WEBVTT - Market Volatility in 2025 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.240 --> 0:00:30.120 Michael Wilson, thank you so much for joining this morning. 0:00:30.240 --> 0:00:33.400 You called a new bullmarket and you say you have 0:00:33.520 --> 0:00:40.000 a higher conviction into twenty twenty six. Why, yeah, thanks Tom. 0:00:40.240 --> 0:00:42.680 I mean we talked about this in our midyear outlook 0:00:42.840 --> 0:00:45.600 going back to May, which we felt like the April 0:00:45.600 --> 0:00:48.159 lows would be a durable low for a lot of 0:00:48.159 --> 0:00:50.680 different reasons. I'll try to go through them in no 0:00:50.760 --> 0:00:53.519 specific order, but I mean, you know, we've had the 0:00:53.560 --> 0:00:55.200 view coming into this year that it was going to 0:00:55.240 --> 0:00:57.920 be a tough first half because earning provisions were coming 0:00:57.960 --> 0:01:02.040 down pretty sharply for a lot of reasons, most notably 0:01:02.160 --> 0:01:05.880 the AI CAPEC cycle was decelerating. We still had what 0:01:05.880 --> 0:01:08.840 I would call a rolling recession in many industries that 0:01:08.880 --> 0:01:11.360 were struggling, and the revisions were coming down. So what 0:01:11.400 --> 0:01:14.520 tariffs did was it sort of culminated that that decline 0:01:14.640 --> 0:01:17.360 into April, and as you know, I mean you've been 0:01:17.400 --> 0:01:20.120 around the block like me. I mean, market's bottom on 0:01:20.319 --> 0:01:23.240 bad news, okay, And so that I would have likened 0:01:23.240 --> 0:01:27.080 the Liberation Day announcement to sort of a natural disaster 0:01:27.959 --> 0:01:32.000 that basically, you know, capitulated, everybody capitulated. So that revision 0:01:32.000 --> 0:01:34.559 of revision factors the main driver when I were bullish, 0:01:34.600 --> 0:01:36.840 we think it's a bull market is the revision factors 0:01:36.840 --> 0:01:40.840 for earnings are have shot higher. And you've seen our notes, Okay, 0:01:40.880 --> 0:01:44.480 So like that's that is doesn't happen every year. That 0:01:45.280 --> 0:01:47.480 is as extreme as we saw coming out of the 0:01:47.520 --> 0:01:51.040 COVID lows in March of twenty twenty. Okay, it's as 0:01:51.200 --> 0:01:53.360 extreme as we saw coming out of nine to eleven. 0:01:53.800 --> 0:01:56.560 It looked like a recession. It walks like a recession, 0:01:56.600 --> 0:01:58.600 a priced like a recession. So that's it. 0:01:59.040 --> 0:02:01.400 Okay. This is a really critical question, folks. We all 0:02:01.480 --> 0:02:06.120 understand the Trump legislation, the Beautiful Bill and all that 0:02:06.200 --> 0:02:09.000 as some form of stimulus forward at least out one 0:02:09.080 --> 0:02:12.560 two years, maybe three years. It Morgan standing, Mike Wilson. 0:02:12.600 --> 0:02:17.520 The key question is the linkage of potential rate cuts 0:02:18.080 --> 0:02:21.440 to equity enthusiasm. I don't have a straight answer on 0:02:21.480 --> 0:02:26.320 that yet, can we link Powell, our future chairman, rate 0:02:26.360 --> 0:02:28.519 cuts into an equity lift? 0:02:30.160 --> 0:02:32.280 Yeah, well, I think I mean, as usual, the markets 0:02:32.320 --> 0:02:34.760 get ahead of this, and what the markets are anticipating now, 0:02:34.960 --> 0:02:36.920 the bond market and the equity markets that the FED 0:02:36.960 --> 0:02:39.600 will be cutting sometime in the next you know, two 0:02:39.680 --> 0:02:42.480 to six months. And you know, even our house call, 0:02:42.560 --> 0:02:44.280 I mean, our house calls for no cuts this year, 0:02:44.280 --> 0:02:46.160 but then they have seven cuts next year. I mean, 0:02:46.160 --> 0:02:49.880 that's like wildly bullish for equities. Okay, so you know 0:02:50.120 --> 0:02:52.799 it's you almost have the perfect setup, Tom, because what 0:02:52.960 --> 0:02:55.920 you have now is lagging economic data, which is what 0:02:55.960 --> 0:02:58.600 the FED uses to make decisions, and you have you 0:02:58.639 --> 0:03:00.880 already had the equity market in our divisions telling you 0:03:00.919 --> 0:03:03.880 what's going to happen. So you know, they're looking backwards 0:03:03.880 --> 0:03:06.040 and they're going to be looking at lagging labor data, 0:03:06.280 --> 0:03:08.359 you know, and then of course lagging inflation data, which 0:03:08.360 --> 0:03:11.080 should come down ultimately later this year next year, and 0:03:11.080 --> 0:03:13.240 they're going to cut into that and but the but 0:03:13.360 --> 0:03:14.960 you know, there's not going to be a knock on 0:03:15.160 --> 0:03:17.800 negative effect for earning revisions in the way that people 0:03:18.160 --> 0:03:21.040 kind of assume when you get that sort of decline 0:03:21.160 --> 0:03:23.520 in labor data. In fact, I would argue because it's 0:03:23.560 --> 0:03:26.320 gradual that we're going to see revisions go up, because 0:03:26.400 --> 0:03:30.400 you know, when companies reduce headcount, it actually accrues to margins. 0:03:31.400 --> 0:03:35.120 Mike, what what is screening well for you? Now? I'm 0:03:35.160 --> 0:03:37.200 not sure if it's sectors that you guys screened by 0:03:37.320 --> 0:03:40.520 or different factors that you screen by. How are you 0:03:40.600 --> 0:03:43.760 looking at this market and maybe where opportunities might be right, 0:03:43.800 --> 0:03:44.720 So we do both. 0:03:44.800 --> 0:03:48.280 We look at factor revisions, we look at sector industry revisions, 0:03:48.320 --> 0:03:49.840 and we look at the stock level too. It works 0:03:49.880 --> 0:03:53.200 in all those areas, and so we've been rightly positioned, 0:03:53.680 --> 0:03:58.240 really since April to be overweight financials industrials. Those are 0:03:58.240 --> 0:04:02.000 the two favorites, and also software to some degree, and 0:04:02.040 --> 0:04:03.680 those have been the areas where the revisions have been 0:04:03.720 --> 0:04:06.920 the strongest, and I think that probably could continue. And 0:04:07.000 --> 0:04:09.400 so at the end of the day, I do think 0:04:09.400 --> 0:04:11.840 the biggest opportunity going forward is the areas that have 0:04:11.960 --> 0:04:14.240 not seen those revisions yet. So let's talk about the 0:04:14.280 --> 0:04:17.320 industries where we've been sort of in this rolling recession. 0:04:17.360 --> 0:04:21.880 Housing related, okay, commodity related, some of the consumer goods 0:04:21.920 --> 0:04:24.000 areas which are going to feel the effects of terrors now. 0:04:24.040 --> 0:04:25.880 So in the very short term, we actually think revision 0:04:25.880 --> 0:04:28.279 breath could come down a bit as some of these 0:04:28.839 --> 0:04:31.159 terrorts flow through to cost of good soul. But that's 0:04:31.200 --> 0:04:34.080 just going to create the next buying opportunity, perhaps in 0:04:34.160 --> 0:04:36.440 these areas that are lagged, even small casts, because they 0:04:36.440 --> 0:04:39.040 will love the fact that that's cutting rates at some point. 0:04:39.920 --> 0:04:42.479 Mike, one of the themes today and really for the 0:04:42.520 --> 0:04:46.280 last period of time has been concentration risk. In this marketplace, 0:04:46.279 --> 0:04:48.520 it seems like only a handful of stocks are driving 0:04:48.520 --> 0:04:51.680 the performance. But I think what we're kind of coming 0:04:52.040 --> 0:04:54.680 to the conclusion of our at least rationalizing is because 0:04:54.680 --> 0:04:56.479 that's where the earnest growth is, that's where the free 0:04:56.520 --> 0:05:00.160 cash flow is. How do you think about that issue? 0:05:00.279 --> 0:05:02.960 You're exactly right. I mean, the market's not stupid. I mean, 0:05:03.000 --> 0:05:06.040 like the first of all, what drove the market lower 0:05:06.400 --> 0:05:08.800 in the first quarter the MAG seven You know why, 0:05:08.880 --> 0:05:10.880 because the MAG seven range divisions were terrible. In the 0:05:10.880 --> 0:05:13.800 first quarter, we had an AI camp BAX acceleration. We 0:05:13.839 --> 0:05:16.840 had questions around whether it's going to generate ROI revenue 0:05:16.880 --> 0:05:19.440 growth kind of decelerated a bit, so you know, it 0:05:19.760 --> 0:05:23.640 happened for a reason, but has nothing to do with teriffs, okay. 0:05:23.920 --> 0:05:26.320 It has everything to do which is the natural evolution 0:05:26.400 --> 0:05:29.200 of this AI cycle that's going on. So I think, 0:05:29.240 --> 0:05:31.920 you know, coming out of the April lows, the reason 0:05:31.960 --> 0:05:34.280 why the MAG seven led is well, hey, they're big 0:05:34.320 --> 0:05:37.480 and liquid, everybody loves them. But also because they were 0:05:37.520 --> 0:05:40.520 seeing a rate of change bottom in the revision factors. 0:05:40.560 --> 0:05:44.279 I'll give you two huge catalysts for that. The weaker dollar, okay, 0:05:44.320 --> 0:05:47.440 which accrues to the large multinationals, particularly some of the 0:05:47.440 --> 0:05:51.080 MAGS seven. And the second one was that we saw 0:05:51.120 --> 0:05:54.200 that you know, U Vidio could no longer sell they 0:05:54.200 --> 0:05:56.520 could sell, they could no longer sell chips to China, 0:05:56.560 --> 0:05:59.120 and they took a big write down on inventory. But 0:05:59.200 --> 0:06:01.000 now they can sell those chips when the inventory is 0:06:01.040 --> 0:06:03.520 at well. So what does that tell you? Gross margins 0:06:03.520 --> 0:06:06.120 are going to be basically manufactured for the next year. 0:06:06.160 --> 0:06:09.120 So there's a lot of reasons, you know, why stocks 0:06:09.120 --> 0:06:11.000 do what they do. But the main reason we for 0:06:11.120 --> 0:06:14.839 our whole franchise, as you know, focuses on earnings, not 0:06:15.240 --> 0:06:16.560 lagging economic data. 0:06:17.360 --> 0:06:20.240 Mike Wilson with us across your commute this morning across 0:06:20.279 --> 0:06:22.440 the nation, I should say on YouTube as well in 0:06:22.520 --> 0:06:26.160 the office and of course at home YouTube subscribe to 0:06:26.200 --> 0:06:28.640 Bloomberg Podcast growing each and every day. Should I do 0:06:28.680 --> 0:06:31.520 a shout out right now for Joe Wisenthal, Tracy Alloy 0:06:31.640 --> 0:06:33.640 killing it number one on Apple? 0:06:33.920 --> 0:06:36.080 Yesterday's phenomenal had a great write up in the New 0:06:36.160 --> 0:06:37.359 York Times, so they did double. 0:06:37.240 --> 0:06:39.520 Days and you know they'll be with us Jackson Hole, 0:06:39.600 --> 0:06:42.840 So maybe I'll get you know, maybe they're entourage. You'll 0:06:42.880 --> 0:06:44.880 let me speak to them. We'll have to see Mike 0:06:44.920 --> 0:06:47.760 Wilson with us. With Morgan Stanley, Mike, how do you 0:06:47.920 --> 0:06:53.840 use your analysts work? Mister Weiss covers Microsoft just as 0:06:53.880 --> 0:06:56.719 you know, do you speak to these people or how 0:06:56.720 --> 0:07:01.560 do you use the securities analysis of Morgan Stanley. 0:07:02.800 --> 0:07:06.440 Percent We're a micro macro franchise man. I started my 0:07:06.520 --> 0:07:08.640 career in the stock business, you know, I used to 0:07:08.640 --> 0:07:11.720 be a TMT specialist as a desk analyst, you know, 0:07:11.800 --> 0:07:14.880 following bottoms up, and so I obviously know these folks 0:07:14.880 --> 0:07:16.360 have been here for thirty five years. I know all 0:07:16.400 --> 0:07:18.400 of them well, I've worked with all of them, and 0:07:18.480 --> 0:07:20.880 so we every month we hold a call that we 0:07:20.960 --> 0:07:23.880 basically call it the micro macro matchup, where we basically 0:07:24.120 --> 0:07:26.080 kind of talk about our views from a macro standpoint. 0:07:26.120 --> 0:07:27.600 Then we talk to the analysts and say, well, what 0:07:27.640 --> 0:07:29.360 are you guys hearing? What are you doing? You know 0:07:29.600 --> 0:07:32.480 how you how are your numbers may be adjusting, and 0:07:32.480 --> 0:07:35.200 that informs us just like our analysis does from a 0:07:35.200 --> 0:07:38.320 top down perspective. So the marring of the micro macro, 0:07:38.400 --> 0:07:40.280 I think keeps us a step ahead of most people. 0:07:40.480 --> 0:07:42.720 People can criticize us for various things, but they can't 0:07:42.720 --> 0:07:46.160 criticize us for I think we have done a better 0:07:46.280 --> 0:07:48.280 job of most of being in the right places within 0:07:48.320 --> 0:07:51.760 the equity market because of that micro macro marriage. 0:07:51.920 --> 0:07:54.280 So so delv here now in to say, I see 0:07:54.360 --> 0:07:58.240 MIT Sloan, I see Caltech, this whole cottage industry, including 0:07:58.240 --> 0:08:03.240 the University of Michigan and Arburg doing AI? Learn about AI? 0:08:04.200 --> 0:08:08.920 Morgan Stanley, what is the next three months, six months? 0:08:09.480 --> 0:08:14.280 Zeitgeist on AI? The momentum of it? Yeah? 0:08:14.280 --> 0:08:15.720 Well, here again we have a pretty I have an 0:08:15.720 --> 0:08:18.320 advantage because we have some analysts who are not only 0:08:19.080 --> 0:08:20.560 you know, very good in this space, and they have 0:08:20.600 --> 0:08:22.680 long tenure, like a lot of our tech analysts have 0:08:22.680 --> 0:08:24.960 been in the seat for ten to twenty years as 0:08:25.000 --> 0:08:28.280 we have continuity there, but the zeitgeist here is essentially 0:08:28.600 --> 0:08:31.080 now into the adoption phase. We've written a lot about this, 0:08:31.160 --> 0:08:33.400 which is that you know these tech cycles, you know, 0:08:33.480 --> 0:08:36.280 there's there's basically an enabler phase where you have a 0:08:36.280 --> 0:08:39.160 build out and the enablers benefit from that build out, 0:08:39.480 --> 0:08:42.680 and then the technology gets adopted by the early adopters. 0:08:42.679 --> 0:08:45.200 We're seeing that mainly by the hyperscalers quite frankly, because 0:08:45.240 --> 0:08:47.480 they're very fast with the big data sets. And then 0:08:47.559 --> 0:08:49.079 ultimately what we think is going to happen to the 0:08:49.080 --> 0:08:52.360 application layers being built now that will then be basically 0:08:52.360 --> 0:08:55.600 diffused out into the broader economy. And so that's where 0:08:55.600 --> 0:08:57.680 it gets really exciting. That's sort of the you know 0:08:57.679 --> 0:08:59.760 the Internet. When the Internet got exciting is when it 0:08:59.760 --> 0:09:04.400 starts to make everyday businesses more productive. So we have screens, 0:09:04.440 --> 0:09:06.079 we have lists, we've been publishing on this for. 0:09:06.080 --> 0:09:06.680 Quite a while. 0:09:07.040 --> 0:09:11.040 Those AI adopter stocks are massively outperforming, they have been. 0:09:11.320 --> 0:09:13.480 The market knows this. I think we've been ahead of 0:09:13.480 --> 0:09:15.240 that curve, and that's what we're saying, that's what we're 0:09:15.280 --> 0:09:17.320 looking for for the next twelve months is that this 0:09:17.360 --> 0:09:18.880 is where we're going to start to finally see some 0:09:18.880 --> 0:09:22.480 of the productivity benefits diffused across the broader economy. It 0:09:22.480 --> 0:09:25.040 won't be a straight line. There'll be doubts and fears 0:09:25.080 --> 0:09:27.679 and uncertainty, but it's a very positive story for the 0:09:27.720 --> 0:09:31.319 twenty twenty six earning story. And this is why stocks 0:09:31.360 --> 0:09:34.000 are not as expensive as people think, because you know, 0:09:34.040 --> 0:09:35.560 the market figured this out just. 0:09:35.440 --> 0:09:35.920 Like we did. 0:09:35.960 --> 0:09:37.480 I mean, you know, if we can figure it out, definitely, 0:09:37.480 --> 0:09:39.440 the market figured it out that we're going to see 0:09:39.480 --> 0:09:42.880 positive revisions lead to better earnings growth next year. Okay, 0:09:42.880 --> 0:09:44.760 and I think you know the economic data is backward 0:09:44.800 --> 0:09:45.880 looking and it just doesn't tell that. 0:09:45.880 --> 0:09:49.400 Stor denominator Paul comes up. Yeah, that's the whole thing. Yeah, 0:09:49.440 --> 0:09:50.800 it's amazing, Hey, Mike. 0:09:51.000 --> 0:09:53.600 In your research note, you're right, since the loads in April, 0:09:53.640 --> 0:09:56.520 the rally in stocks has been relentless. 0:09:56.040 --> 0:09:57.479 With no tradable pullbacks. 0:09:57.920 --> 0:10:01.240 What creates a pause and a bull market where you 0:10:01.240 --> 0:10:03.040 can maybe catch up a little bit. 0:10:04.160 --> 0:10:05.880 Well, we try to lay that out in our note 0:10:05.880 --> 0:10:06.240 this week. 0:10:06.360 --> 0:10:07.160 Right, it's just. 0:10:07.080 --> 0:10:09.880 Because we want to be well balanced here, but I 0:10:09.920 --> 0:10:12.480 want to go back and you know, that comment about 0:10:12.480 --> 0:10:14.680 the market being relentless and straight up in no pullbacks, 0:10:14.960 --> 0:10:18.760 that are those are the characteristics of a new ball market. 0:10:18.960 --> 0:10:21.520 That's what happens, and that's what looks like. This looks 0:10:21.559 --> 0:10:24.920 exactly like April, May, June, July twenty twenty. In fact, 0:10:24.920 --> 0:10:27.720 it's following a similar pattern. So I think that the 0:10:27.760 --> 0:10:30.120 things that could get us a consolidation in the third quarter, 0:10:30.160 --> 0:10:32.319 which we did start writing about, you know, a couple 0:10:32.360 --> 0:10:34.199 of weeks ago, we said there's going to be a pullback, 0:10:34.200 --> 0:10:35.679 it's going to be during a third quarter. We do 0:10:35.720 --> 0:10:37.719 want to win, but we do think there's three or 0:10:37.760 --> 0:10:41.240 four potential drivers. And at number one, revision factors could 0:10:41.240 --> 0:10:43.680 come down as the terror start to flow through, the 0:10:43.679 --> 0:10:45.760 cost of good soul, right, the more expensive inventory starts 0:10:45.760 --> 0:10:48.040 to flow through, and some companies will have margin pressure 0:10:48.040 --> 0:10:50.360 with that, or there'll be some demand destruction. That's one. 0:10:50.600 --> 0:10:52.200 I think. Number two is we know there's a trendspmens 0:10:52.280 --> 0:10:55.680 supply coming on the treasury issue inside, maybe the term 0:10:55.720 --> 0:10:57.839 premium kind of pushes out again and we get a 0:10:57.920 --> 0:11:00.400 backup in long rates. You know, the market now is 0:11:00.480 --> 0:11:03.959 negatively correlated to rate at this point, So that's another 0:11:04.000 --> 0:11:06.240 potential driver. And I think the one that is not 0:11:06.320 --> 0:11:08.840 so obvious but has been a big driver of the 0:11:08.840 --> 0:11:12.199 bull market in the New Bowl market is the dollar weakness. 0:11:12.320 --> 0:11:15.240 So dollar weakness has not only translated to better earnings 0:11:15.240 --> 0:11:19.880 growth for the multinationals, it's also added an incredible amount 0:11:19.920 --> 0:11:22.120 of liquidity to the tune of about eight trillion US 0:11:22.200 --> 0:11:24.400 dollars to global money supply. So if the dollar would 0:11:24.440 --> 0:11:27.439 strengthen here five six seventy eight percent, that could lead 0:11:27.440 --> 0:11:30.079 to a liquidity drain of some kind and a. 0:11:30.000 --> 0:11:33.760 Pullback of interesting fast I should point out mister Wilson 0:11:33.800 --> 0:11:37.680 talks about the lift off of twenty twenty that was 0:11:37.800 --> 0:11:41.760 precisely one hundred percent in twenty two months out to 0:11:41.800 --> 0:11:44.360 the end of twenty twenty one. Was the first leg 0:11:44.880 --> 0:11:48.199 of that lift. Absolutely extraordinary, Mike Wilson. I got to 0:11:48.240 --> 0:11:49.920 go to one of the dogs. I noticed it on 0:11:49.960 --> 0:11:54.320 the WEI screen today. Health, I mean, is it health 0:11:54.400 --> 0:11:58.880 of value trap? How does Morgan Stanley consider purchase of 0:11:59.000 --> 0:12:00.119 health equity? 0:12:01.360 --> 0:12:04.280 Well, it has been one of the worst performing consistently sectors. 0:12:04.320 --> 0:12:06.959 Even when the market was somewhat defensive in the first quarter, 0:12:07.000 --> 0:12:09.240 it didn't really do its job. And I think we 0:12:09.240 --> 0:12:11.599 could attribute this to a couple of different things. I 0:12:11.679 --> 0:12:14.360 would say, most notably, we have a new obviously head 0:12:14.360 --> 0:12:17.280 of the HHS, Robert Kennedy Junior, who you know, has 0:12:17.320 --> 0:12:19.679 been I would say quiet so far on what his 0:12:19.960 --> 0:12:22.080 main initiatives are going to be. And I think there's 0:12:22.080 --> 0:12:24.160 just sort of sort of some fear there that maybe 0:12:24.240 --> 0:12:27.080 it's going to be draconian and in terms of like 0:12:27.120 --> 0:12:28.960 for farmer companies and some of the some of the 0:12:28.960 --> 0:12:31.840 device some of the device companies and even the insurance companies. 0:12:32.280 --> 0:12:33.920 And I think, you know, it could be this simple 0:12:33.960 --> 0:12:37.240 time is that once once RFK Junior and the HHS 0:12:37.320 --> 0:12:38.920 roll out what they're going to do, I think they've 0:12:38.960 --> 0:12:41.560 they've said September they're going to be done with some 0:12:41.559 --> 0:12:44.440 of their studies, it could just be a sigh of relief. 0:12:44.960 --> 0:12:47.480 Maybe that's the catalyst here, But I mean, we're not 0:12:47.520 --> 0:12:49.320 going to probably upgrade the group until we see at 0:12:49.400 --> 0:12:51.880 least a bottoming out of relative range breath. We're just 0:12:51.880 --> 0:12:54.120 not seeing that, and so there's no need to go there. 0:12:54.120 --> 0:12:54.960 There's other things to do. 0:12:55.800 --> 0:12:59.400 Paul, I get good news, I'll check the schedule. Duke 0:12:59.440 --> 0:13:02.080 does not have privileged to lose to Michigan this year 0:13:02.120 --> 0:13:06.200 in football. It's a constructive first step well for Duke 0:13:06.640 --> 0:13:12.800 Mike Wilson, thank you so much. With Morgan Stanley. 0:13:15.080 --> 0:13:18.680 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:13:18.760 --> 0:13:21.920 weekday afternoons from seven to ten am Eastern Listen on 0:13:22.000 --> 0:13:25.640 Applecarplay and Android Auto with the Bloomberg Business app, or 0:13:25.800 --> 0:13:27.640 watch US live on YouTube. 0:13:27.400 --> 0:13:31.600 And Stishamorosa with the Snow with Partners Group David Layton 0:13:31.640 --> 0:13:35.640 and running the charge their Partners Group of course doing 0:13:35.679 --> 0:13:40.400 a lot, particularly more out West in Switzerland as well. 0:13:41.200 --> 0:13:44.000 You're still based in New York, right, Yeah, Partners has 0:13:44.040 --> 0:13:46.199 a huge international perspective. 0:13:46.400 --> 0:13:46.760 That's right. 0:13:46.840 --> 0:13:49.680 We're global private markets firm. I've been around since nineteen 0:13:49.720 --> 0:13:53.400 ninety six. Zooke is the headquarters. Denver's the US Zuke 0:13:53.520 --> 0:13:56.120 that's how you pronounce it, zuk, Yes, outside of Zurich 0:13:56.400 --> 0:13:59.559 and also in Denver as well, but also a really 0:13:59.600 --> 0:14:01.480 big price and it's in New York as very could. 0:14:01.600 --> 0:14:06.160 Thrilled to have you back with this level of MROs 0:14:05.920 --> 0:14:08.840 of courage to stay in the market at different points. 0:14:09.280 --> 0:14:11.760 Is you feel that way right now where people there's 0:14:11.760 --> 0:14:15.000 so much geopolitical nervousness and all, and you're just saying, 0:14:15.040 --> 0:14:16.840 fight the good fight and stay in the market. 0:14:17.200 --> 0:14:20.320 Well, you know, Tom, one of the probably the best 0:14:20.320 --> 0:14:24.120 perspectives I've gotten, you know, through kind of my investment tenures, 0:14:24.440 --> 0:14:27.800 thinking about themes and think about the megatredza really change 0:14:27.800 --> 0:14:29.440 and shape the world figures to come. And if you 0:14:29.480 --> 0:14:32.000 align yourself with those and if you focus on what 0:14:32.080 --> 0:14:35.960 actually drives earnings or what drives profitability, it's focusing on 0:14:36.000 --> 0:14:39.760 things like artificial intelligence or digital transformation, or healthcare innovation 0:14:40.200 --> 0:14:43.120 or you know, new ways of living. So that's what 0:14:43.320 --> 0:14:45.880 sort of gives you the courage to stay through the 0:14:45.920 --> 0:14:48.560 next rate cut or rate hike or not, or through 0:14:48.600 --> 0:14:51.600 the next inflation report if you invest in the right 0:14:51.760 --> 0:14:54.760 kinds of companies in order to benefit from that innovation 0:14:54.840 --> 0:14:55.320 over time. 0:14:56.920 --> 0:14:59.880 One of the big themes that we've i guess become 0:15:00.120 --> 0:15:02.520 more accustoms over the last six months twelve months has 0:15:02.560 --> 0:15:09.560 been maybe this onshoing, reassuring, this reduced sense of internationalism. 0:15:09.640 --> 0:15:11.120 And for a company like yours that it is a 0:15:11.160 --> 0:15:13.200 global company in Zurich and in the US and all 0:15:13.240 --> 0:15:15.240 over the world, how do you guys think about the 0:15:15.320 --> 0:15:19.160 fact that this may be a less global economy than 0:15:19.200 --> 0:15:21.080 it was one, two, three, five years ago. 0:15:22.120 --> 0:15:25.440 You know, I don't know if that is a completely 0:15:25.560 --> 0:15:28.720 right assumption to make that this is a less global economy. 0:15:28.840 --> 0:15:32.720 I don't think the objective is really to sever all 0:15:32.880 --> 0:15:36.040 trade ties. I think the objective is really to rethink 0:15:36.200 --> 0:15:38.680 the trade going forward and also to sort of set 0:15:38.720 --> 0:15:41.280 out new rules of how the trade is going to 0:15:41.320 --> 0:15:45.000 be done. So, if that's the base case scenario, as investors, 0:15:45.040 --> 0:15:48.080 we have to think about how to corporations, how to consumers, 0:15:48.120 --> 0:15:50.520 how do we want to adjust to that? And you know, 0:15:50.640 --> 0:15:52.840 speaking of adjustment, this is why I call this a 0:15:52.960 --> 0:15:55.680 quarter of adjustment. This is the time where companies are 0:15:55.680 --> 0:15:58.760 going to decide whether they're going to pass through the 0:15:58.840 --> 0:16:01.120 tariff cost to the consumer. Where they going to do? 0:16:01.320 --> 0:16:02.840 What do you see there? What's your update? 0:16:03.800 --> 0:16:06.800 We see a combination. I think the vast majority of companies, 0:16:06.800 --> 0:16:09.760 about seventy five percent of companies are saying that they're 0:16:09.760 --> 0:16:12.400 going to pass through the cost of the consumer. Maybe 0:16:12.400 --> 0:16:14.520 only twenty five percent of those say it's one hundred 0:16:14.560 --> 0:16:18.000 percent of the pass through. Some of it will be 0:16:18.040 --> 0:16:20.280 absorbed by the profit margin, which is near a record. 0:16:20.360 --> 0:16:23.760 Anna stj Morosa with this partners Group, and again thank 0:16:23.800 --> 0:16:26.040 you for joining us on You're commute this morning across 0:16:26.080 --> 0:16:29.840 the nation in the office at home in Zoos, Switzerland. 0:16:30.080 --> 0:16:33.680 YouTube is the way our new distribution has subscribed to 0:16:33.720 --> 0:16:38.720 Bloomberg Podcasts. We protect the copyright of all of our research. 0:16:39.200 --> 0:16:42.480 They email and send us am Anastage's note no get 0:16:42.480 --> 0:16:45.000 it from partners Group. I love how you say this 0:16:45.720 --> 0:16:51.080 focus on what you can control. Describe that for equity 0:16:51.120 --> 0:16:52.560 market investments right right now. 0:16:52.680 --> 0:16:55.280 Well, the first thing you can control is the kinds 0:16:55.280 --> 0:16:58.120 of companies you invest in, and what are the profit margins, 0:16:58.160 --> 0:17:00.400 What is the starting point for those profit margins, and 0:17:00.440 --> 0:17:02.560 what is the endpoint what you're trying to achieve. So 0:17:02.640 --> 0:17:06.320 one thing we can control is actually growing that profitability 0:17:06.320 --> 0:17:09.879 and growing the profit margin. You know, it's driving operational efficiencies, 0:17:09.960 --> 0:17:14.000 it's perhaps infusing AI, machine learning and other productivity tools 0:17:14.000 --> 0:17:18.040 to grow those margins. It's building platforms rather than you know, 0:17:18.200 --> 0:17:20.760 let's say one product business. So that's one thing you 0:17:20.760 --> 0:17:22.919 can control. You know. The other thing you can control 0:17:22.960 --> 0:17:25.880 is you can pivot into the sectors where you do 0:17:26.119 --> 0:17:29.760 naturally have faster earning growth because it is not a 0:17:29.920 --> 0:17:32.040 company that's aligned with the old economy, but it's a 0:17:32.040 --> 0:17:35.439 company that's aligned with a new economy. So that's why 0:17:35.480 --> 0:17:38.000 we do look to things like data centers. That's why 0:17:38.040 --> 0:17:41.280 we do look to the build out of the energy 0:17:41.320 --> 0:17:44.320 production as well. So those are the things you can control. 0:17:44.440 --> 0:17:47.639 You can control leverage, how much do you use, and 0:17:47.920 --> 0:17:50.560 how do you know pull that lever based on what 0:17:50.600 --> 0:17:52.879 interest rates are. So those are some of the main. 0:17:52.760 --> 0:17:57.359 Things outside of tech, which is obviously driving this market. 0:17:57.400 --> 0:18:00.760 Are there areas outside of technology that you guys find interesting? 0:18:02.000 --> 0:18:05.159 Yes, you know, I think one of the misnomers in 0:18:05.200 --> 0:18:07.480 the markets right now is that just because there's not 0:18:07.600 --> 0:18:11.160 a big focus on sustainability from the current US administration, 0:18:11.320 --> 0:18:13.440 and this is not a theme that's going to be there. 0:18:14.000 --> 0:18:16.480 And you know, I very much think that sustainability is 0:18:16.520 --> 0:18:18.720 a theme that's going to is here to stay because 0:18:18.720 --> 0:18:20.760 it's really about how can we be the most efficient 0:18:20.800 --> 0:18:23.320 with our natural resources, minimize the damage to the environment, 0:18:23.359 --> 0:18:26.080 also make sure everybody has access to basics, which basic 0:18:26.119 --> 0:18:29.240 since today days and age means a data center, power 0:18:29.320 --> 0:18:34.240 by some sort of electricity production. So this, let me 0:18:34.280 --> 0:18:35.280 interrupt this morning. 0:18:36.040 --> 0:18:40.680 Apollo Funds comes out and says we're buying data centers 0:18:41.480 --> 0:18:44.800 and they're buying stream data centers. Yeah, this is Joseph 0:18:44.880 --> 0:18:48.520 Jackson and Trevor Mills that Apollo Partners, and that's exactly it. 0:18:48.600 --> 0:18:52.280 Where private markets are coming in, that's right to finance 0:18:53.040 --> 0:18:55.800 these this huge capital investment. Right. 0:18:56.119 --> 0:18:58.760 Well, it's a great point, and here's the reality. Everybody's 0:18:58.840 --> 0:19:01.440 been talking about data center for a while, and yet 0:19:01.480 --> 0:19:04.119 if you look at the occupancy rates for data centers, 0:19:04.280 --> 0:19:07.440 they are near record highs and we still think that 0:19:07.640 --> 0:19:11.320 sort of the peak occupancy of data centers is still 0:19:11.359 --> 0:19:14.160 a few quarters away. So that means for the time 0:19:14.240 --> 0:19:16.879 being you still need to build out additional capacity and 0:19:16.920 --> 0:19:19.280 supply demand for data centers is still going to be 0:19:19.359 --> 0:19:22.399 tied for a period of time, so that that gives 0:19:22.400 --> 0:19:26.480 you the ability to control the price and also the 0:19:26.560 --> 0:19:29.880 investment has to continue as well. And by the way, 0:19:29.960 --> 0:19:31.879 just another point to add on that, you know, just 0:19:32.280 --> 0:19:35.240 real quick, data centers are thought right now for you know, 0:19:35.280 --> 0:19:37.800 to be used for cloud and also training AI models. 0:19:38.080 --> 0:19:40.080 But you know, Tom, the next phase of this of 0:19:40.200 --> 0:19:42.439