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This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.

Paul Sweeney (0:27)

Just met and sitting in for TK this morning. I'm Paul Sweeney live here in our Bloomberg Interactive Broker Studio streaming on YouTube as well.

Tom Keene (0:33)

Just as back in my cell site analyst days, when a salesman was booking your Chicago visit, which you had to do like once or twice a year to go see accounts in Chicago, they would start with Northern Trust. This was a big deal.

Oscar De Bok (0:44)

That was the deal.

Paul Sweeney (0:45)

Then once you got the Northern Trust meeting locked down, then you can build all around that for the rest of the day.

Tom Keene (0:49)

So then the stress is over and you got it out of the way.

Paul Sweeney (0:51)

Exactly. Our next guest, Anwita Bahuguna, is a Global Co-CIO of Northern Trust Asset Management.

Tom Keene (0:58)

Joins us here in our Bloomberg Interactive Broker Studio. Anwita, what's the number one issue that you and your team are talking about today?

Paul Sweeney (1:05)

Because for the longest time, it's been AI and it's generally been a really good thing for the marketplace now. Now it seems like people are asking some different questions.

Tom Keene (1:15)

What do you position that AI story within your investment framework?

Anwita Bahuguna (1:20)

Thank you, Paul, for having me. I think the question is excellent because we have started tweaking our portfolios a little bit this month, starting this month.

On the growth side, we have tremendous growth in the US.

We do see inflation moderating in fits and starts. What's worrying us a bit is the fact that we still don't have a handle on the geopolitics situation, which means maybe the inflation story remains front and center for a while. And also, the AI story is beginning to have a few cracks, as you saw last week with CoreWeave. Now we still think that's a one-off, and we are going to see solid productivity boost from AI. We're going to see improvement in the growth picture. All of that is still to come. But one of the things that we are grappling with is, do we begin to start worrying about a few growth hedges in our portfolio? So far, we haven't needed growth hedges, because being long equities has been a good trade, being short bonds has been a good trade. We've sort of barbelled in the portfolios until September, cash and equities. This month, we went and closed our bond underweight and moved neutral bonds, because if there are some cracks to the story, you need a hedge and bond still remains a pretty decent hedge in the portfolios.

Tom Keene (2:58)

I'm glad you brought this up. So the S&P 500 Dividend Aristocrats Index. So this consists of, yes, the S&P 500 Dividend Aristocrats Index. So basically consists of companies that have increased payouts for the last 25 years. Month to date, it's up almost 6 percent. S&P 500 is flat. So we're seeing a lot of those like staples, healthcare, energy, a lot of these other corners of the market taking off this month relative to obviously tech underperforming. How do you view that? Are those corners of the area, those dividend pairs, is that where you're going right now, if you're still staying with inequities?

Anwita Bahuguna (3:31)

That's an excellent question and it sort of depends just on what your opportunity set is. So if you're planning for your client's entire asset allocation portfolio, you can go to bonds for your income. And right now bonds are giving tremendous amount of income. Plus you have the potential for price appreciation if spreads come in.

If you don't have that opportunity set, if you have to look within the equity universe, which is what many investors do, then what is your alternative to tech and AI, which is 40% of the S&P index, and you need to look for something else. And so I'm not surprised at all that people are looking for those stocks which have a negative beta to the tech sector. And in our context at Northern Trust, what we do is we quantitatively look at stocks with really good quality, low volatility and income.

Tom Keene (4:29)

All right, your title is Global Co-CIO. How do you think about the US versus rest of the world these days?

Anwita Bahuguna (4:36)

So there again, I think it's very interesting that the market is starting to look for alternatives to the US story, which at a market capitalized stock level is still very much a tech story. So there are now parsing through countries to say, where can I get diversification from tech? So we are overweight emerging markets, but that's Paul, still a tech story.