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Joining us now, someone never will have an encore career. Claudia sim is the anchor to our job's day. We're honored she could be with us in the revisions coming up here. Claudia, how aging is our population? So?
I mean it's an ongoing process.
I mean baby boomers who have moved into prime retirement. And you know, the demographics on the aging side move very slowly. The demographics that have been moving very quickly have been on the immigration side. That's really what's been pulling, say the payroll numbers around. But aging is happening, and that that is a that's a reality that's marching along right with these every month of data.
Weekend, you know, Claudia, every time we talk about the labor market, what we now also have to incorporate into that discussion is AI quite simply as AI and net creator of jobs or net destroyer of jobs.
What's what's your view at this early early stage.
So we're at a very early stage and with AI, what this how this transforms our labor market and it will transform our labor market is going to depend on the leadership that we have in our businesses, our civic institutions, and our government. Right like AI is not in control, we are in control. It's a technology. It's a technology that has a lot of potential. It could go in a lot of different directions. It's not just about automating
out workers. It can also be about empowering workers and making them you know, more valuable, higher paid, new opportunities. But it's but we don't know to where it's going. And so there's going to be decision makers who really, you know, shape the future of AI and the workforce.
Claud your research not really emphasizes the revisions. So last time I got a one thirty pop, what happens to the markets if we go back to back plus one hundred numbers? I mean, no one's expecting that, are they? No?
Yeah, And I think what we were looking for as we came into this year with signs of stabilization in the labor market, right, things had been slipping since midyear and we saw job creation really like hit a wall in the middle of last year, and so we're just looking stabilization.
Right January was like more than stabilization.
One hundred and thirty thousand payrolls unemployment rate taking down at tent that's not that's like getting better. I mean, we'll take that right like, that would be awesome. But even if we had some downard revisions to January, and we have a February payrolls number that is positive and kind of has some lyft to it, it could be fifty thousand, forty thousand something in there, and then I'm
let me rate stay stable. Like that's going to check the box on stabilization, even if we get some downward revisions in prior months.
So real quickly, wages, how do you think wage environment is right now?
So we have seen you know, wages, wage growth slow, and we've seen a moderation. It's been very gradual, which is consistent with some softening of demand for workers. But the wage numbers, including last month, have still been you know, pretty they've been pretty solid. And even when we think about what's happening right now with gas prices and the
energy shop coming to American consumers. Those wage growth numbers and the jobs are so important because this is the key buffer that Americans have for these higher costs, is to have a paycheck that's getting bigger and being able to find work if they want work.
So that's a really critical backdrop.
Some with us new central advisors that we're going to continue with doctor some here after we see the jobs report. Jennifer Lee of BEMO Capital Markets a NAT your level ubs will join us as well into the jobs report. Futures negative thirty six. Good morning, Wow.
I'm Alexis Christophers, and these numbers just crossing the bloomberg now. The Labor Department says the US economy lost ninety two thousand jobs in February. That is worse than expected. We were looking at an additional fifty five thousand jobs. And of course this is compared to January when we added one hundred and thirty thousand jobs. The unemployment rate ticking up to four point four percent. The estimate there was four point three percent in the prior month was four
point three percent. Checking wages month over month up slightly to four tenths of a percent. Estimates were for three tenths and earnings year over year also a bit hotter three point eight percent versus the three point seven percent expected. But again the headline here the economy lost many more jobs and expected ninety two thousand in the month of February.
Estimates were for fifty five thousand. We also just got retail sales numbers out for the month of January and they were down two tenths of a percent versus the estimate of three tenths of a percent. As for market reaction, it is swift. The Dow futures now down more than four hundred points s and p futures off sixty four.
Guys, alexis, thank you so much. Tenure Yield comes in with a vengeance. Four point one seven is now handle four point one zero. That's price up, yielded down in futures negative forty to negative sixty. Here, retail sales pretty much on track or the constructive revision. But Paul, I'm just going to before we go back to doctor, some change in non farm payrolls negative ninety two two months revision negative sixty nine. I might ball on it, Paul, but I think that's a negative one sixty one yep.
Combine, Yeah, that is a sharp reversal in the short term labor market. Here again minus ninety two thousand. The consensus was for positive fifty five five thousand, and that two month payroll revision negative sixty.
Nine thousand toms. So that is the big numbers across the tape.
Claudia sm this as we continue with all of good work here. These are the kind of numbers, Claudia where amateurs like me go, okay, that means diminished GDP? Is that correct that all of the sun's back to a lesser real GDP where we're on the sum recession.
Watch, So not necessarily you know this, so clearly these numbers from February are not in like you know, checking the box on signs of stabilization in the labor market.
Right, we're losing jobs.
Un'mplating rate ticked up. This is not a good sign. This actually sits pretty consistently, especially get the last three months with what we saw all of last year. The US economy last year created almost no jobs on net right, and at the same time, consumer spending increased, business investment in creed GDP.
Rose for the year on.
Right, it may we can talk about concentration. We can talk about what sectors it's in, but we have already been for a year in a jobless expansion.
So unfortunately, what the February.
Data, with this latest labor market data suggests is that's still where we're at right And we have been looking for signs that hiring was picking up, and you know that January gave some the Januor Employment report gave some signs of that. January still is a really strong number, even with down revisions. It's all you know, it's close to one hundred and thirty thousand still, But I mean, clearly, to lose ninety thousand jobs on net in February is a real problem, Claudia.
It's a it's a we're not creating jobs. It's that question. Is it a problem?
That's a whole separate And this has been a really difficult conversation to have, but we've been in this for well over a year now.
So Claudia, what's just it? What do we know about the supply of labor?
We know that this administration is effectively closed down the border, reducing supply of labor to some indust trees, you know, whether it be housing, construction, agricultural, hospitality. What do we know with a year's worth of data here as to the supply of labor.
Well, the estimates with immigration come in, it takes some time. We have you know, updated estimates from the Census Bureau, we have updated estimates from Congressional Budget Office. They're pulling in a lot of different pieces of data. These are still in flux, but it is very clear directionally, and it's also very clear in terms of magnitudes. These are large down shifts and immigration and immigrants have been kind
of on the margin additional workers in recent years. So it does like directionally this makes sense, and I think that is important to keep in context these shifts in job creation, going from you.
Know, hundreds of thousands of jobs created on net.
Not that long ago, to not creating any and if maybe even destroying jobs on net in the US economy, Like that is a dramatic shift.
And the unemployment rate has drifted up I word, four point four percent.
So like we have to keep the like the magnitudes and the drama on the payroll side. It's not just about we can demand it is this supply and that's a policy choice, but keep an eye on like the unemployer rate has drifted up, and that is there is still a problem. This is not just about supply. We don't have enough demand for workers.
I mean, Claudia, do your point in a flat economy. I just did a three month moving average, folks in the back of my HP twelve c oh. Yeah. And the bottom line here is we've generated five six hundred and sixty jobs over the last ninety days per month. I mean that is I've never seen that. That's like a flat economy. I have, Claudia quickly here. I mean, there's a lot of negative statistics. Claudia, what does a FED do with this information if labor matters?
So they're watching They're watching all of this very carefully. I think the unemployment really does some a lot of this up. The fact that you know, you're the unemployer rate did tick up. We're still at low levels. It has been drifting up gradually. They're going to keep I mean, this returns some attention to the downside risks to employment, right, this is all about the employment risks. The inflation risk Today brought some of those employment risks back into focus.
But this is still.
Largely a labor market that looks like it's working relatively well, not a recessionary dynamic, but a very unusual dynamic.
Okay, it's unusual, but I mean there's a lot of people flat on their back in this country. Claudia saying, cut interest rates. If Waller in company, goals be in company, Hast in company, if they cut interest rates, does that help the labor economy or is it now removed?
Cutting interest rates is a way to stimulate demand, whether that's you know, consumer is going out making bigger purchases they have to take out, you know, on their credit cards, buying a home, businesses making investment equipment. Where like, it's a channel that can help. It is not all powerful. It's a very blunt tool, but you know that's the tool that FEDS got and it is very clear from this power fed they will defend the labor market if they need to.
Doctor Sum, thank you so much for supporting us in your note and all your work with this, Claudia Sum, with this this morning with New Century Advisors. 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 Bloomberg Business app, or watch us live on YouTube.
A wonderful brief here from Eric Vanastron joining us in studio, chief investment officer at Lazard. What have you change in your call in the last seven days? I mean, you know, I'm sitting here, it's like the time Keen Employment Act is like the news Solul's crazy. But what are you writing differently now than eight days ago?
Well, let me first say I'm a big supporter of the Tom Keen Employment Act.
So but that's we're working for you. Alexis doesn't agree with you, That's.
I think the sharpest investors are the ones who are willing to change their minds when the facts on the ground change. And what we've seen over the last seven days is a pretty dramatic rethinking of the global supply picture.
For energy in particular.
We've seen a staggering surge in the price of oil as the traffic in the Strait of War moves has slowed down as dramatically as it has. But I still think markets are thinking of it like a short term disruption. I think there's still a little bit of recency bias from the twenty twenty five Iran episode, which is fundamentally
very different from this one. And I still don't think markets have fully appreciated the cost to global growth, to global supply chains, and to domestic inflation here in the United States from a persistent and disruption of the Straits.
So the underlying economic data in the US is still generally very healthy. Yeah, when you look at GDP growth, we'll get the jobs data today, inflation. But this situation in Iran, you know, I guess the market is kind of telling us.
We're prepared to look through it to the other side.
Is that a fair assumption here or what point does it become problematic?
Is it three four or five, six weeks?
That kind of thing.
Well, I think you're absolutely right in terms of what the market is discounting. The market is trying to look through it. Even though you know, these oil price moves look big. The stock market moves this week feel painful in the grand scheme of things. US equities are just at the bottom of the range they've been since October. Oil still off its heights from since the since the Ukrainian invasion. But I think that that relative sanguinity that relative calm is out of line with the level of
fundamental risks in the backdrop here. And that's why I think paying close attention to traffic in the Gulf is going to be very important.
Eric turnin this here we're going to continue. Jane Folio over at Rabobank just tweaks hero she goes weaker Euro from a one seventeen down to one sixteen is a view right now, Euro with a really difficult week one fifteen sixty two with dxy pushing up against one hundred. I mean that's consensus gets a view here. Oops, it's wrong, Like the massive week dollar call doesn't look so good right now? Right What does consensus and economics into this
job's report into retail sales? What's a consensus call in economics where the Van Nostri and Radar is up.
Well, I think you got to separate the structural, the structural and the cyclical here. And I think the big the structural context coming into the Iranian episode and coming into the jobs report today is that the US economy has been I like to call it more concentrated, that
it's been really in living memory. The way consumers spend it's really driven by the top of the income distribution, the way businesses invest, it's all concentrat in AI data centers, we have a very concentrated set of demand factors on both the consumption side and the investment side of the US, and that's contributed to strong overall growth. But it's also more fragile than this level of economic growth normally is.
And that's why X factors like this energy shock, the risk of a slowing labor market, and that's why we'll be watching today's report very closely. All threaten to disrupt that generally strong growth we've seen here today.
This shape economy, this case shaped consumer, it's been with us for a long time.
Is it problematic?
I know it's problematic for the people on the lower end of the K, But for sure, overall economy, the numbers that we get on our ecoscreen, they seem pretty thrown good.
Is that?
But structurally can this economy continue with such a disparity?
Yeah?
So the reason I think it's problematic for a lot of reason is not least because of the large portrait of Americans who aren't seeing the income growth that one
would expect from this level of aggregate economic strength. But It's also worry because the most persistent growth, the growth we can have the most confidence in his MACROI as macroeconomists, is the broadest growth, and when it gets concentrated like this, it's more prone to disruption from geopolitical shock, which we've had it aful lot of lately, and from supply constraints. And I think this particular geopolitical shock is going to increase those supply constraints.
And before the jobs report fifteen sixteen minutes away from all that data, Claudiusom will be with us. Let me look at the list here. I don't have naughty love. It will be with this ubs and the Equity Marcus Jennifer Lee from Demo Capital, Marcus, just wonderful. Benjamin Ladler, who has the Mother of All calls, a guy named Kevin Has's going to stop by, I believe, talking to John Ferrell as well. Austin gools me late late in the show today. Right now, Eric Faestron with us. Okay,
I'm gonna get you in trouble. There's a guy, Adam Posen at the Peterson Institute who do to co write with a guy named or Zegg, and they have basically suggested inflation will be more are persistent. Do you agree with Lizard's Peter or Zag that we are going to see a persistent wage inflation, We are going to see a persistent overall inflation which is not in the markets at this time.
I'm happy to give you a list of topics on which I disagree with my boss, but on this one, Peter and I are in the same place. I think the markets are generally far too calm about the inflation picture.
They've been kind of.
Well to sleep a bit by the fact that the headline CPI has calmed down, and you know, Peter made that call before the episode this week. I think the oil disruption we're seeing is obviously going to juice the inflation numbers.
In a meaningful way.
But here's the key point, Tom. It's not just the impact of the oil shock that we've already seen. It's the fact that the broader supply picture bleeds through to a much broader global constellation of goods and services and inflation, and to my mind, really increases the risk of upside price.
Ground and Peter the brilliant supply and analysis here two three years ago on COVID as well, So with the jobs report last month was oops. Well that was positive. Are we going to get another oops report here where you got a three month moving average which is oops better than the gloom Crew?
Well, I think I heard Chris Waller. Just tell your colleagues he expects January to be revised down meaningfully. I do think January looks like a pretty significant upside outlier in the pace of job growth we've seen recently. I think it's very important here tom to balance the supply constraints that have been pulling job growth down to and not confuse them with slowing demand, which I think is one of the one of the bigger forward looking worries we have right now.
Supreme Court recently struck down the IEPA tariffs, but we still have a lot of terriffs out there. But the market again seems to have looked through generally after that April time frame last you look through these tariffs. What is the economic impact of these tariffs.
Do you think?
I think the markets have looked through the tariffs because the inflation data has given them permission to. Because the inflation data so far has been much softer than most economists, including me, by the way, would have expected given the magnitude of terroiffs we've seen now, that's much more likely to be a delay in the tariff impact than a
miss on the tariff impact. And that's part of the reason we expect me you know, we expect an elevated risk of hotter inflation over the course of this year.
You were the Assistant Secretary of the Treasury for Economic Policy under President Biden. What did you learn there? I mean, a fancy guy like you, with all your work at Blackrocket now at Lazard, you wandered by Yelle to get pizza in a lot of great, wonderful work out of Pennsylvania. What was the biggest lesson learned in your public service at Treasury?
I mean I came away from that job deeply, deeply inspired by the manner and the courage with which public servants, not just in the Biden administration, but including the career officials that worked closely with us throughout, were able to balance economic rigor and understanding the intellectual arguments with understanding the way they affected human beings.
So if we pop three months, this is like an Orzeg question. If we pop three months moving average sub one hundred thousand, non farm payrolls. You're telling me that's politically acceptable.
Absolutely not. I think the slowdown in job growth we've seen over the past couple of years is evidence that the you know, it's evidence that some of the shifts we've seen in the way the labor market's been able to grow, some of the tighter constraintsprised on supply by immigration policy in particular, are resulting in lower growth in the United States would otherwise be able to deliver.
This is like gossip with Taylor Swift. What's the thing I've gotten that one? What is the most? What is the thing you and Orzag are most not in the same page on? What do you argue about?
Now you are going to I think that the conversational alzar. We always described the conversational lazar as being about contextual alpha, which is, we do our quantitative, rigorous work, but we put it against a backdrop of what's going on in
the geopolitical environment overall. And I think that mix of quality, aative and quantitative is really at the center of how we develop use, but also creates a lot of debate and creates some you know, I think a lot of open questions about whether the whether the Supreme Court's ruling on tariffs creates more or less uncertainty. I think right now, I think it's a good thing they did that, But I think.
We'll sum it up on the back of a three postcards. Do we get solid GDP out of your contextual reality?
I still think this year is more likely than not to deliver above potential growth overall, But there's a lot of risks. Tom and your listeners need to pay close to tell us.
What did you say like ambiguity?
Grammatically grammatically ambiguitous, ambiguous, ambiguous, Yes, thank you, there's nothing.
Eric, Eric, We try to be grammatically precise.
Eric, thank you so much. On this job is that he is with Lizard Asset Management. 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 Apple, Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
We start strong with Kevin Gordon with Charles Schwab working would live in a starders what's the place like if Kathy Jones retires? I mean it's not good.
I mean, I know we're sad.
I mean, you know we're so sidly earned it.
But I'm yes, personally and professionally, we're all set just but we we're happy.
For Kathy. That's a really cuge commitment now by her to Schwab. Our commitment to you is you people are the kings of patients. Just as from you from sixty thousand feet there's a war, do you change your asset allocation.
In response to it in a knee jerk way?
No.
I mean our message around any sort of geopolitical conflict has always has always been that not to say that it doesn't matter or that it won't you won't start to see any impact from it. And I do think that you know to the points that you are all just making around some of these these moves and prices, and this is an environment where rate of change and level both matter. Typically there's sort of some distinction between
the two. But I think from a consumer perspective, but also eventually maybe from a business confidence perspective, there is potential for this to sort of shake things out a little bit more. But I mean this is a day by day yeah, development, developing situation, I mean we're sort of one cease fire announcement away from everything, sort of just reversing sharply and aggressively.
Yeah, exactly right.
So what is the message to the SCHWAP clients, Because I'm sure the phone calls are coming in fast and furious. You guys, go speak to your big room full of SCHWAP clients, and before you even get into your prepared remarks, they like, what do we do?
Yeah, I mean the message around I mean, it always sounds like some sort of boring message around diversification, but that really is the best way to sort of hedge. This s lowercase age hedge. If you think about even coming into this year, before this started, you were still seeing that international outperformance relative to the US, but now
it's kind of reversing a little bit. Where of course, because of the exposure that some other countries mainly in the European region but also Asia that they have to the Middle least because of energy and oil, the US has clearly gotten a bid. You could see that clearly within the dollars. So I think that you know, that's
sort of been the important messages. You don't want to go all in or all out on one particular asset class at the expense of the other, and we're sort of living that in real time, especially over the past five days.
We're going to get some jobs data today that is an important data point for our federal Reserve.
How do you think the FED is.
Going to be taking in some of this economic data that's going to be coming.
So, you know, I think that they're increasingly in a tough spot in the sense that I think it's getting just harder to argue for cuts in this environment. And you know, I was listening actually to Claudia Sum. I know you're going to have around, but most recently just a few minutes ago, talking about sort of this kind of tricky nature of where inflation is averaging closer to three percent, but the fact that you know, we'll see
what happens at eight thirty. There is some stabilization happening in the labor market, and if you take out the federal payroll data, the private workforce in payrolls has been rebounding and a pretty meaningfully over the past several months. I think that it's a good thing from an economic standpoint, but I I think that that is sort of keeping the FED in a really tough position, especially if it's worsh coming in in June and still you know, tilting dubbish.
I just think that's going to be tough at least in the first first half of.
The year across the nation worldwide. On YouTube, subscribe to Bloomberg cod podcasts our number one way to get in touch with us here on a daily basis. Kevin Gordon of Charles Schwab with this this morning, Oil eighty nine dollars really right out to new highs here off of the war, and we're seeing it in futures negative forty three as well. Barry to your note, you're starting to rationalize and I'm just seeing this in the last forty eight hours. MAG seven may be showing signs of life.
Is that the right way to look at the Belingered tech area. Yeah, I think.
I mean, you go through these cycles now, you know, every other year it feels where you get sort of this big sentiment wash out for a group like the max S. Even I would expand it to, you know, beyond just those seven names and probably include you know, all three sectors really communication services, discretionary and then tech and you know, as I mentioned, we're sort of one headline away from you know, a lot of this momentum reversing where oil prices come lower for some reason because
of a ceasefire announcement. Maybe not saying that that's our projection, but those kinds of swings in this environment where sentiment has now gotten so stretched in one direction for an area like software in the broader tech sector, and then vice versa for some of these deeper cyclicals like energy. You know, sometimes you sort of have to pay attention to what could snap in terms of that anti momentum.
Well, Richard Bernstein iconic at Merrilynch just absolutely wonderful, great books on growth and value. Leading indicators continue to show strength, probabilities and timing of FED rate cuts increasingly seem too optimistic. That's the underlying percolation here. Yep.
Absolutely, Kevin.
Earnings were pretty much through the earning cycle, pretty darn good earnings. The outlook maybe a little conservative buy a lot of companies understandably. So here, how is the earnings environment out there for you guys as it relates to can it support this valuation?
Yeah?
I think so.
I think you know a lot of the valuation access that has come in and that froth that has come in has been concentrated in some of these higher flyers that tend to be, you know, overvalued relative to the rest of the market, or have tended to be overvalued relative to the rest of the market. You know, from an earning's perspective, I think this is a really central piece of talking about this conflict or any sort of
geopolitical instability we've seen this year. The sort of framework that I've used to you know, help kind of guide through this environment over the past year, you can really date it back to Liberation Day, has been the distinction between what is a front page risk and what is bottom line risk for the market. And you know, we
often get the question. I was just speaking at client events in southern California and also Vermont over the past week, and there's this sort of discomfort that people have around
how is the market just completely looking through this? I mean, the S and P five hundred largely unchanged over the past several months, and to me, from an earning standpoint, until this materially starts to hit bottom line estimates for the S and P five hundred, you're not going to see as viscerable response from the S and p. So it's an uncomfortable way of thinking about it because of
the humanity angle to all of this. But if you're looking at it dispassionately like the market does, it's an important distinction.
If you go from southern California to Vermont, do you demand Liz's golf stream?
No, golf stream, No, we are a commercial howl.
God's name do you get from southern California?
I had to stop over here, so I stopped in New York first, and then I and then I went over to snow.
Vermont during ski season.
I see what excuse me?
Now that we're here, Kevin, can we pause? Pray? Tell? How are snow conditions in Colorado?
Well, I'm heading out to Colorado Sunday. They're not great, but it's still the Rocky Mountains and we'll take it.
Well better in California. And I know dumped on Yep, Yeah, it was.
So my cohort. They said, hey, let's go to Japan, that's where the snow is. And I'm like, I'm not going to Japan.
What's a lift ticket? I looked at a lift ticket at Bristol Mountain in Western New York. Big drop, ye tiny Mountain one hundred bucks a day, Primetime, three twenty five, three twenty five. Imagine taking a family skiing like my dad back Canniflash about it, Kevin, what's screening well for you guys these days? Whether it's an industry or a factor, How are you What do you guys talk to your clients about these days?
Well, I mean the factors in some of the sectors skew in terms of what looks what looks good moving forward, are actually somewhat aligned in terms of a lot of the earning stability coming back for you know, I called the rest of the market, so everything except those those hyperscalers and the sectors that they occupy. So you know, with whether it's industrials, which has actually shown pretty solid broad based strength recently, or even parts of communication services
that's a very very concentrated sector. I mean, Meta and alphabet makeup about eighty percent of that of that, so it's a pretty you know that we always sort of make that distinction, but everything from an earning stability and profit margin stability standpoint, that's those are the factors that we've continued to emphasize, and again, similar to diversification, sounds boring when you think about it and when you talk
about it. But in this environment where you've got so much potential for whiplash, it really matters in terms of keeping stability in a portfolio.
Do you guys have an S and P target?
We don't.
We don't do that. You don't do that. No, lucky you? Lucky?
Yes, and lucky our clients, because I don't know with you know, forty million clients, I'm not sure how that's helpful.
The magic of schwell, what are you hearing from retail schwab across this country?
So in all the events I've done in the past couple of weeks, there is still this, and I think it is actually in somewhat keeping with what we've seen in the inflation data year to date, some more evidence of this tariff pass through, but there is still more of this consternation and discomfort around what our price is going to look like this year because the general public has just recovered.
So my brain's going, nominal GDP will hold up, whether it's lousy, real GDP two percent, whatever, you throw on a three percent or plus inflation rate, and that's enough to have corporations keep going, oh yeah, I mean revenue, yes, tif Ernie.
But admittedly though with the split between large and then small and medium sized companies, I think that that you know, I know it's an overused term at this point, but the nature of that k you know, how you sort
of describe the economy, it's still very much there. I do think that because of what happened with labor last year and how much companies pulled back on hiring, especially at the smaller end, maybe there was net negative hiring for for small businesses in America that did help us, you know, sort of cushion some of their profit margins, and now I think that is benefiting some of their forward earnings estimates.
Paul, Walmart the last twelve months, you taught me to look at this and thes up thirty one percent. Right now the pe is forty eight Walmart.
For a retailer, it's well, it's more.
I would have flunked CFA if they'd asked me.
That question, I know, absolutely.
So, you know, Kevin, we have seen, I guess since late last year, a rotation in this market away from some of the growthy sectors of the market and maybe some more value maybe small in mid capin is that a short term trade or is that something that you guys think has maybe some some legs.
Here in it.
No think we think it has legs, I mean admittedly, and we always make the clear sort of distinction that it's never going to happen in a straight line. Of course, you're kind of learning that over the past couple of days at times small caps are getting hit harder than large caps as an example, But I think of it kind of in a broader context, not just small versus large in the US, but x US versus the US.
Of course, there's been more pressure in the past week in areas like Europe, as I mentioned, with their energy exposure to the Middle East. However, I do think that if you look at some of the PMI deat and look some of the economic data around the world, even for you know, the Global Composite PMI that just came out recently for February, the strength in Asia and Asia Pacific, in Europe has been you know, it's been better than the US. They've been stronger and they've seen you know,
stronger accelerating growths of rates of growth. So I think that you have to sort of pay attention to that that it's not necessarily just a weaker dollar story. I think that was kind of a twenty twenty five story. Now I think it's translating into sort of more tangible growth prospects for the rest of the world. Not saying that it's this boom, but you know, the market's going to trade off of those rates of change and differentials.
What does earning season look like, I mean, or upon the end of the calendar quarter here March thirty one, I guess April twentieth, April fifteenth, we start to go through the ballet again.
Yeah, well, look, well, I think that the focus is still going to because because of how much you know, we're in this sort of AI centric economy and market. I'm still I think the focus is really going to be again on those hyperscalers and how much they're going
to up their CAPBECS budgets. Because that was really the decisive turning point for this rotation last October, when we were in that earning season and you started to see those announcements roll through where they started to add up to you know, a third of S and P five hundred caps.
That's when the rotation really.
Started to kick into to hire gear, So I think that is still going to be a focal point for earnings.
You know, what we've seen in cellofs before is Schwab customer stepping and buying a market, retail buying, buying the market being reached, buying the dips. I mean, when you go out to southern California and a Vermont, do you get that sense that your clients want to buy dips, want to continue to be bullish.
I do still get that sense, and I think a lot of it. And I know we talked about this last time that I was here with Wizan, and we all had a conversation about this. You know, I think that's still the fact that in the post pandemic era, we really haven't had what I think of as a real bear market. And I think it's more important in
terms of duration, not necessarily death. And I think actually the nature of that, the fact that the bear markets we've had have been so shortened, you know, relatively short lived, that has sort of conditioned the average retail trader, and especially the newer trader these days, or newer investor, to sort of step right in when you're down twenty or
twenty five percent. So to me, the next time we do get a bear market, and if it is more protracted it, if it lasts longer and it's associated with some economic pain, that to me will be the real test for that that Cohorative Traders.
Thank you for coming in. Thank you, it's always good to see you. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast US Live weekday afternoons from seven to ten am Eastern. Listen on Apple, Karplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube.
Brian Gardner joins US chief Washington War policy Strategists. It's Steifel with all his work at Keith, Briett and Woods over the years. Wonderful to have you here. I heard a group.
I think we're gonna go mister Gardner first.
Okay, excuse because let's get the policy stuff right out of the way.
I'm sorry Brian Gardner with this. I'm confused here because we're it's jobs Day. I'm going on here, Brian Gardner with us right now. It's Steph O. Brian. I look at where we are and there's this confusion over conflict in war, it's Stefel. Is this a conflict or is this a war?
I'm not going to speak for the firm time because I probably get myself in a little bit of trouble, But I mean, I'll use the president's words himself. He's referred to it as a war. I mean, obviously there are folks up on Capitol Hill that want to avoid that term. But the President on several occasions said, you know, I got to get back to the war. So when bombs start dropping and people are being killed, it's a war.
Hey, Brian, politically speaking, is this war a net positive or net negative for the president here? Because this is a president at least in his first term, said he doesn't want anything to do with any of these entanglements.
Yeah, so we're Paul, We're in the fog of war. So it's it's tough to see forward and how this is all going to play out longer term. But I think there is risk longer term. Short term, there's not a lot of risk right now, you know, a write down political partisan divides on support for the war. But longer term he has he does have to be careful that part of his coalition more than just the America first diehards start to peel away if there were to be boots on the ground. Now we're not close to that.
The administration is really pushed back on that idea. But if somehow things were to change and there are boots on the ground, I think the political dynamic changes, and he just runs the risk generally of being seen as being too focused on foreign policy when Americans clearly want a focus on economic and domestic policy. That goes back to twenty twenty four and it is still the case today.
And Brian, what we saw in some of the governor elections last year in Virginia, New Jersey and some other places was affordability was issue number one. And we're hearing reports that gasoling prices are really starting to surge across America, twenty five cents a gallon higher just in the last week or so. That can't be politically good for this administration or the party in general, exactly.
Look, if this is sorry to use the word, if this is transitory and markets correct and oil drops back to its previous level, gas gives back its gains, that's one thing.
But if this is longer lasting, that's a problem.
And just going back since you mentioned those elections in November, I mean, keep him on the context of that, not just the shutdown, which everybody pays attention to, but the president had been in Asia before then, and I think again it kind of reiterated this perception that maybe he's more focused on foreign policy than domestic policy.
I think that's a real risk for him.
Wonderful half hour for you folks into the job. Stay in twenty five minutes. Claudius sam will join us to give you that great coverage we try to do for you with the release of the data. Eric van Astron with his shortly chief investment officer at Lizard Asset Management right now, Brian Gardner, Chief Washington Policy Strategies, it's default fold in the elections of Tuesday, I guess the elections
for the mid year. It started this Tuesday with all that we saw, particularly in Texas and the Carolina as well. Brian Gardner, is the election season rush now? With all of our uproar in March, are we doing a May or June fever of a midterm?
Yeah?
It just feels time that every cycle starts earlier and earlier. I mean, I'm already getting questions about twenty twenty eight much less than midterm.
So yeah, we're we're already.
Yeah, we're already into the cycle, especially the midterm cycle, and that's going to flow through to Congress and legislation and what cannot get done. The legislative window is narrowing. It's closing much faster than we have seen in the past. So we are deep into election.
Season inside the beltwagh who has the most money? I'm told, I'm lectured that money matters. Gura does this? Tell me this Bloomberg this weekend with David Girl, look for that here tomorrow. I mean, help me here, Brian, who's got money up to the eyeballs? It matters until it doesn't.
Tom I mean, we can go back and look at a couple of campaigns that have already occurred. The notable state election state legislative election in Texas a couple of weeks ago, where a Democrat won the seat, took it from Republicans that had held it for quite a long time. The Democratic candidate was outspent ten to one. So I mean, you have to match the message in the moment. Money matters. Directly to your question, both parties have more than enough money.
I think Republican.
Parties, the party apparatus.
Is in really good shape compared to Democrats, who know the DNC I think is not in a good cash situation. But at the candidate level, I think Democratic candidates are in very good shape, especially in those key swing districts. They're flush with money. They're going to have enough. But I think we yeah, money matters, but I think we overplay it. It's more about the message and the.
Moment, Brian, most folks feel like the House is certainly in play. How about the Senate in terms of the Democrats taking control.
So Democrats would need a four seat pickup in the Senate, and numerically they have the upper hand because Republicans are defending more seats than our Democrats. So you say, okay, they have more pickup opportunities, but when you look at where those seats are, where the contested seats are, Republicans are in a much stronger position in the Senate than they are in the House. As we sit here today, Paul, I would say Republicans have a pretty good chance, certainly
over fifty to fifty. I'm putting it probably in the sixty sixty five, maybe seventy percent chance of retaining the Senate. Let's see how the situation with Iran unfolds. Let's come back in three, four or five months. It could be in a different environment, but based on what we know today, even with a tough political environment for Republicans, I think they're in a good position to keep the Senate.
Brian Gardner, thank you so much, Chief Washington policy strategist. Steve greatly appreciate that.
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