'Bloomberg The Open' Full Show (11/21//2022)
From New York City for our viewers worldwide and Lisa Abramowicz in for Jonathan Ferro. Right now, we are looking at a softer tone to markets, but it is quiet ahead over Thanksgiving shortened week, down just three tenths of a percent on the S&P. The countdown to the open starts right now.
Everything you need to get set for the start of us trading. This is Bloomberg. The Open with Jonathan Ferro. Begin with the big issue. Gearing up for a turbulent year ahead. There is going to be pain slowdown with respect to growth. The US is going to be flirting with a recession.
We have probably a pretty powerful recession coming when you have this magnitude of rate hikes in such a short period. And you're also withdrawing liquidity through quantitative tightening. It's going to bite. Wages have not kept up with prices.
Real incomes coming down. Thankfully, it's also now starting to bite inflation. That doesn't mean that we've in the mills with to go back to 2 percent. A lot depends on what the Fed does.
The market is asking the Fed, are we there yet? Are we there yet? Trying to find you? Where is the peak of interest rates? The Fed keeps saying no, sit down in the back seat and be quiet. There are huge opportunities underneath the surface. There's still going to be facing an awful lot of volatility in 2023. Meanwhile, investors hoping for a better
2023 are poised for disappointment. That's the view from Goldman Sachs, expecting the bear market to last into next year, writing, quote, The near-term path for equity markets is likely to be volatile and down. The conditions that are typically consistent with an equity trough have not yet been reached. I am so pleased to say that joining us right now is up here, Oppenheimer of Goldman Sachs, who penned those bearish prognostications. And I am wondering from your perspective, just how bearish are you? Why do you see this as continuing and how much further? Thank you, sir. I think the key point here is not that we're so bearish in.
I think that you're going to see some more to and another move down. But I think that the conditions, in our view, that need to be in place is. Peter, I think that were having some trouble with your audio, so let's try to reconnect and hopefully we can get back to you maybe as we tried to reestablish the line, there is this issue as we take a look at the bear market not being over Morgan Stanley agreeing and believing that there is going to be some sort of downturn. Morgan Stanley seeing it going potentially down to S&P, down to three thousand before coming back to the hope phase. Joining us now to discuss how to sort of
position ahead of a tumultuous year, J.P. Morgan's Jack Manley. And Mike Kane, topless of RB advisors. Mike, I want to start with you. And I'm really curious from your
perspective, with all the bearishness, we haven't seen a percolate into credit. Is this a supportive factor into next year or is this something that could potentially be problematic because it will also get hit as companies start to have to actually refinance? Lisa, I think it's problematic. I mean, you know, the credit market is kind of living in a fantasy land right now. They're really pricing in just an ideal
scenario where the economy slows just enough to bring down inflation, not enough to, you know, dent earnings growth or increase increase defaults much. And I think that's just sort of a bad hypothesis. I mean, you look at 2023 and it's clear we're going to go into an earnings recession. You know, high yield credit, for example, does not do well when you go into an earnings recession. It doesn't matter how strong, you know, balance sheets are today. They're going to weaken as as earnings growth slows. And then, of course, listen, you've got
much higher rates and incredibly tight lending standards. And that's going to prove problematic for portions of the loan market. Anybody who has to refinance in the next couple of years and I think sentiment is going to get dinged up pretty bad and that's not good for four broad risk assets. And that really speaks to what Peter Oppenheimer was talking about. And hopefully we can reconnect with him given the technology figures. But I wonder, Jack, from your standpoint
over at J.P. Morgan, whether you do agree that there is going to be a trough here or there out in the this is before we get to that capitulation, after which perhaps you could get a more sustainable rally, but we're not there yet. Yeah, I mean, I would certainly agree that the credit fundamentals don't don't really line up with what reality is showing us. I guess on the equity side of things,
the silver lining here, the good news here, if you want. If you want to be sort of optimistic about it. Glass half full, is that. Well, a lot of what's happened this year, in fact. Basically, everything that's happened this year has been driven by multiple compression. So the good news going into 2023 from an equity market perspective is that stocks aren't expensive anymore, at least not in the way that they were at the start of the year. The problem, of course, is that that
earnings shoe has not really dropped yet. And the big question right now is just how bad our earnings going to be as we move through 2023. I don't think anybody is expecting good news from an earnings perspective. It's really just a question of how bad it actually is. But from that valuation prospect, from the multiple perspective, Lisa, that is at least one thing that's keeping me modestly optimistic about, about short term equity performance potential.
And this this sort of tension right now between valuations being low, the potential outlooks deteriorating has been highlighted by a lot of Wall Street research, including Morgan Stanley's Mike Wilson, who just wrote, quote, We still expect higher highs for this tactical rally. So that's the positive before the deteriorating fundamentals. That's a negative. Take us to lower bear markets, market lows next year. How much, Jack, have we already seen,
though? Some of that disappointment bled into this last quarter's results because there were a lot of disappointments and they were severely punished by the market action. This whole year's been a disappointment, I mean, it's been an extraordinarily challenging year to be a strategist and try to figure out where things are going over the short or medium term, because at every turn you are being challenged by it by by something new. I mean, I could see another 5, 10 percent lower on this equity market. I'm not particularly optimistic about
this current rally. I don't really think it has legs. I don't think it has a whole lot to stand on. But I do like that valuation story. Liz, I don't want to, you know, beat
beat a dead horse here. But markets are off so much from where they were in January that I think if you extend your time horizon by more than 12 months and look out over 18, 24 months and beyond. The story starts to get a lot more interesting, because 2023 may not be a great year for earnings, but 20 24 probably will be a pretty decent one.
And if we can get over this, this this trouble, if the recession that is coming ends up being shorter or at least shallow in nature, I think we can look beyond the short term chop and focus in on that on that longer term story. Meanwhile, from the nuts and bolts of cash flow, Michael can top the list. This has been one of the key issues for me. And I read this in your note and I thought it was fascinating where private markets are with respect to default rates, where private markets are, with respect to companies really rethinking their ambition because it's just expensive to borrow money, it is expensive to expand. And that really gives a feeling for how long the downturn could be and how much layoffs could accelerate. What are you seeing in the private markets that arguably are more leverage than public markets in pockets? And what does that tell you about the future ahead? At least if you think about what's happened over the last 10 years, I mean, the traditional investment banks have been disintermediation from financing the riskiest companies. I mean, that's what the post global
financial crisis regulation was meant to do, is to to shore up bank balance sheets. By the way, it hasn't really seemed to work very much. If you go back and you look at all the long bridge loans and deals that basically can't get off of their balance sheets these days. But besides the point. Listen, private market step in to basically fill the void in financing the worst of the worst companies and that only got worse that you had a bubble sort of percolate in the broader economy and broader markets because of infinite liquidity. And that's all about to unwind. I kind of think it's interesting that, you know, most private managers out there tout how you'll realize lower defaults because of your ability to basically shepherd a troubled company through through trying times.
And yet private defaults today, by some measures are close to 4 percent, while public debt, which is probably the safest market that you've had in the high yield space in decades. You know, public default rates are closer to one or one and a half percent. So it's nearly three times the default rate in the private space right now. And that goes to sort of what I was mentioning earlier. Right. 2023 is going to be a really challenging year, I think, for broad equity markets and credit markets in general. And the play was pretty obvious. The playbook is you have to get defensive.
You don't own illiquid markets like private credit in these types environments. There'll be a time for that in the future. The next year, is not it? All right. Well, meanwhile, we'll get back to this and really dig a little bit further. In the meantime, on the macro phase.
China Covid fears it's going to reemerge a worsening outbreaks over the weekend, stoking concerns that authorities may return to tighter restrictions with Kailey Leinz. Joining us now with more Kelly. Well, Lisa, it's a worsening outbreak, not just in terms of total cases, but the fact that we actually had fatalities reported in China for the first time in about six months. So this is throwing a huge bucket of cold water on the whole idea that this economy was going to be reopening and these curbs were going to be loosened. Now, the fear is that they might be
tightened once more, and that is weighing heavily on Chinese stocks. We saw that in the Asian session overnight, and that is continuing here in the U.S. session with those 80 hours under pressure. Ali Baba by do, Billy, Billy, J.T., AECOM, all down to the tune of 2 to 5 percent. Of course, JD dot com, one of the big underperformers, down nearly five percentage points. But of course, it had rallied 52 percent from its recent low in late October. So there was a big buildup coming into
today. And that has really been true for the broader group of Chinese companies listed here in the U.S. because of what has been a series of good news events, earnings better than expected, seeming ease, an easing of relations between the U.S.
and China. You had support for the property sector as well. And what until today seems like it would be an easing up of Covid zero policy. So all that together had the NASDAQ Golden Dragon China index up about 33 percent from its low in late October, but it still remains down 33 percent on the year. So it just goes to show you how far we had fallen.
And then outside of equities, I want to talk about commodities as well, specifically iron ore, which is very sensitive to the China growth story in terms of demand because of all that reopening optimism, we have seen it have a very, very hot November, up about twenty three and a half percent this month, giving back some of those gains today, which was actually only one of three days in the month of November thus far that we have seen these futures moving lower. Obviously today that based off of the new Covid news and that news as well, part of why Goldman Sachs cut its oil forecast for the fourth quarter. They now see Brent at one hundred dollars a barrel rather than one hundred and ten dollars a barrel, given what they see as the possibility of further lockdowns.
What I will say the least says that may be bad news for commodities prices, if you're along, could be good news on the inflation story if China's reopening is delayed further. Kelly Lyons, thank you so much. Well, you mentioned Goldman Sachs and Goldman Sachs is with us. Peter Oppenheimer, we apologize to you and thank you for bearing with us through the technical difficulties. Peter, from your vantage point, this has been one of the underpinnings of the recent optimism is the potential reopening of China as well as Europe avoiding the worst case scenario? How much is that going to play to the next leg lower in the bear market if that optimism isn't totally founded, at least to the degree that the market is price again? Thank you, Lisa.
Apologies for the connection before. You're quite right. There have been some good pieces of news that markets have absorbed over the last few weeks. Signs of an opening up in China, as you mentioned, a very mild winter so far in Europe. Gas prices falling. And, of course, the evidence that U.S. inflation is reaching a peak. But we have to acknowledge that markets are really pricing that. Let's not forget that the S&P, for
example, is trading at a PE multiple of over 17 times, pretty much where it was the beginning of the year, despite the fact that real interest rates have doubled since then. And we're still looking at around zero earnings growth in the U.S. next year, less in places like Europe. So I think the markets are going to be exposed as a margin. Any more difficult news that comes through, particularly on growth over the coming months. And I don't think we've yet hit the sort of conditions that we would typically see at a genuine trough in a bear market. That helps to form the base for a
sustained rebound. What kind of downturn are you looking for? I know that Michael Barr sent Wilson over at Morgan Stanley has talked about the potential for even a 24 percent decline from here to 3000, the S&P. Are you in line with that kind of projection? Not quite to that level.
No, we're not so negative about the downsides. We just think there'll be more volatility and a trend towards a lower market level before we get that trough. The reason we're not quite so negative is because there are some positives. We do think that the US economy will
avoid a hard landing. We think that there is going to be recession across Europe. But even that is likely to be relatively mild and we should acknowledge the private sector balance sheets are pretty good. In particular, banks and broadly corporates as well. But not withstanding that, valuations
haven't really yet. Shery Ahn to the sorts of levels you would tend to get as investors worry about an economic and a profit downturn. And also we're likely to see further weakness in growth momentum in the next quarter or so before we really get to the negative. The worst point in this in this downturn, it's not really until we hit that the markets tend to recover and I would say just fine.
Last point, there is a lot of optimism now that the pace of rate increases is that as slow as central banks get a little bit more confident that inflation is closer to a peak. But that said, you don't typically gags markets reaching the trough until interest rates actually start to come down. And we're still a long way away. Well, and we were just peaking with Jack Amanda Lang of J.P. Morgan by a topless RB advisor is about the fundamentals and how much free money kind of fostered what we saw and then the lack of it, the downturn.
And from that perspective, how much can technology shares really continue to regain leadership position? And we've talked a lot about that this year. But when we do get those rate cuts, will it be technology that outperforms and drives the equity indexes higher or will it be someone else or will it be a more even weighted kind of a rush? He's going to be a lot more even waited a lot more eclectic. We're really seeing this year is the reversal of the trend that we saw in the post pandemic to pandemic era. That was supported then by zero rates and a lot of money printing. And that really pushed up the value of the longest duration Brad Stone seen towards record highs.
But it's not that there's not going to be great opportunities in technology. I think that will be valuations still to come down. And they have. But they still remain relatively expensive compared to the more traditional and value orientated parts markets which have been outperforming this year. They've seen stronger growth in earnings, but they've continued to get even cheaper. So I think the rotation towards value
that we've seen really driving returns this year is likely to continue over the coming months. And then we'll get a bit more of the mix really between quality growth that will benefit eventually as interest rates come down and some of the more traditional areas that will benefit from a lot more complex spending into the next cycle. Peter Oppenheimer, thank you so much for taking the time and sharing with us. Jack Manley and Mike Anthopoulos will be sticking with us.
Thank you to them as well. Joining us now with a look at the stocks moving ahead of the opening bell. Here's Abigail Doolittle. Well, Lisa, let's start out with today's big story stock.
And that, of course, is Disney shares are soaring, in fact, heading to their best days since December of 2020 as into today, heading to the worst year on record since nineteen seventy five. This, of course, in the news that the board is bringing Bob Iger back on for a two year stint as CEO. This after 40 years with Disney, 15 of those years, as you know, as CEO, his handpicked replacement, Bob Shaye, back is out. Although I may add, with twenty three million dollars and his goal, Iger, is as to rein in spending on programming for streaming video, reignite growth for Disney. Plus plus bring in a permanent
replacement. As for some of the weakness that we're seeing that are dragging on features, Kelly was talking about that 0 Covid policy or the fears around Covid in China. Well, that's weighing also on the chip space. And earlier Bitcoin was below sixteen thousand dollars per bitcoin. Lisa, that has some of the crypto stocks, including Coinbase trading lower. Abigail, thank you so much. Coming up, the Fed's big parade continuing ahead of Wednesday's minutes.
There is more work to be done. I expect that this will require additional increases in the federal funds rate, followed by a period of holding rates at a sufficiently restrictive level for some time. That conversation coming up next on this holiday shortened week. This is Bloomberg. This is CAC down to the open ISE, Lisa Abramowicz and Jonathan Ferro just moments away from the opening bell, we could see that negative tone actually getting a little bit lesser of a negative as time goes on.
NASDAQ down about a half a percent. The S&P down about a third of 1 percent. You're seeing yields a little bit lower on the front end. Difficult to really get a sense in this holiday shortened week. I will say, though, Brent crude falling below eighty five dollars a barrel for the first time going back to September. You're seeing that play out and WTI down
to seventy six. Eighty three, down about 4 percent today. In the initial minutes of the opening bell on the dollar, a little bit of dollar strength versus the dollar weakness, one or two fifty one for the euro versus the dollar. Joining us now with a look at the stocks moving at the opening bell, here's Abigail Doolittle. Well, Lisa, as a result of that oil
weakness, we do have energy is the worst sector on the day. We'll be taking a look at one of those individual movers in a moment. But first, let's return to Disney, because these shares are soaring the best day since December 20 20. That's, of course, as Bob Iger comes back in as CEO Bob Shaye is out. Although I may add, with 23 million dollars and ISE is a new task, really is to rein in spending on programming for the streaming video, plus reignite the growth for Disney plus and find another new replacement, one who hopefully works out for a bit longer.
This stock, I might add, into today had been on pace for its worst year, going all the way back to 1975, the worst year ever. As far as some of the other movers on the day, of course, with stocks down, we do have a number of laggards, including Amazon, actually. Amazon has slipped higher, up nine tenths of 1 percent, really showing you that the intraday volatility that we've had all year is continuing.
But this company, of course, has Black Friday. Either worry about or who knows, maybe it will be a boon for them. Conoco Phillips, though, on oil falling, Brent crude, as you're mentioning, below. Eighty five dollars per barrel, down
about 3 percent. U.S. Steel also down 1 percent. This, of course, has to do with the Kogan fears out of China, Lisa. China is the world's largest user of natural resources. So we have a lot of these materials and energy stocks down. And then Queen Base Global, it is off of
its pre market lows, but nonetheless down one point four percent earlier. As you know, Bitcoin back below sixteen thousand dollars per bitcoin. And of course, still lots of questions and fear around the extent of the FTSE ex bankruptcy and the fraud. What will it mean that crisis in confidence for crypto? Abigail, thank you so much. Sticking with Disney, chair of the board Susan Arnold writing, quote, We've concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the company through this pivotal period. Bloomberg said Ludlow joining us right
now with more. Good morning, Lisa. Uniquely situated because he spent four decades at the company, 15 years as CEO. Many investors and most on the sell side is chairing this. You see that in the stock reaction, though it is surprising. Jay Peck only extended his contract by a three year period in July, and it was less than a year ago that I had retired from the executive chairman role. The big focus is the streaming business, the streaming losses for fiscal 20 to 4.5 billion dollars, almost double what the company outlined.
It expected them to be at the beginning of fiscal 22. The problem is outlined in that chart that the losses from the streaming business are outpacing the growth in revenue. It's on the direct to consumer business. There is some feeling on the sell side at least, that pay was not as focused or as ruthless on the bottom line as he could be. And I get.
Coming back will have that focus. His remit is Abby said is two years as CEO with a drive of new strategy while trying to seek a success of at times a challenging the stock down more than 40 percent year to date. On track for its worst annual decline since the 70s. The macro picture has changed, of course, but so has the industry and the environment. The streaming, they've hung their hat on the streaming business, Lee said. The problem is business needs to be profitable and there's a feeling actually ISE is the man to fix that.
Bloomberg said. Ludlow, thank you so much for that. Both Goldman and Morgan Stanley expecting a challenging year ahead for stocks. Morgan Stanley's Mike Wilson reiterating his view this morning, writing, quote, What's yet to be priced is the earnings risk, and that is what ultimately will serve as the catalyst for the market to make new price lows in the first quarter. Bloomberg Bloomberg Markets Lines. Joining us now. Kelly, what do you see? Well, it may not be a whole New Year, new me thing for the equity market. Lisa, if you listen not just to Morgan
Stanley, but Goldman Sachs as well, which says the bear market is likely to persist throughout the duration of next year. They essentially think that at the end of 2023, we're going to be around 4000, which is not much changed from where we are now. Goldman says the conditions typically consistent with an equity trough just have not yet been reached. And therefore, the recent gains we've
seen aren't sustainable because stocks don't typically recover from troughs until you see the rate of deterioration in economic and earnings growth start to slow down. Now, Goldman's view isn't really far off from the consensus call for next year at this point. The average strategist target in this month's survey has the index down at thirty nine thirty one. End of twenty twenty three, although it's pretty telling, that's already 3 percent lower than they saw in the initial twenty twenty three survey back in October, but clearly the broad consensus is we won't be much change, which echoes the view of Mike Wilson at Morgan Stanley, which you mentioned, reiterating today that he thinks we will end next year near the current level, but it will be a bumpy ride to get there, he thinks will fall as low as three thousand in the first quarter, which would be a 24 percent drop from Friday's close. As for what history suggests about whether a bearish call like that may actually come to fruition. The average peak to trough decline for the S&P 500 over the last 50 years of recession history has been about thirty seven percent. We were down 25 percent this time around
before the recent rally on that cooler inflation data. So there's a 12 percentage point gap there from the norm that could lend support to the idea that this bottom is not yet at least Bloomberg Surveillance. Thank you so much. So bearish that it becomes bullish defiance ETF Sylvia Blonsky seeing signs of a trough writing quote, stay the course, invest for the future when people are this pessimistic and doomsday driven. It's likely a sign we are bottoming out.
I am pleased to say Silvia joins us now. So how strong is that conviction that you feel like, all right, people are so gloomy. So do me. That's a screaming buy signal. Jihye Lee I so I don't think that it's necessarily a screaming buy signal in terms of a short term turnaround and major profit opportunity. But I do think that the market is going to kind of stay where it is.
And even with the most bearish analysts that you just referenced, Mike Wilson and Goldman Sachs talking about 4000, that means that we get range bound volatility probably between now and then. So you're going to get these bursts and perhaps these short term opportunities, you'll get these pullbacks. But the market is unlikely to sort of fall, you know, further out for the next year.
What I think in terms of this market is that it's a great opportunity to dollar cost average. And for those investors who have time horizons beyond 2023, because we've talked about all the things that haven't happened to really call a bottom in terms of earnings pulling back and that, you know, 30 percent, 37 percent move in S&P. But what we're really also looking for is perhaps the positive things that could happen. So if inflation has peaked and it continues a downward trajectory and doesn't get stuck at, you know, 3 to 4 percent, that's a positive. If China reopens and cold, it becomes a
thing of the past. You know, we keep sort of saying that, but it's still an hour in our world and our ecosystem here. You know, that will be a positive for markets. We need a catalyst in either direction to get investors off of the sidelines. But in the short term, I do think you can pick your spots for the longer term.
Names like tech, semiconductors, I mean, they are so far off 52 week highs that I just strongly believe that there's dollar cost averaging opportunities in those types of names. One thing that defines ETF does so well as thematic investing, and that's really one of the main spots for ETF at this point when a lot of people are casting doubt on index is in the face of the tech weakness. How much has tech clouded some of the valuation case made for other sectors that are being reflected into inflows into certain thematic ETF that you oversee? So that's a great question. I think the performance of CAC has has just led to this contagion in terms of any kind of higher growth, innovative thematic ETF type of product. It's it's, you know, sort of shown up with crypto. Crypto has obviously gotten worse
because of RTX in recent days. But anything that's sort of high growth and risk, you know, it sort of makes sense because interest rates are a lot higher. You have a hawkish value of slower growth in the near term. So investors tend to pull back in those scenarios. But interestingly enough, we've started
to see inflows into the funds in recent weeks, which leads us to believe that a lot of the sort of buyers and investors out there are thinking, OK, you know, 5G, for example, we need 5G to communicate, to connect rural and urban America for electric vehicles. Artificial intelligence and semiconductors are just notoriously hammered this year. Perhaps we are at a low in certain areas like that.
And then that feeds the theme of, you know, sort of things like quantum computing, 5G data learning. So you do see some bottom picking out there, informatics and then thematics in different areas. For example, alternative energy, for example, are seeing great inflows. So we have a lot of interest in hydrogen. For example, we're seeing investors looking to diversify their portfolio exposure in that way by picking up, you know, ETF and single name stocks in that space. So much.
Sylvia, you mentioned Bitcoin and I know that defines ETF also has some short bitcoin and short crypto ETF. And I'm wondering from your perspective, do you have any insight into why there hasn't been broader fallout? We were just speaking with Peter Scheer earlier this morning and he was talking about the possibility of Bitcoin going below 10000 dollars. I mean, how much is this something that you're seeing as a theme among the retailers and the institutions that use your funds? So the way that we approach is we look at companies that are related to the block chain digital asset ecosystem, so not crypto itself, but names like MicroStrategy that hold a lot of crypto or coin based that are impacted by crypto. BLOCK Galaxy, things like that. So these names are actually negatively impacted by crypto falling from 70000 down to 16000 where we are now and perhaps if it goes to 10. So you might see a bid in shorting a lot of those types of names, whether through an ETF or individually of crypto continues to fall.
In terms of the broader market, though. You know, I think it's sort of a good thing that, you know, the sort of crash of RTX isn't impacting Apple, for example. Right. So it is this sort of unique discrete asset class. And I think, look, you'll have traders that that play both sides of this.
Right. I think a lot of investors strongly believe in a long term future block chain technology. And so they'll scoop scoop up some big bitcoin here because it'll be a payment method for Web 3 and, you know, the build out of sort of all that. But in the near-term, it's like any other short fund, right? When the market is falling again, you have an opportunity to benefit from falling prices of stocks that relate to crypto investors.
Love it. Sylvia Blonsky, thank you so much and happy Thanksgiving. Coming up, high towers Patrick for ZT, expecting more clarity around inflation to come next summer. Net more on that next. From New York, this is Bloomberg. This is Bloomberg's The Open. I'm Lisa Mateo, live in the principal
room. Coming up, J.M. Smucker, CEO Mark Smucker. That conversation at three thirty p.m. in New York, eight thirty p.m. in London. This is Bloomberg.
This is Bloomberg Markets the Open. Taking a look at the Fed speak this week. The Fed's Collins seeing another 75 basis point move on the table. Atlanta Fed President Rafael Bostic taking a less hawkish stance that his colleagues saying over the weekend, quote, Assuming the economy evolves, as I expect in the coming weeks, I would be comfortable starting the move away from 75 basis point increases at the next meeting. Joining us now, I'm so pleased to say is Bloomberg Michael McKee Mike. Well, Lisa, this is the week of the Fed minutes and a lot of people are going to be paying attention to that.
But you probably don't need to. And here's why. The minutes reflect what the Fed was thinking back on November 2nd. And since then, as Lisa was just noting, an awful lot of Fed officials have been speaking. Six of the 12 who will vote have said they're willing to step down from 75 to 50 if that's what the chairman would like. The chairman says so as well.
And six more of the members of the 19 members of the committee have also said the same thing. Most of the rest have not spoken. And Collins didn't say she wants 75. She just says it's on the table. So what is a three week old set of minutes going to tell us? Not a whole lot. Most of these Fed people have been saying there's still data dependent. They want to leave themselves with lots of room to make decisions based on the data and a lot of data out this week because we're compressing it all ahead of the Thanksgiving holiday.
Daily, Mr. George Bullard, who've all taken a position speaking this week that Wednesday is the big day. Probably want to look at jobless claims and the Michigan sentiment numbers about the idea of whether or not people think inflation expectations are going up.
Then we've got those minutes. But the big news is going to be next week on the 30th. On Wednesday, Jay Powell is going to be speaking at the Brookings Institution and he's going to be quizzed on monetary policy. So I think the minutes this Wednesday are probably not going to mean a whole lot. If you've got Jay Powell two days ahead of the Fed blackout, telling us what he thinks should happen and is likely to happen. So, Lisa, we'll keep an eye on that. That doesn't mean we will carry the
minutes or Covid them. I'll be there. But for sure, this week may not be as important as next week. Michael McKee, thank you very much. I do want to bring you this within the past 10 minutes. The Wall Street Journal has been reporting that Saudi Arabia and other OPEC oil producers are talking about actually increasing production of their output or increasing their output.
And part of this could heal the issue that's come up with the Biden administration and also come ahead of additional sanctions on Russian oil. Some people speculating that this is what's behind some of the declines that we've seen in crude prices with Brent falling below eighty five dollars a barrel for the first time since September. Meanwhile, we do have this feeling right now in markets that there is this disinflationary force. Perhaps this will add to it. And joining us to really pass through that is Patrick presented of Hightower right now. Patrick, thank you so much for being with us. How much are you seeing this
disinflationary kind of move being borne out in the commodity sector on the heels of the expectation of weakness? You know, we've seen it now. I think all year. I mean, the thing that I think the market doesn't totally appreciate yet is that no inflation is so pervasive that I don't see it going away anytime soon. I don't see us getting 2 or 3 percent inflation rate next year. I think this is going to be with us for
years. And why that's important is, you know, again, inflation and energy and consumer services, et cetera. You know, as that ripples through, you're going to see markets, I think, continue to rotate. And what that means is we've had this change of leadership this year. We've seen it in commodities. Yes. But we're going to continue to see that,
I think, for the coming years. And so what worked, you know, over the past 10 years, I don't think is going to work in an inflationary environment. So, you know, the Fed has been very consistent in terms of, you know, again, you know, saying that perhaps that the pace of rate increase will go down at the terminal rate will be higher. I think we're going to be stuck with this inflation issue for quite some time.
So how do you deal with the fact that you're seeing OPEC plus respond, perhaps increasing their output, at least if this Wall Street Journal report is accurate? That does cite sources. Patrick, how much do you sort of double down on your overweight of energy stocks, which we've seen outperform all year, even in the face of the counter measures that are being taken around the world? Take it in stride. You know, I mean, this you know, this is this is a a a long, you know, a long term move. And so these are always opportunities, you know, to add exposure. You know, if you're under way right now, I definitely feel like, you know, the energy market, again, that rotation energy just being such a small percentage of the overall market, you know, up until this year. And it's still very relatively small. I think it's always an opportunity to
use this volatility. You know, on days like this, although we are seeing people say, OK, some of the areas that have gotten bid up, most aren't necessarily going to look the most attractive for the next leg simply from a valuation perspective, because we have seen such incredible valuation resets in certain areas. Is there anywhere in that space where you're starting to see something that's a little bit more attractive despite your hesitation in the face of further inflation? Well, you know, look, you know, I would say in one area, you know, say take media, for example. Right. There's been such a divergence between valuations over the past couple of years with streaming. You know, Disney obviously is at the
forefront today and Iger coming back into the fold. Right. But when I when I look at media assets today, you know, you're going to see, again, the corrections continue to come through that space. And I think there could be very good opportunities within that space. We have some exposure there.
Again, it's sort of the the value side of the equation when you look at part of the industry and I think the growth side of the equation, you know, at the other end of the spectrum and of course, when you have, you know, news coming out every day and, you know, again, competition, I would say among technology, I think that's that's very important thing to pay attention to. So given that you do see the inflation lasting a bit longer than people can stand it. And given the fact that Citigroup is talking about a five and a quarter to five and a half percent Fed funds rate, how much can you use bonds as the same kind of buffer, given that people are expecting a downturn, people do expect longer term things to reset back into some kind of normalcy that we've known. I think bonds are a good complement for any portfolio right now. I mean, there is now competition for,
you know, the equity space and that's in bonds. And you can get a return with, you know, I'd say at least on the short end with, you know, relatively low volatility. And I think to have some exposure in bonds, I think for sure that's that's a part of any asset allocation, particularly when you're looking a few years out. And so, again, it's it's because we haven't had these rates, you know, for 12 years plus. And so that is something you really have to pay attention to and really pay attention to when it comes to valuation of stocks. Right.
The discount rate has now gone up. Right. And so now we see these valuations on the long end, particularly with these high growth companies face massive corrections. And I still don't think we're done when it comes to some of those previously high growth names in terms of correcting. Give the all clear signal for you, Patrick, to go in and start being more aggressive. So you. We look at signals all the time. I think, you know, frankly, you know, I
said before that inflation is not going away. That's because the labor market is so strong. Companies still have a lot of pricing power. Right. So when I start to hear companies, you
know, perhaps not having as much pricing power or again, unemployment sort of rolling over, you start to see that move up significantly. And then perhaps, you know, I see those signals where, OK, valuations have sort of reset and bottomed out and we can add more exposure. But, you know, I don't I don't traffic in the index fund world.
You know, I traffic in individual stocks. And so I like to, you know, to sort of the the, you know, the deep work with my research staff and create a portfolio that we think will, you know, protect our clients and grow long term and take sort of a three to five year view. Patrick, for Sadie, thank you so much for being with us. Let's take a look at some of the sector price action this morning and head over to Bloomberg's Abigail Doolittle. Abigail, what do you see? Well, Lisa, you know, at this point, we're looking at a very small decline for the S&P 500 on extremely low volume. Most sectors are higher.
But let's really hone in on energy, down three point four percent. Of course, you were talking about that report on The Wall Street Journal that Saudi Arabia is discussing a possible OPEC increase. Brent crude below 75 WTI crude, Lisa, at its lowest level of the year.
In fact, it's now breaking down. The question is, will that be good relative to inflation or is that going to be a commodity collapse that will at some point weigh on stocks? We, of course, have the China news Covid really weighing on the natural resources. Abigail, thank you so much. Coming up, the market moving events that
you need to be watching. That's next in our trading diary. In the markets, you are seeing a bit of softness, although easing back with the S&P now just down a tenth of a percent. We've got yields lower. So do we see oil? From New York, this is Bloomberg.