Bloomberg Audio Studios, Podcasts, radio news.

Bloomberg Audio Studios, Podcasts, radio news.

This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Front Exchange Market is the litmus paper. The system has been very important. We saw the whiplash yesterday. We had a great story out in the Bloomberg. Thank you Ted Man, Liz Kepa McCormick and Esha Day for a really sharp article about the roller coaster they call it that we saw in Dollar Dynamics yesterday. Right now, we recalibate with Barkley's and their Skyler Montgomery counning their FX strategists out of the United Kingdom. Skyler, good morning. Can Barkley's bet resilient and strong dollar or do you a just on this Tuesday.

Front Exchange Market is the litmus paper. The system has been very important. We saw the whiplash yesterday. We had a great story out in the Bloomberg. Thank you Ted Man, Liz Kepa McCormick and Esha Day for a really sharp article about the roller coaster they call it that we saw in Dollar Dynamics yesterday. Right now, we recalibate with Barkley's and their Skyler Montgomery counning their FX strategists out of the United Kingdom. Skyler, good morning. Can Barkley's bet resilient and strong dollar or do you a just on this Tuesday.

I don't think we've heard anything in the last couple of days to really adjust our view. I think broadly it's accepted that the current environment is dollar positive. We've had such a large move that the question we're consistently getting from clients is how far can this strength instead? And for US, we wouldn't fade the dollar strength and particularly the reference to euro dollar. The move we've seen, it's not been exclusively driven by terriffs, right, It's also been by growth and rate differentials. US growth continues to be stronger than it's DXY counterparts, and that's meant higher yields in the US than elsewhere, and that's also played a role here. So it's not just teriff threats alone that point to more dollar upside.

I don't think we've heard anything in the last couple of days to really adjust our view. I think broadly it's accepted that the current environment is dollar positive. We've had such a large move that the question we're consistently getting from clients is how far can this strength instead? And for US, we wouldn't fade the dollar strength and particularly the reference to euro dollar. The move we've seen, it's not been exclusively driven by terriffs, right, It's also been by growth and rate differentials. US growth continues to be stronger than it's DXY counterparts, and that's meant higher yields in the US than elsewhere, and that's also played a role here. So it's not just teriff threats alone that point to more dollar upside.

Skyler.

Skyler.

I mean, I'm looking at the Bloomberg Dollar Index up over seven percent just since late September. Call it is there a bear case for the US dollar.

I mean, I'm looking at the Bloomberg Dollar Index up over seven percent just since late September. Call it is there a bear case for the US dollar.

So we get asked this quite a lot as well, kind of what are the reasons or catalysts that you could see for dollar downside? And certainly there are options, right, you know, there's not a complete regardless of that in terms of you could see more fiscal cohesion and you're up. That would be more positive. If you could get more super sized stimulus out of China, that would also be more positive. If you just had less hawkishness on trade again, that would be more positive for those DXY counterparts. I think the issue is just one of those baselines are coming through, and they're certainly not our baseline.

So we get asked this quite a lot as well, kind of what are the reasons or catalysts that you could see for dollar downside? And certainly there are options, right, you know, there's not a complete regardless of that in terms of you could see more fiscal cohesion and you're up. That would be more positive. If you could get more super sized stimulus out of China, that would also be more positive. If you just had less hawkishness on trade again, that would be more positive for those DXY counterparts. I think the issue is just one of those baselines are coming through, and they're certainly not our baseline.

How about in Asia here, what is the Bank of Japan doing? What do they need to do? How do you guys think about the yen here?

How about in Asia here, what is the Bank of Japan doing? What do they need to do? How do you guys think about the yen here?

Yeah?

Yeah?

Absolutely so for the end it's near turn. Upside seems more limited, especially versus the dollar. The January Banka Japan meeting, it's pretty much completely priced in for a twenty five basis point hike. I think top side and dollars yen at seven point you get some kind of cap because of Japanese authority's reaction function to FX weakness, but given we've had this spate of yen strength recently, we're not quite at levels where that comes into the picture. More medium term, though, we do like buying yen on the crosses. I think the direction of policy is clear. Obviously we're expecting a hike this week, but we also expect a hike later in this year that gets due to a policy rate at zero point five percent or sorry, zero point seven to five percent, and certainly neutral expectations for Japan are kind of drifting more towards the one percent level in markets, and then they're also less vulnerable to teriff risks and the volatility of a trade work could be more positive for safe have instatu.

Absolutely so for the end it's near turn. Upside seems more limited, especially versus the dollar. The January Banka Japan meeting, it's pretty much completely priced in for a twenty five basis point hike. I think top side and dollars yen at seven point you get some kind of cap because of Japanese authority's reaction function to FX weakness, but given we've had this spate of yen strength recently, we're not quite at levels where that comes into the picture. More medium term, though, we do like buying yen on the crosses. I think the direction of policy is clear. Obviously we're expecting a hike this week, but we also expect a hike later in this year that gets due to a policy rate at zero point five percent or sorry, zero point seven to five percent, and certainly neutral expectations for Japan are kind of drifting more towards the one percent level in markets, and then they're also less vulnerable to teriff risks and the volatility of a trade work could be more positive for safe have instatu.

Is there a big figure trade out there? I mean, forget about all the sixty thousand feet stuff, Tyler. I lost money on the Detroit Lions. I know it means it's like losing money on Manu. No, it's actually it's not. It's like losing money on somebody good. But the answer is I got to make it back in the next six months, Skyler. Where's the big figure bet for Barclays?

Is there a big figure trade out there? I mean, forget about all the sixty thousand feet stuff, Tyler. I lost money on the Detroit Lions. I know it means it's like losing money on Manu. No, it's actually it's not. It's like losing money on somebody good. But the answer is I got to make it back in the next six months, Skyler. Where's the big figure bet for Barclays?

I mean, in terms of places that you'll get the largest move, I think CNY is where you should be looking, especially versus the dollar. There's been a mispricing in terms of where tariff risk is really showing up. It's showing up in Europe so far, but not so much in China. And the growth backdrop as well as just fundamentally the backdrop or c and Y is for a week or CNY even if you don't account for tariff threats, and so that tariff threat should be more reflected in that cross. And for us, we're looking at seven to fifty originally ONND dollars CNY.

I mean, in terms of places that you'll get the largest move, I think CNY is where you should be looking, especially versus the dollar. There's been a mispricing in terms of where tariff risk is really showing up. It's showing up in Europe so far, but not so much in China. And the growth backdrop as well as just fundamentally the backdrop or c and Y is for a week or CNY even if you don't account for tariff threats, and so that tariff threat should be more reflected in that cross. And for us, we're looking at seven to fifty originally ONND dollars CNY.

Wow, how about that?

Wow, how about that?

We've had just the last twenty four hour Skyler, uh Padre a pretty clear commentary out of the new administration about tariffs on Mexico and Canada. How do you play that in the currency markets? Do you in fact trade that? You try to set it aside? How do you think about that?

We've had just the last twenty four hour Skyler, uh Padre a pretty clear commentary out of the new administration about tariffs on Mexico and Canada. How do you play that in the currency markets? Do you in fact trade that? You try to set it aside? How do you think about that?

I mean, I think you have to trade it. You have to seriously take these threats. Unto consideration, Canada and Mexico are very exposed to the US in a relative way. So seventy five percent of Canadian exports go to the US. It's not recipiable by any means, and most of Canadian GDP are a significant portion of it at least is generated by those exports. And so it's much more worrying for those economies that you have the threat of tariffs and that supersedes anything else that you have domestically. But domestically, particularly in Canada, the backdrops not great easier. You're gonna p period where parliament's burrowed. There's not a lot of political legitimacy behind the current government, and that is an opportunity for Trump, I think.

I mean, I think you have to trade it. You have to seriously take these threats. Unto consideration, Canada and Mexico are very exposed to the US in a relative way. So seventy five percent of Canadian exports go to the US. It's not recipiable by any means, and most of Canadian GDP are a significant portion of it at least is generated by those exports. And so it's much more worrying for those economies that you have the threat of tariffs and that supersedes anything else that you have domestically. But domestically, particularly in Canada, the backdrops not great easier. You're gonna p period where parliament's burrowed. There's not a lot of political legitimacy behind the current government, and that is an opportunity for Trump, I think.

Skyler, what's the shadow out there for Dollar's certitude? Unfortunately, Paul was away on a sabbatical and I was inflicted Damien Sassaur upon me Skyler, and of course he's em em em ei eio. What's the shadow out there in em Barclays is worried about.

Skyler, what's the shadow out there for Dollar's certitude? Unfortunately, Paul was away on a sabbatical and I was inflicted Damien Sassaur upon me Skyler, and of course he's em em em ei eio. What's the shadow out there in em Barclays is worried about.

I think really the threat of hikes returning to the table. It's something that we definitely need to consider in twenty twenty five. If you look at the extory experience, there's this natural tendency for the market to look for hikes ahead of the end of the cutting cycle. And typically in soft landings, the cutting cycle and the pause that follows it's much shorter than in recessionary periods. So that implies that in twenty twenty five we need to be thinking about this. And if you look back at the soft landings of ninety eight and ninety five, there was some concern over energy inflation, but core inflation actually declined in between the last cut and the next hike of the next cycle. And so while the Fed's mandate is more semetrical now there's more relative weight put on unemployment. I think if you had that comeback to the fore and certainly it's something markets are thinking about, that would be very negative.

I think really the threat of hikes returning to the table. It's something that we definitely need to consider in twenty twenty five. If you look at the extory experience, there's this natural tendency for the market to look for hikes ahead of the end of the cutting cycle. And typically in soft landings, the cutting cycle and the pause that follows it's much shorter than in recessionary periods. So that implies that in twenty twenty five we need to be thinking about this. And if you look back at the soft landings of ninety eight and ninety five, there was some concern over energy inflation, but core inflation actually declined in between the last cut and the next hike of the next cycle. And so while the Fed's mandate is more semetrical now there's more relative weight put on unemployment. I think if you had that comeback to the fore and certainly it's something markets are thinking about, that would be very negative.

Free Scott I got a run on breaking news this has been great. Don't be a stranger, Skyler. If you're in New York, we have to do an extended Skyler Montgomery coning interview FX strategist with Berkley. Thank you so much, Skyler.

Free Scott I got a run on breaking news this has been great. Don't be a stranger, Skyler. If you're in New York, we have to do an extended Skyler Montgomery coning interview FX strategist with Berkley. Thank you so much, Skyler.

You're listening to the Bloomberg Surveillance podcast. Catch US Live weekday afternoons from seven to ten am Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch US Live on YouTube.

You're listening to the Bloomberg Surveillance podcast. Catch US Live weekday afternoons from seven to ten am Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch US Live on YouTube.

She was outstanding the last time she was on. She has to put up with Brian Belski on a daily basis. With Demo Capital Markets, their senior economist, Jennifer Lee joins us. Jennifer, just open question. After the pageantry of the last three four days, what are you writing about this morning? What does a Jennifer Lee focus on a post inaugural Tuesday.

She was outstanding the last time she was on. She has to put up with Brian Belski on a daily basis. With Demo Capital Markets, their senior economist, Jennifer Lee joins us. Jennifer, just open question. After the pageantry of the last three four days, what are you writing about this morning? What does a Jennifer Lee focus on a post inaugural Tuesday.

Well, good morning, and thank you very much for having me on. And I still love mister Belski. This morning was the focus. All the focus was on, of course, the US dollar index and the volatility in the currency market, and that was in sharp display. You know, of course after the shotgun comments that he was made almost off handish, you know, I was sort of wondering last night, you know, would he had brought up tariffs if he wasn't asked, you know, legitimate question obviously, So you know, and I was talking to myself and I was thinking, why was I surprised? You know, you know, he said he's doing everything that he said he was going to do during the campaign. So you know, this shouldn't come as a shot. You know, it's just whether or not it's going to come to fruition. And that's anyone's guess at this point.

Well, good morning, and thank you very much for having me on. And I still love mister Belski. This morning was the focus. All the focus was on, of course, the US dollar index and the volatility in the currency market, and that was in sharp display. You know, of course after the shotgun comments that he was made almost off handish, you know, I was sort of wondering last night, you know, would he had brought up tariffs if he wasn't asked, you know, legitimate question obviously, So you know, and I was talking to myself and I was thinking, why was I surprised? You know, you know, he said he's doing everything that he said he was going to do during the campaign. So you know, this shouldn't come as a shot. You know, it's just whether or not it's going to come to fruition. And that's anyone's guess at this point.

What will Canada, dude is, does the Bank of Montreal have Well, first of all, does the Bank of Montreal have any side whether the Canadians can outlast the Bruins. I mean we'll have to say I haven't said that in like eight years. But Jennifer Lee, how will Canada respond to tariffs from America? Do you have any perspective there from the Bank of Montreal Hall.

What will Canada, dude is, does the Bank of Montreal have Well, first of all, does the Bank of Montreal have any side whether the Canadians can outlast the Bruins. I mean we'll have to say I haven't said that in like eight years. But Jennifer Lee, how will Canada respond to tariffs from America? Do you have any perspective there from the Bank of Montreal Hall.

So, you know, there's it's this is more you're coming from the political side. You know, all the provinces have gotten together and all but one has you know, there everyone's talking about retaliation and and having also targeted TIFFs as well on us on US products. You know, again, it's you know, we're gonna have to see how this plays out. It's all about the art of negotiation, you know, as President Trump is always talking about again, I don't know, I'm not sure why whether or not we're going to see from the US side of things, twenty five percent tariffs on all you are, all Canadian products? You know, I call it like the W five W five right, like the who? You know we're talking right now about Canada and Mexico. When when will this happen you know first a hard date or are we just going to talk about it first? Is just throwing it out there as a possibility, you know, the ware of this.

So, you know, there's it's this is more you're coming from the political side. You know, all the provinces have gotten together and all but one has you know, there everyone's talking about retaliation and and having also targeted TIFFs as well on us on US products. You know, again, it's you know, we're gonna have to see how this plays out. It's all about the art of negotiation, you know, as President Trump is always talking about again, I don't know, I'm not sure why whether or not we're going to see from the US side of things, twenty five percent tariffs on all you are, all Canadian products? You know, I call it like the W five W five right, like the who? You know we're talking right now about Canada and Mexico. When when will this happen you know first a hard date or are we just going to talk about it first? Is just throwing it out there as a possibility, you know, the ware of this.

Like the who?

Like the who?

And how is this going to play out? Especially again, will there be a lengthy period of negotiations? And are we targeting every single thing? Are we only looking at or sorry, are we looking at all Canadian products? Or are we targeting certain ones only? And these are all questions that you need to be answered before we can figure out what we are going to do.

And how is this going to play out? Especially again, will there be a lengthy period of negotiations? And are we targeting every single thing? Are we only looking at or sorry, are we looking at all Canadian products? Or are we targeting certain ones only? And these are all questions that you need to be answered before we can figure out what we are going to do.

Good Morning out on YouTube from London, Ontarios, which is the absolute speaking as an ugly American is the absolute epicenter of good ice hockey and also exports to the United States exports.

Good Morning out on YouTube from London, Ontarios, which is the absolute speaking as an ugly American is the absolute epicenter of good ice hockey and also exports to the United States exports.

So, Jennifer, you're based in Toronto there, what's the feeling in Canada in Toronto about maybe some of what you guys can do, what Canadians can do in terms of on tariffs on your side.

So, Jennifer, you're based in Toronto there, what's the feeling in Canada in Toronto about maybe some of what you guys can do, what Canadians can do in terms of on tariffs on your side.

So it's overall, you know, obviously it's a feeling of unease. You know, this is something that you know, nobody wants obviously. Uh, the US is the destination of seventy five percent of our exports, and we import most of our imports, you know, come from the US as well, and from the US. I mean that most of the US exports head to both Mexico and Canada. So this is like something that you know that is not something that we would relish. But uh, in terms of preparation, I don't know if there is a set plan right now, but you know, almost you know, just being prepared for much slower growth than what we have pencils in right now. We've got just under two percent pencils in for twenty twenty five GDP growth for Canada this year, and of course that could be potentially erased if we launch into a protracted trade war with the US. And again it will depend on what products are targeted at? What you know, is it going to be twenty five percent for a long long time. You know, there are a lot of uncoan answered questions, so we don't know how this is going to play. Oh, there's so much uncertainty. And this is what also makes by the way, if I just segue, this also makes you know, the jobs for not only economists very difficult, but it makes jobs for central makers extremely difficult as well. You know, whether or not they're going to tighten or they're going to hold and they're going to cut. You know, all things are on the table right now.

So it's overall, you know, obviously it's a feeling of unease. You know, this is something that you know, nobody wants obviously. Uh, the US is the destination of seventy five percent of our exports, and we import most of our imports, you know, come from the US as well, and from the US. I mean that most of the US exports head to both Mexico and Canada. So this is like something that you know that is not something that we would relish. But uh, in terms of preparation, I don't know if there is a set plan right now, but you know, almost you know, just being prepared for much slower growth than what we have pencils in right now. We've got just under two percent pencils in for twenty twenty five GDP growth for Canada this year, and of course that could be potentially erased if we launch into a protracted trade war with the US. And again it will depend on what products are targeted at? What you know, is it going to be twenty five percent for a long long time. You know, there are a lot of uncoan answered questions, so we don't know how this is going to play. Oh, there's so much uncertainty. And this is what also makes by the way, if I just segue, this also makes you know, the jobs for not only economists very difficult, but it makes jobs for central makers extremely difficult as well. You know, whether or not they're going to tighten or they're going to hold and they're going to cut. You know, all things are on the table right now.

So I guess the two of the themes coming out of President Trump yesterday were migration policy. Immigration policy and the tariffs, both some economists say could be quite inflationary. How do you did you hear anything yesterday that maybe change your thoughts of US inflation outlook?

So I guess the two of the themes coming out of President Trump yesterday were migration policy. Immigration policy and the tariffs, both some economists say could be quite inflationary. How do you did you hear anything yesterday that maybe change your thoughts of US inflation outlook?

No, just again, there is some relief, you know, obviously during his noginal speech when he did not mention teriffs and so, but at the same time, you know, we do know that terriffs are inflationary. It's going to be the US importers that are going to be bearing the costs initially, and then they're going to probably pass it on to the consumers. In terms of the immigration and the migration, you know, first, I mean obviously it's going to be targeting a legal you know, the illegal migrants, the criminals, you know, but in terms of broader how much further he's going to go. You know, it's going to have inflationary impact on the because of the labor market, and we know how dependent US agricultural sector is on illegal citizens and construction as well. So we see those people, those workers unable to work or not able to work. You know, that could put a lot more tightness on the labor market. Means higher wages, it means higher inflation.

No, just again, there is some relief, you know, obviously during his noginal speech when he did not mention teriffs and so, but at the same time, you know, we do know that terriffs are inflationary. It's going to be the US importers that are going to be bearing the costs initially, and then they're going to probably pass it on to the consumers. In terms of the immigration and the migration, you know, first, I mean obviously it's going to be targeting a legal you know, the illegal migrants, the criminals, you know, but in terms of broader how much further he's going to go. You know, it's going to have inflationary impact on the because of the labor market, and we know how dependent US agricultural sector is on illegal citizens and construction as well. So we see those people, those workers unable to work or not able to work. You know, that could put a lot more tightness on the labor market. Means higher wages, it means higher inflation.

Jennifer, thank you so much. Jennifer Lee with a brief there on terraff So with unique perspective on Canada from Beama Capital Marcus.

Jennifer, thank you so much. Jennifer Lee with a brief there on terraff So with unique perspective on Canada from Beama Capital Marcus.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple car Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple car Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty.

Our ecumenical tradition is to get as long a conversation as we can with Laurie Kelvissina. She read Graham, Dot and Coddle on the law of the University of Virginia ages ago. Is security analysis dead? Is everybody turned into a strategist?

Our ecumenical tradition is to get as long a conversation as we can with Laurie Kelvissina. She read Graham, Dot and Coddle on the law of the University of Virginia ages ago. Is security analysis dead? Is everybody turned into a strategist?

Well, I think there are a lot of people who try to do my job for me, and so so, you know, maybe to some extent, but look, I think we are in sort of a more macro driven world at this point in time, and I think this is going to be very much a year where the top dawn tailwinds are informing a lot of decisions.

Well, I think there are a lot of people who try to do my job for me, and so so, you know, maybe to some extent, but look, I think we are in sort of a more macro driven world at this point in time, and I think this is going to be very much a year where the top dawn tailwinds are informing a lot of decisions.

From where you are. Is it an active management stock selection year, particularly in your expertise of mid cap or small cap or is it an index year?

From where you are. Is it an active management stock selection year, particularly in your expertise of mid cap or small cap or is it an index year?

Well, I'll tell you what's fascinating Tom. And we often you will see funds flows turn in January, but we actually saw back in December we started to see some inflows to actively managed funds in both small cap and large cap US equity funds emerged. Now that has occurred alongside passive outflows, so that hasn't sort of taken you into negative territory. And large cap you have seen overall negative flows in small cap but it's really really interesting to see that divergence so far. The people who buy funds seem to be betting more on the stock pickers right now.

Well, I'll tell you what's fascinating Tom. And we often you will see funds flows turn in January, but we actually saw back in December we started to see some inflows to actively managed funds in both small cap and large cap US equity funds emerged. Now that has occurred alongside passive outflows, so that hasn't sort of taken you into negative territory. And large cap you have seen overall negative flows in small cap but it's really really interesting to see that divergence so far. The people who buy funds seem to be betting more on the stock pickers right now.

We had it the inauguration yesterday.

We had it the inauguration yesterday.

Did you guys change.

Did you guys change.

Your outlook for risk assets for stocks based upon this new administration, a new Congress being seated. A lot of people feel like animal spirits on the economic front.

Your outlook for risk assets for stocks based upon this new administration, a new Congress being seated. A lot of people feel like animal spirits on the economic front.

Maybe you're being loosened a little bit.

Maybe you're being loosened a little bit.

Yeah, you know, I think what we did when we put our year ahead outlook together, and we did this around Thanksgiving, so we already knew the outcome, and we had been sort of updating our models heading into that well ahead of the November election. But what we did do with one of our sort of five sets of back tests, we were able to more discreetly model in the political environment. So our political back test, actually I think it's like around an eleven to twelve percent type annual return we added into to the targeting mix, but that's the return you typically see when Republicans run the White House, the Senate, and the House, and so we thought that sort of did a good job of capturing the idea of a better animal spirit, environment, better vibes, and a more kind of business friendly climate.

Yeah, you know, I think what we did when we put our year ahead outlook together, and we did this around Thanksgiving, so we already knew the outcome, and we had been sort of updating our models heading into that well ahead of the November election. But what we did do with one of our sort of five sets of back tests, we were able to more discreetly model in the political environment. So our political back test, actually I think it's like around an eleven to twelve percent type annual return we added into to the targeting mix, but that's the return you typically see when Republicans run the White House, the Senate, and the House, and so we thought that sort of did a good job of capturing the idea of a better animal spirit, environment, better vibes, and a more kind of business friendly climate.

So how do we think about it for twenty twenty five. One of the areas that I feel like there might be a risk to the market is maybe even more dependent than usual earnings.

So how do we think about it for twenty twenty five. One of the areas that I feel like there might be a risk to the market is maybe even more dependent than usual earnings.

Earnings really need to.

Earnings really need to.

Come through because I don't think the Fed's going to do a whole lot for us in twenty twenty five. What's your concern or confidence in the earnings out look?

Come through because I don't think the Fed's going to do a whole lot for us in twenty twenty five. What's your concern or confidence in the earnings out look?

Well, so, look, I've been lucky.

Well, so, look, I've been lucky.

The rate strategist that I work with has been calling for an early end to the cutting cycle for about six months now, and so he did finally just pull out the January cut. But the January cut was the only one he had in this year for quite some time. So what that translated to for us is in our valuation model. So this is another one of the five things that goes into our target mix as we come up with a target pe and look at that in the context of our earnings forecast and then get a fair value for the S and p SO bottom line. Because of his FED view, he also was pretty aggressive on.

The rate strategist that I work with has been calling for an early end to the cutting cycle for about six months now, and so he did finally just pull out the January cut. But the January cut was the only one he had in this year for quite some time. So what that translated to for us is in our valuation model. So this is another one of the five things that goes into our target mix as we come up with a target pe and look at that in the context of our earnings forecast and then get a fair value for the S and p SO bottom line. Because of his FED view, he also was pretty aggressive on.

The ten year yield.

The ten year yield.

We haven't really had any multiple expansion baked into our outlook, and I think that's the right answer.

We haven't really had any multiple expansion baked into our outlook, and I think that's the right answer.

Barn kelviseinor with this folks with RBC thrilled. She's here today, conversation. Is a MidCap still a MidCap? Lori Kelvicina, I got off the Vanguard platform, Pallunteer, Amphanol, Well Towered, Motorola, Constellation. In a bull market, if those market caps go up, do the mid capies become more large capies?

Barn kelviseinor with this folks with RBC thrilled. She's here today, conversation. Is a MidCap still a MidCap? Lori Kelvicina, I got off the Vanguard platform, Pallunteer, Amphanol, Well Towered, Motorola, Constellation. In a bull market, if those market caps go up, do the mid capies become more large capies?

I think so?

I think so?

And you look, I've covered small and mccap stocks for a long time. What's always been apparent to me is that mid cap managers don't really live and die by their benchmarks the way that say small cap managers do or large cap managers do. They tend to be sort of benchmark aware, but don't really get caught up in these same market cap bands.

And you look, I've covered small and mccap stocks for a long time. What's always been apparent to me is that mid cap managers don't really live and die by their benchmarks the way that say small cap managers do or large cap managers do. They tend to be sort of benchmark aware, but don't really get caught up in these same market cap bands.

So how do you buy midcaps? I mean, you're a strategist. I get that. I don't want to ask you individual stocks. But then are you looking at free cash flow? Is the is it revenue growth? What's the game for you?

So how do you buy midcaps? I mean, you're a strategist. I get that. I don't want to ask you individual stocks. But then are you looking at free cash flow? Is the is it revenue growth? What's the game for you?

I tend to not look at free cash flow just because I find databases don't do a good job of allowing me to model. It's very lumpy data. The forecasts are very you know, kind of messy. Pms love to look at it, right, It's something they live and die by, but as a macro person, it does don't really work. I think we tend to define it in terms of market cap. I think if you want to go from like maybe ten up to fifty, that's a pretty safe, you know, kind of range that I think most people can live in. But some people will tell you it starts a little lower, and a lot of people will let those names ride ride and take them a bit higher.

I tend to not look at free cash flow just because I find databases don't do a good job of allowing me to model. It's very lumpy data. The forecasts are very you know, kind of messy. Pms love to look at it, right, It's something they live and die by, but as a macro person, it does don't really work. I think we tend to define it in terms of market cap. I think if you want to go from like maybe ten up to fifty, that's a pretty safe, you know, kind of range that I think most people can live in. But some people will tell you it starts a little lower, and a lot of people will let those names ride ride and take them a bit higher.

Leadership in a market, Lorie, it just seems like, as long as we can remember, it's been technology, technology, technology driving these markets higher. A do you believe in market leadership and if so, do we have tex still as a leader in this market?

Leadership in a market, Lorie, it just seems like, as long as we can remember, it's been technology, technology, technology driving these markets higher. A do you believe in market leadership and if so, do we have tex still as a leader in this market?

Well, look, I'll tell you, Paul, I've been in the broadening camp, but I would say, you know ya.

Well, look, I'll tell you, Paul, I've been in the broadening camp, but I would say, you know ya.

A centimeter, not by a mile.

A centimeter, not by a mile.

I do think this broadening thesis has become one of the most consensus things strategists have talked about coming into the show.

I do think this broadening thesis has become one of the most consensus things strategists have talked about coming into the show.

Are you're observing it?

Are you're observing it?

I mean you can see it to some extent, right, But every time I have a weekly and every time I update my charts right like one week I'm saying growth is fighting back, and then another week I'm saying the value finally looks like it's trying to assert itself. So it's been very, very and I think there are good reasons to rotate. I think you've got valuation problems in the megacap growth names. I think you've got crowding problems, and I think you give out decelerating earnings growth. And I think there is an itch in this market among pms to rotate. But relative pees of MAG seven versus rest of market is a function. It's really tracking very closely relative long term earnings growth dynamics, and MAG seven earnings growth keeps surprising to the upside. So I keep telling people, you know that the case for the rotation it's there, But it feels like the rest of the market is just whipping on its opportunity and just can't reclaim that earnings leadership.

I mean you can see it to some extent, right, But every time I have a weekly and every time I update my charts right like one week I'm saying growth is fighting back, and then another week I'm saying the value finally looks like it's trying to assert itself. So it's been very, very and I think there are good reasons to rotate. I think you've got valuation problems in the megacap growth names. I think you've got crowding problems, and I think you give out decelerating earnings growth. And I think there is an itch in this market among pms to rotate. But relative pees of MAG seven versus rest of market is a function. It's really tracking very closely relative long term earnings growth dynamics, and MAG seven earnings growth keeps surprising to the upside. So I keep telling people, you know that the case for the rotation it's there, But it feels like the rest of the market is just whipping on its opportunity and just can't reclaim that earnings leadership.

What are some of the sectors that screen well for you guys these days going to I think.

What are some of the sectors that screen well for you guys these days going to I think.

Financial still has some room.

Financial still has some room.

I don't think it has as much room as it did. I think the capital markets names are getting expensive, but the bank's insurance companies still look pretty good on valuation, have good earnings revision trends, and I think financials in general, you've got a lot of policy tailwinds.

I don't think it has as much room as it did. I think the capital markets names are getting expensive, but the bank's insurance companies still look pretty good on valuation, have good earnings revision trends, and I think financials in general, you've got a lot of policy tailwinds.

You don't really have any headwinds.

You don't really have any headwinds.

COMM services looks really good, so you got a lot of big tech type.

COMM services looks really good, so you got a lot of big tech type.

Names in there.

Names in there.

They're more consumer oriented. Again, I think more policy tailwinds than headwinds. Good valuations, good revisions. We upgraded that one back in December and got a lot of good feedback from investors.

They're more consumer oriented. Again, I think more policy tailwinds than headwinds. Good valuations, good revisions. We upgraded that one back in December and got a lot of good feedback from investors.

So this is great with Lori Calvalcino, folks, because she's from a distance. On MAG seven, how do you perceive MAG seven? When I see Delta Airlines surprise? Schwab today's surprise? Why are they going to get surprises? So Mag seven and everybody goes on their concentrated portfolio.

So this is great with Lori Calvalcino, folks, because she's from a distance. On MAG seven, how do you perceive MAG seven? When I see Delta Airlines surprise? Schwab today's surprise? Why are they going to get surprises? So Mag seven and everybody goes on their concentrated portfolio.

Way, what I've been seeing with the MAG seven if I look back over the past year, is you know, we'll kind of go into earnings, right, and the banks come in and they have good numbers, and then you'll get some of these other cyclical, kind of overlooked parts of the market working, and then you might have like one of these MAG seven names kind of stumble a little bit and it feels like in the middle of that reporting season, you're seeing the leadership shift and the earnings dynamic shift. And then I feel like all the worker bees around Wall Street go back after reporting season winds down, you know, they go to conferences, they've had all their callbacks, they go you know, on their bus stores and things, and suddenly I noticed the mag seven numbers start coming up again.

Way, what I've been seeing with the MAG seven if I look back over the past year, is you know, we'll kind of go into earnings, right, and the banks come in and they have good numbers, and then you'll get some of these other cyclical, kind of overlooked parts of the market working, and then you might have like one of these MAG seven names kind of stumble a little bit and it feels like in the middle of that reporting season, you're seeing the leadership shift and the earnings dynamic shift. And then I feel like all the worker bees around Wall Street go back after reporting season winds down, you know, they go to conferences, they've had all their callbacks, they go you know, on their bus stores and things, and suddenly I noticed the mag seven numbers start coming up again.

And so it feels like in.

And so it feels like in.

The moment, you know, there's there's a reaction to fade it, but when people really start to give it some serious thought and reflect, the strength comes back. So it's a really really odd dynamic to be fair, Tom and I've been.

The moment, you know, there's there's a reaction to fade it, but when people really start to give it some serious thought and reflect, the strength comes back. So it's a really really odd dynamic to be fair, Tom and I've been.

Talking a lot about ETFs. How does that impact your world as a strategist, Like when I was on the south side, those mutual funds and hedge funds, Yeah, those.

Talking a lot about ETFs. How does that impact your world as a strategist, Like when I was on the south side, those mutual funds and hedge funds, Yeah, those.

Are my clients.

Are my clients.

Do I now go see ETF managers set and I.

Do I now go see ETF managers set and I.

See ETF managers per se. But a lot of my.

See ETF managers per se. But a lot of my.

Hedge funds will use ETFs or ETF like instruments. And then if you think about sort of the not so much the actively managed funds, occasionally maybe they might you know, buy something like a biotech ETF to put cash in, or a small cap manager might buy an IWM, you know type instrument to to put cash in. That's very rare and few and far between. But generally, you know, you'll see sort of the wealth management community, you know, does sort of defer to ETF so they care a lot about sector calls. I think that, you know, sort of wealth management type money moves a little slower. You see big reallocations at the beginning of the year. But the hedge funds, you know, if I think about my small caps, they've been hedge funds have been dialing up and down their bolishness on small caps when they've been dialing up and.

Hedge funds will use ETFs or ETF like instruments. And then if you think about sort of the not so much the actively managed funds, occasionally maybe they might you know, buy something like a biotech ETF to put cash in, or a small cap manager might buy an IWM, you know type instrument to to put cash in. That's very rare and few and far between. But generally, you know, you'll see sort of the wealth management community, you know, does sort of defer to ETF so they care a lot about sector calls. I think that, you know, sort of wealth management type money moves a little slower. You see big reallocations at the beginning of the year. But the hedge funds, you know, if I think about my small caps, they've been hedge funds have been dialing up and down their bolishness on small caps when they've been dialing up and.

Down their red dubbishness.

Down their red dubbishness.

And then to some extent, the election morphed into those trades at the end of last year. So they're playing. It's not they're not the only instruments they're playing, but they did an.

And then to some extent, the election morphed into those trades at the end of last year. So they're playing. It's not they're not the only instruments they're playing, but they did an.

Awful lot of it.

Awful lot of it.

Are we going to see roll ups? Nobody in the room is is old enough to remember this, but there's like every eight or nine years at the old days, industries would go through this mental fake m and a phrase where everything would roll into one company. Are roll ups debt or is that going to be the catalyst for the calvaccino world.

Are we going to see roll ups? Nobody in the room is is old enough to remember this, but there's like every eight or nine years at the old days, industries would go through this mental fake m and a phrase where everything would roll into one company. Are roll ups debt or is that going to be the catalyst for the calvaccino world.

You know, I honestly from my small cap pms.

You know, I honestly from my small cap pms.

Are a great read on this because you know, they want their companies right to be bought and then they also want new interesting supply to come into so they have their ear to the ground on this issue. I've not been hearing from them so much about roll ups. I've been hearing more interest from them on divestitures, like with the bigger cap companies spinning some things off that might prove to be you know, sort of interesting opportunities for them.

Are a great read on this because you know, they want their companies right to be bought and then they also want new interesting supply to come into so they have their ear to the ground on this issue. I've not been hearing from them so much about roll ups. I've been hearing more interest from them on divestitures, like with the bigger cap companies spinning some things off that might prove to be you know, sort of interesting opportunities for them.

That's where I've heard more conversation.

That's where I've heard more conversation.

To be honest, interesting you expected that's that's called a bolton. I know I learned that.

To be honest, interesting you expected that's that's called a bolton. I know I learned that.

Okay, very good.

Okay, very good.

I read the Duke Business Journal this week.

I read the Duke Business Journal this week.

Do you expect bigger, better, more IPO activity this year? I've heard the Jamie Diamonds of the world and Brian Mornian's talking about that. Do you expect to see that? I mean, you've got your ear to the ground.

Do you expect bigger, better, more IPO activity this year? I've heard the Jamie Diamonds of the world and Brian Mornian's talking about that. Do you expect to see that? I mean, you've got your ear to the ground.

Yeah.

Yeah.

And look, I've been reading through earnings call transcripts my team and I and last week it was mostly financials and we're certainly seeing you know, a lot of optimism around both I POS and M and A, and I do think there's some pent up demand. I mean, they're talking about the pipelines. There were some indications in the commentary last week that things are getting started, and certainly we all see the announcements, you know when we come.

And look, I've been reading through earnings call transcripts my team and I and last week it was mostly financials and we're certainly seeing you know, a lot of optimism around both I POS and M and A, and I do think there's some pent up demand. I mean, they're talking about the pipelines. There were some indications in the commentary last week that things are getting started, and certainly we all see the announcements, you know when we come.

But do you have to I interrupt, but we're out of time? Do you have to do you have to ip anymore? Can't you liquefy and make gajillions? I think, like Paul Sweeney, gagillions by not ipo ing now.

But do you have to I interrupt, but we're out of time? Do you have to do you have to ip anymore? Can't you liquefy and make gajillions? I think, like Paul Sweeney, gagillions by not ipo ing now.

Well, I think there are alternatives, to be sure, and I think that's one of the things small cap managers struggle.

Well, I think there are alternatives, to be sure, and I think that's one of the things small cap managers struggle.

With is that, you know, sort of the get access well the.

With is that, you know, sort of the get access well the.

Lack of size appropriate IPOs right, and that a lot of things that come out are too big for them to buy.

Lack of size appropriate IPOs right, and that a lot of things that come out are too big for them to buy.

Again, going back to.

Again, going back to.

Our mid cap or large cap type discussions, look, I think that certainly the activity has been heralded or you know, anticipated I'm sort of telling people I'm optimistic, but they've got really until too Q to pull it off, or people are going to be skeptical it's never coming.

Our mid cap or large cap type discussions, look, I think that certainly the activity has been heralded or you know, anticipated I'm sort of telling people I'm optimistic, but they've got really until too Q to pull it off, or people are going to be skeptical it's never coming.

This is great, This is great. Laura Calvinsena our extended interview. It's nine o'clock ours. She's the RBC Capital Markets.

This is great, This is great. Laura Calvinsena our extended interview. It's nine o'clock ours. She's the RBC Capital Markets.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven a m. Eastern an Apple car Play and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven a m. Eastern an Apple car Play and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

The food in Davos, Happy Valley, this is really not reported, is horrific. The great the great reason. The JP Morgan Cocktail Hour, which is usually Thursday, now maybe it's Wednesday. The JP Moore they bring in the horse divorce from like London or Milan or whatever. The only place you can get a decent dinner in Davos is the Postly Restaurant. And I mean the hitters. This is where they stay. It's the Morrisani Schweizerkoff It's like the hotel because you can actually have decent food and not leftover cold pizza. He's never had leftover cold pizza in Davos. Joining us. Dan Tanaba from the Morrisani This Morning of course with Oliver Wyman is well, let's cut to it. Dan Tanabam, the President will do a virtual with people like you. Up Happy Valley. What will they listen for from Donald Trump?

The food in Davos, Happy Valley, this is really not reported, is horrific. The great the great reason. The JP Morgan Cocktail Hour, which is usually Thursday, now maybe it's Wednesday. The JP Moore they bring in the horse divorce from like London or Milan or whatever. The only place you can get a decent dinner in Davos is the Postly Restaurant. And I mean the hitters. This is where they stay. It's the Morrisani Schweizerkoff It's like the hotel because you can actually have decent food and not leftover cold pizza. He's never had leftover cold pizza in Davos. Joining us. Dan Tanaba from the Morrisani This Morning of course with Oliver Wyman is well, let's cut to it. Dan Tanabam, the President will do a virtual with people like you. Up Happy Valley. What will they listen for from Donald Trump?

Well, Tom, I think people are wanting to hear more specifics about how President Trump's trade policy and foreign policy agenda will work out. We obviously have gotten a preview over the last few weeks in his inaugural address yesterday as well as the evening press conference. But I think whether it's more of the same in terms of kind of threats for kind of trade deals or anything new. Maybe there's another country he wants to invade, But I think there's certainly an air of pessimism until we understand more specifics of how this policy was unfold.

Well, Tom, I think people are wanting to hear more specifics about how President Trump's trade policy and foreign policy agenda will work out. We obviously have gotten a preview over the last few weeks in his inaugural address yesterday as well as the evening press conference. But I think whether it's more of the same in terms of kind of threats for kind of trade deals or anything new. Maybe there's another country he wants to invade, But I think there's certainly an air of pessimism until we understand more specifics of how this policy was unfold.

You're double barreled at Oliver Wyman. You got the wonderful Hugh vannsteinas well when you toured together. What are you talking about about this new era of Trump in Europe? And of course it's challenges with China. You know, what do you and Hugh focus on?

You're double barreled at Oliver Wyman. You got the wonderful Hugh vannsteinas well when you toured together. What are you talking about about this new era of Trump in Europe? And of course it's challenges with China. You know, what do you and Hugh focus on?

And Hugh and I had lunch today, he sends his regards. We're focused on really trying to understand how this new world order unfolds. You've already seen the new Trump administration threatened tariffs, You've seen retaliatory tariffs, threatened by some country, and there's a lot of nations and companies that are frankly worried about being collateral damaged. So really trying to understand whether the unintended consequences of some of these policy moves are really baked into the calculus.

And Hugh and I had lunch today, he sends his regards. We're focused on really trying to understand how this new world order unfolds. You've already seen the new Trump administration threatened tariffs, You've seen retaliatory tariffs, threatened by some country, and there's a lot of nations and companies that are frankly worried about being collateral damaged. So really trying to understand whether the unintended consequences of some of these policy moves are really baked into the calculus.

So how do you feel. What's the feeling in Davos about maybe just global trade going forward over the next four years. Are people rethinking the near shoring, friendshoring, that type of thing.

So how do you feel. What's the feeling in Davos about maybe just global trade going forward over the next four years. Are people rethinking the near shoring, friendshoring, that type of thing.

I think there's cautious optimism. I don't think there's any immediate change in near shoring and friendshoring, but I think certainly the posture and change from the Biden to the Trump administry is a marked one in terms of how trade related issues are settled. So I think there is, you know, certainly a view that this administration is more pro business. However, the means with which they attempt to push that agenda could have some potential consequences down the road.

I think there's cautious optimism. I don't think there's any immediate change in near shoring and friendshoring, but I think certainly the posture and change from the Biden to the Trump administry is a marked one in terms of how trade related issues are settled. So I think there is, you know, certainly a view that this administration is more pro business. However, the means with which they attempt to push that agenda could have some potential consequences down the road.

So what's the feeling there in Davas about this whole tariff situation, Because you see, I guess there's a little bit of relief in the market that President Trump did not announced tariff's on day one that in fact, he will study them and you know, maybe Canada and Mexico.

So what's the feeling there in Davas about this whole tariff situation, Because you see, I guess there's a little bit of relief in the market that President Trump did not announced tariff's on day one that in fact, he will study them and you know, maybe Canada and Mexico.

Will be first.

Will be first.

What's the feeling in Davas about how global financial of global you know, kind of CEO should react.

What's the feeling in Davas about how global financial of global you know, kind of CEO should react.

Now, And being with a lot of global banking CEOs today, I mean, look, we all had practice in the first Trump administration, so I think people are being careful not to jump to any conclusions based on some of the statements he makes until we really start to see the policy shakeout. And that's really important is that the market not overreact to some of these statements as we begin reactlimate essentially to the tenor this new administration.

Now, And being with a lot of global banking CEOs today, I mean, look, we all had practice in the first Trump administration, so I think people are being careful not to jump to any conclusions based on some of the statements he makes until we really start to see the policy shakeout. And that's really important is that the market not overreact to some of these statements as we begin reactlimate essentially to the tenor this new administration.

Jan with the context of we've got a minute here, maybe two minutes to go into it. He's your expertise. And sanctions are we beginning to affect mister Putin in mister Putin's Russian domestic economy.

Jan with the context of we've got a minute here, maybe two minutes to go into it. He's your expertise. And sanctions are we beginning to affect mister Putin in mister Putin's Russian domestic economy.

So that's the question. The sanctions that President Biden imposed a week ago Friday, we're fairly significant and further restricting access for countries to buy Russian oil by beginning to close the loophole that allowed certain legal purchases. Now there's actually a moment for the new Trump administration to leverage authorities that the Biden administration imposed at the end of twenty three on secondary sanctions by really trying to force third country actors that continue to trade with Russia and the US to make a choice more aggressively. And those sanctions cost very little to the American taxpayer versus military aid and other sorts of aid that are provided. So there is a certain mechanism that can be applied. And you know, with Russia, it was always going to be the long game in terms of sanctions to really isolate the economy. But there is more that can be done, and there is more that could be done in the coming weeks by the Trump administration.

So that's the question. The sanctions that President Biden imposed a week ago Friday, we're fairly significant and further restricting access for countries to buy Russian oil by beginning to close the loophole that allowed certain legal purchases. Now there's actually a moment for the new Trump administration to leverage authorities that the Biden administration imposed at the end of twenty three on secondary sanctions by really trying to force third country actors that continue to trade with Russia and the US to make a choice more aggressively. And those sanctions cost very little to the American taxpayer versus military aid and other sorts of aid that are provided. So there is a certain mechanism that can be applied. And you know, with Russia, it was always going to be the long game in terms of sanctions to really isolate the economy. But there is more that can be done, and there is more that could be done in the coming weeks by the Trump administration.

So Dana, just real quickly, is there an expectation that this Trump administration will move to end this war in Ukraine quickly?

So Dana, just real quickly, is there an expectation that this Trump administration will move to end this war in Ukraine quickly?

Well, I think you've already heard President Trump begin to say the challenges in ending this quickly, whether President Zelensky agrees to whatever terms exist. I mean, this is not the simplest thing to end with the snap of fingers. There's a lot of questions on the table in terms of what peace ultimately looks like. But I mean reinforcing the Western Coalition, I mean in the inaugural address. There was no mention of Ukraine. President Zelenski speaks here this afternoon in Davos, and it will be helpful to hear beyond what Scott Bessen said in his confirmation hearing next week, how sanctions will play a role this foreign policy agenda.

Well, I think you've already heard President Trump begin to say the challenges in ending this quickly, whether President Zelensky agrees to whatever terms exist. I mean, this is not the simplest thing to end with the snap of fingers. There's a lot of questions on the table in terms of what peace ultimately looks like. But I mean reinforcing the Western Coalition, I mean in the inaugural address. There was no mention of Ukraine. President Zelenski speaks here this afternoon in Davos, and it will be helpful to hear beyond what Scott Bessen said in his confirmation hearing next week, how sanctions will play a role this foreign policy agenda.

Ten tennemum. Thank you so much. With Oliver Wyman from Davos this morning. Perhaps we can catch up with them on the backside of Davos as well.

Ten tennemum. Thank you so much. With Oliver Wyman from Davos this morning. Perhaps we can catch up with them on the backside of Davos as well.

This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, 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.

This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, 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.