Bloomberg Markets Special Simulcast Day Three

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. Just about two pm here in New York. This is Bloomberg Market Special markets coverage on this day and all week, as simulcast on Bloomberg Radio, Bloomberg TV, and on YouTube. We welcome all of our audiences across all of our platforms. Here Romaine Bostick, alongside

Kritty Gupta and Tim Stanebek. We're gonna be walking you through all the markets as we count you down to the closing bell in just about two hours from now. Looking at SMP five, find basically unchanged on the day. It has been a good portion of the day, down in the red, now starting to tick into the green here forty seven ninety right now, up about a tenth of a percent the Dow Jones industrial laverage. If you're looking for a bright spot, that's where you're gonna find it.

Thirty six thousand and four ninety if you're counting, that would be a record high. If it were to close at that level, up about two tents of a percent. You're to year yield drifting slightly lower here but still

camped out at around seventy five basis points. And as far as some of the other risk assets out there, including bitcoin, you can call it flat on the day forty seven thousand, five forty six as measured by Bloomberg pricing relatively unchanged here on the day Wednesday here, uh, the third day of of the only three days left here, I should say, in uh the year for trading. All right, Let's go straight to our first guest, Timcreaty gonna be joining us in just a second. Here. We want to

bring in our C Peck. He's joining us right now from Fearless Wealth Core. P is the c I O over there. R C. Great to have you here. Uh. You know we've they've been saying all week long. I mean, we of course look at the day to day moves, but a week long, we've kind of looking back and trying to extrapolate, you know, how investors should sort of feel about coming off these just phenomenal gains, gains that to some extent we're kind of unlikely. And I'm wondering

just how optimistic you are about the next year. I mean, from a stock market point of view, I am very optimistic. The market sees what the Fed is doing, It is digesting it actually quite fast. Um. I love the Nasdaq one hundred. It continues to do well. It's a little under the SMP five hundred this year, but really I think is gonna be a great year, and it's gonna probably put off a lot of people because it will be such a good year. So are so you think

the NASDAC outperform the SMP five hundred. I do absolutely What what what will drive those gains? So one of the things I looked at is what happens to the SMP five and the NASTIC one hundred when the Fed keeps their balance balance sheet flat or slightly down, and the lear winner is actually the Nastic one D it loves when the FED keeps its balance sheet flat. So we can only go with what's happened. Of course I could be wrong, UM, but I'm going with what what

index loves a flat balance sheet? R C. Let's talk about what's in the index now, of course, is going to be the majority of tech. I really want to ask you, though, what kind of role is tech playing in this? Is it a haven? Is it an inflation hedge? Isn't your classic growth play or perhaps a value plays kind of like keep peace of someone's portfolio. What role does tech play? It's a fair question to ask because of the Nasteck one hundred is quote unquote tech, right,

and the S and P is Tech. So tech is eating the world right. The largest staples company is tech, Amazon, the largest communication company is tech, and the second largest communication company is tech, Google and Facebook. So I we almost have to think of a new way or to think about what tech is. It's it's eating the world if you're in the United States. We're lucky in the fact that most of these just major major companies are

in and based in the US. UM. And I think it's going to continue happening because, especially with the pandemic. It's accelerated the reach of technology companies. I can talk a little bit here about I guess how you structure or portfolio in this environment. We talk a lot, of course about how I guess you could have just kind of ridden the coattails of tech. But that's not gonna

work forever. In the old days, and some of us are old enough to remember when you know you could actually, you know, buy bonds and that would actually give you some sort of return. That's not happening anymore, at least

not on a nominal basis, on a real basis. Excuse me, I am curious as to whether, as folks sort of look at their portfolio going forward, whether there's a strategy they can take where they can sort of participate, I guess, and whatever sort of run up we do get in the riskier assets, but still find a way to sort of protect themselves when that eventually falters. You know, there's probably two ways you could go about that. Um One would be there is one bond that's doing well in

place you protected treasuries, tips they're doing well. They're basically the only type of bond that is doing well right now. So if someone wanted a non equity, lower volatile asset. Looking at the tips is a very fair simple investment

type of asset to add to the portfolio. The other is, and I don't know how heretical this sounds to people, but to own the index that is winning and has been winning for one twenty years, which is the nasdeck but or nastic one, but place some stop losses on it, right, So maybe you cut out of a quarter of your

position if it closes down from peak high to low. Right, So you could use it that way and you'd still get the upside, but you could start to lower the volatility and the downside by having some kind of circuit breakers there. When it comes to equities, I know one company that you're bullish on is PayPal, despite the fact that it's down from its peak just a few months ago over the summer. What makes you so bullish on the company. I don't think it's going anywhere. It's you know,

over two billion um. Clearly it had had a double top. If you look at a price chart it you know it's it's in a correction phase, ites down intra a day from the top to the bottom. It is adopting crypto it is moving in that direction. It has Venmo, which is moving faster in that direction. It is absolutely taking a hit along with other growth slash crypto leaning equities.

And I don't think it's a close your eyes and buy, but I think if it breaks and stays above two, putting three of your money in it is a very good upside, you know, managed downside individual stock our c Let's talk a little bit about what's going on outside of the stock market, and that of course brings me to commodities. You mentioned cryptocurrencies for a second, but I want to go to another currency we're looking at, which is gold. I guess it's a commodity currency, whatever you

wanna call it. Gold really needs to kind of respond to what's going on on the inflation front, on the fed front. Why is it not doing anything? Yeah, I completely agree. For sixteen months it's been trending down. Um, there's a couple of reasons. One maybe if you're over sixty, you still believe that gold is the hedge for inflation, for money printing, for balance sheet changes. But if you're under fifty, you're not looking at gold the same way anymore.

So I think gold has lost a lot of its buyers, and has those buyers have moved to other assets. I think that's one of the biggest things. Now, Look, if it starts moving up, let's buy it. But if there was ever an environment for gold to move higher, it would have been the last sixteen months, and it hasn't. Yeah, and now you're staring down a potentially uh some degree of great normalization that could take some of the bloom

off of that rose further. Here, a lot of those folks who would normally turn to gold in this environment r C i'll have turned to cryptocurrencies here. What do you say to folks who come to you and say how much should I allocate? Well, I find just find out volatility that can handle in a maybe a five or ten percent of their portfolios. So let's just take ten on the big end. Someone has a million dollars

and we put ten percent into crypto. First of all, I'm probably gonna put in one of the big five cryptos, and I'm going to say to them, expect this to either be cut in half and then you have to, you know, bring it back up to ten percent, or don't be surprised if it doubles or triples and then

after a year we rebalance it back down. So to answer your question, I think an annual rebouncing is going to allow that you know, that bug called volatility to be turned into a feature, and then I think it can be something that's not only survivable, but can I actually help your portfolio. R C. Peck, big thank you to you for joining us, the CEO of Fearless Wealth, thanks so much for taking the time. What is Tim

Stead of Creedy, Gupta and Romaine. You own gold, Tim you're under This is Bloomberg Market's a special coverage edition here all week long, of course, Uh, welcome in and all of our audiences across all of our platforms Bloomberg TV, Bloomberg Radio, YouTube, Romain Boston Creaty Group to Temps Stanegg. Keep an eye right now on the commodities market settlement of NIMEX screwed features coming in right now above seventy

six dollars a barrel. We should point out we did get that e I A data a little bit earlier today at three and a half million barrel drop in the most recent week in US inventories. That's providing a little bit of a boost here. Unfortunately, you're also seeing a little bit of a boost and gasoline futures if you're paying at the pump there. Keeping an eye here on cotton as well, we're actually seeing a lot of pressures not only on the supply side, but on the

demand side as well. That continues to underpin what's shaping up to be on a phenomenal year for copper futures. If you're an investor, if you're an a buyer, that's not necessarily working out right now, And I want to bring your attention for our viewers here to the third line of your screen on coffee futures right now, US camped out right around to twenty eight year, up about

one and a half percent here on the day. Based on the games that we have today, we're now up something like seventy percent, so that surpasses that seventy run we had in two thousand and ten, and that's now setting us up for what could be the biggest annual game that we've seen on a rabbit of beans, at least in the futures market. Going back to a new data out new reporting out right now by e comp Trading saying that world production may actually slide in two

which of course could underpin prices further. Guys, So basically everything in the commodity space higher here. If you're buying oil, you're buying gas, you're buying coffee, you're buying cotton. Eggs even gone up, Tim, I'm told hopefully wine doesn't go up as well. Yeah, that's the question. I mean, you're talking about coffee, but I'm thinking about wine. Because joining us right now is Alex Ryan Duckhorn Portfolio, President, CEO

and chairman. Duck Horn Portfolio produces luxury wine and spirits. It includes Decoy, Postmark, Klera, Canvas Back and more wine brands. Alex, thanks so much for joining us. You went public earlier this year. Shares are up more than fift since going public, though slightly off of a June peak. Give us an update on on how holiday sales were. Were they strong? All day sales are really strong. Thank you. UM. We've been working to get the UH supply chain set up.

We were our partners were prepared for all of our some new innovations and our in our in our standard traditional mix and people love luxury wine UM for a lot of reasons. It's very traditional. Pulling out of the pandemic celebrating a challenging year. UH sales were excellent during the holidays. We expect that to continue into the new year. Let's talk about supply chain issues for a second one. Have you had any into how might you be dealing

with them? We really haven't seen a significant impact. I know it's a it's a it's a very hot topic

right now. On the incoming supply we're able to get wonderful, wonderful grapes from throughout California and the state of Washington where we're centered in those two wine growing regions, and we've been able to get the grapes we need, so kind of the incoming supply chain has has been managed very very well, and I'm confident that we're going to continue to have enough luxury wine to sell into the future.

On the on the distribution side, you know, with a very diversified distribution platform with some really really good partners, and that diversification has allowed us to make sure that all the wines people want hit the market when they want them, especially around this critical fault period. So very few disruptions on our side, and it's really due to the diligent work of a of a wonderful staff. I have Alex talk a little bit about the quality of

some of the grapes that you're getting. There was a lot of concern, particularly in nineteen last year and to a certain extent this year about some of the wildfires and some of the smoke and how that may or may not have affected some of the crops at least coming out of some of the Napa California regions. Here. With the latest harvest that we've gotten, the latest vintages here, how much assurance is do you have right now that what you got? I guess, uh, for lack of a

better phrase, taste good. Because we're really good at what we do. For forty years, we make luxury wine. And the recent harvest, the harvest was not fire affected, uh, and we had a really great growing season. Um uh. So we're very fortunate that respect again the diversifications the name of the store for what we do to preserve

the customer's best interest. So through that diversification, we're able to get the great quality and the great styles that we that we need to continue to make great wine. And so I can assure you as you asked, that they vantage is going to hit the mark and then some for this year. Alex, I know that you said that you've been able to navigate supply chain challenges pretty well. But look, you're gonna have to pay more for shipping if gasoline prices continue to go higher. Uh, wages, we

all know what's happening with it with wages. Price increases for are you gonna have to make them? Uh? No, We're not gonna force to make them. We're a luxury product, as you know, a luxury premium price wine products, so um um. Traditional and planned price increases are kind of built into our long term plan and we're thinking the long term. That's kind of what the wine business about. So we will have and execute scheduled price increases accordingly.

But I don't think you're gonna find up being reactionary to the market. That's just not fair to the consumer, and so we'll be very measured to how we approach that. But we do have pricing increases that you would expect over the next several years built in the long term plan. But again, we're not gonna We're not gonna do anything

rash or or or a reactionary Alex. At the end of the day, wine is a luxury product has been a fantastic year when it comes to just luxury sales broadly, when it comes to wine or clothing or other luxury goods. I wonder, though, how much of that is going to continue into two. Do you see that's the momentum really sustaining into the new year? I do. That's the best question of the day. I do you know, Um, we've been taking share now for the last several years and

starting to pay back wonderful dividends. People are getting exciting about our brand or divertified brand and portfolio. I think wine is a wine's a celebratory lifestyle, if you will, and I think people not only want that, but need that, and historically that's proven true. So I think that the interest in wine, especially domestic California of West Coast United States wine is going to continue. UM. I think the shares we've taken uh in in in market games over

the last several years are starting to pay off. And I think people want to celebrate with friends and family and they want wine to be part of that process. So we're encouraged and we think that that that trend is going to continue into the new year and beyond. All right, great stuff, Alex, I really appreciate and you catch up with us. Alex Ryan there, of course, the CEO and chairman of the dark Horn portfolio. This is Bloomberg Market Special coverage all week long, a global simulcast

Bloomberg TV, radio and YouTube. We welcome all of our audiences across all of our platforms here, Romaine Bosti, Crety Grouped Attempt Stentovic here, keep an eye on the markets. Basically a sideways day here for the SMB five hundred, the Dow actually trading at a record high. As far as some of the individual movers. You're seeing Apple slightly higher here on the day, but not really getting a

whole lot of juice here. Tesla shares also moving higher by about four tenths of represent one of the big decliners today is actually Too Simple. That's company of course that makes these uh sort of technology for self driving trucks.

Here the shares have been higher on the day, but they've actually flipped here in ABC slightly up marisource Burg and I should point out slightly higher here up about six tents of a percent and pretty You know, when you look at this market and you talk about how phenomenal of a trading year that we've had here, and then you look at out of the tamp down in

this final week of the year. Is there anything that we can read into that as we move into well, you know, it's interesting that the investor base really kind of took the Santa rally for granted that no worries will just kind of be in cruise control for this last week of the year, and yet you are seeing hurdles that record high on Monday, but romains since then,

Marcuts have been under pressure. Yeah, they certainly have um, but you know, under pressure and kind of relatively small moves, especially compared to what we've seen for much of the year and then what we've seen on Monday and last week. But if you open up the hood of the SMP five on either side, you do have some stocks making

big moves. I mean Home Depot, you have Procter and Gamble, you have Micron all to the plus side, and then laggards include Amazon and Video Facebook, so tech really weighing down those gains that were pop Quiz him, what's the best performing SNP stock this month. I'm gonna stay Home Depot group just because of that, just because of the acquisition. All right, let's see, I'm gonna give Abigail do a little all right, she's standing by all right now with

the up broader. Look at what's going on in the market, Abigail, what are you watching? Well, Roman, I'm watching that sideways action that you were talking about. Investors basically treading water in this final week of trading, and of course volume super light fort below the twenty day moving average to a lot of folks not at their desks, whether in the office or at home, and the NAZAC over the last two days is underperforming just a little bit. A lot of those big names that you guys were just

talking about, Amazon, Google Meta are lower. However, the reason that we seem to be having a little bit of a pop here Biogen up about ten percent. Of course, on that Korean report that UH Samsung could possibly be

doing a takeover. Sort of interesting because that would be a completely new vertical but definitely giving life to the NAZAC, which has been mainly lower all day and right now flipping between small gains and losses, but at least there's a gain there, and the SMP five hundred being helped to a seventieth record close, potentially, Fabio, what is holding the market back? We saw that record high on Monday. Why are we not just hitting record highs every day

since then? You know? Creaty. I think that when you have a year where the SMP five dred is up almost twenty already year to date, up for a third year in a row, the third the seventh double digit year UH in the last ten years. The fact that you have a small pullback from that record high and Monday, it's not really too too big of a deal. Again, not a lot of folks at their desks right now.

And Tech, even though it's a little bit weak today, it's been a real UH standout up thirty on the year, and one reason the earnings growth for this fourth quarter expected to be very strong, around twenty seven percent. So I think that there aren't any problems that investors are looking at right now. It's just a lot of the fact that a lot of people may not even actually be in their seats. Oh don't say that, Abigail, Abigail, do a little there before she's in her seats. Meet

Tim and Cretty. We're here. We're not going anywhere on the SMP five hundred. Jo's industrial lavage at thirty six five eleven. That is a record high if it holds into the clothes joining us right now, Paul Christopher, head of Global market Strategy for Wells Fargo Investment Institute. Paul, let's look ahead to two. We've done all these surveys at Bloomberg and other banks have done surveys basically saying the biggest risk right now is a FED policy error

of some sort. Here. Does that worry you? It does the market, and and the FED actually themselves in their survey looking at three or four rate hikes, we think that's unlikely. We're expecting one or two, as we do think that inflation will moderate as the year progresses, and that will let the FED off the hook for those other one or two great hikes. But a policy mistake can never be eliminated as a potential market mover, market disruptor.

And we're also worried about COVID and how that will upset the change or the trend I should say in in the economic growth and spending for the first half of the year. Okay, well, let's start with inflation here. And when you say in flation will moderate in give us some numbers. What are you thinking, when will inflation peak and how much will it moderate? Are you talking

sub two percent? Perhaps, Yeah, it's a good question. So with with the omicron variant now starting to dominate and China still locked into an approach to to to COVID that says lock everything down, Our concern is that you'll see more restraints on the supply side. That will mean will have more an imbalance between supply and demand that could fuel some further inflation pressures. We think you could see a seven handle on CPI inflation in the next

couple of months. But after that, you know, there's already evidence from the p m I s that you're starting to see inventories build and order growth is starting to slack off a little bit, maybe some companies stopping their tendency to over order. And as those trends continue, you will see inventories build, you will see supply catch up with demand. You could even see a little bit of

excess inventory by year end that could be disinflationary. So maybe something seven plus in the first quarter of the year heading down to something in the mid fives, maybe five three by the end of the year. And clearly with a downtrend. We think inflation heads below five into investors will take note of that, Paul. A classic post recessionary play is going to be those that small cap trade. Essentially this idea that the economy is recovering from a recession.

Therefore that's going to trickle into the smallest companies. But that hasn't really been the outperformer this year. It's actually been large caps. It's been mid caps. How much of that trade continues into and we don't think that trade continues. It was one we put on early this year. It did well for a couple of months and we had to close it out. Frankly speaking, it just it's just

not strong enough growth. What you're seeing, is it because of the supply and demand and balances that I mentioned. There's been an elongation. Uh, We're gonna have growth above average for longer, but it's not gonna hit those high levels of double digit economic growth that would really help small caps. It's gonna be more in that four or five six percent range. Uh that that really is still pretty good for large caps, but doesn't do enough to lift the boats uh in the small cap universe. So

we got out of that trade earlier this year. All Right, we're talking a lot of stocks here, and I guess any investor uh these days, Uh, it's certainly understandable why you would be allocated pretty heavily, if not almost entirely right now to the equity market here. But you're looking at rates now starting to go back up. Do we get to a stage soon where bonds actually start to become attractive? Probably not. Uh, we'll see some upward movement

in rates. We're looking for a ten year at around two and a quarter by the end of two If we saw rates higher, let's say, around three percent or just to blow three percent, that could be more interesting and would be more risky for stocks. We just don't think you're gonna get that kind of a move because there's just still gonna be so much scarned about COVID going into the year. There's going to be some concern about inflation. As that comes down, we'll see that in

that concern roll off that will also help bonds. And frankly, even if the Fed tapers is still gonna have a nine trillion dollar balance sheet, that's gonna help bonds as well. To to keep some some some bid under the price there, and so it's a good it's a good sort of environment for tech stocks. I think that continues into two. Not so much for bonds. Paul Christopher, head of Global market Strategy for Wells Fargo Investment Institute, thanks so much

for joining us something. Thank you. Happy yeah, Happy new year to you as well. Crety, what do you make of the call for inflation moderating and we're not talking moderating stub three step two, we're talking by the end of twenty two, he said, down to uh, you know

about five. Yeah, well, it's not that surprising, right, because decelerating growth is already something that's kind of baked into markets, the idea that you're just not going to get the same kind of big post pandemic boom that you saw. So this kind of makes sounse. The question is does the FED kind of really fix or kind of tweak their approach as you start to see inflation potentially peak. Yeah, well, you're already seeing that sort of come down here at least.

You mean, even when you look at short term break evens, like on a five year level, you're still something around two point eight percent. So let's say we do get say a seven percent print. What was it on January twelve here? I think right now we're tracking it's something like six point eight percent based on the economist surveys here. The general expectation is that's going to snap back pretty quickly here, maybe in two And it wasna, are you

not are you not sold on that town? I'm not sold on it, just because of the virus and because so much of the inflation is based on supply chain hiccups. Look what we learned from Samsung overnight Samsung Electronics. Yeah, and and if you know if they're closing chip factories because of lockdowns in China, we know China has a really aggressive stance when it comes to the virus. If

more things closed, more supply chain hiccups. This is Bloomberg Market Special coverage this week, a global simulcast across our TV, radio and YouTube platforms. We welcome all of our audiences here, Romaine Stick alongside Tim Stenovic and Pretty Gupta, counting you down to the closing bells in New York, which are just a little more than eleven minutes away here. And we started the day off and pretty much everything was in the red on the day. But as we get

closer to the closing bills. Pretty much everything is now flipped into the green. Here we should just point out the DAW is at a record high, the sp as a record I the NAZAC industries now in the green. For our TV audience. Is what you're looking at on the screen there. Those are some of the indexes right now. The materials up about six tents of repercent, bank stocks up about three tents of repercent as measured of course by uh the KBW Bank Index, and pretty even homebuilders

getting a nice bit here, up about one percent. One of the laggards. So today that's going to be energy, Yeah, and what's interesting with energy, you're also seeing big tech kind of fall in there on a sector basis. Communications is going to be your key laggered on a sector basis, Like I said, with energy, and when you tend to see energy and tech at the bottom of the pack, it tends to mean a pretty broad decline. But that's

not what you're seeing today, Tim and Romaine. You're actually seeing a fairly broad rally with the exception of those two sectors. Yeah, but I think it is particularly no doable. Two is the smp F I've founded struggling for direction for much of the day, seeing a little bit of a leg higher towards the end of the trading session, does this count, guys as a Santa Claus rally three tenths of a percent higher from the smp F I've founded on day three of a Santa Claus rally? Because altogether, Tim,

I mean that you don't believe in Santa Claus. I do, of course I do. I can hear the bell from the Polar Express. Okay, I mean I believe. I still I want to believe. All right, let's see what if our next guest believes. David Sowerby a great friend of the show here. He's a managing director and portfolio manager over at Ancre Advisors. Uh, David, let's start off. I

guess what the year that was? I mean, there are a lot of gains baked into this market right now, gains that I don't think a lot of people anticipated, even some of the more bullish people here. And now there's a big question as to how far that can extend into the new year. Certainly a great two thousand twenty one, because breath was I think better than it. Certain than it wasn't two thousand twenty, you went the entire year without that once a year ten percent correction.

Stocks well outperformed the bond market, which was flat to negative. And one thing I know about a single calendar year, Romaine is the rule of thumb for the last seventy five years is either bet the over it's going to or better, or bet the under it's gonna be five percent or less. We've now had three straight years of bet the over. Where since the last three years the SMP five is returned better than at least the last

three calendar years. I have I have a question though, David, why why don't you think that we've gotten that correction, like a true correction, true pullback, and a reset in this market. It seems like every time we go down to three, that seems to trigger enough people to come back in and buy that tip. And there are a lot of people saying that maybe that's representative of some dysfunction in the market, and other people say, well, the

market has just changed. I think fundamentally companies on a micro basis, when I look at the individual companies and how they're reporting quarterly earnings, their guidance, this has been a very robust year where guidance has continuously been raised throughout the year, and I think it's gonna get raised

a bit more in two thousand twenty two. Add in that we've had this incredible monetary and fiscal stimulus for the last eighteen months, and that's why I think you haven't add a ten percent correction since March and two

thousand twenty. Yeah, David, let's talk about that trend essentially, because not only have we not had this extremely long stretch of no corrections, no technical corrections of ten percent or more, but you've also had a pretty strong amount of Recordize this is gonna be the seventieth record high

for today for the SMP five hundred. The last time we saw both of those records met it was in When you have this kind of global growth story, how much of that becomes a story of two as well, when you kind of have these diverging policy paths around the world in the United States versus Europe, versus China. What's your take on that? I think for two thousand twenty two is what do you do for an encore? Do you get the great Bruce Springsteen on Corn two?

Would we have four consecutive years of above average growth. We haven't seen it since the late ninet nineties, even back to the World War two years of the forties. I think two thousand twenty two for that proverbial hard to guest single calendar year, it's probably gonna be a five to six percent return for the SMP five hund But that doesn't mean that you can have very good games among individual stocks, as you see a greater separation

of winners and losers next year. And I think you've got a pretty good backdrop where the micro is still telling me there are plenty good buying opportunities that I can see individual names up better than ten percent next year on average, when the SMP five hundred may return five to six You know, David, that's so interesting that you bring that up that on a micro level might be sending you a different message than what the index

level is sending. And that's something that we've actually already started seeing some big names like Facebook, Apple hitting those corrections even though you didn't see it on the SMP five hundred. Talked to us a little bit about where you see some of those major moves that was ten percent highers in that micro level. What areas are those

concentrated in well. We saw in the second half of this year that small caps lagged, but now that we've gotten the more debilitating talk of higher taxes at least off the table for now. When when taxes go up, the last four times they have gone up meaningfully, small caps have lagged. Now that they're not likely to go higher, I think that sets the table for small caps. In an environment where GDP is going to grow better than four percent, corporate profits will probably grow between ten and

twelve percent. Evaluations on small cap relative to their large gap siblings are much more attractive, and I can build individual stock portfolios where the free cash flow yield is well better than five percent, and that compares well to a ten year treasury at one and a half percent. Uh Dare I say it's going to be a good environment for the active stock manager, But I do think that we're setting the table for the tail when used

to be better next year. We're in a a conversation with David Swerby, Managing director and portfolio manager at Encore Advisors. 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 pm Eastern on Bloomberg Radio, or watch us on YouTube. Search to Bloomberg Global News