Tech Poised For 5-7% Year-End Rally: Wedbush's Ives

The focus now is on all of the iterations of phase one, how it's going to be rolled out, and people talk about the persisting uncertainty. However, there is some detail that has become more concrete, at least for Dan Ives. He's Banging director for equity research at web Bush Securities, joining us here. Uh. Nice to say in our interactive broker studios, thank you for being here. You're saying that you do think that the trade deal removes a dark

cloud over tech stocks. Can you explain why all that mattered for tech investors was the December fifteen team percent tariff. If that happened, that would have been a gut punch, notch Us for Apple, Semis and really across the whole supply chain could have taken off about two bits of growth once that tariff got removed and no December fifteen, that would have been the issue. Right now green light

for tech stocks. I can tell you from an investor perspective, I think we have five December cent rally in the year and because now despite all the noise, that was remaining risk for names like Apple and Semis to go higher. Alright, so you mentioned Apple that's kind of been held out as the poster child for the way to play or go a long, go short, depending upon your view of how this trade will play out. How do you think Apple is gonna you know behavior, you know, thriving in

the world where maybe trade tensions are a little bit lower. Yeah, I mean that was in our opinion twenty overhang on Apple stock. I think now that's the stock that's going to have a three in front of it either by year in or into early next year. But it speaks to why Cook was such a tactician, a pseudo ambassador between US and China, and why he's broken some spred with Trump because it came down to. For Apple, they bet the farm in China. I think right now they're

in a sort of goldilocks scenario. I don't think they take anything out of China. This was sort of the worry for them. You'll see some US manufacturing like Austin and others right now. For Apple, it's an early Christmas present. I'm trying. I'm just struggling to understand beyond just the December fifteen tariffs being lifted or the prospect of them being removed from the table. Is there anything else that

we know concrete, concretely out of this deal? No, I mean right now in terms of I P protection, any sort of five G specifics that many tax CEOs are focused on. Nothing in terms of those specifics. But that's why, going back to Friday, you know that there was a why noise was that we don't know the specifics of the trade deal from an investor perspective in terms of tech, all focused on if it was going to happen or

if not it didn't. Right now that that's what we'll see a five sambers and rally attach Apple shares right now at about two and eighty dollars per share, up one point eight percent today following one point four percent gain on Friday. Why aren't the gains bigger If what you're saying is the case, It's just like what happened a few months ago. It took time that if you go back before earning stocks to fifteen to twenty and

we're trying to pound on the tables. We came away from China, it was clear iPhone eleven is much better than expected. It took time for that to show up in the stock. I think it's the same thing. That's why I go into next year. This is a stock. I think it starts with three hundred. You can now see three fifty, potentially four hundred into what I believe is a five g supercycle. So I think for Apple right now, it's not gonna happen overnight. But that's why

that's a stock. It continues to be your favorite tech name into next year. You mentioned five gene. That's one of the areas that we hear probably most often when people talk about a bullish call for tech throughout the tech stack. How does how are you suggesting investors play

five g other than the handset I e. Apple? Then there's so there's three ways to play if there's Apple, and then I think on the semi side, you look at qual Calm in terms of my opinion, probably the best way to play five G, as well as Intel in terms of where their position. And then even on cybersecurity, there's gonna be a security piece around five G. That's the name like Ford net ftn T, which plays its

early days today. But I think as we go into the next six twelve months, that's gonna be a bigger focus into what I believe five G transformational technology of the next decade. I remember old enough to remember six months ago when we were talking about suppliers to Apple getting really whipped around on the heels of tariff news. I'm wondering which you expect to do the best with

the removal of the prospects of the December fift tariffs. Yeah, I mean we just came away from China, you know, over the last few weeks in terms of our checks there on the ground, and I from a supplier perspective, it's really playing the chip names, you know. I think names that are going to be most beneficial or qual Calm in telling semis. There's some smaller suppliers that are going to benefit in terms of Apple, but I think here it's really playing the chip plaise for Apple as

well as some of the distributors. Is there any chance at five g's not gonna live up to what's hype. I'd say it's the same view of Lamar Jackson not living up to his hype. I don't. I don't see it possible, just because it's right now. It's more of the most transformational trends and you're seeing whether it's on the handset side and Verizon AT and T and others,

and it's really gonna affect enterprise. So I can tell you in terms of five G, I think it's really gonna be a seminal movement, similar as cloud in terms of how we view tech. Dan, I have thanks so much for joining us. Dan, I was equity analyst web Bush Security, joining us here in Bloomberg and actor brokerst to given us the update on tech. He's bullish. I like his calls into the end of the year, as like his calls on Apple bullish and on five G we're hearing a lot of five GS relates to tech.

The analysis of the UK election continues, the one that led boris Johnson to victory. Also notable though, was the incredible majority and the number of seats at the Conservative Party. One joining us now Marian Harkin, former European Union of Parliament member representing Ireland UH and she joins us by phone. Marian, I want to start there is there a broader takeaway from the UK election given the fact that some of the most liberal neighborhoods that always went for for that

party voted Conservative. Well, I think it's a generalization to say at Lisa, but you know a lot of people disliked Johnson, but they couldn't tolerate Corbon. And if you look at what happened to the collapse of the labor vote in the north of England, in particular the Midlands, what they're called the red walls, I mean that bought just Upston one after another. Labor supporters were saying they just couldn't bring themselves to vote for Corbin. I think

that was one part of that. I think the other part was the simple message get Brexit done, three words. It resonated with people after three years people want to see progress of some kind and I think put those two things together and that really for me gives you the bare bones, if you like, of of what happened in this election. So Marian, now that it appears that the Brexit deal will go through, UM, give us a sense. One of the stumbling big stumbling blocks was Ireland Northern Ireland. Um,

you know the boundaries. Where is zach? How's that going to play out? Do you think? Well? The agreements that was reached between Boris Johnson and our own Prime Minister Ratkar the Withdrawl Agreement and has three main items, citizens rights, the divorce settlement, but the real one was the Irish border and force was agreed. They got rid of what was called the backstop, which was an insurance policy in case there was divergence in standards between the Republic and

Northern Ireland. But what they haven't placed now is a guarantee from the UK that there will be no checks at the border between the Republic of Ireland and Northern Ireland, but there will be some checks in the Irish Sea between goods traveling from the UK to Northern Ireland. So in many ways this is a perfect scenario for Northern Ireland because they have access to the UK market and they have access to the EU market. But because obviously the UK wouldn't have the same access. That's why there

has to be checks in the Irish Sea. And you'll be well aware that the DUP, which is the Democratic Unionist Party, were fiercely opposed to this. Boris Johnson promised them it wouldn't happen, but subsequently he agreed to that. There still remain fiercely opposed. But that's where we are now and if the deal is signed by the thirty one of January, we move on from there. Let's talk

about moving on from there, Marian. You know, given your experience with the European Union as a member of the Parliament, can you give us a sense of their approach and dealing with Boris Johnson, given the fact that not only did he win, but that he has such a big Conservative majority behind him. Well, actually it matures that he has such a big majority because that means he does

not need to be looking over his shoulder. There's a small group in the Tories called the e r G European Reform Group who are all in favor of a heart Brexit, and they are smallish number. They will not bother him the way they is too. Nigel for Age didn't have any MP selected. To be fair, he did stand back in most constituencies are his his party did.

So Boris now is in charge. Basically, he's a man at the helm and that makes a big difference when it comes to negotiating and the sense, I think in many European capitals and the fact that he won the election and wanted well was a positive rather than a negative because it means he's in charge and he can now negotiate and move forward because just like the UK, the truth is many European citizens as well, while many of them had wished at Brexit wouldn't happen, now that

it's going to happen, they want to get on with looking at the trade deal talks and seeing what kind of a future relationship we can manage. So Maryan, one of the items arguments that the Brexiteers made is as in outside of the Union, the UK can make h bilateral deals with the U S and the EU. What is the expectation that of what they can get done with the US Because we're seeing here with the U S and China it's no easy, you know task negotiating with the US. At this point, well, you know, there's

a couple of things here. First of all, Charles Michelle, who is the President of the European Council, he's the former Prime Minister of Belgium, said immediately after the election results that he's looking forward to open negotiations on the trade deal, but he ad about a level playing pitch, and what he means is he's talking about environmental standards, social legislation, workers rights, data rules, etcetera. And that's where

we start from. It's an unusual trade agreement. We're starting from complete regulatory alignment and seeing where we go from there. It's it's always the other way around in any trade deal. So the question then becomes if the UK and when not. It's when the UK negotiates trade deals with other countries and what kind of standard regulatory alignment will be involved. And it's the divergence from those standards that are in the you that's what will cause the problems, if there

are problems. So it's it's hugely complicated and I think what most people want and hopefully Bars Johnson will follow this line as well. It could be some kind of prioritizing sequencing to deal with some of the most important issues first that we can put some sort of framework in place because there are so many issues, I mean fishing rights for example, that is fraught with difficulty, absolutely fraught. So we need to put some sort of framework in

place and work from there. Twelve months is too short, but we have to do the best we can within that period of time. Marian Harkin thanks so much for joining us. Marian is a former member of the European Parliament and of the Irish Parliament as well, giving us her thoughts on the election win by bar Johnson what it means for the Brexit process. We now go on to actually getting this deal done for the folks in

the UK. They will be moving forward on that. We've got a bunch of manufacturing data around the world coming out this morning Europe disappointed in the US manufacturing also slightly underwhelmed, but interestingly services p m I came in a little bit of head of expectations joining us now. Lindsay piigsa chief economist at Siful Financial, joining us on

the phone from Chicago. Lindsay, before we get into sort of the nitty gritty, how important is it to watch the data that we're getting over the next few weeks. Is this so messy and so noisy that it's hard to count, or is this is this significant data? Well, Dad has always done messy and difficult to count. But I do think it takes a very important picture of what we're experiencing here at the US as well as overseas as we head into the end of the year, and it sets the tone for what we can expect

then looking out to the new year. Of all right, so lindsay, it looks like just first like us on trade, we look like we have a phase one deal. Of course, we've seen nothing on paper yet, which is kind of a part of the course, it seems. But assuming that what's been reported is actually in a phase one deal,

does that change or impact your outlook in any way? Well, it's difficult to say, because, like you said, we haven't seen anything put to paper as of yet, and we've obviously seen the evans flow of trade negotiations before, and while a phase one deal has been agreed to in principle, those principles have not yet been signed into text that we won't see that for at least another month, so there still is plenty of time for further disruptions as

further tweaks to negotiations to occur between now and then. There's also a question of enforceability aside from adhering to a specific level of purchases. China did say that it would quote crack down on intellectual property, staff of force, technology transfers, et cetera. Some of the key issues that the Trumble administration has been focused on for the past twelve to eight seen months, but there's few specifics that

have really been hammered out. So there is some skepticism regarding the country's willingness to actually follow through when it comes to these ladder issues, or or really how the US can even enforce such efforts, because we have heard from China many times before saying they would address these issues. So I don't know if I'm necessarily convinced that this

time really will be different. So, given that we do have a trade truce of sorts, but one that keeps a lot of the uncertainty for the C suite, and given the fact that we're getting a bunch of economic data that shows ongoing strength in the US economy, albeit UH an ongoing concern about manufacturing, how are we setting up heading into well? I think that is going to bring a lot of continued uncertainty and volatility. I do think the market right now is looking at the positive.

They're looking at the economy through a glass half full ends. They're focused on train negotiations taking a step in the right direction. But I do think that the market is really disregarding a lot of the red flags that we're still seeing in fundamentals. We're still seeing business investment trend negatives. We're still seeing manufacturing deep into contractionary territory. We're now beginning to see signs of unevenness in part of the consumer,

which has been and we need to. We need the consumer to continue to be the primary support to growth going forward. So even if we do see this phase of one trade deal signed into a certainty within a month's time, there still is a lot of pain that the U. S economy has experience that will take time to unwind going into So given that backdrop, lindsay, do you expect the FED too maybe cut rates once in or prefer to stay on the sidelines, assuming the data

can support that. Well, I think both. I think the FED does prefer to move to the sidelawe and stay there indefinitely, but the FETE has also set the bar relatively high. The FETE has essentially committed the U. S economy to a perpetual two percent growth rate and a return to two percent inflation in the near to medium term. So if the U. S. Economy fails to meet the feds set expectations, I do think the Committee has painted themselves into a corner where they will have to act.

And because the trajectory of the data suggests we will not meet the feds optimistic expectations, I do see the Committee cutting once twice, if not three times next year. Lindsay in in a recent research piece, you seem to agree with Minneapolis Fed President Neil cush Kari that the civilian unemployment rate is basically meaningless. How do you interpret what we're seeing in the labor market in terms of how strong or not strong? Uh? The U. S. Employment

market is? Well, I will say those are his words, um, but I do echo his sentiment that the civilian on his with it rates does a disservice to the average American looking at those numbers, as it doesn't tell the whole story. The civilian unemployment rate fails to capture all of the millions of Americans that have been sidelined, pushed out of the labor market that are no longer actively participating. And what I mean by that is, in order to be included in the unemployment rate, you have to be

actively seeking a job. So if you're not looking, if you're taking a break from from seeking gainful employment, even if you're not employed, you're not technically counted as unemployed. So it really does a poor job of giving us a true sense of the jobless level in the United States, again with those millions Americans sitting on the sideline, not actively participating in the labor market. Hey, Lindsay, just real quickly, do you have a recession US recession in your model

in your forecast? I don't have a technical recession priced into the model. My bigger concern is a longer run, non accelerating economic scenario for the US a otomy falls to a top line GDP rate of less than one percent for an extended period of time. To me, that's the scarier forecast than an outright you're special, Lindsay, thanks so much for joining us. Lindsay Piega, chief economist for Stipo Financial, joining us on the phone from Chicago, getting

her thoughts on the economic outlook. Generally, the economy remains a quite strong slower growth, certainly relative to the prior two years, but most forecasters looking for a two percent ish type of growth in led by the consumer. We are maybe seeing some stabilization in manufacturing business investment, but

still the weaker of the two. The consumer continues to drive the US economy PG and E. That has been a huge question for a lot of BEAT people as they look to the biggest utility in California and wonder what is the future facing bankruptcy, facing a bankruptcy restructuring. Luckily, at Kit Conteledge has been monitoring all of the iterations of this dragged out deal. Kit Contoledge is senior Industrials

and Utilities analyst for Bloomberg Intelligence. Just to sort of give a sense of the latest pg N he shares are sinking today after California rejected their restructuring proposal, Kit, bring us up to speed. Why did California reject this um? I? You know, it's it's such a detailed letter that the governor sent to pg NY that there's there's a lot of reasons. Let's put it that way. It sounds like

the governor wants uh kind of new corporate governance. Uh. He wants uh stronger sounds like much stronger, uh financial structure to the company. Uh. He wants guarantees that if things go wrong, the state can take it over. I think there's a lot of things there that it's hard to say how they would be structured. And so where we go from here. So he's put out a lot of of markers and targets, but exactly how it gets resolved in a way that the company can run in

the future is is very puzzling to me. So, Kate, you've color covered the utility utility industry for many many years. Give us a sense of how long can a utility continue to operate under bankruptcy? Like can they just kind of do this in perpetunity as long as I'm still paying my bill and the other folks in californiare paying their bill. Boy, That's that's a tough one. Uh. I mean, I think clearly, Uh, nobody has an interest in a utility just go and belly up and you know, not running.

Somebody's got to run the operation. And I think when push comes to shove, the governor knows that PG and he knows that, the financial people know that and so on. So, uh, you know, it's not going to go on forever, but I think there's a lot of game playing that can go on here. And the governor wants to establish how tough he is on the utility. The utility does don't want to give away the store so that the shareholders

have have nothing left. And then you have the bond holder position, which would basically wipe out the equity in the utility and they'd take it over. But whether the governor wants out of state hedge funds running the utility is also a question. So you know, it's a question of what's the least bad outcome. Maybe here kit just to sort of paint the picture here, we see p

g N shares down today more than thirtent. Obviously, it's been a terrible year for pg NY and the stems from the wildfires and the liability that potentially will stem from that. So that's the sort of company side of things. There's also the investor side of things, and this has been one of the top bets for distress debt investors. A lot of different players getting involved here. Can you give us a sense of who they are and how

much money is at stake here? Well, the um you know, total enterprise value of the company is of course goes up and down with the stock market every day, but UH in the range of fifty billion dollars something like that. So there are some very big bets by players like Elliott UH for example, and on on the equity side. There's UH Abrams and Pimco is involved on the debt side.

So UH, it's a big position where if you have a strong ability to analyze this situation, you can make a lot of money or potentially lose a lot of money. And we don't know exactly where everybody's position is because obviously you can be long or short or heads along the way. So, Kid, one of the big issues that that I learned about when this story first broke is this whole concept that you know, there's these utilities in California with the wildfires. There's really nothing to protect them.

I mean, so these fires keep coming every year, and these guys are on the hook, and it seems like you know, and and a lot of its just active god kind of stuff. But is there a scenario during this restructuring where maybe from a legal perspective, they get a little bit of protection that if a lightning strikes and or even if one of our equipments puts a spark out there and burns down, that we're not you can't put us out of business. Every single year we

keep coming back to this place. Well, ideally from the utilities viewpoint, they would like an end to this inverse condemnation. That's legal the legal rule where which says basically, if their equipment can be connected in any way with the fire, and it doesn't have to be proved that they did anything wrong quote unquote, but just it was there when the fire started kind of things. So it's easy for the lawyers to prove that they were somehow part of

the problem them. Then everything is is their financial burden. And so obviously in a state the size of California, that can be a very big number very quickly. Um, that's a killer. Uh. It's partly mitigated now by the fact that the state has put out a future rule where beginning middle of next year, UH, twenty one billion dollars some from the utilities, some from the state will be in a fund UH that will go to the utilities.

If there is a big fire, So you know, the state's trying to set up and and I think the market has gotten a little bit comfortable with that setup of there's at least some protection so that they you know, it's not one year everything has wiped out your back in bankruptcy. Has it ever been more exciting to cover utilities? So I'll tell you that, well cover one utility anyway, or or the California utilities. I guess that there's also there was a lot of talk initially about having some

sort of state operated utility. That seems to not be on the table anymore. No one wants to actually take responsibility. I think that you know, the cooler heads might realize that having local governments run a gigantic utility like this, it's not impossible. It's done. Los Angeles has a local utility, Sacramento has a local utility. Whether San Jose would have a local utility in San Francisco, uh, it would. It

would be a huge issue. There are still people who own these wires and power plants that would have to be paid off, and so the complexity gets, you know, to levels of magnitude if if you also have somebody buying the assets while you have a bankruptcy to work out any sense of timing how this we get a conclusion to this um. Everybody wants to see it done by next June because that's when that wildfire fund I was talking about kicks in. So the governor, clearly, I think,

would would like to see that happen. You know, on the one hand, he wants to be tough on these guys and get the right deal from his point of view. On the other hand, uh, he doesn't want it to drag him forever. That would be uh an ugly situation for him politically too, So I think there's some urgency on the part of all parties. Now that doesn't mean that, you know, any one step that somebody takes might not push it out further, and you know it's an unintended consequence.

Thanks so much, Ki. He's a senior industrials and utilities analysts rock and job these days to utilities analysts. Lots of fun out, I mean on every level though, I mean, yes, it's P G and E, but it's also this has been the hotspot because bond yields have been going downs, utilities have been in fire, so much excitement, so kick Conlge Bloomberg Intelligence, thanks so much for joining us here in our Bloomberg Interactive Broker Studios, we looked at Pacific

guests and Electrics. They try to resolve the crisis there. They're in bankruptcy, trying to forge a deal to get out of bankruptcy, but it is now a political process. The governor California Governor Newsom has to sign off on the deal and they're in the midst of negotiations. We will continue to cover that story. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform

you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa abram Woy. It's I'm on Twitter at Lisa A. Bram wits one before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.