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Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven News.
Find the Bloomberg Markets Podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Ben Emmons joins us here in our Bloomberg Interactive Broker studio. He doesn't mail it in or own it, and he's a principal, senior portfolio manager and head of fixed Income at New Edge wealth. Been lots of economic data today and really this week here I don't know. I mean
this services data kind of took me by surprise. Here again the ism services data, and we talk about services, it's important. It's seventy percent of our economy came in at fifty point six, so it's still above fifty, still showing some expansion in the economy, but well below last month and well below the consensus of fifty two point five. That's kind of got the bonds here, yields coming in a little bit in stocks higher. What would you make of that services data, yep.
Paul, I thought that the surprise there was that employment components, you know, dropping below fifty free sharply.
Yep.
I think that's what that triggered the rally in bonds because it's a bit contradicting to what we saw yesterday with the b ANDI services data. Now, the surveys a little different from each other, but nonetheless in the employment component, that survey was up and it was actually I think part of the reason why we saw about a payroll
data this morning. So I guess this survey is indicating that, you know, some of the people in the supply management survey view that the economy is perhaps getting weaker or they're having less demand for labor. Either way, you're getting this whipsite on the market this morning. You goes up to four point ten on the ten year on the pay roverboard and reverse back down between ninety six. So I think what it tells us is that this is
a good economy. There will be some ray cuts coming in the future, but it is not like a recession economy either, so you're not see much lower yields I think from here.
Yeah, So but let's get into the rate cuts that you talked about. Because we have the jobs that we have ism, you also get resource from Wall Street firms, from banks, So when do you see these rate cuts possibly kicking in it?
So I think the March raycut is probably too soon, and that's just because the way the Fed is communicated that so far, you know, they've given us an idea that they are in projections out that probably gives them the confidence that they can actually this year can lower rates compared to last year when they said resoundingly like
there's no case for raycouts. But a March raycot would mean that inflation data we're getting out until that time would see such significant decline that they start reacting to that and then make the case that March is the live meeting. So I think from the here at LISA, it will be more about as we're getting several months of inflation employment data, and it could used to go towards the you know, the goal that they have two percent inflation and unemployment rate maybe a little bit above four.
That probably is more close to the June to get the first ray cut and then we really are into the second half of the year, So I don't think you're going to see six raycouts this year. So, Ben, what did you.
Make We haven't spoken to you in a while here. What did you make of that big move we've saw in the markets there in the last I don't know, ten weeks of the year. Last year, we just had the ten year ago from five percent to three and a quarter. We had the stocks just rip. I mean, what was that?
Yeah?
Actually the right right in a way to say, what was it really about? Was it just about yields going down? Because one CPI reports showed that the owner's equipmental event finally starts to decline. I don't see it in New York. But okay, it's it's finally declining. So that triggered the move down and yields and there was a relief, and you're getting all the high beta and small caps and everything start to pricing this idea that yeah, Okay, the economy is not going to go to a recession. It
will be a soft landing, maybe even no landing. I think, because it's just simply an economy is staying on track. And at the same time, it's about those who had money on the sidelines redeploying in something that lacked relative to technology, so sort of a relative catch up that I think all I think what drove this rally. Now will it continue is to be seen because I think what we're coming into this year is that we're going to keep a fat still restricted for a bit of time.
So the economy, if it does stay in the slower track than last year, you know, you may see stocks not perform so strongly. If it's a lie, she has yields to sort of stay where we are, And I think that there's a really important part about that story. Ultimately, it's all about interest rates.
Now, but a strong drug jobs market. It's that main kind of engine for resilient consumer spending, and it's pushed a lot of economists to rethink their recession calls. What's what's your take on that.
Yeah, I think the recession call, I've never been in that camp. I still think there's no recession this year. It may not even be next year. I think here's where I come from. This important point to make maybe is that the fiscal impulse that we have to the economy, fiscal spending is not going to change this year. They have agreed on the dead seating last year. They have
one percent mandatory spending cut across the board. But that's so small if you think about back in twenty eleven twelve when they had a ten percent mandatory spending cut, which really slowed down the economy. One percent is just not going to do much for the economy. Especially I've seeing job stated like this coming out, and you're seeing confidence picking up and financial conditions being looser. So I
think it's an economy that stays on track. What could change it is next year whomever was in the White House. But here's one other things about that White House race, the new president. But it's buy no Trump, which what it looks like either of them wants to stimulate the economy, either with text cuts or with more spending. So either way, I think this recession scenario is not going to play out unless we getting major fiscal spending contraction. As I mentioned, I don't think that's the case.
So given that backdrop, Ben kind of what's your best idea here? Coming into twenty twenty four, A lot of folks were saying, hey, just be long equity markets, but then you had that huge run up in the end of the year and maybe some of the glory was taken out of there. What's your best idea or do you think about twenty four?
Well, we do look carefully at new edge valuations, and you know MC colleague Cameron Dawson who was on Bloomberg's events the other day, she kind of make the case on that too. It's saying, look, we do have overvaluation in tech and the adjustment of interest rates a bit higher.
For me, I guess economy, it's just better takes off some of that that that valuation fraft that's in there with those also some I think some level of frath coming into uh you know, really Higbida elements of the market, so I think you want to play it more a bit more defense. We like energy, we like utility sector, like some of the healthcare sector. You really pick your
best parts there. There's very some stocks are very undervalued relative to the marketing, trading really at low multiples, and actually the earning forecast much were realistic.
So not chasing. I guess those magnificent seven.
Not not really so to the call like, yeah, jefferis like Microsoft. We all know that Microsoft is a great company. It's good and strong, but you will be chasing it probably here at these valuation levels. But I like and fixed income, and also I think inequity is that emerging markets is an interesting story because we are coming off really restrictive rates in emerging markets and inflation is really moderated.
There.
There's some really good earning growth stories both Asia and Latin America, so I think there's an opportunity. We like Japan, there's another market that's contasued to be outperformer. And international equity. And then lastly, we gotta watch what the dollar is going to do this year. If the Fat's going to lower rates, it's gonna lead like into a week a dollar environment every time the dollar does go below a haunted on the index, it leads to significant rally and
energy and commodities. It's been that historically that way. I don't think it's going to be different this way this year and now whatever happens with ge politically, Energy is I think a bit unvalued from where it is currently. Same thing some someone in commodities. Lastly, gold could actually be a strong air for gold given uncertainty and fat easy it performs quite well in that environment.
And just a quick I want to get an idea of sentiment out there. I mean, you think rising interest rates makes it more expensive for companies to operate. I mean some of your clients, they're entrepreneurs, their corporate executives. What's the feeling that they're getting out there?
Now, Wow, there's caution and nowice this. Obviously, we do deal with this election and it's it's uncertainty. We also just do the fat discussion. It's not clear right if you're actually going to get these raycouts and how many uncertainty while watching what's going on in the Middle East, and we don't know how that's going to exactly play out.
So uncertainty. On the other hand, there doesn't seem to be this slowdown that everybody can teach to talk about that the solda and that tips us into a recession. So I think that our clients are more about, you know, we like risk. We'd like to not be out of the market. We still like some of the areas like private credit or private equity. That's not something we want to necessarily skill completely out of it because of recession risk.
But we don't want you to play the high beta trade either, and meaning you know, going reading in high risk really small small small caps or you know, go into I don't know crypto and things like that. You know, we don't want to play the liquidity high risk game that way, and be mindful that we do have fixed income. We can we can finally get some additional income that's still really important in the portfolio this year.
Thanks so much for joining us, Benham's principal at New Edge Wealth.
You're listening to the team Ken's a our live program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
There is no greater friend to the municipal bond market than me. I tell every governor of the State of New Jersey, I'm probably the largest private creditor to the State of New Jersey through my municipal bond holdings. Chris Burgante Brigatti, he thinks he knows a thing or two about it. But Senior vice president Director Strategic Planning at SWBC, Hey, Chris, thanks so much for joining us here in studio. Fixed income actually had a positive year last year in terms
of total return. How did the municipal bond market do?
The municipal bond market had a very good year, and it all really happened in the last two months of the year. It was negative coming into and through October, so the performance actually turned quite positive about six point four percent to the positive by the end of the year with over seven percent return is coming in November December.
All right, So what are we doing here with the unicipal bond market in twenty twenty four. What's the call here?
The call is to be very strategic in terms of how you approach a market and delegate your capital. A lot of the investors that we're talking to and a lot of the people that we engaged directly, are really kind of being very cautious on their credit approach, not really going too far out on the credit curve because those credit spreads and narrow significantly in the rally through
November and December. So now it's a matter of when can you re engage the market in a more strategic manner further out the curve or down the credit curve, And I think both of those opportunities could happen this year. But I do expect this to be another quite constructive year for the market in general.
So what else are we doing in the fixed the gum space here, because I you know, twenty twenty two is so brutal for across fixed income space, double digit declines declient is like the fixing the market had never really seen had some positive results in twenty twenty three. Any reason for me to own bonds here in twenty twenty.
Four, I think there still are. You know, you look at the fact that we've got real good yields that we have not seen in well over a decade. So for a longer term perspective, you start looking at that, and you know, if you're going to be clipping coupons and be able to grab that four percent yield if rates remained unchanged, barring the expectation for lower rate environment,
which would add additional performance to a bond. If you can lock in four percent or better type of yields in this market, you're really looking at strong performance in chase.
Dig a little bit deeper into what banks are doing with some of them munity teams.
Your city they announced at getting out of the municipal ball market. They did they can't do that.
It's amazing they've they've made that announcement in backing out of the market. I mean the market is becoming tougher and tougher, spreads are narrow, it's becoming much more constrained. Regulators aren't helping. I'm not going to really kind of go down that path too deeply, but it's a challenging market for banks to make money in. And so the strategy and the way you approach it is how can you embed yourself deeper and better with clients to provide
better service. And that's one of the goals that we're trying to produce at SWBC is how can we ingrain ourselves as a partner to those clients and really add value SBbc stand for Southwest Business Court.
Southwest where you guys based.
San Antonio, Texas's headquarter.
Nice?
Is that where you're from?
No?
No, I'm Northern New Jersey.
Here in northern New Jersey. Okay, I'm a big fan of San anton all right. So in the I don't know where are we going to see a new issuance this year? I mean, am I going to see a bunch of new fixed income issueans, credit issuance? High yield municipal bonds? Am I going to see a bunch of issuance? Now that interest rates are coming down? Do you think?
I think so?
I think the opportunity for issuance to rise is twofold when you look at what happened with the taxable municipal market last year, which was down about thirty percent in terms of issuance. So I expect that to rebound a little bit. Last year, issuance came in around three hundred and eighty billion dollars, which was a few percentage points lower than the previous year in twenty two. I expect this year to be a little bit north of four hundred.
And an average year is like five six hundred.
No, an average year of late has been somewhere in that mid to.
Low force mid force.
Yeah, yeah, so I expect to get more towards the average and the opportunity for investors who engage that should be well stated.
But the municipal bond like I've been told in the past that municipal bond issuers, municipalities, they don't issue money when rates are low per se, they issue money when they need it. Correct, So aren't we having a bunch of like infrastructure acts and things like that. Don't have a bunch of stuff going from the federal grim that needs to be funded in municipal bond market.
There are You know, it's funny when the infrastructure bill came out several years ago, the market got all heady and for lack of a better way of putting it, in terms of the opportunity for more issuance to come. But those infrastructure things take time to build. It takes years to get through the system through the process at local or even larger municipalities to be able to construct that new road, to do something with a bridge. All those
infrastructure projects take time to even get started. So once they get started, that's when the borrowing is going to happen, and I think that we kind of got through twenty twenty three with the huge spiking yields we saw in October that scared a lot of people. Now that it's kind of more normalized, I think that the issuers are going to come back into the market, and they, like you said, they're going to come in when they have and when they don't have to and rates are high,
they stayed as far away as they can. So now it's the opportunity is going to be there, and I think they're going to come in quite strongly.
So who are buyers of municipal bonds these days? I'm likely retail versus institutional. How does that split look today and maybe how's that changed over the last decade or so.
Yeah, you know, that's one of the most interesting things, and that's one of the things we're trying to be aware of at SWBC is the retail investor has historically been a strong participant in the municipal market. Their participation has shifted less away from the funds. ETFs have kind of picked up some of the fund bandwidth and fund opportunity, but the small accounts that are managed by portfolio managers,
so they're professionally managed, but it's an SMA. Those types of accounts are really where most of the opportunity is, and that has grown by more than double in the past several years. So those investors are really participating strongly and reaping the benefits tax for yield.
What's not to like, Yeah, exactly. And so what's the credit quality in the municipal space. I'm actually surprised. I mean, always the Puerto Rico issue or something out of Illinois or something like that. But other than some of those weird situations, I haven't heard of any cracks of note in the municipal bond market really for years.
It's been several years, you know. You look at the fact that the federal government allowed for some of the infrastructure bill, some of the opportunity for federal aid or during the pandemic and COVID, so a lot of issuers have built up a reserve of funds as a result of that. So the credits are actually quite high, higher than they possibly would otherwise be. But generally the municipal
market is really really solid footing. I mean, most of the space could take most of the investment and opportunity to take space in the double triple B and higher investment grade. That's where the vast majority of issuance is and the default rate on those is less than one percent. So the only thing time you hear about something like that is sketch your credits in odd different markets. Healthcare is notoriously a challenge some of the housing market as well.
And then you get the odd issuers and the Puerto Rico story I always rears its head.
Then there's the ball across the river there.
Exactly what's going on with that?
What's the dream mall? I think, yeah, yeah, somebody would. I mean, that is fascinating to me. I remember when that issue came to market, I said, I know nothing about the dream mall. I know nothing about the municipal bond market, but I wouldn't go near that bond issuance. I mean, I couldn't see how that thing would actually be successful, much less pay me back my principle.
Have you been there?
No, that's still nice.
That's the point either.
I know, you know, it's in a tough location for New Yorkers especially, it's it's not easier fund to go over the bridge and then travel through there. And you know, my kids have been there to go on some of the rides and do some of those things, and they enjoy it. But I haven't stepped foot in myself either. And it's a tough credit, that's for sure.
All Right.
What are some of the sectors that you think are going to be interesting in twenty twenty four?
You know, I always mention things that are quality revenue bonds that I really like, and you know, you go down the path of water and sewer bonds. Everyone has to pay their water bill, it needs to or so I think in terms of higher credit quality, that's definitely
on the plate. I think that office opportunity, other things that make sense, or some of the better higher quality education bonds the well known names for lack of a better way of putting it, and then transportation transportation revenue bonds, bigger airport revenue bonds, those sorts of things are going to be on the uptrend, I believe.
How about education, because we've seen some stories about how if you're a small, mid size liberal arts college, that's a tough business. And I've seen some issuance. I've seen some issuance from secondary schools, prep schools and things like that. I can't remember which the issue was, but one of the top prep schools. How about those education back bonds? How do you think about those?
You know, to your point, it depends on the name and ten bands on the issuer and the credit you really got and kind of understand and digg into weeds a little bit to understand what is the underlying credit quality of each one. And to your point, you know, you stick to the higher names that are very well known the place where it's ivy leagues, et cetera. You know,
those names stand up very well. They have very strong participation, Their endowment programs are enormous, and when you look at their acceptance rates, they still have low acceptance percentages, meaning a lot of people still want to go there and very few still get in. You look down the curve and you start looking at some of the less well known issuers.
The liberal arts colleges.
That you mentioned, they're having a tougher time attracting retaining people, and I think COVID was not helpful for that construct. They definitely suffered in terms of people wanting to go to college and or how they engage colleges directly.
So just real quick on Puerto Rico, are they out of the woods yet, I can't remember kind of where we are there.
Yeah, they're not quite out of the woods yet. That story seems to be the story that never ends. So they're in challenging times. There's constant discussions over you know, what's going to happen with the debt service and who's going to be paying it and who's responsible, and then what is the restructuring going to look like? And you know, that's getting into the weaths of it. Very challenging, yeah stuff.
Luckily, we have the Joe Mysak who covers the municipal bond mark for like a goajillion years at Bloomberg News, and he keeps us up to date on what's happening there, so we appreciate that. Chris Burgotti, thanks for joining us. Christoph Gotti is a senior vice president, director of Strategic Planning at SWBC based in San Antonio.
Listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and.
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All right, the two teams from twenty twenty one from a stock market perspective for me, that just came out of nowhere. One was AI okay, of course, and the other one is this weight loss stuff the GLP ones.
Now it's EMPI gov.
I mean, you're a workout Maven, so this is a non issue for you. But for a lot of people it's huge. I could see how this could just be massive, particularly if they get into a pill format. My question is always who pays for it? Simone Foxman, reporter for Bloomberg News, TV radio and all that kind of stuff. She's everywhere. She did a lot of reporting on this, has got a great story out on the Bloomberg terminal here she joins us live here in our Bloomberg Interactive
Brokers studio. Simone, help us figure out, because I think you can make an argument that almost well get jillions of people in the US in theory would want to take this drug, will want to take this drug, are taking this drugg But my question is who pays for it? How does that all work?
Well?
So there are different classes of people, right, you have your people who are insured and their employers maybe pay for their healthcare, and some of them who are insured pay for it themselves. Then you have, you know, people on Medicare, and then you have eighty five million people low income people typically on Medicaid. And this is the area that we really dive into as well as some of those insured people, because a lot of this burden
is going to fall on states. States spend on average over a quarter of their overall state budget on healthcare costs, and those you know, for many states, including New York, are skyrocketing, and it turns out, you know, this is going to be a larger and larger part of their budget as they try and pay for Medicaid costs, which is part of is a respect ability they have. They contribute to that as well as their own state employees.
Now right now, most insurers, this is private, public, et cetera, pay for GLP ones for people with type two diabetes.
But the whole.
Idea that we have been hearing from Wall Street is people who just are seeking this for weight loss, who are overweight, They're the ones that are ultimately going to be seeking this and that's why this is such a massive market.
Yeah, the cosmetic weight loss, I mean exactly likely. They came out yesterday and they warned about people doing it for this, but.
It's but it's not just cosmetic weight loss. It should be very if you know, noted that this has all these variety of health benefits. Uh, the twenty percent reduction that a Novo Nordisks showed among patients who had a health had a heart condition or some history of heart disease as well as obesity, you know, that's an enormous savings potentially for insurers, including public insurers. But at a cost of one thousand dollars a month. That's the shrugs.
That's the number that jumped out of meat from your reporting. One thousand dollars a month. And you know a lot of these you know, government officials saying that's going to we don't have that money.
And the first government officials that were really starting to hear from are the ones who control the state health plans. Again, not every state health plan covers this for weight loss. They almost all do for subject to restrictions for type
two diabetes. But the ones who do, including North Carolina and Connecticut, have both flagged that this is a real rising cost and in North Carolina this was a subject of very heated meeting over whether or not they should continue covering these drugs for weight loss at all, and ultimately they decided anyone who was on it up till January first can stay on it for that reason. But people who are just seeking these for weight loss beyond this specifically.
You got some crazy numbers in here, just in terms of the medicage growing GLP one bill. Here are the numbers in twenty twenty three point three billion, in twenty twenty one five billion, and in twenty twenty two seven point nine billion.
So that's just we medicate, and we have some limited data for twenty twenty three. I can tell you already the nut number is bigger.
Wow.
But here's the thing.
You have to be on this drug forever. This is not a one time thing a couple of months. No, you have to continue to be on this correct.
Yeah.
And the thing is, you know some of these costs, the costs that you just mentioned, Paul, A lot of these are driven by type two diabetes patients. In fact, uh, why I was going through these numbers. The biggest driver of that increase that you talk about between twenty twenty and twenty twenty two is for a drug called Trullicity. This is a GOLP one that has has been out there may cause some weight loss, but it's not the ozembic, it's not the wee goov, it's not the one with
all this name recognition really for weight loss. So it's there's still a long way to go. If we just are to cover all the type two diabetes patients, and we calculate it in our analysis that that bill if all the type two diabetes patients that actually deserve this, according to the research, were covered, that would be forty one billion dollars for Medicaid alone. Don't we can't even take in state healthcare plans there.
I mean, I'm not sure how to do the math or I'm sure it's being done within the healthcare industry. But if more people are on these GLP one drugs, Okay, that's an incremental cost and can the system bear that?
But you offset that by presumably some of the issues they won't have to deal with, you know, obesit, diabetes, things like that, And that goes down to I've even seen medical device companies stocks sell off because there'll be less knee replacements, hip replacements, all that kind of thing. I'm not sure how to quantify that benefit versus what I know is the upfront cost.
This is an incredibly problematic analysis. We know that obesity itself is very expensive. Diabetes is three hundred and twenty seven billion dollars in medical cost a year. That's one and out of every four dollars spent. That said, you know, and like, don't bring into account the potential benefits of having people who are not spending their entire day on dialysis, you know, who are contributing to the economy.
You know.
That said, some of the early indications are and the CBO has done has kind of done a little bit of thinking about this. Is the cost is still too high, you know, and.
The and the supply is kind of being limited at this time.
So what do you I mean, do you ration it out?
What do you do at this point?
Yeah, the supply being limited means that the likes of Novo Nordisk have limited who these drugs go to first, essentially, and they're going to the diabetic patients first because it has it's more meaningful for them on a whole on an aggregate basis, immediately, but you know, they're rimming up supply. The problem is the demand is so huge, how do you ever bring down costs meaningfully enough to make it
worth it. Now, it should be noted that some of these costs that we've talked about here are pre rebate, So prescription costs for Medicaid essentially have due to manufacture rebates. Since these are the same and but these are the numbers we're kind of talking about, I think they give a good indication of how significant this is going to be.
Well, I like, I mean, I'm I'm a big fan of North the state of the state of North Carolina, not necessarily the University of North Carolina being a duke red But here I noticed in your reporting here that the debate has played out most heatedly in North Carolina, where Novo Nordis has three plants that make drugs for obesity and diabetes. Yet they're at the forefront of the state trying to limit who you know, what the state will pay for it. So very ironic there and.
Here there's also this incredible calculus as well. So Dale Folwell, who will speak to later today on radio as well as on Bloomberg TV. He you know, it runs this plan and apparently the Prescription Benefit Manager CVS, he says, told him that if they start restricting the population who can get drugs, Novo Nordisk will cut the rebates they get, so they'll have to pay much closer to thirteen forty nine the list price of you know, we go via the weight loss version of one of these drugs.
That's nine dollars yes for a month.
Yes, versus the seven hundred and seventy two that they were currently paid. So that makes the calculus even worse. Right, So, I mean, essentially, if manufacturers threatened to cut these rebates because people are restricting that, I mean, it's this whole vicious cycle.
But I mean they're pushing it.
You know.
Eli Lilly said it's going to launch this digital healthcare platform, you know, and that's really going to pressure They're going to home deliver some of these these medications.
So they're they're pushing it.
And they're doing impact studies talking about the costs of obesity that Lily has publicized a bunch of those or funded a bunch of those. H they are lobbying state and federal officials. Mind you, Medicare is a federal thing. And there are some officials on Capitol Hill who are saying Medicare should cover this for Medicare beneficiaries, just for weight loss too. I mean, anytime you hear about this, it's expanding the potential population of people who could get
these and don't. That doesn't even begin to take in the kind of marketing that we're.
Seeing, all right. I mean, great reporting here, Simone, Simone Foxman, you know, with this story and along with your co reporter Laura nas Nomius. So, Laura Namias, Simone Foxman, great reporting here, great story of Zempic's mania's billions and bills are coming for US taxpayers. Check it out on the Bloomberg terminal Bloomberg dot com. It really it's really good.
It's got a lot of data that I have not seen before in terms of the cost and how the costs are broken down, what are the drugs that are in the marketplace, who's who's in there, and where's the the money going and where's the money coming from. Some great reporting, Simone, thanks so much.
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My next life. I want to come back as a healthcare m and a banker. Those guys get paid every day. It seems like every Monday we come in and there's another mega healthcare deal. So let's see if that's going to continue here. Kristin Pathier, Principal National and Global HCLs Deal Advisor and Strategy Leader, Christian, We've got to deal with that title there. We got to work on that. KPMG. I mean, let's just say you're the global deal person. That's what I'm going to go with. At KPMG, they
know what's going on out there in the world. So Kristin talk to us about the landscape for healthcare MNA. It just seems like it's just a it's almost like a way of doing business for this industry. If you can't come up with the drug or the therapeutic or whatever in your own R and D, you go out and buy it. Is that kind of where we are.
Absolutely and when you look at healthcare and life sciences in general, it really is one of those recession proof industries. People are getting sick. People get sick worldwide. They need better medication, they can need faster medication, they need more access to therapeutics, diagnostics, devices, And regardless of whether we're in a major pandemic or whether we're in a major recession,
we still have people that are getting sick. And so all of our groups in this space, whether they be healthcare firms, life.
Sciences firms, they have to continue to innovate.
And innovation in medicine is precision medicine. It is the future of medicine. It is generative AI. It is putting together a number of different types of pieces of the ecosystem so that we get to our patients faster.
So you are absolutely right.
Both inorganic and organic strategies are absolutely essential in this space, and that is what we have seen throughout the years. Even as the deal market has softened over the past couple of years.
You know, I want to get more into that innovation that you were talking about. I hosted a panel for Bloomberg. It was about AI and one of the companies there was healthcare and they said, AI is playing a big part. It is a game changer. So if you can get a little bit more into that.
For us, absolutely, and it's a game changer across all of the different subsectors of healthcare and life sciences. Remember there are a number of different groups that are playing into this ecosystem.
Our pharma companies.
Need generative AI to really help take their rapidity of their pipelines, make everything going through the pipeline a lot faster, a lot more efficient, a lot more effective. Our health systems are using it both in the front office and the back office to take all of the patient data, all the patient claims, everything that they're getting hit with, and develop new patient journeys, new sample journeys for those patients to get them better and more effective therapeutics.
And what I would say is that over.
The last year alone, the amount of time and energy and diligence that has been spent on generative AI, the companies, the partnerships, how we're even dealing with the space has just gone snowballed throughout the industry, and so we're getting more and more questions on that every day. I would say that the amount of deal making, actual m and a in generative AI is less so than the partnerships and all of the questions around generative AI, but in twenty twenty four, we expect that to increase.
So what is precision medicine exactly?
And from your perspective, absolutely, precision medicine is the best therapeutic or care for the best patient at the best time.
And so when you.
Think about that and you think about what I just said, it isn't a buzzword.
It's the future of medicine.
We want to be able to take one patient, look at that patient, and provide them the most effective and efficient care.
And so that's what we see. And when we take that precision.
Medicine out to precision healthcare, it adds in the entire ecosystem, whether it be the diagnostics that surround those therapeutics, whether it be the patient services, and whether it be in a domestic market or a worldwide market.
Now, talk to about hospitals, they're facing these big financial pressures. You have workers, there's a shortage of workers. How is this going to change the industry moving into twenty twenty four.
Absolutely, both generative AI and precision health health happen to really help what you just mentioned when you think about how many workers we have to put in the workforce, when you think about how many therapeutics that we need to save people's lives. If we can get more precise diagnostics, more precise services to our patients in amount of time in those health systems, that allows us to take our workforce and refine our workforce to only who we need.
It also allows us to upscale our workforce, maybe with bringing in people that could be upskilled faster through generative AI approaches, and then allow us to manipulate and change our workforce to better suit the needs of what we need in the future.
All Right, So, from a deal perspective, Kristen, what sectors do you think are going to be most in play over the next twelve months.
When you look across healthcare and life sciences and you look at the lows of twenty twenty three and you look at what's recovering quicker, each one of the subsectors in life sciences continues to be very exciting in for different reasons. Within biopharma, the innovation around selling gene therapy within a lot of our other biologics within Companion Therapeutics is continuing to move us through the pipeline and look at deals that are continuing to change the portfolio.
Of each one of our pharmaceutical companies.
When you look at diagnostics, we had a little bit of a lull last year, of course, as our diagnostics companies went into the new normal post COVID, But now they are looking for interesting point of care and interesting innovations within diagnostics to help pharmaceutical companies and to help services in better ways. Devices are always going to be one of those areas where we keep on looking to say, is this the year device companies had a harder time
during COVID? Of course, as elective procedures really tanked. All those elective procedures, hips, knees, etc. All have come up again, and now as our health systems continue to promote those elective procedures continue to bring them in, our device companies are looking very carefully at new innovative ways that they can bring new devices to the fold and emerge as the victors in that particular area.
In healthcare, when you.
Look at health systems, when you look at payers, when you look at physician groups, we're seeing health it and physician groups as being the most exciting areas and continued consolidation and thoughts on health systems as the health systems continue to recover from COVID and really be very thoughtful about their costs, paired with the innovation that they're seeing
from life sciences. Life sciences and healthcare are inactuably linked sectors, and so as we look at this overall, we're continuing to see the dynamics between innovation between those two teams.
Kristin, thanks so much for joining us. Really fascinating stuff there. Kristin Pathier, Principal National and Global HCLs Deal Advisory and Strategy leader for KPMG.
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Let's talk about this jobs market again. It is resilient, it is robust. I don't know what you it doesn't matter. It just seems like you can't crack this labor market that continues to be some pretty solid demand. Julia Pollock joins us. She's a chief economist at ZipRecruiter. So, Julie, we got some better than I think expected jobs dated today in terms of the number of jobs and then
also the wages. What are you seeing at there at ZipRecruiter when you look at there at the labor market, it was a mixed jobs report.
But yes, you know, zooming out twenty twenty three was a remarkable year in the labor market. We not just dodged a recession, we completely completely avoided a recession in the labor market, even though it did slow substantially. And not only that, it was actually one of the best years on record when it comes to the unemployment rate, the average unemployment rate, it ties for fifth place with nineteen sixty eight. Wow, So pretty strong year overall.
And talk about some of the trends that are going on. We used to talk about that trend of job switching.
Is that still safe?
Ords it best to just stay in place.
So the data that came out earlier in the week, the JAULTZ data showed a pretty substantial decline in job switching. So the quits rate fell to the lowest rate since before since early twenty eighteen, and that suggests that the Great resignation is fully completely over. And the higher's rate also plunged to the lowest level since twenty fourteen. And so the reason that overall employment levels are going up is not because of aggressive hiring. It's more because of
very slow turnover and churn. And what we're seeing at ZIP recruiter is a continued, gradual, orderly cooling in the label market that's likely to persist until the FED takes its foot off the rate piel and allows the economy to invest in boom again.
So, Julia, what is I guess employee hoarding? Is it a thing? Is it real?
So if you at layoffs and firings, they have been about twenty percent lower this year than was normal between twenty sixteen and twenty nineteen. So we're seeing historically unusually low firing and layoffs at a time when there are many industries where activity has taken a huge knock from high interest rates. If you look at the construction sector, it's actually up over four hundred thousand jobs since before
the pandemic. Industries like banking where I think if you look at a lot of the numbers it hasn't been so great, right, Lots and lots of bank deposits have left that SIB system, like on eight hundred and seventy billion dollars. Bank stocks have fallen pretty substantially and underperformed the S and P five hundred by the largest amount ever. And yet overall employment in that sector has been flat
as a pancake. So yes, I think there is a sign that employers are holding on to the workers they've got, even in industries that are pretty slow, because they are confident that things are going to turn around.
So and when you talk about that, you know, managing this headcount, So is it that they're relying on attrition or rather than doing layoffs? What do you say?
Yes, but even overall headcount numbers are staying pretty flat and stable.
You know.
One exception is transportational warehousing, where we are seeing some sort of right sizing in that sector now after it posted the largest gains since the pandemic. So, you know, as people get back to normal and spend more on services and good spending slows, growth and good spending slows, that industry is shedding jobs, but most are not. Employment
is pretty stable and flat and resilient. That's actually the only sectors that are really contributing to growth at the moment are these three largely acyclical sectors, the government, healthcare, and leisure hospitality. They accounted for ninety two percent of all jobs added in the last six months.
So, Julia, people are at work. My question is where are they working. Are they working at home, are they working in the office? Where are we on that these days?
So it's a very very mixed bag. Remote work has pretty much stabilized now at around twenty five to twenty eight percent of all worked days, up from about five percent before the pandemic. And this is the year when that really stabilized. The Many companies brought workers back to the office, but many other companies started afresh in a remote first posture, and among companies the flexibility became the norm. The five day in office work week became very rare.
Only sixteen percent of companies with office.
So I'm one of the special people's five days.
You're one of those.
I know, I was specialty.
Most people get at least one, two, three or four days off, so I hear out out of the office a week.
And we've learn a lot of us in twenty twenty three about the great resignation is that gone in the days of twenty twenty four.
It's gone. Turnovers not just back to pre pandemic normal, it's actually lower. It's about where it was in early twenty eighteen. And that is a really reliable measure of how much economic opportunity there really is for unemployed workers, for workers to find better jobs. And I think it suggests that there is some cooling in this live market and that workers are finding it a little bit harder to find new jobs and to find the kinds of jobs that they want right now.
All right, my I guess employment ready offspring, they're all employed. But how about folks coming out of college and graduate school. How's that entry market right now?
So, surveys of employers suggest that they are projecting hiring fewer members of the graduating class of twenty twenty four than of previous classes. That said, those projections can change. It's quite possible that twenty twenty four could be like twenty twenty three again, in that companies start the year expecting to cut headcount and cut costs more aggressively and then realize, wait a second, there's nerve recession. On hand,
the consumer is still strong. I need workers and actually hire more than they're expecting at the start of the year, especially if we see interest rates come down and investment rise again.
And new year people out there looking for a new job. Do you have to rip up the script when it comes to your resume? I mean, if you want to start all over again, what should you do differently when you're putting it together? Is it more about skills? What should you have on there that really stands out?
Yeah?
So this is not a chronology. It's more like an advertising pamphlet, showing your most your greatest hits, your most relevant skills and experience. That's I think how people should think about their resumes. Put the relevant experience up first, and then you know, it's really important these days to
have a digital jobs or seecret profile. So upload your resume, make sure it can be read by computers and parsed by these job marketplaces, so that you're actually getting your foot through the door and getting past the robots into a human.
How about it In the trades, people tell me that there's still a shortage of trades men and women out there. How does that part of the market look to you.
Yes, So there are many industries with aging workforces, with a lot of retirements and with shrinking pipelines of new talent. New younger generations of workers are not as interested in those roles. They also are seeing a work a labor force with a lot more flexible opportunities, and so they're going to the remote jobs and the tech jobs and
the influencer jobs. There's tremendous interest still in marketing roles and pr roles and those kinds of things, and much less interest in doing hard labor in manufacturing or construction. That said, wages in those fields are rising in order to deal with the supply shortage, and perhaps you'll see a tipping point where people start to take more interest in these roles.
And what about the gig sector. I've heard a lot of talk about there's more freelancers out there, that's what people are looking to do more. Is that still growing into twenty twenty four or is that cut back? You think this year a little cut back.
So unfortunately, official data on gigwork is not very good, and we haven't really been tracking it over over time in a consistent way, so it's kind of a bit of a black box. It's hard to note. We can look at the company's earning statements about how many users they have. Look broadly, we do see a lot of interest among job seekers on zip recruiter in those kinds
of gig roles because of the flexibility they offer. There are many young people who sort of live from hand to mouth and have fun and watch video games and do what they want to do. And if they need cash and need a buy groceries, need to buy dinner, they know, log onto an app and deliver groceries for a couple hours and then buy their own and then go back to doing what they're doing. That it is
quite common to work that way these days. That said, there's some new research showing that once AI tools chatch GVD was launched, generative AI demand for other kinds of freelancers started to fall. So interesting, all right, we'll get a white collar freelancer.
Yeah, you just walked across or walk through any local coffee shop and I'm like, what are these people doing here? You know, they all got to laptops out and they look like they're doing something committing value. I don't know.
Thanks for listening to the Bloomberg Markets Podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio