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24:53As you know very well, Scarlett, there are shades of gray. And that's what we're seeing right now. Every time we get a market earning, if it's great, we think, OK, well, this is just more a narrative that we're in an AI bubble. If it's bad, we think the bubble is starting to burst. So we're going to see this constant swinging over the next couple of quarters every single time we get one of these earnings reports for that reason. You know, Rebecca, we've been talking a lot about this K-shaped economy. And you say when it comes to people in leadership positions, to executives, they should be leaning into that, right?

25:23Like playing into the K-shaped economy. What do you mean by that? What would that look like? So we've now had several quarters of data in really a couple of years. We are very much into this K-shaped economy. There is a small percentage of customers, you know, 10 % of American consumers are driving half of spending. We've been saying this, we're actually already seeing this happen in the holiday shopping period. Now, this lower income consumer is still spending, right? We had some good data over Black Friday that they're still spending, but it's a different type of spending. It is very value-based.

25:54It is very purpose-driven. It is incredibly researched, right? So influencers and AI engines have a role to play, but we're seeing more research and purpose-driven than we have before. And it's now time for companies to say, OK, we're beyond the point that we can do more shrinkflation or one-off promotions or even worse, wait and see. And we're still seeing this reaction from some of the big players. So my guidance is step up and play, right? This lower income consumer wants real innovation. They want value. And it's time for companies to reinvest and think about what does innovation for this economy and for this consumer look like?

26:29So for companies, does that mean the easy answer is to just make a play for the premium consumer? You know, there's no easy answers in a growth strategy, of course, and we are seeing some go that way. We're definitely seeing a very bifurcated economy and a bifurcated consumer. So if you have an offering for everybody, you essentially have an offering for nobody right now. You know, this is really the time where we want companies to really think about who their ideal consumer is. Now, if it's in the luxury end, this is still a research-driven and purpose-based, but there is a lot more froth in that aspect of the market.

27:01So they could lean in there, but then we're leaving out a large proportion of the American consumer that wants innovation, right? They still want to spend, they still want to give this holiday period. So that is a answer, but I definitely don't think it's the answer. And as we are about to close out this year and look ahead to 2026, how should executives, Rebecca, be thinking about the new year in terms of expanding payroll, R &D, investing, et cetera, et cetera? Yeah, the challenge is the macro data is very messy and it's very lagging. You know, given the government shutdown, we are really lacking that gold standard data.

27:38We really need to make decisions. And we're going to see this reflected in the Fed meeting next week. Now, both aspects of their dual mandate are moving in the wrong way, but not so dramatically so, right? Inflation is high, but still within a tolerance level. The job market is cooling, but we're still roughly in that no fire, no higher narrative, but we might start to see some of those fires happening. And a lot of organizations as CEOs are looking to make their growth strategies for next year are facing this environment. Now, the challenge that we have is we look at all of this data points to try to get a reading.

28:08Is it good or bad? And that's not how we should be looking at data as executives. We should be looking at data for insights. What does this data tell me about what my growth insights are and leading onto those? We unfortunately look at uncertainty and tend to frame it as negative or bad. And when things look gray, we assume it's going to be a downturn and start planning that way. That's not the view we should take if we want to perform in this world. It's about seeing uncertainty for what it is, a series of future events which may or may not occur. And whether or not those events are good or bad depends on what that organization is trying to do and how they're set up.

28:42So I do think on a macro level, we're going to see a real more lean in into an AI investment. Many companies are really just starting to go up the curve there. R &D and innovation are looking a little bit mixed across different sectors, depending on where you're set up right now. So I think we're going to see it next year. And that'll be interesting. We're going to start seeing it coming on through earnings from next summer as well. So Rebecca, what is the black swan or what's the one thing that you really worry about that keeps you up at night that you think executives, you know, would kind of freak out over if it were to happen?

29:12Well, executives freak out over quite a lot of things, but I tend to be a pretty plumber and bull and try to reframe everything for what that possible insight would be. There's a couple of things that we should be looking for, though. You know, this AI investment bubble right now is very much built on anticipated demand. If we get a few industry leaders, non-tech, come out and make pretty firm statements that they're pulling back from AI investment, that would have real market implications. So, of course, we're looking for that. We're also in an environment of extreme political and geopolitical uncertainty.

29:43So any big changes to more trade policy or regulatory policy that really upends industries, that could shake a lot, too. So kind of anything in the AI bubble, geopolitical uncertainty and the string policy uncertainty. Now, if we could get a little bit more stability in the political landscape, that would actually do a lot to helping some of the economic uncertainty and the labor market. If you actually dig into the data that we're seeing from the recent job reports, a lot of this is saying, I'm just waiting until I have a bit more certainty coming up. So, again, there's lots of things that could happen.

30:15Those are the couple of things I'm most looking out for. All right. Thank you so much. Dr. Rebecca Humkis is a lecturer at the London Business School and faculty at Duke Corporate Executive Education. Alexis, we need to go back to the breaking news that we're telling everyone about just a few moments ago. SpaceX telling investors that it is aiming for a late 2026 IPO. This is according to the information. SpaceX is pulling an IPO of the entire company. In fact, according to that publication. At an eye-watering valuation of$800 billion, dollars, far surpassing OpenAI's record setting,$500 billion.

30:50So we want to bring in Bloomberg Tech co-host Ed Ludlow, who's in San Francisco, and on top of all of it for us about this SpaceX IPO deal. First off, Ed, I guess it was a question of just when, right, not if it was going to happen. Yeah, I just want to correct and clarify some things for you guys. There are two distinct things here. There is a tender offer, which is an indecider share sale, where basically SpaceX does this annually or biannually. It allows employees and early investors to sell shares at a specific price and therefore valuation to give them some liquidity. So the journal had reported that this tender was at a share price that would give a valuation of$800 billion, double what we believe the valuation to be earlier this year.

31:35I'm hearing that there is a tender underway. It could close by Monday. But actually, the share price I was hearing is much nearer to $300 a piece, which would put the valuation nearer to$600 billion. So this is a kind of live situation. The IPO part of it is separate. In communications with investors, the company is saying that in the second half of next year, 2026, they'd look at an IPO and the bit you're right about is that it would be the whole company. Previously, we reported that one of the ideas was that SpaceX would spin off Starlink, its space-based, constellation-based internet service, rather than the whole company.

32:15But that is contrary to what the information's put out this morning. Right. Okay. Thank you for clarifying that. There's a lot going on here with SpaceX. And we know investors are hungry for any information they can get on it because right now it's publicly, it's privately held. And so you can't really get access to it. Having said all of that, Ed, And Elon Musk would be the CEO of two publicly traded companies if this happens. Does his current contract or his current setup with Tesla allow for that? Yeah, I mean, as you know, Scarlett, we spoke to Tesla's board chair, Robin Denholm, about this exact idea twice.

32:48The board seems comfortable based on the compensation agreement, which has now been ratified by Tesla shareholders. That Musk continues on at the helm of other companies. and actually the board went a step further to say that there's value in Elon Musk having interaction with these companies because in the future they basically believe they're highly analogous. You know if you think about space-based internet and where this market's going right now a very big concentration on the potential for space-based data centers they will see it as a kind of value add to have the relationship between the two companies.

33:23The technicalities of being the CEO of two public companies? No idea. You know, that will come out in the wash, right, when they talk to investors about it. But remember that SpaceX does have highly capable executives in President and COO Gwynne Shotwell, who runs the place day to day. And then Brett Johnson, the CFO, is the guy that does all the money talk with investors anyway. I wonder if this is going to make Jeff Bezos want to take Blue Origin public. Oh, good question. Yeah, it's a great question. I mean, like, look, Look, it is an expensive endeavor to first get the company off the ground, pardon the pun, for launch companies.

33:59But at this point, the difference with SpaceX is that they have changed the economics of launch and then deployment of Starlink. The reason that we talked about at one time, this was in 2024, spinning off Starlink as opposed to an IPO of the whole company, is that A, the revenues from Starlink now eclipse launch. but B, it's a much higher margin cashflow positive business. There isn't a lot of profit to be made in launching rockets into orbit, but also Musk has been quite transparent that it tops out. There's only so much money you can make from doing that. And so Blue Origin is much earlier in its life cycle, getting the economics right of launch, but also the other things it wants to do beyond just putting things into orbit.

34:46All right, good stuff. Ed, always appreciate your hopping on. Ed Ludlow is Bloomberg Tech co-host, speaking with us about this report from the information that SpaceX is telling investors it is aiming for an IPO in late 2026. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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38:47You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Let's talk more about these markets with Eric Wiener, Bloomberg Senior Editor, Equities America, joining us here in our Interactive Brokers studio. First of all, happy Friday to you. Happy Friday to you as well. What do you make of the market action this week ahead of, of course, next week with the Fed Catalyst? So this week was kind of muted, all things considered. And as you point out, the Fed, that often happens right before a decision.

39:28What was interesting is looking at it from a sector level, the sectors that would be considered growth did actually really well. You had, well, energy did well because winter is coming. But you had tech do well. You had telecom doing well. You had discretionary doing well. And the sectors that didn't do well were the defensive sectors, utilities where people go for dividends. dividends. You also had health care falling. So people were buying into risk. They were playing into the AI trade. Salesforce did really well. So earnings still matter. Right. But like you're still you're waiting on this sort of all systems go from the Fed.

40:19So if you look at the setup, we're kind of ready for, as Christine said, the Santa Claus rally to come. But, you know, there's a big caveat out there. Yeah, well, I mean, it seems like, you know, we've had pricing for a December Fed rate cut for a while now. It's pretty much a done deal as far as markets are concerned. What do you think we could get from the Fed that could derail this? Because, you know, it seems like we have healthy breath. We have a good kind of base of stock movers that could take the index there if we wanted. But is there something from the Fed that maybe markets haven't priced yet?

40:55Oh, absolutely. I mean, when you look at the action in the market relative to the Fed, the expectations for a rate cut came way down. At a certain point a few weeks ago, when we were selling off, we were at like 30%, 40 % on expectations. So now we're at like 90. So that's where things start rising. And a lot of that is priced in. So probably a bit of a sell the news event coming off of the Fed, you know, when they announce it, what people will be listening to is the, well, and will be looking for is the cohesiveness of the group. So, you know, last time when you heard a lot of Fed officials saying, you know, we should kind of dial things back.

41:44That's when people get nervous. Last time you had Powell coming out and talking about how everybody was expecting the Fed to cut this time and Powell kind of threw some cold water on it. That scares everybody. So it's those kinds of things where people are sort of reading into what the officials are saying. They're going to start looking at where they are on the dot plots, where people are on expectations. And, you know, If there is broad agreement that there are going to be more rate cuts, then the stock market will take off. If there's disagreement on where things are going to go, we're back in that kind of holding pattern.

42:21Today we got some more backward-looking data with the PCE, the Fed's preferred inflation gauge, rising 0.2 % in September. I guess that was in line with estimates. Does this do anything at all for the Fed at this point, especially given the fact that it's a September number? Yeah, that was what I was going to say. It's because we're still playing catch up. It's hard to know. It's also hard to know what they see. However, inflation is still rising. And that's really the point. So as things keep climbing and prices keep climbing, that is one side of the equation. The other thing, though, is that we are seeing kind of job softening.

43:00You're seeing some signs of economic weakness. And that is going to be the pressure for them to cut because you kind of need to stimulate things and you need to. It's not even just that one 25 basis point cut does a massive amount. It's just the symbol, the signal that it sends to the market, which is that, you know, we're here. We're going to be reactive. We're going to be responding to all this. And that that's where traders get enthusiastic. Now, Eric, looking forward to 2026, you know, usually when we see a December rally, that's usually followed by a pullback in January. And so now we're there, right?

43:38Even though it's a small rally, but it's still a rally nonetheless for December. Do you get the sense that maybe investors are starting to get ready for that January pullback at this point? Oh, I don't, actually quite the opposite. I mean, it's been strange, but we've been talking to a lot of traders who are all bulled up. We've been talking to a lot of professional investors, hedge fund managers, and portfolio managers who really want to own stocks. The question is valuations. The question is where have the AI stocks gotten ahead of themselves? But there's a broad belief, and we're going to be writing a story about this this weekend, across the globe.

44:18It's not just here. It's in Europe. It's in Asia. That there's this enthusiasm for equities. I'm kind of surprised, but that is what we're hearing. So, yeah, I mean, I'm glad you mentioned Europe because this really has been a global and international, but also a global rally. I mean, we've even seen emerging markets do quite well. Do you see that? I mean, I guess the question is, is there any reason why it wouldn't continue next year? Well, probably if the bull case plays out, you're probably not going to see European stocks and overseas stocks outperforming the U.S., which we saw for a lot of this year, which is weird, particularly when things are moving up.

45:02But you could see a global lift. I mean, the idea that foreign stocks are priced cheaply is true. So if there is going to be growth overseas, if they are playing into the technology game here, if tariffs are not weighing on costs overseas the way that people feared, then there could be room or there appears to be room for people to step in and find some value. Yeah. And well, maybe we finally get the year of value that a lot of investors in Europe have been hoping for. You know, Europe did well this year. And that's always kind of a shock when they do as well or better than the U.S. And there is some enthusiasm for what's going on there.

45:52It's not even necessarily a value play as much as it's like there's real growth in certain sectors there that people want to be in on. Yeah. Well, I mean, you know, look, we're heading into 2026, right? Probably investors are kind of thinking, what happened to the Sell America trade, right? Because that was something we were talking about in April. What do you think? Where do investors stand now in terms of concerns over that? Are those mostly gone at this point? Well, temporarily. I don't necessarily know. See, we're still playing catch up with data. And we don't know. There has been a sentiment change in the way that people are viewing the economy.

46:37I mean, obviously, we got some good news on the economy today. but if you look at the University of Michigan number, it still is troublingly low. So you have a lot of people in the U.S. who are very concerned about things. If we get a broad pullback in spending, so much of our economy and so much of the market is based upon people buying stuff. And if people just stop buying stuff or even slow down, say we're going to cut 25 % off of our spending, the average family goes, you know, we're not going to do this trip or we're not going to buy steak this time, we're going to buy chicken or whatever it is.

47:13Those little decisions, each one of them, when you count it over a thousand times, a hundred thousand times, whatever, it really adds up. And that's where we don't know. We do not know where the American consumer is. And that, to me, is kind of the big fear out there, which is if people pull back. And, you know, right now we're being lifted very heavily by wealthy people spending. If we pull back, it could get dicey. Yeah. And we were hearing it time and time again from a bunch of different companies in different industries. Well, this week, Kroger, Dollar General, all talking about people becoming choosier.

47:50Kroger is going to bring back the paper coupon. That's how that's where they're at at this point. And but each of them, I think the trend is from Walmart on down is that the higher income shopper is now coming in and making more trips to their store and buying more and more to like so uh mcdonald's does well and then mcdonald's starts adding cheaper meals um it's when you start seeing that and you start seeing like people going mcdonald's is too expensive that's when you begin to think well what is that going to mean for dining in general what is that going to mean for what people are spending it and beef prices are very high so it's there's a lot of there are a lot of balls in the air right now when it comes to that.

48:33And we just don't know because we haven't seen the numbers. Eric Wiener, Senior Editor, Equities America at Bloomberg. Thanks so much, guys, for giving us your perspective today. This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, Tune in and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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