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- [00:03]
A
Bloomberg Audio Studios Podcasts radio news this is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news. As it happens, the Bloomberg Business Week Daily podcast with Carol Massar and Tim Stenbeck on Bloomberg Radio.
- [00:33]
B
Yes, we finally got the monthly labor report which was supposed to be out last Friday. We've talked about that. Today's data showed U.S. payrolls rose in January by the most in more than a year. The unemployment rate unexpectedly fell, suggesting the labor market continued to stabilize at the start of 2026. And yet not so fast, Tim.
- [00:51]
C
The US labor market coming off one of its worst years for hiring in decades. Revisions to employment figures showed the nation added 181,000 jobs last year. That's the lowest annual total outside of recession years, going all the way back to 2003. That averaged out to just 15,000 job gains per month. That's down from an initially reported 49,000 pace. This according to data that we got today from the Bureau of Labor Statistics.
- [01:15]
B
All right. With more on where we are exactly in the US labor market because it feels a little confusing. Constance Hunter with us, chief economist at the eiu, the Economist Intelligence Unit. She joins us from Wellington, Florida. Hey, Constance, good to have you back with Tim and me. So January stronger than forecast revisions show a little bit of a different picture. What's your read on the US labor market and why?
- [01:38]
D
Yeah, so I mean, for those of us that had forecast a recession in 2025 because of policy uncertainty, because of tariffs and other changing policies, I suppose one could say it feels a little vindicating because we did have a bit of a labor market recession, although other aspects of the economy were firing all cylinders. And I was at Davos last month and the thing that I heard over and over again from companies, and not just US companies was we put ourselves on hold in 2025 and we are done with that. The tariffs are bad, they're worse than was originally expected, less bad than originally announced, and all of the other policy uncertainty. I think to, to borrow a phrase, the corporate leaders are getting uncomfortable being uncomfortable. And so they're, they're just viewing of it's time to get on with it. But last year was very much a stasis year in terms of hiring.
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C
Yeah. I'm wondering about long term implications of this. I mean, because if you think about it from the perspective of immigration in this country and the way that the labor force will be changing in the coming years where workers are going to come from, especially for, for certain jobs in the trades, for example, in construction, in home building, which we know this country desperately needs. What is your view there?
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D
Yeah, well, I would add to that home health aids and aging population.
- [03:08]
C
Yes.
- [03:09]
E
So.
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F
Yeah.
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D
Well, if you look at the BLS projections of the jobs that require the most absolute increase in workers and the highest percentage change of workers, health care has been in that list for at least the last decade. And of course we're also going to need construction workers to build homes. And a lot of these professions draw upon and immigrant population. So it's certainly, I mean, to, to borrow Powell's phrase, which is still apt, we're in a very curious balance in the labor market. And of course, if we have fewer or lower population growth, wherever that comes from, we know that you have to make up that GDP in terms of productivity. And while we seem to be in the midst of a pretty solid period of productivity growth, that lack of labor force growth is a long term.
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E
So.
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C
Yeah.
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B
So I'm really wondering, you know, I think about. You are currently a board member on the National Bureau for Economic Research. They are the official, we all know that, the arbiter, official arbiter of recession. So the start and the end dates, where are we in this business cycle? And as you look at these longer term trends, maybe with the US labor market, what does it possibly mean in terms of our economic cycle, how that might shape change and maybe how it might be more stressed in the future?
- [04:34]
D
Yeah, well, I mean, certainly if we, if we look at labor force growth, that's generally speaking more of a cyclical thing. I mean, I'm sorry, a structural thing. However, when we look at what happened with COVID right, We had a big decrease in the number of people entering the country during COVID We had some makeup and a big increase for several years. And now we're, we're at this place where we're, we're not having that many people enter the country that has distorted a lot of the data. In addition, when we look at the labor market data, it's also distorted by the layoffs during the pandemic, the rehiring, the frenzy to rehire, the fear and labor hoarding that existed for a while. And so as I look at the business cycle, what you're forced to look at is things other than the labor market, in part because that data is so distorted. And so if I look at something like corporate profits, they're actually looking pretty strong. And we've never entered a recession when corporate profits are growing, usually corporate profits begin to decline a little bit prior to a recession. It's a really important indicator. With that said, the economy has also withstood massive shocks last year, not just on the labor force side, but again on the tariff side. And we seem to be sort of plateauing in terms of the volatility in that regard.
- [06:01]
B
Right.
- [06:01]
D
We seem to be reaching this sort of equilibrium him all that with higher tariffs that I think firms are going to be able to better plan. And so I would say if we were to make a baseball analogy, it looks like we're in, I don't know, the sixth or seventh inning. It's hard to say how much AI and that diffusion of AI is either going to extend the expansion or perhaps cause some significant disruptions.
- [06:29]
C
You know, speaking of potential disruptions, we have to end with with talking about geopolitics. We're going to talking to Annmarie Horden in just a minute. She's actually in Venezuela. You've been a member of the national association for US China relations since 2004. Geopolitics, not just between the US and China, but the US and the Middle east, the US and Canada and Mexico. What relationship in your view could be one that if it does unravel or if it does change, could be the most damaging to the US Economy and the investing economy?
- [07:03]
D
Well, look, I'll add Canada with Mexico since nafta and then the usmca, which I must point out is really the tpp. Right. So the Trans Pacific Partnership, to which Canada, Mexico and the US Were all a party, fixed a lot of the problems with nafta. And so the USMCA really pulled from that agreement that took years to negotiate. And these trade relationships are very deeply integrated. And if in the renegotiation of USMCA we see a breakdown in that, that would be deleterious to the real economy in the US and of course would then impact capital markets.
- [07:44]
B
Great stuff and great set up because we're going to actually even be digging deeper into that relationship between the U.S. canada and Mexico because President Trump certainly pondering maybe something else. Always appreciate it, Constance. Be well. Constance Hunter, she's chief economist at the Economist Intelligence Unit, joining us there from Florida.
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C
Stay with plus more from Bloomberg businessweek Daily coming up after this.
- [08:11]
A
You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [08:25]
B
So folks, it's Often all about the outlook, often for investors. And so shares of the global designer, manufacturer and provider of energy, tech solutions and other power products. We're talking about Generac. They are rallying today top gainer in the S&P 500 after the company forecast a 2026 EBITDA margin range within with a midpoint above analyst consensus. The street weighing in Keybank noting that despite net sales for the fourth quarter missing analyst estimates shares will try to higher on 2026 outlook and positive data center developments shares of Generac by the way the way what is wrong with me? I think I need a new generator is basically it.
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C
I like that.
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B
They are up nearly 60% year to date and third best performer in the S&P 500 this year. We are delighted to have back with us the CEO of the company.
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C
Erin Yuckfeld is chairman, president and CEO of Generac joins us from Wisconsin. Always good to have you on the program. A day like today the stock the best performer as Carol mentioned in the S&P 500 up double digits for the year already Investors are looking through this. Clearly they're all about the guidance. But just share with us why the earnings mess when it comes to the fourth quarter. We we're going to work on getting his connection back. We're speaking with Aaron Yogfeld, chairman, president, CEO over at Generac. Go ahead, go ahead.
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B
See we're all having energy, right? We all need a backup generator today.
- [09:51]
F
I guess, I guess, I guess we need our generators to kick out here. Sorry about that.
- [09:55]
C
No worries. The program, hey I was just asking you know obviously investors looking through that with today's stock performance but why the miss in the fourth quarter?
- [10:04]
F
Yeah, so the back half of the year we actually had a lot less outage activity. So our residential business, you know for portable generators, home standby generators really depends heavily on mother nature honestly to help us drive demand for those products. And so it was a very quiet back half of the year. The fourth quarter in particular back half of the year was 90% lower in outage hours versus the year before. So sometimes that happens and you know we guide based on kind of average outage activity and we got a lot of below active below outage activity in the quarter.
- [10:32]
B
Well it's interesting you know so what gives you confidence around mid teens growth when the weather has been the primary cold culprit for weak residential sales in 2025?
- [10:42]
F
Yeah so on the residential side you know obviously we think a return to normal average environment that will happen. I mean we will get ice storms Again, we have one in January, right. With. With the winter storm Fern. So we're off to a good start here this year. And so we feel like, you know, we're going to return to more normal kind of outages and more normal patterns if we've got some pricing in there as well. You know, the consumer for our products is pretty healthy still. You know, I think there's concerns about the consumer across the broader economy, but when your power goes out, you know, these products tend to become a priority for households. So, you know, we're not very worried about, about the consumer's health for. At least for our category.
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C
Yeah. Aaron, explain the consumer behavior here. Is it that a consumer without a generator goes through a power outage in the middle of winter or the middle of the summer and says, I never want to experience this again and you know, when they get power back, they call somebody to install a generic. Is that how it works?
- [11:36]
F
You've got it right. And in fact, I would just point this out. You know, winter outages tend to drive people to that point a lot faster than summer outages. When you have an outage in the summer, you know, maybe it's nice enough and temperate enough outside, you can open the windows and you kind of push through and survive in the dark if you had to. Winter is a whole different ballgame if you lose your power in the wintertime, especially if you live in the northern states or in this case with winter storm Fern, even in the southern states where you had, you know, just tremendously cold weather, you get pipes that freeze, you get a lot of damage in your home, and a lot of things just, you know, your home becomes unlivable.
- [12:08]
B
There's kind of an assess moment there for Tim. It happened to him. No power during the cold weather. Hey, what I want to ask you is investors are really noticing the forecast, your 2026 EBITDA margin range. How much of what's going on, the growth, the magnitude, is it all because of data centers?
- [12:30]
F
Yeah, I mean, obviously largely the headline here is our entry into the data center market. We started shipping products, our first products in the fourth quarter and we're ramping, we're going to scale this year. We're having some very meaningful conversations as we work towards final contract negotiations with a number of hyperscale customers. And you know, this is going to be for us, it's a generational opportunity. You know, the backup power that is required by each data center site. I mean, you can literally have hundreds of large gen sets sitting there waiting for outages. To happen. And the project sizes are enormous and the opportunity is equal to that.
- [13:06]
B
Is this all about the large megawatt megawatt generators? Is it all about that? That's what the demand is for. Like, I want you to get into. What is the AI play for you guys?
- [13:16]
F
Yeah, for the most part. So there's. For us, there's a direct AI play which is, you know, you build a data center, you need to have backup power because even a second of downtime there are, you know, there are requirements there commit that they've made to their customers and their penalties and things that kick in if they can't supply information or the, you know, the AI models different, you know, depending on what they've contracted that data center out to do. Basically, they've got to have continuous source of power, so they invest in backup generators for those facilities. And that's a product that we're new into, and that's a huge opportunity. The indirect side of data centers is pretty interesting though. And as more data centers come online, you're going to see a lot more requirements for power. Right. Demand is going to grow for electricity. We have supply constraints in particular. You know, there are parts of the grid around the US Like PJM as an example up in the Northeast.
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B
Yeah.
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F
You know, this is a major concern on very hot days, very cold days. Going forward, you're going to see more brownouts, more blackouts, and that's going to lead obviously to more opportunities for us in some of our core products, like home standby generators for homeowners and other generators for businesses and things like that.
- [14:19]
C
So. Okay, so we each have a million questions that we want to.
- [14:23]
B
You want to go back to.
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C
Yeah, yeah.
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B
So Tim might be shopping for a generator.
- [14:28]
F
We can help you out. There's.
- [14:29]
C
There's an interesting thing happening in some parts of the country. And, you know, I don't want to get in the details of new laws in New York City, for example, but some places are, you know, years ago, few years ago, argued that we want to just get rid of gas lines in general and don't want fossil fuel hookups within new buildings. So new construction in some parts of the country doesn't have any gas. How do you account for that with a product that, you know, you want to have connected to a continuous gas line.
- [15:00]
F
Right. I mean, obviously you can use lp. Right. So if you have an LP tank or a propane tank, that works just as fine. In fact, a lot of our installations in parts of the country, like Florida, you know, homes down there don't have connections to, you know, a gas line because it's just, it's untenable for them to be able to put that infrastructure in. So you know what's interesting, like in policy driven areas like New York, when it comes to let's not have new nat gas hookups, oddly enough you can still have a propane gas hookup. So you, those are the ways to kind of navigate around some of those challenges. And again, you're using it for an emergency, right? This is not a continuous use product. So you know, I think really cooler heads should prevail when it comes to certain policies like that. I mean, you want to make sure that homeowners, businesses have access to emergency backup solutions. Right? Backup power, backup, you know, batteries, things of that nature. And those are the things that I think we've got to be careful of when we do policy related things like, like, you know, no net gas, new hookups. And sometimes there's unintended consequences of that and we've got to be careful about that.
- [15:57]
B
Hey Aaron, you guys have and expanding and earlier this year you talked about the acquisition of a new facility in Sussex, Wisconsin and you are quoted in that release saying our commitment to aggressively invest in serving this booming segment offers a generational. Generational opportunity. You've used that word before for Generac. With the potential of doubling our sales of CNI products in the next three to five years. How confident are you on this? Is it likely more on the conservative side or more on the optimistic side?
- [16:26]
F
Yeah, it's interesting when we, so we've been having these high quality conversations with data center co locators and hyperscale operators and you know, there's obviously a massive deficit of supply for backup power generation today based on all the things that are on the drawing board to go on the ground for new data center construction in the years ahead. So our entry into this market, you know, we came into the market, we thought there'd be some interest in the product, but we maybe undersized that. And to be, to be blunt, you know, we went ahead and we, we acquired a new facility and with eye towards doubling our capacity, we said on our third quarter call we thought we had about $500 million of global capacity to serve the data center market. We now have doubled that to over $1 billion with the acquisition of that plant and some of the other investments we're making. This is a, again, we keep using that word generational, but it's true, you know, sometimes in business, you know, you can be with a company like I have for over 30 years and, and maybe never see something as, as interesting as this in terms of opportunity. And I just, it feels like one of those moments that we have got to go after this. And you see it, I mean, look, you see what other industries are dealing with H Vac. You're seeing other power companies and things that, you know, the, the infrastructure needed to handle the data center boom. That's, that's on $650 billion, right. Of hyperscale dollars that are going to go to, to work here on cap capital expenditures in 2026. They're going to go into things like generators and H vac equipment and cabling and all the things that make make these centers real.
- [17:50]
C
Aaron, we only have about 30 seconds left, but a lot to hit just in the last bit of time that we have with you. All the challenges of doing this business in the United States, doing this domestically, finding labor for this. The biggest challenge for you as, as you're running this business right now?
- [18:05]
F
Absolutely. The biggest challenge for us is, you know, the continuing shortage of labor. There's no question that, you know, in terms of the number of people that are going into manufacturing as from a career standpoint, that continues to be a real challenge. And of course now with trade policy being what it is, you know, there's a lot of things that are coming back onshore, which is great, but it just puts a lot more, that much more pressure on, you know, the labor force.
- [18:27]
B
The same. You're not optimistic?
- [18:31]
F
I try not to be. I try to be conservative.
- [18:34]
B
Listen, we so appreciate it all the time you always give us. Be well, Aaron.
- [18:37]
F
Thank you.
- [18:38]
B
He's chairman, presidency of Generac.
- [18:41]
C
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [18:48]
A
You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [19:03]
B
Let's get to the most read story on the Bloomberg in the past eight hours. It is an exclusive by Bloomberg's Josh Wingrove. It's about how President Donald Trump is privately musing about exiting the North American trade pact. Is, according to people familiar with the matter, injecting further uncertainty about the deal's future into pivotal negotiations involving the U.S. canada and Mexico. We don't need to tell you this is a key trade relationship.
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C
We're talking about the USMCA trade pact. Remember, the president was the one who actually signed it into law. We continue to look at this hour around the globe, the challenging alliances. That's something investors are watching closely, of course. And for that, we bring in Jordan Fabian. He's in Our Bloomberg Washington D.C. news news bureau. Jordan, what's going on and what is the president considering when it comes to this, this agreement that he renegotiated during his first term?
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G
Term, yes, really good point. You raised him. His anger over the previous NAFTA agreement is what produced this USMCA agreement during its first term. And now he's saying it's not good enough. And so there's a few actions he could take. The first, most drastic action which he has asked aides about, according to our sources, is withdrawing the US from that agreement. That would be done with six months notice and would of course send shockwaves through the global economy, would really cause a lot of uncertainty for North American trade. Short of that, there's a July 1st deadline where the parties need to decide whether to renew this agreement for another 16 years. And if they don't, they would essentially enter into these annual reviews and negotiations on the terms of that agreement. So not necessarily going away immediately if they don't renew it, but it would certainly cause more uncertainty to hang over the pact.
- [20:51]
B
So, Jordan, you know, so it sounds like a little bit of a clock kind of ticking here. So maybe that's why this is happening. Or I kind of was making some notes. Is this a distraction, a serious consideration? Is the White House looking to provide, you know, kind of create some kind of distraction here? What's really the goal? What does the White House want here?
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G
President Trump has always been about leverage. And right now he's been angry at Canada. He's angry at Canadian Prime Minister Mark Carney for a variety of reasons. Most recently that speech he gave at Davos where he said took aim at global superpowers without naming the United States, certainly implying it was one who used economic coercion to gain, to gain power over mid sized powers. So, so the president didn't take kindly to that and he's retaliating. He's made a series of threats over the past few weeks saying that he would raise tariffs on Canadian goods if they did a trade deal with China, threatening to not refuse to open the new bridge connecting Ontario and Michigan unless the US Gets some sort of concession among others. And so he, you could see this as him perhaps amassing leverage, exchange in order to gain more trade extractions, concessions or concessions on other issues like migration or defense from the Canadians in this ongoing renegotiation of usmca.
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C
Look, we've got to point out that These are the US's two largest trading partners. They're top buyers of American goods. Because of the trade negotiations, a lot of the goods that go between these countries are actually exempted from the quote, unquote Liberation Day tariffs that that were announced. And you got to wonder what this means for, for companies that are trying to navigate this right now. If you know, you're running one of these companies or you handle supply chains for, let's say, an automaker and you wake up to news like this Bloomberg exclusive like what do you do in order to adjust to make sure that you can pull this off?
- [22:53]
G
Well, Tim, I would imagine there's a lot of behind the scenes scenes lobbying going on, especially in the wake of this report, because it's hugely consequential for these businesses in the immediate term. If, if the deal goes away in the next year or so, they would remove all those exemptions that you just mentioned. And so Canadian goods and Mexican goods are all of a sudden facing much higher tariffs than they do now. And then over the long term, you could see Canada, Mexico perhaps integrating their economy economies more closely or looking to other powers like China to form trade pacts with. And you've already seen that happening with Canada cutting this limited trade deal with China that involved electric vehicles. They're trying to form closer trade ties with the European Union. So you would have this, you know, breaking apart perhaps of this North American integration over the last three decades where, you know, companies have really tied their supply chain chains together across the continent. You could see that begin to unravel if this trade deal falls apart.
- [23:55]
B
Well, that's what I think about Jordan. Right. It's about trade and an important trade relationship, no doubt about that. But it's also about backing one another, another global issue. So you do wonder, you know, as the US keeps jockeying and changing kind of its rules and relationships, the world is moving on.
- [24:13]
C
Right.
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G
And so if you have, have, you know, Canada doing deals with perhaps China or Europe, you see Europe doing deals with Latin America. You know, Trump has heralded the, you know, the end of the international order, saying that you basically he wants to have a more protectionist economy. A lot of other powers might not agree. And so you see perhaps other free trading blocs being set up while the US builds a tariff wall around its own economy. And I think they'll be take years for the economic consequences of that to bear out. But it certainly would herald a huge change.
- [24:47]
C
Jordan, in the past, the President has, look, I think, you know, quote, unquote, Liberation Day was it was is a great example of this. The initial news about something doesn't end up being what ultimately happens. And in the meantime, there is sort of a scramble. He's been referred to as taco ing on certain, certain things. You can't predict the future here. But is there any chance this is an opening salvo?
- [25:15]
G
There's a major chance, Tim. And our story is caveat to say that he hasn't telegraphed flatly that he's going to pull the US Out. But the mere threat of it is a big deal and it certainly could be a negotiating tactic. During the first Trump administration, he used the threat of withdrawing the U.S. from NAFTA to get the U.S. excuse me, the Canada, Mexico to sit down and negotiate what eventually became usmca. And so perhaps he's turning to this tactic again to try and force more concessions from Mexico and Canada. The problem is that, you know, Trump is an unpredictable leader, and so it's tough for these counterparts to really figure out where his head is at. Claudia Scheinbau, the Mexican president, I should add, said today she doesn't think Trump withdrawal, but we'll have to see how that works out.
- [26:01]
B
I think, Jordan, it's because USMCA is an acronym that just doesn't work and they just need to figure something else new. Just going to say NAFTA worked this one. What would you say?
- [26:12]
C
I mean, it's been around now for this is the third president.
- [26:16]
B
Like, what do you know?
- [26:17]
C
I mean, this is like, this is what it's called.
- [26:19]
B
Crazy stuff. Anyway, great reporting and great analysis by our Jordan Fabian. He's of course, Bloomberg News White House House Editor.
- [26:26]
C
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [26:34]
A
You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [26:48]
C
Real estate services stocks today, investors assessing the company's vulnerability to the newest crop of AI apps and tools that threaten to disrupt leaders. CBRE plunged as much as 15%. Jones, Lang, LaSalle, JLL 13%. To the downside, Cushman and Wakefield down 15%.
- [27:05]
B
Welcome to the AI scare trade. Let's see what our next guest has to say about it. I'm curious if she's hearing this from clients as she travels around the country. Lauren Sanfilippo, a senior investment strategist for Maryland bank of America America Private Bank. She joins us right here in our Bloomberg Interactive Broker studio. Welcome back. Good to have you. This AI scare trade, are people bringing this up or how do you like. I'm just curious what the communications you guys are having around this, if at all.
- [27:31]
E
Yes. Yeah. Well, you don't know who's next, right? We don't know who's next. But the idea around sort of the clients thinking coming into the year, right. This is a very concentration type risk thing that they were talking to us about out. No one was anticipating these sort of scare sector to sector. But now it's more like where is my exposure? But what tomorrow will bring. Who knows on this scare trade, right?
- [27:53]
C
Yeah, it's. I mean, an Iraq. On our Bloomberg intelligence team, he argues that it's overdone that the market leaders now will come out of this even stronger. I guess the big question that a lot of people have is, is what this looks like on the other side and the way that we should be thinking about this technology, not just from a microeconomics perspective and the effect on individual companies, but what, what's the effect on the actual economy on productivity? How are you looking at that?
- [28:18]
E
Right. And I think too the other thing, like when we first saw the software meltdown as an example, you didn't know what the inflection point would be on the other side. Like when would this stop, when would the flush stop? So that's a little bit scary. But from the productivity angle, we've always liked what I could probably complement a workforce that was sort of like the near term impact at least. Right. Productivity, that's the long term story. We're not really sure yet on what I will bring the hyperscalers, they're raised or reaffirmed their commitments. So we're going with that. Right.
- [28:47]
B
Well, what does that mean though, Lauren? Like if you've got investors who say this AI trade, everybody says they're spending, we see the spend that's happening. But then we also see companies getting hit. Like what do you guys advise for investors who want to take advantage of the opportunity? I feel like last year we talked a lot about the energy story, but I'm just curious how you guys are advising, advising clients on that front.
- [29:07]
E
Yeah, energy and utilities, that story hasn't run its course. Right. I mean there's still a dearth of energy out there to power this AI data center build out. Right. It just got surprisingly physical. Even though we were advising around, you know, utilities and industrials and how you actually build out, that AI build out there was still sort of scarce materials and, and you know, there's more to go with that trade. There's no reason to give up hope on that. Right. Most clients are at least market weight if not overweight tech generally. So we're more neutral on that sector right now. But I think for all the right reasons.
- [29:40]
C
What about portfolio positioning in this environment? In the rotations that we're seeing a couple of weeks ago with small caps now they're in. You know, there's been concern about some of the laggards, especially among mega cap tech. What's the rotation that you're advising right now?
- [29:54]
E
This has been significant, I mean really since what, the beginning of November. Right. So it didn't start at the top turn of the year. But we have liked emerging markets as an example for some time and it would have been an opportunity cost to not be involved in emerging markets last year.
- [30:09]
C
So it's more regional than it is in terms of sectors.
- [30:12]
E
Oh well we do like the cyclical trade here in the U.S. right. We still think U.S. equities generally best in class. So you really have liked. We have liked a lot of like the industrials for example utilities look in.
- [30:24]
C
The US market, you've been right for the past 15 years or so. But if you look at broader history, it does tend to be more global. Does the more global trade come back?
- [30:33]
E
And sometimes those cycles last longer. Right. Than one year. So yeah, we're not giving up on em and, and actually that development developed. Developed a little bit less positive on. But I like a lot of those structural stories. I mean there is a lot to like defense as an example of course NATO bringing up their targets. There's a lot going on. I would follow those cyclical, excuse me, the structural story categories abroad.
- [30:55]
B
I want to go back to emerging markets because if you look at the MSCI emerging markets index it's up almost 12% year to date. So definitely some outperformance. S and P is just up about 1 1/2% year to date. And then I looked at the MSCI World index up a little bit more than 3%. Emerging markets can be volatile. We know that's like right the basics when it comes to emerge, you know, investing. Is it a longer term trend? Like how do. How much longer? Or if you advise somebody, a client to put some more exposure. I mean it was up 30% last year. So I'm just curious like how much or how long a trade might this be?
- [31:36]
E
So that's a good question. Last year it was a large part of that story. Was the dollar right correct. Getting dollar added like 7 and a half percent on a trade weighted basis. It was down last year. A lot of that was the first half.
- [31:48]
B
The weakness in the US currency.
- [31:49]
E
Yeah, that's correct. So we still see the US dollar weakening into year end. But I think the more important part is fundamentally, have you seen the earnings chart? It's like best in class. I mean really, that chart is impressive. So we like that fundamental.
- [32:05]
B
So increasingly the fundamentals are there.
- [32:07]
E
Yeah, actually. Right. And that's backing up the performance of last year. And global growth is re. Accelerating, trade is reaccelerating. Right. And so there's, there is actually a really great setup. And then to your point, boom, bust. That happens with em. Right. Particularly the commodity producers. So you can expect to see that like in Latin America as an example.
- [32:25]
C
How do you, I mean the, some of the volatility that we've seen I think has been surprising to people early on in this year. But as somebody who deals with the folks over in the private banking side of things, how are they not necessarily asking you questions, but people on your team questions like when the phone rings, what are they asking? What do they want to know?
- [32:48]
E
Yeah, I want to pick up depending on the day. Well, I would say first, I mean other than last week, right. Before, just year to date before last week, the vix really hadn't spiked above 20. I mean so you had to put it in perspective first on, on just that one point on volatility because it seems like like, like sub themes were getting hit. Like. Right. It was just software for a moment.
- [33:11]
C
And then it was bitcoin.
- [33:13]
F
Yeah.
- [33:13]
E
And so it was like, it seemed more orderly at first, I would say. And it wasn't really until last week did things did that calculus change real quickly.
- [33:21]
B
20 seconds. Blackman, 10% of his portfolio now. Meta. Do you guys still like the big cap tech names, the hyperscalers, the Mag 7?
- [33:30]
E
We still like hyperscalers. Yeah. Like I said, we are equal weight. But that's just because of their growing weight in the industry index. Right. But I mean best in class for sure.
- [33:38]
C
All right, Lauren, always good to see you. Thanks for coming by the studio. Lauren Sanfilippo, senior investment strategist for Merrill and Bank of America Private bank, joining us here in the Bloomberg Interactive Brokers studio.
- [33:49]
A
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