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Let's get to Dana Diorio, a co chief investment officer at Investment, joining us from Hartford, Connecticut.
Okay, so what do you do?
It's been a crazy twenty four hours within the market.
How do you position?
Yeah, that's that's the big question.
It's so funny because so actually I met our conference in Las Vegas, our Investment Elevate conference, and I was just on stage yesterday literally as the pause was happening telling everyone to stay the course. It was the timing was, you know, madness and kind of showing what had happened on Monday when we had you know, this false report of a reprieve and stop, you know, skyrocket and only
to come back down. And when you're a financial advisor trying to trade on this, it's absolutely impossible, of course, and so you know, the messaging then and now is you know, kind of you've got to stay put I mean, certainly if you have clients who are not diversified and they're super concentrated, or you know, a lot of people let their equity positions get a little bit big in this hopes of a pro growth, pro you know, corporate
corporate uh type of policy from the administration. That's obviously all you know, kind of been obliterated and now we're looking at a picture that's very different. And so you had people who are high in equities, if you're if you're too high inequities, you know, take them off the table for sure. But you know, you really these are the times that you that you need to ultimately stay the course and wait it out, or you turn the paper losses into a real loss.
Conference in Vegas. Nobody is conferences in like Sheboygan. They're always in Vegas or Miami, Scottsdale, Danis.
I mean, they know what they're doing data. So what about earnings here?
I think, you know, I have not seen earning assesstments really come down that much. But I've got companies left and right pulling their guidance and all that kind of stuff. How much earnings how much earnings risk is out there?
Do you think?
Yeah, I mean, your last speaker said it, right. I mean, what's going to be crazy right now is you're going to have the first quarter earnings come out, You're going to have you know, March economic reports come out, and of course all of these are going to paint this incredibly rosy picture that's not reality anymore.
Right.
In fact, they'll.
Probably be rosier even than they normally would have because you have folks, you know, pulling forward consumption, pulling forward demand, and so things will look great and you'll have this series of reports and earn and this earning season is going to be part of that, and so paying attention to that, of course, it gives you no information.
It's really what is the guidance?
And if you're a corporate planner, I'm not sure you can give great guidance, right, I mean the volatility of you know, just what you have to potentially plan for in the short run. And then you know, if you're you know, the idea. Some of the idea here, of course, is hey, look let's bring you know, some of the manufacturing back to the States. Let's let's you know, kind of encourage people to have capex here. But how do
you do a long term plan. I mean, it takes years, right to bring this stuff here?
Yeah, how do you?
How do you plan around that? So I think Guidance is going to be probably overly I'll almost say might likely be overly pessimistic, because nobody really knows what they're dealing with.
Which to that point, Delta yesterday with Drew Guidance, stock pop Today CarMax does something similar, I mean, and pulled back its financial goals because of the volatility. But same thing, and that stacks down twenty percent. So where are we in valuations?
Yeah, well, I mean, obviously we started the year very high. We've shaved a good piece of that, you know, but that was part of the problem, right. We came into the air with that expectation of a goal market with high valuations as a start, not not everywhere, but certainly as an index, right, market cap weighted basis, valuations were high, and so you know, when you come in with high valuations,
really everything has to go well. And if you have this exogenous shock, you know, and everybody knew tariffs are coming, it's not as though you know, this was entirely unexpected, and that's why you have that pull forward of consumption but the magnitude, right, the breadth of it, how quickly it all was was intended to come to pass, that did catch everybody off card and you know, kind of wiped out that picture that rationalized those higher valuations that we were sitting with.
Dana, Thank you so much for joining us. Always appreciate getting a few minutes of your time.
Dany de Aoria.
She is co chief investment officer at invest Net, joining us from Hartford, Connecticut.
Via that zoom thing here Vegas, remember, oh Vegas, that's right?
Time? Is Ava for you?
Exactly? Oh a Vegas. There we go.
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Michael McKee, Bloomberg International Economics and Policy Correspondent, joins us. Now, So, Mike, it was interesting with the CPI. Bloomberg Economics had a note out that said this wasn't about falling prices necessarily, but it was more about falling demand in travel, leisure and apparel and furniture sales and stuff like that.
Walk me through the details.
Well, the biggest drop was in gasoline prices, which is sort of a combination of anticipated falling demand by the gasoline producers and refiners, etc.
Given the impending tariffs.
And then we also saw some declines as you mentioned, in travel prices, and that was definitely terriff related, But the rest of it was sort of mixed news. Food prices were up by food at home, grocery store prices were up by half a percent of fairly large gain than two months in a row where food prices are up, and we saw apparel prices rise, but is that just a natural move or was that also an anticipation of tariffs. Furniture prices we get Furnit love furniture from China, those were also up.
So the.
Report is kind of a mixed news thing, except that the overall good news as it went down. And if you were not going to have tariffs, if none of this had happened, it would be exactly what the Fed would love to see.
Right, So, when do we expect to see any inflation impact in these CPI numbers and the other the pc deflator. When do we expect if there's going to be any inflation impact. When do we expect to see that.
It's a little hard to say.
Probably probably maybe could be hedged enough here next month, this month's data when it comes out next month, because it could reflect tariffs that the President has already put on, But it's probably going to take a couple of months.
Maybe we get something in the May numbers.
First of all, companies have to figure out whether their products are tarra affed or not.
That seems to be bouncing around.
And then it's a question of how many how much stuff people have an inventory they can sell that they bought at the lower prices, how soon inventory actually docks at a port, and is the tariffs are applied. So it's kind of hard to say exactly when we're going to see this, but it would be coming. And given the fact that we still have ten percent tariffs on everybody and now these huge shafts in China, you will see it.
When is the biggest what are you looking at next in terms of the biggest indicator? Is it going to be inflation expectations? Like is that going to be the thing that's going to sort of give us that kind of insight?
Yeah, because that's tomorrow.
So I'm pitching ahead to all the appearances I will do with you guys tomorrow.
Well, John Ticker's in charge tomorrow, sol you on the show, but University of Michigan tomorrow.
The FED has sort of downplayed the long term inflation expectations number is suggesting that it doesn't quite reflect reality in the history of the Michigan numbers. But they do worry about the short term and that has gone up significantly, and they have said, and Jay Pole said that we are obligated to keep prices down and we are very worried about the short term inflation expectations should they become unanchored. So that'll be somewhat big news tomorrow.
But I think.
We're redefining what big news in economic data brings here because everybody's once we get to the point that you asked about, when does this hit. Once we get to that point, then markets are going to react to every little data bit. But anything that is up to this point, people are gonna say old news PPI tomorrow.
How do we interpet PPI versus well, PBI is.
The easy difference to know is that CPI is what you pay to buy things and PPI is what companies charge to sell things. And we may see some of the China impact in the PPI because we saw those big inventory builds in terms of industrial supplies and things like that in the past couple of months.
And so if you were a Chinese company.
Or from anywhere else in the world selling to the United States and there was this rapid rise in demand, you might raise prices.
So we could look for some of that tomorrow.
But so far producer prices have been much better behaved than consumer prices. So overall, it hopefully is a continuation of the good news that no longer matters.
Can you clear something up for me? This is the stupid question for me from the peanut gallery. A guy picking up stuff at the port. That's the person who's going to pay for the town. It's not the exporter often whatever it's trying to the exporter. This is a guy in Newport Elizabeth, Ork, New Jersey.
This is the silly thing that the administration keeps pushing that what they're talking about is that not that the exporter is going to pay anything, but that currencies, the dollars should rise and that makes their currency cheaper, and so they you know, there's an impact on them in that case. And sure, but it's the person, it's the company that is bought the stuff.
So this is the whole story for me.
Yesterday there was like a back channel one thing that he wanted to buy some guy at blooms Oh yeah yeah, go back and listen.
Yeah yeah, it don't even go into the whole different thing.
Mike.
Thanks a lot, Mike.
M keep moving to National Economics and Policy corresponding.
Joining us now, you're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us I've on YouTube.
All right, we're debating in the last hour, like if John Tucker is Versace and Michael McKee is Prada, now they're going to be uniting. So it's like Mike Tucker Prada Versaci thing, all right, track and Boomberg Intelligence luxury goods analyst joined us.
Now.
It's funny because neither of them are those things. So Prada is going to buy Versus a chip for about one point three eight billion dollars. Walk us through the intricacies of this deal.
Hi.
Yeah, So it's been talked about for quite a while and we already last night heard maybe that the acquisition price would be done by a couple of hundred million. The big thing here has been that under Capri, Fasachi is not hard enough investment in it over the last year, particularly in the field of the Tapestry bid for Capri which didn't go ahead and which took a lot of the headlines last year and where all brand under the
Capri banner suffered. We've had chairman John Idel come back into the business as CEO for Capri, and with the focus really on Michael Corese, which is seventy percent of the sales and after a difficult year last year one hundred percent of the profitability of the company leading into
this this year. So it's all about turning around Michael cause which has seventy percent of its business in Americas, is at accessible price point and where actually we think that they'll be much more pressure given the tariff situation and the cost of living on all consumers. And also in the US if we turn over to the Versace acquisition and what's going on there with Prada. Prada has been one of the top performing companies. It's really done ever so well with Proud of the last few years
and gone to normalized single digit growth. And then it has a brand Meo Meu within its portfolio doing ever so well. It's number one on the list index for luxury brands in terms of brand equity brand heat, with Praderate number three, and during the December quarter Versaci dropped three places to number fourteen. So we think it shifts Forsaci into the right hands into Italian luxury owners who can really work well to try to reinvigorate this brand and the brand equity behind Fasaci.
Hey, dab, I'm really interested in evaluation here, being a former banker myself. They're selling this thing for one point three eight billion US dollars in twenty eighteen, they paid two billion dollars for this, so a lot of value destruction. Is that a Versace specific issue or does that reflect lower valuations in luxury Generally.
I would say it's both, but it's mostly Versaci specific because if we look at the Asarchi then to now the fact that it's given double digit declines in organic sales growth through the couple of years, where actually the market was growing five percent or so, and that one point seven, to put it into perspective on an EV, would have been against traditionally a market for a very solid brand for Sarti with a lot of heritage, running from anywhere from three to five times, probably three times
for Versargi, given it isn't particularly big. Under the what was Michael Cause and then became the Capri Group. The expectation was that they would run it from one billion in sales toward two billion, and that just didn't happen. Yeah, So that's partly why. I think also because of the state of the market. We started twenty twenty five with the luxury market focusing for low to mid single digit growth. With everything that's going on, we pull that back towards neutral.
Hey, deb, thanks for joining us. Aways appreciate getting your thoughts there. Deb eight the lead voice on all things luxury. She gets luxury goods analysts for Bloomberg Intelligence. She's based in London.
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All right, here's my Janice story.
The first time I ever went to a Starbucks, like twenty years ago, was waiting to go into a meeting of Janis out in Denver, Colorado. I'm not a coffee guy, so I had no idea what to order, So I just ordered what the person in front of me ordered. There you go, that's my Janis story. Lara Castleton joins us US head of Portfolio Construction and Strategy Janis Henderson, based in Denver.
Laura, you sit.
Back and you think about portfolio.
Construction and strategy.
How do you do that with this volatility that we're dealing with this year?
Well, thank you for having me.
There's a couple more Starbucks that have popped up over she said, sure, you were here. Yeah, there's a little bit of volatility going on the market, making our conversations a lot more in demand. You should say very clearly, planning long term is what we need to be focused on for our clients. Near term volatility is very extremely difficult.
Heading into the tariff announcement a couple of weeks ago, we were talking to clients about really staying the course, not panicking, but being more diversified than what we had maybe been in the past.
What does diversified mean?
And I know that's a stupid question, but I say that, and you.
Know the thirty year.
If I on the thirty year for diversification, I just got burned.
Correct.
So on diversification, what we're talking about in our client consultations, it's diversification of that typical sixty forty portfolio, absolutely, but then it's also diversification within the sixty and within the forty and when we actually survey, so we work with We've worked with over twenty five thousand model portfolios over sixty five hundred clients globally, and recently came out with a piece just kind of isolating the average moderate portfolio
that we come across. One of the biggest topics of conversation we're talking about right now today is actually the diversification within the US equity allocation because that concentrations reached north of eighty percent of investor portfolios. So it's not just across assets, but it's also within Hey.
Laura, how about international markets? You know in the first quarter, the rest of the world's markets really outperformed the US. The S and P five hundred and that doesn't happen very often. Is that kind of a short term blip or is that something that we need to, you know, think about longer term.
That's a very good question.
It was very interesting to me to actually get some incoming calls from clients asking about international because to your point, that has never happened before. I do believe with the tariff policy that's come in, Obviously we don't know what's going to happen long term, but it is signaling a structural shift in what we're trying to accomplish longer term.
With our budget deficits.
To me, that does warrant potentially diversifying away from only the US dollar. And so while international market have been strong this year, there's a shift in how they're spending abroad, they're stimulating their economies, and that warrants having some diversification only outside of just only that heavy concentration of the US dollar.
What do you expect in terms of this volatility? Like, clearly, diversification is good for all, I mean, the idea is that it should be good for all investing climates.
However, the longer the.
Volatility goes on, the harder it is for investors to.
Stomach that absolutely.
So that's exactly what we're coaching our clients through.
Is very clearly, even.
In the past week, if you wanted to make some pretty big bets on going into certain areas of the market, let's talk even fixed income markets, you could easily get whipsod the next day, the next week. And so when you're talking about diversification, you need to be spread across the yield curve, across sectors within fixed income, across regions, within equities, and you should start to see some bounces from some of these other areas while other ports of your.
Portfolio are kind of dipping.
So we're really talking about staying to it's that long term goal. And luckily a lot of the clients that we work with are managing money for clients I have a long term financial plan. So while they're getting headlines every day about the volatility, for the most part, they're being able to coach their clients that volatility happens, this is not outside of the norm, but on a long term basis that you're still well within your reach of your goals.
Laura, are the folks that Jenna Senderson are you guys? You know is there a base case of recession or maybe we can skirt past it.
So base case is not recession that obviously has been coming up into conversations quite a bit. More so, it's not out of the picture this year. And remember before the tariff announcements, growth was already slowing. There was already that lack of confidence within the economy that could bleed into slower growth leading to a recession this year.
So it's not without the.
Realm of possibilities, but it's not a base case, and it's also not necessarily a doomsday scenario for portfolios. Recessions happen, it doesn't necessarily mean it will be the exact recession we experienced the past two times, which were quite severe, and there are ways to plan around that, namely, be high quality within your names, focus on the fundamentals within your company balance.
Sheets and within fixed income.
Really shore up the quality in your fixed income portfolios as well.
Before we let you go.
Corporate credit spreads have blown out, they're continuing to blow out, particularly in high yield.
Does corporate credit play a role.
Here, Yeah, that was one of our biggest overweights we saw in a lot of client portfolios leading into these events was the heavy allocation to corporate credit, and really one direction spreads could go was wide. We've started to see that, although they've maybe started to trickle back in a little bit, that is still an ongoing risk and easily avoidable in our minds to be diversified across yield curve.
So on the shorter end of the corporate credit spread curve, you do get a little bit more insulation from spreads widening. And then within the securitized area of the market, spreads were already a little bit wider.
We weren't able.
To insulate ourselves from that area by hiding into securitize. But corporate credits are typically that canarying the coal mine, and it's something to watch for that recession indicator going forward.
All Right, Laura, thank you so much for joining us.
Laura Castleton, US head of Portfolio Construction and Strategy. Janie Henderson Investors out there in Denver, Colorado, great offices out there, A great firm actually was when I was on the south side. It was the biggest account in Denver. You had to get the vote from Janie, and I did.
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