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Well, sure's an Apple lower right now by about a percentage point. The company holding its product launch event at its headquarters today at Apple Park in Coopertino, California, right now, announcing details of the iPhone sixteen, refresh of AirPods, Apple Watch as well and more. The keynote continuing to be underway. We've also got a great live blog covering the event. I encourage everybody to check that out too. Let's go now to Ed lud Though, co host of Bloomberg Technology
on Bloomberg TV. He's been at Apple Park in Coopertino, California since the wee hours of the morning. We appreciate that he joins us Now, Ed, what is one new thing that you learned today?
Oh goodness, Well, one new thing that I learned today is that what's old is new. We have a button called camera control on the iPhone sixteen generation, and you think if it as something akin to the shutter button on a DSLR camera. For you photography enthusiasts out there, you know very simply, if you're holding the iPhone sixteen in your hand and you see something you're desperate to take a photograph, Bam, hit the camera control button. Camera
comes up. But don't worry, Tim, You don't need to turn your hands or readjust or turn the screen boom, just hit the button again and it takes a photo. This is groundbreaking innovation. Is this, as you guys know enough report?
Yeah?
Is this enough to get people to buy the iPhone sixteen to upgrade from the fifteen or the fourteen or, like me, the lowly thirteen.
Joking aside as I've heard them talk about camera control actually sounds like an awesome idea and I can't wait to get my hands on it and test it. But it probably isn't enough. And so you need to separate the hardware story from the software story. And when I say software, I mean AI and so these are not substantive hardware upgrades from the prior generation I've one fifteen, although there is some improvement to the capabilities of the
processor in the Base sixteen. What they're talking about in real time because the events ongoing obviously, is why we need Apple Intelligence their AI suite in our lives. And very simple summary is that it basically improves the tasks that we already do on our phones each day, makes them more efficient, easier to do, rather than being some kind of wholesale change to how we interact with our mobile phones.
Just very briefly, on the camera, Timmy, my husband.
He's he's a photographer, a real photographer.
Yeah, he actually switched from the Android to the Apple a couple of years ago just because of the camera. But add to your point, I don't know if this is enough. It's very cool, but I don't know if it's enough to sort of pull forward that upgrade cycle. I mean, tod just a little bit more about the software though, about Apple Intelligence, because the narrative is out there that Apple is kind of behind where they should
be when it comes to AI. And of course this arms race that's underwayo big among all the big tech companies. How far does this event go if it all in dispelling that storyline.
Well, the most important piece of news I suppose so far is that it will start rolling out in October, which confirms Bloomberg's existing reporting, And so then think about chronology of events. You know, we'll get the full details of the handsets themselves today, they'll start shipping probably by the end of the September, and you won't get access
Sapple Intelligence until next month. So it's actually a slight delay in terms of like, well, hold on, I just got a new phone, but I don't yet have access to those tools. But the thing I re emphasized, and I think I just did a post in the blog that they'll put out soon, is that this isn't sort
of a new functionality. A lot of what they outlined, be it photo related or task related drafting of an email, reviewing information, it's just a sort of more automated way of doing things we already do, rather than some new brilliant functional task that Generative AI has brought us through the handset. But again Apple being Apple, super heavy emphasis
on privacy data security. That's something they always go back and lean into because they feel they're in a strong position there and they have a great track record.
Maybe that's a good segue to talk about some of the health features that were announced today. In Cooper Tino ed give us an idea from a health perspective, not just when it comes to sleep apnea, but also what we heard about audio and ear health in the new AirPods lineup.
Yes, so sleep apnea starting with Apple Watch series ten pending FDA approval, but it's close a really interesting piece of technology. You know, we don't need to the three of us go into our sleeping habits, but sleep apnea is a real thing. You know, many people listening to the pro will have loved ones that have some sort of degree of sleep ATNA. I know people that have
had strokes as a result of sleep ATNA. And I can tell you that inside the Steve Jobs Theater when they confirm that function, there was real engagement with the audience. This is part of the Apple story about getting wanting to get into more healthcare services and very similarly with the current general next generation of AirPods being used as
a sort of hearing aid device. You know, they gave the example in the presentation of a woman who was hard of hearing and her son speaking to her at a special event and saying like this is why you're so important to us, and using the sort of audio experience of normal hearing versus amplified hearing using the airpod's new territory in some sense for Apple, but again confirms Bloomberg Mark German's reporting.
So that's ears. Let's move to the risk and let's talk about the watch. The watch is interesting, I mean, some new stuff coming there, especially with sleep apnea, but talk to us a little bit about blood oxygen sensing. This goes back to the beginning of the year. Of course, that lawsuit with Massimo. I mean, is there any sense of whether that'll affect users, Are users holding out for that or is that sort of just indefinitely off the table, you.
Know, I remember that week. Well, there are a lot of noise at the time. I don't think there is that much evidence that it sort of puts people off this product and makes them look elsewhere, because it's something core to what they want.
You know.
The sleep apnea detection, along with other monitoring, is a big selling point for the Apple Watch. There's one point that Bloombergsy and King and I made in the blog though, that I would say the health stuff's really important, but you also have to remember what wearables and Apple watches and to all intents and purposes. It's a lower barrier to entry. Think about the price of the series ten, three, nine nine, right, and think about the price of an
iPhone handset. We're yet to get the details. I think for the pro if we get it, you'll jump in. But the handset's probably one thousand dollars. So there is a consumer audience out there that can't afford the smartphone, but maybe they can afford the wearables. Low is the barrier to entry for the Apple ecosystem. It's fashion, you know, Katie, this one's for you. It's a piece of jewelry and the heavy emphasis on the materials, the partnership with themes,
on the on the wrist straps. There's an audience for that out there right there.
Definitely is. I have to say, though, Ed, I'm a garment gal and she's gonna take a lot to get me away from brand loyalty. But no, they're probably I like this because you know, it really communicates a piece of my personality. I'm sporty, tim. I don't know if the Apple Watch does that.
She's wearing hookahs. That is true. That's not a joke. She actually is. Before we let you go, a couple questions I have about this. I was able to tune into some of the presentation as I was preparing for this show. All of it that I saw was pre recorded and very heavily produced. I mean, I'm old enough to remember when very little was pre produced, and a lot of it had to do with like Tim Cook and Craig Frederighi on stage telling you that you know
you two was coming to your iPhone. How much of this is pre produced versus live demos?
Honestly, I think it's really important to say that it's largely all pre produced. A really interesting question posed in the blog by Ian King is was AI used because, for example, you know, they have key executives standing in front of the Golden gate Bridge in San Francisco and chrissy Field the Palace of Fine Arts, like very well
known known landmark, there are no people around them. I mean, these are places that I go almost every day, and I can tell you there's often at least five people there, more than zero, you know, if not dozens or hundreds of tourists. So that's kind of interesting. But you are right.
I mean, the notable thing is that Apple has a deep bench of talent you know, there are many product leads and number two's in the hierarchy that are part of this presentation, and that's become normal in the pandemic post pandemic era for sure.
Ed Ludlow, co host of Bloomberg Technology on bloom Bloomberg TV. He's got to get back to that demo happening at the Steve Jobs Theater at Apple Park in Coupertino, California. Ed, thanks so much for joining us with all the updates. Again, we do have a live blog going. It's contributing to that. We got a great team contributing to that. Do check that out on the Bloomberg terminal and at Bloomberg dot com. Well, speaking of Apple, it's worth three point four trillion dollars.
It's more than any other company in the world. Twenty twenty three revenue came in at nearly four hundred billion dollars. It's about as big as the entire economy of Denmark or the Philippines. Most of the business is about iPhones, but last quarter Apple sales just from digital services reached twenty four point two billion dollars. It's more than the combined revenue of Adobe, Airbnb, Netflix, Palanteer, Spotify, Zoom and
x from Elon Musk. Investors seem to have no problem with this kind of dominance, as Apples storing stock price over the past decade, it makes clear regulators, on the other hand, have some questions. It's today's Big Take, written by Austin Carr and Max Chafkin. Austin is a Bloomberg News technology reporter. He joins us from our Boston bureau. Check out their story and more from the Bloomberg Big Take on the Bloomberg Terminal and at bloomberg dot com
Slash Big Take. Austin give us an idea of the way that regulators, not just here in the US, but around the world have attempted to take aim at Apple's dominance, and also described that dominance this so called Apple tech.
Yeah, so the controversy comes down to how much Apple controls its ecosystem, what they will let into It's so called waldgarden, the sort of confines of its platform. And the truth is they don't let a whole a lot in that they don't regulate review and also charge certain commissions and fees on which is what a lot of developers are taking issues with. If you want to see where the market is seeing a little bit of change.
It's actually in Europe with the DMA, the Digital Markets app with the European Union has put Apple on a under some pressure to actually change its ways and open up that's Apple Guard, that walled garden effect. So actually there you're seeing some pretty novel differences with how you
have an iPhone in the US. Just for example, they're opening up alternative marketplaces in Europe, so you can actually download a different app store if you want a different set of experience from different software makers, like Epic Games
or another called Alt Store. In fact, over in the EU, you can actually delete Apple native apps, like soon you'll be able to delete the browser Safari, the camera app, and even the app store itself, which is opening up a sort of fundamentally different experience that's a little bit more flexible and open than what we have in the rest of the world. So that's actually a good preview of what you might see on the horizon depending on how regulation shapes up in the US.
And it's interesting because you can trust that with investors. It feels like potentially a case where regulators are and investors are at odds here because I don't know, Austin, do you see any signs that investors are uneasy with just how dumb an Apple is?
No. I mean, I think that lock in effect is actually what ironically makes it so enticing for investors and also such a beloved company for consumers. I mean, look, the tough thing for the DJ here in the US, which filed its anti trust complaint earlier in March, is that what they take issue with the way that Apple controls its ecosystem and integrates its hardware, software and services
is usually what consumers really love about it. You know, we like that it works really together if you have a MacBook and Apple Watch, AirPods and an iPhone at.
The same time.
We don't really quite grasp that because of that integrated experience, what it's locking out it can be a detriment to the experience itself, even if we like the Apple sort of day to day incremental updates. So I think actually today's event with AI, where they didn't really release any new AI features that they hadn't already previewed, they're not
actually going to come for a few months. That's one example of the ways that perhaps they're not incentivized to move as fast and as risky and as innovatively as they had in years past, because there's not a lot of risk that I as an iPhone user and going to leave to a different ecosystem.
Right, Well, let's talk about that a little bit more, because we're talking about regulators. Then we talked about investors, and you bring up the end user of course, the customer, the person who is buying into this walled garden. I mean, what is the sense there are users getting frustrated with the fact that you do have to buy into an ecosystem. You can't really buy just a product one off and then integrate it with other products from other companies.
The thing is that this isn't an overnight switch. This is something that they've essentially been building out from when Steve Jobs came back and released the iMac, then the iPod and so on. You started building up that ecosystem over the course of decades, where if you have an iPhone, remember that device came out before there was an app store.
Then they introduced the app store a year later. Then they introduced a lot of companion devices like the iPad, like the Apple Watch, like air pods, and then on top of that part of what makes CEO Tim Cooks
Era so monumental has been this push into services. So you subscribe to iCloud, you subscribe to TV plus, fitness subscriptions, things like that, and so these are all things that add on to the experience and make it just that much easier to add a new Apple device or a new Apple subscription because that's your default, that's what you're going to want to add to. Now. That also makes
it easier to escape that ecosystem. You know, once you've invested thousands of dollars in the Apple ecosystem, you're not going to suddenly overnight switch to a Windows PC or a Google Pixel phone just because they add a new AI feature. It makes that sort of mote that Apple has all the wider because it is very difficult to people not just to switch one device, but to switch
their entire portfolio of hardware and software. And I think that's why shareholders really love Apple stock, because its mode is so wide. It's walled garden barriers are so tall.
Austin and you and Max I love the way you start the piece that iconic nineteen eighty four Apple ad the sort of David versus Golias, you know, and where Apple has come since then and from then. I wonder, just in the last thirty seconds that we have with you, what the biggest threat to Apple is right now moving forward.
I mean, I think it is sort of a feeling of incrementalism of you know, things aren't seemingly disruptive until they are being able to disrupt, until they are disrupted.
You know.
I think when chat ChiPT came along in late twenty twenty two, that shocked a lot of people. No one had ever seen anything like that. And here we are two years later and Apple's just getting around to rolling out its AI features, many of which won't roll out to twenty twenty five. Now, did that disrupt you know, sales of the iPhone going forward? No, there's not really a chat ChiPT phone that's out there. But you can see the risks of sort of slowly introducing some of
this this innovation. You know, it has downsides for consumers. At what point are they going to say, you know what, I want something a little bit sooner. I want something a little bit faster and cooler.
Austin Carr, one half of the team that did today's at Bloomberg Big take. Check it out at Bloomberg dot com, slash the Big Take, and of course, on the terminal.
You're listening to the Bloomberg Business Week. Catch us Live weekday afternoons from two to five pm Eastern, Listen on Apple car Play and then brout Auto with a Bloomberg Business at or watch us Live on YouTube.
Home sales in Manhattan rose to the first time in two years. This was in the second quarter of the year. This as impatient buyers who'd been waiting for interest rates to fall took the plunge. Closings of co ops and condos byke twelve point two percent in Manhattan in the three months through June from the same period in twenty twenty three. That's according to appraiser Miller Samuel and brokerage
Douglas Elman Real Estate. The median price of one point one eight million dollars in the quarter dips slightly from year earlier, still though hovering near record since rate stored back in mid twenty twenty two. For an update on how things look in this quarter and forward, we turned to Barbara Fox. She's president of Fox Residential Group. It's a brokerage firm that works with buyers and sellers throughout New York City, and that is where this afternoon we
find at Barbara. Barbara, how would you describe where we are in the third quarter of the year, now that we're in the final month of the quarter.
Well, it's an interesting market and we can rest assured of one thing. Our market never is static. We came off of a very slow summer, very little activity, and it didn't really change prices very much. But we're now into a little bit more of an active, frisky market, one that we haven't seen in a while.
A frisky market, A frisky at New York real estate market. I mean, what does that mean in terms of prices? And I mean actually zooming back from that even what do you attribute that to? Because of course rates have come down, mortgage rates, but not by that much.
They haven't and we're not going to see the mortgage rates we saw before ever again. And I think people are getting more used to that. You know, everything becomes a new normal in New York. The what's happening right now is that there is very little product on the market.
There's a real shortage of products. There are a lot of apartments on the market and properties, but there's a shortage of compared to other periods of time, but prices have never been higher than they are right now, So you have sort of this juxtaposition of two things that
don't necessarily jive. What we really are seeing is with this increase in activity that's come up in the last couple of weeks, and this actually started before Labor Day, I think people are realizing that everybody, you know, there's a market, always an active market in New York. It's
just the degree of activity. So people are thinking that, you know, it's time to start looking again, because once more comes on, the more product comes on the market and more people come into the market, the prices, it will push the prices even higher. So buyers will looking still looking for good buys which they can still get and and it's it's just interest rates probably aren't going to go down too much more than they have already.
I think the UH they averaged about six and six point three five percent over in the last eighteen months or so. I'm not sure something like that, and I don't think they're gonna we're going to see interest rates much for a six percent. So people are getting used to these new numbers. People still need to buy things. They need to buy homes, and I really think that the buyer demand is going to pick up as long as interest rates don't go back up.
Yeah, and of course, I mean six percent is still so high. Uh, it's not four percent historically, though, certainly better than eight percent.
Yeah, and better than where things were in the nineteen eighties. That's what you know. Carol always reminded, I was.
I was in the business in the I was in the business of the eighties, and we we had eighteen percent interest rates at that point. I know, it's crazy, I cannot and then they went down to two three percent, so go fig Yeah.
Well, let's talk about about the price dynamics a little bit. I'm looking at some of the listings that you have, the sales you're currently representing some pretty big price tags multimillion dollars there. I mean, are you we seeing big markdowns? I mean, how are Okay, maybe these buyers are getting used to, you know, interest rates where they are, but how are we seeing that translate into the prices that sellers can ask.
For When you're in a market which is very volatile as we are seeing now, And I think this volatility will pretty much remain until after the election. I mean, we have so much bad stuff going on all over
the world right now. It's it's going to be volatile for a while, and sellers need to understand that even though their prices are are they even though they price their units at a certain point and hopefully they've gotten some good advice from brokers, it doesn't necessarily mean there's going to be a buyer to buy it at that price point. So sellers really need to be lefts rigid in their expectation of sale prices in this kind of
volatile market. I think finding, particularly in New York, finding the right buyer and the right timing is a little more important even than finding the right price, and prices are always negotiable.
So, Barbara, over the last few years, when we've spoken to you, and we've spoken to folks in New York City who are in the real estate industry, we've seen different themes emerge. Early on in the pandemic, it was people leaving the city, and then a little later it was people coming back to the city. We saw an
explosion of all cash deals when rates went higher. Initially, what's the pattern and the theme that you're seeing right now when people are who are moving to the city or moving within the city, why are they moving and how are they buying and where are they going?
Well, I don't think there's any great desire to move out of the city right now. We're not seeing a lot of that, which is why the supply of apartments and properties in New York and Manhattan are so low. There's not a lot of people moving. There are not a lot of people moving for a lot of reasons. But for one reason is they they a lot of people are sitting with these fixed three, two and three or four percent interest rates and they don't want to have to redo those into a six or seven percent
interest rate, so they're not moving for that reason. And just generally, I don't think that there is a particular there's no desired to escape the city anymore, and that was very prevalent after COVID and during COVID. But I think a lot of people have moved back to the city and are happily ensconced here. And that's great, and you know, everything that's great about the city remains really great, and it's very buoyant.
Right now, Barbara, we're gonna have to leave it there. Do appreciate you taking the time. Always good to check in with you. Barbara Fox as president of Fox Residential Group. It's a brokerage firm that works with buyers and sellers throughout New York City.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Well shares of the cybersecurity company Secure Works rallied late last week Thursday and Friday, this after the company narrowed its total revenue forecast for the full year and Barkley's raised its price target on the stock. We've got back with us Wendy Thomas, president and CEO at Secure Work. She joins us from Atlanta. Wendy, how are you?
I am well, Thanks for having me.
Yeah, thanks so much for joining us. I want to talk about the latest quarter and then big picture of cybersecurity in just a minute. But talk about the most recent quarter, what worked and what investors really we're happy with.
They were thrilled that we more than met our financial commitments, growing our revenue and arr on our new security platform business. We are done with our transformation to build our AI platform and move our customers over to it, and that's led to expanding gross margins positively but cash flow positive quarter and all that on the backs of bunching new
products and offerings like identity detection and response. So we're thrilled with what we were able to deliver and we're nowhere close to done yet.
And maybe for our listeners who aren't as well acquainted with what Secure Works does, cybersecurity obviously a broad church tell us a little bit about what you do, who your customers are, whether of course it's businesses or you protecting individuals for example, with their own cyber hygiene.
So we do protect businesses and nonprofit organizations around the globe. We operate in about sixty countries around the world, and we provide a holistic approach to security for customers. In the industry parlance, it's called managed detection and response, but it is what it is across their entire technology estate.
We can detect any security events or possible security events, help them proactively manage their security posture to prevent breaches from happening and help them in the event that something does occur someone clicks on that fishing link, We're able to respond quickly again to prevent any expltration of data or deployment of ransomware, to keep those customers secure twenty four to seven, three sixty five.
Before we go any further, Wendy got to ask about some news that came out late last month from Reuter's Dell Tech exploring a possible sale of secure Works. According to Reuter's, they said it unidentified people familiar with the matter. Shares of secure Works that day jumped as much as thirty five percent. It was an intra day record. We do know that Dell holds pretty much all the company's Class B shares, so they do have about eighty percent of the company, and they explore a sale of secure
works back in twenty nineteen. Help us and our investors understand what's going on here.
Sure, there's no shortage of rumors in our technology space and security in particular, And well, I can't comment on speculations that come and go years past or currently. I can say that our shareholders talk to us about how pleased they are with the value that we have created in the business and that they are looking toward the future when the stock can really start to reflect that
change in the underlying business. We are absolutely at an inflection point focused on executing our business strategy, have completed this transformation and turn profitable, So it's not a surprise to me that the shareholder base is interested in the stock and sort of waiting for that inflection point to hit. And we've got the capital structure we need today and tomorrow to be able to deliver that for shareholder.
As a publicly traded company, you have the capital.
Structure, you do absolutely. I always view capital structure as a tool, not a goal, and the backing that we have had and continue to have from Dell is an important thing for us, but it's not everything to who
we are as a company. We were able to make this incredible investment in our platform, some two hundred and fifty million dollars in building out this AI powered technology for security detection and response, and that support has been tremendous from both our shareholders and from Dell's, our biggest shareholder, But it is not the thing that makes our breaks. Our ability to stay ahead of the adversary, or to become profitable, to grow our revenue. All of those are
moving in the right direction. And like I said, it's important to think of capital structure as a tool, not a goal.
Well, let's talk about some of the risks that are out there in the cybersecurity space. Of course, we are counting down to the US presidential election in less than two months to go. How are you viewing the threat landscape amid those upcoming elections?
Sure, so it is an important time in terms of a couple of areas of threat around elections in particular. So we think of things around the ability to use generative AI in particular right now for social engineering and sort of those fishing emails that are so much better personalized potentially scraping social media information about you, and also used for we call information operations right political misinformation or
interference in some way. And we do certainly see recent campaigns exposed by different law enforcement agencies, both in the US and overseas, targeting both the Trump and the Harris campaigns. These actions are to be expected that the difference is our ability to see prevent damage from those quickly communicate around those so that the wider community is aware of those.
It's so important to ensuring that we don't undermine even the perception of the integrity of our elections because our elections they are secure, and so between law enforcement the private security community, this is something that we're going to be particularly vigilant about now through November.
And I'm curious about how AI wraps into that conversation, especially with these developments and generative AI that you know we all watch. Do you think that that will make cyber attacks worse potentially or do you think that it'll actually help companies more when it comes to preventing attacks we're talking about just general attacks and also election risk.
Sure.
I always talk about the power and the peril of new technologies, and so generative AI is one of them. It has already for Secure Works been a boon to help with the effectiveness of our detection and response where we can use large language models to do a lot of the work to author an initial security report for our customers using the reports that our team has written, you know, thousands and thousands each year as the training
data for that. Now, we never let anything go out without a human expert looking at it, but having our platform explain and sort of consumable everyday language or even translate to other languages what we see in terms of a security threat, to take it out of the technical into the business speak. Those are powerful applications that are
already helping. When you think about the pyrel we certainly are seeing, especially in the realm of deep big videos, the use of AI to make old techniques, particularly around social engineering or phishing emails, harder to detect.
More belise, I mean, it's pretty terrifying. It's pretty terribly Some of the videos that I've seen, and they've been clearly marked as AI, they're out of this world accurate and getting better I can do. Yeah, it's pretty wild. What I mean, if people are you know, if people are convinced by fake like actual fake news, that's you know, clearly something that's not right. What kind of prayer do we have have, Wendy in this world?
This is all about. Even if they're able to convince a human that they are who they say they are in that video or that phone call or that email, we can use the power of technology to prevent data from going outside of our systems, to prevent to create multiple layers of checking things against a baseline or identity
verification that can prevent actual damage from being done. And that's why we introduced this identity detection response because this deep big videos, the phishing emails that are targeting individuals. Securing your identity, what you're able to access, what you're able to do is kind of the next edge in security because of this world of we can no longer count on our instincts as humans to figure out whether something is real or not. We need the machine to help protect us.
Hey, Wendy, you're joining us at the beginning of September, and it's something that we talk about each and every year as the anniversary of the nine to eleven attacks comes upon us. I was Katie looking over Lower Manhattan over the weekend and they have the lights up already commemorating at nine to eleven. Wendy, I know you've done a lot of work with the nine to eleven Memorial and Museum. That's actually how you got on our radar because you and Carol were down there doing a panel
in the fall of last year. I talk to us a little bitbout the work that you do there and how you try to keep the memory and the legacy of those loss there alive.
Absolutely. So this is the twenty third anniversary of those attacks, and we are incredibly proud to secure the memorial and the museum and have been for years through the pandemic and everything. I think we all remember where we were when that happened, and so for us, it's all about continuing to remember and honor the victims and survivors and
first response, but also to continue to fortify their cyber defenses. Unfortunately, they are under attack each day, and so by the nature of what it represents, they continue to be a high profile target. And our ability to help them scale their small team and equip them with the protections they need at a at a price that makes sense for an organization of their type. We're absolutely proud to do it as Cure Works.
Wendy always appreciate you taking the time and joining us. That's Wendy Thomas, president and CEO at Secure Work. She joins us this afternoon from Atlanta, Georgia.
I'm brothering Mack.
Journal about you let me drive?
Oh no, no, no, no, all right, please, I'll do these.
I want to try it.
It's a good question to good time.
This is the drive to the Globe.
Comer thing on.
Bloomberg Radio.
You know what time it is, Katie, Almost four o'clock. Yeah, yeah, pretty much three forty two.
Yeah, we're pretty much there.
Pretty much eighteen minutes ago until the close of trading on this Monday, the ninth of September. Kind of feels weird having a real full week, I know, given that last week was a holiday shortened trading week. I think everybody's back now.
So just in general, the five day work week is unrealistically long.
I agree with you. What does your boss think about?
Uh, you know, it's a hard subject to bring up.
It is.
I'm not going to make you talk about it right now. Instead, we're going to talk about the markets, because we got Katie Kaminski sanding By. She's chief research strategist and portfolio manager at Alpha Simplex Group. She joins us from Cambridge, Massachusetts. Katie, good to have you back with us. The volatility that we saw last week, Katie and I brought up some
of the superlatives a little bit ago. Yeah, worst week on the socks since twenty twenty, worst week for the and P five hundred going back to twenty twenty three, the regional banking crisis, Katie, is the volatility behind us in the short term?
Unfortunately, I don't think so. I feel like it's September's difficult month and October tends to be difficult. So there's just a lot of stuff up in the air right now.
Yeah, it's a good reminder that we are going according to script. We all know that September seasonally is terrible for the S and P five hundred.
We notice that, though I don't know, we.
Know that seasonally November is great. I mean, Katie, what is the rhyme or reason or do you just have to kind of respect seasonality here and let the market work through this spout of volatility.
Well, I think what we've really been seeing is the
market is going through rotation. We went through a period where we were really focused on inflation as the key culprit for monetary policy remaining on hold, and now we're shifting to a point where we're going to soon be going most likely through a cutting cycle, and economic data is coming out more mixed and more challenging, and so the market is focused on what are the impacts of this policy, and through that we're actually seeing some very defensive signals, especially outside of equities.
Outside of equities, we'll talk to us about that. Fixed income, of course, treasuries have rallied pretty mightily. It feels like maybe a make or break moment is approaching with the FED twenty five or fifty basis points. But how much does it truly matter for your treasury's position right now or is are just the direction of travel?
Well, it's that has been the strongest trend in the recent period, and I think whenever you have a really strong risk off type moves, it definitely is very positive for fixed income. The fact that we have rate cuts on the horizon that's also generally positive for fixed income, But it also to me, represents a little bit of nerves. A lot of investors are concerned about valuations and the equity markets. They're concerned about the impact of policy and
the timing. So I do think fixed income is sort of your go to right now. But we've also seen other asset classes like commodities be very different short signals there, and the dollar has really been under pressure as well, so a lot of moves in the last two to three months.
I'm just going to keep going tim you.
Yeah, you're you know what, you can do whatever you want, Katie. You are my guest here, Katie to.
Katie having a conversation right now, and given that you have this unique cross asset perspective, I mean, talk to us about how the different asset classes are talking to each other right now. Is this a very correlated market or are we starting to see some nuance in how the dynamic between these different asset classes are actually performing.
So what's been interesting to me is you've really seen a pivot in cross asset class themes. It hasn't happened in the equity markets yet, but this is very common during a period where we might have a recession or a crisis. But of course each crisis or draw down is so different in history. But if you look at a time like COVID, you actually saw somewhat similar signals to now. So that would be short commodities, long fixed income.
That's a risk off type of move. It really suggests that the market is a little nervous about growth and it's nervous about valuations, and so that is a big difference from what we've been dealing with for the last two or so years, where it's really been about higher rates, it's been about inflation, and so to us, it's definitely something we've been studying a little bit, just looking at how how often does this happen that you really see this type of pivot that looks more defensive in other
asset classes.
First, how nervous should we be about growth?
I'm myself a little nervous, and that's just because what makes me nervous is, you know, there's a lead lag effect in policy. And I think why people have been so concerned about different economic data coming out, particularly employment, is that maybe somewhat of an indication that the effect of tighter policy does actually have effects, and we might need to wait to see if cutting rates is able
to slow that down. And I think that's where a lot of people are going to be concerned, is that you could growth be stunted a little bit, and then that could cause pressure and equities.
I want to talk about sentiment a little bit here, because going back to the twenty five versus fifty debate, I've been listening to a lot of Neil Dutta, for example, who has just been pounding the table that this FED should move by fifty basis points you read into Christopher Waller's speech on Friday talking about the possibility of front loading hikes or rate cuts rather if appropriate, sort of opening the door to it but not exactly going through.
But we are in a blackout period for the FED, any of the likes of Morgan Stanley's Mike Wilson saying that that would really freak markets out if they want ahead with a fifty basis point cut. Where do you fall on what the FED should do at this month's meeting and we're what they actually will do, Katie.
Well, I think they I probably think more in the camp of Williams that twenty five is sort of starting the force of rate cuts. If you go with fifty, I would agree that that might sort of send a signal that we know more than you, that you know, what we're concerned about is real. And so I think starting with twenty five is sort of a safe way to start the process of easing. And so I think that I'm tending to think that it's going to be about easing into the process instead of jumping in.
Okay, how do you ease into it?
Starting with twenty five? I'd say, I mean, what that's yeah, sorry, oh.
No, I mean but what if you get what if you get data between now and then that says, hey, this is not something we need to be easing into right now. And if they do ease into it, then the market reacts negatively that Yeah.
That's tricky because I think we only have a short period and only a couple of numbers of data that's in between now and the first cut. And if you look at what happened in August, there was a huge reaction and the Fed didn't react. So to me, it seems that they would hedge themselves and say, you know, this may be one number, but we're looking at all the data and we're sort of going in that direction. So I'm a little bit more towards the camp that they'll be cautious.
All right.
Katiekaminski the camp that they should be cautious. She's Chief Research Strategies and portfolio manager at Alpha Simplex Group, joining us from Cambridge, Massachusetts.
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