Rate Cut Bets Spur Modest Market Gains

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Joining you so.

From Minnesota, Brian Belski with this Rudia Mellis this morning. What was it like Brian Belski for The Globe and Mail to say you're a Canadian.

Well, thank you so much.

It's always great to be honest with you guys. And by the way, Lisa Miteo is talking about what about Me? In terms of the AI, there's a fantastic song from nineteen eighty four sung by Moving Pictures. It's called what About Me? And you could play that with respect to AI. But I think for years, you know, our mo for an amazing thirteen years and seven months, and I think that it was a perfect fit for us when we left Oppenheimer, because we could combine the culture of Minnesota

Were from Canada, and I'm not going to lie. I played it up.

When I was seeing to seeing Canadian clients and went into the Minnesota I accent, you know a little bit.

So you know, we had a wonderful experience at BIMO.

We still hope that we may be partners going forward, and it was an amazing experience.

What happens after we get the economic data we're not getting now, what does stocks do?

It's a wonderful question because I think we're in kind of this conundrum right now. The markets actually have held in there a little bit better than we thought. We thought we'd actually get a little bit more of a pullback here. Maybe one of the problems with the market is there are too many bulls here at the end of this big bull site, or at least the end of the big move this year. And we really believe that Macro has really done a disservice to investors really since two thousand and nine.

Now, your question is what happens when we get a flood of all this.

Data again, it could be information overload, and at the end of the day, we're kind of looking forward with respect to what the oh, what's going to be in terms of these job losses that we keep hearing about and what the FED is going to do in twenty twenty six. I think this backup and yields to five percent clearly has put a dampening on the broadening out

Gap into value, into things like dividend growth as well.

Brian, for those that are concerned about valuation in this market, I think they may be focus in particular on kind of this AI trade and kind of the has the AI phenomenon across the economy, not just stack Has that created a bubble in the market?

How do you kind of address that issue?

Well, nice to see if Paul and waves you the other day when I was in studios.

It's kind of fun.

Anyway, I think that bubble, I know, I'm sorry that bubble is one of the most overused phrases in investments and in finance, just like dysfunctional family in most families. We'll find that out in about three weeks from today or tomorrow in terms of Thanksgiving.

But anyway, I would say, I would say this that even when you're leading.

Up to this interview, you talked about Qualcom, and Qualcom is a great company, but you see how Qualcom's running their business relative to some of their chip makers. We're seeing massive differentiation across companies. Back in the nineties, ninety nine, two thousand, we didn't have a lot of differentiation. All stocks that had anything to do with dot Com we used to call them dot bomb. After that, we're all

I would say also this, Paul, I.

Really want you to think about the late nineties and how much everyone was making money. And what I mean by everybody is you had the big investment banks, had these these amazing and these huge IPOs, these huge secondary offerings, and most importantly, these business combinations.

A lot of mergers and acquisitions.

That were done with stock, where companies were buying other companies with stock that they had no value because the stock went up and they were taking that appreciation of the stock to buy another company. We're not seeing any of that yet, So when we see more of that frothy, frivolous.

Type of activity, we would become a little bit more worried.

On the AI side, paper buying real companies, think AOL buying time Warner.

That was the trade of that decade.

Brian talk to us about earning share where you know, kind of as seventy percent away through earnings. Seems to be pretty solid earning spree for Q three after a good Q two as well. Is this enough to support this market?

We think it is, and that's what kept us bullish after the April time period where we saw the out year period with respect to twenty twenty six versus twenty twenty five earnings revisions.

Really begin to bottom on.

In turn, we think that's really what's driven a big part of this. We also think too that if you take a look at the equal weight to S and P five hundred, those companies actually from an earning's revision basis are starting to see a lot stronger recovery.

Lastly, if you take a look at the operating performance.

Of companies, whether or it's cash flow or return on equity or return on assets. We're starting to see from a sector basis, the majority of the most cyclical areas begin to turn and out.

What makes this field really really good? About twenty six and twenty seven.

Brian Belski with iss samilis here this morning across the nation on YouTube. Thank you worldwide for your support on YouTube. Subscribe to Bloomberg Podcast. We're waiting on Kathy Wood here in about five minutes. Going from Brian Bellskin to Kathy Wood. A good thing, Brian, I got to squeeze two things in here. All of a sudden, we have tech issuing bonds to pay for AI. Of course you study you should have seen him. He got an A plus at USC in Medigliani and Miller's theorem.

Does it matter that big tech issues debt?

Brian Belski, Well, if you take a look at debt equity in the tech sector, but then also free cash flow, it's off the charts in terms of free cash flow and debt equity is very very low.

So with respect to where where they are in the cycle, it's not surprising that they're out in the debt markets doing this, especially given the fact that capex is that now the bigger question Tom is going to be in two years from now, do we see a massive reversal in Capex?

And I don't mean to be Johnny.

Rainklau, but at some point we're going to have our recession. So are we going to have a Capex recession in a couple of years?

Again, I don't know that, but when you have.

This big ramp up in capex funded by something else that is not normally funded, I think that could ultimately lead some pullback in the market.

Okay, this is a classy way Belskin and I've been doing this for years and he's a class ack.

Folks.

As you know, Brian your opiniata and Kathy Wood is a greater piniata than Brian Belski. I want you to explain the efficacy of a tech only and a high beta tech only trade if your time frame is longer than a year. Right now to Keathy Wood's on fire, but over a longer time frame, her math, her performance goes way down. You can't have it both ways, Ken.

You you can't. And we have a tremendous amount of respect for Kathy. We've known her for a long time.

I remember going to her offices when I was a strategist at Merrillnch even before that, Piper, Jeffrey and so I think that the holding period for stocks is what kind of what in the average of those of those performances really really hurt that longer term side of things.

But remember you go back to the.

Old notion of Stocksviville long run and buying more on dips and things like that. That's why we're big believers of having different strategies and also running portfolios with respect to value, a small mid gap and dividing growth to balance out the tech positions.

Yeah, Brian, one final thing. I mean, Michael Barr calls in sick today. Do you see that, like three am?

Yeah, exactly.

You know, he calls it in a bapslager and he's sick, and I called it missus. Barry said he's not sick. The Vikings beat the Lions. Okay, Ryan, help me here, JJ McCarthy, Is he really for real or was that a one off what he did to the Detroit Lions?

Well? Quite frankly, he's got a big test this weekend too, with the Ravens. The Ravens haven't been playing great this year, but they do have that traditional strong defense.

In our view, being in.

Minnesota here, we don't believe anybody on the sports side until they put a string of games together. And JJ unfortunately hasn't been able to put a couple of games together number one because he's been hurt and number two because you know, he hasn't really been able to do that.

So I think this is a big test for him.

We're hopeful and quite frankly prayerful that we finally have a franchise quarterback, but time will tell.

We will see on time will tell. With Brian Belski, he sets up Qumillus and will of course be calling on all of the institutional success he's had with this great bull market. He is one who has absolutely nailed Paul participate. Brian Belski is with Humillis. Thank you so much, Brian, and best of luck from all of Team Surveillance.

Stay with us.

More from Bloomberg Surveillance coming up after this.

You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple karplay and android otto with the Bloomberg Business app, or watch us live on YouTube.

We have the right kind studio and now want to treat usually a Queen Victoria Streeter and a continent somewhere.

Older Schweting is with us right.

Now, truly expert on all of this at baron Berg Bank. Let me start with the same question I had for mister Howard at B and P Perry back. Should the Fed is Central Bank, the US Central Bank enjoy the descent that we see at the Bank of England? Do you embrace A five to four vote is a good talking point?

I would say it's a good talking point, But descent on its own is not always good. It depends on what the arguments are. And in a way, this descent shows that we are in rather uncertain times. The Bank of England really is having a quandary. Inflation very high, but the economy lightly is low.

So what do they do in the reset to a higher inflation rank going from one point ninety two percent out to two point x Dare I say three percent?

There's a culture for.

That in America, maybe there's a culture for that in pre Brexit England, Germany to Pokote, the economists Bart Simpson, Yep, they're gonna have a cow. How is Germany going to react to a new higher inflation regime?

Well, Germany will probably be part of the higher inflation regime for a simple reason. We have labor shortages coming across most of the advanced world, especially in the US thanks to well net immigration dropping to zero over here and in Europe demography plays a role labor shortages. Main wages in the future, not necessarily this year or next year, but longer run will rise faster than in the past. Artificial intelligence helps but won't fully offset that.

Get used to more wage.

Inflation in the long run, and central banks needing to keep rates at a level that's above what we usually had for the last twenty years.

You know, most of us grew up with globalization and arguably the net positive effects of globalization.

Is globalization dead or on the back burner?

How do you think about globalzation and the economic effects of globalization over the last forty fifty years?

Where are we on that story?

Now?

The big wave of globalization is over.

China has fully integrated into the world economy, and now it's actually that China is sort of decoupling here, and they're a bit from the global economy, and we are no longer in a phase of globalization. We are in a phase of regionalization. Trade relations and financial relations between friends, between partners, between close neighbors are likely to increase significantly. We see the trend clearly in Europe where we see our exports to the US and China drop, what where

The Germany district are getting closer together, well, they've been pretty pretty close for a long time already, but it's the Germans and the pone size one example, are getting closer together.

For instan it's Germany now exports more to Poland than it does to China.

This is one of the big changes in the world.

This is really This came up a couple of days ago.

Holger schmeting with US folks to advance the conversation, and we welcome all of you acrassination on YouTube. Thank you so much for this experiment. A lot of conversation in Montreal about the YouTube talked about it's another distribution of what we're doing, particularly abroad, and thank you so much.

The October numbers at Google gave us were just really really outstanding futures of ten here, the VIC seventeen point eight three and the broader economy globally in America. Holger schmeeting with this a Behrenberg Bank. I look Holger at where we are and to me, it still comes down to business investment, the whole AI distraction and nominal GDP. What's your frame out of nominal GDP out two years.

Well, for the US, nominal DDP growth is going to slow somewhat, largely because the real economy is slow. That is largely due to Trump policies. Tariffs are ultimately bad, even if they'll lead to an initial search of inward investment. And the AI boom is great, but you probably cannot

Labor shortage is biting the.

US inflation rate is set will likely settle at two point five to three percent, at one point five percent trend growth to that and your nominal GDP well four and a bit.

We saw Germany and some other European countries step up their spending earlier this year in terms of infrastructure defense. Give us an update on that. Is that actually happening. Are the dollars being spent or the euros being spent?

Well, what you saw earlier this year is actually in an announcement that Germany will step up in spending. Okay, we have seen it for defense spending since twenty three that is being stepped up, But the big investment infrastructure

Can I do an audible sure? Okay.

One of the big themes in Montreal was like where we're going with climate change? Of David Gura down in Brazil at COP thirty and all that. I read an article about Portia which I think is owned by VWS Buzzing, and they're flat on their back because they bet on electric and they're turning away from that. You're one of the best I know on this holder. Where is green? Where is climate change? Where is the liberality of those politics? I'm a continent in Britain over the next five years.

There is a shift going on, not really away from greenery. We in Europe are fully aware that climate change is a threat, but we're also aware that we have to be pragmatic about how we reduce our CO two emissions.

The most visious notes I ever got was from a fan l from New Jersey. Oh yeah, Elle emails in.

He goes It's not the Detroit Auto Show, it's the North American International Auto Show. I'm at the North American International Auto Show Polgish meeting with the head of Mercedes, the guy with the mustache, and the answer is he goes, we're not going green line, that we're going to be hybrid. So in Germany there's this parsing between Mercedes, who've done it more intelligently than someone like Porsche. Is that is that accurate?

Well, different companies have done it differently, and they need Some companies went probably a bit too far in trying to sort of front run the green but hybrid is sort of probably an intermediate stage. I would say we are ultimately going very much towards electro mobility, but the pace at which we are going and the transition being a bit more pragmatic, a bit more hybrid, that is kind of a change that's creeping in In response to well, it's it's not cheap to do the trend.

Can I just make an observation for Augish meeting and all of the continent, it is so good that Lufthansa didn't get rid of the seven forty seven. One of the great things in New York City is a Loutanza seven forty.

Seven j a Newerican JFK. Every day that's a great and beautiful they're way much. We should bring them back.

Yeah, I mean, we're definitely that's a streat point.

Holger schmraining with us on this day of dissent at the Bank of England. 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 joining.

Us now and really really looking for She's been so busy that we really had a challenge to get around now a generous amount of time was Shannon O'Neill's Senior Vice President Greenberg Chair at the Council on Foreign Relations, Definitive on Latin America in the broader global economy. Shannon O'Neil, you've got though it's been way too long, by the way, Shannon,

Well, thanks for having me, and there's so much to say, but I think, especially in this article, i'd narrow in on defense because that really is the issue and where there is reasons to intervene in the US economy to make sure that we're secure. And here the blanket TIFFs that we put in place, some of the other controls that we've had are making us less safe rather than more. And in part because the company is the primes, you know, those at our defense contractors is really hard to work

Shannon, does that open the way for China, Russia others to fill the void?

It opens the way for those, but it also opens the way for other industries to grow around the world. Right, We've seen Germany talk about spending a trillion dollars over the next ten years, but a lot of that's for their own defense industry. And you know, traditionally allies like European Allies, Middle Eastern Allies, Asian Allies, Japan, South Koreina, like, they've bought a lot from our suppliers. Right, they haven't

Is there are some of these relationships that the US has built up maybe post World War Two?

Have they been?

How badly damaged have they been? They recoverable? Do you think in years ahead, if we have the will to do that, You.

Know, they've been bent. I don't think they've been necessarily been broken. And you saw on President Trump's trip just to Asia, you know, a week plus ago, reaffirming some of these alliances with Australia, August some with you know, South Korea going to build nuclear submarines together in Philadelphia along with ships. So there's some repairing here, but a lot of this, you know, these alliances are based on mutual trust, and I think the volatility of US policy is bending that.

Shannon on you with us with the CONSOL on foreign relations, we could have a two hour conversation. I could be like, you know, like I did the thing with the governor the other day of the FED. I mean, you know, we could get up on a stage and like go three hours and Venezuela, Shannon, you have followed like no one else I know in America, Maduro, in Venezuela, your thoughts on the present mystery of what the guns doing, your thoughts on the future of Venezuela.

You know, I think the challenge with Venezuela is, you know, if the United States wanted to go in and replace Maduro, we could, But the question is what happens the day after? Right, This is a country that, over the last twenty five years has lost its democratic institutions. It's controlled by a kleptocratic even criminal regime, and it has lots of different

Cuba, And again you've been fabulous on this, and I think of the arching Monroe doctrine somehow coming over to some new Trump doctrine. But Shannon O'Neil, the structure of Venezuela culture, is it like Cuba where it's basically shattered, or is there a finance, an investment, a social system after Maduro that can move on.

You know, lots of the civil society institutions have really been destroyed, and you know, eight million people have left the country and so lots of that has gone with them. Now there is a possibility they would come back. But as you look for analogies, I would look less at Panama or at Cuba. I would look more at Iraq, how do you know, rebuild a country and where you have lots of militarized people, what's the debatification, what's the

Shannon Is.

I'm just trying to think of the role of you know, President Trump has focused on More America first, and that has economic ramifications, it has political ramifications, maybe even security ramifications.

How do you think the rest of the world views the US these days?

You know, as I look at the reactions of those last nine months, particularly in the economic space and the TIFFs. Yes, you see lots of you know, governments coming here trying to sign free trade agreements or frameworks with the United States. So we've seen that, but you know, these trade negotiators are going to all other capitals in the world, and I think what's really interesting here is the dynamism of

I saw charge just in the last forty eight hours. Folks on I'm so sorry I can't cite it, but Shannon and done to that point. We all know when Africa slipped away and China bought resources in Africa. Are we at a point here where South America and Latin America slips away and China takes over those relationships and those trade trade dynamics.

Now, I think there is still a desire in Latin America and the Western Hemisphere to trade with the United States. Right, the United States has been the biggest foreign direct investor, It's been one of the biggest trade partners. And what they trade with the United States is more complicated good, it's not just resources and you know, commodities going out to China, which has normally been the exports from Latin

When's the next book, Shannon, We're waiting, when's the next book?

Come on?

We're gonna look at, you know, industrial strategy, industrial policy, because that's where the world's headed.

Okay, on the supply lines.

A brilliant article in Foreign Affairs, Shannon o'neilla, driving Force ayers the Greenberg.

Chair at the Council on Foreign Relations. 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 Coarcklay, 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.

What did I missed while I was away?

The newspapers with Lisa much anything from the Montreal Gazette thing exactly.

All right, so we want to start with AI because we hear so much about AI taking jobs, right, Okay, so now AI power users at work. They're making their coworkers look like slackers, and it's starting to cause this tension. Okay, all yeah, so this is in the Wall Street Journal. So it's basically not you know, people who do machine learning and all. It's just people who have skills at

The case this is a generational thing because I feel like the younger function.

Better, better at it.

Yeah, I can see that. I can see that.

But they're they're doing like they have their own personal branding, Like they have YouTube pages where they post their tips on how to do this. They go on you know, LinkedIn, and they post little articles on these tips on how to use the as.

This is similar back into my day, if you were like a good spreadsheet person.

Yeah, that like that was my generation was.

The queen of Excel and so many people in the New York area lenor major shout out Courtney Donahoe.

Yeah, is an act of God on an Excel spread.

Wow, it's frightening.

It's frightening.

She looked at me once and goes, are you the worst Excel spreadsheet user in the world. It said, yes, dear, I am ye carrly Dyna. Now it's I agree, Like, AI is a huge deal.

Yes, and it can help you rise up the ranks. And you know, because they're saying, like, the difference if a bot doesn't replace you a human who knows how to use it, it's.

Oh, that's what that is. Spartan, how's having a meeting? Who was sparted that? They said, Hey, stupid, you're a bot.

I didn't know what he meant.

Now I got it, Okay, so we'll stick with AI.

This is from the Washington Post about how the NFL is using AI to prevent injuries. Pretty interesting. So they're using this thing called Digital Athlete. It's this AI platform and helps them kind of figure out player performance. So it basically this database, right, thousands of players in there.

Because they can predict that.

You know what, they might get hurt, they continue using So this is something they're using. They're actually saying it's working because since they launched it back in twenty twenty three, practice related lower extremity strains have dropped about fourteen percent league wide.

So they do different things.

Yeah, they did that with me and Paul.

Yeah, I keep us off the field's rocking it with Scarlet Food, you know, eleven twenty two and they get the software.

Going exactly five hours of radio make a mistakes, get there. He's about to draw intelligence ten eight this morning. I like this next story here because I'm thinking of Scarlet and Matt.

You scar the stories up front, but you see the stories.

I know a person I know, I don't he's vip yep because so much for me more please this is why.

Because yes, they live in Westchester, right and now more people coming back to work, so that means more gridlock, more people coming to the city, which means there is a new way to get into the city, and it is a twelve minute helicopter ride. Okay, it leaves, yes, it goes from Westchester and it goes back here. There's a place on thirtieth Street and twelfth Avenue that's Blade Lounge West, right near Hudson Yards. Or it drops it from Westchester Hudson Yards. It's Blade Air Mobility. It's part

All right, that's the way to go for Scarletton. What's the way to go?

Lisa Mantiro the newspapers this morning, thank you so much for that.

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