Tom Keene, Jonathan Ferro and Lisa Abramowicz have the economy and the markets “under surveillance” as they cover the latest in finance, economics and investment, and talk with the leading voices shaping the conversation around world markets. This show is simulcast worldwide on Bloomberg Television and Radio.
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2024 is going to be the year that we have a very serious discussion in the financial markets about the Federal Reserve’s credibility. What I’m excited about in 2024 is to not hang on every single word that the Fed is saying. Paul thinks the Fed’s to be cutting
Rates in 2024, but it’s possible that the economy could be firmer for longer. If our call is right, more likely to have a soft landing than a recession, clearly not cutting. In March of 2024, the Fed is really unlikely to start cutting in March. This is Bloomberg Surveillance with Tom
Keene, Jonathan Ferro and Lisa Abramowicz. But the mikes on. Are. We’re ready for this. You ready? Oh, yeah. Happy New Year. Let’s get this year started in New York City this morning. Good morning. Good morning for our audience worldwide. This is Bloomberg Surveillance on TV and radio alongside Tom Kean and Lisa Brown
With some Jonathan Ferro your equity market on the S&P 500 this morning, -0.1%, hitting the ground running for 2024 payrolls on Friday, the following Friday earnings season kicking off with earnings from Jp morgan Tom starting the year on a nine week winning streak on the S&P 500.
The winning streak soon has catch up. I think what’s so important here is it wasn’t about the big seven, Big eight stocks. It was about a catchup being done. And you just wonder what’s the character of the follow on if you assume a bull market just office with the Super Bowl
In the 8:00 hour and you wonder, okay, if we’re going to be bullish, what kind of bullish are we going to be? We got to learn how that works out in January. Well, let’s talk about the scores of the last 12 months, Lisa. The S&P 500 up by something like 24%,
The NASDAQ 100 higher by 54%. And the range of forecasts on Wall Street coming into this year, you can drive a double decker through the 4200, the low end JPMorgan, 5200 at the high end Oppenheimer. And they’re all unusual in the sense that they’re all predicting a less than
A 10% gain or loss for the full year. And to me, what I was struck by is that’s really rare. We’ve seen 20 points or 20%, up 20% down pretty consistently for the past couple of years. And you’d have to go back to 2016 for a gain below 10%.
I think it’s important. John really laid out nicely the calls out one year forward. John, I thought over the weekend, over the long holiday, it was way too much short term analysis. I went over to where we were 12 3119 from the beginning, a Covid aspects up
12% per year, Dow up 10% per year, Nasdaq up 19% per year with a Super 2023. We had a decade in 12 months. Tell a decade with the stories in 12 months. We had a banking crisis, Lisa for about 5 minutes moved on from that.
We had this story of high for longer yields through 5% on a US ten year move quickly through that November and December happened. Lisa We had this air phenomenon that could continue through 2024 and beyond, maybe for the next several decades. How many stories, how many themes were
That? And I mean, major theme for 2023 is and pick another. Exactly. And honestly, for New Year’s Eve, I was going into 2024 and I was thinking, we’re going to have another decade in a year. Think about all the themes that we have set up just for January.
Think about all of the potential outcomes that could be the headwinds that could transpire. To me, that was sort of exhausting to think about. We could have another year of a decade of narrative stuffed into 2024, and it’s time for rest this morning.
Wall Street getting back to work. Barclays Tim Long on Apple this we are lowering our rating from equal weight to underweight. The iPhone 15 has been lackluster. We believe the 16 should be the same. We believe the continued period time of weak results coupled with multiple
Expansion is not sustainable. This is the key point. You nailed it and you’ve nailed it with the one stock people care about is multiple expansion. That was the gift of last year. We’ll talk about that the 3 hours this morning. But the answer is what character is the bull market this year?
Can you get it going with the kind of multiple expansion of the last 12 months? In Apple’s case, it was ginormous down in the pre market by 1.6%. Let’s get your morning started your week your month year with some price action equity futures on the S&P 500 shaping up
As follows on the S&P were -0.15%. Your ten year yield three 9257 it felt like at times of this bond market was trolling us. So just to think about everything that was going on last year and then to finish almost exactly where we started 2023, I feel like the entire market’s
Been trolling us, considering the fact that with S&P, the whole round trip, we basically are back to where we were in January of 2022. What we’re looking at this week is really going to be massive jobs numbers. And I’m really watching the labor market for clues of whether they’re going to
Surprise the upside or surprise the downside economically. And when do we get ISM manufacturing for December? That will be interesting to watch. We also get the FOMC meeting minutes and the JOLTS job openings that I’m watching, job openings, even though a
Lot of people discount. This is a sort of non metric that is highly fudged by people posting three jobs at a time. That said, does it continue to go down, given the fact that people are seeing perhaps a little bit more labor come into the market Thursday, initial
Jobless claims watching, continuing claims which have been ticking up and on Friday we get nonfarm payrolls as well as ISM services. I am watching how much pay is increasing, so it is still increasing too quickly for the Fed to be at a trajectory where they’re cutting rates
As aggressively as the market is currently pricing it if it wants. The minutes could be interesting, right? If they think about it, are they likely talking about it would sell then also. So that kind of talking about it. But they have to say that they’re talking about it at this point because
Otherwise they discredit this office completely. If they don’t address it. And it just is, they’re throw Powell under the bus. What point are we talking about something that just lacks any credibility whatsoever? We’re going to have John Stauffer Slater and Hoover modeling, John Jones modeling
Out 11% earnings growth. That’s all the Fed’s got to know. I mean, the juggernaut continues in on any number of analysis of real rates are way behind. They going to cut, cut, cut and we’ll see. No, you know, there’s a lot of sophisticates don’t believe they’re going to do that.
The biggest bell on Wall Street, John, still is a couple of hours away. We start this morning. We start 2024, I’m pleased to say, with Chris Moran, the co CEO of Gabelli Funds. Chris, wonderful to catch up with you, sir.
There was a range of questions that you ask in your note and I want to pick up on the last one I think is the most important where the leadership is going to come from in 2024. Where do you and the team, Chris, believe that leadership will come from? Yeah.
So 2023, obviously the leaders were the big tech enabled companies. They were safe havens. Fortress balance sheets are great cash flow, great places to hide out in economic and political turmoil. We still have a lot of that turmoil, obviously. But you’ve got the Fed. When did you back?
In 2024. You’ve got an economy that has probably hit a soft patch, but I don’t think it’s going off a cliff. So I think that gives some room for a broadening out of the market. Smallcaps had a great December. I think that probably continues into at
Least the early part of 2024. So a broadening of the market. Some of the neglected sectors, neglected sized companies. Is there a part of value, Christopher Hanging with all of the Gabelli Heritage, that is growth, is there value, value and then sort of growth value? Yeah, we tend to look at those growth
Values. Growth growth is neither good nor bad. It depends how it’s priced and whether it adds value or not to the firm. So yeah, we love growing companies. There are the there is the cigar butt investing flavor of value investing. We are looking for a companies that are
Not growing and we’ve got plenty of those too. But again, you’re looking for what’s the price. Give us an example of a grocery value stock. It’s not Apple or Microsoft is. No. And you know, some of the sectors, by the way, that we’re looking at in 2024
Are some of the defensives. There’s some growth there as well. If you’re going to hit a soft patch, many of those companies were hit by higher rates and should look to recovery 24. Those would include some of the staples and what growth staples that we like as bellring brands. B. R. B.
R. OBP You started your day with a protein shake. That’s what they make. They are very narrow dressing that personally, boy does that, you know, growing over 30% and this thing is just a rocket. Lots of other companies would love to own it and we think there’s some
Opportunity there for them to be taken over in 2024. What did you do so well, Chris, you do fundamental research and last year it seems like a lot of fundamental research died. Do you think that this year will actually translate into performance that
Much more at a time where if you talk about the growth fitness, Apple didn’t really have sales growth when it came to the actual unit sales. A lot of people are wondering whether they’re going to get punished for that. As John was mentioning earlier this morning, do you think that fundamentals
Will reconnect with stock performance this year? Well, hope springs eternal at this time of year, always, Lisa. And I do think that’s true. It wasn’t last year. Obviously, you buy seven stocks and you did great. That’s going to be a little tougher to do.
You know, The Magnificent Seven, some of them probably will do well again this year, but it’s going to be across the board. It’s not going to be to the extent that we saw in 2023, you’re going to have to do some work. And those small caps require a lot of
Work. They’re just less harder to find information about them. You’ve got to go out and visit them. And that’s what we do and that’s where we think we can add value this year just on a sort of whim that you do invest in some of the Magnificent Seven stocks.
Which ones do you think are going to be winners? Which do you think are going to be losers? Well, you know, we’re partial, just given our background to some of the ones that look more like media companies, the ones that have been eating advertising, in fact, eating the whole advertising pie.
You know, those have been Google and better in particular. And I think better still has some some room to run. It’s not expensive. But Zuckerberg has shown some cost discipline, which I think will continue and they continue to take share in advertising. Chris, 194% gained yet tonight.
Last year, if you weren’t in that name, you were in that name. Chris. If you weren’t in that name, would you suggest that people add fresh capital to it? Given the move we’ve seen in the last 12 months? Yeah. Listen, I think the market doesn’t know
How much it was stuck. I don’t know how much it was up last year. And just looking at what that earnings are going forward, as you know, over $20 a share. It’s it’s not an expensive stock. It’s a matter at 194%.
And video number one on the S&P 500 last year up 238.87% is a nice line up. And what’s important here to Mr. Muranga and Mr. Gabel is effort is you got to have a three, five, ten year perspective. Which of those tech superstars do you have courage to own out five years or
Seven years or ten years? I don’t hear enough talk about that. Well, you heard from Chris there. I think it’s really important that the stock market doesn’t have a memory that individual stock doesn’t have. Yeah, well, what I noticed here with Maria Lisa, I think this is important.
He goes right to the glazed doughnut. I mean, that’s what he’s doing. He’s got bell ring, 420 employees in St Louis. BBR, you’ve done your reading. They got a deal with the Dunkin Donuts where they’re putting a hydrolyzed whey protein isolate on a Duncan on a glazed
Doughnut. That’s why Mario Gabelli went into this is because it’s donuts. Okay, you know what? Let’s go there and just I would love a final word from Chris. I know he’s epic. Is he worried about Ozempic with that glazed doughnut? Chris, is that something that you’re
Really thinking about? That’s why we love PBR. It actually is on trend. You need protein support if you’re on any of these drugs. And so they’re a beneficiary of actually the summer blue days. Chris Miranda, thank you for making that right. Appreciate it, Chris.
It’s good to catch up as always. Happy New Year, Chris. Frankie Gabelli Funds. Here’s the banner headline, Mario Gabelli on Trend with Glazed Doughnut, Some Dunkin Donuts. With this going on, I feel like I’m you, Tom. I feel like I want to bite my tongue. So I’m just over body types.
Basically, they sort of dress like the bars. Well, he’s dressed up candy bars and got a little whey protein in there, but they’re called a health shaker. And so far, I mean, this is the same thing. It works. And that’s exactly how it works, is chocolate coated and it’s got, you know,
A Splenda in there. So it doesn’t have as much sugar. But essentially, for all intents and purposes, I walked by a Krispy Kreme and our sojourn is, oh, tell us more. Well, we were going to, you know, should I go in and buy a dozen for the team? Yeah.
Well, and did you say that it was unhealthy? It would be sending a bad. Okay. It was well, that’s one company Politico.com out the we’ve mentioned big tech I went through in video number one performer on the S&P last year. Number two was Metta Royal Caribbean. Number three.
Number three Tom, that was about 162% Carnival in the mix as well, over six stock up 130 on the year. You bring up a really important point, folks, and this dovetails into the economic data we’re going to see this
Week is some of these things are off the bottom, like maybe cruise ships off Covid, maybe China’s on the bottom right now. That’s a huge unknown. But these others are growing companies and we can argue about the valuation model. We’ll talk about that the 3 hours today. But the answer is there’s two
Discussions here. Growing companies, how do you price them in off the mat last year? How do you come off the mat of 2023? There’s not doesn’t exist. And ultimately, Tom, the question on leadership, where that leadership is going to come from in 2024 and later
Towards the end of the year, I think a lot of people once again, for maybe the second or third time in 2023, got pulled up on the idea that discretionary can continue this performance into 2024, the likes of Neil Dutta Renaissance macro,
Who’s really putting out there that he thinks that this resilience, this economic expansion can continue because real wage growth is can remain decent through the year ahead. And ultimately that’s going to support this discretionary thing. If that is supported, then shouldn’t the
Gains be a lot more than 6 to 9% on the S&P 500? If that’s the case, don’t you see big tech hanging in there, not necessarily declining and everything else catching up? And this to me is sort of the big sort of unknown.
If the consensus is always wrong, the consensus calls for some sort of medium performance. So where is the apple trying to perform well, What’s the efficacy of watching Bloomberg Surveillance? Here’s the answer. John Farrell puts out JPMorgan 4200. Oppenheimer 5201. So the slight difference that Standard
Poor’s 500, I can’t even do the math. It’s 20% variance or whatever. This is all BS. I mean, that’s all there is to it. And the answer is you take this to find your confidence if you’re in the market, was the efficacy of surveillance and then that final price.
Okay, it’s a good start to the year. This is why you’re watching this. You’re watch this will give you a better. Now big question, think from New York City. This morning. Good morning. Coming up a little bit later, Sara, how about upon Saxon words and the big bell
On Wall Street? Jon staffers of Oppenheimer about 2 hours away from new york philharmonic. One. Just to reiterate what I said before, we’re going to do what we have to do to protect shipping number two. We’ve got significant national security interests in the region just on our own,
The United States. And we’re going to put the kind of forces we need in the region to protect those interests, and we’re going to act in self-defense. Going forward, again, I’m not ruling anything in or out, but we have made it clear publicly to the Houthis.
We’ve made it clear privately to our allies and partners in the region that we take this threat seriously and we’re going to make the right decisions going forward. Things are looking increasingly fragile in the Middle East. That was John Kirby, the National
Security Council spokesperson, speaking on ABC over the weekend live from New York City this morning. Good morning and Happy New Year to our audience worldwide. Let’s check in on the price action to kick off 2024. Equity futures pulling back by 0.4% on the S&P 500. Just a little bit lighter.
Softer negative, lower. Off the back of this may be. Check out Apple in the premarket down off the back of this move from Barclays and Tim Long Lisa we’re lowering our rating from equal-weight to underweight. We believe the continued period of weak results coupled with multiple expansion
Is not sustainable. That stock is down 1.6% and they’re not alone. And this to me was something that I found interesting over the past week of reading Michael back neck over it would hold to wealth management put out projections that he admitted probably
Were fantasy just given the fact that all projections are to Tom’s point earlier But he said Apple the business didn’t have a great year in the last 12 months. Revenue is down, expenses are up and operating income is down. This raising a question, does it have
The growth of the other Magnificent Seven and does it belong there? It was true all year and we asked that question every month, every quarter and stock ended, Tom, that ended the year up by 48% a year. Today, I’m going to say 2023, say the multiple expansion for later.
But right now I go to 29 multiple excuse me a 31 multiple. And on their massive growth subpar compared to others it’s a 29 multiple stock. And so you say to yourself where’s the growth in this of these research notes, the concern at Barclays?
And the answer is they’re not running this for growth. They’re running it for profit. It’s a profit juggernaut. And use of cash is everything. And to your point, still a monster cash machine, Tom spitting out. There’s no compare billions and billions of cash, which is going back into big buybacks and shareholder rewards.
I mean, I just can’t say enough about how the the Magnificent Seven, John, aren’t just seven as they are. We’re going to move forward here now. And of course, we look forward to the politics of the money and futures down 22 of the VIX, 13.68. Jennifer Flint is head of US government
Affairs at INVESCO and joins us. And the 14 things that we need to focus on. Jennifer, I’m going to talk about something that I was shocked didn’t come up this weekend. It’s a calendar item. It’s January and January means you’re going to be in your L.L.Bean boots in Concord, New Hampshire, watching the
Show go by. Does New Hampshire this year matter? Absolutely. New Hampshire matters. I mean, this is the first primary in the nation. It is right after seven days after the Iowa caucus. And quite frankly, the best chance for Nikki Haley to really take hold in this race is in New
Hampshire. And if she can, you know, this may be locked up rather early this year for Donald Trump. They got four days ago of Ms.. Haley and the idea of slavery, misstatements, incorrect, whatever the debate was, will that affect her in New Hampshire? Well, I think it remains to be seen.
I think Chris Christie is certainly trying to take advantage of of that misstatement that she made a few days back. You’ve seen her try to change the news cycle, but I think we’re on like the fifth or seven cycle here. And it isn’t she’s not shaking it.
Well, given the fact, Jennifer, that Donald Trump likely is the Republican nominee and pretty much all the polls are pointing in that direction, how will he really influence some of the key debates that really are going to happen way before the election, including in 17 days time?
Or we could get another get another government shutdown? Yeah, that’s excellent point. And that’s what we’re really watching here. And it is the government potential partial government shutdown here on January 19th and then another risk then on February 2nd. But there’s also this defense supplemental. And so his reading of whatever sort of
Negotiated package comes out in the next week or so on immigration, Ukraine, Israel in the Pacific and border policy that could sink or allow for this defense supplemental to to actually take hold and pass through Congress and signed by the president. So I think we’re watching his reaction
Rather closely to whatever comes out. When Congress comes back next week, which really raises this question about whether there is more urgency around providing aid to both Ukraine, given the offensive that we’ve seen, the aerial offensive from Russia as well as from Israel, especially given some of the
Houthi attacks in the recent Iranian warship, do you expect the attitude in Washington to have shifted about really voting for aid in a much more significant way? Look, I mean, Ukraine aid is completely tied to border policy, and that is only getting more tense due to the fact that
We have close to 300,000 people who have now come over the border just since December 1st. And we’re breaking new ground here. And so the reaction and we saw it on the Sunday morning shows from Senator Graham and from Mike Rogers, those who really
Would like to see Ukraine aid happen. And they want that support from the Republicans in their conference. They know it has to happen alongside strong border policy shifts. And so we’re still waiting to see what it is that they want. They’re still drafting that language.
Well, civics one on one, I mean, we’re talking about a lot of Republicans here. Does does the administration have a border policy after the cacophony of news the last ten days? Well, I think they have a border crisis. And I think there’s an acknowledgement, especially among Democrats who are in
Difficult districts. You know, you have in the House specifically 24 roughly toss up districts. And number of those Democrats who are in those top races are really looking for a resolution here. And you see this especially down in Texas, New Mexico, Arizona. There has to be some sort of a dealing
With this issue and not just for House members, but also for Senate. You know, these toss up Senate races in Arizona and Ohio and Montana, you know, they need resolution here. And it’s going to have to be part of this defense supplemental. I think the optics for the White House
Over the last week or so just absolutely terrible. The president’s on the beach. At the same time, U.S. border officials are processing more than 300,000 migrants for the month of December, potentially the highest monthly tally on record. It’s extraordinary to follow this across the life of Bloomberg Surveillance.
It’s an intractable issue that everyone wants to dodge For us in New York City, folks, it’s visceral. I think the latest thing I saw within the zeitgeist is the buses from Texas are now being dropped off in New Jersey
Because the mayor and others in New York City said, no, you’re not going to drop them off in New York State. What are those good people do in New Jersey? That’s the immediate question. Jennifer, just to squeeze in an additional question, if we can, on that
Point, how does the president, between now and November, convince the electorate this is something that he can do something about? Well, and that’s why the next several days really matter. So if it’s not tied to defense supplemental, then it’s going to have to
Be tied somehow to appropriations. You’re you’re going to see this pressure rise when Congress comes back next week. It’s not going anywhere. And there has to be some sort of resolution for this administration going into what may be an early start to a general election.
They’ve got a lot of work to do down in Washington, D.C.. Jennifer Flood in there of INVESCO. Jennifer, thank you. Lisa, we’ve got these two deadlines coming up for spending, potentially talking about government shutdowns, FEMA, the election out there in November. It’s going to be messy.
It’s going to be really messy because it doesn’t seem like there’s any resolution. And frankly, there’s been discussion from Mike Johnson, the House speaker, that they’re going to be separate bills for each one of the spending packages. They don’t have time to get past
Something like 17 independent bills. I suggest it will be October of next year, a full debate, and it will go right into the presidential election that we’ll see in November. Two deadlines we’re all looking for. January 19th, This one February 2nd is the other.
Coming up shortly on the outlook for the economy in America, Bruce Castmate, Jp morgan, that conversation just around the corner from New York. This is Bloomberg. Live from New York with the scores on the S&P 500 kicking off 2024, pulling back just a touch on the S&P. We’re negative here by 0.5%.
Lighter on the Nasdaq, taking things down by about 0.85%, Lisa. The majority this, would you say, Daniel, that downgrade from Barclays on Apple Apple down this morning in the pre-market, especially because it really comes after so many people have pointed to Apple as a potential outlier of the
Magnificent Seven, not delivering the same kind of sales growth. Those shares down 1.9% in pre-market trading. So, yes, given the weight of them, this one stock can break everything down. Just reminding us how important it is to get the Magnificent Seven right. I would say there’s a set of opinions on Apple.
Let’s go to 4 trillion man Dan Ives Wedbush models out 3 trillion to 4 trillion in market cap out 18 months. He doesn’t really put a timeline on it but this is the bet on these stocks whether you’re pro or con is it’s more
About the business strategy, the structure of it, and it’s about gaming stock price, as Lisa mentioned. But Diana will most 2% in the pre-market. Let’s turn from stocks to bonds in equity land. Nine week winning streak on the S&P 500 in the bond market, November, the ten year yield down 60 basis points.
December, the ten year yield down almost 45 basis points this morning at January, Lisa, up five or six basis points back to three 9350, basically where we started last year. Again, this is sort of to your point trolling us because we see this wild shift up to 5%, wild shift down to sub
4% and we’re just bang, we’re back where we were before. Right now, it’s very unclear to me whether people are going to get worried yet again about inflation. When you start to see a labor market hang in there in an economy, that’s okay.
But the micro trends there, the United Kingdom, John, you know, this 7.7%, I mean, I mean, is that going to lower their prices, 7.7% down to 6.7% on food prices? That from Katy Lindsey on Queen Victoria Street. And the answer is there, Spain, there’s London, there’s Germany, there’s the U.S.
That these micro debt is of disinflation, including the deflationary impulse of China, which gets you to the enthusiasm. Let’s turn to foreign exchange to push out some of those bond markets through foreign exchange, those big moves in bonds taking down the US dollar, the
First down year for the dollar index since 2020, the euro through, what, ten? Briefly, Lisa, back down to 1.79. But if you look at some of the ranges, some of the levels we’ve gone through, think about the move we’ve seen in the Swiss franc as well. The recent weakness in the Donavan, the
Strength house, where has been pretty notable in the last month. And it’s all really stemming from this idea that the Fed is going to cut rates more than three times, maybe five or six times this year. Why? If there isn’t true weakness in the
Economy, can they do that? And we’re going to have to talk about that. Even though people are sick of that conversation, it will still dominate things in 2024. Can’t wait for the Fed minutes a little bit later this week. Did they talk about it? Are they actively talking about it?
He came out, read them as well. What time of day? Tomorrow? I think they’re at 2 p.m.. Cannot wait. Okay, good. Start to 2024 under seven is this morning crude gaining as a run ramps up tensions in the Red Sea. Tehran sending a warship to the area
After the US Navy destroyed three Houthi boats over the weekend. Maersk also suspending all Red Sea transit in order to assess the situation. This one has been simmering now for the last two months, last two, three months now, Lisa. And starting to get to boiling point more recently.
Well, especially the fact that Iran is going to directly bring their own resources into the region. This is sort of getting closer to honestly, what we’ve been hearing from Mitch McConnell and others, the direct confrontation between the U.S. and Iran and what really will trigger
That if you have both U.S. warships, Iranian warships, the Houthi militants and the U.S. willing to shoot them down. You know, Elliott Ackerman scheduled to be with us here with a wonderful book, 2034. And that’s all about unintended consequences. And this is how you do it.
You’ve got things in a sea contained like the Red Sea and, you know, the got the best of plans, the best of hopes. And then there’s oops. And that’s the risk that’s out there right now is one oops. Tubes are sequential mistakes being made, deeply upsetting images coming out
Of the region in the last three months or so, the last two, three months. Shocking images coming out of Japan over the last 24 hours, including these a Japanese Coast Guard plane colliding with a Japan Airlines flight, Haneda Airport in Tokyo. All 379 passengers and crew on board the
Larger plane safely evacuated, according to a spokesperson. But five of the six crew on the Coast Guard plane are unaccounted for. Lee said a smaller plane was carrying eight in northern Japan, where its 7.6 magnitude tremor hit the country. At least 48 people have died.
We understand from the latest reporting coming out of Japan that five are confirmed dead in that Japan Coast Guard plane collision. That news just coming through moments ago. And it’s just horrible considering the fact that they’re also reeling from what we saw with the earthquake, whether this was related or not.
Very unclear about what some of the details were in this. But there’s a real question here about how this country is going to really evolve. You’re seeing the yen respond. In early morning to the disasters, bring it across the world. Here we’re off of COVID and off of the challenges of the American
Transportation system. There’s a real worry, John. It’s unspoken, sometimes reported on. People are worried about order at different airports. You know, in New York were focused on this. But this is not just a Japanese issue. That’s a developing story in the last 24 hours, particularly that crash in the
Last couple of hours. Any more on that? We’ll bring those details to you. I wanted to finish on this. Dutch manufacturer ASML bowing to pressure from the Biden administration. According to Bloomberg, the company canceled shipments of its chipmaking equipment to China weeks before export bans came into effect for January.
The Biden administration is cracking down on China’s efforts to make advanced semiconductors. And Lisa, progress in Iraq. And this, to me, comes as the ASML CEO talked last year about how they’re going to lose some 15% of their revenue from China as a result of some of these bans,
Yet still going ahead with this, because it’s not just the United States, it’s also European countries trying to restrict China’s ability to develop some of the chips in the iPhone rival and other things that they’re developing. This, to me, is really the key area to watch, especially as you hear Xi Jinping
With some niceties memorializing the ties between the U.S. and China that were initiated in 1979. And Biden trying to make nice noise. This is what you need to be watching. But it’s the mystery. I don’t know if you agree with me, but I would say China has a simple mystery for
This year is it can do 5% GDP. And also, of course, all of politics as well. Let’s turn to that, some of the mysteries of your 2024. Bruce Chasm brings chief economist J.P. Morgan. Bruce, thank you so much for starting our year. Strong.
I’m going to cut to the chase. There’s an enthusiasm out there. Tony Dwyer over at Canaccord Genuity just says investors are giddy. I mean, there’s just no other way to put it after what we’ve seen in Q4. Do we have the animal spirit, the nominal GDP to sustain our collective
Giddy? Well, I think on the one hand, there is a support for growth here that’s already reflected in the health of what is both the private sector on the household and the business sector side that should continue to keep growth going. And now we’ve got an additional boost
Coming from financial market easing. So I think the prospects for growth here, while not gloomy, look reasonably good. The question is whether the enthusiasm, which is being driven in large part by expectations of substantial Fed easing in the first half of the year is going
To be realized. And here we think there’s probably going to be a bit of a a speed bump that comes in the way because I don’t think inflation will keep coming down in a way that will deliver that outcome. Well, to the speed bump you’ve provided, this is, as you well know, Michael
Farrell is on the short list to be the next Fed governor. But the answer is Feroli of J.P. Morgan has a potential GDP of sub 2%. John Williams As an our star, it’s back down to what it used to be pre-COVID.
Should we just understand we’re going to migrate at some point back to the feroli lower levels of real GDP? Well, I think it’s it’s pretty unclear right now, given how much the shocks from the pandemic have kind of affected things. I mean, my own view is that our star is
Higher. I think it’s shown in how the economy has performed over the last year or two. I don’t want to argue that’s a long term estimate, but I think the economy is in a healthy position here. I think it will take higher rates to be sustained here to continue to bring
Inflation down. Inflation is not going to stay high as it was over the last two years. But I think getting down from 3 to 2 is probably going to take more work and I think it’s not going to happen quickly.
And as a result of that, I do think the Fed is probably going to be disappointing here relative to the speed at which rate cuts are priced into the market process. You know, as we all know, the last 12 months marked by recession calls that never really materialized.
What have we learned in the last 12 months about which data points are relevant and which data points are totally irrelevant? Because I’m looking at a manufacturing guy, Sam, that comes out later this week, which has been sub 50 since November 2022. How useful is that? Well, I think what we’ve we’ve learned
Or should have learned here, first of all, that forecasting is hard and that’s something we should always be reminded of. But I think importantly in this environment, we should learn that there’s a whole set of things happening in this pandemic recovery which are
Unusual, you know, 500 basis points of Fed tightening traditionally deliver a recession. And that’s what a lot of people were basing forecasts on. But as you noted, even as manufacturing globally has been soft, the service sector has been lifting as a result of
Pandemic normalization. In the US, you had a big fiscal impulse, which I think people missed last year and more generally the underlying health of the household and business sector I think is something that’s not usually in place when the Fed is tightening a lot and has provided a real backdrop of
Resiliency. Resiliency has been the theme, not strength so much. And. I think it’s still in place here, and I don’t think we should bet against the US or global economy, at least not over the next six months or so. To build on John’s question about which data points matter.
I do wonder about the stacking of all of the employment metrics that we’re going to get this week. I’ve really topped off with that nonfarm payrolls report. How high is the bar for either wages to increase, for the numbers to stay high, for the market to wake up to the
Realization that you’re talking about that frankly, the Fed cannot cut rates six times this year and that the economy is much stronger at inflation. Unfortunately, a bit stickier. So I’d say first off, that the you know, the payroll report, the data we’re going to get this week are going to speak much
More to growth, even though we have an average hourly earnings report which will speak directly to wage inflation. We are looking for a 4/10 gain on that. But I think the message from this week is that the economy is doing reasonably well, not as strong as it was six or nine months ago.
We’re looking for job growth to be settling here somewhere in the 151 75,000 a month range here. And I think what you want to look here as is the pattern of behavior, as you noted. Manufacturing still looks weak, but there still is broader strength in the
Economy outside of manufacturing. And I think the net effect of this is an economy that’s growing probably around 2% right now. So this leads to this question of the round trip that we’ve seen on the ten year yield. Are we currently seeing restricted
Levels of rates? Are we going to see that working their way through the economy this year? Or is this really going to be something that allows the recovery hurt the expansion to continue? Well, that’s an interesting question because, as you know, the Fed responded
To the rise in ten year yields from the middle of the year through the end of September by arguing that that was doing some of its work for it. It has not pushed back against the easing so far. It’s really embraced the idea that we can get inflation down without having to
Have any pain and possibly have material Fed easing. We do see the fall in ten year yields as a reflection of risk appetite going up. You see that more broadly in equity markets. You see it across risky assets around the world.
I think it will support growth. It does promote resiliency and I think it is going to, on the margin, be a factor that’s going to slow the Fed and other central banks down here continue to make ruinous into 2024. Bruce, just too short an answer necessary with you and Joyce Cheng and
Your work at Jp morgan. What will be the GDP outcome of China this year? I think five is is good enough a number. China’s economy, which is moving in different directions, in different pieces. But I think there’s enough policy support. I think the external recovery we see,
Which is quite modest, but taking hold in tech and manufacturing will help it. I think it’ll grow five with a very weak private sector demand and quite significant supports externally and from the public sector following a pretty shaky year as well. Bruce, thank you, sir, for catching up
With us this morning. Appreciate the update. Happy New Year. Bruce Kasman of Jp morgan. I did promise you an update on the latest out of Japan following that airline collision at Haneda Airport in Tokyo. A Japanese Coast Guard plane colliding with a Japan Airlines flight at that
Particular airport. As far as we understand. All 379 passengers and crew on board the larger plane safely evacuated, according to a spokesperson. The latest we’re getting on the smaller Coast Guard plane. At least five Coast Guard members confirmed dead. This according to the Japan land minister. And we will be obviously getting more
Details as it comes in. But really, just yet, another tragedy on top of the already tragic images from the earthquake that we saw, as well as some of the tsunami fears. This coming as we still try to establish what actually happened here to the two airports of Tokyo.
We all know Narita and the horrific drive. It’s 40 miles from Narita. It makes O’Hare look like a walk in the park. Haneda is is a newer airport, if you will, for commercial aircraft, mostly domestic, mostly Northern Asia, less the international flights. That’s the latest out of Japan.
More on that a little bit later when we get more updates for you for the broader price action building like this on the S&P 500, pulling back by 0.7% on the S&P. An update on Apple, a downgrade from Barclays this morning. That stock is negative by about 1.8%.
From New York, this is Bloomberg. There will be a temptation to think that the the three major conflict areas geopolitically that you just pointed out, Ukraine, Israel, Taiwan are going to be somehow handled when in fact they’re going to continue on for months. I mean, there’s no easy end to the Ukraine war.
The Israelis say that the mass war will go on for months, and I don’t see anything there to stop it. And there’s a lot of volatility around Taiwan, which I think frankly is under underappreciated by markets. That was Terry Hang Seng, the founder of Panacea Policy.
As geopolitical tensions mount and linger, the latest from Iran dispatching a warship to the Red Sea. More on that in just a moment. They brought a price action if you picking up on things in commodities. Crude looks like this on WTI 7320 by about 2.2%.
Brent crude up to almost 79. Lisa, 78, 71 up there by a little more than 2%. To me, I’m watching this very closely. We’ve been surprised all year by oil prices declining and actually ending the year with a loss last year this year. Really key to see as Iran sends a ship
Over to the region and we’re not seeing any sort of quieting down and some of the conflict in the Red Sea. You heard it there from Terry Haines. Underappreciated by markets may be Tom. October crude was down 10.76%. November it was down 6%, December it was down 5.67%.
Then the last three months on crude, even with all of this going on in the Middle East, with all this going on in the Middle East and it’s 78.68 on Brent crude up 2.1%. It’s sort of middle tendency. I thought I’d see a bigger move over the last week.
But the answer is, you know, people are using surge or lifted. Well, it’s just trading up. And I would thought I think it’d be much higher. Is it possible that the United States is the number one producer of hydrocarbons in the world?
It is the weight of U.S. output, 13 million barrels a day of output in this country. It certainly contributes to that move. Some Joe Biden, Secretary Granholm, oil czars, if you will, that they won’t talk about it. They won’t talk about it. They certainly won’t talk about it to me.
Oh, an inside surveillance joke right now. We need perspective and we get it from someone gifted. He’s served the nation in the Marine Corps, also a White House fellow. And critically, he is a king of speculative fiction with James two meters Elliott Ackerman’s Must-Read, 2034.
Boy, is that a must read right now, given the Philippines, given the South China Sea, and we eagerly anticipate 2054 that you’ll see in March. Elliot Ackerman joins us this morning. Eliot, this is not speculative fiction. It is reality in the Red Sea. What is lost in the press coverage?
You know, I think the one thing that is often lost is we have a tendency to focus specifically on military events while losing perspective, that all military events happen in a political overlay. You know, ultimately, these are political questions. What’s going on in Taiwan, what’s going on in Ukraine, What’s going on in
Israel? And the longer these wars play out, the more and more central the politics of the war itself become and what the outcome is going to be. The heart of your fiction with the admiral story. This is things happen suddenly and then in sequence. Do we have the ships in place against
These terrorists? Whatever you want to call them. Do we have the process in place where unexpected bad things can happen in sequence? I think when it comes to to the Middle East and the challenges that we’re seeing there. Yes, we do. And that is a situation where, you know,
We the United States, vis a vis the Iranians, we are not facing a peer level adversary necessarily in Iran. And I agree with Terry’s comments that the underappreciated conflict here is Taiwan. And when it comes to Taiwan, you know, the United States does not have the
Forces in place, at least peer level force is in place that can meet Chinese aggression across the Taiwan Straits. And that’s one of the huge challenges that we face, is that the Chinese would be fighting that conflict in their backyard and we would be fighting it from across the Pacific Ocean.
I want you to elaborate a little bit on the point that you just made, that all of these international conflicts have real domestic political implications. What are some of the ramifications that we’ve seen over the past year, how the conflicts have developed and how public opinion has shaped the inaction that
We’re currently seeing in Congress to continue providing aid? Well, I think when we go around the go around the world, if we look at Ukraine right now, I would argue that that’s probably a war that’s not going to be decided on the battlefield as those conditions stagnate.
And it’s a war that’s going to be decided at the ballot box. And I think in Ukraine or in Israel, as we see, this war is now extending into months. I think domestic political considerations in Israel are going to determine the outcome of their war with
Hamas. And I think if we look at the United States, you know, the elephant in the room is we have an election that’s going to occur this fall. And how that election unfolds will be determined after those conflicts. And last thing we look at Taiwan.
I mean, in two weeks, the Taiwanese people are having a presidential election and the outcome of that election will certainly affect China’s perceptions on what they should do in Taiwan. How different is the foreign policy of Donald Trump versus President Biden? I think the foreign policy of Donald Trump is much more unpredictable.
And I think the foreign policy of Joe Biden, as we’ve seen it, is much more it has a much more incremental. So I don’t think anyone can necessarily say what Donald Trump’s policies would be on any three of these conflicts Taiwan, Ukraine or Israel, whereas I think we’ve seen sort of a more
Consistent approach that Joe Biden has applied. I mean, look, Eliot, where we are and it’s about public service. There’s a lot of people watching this across this nation that have loved ones that see loved ones on long tours of duty. I know that the Ford is coming back from the Mediterranean.
Are we fit now in our defense budget for multiple wars? You mentioned Taiwan. Let’s take our war. Ukraine, our war, Iran, maybe our war, China. Do we have a budget near capable of meeting those three threats?
I think we’re I think we have to take a very, very hard look, not only at the budget and the financial resources that we’re applying, but also the intellectual resources. And that’s actually where I have the most concern, you know, is a, would a war against China look like a repeat of
The Second World War, in which the coin of the realm, a naval battle where aircraft carriers, 80 years after the aircraft carrier, became the coin of the realm. And I don’t know that that’s necessarily the case. You know, we’ve seen in places like
Ukraine that the Ukrainians have been very effective in sinking Russian ships at the line with shore based missiles. And so, I mean, I’m a I’m a marine veteran of my own service right now, is in the midst of doing some real
Strategic a real strategic reset about what it would look like to fight a revisited island hopping campaign in the South China Sea. And they’re restructuring the entire Marine Corps to do that. So I think there’s there’s a budgetary question, but there’s also an
Intellectual question of, you know, what will the wars of the future look like? And that that work needs to be done now. And it’s going to force some American military institutions to transform in ways that are going to be very uncomfortable with the war of the future.
ELLIOTT What’s a more effective strategy, one that’s predictable or one that’s unpredictable? I think in terms of your battle plans, you always want to be unpredictable. The word I would use is one that is adaptive because it’s very difficult to predict what the war of the future is
Going to be. It’s most essential not to get the prediction right, but to get the posture right so that your forces can adapt to whatever the next conflict looks like. And, you know, to use an analogy from the Second World War at the outset of the Second World War in terms of naval
Warfare. Again, the coin of the realm was the battleship, and it had been the coin of the realm, the most essential platform for four centuries. But as we all know, you know, Pearl Harbor, the entire U.S. battleship fleet was sunk.
And we had this new platform, which was the aircraft carrier, and that that platform was able to adapt and become the central force around which naval battles were fought. And I think whatever the next war is, we’re going to see a similar process of adaptation need to occur.
It’s going to have to occur very fast. And the side that gets it right will probably be the side that wins. And it just to finish that, what do you suspect it is? I think it’s going to probably be a network of platforms. I think it’s going to be unmanned,
Unmanned ships, unmanned aerial vehicles. Our ability to fight both a high tech war and also a hybrid low tech war where those high tech systems are taken offline and our forces ability to kind of toggle between the two. So it’s going to be very, very complex.
But more of the network centric version of warfare as opposed to a platform centric version of warfare built around, you know, very big ships and aircraft and things of that nature, trust and interest. And. Elliot, thank you. Appreciate your time this morning. I always do.
Happy New Year, sir. Thank you for having us. Marine Corp’s veteran on the latest. Okay. I can’t say enough about his book 2034. When the kids say to me, what book do I want to read, but I don’t want to read 1200 pages of Jonathan Spence, I say,
Shut up and read Sister Venus in Aquaman. Aquaman is Venus. It’ll be a great movie on Netflix. This is the reason why I’m watching ASML and some of the bans on certain technology to China, because what Elliot Ackerman is talking about is going to be
Fueled by a lot of these technologies that are connected to chips and artificial intelligence and unmanned kinds of high level not thinking, but processing of data points. We’re on totally the same page. The difference between rhetoric and policy. The rhetoric is cozy, a little bit better between China or the United
States, but the policy policy is not changing anytime soon. Coming up, Sarah Hahn of our pod Saxon words on this equity market pulling back just a touch with 10.6% on the S&P. The S&P 500 coming into a new year on a nine week winning streak. From New York, this is Bloomberg.
2024 is going to be the year that we have a very serious discussion in the financial markets about the Federal Reserve’s credibility. What I’m excited about in 2024 is to not hang on every single word that the Fed is saying. Paul thinks the Fed’s to be cutting
Rates in 2024, but it’s possible that the economy could be firmer for longer. If our call is right, more likely to have a soft landing than a recession, clearly not cutting. In March of 2024, the Fed is really unlikely to start cutting in March. This is Bloomberg Surveillance with Tom
Keene, Jonathan Ferro and Lisa Abramowicz. Live from New York City this morning. Good morning. Good morning. From our audience worldwide, this is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro your equity market this morning, pulling back 5.6% on the
S&p 500. Before we get all excited and start talking about 2024, let’s talk about 2023. Coming into a brand new year. The average forecast, 4000 points on the s&p 500. We close almost 20% higher. So let’s talk about Tom 2020 for the moves for the year ahead.
You conviction on Wall Street, the high 5200, the low 4200 a 1000 point spread between Oppenheimer at the high end and Jp morgan at the low end John sofas of OpCo there. Sam Stovall also from CFR, you had a really interesting and wonderful 2023 of optimism as well.
And you say, well, how did this happen? And here’s the solution is this thing called valuation expansion? Stuart Kizer at Citigroup. But a great research note here and the valuation expansion, the p e multiple expansion that we all witness, John, I would suggest 12 months ago that was not
Predicted and yet there it is. Look at apple with a 30 1pe. This sets up apple perfectly to the pre market pulling back the early call to start a brand new year coming from the team over at barclays. And tim lang lowering our rating from equal weight to underweight the 15 has
Been lackluster. We believe the 16 should be the same. We believe Lisa, the continued period of weak results coupled with multiple expansion is not sustainable. In the last 12 months, you’ve had a revenue down, you’ve had expenses up, you’ve had operating income down.
You’ve got this question of just how much is the cash flow fueling some of the gains by pouring them back into stock purchases, and how long can they continue doing that and be continue to growth stock at this point?
This to me, how did we get it so wrong? Magnificent seven, we’re up 107% last year. This year, people are saying all the others will come to the bat. Okay. This is still the mystery at a time where we’re not getting real growth.
And one of the biggest names. Yeah, but I’m going to go to the optimism side of that is that I mean, there’s a lot in common between the great Sir John Templeton, Indiana. They both were great Air Jordans in. The answer is Dan Ives is channeling Sir John Templeton this morning.
Apple shares they’re on sale. That’s a sale. That’s the language of the wonderful John Templeton of Tennessee. Yeah it’s Dan I’ve saying on sale just to be very clear, he’s saying Dan I’ve just seen it Wedbush on sale. He’s modeling out a $4 trillion apple
Out there somewhere. And this is the struggle the pain of not holding Apple. Everything that Barclays said this morning is true. Almost 99% of it is true. And it was true through much of the whole of last year, Lisa.
And yet still that stock closed the year higher by almost 50% at the bull case include services. The bull case includes just ongoing recycling and ongoing re upgrading. Considering the fact that the upgrade cycle was delayed, not deferred completely, there is a question here
About how any of the tech stocks are going to perform because we headed into the beginning of last year, frankly, everyone was saying this is going to be the area of underperformance. Finally, they were so wrong. So we’re so wrong. Again, whatever the consensus is.
The number one thing I missed. Zuckerberg I’m Mr. Meta. Big Zuckerberg. He’s cutting just like you, John. I just I missed Zuckerberg in 2020. The first comparison I’ve ever had with Mark Zuckerberg takeover. Thank you. I think we’re all eating humble pie on
Wall Street after the year we’ve just had on the S&P 500 and the year we’ve just had our sweat, by the way, and the bond market, just narrative after narrative and a ten year deal just laughing in everybody’s faces and closing the year exactly where it started.
It is the price action for it this morning at ten year at three 9557 it what’s up this morning by seven or eight basis points equities pulling back a touch here Lisa we’re down 0.6% on the S&P and how much is higher?
Oil prices really kind of fuel this idea of potential inflation reigniting? This is what we’re watching for the week ahead is that manufacturing comes out tomorrow as well as the FOMC meeting minutes around 2 p.m. at 10 a.m.. We get the JOLTS job openings which have
Been coming down Again, a fuzzy number. Unclear exactly how predictive this is, but if you see the unemployment rate remain low and job openings come down, this fuels the immaculate disinflation discussion. Thursday we get initial jobless claims. Those have been increasing. I am curious about continuing claims considering the fact that, you know,
There is this feeling something has to give on the labor market front for inflation to come down to nonfarm payrolls to finish. The labor market theme comes out on Friday along with ISM services. Do we see average hourly earnings sticky at around 4% year over year?
If they are, can we see a Fed truly cut interest rates by six times by 150 basis points throughout the remainder of 2024? We’re hitting the ground running in a first week of 2024 where there’s a roundtable. Sarah Hunt, chief market strategist at Alpine snacks and Worth.
Sara good morning and have. New Year. Happy New Year. Let’s revisit that quote from Barclays this morning. We believe the continued period of weak results coupled with multiple expansion, is not sustainable. Are you on the same page? I think you almost have to be.
I mean, you know, the theme for 2023 was all about the Fed and what was going to happen. And as soon as the cycle peaked, you could be okay. So if we pulled forward a lot of multiple expansion on the back of the idea that rates are going to come down,
They’re probably not going to come down to that great financial crisis level. If they come down a couple hundred basis points, is the multiple expansion already too much? And I think that that’s going to be the big tension in a lot of them. And, you know, for Apple, which we are
Talking about, you’ve got to look at all that consistency and all that cash flow. And that’s what people are paying for that and the exclusivity of its Apple and people will keep replacing those products. Is that assessment true of the whole market of just a select group of stocks
That dominate the market? I think it’s more a select group. I mean, you have to I think valuations and we keep saying and it’s sort of like this is Europe’s here, this is valuations here. It’s going to matter this year, Right? I don’t know when it’s going to matter,
But at some point it will. I think having money have a cost makes valuations matter in a way that we had 15 years where, you know, people talked about it but it didn’t really matter. And maybe that starts to happen now and maybe people really start looking at those metrics.
But I think you’ve got a lot of money on the table. You’ve got a lot of places that, you know, get a lot of money that needs to be invested from out total return. You can go to the Bloomberg folks.
The terminal tiara is the function and you can model in annual return quickly, one year back, two years back three years, etc.. And the answer is we’re now addicted to, oh, I made 15%, I failed. Baloney. It’s a single digit return at the most.
You’re going to make 11%. But the answer is do we need to get used again to equity return of eight or 9%? I think that you do. And I think that you also have to look at history. I mean, yes, you had a huge move last year in a handful of names.
And yes, some of the other stocks started to catch up at the end of the year. I mean, it’s just looking at a chart of L-3 Harris before I come on here. And I was like, wow, that back end of the performance was really, really quick.
I don’t know where you end up with multiples here, but I don’t think that you can have the kind of growth that we’ve had given the kind of economic backdrop that we’re looking at. You know, if the Fed is really going to
Cut six times like the market is pricing in, then we probably have a much weaker economic scenario than earnings are pricing in. So I don’t there’s a tension here in 2024 has got a lot of questions that need to be answered. You’re the person I put wanting to ask
This question to. One of the big surprises last year was that the great underperformance came from oil. Tom and John are talking about why that was so surprising considering some of the conflicts that really were escalating in the Middle East. At this point. We are seeing oil perk up just a touch
Relative in relation to what’s going on in the Red Sea. Could this increase, if it continues, change the disinflation narrative? Absolutely. I mean, just the changing the trade routes alone could change some of that because you’re going to have things get
More expensive, but you’ve had a huge supply response to oil demand and you’ve got you were talking about earlier, the U.S. is a huge producer now. Commodities are priced on the margin. If I’ve got excess supply, I can’t get prices to really move that high, which
Is why the Saudis have had to keep taking oil off the market. But if you start to see a crimping of some of those routes and you can’t move things the way you thought you could before, then you’re going to see then
You could see some problems. And that’s been a huge help for the inflation picture. And if that changes and you start to see data that is a little bit more inflationary, that narrative on how much the Fed’s going to cut has to change. And then that’s going to be a question
Of then where do equity multiples go given that scenario? I know that you were bullish on energy stocks through the beginning of last year, then you got a little more tepid, as you saw at some of the moves.
At this point, how much are you leaning in to some of those names because of just how offsides people would be if the disinflation narrative fades and oil prices surge? Well, we think of energy as an area where you need to have some position, but you trade around that position and
You get heavier. When you think that you’ve got an opportunity and you get lighter when you think that the market is not going your way. When the supply came up a lot, that’s where you sort of lighten up on your energy positions. I don’t think you want to be out of it entirely.
You’ve got a lot of very good dividend yields in those and you’ve got a lot of stocks that act better in a bad market than some of the other things do. So I think that’s something you want to trade around. And we still think that energy has a longer tail.
You’ve got a barbell portfolio, you’ve got short term stuff for your day trading. We know you’re famous for this year and then you got the buy and hold and we have to talk to the audience that their heads are spinning off of COVID. They’re stating, okay, covid’s over.
Can I maintain some form of three year or four or five year ownership of whatever equity I’m comfortable? Can you still do that act? I think you absolutely can. And I think that this is a time to really be thinking about that thematic trade of what’s going to happen in the
Next few years. Right? So we look at something like Tetra Tech that does all sorts of engineering construction, but basically on a lot of water and some of the infrastructure stuff, I think that you can definitely look at companies that have a longer
Term theme that are playing into some of the things that are going on. But the volatility within that, you have to be able to say, okay, this is where I will allow some volatility to occur, because some of those stocks that you know, that we like a lot still have had some challenges.
In a year where someone makes an acquisition or somebody does something. But I think you can look at the of investing now because you really got a longer term view and you’ve got a market that’s fairly expensive. So you’ve got to really like where you’re positioned.
Let’s finish on the banks, the regional banks specifically, not the big players, the regionals. Khouri closely followed regional bank ETF, you know, well up almost 14% in November of 16% in December. Is that just the leverage trade on what’s happening in the bond market in
Treasuries as yields fall aggressively? Or is that something to get your hands around for 24? I think that’s a lot to do with what’s going on with interest rates. And I think it’s also a lot to do with people looking for OC where has completely still been on the floor.
And maybe we can pick something up here because the valuations on that group were very, very not challenging relative to the rest of the market. I think you still have issues with the yield curve. I think it’s still difficult to make some money in some of those and I think
We still have some commercial real estate issues that we haven’t flown through yet. So it’s a little bit challenging to say that that’s a definite thing about the environment as more is like it was being picked up off the floor. I Speaking of the yield curve, less a
Two year versus ten year, still -36 basis points. They’re not going to really make up some of the difference through lending longer and borrowing short to to also Sarah’s point, $117 billion of commercial mortgage debt coming due just this year alone.
That’s really going to raise some questions on that front with some of these reasons. I read the same article I believe is in the f t. My brain’s frozen on that right now. But the answer, John, is I saw a bar chart of I’m going to say ten cities in
America is basically New York in some up all the others and maybe every other city combined is the same as New York. I mean, it’s amazing. I this is a local issue for us. Hey, Sarah, it’s good to see you. Happy New Year. Sarah Hunter of our pint snacks and
Words. If you’re just joining us, welcome to the program. Equity futures on the S&P 500 look a little something like this were down 0.6% on the S&P 500. Yields are higher by eight basis points, 395 and 94. There’s one stock to watch in the pre-market, though.
It is Apple moving lower. Lisa, off the back of this move from Barclays. Lowering our rating from equal-weight to underweight the stock is lower by 1.7%. The fact that the stock is lower by as much as it is really highlights the concern that people have out there of
Exactly some of the issues that Barclays have highlighted. Tom, I suggest that you’re going to probably put out there. Well, they’ve been wrong. They’ve gotten the move wrong. If all that behind all the things are true, you are correct.
But this is the big mystery. When will it matter that this is not the growth stocks and video is. I have huge trouble with this. I can’t stand the phrase underweight is underway to sell is I’m serious folks. Everybody else here directly global wise jittery voice wins over in the the green
Room. We are aging right now off this. What in God’s name is underweight? Barclays can speak for themselves. I would just say that perhaps underweight is a marketing concept to make sure that you continue to get engagement from the management team,
Some without actually saying so, even though you might mean, you know, I said it was like, you know, 3 p.m. on New Year’s Eve. I said to Mrs. Keene, I said, I think we’re overweight the champagne right now. You know what I mean? Name is underweight. That’s a very different kind of
Overweight tummy. Yeah, Underweight. Yeah. So I just like, come on. Barclays is going to a smaller media and feels the same way. It’s a ridiculous game to maintain access. Zero. Never underweight. We were on the same page. No champagne. Champagne. Thank you.
Coming up in about an hour from now, don’t miss this conversation. The biggest bull on Wall Street, John, still for some Oppenheimer Asset Management, looking for 5200 on the S&P 500 year end this year. That conversation is just around the corner from New York City this morning. Good morning.
Just a few days ago, we issued what will be the last drawdown package, security assistance package for Ukraine that we have funding to to support. So it’s really important when Congress comes back to work here next week that they get our supplemental funding approved and passed so that we can
Continue the flow of necessary weapons and capabilities to Ukraine. Two big deadlines coming up over the next six weeks. That was John Kirby, the National Security Council spokesperson, speaking on ABC over the weekend live from New York City. Is the price action for you to kick off the trading week?
The trading year equity futures pulling back by 0.7% on the S&P 500. Just a touch lower apple in the pre-market off the back of this downgrade from Barclays. Tim long late in that effort saying we believe the continued period of weak results coupled with multiple expansion
Is not sustainable. That’s stock pulling back 1.71%. I’ve got to say, Lee said no drama in the context of the massive gains we’ve seen in the last 12 months. But certainly I think that’s the question a lot of people were asking already coming into 2024, which is the
Reason why people are responding to a rather ambiguous recommendation to Tom’s earlier point about what it even means to be underweight. But what this highlights to me is the fragility of the S&P level two Magnificent Seven stock performance, how much that is the deciding factor and how
Much of a mystery that is heading into a year where a lot of people expect it to sort of trade sideways. How often does that happen? Nasdaq 100 futures pulling back by almost 1%. Of course, the biggest weighting on that is Apple took Apple last year, up close
To 50%. You know, you lined up, John, as you did with the equity. You can line up the returns you mentioned in videos as outstanding event last year. And the question is, what do the mainstream tech companies, Microsoft, Apple and them doing and also the ones that are more at the margin?
And then I’m fascinated by what nonprofit tech does. Goldman Sachs follows this carefully and they’re a bang up end of the year. Does that continue with these companies with non profit? I love the idea that nonprofit tech means something different, different people. It’s not someone who’s going out of
Their way to do good. It’s non profit, meaning no profits. You know, just just clarifying for anyone who is confused. It’ll be part of our discussion they’re going to highlight today. John’s stuff is scheduled to be with us in the 8:00 hour.
He’s been right and he is bullish. Always optimistic is Anne-Marie Horton, Bloomberg Washington correspondent joining us desk side here today. I’m going to go to the border first in the idea of the immediacy of do something to find do something for the administration after the border dialogue
Of our soldier and our Christmas sabbatical. Well, it’s going to be an important topic this week because we have the current speaker of the House, Mike Johnson, going to the border, going to Eagle Pass, Texas, on Wednesday. He’s bringing a large congressional delegation with him. And all of this is happening while we
Still don’t have an agreement on the border. And what you just heard from Admiral Kirby, when it comes to Ukraine funding, when it comes to Israel funding Taiwan funding, all of that is being linked to the border. At the same time, we also don’t have
Funding agreement when it comes to top line, top line funding figures. So we have these two potential fiscal cliffs coming up the 19th and the second for different parts of government agencies that are going to be running out of money on those days. At the same time, they’re trying to
Secure this massive supplemental package that is going to be money for a lot of foreign policy issues that the Biden administration wants, as well as money for the southern border. But also really what Republicans want is more tighter immigration controls, whether it comes to asylum or close to
Parole. This is where the conversations are. But the most important thing you need to know is no one is back in Washington this week. They all come back next week. So it’s very difficult when you look at the timeline in the calendar, trying to
Figure out how they get this done. They got eight ways to go here, but to give it some historical impact, they got Carlos Gutierrez, a Republican, former secretary of commerce, and they got Ted Kennedy of Massachusetts. And they’re apart. But they’re together on an immigration
Debate well over a decade ago, and it went down in flames. Is the debate any different now and then when it went down in flames? Well, it is curious that they think within a few weeks they can get an agreement on something that they’ve been discussing for decades.
This is, as you say, Tom, generational debate. But potentially they could get something done because push is coming to shove when it comes to the timeline on getting something done on the border, especially with what you’re seeing over the weekend, you’re seeing migrants being
Dropped off in New Jersey because of some law that Eric Adams enacted, some policy. They cannot be dropped off directly in New York City. There’s a lot of pressure as well from Democratic cities and states on this administration. A deal potentially is there. Everyone says, you know, it’s darkest
Just before a deal is done and potentially because the Freedom Caucus members on the House side are going to nit pick anything the Senate sends them, it might be easier for everyone if it’s done just before the deadline isn’t.
It’s a big change in the last 12 months. There has long been a story where Democrats have been able to say there isn’t a big issue here because it hasn’t been the issue of blue states. It’s now on the doorstep in those blue
States, in those cities, in New York City and elsewhere as well. How are local state officials, regional officials squaring up with the White House’s message and what the administration in D.C. said about it? Well, the administration sent out a letter to Congress on top of asking for aid to Israel, Ukraine, foreign partners
Like Taiwan. They asked for more money also being sent to the southern border. This was a big issue for, say, Governor Pritzker, for, say, Governor Hochul writing letters, calling on the administration, Mayor Eric Adams being very vocal about the failure of this administration when it comes to immigration and migration, the southern
Border, thousands of people crossing into the United States every day. The issues the Republicans have is that the funding going to the southern border. They’re actually talking about making it harder for migrants to come into the United States, making it easier to deport them, making it harder for asylum seekers.
And this is where the debate is really an issue. But definitely at this point, there’s a lot of pressure on this administration from those blue states that something needs to be done. So how much urgency is there on the on the behalf of the administration at a
Time where we are talking about thousands of people coming in and a real question about how certain states are going to pay for it? Well, there’s a lot of urgency, especially because we’re in an election year. So the Republicans are also not going to
Want to give too much of a win to the Biden administration this year. So there’s very little that can get done this year in Congress. It’s the you know, the second half of this session, they have to agree on funding and they’re going to have to get the supplemental done, I think, after
That. There’s nothing else that’s that nothing else is going to be able to happen. Republicans on the same side that want to keep their seats potentially don’t want to give a win to the Biden administration, but they have to go home with some sort of prize in November when
It comes to re-election. And we are getting close to New Hampshire. We’re getting close to some of the early primaries. How much is there discussion in Washington right now about a different vice presidential candidate with Joe Biden? That’s not a discussion in Washington.
I think that’s a big discussion around Wall Street, around people who think, you know, can you just flip up a ticket when we’re all at the polls? Well, that something’s got to change, right? Well, at this moment, no, that’s not happening. That’s not a discussion. And the polls are getting worse.
I mean, for President Biden, they’ve been pretty dim. I was going to say dire, dim, dire, gloomy for him. They are getting worse for him, I would say. But again, they are sitting on a huge war chest. And at some point in the next few months, they’re going to start to deploy
This. And we have to see if it’s going to work. Can we see some more engagement from them? I saw the president complaining about how the media has reported on the US economy, and I can’t think of how many
Interviews he’s done on the US economy. Isn’t it pretty easy to get that airtime for the President? They can reach out to any network for an interview on the economy and they’ll take him. We’ll take it whenever you’re ready. And yet they complain about the coverage
Of the US economy. I don’t get it. I feel like you’re baiting me because you saw my picture at the White House press Christmas party and said, What did you say to Biden? And I said, I’d love you to do a Biden nomics interview on Bloomberg TV.
Precisely. They had yes, The answer was a wink. So not not exactly yes. Not a no way. But from Secret Service showing you the door, pretty much they’re responsible for their own marketing, not the media. And when you put out nonsensical tweets
Like the ones we’ve had on inflation from this administration over the last couple of months, that’s not helpful. The data is in their favor at the moment. The trends look decent disinflation, unemployment. It’s their responsibility to engage the media and have those conversations. I don’t see that from this
Administration at all. Well, they will put out Secretary Yellen from time to time. She does do a lot of speeches as well. And, of course, you have Jared Bernstein out of the White House on the North Lawn, frequently briefing the press and going going on interviews.
The issue is the American people are still not feeling it when it comes to inflation. And their big issue is that the economy is number one priority poll after poll. This is what the American voters care about. The media should not be the marketing wing of the White House. I’m not sure.
I’m not sure what the disconnect is about. Well, neither does anybody else. If you read all the reports about the vibe session, the Mystery Survive session, why is it and all economists are saying you have no clue? I don’t know. I want good vibes for 2020. For good vibes.
Thanks. I’m offering you plenty of good vibes. Equities on the S&P 500 shaken up as follows this morning. Good morning to you all and happy New Year. Equities lower on the S&P were -0.66%. Call it -0.7 on the nasdaq 100 lower by almost one full percentage point responsible for some of this move.
Thank you Apple and thank you for the downgrade over at Barclays Apple in the free market Lisa down by 1.8%, almost 1.8% lower. A move to underweight from equal weight. The iPhone 15 has been lackluster. We believe the 16 should be the saying. Just to point out that the magnificent
Seven stocks account for some 28% of the overall S&P weighting. So if you start to talk about the significance of these stocks and the reason why we’re focused so much, that’s why their go at one name, their go at the whole index. And that’s sort of what we were set up
For in 2023 and maybe 2024. So I don’t know really on Tuesday as well, which is we got a lot of data Wednesday, Thursday, Friday and I wonder for adjusting as well today away from Apple and away from equity markets to a
Little bit of angst about what we see, particularly on Friday with wage dynamic. Apple is 9% of the NASDAQ 100. It’s the number one weighting and that’s why it is lower by about 1% this morning. The Nasdaq here today, last year on the
Year to performance, a gain of 54% on the Nasdaq 100. Let’s turn to the bond market. Big moves lower in ten year Treasury yields in November, again in December this morning, up by, let’s call it seven basis points, three 9538. Are they talking about cutting rates?
They’re not talking about cutting rates. Are they kind of talking about cutting rates, Lisa, look out for 2 minutes in the next 24 hours and will that determine anything or just be a further mockery in terms of where the credibility lies? Look, the bottom line is there has been
A disinflation narrative that has gotten very far baked into what market expectations, how low is the bar for that to shift? Was it in the wage data? Is it in the oil prices? Is it in something else? And that’s really what I’m looking for.
Last year in reverse, just a little bit this morning so far, at least in foreign exchange as well. What in 1967, we had seen 110 on the euro against the dollar. Last year, of course, the first down year for the dollar index since 2020, I believe, took the euro negative this
Morning, seeing a reversal of recent moves. But the Swiss take recently some really interesting levels out there in G10 Read My Mind is, you know Fox Channel and I really don’t speak to each other And particularly in the break, we didn’t talk when I when he slipped in the door
Here this morning at 555, the answer is I triangulated. I looked at dollar Swiss, I looked at Euro Swiss. And John, I went back and I looked at trade weighted Swiss. For those of you in radio on CarPlay, it’s real simple. The chart is jaw dropping, the appreciation and a trade weighted basis
Of the Swiss franc. And John, this is really beginning to move. And I don’t think I think for Global Wall Street, this is a major story to see the Swiss strength that we’ve seen. More on that in just a moment. And this advantage this morning itself
Story, oil rising inching higher as tensions in the Red Sea escalate. Iran sending a warship in response to the US Navy sinking three U.S. boats over the weekend. This is Israel enters its next phase of war. Police are pulling five brigades out of
Gaza in the coming days. And this really goes to the conversation we were having earlier about the domestic issues in Israel and the fact that the economy is struggling with so many people out of the workforce and fighting, I will say oil I am so focused on this year.
We were completely surprised at the end of last year of how much prices went down despite this conflict. How much of a risk is this to markets if prices go up? And it really challenges this concept of inflation steadily moving lower. As an amateur, I am completely focused
On the domestic politics of Israel and Mr. Netanyahu. That’s what I saw in the zeitgeist over the last five, six, eight days, and I think that’s underplayed in the US press. Need to turn to another story to come out of Japan. The latest developments, a Japanese
Coast Guard plane colliding with the Japan Airlines flight at Haneda Airport in Tokyo. All 379 passengers and crew on board the larger Airbus A350. 900 aircraft evacuated safely, but five of the six crew on the Coast Guard plane confirmed dead. The smaller plane was carrying eight in northern Japan, where a 7.6 magnitude
Tremor hit the country. Lisa, at least 48 people have been reported dead. Did you see the images? Just this incredible, shocking room? Shocking. And then the the surf coming up and houses crushed, cars crushed. And then here’s a crash, the cause of which still has not yet been determined.
This according to local reports. What’s going on? You know, this is sort of yet another sort of Taylor Riggs. Can you see it as it emerges for that economy And people don’t know how to process in, but you have to really focus just on the domestic humanitarian issue.
And looking back over the last year, this you know, what’s going on. This just speaks to the risk of earthquakes, which are usually around on very predictable flow, things like the horrific earthquake that was in Turkey in I’m going to call it southeastern Turkey here X number of months ago.
I mean, it’s just this is with us in our perfect modern lives. And they’re not perfect. They’re not modern. They’re earthquakes that. The latest on Japan. I want to finish on this story. The Biden administration cutting back on incentives to back electric vehicles. The number of EV models eligible for a
US tax credit, over $7,000 cut in about half. Lisa, the new list, excluding vehicles that use battery components made by Chinese manufacturers, you’re going to hear a lot about this in the months to come. I was looking at what that includes, which cars, Right. So it’s the Ford F-150.
It’s a whole host of others. It’s stellantis. It’s a number of them. It’s Tesla one model. It’s interesting to see how much this is being done in the guise of trying to reduce any kind of benefit to China versus reducing some of the emphasis on
These electric vehicle credits with a kind of shift that you’ve heard under the cover a little bit from the administration and from auto manufacturers as well. So if EV sales are struggling already, Tom, what happens when you lose some of that tax credit as well?
Well, that to me is the whole thing. What happens when the tax credit goes away. And I think that’s something that goes directly into Tesla as well as quickly get deteriorates sort of Macquarie here and global effects and all the other things that get us back to a great bull
Market in the United States. Wonderful to have your Dr. Weisman to get us started for the year. Let me go to the larger view, which is everything hinges on China. Do you agree? Not for 2024, no. Although I do think that China is a very important part of the macro story globally.
We have the central banks in the U.S. to worry about. We have the central banks in Europe to worry about, and we have supply shocks, especially in the natural resource markets and the oil markets to worry about, too. So China is important, but it’s not it’s
Not all or nothing as it comes to China. I will say this, though. I think the market is somewhat wrong in focusing too much on the property sector in China and aggregate demand in China. I think what the market has lost sight of to some extent is
President Xi’s willingness to go after the tech sector in China and more generally, you know, against the whole concept of private property in China. I think this is what is souring sentiment for China. And I think to the extent that that is
Find some relief in 2024, it could be a bigger deal for China on the upside than, you know, some resolution to the problems on the balance sheet of the property sector. There’s been a multi-decade failure of international stocks and some would correlate that over to an ever stronger
Dollar. Is the dollar finally broken where there’s an unspoken opportunity in international equities? Well, if you’re asking is is the dollar is a dollar as a reserve currency, as the standard for international trade in finance is over?
No, I no, I don’t think so. If we are if you’re asking for is is is there going to be a structural break with regard to the status of the dollar, international capital markets and international trade? I think the answer is no. Remember that we had a period before we
Had globalization, before 1995, for that matter, when China and Russia and the other emerging markets were not that fully integrated into the global economy or the Washington consensus for that matter. And yet we still talked about the dollar as the reserve currency of the world.
Why? Because, you know, you know, a good part of the of the world still depends on the dollar for its trade and for its commerce and for its its financing. So, no, I don’t think that’s going to happen any time soon. At least one of the trades that we do at
The beginning of every year is to come up with potential tail risks, which inevitably will probably be wrong. But there is a question here to risk of the dollar being somehow profoundly debased seems to be off the table from what you just said. What about sort of the tail risk of some
Sort of significant supply shock? You sort of alluded to that initially in the commodity space. Oh, that that I think is a bigger, bigger tail risk. And I think it behooves every investor out there to at least have some oil in one’s portfolio, be long oil, because
When you think about U.S. recessions in the post-war period, you’ll find an amazingly large number of them had been preceded by a rapid rise in oil prices. You you’ll see that. And and it behooves investors to have some oil in the portfolio because we
Just don’t know to the extent that we do have a supply shock. Oil prices will go up and you’ll offset the losses you would otherwise experience from seeing stocks go down, from being seeing bonds go down. In that context, though, this raises the question to me of how offsides the
Market would be should there be some sort of oil supply shock, given the fact that people have kind of gotten accustomed to the idea that the U.S. is producing record amounts and that even in the face of conflict, oil prices went down? How wrongly positioned are people for
This kind of this kind of event? I don’t know how wrong the position there they are. There’s a there is a case to be made, however, for for the logic of oil prices having come down in the last few months,
And the logic is very straightforward to the the elasticity of supply in oil is actually quite high and potentially higher than the market surmised before six months ago. What we have seen with the increase in oil prices that preceded this decline is a huge increase in oil production in the
U.S. and that is the basis for why oil prices are down. But if we were to get a shock, a shock out of the Middle East, for example, a shock out of Russia, it’s not conceivable that production can go up quickly enough to offset that in a very
Short period of time. And that’s the risk that we face right now from these such shocks over the long term. There’ll be an adjustment in U.S. supply that’s positive and beneficial, but not in the short term. Is the US dollar a commodity currency now? No, I don’t think so.
Certainly the market doesn’t doesn’t see it that way. Right. It’s interesting. There are some emerging markets that we don’t necessarily associate that much from the perspective of their current account balance in their trade with oil, because they’re not huge net exporters, Brazil, for example, but they are large
Producers. And yet the market tends to associate the Brazilian riyal with oil more than it does associate the US dollar with oil. Do we expect that to change anytime soon? No, I don’t think so. And that’s because no one’s going to really associate the U.S.
With a very large net export balance in oil. It really has to get to a point where U.S. trade is dominated by oil, and that is not the case yet. It’s still dominated by services and technology. Very true to say the numbers just absolutely staggering when it comes to
Production. 13 million barrels a day in this country. Yeah, what’s interesting is we don’t have an oil policy. I mean, we take great pride that Washington has never come up with the plan. We’ve got this plan, that plan, whatever plan. I guess it’s a technological success. Not sure we have one.
No plan. Well, to that point, do we need one? Is Washington is the White House irrelevant with regards to this conversation? Only to respect that oil is such a geopolitical issue. And of course, geopolitics and politics generally have to be managed through diplomacy or through some some
Management of market forces that that are relevant to geopolitics. That’s okay. There’s a case to be made for the energy market to be managed from that perspective. But if it wasn’t for the importance of oil from a geopolitical perspective, I don’t think so. Terry, it’s good to see you.
Happy New Year. Thank you, sir. Terry Wiseman there at Macquarie. If you are just joining us, welcome to the program. You’re S&P 500. Session lows were negative here by 0.7% on S&P 500. I think every time, Lisa, we quote the price action this morning, we’ve also
Got a reference the gains of 2023 total. 0.7% against a move of what, 24% on the S&P last year, 107% for the Magnificent Seven stocks alone in one year. And these were the stocks that were supposed to underperform. To me, the shocking thing is though, with all of those gains, incredible
Moves were basically back to the S&P levels that we were on January 2022 were basically come full circle. And so now people say, are we just going to sort of muddle through, which is essentially even the bull case, or is there going to be some sort of different paradigm in 2024?
I’m going to go back to the habit. You do see this in the earnings reports as well as where are we from Q4 of 2019? And if you look at that, the answer is you’ve got double digit equity returns would say, of the Biden stimulus and the
Rest. But there’s a habit here from last year that maybe we have to continue, which is how do we gauge ourselves in earnings economics from 12 3119 And I was it take to get used to 2020 for a new year to
Remember you were a kid. Tell me how to write down the new day in May and June. The writing checks between right and the last three years. Exactly exactly the same to start. So in 2025, early, you want to start now?
I mean, just get practice, go into the next year, you know, a little bit more advance, less scope. Okay. It’s the price action. The S&P full impact by 0.7% on the S&P 500, pulling back a touch more on the Nasdaq. If you’re looking for the why, plenty of reasons.
Maybe one, Apple, a downgrade from Barclays. The same at Barclays, downgraded the stock from EQUAL-WEIGHT to underweight. The stock is -1.85% on Apple in the pre market one 8897 from New York City this morning with equities pulling back as we kick off a brand new trading year from a
Beautiful new york city. This is bloomberg. Here’s where the big tech enabled companies. They were safe havens. Fortress balance sheets are great cash flow, great places to hide out in economic and political turmoil. We still have a lot of that turmoil, obviously. But you’ve got the Fed. When did you back?
In 2024. You’ve got an economy that it’s probably hit a soft patch, but I don’t think it’s going off a cliff. So I think that gives some room for a broadening out of the market. Where is the market leadership coming from in 2024?
That’s the big question. And answer that from Chris Moran, the CEO of Gabelli Funds from New York City. Welcome to the program. And once again, Happy New Year. You’re actually, Mark, on the S&P 500 session lows in negative by almost three quarters of 1% on the S&P 500 following
A massive year of gains on the S&P on the NASDAQ as well. Apple, responsible for some of the move at least, is negative by close to 2% in the pre-market off the back of a downgrade from Barclays this morning. With Tim Longer, the team taking a stock down to underweight from equal weight,
Tom were negative there by 1.9%. It is some people in there that really agree with this, frankly. They’re looking at this huge dominant unit count of iPhones, which is without question the dominant strategic part of Apple as well. Then there’s a service sector ever
Building, and then there’s that they’re managing for profit and use of cash. And this is a titanic battle. And maybe this is the one stock where there’s the harshest divide between. Sure. Doug Kass later on Bloomberg radio he is short Apple.
It’s a growth stock tom that went x growth and still got multiple expansion. Yeah it still delivered gains of close to 50% year to date last year. Now it’s there and I think this is important. John the magnificent seven or eight whatever it is they’re all different
Stories. I don’t like that they get bundled together. There’s a huge set of different stories there. Well, it’s Lisa suggested when you do bundle that seven together, that seven delivered some pretty big gains in 2023. Yeah, 107%. It’s not bad, is it? But, you know, there was a lot of divergence.
I mean, people say there’s going to be divergence this year. There was a lot of divergence last year. I mean, in video was up 240%. The fort did the 50% of Apple. Huge divergence. I’m just thinking the total return of the triple average saw cash is pausing
For thought. Yeah, no triple lovers don’t care for that Compete with that. It’s no question about it. We digress right now this is important. We decided that Eamon Shine is so important to year 2024. We took the great Terry Wiseman of
Macquarie and we tag team room with Damian Sasse over are chief emerging markets credit strategist for Bloomberg Intelligence. The importance this year of EEM in this massive mystery of China. I called it out on social the known unknown that’s out there. Let’s begin with first principles is China in emerging market the politically
The way we treat with them they’re a developed economy. What are they? Well, they’re considered emerging market, certainly in my universe and fixed income. Right. But I think what Terry was alluding to and I think the real shift for me in the last few weeks, certainly since the Fed
Has been in the factors that are driving foreign currency exchange returns globally, not just in Ian, but in G10. And for me that means it’s a shift from Carry, which has been the primary driver of outperformance across all currencies, whatever shape and size since the pandemic started to value.
And we’re starting to see that we’ve had two consecutive months of negative performance in just about any carry index you see on the upside side. And now we’re seeing value come back. So what does that mean for emerging markets like China? It means funding currencies like the
China yuan, which has been a funding currency, should start performing pretty well. It’s China’s credit rating after the Moody’s News last year. Is it at risk right now? Fareed Zakaria and foreign Affairs lead with that, The idea of the credit rating of China. Are you watching them?
Yeah, the pledge supplemental lending facility, which is the facility that China used from 2014 to 19 to rebuild their shantytowns, which caused the housing boom, which now President Xi is starting to unwind. They’re back in the game with that now. They’re they’re basically I guess it’s
China’s form of quantitative easing. Call it what you will, but they are definitely plowing money back into the policy banks. And we’re starting to see some evidence of that in the PMI data. How much pressure can a leader with no term limits be under and not that much?
I mean, look, I don’t know the dynamics about what goes on inside of Beijing, Jonathan. I think very few people can say that with any sort of credibility. But, you know, there’s certainly a sense from President Xi that he’s trying to repair some of the, I guess, tighter
Policies that kind of have restricted the economy for the better part of the last two years. He’s trying to undo that. But it’s so difficult to undo sentiment specifically domestically amongst consumers and households when it’s been damaged so utterly unbelievably. And talk about foreigners, forget about it.
The FDI data just came out a few weeks back. It has been dismal. I mean, just huge losses. Nobody’s investing there from abroad. So they’re looking inward and it’s just not working out. Whose confidence is lower consumers in China or investors looking into China? I think investors looking into China,
Certainly. How do you repair that? Oh, I mean, other than a regime shift, it’s going to have to be something more tangible than that. Right. And look, I mean, you could say all you want and we can bash trying to here it’s
Over, but we could easily bash the Fed. I mean, look at El-Erian over the break. You know, and and the Fed credibility issues. I mean, I. I’m going to I’m going to channel Herakles again and say, my goodness, the communication has been awful on the
Fed’s part. That’s what’s kind of driving a lot of this regime shift. We’re seeing an effects. And look, you know, I mean, the communication has been abysmal in the U.S. as well. So, I mean, for a speculator or a hedge, you’re looking forward.
It’s just difficult to kind of get a gauge on the market. So let’s take the other side. After a whole year where people are talking about China being an investible and that foreign investment sentiment being just at the very bottom can only go up from here.
I’m hearing more and more people getting bullish on China just because things got to get better than this. And you have on the margins Xi Jinping having certain stimulus, maybe not as much as people want, but the latest being $50 billion in low cost funds to certain policy driven banks.
I mean, on the margins kind of starting to respond? A It was the same argument that many investors made in the beginning of last year. Remember, when we saw, you know, the CSI, you know, kind of rally and look, people who rode that up did really,
Really well. But if you held on to it, you had a loss on the year. Right. So it is a very tactical trade. I mean, it doesn’t take a lot to move Chinese equities in this market, I don’t think. But again, going back to effects, I think that’s the real story.
The carry trade unwind is real. Meanwhile, overnight, we got some economic data that wasn’t so good out of China, but we also got economic data that wasn’t so good from South Korea, from Taiwan, from a whole host of Asian countries in the region. How much is this a China problem and how
Much is this a regional problem? And can you just just distinguish those two things? It’s interesting. It’s not just a China problem. It’s more of a European U.S. problem, right? It’s the end demand. It’s export orders. If you break into the PMI data and you
Look at export orders, export new orders, all of those gauges are down within the PMI. I mean, the one little kind of, you know, silver lining we saw was in the construction, which speaks to all the funding, all the financing that you rightly point out that the PBOC is using
To stimulate its economy. But certainly from an export oriented I mean, South Korea, Taiwan, you just said it all. I don’t think it’s China. I think it’s more us and Europe and growth and a lot of what we’re seeing on that front. Let’s look at the emerging market, Switzerland.
I came in and triangulated dollars with the euro Swiss see in trade weighted Swiss I’m Bloomberg radio we’re showing the chart right now and trade ready John in the middle there is when you and I were in Zurich or Davos I can’t remember
Where and we’re way beyond this with trade trade weighted Swiss strength as well. How disruptive is that to any and all including well, the S&P surprised before break. They’re a little bit more diverse than the markets we’re giving them credit for. I don’t know if anybody was watching
That, but you know the funding G10 currencies of which the Swiss he’s one of them Aussie dollar stock is another that come to mind. Maybe the CAD, all of them rallied pretty nicely against the dollar. Here again, speaking to the strength of these funding currencies as the carry
Trades are slowly unwound in this environment. You know, again, I’m not a big buyer on the fact that you’re going to see this massive dislocation between the ECB and the Fed or that that’s what the markets is driving a lot of the price action lately.
I think European growth is still a real issue. And I think even though they have this mandate on price, I’m not buying it. Let’s go get care. Greek letters. We need Greek letters. Yes. Risk reversal skews a lot next to nothing.
It’s quiet, quiet, quiet out there. I have massive log convexity and any measurement is twisted. I see. I’ve got an accelerated tendency of this carry unwind. What does it mean for listeners and viewers? It means that the market is vulnerable to a short term reversal.
And what we’ve just seen, basically, if you see one month 25 delta risk reversals, which is the skew you’re talking about in currencies, they are at or near three year lows across more than half of the 30 major currency pairs that
We track, not just the Big Ten. So that means that those currency pairs are subject to a near-term rehearsal where the dollar is going to strengthen. Relative to the five minute conversation with Damian, he didn’t bring up college football. I was waiting for you.
Come on. The best case I was thinking of you. It’s not a classic Nick Saban team, is it? Now it’s. No, I mean. Well, look, I mean. I mean JJ McCarthy. What? I mean, he engineered that fourth quarter drive the overtime drive couples of catches Mr. Wilson made. I mean, yeah.
Mr. Wilson But then I mean the Huskies man, I mean who’s not going to talk about it’s a level of underdog in Washington since 1994 and a half point underdogs I believe is the kind of Vegas line going into the Huskies, a four and a half point underdogs. That’s all. Yeah.
Yeah, of course. I mean, Washington’s real team. Real team. Your best Wolverines. I think the Wolverines are probably the safe money bet. You know, they’re obviously the favorites, but I’m going to be rooting for the Huskies. I mean, I have a fondness going back to
1991 for the Washington Huskies. I mean, you know, I’m just a normal college football fan, just the normal visions of ten, which no longer exist. It don’t you have to I that the Redskins you’re not saying that was a man you see what in what Larry and posted about the radio
Yesterday I mean my God the God went out He went to the Braves. What’s that about? I don’t know. I don’t know. I mean, look, the Dodgers are going to own baseball this year. It’s really sad. They have everybody so sure they got someone else since.
Yeah, they got the pitcher, $2 billion, I mean, at the time. But they don’t have to pay it until 2050, so don’t even worry about that. They have all the they have all of that. They have all the luck because people I want to go there because it’s. L.A. Times Taxes. Yeah.
There’s a lot of stuff that helps take that. Really? Good. Now. Thank you. Thank you. It’s very good to see that. Mr. Solomon, you had only shot and then scored one. Then about. I scored one later. Yeah, that’s just sports check.
I think the bullishness it probably has has a wider window to performance going into 2024. I think we’re going to feel a little bit pressure on the big caps coming into the new year. I don’t expect to see the Magnificent Seven crater in 2024.
There’s a lot going on that we think is very positive and that the market is starting to sniff out. And that’s makes us constructive not only through year round but into 2024. The market will continue to widen out.
But we do think that some of the leaders from this year will continue to be leaders for next year. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Good morning, everyone. Jonathan Ferro. Lisa Browns and Tom Kean on radio and television. Good morning to all of you. Good morning, 2024.
In moments, we’re going to talk to one of the great bulls of Wall Street just off is going to join us from OpCo. And John, what this is about is putting economics into stocks, and that begins with a busy economic week and the labor front and what it means for this bull market.
We are absolutely hitting the ground running for 2024. We have payrolls on Friday, the following Friday, kicking off earnings season unofficially with Jp morgan results Tom just around the corner after some massive gains, 24% on the S&P, more than 50% on the NASDAQ 100. Can we get some broader gains this year, Tom?
Does the leadership start to change? It’s about nominal GDP. I think a michael Dada very much focused on the animal spirit of the country and all the mystery of that. And one theme, as we heard from Bruce Kasman, Jp morgan is, yeah, we get the good feeling.
But then what? I don’t know where that then what is is it in May or is it in August? There’s some big lessons to learn, Tom, from the last year or so. It’s not just about eating humble pie over Christmas and saying that the economists got it wrong and the equity
Strategist got it wrong. It’s about trying to learn which data points are relevant and which data points are totally irrelevant. And when you look back at the last year or so, the ice and manufacturing has been sub 15 contraction territory, Tom, since late 2022 and the whole of 2023.
That data point, if you focused on that, it would have taken you down the wrong path for the US economy. Tom If you had focused on something simple like jobless claims, that would have told you week after week, every
Single week that things were okay in the US economy, I assume tomorrow and this is the important. There’s two sets of eyes, right? And tomorrow are we see ISM manufacturing in all the sub parts as well. That’s at first looked at you look at Right Yeah. And then on to services T.K.
Then on to jobless claims and later I think we get jolts later this week as well. We get that yet tomorrow we get that at 10 a.m. I’m curious to see how this all feeds into whether the U.S. can continue to fuel some double digit
Gains in the stock market. We talk about the biggest bulls taking all of this much and coming together with projections. The biggest bull is predicting a 9% gain on the S&P this year. That is not that much after last year’s 24% gain.
The year before, it was a 20% loss. The year before it was a 27% gain. There has not been a single digit kind of gain or loss since 2018. But in CFA, one, two, one is maybe you take it harmonically, which is if you
Got a 24% number in the rearview mirror, then you go to 12% the next year, then 6% and 3% you bring it on down. I guess there’s a lesser anticipation here, but I’m sorry, there’s just too many mysteries. I’m going to the fair rule, Lisa, which is the year begins March 31.
I got to recalibrate somewhere else. First quarter. No, we always start programs like this, Lisa, every single year. And we talk about consensus. And I think you’re right to point out where the highest forecast is right now, the lowest 4200, the highest 5200 is a 1000 point spread. Lisa, think any conversation about
Consensus is totally misleading because when you go through all of the forecasts, the range is so wide for the equity market for the year ahead. There aren’t that many people that are talking about the same kind of tail risks as they were at the beginning of 2023, a catastrophic kind of recession,
Something terrible. No one is expecting that. There is sort of this feeling that we’ve dodged that bullet and there’s going to be maybe a slow soft landing, maybe it’s a harder landing, but nothing that’s going to really shake the boat in any kind of massive way.
To me, that’s the interesting thing. To the upside or the downside, where is that shock factor to begin the data? John, the Bloomberg Financial Conditions Index, Goldman Sachs has a good measurement as well. 11 ratios, I believe it is. And it is a shock to me as this bull
Market of how accommodative we are and we curve up and we’re really getting out to substantial societal economic accommodation, which Chairman Paul has to deal with just a tiny bit more restrictive this morning, though, just to go through some of the price action on the morning on the session.
So far, equities pulling back on the S&P were down by 0.8%. Yields are a little bit higher. The dollar is a little bit stronger. Crude is rallying as well. If you want a single name, it is Apple.
Apple in the pre market is down close to 2%, which doesn’t sound like a big move, but it’s a major weighting a major weighting on things like the Nasdaq 100 and on the S&P, the number one weighting, we’re down by about 2.2% currently in the pre-market, some following a downgrade from Barclays in
The team a little bit early this morning. What is interesting here in the game is to look back at. People that got it right. Yes. We look at the people that got it wrong, always with great humility. But now, John stuff is Jones, chief investment strategist at APCO up in
Homer Asset Management. And we speak to him about the bull market he held last year and continues to now this year. And John, I’m going to take it back to the analog of the middle seventies, a horrific recession, the leap in 1975 and then a follow on in 1977 is 2024.
A follow on bull market? I think in many ways it is. Tom, I think the the question here really is it or rather the difference is it’s a substantially different background in terms of a digitalized global society for business and consumer. And what was back then was essentially an analog world.
And I think things get digested much quicker. I think the data is a better quality. And because we’ve been in crisis in and out of crisis since 2008, all the players as well as the you know, the traders as well as the investors, are more experienced with dealing with
Volatility. John, I think what’s so important here is only stuff is talking about last year was a prelude. I just think that’s so important. 5200 price target year rent this year. John, let’s build on that. You and I have talked about this a few
Times in the last few months and I appreciate it. Can we just address it right now? How dependent that call is on interest rate cuts from the Federal Reserve? Not much, really. You know, we’re not of the camp that’s looking for six cuts this year.
In 2024, we’re looking for a perhaps one or two. And we’re not looking for the first half for cuts. We think it will happen in the second half of the year and slightly later rather than earlier in the second half. I look at the US, the Fed has been
Remarkably sensitive in practicing its mandate, you know, borrowers able economy and full employment as described by unemployment between three and 4%. And we think it wants to keep it that way. And so that’s that’s what we’re looking at a little bit different. We like the Fed. Ironically, very few people do.
We think the Fed has done. It shows the Ben Bernanke legacy carried on through Jerome Powell in the sense of communication and the clarity. So it might not necessarily the rally might not be dependent on Jay Powell, but how much is it dependent on the central bank of.
Tim Cook. I bet I would have to say perhaps I’ll keep it away from company specific here. But I would say certainly a business, the consumer and and the jobs market will play an important role this year. Keyword to watch for is resilience. When we look at economic data, what
We’re looking at is for things to show resilience and naturally is a challenging environment. When you’re making transitions, when you have the levels of of travel around the world, the geopolitical risk seems to keep ramping up by the day. But consider where business plays out
The US, where the opportunities are both this cyclical point, where we are on the calendar as well as the secular trends that are driving potential growth for all 11 sectors. Okay. So in other words, this textile lead, I mean, I guess that’s the question at a
Time where that accounted for 15% of the 24% gain of the S&P last year, at least I think that is certainly remains a major participant in this. But I think what we need to watch well, of course, communication services, which
Is about 50% tech related. You also have when you look at the other sectors, just think about industrials and all the technology in that. And it’s a good customer of technology, whether it’s in sensors or robotics or what have you. And then the cloud, big data and all
That. And so when we look at this, it’s, you know, whether it’s it’s a utility company, whether it’s a materials company, whether it’s a pharmaceutical or a biotech, technology is where it’s at. So we but think the other reason is last
Year tech was it was fabulous its performance because it had been so brutalized in 2022 when the Bears sold all of tech the long duration they sold because they worried about refinancings, but they sold the good stuff that was highly profitable, positive cash flow, great products, and deeply embedded in
The lives of business and the consumer. John, the cliche is the boat has left the dock. I would guess a very large percent of the surveillance audience feels like they missed 2023. How do you get back in the game if the boats left the dock?
Yeah, Tom, I would say for the people who missed this, I would say it’s a question of layering in that’s not back up the truck that these levels are. Consider opportunities that show show up when you get some weakness in names that
May have gotten away from you. Look for babies that get thrown out with the bathwater in downdrafts to add to positions that you’re building. And in essence, what what you want to avoid is just blindly buying dips. You want to be selective, even within what appears to be a nicely broadening
Rally after, as Lisa pointed out earlier, before sail Back to the future in terms of the prices of stocks, in many cases outside of the magnificence of the big bear, they’ve got, it would look like they’ve got plenty of back and room available to move higher in so many ways.
We had a decade and a year, as Lisa and I discussed a little bit earlier on the program. John, wonderful to catch up with you, sir. Happy New Year. John Self Estate of Oppenheimer Asset Management Year End price Target 5200 on the S&P. He was bullish on the S&P last year.
He was right to be T.K. When you get into the details of the call, though, not that dependent on rate cuts from this Federal Reserve decision, that’s not the big hole here. He’s got an underlying 11% earnings growth. And the question is, is Lisa mentioned
At the very top of the show, the multiple expansion question is just front and center. I got it wrong. Everybody else got it wrong. There it is. Now what for this multiple expanded part of the market, 5200, though, and I just
Keep reiterating that is 9% above where we closed single digit rate from the previous at the end of the year. So at this point, that’s the biggest bullish call. It’s not necessarily calling for another massive returns year in the overall index, but what it’s calling for is a
Muddle through with these secular shifts in technology in other areas. Quickly here, this is critical because in CFA, one, two, one 9% is a great year. We forget that, but 9% actuarially is a plus. Plus plus year is a rolling call for 10%
Upside from it. You get a 10% upside, then you come out again and call for another 10%. It’s not that easy, obviously, if you are just joining us, welcome to the program. Your S&P 500 session lows in negative here by 0.8%, responsible for some of
The move. This move in Apple in the pre-market. Apple lower off the back of a downgrade from Barclays and Tim Long from equal weight to underweight that stock is down by 2.3%. As we’ve mentioned repeatedly, though, through this morning, you can’t quote
That stock without quoting what we did over the last 12 months. You go through some select names in tech over the last 12 months, Apple up 48%, Amazon up almost 81%. Who was talking about that? Hardly anyone talked about a stealthy 81% rally.
Lisa in Amazon well over the year alphabet up 58 matter up 194. Yeah although not all of these stocks are the same story. Right. We’ve been talking about that extensively. Amazon as well as Microsoft with shares up 57%. That’s coming from some of the cloud
Computing, some of the generative AI, some of these other things. With Metta, it’s the advertising that came back in bulk with Tesla. It’s its own sort of situation. But then with Apple, there is a question of people are not upgrading at the same level.
People are not buying new iPhones. Yes, you do have people still shelling out thousands of dollars for their whole progeny and everything in their household. But at the same time, it’s not increasing that much. But because people are starting to ask
To make this personal, you know, it’s just firming up to 20, 24. It takes a couple of days or beginning of the year to get to it, to get to the Brahma gloom. You know, we’ve got to meet that. It takes a couple of days. Mandeep Singh of Bloomberg Intelligence
Joining us on Apple and a downgrade from Barclays. The latest, some big tech with Mandeep in just a moment. From New York City, this is Bloomberg. Here’s where the big tech enabled companies. They were safe havens. Fortress balance sheets are great cash flow, great places to hide out in economic and political turmoil.
But we still have a lot of that turmoil, obviously. But you’ve got the Fed. When did you back? In 2024. You’ve got an economy that it’s probably hit a soft patch, but I don’t think it’s going off a cliff. So I think that gives some room for a broadening out of the market.
Massive gains in 2023. Can we get more of the same at 2024? That was Chris Moran, the co-CEO of Catholic Funds says the price action this morning to kick off a brand new trading year. You’re equity market lower by almost point 9% on S&P500 futures on the Nasdaq
100 a whole lot lower negative by more than 1% in the last hour. Off the back of this move on Apple let’s talk about it Apple in the pre-market looks a little something like this where -2.4% near session lows off the back of this call from the team over at Barclays.
They love the price target only a touch from 161 to 160 still use in a PE multiple of 25 times their full year 24 EPS estimate. But here’s the quote and I think the quote speaks to the general angst, the nervousness people have around this name.
More generally after a big gain of almost 50% for the year 23, we downgrade our rating from EQUAL-WEIGHT to underweight, as we believe the continued period of weak results, coupled with multiple expansion, is not sustainable. We also believe 2024 Tom will bring more services risk to light.
Now, that was a question we’ve been asking through the whole of 2023, but the stock kept rolling in and I guess the question will start 2024 with as well. I’m going to go to technical analysis where you see support and the answer is you see support in the Nasdaq 100 where
They’re right now, we’ve barely pulled back even with today’s angst. And on Apple, maybe it’s a little bit grimmer chart sitting on support. It’s been there since early November is well we were so short termism, John. We’re just down to oh, it’s Tuesday morning.
We’ve pulled back quick headlines. I just don’t buy it the last 12 months. Yeah, iPhone X growth, which is why a lot of bears were bearish. The bulls were bullish because, Tom, if you look at the revenue mix towards service says high margin business says that ultimately this can pick up and you
Get the cash machine continue to spin out cash back capital returns program and you get gains like the game we got last year. That’s the bull thesis right now into 24. And it is about technology, which is everybody’s focus. Those that have been in it and those that have missed it.
And John did interact. Romano with Bloomberg Intelligence, Mandeep Singh and everyone else we have is a huge advantage that we lead with. Mandeep Singh joins us right now from Bloomberg Intelligence. Manny, good morning and happy New Year. Happy New Year. What did you make of that call from Barclays on Apple this morning?
Well, so last year what we saw was among the big tech, you know, there were companies that have clear exposure to Disney on the cloud side, namely Microsoft, Amazon to an extent, and Google. Google has both ads and cloud. Apple was the one company where everyone
Kept touting their product refresh cycle, and rightfully so. And till now, you don’t get that conviction that, you know, a large language model can run on a phone. Right now, large language models are running on data centers. We are going through a massive refresh
Cycle and cloud companies are the major beneficiaries of that. We still don’t know when that will happen, but we know it will happen. It’s a matter of time. The large language models, the technology, the co-pilots will run on your phones. And right now there is no alternative device except for your Apple ecosystem,
Whether it’s your phones or your PC. It’s just for A.I.. Specifically, do you suspect the winners of 2023 will be the ultimate winners? Any reason to believe that’s not the case? Well, we are so early in this cycle that, you know, these are multi-year trends. And we know from the past year action
That this is something that has a long runway. You’re upgrading all your data centers. I mean, you will upgrade all your devices. As of right now, you are in the process of upgrading all your data centers. Yes. The growth rates were stellar last year. There will be tougher comparisons.
They will be a digestion phase. But the fact is this is a multiyear cycle and that is not going away. You do the most hardcore research on this that I’ve seen and you published in the last days, a terrific piece on the reality of AI. There’s a satire group out on Twitter,
Adweek, WGA, Adweek. It’s phenomenal, folks. And they talk about in search after A.I. of the next bright, shiny object. Your bright, shiny object is $1.3 trillion in the next nine years in A.I.. What part of A.I. is real and what part of A.I. is the spoof of what we see from Adweek? Yeah.
So, look, I think the data center part is real training of algorithms. Models. This is real. Your data centers, your devices are going to get upgraded. Your ads are going to be more targeted. You, whether you like it or not, these
Companies have more data, and that’s where you know there will be disruption software as we. No, it is not going to be used the same way you would in Iraq. Run it together. How do you respond to Lisa? Am I right? The hysteria that’s out there about AIG, everything is a lie.
Every ad agency is doing it. O How do you respond to the hype of AIG? Well, the hype is there are certain cases, especially on the health care side, you may not have the best data to make that 99.99% call when it comes to giving someone advice and you can’t take a chance.
We have seen that the economy is driving. There are real challenges and that’s what companies are trying to solve for. You can’t take risk with someone’s life. So in the end it comes down to the accuracy and the use case involved. And for most of the customer service use
Cases and 99% accuracy is good enough because it gives you efficiency. So think of coding. I mean, we need a lot of coders around. If I can help you expedite the way you code, that’s a big productivity improvement. So those are the kind of gains you are
Going to see more of this year. And then we’ll strive for the 99.99% use case, which is something that will pass through throughout the year. The details of exactly some of these use case, which I find fascinating. I’m just focused on the fact that this morning we’re seeing that 2.4% drop a
$72 billion market value erasure from the S&P 500 from Apple. I’m just wondering what this tells you. You’re seeing such huge swings and speculation in these behemoths, what that signifies to you of where the appetite is and how much skittishness there is on the part of investors.
Yeah, look, I mean, valuations have expanded and it was primarily driven by multiple expansion except for the likes of in video, which grew into the multiple everybody else. It’s more of hope that A.I. is going to generate incremental revenue.
In the case of Microsoft, they’ve told us cloud is about 2 to 3% of their Azure bucket. In Apple’s case, we don’t know anything when that incremental revenue is going to come from. They don’t have a cloud business, so it has to be a refresh driven kind of
Incremental revenue. This is really important. Are you saying that without some sort of artificial intelligence overlay or some other new innovation at Apple? Currently the multiple doesn’t make sense, but it is at the high end of the historical range.
And you go back in time last ten years, this is the highest multiple that Apple has ever traded at, even though it’s much bigger in scale than it used to be three, five years back. So clearly there’s a lot of hope and
Optimism baked into the multiple, but we know they have the distribution, they own the installed base and that’s where Jenny AI will be deployed. So there is a good reason to be optimistic. Apple is the odd one out. I would suggest the head scratcher when
You say of 2023 of the seven. Yeah, because they don’t they haven’t given us that incremental revenue bucket. The cloud bucket is what is missing in the case of Apple. You see that with Microsoft, Amazon, Google, you don’t see that.
And we know Jenny is expensive. It’s going to cost a lot to invest even for these companies. Maybe it needs to make an acquisition to drive that. And yet the stock still rallied close to 50%. We can talk about what the acquisition might be at a future date. Mandeep, thank you.
Mandeep Singh there of Bloomberg Intelligence on Apple near session lows, down by about two and a half percent, the Nasdaq 100 down by about 1.2. The broader equity market on the S&P 500 shaping up as follows Equity futures pulling back their session lows on the S&P negative by 0.8% on the S&P.
Yeah, it’s a little higher, up nine basis points. The dollar a little stronger against the euro, 1.57. That currency pair down 0.8% and crude rally in 7330 by 2.3%. In the next hour on Bloomberg TV on the Open, Jim Bianco of Bianco Research, Tim
Samana of Wells Fargo, and Amy Silverman of RBC Capital Markets. Later to talk about the data for the week to come, the earnings that come next week from Jp morgan at the big banks. And the conversation no doubt will end up on rate cuts to be or not to be
Anytime soon. You sound so excited. Honestly, this is going to be a really interesting week. We’re going get some rookie data points to hit the ground running as we start off 2020. We’re so 2024, 2024 to 2025. Yeah, right. Yeah, 2024. We’ll be talking about 25 before you know.
Right. Maybe equities negative for New York City. Good morning. We get 2024 started on a Tuesday, a busy economic week. We’ll talk about that in a moment. A market check for you with some challenges out there. Futures are -40 8/10 of a percent down
On specs and the eggs seen in the VIX, more than 14.11. Go to cash only. So it’s six six. To me, what it shows right now, what you can see is sort of this question around what are the most overcrowded trades heading into a new year?
And maybe that’s what we’re learning. As somebody pointed out, one viewer, thank you, because it does really highlight that people seem to be really positioned for a soft landing and a continuation of what we saw last year. And it’s got to be a reset here after all the positioning into a crazy
Illiquid vacation kind of a week. I know you were day trading on the ski slopes and the answer is the bottom line. We’re back and we’re repositioning and it’s a reset, very much correlated across equities, bonds, currencies and commodities. I want to mention oil. Brent crude, 7853 up a dollar.
I will just point out in terms of positioning heading into this year and no, it was not day trading from the ski slopes. I would just say that a Bank of America survey that was conducted in December found that fund managers were more optimistic than in any other month since
January 2022. And they’re talking about being the most bullish on stocks since February 2022. Now, the economics matters. I like with Tony Dwyer published this morning with Canaccord Genuity, he said investors are giddy. I don’t know if Jerome Powell is giddy, but Tony Dwyer’s giddy. Well, maybe there’ll be some sobered as
To the giddiness when we get some economic data. The first week of the new year, we’ll have a slew of it. We kick things off today with the S&P global manufacturing PMI, followed by JOLTS and fed minutes. Tomorrow, Thursday, we get jobless
Claims and the ADP report, which no one cares about until they do. And on Friday that December payrolls report key in there really a question around wages and whether a 4% year over year gain in wages is commensurate or consistent, I should say, with this idea of the Federal Reserve cutting rates by
Six times in 2024. Joining us is Michael McKee Blumberg, International economics and policy correspondent, kicking off the year. Mike, how much are people looking for a sense of this data being the important ones to really focus on? Well, the inflation data that we get
Later in the month is going to be the important thing, because, of course, the Fed is tying everything to the PC numbers and the CPI is the sort of warm up act for that. And everybody’s going to be looking at
The six month average rather than the year over year because we’ve been making progress there. But the jobs numbers are going to be important because of this whole argument that you can’t have declining inflation without rising unemployment because demand has to be destroyed.
And there is a forecast for 3.8%, a tick higher unemployment. So that’s something to keep an eye on Friday. And then that total job creation, the idea is that we need to slow down or we won’t see the kind of soft landing that we’re looking for.
Right. So far, that hasn’t worked as a theory either. We’ll see this week. Are we still in throes of the pandemic? I mean, I find it fascinating. This has really moved on. We have moved on and we are starting to
See a normalization of the economic data while at the same time health experts are telling us that the pandemic is raging, that there are more cases of COVID out there than there have been in months and months and months. It’s just that with the vaccination levels, I guess, and whatever natural
Immunity people have gotten, it’s not the crisis that it was. But that doesn’t mean it can’t come back because this COVID virus can mutate. You put me in the Mickey time out chair once, years ago, you said Tam jolts matters. Does jolts matter?
Tomorrow matters less than it had been. It’s still a question of how many job openings there are and whether they’re still declining. Chris Waller on the Fed was the he was right. He said we can bring down inflation with a softer labor market by absorbing the vacancies rather than creating more with unemployment.
And that’s what’s happened so far. So if that continues, it’ll give people a better feeling about the Fed. I want to finish up with a real question for 2024, which is the vibe session that everyone was talking about, which is if you look at the economic data, it looks pretty good.
You talk to people, they feel terrible. Do you have any sense of what explains that? Because I’ve read so many economic reports trying to explain this mystery and everyone seems to disagree. Well, there are a lot of different reasons why people think this may be
Happening. One of them that gets a lot of credence is that it’s recency bias. People are not looking at the change in the magnitude of inflation. They’re looking at the price level that we reached and they look at food prices and they look at house prices and they
Think that inflation is still out there. Gasoline’s telling them something different. We’re starting to see a little change in consumer sentiment. So maybe the vibe session to the extent there is one, will start to change. Joe Biden, I know, is certainly hoping for that. And the good.
News is that maybe according to the weather people, we might get some snow this weekend. And really those who are going to go trade from the ski slopes. Yeah, we’ll actually have some snow. Very some of us might have already looked at the weather forecast.
Let’s move on to the Michael McKee is going to move on to three very busy days of economics here for Bloomberg surveillance. This is a J.A. of joins us right now senior U.S. economist at Bank of America Securities with parchment from Chicago.
And one of the great things he does is focus on the American consumer. That’s 70% of the American economy, give or take a percentage point. It’s a 70% solution for every economic analysis, and it’s a good place to start. 2024. What is the strength of the American consumer?
So we think the American consumer looks good. That’s the bottom line. I think if you start with the foundation of an unemployment rate less than 4% and wage inflation more than 4%, that is a great starting point for the U.S. consumer. You look at spending through the holidays, November retail sales look
Solid. Our card data through the second week of December look pretty good. And then you look at travel, and I think travel is a great indicator of how the consumer is doing. It’s it’s discretionary and then it leads to more discretionary spending.
When you fly, you go to restaurants, you spend money at hotels, entertainment and so on. And the TSA travel data look great. I’m lost. It’s a 70% solution for the politics of America to the presidential election. Bankruptcies have surged. There’s all sorts of credit card. Lisa, you’re better at this than me.
The credit card gloom out there’s tangible there’s all this worry and angst. How do you process that versus the optimism you just stated? Right. So credit card delinquencies are a point of concern. It’s something that we’re watching quite carefully. We’re watching student loans. These look like modest, moderate shocks
To consumer spending. But if you look at our card data, one of the things you can do is you can slice it in ways that you can’t do with the official data. You look at the cut by income, you see that lower income households are actually spending at a faster rate year
Over year than higher income households. So that has remained the case for several months and that keeps us quite optimistic. Is all of this optimism and all of this strength and resilience consistent with inflation, getting back down to 2% with the Fed cutting rates six times this
Year, I think that’s part of the story. Real income growth has been much stronger over the last few months because of the slowdown in inflation. And yes, the vibe session is certainly a concern, but people keep spending. So it is one of those things I think the answer around price levels, sticker
Shock is certainly part of the story. But the point is that folks keep spending and it’s pretty broad. The pick up in durable goods was really impressive last year. We’ll see if it continues. So it’s not just revenge spending from COVID, it’s broad based consumer spending. This raises this question.
And actually, Andrew Holland Hawes of Citigroup just published and talked about how this is going to be a more difficult 2024 for the Federal Reserve that many people are giving credence to, especially given the fact that housing prices, which had been challenged, the housing market seems to be the housing
Recovery. Now we’re seeing that in building sentiment, even home prices. We’re seeing wages, as you mentioned, go up. Is this consistent with inflation continuing to come down without some consistent restrictive policy from the Fed? Right. So that’s the question, right? The Fed has declared victory rather
Early. It was a remarkable performance by Fed Chair Powell at the December press conference. It wasn’t just that the data are moving in the right direction. It was also that the reaction function of the Fed seems to have moved certainly more than the ECB is a little bit less cautious.
And now the question is you get all this easing of financial conditions as as a result of a more dovish Fed. And will that preempt the the slowdown in inflation? So certainly supply expansion has helped supply recovery, if you will, and that’s brought inflation down.
By definition, that doesn’t hurt output. But the question is now how much demand destruction do you need to actually get all the way back? What is service disinflation doing? I mean, the is paying a lot for service inflation right now versus goods inflation. But is there a legitimate service? Disinflation?
Oh, for sure. So core services, ex housing was running at around 5% early last year. Now it’s at three and a half percent year over year. You look at the six month rate, it’s actually well below 3%. So this is something that you have all
The way for. That’s exactly why we have the Fed cutting 14 year rate cut. June was a January 15th stop rate. We have four cuts next year starting in March. You know. Starting in March. Yes, starting in March. Yeah. Well, can we just finish up with a vibe session?
Because I really have been spending a lot of time trying to understand this because you don’t you can’t discount what people are feeling. If people are feeling bad, they’re usually as a reason for it. But as you pointed. There is some inconsistency with how
People are spending and behaving versus the sentiment surveys that have come in dismally. Time and time again, What’s your theory for this? So I think it’s sticker shock. Here’s a fun fact for you. The University of Michigan index is still below April 20, 20 levels. It has not recovered since it collapsed
With the surge in inflation. I think it’s just that folks are seeing prices when they go to the grocery store, when they go shopping that they’re just not used to seeing. And yes, they have the spending power,
But it’s still unsettling and it’s going to take a while for folks to get used to these higher price levels because the Fed isn’t trying to get prices back. Right. It’s just trying to get inflation back to 2%. So we’re probably stuck with higher
Prices in the long term. And there have been a number of studies I know that show that people care more about the prices they pay than how much their incomes are going up and that it matters more the sticker shock. How long do people have to wait before something becomes normalized?
Is there a historical analog? It’s a tough one. Really, the last wave of inflation that we had that’s similar to this is in the seventies and eighties. And that’s just one data point. And the you survey doesn’t go back before that.
So it’s going to take a while, but I think we’re slowly inching back towards normal. Why do we have to wait to march for a first increase? I don’t I don’t get this. I just, you know, let’s get going. I mean, one little re rate cut in
January is going to upset the apple cart. Well, no, but I think it’s a signal of more to come. Right. If they if they cut in January, the markets are going to they’re already pricing six. They’re probably going to fry seven or eight next year.
Thank you so much. Has been one of adage about it with us, with Bank of America here, particularly on the American consumer right now, we’re consuming data here in the Bloomberg terminal, futures -38, Dow futures -215. Wait to the tape.
Apple, you’re going to tell me this Apple, Apple you to tell me Lisa’s the reason for this. Lisa, are you going to tell me Apple’s the only reason I don’t buy. I buy. It’s the beginning of the year and people are resetting.
I’ll give you this name as well. Rivian plunging this morning, down more than 8% in early trading after coming out with deliveries that were below expectations, saying they delivered 13,972 vehicles versus an estimate of north of 14,000. And you could see the move.
Now it’s been retraced a bit to 4.4%, but Tesla came in a little bit with a beat. These are some of the tea leaves. But the big moves are telling you kind of where some of the maybe have, I don’t know, crowded trades might be. Well, Tesla’s there and I don’t know if
It’s part of the Magnificent Seven or Magnificent Eight, but it’s always in the news. And frankly, it’s about EVA as well. On the markets right now, -37 and the Standard Poor’s 500, and we are down 7/10 of a percent. I’m looking through these numbers and it
Really is interesting to see that even Tesla came in below expectations for the three Y deliveries. So this coming at a time where there’s a lot of skepticism around how long some of the buying trends can continue. We have seen Ford pull back from some of their projections of electric vehicle
Adoption. We see now the fact that subsidies are not going to be as great from the U.S. government for a number of different models that use certain parts that are derived in part from China. So there are real questions here. How sustainable is it stock action here
In the boom of the end of the year, Tesla 200 up to 60, I’m going to call it comes down to 250 something and we’re off a little bit here to 48 right now. Is the pre-market here in Tesla? Yeah, pretty much flat.
I mean, honestly, how much can we really read into an entire year for the first day? We’re going to try. But what’s really a fool’s errand at this point? I think we’re setting up, though, with a series of assumptions that we’re going to get some sort of gradual muddle through economy.
And that’s going to be the real question behind a lot of these idiosyncratic stories. Do we get that or is it going to look a bit different with a bit hotter inflation in a bit hotter in suburban? Certainly the zeitgeist at the end of the year was a study of EVE worldwide of
China and how China redounds over to all the restrictions of importing into the U.S. versus some real import penetration in Europe as well. Coming up, this is the interview of the day and technical analysis You’re in Timmer, Global macro director, Fidelity Boston. Good morning.
I think the economy is in a healthy position here. I think it will take higher rates to be sustained here to continue to bring inflation down. Inflation is not going to stay high as it was over the last two years. But I think getting down from 3 to 2 is
Probably going to take more work. And I think it’s not going to happen quickly and as a result of that. I do think the Fed is probably going to be disappointing here relative to the speed at which rate cuts are priced into the market. That was Bruce Kasman, chief economist
And head of global economic research at Jp morgan. As we look at a new year, a new trading week, a new trading day with a bit of softness as we pass through just a touch of weakness. But really at session lows are a little off session lows now, 8/10 of a percent
Decline on the S&P, a bit of dollar strength, a bit of a reversal in some ways of what we saw over the last three months of last year, including a lift to crude on the heels of Iranian ships entering the Red Sea in response to some
Of the attacks from the Houthi militants and then the reprisal from the United States, Tom Keene Lisa Abramowicz Sean Farrow off to the 9 a.m. hour. But I really think it’s going to be an interesting week to set up the year, Tom, to understand what the consensus is
And how much it can go wrong. I think we underplayed it here with all the equity chit chat. The answer is it’s an exceptionally interesting week is just framed by the gentleman from Bank of America in the answer is we get the labor data and within it the wage dynamic.
And that’s the key determinant to keep the bull tone going is it is about economics. At the end of the day, just want to run through some specific stocks to continue the stock chit chat. As you mentioned, Apple shares very much getting our attention as Barclays
Becomes bearish, or at least marginally so on the at the edges, down 2.2%. But again, that’s like a 65 to $70 billion market cap move. You’re also seeing a revision lower by four and a half percent after disappointing with their deliveries south of 30 14,000 vehicles versus the
Estimate of more than that. And Tesla basically flat to me. Again, I think it’s notable that Apple has moved so much, Tom, in response to not that significant of a proclamation, just basically a recognition of reality. Yeah that’s the opinion of one house Barclays here that that Apple’s going to
Be a little bit tepid but I think also it’s just a normal beginning of the year reset. Everybody’s back. Everybody be back over the next week into the uncertainty of Wednesday, Thursday, Friday. And on this Tuesday, it’s a reset which is beyond healthy. We’re allowed to go down every once in a
While. Well, there’s this real key question, which is is too much good news being priced into this market. You’re in. Timmer asked this question in his recent note, director of global macro at Fidelity Investments. I’m going to ask you that, especially at a time where it seems like people are
Maybe questioning that bullishness the end of the year. Well. So I think the bond markets move and the market’s interpretation of what the Fed is going to do is a little extreme, right? So if if three is the new two in terms
Of inflation, which is my, my, my, my view that it’s going to be hard to get inflation and core inflation below three. And the market, you know, the sofr curve is saying the Fed’s going to go all the way down to three. That doesn’t really make sense in a soft
Landing, right? Because that would be a zero real rate. If inflation is three and the Fed’s at three and at a time when the economy is actually doing okay. So I think the bond market is a little bit over its skis. I think for 410 year for the ten year
Yield, 4 to 5 is a reasonable range from below four. Doesn’t really make a lot of sense to me. So my sense is I’m bullish on equities. I think we’re going to have a bullish broadening, but certainly kind of sober January, if you will.
We might have a little bit more of a sober tone. And remember, market goes up two thirds of the time, which means it goes down one third at the time. And so maybe we kind of come to reality a little bit here. Let me begin with an open question.
Your charts are the powerful use of overlay. One idea, two ideas, a third idea, all on top of the Euclidean surface, which is a single chart right now. It matters for people who want to find the courage to get in Will de novo contra fun weekly chart of SBW, which is
The equal weighted S&P 500 index on a large scale. Of course, if you take a weekly chart, you will see a stellar step function or we have one standard deviation above long term trend. No, we are below the long term trend. If you go back 150 years, we are
Slightly above the long term trend. But if you look at SBW, we’ve been in a holding pattern for two years. Market generally goes up 10% per year two thirds of the time, and to be going sideways for two years is a long, long time. And so and of course, as we know, it’s
Been the Magnificent Seven. So many, many other stocks have not participated, which is a great second chance for investors to actually participate if they’ve if they’ve missed this. So that, I think, would be my primary chart. If you look at it slightly different way, S&P 500 cap weighted index, we are
A little bit above that long term uptrend. Obviously, a lot of very benign soft landing dynamics being priced in. I don’t think the Fed is going to deliver what the market is expecting. The market’s like a spoil chart. You know, the Fed gives it three rate
Cuts, the market one six never happy. So I do think one of the stories for 2024 will be the Fed walking back some of this very dovish narrative. There could be a situation where, yes, you do see a broadening out in some of these sideways moving stocks over the past two years outperforming.
Does that even matter, though, for the overall index? If you have the golden children of the whole the whole past cycle, which is the Magnificent Seven not performing in suit? Well, that is one of the great unresolved questions for this year, right, Because the max seven are 3% of the index.
Right. So if you get a rotation out of those seven stocks into everything else, 493 of the S&P or the Russell 2000, what happens to the index, right, if 30% is being rotated and and that just being seven stocks into everything else, can the tape be up or is that a more muted
Tape even though under the surface the market is broadening, which of course is what’s what’s very important. So it’s kind of the alpha versus the beta. And I think the alpha is going to work. The beta, I think is is kind of a math question.
We know that historically when breadth is extremely narrow, so fewer than 30% of stocks are outperforming the index. It tends to be in rising market, sometimes speaking markets. So the late nineties, the early seventies come to mind. And when the market is broadening, more
Often than not, the market goes up. But again, you have this mass tension of it being so concentrated. Do you find that the big tech stocks are more interest rate sensitive and would suffer more from some of the positivity that you’re talking about that would keep rates higher in part?
And when we when the market started its bear market in early 20, 22, two years ago, almost exactly actually as of tomorrow, those were the stocks that were initially hits because they are long duration stocks are sensitive to interest rates. So it’s ironic that that’s how the bear
Market started. And then last summer, those very same stocks, when yields went to 5%, we’re seen as immune from that because they had so much cash flow, they didn’t have to borrow money, They didn’t care about interest rates. And of course, we had the whole AIG vibe
Going. So it’s interesting that, you know, different same stocks. Same environment, different outcomes. But the rest of the market know the financials, dividend payers, companies fed maybe weaker balance sheets, more interest rate sensitive, that vice of tighter liquidity conditions. When that gets lifted, those stocks can
Finally lift as well. I remember you as a young whippersnapper. It was like ten above zero. Peter Lynch and you were walking down Devon Shire. You know, he’s in the shirt sleeves of value lines in his hands in the bottom line, we forget about this folks. The great Peter Lynch, Fidelity Magellan
In 49 years has given me a total return over 15% per year. How much of America’s gloomy and doesn’t believe in what Lynch and others have done? They don’t believe in the equity advantage. To me, it’s overwhelming the equity gloom that’s out there versus a number of decades ago.
Yeah, I mean, it is still the proven store of value. The proven way to compound wealth and compounding works, of course, not just in a marcus, but in careers in everything else. You do a little bit at a time, right? And over the long term, it compounds, It
Requires patience. Not everyone has patience. And when you have these lopsided market dynamics that will get you, I’m going to cut you off. Is Lisa Abramowicz and financial media destroyed this because of the immediacy of watching Bloomberg Surveillance every day? We don’t you know, we didn’t have two
Years of confidence. But, you know, one of the great things I learned not not so much from Peter but from his successor, Bob Sandusky, was, you know, I would come to him saying, I think the market can go down 10%. Is that good? I could buy some more because the fund
Was so big that it took the opposite approach of what maybe everyone in the media thinks. So the liquidity provider and the liquidity. Are you looking a straight? There is an important role for honest skepticism on the way down and on the way up.
And this morning I’ve been saying back the bull case and up in only 9% tells you where people are positioned for total returns. I think it’s fair to be skeptical. That’s our job. And Bob Stefanski would say, here’s the door you’re in, you’re in timber.
Thank you so much. With Fidelity, of course, it is an eventful four day week. It’s Tuesday. Don’t forget that. Jobs, lots of economic data coming up here in the next three days. We’ll have all that coverage for you on radio and television Bloomberg Surveillance. Good morning.
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Lisa,Tom and Johnathan HAPPY NEW YEAR !!! Hope your 2024 is WELL.
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Haha…how much does Ozempic cost? I'm fairly sure the intersection between the set of Dunkin' Donuts' customers and Ozempic customers is – pace Monty Python – only waaffer thin 😉
Nice to see everyone again!! Happy New Year Surveillance crew
Best way to help Ukraine defeat the Russians? stop all petroleum subsidies which are supporting Russia. It's a good time to stop the petro subsidies just to slow down global warming . Just quit it!
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