Latest / Bloomberg Intelligence / Corporate Political Activity And Markets In 2022

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Corporate Political Activity And Markets In 2022 · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
• 0:15
  Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com. Slash podcast twenty gained in the SMP.
• 0:26
  Speaker 1: What a year. So what do we do now? In
• 0:30
  Speaker 1: we all reset and think about where the opportunities are.
• 0:34
  Speaker 1: Let's check in with Phil Plumbo. He's a founder, CEO
• 0:36
  Speaker 1: and ce IO of Plumbo Wealth Management. Phil, what are
• 0:39
  Speaker 1: you telling your clients about this year where the opportunities are?
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  Speaker 1: So the bubble has clearly burst in the most aggressive
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  Speaker 1: part of the technology sector, and so I would stay
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  Speaker 1: away from that area in particular, and by boring quality stocks.
• 0:56
  Speaker 1: As we think about two thousand twenty two, it's all
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  Speaker 1: in the backdrop the feeder reserve. How inflation is going
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  Speaker 1: to continue to be a problem. I don't know how
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  Speaker 1: they're just recognizing it now. It's going to continue your
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  Speaker 1: problem in two thousand twenty two, which means he's gonna
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  Speaker 1: have to continue to be hawkish, and that type of
• 1:13
  Speaker 1: environment that means rates will climb higher. When rates climb higher,
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  Speaker 1: it put a lot of pressure on technology stock, especially
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  Speaker 1: the most high overvalued parts of the technology sector that
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  Speaker 1: we've been talking about for a while now, because their
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  Speaker 1: long duration assets and their cash flows that people are
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  Speaker 1: paying for. And in a arroging and straight environment, you
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  Speaker 1: see a shift towards financials outperforming energy commodities in goals.
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  Speaker 1: So I just want to step in here because you
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  Speaker 1: had a pretty interesting comment at the top where you
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  Speaker 1: said the tech bubble is popping. What was that happening
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  Speaker 1: in the last three days that you really started to
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  Speaker 1: see the unwind of that? Was it the FED meeting
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  Speaker 1: minutes yesterday that clarified in your mind we're moving faster
• 1:55
  Speaker 1: than we thought. When did you start to see this unraveling?
• 2:00
  Speaker 1: Remember markets are always for we're looking, So since the
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  Speaker 1: Sumber fifteen, when the FED started to get more hawk ish,
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  Speaker 1: you really started to see some of these high flyers
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  Speaker 1: correct from their highs anywhere from thirty So I could
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  Speaker 1: argue that the bubble started really last year and it's
• 2:14
  Speaker 1: continuing right now, and that's not going to settle in
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  Speaker 1: until really the FED settles in in terms of where
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  Speaker 1: they're comfortable in terms of raising interest rates and everything
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  Speaker 1: that they've been talking about at some point this year, Phil,
• 2:25
  Speaker 1: how do you think about inflation out there? It's real.
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  Speaker 1: Whether you you see it at the gas pump or
• 2:30
  Speaker 1: you see it at the supermarket, it's real. How do
• 2:33
  Speaker 1: you think about it? It's always been real. What people
• 2:36
  Speaker 1: have to understand is that when you shut the whole
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  Speaker 1: world down as we did in two thousand and twenty,
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  Speaker 1: and you restart everything, and then you have multiple variants
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  Speaker 1: that are that are occurring as we're seeing, it's gonna
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  Speaker 1: it's gonna it's gonna create an issue with supplied constraints
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  Speaker 1: like we've seen, and and then with all the money
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  Speaker 1: that's been put into the economy, you know that's going
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  Speaker 1: to create inflation. We know that because if you look
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  Speaker 1: at the history of the amount of money that's been
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  Speaker 1: put into economy and measured by M two, inflation has
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  Speaker 1: always started as a result of that. Then you put
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  Speaker 1: money into consumers pockets, which created this pent up demand
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  Speaker 1: and endurable non durable goods in twenty one, and all
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  Speaker 1: of that pull forward effect is why we're seeing the
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  Speaker 1: inflation numbers that we're seeing today, and that's going to
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  Speaker 1: continue because look at omicron and the issues that's that's occurring,
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  Speaker 1: you know, within within consumers and people staying home now
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  Speaker 1: and manufacturing plants and you know, not being in full
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  Speaker 1: capacity and issues going on with China shutdowns, etcetera. So
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  Speaker 1: the pressures are going to continue to just just just
• 3:29
  Speaker 1: doesn't go away in a year or two. We haven't
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  Speaker 1: seen an event like this in over a hundred years,
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  Speaker 1: so it's a totally different playbook. So that's why I
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  Speaker 1: believe inflation is going to continue to be a threat
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  Speaker 1: to the economy and the Fed's gonna have to act
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  Speaker 1: even more hawkish. And as you mentioned earlier, that means
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  Speaker 1: rates are rising. And I know a one seventy three
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  Speaker 1: on the tenure is hardly um high levels given the
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  Speaker 1: absolute still so low levels that we're at. But I
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  Speaker 1: am curious if we start to think about a two
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  Speaker 1: percent in the tenure, when does that become attractive when
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  Speaker 1: you're thinking about a rotation from equities after the big
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  Speaker 1: run up back into bonds, is two percent tempting at all?
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  Speaker 1: Timing bonds and interest rates is very difficult to do.
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  Speaker 1: I would argue that every portfolio. Every investor needs bonds
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  Speaker 1: in the portfolio to help protect when stocks really get
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  Speaker 1: get hit hard. Obviously the past day or two that's
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  Speaker 1: been moved down with both stocks and bonds, and that's happened,
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  Speaker 1: you know, maybe two thirteen that happened. And you do
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  Speaker 1: get periods like that that that do occur, but it's
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  Speaker 1: not normal for that to occur over long periods of time.
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  Speaker 1: So it's not a question of time ago when to
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  Speaker 1: get in bonds or out of bonds. It's more of
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  Speaker 1: using bonds as a way to hedge against stocks. So
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  Speaker 1: Phil on the equity side here, um sticking with kind
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  Speaker 1: of the cyclical play, here are their sectors that really
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  Speaker 1: kind of jump out at you two that you're talking
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  Speaker 1: to your clients about. What I like a lot right
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  Speaker 1: now is, as I said before, market's a forward looking
• 4:58
  Speaker 1: so O macron. It seems like it's going to settle
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  Speaker 1: in and kind of come and go relatively quickly based
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  Speaker 1: on some of the data that everybody's looking at. So
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  Speaker 1: if that's the case, then most likely over the next
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  Speaker 1: two or three or four months, you can see consumers
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  Speaker 1: going back out there and spending money on services and
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  Speaker 1: travel and so forth. So I like airlines here. I
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  Speaker 1: like Disney here as an example. As we think about
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  Speaker 1: the kind of reopening trade coming back in vogue, and
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  Speaker 1: you have to get into that now before that starts,
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  Speaker 1: with which again we'll we'll probably see that the spending
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  Speaker 1: of that over the next three and six months. You've
• 5:32
  Speaker 1: got to get ahead of that trade. So I like
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  Speaker 1: that sector specifically. I also like financials, so as rates rise,
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  Speaker 1: obviously financials make more money. That's the bottom line. It's
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  Speaker 1: the way it works, which means earnings will be greater.
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  Speaker 1: So I like that trade. And I also like energy
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  Speaker 1: a lot as well, as the global economy does reopen,
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  Speaker 1: assuming there is not another variant that that comes across
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  Speaker 1: that affects UH, that affects individuals and so forth, I like.
• 5:56
  Speaker 1: I like the rebound and global economy and energy. So
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  Speaker 1: that's those do I like as well? All right, Phil,
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  Speaker 1: thanks so much, appreciate getting your thoughts here. As we
• 6:05
  Speaker 1: again reset and set off for two. Philip Palumbo he's
• 6:09
  Speaker 1: the founder, CEO and c I O of Palumbo Wealth Managements.
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  Speaker 1: He did stints at Ubs and Morgan Stanley and Maryland,
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  Speaker 1: so he's been doing uh this investment game for a
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  Speaker 1: long time, and that's why we appreciate speaking to him,
• 6:22
  Speaker 1: which we get some really good ideas, and he is
• 6:24
  Speaker 1: really focusing on that reopen trade, which once again is
• 6:27
  Speaker 1: coming to the four we got the Fed minutes yesterday.
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  Speaker 1: I think the two key takeaways from the markets perspective
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  Speaker 1: is certainly a higher chance of earlier interest rate hikes
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  Speaker 1: and maybe even a balance sheet rundown, and that was
• 6:45
  Speaker 1: reflected in the markets immediately. Let's see what that really
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  Speaker 1: means for the near and intermediate term for these markets.
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  Speaker 1: We do that with Katie Nixon. She's a c i
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  Speaker 1: O of wealth management at Northern Trust. Katie, thanks so
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  Speaker 1: much for taking a time to chat with us. Hear,
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  Speaker 1: what was your takeaway from those Fed minutes yesterday? Thanks Paul,
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  Speaker 1: nice to be here. And I think you nailed it.
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  Speaker 1: I mean, I think it pulled forward expectations for the
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  Speaker 1: pace and the sequencing, frankly of the next policy move.
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  Speaker 1: I mean, I think we were used to post global
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  Speaker 1: financial crisis having a gradual anti quantitative easing than a
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  Speaker 1: sort of quiet period, then lift off and then eventually
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  Speaker 1: quantitative tightening. And I think what we're recognizing now certainly
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  Speaker 1: explicitly in the fmc minutes. Is that the not just
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  Speaker 1: the pace, but the sequence is going to be pulled forth.
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  Speaker 1: So we could be in the position of seeing quantitative
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  Speaker 1: tightening in how much of that is also taken into
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  Speaker 1: account the balance sheet because it seems like the markets
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  Speaker 1: were also caught off guard that balance sheet runoff could
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  Speaker 1: happen maybe shortly after the first rate hike, where in
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  Speaker 1: previous years it was almost two years before the rate
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  Speaker 1: hiking cycle started that we even started talking about a
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  Speaker 1: balance sheet. Taylor, You're so right. And one of the
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  Speaker 1: one of our themes this year was that the the
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  Speaker 1: increased pace of UM of taking the foot off the
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  Speaker 1: gas with quantitative easing would easily be absorbed by the
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  Speaker 1: market um because of the reduction and the issue once
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  Speaker 1: of treasury, so there would be sort of a supply
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  Speaker 1: demand balance even with the big um source of demand
• 8:24
  Speaker 1: being the FED sort of lightning up UM. It's pulling
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  Speaker 1: quantitative tightening into two really does change that because that
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  Speaker 1: puts a lot more supply of treasuries on the market
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  Speaker 1: that will have to be absorbed UM. And perhaps UH,
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  Speaker 1: you know, interest rates will be the mechanism through which
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  Speaker 1: UH investors are attempted and are are taken into into
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  Speaker 1: buying bonds again. So I think it does really change things.
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  Speaker 1: Um if if the FED. Now that's a big if,
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  Speaker 1: because it's certainly not our base case that we see
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  Speaker 1: this this sort of very aggressive quee lift off Q two.
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  Speaker 1: I think that's the risk case. It's not our base case,
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  Speaker 1: but that that is that is a risk case because
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  Speaker 1: it does put a lot more paper on the market.
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  Speaker 1: Frankly at the end of this year. Okay, what is
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  Speaker 1: the kind of the base case for the good folks
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  Speaker 1: at Northern Trust in terms of the economy in going
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  Speaker 1: into well, I mean, we think we're sort of seeing
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  Speaker 1: that we're getting past the peak. So we're certainly anticipating
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  Speaker 1: that sort of in April May will be past the
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  Speaker 1: peak inflation, and we're also anticipating we're gonna be past
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  Speaker 1: peak growth. So one of our longer term themes it's
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  Speaker 1: a sort of reversion to mediocrity. So we do anticipate
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  Speaker 1: this process starting in two where by this very high
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  Speaker 1: level of economic growth that's been clearly propelled by policy,
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  Speaker 1: whether it's monetary or fiscal combination, UM will come off
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  Speaker 1: the boil. So we're seeing sort of more four three
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  Speaker 1: two type GDP prints as we get through into three.
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  Speaker 1: But the good news for investors is that growth that
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  Speaker 1: is good enough to keep earnings positive, and it's also
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  Speaker 1: more sustainable frankly um than the high levels of growth
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  Speaker 1: that we saw UM certainly this this past year in one.
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  Speaker 1: So it's good news for investors that growth and inflation
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  Speaker 1: will come off the oil. It sets the stage for
• 10:17
  Speaker 1: sort of more modest but positive returns for risk assets,
• 10:21
  Speaker 1: and it also takes the heat off the FED from
• 10:23
  Speaker 1: having to be even more aggressive in policy online. So
• 10:26
  Speaker 1: equities still the place to be. Yeah, equities are still
• 10:30
  Speaker 1: the place to be. Tailor. The fundamentals are very strong.
• 10:33
  Speaker 1: We anticipate sort of mid to high single digit earnings
• 10:36
  Speaker 1: UM in two. We think along I guess with the
• 10:40
  Speaker 1: market at this point that valuations have become a bit stretched,
• 10:43
  Speaker 1: so perhaps we see a little bit of give back
• 10:46
  Speaker 1: UM in terms of valuation, but that still leaves mid
• 10:48
  Speaker 1: to high single digit returns for for equities and this year,
• 10:52
  Speaker 1: which is which is pretty good coming after several years
• 10:55
  Speaker 1: of very very high returns. Absolutely, and Katie, I think
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  Speaker 1: one of the things that equity investors are trying to
• 11:01
  Speaker 1: grapple with now is where do I want to be
• 11:03
  Speaker 1: in this equity market. Do I want to be in
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  Speaker 1: those growth names that have been so good to me
• 11:07
  Speaker 1: over the last dozen years or so, or do I
• 11:09
  Speaker 1: stick with the cyclical trade. They're kind of a reopening trade,
• 11:13
  Speaker 1: if you will, whether it's commodities or energy and banks
• 11:16
  Speaker 1: and think things like that. How do you think about
• 11:18
  Speaker 1: it over the next twelve months. Yeah, Well, one of
• 11:22
  Speaker 1: the things we've told our clients, UM pretty consistently actually
• 11:26
  Speaker 1: for the last couple of years, is you really you
• 11:28
  Speaker 1: don't need to pick a team here. Um. You can
• 11:30
  Speaker 1: have all the players on the field, and you should
• 11:33
  Speaker 1: because you can't deny sort of sort of the secular
• 11:35
  Speaker 1: tail ones that are behind some of these great growth stocks.
• 11:37
  Speaker 1: We see sort of an I T spending supercycle coming
• 11:41
  Speaker 1: um in the next couple of years, with you know,
• 11:44
  Speaker 1: big capex in the form of I T spending UM
• 11:47
  Speaker 1: propelling earnings from some of these big tech companies. At
• 11:50
  Speaker 1: the same time, we do think we're going to be
• 11:52
  Speaker 1: in a sort of re reopening trade here um with
• 11:56
  Speaker 1: the global economic recovery continuing UM to to see momentment
• 12:00
  Speaker 1: to so you want that cyclical exposure. The one thing
• 12:02
  Speaker 1: I will add Paul, though, is at this stage of
• 12:04
  Speaker 1: the economic cycle, with the best sort of GDP prints
• 12:07
  Speaker 1: behind us, it's probably not a bad time for investors
• 12:10
  Speaker 1: to think about putting some defensive names in their portfolio.
• 12:14
  Speaker 1: Healthcare comes to mind, um, So we would say, put
• 12:19
  Speaker 1: all the players on the field. You'll be there when, um,
• 12:21
  Speaker 1: when that particular sector or style is in favor. Um.
• 12:24
  Speaker 1: And we do have a positive outlook on equities in general,
• 12:27
  Speaker 1: so that that will help as well. But if you
• 12:29
  Speaker 1: don't have a sensitive sense of er portfolio, take a
• 12:32
  Speaker 1: take a good look there. All right, Katie, thank you
• 12:34
  Speaker 1: so much for joining us. Really appreciate getting your perspective,
• 12:36
  Speaker 1: your thoughts. Katie Nixon c A c IO of Walt
• 12:39
  Speaker 1: Management in Northern Trust. One year anniversary of the January
• 12:46
  Speaker 1: six uh insurrection, I guess at the Capitol Hill and
• 12:50
  Speaker 1: a lot of angles to cover. One of them is
• 12:53
  Speaker 1: how has that the events of January six years ago
• 12:56
  Speaker 1: impacted the interaction of government and big business. We all
• 13:00
  Speaker 1: know that the a lot of money slashing around Washington,
• 13:03
  Speaker 1: d C. From big business pushing around legislation to questions,
• 13:06
  Speaker 1: how has that changed really over the last year, if
• 13:08
  Speaker 1: at all? Paul Washington executive director of the E. S
• 13:11
  Speaker 1: G Center for the Conference Board joins us. Uh, Paul,
• 13:16
  Speaker 1: give us your thoughts here. We know how pervasive big
• 13:19
  Speaker 1: business political action committees the money associated with them have
• 13:24
  Speaker 1: impacted Washington really since the beginning of time. I guess
• 13:27
  Speaker 1: how has that changed in the last year if at all? Sure,
• 13:31
  Speaker 1: and first of all, thanks for having me. What happened
• 13:34
  Speaker 1: is UM The majority of companies that have employee funded
• 13:38
  Speaker 1: packed UM suspended their PACK contributions for some are all
• 13:43
  Speaker 1: of this past year in light of the events of
• 13:47
  Speaker 1: January six and then UM and then frankly, they they
• 13:51
  Speaker 1: changed their policies on whom they're giving to, the criteria
• 13:54
  Speaker 1: they use and so forth. Uh. In in the last year,
• 13:57
  Speaker 1: it's actually become a much more challenging and ironment for
• 14:01
  Speaker 1: companies to navigate in Washington these days, both on the
• 14:04
  Speaker 1: contribution side and on the lobbying side. Are they being
• 14:08
  Speaker 1: more careful given how maybe more open the pressure, given
• 14:13
  Speaker 1: the rise in social media, how people are calling them
• 14:16
  Speaker 1: out more. Uh? Is it really coming from pressure from
• 14:20
  Speaker 1: you know, some of the local people on the ground.
• 14:24
  Speaker 1: You know. It's what's really striking is that most of
• 14:28
  Speaker 1: the pressure that companies are responding to is coming from
• 14:33
  Speaker 1: employees and senior management. It's coming from within the company itself.
• 14:38
  Speaker 1: That those are the main drivers for companies to suspend
• 14:41
  Speaker 1: their contributions or packs to suspend their contributions. UM. External
• 14:46
  Speaker 1: pressure UM less so UM. Though traditional media was important
• 14:51
  Speaker 1: as well. So really employees, senior management, traditional media. And
• 14:55
  Speaker 1: then one thing, one factor that wasn't a big issue
• 14:58
  Speaker 1: for companies was invest your attention on this issue. But Paul, I,
• 15:03
  Speaker 1: I know some companies temporarily suspended UH some of their activities,
• 15:08
  Speaker 1: some of their fundraising. But this is Washington, d C.
• 15:11
  Speaker 1: After all. This is this money is coming back, isn't it? Yes,
• 15:15
  Speaker 1: it is. Although I would just say this, UM, I
• 15:18
  Speaker 1: completely understand a lot of skepticism about corporate money in politics.
• 15:23
  Speaker 1: I would note though, that corporations tend to be a
• 15:27
  Speaker 1: bit more of a moderating influence UH in their contributions.
• 15:30
  Speaker 1: They tend to give their packs, which are funded by employees,
• 15:34
  Speaker 1: tend to give to both Democrats and Republicans, and frankly,
• 15:38
  Speaker 1: they focus more on results than on wild rhetoric. UM.
• 15:42
  Speaker 1: So what you really sing is that corporate money, which
• 15:46
  Speaker 1: tends to be a bit more mainstream UM is actually
• 15:50
  Speaker 1: being overwhelmed by other types of sort of dark money
• 15:53
  Speaker 1: out there UM and uh so that's just something to
• 15:56
  Speaker 1: keep in mind. I understand people can be really skeptical
• 15:58
  Speaker 1: without corporate money poitics, but when you look at the numbers,
• 16:01
  Speaker 1: it's it's kind of a little different story. What are
• 16:04
  Speaker 1: some of the issues and that are at the forefront
• 16:06
  Speaker 1: in terms of the mainstream the moderate corporate money that
• 16:09
  Speaker 1: you're seeing. What are some of the issues that they're
• 16:11
  Speaker 1: most interested in and seeing progressed through DC. Sure, I
• 16:17
  Speaker 1: mean it's it's infrastructure policy, it's trade policy, it's UM.
• 16:21
  Speaker 1: It's really industry specific often UM issues that they're focusing
• 16:26
  Speaker 1: on UM and that's the bread and butter for companies UM,
• 16:29
  Speaker 1: and that's what drives a lot of their contributions. What
• 16:32
  Speaker 1: car companies off guard in the last year was how
• 16:35
  Speaker 1: many and this isn't related to money, it's more related
• 16:39
  Speaker 1: to their public stances and their lobbing, was how much
• 16:42
  Speaker 1: pressure was being put on companies to take stands on
• 16:45
  Speaker 1: social issues that aren't necessarily traditionally core to their business,
• 16:50
  Speaker 1: things like voting rights. So companies in the last year
• 16:53
  Speaker 1: it was really challenging for them. They were being asked
• 16:55
  Speaker 1: away on a whole bunch of hot button issues, especially
• 16:58
  Speaker 1: at the state level, that a just you know, and
• 17:01
  Speaker 1: really thought of as part of their responsibility. But now
• 17:04
  Speaker 1: now they are. Paul, this is an election year. Congressional
• 17:07
  Speaker 1: election year has that typically impact businesses involvement in in Washington. Uh.
• 17:14
  Speaker 1: It makes it um. Uh. It's there's heightened level obviously
• 17:19
  Speaker 1: of of corporate giving, but it's also a time where
• 17:23
  Speaker 1: it can be really difficult to get anything done on
• 17:26
  Speaker 1: the lobbying side on you know, policy changes, the legislative changes, um,
• 17:32
  Speaker 1: simply because the focus is on the election and people
• 17:36
  Speaker 1: are you know, are playing a lot more politics. So
• 17:39
  Speaker 1: election years tend to be even more difficult on the
• 17:42
  Speaker 1: public advocacy side for companies. At the same time, the
• 17:46
  Speaker 1: companies tend to give more money. All right, Paul, thanks
• 17:48
  Speaker 1: so much for joining us. Really appreciate getting your thoughts.
• 17:51
  Speaker 1: They're your expert opinion on what's happening. Dana Washington, d
• 17:54
  Speaker 1: C is big business continues to navigate. Uh. One year
• 17:58
  Speaker 1: after the January six insurrection, Paul Washington, executive director of
• 18:03
  Speaker 1: the E s G Center at the Conference Board, Taylor,
• 18:10
  Speaker 1: I just got a text from Amazon there are three
• 18:13
  Speaker 1: boxes sitting outside of my door. I don't even know.
• 18:17
  Speaker 1: I don't even know. I don't even know what. But
• 18:19
  Speaker 1: it's like everyday Amazon is dropping stuff at my door.
• 18:22
  Speaker 1: I don't even know how it happens. But I looked
• 18:24
  Speaker 1: down at the stock hasn't done anything in a year,
• 18:27
  Speaker 1: trailing twelve months of four percent. What is going on there?
• 18:30
  Speaker 1: Barry Dhults, Bloomberg opinion columnists and host of Masters in
• 18:33
  Speaker 1: Business on Bloomberg Radio, also runs a firm, Ridholts Wealth Management,
• 18:38
  Speaker 1: so he's been in this money management game for a
• 18:40
  Speaker 1: long time. Barry, what do you make Amazon? I mean,
• 18:43
  Speaker 1: the mighty Amazon, Jeff Bezos. I mean he's out on
• 18:46
  Speaker 1: yachts in the Caribbean over the New Year's But the
• 18:49
  Speaker 1: stocks hasn't done anything. Really, Yeah, after a fantastic where
• 18:55
  Speaker 1: Amazon really was was the logistical hero of the locked.
• 19:00
  Speaker 1: Not only were they delivering supplies and food and from
• 19:04
  Speaker 1: from Whole Foods to Amazon, but Amazon Web Services was
• 19:08
  Speaker 1: keeping the Internet up and running. Uh. They very much
• 19:12
  Speaker 1: stumbled last year. And if you go down the list,
• 19:15
  Speaker 1: first Bezos, who's been with them from day one, the
• 19:18
  Speaker 1: founder and CEO for twenty years, since the mid nineties. Uh,
• 19:23
  Speaker 1: step down to CEO. That's a giant loss. Uh. They
• 19:26
  Speaker 1: seem to have lost their status as the low cost option.
• 19:31
  Speaker 1: I think when everyone's sitting at home and staring at
• 19:34
  Speaker 1: their screens all day, when you go to buy something
• 19:37
  Speaker 1: in Amazon and it looks a little more than cheap,
• 19:41
  Speaker 1: it's easy enough to google around and say, oh, you
• 19:44
  Speaker 1: know this is more expensive than elsewhere. Uh, that's not
• 19:48
  Speaker 1: how any of us behaved a decade ago. You oh,
• 19:51
  Speaker 1: it's on Amazon, have it delivered the next day, and
• 19:54
  Speaker 1: you know they've made some changes. There's a ton of
• 19:56
  Speaker 1: advertising on the site. It's much less attractive, and they
• 20:00
  Speaker 1: is a ton of third party sellers, which if you
• 20:02
  Speaker 1: remember eBay, Uh, third party sellers are a big headache,
• 20:06
  Speaker 1: both regular totally and administratively. So no surprise they had
• 20:11
  Speaker 1: a mediocre year. The stock was up to and change.
• 20:16
  Speaker 1: When you compare that to their peers, when you look
• 20:20
  Speaker 1: at you know, Google and Apple and Microsoft, Google was
• 20:27
  Speaker 1: up sixty five percent, Microsoft was up fifty two I
• 20:32
  Speaker 1: think Apple was up thirty five two percent. Is that's
• 20:38
  Speaker 1: like losing money relatively speaking? So doctor us about not
• 20:42
  Speaker 1: only Amazon, but big tech, because when it comes to
• 20:46
  Speaker 1: some of the regulatory overhangs on this stock. People were saying,
• 20:50
  Speaker 1: this is an administration who outwardly says they hate big tech,
• 20:53
  Speaker 1: they hate monopolies. But it's been a lot of bark
• 20:56
  Speaker 1: without a lot of bite, at least when it comes
• 20:59
  Speaker 1: to the rhetoric about breaking up big tech. Where are
• 21:03
  Speaker 1: we with that regulatory overhang on the stock? Yeah, I don't.
• 21:07
  Speaker 1: I don't see big tech being broken up as much
• 21:12
  Speaker 1: as Hey, the next time Facebook and I still can't
• 21:15
  Speaker 1: call it meta, but but the next time that company
• 21:19
  Speaker 1: sees an Instagram or or Google sees a YouTube and
• 21:24
  Speaker 1: wants to acquire it. Um, we've seen that that acquisition
• 21:28
  Speaker 1: process has led to less competition in the space. Facebook
• 21:33
  Speaker 1: and Google have really a death grip on online advertising.
• 21:38
  Speaker 1: Everybody else is just kind of picking up the crumbs.
• 21:41
  Speaker 1: And so the likelihood is the likelihood is that, um,
• 21:47
  Speaker 1: those sort of acquisitions and mergers are going to be
• 21:50
  Speaker 1: looked at with a much greater level of scrutiny, scrutiny
• 21:54
  Speaker 1: than we've seen in the past. But the idea that
• 21:57
  Speaker 1: we're going to break up Apple or we're gonna break
• 21:59
  Speaker 1: up Google, I'm kind of a hard pressed to to
• 22:04
  Speaker 1: see that as a um any sort of likely resulted
• 22:11
  Speaker 1: anytime soon. You know, I'm just looking at the FA
• 22:13
  Speaker 1: function here, the financial analysis function on the Bloomberg terminal
• 22:16
  Speaker 1: for Amazon. I got a half a trillion dollars in revenue,
• 22:20
  Speaker 1: and the consensus forecast is it's gonna grow eighteen percent
• 22:24
  Speaker 1: in another seventeen percent next year. This is still a
• 22:29
  Speaker 1: really good growth company. I'm kind of surprised the stock
• 22:32
  Speaker 1: is kind of, you know, lagged, there were just underperformed
• 22:34
  Speaker 1: some of its its peers. Well, look at how well
• 22:38
  Speaker 1: it's done over the course of um two years, you know,
• 22:42
  Speaker 1: when when we look at when we look at Amazon, yeah,
• 22:46
  Speaker 1: they had a pretty mediocre UM but one I'm sorry,
• 22:52
  Speaker 1: but but look at the numbers, what they've done over
• 22:55
  Speaker 1: the prior decade, the decade leading up to last year.
• 22:59
  Speaker 1: The stock rose one thousand, eight hundred. The company has
• 23:03
  Speaker 1: a one point six trillion dollar market gap, and as
• 23:07
  Speaker 1: you've pointed out, for the law of big numbers hasn't
• 23:10
  Speaker 1: kicked in yet. They're still growing at a substantial basis.
• 23:14
  Speaker 1: The question is how much of that is already reflected
• 23:20
  Speaker 1: um in the price. So I look at the one
• 23:22
  Speaker 1: year stock, it's it's up a year uh, two percent.
• 23:26
  Speaker 1: I look at the three year stock price, it's up
• 23:28
  Speaker 1: a hundred eight percent, and so that that says to me, hey,
• 23:33
  Speaker 1: maybe this got a little ahead of itself. Uh, and
• 23:36
  Speaker 1: it needs to digest some of that growth that I
• 23:38
  Speaker 1: look at the five year revenue numbers, it's just under
• 23:42
  Speaker 1: thirty percent. That that's that's a shocking, shocking number. And
• 23:47
  Speaker 1: and earnings have have over the five year period also doubled,
• 23:52
  Speaker 1: So the growth story is still intact. The question is, hey,
• 23:57
  Speaker 1: at one point six trillion, did it get a little
• 24:00
  Speaker 1: ahead of itself valuation wise? And maybe it needs a
• 24:04
  Speaker 1: year or so to digest those gains before it can
• 24:06
  Speaker 1: start chasing the two and three trillion dollar club like
• 24:11
  Speaker 1: Microsoft and Apple. You know, it's interestingly I'm looking Barry
• 24:15
  Speaker 1: at the A n R functions is of the Bloomberg
• 24:17
  Speaker 1: function segment of the day A and R for analyst recommendations.
• 24:20
  Speaker 1: Get this fifty nine by ratings, zero holds, zero cells.
• 24:27
  Speaker 1: Have we ever seen that before? You've seen Nobody wants
• 24:30
  Speaker 1: to be on the wrong side of that trade. It's
• 24:32
  Speaker 1: been embarrassing for the handful of people who are negative
• 24:35
  Speaker 1: on Amazon over the past decade. And so I think
• 24:39
  Speaker 1: just from a career risk perspective, people haven't. But it
• 24:43
  Speaker 1: raises a valid question. You know, when we see upgrades,
• 24:46
  Speaker 1: when we see raised targets, that can be a spur
• 24:49
  Speaker 1: to the stock price moving higher. If everybody is in,
• 24:52
  Speaker 1: if everybody is bullish, if everybody has a by rating,
• 24:56
  Speaker 1: what's the next catalyst going to be the past few
• 24:59
  Speaker 1: catalyst us? Um, you know, Bezo stepping down was not
• 25:03
  Speaker 1: a net positive, obviously, he's a very highly regarded CEO founder. Um,
• 25:10
  Speaker 1: what what's the next surprise after Amazon Web Services? So
• 25:15
  Speaker 1: maybe the company is close to fair value and and
• 25:19
  Speaker 1: therefore it's harder to drive that price. I remember a
• 25:23
  Speaker 1: big chunk of Amazon is a retailer, and that's a
• 25:27
  Speaker 1: very different multiple than hwork. You're exactly right, all right, Barry.
• 25:31
  Speaker 1: Thank you so much for joining us. Always appreciate checking
• 25:33
  Speaker 1: with you on these Thursday mornings by Adults. Bloomberg opinion
• 25:37
  Speaker 1: columnists and host of Masters and Business on Bloomberg Radio.
• 25:41
  Speaker 1: Ridholt's wealth management as well. He's a founder there. They
• 25:43
  Speaker 1: run a bunch of money, so he's been in this
• 25:45
  Speaker 1: game for a while. Thanks for listening to the Bloomberg
• 25:48
  Speaker 1: Markets Podcast. You can subscribe and listen to interviews with
• 25:52
  Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller,
• 25:57
  Speaker 1: I'm on Twitter at Matt Miller, and I'm fall Sweeney.
• 26:01
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• 26:04
  Speaker 1: can always catch us worldwide at Bloomberg Radio