♪ romaine: live from bloomberg world headquarters in new york, i am romaine bostick. joe: i'm joe weisenthal. romaine: a rally around the world. the s&p 500 ending the year at a record high. joe: the question is, what you miss? romaine: joe, we did it, i think. a few hours away from closing out in historic day, that a lot of people are not going to

forget for a wide variety of reasons. joe: i think they're going to remember this one. [laughter] romaine: no matter how you slice it, despite all the volatility in the mess of dried out in the all shook out, and a lot of opportunities and fortunes are made. joe: no doubt about that, a lot of fortunes were made. an extraordinary year if you just look at the news. sort of a cliché that you would not have anticipated it. lots of fortunes made across different asset classes. inflows, one of the highest -- huge etf inflows, one of the largest of the last decade. buying them before the crisis, they started buying them a gain at the end of march, and did not let up again. romaine: if you want to know anything about etf's, the best from bloombergto

intelligence who knows this better than anybody else. me, this was the story of the year. i pronounced the death of the rockstar p.m. i did not think we would see this. i thought all the stuff would take over. but here we are with an actual rockstar p.m. name to cathie wood. this company went from $3 billion to $35 billion, a 10 times increase. it took in the most flows of any issuer outside vanguard and blackrock. that is a crazy feat considering they started the year the 29th biggest issuer. it was just extraordinary, and you couldn't take her eyes off of it. obviously a killer performance. her funds tripled. it was like, how could that be

mathematically possible? looking forward with her, you gotta ask how big she can get, will not harm her ability to be nimble. history is littered with high flyers that come to earth pretty hard. the currency craze from five years ago. we will see what happens, but it is going to be something we are watching next year as well. copycats?about are we seeing that it was doable that a human could manage an etf and attract attention and do well, will other fund families attempt to come up with their own arks and make bets on the idea of actively managed stock tar portfolio managers again? eric: possibly a little bit. the problems with a lot of these trucks is they can't do this. beis not in their dna to dismissed and concentrated.

i don't think you will see anything -- well, what you are seeing is copycats in terms of disruption and theme-oriented. we are seeing a little bit of a pickup any active share -- how concentrated they are committed really increases their potential. i think you will see etf's coming out that are designed to have the max potential, but i don't think you will see them from active managers. romaine: vanguard got a lot bigger this year. it continues a streak. what is the story? eric: we just talked about ark's figure. vanguard took in 10 times what ark did. all the big money is going to vanguard and blackrock as usual. what is interesting about vanguard is they beat blackrock for the first time ever. what we are going to see going forward is a lot of consolidation. all the money going to them is stuff that charges less than 10

basis points. it is making the asset management industry difficult in the future, and you will see people term up -- team up and triy to buy advisors. total marketng -- etf's can we like this one. after the s&p come with think people might look to the total market funds more because it held tesla for 10 years. s&p 500 took the hint to their brand and they set the outflows as a group this year for the first time ever. big one of the other stockmarket phenomena we saw was the explosion of retail investors from individual stock trading, a lot of associated with robinhood. isn't market divergence of the mantra that had been slammed due to everyone's head for the last decade of don't try to beat the market, focus on low fees,

etf's. does that freak more investors to think they can do it on their own and not just being willing to assess index returns? yeah, i think so. when the market is doing this welcome it makes everyone pretty confident. the way i put it is a lot of those robinhood investors are actually future vanguard investors. they just need a crash to straighten them out a little bit. when you have a market that goes up and makes this kind of money, it is easy to be that way. i do think this happened in the late '90s. en-xeroes for me as a g what i saw in the late 90's. it is a big reason to etf's $32 trillion in volume. think i like the etf back in june, and they really like these interesting theme etf's.

we are seeing them cater straight to the robinhood crowd and skip the advisors. i think they are here to stay for sure. romaine: i want to ask a broader question about how they are used by some of the institutions and how much that played into the gains in the flows we have seen. a lot of portfolio managers using etf's to make -- take whatever position they want to take the underlying stocks. eric: we saw this in march for sure. the going gets tough, the etf's get going. the volume for fixed-income etf's in march, normally what they do in a quarter. it is like they squeezed in a quarter's worth of training. they are liquid. people look for them to adjust portfolios for the that is why the etf of volume grows with volatility and fear. hyg to geting

instant click exposure. we call them suitor futures. -- pseudo-futures. yearne: have a great new and we will catch on the others. another big theme of the year, politics. u.s. presidential election, brexit. a lot of big political themes this year. we are going to talk with gina for them, -- tina fordham coming up next. this is bloomberg. ♪

romaine: welcome back to "what'd you miss," final program of 2020, and so we are focused on the big themes of 2020.

a lot of people thought credit would be a loser. turned out to be a big winner for a lot of folks. joe: once again, not what people would've expected. march the mass selloff in dislocation. barclays high-yield index surging, but having come down quite a bit, narrow spreads, not a lot of premium there. joining us with more insight family management corporation chief investment officer. david, thank you for joining us. everything looks pretty expensive by conventional measures. stocks look expensive. credit spreads are kind of narrow. how are you thinking about identifying opportunities in 2021? on.hanks for having me

i think the first thing is stay away from making the big mistakes. the big mistake next year is chasing highflying assets, chasing the hottest momentum plays. in a winter take most market the chances that the average investor is going to be taking those correctly is going to be very small. just avoiding large mistakes is the first thing. the second thing is getting on board with the cyclical recovery. we are in a market that is probably going to -- the u.s. is going to grow north of 5%. globally it is north of 6%. we are really in a market that is priced in a recovery, and i think that the playbook from 2020 is not going to be the way to go for next year. romaine: when we talk about avoiding mistakes, one problem many run into is it seems like

so many asset classes right now are at record highs or depreciated by significant amount. how do you find opportunities when it seems like all the opportunities are already off? david: right, it's a good question. not meannology it abandoning technology completely, but it doesn't mean you have to chase the next -- as the market continues to go up, they have increasingly taken more and more risk. been theand might've nasdaq. then tesla. now should fight an electric vehicle company -- now shared by an electric vehicle company. keeping your head down and focusing on companies that have growth,ath to sustainable

and where you make money from these valuations. there might be areas and technology that are rich but there might be certain segments that don't have value. facebook, if you go out a couple years, still trading in the mid teens and whereas there are other companies that are pricing -- i think that just moving into cyclical recovery, i think areas in the last year, banks, stocks, markets, value all are a place where you have to have some exposure. joe: talk to us a little bit more about the sort of phenomenon of people taking more risks. there are so many opportunities in retrospect to make an absolute fortune, whether it was cryptocurrencies, bitcoin, all the suspects. in your conversations with clients and people you work with, did you hear that attitude change in real-time?

how were the conversations in terms of them thinking about having missed out and one each take bigger swings next year? david: the mentality switches from how much downside is there to mi participating to mi missing out. the mentality is dangerous because the thought process is completely removed from any value in what the downside would be. can i get the next double. that type of psychology is very dangerous. it can promote some pretty dangerous investment habits. about things talk like maybe this is a good time to buy value or have exposure to banks which banks have rallied from the bottom, nothing near --

is that a difficult thing for people to swallow? what is the case other than they are really beaten down? david: in the case of financials , the bar is lower. with the software stock you need everything to go right, and then beat expectations by substantial margin, whereas banks, the bar is somewhat low. be what they need to have happen is that fed lifts the caps on backs. maybe it is that interest rates pick up ever so slightly. they don't need to go up 100 basis points. even a gradual climb will help them out. maybe it is just that flows are a big determinant of what in the last year we have seen flows and a lot of highflying stocks, what tends to happen is that price leads sentiment.

when we see j.p. morgan and wells fargo and all of these banks start to move up what can happen is that flows start going into segments which have negative flows for quite a long time. romaine: what is the lesson going forward? at some point they are going after confront inflation, you would think. is there a lesson to be learned from the efforts they took this here to stabilize markets? david: i mean, i think they did what they needed to do. we are in unprecedented times, and i think going forward, one question for fixed income investors and equity investors is how much do you trust the reaction function of the fed. right now they said they will leave rates low for a prolonged period of time, but the risk is to the upside. if a lot of assets are pricing tend we have a year

f by economy, those probabilities can change. when that happens, asset prices can react pretty substantially, which is why i think having some exposure to his cyclical , iovery in non-us stocks think you need to have some of that in your portfolio for 2021. romaine: great stuff. we will catch up with you soon in 2021. have a happy new year. cio at family management corporation. this is bloomberg. ♪

romaine: all right, today we are focused on the year ahead, joe, but we still have some

unfinished 2020 business to deal with. the senate race in georgia. joe: they are still doing this. coming up next week, and the momentum, it appears, according ossoffpolls, jon slightly leading incumbent senator david perdue i about 1%. i think in the other one, warnock also leading a slightly his opponent, incumbent kelly loeffler. this is big. if the democrats pick up both, they have 50 seats that gives them control of the senate. romaine: let's bring in tina from a political and legal advisory boutique in london. she was formerly a chief global analyst at citigroup. great to have you back in the program. let's start off with the u.s. senate and the general makeup of

the u.s. government in about three weeks or so when biden is inaugurated and we see the new senate and congress. what is the general outlook for whether anything will get done? knows,ell, as everybody we now have yet another big political signpost on january 6 as joee georgia race, just flagged for us. both are within the margin of error, very close. but the street seems to have come down on the side of republicans holding those two seats. i don't see any reason to necessarily challenge that consensus wisdom, but what we know about polls in general and what we know about predicting senate races in particular is that the record is poor. a that sense, i think that

victory for republicans in one or both seats might be a bit of a relief rally, but there is a very good chance the democrats notd win one of those, if two. we have almost a mini referendum on the 2020 election come extraordinary in u.s. terms, and there are questions about whether president trump is trying to sabotage republicans' prospects. joe: bigger picture, we don't know what is going to happen on tuesday, probably going to be close regardless. the direction of politics in this country, the election of joe biden, kind of a throwback to a more normal time of politics than we have experienced, but the broader direction, is it still towards more polymerization, more extremes--more polymerization, more extremes, more crazy? tina: more crazy. the most typical question i get

being outside of the u.s. as i am is is america going to be a normal country again. within u.s. investors themselves who focus on tax and ,egulation and everything else the united states resuming something like a normal posture would be very welcomed in global business and with most global leaders. but hopes are probably too high about what a biden presidency can do and will do, given the extent of the domestic crisis with covid. romaine: trump sort of came into office on what was characterized as a populist wave of sentiment. we saw the perception of populism also lived a lot of folks to leadership posts in europe and asia. we saw a lot of protests in the years prior in the middle east. i am curious as to whether that sort of populist uprising, in

the general sentiment around it, has that run out of steam? tina: there was a big question akether 2016 weas pe populism. that is a topic i follow closely. we had the referendum to leave the eu here in the ok and we had the brexit vote yesterday. four years after, trump did not get a second term. he is probably a casualty of the pandemic in that sense. but we should think of populism as part of the political curvature, and this is important. left wingnd to fear populism with all the expectations of tax raising that comes with it. markets are pretty relaxed about right wing populism. but one of the things i'm flagging in my outlook is what i laying onopuli, uli, that not only is the

vaccine rollout going to be more erratic and prolonged than markets expect, but there is a historical precedent for this kind of trauma from the health and economic perspective would be dropping -- boob y-traping the future and leading to more prospects for political extremism in future elections. in the u.s. midterms, or even, i would argue is a political scientist, five to 10 years out. we have all been talking about economy, markets, the but people vote on the basis of the economy. joe: great stuff. always enjoy talking to you. got to do it more next year. our thanks to tina fordham. what are you watching next year? romaine: next year? oh, my gosh, i don't think i'm going to be watching anything.

you know what i'm going to be watching? "what'd you miss." joe: i will see what tesla does. we don't need to think about next year. romaine: are you coming back next year? joe: i'm coming back. romaine: "bloomberg technology" coming up next. joe: have a great evening, great new year's eve! romaine: this is bloomberg. ♪

♪ emily: welcome to "bloomberg technology." i'm emily chang in san francisco. we are looking back on our biggest interviews of the year this week, a year unlike any other. while a global pandemic created tidal waves for many companies, the tech sector proceeded to do what it doesn't best -- -- what it does best -- adapt.