Transcripts For BLOOMBERG Bloomberg 20240703

With joanne hsu in just a moment, and an oil rally underway. We will see how much risk you should take on into a weekend of uncertainty. Im alix steel, with my cohost in london, died guy johnson. Guy it drops onto our bloomberg terminals the headline number, 63 point zero, down from 68. 1. That is a substantial miss. 66. 7, a big drop. One year inflation wow one year inflation rises to 3. 8 , up from 3. 2 , and we have verizon the five to 10 as well. I wonder if that is gasoline prices, but Inflation Expectations are rising. That is not a good cocktail heading into the weekend. Alix no, that is not great at all. The bond market giving up some of the gains we saw on the treasury market on the frontend, so yields down by two basis points now, but equities are going nowhere yet. This is not a great read for how consumers are feeling. Guy jamie dimon warning on the call, talking about the facts that the consumer is working through the excess savings. We have been talking about that for a while, that has been going on for quite some time. I wonder what this is in reaction to there are potentially a number of different catalysts here. I wonder where the gas prices are when it comes to the inflation story, but the further out story, i dont know. Mimicking what we are seeing at the long end of the bond markets. Alix i think we should go to joanne. Instant analysis with joanne hsu. Lets ask the person who did the numbers. Joanne hsu, the university of michigans consumer director. What is leading the decline and the rise and expectation . Joanne consumers are feeling more stressed out about inflation than they were a few months ago, and this is driven by increased concerns over not just gas prices, but food prices as well. Consumer is in the previous few months felt the increase in gas prices was possibly temporary, and now that is going on for several months, consumers are getting increasingly worried about the future. Alix hmm. Guy in terms of what the implications of this are, can you talk me through what you think is going to happen next . If the consumer is this gloomy, what are the implications for the economy . Joanne the up legations are not good. When you look at all the things that are happening in this country and also oversees in terms of labor strikes overseas in terms of later labor strikes, israel, the student loan payments a lot of things could will way down consumer attitudes. Its surprising that it only declined by 7 this month. There is a decent downside of risk in the months ahead. Alix if i take a look at the daily average of national gasoline prices, but aaa, they have not moved. They are going down. Im confused with that reaction is to. Joanne consumers are confused as well not so much confused as they are unsure. We saw the increases a few months ago in august, july and august, and consumers did not react to it too much back then. But part of the reason, they thought it was temporary. Now consumers are just what we are seeing the last four months are increased spontaneous mentions of food prices and gas prices. This is not just limited to one part of the country, we are seeing this across the board. Guy and what impact are we seeing of higher rates . Joanne thats part of it, but given how focused consumers are on the types of purchases that really affect their lives, it does make sense that food and gas are on the forefront of peoples minds. Consumers have noted the effect of high Interest Rates on the purchases they do need to do, for example, durables and autos. Consumers are noticing those higher Interest Rates, but in terms of active cautious reactions to Interest Rates, that is probably not this months increase, but the past two through consumers. That is part of it. Alix how do people feel about what is happening in d. C. , and is it hitting their radar yet, the house not having a speaker and the dysfunction there . Joanne we are hearing that mentioned by some consumers, but the house dysfunction is a continuation of what we have been seeing over the last few months with the close call with the federal government shutdown. Consumers are absolutely frustrated at the dysfunction in washington and are reserving judgment about how thats going to look going forward. If a federal shutdown does come to pass, what we have seen in previous shutdowns, consumers do absolutely react to that and sentiment is likely to decline further if that happens. Guy one quick question it will be captured by this data, but we have seen the start of another major global conflict wont be captured by this data, but we have seen the start of another major global conflict. We have whats going on in ukraine, and now the emerging conflict in israel. How do you expect the consumer to react to that . Joanne consumers, their attitudes will definitely deteriorate if this conflict continues to escalate. Especially if this provides more disruptions to supply chains, gas or fuel prices, it will certainly affect consumers and their attitudes towards the economy. Alix we really appreciate the instant analysis. Joanne hsu, just to reiterate sentiment dropping, expectations for inflation rising. That is the reflection from you umich in october. We will talk to megan moorman, cio of Capital Investment officers, next. In terms of the bond market the daytoday moves are quite astounding. A lot of this is not just the bond volatility the last seven days, but the volatility of the last three months. We have seen a huge repricing in the long end yields, whether you look at 10 year treasuries, 30 year treasuries. When things move this quickly over short periods of time, there are unrealized losses. Still concerns about weakness in the economy and international stability. The situation is very volatile. One more catalyst for volatility. We think inflation is going to underpin market direction if it comes back. That will be another support for yields moving a little higher. You will see a trend towards lower yields in the early part of next year. Market is trying to find an equilibrium right now. You expect this ongoing volatility. Alix bloomberg tv guests weighing in on the volatile state of markets, bringing us to the question of the day equities give up some of their gains, money flows into the long end of the bond market, but is it risk off right now . Megan, good to see you. Megan we did see that equities pull back from their highs after we got the university of Michigan Consumer confidence index. There could be fadings of this rally ahead into the weekend, especially given the pitiful number we just got from Consumer Confidence. The middle east conflict is still front and center in most peoples minds. Guy what does being defensive mean to you . If you want to be defensive right now, how do you achieve that . Megan its nice to have an overweight cash position right now. This not only gives you an ability to earn a healthy yield, but take advantage of the volatility that we expect the rest of this year. There are opportunities for the long run if you have dry powder to put to work. Alix where would you feel like that would make a safer investment . Megan first of all, there needs to be realistic expectations from a valuation perspective. Valuations in a large part of the market are high. The fed has one more rate hike in them and will not be cutting any time soon, even if the economy starts to weaken. Inflation has been tricky, it has been stubborn, and you dont even know what the feds forecast gets down to the 2 level until 2025. For rate cut saving the day, i dont think they are here. Valuations need to get more realistic to that expectation. Guy to that point, jim bullard is speaking at the imf meeting right now, talking about the fact that the markets might be underpricing as the risk resumes its rise. The fed might have to hike to 6. 5 if that were to happen. What happens to Financial Markets if that scenario comes to pass . Megan that is where we get the 10 , 10 plus correction in the market. The market is not pricing that in. The s p 500 pe is around 21 times earnings. When it is that high, inflation that stubborn, pe should not be trading at 20 times earnings. Alix oil has a feedthrough to inflation. It feels like today it is being treated as a safety asset to hedge the geopolitical risk. What about that and safety stocks that have been outperforming . Megan we have not been dumping money into energy stocks. They had a nice run but some of the sectors we would focus on, you asked, the defensive sector. Health care, staples over discretionary and tech. Oil has been tame considering what is going on in the middle east, but it does put pressure. We talk about higher for longer with Interest Rates, we also think higher for longer for oil as well. Guy a lot of people are coming out of the market and going into cash. Look at blackrock numbers today in terms of the withdrawals they are seeing. A lot of people are thinking this. Getting back in, how are people thinking about getting back in . Everybody is saying to me, get into cash, but then what . What will you be looking for . Megan thats a great question, and one some of our clients asked us as well. There are a couple things. First of all, stocks rarely if ever bottom before a recession. Given the fact that we think a recession is still lightly and could start in the Fourth Quarter of this year if you look at Consumer Confidence numbers, that seems to be a leading indicator for spending. If it does not start in this quarter, at least the first half of next year, so we think the alla volatility inequities is here to stay. We need to get more realistic expectations in valuations. Win thatll starts to come together, that is what we will put money to work. Alix are banks on your list . In some ways, they are perfectly set to manage volatility through the Investment Banking and trading divisions, but on the other, they are dealing with consumer issues. Jamie dimon worrying about dangerous times ahead. Megan the financials are an interesting area to look in, but right now, we are not looking at the financials to end money into them at this point. I am more concerned about the consumer, not the consumer, but businesses. Take a look at Small Business loan rates. These are very high. These will start filtering into the Small Businesses. Auto loans, you heard from some of the big banks today that they are seeing a big uptick in the auto loan delinquencies. We have not even talked about the small and midcap banks yet. Pe multiples arch attractive if you look at them, but the biggest problem they had was the rise in treasury yields and what it did to their balance sheets. No one is talking about that, and we are higher than we were then. There is trouble that could be brewing in the banking sector, we are just not comfortable there yet. Alix we appreciate it. Megan horneman, various Capital Advisors cio. 16 past 7 00 on the west coast. Silicon valley started its gorgeous morning, and joining us as ed ludlow. We are inching towards a historic moment in space. A nasa probe sitting on top of a falcon heavy rocket is set for an unprecedented journey into space, lasting eight years. What are we expecting . Ed you are looking at the nose cone carrying the payload atop the falcon heavy. Whether you are a space nerd or a human being, it is an important mission. That payload over a sixyear period is heading towards an asteroid called psyche, orbiting between jupiter and mars. There is a hypothesis, that asteroid is the remnants of the core of the planet. The question from nasa is trying to pose, is that the case . By using what is in that nose cone, the payload, a trio of hightech sensors and instruments, can we learn something about our own core here on planet earth and the future of this planet based on the elemental composition of that asteroid . Guy ed, talk to me about spacex and nasa coming together and the significance of this mission on that front. Ed mechanically, this is the first time that nasa will do any sort of deep space Exploratory Mission using falcon heavy. The mechanics of the relationship so far have largely been falcon 9. It has been a relationship where spacex varies astronauts ferries astronauts to and from the International Space station and deliver supplies. This payload is nonhuman, they are scientific instruments and pieces of technology to gather data, but it is the next step forward and a 1 billion project. This is big. Alix counting down, we are a minute away from launch. How much is spacex making from this . Ed per launch, the numbers vary from high tens of millions and above. Economics is in the cadence of launch, and the supply chain spacex has established to make a reusable rocket. So far, it is breakeven and then they make cash. Guy walk me through the next few minutes. 45 seconds away from launch. Ed you have the main booster, shrouded by the vapor, the byproduct of the systems in preparation of launch. Those two side boosters and main booster will be taking this beyond earths atmosphere, and 8. 5 minute process to get into orbit before anything really happens, but the key moment to look out for, maximum pressure or aerodynamic stress on the rocket after about a minute, and then we will see it happen quickly. D10, 9, 8, 7, 6, 5, 4, 3, 2, 1, and an engine ignition. Lift off a falcon heavy to psyche, to study the Building Blocks of our planets interspace. Vehicle is touching downrange. Pressure is nominal. The view of the earth from the onboard camera booster. A beautiful shot there as it goes through the clouds. Power and telemetry nominal. Power telemetry nominal, we are looking at the data for all 27 engines, all chamber pressures look good. Peak mechanical stress on the rocket. Max q. The side boosters will be at full power and the center core will be at reduced power to go through max q to reduce the pressures on the structures of the launch vehicle. Coming up in 30 seconds. We will start getting ready to have those boosters cut off. Eagle is looking good. Pitching downrange and all telemetry looks very good so far. We see a beautiful view of the falcon heavy central, core and side boosters there. The data is looking really good. All 27 engines of the falcon heavy putting down 5. 1 Million Pounds of thrust. Standing by now for booster engine cut off for those side boosters. The center core booster will continue on. Booster engine cut off. Side booster separation confirmed. A great shot there of the side boosters coming off the rocket. There we start the chill, stage two, as we get ready for nico on the center core. Stage two, chilling down, making sure the fuel and propellants are flowing through, getting ready for ignition. Guy ok, so at its absolute top speed, the falcon heavy traveling at 24,000 miles per hour. You saw the side boosters separate from the main booster. They will fall back down to earth and they will do what is called a boost back burn, orient themselves correctly and go back down towards earth, and they will attempt to land both of the side boosters. But they will not try to recover the main booster, which they normally do with falcon 9. Alix this is a long process. Now it goes six years . It will take six years to get to the asteroid and two years to circle it . Ed here on Bloomberg Markets the european close is up next, we expect some things to happen in the next hour, but after that, it is a sixyear journey. The first stop is mars, and its interesting, because the propulsion, they use the gravity field of mars to slingshot himself towards the next stage of the journey, which is this Asteroid Belt between mars and jupiter. After that, it is basically a solar Power Electric propulsion system to get it the rest of the way. The thrusters are powered by solar, which is pretty neat. You are getting close to the sun and what you saw was first and second stage operation, which is also pretty neat. Guy this looks like it is going like clockwork. I dont want to jinx it it is friday the 13th, which is a brave call on their part to launch on a day like today, but what is happening behind the scenes here. Are we seeing the acceleration of the Scientific Community . Now that they have usable, reusable, relatively cheap and Scalable Technology to get technology into space, what is happening behind the scenes in terms of the scientific endeavors being pursued . Ed this is a fantastic question. We are focusing on spacex in the context of it being the worlds most valuable start up. Based on the valuations they were doing of 100 billion, money, money, money, etc. The story you are speaking to is critically important. They have lowered the threshold for entry. If you are a satellite maker in Silicon Valley and you can catch a ride now, you can put your payload into orbit at a cost that is realistic. We are talking about publicsector money, right . That has a limit to that. That is the right question, guy, but a reminder that this mission is about 1 billion for nasa, but nasa has the budget. Alix so what is the payload . Ed i love this question. There is a triumvirate of sensors that want to gather data from the asteroid psyche. The first is a gammaray nutro spectrometer, measuring the elemental composition of the asteroid. It is a metal asteroid, but the hypothesis is, it is the remnant of a planet core. The next one is a magnetometer, measuring the egg Magnetic Field left around psyche. If there is a remnant of a Magnetic Field, it indicates to us that that was once a core, and you can use a radio and cameras to map out the rest of the gravity field and the shape and composition of the core. All of the data is going to test another system called deep space optical communications, the dsoc system. How are they going to get the beta back to earth data back to earth . High bandwidth optical communications, sending things back with using Near Infrared lasers. So a lot of tech on board. [laughter] alix thank you. Guy we will take that one. What does that teach us about us and our planet . Ed this is where not my enthusiasm or wanting to know, but my knowledge runs out. The idea is that if you are a geologist and an earth scientist, you see the side booster one of them at least, reentering earths atmosphere. They say they will try to land both of the side boosters back on earth. We look at the lifecycle of planets and stars and try to work out what on earth is going to happen to planet earth over a very, very long time period. Dont worry about our lifetime, guys. Dont see this as a stressful you know what i am trying to say. [laughter] guy we have issues we need to deal with right now. I appreciate the fact that this is further out. Alix i also like you distinguish between space nerds and humans. If guy and i are humans, you tread the water here. What are we watching . Ed they are cycling through shots of both side boosters. Landing on earth, designated watch pads. There is one, it looks nominal. The second one touching down. Everything looks nominal. That looks fine. Where are we eight minutes, 25 seconds into the mission. 56 minutes time, the psyche payload will deploy and go on it sixyear journey. Alix amazing stuff. Guy it looks like cgi, it is absolutely incredible to see this stuff actually happening and the reality of this. You can land two boosters this is side by scifi stuff. The next mission what are these two side boosters going to be used for next . What is space xs next big step forward . Ed i honestly dont know the ounce answer this is only the eighth time the falcon heavy system has ever launched. Remember, it is not the future. The future is starship and we are waiting to see space asks put space x put that nexgen starship to the test. They got it off the launchpad, but it exploded. Alix thanks very much. Thank you for taking us through everything there, ed ludlow. Catch him and Caroline Hyde on bloomberg tech. We are about an hour into this trading session. Equities mixed. Nasdaq 100 negative bonds getting a bid. Relatively small moves on this friday. We are looking at gains for the s p. The nasdaq, a third up week in a row. Weakness for the russell 2000 and this has put in whats been called a death cross, which signals that it could be some more selling pressure ahead. As for those yields alix was talking about, we take a look at whats happening over the last month, its a roller coaster for the two year yield and 10year yield. You can see the two year yield back above 5 . The 10year yield at one point above the level of the last rate decision. It looks like technically may hold 4. 4 . If thats the case, could pressure stocks, although some make the point that rising rates could be on the expectation of some sort of soft landing and that may not pressure stocks in the same way. As for whats beneath the surface for the s p, jp morgan, a barometer of the banks, up 2. 7 . They put up a surprise beat for fixed income. Equities weak but their Loan Loss Provisions there Net Interest Income betterthanexpected and loans up 17 in the Third Quarter. A strong quarter, analysts positive on the fact that they will keep nine dollars per profit on the quarter and we could see some laggards. Alix thanks a lot. Time for wall street beat. We take a look at whats buzzing on wall street and the world of banking and finance. Sonali basak, were you surprised . Sonali a lot of these banks have sold off meaningfully this year and if you look at the big six, you only had jp morgan up. When they are raising their guidance for Net Interest Income, the fact that they are doing at the fourth time this year, of course they will get some love. Wells fargo and jp morgan also coming in very meaningfully in terms of credit losses, in terms of writedowns. The big three banks took in more than 1 billion less of credit writedowns than expected so things were meaningfully better in terms of loans going bad. So you are seeing a lift but take a look at the Kbw Bank Index today. Its remarkable, that i divergence remarkable, the divergence between the biggest banks and the rest of the industry. That divergence between big and regional is certainly continuing on the heels of these results and that choppiness is to be expected through the season. Guy this is going to sound like a weird question, but it makes sense. Are the big banks a good guide for whats happening to the economy . Sonali one number we love to look at, and i know we talk about this every time, is when bank of america reports on tuesday, i look at the fifo score trending up. In addition to what the loan books look like, when you look at wells fargos loan book, even of they are increasing that interest income, the more economically sensitive parts of the economy, home loans, auto qamar still under pressure. They are just not feeling the same pains as before because they have done a lot of enough in those books a lot of cleanup in those books. Regional banks are more sensitive to those parts of the economy that are feeling more pain than the clients you are seeing at these big banks. If youre thinking about wall street businesses, jp morgan, look at its private bank and the revenue surging in the most recent quarter. The higher net worth individuals are clearly creating a benefit here to the biggest banks, which again will farewell for Morgan Stanley on wednesday if they can keep up. Sonali thats a good point. What did you make of jamie dimon saying its the most dangerous time the world has seen in decades . What was the context. Did he address that on the call . Sonali he addressed it in the statement. He gave a bunch of factors, including the ongoing war in you reign war in ukraine, the israelhamas war, pricing concerns, energy, and separately, not related to the danger, but hes talked about the market concerns around on it to of tightening that around quantitative tightening and what that could mean market concerns around quantitative tightening and what that could mean. Particularly rates and commodities, citigroup had the best Third Quarter in a decade on the heels of these moves in markets, so unless that turns to stifling, these banks are still getting a benefit from those trading businesses that could continue next week. Guy this is interesting because in some ways citibanks about the turnaround story, this longterm term project shes putting into place. These numbers in some ways are not a reflection of that, are they . Sonali the future is important. Even jamie dimon and jp morgan are telling you things may not be at this level forever. Things will normalize both in terms of the revenue side and cost tied to credit. Jane frasers turnaround story is remarkable. This is a pivotal quarter to talk about this because not only have they changed management at those key businesses, trading, Investment Banking, you are also watching citi now saying they will remove five layers of management. And so that will come with costs. That will come with severance costs and that has to be accounted for in the upcoming quarters. Guy great stuff, sonali. Busy day for sonali basak. Thank you very much indeed. Finale will be back later. We will update you on the calls. I want to update you on another piece of news. Shawn fain, the gist of the statement hes been giving this friday, his talks are progressing. As a result, it does not look like we will see extra strikes me from the uaw that will impact the big three automakers. It seems maybe some progress is being made. It was interesting to hear ford saying they have given all they can give. They have gone as far as they can go. Some of that progress resulting in some of these strikes being rolled back. Thats the latest from shawn fain and the uaw. Back to the bank story and what is happening here. So far, so good seems to be the narrative. Bill sweeney joins us now. They hold jp morgan, bank of america, american express. He joins us from seattle. These numbers look strong. As an investor, are you happy with what you are seeing here . Bill of course we are. We have owned jp morgan and bank of america since 2012. So the way we look at them right now is they are doing a really good job of running their business and the things they dont control have a lot to do with how cheap the stocks are in relation to the rest of the market, so thats a selfhealing thing, and secondarily, you have to understand where we are from a historical perspective. You just had the segment about the rockets going to outer space, right . What time period did we have rockets going to outer space, very high fiscal deficits that got monetized in the vietnam war and johnsons great society, and Arab Oil Embargoes and inflation that seemed harder to control than what you wanted . So the answer is welcome to the late 1960s. Warren buffett got so frustrated with those circumstances he closed his partnership. So its quite a good lead. So the banks are trying to deal with the fact that you kind of know theres got to be some kind of a comeuppance in the stock market over the next three or four years. Alix does that mean that the banks, for you, are playing defense . Or you just have owned them for so long you will hang tight . Bill no, they are very inexpensive relative to anything else we could own. That makes them very attractive. The only thing i like more at sitting four times plus dividend. Its been cheapened up by the circumstances they dont control. If they have shot themselves in the foot, we have a problem, but these are normal ups and downs of markets and the economy. Guy would you buy more of them . Bill if i did not own them, i would be buying. Alix would you add a position now . Bill i cannot tell you things like that. Alix why not . Bill i can only tell you that after the end of each quarter. Alix we will check back with you then. Fine. Guy so in terms of you are looking at the economy. Walk me through what you think is the relationship between what is going on in the economy now, fiscal deficits, the government, rockets going into space. This is the 1960s. Is that message the banks are delivering these are really strong numbers and i asked this question to finale a moment ago our big banks a good guide as to what americas economy really looks like . Bill there stocks are a good guide to what the average stock is doing. If you take out the magnificent seven, stocks have had that have made no money this year have made no money this year. The vast majority of s p 500 stocks are down this year. To your question, the economy is strong because when you pump 10 trillion of monetized fiscal deficits into the system, when you hand out tax credits for environmental, Clean Energy Investments like candy, and then you have 92 million millennials who were late to get started on household formation waking up two or three years ago and starting to get married, have kids, buy houses, that theres an underlying positive current to this economy thats got nothing to do with policymakers and therefore the frustration is we think so we have a brain dr. Working on a topic that needs a cancer doctor and therefore they are unlikely to solve the inflation problem, just as unlikely as it was in the 1970s when those fed chairs were trying to do it. Alix that deftly feels like higher rates for longer in a big, big way that definitely feels like a like higher rates for longer in a big, big way. Can we talk oil . We had that merger between exxon and pioneer. The word is we are going to see a lot of buyouts. Are you playing that trend at all, bill . Bill well, we have about 25 of our portfolio in oil and gas and we own a patchy and devon and we wrote a piece three months ago basically saying we expect people are going to drill for oil on the New York Stock Exchange and that is what it is. Exxon just drilled for oil and if you buy a company with existing wells and existing production and expand the life of your business by buying another company, you are not going to get the condemnation from the environmental people on poking holes in a new place, so its just theres going to be mass consolidation in this industry and theres a huge gap between the price and the pricetoearnings of everyone below 40 billion in market cap versus chevron and exxon that the big money had to crawl into because of lack of liquidity. Guy if you look out the window, you are going to see amazon. Youre going to see a range of technology companies. Im wondering what you think of them now in a world you are describing that kind of points us in the direction of higher yields from here. Do those Big Technology Companies Look like Good Investments to you right now . Alix first of all bill first of all, what i see looking from the window in seattle is a bunch of partially mostly empty Office Buildings, a place where just thousands and thousands of people, including myself for 40 years, came to work. Im in a building that i worked in in the mid1980s when it opened brandnew and so the fact of the matter is one of the reasons the regional banks are performing poorly relative to the big banks is because the big banks are much more exposed to commercial real estate of the Office Building type as opposed to bank of america and j. P. Morgan, so the answer is i see that. That was created by a boom that came from amazon parking 50,000 people in downtown seattle and i just walked by a building that amazon built thats now being turned into residences because theres no one in it at rainier square. Alix i feel like that was a knock on corporate real estate and maybe also on tech. Appreciate it. We have got to go but thank you for joining us. Bill smead of smead capital management. We will hear from the wells fargo cfo at 2 00 p. M. New york time. We have some breaking news for you. Shawn fain, the uaw president , speaking at a Facebook Live event in an update on the strike. Carmakers have been spared from new strikes. You can watch more in real time at live go. Corporate media trying to scare everyone about the devastation our strike would cause. They tried to convince everyone that its dangerous for the working class to fight for more. Instead, they are learning a hard fact. The working class in this country is fed up with being bullied by rich corporations and the wealthy. The working class in this country is sticking together. The longer the strike goes on, the more the public stands with us. What do you see on the horizon . Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. Alix this is Bloomberg Markets. You are looking at the principal room. Katie nixon joins Bloomberg Television at 3 45 p. M. New york time. This is bloomberg. The broadest s p 500 tracking etfs are seeing above average inflows. We want to find out whats driving this trend. Emily griffey i was here with the details. Emily the underperformance of active this year seems to be driving extra flows into s p 500 etfs, more broadly passive strategies. Theres only four etf that tracked the s p 500 and they have taken in 27 of all equity inflows this year and not only is that a big change from last year when they took in about 10 , its also the highest proportion since 2016, so it seems like investors here are looking at the performance of big tech, which is a large part of the s p 500, and allocating to that passive strategy. Guy in theory, emily, the single stock correlations are low. You are getting some big movements within the market. This should be should be a great time for active, but thats not the message you are giving me it sounds like. Emily if you look at active etfs, and theres not a lot, they only started a few years ago, but only 28 of them are beating the s p 500, and its not just active funds that are core equity, but if you look across yesterday, somatic, factor based yesterday, thematic, factor based funds, most of them are underperforming the s p, which is different from last year, when 70 of them were beating the s p. Now only 15 . So value, growth tilted funds are underperforming. Alix i have to wonder if this goes to your theory that the narratives change so quickly you just cannot and i appreciate thats where active should be good, but when the narrative with saws daily narrative with saws daily, feels, that is difficult. Guy that is where the challenge has been. Yes, you are getting low correlations and things bouncing around all over the place, but nothing seems to last for long, so even if you get it right, you will get it wrong quickly. Alix so, emily, im also wondering we usually talk about rebalancing after november but im wondering if this is different because we have seen so many big moves. Do you think thats part of it . Emily you might expect to see, maybe because of the fact that passive has done well, some big model portfolios shifting out of that passive allocation, but we will have to see. We have a lot of index rebalances coming up into the end of the quarter, and if we are talking about indexes, ftse russell is now considering doing a Second Annual rebalance, so changing it from annual to semiannual. We just had that announcement a few days ago. That might bring in more volatility and movement when it comes to these big funds shifting from active to passive. Guy its amazing. Such a great environment. Emily graffeo joining us for etf credit. Look at lvmh versus novo nordisk. I think the gap now lvmh used to be the Richest Company in europe. Now its novo nordisk. The gap is i think 100 billion. The speed at which this has all happened, i watering. Alix and how you play that trade now. Like, we got a cells and a sales and revenue outlook for nordisk that was solid. How do you buy it at that point . How do you manage that . Guy its the same story as big tech in the u. S. You look at how fast the technology the luxury sector has fallen in europe. Its been i watering. The value destruction has been seismic as the chinese, then the american, then i european then the european consumer starts to roll over. Much more to come in the european close on that story. This is bloomberg. That first time you take a step back. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy, with a partner that puts you first. Godaddy. Guy a little more movement at the index level on equities today. Down. 8 . Still not far away from the middle of the range we have been in since the middle of the year. Single stock sectors is where the action continues to be, this violent rotation we continue to see present again today. Two sectors in positive territory today. The main is energy. Up by 4. 29 . You have seen the major names. Shell hitting a 52 week high. We have been discussing novo nordisk. Thats up i dont have a percentage but we are up, let me assure you of that. A little release we did not expect earlier on in terms of the numbers they will put out. And unsurprisingly, given whats happening here, they are upgrading their figures. Ozempic, obviously, all this stuff is reverberating, demand is better, so the numbers get better and better. It feels like the ai story. Maria will be joining us from state street. We will talk about the markets with her. This is bloomberg. Or filing returns. Avalarahhh ahhh the power goes out and we still have wifi to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Alix friday guy friday, the 13th of october, and, yes, the equity markets seem to have noticed. Countdown to the closed starts now. The countdown is on in europe. This is european close with guy johnson and alix steel. Guy friday the 13th, risk off. Down by. 9 on the stoxx 600