Busiest week of earnings thus far. Trillionlmost 16 worth of corporates reporting. We need to figure out exactly what the set up looks like. Lets do that with scarlet fu. Scarlet what we have learned so far as we are deepening in an earnings recession with more than a quarter of the s p 500 having reported. Third quarter etf down 18 . Third quarter revenue down last, but still up 4 versus last year. We have definitely turned the corner because declines in the top line and bottom line are less bad than it was in the second quarter. It may even turn positive by the second half of 2021 when the conversations become easier. The market had priced in all of these Third Quarter declines. So far, so good. 500 are topping estimates overall. Sales are beating estimates by 3 . That is the most in two years. Eps is surprising to the upside by 18 , slipping from a 23 margin in the second quarter. Gina martin adams says Growth Companies are beating estimates more widely than value companies. When earning stop beat estimates, they outperform the s p the following day. Growth beats do not generate any outperformance. You can see how that added up. Says ck research reluctant to boost estimates by meaningful amount until we see the track record of beats and the Fourth Quarter. Nick is consistent with general market uncertainty about further fiscal stimulus. It is hard to know how much of the Third Quarter strength is sustainable when you do not know if therell be more government aid coming. Jonathan great breakdown alix great breakdown. Markets pricing and a pretty solid expectation of a rebound in the first half of 2021. Is it overdone . What is your take away . Interestings an aspect from our specific data set and the systematic quantitative model that the hedge leverage from us. The post earnings drift model. In the First Six Months of the year, that model did not work at all. Its on negative alpha, negative residual returns. It had a sizable drawdown. In the last four months, that model has made back all of the negative drawdown and then some comment we are seeing it continue into this quarter. And this means is beats misses did not matter to the market at all. In the last four months it is mattering a lot. We think that is because when a company, especially these growth names, and now it is starting to filter into the value names when they surprise to the upside. Analysts are taking that as a cue of future performance and future fundamental strength instead of in the First Six Months, with a just wrote it off and threw it in the garbage and said this does not matter at all, things are way too up in the air to extrapolate off of these numbers. Jonathan one of the things that of thepened guy one things that has happened is the companies have withdrawn guidance. Is that creating this new environment, and as Companies Continue not to impose guidance, will it continue . Leigh that is part of it. This goes back to what scarlet was talking about in terms of growth names. Growth names normally see more preearnings announcement drift in the direction of the revisions going into the report, whereas the value names do not as much, especially the growth names. He guidance is completely gone the preearnings drift has disappeared and been replaced by the post earnings drift whether there is a surprise to the upside and the downside. We saw it today. Reaction inof the that post earnings period. Alix that is interesting. Where does that leave the small caps in value. I am a broken record in terms of that trade. We do not see anything in those nick from data trend pointed out. For the growth names, we continue to see good upward revisions, 2, 3, 4 quarters out. This leaves us to believe this trade is not going to change. There are some spots in the value trade in terms of industrials that got beaten down and are now the benefit of the big housing boom, consumers buying anything and everything for their home. Honestly, some of that is already played out. You just saw what happened with whirlpool, there will be other names this quarter. You might want to throw some of these Consumer Discretionary names in the value bucket, technically, like williamssonoma, but they have surged a lot already as well. That part of the value trade may be over, and im still personally, when i look at the data, i would rather own these enterprise tech names, i would rather own the social media names relative to the classic value trade. Guy big week for those kind of names. Thank you very much as ever. Drogan, thank. Coming up, eight days until the u. S. Election. We will speak to someone who has spent nearly four decades on wall street on what the outcome could mean for investors. This is bloomberg. Guy five but its past the hour. Live from london, im guy johnson. Alix steel is in new york. Are in the final countdown great song. U. S. President donald trump and democratic nominee joe biden are making their final pitches to swing state voters with just one week until the election is over. For a picture of the current state of the race, lets bring in john zogby, founder and senior partner of john zogby strategies. What is your current call . Which what you see the president ial election going and critically key senate races. Election president ial is competitive, particular in the battleground states, but as of this moment advantage Vice President joe biden. That seems to be a growing advantage nationally. Battleground states are very close. I caution people. Four years ago to this minute, it was advantage hillary clinton. There is still eight days to go. The senate does look like it will change hands. Democrats need it is competitive but democrats need three or four seats depending on whether joe biden wins or not. They could pick up as many as seven or eight. Alix does that give us a blue wave over that give us a light blue wave . John that would give us a blue wave. Where we stand right now, we are seeing preelection, a huge blue wave, a massive turnout, 60 million or so. Just by the looks of it in the voter registration, it is a huge blue wave. Remember we are expecting a huge red wave of voters on election day. My latest poll has joe biden leading among preelection voters by 16 points. We are seeing that. The poll also shows that donald trump leads on election day by election day voters alone by 18 points. We are still watching this. Guy you reference to 2016. The models i am assuming have been fixed. Are you worried about the models . John i am not. We lost track of them about a week ago. I did detect some of the major toos had samples that were highly representative of democrats and not enough republicans. That is a problem i had with the industry all along. Butonally i am a democrat, ive always been bothered by samples that show 10 or 12 point differential between the number of democrats pulled in republicans pulled. One of the best that is doing daily tracking is the investors business daily poll. They get their elections right, and they have a more equitable. Istribution alix are shy trump voters a real thing . John i dont know. We have never had a problem with that before. Shy obama voters did not materialize. Today,u see 96 as of 96 of republicans saying they are voting for donald trump, 93 of democrats saying they are voting for joe biden, who is left . A final quick question. It is virus, virus, virus. Is there anything the president can do about that in the closing stages . John i do not believe so. Too late to trust the vaccine. Therell be more than half that do not trust him. Can do isresident watch and wait and see if joe biden stumbles. Isother words, i think it only something external for donald trump, not something they can produce proactively. Alix john zogby, thanks a lot. As we head towards election day, lets talk about what this means for investors. Jp morgan says u. S. Stocks could hit 3900 by the end of the year if donald trump gets elected. A blue sweep scenario is expected to be neutral nutro mostly neutral. Be negative catalysts like rising corporate taxes. For more, lets bring in a wall street veteran, peter kraus, Aperture Investors chairman, plus sonali basak is with us as well. How does wall street look at this . I think you summarized it pretty well. The market right now is probably discounting a biden wind come in other words i think that is in the numbers. I think the market is probably not saying the point you noted is if it was a blue sweep and if the senate does go democratic, taxes will go up on corporations, and that will probably have a less than positive effect on the level of the market. As to where the market ins up at the end of the year, i do not know that is driven by the election. I think that is a confluence of Economic Growth and recovery, where the virus is, where the vaccine is, i think those things will drive for the market goes. As it relates to the election, i think it would be a big surprise if trump wins. I do not know what the market would do. I think it would be a somewhat negative reaction if there is a blue sweep. Theli lets talk about blue sweep scenario for a second. In the event of one, how would investors be repositioning . Happenwhat i think will is investors will think about what companies will pay more in taxes over time and they will discount that. They will also do the math on infrastructure spend and it will probably take 18 months or longer for that to be in place. You will see some of the industrials and stronger cyclicals react well to that, particularly those that are domestic because the spending will be domestic. What about taxation sonali what about taxation . Do you think you will see more forced selling . I think companies that have unusually low tax rates and companies that benefited from 34 to 21 will probably have investors saying 21 is not sustainable. I think that will have a slowing effect on our earnings would grow or potentially a negative effect on prices. , andis a one time thing after that takes place the market will start discounting future growth. Aboute are talking a lot taxes and there seems to be an assumption they would come relatively quickly. You really think the Joe Biden Administration would introduce tax hikes that quickly given the backdrop of the virus . Iser i do not think it possible for anyone to introduce bykes that quickly 2022 there be tax policies debated and put in place. Guy based on that alix based on that, there was a chart in the journal. A lot of the industries gave more democrats and republicans. Does that tell us Something Different than mightve been the case eight years ago and changes how you think about future policy . Peter i would have a hard time speculating on policy changes based on peoples political contributions, but i think it does highlight the fact that the market generally thinks the democrats are going to be in power, and so you are seeing the political contributions shift to that group. On top of any corporate taxes, how do you think the investor class is likely to take in some of those taxes, especially on the state and local level when were seeing so many investors move with their feet and moved to florida, for example . Peter a wealth tax, i do not think a wealth tax will happen in the United States, at least at the federal level. I do not think any states will put in wealth taxes. The question will be what happens to the state and local Tax Deduction . With the Democratic Group in charge, it is possible some, maybe all of the state Tax Deduction will be reinstated with a higher tax rate. On the other hand, you cannot bleed the cities of the country from the revenue source. We have large cities that have high tax rates because they have that havevices provided for those people. You cannot assume those cities will fall apart. It may be deeper for the government and the country to reinstate those stated local deductions and to keep some of the revenue in the cities. That is a debate that will have to happen. I do not think anyone knows what the answer will be, but i would expect to hear that debate. Sonali you are seeing so many of your peers moving jobs outside the cities. Especially the big job workforces in london and new york . Peter london and new york are slightly different. London has a brexit question. New york is dealing with how they locate jobs in the least expensive space that can attract high quality and top talent. Ive lived in new york for long time. Many other people have as well. New york is a very unusual city in that is capable of evolving and changing. This may be a change in which the financial industry is not the leading revenue producer for the city in the future. It may be the tech industry. It may be googles and amazons of the world. Amazon did not move to new york but it is not done growing and changing. I think new york will change its character, but it is impossible for me to concede new york will decline from here. New york is still a growing metropolis in terms of population, and i think that will be true for the large cities in the country. There is still attractiveness to being in a city, people want to be together. At the end of the day there is excitement and Economic Growth. We will solve the coronavirus and we will have a vaccine, and we will return to some degree of normality. Months,r the last three the u. S. 30 year has gone 1. 35, is the market ready for higher rates . Peter great question. I think the biggest risk in the market is assets or long rates, if you will. What that means is they are very exposed to rising rates in the long end of the curve. The tenure and the 30 year, but principally the 10 year. The question is are those rates going to go up and when . The answer is of course they will go up because they cannot stay at this level forever. The speed at which you go up is probably not as fast as some people who are concerned about inflation are thinking. You have to remember that all of europes futures rate construct is negative. At 60,erman bund stays it is very hard for the u. S. 10 year to breach one hundred basis points or 120 basis points. I think going from 80 basis , i do to 120 basis points not think that is the end of the world and does not say no huge amount of inflation. I think we will have inflation anda cycle at some point that will cause structural changes in labor costs and other inputs that will cause some level of inflation, not 8 to inflation, or 4 at least north of 2 . That will drive Interest Rates up. That is not around the corner. We have to see a wholesale change in the Interest Rates around the world for that to happen. You also have to see Significant Growth in europe and change in inflation in europe. That is not on the horizon right now. Guy does not appear to be anywhere right now. Peter, we appreciate your time. Peter kraus, and of course our thanks to bloombergs sonali basak. This is bloomberg. Alix one tech company we are watching is ant financial, said to raise 35. 4 billion for initial Public Offering in shanghai, a blockbuster deal, huge numbers involved. Alibaba owns about a third of ant, they will subscribe to about 730 million of those shanghai shares. We will look at how it will price and how it will trade. Momandpop investors would be able to buy the stock with as much as 20 times leverage. That is how confident the ant ipo is expected to go among the Financial Community in asia. We will break that down later on the show. Coming up, a barbie boom. Sails will last through the holidays. This is bloomberg. Hasbro is down after reports from its smaller rival, mattel. Hasbro has much more of a reliance on toys that have movie tieins than mattel. We have not seen a lot of major movie releases during the pandemic. Optimistico sounded about the upcoming Holiday Season, it was not able to offer details. By contrast, mattel specifically expected higher sales. Sizablegories had gains. You can see how hot wheels rose 9 , dolls up 22 and were looking at hasbro. Lets go back to mattel. 10 for thenue rose biggest gain since 2011. Lets get to the barbie franchise because you mentioned it. A big winner for the company with a 29 search. A note of caution. Jeffries did say that mattel saw some demand forward into october at the expense of what we will get in december. Analysts highlighted mattels margins in particular. A lot of cost cutting. Inventory is now lower at retail outlets than they were at the same time last year. Looking ahead, it is not that mattel will not look to do any movie tieins. They will be developing on that. The area the company is looking to expand. 10 movies in development. There is no specific release date yet. Guy perfect set up. Lets talk more about mattels business. We go to mattelss chairman and ceo. I will start off with a big picture question that every investor wants to know. Up this be able to keep Holiday Season . Thanks for the question. This was a Strong Quarter for mattel. Saw a significant increase in profitability. We are encouraged by the quantity of the results. We grow in every region in currency. Our partnership with retailers driving demand is working well. In Third Quarter in double dishes growth and demand and we see the momentum continuing into october. We are continue momentum heading into the Holiday Season. Where is the weakness in the supply chain . Supply chain remains fully operational as we chase extort era growth for the product. We have it in we have been in the position we are mindful of any covidrelated volatility and do what we can to meet consumer demand in partnership with retailers driving the operation as best we can. How much visibility do you have . Demand, theconsumer demand for the product and inventories heading into the Holiday Season, with the early start of the shopping season, we expect sales to grow in the Fourth Quarter and we expect guidance for the Fourth Quarter. We also give guidance for the full year in profitability, and we expect profitability to grow significantly yearoveryear, driven by operation improvements and momentum we are seeing at the company. When you look at produc