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You're really going to.
Drill down here into the jobs report right now. Jeffrey Cleveland with us with Peyton Riego love having on with just an inherent optimism about waking up and taking a swim. We'll talk about that in a bit here. A ton of moving parts here to partse. Retail sales came in SAGY except the control group. The control group takes out this, that and the other thing, and it's a boom number of zero point eight percent. But Paul, the revisions on retail sales and the published retail sales is sort of
just a mess. Yeah, that's how I do I'd put it. Your comment, Paul on the four point six percent.
Yeah, looking at the four point six percent, I mean, you know, we started the year kind of like around four percent here three point nine percent, so it's definitely jumped a little bit there, market.
Lifting up a little bit. Yields come in a little bit as well. Again, maybe the most important statistic today oil under fifty six dollars barrel. We're given Jeffrey Regal about four more seconds here to parse the data. I'm going to say, folks, there's a single line here thanks to our great economic team, non farm payrolls three month average change is twenty two thousand. I don't understand politically, Paul, how twenty two thousand is okay for Washington.
Yeah, exactly right, Tom. I mean I think that's a little bit of a challenge there. It seems like at that no higher, no fire kind of economy still kind of with us to some agree.
Well, we'll have to see. We're commercial free for you through this far. We're going to continue here with Jeffrey Cleveland and get some good bond analysis as well. Bloomberg Surveillance this morning brought you by Interactive Brokers. Trade over ten thousand US stocks and ETFs, US equity index options, US treasuries and more on your timetable. Learn more at IBr dot com, slash around the clock, and we think Interactive Brokers for all their support. Michael mckeey scheduled to
be with us. Christina Kemeny will be with SOT Invesco. But we continue now with Jeffrey Cleveland, who's had all of two minutes forty seven seconds to massage the data. What's the first thing you looked at, mister Cleveland.
I think, Tom, for me, the unemployment rate taking up to four point six, as we said in the preamble. I think that's going to get attention of investors and policymakers. I think you see that moving the bond market already. After that, I quickly looked at your non farm payroll. I mean, I guess on a positive note, if you want the West Coast optimistic spin, you did have a negative October, but total private if you exclude the government payrolls,
didn't look too bad. Tom, you're talking about fifty two thousand in October. You're talking about sixty nine thousand in November.
You mentioned the three month average.
We do like to look at that as well, and the Bloomberg Economic team absolutely right that twenty two thousand. You know, that's total non farm. If you look at just private, it looks a bit better. It's seventy five thousand. So I would still characterize that as soggy. To steal your phrase, your reference for retail sales, and I still think the risk here is a higher unemployment rate, and so I think this brings the FED already back into play.
We've got a lot more data before the next FOMC meeting, but I think the bomb market will react. If I'm not mistaken, I'm going.
To go to three months average. But Jeffrey, with your study at Claremont of Politics, a seventy five thousand private statistic or a twenty two thousand non farm payroll three much average. I don't care what flavor you are, Jeffrey Cleveland, that's politically unacceptable.
I agree. I don't want people.
I do get messages from people, a friends, family, and they say, you know, it's okay if we have a soft job growth. You know, as long as the unemployment rate stays low, well bad news everyone. If we have slow job growth, the unemployment rate tends to take up.
Which is what we're seeing in the last few months.
And I don't think seventy five thousand is politically palatable. I agree with you. So the risk here is additional rate cuts in twenty twenty six, and the bond market will start to sniff that out.
I think so how do you.
Think the FED here? I mean again, I'm looking at the WORP function.
We're kind of going in today thinking one, maybe two rate cuts. Sure, I'm all over the WORP function. How do you think that maybe changes in the coming days.
I think you're going to get more priced in in our view at the unemployment rate continues to trend up, and we in our forecast we do have inflation moderating. I think that's important to note as well. The Fed we have, you know, in our base case to been cutting three times in twenty twenty six. So WORP is probably under price at this stage, and that four point six percent unemployment rate that bolsters that view.
I think we let's jump ahead here. I mean, that's what That's what Paul Sweety wants and I want on Jeffrey Cleveland, Well, it's camp Benny's taken notes from Invesco here. We'll get to Christina in a moment. But the bottom line, in two days, I get a legit am I right, It's a legit CPI report on December eighteenth, Is that right? Jeffrey?
Yeah, Well, we get our We get CPI on December eighteenth for November. So I mean definitely, that'll be interesting.
To take in.
You know, we do think when we look at the main components of CPI what we think will drive inflation in twenty twenty six. We think goods prices will cool off. We think non housing services prices will also cool given the weaker labor market, and we do think housing. Housing has been a big thorn in the side of the CPI the policy maker community, so we expect some relief in the housing component. So when we tie that all together, we do get core inflation trended back towards two percent next year.
So that's kind of how we're looking at.
Things, Jeffrey, I mean, it's inflation again. We're going to hear some more inflation later on. We're hearing that you made that cost of housing is coming down. How does that housing figure into just kind of inflation, because for a lot of people, that's a big, big component.
Yeah, I mean for the CPI, it's a big chunk. We're talking about a third of core of core CPI. It's a little bit less of an issue in core PC, which is the FEDS preferred inflation gauge, but the data is slow and sticky. At least the government data, and we do see scope for the housing component of those indices to continue to cool off. That's good news, but I think it's more of the government data catching up
with the reality on the ground. I think we've already seen in private sector metrics of rent and things of that nature cooling in the housing component. But that should you know, people have said to be we're sticky. Inflation is sticky, stuck at three percent. I think a portion of that is housing. As that cools off, cor inflation will head back to two percent.
Jeffrey, I've been in awe of Paul Sweeney. He's out in a frigid wetsuit surfing in the ice cold New Jersey serf. Sure, but Jeffrey Cleveland has outdone you. I know he's done the twenty bridge swim in Manhattan. Razy. He's done twenty miles to the Catalina Channel, probably tuned into the Dodgers. Well he did that. What's it like, Jeffrey Cleveland's swimming the English Channel. I mean, that's from our youth. That's amazing.
Well, it's cold.
I mean you're you're looking at about twenty five miles from England to France. I think the day that I did the swim. It was fifty eight degrees at the start. No wetsuits are allowed on that swim. You'll be disqualified. And so you do have one support boat, but you can't touch the boat.
You can't take breaks.
See touch the boat. Unbelievable.
You can't touch the boat because that's cheatie.
You know, you just have to you want to take a break, you do a boat and someone throws you a little bit of a high octane gatorade and then you take a quick swig and then you move on.
Do you see this about ten hours across June or July?
I mean this, screams Lisa Mateo. Can you see Lisa Mateo swimming the Indus Channel.
We did it in September, September, mid September. That was the warmest and we thought that would be the warmest period.
What an accomplishment.
It's a triple crown of swimming. One of only thirty.
Normal people don't do this, Jeffrey, thirty six people in the world have done.
Jeffrey Cleveland, thank you for the insight on the jobs report and the spirit of that accomplishment of swimming around Manhattan is one of the things as we all 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 den listen on Apple Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
Paul Quincy's never seen this before. He's never seen a double jobs report. Wait, none of us have as well. He is global head of Equities. Let's speak for JP Morgan Asset Management, and you have the best single sentence. I hate outlooks. There's a guy I don't know if you know, Sam row Ro. He's in America and his job is to read every outlook, including yours. We're going to get a report from Sam row here.
But I love Paul in your global note.
You only have a belief factor in the equity markets forward, Only nine percent of our investors are expecting above average games in the market.
Are we really that gloomy out there? I wouldn't go good morning. I wouldn't call it gloomy. I would call it realistic. So when we look at that, fundamentals drive markets, and to us, the fundamentals look pretty good. But you're really paying for it. Now, that's what's got our attention. I think that note of caution comes in from a combination of twenty three times next year's earnings. We think earnings are fine, but it's tough to see that twenty
three going up too much. And then you look at earnings have been a triumph of the optimists this year yet again. But within the market there's a lot of very optimistic thinking, particularly when you get into the small cap space. So those two things give us a little bit of pause for caution. So we think staying invested, sure, but you want to diversify by geography, diversified by style, and think about where the returns are going to come from, not just where they have come from in the past.
So in global equities, what's your US versus maybe rest of the world allocation? How do you think about it geographic these days?
Yeah, So we do all that bottom up, right, We look company by company, and when you do that, you find it really hard to get too far away from the United States. So the US on average has better companies in better businesses, and that isn't going to change the reason the US market is two thirds of everything these days. It's come the right way, right, It's come through superior earnings growth over the last fifteen years. So
that's where we are. But you also now have high prices, and I think you can legitimately balance your US exposure these days with the rest of the world, and we're not so sure investors are doing that. I think a lot of investors, including by the way, investors in Europe and Asia, have kind of become a little over fixated on the US and have forgotten you can also make money in those markets too.
Earnings.
We've had some really good earnings out of the US companies here this year, particularly second and third quarter double digit kind of earnings. Looking forward, is the earnings outlook enough to support this market here?
Yeah, you need those earning earnings growth to continue where you're paying twenty three times, right, So, but yeah, we think it is. When I look at forecasts, it's not just what the forecast is, it's where it's going. And our forecasts, all the work our analysts do, have been edging up all year and they're still edging up. And most importantly, I think it's not just the usual suspects.
So yes, these seven incredible companies will yet again drive plenty of earnings growth next year, So we think S and P two seventy this year, three ten next year, so we need forty dollars of extra earnings. We've got the mag seven down for sixteen dollars of that, so the rest of it has to come from the other four hundred and ninety three. And I think that's happening. And we're seeing expectations edging up a little bit there as well, So yeah, we feel good about the earnings part of it.
What are you with cash? Paul was looking at cash. Did you ever get above five percent on money market funds?
No?
No, but that was nice though. That was nice.
And now it's three dollars six Yeah, if you've seen a behavioral change and how we address cash, Stan Fisher would go on a percentage basis, it's one point four divided by five. Wow, that's a percentage move. What's a change in cash appreciation? Yeah?
I think Look, investors have become more comfortable with this market. I think right now investors are pretty comfortable with stocks. Again, look at the prices they're paying, look at the types of stocks people have been buying. The theme in the market this year has been the risk risk rules, right, the risk the better in some cases, particularly in small cap. That again makes us a little bit nervous looking forward. But do you want stocks over cash over any time? Friend? Of course you do.
Yep.
So here it's interesting here outside what screens well for you guys?
Right here you know the best returns on our platform. So we run a lot of strategies by style and geography, best returns this year international value, cheap stocks and cheap markets. You made almost fifty percent European banks, that's a part of it.
They're shaking at the JP Morgan digital experiment that Paul Quincy is launching across Europe right now. The future of European banks, what do you see? Are you allowed to talk about that?
Yeah, of course. So look, first of all, the recent history of European banks incredibly successful, right, So you've made a lot more money in those stocks, even in the much vaunted MAC seven over the last five years. It's not that they've suddenly become amazing companies. It's that the market left them for dead. It took them fifteen years to get over the damage inflicted by the GFC. But now they've restructured, they've got back to the core businesses.
Interest rates have gone up a bit, profitability goes up. If you go from being a left for dead company, he's just an okay company. You can make a lot of money.
Key question I asked this is my Davos question. Are they changing because it's an more Anglo American management style yet relationship?
I think they're more realistic. So rather than trying to compete investment banking with you know some of those other guys that dominate those markets, these days, they focus more on the local markets, on their car They've done a good job.
Paul Auston, are you going to have as many food courts that you're going do Palace in London as you've got on Park Avenue.
Well, we're still working on that. As you know, the food greers.
Is that the little like you're a Piccadilly and you can buy your griers little?
Yeah, that's right. Maybe we'll weave that in careers time.
I mean, Paul's a graduated University of Durham, which I just googles northeast part of England. I found our spot the Woodman Inn Pub for you and I it is that's where we're going.
Absolutely, there are many great pubs.
The Arab studies their first rate, and the cathedral is arguably the best in uninety Kingdom. YEP, Don't be a stranger, Come back, Bring your friends with you from JP Morgan. Paul Quincy with us with JP Morgan here on an important jobs stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty.
Martha Gimble's on fire. The Budget Lab at yells you know. I'm going to call it my think tank of the year. Their work on tariffs was frightening. We're looking for a tariff update here off of November from Martha. But right now she's beginning what I think will be a Yale Budget Lab effort on AI. Mar to just give us the three x five card of the Yale Budget Lab study of AI. In Lisa Matteo's Future job.
Well future who knows five to ten years down the line could be anything. But at the moment, we're really not seeing AI showing up in the labor market overall. So, you know, there's been a lot of stromanbong, a lot of hype about how people are currently losing their jobs due to AI, and we're just not seeing that at all in the data.
Is there an expectation that we will at some time in the future, Because I just think about my early days on Wall Street, it seems like most of the tasks I performed as an investment banker can be done by AI.
I mean, it'd be unusual, right for there to be no labor market disruption when you introduce a major new technology. I think the thing that everyone keeps forgetting right is that it takes time for technological disruption to happen. It took decades for electricity to throughout the labor market. It even took a pretty long time for the Internet to
kick in, right. It wasn't like immediately in nineteen ninety seven, we were changing all the things, and so you know, a I feel so big and people are expecting to see, you know, impacts immediately. That's just not how companies work.
So you don't have a guess out two years or five years. You're that blind.
I don't think any of us really know where technology is going. I will say I think the thing to look for is a broader recession, because in recessions is often when employers take advantage of that opportunity to make you know, quote unquote labor saving productivity enhancements. They fire workers, they you know, et cetera. And I think that's when we'll have a better sense of how AI could be impacted the labor market.
You led the charge from that Rose Garden moment in April on tariff analysis. What you and Erny Tedesky did was just just an act of God. What did you fail at from April to December? When you look back, Martha Gimble, what'd you get wrong? What'd you nail? What'd you get right?
Oh my gosh, you know, I do think that actually, I'm going to pick a kind of nerdy thing here on tariffs. So one of the things that we got wrong on tariffs was that we didn't realize how many exceptions there were in the law currently for companies to take advantage of that. They weren't filing the paperwork for because it just wasn't worth it to them at previous
tarif phrase. But once the tariffs were high enough, companies started, for instance, filing the paperwork to take advantage of the USMCA. And so we've seen the share of goods coming into the US from Canada and Mexico that are exempt under the USMCA go from fifty percent to ninety percent. That is not something we thought about. That is not something we anticipated, and that is one of the reasons why tariffs have had less of an impact than many of us anticipated.
How do you expect tariffs to impact the economy, if at all, in twenty twenty six.
That's partly a question for the Supreme Court, and we're all to find out. You know, it's kind of interesting because you know, yes, we think that tariffs are slowing down the economy, but also if the Supreme Court overthrows the tariffs, that's going to throw much more uncertainty back into the economy because we're going to be back where we were beginning middle of this year with like new tariff announcements every day as the administration starts using other
tariff authorities. It's got Kevin Hassett was just out there today saying they have a plan if the Supreme Court overrules them. So you know, I think my team in some ways is hoping the Supreme Court upholds the tariffs. They don't have to go back to doing tariff o.
It just congratulations is think of the year. You guys just absolutely killed it. I have no idea what you're doing for next year. Folks follow Martha Gimble g I M B E L follow her, and she's actually got a Twitter handle that makes sense at Martha Gimble amazing. You gotta go to Yale to do that, and it's a great feat of firm. And Jed Coco's in here, EARNINGE.
Tedesky's an here. I just can't say enough of thought following Martha Gimble sort of on the linkage between markets and academics here and all this stuff that we mumble jumble about. Martha. Congratulations to the budget lab at Yale. Just a spectacular here. We'll start the year of strong where there is well. Stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Metleting snow, we think that problem will disappear. Tell us about the newspapers the challenges to.
Yeah, here we go.
So this is the wealthiest families in the world kind of looking into them and they how they have never been richer, and that includes the richest family of twenty twenty five. So this is, according to Bloomberg, we're talking about, Yes, the founding family of.
Walmart, the Waltons.
They top the world's Richest families list again, a net worth that exceeds half a trillion dollars for the first time. They own about forty four percent of the retailer. But the thing is in this story, it's not just the Waltons, they say the twenty five richest families. They're collectively three hundred and fifty eight point seven billion dollars richer than a year ago, with a combined fortune of two point
nine trillion dollars. A lot of things helping them stock prices demand for goods like metals, pet food, but also thanks to their experience, they kind of recruit over the decades. So that's what Bloomberg is saying. Four families actually did join the life.
For the first time.
But it just goes to show you how much more rich the richer are getting.
Well, the top five families I'm just looking at the story come from the Middle East, Qatar, Saudi Arabia, United Arab Emirates, so reflecting energy.
There you go.
All right, good for them.
Okay, Now this is one way you can get rich. Okay, this is another way. This is in the New York Post. It's just another excuse to buy that pricey handbag.
Okay.
They say one of the most savvy investments you can make is a twelve thousand dollars handbag. Let me break it down for you.
Here we go. Okay.
So they say the ultrarare Air May's Burken It could get twice at sticker price on the secondary market within five years, and the Kelly bag can climb twenty to forty percent in value over the same period. I hope you're listening out there. Luxury resale authentation, this platform Open Luxury. They say the resale value of particularly the Burken and Kelly bags over the past ten years has outpaced Gold. They say it's similar to buying a picasso that you
kind of hold in your home. And if you want the data, because we need the facts behind this, right okay, Burke and Bags they posted an average annual gain of fourteen point two percent between nineteen eighty and twenty fifteen. That beat the S and P five hundreds eight point seven and Gold's negative one point five percent return over that same period.
I mean, do you carry these things out in public or is it a piece of art that and that you put it in like a seculars.
Yeah, it's like like a picasso. You know, you just gotta hang it there and get your money back. That's what it's about, right, It's an investment.
I'm just fascinated here.
Just someone is listening.
And this was this one is actually pretty funny. It was a Saturday Night Live spoof. It has now become a reality. So Saturday Night Live was making fun of remember Spotify rapped, like it gives you the breakdown of who.
Who your artists were with age?
You know your.
Spotify age, you know it was not So they did a skit about Uber Eats Wrapped, which is about discovering how much you spend on Uber eats, your Uber eats age and also the most frequented restaurants.
Take a listen min you.
Can find out which restaurants you couldn't live without.
Taco Bell, five Guys, Burger, King, Pola.
Guest that explains why the Plumber's always here.
Yes, okay, so the uber has made it reality. Uber has now launched Uber okay that compiles user's activity from across Uber but also Uber Eats. So well, yes, break down like what restaurants you kind of frequented the most. It goes across your Uber schedule too, like if you went for the Uber Comfort, how many things like that? It puts you in different categories. And yes, you can share it on social media with everyone, just at the click of a button.
So check your Uber account, my.
Uber account, the Offsprings Uber account. It's incomputable. The newspapers, Lisa Mattella.
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