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Joining us down. I'm really anticipating.
She doesn't write it out like Cam Dawson joins us some new edge this morning.
You don't do an outlook, do you.
Oh, we do an outlook, but we publish it in January, so we get to look at everybody else's outlooks, see where consensus sits, and then make our forecasts.
Okay, so you know what do you see?
Well, we see a lot of bullishness.
You have an environment now where there's not a single strategist on the street that is expecting a down year in twenty twenty six. Certainly that is as a shift from the last couple of years where you had some stragglers of bearishness left over after twenty twenty twos week environment. But we are an environment in an environment where you're
still seeing GDP forecasts continue to get revised higher. You're seeing EPs forecasts continue to get revised higher, And the biggest challenge you have is that valuations are already pricing in a lot of good news. So when you look at consensus, they're expecting valuations to hold steady and earnings to deliver. That does create somewhat of a high bar for big, huge.
Returns in twenty twenty six.
I'm trying to figure out what is the black swan out there that could really crack this market because evaluations are high. But I know that high valuations historically do not push markets lower. It's usually an event out there that says people to look at the market and say, well, this is rich, and given what just happened, maybe we should take some money off.
Valuation is a very poor timing tool that has no predictive power on one year forward returns, but it does have predictive power once you start looking out three, four and five years, so you're at an environment or at a point where you can say we shouldn't be surprised afore it returns are lower over the next three to five years than they were over the last five years, where they have been extraordinarily strong.
As far as.
Catalysts go, valuations are really interesting because it's like that old warm buffet phrase of prices what you pay and value is what you get. Usually the difference between price and value is a certain degree of emotion, meaning there's a certain degree of hope and dream within valuations. And so if you were to knock something like the AI trade and all of that optimism, could that be something that sees a broader catalyst as an unwind to overall valuations.
It's a good watch item for twenty six.
Technology.
AI have been the driver of this market for several years now. Can we expect that to be the case in twenty.
Six It all depends on earnings.
One of the reasons why we have seen such a powerful degree of outperformance and narrowness of the market is because earnings have been narrow. The most startling stat is that over the last three years, you've seen the mag seven grow earnings by two hundred percent, but the equal weight has only grown earnings by sixteen percent.
Thank you so much for Rina sof I thought it was I thought Barons did a great job this weekend. Besides the foreheads for cam Dawson and Barons, I thought the Barons did a great job parsing is this is something Gina Martin Adams really would.
Push as well. So why is it en? Now?
I just heard you model out, you know, on a cautious strategy like way, single digit performance next year, it's not going to be as good. What's a what's the w what's the wei go? Paul taught me this functions? Sure wei. You know we're up seventeen sixteen percent, SPX, NASDA COP up twenty percent, So you model out single digit and like you said, we've gotten it wrong for three years?
Why now?
Why no?
I think that that there's a lot of expectation that you're going to see a deceleration in MAG seven and an acceleration and everything else, and that has been an area where there's been a lot of surprise. So the reason why MAG seven has performed so well is because it keeps surprising to the upside. And then the reason why eagleweight has been so weak is it keeps surprising to the downside.
So I think that in.
Order for this to be something more than just a flash in the pan rotation, you have to see those earnings deliver.
I was on the phone with Michael Barr this weekend as he was losing the house and the Detroit Lions of Paul. I'm looking, I said, I got a look at the date, January thirteenth of next year.
Yeah, which is not that far away. JP Morgan Earnings.
Yeah, we're going to you know, the belief of the bulls futures up thirty one, Paul.
We're going to do it again. Worry angst OMG were three four weeks away. JP Morgan, January thirteenth. Hello.
Are there some sectors, Cameron that maybe screen well for you these days? Outside of technology? I mean, I'm sure people come out to you and say, I'm I'm long tech, I get it, I get out again. But where else should I be looking?
There has been this dynamic that you might call inattentive blindness, the idea because people have been focused on just one thing, which has been AI and tech. There was a lot of good things happening outside of just those areas. So look at some of the strength that we've seen in some healthcare names, look at some of the strength that we're seeing in some of the materials.
But here's the question. Do you buy things that.
Are over sold in uptrends like a tech or do you buy something that has overboughten a downtrend like a healthcare betting on a more sustatial trend change.
This is really well said.
Which one do you tilt to in terms of optimum outcome of twelve months, eighteen months, three years out?
I think the prudent thing to do is make sure that you start to get closer to neutral. And that is the least exciting answer that we can give. But most people, given the run that we've had, very overweight tech.
I thought it was a really rich weekend. There's a lot of intellectual work out there. Kim Dawson with a speaking of quality, effort and Newish wealth, thrilled that she could be with here to get us started strong.
Whole bunch of other people coming up today as well.
Air built chunas on ETFs unless the Odolongus hasn't been in an agen, so he'll be in here.
The eight o'clock hour Camp. Paul A Monica killed it this weekend.
Looking at ETFs and factor ETFs, I think of you, I think of Liz Anne Saunders and other strategist Brian levitt Over and investco factors are everything.
Does it make sense the bet on momentum?
Does it make sense as Lamonica brilliantly said to bet On, revenue is a factor factor.
ETFs have been incredibly disappointing this year if you look at things like quality factor ETFs, and there's a lot of different ways to define quality. Yeah, all of those
ETFs have substantially underperformed the market. And of course we can look to things and say, oh, well, it's just concentration in mag seven and the leadership is so narrow, but there seems to be a knee to rethink some of the way that these ETFs are constructed, potentially making them a bit more intelligent and how they define those factors, because we've been looking at those factor ETFs going gosh, this performance is extraordinarily disappointing.
This morning, to get you started for a busy, busy week, Cameron Dawson with this new edge of Wealth Manager, Good morning across the nation, the way you listen to us, and good morning on YouTube. Subscribe to Bloomberg Podcasts. We're finishing your strong with Bloomberg Podcasts on YouTube.
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Cameron fixed income mark and we're looking at the iend go function on the Bloomberg terminal, the Bloomberg Index browser. Welly fixed income high single digit returns twenty twenty five across the board like sixty to forty work issues.
YEA, so fast, I certainly did.
So what are we thinking about the fictionome marketing twenty six.
Yeah, we wouldn't be surprised if you continue to see this volatility within fixed income. Remember, we came into the year with somewhat higher yields, and so there was room for downside. But if we continue to chop around in this range for yields, it means that maybe the best of the return that we get is just the cupon,
which suggests that maybe not the most exciting returns. But I think that the key point is that we do expect fixed income to play its role in sixty forty if we were to see a weaker growth environment in twenty twenty six, meaning that we don't think we're going to see at this time a big surge in inflation, which means that fix income can be a hedge within portfolios. If growth were to weaken.
Your charm is you have been invested through thick and thin.
The successful strategist say, you have to participate. There's a debate about how you participate, but you participate. So I'm looking here. I went back and looked Paul early April. Yeah, the world was going to end for Apple. They were done, They were finished. Wi mister cook was a failure. All that Paul taught me.
This, folks.
The description screen in the Bloomberg Apple twelve months return up thirteen percent and up a gajillion percent from the bottom in April.
How do our listeners and viewers.
Use strategy to avoid the fears that we saw in early April of Apple.
I love the concept of fear as an emotion in an individual, it can be incredibly blinding. However, if you can measure fear in aggregate, it is the most illuminating thing possible, meaning that if we can see when everybody else is afraid, it shows you when ford returns are
getting better. So we measure things that capture fear, like the percentage of names making new twenty day lows, or things like overall breadth within markets, put call ratios ideas that when you see fear spike, even though it feels terrible to be allocating capital to markets, it usually is a time where Ford returns are improving substantially. So we measure fear as a way to keep us from making poor decisions, which tend to happen at those times.
Yeah, apple off the bottom in the spring, the world's going to end up seven zeros seventy percent.
Look at that.
We've seen retail investors come in and buy the dips. What dips we've had, we haven't in too many dips, but when there's a dip, the retails come in and bought What does that tell you out there? I mean, you talk to a lot of these folks.
Yeah, there's a lot of appetite to continue to allocate to stocks.
And you can see it.
Fineral margin loan balances have been jumping out to us, growing forty percent over the last six months. And I think the contrast between the retail investor who has been.
Buying dips and the institutional.
Investor who hasn't, because ever since the April low, you actually have seen institutional investors, based on the Deutsche Bank survey not even get back to overweight, So it means that a large cohort of this investor, Yes, they've been buying some, but not to the degree that you would expect that you would normally see.
Given the strength we've seen in market.
So retail investors have been right and institutional investors have been more on the sidelines.
What are we doing here with gold? I mean, I think we're hitting a new record again today here? I mean, do your clients ask you about gold all the time?
All the time?
Look, we call gold a psychological commodity because it allows you to get some kind of comfort with things like fears about currency debasement. But the technicals are the technicals. The uptrend is still very much intact. It is incredibly overbought on a weekly basis, meaning it's moved up very far, very fast. But we've been calling gold Chuck Norris, which means that it's just been invincible and nothing can hurt it. The trend is really powerful, but keep an eye on
the tacticals. The narratives will remain, but gold could go into a constulidation.
Lisa, should we have gold called the rock? That would work out? Rock? See that as well? Is there a legit commodity boom.
I noticed with gold oil not part anticipating, But I'm sorry, there's a legit commodity boom. Is that an expectation out front of a recovering Asian?
Yeah, a bone to pick because everybody looks at the b COMM Index, the commodity index and say, look, how we're in a commodity boom.
A lot of that is gold. Look at the b.
Common Industrial Commodities Index. You're seeing some movement higher.
In that.
Show I is the ticker, but it's important to see that you have seen some movement higher. However, it's certainly not breaking out nearly to the extent that the BCom benefiting from gold has See.
What's the symbol? I got b COMM.
I can do that be com ion b com. Every day's a school day.
Every day.
School day was the curling class you hated, sit in the front row every time.
Okay, oh that's it. The bloomer. All right, I got you. I'm glad somebody's got you. I got you.
I mean fifty yeah, all right, I mean commodities are just been ripping it.
So there you go. We learned something new. Can look it up?
All right?
Oh, Tom, secundo's I'm learning to excuse me. We'll get to what would you write that down? Please use this terminal seminar cam. DAWs still getting a terminal seminary cam. Thank you, Thank you so much greatly. I appreciate you coming in.
Stay with us.
More from Bloomberg Surveillance coming up after this.
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On YouTube Ulus your Day launches. He is head of asset Allocation at Investco, joining us live here in our Bloomberg Interactive Broker studio. Uless you I mean, no matter where I allocated money in twenty twenty five, I did pretty well. Stocks up double digits, bonds up high single digits, commodities through the roof. If your long gold or silver or any of that type of stuff. What's the twenty twenty six outlock makes you think about where to allocate money these days?
Good morning?
Yes, you summarized twenty twenty five perfectly right. We were only a couple of years ago. We were talking about the death of the sixty forty, and here here we are. The sixty forty is back twenty twenty six. We expect still an environment where you need to be long risk assets. Let's keep it simple. We have easing of monetary policy, expansionary fiscal policy, and inflation is in check above the fat target, but is coming down. That is a mini
Goldilock scenario right where typically assets do very well. Growth not too hot, not too cold. Put keep the risk on.
Now.
AI technology is of course the risky part of the market in terms of the outcomes. The uncertain is widening with respect to the certainty of that payout. We have excessive cup expending. Expected earnings growth is now the lowest in four years. So for us, the safest way to stay invested is to rotate into value, into mid caps and international markets.
Is there such a thing as tech value?
Actually, the mag seven when you compare it to the other pockets of tech, is where the valuations. Yes, at twenty six PE the NASDAK today is excessive, but it's nothing like the eighty by its.
Like buying international pay for twenty years.
It's a good analogy, but the point is this is really an environment where we're beginning to see the long waited broadening out of participation. You see it also in earnings revisions for the first time now all over the last twelve months, we're beginning to see earnings revisions in development markets outside of the US and emerging markets turning positive on a twelve month four basis. So we're beginning
to see that convergence. So in our opinion, there is going to be convergence in the performance of equity sectors and styles and also between regions. So staying are located overweight equities, underway fixed income, and maintaining a neutral duration posture. We are not concerned about that about yields in the US.
So US versus non US, How should we think about that? If I want to go outside the US, am I looking at developed markets emerging markets? I've heard a lot more discussion about emerging markets over the past six and nine months and a half in a.
While, we find the case for both, with emerging markets probably the leading the charge between the two. What are the drivers here? We continue to see with high conviction and environment of dollar depreciation, dollar depreciation will will favor international markets broadly, but with emerging markets in particular, there is a rerating fundamentals because as the dollar goes down, the level of liabilities for these markets, as they're mostly
dollar liabilities, goes down. So boost from a currency perspective and boost from a fundamental perspective. So we like emerging market equities. We like emerging markets local debt, and emerging markets our currency debt.
Let's say gell honest with this, he is with invescos we talk about these markets.
The markets lift this morning.
Just a quick data check here features up thirty two the Vicks a sixteen level paud I noting fifty seven handle on American oil and Brent was sixty dollars a barrel now sixty one dollars a barrel down, fractioning gold a moonshot of forty two dollars four three seven one.
Wow yeah on gold. Paul Swiney with a let's see the dollar.
The dollar has not bounced back like we saw the stock market bounce back and some some other asset classes bounce back from the tariff induced sell off earlier in here. Why do you think the dollar is Is this was a dollar just maybe overbought earlier in the year, or is this something more fundamental.
I think you're highlighting to me the most fascinating the coupling in asset performance that happened this year. To your point, it's indicative, you know, when we had the tariff scare and the big beautiful bill, fiscal expansion, the concern around desustainability for the US, the path of least resistance, the finance excess spending is a weaker dollar rather than rising bond yields. Right, So it is indicative of euro, the Yen, and many of these currencies still being cheap relative to
the dollar by our evaluation metrix. One point thirty on the euro is not an aggressive call. Let's not forget that the euro was at one forty in the midst of the European debt crisis.
Can I do an audible sure, got to do an audible Let the longest.
Well, what's amazing to me is in many frameworks, Italy is in better shape than France. Well, first time I met you was in Aperol, sprits on the seventh floor, terrorist at the Hassler. Okay, help me here. Is it France is doing poor? Or is Italy finally getting its act together?
There's been a convergence Italy has been benefiting tremendously from the COVID support the fiscal package from the European Union following the COVID support, the money is being well spent and directed to the appropriate sectors of the economy. And France, just to pick one, as you mentioned, has seen some more headwinds to to structural challenges. So the convergence is real.
Italy has been performing well. The challenge will be will the credit will the private sector sustain that rebound that was induced by public spending Ulussia?
Thank you so much.
Let's you the longest with us year with Invesco here, stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Cocklay 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.
Good time to end the year here with Campbell Harvey.
He's definitive at Duke University, Thinking Thinking, thinking about the broader perspective of technology across the centuries, across the decades and into the future.
Professor Harvey, thank you so much for joining.
I want to get one question in here before Paul talks duke football.
But Kim, I look at the innovation.
Is the innovation we're talking about now, is it the innovation of our academics of decades ago.
Or is it a new innovation.
There's fundamental innovation and there's applied innovation. If you look at the actual activity of kind of university based innovation, you can argue that it has decreased since the heyday of the nineteen sixties and seventies, but more than made
up for in terms of what's happening with corporations. Indeed, it's an extraordinary amount of R and D that the US is spending, and it dwarfs, for example, the EU, So we spend far more on R and D than the EU, even though the EU has a greater population. And it's no surprise that seventeen of the largest twenty companies in the world are based in the US. Indeed, we have companies that spend more on R and D than countries like France and Italy.
So ca as you think about some of the money that's being spent on AI. I mean the dollar amounts, that total sums are just extraordinary, like we've never seen any other industry. I think, is there any way to gauge whether this is money well spent or is it just kind of too early in the process. Yeah, there's lots of comparisons.
Indeed, what's being spent today is, if we look at it in a relative basis, not as much as what was spent on the railroads in the mid eighteen hundreds. So we need to be careful because there's not that many historical episodes, and it is just so tempting to say, oh, well, what's happening in twenty twenty five and twenty twenty six very much looks like nineteen ninety nine in two thousand.
I fundamentally disagree with that.
Cam One of the issues that we've seen in the marketplace is I think that some people scratching.
A head a little bit. Is the US dollar here.
We've seen the stock market bounce back, seeing a lot of commodities hitting all time high, but the dollar seems a little bit un loved here. Is that just a function of the dollar maybe was over bought at the beginning of the year, or there's something fundamental.
Going on here. Yeah, exactly.
I think there is noise, so we do get fluctuations that aren't necessarily explained by fundamentals. And I think it's really important to look at the dollar in a longer term perspective, so not just this year or post Liberation Day, look at the dollar over the last five or ten years to get a perspective.
So there is fluctuation.
It has been beaten up mainly because of the chaotic nature of the terraff initiative. And I do think that in twenty twenty six the terraff initiative will will not be as chaotic, It'll be more strategic.
But is the tariff thing that I'm surprised people are talking less about? Is it a germane issue just within almost the microeconomics of GDP. I mean, I'm hearing too many people telling me tariffs aren't affecting it, and people that I know that are struggled or saying, Kim, you're out of your mind.
Tariffs are a huge impact. Which way is it? Professor?
So I was on the show around Liberation Day and then many other outlets. It was not a very popular thing to say, but I said that the tariffs were not necessarily a big deal, and the math is really simple. The size of the US imports is small like our exports, so imports are at best fourteen percent of GDP, the exports are let's say eleven percent. This is a very small amount of our economy, but it was really overblowing in my opinion. So again I think that in twenty
twenty six it will be more strategic. Let me give you an example of strategic. So most people hear about China dominating the rare earth with over ninety percent of world production, but most people don't realize the state of aluminum production.
So aluminum is a.
Strategic method, so this is important in aircraft and other applications. So it turns out that China produces sixty that's six zero percent of the world's aluminum. And what about the US. The US is less than one percent, So this is a microcosm of what's happened in the US. So in twenty years ago the manufacturing was approximately double that of China, and today China manufacturer sixty percent.
More than the US.
So again I think in twenty twenty six whatever tariffs will be more strategic, focused on repatriating some manufacturing that is strategically important to the US.
Yeah, and before we let you go, we got to talk to you about gold versus bitcoin. Do we talk about them in the same sentence these days? Are they both stores of value? I don't know what's your latest thinking.
Yeah, My latest is a new paper called Gold and Bitcoin, and I argue in that paper that bitcoin is not a substitute for gold. So to be clear here, Bitcoin is a great innovation and I'm a big fan of the space in general in terms of what it can do. I believe stable coins, for example, are the first killer app of the decentralized finance space. But be careful of bitcoin. It is now the case that it is economically feasible
to launch an attack on the Bitcoin network. And what that means is taking over fifty one percent of the computing power of the Bitcoin network. And it is feasible. And if you think about it, why spend billions to take over the network when you know the price of bitcoin is going to go to zero? Well, in finance we understand that, and what it involves is a short position in bitcoin. And given the derivatus markets are so deep today, it is now feasible to take a giant
short and then attack the network. So there is a scenario, a credible scenario, where bitcoin can go to zero. So that type of risk does not exist for gold. So gold five percent of gold is used in technology, over half is used in jewelry. It's got tangible value and it doesn't have the same sort of network structure.
Kay, I've got to leave it there, just because the time, it's so much to talk about. Kem Hervey, Professor Hervey, thank you so much. He is from Paul Sweeney's Dude University. Stay with us. More from Bloomberg Surveillance coming up after this.
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.
Right now, though we digress the newspapers. Here's Lisa Mittao.
Okay, this one's talking about some of the new stories you've been touching about all morning long. This one, John Tucker's been talking about the shooting at Sydney's Bondi Beach. But this story emerging from it, how the bystander who tackled one of the shooters getting praise from so many people had well. Local media says that his name is Ahmed el Ahmed. He's forty three year old father of two from South Sydney. The report say that he was
shot twice. He's in the hospital being treated there. But President Donald Trump at the White House he said he saved many lives. He has great respect for him. He's also being recognized by Australian Prime Minister Anthony Albanize. And this one's kind of interesting. Pershing Square Capital Management's founder Bill Ackman, he called him a brave hero. But what he also said is he's starting this fund to create a reward program for people who carried out similar acts.
So on X, he said, is a society we don't need enough, We don't taken care of enough of our heroes in our community. So he said he's going to report back once this program gets up and started. But there's a go Fundme page for this person. More than eight hundred thousand dollars have been set up there. The biggest donor is William Ackman. It has the name there who just gave under one hundred thousand dollars for that. So a lot of praise going to this bystander.
Very good. What do you have next?
Okay, So this one is a shift in the way we listen to music. Apparently, you know, we've heard about vinyl right more people going to vinyl, But apparently there's a growing toin of people, particularly gen Z and collectors, looking to own DVDs and CDs. I threw them out, I don't know.
I sold them at garage sales.
I don't know.
But it's blowning nostalgia.
Trust. Yeah, it's the vintage media. That's what gen Z is looking for. They say that they can better support their artists, but they say they want to ditch the pricey streaming. They say streaming is costing too much, so they'd rather hold on to like three or five dollars CDs DVD.
I am in awe of title. I use title exclusively.
It sounds exquisite and the fee is like nothing compared to the access to music.
And to me, it's just to fossils. It's streaming. It's a it's amazing.
Yeah, yeah, I mean I found the Duke fight song like thirty seconds next.
They're hoping they've grown value too. Maybe they'll They're hoping that it's going to cost uh be a value someday. Okay, so what is on your plate playlist? Have you been listening to Christmas music yet lately?
Yeah? Yeah, I mean my birthday, I go. After my birthday, I go, yeah, you're the one that they played.
I learned this a long time ago, and I was following the radio industry the ratings for Christmas through the roof, Yes and so here in New York it's what's the one of six seven? They go to it like yes on Thanksgiving Day.
Or Christmas Music from the scow Here's.
The here's the number, the number one hit, let's listen to it.
How much does she make off of this song?
For here?
No, we have to look into that. She is leaving the char yes of course on top. But they're saying, as of December one, you know, more people start listening. Number two is Brenda Lee's Rocking Around the Christmas Tree and then Wham's Last Christmas. Oh I love that one too, but they're saying, people, you know, in times of stress, the holiday season brings on.
That's what they go to. Wait, do you have Pan Terror's Christmas Alva? You don't have.
There are some great rock and roll Christmas tunes that you don't hear on the list, like WMMR in Philadelphia, which is the greatest rock and roll station in the planet.
They play great Christmas.
The newspapers, Lisa Matteo lighting things up here on a difficult day.
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