Daybreak Holiday: Jobs, Bitcoin and Markets | Bloomberg Daybreak: US Edition

thank you so much for joining us for this special edition of Bloomberg Daybreak us markets are closed for the Labor Day holiday I'm Nathan Hager coming up this hour as we enter the final few months of the trading year stocks are trading near all-time highs will it be a bullish close out to 2024 and what about next year we'll speak with Cameron Dawson Chief investment officer at New Edge wealth plus it has certainly been a volatile year for Bitcoin so what's in store for crypto Bloomberg intelligence senior commodity strategist Mike mllo will join us but we begin with the economy and the Federal Reserve another key data point is on tap this week ahead of the next rate decision later this month August non-farm payrolls are due out on Friday ahead of it we're pleased to welcome Michael mcke International economics and policy correspondent for Bloomberg News and Anna Wong chief us Economist at Bloomberg economics it's great to have both of you here with us on this Labor Day I want to start with you Mike because of course you were there in Jackson Hall for chairman Pal's famous Time Is Now speech and then you followed it up with a conversation with the president of the San Francisco fed Mary Daly let's hear what she had to tell you well to my mind we've been on this path of ready to adjust policy rates for several months we just needed to get a little more confidence that inflation was truly on its path to 2% and I wanted to see the labor market come into balance but I think that's completely happened and the risk to our goals are now balanced and the time to adjust policy is upon us is there anything that could derail a cut in September to my mind that would be hard to imagine at this point I I do see that adjusting policy is appropriate we don't want to get ourselves into a situation where we're keeping policy highly restrictive into a slowing economy puts the Focus right back on the jobs Market doesn't it this idea that the labor market is coming into balance so Mike is it well it depends on who you talk to because uh while Mary Daly thinks they're inbalance and several other uh members of the Open Market Committee agree the chairman seems to think that they're a little bit tilted towards the downside for the labor market and that added to his U emphasis on the idea that rate cuts are coming so it I mean it definitely is going to be a very important report on Friday because it will drive the discussion about whether the Fed should cut by 25 basis points or 50 basis points and of course Anna Wong you've been on top of this conversation about whether we are going to see a 25 basis point or a 50 basis point cut how do you how do you view things when it comes to labor market dynamics right now yeah I think we are already in the nonlinear part of the climb of the unemployment rate and I think the reason why Powell seems to be more divish than the uh median fomc part participant is that Powell is actually not a trained Economist he is a lawyer and he's more skeptical about Economist models and when you look at how the other fomc um uh members view the labor markets for example um Mary Daly is a trained labor Economist Chris Waller who's an intellectual figure on the fomc is you know depending on the beverage curve they have this excessively precise way of looking at labor market but whereas Powell has this um to very um total and holistic view of looking at things and the holistic views of looking at things is that the labor market is cooling really rapidly recently as we could see from a lot of the regional fed surveys the employment sub index is plunging so I think my view is very similar to Powell which is that the risks uh facing the economy is definitely tipped toward the downside on an un unemployment and we certainly saw that downside risk to the unemployment picture when preliminary benchmark revisions came out last month that big drop of 88,000 jobs wiped out from the labor picture so how does that cloud things when it comes to the labor market right now it's maybe a a slight Cloud on the horizon the problem with these revisions is that they get revised again and there's a good chance that it will be revised lower uh the level of job creation even if you subtract right now uh the the 8818 th000 goes down from 242,000 on average a month to 174,000 and that's still a very strong job creation number each month so uh I don't know that it is any kind of um push for the FED one way or the other they're going to be looking at what's happening now because remember this 88,000 that's through March of this year now you can extrapolate forward but you don't really know if that's going to be accurate or not uh and so do we get a repeat of the low job creation number last month in July when uh we saw only 114,000 jobs created or do we see a bounce back that's going to be the real question if we get a bounce back it doesn't have to go above 200,000 it doesn't even have to go to 175,000 but you get something 150 or more you're going to see people thinking that um the Eon the job market has slowed but it's not falling off a cliff I want to ask you about this as well Anna not only did we see that much lower than expected Topline number of 114,000 jobs added last month we saw pretty big pickup in the unemployment rate as well is that a oneoff or could it be a sign of a trend of things to come in the labor market that is the trillion dollar question Nathan whether the increase in unemployment rate is due to Temporary factors or uh or transitory factors do you want to be in the transit transitory again or is it permanent Factor so drilled into the Micro Data behind the household survey that produced the unemployment rate really drill into the details right and what we found is that the two most beny explanation for the increase in unemployment is not valid the two most beny explanation is one it's due to layoffs related to Hurricane Barrel well it turns out that most of the temporary layoffs are not in Texas or any of the hurricane impacted um states on the other hand they are con conad in places like California Michigan New Jersey and um uh Nevada you know states that you you know the labor market is weakening the second uh most beny is that oh it's due to the Michigan auto retooling so every July uh the car auto plants will rest to get ready for the next season and usually that leads to Temporary layoffs in the auto market way but what we found is that that accounts for very very minute part of the uh temporary layoffs and historically they don't show up at all so in fact the uh temp layoffs related to Auto uh manufacturing is there in fact it's more severe than normally and just looking at Bloomberg stories on stellent and what's going on Ford and GM a lot of these temporary layoffs is are becoming permanent layoffs due to lack of demand what we actually uncovered in in the driver as a driver of the rise in unemployment rate is actually education sector and um a um uh people don't um are this one issue that's not on people's radar is that uh one pandemic Federal stimulus is expiring in September and that uh stimulus measure has been providing funding for a lot of schools all over the country and because of its expiration a lot of the local schools are laying off teachers and so we are seeing clear signs in the August payrolls and July payrolls that those uh layoffs are not temporary going to be permanent we're speaking with Anna Wong chief us Economist at Bloomberg economics and our Bloomberg economics and policy correspondent Michael mcke with us as well and Mike let's pick up on what Anna was talking about there a lot of the seasonality baked into to uh the last payrolls report and what could that mean for the fed's planning when it comes to whether to actually go ahead and make it clear that the time really has come to kick off a rate cut cycle oh I think it would take an awful lot for the FED to change his mind about kicking off the rate cut cycle you'd have to have a very strong jobs report uh which people are not expecting at this point but we are going to get more seasonal issues a lot of schools start around the country so you add a lot of teachers and also education workers people in the cafeteria janitors Etc and so the uh numbers account for that as well one other question Anna as we think about whether the FED is kicking off a rate cut cycle a lot of expectation that it is going to happen later on this month is the Fed behind the curve and what can the FED do to get investors thinking that it is on top of what's going on in a slowing economy so uh given the fed's Dual mandate he it is behind the curve we estimate that they are about 70 basis point behind the curve I think the question is how fast and how deep are they going to cut if they decide to go for a 25 basis point cut it means that they're still behind the curve and I think uh in given our concern about the rapidly cooling uh of the labor market it would suggest that the FED will risk having to cut more sharply down the line what say you Mike what can the FED do to show that it's not behind the curve well it would help a lot for the FED if uh we get a reasonably strong jobs report that would make one difference and also we get another CPI report before the FED meeting on September 18th but I think it's going to come down to this statement they've told us they're going to cut they generally don't want to do 50 basis points so given the feeling of some economists on Wall Street like Anna Wong um they're going to have to explain themselves and I think they'll probably uh note that we have had some uh strength in the numbers that was uh kind of uh not seen in July that came back in August if uh if we get a rebound and they'll point to the fact that the economy overall is growing at a basically a trend or above Trend pace and they're not particularly concerned because about the labor market because jobless claims have uh remained low so they will defend themselves sort of on on that way of course this all depends on 18 days from now the conditions being the same in our last minute Anna Wong um since Mike mentioned the CPI report coming out just before the FED decision let's dig into that uh can inflation get the FED off the rails when it comes to the time has come I think generally we are going to see more disinflation in the fall uh particularly from Goods sectors because it turns out that a lot of retailers has been front running the holiday season and given our consumer demand is that it's going to slow in the fall they might find themselves to having all these excess inventory which would means more discounts for the consumer come holiday season but I think the FED does have a a base effect problem when it comes to inflation if inflation data just comes in pretty good the year-over-year 12mth change and inflation will actually climb throughout uh uh to December we are expecting it to climb to 2.8% from the current 2.6% Anna Wong chief us Economist at Bloomberg economics thank you for this along with Michael mcke our International economics and policy correspondent for Bloomberg News and straight ahead on this special holiday edition of Bloomberg Daybreak we're going to talk with Mike mclone Senior commodity strategist for Bloomberg intelligence as we look at the volatility that is Bitcoin that's straight ahead I'm Nathan Hagar and this is Bloomberg [Music] welcome back thanks for joining us on the special edition of Bloomberg Daybreak us markets are closed for the Labor Day holiday I'm Nathan Hager well it's certainly been a volatile but profitable year if you're an investor in Bitcoin the world's most valuable cryptocurrency started the year above 40,000 per token then in March it soared to an all-time high above 73,000 since then bitcoin's been in kind of a bouncing ball mode if you look at a chart on the Bloomberg terminal so what's in store for the rest of the year for some answers let's bring in Mike McGlone senior commodity strategist our guy on all things crypto at Bloomberg intelligence thanks for joining us on the holiday Mike so what's been driving all this Bitcoin volatility since the spring it had the launch of us ETFs we've been waiting for that for about a decade it had the having where there was a cut and supply and it hadn't bed the stock market Mak record highs now it's in an hangover and I think it might be enduring Bitcoin was the next best best trade for a long time now I think it's kind of transitioning to last best trade and part of that is because it just went so far so fast and key thing remember about Bitcoin is it basically trades about three times the volatility of the stock market and it's been showing pretty significant Divergent weakness since that Peak so I like to use this number around um it's dropped to about um Bitcoin S&P 500 dropped about 11 S&P 500s versus the Bitcoin I like to use as a ratio the peak in 2021 was 15 so it's heading lower and if beta drops the stock market drops I think bitcoin's going to have a more of a problem I think maybe he I'll end with this I think the key thing about some people have called it the fastest horse in a race it may be indicating the race is over if Bitcoin is the last best thing let's make that the case here does that make the next best last best thing something like ether something like the doge coins probably not if Bitcoin goes down it's beta for the whole space and it probably means all the other highly much more highly speculative digital assets it's hard to argue Bitcoin is not a highly speculative digital asset it's the one that trades 247 it's the Benchmark if it goes down the whole Space goes down and to me that's the risk is partly because it just went up too much but the bottom line to me is this whole Space started with Bitcoin in around 2009 was coordinated with pretty significant rally in US Stock Market and if we're entering into a recession stock market's really expensive we start rolling over a little Bitcoin may be leading that way and I think that's what's happening now one thing that's significant is the vix volatility index to say the 100 we or 200 week moving average is bottoming from about a six-year low and then of course we have things like the dis inversion of the yield curb and Rising unemployment um to me those are all kind of signaling that the fastest horse and race might be tilting lower and the key thing is it's been showing diver weakness versus gold and the stock market for quite a while what about if we are getting into a rate cut cycle from the Federal Reserve if rates do start to come down does that change the outlook for digital currencies we are we starting certainly from a if you look at the curve the long Bond around 4% and fed funds well above 5% we're certainly indicating yields are going lower it does but I think the problem is now it's the cat and mouse game between the stock market which is market capitalization two times GDP that's the highest since the 20s and 30s so it's ra rather expensive and the FED easing and this Nathan is the most widely anticipated fed easing I've ever seen in my entire career and I started in the trading pitch in Chicago in the 80s I've just never seen it so I think it's so priced in that the market so priced for the enthusiasm of a Fed Federal Reserve easing cycle and we know the FED gets it they do not want to risk refueling some of the inflation that really forced them to do a lot of the aggressive hiking to the to the top in 2023 I mean there's as you say there's been so much anticipation that we are going to see a rate cut later this month that the cycle is going to begin and ahead of that we've been seeing a lot of speculation a lot of thought that gold uh you know the original gold could get as high as $3,000 an ounce we're not seeing that same kind of thinking at least as far as I can tell when it comes to bitcoin why is that I think it's a transition and I'm glad you we went to Gold because to the old analog digital gold it's just a matter of time it gets to 3,000 it's in a bull market maybe it's a little bit overdone in the short term it's fine but the new an the new digital version I like to say it's kind of brisky to have old analog Gold without some of that digital version in space but remember it's new and the key thing that I like to say about Bitcoin is all the things I look forward to the last five years the having the you know there was pretty significant discounts in some of the ETFs like grayscale Bitcoin trust um the ETFs and it's going to the mainstream it's in the main stre even we have presidential candidates knocking around how great it is because they want to get elected it's already I so and and it's it's so well ared out now so to me the best of the days for Bitcoin appreciation are over yet what we're seeing now is this pretty significant Global tilt towards recession now remember I'm a Commodities guy and the Tilt from Commodities a severe recession we were seeing declines in almost all Commodities particularly things like corn and natural gas and crude oil is just starting to til lower and the only one that's really going up is gold and a lot of that's because what's happening in China China just look at bond yields in China they're declining so to me that's what Gold's picking up on the the deepest pockets on the planet central banks are buying gold and that's typically will probably accelerate I think gold will be more attractive if we see a little bit of back and fi in US Stock Market us rates going down the problem is digital gold Bitcoin is trades typically about three times of volatility of analog gold and the stock market so if we have a little bit of normal recessionary back and fill in the stock market digital gold Bitcoin will probably suffer a lot more than the analog version it's it's it's just such a volatile speculative asset speaking with Mike mclone Senior commodity strategist at Bloomberg intelligence and you know you talk about Bitcoin as digital gold there's been this debate for years about whether it is going to be the sort of hedge against inflation in the years to come what's it going to take for Bitcoin to get to that level it sounds like you're thinking that it might be a ways off before it gets there in terms of some other melting currencies I'm based in Miami so you hear a lot of people come from South America and they're used to Melting currencies it has provided some of that but the thing is it's a very valal speculative digil ass and it's gone so far so fast I think it needs to back and F for a little while so typically what Bitcoin does when it makes new highs like it is now has a 50% correction so that means it could get down to 35 and that's normal but I think to be more of a digital version of gold in alternative volatility has to come way down which mean it has to have a very boring period right now it's just a very volatile speculative digital asset on the big picture I'm very favorable to the price of Bitcoin going higher it has definable diminishing Supply and increasing demand in adoption so rules economic sh means it should go up over time but to me right now the risk is it's a little bit too extended and it's showing Divergent weakness and I think that's going to continue the bottom line to me the big test for Bitcoin will be is when we get that next say 10% correction in the stock market and see how it performs typically when it trades you know about three times the volatility of beta it typically goes down about 30% if the stock market goes down around 10% now that's not set in stone but we have to see how we can get through that period if Bitcoin can sustain upward momentum with stock market going down the problem is it's showing downward M momentum Bitcoin is with the stock market still going up what about copper uh when we think about whether we are getting into a global economic slowdown whether the FED can provide some support in some way with with rate cut where does copper go down the risks for copper are down unfortunately the copper did make a new high this year at about $520 a pound um it's around $4.20 a pound now and it has a it's highly autocorrelated Co copper is number one is highly correlated to what's happening in China we all know China's somewhat in Decline just look at their bond yields the 10e note yield in China right now is about 2.2% that's well below the US 10e note yield which is just below 4% so it's a sign of deflationary recessionary forces in China so that's bad for copper but it's what put in that Peak that we got earlier in May was a pretty significant speculative excesses in managed money net Futures positions I.E hedge funds they got Way Long the commodity up to about 30% of total Futures open interest and they are still somewhat long around 20% of Futures open interest typically it has to drop a lot more in terms of positions down to around 5% of total open interest for copper to bottom so I think copper is going to do what it normally does um it more like silver now um Silver's n nicknamed kind of the devil's medal and that is I think it needs to get down to near three to put in a good bottom otherwise here's one key prerequisite for copper to continue going higher the US Stock Market has to continue going continue going up and China has to come out of this melees and I think the risks are copper just as it normally does when it gets too high it just goes back to around $3 a pound those are some pretty uh significant Dynamics uh when it comes to the Outlook whether the US Stock Market Rises whether the ch economy uh starts to see a turnaround can the US sort of outweigh what we're seeing in the world's second biggest economy well that's the problem I think is I think a lot of investors are underestimating these deflationary forces starting with China I mentioned their bond yields you see it clearly happening in Commodities the gold is up about 30% since Commodities peaked in 2022 the Bloomberg commod index is down about 30% and I see the whole tilt going lower unless something can change out of and the thing is you have to remember is it all happened for a good solid Paradigm shifting reason it's that unlimited friendship between President Z and President Putin really shifted the world and then we had Russian's invasion of Ukraine that shifted all the sentiment toward kind of against China which is bad for Commodities so um gold is good for gold so that's why I see crude oil around $75 a barrel has a risks of going much lower it always has bottom their 40 for the last 20 years or so and one good leader is food look at corn corn right now is about $33.90 um a Bushell that trade that was first traded in 1973 that's down more than 50% from the peak around 8 in 2022 a lot of that's just on the back of the number one force in all Commodities it's the high price CU prices got too way too high and created a lot of incentive to bring in more Supply or reduce demand and that's what's happening same things happen in natural gas us natural gas at about 1.9 million BTUs was first traded in Futures in 1990 the high in 2022 was 10 and it's dropped more than 80% that is on the back again the high price cure and that's the key thing to remember about all Commodities they're all probing for low price cures con corn is probably close natural gas is probably close and the number one that still probably has a lot more lower to go I'm afraid of is crude oil which is actually really good for consumers I wanted to ask about crude oil as well because so much of that plays into what happens in geopolitics as well I mean how difficult is it to to frame out an outlook for crude oil when we have so much volatility uh in in the rest of the world well that's a key thing is some people find it difficult I find it quite clear there is no no sense at all of a sustainable shutdown in Supply from the geopolitics in the world that's happening to crude oil in fact the lessons of all these type of political events certainly um the Iran Iraq war and Iraq's invasion of Kuwait is typically these events create spikes and then massive in much lower lows the last two significant lows after those two Wars I mentioned was around 10 in crude oil so to me I'm looking at 40 as a normal low price cure the bottom line is the key things that really was pressuring crude oil before uh Russia's invasion of Ukraine are accelerating that's excess of supply and demand out of the US and Canada that Surplus now is around six million barrels a day before the invasion was closer to two million barrels a day really appreciate this Mike this broad outlook on the commodity space Mike McGlone with us there senior commodity strategist at Bloomberg intelligence and coming up next we'll move from Commodities to stocks the equity Outlook from Cameron Dawson of New Edge wealth that's as the special Labor Day edition of Bloomberg Daybreak continues I'm Nathan Hager and this is [Music] Bloomberg thank you so much for joining us for this special edition of Bloomberg day day break I'm Nathan Hager us markets are closed for the Labor Day holiday and we're going to wrap up this hour with a closer look at the stock market with earning season pretty much behind us and a rate cut pretty much coming a few weeks from now where is the best place to put your money let's ask Cameron Dawson the chief investment officer at New Edge wealth Cameron it's so great to speak with you on this holiday first off what is your read on earning season and the Outlook heading into the rest of the year Well earning season certainly has come in better than expected we've seen companies be able to beat and raise guidance there have been pockets of weakness and that weakness has really been focused on the consumer and that's where we started to see some Jitters within markets concerned about the growth Outlook we're hearing from a lot of companies talking about how pricing power is fading how effectively theyve raise prices as much as they could have hit a wall and now it's likely that you're going to start to see even more discount that's a great story for the fed that's a great story for Bond markets expecting rate Cuts meaning that it reduces the risk of inflation but it does raise the question about 2025 earnings which do have a big acceleration in Topline growth and margin expansion priced in so for now it's still a good story but as we go into 2025 I think we have it we have to watch it closely is it a good enough story to keep the rally going particularly after what we heard from from Nvidia last week it is interesting that after Nvidia reported it didn't take down the rest of the tech sector you would have normally expected when the biggest name in the index reports a number that's slightly less extraordinary than expected that you would have seen kind of normal weakness within the rest of the sector but it was resilient the thing that we're watching within the tech sectors that if you look into 2025 what you see is an acceleration in 2025 earnings as well earnings are expected to go to 25% up from about mid teens this year all the while Nvidia being that biggest name in the sector is expected to see its earnings decelerate from 140% to 40% so it gets us back to this notion that for now it's good but we really have to watch 2025 so what are you going to be watching for most closely when it comes to 2025 is it all about the economy is it all about earning earnings it is both because we do think that the economy will feed into earnings so if we think about the consumer one thing that's really been jumping out to us is that you've seen this deterioration in the consumer assessment of the labor market so looking at things like that labor market differential where consumers are starting to say that jobs aren't as plentiful and they're getting harder to get that tends to lead things like retail sales and overall consumption within the economy so if that continues to deteriorate it really would raise the question of current consensus for the S&P 500 which has an acceleration in Topline growth that's baked in so we think this all fits together with the real big risk for 2025 being that earnings kind of start to level out and if that's the case it would imply a choppier kind of market for the overall S&P 500 into next year I'm glad you mentioned the outlook for the labor market because of course we do have another jobs report coming up later this week it's going to be very much in focus for the FED as it considers whether the time really is now to start cutting rates how much does the stock rally depend on the FED beginning the rate cycle this month the surprising thing about rate cut Cycles is that they typically aren't good for markets in the very short term meaning that markets have tended to sell off post the first cut with the question mark of as to why the FED is cutting and this is really the big question as we go into next year which is that is the Fed cutting because they can just because inflation has come down or is the Fed cutting because they should the latter implies a much deeper rate cutting cycle which in some ways is already being priced in by the bond market the bond market has almost 300 basis points priced in over the course of the next two years of cuts which does imply a much weaker growth environment so it's a it's a story of be careful what you wish for if we just get a couple of cuts that typically has been good for markets on the other side a deeper cutting cycle has typically been consistent with weaker markets now what is your view is the Fed cutting because it can or because it should we think that the FED is coming cutting because it can for now but it's the question of the direction of travel meaning that if you listen to Pal's comments from Jackson hle he talked about how the deterioration in things like the unemployment rate weren't because of your more nefarious drivers things like a big uptick in layoffs instead it was new entrance to the labor force as well as a slow down in hiring but we what we've typically seen is that a Slowdown in hiring leads an increase in overall firing so as we go through the next few months and into 2025 it's not as much as where we are today which is still a relatively healthy labor market falling inflation which gives the FED room to ease rate sum it's really the question of the direction of travel and do we get further deterioration which again implies deeper rate cuts from the Fed so if we are heading into a Fed rate cut cycle should we be looking for new leadership when it comes to what's going to be driving the stock market can Tech continue to lead the way or could we see more rotation at a tech ah this is so interesting because we have started to see this shifting Sands of leadership under the surface over the last few weeks what we've seen is Tech really start to lag it's traded heavy it hasn't been able to make a new all-time high unlike the equal weight S&P 500 which made a new all-time high before Tech and before the cap weighted index did so it does signal that you're starting to see a bit of a shift in leadership and what's coming out as leadership on the other side of things are two key areas one it's rate sensitive areas like REITs and real estate that typically do well in a falling rate environment as well as defensives you've seen some signs of life and things like utilities and Staples and for an overall Market Outlook you typically don't like to see utilities and Staples lead it signals that there are growth concerns and that there's an underlying riskof tone to the market so we do have to watch this very closely our view on Tech is one where we think that Tech can be new neutral or flat with the market but it cannot lag in a meaningful way because it's just such a big part of the index it's about 30% of the S&P 500 so Tech has to play ball for the overall S&P 500 to continue to make new highs speaking with Cameron Dawson Chief investment officer at New Edge wealth as we think about how stocks could end this year camon what are you looking at what are some of the major catalysts for you well the election is of course very top of mind and we have seen stocks typically trade weaker going into the election and then a rally after that and of course with a little sprinkling of Santa Claus rally on top that of course all investors hope for going into the end of the year we're hoping to get more indication about the policy priorities of both parties which can help us make a better assessment about what we think will lead coming out of the election so things like taxes and immigration and tariffs all being very important important things to get a sense of what can leadership be post the election once we get the results yeah it's been interesting to see this sort of debate about what a trump trade looks like versus a Harris trade from what we've heard so far do you see major differences between these two candidates who at least as far as the polling goes are very different people yes and the polling is tight at this point so it's really hard for the market I think to price in the winning of One Versus the other very different than where we were in the middle of the Summer where Trump had a 20 point plus lead over the Democratic ticket so then the question is how will the policy priorities of course play out and what does it mean for corporate earnings if we look at the corporate tax rate and how it's being paid for that is a key area of difference between the two parties about where they would raise taxes in order to pay for the extension of the existing tax tax rates we do know that there's a lot of air between immigration policy which could have important implications on things like the labor market going into 2025 and then the last area of difference would be on tariffs and how impactful tariffs would be potentially under a trump presidency if he does enact a more sweeping set of tariffs of course much more sweeping than what the Harris ticket is talking about I wonder what you're thinking as well about certain investment themes of course this year there's been so much focus on the AI story there's been a lot of talk as well about weight loss drugs that sort of thing what kind of themes are you thinking about that could be more lucrative as we think about the end of this year and into 2025 we think it'll be the application of AI right now the AI rally has been one that has been very beneficial to the arms dealers of AI so the Pix and Shel kind of providers of the chips that are needed in order to apply these Technologies where we have seen a lot less impact is on the users of AI and how it will actually show up in things like margins and productivity and so that is the real test for this AI narrative as we go into 2025 which is that is there a return on investment for all of this investment spending for those that are actually applying the AI if that's the case then it does raise the likelihood that you can meet what are already very lofty margin targets that are priced in to the S&P 500 but if AI doesn't deliver or it's just a longer time to deliver as we heard from some of the tech names this year it could set up for a little bit of disappointment so we see AI still remaining top of mind but that the story is likely to evolve as we go into next year and if we are heading into a rate cut cycle uh could we start to see more of a correlation between uh bond yields and stock prices what could that mean when it comes to portfolio diversification well we do think that bonds are back in the sense of being able to provide that diversification of the classic 6040 portfolio that's been our expectation throughout this year which is that the scenario that led to bonds breaking down as a diversifier in 2022 was of course a big rise in infl and and that concomitant rise in yields given the fact that we continue to see greater downside to infl or greater risk that there is downside to growth than there is upside to inflation it implies that bonds can be that ballast if you do go into a growth scare so it leads us to see upticks in yields meaning when bonds sell off and yields move higher to use that as opportunities to extend duration and lock in lower yield lock in those higher yields with the expectation that it can be a great diversifier if growth fears really do start to pick up Cameron Dawson there new Edge wealth Chief investment officer also want to give our thanks as well to Bloomberg intelligence senior Commodities analyst Mike McGlone Bloomberg International economics and policy correspondent Michael mcke and Anna Wong chief us Economist at Bloomberg economics our thanks to you as well for joining us on this Labor Day holiday and if you're listening to us in Boston our new home starting September 3rd will be 929 FM that's tomorrow at noon Bloomberg Radio moving to 929 FM in Boston I'm Nathan Hager wherever you're listening to us stick around today's top stories and Global business headlines are coming up right now