February 10, 2026 • 38 mins
Paul Lane and Marc Fandetti break down the key forces shaping markets as investors digest weak retail sales data, rising equity valuations, and an important week of economic reports. The discussion looks at earnings growth expectations for the S&P 500, what elevated price-to-earnings ratios mean for long-term returns, and why headline market milestones matter less than fundamentals. The show also explores major labor market trends with Corey Adams of Robert Half, including hiring optimism for 2026, widening skills gaps, and how artificial intelligence is reshaping the job application and recruiting process. The episode wraps with insights on consumer behavior, fast food pricing pressures, and renewed interest in international equities after years of U.S. market dominance.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
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Speaker 2 (01:12):
Welcome back to the Financial Exchange. Taking a look around
at markets, the Dow Jones is up nearly three hundred points,
close to a half percent, the S and P five hundred,
slightly in positive territory as investors are largely shaking off
a retail sales report that was rather weak that came
out this morning at eight thirty, where we saw in
the month of December that there was no increase in
(01:34):
retail sales spending, which tries to capture consumer spending for
the country. It was anticipated that we would see an
increase of about point four percent, but the December number
came in flat entirely. And if we look back over
the course of the last year, we saw that from
December's numbers, a about two point four percent increase year
(01:55):
over year on retail sales spending compared to inflation that
was running at two point seven percent, so almost decline
if you adjust for inflation again just one data point.
It's ultimately more more important to focus on the trend
of retail sales report is if they continue to march
down progressively in our week, month by month, and it's
(02:15):
an area of concern, but this could just be an
anomaly because the month of November's report was quite strong.
As a result of that, you do see that the
US tenure Treasury is down a little bit on that
miss from retail sales, sitting at about four point one
four percent off where it started previously, close to about
four point two percent. Really big week here on the
(02:38):
economic front. We are going to get a jobs report
that will come out tomorrow that will break down where
we stand on the employment front, recapping the month of January,
and then on Friday we will get a CPI inflation report.
So a lot of material to digest on the economic
front this week. On the market front, we have had
(03:00):
a looming goal out there that has been mentioned by
many pundits, even though I don't really care about it
that much, is trying to hit seven thousand on the
S and P five hundred. It has been something that
has been eluding markets over the course of the last
several months or so, just briefly eclipsing that seven thousand
mark just once. But a piece here from Bloomberg regarding
(03:25):
the next big target for the S and P five hundred,
and to be fair, the columnist Jonathan Levin does make
the point that ultimately seven thousand or five thousand, or
six thousand, none of those century, none of those thousand
marks are that significant in terms of what it means
for markets. But he did have a point in here
that I want to highlight just briefly, is earnings growth
(03:48):
for the S and P five hundred has been quite strong.
We saw thirteen percent or twelve percent earnings per share
growth this earning season. It is anticipated that earnings going
to grow about thirteen percent this year, and it's going
to be a little bit more widespread. Obviously, the technology
sector drives a lot of the earnings growth, but it
is anticipated that ten out of eleven sectors will see
(04:10):
earnings growth this year. So that piece on the market side,
I could care less. And I'm sure you're probably in
the same camp as to whether the S and P
f I've heard, well, it's seven thousand.
Speaker 3 (04:19):
Part of what matters evaluation ratio. Any ratio has two components,
a quote and it's a ratio. What's on top is
the price, that's your seven thousand in this case, what's
in the denominator on the bottom is some measure of
earnings or sales or whatever you're whatever it is you're
trying to value. People could mean a lot of things
when they say stocks are richly valued or cheaply valued,
(04:41):
So you have to ask what do you mean? What
measure are you using. So you pointed out earnings growth,
the E and PDE might average low double digits over
the last few years. The problem, if you think this
is a problem not everybody agrees, is that the P
and PDE been growing faster. The top in the ratio,
(05:02):
the numerator has been growing faster than the denominator. That
means rising valuation ratios. Historically, valuation ratios have been a
pretty good forecaster of long run returns. The higher they
get the more you pay for something, the lower you're
expected return. It's obvious in the case of a bond,
where you pay more for something, your coupon is lower
(05:23):
because the coupon is in the numerator and the prices
in the denominator. You can think about equities the same way.
So equity valuations is measured by PE no matter how
you define the E, and there are lots of different.
Speaker 4 (05:37):
Ways to do that too.
Speaker 3 (05:38):
They're pretty steep, Paul, As you know, they're at levels
where historically big declines have followed because highpes don't adjust
by the E getting bigger to bring it down. Historically,
they adjust by the P coming down. And that's what's
got some fundamentally oriented people worried. On the other side
of that, you've got AI exuberance, and you've good very
(06:00):
supportive fiscal and arguably monetary policy.
Speaker 4 (06:05):
Yeah, the somewhat supportive fiscal policies.
Speaker 2 (06:07):
The ratio is, like you mentioned, the price to earnings one.
We've we've chronicled that a ton on the show, the
idea that they we are in a significantly high percentile
in terms of price to earnings. The problem with those
is that they can be lousy short term predictors of
market action, but it is certainly worth noting because they
do these valuations do tend to revert to their mean.
(06:28):
The question is just when they do.
Speaker 4 (06:30):
That, Yeah, I mean, well, not perfectly.
Speaker 3 (06:34):
Yeah, The question is to what mean the mean of
just I'll just say PE, even though I mean P
relative to some longer term measure of the smoothed like
a like an average inflation adjusted measure that seems to
have gone up. PE seemed to have gone up over time.
There was a break in the way they behaved argue
(06:55):
in the early nineties. So I don't think most people,
I don't think would say, well, we're going to go
back to the average pe the sixty seventies and eighties,
which would be less than half of today's level, which
right a huge drop, a permanent drop by the way
in stocks relative to earning, unless you think peas are
going to climb again. But most people are uncomfortable with
where they are today.
Speaker 2 (07:15):
We are going to get that labor market report, as
I mentioned, tomorrow, from the Bureau of Labor Statistics for
the month of January. What also will come with that
report is a revision on the payroll data that we've
seen over the last twelve months from March of twenty
twenty five through March of twenty twenty four. They are
(07:38):
expected to be a pretty significant downward revision. I've read
Bloomberg economists estimating it at about six hundred and fifty
thousand of a downward revision. But I've also seen other
numbers elsewhere for last.
Speaker 3 (07:50):
Year for a total for what period Paul, sorry to interrupt,
through March.
Speaker 4 (07:53):
Of twenty five, and I believe they it's a twelve month.
Speaker 3 (07:56):
Okay, I always forget how they do. Sorry, it's not
a labor you know economist. But so that's going to
be the twelve months through last March.
Speaker 2 (08:03):
That's what the Bloomberg Comes estimated. The adjustment I've seen
elsewhere in nine hundred thousand too. If you look back
at that period, there are some significant months of gains
through the December of twenty four where there was three
hundred and twenty three thousand jobs added. So again we'll
(08:23):
be really focused on what the data that we see
that comes out in tomorrow's report.
Speaker 4 (08:27):
Of course, we'll get.
Speaker 2 (08:28):
An update on the jobs added for the month of January,
where's anticipates seventy thousand jobs are added to the economy.
That would be the highest over the last four months
because we saw December come in around fifty thousand. So
certainly a lot of focus on that labor report tomorrow,
and the unemployment rate two will probably be the biggest,
(08:49):
biggest statistic that we'll be focused on.
Speaker 3 (08:51):
Yeah, that that of course won't be affected by the revisions. Right,
so the I suppose unemployment doesn't move, stays at four
point four percent, but a million jobs get wiped out.
Speaker 4 (09:02):
That's in the past, backward looking up, So what should
the Fed?
Speaker 3 (09:05):
Should the FED do anything? I'm being a little bit
rhetorical here when you keep their goals of low and
stable inflation and maximum employment or minimum unemployment equivalently, those
are there too, the two prongs of their so called mandate,
which are intention. Should it even matter if a million
(09:26):
jobs get wiped out but unemployment doesn't change?
Speaker 2 (09:28):
No, I don't think so, because ultimately it's backward looking,
and I don't think it would be a tremendous surprise
too many economists out there that it seems like these
downward resions are going.
Speaker 4 (09:40):
To be part of the process.
Speaker 2 (09:41):
It will be staggering to see the number, but ultimately
it's something that you just have to And again it's
an impossible job. I wouldn't want it, but you just
have to take what you're getting, the most real time
data that you're getting into.
Speaker 3 (09:56):
There'seration, there's nowhere that fits in the models that the
economists of the FED uses. I understand them that revision,
now I could be misspeaking. I understand them in abstract
terms like I've seen them in a book, but I've
never worked with them because I've never been a FED economist.
So it may, but it may also mean nothing. We've
(10:17):
got four point four percent of employment, we've got inflation
that remains above the Fed's goal and could easily tick
up with all the monetary stimulus, the fiscal stimulus that's
being pumped into the economy, coupled with elevated inflation expectations,
which are an important part of the inflation process. It's
just not obvious to me that it should mean anything,
(10:38):
even if it's dramatic.
Speaker 2 (10:39):
As you said, Paul, We're gonna take a quick break
here on the Financial Exchange, and when we come back,
we're we talking with Corey Adams from Robert Half specifically
about the labor market. There's been a lot of significant
trends in the labor market. AI certainly is on a
lot of employee's minds. So we're only talking to Corey
Ibms from Robert Half about where the labor market stands
(11:01):
and the impact of our official intelligence on some of
these desired skills for employees out there. That's right after
this break here on the Financial Exchange. Stick with us.
Speaker 1 (11:10):
If you missed any of today's show, catch up whenever
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one three eighty five with your comments and questions about
(11:31):
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Speaker 2 (11:44):
As promised, we are joined by Corey Adams from Robert
Haff who conducts surveys on the labor market and in particular,
what we'll be focusing on is the demand for skilled
talent here today, Corey, thanks so much for joining us.
Speaker 5 (12:00):
Good morning, Paul.
Speaker 4 (12:01):
Greed to be with you Corey.
Speaker 2 (12:03):
In the headlines recently, there has been a tremendous amount
of focus and scrutiny on AI and the new programs
coming out that could potentially impact white collar workers in
terms of cloud code and all these other software that
could be potentially drummed up by all these AI artificial
(12:24):
intelligence models out there. Give me a look at what
employers are saying, just in terms of the labor market
and what they're looking at for twenty twenty six. What
skills are in demand, What are areas that perhaps there's
waning demand for. Just give us a sense for what
you're seeing on the employer front.
Speaker 6 (12:45):
Sure, so we'll kick this off the demand for skill, talent,
perfect timing for twenty twenty six. There's a lot of information,
so we'll probably cover a lot this morning, so let's
just start here. For the employers out there, we're seeing
that hiring optimism is remounting in the first half of
twenty twenty six. The research shows that sixty percent of
employers plan to add permanent staff and fifty five percent
(13:08):
expect to see the increase in contract hiring to support
their immediate needs. Staying with the employers, they're showing business confidence,
eighty three percent of hiring managers said that they're confident
in their business outlook for twenty twenty six, of which
forty three percent expects strong company growth. Important note both
those numbers are up significantly from the last time we
(13:29):
asked this question around the same time period last year.
To your opening comments, we're also finding that there are
challenges and the hiring process because of AI. Sixty five
percent of managers said that hiring has become harder due
to the rise of AI generated applications, and fifty eight
percent reported greater difficulty identifying truly qualified candidates compared to
(13:52):
one year ago. And then finally to close out sort
of our top key findings, businesses are entering twenty twenty
six with widening skills gaps in more complex hiring conditions.
Sixty two percent of hiring managers say the skills gap
has grown just the last year, and I thought this
was really important. Only six percent of managers feel like
(14:13):
they are fully resource with both talent and headcount in
order to deliver on their current initiatives and projects for
twenty twenty six.
Speaker 2 (14:21):
I'm a little surprised to hear that there is some
more hiring optimism because everything you read tends to point
to major employers sort of focusing on kind of keeping
headcount level and can we invest more in artificial intelligence
or technology in general to try and not necessarily to
eliminate roles, but maybe optimize them. So why are employers
(14:44):
feeling more optimistic because it kind of runs counter to
a lot of the discourse that you read on the
labor market.
Speaker 5 (14:52):
Sure, well, there's a few things.
Speaker 6 (14:53):
So first, you know, as I just said, business confidence
is improving because the economic conditions are stabilizing, and so
that's sort of your baseline. When that happens, it's always
a good start. And the reality is what we're seeing
in our research shows us is that many organizations that
pause hiring in twenty twenty five are actually restarting some
of those strategic projects. In fact, many started at the
(15:16):
end of last year. And so all of that momentum
is fueling demand for talent, especially in the hard to
hire skill areas.
Speaker 5 (15:23):
And listen, let's just talk about AI for.
Speaker 6 (15:25):
A minute, because you've brought it up in the impacts,
I mean, generative AI has literally transformed how candidates are
applying for jobs, and by the way, it's not always
for the better. So according to our research, sixty five
percent and I said this, I want to repeat this,
but sixty percent of managers say that finding skill talent
has in fact become harder, and fifty eight percent said
(15:46):
that the AI generated applications make it more difficult to
identify truly qualified candidates. So these AI tools allowed job
seekers to produce overly polished and near identical resumes, cover letters,
and work samples at scale. And so while that is
certainly helpful in many ways for the job seeker, it
also means that many hiring teams are spending significantly more
(16:08):
time verifying work, validating experience, and ensuring it Canadi's skills
actually translates into real world readiness. So the bottom line
is that the world of AI as relates to the
job seeking the job employment process is ultimately adding friction
to the hiring process an increasing the risk of misalignment
between the actual applicant and the actual job requirements.
Speaker 2 (16:29):
Certainly is a fascinating such just quick for you here,
just what are some of the ways that employees could
stand out because you mentioned that everybody's kind of just
replicating the same resume. Look, what are some ways that
they could stand out compared to their peers that they're
up against for a new job.
Speaker 6 (16:46):
Sure, So for the job seekers, first off, I would
just say this good news is they're still demand and
great opportunity for professionals with specialized and in demand skills
both technical and interpersonal. And I tend emphasize that that
second one because it's one thing that you can truly control.
So job seekers who combine soft skills like communication and aptability,
(17:09):
which by the way, AI cannot replicate, and you combine
that with technical know how with business and applications and
solutions from problem solving, adaptability, and cross team communication. I
promise you there's one hundred percent chance that you will
in fact stand out. And we're also going to suggest
that you prioritize job specific upskilling and certifications, as these
can be key to differentiating yourself in this market, but
(17:32):
especially for the entry level workers who don't have as
much of an opportunity or experience.
Speaker 5 (17:37):
To showcase their abilities.
Speaker 6 (17:38):
And the last thing I would say around this and
not so much a tip, but more of a head
up and more of a heads up and sort of
reference this with the world of AI, but as a
job seeker and a candidate, you should one hundred percent
expect a more rigorous assessment and or interview process, as
employers right now are looking for ways to truly verify
real capabilities in this AI driven hiring environment that we're
(18:01):
all sitting.
Speaker 5 (18:02):
In right now.
Speaker 4 (18:03):
Corey Adams from Robert haf thanks so much for the time.
Speaker 5 (18:05):
Corey, Thanks pall, appreciate the time all.
Speaker 7 (18:08):
Right time for trivia and the financial exchange, and with
the Winter Olympics going on, you'll be inundated with ads
from the likes of Visa, Airbnb, Coca Cola, et cetera.
These companies are some of the official sponsors of the
Winter Olympics. The first Olympic sponsor came back in nineteen
twenty eight. So our trivia question today, what was the
first company to be an official sponsor of the Olympics?
(18:30):
Once again, what was the first company to be an
official sponsor of the Olympics. Be the fourth person today
to text us at six one seven three six two
thirteen eighty five with correct answer along with the keyword trivia,
and you win a Financial Exchange Show T shirt. Once again,
the fourth correct response to textas to the number six
one seven three six to two thirteen eighty five with
(18:52):
the correct answer along with the keyword trivia, We'll win
that T shirt. See complete contest rules at Financial Looks
Shane Show dot com.
Speaker 4 (19:02):
Have you watched any of the Olympics yet? No, I haven't.
Speaker 5 (19:05):
I was just watching a commercial for them.
Speaker 4 (19:07):
I've been meaning to check it out a Tucker, have you.
Speaker 7 (19:09):
Yeah, the Curlings actually been pretty intense, pretty intense, believe
it or not.
Speaker 2 (19:13):
I'm taking some time off, so hopefully on vacation I'll
be able to catch up and watch.
Speaker 4 (19:18):
A little bit. Yeah. The kiddo's Olyptics.
Speaker 2 (19:20):
Yeah, that'll be fun to show them some of that stuff.
It's it's a fun, fun time. We're gonna take a
break here on the Financial Exchange. When we come back,
we're gonna have the answer to that trivia question about
the Olympics and Wallstreet Rotch right after this break.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 7 (20:01):
The markets are mixed as Walsree reacts to a somewhat
underwhelming retail sales report for the month of December to
cap off the holiday season, where sales climb zero point
four percent, down from zero point six percent in November.
Traders also sifting through more earnings from the likes of
Coca Cola's, CBS Health and Spotify. Right now, the Dow's
(20:21):
up four tenths of a percent, or two hundred and
eight points higher, SMP five hundred is flat, NASDAC down
twenty one points now. Russell two thousand is up a
third of a percent. Tenure Treasur reel down five basis
points at four point one three nine percent, and crude
oil down about half a percent, trading right at sixty
four dollars a barrel. Beverage trying Coca Cola reported earnings
(20:45):
and missed revenue expectations for the previous quarter, while it's
adjusted earnings beat. The company guided for twenty twenty six
organic revenue growth of four to five percent and comparable
earnings growth of seven to eight percent. Coke stock is
down about two percent. Meanwhile, audio streaming company Spotify is
seeing its stock jump fifteen percent after the company saw
(21:06):
its monthly active users grow to seven hundred and fifty
one million, up eleven percent from the same period a
year ago. Elsewhere, Taiwan Semiconductor posted its highest monthly revenue
ever to four hundred and one point three billion dollars
in January, up thirty seven percent from a year ago.
Shares are up over one percent. Sticking with the chip sector,
(21:28):
where On Semiconductor saw its sales decline and its two
biggest businesses and narrowly missed revenue expectations for the previous quarter.
Shares are up over four percent. CBS Health reported fourth
quarter earnings and revenue that beat expectations, where the health
insurer also held its twenty twenty six profit guidance. That
stock is up modestly, and after today's closing bell, we'll
(21:53):
see earnings from Ford, Robin Hood and Gilead Sciences. I'm
Tucker Silvan. That is Wall Street. Watch the previous segment,
we asked you the trivia question what was the first
company to be an official sponsor of the Olympics. Well,
that would be Coca Cola step on from Wareham, Mass
is our winner today taking on a Financial Exchange Show
(22:13):
t shirt, and we play trivia every day here in
the Financial Exchange See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (22:22):
What fast foods downturn says about the US economy Here
a piece from the Financial Times. We've covered this a
bit on the program, where the costs at fast food
restaurants has increased significantly and just really not commensurate with
wage increases over the course of the last several years,
and it's particularly harming lower income consumers. And as a result,
(22:43):
you've seen companies like McDonald's come out saying that they
are seeing double digit declines percentage wise in their lower
income consumers visiting their drive throughs, and so as a result,
what you've seen is a lot more value being accreted
to kind of those fast casual dining restaurants. Chili's is
the most emblematic example of that. Their stock has done
(23:05):
tremendously well as they have offered I believe it's two
entrees for fifteen dollars or some sort of I think
that's the value meal that they've been offering. And so
as a result, you've had McDonald's that has had to
come back with more emphasis on their five dollars value meal,
and it's just been a very difficult go around for
(23:25):
fast food. You've got Wendy's closing hundreds of locations across
the country with the decline and activity, while on the
other hand, fine dining has done quite well. It's been
the top pour performing segment in the restaurant segment. So
not easy for those fast food operators out there.
Speaker 3 (23:44):
And maybe this relates to some of the bigger themes
that you were talking about earlier in the show. You
mentioned some summary of some work that Greg ibb did,
and I don't know if you did it himself or
if you just summarized other people's work or what in
the Wall Street Journal about labor share of income falling.
We know inequality has been rising. The impetus of motivating
(24:08):
those trends seems to be just technology and its effect
on wages of people without a college degree. These trends
have been playing out, these themes have been operating for
a long time. Unless these trends are are long term.
Do you think, because you think a lot about these things,
is this related to what we're seeing in terms of
(24:32):
a fast food like this big segment of fast food
struggling is as simple as that their consumers are struggling.
Speaker 4 (24:39):
I'm sorry, yeah, I think so.
Speaker 2 (24:41):
You know, obviously I don't have it with precise certainty.
But if you think about and look at just the
costs of eating outside the home versus eating just regular
grocery store food prices, You've seen a four point one
percent increase on menu prices over the last year compared
to two point four percent for grocery item costs. So
(25:02):
if you do have those lower income consumers that are
feeling more pressure from a wage perspective, they're going to
gravitate more of their spend to the grocery store than
eating out and those typically those fast food restaurants like
the McDonald's, like Wendy's would cater to those lower income
consumers because of the cheap affordability of food outside the
(25:23):
house with ease and convenience, and with some of these prices,
they're not really hitting that. And to me, broadly speaking,
the gap between the price that you pay at McDonald's
for my kids happy meal versus you know, that Chili's
or that mid fat tier, you know, fast casual restaurants,
it's narrow to a point where you start to question,
(25:43):
if I'm going to spend this much, I may as
well kind of go up a level if I'm going
to actually go out and get something to eat. And
it seems like that's sort of playing out over the
broader area here.
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Speaker 2 (27:01):
For the last ten fifteen years, the US stock market
has absolutely pummeled international equity markets, and you and I
have talked off air that the traditional portfolio construction has
often been if you look at a target date fund,
let's say, for example, in a four to one K plan,
and we'll just look at the target date front for
a younger employee, because that is primarily stock for the
(27:22):
purposes of this conversation that you'd have a bulk of
your money in US equities within this cookie cutter target
date fund, but there also would be a slug anywhere
from twenty to forty percent depending on who you're looking at,
in international equities. And like I mentioned, the trend for
the last decade plus has been US markets have just
(27:42):
absolutely bludgeoned international markets in terms of their outperformance. But
what we've seen over the course of the last year
or so, and the momentum has continued into twenty twenty six,
is that international markets are performing much stronger than its
US counterparts. And some of that is these broad themes
and regarding dollar weakening, some optimism are around the European
(28:03):
Union spending a little bit more money on defense. What
are your thoughts on sort of the international takeoff? And
if I was to tell just a layman person who's
not a well seasoned investor, are those the broader themes
leading to the inflows? It seems like it's not as
if there's substantial earnings growth to justify this flock over
(28:24):
relative to US peers.
Speaker 3 (28:26):
Well, first of all, your point about portfolio construction is
the key one. A diversified investor, An investor who seeks
high returns without unnecessary risk, should all l sequel allocate
some of his or her portfolio to their home country
and some abroad. And the reason for that is that
(28:49):
expected return, the historical returns, despite the big gap that's
opened up. And it's a big thing to say despite
with respect to but I'm gonna say it anyway, not
with standing just a synonym. It feels it feels stupid
to say it that way. The big gap. In the
past ten to fifteen years, historically foreign markets have offered
(29:10):
developed markets, now I'm comparing apples taples, I have offered
returns comparable to US markets. So an investor, a prudent
investor seeking to mitigate risk, not take unnecessary risk, I mean,
would have allocated some of their portfolio abroad. That's just
a basic principle of diversification. And a good example of
that is, as you point out, so called target date funds,
(29:32):
which are managed according to very conventional modern portfolio management practices.
Is now a good time well, historically when one or
the other us in our case, because from our perspective,
that's the home market. When when US stocks have had
(29:53):
an exceptional run relative to foreign foreign stocks have I
want to say, outperformed or I'm oversimplifying a little bit here,
because the valuation gap valuation that concept we talked about earlier,
gets pretty wide and foreign stocks become relatively attractive unless
you think US growth and therefore company earnings rates will
(30:15):
continue to outpace foreign.
Speaker 4 (30:17):
Yeah, that's that's what's say.
Speaker 3 (30:19):
There was a lot of gobbledgook. I just meant, you know, diversify,
so that means owning a little bit of whatever's available
out there.
Speaker 2 (30:25):
The last ten years, if you look back broad US
index I'm using the S and P five hundred here
has done about close to fifteen percent where the world
indices and there's a bunch you can use, but just
broadly speaking, there's been about a two and a half
percent gap between the two over the last ten years.
But the last five years number has narrowed down a
bit just because you've got these world indices, you know,
(30:49):
international emerging markets performing a little bit more strong, So
it'll be interesting trend to continue to fall. Like you
mentioned that the most common sort of portfolio construction has
some international in there, but they certainly are seeing a
lot more stronger.
Speaker 3 (31:03):
In the seventies and eighties global international. And again I'm
being a little fast and loose here, but beat the
snot out of U.
Speaker 4 (31:09):
Yes.
Speaker 3 (31:10):
And after that time people realized, starting with institutions like pensions, realize, well,
you got to have some international. And then of course
US went on a tair during the late nine similar
to today's tear.
Speaker 4 (31:21):
Yeah.
Speaker 3 (31:22):
And then then international specifically emerging mark gets dominated in
the first several years of the two thousands. Everybody loaded
up on it and it's subsequently underperformed. By the way,
that's not a coincidence. Loading up on it means pushing
the price up. Pushing the price up means pushing down
future returns. The higher the more you pay for something today,
the lower your expected return, all else equal.
Speaker 2 (31:43):
We're going to take a quick break here on the
Financial six Change. When we come back, a little bit
of stack Roulette right.
Speaker 5 (31:48):
Up the time.
Speaker 1 (31:48):
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(32:09):
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Speaker 7 (32:29):
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Speaker 4 (33:07):
Out guys a fire over there.
Speaker 7 (33:11):
Literally, that was just a spark off my microphone.
Speaker 2 (33:14):
That was not fun a hot mic. Literally to time
for a little bit of stack roulette. I will kick
it off with a little bit more Olympics chatter. Apparently,
mark these medals that these athletes have worked their whole
lives to try and obtain are falling apart very quickly
after they are being gifted to them. They've done an
(33:36):
investigation where these Italian officials are promising to scrutinize what
has become an epidemic at the Olympic Games here where
many recipients of different medals than it could be gold, bronze,
or silver, the medals are falling apart. Basically, the medal
is detaching from the ribbon around their neck when they celebrate.
(33:57):
It doesn't take much to jar them loose. And I
can't imagine the amount of hours and prep and time
that has gone into them reaching the pinnacle of their
career and getting a metal and then having that metal
said metal fall apart. Apparently they were put together made
by recycled materials recovered from its own production waste. This
(34:19):
company it's called ip SE. I'm going to throw them
under the bust here. IPZS it was the Statement and
Polygraph Institute that's a government owned company that produces the
Italian coins, is just not fit the bill here. I
can't imagine how much of a bummer. That would be
to have my silver metal fall apart when I throw
it on my neck. Just not a good look here.
(34:42):
I've heard this in a couple times.
Speaker 4 (34:44):
About Olympic medals.
Speaker 2 (34:45):
This is not new the thing I had heard previously.
This is more a ribbon and metal issue, you know,
them becoming detached. But the issue that I've heard for
prior Olympics is that the coloring on the gold, you know,
very quickly fades and looks you know, quite lousy, and
the shine sort of is deteriorates quite fast from it.
(35:06):
Other issues that you guys have heard of over the
years that I'm neglecting to.
Speaker 3 (35:09):
Mention held up pretty well. But they're not for like
napping or they're not solid gold.
Speaker 5 (35:17):
Maybe that's obvious, but I had to.
Speaker 3 (35:19):
I had to look it up.
Speaker 4 (35:20):
They should be. They're mainly right, yeah, but I can't
imagine the expense. Well, we all we know it's.
Speaker 3 (35:26):
Smaller but gold. Just make them small and put them
in the in case them in something. Yeah, something solid
gold would be half of them probably wouldn't make it home.
But they're not solid gold. They're mostly Stirling silver, like
ninety three percent with a minimum. It says here of
six grams, which is just gold plating, which gives them
the veneer, and.
Speaker 4 (35:44):
That veneer falls apart really quickly.
Speaker 3 (35:46):
It's but are the actual metals cracking in chairs they
join them, and are they coming a part of the
joint or it's just.
Speaker 4 (35:53):
The ribbon versus the metal the metal falling.
Speaker 3 (35:56):
Off the ribbon.
Speaker 4 (35:57):
Yeah, got to be.
Speaker 3 (35:58):
I mean they're a little they weigh like the several hundred.
Speaker 4 (36:03):
Oh okay, yeah, the Golden Media.
Speaker 5 (36:05):
They're not idiots.
Speaker 3 (36:06):
These are most These are where we're very proud of
our American competitors. But you don't dance around with it.
Speaker 1 (36:12):
You don't.
Speaker 3 (36:13):
They're complaining because they're dancing, and then it's breaking from
the ribbon.
Speaker 4 (36:17):
Well you clear a little excited. Yeah, they've only spent
their whole lives off first.
Speaker 3 (36:22):
Then you jump around like a moron. Right, obvious it's wrong.
It's going to become detached.
Speaker 4 (36:29):
Strongly disagree.
Speaker 2 (36:30):
Okay, you you were dreaming of this moment since you
were what six or eight years who knows how early
they start training six years old?
Speaker 4 (36:37):
You get that old.
Speaker 3 (36:38):
Sorry, I take some of that back.
Speaker 2 (36:39):
You want to wear it around your neck and you
don't want to say Hey, I'm gonna here, you know here, coach,
you hold it and I'll go dance over here.
Speaker 4 (36:45):
You you want that around your neck? Yeah? Okay, what's
your athletic what's your athletic career? Were you an athlete
back then? We're not going to talk about how.
Speaker 3 (36:54):
Much time you know?
Speaker 7 (36:55):
I was watching last night and you know you guys
know lose right, Yes, it's just like you know the
Bob's like, but just like a single person thing.
Speaker 4 (37:04):
How do you do that?
Speaker 7 (37:05):
Like, how do you be like, Hey, I'm going to
get into this. Let me go down the down the.
Speaker 4 (37:09):
Street to the lose track slighting enthusiasms.
Speaker 7 (37:13):
I don't know where you find these loose tracks. They're huge,
great and they go like seventy five miles an hour.
Speaker 4 (37:19):
How do you get into this? I would be very
curious what the US scene.
Speaker 2 (37:23):
It's got to be out west, like Colorado that yeah,
attracts these the talent there, because I don't know of
anything Island. Yeah, I don't know anything in New England
that I've never heard of. Anybody get into loge around area.
Speaker 7 (37:37):
I think there's a curling situation in Boston.
Speaker 2 (37:40):
Curling clubs I've heard about before. But I have not
heard anyone who is a big, a big loser in
the family that that does intend to get a lot
of play skiing. We definitely got a lot of around
this this area, but I'm the last person to be
able to give any sort of insight on winter Olympics sports.
Speaker 4 (38:00):
I barely have a winter jacket.
Speaker 2 (38:02):
That's all the time that we have for this episode
here of the Financial Exchange, a lot more to cover
for the rest of the week, Jobs Report tomorrow, we'll
have it for you at ten am.
Speaker 4 (38:12):
Thanks so much for joining us, guys,
The Financial Exchange is produced by Money Matters Radio and
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(01:06):
and Mark Vandetty.
Speaker 2 (01:12):
Welcome back to the Financial Exchange. Taking a look around
at markets, the Dow Jones is up nearly three hundred points,
close to a half percent, the S and P five hundred,
slightly in positive territory as investors are largely shaking off
a retail sales report that was rather weak that came
out this morning at eight thirty, where we saw in
the month of December that there was no increase in
(01:34):
retail sales spending, which tries to capture consumer spending for
the country. It was anticipated that we would see an
increase of about point four percent, but the December number
came in flat entirely. And if we look back over
the course of the last year, we saw that from
December's numbers, a about two point four percent increase year
(01:55):
over year on retail sales spending compared to inflation that
was running at two point seven percent, so almost decline
if you adjust for inflation again just one data point.
It's ultimately more more important to focus on the trend
of retail sales report is if they continue to march
down progressively in our week, month by month, and it's
(02:15):
an area of concern, but this could just be an
anomaly because the month of November's report was quite strong.
As a result of that, you do see that the
US tenure Treasury is down a little bit on that
miss from retail sales, sitting at about four point one
four percent off where it started previously, close to about
four point two percent. Really big week here on the
(02:38):
economic front. We are going to get a jobs report
that will come out tomorrow that will break down where
we stand on the employment front, recapping the month of January,
and then on Friday we will get a CPI inflation report.
So a lot of material to digest on the economic
front this week. On the market front, we have had
(03:00):
a looming goal out there that has been mentioned by
many pundits, even though I don't really care about it
that much, is trying to hit seven thousand on the
S and P five hundred. It has been something that
has been eluding markets over the course of the last
several months or so, just briefly eclipsing that seven thousand
mark just once. But a piece here from Bloomberg regarding
(03:25):
the next big target for the S and P five hundred,
and to be fair, the columnist Jonathan Levin does make
the point that ultimately seven thousand or five thousand, or
six thousand, none of those century, none of those thousand
marks are that significant in terms of what it means
for markets. But he did have a point in here
that I want to highlight just briefly, is earnings growth
(03:48):
for the S and P five hundred has been quite strong.
We saw thirteen percent or twelve percent earnings per share
growth this earning season. It is anticipated that earnings going
to grow about thirteen percent this year, and it's going
to be a little bit more widespread. Obviously, the technology
sector drives a lot of the earnings growth, but it
is anticipated that ten out of eleven sectors will see
(04:10):
earnings growth this year. So that piece on the market side,
I could care less. And I'm sure you're probably in
the same camp as to whether the S and P
f I've heard, well, it's seven thousand.
Speaker 3 (04:19):
Part of what matters evaluation ratio. Any ratio has two components,
a quote and it's a ratio. What's on top is
the price, that's your seven thousand in this case, what's
in the denominator on the bottom is some measure of
earnings or sales or whatever you're whatever it is you're
trying to value. People could mean a lot of things
when they say stocks are richly valued or cheaply valued,
(04:41):
So you have to ask what do you mean? What
measure are you using. So you pointed out earnings growth,
the E and PDE might average low double digits over
the last few years. The problem, if you think this
is a problem not everybody agrees, is that the P
and PDE been growing faster. The top in the ratio,
(05:02):
the numerator has been growing faster than the denominator. That
means rising valuation ratios. Historically, valuation ratios have been a
pretty good forecaster of long run returns. The higher they
get the more you pay for something, the lower you're
expected return. It's obvious in the case of a bond,
where you pay more for something, your coupon is lower
(05:23):
because the coupon is in the numerator and the prices
in the denominator. You can think about equities the same way.
So equity valuations is measured by PE no matter how
you define the E, and there are lots of different.
Speaker 4 (05:37):
Ways to do that too.
Speaker 3 (05:38):
They're pretty steep, Paul, As you know, they're at levels
where historically big declines have followed because highpes don't adjust
by the E getting bigger to bring it down. Historically,
they adjust by the P coming down. And that's what's
got some fundamentally oriented people worried. On the other side
of that, you've got AI exuberance, and you've good very
(06:00):
supportive fiscal and arguably monetary policy.
Speaker 4 (06:05):
Yeah, the somewhat supportive fiscal policies.
Speaker 2 (06:07):
The ratio is, like you mentioned, the price to earnings one.
We've we've chronicled that a ton on the show, the
idea that they we are in a significantly high percentile
in terms of price to earnings. The problem with those
is that they can be lousy short term predictors of
market action, but it is certainly worth noting because they
do these valuations do tend to revert to their mean.
(06:28):
The question is just when they do.
Speaker 4 (06:30):
That, Yeah, I mean, well, not perfectly.
Speaker 3 (06:34):
Yeah, The question is to what mean the mean of
just I'll just say PE, even though I mean P
relative to some longer term measure of the smoothed like
a like an average inflation adjusted measure that seems to
have gone up. PE seemed to have gone up over time.
There was a break in the way they behaved argue
(06:55):
in the early nineties. So I don't think most people,
I don't think would say, well, we're going to go
back to the average pe the sixty seventies and eighties,
which would be less than half of today's level, which
right a huge drop, a permanent drop by the way
in stocks relative to earning, unless you think peas are
going to climb again. But most people are uncomfortable with
where they are today.
Speaker 2 (07:15):
We are going to get that labor market report, as
I mentioned, tomorrow, from the Bureau of Labor Statistics for
the month of January. What also will come with that
report is a revision on the payroll data that we've
seen over the last twelve months from March of twenty
twenty five through March of twenty twenty four. They are
(07:38):
expected to be a pretty significant downward revision. I've read
Bloomberg economists estimating it at about six hundred and fifty
thousand of a downward revision. But I've also seen other
numbers elsewhere for last.
Speaker 3 (07:50):
Year for a total for what period Paul, sorry to interrupt,
through March.
Speaker 4 (07:53):
Of twenty five, and I believe they it's a twelve month.
Speaker 3 (07:56):
Okay, I always forget how they do. Sorry, it's not
a labor you know economist. But so that's going to
be the twelve months through last March.
Speaker 2 (08:03):
That's what the Bloomberg Comes estimated. The adjustment I've seen
elsewhere in nine hundred thousand too. If you look back
at that period, there are some significant months of gains
through the December of twenty four where there was three
hundred and twenty three thousand jobs added. So again we'll
(08:23):
be really focused on what the data that we see
that comes out in tomorrow's report.
Speaker 4 (08:27):
Of course, we'll get.
Speaker 2 (08:28):
An update on the jobs added for the month of January,
where's anticipates seventy thousand jobs are added to the economy.
That would be the highest over the last four months
because we saw December come in around fifty thousand. So
certainly a lot of focus on that labor report tomorrow,
and the unemployment rate two will probably be the biggest,
(08:49):
biggest statistic that we'll be focused on.
Speaker 3 (08:51):
Yeah, that that of course won't be affected by the revisions. Right,
so the I suppose unemployment doesn't move, stays at four
point four percent, but a million jobs get wiped out.
Speaker 4 (09:02):
That's in the past, backward looking up, So what should
the Fed?
Speaker 3 (09:05):
Should the FED do anything? I'm being a little bit
rhetorical here when you keep their goals of low and
stable inflation and maximum employment or minimum unemployment equivalently, those
are there too, the two prongs of their so called mandate,
which are intention. Should it even matter if a million
(09:26):
jobs get wiped out but unemployment doesn't change?
Speaker 2 (09:28):
No, I don't think so, because ultimately it's backward looking,
and I don't think it would be a tremendous surprise
too many economists out there that it seems like these
downward resions are going.
Speaker 4 (09:40):
To be part of the process.
Speaker 2 (09:41):
It will be staggering to see the number, but ultimately
it's something that you just have to And again it's
an impossible job. I wouldn't want it, but you just
have to take what you're getting, the most real time
data that you're getting into.
Speaker 3 (09:56):
There'seration, there's nowhere that fits in the models that the
economists of the FED uses. I understand them that revision,
now I could be misspeaking. I understand them in abstract
terms like I've seen them in a book, but I've
never worked with them because I've never been a FED economist.
So it may, but it may also mean nothing. We've
(10:17):
got four point four percent of employment, we've got inflation
that remains above the Fed's goal and could easily tick
up with all the monetary stimulus, the fiscal stimulus that's
being pumped into the economy, coupled with elevated inflation expectations,
which are an important part of the inflation process. It's
just not obvious to me that it should mean anything,
(10:38):
even if it's dramatic.
Speaker 2 (10:39):
As you said, Paul, We're gonna take a quick break
here on the Financial Exchange, and when we come back,
we're we talking with Corey Adams from Robert Half specifically
about the labor market. There's been a lot of significant
trends in the labor market. AI certainly is on a
lot of employee's minds. So we're only talking to Corey
Ibms from Robert Half about where the labor market stands
(11:01):
and the impact of our official intelligence on some of
these desired skills for employees out there. That's right after
this break here on the Financial Exchange. Stick with us.
Speaker 1 (11:10):
If you missed any of today's show, catch up whenever
you want. On our YouTube page find daily show segments
and full shows. Just go to YouTube dot com and
search for the Financial Exchange. This is your home for
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Radio Network. Text does six one seven three six two
one three eighty five with your comments and questions about
(11:31):
today's show. This is the Financial Exchange Radio Network.
Speaker 2 (11:44):
As promised, we are joined by Corey Adams from Robert
Haff who conducts surveys on the labor market and in particular,
what we'll be focusing on is the demand for skilled
talent here today, Corey, thanks so much for joining us.
Speaker 5 (12:00):
Good morning, Paul.
Speaker 4 (12:01):
Greed to be with you Corey.
Speaker 2 (12:03):
In the headlines recently, there has been a tremendous amount
of focus and scrutiny on AI and the new programs
coming out that could potentially impact white collar workers in
terms of cloud code and all these other software that
could be potentially drummed up by all these AI artificial
(12:24):
intelligence models out there. Give me a look at what
employers are saying, just in terms of the labor market
and what they're looking at for twenty twenty six. What
skills are in demand, What are areas that perhaps there's
waning demand for. Just give us a sense for what
you're seeing on the employer front.
Speaker 6 (12:45):
Sure, so we'll kick this off the demand for skill, talent,
perfect timing for twenty twenty six. There's a lot of information,
so we'll probably cover a lot this morning, so let's
just start here. For the employers out there, we're seeing
that hiring optimism is remounting in the first half of
twenty twenty six. The research shows that sixty percent of
employers plan to add permanent staff and fifty five percent
(13:08):
expect to see the increase in contract hiring to support
their immediate needs. Staying with the employers, they're showing business confidence,
eighty three percent of hiring managers said that they're confident
in their business outlook for twenty twenty six, of which
forty three percent expects strong company growth. Important note both
those numbers are up significantly from the last time we
(13:29):
asked this question around the same time period last year.
To your opening comments, we're also finding that there are
challenges and the hiring process because of AI. Sixty five
percent of managers said that hiring has become harder due
to the rise of AI generated applications, and fifty eight
percent reported greater difficulty identifying truly qualified candidates compared to
(13:52):
one year ago. And then finally to close out sort
of our top key findings, businesses are entering twenty twenty
six with widening skills gaps in more complex hiring conditions.
Sixty two percent of hiring managers say the skills gap
has grown just the last year, and I thought this
was really important. Only six percent of managers feel like
(14:13):
they are fully resource with both talent and headcount in
order to deliver on their current initiatives and projects for
twenty twenty six.
Speaker 2 (14:21):
I'm a little surprised to hear that there is some
more hiring optimism because everything you read tends to point
to major employers sort of focusing on kind of keeping
headcount level and can we invest more in artificial intelligence
or technology in general to try and not necessarily to
eliminate roles, but maybe optimize them. So why are employers
(14:44):
feeling more optimistic because it kind of runs counter to
a lot of the discourse that you read on the
labor market.
Speaker 5 (14:52):
Sure, well, there's a few things.
Speaker 6 (14:53):
So first, you know, as I just said, business confidence
is improving because the economic conditions are stabilizing, and so
that's sort of your baseline. When that happens, it's always
a good start. And the reality is what we're seeing
in our research shows us is that many organizations that
pause hiring in twenty twenty five are actually restarting some
of those strategic projects. In fact, many started at the
(15:16):
end of last year. And so all of that momentum
is fueling demand for talent, especially in the hard to
hire skill areas.
Speaker 5 (15:23):
And listen, let's just talk about AI for.
Speaker 6 (15:25):
A minute, because you've brought it up in the impacts,
I mean, generative AI has literally transformed how candidates are
applying for jobs, and by the way, it's not always
for the better. So according to our research, sixty five
percent and I said this, I want to repeat this,
but sixty percent of managers say that finding skill talent
has in fact become harder, and fifty eight percent said
(15:46):
that the AI generated applications make it more difficult to
identify truly qualified candidates. So these AI tools allowed job
seekers to produce overly polished and near identical resumes, cover letters,
and work samples at scale. And so while that is
certainly helpful in many ways for the job seeker, it
also means that many hiring teams are spending significantly more
(16:08):
time verifying work, validating experience, and ensuring it Canadi's skills
actually translates into real world readiness. So the bottom line
is that the world of AI as relates to the
job seeking the job employment process is ultimately adding friction
to the hiring process an increasing the risk of misalignment
between the actual applicant and the actual job requirements.
Speaker 2 (16:29):
Certainly is a fascinating such just quick for you here,
just what are some of the ways that employees could
stand out because you mentioned that everybody's kind of just
replicating the same resume. Look, what are some ways that
they could stand out compared to their peers that they're
up against for a new job.
Speaker 6 (16:46):
Sure, So for the job seekers, first off, I would
just say this good news is they're still demand and
great opportunity for professionals with specialized and in demand skills
both technical and interpersonal. And I tend emphasize that that
second one because it's one thing that you can truly control.
So job seekers who combine soft skills like communication and aptability,
(17:09):
which by the way, AI cannot replicate, and you combine
that with technical know how with business and applications and
solutions from problem solving, adaptability, and cross team communication. I
promise you there's one hundred percent chance that you will
in fact stand out. And we're also going to suggest
that you prioritize job specific upskilling and certifications, as these
can be key to differentiating yourself in this market, but
(17:32):
especially for the entry level workers who don't have as
much of an opportunity or experience.
Speaker 5 (17:37):
To showcase their abilities.
Speaker 6 (17:38):
And the last thing I would say around this and
not so much a tip, but more of a head
up and more of a heads up and sort of
reference this with the world of AI, but as a
job seeker and a candidate, you should one hundred percent
expect a more rigorous assessment and or interview process, as
employers right now are looking for ways to truly verify
real capabilities in this AI driven hiring environment that we're
(18:01):
all sitting.
Speaker 5 (18:02):
In right now.
Speaker 4 (18:03):
Corey Adams from Robert haf thanks so much for the time.
Speaker 5 (18:05):
Corey, Thanks pall, appreciate the time all.
Speaker 7 (18:08):
Right time for trivia and the financial exchange, and with
the Winter Olympics going on, you'll be inundated with ads
from the likes of Visa, Airbnb, Coca Cola, et cetera.
These companies are some of the official sponsors of the
Winter Olympics. The first Olympic sponsor came back in nineteen
twenty eight. So our trivia question today, what was the
first company to be an official sponsor of the Olympics?
(18:30):
Once again, what was the first company to be an
official sponsor of the Olympics. Be the fourth person today
to text us at six one seven three six two
thirteen eighty five with correct answer along with the keyword trivia,
and you win a Financial Exchange Show T shirt. Once again,
the fourth correct response to textas to the number six
one seven three six to two thirteen eighty five with
(18:52):
the correct answer along with the keyword trivia, We'll win
that T shirt. See complete contest rules at Financial Looks
Shane Show dot com.
Speaker 4 (19:02):
Have you watched any of the Olympics yet? No, I haven't.
Speaker 5 (19:05):
I was just watching a commercial for them.
Speaker 4 (19:07):
I've been meaning to check it out a Tucker, have you.
Speaker 7 (19:09):
Yeah, the Curlings actually been pretty intense, pretty intense, believe
it or not.
Speaker 2 (19:13):
I'm taking some time off, so hopefully on vacation I'll
be able to catch up and watch.
Speaker 4 (19:18):
A little bit. Yeah. The kiddo's Olyptics.
Speaker 2 (19:20):
Yeah, that'll be fun to show them some of that stuff.
It's it's a fun, fun time. We're gonna take a
break here on the Financial Exchange. When we come back,
we're gonna have the answer to that trivia question about
the Olympics and Wallstreet Rotch right after this break.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 7 (20:01):
The markets are mixed as Walsree reacts to a somewhat
underwhelming retail sales report for the month of December to
cap off the holiday season, where sales climb zero point
four percent, down from zero point six percent in November.
Traders also sifting through more earnings from the likes of
Coca Cola's, CBS Health and Spotify. Right now, the Dow's
(20:21):
up four tenths of a percent, or two hundred and
eight points higher, SMP five hundred is flat, NASDAC down
twenty one points now. Russell two thousand is up a
third of a percent. Tenure Treasur reel down five basis
points at four point one three nine percent, and crude
oil down about half a percent, trading right at sixty
four dollars a barrel. Beverage trying Coca Cola reported earnings
(20:45):
and missed revenue expectations for the previous quarter, while it's
adjusted earnings beat. The company guided for twenty twenty six
organic revenue growth of four to five percent and comparable
earnings growth of seven to eight percent. Coke stock is
down about two percent. Meanwhile, audio streaming company Spotify is
seeing its stock jump fifteen percent after the company saw
(21:06):
its monthly active users grow to seven hundred and fifty
one million, up eleven percent from the same period a
year ago. Elsewhere, Taiwan Semiconductor posted its highest monthly revenue
ever to four hundred and one point three billion dollars
in January, up thirty seven percent from a year ago.
Shares are up over one percent. Sticking with the chip sector,
(21:28):
where On Semiconductor saw its sales decline and its two
biggest businesses and narrowly missed revenue expectations for the previous quarter.
Shares are up over four percent. CBS Health reported fourth
quarter earnings and revenue that beat expectations, where the health
insurer also held its twenty twenty six profit guidance. That
stock is up modestly, and after today's closing bell, we'll
(21:53):
see earnings from Ford, Robin Hood and Gilead Sciences. I'm
Tucker Silvan. That is Wall Street. Watch the previous segment,
we asked you the trivia question what was the first
company to be an official sponsor of the Olympics. Well,
that would be Coca Cola step on from Wareham, Mass
is our winner today taking on a Financial Exchange Show
(22:13):
t shirt, and we play trivia every day here in
the Financial Exchange See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (22:22):
What fast foods downturn says about the US economy Here
a piece from the Financial Times. We've covered this a
bit on the program, where the costs at fast food
restaurants has increased significantly and just really not commensurate with
wage increases over the course of the last several years,
and it's particularly harming lower income consumers. And as a result,
(22:43):
you've seen companies like McDonald's come out saying that they
are seeing double digit declines percentage wise in their lower
income consumers visiting their drive throughs, and so as a result,
what you've seen is a lot more value being accreted
to kind of those fast casual dining restaurants. Chili's is
the most emblematic example of that. Their stock has done
(23:05):
tremendously well as they have offered I believe it's two
entrees for fifteen dollars or some sort of I think
that's the value meal that they've been offering. And so
as a result, you've had McDonald's that has had to
come back with more emphasis on their five dollars value meal,
and it's just been a very difficult go around for
(23:25):
fast food. You've got Wendy's closing hundreds of locations across
the country with the decline and activity, while on the
other hand, fine dining has done quite well. It's been
the top pour performing segment in the restaurant segment. So
not easy for those fast food operators out there.
Speaker 3 (23:44):
And maybe this relates to some of the bigger themes
that you were talking about earlier in the show. You
mentioned some summary of some work that Greg ibb did,
and I don't know if you did it himself or
if you just summarized other people's work or what in
the Wall Street Journal about labor share of income falling.
We know inequality has been rising. The impetus of motivating
(24:08):
those trends seems to be just technology and its effect
on wages of people without a college degree. These trends
have been playing out, these themes have been operating for
a long time. Unless these trends are are long term.
Do you think, because you think a lot about these things,
is this related to what we're seeing in terms of
(24:32):
a fast food like this big segment of fast food
struggling is as simple as that their consumers are struggling.
Speaker 4 (24:39):
I'm sorry, yeah, I think so.
Speaker 2 (24:41):
You know, obviously I don't have it with precise certainty.
But if you think about and look at just the
costs of eating outside the home versus eating just regular
grocery store food prices, You've seen a four point one
percent increase on menu prices over the last year compared
to two point four percent for grocery item costs. So
(25:02):
if you do have those lower income consumers that are
feeling more pressure from a wage perspective, they're going to
gravitate more of their spend to the grocery store than
eating out and those typically those fast food restaurants like
the McDonald's, like Wendy's would cater to those lower income
consumers because of the cheap affordability of food outside the
(25:23):
house with ease and convenience, and with some of these prices,
they're not really hitting that. And to me, broadly speaking,
the gap between the price that you pay at McDonald's
for my kids happy meal versus you know, that Chili's
or that mid fat tier, you know, fast casual restaurants,
it's narrow to a point where you start to question,
(25:43):
if I'm going to spend this much, I may as
well kind of go up a level if I'm going
to actually go out and get something to eat. And
it seems like that's sort of playing out over the
broader area here.
Speaker 7 (25:54):
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Speaker 2 (27:01):
For the last ten fifteen years, the US stock market
has absolutely pummeled international equity markets, and you and I
have talked off air that the traditional portfolio construction has
often been if you look at a target date fund,
let's say, for example, in a four to one K plan,
and we'll just look at the target date front for
a younger employee, because that is primarily stock for the
(27:22):
purposes of this conversation that you'd have a bulk of
your money in US equities within this cookie cutter target
date fund, but there also would be a slug anywhere
from twenty to forty percent depending on who you're looking at,
in international equities. And like I mentioned, the trend for
the last decade plus has been US markets have just
(27:42):
absolutely bludgeoned international markets in terms of their outperformance. But
what we've seen over the course of the last year
or so, and the momentum has continued into twenty twenty six,
is that international markets are performing much stronger than its
US counterparts. And some of that is these broad themes
and regarding dollar weakening, some optimism are around the European
(28:03):
Union spending a little bit more money on defense. What
are your thoughts on sort of the international takeoff? And
if I was to tell just a layman person who's
not a well seasoned investor, are those the broader themes
leading to the inflows? It seems like it's not as
if there's substantial earnings growth to justify this flock over
(28:24):
relative to US peers.
Speaker 3 (28:26):
Well, first of all, your point about portfolio construction is
the key one. A diversified investor, An investor who seeks
high returns without unnecessary risk, should all l sequel allocate
some of his or her portfolio to their home country
and some abroad. And the reason for that is that
(28:49):
expected return, the historical returns, despite the big gap that's
opened up. And it's a big thing to say despite
with respect to but I'm gonna say it anyway, not
with standing just a synonym. It feels it feels stupid
to say it that way. The big gap. In the
past ten to fifteen years, historically foreign markets have offered
(29:10):
developed markets, now I'm comparing apples taples, I have offered
returns comparable to US markets. So an investor, a prudent
investor seeking to mitigate risk, not take unnecessary risk, I mean,
would have allocated some of their portfolio abroad. That's just
a basic principle of diversification. And a good example of
that is, as you point out, so called target date funds,
(29:32):
which are managed according to very conventional modern portfolio management practices.
Is now a good time well, historically when one or
the other us in our case, because from our perspective,
that's the home market. When when US stocks have had
(29:53):
an exceptional run relative to foreign foreign stocks have I
want to say, outperformed or I'm oversimplifying a little bit here,
because the valuation gap valuation that concept we talked about earlier,
gets pretty wide and foreign stocks become relatively attractive unless
you think US growth and therefore company earnings rates will
(30:15):
continue to outpace foreign.
Speaker 4 (30:17):
Yeah, that's that's what's say.
Speaker 3 (30:19):
There was a lot of gobbledgook. I just meant, you know, diversify,
so that means owning a little bit of whatever's available
out there.
Speaker 2 (30:25):
The last ten years, if you look back broad US
index I'm using the S and P five hundred here
has done about close to fifteen percent where the world
indices and there's a bunch you can use, but just
broadly speaking, there's been about a two and a half
percent gap between the two over the last ten years.
But the last five years number has narrowed down a
bit just because you've got these world indices, you know,
(30:49):
international emerging markets performing a little bit more strong, So
it'll be interesting trend to continue to fall. Like you
mentioned that the most common sort of portfolio construction has
some international in there, but they certainly are seeing a
lot more stronger.
Speaker 3 (31:03):
In the seventies and eighties global international. And again I'm
being a little fast and loose here, but beat the
snot out of U.
Speaker 4 (31:09):
Yes.
Speaker 3 (31:10):
And after that time people realized, starting with institutions like pensions, realize, well,
you got to have some international. And then of course
US went on a tair during the late nine similar
to today's tear.
Speaker 4 (31:21):
Yeah.
Speaker 3 (31:22):
And then then international specifically emerging mark gets dominated in
the first several years of the two thousands. Everybody loaded
up on it and it's subsequently underperformed. By the way,
that's not a coincidence. Loading up on it means pushing
the price up. Pushing the price up means pushing down
future returns. The higher the more you pay for something today,
the lower your expected return, all else equal.
Speaker 2 (31:43):
We're going to take a quick break here on the
Financial six Change. When we come back, a little bit
of stack Roulette right.
Speaker 5 (31:48):
Up the time.
Speaker 1 (31:48):
Daily interviews and full shows of the Financial Exchange on
our YouTube page. Like us on YouTube and get caught
up on anything and everything you might have missed. This
is the Financial Exchange Radio Network. The Financial Exchange is
life on Series XM's business radio channel one thirty two
weekdays from eleven to noon. Get the latest business and
(32:09):
financial news from across the country and around the world,
and keep up to date on how it might affect
your wallet. That's the Financial Exchange weekdays from eleven to
noon on Series XM's business radio channel one thirty two
Face He's the Financial Exchange Radio Network.
Speaker 7 (32:29):
The Financial Exchange is a proud partner of the Disabled
American Veterans Department of Massachusetts. The DAV five K raised
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we still need your help. You can support our great
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(32:52):
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That's DAV five K out top Boston. I just kind
of like static from the microphone that hurt.
Speaker 4 (33:07):
Out guys a fire over there.
Speaker 7 (33:11):
Literally, that was just a spark off my microphone.
Speaker 2 (33:14):
That was not fun a hot mic. Literally to time
for a little bit of stack roulette. I will kick
it off with a little bit more Olympics chatter. Apparently,
mark these medals that these athletes have worked their whole
lives to try and obtain are falling apart very quickly
after they are being gifted to them. They've done an
(33:36):
investigation where these Italian officials are promising to scrutinize what
has become an epidemic at the Olympic Games here where
many recipients of different medals than it could be gold, bronze,
or silver, the medals are falling apart. Basically, the medal
is detaching from the ribbon around their neck when they celebrate.
(33:57):
It doesn't take much to jar them loose. And I
can't imagine the amount of hours and prep and time
that has gone into them reaching the pinnacle of their
career and getting a metal and then having that metal
said metal fall apart. Apparently they were put together made
by recycled materials recovered from its own production waste. This
(34:19):
company it's called ip SE. I'm going to throw them
under the bust here. IPZS it was the Statement and
Polygraph Institute that's a government owned company that produces the
Italian coins, is just not fit the bill here. I
can't imagine how much of a bummer. That would be
to have my silver metal fall apart when I throw
it on my neck. Just not a good look here.
(34:42):
I've heard this in a couple times.
Speaker 4 (34:44):
About Olympic medals.
Speaker 2 (34:45):
This is not new the thing I had heard previously.
This is more a ribbon and metal issue, you know,
them becoming detached. But the issue that I've heard for
prior Olympics is that the coloring on the gold, you know,
very quickly fades and looks you know, quite lousy, and
the shine sort of is deteriorates quite fast from it.
(35:06):
Other issues that you guys have heard of over the
years that I'm neglecting to.
Speaker 3 (35:09):
Mention held up pretty well. But they're not for like
napping or they're not solid gold.
Speaker 5 (35:17):
Maybe that's obvious, but I had to.
Speaker 3 (35:19):
I had to look it up.
Speaker 4 (35:20):
They should be. They're mainly right, yeah, but I can't
imagine the expense. Well, we all we know it's.
Speaker 3 (35:26):
Smaller but gold. Just make them small and put them
in the in case them in something. Yeah, something solid
gold would be half of them probably wouldn't make it home.
But they're not solid gold. They're mostly Stirling silver, like
ninety three percent with a minimum. It says here of
six grams, which is just gold plating, which gives them
the veneer, and.
Speaker 4 (35:44):
That veneer falls apart really quickly.
Speaker 3 (35:46):
It's but are the actual metals cracking in chairs they
join them, and are they coming a part of the
joint or it's just.
Speaker 4 (35:53):
The ribbon versus the metal the metal falling.
Speaker 3 (35:56):
Off the ribbon.
Speaker 4 (35:57):
Yeah, got to be.
Speaker 3 (35:58):
I mean they're a little they weigh like the several hundred.
Speaker 4 (36:03):
Oh okay, yeah, the Golden Media.
Speaker 5 (36:05):
They're not idiots.
Speaker 3 (36:06):
These are most These are where we're very proud of
our American competitors. But you don't dance around with it.
Speaker 1 (36:12):
You don't.
Speaker 3 (36:13):
They're complaining because they're dancing, and then it's breaking from
the ribbon.
Speaker 4 (36:17):
Well you clear a little excited. Yeah, they've only spent
their whole lives off first.
Speaker 3 (36:22):
Then you jump around like a moron. Right, obvious it's wrong.
It's going to become detached.
Speaker 4 (36:29):
Strongly disagree.
Speaker 2 (36:30):
Okay, you you were dreaming of this moment since you
were what six or eight years who knows how early
they start training six years old?
Speaker 4 (36:37):
You get that old.
Speaker 3 (36:38):
Sorry, I take some of that back.
Speaker 2 (36:39):
You want to wear it around your neck and you
don't want to say Hey, I'm gonna here, you know here, coach,
you hold it and I'll go dance over here.
Speaker 4 (36:45):
You you want that around your neck? Yeah? Okay, what's
your athletic what's your athletic career? Were you an athlete
back then? We're not going to talk about how.
Speaker 3 (36:54):
Much time you know?
Speaker 7 (36:55):
I was watching last night and you know you guys
know lose right, Yes, it's just like you know the
Bob's like, but just like a single person thing.
Speaker 4 (37:04):
How do you do that?
Speaker 7 (37:05):
Like, how do you be like, Hey, I'm going to
get into this. Let me go down the down the.
Speaker 4 (37:09):
Street to the lose track slighting enthusiasms.
Speaker 7 (37:13):
I don't know where you find these loose tracks. They're huge,
great and they go like seventy five miles an hour.
Speaker 4 (37:19):
How do you get into this? I would be very
curious what the US scene.
Speaker 2 (37:23):
It's got to be out west, like Colorado that yeah,
attracts these the talent there, because I don't know of
anything Island. Yeah, I don't know anything in New England
that I've never heard of. Anybody get into loge around area.
Speaker 7 (37:37):
I think there's a curling situation in Boston.
Speaker 2 (37:40):
Curling clubs I've heard about before. But I have not
heard anyone who is a big, a big loser in
the family that that does intend to get a lot
of play skiing. We definitely got a lot of around
this this area, but I'm the last person to be
able to give any sort of insight on winter Olympics sports.
Speaker 4 (38:00):
I barely have a winter jacket.
Speaker 2 (38:02):
That's all the time that we have for this episode
here of the Financial Exchange, a lot more to cover
for the rest of the week, Jobs Report tomorrow, we'll
have it for you at ten am.
Speaker 4 (38:12):
Thanks so much for joining us, guys,
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