Thank you so much for joining us for this special edition of Bloomberg Daybreak. US markets are closed for the Labor Day holiday. I'm Nathan Hager coming up this hour. As we enter the final few months of the trading year, stocks are trading near all time highs. Will it be a bullish close out to twenty twenty four and what about next year? We'll speak with Cameron Dawson, chief investment
officer at New Edge Wealth Plus. It has certainly been a volatile year for bitcoin, so what's in store for crypto? Bloomberg Intelligence Senior commodity strategist Mike mcgloon will join us, but we begin with the economy and the Federal Reserve. Another key data point is on tap this week ahead of the next rate decision later this month. August. Non
farm payrolls are due out on Friday. Ahead of it, we're pleased to welcome Michael McKee, international economics and Policy correspondent for Bloomberg News, and Anna Wong, chief US economist at Bloomberg Economics. It's great to have both of you here with us on this Labor Day. I want to start with you, Mike, because of course you were there in Jackson Hall for Chairman Palace famous time is Now speech, and then you followed it up with a conversation with
the president of the San Francisco Fed, Mary Daily. Let's see what she had to tell you.
Well, to my mind, we've been on this path of ready to adjust policy rates for several months. We just needed to get a little more confidence and inflation was truly on its path to two percent, and I wanted to see the labor market come into balance. But I think that's completely happened, and the risk to our goals are now balanced in the time to adjust policy is upon us.
Is there anything that could derail a cut in September?
To my mind, that would be hard to imagine. At this point, I do see that adjusting policy is appropriate. We don't want to get ourselves into a situation where we're keeping policy highly restrictive into a slowing economy.
Puts the focus right back on the jobs market, doesn't it this idea that the labor market is coming into balance? So, Mike, is it?
Well, it depends on who you talk to, because well, Mary Daily thinks they're in balance, and several other members of the Open Market Committee agree. The Chairman seems to think that they're a little bit tilted towards the downside for the labor market, and that it added to his
emphasis on the idea that rate cuts are coming. So I mean, it definitely is going to be a very important report on Friday because it will drive the discussion about whether the Fed should cut by twenty five basis points or fifty basis points.
Of course, Anna Loong, you've been on top of this conversation about whether we are going to see a twenty five basis point or a fifty basis point cut. How do you view things when it comes to labor market dynamics right now?
Yeah, I think we are already in the non linear part of the climb of the unemployment rate. And I think the reason why Powell seems to be more devish than the median FMC partic bit is that Powell is actually not a trained economist. He is a lawyer, and he's more skeptical about economist models. And when you look at how the other FOMC members view the labor markets, for example, Mary Daily is a trained labor economist. Chris Waller, who's an intellectual figure on the FOMC, is you know,
depending on the beverage curve. They have this excessively precise way of looking at labor market.
But whereas Powell has this.
Very total and a holistic view of looking at things, and the holistic views of looking at things is that the labor market is cooling really rapidly recently, as we could see from a lot of the regional vet surveys that employment sub index is plunging. So I think my view is very similar to Powell, which is that the risks facing the economy is definitely tipped toward the downside on unemployment.
And we certainly saw that downside risk to the unemployment picture when preliminary benchmarker visions came out last month, that big drop of eight hundred eighteen thousand jobs wiped out from the labor picture. So how does that cloud things when it comes to the labor market right now?
It's maybe a slight cloud on the horizon. The problem with these revisions is that they get revised again, and there's a good chance that it will be revised lower the level of job creation. Even if you subtract. Right now, the eight hundred and eighteen thousand goes down from two hundred and forty two thousand average a month to one hundred and seventy four thousand, and that's still a very strong job creation number each month. So I don't know that it is any kind of push for the FED
one way or the other. They're going to be looking at what's happening now, because remember this eight hundred and eighteen thousand that's through March of this year. Now you can extrapolate forward, but you don't really know if that's going to be accurate or not. And so do we get a repeat eat of the low job creation number last month in July when we saw only one hundred and fourteen thousand jobs created, or do we see a
bounce back? That's going to be the real question. If we get a bounce back, it doesn't have to go above two hundred thousand, it doesn't even have to go to one hundred and seventy five thousand. But you get something one fifty or more, you're going to see people thinking that the job market has slowed, but it's not falling off a cliff.
I want to ask you about this as well, Anna, Not only did we see that much lower than expected top line number of one hundred and fourteen thousand, jobs added. Last month, we saw a pretty big pickup in the unemployment rate as well. Is that a one off or could it be a sign of a trend of things to come in the labor market.
That is the trillion dollar question, Nathan, whether the increase in unemployment rate is do you to temporary factors or transitory factors? Do you want to be a transit transitory or is the im permanent factor. So into the micro data behind the household survey that produces the unemployment rate, really drill into the details right and what we found is that the two most benign explanation for the increased unemployment is not valid. The two most benign explanation is one,
it's due to layoffs related to Hurricane Barrel. Well, it turns out that most of the temporary layoffs are not in Texas or any of the hurricane impacted states. On the other hand, they are concentrated in places like California, Michigan, New Jersey, and Nevada. You know states that you know the labor market is weakening. The second most benign is that, oh,
it's due to the Michigan auto re tooling. So every July the car auto plants will rest to get ready for the next season, and usually that leads to temporary layoffs in the auto markets way. But what we found is that that accounts for very very minute part of the temporary layoffs, and historically they don't show up at all. So in fact, the layoffs related to auto manufacturing is there.
In fact, it's more severe and normally, and just looking at Bloomberg stories on Stillentis and what's going on Ford and GM, a lot of these temporary layoffs are becoming permanent layoffs due to lack of demand.
What we actually.
Uncovered in the driver as a driver of the rise in unemployment rate is actually education sector and people. This is one issue that's not on people's radar is that one pandemic federal stimulus is expiring in September, and that stimulus measure has been providing funding for a lot of schools all over the country and because of its expiration, a lot of the local schools are laying off teachers.
And so we're seeing clear signs in the August payrolls and July perils that those layoffs are not temperate, going to be permanent.
We're speaking with Anna Wong, chief US economist at Bloomberg Economics and our Bloomberg Economics and Policy correspondent Michael McKee with us as well, and Mike, let's pick up on what Anna was talking about. There are a lot of the seasonality baked into the last payrolls report, and what could that mean for the Fed's planning when it comes to whether to actually go ahead and make it clear that the time really has come to kick off a rate cut cycle.
Well, I think it would take it awful lot for the FED to change its mind about kicking off the rate cut cycle. You'd have to have a very strong jobs report, which people are not expecting at this point. But we are going to get more seasonal issues. A lot of schools start around the country, so you add a lot of teachers and also education workers, people in the cafeteria, janitors, et cetera. And so the numbers account for that as well.
One other question, Anna, as we think about whether the FED is kicking off a rate cut cycle of a lot of expectation that it is going to happen later on this month, is the Fed behind the curve and what can the FED do to get investors thinking that it is on top of what's going on in a slowing economy.
So, given the.
Fed's dual mandate, it is behind the curve. We estimate that they are about seventy basis point behind the curve. I think the question is how fast and how deep are they going to cut. If they decide to go for a twenty five basis point cut, it means that they're still behind the curve, and I think given our concern about the rapidly cooling of the labor market, it would suggest that the FED well risk having to cut more sharply down the line.
What say you, Mike, what can the FED do to show that it's not behind the curve?
Well, it would help a lot for the FED if we get a reasonably strong job report that will make one difference, and also we get another CPI report before the FED meeting on September eighteenth. But I think it's going to come down to this statement. They've told us they're going to cut. They generally don't want to do fifty basis points. So given the feeling of some economists on Wall Street, like Anawong, they're going to have to
explain themselves. And I think they'll probably note that we have had some strength in the numbers that was kind of not seen in July that came back in August. If we get a rebound, and they'll point to the fact that the economy overall is growing at a basically a trend or above trend pace, and they're not particularly concerned because about the labor market because jobless claims have remained low. So they will defend themselves sort of on
that way. Of course, this all depends on eighteen days from now, the conditions being the same.
In our last minute and long since Mike mentioned the CPI report coming out just before the Fed decision, let's dig into that. Can inflation get the Fed off the rails when it comes to the time has come.
I think generally we are going to see more disinflation in the fall, particularly from goods sectors, because it turns out that a lot of retailers has been front running the holiday season, and given our consumer demand is that it's going to slow in the fall, they might find themselves to having all these excess inventory, which means more discounts for the consumer come holiday season. But I think the Fed does have a base effect problem when it
comes to inflation. If inflation data just comes in pretty good the year over year twelve month change and inflation will actually climb throughout to December. We are expecting it to climb to two point eight percent from the current two point six percent.
Long Chief US economist at Bloomberg Economics, thank you for this. Along with Michael McKee, our international economics and policy correspondent for Bloomberg News and straight Ahead, on this special holiday edition of Bloomberg Daybreak, we're going to talk with Mike mcglohane, Senior commodity strategist for Bloomberg Intelligence, as we look at the volatility that is bitcoin. That's straight Ahead. I'm Nathan Hager, and this is Bloomberg Welcome back. Thanks for joining us
on the special edition of Bloomberg Daybreak. US markets are closed for the Labor Day holiday. I'm Nathan Hager. Well, it's certainly been a volatile but profitable year if you're an investor in bitcoin, the world's most valuable cryptocurrency, started the year above forty thousand per token. Then in March it's soared to it all time high above seventy three thousand. Since then, coin's been in kind of a bouncing ball mode. If you look at a chart on the Bloomberg terminal.
So what's in store for the rest of the year. For some answers, let's bring in Mike mcglowan and senior commodity strategist our guy on all Things Crypto at Bloomberg Intelligence. Thanks for joining us on the holiday Mike. So what's been driving all this bitcoin volatility since the spring?
It had the launch of us ETFs. We've been waiting for that for about a decade. It had to have in where there's a cut and supply, and it had bay to the stock market making record highs. Now it's in and then hangover, and I think it might be enduring. Bitcoin was the next best trade for a long time. Now I think it's kind of transitioning to the last best trade. And part of that is because it just
went so far so fast. And key thing you remember, aout Bitcoin is basically trades about three times a volatile the stock market, and it's been showing pretty significant divergent weakness since that peak. So I like to use this number around. It's dropped to about bitcoin s and P five hundreds, dropped about eleven SMB five hundreds versus the bitcoin I like to use as the ratio. The peak in twenty twenty one was fifteen, so it's heading lower. And if beta drops, the stock market drops, I think
Bitcoin's going to have more of a problem. I think maybe he ill end with this. So I think the key thing about some people have called it the fastest horse in the race. It may be indicating the race is over.
If Bitcoin is the last best thing, let's make that the case here. Does that make the next best last best thing something like ethereum, something like the doge coins?
Probably not. If Bitcoin goes down, it's beta for the whole space, and it probably means all the other highly much more highly speculative digital acids. It's hard to argue Bitcoin is not a highly speculative digital acid. It's the one that trades twenty four to seven. It's the benchmark. If it goes down, the whole space goes down, and to me, that's the risk is partly because it just
went up too much. But the bottom line to me is this whole space started with bitcoin in around two thousand and nine, was coordinated with them pretty significant rally in US stock market, and if we're entering to recessions, stock market's a really expensive we start rolling over a little. Bitcoin may be leading that way, and I think that's what's happening now. One thing that's significant is the Vix
Valtili index. It's say, the one hundred week or two hundred week movement average is bottoming from about a six year low. And then of course we have things like the dis inversion of the yield curb and utrising unemployment. To me, those are all kind of signaling that the fastest horse and rice might be tilting lower. And the key thing is it's been showing divergent weakness versus gold and the stock market for quite a while.
What about if we are getting into a rate cut cycle from the Federal Reserve. If rates do start to come down, does that change the outlook for digital currencies?
We are we're starting, certainly from a if you look at the curb the long bond around four percent and Fed funds well about five percent, we're certainly indicating yields are going lower. It does, But I think the problem is now it's the cat and mouse game between the stock market, which is market capitalization about two times GDP.
That's the highest since the twenties and thirties, so it's rather expensive and the FED easing, and this, Nathan, is the most widely anticipated FED easing I've ever seen in my entire career, and I started in the trading pitching chericognnites, I've just never seen it. So I think it's so priced in that the market's so priced for the enthusiasm
of a Federal Reserve easing cycle. And we know the Fed gets that they do not want to risk refueling some of the inflation that really forced them to do a lot of the aggressive hiking to the top in twenty twenty three.
I mean, there's, as you say, there's been so much anticipation that we are going to see a rate cut later this month, that the cycle is going to begin. And ahead of that, we've been seeing a lot of speculation, a lot of thought that gold, you know, the original gold, could get as high as three thousand dollars an ounce. We're not seeing that same kind of thinking, or at least as far as I can tell, when it comes to bitcoin. Why is that.
I think it's a transition, And I'm glad you we went to gold because to me, the old analoge digital gold, it's just a matter of time it gets through three thousand. It's in a bull market. Maybe it's a little bit overdone, and the short term it's fine. But the new and the new digital version. I like to say, it's kind of risky to have old analog gold without some of that digital version in space, but re memory, it's new.
And the key thing that I like to say about bitcoins all the things I look forward to the last five years, the having the you know, there's pretty significant discounts in some of the ETFs like Greyscale, Bitcoin Trust, the ETFs, and it's going to the mainstream. It's in the mainstream. I mean even we have presidential candidates knocking around how great it is because they want to get elected. It's already so and it's it's so well armed out now. So to me, the best of the days of bitcoin
appreciation are over. Yet what we're seeing now is is pretty significant global tilt towards recession. Now, remember I'm a commodities guy, and the tilt from commodities is severe recession. We were seeing declines in almost all commodities, particularly things like corn and natural gas and crude. All's just starting till lower. And only one that's really going up is gold. And a lot of that's because of what's happening in China, just like at bond yields and trying to their declining.
So to me, that's what gold's picking up on the deepest pockets on the planet. Central banks are buying gold, and that's typically will probably accelerate. I think gold will be more attractive if we see a little bit of back and fill in US stock market, US rates going down. And the problem is digital gold. Bitcoin is trades typically about three times a voltui of analog gold and the
stock market. So if we have a little bit of normal recessionary back and fill in the stock market, digital gold, bitcoin will probably suffer a lot more than the analog version. It's just such a voltal speculative asset.
Speaking with Mike mcglohon', senior commodity strategist at Bloomberg Intelligence, and you know you talk about bitcoin as digital gold. There's been this debate for years about whether it is going to be the sort of hedge against inflation in the years to come. What's it going to take for bitcoin to get to that level. It sounds like you're thinking that it might be a ways off before it gets there.
In terms of some other melting currencies. I'm based in Miami's so we hear a lot of people come from South America and they're used to melting currencies. It has provided some of that. But the thing is it's a very volatile speculative digital ass and it's gone so far so fast. I think it needs to back and filth little well. So typically what bitcoin does when it makes new highs like it is now, it has a fifty percent correction, so that means it could get down the
thirty five and that's normal. But I think to be more of a digital version of goal and an alternative, valatility has to come way down, which means it has to have a very boring period. Right now, it's just a very volatile speculative digitalist. And now, in the big picture, I'm very favorable to the price of bitcoin going higher. It has definable diminishing supply and increasing demand and adoption, so rozec economics means it should go up over time.
But to me, right now, the risk is it's a little bit too extended and it's showing the virgin weakness, and I think that's going to continue. The bottom line, to me, the big test for bitcoin will be is when we get that next say ten percent correction in the stock market and see how it performs. Typically when it trades, you know about three times a volte of beta. It typical is down about thirty percent if the stock
market goes down around ten percent. Now that's not set in stone, but we have to see how we can get through that period. If bitcoin can sustain upward momentum with stock market going down, the problem is it's showing downward momentum Bitcoin is with the stock market still going up.
What about copper? When we think about whether we are getting into a global economic slow down, whether the Fed can provide some support in some way with rate cuts, where does copper go down?
The risks for copper are down. Unfortunately, the copper did make a new high this year at about five dollars and twenty cents a pound. It's around four dollars and twenty cents upon now and it has a it's highly autocorrelated. Copper is number one. Is highly correlated to what's happening in China. We all know China somewhat in decline. Just look at their bond yields. The ten you notte yield in China right now is about two point two percent. That's well below the US ten note yield, which is
just below a four percent. So it's a sign of deflationary recessionary force in China. So that's bad for copper. But it's what put in that peak that we got earlier in May was pretty significant speculative accesses in managed running at futures positions ie hedge funds. They got way long the commodity, up to about thirty percent of total futures open interests and they are still somewhat long around
twenty percent of futures open interests. Typically has to drop a lot more in terms of positions down to around five percent of total open interests for copper to bottom. So I think copper is going to do what it normally does. It trades more like silver. Now Silver's nickname kind of the devil's medal, and that is I think it needs to get down to nearer three to put in a good bottom. Otherwise, here's one key prerequisite for
copper to continue going higher. The US stock market has to come to go and continue going up, and China has to come out of this meleise. And I think the risks are copper just was it normally does. When it gets too high, it just goes back to around three hours a pound.
Those are some pretty significant dynamics when it comes to the outlook, whether the US stock market rises, whether the Chinese economy starts to see a turnaround. Can the US sort of outweigh what we're seeing in the world's second biggest economy.
Well, that's the problem I think is. I think a lot of investors are underestimating these deflationary forces, starting with China. I mentioned their bond yields. You see it clearly happy in commodities. Gold is up above thirty percent since commodities peaked in twenty twenty two. The Bloomberg Commodity Index is down about thirty percent, and I see the whole tilt going lower unless something can change out of China. And the thing is you have to remember, is it all
happened for a good, solid paradigm shifting reason. It said unlimited friendship between President Zee and President Putin really shifted the world. And then we had Russians invasion of Ukraine that shifted all the sentiment toward kind of against China, which is bad for commodities. So gold is good for gold. So that's why I see crude oil around seventy five dollars a bail has risks of going much lower. It always has bottom they're forty for the last twenty years
or so. And one good leader is food. Look at corn. Corn right now is about three dollars and ninety cents a bushel that trade. That was first traded in nineteen seventy three. That's down more than fifty percent from the peak around eight in twenty twenty two. And a lot of that's just on the back of the number one force in all commodities. It's the high price queue. Prices got too way too high and created a lot of incentive to bring on more supply and reduce demand. And
that's what's happening. Same things happened in natural gas US. Natural gas at about one point nine million BPUS was first traded in futures in nineteen ninety. The high in twenty twenty two was ten and it's dropped more than eighty percent. That is on the back again, the high priced cure. And that's the key thing that we remember about all commodities. They're all probing for low price cures.
Cone corn is probably close, natural gas is probably close, and the number one that still probably has a lot more lower to go I'm afraid of is crude oil, which is actually really good for consumers.
I wanted to ask about crude oil as well because so much of that plays into what happens in geopolitics as well. I mean, how difficult is it to frame out an outlook for crude oil when we have so much volatility in the rest.
Of the world. Well, that's the key thing is some people find it difficult. I find it quite clear. There is no sense at all of a sustainable shutdown supply from the geopolitics in the world that's happening to crudell. In fact, the lessons of all these type of political events, certainly that ran Araq war and Iras invasion Kuwait is typically the events create spikes and then massive supply in
much lower loads. The last two significant lows after those two wars I mentioned was around ten in crude oil, So to me, I'm looking at forty as a normal low price cure. The bottom line is the key things that really was pressuring crude oil before Russia's invasion in Ukraine are accelerating. That's excess to supplying the man out of the US and Canada. That surplus now is around six million barrels a day before the invasion was closer to two million barrels a day.
Really appreciate this, Mike, this broad out look on the commodity space. Mike mcgloan with us there, senior commodity strategistic Bloomberg Intelligence, and coming up next we'll move from commodities to stocks. The equity outlook from Cameron Dawson of New Edge Wealth. That says, this special Labor Day edition of Bloomberg day Break continues. I'm Nathan Hager, and this is Bloomberg. Thank you so much for joining us for this special
edition of Bloomberg Daybreak. I'm Nathan Hager. US markets are closed for the Labor Day holiday, and we're going to wrap up this hour with a closer look at the stock market. With earning season pretty much behind us and a rate cut pretty much coming a few weeks from now, where is the best place to put your money? Let's ask Cameron Dawson, the chief investment officer at New Edge Wealth. Camerdon still great to speak with you on this holiday.
First off, what is your read on earning season and the outlook heading into the rest of the year.
Well, earning season certainly has come in better than expected. We've seen companies be able to beat and raise guidance. There have been pockets of weakness, and that weakness has really been focused on the consumer, and that's where we started to see some jetters within markets, concerned about the
growth outlook. We're hearing from a lot of companies talking about how pricing power is fading, how effectively they raise prices as much as they could have hit a wall, and now it's likely that you're going to start to see even more discounting. That's a great story for the FED, that's a great story for bond markets expecting rate cuts,
meaning that it reduces the risk of inflation. But it does raise the question about twenty twenty five earnings, which do have a big acceleration in top line growth and margin expansion priced in. So for now it's still a good story, but as we go into twenty twenty five, I think we have it, we have to watch it closely.
Is it a good enough story to keep the rally going, particularly after what we heard from Nvidio last week?
It is interesting that after Invidia reported, it didn't take down the rest of the tech sector. You would have normally expected when the biggest name in the index reports a number that's slightly less extraordinary than expected, that you would have seen kind of normal weakness within the rest of the sector. But it was resilient. The thing that we're watching within the tech sectors that if you look into twenty twenty five, what you see is an acceleration
in twenty twenty five earnings as well. Earnings are expected to go to twenty five percent, up from about mid teens this year, all the while in Vidia, being that biggest name of the sector, is expected to see its earnings decelerate from one hundred and forty percent to forty percent.
So it gets us back.
To this notion that for now it's good, but we really have to watch twenty twenty five.
So what are you going to be watching for most closely when it comes to twenty twenty five. Is it all about the economy? Is it all about earnings?
It is both, because we do think that the economy will feed into earnings. So if we think about the consumer, one thing that's really been jumping out to us is that you've seen this deterioration in the consumer's assessment of the labor market. So looking at things like that labor market differential where consumers are starting to say that jobs aren't as plentiful and they're getting harder to get, that tends to lead things like retail sales and overall consumption within the economy.
So if that continues.
To deteriorate, it really would raise the question of current consensus for the S and P five hundred, which has an acceleration in top line growth that's baked in.
So we think this all fits.
Together with the real big risk for twenty twenty five being that earnings kind of start to level out, and if that's the case, it would imply a shoppier kind of market for the overall S and P five hundred into next year.
I'm glad you mentioned the outlook for the labor market, because of course, we do have an other jobs report coming up later this week. It's going to be very much in focus for the FED as it considers whether the time really is now to start cutting rates. How much does the stock rally depend on the FED beginning the rate cycle this month.
Well, the surprising thing about rate cut cycles is that they typically aren't good for markets in the very short term, meaning that markets have tended to sell off post the first cut, with the question mark of as to why the FED is cutting, And this is really the big question as we go into next year, which is that is the FED cutting because they can just because inflation has come down, or is the FED cutting because they should?
The latter implies a much deeper rate cutting cycle, which in some ways is already being priced in by the bond market. The bond market has almost three hundred basis points priced in over the course of the next two years of cuts, which does imply a much weaker her growth environment. So it's a story of be careful what you wish for. If we just get a couple of cuts,
that typically has been good for markets. On the other side, a deeper cutting cycle has typically been consistent with weaker markets.
Well, what is your view? Is the FED cutting because it can or because it should?
We think that the FED is cutting because it can for now, But it's the question of the direction of travel, meaning that if you listen to Palace comments from Jackson Hole, he talked about how the deterioration in things like the unemployment rate weren't because of your more nefarious drivers, things like a big uptick and layoffs.
Instead, it was new entrance.
To the labor force as well as a slow down in hiring. But what we've typically seen is that a slow down in hiring leads an increase in overall firing. So as we go through the next few months and into twenty twenty five, it's not as much as where we are today, which is still a relatively healthy labor market, falling inflation, which gives the FED room to ease rate some.
It's really the question of the direction of travel and do we get further deterioration, which again implies deeper rate cuts from the FED.
So if we are heading into a FED rate cut cycle, should we be looking for new leadership when it comes to what's going to be driving the stock market? Can tech continue to lead the way or could we see more rotation out of tech.
This is so interesting because we have started to see this shifting sands of leadership under the surface. Over the last few weeks. What we've seen is Tech really start to lag. It's traded heavy, it hasn't been able to make a new all time high, unlike the equal way S and P five hundred, which made a new all time high before Tech and before the cap weighted index did so it does signal that you're starting to see a bit of a shift in leadership and what's coming out as leadership.
On the other side of things are two key areas.
One, it's rate sensitive areas like reets in real estate that typically do well in a falling rate environment, as well as defensives. You've seen some signs of life and things like utilities and staples, and for an overall market outlook, you typically don't like to see utilities in staples lead. It signals that there are growth concerns and that there's an underlying risk off tone to the market. So we
do have to watch this very closely. Our view on Tech is one where we think that Tech can be neutral or flat with the market, but it cannot lag in a meaningful way because it's just such a big part of the index. It's about thirty percent of the S and P five hundred, so Tech has to play ball for the overall S and P five hundred to continue to make new highs.
Speaking with Cameron Dosa and Chief Investment officer at New Edge Wealth. As we think about how stocks could end this year, Cameron, what are you looking at? What are some of the major catalysts for you?
Well, the election is of course very top of mind, and we have seen stocks typically trade weaker going into the election and then a rally after that, and of course with a little sprinkling of a Santa Claus rally on top that. Of course all investors hope for going
into the end of the year. We're hoping to get more indication about the policy priorities of both parties which can help us make a better assessment about what we think will lead coming out of the election, So things like taxes and immigration and tariffs all being very important things to get a sense of what can leadership be post the election once we get the results.
Yeah, it's been interesting to see this sort of debate about what a Trump trade looks like versus a Harris trade. From what we've heard so far, do you see major differences between these two candidates, who, at least as far as the polling goes, are very different people.
Yes, and the polling is tight at this point, so it's really hard for the market, i think to price in the winning of one versus the other very different than where we were in the middle of the summer where Trump had a twenty point plus lead over the Democratic ticket.
So then the question is how.
Will the policy priorities, of course play out, and what does it mean for corporate earnings If we look at the corporate tax rate and how it's being paid for, that is a key area of difference between the two parties about where they would raise taxes in order to pay for the extension of the existing tax rates. We do know that there's a lot of air between immigration policy, which could have important implications on things like the labor
market going into twenty twenty five. And then the last area of difference would be on tariffs and how impactful tariffs would be potentially under a Trump presidency if he does enact a more sweeping set of tariffs, of course, much more sweeping than what the Harris ticket is talking about.
Wonder what you're thinking as well about certain investment themes. Of course, this year there's been so much focus on the AI story. There's been a lot of talk as well about weight loss drugs, that sort of thing. What kind of themes are you thinking about that could be more lucrative as we think about the end of this year and into twenty twenty five, we.
Think it'll be the application of AI.
Right now, the AI rally has been one that has been very beneficial to the arms dealers of AI, so the picks and shovels kind of providers of the chips that are needed in order to apply these technologies. Where we have seen a lot less impact is on the users of AI and how it will actually show up
in things like margins and productivity. And so that is the real test for this AI narrative as we go into twenty twenty five, which is that is there a return on investment for all of this investment spending for those that are actually applying the AI. If that's the case, then it does raise the likelihood that you can meet what are already very lofty margin targets that are priced
into the S and P five hundred. But if AI doesn't deliver, or it's just a longer time to deliver, as we heard from some of the tech names this year, it could set up for a little bit of disappointment. So we see AI still remaining top of mind, but that the story is likely to evolve as we go into next year, and.
If we are heading into a rate cut cycle, could we start to see more of a correlation between bond yields and stock prices. What could that mean when it comes to portfolio diversification.
Well, we do think that bonds are back in the sense of being able to provide that diversification of the classic sixty forty portfolio. That's been our expectation throughout this year, which is that this scenario that led to bonds breaking down as a diversifier in twenty twenty two was of course a big rise in inflation and that concomitant right
in yields. Given the fact that we continue to see greater downside to inflate, or greater risk that there is downside to growth than there is upside to inflation, it implies that bonds can be that ballast if.
You do go into a growth scare. So it leads us to see.
Eptiics in yields, meaning when bonds sell off and yields move higher, to use that as opportunities to extend duration and lock in lower yield lock in those higher yields with the expectation that it can be a great diversifier if growth fears really do start to pick up.
Cameron Dawson, their new Edge Wealth Chief Investment Officer. Also want to give our thanks as well to Bloomberg Intelligence see your Commodities Analyst Mike mcgloane, Bloomberg International Economics and Policy Correspondent Michael McKee, and Anna Wong, chief US economist at Bloomberg Economics. Our thanks to you as well for joining us on this Labor Day holiday. And if you're listening to us in Boston, our new home starting September
third will be ninety two FM. That's tomorrow at noon, Bloomberg Radio moving to ninety two nine FM in Boston. I'm Nathan Hager. Wherever you're listening to us, stick around. Today's top stories and global business headlines are coming up and right now