'Bloomberg The Open' Full Show (06/05/23)

from New York City for our viewers

worldwide I'm Lisa Bromwich Dayton for

Jonathan Farrow 30 minutes away from the

start of trading on Wall Street you're

seeing basically a range-bound market

although crude very much leading the

charge the countdown to be open starts

right now

everything you need to get set for the

start of U.S trading this is Bloomberg

the open with Jonathan Farrow

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foreign

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coming up oil prices rising after Saudi

Arabia's July production cuts big U.S

banks could face a 20 jump in capital

requirements as Apple shares Edge

towards a record high ahead of its

developers conference we begin with a

big issue on the cusp of another bull

market beer pivot to fomo equities of

trading optimistic you're seeing markets

move higher Equity Market of

participants are very lucky the U.S

consumer has been strong we had the q1

earnings results Corporate America is

actually doing all right the economy

really hasn't slowed much at all the U.S

has been more resilient than anticipated

the data the economic surprise continues

to be so resilient the US is in a very

different place American exceptionalism

the U.S economy remains a major engine

of job creation all of this debt ceiling

uncertainty a debt deal removes it as an

issue for the next over year and a half

the FED they got into the game late it's

going to proposal like it certainly

complicates it I don't think we rule out

a 25 basis coin hike in June I don't see

any evidence for rate cuts a skip not a

permanent pause the FED raises rates one

or two more times plenty of reasons to

keep on hiking the side is gonna have to

make a really difficult judgment

if this is a new bull market it is one

that people really dislike joining us

now to discuss John Hancock's Matt

Miskin and Christian mamani of Lafayette

College and this is what strikes me if

this is the start of a new bull market

people do not like it Matt do you think

that it is accurate to say that we are

on the brink of a new kind of economic

cycle that is starting to rear its head

we do not believe so we think we're in a

late cycle environment where you're in

this choppy trading range across asset

right now and you're getting this better

than expected data worse than expected

data it's all coming in relative to

expectations and whether or not it's

beating expectations market like it if

it's not then the other side of the coin

right now fighting the tape is like

fighting Mike Tyson and it is a

challenging backdrop uh to be relatively

conservative in a late cycle environment

we're tilting toward the higher quality

parts of markets holding on here until

we see more clear signal of a recession

on our doorstep we're not there yet but

for us managing risk is a top priority

Krishna do you agree is it felt like

fighting Mike Tyson and yet you need to

stick with it

well you know I think it's fighting

imaginary Mike Tyson in a way that is uh

people have been looking for this

recession Bugaboo for quite some time

and it really hasn't materialized that

in and of itself doesn't really mean

that this is the start of a new bull

market I think if you kind of boil

things down it's it comes down to two

things uh nominal growth is too high for

stocks to Clank and rates are too high

for and and there's not enough slowdown

in the economy for it to be a a real

start of a bull market it may actually

come about that way but I think looking

at the data today making that assertion

on both sides just doesn't uh doesn't

hold we are in a choppy Market uh range

one market and we'll try to break out

and if we do and the economy remains

where it is we will probably give a lot

of that back at some point later this

year a choppy fog fighting a fake Mike

Tyson I love it happy Monday meanwhile

we do have on one side perhaps it's a

bull market on the other side you have

Morgan Stanley's Mike Wilson who's

expecting a sudden pullback in corporate

earnings to slam the breaks in the

recent U.S Equity rally writing quote

hotter but shorter Cycles persist we

continue to forecast an earnings

recession this year that we don't think

is priced followed by a sharp EPS

Rebound in 2024 2025 we recommend

investors focus on stocks with defensive

characteristics operational efficiency

and earnings stability that seems to be

Matt what you were saying there is this

real kind of dilemma here you can say

we're not entering a new bull market but

can you get bearish can you fully rule

out some of the areas that have gotten

pretty beaten up and say they're not

perhaps trying to yield a little bit

more value here

yeah I mean for us uh the the value for

example like financials right now I mean

you're seeing the higher cost of capital

really weighing in The Lending growth

decelerate but the solvency risk

diminished so that child support on

Friday and what a week last week I mean

you got the ism new orders index coming

in below expectations 42. uh so leading

indicators still showing a Slowdown and

then you got coincident data like the

job support beat and causing a massive

rally in these financial sector and some

of these cheaper parts of the market we

would trim into strength redeploy that

Capital into higher quality companies

Great balance sheets good Roe things

like that and what we see in terms of

earnings estimates to Mike's point is

that in the back half earnings estimates

really ramp up so it's nice in q1 and Q2

that the estimates are negative six

percent earnings growth and you could

come in better than that but in the back

half the street is looking for a nice

earnings recovery and inflection point

that's where the bar goes up and it's

going to be harder to beat so we're

looking for those that have lower

estimates Tech and Healthcare and flat

to negative earnings estimates those two

places we think could actually beat on

the upside over the year Krishna do you

agree that some of these areas are

actually starting to see perhaps The

Greener shoots than other areas that

have gotten a bit up perhaps a bit more

absolutely so I I think people focus on

the narrowness of the market and uh why

the the kind of the temporary breakout

that we have cannot be sustained I think

uh if you look broadly yeah again at a

macro level uh the the most cyclical

part of the economy housing and

construction is not slowing down if you

if there was going to be a a recession

or a really an earnings recession you

you have to see some evidence somewhere

you know and we we added 340

000 jobs so we can look at any piece of

data and convince ourselves of any view

that we have but if you look at the

underlying strength in the economy it is

just uh it is just extraordinarily

strong not not something that anybody

could have expected at this point uh

with the FED raising 500 basis points

and rates but it is what it is and

expecting a recession and an earnings

recession in this context uh it seems a

little uh a little less likely in my

some of the areas that perhaps have been

setting a contrary signal has been the

oil markets which did get bit off quite

significantly sold off quite

significantly and now oil is advancing

up about two and a half percent plus or

minus after Saudi Arabia pledged to cut

a million barrels a day from its

production starting next month this was

at the Vienna based OPEC plus meeting

joining us there us now from there is

Bloomberg's Madness cranny man is what

did we learn and how much is this pop

that we're seeing in prices likely to

stick

I think it's going to be tricky because

I remember days when a million really

meant something here we are let me give

you a fresh line the society ministers

just done another interview his Royal

Highness principales is bin Salman talk

about a good night's sleep and

reflection the society Minister says

he's fed up with OPEC members not

meeting their output goals and says the

societies will seek more transparency

from Russia so here we have the Sugar

Rush from the lollipop up four percent

on the open gave a little bit back the

market reflects this is a real cut make

no doubt about it it's almost twice the

size of everything that you've seen

before in the past eight months so just

put that in the back of your mind to me

that creates the floor that creates the

near-term floor in this market because

he's bought himself a call option the

ability to roll this cut forward forward

forward coming into this there were

three dreams the economic dream of Saudi

Arabia the war that Russia is lording

over Ukraine and third the emiratis

wanted a higher production Target we've

just worked it out you gave up million

barrels a day four a month on a rolling

basis two and a quarter billion dollars

the dream suffers it matters to keep

this floor in place and perhaps the

upside can be re-tested if the Chinese

reopening is delivered but we have a

global manufacturing slump you've done

the data these are breaking headlines

from his Royal Highness Prince

abdullah's is Ben Salman a good night's

sleep

just shows you what a better reflection

does they want more and they want more

transparency from Russia how much is the

cut some sort of signal as to what Saudi

Arabia sees from China and this is

something that we were talking about

with Ellen Wald earlier this question

around do they know something that we

don't with respect to cutting production

even further

look I I think we've got to sometimes

you just got to stand back from this

from a moment ago every PMI that you've

read out there that I read out in the

morning in the Middle East that my

colleagues read out in Europe we have a

global manufacturing recession that is

factual everything else that we're

debating around the margins about hot

employment hot wages Etc is about

weather and when this recession slowdown

comes one thing I will say about this

leader of OPEC is Royal Highness

princess bin Salman he sees himself as

this Central Banker of oil he challenges

his inner Greenspan he wants to be ahead

of the macro he wants to present himself

as somebody that has the finger on the

pulse So to that extent maybe there is

something more malevolent I'll leave you

with this thought the Saudis raised

prices on selling their crude to Asia

last month despite the drop from China

900 000 barrels a day dying last month

in terms of demand but they raised their

pricing they're trying to balance this

this is about the economic dream of

Saudi Arabia and delivering that

transformation program that his brother

who runs the country MBs is in charge so

that is the driver and it is about

trying to be ahead of the macro right

now we're looking at manuscript thank

you so much as we're speaking with men

as Craig were looking at European gas

Futures jumping 20 percent on

expectations of more Asia demand this

crossing the headline the the terminal

as a hot headline and I do wonder how

much this is going to feature into

expectations for inflation around the

same time we're also getting word from

the ECB president uh Christine Lagarde

saying no clear evidence that underlying

inflation has peaked and that the ECB is

fully committed to fighting inflation uh

still with us krishnam Amani as well as

Matt Miskin Krishna from your Vantage

Point how much do you think that people

have underpriced some of the

inflationary inputs from the likes of

natural gas certainly in Europe as well

as higher oil prices

now as as the the person speaking before

me was indicating I think if you kind of

look outside the U.S we are in a

Slowdown and I think that is a that is

entirely factual and uh I I think that

is the driver of oil prices and natural

gas farm and inflation expectations

driven by Commodities far more than what

is happening in the U.S so I I think the

the the the the point is entirely

correct that is the attempt of Saudi

Arabia the cut production is really

getting ahead of a Slowdown rather than

meaningfully trying to raise prices in

an environment where that cannot be

sustained especially given what the

Outlook is uh in the rest of the global

economy Matt do you think that oil is

still an indicator in terms of global

growth or do you think that right now

it's kind of lost the signal and noise

just simply because of all the

distortions and the varying inputs from

China and the cuts and and the

production sort of ambiguity out of

Russia

we we do and you know really coming into

this morning what did we get we get

higher gas prices so that's not good for

the consumer interest rates are higher

because inflation expectations are

higher that means higher cost of capital

that's not a great sign and then the

Dollar's stronger which the dollar is

now more correlated to oil than it was

in the past because U.S is such a big

exporter but all those three things are

not good for the consumer or the macro

frankly uh so we again think we're in a

late cycle environment where you're

getting this tightening through these

channels which eventually it works with

a lagged impact and I think that's the

biggest misconception right now or the

thing that's missed is that monetary

policy works for the lag so when we hear

everybody's saying everything's great

soft Landing we still haven't felt the

lagged impact of a lot of this

tightening that's coming through and now

opec's trying to push in a little bit

more tightening right now that

unfortunately is going to have more of a

negative impact in terms of the consumer

Matt Miss kid Krishna mamani both of you

are sticking with us which are really

pleased about joining us now let's take

a look at which stocks are moving ahead

of the opening bell Abigail Doolittle

Abby Lisa let's start out with the

shares of Apple because they are popping

higher potentially if they were to close

at this level after they opened at this

level it would be a record closing high

for the shares and not so far away from

a potential intraday high this of course

is the worldwide developers conferences

occurring today updates on all kinds of

platforms and the excitement it

generates this stock NOW up about 40

percent on the year Tesla also higher

1.7 percent positive news out of China

they sold more than 77 000 made in China

Vehicles last month and sold nearly 76

000 in China of 142 jump from the year

prior and then AI Lisa not so much today

we haven't shares of Nvidia down 1.2

percent palantir most stocks related to

AI taking a little bit of a breather

after the big rally that we had last

week and the week before I like that you

say that a little bit of a breather down

one percent isn't exactly a massive

round Abby thank you so much coming up

one crisis averted down in D.C it was

critical to reaching agreement and it's

very good news for the American people

no one got everything they wanted but

the American people got what they needed

Hortons closing on the debt limit

Showdown markets now bracing for a flood

of U.S debt sales more on that next to

this is Bloomberg

foreign

agreement

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and it's very good news for American

people no one got everything they wanted

but the American people got what they

needed

reverted an economic crisis an economic

collapse

for cutting spending and bringing the

deficits down at the same time

Washington closing the books on weeks of

tumultuous debt limit negotiations

focused now turning to issues abroad at

Asia's largest security conference

Pentagon Chief Lloyd Austin sang in a

speech at the Shangri-La dialogue quote

I'm deeply concerned that China has been

unwilling to engage more seriously on

better mechanisms for crisis management

between our two militaries his Chinese

counterpart firing back accusing quote

some big Power of bullying other nations

telling the U.S to quote mind your own

business this coming as China says its

Navy tracked U.S and Canadian vessels

throughout the Taiwan Strait over the

weekend let's bring in the team down in

Washington D.C Bloomberg's Emory hordern

and Kaylee lines joining us now

Anne-Marie let's start with you with

respect to some of those tensions what

did we learn how much did we actually

not ease some of the tensions but

ratchet them up at the Shangri-La

dialogue

well there really was just this cordial

handshake and that's what Lloyd Austin

described it and then when he got up to

talk about it and this is of course with

his counterpart in China the Chinese

defense minister Lee Shang Fu when he

got up to talk about it he said we

cannot just have these cordial handshake

we need dialogue the issue of course

Lisa and this is something I asked the

president about at the G7 is that Lee

Shang Fu was under sanctions from the

United States this has to do with

Transporter of Russian military

equipment that he oversaw in 2018 and it

was under discussion that the

administration potentially lift those

sanctions because that looked like a big

barrier in the way for China to saying

they would agree to sit down with Lloyd

Austin but they did it so all we got

from these two leaders in terms of

engagement at this

Shangri-La dialogue is just a handshake

and that's all and the rhetoric was just

amped up even more and as you say all of

this with the backdrop of a Chinese

vessel coming very close to a U.S

military uh warship that was going

through the the Taiwan Strait everyone

else at this Summit is just looking

around and saying we want to see these

two economies engaging and they're not

and they are quite concerned of

potentially what this could lead many

saying they do not want to see what is

happening right now in Europe with

Russia's invasion of Ukraine taking

place in the Asia Pacific that's on the

international side on the domestic side

Kaylee there's a real concern yes great

yay we've got a debt ceiling agreement

but we now have to issue about net

trillion dollars of T bills in order to

finance the government going forward

starting this week how concerned are

people about the amount of liquidity

sucked out of the market to pay for that

well frankly Lisa here in Washington I

think so much focused was just put on

the idea that the U.S cannot default on

its debt getting a deal done and signed

by the president as we saw this weekend

less so about the ramifications of that

because avoiding default does mean as

you allude to that the treasury is open

to borrow once again and is going to

have to do so aggressively considering

that its cash balance has fallen below

23 billion dollars as of June 1st so in

order to replenish those coffers it is

going to need to issue potentially a

trillion dollars or more of debt by the

end of the third quarter just an

absolute Title Wave of issuance that

Bank of America has actually said could

have the same consequence in terms of

liquidity and economic implications as

another quarter point hike from the

Federal Reserve so we have to consider

that and then also the other ongoing

risk at play here is that even though

you have lifted the debt ceiling put the

risk of default on the back burner for

another two years we won't have to deal

with it until 2025. come the fall of

this year we still are going to have to

pass a budget for fiscal year 2024 by

the end of September and there is an

non-zero risk according to Bank of

America the government shutdown in

October 1st as we're likely to still see

jockeying around that so it's not to say

that all the domestic issues Lisa are

tied up nicely in a neat bow even though

we do have a higher debt ceiling now

Kaylee and Marie both of you thank you

so much for being with us still with us

is Matt Miskin and krishnamani and I am

wondering Krishna do you think that it

is overplayed or underplayed the amount

of liquidity that would get sucked out

of the system to pay for the net one

trillion dollars of t-bills the US is

expected to issue it's a short order

so I I think in an environment where the

FED is paying interest on excess

reserves and you have more than two

trillion dollars in RRP just sitting

there I think there is a way to kind of

make it all work without it being

disruptive at all in fact if all that

happens is money comes out of RP and

goes into tables nobody would notice it

except for the FED balance sheet so I I

think this liquidity Bugaboo is again

another thing a fake Mike Tyson being

invented to kind of uh support a

particular case I think there will be

some liquidity impact but it won't be to

the extent that people are making it out

to be question just real quick before we

get to Matt are you getting full bullish

I mean are you going full bull at this

point no no not at all I I think again

if there was some slowdown in the labor

market I would get bullish because that

would mean that the the FED policy is

having a meaningful impact It Isn't So

what I'm afraid of is we are uh you know

the FED may have to do more I'm hoping

that is not the case but that cannot be

ruled out just yet Matt your perspective

on the t-bill issuance and what the

implication is for the market is it a

fake Mike Tyson

yeah we do think it's a bit overblown

but yeah what we're seeing is just tail

risks keep getting chopped off uh and

that is the bullish argument right now

to Christian's point in essence is that

you keep getting these you know big

macro risks and like the debt ceiling

and then you know we we come over these

things and the wall of worry just keeps

getting getting

um you know come overtaken and that is

the the bullish argument to us though

again you know the labor market is tight

the FED is tight liquidity is draining

regardless we're in a late cycle

environment the economy has held up

until now but again the leading economic

indicators are not giving the all clear

sign it's not like the yield curve is

uninverted it hasn't it's massively

inverted still uh there's only one way

the yield curve uninverts and that's

usually historically speaking the FED to

cut rates I know that now it seems like

that's not going to happen but

eventually it likely has to happen just

real quick Matt 20 seconds how much are

you looking at credit really expressing

the risks that you're seeing

yeah tightening a letter lending

standards uh higher across the capital

all that will weigh on the economy in

time again getting a bit more defensive

into this risk on rally May make some

sense

Miskin and krishnam Amani both of you

thank you so much for being with us

coming up the morning calls and later

Joanne Feeney of Advisors Capital

Management joining us with her outlook

for stocks as they Edge even closer to

bull market territory that conversation

still ahead at the opening fell this is

Bloomberg

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countdown to the open I'm Lisa abroadson

for Jonathan Farrow time now for our

morning calls a look at some of the

analyst recommendations on Wall Street

this morning first up Key Bank

downgrading Target to sector weight

expecting the resumption of student loan

payments to weigh on consumers next up

Morgan Stanley downgrading Dollar

General the equal weight seeing too many

of macro uncertainties and finally a

city upgrading forward to buy pointing

to the stocks valuation and

strengthening demand coming up the

opening bell we'll get that to you with

Joanne Feeney of Advisors Capital

Management this is Bloomberg

thank you

foreign

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for Jonathan Farrow a moment away from

the start of trading which you can see

is there has been this shift upward in

the s p up about a tenth of a percent

even as you see a little bit of a

decline in the NASDAQ meanwhile the

Russell continuing to underperform down

through tenths of a percent in the yield

space you are seeing yields marginally

higher as people assess what the strong

labor market report on Friday means for

the Federal Reserve we could see the

10-year yield a little offer earlier

High 3.7 4 Euro weakness dollar strength

106.85 in crude markedly higher after

Saudi Arabia agreed to cut output by a

million barrels per day after they did

not get any kind of commensurate

agreement from United Arab Emirates One

stock to watch the open is Apple shares

climbing above its record close level

inching closer to a historic three

trillion dollar valuation Abigail

Doolittle has more Abby what will drive

us to that value Nation well the

worldwide developers conference today is

certainly a piece of it the excitement

for what might be unveiled but you know

what's so interesting about this Lisa it

feels a little bit like a stealth rally

to me because this stock NOW up 40 on

the year it's best here since 2020. of

course after falling 27 last year and

now we have the stock basically at a new

all-time high uh very close to an

intraday record high but if it holds

these levels into the close it will be a

record uh close investors I think Lisa

looking forward to next year because

this year we're actually modeled for

negative growth on both the top and the

bottom line if you recall a few years

ago back in 2016 when we had the first

time of revenues dropping uh in about 10

years it was a big deal the stock fell a

lot well that could have been why the

stock fell so much last year next year

we're looking for nine percent bottom

line growth we're looking for Top Line

growth as well anything could happen to

those estimates but I think that that's

one piece of what's driving this stock

uh higher on the day and on the Year

Lisa I believe our team here has said

190 dollars per share would bring in it

to that three trillion dollar valuation

Abigail thank you so much from Big Tech

to Big Oil energy stocks getting a Boost

after Saudi Arabia's surprise production

cut its energy Minister saying that he

would quote do whatever is necessary to

bring stability to the market stability

means higher prices Katie greifeld

joining us now with more Katie and that

stability definitely a windfall for some

of these energy equities at least for

today you have the likes of Chevron

Exxon both rallying from the Bell not

quite as much as oil itself but still a

rally nonetheless after of course that

surprise production cut from Saudi

Arabia now Jeffrey's analyst had a

really interesting note out this morning

saying that this is definitely positive

at the margin for oil and for these

equities but longer term it's still

demand that's still the driving force

for this market so we'll see how long

the legs are on some of these games but

still it's a needed win for a sector

that's really struggled so far in 2023

that's after absolutely crushing it the

past couple years energy was the best

performer for two straight years it's

the biggest loser this year though as

demand has ebbed it's down almost eight

percent or so so far this year that

follows a gain of 59 in 2022 Lisa Katie

greifeld thank you so much turning now

to the financials big U.S banks

potentially facing a 20 increase in

capital requirements that's according to

reporting earlier this morning from The

Wall Street Journal let's bring in

Bloomberg's Kaylee lines for more Kaylee

what's the logic and the likelihood

behind this potential Capital raise

well Lisa frankly we knew something like

this was likely coming the FED already

had been undertaking a holistic review

of capital requirements under the vice

chair of supervision Michael Barr and

that was before we saw multiple Banks

fail earlier this year which really put

an increased scrutiny on regulators and

the Prudential regulation of banks

specifically between 100 and 250 billion

dollars in assets that saw some of those

requirements rolled back under the Trump

Administration uh with the 2018 changes

to how Dodd-Frank applied to Banks of

those size and Michael Barr had hinted

in the fed's report put out after the

failure of Silicon Valley Bank that that

may mean that things need to be

tightened and we could actually see

those proposals soon Lisa The Wall

Street Journal reporting potentially as

early as this month we could see an

average 20 percent increase to the

capital requirements of larger Banks and

banks with at least 100 billion dollars

in assets rather than the current

threshold of 250 billion dollars could

be subject to those same rules now of

course we're likely to see some pushback

on this from the banks themselves

especially the larger ones the six

biggest mind you have built 200 billion

dollars more in their Capital reserves

over the last decade and you may see

political pushback as well of course one

side of the aisle on Capitol Hill has

pushed back against the idea of doing

anything legislatively to heightened

regulation in the banks even after the

failures but this would be Regulators

acting really with their existing

Authority so we'll wait to see what

those rules potentially are Elisa but

you are seeing the financial sector as a

whole lagging early on in the trade

today Kaylee Lyons thank you so much

joining us now is Joanne Feeney of

Advisors Capital Management Joanne as uh

we speak we're seeing Apple shares climb

to a new intraday all-time high ahead of

their worldwide developers conference

this really comes as people have already

rallied around these shares up about 40

percent year-to-date question around how

much this can continue Joanne from your

Vantage Point does big Tech still have

Steam

yeah good morning Lisa you know there's

a lot of future opportunity available

for these big Tech Guys the super seven

that has really driven the market up so

far this year comes on the heels of new

information about the potential of AI

and what we saw was investors reevaluate

the future earnings potential of these

companies and and apple may not be as

thoroughly involved in AI as some of the

others but I think it's clear to

investors that Apple has a Stranglehold

on the folks that use the iPhone and the

other parts of the Apple you know

Network because it's just so you know

once you're in you're in for

we've seen a lot of institutional

investors start to increase their

positions because they were underweight

a lot of these big names I think that's

driven a lot of the rallies so far but

looking longer term we think there's a

lot more room to go however you know

given the recent rally we probably

shouldn't expect as much from these

companies over the next you know several

months have we moved away officially

from them being interest rate sensitive

no not at all I think what we saw last

year right was the digestion of the

higher interest rates on these

valuations and what we're seeing now is

the reflection on the higher growth

coming for them and moreover Lisa right

we are expecting the FED uh to pause

probably here next week and and that

means that interest rates going forward

are you know flat-ish to coming down

over time and that means that interest

rates actually become a tailwind and I

think investors are also you know

reflecting that when they buy these

names now okay this is what I'm actually

struggling struggling with this morning

yes people are waiting for the next bull

market they're looking for reasons to

buy they're looking for reasons to not

be bearish to be more and yet we still

have a Fed that isn't quite on hold

maybe they're not going to raise rates

next week but they certainly have a

labor market that still is incredibly

hot how do we get from there to rate

Cuts in the time frame that this Market

is currently pricing in

yeah Lisa I think that conundrum that

you just described is exactly the

problem the FED has still a lot of work

to do to get inflation down and that

means that you know investors should be

prepared for things to probably be a

little bit boring here because probably

see a pause we're probably not going to

see any rate Cuts this year although the

market is expecting that because that

inflation problem is so intractable and

what we're seeing in the labor market

suggests that the economy is still quite

strong Labor's still much in demand and

rages are still rising over you know

close to four and a half percent that's

not a recipe for getting inflation down

quickly so it's going to take some time

and we probably aren't going to see rate

Cuts until next year but the flattening

of of interest rate that path of

interest is what I think has taken the

headwinds away from the higher

evaluation technology and growth

companies as we shift from Tech to the

rest of the universe of equities and

Beyond just in terms of what hasn't

followed through with the rally to the

same degree that the apples and The

Meadows of the world has we have to turn

back to oil and this idea that that

Saudi Arabia is is concerned enough

about how low prices are that they are

making a unilateral one million Barrel

per day cut in production how much does

that give you faith that there is some

more value and some of the equity names

that haven't really done so well

you know Lisa this has been a really

frustrating time for a lot of investors

because they see these big Tech names

going up and if they're Diversified more

broadly you know across the market

looking at some of the longer growth

potential you know they're not seeing as

much of a lift to their portfolios we're

getting a lot of questions from our

clients saying is this a time to to be

going into equities given how much the

market so-called has risen and the

market really hasn't risen to two

markets it's the super seven and then

it's the rest of the market which is

barely budged and you know I think that

investors need to be patient here and

recognize there are still opportunities

because the rest of the market really

hasn't gone up that much because of

these recession fears because of the

concerns about what the FED is going to

do but longer term we're seeing the

infrastructure Bill the inflation

reduction act there's good government

spending going on to support various

manufacturing Industries there's a real

opportunity here among those names that

really haven't moved much this year how

much are you shifting out of bonds and

into equities and I asked because Mark

Heffley of UBS doesn't seem to have much

faith in the recent Equity rally writing

quote we can continue to prefer Bonds in

our Equity to equities in our Global

strategy favoring defensive higher

quality segments a fixed income as they

offer both attractive absolute yields

and a hedge against growth and financial

stability risks do you agree with that

or is that not really working given that

a lot of the stocks that are out there

have not participated in the gain so far

this year

yeah well you know the bond side of a

client's portfolio can do very well in

this environment they're getting

terrific yields although over the long

term those yields are wonderful for a

bit of cash flow but they're really not

keeping up with inflation so much so for

long-term appreciation and portfolios

you still need to be inequities and

there are ways to be inequities that are

defensive too you can buy you know

higher dividend yielding stocks they are

some of our balance strategies are

putting up you know four or five percent

dividend yields and you get some Total

return over time with appreciation as

some of these stocks that haven't

performed well start to recover as some

of these recession fears it'll

potentially fade and as some of those

government spending programs help to

boost you know the the industrial

companies for example how are you

positioned in terms of bonds versus

stocks right now

you know it's up to the client Lisa I

mean it's really up to them and their

risk preferences and their time Horizon

right so somebody pre-retirement may be

more heavily you know 80 20 Equity to

fix somebody in retirement that you know

really needs to have a better handle on

a more stable portfolio is going to be

more you know potentially 30 70 or 40

60. so it really depends on the client

their time Horizon and their risk

tolerance to determine that but Total

return and appreciation of the portfolio

is still going to come from the equity

side and if you have a sufficiently long

Horizon I'm talking you know three five

years yeah you know it's not a bad time

to be more broadly exposed to equities

let's say your client brings to you

Morgan Stanley's Mike Wilson and some of

his recent research or he said quote the

boom bus period the began in 2020 is

currently in the bust part of the

earnings cycle a dynamic that's not yet

priced in our view and what happens if

they say to you there will be a better

entry point what do you say

I say excluding those super seven that

have done so well the entry point is

probably really pretty good right now in

equities and you know for the investor

that has a three to five year time

Horizon you know the the boom bust cycle

happened last year we saw that major

pullback we saw those recession fears

come in the global geopolitical risks

come in now we're starting to see

investors look beyond the recession

risks seeing that strong labor market

yes we might get a recession we're

probably thinking it's going to be next

year and it's going to be mild but you

know the investors should be looking

longer term than that and there's some

really good opportunities out there

stocks Trading still below 15 16 times

that have good long-term potential so

this isn't a time to avoid equities but

it is a time to pick and choose that's

why we only own you know 40 to 50 stocks

in a client portfolio so we can be

pretty selective at this point Joanne

Feeney thank you so much for being with

us coming up shares of Apple hovering at

record highs hitting them on an intraday

level ahead of its developers conference

we'll look ahead to the big event in

Cupertino with D.A Davidson's Tom Forte

that conversation station coming up next

[Music]

AI adds another 30 to 40 dollars per

share to the Apple Store from a user

perspective be giving users the ability

to on the services side from cloud from

music from TV to more and more the

devices cross-pounding between different

devices that you're going to be able to

get different information within the

actual Apple user and I think what

Cook's going to talk about is AI could

be really another Foundation another

modernization of the Cupertino Growth

Store and that monetization has led to

about a 40 percent pop in Apple share so

far this year new all-time highs on an

intraday basis for those shares and the

s p this has really helped to fuel the

fact the S P 500 has now risen 20

percent from the October low set to

enter a bull market except only with

seven stocks evidently with with big

Tech leading the charge which is the

reason why investors are so focused so

trained on the Apple's worldwide

developers conference which happens

today shares have been hitting all-time

highs people expecting the tech giant to

unveil a mixed reality headset that

could potentially help fuel future

growth joining us now is Bloomberg's

Caroline Hyde with Mark Caroline what

are we looking for today all about the

headset yes you're going to get a

sprinkling of operating system upgrades

you're going to see that for the watch

you're going to see that for the max

maybe a new lineup of a Mac but really

ultimately Lisa this is about VR AR this

is about a headset that's going to be

selling at about three thousand dollars

they're not thinking of selling many

about 900 000 in the first year just

think compare that to the well 200

million that they send in terms of

overall iPhones per year but this is a

focus on Reinventing what basically meta

hasn't really been able to make a killer

product the fact that it's going to be

lighter weight aluminum carbon graphite

the likes of glass going to be going

into this initially Tim Cook thought

this was going to be a sort of like a

pair of glasses you'd were able to wear

all day it's not that it's like ski

goggles more like but this is going to

reinvent the wheel this is going to be

aspirational and this is going to be

something that they hope is going to be

productivity-led gaming LED health-led

as well Caroline hi thank you so much

dear Davidson NLS Tom Forte commenting

on Apple's expected AR headset launch

that Caroline was just talking about

saying quote this could represent its

most significant new product launch

since the iPhone and the biggest new

product launched during Tim Cook's

tenure CEO Tom Forte joins us now Tom

can you talk about why it's so

significant if at first they're not

going to roll it out in so much scope in

terms of the number of units sold and

it's going to have a pretty high price

tag of about three thousand dollars

yeah those are excellent points and the

way that I think about it is when you go

back to 2007 when they released the

iPhone the real power of the iPhone came

with the apps and the App Store so I

think it's excellent that they're going

to launch an AR VR headset and I do

believe this is potentially by far the

most significant new product news during

Tim Cook's tenure but it's going to take

time there needs to be content there

needs to be things that people can use

when they use this augmented reality

virtual reality headset but I think it's

exciting as it is the most significant

product launch in a long time how do you

value some of these names that have

gotten bit up so dramatically I mean I

think of Nvidia as sort of a front

runner in that in that game but apple as

well how do you give evaluation to

something at a time when a lot of people

thought that you'd already brought

forward a lot of the growth in the

pandemic and suddenly we're looking at a

new wave from AI a new way from new

Innovations

when Apple trades at an all-time high or

near an all-time high as it is today I

think investors are starting to embed uh

sales expectations and profit

expectations for significant new

products such as this AR VR headset and

I think potentially over time in

autonomous driving vehicle so I think

that for Apple you need to expect that

there's going to be more than the iPhone

as wonderful as the iPhone product is to

continue to drive the stock higher given

that it's trading at near or at all-time

highs what are you expecting to learn we

know that there's going to be the AR

headset at bail today at the conference

is there anything else that you're

looking for in terms of indications

about strategy or just growth potential

yeah so for me again the key is what is

a consumer going to do with this device

so it's wonderful to have an excellent

piece of Hardware from Apple but if you

don't have games to play or content to

consume then I think it's going to be a

tough sell for apple as it waits for the

ecosystem to catch up with the hardware

so basically I'm looking forward to

details on what exactly does Apple think

consumers are going to do with this

device especially over the next 12

months we're probably not going to hear

too much about artificial intelligence

at today's conference but what are you

looking for just more broadly in terms

of how Apple will deploy it I think

about artifact about the the AR headsets

as being sort of a prime candidate to

possibly be some sort of foil for some

new artificial intelligence chat GPT

that can help us in our daily lives

yeah so I think meta platforms kind of

played at best when they said that their

long-term vision is the metaphors but in

a near-term vision a meta platforms is

leveraging artificial intelligence to

improve the consumer experience on

Facebook Instagram and elsewhere so I

think for Apple uh if the AR VR headset

is a long-term Vision or apple

leveraging artificial intelligence uh

what are they going to do in a near-term

basis you think about some of the

functionality they've added to their

iPhones SOS as an example things of that

nature you think about Siri so there is

things that Apple can do on a near-term

basis with artificial intelligence while

we wait for this AR VR headset to gain

traction Tom do you think any of the

tech Giants are overpriced at this point

so specifically as it pertains to the

two that I cover apple and Amazon the

answer is no I think the important thing

here for apple is that you have new

product news I think if we were solely

baking it on iPhone sales and things of

that nature it might be challenging and

then for Amazon it's certainly a slow

period of time for e-commerce and the

slowing growth in their AWS businesses

concerning but I do think their AWS

business essentially is a backbone for a

lot of this artificial intelligence

efforts and we are looking for Trends

potentially to improve on the e-commerce

fronts as they do a better job managing

their expectations so for those two I

think they're still upside to where the

stocks are trading today Tom Forte thank

you so much for being with us we really

appreciate it meanwhile we do have some

breaking U.S economic data just crossing

the terminal Bloomberg's Michael McKay

joining us now with more Mike well we're

setting up for the ism Services number

at 10 o'clock we get the s p Global

Services PMI uh for the United States

comes in at 54.9 that's down from 55-1

and the composite 54 3 from 54.5 so very

little change in those numbers and if

there are any indication maybe not a lot

of change coming in the ism Services

index which is due at 10 A.M uh Wall

Street time and Lisa that is expected to

rise a little bit so we shall see Mike

thank you so much I do think it's

interesting a downside surprise on

Services uh PMI I mean maybe this is

indicative we shall see coming up the

market moving events that you need to be

watching that's next in our trading

diary at a time when stocks are reaching

a bull market this is Bloomberg

thank you

[Music]

this is Bloomberg's the open I'm Lisa

Bromwich and for Jonathan Farrow a quick

look at markets we are seeing just up

off some of the highs of this session

but still the s p looking to get toward

that 4 300 basis time now for the

trading diary you need to be watching

this week U.S durable goods and IMS ISM

services at the top of the hour then

later today Apple will have its

worldwide developers conference UK prime

minister Rishi sunak visits President

Biden in Washington on Wednesday and

will get U.S mortgage applications and

then on Thursday another round of

jobless claims this was countdown to be

open this is Bloomberg

[Music]

thank you