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Well, the truck in from Yellow Corp. Told workers that are shutting down. That's according to its union, jeopardizing thirty thousand jobs as the historic freight brand faces heavy debt, loads and operational woes. This company is the third largest less than truckload carrier in the US, so that means that it uses a warehouse network to combine several smaller shipments on one truck for short haul deliveries. It's different from long haul trucking in the parcel industry, those UPS's
of the world, which carries individual, usually smaller packages. Very pleased this afternoon to be joined by Thomas Black, Bloomberg Industrial Logistics and Aerospace reporter. He's been all over this story. We're also joined by Bloomberg anchor and markets correspondent Crety Kupta, who's also been all over this It's good to have you both with us. Thomas, I wanted to start with you and just give us kind of the latest, because
we're still reading that. It's the union that's communicating this, not Yellow.
That's right.
Yellow hasn't made it official yet, but all the expectations are they will to clear for bankruptcy. There may be some legal issues. They are still shopping around. Their threepl business, which is a business that coordinates freight, doesn't have truck so I don't know if that's slowing things down. But we haven't heard from the company, but the union knows this is happening because the company has shut down operations and workers are no longer going to work.
Well, bankruptcy doesn't always mean that a company shuts down operations, that a company stops what it's doing. I mean, there are plenty of bankrupt companies that continue to have operations. What's going on with Yellow?
Yeah, in this case, trucking is a little bit different because you can't get your products stuck in the system. So when the operations are under strus like this, customers tend to flee, and at some point they have closed operations, they are no longer picking up freight.
So we do know that, all right, So Chrity, come on in here, because I know that you are following the labor story for several companies right now, so closely talk to me with Yellow specifically about what the back and forth looked like between the union and the company and what the kind of sticking points were.
Well, we know that the Team Stars union negotiations have really kind of set the tone for labor negotiations across the country when it came to what they demanded from UPS, the Majorshipper, and this included things like eliminating the two tier wage system, giving benefits time off, but of course pay was at the core of it, especially because a lot of these workers, I mean they're truck drivers, they're
manual laborers. This is a very intensive industry, and they weren't getting paid necessarily by the same rate depending on how many hours that they worked. UPS has really ended or the Teachers negotiations that really ended that dynamic. But Teamsters also represents a lot of workers at say Amazon for example, and Yellow among others. And the Yellow story is really interesting because they had tried to negotiate an
agreement with this. By the way, I should say, what used to be kind of a name brand logistics company and of course has declined since but they ultimately, I think what you need to know here is had negotiated a fifty million dollar increase of a payment from Yellow to their employees, and their Yellow's company finances got so
bad they weren't even able to make that payment. Ultimately, Teamster said, look, we're going to strike, and even that didn't pan out simply because there's no money to go around.
Well, the company also really kind of put the blame on the union, saying that the union efforts hurt a plan to combine its trucking divisions for Yellow. What is Yellow's standing on that and how does that plan into the overall picture that we're seeing in the infighting between unions and these companies.
Yeah, well, I think it's really speaks to kind of the pattern that I think Yellow has developed, and I mean Thomas can speak I think probably better to this, but essentially this idea that a lot of their financial troubles have come simply from trying to acquire other pieces of the logistics space, and in doing that, that kind of consolidation, which again is very normal when you're trying to be in market share, has ultimately led to these
major debt issues. Add On the higher wages of workers and specifically what the teamsters are adding for and that is an additional cost. So you are seeing this kind of double barreled whammy. If I will on on kind of how they're able to deal with these, I'll allow that.
Created I'll allow that. I thought, Thomas, I want to bring you back in here and talk a little bit about the other companies that might be the beneficiaries of Yellow shutting down XPO Logistics. Old dominion, for example, from the perspective of customers is that where they fled.
Now, the LTL market is a little bit more concentrated, a lot more concentrated than the truckload market, so they're a handful of large players. FedEx, for example, has an LTL business. There's another company called SI, and the ones that you mentioned, those are really the dominant players in
this market. There's some smaller ones, but it's concentrated. So those companies have had a decline in their volumes just coming down from the pandemic highs, so they have excess capacity and they are up you know, the freight that will come to them. They probably will try to cherry pick it a little bit to make sure they get the most profitable part of that or the freight that matches up with the lanes that they tend to run.
So we're going to see that being divvied up. I would say on the union talks, the company actually came to the union to ask them to reopen the negotiation, but they their contract had run through into next year, but they wanted to do this consolidation of their different units to gain some efficiency, so they reopened that contract and the negotiations didn't go anywhere, and that that fifty million payment was a payment that they owed for the
penon and when they couldn't make that, that's when the team decided to pull the plug on their negotiations. Now, whether it's the fall of the Teamsters or not, that's I don't want to make that call. Certainly the company
says that's the case. I would just say that the Teamsters, besides the UPS contract, did negotiate contracts with the art Best freight unit called ABF Freight, which is also an LTL carrier, and they just they're about to ratify an agreement with t Force, which is the LTL carrier that UPS sold a couple of years ago. So it's it's not like the team stars aren't doing agreements. This one I think was maybe an outlier.
Okay, that's that's that's good to know. Thomas Credie. I want to bring you back in here because you and I were chatting about this a little earlier about you know what you thought sort of the most interesting element of this story is, and it's one that struck me as well, it's the fact that pretty much everyone listening, if they're a US taxpayer, they're owners of this stock. Taxpayers are owned thirty percent.
Of this they are.
The irony is that the stock is a penny stock now, it doesn't even really hold that much value, So.
The taxpayer should have shorted it, is what you're saying.
I mean, I do not give investment advice, thank you, but yeah, I think that's my favorite fun fact time about the whole stories that look, because of these big financial troubles that Yellow has gotten into, well, then to procuring about a seven hundred million dollar load in twenty twenty when a lot of businesses were getting that kind of COVID relaef the idea that under the Trump administration, he can use these nations security measures to make sure
that supply chains were working that everything was kind of trying to function as best as it could just given the dynamic there. Under that Yellow had gotten a seven hundred million dollar loan that they still have not paid back, So they basically owe the Treasury Department seven hundred million dollars and in doing that, by extension, taxpayers own about
thirty percent of the stock I think. So one of my favorite kind of things to put into perspective here is simply that when you look at their long term debt, that seven hundred million dollar loan represents nearly half of it. It's a lot. So again, when I say that they're in some serious financial trouble, taxpayers are are paying part of it all.
Right, final thirty seconds here, Thomas is part of the takeaway from this story about overall freight demand clients declines rather post COVID.
I would just say Yellow is an outlier.
They've had financial problems really since the Great Recession back in two thousand in eight two nine, so they have been battling financial difficulty for a long time. So I wouldn't read too much and do their particular problems for the freight market is depressed a little bit, but the strong carriers are going.
To be able to power through really good stuff. Guys, both of you really appreciate that. That's Kredi Gupta, Bloomberg anchor and Market's correspondent, and the voice you just heard there Thomas Black, Bloomberg Industrial Logistics and aerospace reporter. Both of them have been all over this story, so we really appreciate it.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Maddie, I got a true story for you last week. I'd hear it last week. I come into work and I'm soaking with sweat, and my colleague Alex s Gittelson says, Tim, how is your bike ride in this morning? And I was like, Alex took the subway in. This is how much I sweat when I walk from the subway to our office two blocks. And he was like, Oh, I'm sorry, you're so sweaty. I thought you rode your bike all the way from Brooklyn. No, that's just because this month
has been really hot. All that to say June was hot. In fact, it was the hottest June in recorded history, and this month it's the hottest ever July. It's not good news, but it's good that we have Eric Rosston all over this story. It's a big take from last week and overheating planet requires supercharged climate solutions. Eric joins us on zoom from our Washington, DC bureau. Eric, good to have you with us. First, give us the bad news. Just how bad was July?
July was bad? You have characterized it well, it was the hottest month and recorded history. The temperature records go back to the middle of the nineteenth century. This year is likely to be the hottest year on record. The last nine years have been the hottest year on record, the hottest twenty two, twenty two of the hottest twenty three years have occurred this century, and every decade has been hotter than the last since the nineteen sixties.
Yeah, so not great. How much more of this are we going to experience throughout the rest of this year? How much more heat can we anticipate? Is this going to happen through the end of twenty twenty three?
Even well, we're helped out in some ways by the fact that July is the hottest month, and so as we spin around the sun toward fall and winter, temperatures
will retreat from the peace we've seen. On the other hand, we're also entering hurricane and wildfire Season's what's making this year unduly punishing is the coincidence of not only climate change, which just steps up all the time, but also in El Nino, which is this phenomenon of the Pacific Ocean sort of coughs up lots of heat every few years, and it makes temperatures hotter and throws weather in the chaos in different parts of the world.
It's pretty depressing, I gotta tell you.
Eric.
You know, we got a note from my kids nursery school that says AQI is over one hundred today, so we're not going to let the kids play outside. Meaning the air quality index from the wildfires in Canada a few weeks ago, a few months ago, and a few weeks ago actually happened twice recently prevented the kids from being able to play outside. But it's so hot that you got to be blasting the air conditioner. Where does
the electricity come from to blast the air conditioner? Well, because it's not coming from nuclear anymore here in New York. It's coming from fossil fuels. It's creating this terrible cycle that we're in right now, which is you know, really my question is about solutions, because staying inside in blasting the ACA is not a viable solution. That's not going to keep sea levels from rising, that's not going to keep wildfires from happening, that's not going to keep the air clan. What do we do.
We need to get off fossil fuels, even though it's not said that bluntly in American political culture, fossil fuels cause called fossil fuel burning causes climate change, and until we get that under control, climate change will always be in its opening act. This will be a cold summer in twenty or thirty years, and that's ultimately this whole story. You know, this is not a complicated topic. We've known
for many decades that this is occurring. Scientists, you know, warned us for decades that you want to get on top of this before the symptoms start occurring. The symptoms are occurring. Fortunately, and this is the good news. We have the tools, right We have affordable solar wind and battery technology, Solar is cheaper than coal in most of the world on a levelized cost basis. We have wild
investment into things that are not solved technologically. Yet this story, the reason this is the greatest story ever is that the stakes could not be higher. But you know, we have the fixes and all we need to do is the work to implement them. Like that's it. All we have to do is the work.
Can we reverse some of the damage that's already been done? Or when you said this is going to be viewed as a cool summer in twenty or thirty years, is that a foregone conclusion or can we fix it still?
The scientists have said, in a break from previous years, they think that as soon as we stop increasing the atmospheric concentration of greenhouse gases, that the warming will will stop pretty quickly thereafter. So let's what you know, it's what passes for good news in this space. Uh, but you know this is this is uh, it's a it's a situation, right, This is not it's not great news. We've known about it for a long time. We've made you know, we put it off for a long time.
And that's just where we are. I, as someone who covers this. You know, we get climate reporters, I think get this question a lot, which is how do you deal with it? And part of the part of it is by being in touch with everything that's going on. There's a way that kind of diffuses anxiety, you know, like if you can if you can understand something, it makes it less scary. But the other thing is that, like again, I cannot over emphasize the excitement around clean
energy technologies. The rate of growth, the rate of the price declines, it's just phenomenal how quickly we can solve the problem if we decide.
To Nancy Lyons in our DC newsroom, who I believe it's probably Eric, just a few steps from you, because I think you're in the same newsroom today. She just sent in our chat a great question and reminded me that the problem when it comes to renewables is consistent power supply. You know, when there is no wind, when there is no sun, when it's nighttime. How do we get to a place where we can actually store power that's generated in the day to offset fossil fuel use
at night? Or is the answer just nuclear?
Both of the answer the price declines in utility scale batteries have plummeted like the curve just like somebody looks like somebody just like dropped an egg on the chart of price declines, right, it's just like very precipitous. So increasingly you see utility scale batteries and nuclear is an option that has been there the whole time, and it is a critical source of baseline electricity.
It's just there.
People just seem not to be able to build them. They're just they come in billions of dollars over budget and many years late. You know, when you look at the time crunch, we're in to have global emissions by twenty thirty, Like you can't build nuclear in that time, or at least nobody has. So you know, nuclear is you know, it's this tragedy of like having a carbon free source of power that you know, we've used for more than half a century, but nobody will build them.
Yeah.
In our final minute with you here, I'm curious about legislation around this because you are in DC for us. How effective has legislation like the Inflation Reduction Act been at sort of solving some of the issues that you're talking with us about.
It's the most phenomenally important climate legislation that any country has ever passed. You know, the the International Energy Agency says we need to triple renewable deployment by twenty thirty, we need to double energy efficiency, and the oil and gas sector needs to cut its methane emissions by seventy five percent. There are things in the inflation reduction app and now in copycat legislation in Europe that will incentivize
all of those things. So it is it's difficult to overstate the importance of how much that that legislation will help things along. There's still more that's needed. One interesting thing is like we're going to build so much solar and wind in the US that like we can't keep
up with plugging it into the grid fast enough. And so it's interesting, like the federal government can you know, has U can build pipelines and highways, but they can't build transmission right, So that's something Congress has to fix.
Eric, we got to run, but we love it when you join us. Thanks so much for doing this. That's Eric Roston, sustainabilitator at sustainability editor at Bloomberg News.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
We have been talking a lot about investors, and they've been very bullish this year on everything from AI to big tech chip manufacturing of course, Tim, but you know one other thing that they're bullish on, it turns out is women's soccer.
Yeah.
We got a great story featured in BusinessWeek newsletter recently the BW Daily newsletter, and with the World Cup going, we're gonna get a pulse check on women's soccer, specifically Maddie.
Yeah.
We're thrilled to have Bloomberg BusinessWeek editor Joel Weber here with us in studio as well as reporter Aira Budua to discuss and as always, you can find this story on Bloomberg dot com and on the terminal. But Joel, talk to us because investors, they're into a lot of sports right now.
They are, Pickaball being one. So the thing with pickaball is that it's really loud. It's so loud and it's like maybe you've heard it, so've heard it. Yeah, Uh I still love it, still love it. But you know, look it's it's World Cup season, and uh it is a huge reminder of just whenever this comes around every four years, Uh, all eyes just go to it. And America is obviously really good at the American team is really good. So good, right, and kind of a lukewarm
start here, we'll see what happens. But reminded how much people love watching it, right Ira so far, and I'm curious what the business really looks like. And it's just this reminder of like when this comes around, it's like pulls everybody in and it turns out this business just gets better and better and better.
Yeah.
It's interesting because I mean this is the third time that the National Women's Soccer League, is the third time that the US has tried a professional women's soccer league, and each time it's sort of been tied to the buzz and hype of the World Cup. So in you know, after the ninety nine Ers, the famous team in nineteen ninety nine that won it here on US soil, huge sensation, Mia Hamm all of that proved that they could draw huge crowds, they launch a league and after three seasons
one hundred million dollars spent, it collapses. And I think some people thought that meant there wasn't a market beyond the national team. But if you talk to people in this world world now, they say the lesson of that was basically that you need more patience and time. If you look at any sports league, it takes decades to grow. And what you're seeing now in the National Women's Soccer
League is big money coming in smart investors. You know, we look at Sixth Street just paid the private equity from just paid fifty three million dollars for the expansion franchise in San Francisco BAFC. That shatters the previous you know, you used to pay two million for that kind of thing.
And they see this as a real opportunity. They think they're going to reach parody with men's soccer in this country within about a decade, and they're investing a one hundred and twenty five million as a commitment and that those kinds of numbers are what it's going to take, and it's going to take time. But now it looks
like the wherewithal is there finally what's changed. Well, if you talk to Alan Waxman at Sixth Street, he says that, you know, one big thing that's changed is just the there are fewer gatekeepers, so you can get yourself in front of fans on streaming networks more easily. Right. So they have the enn WUSL as it has a deal with CBS that includes every single one of their matches. The ones that aren't on CBS broadcast or support or
cable channel are also on Paramount Plus. So if you're a fan, you can see it and then you find it right right. Other sports in the past you had to take whichever little windows you could get from, you know, the gatekeepers. And so that's one and two, he said, I.
Like with the like on Sundays with the Rabbit Ears trying to actually watch.
A ESPN we're showing pickleball on UH And the other thing that's changed in his mind is social media has made the players accessible on a day to day basis, and they are the best promotion that you have, So you not only see them every four years or or maybe at the Olympics, you see them day to day and that and that's a way to build loyalty and build it and build a customer base.
So in the past, when the past few times when this has not worked, when it's failed, it weren't It wasn't the social media era, it wasn't the streaming era. Is that enough though, to make time of success?
I think if you add that third element of investor patients right right, I think that you have to recognize it. I mean, you talk to this economist David Berry out in Utah who studied these things, and if you just look at like where was the NBA at year twelve? That's how old the NWSL is right now, they're in their eleventh season. Where was the NFL? Where Major League Baseball teams? You know, the National League fourteen out of
the first sixteen teams failed. You know, the Pittsburgh Steelers lost money for decades, Like you really have to in sports. It's a long term growth proposition. But once you because you're building basically generational emotional attachments, and then once you get there, it's almost impossible not to make money because people will come and watch whether you're good or bad, day in and day out. They will think about you,
whether you're doing well or not. But that takes twenty thirty forty years to create.
Does Messy help. I'm just thinking, you know, that goal was sensational. I watched it like five times, and between that and the fact that we've got the World Cup happening right now, you just have to kind of think that all of this could parlay into a moment.
Well, I mean, the joke is that soccer has been the sport of the future in the US since nineteen seventy two, but yes, walks out, that's true, and I mean, and to that point, on the women's side, they have an issue because the European League is the women the super League in the UK and some of these teams in Spain and elsewhere that have connections to their men's sides, so Barcelona, Chelsea, these clubs, they're now starting to really
invest in women's soccer and they already have emotional attachments through the men's sides with a lot of fans, and they're in some cases paying more than the National Women's Soccer League for talent. And that's going to be a challenge because you have to have whoever the equivalent to MESSI is say, and you have to be able to say we are the best league in the world, and they're going to have to compete. Sam Kerr left for Chelsea. She's the Australian player, she's the highest paid player in
the world. She does not play in the National Women's Soccer League. So as they grow, they're not only going to have to invest in all the things that you have to do stadiums and so on, but they're going to have to compete for talent.
When you say highest paid player in the world, we're talking We're not talking millions of dollars a year. No, we're talking less than a half million dollars a year. That was shocking for me to say.
Yeah, I mean, she is reportedly the highest paid player in women's football and she makes about four hundred fifty thousand a year.
Which, don't get me wrong, that's yeah, really good money, right, but that's not right men's soccer money.
No.
I mean, on top of that, people like Alex Morgan have real opportunities obviously in the sort of commercial space, but it's still a huge disparity. And that is another thing that comes with maturity, right, because really, when you've hit it big is when you're making streaming money or media rights money in the billions and that's when you then probably have a collective bargaining agreement that says players get half of that, and then the contracts get huge.
Before that, it's more difficult to generate that kind of those kinds of salaries.
It makes me think about what the audience looks like, too, because the reason that I have been drawn to women's soccer is because of the activism surrounding it. And I'm sure that that is not the case for the majority of fans, but that's what got me into it. How much of that are you seeing people who are in it for the pro these women getting paid more eventually someday.
Viewership, I mean it's you know, if you go I go to Gotham FC matches out in New Jersey and there's definitely, like the signs in the crowd, a lot of them are about social justice, about believing women, these kinds of things about pay. So there's an element of that is what are I think some of the core
fans are there for. And it's definitely a piece of the attraction for this, that idea that it's about time that we started supporting and following women's sports on a power of the men's I think for the league to grow, it has to break out of that. And that's what you're starting to see now where it's just an entertainment proper position. These are the best. These are fast, exciting, quality, talented players and competitive, intense matches that you're going to
want to see the outcome. You're going to care who wins. And that's when you get to I think, you know, stronger investment proposition.
How much is writing on the performance of the women's team, the American women's team in the World Cup right now? Because I mean, like I mentioned just there was.
This tie, right and like well tonight, yeah, Portugal tomorrow three am.
So so you know, for real, like a lot is writing on this right Like if if somehow America doesn't do that, well, like what does that do for this you know interest in the sport here?
They have So the NWSL has twenty two of the twenty three players on the US team. So I spoke with the commissioner, Jessica Berman.
Who's the one who's the one that's not.
Plays in France for leon Oran, but they so they you know, I spoke with Jessica Berman. She would she said, as an American, I'm rooting for the US team and reminded me that they have sixty one players total across all the rosters are on half the teams, so they
have a stake in a lot of these clubs. But it's clear that I think they would love to see a fifth World Cup victory and these players to come back to their teams which are playing right now, have them come back in the late summer fall and be returning heroes and juice the short term certainly, you know.
But in the meantime they are They put together a marketing team to advertise and promote around the World Cup to say, hey, if you love watching these players on this stage, come and watch them on our stage when they get back.
Right or now right, it's like all the best players are going to disappear for a little while.
No, I mean I have not gone to a Gotha match during the World Cup because you know, the best players aren't there. Yeah, so's it's a short term loss for them.
The marketers, the Nikes of the world, the huge, huge consumer package goods companies that want to be associated with something really cool. Are they stepping up?
They have been, and it's been interesting because you look at Budweiser, or now it's bud Light. Uh uh. Nike is a big one MasterCard. I believe those deals. They've been investing in the league even as it was going through this scandal and the Sally ATE's report and really a lot of questions about player treatment, harassment, abuse, and they stuck with them through that and and have I think because the league showed that it wanted to you know,
clean house. But there that that side of the of the sort of investment, you know, the media, the media side is small, the ownership side is getting bigger fast. But I think the sponsorship side has maybe been the strongest over the last few years because partly what you were describing of just there's a glow around these teams. It's not that they're great athletes and it's a great sport to watch, but these people are sort of social heroes as well.
Okay, so I'm curious, like if if all these players have this World Cup they go back to, uh to their regular regular teams, who am I supposed to watch? Like you know, you you make going to pitch for Jersey here, But like you know, like how there's obviously there are very fan centric places like the Portland team Portland forms is viewed as like an example of what this can really look like. Is that true everywhere?
Though?
I mean there's these pockets right and like you have and you know, this is big money heading towards San Francisco. So what's the whole league like when there's like really really strong followings and then you know, I don't know what Louis Tho's.
Like, right, No, this is something they need to get right because there's huge you know, Angel CITYFC came out with a huge amount of attendance and buzz to Portland Thorns. You mentioned Raining champs. They have Sophia Smith the MVP. They have a really strong following. BAFC, the new team coming next year, looks like set to really explode. Kansas City's doing great, but it's not across the whole league for sure, and they're looking to expand to sixteen teams
within the next few years. And what they're going to need is that kind of enthusiasm league wide, and that's going to mean not just building that fan base, but having the type of ownership that wants to spend the money that that takes.
And stars too, right, Like the stars can kind of cut through everything so who are people on the women's team right now who's viewed? We know who the regulars are, but like if somebody's gonna rise up and really kind of prove themselves, who are some of those candidates.
Well, I mean, you look at Alyssa Thompson eighteen years old at Angel CITYFC. I think that's a person that many people expect, along with Sophia Smith to the face of the women's game once the sort of current generation Alex Morgan, Megan Raupino star eighteen. Yeah, and they have. That's another thing that they've developed lately is they've got fifteen year olds. A fifteen year old scored the other night, set the record for youngest player to score in the league.
Because they've set up a mechanism for high school players to be able to play, and they're seeing young athletes skip the chance to go to Stanford or North Carolina to play in the league, which tells you that they believe that this this league can really be a platform for the future.
So when a high school student plays, do they get paid and then if they get paid, they can't go to college?
That's right, They're they're doing their opting to do this instead of going to college, but a decision to make it fifteen. Yeah. I mean in some cases they're still in high school, so they might you know, things can change, but I think they look at it as you can still go to college later.
You're still are you allowed to play to play in college?
Sorry?
If you accept is that has that rule changed?
That's a good question. I think you can go back. I don't know if you're eligibility as a as a that's a great question. As a Division one player, would be would be totally expired if you went pro in n W s L. I don't think we've we've never that's uncharted.
Joy, we'll find out.
Good story, check it for.
You can certainly go back to school though, if you want to get it exactly.
Thank you so much for joining us, both of you. Joel Webber of course our editor here in Ira Boudue, the journal.
Now about you let me drive?
Oh no, no, no, no, please travel.
I want to drive.
It's a good question.
This is the drive to the clothes.
On Bloomberg Radio.
You know, I've just realized it's Tim. You were on path leave during the massive AI rally, so you got to miss saying AI twenty thousand times. It's broadcast.
I get to keep saying it, Yes, disagreed, this AI rally continues.
That is that is so true? Call it AI euphoria, the Foamo rally, a classic bull market, whatever you want to call it. The market has obviously been on a tear driven by that exact AI rally. It's sept for its longest streak of monthly games since August twenty twenty one for the S and P. So as always with too much of a good thing, you got to wonder when are we going to start to see the cracks? And that's exactly what I want to ask our next guest.
We've got Vivian Hairston, director of Portfolio Management at Huntington Private Bank, joining.
Us on zoom.
Vivian, thank you so much for being with us. We're seeing that stock exposure for traders at record highs and the rally really driven by that magnificent seven big tech names. Is there kind of a scary catalyst looming out there that you are anticipating and that could start to kind of turn this market?
Well, I want thank you for having me. I won't say that there's a scary catalyst. We are cautiously optimistic regarding markets. Really looking at the consumer, the consumer remained strong, and so markets and the economy both we're cautiously optimistic.
Of course, the FED did raise rates just.
By twenty five basis points, no surprise last week. But we in looking out next twelve six to twelve months, we're saying perhaps now that there's maybe a fifty five percent chance that we'll see a recession. But overall on markets again, as you just mentioned, you know, looking at equity markets, they've been very strong.
They really have. Oh I just I want to go back to the fifty five percent chance that there's going to be a recession. Is that Huntington Private Banks view? It is?
It is?
Did that change last week after you heard fedhair Japowe will say that even though the internal economists at the FED are no longer seeing a recession as their base case.
Actually we became a little bit more cautious before the meeting, and it was, you know, looking at the markets, and really after that June meeting, of course, Chair Pal was very hawkish, and so last week of course dialed it back a little bit, not as pessimistic, it seems, but we reduced our were equity waitings a little bit before the FED meeting, just looking at where equity domestic equity markets had been. I really just thought it was best, you know, to lock in some of those games.
When you think about the recession call, I wonder to what extent you feel like company earnings are part of that calculation. Are you looking at earnings that we're going to get this week from the likes of Amazon and Apple when sussing out the strength of our economy.
Well, we did consider the fact that earnings in the first quarter came in better than expected. Of course, those earnings were better than expected on lowered expectations. And what we're hearing now is we're beginning to hear some earnings revisions coming down again, forward earnings coming down again, and so we are kind of again just being cautious. We've
seen so far. I think the expectation coming into the quarter was down about nine percent, and what we're seeing, I think is somewhere about nine point two, and so that provide us caution.
And I noticed that you trimmed your equities holdings by ten percent and added to fixed income, which I'm so curious about. It feels like you're really getting paid to go into fixed income right now? How much are you changing your thinking on allocation between stocks and bonds there, So.
We actually trimmed by five percent are exper holdings, and then we took that five and you are correct, and we added it to.
Fixed income for a number of reasons.
Of course, you know, fixed income is finally attractive after twenty some years, and so now you're seeing those yields on fixed income and cash above the inflation, and so that third leg of the stool is available to investors.
And we just thought, looking at domestic equities again, looking at those returns, some of those returns we'd be happy to have had just for a year, let alone, you know, six seven months into a year, and so we thought it was prutent just to take some of those gains off the table.
So raise is the question about somebody who comes to you right now with you know, a few million dollars. Let's say they had an exit. They want you to deploy the money for them. They have a time horizon of they've got they've got a long time horise, and this is money for later. Are you comfortable putting money in equities right now?
We are, And you know, really not just right now when if we kind of take a look back, that five percent yield on cash is very attractive and one might.
Be tempted to.
Perhaps hold the money in cash. But really, as you mentioned earlier, the returns that we've seen inequities, they've been relatively narrow. Of course, we've seen that leadership in those
seven tech consumers or communication services company. So now what we're beginning to see is really that performance began to broad now whereas communication services information technology is still leading here today, what we're beginning to see is a little bit of broadening, you know, if you've used energy as an example of about seven percent so far this month.
Sure, and in our final kind of forty five seconds with you here, I want to talk about some of the stocks you've recently added in our note here. We have Adobe, American Express, T Mobile, and Netflix in that list. Talk to me about your thinking on Netflix because the earnings picture was not great, particularly in the market reaction.
Well, really, you know again just thinking about the consumer, and my area of expertise isn't the individual companies. We have a wonderful research team that could probably talk a little bit and go a little bit deeper, but.
Again looking at consumer trends.
Of course, Netflix earlier changed their model a little bit in terms of how they were going to be charging clients or fiend clients, not sharing those passwords and like, and so we anticipate that they will begin to see a turn and.
Some better earnings.
Vivian, we're gonna have to leave it there. We really appreciate you taking the time this afternoon. Vivian Herston is a director of portfolio management at Huntington at Private Banks. She joins us via zoom this afternoon.
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