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- [00:01]
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- [00:59]
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- [01:32]
Bloomberg Surveillance Podcast Host
Bloomberg Audio Studios podcasts Radio News. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [01:57]
Tom Keene
Ross Mayfield with us right now. Investors Trust Strategist IT bear Ross, I love your note where you say okay they're selling this but they're not running from the market. Describe.
- [02:08]
Ross Mayfield
Yeah so the S and P is within a percent of the all time high and the momentum index is down some 25%. So you've had this big rotation out of the darlings of the first half and there's a lot there to pick up the slack. You know, equal weights near an all time high, small caps near an all time high and it's some defensives and that's to be expected. Health care utilities catching a bid but financials industrials doing well. You don't see that if it's investors fling the asset class because they're worried more of a rotation which I think is healthy. So we'll take it.
- [02:42]
Tom Keene
It's healthy and it's not a correction, is it? I Mean, we're just simply on a blended basis. There's a lot of carnage out there, but we're nowhere near like quote unquote, a correction.
- [02:55]
Ross Mayfield
No, not even close. I mean, the one thing you could worry about is where's the leverage in the system? And if there's enough of a momentum unwind, do leveraged players have to start selling other things to meet margin calls or whatever it is? So maybe there's some technical pressure down the pipe, but again, the indexes are within a percent or two of an all time high. I mean, they'll be down a little bit today, but yeah, correction, not even close. Rotation, healthy consolidation, whatever you want to call it, it's, it's not a reason to get to get scared of things here.
- [03:28]
Damian Sassour
Well, Ross, let's talk about, you know, rotation, right? I mean, let's talk about those factors that do drive the equity market. Low volume, value growth. You tell me through the second half of this year. Which of those factors do you think do you expect to do the best?
- [03:42]
Ross Mayfield
I think value could catch a bid, right? I think financials, industrials, some of those classic value stocks. Energy is obviously going to move with oil, but that's been good lately. To me, the strength or the robustness of that move depends on what happens in Iran. If we get yields down and oil down, I think value has legs. If we don't, it's more of a mixed bag.
- [04:04]
Tom Keene
Okay.
- [04:05]
Amazon Health AI Narrator
For us.
- [04:05]
Tom Keene
We've all got experience here. Henry's in the studio today, Rocket. He listens every morning. Henry's 10. For the kids out there, Ross, how do you begin to learn about your game when with all these different narratives going on, what's your advice to Henry about starting an investment account?
- [04:25]
Ross Mayfield
Well, I would say get started. Now, Henry, the best time to buy stocks was 10 years ago. The next best time is today. I think this is a perfect time to learn about stocks because we're about to enter an earnings season where the thing that really drives stocks over the long term take center stage. A lot of times it's easy to forget what the main driver of stock prices is. And we're about to see a great quarter of earnings. So Henry, pay attention to what these companies are saying. That's the game.
- [04:50]
Tom Keene
Yeah, I'm reading the House, you know, Justin Baer's great, great book. And Damien, there's always an excuse to say no, right?
- [04:58]
Damian Sassour
Well, I mean, there is always an excuse to say no, I think. Look, I think you're making a good point here, Ross, about position sizing or at least that's the way I'm reading what you're saying. Right. I mean, you can take risk in this market, but it's about, you know, it's about how you, how you position within the broader portfolio. And, you know, instead of getting defensive outright and buying, you know, I don't know what are defensive sectors? Staples, utilities, to a lesser extent. You know, maybe you just have to kind of, you know, take, take a
- [05:21]
Boost Mobile Announcer
little bit off the table here.
- [05:22]
Ross Mayfield
Yeah. And one of the things we've been talking about to clients is, you know, there's a lot of passive investors out there who might not know how concentrated their portfolios have gotten, and especially in the AI trade. And so it's a good time to be proactive about looking to those other sectors. It's not necessarily a repudiation of AI trade, but more just as you mentioned, kind of risk management diversification. And I think a lot of people don't know how concentrated the S and P is, even if it's talked about all the time.
- [05:48]
Damian Sassour
Even global stock, I mean, even internationally. Right. You can make an argument like what we're seeing in China with their stock
- [05:53]
Ross Mayfield
market is heavily tied to the AI trade, 100%. I mean, the EM indexes now are so weighted in China, Korea and Taiwan that they're basically AI indexes. They're not plays on demographic growth or stronger economic growth in the emerging market world. So you just have to know what you own and, and then like you said, size those positions accordingly and kind of just play the game, you know, risk management is important.
- [06:17]
Tom Keene
Here with Baird Ross Mayfield with us this morning. Thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this.
- [06:28]
Domino's Pizza Announcer
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- [06:47]
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- [06:59]
Amazon Health AI Narrator
Amazon Health AI presents painful thoughts.
- [07:04]
Tom Keene
Why did I search the Internet for
- [07:06]
Optum Healthcare Narrator
answers to my cold sore problem?
- [07:08]
Simona Makuta
Now I'm stuck down a rabbit hole
- [07:10]
Optum Healthcare Narrator
filled with images of alarmingly graphic sores in various stages of.
- [07:17]
Tiffany Wilding
I can clear my search history, but
- [07:19]
Tom Keene
I can never unsee that.
- [07:22]
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- [08:04]
Bloomberg Surveillance Podcast Host
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [08:17]
Tom Keene
Last time Tiffany Wilding was on for like a minute and 12 seconds. Going along here today with the Pacific Investment Management Company, their economist for all of North America, Tiffany Wilding. Tiffany, what are you thinking about for the PIMCO manager brief on Monday morning? What's the thing that matters right now?
- [08:39]
Tiffany Wilding
You know, well, I think we're, we're clearly focused on, on how Federal Reserve official communication is evolving. You know, obviously we're also focused on on the data and I think there's an interesting sort of bifurcation that's happened because on the one hand, you know, Federal Reserve officials appear to be setting the markets up for potential rate hikes if inflation doesn't start to moderate here. You know, on the other hand, we got good news on the inflation data this week. Both the CPI and the PIE coming in under expectations, you know, in our own forecast is, is that you will see some moderation in core inflation, which important one for the Fed. You know, but I've been saying this, even on this program with you, Tom, that you have to keep in mind that headline inflation, you know, we're going back to pre war levels on, on commodity prices. Headline inflation is actually likely going to dip below 2% next year. You know, so all of that sort of suggests to us that we have a Fed on hold. But nevertheless, officials, you know, are certainly preparing the markets for a couple of potential hikes.
- [09:43]
Tom Keene
Okay, so the first derivative inflation's coming down. There's a lot of people that agree with what Tiffany just said. There are, we could see lower prices or dare I say even are we going to see level prices as we go along in time?
- [09:59]
Tiffany Wilding
Well, we've already seen the national average retail gasoline price come down off of its recent peak. Now, over the last few days, it's, it's up again as the Middle east conflict as has kind of flared up. But we are down off of the wartime peak levels. You know, we're also seeing some various food prices that are actually falling, you know, but in general, you know, when we say inflation is coming down, you know, that is the price change. And so, you know, we're not expecting overall inflation in the United States to, you know, to dip in negative territory, go into deflation. But we do think moderating inflation is a completely reasonable outlook to have.
- [10:38]
Tom Keene
I mean, Tiffany gets everything. You know, she's at restaurants seven days a week. What's the grocery shop and look like at the sass, our house?
- [10:45]
Damian Sassour
Tiffany, I have to ask you this. You know, obviously you were watching. I was watching Kelman wash his testimony to Congress this week. And you know, some of the questioning, specifically the questioning I saw from Senator Warren regarding $100 million payments or some craziness, I mean, is there any validity to that? I mean, is she just kind of muckraking, I mean, what's going on, you know, underneath the surface here in terms of, you know, the Senate's real acceptance of the new Fed, new Fed chairman?
- [11:12]
Tiffany Wilding
Well, you know, I mean, certainly, you know, I mean, Senator Warren will have her piece to say, you know, I think what. And certainly there could be some more that comes out on that, but I think what we're focused on at least is, you know, what sort of signals is Chair Warsh sending in terms of how he's going to conduct monetary policy? You know, and I think the biggest emphasis that's come out since he's become chair, you know, is that he's very focused on price stability. You know, and I think that's very consistent with the other communication that we've seen from other officials to say that if you're not getting inflation that's moderating, you know, that the Federal Reserve is prepared to act, you know, and I think that, you know, this is a good focus to have, you know, in terms of the markets, you know, anchoring longer term inflation expectations or ensuring that they're anchored, you know, with this commitment to act if inflation, you know, doesn't moderate as we all expect, should actually keep longer dated interest rates anchored. Right. Because you don't have inflation risk premiums that are getting priced into the long end of the interest rate curve. So, so everything that we've heard from Wash in terms of, of his commitment to price stability, we actually think is a good thing for the bond market. You know, now of course, you know, there will be other questions that senators have. We'll continue to watch that as well.
- [12:30]
Damian Sassour
And Tiffany, what about the size of the Fed's balance sheet? I mean, I know we didn't really get into the thick of it during the testimony, but you know, did you get any takeaways on that and where that's headed?
- [12:40]
Tiffany Wilding
Well, I mean I think there is, I think this is now an open question. So the Fed stopped its so called Q T program, quantitative tightening where it gradually reduces its balance sheet at the end of last year, you know, and as because we saw front end interest rates, overnight rates and things like that, you know, start to start to increase to suggest that, you know, reserves were coming more scarce. But, but ultimately we think they probably, the Federal Reserve probably can further reduce its balance sheet. And the reason, just because you have Michelle Bowman and other bank regulators within her team that are laying the groundwork to try to relax some of the liquidity regulations and liquidity stress tests for banks and how they're implemented and that should result in them effectively hoarding reserves less. And that can mean that the Federal Reserve can drain. So we actually think that the Fed will probably start to reduce its balance sheet again next year as some of these policies sort of reduce bank demand for.
- [13:40]
Tom Keene
Okay, before you go frame up the calendar for me, I got July 29th, which is tomorrow, and then I go to September 16th which is a million years away. October 28th, December 9th. Which meeting is Tiffany Wilding focused on?
- [13:57]
Tiffany Wilding
I mean obviously we're, we're focused on all of the meetings, you know, and I think September, you know, is certainly one to focus on. You know, I think the interesting thing for from Fed speak more recently, Governor Waller in particular, you know, sort of suggested that regardless of the drivers of inflation, you know, whether they're supply or demand related, that if they see one more strong firm inflation print, then they're sort of ready to act. So that suggests to us that even if our view is ultimately right that inflation moderates, you know, if you get one more strong print here, you know, you could certainly see them hiking as early as September, you know. But again, we take a step back. We're not in a 22, a 2022 type of environment and ultimately we think the Federal Reserve isn't on course to hike dramatically here. Maybe a few if they do it. But inflation I think is certainly in a good place and hopefully we'll get more data to that regard moving forward.
- [14:56]
Tom Keene
Really wonderful Tiffany Wilde, thank you so much for the Pimco this morning. Stay with us. More from Bloomberg Surveillance coming up after this.
- [15:06]
Domino's Pizza Announcer
He's dribbling the ball with everything on the line. He's driving down the pitch. He's facing price hikes and cuts past him. Carrier contracts, tries to block him. Oh, he leaves him in the dust. He's at the edge of the box. He cuts past the non stop group chat trash talk. He clears on goal. He shoots no unlimited data for $25 a month forever.
- [15:24]
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- [15:45]
Bank of America Announcer
Mm, yeah, but I'm not itching to go downtown and tell a receptionist I'm here to talk about my downtown. Some things you'd rather type than say out loud.
- [15:56]
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- [16:07]
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- [17:11]
Bloomberg Surveillance Podcast Host
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube in our studios
- [17:25]
Tom Keene
in New York, Simona Makuta joins us with State Street Investment Management, their chief economist. You were in school in Romania, right?
- [17:35]
Simona Makuta
I was, yes.
- [17:35]
Tom Keene
So I got to do an audible here. It's Friday. Get used to it. Okay, when it's. When we talk about the Black Sea, what is the number one misconception Americans get wrong? Stravitas. Admiral Stravitas tells me Romania is arguably the most important territory in Eastern Europe for America.
- [17:54]
Simona Makuta
It is pretty strategic and I think the interest in making that, you know, strategic and strong is coming from both sides because the water up on the
- [18:05]
Tom Keene
Black Sea, the naval bases and all that.
- [18:07]
Damian Sassour
The Danube.
- [18:08]
Simona Makuta
Absolutely. Yep.
- [18:09]
Tom Keene
The Dan. Have you done the Danube tour?
- [18:11]
Damian Sassour
I, I've not done the Danube tour out of Romania. But here's the thing about Romania. I mean yields are pretty high now. I mean they've had to hike pretty, pretty aggressively to offset some of the things that we've seen on the ground there domestically. And real yields in Romania have collapsed. I think they're one of the few now in em that have actually a negative real yield on a two year basis. But we're not going to talk about Romania. Simonia. Let's talk about Japan, let's talk about funding those carry trades and em. Talk to us about the yen. Talk to us about, you know, do you see any potential buying of JGBs by locals, repatriation of all those assets onshore?
- [18:43]
Simona Makuta
You know, that's been the story for so long. We've been talking about this, we've been afraid about this happening and so far it's been a very slow moving kind of animal here. Right. And I think it will continue to be that incrementally. Yes. Because obviously you look at Japanese yields being at the levels not seen in a very, very long time. There is an attraction there. But you know, these things don't happen overnight.
- [19:09]
Damian Sassour
No, they don't. But I mean I. Look, I'm just. Tom, I don't know if you caught this. The latest tick date out of the U.S. i mean the foreign bid, specifically the bid out of Japan, has collapsed. Not collapsed, but it's gone down pretty, pretty, pretty significantly. And so, you know, these are the things that I get concerned about. Right. Who's going to be buying all this debt, all this issuance, all this coupon, you know, issuance that we're expected to see from the U.S. treasury. And so when I ask about, you know, the Fed's balance sheet, that's the place that I think most investors myself and I are looking for if there's going to be a Black Swan event. Would you agree with that?
- [19:38]
Simona Makuta
I don't expect that. I mean the concerns are valid, right? You look around the world and tell me, where do you see a fiscal picture that actually looks good? Maybe Germany. And there you argue it's almost the opposite, where it's almost too good for their own benefit. Right. It's a problem across the board. It's something that I think incrementally we. The prices get squeezed and the pen gets intensified, but it's gonna take a while. And you know, one of the biggest lessons I learned when I came to State Street, I'm an economist, right? I don't manage money, but I'm surrounded by all these people who do. We have 6 trillion under management. Lots of people who manage money there. One of the best lessons I learned from a colleague was when I was told, simona, I cannot hate everything. Right? You have to own something. And in the realm of things, State
- [20:28]
Tom Keene
street law in Japan, because they're going to get their act together.
- [20:32]
Simona Makuta
I wouldn't say so. I would say the view is that the US dollar as a whole is in a multi year depreciation cycle. And that comes from a number of places, including fixed income allocations.
- [20:46]
Tom Keene
I don't see that.
- [20:48]
Simona Makuta
Well, no. And that's the irony of it, right? Sometimes you're the trigger of the geopolitical risk event, and yet you are the safe asset. So that's a reminder though, that these things, there is value in what the US dollar offers. So incrementally it can shift in a direction, but it's going to be a slow process.
- [21:06]
Tom Keene
I got to ask this. Can I do an auto Friday? Okay. You went to graduate school in a place with two of the most spiritual libraries in America. It's Suffolk in Boston, the Moakley Law Library, and There's also the 9th Floor Study Lounge just down Tremont Street. Did you study in those libraries? Yes, I, I literally studied for half the CFA between BU and there. But they're the, the folks in Boston. It's Suffolk University in Tremont. They have built modern architecture in the old street. These spectacularly gorgeous libraries. Nobody knows about them.
- [21:43]
Simona Makuta
Yeah, no, they are beautiful. And it's like the location is amazing, right? Like I, I always say, like, oh my God, I'm walking on history with
- [21:52]
Tom Keene
all this history brings you back to Bucharest. You're with all this history in the Athenaeum there, and you're trying to study Friedrich Hayek out of LSE over to Chicago, because that's what Simona and I did. And then there's a damn sunset in your way, you know, across the pond. And so this is great. Can you come back again? Oh, once a decade?
- [22:12]
Simona Makuta
Not that far.
- [22:13]
Tom Keene
You know Simona Makata on Romania, Her Romanian also all of her effort at State Street Investment Management as well Simona Makoto, their chief economist. Stay with us. More from Bloomberg Surveillance coming up after this.
- [22:30]
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- [22:57]
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- [23:01]
Amazon Health AI Narrator
Amazon Health AI presents Painful Thoughts I
- [23:07]
Bank of America Announcer
I can't stop scratching my downtown. Yeah, but I'm not itching to go downtown and tell a receptionist I'm here to talk about my downtown. Some things you'd rather type than say out loud.
- [23:20]
Amazon Health AI Narrator
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- [23:32]
HeroBread Announcer
Bite into a stacked sandwich made with herobread or a fully loaded bagel and the only thing you'll think is delicious. You won't think it's up to 19 grams of protein, but it is. You wouldn't believe it has 11 to 32 grams of fiber, but it does. Herobread makes loaves, buns, tortillas, bagels and noodles packed with taste but without all the net carbs. We're talking 0 to 5 grams net carbs per serving. With Herobread there are no compromises, just flavor. There's none of the stiff baked goods you expect from better for you brands. There's just the soft, fluffy bread you crave, plus small batch drops of indulgent favorites like the popular 2 gram net carb Hero croissant and the 3 gram net carb Hero pan au chocolat. And right now, Herobred is offering 10% off your order. Go to Hero Co and use code IHEART at checkout. That's code IHEARTRO. All figures per serving of HeroBred. See Nutrition Facts on Hero Co.
- [24:35]
Bloomberg Surveillance Podcast Host
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [24:48]
Tom Keene
And it's a good time to talk to David Katz, President, CIO Matrix Asset Advisors, because he says there's no fog to Comcast it's the one to buy. David, Top your list is CMC sa. Discuss.
- [25:02]
David Katz
Basically the company has been under some very negative trends for the last few years in terms of subscribers. Management is doing everything that it can to try to maximize or enhan shareholder value. They're going to be splitting the company up in the next 12 to 18 months. We think the two pieces are worth well above what the combined entity is worth. We think the stock is easily worth in the mid-30s. You're getting it at 24, you get a very good dividend while you wait and you have a very motivated and very competent management team to enhance shareholder value. And stocks at about seven and a half to eight times earnings. So it's just dirt cheap, right?
- [25:37]
Tom Keene
Link that over then to Netflix. I mean Mr. Roberts has taken a different path, hasn't he?
- [25:43]
David Katz
Netflix has been a great company. They've really done well. They were the, you know, in terms of subscriber growth and in terms of revenue growth. And in light of the problems that they're having, the stock is now down to about 16 and a half to 17 times next year's earnings. So it's on our radar. We think it's still a little bit early but at this price you're getting a lot of the negatives in it. We think if you have a 18 month time horizon probably is going to be okay. We're not ready to step in here.
- [26:10]
Tom Keene
Geetha Raghanathan with us in a few moments here on Netflix. David Katz of Matrix Asset Advisors with Damian Sassour.
- [26:17]
Damian Sassour
David, I know you think it's going to be a pretty healthy earnings seasons but you're also expecting significant volatility. Talk to us about that. I mean is that a little bit of a taste I guess this week in terms of what we can expect for the balance of of July and August?
- [26:30]
David Katz
We think it is. We think that the numbers are going to by and large come through good. But you're seeing stock price moves of 3 to 7%. If the market thinks it's a little bit better than expected or a little bit worse than expected. HCA preannounced, IBM preannounced. Those stocks got taken out shot. The flip side is Abbott said business wasn't as bad as people had expected and their outlook was a little bit better than expected and the stock was up about 5 or 6%. So unless you have a great conviction about what a company is going to do before they report earnings, we would not step in front of any companies this earnings season. Assess what's happened afterwards Take a longer term perspective but we wouldn't try to trade around or trade before earnings.
- [27:12]
Damian Sassour
What do you think about tech here? I mean is this really a great rotation out of AI related stocks? Is there any legs to this?
- [27:17]
Tom Keene
Is this just a thank you Because Apple's hitting a record high when the rest of tech is flat on its back, right?
- [27:24]
Damian Sassour
I mean is this broad based in nature? I mean or is as you rightly point out, is this just a little bit of bloodletting, a little bit of momentum?
- [27:30]
David Katz
Well what's happened this year is the hyperscalers, the Max 7 which had a great year last year had a horrible six month period and actually were down 3 to 7%. Companies like Microsoft and Google and Amazon, Amazon and Metta. The flip side is semiconductor companies basically melted up. It was actually the best quarter for semiconductor companies in the second quarter ever. So basically after these huge gains the stocks are giving back some. Our expectation for the year is a lot of rotations. So you're getting rotations into semis, out of semis, into the Hyperscalers in the Mac 7. Expect that to continue. We think the best way to approach this market is take a longer term view. If you like semis and they just sold off 25% you could add into that weakness. We actually think that the Mag 7, many of them, the hyperscalers are going to have a very good back half of the year. So we had been buying into that weakness. Then there are other sectors that you know, the consumer staples has done poorly, health care had done poorly. We'd be buying a number of companies there because we think when the market falls out of love with tech it's going to put that money elsewhere.
- [28:37]
Tom Keene
Damian, one more.
- [28:37]
Damian Sassour
Yeah, I mean look, with equities near record levels, David, I mean you know market breadth has actually turned negative here, right? I mean we've seen a lot of stocks making more new low lows, the new highs. We've seen a lot of members trading, you know, below their 15200 day DMAs. I mean talk to us a little bit about you know, technicals here.
- [28:53]
David Katz
Well we're fundamental shop so we can't get great insight into technicals but on a fundamental basis we think the market is fully priced. But there are many, many pockets of undervalued stocks and we think the key is to buy those undervalued stocks with a good long term perspective. Get a lot of consumer staples like Pepsi announced earnings, they were, were a little bit light in terms of their outlook but it's at 16 and a half times earnings with a 4% yield. Put money and things like that, you're going to do very well in the next 12 months.
- [29:22]
Tom Keene
David Katz, thank you so much. Matrix Asset Advisors this is the Bloomberg
- [29:26]
Bloomberg Surveillance Podcast Host
Surveillance Podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.
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