Bloomberg Surveillance: CPI Hotter Than Expected

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Tomorrow that's yes, very good, perfect, We'll go there.

I forgot Nadia.

Thank you, Bend and you love.

It's crazy here about Natia level. She sends us love on the courage Paul to be in the market.

Absolutely, Natia level, senior US equity strategist, Global Wealth Management at UBS so Nadi. We got this inflation print here this morning, a little bit hotter than expected, the market selling off here, the S and P off about one point two percent. What did you take away from this? And I guess more importantly, what do you think FED Chairman J Pal's going to take away?

You know, yes, inflation did come in a little bit hotter than we expected. We were looking for two nine on headline and three seven on core.

But I don't think that this one data point changed an out if the FAT has been hinted for some time that March rate HEIGHTE was off the table. We have been saying for a few months now that we had expected the first height to start excuse me, the first cut to start in May. And you know, I would say that this does put a make cut at risk, just given the strenth that we're seeing in.

The economic data.

But I do think that what it does say, though, that the equity market can take some comfort right in the fact that you are seeing strong economic growth and that's what's probably going to cost delay in the rate cuts. And the FED is on standby at the end of the day with.

Great latitude that if we see any sort of meaningful.

Deterioration in the macrodata, which there are no signs of that, that the FAT can adjust policy very quickly.

I don't think at the end of the day, when we.

Have a soft landed insight that anyone wants this to dip in a recession. So we think that the FAT will do what's needed to adjust putuntary policy accordingly, but it probably does push out, you know.

The sort of a parent cycle or just a little bit.

Paul Ian Lingott, being on Capital Markets a get friend of the show he publishes, he says, of CPI super core, super high, and that's what Michael McKee does. When you get the different service sector inflations, they indicated a higher level. And let's get where you get to futures from negative twenty to negative sixty three. NASTAC futures down one point eight percent, So.

We're seeing a market move here and yields higher NADIA. So you know, we're about seventy percent way through this earnings period right here. How are you what's your takeaway here? How's corporate America doing?

I think corporate America is doing well.

When you look at the earning season for the fourth quarter, I mean companies are beaten. We're seeing earnings trending towards seven percent growth for the quarter, which is a little bit better than we had expected. You also see some confirmation from the commentary from companies of what we're seeing in the macro data sort of some green shoots in the manufacturing areas of the economy. You're seeing a pickup

So that's quite encouraging as well.

On the equity front, do you we feel restrictive? One of the great debates here with the real yield, the ten year real yield out of two point two point zero one percent, it's now pulled back it's one point nine eight percent. Not here does the inflation adjusted oil in the engine. Does it begin to gum up and restrict the system?

I don't think so.

I mean, the consumer.

Still has a lot of excess savings and corporate balance sheets are remaining strong. And ultimately, I mean the reality is, we do think that the FED is going to cut this year by lease one hundred bases points or so, and that should help bring down our bondios. We're looking for the ten year to end the year at three and a half percent. Yes, in your term, we're looking for more of a trade and range of three seventy

So when we get into the backup.

Of year, we're looking for, you know, inflation to come down to about two and a half percent.

All right, giving that backdrop here, what do I do with my tech trade? You know, I've been long the magnificent seven leverage long position and like Nvidia up another forty five percent this year. Do I just kind of ride this tech wave here?

We think that you do. I mean, we remain positive on it. I mean I would.

Say to Tom, who might be still the triple leverage hash, you know, to take up opportunities and take advantages of the pullback that you might see Tag. It would be surprised to see a little bit of consolidation. But when we look out six months tour youar from now, we think that this is the sect that there's going to be higher h We are looking for, you know, Ernie's growth with an executive to be in the high teas and it could even trend into the twenty percent range.

Nadia, thank you now your level hydrated it you'd be a sweet appreciate your effort this morning. Like Gwynn joins now RBC Capital Markets on Apple car Play and on YouTube Bloomberg podcast Plake. Let me go right there, the real yield out to two percent, What does that signify to the Federal Reserve.

Well, I mean, I think, you know, this is part of why we had been talking about custody begin with, is really that they're looking at these real yields. They don't want a passive tightening real yields. As inflation continues to fall, you know, even if they kind of stay at that same rate, it just keeps getting tighter and tighter.

So certainly something I think.

That that's focused on those real yields, and that's part of the wins which they're looking at to to deliver these cuts.

Well, I got to go to theater and Paul wants to jump in some with some market moving questions. S and B futures plunging negative fifty eight, the down futures down three hundred and twenty points in Nasdaq on a percentage basis, down one point five percent the markets move. You mentioned a passive restriction. Are we now restrictive because the market's saying so? Are we now restrictive because the Fed's dawdling around?

Well? Well, this is a real question about what's restricted here, because I.

Mean, I think part of what you're seeing over the last month is a little bit of doubt creeping into the you know, to the Fed, that that they are actually as restrictive as they thought.

I mean, how can you argue, you know, we've.

Been above what most people would have ex anti considered a neutral rate. We've been above that for a year now, and we're still seeing data as strong. You know, it gets harder and harder to argue that you're well into restrictive if you know, the economic conditions just aren't necessarily suggesting that.

So, Blake, are you in the camp that says May is a period where the FED should cut rates? And if so, do you think they will?

No? We we've actually very for for a very long time. We've been in the June camp.

So this goes back to this goes back to June and July last year, we have the same FED call.

We've kept it all the way through. We've been very steady.

We see a June first cut, we have four cuts after that, so it a cumulative five cuts for twenty twenty four.

I'll tell you this data today NFP on Friday.

It makes me feel more confident about the June part of that equation. I think this really brings in a question whether they're going to have to do anything in May or whether they are going to do anything in May. You know, those are two separate questions, what they will do and what they should do. You know, I think June certainly looks like the starting point where I'm starting to get a little bit worried about that call.

Like I said, we've had it for a very long time.

But you know, the five cuts is where I'm starting to get a little bit more concerned because I think, you know, the inflation data alone, in this kind of passive tightening we're talking about in real rates, I think that's enough on its own for the feed to start cutting, but without any kind of signs of weakness or slowing on the growth or the labor side of the mandate.

You know, where's the urgency.

I think, you know, now you start talking about a scenario where yeah, sure you start cutting in June, but you know, are they going to go five times or are they going to take rates all the way back to you know, we have them going to three point fifty in twenty twenty five. That's the piece of it that I think starts to really get called in a question here is how aggressively they go and where do they end up stopping.

So like, there are a lot of folks out there, both on the academic front and in the markets a practice miitioners that say the FEDS already behind look at the data they should be cutting. Now, what do you say to those.

Folks, what data are they? I mean, you know, we had a great NFP report. You know, we had a pretty solid CPI report. You know.

I just think that you know, this idea that things that cracks are showing that we're, you know, we're.

In problematic territory.

I think a lot of times people tend to look at the delta, they look at the changes of how the day is changing. But when you look at the level of where we're actually at, I mean, across most metrics.

We're still in a very healthy economic scenario.

So I think going more slowly making sure, you know, the FED just really wants to make sure that inflation dragon is really slayed.

So Blake, when expand on problematic territory, what in God's name does it? Was that in Fibosi? I don't remember that Blake expand on what problematic territory means?

Well in what respects for the data?

Or I'm asking? I got an inflation report, yuh? I mean it's been up up in a way. I know, this is what's called a mini correction. Futures down fifty seven. I get at the vics fourteen point before I forget about the stock market chit chat. Is this inflation report problematic for Jerome Powell?

Oh?

I I you know, I really don't think so. I mean, I think it certainly raises an eyebrow. I think the overall trend, you know, you guys were saying before you came over to me. I mean, I think the overall trend is still positive.

You know, I don't. I don't think there's.

Anything necessarily here that they're worried about a reacceleration. I think, you know, we've gotten some decent proof, you know, over the last six months a year that a lot of the inflationary pressure we were seeing, you know, whether it was supply side, whether it was demand side, that I care a little bit less about those specifics, But looking at as a hole, I think we can say that

Good, et cetera.

But either way, a lot of that seems to be pandemic related, seems to be an idiosyncratic and it has come off. So I think this kind of, you know, the idea that we would kick off some kind of waste price viral or that we were in some kind of new inflationary process, I think that window has mostly closed. I mean, certainly the FED doesn't want inflation taking back up, but I think you know, they're not looking at each

So Blake, we've got to ten year treasury up ten basis points here four point two eight percent. Where do you think this is? Ten years is going to be a year end?

So right now we have it a three eighty, you know, so we do have that moving lower. I think you know, again that was premised on this idea that they start cutting in June. They you know, cut it a i'd say a relatively you know, moderate pace going once per meeting. But you know that that is that is part where I feel a little bit less comfortable about.

And now I'm sorry to wonder.

You know, we have twos that uh you know, we have twos at three ninety five. So we've taken out

Four percent, so three fifty you know, those front end yields are are are not going to rally in the way that that we've been calling for.

So we we kind of have taken out some of that curve lattening, and two's not rallying as much.

So that's really where we're seeing.

Someone got to leave it there, Blakequin, thank you so much. Dan I's promised me the market would never go down again. He was wrong, joining us down from webbush of course, ubiquitous with a bullsh call on technology. We're going to focus this entire next eight minutes six minutes with Dana Ives on Apple. Dan ives, why has Apple lagged the others.

Because iPhone growth has lack right, I mean this is something we've seen in China. The upgrade cycles happen, I think been better than many a feared, but it's not been iPod and I think this is the start we've talked about of the renaissance of growth that's going to happen over the next twelve to eight months. Or we believe Apple significantly outperforms even the rest of tech.

Is your reporting? Dan Eves that the new iPhone that Paul Sweeney asked to buy what for Paul for your family?

Yeah?

Is a new iPhone an up upgrade? Or is it just another iteration of the one I got in my hands?

Look, I think in terms of iPhone fifteen, that's obviously just been an upgrade that's been strong from a technology around camera and speed. But the big one's iPhone sixteen. I mean we've talked about it. Yes, today our checks are shown. From a memory perspective, this is going to have AI technology built into the phone. I think, what is the start of the dance stuff?

What in God's name did you just say? What is AI technology in Paul Sweeney's phone?

So they're gonna have essentially their own lms, their own language models built into the actual iPhone, So that that's going to be for consumers to do all types of apps that they could actually launch, technology around animation what I from a fitness perspective, it's gonna ease you know, it's going to create a whole another ecosystem for Apple, which we believe starts with the AI app stores that they're going to talk about at WWDC in June.

Is an example, Paul, you can type in on your iPhone sixteen. Should I spend thirty nine hundred dollars to see Louisville lose to do.

Exactly and you'll get a screen pro by the vision Pro. Hey, Dan, we've got you know. Apple obviously a two point nine trillion dollar market cap stock. It's do about three percent year to date, and I would argue that I guess the investor concerns out there. If you could just underline one, it would be China. Give us your latest sense of China in terms of an end market ultimate demand for Apple products going forward. What's your view?

Yeah, Look, I'm not saying it's roses and champagne, but from a lunar New year perspective, we believe it's up year of a year, and I think they're going to be able to actually return to growth in China despite the Huawei, despite geopolitical because you have two hundred and ten million iPhones in China and there've been share gained. So so my view here is right now, the New York City cab driver, it could be bearish in Apple, it's the relative to broader tech as we expect tech

Hey, Dan the I'm just looking at the FA functional in the Bloomberg terminal, which has consensus revenue estimates for Apple over the next seven years. Kind of let's just call it mid single digits. Yet I'm paying a twenty eight multiple for those for that type of revenue growth. How do you kind of square that? Is that something you have to convince your investor clients to kind of deal with.

Yeah, I mean it's very similar to how what we do with Microsoft or Nvidia. For Amazon, it's really showing that the services piece that high growth the multiple for that Key and I talked about this a lot. I mean one point five to one point six trillion, and that's that's the modization. Why Cook and company, whether there's a mount rushmore with Tim Cook and the Della but Microsoft, if.

These guys are you know, fanboys, I mean, if if the CFO and the CEO of fanboys like Dan Ives and they're looking at Apple behind over X number of months or whatever. Do you see them doing strategic decisions like a new bond offering and enhanced share buyback. Sweeney wants a dividend increase. What are they going to do with the use of the mother of all cash they've got, Given that Apple's lagged.

Well, I think it's getting to a point they're going to have to do potentially some accelerated buy back, or if they don't do M and A, which has never been the sort of the DNA obviously Kubertina, they're going to have to do some capital allocation changes and look, and that's why it goes back to when I look at Apple from some of the parts, there's so much more that could go right than wrong, especially what's factored

Dan, you mentioned the Developer conference in June for Apple, and oftentimes in the past that's been a big, big analyst for the company for the stock. Give us a little preview what we might see from our friends at Apple.

Book and I'm sure Germer will talk about this as well. I think it's where they start to intu generated AI from a developer perspective. I think it starts with an AI app store. That's that's going to be the first piece, and then that's going to lead into an iPhone sixteen and includes generative AI exclusive to Apple ecosysts, and it starts that modization and I think even a further rerating to where I see that renaissance are great over the coming.

Okay, you're wired and understand. I don't mean to interrupt, but I think this is critical. I get an iPhone sixteen in eight months June. You said, so Labor Day you get a new phone. What am I gonna AI? E I EIO do? What am I actually going to do in AI on my iPhone?

So you can I'll just give you like an example, So you have a picture the day you've taken on your iPhone sixteen. You now could actually superimpose you Paul at a duke game, okay, and then basically take that picture and it actually looks from an animation perspective that you're actually in the picture, and you can actually create movies from that. Those are examples of just a little tip of the iceberg in terms of the examples of what consumers and I think vision pro you're seeing some

Okay, we're gonna have to leave it there, Dan, I thank you for the brief, and we focus there of the entire day and Apple. That was a real luxury. He's got a lot of other capabilities. Today's from page headlines. Lisa came in, She's gonna do an all tailored newspaper thing. I said, no, I'm done with Taylor. Start with something different. Please, what do you guys?

We will well, so were John Stewart. He returned last night, host of the Daily Show. You know he's going to be on every Monday, so he returned. It was classic John Stewart style, right. He first answered the question on everyone's minds. Listen up, why am I back?

You may be asking yourselves. It's a very reasonable question. I have committed a lot of crimes from what I understand. Talk show hosts our granded immunity.

So there you go.

So he kicked off the season. He did that Shoe's signature franchise indecision election coverage, he talked about yes, Taylor Swift, the Super Bowl conspiracy theory surrounding it, right, But he's just he's back and full forth. I'm curious to see how the ratings pop helped me here.

Did you just say he's not only one day a week? Mondays Paul, I don't get this. I mean, you know, the wonderful Rachel Meadow's doing the same thing, and many others out there. How do you build a franchise if you're as an ept as I am, you can't do it one day a week.

I think he's already got the franchise. This is throwing a bone into the network and say, hey, we'd love to have you as much as we can get you. I'll give you one day a week and we'll do it through the election. So that's his gig. He's going to do it through the election. So it's not a long term, but he gets a play. And I'll tell you TV is so desperate for any relevance broadcasts linear televisions brought, you know, so desperate for relevance networks and they.

Haven't had much. He tried to get something with Apple TV, going that Apple.

But I'll tell you that I listened to the I watched the show this morning. It's the exact same as it was, which is exactly what you want, I think.

But it's what brought it to that success in the first right. All right, we got Tiger Woods, Yes, we talked about Michael Barr mentioned this moving on from a split with Nike launching a new apparel line. Now, Paul, you're the golf guy. So he's going with Tailor Made Golf Sunday Red. That's what it's called because you know he wears the red you know, on Sundays for the final round of tournaments. But it's like an ongoing relationship. He joined them back with the brand in twenty seventeen.

I used Tailor Made Woods, I use Callaway Irons. Tailormade's a great brand, but it's no Nike. I was surprised to see the Nike Tiger Woods split on both sides. So I guess this is just a question of I don't know who's got equity ownership and does he have, you know, more say over what's going to be done here. And you know, Nike had backed away from golf a little.

I think of the great Miller Barber who just kept going. I mean, you know, you at the senior course and just kept going and going. Is Tiger Woods now a senior.

Not quite a couple of years away, But he's still still by far the number one driver of anything.

So he's still in the circuit even with this terrible.

Yeah he's playing this week, for example, Adam Los Angeles, because he's the sponsor this week's tournament.

I I got thirty seconds, Paul, the drunk kids on the golf course got it.

Just went over the edge, I mean over the edge, just over the edge, and it's out there in Arizona. It's a great tournament, the waste it is and it's a big party, and they just went over the edge, over the line. This year, they got to pull it back, pull it.

Back right away. One final story there, Lisao.

Tell her swift come on, Bob, discipline Okay, here's the thing. They put a priced tag on her airtime during the Super Bowl. She was on for fifty three seconds.

Okay, so if a four hour brought.

So if you if you factor in the cost of a thirty second commercial, right seven million dollars, that airtime was worth twelve point four million dollars.

And so for the people that are complaining that she gets too much airtime, it was fifty four seconds and a three and a half or four hour broadcasts listen up.

And it was great for CBS.

They're happy because it brought in more viewers, record viewership. Everybody's happy.

Even tell you the game for free? Can I Can I just say there is a videotape out there on YouTube, thank you for watching a YouTube Bloomberg podcast. And one night at a place called the Bluebird Cafe in Nashville, and this happens all the time. One night Steve Tyler from Aerosmith came out of the audience. This blonde comes out of the audience and picks up guitar and she sat on a stool without any of the modern hot air, and she blew the room away, just the chops, just