Bloomberg Talks
00:01:13 · Tim Stenovec, Edward Yardeni, Carol Massar
[00:01:13] S0: That's not the only story, though, Ed. It's also the earnings story. If you'd spent the last 12 months monitoring this program, the overwhelming majority of responses that we get from people when we ask them why they like the stock market, they'll tell you the earnings. Is the ultimate support factor becoming a bit of a vulnerability, given some of the reports we've had over the last week? [00:01:32] S1: Well, we've had some reports that have been disappointing, other reports that have been better than expected. All in all, we looked at the weekly analyst consensus expectations for last week, and they were kind of flat. They didn't really lower their numbers. And as a matter of fact, they're still very bullish about 2027 and 2028. 2028. The 2028 number they're using is $ 500 a share, which is what we've been projecting for 2029 as the expectations. So they're very bullish on earnings, and they haven't really pared back their expectations as a result of some of the haircuts in Google and Intel, for example. [00:02:17] S2: Ed, are the bond vigilantes throwing a kink in some of those earnings plans You said that bond vigilantes are monitoring the credit story. And I just wonder if they are doing that and they're jacking up the borrowing costs and we'll see just how much they are later today or tomorrow when we get the results of the Alphabet sale. How much does that crimp some of their forward-looking ambitions?
00:02:17 · Carol Massar, Edward Yardeni
[00:02:17] S2: Ed, are the bond vigilantes throwing a kink in some of those earnings plans You said that bond vigilantes are monitoring the credit story. And I just wonder if they are doing that and they're jacking up the borrowing costs and we'll see just how much they are later today or tomorrow when we get the results of the Alphabet sale. How much does that crimp some of their forward-looking ambitions? [00:02:36] S1: Well, you know, we have a lot locked in already in terms of commitments to building data centers. We've got lots of backlogs. that the hyperscalers can pretty much rely on, which is why they're scrambling to build these data centers so quickly. But it's been kind of the Wild West, and I think the sheriffs are coming in to cool things off. The neoclouds have been borrowing willy-nilly, and now that's going to be more expensive and more regulated. OpenAI, as you said, just tried to to raise more money than the market was willing to give it. This is all good. I have no problems with the markets regulating the AI boom. [00:03:23] S2: Is it better as an investor for the stock or for the bonds of some of these companies? [00:03:29] S1: A very, very good question. I think it's better for the bonds. The stocks, I think we still have that uncertainty about when all this spending is going to generate... earnings. But to have a slowdown in the issuance of bonds, the supply of bonds by the AI companies, I think takes the pressure off of what's already been issued.
00:03:29 · Edward Yardeni, Caroline Hepker
[00:03:29] S1: A very, very good question. I think it's better for the bonds. The stocks, I think we still have that uncertainty about when all this spending is going to generate... earnings. But to have a slowdown in the issuance of bonds, the supply of bonds by the AI companies, I think takes the pressure off of what's already been issued. [00:03:52] S3: Ed, the election is tomorrow. Lisa posed the question at the top of the show. Is it a clearing event or is this going to be a new source of volatility for the market? [00:04:01] S1: Well, I got a sense from Lisa that she kind of views, and Lisa, you could tell me if this is the case, that this is not that simple. This is a much more complicated midterm, a lot more really at stake. I guess we always say that about elections. But truly, we're talking about a radical change in the Democratic Party. And if the Democrats do, in fact, gain the House and maybe even the Senate, I think the stock market has to consider the possibility that partisanship will be much worse than it's been so far. And it's been pretty ugly so far. up to now. And if Parkinson's is much worse, it means that next time we get into a government debt crisis, next time we get into a government shutdown, these events could last a lot longer and actually have a much more adverse impact on the government and the economy, I should say. [00:04:56] S3: So that will be obviously market negative. [00:04:59] S1: Market negative. [00:05:00] S3: Do you think the market right now is pricing in what the polls are, which is a Democratic sweep?
00:05:00 · Caroline Hepker, Edward Yardeni, Carol Massar, Tim Stenovec
[00:05:00] S3: Do you think the market right now is pricing in what the polls are, which is a Democratic sweep? [00:05:07] S1: Not entirely. I think the market has a bit of a contrary bent, you know, sort of the rallying cry as Democrats pick up the phone and talk to pollsters and Republicans don't. So we'll see the extent to which that's true or not. But I think it could be a very cold shower for the market in terms of the gridlock. Usually the market loves gridlock. But in this situation, we're talking about much more partisanship. And we may actually need them to get along at some point and come up with a significant, serious, credible deficit reduction legislation in the event that the bond market acts up again. [00:05:52] S2: Ed, I have to say, you're talking pretty gloomily for someone who's expecting the holidays around the corner. [00:05:57] S0: Where's Santa in. [00:05:58] S2: All of this? [00:05:59] S1: Well, I think it's in earnings. I guess what I've learned over the years is it's amazing how well the U.S. stock market and the U.S. economy do despite Washington. So, sure, the headlines coming out of Washington more often than not are not all that bullish. Government meddles a great deal with the economy and that can have adverse impacts on the stock market. And yet somehow or other, because of all the working stiffs that are out there trying to make things better for themselves, their families and the communities, the economy does well. And that's what I'm counting on.
00:05:59 · Edward Yardeni, Tim Stenovec
[00:05:59] S1: Well, I think it's in earnings. I guess what I've learned over the years is it's amazing how well the U.S. stock market and the U.S. economy do despite Washington. So, sure, the headlines coming out of Washington more often than not are not all that bullish. Government meddles a great deal with the economy and that can have adverse impacts on the stock market. And yet somehow or other, because of all the working stiffs that are out there trying to make things better for themselves, their families and the communities, the economy does well. And that's what I'm counting on. [00:06:38] S0: Ed, appreciate it. As always, if you have any research, still bullish, going into year end.