Paradigm Shifts: Valuations, Earnings & What The Market Holds In 2025 with Cameron Dawson
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On the Tape.

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They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. Welcome to the first On The Tape podcast of 2025. Guy Adami joined by Danny Moses. And Danny, what better way to start the year

than to be rejoined by Cameron Dawson. She's the chief investment officer at New Edge Wealth. You see her on Bloomberg. You see her on CNBC. And the last time she was with us on the podcast, I believe, was November 1st. Cameron, happy new year. Thanks for joining us.

Happy New Year. Thank you for having me. You are one of those people, and I say it not too a lot to a few, that when you're on, you should turn the sound up and listen to what you have to say. And quite frankly, when you talked to us in November, a lot of things you brought up came to fruition. So here we are now.

New Year. Let's take a look back first and let's talk about some of the things that you definitely got right. And sometimes more importantly, some of the things that you really didn't see coming. Well, I do think that the biggest surprise of 2024 was the market's ability to

re-rate up to 2020, 2021 highs. If you look at the forecasts for the beginning of 24, what they effectively assumed, and we were one of them, is that you'd get the earnings growth, that the U.S. economy, in our view, was going to be stronger than expected, but that effectively at a certain point valuations would act

as a ceiling and they didn't act as a ceiling at all in 2024. In fact, you saw this huge re-rating of the multiple up over mid-teens in its appreciation higher on a forward basis, all despite the fact that the Fed was tighter than what was expected at the beginning of the year that you saw this upward pressure in interest rates.

And obviously, there's an aspect of technology that was exciting that got people to be able to dream the dream of higher valuations or that being priced into higher valuations. But it's pretty prevalent throughout the market, this kind of re-rating. And so as we go into 2025, the question is, will valuation matter this year? It didn't matter last year. Will it start to matter? And does it act as a ceiling? And we think that that's

question around valuations and what paradigm we're in in valuations might be one of the most important ones. If it matters, we think it translates to a sideways chop a year. If it doesn't matter, we think it translates to effectively going into bubble territory where valuations are cast to the side. We all dream the dream. And one of my favorite quotes is from Goethe. It's few people possess the imagination for reality. So how much of

the imagination will start to be put into multiples. And that's kind of your upside scenario of effectively you kind of set aside valuation concerns, at least for a short period of time. Cameron, happy new year. Great to see you again. It feels like, to your point, that 2025, at least coming out of the Q4 2024 earnings, is a show-me story.

for some of these growth names. And you mentioned market breadth obviously hasn't been very healthy. It's been very concentrated. And in order to expand that breadth of the market, you're going to need pretty solid earnings growth. What are you looking for exactly? What's the number of earnings growth you're looking at? Is it a percentage growth? Are there certain data points that you're going to look for to basically affirm this market valuation?

Well, I think that that is the other really key point, which is that the market breadth being so narrow was a function of earnings growth being very narrow and that you can explain all

all of the outperformance of the Mag7 really from the earnings growth line, not necessarily just valuation expansion, because a lot of the Mag7 names actually saw valuations come in because earnings were accelerating so much for them.

So there's an interesting kind of assumption in the 2025 earnings estimates, which is that MAG7, which contributed the vast majority of earnings growth in 2024, will start to take a backseat. And it'll be the 493 that takes up the mantle and drives earnings growth. But if you think about it from the line of just the growth index itself, so the Russell 1000 growth index, there's some interesting numbers to put to this.

So 55% of the Russell 1000 growth index is made up of the mag seven names and the mag seven. If you were to wait them based the earnings growth based on their weightings within that index, you have the earnings of the mag seven being about 50% this year. That's expected to start back in 24. It's already last year. And that's expected to decelerate to 20% in 2025. So

But if you look at consensus forecasts for the overall Russell 1000 growth index, they have growth going from 4% in 2024 to 16% in 2025, which means that by definition, that 45%, that's not mag seven, is expected to see a huge reacceleration in its earnings growth.

And we're not quite sure if that is really possible. We're willing to dream the dream on the mag seven, the idea that they've consistently been able to surprise to the upside. But this sort of 493, everything else, reacceleration in earnings might be a bit of a high bar as we move through the year. That is the show me story.

You know, I missed a lot in 2024 without question. And, you know, going back and trying to figure out, you know, how you missed it or what you missed.

What's become painfully clear to me is passive investing dominates everything. And Danny talks about this. I've brought it up. I know you talk about it as well, Cameron. Last year, trillion dollars of inflows. And in a world of passive investing where money flows into the market, that specific investment flow is not focused on any things that I think still matter. Valuations, overbought, oversold, any of those things that historically matter.

seemingly left on the wayside. And, you know, there are a number of different indicators that are flashing red. One of them is the Shiller Index. That's the CAPE ratio that people talk about, cyclically adjusted PE. Typically, I think the median for that is about 17 or so. It's currently trading north of 38. Last time we saw it this high was 1999. Prior to that, if you want to go back in time, was the late 1920s. And

And then you have Warren Buffett sitting with $325 billion of cash on the balance sheet. We talk about the Buffett indicator. I guess my question to you comes in the form of what derails, if anything, passive investing? Because clearly valuations are not in their purview right now.

Yeah, I think that the other way that that question is effectively one of what causes you to see index concentration reverse and go in the other direction is that passive investing works as long as you continuously are getting this more and more concentrated kind of market because the flow keeps going to an increasing amount to these particular names.

And a lot of that we think would come down from either two things. One would have to be a shift in the earnings capability of these prior winners. So the answer to that would be a year like 2022, where earnings in the growth sector and MAG7 for that matter, actually underperformed value, which was very much driven by the reacceleration we saw in energy earnings during that time. So

The earnings story will be important. The other one is a liquidity flows psyche approach to the market, which is really hard to time. This is why valuations are such terrible timing tools. But we do know at the peak of the nifty 50 in the early 70s, at the peak of the dot com bubble, other periods of max concentration that after those periods,

the names that underperformed that had been the leading parts of the market over the prior period, the names that underperformed actually only underperformed because of valuation multiple compression, not because of earnings. That the nifty 50 actually outgrew the overall market from an earning standpoint, that the tech names outgrew the overall market post the tech

bubble bursting, but they had much more valuation compression, much more room to fall. So we think that the message from 20 or 2025 that we're telling clients is that valuation discipline still remains highly important.

And that, yes, it's really hard to fight the trend of passive investing, mostly within hyper concentrated growth indices, but that there's a lot of opportunity within value indices, within mid cap indices, international indices that have just been left behind. And we think that there's greater dispersion between winners and losers.

And I was just talking to the PM on our equity strategy, Jay Peters, who said something pretty wild over the last three months. Our dividend portfolio has actually seen a lower valuation, outperformed the market has been an up

three months, but it's actually seen its valuation compressed because earnings growth has been there. So we think that valuation discipline, not necessarily dumpsters diving on value, is going to be a key part of navigating 2025. So along those theme of flows, let's go into fixed income for a second. And I was just reading this morning that credit spreads ended on investment grade, the tightest since 2005. They ended on high yield.

the tightest since 2003. Private credit flows have been massive, obviously. So as you think about that supply and demand equation, and then we've ignored rates in general on the long end as we've been higher for longer. As we roll the calendar to 2025, what type of volatility do you expect to see within fixed income and what could that mean for the equity markets? David Stein :

Yeah, we've been thinking that credit was priced for perfection for quite a few months now, and it keeps getting more and more perfect. And at a certain point, it becomes the burden of being so wonderful that you are just priced for no contemplation whatsoever of the growth slowdown. And we think the reason, the key reason why you've been able to continuously compress credit

spreads is because growth estimates continue to move higher for GDP, quite simply, meaning that if you are more confident that growth will will be delivered, that you are willing to take on less compensation because you don't have to price in this downside scenario that maybe people won't be able to make do or make good on their debts.

So what we think has happened is that as you continuously seeing GDP estimates get revised higher, that has been the key input into why risk assets have been able to re-rate, including equity and including credit. But now you're starting at a point where how much room is there really for risk assets to get even tighter from a valuation perspective? And we could get into silly season. And that's

We always think about you sow the seeds for the next crisis when times are great and the tighter credit spreads get, the more likely in 25 that we're going to start to see people take on more leverage.

We'll start to see them increase the turns that they take on. We'll start to see more silly kind of behaviors happening. Danny, you probably, you know, I was reading an article over the break about the synthetic risk transfers, for example, of what's going on within getting credit risk off of bank balance sheets is getting funneled into private credit portfolios, funneled into hedge funds.

Some of this stuff is so reminiscent of the black box. We repackage risk. We find somebody to buy it because they need to put capital to work and hope for everything to remain copacetic, that it's not going to blow up. And we know that how that

tends to end. So we are keeping this idea of credit risks on top of mind. We're not sure if it blows up in 25. It's likely my gut says that we need to get sillier before things get scary, if that makes sense. So you're likely going to see more and more credit risk get taken on and that then will sow the seeds for something a bit more nefarious down the line. As far as interest rate volatility goes,

If we think about 2024, we ended the year up about 70 basis points in the 10 year, but you had a massive wide 120 basis point range. We think that that persists next year or this year, meaning that you likely could see upside to yield close to 5%. Wouldn't rule it out, but that you're going to have periods of growth fears and periods where you're going to want to seek or people will be in demand for safety assets.

And so the strategy that we think is going to be important for fixed income is to remain

acquisitive when you see yields back up higher and to be patient when yields back down lower. That narrative is going to drive a lot of this volatility and that interest rate volatility is just going to be here to stay. We're not going to trend. We definitely don't think we're back to a world of constantly falling yields simply because of inflation risk, fiscal risk. We could get into all of those details. And I wonder if the price of investment grade bonds being so tight

means two things. One is people feel safe taking a little bit more risk, corporate side and their balance sheets versus the balance sheet of the U.S. government itself, which we can talk about term premium and what is built in, obviously, the long run of the curve for credit quality of the U.S. government.

What are your thoughts in terms of that as the driver? So when you say that rates can pull in over time, at what point would that might that not matter? People are concerned about deficits and spending and debt ceilings and so forth.

Yeah, if we think super tactically, given where economic surprises have gone, so economic data has been surprising to the downside over the last month or so. And the fact that you got technically overbought in the 10 year, we've been thinking we might start the year with yields moving slightly lower, meaning that if you also consider just treasury funding, you hit the debt ceiling, you're not issuing as many treasuries, just simple supply and demand.

and demand maybe there's a little bit of downward pressure on yields um but certainly not something that we think is going to persist because of uh of that risk on the fiscal side of things

And that's where you best and faces a huge quandary, which is that what do you do with this pile of bills? We've been calling Yellen the fourth member or the fifth member, depending on which year it is for Destiny's Child. But because she just sings bills, bills, bills and.

What is the strategy that Besant will have to deal with the rolling over of all of these bills that are constantly coming due? Will we see bills as a percentage of treasury debt come down? That is a fascinating question only because it will affect broader market liquidity. The conclusion from the last couple of years that a lot of people who are incredibly smart and sharp on this topic is that

because you've seen this funding and bills, it has kept overall market liquidity more abundant, which has allowed equities to remain so strong, overall financial conditions to remain very loose and easy, despite what the Fed has done, despite the high issuance of treasuries that you've had. And so does Besant think that that

will can be sustained? Do they think that they can keep bills as a percentage of Treasury debt well above what T-back is suggesting? Or do we see them turn in the other direction, start issuing more long coupon bonds? I don't know if they'd be willing to do that. We saw what happened when Yellen tried to do more long coupon bonds back in 2023, and the 10 year yield went up by 100 basis points in like three months.

And the equity market sold off by 10%. I can't imagine that they have the stomach for that, which just means that I think it's going to be an extended pretend, keep the bills loose, keep the liquidity loose as much as you can, unless your hand is forced to do something different. And I frankly don't know what would be the cause of the forcing of the hand. So not quite sure. It's a dangerous game they're playing though with the short-term stuff. And I think there's $3 trillion of

of issuances that come and do this year that need to be refunded. I think half of that is over the first, I want to say, three or four months of this year. So it's going to be interesting to see how they play it without question. And I'm still one of these people, one of the few probably out there that, and I think you might be in this camp as well, that think rates, 10-year yields are going to surprise people to the upside. I guess the question I have to you is, if I am right and we see 5% again in the 10-year,

What, if anything, does that mean to the equity market? Because theoretically, they're moving, yields are moving higher, not because the economy is doing better, because of the things that we've been talking about. And those should be tremendous headwinds for equities, one would think.

You're right that it is the why. If yields are moving higher because growth is more resilient, then it's one thing. If yields are moving higher because inflation is stickier, the Fed is going to be tighter and you are having fiscal issues, that's a very different thing because the former comes with a

a increase in growth expectations. That's the message from 23 and 24 growth expectations have risen consistently through the last two years. So equities can do really well even in a rising yield environment because the income statement is doing well. You're surprising to the upside on the earnings line. The second scenario where yields are moving up because of inflation because of the Fed being tighter and because of fiscal effectively the 2022 scenario.

then you're right that growth estimates would start being cut in that environment and risk assets would do poorly.

So it really comes down to the why within the yields in order to determine how much equities are able to shake them off. So the other question is on the equity risk premium, which is we know that valuations are a poor timing tool, including valuations that are relative valuations. So equity risk premium being the extra yield you're getting on taking equity risk versus what you're getting from a risk free asset.

And one of the considerations there is that if you're choosing between equity and fixed income, you're effectively saying that I'm making an active choice of putting $1 here versus another dollar here. There's that trade-off. But if people feel as if they are fundamentally underweight equities,

we actually don't think that that trade-off happens. Meaning that if you're looking at your portfolio and saying, I want to be at 60% equities, but I'm only 50%, I'm actually a lot less sensitive to valuation than I would be if I was at 65% equities and I'm deciding where to put my next incremental dollar. So I think that one of the reasons why equities have been able to shake off the higher interest rates over the last two years is because people were underweight equities.

You can't say that as much today. If you look at institutional positioning, household positioning, all of them show equities from the household perspective near 20-year highs. Institutional, you're in the 90th to 95th percentile. So it could be

be the point of this long drawn out statement is that it could be that interest rates start to matter more because if you're already fully allocated, you're making a trade off decision between one and the other. And you're looking at equities being more fulsomely valued. And that might mean that you are more sensitive to valuation. But again, very poor timing tool. So it certainly remains to be seen.

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navigate through that. I want to give you one example of what I think might happen, and then I want to get your overall view on this. So January 29th, Fed meeting. Obviously, no one's expecting them to cut. We'll see what they say, et cetera, et cetera. It happens to also be, found out today, Tesla's earnings. And the reason I mention that is the Fed's at 2 o'clock

earnings for Tesla three hours later. We know that Musk, who is going to have a big impact on policy, has been after the Fed for years. One, he thought they should have cut rates because it hurt his quote business. Things are overstaffed, the Fed of all that. But I think we're going to get something like that as an example of, let's say Tesla has bad earnings and Musk said, Fed's got to go. Powell's got to go. This enough. We have to cut rates, cut rates.

We joke about that, but that could have an impact, obviously huge on rates that day. You can see the 10 year yield shooting much higher. You can see the short term rates moving lower. That is an example of kind of the volatility we might be going through. Give us kind of how you think this will play out. Not necessarily Musk. I'm kind of joking, but I'm somewhat serious. Those type of things as we kind of go to 2025.

Yeah, you know, it raises the question as to why we have seen the movement in the 10-year over the last four months or so, so since the September cut. And the reason I bring that up is that I've been of the camp that I think that the neutral rate is higher than what the Fed is expecting and that they're talking about the neutral rate and how much they need to be cutting rates has been...

misguided might be too strong of a word, but has been not complete in its appreciation of all the different dynamics in this economy. What I mean is that they look at a very narrow definition of the real rate, real Fed funds rate, or the spread of where Fed funds is over the neutral rate, and they say we're tight. But then the empirical evidence doesn't suggest

it. It doesn't support this notion that we're tight given where financial conditions are, given the fact that the entire time we've been above neutral or in tight territory, that the U.S. economy has grown above trend, etc. The reason I bring that up is because of the risk that yields move higher because we run policy that is far too easy for where underlying growth currently is.

for where fiscal policy currently is, and for where asset prices currently are. And I think that was a key reason as to why we saw this back up in yields. You have the Fed knee-jerk react to some weak payroll data, cut rates by 50 basis points, and effectively the bond market goes, well, things are going to get a little bit crazy because we're stimulating policy at a time where we don't necessarily need stimulative policy.

So I think that, that to your earlier question, that preparing oneself for continued volatility makes a lot of sense because we're not necessarily going to have the kind of communication and the kind of maybe intervention is the word, um, that would be in quote traditional. Um, so given the fact that certain people's comments can carry so much weight and cause people to overreact or potentially react in the short term, um,

certainly is a risk. And we don't think that you can rule out that risk in 25 because that is probably the mode that they will do business, if that makes sense. Cameron, there was obviously some great stories in 2024. There are also some cautionary tales. And for me, they came in the form of healthcare, which outside of a couple of names really didn't perform

materials not at all performing, and then you throw energy in the mix. And people looking for value found their way there only to sort of be disappointed. So where do those things sort of stack up as we head into 2025?

They're all earnings stories. You can explain every single one of those pockets of underperformance with earnings revisions. Healthcare went into 2024 with an expectation for 20% earnings growth. Where did it end 2024? Great.

So the fact that you saw such a sharp earnings revision down cycle that happened for energy as well. I don't have the numbers in front of me, but energy earnings, if you look at the 24 and 25 earnings estimate chart, it's just one straight line continuously down. So we think that it sets up for an interesting question, which is that short term mean reversion we think we're really set up for.

We've seen it over the last week or so with value starting to outperform, meaning that it underperformed so much over the course of the last few months, mostly with that that that December to hopefully not remember for value stocks being so very weak. You had nearly a 20 percent spread between the mag seven and the equal weight index. So you just saw a lot of underlying weakness within the index there.

And so we think that you are primed for a snapback. We think that value has the capability to have, at least in a short period of time, a performance reversion simply because it was so unloved and underperformed so much.

But the caveat comes from, can it be sustained? And the sustainment of that snapback comes down to the earnings line. And we do think that the start of that test for earnings, the start of the show me story for earnings is 4Q earnings season, which starts in just a couple short weeks.

because that is the first quarter that if you look at consensus estimates, it has the everything else starting to really reaccelerate. And if that doesn't deliver, then this value rally starts to be a flash in the pan and we go back to the things that can actually deliver on earnings growth. So we're watching those forward earnings estimates for each of the sectors really closely to get a sense of are the moves sustainable? And until we start to see a turn in that earnings line, we don't think that

that the moves can be sustained. And it does also reveal at the end of the day as well, high valuations. So something like industrials saw their earnings get revised consistently lower, but valuations expanded up to a premium to the market. And then lo and behold, boom, over the last two months, completely reversed it. So that's where we think you have to combine that earnings revision outlook with valuation discipline to make sure you don't get caught flat footed.

David Morgan: Cameron, as an example, when you look at builders, historically, they're trading much higher than they normally do in terms of book value. We know that's not sustainable and they've been kind of trading ahead. They pulled in recently because what the Fed has been somewhat hawkish, right? And then you look at the banks. Normally, the percentage of above book value is predicated on their ROEs. They're well above that. You just mentioned energy and I want to hone in on that for a second.

Part of this, I think, is just the passive flows in general that fund managers are trying to pay to outperform certain sectors. And they get carried away on the upside and carried away on the downside in terms of being under allocated.

I don't think you need earnings growth per se in energy when you look at maybe net asset value and all the M&A that has occurred. It's easy to change quickly, right? In terms of, oh, I can buy value because there's a little bit of downside with potential upside just based upon the net asset value of some of these companies. So how does that look? Is it the end of momentum and growth that just spurns a reallocation? Valuations be damned kind of on the lower end versus kind of earnings growth? Like where does earnings growth meet valuation in terms of

reallocations, I guess it passes. I think it's the fact that earnings were revised lower so much over the course of 2025 for these value sectors is the key reason why they all underperform so much. So we do think that earnings are still a very important aspect to it. But if we're thinking about energy specifically, we actually just went through this exercise as a team to say, OK, where do we really think oil prices are going to go? If we're

Oil prices have been touching a low, I think, in the mid-80s pretty consistently. That has been the low for the last two years of a support line that at a certain point, we're almost there. So if we see energy prices break far below that, that's likely a scenario where global growth is much, much weaker than we are expecting. And you're going into an environment where

everything is getting cut when it comes to an earnings growth forecast. And then if you think what could then be the upside surprise for oil prices that maybe global growth is stronger than expected, maybe some supply disruptions, et cetera, that maybe your risk reward in some of these sectors is starting to look

better. But again, if you're cutting earnings estimates consistently, really hard to see people want to rotate into those areas. So pulling up the forward earnings estimates is, I think, the absolute critical thing to do to determine if we're going to see an actual inflection point. And, you know, also appreciate the fact that earnings prices do tend to leave narrative prices do tend to leave earnings. So I think there was that hope in the fourth quarter,

quarter. You saw a big rally within energy stocks, but then they gave it all back up because earnings estimates just kept getting cut. You know, Cameron, one thing I've learned over the years doing fast money is you never bet against the U.S. consumers want to spend money. Seemingly, we'll spend under any circumstances you can throw at them with

With that said, the numbers don't lie. I mean, credit card debt is now in the United States, I think $1.2 trillion, an average credit card rate of about 22.5%, 23%. I think total household debt is now north of, for the first time ever, $18 trillion. Alarming numbers, but seemingly nobody's paying attention to as the market continues to talk about the health of the consumer. So Mike,

question sort of is predicated around those numbers and then your view on what the employment picture is going to look like. Because I'll tell you, in 2024, I thought we would see a spike in the unemployment rate. We did not. But I just think it's a matter of time before that starts to surprise people to the upside. So thoughts on that?

Well, you hit the nail on the head, which is that it's one thing to have a lot of debt when you have a lot of income. It's a very different thing to have a lot of debt when your income is falling. So if you look at the debt servicing ratios, they actually still look really healthy. Yes, you have big, huge mounds and piles of debt.

but as a percentage of disposable income, it's actually not that stretched. You're still below pre-pandemic levels, well below where you were pre-GFC. And so people look at the debt scenario and say all well and good. But what you're effectively saying is that you're hoping that your denominator holds up. You're hoping that you continuously see this income growth because it allows you to carry on higher debt levels.

The same goes, we would argue, in the corporate side of things. Corporate debt levels, for the most part, look really healthy, but it's because incomes, earnings have been so very healthy as well, which is why we think there's that relationship between GDP growth and credit spreads.

So when we bring it back to back to the consumer, we do know we have to talk about the two cohorts of the consumer, that K-shaped economy and talk about their sensitivities. The low income consumer is much more sensitive to the labor market because they rely on their income far more to sustain their lifestyle. They you know, they have a higher propensity to consume. They spend a lot more of each of their paychecks.

And what we know is that that if you look at the breakdown with the delinquency data, a lot of it is coming from the low income consumer. They don't break it out by income cohort, but they break it out by age. And low income consumers do tend to be younger, whereas the high income consumer does skew higher. That consumer really sensitive to the labor market. If the labor market rolls over even in the slightest, these delinquencies rate rates will likely look even worse.

The other side of things is the high-income consumer, that top part of the K. And what we know about them is that, A, for one, they outpunch their weight when it comes to consumers. So the highest-income cohort, the top 20%,

20% of income earners make up 40% of overall consumption. So it's one of the reasons why the low-income consumer has not pulled the economy lower. You can hear these horror stories from company management teams saying the consumer is weak. Then all of a sudden you keep printing these big retail sales. Well, it's because if the retailer is focused on that low-income consumer, they're going to have a very different experience.

The last part of the high income consumer, though, is that we do think that they're more sensitive to asset prices. And if you look at the pace of asset price growth, it has been multiples of what liability growth has been because of strong equity markets and because of strong housing markets. So if either of those things from a price perspective, equities start to roll over or you start to see more weakness within housing prices, then

Those two things could cause the high income consumer to pull back in a way that they have not done since the pandemic. And thus, that would be the thing that would cause the overall consumption in the U.S. to stop surprising to the upside. So it's sort of a self-fulfilling prophecy or maybe a feedback loop that weaker equity markets could be the thing that takes down the aggregate consumer in a way that we haven't seen in the last few years.

It makes sense. And Guy's point, if unemployment were to tick up, obviously that would make it even harder for these consumers to make payments. And the wealth effect, I think, is always underappreciated. And I think a lot of it's come, obviously, with Bitcoin, obviously, over the last kind of six to nine months as well. I want to point out one other thing. I know we touched on kind of corporate lending earlier, and Peter Bukvar in his note this morning cited it.

an FT article, the US companies are defaulting on junk loans, basically the highest rate in the last four years. And again, I feel like it's all being kind of masked by everything else in the growth and kind of stock prices and elevation of stock prices, things like that. So how do you think about that also in terms of the impact? Again, that could have unemployment in the trickle down then that would obviously happen to the consumer.

It is such an important question about how much of the strength we've had on the credit side of things has been predicated on a hope that the Fed's going to be bailing you out.

and the hope that interest rates are going to move lower, and you're going to be able to refinance at a more attractive rate. And we saw this in definitely within real estate of the kicking of the can saying, hey, you know, rates are high now, but if we can just survive to 25, then we're going to get lower rates. And those lower rates are going to then allow us to breathe a sigh of relief. But if rates stay higher for longer,

then it means that as we're refi-ing, you start to have an issue where you cannot afford that debt unless you're starting to see these delinquencies. And this is where, you know, I know I mentioned earlier that we think the neutral rate has been higher. That doesn't necessarily mean that it stays higher. We think the key reason is why the neutral rate has been higher is because

the U S economy was effectively desensitized to short-term interest rates because of a decade of QE and because of the suppression of interest rates, uh, on the long end of the curve that we know reached that peak or that trough at 0.5% of the 10 year in 2020. And that, that because rates were so low in 2020, 21 people refinance that allowed them to term out their debt, be less sensitive to the hiking of interest rates by the feds,

in the last couple of years. And thus growth didn't slow to the degree that it did in prior hiking cycles. But that doesn't mean that that debt won't eventually need to get refinanced. And that's the kicker, which is that we think the reason that you're starting to see some of these pains within some of the corporate credit is because there was a hope that interest rates would be lower. There would be a hope that the Fed was going to cut and then it's not happening. And thus they're having to reevaluate and reassess.

And that's one of our wild cards for 25 is the refi cycle. Maybe it bites more in 26 just because of the timing of when the debt was issued. But it certainly is a concern and consideration.

All right. Let's pivot real quick to the dollar, because, you know, a lot of things we talked about obviously either lead to or predicated on what's going on with the U.S. dollar. And in terms of some of these countries, we've seen disasters. I mean, Brazil's an unmitigated disaster in terms of their currency. And I don't want to make a big deal out of that in terms of what it means for us.

But the dollar strength is a story. And if you look what's going on with dollar yen this year, you look at the weakness in the yuan in China. I mean, there are a lot of things on the currency side of the equation that should give people, if nothing else, pause. So speak to the importance of the dollar and where you think the role it plays in 2025.

Yeah, the ultimate role, because it will define and drive what is market leadership. We do not think that you can have leadership from non-U.S. assets in a strong dollar environment, that a weak dollar is absolutely necessary for you, for us to make a call that we would want to be overweight anything that is non-U.S.

So that's step number one. Step number two is, at what point does the strong dollar start to actually tighten financial conditions? So right now we've been in this environment where the,

The strength of equity valuations, the strength of credit spreads, the strength of other kind of risk assets has masked the fact that the dollar has gone up so much and has tightened financial conditions that at what point do we start to see that filter through on the earnings line? And that's something that we'll be listening for really closely when we start fourth

quarter earnings season is that fourth quarter, we had huge dollar appreciation over the course of the quarter. Do companies start calling that out as a headwind and a reason why they're missing estimates and say, hey, on an FX neutral basis or on an organic growth basis that

We made estimates, but the reported numbers are much weaker because of the dollar. We do think that we can't rule out continued dollar strength. When we look at CFTC positioning, it doesn't look ultra stretched.

So usually CFTC positioning correlates really well with peaks and troughs in the dollar. It's a real pain, but consensus is always a risk where we've seen the most short dollar positioning at dollar lows, the most long dollar positioning at dollar highs. If I look at CFTC positioning,

it's middling, but it's not so much so that I think that positioning in and of itself could be a risk. So as long as the U.S. economy grows, is healthier than other peers, the fence stays tighter, then that interest rate differential leads to dollar strength as well. The neutral rate being higher in the U.S. versus Europe also leads to dollar strength as well. But don't rule out the wild card of

of what if we do go into a period of weaker US growth, that dollar strength can evaporate in a second. So again, the message is, stay on your toes because this is likely going to be a volatile ride. - So as you look around the globe, whether it's EM, whatever asset allocation it might be, what are your thoughts kind of outside the US and what markets are you kind of looking at that you think are under-owned or could benefit from what you just described potentially, which would be the dollar weakening?

Yeah, we've been trying to be very selective within international. It's been interesting that there has been over the last year, we run a quality international strategy. And if we look at the factors that did well in 2024, it was a lot of low quality factors, a lot of it related to China stimulus, not necessarily on the cyclical side of things.

So we like to stick to our knitting on finding high quality names that trade at significant discounts to U.S. peers and kind of looking across countries. We are underweight developed market international and neutral E.M.,

We actually made that call to move some of our developed market international weighting into US mid cap, where we just thought that there was more upside and less currency risk, less tariff risk, et cetera. Just we could wrap our arms around the risk a bit better.

There is a point where it becomes so bad, it's good. And that's, you know, what, what we're constantly looking for. It's why, you know, we didn't go deeply underweight, even though there's all these uncertainties, because really, well, we're probably going to bottom ticket. So let's, let's stay neutral at a certain point that blood in the streets moment, you know, where people are, are so sure that the world is going to end in these places. But, you know, look at something like the Dax, that's actually held up fairly well, despite all of the turmoil there. So not,

ultra compelling, but we do think that there's pockets of areas where you can take risk. Cameron, it's amazing what you're able to talk about in 45 minutes span. Wealth of knowledge, again, and I mean this sincerely, you're one of the people that when you're on CNBC or any of the networks for that matter, you absolutely have to turn the volume on. We were fortunate to have you a couple of times last year, but there's no better way, Danny, for us to start 2025 on the tape than to be joined by you

Talk about what happened last year and what you think is going to happen this year. So Cameron Dawson, thanks so much for joining us on the tape. Thank you for having me.