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So let's get to the news out of Canada. Prime Minister Justin Trudeau resigning as Liberal Party leader and Prime Minister, suspending the Canadian Parliament until March twenty fourth. Trudeau said in a press conference and speech in Ottawa that parliament needs a reset and needs to calm down. Want to just get the latest with Laura Kane, Ottawa Bureau Chief, joining us. Hey, Laura, what was unexpected? What did you learn from this?
Well, one thing that was unexpected was his reflection on Christian Freeland, his Finance minister, who resigned in mid December and really kicked off this crisis for his leadership. You know, calls had been growing for him to resign leading up to that point, but it was really her issuing that scathing resignation letter that accused him of costly political gimmicks and failing to keep the fiscal powder dry in advance of Trump's presidency that really, you know, led to his
demise as Liberal leader. And so when he was asked to reflect on his side of that story, he said that when he called her in to offer her a different job than finance minister, he hoped that she would take it and believed that she would. He expected that she would stay on in cabinet in that position that he offered her of managing US relations, and he did not anticipate that she would, you resign as Finance minister very publicly and trigger this crisis. And so it was
interesting to hear that. And he also said that he had hoped she'd stay on as his deputy prime minister as well, which was something we didn't necessarily know before. So I did find that surprising. But apart from that,
it did sort of unfold as we expected. And I'll just add that he did confirm that a confidence vote on his government would be held in March, when the parliament resumes March twenty fourth, and so that would mean Canada goes to an election pretty soon after that, potentially with an election day in late April or early May. That is, assuming that the opposition parties keep their word and do as they've told Canadians they would and bring down this government.
All right, Laurn, thank you so much for your reporting. Really appreciate that. Lara Kaine, she is Ottawa Bureau Chief. Justin Trudeau news today that he'll be stepping down as leader of the Liberal Party in Canada.
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Michael Barr of the FED stepped down. I called him William Barr when I wrote the news, My bad, Michael Barr. Michael Barr stepping down on his FED Vice chair for supervision. He's going to hold onto his post in the FED. Just stepping down his FED Vice chair for supervision. He's going to depart on February twenty eighth, unless a successor is confirmed earlier. So guess who's here. Michael McKeith, Bloomberg International Economics Policy.
Correspondents, who does the news for it.
Was like Michael Barr, Wait, no, it's got to be William my bad. Okay, So why is he resigning for this specific post.
You know, this post is relatively new.
It came in after Dodd Frank, and there have really been only well, there's been two people.
Basically who have had the job in the past.
And.
The tradition sort of started in the last administration with the vice chair resigning at the time, and now you've got Michael Barr following through because basically, you get a new administration like this with a big philosophical change, and it's going to be a big philosophical change in regulation. And so Barr in his in his statement said the risk over a dispute over the position would distract the
FED from its mission. So he's decided to resign as Vice chair for Supervision, which has big implications for banks. Keep an eye on bank stocks because basically what this tells you the FED says it won't make any new major bank regulations until a successor is in place, and with bar leaving, that probably means that Basil three, the Bosle three endgame proposal, is on life support at this point,
if it even has a breath left. And so that's major news for financial firms because the Trump administration would be expected to sort of junk that. But the interesting thing is he's not resigning as governor, and there are no openings on the FED at least not until January of twenty twenty six, and so the incoming administration cannot name a new person to the job. They could elevate one of the current governors to the job.
Interesting. So again, I'm just looking at the banks, you know, over the past year. You know, they're all up kind of thirty forty percent, kind of the big banks, JPMorgan, Bank of America. So it feels like, you know, I guess since the election, people said banks are one of the places you have to be, and I guess this is just another example of how things are changing.
Yeah, there's been a feeling that the incoming administration would pull back on the Basil three requirements, the additional capital that the big banks would have to hold, and so this is going to be seen as good news for them, and this is just sort of confirmed the idea that that's probably what's going to happen.
So endgame BOSL three endgame is the endgame.
Yeah, unless this is like the Marvel movie series where the the you know, the The Avengers Endgame was followed by another dozen sequels.
Okay, but to be fair, let's get into it. They wound up killing off the main characters, right like Captain America, iron Man and Black Widow, the new generation that took one after.
It, and now Michael barr it goes with iron Man.
But the position could still exist. He just won't do it. The position a position.
Theory would have to be filled. The only one I can think of on the board right now who might take that job would be Mickey Bowman. She's the essentially the small bank representative on the community bank representative on the FED Board of Governors.
She's been heavily involved.
In the regulatory efforts of the FED and has been a big opponent of a lot of what we've seen in the basle proposals, and so she might be the choice. She is a Republican, and people had thought she might be a candidate for that job or one of the other bank regulation jobs. But at this point, you know, she'd be about the only one I could think of that would take the job because it's less of monetary policy and much more regulation.
So there's also so that's the Bossle three.
Now there's also a broader narrative in the marketplace, Michael, that Trump administration would be depositive for M and A activity just in general, and me from a regulatory perspective that nothing else, an easier, lighter touch from the Federal Trade Commission in the Department of Justice. What are you hearing about that type of narratives? That's something because I'm hearing bankers lawyers putting that out there.
Well, it makes logical sense put it that way, and there is some pent up M and A demand out there. How much there is in the banking sector, I don't know. That's a question for some of the bank analysts that you have on because we saw a lot of consolidation in the past following the financial crisis. But there are always mid sized banks that are looking to get a little bit bigger, and so I would imagine in that space there is going to be some business for those
lawyers and lenders. I'm not sure that we'll see a big well, we won't see a big impact in the megabanks, except as lenders perhaps because they're already at their limit for how many deposit customers they can have.
But it is going to be a new era.
A new era in terms of the Fed speak. We've heard of them last day, three days. Have you taken anything away from it? The notes that I read tend to think like, oh, maybe we want to just roll back on these cuts, maybe we don't want to go to aggressively, we're still really worried about inflation, etc. Is that your take.
Yeah, they're basically reaffirming what Jay Pole said in his news conference that the FED is close enough to pausing that they would consider pausing because the risks are sort of even at this point, and they want to move slowly and make sure that inflation doesn't come back while
making sure that unemployment doesn't rise too much. So they're all kind of setting the stage at this point for a pause in January, and we'll see what the conditions are when we get there, because obviously, if you've slapped tariffs on right away, there might be an immediate market reaction or something like that.
But right now it looks like a.
Pause in January, and then we'll see what happens by the time they get to March.
Pretty busy week here with you look at the economic data calendar, what are you going to be focusing on it. I guess it's kind of Friday with the change in non farm payrolls is a big one.
How are you prioritizing that's going to be the big one.
It's an interesting situation because on Thursday in Washington you have the Jimmy Carter Memorial and that's pushed a lot of stuff into Wednesday, like jobless claims will be out Wednesday, and also it's moved up the calendar for treasury auctions to Tuesday and Wednesday. So at this point it looks like by the time you get to Thursday, there will have been a sort of data and information void for
the markets. So it may have a bigger impact than it usually does, just because traders always have to trade on something, and this will be news in more of a vacuum.
When we take a look at the jobs number real quick, does that mean that if we get a strong jobs number, does that really wipe out the case for cuts? Like is that really going to be the barometer here?
Well, it will have that impact immediately in the markets. Then I think people will take a look at where
we are. As I say, when we get past I mean the next big meeting is January twenty ninth, So when we get to that period, we'll have a little bit better feel for the economy than we do immediately, which is because it's December numbers, but a strong jobs report and Bloomberg Economics thinks we're going to get two hundred and sixty eight thousand jobs and sixty so they're out right on a very long limit and we'll see
how they do with that. But if we got something like that, it would certainly cement a pause for January, and then we'll see what Trump policies do to you know, the march outlook.
Hence the thirty year yield at the highest in November twenty twenty three.
Yep.
Yeah, and you talk to some of the bond analysts and they say, we're kind of there now. You would need something else to push us above the levels we're at for the long end, because it's steepened enough at this point. So if anybody could do that, though.
Yep, it's stop one Trump, right. Michael McKee, thank you so much for joinings. Michael McKee covers all the economics here, force the markets trading kind of at their intra day high, Seria, the S and P five hundreds, up one point two percent, the nastacs up one point eight percent. Here the vis it's below sixteen. I'll call that after Tom Keen. And again we were just talking about the treasure market. Ten year treasure is up another couple basis points here four
point sixty one percent. And why is your WTI crude oil over seventy four dollars a hourrow?
I mean, maybe it's a demand thing. You no, Actually a big part of it's going to be a storm if it's going to disrupt oil and gas production, so that's like a weather impact. But in actuality, many are thinking that a President Trump is going to be more hawkish when it comes to Iran, and does that actually remove some barrels and tightened sanctions because there's been a lot of oil exported surreptitiously at the end of the day, so thank you. So if that changes, then that could
actually have a material impact. But it's really hard to play the geopolitical risks in this world.
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 live on YouTube.
Alex deal here alongside Paul swe Need. This the Bloomberg Intelligence Radio. We bring you all the top news and business, economics and finance through a lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. We also tap our great experts outside of Bloomberg for their take on the market, and we go to one now. Shana Sissel is president and CEO of Benriyon Capital Management and she joins us.
So usually January is like one of the best months for inflows, right, like, do we buy the January effect here?
I don't know if I buy the January effect this year.
We also normally get a Santa claus rally that we didn't get through this year either.
So I think we have a new administration coming in.
There's some uncertainty there, but overall positives for the markets.
Inflation, though remains a headwind.
The FED is more hawkish than they were, so there's there's certainly some things to be concerned about.
But that doesn't mean I wouldn't put money into the market.
I'd just be really selective on where I do put money in the market.
So Shanna a Bloomberg News m Live is out with a survey with we do with a third party. People are still buying this Trump trade. I mean, sixty one percent of the responds feel like risk assets are going to move higher. Is that what you're still hearing from your clients? Is there still that type of trade out there?
Well, I think it's more of a mindset of the last you know, fifteen years.
If you think about it, I think we.
Are largely more optimistic because there's an entire generation of investors that don't know what it's like to have a flat to down to volatile market, and there's an expectation that what we've been seeing, which is double digit returns on average since the financial crisis bottomed, and that I think is kind of coloring the expectations of the average investor.
I do think that overall, the Trump tated is positive for equities, but I do think we need to temper our expectations and the fact that you know, twenty percent plus returns of the S and P five hundred for multiple years is not normal, and there is going to be a return to normalcy at some point when that is I don't know, but there are certainly reasons to think that twenty twenty five could be the year we returned to normalcy.
And god forbid, get eight to ten percent returns on.
The S and P five hundred, right, it's like normalcy. But it's not like you're getting negative return or anything. What's interesting is that FED official Lisa Cook said that AI and private credit are among financial stability risks. That was in a speech earlier this morning. That kind of touches your area of expertise, right, the alternative landscape. What do you think about that kind of sentence.
Well, you know AI.
I think is interesting that that was thrown in there because that doesn't necessarily impact the capital markets per se.
I think it's more the whole you.
Know, trends around it and all of the FOMO that goes into wanting to be involved with the AI trade. But it's not necessarily specific to how the structure of capital markets work. But private credit is. And I think
that's an interesting comment. You know, if you think about the explosion of private credit, it happened during and after the Financial crisis as traditional banks became less able and less willing to provide capital to small businesses to lower credit, that kind of thing, and there was this need for this secondary non bank financial lending market, which is where private credit kind of exploded. It's always existed, but that's where it really became a much bigger part of overall
capital market structure. And you know, the same risks that existed prior to that, in terms of lower quality lending, lending to non traditional types of businesses, things of that nature. Those risks still exist, right and AI is part of that. Crypto is part of that. And when and when I mean AI and crypto, I don't necessarily mean actual crypto and AI as an investment, but companies related to that
ancillary that need capital. And so I do think that private credit, because so much money has rushed into it, that tends to push folks to make loans and to provide capital at a higher risk.
And so I can see why she would have mentioned private credit.
So CES kicks off in earnest tomorrow out Las Vegas, and we heard from Dan E's Woodbush Securities this morning that once again AI is going to be front and center. From your perspective on Gal Turner's front, do you feel like there's a lot more to go with this AI story, it feels like it's a long term trend, not a short term issue at all.
I agree it is a long term trend. But what happens when we have these long term trends? And let's think about Like, I know, it feels like AI has been all we've talked about for a really long time, but let's think about what the last hottest trend was. Where all the money, especially in the private markets like venture capital and private equity, was just throwing money at anything that had the word blockchain or crypto in it.
And what happens is.
All the money runs and there's people who probably shouldn't have gotten capital, did not have great business models or business plans, but because they had those two really really important buzzwords in their pitch decks, they were able to capture assets and capital as a result. And then what happens is you find out who the winners and losers are going to be, and there's always things that blow
up on you. And I think AI is kind of in that trend right now, and as we get a little bit further into the AI.
Development, you will see.
Similar things happen there because so much money run into it all the vcs wanted to have anything and anything that had AI associated with it, and there are going to be things that just don't work but blow up in spectacular fashion as a result. So I think AI as a trend is a big deal. Just like when we had the tech bubble, the same thing.
It was a game.
Changing type of technology, type of trend, but as a result, a lot of money runs after it and goes into bad things.
Channa, always going to get your perspective. Thank you so so much. Happy New Year. Shanna Sisoul, President and CEO of benry On Capital Management, Joining us.
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All right, s and P five hundred, up mid twenty percent, twenty twenty three, up mid twenty percent and twenty twenty four. Can you top it in twenty twenty five? That's what the pros have to figure out here. Brian Vendick joins us here. He is a Chief investment Officer at MJP Wealth Advisors. Brian I'm sure you're out there with your look ahead letter recently telling your clients kind of what you're looking for for twenty twenty five. What'd you tell them?
Yeah, thanks, Paul, and great to be with you.
Well.
I think we're still constructive on the markets over the balance of the year, but I think it's going to be the tale of two cities, as we've seen in some other years in the past, where we have the
policy uncertainties. These policy pieces I think that need to come together, as we've seen in recent headlines this morning with the new administration coming to town and what's going to happen with tariffs, spending, taxes, immigration, paired with are we still going to have earnings growth for the SMP and other.
Parts of the cyclical parts.
Of the economy over the balance of the year, And I think a two we get through this policy uncertainty and also uncertainty that the FED gave us back on December eighteenth regarding monetary policy. In twenty twenty five, it's going to be chopping in the markets. I think it's easy for me to forecast Paul on alex but I think if earnings is there, and we've heard from some
FED officials some FED speak this morning. As you mentioned, the economy is unstable footing inflation probably will be sticky over the course of the year due to housing pricing and some seasonal adjustments there. But at the end of the day, if consumers have a job, consumers will spend.
We expect lower spending, but we still expect earnings to grow double digits for the SMP and also maybe some participation coming in the markets from some areas outside of megacap tech, even though this morning we know megacap tech is in front of investors optimism for a good year.
I guess the question then becomes weirder earnings actually grow, So do earnings for say the megacap mag seven come down and then the rest of the S and P earnings go up and that spread narrows.
Yeah, so that's a great point. I mean, that's our view. You know, we are still expecting growth, you know, greater than twenty percent year over year on the megacap tech side, So when we think about portfolio positionings, we're definitely leaning still in that direction. Also because tech has been a great place to hide out obviously when trouble waters happen in the economy. We've seen that historically, and I think that muscle memory is still going to occur for investors.
But those are other areas of the market that I still say look attractive, in mid and small cap and some of those cyclical areas where the economy does slow. And we've gotten some indication that FED cuts are still you know, on the table. That's going to help out some of those sectors like industrials, some pocket areas and healthcare. And also I got to give it to our friends in small cap that I know have been trailing for
about ten years. The economies on stable footing. We're not going into a recession, and we have some domestic focus and policies. Those should help some of the smaller companies as well, assuming a good economy over the.
Next twelve months.
How about in the fixed income space, Brian, We've got a steepening yield curve. We've now, you know, after being inverted for several years, we've got a ten year treasury yield to four point six percent, two year four point twenty five percent. I mean, that seems like a nice way to make a living in a fixed income space. Do you stay there or do you maybe take some credit risk.
Yeah, no, that's that's a great point.
We've actually been adding.
Duration in our portfolios late last year into even the start of this year. And you know, we like fixed income. I mean, it's it's we know it's it's been a tough investment over the last three years or so with anemic total returns. But again, our view as we kind of look out, is that the economy will slow due
to slower consumer spending. And depending on how those puzzle pieces come together from our friends in Washington, that might we might look at these yields right now and say, you know what, this is a great opportunity from a risk war point of view.
So we're not getting too.
Long in duration, Paul, going back to your question, We're not trying to be heroes here with a bond trade, but thinking about taking durations up a little bit from that two to three year to five to seven year, still sticking with quality, not looking to jump in too deep on some of the high yield that's already had a good run with tight spreads. But I think fixed income isn't is an opportunity for investors, and also if we have trouble waters ahead with those uncertainties from policy decisions.
We've seen investors come back to fixed income as a means to protect.
Do you think that we're going to see correlations kind of up that the higher yields go, the more equities get hit that inverse correlation, or do you think that both can live in harmony.
Well, I think we have seen recently, going back to the second half of December and now we've seen that when yields have picked up, it's been it's been tough for the equity market. Now I'm not I'm not saying that you know, yields at you know, four to six and they come down a little bit from this morning's
highs is not tolerable for the markets. But I think if you start getting above you know, four seventy five on the ten year and getting back to that five handle, I mean, I think the economy, based on where we
are right now, can handle it. But it definitely starts to take some of some of the optimism out of earnings growth in some of those more cyclical areas that are dependent upon lending and the cost of debt and that and then again, but you know, this is why I say it's a first half versus second half story. Not to talk and be too complicated here, because we know that FED will use Monto Harry policy to support
the economy. So if we start seeing that those higher rates are being more restrictive and slowing down the economy, that's where I think the FED has made it clear that they'll take action to kind of support the labor market and try to keep things going.
All right, Brian really appreciate that. Thank you very much. Brian Bendig, Chief investment Officer at MJP Wealth Advisors, joining us.
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