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 on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. I mean, today's tape basically unchanged. It kind of feels kind of like where we are overall in these markets here feels range bound, as we've heard from some guests kind of to suggest, and the question is, you know, kind of what moves you out of that range. Maybe our next guest has some thoughts here. Joe Mazzola, he's
over at Schwab. He is the managing director of Trading Education at Charles Schwab.
I mean, Joe, you're at Schwab.
You guys see everybody, You see everything out there because you have so many clients out there. What do you feel like investors are kind of the biggest issue for investors right here.
I think there's probably three things that investors that are really kind of keying on right now, you know, interest rates being number one, you guys just kind of let into that, you know, back around four and a half percent, four point five to five and the tenure. I don't think it's it's the it's the move itself. It's the magnitude and how quickly it moved. I think that's shaken markets up quite a bit. I think the second thing is the political landscape, and you know, there is more
risks around a government shutdown. We you know, I think maybe we sit back and say, wow, you know this this will work itself out, but there's real risk that this could this could carry on for a while and could have some economic impacts. I think the last thing, and probably maybe front and center and investors' minds, is inflation data.
It did seem like it was subdued over the summer.
It seemed like, you know, people were kind of able to kind of get ahead of it and see the end in sight.
But we started to see it kind of tick back up. We get PC data.
On Friday, so it'll give us a little bit more of an indication on where we're at. But that's absolutely front and center for our investor's mind.
Gabagail do little, Abigail do a little looks at the technical analysis and she thinks we could float down below forty two hundred on the S and P five hundred. I guess I would imagine that retail investors look at these yields and find them attractive, especially versus stocks. Right now, how are your clients trading it?
So we look at a couple of things, right we look at the S ANDP earnings yield versus the tenure yield. Then you look at that spread, and we're back at levels that we really haven't seen since prior to the Great Financial Crisis. Meaning look that whole Tina talk that we've had for what fifteen years? I mean, that's out the window. There is an alternative, there's an alternative. And
fixed income, there's an alternative. In money markets. A lot of investors are comfortable just kind of sitting in five percent yield and waiting for the market to work itself out. I agree one hundred percent. And looking at some of these technical levels right now, it does seem like, you know, we've moved into a bit of a lower range. And the reason I say that is because you know, we
broke that forty three to fifty range. I think we have some some room to potentially go maybe down to about forty two to ten, where you might see a bit of a bounce. That's kind of that intersection of where the two hundre day moving average is sitting right around forty two hundred. But we also have a Fibinacci retracem the level from the one year highs right around that level as well.
Two.
But a couple of things that I've been paying attention to, and you know a lot of our traders and investors been talking to us about, is this idea of the market breadth and.
How it's really weakening.
We're just not seeing a bounce, and we're not seeing it across the whole spectrum, if anything. Really, the only sector that's held up well is energy, with about ninety percent of its components in the S and P five hundred up above its fifty day moving average. But when you look at the S and P five hundred as a whole, we're around twenty five percent of the S and P five hundred up above its fifty day moving average. And that's just not it's not at a level that
supports a bounds. Now, what I'd like to see is I'd like to see a little bit more of a washout. I'd like to see us get down maybe around that ten or twelve percent level to see if we get a bounce from there. At that point, maybe you know, some of that polishness kind of fades from the market. You might start to see some you know, that that washout occur where buyers might start step back in.
Hey, Joe, you know when you when you talk to the bloom the shrub customers, what are some of the sectors that they like right here? I mean it was if you just kind of look back at this year to date, if you owned you know, the Magnificent seven, boy, this has been a great year. What are they most bullsh on at this point? Or maybe what are they most concerned about?
Yeah, as rob customers for sure are looking at really two sectors right now, Energy and they've done well in that over.
The last couple of months.
I think, you know, if you look at a sector as a whole over the last month, it's over double digits and then information technology. So it so they continue to be buyers there. They're looking for opportunities on selloffs to kind of step in and buy at those levels. But those are the two right now that they're really looking at the ones that they are really shying away from our real estate utilities.
Those are the ones that they're very pay or shoun right now.
In terms of real estate.
Is it a problem, you know, with these higher rates, with higher mortgages, with refinancings coming to I mean both on the retail and sorry residential and on the commercial side, there are some big question marks there now.
I think you hit a nail on the head.
I think when you're starting to look at a thirty year fixed mortgage up above seven percent, you know, seven point one, seven point one five percent at this point right now, I mean, just look at look at what we've seen in existing homes. I think ninety percent of the US has a mortgage under five percent. What's the impetus to move to a new home. I think they're kind of sitting still, and that's cut down on supply, which you know, to a certain extent, is held housing
prices in check. It hasn't. We haven't really seen a big decrease in housing price. At the same time, it's just not really providing the catalyst for people to move now, until you start to see a real break there. I know there is some pent of demand and supply apply is starting to hit. We've seen that on the new home sales exceeding existing home sales, and we've seen that
spread continue now for basically a year. But until you start to see those mortgage rates kind of take back down, I don't think you're going to see a lot of buying momentum there.
So, Joe, the good folks at SCHWAP, are you, guys, is it your base case that we're going to have a recession and if so, when or what do you think we can skatee past one?
Well, I could tell you what our investors and what our trade is telling us about sixty nine percent of them do believe that a recession is coming.
But they do believe that it'll last.
Less than a year and it might not be as deep as as maybe some are predicting. I think that the belief is that, you know, it'll happen in twenty twenty four, and they're kind of they're constantly looking at this battle between the soft landing a scenario in a recession, and I think they're probably skewing a little bit more towards recession side at this point.
So do people back up into these rates do you buy, uh, you know, treasuries and even maybe go along a little bit duration if you're if you're worried about a recession.
Well, I'm not a fixed income guy, but I can tell you, you know what our traders are.
Telling us, and they have been bearish on but they, let me rephrase that, they've been a little bit more bearish on bonds and then than they were in Q two. So the Q three survey, they pull back some of that excitement towards bonds. But I think that what we're starting to see now is maybe a little bit movement back into that into that sector. And we're starting to see it, of course on the money market side as well too, as people are kind of waiting for a
correction in the market. I think the thing that's frustrating for investors right now is it's kind of a slow grind down, right. I mean, we're not really seeing a big pop in the VIX. You know, we're still below twenty. We haven't really seen a big pop in the move index on the fixed income side, which is showing that you know, investors and traders not they're not comfortable at this level.
But at the same time they're not panicking either. That's why I talk about that wash out.
Until we see that wash out, I think we just can continue to see this grind down within this lower range.
Hey, Joe, thanks so much for joining us. Really appreciate it. Joe Mazzola. He's a managing director and trading education at Charles Schwab.
You're listening to the team Ken's are 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.
Jackie Bowie joins us.
She's a managing partner and head of e m EA at Chatham Financial. Jackie, you know investors here and folks here in the States, we kind of feel like our economy's okay. You know, inflation with like inflation to come down a little bit more. Higher rates are hurting, like if you want to go out and buy a house. But generally things are okay.
Here.
People feel like I think generally things are kind of in a right direction, but Europe not so much. Talk to us about kind of the the economic backdrop that European investors and investors that invest in em mea over in Europe and emerging markets, what are they dealing with?
Well, I guess the trends are very similar around you know, higher inflation, higher interest rates, and a concern that those interest rates are starting to impact the real economy. I think the differences in Europe and in the UK is that getting inflation under control has not been quite as successful, you could say, as the Fed have managed to do.
And there's also a huge divergence within the economies. So we think about the EU as a you know, one geographic zone, but in fact, if you look at the economic performance of Germany for example, in recession, very industrial economy not doing well, versus like Spain and Ireland who are showing decent growth. So it's hard to make a uniform statement across the board, and certainly a lot of divergence between the individual country performance.
How difficult are higher commodity prices? You know, last year we were really worried about Germany and continental Europe as gas prices rose up. They managed to avoid taking a huge hit from that by storing enough.
But is it still a concern?
Definitely, and I think it's a real concern right down to the consumer level in terms of perception, because as soon as the headlines start to come through, you particularly about the oil price, everyone realizes how much that really impacts what they payple for energy and also the cost of fuel at the pump here in Europe in the UK, which is much higher than it is in the US.
So I think there's a bit of a concern that if consumers start to see that, they will then start to renin spending as they prepare for perhaps another win to significantly higher energy costs in Germany.
I mean, I guess there's such an I guess the importance of China as a trading partner, and the China reopening has been disappointing relative to I guess maybe the beginning of the year expectation. How is Germany and its economy dealing.
With that, well, if you look at the headline numbers of the GDP levels, you could say not very well. So as you imply, Germany is obviously a big expert economy and pretty much reliant on a lot of those overseas markets. China is being just one of them, you know. And if we think what happened through the pandemic where we had supply chain issues, which was then impacting growth,
and now we have it on the demand side. So we've gone through a full cycle with none of the upside of the upcycle because you've had a bit of a double whammy on either side of that. I mean, there are other things that are specific to the German economy, a whole other topics around the green agenda and the cost for businesses to try and comply with what Germany are trying to do around sort of green and sustainable policies, which is definitely impacting the economy as well.
Is that not Is the green transition not going to be a driver of growth down the road? I mean, I look at expectations for the German economy and their law. Obviously we're looking for a contraction this year and only zero point six percent GP growth next year. But is the green transition going to be a driver there? Or is Germany going to be penalized by its reliance on the internal combustion engine industry.
Yeah. I think if we were to look ten years ahead and then look retrospectively, you might be able to say that the transition to green overall created jobs, created growth. I think the pain comes in the transition period. If you look at the number of people who are still employed in industries around fossil fuels, around the automotive industry as in you know, few powered cars, not electric cars.
It's huge and you don't just get an automatic replacement of them, you get a displacement which impacts the economy before call it the new green economy starts to take off. And I think there are more concerns that the short term pain of pushing towards sustainable policies. The same in the UK, and you know, our prime ministers now starting to rein that in a little because they realizes that the transition period will be painful.
By the way, how's Brexit been twenty sixteen?
Right?
Was that twenty sixteen?
So seven years on are you are you just reveling in the benefits of independence? I mean, has it been just an amazing weight lifted from your shoulders, the freedom of doing it on your own, all.
The incredible trade deals that you've made. I mean, what courage, What courage that took.
Yeah.
So I think the idea of Brexit was had lots of very positive components. The challenge for the UK government was in the execution plan and circling through for prime ministers in that time to try and execute the plan in the middle of a global pandemic meant that getting those big trade deals done was definitely more of a challenge.
And of course you're partying right, they shouldn't have partied so much.
Got to let their hair down. And I think the issue now, you know, just coming into the political cycle. I know it's the same in the US as we come into twenty twenty four that we're starting to see, you know, really big shifts in the sort of left to right movement or wherever way you want to look
at it, in the direction of travel. Where you know, in the UK the leading party in the polls is making very clear signs about a much closer relationship with the EU Again, so just as businesses have got used to the new operating environment, you start to sort of inject more of that uncertainty back in. So we'll see how the politics shape up next year.
Jackie, thanks so much for joining us. I really appreciate it getting your views. Jackie Bowie, Managing Partner and head of E M e A at Chatham Financial based in London.
You're 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 the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
Former colleague device Callie Cox back in the studio, US investment analyst with E.
Touro, So, Kelly, what do.
You make of this market? I mean there's people lass, you know, four or five weeks, people have gotten very nervous here about this whole interest rate environment and what it may mean a how to risk assets perform in a higher for longer environment. But does that really bring back onto the table recession? How do you guys think about that right here?
Yeah, well, we see people building a wall of worry and we think that's a good thing. And I'm not trying to be overally optimistic here, but if you think about this list of worries that we're going through, student loan payments restarting, if you think about you know, higher oil, higher yield's, potential government shut down, there's a reason why people are nervous. But put them all together, and I can only count a few of those as actual systemic
risks to the economy. So that's what we're telling customers. Keep an eye on oil, keep an eye on yields, even though yields are telling us a good thing. Still pressure on the economy and markets, but everything else might just be a distraction.
All right, So I'm sorry, but you sound still pretty constructive on these markets here.
We're I hate this phrase, but cautiously optimistic. We're constructive, but we're also asking people to really tread carefully and pick up quality risk, don't go all out here. I mean, we are in a bull market until proven otherwise, until we see that recession or that crisis. Right now, there are a few signs of that, but at the same time, we don't know what cracks could be forming underneath the surface.
So how worried are you about the government shut down which is very likely to come this weekend? The strikes, the UAW strikes being prong I mean, is this a factor in your analysis?
Yeah, So we think about the strikes and the shutdown a bit differently. Even though the strike the shutdown is kind of like a like a four strike from government employees, right, So the UAW strike, of course, is front and center of our minds, especially because we have a lot of investors who own auto stocks, and this is a big deal for the auto industry. I mean, luckily, we're talking about US production here, and US production is just a
small share of global car production. I mean, US consumers use a lot of cars, but they don't exactly produce a lot of them, so we think global production could fill the gap there. But at the same time, I mean, this is another worry to lop on top of an economy that's under a lot of pressure. Government shutdown again. I mean, if you look historically, they haven't made much of a dent in either the economy or markets. It's
usually just a distraction. But going back to systemic risk, I mean, we don't know what's happening underneath the surface, and you know, we're encouraging people to not freak out too much, but understand that this is just another you know, piece of pressure. Sure that you know investors have to think about.
Well, why don't I just sit my two year treasury at five point one percent? That's pretty good.
I mean a lot of people are doing that.
I mean, is that something you guys I mean, is that something you guys are seeing from your clients or hearing from your clients, and what are you telling them about that?
Oh?
Yeah, we hear it all the time. We did a webinar with clients yesterday and that was one of the first questions that came up. And it's a very fair question. I mean, that's the five percent is the most you've been able to get on money in thirty years. So we frame it like this. I mean, timeframes matter a lot when it comes to considering whether to go into cash or go into equities, or basically when you're determining how much risk you're taking on here, because cash at
five percent is great for short term goals. But remember that yields are probably not going to go much higher from here. The economy is probably going to slow down from this five percent annualized pace. People think we're growing out in the third quarter. And if that's the case, if the Fed starts cutting rates into next year, you know, that's the rate that you're getting paid on your cash and you know, on your bonds, unless you, of course
hold them to maturity. So you know, we have a lot of longer term investors on the platform well.
If you get five percent, you know on a twenty year you're getting that for the next two decades plus the appreciation. If yields go down, your capital is then worth more.
Yeah.
Yeah, and it's tempting, but you also have to remember the S and P has a seven percent average annual return and that compounds as well over the years. So, you know, with younger investors, with a lot of millennials and Gen zs on the platform, we tell them to think about the fact that they have time on their side, so cash is good, but you know, you really have to think in the gray area as.
When who is a typically TURO client customer.
So we we skew towards the you know, older millennials and the Gen x's, but we do have a younger investor base when compared to other traditionals.
And did they invest differently, did they think differently or do they just or is it just simply hey, you guys are young. You need to think longer term, and over the long term stocks outperform most other asset classes.
Is that kind of the base message, Well.
They're a little more complicated than that. A lot of our customers are those long term investors, but they have that active account on the side. They're interested in crypto, they're interested in investing with a community.
Because we never talk about crypto anymore. It seems like it was almost every day, and I used to quote it all the time.
Is but now we don't talk about it.
Why bother it's just twenty six thousand without looking let me see, I I haven't looked today, but you're probably pretty close. And I mean twenty six I think it's more interesting to talk about investing with the community.
So what exactly does that mean?
Somebody has a model portfolio, you might like it, and you can then clone that portfolio like like tracking an index.
Yes, so we offer that for crypto, Matt. We call that are not our smart portfolios. But you know, being able to follow somebody and being able to invest if you like the crypto, their crypto that they're investing in. I mean, that's what we're trying to promote here. We're trying to promote the transition of ideas. You know, the ability to talk about what you're investing in and the ability to see what other people are investing in as a track record type thing. You know, these are my
returns this is what I have in my portfolio. You know, if you see yourself as a similar investor, then you know.
Maybe is it only for crypto? I mean, can I not?
Like if Paul goes on there, can he put you know, his munis and all of that sort of baby boomer stuff on there, and I can say I want a boomer account, so I just clone his account and do the same thing.
Not in the US yet, but we're hopefully working toward that, and Paul, if we get there, I would love to create a baby boomer portfolio just for you.
There we go.
See he's the tail end, he's the last, he's the last month of baby boomers.
Literally, he's set.
For sixty three, John Tucker, he's more firmly asconced.
Within the you're closer, would you reach over and just smash?
All right?
So if I can do that, Kelly, what's kind of the big issues that are coming up from your clients you had the webinar?
What are they worried about?
What are they excited about? Your your clients?
Yeah, well they're worried about a recession. But the funny thing is they feel really good about their financial situation right now. They say I don't have a reason to really change up my portfolio, but I'm frozen, you know, I'm not quite sure what to do here, especially because things just don't feel good around me. So we're encouraging them to again focus on their whys, understand what they're
different accounts are for. You know, if they want to be active, there are plenty of opportunities in this environment. You just have to be careful. And on the long term side. I mean, we're you know, we're quite optimistic on the US economy over ten twenty years. Everybody is, but you know, when you look over the next year, you might have some chances to, you know, jump back into a strong room.
Our ETFs.
I mean, you guys even recommend mutual funds or talk about mutual funds or it's just ETFs now.
So we have ETFs on our platform, and we're actually noticing that ETFs as a share of volume is growing. Investors are looking toward diversifying their portfolios or looking toward broader market and sector trends. So that's a trend that we're watching closely. I feel like everybody is, but it's something that the average investor is picking up on.
I can't even imagine like the future of the mutual fund business.
I mean, if you.
Nless it's in a retirement account, why wouldn't you just I don't really well.
But we haven't seen the continuation, not at last year's pace of conversions to ETF right, which I don't know why that slowed down.
In fact, that's a real conversion.
Of a mutual fund into an ETF.
Yeah, last year that was huge, right, and the beginning of this year as well, it's kind of slowed down a bit. But I can't imagine why you would want a mutual fund rather than an ETF, other than you know, you're not allowed to have ETFs in certain investment cases.
So you have to use mutual funds for that.
Yeah, that's the only case I can think of too. I mean, as an investor myself, it's I have no reason to use mutual funds.
All right, Matt.
Yesterday was the beginning in basketball preseason practice. So my question to Cali, being a proud alum of that trade school in Chapel Hill, North knowing it, I knew it.
She's a tar heel.
How is basketball season when you're talking to a Duke fan?
Yes, So what's the outlook for Chapel Hill this year?
Oh man, We've had a lot of turnover on our roster. We have bay Cod, he's a big guy. He's really good. But quite honestly, I mean the turnover we've seen it. I think it's going to be really hard to tell what's.
Just historically in these conversations though, Kalie, don't you say, like, I guess what Jordan didn't play at Duke?
Right?
I mean, that's the thing we can hang over your head, right.
Well, we always say the only person that can guard or keep Michael Jordan down is Dean Smith, the coach. He's the only one that could keep Jordan from doing amazing things, Dean Smith by limiting, you know, the type of playing that.
He could do.
But Jordan did amazing things. He's the greatest of all.
Time, of all time, and then he got that in the pros. But anyway, so I'm a you know, it'll be interesting because what's the feeling about your coach Hubert?
Oh?
I love Hubert now part of the family.
Now, but does that still hold within the alumni base? And this is he still really well supported?
I think so he's on thinner ice than he was you know, of course last year. And he's done a really good job recruiting. But it's putting different pieces together on a team that's not used to playing like the three ball. Basically. Yeah, we're very big into getting into the middle and you know, grinding in right below the basket.
All right.
Then chop Hill also has a good football team this year.
We do.
I would love to talk about football here. Yes, apparently Duke is good, very good now a lot.
It doesn't happen almost any time. You know, they beat Clemson this year at Duke. The last time they beat Clemson was when I was a first year business school student in nineteen eighty nine, beat Clemson. I was at that game.
It was pouring rain.
I was the only one for my study section because we had a big exam on that Monday. Everybody else was doing a smart thing and studying for the exam. I was out in the pouring rain watching Duke beat Clemson. John So that's kind of how.
I put you through.
It was a long road to dig out of that hole I started myself in, but you know it was worth it.
Yeah, exactly, I passed. It's all good.
The historic moment it is, so it's all good. Kelly Cox, thanks so much for joining us. Kelli Cox, us investment analyst for e Toro and a proud graduate of the University of North Carolina.
You're listening to the Team Canser Live Programloomberg Markets weekdays at ten am Eastering on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcast.
Bank Great dot Com. Thirty year US fixed rate mortgage seven point seven eight percent. I'm not going to complain about my six percent mortgage anymore. And you've got the three something.
Yeah, well three and a quarter.
Yeah, there you go.
So I mean, how can I know if you look back like a gajillion years, that's pretty much in line with the average. But still that that hurts. But let's talk to somebody who does this stuff every day. Odetta Kushi, Deputy Chief Economists at First American. Adetta, what's your thirty thousand foot view of this residential real estate market? I mean, nobody wants to get out of their house. Nobody wants to sell. If I want to buy, I got to pay this huge mortgage. It's kind of tough out there, isn't it.
It is very tough out there, a lot of headwinds in the housing market, but it's resulted in some really interesting dynamics. The first of which is that we're seeing a reacceleration in house price growth. You know, you've got demands still surpassing supply and that's putting that's econ one to one right for house price growth, and so we saw the SMP case Shiller reaccelerate. We've seen it up on a year over year basis after declining for three
months in a row. And that's pretty broad based across most markets, of course, with some regional differences. And the other dynamic here is because there are so few existing homes on the market because of that rate lock and effect that you alluded to. You know, people are going to the new home market because builders are offering incentives, they're buying down rates, and so the new home market has actually fared better than the existing home market this year.
So what does that mean for affordability? I mean, prices are up, you know, rates are up. Is this a market that is just you know, deadly for first time buyers.
It's really tough out there for first time buyers. As you mentioned, you know, affordability is a function of home prices, interest rates, and incomes, and home prices are up again, interest rates are moving higher, incomes are increasing, but it's not enough to offset the impact of higher rates and prices. So it's tough out there as a first time home buyer.
But we are seeing them look to the new home market because again with rates at seven percent, builders are buying down rates to six percent, sometimes even five percent, and oftentimes also cutting prices on homes, and so the new home market is actually more affordable than the existing home market, which is not traditionally the case.
How are builders able to do that? I've been hearing this too, and I find it fascinating. And how long will they be able to hold to keep that up?
I think it'll be tough.
I mean, we saw the new home sales number come down in August, rates at seven percent, over seven percent, really biting into affordability and cutting down demand. And builders have had the margins to be able to buy down the rates. But the higher that moreage rates go, the more difficult that.
That will be.
Oh, I'll just you know again on that bank rate thirty or mortgage seven point seven percent. That's the highest sense two thousand, just extraordinary. So I guess the question is, is there a rate out there that you think is a clearing rate for lack of a better word, where it might kind of loosen things up in buyers will be willing to take that mortgage sellers, we'll bring.
About the great reset a lot, as a lot of people have called it the expected event.
Well, you know, more than ninety percent of existing homeowners are locked into rates below six percent, So I think, certainly if we could start approaching six percent, we'll start to see a lot of activity. There's a lot of buyers on the sidelines. There's a whole generation of millennials that that are out there looking for that first home and you know, on the sidelines waiting for that mortgage
math to work for them. So I think if we can start to get rates heading lower, you know, approaching that six percent, certainly that that would bring some folks off the sidelines.
What about adjustable rate mortgage is how popular had they become?
We start to see adjustable rate mortgages, you know, the use of those increase as rates increase, So we've seen them come up a little bit over the last year as mortgage rates have increased, but there's still a smaller share of the market.
If I want to go get a mortgage, can I even get one here? And how is the mortgage origination market?
Mortgage standards have been tight, right, so not even just this year, but generally speaking, and certainly compared to you know, the early in mid two thousands, lending standards have been significantly tighter, and so it's probably tough route there to get a mortgage, certainly tougher to get a jumbo mortgage if that's what you're in the market for. And so that's that's sort of another headwind to the housing market.
What's the regional factor here? I mean, it just seems like we just heard so many stories during the pandemic of everybody you know, owing to the Sun Belt going to Texas, Florida, Tennessee for crying out loud. I mean, is it I don't even know where there's where they're putting those people. But are those markets appreciably stronger? Are we seeing more activity there than maybe other parts of the country.
That's right.
In the latest SMPK shild report, the markets that experienced the strongest growth were in the rest belt, and then you also had New York. So it was really the Midwest the Northeast that are outperforming, and then the West Coast traditionally more expensive markets that really have experienced the strongest price declines. So you know, you've got your San Jose, San Francisco, you know, have had a tougher go in a rising mortgage rate environment.
So I imagine you know, workers there are still in strong demand.
Construction workers.
Are builders able to get everything they need, land, permits, labor.
It's still tough.
The supply chain headwinds, the supply side headwinds for builders. You know, some have eased, some of the material supply side challenges have eased, but there is still a chronic shortage of a skilled construction workers. And so you know, the construction industry is still contending with some of these headwinds.
So do you guys at your shop, do you have a view on mortgage rates kind of where you think they're going to be six months from now, twelve months from now.
Mortgage rates are notoriously difficult to forecast because they're tied to you know, the ten year treasury, which can be influenced by everything from you know, geopolitical tensions to your recession, to of course inflation. But I will say that the Fed has maintained its hawkish stance. They've made it very clear that they intend to stay keep rates higher for longer,
and that means continued upward pressure on mortgage rates. I'm certainly not seeing mortgage rates, you know, getting back to I think one of you said you have a three percent mortgage, and I'm not seeing that happen anytime soon.
Thank goodness, that was me.
So if you have I guess slower household formation because affordability is off the charts, does that also mean consumers are spending less money, you know at I don't know where people go these days, you know, restoration, hardware, create and barrel, you know, furnishing places, putting things together.
I mean there is a multiplier effect on the economy, certainly from from from demand sort of subsiding for housing, you know, and of course if construction slows further, that will have a multiplier effect on you know, durable goods, housing services. So certainly reduced demand for housing due to the affordability environment can impact demand for furnishings and all of those.
All right, Odedda.
Thanks so much for joining us at Debtakushy, Deputy Chief Economists for First American.
You're listening to the tape cans are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven.
Thirty glco go the global commodity prices. That's the function for that. I look at the medals here you're to date. Pretty much everything is down on a year to date basis. A couple exceptions, most notable being gold that's up three percent. Let's see what's happening in the world of metals right now. We talk commodities, we talk crypto. We talked to Everett Millen. He's a chief markets analyst at Gainesville Coins. So, Everett,
what is happening with gold here? What's the cause? Seems to be bucking the trend where I've got aluminum down, copper down, gold down on a silver down on your today basis, but I've got gold higher.
Yeah, thanks for having me on I think it's really interesting that gold has been fairly resilient, hanging out around that nineteen hundred mar even with so many headwinds working against it. You have the dollar climbing to its highest and six months rates being higher. Real rates being higher is usually negative for gold. And we've also just come out of the summer months, which are typically they see
poor seasonality for the gold market. And in spite of all that, you're right, gold has held up relatively well. And I think a lot of it has to do with the fact that central banks continue to purchase gold and kind of place a floor beneath the price. And in many cases, sure this is done to stave off currency appreciation, but it's also a sign that central banks are probably hedging against the potential for a policy error or an economic downturn in the near future.
So which central banks had the most gold and who's doing the buying.
So as of now, the Federal Reserve still holds the most gold in the world, but the big buyers we see are mostly in the East, especially as we've seen outflows from gold ETFs in North America and Europe. Typically most of that gold ends up flowing into China and India, and so the People's Bank of China is certainly continuing to buy gold. And what's interesting is there's been this
persistent premium on gold in Shanghai relative to London. Now there is some speculation that that's perhaps due to policies followed by the PBOC, but really what it says to me is it's just a sign of robust demand for gold in China, and that's important because China is always the number one consumer of gold in the world.
By the way, how do you play that arbitrage?
I mean, it's not like you're going to load up a plane full of gold bars in Shanghai and fly them into Heathrow, right, is there any way to play the difference?
Well, that's a great question.
There's there's been some suggestions that perhaps that could be done through Hong Kong, given that it is still under Chinese rule but is somewhat of a separate special financial zone.
I don't think that there's any practical way to play that arbitrage.
But again, outside of the East, sentiment in the pressures and precious metals market it's still rather pessimistic.
So even if there was a way to play that.
I don't think a lot of investors are really tuned into that or paying attention.
To that evert how closely do you watch the dollar?
I always have the Bloomberg Dollar Index on my screen. A lot of people watch just DXY. But right now we're trading at twelve seventy. It's the highest level we've seen in about a year, showing some real strength against our trading partners, but also obviously strength in gold term strength and oil terms, et cetera.
Right, it's always important to watch the dollar.
The fact that it has strengthened so much against its pure currencies around the world shows up in the gold price. Especially this week we've seen gold drifting lower, but when you look outside of the US, in most other currencies, gold is at or near all time highs. So it sort of is just a relative, a relative comparison that the strength of the dollar in the West, it tends to damp in interest in gold, but there's not.
Always a direct line.
So about a year ago we saw the last time that the DXY was at these levels, we saw that both the dollar and gold rallied in tandem. And sometimes when there are safe haven concerns, you can see that kind of paradoxical relationship happening.
And Paul and I were just talking about how boring it's been to quote bitcoin lately. It's just holding it twenty six thousand. But actually when you look at the strength and the dollar, it's pretty interesting that bitcoin's been able to hold this level.
That's right, it has been somewhat ranged down, and I think clearly we're going to have to get some more clarity on the regulatory end. We still have not gotten a bitcoin ETF approval. And to kind of make a comparison to gold, the gold market about a decade or two ago experienced much greater liquidity and much greater demand
once a gold ETF was launched. So I believe a lot of bitcoiners are looking at that experience and hoping if there is a bitcoin ETF, it's going to ease access for kind of lowering that barrier of entry for people to get invested into bitcoin. And it's also important to keep in mind that anyone who has been in the crypto market for a few years, they've experienced these
kind of crypto winters before. So the current poor sentiment regarding cryptos in bitcoin is not necessarily the death warrant that I think some perceive it to be.
So what is the future of this ETF here? I mean, it's kind of it feels like the crypto space Matt and I were just talking about it. It's no longer top of mind or what everybody wants to talk about as much as it was, say, six, nine, twelve months ago, And I'm wondering, is the space just waiting on how this ETF issue will be resolved?
I think so.
And along the same lines, you know, you have this tug of war between the greater trust and legitimacy that would come with an ETF and greater regulation.
But on the other hand, pulling in the opposite direction is the.
Fact that the crypto market has always been characterized by this kind of free wheeling behavior where it thrives without any oversight. And I think one of the important things that, as you point out, that the market seems to be waiting for, is there's an IRS proposal for new tax reporting rules on digital assets, and so far that has not been very well received by.
The crypto industry.
And we already know with the FTX to backle what a complete lack of regulation and oversight looks like. But we're going to have to get some kind of clarity in that realm. Otherwise you will see all of the activity in DeFi and Web three in the crypto space will almost certainly move offshore and leave the US.
All right, So run more quick quick question forty seconds? Silver? What's the call here?
Silver is one of those interesting disappointing things for the precious metal foals. It has not really performed the way that they expected. At the same time, we have to keep in mind that year on year, silver's up about twenty three percent, and I'm looking at a lot of supply concerns. Mexico has seen at silver output drop by nearly twenty percent. They're the world's largest producer, so supply concerns I think give silver some fuel to move higher in the short run.
All right, Everick, thank you so much. We appreciate that as always.
Everett Milman joining US chief markets analysts at Gainesville Coins.
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Well, we here in Bloomberg Radio and TV, the media side of Bloomberg.
We're here every day.
We're required to be here every day.
And there are a lot of people in Bloomberg Radio and TV that did not miss one day during the pandemic, that came in every day to get the shows on the air. But we are clearly the exception, not the rule. It seems like this hybrid work is here to stay. Let's see where the latest findings are. Eileen mulaney joins us. She's a workforce transformation lead at Viato Partners. She joined us via Zoom So Eileen is I guess hybrid work is that the new normal going forward?
That is the new normal, and first, thank you so much for having me. Yes, that is the new normal. I think what we're seeing in a lot of industry sectors, though, is this combination of really hybrid work. There really is a big focus on return to the office. So we definitely are seeing that. I think in the height of
the pandemic, we never thought we'd see returns office. We thought we were folding remote forever, but there has been a big push to get people back to the office, and I think three two or four to one is the most common schedules we're seeing.
I mean, there are a lot of folks. It seems like a lot of industries, a lot of companies. I'm thinking of the financial services industry. I'm thinking that Jamie Diamonds of the world that are pushing still for five days a week, but they again, they feel like the exception rather than the rule here.
I think we're not seeing as much on the five days a week though. I think there is a lot to be said for human interaction collaboration, more than you can do just on zoom. So I do see a lot of focus on that, especially when it's very junior staff, young staff that perhaps have not developed their professional network, and that really is a plus to be in the
office and just see how things get done. Also, some of the challenges with developing relationships with new clients new customers can often be difficult if the relationship is purely video based and not really in person. So I think for me personally, the hybrid is kind of the best
in all worlds. But I do think that there are some CEO some companies in particular that are really trying for that five day week work in the office, But we have seen employee expectations have significantly changed coming out of COVID.
Yeah, I have two twenty seven year olds and a twenty five year old in the workforce, my offspring, and to them coming in five days a week, it's not even something that's in their mindset. And I kind of feel like this this generation, it's just a non starter. Is that kind of how it seems at this point.
I think it certainly feels like that sometimes. I think a lot of them started their career in COVID, so it's all they know. But I think and some of them do have an expectation when they do come into the office kind of what's happening that day? Is there something exciting? Is there you know, a happy hour? Is there a lunch? You know, what's happening? Why should I? Why do I need to be in the office? And I think it's because they haven't seen the benefits of
that kind of collaboration full time. So I think that's the importantsage to get to all of them for sure.
You know, when this whole thing started I was. I just saw no way that this economy could function efficiently with everybody working from home, like I thought, you know, for example, just the business that I'm in Wall Street, I couldn't imagine traders trading as efficiently and as successfully from home as they do in the office, and they've got all this computer screens and all the technical tools. But they did, and the economy did, and the global
economy did just well. I mean, it's just really shocking how it really played out.
I was one of those that thought, oh, this will be in place for about two weeks and we'll get back to normal. I kind of shared the same opinion that it's going to be hard to really shift to being productive efficient and just continue on as if this was a normal and none of us were really prepared for it, and none of us were really trained properly
for it. It's different with the organizations now. They're doing a lot of focus training on helping manage understand how to really manage a workforce that's not in the office, how to kind of look at social cues on video, all different kinds of training that we had never thought of putting our teams through before COVID. So certainly a lot more age and tools to help people, But I agree with you, I don't think we all expected it would be quite so successful without any planning or training.
For sure, I think one of the unintended consequences. But something that people are starting to think about now is is this kind of creating a divide or exacerbating a divide between those people will call them essential workers that have to be in whether it's on a factory floor or at a fast food restaurant, and those that don't and those that actually have the flexibility. How big of a problem is that now and could it evolve into it continues to be a problem.
We certainly saw it as a lot of organizations started to design their future of work programs, And this was during the height of COVID, when, as you said, those essential workers had to be at work by day's a week and everybody else was at home. And it's I think companies still really struggle with what kind of peer equity do we want to develop, what kind of culture do we want to develop for the organization? When there's definitely in a lot of industry sectors, a lot of companies,
very distinct workforces. A part of the same organization, and it's very challenging to come up with policies that are viewed as equitable across the board for everyone when certain roles and even certain locations just have a bit more flexibility than others. So I think that tension is here to stay for.
Sure, and I wonder if that's kind of driving to some extent, some of the strikes that we've seen worker strikes, whether it's a UAW or the actors and writers in Hollywood or the ups drivers. I'm guessing a lot of those folks are saying I need to get some now. I mean, I was an a central worker. I made the big commitment, I took the risk. Now I want something.
You know.
It's hard for me to comment on those I'm not part of any of those unions, but I can say for the organizations that I work with across the board, flexible ability is a critical design feature more than it ever was before. And it's interesting when companies think about flexibility for their workforce, they think about it in two parts.
One employee flexibility, where the employees can work flexibly, and that doesn't always mean I get to work at home, but it could be more creativity around the shifts they have to work or how much time off there is. So I think that whole kind of creative approach, it's not kind of business as usable when we're thinking about
designing policies and approaches. And then on the other hand, there's also a flexibility for the managers to be able to have a little bit more autonomy in the decisions they can make and the arrangements they can approve for their team members.
Right, it's a whole new world. Everybody's adapting.
It seems like Aileen Malany, workforce Transformation lead at Viato Partners, talking about the new workforce is it appears to be for most organizations some form of hybrid, and I guess a lot of folks that are still trying to work that out. But whether it's three two or four to one or something different, hybrid seems to be the new normal.
Thanks for listening to the Bloomberg Markets podcasts. 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 fall Sweeney. I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio