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This is a.
Joy And for Global Wall Street lean forward.
Stuart Kaiser joins us in NIC's got a fancy title, had a US equity trading strategy.
It's City Group.
You've seen him in the TV show Industry and we've got in here for a long conversation today. What's the mood on institutional desks? Our review is retails buying on the dip and institutions are going mental over this, that and the other thing. What's the mood that you see across pro desks.
I think people are a little bit concerned about the speed of the rally, But the fact is it seems like stamatic buying is really going to be very large over the next couple of weeks up and people are not going to fight that. So I think even if you're a little negative of the market as an institutional investor, you're sort of allowing this buying to play out and then you'll kind of step back in, you know, once
that's done. So I would say, you know, a little bit concerned with the speed, but you know, okay, for now what we call long.
Only buy side, which is basically conservative money. Folks are not doing hedge funds and all the fancy things you see on industry or billions.
Forget about that long only by side. Do they feel behind right now?
You know, I think a little bit.
But the fact is the sell off happened so quick and then the rally happened so quick back that you know, it was a little hard to capture the rally, but it was also a little hard to risk matters the way down. So I think they're actually just pretty happy we've got the price levels back back to where it was.
If you look at your so they.
Were dumb going down and dumb going up. I love it. Well.
I prefer the word patient, patient and strategic. But but yeah, I mean, like you'd give you an example. You know, we had a lot of investors coming in when you were on the lows. What are the ten or fifteen stocks you would buy here. By the time they would have put that trade on, we're already ten percent higher. You know, we kind of made a joke last weekend that whole seventeen percent rally, if you timed it perfect, you only needed to own the market for sixty minutes.
Slow stop. Show you work on the weekends sometimes yeah, sometimes this is just.
Because Jane's in a commute right now and you work.
I have to catch up on all your YouTube, all your YouTube, and I can't go during the week.
Sectors, sir, what do you guys see on your desk? Are people just kind of are they jumping back into tech? Are they just trying to buy good balance sheets? What are they buying out there when they did come back?
Yeah, I mean tech and growth I think have been the stocks that have driven the rally the most. Two things that would just highlight institutional investors two themes that they liked earlier in the year that they got hurt on but now are re engaging in, would be power generation. So all that power that we need for AI and
M and A targets. You know, coming into the year, we had thought we were going to get this big M and A cycle, all the tariff news, all the market volatility, you know, delayed that I think people are hoping now that things stabilized, that we will get a little bit of an M and A cycle, and that's going to be good for the bank sector. So I think those are two areas growth and banks that are People were focused on healthcare has been real tricky, so I think.
People are kind of staying away from that.
A big OPEC meeting you know today, I think it is so you'll have some focus on energy. But I think to the longside it's been growth stocks, particularly tech, and then some.
Re entry into the bank space.
We had Gena Martin Adams on earlier.
She's a US equity strategist for Bloomberg Intelligence, and she was saying, this non US trade into Europe and other non ghost markets that's still there.
It's still playing.
Are you still having those conversations with your clients that they want to own maybe some European stocks.
We're still having the conversations. I think the fact that you know, we've backed off the worst of the tariff outcomes has made people a little more comfortable.
Kind of being in the US.
But yeah, I mean the Europe versus US trade, particularly when you got that fiscal announcement. Yeah, I think the view is it's a very high bar to get the Europeans to spend money. The fact that they were committed to do that gets real money in the US a little more comfortable owning Europe, and I think it's given
it another leg there. The fact is, though you've not seen an extended period of Europe beating the US probably for about twenty years, so there is you know, I think people like the trade, but they're also they respect that and are a little bit you know, cautious about how.
Long it might might keep going.
They got to relearn the stock symbols Steward Kaiser with us on your commute across an issue. Good morning, particularly good morning and Android Ota Google. Did you see they did their their roadshow.
Thing yesterday big heys like big, It was bigger.
Than I thought.
I got to actually like read about it, like they get up to Gemini.
Yes, Gemini and all that. Anyways, good morning on your community. Good morning on YouTube as well, Thank you YouTube. When we put this together, like as a huge deal, should we have makeup or not make up? It was like a major debate, folks. Matteo had a tantrum where people came in and they said, look, I'm endorsed by Bobby Brown and Mac I gotta have the makeup.
Going, so Lisa's the only one that beautifies here, and so.
To have Steve Roach on the phone looking over Steve, the camera's over there.
But that's the way we're rolling on YouTube.
Stewart Keiser without makeup this morning, I want you to talk about MAG seven.
In position sizing.
What do your big clients, what do they do when they go h I think we need more Apple just as one example, how.
Do you affect position sizing in MAG seven?
Look at Tom. It's a great question because at the beginning of the year, the.
Two biggest challenges to the MAG seven trade were valuation and positioning. From mid February till March, those two things got addressed pretty quickly. Valuation down twenty five percent, positioning, you know, kind of pulled off. I think what we've seen, frankly, is a lot of people in that AI trade kind of sizing up a little more on the software side, a little a little less on the Microsoft on a tear. Yeah, Microsoft Meta, you know, has obviously been a favorite in
terms of sizing the other stuff. Honestly, the what those we've seen recently have been almost across the board. Like you know, I'm going to trade Max SEV and maybe I pulled Tesla out because Tesla's had a little bit bit of political risk. But I'm going to pretty much put a dollar or ten million dollars in each of those stocks on generally.
So for you is ten million dollars for.
Me personally, No, what I love for me is about fifty fifty dollars.
The City group An is a ten ten million give it to the intern to trade.
Yeah, I mean, look, these stocks are I mean you're talking three trillion dollars in market cap for some of these stocks, So you know, the notional sizes going through or are quite large.
I think you're generally approximately equal weight.
But going into each quarter, there's always one or two that are favorites that are a little more widely held, and a couple that are less liked. And again, I think the software side of that Ledger is a little more little more over owned right now, and perhaps the tech hardware and send me is a little less owned at the moment.
What's going to drive this market for the remainder of the year. I'm looking at the WORP function and I think I've only got a couple of fit cuts.
Maybe in the forecast, is it earnings?
Is it just what comes out of washing in DC and what comes over X or Twitter or whatever it's called.
Is that what drives the market today?
Look, I think near term, like the next month or so, it's a lot about positioning, and now that you had that Moody's downgrade, it's going to be what happens in the long end of the bond curve. As you guys were chatting about earlier, you know, medium term, what's called that July through September, it's going to really all be to me about EPs and GDP growth. Okay, both the FED and Corporate America took a weight and see approach in the first quarter. I don't think that's going to
be sustainable through the summer. So we're ultimately either going to see relief and the recession risk get priced out, or we're going to see EPs and GDP numbers come down, and that's going to be kind of a waiting on the market. So I think, frankly, let's call it July through September, through the September FED, this is really going to be about the growth outlook.
It seems like I mean Erning's growth. I don't know what Scott Crohner's saying, but I mean we've got Erning's growth was like thirteen fourteen fifteen percent for this year. Now it's down to like seven. Is that Is there still risk in earning?
Strewth Do you think?
I think there is still risk? I mean, you know, Scott was a two seventy for the year. He took his number down of two fifty five. That number does not include a recession. So the downside risk from here is less tariffs.
Because I think we've trimmed the tail.
Risk off tariffs and it's more about what is happening to the economy. So I do think there is a bit more downside to earnings, but it's going to be relying on economic data. I think most people at this point have incorporated some degree of tariff hadwin.
So do institutions call you up.
It's like industry and they gotta go to break and get to the next season. Do people call up and say go to cash at that size and scale?
People don't do that, right, I mean, look, it depends like a mutual if on long only can't really be in cash right regulatory wise, they can't be you know hedge funds, Yes, I mean hedge funds will go cash.
Up and say clear out these four positions? Yeah, or how do you do that?
We just we push a button. These days, I think no man like I think. I think.
What's interesting, Tommy, you're raising you entry point is the selling that we saw earlier in the year was much more what we call low touch, going through the pipes, going through the computers, going through the algorithms. We haven't had those days where they are calling up our high.
Touch sales desk and just saying get me out quick. And I think part of the.
Reason for that is something you touched on earlier. People are so long these stocks that if you're trimming up your positions, you need to do it quite quietly, if that makes sense.
I'm not going to mention the name here. The name doesn't matter.
Folks in the Bloomberg you can't believe the information you've got when you get the terminal. Get the terminal, folks, you need your card. So I got a very famous regional American name. They own seven point one six three, six seven nine Microsoft shares. So when they call up and say sell a ten percent position seven hundred and seventeen thousand shares. How do you actually do that? Do you just put in a cell order for seven hundreds? You don't do that, right?
No, I mean a lot of that is done, you know, gradually throughout the day, the day on evaluated probably unless it is a we have to get out and look. What I would say too, is that the retail participation in the market is much larger today than it was a few years ago. So actually, if you're an institutional investor selling stock in retail, you're selling to a c LEBRITYTF you're selling to retail the men. Again, you're not
just dumping it at one block. You're taking your time, you're spreading it out over the day, and you're making it work.
Jane calls in.
Good Jane, thank you so much for calling in from Connecticut. If you sell four percent of it's seven hundred and seventeen thousand.
And you have to wait twenty minutes, what do you do in the meantime?
You get coffee?
You get coffee.
I thought, that's how well, if it's here four o'clock, it's like, where are we going to have a beverage?
Exactly, So, doing that selloff, we saw earlier, Earlier in the year, we had some really you know, maybe a five or six day period. It wasn't panic selling. Everybody said, it was kind of orderly selling. What were the calls you're getting from your clients. Was it the get me out call or was it, hey, we're.
Taking some risk off the table kind of call.
I think it was more of the latter.
As you said, it wasn't a discombobulated and aggressive sell off. I think people were pretty measured about it. As I mentioned, a lot of that was going through the computers, going through the algos, less you know, just calling us up and saying sort of get me out now. Obviously there were some of that, but no, it was a pretty orderly self. But if you think of the sell if it happened in two stages, right, you had about a ten percent draw down to la February, and then you
had another you don't post the tariff announcement. The first of those ten percent pullbacks was a little bit more disorderly, a little.
Bit more stressed.
Once you got that initial pullback, a lot of institutional investors got their risk right sized, and when you had that second pullback, I think.
People were much more prepared for it.
If it makes sense, this is brilliant.
I did not observe, and folks, I'm making it up by by no means have my thumb on the market, not that I ever did. But I didn't see Catharsis there in the big cardit on follow, folks, because the drift of bitcoin.
Is a fiction. But in your world, Steward Kaiser, I didn't see panic. I didn't see Catharsis.
Look at and top to your point, I mean you basically Liberation Day was April second. The market bottomed on April seventh, intra day, and on April eighth, on a close to close. It was really a three day, three to five day sel if it didn't feel like that, but you know that's what the price actually would tell you. So look, you had a few moments there where you got the vix up to fifty sixty, and I think that was the closest we got to kind of you
know compure, you know, complete fear based selling. You know, the fact is one of a good good proxy for today I think is actually twenty eleven in the sense that it was sort of a self created selloff driven by government policy, and you know, the second the administration started to show that they were willing to negotiate and trim the tail rists off.
I think people got much more comfortable that this isn't great risk reward.
But this is not, you know, a COVID or financial financial crisis quickly.
Or season four. Harry Lotty's not going to be back for industry. Are you going to be back for industry for season four?
Shortly?
Up to the agents, Tom, you know we have to.
Yeah, Cia, I understand. Stuart Kaiser on the street. I can't say enough, folks, a joy of Stuart. He's not coming in going well, the Fed will do this. It It's like real talk.
And I reach Stuart's note every day because if I only have time for one paragraph, I got it.
I can sound smart. What's buying, what's selling?
I got it?
Treasure from Citigroup. Stuart Kaiser, thank you so much, Jane, be nice to him. I'm sorry.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Joining us now for an extended important conversation here on your conviction to be in the equity markets. Brian Belski's chief investment strategist for PMO Capital Markets. I'm sorry, Brian, for me always and forever.
The my truh gosh, Brian.
You know, Brandon want you to talk about what I've lived and a lot of younger people have never lived it.
If price goes.
Down and yields go up, stocks can still do well.
Discuss that they can do very well. And thanks for mentioning Nick Rokanova too. First of all, one of the best names in Wall Street history, never one number two.
The poor man has worked with me for eighteen years, so well, pray for him.
I'm coming live to you, by the way, from the from the wonderful Jennifer Lee's office here at BEMO headquarters in Toronto. So I feel like I'm in the in the in the midst of greatness and anyway, yeah, exactly. So I really think we wrote this piece and talk about voluminous piece. Nick, lets me go crazy on the year Ahead piece. We wrote this piece in twenty twenty two for the twenty twenty three Year Ahead, and we talked to Tom about normalization in markets.
Something we talked about last appearance as well, and you know, stocks can go up when.
Yields go up. You know, the average ten year treasury the last seventy five years is five percent. Zero percent is not normal. What's happened in the FED since November of two thousand set, I'm sorry, August of two thousand and seven is not normal. And I think we're kind of returning to normalcy on the bond side of things.
Even though we're primarily equity people, we believe the majority.
Of returns, total returns of bonds the next ten years is going to be about yield, not price performance. Remember the last forty years, we've seen massive all performance of bonds for the most part, and we've had great price performance. So I think Tom that we're entering into this period where more even returns for stocks high single digit, low double digit.
Same thing with Ernie's growth, where a yield environment can that can kind of hover in this three fifty to four to fifty range predominantly.
So you know, even though you maintain and rightfully so, Brian, your bullish stance here and it's been an amazing rebound in this market, here, still your EPs for the s and p five hundred still around two hundred and fifty bucks. Does that support higher stocks from here?
It does, and we're in the bottom of the report.
Paul, we talked about how we're not revising back to our sixty seven hundred target, which was officially our initial target for twenty twenty five. It still remains our bow case at two seventy five for earnings and sixty seven hundred.
For the price.
However, as we wrote the piece, we need to see some sign posts, quite frankly, and one of them, quite frankly, to be clear, is we need to see guidance come back, and we need to see earnings growth solidify, and so
we think we're going to probably see that. So with the market we call it, we're transitioning to show me from scare me, and I think the next quarter or two, which is a long time in Wall Street Brothers a long time, the next quarter or two, I think we need to see earning growth come in and then we'll feel better about returning to our boal caase at sixty seven hundred.
To get to it, you know, a sixty seven hundred target. Does tech have to be a leadership category?
Brian, that's a great question. Yes and no, we don't think MEG seven needs to be leadership.
MAKES seven is all about liquidity.
You know, Tom and I talk about the nineties and these these stocks are the new consumer staple sacks. As we talked about these big cap, these megacap tech stocks. We're technically underweight the MACS seven because we own zero a Meta in our eleven billion dollars that we run for BEMO. But I think it's going to come from other areas of tech, whether or not it's bottom fishing and AMD or the great fundamental story of Pallenteer or buying the dip in Palo Alto today, which the major
theme of AI we think going forward is cybersecurity. It's maybe moving down in cap to a cyber arc with respect to cyber secure already and even Oracle. Oracle's not in the MAKE seven, but we're talking about a multi billion dollar company with a fantastic balance sheet and a great software company. So I think it's going to be other areas and tech call that I'll perform, and that's why we continue to be all perform or overweight.
I'm sorry with respect to the technology sector.
So, Brian, it seems like again the volatility that we've seen here in you know, the first five months or so of the years, really come out of Washington, DC with economic policy, trade policy just kind of bringing in level of certainty to the markets. I'm not sure that's going to necessarily change going forward. How do you kind of come to grips with what is still going to be a higher tiriff environment out there?
Right That's one of the points that we make in terms of our sign posts. Markets have to stop reacting to every little thing out of walls, arms, storry Washington, whether or it's good, bad, or indifferent. And once we kind of get back to quote unquote business and normalcy, I think we'll feel better about the bull market, which we remember we're still big, giant, secular twenty five year
bull market. But again, given this uncertainty, I think too many people are trying to make the big call and go right back up to seven thousand on the market with the market needs some work to do.
It doesn't mean we're not bullish, we need to see some fundamental work.
Brian Belsk in the excess where I live, folks, he's with BMO Capital Markets.
Hey, Brian, I'm looking at what we haven't talked about a lot really this year, with all the talk on terrafs, we haven't talked about the Federal reserve and interest rate policy here. Do we need the Fed to be accommodative here for this market to work?
I don't think so. And I think that's really the secret sauce there, Paul.
I mean, I think at the end of the day, the end of quantitative tightening, rates are still low relative to history, the SET has a dual mandate. Employment remains very strong. Remember, employment is the leggingest of all indicators, that always happens last. And then on the inflation Sideys you're talking about SET. We'll see how PCE and all that kind of comes in going forward.
But I think the Fed is done.
I actually I'm one that says the Fed's actually done a pretty good job. And so I don't think that we don't need an interest rate cut for the markets to go up.
What do we need in terms of I don't know, just from the companies themselves help. Do we need for these companies to step up and say we have better visibility, more visibility, any visibility on our earnings Because the first quarter was kind of characterized as a lot of companies, rightfully, So just saying we don't know what's going on out.
There, right and that's part of our sign posts that we need to see guidance and earnings kind of growth numbers come back meaning to show me side of thanks, Paul, And I do think obviously first quarter the majority of
earnings didn't have terre for related type of issues. But at the end of the day, we want to see companies that have strong operating results, that operate from the bottoms up bases very strongly, and have some guidance to say, hey, you know what tariffs, tariff's mariffs, We're still going to
have very strong and steady earnings. And oh, by the way, you know what you get what you pay for, and you know what you're paying for in US stocks, And so I think that's going to be the theme for the second half of the year.
Brian, have we ever seen retail and institutions so far? Apart? I mean I got retail buying the dip that's others to it. Belski's going to these.
Florida, you know, Caribbean Island stock conventions. You know people are daytrading off their laptops. Why Bellski's given them pro tips.
Okay, retail's all in. Brian institutions aren't. Has it ever been this.
Nuts great question, it's been On the other side, I would say I remember having very complex and aggressive conversations with private wealth in March April of twenty twenty. Institutions were still late in getting out Tom, and I think also too, I go back also to October of two thousand, where retail was the opposite side. Retail was all in, completely all in, and you start to see the technology crack a little bit. In the US, foreign investors were
still very, very aggressive. I quite frankly hate the notion of retail's dumb money and institutionals smart money.
That's actually the opposite.
It's actually the opposite, and I think that's part and parcel Tom quite frankly to what happened in the late nineties, because retail private wealth really learned their lesson to be two overexposing stocks and a wealth manager has done a wonderful job kind of diversifying.
So I think that's the dumb money.
It's actually the hedge funds and the short term money that's trying to change these momentum moves that Oh, by the way, they've been wrong.
Is that because they have access to leverage. I mean, there was a white paper years ago. Sorry folks, I can't cite it that if you get out over two point eight to one or three to one leverage, things fall apart. I mean, it's just about institutions are leveraged up, and that's where they get into trouble.
I think it's part leverage, quite frankly.
But it also, I think too, is that institutions they owned too many stocks in these big portfolios and they haven't made the right bets. And I think that they're chasing momentum quite frankly, and there there's not a lot of independent thought. When I go on to talk to a bank institution, Tom and Paul and I start talking about stock picking, it's like their their eyes gloss over, because for the most part they're just kind of chasing the momentum. They don't really want to talk about operating
performance and management and product and service. So I think that's kind of the rule we're in. And oh, by the way, retail I e. Private wealth, they love stories. They want to talk stories about stocks, and institutions forgot have kind of forgotten how to take stories.
Really really, that's really really interesting. I'll have to have you back for that. I got one final question. Knicker Pacers.
Next, come on with the Wolves choke last night.
I want to see I want to see the cat taking on it's old their old team, the Wolves.
So we got to get going.
Brian Belski, thank you so much.
Bemont Capital at Markets, Thank you, Nicholas rocking Over for writing.
Everything else Elsey does.
Of course, he's just he's writing around in a rolls. Nick, let's do something on this. Okay, we'll do that. Brian Belski, thank you so much. We'll get them back.
That's a really important discussion, Paul about retail institution.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty The Quick.
Visit right now. He is at EO Law School.
He invented Morgan Stanley Economic Stephen Rohatch joins us with his decades of study of China Stephen. I was reading Ken Rogoff last night, my book of the Summer Our Dollar Year Problem, and there's one page in the last chapter on China where he makes clear everything changed with President g the totalitarian sense of it, the inwards sense of it. It's the premier, the president and his buddies.
Do we understand that in our negotiations with China, the unique character of this regime in Beijing.
First of all, Tom, thank you for talking to me. Making your intro makes me sound a little bit like Thomas Edison. But with respect to Ken's point, I would respectfully disagree. China has been on a trajectory that has been pointing in this direction really since the late seventies and post Mao Dungshao Ping. China under Sijenping. Things have certainly crystallized much more around an authoritarian, single leader dominated system.
But the trend of economic policy, state directed industrial policy, repressed consumption, an unbalanced Chinese economy increasingly at odds with the rest of the world. That has been evident for a long time prior to the ascendancy of Shijinping.
So Steven, I mean there is a period there where China was really embracing the West and vice versa, and there's a lot of optimism for mutual growth.
Are the people of China?
Are they comfortable with where they are now and where President She is taking this economy.
Look, I've written books about US China codependency, the relationship that was initially constructive from perspective of both countries relying on each other. And I think the people of China that I speak to and I still go there on a regular basis, would love nothing better than to go
back to that comfortable codependency. But the leaders, the political leaders of both nations, and in the case of the US, I wouldn't just single out the president most importantly, I emphasized the US Congress don't see it that way anymore, and the Chinese people don't fully understand what has changed to alter that balance.
Stephen Roach with us with you law school, we will continue here futures negative thirty three, doubt futures at negative three to thirty in the Vicks eighteen point five eight. Doctor Roach, I think that within your travels and you were in China, off.
What have you observed, What's changed?
What has changed in the modern China versus the years ago getting off the airplane and seeing that giant Morgan Stanley's sign at Hong Kong's airport.
Well, first of all, the sign has gone, and.
It so is the chief Economist.
Yeah, that happened after I left Asia and came back. It would still be there if I was still in Hong Kong. But look, what's changed a lot is China's rise as a a superpower, driven largely by extraordinary progress in technology and what chi Jin Pink calls, you know, new high quality productive forces. What has not changed is that China has been unable to stimulate internal private consumption.
Why not, let's stop there. That's important. This has been for year, stevehen you wrote about this with Richard Berner years ago. Why can't they stimulate consumption?
Well, but the main reason in my few time is they just don't have a robust social safety net healthcare and pensions. And what that means is that, you know, Chinese people, when they earn money from working, they save it because of a fear of an uncertain future. And that fear driven precautionary saving means that an incremental rem and bee of of income goes into saving. They've got a personal savings rate that's over thirty percent, the highest in the world.
So, Stephen, what is your view of the I don't know one to three year economic outlook for China because that will have an impact on the global economy.
Well, I think the outlook is worrisome. China, because of this sort of stemied rebalancing, is still heavily dependent on exports. Exports are about twenty percent of their GDP. Their largest trading partner remains the United States, even though the US share has fallen significantly since the first round of Trump tariffs. So they're going to get hit by this external demand shock emanating from the US exacerbated by Trump's tariffs, and the risks are on the downside.
Steve Roach, don't be strange. You're too short of visit. We greatly appreciate it. With the Yale University where he's never he gives out seas, it's.
Always tough solids, you know, you know, getting him beef doctor. It's it's very hard to do. Stephen Roach, thank you.
I can't say enough about some of his efforts in writing on China. I'll get those out on LinkedIn and Twitter here as well.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Well, Mamadalarian, the zeitgeist was out there, but Larian nails it with a tweet that this has been under reported this morning in the United States United Kingdom service sector inflation up up up. They were looking for three point three percent, and their UK inflation statistic came in in a lofty three point five percent in April. That bears close close watching and goes over to Paul Sweeney's thirty year.
Bond, which is my eyes are failing me right now. There it is five.
Point zero two percent the Joiney's right now. And you know, I got to be honest, folks. I got the two O one K and the two one k is with Empower, and I could go in and they got when I log in, they got a bright but they got a blinking red light. Stupid put in more money exactly. Thank you Empower for that. Empower keeping track of all the retirement plans for all of us at BLOOMBERGILP, and we say thank you. They went out and got Martin Norton
to be their investment strategist. What's it like being an investment strategist where we don't care what you think may is going to be? Like, we're looking at a three year, a five year, a ten year perspective.
How do you ride along the empower line?
Well, you know, I think what's really valuable to the retirement market to I would say individual investors broadly is making sure that the focus is on the fundamentals. I think there's so much noise out there from kind of data point to data point, headline to headline, and it
can really have an emotional toll on people. And so my orientation with empower, whether it's the well side of the business, whether it's the retirement business, is to understand and you know, aim to understand what's happening with the fundamentals and how should that drive their views.
But your charm is your morning star.
If you live the certitude of a five star fund that all of a sudden stumbled and became a three star fund, how do you get long term investment in a select group of funds?
Correct?
Okay, So that's that's a great question. And of course, I think if you're looking at the data, a big part of it is the expenses equation. If you're trying to think through kind of what's going to drive performance over time?
Can she read's book?
You do want to keep those costs down, right, That's that's your one certainty in terms of what you're paying. You want to keep that as low as you can. But I also think my kind of grounding at morning Star one of the biggest takeaways that I had, you know, to your point, I grew up as an investor at morning Star. It was the importance of an investment philosophy, having a point of view, a framework that would help you distill what's happening in the markets and make determinations
going forward. If you look at, you know, kind of the most successful strategies out there, they're not successful in every environment, but they have a touchstone that they return to, and I think those touchstones are really important to navigating shopping markets.
So what does your investment outlook, your strategy for twenty twenty five or we've had a lot of volatility here big, you know, out of twenty percent draw down in the market, retraced a lot of that here, but it's kind of driven by not so much the fundamentals of company A or company B, but kind of trade policy out of Washington, DC.
And I'm I'm certainy, So how do you guys talk to your clients about that?
Well?
You know, it's funny because back, you know, pre election, a lot of the commentary I was putting out was that, you know, you don't your your portfolio is not dependent on in Washington or what's in control or kind of how you feel politically about things. And yet we head into twenty twenty five and it's been the year of fiscal policy, and it's been decisions out of Washington that have caused kind of the ups and downs of the market.
We entered twenty twenty five talking a lot about valuation and really concerned about the economy, and our estimations seemed reasonably healthy, but the valuations seemed high, especially in the mag seven, and so that was our greatest risk factor. And it seems like we've lived nine lives since the start of twenty twenty five, right, And so the valuation picture changed and then changed again. And I guess if I think back to that outlook at twenty twenty five
and where we stand today. One of the biggest changes has been where the MAG seven is. The broad market looks expensive like it did back then, but the MAG seven looked cheap, and that was a surprise to me because my expectation was that MAG seven dictated the market.
Is with all your work, are we over diversified in our four case?
Peter Lynch was really good on this fidelity. Are there are there just too many things in our four one case?
Well, I mean that depends on kind of how you're you know, if you're picking your own strategies, if you're picking your own investments within your four one K, then you know, it all depends on kind of come on four things.
Paul can pick him. He's smarter than me.
And the answer is we got advisors out there that is saying you need forty two things in your four and okay, it causes angst and empower.
People get older him over there, there is a you know there was there's kind of like a retail market that follows the endowment market. The endowment like approach where you had to have a very diversified, you know, healthy selection of all these various investments. But I would say the average you know, retail investor still it's still a sixty forty split stock bonds. It's still kind of a
vanilla approach to the market. So I wouldn't say that, you know, my impression of the average war one K investor is that they're too diversified, though I think there is that, you know, argument that people are trying to put a lot of stuff.
Importantly is how about fixed income here?
I mean again, Tom and I talk about to two year treasury at four percent?
Do we it's not a bad way to make a living it.
We take some credit risk here, So I think it's kind of an interesting market. One of the things that we've called for twenty twenty five is a year for coupon clipping. That idea of capital appreciation coming from your fixed income. It's just harder to get behind that when you think of the inflation forces, or the deficit forces or everything that kind of is putting a floor potentially
under the yield curve. Now that felt like that was potentially the wrong view earlier in the year, but we're back to that situation right where people are focused on the deficit and they're thinking about yields and kind of a range bound mindset rather than you know, necessarily falling
from here. I think one thing that's really important, and this has been a shift, has been thinking about as you're looking for capital preservation as an individual investor, not just going to the AG or the core bond space, but thinking about that breath of the yield curve and having some of the shorter dated securities in your portfolio. They have a very different risk profile. That inflation risk is not the same, the rate risk is not the same.
They showed that in twenty twenty two and they've shown it since, and so I think that breath is a really important element for construction.
How do you guys think about alternatives? I mean, it's become such a big part of the average ria that we go talk to.
Yeah, it's not five percent of the allocation. It's a lot bigger.
It's a lot bigger.
And I'm surprised by that. Whether it's private equity, private debt, hedge funds. How do you guys think about that?
Yeah, so empower is moving into or allowing partnering with alts in the private equity sense. But I guess when I think about your question, I want to expand on it a little bit because I think the word alternative is such a catch all, and it's important to define what we mean by alternative. So if we're thinking about something like private equity, I think the real case for private equity, of course is the breath, the broader exposure to the US equity market. But I think the operative
word is equity. This is equity like exposure, and so you have to size it accordingly. You have public equity in your portfolio, so you have to think about that as you're looking at at private equity.
Are you in Chicago? Are you in Winnipeg, Chicago, chic your deep deep South?
Okay, within Power. Thank you so much, Buda Norton, greatly appreciate it. Strategist Power.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Right now with the newspapers.
Who else but Lisa went all right?
This is from the Wall Street Journal. This is a really interesting look at the real estate market in New York City. It looks like downtown is actually the new uptown for the rich and the wealthy. That's where they're going now. The city right the most expensive real estate has traditionally been like Billionaire's Row, Central Park, West, Upper east Side, but now things are changing. Listings below fourteenth
Street are actually starting to compete with it. A lot of things firms, a lot of tech firms, finding firms are moving down there, more retail parks moving down there. New luxury condo developments along the West Side Highway, you've seen them, West Village, Tribeca, Chelsea. And that's the reason why they say there were more than more thirty million dollar plus home sales below thirty fourth Street in the past five years than in the previous decade.
I did read that argument in the Adournale, and some of the places had there were spectacularacular eighty.
Five million, like big, big bag.
But I was on the Upper west Side last night walking around. That's still that is a great place to live. I always felt comfortable up there. It's it's nice. I lived on the Upper East back in the day, but upper I don't know.
This city's a great place to be.
Damian says Or sent me this morning thanking Natalie Wong. The IBM building, which is a lovely black brand building at Madison in fifty six, is sold one point.
One billion new top tick. Oh taking it out. There's a spirit here to it within the lump.
And I actually saw a restaurant yesterday doing the curb thing.
Oh yes, the outdoor dining next to you.
That is the season football could have its own version of the US Olympic Dream Team. Not traditional football. We're talking flag football, okay, but the NFL team owners. What they did is they proved this resolution it could allow those pro players to participate in flag football at the twenty twenty eight Olympics in Los Angeles. So it's really you've seen the NFL they've been pushing to make all around the world, they do, but not in the Olympics.
They haven't laid they play flag football in Japan or Italy.
I don't know.
Well, now we'll find.
Eight at the Olympics.
But they're just trying to get you know that the NFL has been pushing to get them on this global stage. So this is really a good way for them. But I mean there's still more talks that have to be done, right, you have to talk about injuries, thing to consider, so they have to negotiate all.
This is what I understand. That's like kind of the mass.
One player parteam okay, and a couple of players have expressed interest. Patrick Mahomes does.
He'll do it when thea Olympics.
Twenty twenty eight.
So we have a field couple of years, a couple of years.
Featuring the fire and just LA and the sprawl. You know, good morning Los Angeles in your early morning. They got time to make it happen.
Yes, and they've gotten most of the venues, most of the infrastructure there already. That's why you like go into LA and Salt Lake for example.
You have one more of this one I do? Okay.
So this there's an item from Lulu Lemon. It is all the talking social media, okay. It has nothing to do with working out either or leg it.
Yes, okay. So it is there.
Two in one maxi dress, so two in one because it can be used as a strapless dress and a long skirt. Miss Kean would love this. It's one hundred and forty eight dollars for colors. She can choose from. It's great. But the thing is is that it's getting kind of backlash too because people are saying one hundred and forty eight dollars for you know, a long dress. Expensive, but it's Lululemon.
You have to think about that too.
And they love the versatility, how soft it is.
It can be worn as a skirt when its top is folded over.
Hips, Editors, how did this story gets you.
The gauntlet of surveillance editors?
It's on the houseless Now you go on.
Anything else you'd like to. Is there a bag that you know what's happening for you right now?
Oh?
You know what?
No, Actually, this will be it, This will be this will be my thing for the summer. This is what you wear on the beach, around the streets of New York City. It's the mini maxi dress.
And we'll do the newspapers tomorrow, I think Lisa Matato, thank you so much, greatly appreciated.
This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday seven to ten am Easter and on Bloomberg dot com, the iHeartRadio app Tune in and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal