Stocks Drop & Bitcoin Slides in Weak December Start

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You know, you could call twenty twenty five the year of the paradox for the stock market, right because despite all of it, the trade tensions, the inflation, the geopolitical surprises and shocks, you know, we're up double digits across the board here for the major indexes. What is twenty twenty six? Hold Semashaw here glee in our studios actually,

Thank you.

Is twenty twenty six going to be your paradoxes as well for this market? Do you think?

Yeah?

I think it will be in a slightly different way, in that you have a fairly constructive economic backdrop. Consumers we think will be okay, not incredibly strong, but we think they'll be okay. They get help from the fiscal side they get help from the mounetry side, and yet despite that constructive backdrop, investors are still going to have that niggling fear about AI, which is likely to persist.

I'm not sure if AI is going to continue to be the tailwind that it has been for the last several years.

Now.

It seems like conversations that we're hearing from folks say, well, I'm a little bit concerned that we've gotten too far of our skis or to run its course, or the best growth daser behind us. How do you guys think about that?

Yeah, I think the narrative has definitely shifted in the last two or three months. That really has gained a lot of momentum in that people are saying, Okay, what else is there? They're not shying away from tech by any means, but they're not adding to exposure. They are trying to think where else to go, whether that's of the sectors, other regions. So there's definitely that dynamic which is starting to come through in a lot of conversations that we're having.

So what are you hearing from clients? I mean, where are they looking outside of sort of the obvious tech plays.

Yeah, so I think the key areas that are really we're speaking about is financials, which has already had a really good year, but with that constructive backdrop that continues to flow through into twenty twenty six. And also consumer discretionary. We're hearing more people talk about that, of course, but with the fiscal stimulus, the tax refunds that we're expecting to come through in Q on, that should give a bit of a boost, particularly after a period of some difficulty.

Is emerging market something you guys think.

About, Yeah, emerging markets. It's actually because I'm a real favorite over the last nine months, and that's something which is also carrying through. I give been very particular, you know, pick out which areas that you want to be in. But certainly the interest rate cycle is continuing in a lot of these nations. And interestingly, you know, if you still really do believe in the tech narrative when you

So when you talk are em doing well next year possibly and the financials continuing to do nicely, I think all that's predicated on a scenario where we're going to have lower rates for longer. What happens if we don't well.

I mean, it's been interesting because the last week or so, just the fact that the market lifted because of expectations turning for the around the FED cut in December tells us how important it still is. So when we're thinking about twenty twenty six, we have this constructive backdrop. We think that markets will do okay, And to your point, it is predicated on the idea that policymakers are able

We had some very good earnings in third quarter, I think better than most people forecasted. Is the earnings out constructive for this market? Are there earnings growth? Is it enough to push this market higher?

Yeah? Absolutely, we do think that without you know, for example, our economic growth forecast is for about two percent two point one percent growth next year. When you have that kind of backdrop, then really earnies can do well. Now, again it's not bangbusters, but it is something that you can see a bit of a broadening out and it

Do tariffs trip up finally trip up Corporate America next year? Because I mean, if you look at earnings this past quarter, they really didn't.

I don't think that tariffs are going to be that much of an issue, you know, we're expecting that the amount of uncertain that we have this year is going to continue to fade into next year, though of course there'll be pockets volatility and concerns, but ultimately we have also realized that businesses are able to adapt. We don't think that they are willing to pass on too many price increases, so you could see some margin compression, but we're not expecting it to be very very significant.

But geopolitics, I mean, it just seems like, you know, we still have I don't know what's going on in the mid mid East, but does nothing seem to be resolved there. We've got ongoing negotiations between the ukin and Russia. We've got China. Who knows what's going to happen in that part of the world. The market seems to have discounted most of that throughout this year. Is that something we can expect to continue to think or is that a black swan out.

There that is now I believe that the market should continue to discount it was right and ounting it this year. Historically, whenever there've been geopolitical events, unless it fundamentally changes the inflation story, it is not something which has a sustained market impact. So of course we keep an eye on it, but it's not something that we're willing to try and position portfolios around.

And what about outside equities, I'm thinking, well, crypto, which we know volatility is sort of always the word of the day. But even things like private credit, where there have been some concerns and we've seen pockets of weakness, how do you look at that in twenty twenty six.

Yeah, we still have a constructive view of private credit. Of course, I've been as you said, there's been pockets of weakness and it has created a lot of concerns. Are they something more sinister underlying it? But a lot of that has to us it's been idiosyncratic shocks. If we're looking at the consumer base, for example, and how this feeds through to private credit, we don't have that many concerns. We still think they strength in that underlying story.

Not for nothing but the high temperature today in des Moines I was supposed to be thirteen degrees.

We're looking forward to that.

And dude, the low temperature in Wednesdays can be minus five.

So the thing is is that in de Moines you don't need to step outside. You can go through the skywalks.

Okay, because for those of who all know Principal Asset Management, great great asset management business. They've been into business forever. I've gone out there to Des Moines many times to see those folks. It's December and it's chili in Des Moines. Yeah, and so Seema being the leader of you know, one of the senior folks of Principal as the managers, he's got to go to des Moines and see the folks there.

Black Friday thermal thermal sales.

Yes, you're stocking up.

This is not London because this is not the city of London. This is De Moines, Iowa in December.

Makes it look like a heat wave here in New York City exactly.

Semasha, thank you so much for joining us.

We appreciate it.

On our way from London to Des Moines, Iowa, make a little stopover in New York City here, Smashaw, chief global Strategist, principal Asset Management to 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. He's durn Listen on Apple Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.

You know, Paul, we are going to have a new FED chair in in May. President Trump says he's decided on his pick. He hasn't announced too, but we know that Kevin Hassett, his chief Economic advisor, seems to be at the top of that list. Want to dig into how that may impact market decisions and take a look at sort of the more global political landscape, if you will. With Henrietta Trey's co founder of Veda Partners. Henrietta, thanks

I think it's obviously the core question.

And with so much uncertainty at the FED, what I like about having a new FED member, specifically if it's Kevin Hassett, is you know how that member is going to vote.

There's not any confusion, and with such.

A disparate FED, that's been something that's tricky for investors to really nail down. So you now will have two guaranteed locks on the voting basis of whether or not there should be cuts.

The tricky part is the timing.

As we get into May, the President is going to be staring down the twenty twenty six midterm elections coming up in November, and all four hundred and thirty five members except for the twenty two I think Republicans who are not running again, are going to be up for reelection.

They're going to have to sell the United.

States consumer on the idea that the economy is great and so we should be cutting interest rates if we need to, or the job market is where we should be prioritizing our time, but simultaneously that we need a two thousand dollars tax rebate to offset the cost of the tariff. So it's a really tricky dynamic to have that conversation at the same time.

That's what I'd be worried about in terms of timing, but Kevin has it. I think we'd get through the set.

Without too much of a problem on the confirmation front, unless there's some unknown quantity we haven't learned about the last decade of his time in the public space.

Henrietta, I know you're going to tell us that Congress is either on break now or they're about to go on break, But what's the to do list for our Congress here?

Looking forward?

Yeah, the to do list is really going to be dominated by those ACA subsidies, which is where they actually have promised the Democratic Conference that they will hold a vote this year.

So in the three week work session.

Which equals out to about twelve days of legislative action for the whole month of December through the end of this year, they're going to have to.

Hold some sort of vote on ACA subsidies.

They also wanted to hold something that they were calling Russia week but as the President is negotiating deals with Brussia and Ukraine separately, they'll probably not hold those votes. So mostly ACA subsidies continued work on the appropriations bills to avoid a shutdown.

As we come back in early twenty twenty six, and.

You throw into the mixed Venezuela now Henrietta right, President Trump said that Airline should consider the airspace above and around Venezuela to be closed. As his administration continues to threaten more aggressive steps against President Maduro's government. We see Oil reacting to this news. Oil is hired today. No big surprise there, But how do you see that possibly playing out?

Yeah, The thing about going into foreign policy issues is that members, especially on the Senate side on Armed Services and Foreign Affairs Committee, they take their.

Jobs incredibly seriously. They're going to want to hold hearings.

They're going to want to talk about the potential commands that HEXIT delivered to kill two remaining survivors.

They take that incredibly seriously.

You've seen it in the backlash that came out this weekend in public comments from Republican members as well. So that's going to eat up a lot of airtime for probably weeks, if not months, well into twenty.

Twenty six, I would expect as well.

And again, it just takes away those twelve legislative days of action that they actually have in the month of December to tackle government funding.

And ACA subsidies. That's going to be.

Where all their concentration and oxygen is and they love those moments.

They really want to have hearings about it. Oversight. That's very serious for those members.

I'm heading Tooruba next month and that's like right off the coast of Venezuela, so I'm paying attention to I mean, I'll be sitting on the beach watching navy ship. I don't know what's going on. Hey, Henrietta, can you tell me what an auto pen is? And do I need to care about this?

I would. They're used all the time.

The President signs a million different things today and the auto pen is a time test used in every single administration way to get signatures out the door from the president. Obviously, President Trump has a bone to pick with the auto pen, but I would be shocked if he hasn't also been a profligate user of it, particularly in his first term.

But he actually made Biden's portrait in the White House a picture of the autopen his auto signature. Yes, so it's not Biden's face, it is his auto pen signature hanging in the White House.

Estra.

So the maturity is astounding.

Henriette is. We had the governorships in Virginia and New Jersey several weeks ago, which were a positive for the Democrats, and that kind of caused the Trump administration too, I guess focus a little bit more on affordability. Is that still a theme for this White House or as it moved on?

You know, it has to be.

It has to be because the president is very closely watching the midterms. If the Democrats control the House, which is very likely to be the outcome of the next election, then he has a serious problem in terms of real oversight, subpoenas, etc. That will occupy the next the final two years of his term in office. So winning the twenty twenty six midterms has been a huge focus for the president, which is why there's been the redistricting efforts across Indiana and

And of course the job market, which you mentioned just a second ago. So we know that this administration vows strict immigration curves, especially after that National Guard member or two of them dying after being ambushed near it near the White House last week. So how if they continue with that strategy, which it seems like they're going to throughout the Trump administration, how do you see that impacting the job market specifically?

Yeah, the job.

Market is hugely problematic, mostly because people don't feel comfortable.

If you look at the University.

Of Michigan consumer confidence data and whether they think they have an opportunity to go get a new job, if they're going to get a pay increase, everybody's sort of staying put. But on top of that, you're seeing major corporations fire folks. I think it's eighty six thousand jobs in the manufacturing job sector have been lost since Liberation Day. So there's this sense amongst the US consumer that there's not another job out there and they.

Need to stay put.

That creates the uncertainty and the lack of wage growth, and again that compounding issue of focused on prices and affordability that keeps all that front and center on the immigration front.

From my seat, the response function.

That you see in the voter polls is that they think the President has quote gone too far on immigration, and a lot of that is to do with the National Guards being sent to cities around America.

They're coming to New Orleans this week.

So that's an issue that the American voter sees and has decided that they don't like, even though they just.

Voted for it in twenty twenty four.

So that's going to be an area of overreach and that sort of pendulum swing that we're very used to in politics. So you elect one party to do sweeping change in one year, and then as soon as they start doing a sweeping change, you decide you don't like it.

That's the phase that we're in right now.

From the book base, Well, Henrietta, you provide investors with economic policy analysis. You've been doing it for years. You're gonna have a very busy twenty twenty six. How Manyetta Treys, co founder of Veda Partners.

Stay with us. More from Bloomberg Surveillance coming up after this.

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Brian Levitt, chief global market strategist for Investco, joins US here in our New York City studios. Brian, what is the twenty twenty sixth call for you guys?

This year?

The twenty twenty six call for us is that we will continue to see resilience in the global economy, actually even a pick up in global economic activity given some school support policy easing in the United States, and that should continue to drive markets higher. We're looking for some type of rebalancing, you know, sector rotation even within growth, but also to broadening out to other parts of the markets, specifically non US markets.

As the Federal Reserve lowers interest rates.

Okay, so what non US markets do you particularly like in twenty twenty six?

Typically the developing markets of the world perform best in an environment when the FED is easing and when the

In the US.

Here it's been twenty twenty five has been I guess the theme has been AI and what it means for everybody. Do we still play that in twenty twenty six. Do we have a different playbook for AI in twenty twenty six.

Well, the nice thing about it, I think you continue to play it. But the nice thing is you can diversify some of your portfolio into other parts of the market if you get the policy easing and a pickup in activity. And so the challenge for the last couple of years has been it's really been an environment where economic activity has been basically flat. There's been no real catalyst to unlock value in the US markets, and so in a slow growth environment, you buy growth. I don't

And what about private credit, which we know has been exploding. You see opportunity there in the new year.

Yeah, we do.

And I don't think that you know this the concerns that people have with a couple of high profile names, questions about whether that was systemic, and you know, I went on record saying idiosyncratics.

So so far, so good.

I don't think that the private markets are paired as impaired as many people believe. And you're still looking at yields of you know, seven eight percent, which is you know, probably a reasonable equity like return, maybe even better than equity like return over the next decade, and the fundamentals still appear to be sound.

Twenty twenty eighty five. I mean, if you look across fix income, I do that with the I go function on the Bloomberg terminal, Like you could read about how fixing come is performing globally the US fix income market. I mean mid to high single digit returns this year. It's been a good year, and some of the best returns have been. If you've been taking credit risk, high yield leverage loans, how do you think about the credit profile out there?

Well, the first thing I would say about just the returns in general and the aggregate. How many people were trying to warn us at some point this year about the sustainability of the US fiscal situation, and we heard things like rates are going to keep going well above five six percent.

I never bought into that.

In essence, what investors were trying to tell us was that the US Treasury was going to trade like a credit No, the US Treasury is going to trade based on the nominal growth potential of the country. That's precisely what it did, moving down from four to eighty and mid January to basically four percent today. Now the credit markets, what ends up happening mid cycle is that investors become

Are you reading any tea leaves and what's happening in crypto? I mean, we've got bitcoin now below eighty six thousand. It was at one hundred and twenty six thousand just a couple months ago. Not even what do you do with bitcoin in particular in the new year.

It seems to me that it's been very much predicated on expectations of the Fed, which makes today seem like a little bit of a surprise compared to where we have been. If you look at when Jerome Powell first indicated that there might be some differing of views at the FOMC, that's when you started to see things like crypto sell off. You started to see nonprofitable tech sell off, So that was all.

Part of the same trade.

I've got to be honest, I'm not the world's form most crypto expert, but I assumed as there was greater clarity from where we were going with the Federal Reserve as December got priced back in for a raykit, I didn't expect this morning's action.

In crypto, so clearly there's still.

Some is there just contagion selling? I mean there's some.

Leverage in those markets, contagion selling. I mean it has moved pretty far below it's it's fifty day moving average right now, where the S and P five hundred does not. I don't view it necessarily as a harbinger of where the stock market is going, but certainly interesting to watch today, intriguing, not something I would have expected. I did not expect to wake up this morning and see crypto down five percent.

Right, you're a Michigan man in good standing after four years, winning year in sale? Are you top universe? I expect this from Tom. What was your takeaway from this Saturday? The Ohio State University and you're Michigan.

Michigan could not stop the run, and you know you had a twelve minute dry Ohio State just rolling them. I think sixteen of eighteen plays were running. Michigan couldn't stop the run, they couldn't get anything going on offense.

They'll be back right.

These things are These things have tended to be a little bit cyclical.

Ohio State's got.

A very good team this year. They've got a number of first round picks heading towards the NFL.

We'll be back go blue.

And it's crazy. If the Ohio State coach did not win this game and he won the national championship, he still would be at risk. Remarkable, right and believed because you can't Michigan, you can't get.

As you should have been. Exactly exactly, That's how it works.

Brian Levi at Chief Global Market Strategists for Investment. 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 applecar Play and Android Otto with the Bloomberg Business app, or watch us live on YouTube.

It is time for newspapers and Lisa Manteoli, So what have fors?

All?

Right?

So I want to talk about DNA test kits. Right, I'm not sure if you guys have done that. My sisters have tried it.

You know the twenty three did it? You did the twenty three and meters you did see that's when they did too. It's really popular. But here's the thing.

It's now causing issues for families that are handling the states because they have surprised heirs who are now looking for their cut of.

The inheritors only under services way.

Yes, yes, yes, yes, so the Wall Street Journal actually had this is an interesting take on it. States are now reconsidering laws because a will or a trust it doesn't necessarily prevent surprise.

Relatives from making a claim.

And there's phrases and will sometimes like to my descendants, So that can leave out room.

For like the open Yes it does, it does.

So that I mean the rules differ from state to states, so it depends on what state you are. But lawyers are saying what you need to do is you need to create a state plans that account for potential surprise heirs because it's.

Happening more and more. I can't believe it. Can you believe they're now in yan need to add a line to your wills and trusts?

Now, did you have me surprises in your twenty three and me experience?

No surprises? It sort of just confirmed what I thought. Oh, it's kind of neat.

Yeah, it's fun.

Yes, okay, good good, No surprise anything out there. You're just putting that out there, nothing surprising. You're not going to claim anybody's art.

Its Okay, did you guys go to the movies over the weekend?

No, yes, I did. Okay, did you see the Utopia too?

I did?

I know, and I saw this story that I saw Wicked. Oh you did, okay, which I really enjoyed. Okay, good, good, And I'm surprised it was not number one because I know what you're going to tell us.

Yes, Yancey's which I was surprised too, because I was like, Wicked is huge and it's been huge. But yeah, it's now Walt Disney. They are front and center Utopia too. It's a sequel to the film that was back in twenty sixteen, so it's been like a while since. This came out one hundred and fifty six million in North American box office over Thanksgiving, five hundred and fifty six million worldwide. Disney said it's the biggest animated opening for

Yeah, that's rarely.

Global Hollywood, because China has been kind of closed off. After becoming the second biggest movie theater in the world after North America, it kind of slowed down over the last six seven, eight years. But you know, I think it's opening.

Up a little bit more.

So that's a good sign for Hollywood.

Okay, good, good, good, And it's good news for theaters, right because it's been kind of slow before before Wicked came out. And it kind of sets the stage two for the next Disney movie, which is Avatar. It's coming December nineteenth, so they're kind of set in the stage for a little bit.

But yeah, I hope to go see it. I like the first one.

It was very cute movie, I mean cuteness, surprise. I think for Disney they thought it could be big bag.

Yeah, but I see Wicked after just one weekend. That's that's what's surprising to me. But okay, those Utopia.

Yes, yes, yes, okay, So this one, there was a big ultra marathon in DC over the weekend. But it might not be the one that you've heard of. It's the Taco Bell DC fifty k. Okay, So here's what you.

Have to do.

Thirty one miles of running, but you have to stop and eat at nine different taco bill the way. Okay, each location you have to purchase and eat an item. Drinks don't count as a purchase, and the race rules say that yes, vomiting is discouragement.

Allowed, oh gosh, but.

Also no pepto, bismal, no alcocy. You're not allowed to take any pepsid. You can't do anything like that before the race. And it gets tougher as you go on because they start add it on, like at this you know, by this time you hit this chain, you have to eat this many chilupus or something like that.

So they really push it. You have to hand in a receipt when.

You cross the finish line to show that you had you know, all the greasy event. Yes, you have to complete it in eleven hours at least that's the cutoff. Okay, okay, but people, it's something new. It's like ultra marathons is like this whole big you know, crazy They can.

Eat any crazy stomach for something like that.

I get.

I would not want.

Yeah, I would not even attempt, especially our clean eater Lisa Macheo. I cannot see you doing.

I mean, granted you run off the calories, but still it can't be good.

Now I'm going to pass on that running experience, all right.

The newspapers, Lisa Matteo, there you go. The highlight of the day.

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