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Walmart Profit Forecast Falls Short on Slowing Growth · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
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  Speaker 2: It's been Walmart here. The company came out with numbers
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  Speaker 2: kind of in line. I thought they were pretty good numbers,
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  Speaker 2: but the guide that's definitely disappointed the stream. We've got
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  Speaker 2: the stock off six point four percent here today, but
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  Speaker 2: still about about sixty six percent year to day. To remember,
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  Speaker 2: this has got a market cap of seven hundred and
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  Speaker 2: eighty one billion dollars, does Walmart. So let's check in
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  Speaker 2: on this story. Emily Cone joins us Bloomberg Consumer Team
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  Speaker 2: Leader joints us here and at Bloomberg Get Interactive Brokers Studio. Emily,
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  Speaker 2: what kind of jumped out of you for this earnings
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  Speaker 2: report from Walmart?
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  Speaker 3: Thanks, Paul. Yeah, I'm definitely the the lower than expected
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  Speaker 3: profit forecast for the full year. I think you know,
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  Speaker 3: these were consistent estimates. This was a consistent guidance in
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  Speaker 3: line with what they laid out last year for the
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  Speaker 3: full year as well. But it definitely signaled that the
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  Speaker 3: you know the world's largest retailer, Walmart, isn't immune to
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  Speaker 3: the risks that are out there for the broader economic environment. Granted,
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  Speaker 3: Walmart has historically given conservative outlook to start the year off,
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  Speaker 3: but this definitely showed, you know, and they they used
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  Speaker 3: the word uncertain. I haven't checked, but a number of
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  Speaker 3: times on their analysts call. That was sort of like
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  Speaker 3: the theme of the call.
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  Speaker 4: What else did they say for this, I guess we
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  Speaker 4: could call it conservative or negative outlook? Did they mention
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  Speaker 4: it's because consumers are pulling back, people are looking for bargains.
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  Speaker 4: I guess, like, what did we learn about the consumer
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  Speaker 4: in this report?
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  Speaker 3: Yeah, it was it wasn't negative. It was it was
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  Speaker 3: in line with what they offered last year, three to
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  Speaker 3: four percent growth. But I think, you know, and I
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  Speaker 3: think that's taking into account near term investments. So they
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  Speaker 3: mentioned things like consumer trends and near term investments like
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  Speaker 3: the cost of the acquisition of the smart TV maker Visio.
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  Speaker 3: We're still seeing those costs take a hit on the
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  Speaker 3: bottom line. But yeah, they said they haven't incorporated yet
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  Speaker 3: the risk of tariffs into their guidance. We also saw
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  Speaker 3: US retail sales dip in January and core inflation pick up.
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  Speaker 3: So I think those are those are all things that
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  Speaker 3: are weighing on on retailers, and Walmart certainly isn't immune.
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  Speaker 2: How about on the tariff front. I mean, they am
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  Speaker 2: looking at your Bloombergers right up here, talk about tariffs.
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  Speaker 2: Walmart imports food from Mexico and general merchandise products like
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  Speaker 2: microwaves in China. What are they saying about tariffs? Is
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  Speaker 2: that incorporating their guidance?
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  Speaker 3: They said they have not incorporated tariffs into their guidance before.
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  Speaker 3: Tariffs aren't new for a company like Walmart. Obviously we
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  Speaker 3: saw import tariffs, you know, during the last Trump administration.
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  Speaker 3: But they're doing what we've seen most companies do so
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  Speaker 3: far this year, which is say it's uncertain, we're not
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  Speaker 3: sure what's going to happen, and we're not incorporating tariffs
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  Speaker 3: into our guidance yet. But yeah, I mean, food prices
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  Speaker 3: were up for them, General merchandising prices I think came
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  Speaker 3: down a little bit.
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  Speaker 4: I actually learned something new about Walmart today, and that's
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  Speaker 4: that you can buy a pre owned Chanel bag through
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  Speaker 4: their website. So I guess they're getting into online sales.
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  Speaker 4: They're beefing up their digital operation to include items like
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  Speaker 4: collectibles and pre owned Chanel bags. Wow, think about that,
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  Speaker 4: I mean luxury items at like a discount retailer.
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  Speaker 3: Yeah. So Walmart is still small compared to Amazon, but
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  Speaker 3: in terms of e commerce, but that's an area where
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  Speaker 3: they're just continuing to see huge growth in e commerce
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  Speaker 3: in their their marketplace. So that that is something that
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  Speaker 3: you'll continue to hear them talk a lot about and
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  Speaker 3: there's a ton of upside there. Pharmacy delivery was another
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  Speaker 3: one that they shouted out today. That's a new business
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  Speaker 3: for them. So these newer businesses continue to grow a
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  Speaker 3: lot for Walmart, and they would say there's still a
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  Speaker 3: big runway there when it comes to competing with Amazon.
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  Speaker 2: It's interesting comparable sales excluding fuel rose four point six
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  Speaker 2: percent at US Walmart Star Wars open at least a
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  Speaker 2: year for the quarter end of January thirty first. That's
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  Speaker 2: higher than Wall Street had been anticipating. So it doesn't
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  Speaker 2: seem like the consumer per se, at least in this
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  Speaker 2: quarter was a problem. Consumer was still spending.
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  Speaker 3: So an interesting thing about the growth this quarter and
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  Speaker 3: actually last quarter as well, was that growth was mostly
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  Speaker 3: coming from higher income households, So households that are earning
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  Speaker 3: more than one hundred thousand dollars a year. Not the
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  Speaker 3: person you typically think of as your average Walmart shopper.
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  Speaker 3: These are like wealthier people who are looking for deals,
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  Speaker 3: looking for value. Maybe they're coming to Walmart for groceries
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  Speaker 3: as opposed to whole foods this quarter because prices on
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  Speaker 3: food are so high. So that's really where the growth
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  Speaker 3: is still coming from, are wealthier shoppers.
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  Speaker 4: So that does that tell you then that the consumer
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  Speaker 4: is maybe weaker if these high income people are having
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  Speaker 4: to move down the spectrum.
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  Speaker 5: It's possible.
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  Speaker 3: And I think, you know, we are looking forward to
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  Speaker 3: the rest of the big pox results coming this quarter.
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  Speaker 3: We're looking at Home Depot, We're looking at Target. I
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  Speaker 3: think they will tell us a bigger picture view of
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  Speaker 3: how the US consumer is doing. But yes, I have
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  Speaker 3: the same question, where are those shoppers coming from? Who's
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  Speaker 3: losing here?
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  Speaker 2: Emily Cohen, thank you so much for joining us. Emily Cohen,
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  Speaker 2: she's a consumer team leader for Bloomberg News, joining us
• 6:05
  Speaker 2: live here in our Bloomberg Interactive Brookers studio talking about
• 6:08
  Speaker 2: breaking down those Walmont Earnings.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 6:15
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 6:18
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• 6:21
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:25
  Speaker 2: Let's switch gears here talk about this Federal Reserve. We
• 6:27
  Speaker 2: had the FED minutes yesterday. I did not read them.
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  Speaker 2: I never read them. That's why we have people like
• 6:32
  Speaker 2: Mike McLoone, I mean Mike McKee. We've got Danielle di
• 6:35
  Speaker 2: Martino Booth joining us here in studio. She's the CEO
• 6:39
  Speaker 2: and chief strategist for QI Research. What's our FED doing here?
• 6:43
  Speaker 2: Our Fed can do? Is it safe to say they
• 6:45
  Speaker 2: could do nothing all year? And that would be okay?
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  Speaker 5: I really don't think markets are priced for that.
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  Speaker 6: Okay.
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  Speaker 7: In fact, in the last week, if there's anything that
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  Speaker 7: we've seen, it's the second it's the second rate kind
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  Speaker 7: of the year begin to be really priced in. So
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  Speaker 7: I wouldn't be surprised if we were to see something
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  Speaker 7: around June.
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  Speaker 5: And I think what's going to force their hand is
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  Speaker 5: the job market.
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  Speaker 4: What did you learn from the minutes?
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  Speaker 7: Not too terribly much and It's not that they didn't
• 7:18
  Speaker 7: try and present a unified front in the minutes, But
• 7:24
  Speaker 7: when the chair of the FMC gets up at the
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  Speaker 7: podium and swats away the verbiage of the statement, you know,
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  Speaker 7: without even reading a single line of the minutes that
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  Speaker 7: there was a lot of controversy, dissent, disagreement in that room.
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  Speaker 7: So you're going to see very little when it comes
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  Speaker 7: to the minutes. Remember in two thousand and eight, Janet
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  Speaker 7: Yellen said we can use the minutes as another tool
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  Speaker 7: in the toolbox to continue to shape the thinking of markets,
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  Speaker 7: even though they're theoretically timestamped, but they're not.
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  Speaker 2: You mentioned the labor market earlier. What what is your
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  Speaker 2: read of the labor market these days? We had I
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  Speaker 2: guess we had the initial job as claims came in
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  Speaker 2: just a little bit higher than expected today, but I
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  Speaker 2: do know any number with it, two ten, fifteen, two
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  Speaker 2: twenty seems like the norm. How do you view the
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  Speaker 2: labor market?
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  Speaker 7: So I think right now what we have is a
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  Speaker 7: pig and a python, and we've had a very constant
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  Speaker 7: stream of layoffs in the private sector. I mean, I
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  Speaker 7: need to meet and shake the hand of the person
• 8:31
  Speaker 7: who runs bcygo because I don't think they sleep because
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  Speaker 7: the bankruptcy cycle has as even though it hit a
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  Speaker 7: fourteen year high in twenty twenty four, it's only accelerated.
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  Speaker 7: My gosh, we've had almost four thousand store closings announced
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  Speaker 7: and it's just February twentieth so far this year.
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  Speaker 5: To give you context, co Star.
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  Speaker 7: Reported that there were seventy three hundred closed for all
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  Speaker 7: of twenty twenty five.
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  Speaker 5: So we know that there is a there's.
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  Speaker 7: A bulge of layoffs moving like a pig through a python,
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  Speaker 7: plus plus public sector job cuts, and that's the.
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  Speaker 5: Big that's the big change agent.
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  Speaker 3: You know.
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  Speaker 7: It was interesting to see that the survey week end
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  Speaker 7: at February the fifteenth, that was what was coincided with
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  Speaker 7: what was reported this morning, and yet we saw continuing
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  Speaker 7: jobless claims pushing three million, not not seasonally adjusted.
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  Speaker 5: The high for the for the cycle.
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  Speaker 7: If you lose your job, if you have a job,
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  Speaker 7: don't lose it, That's what Powell said at the podium.
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  Speaker 7: But when you figure that there been one hundred thousand
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  Speaker 7: jobs cuts announced in the private sector this thus far
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  Speaker 7: in February alone, and then you tack on what seventy
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  Speaker 7: five thousand who took the buyout, and the fact that
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  Speaker 7: they waited until today to start laying off six thousand
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  Speaker 7: people at the IRS seven thousand Department of Defense. It's
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  Speaker 7: going to snowball, and it's gonna snowball before the FED meets.
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  Speaker 7: Not maybe not in March, because today coincided with the
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  Speaker 7: survey week for non farm payrolls and obviously a fairly
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  Speaker 7: low number. But if we don't see it in the
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  Speaker 7: February jobs report, we're going to see it in the
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  Speaker 7: March jobs report, and then the Fed will meet again.
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  Speaker 7: So I think that that's why markets have begun to
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  Speaker 7: sniff this out. Seventy percent of jobs created in the
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  Speaker 7: month of January were either government jobs or related to
• 10:23
  Speaker 7: the government healthcare. So when you begin to take that
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  Speaker 7: job creation machine offline, it's been such a massive support.
• 10:34
  Speaker 7: In addition to the fact that we haven't had any
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  Speaker 7: private job creation net net for two and a half years,
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  Speaker 7: something's going to give.
• 10:40
  Speaker 4: So when we see then that the minutes, the officials
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  Speaker 4: are saying in the minutes that you know they want
• 10:46
  Speaker 4: to keep rates steady, we look at what markets are pricing.
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  Speaker 4: Maybe only one more rate cut is the FED not
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  Speaker 4: aware of this snowballing effect that you see coming in
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  Speaker 4: the labor market.
• 10:59
  Speaker 7: Oh, I think FED officials are more than aware. They
• 11:03
  Speaker 7: do have a narrative to uphold. They're not allowed to
• 11:07
  Speaker 7: say that that. You know, they're not allowed to screen
• 11:09
  Speaker 7: fire in a crowdit theater. But we know that FED
• 11:12
  Speaker 7: officials know because Chair Powell, because Governor Christopher Waller, you know,
• 11:18
  Speaker 7: the closest thing to him speaking himself, his closest confidant
• 11:22
  Speaker 7: on the Federal.
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  Speaker 5: Ban Market Committee.
• 11:24
  Speaker 7: They've recognized that new rents are the way to gauge inflation.
• 11:28
  Speaker 5: They've talked about it on multiple occasions.
• 11:30
  Speaker 7: Apartment List yesterday was out with the highest vacancy rate
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  Speaker 7: six point eight five percent, which check out the July
• 11:36
  Speaker 7: twenty twenty high. We've got seven hundred and thirty five
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  Speaker 7: thousand apartments that are still coming out of the construction pipeline,
• 11:44
  Speaker 7: and one apartment read after another saying rents are falling.
• 11:48
  Speaker 5: I'm going in all.
• 11:49
  Speaker 7: These details because if it's rents that Powell and Waller
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  Speaker 7: are falling to gauge inflation, and that's exactly what we're
• 11:57
  Speaker 7: seeing in trueflation, tru bond Traders introduced me to that metric.
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  Speaker 5: It's real time, if you will.
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  Speaker 7: It's come from three come down from three point one
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  Speaker 7: percent two point three percent this year true inflation. We
• 12:08
  Speaker 7: can see what's happening in real time with inflation. And
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  Speaker 7: then there's the dot dot dot what happens with tariffs
• 12:16
  Speaker 7: and who on Earth knows, but we do know that
• 12:18
  Speaker 7: in twenty eighteen with the first Trump tweet about tariffs,
• 12:22
  Speaker 7: by the end of twenty nineteen, the CPI was actually
• 12:24
  Speaker 7: lower because it's because tariff's slowed growth.
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  Speaker 6: Yep.
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  Speaker 2: Absolutely, daniel Dee Martina Bouth, thank you so much for
• 12:31
  Speaker 2: joining us. Danielle Di Martina Booth, She's a CEO and
• 12:34
  Speaker 2: chief strategist QI Research. Joining us live here in our
• 12:37
  Speaker 2: Bloomberg and DIRECTI Brokeer studio, one of our absolute go
• 12:39
  Speaker 2: to voices when it comes to the Federal Reserve and
• 12:42
  Speaker 2: what those folks are doing there.
• 12:46
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 12:49
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 12:53
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 12:56
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 13:00
  Speaker 2: Sorry, demil gurfail sitting in for Alex Steele Paul Sweeney
• 13:03
  Speaker 2: were live here in a Bloomberg Interactive Broker studio and
• 13:05
  Speaker 2: we are streaming live on YouTube as well. In the
• 13:08
  Speaker 2: Greater New York City area. One of the biggest stories
• 13:10
  Speaker 2: over the past couple days is congestion pricing. I went
• 13:12
  Speaker 2: into effect earlier in January. It seems to be working.
• 13:17
  Speaker 2: I mean, congestions down. My travel time into the city
• 13:21
  Speaker 2: when I come in is less, you know, revenues up.
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  Speaker 2: I don't know. But the federal government, Donald Trump put
• 13:28
  Speaker 2: a stop to that, a temporary stop perhaps, and we've
• 13:30
  Speaker 2: got some litigation stemming from Governor Holkl here to maybe
• 13:34
  Speaker 2: keep the congestion pricing going. But it is a big,
• 13:37
  Speaker 2: big deal, certainly here in New York City, but also
• 13:39
  Speaker 2: for some other regions around the country that also have
• 13:41
  Speaker 2: some types of congestion pricing. So everybody's kind of watching
• 13:44
  Speaker 2: to see how this will play out. So we want
• 13:46
  Speaker 2: to get a smart voice on this. Sarah Lynn joins this,
• 13:48
  Speaker 2: co executive director of Open Plans. It joins us from
• 13:51
  Speaker 2: New York City via zoom. Sarah, kind of where are
• 13:54
  Speaker 2: we today with this congestion pricing?
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  Speaker 1: Is it on?
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  Speaker 5: Is it off?
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  Speaker 6: Where are we I think The first really important thing
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  Speaker 6: to say is that congestion pricing works and it's good
• 14:03
  Speaker 6: for business, you know, and you have groups like the
• 14:06
  Speaker 6: Partnership for New York and Redney supporting congestion pricing. They're
• 14:10
  Speaker 6: doing it because they know it's good for business within
• 14:12
  Speaker 6: the zone and in the regional economy as a whole.
• 14:16
  Speaker 5: It's still on.
• 14:17
  Speaker 6: Governor Hokel was very clear yesterday the cameras are still on.
• 14:22
  Speaker 6: The NCAA has already filed suit against the administration's action,
• 14:27
  Speaker 6: and I expect the cameras will be on while that
• 14:29
  Speaker 6: all plays out in court.
• 14:31
  Speaker 4: What do we know about the presidential administration's rationale for
• 14:36
  Speaker 4: wanting to halt this? And then I guess what kind
• 14:41
  Speaker 4: of power they have to actually put this through.
• 14:45
  Speaker 6: I think rationale is a strong word with many things
• 14:47
  Speaker 6: this administration is doing. This feels very personal. Frankly, again,
• 14:54
  Speaker 6: there's not a good business rationale. There's not a good
• 14:58
  Speaker 6: rationale in terms of this is reducing congestion. This is
• 15:01
  Speaker 6: speeding up bus times. That's good for working New Yorkers.
• 15:04
  Speaker 6: This is already reducing traffic crashes in the zone. It's
• 15:07
  Speaker 6: reducing air pollution. So from every perspective that matters, congestion
• 15:12
  Speaker 6: pricing is working the administration. Sean Duffy has made arguments
• 15:16
  Speaker 6: that congestion pricing is bad for working New Yorkers. That's
• 15:20
  Speaker 6: just patently false. Only four percent of working New Yorkers,
• 15:25
  Speaker 6: low income New Yorkers drive into the zone. All of
• 15:28
  Speaker 6: the rest of them rely on public transportation that has
• 15:30
  Speaker 6: gotten better already with only a month and a half
• 15:33
  Speaker 6: of congestion pricing, and we'll continue to get better. So
• 15:35
  Speaker 6: that rationale is just false. I think that they think
• 15:42
  Speaker 6: they have the authority, but we really believe they don't. Again,
• 15:45
  Speaker 6: lawsuits will bear this out over the next few months,
• 15:49
  Speaker 6: but federal approval has already been given. The program is
• 15:51
  Speaker 6: already in place.
• 15:53
  Speaker 2: So folks on the other side of that argument would say,
• 15:56
  Speaker 2: then I live in the grade state of New Jersey.
• 16:00
  Speaker 2: Defend that one.
• 16:01
  Speaker 5: It's a tax.
• 16:02
  Speaker 2: It's just another tax on Metro New York people, and boy,
• 16:06
  Speaker 2: aren't we taxed enough. What's a response to that.
• 16:10
  Speaker 6: Well, it's a toll and there are toll roads all
• 16:12
  Speaker 6: over New Jersey, for example. And you know this is
• 16:15
  Speaker 6: a common this is a common technique that states and
• 16:20
  Speaker 6: municipalities use to raise money both for you know, highways
• 16:24
  Speaker 6: and for other.
• 16:27
  Speaker 5: Funding.
• 16:27
  Speaker 6: You know, this is going to the MTA and funding
• 16:29
  Speaker 6: our public transportation system. But Governor Murphy, you know, has
• 16:33
  Speaker 6: been very critical of this. We'd love to see him
• 16:35
  Speaker 6: get rid of all the tolls on the New Jersey
• 16:37
  Speaker 6: roads if that's his argument.
• 16:40
  Speaker 4: Okay, And so where are we on the process of
• 16:44
  Speaker 4: how New York is trying to fight back. Just walk
• 16:49
  Speaker 4: us through kind of like what the timeline looks like here.
• 16:52
  Speaker 6: Yeah, So the MTA immediately filed suit. We knew this
• 16:55
  Speaker 6: was coming. Trump has been talking about this, you know,
• 16:57
  Speaker 6: since the campaign. So the mt immediately filed suit. I
• 17:02
  Speaker 6: expect that there will be a countersuit from the administration
• 17:06
  Speaker 6: to turn off the cameras, seeking an injunction. I don't
• 17:09
  Speaker 6: know that, but just that would be my assumption. And
• 17:12
  Speaker 6: so then obviously the MTA and Hopel will fight that.
• 17:16
  Speaker 6: My opinion is that an injunctions not warranted here because
• 17:19
  Speaker 6: that would be clear and present damage to the state
• 17:22
  Speaker 6: and the mpta's budget. We should be allowed to continue
• 17:26
  Speaker 6: receiving this funding. Well, the lawsuit, the main lawsuit, plays
• 17:28
  Speaker 6: out in court, and that can take you know, that
• 17:31
  Speaker 6: can take a long time. Lawsuits famously are not the
• 17:34
  Speaker 6: fastest thing.
• 17:36
  Speaker 2: So just thirty seconds left, Sarah in the interim, giving
• 17:38
  Speaker 2: them now into the legal realm here and the delays.
• 17:42
  Speaker 2: The cameras are on. Are they still recording everybody? Is
• 17:45
  Speaker 2: it still like functional?
• 17:48
  Speaker 6: Yep, the cameras are on. They're still issuing tolls. That
• 17:50
  Speaker 6: will continue until we are told otherwise by a court,
• 17:54
  Speaker 6: and we'll continue to receive all the benefits. And the
• 17:57
  Speaker 6: program has been getting more and more popular over time.
• 18:00
  Speaker 6: Every program in the world that is put in place does,
• 18:03
  Speaker 6: and I think New Yorkers are continuing to see the
• 18:05
  Speaker 6: benefits of this.
• 18:06
  Speaker 2: All right, Seralyn, thank you so much. We appreciate that.
• 18:08
  Speaker 2: Serlyn co Executive director, open plans again. Congestion pricing folks
• 18:12
  Speaker 2: here in New York is a big, big issue affecting
• 18:14
  Speaker 2: a lot of folks here. Our offices are Lexington Avenue,
• 18:18
  Speaker 2: the Bloomberg offices Lexington Avenue at fifty ninth Street, so
• 18:22
  Speaker 2: we are just one block inside this zone here, and
• 18:24
  Speaker 2: so for people like John Tucker, Bloomberg News, Michael Barr
• 18:28
  Speaker 2: Bloomberg News who drive into the city from New Jersey
• 18:33
  Speaker 2: very early in the morning two three, four, o'clock in
• 18:35
  Speaker 2: the morning. It's an issue just for them to their
• 18:38
  Speaker 2: daily commits. It's issue for a lot of people, and
• 18:40
  Speaker 2: there's arguments.
• 18:41
  Speaker 5: For both sides here.
• 18:42
  Speaker 2: So but now it's in the courts.
• 18:44
  Speaker 4: Yeah, the Bloomberg headquarters actually have they have cameras, and
• 18:49
  Speaker 4: so we had Bloomberg News actually has a unique perspective
• 18:52
  Speaker 4: and a unique way to report on this because we
• 18:54
  Speaker 4: can actually see exactly, you know, which.
• 18:57
  Speaker 2: Our building on the street right outside the bloom the
• 19:01
  Speaker 2: Bloomingdale's across the street from the Bloomberg headquarters of blooming Gills.
• 19:04
  Speaker 2: That's where the cameras are and they're right over Lexington
• 19:07
  Speaker 2: Avenue and they've been there for almost a year. So
• 19:10
  Speaker 2: we'll stay on.
• 19:11
  Speaker 8: Top of that.
• 19:13
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 19:17
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• 19:20
  Speaker 1: with the Bloomberg Business app, Listen on demand wherever you
• 19:23
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• 19:27
  Speaker 2: Emily Grafe was sitting in for Alex Steel and Paul Sweeney.
• 19:30
  Speaker 2: We are live here in the Bloomberg Interactive Broker Studio.
• 19:32
  Speaker 2: We're streaming live on YouTube to theay can actually see
• 19:34
  Speaker 2: us for better or worse. I go over to YouTube
• 19:37
  Speaker 2: dot com search Bloomberg Podcast Live. That's where you'll find
• 19:40
  Speaker 2: us here. Earnings coming in we have been about eighty
• 19:43
  Speaker 2: percent of the S and P five hundred companies have
• 19:45
  Speaker 2: reported already double digit increases in earnings for share, a
• 19:48
  Speaker 2: little bit better and expected. Gina Martin Adams and Bloomberg
• 19:51
  Speaker 2: Intelligence was just saying how the narers are coming on
• 19:53
  Speaker 2: a little bit better than she had been looking for.
• 19:55
  Speaker 2: The question is is that enough for this market? Because
• 19:58
  Speaker 2: I don't think the FED is going to be doing
• 19:59
  Speaker 2: a lot for us this year. That let's you know,
• 20:01
  Speaker 2: kind of what the market's telling us. Phil Orlando joins us.
• 20:03
  Speaker 2: He does this stuff for a living. He's a chief
• 20:06
  Speaker 2: equity market strategist and head of client portfolio management at
• 20:09
  Speaker 2: federatedt Hermeis. We was appreciate getting a few minutes of
• 20:11
  Speaker 2: Phil's time. So, Phil, how did you kind of set
• 20:14
  Speaker 2: the expectations for twenty twenty five with your clients after
• 20:17
  Speaker 2: the really good performance the SMP has had really for
• 20:21
  Speaker 2: the last couple of years.
• 20:23
  Speaker 8: I absolutely right Paul that in twenty three and twenty
• 20:27
  Speaker 8: four the S and P was up between twenty and
• 20:29
  Speaker 8: twenty five percent total return. And then where we got
• 20:34
  Speaker 8: really aggressive on stocks was what we thought was that
• 20:38
  Speaker 8: over sold bottom. In October of twenty three, the SMP
• 20:41
  Speaker 8: was down around forty one hundred, and then our year
• 20:45
  Speaker 8: end target for the S and P last year was
• 20:47
  Speaker 8: sixty two hundred. That was, you know, roughly a forty
• 20:51
  Speaker 8: eight percent rally in stocks over like a fifteen to
• 20:55
  Speaker 8: sixteen month period. That's phenomenal, and it's not replicable. I mean,
• 20:58
  Speaker 8: we're not going to do that this year next year.
• 21:01
  Speaker 8: But what we have been telling clients is in light
• 21:07
  Speaker 8: of the fiscal policy initiatives that we think are going
• 21:11
  Speaker 8: to put in place over the course of the next
• 21:13
  Speaker 8: fifteen months or so, in light of a gradual decline
• 21:18
  Speaker 8: in interest rates that we expect to see out of
• 21:21
  Speaker 8: the FED over the next year or two, we can
• 21:24
  Speaker 8: still see stocks grind up, you know, mid to upper teens,
• 21:28
  Speaker 8: but not you know, twenty or twenty five percent. So
• 21:31
  Speaker 8: still a constructive environment, but not as phenomenal a it's
• 21:34
  Speaker 8: been the last couple of years, Phil.
• 21:36
  Speaker 4: What would have to change at least for the FED
• 21:40
  Speaker 4: environment to kind of dent that view. We were talking
• 21:44
  Speaker 4: earlier about how potentially we might only see one rate
• 21:49
  Speaker 4: cut this year. What if we don't see any at all?
• 21:53
  Speaker 4: How much would that affect your stock outlook.
• 21:57
  Speaker 8: So we are in the one or two rate cut
• 21:59
  Speaker 8: camp right now in the back end of the year.
• 22:03
  Speaker 8: We're thinking the first cut might be September or so,
• 22:06
  Speaker 8: second one if there is one, December or so, and
• 22:09
  Speaker 8: that's largely a function of the data. Now remember, Emily
• 22:12
  Speaker 8: that the Federal Reserve has a dual mandate, so they're
• 22:15
  Speaker 8: looking at the trajectory with that Phillips curve trade off.
• 22:18
  Speaker 8: What's going on with the labor market, what's going on
• 22:20
  Speaker 8: with inflation? And right now, the labor market's pretty strong,
• 22:25
  Speaker 8: and inflation has actually been reaccelerating over the course of
• 22:30
  Speaker 8: the last you know, six to eight months, based upon
• 22:34
  Speaker 8: whatever metric you want to look at. So given that environment,
• 22:38
  Speaker 8: you know, the market a year ago thought the Fed
• 22:42
  Speaker 8: was going to be cutting interest rates seven times last year.
• 22:45
  Speaker 8: That obviously didn't happen, and there's a school of thought
• 22:49
  Speaker 8: that the Fed is going to slow down materially, you know,
• 22:53
  Speaker 8: from this year. Remember they cut their their SEP target
• 22:56
  Speaker 8: down to two cuts for this year, and the market's thinking, well,
• 22:59
  Speaker 8: maybe it's one, maybe it's none, and and I guess
• 23:02
  Speaker 8: the bears are thinking, well, maybe the Fed's going to
• 23:04
  Speaker 8: turn around and start hiking interest rates at some point.
• 23:07
  Speaker 8: So there's a lot of confusion about, you know, what
• 23:11
  Speaker 8: monetary policy is going to look like, and to some
• 23:13
  Speaker 8: degree that's going to be driven by what What does
• 23:17
  Speaker 8: fiscal policy look like? What what is the incoming Trump
• 23:20
  Speaker 8: administration able to get done in terms of extending and
• 23:24
  Speaker 8: making permanent the tax cuts, What are they doing with tariffs,
• 23:27
  Speaker 8: what are they doing with regulations and and and how
• 23:30
  Speaker 8: is all of that going to impact economic growth and inflation.
• 23:34
  Speaker 8: I think there's a giant question mark mark on all
• 23:37
  Speaker 8: of that. Yet, yet stocks have been just powering through.
• 23:40
  Speaker 8: We hit you know, another all time record high yesterday,
• 23:43
  Speaker 8: So there's a little bit of a disconnect there in
• 23:46
  Speaker 8: terms of the uncertainty in the marketplace. Yet, uh, the
• 23:50
  Speaker 8: you know, very strong performers of the equity mark.
• 23:53
  Speaker 2: Pill What is the January Barometer portfolio indicator? What is
• 23:57
  Speaker 2: it and what's it telling you?
• 23:59
  Speaker 8: The January Barometer Portfolio indicator is telling us that the
• 24:04
  Speaker 8: sectors of the market, the eleven s and p five
• 24:08
  Speaker 8: hundred sectors in the month of January. Historically, the market
• 24:14
  Speaker 8: sort of tips their hand, and the sectors that do
• 24:17
  Speaker 8: well or do poorly in January tend to continue in
• 24:20
  Speaker 8: that direction through the balance of the year. What we
• 24:22
  Speaker 8: saw on January this year is that a lot of
• 24:26
  Speaker 8: the growth and technology mag seven kind of names took
• 24:30
  Speaker 8: it on the chin. In the month of January, investors
• 24:33
  Speaker 8: began to lock in some profits. Yet the sectors of
• 24:37
  Speaker 8: the market that we felt had been left for dead
• 24:40
  Speaker 8: the last year or two, financials, healthcare, industrials, utilities, they
• 24:45
  Speaker 8: had a pretty good month, all better than the S
• 24:48
  Speaker 8: and P five hundred performance. So what we've been talking
• 24:52
  Speaker 8: about since the middle of last year is that we
• 24:55
  Speaker 8: felt that there would be a reversion to the mean,
• 24:58
  Speaker 8: that the dramatic ou foremant of the meg seven names
• 25:02
  Speaker 8: would ease to some degree, that there'd be some profit
• 25:06
  Speaker 8: taking and a rotation of some of those profits into
• 25:10
  Speaker 8: the forgotten four ninety three that had dramatically underperformed. And
• 25:14
  Speaker 8: we thought that there was, you know, a significant catch
• 25:17
  Speaker 8: up trade in the offing, and for the better part
• 25:20
  Speaker 8: of the last couple of quarters, that trade has started
• 25:22
  Speaker 8: to work, and we think it's got legs.
• 25:25
  Speaker 4: Phil, We don't have a ton of time left, but
• 25:27
  Speaker 4: I want to get your thoughts on the data that
• 25:30
  Speaker 4: we saw showing a slump.
• 25:32
  Speaker 5: In retail sales.
• 25:33
  Speaker 4: What does that mean for the equity market.
• 25:37
  Speaker 8: I wrote a piece beginning of the week that hit
• 25:40
  Speaker 8: the Federated website. Yesterday we talked about the consumer slowing down.
• 25:45
  Speaker 8: We had a pretty good Christmas, all right, and we
• 25:48
  Speaker 8: defined Christmas as October through January. Christmas sales were up
• 25:52
  Speaker 8: three point nine percent year on year this year versus
• 25:56
  Speaker 8: two point eight percent last year. So it was a
• 25:58
  Speaker 8: pretty good Christmas. But October, November, December were pretty good.
• 26:03
  Speaker 8: January sort of fell off a cliff. January was not good.
• 26:08
  Speaker 8: And you look at a number of the issues that
• 26:11
  Speaker 8: are that are happening. We talked about inflation starting to
• 26:15
  Speaker 8: re accelerate, consumer confidence has started to roll over, personal
• 26:19
  Speaker 8: savings rate had come down with two year low. Low
• 26:22
  Speaker 8: end consumers are struggling. Our view is that the strength
• 26:26
  Speaker 8: we saw in the fourth quarter of last year is
• 26:29
  Speaker 8: going to decidedly slow here in the first quarter. And
• 26:32
  Speaker 8: I guess, depending upon what happens with the Fed and Washington,
• 26:36
  Speaker 8: that trend, you know, may stabilize in March or April.
• 26:41
  Speaker 8: Or it may continued a week and we'll just have
• 26:43
  Speaker 8: to say.
• 26:44
  Speaker 2: Phil, thanks so much for joining us. Always appreciate getting
• 26:47
  Speaker 2: a few minutes of your time. Philler Lando, chief equity
• 26:49
  Speaker 2: market strategists and head of client portfolio Management and federated
• 26:52
  Speaker 2: at Hearmeyes joining us via zoom Appreciate getting his thoughts.
• 26:56
  Speaker 2: He's been really clear on his market calls over the
• 26:59
  Speaker 2: last four five, six years, and more than not he
• 27:03
  Speaker 2: has been spot on. So it's a good voice with
• 27:05
  Speaker 2: like check it in with pill Orlando.
• 27:08
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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• 27:16
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• 27:27
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