K-Shaped Recovery and Government Stimulus

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. So something Tim that we've definitely been talking about in the news room amount of know what you folks over at Quick Take, whether it's been on your mind this morning, But about Texas Governor Greg Abbott lifting the mask mandate Texas, I think actually

you and I may be touched on it yesterday. Yeah, we did towards the late in the day yesterday, but it was the lead of our nine am show this morning, because look, this comes at a time where people definitely do not feel like we're on the other side of the pandemic and healthcare professionals are saying, hey, it's a little early to be opening up. Yeah, and they're getting

ready to allow businesses to operate at full capacity. I think it all begins next week, even though some of their city and county officials say, wait a minute, this is too fast. Basically, let's get into it, because we did get an update on the vaccine and the virus yesterday from President Biden talking about all Americans will have enough UH COVID vaccines by May, but working on getting the places and the vaccinators in place to give them out. Let's get to our guest. A. Lissa Wraps, she CEO

of the healthcare solutions company Surgical Solutions. She's with us once again on the phone from Deerfield, Illinois. A. Lissa, nice to have you back here on Bloomberg. How are you. I'm well, Carol, Hi, Tim, Thanks for having me back. And I'm feeling a little bit more optimistic about the state of vaccine than I even was a few days ago. How come I think that now that J and J has had the shot approved and there's just going to

be more vaccine in the market. You know, if if we're on a current average of one point nine million shots given per day at that page of American adults could be vaccinated by August and maybe we can accelerate that further, and that becomes that interesting almost tipping point for from a herd immunity standpoint with adults. Now the

children are a different issue. I understand J and J vaccines plus has less efficacy than the other two, but at the same time, that's a much greater clip of vaccinations, which is I think possibly a light at the end of the tunnel. Lissa, that's I mean, that's great, great to hear that the optimism has changed in just recent days. You have over two hundred employees on the front lines of the COVID nineteen crisis. They're working to provide services

and equipment for hospitals. What are you hearing from them? What's it like for them on the front lines right now? So in the early days it was really well throughout, COVID has been extraordinary and clinician burnout and they're burnout is very real. So that's a whole different conversation. But as it relates to the vaccine in the last few months, as their sites of service in the thirty five possibles where Surgical Solutions operates. As they've all been receiving the vaccine.

There were still hiccups that we talked a little bit about that when I was last on how there were hiccups and delivery even that hospitals of all essential workers, which I found very frustrating due to regulatory requirements and tracking um through technology. But now I think some of that has been solved for and now we're seeing and the education of our staff through lots of mechanisms is high, so we are seeing a much greater clip of people

getting the first shot and then a second. We've all been receiving maderna advisor to date, and I'm hopeful that when it when there's a one shot option, we'll see it increase even further. But at least the friction in terms of getting the vaccine as an essential worker seems to have been dramatically reduced, and now access to vaccines themselves sites of hospitals being out of vaccine seems to be. Replenishment seems to be going a little bit better. That's good.

That's great to hear because you guys are seeing it directly. What about the one of the things that President Biden brought up is getting kind of the supersites out there so that people can actually get the vaccine and having the vaccinators in place. And I'm curious if that's where you know some of your employees and team members know really are seeing this firsthand. Are they being asked to work long our work more places to get those vaccines out.

We haven't been a part of the actual vaccination team yet, although we're working longer hours and and doing all sorts of things to support minimally invasive surgeries, which is tangentially related. But I firmly believe that working with our existing big box retailers, and it almost doesn't matter which one we talk about, whether it's a Walgreens or CVS or a Walmart or Costco that has infrastructure for shot delivery. As you know, will Greens all ready have the food shot

as as this Costco, etcetera. That to me is the cleanest and simplest way to ensure that it's going to be mass rollout from a retail consumer facing perspective. I'm wondering how you're thinking about this year as the CEO of Surgical Solutions. What are you planning for in terms of how your employees will change their behavior once we

are on the other side of this pandemic. How they're going to I mean, I gotta tell you, Uh, we are like planning for mass vacations at this point, and I'm wondering as as a leader, like how do you plan for that because people have some pent up demand to take a break, right, Like you all can't take August off? Sorry? Right? No, No, that certainly wouldn't work. Actually, scheduling a vacation time has become a very real priority in team leaders could call our account supervisors or junior

account managers. Have to be very I have to be very dedicated and clear and how they're going to allow for staggered vacation time because people need it, We want them to have it. They've earned it, they should take it. But you can't take it all at once, to your point, and so making sure we're intentional so there isn't a drop in coverage and being choiceful and how we planned for that's going to be important. And then also being being clear that in past years people have chosen not

to take vacation. It's like no, no, not only have you learned it, you should take it. We all need a break. It's exhausting. This has been exhausting on numerous levels, and taking the time off is really key. A couple of our one of our director of implementation, UM, we had and rotate for a few days off only, and he came back saying he was super rejuvenated and refreshed with his music. To my ears, that's what time off

is supposed to do. So it's needed and we just need to be planning for it here, especially especially in this time when kind of the lines are blurred between work and home and all of that. UM Alyssa, always great to uh talk with you. Alessa Wrap, CEO over Surgical Solutions, joining us on the phone from Deerfield, Illinois. What's the message, take a vacation. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovich

from Bloomberg Radio. A lot of great stories being reported for Bloomberg Business Week. What about sick time during working from home? We're going to get to that a little bit later on. Then there's a story that stayed at the top of the most read on the Bloomberg from most of yesterday about that four day work week. You can I talked about that. Yeah, sounds pretty nice. I think to a lot of people it was like, sign me up to everyone. Well. Stevan Nikola is the person

who wrote that story. German business reporter on for Bloomberg News joining us on the phone from Berlin. Stevan, it's great to talk to you about this. I loved it when you joined us on quick Take yesterday. UM tell us about the company a when Yeah, thanks for having me so. ABAN is a Berlin based tech company that when it went into lockdown last year, it realized that its employees stuffered from stress, and it gave employees half of Friday off U two sort of ease into the weekend.

And that experiment went so well sales, employee engagement, and clients and satisfaction all rose that in January, ABN decided to go a step further and they rolled out a full day week for the entire company with no cuts and salaries of benefits, and the CEO says it's working really well. Toe Webber, I'm thinking, all right, sign me up Bloomberg Business Week nitor Toie Webber is here on

the Access Land in Brooklyn. I feel like, as we're all thinking about Joel getting back to work post pandemic. We're trying to figure out is it a hybrid? Are we working from home? Are we going to the office? What is it? Yeah? You know, more importantly, like if you're going to do a four day work week, which which day do you exercise from that work week? You know, like Friday is the obvious choice, but like Monday, there's clearly strong case for that. Yeah, Like Wednesday was like

the out of the box. When that a colleague said, like, what why bother with Wednesday? So I thought it was fitting that on a Wednesday we would talk about which one to get it up. But but seven, the thing that I thought was most interesting about this is like, even if you lop off a day, whichever day of the week it happens to be, it doesn't seem to

affect productivity. What did we learn about that? Yeah, so there are studies out there that productivity isn't dropping in some cases, Um, we are seeing increased productivity even and the CEO of the company told me he saw the same. He said that employees find ways to work smarter and not less, but smarter and that just as productive and and just um, going back to the Monday, Wednesday, Friday discussion.

He said that Friday's are the most popular days to take off, followed by Monday and then actually Wednesday, as you suggested, because it gives people a nice break in the middle of the week and they can restart recharged. I'm just gonna say Fridays I like because that's always sometimes have a wine guest and we can drink wine on here. So I'm not getting rid of Friday. Let's get rid of my money. Nobody says, give a case of the Fridays. You know what I'm wondering though, are

we still productive these four days? Like we when they cut it down? What did they find? Yeah, they did find that that productivity is basically the same or even improved. And Uh, it's that, you know, workers tend to be more focused during the four days, and they tend to put a lot of effort into those four days that

they are either in the office or or king from home. Um. Interestingly enough, UM, the CEO of that company also expected you know, productivity to you know, uh suffer when he sent all of his employees at home, and he said clearly that didn't happen. Much of the country work has worked just as as well from home and uh, lopping off another day with the natural choice for him, and he said it really restored a work life balance that has you know, left him energized for the rest of

the week. Hey, Stephan, I want to move to another story that you wrote, this one coming out today talking about Tesla speaking of the corporate world. You've got to get to those four days of work somehow. And it turns out the European corporate car market is huge. This was really surprising for me to see. Um, a lot of companies are a company's account for a large proportion of cars so old, uh in Europe, right, Yeah, that's that's correct. Around around sixty percent of new cars sold

in Europe are brought by corporate customers. So that is the huge market. And uh, it's worth about three hundred sixty billion dollars and it's a market the local automakers dominate. UM and of course Tesla has a hard time cracking

that market, partly because it's lacking servicing stations. One company told me that you know, it's it's workers would love to get Tesler's but the company is not comfortable offering those cars as a perk because they are afraid that these employees would take time off from work to to deal with repairs, and the likes from Mercedes, BMW and Volkswagen.

They offer same day fixes nearby for these company cars that that these workers get as a perk, and and that's why there's there's the favorite models for many companies. But if you're only working four days, you know that extra day seems like a day that you could like your car. Just bringing it all together here with the bone. But how big of a deal is this really? For

teslasting like they are? You know, clearly they have demand if it's many people want them, so so is this corporate um conundrum going to end up being a headache for them? And Stefan just got about thirty seconds. Yeah, I look for now of course, Um, you know, the company is building a new plant in Berlin. It's going to be huge outputting as much as five from thousand carts, so they need to sell those costs somewhere, and the corporate car market is just too big to ignore for them.

So I think there's a third story that stuff I can do that ties it all together. I can find one the week. The week is not done yet, good stuff guys. Thank you so much. Jill Webber, Editor Bloomberg Business Week, Remote access from Brooklyn. Stuff on Nicola during this reporter joining us from Bertlin, staying up for us. This is Bloomberg Business Week with Carol Masser and Bloomberg

Quick Takes. Tim Stinovic on Bloomberg Radio. Are you are listening to Bloomberg Business Week and really looking forward to our next guest? Because I feel like a top story at this hour. It's got to be, it continues to be, and that is the economy. We're counting down a Friday's monthly jobs report, watching the prospects for another round of stimulus from d C. So I gotta say, great to

have back with us. Peter Atwater. Yeah. Peter Atwater is an adjunct professor of economics that William and Mary joining us on the phone from Pennsylvania. Professor Atwater, Great to have you on the show. How are you doing. I'm doing well, Jim, Thank you good. Um. What do you think of the we've been We've been dying to have you on and we're ucky I get so much time with you. How is the American economy doing right now? Because we are getting so many mixed signals. Right there's

this optimism flashing in the bond market right now. The stock market is just of of record highs in recent weeks. At the same time, though, ten million Americans out of work, so it continues to be the case shaped recovery. Um. For those that were able to migrate to work from home, they are now counting down the hours to the reopening of the economy and getting back to life as normal.

But as you said, there are ten million Americans unemployed, four point five million filing continuing claims, for whom the recovery is going to be very slow, even once it's reopened. What's kind of wacky is and we just did a conversation with one of our reporters. It's among our most read stories on the Bloomberg and it has to do with um Peter, what's going on in states and state revenues.

I think we all thought, oh my god, the states are going to fall apart, municipalities are going to fall apart. Revenues actually aren't down that much, and this is kind of going against They expected two hundred billion in state A that's that's expected to come from the COVID relief package from President Biden, what do you say to that? So I say that we're seeing similar unevenness that we're seeing with individuals that we're seeing with businesses, we're seeing

it with states. And so the challenge now for the administration is how do you provide support for the states that are not doing well in the face of the economy about to reopen, and you know, without it being viewed as a bailout on the one hand, and also without it being viewed as incremental stimulus. That runs the

risk of the economy running hot. And I think it's going to be very difficult for the administration to get the current package that it's proposed on the States through because it, as as things stand right now, it gives everybody a reason not to like it. It's too much stimulus, it's too much relief, it's a bailout. Something is going to have to give there. Well, are you worried about inflation? I'm not. I I feel like the lone voice here.

You know, last week, last week, we saw this intense capitulation, this intense climax on the reflation trade and bond yield. You know, Carol, I I spent a lot of time looking at Google trends, and I do because it shows when the retail investors shows up and suddenly last week all they wanted to do was to search for reflation and bond yields. And that feels, you know, we may go a little higher, but that feels to me very sort of game stopp ish, where there was this intense

rory that then fizzled out. And I honestly think folks have gotten way ahead of themselves on the reopening. So do you think the move up, like we were talking about the tenure at one point five, we've gone as far as point six. I kind of see it as a little bit of a catchup from the equity bounce back of okay, where we can see a trajectory of things getting better, it's going to take a while. How

did you see the move up though and yields? So I I saw it in some ways very much mirroring what we've seen in commodities and and so we've also seen everybody now worried about shortages and you know the supply chain being a problem. The White House had a group of folks in last week worrying about chips supply and so that to me is all indicative of the same kind of sentiment that there's that there are shortages, that inflation is built into the system, and that problems

are coming ahead. But it all presupposes that when the economy quote unquote reopens, people now fantasize that they're going to get back to what was, and we never do. I love this. I tweeted about this way. I just gotta jump because you say this whole idea of getting back to normal, right, the return to normal. I probably would be a really rich woman if I had a nickel for every time I said it or a guest said it. But you're saying that we don't. That's not

what happens. No, we we carry our experiences, particularly traumatic experiences, with us, and I think that there's those that did not experience trauma. They've been spending wildly on homes and other things um already. So I struggle other than with travel and some entertainment where those at the very top

are now suddenly going to splurge. But I worry as we moved down the economic chain, there there are people who have been traumatized by this financially and for whom I think we're going to see continued hoarding, continued reluctance

to spend um. You know, I think about it in terms of what I call the pantry effect, where when you when you didn't have enough toilet paper, when you didn't have enough you know, whatever it was that you were rushing to costco to bill a spring, Well, it's still in your house even though supplies have come back. For Peter, is there is there any silver lining to that? I know it doesn't have the stimulus effects that economists want to see, that the Biden administration wants to see.

But is there any silver lining to hoarding cash and paying down debt for some of these people who you say, we're financially traumatized and when we have about thirty seconds left? Yeah, I do think that there is getting stable, you know, getting some certainty and control back to their their lives is important, and I think that's part of the stimulus effort. But I think to assume that they're going to now wildly spend is woefully optimistic. Listen, I've said it a

million times. We love hearing from you. You first coined the term to describe the economic world that we have been in this K shaped recovery, and I have to say in the break and Tim maybe you come in on because we've been talking about the case recovery as it relates to the covered relief package. Yeah, and it's a conversation happening in Washington right now. Just today President Joe Biden agreeing to moderate Democrats demands to narrow that

eligibility for those stimulus checks. So now individuals earning over eighty dollars would not qualify for those direct payments, compared with a hundred thousand dollar cap that was in the previously drafted legislation. The ceiling for couples will now be a hundred and sixty thousand UM as compared to two hundred thousand before. Professor Atwater, is that the right move? Is that the right way to address the k shaped

recovery here? Yeah? I think it is. I think that there has been you know, the policymakers use fairly blunt tools, and I think initially there was a sense that everyone needed to be helped. There is much greater clarity today. I think where the pain really is as well as where those who have benefit really have have have fared. So I think that there is a need for greater precision and folks us on those whose whose lives have been upended versus those who are already on their trajectory

to recovery. So I want to ask you. I kind of love your mix of you worked in financial services, you're in academia, Like you've seen a lot, you understand the intersection of a lot. Peter and I do wonder if we are at this juncture where we can really make some big changes in our economy, in our world and the inequities that are out there that are longer lasting. Like I've got cousin t J who's tweeting at me and I said, do you have a question for professor Atwater?

He says, yeah, the economics of infrastructure and spectrum upgrades, the economic costs of not doing them, Like, there are things we need to be thinking about. How do you think about it in terms of let's do that long term plan for America. So, I think given the current mood, it's going to be difficult for us to tackle abstract

ideas like climate change. Now having said that, I think there is enormous energy around addressing the problems that come from climate change, that come from the insufficient investment that we've made and so I think that no matter the administration, we will see an emphasis on repair, replace, remediate things that we see as real, tangible problems that we have

to fix. What are some of those tangible problems, Well, certainly the effects of climate change are are are places where you know, whether it's flooding, you know, you look at you know, we still haven't done anything in New York around Sandy, but which is yeah, and you're seeing, you know, the infrastructure issues in Texas on the energy grid.

I think that basic systemic infrastructure. I think we tend to think of infrastructure as solely transp rotation, but we have a number of critical system and networks that need to be upgraded if America is going to be competitive against global the global competition that's out there. Are you optimistic that there is the political will for that long

term view? I mean, look, we talk a lot about executives that companies thinking on a quarterback quarter basis, But I think one criticism of people in Washington elected officials that is that they think about the next election as soon as they win that current election. So I agree with you that we are very short term focused. You know, with with low confidence comes to me here now thinking. But I also think part of that is a need

for domestic investment versus investment abroad. And so I think that this this mantra of you know, whether it's build America, build back better, the make America great again, I think that both parties have tapped into a desire to reestablish America and focus on America first. That's what voters across

the aisle are demanding. Can we do that in a world where increasingly the borders have come down or I mean, I know they've come back up again big time, but we constantly have I spent I don't know the last five ten years talking increasingly about globalization. Can we do

it and it'll all work. Well, We're going to do it, I think, whether it works or not, because there is a need for this what I call the justin case economy, So that mindset that we have that we need and expect critical supplies, critical manufacturing, things that are vital to the American economy happening in America. And I think we were awakened in terms of the pandemic and what we didn't make here and probably need to. And so I think there was a there was a again a bipartisan

view that we need to focus here at home first. No, really really thoughtful ideas and something to think about. Um. And I think that's interesting how you said, Peter, about how both sides of the aisle are thinking about this kind of make America great again. Yeah, we don't think of a common ground that often when it comes to Democrats and Republicans, but it's true. Yeah, great stuff, Peter b Well, thank you, thank you. Peter Atwater at Gen

professor of economics. That William and Mary on the phone from Pennsylvania. You read his bio and it talks about at his son said, you're halfway to ninety, Like, what are you doing. I'm so glad he's had some time for us. I'm road journal. Yeah, but you let me drive? Oh no, no, no, Anne, please, I'll I want to drive. Just drive. Questions the drive to the globe. Thanks, we'll

drying us Dawn on Bloomberg Radio. Right, folks, just about eleven minutes left in today's trading send session, bouncing around a little bit, bouncing around the bottom. Right now, I've got about a two decline on the NAZAC at text talks really taking the biggest hit here. Um, let's get into it with Sarah Mallock. She's head of Global Equities, Chief investment officer of Global Equities of Written y Viene on the phone from San Francisco, overseeing roughly four billion

in assets under management. Sarah, nice to have you here with Tim and myself the tech route. Do we need to be concerned here? Well, thanks for having me. There's three issues weighing on the market, and a lot of those are hurting these long duration sectors like technology. The first issue is inflation. We do view that as more of a fear than reality, but it's causing a many tantrum for the market. The feeds should stay on its Dovis course, so I think that we're okay on inflation. However.

The second is the backup in rate. These higher yields that we're seeing are being driven by growth, so we don't view it as an imminent risk even though the tenure interest rates are moving up. You know, as long as growth expectations and vaccines continue to roll out, we think will be okay. Third is valuations. Valuations on the S and P are over twenty times at this point, and we need that earnings growth to kick in for to drive the market's higher because we don't expect any

more valuation expansion. And the beneficiaries of that faster earnings growth are going to be those shorter durations cyclicals and the and the source of funds of those cyclicals will most likely be technology stocks. And that's why you're seeing these tech stocks continue to compress in this kind of faster economic growth environment. Okay, I want to start with number two, bond yields. Is there a number that we should be concerned about? Is there a point when you

start to get concerned about rising bond yields. Yeah. We look at, for example, high yield spreads, which actually remain quite low, so that's not causing any issues. We look at the UH, how steep is the yield curve. It remains steep, so it's telling you that growth is driving these yields higher and it's not to your recession. We're also watching commodities such as copper. Copper prices continue to move up. That's improved. That's plinty to improve economic performance.

So as long as the drivers behind these yields are strong, we're not as worried about them. But you do need to watch the spreads. You do need Do you need to watch the slope of the yield curve and you start to see those start to move in the wrong direction, then we would become more concerned about higher yields, right. And and the other thing is, I mean there were some stories on the on the Bloomberg, some great reporting

about inflation expectations short term versus longer term. If you look longer at on the curve in terms of what investors are expecting, they're not worried about inflation. Is it important to us to keep that in perspective? I think that's also another key to this is we do expect to see higher inflation because of the reopening of the economy, people going back demand for traveling. There's also some supply issues with logistics that as we're having trouble getting supply

back online, it's causing spikes in prices. The longer term, there's headwinds for inflation in the labor markets. About labor is two thirds of company revenues. There's still a lot of flak in the labor markets. Higher productivity, demographics going in the in the wrong direction. All of that put the lid on inflation. So exactly, I agree with you. Our view is that inflation can see a short term spike.

We don't expect the FED to overreact on a short term spike in inflation, and longer term those expectations actually remain quite mild, which is positive for equities. So, Sarah, giving this backdrop, where are you seeing opportunity in the market right now? We think cyclicals are attractive, So looking for those companies that have the most banks there for

your buck in terms of lever to the economy. So this is financial the consumer as the as the economy's reopened, the consumer has a very strong balance sheet and the consumers should be strong. Going outside of the US, non US benchmarks tend to have a heavier cyclical weight than US benchmarks, which tend to be more technology weighted. So looking at European benchmarks and also emerging market which should benefit from a reflation trade and also from stronger currency

in versus a week or dollar. Okay, One thing I wanted to ask you, Sarah, as I think UM last time around, and I think it didn't work out either because the news or some other thing that the market, the part of the market that you were looking at was UM and I think this was in late February, you were looking at some of the digital names, whether it was a Service Now or a HubSpot. I'm just curious, do you still like that area of the market which

has definitely come down significantly from its highs. Yes, so we have found opportunity in some of these digital names. In January when you saw a lot of the individ visual investors buying company that were heavily shorted and some long some hedge funds that had to pretty quickly be risk and sell some of these crowded technology names. And we still do like the structural growth of strong technology companies.

The question is what price do you want to pay for them when you do see them dropping in a week, which for some of these companies that happened in January, we view that as a buying opportunity and we think another one will be coming up in some of these strong companies like service Now, hub Spot, um Salesforce. All of these companies are companies that you do want to own over time, and you need to pick your points that where you want to buy them because they're strong.

Structural growth is still there. However, the companies that are really going to benefit from a faster growing economy in the narrow term, are going to be those civil because service now is down about from that February eleventh high. Hey, what are you guys hearing from clients when it comes to portfolio construction right now? I mean, are you really

overweight equities in general? And I don't know, this is a question that depends on who the client is, But are you overweight equities because because fixed income isn't doing anything, you know, it depends on the needs of the client. You know, clients are some clients are more focused on

income summer, more focused on capital appreciation. We're looking really at it, you know, with a rich reward of different asset classes, so equities you can get higher returns that also they come with a higher level of risk than other asset classes. So really it's for us, it's based on what is the client looking for um and then we have a very diversified platform that can offer them

anything they need to help them meet their goals. Sarah Wee last question, So a year from now you're writing a book about one what do you think the title is going to be? Well, I think it it'll be the Return to Normal. So getting back to the normal way of life. I think we could see people actually almost everything happening greater than we expected. So so I think that we could, if anything, error on the side of more growth than we expect because of the stimulus. Uh,

you know, we could overshoot in some ways. If you look at history post these types of periods, people actually it's almost like they come roaring back, and we may see that in the second half of this year, Ernest could be very back and loaded back to drive the market. That's probably more of the risk, right stutting down again, Well, I'm going back to Peter Atwaters and you really can't go back to normal because there's just things that have happened,

whether it's increased agdization. So it's this interesting conversation we're having around that. Sarah, thank you so much, really appreciated. Sarah Malic, chief investment Officer of Global Equities over at New Vene with us from San Francisco. 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,