رونوشت کامل Reaction to the May Jobs Report

companies outperforming the S and P five hundred on a rolling three month basis. That's remained pretty weak because you've gone through, you know, another kind of out of AI hype, especially within the semiconductors. So that in and of itself is not a horrible omen for the market. We've seen it actually resolve itself. Those divergences resolve themselves in a positive way over the past couple of years when they have happened. 00:05:55 Speaker 3: Yeah, I like even in the past three days. 00:05:57 Speaker 2: I mean I had when I got the Dow move it up, but I see some of the mutual funds giving me better returns than Broadcom. 00:06:04 Speaker 3: Yes, yeah, there's something. 00:06:05 Speaker 6: Going on out there is Yeah, and the new and I will say the new norm. 00:06:08 Speaker 7: You know, the last time that you actually saw a lower percentage of that metric I mentioned the percentage of companies that are outperforming the index on a rolling three month basis. The last time you saw a lower percentage so sub twenty three percent was twenty three and twenty four. Before that, you have to go back to nineteen seventy three, so of course, very different market backdrops. Seventy three the start of a horrible bear market twenty three and twenty four more consistent with correction. So it is more of the norm these days, you know, given the concentrated market. 00:06:34 Speaker 3: Well, let's just say future is negative fifty right now. 00:06:36 Speaker 4: Kevin, We're in a time here are very active equity new issuance in the marketplace. We had this monster megadeal from Goldman, I mean, from Google this week, from Alphabet. The market took it in seemingly very well. And then of course we've got all these IPOs that are tuned up SpaceX on the road as we speak. Then maybe some of these AI plays come huge transactions. What does that tell you about this market? How do you guys think about it? 00:07:01 Speaker 3: So? 00:07:01 Speaker 7: I think it does underscore, of course that the sentiment environment is certainly getting frothier. You know, whether you think of it as frothy or not, I think that's always just kind of up for you know, whoever's whatever the person's perspective is. I will say, you know, I've been traveling the past four weeks almost NonStop all over the country, also in Korea, but you know, in the US when I've been speaking with our investors, there's actually been a sort of an elevated degree of skittishness or hesitation around just the environment of megacap IPOs in general. So the attitudinal sentiment is not necessarily matching up with the behavioral sentiment that we've been seeing in terms of really stretched fun flows and how much you know, has been going into tech and how well semis have been doing. So to me, that sort of lays the framework, I think, or the groundwork for maybe a little bit more room for sentiment to get stretched to the upside. Of course, you know, well, I think the game will change a little bit after we do get a lot of these companies coming online into public markets. But I haven't yet felt at least that on the attitudinal side, there's been a lot of that hype that has matched what we've been seeing with people, you know, what they've been doing with their actual dollars. 00:08:05 Speaker 4: And I guess, you know, if you want to take the bullish side here, which is probably the right way to be, earnings have been there. Earnings have supported this market, you know, it seems like, and how do you think about that going forward? 00:08:16 Speaker 7: I mean, I think, you know, of course, the breadth of earnings is actually if you just want to look at the number of industries that are seeing their earnings grow. Yes, the breadth is there, of course, the magnitude in terms of concentration, it is a little bit more skewed towards the large caps and the megacaps. 00:08:31 Speaker 6: Take the I do take the optimistic. 00:08:33 Speaker 7: Side and angle of that where if you look over the past several decades, the growth and that earning share for that cohort has grown, so it's not like it's been totally unjustified. But on the flip side, you do have more reliance on a smaller share of companies, so to the extent that they can't keep up with expectations, to the extent there is a disappointing you know quarter a series of quarters where CAPEX estimates for some reason have to come down. Earnings estimates, you know, get revised, get revised lower. Of course, you always run the risk. But that's why we make the case for a diversification within the equity market, because you've been able to you know that that's been the best way to play this, especially with even a sector like healthcare. 00:09:07 Speaker 2: Over the past couple of weeks on the road way and with the new Schwab commitment to wealth advisors and all that huge announcements from Schwab over the last ten days on this on the road in the trenches, Paul and I it's cushion. You know, Paul gets in the Gulf stream again. You know, he goes out to San Francisco and you know, he takes the ferry home and sits there with a beverage of his choice. 00:09:30 Speaker 3: It's kind of Budweiser. 00:09:32 Speaker 2: And you know, I'm in the Bentley going up Madison Avenue complaining about the traffic. 00:09:36 Speaker 3: You're in the real world. 00:09:38 Speaker 2: Yeah, how do you respond to people who raise their hand and say, I love all your optimism, we love liz Ane Saunders, but we're scared stiff. How do you respond to them? 00:09:50 Speaker 7: Well, frankly, you know, we don't get a lot of clients who exhibit a lot of fear, especially if they're working with an advisor and taking an advised approach. I mean, you know, I've always been a believer that is the ben fit of working with somebody taking your personal emotion out of it. But seriously, I mean that is that is actually the biggest split I see, especially when I talk to people, you know, who are newer to markets. This kind of newer retail cohort that

you know just is getting still getting into this, still getting into investing and learning it, not necessarily working with somebody. That's where you see some skittishness around. You know, what do I do with a big drop in the market. What do I do when I see a particular stocker industry go up by twenty or thirty percent. 00:10:28 Speaker 6: You know in a day. 00:10:29 Speaker 7: So I haven't been met with as much fear, but as my you know, to my point around some of these larger IPOs and just the sentiment environment, that is where there's been some I guess concern over whether this is you know, too hyped up. 00:10:42 Speaker 6: And I think it comes back to I mean. 00:10:43 Speaker 7: My favorite quote ever about markets is from the late great John Templetons or John Templeton, you know, bull markets being born out of pessimism, growing on skepticism, maturing on optimism, dying on euphoria. 00:10:54 Speaker 6: I mean that is I think. 00:10:55 Speaker 7: The perfect way to sort of the perfect overlay that you can apply to really any cycle doesn't say anything about her, doesn't say anything about valuation. 00:11:02 Speaker 4: When you're on the road seeing your clients, are they looking to embrace these markets here or like as Tom said, maybe a little bit skittish. Are they looking to make you reposition? Maybe I should own some more bonds, Maybe I should own some gold, Maybe I should made a little bit more cash. 00:11:15 Speaker 3: Yeah. 00:11:16 Speaker 7: I haven't seen the willingness to embrace markets fade materially. If anything, I think the bigger concern has been more on the economic side, and actually the dominant question I've been getting in the first question I've been getting at every event is the concerns over AI and the labor market. That has actually been and from from all age groups across the whole spectrum, from gen Z you know, to people who have been investing for decades, that has been the dominant question that, of course nobody knows the answer to. I tend to have a relatively optimistic view, you know, in the end, you know, the endgame of this not necessarily being tens of million jobs just fading, you know, out of the economy. 00:11:53 Speaker 6: But that has definitively been the main question. 00:11:56 Speaker 2: I got to go seventy three to seventy five to forty five. 00:12:01 Speaker 3: Percent on the Dow. The percentage of people in this country they have not enjoyed that, ye or Bob Seeger at the time, huge amount. Kevin Gordon, thank you so much. I really really appreciate it. 00:12:13 Speaker 2: We take huge advantage of the way all of our guests travel, travel, the romance, the romance of the business. Let me tell you Christina camp Manny is out traveling, got to get home. Her children are well mannered somewhat, but you know she's stuck at DFW and can't get home for a six hour delay. I mean that's the room, the romance of working for Invesco across this great nation. 00:12:36 Speaker 3: Right. 00:12:36 Speaker

6: Of course, of course the travel's brutal. 00:12:39 Speaker 3: I mean it's just it's just you get one delay and yeah, three days are ruined. 00:12:44 Speaker 8: At least we've moved past our tsa expedition at the beginning of the year with all those lines feel their now. I was very fortunate my mom missed a flight going back and leaving my house. I don't think she was too happy with me. 00:12:57 Speaker 3: Thank you for joining us. 00:12:58 Speaker 2: Christina cat Many, senior portfolio manager at Invesco. Let me ask a Paul Sweeney question off of this, I got a yield shift, price down, yield up. Kevin mentioned, Sir John Templeton, are bonds on sale today? 00:13:13 Speaker 8: You've definitely seen a bit of a reprice across the front end, and I think, I mean, we keep chopping in these ranges. 00:13:19 Speaker 9: Right in the last month. 00:13:21 Speaker 8: We thought maybe four fifty would contain tens and five percent, and we pushed to five excuse me, five twenty and four seventy, and then you saw very quickly money get put back to work there. And I think once we've tested those levels, we'll probably repush them. And it does keep changing the narrative. Right before we thought it was somewhat balanced. If we've had this energy shock and we have an inflation shock, but we're still a little bit concerned about are there going to be cracks in the labor market when we're talking about payroll break even maybe zero to fifty K and you have one hundred and seventy or one hundred and eighty plus positive revisions, Like it's hard to say that there is weakness in the labor market, but right, like, where where does it feed through? 00:14:01 Speaker 2: Right? 00:14:01 Speaker 8: You still have a consumer led economy, And I think we, I mean, we're all sick of talking about this case shape, but it's so true, Like there I feel like there is pain out there in kind of Oh this is certainly the bottom half. 00:14:13 Speaker 3: Do you get We get lucky here, folks. 00:14:15 Speaker 2: When you have Christina Kantmany in the turret, she can respond Traders fully price in quarter. 00:14:21 Speaker 3: Point FED rate hike by year end. That changes. 00:14:26 Speaker 2: That changed? 00:14:26 Speaker 8: Yeah, yeah, I mean again, when we had this flip in post the Middle East shock, we flipped from an easy bias pricing to a hiking bias pricing, and I think it's very hard to go back. I think the market is grappling. Whereas other global central banks, like we expect the ECB hikes next week, I think it's clear that the BOJ is still going to hike. I think the market is pricing for the Fed to go. We have priced more and we've taken out a little bit of it, and now we're retesting that again with a five six seven basis point sell off in the front end. But I don't know that where anyone has high, high conviction that the Fed is certainly going because it's just still this shift. I think even they want they don't want to make the mistakes that they made with the inflation shock post COVID, but they also want to see like is it more broad based? Are you going to see wage pressures materialized and we haven't seen that bit yet. 00:15:21 Speaker 4: What do you think about just the opportunities globally in your credit markets? 00:15:25 Speaker 6: Where do you see the value these days? 00:15:27 Speaker 8: Credit or rates are both both sure, So I think when we look at credit, credit still remains really tight. So it's hard to get really excited. But you look at it and you say, there is clearly and I think you guys spoke about it earlier. Today there's clearly money going into credit funds more so than rates, And I think that there's that question out there of spreads are so tight, but like what's your comfort with the with there's more government fiscal issues than some of these big hyperscalers and that people are comfortable putting money with, So I think money will continue to go there. So within credit we probably have a bias for the US over Europe and shorter higher quality paper and shorter demand paper. Within global rates markets, I think there is still value in the front end across course, even in the US right because we're not so convinced that the FED really goes on a massive hiking cycle, because I think the financial markets don't tell you. But but but there are other places that are interesting Australia, Canada, Okay. 00:16:27 Speaker 2: Before before we go, I think it's just so important. Is your market functioning functioning normally? I got a SpaceX I p O. Fortunately I don't have to ask you about that, you know, I mean she's in the balls bracket, yes, Christina JP, Morgan. 00:16:45 Speaker 3: Stanley and Christina kampmany there, you know, but it's a it's a crazy time. Is your when you sit at the desk, is operationally the huge international bond space that you're in charge of? Is it working quote unquote normally? 00:17:02 Speaker 8: I think the markets themselves are functioning. 00:17:04 Speaker 9: There's liquidity. 00:17:05 Speaker 8: But when you say, like are things and I guess it goes it is your question about is it logical or is it like functioning? Because to say, with all of the macroeconomic things that have developed in the last three months and stocks are where they are, you would it's like a head scratcher of how are we here? It feels like we live in two different worlds and there's a lot of complacency about even what goes on with this Middle East situation. But we're all sitting here with the expectation was that this would be resolved in three weeks and here we are three months later, and even from when we speak to commodity experts across the street, it feels like it's been this rolling three weeks out. We're going to have this severe pressure point. Should all of these things matter, like should there be flow through to the US consumer? They're absolutely should, but we're not seeing it. Yeah, and that could just be the AI capex spend is just overwhelming it for now, but I think it

does have to show up. 00:18:02 Speaker 3: Can you come back more often than just job stay? I would love to. Okay, can we figure that out? 00:18:06 Speaker 6: We can work with it. 00:18:07 Speaker 8: Can we can talk markets, we can talk over next. 00:18:08 Speaker 2: Can we get one all our interns from Villanova like the next? 00:18:13 Speaker 6: That's how it works? 00:18:15 Speaker 3: Is that how it rolls? 00:18:16 Speaker 6: They'll nev has taken over New York, no question. 00:18:17 Speaker 3: It's just unbelievable. Christy Keviny, thank you so much with Investco stay with us. 00:18:22 Speaker 2: More from Bloomberg Surveillance coming up after this. 00:18:32 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube. 00:18:45 Speaker 2: Do we get beyond lucky, you get this big move, yields move. 00:18:48 Speaker 3: You know the story, folks, futures Decada fifty three. 00:18:51 Speaker 2: But we need to reset is Francis donald Will with their exo spreadsheets at RBC Capital Markets. 00:18:57 Speaker 3: They're chief economists. 00:19:00 Speaker 2: He says, I don't want you to take the one report, but the compendium here of a better labor economy, the compendium here of our various stimuli. The bottom line is you have to reset real GDP and out front of that nominal GDP. 00:19:17 Speaker 3: Are you in that process right now? 00:19:21 Speaker 10: Well, we already felt the economy was doing just fine, and you've heard me say many times America needs workers, not jobs, and this is a good report of that. But I really appreciate Tom how you frame this. You say, it's not about this one report exactly. It's about what this report and the labor market is telling us about the broad economy. And there's so many interesting stories within this May job report that are really synonymous with other trends that we're seeing. So, for example, there's some cyclical momentum forming underneath. The gains that we saw today were pretty broad across all the sectors, not just about healthcare, there are signs the consumer is okay. So leisure and hospitality having a big number, we watch that not because we're trying to forecast the next leisure and hospitality number, but because we want to know what the consumer's doing. We're looking for evidence of tariffs impacting the job market, and so far that seems okay as well. Looks like businesses are passing on those price pressures through the inflation channel, not through the jobs channel. And we still got a hearty support from those healthcare added jobs. So when I put that story together, you know, for a long time, the goal of the economist was to get that non farm. 00:20:34 Speaker 9: Payroll number right. You know, you were sort of measured by how well you could forecast that. 00:20:38 Speaker 10: I don't know if it's just because I'm getting older, but now I use the NFP number to help me forecast where the economy is going to be in six to twelve months. And when I do that, it tells me that our view that we're going to come in around two percent growth this year is right on track. 00:20:51 Speaker 4: Hey, francis the marketplace here and I look at the work function in Bloomberg had this red headline pressing in a twenty five percent hike in by the end of this year decent. How does that jog with you? 00:21:04 Speaker 10: Well, I can't help but think about all those dissenters at the last FED meeting who said, hey, we should not have an easing bias in this statement. I have to believe that they are smiling this morning, that they were indeed right. Let's start by removing the easing bias, which when you're looking at you know, stable employment and unemployment rate of four point three percent and if you go out the double or triple decimal improving on that front, and inflation that's probably on headline base is going to come in about four percent this month. There's no reason for an easing bias. The data is simply not providing that. However, a hiking bias, I'm just not there yet. There's no wage spiral evidence in the data, and core inflation is still okay, so that gives them some time to wait out another few reports. But if you're asking me where our bias is, it's absolutely a hold or hike conversation as we think through what the next move from the FED will be over the next six to twelve months. But the enter has got it right, is the headline to me this morning. 00:22:03 Speaker 2: Fransis Donald with US was RBC Capital Markets off this big jobs reported? 00:22:08 Speaker 3: Of course right into next week. 00:22:10 Speaker 2: So if I got two percent real GDP, okay, let's say you're wrong two point two percent whatever the number I add on an inflation. Do I have a Banana Republic nominal of five or dare I say six percent nominal GDP? 00:22:28 Speaker 9: Well, that's the map of it. 00:22:31 Speaker 10: This is an economy that's really hard to bet against now. Up until now, it's been hard to bet against it because of structural factors. And there's been these three heavy pillars AI government and then sort of that healthcare sector that's providing support underneath the US economy, and it was really hard to. 00:22:51 Speaker 9: See those shaking. 00:22:53 Speaker 10: What's moving now in the last two to three weeks is that structural support overlaid with some cyclical momentum. 00:22:59 Speaker 9: Now, Tom, it's still early, not going to make a big bold. 00:23:02 Speaker 10: Call here, but when you layer in structural guard rails with some sickle cical support coming from slightly better consumer than maybe we were expecting some relief on tariffs, then you start to get towards a different sort of paradigm and yet I say it's early because. 00:23:17 Speaker 9: There's still some things we need to be watching. 00:23:19 Speaker 10: We need to see how much inflation producers can pass

on to consumers. Real wages are going negative for the second month in a row. Looks pretty clear from today's average hourly waitings. So there's going to be a limit to that. And we are in temporary relief with tariffs, and then we don't talk about tariffs anymore, but it's very clear to us that this is producing pressure on businesses in America. 00:23:40 Speaker 9: We got that AIPA hold. 00:23:41 Speaker 10: Now just this week you've seen Section three oh one tariffs coming through, So we have to be a little. 00:23:46 Speaker 9: Bit conscious here. 00:23:47 Speaker 10: I of course have been optimistic, because I say, really hard to beg it against the US economy, but we also have to manage the risks, and there are risks on both side right now. It's just that we spent so long talking about the downside risks, we've avoided talking about the upside risks, and clear least there are some of those as well. 00:24:02 Speaker 4: I'm glad you caught out the wages here, Francis, because we did have average avergly earnings rise three point four percent. That was lower than the last period. But I look ahead the next week in CPI and the core your year's four point two percent, So it looks like the consumer visa v inflation struggling. How do you think about the consumer these days? 00:24:22 Speaker 9: Yeah, it's such a great point. 00:24:23 Speaker 10: For years, you know, when you were taught as an economist to look at the US economy, you were told, the US's economy is the US consumer, and the US consumer. 00:24:33 Speaker 9: Is do they have jobs or not? 00:24:35 Speaker 10: And as long as the job market was doing well, then the US consumer was doing. 00:24:38 Speaker 9: Well and the US economy was doing well. 00:24:40 Speaker 10: And that's why I said earlier the whole goal of the economist was to predict the non farm payrolls number. The challenge now is that if you're an American then you want a job, you probably have one, especially if you're over the age of twenty five. It's not if you have a job in America that matters anymore. It's whether it pays you enough to afford the cost of living. And that's just an out of wages story, Paul. It's also an hour's worked a number. So today what I was looking at most closely wasn't just the average hourly earnings, which is decelerating. It's did we see any decline in the amount of hours of employment worked? 00:25:11 Speaker 9: And no, we didn't see that. 00:25:13 Speaker 10: We actually saw a nice stable element of that. So for me, we really have to shift our perception away from what's that unemployment rate that's going to stay low to is it providing enough? 00:25:23 Speaker 9: And we know from the numbers it's not. And there'll be a limit to how long the consumer can hold. 00:25:27 Speaker 2: On a gift to you across the nation. Francis Donald with us. We continue with Francis Donald of rb A. See here off the jobs report. All you need to know is a massive shift in the Sweeney yield. The two year was up ten basis points. 00:25:42 Speaker 3: It is up now in. 00:25:44 Speaker 2: Explosive thirteen basis points four point one three excuse me, nine basis points four point one three percent on the two year yield thirty year bond five point zero one percent. Francis, I think the CACA, even dow is and of course the war. In all that, we're looking at the algebraic function, and there's a lot of stuff we're not talking about, Like we're not talking about the massive changes in immigration, we're not talking about this massive delta of declining government employment as well. Do you have clarity out into twenty twenty seven? 00:26:26 Speaker 10: So what we never know what policies will be around things like immigration or even what government employment will look like, but we do spend an enormous amount of time Tom talking about retirements. You've heard me talk about this before, and how critical they've been to the decline in labor force participation rates which has sharply declined through twenty twenty six, and just what this means for the general state of the US economy. So our estimate of break even employment in the US is twenty thousand. The US only needs to add twenty thousand jobs per month now to keep the unemployment rate stable, and that is largely driven by retirements more than changes in immigration policy. But it so clearly contributes to our view that again America needs workers, not jobs. 00:27:11 Speaker 9: But Tom also impacts income. 00:27:13 Speaker 10: Twenty percent of income in the United States right now is government transfers money from Washington into the households across the country. And the larger that becomes, the less cyclical the US economy will be. Because if you're getting a paycheck every month as inflation adjusted, and doesn't matter if there's a recession in play, the economy operates differently. 00:27:31 Speaker 2: See like if Francis, if the Canadians had gone to the finals, Francis would be on our way to Las Vegas. Neil Datta this living large. He's down in Spurs Country seeing back to back Knicks games his screen. His Bloomberg terminal tells me he's working to graph this morning. I'm not buying it. I think his massive work from San Antonio Francis. I love this single sentence from Neil Duda of Renmack. I want you to comment on this. Stagflation is bad for stocks, and inflationary. 00:28:04 Speaker 6: Boom is not. 00:28:06 Speaker 3: So the ambiguity here is there can be a good side stacks up to equality boom economy. Right. 00:28:17 Speaker 10: So the way that we think about that is that think about growth and inflation like a two by two matrix. You've got growth up or down, inflation up or down. Now, when you have growth down and inflation up, that's one quadrant quadrant. We call that stagflation. But when you have growth higher and inflation higher, that's a heating up economy that we typically call reflation. There's an enormous amount of work coming from the cell side on where we are in those four

quadrants and just how different in an environment they are. But one of the big challenges is reflation. Very clear FED response, they know what to do in that type of environment. Usually your labor market's getting real tight and inflation is high, you can hike rates, which is why you get different market responses to really rate hikes. But when you have a stagflation environment, that's the FEDSI dual mandate pulling in opposite directions. Not only does that create a bad environment for businesses just everyday folks operating on the ground trying to run their companies, it's also enormously challenging for central banks. 00:29:15 Speaker 9: So even though right now, probably you know new. 00:29:18 Speaker 10: Fetcher orsh is sitting there saying, oh my goodness, it probably can't cut. At least he doesn't have the mandate pulling in opposite directions. That would be a much harder for feeding. This one, at least from a traditional lens excluding the politics of it is fairly. 00:29:31 Speaker 2: Straightforward, really well said versus New Zealand and a few other choice geographies. 00:29:36 Speaker 3: Francis Donald, thank you, thank you so much. Stay with us. 00:29:39 Speaker 2: More from Bloomberg Surveillance coming up after. 00:29:42 Speaker 1: This you're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Otto with the Bloomberg Up, or watch us live on YouTube. 00:30:02 Speaker 2: I'm jealous because Paul and Scarlett Bloomberg Intelligence get to do individual stocks. 00:30:09 Speaker 3: David saweryby with us, and he's expecting us to say, what's the FED gonna do? There you go, David, you are expert. 00:30:18 Speaker 2: IT companies on burn Boat Road in Bismarck, North Dakota. They're building data centers evere ECG, Paul. It's up one hundred percent a year, like over the last two or three years. All right, it's forty two people. They all look well fed, like they played for North Dakota State and ice hockey. David Sowerby tell us about ECG Everest. 00:30:45 Speaker 11: Tom it's a it's the second derivative of playing the AI infrastructure build out in the data centers. Ever's construction is about an eight billion dollar market camp. There's only seven or so analysts who follow the companympany, So you could play at the large camp way like eaton Great Cleveland firm. But you can also play it in a less followed everest construction that's growing their revenues at double digit pace cash flow double digit pace. The semiconductor build out in these data centers is EVERSU is a direct beneficiary, and I like it because it's in the smaller camp area where it gets less noticed, but certainly significant price potential to a company. 00:31:30 Speaker 2: Like that, like if they had a red herring out. Now for secondary, what's the risk factor here? Is it just like management shocks or a competitor comes in. What's the risk factor to a company that's popped one hundred per year for the last two years? 00:31:49 Speaker 11: To me, it would be that earnings don't keep up with high expectations. If I look at a ratio of the valuation relative to their free cash flow margin, it's still appealing to me. The risk would be valuation is stretched, free cash flow margin peaks. 00:32:11 Speaker 3: That would be the risk to me. 00:32:13 Speaker 11: But it's not in play yet. 00:32:15 Speaker 4: David, we said, we have what has become once again a very narrow market here. 00:32:21 Speaker 9: How do you guys think about that? 00:32:23 Speaker 4: Is it a concern for you? 00:32:25 Speaker 6: What's you're called well? 00:32:27 Speaker 11: As an active manager? It's absolutely a concern because it presents more headwind in this narrow market. It isn't just the S and P five hundred, it's the small cap indexes as well. It's permeated to large cap growth stocks, large cap value stocks. It's the narrowest market I've seen in twenty five years. Now, as an active investor, we can lament about it, we can cry about it. Even what's going to change it is when valuations in some of these very narrowly lead market get pe and their profits don't grow as fast. I think the quarter we're sitting in today, in Q two, small cap earnings will now exceed large cap earnings and the MAG seven. It's starting to unfold right now. I think it's going to persist into twenty twenty seven, where small cap profits grow eighteen to nineteen percent, large cap profits grow fourteen to fifteen percent, when many of these companies trade at a twenty to twenty five percent discount. That's where the market can broaden out more breath, and that's what we really need, I think for all investors. 00:33:35 Speaker 2: David, you know, I think of the giant out at Washington University, at Saint Louis Douglas North, and his keyword was ambiguity and that could be a number of things, folks, institutional economics, it can be microeconomics in that, but it's ambiguous. David Sowerby that if rates lift or sustain in a five percent thirty year bond, just as one, it can cut both ways. Higher rates can be good for stocks and good for revenues of American companies Right. 00:34:10 Speaker 11: The time, the higher rates are reflect that ism index well above fifty. We've got a good job support this morning. One of the most untold stories in the economy is the two and a half to three percent growth and productivity. That's why rates are modestly higher. So they're not a threat to the market yet. Pick your point this point. I think it's five percent yield on a ten year treasury that I get a little worried that the six percent free cash flow yield I can build in a stock portfolio becomes somewhat less compelling. But the higher rates right now are not a threat to the economy, Nor are they, I think a threat threat to the market companies cost capital is still low. 00:34:55 Speaker 4: Are they a threat to the consumer? I see you guys like Marriott Marriott Vacation. Do you think the consumer was going to remain. I guess vibrant out there in terms of spending. 00:35:06 Speaker 11: Paul my mantra for twenty plus years is the US consumer defies gravity. Never under estimate the US consumer. So travel is still important from a discretionary spend. It can be directly with Marriott, who has over seven hundred properties within thirty miles of a World Cup game. This summer, they're going to be a beneficiary Marriot Vacations, which was the spinout a number of years ago for the rentals. The Time shares another play on travel and leisure. I think the consumer is still faring quite well, even with somewhat higher gas prices. But I did fill up my car yesterday my GM at four dollars and fifteen cents a gallon. 00:35:49 Speaker 3: David, Thank you so much, David Saw. We really appreciate that. 00:35:51 Speaker 2: Prageically evers ecg out of Bismarck, North Dakota. 00:35:56 Speaker 1: This is the Bloomberg Surveillance podcast, available on our 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