Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait 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 Stenebek from Bloomberg Radio.
Let's get into it with big bank earnings. Carol Master, we got another big batch of earnings from the Wall Street banks from Bank of America, City Group in Goldman, Sachs all rallying at their highest today, Bava holding onto some of it, will City is selling off a little.
Yeah, it's definitely been bouncing around here with a look at the quarter outlooks and the comps. Back with us as Cheryl Pate, She's senior portfolio manager at angel Oak Capitol Advisor. She joins us from Atlanta on this bank earnings Tuesday. Cheryl, good to have you back with us, so simon initial enthusiasm and even earlier in the trade. When it comes to the big three reporting today, it's playing out differently. Goldman just up about a quarter of
a percent. It was up three point four percent earlier in the session. City was up nearly two percent at it TIES Today it's now down almost five percent b of a mean time was up about three and a half percent at of TIES, still holding on to a gain of about one point two percent. Walk us through the earnings from these big three, what it says to you and how you think they did.
Yeah, absolutely, and I'm happy to be back on And I think the stock action today would line up with how we think the earnings really came out. I think we did have a preference for Bank of America into earnings, and I think we got a lot of what we wanted. There are certainly finds that the operating environment is becoming more positive. They highlighted that they think they're at the inflection point on NIM and that I think has been the key focus for a lot of investors when we
hit that inflection point. Other than that, we also were positively encouraged by what we saw in consumer credit. The consumer continues to hold in well. We saw good trends on credit cards in terms of some of the charge of data improving from the prior quarter. That lines up with what we've been seeing in the monthly data as well. And then capital markets are strong too. If we loop that back to City. I think it's still a longer tailed, more of a self help restructuring story to go there,
but a lot of the similar trends played out. I would say they were more cautious on the NIM guidance and guiding to flat, although that's probably a little bit better than what investors and analysts were expecting. And to round it out with Goldman, I think, you know, it was a very strong quarter capital markets across the board. I think there's still a little bit of question on the consumer division there, but all in all, I think it's been a good start to earning season.
Cheryl, big picture you mentioned then a few times there. But if we take these three banks at what they said today, what's the picture of the American consumer they painted? And I know it's not monolithic. There's certainly some commentary from Bank of America about lower income consumers that differ from middle class and higher income consumers. But how would you characterize it taken together?
Yeah, when we look at the consumer broadly, I do agree. I think we've seen really no weakness in terms of retail spending, particularly on the higher end, but still some pressures on a lower end. Lower FICO type consumer and that'll hit different banks and consumer finance companies differently based on their portfolios. But I think what we can see it is some credit normalization happening, but at a decelerating pace.
So if we're moving into a rate cut environment and achieva soft landing, we feel pretty good about the consumer here, and you know, keeping eyes on the lower end, but some of the positive tailwinds should be helpful there.
Hey, Cheryl, when you look at the big banks overall, of course, JP Morgan kicking off the earning season on Friday, and when you look at the group and the comps, who is best in class? Is it JP Morgan? In your view?
I do agree with that. I think you do see that, you know, there is a valuation premium that comes along with JP Morgan, and I do think it is deserved. They've proven time and time again that you know that there really is this concept of the fortress balance sheet that has been talked about for years. But also they continue to deliver on sort of firing on all cylinders, so consistency and strength continues to play through there, and we do think that the premium valuation is deserving.
Were you buying what have you been buying or selling. I am curious coming off of earnings, are heading into earnings, they're heading out of earnings yep.
I would say we have been. We've been finding opportunities. I would say on the debt side of a lot of the money center banks, we have been adding to positions in names like JP Morgan and Bank of America, and we remain more cautious on the regional banks. Rate cuts could help the narrative there, but at this point in the cycle, we have a preference for the large cap given diversification of the business model, upside from capital markets and consumer exposure.
We should put out JP Morgan Chase, the first of Wall Streets six biggest banks to tap the US investment grade bond market after reporting earnings, really setting the stage for a potential flood of issuance from the banking group overall. JP Morgan selling the bonds and as many as four parts, according to person with knowledge of the matter. So that talks about some of the debt, Cheryl, that you are suggesting and that may be interesting, Hey.
Cheryl, any commentary or insight into dealing for the final quarter of the year and into next year. What m and A will look like, what IPOs will look like, and of course the fees associated with those for some of these banks.
Yeah, I do think we are in sort of the early stages of the capital markets recovery, so we do expect continued strength coming out of both investment banking and the trading businesses in the fourth quarter and certainly into twenty twenty five as well. I think a little bit
of relief on the rate side helps. We're hearing that pipelines are strong, and then even if we think about M and A within the banking sector specifically, we think there's a lot of reasons why that will increase over the next year or so, as efficiency gains and cost saves remain a key focus for the sector.
In terms of City Group, which we know has been kind of changing in terms of strategy, and Jane Fraser making a lot of moods, you know, one of our stories that's on the Bloomberg talks about how she has had to deny that the bank had a secret regulatory straight jacket and took repeated questions by analysts for her to be clear that US regulators have not placed City under an acid cap, which has been one of the most feared and prohibitive penalties that we know regulators can
place on us lenders. She's said, let me be crystal clear, we do not have an acid cap. We're not expecting any. But what does that say that she had to say that so many times and the concerns about you know, where city is going.
Yeah, I think there is still some uncertainty as to the restructuring it and what city looks like when when we come through the other end of this. I think the first answer on the analyst call was was a little evasive and and you know, really was what was driving the need to be clear about that later. But but to me that signals there's there's still a lot of work to do in terms of execution on the strategy, and I think going to take some time for investors to buy into it.
Kay, Cheryl, you mentioned that JP Morgan kind of stands out as a leader at least thus far when it comes to rounding out the earning season. Give us an update your view on who's at the other end of the pack right now, which which bank or which stock is lagging.
If we're sort of looking at who's come out thus far in sort of the larger cap world. You know, I think I would say, you know, both City and Wells.
On the lower end.
Now, there's a lot of you know, sort of regulatory self help type narrative around both of those names. But I think also in terms of you know, forward guidance was a little less optimistic than what we're seeing at some of the other banks and just you know, maybe some more room in terms of improving confidence and driving valuations hired. It's a little bit of a longer tail, and there's some messiness around the numbers that that, you know, cause cause some uh, you know, varying views.
Any indications in terms of the big bank earnings, what it tells you about kind of the US economic outlook or even the global economy since these are global banks.
Yeah, I think most of the commentary, I would say, generally focused on on sort of domestic conditions, and I think it was a little bit more optimistic tone than last quarter. I think, you know, capital markets rebound is helping a lot here. But also we got the rate cut pretty late in the third third quarter, so there's you know, been some benefit that's played through in terms
of AOCI and capital levels. But I don't think we saw the full benefit really in the numbers yet, and that's sort of to come in terms of the operating environment, and it seemed like a more optimistic tone generally speaking.
I think Jamie Diamond was probably the more not not to say negative, but more cautious on sort of the more global environment, and that could play into some of the more international business lines, but that still tends to be a smaller piece that the next year or so is really I think going to be driven off sort of the fundamentals of key banking businesses.
Hey, Cheryl, election less than three weeks away at this point, three weeks away exactly certainly top of mind for us. Our editor in chief here at Bloomberg News, John Mickaelthwaite, just wrapping up an interview with former President Donald Trump at the Economic Club of Chicago. I'm thinking, in your seat, how are you thinking about the way that Harris administration or another Trump administration would affect these big banks.
Yeah, I think when we sort of think about potential outcomes from the election, you know, the view, the view from my seat would really be, you know, a democratic win, I think is status quo in terms of where we
are in terms of capital levels. There's you know, perhaps a faster path to getting the final details on Basil three end game, and a Republican win I think would really maybe help advance some of the M and A I was speaking about and sort of loosening some of the regulations around around combinations, but also speeding up the time of approvals, which has been a bit of a you know, a lengthening process over the last few years. So sort of status quo to positive.
You know, sol real quickly though, Donald Trump did tell John mcil thwaite when it comes to the FED, I think that if you're oh, he said, he thinks it's a fair game for president till the head of the Central Bank, how he thinks interest rates she change. If there is a second White House with Donald Trump in it and he plays around with the FED, that's a problem, right, real quickly, just got fifteen seconds.
Yeah, now I would agree. I think the independence of the FED is critical.
All right, Gonna leave it there. Cheryl Pate, Senior portfolio manager at angel Okappal Advisors. You're listening and watching Bloomberg Business Week on TV, radio, YouTube and Blueberg originals.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm. Easter Listen on Apple card Play and then Bright Auto with a Bloomberg Business app, or watch us live on YouTube.
Well, the property market, it has started to stir again, bolsted in part by the Federal reserves first interest rate cut in more than four years. It's not, though, necessarily full steam ahead. As Bloomberg's Abigail Dolittle reported recently with Natalie Wong, many parts of the commercial property market have started to hit a bottom, but offices remain an outline. This is according to one specific real estate investment from BGO, which oversees him more than eighty three billion dollars.
Here to talk more about that is Amy Price, president at the private commercial real estate firm Bgo, along with the Bloomberg News Markets correspondent Abagail Doolittle, who follows and reports on the real estate space as well. They both join us here in the studio. Amy, I want to start with you and just get this idea from you,
that the property market has started to stir again. Is when we hear that, when we see that, what is the time period that's referring to, is that referring to when we knew rates would get cut or when rates were actually cut.
Yeah, it's a good place to start. I would say we will look back and see the latter half of twenty four as that churning point for commercial real estate broadly. Now, as you pointed out, office is a bit of an exception to that, and I think we started to see that even in anticipation of that first rate cut, we saw more liquidity in the market. We saw more activity both on the credit side and on the equity side. But we're also seeing it now to the fourth quarter
of this year. So yes, i'd say with the anticipation of rates having peaked, with the anticipation of you know, values having found their bottom and starting to increase again, Office a little bit different liquidity is returning to the market, and that's healthy.
I want to ask you, in anticipation of rates going lower, I'm curious, how important is it that rates actually continue to go lower a lot to have a dramatic difference and impact on real estate, Like how sensitive and in terms of what the FED does.
Yeah, real estate from an income and yield perspective, it's quite sensitive, right, And so I think certainly where interest rates level out and where they get to is very important. I would say the pace is less critical. You know, as an investor in real estate, we are generally long term investors, so we're really looking for yield an opportunity now, but we're measuring that also aligned with just the demand drivers the or longer term and that are kind of
acycle goal. So we're looking for both. And so from an investor's perspective, you know, certainly how quickly rate suggests will drive velocity in the market, but longer term it has less of.
How much lower would you like to see it go though, well, we'd like to see it go, but realistically to really kind of get a.
Jolt, well, you know, listen, I think the jolt is probably you know, more than fifty basis points, okay, right, another twenty five to fifty is probably expected. More ordinary course. Again, question is the timing going beneath that we'll start to see more of a jolt from what's already been baked into the market today.
So that's a pretty bold call. Amy on the idea that this last half of twenty twenty four could be the bottom and what's been a pretty painful cycle. So many people saying that it's going to take a long time to work out work it out. But one piece, as you were mentioning office that's still in pain. I was talking to one of the top private credit guys recently and he was saying that while the rest of them are it may be starting to recover that office
is so painful. It's almost acting like this big weight around the leg of real estate. Are you seeing that at all? And to what degree could it remain a problem into twenty twenty five? Understanding that the bottom may be made right.
So office is idiosyncratic this cycle, for sure. We're seeing the headwinds from return to office, you know, start to normalize the pendulum to kind of find it's I think it's equilibrium. But there's questions on the horizon about what does AI do for the future of office jobs, et cetera. So if you look forward in office, there's just you know, a much murkier picture ahead, and that is a bit of a weight against a diversified pool or diversified strategy.
So I think that's part of why we're seeing more interest in you know, sometimes people refer them as a niche sectors, but specific strategies where you say, okay, I can invest into You know, some of these sectors that that are countercyclical, right, don't have the same headwinds's office.
Does it eat into the dry powder though, of say some of the big sovereign funds that are in office that they can't get out of it, so they just don't have the money to allocate to these other sectors you're talking about.
There is definitely capital tied up in office that would like to be out of office, but at the same time, probably more than you would think. At the same time, there's also what matters is the overall allocations to real estate as well, and what we are seeing now with rates normalizing hopefully beginning to decline, a renewed interest in real estate outside of office as an alternative for credit
and yield strategies. So we're seeing some of that capital come back in to compliment the holdings in office.
You operating twenty seven cities around the world, where exactly are you seeing strength and where are you seeing weakness in the US and outside the US.
So one combin I make globally is that we see strength in Asia. I don't invest heavily into China, but we do in other markets Japan in particular, and so some of the what we've been talking about in office, for example, this conversation is not relevant the same way in Japan and in Asia. So we see opportunity and momentum there. And then i'd say in North America and in the US in particular, there are some markets. What we try to do is just obviously you're trying to
be predictive. Where do we expect population growth to be, where do we expect job growth to be. So we are looking at markets that are both the anchors in New York absolutely a market that we are figuring out how to you know, we want to invest into at this point in the cycle, and then complementing that with
growth markets. So some of the markets we think are compelling for industrial, for residential markets like Atlanta, you know, the Virginia market, Charlotte, they're they're seeing a lot of anything spand well not too far well, but yes, can I ask you.
Something though, when you talk about office properties and concerns class A too, Our is class A still okay? Because we keep hearing that from everybody like class fine, it's the other.
Step, yes, excellent point. It is absolutely the winners and the losers. So even beyond Class A, what I'd say is the highest quality, the best amendatized office, very strong demand. And if you one statistic I'll share is that if you look at buildings that have been built just in the last ten years as one metric of quality, there's positive net absorption i e. More demand for that space
in the last three or four years. Now everything else built before that negative net absorption by multiple So you really see that in what tenants are looking for in terms of making occupancy decisions today.
So that reminds me of industrial actually because one of the niche sectors that BGO likes is industrial and in part because seventy percent of it just does not really fit our lifestyle anymore. Talk to us about building that up and those investments that you're making in that space that you favor.
And we have about a minute.
Left, okay, So industrial, and more specifically, I'll touch on cold storage as one component of an indul austrial strategy because it exemplifies this.
Well.
What we look for is one where are there those secular shifts?
Right?
So e commerce, technology, robotics, automation, This is transforming the way, real estate is a critical piece of the supply chain and the delivery of those goods. So what are we looking for. We're looking for the barriers to entry, if you will, right, and the opportunity to kind of develop a high quality building, a modern building that's distinct from what was built, you know, twenty years ago and is really not meeting the millions of tenants today. So for example,
sealing heights. You know, there's physical characteristics that you can't you know, renovate, you have to build.
Come back, both of you. I'd love to continue this conversation. Really cool insight. Amy Price, President of BGO, and of course our Abigail Doolittle, markets correspondent. Here at Bloomberg News.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two Pme's sure to applecar Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven thirty.
Got to get to one of the big market stories today, and that is a semi space.
Yeah, taking a look at the socks right now, it's down more than five percent. A cloud hanging over the industry got ASML shares plunging the most in more than twenty five years. It booked only half the order's analysts expected in the third quarter at lowered guidance for twenty twenty five, and Nvidia shares also following today after reaching a record yesterday. Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other American companies
on a country specific basis. People familiar with the matter telling our own Mackenzie Hawkins, Bloomberg News US Economic and Industrial policy reporter. She joins us from our Washington, DC bureau. Ian King is also joining us. He's Bloomberg News US semi conductor and networking reporter. He joins us from our San Francisco bureau.
Ian.
The video story is certainly a big one. But when you think of the entire chip sector also reacting to the news that we got mid morning New York time from ASML shares plunging today, what's the signal that they sent.
Yeah, I mean, orders are obviously an indicator of future revenue, and what they said was we're getting a lot less in the future. Than you guys have been expecting, and that was not welcome news. It was done in a haphazard way. The report was published by mistake ahead of time, so cause basically a panic. And you've got to remember that this company is very much a leading indicator of
what it's selling to the world. Is something which tells us something about what people feel about what's going to happen perhaps next year.
Hey, is it though, Ian all about Intel, which is one of its biggest customers. Is that where the problem is?
Yeah, I mean, obviously they're not going to name specific customers and call them out, particularly if things are bad for them, but you know, passing through the numbers, it's hard to go past the fact that this is probably at least partially Intel's doing that. Intel, as you know, and is going to spend a lot less money on plants and equipment because it can't afford to. And that has a real, you know, huge impact on a company like ASML and the chip equipment sector in general.
In one more for you, and then we want to bring in Mackenzie on her in video scoop from earlier today. When you think about where ASML is in the semiconductor manufacturing process in the universe with these huge, incredible machines. What are the other companies we need to be watching as a result of the news we got from ASML today.
Yeah, I mean it's a good question. We've seen that happen already. We've seen applied materials trade off. We've seen KLA ten core trade off. We've also seen LAM Research get hit, and we should probably look out for when Asia opens. What's going to happen to Tokyo Electron. These are all companies that are key suppliers of this technology.
As we should point out, twenty eight names in the Philadelphia Semiconductor Index are lower today, only too to the upside. Mackenzie Hawkins, come on in on your scoop here. What do we know? What's the Biden administration seriously considering?
So? For the past two years since the US first implemented sweeping export controls on advanced SEMDY conductors, a lot of the focus has been on China, and around a year ago, the US actually added trade restrictions to more than forty additional countries because of concerns that if Nvidia or AMD or some other AID ship maker sent those chips to places like the United Arab Emirates or Saudi Arabia,
they could somehow wind up in Beijing's hands. But over the past couple of months, in particular, Biden administration officials has been looking at a range of other national security risks specific to these regions in the Middle East, Central and Southeast Asia, and parts of North Africa, things like human rights and surveillance concerns, counterintelligence risks to US intelligence personnel around the world, And they're beginning to think, you know,
how high volume shipments are, how high of volume shipments should we allow in Nvidia and other AI ship makers to send to these countries to let them stand up their own AI infrastructure. So the latest development is that they're considering capping the total volume of sales that in Vidia and its rivals would be able to ship to places like countries in the Persian Gulf.
Are there ways that countries and companies that operate in these countries can get around restrictions such as ease by using compute power in other parts of the world.
So these countries are actually trying to stand up massive amounts of compute power themselves. Of course, an AI company can train its models on data centers that aren't located physically next door. But a big part of the Middle East AI push is to actually stand up these data centers. And so they're desperate to import ships from Nvidia, which is the far and away industry standard, the gold standard,
and several generations ahead of any offerings from China. But the US government is not wholesale blocking the sales of these chips. They're saying, Okay, you can have these chips so long as you meet certain security requirements of ours in the licensing process, and all of the licenses together won't add up to more than a threshold that will have to wait and see if they are able to determine.
You know, And it makes me wonder, you know what about just kind of believing in capital markets, letting companies do what they need to do. I know we've talked a million times with you about national security concerns when it comes to high tech companies, particularly some of these semiconductors. But I wonder how crippling this could be ultimately for
a company like Nvidia. If at the same time as you guys write in this story or this as Mackenzie's story, and I know you also worked or gave some input. You know, you've got China and other companies looking to figure out their own Nvidia.
Yeah.
I mean this is the argument that the companies push back with, which is, look, if you don't allow us to supply them, if you don't allow us that window into what they're doing, ay, that hurts your visibility, will be it doubles their incentive to try harder and to get equivalent products. For now, as Mackenzie just said in VideA, is over the horizon, in the lead in this particular area. But it keeps quotioning, and it keeps telling everybody, including
in the White House. Look, you need to be aware of the fact that we are giving them an incentive to catch up.
Mackenzie, what's the next bit of this story that our investing audience needs to understand or needs to watch out for. What are you looking out for?
So the big thing is after months of the Biden administration basically slow walking in Vida and other AI chip licenses to countries in the Middle East and elsewhere, but with a primary focus on the golf, we're going to be waiting to see whether any of these massive data center licenses are approved. A great example to watch out for is Microsoft's partnership with G forty two, which is the top AI company in the UAE. Microsoft is investing a billion and a half dollars. They want a stand
up data centers in the UAE and in Kenya. But that's all contingent on getting this license application approval from the US US government, and that's one of many licenses that's been held over the past couple of months. So we'll be waiting to see if that ones comes through.
Mackenzie, can we make an assumption this is a Biden administration policy that this could potentially carry over if there is a Kamala Harris in the White House? Just got about twenty five seconds.
I don't think anyone thinks that these chip restrictions are going away, so that's probably a safe bet.
All right, Gonna leave it there. Hey, guys, thank you so much, really appreciate it. Mackenzie Hawkins, US Economic and industrial policy reporter at Bloomberg News. Check out our scoop. You can find it on the Bloomberg terminal and at Bloomberg dot com, and of course always Ian King, US semiconductor and networking reporter at Bloomberg News. Out there in our San Francisco. You're the SOXO. Definitely underperformance in today's session, Tim still down about five and a half percent. A bromacle.
A journal.
Now about you let me drive? Oh no, no, no, no, honey, please, I'll do the riding gravels.
Mate, I want to drive to check.
It's a good question, good time.
This is the drive to the globe down think well by on Bloomberg Radio.
All right, everybody, we've got eighteen minutes to go until we wrap up this trading day. On this Tuesday, October fifteenth, Carol Masser along with Tim Stanovic live here in our Bloomberg Interactive Broker studio. And as Charlie mentioned, as Bill Maloney mentioned, we are seeing stocks hovering near the lows of the session. Taking look at Trump Media that stock
two is down in today's session. I'm just bringing it since we did see our John Micklethwaite have an in depth conversation from the Chicago Economic Club with the former president talking about a lot of different policies, and we do see Trump Media down about fourteen percent, so hovering near its lows the days.
Yeah, interesting, chair slid as much as twelve percent. Well, that was an earlier article.
It raised it down sixty percent lows today.
Yeah, and it was briefly halted for volatility.
Yeah, so just interesting. Just on the backdrop of that conversation, I bring it up, and that's why it is relevant. Let's talk to market.
Yeah, let's see what Jason Bronketti has to say, Chief investment officer at Lincoln Financial, joining us from Pennsylvania. Jason, good to have you with us this afternoon. How are you watching things? I mean, we hit a new record yesterday for the S and P five hundred. We're seeing chip stocks really way on the trade today. A couple different stories out about that. We talked about that throughout our program. What's the view from your perch?
Yeah, Well, first of all, thanks for having me on with you again. It's great to be back with you. And I think, you know, as we think about the market, I mean, today's a choppy day, but the last time I was with you, we were talking a lot about the economy and the market backdrop and kind of where we might be headed. And I think there was a fair amount of debate at the time as to, you know, whether we were going to be in a soft landing or a hard landing, no landing, and what that might
mean for markets. And I think if we take a step back and think about where we are today, you know, it looks like we're in this kind of soft landing category at least for the moment. Growth is is still positive clearly Q two GDP coming in over three percent. Q three is looking about the same, Inflation is approaching trend, and employment remains pretty healthy. So I think earnings are in focus. Obviously this week and last week the banks setting a healthy tone, So I think the economic backdrop
is looking pretty good. Now we're bound to see some volatility, and that's one of the top things that we've been talking about with folks, particularly as we head into the election here and as the FED kicks off and continues it's easying cycle.
Hey, Jason, you bring up the election former President Donald Trump saying his policies would inspire growth despite adding to the debt as he sought to assuage business leaders who were his economic plans will fuel inflation. He says, we're all about growth. He told that to Bloomberg News editor in chief John Mickelthwaite earlier today, and interview at the Economic Club of Chicago, He says, we're going to bring
companies back to our country. Is there a Trump factor though in the trade and here we are pretty much just hovering near our lows of the day. Is there some nervousness among vestors about what a second term by Donald Trump might be?
You know, I think I think anytime you're in the in the throes of a presidential election cycle, you're going to see volatility. And that's what we've seen. If you look back in history, markets tend to be pretty volatile during election years leading up to the actual presidential election and the outcome there. That being said, what we have seen is that once we get through that, markets tend to be less concerned about the about the political situation
as some of that cloud lifts. So whether it's a whether it's concerned about Trump, where it's concerned about, whether it's concerned about Harris or what those policies might be. I do think you're right that that's weighing on things, and we would expect to see that volatility and perhaps
heightened volatility even up for the next few weeks. But once we get through that, what we've seen historically is really that in you know, all but four of the last twenty four elections, going back to the nineteen thirties, you saw positive returns for the equity markets during presidential election years. And the years in which three of those where we didn't have positive returns were those that were marked by crisis in nineteen thirty two, two thousand, two
thousand and eight. So what I'd say is, I'd expect to see more volatility for whatever reason, but once you get through that, wouldn't be surprised to see things firm up as we move forward from there.
Hey, there's you know, candidates on a campaign trail, and then there's you know, a president in the White House, and then there's also the Congress that goes along with it. Whether or not it's of the same party or of a different party determines what policies ultimately get get done. How do you like who's better for investors? What president come November, come January is better for investors in your view?
Yeah, I mean, we all have our views. But the reality is, if you look back through history and you look at the you know, the ten year annualized performance in the S and P five hundred post an election year, whether a Democrat wins or Republican wins, the returns have been about the same bet but eleven point two percent annually for when a Democrat wins, about ten and a half when a republic and wins. And that's been the
case since World War Two. So I think that while we care a lot about politics and we care about the markets, and notably near term, I think you're going to see volatility around that. But when you have the likelihood of some degree of divided government, the hard policy shifts are certainly less likely. And I think that that's more than likely the outcome in this case that regardless of few wins, the clouds will the clouds will lift, and we'll see pretty positive returns over the long term.
And so focus on you know, zooming back out, widening the aperture, and being less focused on any given trade and more focused on what markets have done over the long term.
We're just focused on you, like every other person out there who's focused on the folks who live in a swing states, because there you you're like the most Pennsuvania.
We're in the hot we're in the hot bed.
Yeah, every every four years, this happens to you right where it's like you turn on every other I did go to Georgia back in August, Carol, and you know, watched a little local tell Actually I watched, I watched uh yeah, TV, national TV. I couldn't get away from the ads. Every other ad was for a political candidate. I bet more money being spent.
Yeah, I mean, right, Well, I don't know, I just I get what you're saying about, like historically what happens obviously in election years and coming after it. But when you do have, you know, potentially a candidate who talks about increasing dramatically tariffs on foreign goods, Doesn't that doesn't you're smart guy like tariffs like don't doesn't that make you a little concerned potentially?
Yeah, I mean I think that I think it's.
Trade war, right, would not be great?
Yeah, yeah, I mean, any any kind of any kind of upheaval in that regard is certainly has the potential to be quite negative or or stoke that inflationary impulse as well. I mean, I think when you look at what the what the FED has done, we've gotten to a pretty good place in terms of the trajectory around inflation. I think any policies like that that that would be inflationary certainly should should give some cost for concern as far as that goes.
And at the same point, both seem to talk about a lot of spending, right, and you worry about the debt.
That's what I wonder, I mean, look on market, lets them do yeah, exactly.
I mean, nobody's really talking seriously about reigning in any degree of fiscal spending. And so I think when we think about the short end of the curve, you're likely to see rates come down in the front end, just given the direction of travel with the FED. And I think that direction is clear and the pace and the destination are a little bit uncertain. But the policies out there, and regardless of who wins, probably have the potential to
be a little bit more long term inflationary. My friend Henrik Vay talks about we've been in this marketplace, in this economic backdrop of thirty years of benign globalization, inflation coming down, interest rates going lower. I think when you think about the amount of debt that's out there, and some of the policy ideas that are being floated certainly have the possibility of stoking that inflationary impulse and leading longer rates higher. Over the longer term.
All right, good stuff. Fun to check in with you. Jason Brikay He's chief investment officer at Lincoln Financial, joining us from Philadelphia.
This is the Bloomberg Business Week Podcast. Avail little on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Jurminal