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Laura Rain joins it. She's the Chief ECONOMOCE at FS Investments.
Lare given some of.
The economic data we've seen recently. I guess most recently was a strong retail sales. It seems like this economy's doing fairly well, if not better than fairly well. How do you think about it?
I think what we're seeing is a little bit of a difference between the growth data that you alluded to with the retail sales numbers, and the employment data, which does seem like the trajectory is slowing more notably. I think all of this adds up to a soft landing. But I think you bring up something really important. If you look at the GDP data, it still looks like there's no landing. We're still growing at a pace that's well above potential, and I think really reflects a consumer
that just is truly unstoppable when we look ahead. However, I think we are in for an incremental slowdown in GDP growth. We're probably going to see a business investment take a pause, a lot of uncertainty right now about regulation around the election, and I think we're going to see government spending also downshift to neutral from being a
pretty powerful tailwind. But you add it all up, I think today where you see the soft landing, more specifically as in the labor market data, where we are starting to see a cooling picture, not cold, a cooling.
Laurie, you walk us through sort of how you're thinking about all of this as you listen to FED policymakers walk us through the way that they were approaching this next meeting, which is going to take place just a day or two after the presidential election. What are you listening for? I'll note that Chris Waller is speaking today. I think in Vienna, Austria, we're gonna hear from Neil kshk sorry as well. Is the is the commentary there?
Commentary that we're getting is a cacophonists. Are we hearing some of that unanimity that a lot of people thought was eroding after the last meeting? What stands out to you? What are you listening for when when these policy makers.
Speak, I think the only thing that they're unanimous about is that they're going to have to be data dependent when they're looking ahead to twenty twenty five. Listen, the inflation data has absolutely come down enough to open a window of opportunity for the FED to correct rates down and sort of keep them in line with real FED funds rates. You know, when we see inflation coming down, just the nominal FEDS funds rates starts to look a little bit more restrictive.
So I think that's the.
Adjustment that they're making today, and to twenty five basis point rate cuts at the next two meetings has always been my forecast. I think where I deviate more significantly is into next year because I think they're going to really take a pause. They're going to wait and see how the economy is evolving. And I feel like they take flak for having this sort of data dependent view, but I think they have to because I don't think inflation's totally gone. I think it's you know.
I think the boogeyman's under the bed.
I don't think it's just gone for good.
Lauren, let's talk in the labor market here. You know, from my perspective, this is a fully employed economy because all of the Sweeney offspring are gainfully employed. So to me, that's very good well employed economy. What does numbers tell you about kind of where the labor market is today and where there might be some risks.
You know, it's interesting that it's evolved into almost a two speed labor market because when you look at the hiring data, it's declined, it's looking weaker than it was before the pandemic, and it's eroding somewhat. But when you look at the layoffs data, it's also very low, so you know, people aren't losing their job en mass, which is really just what's so critical to keep household consumption
going and consumer confidence where it is. But when you look at job opportunities, you know clearly that churn that we saw after the pandemic is really gone now, and you're seeing the hiring side of things looking cooler.
But you know, to me, the can area.
And the coal mine is always the weekly initial jobless claims.
You know, we are seeing some elevation there because of the hurricanes that have devastated some local communities, but overall, outside of that, they're still fairly low, and of course, you know, nothing gets the market's attention like the monthly payroll report, which I think is going to continue to show a steady unemployment rate at round four four point one percent and hiring that's strong enough to keep that unemployment rate steady where it is.
You know, bearing in mind what you're saying about how the Fed's going to be data driven and we have to be as well. Let me just ask you about some of the softer data. And we had that consumer confidence number a few weeks back, which I think spooked a lot of people. Consumers less confident in the economy where it is now and where it's headed. How do you factor that into the way that you were forecasting
and thinking about the economy. Just the sense that consumers have about the US economy directionally, I noted in the last Confidence Board Report conference report, this sort of heightened interest in what the FED is doing and where interest rates are going.
You know, you bring up to such an important point because the consumer confidence data have been lackluster, have been weak really since the pandemic. And that's despite you know, a very strong on a labor market, and despite the fact that while consumers say they're a little more downbeat on the on the economy, they're still out spending like gangbusters. So it's hard for me to connect those dots today given that the data has just sent such mixed signal.
You know, we read the consumer confidence data closely because it comes out early, But of course what really matters for all of us is what their consumers are actually doing now, what they say they're worried about. That said, we cannot just ignore it. So it's something I think that I'm hoping we'll get better after the election. I
think that's weighing on sentiment, just the uncertainty. And I think that, you know, as consumers slowly get used to interest rates at a higher for longer place, some of that concern around what they're able to do afford and what houses they're able to buy is going to normalize a little bit. I just think a lot of people are waiting for us to come back to a very low rate environment that I don't think it's going to happen.
All right, because I'm not refinancing my mortgage, is what you're telling me anytime soon. Lara Ram, thanks so much for joining us loa Rain Chief economists at FS Investments.
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I want to bring a Nancy Curtain, Partner, Global CIO, head of Investment Advisory at alt It Tiedament Global. Hey, Nancy, We're just kind of getting into the teeth of the earnings, but we have some good numbers out of American Express today. The big banks put up some really good numbers. I mean, Morgan Stanley JP Morgan, What do you take away so far from what we've seen coming out of Corporate America earnings wise?
Okay, so we're early innings in the third quarter, but like, so far, so good banks. As you said, we're pretty strong trading, they're benefiting from the volatility and markets. We think investment banking will probably pick up, and I think they indicated quite nicely on improvement net interest margins. We have Netflix Overnight TSMC rather just spelled the fact that there's a problem in demand for jen Ai, So I think that reads well into Nvidia earnings that's coming towards
the end of November. As you know, look, there's a lull bar for the third quarter. Expectations are four percent, and I think companies are going to leap right over it. So we think this quarter will be strong. But really what's important for our clients and our positioning is looking ahead to the fourth quarter and twenty twenty five, where we still expect earnings to continue to accelerate as Central Bank's ease.
Well, Nas, let's talk about that as you try to look ahead to the fourth quarter. And obviously there's an election between now and then looming large, and I'm curious just about kind of the panoply of risks that you see here. Yes, there's the election results, there's this Federal Reserve meeting that we were talking about just a few moments ago. I'm looking at just sort of how much gold has gone up in price here in recent days.
How are you thinking about risk and how is that kind of shaping your perspective as you look ahead to the fourth quarter.
Well, first of all, it's important to remain diversified, which is what we do. We don't just have equities. We've got things like private credit and infrastructure and gold, gold as you mentioned, hit twenty seven hundred overnight. That's been a really really nice diversifier and ballast in client portfolio. So it's not just about equities. And I think given the strength and market that we've seen already year today, a pullback on any of those event type things and
data things that you said coming ahead. We've got a PCE, we've got a jobs number that's going to be a bit mixed up with the hurricane and bowing and so on and so forth, and then we got the election, and then we've got the FED. So you know, short term, you never know with markets could easily pull back. They've been super strong. But remember last Saturday we celebrated Happy Birthday,
two year anniversary. You know, typically when you make it to two years, you make it to three years seventy percent of the time, and data going back to like nineteen forty nine, and remember the average length of a bullmark in the United States is five years and one
hundred percent. We've done sixty and two years. So we got to look forward to twenty twenty five at all things being equal, unless there's some big resurgence of inflation, Middle East upset, whatever, we are still constructive positive on the outlook.
Hey, Nancy, we had some I guess some conflicting results coming out of some of the big chip makers over the last week. ASML had a little bit of a warning there, actually a big warning, let's be honest. But then Taiwan Semika doctor came back strong yesterday. As someone who thinks of the chip business as kind of a proxy for this whole AI trade here, I'm not sure if it's a trader, it's a long term theme. How did you kind of deal with those two earnings announcement?
How do you think about the tech space in AI given what we've seen from the chip makers.
So look, ASML is a bit of a howler there, that's for sure. But you know, and we haven't gotten full clarification, but the press release from the company talked about the fact that it's really not in the A side, it's more in what I call you know doubt, you know, easier electronics, et cetera, some weakness in end markets of where they sell some of their less advanced so called you know, chip equipment into. So we don't think that plays into at all that there's going to be weakness
in nvideo. Jensen Wang has made it pretty clear demand is on fire. TSMC is forecasting thirty percent growth and revenue, So we think the gen Ai and demand for chips is very much alive and well so much so, so much so that there could be some near term shortages as we head into twenty twenty five in components, chips,
et cetera. And funny enough, before we get to the big productivity boom of jen Ai, we're gonna have a bit of inflation that comes from these shortages, So something we're keeping an eye on, Nancy.
I think the last time that you and I spoke, China had unveiled maybe the first of these initiatives to do fiscal stimulus monetary stimulus. There was great excitement about that than that ebbed is. There is some skepticism about what that actually meant and how China might implement it. We got these new growth figures today, which I think are on the low end for the last six quarters, but some more clarity from the Chinese Central Bank this morning.
How are you looking at China as you kind of look at the investment landscape globally and processing what we've heard both from policymakers there on the fiscal side and monetary policy side.
So the good news is in China it's kind of Houston. We have a problem, right, So finally China is dealing with both the deflation and slow down in the economy. But we believe the fiscal and stimulus so far is not kind of in the Dragy school of whatever it takes, right, we think China probably needs a trillion and a half of stimulus fiscal and monetary combined with an emphasis on the fiscal. They've done about a third of that, or at least hinted at something like that, so we don't
think it's enough. More importantly, China has some big strugruel issues, right. It's got a very high savings rate, it's got an aging demographic, unemployment and double digit and lack of the social safety net. So that is really a problem for consumption, particularly as a lot of those consumers but their money
and the property market which isn't doing too well. And then they've got a strategy for export growth, right, let's be manufacturer of a naissance, be the world's leader in manufacturing. And the problem is if their domestic economy is weak, that creates excess capacity that they want to ship to the rest of the world. The rest of the world doesn't want it, and so that brings tariffs and trade
tensions and the like. So look, we think there are some cheap Chinese shares, there is some value in the market, but overall we think the combination of structural and cyclical not yet dealt with by the Chinese authorities. But the good news is it's removed what I call the tail risk of China kind of dragging the world lower width. So in that sense, the monetary and fiscal stimulus is a positive from an overall global growth perspective.
Nancy, thanks so much for joining us, as I always appreciate getting your thoughts and your perspective. Nancy Curtin, Folks, she's a partner, she's a global CIO. She's the head of Investment advisory at alt Ittaman Global. Nancy's been on Global Wall Street four decades and we appreciate getting hurt.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecar Play 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 playing Bloomberg eleven thirty.
Our next guest, we need to get right to Gatham Maconda. He's a lecturer of management practice at the Yale School of Management is also the author of Picking Presidents. Gatham, thanks so much for joining us here on our studio. I don't think anybody knows how we're going to pick this president come three weeks time. What's your view of this election? In these campaigns kind of where we are today.
Always a pleasure to be here. Anyone who tells you they know what's going to happen is immediately demonstrating that they do not know what is going to at So when people say it's too close to call, that's basically true. I think the Harris campaign seems to feel that they'd rather be them than the other guy. I observed that the Trump campaign seems to feel that the Harris campaign is right because they're acting in a few ways that don't seem like someone who thinks that they can tip it.
Trump has pulled out of four interviews Major interviews CNBC sixteen minutes in the last few days. That's kind of striking and surprising. For twenty some days to go to an election. But the other thing that the big change that has happened since Harris came in, and this is incredibly static race since you came in, right all these people the polls are swinging. No, they're not.
This is just stable.
The big changes there's been a convergence in the swing states. When Biden was the candidate, he had a path through the Midwest and that was it. What's happened since Harris is that Arizona, North Carolina, They've all kind of converged. And so you do have this odd prospect where what is objectively a very close race could become not that close in the electoral college on after election day, just because all the swing states correlate, and so they carrelate for whom That's what no one knows.
Yeah, that's make sure I was missing something there.
Okay, you know you bring up polling, and I wanted to ask you about this because it's something Paul and I have talked about off mic, and that is, there are so many polls. We were getting so many of them. You look at them in compliment, What did they tell you? How do you approach them? I know that there's so much skepticism about what they've said in the past, how they've been right and wrong. Here we have them at
such a granular level. So much of what we know about these swing states comes from them, and we know kind of what issues are most important to voters, how much faith do you put into them, and how do you look at them kind of holistically.
Right, So, the polling data in twenty sixteen was actually pretty good. The essumate of the popular vote was only off by one percent. The polling data in twenty twenty was really bad. The estimate of the popular vote was off by four percent. What was bad in twenty sixteen was the swing state polling, right, which is why the estimates.
Is two one.
We're so old, but caveat to that.
Right now.
The thing that makes me really question the polls right now is how consistent they are. Interesting just polling our statistical instruments, normal statistical variation, you should see numbers that jump around all the time. Right if Harris is legitimately up two percent, let's say she actually is up two percent, you should expect to see a fair number of polls where Donald Trump is up one We are not seeing that.
We are just seeing poll after poll after pole coming in with roughly the same data over and over again. To me, that suggests that the polling companies are hurting that nobody wants to explain that.
What does that mean? When there's hurting polls.
There's a lot of judgment involved in how you weight different populations, how you assess right, are you going to use recollections of how people voted four years ago? For example? A lot of polls will ask how did you vote to four years ago and use that to assess, like, you know, to wait the reweight their sample. The problem is people don't actually remember that as well as you think.
If you ask people a few years after the race, who did you vote for, on average, more than sixty percent will say they voted for the winning side blocked it out. This seems unlikely. Yeah, So when you add in there are enough subjective factors into polling that it just seems to me like the polling companies might be thinking, but nobody wants to be embarrassingly wrong, and they're converging on a number which you know, like, look, it might be right, but it's not normal for it to be
this type. This consistent across.
All the polls.
One of the other shows that I think a lot of people are concerned about is we may not know the evening of election day who the winner is. We may not know the next day or the day after, and then oh boy, it could get messy and it's two thousand and all over again. But on steroids. What is the risk there of that type of scenario developing?
Quite significant, But it also depends on your definition of noe. We did not get the networks who somehow we have outsourced the job of calling who wins an election too. We did not get the networks to declare until several days after the election in twenty twenty. But by eleven pm on election night, I was texting people saying one hundred percent Biden is going to win, Like I am, you know, I will bet my condo right now any odds you want Biden's gonna win. So we knew, right,
we just didn't officially know. Okay, this election I suspect will look more like twenty twenty, where we'll have a really good sense just because I expect the swing states to correlate. I expect you know where what we'd have to say is, well, there have to be flips in like multiple states to reverse it. That doesn't seem.
Likely to me.
But but that doesn't mean that we'll have official knowledge because if look, if Harris loses, she's gonna she's gonna say I lost them. That will be the end of it. But if Trump loses, I don't think there's any chance that he'll do anything other than claim it was stolen. He'll legally he'll do that, and then we're off to the races we really have We really don't have a race, son, So what's going to happen after that?
We have been through this week when both of these candidates had made overtures to populations you'd think would not be natural supporters and them. So for Kamala Harris, it's Republican Republican women voters in Pennsylvania. For Donald Trump, it was going down to Miami to speak to this audience of Latino voters from the Univision studios there. I'm curious sort of what you make of that outreach that they're doing.
And so when you look at the game plan going from here to November, the fifth is the should the game be to reach out to those undecided voters, how few of them there may be, or is it simply to focus on that get out the vote effort to make sure that those are committed to these candidates make it to the polls on election day.
True undecided voters last time I was on I said three percent true undercided voters is probably under two percent. Well, at this point, we're talking about really tiny margins. A lot of what people are looking at which seems like going to undecided voters. I don't think it's actually about that.
Right If in North Carolina Harris is going to win the cities and lose the rural areas, but if she cuts into Trump's margin in the rural areas, the cities will take her right in Pennsylvania's you know, it's the same thing. So what we're seeing is what my code as undecided voters actually to me looks a lot more like we're trying to do essentially a covert turnout, get out the vote margin in areas where we're going to get blown out. We just don't want to get blown out by that much.
So it is I've heard from folks get out the vote kind of election. Does one side or the other have an advantage in that?
So from people on the ground in Pennsylvania that I talk to. That's where I've been focusing my attention. It certainly feels like the Harris operation is a lot more sophisticated it. What we've seen is is the Trump campaign is essentially outsourced. There get out the vote operation essentially with Elon Musk and his superpag. Obviously, that's lavishly funded. He puts seventy five million dollars in just just recently there, but we don't see them on the ground. I'm not
totally certain where this money is going. Frankly. The question is that the Trump people have a theory of victory, and it is not a dumb theory of victory, right. This is not the amateur hour campaign we saw twenty sixteen and twenty These people know what they're doing, okay, And the theory of victory is that they can get people who do not normally vote to vote for Donald Trump. If they're right about that, then they win.
This lecture, okay, Gotham, thank you so much, back big with you. Yeah, great stuff, Gotham, Maconda. He's a lecture of the management practice. Now it's at the Yale School of Management.
Now.
He walks into Gotham with a very nice three piece suit. But he's got this pin on his lapel. It's got the American flag, also the flag of Harvard, and you walk into your classroom at Yale with that.
The only time in my life I ever wear Harvard gear is when I'm on yellow.
YEA, All right, stuff there. We'd like to see that rivalry still in full tech. That's good to see.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecar Play 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, let's get a sense of this M and A business for the remainder this year and kind of what the big banks you're looking for next year. Carol Striker joins us. She is America's regional head of Deal Advisory for KPMG. Carol, thanks so much for joining us here. Talk to us about M and A in twenty twenty four, how's the business been for Global Wall Street? And then we'll talk about next year. But how's twenty four been?
Yeah, twenty four has been a better year than twenty three. We are seeing deals increasing in twenty four. We've seen them in preasing, but you know, twenty three with a really low year, so it's it's not a robust twenty four if you kind of look at the last year that deal makers kind of look as the last year of normality was twenty and nineteen, and twenty four is still lower than twenty nineteen. So better than last year, but still not a super robust deal market.
I'll take the follow up picking up on what Paul said. So, looking ahead to twenty twenty five, what in gender's optimism in bankers and lawyers in your clients about how the market is.
Going to look.
Yeah, I think the sentiment around from everyone we're talking to. I was with a one hundred and fifty deal maker yesterday talking about the M and A market, and the sentiment everywhere is that twenty five is going to be a more robust year and twenty six. We're talking about kind of the next.
Couple of years.
And you know, there's a few things that we're looking at that are going to be you know, things that are headwinds and tailwinds in the deal market. Some of the things that are positive, it's interest rates that you guys know are coming down and that is an important factor in deal making. The election hopefully will be behind us, and some certainty will be back into the market, and I think that will be something that will also help
with the M and A market. I think this next quarter, the remainder of the year is still going to be on the light or side given the election. I think what deal makers want is that certainty. And so those are some of the things that we're looking at for twenty.
Five private equity where they in this deal market here? I know there's just tons of capital on the sidelines for these private equity folks. They're always in fundraising mode, it seems, but we haven't seen them maybe back in the market and the size. Maybe some of the bankers would like to see. Where's the private equity sector as a driver?
Yeah, you're exactly right. There is so much dry powder out there. The private equity firms need to put that money to work. And I think the thing that is most impactful that we see from a private equity perspective is the interest rates coming down. So especially those LBOs as leveraged by interest rates needing to come down to be able to make those deals. A little less costly
for that cost of capital. And so when we did our M and A survey of deal makers, it came out very clear that in the first half of twenty five, PE is more bullish around having a more robust M and A market, driven again by those interest rates. It was interesting in our corporate clients in contrast, so that they thought it would be the latter part of twenty five where they'd be more robust deal market for them.
I wanted to ask you about regulatory clarity. So you mentioned the election at this obstacle. I think for a lot of CEOs as they look at the prospects of M and A, and I wonder, as you listen to these two candidates on the campaign trail, how throw their
policy on regulation seems to be. So Obviously, we've lived through a Trump administration before, and even though Vice President Harris has tried to draw a distinction between what her presidency would be like compared to the one that she's in now with under Joe Biden, do we have a good sense of what the regulatory environment would be like under each of these candidates.
Yeah.
So here's what I would say is that there has been increased scrutinity from an antitrust perspective for several years. That's not just been within this administration, and I think that as we think about the future and what we're hearing from our clients is that that scrutiny is not going to go away in the next term of whoever's
in office. I think they're working closely with their lawyers to assess what scrutiny might be there for that in particular deal in working closely on that, and so that's what I would You know, there's not a clear one path leads one way and one one path leads another way.
Carol, If I want to go out and buy a company, Who's going to lend me the money because I'm going to want to use some leverage to leverage my equity returns. Are the banks still there or where am I going to get the money?
Yeah?
Absolutely, great question. You can only get deals done if you've got the money. So a couple thingsly, for those that are using debt to finance the acquisition, the banks are open. You know, if you rewind gosh, around six eight months ago, that was not the case. And so
there is money out there. It's a little bit more expensive than it was, you know, several years ago, but it is available, and there's also the opportunity for some of our corporates to be using their stock as well as they're flushed with cash on their balance sheets as well.
Let me just ask you.
You talked about the Federal Reserve and the path of rate cutting, and I'm curious to sort of how catalytic that's going to be. So we've you know, joked about refinancing mortgages and the housing market and all of that in this space in particular, how much of a catalyst how much did the dam break when you saw the FED cut by fifty basis points, just kind of when we saw the start of what we anticipate to be a cycle of rate cuts.
Yeah, it's really interesting because when that rate hit cut hit, it's also all the election stuff is going on, and so it's hard to biper kate, if you will, what's happening with the different things interest rates and election because oftentimes in election years we see a depressed m and a market. That's what we've seen for the last several
election years. All that being said, your question is around those interest rates, and it is a catalyst for M and A we haven't seen the DM break if you will. We at kpmgr our chief economist is predicting another fifty basis points drop twenty five basis points in November twenty five in December, and when we look at our M and A survey, what our deal makers said is that a fifty basis point drop would spur them into doing
activity like it was in twenty twenty one. Now this is deal makers who that's what they do for a living, right, but.
It is to get back in the game.
Yes, absolutely.
I always say it's like a kid asking a kid in a candy store if they want a candy, of course going to say yes, let's go Carol.
Are there any sectors or what are the sectors that you think might be your clients think might be active over the next year or two.
Well, you know, what we've seen so far is that TMT has been a sector that's been extremely busy. On the contrast, healthcare has been significantly down. We're starting to see that pop up a little bit from a sector perspective. But you know, of course, I think there's things around our energy, energy needs energy clean energy is another one where we're seeing some uptick in the deal market as well.
Carol, thanks so much for joining us. I really appreciate getting your perspective on the global M and A business. Twenty four better than twenty three. Expectations twenty five might be pretty solid as well. That's certainly what we hear from the big investment banks that have reported their earnings so far. Carol Striker, she's America's regional head of Deal
Advisory KPMG. Her clients are the big M and A bankers around global Wall Street, so it's good to check in with Carol and get a sense of kind of where her clients think this business may go.
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