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I'm Hannah Frey and as we rely more and more on artificial intelligence in every facet of our lives and businesses, I'm on a mission to find out how we can build the Internet that AI needs. Learn more later in the podcast.
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There are two kinds of people in the world. People who think about climate change and people who are doing something about it. On the Zero podcast we talk to both kinds of people. People you've heard of, like Bill Gates. I'm looking at what the world has to do to get to zero, not using climate as a moral crusade and the creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Rati. Listen to Zero every Thursday from Bloomberg Podcasts on Apple, Spotify or anywhere else you get your podcasts.
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Bloomberg Audio Studios Podcasts Radio News this is Masters in Business with Barry Ritholtz on Bloomberg Radio.
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B
I'm Barry Ritholtz on the latest Masters in Business podcast. Another banger I have Binky Chadha. He's chief US Strategist for Deutsche Bank Securities. Fascinating career and approach to looking at markets. He's an economist, but essentially operates as a market strategist. He's been fairly constructive where he's supposed to be started the year 2025 with the 7,000 target on the S&P 500 brings in a lot of different fact factors that makes his work so interesting at Deutsche Bank Securities. Not just economics, but FX equities, global perspective focused on US Equities. I thought this conversation was absolutely fascinating and I think you will also. With no further ado, my interview of Deutsche Bank Securities. Binky Chadha. Binky Chadha, welcome to Bloomberg.
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C
Thank you.
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B
So I have been looking forward to this conversation for a long time, primarily because so many people, when I ask them who their mentors are, reference you. So you have a lot of influence throughout the street.
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C
That's very kind.
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B
We'll come back to that a little later. Let's start with your career. You get a bachelor's in mathematics and computer science from Denison and then a PhD in philosophy focused on economics from Columbia. Is that right?
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C
A PhD in economics.
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B
So what was the career plan?
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C
The career plan was to get a PhD in economics and study development economics and alleviate poverty and help the world. I went to graduate school. And graduate school kind of wrings that out of you. Exactly.
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B
There's a whole lot of debt. Go do some well somewhere.
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C
Well, I mean I think that development economics is sort of builds on, is not necessarily core. You Know, core is micro and macro. And I ended up basically studying macro and then went to basically work at the International Monetary fund in Washington D.C.
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B
First job right out of school. You were there for a while?
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C
17, 17 years.
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B
So what were the various positions you had? I saw division chief of the euro area and global markets.
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C
Yeah, I do it in chronological order. So I started basically in the. So the IMF has a grad program just like any investment bank. It's called the Economist program. And my second assignment was in research and I stayed in research for the next few years. It was the heyday of the IMF's research department under Jacob Frankel and then Michael Moussa and we had all the world's leading researchers visiting the imf. And then the Iron Curtain came down and the IMF suddenly had 30 new member countries and we all got pulled working on various aspects of that. So I worked on Bulgaria pretty much full time for, for a year.
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B
So. So you're at IMF for almost two decades. How did that experience shape your view about the economy and markets both domestically and internationally?
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C
Yeah, so you know, I started in the research department, but I went from there to the Asian department. And even while in the research department, like my participation in Bulgaria, we always, or at least I always, you was eager to participate in the IMF's bread and butter work, which is really country work. So I remember going to Singapore in my very early days. Singapore is, you know, obviously a small country, but because it's a small country has issues, especially from a development strategy point of view, that are sort of key. You remember in the 1970s we used to talk about the Knicks, you know, so I mean I could talk for quite a while about Singapore, but Singapore started in the early 1970s with a 10, 12% unemployment rate, had low wage export led growth model. By 1979, unemployment was 2%. Both had been strong. And because of the peculiarities and the politics of Singapore, it's ethnic Chinese that moved, moved out of Malaysia to have an independent country. When you want to grow rapidly but you only have 2% unemployment, you would end up sort of violating the principle when you reform because you would need basically lots of imported labor from Malaysia and Indonesia.
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B
So a wild success story though. Singapore's economy has done really well, hasn't it?
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C
So it has because they made a very, very concerted push at the time to move basically towards higher value added activities. And the first paper I ever wrote on a country was really Singapore. And it's about Singapore's high wage policy. They announced an increase in real labor costs or wages. It's also sort of the retirement plan of in 1979 to work through the system over the next three years. And it was wildly successful in basically, you know, turning the economy into sort of a much higher value added growth part. I mean the finance was some of it, but it was, you know, the focus was more on sort of high tech manufacturing.
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B
So today you're overseeing asset allocation primarily for US based investments investors for Deutsche Bank. I know you're global also.
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C
Yes, that is true my focus partly because I'm here and partly because the US is the most important and biggest driver. I've been our equity strategist in two different stints over periods. So I actually spent most of my time basically on US equities I would say.
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B
So how do the lessons from Singapore and Bulgaria or just global perspectives via the imf, how does that translate into making better asset allocation decisions for U.S. investors?
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C
I think those experiences are basically, you know, things that sort of inform you about the bigger picture and forces that are ongoing that, you know, one may not sort of see day to day. Certainly not day to day, but week to week, but sort of, you know, explains the direction in which things are going. And I think Singapore is sort of a good example for, I mean we started talking about development economics which was. But it's about growth economics and development economics and sort of like, you know, does policy really have a rule, a role or should we just let the free markets keep going?
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B
Really, really interesting. So after 17 years at the IMF, what led you to Deutsche bank in 04?
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C
So the IMF does not historically never really spoke about exchange rates because it's a market sens variable. That was the thinking at the time. But that didn't mean that the IMF didn't spend a lot of energy working on effects. We had an internal group that, you know, some people in the market knew and basically because we used to have a dialogue with the markets, there was an opening basically in effects because the strategist had been around for quite a while. He had moved on or retired basically. And so they asked me because they Deutsche bank at the time. So the strategist that I'm referring to, his name is Mike Rosenberg. He really did affect from a top down macro point of view and it's hard to find people like that. But I was at the imf, I was trained as an economist and I had done plenty of work on fx.
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B
So given all your background, background in economics, currency development, how do you end up eventually, as an equity strategist for Deutsche bank, because that seems like it's adjacent to economic and economists.
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C
So for a few years, last few years at the imf, I was actually part of a small group that was responsible for developing and maintaining basically a dialogue with the markets. I used to report to Stan Stanley Fisher, who said he was tired of reading in the newspaper on the way to work that another country had gone under and somebody should be having a dialogue at the time.
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B
Where was Fischer?
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C
It was Stanley Fischer. He was the first deputy managing director of the IMF in the late 90s, which is. So this is soon after the Asian financial crisis. And then sort of, you could argue that the dominoes continued for the next few.
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B
When you reported to Stanley Fisher, was he at IMF or had he gone elsewhere?
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C
He was at the imf. He was the first deputy managing director, which would be the counterpart of being the CEO as opposed to being the president of the imf. So he ran the IMF intellectually and otherwise. And it was a small group of us that basically was a financial markets dialogue with an open license to go out there and tell us about any and everything that you think that matters.
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B
So how do you transition from head of foreign exchange research to U.S. chief U.S. equity strategist?
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C
Yeah, so what I was going to say on that was simply that, you know, I came to do FX strategy and research, but I really wanted to do things more sort of close to the markets. And there was a simple practical issue, which is if you want to be near the markets, the center of liquidity was really 7 8am to 8am London time. And so you either live in London or, you know, you find a US asset class. So I found US Equity. So gotcha.
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B
As opposed to covering FX in London, you did equity in the States.
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C
Yes, in the middle of the night.
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B
So since we're talking about both equity and foreign exchange, you've said we have favorable investor positioning, a stable dollar investor, animal spirits, and robust buyback activity, lots of M and A activity going on, and high business confidence. That sounds like a fairly bullish set of factors.
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C
It is a very bullish set of factors. What I would point out is that, you know, equities historically are really about the business cycle. And that's why people wrote pieces that are well known on Wall Street. They are from some time ago that, you know, getting at what drives the cycle. And once upon a time, the US business cycle was just really the housing cycle. There's a very famous paper with that title. And, you know, if you fast forward from there basically to today. We have a very, very, very peculiar cycle is the way I would put it. We've had for the last two, almost three years now essentially full employment in the labor market. And what is at odds with the traditional cycle is that when unemployment is low, you're typically at the end of the cycle and growth tends to be low. But for the last two to three years, what we've had is 4% approximately unemployment. But GDP growth, especially underlying GDP growth ranked pretty steady at 3%, showing some signs of going even higher, basically. And what I would say is historically that is very, very rare. It's happened only 6% of the time. If you do things on a quarterly basis, 6% of the time since World War II. And it's no secret when those two times were. One was in the 1960s, where I would argue basically that's really the takeoff, that's really the post World War recovery with a big lag because people didn't know in the 50s what exact. Because you could only extrapolate the great, you know, the Great Depression and World War II. So it took a while. But the 60s is really the post World War II recovery. And the second time that happened is more recently, and everybody is reminded of that now is the second half of the 1990s. But it goes without saying that both of those periods, like the current period, have been very good basically for equity markets. So when you have a job but growth is strong, risk appetite is going to be high. I think that's not surprising. And that's kind of almost exactly where we are.
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B
So you mentioned the 60s, you mentioned the 90s. I have to ask you about the 2020s, which on the one hand, and we'll circle back to housing. I'm fascinated by that. But this feels like a little bit of a, to use your word, peculiar cycle because during the pandemic we had the biggest, after 15 years of more or less of monetary driven stimulus, we had the single biggest fiscal stimulus, at least as a percentage of GDP since World War II. Are we seeing that boom? That boom let I don't know what to call it on a bit of a lag or has it hit the economy and is beginning to fade?
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C
From what I look at my reading would be that this has been going on for a while. It's been going on basically through a variety of policies. And so I don't think it's really coming from the policies. I might even go far enough to say that it's happening despite the policies because we had a massive hiccup this year and it has to do so, you know, one of the things about a cycle and how vulnerable or strong it is has to do with basically, you know, household and corporate balance sheets. Right. And so in sort of a peculiar way, we are blessed in my view because of the global financial crisis which created huge deleveraging on the household side. And then we had Covid and you needed to have your balance sheets right. If you were a company and you needed to basically get used to dealing with, with new shocks. And arguably we got another one today. So. But what I would argue this resilience is partly a blessing. Of the two large shocks that we.
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B
Already had and long before COVID most of corporate America had refinanced all their long term debt very favorably. So heading into this, both households and companies pretty well situated.
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C
Exactly. I would agree completely. And they remain. So I would say right now, outside of a few pockets, you don't really see any signs of excess. So there's every reason to believe that it continues. And if you start by looking just at near term economic forecasts as one idea, basically everybody has a pickup in.
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B
Growth next year based on either Fed cuts or. We'll talk about the policy issues coming up later. What I wanted to ask you about, you mentioned housing is such a key factor in cycles. Is it a leading factor or is it a benefit of a positive business cycle? Because a lot of people kind of grew up in the 2000s, which felt very backwards. Right. The first time we had ultra low rates in a few generations. And so all the refinance and heloc, home equity loan withdrawals, all that stuff felt like it was the real estate was driving the economy as opposed to the economy benefiting real estate.
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C
Right. So what I would point out is that the housing market today is a much smaller part of the US economy than it used to be. So if you go back to the 70s, you know, we're talking 6, 7, 8% of GDP is housing today it's like more like 2%. I apologize that I don't know the exact decimal point, but it's a fraction.
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B
Of what it was.
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C
It's a fraction of what it was. And so it's, I mean, and we were just talking about 3% GDP growth for the last two, two and a half years. And housing has been in the doldrums for quite a while.
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B
We've been under building single family homes since the financial crisis. So it's not a big contributor there. What are we doing 750 800.
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C
What is very peculiar about this cycle is that you know, so there's this very important fact when you think about the 3% or 3% plus GDP growth number is that actually and equities about cyclicality and cyclical variation. So recessions are big events and recoveries are big events. But what I think is easily missed is that 2/3 of the US economy is actually stable growth economy. It's like the old days of consumer staples earnings where every company analyst in the room would get mad when I would say you don't need an analyst to tell you, you just to need a ruler as to what their earnings are going to be because it was so predictable. In the same vein, 2/3 of US GDP is really stable growth GDP. Now it's not rip roaring growth but it's to you know, 2% growth. What the cycle comes from the cyclical parts basically and that's a little bit over 20% of GDP. So it's not really that huge. But all the cyclicality really comes from there and when it gets going it's very powerful. And if you think about what is the cyclical parts I can go further. Basically it would be number one is consumer durables, number two is corporate capex, number three is housing and number four is structures. And so what is extremely unusual about this recovery from my point of view is that stable growth is doing what it's always doing. There's mostly services. It's really that if you look at the cyclical part of US gdp, yes it's growing, growing but it's at the bottom of the channel basically. So it actually has a lot of room to move to the upside like then 15% I'm saying does that include.
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B
All of the tech investments in AI and data centers that seem to be just full on booming?
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C
Yeah, so, so the tech investment wouldn't be in here. I mean if you look at CapEx, if you take out the AI part it's on the soft side but so you can take, as I always say, you can take a bearish view on that which is it's all coming from this one part or you can take a bullish part that the other part's going to start to happen. And here what I would say is that it's hard to put your finger on exactly what the issue is but there's a lot of overlaps in the different aspects of what's going on. So I just gave you the list of the four parts that are not doing great.
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B
All of which seems, seems to be somewhat Interest rate sensitive. And I know you're looking for a few more cuts over the next year or so.
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C
Sure, could.
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B
Is that what's going to light the next leg? Start the next leg moving higher?
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C
I mean, I think interest rates are important for housing and durables.
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B
Right. By a house, you fill it with furniture and appliances and a car.
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C
Sure. But what I would say is I don't think that interest rates are absolutely the key because Capex, we were just talking about that a little bit earlier about corporate balance sheets since the 1970s. What corporate America learned is that you don't spend beyond your means. I would say most Capex, especially for S&P 500 companies, is coming from internally generated cash flow. And if you look basically at the three uses of cash flow, you know, dividends, Capex and buybacks, and you take their total spending relative to their total cash flow, it's been this side of 100% forever, which sounds, sounds pretty reasonable. Exactly. And so I don't think that the interest rate is going to make play such a big deal for corporates. You could even argue. I mean, for a long time it was like if interest rates go up after the global financial crisis, corporates are going to get killed. It was the reverse and their earnings went up.
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B
Just a Wall Street Journal column. Why, why are corporate bonds on fire? Because they seem like such a safe bet bet.
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C
That is exactly right. And there's been, you know, market mechanisms that have in many cases actually improved the credit quality. So when we look at indices, you want to be careful because they're not controlling for the historical credit quality. I mean, S&P 500 is different because it's about earnings and your earnings power. But in terms of credit quality, you know, a lot of the indices, I mean the current composition is better than it used to be. Now we are at a certain stage in the cycle, so we've had two and a half years basically of, you know, a fully employed labor force and strong growth. But there's been, if you think about those two and a half years, 2023 is, you know, everybody's waiting for a recession, right. And this never came. I call that period the rolling Vs. And we are kind of going through a similar version of the same thing right now.
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B
Meaning rolling decreases sectoral recessions that quickly.
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C
So actually what I mean, I call it, when I say the rolling Vs, what I mean is that basically if you look back to late 2022 and you looked at the forward forecast that was in the macro consensus, it was growth is here, growth Next quarter is going to be lower in two quarters we'll be in a recession and then of course we'll have a recovery. And so if you look at four or five. So when the recession didn't come, what the macro consensus did is simply roll it forward. They said no, we are right, just wrong on time, climate. And then when that didn't happen, we went and rolled it forward. And I mean I have this chart, it's a little old now but on the same chart as you see the rolling Vs, you look at the actual data when it came in and there is, you know, we are like way above, closer to 3% than people are forecasting a recession.
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B
And those recession forecasts, we heard those in 21, 22, 23, like if they kept doubling down and got it wrong.
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C
Yeah. So it's 2023 and then the early part of 2024. So Deutsche bank was, and I don't mean to single out our economists here, but excellent. But they were some of the earliest on the street of a recession is going to happen down the road. They didn't give up their recession call I believe till the first quarter of 2024. And so from a company point of view, if you were listening to companies and you know, analysts ask on earnings calls, why aren't you spending? They're like, no, there is a recession coming and the recession is coming. So all through 2023, corporate America just.
- [25:38]
B
Waited for the recession that never came really quite fast.
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C
Early 24 and they began to wait for the election. We had the election. Everybody got very, very optimistic, very, very constructive. We got Liberation Day. I think where we are now is those two years basically of waiting created pent up demand is a shortcut way of saying what I'm trying to get at and has also, you know, led to the approach or strategy, if you want to call it that, that we just need to deal with it and get on with it and we're not waiting anymore. And so we are where we are, where we're having this strong growth but it's really the cyclical bonds of the U.S. you know, are either erratic and noisy or at the bottom of the channel. So not exactly depressed and falling out of the channel or going into recession, but growing very modestly. That is the, basically the challenge that it creates for equity strategy or investment.
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B
Really, really, really fascinating. Coming up, we continue our conversation with Binky Chadha, chief US Equity and global strategist and head of asset allocation at Deutsche bank securities, talking about his role at Deutsche Bank. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.
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As our use of AI expands, how do we make sure it doesn't end up breaking the Internet? I'm Hannah Fry, host of the Exponential Era, a series that explores the real world impact of future network technology. And I sat down with two experts to discover how we can support the massive connectivity needs of AI. Find out what I learned@Bloomberg.com Nokia.
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B
I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My ext special guest today is Binky Chadha. He's chief US Equity and global strategist as well as head of asset allocation at Deutsche Bank. Although he's here in the US and has a lot of US clients, he is also a globetrotter and travels around the world, Europe, Asia and elsewhere advising clients of Deutsche Bank. So before we get into what's going on today in more detail, I want to talk a little bit about your role at Deutsche bank. You've led U.S. equity and global strategy for a couple of decades now. How has your team, how has the team's process evolved? What do you think of in terms of tools and quantitative analysis as well as a broad global macro overview? What drives your decision making? Sure.
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C
I mean at the simplest level it's to figure out where the equity market is going to go.
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B
That's all I need to do. Once you figure that out, you're golden.
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C
We're pretty humble about that pursuit, but I would say that is the number one objective and pursuit. And what we do is basically we have developed over time basically a whole set of frameworks. They're not all, I mean they're meant to be non overlapping frameworks.
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B
Quantitative or qualitative. Are they all models or is there.
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C
Some are quantitative frameworks? You could call some of them models. So I would say the most important thing for equities in again my very humble opinion is what's happening with earnings. And so you need to have a good framework basically for earnings if you could get earnings, right? I mean, and you need to do that well in advance of the actual delivery. You know, you will know what the markets are going to do basically. So what we did and we revisit, revise, revamp, redo, throw out whatever you want to call it. But at the moment, basically what we have is we take a whole group of stocks and sectors, we divide it up our way. So there's mega cap growth in tech, I mean, and that, you know, needs to include Visa and MasterCard. Because it's. They're not tech companies but they behave very, very similarly in terms of their revenue streams. So you can think about it as basically a trend and cycle framework for each of the groups. And the question that the trend is what has basically been prevailing for quite a while and then the question is what drives the cycle in those. So if we take mega cap growth in tech, for example, you would have the US dollar and for some parts you could be looking basically for very specific things that matter which you're not going to pick up. So for example, for material, because of the way U.S. materials is structured into two parts. For chemicals you need basically a chemicals deflator which is not something that most people tend to look at. So there's idiosyncratic. But it's cycle and trend. And what drives basically the cycle it would be ISM manufacturing, the US dollar. ISM manufacturing is an interesting one because that's historically the one thing that explained S&P 500 earnings things extremely well. And that's kind of like all you needed to know.
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B
Still today, does it still have that?
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C
Basically for the last three years it hasn't been the case. And why? It's simply because of mega cap growth in tech. If you take the S&P 500, you break up its earnings into mega cap growth in tech and everyone else, you'll see that everyone else is still currently aligned with the ISM manufacturing. ISM manufacturing has been in a funk for, for three plus years now. And so we haven't had growth. So I kind of hinted earlier you can look at the current sort of context in a bearish way. That is all the growth is coming from 90% of S&P 500 earnings growth has come from mega gap growth in tech. Or you could take the view going forward that everybody else is going to recover. That's the camp that we are in.
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B
Because that everyone else will be catching up to tech events.
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C
Exactly. Unless their earnings are completely clearly aligned with the ISM manufacturing in the US ISM manufacturing is basically. And that's historically the case for the entire index is earnings. We've been in a funk for three plus years. We've been. ISM manufacturing has been between 46 and 50. So you know, it's something that we've never seen historically. So if you ask why are we sitting here? Well, first thing to note is that if you know things that were bad then we should have been going down. We shouldn't be sitting, sitting in mildly contractionary.
- [32:53]
B
50 is the dividing point above 50.
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C
Is the dividing point. But I mean, I think the fair or I mean, conceptually it's the. Intellectually it's meant to be the dividing point. But this is still slightly positive growth, even below 50. To get to negative growth, you have to go quite a bit lower. And I would argue in the first instance, it was basically just the hangover from the pandemic. So you remember that as we came out, you know, we had basically the massive spending on goods and that in some way involves manufacturing. And then we had basically the slowdown.
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B
In the rotation reminds me a little bit of what took place in the run up to Y2K in 2000. You had all this tech spending pulled forward and then it was soft for a year or two.
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C
Right, right. And it's been followed basically by a whole set of things. Number two. So on the hangover, I would say you. I don't think a hangover has killed anybody. So a hangover is holding time, basically, and it would naturally, basically, you know, pass. But then in early 2022, we got the Russian invasion of Ukraine. We had $120 oil. And if you look at oil prices today, what we've had is basically we've gone from 120 to in round numbers, 60. But it's taken three years to get there. And what the three years to get it means is that energy earnings on a year, on year basis have been negative, basically, or contracting for three years now. The good news is that we are much closer now to basically what I would think of as fair value for oil prices. That's actually a little bit higher. It's not a tradable difference right now, but fair value is probably $64 or $65. And so, you know, this drag should basically stop soon, even though for the third quarter we are still looking for 15% down. So energy in. Energy in energy earnings, just mostly oil prices and energy vertical is important basically for various parts of manufacturing. Then we have basically idiosyncratic issues in autos and Chinese autos in particular. And of course, last but not least, we have the tariffs this year, which impacts manufacturing.
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B
We're going to talk more about tariffs shortly. I'm kind of fascinated because I'm hearing in your laying out where we are today a lot of different voices. And at a shop like Deutsche bank securities, you have to have so many different perspectives, opinions from different quarters, from the economists, from the FX traders, from every everybody. How do you navigate and organize all of these different perspectives, some of which may be in conflict with others.
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C
Sure. I wouldn't describe it as conflict. I mean, we are encouraged to have our own different views, a broad dispersion of views.
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B
Is that a fair bitter?
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C
Absolutely. So what I was always told by our head of research, David Fogarts Landau, so if I ask you at the end of the year, why did you get Your S&P 500 call wrong, you're not to tell me that the economist was bearish.
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B
Right? That doesn't work.
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C
So you are responsible for everything that goes into your view. And so we discuss and debate. So as far as the research aspect of it is concerned, in terms of the strategists across all asset classes and economists, we have a regular meeting. We just had one this morning actually.
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B
So let me ask you a question. You mentioned isc, what leading indicators do you put the most amount of weight on? And what indicators do you think aren't all that important for forecasting the economic and or market cycle?
- [36:54]
C
So we always start with our economists forecast and we always ask the question of does this make sense to us? Does this make sense to, you know, the way various economic data are behaving? So I mean, if you think about the US and 2023, when everybody's calling for a recession, there was this annoying fact which was if you simply said, okay, I just landed here, so, okay, we're talking about the US potentially going into a recession. Let me start by looking at GDP and you would find that near 70% of US GDP in real terms comes from personal consumption spending. Everybody knows that. So why don't we just draw a chart of it? Because I come from a relatively volatile asset class. I don't do it in growth rate terms. I just plot the level. You rather take logs. Because we all know why we should take logs. And then I draw channels around it. If you look at real personal consumption spending in the US for the five years before the pandemic, we, we are in this tight channel growing steadily at 2.5% a year, pandemic collapse, recovery of PCE back magically into exactly the same channel magically. So this is 21, and the same applies during 22. And the Fed is hiking aggressively and personal spending just continues in the middle of the channel. And it was almost like there's nothing to see here, right?
- [38:31]
B
Well, we had three, three handle on unemployment. Wages were actually rising as fast, almost as fast as inflation. Other than that 9% peak, why wouldn't the economy and market do well? And he says with perfect hindsight.
- [38:47]
C
To fast forward to this morning, where is bce? It's right in the middle of the channel. I would say if you, you know, there is a couple of different variations of looking at it and in the headline numbers actually at the top of the channel and mo. And you know, we did have some slowing in the first quarter, but it was at the risk of going way out of the channel and it just sort of moderated and went flat. And since it got back to the channel, so it's the same thing.
- [39:17]
B
And that's why NPC is important, because that's a key indicator.
- [39:20]
C
The Fed looks like the US gdp. Yeah, right, Absolutely.
- [39:24]
B
I think that's Jerome Powell's favorite data point.
- [39:27]
C
Yeah. So he focuses more on the inflation in there. So I'm talking about really the real volume or that the measure that we have, which is in real terms, I'm just saying if that's 70% of GDP and that's growing steadily and it's been doing we in the same place that we've been in for 10 years, growing in at what I would describe as a 2 1/2% trend rate.
- [39:50]
B
So that sounds pretty bullish. I'm going to ask you in a little bit about cautious issues and risk. We'll circle back to that. But given the relative strength of the US over the past 10 to 15 years and the fact that you've just gotten back from Asia and Europe before that, how do you look at the rest of the global economy? What's happening in Asia, what's happening in developed ex US Europe and elsewhere.
- [40:17]
C
Absolutely. So, you know, there's a chart that I'm going to draw for you or really two charts. And what I would say I kind of already described the US chart, which is a steady trend channel growth of 2.5% before the pandemic, steady 2.5% growth since then. If you look at the rest of the world, the trend rates are different. So if you use Europe as an example, but the same applies basically to various other regions. We were growing steadily before the pandemic at sort of a 2% rate. Then we have the pandemic collapse and just like the US recovering back basically to the trend line. But that was in the first quarter of 2022. So it is really Russia, Ukraine that then basically arrested that recovery back the trend and basically activity in Europe, you know, it's essentially gone sideways ways to very slightly up in the decimal points, I would say. And so there's a very large gap basically relative to trend. And so what I would argue is that there was nothing exceptional happening in the US in absolute terms it was really in relative terms because the rest of the world wasn't really growing. I'm using Europe as an example, China, Japan, slightly different, but I think the European example is sort of key. And, and so if you think about things like, and the US dollar, US dollar typically does long multi year cycles. We were sitting at the top of the band for three years. So I think about it as a multi year trade or trend. Basically waiting for a catalyst. And waiting for the catalyst is just, is the rest of the world going to start to grow? And in the case of Europe, you know what we had basically, so we went long European equities on the first Monday of the year. All the credit goes to my colleague, European equity strategist Max o'. Leary.
- [42:27]
B
That's a great, great call.
- [42:30]
C
It was just the view that everybody was short Europe, everybody's going to cover their shorts, or at least some people are going to cover their shorts. Going into the election, given the plan platforms, which they began to do and after they covered their shorts, it became a question of, you know, from a fundamental point of view, you know, is this going to happen now in terms of policies is going to happen. So if you look back for the last few years, you know, as a policymaker, you want to do something about this, but maybe that shock was already gone and you would start growing anyway. And so now you have that plus a whole set of additional incentives to basically to spend infrastructure. Then there's the defense issue. So I would argue it happens.
- [43:22]
B
And is this early days in the resurrection of European equities or is this a one year, one time?
- [43:32]
C
It depends on whether you believe the growth will happen, happen and sustain. I'm in that camp. So I would argue it's still very early days. And so we are actually, from a positioning point of view, we overweight the US which is what we've been talking about. But we're also overweight Europe and overweight Europe not because I'm expecting it to match the US in performance through Europe.
- [43:53]
B
Just doing so much better than it used to.
- [43:55]
C
But I think it's important to keep in mind that so far we have very little evidence that Europe is actually growing. And if anything, over the last few weeks the data has kind of disappointed. It doesn't negate what is likely to come. And then you look at the Euro, I mean, you know, getting disappointment. We moved up because Europe might grow and you know, it hasn't. But you know, we have trouble getting below 116. So the market is, you know, very much, I would Say, you know, concerned that the growth actually happens. So I'm staying overweight because there you have to get in before it happens. And given the gap basically in the level of activity, in the level of earnings relative to trend lines, you know, you could gap up at some point really. And so it's not just about tomorrow's earnings numbers. So we start getting positive growth news out of Europe while bets are off at that point. Exactly at that point it's already. Half of it's already happened.
- [45:06]
B
Wow. So let's talk a little bit about U.S. economic growth. We earlier discussed Asia and Europe. You have said we have resilient corporate earnings with forecasts that are in the low double digits, robust risk appetite and major buybacks that are likely to rise as earnings rise. What's not to like about the US Market?
- [45:35]
C
Not too much, I would say. I think that, you know, going back to what I said earlier, 2023, we're waiting for the recession, 2024, waiting for the election. There's a lot basically of demand, pent up demand that for a variety of activities.
- [45:54]
B
You're talking pre 2020, November 2024. So the prior year. Year.
- [45:58]
C
Right. But what I'm saying is that while you know, the backdrop and the context has been very good, it's been very strong. It hasn't really been. There hasn't really been buy into it because there's been something massive to worry about like a recession in 23. And so I would argue after the Liberation Day shock. So I would say around the election last year there was a lot of buy in to a very optimistic take. So we spend. One of our frameworks that we spend a lot of energy on is our equity positioning framework. And if you look at where we are today, and that's what I'm saying, there's limited buy in is my positioning measure. It's a Z score measure. So typically plus minus one is sitting at plus point five. But what I would point out, so markets clearly overweight. That entire overweight characterization is coming form the positioning of systematic strategies who are not following or thinking about fundamentals. If you think about the.
- [47:00]
B
When we say systematic, it's quantitative, it's trend based, it's earnings growth based.
- [47:06]
C
I have three in particular in mind. So there's volume control, there is the CTAs and then there's risk parity funds.
- [47:12]
B
CTA is meaning mostly trend following commodities.
- [47:15]
C
Exactly. So it's about trend involved. It is a good summary of each of the three, basically. I mean and if you look at systematic Strategies, positioning. You know, it's hard to come up with an intuitive, simple measure of what is the trend. That, that, that's what a lot of that exercise is about. But the other part is very easy, which is basically volume. You can use any measure of volume that you like and it explains basically their positioning. So, so we had Liberation Day collapse. We had April 9th when the cause of the volatility basically diminished or went down. And so we had the fastest recovery from a volume shock ever. But there's been very limited buy in, I would say, from discretionary investors who are actually sitting at neutral. Discretionary is as opposed to systematic, but discretionary you want to think about as fundamentals based investors.
- [48:14]
B
Well, let's take that apart because that's kind of fascinating because on the one hand, there's been a bubble in bubble forecasts. That's an old joke. We've heard that, you know, for decades. But really it seems like everybody is saying, oh, there's an AI bubble, there's a market concentration bubble, and the market seems to not care and it just keeps powering itself higher. Let's talk about the policy issues, issues you just raised. So despite Trump won with some tariffs that were, I don't know, about 10%. And I'm tariff man, it's the most beautiful word in the dictionary. Despite all of that, a failure of imagination on all our parts, April 2nd shocked everybody with 100% tariffs. I don't think anybody imagined it. And we had that very rapid sell off over the next week. Then the 90 day pause and markets took off. But at the end of the 90 day pause, markets just kind of kept going.
- [49:16]
C
Going. Yeah.
- [49:17]
B
How do you, how do you put this policy into context? And when you say there's not buy in from the discretionary part of the equity market, somebody's buying. Is it just systematic or.
- [49:29]
C
So it's systematic strategies. And I would, I would say we are sitting here in the first week of October. So if you think about September and just the very, very steady, steep, huge.
- [49:40]
B
Huge gains in September.
- [49:41]
C
So what we got in September is basically big inflows, right?
- [49:46]
B
And I want to say Q3, 2025 was like the seventh best quarter going back to World War II, some crazy number like that.
- [49:56]
C
So last month we had the highest inflow into bonds and equities as a group ever since. Trillion dollars into just one month.
- [50:10]
B
Do you pay attention or care about the $7 trillion in money market funds or is that, you know.
- [50:16]
C
So I think that's partly a red herring in the sense that basically it is a reallocation away from bank deposits. So if you take a sum of money market funds and, and cash deposits, the line's kind of going up. But it's going up in line with its trend because cash holdings are going up. So the two things are just sort.
- [50:38]
B
Of a wash because some people have been claiming that is the next source of fuel for equities. I'm in your camp. I think that money mostly came from low yielding bonds or checking and savings accounts.
- [50:52]
C
I think it's like very important to keep in mind that we're having a boom in inflows across all asset classes really. And it's been going on for two years, if not longer. And you know, as to the question of why we're having this boom, our take is basically that. So you have to start historically first so that we're talking about, you know, how things changed relative to history. So the pattern was that U.S. households would put about 50% of the new savings. So you get a paycheck, you spend some is left in the bank account and then you allocate basically some of it. But historically about half of all household savings, it would stay in cash. Half would basically go into financial assets. And so if you think about the cash holdings of households, very, very steady, clear trend line, what the pandemic did, partly because people spent less, partly because they were getting checks in the mail or directly deposited in their bank accounts, their cash holdings went way, way up relative to trend. We then had a period where because you just overallocated relative to trend, a period of cash going side sideways. So that all new savings, 100% of it was going into financial assets. And into all financial assets is not just, I mean bonds were actually the bigger beneficiary than equities. Believe it or not, most people think it's equities first, but it's across that. So crypto, you know, commodity funds, you name it. But. But it goes all the way back to the pandemic and it's not done yet is the way I would put it.
- [52:45]
B
Wow. So you were talking about trade earlier. One of the comments you made, really I found fascinating. Markets often price in trade deal hopes early. Are we over discounting the impact of tariffs or our markets being too optimistic or how do you contextualize? You know, we've been waiting to hear about all these tariff deals we really haven't heard. I think we have one with the uk that's kind of kind of it. And Japan.
- [53:16]
C
Right.
- [53:19]
B
Are markets not paying enough attention to tariffs? Or are markets saying, hey, the President lost at the Court of Trade, he lost at the Court of Appeals, maybe he's going to lose at the Supreme Court. How are we looking at tariffs?
- [53:34]
C
So, so first, you know, a confession, which is basically after April. The second, you know, if you thought through the impact of the announced tariffs, you were to come to a very, very negative conclusion.
- [53:50]
B
Right.
- [53:51]
C
And that's what we did. And so we lowered our numbers. We always built in that there would be what we call a relent on policies. It's just like Trade War 1.0. Oh. When the market is up, you know, he would escalate. When the market was down, he would de. Escalate.
- [54:07]
B
People have called that, I heard a couple of options traders call that the Trump collar. The Trump collar, unlike the Powell put, this is the Trump collar.
- [54:17]
C
Right.
- [54:17]
B
When markets are high, he's emboldened. When they're low. All right, we're going to pause this and let you dust.
- [54:23]
C
Exactly. That's kind of, you know, where we were. And so the call was that we would go a lot higher but a lot less than we had originally thought, basically. And we have since basically raised both our earnings numbers and our target.
- [54:42]
B
What's Your S&P? 500. 7,000.
- [54:44]
C
So on January 1, it was 7,000 and today it's again back to 7,000 and then raised it in two steps. But your question on, you know, or the tariffs having an impact, what I would say is that there's sort of different dimensions. So this is kind of a big question because it impacts everything. So first is growth. We kind of spoke about that a little bit, macro growth. And what I would say is that so far there is, I mean, the logical and intellectual case for a slowing because of very high tariffs. Tariffs or a new tax, you know, is impossible to refute. And I'm not refuting it, but I'm just saying there's like no evidence of that because other things are basically dominating. So I talked about the consumers are doing what they've always been doing, etc. But if you look at macro growth, I also said that what we are going through is a mini version of 2023, because everybody took a negative view, that negativity is extreme. Extremely important part of the positivity in terms of the price action, markets climb a wall away. Exactly. And, you know, are equities going to go down if somebody raises their GDP growth numbers or their earnings numbers? So it's. So that negativity is a positive force for now, our economists. So, Matt Luzetti has a 2.8% GDP growth number for the third quarter. That's, you know, the highest numbers I've ever seen.
- [56:16]
B
For me, Atlanta GDP now is even.
- [56:18]
C
Higher, close to 4 before the data started to disappear. And so, you know, number one, no sign of it in terms of growth, if you do and think about in terms of earnings. So there should have been a big impact in the second quarter. Earnings growth in the second quarter actually picked up from where it was in the first quarter. So even the sign is wrong. It's going in the other direction. A number of three qualitative read on earnings, which I would argue is more important than just the numbers and companies just basically saying that yes, this is a negative shock, yes, it's a big deal, but it's, you know, it's not way out of basically the realm of, in many cases, even for machinery companies within the realm of, you know, our guidance range. So yes, it's negative, but it's not having such a, a huge impact. And that the impacts are basically, you know, modest and manageable is a level at which, you know, you can think about. So the numbers, what are the numbers? So the effective tariff rate, defined as basically tariff revenue on the Treasury's website divided by the value of imported goods, it was kind of stuck at 10, 11% and maybe it's a little bit higher right now. So the market's working with something like 15. So we still have a ways to basically get there. And the underlying thesis has been basically that if there's a problem, you will get relentless exemption. So there's a lot of exemptions and that's part of the whole thing really. Dimension, of course, is inflation.
- [58:01]
B
So let's talk about that.
- [58:03]
C
Yeah, you know, did it already happen or is it still to come one simple way, I mean there's, there's no way to answer the question with 100% certainty. But what I would say is that if I take a look at core goods prices or core CPI if you want, and what you will see is that the norm is for goods prices to be deflating. We have the post pandemic 10% increases. The chart of the price level, right. We jump up by 10, 11 in a relatively short period of time and then that's done with and we start disinflating. At the same historical trend rate is a very modest mild deflation. And what we've had over the last three months is a clear increase up. So some impact of the tariffs has already happened. Question is how much, and I would say relative to the trend line core goods prices are probably one, one and a quarter percent higher than they would have been if we had just continued basically down that trend line. And so how to basically handicap that one one and a quarter percent we have in house from our rate strategist a bottom up measure basically of the direct impact of tariffs. So you go sic code by sic code, you add it up and then you calculate and they calculate 2 2.5% percent. So simple point I would make is it looks like half of the direct impact already happened and if half of it, you know, it wasn't so bad, how much should we fear the second half?
- [59:40]
B
Coming up, we continue our conversation with Binky Chadha, chief US Equity and global strategist and head of asset allocation at Deutsche bank securities, talking about his roles at Deutsche Bank. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Binky Chad. He's chief US Equity and global strategist as well as head of asset allocation at Deutsche Bank. You're very constructive about additional Federal Reserve rate cuts this year and next year. And the people who are a little bearish on that are saying hey, tariffs are going to be very inflationary. We're seeing a re acceleration. This isn't a noisy blip, but it's a start of something worse. We're going to end up at 4, 4 and a half, 5% inflation which would put the Fed on hold. Walk us through your thinking on how many more rate cuts this year and next year. It sounds like you've already given the game away because.
- [60:59]
C
No, no, actually, actually you know, I'm not counting on rate cuts and I would argue the rate cuts are, you know, much more of a sideshow basically really earnings, we do so hyper focused on them.
- [61:12]
B
At least the media, media is on it's, you know, everybody is if we get these rate cuts it'll unfreeze the housing market. It'll do all these great things.
- [61:23]
C
No, I mean to unfreeze the housing market you need longer end yields to basically go down which have not happened yet. They are pretty much on the low side I would argue relative to. So we have a house view for the 10 year by year end that's closer to four and a half half. So 445.
- [61:40]
B
So we what does that mean for mortgage rates? Are we going to see a 5 handle on mortgage rates?
- [61:45]
C
That's a Pretty wide. So there is room if and spreads depend on volatility rates. Volatility has been coming down quite a lot because, you know, the brokers need to hedge basically the interest rate risk while it's outstanding. So. So I think it's supportive, but I'm not foreseeing any big decline in interest rates.
- [62:07]
B
So maybe another cut this year, one or two more next year also.
- [62:10]
C
I mean, we have the data anymore, so it's going to be, well, well, there's that. Who needs data? But, but I wouldn't be surprised if the Fed misses one of those two meetings in terms of the rate cuts and pushes it out. I mean, this is sort of more a, you know, fine tuning type exercise, I would argue. I mean, if the Atlanta Fed GDP is right and it's been pretty right for several years, obviously not to all the decimals, but it was giving you some, you know, with that kind of growth, I mean, do we really need lower interest rates?
- [62:44]
B
So let me ask the Jerome Powell question. We're seeing the labor market sort of soften even though we're fairly close to, you know, as low as unemployment gets. At the same time there are shortage of workers. 2025 may be the first year in history where US population actually declines. Less immigration, more deportations, a whole lot of other policy issues that are affecting that. How do you think about the labor market here and what does that mean for corporate earnings? What does it mean for interest rate policy?
- [63:20]
C
Yeah, I think we have a rather relatively fully employed labor force and our baseline view basically sees, if you ignore the decimals, a little bit of bounce here and they're not really changing very much. So the question becomes who's going to produce that 3 and 4% GDP. So it was pretty bearish take when we got the revisions basically to the payrolls numbers, the benchmark revision. But you know, if you're not changing the GDP numbers and you just raise the level of productivity basically commensurately, it's.
- [63:57]
B
Not, it's not as much of a negative as it looks at first blush.
- [64:00]
C
Exactly. Right.
- [64:02]
B
I know a lot of economists who look at growth as productivity plus inflation. Fair assessment.
- [64:09]
C
Yeah, I would say productivity plus employment. Then to get to the nominal part, you would add inflation. And so I mean, if you think about, so we talked a little bit about, you know, the parallels between today and the 1960s and the second half of the 1990s. That's the two periods since World War II where we had basically productivity growing at three, three and a half percent for a sustained Period of time. Normally it grows at 1.4, 1.5%.
- [64:42]
B
What's the old line? I forget who I'm stealing this from. Productivity gains are seen everywhere except the productivity data.
- [64:51]
C
So that's because you know, it's calculated as a residual. Right. So first you have to estimate gdp, then you have first revision, second revision, third revision. Then you have to estimate what we were just talking about, which is the labor input, which is revised and re. Revised benchmark. And then what's left over is productivity. But what I would argue is that if you look at a simple chart of reported productivity in the non farm business sector, you'll see this growing in a Trend channel of 1.4%. And basically what we've had over the last couple of years is we went way above the channel, basically post pandemic, that is right. So we got a pandemic jump, then a slight slowdown back into the channel. And so over the last two years is what I'm saying. So officially, yes, the immigration issue, but officially unemployment has only been 4% was even lower. So it was a tight. Historically a tight labor market has been a necessary condition for getting those productivity booms like we had in the 1960s and in the second half of the 90s. And we've had a tight labor market for several years right now.
- [66:07]
B
Very interesting. One of the things I'm so fascinated about your work is that you're not just, you know, a one way bull. You start the year as one of the most bullish forecasts for the s and P500, but you're constantly bringing up the various macro risks investors face. That sort of full view and not being so sort of just mindlessly bullish is kind of fascinating. So, so let's talk about some of the risks that, that you've been writing about and discussing. Have to start with froth in AI and, and capital spending.
- [66:50]
C
Sure.
- [66:50]
B
How do you respond to charges that this market has become frothy?
- [66:56]
C
What I would say is basically that, you know, we do see signs basically of rampant speculation, but I would say so far it's only in basically relatively well defined pockets.
- [67:11]
B
So AI Bitcoin hit 125,000 over the weekend.
- [67:18]
C
On AI. I would say it's, you know, what some companies and some deals are doing you could put in that bucket. But I mean the stocks are not necessarily doing that. And so I would argue that we are still sort of in the early stages. I would say there's a lot of focus on the retail investor. Now the question I would ask about the retail investor is, you know, when you look at measures of retail participation or retail activity, you know, so it's easy to sort of exaggerate relative to their own history. I mean, we don't have a history of retail participation in US equities since the 90s. So it's been more episodic, basically. And so there is a tendency to put it in that light that this is an episode. But I mean, we were talking about Asia earlier. There's a long history of retail involvement in all markets. And so one of the things that is getting attention is the presence of retail investors. But from a quantitative point of view, I don't know, I was looking at statistics. So there's conflicting measures.
- [68:28]
B
It's fairly modest. And a lot of it seems to be 401k and Iraq.
- [68:32]
C
This whole thing about how the volumes have taken off and they've skyrocketed and now they account for 4% tiny. Exactly. So everything is consistent and correct. But I would. Now you have to frame it appropriately. Yeah. And this is a cycle and we're talking about now, but basically, and this is, you know, me speaking as equities, it's a cyclical asset. Okay. And so if the cycle continues the way that it has been continuing, all of this is going to grow. But today we are not there yet.
- [69:07]
B
What about market concentration? The Magnificent seven or whatever you want to call the top ten. Sure. Is that as big? Is that really a threat or is that, you know, this happens from time to time when a new technology attracts all this attention.
- [69:21]
C
And so, I mean, I would put it slightly differently. I would say the market concentration in mega cap growth and tech reflects the concentration of S&P 500 earnings in the mega cap growth.
- [69:34]
B
What are they? Something like 2 trillion in revenue, 300 billion in profit. Some. Some crazy.
- [69:39]
C
They're responsible right now for about 40% of S&P 500 earnings.
- [69:45]
B
So why shouldn't they be 40% of the market cap?
- [69:49]
C
Exactly. So they're actually 30% of earnings and 40% of the market cap. I apologize.
- [69:54]
B
Oh, so why are they so overweight? Is it just future growth expectations?
- [70:00]
C
They're growing faster, so they should definitely have higher multiples. So people frame the question as focused on the mega cap growth. In tech, you can ask the equivalent question. Actually it's a bigger part than 60%. Why isn't everybody else growing? I got into this a little bit earlier. It's a very peculiar recovery where the cyclical parts basically haven't really kicked in in a big way. But it looks like they are kicking in.
- [70:24]
B
What other sectors are kicking in? I know you've written about financials, consumer cyclicals, materials, and then we could talk about EM and small cap and value.
- [70:35]
C
Sure.
- [70:36]
B
What other sectors have been less lagging that you find particularly interesting?
- [70:41]
C
So right now we have what I call simple cyclical tilt to our positioning because I talked about discretionary investors sitting at neutral. Why are they sitting at neutral? Because they're concerned about the cycle. What are they going to buy if they get off and start participating in a bigger way? I would argue they will buy the cyclicals because that's their concern. They, they're unlikely to buy mega cap growth in tech for well known reasons, all the reasons that you basically mentioned. So you know, if you phrase it form, you can phrase the question basically from who's actually going to buy this stuff. I would argue this group stands out and their concerns suggest that they would buy the cyclicals if they started to believe that the cycle is going to be fine. If you look at it from a fundamental point of view. No, I mean there aren't no signs of a huge uptick on the cyclical side. But if you wait for those signs, equity market will price it far before. I mean, one of the lessons that I take away is you have to think about the s and P500. In a recession, you know, this big shaded period, equity market falls 20% once the recession, you know, starts, but it robustly bottoms around the middle of the recession before and recover while you're still in this gray shaded area. So if you wait till payrolls turn negative, you will have missed the entire move and you will be back to basically catching that small. Exactly. So equities turn up when there's a positive probability that you're going to basically have a recovery. Because you've been in a recession for.
- [72:18]
B
So long, you've identified a number of risks earlier in the year. And I'm talking curious if, if you still think they are significant protectionist trade policies and immigration policies, are those still potential growth pressures or inflation pressures?
- [72:35]
C
I think on the tariffs, basically they've proved to be modest. Exactly. And so I don't worry about that. I don't think it closes the issue. I mean they could still be negatives that come out of that that we don't just not completely aware of yet. But in that event, you know, a big part of our thesis for this year has been that if things get bad, you know, at the end of the day, any administration cares about its approval ratings, the approval ratings about the economy. So they will relent and especially if it's caused by one of the policies. So that's been a big part of our thesis for staying constructive through the year. I so, you know, we talk about risks and I am deeply aware of what most people mean when they talk about risks. But where we are sitting, I would argue that it is my duty to simply point out that right now I'm much more concerned about upside risks than downside risks.
- [73:35]
B
A melt up, A potential.
- [73:38]
C
Yes, because we don't. We stop worrying about going into a recession. We stop worrying, worrying about the politics and we stopped worrying about the tariffs because companies are dealing with it and.
- [73:50]
B
Suddenly there are blue skies out there.
- [73:53]
C
Exactly.
- [73:54]
B
So last question before I get to my favorite questions.
- [73:58]
C
Okay.
- [73:58]
B
What do you think investors are not paying attention to or not talking about that perhaps they should. Could be a policy, could be an asset class. What do you think is getting overlooked?
- [74:10]
C
The context that we are in, what I was talking about, basically that 3% GDP, GDP growth with a 4% unemployment happens only 5 or 6% of the time and it unleashes certain dynamics. And you know, it started during the previous administration, it has continued in this administration. So it's not necessarily about the policies.
- [74:37]
B
So we've gotten a lot of noise and a lot of headlines and a lot of news coverage. Is that obscuring what is fundamentally underneath everything, a robust economy and a healthy market?
- [74:49]
C
I believe so. Huh.
- [74:50]
B
Really, really interesting stuff. Let's jump to our favorite questions, starting with the question that brought me to you, which is who are your mentors who helped shape your career? So many people, so many guests of this show have mentioned you who helped shape your career.
- [75:10]
C
So I started my career at the research department at the imf. And most important mentor, I would say was my boss is a gentleman called Michael Dooley, ex Federal Reserve, you know, at some of the highest levels, but was at the imf. Then he I was just out of graduate school, taught me basically how to think critically, how to stand on my own feet, and most importantly, how to communicate things or the essence of things in a very simple way.
- [75:46]
B
That's a great, great answer. Let's talk about books. What are some of your favorites? What are you reading currently?
- [75:51]
C
So I'm definitely a fiction reader. It gives me a good break from where I live and what I do. I'm currently reading Isabel Allende's books. I'm currently on a Long Pedal by the Sea, which is a book about Chile.
- [76:08]
B
Hmm, really interesting. What about streaming outside of this show. What are you watching? Listening to what. What keeps you entertained when you have a little downtime?
- [76:17]
C
Oh, given my background, I'm definitely big Bollywood fan.
- [76:20]
B
Oh really?
- [76:22]
C
Yeah. I'm very partial to Indian movies.
- [76:26]
B
Give us a title that some of.
- [76:27]
C
Them are the one that I really liked. It's on prime actually. It's called Tandav. T A N D A V. Huh.
- [76:36]
B
What's that about?
- [76:37]
C
It's about politics and political career and unfortunately they did not allow the season two to be. The authorities didn't allow season two to in India.
- [76:52]
B
They stopped it going on.
- [76:54]
C
Yeah. Yeah.
- [76:55]
B
Well, thank goodness nothing like that would have season one. Yeah. All right, our final two questions. What sort of advice would you give a recent college grad interested in a career in either economic policy analysis, asset allocation or just investing?
- [77:12]
C
Yeah, I think that, you know, working on Wall street or in finance, I mean, there's a lot of different things you can do. And I think for young people starting out, the biggest challenge is to figure out where, you know, how do I match basically what I'm most interested in and where my abilities are. And my advice would be to go with where your interests are. The ability will come. I just went through recruiting process and just hired somebody from our grad program onto my team.
- [77:44]
B
Interesting. And our final question, what do you know about the world of economics and investing today? Would have been helpful when you were starting out back at the IMF in.
- [77:54]
C
The 1990s to ignore everything except the economy. You all heard this expression, right? About presidential elections. It's about the economy, stupid.
- [78:06]
B
Still accurate.
- [78:07]
C
And the s and P500 is about earnings period, positioning, valuation. It all kinds of fits in, but the underlying trend is all basically coming from earnings.
- [78:21]
B
Totally, totally fascinating. Thank you Binky for being so generous with your time. We have been speaking with Binky Chadha. He is the chief US Equity and global strategist and head of Asset allocation at Deutsche Bank Securities. If you enjoy this conversation. Well, be sure and check out any of the funds 577 we've done over the past 11 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, or wherever you get your favorite podcasts. Be sure and check out my new book, how not to Invest. The ideas, numbers and behaviors that destroy wealth and how to avoid them. How not to invest at your favorite bookseller. I would be remiss if I didn't to thank the crack team that helps put these conversations together each week. Alexis Noriega is my video producer. Anna Luke is my producer. Sage Bauman is the head of podcasts at Bloomberg. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.