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You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Cardplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Cardplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

John Talker sitting in for Alex Deal and Paul Sweeney.

John Talker sitting in for Alex Deal and Paul Sweeney.

You're live here in our Bloomberg Interactive Broker Studio streaming live on YouTube as well. John, look at that you missed data a little bit better and expected. And what's also interesting to me is the one year inflation outlook. The consensus was two point nine percent, came in two point seven, so maybe people feel a little bit better about inflation.

You're live here in our Bloomberg Interactive Broker Studio streaming live on YouTube as well. John, look at that you missed data a little bit better and expected. And what's also interesting to me is the one year inflation outlook. The consensus was two point nine percent, came in two point seven, so maybe people feel a little bit better about inflation.

And of course this is the pulse that we take just before the election.

And of course this is the pulse that we take just before the election.

The last one.

The last one.

Oh that's right, So uh, we're gonna have to put on our politics.

Oh that's right, So uh, we're gonna have to put on our politics.

Hasty as well. Yeah, exactly.

Hasty as well. Yeah, exactly.

Let's break this data down with Joan shut She is Surveys of Consumers Director at the University of Michigan. Joanna, it seems like some pretty solid numbers here.

Let's break this data down with Joan shut She is Surveys of Consumers Director at the University of Michigan. Joanna, it seems like some pretty solid numbers here.

What is your takeaway Over.

What is your takeaway Over.

The last few months, consumers have been inching up in their level of confidence in the economy. They haven't really been seeing major swings up or down. A lot of people are kind of reserving judgment until the election because for a lot of people, the trajectory of the economy depends on which candidate wins the presidential race.

The last few months, consumers have been inching up in their level of confidence in the economy. They haven't really been seeing major swings up or down. A lot of people are kind of reserving judgment until the election because for a lot of people, the trajectory of the economy depends on which candidate wins the presidential race.

But what does it say about their feelings about which way they're going to vote, Because the economy, we're told time and time again, is the number one issue.

But what does it say about their feelings about which way they're going to vote, Because the economy, we're told time and time again, is the number one issue.

You know, consumers overall are feeling much better about the economy than they were two years ago. Business conditions, expectations are near their historical or at their historical average, so people are not feeling as dismal about the economy as they did a year ago two years ago. At the same time, they continue to tell us how much high prices are weighing on their personal finances.

You know, consumers overall are feeling much better about the economy than they were two years ago. Business conditions, expectations are near their historical or at their historical average, so people are not feeling as dismal about the economy as they did a year ago two years ago. At the same time, they continue to tell us how much high prices are weighing on their personal finances.

So people don't necessarily feel.

So people don't necessarily feel.

Like they're thriving now, but they really have seen quite a bit of amp since since the peak of inflation a couple of years.

Like they're thriving now, but they really have seen quite a bit of amp since since the peak of inflation a couple of years.

Ago, Joanne, how much, if any, is the recent FED rate cut factor into these results for consumers?

Ago, Joanne, how much, if any, is the recent FED rate cut factor into these results for consumers?

They are, they're they're absolutely expecting.

They are, they're they're absolutely expecting.

They welcomed the rate cuts, and when we ask people about buying conditions for large purchases like cars or homes or durable goods, those those have all improved on the wake of these rate cuts and and continue consumers expect that to continue going forward. We have over half of consumers expecting rake further rate cuts in the year ahead.

They welcomed the rate cuts, and when we ask people about buying conditions for large purchases like cars or homes or durable goods, those those have all improved on the wake of these rate cuts and and continue consumers expect that to continue going forward. We have over half of consumers expecting rake further rate cuts in the year ahead.

So it is helping a little bit. It's not helping dramatically.

So it is helping a little bit. It's not helping dramatically.

Home buying conditions still near historic lows, but consumers absolutely welcome these rate cuts.

Home buying conditions still near historic lows, but consumers absolutely welcome these rate cuts.

Before you go, who are the people that you survey? Are they whacked out lefties or hardcore right wingers.

Before you go, who are the people that you survey? Are they whacked out lefties or hardcore right wingers.

All of the above.

All of the above.

We get a random sample of American consumers. We get all ages, all political stripes, all educational payment levels, and it absolutely comes through in our data.

We get a random sample of American consumers. We get all ages, all political stripes, all educational payment levels, and it absolutely comes through in our data.

All right, Joyanne, thank you so much for joining us. We appreciate checking in with you on these you miss days. Joan Shoe, She's Surveys of Consumers Director at the University of Michigan.

All right, Joyanne, thank you so much for joining us. We appreciate checking in with you on these you miss days. Joan Shoe, She's Surveys of Consumers Director at the University of Michigan.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.

It's all about the election, John, It's all about DC.

It's all about the election, John, It's all about DC.

The good news for us is we got Bloomberg intelligence people down in DC and their job is to figure out what's going to happen in DC in Congress and how's it going to impact various industries and various markets. We actually pay them to do this stuff and they're really really good at it. Nathan Dean is our go to person and all things Washington, and he makes sense out of it all. Nathan Dean, Bloomberg Intelligence Senior policy analyst, joined here. Hey, Nathan, I'm sure you're getting this question one thousand times a day. What will a Harris administration look like? And what will a Trump administration look like across basically everything? And how will impact the markets? How do you kind of synthesize that question to our clients?

The good news for us is we got Bloomberg intelligence people down in DC and their job is to figure out what's going to happen in DC in Congress and how's it going to impact various industries and various markets. We actually pay them to do this stuff and they're really really good at it. Nathan Dean is our go to person and all things Washington, and he makes sense out of it all. Nathan Dean, Bloomberg Intelligence Senior policy analyst, joined here. Hey, Nathan, I'm sure you're getting this question one thousand times a day. What will a Harris administration look like? And what will a Trump administration look like across basically everything? And how will impact the markets? How do you kind of synthesize that question to our clients?

Yeah, So I think we're saying that there's four, maybe five key themes. Let's go with five for next year in terms of a Harris or a Trump presidency, and you can see where both presidencies are going to have to play out in these themes. The first is, like you just mentioned tariffs, Now we have a seventy percent chance of tariff's coming no matter what next year. It's just whether or not they are broad tariff like sixty percent on all goods coming from China, or a subsector of tariff like what we've seen in the Biden administration with on automobiles, for example. Tariffs are somewhat popular, so tariffs are coming. The second is tax. The Trump era tax cuts expires at the end of twenty twenty five for individuals, so we're going to see a robust tax debate, and specifically you're going to see a debate on whether or not that corporate tax rate changes from twenty one percent to something else to help pay for these tax cuts. You're going to see a regulation effort or a deregulation effort, depending on who you are. This is certainly important to the investment banks. You're going to see the debt sealing return probably in the second to third quarter next year. You're going to see a debt ceiling fight if Kamala Harris wins the presidency. And finally, a lot of people have questions on the Inflation Reduction Act because there's a lot of capex coming into the United States on renewable industry. For example, will the IRA either be cemented under Harris presidency or tweaked or altered to help pay for those tax cuts under a Trump presidency.

Yeah, So I think we're saying that there's four, maybe five key themes. Let's go with five for next year in terms of a Harris or a Trump presidency, and you can see where both presidencies are going to have to play out in these themes. The first is, like you just mentioned tariffs, Now we have a seventy percent chance of tariff's coming no matter what next year. It's just whether or not they are broad tariff like sixty percent on all goods coming from China, or a subsector of tariff like what we've seen in the Biden administration with on automobiles, for example. Tariffs are somewhat popular, so tariffs are coming. The second is tax. The Trump era tax cuts expires at the end of twenty twenty five for individuals, so we're going to see a robust tax debate, and specifically you're going to see a debate on whether or not that corporate tax rate changes from twenty one percent to something else to help pay for these tax cuts. You're going to see a regulation effort or a deregulation effort, depending on who you are. This is certainly important to the investment banks. You're going to see the debt sealing return probably in the second to third quarter next year. You're going to see a debt ceiling fight if Kamala Harris wins the presidency. And finally, a lot of people have questions on the Inflation Reduction Act because there's a lot of capex coming into the United States on renewable industry. For example, will the IRA either be cemented under Harris presidency or tweaked or altered to help pay for those tax cuts under a Trump presidency.

For banks, I go right to the capital requirements under Bozel three. How do the candidate stand on that and how would that impact the sector?

For banks, I go right to the capital requirements under Bozel three. How do the candidate stand on that and how would that impact the sector?

Yeah, so you're talking about the Basle three endgame. It's a proposed rule which, if outlined as by the FED, would increase capital requirements for the American gesips. So think of the Bank of America as the JP Morgans and the city groups around nine percent. You're looking around a three to four percent increase in terms of the mid sized regionals like P and C. Tryst If Kamlin Harrison wins the presidency, we think this proposal will be reproposed in the early part of next year, and they'll try and finalize it towards the end of twenty twenty five, maybe the beginning of twenty twenty six, and then implementation would begin the next three years after that or over the next three years. If President Trump wins, I think you're going to see the work on this just stop. And I don't think these capital requirements are ever going to be implemented, at least not within the next few years. And this is where it could actually turn global in terms of its impact. The European regulators have already implemented this, they call it Basil four. It's already been implemented, and we've seen steps, for example, in the UK for the UK regulators to delay the implementation because they're concerned the Americans are never going to fallow suit. So if the American regulators say no, we're not going to move forward with the Bass of three endgame under the Trump presidency, you could see but the potential start of a global race to the bottom in terms of capital as Europe begins to actually pull back some of their stuff as well.

Yeah, so you're talking about the Basle three endgame. It's a proposed rule which, if outlined as by the FED, would increase capital requirements for the American gesips. So think of the Bank of America as the JP Morgans and the city groups around nine percent. You're looking around a three to four percent increase in terms of the mid sized regionals like P and C. Tryst If Kamlin Harrison wins the presidency, we think this proposal will be reproposed in the early part of next year, and they'll try and finalize it towards the end of twenty twenty five, maybe the beginning of twenty twenty six, and then implementation would begin the next three years after that or over the next three years. If President Trump wins, I think you're going to see the work on this just stop. And I don't think these capital requirements are ever going to be implemented, at least not within the next few years. And this is where it could actually turn global in terms of its impact. The European regulators have already implemented this, they call it Basil four. It's already been implemented, and we've seen steps, for example, in the UK for the UK regulators to delay the implementation because they're concerned the Americans are never going to fallow suit. So if the American regulators say no, we're not going to move forward with the Bass of three endgame under the Trump presidency, you could see but the potential start of a global race to the bottom in terms of capital as Europe begins to actually pull back some of their stuff as well.

Nathan, you're down there in DC.

Nathan, you're down there in DC.

You're knee deep in this stuff, and I know you've got great sources down there. Is there any consensus to how Congress may play out in this election or houses flipping? Are they staying the same or we can have a split type of thing? Is there any consensus?

You're knee deep in this stuff, and I know you've got great sources down there. Is there any consensus to how Congress may play out in this election or houses flipping? Are they staying the same or we can have a split type of thing? Is there any consensus?

Yeah?

Yeah?

So, I think most Washingtonians think that the Republicans have a really good shot of taking the Senate. And the reason being is is that this is not a good race for the Democrats. They're playing. They're defending twenty three against thirty four in states in total, and with Senator Joe Manchin retiring in West Virginia most likely going to replace him with a Republican. You know, the Democrats are essentially going to have to run the gauntlet and have a really good night in order to keep the Senate. Now why do we care about this, Because the Senate is there's a filibuster in the Senate for legislation. There's no filibuster for nominations. So if Kamala Harris wins and the Senate Republicans take the Senate, they'll effectively be able to jam a lot of her nominees, a lot of her regulatory leadership in place for the first half of the year. If President Trump wins, he's going to be able to get a lot of his nominees in place and be able to move much quicker on a deregulatory after Now, when it comes to the House, pulling is a little bit more difficult. You know, it's extremely tight. Our general thought is is that whoever wins the presidency most likely win the House. And the reason why investors should care about who wins the House is because of the tax debate that I mentioned next year. Tax policy historically starts in the House, So whoever controls the House controls the House of Ways and Means Committee, and therefore controls a very important person in Washington who's going to decide what those tax negotiations will look like next year.

So, I think most Washingtonians think that the Republicans have a really good shot of taking the Senate. And the reason being is is that this is not a good race for the Democrats. They're playing. They're defending twenty three against thirty four in states in total, and with Senator Joe Manchin retiring in West Virginia most likely going to replace him with a Republican. You know, the Democrats are essentially going to have to run the gauntlet and have a really good night in order to keep the Senate. Now why do we care about this, Because the Senate is there's a filibuster in the Senate for legislation. There's no filibuster for nominations. So if Kamala Harris wins and the Senate Republicans take the Senate, they'll effectively be able to jam a lot of her nominees, a lot of her regulatory leadership in place for the first half of the year. If President Trump wins, he's going to be able to get a lot of his nominees in place and be able to move much quicker on a deregulatory after Now, when it comes to the House, pulling is a little bit more difficult. You know, it's extremely tight. Our general thought is is that whoever wins the presidency most likely win the House. And the reason why investors should care about who wins the House is because of the tax debate that I mentioned next year. Tax policy historically starts in the House, So whoever controls the House controls the House of Ways and Means Committee, and therefore controls a very important person in Washington who's going to decide what those tax negotiations will look like next year.

Ah.

Ah.

Can I just jump back to some of the sectors, specifically with electric vehicles, Harris, They would support subsidies for electric vehicles or tax breaks, which I find curious because Elon Musk is the guy stumping for Donald Trump at this point, then he stands to be well, Tesla stands to be impacted quite a bit by this.

Can I just jump back to some of the sectors, specifically with electric vehicles, Harris, They would support subsidies for electric vehicles or tax breaks, which I find curious because Elon Musk is the guy stumping for Donald Trump at this point, then he stands to be well, Tesla stands to be impacted quite a bit by this.

Yeah, you know, we've heard anecdotally that, you know, because Tesla, you know, the Tesla vehicle is pretty expensive, and so whether or not a seventy five hundred dollars tax credit would change the buying habits over Tesla. You know, I've been talking to our auto's Annal Steve Man about this quite a bit. So there's some thought out there that Tesla's somewhat protected. We've also seen through Steve's work that some of the other automakers are looking to try and put out low cost evs as a way to combat that. But the reason why the EV tax credit is so important is because it's part of the Inflation Reduction Act. And if you're going to try and figure out how to pay for three and a half four trillion dollars worth of tax cuts to extend those, you know, the IRA is certainly something they're going to be looking at.

Yeah, you know, we've heard anecdotally that, you know, because Tesla, you know, the Tesla vehicle is pretty expensive, and so whether or not a seventy five hundred dollars tax credit would change the buying habits over Tesla. You know, I've been talking to our auto's Annal Steve Man about this quite a bit. So there's some thought out there that Tesla's somewhat protected. We've also seen through Steve's work that some of the other automakers are looking to try and put out low cost evs as a way to combat that. But the reason why the EV tax credit is so important is because it's part of the Inflation Reduction Act. And if you're going to try and figure out how to pay for three and a half four trillion dollars worth of tax cuts to extend those, you know, the IRA is certainly something they're going to be looking at.

Now.

Now.

I think the IRA, for most part is going to be cemented. It's really popular in Republican states in terms of that capex that's coming in and building plants. But that EV tax credit is one of those provisions that could potentially be on the chopping block to help pay for those tax cuts.

I think the IRA, for most part is going to be cemented. It's really popular in Republican states in terms of that capex that's coming in and building plants. But that EV tax credit is one of those provisions that could potentially be on the chopping block to help pay for those tax cuts.

John John, If I were elected president, my first phone call would be get this Nathan Dean guy in my White House, just to get stuff done. He knows everything, and I feel like he knows everybody, and he just explains stuff so well, and just get stuff done.

John John, If I were elected president, my first phone call would be get this Nathan Dean guy in my White House, just to get stuff done. He knows everything, and I feel like he knows everybody, and he just explains stuff so well, and just get stuff done.

Why isn't anybody talking about the fiscal deficits at this point? I guess I guess it's just, you know, it's just.

Why isn't anybody talking about the fiscal deficits at this point? I guess I guess it's just, you know, it's just.

It's not good, not popular, it's not good politics.

It's not good, not popular, it's not good politics.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broud Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broud Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Let's step back and take a look at these broader markets share. We do have, you know, some green on the screen here today, we've got the SMP of fifty points. That's nine tens to one percent. The tech heavy NASDAC up about one and a half percent here, So that's good news there.

Let's step back and take a look at these broader markets share. We do have, you know, some green on the screen here today, we've got the SMP of fifty points. That's nine tens to one percent. The tech heavy NASDAC up about one and a half percent here, So that's good news there.

Victoria Fernandez joins us.

Victoria Fernandez joins us.

He's a chief market strategist at cross Mark Global Investments. Victoria, we had some pretty good economic data today. I know, durable goods orders came in better than expected. We had the You Mission Sentiment survey come in better than expected. If I'm the Federal Reserve, I can actually think about maybe I don't have to cut come November.

He's a chief market strategist at cross Mark Global Investments. Victoria, we had some pretty good economic data today. I know, durable goods orders came in better than expected. We had the You Mission Sentiment survey come in better than expected. If I'm the Federal Reserve, I can actually think about maybe I don't have to cut come November.

How do you guys think about it over their cross Mark?

How do you guys think about it over their cross Mark?

It's really been our thought process all along that we would only get two cuts from the September through the December meetings. We thought we would get a twenty five basis point cut in September, they would skip November, and then we would get another twenty five in December. For the exact reasons that you're talking about. We've seen some of the growth components of the economy continue to do pretty well. I mean, you look back at the end of August, the City Economic Surprise Index was one of the worst levels it's been in years, but it has come up significantly since then. It's one of the reasons we've seen ten your treasury yields come up because they have a pretty high correlation. So I think it does give the FED a little bit of wiggle room if they don't want to do anything the week of the election, because I have a feeling we probably won't know who the president is come Fed day when they're ready to have their press conference. It gives them a little bit of cover to hold off and then maybe do another cut in December.

It's really been our thought process all along that we would only get two cuts from the September through the December meetings. We thought we would get a twenty five basis point cut in September, they would skip November, and then we would get another twenty five in December. For the exact reasons that you're talking about. We've seen some of the growth components of the economy continue to do pretty well. I mean, you look back at the end of August, the City Economic Surprise Index was one of the worst levels it's been in years, but it has come up significantly since then. It's one of the reasons we've seen ten your treasury yields come up because they have a pretty high correlation. So I think it does give the FED a little bit of wiggle room if they don't want to do anything the week of the election, because I have a feeling we probably won't know who the president is come Fed day when they're ready to have their press conference. It gives them a little bit of cover to hold off and then maybe do another cut in December.

We get ahead of ourselves by the markets by pricing FED cuts.

We get ahead of ourselves by the markets by pricing FED cuts.

I think we absolutely did. It's no different than at the end of last year, or when the market was pricing in what was it, six seven rate cuts by March, and we were having the conversation with clients going there's no way that we're going to do that. The FED has worked too hard and too long to get us to the point where we are. They're not going to start cutting that quickly, and we saw the market reprice at that point in time. They did the same thing here. I think they thought, okay, we're going to hit September. Labor market is weakening. We had that one payroll report, was it July that really kind of unnerved the market a little bit, and the markets just ran with that. And again here we are pricing some of those cuts out. You look at where the neutral rate is priced. A couple months ago, that neutral rate was around two and three quarters two and a half. Now we're back up over three. We're closer to like a three point six. So they basically cut in half the number of cuts that they're expecting over the next twelve eighteen months. So yes, I think the market got a little bit ahead of itself. It's correcting itself now, which again plays into the Fed's hand of being able to be a little more cautious Victoria.

I think we absolutely did. It's no different than at the end of last year, or when the market was pricing in what was it, six seven rate cuts by March, and we were having the conversation with clients going there's no way that we're going to do that. The FED has worked too hard and too long to get us to the point where we are. They're not going to start cutting that quickly, and we saw the market reprice at that point in time. They did the same thing here. I think they thought, okay, we're going to hit September. Labor market is weakening. We had that one payroll report, was it July that really kind of unnerved the market a little bit, and the markets just ran with that. And again here we are pricing some of those cuts out. You look at where the neutral rate is priced. A couple months ago, that neutral rate was around two and three quarters two and a half. Now we're back up over three. We're closer to like a three point six. So they basically cut in half the number of cuts that they're expecting over the next twelve eighteen months. So yes, I think the market got a little bit ahead of itself. It's correcting itself now, which again plays into the Fed's hand of being able to be a little more cautious Victoria.

We're kind of in the teeth of the earning season right now. We've had obviously the big banks put us some really good numbers lot last week, and we're starting to see some more What do you make of this earnings season here so far, and what do you think the market needs from earnings this period.

We're kind of in the teeth of the earning season right now. We've had obviously the big banks put us some really good numbers lot last week, and we're starting to see some more What do you make of this earnings season here so far, and what do you think the market needs from earnings this period.

So we saw expectations get really lowered right coming in to this earning season. It's really the lowest earnings growth season that we've had since the second quarter of twenty three, so a little bit over a year, and it was negative back then. We're not expecting anything negative here. But you're looking at maybe three to four percent earnings growth for the third quarter, and you might say, Okay, we're starting to see things come through from a weakening labor market. Maybe we start to see less hiring wages, or off margins are being compressed. All of that would make sense to see a lower earnings bar being set right going into next quarter and into the four quarters of next year, expectations are right back for double digits. So it seems like the market thinks earnings are continuing to be strong. Obviously, I don't have a crystal ball to tell us whether they.

So we saw expectations get really lowered right coming in to this earning season. It's really the lowest earnings growth season that we've had since the second quarter of twenty three, so a little bit over a year, and it was negative back then. We're not expecting anything negative here. But you're looking at maybe three to four percent earnings growth for the third quarter, and you might say, Okay, we're starting to see things come through from a weakening labor market. Maybe we start to see less hiring wages, or off margins are being compressed. All of that would make sense to see a lower earnings bar being set right going into next quarter and into the four quarters of next year, expectations are right back for double digits. So it seems like the market thinks earnings are continuing to be strong. Obviously, I don't have a crystal ball to tell us whether they.

Will or not.

Will or not.

But if they don't, then I don't know how we support a twenty two times evaluation on the equity market. So earnings better pull through if we want to see the stock market continue on the trend that it's been on all.

But if they don't, then I don't know how we support a twenty two times evaluation on the equity market. So earnings better pull through if we want to see the stock market continue on the trend that it's been on all.

Right, So how do we what should I buy? How do we position ourselves?

Right, So how do we what should I buy? How do we position ourselves?

So the one thing we don't want to do is get in the way of the momentum of the market. And we know we have this kind of momentum play going right now because you're seeing yields and stocks. Except for the last couple of days, yields and stocks have been trending higher together. But we do think you need to be a little bit guarded because there are yellow flags that are out there, whether it's you know, Jolt's report, whether it's temporary hiring declining, whether it's hiring rates across the board declining, all of these different kind of yellow flags we've been seeing in the economy. So we want to have a pretty balanced portfolio. We like financials because of the yield curve we think will be resteepening. They've gone as you've mentioned, they had really good earnings, so they've gone up. Maybe wait for a little pullback industrials or showing leadership right now versus the rest of the market. But find some of those areas that have pulled back as of late, healthcare, staples, even some of the tech names. That's where I think you need to go in and start looking. You look at a name like Signa that we own, doesn't have exposure to Medicare and Medicaid like some of the other HMOs and has been holding its own but it's had a pullback. You can go in there and even a name like Qualcom. I think within the tech industry. We know we've got the mag seven reporting next week. You can find some other areas within tech to add some exposure. So make sure you're diversified. And we would add a little bit of fixed income to have steady cash flow with yields as high as they are right now.

So the one thing we don't want to do is get in the way of the momentum of the market. And we know we have this kind of momentum play going right now because you're seeing yields and stocks. Except for the last couple of days, yields and stocks have been trending higher together. But we do think you need to be a little bit guarded because there are yellow flags that are out there, whether it's you know, Jolt's report, whether it's temporary hiring declining, whether it's hiring rates across the board declining, all of these different kind of yellow flags we've been seeing in the economy. So we want to have a pretty balanced portfolio. We like financials because of the yield curve we think will be resteepening. They've gone as you've mentioned, they had really good earnings, so they've gone up. Maybe wait for a little pullback industrials or showing leadership right now versus the rest of the market. But find some of those areas that have pulled back as of late, healthcare, staples, even some of the tech names. That's where I think you need to go in and start looking. You look at a name like Signa that we own, doesn't have exposure to Medicare and Medicaid like some of the other HMOs and has been holding its own but it's had a pullback. You can go in there and even a name like Qualcom. I think within the tech industry. We know we've got the mag seven reporting next week. You can find some other areas within tech to add some exposure. So make sure you're diversified. And we would add a little bit of fixed income to have steady cash flow with yields as high as they are right now.

All right, Victoria, thank you so much for joining us. Victoria Fernandez Folks. She's chief market strategist at cross Mark Global Investments, joining us via zoom from Houston, Texas. She's a Houston native born and raised in Houston. When undergraduate school at Rice, which is one of the great universities in this country.

All right, Victoria, thank you so much for joining us. Victoria Fernandez Folks. She's chief market strategist at cross Mark Global Investments, joining us via zoom from Houston, Texas. She's a Houston native born and raised in Houston. When undergraduate school at Rice, which is one of the great universities in this country.

Wish I looked at Rice back. I don't even think about that.

Wish I looked at Rice back. I don't even think about that.

That would have been such a cool thing to be in Houston, Texas. At Rice didn't even think about it.

That would have been such a cool thing to be in Houston, Texas. At Rice didn't even think about it.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

All right, John.

All right, John.

One of the new stories today was a deal that's not going to happen, Tapestries eight point five billion dollars deal for Capri that's halted by a judge. In a big win for the Federal Trade Commission, not such a big win for the shareholders of Capriga. I might add deb Acon, she is our go to person for everything Luxury Debate and Bloomberg Intelligence Luxury goods analyst deb I have to admit I'm kind of surprised by this ruling by the judge. I think the market is too judging by the big decline and cappreciares what's going on there with this deal?

One of the new stories today was a deal that's not going to happen, Tapestries eight point five billion dollars deal for Capri that's halted by a judge. In a big win for the Federal Trade Commission, not such a big win for the shareholders of Capriga. I might add deb Acon, she is our go to person for everything Luxury Debate and Bloomberg Intelligence Luxury goods analyst deb I have to admit I'm kind of surprised by this ruling by the judge. I think the market is too judging by the big decline and cappreciares what's going on there with this deal?

I think so too, Hi, So yeah. I would say there was a sixty to seventy percent swing of expectation of this deal going ahead, and it's all about the coming together taps use eight and a half billion bid four Capri could have brought together two very big brands in aspirational luxury, aspirational fashion, entry level luxury, however you like to name with Coach under Tapestry and Michael Cars under Capri as well as their four of the brands combined, and the idea, you know what was found by the judges that actually there would be too much of an overlap and that there was a commission clash. So there's been a rule against the expectation when we looked at all the data sets as well as many of us who've done the due diligence, and there are reams and reams of data taken to court where that actually there's so much fragmentation across the space, particularly in the US, which is the biggest market for both brands, across so many price points online and offline, in department stores, in owned stores, that this was seen as possibly a deal that could have gone ahead.

I think so too, Hi, So yeah. I would say there was a sixty to seventy percent swing of expectation of this deal going ahead, and it's all about the coming together taps use eight and a half billion bid four Capri could have brought together two very big brands in aspirational luxury, aspirational fashion, entry level luxury, however you like to name with Coach under Tapestry and Michael Cars under Capri as well as their four of the brands combined, and the idea, you know what was found by the judges that actually there would be too much of an overlap and that there was a commission clash. So there's been a rule against the expectation when we looked at all the data sets as well as many of us who've done the due diligence, and there are reams and reams of data taken to court where that actually there's so much fragmentation across the space, particularly in the US, which is the biggest market for both brands, across so many price points online and offline, in department stores, in owned stores, that this was seen as possibly a deal that could have gone ahead.

Yeah, it's what were the regulators afraid of, Like handbag prices. Would you know there'd be a monopoly and price go up so I couldn't afford Yeah.

Yeah, it's what were the regulators afraid of, Like handbag prices. Would you know there'd be a monopoly and price go up so I couldn't afford Yeah.

Absolutely, the expectation, the expectation that over time price rises would be seen to be taking place in the industry. Once the two brands were together and it was seen that they could have fifty nine percent of that aspirational marketplace, which I find difficult to understand and as does know much of the market, given that we did a lot of work on that and there is the deadline on this deal was actually the tenth of feb Speaking to one of our specialists last night, there's an understanding of course that Tapestry will appeal, that Capri will follow and go along with that appeal, but that actually to get the FTC to come up with their findings by the tenth of February would be difficult, and then an extension beyond which would be difficult. And at that point, if the tenth of feb it could be that the deal would break up. So you know, there are still cogs in motion taking place. But the view in the market today is that Tapestry a little bit is safe because the market versus when they put the offer in two years ago coming up by the time it would complete it was actually a mid twenty twenty three. It's probably down for aspiration luxury. In terms of growth, we're actually in slight decline. Difficult US market, very difficult, China market are particularly difficult Q two and we haven't seen any changing Q three and that's moved into October. You know, for China, we're probably seeing that market down twenty five percent plus after a difficult couple of years. And then for the US, very very slow growth, and you really have to have your brand out there, visible, new design, new innovations, coaches doing it well under Tapestry. We're just we're looking at some data from lists to show that they're in the doing very well and they're brand to eat, you know, but there is a long way to go, all right.

Absolutely, the expectation, the expectation that over time price rises would be seen to be taking place in the industry. Once the two brands were together and it was seen that they could have fifty nine percent of that aspirational marketplace, which I find difficult to understand and as does know much of the market, given that we did a lot of work on that and there is the deadline on this deal was actually the tenth of feb Speaking to one of our specialists last night, there's an understanding of course that Tapestry will appeal, that Capri will follow and go along with that appeal, but that actually to get the FTC to come up with their findings by the tenth of February would be difficult, and then an extension beyond which would be difficult. And at that point, if the tenth of feb it could be that the deal would break up. So you know, there are still cogs in motion taking place. But the view in the market today is that Tapestry a little bit is safe because the market versus when they put the offer in two years ago coming up by the time it would complete it was actually a mid twenty twenty three. It's probably down for aspiration luxury. In terms of growth, we're actually in slight decline. Difficult US market, very difficult, China market are particularly difficult Q two and we haven't seen any changing Q three and that's moved into October. You know, for China, we're probably seeing that market down twenty five percent plus after a difficult couple of years. And then for the US, very very slow growth, and you really have to have your brand out there, visible, new design, new innovations, coaches doing it well under Tapestry. We're just we're looking at some data from lists to show that they're in the doing very well and they're brand to eat, you know, but there is a long way to go, all right.

Deb thanks so much for joining us getting up to date there.

Deb thanks so much for joining us getting up to date there.

They're making luxury goodzanas for Bloomberg Intelligence, John, I think I would just walk members of the Federal Trade Commission.

They're making luxury goodzanas for Bloomberg Intelligence, John, I think I would just walk members of the Federal Trade Commission.

Down like Canal Street. I mean, there's like a billion of these knockoff bags all over the place. I mean, you know, I meant.

Down like Canal Street. I mean, there's like a billion of these knockoff bags all over the place. I mean, you know, I meant.

I was tired of my belt that I bought at Cole's falling apart. After a couple of mong steps back, I was going to step up, go to coach. I was told by one of the retail experts, no massimo data, oh and a lot cheaper. And so far it hasn't fallen apart.

I was tired of my belt that I bought at Cole's falling apart. After a couple of mong steps back, I was going to step up, go to coach. I was told by one of the retail experts, no massimo data, oh and a lot cheaper. And so far it hasn't fallen apart.

You get a little belt. Correspondent John Tucker, very good.

You get a little belt. Correspondent John Tucker, very good.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business ap You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business ap You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

John Tucker sitting in for Alex Steel and Paul Sweeney were live here on our Bloomberg Interactive Brober Studio on our streaming live on YouTube as well, so check us out there as well.

John Tucker sitting in for Alex Steel and Paul Sweeney were live here on our Bloomberg Interactive Brober Studio on our streaming live on YouTube as well, so check us out there as well.

Big Take Stories we love them here. These are really really deeply sourced stories.

Big Take Stories we love them here. These are really really deeply sourced stories.

They go really deep dives and some some really interesting topics. And this one's about kind of the wealthy and some of the advantages they have in terms of shielding of their taxes. Justina Lee joins us here cross Asset Markets reporter for Bloomberg News. She's based in London, joining us there via zoom. Wealthy investors are using tax aware long short strategies to generate losses that can be used to offset capital gains taxes, allowing them to minimize their tax bills. I had not heard of this before, so I learned a lot reading this article. Justina, thanks for joining us here. Can you tell us what a tax aware long short strategy is?

They go really deep dives and some some really interesting topics. And this one's about kind of the wealthy and some of the advantages they have in terms of shielding of their taxes. Justina Lee joins us here cross Asset Markets reporter for Bloomberg News. She's based in London, joining us there via zoom. Wealthy investors are using tax aware long short strategies to generate losses that can be used to offset capital gains taxes, allowing them to minimize their tax bills. I had not heard of this before, so I learned a lot reading this article. Justina, thanks for joining us here. Can you tell us what a tax aware long short strategy is?

Yeah? Sure, I think most people, probably if you're familiar with the wealth management space, might have heard of tax loss harvesting, and that's where you sell your losing investment so that you have a capital loss to offset some of your capital gains tax bill. So taxbi long short essentially takes advantage of that same idea, except that because you have longs and shorts, it means that at any given time, even if the market is going up, you can still generate quite a lot of losses to upset kind of your capital gains tax bill. You know, maybe you want to sell your apple stock, or you want to sell your house, or you kind of you want to sell your business, and so the whole idea here is it kind of gets you more losses faster.

Yeah? Sure, I think most people, probably if you're familiar with the wealth management space, might have heard of tax loss harvesting, and that's where you sell your losing investment so that you have a capital loss to offset some of your capital gains tax bill. So taxbi long short essentially takes advantage of that same idea, except that because you have longs and shorts, it means that at any given time, even if the market is going up, you can still generate quite a lot of losses to upset kind of your capital gains tax bill. You know, maybe you want to sell your apple stock, or you want to sell your house, or you kind of you want to sell your business, and so the whole idea here is it kind of gets you more losses faster.

When you don't necessarily have losses.

When you don't necessarily have losses.

Is the way I think I see this is that right right exactly? And it sounds kind of funny because obviously you want to make money overall, But the magic of these strategies is they're still trying to make you money on the whole, but usually kind of in a whole portfolio, even if the portfolio is making money, there will be some losing positions there because you're holding hundreds of stocks usually in these strategies, and so the idea is like, well, you know, you make the best out of those losing investments, and in the meantime, you're also like getting richer, and because you're saving money from not paying taxes, you can also be invested for longer.

Is the way I think I see this is that right right exactly? And it sounds kind of funny because obviously you want to make money overall, But the magic of these strategies is they're still trying to make you money on the whole, but usually kind of in a whole portfolio, even if the portfolio is making money, there will be some losing positions there because you're holding hundreds of stocks usually in these strategies, and so the idea is like, well, you know, you make the best out of those losing investments, and in the meantime, you're also like getting richer, and because you're saving money from not paying taxes, you can also be invested for longer.

So and this is.

So and this is.

Different from just regular tax laws selling, because I'm buying a huge basket of stocks knowing that overall I'll probably make money, but there will be individual losers, even if those are names I didn't necessarily want to own.

Different from just regular tax laws selling, because I'm buying a huge basket of stocks knowing that overall I'll probably make money, but there will be individual losers, even if those are names I didn't necessarily want to own.

Right, So, in regular tax loss harvesting, usually you just have a portfolio of stocks that you own. But the problem with that is that over time the market goes up and so you run out of losses to harvest. I mean a lot of estimates say this can happen even just after a few years. And so with long shorts, because you have those shorts, that's betting against some stocks. Actually, the idea is you will always have some positions to sell.

Right, So, in regular tax loss harvesting, usually you just have a portfolio of stocks that you own. But the problem with that is that over time the market goes up and so you run out of losses to harvest. I mean a lot of estimates say this can happen even just after a few years. And so with long shorts, because you have those shorts, that's betting against some stocks. Actually, the idea is you will always have some positions to sell.

Okay, So election days coming up, and this does kind of sort of figure into the elections because the Biden administration has proposed a taxing unrealized profits. How does this all I haven't I'm not sure what Kamala Harris's position is, but how does this tie in?

Okay, So election days coming up, and this does kind of sort of figure into the elections because the Biden administration has proposed a taxing unrealized profits. How does this all I haven't I'm not sure what Kamala Harris's position is, but how does this tie in?

Yeah, because I guess the whole reason tax loss harvesting works is that you, as the investor, you can choose when to sell your investments, and so most people you know, just just never sell, especially because you can just you know, pass them on to your you know, your kin and then you get the step of a basis as well. And so in order to tackle that, I mean, President Biden proposed in his budget earlier this year that he would impose a minimum tax on billionaire so I would cover unrealized capital gains. And initially Kamala Harris did say she supports that proposal in general, but more recently I think her campaign has been kind of a little bit more vague about whether they would support, you know, taxing unrealized gains in particular.

Yeah, because I guess the whole reason tax loss harvesting works is that you, as the investor, you can choose when to sell your investments, and so most people you know, just just never sell, especially because you can just you know, pass them on to your you know, your kin and then you get the step of a basis as well. And so in order to tackle that, I mean, President Biden proposed in his budget earlier this year that he would impose a minimum tax on billionaire so I would cover unrealized capital gains. And initially Kamala Harris did say she supports that proposal in general, but more recently I think her campaign has been kind of a little bit more vague about whether they would support, you know, taxing unrealized gains in particular.

All Right, so critics of I guess they argue that these strategies, which are generally only accessible to the very wealthy, exacerbate wealth inequality and encourage complex tax avoiding schemes rather than encouraging investment and economic growth. How does the financial services industry respond to those critics. I mean it's all legal, right, right exactly.

All Right, so critics of I guess they argue that these strategies, which are generally only accessible to the very wealthy, exacerbate wealth inequality and encourage complex tax avoiding schemes rather than encouraging investment and economic growth. How does the financial services industry respond to those critics. I mean it's all legal, right, right exactly.

I mean there are a few restrictions, you know, like you cannot sell a security for the tax loss and then buy it back tomorrow. But yeah, I mean generally it's entirely legally above board. I think for a lot of critics, I mean, it just shows the problem with only taxical taxing capital gains upon realization. But the problem is, and we've kind of seen this debate, you know, unfolding over you know, Biden's proposal as well, that the problem is if you're taxing unrealized gains, that's kind of very hard to administer. And also some people say it will discourage investments, and so that would be a massive overhaul, and I don't think anyone's expecting that to change anytime soon. And so I think that's also why these strategies have been booming.

I mean there are a few restrictions, you know, like you cannot sell a security for the tax loss and then buy it back tomorrow. But yeah, I mean generally it's entirely legally above board. I think for a lot of critics, I mean, it just shows the problem with only taxical taxing capital gains upon realization. But the problem is, and we've kind of seen this debate, you know, unfolding over you know, Biden's proposal as well, that the problem is if you're taxing unrealized gains, that's kind of very hard to administer. And also some people say it will discourage investments, and so that would be a massive overhaul, and I don't think anyone's expecting that to change anytime soon. And so I think that's also why these strategies have been booming.

Uh is the iron rams going to swoop in at some point the Congress going to take hold of this and make changes. What's what's happening on that front?

Uh is the iron rams going to swoop in at some point the Congress going to take hold of this and make changes. What's what's happening on that front?

There has been kind of a few bills in Congress over the years from Democrats to tax unrealized gains. And of course you could say you could change kind of smaller things, you know, such as ending the step of the basis or maybe changing the wash sale rule so that you can't that's the rule that kind of restricts you from buying back the stock immediately after you sell it. But I think at the end of the day, I mean, a lot of you know, people I spoke to for the story say, I mean, they know that it takes a long time for these changes to go through Congress, So I think most people seem pretty confident that there won't be any material changes that will affect these strategies anytime soon.

There has been kind of a few bills in Congress over the years from Democrats to tax unrealized gains. And of course you could say you could change kind of smaller things, you know, such as ending the step of the basis or maybe changing the wash sale rule so that you can't that's the rule that kind of restricts you from buying back the stock immediately after you sell it. But I think at the end of the day, I mean, a lot of you know, people I spoke to for the story say, I mean, they know that it takes a long time for these changes to go through Congress, So I think most people seem pretty confident that there won't be any material changes that will affect these strategies anytime soon.

Any sense of how many people actually employ these strategies.

Any sense of how many people actually employ these strategies.

It's hard to say, but it's it's interesting that they've actually been around for a few years now, but they've really only grown quite a bit in the last year or so. So AQR, which is sort of a pioneer here, I mean, their AUM and the strategy has almost doubled in just half a year. And like Quantina, which kind of shares some DNA with AQR, I mean that's the only thing they do, and their AUM has more than doubled this year. This strategy does have higher minimum thresholds, so you do need to kind of put in at least a million dollars, and of course for this to be helpful at all, you need to have quite a lot of capital gain somewhere in your portfolio. So it's quite it's for the it's for the elite.

It's hard to say, but it's it's interesting that they've actually been around for a few years now, but they've really only grown quite a bit in the last year or so. So AQR, which is sort of a pioneer here, I mean, their AUM and the strategy has almost doubled in just half a year. And like Quantina, which kind of shares some DNA with AQR, I mean that's the only thing they do, and their AUM has more than doubled this year. This strategy does have higher minimum thresholds, so you do need to kind of put in at least a million dollars, and of course for this to be helpful at all, you need to have quite a lot of capital gain somewhere in your portfolio. So it's quite it's for the it's for the elite.

Yeah, all right, Justina, thank you so much for this great story. Justin and Lee Cross asset markets reporter for Bloomberg News, great Big Take story. You can read more of this story on the Bloomberg and at Bloomberg dot com Slash Big Take.

Yeah, all right, Justina, thank you so much for this great story. Justin and Lee Cross asset markets reporter for Bloomberg News, great Big Take story. You can read more of this story on the Bloomberg and at Bloomberg dot com Slash Big Take.

This is the Bloomberg Intelligence podcast, available on apples, Spotify, and anywhere else you will get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the Ihard Radio app, 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 Intelligence podcast, available on apples, Spotify, and anywhere else you will get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the Ihard Radio app, in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal