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UMich Survey, Euro Falls · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Listen on demand wherever you get your podcasts, or watch
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  Speaker 1: us live on YouTube.
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  Speaker 2: Malex Steel alongside Paul Sweeney. Happy Friday. Everyone made it
• 0:26
  Speaker 2: the end of the week. Yes, we did that. Lots
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  Speaker 2: to go through over the next couple hours. We want
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  Speaker 2: to kick off with more on that you mished sentiment.
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  Speaker 2: It is the final read for November, but I'm interested
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  Speaker 2: to see sort of what that brings in when it
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  Speaker 2: comes to the election result. So Joe Anshu, University of
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  Speaker 2: Michigan Surveys of Consumer Director joins us sentiment coming in
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  Speaker 2: at about seventy three point nine, a little bit better
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  Speaker 2: current condition sixty four point four, also better expectations, also
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  Speaker 2: a touch better. Does this encapsulate the election?
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  Speaker 3: Yes it does so.
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  Speaker 4: Our preliminary read that we released two weeks ago did
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  Speaker 4: not encapsulate the election, but today's release includes two weeks,
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  Speaker 4: four and two weeks after the election. Essentially, what we
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  Speaker 4: saw was that after Trump was elected, sentiment lost about
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  Speaker 4: half of the gains that it had seen in the
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  Speaker 4: first two weeks of the month. But on net, we're
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  Speaker 4: still a little bit better than we were in October,
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  Speaker 4: and we are now at four straight months of incremental gains.
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  Speaker 5: Johan, talk to us about inflation out look. I know
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  Speaker 5: you guys at Michigan take a look at that in
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  Speaker 5: your survey. How are people thinking about the inflation netlook?
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  Speaker 4: In the short run, people are expecting inflation to continue stabilizing.
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  Speaker 4: We saw the year ahead inflation expectations edged down by
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  Speaker 4: one tenth of percent, likely supported by lower gas prices
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  Speaker 4: at this time of year. That being said, we actually
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  Speaker 4: saw long run inflation expectations go from three point zero
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  Speaker 4: to three point two. That's kind of on the high
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  Speaker 4: side of the range we've been seeing for the last
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  Speaker 4: couple of years. Consumers are perceiving quite a bit of
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  Speaker 4: uncertainty over long run inflation, which is consistent with the
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  Speaker 4: fact that we don't really know exactly Trump's economic agenda
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  Speaker 4: is going to look like over the next four years,
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  Speaker 4: So that uncertainty seems quite reasonable.
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  Speaker 5: All right, Joe, and thank you so much. We appreciate it.
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  Speaker 5: I appreciating a couple of minutes of your time joined shoe.
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  Speaker 5: She's at the University of Michigan Surveys of consumer She
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  Speaker 5: directs to that whole business here and again the you
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  Speaker 5: missurveyed numbers just a headline number. I'm gonna go with that.
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  Speaker 5: It came in at seventy one point eight contentius seventy
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  Speaker 5: three point nine and also is down a little bit
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  Speaker 5: from last period as well.
• 2:25
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  Speaker 2: Let's get to the other big news of the day,
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  Speaker 2: and that was European PMIS. They were terrible and you
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  Speaker 2: definitely then saw rerating in terms of cuts, maybe a
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  Speaker 2: fifty basis point cut from the ECB. So we wanted
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  Speaker 2: to break it down a little bit more for you
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  Speaker 2: with David Powell Senior. You're area economist for Bloomberg Economics.
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  Speaker 2: David was so bad about these numbers. What stood out
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  Speaker 2: to you, Well.
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  Speaker 6: Actually they were bad all around, and that's really what
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  Speaker 6: stood out. There was no bright spots here, so the
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  Speaker 6: composite figure for the your area declined and the numbers
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  Speaker 6: for both the services and manufacturing sectors were weak. In
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  Speaker 6: addition to that, we get a national breakdown at the
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  Speaker 6: first release which shows the numbers for France and Germany,
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  Speaker 6: and it showed both of the your areas to largest
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  Speaker 6: economies experience weakness. So it's not something that's just isolated
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  Speaker 6: to one country or one sector. It's this broad based weakness.
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  Speaker 5: Again, it's interesting that we woke up to this data
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  Speaker 5: here in the States, David, and we kind of said
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  Speaker 5: we knew there was you know, it was softer in
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  Speaker 5: across Europe, but some of this data came in and
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  Speaker 5: just really, I think, surprise the markets here. What's the
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  Speaker 5: expectation for the next you know, six to twelve months
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  Speaker 5: as reached in European economic activity.
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  Speaker 6: Well, I think the market is bracing for deterioration in
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  Speaker 6: the economic numbers coming out out of coming out of
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  Speaker 6: the EUR area, and that's because of the electoral victory
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  Speaker 6: of Donald Trump. One of his campaign promises was to
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  Speaker 6: impose tariffs not only on China, but smaller tariffs on
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  Speaker 6: other trading partners and one country that really stands out
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  Speaker 6: in that list is Germany given its huge trade surplus
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  Speaker 6: with the United States, and it's a country that Donald
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  Speaker 6: Trump specifically referred to on many occasions during the campaign.
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  Speaker 6: And we have run the numbers and our estimate is
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  Speaker 6: if those tariffs turn out to be as high as
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  Speaker 6: Trump promised during the campaign, that could knock in the
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  Speaker 6: short term about one percent off of GDP in the
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  Speaker 6: EU area. And we've also had estimates come from the
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  Speaker 6: Bundesbank Germany Central Bank, and they have a similar estimate
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  Speaker 6: for the German economy. And that's going to be a
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  Speaker 6: big shock to demand in the your era, which will
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  Speaker 6: require the ECB in all likelihood to respond the form
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  Speaker 6: of lower interest rates. And that comes on top of
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  Speaker 6: what was already a weak economy before any of this happened.
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  Speaker 2: Okay, so do you think fifty basis points coming up?
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  Speaker 6: I don't think they'll cut by fifty basis points in December.
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  Speaker 6: It will certainly introduce that topic for discussion. I think
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  Speaker 6: the more likely outcome is you just see a longer
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  Speaker 6: period of twenty five basis point cuts. So we look
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  Speaker 6: for a cut of twenty five basis points in December,
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  Speaker 6: and we think the ECB will keep with these back
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  Speaker 6: to back cuts being cut at every meeting until until
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  Speaker 6: they reached neutral, which is about two percent. So we're
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  Speaker 6: going to have numerous cuts coming up throughout the start
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  Speaker 6: of twenty twenty five. And like I said, more frequent
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  Speaker 6: cuts is more likely than larger cuts.
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  Speaker 5: David, thank you so much for joining us. We appreciate
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  Speaker 5: getting a few minutes of your time. David Powell, he's
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  Speaker 5: a senior Euro Area economist for Bloomberg Economics. That joining
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  Speaker 5: us from via zoom thing.
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• 6:18
  Speaker 2: So and video is built as like the biggest event
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  Speaker 2: for the end of the year. And so my question
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  Speaker 2: over the last twenty four hours has been, Okay, well
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  Speaker 2: we're done with that, so then then what? And I
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  Speaker 2: keep getting notes in my inbox about how the rally
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  Speaker 2: is broadening out and then I hear, ooh, we might
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  Speaker 2: be topping out in tech. Go diversify. So let's get
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  Speaker 2: someone whose job is to actually understand all this. Grace Lee,
• 6:36
  Speaker 2: senior portfolio manager for Columbia thread Needle, joins us. Now, Grace,
• 6:40
  Speaker 2: what is the right strategy now that we're done with Nvidia?
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  Speaker 6: Now? What?
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  Speaker 8: Well? I think we always have to pay attention to
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  Speaker 8: in video and I think what in videos earnings showed
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  Speaker 8: us this week is that the AI theme is still
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  Speaker 8: alive and well, and so I think we can't ignore that.
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  Speaker 8: That said, there are plenty of other sectors and I
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  Speaker 8: think we're starting to see DOT. You know, we've started
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  Speaker 8: to see it all year. You know, you've seen a
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  Speaker 8: stealth rally in utilities and banks, especially post elections. You know,
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  Speaker 8: there has been definitely a people taking a second look
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  Speaker 8: at financials and other sectors that might have been a
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  Speaker 8: little bit more ignored during the year because of maybe
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  Speaker 8: regulatory concerns and things which have certainly eased post elections.
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  Speaker 5: Grace, what did the election mean to you and your
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  Speaker 5: team when you woke up that Wednesday morning? Did it
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  Speaker 5: alter your outlook or how you're thinking about allocation or sectors?
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  Speaker 5: How did you think about that?
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  Speaker 8: No, I think mostly it was a huge clearing event
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  Speaker 8: that it was decisive. It didn't take days or weeks
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  Speaker 8: to count the votes or anything, and then I think
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  Speaker 8: that it really is probably more of a positive I
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  Speaker 8: think for the for the markets. The one takeaway I
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  Speaker 8: would say is that at this point I probably don't
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  Speaker 8: want to be more defensive. You know, I think I
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  Speaker 8: think business leaders, company managements that we've met with since
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  Speaker 8: the elections, they are more optimistic about what might happen
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  Speaker 8: under a Trump administration and with the Republican Congress.
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  Speaker 2: What are your favorite top companies right now? Let's give
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  Speaker 2: me a couple that really float your boat.
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  Speaker 8: Well, I think in terms of I would broaden it
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  Speaker 8: out to maybe some sectors I think, you know, I
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  Speaker 8: would say utilities is actually an interesting one. As much
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  Speaker 8: as I say, don't get more defensive, there are some
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  Speaker 8: some actual secular themes going on in in the utility sector.
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  Speaker 8: And by by utilities, I'm not talking certainly the power
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  Speaker 8: producers have done very well this year. But you know,
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  Speaker 8: when when you think of Plaine Vanilla regulated utilities, I
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  Speaker 8: would say that if there's ever a time to get
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  Speaker 8: excited about about these companies, now is that time. And
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  Speaker 8: you know, these are companies like Excel Energy, Southern Company,
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  Speaker 8: the ones that maybe your you know, grandmother might have
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  Speaker 8: been clipping the dividends. But at this point, what we've
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  Speaker 8: seen is that we've had flat power demand for probably
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  Speaker 8: over twenty years, and that is now changing for the
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  Speaker 8: next several years where it's not just AI data centers,
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  Speaker 8: it's just broader electrification, these crypto mining and resuring. That's
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  Speaker 8: going to drive a lot more power demand, which means
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  Speaker 8: that the regulated utilities will have to invest, and that
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  Speaker 8: means that their earnings growth takes up higher. And we've
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  Speaker 8: started seeing that in reality this quarter, where you've seen
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  Speaker 8: some really interesting stock reactions, you know, maybe even double
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  Speaker 8: digit price gains in a day off of just slightly
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  Speaker 8: higher long term earnings outlooks. And I think that can
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  Speaker 8: continue within the c Hey grace.
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  Speaker 5: As a former banker, when I woke up that Wednesday morning,
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  Speaker 5: I said, uh, oh, M and A. I think that
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  Speaker 5: could be back on the front burner here. The regulators
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  Speaker 5: have been really really tough on M and A or
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  Speaker 5: list several years. That might change. Does that factor into
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  Speaker 5: how you think about what sectors to get exposure to.
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  Speaker 8: I think broadly M and A should pick up. People
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  Speaker 8: have been waiting for this for a long time. I
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  Speaker 8: think you know, financials are obviously front and center there.
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  Speaker 8: You know, we're we're certainly involved in some of the
• 10:34
  Speaker 8: capital market stocks, some of the alternative investment managers which
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  Speaker 8: we think we will will certainly see benefits there. But
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  Speaker 8: you know, I think broadly and possibly you know, we
• 10:47
  Speaker 8: don't traffic in small caps a ton, but I think
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  Speaker 8: some of the smaller mid cap companies might might also
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  Speaker 8: be a little bit more interesting in this environment as
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  Speaker 8: potential targets.
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  Speaker 2: Yeah, profitable small camp that's really been out performing. All right,
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  Speaker 2: thanks so much, Grace, really appreciate it. Grace Lee, Senior
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  Speaker 2: portfolio manager for Columbia Thread Needle. Joining us.
• 11:08
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 11:26
  Speaker 2: Another story that we're following today concerns oil and JP
• 11:30
  Speaker 2: Morgan and Iran. So apparently the US Treasury Department is
• 11:33
  Speaker 2: examining JP Morgan's relationship with a hedge fund that is
• 11:36
  Speaker 2: said to be part of a network that's overseen by
• 11:39
  Speaker 2: Iranian oil trader hosting Chamkani. We want to understand sort
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  Speaker 2: of more on this. What might this violate in terms
• 11:46
  Speaker 2: of sanctions or not. So we're here to break us
• 11:47
  Speaker 2: down for us as Elliott Stein Bloomberg intelligence litigation analyst.
• 11:51
  Speaker 2: Can you just give us the facts first?
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  Speaker 3: Yeah?
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  Speaker 9: So, I mean the investigations early, the reporting is early.
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  Speaker 9: A lot of unknowns, both known and unknown at this point.
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  Speaker 9: But it sounds like the Treasury Department is investigating JP
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  Speaker 9: Morgan in relation to its connection to this hedge fund
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  Speaker 9: that's based in London and Dubai and the hedge funds
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  Speaker 9: connection to an oil trader, And it sounds like the
• 12:16
  Speaker 9: overall investigation is focused on the oil trader, but the
• 12:20
  Speaker 9: Treasury departments also looking at JP Morgan to make sure
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  Speaker 9: that it followed its you know, due diligence and did
• 12:25
  Speaker 9: its KYC and know your customer and AML compliance processes.
• 12:29
  Speaker 5: And I guess I'm just looking at the Bloomberg reporting.
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  Speaker 5: I guess folks there say JP Morgan feels like they
• 12:35
  Speaker 5: don't need to do anything here because neither the Shimkhani
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  Speaker 5: guy nor the company appear in any sanctions list.
• 12:42
  Speaker 3: I guess, right, yeah, and this may be you know,
• 12:44
  Speaker 3: this may be a nothing burger. There may be nothing there.
• 12:47
  Speaker 9: And you know, best case scenario, or one possible scenario
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  Speaker 9: where JP Morgan has no exposure, is that maybe it
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  Speaker 9: did all its due diligence and it was misled by
• 12:59
  Speaker 9: you know, the the companies that was doing its due
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  Speaker 9: diligence on That's just one possibility. But worst case scenario,
• 13:05
  Speaker 9: it didn't do it's due diligence or it ignored red
• 13:08
  Speaker 9: flags and we've seen, you know, recently with TD Bank
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  Speaker 9: what that can amount to.
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  Speaker 2: So if this oil trader did have a relationship with
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  Speaker 2: this individual from Iran, what does that potentially violate? What
• 13:20
  Speaker 2: are the sanctions and the rules currently that would make
• 13:22
  Speaker 2: that a problem, right, So, you.
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  Speaker 9: Know, banks should not be doing business with companies that
• 13:28
  Speaker 9: are under sanctions or on you know, special lists, you know,
• 13:33
  Speaker 9: And so it's unclear what the connection is though to
• 13:37
  Speaker 9: this oil trader.
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  Speaker 3: Apparently he is the son of someone who was.
• 13:41
  Speaker 9: In the Ayatolla's like inner circle, so there may be
• 13:45
  Speaker 9: some connections. But we've seen in the past that banks
• 13:47
  Speaker 9: have paid billions of dollars for doing transactions with the
• 13:51
  Speaker 9: Iranian government or other Iranian entities that are on sanctions lists.
• 13:55
  Speaker 3: So it can be very costly. But it's not clear
• 13:58
  Speaker 3: that the investigation is even focused on that, and may
• 14:00
  Speaker 3: be sort of just to make sure that JP Morgan
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  Speaker 3: was doing its due diligence.
• 14:05
  Speaker 5: And doing through that. The training here at Bloomberg about
• 14:08
  Speaker 5: this type of issues, yeah, the type of training that
• 14:11
  Speaker 5: the same thing we receive and I'm sure everybody across
• 14:14
  Speaker 5: the industry, to various degrees receives about Hey, if you're
• 14:18
  Speaker 5: doing business with somebody that may or may not be
• 14:20
  Speaker 5: on a list, just stop, call your boss, call complaints,
• 14:24
  Speaker 5: see what the gig is before you move forward.
• 14:26
  Speaker 2: Well, it sounds like this could be like a third derivative.
• 14:29
  Speaker 9: Exactly, And that's why there's a lot of unknowns here.
• 14:32
  Speaker 9: The bank may have no exposure, but anytime you're talking
• 14:36
  Speaker 9: about sanctions on Iran and you know banks doing transactions
• 14:40
  Speaker 9: you know indirectly as well, you know, your eyebrows get
• 14:44
  Speaker 9: raised and banks have paid.
• 14:46
  Speaker 3: A lot of money in the past for failures related
• 14:48
  Speaker 3: to this.
• 14:48
  Speaker 2: Do we feel that sanctions could get more strenuous under
• 14:51
  Speaker 2: President Trump? Like, what are you thinking about?
• 14:54
  Speaker 3: Certainly possible, right I mean, yeah, I would expect that.
• 14:57
  Speaker 5: I would expect it, all right, So I'm going to
• 14:59
  Speaker 5: a JP Moore stocks up one percent today, up forty
• 15:01
  Speaker 5: five percent year to date, so I'm assuming the market's
• 15:04
  Speaker 5: discounting this is a non risk issue. How about other
• 15:06
  Speaker 5: litigation that your work? What else are you working on?
• 15:09
  Speaker 5: Because you do the litigation that companies have the deal
• 15:11
  Speaker 5: with that can move stocks.
• 15:13
  Speaker 9: Absolutely and actually in this arena, there are several other
• 15:17
  Speaker 9: banks that are under investigation for either AML violations or
• 15:21
  Speaker 9: potentially sanctions violations. UBS is being investigated with in connection
• 15:26
  Speaker 9: with clients that have took over from Credit Sue who
• 15:29
  Speaker 9: may be in violation of sanctions on Russia. There's a
• 15:33
  Speaker 9: swedest Sweat Bank that has been under investigation for AML
• 15:37
  Speaker 9: violations for years now, so I'm waiting for a penalty there.
• 15:40
  Speaker 9: There's a Turkish bank, Hawkbank, that was indicted by the
• 15:44
  Speaker 9: US government for violating sanctions on Irun.
• 15:46
  Speaker 3: So that's one area I'm looking at.
• 15:49
  Speaker 9: Another big area right now is all these rules and
• 15:52
  Speaker 9: regulations that the SEC and other regulators have put into
• 15:55
  Speaker 9: place under the Biden administration. There's a lot of lawsuits
• 15:58
  Speaker 9: over them, and so we're waiting to see what is
• 16:00
  Speaker 9: going to happen with the rules and with the lawsuits.
• 16:02
  Speaker 2: What else would a Trump victory mean for your world?
• 16:06
  Speaker 9: Right, So, in connection with these rules and regulations that
• 16:09
  Speaker 9: the SEC has promulgated during the Biden administration and the
• 16:14
  Speaker 9: CFPB as well, we're expecting a lot of the rules
• 16:17
  Speaker 9: and regulations to maybe be paused in terms of enforcing them,
• 16:21
  Speaker 9: and then the regulators will probably go back and revisit
• 16:23
  Speaker 9: the rules, but that takes a while. I'm also you know,
• 16:27
  Speaker 9: I'm attuned to the courts as well, and I'm particularly
• 16:33
  Speaker 9: interested in seeing whether.
• 16:34
  Speaker 3: The two oldest justices on the Supreme Court.
• 16:36
  Speaker 9: Clarence Thomas and Sam Alito, retire, probably at some point
• 16:40
  Speaker 9: during this next Trump administrator life, in which case he
• 16:43
  Speaker 9: would name the replacements and you'll have a conservative majority
• 16:47
  Speaker 9: for at least another generation on the Supreme Court.
• 16:49
  Speaker 7: Interesting.
• 16:49
  Speaker 5: Wow, because you started off fine going to Stanford, then
• 16:53
  Speaker 5: you went to get a law degree. It all turns
• 16:56
  Speaker 5: south Man. What were you thinking?
• 17:00
  Speaker 3: Have you marked your calendar for the Stanford Duke basketball game?
• 17:03
  Speaker 5: No, because we're now in the same conference, right, Yeah,
• 17:05
  Speaker 5: when is that?
• 17:06
  Speaker 3: I don't have a car, but I think I think
• 17:08
  Speaker 3: it's in January, maybe February.
• 17:09
  Speaker 5: I want to check it outre Stanford is in the
• 17:11
  Speaker 5: Atlantic Coast Conference. That makes sense.
• 17:12
  Speaker 3: Yeah, big game this weekend.
• 17:13
  Speaker 5: My Duke Field hockey team had a little problem getting
• 17:15
  Speaker 5: out to the Bay Area for their games against it
• 17:17
  Speaker 5: because you have to Drham, you have to transfer and connect,
• 17:20
  Speaker 5: and I'm like, why are my kids going out to
• 17:23
  Speaker 5: San Francisco for It's just the whole thing's a mess.
• 17:26
  Speaker 5: Elliot Stein Bloomberg Intelligence litigation analysts joining us here in
• 17:29
  Speaker 5: our Bloomberg Interactive Brokers Studio.
• 17:33
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 17:43
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  Speaker 1: flagship New York station Just say Alexa playing Bloomberg eleven thirty.
• 17:51
  Speaker 2: Happy for Friday. We made it to the end of
• 17:53
  Speaker 2: the week. I'm Alex d alongside Paul swe Need. This
• 17:55
  Speaker 2: is Bloomberg Intelligence Radio. We bring you all the top
• 17:57
  Speaker 2: news and business, economics and finance through our lens of
• 17:59
  Speaker 2: our Bloomberg Intelligence folks. We also tap an amazing network
• 18:03
  Speaker 2: of resources outside of Bloomberg Intelligence, and we're going to
• 18:06
  Speaker 2: tap one right now. Jessica Kriegel is chief strategy Officer
• 18:09
  Speaker 2: of Workforce and Labor at Culture Partner. She joins US
• 18:12
  Speaker 2: now from Sacramento, California. So the headline from this week
• 18:16
  Speaker 2: that we didn't really get to digest as much was
• 18:19
  Speaker 2: Elon Musk and Vivek Ramaswami outlining a plan for large
• 18:23
  Speaker 2: scale firings of the federal workforce, in part, guys, get
• 18:26
  Speaker 2: your butt backs in the office five days a week.
• 18:28
  Speaker 2: You don't want to do it, and then you're going
• 18:29
  Speaker 2: to quit. Is this realistic? What's your take on something
• 18:33
  Speaker 2: like this?
• 18:35
  Speaker 10: Well, they argue that it is absolutely realistic, and you've
• 18:39
  Speaker 10: already seen a precedent set in the corporate world where
• 18:43
  Speaker 10: people are forcing employees back into the office five days
• 18:47
  Speaker 10: a week. What is a little bit different or maybe
• 18:49
  Speaker 10: even refreshing, you could argue, is that they are being
• 18:52
  Speaker 10: straightforward about the fact that they anticipate by forcing people
• 18:56
  Speaker 10: back into the office five days a week, that people
• 18:59
  Speaker 10: will quit, and they welcome that. I think that's probably
• 19:02
  Speaker 10: true for a lot of CEOs who make that decision
• 19:04
  Speaker 10: because they know their workforce values flexibility, and yet they're
• 19:09
  Speaker 10: forcing them to go back into the office. So they
• 19:12
  Speaker 10: are being in some ways at least transparent that there
• 19:15
  Speaker 10: is an alternative motivation for forcing people back into the office.
• 19:19
  Speaker 10: It's not about quote unquote culture, it's not about quote
• 19:22
  Speaker 10: unquote collaboration. It's really about we want to reduce the workforce,
• 19:26
  Speaker 10: and this is one of the many tools that we
• 19:27
  Speaker 10: will use.
• 19:29
  Speaker 5: So I guess in the federal government again, Elon musk
• 19:32
  Speaker 5: vivek Ramaswani, what do you think they could do?
• 19:36
  Speaker 3: Should do?
• 19:36
  Speaker 5: When you think about I don't know, waste inefficiency bureaucracy.
• 19:42
  Speaker 5: Is there a preferred way to kind of go about
• 19:44
  Speaker 5: this or you just take a you know, a clever
• 19:47
  Speaker 5: and lop off ten percent?
• 19:50
  Speaker 3: Well, should do?
• 19:51
  Speaker 10: Can? I'll leave that up to the political analysts. But
• 19:53
  Speaker 10: what I will say is they're arguing that the bureaucracy
• 19:58
  Speaker 10: is wildly inefficient, and they're not wrong because if you
• 20:00
  Speaker 10: look at accountability in bureaucracies as compared to the free markets,
• 20:05
  Speaker 10: there is less accountability, right, There's less consequences for failure
• 20:09
  Speaker 10: in a bureaucracy. There's less competition, and so accountability necessarily
• 20:14
  Speaker 10: goes down. And they're saying we need to address that.
• 20:16
  Speaker 10: It's not necessarily a problem the size of the federal government.
• 20:20
  Speaker 10: The federal government is the largest employer in America with
• 20:23
  Speaker 10: three million employees. But size isn't in and of itself
• 20:27
  Speaker 10: the problem, right Look at Amazon. Amazon has one point
• 20:29
  Speaker 10: five million employees, and they could deliver a band book
• 20:32
  Speaker 10: to your doorstep in the next eight hours. Right. The
• 20:35
  Speaker 10: problem is the lack of accountability, and that is in
• 20:38
  Speaker 10: particular what they are wanting to address with. Yes, it
• 20:41
  Speaker 10: sounds like a cleaver, Uh, how do they do that if?
• 20:44
  Speaker 2: Okay, so let's say that they didn't just do the clever.
• 20:47
  Speaker 2: How do you transform culture and help productivity in a
• 20:51
  Speaker 2: government agency.
• 20:54
  Speaker 10: Well, what we know from helping companies transform culture is
• 20:57
  Speaker 10: that culture does not go down without a fight. So
• 21:00
  Speaker 10: this is going to be incredibly disruptive. And here's the
• 21:04
  Speaker 10: pros and cons of disruption. Innovation comes from disruption. You
• 21:08
  Speaker 10: cannot have innovation without disruption. But disruption does not in
• 21:12
  Speaker 10: and of itself create innovation, right, Disruption can simply be
• 21:16
  Speaker 10: catastrophic to culture. And so what they are doing is
• 21:20
  Speaker 10: they are creating an opportunity, but they are also creating
• 21:23
  Speaker 10: a potential massive headache. And I do believe from the
• 21:27
  Speaker 10: federal workers and also from the public, there will be
• 21:31
  Speaker 10: resistance to change. There's always resistance to massive change like this,
• 21:35
  Speaker 10: And what we've also seen is the best things come
• 21:38
  Speaker 10: from the organizations that embrace change. So the extent to
• 21:42
  Speaker 10: which the federal workers and the public are able to
• 21:44
  Speaker 10: embrace this change will probably have a lot to do
• 21:47
  Speaker 10: with how well this is going to end up.
• 21:50
  Speaker 5: I feel like I have to ask us for a
• 21:52
  Speaker 5: while there this was a big issue for me, but
• 21:54
  Speaker 5: where is the US private sector economy in terms of
• 21:58
  Speaker 5: work from home, hybrid that type of thing. Have we
• 22:00
  Speaker 5: settled into a new normal or are the sands still
• 22:04
  Speaker 5: shifting there?
• 22:06
  Speaker 10: They're still shifting, so we see various plateaus in what
• 22:11
  Speaker 10: normal is year over year. I believe I'm coming out
• 22:15
  Speaker 10: soon with an article on the workplace trends of twenty
• 22:17
  Speaker 10: twenty five. The year twenty twenty five is going to
• 22:20
  Speaker 10: be the year of forcing people back into the office
• 22:22
  Speaker 10: five days a week. Usually what happens is there's a
• 22:25
  Speaker 10: lot of press about one big deal CEO forcing people
• 22:28
  Speaker 10: back into the office, which has already happened, and now
• 22:31
  Speaker 10: it's happening again with this announcement from Bavek and elon.
• 22:34
  Speaker 10: And so next year that empowers other leaders who wish
• 22:37
  Speaker 10: their employees were back in the office to get back
• 22:40
  Speaker 10: into the office. And you're going to continue to see
• 22:42
  Speaker 10: a push. We had plateaued it around three days a week,
• 22:44
  Speaker 10: but it's going to go even more back into the
• 22:47
  Speaker 10: office next year.
• 22:48
  Speaker 2: Okay that this means then that my commute in on
• 22:50
  Speaker 2: Fridays and Mondays now will be more trafficked. I don't
• 22:53
  Speaker 2: love that. I don't love that for me, Like we're
• 22:55
  Speaker 2: already here five days a week, when I've been here
• 22:56
  Speaker 2: five days a week since June and twenty twenty, so
• 22:58
  Speaker 2: it's like, yeah, whatever, but don't make traffic back. That's
• 23:01
  Speaker 2: a bummer. Exactly all right, We really appreciate it. Thank
• 23:03
  Speaker 2: you so much for all your insight on this. Jessica
• 23:06
  Speaker 2: Kriegel as Chief Strategy Officer of Workforce and Labor for
• 23:10
  Speaker 2: Culture Partners, joining us on that, speaking of I don't
• 23:13
  Speaker 2: know nothing in culture.
• 23:14
  Speaker 5: But it's interesting, Like I talked to my twenty eight
• 23:17
  Speaker 5: year old daughter who has only worked really during the
• 23:21
  Speaker 5: started working kind of in a pandemic era. It's not
• 23:24
  Speaker 5: even I guess they can reprogram, but for a while there.
• 23:27
  Speaker 5: It wasn't even in her DNA to do that, to
• 23:30
  Speaker 5: come in five days a week, I mean, she feels crazy. Yeah.
• 23:33
  Speaker 5: So I think they're getting reprogrammed back because they're now
• 23:35
  Speaker 5: in four days a week at her employer, which will
• 23:37
  Speaker 5: likely go to five. But for a while, it just
• 23:40
  Speaker 5: wasn't in her DNA to think about that.
• 23:42
  Speaker 2: I mean, I understand having a flex day here and there, like, hey,
• 23:45
  Speaker 2: my kids said, I got to work from home. Okay, great,
• 23:47
  Speaker 2: but like that's that feels like an exceptions, right.
• 23:50
  Speaker 7: It does.
• 23:50
  Speaker 5: And I think Jessica was saying, it's slowly been going
• 23:54
  Speaker 5: back to work from home, but I mean work from
• 23:56
  Speaker 5: the office. But we'll see how that plays out. I
• 23:59
  Speaker 5: still see a lot of vacant commercial space here in
• 24:02
  Speaker 5: a city, oh my god.
• 24:03
  Speaker 2: Yeah, although across the street on Lex it looks like
• 24:05
  Speaker 2: they're doing some construction on that massive retail space. Yes, anyway,
• 24:09
  Speaker 2: that's just food for thought.
• 24:12
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• 24:16
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• 24:18
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• 24:29
  Speaker 2: All right, let's get back to the market here and
• 24:31
  Speaker 2: sort of what's next. I'm getting all the research about
• 24:34
  Speaker 2: twenty twenty five and what to expect. Christina Hooper, chief
• 24:37
  Speaker 2: Global market strategist at Invesco, joins US now, I feel
• 24:41
  Speaker 2: like every strategist is now sixty five hundred and sixty
• 24:43
  Speaker 2: six hundred on the S ANDP for next year? Is
• 24:45
  Speaker 2: this the right metric for us to be looking at
• 24:47
  Speaker 2: right now? So, Alex, we.
• 24:50
  Speaker 11: Actually don't give a set target, but I do think
• 24:54
  Speaker 11: directionally it's appropriate to assume that we see stocks go
• 24:58
  Speaker 11: up next year. I think we shouldn't just be looking
• 25:01
  Speaker 11: at the S and P five hundred. We should be
• 25:03
  Speaker 11: looking at markets outside the US, and I think directionally
• 25:06
  Speaker 11: they're likely to move higher as well. And I actually
• 25:08
  Speaker 11: think we could see UK equities, for example, outperform US
• 25:13
  Speaker 11: equities next year. I think there are opportunities in emerging
• 25:16
  Speaker 11: markets equities, so there is a lot more out there
• 25:20
  Speaker 11: than just focusing on US large cap stocks.
• 25:24
  Speaker 2: I feel sacriligious, Christina, I thought it was the whole
• 25:27
  Speaker 2: US exceptionalism kind of thing. Well, I don't know if.
• 25:31
  Speaker 11: It's necessarily US exceptionalism. We had a few things going
• 25:34
  Speaker 11: in our favor over the last few years that made
• 25:36
  Speaker 11: the US economy more resilient. Namely, I think first and
• 25:40
  Speaker 11: foremost would be long term fixed rate mortgages. That meant
• 25:44
  Speaker 11: the transmission mechanism for monetary policy wasn't as strong in
• 25:49
  Speaker 11: the US. We just didn't have as negative an impact
• 25:52
  Speaker 11: from aggressive tightening as some other Western developed economies, and
• 25:56
  Speaker 11: that certainly was helpful. The other key factor I think
• 25:59
  Speaker 11: was the amount of fiscal stimulus thrown at the US
• 26:02
  Speaker 11: economy by the federal government. A lot of governments put
• 26:06
  Speaker 11: stimulus into their economies, but not at the level that
• 26:08
  Speaker 11: the US did.
• 26:10
  Speaker 5: Christina, When you woke up two weeks ago Wednesday and
• 26:14
  Speaker 5: we've got you know, we saw the new presidential election
• 26:17
  Speaker 5: results and now we know that Congress is firmly in
• 26:20
  Speaker 5: the hands of Republicans. Has that changed kind of how
• 26:22
  Speaker 5: you guys at investco think about asset allocation, how much
• 26:26
  Speaker 5: risk you want to take? Did the elections change anything
• 26:29
  Speaker 5: for you guys?
• 26:30
  Speaker 11: Not very much, because we think it's far more important.
• 26:35
  Speaker 11: The more important factor is who is sitting at the
• 26:38
  Speaker 11: helm of the Fed than who was sitting in the
• 26:41
  Speaker 11: White House. I think the reality is that monetary policy
• 26:44
  Speaker 11: matters more for markets. Now that doesn't mean that policy
• 26:48
  Speaker 11: coming out of the White House has no impact. We
• 26:51
  Speaker 11: think of it as something akin to swing factors. We
• 26:55
  Speaker 11: have to be concerned about tariffs that certainly the first
• 26:57
  Speaker 11: time around created more volatility and created some selloffs for
• 27:02
  Speaker 11: the stock market. We also have to think about, for example,
• 27:07
  Speaker 11: immigration policy and the potential for it to impact inflation.
• 27:11
  Speaker 11: But those are really eclipsed by monetary policy and by
• 27:17
  Speaker 11: all the factors that have gone into the US economy
• 27:20
  Speaker 11: thus far that have enabled it to have essentially a
• 27:23
  Speaker 11: soft landing and what I think prepares us for reacceleration
• 27:27
  Speaker 11: next year.
• 27:28
  Speaker 2: When we take a look at the central bank cutting cycle,
• 27:32
  Speaker 2: let's leave Japan out of it. Do you need to
• 27:35
  Speaker 2: think about the areas where you might see more cuts?
• 27:37
  Speaker 2: So I'm just looking at the data from Europe in
• 27:40
  Speaker 2: terms of the pmis, they were terrible. Now we're talking about, oh,
• 27:43
  Speaker 2: we're going to see a fifty basis point cut. Is
• 27:45
  Speaker 2: that a good indication of kind of where to go
• 27:47
  Speaker 2: by how much the bank can cut?
• 27:50
  Speaker 6: Well?
• 27:50
  Speaker 11: I certainly think that is one helpful factor to consider.
• 27:55
  Speaker 11: I think it certainly matters in terms of currencies, and
• 28:00
  Speaker 11: I do think that the more easing that comes, certainly
• 28:04
  Speaker 11: that can be a powerful catalyst for economies. We also
• 28:08
  Speaker 11: have to recognize that part of the equation for investing
• 28:13
  Speaker 11: is how much negative sentiment is priced in, and so
• 28:16
  Speaker 11: when we do have a scenario where there's some negative
• 28:19
  Speaker 11: data coming out, there is the potential for positive surprise,
• 28:24
  Speaker 11: especially if we have significant easing. So I am excited
• 28:27
  Speaker 11: about European equities. I also think the valuations are attractive.
• 28:31
  Speaker 11: I think dividend yields are solid, So that's certainly. Those
• 28:35
  Speaker 11: are all factors that I would consider that make for
• 28:40
  Speaker 11: investors make a compelling case for investors to at least
• 28:43
  Speaker 11: have some exposure to European equities fixed income space.
• 28:47
  Speaker 5: Christina, do I sit with my two year Treasury at
• 28:49
  Speaker 5: four point three six percent or do I take some
• 28:51
  Speaker 5: credit risk out there?
• 28:53
  Speaker 11: I think you need to take some credit risk. The
• 28:56
  Speaker 11: US economy is in rather good shape and there's the
• 28:59
  Speaker 11: potential for I think there's a very good likelihood that
• 29:03
  Speaker 11: we see a reacceleration in the US economy next year.
• 29:07
  Speaker 11: So in this environment, you want to take credit risk.
• 29:11
  Speaker 11: You want to have exposure to high quality, high yield,
• 29:14
  Speaker 11: investment grade bank loans. This is an environment where there
• 29:18
  Speaker 11: are many attractive asset classes within the fixed income space.
• 29:23
  Speaker 2: What happens to all the money and money market funds?
• 29:25
  Speaker 2: Do you think eventually that winds up taking on more risk?
• 29:27
  Speaker 2: How long does that take?
• 29:30
  Speaker 6: So?
• 29:30
  Speaker 11: I think it absolutely eventually goes into both equities and
• 29:35
  Speaker 11: fixed income. And I think that as we see continued
• 29:39
  Speaker 11: easing by the FED, that's certainly a helpful catalyst. As
• 29:43
  Speaker 11: well as the psychological impact of FOMO. I think we're
• 29:48
  Speaker 11: likely to see stocks move higher from here, and not
• 29:51
  Speaker 11: just stocks in the US elsewhere, and so I think
• 29:54
  Speaker 11: those are all reasons why and drivers for money start
• 30:00
  Speaker 11: to come out of cash.
• 30:02
  Speaker 2: I'm thinking about it, thinking about it, liad it. If
• 30:06
  Speaker 2: I'm thinking about it, that means stuff. I definitely have
• 30:08
  Speaker 2: some viewers that pin me all the time. You're like,
• 30:10
  Speaker 2: what are you doing? Get into high yeld ETFs? Come
• 30:12
  Speaker 2: on now, all right, Christina, thanks a lot, We really
• 30:15
  Speaker 2: appreciate it. Christina Hooper joining us from Investco. She's the
• 30:19
  Speaker 2: chief of Global market strategist over on that side.
• 30:22
  Speaker 5: This is the.
• 30:23
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