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Let's go to Galit Alstein. She is a Bloomberg News reporter. She is based in Tel Aviv, Ghale. Thanks so much for joining us here. What's the feeling in Israel today as these hostages come home?
I think for almost everyone in Israel, this is a very happy day. We've been seeing tens of thousands of Israelis flock since early this morning to Tel Aviv's Hostage Square, which has become a sort of gathering point over the past two years for those who have been advocating for
the release of the hostages. And it was quite a sight today seeing about, like I said, sixty seventy thousand people in the square and then all the surrounding streets with a big stage that Tom kept broadcasting the images of the hostages coming out. People were chanting and clapping their hands and singing and cheering, and it was indeed a very happy day and I think a sense of relief for a lot of Israelis here.
Glik.
There was a moment in that speech when President Trump was talking to Prime Minister Netniahoo directly and he said he had a lot of guts for knowing when to stop the fighting and for stopping the fighting when he did. Just get us up to speed here on what these last few days have been like. We had President Trump unveiling this peace plan a couple of weeks ago. The devil is in the details, of course, we were talking
about that just a few moments ago. What's going to happen here in Egypt and going forward, But just explain what President Trump was able to do, how he was able to convince Prime Minister net Yahoo to stop that assault on Gaza City that was underway.
Yeah, so we to be very honest and transparent. I think we only know like part of the question, the answer to that question at this stage. But overall, you know, Natan Yao has generally insisted that Israel cannot stop fighting in Gaza and cannot stop fighting Hamas until it is totally defeated, until it's completely out of power, and until
all of its military capabilities are taken out. And what happened here is that Trump, I think, along you know, with Im, Steve Whitkoff and Jared Kushner, they managed to do a few things. On the one hand, they managed to convince Hamas by themselves, through mediators, that to give up all the hostages at once, at least all the living hostages, because there are still twenty eight dead hostages that remain in Gaza, and we understand that only about four of them are going to be brought back today.
So that's one thing they managed to do. But in terms, what Hamas wanted was guaranteed that the war will in fact end after that happens, and that Israel doesn't just get all the hostages back and then goes back to fighting. And you know, Trump has basically personally guaranteed that this will happen and that the war will end. And we've heard him say multiple times today on the way to Israel and Air Force one when he came to the Israeli parliament, that this is the end of war and
that the US will make sure that's what happens. So I think these are, you know, the two things that made a difference. You know, the biggest sticking point moving forward will be whether Hamas some agrees to disarm. Trump's twenty point Plans says that that's what Hamas has to do. Hamas hasn't agreed to do that yet, and that's what Israeli system. So we'll have to see how that plays out.
But the sense is that the war, at least as if we as we've known it in the past two years, has in fact come to an end that sort of looks like today.
Glee, thank you so much for joining us. Really appreciate your reporting from Israel. Gleed Alstein Bloomberg News in our Tel Aviv euro Stay with us.
More from Bloomberg Surveillance coming up after this.
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Let's check out with Lori Calvacina ahead of US equity strategy for RBC Capital Markets. Laurie, it's kind of seems to be trade as one of the drivers of kind of market sentiment these days. We got maybe a little bit of a softening of tone from President Trump as it relates to China, and I guess that's what the market likes to see here. What are you making of today's pre market action?
Well, thanks for having me, Paul. Look, I mean, it's not unexpected to get a bit of a bounce right after kind of the big drop that we saw on Friday. I think it's gon to be really interesting to see how the S and P five hundred trades today. The kids are out of school in New York City, I'm guessing other parts of the country as well. They're thankfully not running around here for me, but the you know, it is a quiet day on Wall Street, right, so let's see what we get in terms of the price action.
But I think tomorrow is really going to be, you know, kind of the day where I think we start to hear a bit more from folks, you know, in terms
of how they're digesting this. And look, i'll tell you, Paul, as I think back over the last three weeks i've been in the UK, I've been running around the US to more cities than I can count and keep track of at this point, and I heard a whole lot of things about people that they were worried about valuations, AI capex, right cut pricing got pulled forward in the stock market, labor inflation, you know, is that going to start to percolate soon or are we going to see
more of a growth response to tariffs in the market. But the one thing I was not hearing about was that things could you know, start escalating again with China. So I think what we learned on Friday was that a fair amount of you know, we're on a good path, things are headed in the right direction. That was really kind of a firm underpinning of this market. So we need to see how that plays out.
It seems like quarter after quarter, Laurie, going into earning season, financials are held up as a bell weather is something that's going to tell us about the health of the market. It's going to give us some insight into the economy as well. So tomorrow we've got JP Morgan Goldben Sachs, City Group on the heels of that, We've got Bank of America and Morgan Stanley on Wednesday. In this odd economy, in this moment, what are those particular companies going to tell us?
So, you know what, we'll see what they have to say. Earnings revisions have been pretty resilient there. So my guess is that we're going to have, you know, some pretty good messaging coming out of them, but we'll have to see the reality though. You're common about the bell weather. This was something we wrote about in our weekly today.
And if I go back the last couple reporting seasons, you know, I could summarize, you know, what we've been hearing from the banks, and especially the Big Bank says, don't worry about the consumer. Everything's fine, the stats all look good. You know, we're really you know, proud of our consumers for being more choiceful in their purchases.
But don't worry. Things aren't cracking.
And that's that's not wrong, right, I mean, that's what they're seeing in the data.
That's one perspective.
But the problem is that you have a lot of people in the financial community that go around saying that as evidence of there's nothing to worry about. And if you actually go and listen to the consumer companies who have the boots on the ground, feel you know, there's some really you know, not troubling. That's not quite the word I want to use, but there are some problems.
And so for example, what we've noticed in the recent consumer companies kind of those late cycle off cycle reporters, kind of that came at the last tail end of the reporting season. They were talking not just about the low income consumer being stressed, but the middle income consumer being stressed. There was one company over the last few weeks that said they were seeing stressed in the consumer worldwide. We had another company that was talking about how socioeconomic
issues are pressuring consumers across cohorts. So I think that we really need to take the financials with a grain of salt. It's an important perspective, it's one that we absolutely want to have and find valuable. But at the same time, they're not able to give us the full picture because only the consumer companies are really able to tell us about the composition of the spend under the surface.
So, Laurie, given that earnings are kicking off here, let's put that in context of valuation. Here, what are the discussions you're having with your clients these days about valuation across the market.
Everyone's worried, everyone's got sticker shock. And if you just look at our charts on just say the SMP five hundred market cap weighted PE you can do the same thing on the Nasdaq one hundred, either cap weighted or equal weighted. And we also look at the top ten names in the S and P five hundred, and you've basically got forward pe levels that are sitting in line with the recent highs. Not necessarily tech bubble highs, not necessarily all time highs, but highs that in recent years
have been difficult for the market to move past. So you're not getting any valuation expansion in this market, and I think that's something you know, the bottom up stock pickers I talked to Frankly are picking up on and I think there's somewhat alarmed at some of the levels that they're scene in some of their portfolios. So I do think that earnings are really the big driver here,
and we have seen a fade in earning sentiment. Now that doesn't mean earnings are going to be a disaster, but the big pop in earning surprises that we got in the last reporting season, I don't think that we're set up to repeat that.
Paul, you weren't here. I was filming in for you. Laurie was on, and I brought up the fact that it seemed like analyst after Analysts and strategist after Strategists was touting how this was a moment for small caps, and I asked Laurie if she agreed with that, and Laurie rightly brought out her CV and touted her bona fides when it comes to her experience analyzing small caps
in her previous life, and she was skeptical. I think I could say about the prospects for small caps and I would invite her to take a bit of a victory lap here, Laurie, what is your sense of where small caps are head and what does that tell you about the market more broadly?
Well, look, David, I mean I always describe small caps as my first professional child. So there's no one more than me who wants them to succeed and wants them to have that moment in the sun, and wants them to have that leadership shift. Frankly, you know, I felt a little bit like I was shouting into the abyss over the last few months while the street was just going bananas on talking about small caps and calling for
the beginning of this big outperformance cycle. And based on what I'm seeing in the recent trading data, it looks like, you know, it's kind of fizzled out once again. And that's not to say there's not incremental upside and absolute terms, but we're no longer seeing this part of the market outperform the SMP or outperform the Nasdaq one hundred. It looks like it may have just been another rate cut bet that fizzled out pretty quickly, you know.
I think as we.
Kind of head into earning season, one of the interesting things on small caps that's been coming up recently is whatever challenges they're out there, you know, whether it's you know, tariffs for example, back when we had the tight labor market post COVID, small caps just have a difficult time managing around those challenges relative to their big cap companies.
So that's one of the things I'm going to be looking for in this reporting season is to see how small caps are managing through relative to their big cap counterparts.
So, Laurie, given that backdrop, what screens well for you, I'm not sure if you do it by sector or by factor, something jumping out of you, guys that kind of gets your interest.
So we mostly focus on sectors, and we continue to like the financial sector. You know, Frankly, if we get a pullback in the market, they may not, you know, sort of hold up better on the way down. They are cyclical in nature, but we're not really concerned about that. What we've said is we like them on a six to twelve month view, so as there is incremental weakness on a relative basis in a short term, we'd still use that as a buying opportunity. Earnings revisions have been
very resilient relative to other sectors. We're basically seeing the rate of upward revisions fade for most sectors in the S and P five hundred x. Technology Financials has had a little bit of a fade, but it's kind of paled in comparison to what we've seen elsewhere. Banks, consumer finance, insurance all screen well on our valuation in Earning's work, and.
I didn't upgrade it.
But one of the things we have been talking about in recent reports, and we actually said this specifically in the weekly we put out this morning, is that healthcare is starting to look a bit more interesting, especially if you think there's a market pullback that's already started, or maybe on the We are neutral all four of the defensive sectors, but healthcare's one that's been coming up in
conversation recently. Valuations look good, Earnings revisions have been a touch more resilient than other sectors, and the flows look pretty good. Policy risk is still a big overhang, but we've had some developments on that, so maybe investors will be able to wrap their heads around that a little bit better than they have in the past.
Laurie very quickly here. I'm curious what your processes as we get into earning season in earnest, and I know a lot of that involves you kind of going through call transcripts looking for phrases that stand out. Paul asked about tariffs, I asked, he asked about valuations as well. What are you going to learn from those calls, do you think, or what are you hoping to learn from those calls with executives here in the weeks ahead.
So look, we do use tools, you know, sort of help point us in the right places and earning's call transcripts, but a lot of that's done after the fact. My team we like to read top to bottom and we do speed read, but we tend to divide up different sectors. We have some knowledge that we've built up over time of which companies tend to be more insightful than others, and we look at the price action frankly to figure
out what transcripts we want to focus on. I'm really curious to know more about inventory, so how much pre tiff inventories are companies still sitting on. Another thing I really want to understand in both the corporate and consumer world is how much demand was or frankly, was not, pulled forward from the back half of the year into the second quarter as companies and consumers were trying to get.
Ahead of tariffs.
I don't think we got good indications about either of those in the last reporting seasons. Companies were a bit vague analysts. Frankly, I don't think we're pushing hard enough to get answers to those questions. And on the issue of pull forward, a lot of companies said they also just they couldn't quite tell yet. So I think those are some of my big questions. I'm also curious about twenty twenty six. So far, companies are deferring, declining to
answer when asked about twenty twenty six tariff impacts. But any clues we can get there I think are going to be helpful.
Laurie, thank you so much for joining us. We always appreciate getting a few minutes of your time, Lorie Cavalcina, she said of a US equity strategy for OURBC capital markets, and we appreciate getting some time from.
LORI stay with us. More from Bloomberg Surveillance coming up after this.
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Let's talk about the residential real estate market here. Sma joins here. She's the chief economist for Totality. She joins us here, some of the the big issue in residential real estate is just affordability, or the lack thereof. Is there a solution to this affordability issue? I think about the folks in their late twenties, early thirties looking to buy a house.
That's tough out there.
Yeah, it's very tough. Well, first of all, thanks for having me. I'm also happy to be here today. You know, it's really a lot it is right now about mortgage rates, and mortgage rates have retreated from recent highs, they are now averaging between six and a quarter and six point four for thirty years fixed, and that is the lowest in about a year, which means that affordability is that it's best now that it's been in over two and
a half years. So affordability is improving, and honestly, in some markets you do have quite a bit, relatively quite a bit more affordability than than other markets. So in Midwest, for example, and also parts of Northeast, it's it is clearly more affordable than markets coastal markets such as you know, New York, Miami and LA and so in these markets you do now continue to see relatively stronger rate of
compress appreciation despite all of these affordability challenges. So you know, markets in Indianapolis, Chicago for example, uh, even even Boise City at this point again are seeing relatively more appreciation over the course of this summer h than other markets where for example, in Florida and markets that have seen culative so much more appreciation since Joan sort of the pandemic and have as a result becomes so unaffordable and how home prices are in those markets are declining, So
it just really depends where you are in the country. Somem, I want to just ask.
You another question about consumer behavior here, Paul asking about twenty year olds and thirty year olds. And I got to give Lisa Mateo credit for this. She flagged the piece in the Wall Street Journal for us this morning about how young people in particular, faced with these higher than we're accustomed to mortgage rates, have opted not to buy and see is more promising putting money in the stock market where you can get you know, nine ten percent return over time, and that's just a better deal
for them as they pursue renting. Is that bearing out sort of what you see in terms of consumer behavior? What are young people doing if they're not buying homes and what's it going to take for them to once again consider home buying to be so integral to our notion of what the American dream is.
Yeah, I mean, I think American dream is still alive and well, you know, it's just been a little bit postponed. And with the returns that they're getting in the talk market, it allows them to make larger down payments down the road. So we do see the median age of first time home buyer and be higher than it's been previously. And you know, they're now tend to be about ten years older when they buy their first home than they used to be. But I think survey after survey shows that
again American dream is live and well. And so what they're doing is, you know, and the fact that we can in many ways still work remotely or don't have to go to offices five days a week. People are moving to areas that are more affordable. They don't have to be in central cities, especially if they have families, and you know, they're looking for good school districts. You know, they tend to move a little bit further outside the cities. They tend to stay with their parents for longer to
save for down payments. But again, you know, in our survey, in our data, for example, of mortgage applications, areas that are more affordable in Midwest, for example, the share of first time home buyer is really high. It's fifty or sixty percent. So you know, it just again depends where you are in a country and where it's more affordable to buy. People are buying, and the younger buyers are buying, and so.
Here again in the New York metro area.
We're dealing with the Northeastern here today, which just once again highlights the cost of insurance, if people can even get insurance, whether it's for hurricanes or fire or whatever. Talk to us about insurance costs. I mean, we've been hearing a lot about that is really oppressed on a lot of people.
Yeah, insurance costs have been a big constraint on the market. And in markets that have work costs have gone up a lot or have higher risk of natural disasters, you've seen home sales being impacted. So in those markets, home sales do tend to fall out a contract because people
cannot get insurance. Overall, insurance costs have gone up about forty to fifty percent again in some markets significantly more, particularly in Florida and actually parts of Midwest to where you don't think about insurance costs being high, but there are. Because there's persistent tornadoes for example, or Hell and so not big natural disasters, but more persistent natural disaster that's where we see large increases in insurance costs. Again, it's it's it is a big concern, but you do see
some stabilization in the markets. You know, there's been regulatory changes in markets at Florida and California, for example, and that's helped improve accessibility to insurance. But when you think about you know, costs and insurance continuing to go up, forecasts affter forecasts do show that those costs will go continue to go up. You know. Really the big biggest thing is concentration of residential valuation in areas that are have high exposure to natural disasters.
Some Let me ask you lastly, just about what you were seeing when you look at survey data about the US consumer, How he or she's feeling about the economy, is her prospects going going forward? A moment here we're kind of struggling because we don't have the data that we're used to having, the harder data that we're used to having, because of the government shutdown from your surveys, from the so called softer data. What are you learning about the health and optimism of the US consumer today?
Well, unfortunately, especially unfortunately for the housing market, consumer confidence does remain fragile. You know, there's been a lot of as you said, economic certainty, policy and certainty. Most recently, what seems to a weigh on consumer's mind is job security and income stability versus, for example, fears of tariff or tariffs earlier in the year. The other thing we do see is again by furcation, income by furcation, So upper income households are doing better, and when you look
at home sales activity, it's performing better. And price stability is better in upper income or upper higher priced homes than lower price homes. So again it's about income and it's there's regional variation. But I would say that consumers are continue to be very fragile and they are very responsive though to mortgage rate changes, you know. So with most recent decline in mortgage rates, we've seen consumers are coming back in home buying. Home buying market.
Salma, thank you so much for joining us. Always appreciate getting a few minutes of your time. Sama, he chief e Commerce for Cocality.
Stay with us. More from Bloomberg Surveillance coming up after this.
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Let's get right to it.
David Maxwell, Managing director of Sustainable Development Capital Co manages a six hundred and fifty million euro green Energy Solutions Fund investing in energy transition and infrastructure across the US, Canada, UK, and your David, thanks so much for joining us here in studio braving the nor reachter.
We appreciate that.
Is this administration supportive of the energy transition from your perspective or is it kind of a headwind here?
What are you guys figuring out so far?
Yeah, it's a good question. I think the important thing to focus on is the problem. So I think we all know that in the United States there's going to be a surge in electricity demand, driven by the AI boom, by electrication, by on shoring, and the question is what do you do about that? Because we don't necessarily have the generation capacity or the transmission infrastructure to meet that
growth in demand. And so I think that the general consensus is that an all of the above approach is required. And in that context, certainly things like distributed generation and energy efficiency are massively important in terms of filling the gap. I think when it comes to things like the Big Beautiful Bill, which was passed on July the fourth, certainly there are going to be headwinds, some headwinds associated with
utility scale solar and electric vehicles. But at the same time, if you really look at the text and the way that the BBB has been discussed, there have actually been lifelines thrown to in fact, major parts of the energy transition and technologies associated with it. These include things like some runway for distributed solar to continue to benefit from investment tax credits until the end of twenty twenty seven.
You know, the big Beautiful Bill supports geothermal. It's quite useful in terms of batteries, hydro electric power, carbon chatrum storage, and other components. So I think that we just have
to take a pragmatic view. One of the positives that has come out of discussions, and we recently hosted an event during New York Climate Weeek, was that actually, the fact that this has been passed and that there's policy certainty is a very positive thing for the types of sectors that we invest in, and certainly uncertainty is unhelpful. And so actually we feel pretty good and comfortable and quite bullish on the investment strategy that we deploy within SECR.
I'm curious how much you and investors can tune out some of the politics surrounding energy right now. So I think of friends who live in Rhode Island or Massachusetts who have seen such great expenditure and investment in wind farms on the ocean. Now we see administration taking a very adversarial approach to that. Obviously, this is being fought
out in the courts. But when you look again at that level of investment and put it in the crucible of politics, is in your sense that cooler heads will prevail. Enough has been built, these are close to being finished that they'll end up being operational. Or is it something that actually should be of concern to those who saw the prospect of this kind of broader based energy future and are now wondering if we're going to have wind energy and other types of energy going forward.
I mean, I think the things focus on. I think what will prevail is the concept of economic imperative. So going back to the theme, there's going to be an explosion in energy demand in the United States and there has to be some way to meet out a growth in demand. You know, if you look at the kind of investment strategies that we deploy with an SDCL, they
focus on downstreams. They focus on energy efficiency where the energy has consumed, how it's built, and those sorts of themes are quite in some ways immune to the policy
because they don't rely on policy incentives. Energy efficiency distributed generation can really stand on its own t feet, and certainly, you know in discussions with some of the CEOs we do business business within our portfolio companies, they are feeling that in time to come, and not very long in sort of two or three years post twenty seven, that these types of technologies are should and can stand on their nt feet. Ultimately, I think that's what's going to
drive the energy markets going forward. And actually you can see that there's a confluence of opinions across the pond as well.
In Europe and Europe one of the things and talking to your colleagues is energy efficiency. How much energy is lost from like where are the energy is created, like an oil wall.
To before it gets into my home.
I mean energy loss and energy efficiency is it's a huge issue.
How do you guys to talk about.
That two thirds of energy two thirds energy is lost point of extraction to the point of use STA statistic. It's a staggering statistic, and so That's one of the things that we identified it when our company was established.
If you can go to a hospital, if you can go to a data center, if you can go to a school, and you can save them energy and you can reduce some of their energy wastage by primarily two things, by installing on site generation, which removes all the transmission and distribution losses associated with that large two thirds energy loss, and if you can go in and do retrofits to make their energy plant and equipment more energy efficient.
These things are really good for business. They actually enhance energy security on site, they reduce carbon emissions, they cut costs, which is great for business, and also it represents a fantastic investments opportunity for us and for the investors be represented.
I never heard that two thirds these guys.
I will never forget that either.
Yeah.
David Maxwell, Managing direct to Sustainable Development Capital.
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