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I'm Alex Thee alongside pauls.
We need.
This is the Bloomberg Intelligence Radio. We bring you all the top news and business, economics and finance. Threugh are a lens of our Bloomberg Intelligence analysts because they cover two thousand companies and one hundred and thirty industries worldwide, and we're going to check in with one of them now on Goldman Sachs sitting at a record high and this was all thanks to the traditional old school Goldman Sacks business FIC and equity trading, just crushing analyst estimates.
For that, we want to go to Alison Williams, Boomberg Intelligence, senior analysts for global banks and asset managers. Alison the highlights and is it worth the record high on Goldman stock? Goldman Sachs stock, that is hard. That is hard to say.
Well, as you know, we don't make stock calls, but I can tell you that the fundamentals are strong and Goldman is really, you know, showing that it made the right decision in the last couple of years to focus back on its core institutional businesses. Out of all the global banks, they have been the most focused on this business. They earn the most from trading, and they're definitely showing progress in different aspects of the business that they've focused on.
So for example, fixed income trading up fifteen to twenty percent, doing a lot of financing assets in that business. Equity trading also up strong. The one area that was a little bit weak was the M and A fee side. They are typically the global leader in fees, but JP Morten really sort of leapfrogging them this quarter. But the positive thing is that they talked about the investment banking feed pipeline increasing sequentially. That looks good for the third quarter.
On the expense side of things, also showing some good cost control on the non compensation expenses, but on the compensation expenses the ratio they're actually going up a little bit.
Ah interesting Okay. Also, what kind of returns do the Goldman Saxes of the world earn on their their global trading businesses today. I know that you with coming down a great financial crisis, lots of regulations, lots of limits. Where is Goldman in some of their big peers.
So certainly, I mean the returns are not what they used to be, and it depends on the specific vertical.
I think if you look at fixed.
Income trading, it tends to have sort of a higher pretax margin, but the returns on equity tend to be lower because it's a little bit capital intensive. But for the bank overall turning in double digit return, so I think showing a good return overall.
Do you think that Goldman Sacks has left behind it? It's Marcus fiasco. It's pushed into consumer banking. Is that is that chapter officially closed?
That chapter is closed. Keep in mind that they are still focusing on gathering deposits, right, So what they've closed is you know, saying we're going to expand into all these businesses incrementally add to something that they've never had a leadership position in and sort of you know, making an entry a new market, changing the business model, if you will. Instead, they said they're going to go back to, you know, focusing on what they're good at.
They do have the.
Transaction banking business, which is something that they've entered into recent years. But we think that business makes sense for them. I think it helps them to serve their corporate clients and on the consumer side stepping away from lending. So they still have a couple of lending products left. But I'm sure everyone has seen the headlines related to Apple
and know that those are probably going away too. They're really just sticking to the deposit side of things as sort of diversification of funding.
So talk to us about their asset and wealth management business. I know it's about thirty percent of their revenue these days. What's their focus for that going forward.
Yeah, that's a good question, Paul, and really highlights one of the areas of strength this quarter, which is raising
money in their alternatives business. This has been a strategy, you know, several years ago they embarked on shifting from the Goldman that we know for decades and decades of investing their own money, using that expertise to really invest more for clients and making those revenues sort of more of a fee based revenue management money for clients versus just the proprietary gains that they would get on those types of assets, and they are doing really well in
terms of exceeding their targets for raising money there and at the end of the day, these are that's sort of a better proposition to to investors in the stock because investors generally tend to like to have more recurring, revenue based businesses and capital light businesses.
Okay, so tomorrow we get Bank of America, which is currently in a fifty two week high, and Morgan Stanley. How are they going to do? Knowing what we know from City, JP and Goldman.
Sure, so a couple of different stories. I mean, the read through is really positive for Morgan Stanley in terms of the institutional business, but certainly they need to jump over that higher bar because according to consensus right now, JP Morgan moving into the number two spot for equities trading revenue. Keep in mind that Morgan Stanley was number one for several years, Goldman's number one now and JP Morgan moving up. But equities trading should be good, fees
should be good. I think people will be watching on the wealth management side of things just due to some pricing changes that we saw at Wells. So I think that's what people are going to be watching there also the compensation ratio to see what's happening across the industry. Bank of America on that interest income again, we had sort of that negative surprise from Wells Fargo related to their wealth management business. What are we going to hear
from Bank America with regard to that. We do expect that we'll see the same capital market strength. We're also wondering on the commercial loan side of things. Disappointing loan balances hurt Wells Fargo. In the industry. Data looks like there was a little bit of a pickup in commercial balances at the.
End of the quarter.
We don't know if that's just something funky with the data or if there might be more to it.
So that's what we'll be looking to hear about from Bank America.
All right, great stuff as always. Alison Williams is the senior financials Banks Global all that kind of stuff for Bloomberg Intelligence. She's been doing that for decades, first on the buyside at Morgan Stanley Investment Management and then for the last close to fifteen years with Bloomberg Intelligence. So good numbers coming out of Golden Sachs.
You're listening to the Bloomberg and Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with a Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty.
I'm Alex Steel alongside Paul Sweeney. This is a Bloomberg Intelligence Radio. We'll bring you all the top news and analysis and business and economics through our lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries worldwide. We also follow all the news for you also outside of Bloomberg and joining us now as Henry Natrice, Managing partner and director of Economic Policy. She joins us. Now, Okay, there is a lot to
get through here. You cover all of this for Vada Partners. There's a lot to pick cherry pick from. But let's go to the breaking headline here. According to Fox News, and this was according to a post on X President Trump will be making his vice president announcement today. Who do you think that's going to be?
Well, I think the base case should be JD. Bay Its Ohio is obviously a pretty safe read state right now, but I think the two of them have a mutually compatible outlook. It really suits the theme of his campaign, which is a very sort of robrust, sort of aggressive
America First campaign. The speculation, obviously, and the real exciting component would be if he were to choose Nikki Haley, coming off of a twenty two percent when in Indiana in the primaries just a couple of weeks ago, she has shown that she has a real lock on a totally different demographic that Trump has struggled with for many years and specifically in the last couple of months, which is a female demographic, specifically suburban, married educated women, that
would make his potential path to an electoral college win on part with Obama's in two thousand and eight a real possibility.
So, Henrietta on the VP pick when do you think we're going to hear when? Who could it possibly be? Because that seems to be maybe at the top of the agenda here today, right.
Yeah, So my understanding is it could happen as early as tonight. But I've seen quite a bit of speculation and roles changes within the RNC delegation and their committees that it could be as late as Wednesday. So while I recognize that the administrator of the Trump team is saying that it could be tonight, I wouldn't be surprised if there were some fastballs thrown in here at the last minute. But my base case expectation is for JD. Vance, and I'd be pretty alarmed and surprised if it were
Nicki Haley. The difference between the two campaigns and internally within the Trump campaign, I think is probably insurmountable. But it would be a very rational sort of strategic move to Trump for Trump to move to the middle and try to say, you know, this really is a unity ticket. Let me show you how and put Meikay Haley on the top.
If you go to JD. Vans for a moment. What was striking though, is how he really came out and was wimming Democrats for the assassination attempt on President Trump. What we've heard so far from former President Trump is more of a message of unity. Do you think that the unity message prevails here on the ticket or do you think that the fracturing prevails on the ticket.
I think fracturing is where Trump feels most comfortable. I think he likes being, you know, sort of the aggressor, and a unity ticket is not in keeping with anything we've seen from the Trump campaign since twenty sixteen, so
I'd be pretty surprised if it were Nicki Haley. Again, I do think that makes the most political sense for him, just in terms of trying to win the electoral College and winning the popular vote as well, which could be massively helpful to him in twenty twenty five as Republicans try to pass get four point six trillion dollar tax bill. So there is a lot of strategic benefit to choosing in Nicki Haley. I don't know if it's compatible with his actual campaign, though my default is going to be
a gdvanced style candidate. Mark Rubio is another one I'd put up there and roughly the same category.
So, and you know, what do you think, or let's put it this way, do you think the message from former President Trump and his campaign will it change it all? Given the events of Saturday, I think.
The agenda of the campaign and the campaign in general needs to just get through the next couple of months. We are, you know, in the very early days in July. I mean, this should be something that we are expecting is a shakeup in October. And it's only July, and we've had two massive shakeups in just the last week, you know, with the disastrous presidential debates for Joe Biden and the dramatic rise we've seen in calls for Biden to get off the ticket, and then an assassination attempt.
So for my CNY, there's a lot of whiplash and we still have four months to go till actual election. Deck.
Part of the Biden campaign has truly been talking about how President Trump will fracture democracy and what a big risk is big Do you think the Biden campaign can continue with that? Now they've already pulled some campaign ads. How does that narrative evolve?
No, I don't think that.
That's going to hold the idea of staying as a unity tickets to spending campaign donations, suspending fundraising, suspending ads. That's all going to wrap up. I think in the next couple of hours. You're already seeing some policy papers come out from the White House. There was one release just moments ago on the impact of Trump's potential tariffs and replacing the federal income tax with tariffs, which would
drive drive tariffs up. It would have to be seventy percent or higher in order to compensate for the lost revenue to treasury if they were to abolish the federal income tax. So there's stuff barkolating behind the scenes. And then let's be mindful that the Biden team is really trying to beat back the base of the Democratic Party
that's hoping he will step aside. So a whole bunch of things went in Biden's favor ironically since the shooting, and it is really just that it has taken Democratic concerns about his ability to run for another four years off the table. I think that's only temporary. In the background, you still have from members of the DNC and from donors to either suspend donations, not continue contributing to the campaign, and to move forward with something akin to a mini
primary in late July. So all that is percolating in the background, and I think Biden's going to have to go out in force. The one area he really succeeds in beating Republican messaging on aside from things along the lines of abortion, is really who has the better state of play with regards to maintaining democracy. He pulls ahead of Trump by seven points there, we really want to watch and see how that plays with voters in the week of Saturday shooting.
So when do you think the Democrats will make any kind of moves as relates to their candidate, if at all? Here is this something that they have to just see how the recent news of the failed assassination, how that plays out in the public's mind. Maybe get some polling. What's the timing there, do you think?
Yeah, because we had a tremendous amount of pulling. I mean, everybody was interested in seeing how Biden and Trump would fare in the wake of the disastrous debate, and in the uproar about Democrats potentially replacing Biden, that has all
taken a back seat. I don't think it's going to go away, though there are I think the view in the Democratic Party with everybody that's not you know, Team Biden, is really that Republicans are on a trajectory to win right now, and if Biden stays at the top of the ticket, Democrats could get wiped out in the House and the Senate and give Republicans not just a statistical majority, but a mandate level majority fifty five fifty six fifty
seven seats in the Senate. So I think there's a tremendous amount of focus in the background of getting Biden to step aside. Sixty percent of war of Democratic voters want someone else at the top of the ticket. They're going to need to shake things up. I don't think that that's going to go away.
I'm about thirty forty seconds left. The Trump trade is in full effect right now in the market. It is that legit for the long term.
Absolutely. I mean, at this point, the Democrats have a candidate that sixty two percent of Democrats would prefer not on the ballot. In that scenario, coupled with the resurgence and massive galvanization of Trump voters, you really need to have another shake up at the Democratic front in order
for this not to be a Republican win election. The two are second neck nationally, but Trump leads by four or five points in most of the swing states, and that's how you get elected in the electoral college.
All right, Henrietta, thank you so much. We do appreciate you and know it's been a busy of seventy two hours for you. Henry A. Trece, Managing Partner and director of Economic Policy over at VATA Partners.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Play and and broyd Otto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
We are broadcasting two live from Interactive Broker Studio right here in midtown Manhattan. There're two very interesting things evolving in the market. One is earnings, that would we do with a value trade? What do we do with small caps? And the other is the Trump trade effect that if Trump wins the presidency, after the events over the weekend, what that winds up looking like for the market. So
there's lots of different stuff to dissect. We want to go to Shana Sizzle, President and CEO of banry On Capital Management. She joins us from Chicago, Illinois. Shana, let's start off with the events over the weekend, the attempted assassination attempt from by to President Trump. There is a Trump trade in the market. Do you buy it?
Like?
Is it real? I mean, typically if you wind up trading stocks around who you think is going to be the president, that actually hasn't really paid off for you.
Well, I do think the Trump trade is real. I do think it's warranted. I think the events of the weekend actually bolster president former president Trump's already uh the lead that he has. I think just you know, if you look across social media, a lot of folks who are not really Trump fans saw the events of this weekend as a reason to.
Vote for him in a way.
That photo that came out is going to be iconic, and people saw it as like America, and you know, look at the way he handled this, And I think all of those things play into market sentiment, and you're seeing that in the Trump trade.
All Right, Shanon, let's maybe step back from that kind of prior to this weekend. What was your market call and has anything changed?
My market call was that we're in a period of slowing economic growth, that the FED rate hikes have done their job in many respects. We're clearly seeing the economy slow. The Fed has made it clear that there's a likelihood that.
There will be a rate cut in September.
And I don't think any of that has changed in my opinion. I think we still have a slowing economic conditions, and we still have probability high probabilities of fad will make its first cut in September.
So the headline to that over the last three trading days has been by small caps. Do you buy that?
Not necessarily. I am very encouraged by the small cap rally. Small caps have done horribly for like two years.
And behaved in a way that.
We don't really have any like historical reference point for Typically small caps behave in a certain way technically, and they hadn't been doing that.
So I'm encouraged by the small cap rally.
We'd had a very long period of time where small caps did not make a new high, something like almost two years, I think, And so that is something I think is you.
Know, a good thing.
But I don't necessarily think small caps benefit in the current market environment for a number of reasons. Higher rates is just harder for them to tap into the capital markets. They're not necessarily the biggest beneficiaries of the hottest trends that are pushing earnings in growth like AI, and so for those reasons, I'm still cautious.
On small caps.
Conversely, how do you think about those magnificent six or seven stocks which have been, you know, such a driver of this market, accounting for you know, the large majority of performance. So one of the.
Things that you can see in the market right now is we're seeing some dispersion of returns, starting to see a greater participation across the S and P five hundred outside of the magnificent seven, which is very positive.
It's good for active managers.
You know, we touched on small caps active management and small cap has done absolutely phenomenal and that's a perfect example of, you know, why active management can work in certain areas of the market. And I think we're starting to see that a little bit outside of small caps and in large caps as we start to see the mag seven kind of take a breather. I think there's lots of other opportunities in the market to benefit from some of the hottest trends that people just aren't paying attention to.
So tell us you have some nice stock picks here, give us your tie right now.
So I really like VRT. That's a second derivative player of the AI trade. So they do cooling systems for data centers. It's absolutely critical as we need more computing power for anything that is machine learning and artificial intelligence related, and they are the leading player with the top solutions when it comes to cooling, because a lot of computing power gets really hot and you certainly do not want things to overheat. So that's probably my favorite stock right now.
It's a second derivative play of AI. And then I wanted to look outside of technology. You know, everybody kind of knows me as the in video girl, and you know there's other places in the market.
So no of artists is a healthcare name.
Healthcare has not done great this year, but this is an opportunity to get in with a player that is doing some really cutting edge things in oncology in particular.
And then you know, I have Apple on my lists.
You know, I just said, let's think outside a tack, and now I'm going to throw Apple at you. But that's a stock that hasn't participated as much as some of the others. We've seen a rally recently, but the stock is treating at you know, our reasonal valuation and.
It has some really interesting opportunities going forward.
Hey, Shane, what do we know about this AI tech spending? We hear about it, you know, from all sorts of companies, And I guess one of the questions I have is how much of this AI spending is incremental versus maybe just shuffled from another tech budget, whether it's you know, information technology or something like that. What do we know about that well.
I would argue that AI should be part of your information technology budget because that's where it sits.
I think that it is incremental, though.
I do think companies realize that they need to have both the infrastructure for traditional IT and then have to really be thinking long term as it pertains to how these things can improve business efficient I know at Bondran we're finding ways to incorporate AI in our tools and.
The way that we do our business as well.
We use AI to help us with due diligence, and we use AI to help our clients use our technology. So I think everybody should be thinking about it because not only does it improve the user experience and improve business efficiencies, but it can save you.
Money in the long run.
But also one company that you have here on your list is air Cap Holdings. It's the world's largest aircraft leasing firm if you're just looking at by fleet value. It also just hit a fifty two week high just a couple of days ago. I think it's i'll say all time high. Really why do you like this company in this particular environment.
Well, we have the Boeing fiasco, which I think kind of makes.
People look for other areas where they can be.
Taking advantage of, you know, kind of the shortfall of Boeing. But it's also a really well managed company trading adding massive discount to the market. So those two things more than anything or the reason why I like the stock.
But you know, you can't overlook sort of market trends, you know.
I think you could argue that the Boeing situation doesn't necessarily affect them directly, but any kind of headline that would make people think about how airlines and fleets are managed, I think is beneficial to Aircap.
Shane, I know in your career you've spent a lot of time on alternatives investing. What's the alternatives that you think is most interesting these days that you're talking to your clients the most about.
Oh Man, So, one of the things that has been coming up a lot lately is sports rights. It's one of my favorite topics because I think everybody out there can kind of connect with it, and we talk a lot about having advisors use alternatives as a way to connect with their target market of the types of clients that they want, and I think sports is, you know, universally one of the ways to do that, and sports
rights is becoming more and more common. I know Avenue Capital is launching a sports rights fund, and there are others like cas Investments that have these accredited investor only and I just want to preface that opportunities in sports, but I'm seeing it more and more, and I think that's a really interesting play right now as you see, you know, the Boston Celtics are being sold and the multiple that they will get for that is going to be huge, and those opportunities are things that people pay
attention to and connect with.
Hey, Shannon, we really appreciate it. Thank you so so much, Shannon sis Old, President and CEO at Benjin Capital Market. So is that like everyone can get involved in sports rights.
I think if there's certain funds, I think that will invest and you can be investor in those funds. But again, I think, as Shane was saying, the evaluations that you know, they just continue to go up and up and up, and you know, some people thought there might be a top with the struggles of some of these traditional media companies and the amounts they can pay for broadcast rights. But for every one of those media companies that's struggling,
there's a technology company that's doing really well. And so whether it's you know, you can find these games on YouTube and Amazon Prime and all these other pipes.
And do the sports leagues makes the same whether or not like Netflix is paying them versus like CBS. It's the same kind of money.
Sure, yeah, And the rights go right to the athletes in addition to the owners of the teams and everything like that.
So I need to know anything about sports to be able to invest in sports. Nope, Hey, there we go, go exactly right.
So the money keeps going up. It seems like.
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Well, let's go to move over to the world of financial stocksure Goldman Sacks. They had some numbers came out today a little bit better and expected. We're gonna break them down later with Alison Williams and Bloomberg Intelligence. Also interesting story on black Rock, just extraordinary how big they are ten six trillion dollar assets and they're setting ETF is a big reason here Neil Sipes Joints is financials analysts for Bloomberg Intelligence. Joints is here in studio. Neil
talk to us about Blackrock. It's obviously a monster financial institution, but I think it's probably the biggest financial institution people don't know about. Yeah, the news today on Blackrock.
I think obviously over the past eighteen months, banks have been much more in the focus asset managers, maybe a little bit of a sleepier name, so to speak. But like you said, Blackrock eclipsing ten and a half trillion. Of course, a lot of that is due to markets. We're up, you know, fifteen twenty percent so far you're to date. But Blackrock sort of that perennial grower in the industry where organic growth, those flows from institutional retail
clients have been harder to come by. Blackrock, having that breadth and diversity of the platform, has really been able to deliver growth through varying market cycles. We think that's one of their strengths and why they're the leader in the space in terms of size. In terms of the second quarter organic a little bit lighter than expected. Part of that due to the fact that we saw some
larger institutional clients sort of rebalancing portfolios. That's just sort of natural in the business, especially when you're at all time highs. Nonetheless, margin really improved. Again, that's on the heels of stronger markets. Most of the revenue here is asset based fees, so as markets move higher, the top line expands as well. And so really, you know, you highlighted the last thing. I guess ETF's another strong suit.
That's really the bread and butter of black Rock again, and obviously, now with some of that private's markets push that we've seen in the past couple months.
When do they hit the law of large numbers thing?
Yeah, I think that is becoming the more popular question for I asked this.
Question forever, right, and it is still do it?
Yeah, and they and they continue to target this five percent organic based feed growth figure. They've been lagging that over the past couple of quarters. Obviously, markets you know, since the beginning of twenty twenty two were less conducive. They've been more conducive for the past three quarters or so, But the question still remains, how do you continue to grow at that five percent clip when you're talking about a ten trillion dollar asset base. And we think blackrocks diversity.
When assets are in motion, they can continue to garner share from less diversified, less price or these you know competitors.
Stock hasn't done anything this year, kind of up one percent just on the year, lagging the market. What's the what's the investment call here on blackro What are the investors saying?
Yeah, So I think, you know, a lot of what's been baked into this year is sort of market growth, which is going to be a benefit to all asset managers in the space. So I think the skepticism of are these gains lasting? What happens obviously in November when we get this eventual FED pivot to cuts, How is that going to impact you know, client allocations, How is
that going to impact the business model? But we do think Blackrock is you know, a is position to benefit in pretty much all market cycles, and a lot of that long term story is now shifting into that private market's focus with prequel acquisition just announced a couple of weeks ago and Global Infrastructure Partners in January.
Can ask a really dumb question at this point, who are Blackrocks actual competitors? Like who can actually compete with this company?
Yeah? So there are plenty of competitors. I mean, asset management can be somewhat commoditized in a lot of spaces. You know, there's competitors like a Vanguard. There's competitors like a Schwab, in Vesco, Franklin, Tira, Price, There's plenty of names out there. The question is who's able to compete on price with Blackrock? And that's where scale really becomes paramount here because they can continue to innovate with new products.
If a new competitor comes out with, you know, a new flashy product, Blackrock tends to match that and can sometimes beat it on price. And we know that Blackrock is entrenched with pretty much every institutional client, every retail client, so to speak, and that really gives them the strength of distribution to kind of leverage across its platform.
All right, really good stuff, Thank you so much, Really appreciate it and all of your insight. Neil Neil Sipes, Bloomberg Intelligence of Financials Analysts, the numbers are so big, it's like hard to comprehend like how big this company actually is, and.
It's across the board at all lassclasses. Yeah, so the ETFs being a new source of assets there, it kind of makes a question like I grew up with the mutual fund business that flities zero presses. It just seems like all the money's going to ETFs, and even the mutual funds are converting to ETFs, so that seems to be the wrapper of choice.
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Alex Deal, Paul Swinging. We're live here on our Bloomberg Interactive Workers Studio. We're streaming live on YouTube as well. Say head over to YouTube dot com and search Bloomberg Podcasts. A lot of things that this market's trying to digest right here, and most recently the domestic politics to fed assassination temp of former President Trump. We've got global geopolitics still out there. We've got earnings for Rakesmack in the middle earning season, and then we've got the ever president
fed watch. What is an investor to do? Let's check in with professional Sylvia Jablonski, chief executive officer and chief investment officer at Defiance ETFs A Joints, is here. Sylvia. We come into the markets here on a Monday morning. Another key issue out there in terms of domestic politics. What it means for these markets? How did you layer in what we learned over the weekend to what was already, you know, a challenging process for investors.
Good morning, Great to be here with you today.
Well, you know, I think this weekend was a shock for many, and you know, I think it's.
Somewhat unsurprising that the market is selling today off of what happened.
I think that there's some sentiment in the market that, you know, perhaps this turns out to be a Republican favored win. And you know, if that's the case, if you think about kind of like big corporations and things that benefit from them or benefit them, things like policies for lower taxes and you know, less kind of regulation, more m and a activity, this tends to be positive for some of the mag seven types of firms and
things like this. But I think the other side of it, though, is I do think that we need to be a little bit cautious and see what happens in the market in coming days. The other way that this could have gone is that, you know, we could have seen a lot of volativity in the markets, which I did and will expect to see in coming months if the election kind of goes back to you know, he said, she said, he did, he didn't do, versus let's unite.
You know.
I think if it's kind of a united front type of election, you get more stability in the markets.
If you don't, you're going to see a lot of that volatility, and.
It'll be interesting to see at that point where where asset allocations go.
It is really interesting.
It is really interesting to see the Vics curve, for example, like it hasn't really moved upwards, Like we do get that spike in the VICKS if you look at your function CCRV right around the election, but it hasn't really re rated in the last couple of days. Sylvia. The other thing that feels, irrespective of what's happening in d c is this massive Russell two thousand rally. Multiple choice question is it short covering? Is do you fade it or do you buy it?
I think that there's you know, there's there's an argument here to buy Russell, to to you know, start dipping into small caps just for the sake of the fact.
That the FED is very likely to start cutting.
You know, the data is arguably more favorable than not in terms of inflation going down.
We've heard fret share Pal talk about it. We've heard a lot of the.
FED, you know governors come on and talk about you know, their their views that we're finally going in the right direction.
They need more data and things like this. But overall, rates coming down is probably going to be good for small caps.
It could be some short covering, but that also comes because of the fact.
That you know, rate cuts are likely to come forward.
So I do think that you're going to see some of that diversification into areas of the market that haven't performed as well as the MAGS seven. So that's also
the natural inclination I think of longer term investors. You have these huge gains on some of the large cap names, maybe you hang out with those but you put some of your extra cash to work in places like small caps, and then I would argue, you know, after this weekend bitcoin, right, we see the rally there digital assets and crypto had a good, good fall, good pullback, good dip to buy.
On, and so that might be part of the diversification trade too.
So we we're just kind of getting into the teeth of this earning cycle here. What are you looking for this time around?
I'm looking for the same thing I was last time around, you know.
Overall, I mean, it would be it would certainly be good to see that ten percent growth that's estimated out there for S and P five hundred earnings growth. But the truth is, I think we're all going to be looking for mag seven. What is the video going to do or continue to Will they continue to do what they've.
Been doing all along? What will Apple look like with some of the positive news.
We've seen about demand picking up WI those will those seven hang time continue leading?
And I think that's what a lot of what the market wants to continue to see this year.
What would be healthier for the market is if we saw broad diversification and earnings growth and broad participation across the market, But I think the overall sentiment right now is still really heavily linked to the mag seven.
Going back to the bitcoin comment that you said, I don't get the bitcoin trade with President Trump, Like, go ahead and buy bitcoin shore like safety trade. Okay, fine, Like golds at a record high or near a record high.
Why not?
But what's the specific link to President Trump here?
Well, he's crypto friendly, right, He's he's thought to be crypto friendly anyway, in recent times he's been you know.
A little bit more more favorable or.
At least less doubtful about the viability of crypto as an asset. And so, you know, I think that there's there's this idea that because he's a potentially crypto favored, you know, favorable president, that you know, policies will kind of support or at least not diminish the growth of crypto. And that being said, I mean I think, you know,
micro strategy is actually one of my bias too. I think, you know, with crypto falling as much as it has because of the splid, because of the you know, German government offloading positions you have, you have a real good dip there, and that's you know, that's part of the rally too, but notably crypto rose over the weekend, So you have to think that there's a link, you know, due to his kind of favorable opinion about digital currency investment.
Well, I also have the wonder, Paul too, if it's just a deregulation and environment for sure, deregulation all the way if President Trump wins. I've already seeing that with the courts.
Right exactly. So, uh, Sylvia valuation here, boy, if I look at valuation just the surface for y S to P five hundred, it feels maybe not frothy, but it certainly expensive. Now, some folks say, well, he pull out the handful of stocks that are really driving that in the Market's not that expensive. How do you kind of pursue that?
Yeah, I agree with that ladder comment.
You know, pull out, pull out some of the top names, and actually it doesn't look so frothy. But I would even argue that even for some of the top names out there, if you look at companies like Navidio for example, that have just you.
Know, skyrocket in terms of stock performance.
You know they're certainly justifying their their valuation, right, I Mean, earnings have been positive, a lot of these corporations have cut you know, massive spending and costs over the last couple of years. They're running leaner and meaner. They're more efficient or top and bottom line earnings are coming in. You know, the valuations for now to me have been justified, and you know, they wouldn't keep me from investing in these stocks going forward, particularly when you get market pullbacks.
You know, when you get a couple of days ago nas XL you know, over two percent and things like that. I mean, those are times to enternto the market, particularly if you're a longer term shareholder. I'm not opposed to getting in, but there are opportunities outside of you know, the Mag seven, the companies that do have the higher
valuations too. So when you hear things like small cap rallying and also you know, other parts of the AI trade, like like you know, energy and you know, uranium, copper, things like this.
That there are other areas of the market to participate in. What the Mag seven are doing.
Well.
It's interesting. You know we talk about a rotation though right like out of growth into value, but both are moving Like you have growth the MAG seven, you have the Nasdagnatic one hundred, the S and P and you also have the rustle you can you have all these things at once, like what what does this tell us about where we are?
Well, that tells us in my mind, that tells us that you know, we're in a soft landing and that you know the market is a good place to be. And so for all of the investors that have you know that six trillion of cash that they're sitting on in their four to five percent and you know, different fixed income types of products, money markets, treasury, things like this. You know when you have an S and T five hundred and NASDAC that are returning double digits. And we
do have the sense of a soft landing. We have rates coming down. Electioneers had to be favorable for stocks. I think you're going to see participation across the markets. There will be those who favor momentum and the mag seven and there will be those who you know, strategically
diversify and have have wider market breath exposure. And I think that both of those things are happening because we are seeing that inflation coming down, that soft landing, and that's you know, that's that's what markets want, and that's.
The sweet spot right now.
Not to say that volatility isn't going to come our way, but I do think that at this moment, we're in that soft landing sweet spot.
All right, Sylvia, thank you so much for joining us. Silvia Derblonski, chief Executive Officer and Chief Investment Officer, defines ATFS.
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