What can a chins, I'm Chuil Webber and Americ Belcunas Eric anything of note been happening in markets of late What a year?
What a year this day has been but whiplash, Yeah yeah, COVID like whiplash.
You know.
The whole year it was sell America, the sell America trade, uron stocks, Europe is the place to be and uh well that didn't turn out to be true. The us rallied back. Now it's positive on the year. I'd say even that just blew away much of the negativity and expert analysis out there. It's a little I think it's one of those moments that's baffling for a lot of people.
But so instead of you know, selling America, everybody bought it, and here we are back in what feels like twenty twenty four again, it feels like we're kind of like back to normal, which is sort of like, as somebody on this podcast is going to say, is comfortably bullish, comfortably bolish.
Okay, Well, to help us walk through some of those headlines and what's happening in markets and bonds, we're gonna be joined by Isabelle Lee Process, a reporter with Bloomberg News as well as Athanasios, Sarah Vegas ETF analyst with Boomberg Controjans Beast time on Trillions. Bye bye America, Athanasios, welcome back to Trillions, Isabelle, thanks for being here. See what I did there? Good bye bye.
I heard it.
It was good. So let's I want to set this up with you because you've been writing some interesting notes right now. What have you been seeing on sort of like just a metal level of how things have transpired.
Yeah, well, Eric kind of alluded to it, but it's the bounce back in the US market, And looked at what happened in the beginning of April. It was a lot of negative sentiment. It was the US acceptavision is over time to rotate into Europe, move away out of it.
Uh.
But one thing that was interesting with THETF flows, they never really fully bought into the Europe story, right, so you heard everyone coming up with, well, it's time to rotate into Europe. The flows didn't really bite. They were still sort of buying the US even during that dip in the beginning of April. They continued to buy. And now that's paid off because the market's bounced back so far.
So maybe across the world. Yeah, Europe was a little bit more negative on the US, but if we didn't look in like Asia, they were actually buying US stocks like pretty aggressively. So you know, you if you weren't buying, you missed out on this massive, really rapid rebound, I.
Mean, one of the phenomenons. And you know we saw this during Trump one point zero two. There does seem to be like a little bit of a wider gap between negativity and the headlines and like the reality in the market. And I know that probably because you know, the president can be polarizing, and I think sometimes that gap is almos.
Remember I had that guy on here.
I know, I'm trying to make a metric out of it between the flows and the price and then the headlines, and it's almost like a factor where there's some kind of a gap there. It reminds me of that guy we had on who talked about intangible value of a stock, where it's like dark matter. You can't quite see it or measure it, but you know it's there. And I think it's something people have to be careful of. But it seems to me the money doesn't care what the headlines are they're just simply buying.
They wants more money.
Money wants more money, and that's kind of cool that in all this, like, you know, all this political warfare and headlines going back and forth on both sides, that you know, money just wants to make money. And I think when it saw some pullback on the tariffs, it was immediately in because it generally has real faith in US stocks, likes to be in US stocks, doesn't want to not be in there. And I think that was something we saw this year and something will probably continue
to see. So I think in a way sometimes the headlines need a little bit of an adjustment factor, you know, for the next three years.
We'll see.
But that's something we've noticed and I think other peoples have. There just definitely was like a disconnect between flows and prices and the headline and the sort of vibe out there coming on every little thing that was going on.
Macrowise, so said media here in New York Face. But I think the headline was an attack on us.
No, it's true.
I mean, the headline risk is real. I've actually we talked to money managers all the time and they also say that the concerns are there but most of them are actually staying put also because many reasons, long term investment strategies, or because they're just trying to write it out, because if you move, you move to what I mean, we were just talking about this earlier, Joel, that one tweet or one truth could change a lot of things,
and it's hard to have conviction. That's what they tell me, because then if you have conviction on one tweet, what will happen to the others. The data that jumps out to me is that disparity between soft data and hard data. Back of America had this really interesting graph that showed that the gap between those two is that it's wide since at least twenty five years. So what do you
look at these days? And then we have a lot of money managers looking at alternative data like cargo or like foot traffic to stores or pizza deliveries because they can't rely on our data anymore, the traditional one solely at least.
So it's like anything that helps me feel like I can get a read on what's happening and gives.
Me an advantage, yes, or even Uber deliveries. One person was telling me because he was like, you don't order out if you feel like there's a recession coming interesting.
And Isabelle this is a great thing to riff off of for Athanasios, which is that where else can you go? I think this is something that's underrated. So this idea of American exceptionalism in markets, in markets, I do think it's stronger than it's given credit for, because you've found that the poll to invest here, even if you don't like what's going on. You look at the stocks in the Nasdaq one hundred or the S and P, and then you fire up the European ETF and you look
at those stocks. I'm sorry, you're not leaving, You're you gonna stay in America.
Yeah, I mean, I think it's right about what alternative there is, and it's really hard to give it up, you know, and with Trump and all that, like, I get it, Yeah, he's kind of messing with the markets now, But if you take all that out, we're still just these companies are really good at just making money right, way better than Europe, way better than some other kind.
And so when you just look at what is the best alternative, I find it really hard to get money to pry away from the US and be like, Okay, I'm gonna go fully into Europe. I just feel like this might not age well. Not saying that they can't do well, but a lot of times when europe stocks do well, US is also doing really well too. I can't really see a scenario where we're doing really poorly
and they're like crushing it. But you know, I think it's just And even if you look at Europe, most of their money is invested in the US, right, So I think almost in a way, like our greatest export here is like our returns, our market returns, because so much of the world has benefited off of like just the growth in the SP five hundred. It's not just US, it's like a global phenomenon.
What else in the data have you been evaluating specifically around Europe?
Could say two things, right, they'd say, there's US investors trying to buy European funds. Here there's there's barely any movement, right and even this is Europe doing really really well this year, they just haven't really allocated to it. Then there's the European investors investing in the US and then their local markets. So there you've seen that they definitely turned more bearish on the US in April. They were cutting down their allocations and were staying more domestic, but
with that they missed this massive rebound. But if you still look at the way they're positioned, there's still mostly overweight the US. So they're invested more in the US, at least three tfs more in the US than they are even in their own local market. So I think they understand it too. It's like, yeah, I live here, Europe's a great place, but for investing in stocks, just the US just offers a way better alternative than some of the local ones that I'm getting.
But you also looked at the times when Europe outperforms the US. It's like a rower band, right, Yeah, and it got to its like sort of widest length that it ever gets to, which is what like seventeen eighteen percent? And what happens next?
Yeah, and things mean revert, right, So you know, Europe was outperforming the US quite a bit this year, and mean mean reverted in April. Then the other thing we always kind of joke about European summers and how Europe like takes off the entire summer summer is actually a bad time to rotate into Europe. On a relative basis, US usually always does better over the summer than Europe.
But you know, it's probably to say that maybe the ourperformance is a little bit stretched from European over the US, so that just tends the meaner vert a little bit. So I think there's a lot of all like narratives now to support a little bit of rotation back into the US. I bet you we could see European investors rotate back into the US even locally.
Okay, another thing that's been wiplash inducing has been the bond market. Is well, you wrote about that recently. What is that story about.
It's about TLT. So it's I shares twenty plus year bond ETF. It's the biggest long bond ETF, and it's known as a widow maker. So widow maker in market terms means that it's a trade that could lead to potentially catastrophic losses. And I must credit Athanasius here because he did write a note about TLT that made me realize that, you know what it did actually see in a one week time horizon, the most inflows over one week out of all the more than six hundred ETFs
fixed income ETFs that Bloomberg track. So you follow the flow, at least for us, because price tells you a different thing. But flows show conviction. And then it's interesting because people have really been piling into this trade even if but.
You got to get the timing right otherwise it'syeah, widow.
Maker, yes, and it hasn't been right for them until one day when we saw really the bonds rallied and so that was a rare payday for those investors. And so for that time, at least for this brief moment, TLT wasn't a widow maker those.
Long dated bonds at the Nastia's like, what else have you all been watching on that front?
The thing that I find really interesting with TLT, I feel like it's a very institutional vehicle. So I don't know if it's just this mindset of like trying to fight the FED and like outsmart the FED and there's like something about that.
But there is.
Fifty billion or so in the CTF and it's done nothing for like three years.
It's just sort of treaded water.
So you have like fifty billions sitting in the CTF that hasn't really moved a lot.
But it's one of those things.
I think people want to get it right, and this is why they've literally been trying for three years. And most of the flows have come in the last three years. It was only about fifteen billion or so in twenty twenty two, and now it's fifty, like I mentioned. But I think it's even just a bigger story about bonds and like what they've sort of done for you in the last couple of years. Nothing, yeah, nothing, yeah? And does it make sense to keep allocating to them?
Right?
We always talk about sixty forty and whatnot, and you're earning the same yield as you would in like a bill, which is really short term treasury ETF. Obviously you're not getting the price movement if the FED cuts or whatnot. But I think it just opens up a much bigger question about what, you know, what a bonds do for you.
I think TLT fell around forty in the past five years, but it gathered like fifty billion of endflows.
This to me, this ETF is for people who like to overthink things, like you're playing forty chess with the Fed. You're like, no, but then we're gonna get an economic number. It's gonna say this the Fed will have to blink. Rates will go down, TLT goes up. And it's like that meme with Zach gal Galfanakis with all the formulas. To me, that's who buys TLT. Okay, it's not regular people. Regular people are buying es GOV, which is so much
more of a no brainer, basically, no duration risks. You're at one one to three month treasuries yields the same almost, so you must We'll clip that coupon with no duration risk. But that's again the TLT people are playing like a whole game. It's like a risk or something on it thing going on over there. It's like the further out on the curve you go the bigger brain that.
People get nice image. But to your point, bond investors have actually been demanding extra compensation for the risk of holding long duration bonds. I think Bloomberg usually refers to the US ten year term premium, so an inch closer to one percent. That's the highest level in at least a decade.
And the issuance of those long dated bonds have been falling off too. Haven't been seeing that.
But again, this is another thing where again I feel like the media kinda was like Oh my god, Moody's downgraded the US. It's all over, see what's happening? And like honestly, yields when up for a minute like and that then they fell again, like they've been around five percent four percent for like a long time. Nothing, there's nothing really going on.
The media is just here, Eric, I know, well I was.
I was talking to other colleagues earlier. I used to work at a derivatives monitor my first job out of school, and I remember the guy'd be like, I had to call traders and like's find out what happened that day. And I'd be like, okay, like the something move like twenty basis points and he's like, well why, and I'm like they don't know, and he's like, you, there has to be a reason. So there's like this pressure to like come up with a reason for everything, and you know,
you gotta get the clicks. I get it.
But if you can tell the story of the market through one etf right now, what do you think it is?
Vou sixty four billion dollars year to date, it's kind of that's the influence. Yeah, Because I do find this juxtabsition interesting and I've always found it interesting. And this is well beyond Trump or the president, but just in general, when something bad happens and there's like this, because again, let's face it, when there's negative news, you get more clicks on your stuff. It's just like, it's just the fact.
It's like the Weather Channel when there's a hurricane. You know how they pump up hurricanes.
Hurricane seasons basically upon us.
Yeah, but I get it. I do it too. I'm guilty as well. But at the same time, the VU investor doesn't care. And it's interesting to see this immovable object against this big force of the headlines, and they're just like, you cannot shake these VU investors. And this year VU is on track to break the old record by fifty percent, which is set last year. So VU being this steamroller of like I don't really care what
you're saying, or what anybody's saying, even the President. I'm just gonna buy us thoughts like nothing can scare me, is fascinating to me. That's a big story. Not every single thing on earth bought like VOO did, but VU is symbolic. I thought of this idea of I think a lot of investors would come up with a couple truths that they just truly believe in. Number One, they think they can't time the market. They've tried and they failed,
and they're like, I can't do it. No one can, even the experts fail, So I'm not gonna do it. Number two, they're like, I can never get a better deal than VU three basis points for the entire US market, so I don't need to change funds, So I'm not getting out for that reason. And number three, the US stock market kicks ass. I'm not going to trade in Amazon, Apple, and Microsoft for like HSBC and Nesley, No thanks, And so.
Those eslie chocolate does taste better? I agree with you.
I think a lot of them have maybe ten percent in international, like they don't. They're not devoid international, But this idea of like selling America or the end of the exceptionalism, I just think that those three things I just said are truths that create the immovable object of those flows, and I think they're underrated by people who
are trying to call the markets. And I think a lot of people have gotten to that point with their investing, and this year it's just going to embolden that because the rally back just reminded them I did the right thing by not panicking.
Voo is hard to beat, actually, but I was a small part of me was preparing for you to say ibit, because not only do you tweet about it every day, but also I think the ibit is just indicative of the this staunchness or the conviction of traders to really just plow money into this new bitcoin fund or I guess it's not so new now anymore. And recently we saw everything whiplash, but Crypto was the adult in the room, so that was the story.
We also wrote real quick on ibit. It is the second flow getting ETF in the past six weeks after Voo nine billion. It's on a crazy run. Interesting about ibit, in my opinion. I was on stage with Robbie Mitchnick from Blackrock in Dubai at a thing called Token twenty forty nine. Fifteen thousand people at this thing, average age Joal twenty eight. Like I was like the old grandpa the ors. My kid would say, unk, that's the new
term for old head. Anyway, I'm unking out there and I'm on stage with other unks right with the trad five panel, and Robbie says that when bitcoin decoupled and went like a different direction than spy, he got incoming
calls from big fish, big institutions. So I think bitcoin's in this nice place right now with regulatory headwinds gone, and as it starts the lower in volatility and get more less correlated than to the market, it will get bigger investors who are more stable, which will ultimately help it look more like gold too.
He says.
These giant investors are not interested in tech stock returns. They want like digital gold. So everybody's kind of waiting for bitcoin to kind of mature and act more like an adult and not like a teenager. And as it is, and you can see it in the ball coming down, they're going to get bigger investments. And IBIT, to me,
is the one that bit the big fissues. So the fact that ibit has taken ninety percent of the hall of all the other bitcoin ETFs, normally it takes in two thirds tells me that the institutional incoming is pretty serious. Not to mention all the corporations you see adding it to the balance sheet, a couple governments, it could get pretty crazy. I think we're entering this like true financialization of Bitcoin. There will be a point where it peaks
out and then maybe it goes down. I don't know what, but there feels like there's like three or four positive narratives and not a lot negative. And especially with the stock market being placid, it's hard to see much in the way. But we have a phrase on the team. I just don't see the bear case, which is like famous last words. So I say that knowing that that's probably a bad side.
I think that's a fitting place to end. So, Isabelle, thanks for joining us at trillions.
Yeah, thanks for having me on.
Thank you that was really fun.
Thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd like to listen. We'd love to hear from you. Hit us up on social I'm at Joel Weber Show, He's at Eric Pulcini's. Trillions is produced by Magnus Hendrickson. Brendan Newman is our executive producer. Sage Bauman is the head of Bloomberg Podcast