Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Earning season, Folks, you know officially underway.
Three of the big ones already reporting, JP Morgan, Chase, City Group, and Wells Fargo. They were out this morning before the open. A bit of a mixed bag on what some would say maybe is a bit of a tough backdrop.
I'm looking at the stocks.
City is down two percent, Tim as we speak, JP Morgan just a little bit lower, down about one percent or just shy, but Wells Fargo really taking the hit the biggest on a percentage basis, down about six percent.
Yeah. Three of my decliners that you just mentioned just now, certainly, Hey, I'm all three sold off earlier in this set you just heard from Carol the latest and Charlie when it came to those numbers with our banker earnings round up with us, as Bloomberg News Global Finance correspondent Snali Basix she's here in our Bloomberg studio. Also, Cheryl Pate, senior portfolio manager at angel Oak Capital, joins us as well. Cheryl joins us from Atlanta. Okay, Shanali, the good, the bad,
the mixed. The results from the three give us the highlights.
Wow.
So the good news is that you did see a tick upward, for example, in investment banking fees at a lot of places JP Morgan that was fifty percent higher. The bad news is that, for example, at Wells Fargo, you saw weakness compared to what was expected in net interest income that was.
Coming though you know, yes.
But the thing here is is you did see interestingly yesterday, for example, when the CPI print was released and you saw that sharp moved lower in yields. You actually saw the biggest US bank sell off and the regional banks rally. And the reason you saw that was because even though you're seeing rates potentially come down, I think there's a massive question on what does this mean for that mix
that banks have. What happens to the deposits, but also what happens to the money that's being made from the loans that are being put out. Remember, we're looking at consumers with tons of credit card debt. Right now, you're seeing charge offs starting to rise. Provisions for loan losses were higher than expected at JP Morgan Fortress, JP Morgan, No one. It's not that people are really worried about
the health of JP Morgan. What they're more worried about is Okay, well, what does this say about the propensity of consumers to both take on more debt and pay that debt back?
Right exactly?
So?
Is there like so is it mixed? Do you say in general? Or is there any trend overall? Takeaway?
Well, think about it. All the big stocks are lower today after earnings, and not by a really small margin. They had a really significant runoff into this moment. You've seen JP Morgan Wells both at more than twenty percent city group thirty percent city groups still trading at around sixty six or so percent of book value, maybe a little less right now. But you know, the setup was pretty good going into this. The future is super uncertain.
Yeah, that's fair. I think that is so fair. Let's get to Cheryl. Cheryl come on in on the conversation. Listening to Shanali, who is usually up. I don't know at the wee hours and breaking it down and sending us all messages about the results. What's your takeaway about the three big banks that reported today.
Yeah, No, I think it's a similar perspective here. I really think a lot of the reaction today really hinges on the forward guidance, and I think, you know, there may have been some expectations that there may have been some upside to some of the guidance. The fact that JP Morgan reiterated I think was a little disappointing. And then you know, Wells on the other side, guiding to the high end in terms of in terms of NIM
compression or NII compression certainly was disappoint team. So we've been focused on guidance, on NIM and on credit and I think that the question mark really is on the forward guidance, and we didn't get a lot there.
Janellie, Jamie Diamond, we always listen when he speaks. It's a letter to investors, an annual report, or an earnings call, commentary from Jamie Diamond, anything of note.
He wasn't there today.
He was out celebrating the banks one hundredth anniversary in Germany. He was in Frankfurt.
Is that notable.
You know, it's interesting when Jamie diamond sneezes, everybody catches a cold.
Right, you know, is that what happened to me?
If he doesn't sound like Tim Stenovick, a deeper Tim Stenevik, it is people.
Want to look for a deeper meaning. You look at Morgan Stanley for example, and just kind of how sloggish the stock has been relative to the other banks, given that there has been a big change in leadership. There so much confidence in James Gorman. People are looking for direction from Ted Picken who he is as a leader. And if Jamie I'm in worre to step down than what the same questions arise for JP Morgan perhaps on
a bigger scale. So people do look for direction. But you know, perhaps like many leaders are doing right now, giving deputies time to breathe and make their mark is prudent coming into the next cycle.
So Chaneli, is that another sign that you know where I'm going with this?
You can't read into things.
I can't think.
We can't read into this, I don't think.
So he steps down. When he steps down.
He does, But he's also made some moves in the past few months about potential successors.
And to say talk for the first time ten years. Man, this guy has been making moves.
But didn't he say something different a few months ago?
He said that you know that five years, five years, five years thing that he always said that has gone away. It's the horizon is certainly smaller. The bigger question for me is are his deputies ready? Is Jen Pipsack ready? She's the one that people are watching the most.
Some would say he's being, you know, maybe really responsible as a leader to make sure that bench is ready to take over.
I want to bring Cheryl back in.
You're hearing us talk about Jamie Diamond, and we know there's more than JP Morgan, but we do focus on it. You know, what is you're thinking about the outlook for this company and then kind of who takes over and when they take over from Jamie Diamond.
Yeah, I think that's been a question for a number of years. Clearly as some of the commentary already look. I think this was a good opportunity to have some more people in the in the forefront, and I think it was it was done well on the conference call today. Timing, I think it is still uncertain and perhaps maybe it's It's dependent on where we go from an economic perspective
here too. You know, the data now is somewhat supportive of moving towards rate cuts and hopefully you know, it's off landing no landing type scenario, which which may be more opportune than than a more hard landing scenario.
Cheryl, I want to shift gears to City a little bit. City's down two percent, So if it's lows of the day down three point six percent at its lows today, City warning that costs likely to be at the high end of the forecast. What was your takeaway on City? What do we need to know about Jane Frasier and her team and what they're doing? And as Shaneli mentioned, I mean this is another one up twenty five percent so far this year.
Yeah. No, I think the execution so far has been good on the restructuring plan, and you know we are positive on the name for that reason. I think you know, this loops into the forward guidance and expenses have been you know, troublesome for the whole sector for some time, and moving to the higher end of the range again here I think puts more uncertainty onto the forward look. I think more of what will drive city looking forward. That is going to be execution on restructuring and also
working to deploy some of that excess capital. And I thought the buyback commentary was helpful from that perspective.
Today, Cheryl, what is your favorite choice among the banks and why?
You know?
I think today we would say JP Morgan would be our top pick. We do like the large cap banks generally given more diversification. We clearly saw that come through in the capital markets revenue, and I think, you know, JP Morgan was the standout winner there today. But also in case of looking towards any wobbles and credit going forward, the prudence the fortress balance sheet concept, I think really stands the test of time in a more difficult environment.
So that's you know, where we would put our top pick today.
Hey, just to wrap up, guys, just got about sixty second Cheryl, let me start with you and then we'll go to Shanali next week.
Holman Sachs. Bank of America, what is on your radar, Cheryl?
I think we're mostly watching for credit, particularly from Bank of America, and then starting to get in some of the regional banks. We've clearly been concerned about commercial real estate exposure, but also some weakening in the consumers side. I think we were encouraged today with the comments from JP Morgan on credit card and also City that it's just regular, sort of normal course normalization, seasoning of vintages.
But I think that'll be important to see out of Bank of America and then you know, the Goldman's and Morgans of the world. Clearly it's been a good quarter for capital markets, particularly strong investment banking revenues and equity trading.
Shanali very briefly next week, Bank of America, what are you looking for In.
Addition, in addition to what Cheryl was saying about credit quality, I'm also watching for trading because if you saw fixed income coming in a little light at JP Morgan and even City Group, that's a big, big, big business for Goldman Sacks. They have been leaning in on prime brokerage and of course Morgan Stanley equities trading as well. It was a huge bite spot this quarter so far. Let's see how that competition plays out.
All right, great setup of what's going on today and then of course into next week.
Shanelli Bossk, thank you so much.
As always, we always appreciate your input and the researchers end us.
I know this kid doesn't sleep.
Global finance correspond at Bloomberg News and Cheryl Pate are thanks to you as well, and the analysis senior portfolio manager at angel Oak Capital Advisors there in Atlanta. The KBW Bank Index little change and actually most of the names are higher in today's session.
Okay, So now to our other big focus this week, and that was two prints on inflation fed cho J. Powell updating US lawmakers on the economy and monetary policy, and then how it all played out in moves along the treasury curve. Carol's safe to say a reset on rates again, which makes us wonder have we talked out?
Yeah, it's a great question, and we've got a great person to answer back with us. Is Bloomberg News rates reporter Michael mackenzie. He's out there in New Jersey. All right, Michael. Another inflation print today. We had one yesterday. We definitely did see the treasury curve move. How are you kind of adding it all together? Have we topped out when it comes to some of the levels that we've seen on the treasury curve.
I think that's a pretty reasonable conclusion to control, Carol, I think the rally you're now seeing this week has actually one investor described to me as a bit of fomo. People who missed the top and yields back in April when we were around four seventy five, for example, in five years are now having to buy because the data
is slowing and the inflation picked. The inflation printly got yesterday on CPI was really important because there was a bit of anxiety going into that, but the fact that it came below expectations, the fact that it shows that FED is probably done enough here in terms of tightening interest rate policies is twenty twenty two that they are going to win the fight on inflation, and they are only get it closer towards that two percent target, And I think you're now going to get the market beginning.
We've seen some big trades go through FED fund's futures today where people are beginning to speculate on whether the FED will go fifty in September. I think that's not on the table at all at the moment, but it is interesting to see when you look at rate cut expectations for twenty twenty five, they're beginning to build again. His expectation of bomb market that the FED is going to do a lot more easy than people think, well at least what the FED says they're going to do
by next year. So I think there is a bit of pomo going on. Retail sales. Next Tuesday will be an important piece of data, and I think really it'll be the next couple of payroll numbers that we get, because if the labor market softens further, then I think you definitely get the cut in September. You might even get another one in November.
Michael Weed, we often ask you about a peak on the tenure, but how low could the tenure go this year?
Well, it's chatter today that you're going to see a three handle on the ten year. I think you.
Said three handle, You said a three hand.
Get below four percent? I think again, we're in this tricky period now where the inflation number was such a good number for the bomb market. You just cannot really assess just how big this buying is going to come in the drive prices down, actually drive prices up and yeelds down. Sorry, so, and we have been here before. We've had these big pivot trays that have been put
on the last couple of years. But the CPI was also It came after two days of testimony from Chair Power, and he kind of brought back to duel mandate for the fair here. He said, we're watching employment, and I think if you get cracks in in labor over the next couple of months, you're definitely going to see the bomb market rally harder.
So I am thinking we all are thinking about Monday at twelve thirty pm Wall Street time, when Fetcher J. Powell will be interviewed by David Rubinstein at the Economic Club of Washington.
D C.
Powell asked for this conversation.
Is this kind of a victory speech a little bit or I don't know, how are you.
I don't think he's going to play it that way. I think he's going to continue to be pretty careful. The one speech you really got to look forward to, I think is the end of August at Jackson Hall, because that'll be about what twenty days before the September eighteenth BED meeting, and that's going to be the pivotal one because then you have seen more data. Don't forget they're very data dependent. They keep telling us they're data dependent. I think Monday he'll be a bit he'll stick to
the script, the recent script. Then you know, they looking at both the labor market, they're looking at inflation. They probably he's probably has more confidence that inflation is coming down. Don't forget this week he said they didn't have enough confidence. So there may be he could get the market fired up again if he says we do have confidence. But
I think he's going to be pretty cautious still. But I think that Jackson Hole speech he makes at the end of August, that's going to be that's going to be the big thing, the big event for the market.
Michael, just thirty seconds. What about the July thirty first fal Reserve meeting? Is there any chatter of a rate cut?
There?
No, why not?
I think you just haven't seen enough data. I think the Fed has made it pretty clear they want to see a series of data prints. The inflation is moving the right direction. Labor market okay, unemployment rates ticked up over four percent. That's not enough to get the Fed to read You think about, you know, bringing right cards forward.
They want to give themselves, you know, play flexibility. Still, But everyone I've spoken to this week as even people who didn't think September was in play before now say it's in play and they expect to cut in September. Plased on what we're currently seeing in the days.
An amazing week again, Michael McKenzie, Have a great week and Bloomberg News Rates report. Michael McKenzie out there in New Jersey.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then Bright Auto with a Bloomberg Business app, or want just live on YouTube.
All right, folks, Tesla always on our radart fields like shares of Tesla did sell off earlier today, I think I'm just.
Gonna they turned around there up three point eight percent.
Now.
Yeah, we've definitely seen like a rally around Trail market right a little bit yesterday we did see the trade, though there was some pressure. The stock today was downgraded by ubs and concerns at the US Carmaker's shares have risen too much too soon, that's their words on optimism over its artificial intelligence plans. Meantime, Tim, we've got another story on our radar when it comes to Tesla, or should I say the anti Tesla crowd.
Yeah, the other EV startup that's persuading buyers to drop seventy thousand dollars on its EV's, but still has a big hurdle to get over and that is making money. The story is in the upcoming issue of Bloomberg business Week. It's coming out next week. It's the August issue we've got with us Bloomberg Technology co host ed Ludlow. He joins us on his Business Week story in our San Francisco bureau. And you know a lot about Tesla, you know a lot about Rivian. This is the focus of
the story that you wrote with Max Chafkin. How is the company doing?
It's hard to say, and we wrote four thousand words, so you think we'd come to a conclude. It's a great story, you know, So thank you guys.
Good.
Where have you two been all over the place? West coast, East coast again? Look, you guys kind of.
Teaching a lot of EV's, we have been.
I will exactly different, I know types, and I'm really grateful for you guys getting hands on with that world. Like the point or the open of the four thousand word BusinessWeek article is that Rivian or the first iteration of it was like the anti Elon anti Tesla. Tesla had small form factor cars, Model three, Model Y. They have Elon, and we you know, Elon is divisive. I think that's a fair and objective thing to say, frankly.
And so in the first instance, Rivian was able to sell it's kind of very large suv and very large pickup to that kind of market somebody that didn't want a Tesla but wanted MeV or just didn't like to be assated with Elon's products. But it had a super limited shelf life. Now they've hit reset, they are on Rivian two point zero, and we went super detailed on the strategy to actually stop burning through billions of dollars and start making some money down the road.
Okay, And I have a sort of how the sausage has made question for you because I imagine while you were reporting the story, news of that five billion dollar investment from VW came in.
Oh so, without betraying confidence, it's brilliant timing. It gives the story new life and energy. Like the way that I would put it is that Volkswagen almost comes in at the eleventh hour, and because an injection of five billion dollars certainly helps, even if the story is that you're burning through billions anyway, having some more billions is good. But Max and I certainly got the sense a few
weeks ago that something was happening. And I've got a pretty good track record, right I've broken quite a lot of news on Rivian, frankly, and I just had no idea. I didn't see it coming. You know, we did learn the backstory, which is that Oliver Bloom and Volkswagen were admirers of Rivian.
RJ.
Scaringe, the seer of Rivian, met with Oliver Bloom about less than a year ago. But like last summer in Atlanta, Georgia, where Porsche has its kind of excellent center. It's somewhere you can visit, and he rocks up and in the parking lot they've got some Rivians and he's like, that's kind of neat. But the idea is, like all car companies benchmark against each other by testing other people's vehicles,
and they kind of went from there. And the main thing you need to know is that Rivian needed money and it has some access to that now. But it's also kind of a big vote of credibility for Rivian that Volkswagen would turn to them to fix some of Volkswagen's own problems in this kind of shift we're seeing to electric drive train.
And yet Rivian, if you go back to late twenty twenty one, was a one hundred and seventy two dollars a share stock. It is down more than twenty percent this year. I said it used to be one hundred seventy two a shear it's eighteen dollars and fifty two cents a share today. So if it seems like it has so much potential, how come investors aren't really necessarily, you know, buying up shares.
Yeah, the concern has been does it ever move beyond being a niche player? You know, it built fifty two thousand evs across its two consumer cars and a van for Amazon last year. It will probably do fifty seven thousand this year. How does it get to like the four hundred thousand that Tesla does each quarter? And at one point it's market cap was lower than the cash it had on its balance sheet. And one way of interpreting that is that the market values the car business
that basically zero and so Q the R two. The R two is a smaller form factor suv. They have a new plan on how they're going to build it. It's going to go from their existing plant in Illinois instead of Georgia, where they still plan to build a factory in the future. That's going to be they hope the Model three moment, like Tesla went through, finally a mass market car. And the question that we pose or at least, like you know, Bradstone says, now that we
want to answer questions in BusinessWeek. I think we explain how the R two is going to get Rivian there based on interviews with r. J. Scaring's the CEO, and it's not going to be easy, but they have really thought about it.
Can we think about it the R two being like the Model three for Tesla?
Yeah, yeah, so like in scale, I think, like go back to what we started the conversation on the initial buyers were like the early adopters, the people that didn't want a Model three, so they wanted an suv and Rivian had the only three row suv on the market. But most people just want like the RAV four, Toyota Rav four or Honda CRV equivalent, and it doesn't really exist yet. The problem Rivian's got is that they've said, here,
we have it. It's forty five thousand dollars. They r two them and everyone else everyone's going to have like this little suv in the thirty five to forty five thousand dollars range coming in the next two years. So it's about kudos Serivian for also being quite good at technology. You know, the products are really good. They've just not been very good at building them. They're a startup, right that's grown super fast and time to grow up, get rid of the teething problems.
But that like you just hit on it, right, That's the holy grail though, whether you're Tesla, whether you're Rivian, it's not about spending seventy or eighty thousand dollars.
For an EV you want. I mean, if you're really going to.
Build out your business, you've got to get to that middle market, right or less expensive market.
That's where you scale up.
Yeah, and I think that the reason I really enjoyed the process is I covered Rivian starting when it was like forty people or whatever, and now it's thirteen thousand and we kind of really get into the head of CEO RJ Scarrange, And you know, he was generous with his time in terms of interviews, and of course I spoke to a lot of sources, but I think the penny dropped for him that he needed this R two to materialize more quickly, and that's why they're going to
build it at their existing factory in Illinois, not Georgia, because they can do it six months faster than they had originally planned, knowing that all that competition is going to do something at the same time, and.
Very briefly because there's a lot we want to get to in the last three minutes with you. Yeah, last question on this. One of my big takeaways was RJ. Scarrange really finds himself in the right place at the right time, whether it's MIT or whether it's with Lauren Sanchez.
Oh sure about that.
So in short, RJ is an incredibly impressive person. He is kind, he is held in wide high regard by everyone that I've spoken to, takes incredible care of himself physically. He's a micro manager from an engineering standpoint. The question is, like, you know, it's hard being a startup CEO, founder, CEO. He's been also brilliant at deal making, and so I also kind of explained in the magazine he's been an unreliable boyfriend, you know, the deals with Ford and Mercedes
to do joint ventures and joint evs. What happened to those? And so now with VW. He gave me a pretty strong response when I put that to him about why VW is going to work, and the answer basically was like, you know, we've proved that we're good at this. We'll see.
Yeah, all right, So listen, great story, killer story in the upcoming new issue of Bloomberg Business Week. So we highly recommend everybody check it out. That new issue should be it out next week. Having said that, we also want to get to an exclusive from you and Dana Hall yesterday that Tesla postponing its ROBOTAXI unveiling to October.
Okay, Ed, When Ed joined us to talk about this a few months ago, we said, Ed, is this really going to happen in August? Because because next year autonomous has been the big joke for about you know, eight or nine years when it comes to well a decade at this point to Tesla, so not surprise, surprise the market. We saw shoes close down by more than eight percent. Was it a surprise to you.
Well, it wasn't a surprise to me because, like our job, right in the course of our reporting, we spoke to sources and they said, yeah, it's delayed to October. The reason, according to the sources, is that I think Tesla and Elon wanted more to show. They wanted more prototypes to actually unveil when the event happens. One source told me that even as recently as this week, Elon requested that the design team make changes to the design of the
robotats team. So, as we always say, Elon's often late on the timelines or deadlines he publicly states, but he also often gets there at the end. And I think the anxiety in the share price was it had been on an eleven day winning run RSI for the technos or technicals out there was like in the high eighties.
And so much as Empsis has been put on the pivot, you know that Tesla in the long term, making evs and setting them to consumers will be a small part of the business relative to software sales are running on autonomous ROBOTAXI business.
Yeah, fascinating. I'm looking at RSI two relative Strength Index, and it's still pretty much overbought at this point, so you're right. It had quite a run as of late. Ed, so great to go around the world when it comes to EV's with you, so so appreciate it.
Have a great weekend, Our, Ed Ludlow.
He is co host of Bloomberg Technology on Bloomberg Television. Catch them every day at eleven am Wall Street Time on Bloomberg TV.
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Well.
Last night's press conference, President Joe Biden said European our are prepared to cut investment to China if it keeps up its support for Russia, offering a warning after NATO accused Beijing of enabling the invasion of Ukraine.
That's right, Tim.
He also reiterated that the United States is very committed to NATO basically bottom line. Earlier on Bloomberg Surveillance, NATO Secretary General Stoltenberg stress too the ties between the US and its European allies.
The United States so will remain a strong NATO ally because this also makes the United States safer and the stronger. The United States is big twenty five percent of the world GDP, but to get with NATO allies, we are fifty percent of the world's GDP.
Okay, that, of course is NATO Secretary General Stoltenberg earlier on Bloomberg Surveillance. I do want to point out too, there's a new story in the Bloomberg that says, whether it's Joe Biden nor Donald Trump, Europe knows it must stand alone.
So we want to get more on.
NATO, the role of the US, how the questions around President Bien's presidential run are tim impacting it all.
We welcome back Angela's senior fellow at Brookings Institution, also the author of Putin's World, Russia Against the West and with the Rest, Doctor stant also Senior Advisor to the Center for Eurasian, Russian and East European Studies and Professor Emerita of Government and Foreign Service at Georgetown. Early in her career, Carol she was a national intelligence officer for Russia and Eurasia at the National Intelligence Council and also served in the Office of Policy Planning at the US
Department of State. We're done with the interview again, out of time.
Hey, Angelia, it be so impressive, thank you for coming back. What's top of mind NATO, US, Europe, Russia and President Biden's political future. Where should we start?
So a lot we can with the NATO summit, which, from the point of view of the Ukraine Russia war was as expected, was successful, presented unity, continued support for Ukraine, said that there would be a bridge to NATO membership, although it's not clear what that bridge is. We're setting up a new NATO command in Germany and vs Baden to support Ukraine, seven hundred people there. NATO sending a civilian officer to permanently be stationed in Kiev to advise
the Ukrainian government on different things. So there was a lot that was signed, that was promised that was to Ukraine. A Ukrainian president was there. But as you intimated, hanging over this NATO summit for the Allies was the question of after January of twenty twenty five, will the United States still be committed to NATO, and we know that some of these NATO leaders that were in town for
the summit. We're also meeting with some of President Trump's foreign policy adviser to advise us to try and get a sense of the lay of the land. But there's a lot of uncertainty, and now some of these Europeans are saying we have to conceive of a world where Europe is without the United States as it contemplates its own security.
Well, angel to that point, just this isn't an anecdote. But on the subway this morning, I opened the New York Times app, as a always do, and I saw in the app that there were leave seven or eight stories about the press conference last night and about what Democrats are thinking when it comes to Biden's reelection chances. Not one of those stories was actually about the substance
of what happened at the NATO confab. And I think, and my question for you is how damn And this is not a knock on the New York Times, no question. This is what people are interested in and what this is dominating the conversation in Washington and abroad as well. My question for you, Angela is what does it mean for international the international community. If this is the focus right now and we're not focused on the NATO confab.
Yeah, I mean, there was precious little in the news about the NATO conference, which was seventy fifth anniversary, lots of preparations, supposed to show the strongest alliance and the history of the world, but it was so overshadowed by President Biden his state of health and the future of democracy in the United States, which is a shame because this was an important summit. As you said, it's the first time that NATO explicitly criticized China for its support
of Russia in this war. The Chinese were not happy about that. There was a meeting with Asian allies Japan, South Korea, Australia, New Zealand, and NATO and the Asian Allies are now cooperating more because obviously the Ukraine War and also the challenge from China, they're very much interconnected.
All of those things were really.
Overshadowed by this question of what's happening domestically in the US. And you know, I did watch the President's press conference yes today and on the substance of what he said about foreign policy, particularly Russia, Ukraine, but also China, the Middle East. That was all very coherent and good. But as you say, people are focusing on the style and his attitude towards everything instead of focusing on the subject.
So our story on the Bloomberg at two twenty seven pm Wall Street Time here is whether it's Joe Biden or Donald Trump, Europe knows it must stand alone.
Is that how you see it?
No matter who is in the White House come November, that is increasingly a Europe on its own versus really working with the United States.
I think that's a little over dramatized.
I mean, I think if a Democrat wins the presidential election, there will be continuity. I think there will be more pressure on the Europeans to spend more on defense. But in a way, the Biden administration has been successful in persuading many of them to do that, and so many of these companies are not spending more on their own defense than they were before. But obviously, if you think about NATO, the US is the biggest contributor to it.
If President Trump wins the election, then I think there are very serious questions about what will happen to Europe and the US.
European relationship. We know that he seriously.
Contemplated pulling the United States out of NATO when he was president, and even though the Congress has passed legislation trying to make that impossible, if that's what he wanted to do, he would probably do it now. Some of his foreign policy adviser, I mean, there are different people. We don't know who would get what positions, but some of them I think, and Sena advanced for instance. I don't know whether he'll be the vice presidential candidate or
notter what position he might get. He's been explicit that we should stop giving money to Ukraine, he should make the Europeans do much more for their own defense. So I think to say that Europe's going to be on its own definitely after January twenty twenty five is overly dramatic. But I think there's certainly near grounds for concerns in Europe that are quite well founded.
Angela, we have about two minutes left. I have two quick questions I want to get to with you. First Up, the relationships that we are increasingly seeing between Russia and India, Russia and China. There's a lot of jockeying that seems to be going on. Are you still worried about Russia and Vladimir Putin and his kind of longer term intentions.
Oh, I certainly am.
I mean I think we in the West thought they would try and isolate him after this war broke out, and of course he's less isolated now than he was when the war broke out, and even arguably before it. So you can see a company like India Fields, it's very important to maintain that relationship with Russia, irrespective of the war and irrespective of the fact that US Indian relations have been improving.
And to go to Russia just before.
The NATO summit began and on the day when Russia bombed this children's cancer hospital in ki if not the Prime Minister Modi would have known that before he went. Still, it says something about how Russia has managed to utilize this war to its own benefit.
Angela forty seconds left, hair, Now, I should US voters care about NATO and US involvement.
Because if Russia succeeds in Ukraine, and if Russia then sets its sights on some other country, we should remember that twice in the twentieth century the US was forced to support Europe in the war, because in the end it does threaten US security. If Russia makes huge strides on the European continent, it does affect us. We can separate ourselves from that continent.
So appreciate it you finding time for us on this Friday, and as you always seem to do.
Angela, thank you so much. Have a great excuse me, great great weekend.
Doctor Angela Stan, senior Fellow at Brookings Institution, also the author of Putin's World, Russia Against the West and With the Rest. Doctor Sten also a senior Advisor to the Center for Eurasia at Russian and East European Studies. She was a National Intelligence Officer for Russia and Eurasia at the National Intelligence Council and also served in the Office of Policy Planning at the US Department of State.
Comm a journal.
How about you let me drive?
Oh no, no, no, no, who's going to drive?
Alright?
Please, I'll do the gravels.
Let's wat I want to try it. It's good question.
This is the drive to the globe.
Don com a thing.
We'll buy around shold down on Bloomberg radio.
Oh, in our next lifetime, we're going to do Bloomberg business week after dark, after dark, and that conversation we just about drinking water before you go to bed.
Don't do it.
Let's just stop it.
Leave it there.
Having said that, more importantly, what our Bloomberg audience really cares about, not that terms like please master, please master, stop while you're ahead. Uh, we've got a rally in worry, but we're rolling over in terms of our best level. So we're not seeing one percent gains anymore on the S and P of the Nasdaq, but still up about eight ten percent.
Eighteen percent on the S and P five hundred exactly so far this year. Yeah, that's a rally.
Yeah, and that's why you you know, some would say, you know, you pull up something like RSI and you see some over bought indices or indication. Certainly you see that on the S and P five hundred. So yeah, Relative Strength Index.
Okay, So let's see what Dana Dioria has to say about that. Dana's cocio over at Investment. She joins us
from Pennsylvania. By the way, invest Net in the news cycle itself just yesterday Being Capital and Reverence Capital Partners said they've agreed to take investment at private accentuating the extent of investor interests in software firms exposed to wealth management that offer values investment at three point five billion dollars on an equity basis and at four point five billion dollars including debt.
All right, we know you weren't probably at the signing of the deal, but we have to ask you, does it change your world at all? Or what does this mean? Because we see some deals kind of happening, whether it's you know, acquisition deals being taking private. We talked about it with the big banks today that you know, the bankers are doing stuff.
How does it change your world, Dana? If at all?
It doesn't?
Right?
So, I mean certainly we're go for work with business sids usual, caring for the vision.
That we've had, and you know, I think that's why there's the interest in us to begin with.
You know, the.
Platform, the Pressment platform has done a lot to put together a financial ecosystem for retail advisors and their clients, and that's going to be increasingly important as we move forward. And I think there's just interest in that, you know, that value proposition that we've had out there and continue
to have out there. We've done a lot of the work, you know, to kind of put together these pieces of the system that we've you know, built as well as acquired, and you know, I think they saw the value prop there.
Frankly, Yeah, all right, So good to kind of get your view on it. Having said that, really interest in your view on kind of.
Where we are in the markets.
Our most read story on the Bloomberg we talked about some of the strategists that are out there that have varish views and that are potentially kind of being pushed out maybe or I shouldn't say that, but just it's very hard to be a bear in this environment, to be fair, and it harkens back to nineteen ninety nine, another environment where we saw a rational exuberance perhaps in the market, and then you saw it come undone is it?
You know, how do you think about it? Because markets don't just only go up. We know that.
Yeah, well, I think what you're seeing right now is some breath in the market. So when you think about the idea that markets have gone up and the you know, the e troups erc rally, but I mean, of course that's market cap weighted, right, And really, if you dive onto the surface, if you're sitting in something market.
Cap weighted or low tracking error to market cap weighted. It's been a great ride this year and last year.
But if you're in a more of an equal weighted type of a framework, or something tilted more towards lower price value stocks or small caps, it hasn't been as much fun. And you know, you haven't experienced a lot of that uptick. So I think you know now this last you know, obviously the news around inflation was very good for markets in general, but small cap stocks in particular finally catching a break because being more interest rate expensitive and also not being richly valued, and the way
the large cap peers are. You're actually starting to see some breath. So i'd say, you know, is there a room in the rally now for some other participation? That being said, of course, we're going into an election season, expect heightened volatility. Yeah, it doesn't surprise me at all that you're starting to hear chatter now for well, hey, maybe maybe.
Some of this is going to catch up with us. It can't all go up. We're very richly valued on a market cap weighted basis, So.
What do you mean catch up with us? Like, what part of the valuation catches up with us. Is it that earnings don't earnings don't match what investors expect? What is it?
Yeah?
So, I mean I think, you know, we were looking at the stand sixty forty model and something like the ninety seventh percentile of valuation, right where a lot of investors sit. I think when you're priced to perfection and you're also very top I mean concentrated on those largest growth growthist companies in the market. We all know there's a reason technology and communications are leading the way this year, right,
it's these magnificent seven socks. It's this story around AI and growth and yes, uh that that thesis could certainly prove out and we continue to have earnings that support that level of valuation, But there is there is at some point a question of you know, does do we have a dip in that story? Do we start to realize that AI is going to take a little.
Bit more time than we hoped to be transformative? Is that?
You know?
Is there a pullback expectation of something like that when you have so much concentrated in one thesis and one small part of the market I'll say small from the standpoint of number of companies.
Certainly there's room for you know, concern there. And then you know, going.
Back to why is there why is there a little bit more exuberance in the market around other parts.
Of the economy.
Of course, you know, the idea that we're finally going to get those rate cuts, you know, and we've we've had a fairly hawkish stance from our Fed, right, you know, the notion that perhaps we could even get a cut in September, at the very least a signal of a cut by September.
I think it's starting to bring other parts of the market into the game.
Did yesterday did yesterday's inflation report? Did that change your view of timing of a cut?
Well, I mean, I think for a lot of people, it obviously brought the thought that it's going to come in September. You know, maybe there was maybe the expectation was that the Fed would wait until after the election. Now I think a lot of people are expecting that it would happen in September. I would say from my standpoint, it made me think September is certainly much more possible. I do think also the FED may just signal in September, you know, or I don't think July is in play yet.
And it may just signal it plans today earlier too.
Yeah, yeah, Hey, Dana, what I you know, really want to find out from you is I'm looking at the rustle It's up about one point three percent. It was up three point six percent yesterday. It was an use to see a fair amount of momentum, to say the least this week. So as you say this broadening out, got new money to put to work, where do I put it?
Yeah?
I am a proponent of you know, looking at those areas of the market have been ignored. I know, valuation has not seemed to matter. And you started with it's hard to be a bear in this market. I'll say it's also hard to be a value investor. But nevertheless, I think, look, if you have money to put into the market, I'm taking the assumption you've already got a big chunk of money in the market that's your standard investment. It probably looks market cap esque and that means you've
got a lot of large cap growth tech already. So you may love the AI thesis. You're already very heavily bedded on that thesis, whether.
Whether you know it or not.
I would put it more towards area of the markets that I have been ignored, that are you know, small caps in particular, right, small value tends out perform over time. These areas of the market are ower than average.
And their valuation.
All right, we're gonna leave it on that note, Dana, Thank you so much. Dana Dioria Cocio over at Investment joining us from Pennsylvania. The Russell is up more than six percent. Russell two thousand, up six percent this week. If I look at the S and P five hundred, just shy of one percent, it's.
A broadening out of the rally. Yeah, yeah, that reclebration hen you live?
Does it continue?
I don't know, find me the.
Answer to that makes earning so important?
It does, especially for those small companies.
Yeah exactly.
But from the large cap do they live up to those expectations.
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