An Inflation-Focused Election Day

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg glovel News. Let's get your business week agenda on this midterm election day in the United States. Just metten in the house Bloomberg and director Broker's studio right to my left. She's deputy team leader for US Equities

at Bloomberg News. And then we've got Red pick Heart, us economy reporter at Bloomberg News via zoom from Washington, d C. Where we're going to talk about. It's the economy stupid, So we'll get into that in just a moment, but just let's kick it off with you. We had a pretty strong rally, and yet what's happened. We've kind of run out of some steam here. We are seeing

stocks coming off the highs and some that's interesting. I was looking at the volume for today, so over the past ten trading days for the SMP five hundred volumes about ten percent lower, and as you mentioned, stocks were higher or a lot higher earlier as far as just the prospects for maybe potential gridlock following the midterm elections.

Also we did see treasury yields ease, so that was a big help as well as the dollar, but now you're seeing that not quite as helping as much of the broader market since it is a bit flat now. But still I was looking at as far as when it comes to a still right, still lower if you're looking at the tenure, I mean they fell as much as eight basis points today, So still it's not like there was a dramatic reversal there in yields. But again seeing sort of volume lights kind of at least making

some digressions there for the markets. But again, when I'm talking to money managers, they're sort of because Paul and I saw the kids off right, because there are like schools it right, in New York, I think I end up getting closed because they use them for voting polls. I know in New Jersey, where I grew up, the school stayed open, but apparently in New York City. I guess the kids get the day off, So maybe there's

a bunch of parents at home. Maybe that's why volumes like, I mean, potentially, maybe that could be one of the reasons. But also I think it has to just do what Paul and I has. I talked a lot about this this week as far as just the historical aspect of mid terms, how typically it kind of doesn't matter who you're pulling data from, whether it's see if we're a research or the Stock traders Almanac, how following midterms that

typically vodes well for stocks. But when I've been talking to a lot of money managers, they've already kind of pointed out that even if there is say a Republican sweep, there already was a lot of grid luck in general with Congress, so they don't expect to see some sort of massive sort of rally following that. And I was talking to think gridlock was the norm. Well, plug out a second, let's bring in read read pickards US Economy

Report Bloomberg. She's got something on the Bloomberg to about what really kind of matters, what are the most important issues for mid term voters read. So Paul's heading into the elections have shown us that the economy and inflation are ranking really high on voters concerns and higher than some of the other issues that are on the bout

this year. And when we think about what the economy looks like, it's it's really this extreme scenario where on one hand, you have this really strong labor market, where the unemployment rate is near its lowest level in decades, Employers continue to add jobs at a good clip, and and wage growth has really been broad based and especially

helpful for lower income workers. But then on the other hand, you have the fact that the highest inflation in a generation has essentially, you know, sucked the air out of the room. And so these rising costs from everything from you know, groceries to airline fairs has really you know, weighed on Americans. So when we think about those wage games that have come from this, you know, great jobs market adjusted for inflation, wages year or year or actually lower.

So if you're a Republican running today, you're pointing at that horrible inflation, and if you're a Democrat, you're pointing at the awesome jobs market. And it's interesting read. We had Matt Miller, I'm sorry, Matt Winkler on earlier today. Matt Winkler is a founder of Bloomberg News and he has got a fascinating column out there today and he said, by just about any measure, the economy Underbiden is better than any president other than Jimmy Carter. So he the

data is there. But I guess the question for um the candidates is kind of which day you're gonna focus on exactly. And from the perspective of a voter, you know, are you putting more value on the fact that you have a job right now and unemployment is really low, or are you looking at the fact that the rising cost of gasoline and groceries right and everything else is

really weting on you in your household. Well, that's a good point, and you know, Jess, this is something we've seen throughout the corporate earning season, is that companies have to deal with those higher costs, and some have been able to pass it on to customers, some have been

able to you know, reduce costs elsewhere. But that's a real thing, and the longer that sticks around, that's where we get into the questions of evaluation, certainly for the public markets right inequities correct and also the on going

issue when it comes to margins. So that's slowly been spilling over beyond even just discretionary companies into communications services, staples, materials companies now and Gina Martin Adams and her team actually had some interesting data where they were looking at the correlation between operating margins as far as how does that mean for this process when markets bottom, and typically right now, the consensus for analyst they're thinking that margins

could bottom in the third quarter, but that continues to get pushed back. So even though that could potentially past quarter correct, but that doesn't mean there's going to be a dramatic rebound because basically, if you're looking at the estimates in Bloomberg Intelligence, they're basically staying flat until the second quarter of next year. So for her, in her

mind did her strategies. When we'm talking about Gena Martin Adams, they're thinking that doesn't necessarily bode well for the broader stock market because you need to see that swing higher. So say, if we do see a rebound there and more broadly with margins, that bodes well for the stock market. But if you continue to see animals keep pushing those estimates further and further back, that's going to be a

challenge for stocks. Don't forget. We're gonna get important flation print. Yeah, so we'll get a little bit more in terms of how that's played out. Just Manton, thank you so much, Deputy team leader for US Equities at Bloomberg News. Here in our interactive broker's studio. Read Picker out there in Washington, d C. Via zoom She is US economy reporter Blomberg News. Be sure to check them both out at Bloomberg dot com for some of their stories dealing with peak inflation

and also the US economy on election Day. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We'll go figure it's the economy stupid again, or more specifically, it's inflation when it comes to today's midterm elections in the US. We talked

about this earlier with Reid Picker. This story is this next story in the upcoming issue of Bloomberg Business Week, out on news stands later this week, already online at Bloomberg dot com, slash business Week, and on the Bloomberg terminal. So let's get into it with Nancy Cook, who wrote it, White House correspondent at Bloomberg News via zoom from our Washington, d C. Bureau. And also with us is Christina Limblad. She is echo ex editor a Bloomberg Business Week. She's

here in our interactive broker studio. So Nancy, let's kick it off with you. I mean, it is really inflation, inflation, inflation right today when it comes to uh, the elections. It's amazing the narrative and coming from the Republicans versus the Democrats. Yeah, I mean, we really um over there in the closing weeks of the election, saw that inflation really has become the dominant issue. Um. You know a majority of voters say that inflation and the economy are

really the most important things. And what's interesting is in the New York Times Siena College poll um that pollsters took a few weeks ago, it showed that voters, by a two to one margin, who said that the economy was a major issue of thought the Republicans were best boys to handle that. So Democrats certainly wanted the election to be about a range of issues, um, including the labor market. Uh, you know, abortion, threats to democracy, but

really pull after polhos. Voters are really focused on inflation. Yeah. You guys have a great chart in here, and I like the pictures. They make it easy for me to understand things. And it's just like, you know, the list kind of what are the big issues for voters? What happened to abortion? Christina? It's number six on the list. What happened? I thought that was gonna be the Democrats

calling card. Well, that was the hope in the summer that they were going to be able to energize voters along other you know, issues like abortion and gun rights because we had school shootings, um and and specifically you know, women's suburban voters. Those are going to be issues that hopefully would energize them. But it's been really hard to turn the channel on the narrative away from economic issues

and about inflation. And I have to say the Republicans, Um, you know, Nancy, another great chart in the story is about ad spending. Maybe Nancy can tell us a little bit about how, you know, because that's a very clear trend lines you see. Yeah, basically, basically we saw that Republicans were outspending Democrats um four to one in ads talking about inflation, and that really became the dominant Republican message.

And you know, in addition to just voters citing it, Republicans sort of really picked up the baton of that and really hammered at home and Democrats just have not been able to escape it or really come out from under that narrative. As Christina said, you know, Nancy would I really would have loved has been a fly on the wall in the White House. As Joe Biden said, hey, folks, fails smart economic people. You said this was going to

be transitory. I mean it really right. He was thinking a message out there talking to the American public, and yet as it's become persistent, the White House has really kind of had to scramble and rethink its message a little bit. Absolutely. You know, I've been reporting on how the White House has been dealing with inflation really for the past year and a half, and my reporting shows that really starting last fall, when um inflation started to

become a major political problem. The White House started to take it much more seriously, and the President um has privately expressed a lot of concern with the fact that his AIDS for so long kept telling him that it was so called transitory and temporary, when in fact it

was not. He got angry a few times at the National Economic Council Director Brian D's for basically, the White House is handling of inflation and it's faulty messaging on it um and so it's been been a real source of tension inside the White House, even as they try to point to other great spots in the economy like the jobs market and Nancy. I guess it's a little bit of a messaging problem in a sense that when you think about inflation, it is a global issue. There's

inflation all over this planet. Just go look at our good friends in the UK and across Europe and other places. Number one, Number two, A lot of the inflation was not the result of any particular policy measure, but it's simply supplying demand of global economies, think oil. But I guess that's not an easy message to get across to Middle America to everyone. Yeah, that has been a huge part of the White Houses message like, look, look at these other countries they're facing it to. UM. You know,

this is a post COVID economy feature. This is also partly caused by um Putin's war in Ukraine. That is a big part of the White House this message. But the fact of the matter is Americans every day are going to the grocery store and they're seeing higher prices for things like meat and produce. They're paying more for airline tickets, are playing more for their rent or their house. UM, and Americans are just very frustrated by the rising prices

and they sort of don't want these excuses. And even Democrats strategists say the White House UM and Democrats at large just have not done a good enough job talking about their economic record but also showing that they are trying to take action on inflation. So I guess the next question, uh, Nancy, it would just be simply and I will wake up tomorrow, and I guess the Democrats

will have to see how it plays out. Of course, but to the extent that the polls hold true and some of the reporting today holds true, it'll be time for the Democrats to maybe re message some of their key Uh key tenants. Is that something you're hearing from some of the leaders down in Washington. Well, I think that the White House is trying to project a very optimistic view of what's going to happen at this point.

I think that they're telling people that, you know, keeping the House will be very hard, that the sentiment is that the House will likely flip to Republicans. I think the question is just what happens with the Senate, And what I'll be looking for tomorrow is the exit polling, not just the results, but what voters say about why they voted and if inflation and the economy continues to be the dominant theme. Well, and the thing is, Nancy, I love. I think it's how you wrap up the story.

The thing is, Republicans have been really smart in terms of ad spending and the narrative when it comes to inflation. But what's their plan for bringing inflation town? That's a great point, you know, um Rick's got the senator from Florida has talked about, you know, UM cutting Medicare and Social Security as a means of cutting in federal spending. UM as a way to fight you know, out of

control government spending or out of control rising prices. But that's not really a plan that is uniformly embraced by all congressional leaders. And so the Republicans sort of don't have and across the board plan for fighting inflation. And I think that that's something to keep in mind too. So all right, Nancy, So the issue here is going to going to be the Senate. What's this state that you're really focusing on tonight? I'm focusing on a few.

I mean, I'm very curious to see what happens in Pennsylvania. Um, I'm very very curious about Georgia, although I think that we we may not know the results of that tonight. And I'm really closely watching Nevada as well, just to see if Democrats that's been a really close race for a while. Um. You know, there's a lot of union workers there, um, and and also a lot of Hispanics. I'm really curious to see how Democrats fare there. Hey, Nancy,

just got about thirty forty seconds left here. I was just thinking, going back to what you said about, you know, the Republicans and their plan or lack they off on inflation. Should this be an issue two years from now? And should the Republicans really make some inroads this time around. Will it work against them? Or do you think, based on what you're seeing that they're just better at messaging when it comes to things about the economy And just

got about thirty seconds. I don't think they're better at messaging. I just think that the Democrats have held all the lovers of power at this point, and uh, you know Americans are very mad about inflation, so they're going to blame those in power. Yeah, it's kind of how it works, right, That is how it works. Well, really smart, really relevant, certainly to the conversations we're having today. Nancy Cook, Thank you so much, White House Correspondent, Bloomberg News via zoom

from our Washington, d C. Bureau. This story in the upcoming issue of Bloomberg Business Week, but find it already on the Bloomberg terminal and online at Bloomberg dot com and or thanks to Christina Lynblad. She is the economics editor of Bloomberg Business Week magazine. Joining us in studio. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Not so smart, certainly if you're holding bitcoin, Bitcoin extending its loss UH to more than fifteen Actually it was down more than sixteen percent to below seventeen thousand, five hundred. It is bouncing around now, it's still down about twelve percent. Man, It's an area, Paul, where I feel like one man's crisis, another man's opportunity, because we definitely saw some deal making

and consolidation today. This deal, you know, it's interesting, it's financed by f t X TO exchanges, it's together and news broke this this morning is Katie Greyfeld and I

were on air broadcast sounds like what happened there. So we have Katie Greifeld in our studio now hopefully we've got some more reporting on this because this was odd deal that's really rocking the Cryptosy Katie Greifeld, Bloomberg News Senior markets reporter, co host of Crypto I R l on Bloomberg Crriet Take joins us here in a Bloomberg in active broker studio. Katie, what's the backstory, what's going on here? First of all, it's nice to see you again.

It feels feels like we've lived in multiple lives since I last saw you in terms of more reporting. I mean, there's still so many questions about this deal number one or what are the terms? I mean, what kind of money are we talking about here? But the big headline, of course, is that the world's biggest crypto exchange by far by spot volume, is buying the second largest again by spot volume. Again a lot of question marks here. We know that f t X was having some sort

of liquid tod the event. Both CEOs tweeted to that effect. We know that f t X was being hit by massive withdrawals. We do have a tweet from f t X CEO Sam Bakman freed He said that the assets will be covered one to one quote, this is one of the main reasons we've asked finance to come in. So is this just about survival? You know, it's I think it's too early to say, but I would venture that a lot of people didn't even know f t X was for sale. I mean, this is shocking, This

was shocking news. It's been a really dramatic forty eight hours. We had been seeing the two CEOs tweet back and forth at each other, but given this sort of white night in the industry that SPF has played, I think a lot of people were surprised by this nude and just the magnitude of it. When Paul and I were on radio, I was like, this is the biggest thing to happen since Terra, which I think was surprising to some of our producers. Like, we're going from crisis to crisis,

is exactly. I mean, in crypto time may feels like a long time ago, but in the grand scope of time, you're right. I mean, we're just rolling crises. There's been periods of lulls. I mean, the stat we were looking at this morning before this news broke was bitcoin has been way less volatile than the stock market. That's not the case right now. That's not the case. And you know, the CEO, Sam Bankman Freed SPF is the you know the crypto folks referred to him as I kind of

thought he was like this jillionaire. Where did all his gaions go in terms of why was there liquidity crisis at his company? Or was his jillion's all tied up in stock that's not liquid We didn't know any of that yet. A lot of great questions. Uh, this sort of factors into stuff that we're still reporting out that comes to the f t T token that is the native token of the exchange. Binance coin is the native token of the Binance exchange. So we don't know exactly

necessarily what SPF states was. We know that the Binance CEO, Shan Pan's out. He's known as c Z. Of course, everyone has their initials. The big news over the weekend was that he was selling more than five hundred million dollars worth of that token. Coined Us had reported that Alameda Research, which is a trading shop owned by SPF, had significant assets in that token. So again the direct linkage is unclear here, but it's a very interconnected world

the crypto industry. A day before reaching a deal, bank and Freed sent on Twitter that assets on FTX were fine. And I mean again, we know that they were really under a lot of pressure from those withdrawals. It seems like that was a big focus here and getting this deal done. But again, the terms of the deal. Should we assume when he said fine because he knew that he had a deal coming. You know, if I could get an interview with him, Carol, I would love that.

If he's listening right now, please call me. Meanwhile, let's just say crypto across the board. We've got bit coining down twelve percent, Etherorium down almost seventeen percent, binance coin is down eight percent, x rps down twenty percent, so we are just seeing Salana is down twenty eight percent, so we're just seeing mass selling. So once there's a

lot of systemic question marks right now. Systemic that's like that, but it's just for this, for the ticks out there of crypto, like a Jamie time In for example, just more ammunition for kids. I told you another man I would love to talk to right now. Right, he's still watching it. We love checking with you when it comes to the crypto space. Katy gray Felt, Bloomberg New Senior Markets reporter, reporter, co host of Crypto I r l on Bloomberg Crricktakes. She does that with Tim's Tanebeck. I'm

broom mac journal now. But you let me drive, no, no, please, I'll do the riding gravels. I want to drive. Its good question drive. This is the drive to the Clobell on Bloomberg Radio. Right, folks, we just got about ten minutes luck in today's trading session. Definitely bouncing around those major equity averages off our highs and lows, but green

across the screen. And if I look at the eleven major industry groups in the S and P five hun did everything is higher, although consumer discretionary just barely uh in the green. So let's get to it with Marianne Bartel. She's Chief investment strategist imagining director at Sanctuary Wealth. It's

a platform for a network of registered independent financial advisors. She, by the way, spent more than two decades at b of A Merrill Lynch, where she was head of technical and market Analysis, where she and I used to talk a lot over the years, so it's so great to have her back. She's joining us via zoom from Nyack, New York. Marianne, how are you. I'm doing great. Thank you so much for having me on the program. Well,

it's great to have you here. Let's talk about the markets. Um. You guys do work with and support a lot of financial advisors. What are you hearing from them when it comes to this market environment? You know, Carol, it's really interesting. They've been very quiet. I haven't gotten too many questions, which is really quite interesting. You know. I could spend that both in a positive way and end a negative way.

What I really feel is that our firm is very well positioned for the pisodic volatility that's been the theme that we've been talking about for both the equity market and the bond market, and I think they've really have educated their clients to kind of weather some of the moves that we've been getting in this market. Marian, This market seems to be one that's driven in large part by macro drivers. Take the federal reservant interest rates, for example,

or political um contests here in the States. Are geopolitical issues in terms of maybe the you know, the war in Ukraine and so on. But earnings also matter, don't they. And we just finished up an earning seasons wondering kind of help, what were some of your takeaways from this earning season. You know, that's a great point you make.

We we love to talk about the macro it's a lot of fun, but at the end of the day, stock prices respond to earnings, and you know, it's the good news this this quarter was earnings have not been a disaster, and many people were expecting a disaster. But they're not great either. Um, some companies have done well

all some companies have done very poorly. If we look at where we're standing so far in earning season, we've got earnings up around two UM, which is not that great, and then if you take out energy um, you're actually down five percent. So the bulk of the earnings this quarter has actually been driven by the energy sector, which is a sector we happen to like a lot. What do you make of the mid terms today? I'm looking at our Markets Live blog and they've got a headline

on a story. The US midterms will not change market direction um because when you think about things like valuations, because that's about earnings and interest rates. Is that a good point here that ultimately, at the end of the day, you've got to look at what a particular publicly traded stock is worth and how it compares to maybe its historical valuations, and how it compares to the market environment.

That's that's absolutely correct. Valuations do matter, and what you've been seeing in this market is that, you know, tech stocks got very overvalued and that's where you're seeing much of the decline, especially in in the in the thanks space.

And I think they're you know, rerating multiples because interest rates are going up and this is a very well known story, but we do like to talk about, you know, midterm cycles, how to markets you know, behave And if you study the average mid term election cycled with the market, you actually bottom in October, which is what we did, and rally into year end, which is what we're doing. UM and then seasonally November and December two of the

strongest months in the year. So you know, when you kind of combined you know, the the seasonal behavior patterns and not having earnings a disaster, the market has actually been able to rally. But we're we are concerned that if industries continue to go up, you're still going to de rate the multiples and and that will eventually put pressure on stocks. But you know, we still think Santa

Claus is going to show up this year. So in your outlook, it sounds Merrianne that you'd prefer value over growth, maybe even small caps over some of the larger ones. Is that how we should think about Is that what you're kind of trying to communicate to your folks. Yes, so that that's where you've seen the shift And something that I learned many many years ago actually from my

aunt that went to Wall Street in nineteen fifty six. UM, and what she always told me, when a market is in a bear market, you eventually start seeing the leadership emerge. And that's what's happening because yes, if you own tech stocks, it feels really bad. But if you own energy, if you own some industrial stocks, if you own select healthcare, you don't feel like you're in a bear market. And that's where your new leadership is. And that's where the

value is. Yes, they're they're called value. And if you look at the equally weighted SMP, it's outperforming the SMP, which is a cap weighted index, and small caps are starting to do better than large cap and UM one of your analysts actually pointed out and I thought it was a great observation, UM that small caps if you used UM twenty three earnings or treating it around fourteen times, which is very very attractive your core too. As we mentioned, when you're at b of A, you know, Marian was

doing technical analysis on the markets. You talk about, you know, midterm cycles and what we've seen in historically. When you look at the technicals, how does this market seem to you or what does it say? So right now on a very short term basis, so I would say over the next three months. Yes, the markets can rally, and you know what could potentially happen is you can see ten year treasury yields maybe even fall to three and

a half percent. But that's still in a context of an uptrend where we think that ten your treasure yields can still get to five and twos can also get um to five percent. But if rates can actually fall here here, I think that's going to allow equities to rally. And you know, the VIX has already rolled over and I think that can fall to around twenty. But then I expect as rates continue to go up over time, and the FETE is made it very clear that they're

not done yet. Um, that is going to put pressure on the equities in the first quarter of the year. Marianne, real quick, thirty seconds. Is there a sector in the equity market that's just screaming at you right now? Um, high octane and energy. It's across the board. And this actually reminds me of the two thousand period. Now. I want to say, you know, technology stocks valuation is completely different.

You're talking about two pete multiples and two thousand in the twenties now, But we got a leadership shift into value into energy, UM and commodities, and it feels very similar. So I I think the number one sector next year is going to be energy, followed by industrials being a top winner. Yeah, it's certainly been an outperformer. A little bit mellow today, but we definitely have seen some outperformance. Marianne.

Thank you so much. Appreciated. Marian Bartel's chief investment strategists managing director of its Sanctuary Wealth, joining us via zoom from Nyack, New York. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two p m. Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News