Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Now, let's get to one company that I gotta say. Tim was already on track to be the news this week.
We knew that, yeah, but for good stuff.
Yeah, we're talking about Macy's. It's usually a big week for Macon's ahead of their Thanksgiving Day parade and Black Friday. It kicks off the all important holiday shopping season for it and the rest of the nation's retailers. Yet it's kind of been a rough start to it all. Macy said it would delay its third quarter earnings release after an investigation revealed an employee hit more than one hundred
million dollars of expenses. Macy's shares down about two point six percent as we speak, with some insight into really what the heck is going on? We got Bloomberg Television's remained bostic here in our studio. He's the cost of the clothes coming up in a little less than an hour on a Bloomberg TV. So you spoke with the folks over at Macy's today, what's going on here?
I did, and unfortunately I can't really tell you what's going on because there was only so much they would share. I mean, this is a pretty big deal.
Now.
Obviously in terms of the actual dollar amount, this is a drop in the bucket when you consider their overall revenue. But you're talking about an employee who was effectively in charge of certain things when it came to their delivery operations. One hundred and thirty to roughly one hundred and fifty four million dollars over a three year period, apparently unaccounted for. Now. I asked macy specifically, was this money stolen? Was this
just expenses that were miscategorized? They could not say. They said that the investigation is still in the early stage, and they weren't able to actually share publicly exactly what happened, other than to say that the employee is no longer there.
I mean, I don't want to read too much and do it right, because we've got to get more details and we want to be careful here. But it does make you wonder about like oversight or something, or what was going on.
Well, that's the big question because they're basically this on one single employee. Now, you know, not to be too clib about it, but you know, you know, one employee making off with a few thousand dollars sounds plausible. One employee potentially making off or at least obscuring over one hundred million dollars, that's a lot for one person. I mean, I know there are a lot of overachievers out there, but I think I would need a little bit of help. But they but they said right now that they think
that this has been nipped in the blood. They did make it clear that this actually came about while they were preparing their earnings report, and they just noticed some discrepancies and then they did a deeper dive, and then they made the decision that it was better to hold off on issuing that report until they got a fuller investigation of what was happening.
But this is also a time when Macy's is trying to do a huge turnaround right now. Yeah, got a relatively new CEO, someone you've spoken with quite a bit over the last few months. Explain the backdrop that this is happening against well.
The backdrop is basically a slowdown in sales growth for the company overall, Macy's Inc. That's the large umbrella company. Of course. The major properties are Macy's the store, Bloomingdale's the store, and Blue Mercury, which focuses on cosmetics. Blue Mercury is doing great. Yeah, Bloomingdale's, believe it or not, is doing great. Macy's stores themselves not so great on a comp sales basis. They were down three percent. That's just that the Macy's branded stores, but that drags down
the ink the umbrella. Comp sales down as a whole also lower. Of course, the company will focus on Bloomingdale's. The current CEO of Macy's Inc. Tony Spring, used to run Bloomingdale's, so there's a big reason why he became CEO of the overall company because he did a lot to turn that around. And Blue Mercury is doing better as well, as a lot of people are still willing to buy cosmetics and skincare.
Guilty as charged, but no, like listen, whether it's a four or right or all of those, they've really done well. But I feel like blooming Dale's is different from Macy's in terms of their customer in a big way. And I do wonder whether you know Tony Spring, you know, can make those adjustments.
Well, that's a big part of the problem. And I've asked in this in past calls. Now they wouldn't want. They didn't want to talk about this today. They're saying that when they released their earnings, which they say will be done well, they said by December eleventh, so it could come before that, but they expect to have the earnings release and the conference called by December eleventh. But to your point, Bloomingdale's had much more of a I guess niche customer if you will. It was much more
definable than Macy's. Macy's was kind of everything to all people, and as you know, that's the big challenge for department stores right now is how do you beat everything to all people in a world where I think a lot of shoppers want something that's a little bit more personalized, a little bit more niche. And I think Tony Spring did a good job with that with Bloomingdale's, but he was dealing with the customer base that was kind of right for them.
How much digital are they doing over on the Macy's side. Is that productive for that.
I think the last quarter they said roughly it's still it's sort of tracking around the thirty percent range. So that varies pretty wildly depending on which brand you're talking about. Again, it's doing relatively well for Bloomingdale's, relatively well for Blue Mercury. Macy's is still kind of that nut that they have to crack. And they have tried something, and I want to point out they had this thing they called these are smaller stores, called the First Fifth that Donny Spring
set up said, let's do smaller concepts. We don't necessarily need these gigantic you know, tens of thousands of square feet, hundreds of thousands square feet at some of these stores. We need smaller versions of these that will do better. They identified fifty stores that they did that, and if you break out just those fifty stores away from the other Macy's, they're actually doing pretty well. Three consecutive quarters
of COMM sales growth. In the most recent quarter it was up two percent, so down on Macy's as a whole, but those first fifty macy stores and when they've redesigned the smaller format up almost two percent.
Okay, so in this case, smaller could be better. We'll have to wait and see maybe a few more quarters to make that determination.
Sport coat you're wearing about ue, where'd you get that from?
Thank you? I don't actually know.
Okay, this might be a j crew about of Macy's ling tales.
But I asked the question, guys shares.
Down as much as five percent earlier in the Yeah, down a little more than two percent. Right now, What do you think it is that analysts are reacting to here? I think it's just a one off charge here. Well, but there's a million dollars one hundred million.
But there's also the issue of how deep does it go?
Right?
And what else did they miss right?
Any potential something like this big question is if there's smoke, is there a fire? Now? Again, the company line right now, both both of what they told me on the call as well as in the press release, is that this is an isolated incident and that it has been contained. But they could not give me any details right now, reassuring me of that, and they said they will have more deals another criminals.
We don't know how like, we don't know, so all right for someone like you who knows this company. Well, I just got about thirty seconds left here. I mean, the worst case scenario would be what the best case scenario is?
What?
Well, the best case scenario it is just one hundred million dollars, as they said, one hundred and fifty four million dollars as they say. When you look at their total expenses that they were logging, that was four point six billion dollars. So a small fraction of what their expenses were. That's the upside. Now the potential downside. If there's more to this, or this was more widespread, then that potentially becomes an issue.
All right, So next vocal points when we finally get their earnings.
Right, yeah, hopefully before December.
A black right when you're shopping because you want that coat that Tim's got.
I had some nice coate. I know, I know, I'm just saying.
Great stuff. As always. Romain bost At, co host of The Clothes on Bloomberg TV. It's coming your way at the top of the hour, so be sure to check it out.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and the brout Auto with a Bloomberg Business app or watch us live on YouTube.
I'm just looking at treasuries right now. To your note, We've seen yields definitely back off now four twenty seven on that two year note, and I'm looking at a tenure at four twenty six. Talk about a flattening, certainly of the curve that we've seen. I want to talk a little bit more about the treasury trade. We mentioned
this earlier. We have seen treasuries added to some of the gains from that late Friday announcement of Scott Besson, a Wall Street veteran who investors expect will take this thing out of the administration's more aggressive trade and economic policy proposals. Of course, he was nominated to be presidentle like Donald Trump's Treasury secretary choice.
With some thoughts on that in the market outlook post election. We go now to Aaron kenn And he's co founder and CEO over at Clear Harbor Asset Management. They've got about one hundred one point five billion dollars in assets under management. Aaron joining us once again from Stanford, Connecticut. Aaron, good to have you back with us. We haven't spoken
to you since the election result earlier this month. I'm just wondering, big picture, how your views have shifted now that we know who is going to be the next president and the more we're learning about the president elect's cabinet choices.
Yeah, thanks for having me back, Tam and Carroll. It certainly has been interesting.
We started to see these trends just before the election, as the markets, the betting markets that is, priced in or starting to price in a Trump victory. But certainly on the equity side we've seen much more of a convergence of performance. So not just the MAC seven, not just the tech sector, not just the communications sector, but rather financials and industrials and utilities and in other areas of the markets such as energy and materials.
So I think that's one.
Theme that may actually continue into twenty and twenty five.
And then you mentioned interest rates.
I mean, clearly with the selection of Scott Bessett, and we've seen rates decline notably today.
There's a sense that.
Perhaps the deficit spending concern that the market had regardless of who won, frankly, could be quelled on the margin because we have someone who is quite experienced at the US Treasury, and perhaps will have a little more discipline on that front, and so I think there's a sense there that it'll allow the FED to worry less about inflation, to think a little more about the employment and growth picture, and perhaps the lower fifty percent of the economic stratum,
which has still been under a lot of pressure over the last couple of years.
Erin how do you game this out? I am just curious some of the conversations you might be having with some of your investors or clients, the money that you guys have under management, about what really happens. Right there's the campaign, and I think it's fair to say that ahead of the outcome that folks came on and said, listen, either way, it's going to be good for the markets because you have candidates that promise everything right to kind
of get people to vote on it. But I do wonder what the reality is of now that we know it will be a second term for Donald Trump and his team. What will be the reality of policies that ultimately take place. Will it be the extremes that everybody is talking about, or will it be more likely know or something in the middle.
I don't want to sound too cute, Carol, but I think this is the difference between trading and investing to a great extent. There are certain trends that clearly coming out of the Trump administration we think on day one will impact asset prices across fixed income equities, even private equity.
So one trend, for example, as we gain this out and think about medium and long term trends for our clients, is how lower regulatory environment, lesser regulatory impact could could potentially provide a tailwind.
To mergers and acquisitions.
What does that mean for small cap and mid cap companies, But what does it also mean for certain sectors within the economy that over the last four or five years have underperformed the sort of tech trends or financials or even mid cap smaller cap financial companies that are sort of consulting within M and A. And also, you know, what does it mean for the democratization that we've seen of private equity in the growth in that landscape and
the publicly traded asset managers that are really seeing revenues accelerate on the heels of them continuing to attract capital frankly from clients at firms like Clear Harbor Asset Management, who we believe in some cases may be deserving their portfolios and their risk tolerance may require them to have.
Some of that exposure. So we're thinking very much long term.
Even artificial intelligence very hot topic, but how is it really impacting other segments of the economy outside of technology?
And so we think about how is.
It impacting biotechnology and healthcare and maybe the acceleration of some of the phase one, two and three work that's being done, and you know, sort of molecule research and development, and how is it even impacting utilities artificial intelligence in the smart grid. So we're trying to think longer term about these trends, and we're trying to not make any you know, one huge bet as it pertains to this.
Hey, Eron, I.
Want to talk a little bit about about doge no, not doge coins, that of government efficiency, Elon musk vek Ramaswami. They've avowed to cut two trillion dollars in spending from the federal budget. We're talking, you know, twenty percent goes to social security, eighteen percent to national defense, fifteen percent of health, about fourteen percent just goes to interest. Do you think they can pull it off? And if they do, how do you look at it from an investment perspective.
Well, in some ways.
In the long term, I hope they can pull it off, because I think we need to get our sort of fiscal house in order and start balancing our revenue collection with our expenses. And that may require some significant pain in certain aspects of society, and that's unfortunate, but we do need to bring ourselves back to that north star. But you bring up a good point to him, and that is to the extent that DOGE is successful. And Elon Musk mentioned, well, maybe he could cut two trillion
dollars out of an annual budget. I don't know if he was thinking over a five year period or a ten year period, but he seemed to intimate it was one. It was over an annualized period. If that's the case, which would still not bring ourselves into balance. I think we would have to ask ourselves. The GDP trends that we've seen over the last several years have heavily been
impacted by the deficit spending, the unsustainable deficit spending. We've all applied GDP, We've always sort of had consternation around the deficit spending, but this could be a reverse where we have less deficit spending and we have lower GDP. Now that the positive silver lining and all this which we have to analyze as productivity and whether or not we can achieve productivity gains.
To offset that. But that's something I think investors are.
Not yet totally sort of grappling with, and to be fair to them, it's not clear exactly how this Doge process will work. Ultimately, Congress has to decide on some of these spending initiatives.
Are you anticipating the next four years or at least a couple of years where markets trade on posts that come off of truth social.
I don't think of it that way.
I mean, I think there are some very qualified people that.
Incoming President Trump has selected. There are certainly some people.
But there were a lot of qualified people the first time around, and then yet there was still a lot of social media posts.
That's right, And there's a lot of there's a lot of turnover as well, and I think that's that's something.
That I'm keeping my eye on.
You know, we have some interesting picks, some are I think highly qualified. Will they stick around for a year or two or three or four, and that'll that'll I think be important to invest sort of ponder.
Well, So glad we got some time with you. We've been wanting to get your view now that the election is over. Aaron Kennon, co founder CEO Clear Harbor Asset Management.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on 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 a.
Bloomberg scoop Today.
Also most Bread story our colleague Todd Gillespie reporting that city is using retention bonuses alongside management changes and tech upgrades to remake the banks offering for ultra rich customers.
Stay. Yeah, so doing more, doing less.
Trying to keep these employees on by enticing them. And also the new or new ish head of Wealth Management has been doing a lot of traveling to many parts of the world to meet with clients.
I got to say the Wealth business, right, that's something that I feel like whoever we talked to came up with the folks over at Schwab on the West Coast.
I mean right.
It's the wealth management business just continues to grow. If you didn't notice, we are approaching bonus season. Mereth Dennis has a great view on how that could look for Wall Street. She is managing partner the financial search firm Prospect Rock Partners. The company does placement in finance, also operations for private equity firms, investment banks, and the like. She joins us right here in our Bloomberg Interactive Broker studio. Welcome, Welcome,
How are you. I'm doing great? Thank you well. Tell us about your world and what you are seeing in terms of placement demand, who's hiring, what kind of hiring, what's going on.
So there's a lot going on, and a lot has happened since the presidential election. I think we're seeing definitely an uptick in hiring over the past two weeks. We're seeing firms really start to close on their pipeline, and as they get the deals across the finish line, there's more certainty in terms of fee income. More certainty in terms of the income means more money for the bonus pool and also more money for deepening that bench.
So Meredith was just just a case of deals waiting for the election. Outcome, or like, help me understand, because deals actually are in the pipeline. They're working, and they're working, and so I don't know if there's really a cause and effect.
Here or tell me, well, I think I think there was a couple of things that happened. Number One, I think interest the interest rate market started to stabilize. I think given the rate cuts along with the certainty from the presidential election, deals really started to move across the finish line. I think prior to second you know, even second quarter, you know, there was a lot of discussion of pipeline, but a lot of those deals just didn't close.
A lot of hung deals, and that caused a lot of uncertainty in terms of hiring and also what could potentially impact bonuses. Now we're seeing deals come across the finish line. Fee income is coming in, so bonuses are much more certain than.
They had been.
Bonuses for who though bonuses I would say for deck capital markets, I would say that would be up, you know, twenty percent, twenty to twenty five percent. You're seeing the equity capital markets open up again, m and A. You're seeing deals come across the finish line there, and so I would expect, you know, a five to ten percent bump and bonus for them. We're not talking twenty twenty one levels, but definitely a much rosier picture than it has been over the past eighteen to twenty four months.
You know, your team shared with us some notes. So the most significant compensation rebounds since the record breaking twenty twenty one one? Is that fair?
Yes?
That is interesting? Okay, So do you expect it to continue? Does twenty twenty five even look more promising?
Well?
I think twenty twenty five if you consider the fact that the pipelines are really robust, and there's a you know, a genuine feeling of momentum, and the interest rate environment is stabilized, and that you know, we now are moved past some of the presidential uncertainty. So yes, I do think twenty twenty five is going to be a lot rosier given the certainty of the markets.
Carol and I talk a lot about The first Milken Institute Global conference that we went to post pandemic was help me Out, Carol, October.
Of twenty twenty one.
Oh yeah, and then we went to another one a few months later, because that's when they the spring spring is when I'm normally doing it. Private credit has been just the talk of that conference the entire time. I see you nodding your head, Meredith, what are you s in your world? When it comes to private credit.
Explosive, still explosive, absolutely. I think private credit is much more nimble, obviously than than the public debt markets. And I think you know it's it's become kind of the sweetheart of private equity in a lot of ways. And so I think you're going to see continued explosive growth in private.
Credit even if rates go down.
I think it will take a while for rates to go down. And the flexibility of private credit is extremely attractive and the innovation behind it. It's really a creative, a creative debt product.
So when it comes to jobs and people looking for jobs, is a lot of it private credit. Like, what what is going on that you're seeing?
Right?
You're involved in placement, right, I'm just curious.
So there's private credit is really hot right now. But investment banking is starting to really pick up. Before or in the last eighteen months. I was seeing a lot on biotech, biopharma, life sciences, m and A. I'm seeing a lot obviously, I was seeing a lot in terms of software, fintech, investment, banking. Now we're seeing it expand to fig You're seeing some consumer, some industrials. So it's really kind of an exciting time. It used to just.
Yeah, well do you do you do placement for roles that are in technology too?
On the corporate side, corporate development, so not on the more on the strategic M and A side than on technology.
The reason I asked is, Carol did this panel last week at the Schwab Impact Conference about all about AI, and one question that you said kept coming up was, you know, when are these banks going to Well some of them are doing it, Schwab is doing it, Jippy Morgan is doing it, But do their own versions of these chatbots, these oms? And I'm wondering the hiring that's happening around there.
That's interesting, you know. I imagine as they come out, the hiring needs will will increase. I haven't seen it, but that doesn't mean it's it's not there and happening. It just means maybe I'm not privy to that side of the market right now.
Hey, I am curious to within your world, like how closely people are watching president like Donald Trump as we are like obsessed with the nominees and as he's really kind of very quickly laid out what his administration could potentially look like if everybody gets confirmed and if it all settles in. But how closely in terms of some of the things you're laying out is contingent on kind of who is in those top spots, whether it's sec
whether it's you know, the various financial regulatory bottles. We've been bodies. I should say, we've been talking a lot about Scott Bessett right for Treasury Secretary, and the market seem to like that. Help me out here in terms of what you are hearing on that front.
I think a lot of it has to do with the regulatory environment and how stringent the regulatory environment is going to be going forward, and so anybody the market likes anybody who is a little bit less stringent, And so I believe that this, you know, I think what we're seeing in terms of nominees are people that are going to be relatively hands off, Yeah, and the market likes that.
Yeah.
And so that I'm not saying that, you know, it's a wave on through for every merger deal, but definitely maybe a little bit easier than it has been in the past, or even just with the certainty of of who it's going to be. Is giving some solace to what's going on.
In terms of m and A.
Right, So are you are you hearing a sigh of relief from your clients right now or the sense that hey, we're going to be able to do a lot more over the next four years than we were able to do.
So I am hearing a lot of you know, we right size, you know, the market, the recruiting market was kind of a little sluggish obviously, as as banks right size their their employee base. And now I'm hearing, hey, maybe we should deepen that bench. It's time to kind of build the reserves back a little bit because it will be busy. So I don't know if it's a cyber relief or just a genuine feeling of optimism that
things are going to be busy. So I get in terms of mood and sentiment, I mean love, I feel like you have a really good vantage point right in terms of the people that you talk with, probably small firms, big firms, lots of different firms across the different types of you know, financial firms, as we said investment banking or whether you're dealing with pe or private credit.
So is there been like.
A noticeable shift in kind of mood post election and is it is it just the election's over? Is it just or is it something more than that?
I think it's more than that. I what I'm seeing is that the bulge racket is coming back into the market. As the bulge racket comes back in, and the elite boutique starts to pick up a little bit more aggressively than just opportunistic hires. Yeah, uh, the middle market starts to shake in their boots a little because that's where
those opportunistic hires and aggressive hires come from. Those middle market employees who have really solid close deal experience maybe A to A promotes and so all of it is just pushing upward a little bit. So this is one of the first times that we're seeing people really up tier in brand.
I hadn't.
I haven't.
So people moving from like a middle market firm up.
To uh, yes, or like a tier you know, a tier two to a tier one. That's happening a little bit more. All the riffs that happened, they've they've kind of been cycled through. A lot of those people who were really quality qualified people have found jobs, which is wonderful news. So if you think you're going to be picking up you know, somebody from a bull rock at a leap boutique who's been riffed due to kind of a sluggish environment, that's not going to happen anymore.
Geographically where the hire's happening.
New York, San Francisco, Chicago. I would say Chicago's really interesting because of industrials. You'll see in the interest rate. Environment going down means that industrial business will go up.
Charlotte and probably energy.
A little bit of Houston, Miami Love, Miami Love, Palm Beach, a lot of healthcare down there, a lot of healthcare hiring down there.
Okay, no offense, but rift versus layoff. I don't know that I reduction in what is it? Reduction in force? Is that what it means? Reduction force?
So you know, I think reduction in forced is typically kind of a larger group of people, and it could have been enough from wide performance, or it could have been a market impact or something like that. Whereas you know.
I've never liked have you very cool stuff? Very cool stuff? Great perspective. Thank you, thanks for coming in. Meredith Dennis h She is managing partner at Prospect Rock Partners. Right here on Bluebird, I'm brother Marc, a journal How about you let me drive?
No, no, no, no, who's going to drive?
Honey?
Please?
I'll do the riding gravel.
Let's wat I want to try it.
It's good question. This is the drive to the globe.
Think we'll buy a rock?
Found it? Don on Bluebird Radio.
All right, everybody, just about eighteen minutes left in today's trading session, getting ready to wrap up the Monday trade. A shortened holiday schedule this week because of thanksgaming the horse, and it just feels like it's a little bit mill up.
It's gonna be quiet, Yes on Wednesday, I would say so.
Yeah.
Friday at the New York Stock Exchange is a fun day because everyone brings their kids in. Do you think, yeah, Santa shows up. It's like a holiday tradition. It's pretty cool because the kids are office school. But the traders have to do a half day and there's.
Plenty of room on the floor.
There's no traders on the floor anymore.
That is so true.
Let's see what our next guest has to say about the market environment. Jim Schmiguel is chief investment officer at SEI. They've got about one point six trillion in assets under manager based in suburban Philly, joining us right here in our Bloomberg Interactive Brokers studio in New York City. Hello, Hello, welcome, Welcome, How are you.
I'm doing well, Thanks for having me.
Great to have you here.
One point six trillion, that's a lot a lot of institutional investors.
A lot of institutional, a lot of retail. There's a lot of AUA in there as well as AUM. So we are a bit of a diverse fied financial services firm. We do three legs of our school. We do back office outsourcing, particularly in the alternative space. Yeah, we have a technology platform which does really really well with banks, large banks, money center banks, regional banks, and then we have our asset management platform as well, which is not
surprisingly where I find myself the housed nowadays. So in an O CIO context, we're dealing with institutional investors dB, D, C, E and F but on the retail side as well, so delivering model portfolios to registered investment advisors, to regional banks, things along.
Those lines, all right, so what's changed since the election for you?
Well, you know what's what's changed? I guess, you know, first and foremost, we're risk on. We're feeling really good about that, Our investors are feeling really good about that.
So what does that mean. Did you guys start moving stuff more aggressively into certain areas as a result or not yet?
Not?
Well, I wouldn't say we've been moving anything post election. You know, as as a fiduciary providing advice, you have to look past the election. Of course, that's what we did, and you know, we looked at the commonalities between all the potential outcomes. It was it was pretty obvious early on that the tales were kind of being taken out of the distribution, particularly from like a democratic sweep perspective.
So that was one that was pretty unlikely, just given the numbers, particularly in the Senate were really kind.
Of stacked against the Democrats.
So we knew that there were some outcomes that were very very unlikely, focusing on those that were more likely. That there was going to be divided government typiclarly, markets love divide a government keeps government kind of all, you know, kind of busy with itself and kind of not.
Focused on everything else government.
Well, that's that's the outcome that you know obviously came to bears, not that at all. But the market is pretty is pretty happy about it.
So does it make you nervous that policies will happen maybe too quickly without the checks and balances that we've had in the past.
I don't think so, because it's not you know, within within the House, within the Senate, you're looking at fairly slim majorities, and you know the cabinet that is being put together, particularly Friday's news with Becent, I mean, pretty pretty favorable result from that kind of you know debate over who's going to be the next Treasury sector.
What does that signal to you about whether Trump makes good on the tariff promises that he made during the campaign and also on other economic promises, including reducing the workforce here in the US by deporting a lot of people.
Yeah, I think it adds and you're seeing it today. I mean, with a ten year training below four point three percent four two seven before I walked in here, that's a big, big move. So you know, what the market is assuming is that you know some of the things that that's got has articulated before about the Trump policy, really putting it into the context of look, this is an opening salvo. You're talking about a big real estate investor here who's used to negotiating the market likes that message.
So in this, in this idea that we're taking kind of some of the tales out of the distribution what the market feels like to me today, the tale that that's being taken out is sixty percent on China and ten percent on everything else. That's kind of off the table, and it's going to be a little bit more strategic, probably not going to be as big as what most
people think probably will be phased in. And therefore that kind of knee jerk kind of view that this is going to be this huge inflationary impulse that we're going to see in twenty twenty five. I think a lot of investors are reassessing that.
How would you think about history? We were talking with our Alexandra Semenova earlier, because the Wall Street strategists are putting out, you know, their targets for the S and P five hundred. FYI didn't do so well last year?
Yeah, no recession last year that was the big called come back.
So we're in the third year of a bull market, right. It's pretty phenomenal the returns that we've seen, very bullish gains this year, last year. The third year historically, at least over the past fifty years, has historically been the weakest, with single digit average gains and a much larger percentage of stock suffering declines. This is some data from BMO. I don't know what what do you think will really
be the catalyst for the market. Will it be historically we've had two big years, so maybe it's time for a down year. Will it be a new president who, yes, he's been in the White House before, but who knows what we might get this time around? Will it be ultimately the US economy and earnings?
Like, what is it?
I think it's rates. I think that's what everyone should be kind of focused on. We have a robust economy. We're going to get a first view of GDP later on this week, we'll get PCE. But look, the reality is we're close to three percent on GDP, we're still above three percent on inflation, and the Fed's in easy.
Mode, so we don't need those cuts.
I don't think we need these cuts now.
A lot of cuts have already been priced out right, so the Fed put themselves in a little bit of a bind when they came out of the gate with fifty totally unnecessary.
I think they're locked in for December.
I think it would be odd from an optical perspective to come out with a fifty basis point cut, do a twenty five after the election, and then pause. So we'll probably get another twenty five basis point reduction in December and then start talking about skipping meetings and pausing in early December. But the reality is, we're lowering rates, were stimulating an already fairly robust economy. We're going to
get less regulation for sure. We're going to get tariffs in some way, shape or form, hopefully not as big as what everyone expected. That's the thought, that's what we're trading off today. But that doesn't tell me for in a quarter in the tenure. That tells me four and three quarters on the tenure, And that's what we're looking at.
We know what the Federal Reserve tells us, and we know what Jerome Powell tells us during press conferences. But do you buy that they aren't making decisions based on potential policies.
You know, they're they're human. It's a very very tough job. I hate to be the critic out there kind of throwing stones. It's very very hard to kind of look through. I mean, think back to where we were prior to that September meeting, people calling for emergency rate cuts. I mean crazy, the data can turn so so quickly, which in our mind, or my mind, I should say, I mean that that almost begs to go slow. That's what
they should be doing. The fifty was something that just did kept me a bit off guard.
It was it was the last one foreign election.
You don't want, Yeah, you don't want to appear political in any way, shape or form. Do they have it in the back of their minds? Now, what might be on the horizon given given the red sweep? How could they? How can they not? I mean they're they're unfortunately like all of us in this business. I mean, they're designed to predict the future.
It's a horrible They also look at the bond market, and the bond market is making its own reactions.
Absolutely, yes, well it's very well behaved today. Yes, so, uh you know, and this is look, this is going to be the volume is going to be down this week. We're going to see some kind of big moves, so you have you're going to have to look past this week.
Obviously, we all start talking about that fiscal deficit that well, you know, that's.
A great thing to talk about, because you know what, one of the things that I would always say to investors is that doesn't matter who wins, deficits are going higher. Hey, I don't know, we're actually we're talking about it. It's in the conversation though.
Jim, thank you so much. I really appreciate it. You're listening to Bloomberg.
This is the Bloomberg Business Week Podcast, a little Apple, Spotify, and anywhere else you get your pie. 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 terminal.