Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.

It is Bloomberg business Week. Shares a meta platforms bouncing around, but up about five percent in the after hours. Now, the company did report second quarter revenue that beat estimates. Revenue coming in at thirty nine point oh seven billion dollars. That's a twenty two percent year over year increase, beating estimates of thirty eight point three four billion dollars in that family of apps revenue that is the core business thirty eight point seven two billion dollars in the quarter, up twenty two percent. Estimate was for thirty seven point seven six Carol highlighted the capex, the company seeing total cap thirty seven to forty billion where they sought where investors saw thirty five to forty billion. The estimate was for thirty seven point five to three billion dollars. So again, what we saw from Microsoft and what we saw from Alphabet.

It is Bloomberg business Week. Shares a meta platforms bouncing around, but up about five percent in the after hours. Now, the company did report second quarter revenue that beat estimates. Revenue coming in at thirty nine point oh seven billion dollars. That's a twenty two percent year over year increase, beating estimates of thirty eight point three four billion dollars in that family of apps revenue that is the core business thirty eight point seven two billion dollars in the quarter, up twenty two percent. Estimate was for thirty seven point seven six Carol highlighted the capex, the company seeing total cap thirty seven to forty billion where they sought where investors saw thirty five to forty billion. The estimate was for thirty seven point five to three billion dollars. So again, what we saw from Microsoft and what we saw from Alphabet.

Here's what I'm going to say. The bread and butter is advertising. They did report better than a sales for the second quarter, so again, are right through them, Like Kurt Wagner Carol offering evidence at the company's heavy investments in AI are helping itself more targeted and personal personalized advertisements. That is still their bread and butter. So if they are saying we are spending guys, and we're going to spend even more, but look at the results from the past quarter. And that's where I'm trying to make sense of the stock being up here in the aftermarket, up five percent. It's not like people are saying, oh my god, what are you spending?

Here's what I'm going to say. The bread and butter is advertising. They did report better than a sales for the second quarter, so again, are right through them, Like Kurt Wagner Carol offering evidence at the company's heavy investments in AI are helping itself more targeted and personal personalized advertisements. That is still their bread and butter. So if they are saying we are spending guys, and we're going to spend even more, but look at the results from the past quarter. And that's where I'm trying to make sense of the stock being up here in the aftermarket, up five percent. It's not like people are saying, oh my god, what are you spending?

You all thought you all thought that AI was going to make our jobs easier, when in reality it just makes Facebook better at targeting ads to you.

You all thought you all thought that AI was going to make our jobs easier, when in reality it just makes Facebook better at targeting ads to you.

Yeah.

Yeah.

So yeah, well done. All right, So let's get to it. Our team coverage with Bloomberg News contributor John Earlekman joining us from Toronto, along with Bloomberg News social media reporter Asha ki Counts joining us in Chicago. I want to start with you, how did meta do?

So yeah, well done. All right, So let's get to it. Our team coverage with Bloomberg News contributor John Earlekman joining us from Toronto, along with Bloomberg News social media reporter Asha ki Counts joining us in Chicago. I want to start with you, how did meta do?

I mean? I think you said it earlier. They beat on everything right, The revenue beat expectations, actually the top end of what analysts expected, and they also beat on the amount of users that they have. I mean they just they beat in every dimension. Now, the one thing you did mention right with that capex, which is that spending a lot of which is going to things like a infrastructure. You're talking servers and data and hardware and stuff like that. That increased a little bit. But because it was that bottom range, right like, their top line level didn't increase. I don't think Avestas are going to be that upset about that. So, yeah, they beat on everything, changed a couple of things, but I think overall it's good for them.

I mean? I think you said it earlier. They beat on everything right, The revenue beat expectations, actually the top end of what analysts expected, and they also beat on the amount of users that they have. I mean they just they beat in every dimension. Now, the one thing you did mention right with that capex, which is that spending a lot of which is going to things like a infrastructure. You're talking servers and data and hardware and stuff like that. That increased a little bit. But because it was that bottom range, right like, their top line level didn't increase. I don't think Avestas are going to be that upset about that. So, yeah, they beat on everything, changed a couple of things, but I think overall it's good for them.

Hey, John, what sticks out to you here? You've had a few minutes to go over these numbers. What sticks out to you?

Hey, John, what sticks out to you here? You've had a few minutes to go over these numbers. What sticks out to you?

Just tim that Mark Zuckerberg and Metas seem to have the script down pretty cold at this point. I mean, building on everything you've said, here's a company that over the last couple of years has learned its lessons when it comes to what starts to make Wall Street uncomfortable on the spending front.

Just tim that Mark Zuckerberg and Metas seem to have the script down pretty cold at this point. I mean, building on everything you've said, here's a company that over the last couple of years has learned its lessons when it comes to what starts to make Wall Street uncomfortable on the spending front.

And I think that.

And I think that.

The fact that the as you guys highlighted earlier that they can make the case that the revenue that came in stronger than expected gets assistance from the investment that's coming from all this AI focus.

The fact that the as you guys highlighted earlier that they can make the case that the revenue that came in stronger than expected gets assistance from the investment that's coming from all this AI focus.

That seems to be a helping hand here.

That seems to be a helping hand here.

I would add, though, that if you go back to the last quarter, remember and by the way, this stock always moves a lot. Generally it moves a lot after earnings, either up or down. But the shares got crushed because investors had to do another reassessment on this AI spending. So arguably we've had some time to sit with this, and even the stock price, I know it's up a lot this year, but at last check it was coming into this earnings report a little bit lower than where it was heading into the last quarter. So I don't think anyone would have been surprised to see a big spending bill.

I would add, though, that if you go back to the last quarter, remember and by the way, this stock always moves a lot. Generally it moves a lot after earnings, either up or down. But the shares got crushed because investors had to do another reassessment on this AI spending. So arguably we've had some time to sit with this, and even the stock price, I know it's up a lot this year, but at last check it was coming into this earnings report a little bit lower than where it was heading into the last quarter. So I don't think anyone would have been surprised to see a big spending bill.

But you have stronger than expected numbers.

But you have stronger than expected numbers.

And remember this is also the company that's starting to find shareholder friendly tricks in its playbook. They issued their first dividend and they're buying back a lot of stocks, so they've got the levers they can pull.

And remember this is also the company that's starting to find shareholder friendly tricks in its playbook. They issued their first dividend and they're buying back a lot of stocks, so they've got the levers they can pull.

But we still have to see how all.

But we still have to see how all.

This AI spending nets out in the long term. We don't quite know, but they're trying to paint a good picture so far.

This AI spending nets out in the long term. We don't quite know, but they're trying to paint a good picture so far.

Yeah, and for a stock that bopped up I think about ten percent here in the aftermarket, we're now just up about three point six percent, still higher, but it continues as I think investors and analysts continue to go through the report and we'll wait to see what comes out on the call. Having said that, John, how does Meta square with some of the other companies that we are so intently focused on their AI spending and their AI ROI return on investment?

Yeah, and for a stock that bopped up I think about ten percent here in the aftermarket, we're now just up about three point six percent, still higher, but it continues as I think investors and analysts continue to go through the report and we'll wait to see what comes out on the call. Having said that, John, how does Meta square with some of the other companies that we are so intently focused on their AI spending and their AI ROI return on investment?

You know, everybody is in an arms race here, and I think at the end of the day, Carol, you could make an argument that because Alphabet came first and investors got a little jittery on the roadmap for the spending on AI and the return on investment. Remember that coming into this week tech had been pretty roughed up, so it almost dare I say, set the bar lower for the tech giants that.

You know, everybody is in an arms race here, and I think at the end of the day, Carol, you could make an argument that because Alphabet came first and investors got a little jittery on the roadmap for the spending on AI and the return on investment. Remember that coming into this week tech had been pretty roughed up, so it almost dare I say, set the bar lower for the tech giants that.

Would be putting out numbers this week.

Would be putting out numbers this week.

I think that at the end of the day, longer term, and Mark Zuckerberg said it himself in his interview with Emily Chang not that long ago, there is a possibility that all the spending they are doing today might be an overshoot, but they're right now trying to build a future where engagement can be increased through AI, that advertisers can have better, more targeted ads through AI, that they can have a much cleaner thread between software and hardware, like the glasses you're talking about.

I think that at the end of the day, longer term, and Mark Zuckerberg said it himself in his interview with Emily Chang not that long ago, there is a possibility that all the spending they are doing today might be an overshoot, but they're right now trying to build a future where engagement can be increased through AI, that advertisers can have better, more targeted ads through AI, that they can have a much cleaner thread between software and hardware, like the glasses you're talking about.

I think they really like where this story is going.

I think they really like where this story is going.

Over the long term, they're probably getting a boost as well, just because there's a lot of eyeballs on big events right now, like the Olympics, and so they can benefit from that.

Over the long term, they're probably getting a boost as well, just because there's a lot of eyeballs on big events right now, like the Olympics, and so they can benefit from that.

But there's, you know, the other side of AI that we don't know a lot about.

But there's, you know, the other side of AI that we don't know a lot about.

Mark Zuckerberg spent a lot of time in front of lawmakers in Washington over.

Mark Zuckerberg spent a lot of time in front of lawmakers in Washington over.

The last decade.

The last decade.

People are still a little concerned, maybe more than a little concerned about the ramifications of all this AI technology that they're weaving into the Meta ecosystem. But you know, at the end of the day, if they can keep the bottom line in a relatively clean manner and keep growing the revenue story, you know, Meta is in a position to have a arguably a cleaner quarterly story than some of its peers.

People are still a little concerned, maybe more than a little concerned about the ramifications of all this AI technology that they're weaving into the Meta ecosystem. But you know, at the end of the day, if they can keep the bottom line in a relatively clean manner and keep growing the revenue story, you know, Meta is in a position to have a arguably a cleaner quarterly story than some of its peers.

Hey, so can you talk a little bit about the integration of Lama and AI into meta platforms family of apps. You know, Carol and I were joking about the idea of the result of all this investment in AI is just better targeted ads.

Hey, so can you talk a little bit about the integration of Lama and AI into meta platforms family of apps. You know, Carol and I were joking about the idea of the result of all this investment in AI is just better targeted ads.

It's funny because Metta is one of those companies where the AI is all behind the scenes, right. So obviously they've been using AI for years, for decades to recommend content on your feed, whether that's on Instagram, on our Facebook where that's posts and images or videos, and so a lot of it goes towards that. But then they've also released new products like AI chatbot that you could talk to, right, so meta AI, if you go on Instagram or Facebook, it'll pop up and you can ask it questions and things like that, and so you see some product experiences. They also had rolled out some things like celebrity chatbots, so you could chat with a chatbot that looked and sounded like, you know, Tom Brady for example, knew you were gonna say.

It's funny because Metta is one of those companies where the AI is all behind the scenes, right. So obviously they've been using AI for years, for decades to recommend content on your feed, whether that's on Instagram, on our Facebook where that's posts and images or videos, and so a lot of it goes towards that. But then they've also released new products like AI chatbot that you could talk to, right, so meta AI, if you go on Instagram or Facebook, it'll pop up and you can ask it questions and things like that, and so you see some product experiences. They also had rolled out some things like celebrity chatbots, so you could chat with a chatbot that looked and sounded like, you know, Tom Brady for example, knew you were gonna say.

Tom Brady, Yeah, I remember he showed that off, right, Yeah.

Tom Brady, Yeah, I remember he showed that off, right, Yeah.

Yeah, they showed that off. But then they shuddered it recently. And so it's like, how much are those products and services really moving the needle for them, or is it really just again, like you're saying, going back to the core advertising business, going back to the feed, and how do they recommend content that users actually want to watch inview?

Yeah, they showed that off. But then they shuddered it recently. And so it's like, how much are those products and services really moving the needle for them, or is it really just again, like you're saying, going back to the core advertising business, going back to the feed, and how do they recommend content that users actually want to watch inview?

Can I help me out here? Is there something in this release that sells specifically shows specifically, is there number or something that says, Yep, here's our AI investing and here's how it paid off? I mean, or John, do we just assume that if the revenues is beating that it's because of AI spending?

Can I help me out here? Is there something in this release that sells specifically shows specifically, is there number or something that says, Yep, here's our AI investing and here's how it paid off? I mean, or John, do we just assume that if the revenues is beating that it's because of AI spending?

You know what I mean?

You know what I mean?

Yeah, I absolutely know what you mean.

Yeah, I absolutely know what you mean.

I mean, the first line in the press release itself was really trying to talk more about how AI is complementing the hardware that they've got. Yeah, and that might just speak to the fact that go back a couple of years ago, as we were just highlighting like AI is technically not a new thing for the company, but it is the hot thing for the world to talk about. So it is front and center right now. But a couple of years ago what was front and center was quite literally changing the name from Facebook to Meta and talking about the metaverse and talking about you know, other VR and AR opportunities. And so I think that there is still because of the explosive spending in that area. You know, maybe this is Mark Zuckerberg just wanting to put a pin in the fact that they can actually make.

I mean, the first line in the press release itself was really trying to talk more about how AI is complementing the hardware that they've got. Yeah, and that might just speak to the fact that go back a couple of years ago, as we were just highlighting like AI is technically not a new thing for the company, but it is the hot thing for the world to talk about. So it is front and center right now. But a couple of years ago what was front and center was quite literally changing the name from Facebook to Meta and talking about the metaverse and talking about you know, other VR and AR opportunities. And so I think that there is still because of the explosive spending in that area. You know, maybe this is Mark Zuckerberg just wanting to put a pin in the fact that they can actually make.

All of this thing together.

All of this thing together.

I would imagine Carol, you get more color on how they're connecting the APPA tising dots on the quarterly conference call, but the revenue growing.

I would imagine Carol, you get more color on how they're connecting the APPA tising dots on the quarterly conference call, but the revenue growing.

I think already.

I think already.

Analysts and reaction to this as Bloomberg is reporting, are suggesting that as the case.

Analysts and reaction to this as Bloomberg is reporting, are suggesting that as the case.

Listen, both of you. Thank you so much. Bloomberg News contributor John Arlokman out there in Toronto. Bloomberg News social media reporter Asha Counts in Chicago shares a medicin right now up five point four percent.

Listen, both of you. Thank you so much. Bloomberg News contributor John Arlokman out there in Toronto. Bloomberg News social media reporter Asha Counts in Chicago shares a medicin right now up five point four percent.

Coming out Frank Sorrentino, Connect one bank. That's next.

Coming out Frank Sorrentino, Connect one bank. That's next.

You're listening to the Bloomberg Business Week podcast. Can't Just Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business app or wan't us Live on YouTube our.

You're listening to the Bloomberg Business Week podcast. Can't Just Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business app or wan't us Live on YouTube our.

Last day of July. It is our fifth FED decision, and I feel like it is all about September. I feel like I heard Jay.

Last day of July. It is our fifth FED decision, and I feel like it is all about September. I feel like I heard Jay.

Is it about September or is it about Jackson Hall.

Is it about September or is it about Jackson Hall.

No, well, I.

No, well, I.

Think maybe we get some clarity, but I feel like we heard Jay Powell kind of love with him saying September, like it could happen as soon as September.

Think maybe we get some clarity, but I feel like we heard Jay Powell kind of love with him saying September, like it could happen as soon as September.

Yeah, yeah, that's I'm looking. We saw an equity market reaction that's certainly in a bond market reaction too. That's certainly into that. We just heard the numbers from Charlie. But still the S and P five hundred up one point seven percent right now, the dough up half a percentage point, where NaSTA can posit up two point seven percent off of earlier huhs.

Yeah, yeah, that's I'm looking. We saw an equity market reaction that's certainly in a bond market reaction too. That's certainly into that. We just heard the numbers from Charlie. But still the S and P five hundred up one point seven percent right now, the dough up half a percentage point, where NaSTA can posit up two point seven percent off of earlier huhs.

Yeah.

Yeah.

Absolutely. The other thing, let's let's throw into this because we did get some headlines in terms of those tensions war that we continue to see out of the Middle East. Specifically, we did see oil jump about four percent, jumping the most into October after Hama said Israel killed its political leader, stocking tensions in a region that produces around a third of the world's crued. What's interesting is that it sounds like Iron is getting ready to do a counter attack. So we are watching that very very closely. But we're going to focus certainly on the FED decision and let's not forget another of the mag seven reporting after the closing belt meta platforms.

Absolutely. The other thing, let's let's throw into this because we did get some headlines in terms of those tensions war that we continue to see out of the Middle East. Specifically, we did see oil jump about four percent, jumping the most into October after Hama said Israel killed its political leader, stocking tensions in a region that produces around a third of the world's crued. What's interesting is that it sounds like Iron is getting ready to do a counter attack. So we are watching that very very closely. But we're going to focus certainly on the FED decision and let's not forget another of the mag seven reporting after the closing belt meta platforms.

Yeah, we'll bring those numbers to you as as soon as we get them up, including to Carol. An interview before that with the CEO of Connect One Bank Corp, Frank Sorrentino, who's going to be back with us. He's going to talk monetary policy and rate small business activity and the environment for lending.

Yeah, we'll bring those numbers to you as as soon as we get them up, including to Carol. An interview before that with the CEO of Connect One Bank Corp, Frank Sorrentino, who's going to be back with us. He's going to talk monetary policy and rate small business activity and the environment for lending.

It's a great lineup, folks, So let's get to it. Let's get to our drive to the close with about eleven minutes to go. Joining us right now is Nate Thoofty, is chief investment officer over at Manual Life Investment Management, joining us from Boston. And then right here in our Bloomberg Interactive studio, our own Bloomberg News rates reporter Michael Mackenzie. Michael, I want to start with you the FED decision, was there more of a hawkish tone or more of a dovishtone, you know, it did feel like rates all along the US curve moved up a little bit initially on the decision.

It's a great lineup, folks, So let's get to it. Let's get to our drive to the close with about eleven minutes to go. Joining us right now is Nate Thoofty, is chief investment officer over at Manual Life Investment Management, joining us from Boston. And then right here in our Bloomberg Interactive studio, our own Bloomberg News rates reporter Michael Mackenzie. Michael, I want to start with you the FED decision, was there more of a hawkish tone or more of a dovishtone, you know, it did feel like rates all along the US curve moved up a little bit initially on the decision.

They did, Carol, and I think initially this statement was viewed as being a little bit more harbish and anticipated, and then Power began talking, and as he slowly but surely continued on and was asked more questions, he started throw peppering his conversation with expressions like, you know, the real downside rooster labor. He talked about, We're nearly going to go. He kept mentioning September yeah, and a.

They did, Carol, and I think initially this statement was viewed as being a little bit more harbish and anticipated, and then Power began talking, and as he slowly but surely continued on and was asked more questions, he started throw peppering his conversation with expressions like, you know, the real downside rooster labor. He talked about, We're nearly going to go. He kept mentioning September yeah, and a.

Last count of how many times I felt like and I.

Last count of how many times I felt like and I.

Think that's and you could start to see. We saw the five year make a new yield low for the day below three ninety nine, and then once the press conference finished, the market really took off a on those around headlines, I think, but also because it's month end and people now need a buybond, so I think they were waiting to see what was happening what Power would say. But I think the broad takeaway for the market here is he's put September clearly on the table. He did mention actually that they did discuss a rate decision for July, which also got the market kind of go, oh, here we go, yeah, I think, And if you look more out over the next twelve months, the market's gone from pricing about one hundred and fifty bases points it cuts to one hundred and sixty now, so they're ready to go.

Think that's and you could start to see. We saw the five year make a new yield low for the day below three ninety nine, and then once the press conference finished, the market really took off a on those around headlines, I think, but also because it's month end and people now need a buybond, so I think they were waiting to see what was happening what Power would say. But I think the broad takeaway for the market here is he's put September clearly on the table. He did mention actually that they did discuss a rate decision for July, which also got the market kind of go, oh, here we go, yeah, I think, And if you look more out over the next twelve months, the market's gone from pricing about one hundred and fifty bases points it cuts to one hundred and sixty now, so they're ready to go.

Okay, he did mention September quite a bit, Michael, but he also said we've made no decisions about future meetings and that includes September. We will be data dependent, but not data point dependent.

Okay, he did mention September quite a bit, Michael, but he also said we've made no decisions about future meetings and that includes September. We will be data dependent, but not data point dependent.

Yeah, that was an interesting he tried. I think that was a shot across about the bomb market, you know, with the totality of data. But here's the bomb market perspective. Inflation's moving in the right direction. You've mentioned labor weakness is potentially the big downside source of is key. The next two payroll reports matter a great deal, particularly after what we've seen this week from the employment cost in decks, what we've seen from ADP today, and what we saw from the Joels Right, So everything's lined up, but again, you need to see a materially weakened number over the next two months in payrolls.

Yeah, that was an interesting he tried. I think that was a shot across about the bomb market, you know, with the totality of data. But here's the bomb market perspective. Inflation's moving in the right direction. You've mentioned labor weakness is potentially the big downside source of is key. The next two payroll reports matter a great deal, particularly after what we've seen this week from the employment cost in decks, what we've seen from ADP today, and what we saw from the Joels Right, So everything's lined up, but again, you need to see a materially weakened number over the next two months in payrolls.

I'd get this. I just want to remind everyone listening, Michael. McKenzie told us this last week, so we knew this was common, Michael, and you have not shifted your view on it.

I'd get this. I just want to remind everyone listening, Michael. McKenzie told us this last week, so we knew this was common, Michael, and you have not shifted your view on it.

Just reflect you want people people tell me every day.

Just reflect you want people people tell me every day.

It's always become kind of a member of our team.

It's always become kind of a member of our team.

He's to go to no question.

He's to go to no question.

All right, let's go to Nate right now, chief investment officer at Manual Life Investment Management, Nate Throof out there in Boston. Nate, what jumps out for you in terms of today's FED decision?

All right, let's go to Nate right now, chief investment officer at Manual Life Investment Management, Nate Throof out there in Boston. Nate, what jumps out for you in terms of today's FED decision?

Yeah, well, I were surprised by obviously the market had priced in a lot for this in anticipation of a fairly dubbish statement in my view, and I actually.

Yeah, well, I were surprised by obviously the market had priced in a lot for this in anticipation of a fairly dubbish statement in my view, and I actually.

Interpreted as pretty stubbish.

Interpreted as pretty stubbish.

Basically every edit they made in the statement was leaning towards the Doverish healthcup. Now couldn't they spraise it slightly differently to get it across? But at the end of the day, Powell did reassert it during his comments, basically saying, hey, September is live.

Basically every edit they made in the statement was leaning towards the Doverish healthcup. Now couldn't they spraise it slightly differently to get it across? But at the end of the day, Powell did reassert it during his comments, basically saying, hey, September is live.

Of course we're going to talk about it.

Of course we're going to talk about it.

And the fact that you pointed out that they actually had the discussion at the July.

And the fact that you pointed out that they actually had the discussion at the July.

Meeting as to whether they should make a cut.

Meeting as to whether they should make a cut.

I think it's an important tell tale that the committee overall is definitely leaning towards wanting to make a cut, assuming again that the data continues to come in with a level of respectfulness when it comes to the weakness on the lower side of inflation, and also potentially getting continuation of some of the.

I think it's an important tell tale that the committee overall is definitely leaning towards wanting to make a cut, assuming again that the data continues to come in with a level of respectfulness when it comes to the weakness on the lower side of inflation, and also potentially getting continuation of some of the.

Labor weakness and that we've been seeing.

Labor weakness and that we've been seeing.

So we firmly believe that September is live and we will get a twenty five basis point cut. We're also in the camp that we could still see as many as three quarter point cuts before the end of twenty twenty four.

So we firmly believe that September is live and we will get a twenty five basis point cut. We're also in the camp that we could still see as many as three quarter point cuts before the end of twenty twenty four.

Okay, that's that's quite a few, Nate. What derails a September rate cut between now and then.

Okay, that's that's quite a few, Nate. What derails a September rate cut between now and then.

Well, obviously, the FED is data dependent.

Well, obviously, the FED is data dependent.

They always have been and always will be, and I think it's important that they point out that they're not data point dependent versus broadly data dependent, because I think the trends matter more than any given data print, and it opens a window for them to have a little bit of flexibility around one bad data point or two bad data points by saying, hey, we're still looking at the overall trend. And so obviously, if we get really hot job data coming in the next two months, or we get a surprise uptick inflation, which I think would be very surprising based on the data that we're seeing, that you would see that, but that could derail or delay the potential for a quarter point cut. It as the September meeting, So it really is a much higher, hotter data when it comes to the job market and obviously inflation taking a reverse turn and going higher again.

They always have been and always will be, and I think it's important that they point out that they're not data point dependent versus broadly data dependent, because I think the trends matter more than any given data print, and it opens a window for them to have a little bit of flexibility around one bad data point or two bad data points by saying, hey, we're still looking at the overall trend. And so obviously, if we get really hot job data coming in the next two months, or we get a surprise uptick inflation, which I think would be very surprising based on the data that we're seeing, that you would see that, but that could derail or delay the potential for a quarter point cut. It as the September meeting, So it really is a much higher, hotter data when it comes to the job market and obviously inflation taking a reverse turn and going higher again.

Well, so it's interesting Michael mackenzie. I do wonder too that what Jay Powell also said is that there's a ton of data between now and the septem meeting and we shouldn't forget about that. Is it just reminding him that he's just going to go through it all, even though he kind of dropped September many times.

Well, so it's interesting Michael mackenzie. I do wonder too that what Jay Powell also said is that there's a ton of data between now and the septem meeting and we shouldn't forget about that. Is it just reminding him that he's just going to go through it all, even though he kind of dropped September many times.

Yeah, And I think also what was one of the more interesting lines he said was he was asked about rate cuts for this year and he said he could see scenarios where he could have zero or several. Yeah, and what the bomb markt really listened. They didn't listen to zero. They listened to several, which means more than two. And I think that was where the rally begins to get going. Here. I think this is a fed that is meaning.

Yeah, And I think also what was one of the more interesting lines he said was he was asked about rate cuts for this year and he said he could see scenarios where he could have zero or several. Yeah, and what the bomb markt really listened. They didn't listen to zero. They listened to several, which means more than two. And I think that was where the rally begins to get going. Here. I think this is a fed that is meaning.

Rally in the bond market because people are saying, Okay, we've topped out in terms.

Rally in the bond market because people are saying, Okay, we've topped out in terms.

Of rates, so or what.

Of rates, so or what.

Well, it's a rally because we're now at a stage where the cycle is turning. We're late cycle and the FED is about to cut, and if you're if the Fed's about to cut, then the classic bond trade here is to get into the two year to five year You're going to have to pay up to get in there now, but you're getting in there now because you know there's a wall of money sitting in teabills that it's going to come following you. And this thing could really shoot lower to the downside here in terms of rates before it's all ended. But so now there's a premium to be paid, and you're going to buy twos and you're gonna buy fives, and the feedg telling you they're ready to go, and it's just going to take a further softening in labor. They will cut in September. The question whether they cut more remains to be seen. But then they could do fifty well or not they do three cups this year, Okay, I don't think. I mean, I think power ruled. You'd have to have something thatterily weakened dramatically in the next two months. You're just saying more frequency, more frequency.

Well, it's a rally because we're now at a stage where the cycle is turning. We're late cycle and the FED is about to cut, and if you're if the Fed's about to cut, then the classic bond trade here is to get into the two year to five year You're going to have to pay up to get in there now, but you're getting in there now because you know there's a wall of money sitting in teabills that it's going to come following you. And this thing could really shoot lower to the downside here in terms of rates before it's all ended. But so now there's a premium to be paid, and you're going to buy twos and you're gonna buy fives, and the feedg telling you they're ready to go, and it's just going to take a further softening in labor. They will cut in September. The question whether they cut more remains to be seen. But then they could do fifty well or not they do three cups this year, Okay, I don't think. I mean, I think power ruled. You'd have to have something thatterily weakened dramatically in the next two months. You're just saying more frequency, more frequency.

Hey, Nate, investors are not just focused on J. Powell and the Federal Reserve and the data that we're going to get On Friday when it comes to the labor market, we did see stocks move lower after The New York Times reported that Iran's leader has ordered a direct strike on Israel in retaliation for what it said was the assassination of Hamasa's top leader well in Tehran. This according to The New York Times. How are you watching this? As CIO at Manual Life Investment Management, Just very briefly, I do.

Hey, Nate, investors are not just focused on J. Powell and the Federal Reserve and the data that we're going to get On Friday when it comes to the labor market, we did see stocks move lower after The New York Times reported that Iran's leader has ordered a direct strike on Israel in retaliation for what it said was the assassination of Hamasa's top leader well in Tehran. This according to The New York Times. How are you watching this? As CIO at Manual Life Investment Management, Just very briefly, I do.

Believe that the market is underappreciating these risks, and keep in mind, there are a lot of risk out there. We have election risk dynamics that we've seen throughout this year and there's more to come. We have geopolitical risks in the Middle East, and so I think the market is underappreciating the risk. And so one of the areas that we are focused on to potentially offset that is we are trying to add to our duration, both because of the FED cutting cycle will begin, but also that there are these risks out there, so we're adding to duration in our portfolios. But similarly, we aren't trying to own some of these asset classes like energy, where it will benefit from more geopolitical risk for.

Believe that the market is underappreciating these risks, and keep in mind, there are a lot of risk out there. We have election risk dynamics that we've seen throughout this year and there's more to come. We have geopolitical risks in the Middle East, and so I think the market is underappreciating the risk. And so one of the areas that we are focused on to potentially offset that is we are trying to add to our duration, both because of the FED cutting cycle will begin, but also that there are these risks out there, so we're adding to duration in our portfolios. But similarly, we aren't trying to own some of these asset classes like energy, where it will benefit from more geopolitical risk for.

What it's worth. I did a little poll this morning, what's top of mind? FED earnings, US politics, geopolitics. FED was thirty four percent, But in second place at thirty percent was geopolitics. In terms of what's on everybody's mind. People also said getting a second cup of coffee and watching the Olympics.

What it's worth. I did a little poll this morning, what's top of mind? FED earnings, US politics, geopolitics. FED was thirty four percent, But in second place at thirty percent was geopolitics. In terms of what's on everybody's mind. People also said getting a second cup of coffee and watching the Olympics.

But that was add on?

But that was add on?

Is that?

Is that?

Yeah?

Yeah?

That was not that was Those were writings. Yeah, but I gave.

That was not that was Those were writings. Yeah, but I gave.

Them four choices, Okay, Michael McKenzie. Always appreciate your instant analysis rates reporter at Bloomberg News here in our studio, Nate, thank you so much, as while Cio over at Manual Life Investment Management out there in Boston.

Them four choices, Okay, Michael McKenzie. Always appreciate your instant analysis rates reporter at Bloomberg News here in our studio, Nate, thank you so much, as while Cio over at Manual Life Investment Management out there in Boston.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty well.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty well.

As Romaine Bostik said, Q, Earthwind and Fire fed chair J Powell saying an interest rate kay could come as soon as the next meeting, after the US Central Bank voted to leave its benchmark at the highest level in more than two decades that was widely expected. Here's what JA Powell had to say today.

As Romaine Bostik said, Q, Earthwind and Fire fed chair J Powell saying an interest rate kay could come as soon as the next meeting, after the US Central Bank voted to leave its benchmark at the highest level in more than two decades that was widely expected. Here's what JA Powell had to say today.

Whether the totality of the data, the evolving outlook in the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.

Whether the totality of the data, the evolving outlook in the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.

All right, everybody sing some earth, wind and fire be on the table, he said, September an awful lot.

All right, everybody sing some earth, wind and fire be on the table, he said, September an awful lot.

Yeah, that is on the table, but could be.

Yeah, that is on the table, but could be.

Could be, could be.

Could be, could be.

But like I said, I lost count of how many times he said September Wealth.

But like I said, I lost count of how many times he said September Wealth.

More on today's decision in J. Powell commentary. Let's head to a member of the banking community, always sensitive to FED moves back with us, a guest who's continued to remind us since late last year about the quote robust parts of our economy, even when others were talking about a possible recession, and also to remind us that historically interest rates are still low.

More on today's decision in J. Powell commentary. Let's head to a member of the banking community, always sensitive to FED moves back with us, a guest who's continued to remind us since late last year about the quote robust parts of our economy, even when others were talking about a possible recession, and also to remind us that historically interest rates are still low.

Perspective and context. That guest Frank Sorrentino, chairman CEO over at connect One Bank, the publicly held New Jersey based Community Bank. It's got about a nine hundred and thirty million dollar market cap. He joins us from Englewood, New Jersey, where I was born in Englewood. Frank Sarrentino, great to have you back with us. First of all, I had to when we were prepping for this, Tim and I, you know, remembered that the last time we talked, your market cap was about six hundred and seventy seven million. We were looking at our old notes. It's now dramatically higher. Your stock is up a forty percent since we last talked after the June FED meetings.

Perspective and context. That guest Frank Sorrentino, chairman CEO over at connect One Bank, the publicly held New Jersey based Community Bank. It's got about a nine hundred and thirty million dollar market cap. He joins us from Englewood, New Jersey, where I was born in Englewood. Frank Sarrentino, great to have you back with us. First of all, I had to when we were prepping for this, Tim and I, you know, remembered that the last time we talked, your market cap was about six hundred and seventy seven million. We were looking at our old notes. It's now dramatically higher. Your stock is up a forty percent since we last talked after the June FED meetings.

Like six weeks ago.

Like six weeks ago.

It's unbelievable. What has happened.

It's unbelievable. What has happened.

Well, I think part of it is just a rotation, a sector rotation into banks.

Well, I think part of it is just a rotation, a sector rotation into banks.

Right.

Right.

Banks have been really pummeled over the last I'll say six months nine months or so. And I think when when folks look at investors look out over the next six or nine months, they're absolutely seeing that banks are going to begin earning at higher levels in general. Lower rates will help with that, more liquidity in the marketplace. And I know I've used the word robust, but a robust economy where lending takes place again, we're beginning to see banks making more loans over time.

Banks have been really pummeled over the last I'll say six months nine months or so. And I think when when folks look at investors look out over the next six or nine months, they're absolutely seeing that banks are going to begin earning at higher levels in general. Lower rates will help with that, more liquidity in the marketplace. And I know I've used the word robust, but a robust economy where lending takes place again, we're beginning to see banks making more loans over time.

I have to say, if I look at the KBW Bank Index, which is a broader measure of the banking sector, it's only up about fourteen percent in that time. I mean, you guys aren't in player or anything, right, there's nothing you want to share with us.

I have to say, if I look at the KBW Bank Index, which is a broader measure of the banking sector, it's only up about fourteen percent in that time. I mean, you guys aren't in player or anything, right, there's nothing you want to share with us.

Nothing I want to share. Of course, that one's doing a great job of satisfying its clients demands here and uh, you know, we are a little bit unique that we're centrally located here in the New York metro market. And so anybody looking for a play in uh you know what I believe is one of the best markets in the country in our size range. Well, connect one's the place.

Nothing I want to share. Of course, that one's doing a great job of satisfying its clients demands here and uh, you know, we are a little bit unique that we're centrally located here in the New York metro market. And so anybody looking for a play in uh you know what I believe is one of the best markets in the country in our size range. Well, connect one's the place.

Oh interesting, Okay, so wait you are what do you mean? What do you mean?

Oh interesting, Okay, so wait you are what do you mean? What do you mean?

No, No, I'm just saying anyone is looking to invest in the New York, okay market area in banking where you know where one of the names that will come up.

No, No, I'm just saying anyone is looking to invest in the New York, okay market area in banking where you know where one of the names that will come up.

Okay, not necessarily a larger bank coming in and gobbling you up.

Okay, not necessarily a larger bank coming in and gobbling you up.

I just know anybody who makes investments in banks, okay, and in their thoughts.

I just know anybody who makes investments in banks, okay, and in their thoughts.

Okay, let's get to the FED a little bit, because we last talked to you following that FMC decision in June, we got another one on the books. What was of note to you in the FED commentary and especially in j Powell's press conference today.

Okay, let's get to the FED a little bit, because we last talked to you following that FMC decision in June, we got another one on the books. What was of note to you in the FED commentary and especially in j Powell's press conference today.

I think they've I think Jay Powell and the FED has been very consistent about looking at the data, looking ahead, thinking about how to land this. You know where we are today. I think we pretty much have in the books a soft landing. We've been talking about it for over a year. It looks like that is exactly what's going to happen. Consumer is still spending, people still have their jobs, Inflation is coming down, things are normalizing again. We are, as I've mentioned before, yes, in a higher rate environment, but not a high rate environment. Business is still taking place. Folks are pretty much doing all the things they want to do. You still can't get a house or an apartment that you want. The demand is there. So I think they're looking at the data and saying, Okay, things have come off the high. So we don't see as much you know, positive momentum in the market as we saw before. But it's still a robust market. So yes, I think we will see time for the overnight rate to come down a little bit.

I think they've I think Jay Powell and the FED has been very consistent about looking at the data, looking ahead, thinking about how to land this. You know where we are today. I think we pretty much have in the books a soft landing. We've been talking about it for over a year. It looks like that is exactly what's going to happen. Consumer is still spending, people still have their jobs, Inflation is coming down, things are normalizing again. We are, as I've mentioned before, yes, in a higher rate environment, but not a high rate environment. Business is still taking place. Folks are pretty much doing all the things they want to do. You still can't get a house or an apartment that you want. The demand is there. So I think they're looking at the data and saying, Okay, things have come off the high. So we don't see as much you know, positive momentum in the market as we saw before. But it's still a robust market. So yes, I think we will see time for the overnight rate to come down a little bit.

It's a little it's we.

It's a little it's we.

Are in an inverted yield scenario, but the ten year is still at over four percent. So I think we're in a good place, and I think they believe they can lower rates a little bit, which would be great for banking and it'll be great for the economy going forward.

Are in an inverted yield scenario, but the ten year is still at over four percent. So I think we're in a good place, and I think they believe they can lower rates a little bit, which would be great for banking and it'll be great for the economy going forward.

Well, give us a little bit more color if you can around your loan book, what it looks like, whether it's for small business, for the housing area, the construction. What can you tell us.

Well, give us a little bit more color if you can around your loan book, what it looks like, whether it's for small business, for the housing area, the construction. What can you tell us.

Yeah, so we're a community bank here in the New York metro market that's New Jersey, New York, and we're also in Southeast Florida. A lot of our lending is the small to medium size businesses. We do a fair amount of construction lending, and I will tell you that is still quite robust. As fast as projects can be built, they're either being rented or sold. There's probably more demand than the supply. I've said before that you know, nationwide, there's just a shortage of supply. So that's that's one segment we do. We do a fair amount in the real estate industries, and we do a fair amount in just business type loans. We're not a big consumer lender, but for the businesses that bank with us, we are seeing that most of them are doing well. Yes, a little bit less than maybe a year ago or two years ago, but still doing quite well.

Yeah, so we're a community bank here in the New York metro market that's New Jersey, New York, and we're also in Southeast Florida. A lot of our lending is the small to medium size businesses. We do a fair amount of construction lending, and I will tell you that is still quite robust. As fast as projects can be built, they're either being rented or sold. There's probably more demand than the supply. I've said before that you know, nationwide, there's just a shortage of supply. So that's that's one segment we do. We do a fair amount in the real estate industries, and we do a fair amount in just business type loans. We're not a big consumer lender, but for the businesses that bank with us, we are seeing that most of them are doing well. Yes, a little bit less than maybe a year ago or two years ago, but still doing quite well.

Hey, politics has been front and center since we last spoke to you, with a lot happening, not just in Washington but all over the country. And I'm wondering, Frank, how you're feeling about who occupies the White House come January of next year. Is one candidate better for your business and your customers than another candidate?

Hey, politics has been front and center since we last spoke to you, with a lot happening, not just in Washington but all over the country. And I'm wondering, Frank, how you're feeling about who occupies the White House come January of next year. Is one candidate better for your business and your customers than another candidate?

Well, I think if we polled all of our clients, we would have a very varied opinion about that. I would say to you that, you know, one of the great things about our country is no matter who occupies, you know, the presidency or any of the national level offices, we always seem to do well. And so I have the utmost confidence that the elector will make the right decision and we'll live with whatever the choices are at that time. And we've done incredibly well under administrations from both political parties. So I don't spend a whole lot of time thinking about that.

Well, I think if we polled all of our clients, we would have a very varied opinion about that. I would say to you that, you know, one of the great things about our country is no matter who occupies, you know, the presidency or any of the national level offices, we always seem to do well. And so I have the utmost confidence that the elector will make the right decision and we'll live with whatever the choices are at that time. And we've done incredibly well under administrations from both political parties. So I don't spend a whole lot of time thinking about that.

Interesting. What about though, something you probably do think about is obviously FED policy, which is why we'd love to talk to you about it, Jay Powell, whether or not he continues as FED share. I know Donald Trump, in an interview with our Bloomberg BusinessWeek team, has talked about that he might consider keeping Jay Powell around. How do you think about that in terms of a new FED share and maybe you know, it takes a while for someone to get a little bit acclimated maybe to the job. Is that something that you think about, maybe you're a little concerned about in terms of that November outcome.

Interesting. What about though, something you probably do think about is obviously FED policy, which is why we'd love to talk to you about it, Jay Powell, whether or not he continues as FED share. I know Donald Trump, in an interview with our Bloomberg BusinessWeek team, has talked about that he might consider keeping Jay Powell around. How do you think about that in terms of a new FED share and maybe you know, it takes a while for someone to get a little bit acclimated maybe to the job. Is that something that you think about, maybe you're a little concerned about in terms of that November outcome.

Look, I think the independence of the FED is an incredibly important part of our economy and the way it works and how our central bank system works. I think Jay Powell, for the most part, you'd have to say, has done a good job. There were those who would say he was a little slow on the switch to you know, raise rates at the appropriate time. But I have to tell you that was a point in time when no one really knew where we were, where we would go, and or what the impacts of this global pandemic were going to look like. So Okay, he didn't get maybe he didn't get that perfectly right, but all the rest of the decisioning both of J. Powell and the entire FED Board of Governors. You have to say it has been pretty much spot on, and they've been dealing with this inflation environment quite well. I'm happy to see him, you know, play out the rest of his term for the I guess it's the next two years or so, and I'm and I'm confident we'll have the right FED governor in place, irregardless of what administration takes over in November, and that the Federal Reserve itself maintains its independence. And yes, it is an incredibly important part of our economy.

Look, I think the independence of the FED is an incredibly important part of our economy and the way it works and how our central bank system works. I think Jay Powell, for the most part, you'd have to say, has done a good job. There were those who would say he was a little slow on the switch to you know, raise rates at the appropriate time. But I have to tell you that was a point in time when no one really knew where we were, where we would go, and or what the impacts of this global pandemic were going to look like. So Okay, he didn't get maybe he didn't get that perfectly right, but all the rest of the decisioning both of J. Powell and the entire FED Board of Governors. You have to say it has been pretty much spot on, and they've been dealing with this inflation environment quite well. I'm happy to see him, you know, play out the rest of his term for the I guess it's the next two years or so, and I'm and I'm confident we'll have the right FED governor in place, irregardless of what administration takes over in November, and that the Federal Reserve itself maintains its independence. And yes, it is an incredibly important part of our economy.

Yeah, most people would agree with you, no doubt about that. Frank Sorrentino, Thank you as always, always appreciate getting some time with you, especially when it comes to FED policy and after decision, really helpful for us. Frank Sorrentino, chairman and CEO over at connect One Bank.

Yeah, most people would agree with you, no doubt about that. Frank Sorrentino, Thank you as always, always appreciate getting some time with you, especially when it comes to FED policy and after decision, really helpful for us. Frank Sorrentino, chairman and CEO over at connect One Bank.

I think last time he was on with us, we were waiting on a political speech that was very very delayed, and Frank came on after being so patient and we had him for like two minutes and then he had had we had to leave it out of it. Thanks for coming back Frank to appreciate it.

I think last time he was on with us, we were waiting on a political speech that was very very delayed, and Frank came on after being so patient and we had him for like two minutes and then he had had we had to leave it out of it. Thanks for coming back Frank to appreciate it.

This is the Bloomberg Business Week Podcast, Apple, Spotify, and anywhere else you can get your podcast. Listen live weekday afternoons from two to five pm Eastern Bloomberg, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

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