BI Weekend: Luxury, Railroad, and Machinery 2026 Outlook

0:00Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Every week, I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street and beyond. Listen to new episodes every Wednesday and follow Trumponomics wherever you listen. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy.

0:38Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio. That's Vanguard.com slash audio.

1:14All investing is subject to risk, Vanguard Marketing Corporation Distributor. Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Intelligence with Scarlett Fu and Paul Sweeney. How do you think the Fed is looking at tariffs, the uncertainty of tariffs? Let's take a look at the sectors and how they perform. A lot of investors getting whipsawed every day by news events. Breaking market headlines. And corporate news from across the globe. Could we see a market disruption, a market event? Are people just too exuberant out there? You see some so-called low-quality stocks driving this short-term rally.

1:52Bloomberg Intelligence. With Scarlett Foo and Paul Sweeney. On Bloomberg Radio, YouTube, and Bloomberg Originals. On today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll look at the outlook for U.S. railroad transportation, telecoms, and cloud computing business for 2026. Plus, we speak with the writer and producer of the film Bull Run on capturing the excess and high-octane world of Wall Street.

2:23But first, we lean into the world of luxury. According to the most recent Bloomberg Intelligence research, the recovery of luxury goods makers in 2026 hinges on limited price increases and a shift toward volume led growth. For more, Paul and guest host Norma Linda spoke with Deb Aiken, Bloomberg Intelligence luxury goods analyst. We started out 2025 with an expectation that we'd move back to growth. And that certainly didn't materialize through the first half of the year. But we seem to be ending at around three to four percent growth as we exit 2025. Now the U.S. has been robust, Middle East doing very well but particularly in the first half of the year it was China which was the drag and what we've noticed as we end the year we've actually just heard on a fireside chat over the last few days from L 'Oreal where they're mentioning high-end beauty doing very well out of the U.S.

3:19but also in China too. So they're adding to what we've heard from the luxury companies where we've seen two thirds of luxury companies and most of the top 10 switch into growth in China in Q3 from a low base, from negatives a year ago, but actually that we're calling green shoots into the end of year. How are these companies holding up as it relates to tariff overhangs? Yeah, so we did a lot of work around May time and again through July and August with the different tariff rates moving around. And what we've actually seen, it was less detrimental overall in our numbers. We probably think that EPS won't be pulled as much as was expected because there have been some cost savings and the biggest companies and those that were where brands were really in favor have managed to pass on price and then generally because these companies operate on high gross margin the cost into the U.S.

4:19they've moved around two to four percent on additional price into the U.S. as well as two to three percent from the beginning of the year so some of those brands have absorbed passing through six seven percent pricing to the U.S. consumer and we think into 2026 that moves nearer to 2 % to 3 % overall, so it should be less intimidating for the consumer overall in 2026. So it's one of our drivers for the year ahead. Deb, talk to us about the Chinese consumer. Are they not traveling? So is that an impact for New York and London and Paris and things like that? We actually have a survey out of our Asia office that we've just incorporated into a travel document, which we'll be producing, but this piece of work has already produced.

5:04and actually on October versus May the China consumer is looking to travel more into Europe to start with so that's the first big positive. I think part of that is just on the way the tariff situation has gone maybe so that will be the first time that we're looking for them to come back so versus three months ago they're looking at traveling outside of Asia but overall what we call the China cohort that's actually really operating more avidly across the Asia region. We're not seeing so much travel from Chinese into Japan and of course we know that there's some political commentary there as well so we wouldn't expect that to pick up next year but we are seeing Korea, Singapore, Australia and others being positive and the first move to Europe should hopefully indicate that towards the end of the year and as tariffs settle more in 2026 that we see some of that return to the U.S.

6:04as well. And sticking with China, how are we thinking about supply chain operations as it relates to a lot of these luxury firms, especially stemming from China? Yeah. So if we think about maybe if we look at from some of the aspirational entry-level luxury companies, then they will have some production moving around the Asia region. But if we think about the heritage, traditional higher-end luxury companies, then most of their production is France, Italy, some Portugal, some parts of southern Spain, not so much going on in the Asia region. And so they've been able to manage on the 20 % tariff from made in Europe over to the U.S.

6:51more so than some of the peer group. For example, one of our entry level that we call branded affordable jewelry, Pandora, produces out of Thailand. It's really suffered in terms of share price this year versus some of the Asian retail jewelers who've done very, very well on the price of gold. So you got to explain this whole handbag thing to me, Deb. I was in Italy in September. We toured some place, factories, artisan shops where they make these handbags, and they sell them for tens of thousands of dollars and euros. What is going on there? Who buys that? Yeah, it has. I always say if you bought an Hermes, you have a just as good or a better correlation than if you'd have held gold.

7:35so I think that these bags particularly for sought after material the craftsmanship and the fact that they have continued value are seen as investment pieces and so we have the middle ground if we look over the last year and one of the things that we think for 2026 bags from Tapestry from Coach, Ralph Lauren, others as well as Ready to Wear have done very very well, resonated with a consumer who's been a little bit more skeptical on the consumer sentiment side and maybe shopped around$1 ,000 or so. But at the very high end, there hasn't been much of a move. So we've seen Hermes, Brunello Cuccinelli and others doing very, very well at that high end.

8:21Our thanks to Deb Aiken, Bloomberg Intelligence Luxury Goods Analyst. We move next to a conversation with Jonathan Goldstein, co-founder and CEO of Cain International. It's an alternative asset manager specializing in real estate investment solutions. Jonathan's real estate and experiential investments have helped him morph into sports-related investments. In 2022, he also became director and co-owner of Chelsea Football Club, a prominent soccer club in the English Premier League. He shares details about his new club and what it means to be part of a growing ownership group. Well, I'm on the board of Chelsea, and obviously the buyout was led by my partner, Todd Bowley, in partnership with Clear Lake back in 2022.

8:59Team's doing well, obviously. Huge success in the summer in New York, winning the Club World Club Championship, which was a proud moment for the fans. The women's team done extraordinarily well, winning the Women's Premier League for multi-times in a row last summer. So, you know, we're very proud of the development since we've been involved in 2022, and we think there's more to come. We're very excited. So the valuations on some of these franchises, whether it's huge franchises like in the English Premier League or the National Football League here in the U.S., just beyond the realm of arguably even 100 millionaires.

9:33These are billionaires, if not private equity, corporate money. So that leads some people to say, hey, I'm going to go to some of these smaller sports where I can maybe get some better value. How about cricket? Trent Rockets, what's the play there? I don't know. That's all I got for cricket. First of all, let me explain the way that the 100 competition works that we've invested in and try and put it in an American language. Please. Let's assume you have a baseball game where you have 100 pitches per side. And the objective is to score as many runs off those 100 pitches as you can. It's a short form nature of the game.

10:11Two to two and a half hours. Exciting. Every pitch is important. And this is what the English Cricket Board created five years ago in London, in the UK, with the 100, with eight franchises around the country. Now, it modeled itself on the Indian Premier League, which obviously has been a phenomenal product for the Indian population and globally for those who like cricket. It has the second most valuable broadcast rights per game in the world behind the NFL on a per-game basis. There are larger broadcast contracts, but not on a per-game basis. So we have watched this competition in the UK, and we thought there was a significant opportunity for us to get involved, add value.

10:54Nice. And we watched other people get involved, obviously. And there's, you know, of the eight teams, four of them are owned directly by Indian Premier League teams. One of them is owned by a group of what they call themselves the Tech Titans from the West Coast of America. You know, the Microsoft CEO, by way of example. Ah, okay. And so, you know, a lot of, you know, Indian heritage love cricket. And so we thought, you know, here is a significant opportunity to create the baby product to the IPL. and over five to ten years grow that. It's a great window of the summer in the UK. Obviously, you have to, just like in America, a good external climate to play cricket because you want it outdoors and you can't play in the rain just like baseball.

11:36So it's a great time, mid-July to mid-August, where there's a window for an opportunity to build a huge product and broadcast and spectator. And I think what's really important is that you're building it in a country which has an undercurrent of love for the sport. So therefore you're doing off a good base. That is a bucket list thing for me to go see. I'm not going to go to see a cricket match. To see a professional cricket match. Well, I'm going to invite you next summer. I think what we're doing here, and playing back to your initial question, we've watched the valuations of the NFL teams, of the baseball teams.

12:09I mean, Todd obviously led the way with the Dodgers over 10 years ago at just around$2 billion, and we've seen what trades are happening today. We saw the valuations being put on the NFL teams recently. And even the MLS is trading at very high levels. So, you know, you try and see a situation where you think you can add value and grow a franchise and grow a business. Jonathan, do you see a future for cricket in the US? I think there's a future for most sports in most places. It depends upon the depth of demand and the depth of local participation. I don't think you can just pick up a sport and put it in each country unless there is an underlying desire.

12:47But in my view, there's a much greater opportunity in the UK because of the inherent nature, the love of cricket that people grew up with. And I think there's so much competition in the US for, again, basketball and baseball and football and all the major sports. I think the MLS has made a breakthrough, but it hasn't really got up to the top table. And I think if you look at how many years that's been at it, I think cricket will find itself even harder to get to that top table in the US. go to any of the parks in Queens, Brooklyn, across the street from my house, world-class cricket dudes out there.

13:23Yeah, yeah. They're playing every Sunday and every Saturday. Yeah, it's crazy. Well, you know, I think Americans have had a view of cricket overall, which is wrong. Right. It's an amazing sport. Even the five-day variety is probably the most enthralling sport you could ever watch. Yeah. And I think that, you know, I think that cricket is a growth area, and that's why we put some money behind it. Our thanks to Jonathan Goldstein, co-founder and CEO of Cain International. Coming up, railroads on the move, telecoms in orbit, and gaming in the cloud as we look ahead to 2026. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries.

14:00You can access Bloomberg Intelligence via BI Go on the terminal. I'm Scarlett Foo. And I'm Paul Sweeney, and this is Bloomberg.

14:09Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.

14:51That's Vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor. Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now.

15:24And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

15:58This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. We start on the rails. Heading into 2026, North American Railroad companies are betting on precision, technology and cost control as they navigate steadier demand. According to the latest Bloomberg Intelligence research, North American Railroad's earnings growth look poised to pick up next year, but may fall short of double digits because of President Trump's tariffs. For more, guest host Christine Aquino and I are joined by Lee Clasgow, Bloomberg Intelligence Senior, Transport, Logistics, and Shipping Analyst.

16:30We're thinking that next year is going to be a better year, but it's not going to be a great year. So earnings for the rails, broadly speaking, increased by mid-single digits. We expect that to accelerate to high single digits. I think investors would really like to see it get into the double digits and even mid-teens. But I think we might be a ways out for that for a while. And that's really being driven on the demand side. We're really expecting tepid demand across the board at low single-digit growth. Some rails might do slightly better than others, like CSX, which has easier comparisons versus this year, and Canadian Pacific, which has a lot of synergy opportunities following its merger with Kansas City a couple years ago, and they're still working through some new business opportunities following that merger.

17:17So those two rails will probably outperform when it comes to volume growth. And you could see flat growth from a rail like Norfolk Southern, which is dealing with possibly some lost share on the intermodal side and some tougher comparisons when it comes to export coal. Yeah, well, very interestingly, of course, still a challenging outlook, it seems like, for the rail sector next year. How do tariffs play into that outlook? Because we still don't have a lot of clarity on whether tariffs are going to stay. But if they do, how could that disrupt the outlook for rail in 2026? Yeah, so it's impacting rails differently.

17:54It's impacting the Canadian rails, Canadian National and Canadian Pacific, Kansas City, or Kansas City Southern. They're impacting them, you know, kind of on, if you think about it, forest products or metals or autos. That's being negatively impacted. And if you look at Union Pacific, you know, if you have inconsistency with imports coming into Southern California, that's impacting them. So, you know, it's really creating a level of uncertainty among shippers. And that's creating, you know, what I would say, not allowing the rails to operate as fluid as they possibly can because of that stop and go demand.

18:33Lee, one of the big topics in the railroad industry, and I think it'll be most of the year, is the proposed Union Pacific Norfolk Southern M &A transaction here, creating the first east-west coast-to-coast railroad in the United States. Is this even going to get approved, do you think? We're kind of cautious on that. I think we have like a 40%, 45 % probability that the deal gets done, and we're well below consensus, we admit. We might be a little naive thinking that the STB will remain neutral when they take a look at this deal? Because the parties have to prove that it's in the public interest and it's going to enhance competition.

19:13Some could argue that some of that enhanced competition is going on right now because you've seen Burlington Northern, which is a competitor in the West, teaming up with CSX to provide coast-to-coast services, not through an acquisition but through more of a collaborative effort. And you are seeing CSX winning some share from Norfolk Southern based on that. Yeah, well, if that does not clear the regulators, Lee, what do you think that will say about the future of potential consolidation or strategic partnerships across the rail industry? Is it kind of, do you think people are going to see it as a one-off sort of situation, or is it kind of a harbinger of challenges to come when it comes to M &A in this space?

19:55Well, the SDB raised the bar for large class one railroads to merge back in 2001. And that was really driven on some service issues from past mergers. And so, you know, that's why the bar has been set so high. All the other railroads, obviously they're talking in their book, but, you know, they think that they can create a better network through collaboration. You know, we think that it can happen through a merger or through collaboration. But, you know, like I mentioned earlier, Union Pacific and Norfolk Southern still have to, you know, clear that high hurdle that it enhances competition. And it's also in the public interest, which is, again, it's really tough to prove.

20:39Also, you know, we expect that, you know, we probably get an answer about whether or not the STB or the Service Transportation Board will approve this deal in early 2027. So we'll be talking about it all year, and I hope to talk to you guys about it all year. Our thanks to Lee Clasgow, Bloomberg Intelligence Senior Transport Logistics and Shipping Analyst. We move next to the telecom and satellite space. Bloomberg Intelligence recently put out its outlook for U.S. telecoms and satellites in 2026. According to their research, slowing wireless service revenue gains and mounting cable competition are prompting a deeper push into broadband for growth as U.S.

21:13telecoms enter next year. For more, guest host Alex Seminova and I were joined by John Butler, Bloomberg Intelligence Senior Telecom Analyst. So I think the big thing to keep in mind here, Paul, is as we roll into 2026, I think we're going to see price promotion take a modest step up. The bullets are really flying in wireless right now. I think part of it is AT &T and Verizon both have new CEOs. Both CEOs are going to want to make their mark. I think the one to watch is Dan Schulman at Verizon. He is very focused on volume. He wants to get Verizon back to subscriber growth. And I think the only way to do it is going to be by promoting a little bit more aggressively than they have in the past.

22:02John, where do you see the strongest incremental demand coming from? Is it going to be mobile data? Is it going to be broadband? Two areas, Alex. One, as you touched on, is broadband. That's a real growth factor for the telecoms. If you look at fixed wireless access, which is delivering broadband over a wireless link into the home, that has proven to be exceptionally popular with people. So I think all three telcos are going to lean into broadband in order to supplement the slowdown in wireless growth. But the one area I'm watching as we move into next year is satellite. Starlink is partnered with T-Mobile.

22:45The two of them are already offering limited texting service on a nationwide basis. It's sort of early stages there, early innings, if you will, for them. Verizon and AT &T are partnered with AST Space Mobile, which is in the process of launching its constellation now. They actually have more better satellites than Starlink. And so the space race is on, as I like to say. It's going to be really interesting to see once Verizon and AT &T are able to launch services early next year, how that market segment unfolds. So the wireless operators, the Verizons of the world, AT &T, John, are they partnering with some of these space satellite services?

23:34Yeah. I mean, I think the way to think about it, Paul, is it's almost like cell sites in space at this point. So the major carriers have partnered with Starlink and AST to provide that infrastructure and the transmission capability up in space to be able to provide coverage outside the range of terrestrial networks now. So essentially that concept of coverage everywhere is going to become a reality as we move through next year. I will say I was getting a new iPhone in T-Mobile. I'm still grandfathered into my father's plan. They're very lucky. He's still paying for my cell phone. But they immediately offered me to get Wi-Fi with them, with T-Mobile.

24:18So it's really interesting. A new offering from them, as you mentioned, John. Is there a 6G out there? Because I think I've grown up and we've had 3G, 4G, 5G. Is there a 6G out there? Not yet. I think 6G is going to move on to the horizon probably as we move through next year. It's a development process by the industry. And so that standard, if you will, is getting developed now by industry committees. It will then move into test probably in 2028 and become a reality for us by 2030. Right now, we're mid-cycle with 5G. So if you think back to when 4G was originally launched, it was much lower speed than it is today.

25:02So that standard, those generations of mobile evolve over what are typically 10-year cycles. So we're mid-cycle with 5G. Expect better speeds and better performance there as we move through the next five years. And then ultimately 6G will appear probably again in the 2030 timeframe. Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analyst. Now we move to the cloud gaming space. Bloomberg Intelligence has recently put out a deep dive into cloud-streamed gaming, and specifically how AI could accelerate game development with a shift toward cloud-based games. This development could, in theory, make physical gaming consoles obsolete.

25:42For more, we talked to Nathan Nadeau. He is Bloomberg Intelligence Technology Research Analyst. Consoles will decline gradually, and that's what I mean, and kind of remaining over the long term as a niche device for loyal fans, the really hardcore gamers, as advancement in cloud infrastructure. And we see what's happening with data centers, as well as a wider spread of mobile gaming, playing games on mobile devices, whether smartphones or tablets, as that gain wider spread. And people become less interested, you know, in playing games at an unportable gaming hardware that's stuck at home or living room.

26:18If they can do so and have the same experience on a mobile device, why not, right? So where are we in kind of that evolution in terms of really putting more and more of the content of the technology of the capabilities in the cloud? How is that changing the gaming experience, the gaming business? Yes. So the key pain point to cloud gaming is network latency, because that literally depends on the distance between the user's hardware, whether a mobile device or console to the nearest cell tower. And we know that 5G network coverage are improving not just in emerging markets, but also becoming better in even developed markets, including China and the US.