US Stocks Limp Into Year End While Treasury Yields Rise

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2:41Carol Massar:We also have some questions about things like private credits, private markets. What happens next there? So with that as our backdrop, let's talk about the alternative investing landscape. We've got Mike Green with us, portfolio manager and chief strategist at the Alt Strategy RIA, Simplify Asset Management. They offer an array of ETFs and funds. Mike, good to have you here with Tim and me as we have just about two hours to go and we wrap up trading here in the United States. Alt investing, some clear winners and losers. What trends do you think might carry into 2026? Well, I think one of the trends has been really critical, and it has been introduced with the alternative ETF space, which really didn't emerge until 2020, tied to regulatory changes.

3:25Things like managed futures and actually trend following are one of the tools that has made its way over into the ETF space. It has been a leading area of interest as people look to diversify from the traditional bond equity mix. That's one area where I continually emphasize that you're trying not to actually outsmart the market. You're trying to recognize that there's information being diffused that you don't necessarily have at that point. So that trend following is one area. I think other areas that we're seeing increased demand for various forms of income, those take the form of derivative tradings, things like call overwriting strategies or put selling strategies that are designed to enhance income.

4:05Or it can take the form of things like a hedged high-yield credit fund, which is one that I manage at Simplify Asset Management, that is designed to reduce the risk associated with the uncertainty of areas like high-yield, with credit spreads relatively tight. You want that fixed income exposure and that income generation. But we're really not certain how the economy is going to play out in 2026. Does the slowdown continue or does it reaccelerate? It's a good place to think about, are there ways to protect some of the risks that you have in the portfolio. So what do you think it's going to do?

4:40I think, unfortunately, I heard you talking about the S &P and the lead-in. Yeah. You know, I've spent a lot of time around. 30 in a row of a bull market. Yeah. Well, actually, I think the most important statistic is if you pull up the statistics that show asset class performance, we're actually now, I believe, in nine out of the past 10 years that large cap momentum and growth orientation has been the place to be. Unfortunately, as you know, that echoes the work that I do around the impact of passive investing in markets. People are largely shunted into momentum and cap-focused indices by virtue of the way we structure our retirement system in the United States.

5:19Unless we see a significant change in the economy, it's just really hard to bet that that's not going to happen yet again.

5:26Carol Massar:Yeah, I love that you went there, Mike, because I can't tell you how many years, several years in a row where people said, momentum trade is over, the big tech, you know, mega caps, done. It's time to go into some of the value names, smaller caps. And yet, you know, here we are a third year in a row. You said this every year for the last five years since I've been doing this show with you. We see the outperformance. But when I look at the economy around me and what impacts my world, a lot of those mega cap names are largely what I spend a lot of time with on a daily basis. I think there's some truth to that, but I think it also feeds back in both directions, right?

6:00Given a very, very low cost of capital, we're seeing the impact that that has on the investments that these companies can make. That means that Amazon can go out and make acquisitions or Google can make the roughly 1 ,500 acquisitions it's made over the past seven years. This puts them in front of you, regardless of whether they earned that place initially. Michael, I keep getting these emails from whatever formerly high yield savings account that I had, I don't know if I can still call them high yield savings account, that tells me that the APR is going down. You know, the yield is going down as a result of the Fed lowering rates and as a result of rates coming down.

6:40That money that's in money markets, that's in high yield savings accounts, where it's going, where is it going? Well, where we're really seeing that money trend is one, it continues to grow. So despite the fact that the yields are falling, money market funds continue to hit new highs in terms of assets. That is a byproduct of the money market yield in and of itself. After nearly a decade of roughly zero yields, suddenly people are getting three to 5 % on those over the past several years. That's created significant additional income, which has meant that money doesn't have to be spent in other areas, particularly for those who are starting with money.

7:18The money can't really leave the money market funds because when you go to buy, somebody else is going to sell and receive the assets as well. What can happen and what historically causes those assets to fall is either the loss of the underlying asset, bonds default, companies go bankrupt, et cetera, that requires injections of cash that take the form of primary securities, or we see a surge in new issuance, things like IPOs, credit for new investment purposes, et cetera. It's that latter part that I think we're actually going to really see in 2026. We continue to see astonishing demand for investment-grade debt.

7:56Some of it is increasingly questionable how investment-grade it is going into areas like data centers. But that is an area where we are continuing to see significant inflows into the fixed income space.

8:08Carol Massar:Well, that's what I wanted to ask you. You know, just going on your website and looking at some of the company ETFs that you guys offer out there, it is an array. It's government, money market, managed futures, volatility, premium focus, high-yield, health care. Tesla, Volt, Tesla, Revolution ETF, energy infrastructure, gold, Bitcoin, China. These are some of the things that we're going to tackle over the next three hours. I am curious about, as we were getting near the end of the year, were you guys noticing any interesting trends in terms of flows in and out of some of these spaces, especially after a year where, whether it was gold, whether it was some of the commodities, whether it was, you know, some of the healthcare names and others that may have run up over 2025?

8:52Well, there's a couple of areas and our growth is largely organic and driven by that innovation. We've seen tremendous inflows into areas like money market funds. We actually introduced a money market ETF in the past year that's powered a significant quantity of growth. Our fixed income strategy, the high yield strategy that I run, has done well and has attracted significant assets over the course of the year. Our other areas in fixed income where we offer differential exposure to coupon yields in things like mortgages, buying new issue mortgages as compared to the seasoned index. That has been a beneficiary.

9:27The areas that we've seen that have been, I think, more alternative in their construction, we have a true ESG healthcare fund run by my good friend, Mike Taylor. Mike donates all the proceeds associated with that to the Susan G. Komen Foundation. So it's truly giving, you know, it's doing good by doing good. It's performed fantastically well. That area of healthcare is starting to attract attention as technology starts to lose a little bit of its luster. The other area that I mentioned was the managed future space. That is now our largest strategy and has really been a source of continued growth.

10:07Carol Massar:All right. Well, hopefully we can continue talking about that, certainly in the new year. Happy New Year. Mike, thank you so much. Mike Green, Portfolio Manager, Chief Strategist over at Simplify Asset Management, joining us here on this Wednesday. Stay with us. More from Bloomberg Business Week Daily coming up after this.

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14:05Carol Massar:All right, so we want to talk a little bit more about retail, more on the trends, the consumption habits, and also the role of technology increasingly that may shape what goes on in the consumer space in the new year. Joining us right now is Laura Champagne. She's Tabor Asset Management's Director of Research and Consumer Sector Head. Joining Tim and me right here in studio. Welcome, welcome. Thanks, Carol. Thanks for having me. How are you thinking about 2025 when it comes to the retail space? 2025 has been interesting. I think some of the trends like strength in apparel and accessories likely extended to next year.

14:36We're excited about GLP-1s moving to oral, not just injectables. So people have to buy new clothes if they're changing sizes. I was just going to say, what is that doing for retail? But you answered the question right then. Right, right. New clothes, new size. Exactly. And new clothes may as well have new accessories to go with it. So we're focused in on apparel. We think there are interesting things happening. You mentioned Nike, I think, in an earlier segment. They are desperate and eager to grow again, which puts pressure on Adidas. It puts pressure on Hoka, on on running. So I think that'll be an interesting sector to watch these guys duke it out there.

15:09We saw so much Nike at Burlington last, yesterday. In the store? In the store. Burlington had three end caps of Nike and not the weird ones, not the Doritos partnerships. What does that tell you that they're offloading stuff that just wasn't selling? It's a weird time of year, right? So it's a clearance time of year and it may be that. Or it may be that Nike will grow sales wherever they can and off price, the three big off pricers are top 10 footwear retailers now. Does that dilute the brand at all to be so focused on off price? I think it dilutes the brand and potentially it dilutes the returns.

15:45So I think investors are really focused at this moment on sales than trying to turn sales positive. But margins will be lower. The reason the previous management team focused so much on direct was to maximize profit. We'll see how the market views it next year. But I would guess footwear is less profitable in 2026. Okay. I want to go back to this thing you said about GLP ones because I actually haven't. Cool, right? Now I know. It's very cool. As a society, are we losing collectively, losing so much weight that we are all changing our closets? We have to all get new clothes. I mean, is that how widespread these GLP ones are?

16:18You know, as a cynic, I'll tell you that we lose weight and then we gain it back. So most people don't stay on the GLP ones. This was explained to me. I read this somewhere. The criticism of having to stay on these is like, well, if you stop working out, you get out of shape, too. So you have to think about it like that. Most of the analysts we've talked to on the GLP-1 say that when people stop GLP-1s, they might be eligible again in nine months. Do they stop them because they're no longer eligible? They stop them because they're expensive. So some of the moves that people are making to make these drugs cheaper may help people stay on them longer term.

16:56Also injectable, it's a big deal to shift towards oral, we think. So don't throw away the clothes because...

17:03Carol Massar:That's what I tell my husband. I'm never throwing a money. You never know if I get into it. Hey, the thing, though, I want to say is that a lot of the GLP-1s are actually for people who are diabetics. And so they tend to stay on them longer or forever because it's in managing the disease unless they ultimately don't need it anymore. But it's also a market where people are losing weight dramatically. And so, I mean, that is a big sector of our economy or a big sector of our population. We also think that apparel is benefiting in part because you mentioned Whirlpool earlier. Big ticket appliances, flooring, those sales are way down.

17:42Mattresses trying to turn a corner, furniture too, and we hope they do next year. But since those segments have been down and they've been such a big part of this consumer discretionary budget, it's left room for people to buy more apparel. I just looked at the credit card statement. My wife not only rejoined Costco today, but put in a big order as well. That's what she's doing. Costco for 2026. Things looking good? Costco's been losing ground to Walmart. And it's a slightly different customer, although Walmart is gaining with higher income consumers. Costco took tariffs to heart in a serious way, which meant that they had less decor for holiday.

18:18I've been in there once again yesterday, a lot less furniture than they usually have this time of year. I think that they're... So what do you mean they took it to heart? That they didn't plan? I mean that they canceled orders and they stopped buying some categories that they used to buy. So they had maybe a third as many Christmas trees as they normally would. And they're trying to make it up with like baked goods and wine, which they're awesome at. But I think it's tough when you take so many big ticket items out of the store. Talk to us. Oh, go ahead. Just still on Costco is, I was actually planning out tomorrow and I was thinking maybe we could actually do our Costco order tomorrow.

18:51They're closed on New Year's Day. Is that pretty rare in retail these days? It's rare in retail, but Costco is where you want to work. They pay well. They take holidays. They pay good health care. Recently, they started disclosing their regional profit trends. They're barely profitable in the U.S. It's just the membership fees. So anything you can buy from there, you really should. They make most of their money in their international locations.

19:16Carol Massar:Looking at Costco, down about 5.5 % year to date. Walmart is up almost 24 % year to date. What is it that Walmart has kind of figured out? Is it the digital? Is it also kind of playing to a higher-end consumer on some level? It's that, and they work hand-in-hand. So the way they're using tech and AI, a lot of it's the back-end, making their deliveries so fast and helping them carry the right products. So better merchandising they'll deliver to your house. So if you don't enjoy the Walmart shopping experience, you can just wait for the truck. So that's bringing in higher income customers, staying really sharp on prices, being able to watch real-time competitors' prices.

19:55That's where you get your gold bars.

19:56Carol Massar:That's where I get my gold bars, yeah. And I have them delivered. Hey, bring in the truck. Yep. Unpack. What's the retail category that you find most interesting right now? I think beauty is going to have a resurgence. I think that we've been in this sort of— I don't know. The Sephora that I go into just outside our office is often packed. packed. And you should check out Ulta when you're not in Manhattan because they are also packed. Great Bloomberg cover story just in the last couple of months on this. Amanda Moll wrote about Ulta's success. Remarkable. And carrying a good mix of beauty, skincare, healthcare, which others, or haircare, which others don't do.

20:33You know, Sephora is really focused in on makeup and Ulta does a great job of carrying like mid-tier brands. So who are the winners in this space in 2026. Yeah. We like Ulta look for kids and we're seeing a lot more kids in makeup five below. I think as a winner, I think five below had great price points. When you say kids, are you talking like eight year olds? I'm talking like eight to 18. So, um, but to me, I guess that's kids. Yeah, I know, but I do see them in Ulta and I see them in five below and in that kind of lipstick area, you know, and also buying the, the fake that they had some great fake Kelly's yesterday when I was in stores.