This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Should we talk about crypto?
Yeah, I'm taking a look at bitcoin right now, and I haven't seen a rally like this in quite some time. It's up seven point four percent just today, Carol.
Yeah, I'm looking at the whole crypto monitor on the Bloomberg like it's all up. Ethereums up about five and a half percent.
Which makes no sense. If this is about bitcoin, then why is every other crypto?
I'm sorry, Tim Stenewick. You want sense when it comes to the crypto market.
Maybe Hannah Miller can help us make sense.
I hope so, because we did have a three judge appeals panel in Washington today overturning a decision by the SEC to block a spot based bitcoin ETF from Grayscale.
Does that make sense to you?
You know? I just feel like getting an interpreter when it comes to all things crypto. We do get an assist from Hannah Miller's Digital currencies and venture capital reporter for Bloomberg News, and she's with us on the phone in San Francisco. Hannah, take it away. So big decision, significant help.
Yeah, So this is a significant decision for the industry. You know, this has been a very drawn out battle. This is lasted years, and it is paving the way for the approval of the spot Bitcoin ETF in the US. But that is not definitive. There's still a lot of stuff that needs to happen. There still needs to be an approval process from the SEC. So I've been talking to people in the industry. It's been a lot of cautious optimism about what's happening here.
Okay, forgive the question, Hannah, but why do we need a spot bitcoin ETF when bitcoin is so easy to buy?
Oh my god, they're banging out the doors, Tim the crypto folks.
No, that is a great question. So this stockcoin, the spot Bitcoin ETF, allows people to have exposure to bitcoin without actually buying the cryptocurrency. So for people who are, you know, a little nervous about bitcoin, especially amid all of the regulatory uncertainty happening here, this is a way to kind of get a taste of the action without you know, going all in. So a lot of people think that this could broaden mainstream adoption amongst both retail and institutional investors.
So what do you wait? So what do you own?
Then you have an ETS that's tied to the spot bitcoin price. You know, you are able to track the market. And they're hoping, they're hoping that, you know, the discount between the gray scale bitcoin trust and bitcoin itself will narrow, you know, with this decision, and we've seen that happen. You know, these two are becoming more closely aligned in price. So you know, GBTC is up, Bitcoin is up. Uh, the industry is celebrating right now.
Sounds like a derivative. I don't it's I don't want to get too mechanical here because I know we're talking crypto and not necessarily et S. This is not et f IQ, but it's it's just again, I I question that the need for something like this, and also the reaction from from the entire crypto market.
Yeah, I think that entire crypto market is just looking for some positive news here. I mean, there's been you know, such entanglement with regulators, there's all these legal battles. This is you know, a much needed win, even though you know there's still a lot of uncertainty about what's going to happen here.
So what's so, is there a timeline, a date that's kind of on your radar radar as to what's next.
Yeah, so we could see an approval as soon as next week. You know, there's this labor day deadline, and you know that that could happen. But again, there are a lot of logistics that need to you know play out here. The SEC has to decide how they're going to react to this, if they're going to you know, file with new reasoning for their rejection or if they're just going to capitulate here. So there's stuff that we still need to watch a Buyah, no.
Go ahead, Hannah.
Oh, there's just also a lot of buzz about ethereum products, you know, ethereum ets, you know, whether this could help pave the way for I always just.
Feel like whenever there's like a crypto story, Hannah, I don't know, tim like it's like hey, hey good, but like there's always a.
Lot of bubbs. Well that's so my butt question for Hannah before we go, just in the last minute that we have. Does this mean that Chair Gensler is a friend of crypto?
Now?
I wouldn't go that far. I think he's taken a couple of blows here. This is the latest setback. We'll see what happens, but yeah, I think it hasn't been the easiest road as of late for Gensler and NASTYC.
All right, well, it's keeping us on our toes in these dog days of August. That's gonna say, that's for sure. Hannah Miller, thank you, Thank you. She's Digital Currencies and VC reporter for a Bloomberg News joining us on the phone from San Francisco. You did so much reporting too for Crypto r L. Yeah, so how are you thinking about these?
I mean, this is something that the industry has wanted to see for a very long time. So it's a huge win for the industry. But I still question, you know, is it a product?
I want to see a unicorns flying in the sky, But does that mean it's a good thing?
Again, it's so easy to buy crypto. You can use PayPal or like, you know, just pull out your phone and buy it. But do more?
Does general investors feel like it's so easy?
I think so yeah, it's really easy.
I don't know all right to be continued, that's for sure.
If 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 want us live on YouTube.
We want to continue a little bit with the hp E story because they are out. We're waiting for HPQ to report. As we said, HPE did pre announce, so a lot of it was already laid out for investors. Having said that, we do want to get a little bit of some color, if you will, on the quarter of the outlook and how this particular tech company, well known around for a long time, kind of fits into our world.
Very pleased to have with us this after in Bloomberg Intelligence Senior Technology analyst Wou Jenoe with us on zoom from b I headquarters in Princeton, New Jersey. So good to have you with us this afternoon. The question I have is what in here was a surprise to you? What's new to you?
Well, I mean, there's really nothing new here. They're pretty much okay.
I guess they pretty much pre announced, but if we did, if we dig deeper.
Into the numbers, actually, look what's been white hot not only for HPE, but also the rest of the tech sector has been the networking space. And the slide upside into the quarter was the intelligent edge, right that that segment group fifty percent on a year on year basis. Where it fell short, however, was on the compute space. There has been some concern that, uh, the service space is going to be weak, and they missed by about three percent versus consensus expectation, and that that turned out
to be true. We're still waiting for the service space to rebound. It still may take a couple of quarters before we start seeing growth come back here.
You know, in an AI obsessed world, how do we think about HPE specifically and where they fit in?
Yeah, I mean they're actually trying to really position position themselves very well in AI. Keep in mind that they have this high performance compute division which is going to drive some AI.
Uh.
The CEO, Antennayo Nire said either recent investor briefing that they had about eight hundred million dollars in order. So that's a number that I'm really curious to hear on on the on the call. But you know, in the overall picture, they're still growing that AI business. Uh. But and also they have to get access to the Nvidia cards to build these AI clusters for the enterprise. So it's going to take some time for that AI business to be to be a real business.
What is that AI business like? What does it look like, what do customers experience? And how much of it is done? I mean, how much of a value creator is HPE. You said it sounds like a real winner is in video.
It's it's it's potentially you know, a value creator over over the long term near term. I you know, eight hundred million dollars in orders in a roughly forty million dollar revenue base or twenty nine billion revenue base isn't going to move the needle anytime soon. But there's a couple of things right First, the enterprise customers do not have access to these Nvidia cards where all the clouds
are sucking them up. HP can actually come in there and provide as a service provider to build in house AI systems for these enterprises. That's number one, number two HPE. Over the past several years, that has been moving over to this as a service business model, and with that they've actually introduced a new AI large language model service
to provide to these customers. So if there are customers who want to build out these large language models do not have the wherewithal they can actually rely on HPE. And among all the large enterprise vendors enterprise IT providers, HPE is very far along relative to someone like ADEL or a Cisco.
Which just as a reminder that when we speak of about AI and the needs and the demands and who are the winners, there's going to be multiple ones. Is that safe to say? Wouldjin Well?
Right now, the the the big winter right is in video, as we saw on last week's earning right, and when when we think about AI in the early stages and think about AI house being built, the first thing that's going to be built is the plumbing. And in video is the leader there. One smaller name that I can share is probably a risk of Networks and they provide Ethernet networking and they're probably going to try to fight
the battle where Nvidia is on the networking side. You know, if you talk about on a services perspective, the cloud, the hyperscale cloud providers are probably nearer in terms of being revenue generating versus like meaningfully revenue general genera generating relative to some of these enterprise I guys.
Recent Networks is fifty two percent this year to Sharon, Yeah.
Wujin who would be competitors when A comes to AI and where Hewlett Packard Enterprise is really trying to grow.
Well, you know, the one benefit that HPE has is actually their their Qua acquisition from several years back, and they've actually been they've been trying to pivot that towards an AI play, so they know high performance compute really really well, and they are starting to build out the servers for enterprises to drive AI. Now the one company that is trying to there are two companies that are trying to move on the server side. One larger company
is Dell. They're building out their own AI servers. A smaller company that I can share is super Micro and they've been performing. They've been delivering these high performance compute and if you look at that stock price that's I think has tripled over the past year because of they make these AI specific servers.
Yeah, two hundred and eighteen percent this year alone, So yeah, it's been on a tear. It's been a thirteen almost fourteen billion dollar market cap company for micro HPE. Nice done. HPE is down about four ten percent in the aftermarket. H can we flip to HPQ. We're waiting for those numbers. It's definitely been outperforming. It's uh, you know, former sister, brother, whatever you want to call it HPE.
Well, before you get into that, is it typical wujin that these are two companies report on the same day. This is surprising to me.
It's it's all legacy.
They always bear they do okay, all right, so they're stick to brother and sister and they're still like, you know, kind of.
Related twins of a Yeah. So okay. HPQ up about sixteen percent. We used to call this was the old right, uh heulid packard. What are you watching out for that one?
Yep. So I'm looking for the rebound on the on on the PC market. It looks as if it's silently flattened out in the second well the calendar second quarter of their fiscal third quarter, and hopefully they'll talk about signs of a slow but steady recovery. I don't think it's going to go down any further, and I don't think they're going to stick the neck outs and talk about growth anytime soon. What stability is where investors want them to be right now.
Did back to school help with with PCs?
Well, look what had happened over the past couple of quarters was that there was such an influx of PC production build that companies have overbuilt PCs and there was an inventory correction, so there was a halt on PC sales. Back to school and a return to seasonal demand is going to help back to school plus the holidays.
And it looks like HPQ just crossing. Just go through a quick some numbers at you Amujin hp Inc. C's fiscal year adjusted EPs of three twenty three to three thirty five had seen three thirty to three fifty, So it looks like it's bringing in its fiscal year justin EPs.
Looking at fourth quarter just a DPS eighty five to ninety seven, the estimate is ninety four cents personal third quarter personal systems revenue eight point nine to three billion, that is better than the estimate of eight point seven to nine billion, and third quarter free cash flow we're looking at nine hundred million. Estimate though was for more than a billion dollars.
Yeah, and in the after hours shares at least the kne jerk reaction is lower wo'gen down about six point five percent. What's your immediate reaction.
The reduction in guidance is possibly because of higher mix of PCs. Because PCs did better, that means they have lower gross margin. The printing business actually has higher gross margin and operating margins because of the supplies business.
So the.
Stability or better PC business is actually encouraging.
Sign It did say, I'm just going to get to it. Our rite through real quickly reducing its full year cash flow and profit outlooks. Sing A rebound on the market for PCs will take longer than expected, so it sounds like a little bit more of the same that we've been expecting. Hey, thank you so much in real time breaking down those earnings with us. Swi Jinho. He's senior technology analyst at Bloomberg Intelligence, joining us from BI headquarters
in Princeton. We've been leaning on those guys a lot. Heading out to our Princeton bureau today and our BI team. They are incredible.
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 playing Bloomberg eleven thirty.
All right, well, speaking of shaky ground out Later this week the Double City's issue of Bloomberg BusinessWeek, where a team of global reporters looked around the world to tell stories happening in all corners of our societies. Among them is one about a fragile real estate boom emerging in Palestinian territories.
Tim Yeah, one in which Arab Israelis are purchasing luxury homes in Jericho, adding a new dynamic to their complex relationship with other Palestinians and Jewish Israelis. Take us to taking us to the development known as Jericho Gay. We've got Bloomberg News Israel Bureau chief Ethan Bronner with us on zoom along with the editor of Bloomberg BusinessWeek, Joel Webber,
who joins us on the access line in Massachusetts. So Joel, take us first into you know, the Double Cities issue and where Ethan's truly amazing story fits in.
So Jericho happens to be one of the oldest cities in the world. So I thought that was pretty fitting way to you know, build the city's issue, go to the really old, and then also find ways to talk about some of the new new challenges and new innovations and things that we can all be excited about, as
we've also discussed right here on the show before. I went to one of the world's most complicated geopolitical situations in Taiwan recently, and you know, the only place in the world that might rival that one is probably where Ethan resides. And so I thought, you know, we can always talk about cities, and we can talk about the pandemic, but let's be real and talk about some seriously interesting stuff. And that's what Ethan was able to bring us from
a development called Jericho Gate. So Ethan, what's happening?
A Jael hs Tevit and Carol So, yes, it is a very complex and interesting situation. I mean, of course, the West Bank is occupied, militarily occupied by Israel, and it is no fun to live under occupation. It is a difficult situation for many. But what I learned is that despite that, there has been a Palaestadian business class that has decided to build vacation villas with pools, for there are several hundred some thousands of Palace Citians who
can afford it. And now the complicated thing here is also that there are three kinds of Palestinians evolvetor those who live under occupation in the West Bank, those who live in Jerusalem, which is a kind of occupation, but they have special IDs because Israel considers all of Jerusalem
it's capital. And then there are those who are Israeli Arabs, who are citizens of Israel, and all three populations have grown wealthier, I don't want to say wealthy, but wealthier in the last twenty years, because Israel has become very, very wealthy compared to what it was generation ago. And therefore there is kind of a room for vacation homes
for people who live nearby. Now, the other thing that's so interesting is that the Israeli Arabs were not really mixing with those of the West Bank for many years. Now they are. And one of the questions the story raises is what that might mean politically in the future.
Can we just take a step back and just talk about the development itself and what's inside the walls and kind of what surrounds it.
Sure, So this is just outside the city of Jericho, and as Joel mentioned, one of the very oldest cities in the world, the lowest city on the planet as well, and just near the Dead Sea. And so you have a whole group of Palestinian developers who created villas with walls around them, typically three bedrooms, three bathrooms with a pool, pretty big pool fied by ten meters. And these are vacation homes that sell for a quarter of a million dollars, which is a pretty good price in most places for
a vacation villa like that. And there is a big development around. They're still building it, but the plan is for going to be a couple of three or four malls, a water park and other kinds of tourism things. So the idea is to make it a real a place of attraction for people visiting from within Israel and Palestine areas and from outside.
There's an incredible quote in your story. One of the subjects says, Jericho is booming despite the checkpoints and occasional war. People can make money here.
That's right, that's right. I mean, what is the.
Looming threat of war described that.
Look, I mean there have been is there you know, there there is tension. I mean, nobody wants to live under military occupation. So there are young men who are armed, who are go after Israeli soldiers and Israeli settlers, and then the Israeli army comes in and tries to quote unquote restore order from its perspective.
So there in January there were there was a shooting at a restaurant where Israeli's go and the Israeli military went into a refugee camp near Jericho Gate and killed.
Five guys and the course of trying to restore the situation to the stems quote ante. So that's what that means. And at any given time, there could there have been two so called intifadas uprisings in the last forty years, and there could be another one in theory, And that's what the mayor means, the mayor who said those things.
At the same time, there is money to be made, because there is a lot of money slashing around now, partly as a result of Israel's wealth and partly as a result of some savvy business folks who are decided listen whatever happens, we're here. And that's the other interesting aspect here, right, that these developers and business people who say, look, whatever happens, we're not going to go, so let's just build and make sure that whatever happens in the end, we have someplace nice to live.
So talk to us about that. The fragile piece that it's all sort of built on ethan because sure you can build stuff like this and you can develop it, but like underneath it all, you know, as you kind of mentioned here, I mean, there's there's some real fragility that it's all built on.
That's true. There is increasingly less and less of a chance that there will be an independent Palestinian state. Israel is very powerful and has turned to the right. It has decided mostly that it is not especially interested in helping the creation of Palestinian state. At the same time, you have millions of Palestinians, several million who lived in the West Bank without full rights, and would not be
surprising if they were to rebel again. Now the situation is that Israeli military does maintain a sense of order in the place it does. It isn't so easy to rebel against Israeli military. But you know, as you said, it could happen again. At the moment, the kind of occupation that Israel is engaged in has seemed to have kept down any genuine full time violence as opposed to what has happened in Godz that we're talking about justin
in the West Bank. But you know, until there is some kind of political horizon that makes sense, there's always a risk of vice. And that's what those guys are talking about.
So for the for the past Indians who are able to buy these villas, what does it feel like for them? And what do the villains look like?
Well, the villas are beautiful there, as I said, three bedroom, three own, sweet bathrooms, tiles, beautiful kitchen appliances, last sliding doors out to the pool, you know, slip free tiles around the pool, computer worrying about the pH of the water and so forth. They're gorgeous. The people who go there, you know, it's it's sort of like they've decided. You know, all these years, all these decades, we never nothing seems to be going right. But you know what we have,
We have enough money. This is where we live, and
we're going to do this. And and Jericho has historically been I mean long history, a place that in winter people go because it's low and warm, and so the idea that it can be your vacation weekend replace is very appealing to both to Palestinians who live in Jerusalem and the West Bank, and again interestingly, thousands and thousands of Palestinians in who aren't Israeli citizens, who are sort of spending their weekends in the West Bank because they can,
because they can afford, you they can't afford to buy such a property in Israel, which is very, very expensive, and they're culturally, of course in tune with the people there. So there is this kind of growing intermixing of Israeli
Arabs and West Bank Palestinians. And you know, I think it's too early to know, because it's only been five or some years, if this has been happening on a big basis, but I suspect that there could be a political development which would bring leadership, possibly from Israeli Arabs who go to the West Bank because they know the place they're coming from, and they know that the country they have to deal with, and they of course politically and culturally aligned with the people in the West Bank.
But it's very early, it is really.
But even talk a little bit, talk a little bit about the politics though of this. That's that's really where I want to go and understand how this could have political implications and maybe.
Be a stabilizing force, right to see, that's right, you know, the movement of this wealth into it.
That's right. So we have, of course, the most right wing religious government in Israel's history. It is not it is a government under Benjamin Senya, who that is not dedicated to independent Palestinian state, trying to limit and possibly annex some of that land. So there's that now. Internally in terms of the millions of palestin is the two million Palestinians who are israel As citizens and the several
million who live in the West Bank. I think the politics of this is that they they you know, let me let me step back for one second. The region is not an encouraging place to live. If you are an Arab and you look around at Jordan, Lebanon, Syria, Egypt, and you say to yourself, I'm an Israeli Arab. I mean, I'm very unhappy that I don't have political independence. On the other hand, everything around me is in many, maybe
far worse that. So maybe there will be some kind of accommodation internally for bi Palestinians internally to somehow come to terms with the with the Jewish state of Israel. And I say this is because the two million Palestinians who are citizens of Israel. On the one hand, of course they can't. It is it is a Jewish country, and that is, you know, not something easy for them
to embrace. On the other hand, the bourgeoissification, the middle classification of Israeli Arabs over the last generation has been remarkable, lightning strong. They all go to university, They are filling Israel's occupations, including high tech and and so. On the one hand, it is sort of scarier to be an Israeli Arab than ever, and on the other hand it is easier to be. And those parallel lines are aspects
of Israel that you see all around. Israel is both richer, more more advanced, and heading toward weird medieval forces at the same time, all at the same time. And for Israeli Arabs, they're like the canary and the coal mine. They what's going to happen to them? We don't know. The other question is do they view buying property in the West Bank as an insurance policy in case it gets really ugly in Israel?
Right?
I don't know, but some do it.
You know.
What's what's fun about, as you guys all know, is that we cover markets and we have investors, business folks. They take risks. Who's the developer who has taken the risk in this? Just at about a minute, I know, you tell a really long, not alone, but a really detailed story which which is so rich. But who is this individual who does it?
Yeah?
Yes, So the brains behind it is a man named Samir Huli Lay and he's a fascinating guy who pilled those of you listening will read the story because he's sixty five year old Palestinian who was in politics and ended up in private enterprise and has this vision, got got purchased in fat millions and tens of millions of dollars worth of land from a particular clan and then you know, started to sort of engage sixty two separate
Palestinian developers to create the villas and so on. So I mean he and he, you know, he's the guy who says in the story, I realized in the end that there if whatever, however this ends up, what's the point of having a flag over a garbage stop? Which was an amazing quote, I thought. He so he said, you know, we need to resist, we need to build, and that's how we're going to look forward. Politically, We're not going anywhere. We're not gonna win on the battlefield
right now. But this is what I can contribute. And I was very moved by that.
Yeah, well, we can tell and it's an incredible story. And I feel like this is I've said it a million times that you guys all at business we do this so well. You open a window into the world where people probably don't know what's going on, and you really tell the story with so many details and how it can be potentially a changing force or not. Time will tell.
Yeah, it's a really great piece. I should note it is in the upcoming new Double Cities issue of Bloomberg Business Week. It's on newstands later this week. The story though already online at Bloomberg dot com, slash BusinessWeek Carol and of course always on the Bloomberg terminal.
I highly recommend everybody check it out and read it in its entirety because as we said, it's just really rich in detail and just pretty amazing. Who knew this was going on? Well, Ethan Bronner did. He's Bloomberg News Israel, your chief. We thank him, joining us on zoom and then of course the edit of Bloomberg Business Week, Till Weber joining us on the access line in Massachusetts. You're listening and watching Bloomberg Radio.
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? Exclet's met, I want to dry.
It's good question time.
This is the drive to the globe.
Con me think we'll buy around yether Don on Bluebird Radio.
All right, everybody, just under eighteen minutes left in today's poling session. A dozen Indeed, it's funny how that works, you know. O'clock just going uh and this is one for the bulls, everybody, because we're holding out of the games. You just heard gains. Excuse me, you just heard from Charlie. We're pretty much at our best levels of the session. You got one and a half percent higher on the S and P five hundred ten and one point eight percent higher on the Nasdaq, and then you've got yields
down on that softer economic news. So right now traders are maybe you know, we talked about this at the top. Maybe you know the FED is getting closer to being done. But yeah, I know, maybe we have another point.
You've been playing that game for quite a bit of time. Let's see what Nicole Webbs, senior vice president at the financial advisor at the registered investment advisor at Wealth Enhancement, joining us on Zoom from Plymouth, Minnesota, has to say, Nicole, good to have you with us. How are you.
Hey, I'm doing well today.
Thank you.
So does a rally like this have legs? Is it warranted?
You know, I think today has a lot to do with the Joelts data. Everyone's you know, just sing the same song there where Glad you said that.
Because I thought I had to do with the Jolt data too. Finally you can stay you know, I.
Think it's Yeah, it's one of those weeks where bad news is good news. You know, we're going to read into this to say, okay, do we have to price in an additional twenty five basis points? And only two weeks ago we were looking at shipping costs we were looking at oil over the last two months and we were going, Okay, are we going to have some resurgence of inflation? Are we going to be talking about that, you know about kind of additional stickiness in the back
half of this year. And so some of the deterioration and jobs is meaningful. And I think you couple that with this pressure on return to work, which is showing a little bit of a nuance from a business perspective of we're not as fearful to lose you as we once were. So if it's a if it's a deal breaker for you to come to the office, that's okay with us. There's available workers out there that we'll go grab.
So when you and your team advise and are helping clients, and I understand it's long term accumulation, it all. Everybody has specific investment goals. But what is it that right now in this broader market environment that makes you pull a trigger on something or saying, hey, we know you're in it for the long term, but you might want to think about this, or you might want to think about this, and what would those this is or that be if you will.
Yeah, I actually really appreciate you framing the question that way because all too often, you know, we spend a lot of time talking about the risk on, risk off narrative, but that doesn't work the same way for a bank as it does for an individual. When we think about the market today, there's certainly opportunity below the surface. And so if we know or expect we think, we know that we're in a higher for longer environment, and we know that this year had a lot to do with
margin expansion. We know last week and the video was a bit a bit of a look through into what
we could expect from the technology sector. You know, if we think about jewelt Stata telling us a piece of the duration story, then in a moment like the one we're in right now, there's two things we talk a lot about when it comes to equities, and that's you know, the four hundred ninety other companies we haven't been talking about this year, areas of growth like liquid natural gas or companies with multi business lines that aren't leveraged in
this environment at all. And then you couple that with the story around opportunities and fixed income outside of just ultra short duration meaning money market and T bills, and look at when do we start to incrementally increase that duration exposure because rates at the levels are at today are higher than we would expect to growth rate over the next ten years to be. And that's when one starts to think about placing some of that extended duration in risk free assets.
So, well, you know, it's funny that you say that, So is it the net net there? And I've heard, you know, various folks around the table here in this control in the studio say that, you know, you look at what's going on in US treasure yields and you're right, like, that's not so bad. And considering, you know, the reduced risk in going into a US treasury that's giving you four or five percent at this point versus the risks potentially in the equity markets, is that basically the net net there?
Yeah, I also think one has to remember that, you know, volatility in the market is actually extremely profitable for the individual for the long term investor, the reinvestment of dividends alone in aggregate makes up a great sum of that total return perspective. And so when we think about the market we're in, you know, there's a couple of trends
we think about for the year ahead. We do believe the stickiness of inflation and that's been a huge win for large cap companies and their ability to pass along
pricing to the consumer and not have volume decrease. We expect that trend to continue, but we also believe that we can incrementally be buying into the small cap spectrum knowing that we've likely reached a price point where the price to entry is very inexpensive comparative to the large cap and so I think you're going to see a lot of positioning or reposition in the back half of this year when we come out of you know, lame August, and it's all going to play into the story you're talking about.
You guys still have a expectation a year in target of forty six hundred on the S and P five hundred. Here we are close to forty five hundred at this point. What does the path between now and December thirty first look like?
Yeah, we expect that there is you know, ye, last week was a bit of a game changer in terms of, you know, expectations around what Navidio would provide in terms of a look through into the tech sector. You couple that with you know some of the data supporting now that perhaps there isn't another twenty five basis point increase yet this year. But at the same time, we do expect there to be a bit of a churning at
the surface. This is where we step away a bit from passive investing and think more about being really thoughtful in how we deploy into specific names in the back half. So our expectation of how we get to forty six hundred is less in that the top ten of the cap waiting of the SMP and more of a churn
below below the surface that is less noticeable. And so all of that to say, a bit of a tighter trading range to get there probably bouts some polatility in some of the text sector as you see that drew up into the end of the year.
All right, good to get some time with you, Nicole. Thank you. Nicole Webbs. She's senior VP and financial advisor at the registered investment advisor Wealth Enhancement, joining us on zoom from Plymouth, Minnesota.
Told you bad news is good news.
I'm with you because I think as soon as those data points came out and it was one afternoons right room exactly, and it's just like, well, wait a minute, maybe the FED is getting closer to being done.
Maybe maybe, like Ira said, wait till later this week, we're gonna get a lot more.
Data PCEE than jobs and jobs those big ones, and then there's still more to time until we get to that September two, right.
Seeing Ja Peel is just like relaxing, joining some time of Jacksonville.
Spoilt Jackson Yeah, I get some time kids massage, spickle it off, Manny Petty.
No, maybe not.
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