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Okay, folks, what we're going to talk about you. We're not gonna talk dsge. We're not going to talk intercals within intericals or derivatives the mathiveness that Richard Clarett has acclaimed for the former vice chairman of the FED. I don't want to know when the Fed's going to cut rates or all that. We're going to talk about what you did at Columbia. Okay, Richard Claret of folks went into Columbia with some massive hires in retention of one
of the best faculties in the planet. It goes back to Luvin in Belgium, it goes back to some of the way back work in Germany, and of course the combine out of England is well, you retained a laureate Stiglitz. Yeah, you dealt with Jeff Sachs with all of his ability. In that you have ned Phelps with this massive eclectic view over time. Colombia owns the social analysis. Good morning Chicago, and mister Becker, you own the social analysis of this
K shaped economy. Jeff Sacks wrote a book twenty years ago. I'm going to say it was way out front on this how case shaped are we? When you talk to your friends and Romans and countrymen in Colombia, how K shaped are we now? Doctor Claardon.
Well, and also you left out Bob Mandell, Chili a giant and international monetary economics. So it certainly been a treat to be at Columbia all these years. We're definitely in a K shape economy. I think we've been moving in that direction for thirty years. Not in a straight line, but the trend has definitely been in that direction. I think the events with the pandemic, the policy response, and
the like amplified some of those trends. You know, in America, if you own your home, as sixty percent of people do, and if you own stock, you've had a very good run.
But that means there's.
A substantial fraction of the country that has not been participating. Maybe if I can just parachute a bit in on this. You know, at the FED. When the economy slows, you cut rates, and I certainly did that at my time at the FED.
And the FED.
Understands that when it lowers rates, it's going to support the labor market, which is good and for a lot of people that is their stake in the economy.
Is their job.
But low rates also lead to higher acid valuations and also leads to some of the trends that you've mentioned in the case shape economy. And so I think central bankers understand that, but their toolkit is really pretty limited. So I think that's how we end up with this dynamic.
How does it fit a reserve? Any central bank deal with a black swan like, oh, I don't know, a war and rent that came out of nowhere. I mean, how does a FED typically look at those types of events.
It's difficult to predict back swanp black swans almost by definition. So what you try to do is you try to do analysis. You try to look back at history. You know, history doesn't repeat, but it rhymes as the saying goes. And so I'm sure at the FED they're looking at past oil shocks, past Middle East conflicts, but they'll also have to fix factor in Paul that it's a different US economy than you know back in my college years in the nineteen seventies. In particular of the US is
a net energy export. Important, however, is in the FEDS models it's still the case that when energy prices go up, the economy slows, and I think the main reason for that is that roads real incomes for a lot of workers. Also the fact that the US imports a lot of goods that have a high energy content, and so yes, you'd better be an exporter than an importer. But the US is not insulated from this shop.
Karl Marx comes from the giant Thomas soul Out at Hoover. Yeah, and also from my great mentor in London, Megduan to Saia, who we lost last year, Carl Marx said in the British Museum reading room and wrote a treatise on the end of capitalism, and the bottom line is by definition we become ever more k shaped, evermore divided, and there's corrective solutions. Do you worry that within all of the institutions of you, as you've represented, that we're getting to stress points where it falls apart.
Well, I'm not sure of that, but certainly.
The trends, as I mentioned, since twenty twenty have definitely moved more in that direction. I would point out, though, that we have had periods not all that long ago, you know, certainly in the last part of Obama and during the first Trump term, before the before the pandemic, you actually had some of those K shaped trends reversing and lower desk. And I can certainly tell you that during my time at the FED, it was one of
my focuses. That's one reason why the FED got a lot of criticism for cutting rates in twenty nineteen, because the unemployment rate was below four percent, and some models were saying, oh, you can't operate the economy below four percent unemployment. And our attitude, well, let's see how the economy operates. And I think that was a positive development. And so I think policymakers do need when they are in healthy economy to allow the economy to reach its potential.
Well, one could argue, I mean the war. Notwithstanding the economy is generally performing well in terms of growth, the unemployment still looks like at our near full employment. Sure, I guess that's a recipe for the FED to say, all right, we're doing our job and maybe we can just sit down, stand down a little bit. Is that what you expect the FED to do over the next several meetings?
I do.
I think that they've pretty much signaled that the existing FED before Kevin Warsh arrives, it is happy right now to step back see how the economy evolves with its energy shock. It is interesting, though, that they did indicate that most of the members of the committee still see at least one cut this year and next year as appropriate, and so I would think that over time Kevin Warsh will be able to get the Committee to cut rates at least a couple more times, but it may not happen for for a while.
Richard Clarina with this folks of Columbia, of course of PIMCO as well, global economic advisor in the former chair of the Federal former vice chair, It's going to give you a promotion Therey formervice chair the Federal system as well. Okay, I've got to get you in trouble. Myrone was and Governor Myron was in with John Farrell. John I thought
was great. Good, there's a FED reacting after the fact, folks, John Tucker told me the Latin is ex post, and then there's this whole dream of getting out front and fixing it before it screws up, called ex ANTI. I would suggest Governor Myron is not nearly ex post. Is his brethren at the FED. He genuinely wants to get x anti. Is there any evidence of a successful central bank trying to get out front of the model?
Well, you have to look pretty long and hard to find that.
New testament.
Yeah, you know, models are tools, but they're backward looking, and in particular, I think oftentimes the argument that Governor Myron has made is he.
He has a personal individual belief that the.
Neutral interest rate in the US is well below the current level and well below where the committee believes. You know, he could be right, but I don't think that is the view on the committee, So I think he'll continue to be a minority view on that.
You mentioned mister Walsh taking the FED chair seat later this year.
In several months time.
I'm not sure we've got a path for that to happen. How concerned are you about some of the noise surrounding that whole.
Well, I think it's pretty clear now that in order to become a FED chair you've got to be confirmed by the Senate, and to be confirmed by the Senate, you have to have an affirmative.
Vote in the Banking Committee.
And right now, Senator till Us has indicated he will not support any FED nominee, including Warsh, who he thinks would be a good choice, until the current situation with the Justice Department subpoenas and the FED is resolved. And Power more or less said that himself that he's not going anywhere until it's resolved. We do think it will be resolved. We do think eventually Warsh becomes chair. The
timing of that is uncertain. Whether or not it happens in time for the June meeting is too soon to tell. But we do a thing eventually that it will get resolved.
The first thing I did with AI, yeah, Tom Sekunda was our founders grabbed me by the cheese its rack in the food court, so that we need a briefing. And is mister Secunda's leadership. Folks on AI is noted across a ten state area. Richard Clarita, he said, here's AI. Get up to speed on it. Richard Clarita is up to speed on AI right now? Is it a job creator or is it a job loser?
Well, right now doesn't appear to be either in the data. And I think there is as many opinions on this as there are people that you talk to. Myself, I am. I'm skeptical that in the next year or so we're going to see a dramatic change in the labor market because of AI. The models are impressive, but the analogy I like to use is even their developers admit right they hallucinate.
Hallucination is a feature, not a bug.
And I don't know about you, a Bloomber, but I can tell you at PIMCO, we don't hire a lot of employees who say part of my job description is I'm going to hallucinate, And so I think until they figure that out, it may not have as much an effect on the labor market as people think.
You and I used a Kueful and Asker slide rule. Okay, the only way you can learn logs is a slide rule. Remember when the Hewlett Packard cat or the rich kids had the Helett Packard.
What was it called reverse polish reverse polish notation.
I got one on my phone here, But to me, it's the same shift where the professors are going mental and clash and use your calculator and all that, and we're just gonna get We're gonna deal with it.
I think we're gonna deal.
With it, and remember that near term, in order to get the nirvana of AI benefits, there has to be a lot of capital spending, data centers, power generation, and so that the interesting thing about AI right now is that it's really a driver of a lot of the old traditional bricks and mortar economy.
One final question, Yes, sir own Powell. Yeah, you've been a staunch defender of him. He's had a pretty good ten days week here. Yeah. And so the governor as well, under duress, what's his value add to the American people to serve out all of his different tenures.
Well, I think it's important.
I think I think J.
Powell recognizes that, you know, the first sentence and eventually, whenever his New York Times obituary is written, is he wants to make sure that it says something along the lines as chair Powell Report, restore price stability and maintained the Fed's independence.
And I think that he is going to achieve that.
Thank you so much, Richard Claire to coming. Was this okay that we didn't do monetary parlor game?
Can I also say it must be opening day because mister Kean's wearing a tomorrow probably mister Sweeney, of course, My god, where's the duke?
I know, are you going to the game? Not going to the game, But it'll be a great game.
I'm afraid to ask. How's your bracket?
Yes, well, I'm a loyal alam of the University of Illinois and I picked them.
At least on that part of the bracket.
I'm doing pretty well, although I got to tell you, what's this playing a tournament game on a home court for the number two?
Do they have a bracket pool at the FED? Oh yeah, PhDs all the stuff? I think so ringer there, you know, like Vince Ryanair years ago was reading three years in a row.
Anyway, go line on.
Okay, Richard Claire, thank you so much, greatly, greatly appreciated. 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 Applecarplay and Android Otto with the Bloomberg business app or watch us live on YouTube.
Tina Fordham is a force on LinkedIn and research effort at Fordham Global Foresight is world class. Where thrilled we could get a briefing this morning, Tina. And all the years I've done this, I have never ever seen a morning like this, a cacophony of news sources, headlines, different cross currents this way that I'm completely relying on the acclaimed t live of Bloomberg with its translation abilities. Give us your update on the veracity of a fifteen point piece plan.
No one knows Tom.
The idea of coordinating with Pakistan on this is interesting. It is something that we heard through our sources over
the last couple of days. What I think is really, you know, fascinating and so important for kind of gaming out the power balance here is that Iran, having been presumed to be a weak military force, actually finds itself with more leverage than anybody thought right now and is issuing some pretty robust statements about its commitment to defending its land even as the eighty second Airborne is on the way.
Does President Trump and whomver of America have an identified Iranian leadership they can speak to.
Well there's some suggestion about who they might be speaking to. But one of our problems, you know, and I put both of us in the same boat here is the presence of so many unreliable narrators, including the President of the United States. Now he is clearly looking for an interlocutor, as he said himself.
So many of them have been killed.
They've been assassinated by Israel, who have eliminated that whole kind of middle.
Cadre of possible successors.
I know that the Iranian succession is for leaders deep, but you've got to have somebody to talk to to make a deal, and you have to have a counterparty that wants to accept that.
Right now, Iran is signaling strength.
So Tina, I have to ask, where's the US State Department in all of this? Don't we have like a whole section of government that does this kind of stuff, negotiates with the countries, really thinks about how to craft these agreements. Is that is there any a sense that there's involvement here?
Well, we haven't seen much from the Secretary of State. And not only that at the kind of you know, the line levels, so many of the embassy's US embassies in the Middle East are without a US ambassador, so everything's concentrated in the president who values surprise, it confuses that Jesus out of market participants among others. I've been talking to corporates, including in the Middle least, who are
you know, bewildered about all of this. The geopolitical butterfly effect, as I call it, the kind of knock on effects are manifold, but one of the ones that's caught my attention is a reminder that after the nineteen seventy three oil price shock, no incumbents in major countries were re elected.
So this is going to be sending a cool, you know, chill win.
Not just the inflation shock, but the political outlook from all of this is not going to endear the United States to anybody.
Across the United States around the world. This morning, Tina Fordham where it's a Ford and Global Foresight, Paul Sweeney and Tom Keene with a news flow this morning extraordinary, there's an upfield to it. With a fifteen point piece plan futures up sixty down, futures up four forty six, The vixen well over a stick, but oil now under ninety eight ninety seven point seventy one on Brent Crude. Your acclaim is a cultural synthesis of your study a
foreign policy of international relations. Now we have a presence talking to Tim O'Brien of Bloomberg Opinion. Yesterday you go up to the food court. I'm having a bag of apricots and Tim O'Brien's having a full English. Sure up there, you know the whole thing, And Tina, I'm talking to
Tim O'Brien, who owns the understanding of Trump. We've got a guy who's deal transaction based in that Culturally, how is that Trumpian deal transaction process greeted by the Arab and separately by the Persian world.
How is it created by Well?
I mean he is somebody who values making a deal above all, but also winning above all. And what I think is very concerning is that it's hard to imagine an easy win here. As we get further in, you start to you know, hear references to that Q word from the Vietnam era quagmire.
Now, the President probably won't want to allow that to happen.
But you know, thinking about your previous guest and what others like Mohammed a Larian are saying.
The impact of this oil price shock.
Even if it's stopped tomorrow, it will you know, continue for some months.
We're already in this shock.
So calling that a win, I mean most market participants I speak to say, well, the president can kind of.
You know, he can quit any time. He can quit this war and call it a victory anytime.
Maybe, But we still come back to first principles, which is who's going to lead the country. And this notion of the world's most unusual joint venture proposition with the Ayatola, as President Trump put it, and himself, you know, kind of co owning the Strait of Hormuz. It's hard to think about how you execute that kind of arrangement, isn't.
It It is?
It's odd, And I think what it comes down to for a lot of us that are just ramping up our knowledge of this part of the world once again, is it all comes down to the Strait of horror moves and I just declaring victory and walking away. That does nothing to really secure that part of the world.
Is reasonable, take it.
Away from Iran, It doesn't take Iran controls a major economic choke hold. If you know, among the many pretexts given for this war. One one that has appeared is
kind of eliminating Iran's leverage there. You know, there's some reason to imagine that President Trump thinks about the Strait of Hormuz, which he's been talking about for forty years, by the way, and carg Island in the same way that he thinks about the Panama Canal something that it is like a toll road for global trade that it is unacceptable for anyone to have control of without United States as a as a kind of majority shareholder in that arrangement.
Tina, thank you so much. I can't say enough, folks about the LinkedIn effort of Fordham Global Foresight. As we had way Lee of Blackrock on yesterday. It's just a font of brilliance from Tina Fordham and her team out at LinkedIn. Tina Fordham, thank you. 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 Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Brian Belski with us with Humillus investment strategies, and the wonderment of his eight page note densely written, like damn, I've got to read every word. Is he this is the courage, this is the thinking to stay in the market. Is the mood out there? A panic our people quote unquote going to cash.
I think a lot of institutional accounts are kind of waiting to see to happen. You know, the majority of who we've talked to recently, obviously are a great wealth management clients and they've been waiting for an opportunity. In Canada, they're still a little bit worried with respect to what's happening in the US, and they kind of see this.
As a replay of last year, so they're.
A little more emotional.
But in the US, we're ready to put money to work. I think a lot of people.
Kind of redid their portfolios and re kind of configured at the end of the year time, and there's been a lot of talk with respect to some tax gains taken at the end of the year, So I think there's some cash on the sidelines that are ready to go.
Is Microsoft at a pea twenty two forward like a new Microsoft?
You know what's interesting about Microsoft is that last year it was kind of the darling in terms of the war chest of cash and in terms of how we look at Microsoft and kind of core and large cap portfolios. It was tough to continue to be overweight that stock. So we're more neutral in that stock where I think that the Apples and the Amazons, which actually underperformed the Max seven last year, are better. But I think Microsoft Oracle Palenteer from a software perspective, We're gonna kind of
get through this malaise. Let's say, the thing that you have to understand is you don't have to own everything, guys. You don't have to own everything. And I think sometimes the market has been trying to outsmart themselves by trying to pick the bottom in some of these SaaS names.
It's a really important insight there. It goes back to Munger where you don't have to look at it. Can you hear me buttoning and unbuttoning my Red Sox jacket? Absolutely, this is Don's the only one that fit me was Don Zimmer's check exactly way back. I'm going to Scott for those of you on radio, I'm wisconstant Red Sox today and drawing it down for Giants Yankees Paul Sweeney in his Yankees jacket with Brian Belts.
Absolutely, Hey, Brian, what we saw a little bit before Iran started was a little bit of rotation in this world out of some of the higher multiple tech names maybe into some more cyclical name to being small and mid cap. Is that a short term tray? Is that something that place out in twenty six as well?
I think it's the real trade.
When we wrote our year ahead piece in first week in January for both the United States and Canada, especially in the US, we talked about a broadening out of the market. Finally, we also talked about and defined what an earnings driven market looks like. Typically and historically the beginning stages of cyclical bulls which we saw in twenty three, twenty four to twenty five was this momentum multiple driven market. We've transitioned to more earnings driven market. Think about the
earnings growth is really good. So when that happens is you see dispersion increasing, meaning stocks trade at different levels in different technical type performance. But more importantly, the earning side really tried to drive things. So I think investors have a hard time dealing with that. And traditionally that's the more volatile market. So if you look at an earnings driven market relative to a multiple driven market, the upside is roughly half. Let's just keep the math simple.
But it benefits names that have been underperforming, like small cap, like financials, like some industrials, and I think that's where we want to be longer term. Again, I've said this for a while now, and we've been a little early, but I think we're right. Ten years from now, we're gonna be kicking ourselves if we don't own more small cap.
Okay, how about the AI trade? And I'm trying to think about what's been going on in the market outside of Iran, and of course AI trade is evolved. It used to be just buy everything you know, and who's ever spending more money? That's where you want to be Now. The market's trying to be a little bit discerning winners and losers. And you mentioned the SaaS stocks took it on the chin earlier this year.
I think about that.
I think discerning is the great way to think about it. So let's use a couple of terms, demand, supply, expenses and revenue. I think what's happening is we're trying to match what's happened in expenses and revenues or spending spending, spending spending, So how much revenue can we derive from that? And then in terms of the supply demand, who are going to be the winner? So there's been so much rhetoric in terms of what platform is going to be
the best. I still think that you just got to kind of keep it simple and think about think about here's an Apple, Here's the core of AI is an Apple, and the core is in Vidia, So then what else do you want to own and be around that? And tour three in terms of every kind of theme, whether or not software is cybersecurity, but especially with respect to how you're the electrification of that, which would be the sum how.
Many you quickly hear how many stocks is a minimum portfolio for Brian Belski.
For us to fill a minimum portfolio to be properly diversified in large scap money. We believe, and we've done a lot of back testing on this, fifty stocks five zero five zero because you can get a highway.
Of fun fidelity fifty.
Six five seven percent on the top end in terms of a position one percent on the lowan for our small MidCap money that we run a humorless it's anywhere between sixty and seventy five. And I think going into as we progress through this broadening out, you want to own more names.
So you have the opportunity to make all your bets.
Okay, Brian Belski is all over the country folks in this industry of investing away from what we do here. I'm not a fan of this, but we're going to get his knowledge base. James Diamond on the cover of Barons this week. Mary Erda's front and center for JP Morgan and they've had huge success with their hedgedat whatever it is JPMI, whatever the code is. Brian Belski on the modern rage of only SMP hedge it for a
more stable income and give away the upside. Your thoughts on this what we see out there right now?
Well, and Jamie, we trust one of my great friends in the business, Hamilton Render, does a lot of these things that worked. That was a great client of mine when I was on the institutional side. I think those products are important. What we like to think is that
the passive market has peaked. Active investing own stocks, keep it simple, nineteen ninety added the ability to meet Charles Schwab, Peter Lynch, and Warren Buffett in the first six months of the business at will Ammonio okay, and Warren Buffett said, don't buy anyth unless you can reach out and touch it. Keep it simple. And I think sometimes we try to outsmart ourselves. That's why we got in trouble. I think at private equity, Tommy, this time around, we're how.
Big is the upset in private credit? We run out of time?
Think we see an unwinding there that was ultimately not gonna It's not systemic. We've already I think we've already established that. But ultimate, that ultimate unwinding is actually gonna be positive for publicly traded securities, especially small midcast.
Is the Twins just a funding place for baseball teams before they go to the Dodgers, the Giants in the Yankees?
The answer is yes, so your socks right, they've been after Joe Ryan. They should just take him out of his misery to I mean, the Twins are gonna win seventy games, they.
Beat the Socks. The Twins beat the Socks. Yesterday's safeteen to six.
Qui animies it's a beautiful ball part twenty six years, Tommy, twenty.
Six straight years of season tickets. What did they get me? Here's your here's your code to blog into your tickets. Nothing.
I mean, it's a great divide.
It's a beautiful ballpark.
But you know, even the you know the Yankees. You dont remember Don Zimmer ended his career with the Yankees. So the Jack, you know the Jack.
It was a great trade. Like Babe, Ruth, you know, Okay, this is a problem. Sarah emails, and it is time. There's not enough Orioles talk. I was talking to Mindy Ripkin yesterday up in the flute for she can't even concentrate.
She's so pumped. Tomorrow tomorrow, Oh.
Really must watch. You know they're our favorite team.
I know, I know they're going to get choice. Give me like a twelfth of two game.
Mister Bloomberg's got a bag of Jesus is in an handgoing time. I don't hear enough Orioles talk.
Yeah, exactly, Brian, thank you so much.
This is milst thing going.
Okay for it, it's going amazing. Thank you so much.
Look and rested.
Well it's it's Naples.
This is my this is my lunchtime Walker Tine and I process and I listened.
I listened to Bloomberg Radio on my wah.
Are you doing? It was a very nice like that a lot, I mean, are you squeezing? Like a seventy hour work weekended eighty hour?
You know when you're the chief bottle washer, the chief compliance officer, the chief of staff and picking stock kill a lot.
Courage to stay in the market. He owns a high ground on that. Brian Belski 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 Auto with the Bloomberg Business app, or watch us live on YouTube.
Celebrate Franzos to Han just wonderful with his work over the decades. Now Chief Investment Strategists Pimo at Capital Markets. Did you fly in from the Carolina game last night? Were you in the loge bmo.
As they call it, No, but I did. I did watch it. I thank you for remembering.
Can they can they keep going? I'm watching every game and show I'm.
Love Yeah, this is this is their year. I mean, it's a talking because for the rest of the world got in Montreal, Canadians.
The Rangers had nine shots last night. It's magical up in Montreal right now, isn't it. Yeah.
I mean for a team that's been in rebuild mode for so long, Yeah, to finally feel like we're getting there.
Are we rebuilding? With AI? You walked in the studio and you said, I want to talk about AI. Your synthesis is so odd and wonderful about the way you bring economics, finance, investment in synthesize AI out. When the Canadians win the Stanley Cup.
Well, AI, you know, it's a big pushback on our thesis, and so you know what I've been was easier by the way to pitch this a month ago, to be perfectly honest. But you know, if you look at the overall thesis, there's a lot of stimulus in the pipeline, the type of stimulus that you see when you have a recession. The issues We never had a recession, and so we don't have a lot of excess capacity in
the economy. To see this kind of stimulus with a fore handle on the unemployment rate, is a recipe for inflation that comes back more quickly than we've been accustomed to. So I don't think this time around we get goldilocks for very long. So the pushback Tom is people say, all right, we can't have non inflationary growth because we don't have access capacity. Why can't AI play that role
with productivity? And that sounds logical when you think about it, when you dig into the data, you realize that it's not feasible in twenty twenty six and so, and the reason for this is that AI is really for now a phenomenon of the very large companies. Small business America has not really embraced it, and small business America creates
three quarters of jobs in the US. And so until you know this is adopted broadly, I don't think we're going to see the employment phenomenon that a lot of people are looking for.
So are you calling for higher inflation here and then your intiate term?
Yeah?
And this is before you know the events in the Middle East?
So how does that impact kind of where you want to allocate capital here? What are the conversations you're having with your quinity?
Yeah, So it's not easy because to me, it is a pretty constructive backdrop. But really for cyclical assets, the issue is that there's not a whole lot of that left in the S and P nowadays. You know, the S and P is now a growthier benchmark. You know, on growth stocks are kind of allergic to higher inflation, and so when you have this amount of stimulus, you know, it is the tie that lifts all boats for earnings.
But I think when it comes to growth, their pees are going to be you know, they're going to see a bit of a headwind in the form of higher inflation later.
In the year.
It doesn't sound like you're very constructive on the equity.
Markets I am. I mean, if you gave me the S and p's version of twenty years ago, would be jumping up and down right, you know, because that was seventy nine percent of your earnings came from cyclicals. When you're going into the GFC that was a very pro cyclical index. It's just a different story nowadays. And so I would say my comments, I have more enthusiasm for the Russell two thousand index or the S and P six hundred, you know, the smaller indices that just have more cyclicals in them.
From late twenty twenty five may be Autumnal twenty twenty five. Microsoft's enjoying a draw down of thirty two percent Max seven in particularly these selected hyper scale it's whatever you want to call them. Is that enough of a pullback for transport? How to load the boat?
Uh?
Not yet? I think you know the issue is that And this is part of the problem in pitching this story, is that there's a real love affair with the MAC seven because it's been so profitable for so long, and so when you're telling people there's a lot of opportunities in the marketplace, it's just in an unusual spot that you haven't looked at in a while. And so to me, Tom, the ideal time to load up on big growth stocks like that is when we're going to be at the
top of the cycle. And I don't think that's the story of twenty twenty six.
We saw a rotation beginning, I guess late last year out of some of these tech names growth your names, hire multiple names into Maybe it's more cyclical.
Correct.
Is that a investible trend in the next twelve to eighteen months or is that a trade Because we saw a little bit of a pulling back on that as we kind of got.
Yeah.
No, I think it's the beginning. It's the early innings of a recovery. You know, if you didn't know about all the craziness going on in the world and you're only looking at the market's behavior, you know, you've seen the FED cut rates. Then we had fiscal stimulus and leading indicators started to pick up, and alongside that we saw change in leadership towards the more pro cyclical segments.
I want to say that starts like late summer, early fall, pretty normal stuff, and so you know, you tell me when the cycle tops out, and then we can talk about when it will be time to revisit the growth stock story again.
Franspha turn with us with the Bank of Montreal. I'm sorry, I'm old fashion. It will always be the bank. It's so spiritual where their offices are across from this most beautiful church in North America. Early in the Western atmosphere, just extraordinary female capital markets in you guys own with your acquisitions to Minneapolis, the study of the Great Lakes. Paul, when did we last mention tariffs? Yeah, exactly, I mean I think it was yes, expos were going down. Frank Trahan.
Here a tariff update in the impact on the Canadian Great Lakes, the Gordon Lightfoot territory.
You want to know what the impact is on the See impact.
From the Bank of Montreal on tariffs. We haven't talked about it in three months.
Of tariffs on inflation more broadly, and.
Inflation more broadly, windsor ow you know, autos and you know the going over the two bridges which cars are doing with Trump about.
And so it's uh, look, it's uh. I think uh prime mister Carney sees it as it's intended. This is a structural change in how we do business, and so you know, I don't think it's unusual to think that there's going to be a little friction in negotiations. To be honest. You know, economists of my generation aren't fans of tariffs because they're inflationary. And the reality is our
economy is consumption based. Nowadays, sixty eight percent of our GDP comes from consumption, and inflation is like a variable tax rate, if you will, And so you know, but it is the policy we're dealing with.
One of the themes in twenty twenty five that worked out very well is as well as a US equity markets did the rest of the world. A lot of parts of the resta world did really well, and part due to the falling dollar, but other drivers as well. How do you think about the US or North America vice to be the rest of the world here.
Yeah, so.
You know, we've had very US centric comments here. But the reality is the story I just told you is the story of the world. Eighty nine percent of the world's GDP is in countries that have monetary stimulus in the pipeline. There's only a few large economies that have raised rates, so it really is a global story. Up until the events in Iran, most equity markets are outpacing US equity, which is what you see in a global
in a global recovery. US equities have been really resilient in the last month because we're a large oil producer that insulates us to a certain extent, unlike the countries that import, you know, much of their energy needs. We have a lot of stimulus in the pipeline right that
also helps insulate us. Our earnings were growing before all of this, and our stock market, our main benchmark, the S and P five hundred, is very growthy and those are stocks that tend to do well when the economic outlook gets all murkier.
If you will, what's the energy component of the standard and oh it's a single dish.
Oh yeah, single digits at least like six percent?
Should is an enormative basis. Does that expand over a decade?
I think it will.
Yes.
You know, it's shrunk dramatically largely. You know, it's been squeezed out by what's taking place in technology.
There's so and I've got a distraction here. We're gonna have to go to in a moment here off of Dubai's the Bloomberg desk in Dubai. But first of Johan, the earning season is upon us. Can you even model double digit earnings growth? I guess before the war that's what we're going to see.
Before the war.
Yeah, I think you can absolutely Again, when you have the amount of stimulus that you get typically when you have a recessionary backdrop, without one, our earnings were still growing. I think you can get the double digit earnings territory.
How much credit risk are you taking in the fixing come market these days?
I want to say that I'm a little bit less concerned than the headlines when it comes to that. You know, we're in this we're in this transition period right where we have stimulus. We're starting to see it in leading
indicators of the economy. You know, all the pmis basically have these smile patterns that start late last year, as you pointed out a little earlier, but we haven't seen it in the economic data itself, in retail sales, industrial production, that sort of stuff, and that's usually when the earnings really kick in the gear. So it's really rare that something breaks when you're in recovery mode. You know, recovery tends to patch a lot of things, if you will.
It's more on the other side of this that I think you'll want to be concerned, meaning once we have tightening and we have a slowdown in the pipeline, which is probably a couple of years away.
TRANSPA, thank you so much. Congratulations on the new effort at Female Capital.
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