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Is this the beginning of maybe something bigger? Let's talk it over with Cameron Dawson, chief investment officer at New Edge Wealth, joining us here in our studios Interactive Broker Studios. So good to have you, Cameron, Thanks for being here.
Thank you for having me.
Let's talk about twenty twenty six for a minute. Let's look into the crystal ball. What do you see as the biggest challenges for this market.
Well, certainly as we get into twenty twenty six, we will be trading at high valuations with high earnings expectations. You've seen valuations just like last week they got over twenty three times forward earnings. You have earning sexpectations for mid teens growth that's baked in already into S and P five hundred estimates, and so that does create a
high bar for the market to jump over. And I think the question will be as a is there further upside to earning sestiments because of things like AI productivity and AI investment. I think that remains a big question mark. And B and this is a little bit nebulous, which is do you still have a liquidity environment that supports even more margin or multiple expansion, because if liquidity starts to receive, then twenty three times looks pretty darn expensive.
Particularly with the MAG seven still putting up some big numbers. But the growth rates are decelerated for the MAC seven, so that means the four hundred and ninety three need to really perform.
How do you think about that?
Hope springs a tournament a lot in the broadening out trade if that is something that market participants we're hoping for in twenty twenty five, this idea that you would see the four ninety three catch up even as MAG seven dece and what ended up happening is MAG seven surprise to the upside and four ninety three surprise to the downside. And you didn't see that kind of catchup.
But if we look at what's going on in twenty six, you have this law of large numbers that's pulling MAG seven earnings growth lower, and of course secondaryvet is matter in markets.
Do you have a name like Meta.
Decelerating from forty percent growth this year to a potential decline of about two percent next year? And you see that across the mag seven names, and this baking in of the idea of the broadening out really relies on the economy a being very strong and b these businesses
being able to generate margin expansion. And they don't necessarily deserve the benefit of the doubt as we look at that four ninety three because they've continuously underperformed or disappointed on the earnings front over the last few years.
What are you looking at at outside the AI trade, because there's a lot of good stuff out there that we just don't talk a lot about. Is doesn't garner the headlines.
Yeah, our equity portfolio manager j Peters has been absolutely salbrating at some of the deals that he's starting to see where you have had names simply get left behind in the rally. Remember that September and October have been incredibly low quality rallies and incredibly narrow rallies, So a lot of junk moving higher very very fast, and then the quality things that have been moving higher really just
been in that MAC seven. So if you can broaden out the aperture into more value oriented names as well as MidCap names, is where we're finding a lot of opportunities of parts of the market again that have just simply been left behind, but remaining very disciplined on those quality metrics, not chasing the junk, not chasing the dumpster dives, I think is incredibly important at this time.
The most powerful leadership in this market over the last six months has been low quality, junkie, no profit, no revenue, specultive parts of the market that reminds me of me in nineteen ninety eight, nineteen ninety nine, parts of two thousands of stuff I was selling when I was a banker. How concerned are you about that?
Yeah, it's been some thing that has definitely caused us to raise an eyebrow. We wrote about it over the week and saying this is not sustainable. We looked at the rally that you saw in for example, Korean fried chicken stocks in.
Response freaking fried chicken.
There was a picture of Ginsen Wong eating fried chickens one viral, and you saw this big, huge surge in Korean stocks.
But if you look at the costp it.
Rallied twenty six percent in October alone, So you.
Talk about irrational exuberance exactly.
And the COSTPI has oftentimes had these kind of casino capitalism types of moves. So it's a global dynamic, and we why we remain really disciplined about qualities because what tends to happen is these names can go up a lot in a very short period of time, but they can also go down a lot in a short period of time. So from a portfolio perspective, they actually don't add any incremental return and at the same time, they just add to volatility.
What do you like in terms of alternative assets? I mean, we saw bitcoin have a little bit more volatility. I think it's back up of one hundred thousand dollars now, but failled to its lowest level since June. Gold continues to hang in there despite whatever is happening in the equity market. What do you like in terms of ald assets?
So when we think about bitcoin, we see it really as a function of liquidity, which appears to be tightening at this time given the fact that it is broken down, but also encapsulating some of these fears about dollar debasement. Et cetera, which of course we know is the relationship with gold. I would add on to that spectrum of real assets, which we would consider gold and bitcoin to be a part of infrastructure. Is something that we've really
liked and added to portfolios. This idea that you can get high single digit, low double digit returns depending on how you're positioned, and have something that's less correlated to equity markets. We like that in a world where equity markets could have lower forward returns. So that's been an area where it's certainly peaked our interest over the course of the last year and definitely into twenty twenty six.
What are we doing in the bond market here?
I could sit there and to your treasury three point five three point six percent, that's not a bad way to make a living here.
Do we stick there or do we take some credit version?
Yeah? I mean continuously we keep talking about how this idea that credit really isn't compensating you for the risk that is potentially embedded in some of these businesses and remaining higher quality and credit doing active management within credit to be able to make sure that the right issues
are being put into portfolios. And I think that high yield is what is causing us also to kind of look a little bit with a higher eyebrow at this market because you've seen those spreads start to widen out. The thing to remember about high yield is that it is coincident and it is episodic, So spreads will widen out as there is pain in other places. Not necessarily a leading indicator.
Now we talk a lot about how this market is priced for perfection, and all you need to do is look at a stock like Palenteer, right, I mean, by all metrics, that was a really good earnings report, yet they were punished. What do you make of that? And what's an investor to do if you're looking for those quality names.
Yeah, a high bar is a high bar is a high bar. And the reality is is that what might be baked into the cell side estimates that generates some beaten rays might not be being baked into the buy side estimates the people who actually own the stock and the forecast that they need to drive them to buy more. So we think that these reactions to good earnings reports is a reflection of a buy side estimates are probably too high, and b the fact that positioning is probably
already very crowded in these areas. So valuations always do matter, but they matter eventually, and it's that catalyst of what causes evaluation to unwind. That's a really key component of potentially driving these high flying stocks lower.
All right, but again we've got futures on the downside right now, looking at possibly back to back down days for Wall Street. Cameron Dawson, Chief Investment Officer knew Edge. Well, thanks so much for stopping by the studios.
Stay with us. More from Bloomberg Surveillance coming up after this.
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Jennifer Lawless, Georgia.
She's a professor of politics and public policy at the University of Virginia and lovely Charlottesville, Virginia. Been there many many times, Jennifer, talk to us about what you saw coming out of Virginia and New Jersey with democratic wins, pretty solid wins as well.
What did you take away from those governorship races?
Well, good morning.
I think it was a good night for Democrats because both Abigails Bamberger and Mikey Cheryl had double digit wins. They both exceeded expectations, and they were able to, especially in the case of Virginia, bring a long down ballot candidates that included j Jones for Attorney General in Virginia as well as flipping as of right now, thirteen House of Delegate seats. So there was a moment on the Democratic side. There was excitement for these candidates at.
The top of the.
Ticket, and that's necessary, although not sufficient, if the Democrats are going to do well in twenty twenty six, professor.
Professor, were these races the sweep by Dems last night, is it a verdict on Trump's second term? Do you think?
I think it's a mix of factors.
Some of it is certainly dissatisfaction with Trump, but that's really among Democrats who were enthusiastic and independents who got out to vote. There's not much evidence that Republicans decided that they were no longer going to support the Republican administration. It was just they weren't that excited about their candidates at the top of the ticket, and Democratic turnout surge.
So it was in part a referendum on the Trump administration. But the Democratic candidates who.
Won last night were not only running as alternatives to Trump, they were also putting forward their own plans that would resonate with independent voters.
It's interesting, Jennifer. I'm a resident of New Jersey and President Trump had a very, i want to say, a low profile in this race here in terms of supporting the Republican candidate, mister Chittarelli, What does that tell you, if anything, Well.
I think the Trump administration and the Republican candidate's campaigns are aware of the liabilities associated with Donald Trump.
In blue states.
There's no question that.
Trump overperformed expectations in New Jersey in twenty twenty four, but it's important to keep in mind that Kamala Harris didn't really campaign there. So I think the Republicans thought that they were stronger in some of these blue states than they actually were, simply because there was one presidential
candidate campaigning there last year and not two. And the outcomes in both Virginia and New Jersey suggest that Donald Trump can be a liability, especially when Democrats are excited and energized about their own candidates.
Triser, I want to step away from the elections for a moment and just talk about what's going on with the Supreme Court today, going to hear arguments over Trump's unilateral decision too sweeping global tariffs. What's at stake here, besides possibly trillions of dollars in refunds needing to be given.
Back, This is one of the cases where we're really going to see what the Supreme Court thinks about presidential power and executive power and the ability of the president to engage in unilateral action. If we've learned anything over the course of the last several months is that the Supreme Court seems to be willing to grant Donald Trump more in the way of authority than previous presidents thought they were entitled or sought.
So this is just one more example of that. We'll see what happens.
So, given the what we saw yesterday, just kind of the elections here, Professor, what are the takeaways for I don't know the Democratic Priority writ large, the Republican Party writ large?
Are there lessons to be learned here?
I'm always a little bit leery about using a couple of races to forecast what could be done in the future, but I do think there are a few lessons.
The first is that despite the.
Fact that the overwhelming majority of the American people are turned off to politics are disgusted with what's going on, they voted in record numbers yesterday, and that bodes well for the Democrats. It suggests that even though the Democrats have been demoralized and have felt that they haven't had a win in a long time, when push came to shove, they turned out. They turned out with enthusiasm, and they won.
The second take home I think is that different kinds of Democratic candidates win in different kinds of places, which is not rocket science, but it's something that we often forget. And so the kind of Democrat that can win in New York City does not look like the kind of Democrat who can win.
Statewide in Virginia.
That doesn't mean that Democrats can't win in both of those places, and that should also be encouraging for the Democratic Party heading into twenty twenty six.
And the final message I think is that.
When Donald Trump is not on the ballot, Republicans have a tougher time. He's really what motivates turnout among Republican candidates, and he's not going to be on the ballot in twenty twenty six. So I think last night should have injected some enthusiasm into the Democratic Party.
We'll see what they do with it over the course of the next twelve months.
All right, very good.
So I guess one final question here at Monica is just simply who is the face of this Democratic Party?
Here?
It doesn't seem to be mister Schumer, doesn't seem to be even King Jefferies. Might it be one of these folks who won yesterday?
It's unclear.
There was definitely a generational shift yesterday. All of these candidates are relatively young, some younger than others, but a lot of them have not been career politicians either. They've been elected just for the last three or four cycles. And so I think the face of the Democratic Party might be just fresh faces.
And new ideas and new energy.
And as long as Jeffries and Schumer embraced that, I think that the twenty twenty six elections could go better than they probably anticipated a week ago.
And shutdown who's paying the cost here? I mean, we're in day thirty something or that. I can't even keep track. Is there anybody paying a cost here for these shutdown.
The American people are clearly paying the cost. It seems based on last night that at least in terms of the Virginia results, federal workers broke for spam Berger. And it seems like they are blaming the Republicans. When the Republicans have unified control of government, when they control the House, the Senate, and the White House, it's hard not to blame them for the shutdown. And it seems that at least in terms of the ballots cast yesterday, they are bearing the brunt.
All right, Jennifer, thank you so much. We appreciate that.
Jennifer Lolas, Professor of politics and public Policy at the University of Virginia, 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 Eastern Listen on Applecarplay and Android Otto with the Work Business up, or watch us live on YouTube.
Daniel Di Martino Booth joins us. She's one of our faves. She's a CEO and chief strategistic QI Research. She looks at data that I don't even know where it comes from. And you know, she doesn't rely upon the government stuff. She gets her own data sets. I have no idea where that comes from. But it's really really smart and really helpful here. Danielle, thanks so much for joining us here again with the dearth of economic data out there for those of us that are trying to figure out
where this economy is going? What are you looking at? What are you seeing at there in this US economy?
So I mean, I think the good news a month ago is that QI Research was always looking at alternative data sets.
The Reuters poll that.
Came out that said that eighty nine percent of economists did not trust the official data prior to the shutdown, So I don't think that I'm necessarily alone. But anyways, to answer your question, we look at macro Edge, which is an alternative to Challenger. They use kind of big data to scrape headlines. For the month of October, we learned that it was almost one hundred and fifty five thousand job cuts that were announced, and that helps to kind of put into context what we heard from ADP
this morning. Because these are large companies making big job cut announcements and yet what we saw for the month of October is that ADP job creation was exclusively with the largest companies. Of course, you count an employee as being on the payroll until their severance runs out, so we know that that's kind of a ticking time bomb.
We follow Google trends every day Americans search or don't search to file for unemployment, and when you look at that the five twenty twenty five trend really has gone off of what we saw in twenty two, twenty three, and twenty four. We also follow individual state warn notices, which they have to provide to workers when they're going to be laid off, and right now, in the aggregate, on a nationwide basis, warn notices are running at the highest pace since September two thousand and nine.
So the data has always been there. You just have to know where to look.
And what does all this mean for the FED and that December meeting. You know, in just a few weeks are we going to get one more cut? Do you think before the end of the year.
Well, I think given the headlines that we've seen subsequent to Powell being at the podium in the beginning, that the odds of a rate cut tick down to like fifty five percent. Now as of today, we're back up at seventy percent, and I think that that's because we're not seeing, especially when you hear from companies like Cava and Chipotle, we're not seeing companies able to pass through higher costs to their end customers.
And that means that there's not going.
To be as much pressure on the Fed's inflation mandate as there is going to be on its employment mandate. And I think that that's why we've seen odds of a subsequent December rate cut stay hover around this seventy percent level. And Jerome Pals never defied markets when it's been north of even fifty percent, so there is the presumption in the markets that we will see this next break cut.
Danielle, So we've seen a lot of I guess, headlines on layoffs and from companies we all know and people can relate to. Is that headline risk or does that really reflect oh boy, we've got a labor market that's at the margin, really kind of struggling here.
Well, I think it's the ladder of the two. Yesterday we heard from trip Advisor, American Airlines IBM, and every day we seem to get a new laundry list of companies, and I think that that it's indegative, that it's more endemic kind of At the beginning of the year, we had this so called low hiring, low firing situation, and Powell warned when he gave a speech a few weeks ago that if we see a continued lack of hiring but also see a pickup in firing, that that really
does change the construct. It's going to change the FEDS thinking. And I think that that's where we are at this point, Danielle.
I just want to get your thoughts on AI because we seem to be doing that every day with our guests. And earlier we had Brad Konger on he's a chief investment officer over at Hurdle Callahan, and he said that he thought the AI data center boom was a big, huge bubble. He went on record saying that what are your thoughts on that?
Well, you know, I'm not an expert in this field, but I would have to say that Main Capital would have agreed. Just yesterday when they came out and they said that they were not going to be joining with other large investors in trying to pump up this boom. We also know, you know, this is the day after election day. We also know that a lot of communities are pushing back against these data centers being in their backyard because one of the main sources of inflation are
food prices and electricity prices. But yes, when when the United States has ten x that of Germany or China in terms of the number of data centers, it brings you back to the days of fiber optics and makes you question, is this optics two point zero? I would agree with your guests earlier today.
Yeah, I remember those fiber optic days when that was kind of the bomb and telecom stocks are going crazy, Danielle. On the inflation front here, you know the headline numbers, they're still a little bit above obviously where the FED would like to see it. But boy, I kind of feel like we're dodging a bullet here on this tariff inflation. Here is that writer or is it still perhaps to come listen to your point.
Ism came out a few days ago and said we are no longer seeing the effect of tariffs in our price structure. Manufacturers, factories are no longer feeling these tariffs they've mainly come through the pipeline, And in fact, what we're seeing now is one company after another saying they've got too much inventory on hand because they had a lot of stock building going on into the tariffs, and
now they're trying to work that down. And we're hearing from one company after another, especially in the housing space, that they've simply got too much stock on hand right now and they're having to discount to get rid of it. So you're actually saying the opposite effect on inflation due to tariffs.
Do you think also that just they've been successful negotiating with other countries or with you, whatever it is they have to pay at the port, So I mean there's got to be some heavy duty negotiating going on here. It's hard to believe they're absorbing all the cost. Well, yes, and you hear one company after another say we have found alternatives. It's like I'm finding alternative data sets every day.
Companies are finding alternative suppliers if need be, and I think that that is something that is probably a healthy development because you always want to be able to whether it's hedging your portfolio or hedging your supply lines. And I hope to see this trend continue going forward, because I think it could have been pursued more aggressively after COVID and.
It was not.
Danielle, thanks so much for joining us. We always appreciate getting a few minutes of your time. Danielle Di Martinez, Booth's CEO and chief strategist, QI research on the smart folks we chat with to stay with us from Bloomberg Surveillance Coming up after this.
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Let's do some newspapers right now. It's that time of the day we do. Lisa Matay, what do you have for Lisa Okay? I want to start with this in the Washington Post. This is a sign that more college students are worried about getting a job in this economy analysts.
This is an analysis of federal data. They're choosing more double majors, which is interesting. They have nearly five point four million credentials, which are degrees or certificates. They were earned by the four point eight million college and university graduates in twenty twenty three and twenty twenty four, So that means about twelve percent of graduates earned more than one credential. That was compared to six to ten percent
years ago. So you see there's more of them doing and experts are saying, you know what, the students think more is more because there is a study that shows graduate who add two majors, they're fifty six percent less likely to be laid off and have their pay cut. So these are kind of the decisions that students are making. I had a double major when they're specially back.
In the day. But what was your double was it journalism? Communications? Very closely aligned?
Nice?
Well, you know what for me, it would come down to you also, how much more money is that going to be? Most colleges will not charge you for the double major because it still falls within why I guess, however many credits you need to graduate, But if it means summer classes, if it means more money, you might want to rethink that college is expensive.
For me, it took a little summer class and it took like a few more classes to take, but four years they got it done.
You gotta do here. You are to do it all, right, burger King?
Okay, yeah, so we talked about McDonald's earlier, right, so now we're going to hit burger King. It's not about the burgers and fries, though, It's about the change that they're giving to customers.
This was in the Wall Street Journal.
It's actually says that it's struggling with pennies, and you mentioned this before. They're wondering what's going to happen when they run out of them because most of their customers still pay with cash over at McDonald's. So one operator is saying, you know what, I have thirty boxes of pennies squirreled away. I hope it makes me go through two months at least. President Trump, you know, has that order stopping production of new pennies. So it has all
these you know, folks scrambling. So what are they doing. In the meantime, you have cashiers who are having to get used to like split second rounding. It's all this math at the counter that's trying to figure a round.
Up and then the rounding up in a round up.
I go for uh breakfast under lunch on Saturdays in Mike Town, cash only and you be surprised. Now, for all the locals that go there, we all know it and we're all prepared for it. But for the tourists to come in, they're like, what cash? I mean, where do I get cash? You know Venmo. You know, they're freaked out because they have to deal with cash. So it's so true. It's a dying art.
It's so true.
I mean sometimes you go, but usually they have the big sign that says cash all right, exactly, it's to warn you. Okay, So this last one, this has a panic setting in for moms and dads. Okay, K Pop Demon Hunters toys may not be here in time for Christmas. They don't know what to do with themselves. They're struggling. What are we How are we going to get these toys? They're not going to get them. The Netflix said, it's it's less. It is high demand for merch you have
like action figures, dolls, plushies. The kids want them all. The reason why it's not happening, it's because of the time required to produce ship the you know, the consumer products.
But no one thought it would become.
These things take like a long time in the making, you know, to start, Like Netflix was pitching retailers about the film years ago and they said, no, we're not interested, you know.
And now they're now APAs Bro Mattel.
They're scrambling to uh, you know, to get these items out there. So I wonder what the big thing is going to be for Christmas. Then that's a good question.
Toy.
I don't know. My kids are toys now. I don't electronics for our house. I'm not zoned in on that anymore.
I just get they get a pat on the back of my kids. What's the demo for these kpop things? Is it teenagers? Is it younger?
It's younger and I'm teens too. I kind of watched it over the weekend with my daughter, and what do.
You think, Well, I haven't seen it yet.
I actually it was kind of a me fun movie to watch, Like it's very like uplifting and kind of like dancing to the seek.
But I do have to say it's good. But for those kids who wanted these toys, they're going to be a little bit bit upset about it. It's not going to be in the stock. Thanks for them to strive towards, you know. Okay, very good, All right, that's it. Newspapers, Lisa Matteo, you know it, you love it.
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