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Kate Moore, CIO City Wealth this morning. Kate does your team of security and analyst at City Group, but claimed we use them all the time, great, great benefit. Do they have any framework of what September thirty earnings look like?
I think it's incredibly hard Tom right now to make a call on what third border earnings are going to look like, because, and this is a point I've been making as we were even getting reporting during for second quarterer season, is that there is a growing gap between the winners and users where it's around CERAs round Ai.
Yeah, no, igain to continue.
I think this is, folks, the absolute heart of the matter, growing direct This is political economics with Kate Moore from Chicago. The answer is, Kate Moore, it's a growing gap of America, a growing gap of society and a growing gap of investment.
Right.
Yeah, Remember Tom, We've talked a lot about in the past you know, K shaped economies, but I'm seeing a very K shaped market at this point in terms of the fundamentals, particularly even as we get these trading rallies, whether it's around small caps or home builders or some of the lower quality and more rate sensitive areas at the market.
And what I mean by the K shape is.
That you're increasingly seeing companies that have the ability to navigate policy changes and have the ability to navigate you know, sort of weaker end demand in general, because we had a slowing economic trend even before this policy introduction. And those that are adopting AI and becoming more efficient and
really focusing on their productivity. And then those that are kind of left behind, maybe they didn't have the cash to make that investment, maybe they were you know, they don't have the right people in place to make those business decisions. But there is a real gap in each industry between the haves and have nots. In theory, this should be a great environment for alpha seeking and active investors.
So Kate, it seems if you look at the stock markets making seemingly new highs every day, does that suggest too that the markets said tariff risk is in the rearview mirror. I mean, do you agree with that?
Yeah, So here's my problem.
I feel like the markets are overly complacent when it comes to terror risks, and then you see these, you know, knee jerk reactions to the PPI data yesterday and big reversals from what had been a very kind of risk on high beta move for the previous two weeks. I think that, you know, there's a lot of room for the market to quiet down. That's another way of saying
getting to the bottom end of its trading range. You know, as some of this tariff data comes through, obviously we're going to be watching retail sales and a few quick seconds here to get a sense for how consumers spared over the course of July. I mean that that's going to be important.
But more important than.
That is really what the trend is in terms of prices and in margins, corporate margins over the next few quarters.
How have earning has been so far, in your opinion, looks pretty darning good for the second quarter, came in better than expected it so it looks like Corporate America delivered.
Yeah, I mean, I thought the earning has looked pretty good. The one thing I will say though, is some of these aggregate numbers, whether it's on the sector level or on the index level, do mask some of that discrepancy or that you know, sort of K shaped experience underneath the surface. But one thing I've always said is that you don't want to bet against the resiliency of corporate America.
That the decision making to really kind of manage overall expenses, to focus on the business lines that have the greatest potential for growth, and to really kind of dial up and dial down spending when economic conditions necessitated, you know, should not be discounted. This flexibility from US companies, particularly US listed companies, is so much greater than the rest of the world, and it's a reason why I prefer the USK over other regions for the most part.
Kate, up, we go in the equity market. We get it right back in one minute. What's it mean?
Well, I mean, the one thing I'm sort of focused on as I'm looking at this data, it may have to remember that, like, while these were visions to June data are excellent, you know, it looks like there was a significant amount of retail activity, that the retail sales data are nominal, So there's a chance that that's capturing some of the increase in prices that we're starting to see in other bits of economic data. So this is not necessarily an indicative like a real acceleration in terms
of overall retail spending. And that's what I want to dig into a little bit later this morning as we get off right.
Yeah, the low point of your Sunday morning is you've got to read Andrew Hollandhorst for three hours. What is the city girl belief on the tariff pass through to the consumer?
Well, the pass through.
We were having a pretty robust debate across city on what the pass through might be. And I think, as we all know, they're the three buckets. You know, what does a supplier do, what is the importer do, and what you know kind of gets passed through to the consumer. And it feels like it's a moving target, depending not just on the industry and the commodity, but on the flexibility of that company and how sort.
Of captive their consumer base is.
I think we're going to see, you know, fewer companies absorbing the costs, both on the supplier side and on the importer side, and more costs passed through to the consumer.
We'll have to see m Thank you so much for learting me.
We'll let you get back to an incredibly busy morning at City Group Kate Moore driving all of Citygroup Wealth.
Thrilled to have her with us this morning. Stay with us. More from Bloomberg Surveillance coming up after this.
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We're to go sixty thousand feet right now. Peter's share with us here on a Friday in the summer as we reset for Q three. The end of Q three and into Q four is where Peter the technology juggernaut we're all living and experiencing. Do you assume that academy securities that we're just going to have the haves get heavier and the have nots get have not here I mean a greater divide within society.
Yeah.
Unfortunately, you know, we keep looking at and I really am from a market standpoint, I really want to buy the Russell two thousand right waiting for the opportunity where the small caps and midcaps can outperform. And yet you look at it, the story is really still is very AI driven. It's the spending on AI, it's the electricity generation that needs to be done so that entire industry is like doing extremely well.
That's where the growth is.
And away from that, I think the impact of tariffs are impacting small and mid sized companies. Just feel there's an overall weight on the economy from that.
But somebody live in three towns outside Cincinnati right now and they're seeing, you know, the reds are going down at Flames.
I mean, you know, this is not happening. What the poets are doing.
Well, somebody out of a job or a his daughters out of a job outside Cincinnati.
They don't give a damn about AI. And to me, it's just a further I mean, you're brilliant at this.
It's a further severance of society.
Yeah.
And you know, I think part of the reason I'm slightly nervous, more maybe nervous than most guests about the economy is I'm worried about the job situation. I'm particularly worried about, you know, the recent college graduate situation right, the unemployment rate seems to be fairly high. They're not getting jobs. I look at law school applications, they're skyrocketing. That to me is another sign that jobs are very tough, especially for the college graduates. And those are the people
I think who currently are being displaced by AI. Right.
That's people are.
Comfortable kind of giving those sorts of assignments to AI, and you know, they're not going to let big decisions being made, but they're letting some of that work be done. And I'm not sure what that does for that job market opportunity. I'm not sure what that does for a future where those people supposed to get those jobs that lead them into management and things like that over time. So some of this I think we're getting close probably
you know, six months a year away. There's going to be a little bit of pushback on AI, the deployment and you know, you keep looking at the cost of electricity rising, that's going to be an issue.
Inflation also an issue for these markets for this Futter reserve. It got's inflation data this week. Uh, the brucer pricing next is yesterday, I think really got people's attention. What did you make of that? And some of the cooler CPI with data we got earlier.
You know, I always ignore a little bit PPI.
To me, that's always been kind of a tertiary data point, and it's always hard to see that it actually ever follows through into true inflation. So it was a bit disturbing,
but nothing you know, to alarm me. I still think goods inflation is going to be there a little bit away from that, though, I think, if I'm right, in the economy slowing, you've seen some pressure on services inflation, and to be honest, even in CPI, which was somewhat cool, I think it's even overstated there because we continue to use owner's equivalent.
Rent as the metric.
I'm not sure why we won't adopt Cleveland has a real time you know, rentric metric, you know Zillow. And to me, the one thing this comes to back to so much of our data. There is so much real time, reasonably accurate information out there, and we still tend to rely on surveys and these old methodologies. We have to
revamp that. So I think CPI is overstated. So I think the FED will be in position to cut three times this year because jobs are going to weaken enough, and inflation is going to remain contained.
Given that backdrop, can this market expand out the breadth of this market here, which has been so concentrated, Yeah.
I think it can.
And to me, I think the real growth is going to have to come from what we've been calling national production for national security. And I think last time I was on, we talked about the Department Defense made the investment in MP. Now we're hearing potentially the government's going to make an investment in Intel. And actually I've got admit I'm an owner of Intel, so that's a full disclosure.
But on those things, I think, right this has to come national production for national security, and this administration is going to do it through investment. They're not just going to give subsidies. They're not because they want the American citizen to benefit.
Can I ask a.
Stupid question in our new capitalism, It's Friday stupid question, right? Why don't they make an investment in Microsoft?
Why buy a dog?
I mean, if the President Trump wants to attach himself to our technological superiority.
By two percent of Microsoft, you know, And I think what we're really looking I'll come back to national production for national security. So I think someone in the administration is taking time. What do we need to be producing here to be safe. It's going to include pharma, biochemical or bio biotech, those sorts of industries. Look for investments there because those are things we want to be producing
we need to do domestically. Chips is all over this, right, and Intel's kind of the cheapest way to get involved in it, like.
Tiss is in Norway.
I'll give you in Singapore the sovereign Wealth fun I mean, I had an office once in Boston near the Kuwait Authority.
Whatever, I'd get a sovereign wealth fund. That's not what we're talking about, Peter, right.
No, I think this is much more strategic, right. I think again, the deals we are looking for rarerst critical minerals, the processing, refining, and I think this is meant to boost things along.
It also ties in very nicely for.
These companies with the big beautiful bill where you get accelerated depreciation. So if you can get this influx of money and excitement because the US government's involved, presumably the US governments can be buying from the They've got that impetus to grow and build. And I think It's going to be targeted though, around the industries that we are behind and that we need to be doing domestically to compete with China economically.
Should investors, should the market be paying attention to what happens today in Alaska?
I think a little bit.
In the end, I think all this probably leads to is, you know, I think your prior guest is, you know, miss Baker did a great job discussing that normally, you know, these presidents and leaders only meet when there's a deal already laid out.
You know, this could go any which way.
Our suspect at Academy security is what we suspect will come out of this is a little bit of pushback on Putin and finally a little bit more of this stick because if you think about in the last few weeks, the President has talked a lot more about going after the sanctions again, re upping them. They've pushed on India, and they've also now find a way to get weapons to Ukraine that's palatable to this administration. Right, we sell
them to europeasses them Moudt Ukraine. This administration seems fine with that. Phuda needs to feel the stick, I think to really cave on anything.
I haven't seeing the new barons for tomorrow, Pierce sheer barons.
Let's pretend he's on page eleven.
Can you buy that Meg's seven and barons tomorrow.
I'm trying to not buy that. I'm trying to buy the other things. I'm looking for, these new growth stories. I think, you know electricity, and this is one of my key things. I'm still you know, Tom, you might be iilthy of this as yourself. Well, when I think energy, I used to think oil, right, energy and oil equated. You know, It's how it's always been, can he It's energy equals electricity. You look at things like China's doing in terms of their nuclear power plants in the Saudia's
on solar. I think we have a huge opportunity in the electricity space and it's going to drive a lot of production, and it's so necessary to keep the AI game afloat.
Peter, in this room, when we think energy, we think uncrustables.
I did hear that the other day. It's better. Thank you for listening, Peter Share. We are thrilled to have Peter Share with us this morning. Thank you so much. With academy, I'm security, Stay with us. More from Bloomberg Surveillance coming up after this.
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Akindi Krabo Retiker a right to the console on Foreign Relations adjunct Senior fellow. We're thrilled she could catch up with us on Trump Putin as well. Hiding within your note and I think this is the embarrassing question. Does Putin want to cease fire?
I think that he absolutely does not want to cease fire. And I would say, you know, I think it's a win for Putin to actually get this meeting in the first place with President Trump in Alaska of all places. But Putin thinks he's winning the war right now and that time is on his side. So I don't think he's altered any of his demands. I don't think he's
negotiating in good faith. And why would he declare that he would have that he would support a ceasefire when the only way that he will actually agree to that is on terms that neither Ukraine nor Europeans would agree to.
So what is a quote unquote win for President Trump here in this meeting in Alaska?
So I think a win would be I think what President Trump is looking to do is to arrange that second meeting with with Putin and with Zelenski, so that trilateral meeting, which you know President Trump has said and dangled that it could be as early as this weekend and in Alaska.
But I do not think that.
I do not think that that the Ukrainians have high hopes in that President Putin will actually agree to meet Zelenski.
He has not done so in the past.
What do we what do we know about the I don't know the discussions that President Trump president Zelensky had with European Union leaders earlier this week. Do we know what was agreed upon there at all?
Well, you know, I think that the Europeans made very clear what their you know, what their position is on on on Ukraine and what Ukraine's physician is. I think that they want the justin lasting peace, and they want respect for international law and the principles of independence and sovereignty. And this is one of the big sticking points a Ukraine that can defend itself effectively. And one of the
key asks of President Putin is a demilitarized Ukraine. The Ukraine has in the meantime been building up some really both indigenous military capacity that is cutting edge.
It was the one of the key.
Pillars of the Soviet defense industrial economy, so they actually have the expertise the capability. Having a militarized Ukraine is really foundational for Ukraine to defend itself.
Explain the economic reality of the map, Heidi, which you have memorized and Paul and I can't pronounce it, but basically eastern Ukraine from the north, down to the south and down to the Black Sea and of course down below that crimea of a decade ago. What's the economic advantage of mister Putin to own that territory.
Well, I mean it's it's obviously resource rich, and I I believe not only not only is it a it's a forward it's a forward base for additional expansion. I don't think that that President Putin really has in the next you know, in between now and when he leaves the position as as President of Russia, that he is going to stop the imperi the sort of expansion of how he sees imperial Russia, and so I don't I don't believe that.
I think it's it would be.
A win.
For many reasons that are economic, rare Earth's industrial capacity, a lot of the a lot of the access to the Black Sea that comes with with with the with the control of that territory. It's really, it really was a powerhouse for the economy. I think a lot of it's been destroyedoid over the past couple of years. But in terms of what Putin wants, I think it's both power as projection and it's economic.
What leverage, if any does the does President Trump have at this negotiation today? How do you think that lays out?
So I think that it's it's important for President Trump to make sure that he has the backing of the Europeans and the Ukrainians. I don't know the leverage that he has both carrots and sticks. The ability to actually impose greater pain through sanctioning. For example, for example, the dark shadow fleets of oil tankers that are that are prolific in actually exporting Russian oil right now would be meaningful.
So I think that there are sticks, there are also carrots that he's looking to put on the table.
I thank you for the brief.
Heidi Kramer, writing writing for the Writing for Foreign Affairs should say in the Council on Foreign Relations.
Stay with us. More from Bloomberg Surveillance coming up after this.
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Jennifer Lee one of the toughest jobs on Global Wall Street.
She has to put up with Ian Lincoln and Brian Belski at the same point, and she has the single best sentence in a research report of the week.
Here's Jennifer Lee. I quote what now, question Mark? We wait, We watch Jennifer poetry. It's like a haiku. It's so so true.
We wait and we watch. What are you watching? To unfold the mystery of the back half of twenty twenty five?
Well, good morning, and thank you very much for having me on. And just quickly about the airline breakfasts. It's kind of hard to screw up yogurt. I think that's basically what I get.
Every every time I'm on an early.
Morning flight.
Watching the data watching. I think inflation is probably like the biggest report right now to keep an eye on. But of course, this morning's retail sales numbers were also very interesting, and I was very torn. I gotta tell
you this, I was very torn. I was like, do I want a strong number to signify, you know, that the US eclimate remains resilient, or do I want a weak number because it shows that the FED is going to have to start cutting rates starting next month and by how much it's always torn?
But you know, I'm kind of lying.
I kind of lean toward, you know, I want a stronger economy, more resilient economy. And the retail sales numbers approved that it wasn't wall to wall strength. We saw some pullback and play in things like eating out, dining out, for example, which is something I like to keep an eye on all the time. But there's more spending on things like sporting goods and on clothing and things like that.
So cannot write off the US consumer just yet. You know, we should almost never write right off the US consumer. But it shows that again, the US economy is still holding up there. The backward revisions, by the way, show that there's a lot more momentum coming in into the second half. But what happens at this point on with signs of higher inflation bubbling, You know, this is where everything hits the fan.
My summary, Paul is simple, what now we wait? Watch exactly?
So, Jennifer, what do you think or how do you think the FED interpreted this week's inflation data in today's retail sales? How do you think that may or may not affect kind of what they do in September.
I think it potentially makes them dig in their heels a little bit.
And you know, there is talk about a fifty basis point cut, perhaps maybe from just one individual with the initials s B, but I think the inflation reports this week sort of put that under the put that on the side, at least.
Off the table for now. On twenty five basis places.
Still looks like the way we looks like what we're going to be seeing come come the next meeting in September.
Again, we still have I mean, we just had like the two pretty.
Scary you know, inflation reports this week for July, but we still have And then of course this morning is hotter than expected import price report that you've already mentioned. So we've got one of each, by the way, one more CPI, one more PPI, one more import.
Price report before the September seventeenth PEN meeting.
We also have a couple of ISM surveys and I always love to read those because I like to see what the respondents of there are doing or what they're seeing in terms of prices. And those are like the boots on the ground, right, It's not these numbers that are being calculated in whatever format and whatever fashion. These are actually talking to the people out there who are making their purchases, on actual purchasing managers, and we wanted to see what they are seeing out there.
What do you make of the US labor market here? That was the discussion point a week ago. This week's been all about inflation. Last week was about labor. What's your on the guest labor market?
So this is I mean, obviously the last report was a little shocking showing like slowing demand, but there is still demand for jobs and we still have you know, well over seven million jobs job openings out there across the country, so you know, it depends on what sector
we're talking about, but clearly the demand is slowing. But it's also interesting, just given from what we've seen from some of these surveys, from what some of the hiring managers have been saying, you know, they're basically holding off to see what happens with the economy, what happens with tariffs. Is this trade war worth trying to going to continue
dragging on or not. So that's going to determine whether not they're going to be starting to get rid of people or if they're going to lay people off or hire. Everyone is on hold right now until there is more clarity. We have a little bit more clarity now, but there's still not one hundred percent. It's still a little fussy to short of.
Visit Jennifer Lee. I promise I will wait and I will watch.
Jennifer Lee, Senior Economist, beam A Capital Markets.
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