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Jobs, Munis, and Ozempic · Bloomberg Intelligence

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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside
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Speaker 2: my co host Matt Miller.
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Speaker 1: Every business day we bring you interviews from CEOs, market pros,
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0:55
Speaker 2: Ben Emmons joins us here in our Bloomberg Interactive Broker studio.
0:59
Speaker 2: He doesn't mail it in or own it, and he's
1:00
Speaker 2: a principal, senior portfolio manager and head of fixed Income
1:03
Speaker 2: at New Edge wealth. Been lots of economic data today
1:07
Speaker 2: and really this week here I don't know. I mean
1:10
Speaker 2: this services data kind of took me by surprise. Here
1:13
Speaker 2: again the ism services data, and we talk about services,
1:16
Speaker 2: it's important. It's seventy percent of our economy came in
1:19
Speaker 2: at fifty point six, so it's still above fifty, still
1:21
Speaker 2: showing some expansion in the economy, but well below last
1:25
Speaker 2: month and well below the consensus of fifty two point five.
1:29
Speaker 2: That's kind of got the bonds here, yields coming in
1:32
Speaker 2: a little bit in stocks higher. What would you make
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Speaker 2: of that services data, yep.
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Speaker 3: Paul, I thought that the surprise there was that employment components,
1:38
Speaker 3: you know, dropping below fifty free sharply.
1:40
Speaker 2: Yep.
1:41
Speaker 3: I think that's what that triggered the rally in bonds
1:44
Speaker 3: because it's a bit contradicting to what we saw yesterday
1:48
Speaker 3: with the b ANDI services data. Now, the surveys a
1:50
Speaker 3: little different from each other, but nonetheless in the employment component,
1:54
Speaker 3: that survey was up and it was actually I think
1:57
Speaker 3: part of the reason why we saw about a payroll
1:59
Speaker 3: data this morning. So I guess this survey is indicating that,
2:03
Speaker 3: you know, some of the people in the supply management
2:07
Speaker 3: survey view that the economy is perhaps getting weaker or
2:10
Speaker 3: they're having less demand for labor. Either way, you're getting
2:12
Speaker 3: this whipsite on the market this morning. You goes up
2:15
Speaker 3: to four point ten on the ten year on the
2:17
Speaker 3: pay roverboard and reverse back down between ninety six. So
2:21
Speaker 3: I think what it tells us is that this is
2:23
Speaker 3: a good economy. There will be some ray cuts coming
2:26
Speaker 3: in the future, but it is not like a recession
2:29
Speaker 3: economy either, so you're not see much lower yields I
2:32
Speaker 3: think from here.
2:33
Speaker 4: Yeah, So but let's get into the rate cuts that
2:35
Speaker 4: you talked about. Because we have the jobs that we
2:37
Speaker 4: have ism, you also get resource from Wall Street firms,
2:41
Speaker 4: from banks, So when do you see these rate cuts
2:44
Speaker 4: possibly kicking in it?
2:45
Speaker 3: So I think the March raycut is probably too soon,
2:49
Speaker 3: and that's just because the way the Fed is communicated
2:52
Speaker 3: that so far, you know, they've given us an idea
2:54
Speaker 3: that they are in projections out that probably gives them
2:58
Speaker 3: the confidence that they can actually this year can lower
3:01
Speaker 3: rates compared to last year when they said resoundingly like
3:04
Speaker 3: there's no case for raycouts. But a March raycot would
3:08
Speaker 3: mean that inflation data we're getting out until that time
3:11
Speaker 3: would see such significant decline that they start reacting to
3:15
Speaker 3: that and then make the case that March is the
3:17
Speaker 3: live meeting. So I think from the here at LISA,
3:21
Speaker 3: it will be more about as we're getting several months
3:24
Speaker 3: of inflation employment data, and it could used to go
3:27
Speaker 3: towards the you know, the goal that they have two
3:29
Speaker 3: percent inflation and unemployment rate maybe a little bit above four.
3:32
Speaker 3: That probably is more close to the June to get
3:35
Speaker 3: the first ray cut and then we really are into
3:38
Speaker 3: the second half of the year, So I don't think
3:40
Speaker 3: you're going to see six raycouts this year. So, Ben,
3:43
Speaker 3: what did you.
3:43
Speaker 2: Make We haven't spoken to you in a while here.
3:45
Speaker 2: What did you make of that big move we've saw
3:47
Speaker 2: in the markets there in the last I don't know,
3:49
Speaker 2: ten weeks of the year. Last year, we just had
3:51
Speaker 2: the ten year ago from five percent to three and
3:53
Speaker 2: a quarter. We had the stocks just rip. I mean,
3:56
Speaker 2: what was that?
3:58
Speaker 5: Yeah?
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Speaker 3: Actually the right right in a way to say, what
4:01
Speaker 3: was it really about? Was it just about yields going down?
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Speaker 3: Because one CPI reports showed that the owner's equipmental event
4:09
Speaker 3: finally starts to decline. I don't see it in New York.
4:11
Speaker 3: But okay, it's it's finally declining. So that triggered the
4:16
Speaker 3: move down and yields and there was a relief, and
4:18
Speaker 3: you're getting all the high beta and small caps and
4:21
Speaker 3: everything start to pricing this idea that yeah, Okay, the
4:24
Speaker 3: economy is not going to go to a recession. It
4:26
Speaker 3: will be a soft landing, maybe even no landing. I think,
4:28
Speaker 3: because it's just simply an economy is staying on track.
4:31
Speaker 3: And at the same time, it's about those who had
4:34
Speaker 3: money on the sidelines redeploying in something that lacked relative
4:38
Speaker 3: to technology, so sort of a relative catch up that
4:41
Speaker 3: I think all I think what drove this rally. Now
4:45
Speaker 3: will it continue is to be seen because I think
4:49
Speaker 3: what we're coming into this year is that we're going
4:51
Speaker 3: to keep a fat still restricted for a bit of time.
4:54
Speaker 3: So the economy, if it does stay in the slower
4:57
Speaker 3: track than last year, you know, you may see stocks
5:00
Speaker 3: not perform so strongly. If it's a lie, she has
5:02
Speaker 3: yields to sort of stay where we are, And I
5:04
Speaker 3: think that there's a really important part about that story. Ultimately,
5:07
Speaker 3: it's all about interest rates.
5:08
Speaker 4: Now, but a strong drug jobs market. It's that main
5:12
Speaker 4: kind of engine for resilient consumer spending, and it's pushed
5:15
Speaker 4: a lot of economists to rethink their recession calls. What's
5:18
Speaker 4: what's your take on that.
5:20
Speaker 3: Yeah, I think the recession call, I've never been in
5:23
Speaker 3: that camp. I still think there's no recession this year.
5:25
Speaker 3: It may not even be next year. I think here's
5:28
Speaker 3: where I come from. This important point to make maybe
5:30
Speaker 3: is that the fiscal impulse that we have to the economy,
5:33
Speaker 3: fiscal spending is not going to change this year. They
5:36
Speaker 3: have agreed on the dead seating last year. They have
5:39
Speaker 3: one percent mandatory spending cut across the board. But that's
5:42
Speaker 3: so small if you think about back in twenty eleven
5:45
Speaker 3: twelve when they had a ten percent mandatory spending cut,
5:48
Speaker 3: which really slowed down the economy. One percent is just
5:51
Speaker 3: not going to do much for the economy. Especially I've
5:53
Speaker 3: seeing job stated like this coming out, and you're seeing
5:56
Speaker 3: confidence picking up and financial conditions being looser. So I
6:01
Speaker 3: think it's an economy that stays on track. What could
6:04
Speaker 3: change it is next year whomever was in the White House.
6:06
Speaker 3: But here's one other things about that White House race,
6:09
Speaker 3: the new president. But it's buy no Trump, which what
6:13
Speaker 3: it looks like either of them wants to stimulate the economy,
6:15
Speaker 3: either with text cuts or with more spending. So either way,
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Speaker 3: I think this recession scenario is not going to play
6:20
Speaker 3: out unless we getting major fiscal spending contraction. As I mentioned,
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Speaker 3: I don't think that's the case.
6:27
Speaker 2: So given that backdrop, Ben kind of what's your best
6:31
Speaker 2: idea here? Coming into twenty twenty four, A lot of
6:33
Speaker 2: folks were saying, hey, just be long equity markets, but
6:35
Speaker 2: then you had that huge run up in the end
6:37
Speaker 2: of the year and maybe some of the glory was
6:39
Speaker 2: taken out of there. What's your best idea or do
6:42
Speaker 2: you think about twenty four?
6:43
Speaker 3: Well, we do look carefully at new edge valuations, and
6:46
Speaker 3: you know MC colleague Cameron Dawson who was on Bloomberg's
6:49
Speaker 3: events the other day, she kind of make the case
6:51
Speaker 3: on that too. It's saying, look, we do have overvaluation
6:54
Speaker 3: in tech and the adjustment of interest rates a bit higher.
6:57
Speaker 3: For me, I guess economy, it's just better takes off
7:00
Speaker 3: some of that that that valuation fraft that's in there
7:03
Speaker 3: with those also some I think some level of frath
7:05
Speaker 3: coming into uh you know, really Higbida elements of the market,
7:10
Speaker 3: so I think you want to play it more a
7:12
Speaker 3: bit more defense. We like energy, we like utility sector,
7:16
Speaker 3: like some of the healthcare sector. You really pick your
7:18
Speaker 3: best parts there. There's very some stocks are very undervalued
7:22
Speaker 3: relative to the marketing, trading really at low multiples, and
7:25
Speaker 3: actually the earning forecast much were realistic.
7:27
Speaker 2: So not chasing. I guess those magnificent seven.
7:31
Speaker 3: Not not really so to the call like, yeah, jefferis
7:34
Speaker 3: like Microsoft. We all know that Microsoft is a great company.
7:37
Speaker 3: It's good and strong, but you will be chasing it
7:39
Speaker 3: probably here at these valuation levels. But I like and
7:44
Speaker 3: fixed income, and also I think inequity is that emerging
7:46
Speaker 3: markets is an interesting story because we are coming off
7:49
Speaker 3: really restrictive rates in emerging markets and inflation is really moderated.
7:53
Speaker 6: There.
7:54
Speaker 3: There's some really good earning growth stories both Asia and
7:56
Speaker 3: Latin America, so I think there's an opportunity. We like Japan,
8:00
Speaker 3: there's another market that's contasued to be outperformer. And international equity.
8:05
Speaker 3: And then lastly, we gotta watch what the dollar is
8:07
Speaker 3: going to do this year. If the Fat's going to
8:09
Speaker 3: lower rates, it's gonna lead like into a week a
8:12
Speaker 3: dollar environment every time the dollar does go below a
8:15
Speaker 3: haunted on the index, it leads to significant rally and
8:18
Speaker 3: energy and commodities. It's been that historically that way. I
8:21
Speaker 3: don't think it's going to be different this way this
8:24
Speaker 3: year and now whatever happens with ge politically, Energy is
8:28
Speaker 3: I think a bit unvalued from where it is currently.
8:30
Speaker 3: Same thing some someone in commodities. Lastly, gold could actually
8:34
Speaker 3: be a strong air for gold given uncertainty and fat
8:37
Speaker 3: easy it performs quite well in that environment.
8:41
Speaker 4: And just a quick I want to get an idea
8:42
Speaker 4: of sentiment out there. I mean, you think rising interest
8:45
Speaker 4: rates makes it more expensive for companies to operate. I
8:47
Speaker 4: mean some of your clients, they're entrepreneurs, their corporate executives.
8:51
Speaker 4: What's the feeling that they're getting out there?
8:54
Speaker 3: Now, Wow, there's caution and nowice this. Obviously, we do
8:57
Speaker 3: deal with this election and it's it's uncertainty. We also
9:01
Speaker 3: just do the fat discussion. It's not clear right if
9:04
Speaker 3: you're actually going to get these raycouts and how many
9:06
Speaker 3: uncertainty while watching what's going on in the Middle East,
9:10
Speaker 3: and we don't know how that's going to exactly play out.
9:12
Speaker 3: So uncertainty. On the other hand, there doesn't seem to
9:16
Speaker 3: be this slowdown that everybody can teach to talk about
9:20
Speaker 3: that the solda and that tips us into a recession.
9:22
Speaker 3: So I think that our clients are more about, you know,
9:25
Speaker 3: we like risk. We'd like to not be out of
9:28
Speaker 3: the market. We still like some of the areas like
9:31
Speaker 3: private credit or private equity. That's not something we want
9:34
Speaker 3: to necessarily skill completely out of it because of recession risk.
9:37
Speaker 3: But we don't want you to play the high beta
9:40
Speaker 3: trade either, and meaning you know, going reading in high
9:43
Speaker 3: risk really small small small caps or you know, go
9:46
Speaker 3: into I don't know crypto and things like that. You know,
9:49
Speaker 3: we don't want to play the liquidity high risk game
9:52
Speaker 3: that way, and be mindful that we do have fixed income.
9:55
Speaker 3: We can we can finally get some additional income that's
9:57
Speaker 3: still really important in the portfolio this year.
10:00
Speaker 2: Thanks so much for joining us, Benham's principal at New
10:03
Speaker 2: Edge Wealth.
10:05
Speaker 5: You're listening to the team Ken's a our live program,
10:08
Speaker 5: Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com,
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10:15
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10:20
Speaker 2: There is no greater friend to the municipal bond market
10:22
Speaker 2: than me. I tell every governor of the State of
10:25
Speaker 2: New Jersey, I'm probably the largest private creditor to the
10:28
Speaker 2: State of New Jersey through my municipal bond holdings. Chris
10:31
Speaker 2: Burgante Brigatti, he thinks he knows a thing or two
10:33
Speaker 2: about it. But Senior vice president Director Strategic Planning at SWBC, Hey, Chris,
10:38
Speaker 2: thanks so much for joining us here in studio. Fixed
10:41
Speaker 2: income actually had a positive year last year in terms
10:44
Speaker 2: of total return. How did the municipal bond market do?
10:46
Speaker 7: The municipal bond market had a very good year, and
10:49
Speaker 7: it all really happened in the last two months of
10:51
Speaker 7: the year. It was negative coming into and through October,
10:53
Speaker 7: so the performance actually turned quite positive about six point
10:56
Speaker 7: four percent to the positive by the end of the
10:58
Speaker 7: year with over seven percent return is coming in November December.
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Speaker 2: All right, So what are we doing here with the
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Speaker 2: unicipal bond market in twenty twenty four. What's the call here?
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Speaker 7: The call is to be very strategic in terms of
11:10
Speaker 7: how you approach a market and delegate your capital. A
11:13
Speaker 7: lot of the investors that we're talking to and a
11:15
Speaker 7: lot of the people that we engaged directly, are really
11:17
Speaker 7: kind of being very cautious on their credit approach, not
11:21
Speaker 7: really going too far out on the credit curve because
11:23
Speaker 7: those credit spreads and narrow significantly in the rally through
11:25
Speaker 7: November and December. So now it's a matter of when
11:28
Speaker 7: can you re engage the market in a more strategic
11:30
Speaker 7: manner further out the curve or down the credit curve,
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Speaker 7: And I think both of those opportunities could happen this year.
11:35
Speaker 7: But I do expect this to be another quite constructive
11:37
Speaker 7: year for the market in general.
11:39
Speaker 2: So what else are we doing in the fixed the
11:41
Speaker 2: gum space here, because I you know, twenty twenty two
11:45
Speaker 2: is so brutal for across fixed income space, double digit
11:47
Speaker 2: declines declient is like the fixing the market had never
11:50
Speaker 2: really seen had some positive results in twenty twenty three.
11:54
Speaker 2: Any reason for me to own bonds here in twenty twenty.
11:56
Speaker 7: Four, I think there still are. You know, you look
11:58
Speaker 7: at the fact that we've got real good yields that
12:01
Speaker 7: we have not seen in well over a decade. So
12:03
Speaker 7: for a longer term perspective, you start looking at that,
12:05
Speaker 7: and you know, if you're going to be clipping coupons
12:08
Speaker 7: and be able to grab that four percent yield if
12:09
Speaker 7: rates remained unchanged, barring the expectation for lower rate environment,
12:14
Speaker 7: which would add additional performance to a bond. If you
12:16
Speaker 7: can lock in four percent or better type of yields
12:18
Speaker 7: in this market, you're really looking at strong performance in chase.
12:21
Speaker 4: Dig a little bit deeper into what banks are doing
12:24
Speaker 4: with some of them munity teams.
12:26
Speaker 2: Your city they announced at getting out of the municipal
12:29
Speaker 2: ball market. They did they can't do that.
12:31
Speaker 7: It's amazing they've they've made that announcement in backing out
12:34
Speaker 7: of the market. I mean the market is becoming tougher
12:36
Speaker 7: and tougher, spreads are narrow, it's becoming much more constrained.
12:39
Speaker 7: Regulators aren't helping. I'm not going to really kind of
12:42
Speaker 7: go down that path too deeply, but it's a challenging
12:44
Speaker 7: market for banks to make money in. And so the
12:47
Speaker 7: strategy and the way you approach it is how can
12:49
Speaker 7: you embed yourself deeper and better with clients to provide
12:51
Speaker 7: better service. And that's one of the goals that we're
12:54
Speaker 7: trying to produce at SWBC is how can we ingrain
12:57
Speaker 7: ourselves as a partner to those clients and really add
12:59
Speaker 7: value SBbc stand for Southwest Business Court.
13:02
Speaker 2: Southwest where you guys based.
13:04
Speaker 7: San Antonio, Texas's headquarter.
13:06
Speaker 3: Nice?
13:06
Speaker 2: Is that where you're from?
13:07
Speaker 3: No?
13:07
Speaker 7: No, I'm Northern New Jersey.
13:08
Speaker 2: Here in northern New Jersey. Okay, I'm a big fan
13:10
Speaker 2: of San anton all right. So in the I don't
13:15
Speaker 2: know where are we going to see a new issuance
13:16
Speaker 2: this year? I mean, am I going to see a
13:17
Speaker 2: bunch of new fixed income issueans, credit issuance? High yield
13:22
Speaker 2: municipal bonds? Am I going to see a bunch of issuance?
13:24
Speaker 2: Now that interest rates are coming down? Do you think?
13:26
Speaker 6: I think so?
13:26
Speaker 7: I think the opportunity for issuance to rise is twofold
13:30
Speaker 7: when you look at what happened with the taxable municipal
13:32
Speaker 7: market last year, which was down about thirty percent in
13:34
Speaker 7: terms of issuance. So I expect that to rebound a
13:37
Speaker 7: little bit. Last year, issuance came in around three hundred
13:39
Speaker 7: and eighty billion dollars, which was a few percentage points
13:42
Speaker 7: lower than the previous year in twenty two. I expect
13:44
Speaker 7: this year to be a little bit north of four hundred.
13:47
Speaker 2: And an average year is like five six hundred.
13:49
Speaker 7: No, an average year of late has been somewhere in
13:51
Speaker 7: that mid to.
13:51
Speaker 2: Low force mid force.
13:53
Speaker 7: Yeah, yeah, so I expect to get more towards the
13:54
Speaker 7: average and the opportunity for investors who engage that should
13:58
Speaker 7: be well stated.
14:00
Speaker 2: But the municipal bond like I've been told in the
14:01
Speaker 2: past that municipal bond issuers, municipalities, they don't issue money
14:06
Speaker 2: when rates are low per se, they issue money when
14:10
Speaker 2: they need it. Correct, So aren't we having a bunch
14:13
Speaker 2: of like infrastructure acts and things like that. Don't have
14:17
Speaker 2: a bunch of stuff going from the federal grim that
14:19
Speaker 2: needs to be funded in municipal bond market.
14:21
Speaker 7: There are You know, it's funny when the infrastructure bill
14:23
Speaker 7: came out several years ago, the market got all heady
14:25
Speaker 7: and for lack of a better way of putting it, in
14:27
Speaker 7: terms of the opportunity for more issuance to come. But
14:30
Speaker 7: those infrastructure things take time to build. It takes years
14:33
Speaker 7: to get through the system through the process at local
14:36
Speaker 7: or even larger municipalities to be able to construct that
14:39
Speaker 7: new road, to do something with a bridge. All those
14:42
Speaker 7: infrastructure projects take time to even get started. So once
14:45
Speaker 7: they get started, that's when the borrowing is going to happen,
14:47
Speaker 7: and I think that we kind of got through twenty
14:49
Speaker 7: twenty three with the huge spiking yields we saw in
14:52
Speaker 7: October that scared a lot of people. Now that it's
14:54
Speaker 7: kind of more normalized, I think that the issuers are
14:56
Speaker 7: going to come back into the market, and they, like
14:58
Speaker 7: you said, they're going to come in when they have
15:00
Speaker 7: and when they don't have to and rates are high,
15:02
Speaker 7: they stayed as far away as they can. So now
15:05
Speaker 7: it's the opportunity is going to be there, and I
15:06
Speaker 7: think they're going to come in quite strongly.
15:08
Speaker 2: So who are buyers of municipal bonds these days? I'm
15:12
Speaker 2: likely retail versus institutional. How does that split look today
15:14
Speaker 2: and maybe how's that changed over the last decade or so.
15:17
Speaker 7: Yeah, you know, that's one of the most interesting things,
15:18
Speaker 7: and that's one of the things we're trying to be
15:19
Speaker 7: aware of at SWBC is the retail investor has historically
15:23
Speaker 7: been a strong participant in the municipal market. Their participation
15:27
Speaker 7: has shifted less away from the funds. ETFs have kind
15:32
Speaker 7: of picked up some of the fund bandwidth and fund opportunity,
15:35
Speaker 7: but the small accounts that are managed by portfolio managers,
15:40
Speaker 7: so they're professionally managed, but it's an SMA. Those types
15:43
Speaker 7: of accounts are really where most of the opportunity is,
15:45
Speaker 7: and that has grown by more than double in the
15:47
Speaker 7: past several years. So those investors are really participating strongly
15:51
Speaker 7: and reaping the benefits tax for yield.
15:54
Speaker 2: What's not to like, Yeah, exactly. And so what's the
15:57
Speaker 2: credit quality in the municipal space. I'm actually surprised. I mean,
16:00
Speaker 2: always the Puerto Rico issue or something out of Illinois
16:02
Speaker 2: or something like that. But other than some of those
16:04
Speaker 2: weird situations, I haven't heard of any cracks of note
16:08
Speaker 2: in the municipal bond market really for years.
16:11
Speaker 7: It's been several years, you know. You look at the
16:13
Speaker 7: fact that the federal government allowed for some of the
16:16
Speaker 7: infrastructure bill, some of the opportunity for federal aid or
16:20
Speaker 7: during the pandemic and COVID, so a lot of issuers
16:22
Speaker 7: have built up a reserve of funds as a result
16:25
Speaker 7: of that. So the credits are actually quite high, higher
16:28
Speaker 7: than they possibly would otherwise be. But generally the municipal
16:31
Speaker 7: market is really really solid footing. I mean, most of
16:33
Speaker 7: the space could take most of the investment and opportunity
16:36
Speaker 7: to take space in the double triple B and higher
16:38
Speaker 7: investment grade. That's where the vast majority of issuance is
16:41
Speaker 7: and the default rate on those is less than one percent.
16:45
Speaker 7: So the only thing time you hear about something like
16:47
Speaker 7: that is sketch your credits in odd different markets. Healthcare
16:51
Speaker 7: is notoriously a challenge some of the housing market as well.
16:54
Speaker 7: And then you get the odd issuers and the Puerto
16:56
Speaker 7: Rico story I always rears its head.
16:58
Speaker 2: Then there's the ball across the river there.
17:00
Speaker 8: Exactly what's going on with that?
17:01
Speaker 2: What's the dream mall? I think, yeah, yeah, somebody would.
17:04
Speaker 2: I mean, that is fascinating to me. I remember when
17:07
Speaker 2: that issue came to market, I said, I know nothing
17:10
Speaker 2: about the dream mall. I know nothing about the municipal
17:12
Speaker 2: bond market, but I wouldn't go near that bond issuance.
17:15
Speaker 2: I mean, I couldn't see how that thing would actually
17:18
Speaker 2: be successful, much less pay me back my principle.
17:20
Speaker 3: Have you been there?
17:21
Speaker 8: No, that's still nice.
17:22
Speaker 2: That's the point either.
17:23
Speaker 7: I know, you know, it's in a tough location for
17:26
Speaker 7: New Yorkers especially, it's it's not easier fund to go
17:29
Speaker 7: over the bridge and then travel through there. And you know,
17:32
Speaker 7: my kids have been there to go on some of
17:33
Speaker 7: the rides and do some of those things, and they
17:35
Speaker 7: enjoy it. But I haven't stepped foot in myself either.
17:37
Speaker 7: And it's a tough credit, that's for sure.
17:39
Speaker 6: All Right.
17:40
Speaker 2: What are some of the sectors that you think are
17:41
Speaker 2: going to be interesting in twenty twenty four?
17:45
Speaker 7: You know, I always mention things that are quality revenue
17:48
Speaker 7: bonds that I really like, and you know, you go
17:50
Speaker 7: down the path of water and sewer bonds. Everyone has
17:52
Speaker 7: to pay their water bill, it needs to or so
17:54
Speaker 7: I think in terms of higher credit quality, that's definitely
17:57
Speaker 7: on the plate. I think that office opportunity, other things
17:59
Speaker 7: that make sense, or some of the better higher quality
18:01
Speaker 7: education bonds the well known names for lack of a
18:04
Speaker 7: better way of putting it, and then transportation transportation revenue bonds,
18:08
Speaker 7: bigger airport revenue bonds, those sorts of things are going
18:10
Speaker 7: to be on the uptrend, I believe.
18:12
Speaker 2: How about education, because we've seen some stories about how
18:15
Speaker 2: if you're a small, mid size liberal arts college, that's
18:20
Speaker 2: a tough business. And I've seen some issuance. I've seen
18:22
Speaker 2: some issuance from secondary schools, prep schools and things like that.
18:25
Speaker 2: I can't remember which the issue was, but one of
18:27
Speaker 2: the top prep schools. How about those education back bonds?
18:30
Speaker 2: How do you think about those?
18:32
Speaker 7: You know, to your point, it depends on the name
18:34
Speaker 7: and ten bands on the issuer and the credit you
18:36
Speaker 7: really got and kind of understand and digg into weeds
18:38
Speaker 7: a little bit to understand what is the underlying credit
18:40
Speaker 7: quality of each one. And to your point, you know,
18:43
Speaker 7: you stick to the higher names that are very well
18:45
Speaker 7: known the place where it's ivy leagues, et cetera. You know,
18:48
Speaker 7: those names stand up very well. They have very strong participation,
18:51
Speaker 7: Their endowment programs are enormous, and when you look at
18:55
Speaker 7: their acceptance rates, they still have low acceptance percentages, meaning
18:59
Speaker 7: a lot of people still want to go there and
19:01
Speaker 7: very few still get in. You look down the curve
19:03
Speaker 7: and you start looking at some of the less well
19:05
Speaker 7: known issuers.
19:07
Speaker 6: The liberal arts colleges.
19:08
Speaker 7: That you mentioned, they're having a tougher time attracting retaining people,
19:11
Speaker 7: and I think COVID was not helpful for that construct.
19:14
Speaker 7: They definitely suffered in terms of people wanting to go
19:17
Speaker 7: to college and or how they engage colleges directly.
19:20
Speaker 2: So just real quick on Puerto Rico, are they out
19:22
Speaker 2: of the woods yet, I can't remember kind of where
19:23
Speaker 2: we are there.
19:25
Speaker 7: Yeah, they're not quite out of the woods yet. That
19:27
Speaker 7: story seems to be the story that never ends. So
19:29
Speaker 7: they're in challenging times. There's constant discussions over you know,
19:33
Speaker 7: what's going to happen with the debt service and who's
19:35
Speaker 7: going to be paying it and who's responsible, and then
19:37
Speaker 7: what is the restructuring going to look like? And you know,
19:40
Speaker 7: that's getting into the weaths of it. Very challenging, yeah stuff.
19:42
Speaker 2: Luckily, we have the Joe Mysak who covers the municipal
19:46
Speaker 2: bond mark for like a goajillion years at Bloomberg News,
19:49
Speaker 2: and he keeps us up to date on what's happening there,
19:51
Speaker 2: so we appreciate that. Chris Burgotti, thanks for joining us.
19:53
Speaker 2: Christoph Gotti is a senior vice president, director of Strategic
19:56
Speaker 2: Planning at SWBC based in San Antonio.
20:00
Speaker 5: Listening to the tape Cat's are live program Bloomberg Markets
20:03
Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune
20:06
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20:08
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20:09
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Speaker 5: flagship New York station just say Alexa play Bloomberg eleven thirty.
20:19
Speaker 2: All right, the two teams from twenty twenty one from
20:21
Speaker 2: a stock market perspective for me, that just came out
20:23
Speaker 2: of nowhere. One was AI okay, of course, and the
20:26
Speaker 2: other one is this weight loss stuff the GLP ones.
20:29
Speaker 4: Now it's EMPI gov.
20:31
Speaker 2: I mean, you're a workout Maven, so this is a
20:33
Speaker 2: non issue for you. But for a lot of people
20:36
Speaker 2: it's huge. I could see how this could just be massive,
20:39
Speaker 2: particularly if they get into a pill format. My question
20:42
Speaker 2: is always who pays for it? Simone Foxman, reporter for
20:46
Speaker 2: Bloomberg News, TV radio and all that kind of stuff.
20:48
Speaker 2: She's everywhere. She did a lot of reporting on this,
20:51
Speaker 2: has got a great story out on the Bloomberg terminal
20:54
Speaker 2: here she joins us live here in our Bloomberg Interactive
20:56
Speaker 2: Brokers studio. Simone, help us figure out, because I think
21:00
Speaker 2: you can make an argument that almost well get jillions
21:03
Speaker 2: of people in the US in theory would want to
21:06
Speaker 2: take this drug, will want to take this drug, are
21:08
Speaker 2: taking this drugg But my question is who pays for it?
21:10
Speaker 2: How does that all work?
21:11
Speaker 6: Well?
21:12
Speaker 9: So there are different classes of people, right, you have
21:14
Speaker 9: your people who are insured and their employers maybe pay
21:17
Speaker 9: for their healthcare, and some of them who are insured
21:20
Speaker 9: pay for it themselves. Then you have, you know, people
21:23
Speaker 9: on Medicare, and then you have eighty five million people
21:27
Speaker 9: low income people typically on Medicaid. And this is the
21:31
Speaker 9: area that we really dive into as well as some
21:34
Speaker 9: of those insured people, because a lot of this burden
21:38
Speaker 9: is going to fall on states. States spend on average
21:41
Speaker 9: over a quarter of their overall state budget on healthcare costs,
21:47
Speaker 9: and those you know, for many states, including New York,
21:49
Speaker 9: are skyrocketing, and it turns out, you know, this is
21:52
Speaker 9: going to be a larger and larger part of their
21:55
Speaker 9: budget as they try and pay for Medicaid costs, which
21:58
Speaker 9: is part of is a respect ability they have. They
22:01
Speaker 9: contribute to that as well as their own state employees.
22:04
Speaker 9: Now right now, most insurers, this is private, public, et cetera,
22:09
Speaker 9: pay for GLP ones for people with type two diabetes.
22:14
Speaker 2: But the whole.
22:15
Speaker 9: Idea that we have been hearing from Wall Street is
22:18
Speaker 9: people who just are seeking this for weight loss, who
22:21
Speaker 9: are overweight, They're the ones that are ultimately going to
22:23
Speaker 9: be seeking this and that's why this is such a
22:25
Speaker 9: massive market.
22:26
Speaker 4: Yeah, the cosmetic weight loss, I mean exactly likely. They
22:29
Speaker 4: came out yesterday and they warned about people doing it
22:32
Speaker 4: for this, but.
22:32
Speaker 9: It's but it's not just cosmetic weight loss. It should
22:35
Speaker 9: be very if you know, noted that this has all
22:38
Speaker 9: these variety of health benefits. Uh, the twenty percent reduction
22:42
Speaker 9: that a Novo Nordisks showed among patients who had a
22:47
Speaker 9: health had a heart condition or some history of heart
22:50
Speaker 9: disease as well as obesity, you know, that's an enormous
22:55
Speaker 9: savings potentially for insurers, including public insurers. But at a
23:01
Speaker 9: cost of one thousand dollars a month. That's the shrugs.
23:04
Speaker 2: That's the number that jumped out of meat from your reporting.
23:06
Speaker 2: One thousand dollars a month. And you know a lot
23:08
Speaker 2: of these you know, government officials saying that's going to
23:11
Speaker 2: we don't have that money.
23:13
Speaker 9: And the first government officials that were really starting to
23:15
Speaker 9: hear from are the ones who control the state health plans. Again,
23:20
Speaker 9: not every state health plan covers this for weight loss.
23:23
Speaker 9: They almost all do for subject to restrictions for type
23:26
Speaker 9: two diabetes. But the ones who do, including North Carolina
23:30
Speaker 9: and Connecticut, have both flagged that this is a real
23:33
Speaker 9: rising cost and in North Carolina this was a subject
23:37
Speaker 9: of very heated meeting over whether or not they should
23:40
Speaker 9: continue covering these drugs for weight loss at all, and
23:44
Speaker 9: ultimately they decided anyone who was on it up till
23:46
Speaker 9: January first can stay on it for that reason. But
23:51
Speaker 9: people who are just seeking these for weight loss beyond
23:54
Speaker 9: this specifically.
23:56
Speaker 2: You got some crazy numbers in here, just in terms
23:58
Speaker 2: of the medicage growing GLP one bill. Here are the
24:02
Speaker 2: numbers in twenty twenty three point three billion, in twenty
24:05
Speaker 2: twenty one five billion, and in twenty twenty two seven
24:08
Speaker 2: point nine billion.
24:09
Speaker 9: So that's just we medicate, and we have some limited
24:12
Speaker 9: data for twenty twenty three. I can tell you already
24:15
Speaker 9: the nut number is bigger.
24:16
Speaker 3: Wow.
24:16
Speaker 9: But here's the thing.
24:17
Speaker 4: You have to be on this drug forever. This is
24:21
Speaker 4: not a one time thing a couple of months. No,
24:23
Speaker 4: you have to continue to be on this correct.
24:25
Speaker 3: Yeah.
24:25
Speaker 9: And the thing is, you know some of these costs,
24:28
Speaker 9: the costs that you just mentioned, Paul, A lot of
24:31
Speaker 9: these are driven by type two diabetes patients. In fact, uh,
24:36
Speaker 9: why I was going through these numbers. The biggest driver
24:39
Speaker 9: of that increase that you talk about between twenty twenty
24:42
Speaker 9: and twenty twenty two is for a drug called Trullicity.
24:45
Speaker 9: This is a GOLP one that has has been out
24:47
Speaker 9: there may cause some weight loss, but it's not the ozembic,
24:50
Speaker 9: it's not the wee goov, it's not the one with
24:52
Speaker 9: all this name recognition really for weight loss. So it's
24:54
Speaker 9: there's still a long way to go. If we just
24:57
Speaker 9: are to cover all the type two diabetes patients, and
25:00
Speaker 9: we calculate it in our analysis that that bill if
25:03
Speaker 9: all the type two diabetes patients that actually deserve this,
25:06
Speaker 9: according to the research, were covered, that would be forty
25:09
Speaker 9: one billion dollars for Medicaid alone. Don't we can't even
25:12
Speaker 9: take in state healthcare plans there.
25:14
Speaker 2: I mean, I'm not sure how to do the math
25:17
Speaker 2: or I'm sure it's being done within the healthcare industry.
25:19
Speaker 2: But if more people are on these GLP one drugs, Okay,
25:22
Speaker 2: that's an incremental cost and can the system bear that?
25:25
Speaker 2: But you offset that by presumably some of the issues
25:29
Speaker 2: they won't have to deal with, you know, obesit, diabetes,
25:33
Speaker 2: things like that, And that goes down to I've even
25:36
Speaker 2: seen medical device companies stocks sell off because there'll be
25:39
Speaker 2: less knee replacements, hip replacements, all that kind of thing.
25:43
Speaker 2: I'm not sure how to quantify that benefit versus what
25:45
Speaker 2: I know is the upfront cost.
25:46
Speaker 9: This is an incredibly problematic analysis. We know that obesity
25:53
Speaker 9: itself is very expensive. Diabetes is three hundred and twenty
25:58
Speaker 9: seven billion dollars in medical cost a year. That's one
26:01
Speaker 9: and out of every four dollars spent. That said, you know,
26:06
Speaker 9: and like, don't bring into account the potential benefits of
26:12
Speaker 9: having people who are not spending their entire day on dialysis,
26:16
Speaker 9: you know, who are contributing to the economy.
26:18
Speaker 6: You know.
26:18
Speaker 9: That said, some of the early indications are and the
26:24
Speaker 9: CBO has done has kind of done a little bit
26:27
Speaker 9: of thinking about this. Is the cost is still too high,
26:30
Speaker 9: you know, and.
26:31
Speaker 4: The and the supply is kind of being limited at
26:34
Speaker 4: this time.
26:34
Speaker 8: So what do you I mean, do you ration it out?
26:36
Speaker 4: What do you do at this point?
26:38
Speaker 9: Yeah, the supply being limited means that the likes of
26:41
Speaker 9: Novo Nordisk have limited who these drugs go to first, essentially,
26:49
Speaker 9: and they're going to the diabetic patients first because it
26:51
Speaker 9: has it's more meaningful for them on a whole on
26:54
Speaker 9: an aggregate basis, immediately, but you know, they're rimming up supply.
27:00
Speaker 9: The problem is the demand is so huge, how do
27:03
Speaker 9: you ever bring down costs meaningfully enough to make it
27:08
Speaker 9: worth it. Now, it should be noted that some of
27:10
Speaker 9: these costs that we've talked about here are pre rebate,
27:13
Speaker 9: So prescription costs for Medicaid essentially have due to manufacture rebates.
27:19
Speaker 9: Since these are the same and but these are the
27:22
Speaker 9: numbers we're kind of talking about, I think they give
27:24
Speaker 9: a good indication of how significant this is going to be.
27:26
Speaker 2: Well, I like, I mean, I'm I'm a big fan
27:28
Speaker 2: of North the state of the state of North Carolina,
27:30
Speaker 2: not necessarily the University of North Carolina being a duke
27:33
Speaker 2: red But here I noticed in your reporting here that
27:35
Speaker 2: the debate has played out most heatedly in North Carolina,
27:39
Speaker 2: where Novo Nordis has three plants that make drugs for
27:42
Speaker 2: obesity and diabetes. Yet they're at the forefront of the
27:46
Speaker 2: state trying to limit who you know, what the state
27:50
Speaker 2: will pay for it. So very ironic there and.
27:52
Speaker 9: Here there's also this incredible calculus as well. So Dale Folwell,
27:58
Speaker 9: who will speak to later today on radio as well
28:00
Speaker 9: as on Bloomberg TV. He you know, it runs this
28:05
Speaker 9: plan and apparently the Prescription Benefit Manager CVS, he says,
28:10
Speaker 9: told him that if they start restricting the population who
28:14
Speaker 9: can get drugs, Novo Nordisk will cut the rebates they get,
28:20
Speaker 9: so they'll have to pay much closer to thirteen forty
28:23
Speaker 9: nine the list price of you know, we go via
28:25
Speaker 9: the weight loss version of one of these drugs.
28:28
Speaker 2: That's nine dollars yes for a month.
28:32
Speaker 9: Yes, versus the seven hundred and seventy two that they
28:35
Speaker 9: were currently paid. So that makes the calculus even worse. Right, So,
28:39
Speaker 9: I mean, essentially, if manufacturers threatened to cut these rebates
28:42
Speaker 9: because people are restricting that, I mean, it's this whole
28:44
Speaker 9: vicious cycle.
28:45
Speaker 4: But I mean they're pushing it.
28:46
Speaker 6: You know.
28:47
Speaker 4: Eli Lilly said it's going to launch this digital healthcare platform,
28:50
Speaker 4: you know, and that's really going to pressure They're going
28:52
Speaker 4: to home deliver some of these these medications.
28:54
Speaker 2: So they're they're pushing it.
28:55
Speaker 9: And they're doing impact studies talking about the costs of
28:58
Speaker 9: obesity that Lily has publicized a bunch of those or
29:02
Speaker 9: funded a bunch of those. H they are lobbying state
29:06
Speaker 9: and federal officials. Mind you, Medicare is a federal thing.
29:10
Speaker 9: And there are some officials on Capitol Hill who are
29:12
Speaker 9: saying Medicare should cover this for Medicare beneficiaries, just for
29:16
Speaker 9: weight loss too. I mean, anytime you hear about this,
29:20
Speaker 9: it's expanding the potential population of people who could get
29:23
Speaker 9: these and don't. That doesn't even begin to take in
29:26
Speaker 9: the kind of marketing that we're.
29:27
Speaker 2: Seeing, all right. I mean, great reporting here, Simone, Simone Foxman,
29:32
Speaker 2: you know, with this story and along with your co
29:35
Speaker 2: reporter Laura nas Nomius. So, Laura Namias, Simone Foxman, great
29:40
Speaker 2: reporting here, great story of Zempic's mania's billions and bills
29:44
Speaker 2: are coming for US taxpayers. Check it out on the
29:47
Speaker 2: Bloomberg terminal Bloomberg dot com. It really it's really good.
29:50
Speaker 2: It's got a lot of data that I have not
29:52
Speaker 2: seen before in terms of the cost and how the
29:54
Speaker 2: costs are broken down, what are the drugs that are
29:56
Speaker 2: in the marketplace, who's who's in there, and where's the
30:00
Speaker 2: the money going and where's the money coming from. Some
30:02
Speaker 2: great reporting, Simone, thanks so much.
30:04
Speaker 5: You're listening to the tape. Can's are Live program Bloomberg
30:08
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
30:11
Speaker 5: tune in app, Bloomberg dot Com, and.
30:13
Speaker 6: The Bloomberg Business App.
30:15
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30:17
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
30:24
Speaker 2: My next life. I want to come back as a
30:26
Speaker 2: healthcare m and a banker. Those guys get paid every day.
30:30
Speaker 2: It seems like every Monday we come in and there's
30:32
Speaker 2: another mega healthcare deal. So let's see if that's going
30:36
Speaker 2: to continue here. Kristin Pathier, Principal National and Global HCLs
30:42
Speaker 2: Deal Advisor and Strategy Leader, Christian, We've got to deal
30:45
Speaker 2: with that title there. We got to work on that. KPMG.
30:48
Speaker 2: I mean, let's just say you're the global deal person.
30:51
Speaker 2: That's what I'm going to go with. At KPMG, they
30:53
Speaker 2: know what's going on out there in the world. So
30:56
Speaker 2: Kristin talk to us about the landscape for healthcare MNA.
31:00
Speaker 2: It just seems like it's just a it's almost like
31:03
Speaker 2: a way of doing business for this industry. If you
31:06
Speaker 2: can't come up with the drug or the therapeutic or
31:10
Speaker 2: whatever in your own R and D, you go out
31:12
Speaker 2: and buy it. Is that kind of where we are.
31:15
Speaker 10: Absolutely and when you look at healthcare and life sciences
31:18
Speaker 10: in general, it really is one of those recession proof industries.
31:21
Speaker 10: People are getting sick. People get sick worldwide. They need
31:25
Speaker 10: better medication, they can need faster medication, they need more
31:28
Speaker 10: access to therapeutics, diagnostics, devices, And regardless of whether we're
31:33
Speaker 10: in a major pandemic or whether we're in a major recession,
31:37
Speaker 10: we still have people that are getting sick. And so
31:40
Speaker 10: all of our groups in this space, whether they be
31:43
Speaker 10: healthcare firms, life.
31:45
Speaker 8: Sciences firms, they have to continue to innovate.
31:47
Speaker 10: And innovation in medicine is precision medicine. It is the
31:52
Speaker 10: future of medicine. It is generative AI. It is putting
31:55
Speaker 10: together a number of different types of pieces of the
31:59
Speaker 10: ecosystem so that we get to our patients faster.
32:01
Speaker 8: So you are absolutely right.
32:03
Speaker 10: Both inorganic and organic strategies are absolutely essential in this space,
32:08
Speaker 10: and that is what we have seen throughout the years.
32:11
Speaker 10: Even as the deal market has softened over the past
32:14
Speaker 10: couple of years.
32:15
Speaker 4: You know, I want to get more into that innovation
32:17
Speaker 4: that you were talking about. I hosted a panel for Bloomberg.
32:19
Speaker 4: It was about AI and one of the companies there
32:23
Speaker 4: was healthcare and they said, AI is playing a big part.
32:26
Speaker 4: It is a game changer. So if you can get
32:29
Speaker 4: a little bit more into that.
32:30
Speaker 10: For us, absolutely, and it's a game changer across all
32:33
Speaker 10: of the different subsectors of healthcare and life sciences. Remember
32:37
Speaker 10: there are a number of different groups that are playing
32:39
Speaker 10: into this ecosystem.
32:40
Speaker 8: Our pharma companies.
32:42
Speaker 10: Need generative AI to really help take their rapidity of
32:46
Speaker 10: their pipelines, make everything going through the pipeline a lot faster,
32:50
Speaker 10: a lot more efficient, a lot more effective. Our health
32:53
Speaker 10: systems are using it both in the front office and
32:55
Speaker 10: the back office to take all of the patient data,
32:58
Speaker 10: all the patient claims, everything that they're getting hit with,
33:02
Speaker 10: and develop new patient journeys, new sample journeys for those
33:06
Speaker 10: patients to get them better and more effective therapeutics.
33:09
Speaker 8: And what I would say is that over.
33:11
Speaker 10: The last year alone, the amount of time and energy
33:16
Speaker 10: and diligence that has been spent on generative AI, the companies,
33:20
Speaker 10: the partnerships, how we're even dealing with the space has
33:23
Speaker 10: just gone snowballed throughout the industry, and so we're getting
33:28
Speaker 10: more and more questions on that every day. I would
33:30
Speaker 10: say that the amount of deal making, actual m and
33:34
Speaker 10: a in generative AI is less so than the partnerships
33:38
Speaker 10: and all of the questions around generative AI, but in
33:41
Speaker 10: twenty twenty four, we expect that to increase.
33:43
Speaker 2: So what is precision medicine exactly?
33:48
Speaker 10: And from your perspective, absolutely, precision medicine is the best
33:53
Speaker 10: therapeutic or care for the best patient at the best time.
33:57
Speaker 8: And so when you.
33:58
Speaker 10: Think about that and you think about what I just said,
34:01
Speaker 10: it isn't a buzzword.
34:03
Speaker 8: It's the future of medicine.
34:04
Speaker 10: We want to be able to take one patient, look
34:07
Speaker 10: at that patient, and provide them the most effective and
34:11
Speaker 10: efficient care.
34:12
Speaker 8: And so that's what we see. And when we take
34:15
Speaker 8: that precision.
34:16
Speaker 10: Medicine out to precision healthcare, it adds in the entire ecosystem,
34:20
Speaker 10: whether it be the diagnostics that surround those therapeutics, whether
34:24
Speaker 10: it be the patient services, and whether it be in
34:26
Speaker 10: a domestic market or a worldwide market.
34:29
Speaker 4: Now, talk to about hospitals, they're facing these big financial pressures.
34:33
Speaker 4: You have workers, there's a shortage of workers. How is
34:36
Speaker 4: this going to change the industry moving into twenty twenty four.
34:39
Speaker 10: Absolutely, both generative AI and precision health health happen to
34:45
Speaker 10: really help what you just mentioned when you think about
34:48
Speaker 10: how many workers we have to put in the workforce,
34:50
Speaker 10: when you think about how many therapeutics that we need
34:53
Speaker 10: to save people's lives. If we can get more precise diagnostics,
34:56
Speaker 10: more precise services to our patients in amount of time
35:00
Speaker 10: in those health systems, that allows us to take our
35:04
Speaker 10: workforce and refine our workforce to only who we need.
35:08
Speaker 10: It also allows us to upscale our workforce, maybe with
35:11
Speaker 10: bringing in people that could be upskilled faster through generative
35:15
Speaker 10: AI approaches, and then allow us to manipulate and change
35:19
Speaker 10: our workforce to better suit the needs of what we
35:21
Speaker 10: need in the future.
35:23
Speaker 2: All Right, So, from a deal perspective, Kristen, what sectors
35:27
Speaker 2: do you think are going to be most in play
35:29
Speaker 2: over the next twelve months.
35:33
Speaker 10: When you look across healthcare and life sciences and you
35:35
Speaker 10: look at the lows of twenty twenty three and you
35:38
Speaker 10: look at what's recovering quicker, each one of the subsectors
35:41
Speaker 10: in life sciences continues to be very exciting in for
35:45
Speaker 10: different reasons. Within biopharma, the innovation around selling gene therapy
35:49
Speaker 10: within a lot of our other biologics within Companion Therapeutics
35:53
Speaker 10: is continuing to move us through the pipeline and look
35:57
Speaker 10: at deals that are continuing to change the portfolio.
36:01
Speaker 8: Of each one of our pharmaceutical companies.
36:03
Speaker 10: When you look at diagnostics, we had a little bit
36:05
Speaker 10: of a lull last year, of course, as our diagnostics
36:08
Speaker 10: companies went into the new normal post COVID, But now
36:12
Speaker 10: they are looking for interesting point of care and interesting
36:16
Speaker 10: innovations within diagnostics to help pharmaceutical companies and to help
36:19
Speaker 10: services in better ways. Devices are always going to be
36:24
Speaker 10: one of those areas where we keep on looking to say,
36:27
Speaker 10: is this the year device companies had a harder time
36:31
Speaker 10: during COVID? Of course, as elective procedures really tanked. All
36:34
Speaker 10: those elective procedures, hips, knees, etc. All have come up again,
36:39
Speaker 10: and now as our health systems continue to promote those
36:42
Speaker 10: elective procedures continue to bring them in, our device companies
36:46
Speaker 10: are looking very carefully at new innovative ways that they
36:49
Speaker 10: can bring new devices to the fold and emerge as
36:52
Speaker 10: the victors in that particular area.
36:55
Speaker 8: In healthcare, when you.
36:56
Speaker 10: Look at health systems, when you look at payers, when
36:59
Speaker 10: you look at physician groups, we're seeing health it and
37:02
Speaker 10: physician groups as being the most exciting areas and continued
37:07
Speaker 10: consolidation and thoughts on health systems as the health systems
37:10
Speaker 10: continue to recover from COVID and really be very thoughtful
37:14
Speaker 10: about their costs, paired with the innovation that they're seeing
37:17
Speaker 10: from life sciences. Life sciences and healthcare are inactuably linked sectors,
37:22
Speaker 10: and so as we look at this overall, we're continuing
37:26
Speaker 10: to see the dynamics between innovation between those two teams.
37:30
Speaker 2: Kristin, thanks so much for joining us. Really fascinating stuff there.
37:33
Speaker 2: Kristin Pathier, Principal National and Global HCLs Deal Advisory and
37:37
Speaker 2: Strategy leader for KPMG.
37:39
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37:43
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37:46
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37:48
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37:49
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37:58
Speaker 2: Let's talk about this jobs market again. It is resilient,
38:02
Speaker 2: it is robust. I don't know what you it doesn't matter.
38:05
Speaker 2: It just seems like you can't crack this labor market
38:07
Speaker 2: that continues to be some pretty solid demand. Julia Pollock
38:10
Speaker 2: joins us. She's a chief economist at ZipRecruiter. So, Julie,
38:13
Speaker 2: we got some better than I think expected jobs dated
38:16
Speaker 2: today in terms of the number of jobs and then
38:18
Speaker 2: also the wages. What are you seeing at there at
38:20
Speaker 2: ZipRecruiter when you look at there at the labor market,
38:22
Speaker 2: it was a mixed jobs report.
38:24
Speaker 11: But yes, you know, zooming out twenty twenty three was
38:27
Speaker 11: a remarkable year in the labor market. We not just
38:30
Speaker 11: dodged a recession, we completely completely avoided a recession in
38:35
Speaker 11: the labor market, even though it did slow substantially. And
38:41
Speaker 11: not only that, it was actually one of the best
38:42
Speaker 11: years on record when it comes to the unemployment rate,
38:45
Speaker 11: the average unemployment rate, it ties for fifth place with
38:47
Speaker 11: nineteen sixty eight. Wow, So pretty strong year overall.
38:51
Speaker 4: And talk about some of the trends that are going on.
38:53
Speaker 4: We used to talk about that trend of job switching.
38:56
Speaker 2: Is that still safe?
38:58
Speaker 4: Ords it best to just stay in place.
39:01
Speaker 11: So the data that came out earlier in the week,
39:04
Speaker 11: the JAULTZ data showed a pretty substantial decline in job switching.
39:09
Speaker 11: So the quits rate fell to the lowest rate since
39:12
Speaker 11: before since early twenty eighteen, and that suggests that the
39:17
Speaker 11: Great resignation is fully completely over. And the higher's rate
39:21
Speaker 11: also plunged to the lowest level since twenty fourteen. And
39:25
Speaker 11: so the reason that overall employment levels are going up
39:29
Speaker 11: is not because of aggressive hiring. It's more because of
39:32
Speaker 11: very slow turnover and churn. And what we're seeing at
39:36
Speaker 11: ZIP recruiter is a continued, gradual, orderly cooling in the
39:40
Speaker 11: label market that's likely to persist until the FED takes
39:44
Speaker 11: its foot off the rate piel and allows the economy
39:48
Speaker 11: to invest in boom again.
39:50
Speaker 2: So, Julia, what is I guess employee hoarding? Is it
39:56
Speaker 2: a thing? Is it real?
39:58
Speaker 11: So if you at layoffs and firings, they have been
40:03
Speaker 11: about twenty percent lower this year than was normal between
40:06
Speaker 11: twenty sixteen and twenty nineteen. So we're seeing historically unusually
40:11
Speaker 11: low firing and layoffs at a time when there are
40:14
Speaker 11: many industries where activity has taken a huge knock from
40:19
Speaker 11: high interest rates. If you look at the construction sector,
40:22
Speaker 11: it's actually up over four hundred thousand jobs since before
40:26
Speaker 11: the pandemic. Industries like banking where I think if you
40:31
Speaker 11: look at a lot of the numbers it hasn't been
40:33
Speaker 11: so great, right, Lots and lots of bank deposits have
40:35
Speaker 11: left that SIB system, like on eight hundred and seventy
40:37
Speaker 11: billion dollars. Bank stocks have fallen pretty substantially and underperformed
40:45
Speaker 11: the S and P five hundred by the largest amount ever.
40:49
Speaker 11: And yet overall employment in that sector has been flat
40:51
Speaker 11: as a pancake. So yes, I think there is a
40:54
Speaker 11: sign that employers are holding on to the workers they've got,
40:57
Speaker 11: even in industries that are pretty slow, because they are
41:00
Speaker 11: confident that things are going to turn around.
41:03
Speaker 4: So and when you talk about that, you know, managing
41:05
Speaker 4: this headcount, So is it that they're relying on attrition
41:09
Speaker 4: or rather than doing layoffs? What do you say?
41:14
Speaker 11: Yes, but even overall headcount numbers are staying pretty flat
41:18
Speaker 11: and stable.
41:19
Speaker 3: You know.
41:19
Speaker 11: One exception is transportational warehousing, where we are seeing some
41:23
Speaker 11: sort of right sizing in that sector now after it
41:26
Speaker 11: posted the largest gains since the pandemic. So, you know,
41:30
Speaker 11: as people get back to normal and spend more on
41:32
Speaker 11: services and good spending slows, growth and good spending slows,
41:39
Speaker 11: that industry is shedding jobs, but most are not. Employment
41:43
Speaker 11: is pretty stable and flat and resilient. That's actually the
41:46
Speaker 11: only sectors that are really contributing to growth at the
41:50
Speaker 11: moment are these three largely acyclical sectors, the government, healthcare,
41:54
Speaker 11: and leisure hospitality. They accounted for ninety two percent of
41:58
Speaker 11: all jobs added in the last six months.
42:01
Speaker 2: So, Julia, people are at work. My question is where
42:04
Speaker 2: are they working. Are they working at home, are they
42:06
Speaker 2: working in the office? Where are we on that these days?
42:10
Speaker 11: So it's a very very mixed bag. Remote work has
42:14
Speaker 11: pretty much stabilized now at around twenty five to twenty
42:17
Speaker 11: eight percent of all worked days, up from about five
42:20
Speaker 11: percent before the pandemic. And this is the year when
42:24
Speaker 11: that really stabilized. The Many companies brought workers back to
42:28
Speaker 11: the office, but many other companies started afresh in a
42:31
Speaker 11: remote first posture, and among companies the flexibility became the norm.
42:39
Speaker 11: The five day in office work week became very rare.
42:43
Speaker 11: Only sixteen percent of companies with office.
42:46
Speaker 2: So I'm one of the special people's five days.
42:48
Speaker 11: You're one of those.
42:50
Speaker 2: I know, I was specialty.
42:51
Speaker 11: Most people get at least one, two, three or four
42:53
Speaker 11: days off, so I hear out out of the office
42:57
Speaker 11: a week.
42:58
Speaker 4: And we've learn a lot of us in twenty twenty
43:00
Speaker 4: three about the great resignation is that gone in the
43:04
Speaker 4: days of twenty twenty four.
43:06
Speaker 11: It's gone. Turnovers not just back to pre pandemic normal,
43:09
Speaker 11: it's actually lower. It's about where it was in early
43:12
Speaker 11: twenty eighteen. And that is a really reliable measure of
43:19
Speaker 11: how much economic opportunity there really is for unemployed workers,
43:24
Speaker 11: for workers to find better jobs. And I think it
43:28
Speaker 11: suggests that there is some cooling in this live market
43:31
Speaker 11: and that workers are finding it a little bit harder
43:34
Speaker 11: to find new jobs and to find the kinds of
43:36
Speaker 11: jobs that they want right now.
43:38
Speaker 2: All right, my I guess employment ready offspring, they're all employed.
43:43
Speaker 2: But how about folks coming out of college and graduate school.
43:46
Speaker 2: How's that entry market right now?
43:50
Speaker 11: So, surveys of employers suggest that they are projecting hiring
43:55
Speaker 11: fewer members of the graduating class of twenty twenty four
43:58
Speaker 11: than of previous classes. That said, those projections can change.
44:03
Speaker 11: It's quite possible that twenty twenty four could be like
44:07
Speaker 11: twenty twenty three again, in that companies start the year
44:11
Speaker 11: expecting to cut headcount and cut costs more aggressively and
44:14
Speaker 11: then realize, wait a second, there's nerve recession. On hand,
44:17
Speaker 11: the consumer is still strong. I need workers and actually
44:21
Speaker 11: hire more than they're expecting at the start of the year,
44:23
Speaker 11: especially if we see interest rates come down and investment
44:27
Speaker 11: rise again.
44:28
Speaker 4: And new year people out there looking for a new job.
44:31
Speaker 4: Do you have to rip up the script when it
44:33
Speaker 4: comes to your resume? I mean, if you want to
44:35
Speaker 4: start all over again, what should you do differently when
44:38
Speaker 4: you're putting it together? Is it more about skills? What
44:40
Speaker 4: should you have on there that really stands out?
44:43
Speaker 8: Yeah?
44:43
Speaker 11: So this is not a chronology. It's more like an
44:46
Speaker 11: advertising pamphlet, showing your most your greatest hits, your most
44:50
Speaker 11: relevant skills and experience. That's I think how people should
44:53
Speaker 11: think about their resumes. Put the relevant experience up first,
44:57
Speaker 11: and then you know, it's really important these days to
45:01
Speaker 11: have a digital jobs or seecret profile. So upload your resume,
45:06
Speaker 11: make sure it can be read by computers and parsed
45:08
Speaker 11: by these job marketplaces, so that you're actually getting your
45:13
Speaker 11: foot through the door and getting past the robots into
45:16
Speaker 11: a human.
45:17
Speaker 2: How about it In the trades, people tell me that
45:20
Speaker 2: there's still a shortage of trades men and women out there.
45:24
Speaker 2: How does that part of the market look to you.
45:28
Speaker 11: Yes, So there are many industries with aging workforces, with
45:34
Speaker 11: a lot of retirements and with shrinking pipelines of new talent.
45:38
Speaker 11: New younger generations of workers are not as interested in
45:41
Speaker 11: those roles. They also are seeing a work a labor
45:46
Speaker 11: force with a lot more flexible opportunities, and so they're
45:49
Speaker 11: going to the remote jobs and the tech jobs and
45:51
Speaker 11: the influencer jobs. There's tremendous interest still in marketing roles
45:55
Speaker 11: and pr roles and those kinds of things, and much
45:57
Speaker 11: less interest in doing hard labor in manufacturing or construction.
46:04
Speaker 11: That said, wages in those fields are rising in order
46:07
Speaker 11: to deal with the supply shortage, and perhaps you'll see
46:11
Speaker 11: a tipping point where people start to take more interest
46:14
Speaker 11: in these roles.
46:15
Speaker 4: And what about the gig sector. I've heard a lot
46:17
Speaker 4: of talk about there's more freelancers out there, that's what
46:20
Speaker 4: people are looking to do more. Is that still growing
46:23
Speaker 4: into twenty twenty four or is that cut back? You
46:25
Speaker 4: think this year a little cut back.
46:27
Speaker 11: So unfortunately, official data on gigwork is not very good,
46:34
Speaker 11: and we haven't really been tracking it over over time
46:37
Speaker 11: in a consistent way, so it's kind of a bit
46:40
Speaker 11: of a black box. It's hard to note. We can
46:42
Speaker 11: look at the company's earning statements about how many users
46:47
Speaker 11: they have. Look broadly, we do see a lot of
46:51
Speaker 11: interest among job seekers on zip recruiter in those kinds
46:53
Speaker 11: of gig roles because of the flexibility they offer. There
46:56
Speaker 11: are many young people who sort of live from hand
46:59
Speaker 11: to mouth and have fun and watch video games and
47:01
Speaker 11: do what they want to do. And if they need
47:03
Speaker 11: cash and need a buy groceries, need to buy dinner,
47:05
Speaker 11: they know, log onto an app and deliver groceries for
47:08
Speaker 11: a couple hours and then buy their own and then
47:10
Speaker 11: go back to doing what they're doing. That it is
47:12
Speaker 11: quite common to work that way these days. That said,
47:15
Speaker 11: there's some new research showing that once AI tools chatch
47:20
Speaker 11: GVD was launched, generative AI demand for other kinds of
47:23
Speaker 11: freelancers started to fall. So interesting, all right, we'll get
47:28
Speaker 11: a white collar freelancer.
47:29
Speaker 2: Yeah, you just walked across or walk through any local
47:32
Speaker 2: coffee shop and I'm like, what are these people doing here?
47:34
Speaker 2: You know, they all got to laptops out and they
47:36
Speaker 2: look like they're doing something committing value. I don't know.
47:38
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47:41
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47:45
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47:51
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