.
Speaker 2 (26:30):
They are okay, all right, very good alternatives. So ASTI,
how do you guys think about alternatives?
Speaker 3 (26:35):
Like as an allocation? Is it five percent, is it
zero or is it something more?
Speaker 9 (26:40):
It's more so alternatives broad category. So there are different
kinds of alternatives. But let's say in our typical portfolio
of a seventy percent equity or what was thought of
as a typical seventy thirty portfolio, we have a good
ten to fifteen percent of alternative investments, not only private
(27:00):
equity and venture growth, but structures as well.
Speaker 2 (27:03):
Interesting.
Speaker 3 (27:04):
I mean, there's a lot of ways to go out there, folks,
and smart people like Sevesti Balafas they figure it out
for you. Sevesti Balafas, CEO of Goal West Advisory, joining
us here in our Bloomberg Arrecti Broker studio. We appreciate
getting a few minutes of time here.
Speaker 2 (27:19):
Up.
Speaker 1 (27:20):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (27:37):
Newspapers, Lisa Miteo, what do you have for us today?
This one?
Speaker 10 (27:40):
Actually I want to ask you a question before I
get this, because this one is have any of you
how many of your kids have gone to grad school?
Have they gone?
Speaker 8 (27:46):
None?
Speaker 2 (27:48):
They're all working? Okay, Okay, I have one more to go.
So that's it.
Speaker 10 (27:50):
Yeah, so that ties into like this next story. That's
why I want to ask you about it. So this
is in the Wall Street Journal. It's talking about how
the tough job market, like a good case for college
grads is to do that so that it makes you
stand out. But now they're saying, is the extra debt
worth it? And that's what these kids are facing. So
you know, they had the unemployment rate for graduates fell
in May. AI is taking out some roles, uncertainty around
(28:14):
the impact of higher tariff so companies cutting back or
slowing hiring, those are the things that they're facing. So
now experts are telling the Wall Street Journal, here's what
you need to do. You have to look at how
much of a salary boost you can expect to get
from that advanced degree, and then how much of a
burden that total debt load is going to be, and
that's what they should be asking themselves.
Speaker 2 (28:32):
I don't know.
Speaker 3 (28:33):
My dad told me I'll pay through undergrad and then
anything after that, you guys pay.
Speaker 2 (28:37):
So my sister went to law school, she paid. I
went to business school. I paid. I thought that was
a pretty good deal. That's to my kids, Okay. But
if number four comes up to me and says, hey,
I want to do something, I might, I might.
Speaker 6 (28:48):
You might feeling this cost for a master's degree is skyrocketing.
Speaker 10 (28:53):
Well, that's what changes in the in the spending and
the spending.
Speaker 2 (28:58):
So for a lot of people like I get. I
was on the board of the Duke Business School for
twelve years. For still a lot of kids today, if
you want to make a career change, it's still a
good way to go. There you go. Okay.
Speaker 10 (29:10):
This one was from the New York Times. So Curtis
leewall right, you know, the Republican nominee from mayor.
Speaker 2 (29:15):
He's been sporting.
Speaker 10 (29:16):
This new look lately. He's been ditching that Guardian Angels
red beret. You know, he's known for wearing it the
red jacket for a suit, especially when he meets with
like business leaders. Union officials things like that. He's also
said he will keep it off permanently if he is
elected in November. So he's telling The New York Times
that some people are turned off by it because they
say it has this revolutionary look to it. So if
(29:39):
it takes you know, him taking it off to have
people listen to him, he wants to do.
Speaker 3 (29:43):
We interviewed him three weeks ago here at Bloomberg in
this studio.
Speaker 2 (29:48):
I interviewed him. He had he had it on, Yeah,
but had the suit on. I don't know. It's just
to me, I've always known him with it. It's just
like his trademark shown him.
Speaker 10 (29:59):
It's like up Tom he always has the bow type,
but sometimes he has And it's funny because people are saying, Oh,
didn't recognize.
Speaker 4 (30:06):
Him right without the bridge wearing. So that's a different sector.
Speaker 10 (30:11):
And so this one is up your alley Wall Street Journal.
This is the AI struggles for Hollywood studios. So what
they're doing, especially Disney as an example of they give
it says bounce over how to use AI in the
filmmaking process and then how to protect themselves.
Speaker 4 (30:24):
Against it at the same time.
Speaker 10 (30:26):
So Disney, I didn't even realize this when it began
working on that live action version of Mowana, they actually
considered whether to clone Dwayne Johnson for it. So apparently
Johnson has a cousin who.
Speaker 8 (30:37):
Looks just like him.
Speaker 10 (30:38):
He's six foot three, he's two hundred and fifty pounds, Okay,
so yeah, so he would fill in as this body
double for a few shots. Disney would work with like
this AI company to make these like deep fakes of
his face that would be layered on top of his
cousin's body.
Speaker 4 (30:54):
So, but the problem that.
Speaker 10 (30:56):
Disney attorneys were like, I don't know about this because
they can't claim ownership over every element of that that
the firm if it's AI generated in part. So this
is like that struggle they're dealing with. We want to
do this technology, but you know, do we still own
it or what are the repercussions from using it? And
what are the fans going to say? You know, like
that's not the real rock. I mean, come on, you
(31:17):
would know.
Speaker 2 (31:19):
No, I don't know.
Speaker 3 (31:21):
I mean this whole AI and the content creation thing,
I don't know how that's all gonna.
Speaker 4 (31:25):
Work movie studios.
Speaker 2 (31:26):
It's going to be a change.
Speaker 10 (31:27):
But it's this back and forth struggle for that.
Speaker 2 (31:29):
Very good lisha mateo with the newspapers.
Speaker 1 (31:32):
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Easter and on Bloomberg dot Com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(31:52):
and always on the Bloomberg terminal
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