We Won’t Get the Earnings Jolt Like in 2018 (Podcast)

earnings recession. We have, of course, data, particularly having to do with the housing market in the United States, that has been weaker than some people would like to see. The question is does this indicate a broader slowdown or is this just a seasonal blip that will recover later in the year. Joining us now to talk about that, Matt Forrester b and y Melon's Lockwood chief investment Officer. Joining us here in our Bloomberg Intta Active Broker Studios.

Matt Wonderful having here as all. So let's start there. It seems like stock markets are looking through a lot of the less positive data. Bond markets maybe not so much. Right, So, uh, we're markets are in this sort of hurry up and wait you a moment. I mean, I know you have small children. I know when I'm trying to get out the house, I've got they've got to go get their socks, they get their shoes, if you get their coat. Markets are markets are, you know, are worried about these things.

But we're waiting for decisions around China and whether g and Trump are going to come to an agreement and how substance that agreement will be. We're waiting for a deal on Brexit. We're waiting on a deal in North Korea. UM. We're waiting on the FOMC next week. We're waiting for a mule of report. There's all kinds of things that markets are thinking about, UM, and I think one of the most interesting ones is whether or not we're that's how we're assessing this data that's coming out of the

first quarter. And you know what these things look like. So we've seen seasonality. One of your economists wrote about this in a March fourth piece. A couple of weeks ago, Elena Siltate wrote about, Yeah, so let a road about how UM the US GDP data is showing this residual seasonality and sort of a data artifact that seems to have been with us from almost the recession period, the Great Recession, and we're also seeing that in corporate earning statements.

So if you look at analysts estimates of what's going to occur, so every first quarter, with the exception of eighteen where we're reacting to a tax cut, for the last number of years, we've seen first quarter tad a really weaken up in terms of analysts expectations for what we're gonna happen, and then as the year went forward, we had, you know, pickups in that as the year

went on. So I think those are really interesting and it seems to me like markets are looking through a lot of these things, and of course they're probably also expecting relatively positive results from some of these bigger issues they're facing. The trade deal, for example, I think we've priced in some amount of eventual deal that we think

we might get. Whether that's a month or two months, knows, but um, it looks like the markets are thinking rather positively about how these will eventually have outcomes in for markets. So going forward into the second quarter, just to begin there, um, looking through seasonality is great when the trend continues to hold,

So essentially markets hoping that this trend continues. As we approach the second quarter, second half of the year, things will resume pick up again, even without like the tax cuts we had in two thousand eighteen, and and markets will again really right. So I think we you know, as you look throughout the year, it's clear that analysts estimates are rising as the year progresses. We're also seeing

relatively strong top line growth. So we had almost six percent in a revenue growth in the SMP five for the fourth quarter. So some of this does seem to be some amount of earnings estimates. It was pretty clear that you could see we were not going to get the type of earnings jolt that we got from ten. That would be crazy to expect that again. Um, and we've also had twenty dollars about off with w t I. So remember what we went through this a little bit ine.

We had a much bigger decline in energy prices, but the energy component of the SP five and earnings is also declining, you know, and that's enough to cause you know, a temporary slowdown in the earnings estimates. I have to wonder, Okay, so you're talking about the equity markets looking through some of the weaker than expected data, holding in. That's why

we're seeing this rally that is continuing. My question is where do bonds fit into that picture, given the fact that yields are now retracing any gains that we saw in and you have some people saying that the federal reserves next move will be a rate cut. Do you think they are wrong? Do you think that stocks are right and bonds are wrong? Right now? Um? Yes, so

I I think that's still up in the card. So I think the question for us has been whether or not the FED is actually changing policy or whether they're changing communications strategy. The policy of being patient really hasn't changed very much. The question is when is the FED going to be in aition again and will that actually occur in this cycle? And I think that's still relatively an open question. Again, we're waiting, like the FED in this data dependent mode, and I don't think we're gonna

know for a while. And I think the FED is very aware of these data seasonality, data artifacts from UH from the crisis and these last number of years, and so they may take more time to assess whether or not they're actually going to change policy at all. And like always, you have to watch what the central banks do, uh, and not what they say, you know, so you can listen to them, but they're talking about a lot of

things that are helping them support markets and policy. Uh, you know, the questions about how they're going to deal with the balance sheet, how they might deal with an inflation target going forward. All this is news to the market because it sounds like there could be additional stimulus coming to the markets at some point in time, and

they like that. Um, but uh, you know, you have to watch again what they're actually doing and what policies are actually being implemented in that has an Then do you think that like markets are looking for additional stimulus of the day to get strong, we could actually see the other side. They flipped very quickly from hawk to dovish, if you will. If they flip in that same sort of pattern again, if the data really comes in strong,

bad news for markets. I agree that's gonna be a risk for for equity markets if we get into that place. And the question again would be how many I mean, if it's a rate hike or two, which I think would be the kind of consensus estimate or where we're going now. I mean that I mean one later in maybe one. I don't know that that's a giant deal, but I think the overall question of whether the fete is actually done here is going to be a real question as we go forward. In Matt Forrester, we love

having you, Thank you so much for being here. Matt Forrester is at B and Y Melon's Lockwood, chief investment officer, talking about that weaker data that frankly stock investors are looking through. Lisa Abram woids here. Paul Sweeney, my coast and colleague off today. I am joined by the great Vince Signarella, a resident trader, storyteller and extraordinary market watcher here at Bloomberg LP very much onto the forefront of

people's minds. This week has been Boeing shares down another one and a half percent after the f a A joined in with all of the other nations around the world that have ordered a stop to the seven thirty seven Max jet and saying to Boeing, you know, honestly, no, these needs to be taken out a circulation while we figure out what to do about the problem. Joining us

now Benedict Cambell. He is Bloomberg Senior editor covering company news and Benedict, can you just give us the latest with respect to the investigation into the second fatal crash of the seventh thirty seven jet. So there is a picture that is emerging thanks to some of the data that's becoming available. In principle, we now have the black boxes, the flight record and the and the UM and the voice recorder that are in Paris being read out. We don't have the results of those yet, but that will

give us arguably the most conclusive evidence. But we have a couple of other pieces that are starting to put together a picture. We heard overnight that authorities on the ground, the sort of such and rescued recovery crew on the ground found a small device essentially no bigger than a screw. But it was an interesting component because it showed that the trim on the plane had been raised to lower the plane's nose, and that showed that it was actually

at the wrong angle. Again note of caution, this is a plane that came down an incredibly high speeds, so it could have been somehow caused by the impact. But again that is one piece of evidence that shows that principally everything went wrong with this flight. Very early on, there was a report over night as well that a panicky voice from the cockpit showed that the pilot struggled

to keep the plane under control. So there is this picture, as I said, emerging of a of a trip that really went horribly wrong early on, and that is part of the evidence that prompted the f a A to finally respond late this week. Benedict, does this take um or is this part of the story or does this take the software conversation off the table? Are they moving in a different direction. I don't think it takes the

software conversation off the table. Just to remind people, there is that piece of software in this plane that helps stabilize the aircraft. Has to do with the new engines on the plane that are slightly bigger, slightly heavy, and that changed sort of the the center of gravity of the jets. So to counter that, they introduced the software. But there seems to be a case where the software

and the pilot didn't sort of interact perfectly. So this is still something that is being investigated at the moment, certainly not off the table. Whatever happens. Boeing has a very a keen interest in finding as much evidence as quickly as possible, because the last thing they want is some sort of inconclusive evidence or no evidence whatsoever, and that's where the flight recorder will be helpful. We have a first image of this flight recorder. It looks badly mangled,

but broadly intact. These are very sort of fortified UM devices and hopefully the b e A, which is the French authority, they will be able to give a read out. They've managed to do this under very difficult circumstances of recorders that have been submerged in some cases for years,

and they still manage to get the full data. So hopes so high they'll be able to do the same thing here Benedict twenty Here, I'm just wondering, have Airbus and the big Chinese aircraft manufacturer have they really been aggressively trying to pursue business and get away, uh some some sort of competitive advantage from Boeing here. The short answer is no, aggressive is probably not sort of what

they're trying to be right now. There's sort of this unwritten rule in aviation that if if there is a tragedy on on one company, the others try to sort of keep a very low profile UM. But you can imagine that behind the scenes they will probably start to position themselves. We have had some airlines say we're not sure about this order book anymore. How they will wiggle out of it as another question, but that might potentially open some business for US and the Chinese, which will

create a very interesting dynamic. Benedict Cambell, thank you so much for being with us. Benedicto Cambell, Senior Bloomberg Senior editor for Company News, joining us with Boeing shares down one and a half percent, Lisa brom woids here. Vince Signarella joining me today. Paul Sweeney is on a well deserved vacation. The pound is gaining a little of versus the dollar today after sinking yesterday. It has been Brexit week, and joining us to discuss is none other than Marian Harkin,

a European Union parliament member representing Ireland. UH. She joins us here in our Bloombergadder Active Broker Studios in New York. Marian, thank you so much for being with us here today. To be here happy Patrick's today. UM, I wanted to start with why is it so difficult for Teresa May to get through her plan? Well? The withdrawal agreement has three parts, citizens rights, the divorce settlement, the money and the big issue, the Irish backstop. Now what is the

Irish backstop? The Irish backstop? It's that the all of the UK, including Northern Ireland, would remain in a customs union with the EU, but that furthermore, the North violent would have regulatory alignment with the South. So that me that that will be in place until a trade deal is done, which would negage the need for any such agreement.

But of course what the British are afraid of is that maybe that trade deal won't be done, maybe it won't be sufficient, that the backstop will never be needed. The backstop is merely an insurance policy. Nobody wants to use it, not the EU, not the UK, not Ireland, but it's there to preserve the Good Friday Agreement and no hardening of the arch border. And that's the difficulty Trees and May has. But as you say, it's in

everyone's best interest to get a trade deal through. It seems unrealistic that the backs that would be there indefinitely that that this, It seems that the fear of never having a trade deal, or or an acceptable trade deal is superfluous. I mean, I agree. Now, a trade deal is never easy and it takes time, and that's one of the issues because the withdrawal agreement is in place until the end of December, so it's not a lot of time. But of course there could be an extension

if it's needed. But there is this fear that it may not be sufficient. But everybody is intent on ensuring it's sufficient. But these things are never simple, and therefore many of the hard Brexiteers do not want to find themselves in this position. Are we closer today to a second referendum on Brexit than we were a week ago? I don't think so, and I'll tell you why. I think Theresa May might just get her deal true next week. I think there's a real possibility there because people's backs

are to the wall a second referendum. Labor is will he won't he want a yes another day No? And instinctively Jeremy Corbyn does not want a second referendum. He's a Brexit here really. So there's the Conservatives are split and it's I think it's going to be very difficult, if not impossible, to get sufficient people in the House of Commons to vote for that. A lot of people

want it, but we're not looking at a majority. And to me, the best chance at this stage is that May's deal might squeak at next week, So walk us through that a little bit, suppose, and then that's penciled in for Tuesday. I should save this vote. If the vote gets through, if you go third times a charm and gets her deal through, what's the next step, Well, just how I should get through the Attorney General Jeffrey Cox, whose advice really led to her deal in thrown out

this week, is looking at it again. The d u P I believe are around London this weekend. A lot of people are talking and remember this the heart Brexit hears know that if May's deal is not accepted next week then they are looking at perhaps an indefinite suspension of Article fifty, and that's the last thing they want. They may be prepared to accept this brexit. It's not what they want, but it might be the least worst option.

And people's backs are to the wall on this, and for those who really want Brexit, this may be their last opportunity to guarantee it, so they might take it despite the fact that they have said time and time again it's not acceptable right now. Do you get the sense that Brussels that the European Commission wants to be dealing with Theresa May and only Theresa May, and not a potential successor here? I think so, um, I think Brussels.

I was air this week in Strasbourg. A lot of speeches were made and people were putting their positions forward. There's a certain level of impatience that's probably heading towards frustration, but nonetheless there's a lid on't and I think people

still hope that Treesa May can finally do this. But Barney was very clear this week he said the negotiations are over, it's done, and talking about any extension of the deal again, it was very clear from senior figures that only if the British have a plan will the EU consider an extension. But perhaps to me, the statement from the European Commission that really says where it's at at the moment is this, And they've said there are two ways for the UK to leave the European Union,

with a deal or with actually deal. The European Commission is ready for either. So that tells you where the EU is at at the moment. So the EU is very prepared for a hard Brexit if if this deal perhaps should fall by the way side. Look, nobody can be prepared for a hard Brexit as such. I mean this week, for example, we put through a lot of

contingency legislation. I put through legislation on the fact that if people have moved from the UK to Europe or vice versa, that their social security coordination is in order that citizens won't close out. There was contingency legislation put through on aviation, on many many other issues. But that's that's bottom that's bottom line stuff that is not anything extra, and definitely business and markets would react with horror if if there was a hard Brexit. So we're as prepared

as we can be. Arian Harkin, thank you so much for being with us, and again, happy St Patrick's Day. I imagine that your trip here will be a bit of a reprieve from the Brexit experience, if not for just maybe a couple of hours. Yes, at least you can talk to taxi drivers here and they don't talk ramatically ask you about Brexitt. We're trying to change that. Marian Harkin, European Union Parliament member representing Ireland. Joining us here in our eleven three OH studios in New York,

the tragedy in New Zealand has rocked the world. At least forty nine people massacred at a mosque by a gunman with extreme views, white supremacist views. Of course, this is absolutely a humanitarian tragedy. There is a business side to it. We are going to dig into it. There is no good transition and from human tragedy to the business base case. And yet we do want to focus on Facebook and its role as the perpetrator live streamed

this horrible tragedy on Facebook and YouTube. Facebook shares down nearly three percent. Joining us here in our eleven three OH Studios is Garrett to Vank, who covers technology for us at Bloomberg. Garrett, can you give us a sense of how much of Facebook's share decline is due to their ability or lack thereof, of monitoring and quickly responding to something as horrific as this versus some of the

turnover that we've seen just into the upper management there. Yeah, I mean, I think when you're seen with attacks such as this one, I mean Facebook, YouTube, other Internet platforms,

they're intrinsically part of how these things happen nowadays. This attacker clearly had what you know, what is probably best called a social media's outreach strategy, right They had been posting a little bit on Twitter hinting about some of these actions, and then when they went out and did it, they went and posted in certain you know, alt right, far right communities around the world to sort of, you know,

gain traction, gain support. There was a manifesto that very clearly was focused on, you know, had had a lot of information to sort of you know, get out there for people to kind of be talking about it, to be sharing these ideas and memes, trying to analyze them. That's the whole point of what happened here. And then at the end of the day when they actually went

to do the attack, they went live on Facebook. And so I think the share reaction is because there might be some concern from the investor community that you know, either through regulation or through self regulation, the companies will stop allowing live streaming, which is a product that they have had for a couple of years now and has been you know, a big sorce of engagement and and and and from Facebook's perspective important part of future growth.

You mentioned regulation. I mean this has been a big push for some presidential candidates, Elizabeth Warrant specifically wanting to break up some technology companies. You see, Yes, you think you see a spillover from this from Facebook into other other places of technology. Yeah, And I want to I know we're talking about Facebook, but I do want to say that, you know, YouTube also is a big part

of what happened here. Because the video was live on Facebook, it was quickly taken down, you know, not immediately, but still quite quickly, I think after about seventeen or eighteen minutes or so, but it had been recorded by other people and then started being reposted on YouTube, and so YouTube is kind of the distribution method for a lot

of this content. When it comes to regulation, I mean I have to sort of say that as a reporter covering this for the last couple of years, I've become a little bit cynical because we've been talking about regulation time and time again. And although some countries do have some regulation, For example, in Germany, there are rules about what you can and can't post about you know, Holocaust related content and you know, anti Semitic related content in the US and other sort of you know, major major

places where these companies are actually based. We haven't seen any strict regulation changes. I guess that there's a question of what is the correct approach to regulating some of this type of behavior. Because Facebook has uh deployed a thousand plus person team to try to figure this out,

I just have to wonder. I mean, could it be the other way around that that Facebook and other tech giants cooperate with local authorities to pin down people who are trying to use these as you know, these platforms with social media strategies to perpetuate hate and violence. I mean, I think that Facebook and the other platforms are already doing that. I mean they they have had instance in the past where people say they're going to go and do something, and then they went and did it, and

people say, why didn't you tell anyone about this? Why didn't you report this? And there are places, you know, there are times where Facebook will report things. They'll even report um, you know, if someone is threatening to harm themselves or to kill themselves. They will report that to local law enforcement, which obviously opens up a whole new bag of questions about this tech company's private company, you know, a a corporation's role in society and safety and health

and law enforcement that brings in the big brother. I mean, is it Is it possible, though, that the technology is just not there to monitor this technology? I mean, you know, we we in this business have editors, generally speaking, before we can publish something. When you're talking about live streaming, it's it's out there as soon as somebody wants it out there. There's no no filter. So live streaming, the

question is should we just ban it or not? Because at the end of the day, if you're gonna have it, it's going to go out there and no filter, there's not really any great way to stop it. But what I think is a major question that I'm asking today is why was this video continually allowed to be reposted? Even now? A colleague of Mindset, they were able to find it on YouTube through a few minutes of searching, and that's because people are constantly trying to repost it

and it's being taken down. But Google has thrown more than one thousand people, thousands of people I think the last number was ten thousand people that they've hired to moderate content. They have the greatest minds in the business when it comes to algorithms and recognizing videos like this, and they have been able to do a pretty good job of keeping copyrighted copyright in fringe videos from even

finding their way onto the platform. If I want to post a popular song, they don't even let me upload it. The algorithm recognize it before it even gets the public. So why in this case, when we all knew what the video was, have they not been able to stop it from being uploaded in the first place. Garrett Devink, thank you so much for being with us. Garrett Devink covers technology at Bloomberg, joining us at our in our interactive broker studios. 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. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woy. It's I'm on Twitter at Lisa abram Woyits one before the podcast. You can always catch us worldwide on Bloomberg Radio.