WEBVTT - Sustainability, Markets, and the Fed in Focus 0:00:02.400 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.119 --> 0:00:13.320 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.320 --> 0:00:15.800 Eastern on Apple card playing and Broid Auto with the 0:00:15.800 --> 0:00:19.720 Bloomberg Business app. Listen on demand wherever you get your podcasts, 0:00:19.920 --> 0:00:22.760 or watch us live on YouTube. 0:00:23.120 --> 0:00:25.320 So lion Elbasel. If you don't know the company, takers 0:00:25.440 --> 0:00:28.960 lyb It's basically a chemicals company. It's thirty billion dollar 0:00:29.000 --> 0:00:32.959 chemicals company, think things like plastic. It is also doing 0:00:33.000 --> 0:00:36.680 a lot of shift into sustainability, retrofitting certain plans to 0:00:36.760 --> 0:00:39.320 make greener stuff. And this stuff is important because it's 0:00:39.400 --> 0:00:42.680 things we use every single day and the most mundane things, 0:00:42.960 --> 0:00:46.360 and it's difficult to really decarbonize those sectors. Joining us 0:00:46.360 --> 0:00:49.800 now is Tracy Campbell, Executive VP of Sustainability and Corporate Affairs, 0:00:49.840 --> 0:00:52.280 but she's held many positions within the company. 0:00:52.320 --> 0:00:53.280 Tracy, great to see you. 0:00:53.680 --> 0:00:55.560 Thank you. It's a pleasure to be here, and who 0:00:55.600 --> 0:00:57.560 doesn't want to be in midtown Manhattan on a day 0:00:57.600 --> 0:00:58.640 like today. Thank you. 0:00:58.880 --> 0:01:02.160 That means it's nice out right. Okay, we'll take your reustry. 0:01:02.760 --> 0:01:04.800 So let's just start with the macro for a second, 0:01:04.840 --> 0:01:07.920 because for those for those viewers who don't know. Devis 0:01:07.920 --> 0:01:11.759 Hell makes all the stuff we need, plastics, ethylene, all 0:01:11.800 --> 0:01:15.319 the things. How's it going, like, what's demand like right now? 0:01:15.560 --> 0:01:18.399 You know, demand has been very steady, certainly in the Americas, 0:01:18.440 --> 0:01:19.920 and I think demand got a bit of a boost 0:01:20.040 --> 0:01:22.920 yesterday the economy did as well. So we're excited about that. 0:01:23.520 --> 0:01:28.039 And while yes, some of the global markets are substantially weak. China, 0:01:28.120 --> 0:01:31.000 for example, is an important market, but we're not as 0:01:31.000 --> 0:01:33.280 exposed there as others. And of course you're up's a 0:01:33.280 --> 0:01:35.360 bit slow to recover as well. But no, we're really 0:01:35.400 --> 0:01:37.800 excited about about the demand that we're seeing here in 0:01:37.840 --> 0:01:40.119 the Americas. And I've been in the industry for more 0:01:40.120 --> 0:01:42.640 than thirty five years. I've lived through this cycle of 0:01:42.760 --> 0:01:46.880 low demand and strong demand, and we don't subscribe to 0:01:47.160 --> 0:01:49.120 this doom and gloom that you hear out there. So 0:01:49.120 --> 0:01:52.120 we're excited about the recovery that we're going to see because, 0:01:52.160 --> 0:01:54.440 as you said, Alex, we make the materials that people 0:01:54.480 --> 0:01:57.480 count on every single day, and that's fundamentally not changing. 0:01:58.000 --> 0:02:01.000 How does a company like yours and any global petro 0:02:01.080 --> 0:02:05.640 chemical company, plastics company, how do they balance the business requirements, 0:02:05.760 --> 0:02:09.200 grow the business, invest delivered profits for shareholders, and then 0:02:09.320 --> 0:02:12.800 make this transition to maybe a cleaner business. How do 0:02:12.800 --> 0:02:13.800 you guys balance that? 0:02:13.880 --> 0:02:16.600 In general, we see it as an end When you 0:02:16.680 --> 0:02:20.079 think about the value play that we have for more 0:02:20.120 --> 0:02:24.240 sustainable products, whether they're more circular, perhaps they're low emission products. 0:02:24.760 --> 0:02:28.000 We believe that that's a value proposition for the company 0:02:28.000 --> 0:02:30.760 as itself, and we have a play there because we 0:02:30.760 --> 0:02:33.920 can bring these products to market at scale. We're not 0:02:34.040 --> 0:02:36.880 doing it for the greater good of society, while that's 0:02:36.919 --> 0:02:39.360 an added benefit, We're doing it because we believe it's 0:02:39.360 --> 0:02:41.600 a creative to earnings in the long run. So there 0:02:41.639 --> 0:02:44.359 are consumers and brand owners out there that are looking 0:02:44.400 --> 0:02:45.480 for those materials. 0:02:45.600 --> 0:02:47.520 So in what sense does this happen. 0:02:47.639 --> 0:02:50.280 Is it like we're going to use greener feedstock to 0:02:50.360 --> 0:02:53.760 make stuff, Is it we're going to use alternative energy, 0:02:53.840 --> 0:02:56.840 renewable energy to run our plant? Or is it we're 0:02:56.840 --> 0:03:00.400 going to capture any sort of emissions? And then with it, 0:03:00.440 --> 0:03:02.560 like what's the strategy? 0:03:03.639 --> 0:03:07.000 There are multiple strategies there, and I think you hit 0:03:07.080 --> 0:03:08.720 on quite a few of them. If you think about 0:03:08.760 --> 0:03:11.560 our strategy as a company. We still believe that our 0:03:11.600 --> 0:03:15.560 core petrochemical business is here to stay. However, we can 0:03:16.720 --> 0:03:20.560 change the way we operate the feedstocks we use the 0:03:20.639 --> 0:03:23.280 type of like you said, renewable energy and things like 0:03:23.320 --> 0:03:27.000 that to lower the emissions that are being generated as 0:03:27.000 --> 0:03:30.080 we make these materials. You know, another core piece of 0:03:30.080 --> 0:03:34.239 our strategy is to really again leveraging our core business 0:03:34.680 --> 0:03:39.320 to fund a much less capital intensive ecosystem for circular products, 0:03:39.360 --> 0:03:43.400 for things waste materials being brought back into our system 0:03:43.800 --> 0:03:47.600 and using those as the feedstocks essentially for the products 0:03:47.640 --> 0:03:51.240 of the future. So really, there is renewable energy, there 0:03:51.280 --> 0:03:53.720 is low carbon emissions, There is technology out there for 0:03:53.760 --> 0:03:56.400 carbon capture and utilization. All of these are part of 0:03:56.440 --> 0:04:00.600 the transition, including hydrogen for example, to bring either fossil 0:04:00.640 --> 0:04:04.320 based materials or renewable and recyclable materials to the market 0:04:04.560 --> 0:04:06.280 that we're looking at all of those. 0:04:06.400 --> 0:04:08.360 I know, I mean, your company is truly a global company. 0:04:08.440 --> 0:04:11.360 Roughly half the revenue in the US, half your revenue 0:04:11.360 --> 0:04:12.000 outside the. 0:04:12.000 --> 0:04:14.000 US, roughly, right, How is it? 0:04:14.240 --> 0:04:19.400 How are the requirements or the environments for maybe migrating 0:04:19.400 --> 0:04:22.480 your company to a more eco friendly business model. Is 0:04:22.520 --> 0:04:24.440 it different in the US and it is outside the US? 0:04:24.800 --> 0:04:27.400 I think the pace of change is different in different 0:04:27.440 --> 0:04:30.599 parts of the world, but we see that change happening 0:04:30.640 --> 0:04:34.480 on a global scale. For example, in Europe earlier today, 0:04:34.640 --> 0:04:37.840 fact in Germany you'll see our press release soon. We 0:04:37.880 --> 0:04:41.080 are laying the foundation stone of our advanced, our first 0:04:41.279 --> 0:04:45.120 scalable advanced recycling unit, and we see the Germans sort 0:04:45.120 --> 0:04:48.320 of and the Europeans advancing quickly right with respect to 0:04:48.360 --> 0:04:51.560 embracing circular and low carbon. But it is we are 0:04:51.600 --> 0:04:53.839 seeing the same trends here in the United States and 0:04:53.920 --> 0:04:56.279 even with our joint ventures and our activity in Asia. 0:04:56.360 --> 0:04:59.000 So it's just happening at a different time scale, but 0:04:59.080 --> 0:05:02.160 the momentum and energy and the excitement around those products 0:05:02.279 --> 0:05:05.040 is really not different. The policies might be a little 0:05:05.040 --> 0:05:07.560 bit different depending on what country we're operating in, but 0:05:07.640 --> 0:05:10.120 our direction is still the same. So we're very excited 0:05:10.120 --> 0:05:11.680 about that announcement today in Germany. 0:05:11.760 --> 0:05:13.280 So talk me about costs for a second. 0:05:13.360 --> 0:05:19.000 So the working theory is that when you make stuff green, 0:05:19.080 --> 0:05:22.880 it costs more. So a is that even true? And 0:05:23.040 --> 0:05:27.440 if it is, how do you offset those costs? I mean, yeah, 0:05:27.480 --> 0:05:28.839 and how do you offset it? Like do you wind 0:05:28.920 --> 0:05:31.200 up having the cost end user have to pay more, 0:05:31.640 --> 0:05:33.520 or there are different ways it's offset, even if it's 0:05:33.520 --> 0:05:35.200 from policy like tax credits. 0:05:36.440 --> 0:05:40.800 You know, when technology it's new, and when you're transitioning technology, 0:05:40.880 --> 0:05:43.240 yes there are investments that need to be made, need 0:05:43.279 --> 0:05:46.560 to be made to accelerate that transition. So you know, 0:05:46.640 --> 0:05:48.960 I don't think in the long run the materials will 0:05:48.960 --> 0:05:52.760 cost more. But the transition, of course is what where 0:05:52.800 --> 0:05:55.479 the investment is tricky, right, and we need to look 0:05:55.480 --> 0:05:57.320 at that. But if you look at consumer demand for 0:05:57.360 --> 0:06:01.200 these materials, if you look at the governments programs that 0:06:01.240 --> 0:06:04.360 are out there to accelerate the transition. The unit that 0:06:04.400 --> 0:06:06.520 I spoke about that we're laying the foundation stone in 0:06:06.560 --> 0:06:11.000 Germany just this morning was a recipient of a European 0:06:11.000 --> 0:06:13.400 Innovation Fund, you know, millions of dollars to help us 0:06:13.400 --> 0:06:16.520 with transition. But we really see the consumers stepping up, 0:06:16.560 --> 0:06:19.200 the brand owners stepping up, and I think over time 0:06:19.240 --> 0:06:22.680 the technology to make this transition. Tax credits for example 0:06:22.680 --> 0:06:25.960 for hydrogen production, for hydrogen consumption are important as well. 0:06:26.040 --> 0:06:28.440 So I really see a lot of activity in that 0:06:28.480 --> 0:06:29.760 space to help us transition. 0:06:30.680 --> 0:06:34.719 Jason from Omaha, Nebraska Rights and how have ocean Freight 0:06:34.760 --> 0:06:38.000 costs affected the US ability to export our cheaper plastics 0:06:38.520 --> 0:06:40.760 to the rest of the world ocean. 0:06:40.839 --> 0:06:43.800 You know, I'm not an expert on ocean rates anymore. Okay, 0:06:44.080 --> 0:06:45.920 at one point in my career, I can still plan 0:06:46.080 --> 0:06:48.960 on radio. Yeah I can still Yeah, pretend. But you 0:06:48.960 --> 0:06:53.119 know what we think about as our company, we really 0:06:53.160 --> 0:06:58.479 focus on differentiating our assets in terms of feedstock advantages, 0:06:58.680 --> 0:07:03.040 technology advantages, scale advantages. So do we have assets in 0:07:03.160 --> 0:07:07.720 regions that depend on ocean freight. Absolutely, we have JVS 0:07:07.720 --> 0:07:11.120 in the Middle East, We're growing there. We have owned 0:07:11.160 --> 0:07:13.840 assets in the United States, and yes, we do export 0:07:13.880 --> 0:07:16.239 these materials and we stay on top and we actually 0:07:16.240 --> 0:07:18.960 have a supply chain organization and is constantly looking at 0:07:19.000 --> 0:07:21.400 the optimization of freight to make sure we can deliver 0:07:21.480 --> 0:07:24.200 those materials to market very competitively. 0:07:24.720 --> 0:07:29.160 In terms of all of it, the transition, dealing with 0:07:29.320 --> 0:07:32.600 current slowdown in Europe and Asia, etc. And this comes 0:07:32.600 --> 0:07:34.960 from Ryan Hornan. So see, I'm going to ask your question, 0:07:35.680 --> 0:07:38.120 do you think that animal spirits will awaken and we 0:07:38.160 --> 0:07:40.160 get more M and A in the chemical space with 0:07:40.280 --> 0:07:42.800 those low rates? And I would add on, are you 0:07:42.880 --> 0:07:45.720 kind of forced to make acquisitions or even boltons as you're. 0:07:45.640 --> 0:07:47.240 Also making this energy transition. 0:07:48.440 --> 0:07:50.080 You know, growth is important to us, and I talked 0:07:50.080 --> 0:07:52.640 about growing and upgrading our core and even growing this 0:07:52.720 --> 0:07:56.640 circular and low carbon economy that we're looking at. So 0:07:56.760 --> 0:07:58.680 I think M and A is always part of our 0:07:59.600 --> 0:08:00.840 part of our optionality. 0:08:00.960 --> 0:08:01.120 Right. 0:08:01.160 --> 0:08:04.000 You've seen us grow our footprint in the Middle East. 0:08:05.200 --> 0:08:08.000 I lived in Asia recently where we grew some footprints, 0:08:08.200 --> 0:08:10.160 we grew some joint venors over there. So I think 0:08:10.280 --> 0:08:11.680 M and A is always going to be in the 0:08:11.680 --> 0:08:14.200 cards for us. And we do see ourselves as a 0:08:14.240 --> 0:08:18.920 consolidator and a very efficient, scalable provider of these circular 0:08:18.920 --> 0:08:21.440 and low carbon solutions. So there's a lot of activity 0:08:21.440 --> 0:08:25.120 that we're doing there to consolidate feedstock acquisition, to build 0:08:25.120 --> 0:08:28.400 these integrated hubs in order to have a very scalable 0:08:28.440 --> 0:08:32.320 and optimized delivery system for these materials of the future. 0:08:32.440 --> 0:08:35.280 So M and A is always an option for companies 0:08:35.280 --> 0:08:36.319 of our size for sure. 0:08:36.800 --> 0:08:38.760 Again, as a global company, I'm guessing you guys have 0:08:38.800 --> 0:08:42.160 a vested interest in all this talk coming into Washington 0:08:42.200 --> 0:08:45.120 to various degrees various parties about tariffs and things like that. 0:08:45.120 --> 0:08:48.120 Does that impact your business? Has it impacted your business 0:08:48.160 --> 0:08:49.280 over the last four or five years. 0:08:49.280 --> 0:08:52.760 And you know, tariffs to me are I'm a believer 0:08:52.800 --> 0:08:54.880 in a free market economy, right, and I think tariffs 0:08:54.880 --> 0:08:58.160 in the long run tend to hurt to hurt that. 0:08:58.400 --> 0:09:02.079 So you know, we really are positioning our company need 0:09:02.160 --> 0:09:05.240 to be resilient no matter the outcome of any election 0:09:05.520 --> 0:09:07.880 in the world. So you know, we're making sure that 0:09:07.880 --> 0:09:09.880 we've got the right products, the right assets. We have 0:09:09.920 --> 0:09:14.760 that differentiation to really be successful regardless of whether a 0:09:14.800 --> 0:09:16.840 particular person wants to have tariffs or not. 0:09:16.960 --> 0:09:20.080 So that was a very That was an SVP answer. 0:09:20.960 --> 0:09:22.440 I try to be an enterprise thinker. 0:09:22.760 --> 0:09:23.200 It's fair. 0:09:23.320 --> 0:09:26.360 It's fair when we talk about the cost situation. And 0:09:26.400 --> 0:09:30.840 this also plays into Paul's tariff question. Do you secure 0:09:30.920 --> 0:09:35.040 customers for your products and that then help you build 0:09:35.040 --> 0:09:37.480 the product, or after it's done, you have to go 0:09:37.559 --> 0:09:39.080 out and sell them And what is both? 0:09:39.120 --> 0:09:40.800 What do both of those processes look like? 0:09:41.240 --> 0:09:44.920 We work with brand owners and with customers to build 0:09:44.960 --> 0:09:48.400 the future materials and to help design those applications, so. 0:09:48.440 --> 0:09:49.880 They have to commit to stuff. They have to be 0:09:49.880 --> 0:09:51.320 like we will give you this much money for this 0:09:51.400 --> 0:09:52.040 much product. 0:09:52.320 --> 0:09:54.280 We work with them right from the early stage of 0:09:54.360 --> 0:09:58.400 concepts through designed through perhaps a long term contract for example. 0:09:58.440 --> 0:10:02.960 But yeah, having that being solutions provider requires us to 0:10:03.000 --> 0:10:04.600 really develop those materials together. 0:10:04.760 --> 0:10:06.400 Is it hard to come up with those numbers right 0:10:06.440 --> 0:10:09.720 now with your customers in terms of pricing? 0:10:10.760 --> 0:10:10.960 You know? 0:10:11.200 --> 0:10:13.480 I don't think so. I think it's always been. We've 0:10:13.520 --> 0:10:16.600 always worked with our customers and with downstream, so the 0:10:16.760 --> 0:10:19.600 entire value chain to really design the materials that you know, 0:10:19.640 --> 0:10:22.760 consumers like ourselves are looking for. So yes, as we 0:10:22.800 --> 0:10:25.200 work through that process, we're looking at our cost to 0:10:25.240 --> 0:10:28.440 deliver the material, the intermediate, the converter costs, the custom 0:10:28.480 --> 0:10:31.520 consumer costs. But I don't think. I don't think the 0:10:31.679 --> 0:10:36.160 uncertainty is any more, you know, is any higher than 0:10:36.200 --> 0:10:38.880 it's ever been. Frankly, I think it's just something that 0:10:38.920 --> 0:10:42.479 we're always making sure that we design for all options 0:10:42.520 --> 0:10:44.920 and we have the flexibility to pivot if we need to. 0:10:45.400 --> 0:10:46.720 All Right, Tracy, so great. 0:10:46.720 --> 0:10:48.480 I've been trying to get Tracy on for like since 0:10:48.480 --> 0:10:52.320 what February March LA here. Yeah, yes, it's great to 0:10:52.360 --> 0:10:54.200 be Thank you so much, really appreciate I know you're 0:10:54.240 --> 0:10:55.880 here for Climate Weeks. I'm looking forward to what will 0:10:55.880 --> 0:10:59.440 come out and yes as well, Tercy Campbell joining us. 0:10:59.480 --> 0:11:04.719 There your titles long is SVP of No, I'm trying 0:11:04.760 --> 0:11:05.080 to find it. 0:11:05.120 --> 0:11:07.920 I've got executive stainability over affairs. 0:11:08.080 --> 0:11:11.160 Oh, come on an email, Alex, come on, all right, trades, 0:11:11.200 --> 0:11:14.120 appreciate that. Joining us from mine elvisl on all things 0:11:14.200 --> 0:11:16.559 energy transition when it comes to petro chemicals. 0:11:18.160 --> 0:11:22.079 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:22.160 --> 0:11:25.680 weekdays at ten am Eastern on applecard Play and Android 0:11:25.679 --> 0:11:28.880 Auto with the Bloomberg Business. You can also listen live 0:11:28.960 --> 0:11:32.120 on Amazon Alexa from our flagship New York station. Just 0:11:32.200 --> 0:11:37.000 say Alexa play Bloomberg eleven thirty. 0:11:36.840 --> 0:11:40.559 Markets at a record there's some serious volume coming into play. 0:11:40.840 --> 0:11:43.080 I was talking to one market technician who was like, 0:11:43.120 --> 0:11:46.560 we get options expiration tomorrow. You gotta reshuffle your delta, 0:11:46.679 --> 0:11:48.720 which I guess is a fancy option word. So that's 0:11:48.760 --> 0:11:50.440 why you're seeing a lot of the flows here. Emily 0:11:50.559 --> 0:11:54.040 Rowland is co chief investment strategist for John Hancock Investment Management, 0:11:54.200 --> 0:11:56.520 and she joins us. Now, Emily, do I just blame 0:11:56.840 --> 0:12:00.280 technicals an options expiration or is this some serious, real fomore. 0:12:01.160 --> 0:12:01.400 Yeah? 0:12:01.520 --> 0:12:04.480 No, I think that that's probably some noise that does 0:12:04.520 --> 0:12:07.880 a curve periodically. You know, Look, markets are celebrating today. 0:12:07.920 --> 0:12:10.520 We're near new all time highs or kissing them, as 0:12:10.520 --> 0:12:12.960 you said earlier, and I think there's a lot of 0:12:13.000 --> 0:12:16.160 relief around this Dubvish pivot that the Fed has taken. 0:12:16.240 --> 0:12:16.560 Here. 0:12:16.880 --> 0:12:19.600 There was a bit of confusion in the markets yesterday 0:12:20.280 --> 0:12:22.480 after Powell came out and told us not to get 0:12:22.520 --> 0:12:25.640 too excited that more fifty basis point CODs aren't coming. 0:12:26.040 --> 0:12:28.440 But I think overall, it was a Dubvish FED meeting 0:12:28.920 --> 0:12:31.880 and it looks like markets can continue sunning themselves on 0:12:32.000 --> 0:12:35.040 soft Landing Island. 0:12:35.640 --> 0:12:39.600 Very nice Netflix Season one. 0:12:38.840 --> 0:12:42.199 Hey, we've actually got a yield curve that's steepening here. 0:12:42.200 --> 0:12:44.360 We got the two year at three point five eight percent, 0:12:44.520 --> 0:12:46.040 ten years three point seven two percent. 0:12:46.480 --> 0:12:47.240 What does that tell you? 0:12:48.360 --> 0:12:51.560 Yeah, I mean you're bond yields came a long way 0:12:51.800 --> 0:12:54.920 prior to this Dubvish FED meeting yesterday, So I think 0:12:54.920 --> 0:12:58.920 you're seeing a little bit of repricing there across the curve. 0:12:59.800 --> 0:13:02.480 You know, I think that we could see some chopping 0:13:02.600 --> 0:13:05.559 rates from here as we kind of navigate through this 0:13:05.760 --> 0:13:09.959 environment where there's kind of some better than expected economic data. 0:13:10.800 --> 0:13:14.040 You know, maybe we're continuing to see some broad deceleration, 0:13:14.200 --> 0:13:18.040 but again, this deceleration is happening slowly enough that it's 0:13:18.080 --> 0:13:21.000 sort of providing this perfect backdrop for the Fed to, 0:13:22.160 --> 0:13:25.319 you know, to continue to implement rate cuts amidst a 0:13:25.360 --> 0:13:29.240 decelerating economic environment. It's going to happen in choppy fashion, 0:13:30.040 --> 0:13:31.640 but for now, I think you're kind of going to 0:13:31.640 --> 0:13:34.079 see rates hold steady. As yesterday was a big event. 0:13:34.120 --> 0:13:37.000 We've gotten through it and we'll see what happens from here. 0:13:37.320 --> 0:13:39.280 So do you chase here or is there something on 0:13:39.320 --> 0:13:41.280 your shopping list or is it just a rotation at 0:13:41.280 --> 0:13:41.760 this point? 0:13:42.440 --> 0:13:44.520 Yeah, I mean we would look at any backup in 0:13:44.640 --> 0:13:48.280 bond yields is a nice opportunity to lean in income. 0:13:48.320 --> 0:13:49.439 There is still elevated. 0:13:49.480 --> 0:13:51.800 Of course, yields have come down a lot over the 0:13:51.800 --> 0:13:54.080 course of this summer, but we still don't think that 0:13:54.200 --> 0:13:58.520 bonds have fully sniffed out this disinflationary, lower growth environment. 0:13:58.640 --> 0:14:02.719 So we'd like higher quality areas like mortgage backed securities, 0:14:02.760 --> 0:14:05.400 investment great corporate bonds, sprinkle in a little bit of 0:14:05.440 --> 0:14:09.200 treasuries there. So we think there's a buying opportunity there. 0:14:09.360 --> 0:14:13.520 You know, stocks are fully reflective of this soft landing backdrop. 0:14:13.920 --> 0:14:17.760 We continue to embrace higher quality stocks, and we're looking 0:14:17.800 --> 0:14:21.520 for areas that provide quality at a reasonable price as well, 0:14:21.840 --> 0:14:24.760 so we would be leaning into things like healthcare stocks. 0:14:24.800 --> 0:14:27.680 We're legging into more defensive areas of the market like 0:14:27.800 --> 0:14:31.680 utilities and infrastructure equities. And we continue to see US 0:14:31.680 --> 0:14:34.880 mid cap stocks is a big beneficiar area of onshoring 0:14:34.960 --> 0:14:39.680 activity and the fiscal spending that's still happening against this 0:14:39.680 --> 0:14:42.200 this this decent economic backdrop. 0:14:43.000 --> 0:14:45.080 Emily, when you get big moves into market like we're 0:14:45.080 --> 0:14:47.520 seeing today, that kind of just raises the valuation flag 0:14:47.560 --> 0:14:49.200 for a lot of investors. How are you kind of 0:14:49.200 --> 0:14:51.680 thinking about valuation any equity markets? 0:14:52.320 --> 0:14:54.640 Yeah, I mean it's not great, I'll tell you. You know, 0:14:54.800 --> 0:14:57.720 certainly with markets you know, bumping up on twenty one 0:14:57.880 --> 0:15:01.040 twenty two times forward earnings, I think are well priced 0:15:01.040 --> 0:15:03.760 for this soft landing scenario that we've been talking about. 0:15:03.800 --> 0:15:06.640 You know, and you look at areas like technology stops 0:15:06.680 --> 0:15:09.680 which are trading at thirty times forward earnings, which is 0:15:09.880 --> 0:15:12.640 about as high as we've gotten over the last cycle. 0:15:12.680 --> 0:15:15.360 It's not the fifty times forward earnings that we saw 0:15:15.800 --> 0:15:18.200 in the late nineteen nineties. So I think the froth 0:15:18.320 --> 0:15:20.480 is is a bit of a concern. But I would 0:15:20.480 --> 0:15:23.760 tell you that valuations just simply aren't a catalyst for 0:15:24.080 --> 0:15:27.320 a market rotation. They haven't been historically. I think you'd 0:15:27.320 --> 0:15:30.000 need to really see some kind of shift in the 0:15:30.080 --> 0:15:32.760 economic regime. You'd have to see a big shift in 0:15:32.840 --> 0:15:36.560 earnings trends to really see that market leadership change. And 0:15:36.600 --> 0:15:38.440 you know, you can blame a lot of things on 0:15:38.760 --> 0:15:41.360 the multiple expansion that we've seen in technology, but you 0:15:41.440 --> 0:15:44.400 can't blame the denominator. The earnings have been there for 0:15:44.480 --> 0:15:47.920 these companies, which makes us continue to be constructive there. 0:15:47.840 --> 0:15:50.920 Which also the reason of the question, how where do 0:15:50.960 --> 0:15:54.040 you go in terms of large, mid small? So I've 0:15:54.040 --> 0:15:55.920 been reading a lot about, particularly from Bank of America, 0:15:55.960 --> 0:15:57.680 how maybe this is the time for midcaps? And mid 0:15:57.760 --> 0:16:00.120 caps hit a record high yesterday, they outro foot today, 0:16:00.120 --> 0:16:03.480 they outperformed yesterday, Like, is not the sweet spot for 0:16:03.520 --> 0:16:04.880 that environment that you're talking about? 0:16:05.720 --> 0:16:08.120 Yeah, midcaps are the sweet spot for us. You know, 0:16:08.160 --> 0:16:10.480 when you go down into small caps, you're looking at 0:16:10.480 --> 0:16:14.640 companies that are unprofitable, they have higher interest burdens. You know, 0:16:14.680 --> 0:16:17.880 the Rustle of two thousand is comprised about forty percent 0:16:17.920 --> 0:16:20.880 of that index is comprised of companies that don't make money. 0:16:21.240 --> 0:16:24.160 They could do really well in an early cycle environment, 0:16:24.400 --> 0:16:26.360 but we just don't think that we're there yet. And 0:16:26.400 --> 0:16:29.120 you see these little rallies in small cap equities based 0:16:29.160 --> 0:16:31.760 on the idea that rates are coming down. But remember 0:16:31.840 --> 0:16:34.520 rates are coming down because there's a challenge with growth, 0:16:34.600 --> 0:16:36.840 and we think that that does not benefit the most 0:16:37.400 --> 0:16:41.800 cyclical areas, namely small caps. Moving up into MidCap equities, 0:16:42.080 --> 0:16:45.120 you get a big overweight to the industrial sector. So 0:16:45.200 --> 0:16:48.120 think about the relative sector composition there, and we think 0:16:48.200 --> 0:16:53.280 mid cap industrials are massive beneficiaries of the spending that's 0:16:53.320 --> 0:16:56.880 happening in the US. There's a manufacturing renaissance happening right 0:16:56.920 --> 0:17:00.400 now in the US Midwest due to onshoring and due 0:17:00.400 --> 0:17:02.520 to things like the Chips Act and the Infrastructure and 0:17:02.640 --> 0:17:04.800 Jobs Act. So we want to look to mid caps 0:17:04.840 --> 0:17:07.159 as a way to capture that. They're also trading at 0:17:07.160 --> 0:17:11.200 the deepest discount to their large cap counterparts since the 0:17:11.280 --> 0:17:14.240 late nineteen nineties, so you're not overpaying for this theme. 0:17:15.160 --> 0:17:17.120 Emily, how do you feel about the earnings backdrop here 0:17:17.200 --> 0:17:17.680 for the. 0:17:17.640 --> 0:17:21.720 Market, Well, I love it going into the third quarter 0:17:21.880 --> 0:17:26.679 because the bar is low. It's actually analysts are penciling 0:17:26.760 --> 0:17:31.040 in four point three percent earnings growth as we look 0:17:31.119 --> 0:17:33.680 forward to the next quarter's earning. 0:17:33.560 --> 0:17:35.600 Season, So we love a low bar there. 0:17:35.680 --> 0:17:38.520 I think we should enjoy it while we can because 0:17:38.600 --> 0:17:41.240 Q four earnings growth is penciled in to be about 0:17:41.240 --> 0:17:44.560 fifteen percent, and then analysts are looking at fifteen percent 0:17:44.720 --> 0:17:47.480 into next year. So not only is the market trading 0:17:47.840 --> 0:17:51.720 at an elevated valuation, but that's also against expectations that 0:17:51.720 --> 0:17:54.440 we're going to see about fifteen percent earnings growth next year. 0:17:54.480 --> 0:17:58.679 That's probably a bit optimistic, so we may see a 0:17:58.760 --> 0:18:01.879 challenge to that right now. Multiple expansions helping as we 0:18:01.960 --> 0:18:05.679 continue to embrace the fad pivot here and the soft landing, 0:18:05.960 --> 0:18:09.040 but ultimately the earnings need to come through as stock 0:18:09.080 --> 0:18:12.280 prices over time, we're going to follow profits and follow earnings, 0:18:12.280 --> 0:18:14.040 so we think that's going to be critical to watch 0:18:14.080 --> 0:18:15.119 as we look forward. 0:18:15.480 --> 0:18:16.359 Emily, great stuff. 0:18:16.400 --> 0:18:18.560 Really good to see you, Emily Roland, co, Chief Investment 0:18:18.600 --> 0:18:21.919 Strategies for John Hancock Investment Management, joining us. 0:18:23.280 --> 0:18:27.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:27.240 --> 0:18:30.600 weekdays at ten am Eastern on Apocarplaying and Broyd Auto 0:18:30.680 --> 0:18:33.560 with the Bloomberg Business app. Listen on demand wherever you 0:18:33.640 --> 0:18:37.320 get your podcasts, or watch us live on YouTube. 0:18:38.520 --> 0:18:41.480 It's a good moment to check in on media stuff 0:18:41.480 --> 0:18:43.960 and media deals. And I read that really interesting article 0:18:43.960 --> 0:18:45.480 in the Wall Street Journal about how there's going to 0:18:45.480 --> 0:18:48.240 be a show on Amazon where people get to basically 0:18:48.320 --> 0:18:52.200 compete to get a slot in the in their big 0:18:52.200 --> 0:18:54.560 Amazon dot com store. So they're describing it as like 0:18:54.640 --> 0:18:57.200 Shark Tank meets Home Shopping Network, which. 0:18:57.240 --> 0:18:59.160 I don't know. For me, you would actually watch this 0:18:59.359 --> 0:19:03.200 one hundred percent? Would you not? Okay, you're not gonna 0:19:03.200 --> 0:19:05.800 watch it. Paul, No, that's not his thing. KEITHA helped 0:19:05.800 --> 0:19:06.040 me out. 0:19:06.119 --> 0:19:08.800 Keithan wrong or not them, Boomberg Intelligence US media analyst. 0:19:08.920 --> 0:19:11.119 This sounds brilliant to me. Did you see this article? 0:19:12.480 --> 0:19:14.600 I did not, but it definitely sounds intriguing. 0:19:14.760 --> 0:19:17.320 So it's a new competition show next month. Entrepreneurs are 0:19:17.320 --> 0:19:19.360 going to pitch their products to a studio audience as 0:19:19.359 --> 0:19:23.120 well as to judges including Amazon executives and some celebrities. 0:19:23.640 --> 0:19:26.800 Like Goop founder Gwyneth Paltrow and designer Christian Siriano, and 0:19:26.840 --> 0:19:29.120 then finalists will have their inventions sold in a new 0:19:29.160 --> 0:19:31.280 Amazon Buy It Now online store. 0:19:31.600 --> 0:19:33.760 That's synergy, That's what I'm saying. 0:19:33.960 --> 0:19:36.440 Yes, whether or not you watch it, that has some synergy. 0:19:36.760 --> 0:19:38.000 So she's not gonna watch it. I'm I the only 0:19:38.040 --> 0:19:40.159 one that gonna watch thinks, So all right, fine, fine, 0:19:40.280 --> 0:19:41.640 all right, you talk now, Paul. 0:19:41.760 --> 0:19:43.760 All right, Keitha, thanks so much for joining us here. 0:19:43.840 --> 0:19:45.240 What I want to talk to you is about is 0:19:45.359 --> 0:19:47.640 just kind of where are we these days, Githa on 0:19:48.240 --> 0:19:52.520