WEBVTT - Market Volatility Raises Risk-On or Risk-Off Question 0:00:02.520 --> 0:00:07.840 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:12.680 This is Bloomberg Business Week Insight from the reporters and 0:00:12.800 --> 0:00:17.120 editors that bring you America's most trusted business magazine, plus. 0:00:17.000 --> 0:00:19.280 Global business, finance and tech news. 0:00:19.440 --> 0:00:23.360 The Bloomberg Business Week Podcast with Carol Masser and Tim 0:00:23.400 --> 0:00:27.080 Stenovek on Bloomberg Radio, we. 0:00:27.080 --> 0:00:27.960 Are no doubt about it. 0:00:27.960 --> 0:00:30.040 Starting with the US stock trade, as a course of 0:00:30.040 --> 0:00:34.000 Wall Street strategists is warning about higher stock volatility. You 0:00:34.000 --> 0:00:37.200 got Morgan Stanley's Mike Wilson saying the latest to sound 0:00:37.200 --> 0:00:40.960 the alarma on economic growth worries. Other market forecasters include 0:00:41.159 --> 0:00:44.519 over at JP, Morgan Chase, RBC Capital Markets, all tempering 0:00:44.600 --> 0:00:46.280 bullish calls for twenty twenty five. 0:00:46.760 --> 0:00:48.599 You know what's really the catalyst here. 0:00:48.640 --> 0:00:51.960 You've had Trump's tariffs really stoking fears of slowing economic growth, 0:00:52.000 --> 0:00:54.480 and you also had the President and the administration making 0:00:54.480 --> 0:00:56.840 some talks about the US economy not such great ones 0:00:56.840 --> 0:00:57.440 over the weekend. 0:00:57.480 --> 0:00:59.720 Well, let's get with it with the Bloomberg Intelligence Chief 0:00:59.760 --> 0:01:01.840 Act Strategy Gina Martin Adams. She joins us here in 0:01:01.840 --> 0:01:02.320 the studio. 0:01:02.360 --> 0:01:02.640 Gina. 0:01:02.680 --> 0:01:04.399 The plunge in the S and P five hundred's most 0:01:04.400 --> 0:01:07.120 influential group big Tech. We got the S and P 0:01:07.200 --> 0:01:09.880 five hundred going below it's two hundred day moving average 0:01:09.920 --> 0:01:12.280 for the first time since November of twenty twenty three. 0:01:12.560 --> 0:01:14.920 It's off at least well more than eight percent from 0:01:14.959 --> 0:01:17.759 its high. The Nasdaq one hundred off about twelve percent 0:01:17.800 --> 0:01:20.160 from its high. How much is tech weighing on the 0:01:20.160 --> 0:01:20.840 overall trade? 0:01:21.600 --> 0:01:21.959 A lot. 0:01:22.400 --> 0:01:26.360 I think it's one of three monstrous issues weighing on stocks. 0:01:26.360 --> 0:01:28.080 It has been the case most of the year. If 0:01:28.080 --> 0:01:30.080 you look at the MAG seven, for example, they peaked 0:01:30.080 --> 0:01:32.240 all the way back in December. They're down sixteen percent 0:01:32.680 --> 0:01:34.679 as of yesterday from their. 0:01:34.760 --> 0:01:36.280 Almost bear more weakness. 0:01:36.360 --> 0:01:40.080 Yeah, pretty significant decline in the MAG seven. Of course, 0:01:40.120 --> 0:01:43.120 a lot of that is selected stocks Tesla and Navidia 0:01:43.160 --> 0:01:47.280 weighing heavily there. But nonetheless that in and of itself 0:01:47.400 --> 0:01:49.760 is creating a big drag on the index. But it's 0:01:49.760 --> 0:01:52.960 more than that. Clearly, the Doge firings and the concern 0:01:53.000 --> 0:01:55.720 about the ultimate consumer outlook as a result of that 0:01:55.920 --> 0:01:58.680 have been weighing on consumer stocks. At the same time, 0:01:58.720 --> 0:02:01.400 you do have the tariff chatter, which is creating sort 0:02:01.440 --> 0:02:05.080 of stalled activity to the with the lack of a 0:02:05.120 --> 0:02:09.560 better descriptive term and a lot of uncertainty, and a 0:02:09.600 --> 0:02:12.280 lot of that tariff chatter impacts tech as well. I 0:02:12.280 --> 0:02:14.600 think this is a little bit underappreciated. If you look 0:02:14.600 --> 0:02:16.480 at the companies in the S and P five hundred 0:02:16.480 --> 0:02:20.919 with their greatest cost of goods sold, exposure to overseas economies, 0:02:21.000 --> 0:02:24.920 its tech and communications stock, so those groups being the 0:02:24.919 --> 0:02:28.320 biggest market cap share also really drove so much of 0:02:28.360 --> 0:02:31.160 the optimism over the last two years, and that's now unlinding. 0:02:31.320 --> 0:02:33.480 So it's not a case of just repricing, because we've 0:02:33.480 --> 0:02:35.600 talked about, right, what a tremendous run up we've seen 0:02:35.639 --> 0:02:37.200 over the last couple of years. So at some point 0:02:37.240 --> 0:02:39.720 you got to expect some of that to come out 0:02:39.760 --> 0:02:40.400 of the markets. 0:02:40.560 --> 0:02:42.840 Is it still just a repricing or we've gone beyond that. 0:02:43.120 --> 0:02:43.440 Yeah. 0:02:43.560 --> 0:02:46.760 I think up until this weekend it really was about 0:02:46.880 --> 0:02:50.040 a reset of expectations that were far too robust. I mean, 0:02:50.080 --> 0:02:52.359 this is something we started talking about in December. Our 0:02:52.440 --> 0:02:55.280 fair value models were detecting that inside the market, the 0:02:55.360 --> 0:02:57.520 S and P five hundred was priced for greater than 0:02:57.560 --> 0:03:00.360 twenty percent earnings growth to emerge this year, which is 0:03:00.360 --> 0:03:03.560 the next two impossible tasks. This just doesn't happen unless 0:03:03.600 --> 0:03:07.080 you're bouncing out of her session. So it seemed almost 0:03:07.160 --> 0:03:10.440 impossible for the market to satisfy those expector for the 0:03:10.520 --> 0:03:14.520 companies to satisfy those expectations embedded in market prices. There 0:03:14.600 --> 0:03:18.720 was also, though, this underlying narrative, if you will, in 0:03:18.760 --> 0:03:21.320 the market that the president was inordinately going to pay 0:03:21.360 --> 0:03:24.560 attention to the market as a guidepost. And he obliterated 0:03:24.560 --> 0:03:27.560 that theme. You and the weekend, I think he just 0:03:27.800 --> 0:03:31.720 crushed it. And that's what's happening today is he just said, 0:03:32.520 --> 0:03:35.520 I don't we are going to have short term pain 0:03:35.640 --> 0:03:38.680 for long term gain. I don't actually pay that much 0:03:38.720 --> 0:03:42.360 attention to the equity market. He completely just blasted that 0:03:42.400 --> 0:03:43.360 whole theme out of the water. 0:03:43.400 --> 0:03:44.480 We got clues, I'm trying to. 0:03:44.400 --> 0:03:47.480 Think the clues last week, but he said I'm not 0:03:47.480 --> 0:03:49.320 paying attention to it. But then he also said a 0:03:49.360 --> 0:03:51.760 few minutes later, it's the globalists who are causing the 0:03:51.840 --> 0:03:54.200 sell off. So that indicated to me that he was 0:03:54.240 --> 0:03:55.280 sort of paying attention to it. 0:03:55.320 --> 0:03:57.560 Well, the globalists are causing the sell off because the 0:03:57.600 --> 0:04:02.120 globalists recognized that tariffs are coming. Yeah, right, tariffs are coming, 0:04:02.440 --> 0:04:05.280 And even though he is saying, ah, they may or 0:04:05.320 --> 0:04:08.200 may not come, I'm using these as a negotiating tool. Incrementally, 0:04:08.240 --> 0:04:10.720 we have had more and more tariffs implemented so far 0:04:10.760 --> 0:04:13.040 this year. Maybe not as much as he originally said, 0:04:13.440 --> 0:04:14.240 but we have had more. 0:04:14.320 --> 0:04:15.720 Do you buy it that he's not paying attention to 0:04:15.760 --> 0:04:17.600 the market. I know you said it. That idea got 0:04:17.640 --> 0:04:19.960 obliterated over the weekend. But look what happened during his 0:04:19.960 --> 0:04:22.239 first term. I mean, there were tweets, there were social 0:04:22.240 --> 0:04:25.040 media posts every time there was a new record. He 0:04:25.080 --> 0:04:27.320 did the same thing in the Biden administration. 0:04:27.640 --> 0:04:29.560 I think we've rewritten history of what happened in his 0:04:29.600 --> 0:04:32.599 first term. If you look back at twenty eighteen, it 0:04:32.680 --> 0:04:34.680 was one of the most volaile years on record. We 0:04:34.800 --> 0:04:37.240 had vall mcgeddon the first part of that year, We 0:04:37.240 --> 0:04:39.560 had a twenty percent correction in stocks in the second 0:04:39.600 --> 0:04:42.120 half of that year. He didn't jump into the equity 0:04:42.120 --> 0:04:45.560 market to save the day by reversing tariffs in the 0:04:45.600 --> 0:04:49.240 second half of twenty eighteen. There's only so much that 0:04:49.279 --> 0:04:52.080 he pays attention to the market. But we've rewritten that 0:04:52.200 --> 0:04:56.520 narrative somehow in our minds Now, Yes, in the first 0:04:56.600 --> 0:04:59.880 year of Trump's term, we had magnificent returns to equities 0:05:00.200 --> 0:05:03.280 because he put forward tax reform, which is a net 0:05:03.320 --> 0:05:07.120 beneficial sort of has a net beneficiary beneficial impact to 0:05:07.160 --> 0:05:10.239 earnings growth, and then we didn't get to tariffs until 0:05:10.279 --> 0:05:11.000 twenty eighteen. 0:05:11.680 --> 0:05:12.960 It's the reverse today. 0:05:13.520 --> 0:05:17.200 Tariffs have a net downside to economic and earnings growth 0:05:17.240 --> 0:05:21.279 that is inescapable. He recognizes this in his commentary. We 0:05:21.360 --> 0:05:23.560 hope that we might get to some kind of tax 0:05:23.560 --> 0:05:26.880 reform and some kind of domestic programs to substitute for 0:05:27.080 --> 0:05:30.599 the loss of earnings momentum from tariffs and some of 0:05:30.600 --> 0:05:33.920 the geopolitical risks that have emerged as well. But it's 0:05:33.960 --> 0:05:35.719 a hope, and hope is not a strategy. So the 0:05:35.720 --> 0:05:38.560 market is saying, Okay, real time things are a lot 0:05:38.600 --> 0:05:39.960 worse than we were hoping for. 0:05:40.160 --> 0:05:42.240 If it is the strategy and it comes to fruition, 0:05:42.560 --> 0:05:46.040 so tariffs first, then tax cuts later. Is that enough 0:05:46.080 --> 0:05:48.080 to juice the markets and have them come back and 0:05:48.120 --> 0:05:49.479 provide a floor, or it could be. 0:05:49.760 --> 0:05:51.760 It could be it depends upon what kind of tax 0:05:51.800 --> 0:05:54.400 reform we get. Our best guess is based upon the 0:05:54.440 --> 0:05:56.560 promises in the campaign. We will get about half as 0:05:56.640 --> 0:05:59.280 much a benefit as we did in twenty seventeen, just 0:05:59.560 --> 0:06:02.640 doing the math on the numbers. But it depends on 0:06:02.760 --> 0:06:05.960 how far earnings expectations have been suppressed with respect to 0:06:06.000 --> 0:06:09.919 tariffs and what comes out of those negotiations in the 0:06:09.960 --> 0:06:12.280 second half of this year. It's still very much up 0:06:12.279 --> 0:06:12.600 in the air. 0:06:12.720 --> 0:06:14.839 So it raises the question about valuations. Do you know, 0:06:14.839 --> 0:06:18.040 which Carol was alluding to a little earlier, the idea 0:06:18.080 --> 0:06:21.600 that people have said, by many measures, stocks are expensive 0:06:21.640 --> 0:06:25.200 right now, they're out of line with historical standards from 0:06:25.279 --> 0:06:28.480 a pe perspective. Are we starting to see them come 0:06:28.520 --> 0:06:29.080 back to earth? 0:06:29.400 --> 0:06:31.559 That's a great question, something we actually wrote about today 0:06:31.600 --> 0:06:35.599 for tomorrow, and the answer is no. Unfortunately, the reality 0:06:35.600 --> 0:06:37.600 of the US equity market is we were so far 0:06:37.680 --> 0:06:41.960 above our valuation bogies that even with the seven percent 0:06:42.040 --> 0:06:44.039 or so correction that we've had in stocks so far, 0:06:44.200 --> 0:06:47.440 we're still near all time high valuation levels set in 0:06:47.480 --> 0:06:50.560 the post pandemic period. That's only for US stocks, though, 0:06:51.000 --> 0:06:53.919 and it's really specifically for large cap stocks. I still 0:06:53.960 --> 0:06:57.039 think that the international opportunity is there even with the rerating. 0:06:57.560 --> 0:07:00.239 This is a year where international stocks are just likely 0:07:00.320 --> 0:07:03.680 to shine with the programs that are being initiated, and 0:07:03.800 --> 0:07:07.039 small caps have derated again. Small caps have had an 0:07:07.200 --> 0:07:11.360 absolute horrible February and early March so far, and they 0:07:11.360 --> 0:07:13.680 have derated once again to be at discounted levels. 0:07:13.880 --> 0:07:16.040 Is there anything just kind of final question, final thought 0:07:16.240 --> 0:07:18.720 at this point, anything about the selling that we're seeing 0:07:18.720 --> 0:07:20.680 that makes you a little bit nervous. I mean, the 0:07:20.760 --> 0:07:23.120 VIX is twenty eight. It's not like it's up to forty, and. 0:07:23.200 --> 0:07:25.440 That actually makes me nervous. Okay, the fact that the 0:07:25.480 --> 0:07:27.160 VIX has We've talked about this a lot on our 0:07:27.160 --> 0:07:30.200 team call actually this morning, is what's happening here with 0:07:30.280 --> 0:07:35.040 volatility because low volatility stocks are absolutely pummeling high volatility 0:07:35.040 --> 0:07:38.760 stocks right now, but the VIX is only incrementally moved higher. 0:07:38.920 --> 0:07:41.120 You love a huge spike in the VIX because those 0:07:41.120 --> 0:07:44.120 are usually affiliated with bottoming formations in the equity market, 0:07:44.240 --> 0:07:47.800 like we had with the Japanese yen meltdown last summer. 0:07:48.080 --> 0:07:50.080 We had a VIXED spike all the way to near forty. 0:07:50.080 --> 0:07:52.840 I think it even got above forty in today, very 0:07:52.880 --> 0:07:56.800 clear sign of panic. We don't have any panic emerging yet. Instead, 0:07:56.800 --> 0:07:59.720 we just have this sort of sea sawing upward direction 0:07:59.800 --> 0:08:03.480 of volatility. The last pattern like that that we saw 0:08:03.560 --> 0:08:06.560 was twenty twenty two, which was obviously a horrible year 0:08:06.600 --> 0:08:09.560 for stocks. That was also the last time we saw 0:08:09.640 --> 0:08:13.080 such an extreme underperformance by US equities compared to rest 0:08:13.120 --> 0:08:13.440 of the world. 0:08:14.880 --> 0:08:18.400 That was that when that Yen blow up happened, Carol. 0:08:18.520 --> 0:08:20.880 That was back in August. The S and P ffvend 0:08:21.000 --> 0:08:23.320 was out about fifty two hundred. It's at fifty six 0:08:23.400 --> 0:08:25.320 hundred down, so about another eight percent to go to 0:08:25.360 --> 0:08:26.040 get back to there. 0:08:26.400 --> 0:08:31.520 Happy Monday, everybody for it. News all around, Gina, Thanks 0:08:31.560 --> 0:08:31.800 so much. 0:08:31.880 --> 0:08:35.000 Jean Martinadas, Bloomberg Intelligence, Chief equity Strategist. 0:08:35.800 --> 0:08:39.360 You're listening to the Bloomberg Business Week Podcast. Catch US 0:08:39.440 --> 0:08:42.880 Live weekday afternoons from two to five pm Eastern. Listen 0:08:42.920 --> 0:08:46.439 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:08:46.600 --> 0:08:48.440 or watch US Live on YouTube. 0:08:49.280 --> 0:08:51.240 We're gonna stay with the markets, but also broaden out 0:08:51.280 --> 0:08:53.400 and get a c suite view. I mean, we've talked 0:08:53.520 --> 0:08:57.080 so much this year, often about how European markets are 0:08:57.080 --> 0:09:00.440 out performing the US market by a wide margin. Stocks 0:09:00.440 --> 0:09:03.120 fifty is up about ten percent year to day, while 0:09:03.120 --> 0:09:05.160 the S and P is now down I think close 0:09:05.200 --> 0:09:07.240 to five percent in twenty twenty five. 0:09:07.400 --> 0:09:10.240 With a view on that contrast and the continued electrification 0:09:10.320 --> 0:09:12.600 of our world, Let's head on over to London and 0:09:12.640 --> 0:09:16.000 to Gwenell Hewett, executive vice president of Europe Operations, over 0:09:16.000 --> 0:09:20.079 at Schneider Electric. It's based in France. Schneider manufactures electrical 0:09:20.120 --> 0:09:23.320 power products. The company's ADRs trade in the US this 0:09:23.440 --> 0:09:27.480 year down roughly about five percent. Gwenell, welcome, first up 0:09:27.480 --> 0:09:32.160 the global market environment today, geopolitics. How difficult is it 0:09:32.640 --> 0:09:35.240 to do business in this economy, in this market. 0:09:36.679 --> 0:09:38.760 Well, I think that's what we are looking for is 0:09:39.080 --> 0:09:42.120 some strong position in Europe in order to shape what 0:09:42.240 --> 0:09:44.520 would be the future of the industry in Europe. And 0:09:44.559 --> 0:09:46.959 in that sense it can be as an electro shock 0:09:47.200 --> 0:09:50.200 right to switch gears. I mean, for the past years, 0:09:50.320 --> 0:09:52.719 the Europe and Union has been regulating quite a bit. 0:09:53.240 --> 0:09:56.880 Now we need to project that into concrete investments, into 0:09:56.920 --> 0:10:00.160 a very friendly environment for industry, and that's what we're 0:10:00.160 --> 0:10:01.640 expecting right now, right you. 0:10:02.080 --> 0:10:04.760 Are expecting a friendly environment for industry. 0:10:05.800 --> 0:10:08.640 Exactly. I mean the European Commission just announced a week 0:10:08.679 --> 0:10:12.000 ago a clean industrial deal in order to promote and 0:10:12.120 --> 0:10:15.080 accelerate the development of the industry in Europe. That's what 0:10:15.160 --> 0:10:18.520 we need. We need a European industry that is much stronger. 0:10:18.640 --> 0:10:21.679 We need to build and to boost its manufacturing footprint 0:10:21.880 --> 0:10:25.880 within Europe. We need to compete globally, and the European 0:10:25.880 --> 0:10:29.559 Commission has a world to play in that sense. Of course, 0:10:29.640 --> 0:10:33.120 we have a very strong assets. The first one is 0:10:33.160 --> 0:10:35.400 being a very large internal market. But at the same 0:10:35.440 --> 0:10:39.000 time we have very strong industrial players, so we need 0:10:39.040 --> 0:10:41.080 to leverate on that. And the problem is that in 0:10:41.120 --> 0:10:44.920 the past years there are a lot of regulation, sometimes 0:10:44.920 --> 0:10:50.000 over regulation, and now we need to come around more incentives. 0:10:50.040 --> 0:10:55.080 How to accelerate through more incentives, friendly environment instead of 0:10:55.200 --> 0:10:59.680 only compliance and just regulating in a very difficult way. 0:11:00.080 --> 0:11:01.760 Now, I do want to ask you though about the 0:11:01.840 --> 0:11:04.160 US market versus the rest of the world. I mean, 0:11:04.280 --> 0:11:07.120 how do you describe the demand that you're seeing from 0:11:07.160 --> 0:11:10.040 your US customers? And from what I understand, you guys 0:11:10.320 --> 0:11:12.360 produce about eighty three percent of what you sell in 0:11:12.400 --> 0:11:15.680 North America locally, but tell us about North American demand, 0:11:15.760 --> 0:11:18.040 US demand specifically, and then what you are seeing in 0:11:18.080 --> 0:11:19.320 terms of demand. 0:11:19.600 --> 0:11:21.680 Outside the United States, is it strong? 0:11:21.760 --> 0:11:26.120 In both areas, How would you describe it for each Well, 0:11:26.280 --> 0:11:27.000 so just to. 0:11:26.960 --> 0:11:30.079 Put it simple, a model for Schneider Electric is a 0:11:30.160 --> 0:11:32.319 very much local model. So what we sell in the 0:11:32.440 --> 0:11:34.320 US is produced in the US, what we sell in 0:11:34.320 --> 0:11:38.200 Europe is produced in Europe, et ceterace. That's really very 0:11:38.280 --> 0:11:41.640 much important, especially in geopolitical context that you're seeing today. 0:11:42.120 --> 0:11:44.920 The mega trends that are below that that are below 0:11:44.960 --> 0:11:48.400 the business is around energy transition, it's around data centers, 0:11:48.520 --> 0:11:54.000 in electrification, digitarization and all that remains across the world. 0:11:54.120 --> 0:11:57.000 So I can tell you today that yes, we have 0:11:57.120 --> 0:12:02.160 huge demand in the US and we are building factories, expanding, etc. 0:12:02.559 --> 0:12:06.040 But Europe is also an area of growth. Why because 0:12:06.080 --> 0:12:08.600 we had in the past years the EU Green Deal 0:12:09.160 --> 0:12:13.880 favoring renewable energy development, favoring also energy efficiency, and this 0:12:14.040 --> 0:12:17.040 is taking off. So when you look at our numbers, yes, 0:12:17.160 --> 0:12:20.679 we created growth also in Europe. So that's why you know, 0:12:20.800 --> 0:12:24.840 we have to remain awful because the sustainability has set 0:12:24.920 --> 0:12:27.920 that we have built across Europe is still valid. 0:12:28.440 --> 0:12:31.640 What about in the US when it comes to the 0:12:31.800 --> 0:12:35.640 switch to renewables, because we've heard from the President that 0:12:35.720 --> 0:12:39.120 he does not favor the policies of the last administration. 0:12:39.360 --> 0:12:41.560 He likes to call the Green New Deal the Green 0:12:41.559 --> 0:12:45.520 New scam, and he talks about drilling here in the US, 0:12:45.840 --> 0:12:48.679 not the switch to renewables. How does that affect your business? 0:12:49.600 --> 0:12:51.760 But you know, let me come back to Europe, because 0:12:51.800 --> 0:12:53.560 at the end of the day, this is an asset 0:12:53.600 --> 0:12:56.160 that we have built in Europe. So how to continue 0:12:56.200 --> 0:13:00.320 differentiated by developing the own technology in Europe? And a 0:13:00.360 --> 0:13:04.240 lot to be done. Look at electrification. Electrification in Europe 0:13:04.320 --> 0:13:07.440 is stagnant, so we need to accelerate. I don't want 0:13:07.520 --> 0:13:10.600 to give the impression that everything is done in Europe. 0:13:10.600 --> 0:13:13.960 On the contrary, we have to fight for more electrification 0:13:14.200 --> 0:13:18.840 because again this is a challenge. More digitalization, more renewable enhance, 0:13:19.400 --> 0:13:22.640 more investment into the network. This is not a done deal. 0:13:23.160 --> 0:13:25.959 So that's why when it comes to Europe, you have 0:13:26.080 --> 0:13:29.360 big numbers, big targets in terms of decombonization, in terms 0:13:29.360 --> 0:13:32.600 of renewable energy, in terms of energy efficiency. We need 0:13:32.679 --> 0:13:35.480 to turn that into reality already in Europe. 0:13:35.800 --> 0:13:38.360 But in the US, if you don't see those policies 0:13:38.360 --> 0:13:41.640 coming from the federal government, do you start to see 0:13:41.640 --> 0:13:44.839 companies moving away from that and that affects your business. 0:13:45.920 --> 0:13:48.480 Well, again I told you we have very much across 0:13:48.480 --> 0:13:50.280 the world, and in US we have a much local 0:13:50.280 --> 0:13:52.360 for local, we have our own customers. We have a 0:13:52.480 --> 0:13:55.200 huge trend over there. And then makeasurrens that I was 0:13:55.200 --> 0:13:59.760 discussing about around digitalization exctrification is still happening. So let's 0:13:59.800 --> 0:14:02.560 not opposed one to each other. I think that we 0:14:02.640 --> 0:14:05.440 have to look at each and every market and within 0:14:05.559 --> 0:14:09.600 these mega trends, which one can accelerate faster depending on 0:14:09.679 --> 0:14:14.120 the context that we foster. And in Europe again it's 0:14:14.240 --> 0:14:17.439 not a don deal, so that's why it's not against 0:14:17.800 --> 0:14:22.120 Europe against us. On the contrary, each and every region 0:14:22.280 --> 0:14:25.680 has their own pathway. The question is that now with 0:14:25.760 --> 0:14:29.120 the job politics, everybody is, you know, looking around I 0:14:29.160 --> 0:14:31.280 think that we need to focus on the own market 0:14:31.320 --> 0:14:34.080 and being the most local company is really an asset. 0:14:34.240 --> 0:14:36.520 So it sounds like you no and and forgive us. 0:14:36.520 --> 0:14:38.800 I think we're just you know, came in Monday and 0:14:39.000 --> 0:14:40.800 we saw a global sell off, and I think we're 0:14:40.800 --> 0:14:43.600 trying to get you have a great dvantage point in 0:14:43.680 --> 0:14:45.720 terms of looking around the world and in terms of 0:14:45.720 --> 0:14:47.920 business and really trying to understand when you guys sell 0:14:48.600 --> 0:14:51.240 big time. North America is your biggest market, AGEA Pacific 0:14:51.360 --> 0:14:52.200 is just right behind it. 0:14:52.280 --> 0:14:54.920 Western Europe. Of courses, you've been saying very very important. 0:14:55.400 --> 0:14:57.960 Uh, and then you know you've got almost five billion 0:14:58.000 --> 0:14:59.640 dollars in the rest of the world. So you really 0:14:59.680 --> 0:15:02.480 have this great snapshot of what is going on globally. 0:15:02.560 --> 0:15:04.680 And I think we're trying to assess as we watch 0:15:04.720 --> 0:15:07.520 the US market come down, with our European markets also 0:15:07.600 --> 0:15:11.040 under pressure, that are we starting to see some kind 0:15:11.120 --> 0:15:14.240 of global slow down? It sounds like from what you 0:15:14.360 --> 0:15:17.800 are saying that you're not worried about it. Whether it's 0:15:17.800 --> 0:15:21.080 a US recession or global recession, that's not necessarily something 0:15:21.560 --> 0:15:23.080 that's in the cards from what you're seeing. 0:15:23.120 --> 0:15:23.640 Is that fair? 0:15:25.120 --> 0:15:28.160 You know why I'm so optimistic is that I'm looking 0:15:28.240 --> 0:15:31.720 at the mega trends that we at Schneider are positioned. Okay, 0:15:32.000 --> 0:15:35.920 it's climate change, it's energy transition, it's electrification, it's digitalization. 0:15:36.240 --> 0:15:39.600 Those mega trends are not slowing down. So that's why 0:15:39.640 --> 0:15:43.040 we are still optimistic. And to give you one example, 0:15:43.120 --> 0:15:47.240 you're saying it's maybe it's challenged in Europe today, there 0:15:47.320 --> 0:15:51.480 is a discrepancy between commitments that leaders have been taken 0:15:51.960 --> 0:15:54.520 and the reality of the projects that are de flopping. 0:15:54.560 --> 0:15:57.760 So we need to accelerate. So that's why I really 0:15:57.840 --> 0:16:01.920 want to continue pushing and showing that even in a 0:16:02.040 --> 0:16:04.640 country or in a region that is so committed to 0:16:04.720 --> 0:16:08.680 the energy transition, we need to continue having attention. I 0:16:08.720 --> 0:16:10.880 give you one number, just you know, to fulfill the 0:16:10.880 --> 0:16:14.080 commitment that we have in Europe for renewable energy, we 0:16:14.120 --> 0:16:18.080 should develop thirty gigawatt of wind a year and now 0:16:18.160 --> 0:16:21.520 we're developping only seventeen gigawat. So just to showcase you 0:16:21.640 --> 0:16:25.440 that in reality the path the acceleration should be made 0:16:25.520 --> 0:16:26.680 also in Europe. 0:16:27.280 --> 0:16:29.880 Good stuff and some perspective on a day where it's 0:16:29.960 --> 0:16:33.240 very easy to get distracted, probably rightfully so by the 0:16:33.240 --> 0:16:36.680 markets and concerns about the outlook, but certainly some optimism 0:16:36.720 --> 0:16:40.280 from Granell Hewett. She's executive vice president of Europe Operations 0:16:40.280 --> 0:16:43.880 at Schneider Electric, joining us from London on this Monday. 0:16:46.080 --> 0:16:49.840 This is the Bloomberg Business Week podcast. Listen live each 0:16:49.880 --> 0:16:52.880 weekday starting at two pm Eastern on Apple car Play 0:16:52.960 --> 0:16:55.600 and the Android Auto. With the Bloomberg Business app. You 0:16:55.640 --> 0:16:58.840 can also listen live on Amazon Alexa from our flagship 0:16:58.880 --> 0:17:02.680 New York station, Say Alexa played Bloomberg eleven thirty. 0:17:03.920 --> 0:17:05.760 Well, we heard a lot about the equity market just 0:17:05.760 --> 0:17:08.840 now from Charlie. I want to talk bonds because bond 0:17:08.880 --> 0:17:12.200 traders are signaling an increased risk that the US economy 0:17:12.200 --> 0:17:15.119 will stall as President Donald Trump's chaotic tariff rollouts and 0:17:15.160 --> 0:17:18.399 federal workforce cuts threatened to further restrain the pace of growth. 0:17:18.400 --> 0:17:20.879 We've got with us Michael McKenzie's Bloomberg News rates reporter. 0:17:20.920 --> 0:17:24.400 He joins us here in the Bloomberg Interactive Broker's studio. Michael, 0:17:24.680 --> 0:17:27.840 as you write, there was speculation that the president would 0:17:27.840 --> 0:17:31.480 pour stimulus on an expansion it would keep upward pressure 0:17:31.640 --> 0:17:35.159 on treasury yields. That is not at all what's happening. 0:17:35.240 --> 0:17:36.560 What's happening instead. 0:17:36.480 --> 0:17:38.760 Well, I investors had to tear up the rule book. 0:17:38.800 --> 0:17:41.920 They came into this year thinking Okay, this is Columbie's 0:17:41.920 --> 0:17:46.439 going to get pumped up a lot by deregulation, and 0:17:46.480 --> 0:17:48.840 that the Trump administration was going to be pro business. 0:17:49.040 --> 0:17:51.080 And that's not really how it's panned out. And I 0:17:51.080 --> 0:17:53.359 think some of the datas come on the disappointing side. 0:17:53.960 --> 0:17:56.280 And you're beginning to get a sense here that the 0:17:56.359 --> 0:18:00.159 cuts in government's government spending. If you think back to 0:18:00.240 --> 0:18:02.080 last year, we had a big tail wind from government 0:18:02.080 --> 0:18:04.800 spending under the Biden administration. So when even when the 0:18:04.800 --> 0:18:07.760 markets started pricing in rate cuts last summer and the 0:18:07.760 --> 0:18:10.600 Fed duly delivered in September the fifty basis point rate cut, 0:18:11.119 --> 0:18:13.680 lo and behold, the economy held up, and by the 0:18:13.760 --> 0:18:16.080 end of the year the Fed was saying we're pretty 0:18:16.160 --> 0:18:19.320 much done. So the mark is now having to get 0:18:19.320 --> 0:18:21.399 its head around the risk or trying to price in 0:18:21.440 --> 0:18:23.760 the risk of Okay, if growth's going to slow, how 0:18:23.840 --> 0:18:26.919 much is it going to slow? And from discussions with 0:18:27.200 --> 0:18:29.040 a number of traders in the last week or so, 0:18:29.160 --> 0:18:32.480 it seems to be if the data continues to point 0:18:32.520 --> 0:18:35.480 to a deterioration, then the Fed probably going to have 0:18:35.520 --> 0:18:38.399 to start resuming rate cuts at some point and probably 0:18:38.480 --> 0:18:40.800 gets the funds rate down about three and a half. 0:18:41.080 --> 0:18:43.159 And right now, that's where the market's pricing in at 0:18:43.240 --> 0:18:45.439 least three rate cuts this year, which will get you 0:18:45.480 --> 0:18:47.600 down to three and a half. So that's kind of 0:18:47.600 --> 0:18:48.520 where we are at the moment. 0:18:50.040 --> 0:18:53.720 Does the bond market equally reflect the nervousness that we're 0:18:53.720 --> 0:18:55.440 seeing in the stock market. I think we were talking 0:18:55.440 --> 0:18:57.760 with Mike McKee earlier and you talked about spreads are 0:18:57.800 --> 0:19:01.880 still pretty narrow on different segment of the bond market. 0:19:02.119 --> 0:19:05.400 So does what we're seeing right now in the treasury 0:19:05.440 --> 0:19:09.560 trade equate with the selling we're seeing in the stock market. 0:19:09.560 --> 0:19:12.080 The other fact that's behind the rally we've seen in 0:19:12.080 --> 0:19:14.480 the treasure So think back to in mid January. We 0:19:14.560 --> 0:19:17.159 peaked at four eighty on the ten year, four to 0:19:17.280 --> 0:19:20.080 sixty on the five year. Ten years now back down 0:19:20.080 --> 0:19:23.680 to four to twenty and the five years below four percent. Now, 0:19:23.880 --> 0:19:27.600 these are big rallies, and essentially that's reflecting the hit 0:19:27.680 --> 0:19:29.520 to risk assets. So when I was talking to investors 0:19:29.520 --> 0:19:31.600 at the beginning of this year, they were saying, the 0:19:31.680 --> 0:19:34.680 one case we're buying treasuries with a new adminstration coming 0:19:34.720 --> 0:19:37.600 in is going to be that if you get a 0:19:37.640 --> 0:19:39.840 hit to risk assets, you want to own the fives 0:19:39.840 --> 0:19:42.600 a ten year sector that's really paid off and that 0:19:42.680 --> 0:19:45.160