Thank you so much for joining us on the special edition of Bloomberg Daybreak. Merry Christmas, everybody. Markets are closed for this holiday. I'm Nathan Hager coming up this hour. It has been another banner year for the bulls on Wall Street. Will the new year bring as many happy returns for equity investors as twenty twenty four We will bring you a special stock round table with Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, and Cameron Dawson, chief investment officer at New Edge Wealth Plus. We're wrapping up the most wonderful time of the year for retailers, So who were the big winners? We'll ask retail analyst Bert Flickinger, managing director at Strategic Resource Group. First, we want to focus on the economy as a whole. The Federal Reserve is coming off its final rate cut of the year. J. Powell and Company surprised Wall Street not with the interest rate reduction, but when they changed gears and put their policy focus back on inflation once again.

Thank you so much for joining us on the special edition of Bloomberg Daybreak. Merry Christmas, everybody. Markets are closed for this holiday. I'm Nathan Hager coming up this hour. It has been another banner year for the bulls on Wall Street. Will the new year bring as many happy returns for equity investors as twenty twenty four We will bring you a special stock round table with Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, and Cameron Dawson, chief investment officer at New Edge Wealth Plus. We're wrapping up the most wonderful time of the year for retailers, So who were the big winners? We'll ask retail analyst Bert Flickinger, managing director at Strategic Resource Group. First, we want to focus on the economy as a whole. The Federal Reserve is coming off its final rate cut of the year. J. Powell and Company surprised Wall Street not with the interest rate reduction, but when they changed gears and put their policy focus back on inflation once again.

We you know, we've had a a year on projection for inflation and it's kind of fallen apart. As we've approached at the end of the year. So that is certainly a large factor in people's thinking. I can tell you that might be the single biggest factor. Is inflation has once again underperformed relative to expectations. It's still you know, going to be between two and a half and three. It's way below where it was. But you know, we really want to see progress on inflation.

We you know, we've had a a year on projection for inflation and it's kind of fallen apart. As we've approached at the end of the year. So that is certainly a large factor in people's thinking. I can tell you that might be the single biggest factor. Is inflation has once again underperformed relative to expectations. It's still you know, going to be between two and a half and three. It's way below where it was. But you know, we really want to see progress on inflation.

And that was fair Chair J. Powell last week following the Central Banks final policy decision of twenty twenty four. So what's in store for next year? To answer that, we're pleased to welcome Tom Porcelli, chief US economist at PGIM Fixed Income. Tom. Great to have you with us on this holiday. And I hate to say inflation's been persistent, but are we going to see progress?

And that was fair Chair J. Powell last week following the Central Banks final policy decision of twenty twenty four. So what's in store for next year? To answer that, we're pleased to welcome Tom Porcelli, chief US economist at PGIM Fixed Income. Tom. Great to have you with us on this holiday. And I hate to say inflation's been persistent, but are we going to see progress?

Well, good to be with you, Nathan as always, and I think, you know, let'st I would reframe it a little bit. We have seen a lot of progress. I mean, if you just look at you know, a pick your flavor of inflation, but if you just look at core PCEE, core PC with what as high as nearly six percent and we're down to what two point eight percent now, So there's been quite a lot of progress from an inflation perspective. And you know what was interesting about about Powell's press conference at the recent FOMC meeting was he acknowledged I think a number of the things that that are challenges from inflation perspective that we can exclude from inflation, right, Like, so shelter is a great example. You know, they they and we all recognize that there are these calculation challenges from a shelter perspective, so you remove it, and you know, this is how the whole supercre idea sort of came came to be. Well, what I would say is I'm not a huge fan of supercore because I think it also strips out the things that are deflating. And I don't know why you do. That's part of the consumable basket, So that that to me just seems a little intellectually disingenuous. So what I would say is this, just take headline inflation, take core inflation, strip out shelter, and when you do that, what you see is that inflation is actually pretty tame.

Well, good to be with you, Nathan as always, and I think, you know, let'st I would reframe it a little bit. We have seen a lot of progress. I mean, if you just look at you know, a pick your flavor of inflation, but if you just look at core PCEE, core PC with what as high as nearly six percent and we're down to what two point eight percent now, So there's been quite a lot of progress from an inflation perspective. And you know what was interesting about about Powell's press conference at the recent FOMC meeting was he acknowledged I think a number of the things that that are challenges from inflation perspective that we can exclude from inflation, right, Like, so shelter is a great example. You know, they they and we all recognize that there are these calculation challenges from a shelter perspective, so you remove it, and you know, this is how the whole supercre idea sort of came came to be. Well, what I would say is I'm not a huge fan of supercore because I think it also strips out the things that are deflating. And I don't know why you do. That's part of the consumable basket, So that that to me just seems a little intellectually disingenuous. So what I would say is this, just take headline inflation, take core inflation, strip out shelter, and when you do that, what you see is that inflation is actually pretty tame.

Right.

Right.

So if we just use CPI as as an example of that, you know, like headline CPI is running out well one point six percent pace x shelter and core CPI is running out a two point one percent pace x shelter.

So if we just use CPI as as an example of that, you know, like headline CPI is running out well one point six percent pace x shelter and core CPI is running out a two point one percent pace x shelter.

So you know, I.

So you know, I.

Was, I was, I was a little bothered by by the idea of this notion of sticky inflation. I mean, I think I think a lot of us expected inflation would remain relatively elevated relative to target, but we continue to drift in the right direction. And I'm sorry, I'll say one last thing on this, Nathan, and then and then I'll stop. You know, I think about not just the not just the idea of of of stripping out shelter, but let's acknowledge that in real time shelter prices are slowing, so that will will continue to act as a sort of a as a weight on inflation as that continues to slow down. But maybe more important, when I look at wages, the direction of travel for wages I think is pretty clear. I mean, just look at quit rates that that are, you know, sort of getting clobbered. You know, that's that's yet another factor that I think we do not have to worry about because wages will continue to slow. So I think the inflation story is is is at least a bit more benign than what Powell suggested, So.

Was, I was, I was a little bothered by by the idea of this notion of sticky inflation. I mean, I think I think a lot of us expected inflation would remain relatively elevated relative to target, but we continue to drift in the right direction. And I'm sorry, I'll say one last thing on this, Nathan, and then and then I'll stop. You know, I think about not just the not just the idea of of of stripping out shelter, but let's acknowledge that in real time shelter prices are slowing, so that will will continue to act as a sort of a as a weight on inflation as that continues to slow down. But maybe more important, when I look at wages, the direction of travel for wages I think is pretty clear. I mean, just look at quit rates that that are, you know, sort of getting clobbered. You know, that's that's yet another factor that I think we do not have to worry about because wages will continue to slow. So I think the inflation story is is is at least a bit more benign than what Powell suggested, So.

Are you thinking then that the Fed could be more open to accelerating the pace of rate cuts more than they said they were planning to last week when they surprised the market with this expectation of just two cuts for all of next year.

Are you thinking then that the Fed could be more open to accelerating the pace of rate cuts more than they said they were planning to last week when they surprised the market with this expectation of just two cuts for all of next year.

Yeah. I think this is the one thing that I actually did agree with Powell on. I think that, you know, look, as as a as a central banker, you know, you you relish optionality and and and I think you're and you're supposed to because you want the flexibility to be able to adjust as as the backdrop sort of evolved. So I have a ton of sympathy for that. So the short answer is, yes, I think you're you're absolutely supposed to acknowledge that you could see a faster pace of of rate cuts and and and indeed you could certainly see a slower pace depending how the data evolved. But I think again the problem for me is he kept on, pal kept on talking about, you know, data dependency, but I don't know if that's quite what it is. And I don't want to split hairs on this, but it really strikes me more as data point dependency, and that to me is a problem. And it's a problem because we all know this, right, I mean, we could all we could do an entire segment on this from one point alone. The data have been very volatile, more so than than what we've seen certainly pre pre COVID. And so think about the coming you know, in the next couple of weeks, we're gonna get what, We're gonna get a payroll report, and then we're going to get a CPI report. What if you get a clunker, right, what if you get a clunker of a payroll report, the market is then going to immediately start to sort of build in the idea of, oh well maybe if it is going to have to do more. So I think this is this is part of the problem with data point dependency.

Yeah. I think this is the one thing that I actually did agree with Powell on. I think that, you know, look, as as a as a central banker, you know, you you relish optionality and and and I think you're and you're supposed to because you want the flexibility to be able to adjust as as the backdrop sort of evolved. So I have a ton of sympathy for that. So the short answer is, yes, I think you're you're absolutely supposed to acknowledge that you could see a faster pace of of rate cuts and and and indeed you could certainly see a slower pace depending how the data evolved. But I think again the problem for me is he kept on, pal kept on talking about, you know, data dependency, but I don't know if that's quite what it is. And I don't want to split hairs on this, but it really strikes me more as data point dependency, and that to me is a problem. And it's a problem because we all know this, right, I mean, we could all we could do an entire segment on this from one point alone. The data have been very volatile, more so than than what we've seen certainly pre pre COVID. And so think about the coming you know, in the next couple of weeks, we're gonna get what, We're gonna get a payroll report, and then we're going to get a CPI report. What if you get a clunker, right, what if you get a clunker of a payroll report, the market is then going to immediately start to sort of build in the idea of, oh well maybe if it is going to have to do more. So I think this is this is part of the problem with data point dependency.

Speaking with Tom Porcelli, chief US economist at PGM Fixed Income, So what should the FED be focusing on then, Tom, I mean, at the meeting last week it seemed as though FED Chair pal was really laser focused now on inflation as opposed to potential risks to the labor market. Should be they be taking a more holistic approach.

Speaking with Tom Porcelli, chief US economist at PGM Fixed Income, So what should the FED be focusing on then, Tom, I mean, at the meeting last week it seemed as though FED Chair pal was really laser focused now on inflation as opposed to potential risks to the labor market. Should be they be taking a more holistic approach.

I think that's exactly right. I mean, look, they are a dual mandate Central bank, I think that you're supposed to be focused on both of these. Now, both of these are parts of the mandate. Now, of course, we all recognize that there are points where you know one will be fine and the other will be, you know, sort of deteriorating or accelerating, and so you know, you might want to sort of shift your focus to some extent. But I think what we have to acknowledge is that from a labor market perspective, right, because it's clear that he is shifted, right, he's starting the process of shifting away from labor, which is what they had been focused on over the prior few meetings, which is why they've delivered one hundred basis points of cuts at this point. But it's pretty clear that they're shifting back toward inflation. Now, I would caution against doing that too forcefully, because what we know is that there are some cracks that are forming in the labor backdrop. Now, again, I would hasten to add just because I'm saying cracks does not mean that I think the floor is going to fall out from from beneath labor. In fact, I don't think that's going to be the case at all. I think labor will be fine. I mean, you know, the continued economic expansion is is and has been our call over the coming and for the coming year, So you know, I want to sort of level set for everyone on that. But that does not, you know, mean that we should take our eyes off the fact that quit rate is getting cloppered, the hiring rate is slowing down. Confidence toward labor has deteriorated, right per the Conference boards labor differential, and that has a very good relationship with the unemployment rate, which is up what amost a hundred basis points from from the nearby low. So so you know, these are our realities. I mean, labor has slowed down. Demand at large has really slowed down. So I don't think we should take our eye and I don't think the Fed should, and I don't think that they will take their eye off of labor. I just think that shifting these focuses from like one mandate to the other, I think just lent itself to volatility, particularly as it relates to volatile economic reports, which is what we've been getting.

I think that's exactly right. I mean, look, they are a dual mandate Central bank, I think that you're supposed to be focused on both of these. Now, both of these are parts of the mandate. Now, of course, we all recognize that there are points where you know one will be fine and the other will be, you know, sort of deteriorating or accelerating, and so you know, you might want to sort of shift your focus to some extent. But I think what we have to acknowledge is that from a labor market perspective, right, because it's clear that he is shifted, right, he's starting the process of shifting away from labor, which is what they had been focused on over the prior few meetings, which is why they've delivered one hundred basis points of cuts at this point. But it's pretty clear that they're shifting back toward inflation. Now, I would caution against doing that too forcefully, because what we know is that there are some cracks that are forming in the labor backdrop. Now, again, I would hasten to add just because I'm saying cracks does not mean that I think the floor is going to fall out from from beneath labor. In fact, I don't think that's going to be the case at all. I think labor will be fine. I mean, you know, the continued economic expansion is is and has been our call over the coming and for the coming year, So you know, I want to sort of level set for everyone on that. But that does not, you know, mean that we should take our eyes off the fact that quit rate is getting cloppered, the hiring rate is slowing down. Confidence toward labor has deteriorated, right per the Conference boards labor differential, and that has a very good relationship with the unemployment rate, which is up what amost a hundred basis points from from the nearby low. So so you know, these are our realities. I mean, labor has slowed down. Demand at large has really slowed down. So I don't think we should take our eye and I don't think the Fed should, and I don't think that they will take their eye off of labor. I just think that shifting these focuses from like one mandate to the other, I think just lent itself to volatility, particularly as it relates to volatile economic reports, which is what we've been getting.

One potential possibility of volatility here we haven't talked about just yet is the incoming Trump administration and how policy could affect the economic trajectory going forward, How do you factor that in? How does the FED factor that in?

One potential possibility of volatility here we haven't talked about just yet is the incoming Trump administration and how policy could affect the economic trajectory going forward, How do you factor that in? How does the FED factor that in?

Yeah, I think I think Powell had it quite right when when he said, you know, they just they can't build it into their forecasts at this point. And I have nothing but sympathy for that. The reality is we just don't know what these policies are actually going to be, So for better or for worse, you know, the FED is going to have to be reactionary.

Yeah, I think I think Powell had it quite right when when he said, you know, they just they can't build it into their forecasts at this point. And I have nothing but sympathy for that. The reality is we just don't know what these policies are actually going to be, So for better or for worse, you know, the FED is going to have to be reactionary.

How do you expect the FED to react then? Given to how what kind of uncertainty we have for Trump administration policy?

How do you expect the FED to react then? Given to how what kind of uncertainty we have for Trump administration policy?

Carefully? I mean, I think that you know, we have to recognize there are extremes from a tariff perspective and from an immigration perspective that could do some damage. From from an economic perspective, if you get more modest versions of tariff and immigration policy, then it probably you know, doesn't turn out to be nearly as bad.

Carefully? I mean, I think that you know, we have to recognize there are extremes from a tariff perspective and from an immigration perspective that could do some damage. From from an economic perspective, if you get more modest versions of tariff and immigration policy, then it probably you know, doesn't turn out to be nearly as bad.

Right.

Right.

So my view is that I think people are putting a little too much emphasis on the negative, and I think they're putting a little too much emphasis on the positive. And I think ultimately, if we get more modest versions of immigration and tariff policy. I think that our view that this is going to be you know, sort of a roughly two percent year in twenty twenty five, I think we'll remain firmly intact.

So my view is that I think people are putting a little too much emphasis on the negative, and I think they're putting a little too much emphasis on the positive. And I think ultimately, if we get more modest versions of immigration and tariff policy. I think that our view that this is going to be you know, sort of a roughly two percent year in twenty twenty five, I think we'll remain firmly intact.

Is a two percent inflation target still realistic for this FED?

Is a two percent inflation target still realistic for this FED?

I mean I don't know if it was ever really totally realistic to I mean just just sort of thinking over history. I mean, look, the central banks want an anchor and two percent is just the sort of the number that they landed on. So in that context, I have sympathy for a target. Is this supposed to be two point zero percent? That's a completely debatable point. I mean, there's nothing empirical that really drives home that two point zero percent is the right number. And if you think about, you know, where inflation spends most of its time, it's not at two point zero percent, So you know, look, should the FED go to a range sort of like the RBA, the Reserve Bank of Australia like they do. I mean, I think that that is a reasonable discussion, but the FED has been pretty clear that that's not going to be part of any of the debate that's happening internally, and two point zero percent is going to be the target for the foreseeable future.

I mean I don't know if it was ever really totally realistic to I mean just just sort of thinking over history. I mean, look, the central banks want an anchor and two percent is just the sort of the number that they landed on. So in that context, I have sympathy for a target. Is this supposed to be two point zero percent? That's a completely debatable point. I mean, there's nothing empirical that really drives home that two point zero percent is the right number. And if you think about, you know, where inflation spends most of its time, it's not at two point zero percent, So you know, look, should the FED go to a range sort of like the RBA, the Reserve Bank of Australia like they do. I mean, I think that that is a reasonable discussion, but the FED has been pretty clear that that's not going to be part of any of the debate that's happening internally, and two point zero percent is going to be the target for the foreseeable future.

Where do you put FED credibility right now? Given that they kicked off the rate cut cycle so quickly slowed down just a bit, now we're projecting so much fewer rate cuts into next year.

Where do you put FED credibility right now? Given that they kicked off the rate cut cycle so quickly slowed down just a bit, now we're projecting so much fewer rate cuts into next year.

Yeah.

Yeah.

I mean, look, I've been speaking with a number of folks, you know, post the fom C meeting, and I think a lot of them are sort of scratching their head. Okay, you know what exactly just happened, and not just at the FOC meeting that just passed, but over the last few fo C meetings, So you know, is credibility being tarnished or dinged up here? No, I don't think that's the case. I think the FED has really very very much earned the credibility that they do have. But I do think people are are are wondering aloud about you know, do they have it right? So there's I wouldn't call it a crisis of confidence, not by a long shot, but I do think people are are wondering if they have the right take on this.

I mean, look, I've been speaking with a number of folks, you know, post the fom C meeting, and I think a lot of them are sort of scratching their head. Okay, you know what exactly just happened, and not just at the FOC meeting that just passed, but over the last few fo C meetings, So you know, is credibility being tarnished or dinged up here? No, I don't think that's the case. I think the FED has really very very much earned the credibility that they do have. But I do think people are are are wondering aloud about you know, do they have it right? So there's I wouldn't call it a crisis of confidence, not by a long shot, but I do think people are are wondering if they have the right take on this.

Really appreciate this, Tom, thanks for coming on with us on the Christmas holiday. That's Tom Porcelli with us here us economist at PGIM Fixed Income. And as we continue on the special holiday edition of Bloomberg Daybreak, we're going to bring you a special roundtable looking at stocks in twenty twenty five. We're going to speak with Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, along with Cameron Dawson, chief investment officer at New Edge. Well, so stay with us. It's twenty minutes past the hour. I'm Nathan Hager, and this is Bloomberg. Thanks for being here on this special edition of Bloomberg Daybreak. Markets are closed for the Christmas holiday. I'm Nathan Hager. We now turn from the economy in twenty twenty five. So the stock market twenty twenty four has certainly been a good year. If you are a bull on Wall Street, will it be even more happy returns in the new year. For that, we're please welcome two of our favorite analysts on this market, Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, and New Edge Wealth chief investment officer Cameron Dawson, for a holiday stock roundtable. Thanks to both of you for being here. I mean, we've had a more than twenty percent gain I think for the SMP five hundred year to date, I'll start with you, Lourie. Can the market keep up that kind of momentum into twenty twenty five?

Really appreciate this, Tom, thanks for coming on with us on the Christmas holiday. That's Tom Porcelli with us here us economist at PGIM Fixed Income. And as we continue on the special holiday edition of Bloomberg Daybreak, we're going to bring you a special roundtable looking at stocks in twenty twenty five. We're going to speak with Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, along with Cameron Dawson, chief investment officer at New Edge. Well, so stay with us. It's twenty minutes past the hour. I'm Nathan Hager, and this is Bloomberg. Thanks for being here on this special edition of Bloomberg Daybreak. Markets are closed for the Christmas holiday. I'm Nathan Hager. We now turn from the economy in twenty twenty five. So the stock market twenty twenty four has certainly been a good year. If you are a bull on Wall Street, will it be even more happy returns in the new year. For that, we're please welcome two of our favorite analysts on this market, Lori Calvacina, head of US Equity Strategy at RBC Capital Markets, and New Edge Wealth chief investment officer Cameron Dawson, for a holiday stock roundtable. Thanks to both of you for being here. I mean, we've had a more than twenty percent gain I think for the SMP five hundred year to date, I'll start with you, Lourie. Can the market keep up that kind of momentum into twenty twenty five?

So thanks for having me, Nathan, And look, you know, I've got a ten percent target on the market for twenty twenty five, at least where the market closed when we put our numbers out. So we've been looking for sixty six hundred, and we think that's going to be another solid year of gains in the US eclby market, probably a little bit slower than what we saw this year, and we do think that we are going to have you know, what some of my colleagues term is potholes, right, some bounce of five to ten percent type drawdowns. So we don't necessarily think it's going to be a completely smooth ride. But at the end of the day, we think a continued moderation in inflation is going to help keep PE multiples elevated, and we think a solid earnings grows back and a solid economy are also going to help propel this market higher. But there may be some volatility here and there that we have to deal with.

So thanks for having me, Nathan, And look, you know, I've got a ten percent target on the market for twenty twenty five, at least where the market closed when we put our numbers out. So we've been looking for sixty six hundred, and we think that's going to be another solid year of gains in the US eclby market, probably a little bit slower than what we saw this year, and we do think that we are going to have you know, what some of my colleagues term is potholes, right, some bounce of five to ten percent type drawdowns. So we don't necessarily think it's going to be a completely smooth ride. But at the end of the day, we think a continued moderation in inflation is going to help keep PE multiples elevated, and we think a solid earnings grows back and a solid economy are also going to help propel this market higher. But there may be some volatility here and there that we have to deal with.

Cameron. We have seen a lot of analysts raise their price targets for the SMP five hundred, particularly after the election of President elect Donald Trump. Where are you sitting at this point.

Cameron. We have seen a lot of analysts raise their price targets for the SMP five hundred, particularly after the election of President elect Donald Trump. Where are you sitting at this point.

Well, it does create an interesting scenario where we're now seeing that overall in the market we have stretch positioning, stretch sentiments, stretched valuations, as well as pretty lofty growth expectations depending on where you're looking at earning vestiments. All of those things don't have to be a death knell for forward returns. They're usually not good timing tools, but it could be that we have to spend some time growing into those higher valuations, which lead.

Well, it does create an interesting scenario where we're now seeing that overall in the market we have stretch positioning, stretch sentiments, stretched valuations, as well as pretty lofty growth expectations depending on where you're looking at earning vestiments. All of those things don't have to be a death knell for forward returns. They're usually not good timing tools, but it could be that we have to spend some time growing into those higher valuations, which lead.

Us to expect two.

Us to expect two.

Distinct scenarios for the market in twenty twenty five. We think we're either going to have a talking heads market, a road to nowhere kind of sideways chopped that looks like twenty fifteen or twenty eighteen, giving us time to grow into those high valuations, or we have a prints market where we sing, let's go crazy, let's party like it's nineteen ninety nine, and we actually have a bubble scenario where we have another strong year of returns driven by valuation expansion, but of course we know what comes on the other side. Of melt ups, which is typically melt down. So in either scenario, we think that we could have this increase in volatility instead of that low volatility up into the right market that we've been in for the last two years.

Distinct scenarios for the market in twenty twenty five. We think we're either going to have a talking heads market, a road to nowhere kind of sideways chopped that looks like twenty fifteen or twenty eighteen, giving us time to grow into those high valuations, or we have a prints market where we sing, let's go crazy, let's party like it's nineteen ninety nine, and we actually have a bubble scenario where we have another strong year of returns driven by valuation expansion, but of course we know what comes on the other side. Of melt ups, which is typically melt down. So in either scenario, we think that we could have this increase in volatility instead of that low volatility up into the right market that we've been in for the last two years.

Love the eighties metaphors. Is this a nineteen eighties moment for you, Laurie?

Love the eighties metaphors. Is this a nineteen eighties moment for you, Laurie?

Oh?

Oh?

Look, I do agree that we're going to have more of that volatility, and I think one thing that makes things so challenging is just this idea of animal spirits being so strong post election and taking us into the new year, and so on the one hand, we do think that those good vibes get us off to a good start. We heard a lot about companies in particular, just seeing activity being frozen quarters and months ahead of the election, so we expect some of that to be unlocked and to really give us some good vibes. And we've also seen consumer sentiment improve post election, and that is something that's very normal after elections, including changings of the guard. I do sort of sympathize with that possibility of the prince market. I think that one of the things that's tough for forecasters in twenty twenty five is that you know, we all put out forecasts and we have to articulate a base case, but the bear case and the bull case sort of the tails around that forecast. It seems like those are higher probability on both sides of the equation, and those tales are just fatter in the new year. And so I think the idea of you know, kind of twelve month visibility, I'm not entirely sure that we have it right now, to be honest, I think we do our best as forecasters, but we have to admit that things are going to be changing quite rapidly in the year ahead. There's going to be policy developments out of DC, and I think Cameron hit the nail on the head in terms of stretched sentiment and stretched valuation, and those things can last. It's very hard to predict exactly when they pop out, but they do tend to invoke some pain on the other side, and I think that makes it very very tricky to time everything next year.

Look, I do agree that we're going to have more of that volatility, and I think one thing that makes things so challenging is just this idea of animal spirits being so strong post election and taking us into the new year, and so on the one hand, we do think that those good vibes get us off to a good start. We heard a lot about companies in particular, just seeing activity being frozen quarters and months ahead of the election, so we expect some of that to be unlocked and to really give us some good vibes. And we've also seen consumer sentiment improve post election, and that is something that's very normal after elections, including changings of the guard. I do sort of sympathize with that possibility of the prince market. I think that one of the things that's tough for forecasters in twenty twenty five is that you know, we all put out forecasts and we have to articulate a base case, but the bear case and the bull case sort of the tails around that forecast. It seems like those are higher probability on both sides of the equation, and those tales are just fatter in the new year. And so I think the idea of you know, kind of twelve month visibility, I'm not entirely sure that we have it right now, to be honest, I think we do our best as forecasters, but we have to admit that things are going to be changing quite rapidly in the year ahead. There's going to be policy developments out of DC, and I think Cameron hit the nail on the head in terms of stretched sentiment and stretched valuation, and those things can last. It's very hard to predict exactly when they pop out, but they do tend to invoke some pain on the other side, and I think that makes it very very tricky to time everything next year.

So if we have this kind of froth in the market right now, this lack of clarity, what do you need to see, Cameron to bring more clarity? What are you going to be looking for in the next couple of months for us.

So if we have this kind of froth in the market right now, this lack of clarity, what do you need to see, Cameron to bring more clarity? What are you going to be looking for in the next couple of months for us.

It all comes down to earning sestiments, and if you look at what has been the key underpinning driver of the last two years of the bull market has been that twelve months forward earning sestiments continue to rise. And we think in the next month, when we start the fourth quarter earning season at the end of January, we're going to start putting some of these earning vestments to the.

It all comes down to earning sestiments, and if you look at what has been the key underpinning driver of the last two years of the bull market has been that twelve months forward earning sestiments continue to rise. And we think in the next month, when we start the fourth quarter earning season at the end of January, we're going to start putting some of these earning vestments to the.

Test, because this is the first quarter that you had.

Test, because this is the first quarter that you had.

The expectation that the four ninety three, those non NAG seven names.

The expectation that the four ninety three, those non NAG seven names.

Will really start picking up the.

Will really start picking up the.

Slack and earnings growth and pulling their weight. The question is is that a bar that's too high. What you have in the four ninety three going into next year is a big reacceleration in earnings growth, and so we.

Slack and earnings growth and pulling their weight. The question is is that a bar that's too high. What you have in the four ninety three going into next year is a big reacceleration in earnings growth, and so we.

Have to ask the question of can that.

Have to ask the question of can that.

Part of the market truly deliver or are we still having to fall back on this small subset of MAG seven names that have been such a key underpinning of the overall earnings estimates. So we're watching that twelve month forward number on EPs estimates very closely because if that starts the flatten oute market returns likely flatten out as well.

Part of the market truly deliver or are we still having to fall back on this small subset of MAG seven names that have been such a key underpinning of the overall earnings estimates. So we're watching that twelve month forward number on EPs estimates very closely because if that starts the flatten oute market returns likely flatten out as well.

We're speaking with Cameron Dawson, the chief investment officer at new Edge Wealth, and Lori Calvacina, head of US equity strategy at RBC Capital Markets. Laurie, how do you view the earnings backdrop heading into twenty twenty five? What do you need to say?

We're speaking with Cameron Dawson, the chief investment officer at new Edge Wealth, and Lori Calvacina, head of US equity strategy at RBC Capital Markets. Laurie, how do you view the earnings backdrop heading into twenty twenty five? What do you need to say?

Well, look, I think Cameron raised some excellent points, and if I think about, you know, the earnings environment, I would say sort of three things have been coming up in my conversations. I am looking for two seventy one on smp EPs next year. The consensus is about two seventy five, so we're a little bit below, you know, kind of that bottom up consensus, but kind of putting that aside, you know, I would say three things is number one. If you look at this past year twenty twenty four, there was an enormous amount of download guidance that happened before reporting season actually kicked off, So companies really tried to keep the bar very low, and I think that set them up very well for this year. So I'm very curious to see if companies try to pull that rabbit out of a hat again in twenty twenty five. So you know, I'm not expecting, frankly, the tone to be all that great when that reporting seasons kicks off in late January. The second thing is I want to see what companies say about the dollar. We've seen an increase in the dollar a year over a year, and that does tend to push earning's revisions down. We haven't really seen that yet, but it does tend to hit most sectors in the market, aside from things like financials, reads and utilities. So we're watching to see if we might get some truing up there. And then the last thing, you know, that I'm really focused on when we get that January reporting season starting up is what are companies saying about margins and costs. Bloomberg does a great job of the Bloomberg Intelligence folks of tracking the bottom up sell side consensus estimates, and what they're showing in their margin stats is that we've been seeing twenty twenty five operating margins for the S and P really coming down since the middle of twenty twenty four, and that's really coincided in my work with just increased concerns about cost and inflation. We really do think that we're going to need to see sort of what companies are saying about that cost environment because strong margins have really been keeping earnings forecasts aloft, and if that story ends, I think it could be problematic for stocks.

Well, look, I think Cameron raised some excellent points, and if I think about, you know, the earnings environment, I would say sort of three things have been coming up in my conversations. I am looking for two seventy one on smp EPs next year. The consensus is about two seventy five, so we're a little bit below, you know, kind of that bottom up consensus, but kind of putting that aside, you know, I would say three things is number one. If you look at this past year twenty twenty four, there was an enormous amount of download guidance that happened before reporting season actually kicked off, So companies really tried to keep the bar very low, and I think that set them up very well for this year. So I'm very curious to see if companies try to pull that rabbit out of a hat again in twenty twenty five. So you know, I'm not expecting, frankly, the tone to be all that great when that reporting seasons kicks off in late January. The second thing is I want to see what companies say about the dollar. We've seen an increase in the dollar a year over a year, and that does tend to push earning's revisions down. We haven't really seen that yet, but it does tend to hit most sectors in the market, aside from things like financials, reads and utilities. So we're watching to see if we might get some truing up there. And then the last thing, you know, that I'm really focused on when we get that January reporting season starting up is what are companies saying about margins and costs. Bloomberg does a great job of the Bloomberg Intelligence folks of tracking the bottom up sell side consensus estimates, and what they're showing in their margin stats is that we've been seeing twenty twenty five operating margins for the S and P really coming down since the middle of twenty twenty four, and that's really coincided in my work with just increased concerns about cost and inflation. We really do think that we're going to need to see sort of what companies are saying about that cost environment because strong margins have really been keeping earnings forecasts aloft, and if that story ends, I think it could be problematic for stocks.

It's really interesting to bring up those points about the dollar and about margins the potential for higher costs. That raises the issue of what policy could mean for companies going forward in terms of FED policy and fiscal policy out of Washington, d C. How much does that affect how stocks could travel in twenty twenty five For you, Cameron, Well.

It's really interesting to bring up those points about the dollar and about margins the potential for higher costs. That raises the issue of what policy could mean for companies going forward in terms of FED policy and fiscal policy out of Washington, d C. How much does that affect how stocks could travel in twenty twenty five For you, Cameron, Well.

It's been very interesting over the last couple of years how resilient stocks have been to changes and expectations for FED policy. If we contrast how we started twenty twenty four with six cuts priced in six and a half cuts actually into the beginning of the year, and at the end of the day we only got four cuts, and that we had a more hawkish FED than expected.

It's been very interesting over the last couple of years how resilient stocks have been to changes and expectations for FED policy. If we contrast how we started twenty twenty four with six cuts priced in six and a half cuts actually into the beginning of the year, and at the end of the day we only got four cuts, and that we had a more hawkish FED than expected.

Stocks had this ability to shake that off.

Stocks had this ability to shake that off.

The question is can they continue to do that if the Fed does not deliver on those cuts in twenty twenty five that are now projecting to be two cuts for next year. If we think about how that translates inn into the dollar, If the Fed continues to be in this position where they're seen as more hawkish, more restrictive in their policy than the rest of the world, which is having to cut because their economies are weaker. The end result is that you have that continued upward pressure on the dollar, which, of course, as Lori pointed out, could mean challenges for company earnings that are relying on overseas revenues. So if we think then in the context of financial conditions, we still are in a place where financial conditions are very loose, very easy, and considered to be supportive or even stimulative for growth. The question for twenty twenty five is how that progresses. If the FED continues to remain relatively hawkish to the rest of the world, could we see financial conditions tighten and thus feed into risk asset prices.

The question is can they continue to do that if the Fed does not deliver on those cuts in twenty twenty five that are now projecting to be two cuts for next year. If we think about how that translates inn into the dollar, If the Fed continues to be in this position where they're seen as more hawkish, more restrictive in their policy than the rest of the world, which is having to cut because their economies are weaker. The end result is that you have that continued upward pressure on the dollar, which, of course, as Lori pointed out, could mean challenges for company earnings that are relying on overseas revenues. So if we think then in the context of financial conditions, we still are in a place where financial conditions are very loose, very easy, and considered to be supportive or even stimulative for growth. The question for twenty twenty five is how that progresses. If the FED continues to remain relatively hawkish to the rest of the world, could we see financial conditions tighten and thus feed into risk asset prices.

What's your view on that, Laurie, Do you think financial conditions are going to tighten and can companies continue to sort of look past some of the hawkishness that is starting to build up in the FED.

What's your view on that, Laurie, Do you think financial conditions are going to tighten and can companies continue to sort of look past some of the hawkishness that is starting to build up in the FED.

Well, it's a great question, Nathan, And I'll tell you know, after this last FED meeting, you know, there were sort of two things that jumped into my mind based on you know, sort of said conversations and said policy impact on data from the past year. And the first one was, if I think back to what I was reading from companies in our transcript reviews, you know, really earlier on in the year, one of the big points of uncertainty that companies were struggling with was just the sort of uncertainty over the path of interest rates. And so to the then that we're bringing some of that uncertainty back, I do worry a little bit that it could weigh on corporate confidence. The second thing is if I think about my own modeling for S and P earnings. I've been talking about this a lot in my meetings with investors lately. It's not that the debt burdens are unmanageable, but I have, you know, one line item in my earnings model where we try to forecast interest expense relatives to sales, and it's based on a variety of macro indicators. And you know, long story short, that part of my model always behaves very very well, and the interest expense has tended to be pretty low. What I've noticed the last couple quarters is that the interest expense line item has been coming in a bit hotter than my forecast. And then I also, you know, recently took a look at the effect of interest rates that S and P five hundred companies are paying on the debt they have outstanding, and that's moved out pretty meaningfully. So overall, I look at this as it just seems like it's getting a little bit harder for companies to manage other debt burdens from an interest rate perspective, and so I do want under if maybe that could dampen corporate confidence just a little bit in the new year.

Well, it's a great question, Nathan, And I'll tell you know, after this last FED meeting, you know, there were sort of two things that jumped into my mind based on you know, sort of said conversations and said policy impact on data from the past year. And the first one was, if I think back to what I was reading from companies in our transcript reviews, you know, really earlier on in the year, one of the big points of uncertainty that companies were struggling with was just the sort of uncertainty over the path of interest rates. And so to the then that we're bringing some of that uncertainty back, I do worry a little bit that it could weigh on corporate confidence. The second thing is if I think about my own modeling for S and P earnings. I've been talking about this a lot in my meetings with investors lately. It's not that the debt burdens are unmanageable, but I have, you know, one line item in my earnings model where we try to forecast interest expense relatives to sales, and it's based on a variety of macro indicators. And you know, long story short, that part of my model always behaves very very well, and the interest expense has tended to be pretty low. What I've noticed the last couple quarters is that the interest expense line item has been coming in a bit hotter than my forecast. And then I also, you know, recently took a look at the effect of interest rates that S and P five hundred companies are paying on the debt they have outstanding, and that's moved out pretty meaningfully. So overall, I look at this as it just seems like it's getting a little bit harder for companies to manage other debt burdens from an interest rate perspective, and so I do want under if maybe that could dampen corporate confidence just a little bit in the new year.

And Cameron, what do you see as potentially the biggest headwind to the rally as we get into twenty five.

And Cameron, what do you see as potentially the biggest headwind to the rally as we get into twenty five.

I would certainly agree with Lori.

I would certainly agree with Lori.

The idea is that a lot of companies were banking on the FED bailing them out in twenty twenty five. It was a survived to twenty twenty five kind of mentality, mostly within the small and mid cap line of things, where we tend to see less profitable companies, more reliance on short term debt and higher overall debt levels. And so if we think about the FED staying tighter and interest rates staying higher, that would certainly create a challenge for companies that we're expecting the exact opposite to happen, So that could effectively weigh on some of this hope and dream for a cyclical recovery because you're not getting the support from lower interest rates, and just create an earnings headwind that is not contemplated in the market that's trading still at twenty two times forward earnings. So it certainly would be a challenge and potentially something that would come right into terms with this high valuation.

The idea is that a lot of companies were banking on the FED bailing them out in twenty twenty five. It was a survived to twenty twenty five kind of mentality, mostly within the small and mid cap line of things, where we tend to see less profitable companies, more reliance on short term debt and higher overall debt levels. And so if we think about the FED staying tighter and interest rates staying higher, that would certainly create a challenge for companies that we're expecting the exact opposite to happen, So that could effectively weigh on some of this hope and dream for a cyclical recovery because you're not getting the support from lower interest rates, and just create an earnings headwind that is not contemplated in the market that's trading still at twenty two times forward earnings. So it certainly would be a challenge and potentially something that would come right into terms with this high valuation.

Stay with us. We're going to continue this conversation with Cameron Dawson of New Edge Wealth and RBC Capital Markets Lori Calvacina. See what areas of the markets you two like in twenty twenty five. As this special Christmas edition at Bloomberg Daybreak continues, I'm Nathan Hager, and this is Bloomberg. Thanks again for being with us on this special edition of Bloomberg Daybreak. I'm Nathan Hager. Markets are closed for the Christmas holiday, but we continue our market roundtable now with Cameron Dawson, chief investment officer at New Edge Wealth and RBC Capital Markets, Head of US Equity Strategy, Lori Calvcina, And as we wrap up this conversation, let's talk about some areas of the stock market that you both like in twenty twenty five. How about we start with you, Cameron, Well, we.

Stay with us. We're going to continue this conversation with Cameron Dawson of New Edge Wealth and RBC Capital Markets Lori Calvacina. See what areas of the markets you two like in twenty twenty five. As this special Christmas edition at Bloomberg Daybreak continues, I'm Nathan Hager, and this is Bloomberg. Thanks again for being with us on this special edition of Bloomberg Daybreak. I'm Nathan Hager. Markets are closed for the Christmas holiday, but we continue our market roundtable now with Cameron Dawson, chief investment officer at New Edge Wealth and RBC Capital Markets, Head of US Equity Strategy, Lori Calvcina, And as we wrap up this conversation, let's talk about some areas of the stock market that you both like in twenty twenty five. How about we start with you, Cameron, Well, we.

Are looking more at value areas going into twenty twenty five. Buying value broadly. We think that there are a lot of low quality and value traps within the overall value style, but the degree of underperformance has been so pronounced versus growth that we think a lot of companies are just simply being ignored. If you look over the last two years, growth or value has underperformed growth by over sixty percent, which just leaves rooms for more valuation kind of buffer for those lower, lower priced companies.

Are looking more at value areas going into twenty twenty five. Buying value broadly. We think that there are a lot of low quality and value traps within the overall value style, but the degree of underperformance has been so pronounced versus growth that we think a lot of companies are just simply being ignored. If you look over the last two years, growth or value has underperformed growth by over sixty percent, which just leaves rooms for more valuation kind of buffer for those lower, lower priced companies.

So we're being selective.

So we're being selective.

We're putting a quality overlay on that value side of things, looking for good cash flow, good return on invested capital, but looking for names that are trading at a discount simply because they have been left behind over the last two years.

We're putting a quality overlay on that value side of things, looking for good cash flow, good return on invested capital, but looking for names that are trading at a discount simply because they have been left behind over the last two years.

It feels like growth has been the place to be though for quite a while. Laurie, what's your view look, I would.

It feels like growth has been the place to be though for quite a while. Laurie, what's your view look, I would.

Just say on growth versus value. You know, in our year head outlook, we gave value a tiny edge just because growth has been so crowded and so overvalued. But one of the things that has come up up in conversations over the last few weeks has just been there's not as much opportunity and value as there was six months ago, and growth has really been fighting back in terms of defending its earnings dominance. So I wouldn't completely give up on things like the mag seven, you know, I would look for opportunities on the value side of the market. But I do think until we really see the earnings growth leadership seeded from growth to value, I think that growth is going to continue to fight back and you're going to see volatile trends. I will say in that context, one of my favorite sectors has a good mix of growth and value within it, And so our fresh money idea for twenty twenty five at the sector level is communications services. It's cheap, it's had positive earnings revision trends. There has not been a lot of talk about politics in this sector, which I frankly like, just given how a number of things could go in multiple directions. And when I look at my industry work, there's pretty broad based appeal by industry within that sector. So that's really the one we're emphasizing, you know, on more of the value side, I see opportunity and smaller cap financial especially regional banks, and on more of the growth a side. Areas we've been highlighting have been things like software and IT services, which still have pretty reasonable valuations and very strong earning trovision trends.

Just say on growth versus value. You know, in our year head outlook, we gave value a tiny edge just because growth has been so crowded and so overvalued. But one of the things that has come up up in conversations over the last few weeks has just been there's not as much opportunity and value as there was six months ago, and growth has really been fighting back in terms of defending its earnings dominance. So I wouldn't completely give up on things like the mag seven, you know, I would look for opportunities on the value side of the market. But I do think until we really see the earnings growth leadership seeded from growth to value, I think that growth is going to continue to fight back and you're going to see volatile trends. I will say in that context, one of my favorite sectors has a good mix of growth and value within it, And so our fresh money idea for twenty twenty five at the sector level is communications services. It's cheap, it's had positive earnings revision trends. There has not been a lot of talk about politics in this sector, which I frankly like, just given how a number of things could go in multiple directions. And when I look at my industry work, there's pretty broad based appeal by industry within that sector. So that's really the one we're emphasizing, you know, on more of the value side, I see opportunity and smaller cap financial especially regional banks, and on more of the growth a side. Areas we've been highlighting have been things like software and IT services, which still have pretty reasonable valuations and very strong earning trovision trends.

That's going to be interesting to see which, if any sectors can stay politically agnostic heading into twenty twenty five. But in terms of the sector level, Cameron, what are you looking at?

That's going to be interesting to see which, if any sectors can stay politically agnostic heading into twenty twenty five. But in terms of the sector level, Cameron, what are you looking at?

Well, we find opportunities across sectors, and we're more focused on the quality factor quality style of investing.

Well, we find opportunities across sectors, and we're more focused on the quality factor quality style of investing.

Which is just to say that if we look over the last.

Which is just to say that if we look over the last.

Three months, there has been a big deterioration in the performance of quality names versus low quality, high beta, high momentum parts of the market. But what's interesting is that high beta, high momentum, low quality are all in the ninety ninethis percentile of outperformance. So we think that this is the time to not chase that part of the market, but instead look for those names as I mentioned earlier, with good balance.

Three months, there has been a big deterioration in the performance of quality names versus low quality, high beta, high momentum parts of the market. But what's interesting is that high beta, high momentum, low quality are all in the ninety ninethis percentile of outperformance. So we think that this is the time to not chase that part of the market, but instead look for those names as I mentioned earlier, with good balance.

Sheets, with good free cash flow that simply.

Sheets, with good free cash flow that simply.

Have been left behind in the last few months of the low quality rally and using that as an opportunity to build into positions that we would consider Crown.

Have been left behind in the last few months of the low quality rally and using that as an opportunity to build into positions that we would consider Crown.

Jewels and Laurie, I know you said that you wouldn't count growth out just yet, but can the MAG seven continue the kind of momentum that we've seen over the last several months.

Jewels and Laurie, I know you said that you wouldn't count growth out just yet, but can the MAG seven continue the kind of momentum that we've seen over the last several months.

You know, it's a great question, and I think one of the reasons why this rotation has gotten started. It hasn't really been smooth. But one thing you're seeing in the MAG seven names is a acceleration of garning's growth in terms of expectations that are embedded in the market and the individual companies for twenty twenty five. So whenever we see hot growth momentum, ayas with accelerating Earning's growth, you know, if I think back over the last couple decades in my career, it tends to make investors very skittish and it tends to make you know, any sort of misstep really magnified in terms of negative price reaction. So I do think that that is a high hurdle. That being said, the value part of the market is just not stepping up and taking over leadership. And so when we look at twenty twenty five, earnings growth expectations. The MAG seven, you know, is I believe it's down in the single digits, but so is sort of the rest of the market, and it's not. The rest of the market is not able to surpass that MAG seven earnings growth. And when I look, you know, take a look at it slightly differently, and I look at the relative PE between a basket of top ten market cap names in the S and P, and I compare that with the rest of the market, and then I do the same analysis on long term earnings growth expectations. The relative pe is tracking the relative long term earnings growth expectations. They're almost an identical chart. So MAG seven is getting that superior valuation because the earnings growth expectations longer term are still vastly superior to the rest of the market. And until you see something change in terms of long term earnings growth expectations, that could be MAG seven falling apart, that could be rest of market really surging. But until something changes, I think that you're going to be stuck in elevated relative valuations for that top ten seven cohorts. And they basically the bottom line is they deserve the premium valuations that they're getting from an earnings perspective.

You know, it's a great question, and I think one of the reasons why this rotation has gotten started. It hasn't really been smooth. But one thing you're seeing in the MAG seven names is a acceleration of garning's growth in terms of expectations that are embedded in the market and the individual companies for twenty twenty five. So whenever we see hot growth momentum, ayas with accelerating Earning's growth, you know, if I think back over the last couple decades in my career, it tends to make investors very skittish and it tends to make you know, any sort of misstep really magnified in terms of negative price reaction. So I do think that that is a high hurdle. That being said, the value part of the market is just not stepping up and taking over leadership. And so when we look at twenty twenty five, earnings growth expectations. The MAG seven, you know, is I believe it's down in the single digits, but so is sort of the rest of the market, and it's not. The rest of the market is not able to surpass that MAG seven earnings growth. And when I look, you know, take a look at it slightly differently, and I look at the relative PE between a basket of top ten market cap names in the S and P, and I compare that with the rest of the market, and then I do the same analysis on long term earnings growth expectations. The relative pe is tracking the relative long term earnings growth expectations. They're almost an identical chart. So MAG seven is getting that superior valuation because the earnings growth expectations longer term are still vastly superior to the rest of the market. And until you see something change in terms of long term earnings growth expectations, that could be MAG seven falling apart, that could be rest of market really surging. But until something changes, I think that you're going to be stuck in elevated relative valuations for that top ten seven cohorts. And they basically the bottom line is they deserve the premium valuations that they're getting from an earnings perspective.

Thanks for this, Laurie, and great to have you with us on as well. Cameron Dawson. That's new Edge Wealth Chief investment Officer, Cameron Dawson with us along with Lori Calvacina, had of US Equity Strategy at RBC Capital Markets. And we're going to wrap up our Daybreak Christmas special with a focus on the retailers this holiday season. Who better to do that with than Bert Flick and Jert managing director at Strategic Resource Group. Happy Holidays. Bert, I think it was a pretty happy holiday kickoff in terms of shopping season. So how the retailers do good kickoff?

Thanks for this, Laurie, and great to have you with us on as well. Cameron Dawson. That's new Edge Wealth Chief investment Officer, Cameron Dawson with us along with Lori Calvacina, had of US Equity Strategy at RBC Capital Markets. And we're going to wrap up our Daybreak Christmas special with a focus on the retailers this holiday season. Who better to do that with than Bert Flick and Jert managing director at Strategic Resource Group. Happy Holidays. Bert, I think it was a pretty happy holiday kickoff in terms of shopping season. So how the retailers do good kickoff?

If you said, Nathan, in as stable finished, adjusted for inflation, November December sales should be up about one percent. Given the two thirds of American consumers is reported on the Bloomberg terminal or living paycheck to paycheck, good results for retail.

If you said, Nathan, in as stable finished, adjusted for inflation, November December sales should be up about one percent. Given the two thirds of American consumers is reported on the Bloomberg terminal or living paycheck to paycheck, good results for retail.

Overall percent sounds pretty tepid. What does that tell us about twenty twenty.

Overall percent sounds pretty tepid. What does that tell us about twenty twenty.

Five concerns ahead in twenty twenty five, Nathan, We're already seeing it in the wipeout of chain drug Chain, Dollar Specialty, Best Buy, Consumer Electronics, The only ones that are really winning, Nathan, is food and off price, and the rest are struggling and choice as many consumers for Thanksgiving, Christmas, Sonica, New Year's are buying buy now, pay for part of it now, pay for the rest of it later.

Five concerns ahead in twenty twenty five, Nathan, We're already seeing it in the wipeout of chain drug Chain, Dollar Specialty, Best Buy, Consumer Electronics, The only ones that are really winning, Nathan, is food and off price, and the rest are struggling and choice as many consumers for Thanksgiving, Christmas, Sonica, New Year's are buying buy now, pay for part of it now, pay for the rest of it later.

Does that tell you that we're going to see a downturn getting into twenty twenty five if the consumer continues to be selective as it has been throughout twenty twenty.

Does that tell you that we're going to see a downturn getting into twenty twenty five if the consumer continues to be selective as it has been throughout twenty twenty.

Four, Nathan, Yes, to your present point, we're expecting a strategic resource group downturn. The XRT on the Bloomberg terminal, the S and P retail indexes at an all time high going into this last week of December, and Walmart's pretty heavily valued targets probably undervalued with the Taylor Swift tailwind that will really help them the rest of this month and into the new year, but most of retail struggling. What's really a leading indicator on the terminal, Nathan, is the restaurant sales on a cash on cash basis were negative last month for the first time in about four years.

Four, Nathan, Yes, to your present point, we're expecting a strategic resource group downturn. The XRT on the Bloomberg terminal, the S and P retail indexes at an all time high going into this last week of December, and Walmart's pretty heavily valued targets probably undervalued with the Taylor Swift tailwind that will really help them the rest of this month and into the new year, but most of retail struggling. What's really a leading indicator on the terminal, Nathan, is the restaurant sales on a cash on cash basis were negative last month for the first time in about four years.

So where do you see consumers concentrating their spending in twenty twenty five? Is it just going to be all about staples or is there room for some of those big ticket items to get a little bit of a look at least.

So where do you see consumers concentrating their spending in twenty twenty five? Is it just going to be all about staples or is there room for some of those big ticket items to get a little bit of a look at least.

Well big ticket items. Nathan has Bloomberg's reported, well, since Black Friday is Triple A is expecting record travel, close to one hundred and ten million travelers, most by power. But they're going to be spending on experience. This is seventy percent of the expenditure to your question, is going to be on an experiences thirty percent on retail. Retail people say is the best, Well, they're great bargains between today Christmas and Hanika Day into New Year's the smart shoppers, a lot of smart the stores and wait till Calendar twenty twenty five for desperation discounting. As the retail ice age accelerates and more retailers contract or some even collapse into bankruptcy and they have to liquidate more and more inventory.

Well big ticket items. Nathan has Bloomberg's reported, well, since Black Friday is Triple A is expecting record travel, close to one hundred and ten million travelers, most by power. But they're going to be spending on experience. This is seventy percent of the expenditure to your question, is going to be on an experiences thirty percent on retail. Retail people say is the best, Well, they're great bargains between today Christmas and Hanika Day into New Year's the smart shoppers, a lot of smart the stores and wait till Calendar twenty twenty five for desperation discounting. As the retail ice age accelerates and more retailers contract or some even collapse into bankruptcy and they have to liquidate more and more inventory.

Wonder if that points to an opportunity for some retailers on an aspect that we've talked about in the past, providing more of an experience on the brick and mortar side. Is that something that's a possibility into next year? So does that point to an opportunity for retailers to provide more of an experience along the lines of an aspect of retail that we've talked about in the Passport.

Wonder if that points to an opportunity for some retailers on an aspect that we've talked about in the past, providing more of an experience on the brick and mortar side. Is that something that's a possibility into next year? So does that point to an opportunity for retailers to provide more of an experience along the lines of an aspect of retail that we've talked about in the Passport.

Nathan, you're raising a really important point about experiences, and yes, they're doing it well in London, Dubai, Paris, Toronto and throughout the Asia Pacific region. They're not doing it in the US, and we're seeing sax Fifth Avenue not investing in windows for the first time in their history, and we're seeing the ones who have experiences are winning. Specifically, Target wall the Wall on Taylor's Swift's eras tour release of her book, her music, her licensed merchandising. Big win for Target. Kroger Company always a big partner of Disney, big winner experientially Wall the Wall from Disney to societal good for people from all walks of life, especially for people who are nutritionally and economically target challenged. So win for Kroger, win for Target, not a win for the rest of retail in terms of experiential, which is so important this time of year.

Nathan, you're raising a really important point about experiences, and yes, they're doing it well in London, Dubai, Paris, Toronto and throughout the Asia Pacific region. They're not doing it in the US, and we're seeing sax Fifth Avenue not investing in windows for the first time in their history, and we're seeing the ones who have experiences are winning. Specifically, Target wall the Wall on Taylor's Swift's eras tour release of her book, her music, her licensed merchandising. Big win for Target. Kroger Company always a big partner of Disney, big winner experientially Wall the Wall from Disney to societal good for people from all walks of life, especially for people who are nutritionally and economically target challenged. So win for Kroger, win for Target, not a win for the rest of retail in terms of experiential, which is so important this time of year.

How do you see retailers making that kind of investment in an experience? Do they have the wherewithal to do it?

How do you see retailers making that kind of investment in an experience? Do they have the wherewithal to do it?

Nathan, it's ironically or radiosyncratically, it's an investment, as you said, rather than an expense. It's almost analogous to retail crime. The Kroger company, in Costco and Target invest in crime prevention for shopper, worker and vendor security the same way they invest in experiences to really excite and delight shoppers of all ages, where Walmart treats everything as an expense. And one of the things in the attachments we sent for Another day another time is Walmart fails worldwide where they don't get subsidies and in the US, taxpayers subsidized Walmart target, Amazon, Aldi and Costco at the expense of retailers that pay their own way like Kroger, CBS, etc. So the retailers that are subsidized do not invest in experiences and oftentimes do not invest insecurity, which is the ultimate consumer and commercial irony across America.

Nathan, it's ironically or radiosyncratically, it's an investment, as you said, rather than an expense. It's almost analogous to retail crime. The Kroger company, in Costco and Target invest in crime prevention for shopper, worker and vendor security the same way they invest in experiences to really excite and delight shoppers of all ages, where Walmart treats everything as an expense. And one of the things in the attachments we sent for Another day another time is Walmart fails worldwide where they don't get subsidies and in the US, taxpayers subsidized Walmart target, Amazon, Aldi and Costco at the expense of retailers that pay their own way like Kroger, CBS, etc. So the retailers that are subsidized do not invest in experiences and oftentimes do not invest insecurity, which is the ultimate consumer and commercial irony across America.

It sounds like a challenging backdrop heading into twenty twenty five for retail. Thank you for this, Bert, really appreciate it. Thanks to Bert Flickinger, Managing director at Strategic Resource Group, along with Lori Calvacina of RBC Capital Markets, New Edge Wells Cameron Dawson and Tom Porcelli at PGIM Fixed Income. And thanks to you as well for listening on this Christmas Day. I'm Nathan Hager, wishing you a very happy and healthy holiday season. But stay with us. Today's top stories and global business headlines are coming up right now

It sounds like a challenging backdrop heading into twenty twenty five for retail. Thank you for this, Bert, really appreciate it. Thanks to Bert Flickinger, Managing director at Strategic Resource Group, along with Lori Calvacina of RBC Capital Markets, New Edge Wells Cameron Dawson and Tom Porcelli at PGIM Fixed Income. And thanks to you as well for listening on this Christmas Day. I'm Nathan Hager, wishing you a very happy and healthy holiday season. But stay with us. Today's top stories and global business headlines are coming up right now