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Speaker 3: Just kind of summarizing that farm non farm payroll data.
Speaker 3: The good news was for the month of February came
Speaker 3: in better than expected. The two hundred and seventy five
Speaker 3: thousand jobs at IT consensus was two hundred thousand, So
Speaker 3: good headline print. There kind of a little bit of
Speaker 3: the downside here is a big negative revision for the
Speaker 3: prior month. The prior month was revised down from a
Speaker 3: gain of three hundred fifty three thousand to two hundred
Speaker 3: and twenty nine. Claudia Asam from them Group said, don't
Speaker 3: worry about it, it's just noise. Taking it in, take
Speaker 3: everything on like a three month basis, rolling basis, and
Speaker 3: basically the payroll market's pretty strong. Jony Biley joins US
Speaker 3: chief workforce analysts at employ Bridge, reportedly on Zoom from
Speaker 3: Pompano Beach, Florida.
Speaker 4: What are we doing here?
Speaker 1: Jealous?
Speaker 5: Right?
Speaker 3: Yeah, why not? But I'm going out to the mountains Sunday, summer, right, Joni,
Speaker 3: what did you make of this jobs report number today?
Speaker 3: A lot of moving parts, as we've been saying, Yeah, you.
Speaker 6: Know, you really have to break it down because there
Speaker 6: is a lot of data in this report, and there's
Speaker 6: some good news and there's some bad news.
Speaker 7: So to your point you were talking about, you know,
Speaker 7: the revisions that were made to the prior months. We
Speaker 7: did see some pretty big revisions.
Speaker 6: Downward to January and then also some revisions in December.
Speaker 6: So you know, the previous month's reports weren't really as
Speaker 6: strong as we thought they were. But however, if you
Speaker 6: look at the overall job growth, you know, the US
Speaker 6: is adding jobs to the economy, mostly in the healthcare sector.
Speaker 6: We did see growth in the retail sector. Construction added
Speaker 6: over twenty thousand jobs, so you know, there is some
Speaker 6: good news and we continue to see wages also moving
Speaker 6: up in the report as well.
Speaker 8: But jo Johnny, do you care that the wages were
Speaker 8: moving up less?
Speaker 7: Yeah, we're definitely seeing a slow down.
Speaker 6: I think with you know, wage growth has been so
Speaker 6: strong over the past few years, so I expect them
Speaker 6: to flatten. I do think you know, wages will kind
Speaker 6: of soften, but I was surprised actually to see that
Speaker 6: we're still having some decent, you know, decent wage growth.
Speaker 3: So the one go ahead.
Speaker 6: Well, the one thing I was going to say that
Speaker 6: concern me the most about this Job's report was actually
Speaker 6: the household survey, and that's where you saw unemployment, you know,
Speaker 6: tick up to three point nine percent. And when you
Speaker 6: look at the data and kind of break that down,
Speaker 6: we see that the population is growing, the size of
Speaker 6: the labor forces growing, but we actually have over three
Speaker 6: hundred and thirty thousand more people on unemployment, and.
Speaker 7: That concerns me.
Speaker 6: So, you know, we have these two surveys, and so
Speaker 6: when you look at you know, the establishment survey, the
Speaker 6: headline number of you know, two hundred and seventy five
Speaker 6: thousand jobs being created looks great, but that household survey
Speaker 6: is really concerning that we're seeing more people on unemployment.
Speaker 3: So, Jony, I think when you listen to earnings conference
Speaker 3: calls from companies and just about every industry, they say
Speaker 3: it's still really hard to attract and retain a good
Speaker 3: talent and labor. Are you still seeing that? Is it
Speaker 3: as a cute today as it was maybe you know,
Speaker 3: a year or two ago.
Speaker 7: Yeah, it's definitely softened a bit.
Speaker 6: The job market, you know, was much stronger last year
Speaker 6: and the prior year, you know, even coming out of
Speaker 6: the pandemic, we just had robust growth.
Speaker 7: It was a very competitive market.
Speaker 6: People were quitting their jobs going somewhere else the grass was.
Speaker 7: Greener, making more money.
Speaker 6: Now we're starting to see, you know, the quits rate
Speaker 6: is coming down. It is still though, a very tight
Speaker 6: job market to your point, you know, we have eight
Speaker 6: point nine million job openings, about six point four million
Speaker 6: unemployed workers, so more jobs than there are people. But
Speaker 6: it depends on the sector you know that you're in.
Speaker 6: We've seen a slowdown in some of the professional and
Speaker 6: business service sector. Healthcare though continues to remain strong. Leisure
Speaker 6: and hospitality, you know, it is very hard to find
Speaker 6: people in that industry.
Speaker 7: So we've seen wages.
Speaker 6: Really start to increase, and employers are focused on that,
Speaker 6: you know, employee retention strategies to keep their workforce engaged
Speaker 6: and keep them with them.
Speaker 8: So to that point, the market is pricing in now
Speaker 8: one hundred basis points of cuts. This year really starts
Speaker 8: to kick off in June. Is this an economy that
Speaker 8: needs that. Like, if we do get those cuts, is
Speaker 8: there now penned up demand with companies so it actually
Speaker 8: make the job market tighter.
Speaker 6: Well, I do think if we get those cuts, you know,
Speaker 6: even if it's in the second, you know, half of
Speaker 6: the year, that will help many companies feel better about
Speaker 6: investing and start hiring again. Because what we see at
Speaker 6: employee Bridge is employers are talking about hiring. They say
Speaker 6: they have the demand, but they do seem a bit cautious.
Speaker 6: They're not adding, you know, to their payrolls as quickly
Speaker 6: as they have before, and I think they have to
Speaker 6: be careful with their cash position. And certainly you know,
Speaker 6: their their debt and the interest rates being high, you know,
Speaker 6: of course it's impacting companies with making those investments. So
Speaker 6: if we start to see those rates, you know, begin
Speaker 6: to ease, I would certainly feel better about companies starting
Speaker 6: to add to their permanent payrolls again.
Speaker 3: JNY last night was the State of the Union address
Speaker 3: and one of the key issues was immigration issues at
Speaker 3: the border. How does immigration with it's legal or illegal,
Speaker 3: how has it been impacting Have you seen it anywhere
Speaker 3: in the labor market? What are your clients saying, because
Speaker 3: I was speaking to a buddy mine who owns a
Speaker 3: restaurant just yesterday, and he was saying, for the first
Speaker 3: time in three years, he actually has everybody he needs
Speaker 3: for all his shifts. And these are you know, bus
Speaker 3: boys and waiting staff and dishwashers and things like that.
Speaker 3: Has it shown up in your work.
Speaker 6: Yeah, so we're we I think it's still too soon
Speaker 6: to tell. To be honest with you, it definitely will
Speaker 6: have an impact. When you look at the numbers of
Speaker 6: people that are coming into the country. You know, obviously
Speaker 6: that's adding, you know, to the population, and many of
Speaker 6: them are unskilled workers, you know, so they will really
Speaker 6: you know, if obviously getting their green cards are being
Speaker 6: able to work in the United States, they will impact
Speaker 6: the lower level, lower level.
Speaker 7: Jobs, you know, looking for talent more in those unskilled positions.
Speaker 7: And we see that we haven't really seen.
Speaker 6: The big impact in the workforce yet, but it certainly
Speaker 6: would impact the workforce in the future.
Speaker 8: What do you look for next then, so if there's
Speaker 8: some good interest in bad it's like a Worsheck test,
Speaker 8: right when it comes to the jobs data, what's going
Speaker 8: to be the next data point that you're really paying
Speaker 8: attention to in the jobs numbers.
Speaker 6: Well, I think there's a couple of things that'll that
Speaker 6: we need to continue to watch.
Speaker 7: One thing is labor participation.
Speaker 6: You know, if you look at the overall workforce, we're
Speaker 6: at about sixty two point five percent labor participation, and
Speaker 6: that if you break that down, you know, men over
Speaker 6: twenty years old we're up at seventy percent, which is
Speaker 6: a pretty good number. Women for over twenty years old
Speaker 6: are We're at fifty nine percent. So when I look
Speaker 6: at the overall job market, I'm also looking not only
Speaker 6: where is the job growth and who's adding what's happening
Speaker 6: with ages, but are we getting people back to work
Speaker 6: in the United States? And are we seeing that labor
Speaker 6: participation start to tick up? And that's a very important
Speaker 6: indicator that I certainly watch. It's still at a very
Speaker 6: very low rate, and we have some work to do
Speaker 6: I think in encouraging people that it is a.
Speaker 7: Good job market.
Speaker 6: There are opportunities out there, there's training opportunities out there,
Speaker 6: and certainly need to get that number up. I'll also
Speaker 6: be watching for revisions next month, you know, are the
Speaker 6: numbers getting continually revised downward? The temporary help sector is
Speaker 6: interesting to follow. Usually, if we're losing jobs in the
Speaker 6: temporary help services sector, that's not a good sign for
Speaker 6: the economy because companies will lay off temporary workers first,
Speaker 6: and unfortunately.
Speaker 7: That has been declining for many months, which could show
Speaker 7: us that, you.
Speaker 6: Know, we're not at this yet, Johnny, there are definitely
Speaker 6: some softening Johnny.
Speaker 8: We appreciate your time. Thank you so much. Jony Biley,
Speaker 8: she is employee Bridge, Chief Workforced Analyst, joining us there.
Speaker 8: We very much appreciate your time.
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Speaker 8: Happy Friday to everyone we made at the end of
Speaker 8: the week. You're listening to Bloomberg Intelligence. I'm Bloomberg Radio.
Speaker 8: You can also check us out on YouTube. We are
Speaker 8: live in the interactive at Broker Studio right here at
Speaker 8: headquarters in New York. I'm Alex Steel, Paul Sweeney as well.
Speaker 8: So we have thousands of analysts hundreds. It's good. With
Speaker 8: hundreds hundred of analysts that cover two thousand companies and
Speaker 8: one hundred and thirty industries around the world, they are
Speaker 8: truly the best of the best. And one of the
Speaker 8: headliners here is Gina Martin Adams. She is the chief
Speaker 8: equity strategist at Bloomberg Intelligence and she joined us now
Speaker 8: from the Golden State. Gina, I'm looking at the market,
Speaker 8: and I've been skeptical of the rally for a long time.
Speaker 8: But then I get things like the Rustle two thousand
Speaker 8: up the most and hitting its highest level since March
Speaker 8: of twenty twenty two. Then I get things like you
Speaker 8: have the equal Weighted Index sitting at a record high,
Speaker 8: you have industrials doing really well, and it's not just uber.
Speaker 8: Is it time for me to stop being skeptical?
Speaker 5: Yeah, I dare say, Alex, we should have convinced you
Speaker 5: a little while ago to stop being skeptical. But frankly,
Speaker 5: I do think that what is happening in the market,
Speaker 5: You're not alone. There are a lot of people that
Speaker 5: are very skeptical to in the market, and that is
Speaker 5: what makes what makes the wall of worry that stocks
Speaker 5: tend to climb right and I do think though that
Speaker 5: when you look at the bulk of the evidence, you
Speaker 5: see fundamentals starting to turn a corner. For the vast
Speaker 5: majority of the S and P five hundred and prices
Speaker 5: are reflecting that corner that fundamentals are turning over the
Speaker 5: course of twenty twenty three. Of course, the big argument
Speaker 5: against stuff is that this market was really just driven
Speaker 5: by the biggest names, but that argument has been diminished
Speaker 5: considerably over the last three months. So we're starting to
Speaker 5: see breakouts across the board. As a matter of fact,
Speaker 5: more than half of industrials companies are making new all
Speaker 5: time highs over the last three months, so you are
Speaker 5: starting to see much broader gains emerge. Small caps starting
Speaker 5: to show some signs of life as well, breaking across
Speaker 5: key resistance levels just this week. So we're starting to
Speaker 5: see more participation, more capitalization, participation, more sectors, more stocks
Speaker 5: really getting on board this full market.
Speaker 3: So I guess, just in the back Gina on the
Speaker 3: jobs number today, it seems like the bond market is
Speaker 3: pricing in, you know, pretty confidently.
Speaker 2: A rate cut in.
Speaker 3: June gave us just kind of what you're fed outlook
Speaker 3: is for kind of the remainder this year, and how
Speaker 3: important that is to kind of just the overall fundament
Speaker 3: of the movement of the markets.
Speaker 5: Yeah, so luckily, paul I, that's one thing I don't
Speaker 5: have to set is a FED outlook. But I will
Speaker 5: say that what the equity market is pricing is generally
Speaker 5: we're starting to adopt the thesis that earnings are improving.
Speaker 5: I do think that what's really driving the equity market
Speaker 5: more than anything is not what's happening in rates. As
Speaker 5: a matter of fact, we see some very clear evidence
Speaker 5: that equities are detaching from the rates landscape, and we're
Speaker 5: not necessarily as closely correlated on a daily basis, monthly
Speaker 5: basis with watchab what's happening with rates and the bond market,
Speaker 5: speculation about the FED, and instead we're looking at much
Speaker 5: stronger than expected earnings and cash flow growth that has
Speaker 5: emerged for the S and P five hundred, and the
Speaker 5: anticipation that maybe earnings actually will prove to be much
Speaker 5: stronger than the market was forecasting over the course of
Speaker 5: this year. I do think that that's the most important
Speaker 5: driver of stocks. That said, you can't completely ignore the FED.
Speaker 5: If the FED is going to even just modestly reduce
Speaker 5: interest rates because inflation risks has diminished. That could be
Speaker 5: very supportive of equities as well and certainly contribute to valuations.
Speaker 5: I think the most dangerous condition for stocks right now
Speaker 5: is one of two things happen. First and foremost, the
Speaker 5: biggest sort of not predicted component of the market outlook
Speaker 5: is this idea that maybe inflation is stickier than anticipated.
Speaker 5: If inflation reaccelerates, that is obviously very bad for stocks
Speaker 5: because it could compress profit margins.
Speaker 7: On the other end of the.
Speaker 5: Spectrum, if the FED is easing policy because growth is
Speaker 5: breaking down, that's also not great for stocks. We need
Speaker 5: this middle zone of sort of stable policy, stable inflation,
Speaker 5: and modest improvement and earnings growth to really support the
Speaker 5: equity market right now.
Speaker 8: That is a Goldilocks word there for Gina. Okay, But
Speaker 8: here's my question is that if we do get the cuts,
Speaker 8: let's say they start in June, and neither of those
Speaker 8: negative scenarios imply like there's no sticky inflation and there's
Speaker 8: no disastrous economy, the risk of the cuts is that
Speaker 8: we actually fuel more investment into an economy that doesn't
Speaker 8: need it, and then that kind of sets us up
Speaker 8: for a rougher twenty twenty five.
Speaker 5: I think that's a really good point, is how much
Speaker 5: can they cut before they ultimately the ultimate result is
Speaker 5: another bout of inflation into twenty twenty five, And we
Speaker 5: won't know this until we get to mid twenty twenty
Speaker 5: four when they do start cutting. If they do, but
Speaker 5: the Fed does have to threat a pretty fine needle
Speaker 5: if we're at a point where growth is relatively stable
Speaker 5: and inflation is simply decelerating, I think the arguments for
Speaker 5: those cuts are relatively deminimus. So if we do get
Speaker 5: to that point and the Fed does start cutting, you
Speaker 5: could indeed see the markets start to think about, well,
Speaker 5: what does this really mean for inflation prospects in twenty
Speaker 5: twenty five? Is it justified to see these growth this
Speaker 5: sort of outlook from the Fed? Will we see much
Speaker 5: more volatile inflation conditions emerging? What will that mean for
Speaker 5: profit margins? That of course comes in the middle landscape
Speaker 5: of we do have the election coming later this year,
Speaker 5: We've gone I have a lot of other potential moving
Speaker 5: parts to contend with in the economy, but it's certainly
Speaker 5: one factor to consider.
Speaker 3: Geet, I'm glad you brought the election because we'd had
Speaker 3: this State of the Union last night, So it just
Speaker 3: feels like that's kicking off what's going to be a
Speaker 3: very long campaign here in a very long process. Historically speaking,
Speaker 3: How do markets perform in a presidential election year?
Speaker 5: Yeah, I think Paul I tend to dismiss a lot
Speaker 5: of those sort of the statistical evidence about election years
Speaker 5: because you get very different results if you talk about
Speaker 5: how seasonality and political cycles play out over the last
Speaker 5: twenty years versus the last fifty years versus the last
Speaker 5: one hundred years. So you can kind of pick your narrative.
Speaker 2: Yep.
Speaker 5: I think that things that are most important, of course
Speaker 5: to drive stocks really are what's happening with growth and inflation.
Speaker 5: That said, as we move closer to the election, I
Speaker 5: do think that there are two major macro issues to
Speaker 5: consider with respect to the twenty twenty five outlook, and
Speaker 5: they will matter depending upon who ultimately becomes the US president,
Speaker 5: and that is really tax and trade. And trade are
Speaker 5: the two issues that could have very meaningful impacts on
Speaker 5: the outlook for earnings growth. Both of these presidents do
Speaker 5: tend to have fight bipolar policies with respect to especially taxation,
Speaker 5: but also trade policies and a sort of international framework
Speaker 5: of relationships. So I think we want to pay pretty
Speaker 5: close attention to those two issues as we get closer
Speaker 5: to the election because they could have meaningful outcomes for
Speaker 5: equities going into twenty twenty five.
Speaker 8: So before we get there, I just want to before
Speaker 8: we let you go enjoy the weekend, I want to
Speaker 8: get your take on what's happening with certain areas of tech.
Speaker 8: So if you have Tesla, if you have Apple, if
Speaker 8: you have maybe Alphabet starting to really break down, yep,
Speaker 8: but yet you still have an Aazak one hundred at
Speaker 8: a record high. How long do you think that that
Speaker 8: divergence can last?
Speaker 5: Yeah, I think this is super interesting, Alex And something
Speaker 5: we've been actually exploring over the course of the last
Speaker 5: two weeks as well is what's happening in the market
Speaker 5: is quite interesting. Beneath that headline, what we see is
Speaker 5: actually tech stops relative performance, failing to make new so
Speaker 5: tech appears to be consolidating, even communications, as you noted,
Speaker 5: with Alphabet sort of breaking down, communication stocks have been
Speaker 5: in a bit of a downtrend. At the same time
Speaker 5: the broader markets are moving higher and that's because we're
Speaker 5: seeing greater participation outside tech really push those markets higher.
Speaker 5: Within the Nasdaq, for instance, you've started to see breakouts
Speaker 5: in healthcare. Healthcare of courses is horrible laggard in twenty
Speaker 5: twenty three. If you get momentum games in the rest
Speaker 5: of the market and tech just stalls or even starts
Speaker 5: to break down a little bit, you can see stocks work.
Speaker 5: And the last week and a half or so has
Speaker 5: proves some evidence of that case. We do need to see, though,
Speaker 5: participation continue to emerge in the rest of the market
Speaker 5: if tech is indeed going into a stall state.
Speaker 3: All right, Gina, thanks so much for joining us, as
Speaker 3: always appreciate it.
Speaker 4: Geina.
Speaker 3: Martin Adams, chief equity strategist for Bloomberg Intelligence, joining us
Speaker 3: from zoom from NJ.
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Speaker 8: Let's get broader market. I want to pick up on
Speaker 8: where John Tucker sort of left off there, which is
Speaker 8: the Russell. It's at a highest level since twenty twenty two,
Speaker 8: and again the signs of the broadening part of the
Speaker 8: rally and all of that significant as certain parts of
Speaker 8: tech really start to underperform. So joining us now is
Speaker 8: Grace Lee, senior portfolio manager for Columbia Thread Needle. She
Speaker 8: is standing by for us. Is this the moment for
Speaker 8: value and is it going to last?
Speaker 4: That's a great question, and thanks for having me on today.
Speaker 4: I think we're getting closer to a tipping point for value.
Speaker 4: I think you know, last year our value was certainly
Speaker 4: hit with a double whammy of rates rising, hurting a
Speaker 4: lot of the defensive sectors, and then you had the
Speaker 4: AI trade where our value really doesn't play very obviously
Speaker 4: in the first round. But I think right now what
Speaker 4: you're seeing is is people are looking for other other
Speaker 4: opportunities and even other ways to play the AI trade,
Speaker 4: and we're seeing rate cuts on the horizon, and I
Speaker 4: think that's that's also going to be you know, a
Speaker 4: it's going to drive a return to some of these
Speaker 4: underperforming sectors from last year.
Speaker 3: Grace, how do you find define value?
Speaker 4: I like this, Well, we look at value in a
Speaker 4: number of ways. I think you know, we do look
Speaker 4: to the Rustle one thousand. Value is as sort of
Speaker 4: the you know, the broader index, but but it also
Speaker 4: involves just looking for undervalued opportunities and and so you know,
Speaker 4: I think one thing that has been overlooked is that
Speaker 4: a lot of companies are going through transformations. And and
Speaker 4: you know, as much as people think that that, you know,
Speaker 4: equities are are valued or something, but there's there's always pockets,
Speaker 4: and we look for those pockets.
Speaker 7: You know.
Speaker 4: I think City Group is actually a really interesting example
Speaker 4: where the company is going through a significant transformation, simplifying
Speaker 4: the business, really driving better accountability, and you know that
Speaker 4: that stock still trades a maybe seventy percent of book value,
Speaker 4: and we think that that one's very interesting. So we
Speaker 4: look for those types of opportunities where even in a
Speaker 4: very strong market, you know, you look under the covers
Speaker 4: and there's always something there that looks interesting.
Speaker 8: What gives you confidence at this time will be different?
Speaker 8: I mean I feel like value, specifically small caps go
Speaker 8: there had their chance their moment last year, it didn't
Speaker 8: last for very long.
Speaker 4: What do you think, Well, I think it does feel
Speaker 4: like it's always one step forward, two steps back for value.
Speaker 4: And I think you know, to a certain extent you
Speaker 4: can you can certainly extend that to small caps. But
Speaker 4: I think over the long term there is mean reversion,
Speaker 4: and it's it's always hard to pinpoint exactly what will
Speaker 4: drive that and when that will happen. But you know,
Speaker 4: AI is not going to eat the world. It's it's
Speaker 4: certainly growing very fast, and we have very high optimism
Speaker 4: on on what it can accomplish. But but there are
Speaker 4: other sectors and and things have to sort of normalize
Speaker 4: a bit.
Speaker 3: So are there sectors per se that that you like
Speaker 3: here or do you kind of go stock by stock?
Speaker 3: How do you guys screen for value?
Speaker 4: So there are some sectors that that are interesting, you know,
Speaker 4: I think healthcare which was mentioned earlier, there's a lot
Speaker 4: of interesting value names there. AD buys or I would
Speaker 4: call out is the stock is the stock dividend is
Speaker 4: actually higher than any of its A rated bonds right now,
Speaker 4: which which is an interesting setup, and they've been emphatic
Speaker 4: in terms of saying that they will support that dividend.
Speaker 4: So I think that one's interesting. So aside from healthcare,
Speaker 4: I think there are also very uh company specific opportunities,
Speaker 4: you know, and we we've looked at the AI trade
Speaker 4: and AI is not value, but there are certainly uh
Speaker 4: opportunities for for AI participation amongst value names, and I
Speaker 4: think that's probably one of the most the most interesting
Speaker 4: things within our space right now. So I think I
Speaker 4: think old tech is actually seeing a bit of a
Speaker 4: renaissance driven by AI. Where people used to think that
Speaker 4: that servers and storage were kind of low growth, may
Speaker 4: be dead for a while because everyone's moving to the
Speaker 4: cloud and they need less hardware. But you know, as
Speaker 4: we're we're seeing now that is not the case, and
Speaker 4: there's there's AI servers that's driving a lot of growth,
Speaker 4: you know both. So I think we saw that specifically
Speaker 4: with Dell, which were actually involved in and and you
Speaker 4: know that company. It was not initially a an AI
Speaker 4: play for us. It was really that PCs are going
Speaker 4: to see a refresh cycle. Servers and storage will certainly
Speaker 4: pick up and they might gain a little bit from AI.
Speaker 4: It looks like the market thinks are going to gain
Speaker 4: a lot more from that. Yeah, And then you've got
Speaker 4: old companies like IBM, which I think again has has
Speaker 4: really transformed itself over the last couple of years and
Speaker 4: become more of a software and services company, which is
Speaker 4: not how you think of the traditional IBM.
Speaker 8: Yeah, and that's exactly what we pointed out. And Paul
Speaker 8: in particular, after earnings for Dell, like that stock just
Speaker 8: like shooting up. It's like, oh right, right, Dell is
Speaker 8: still around. They do stuff. You also like some utilities, why.
Speaker 4: So what what AI is going to do. It's going
Speaker 4: to drive a lot of power demand. And there are
Speaker 4: some and they're they're probably not they're in the utility category,
Speaker 4: but they're the independent power producers and they're the ones
Speaker 4: that will benefit directly from higher power prices. There are
Speaker 4: some that own nuclear assets where clean energy, clean clean
Speaker 4: power is actually going to be very much in demand
Speaker 4: by the large hyper scale cloud providers as they want
Speaker 4: to balance their environmental goals with this this massive demand
Speaker 4: for AI power. So so I think there's there's opportunities there,
Speaker 4: and I think companies that own power producing assets, and
Speaker 4: especially nuclear assets, are very well positioned.
Speaker 8: All right, Grace, thanks lot, We really appreciate it. Thank
Speaker 8: you so much for joining. Grace Lee, Senior portfolio manager
Speaker 8: for Columbia thread Needle.
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Speaker 8: Let's talk about the real economy front real world. Yeah,
Speaker 8: let's talk about the real world here. So Arcadus is
Speaker 8: a company based in Amsterdam, but the bulk of their
Speaker 8: revenue really now comes from the US and Canada. And
Speaker 8: they do things like sustainable design, engineering, consultancy, solutions for assets,
Speaker 8: they build stuff, and just to make Paul happy, they
Speaker 8: are also working on the Hudson Tunnel project.
Speaker 2: Thank you.
Speaker 8: That's going to get about twelve billion dollars in federal funding.
Speaker 8: It includes two four and a half mile long tracks
Speaker 8: and tunneling. It's a big deal. So I always love
Speaker 8: checking on these companies because they're the people who are
Speaker 8: putting your shovels in the ground, right, And that's what
Speaker 8: we really want to understand. And we're lucky now to
Speaker 8: join Virginie Duperrat. She is CFO of Arcadis. She's in
Speaker 8: town joining us. It's so wonderful to have you here.
Speaker 8: Thank you for joining us.
Speaker 9: Thank you Alex, and thank you Paul, and very happy
Speaker 9: to be with you tomorrow this morning.
Speaker 8: So in Amsterdam over in Europe, I should say, right,
Speaker 8: a fifty two week high for the stock earning is
Speaker 8: super good. You got a strong story. I just want
Speaker 8: to get your take on kind of what how's it
Speaker 8: going like, how what demand is like? Where in the
Speaker 8: world are you seeing the most demand and for what stuff?
Speaker 9: Thank you, Alex. I think that we are in a
Speaker 9: very buoyant moment. Frankly, it is not started yesterday already,
Speaker 9: I think you know, just after COVID we started to
Speaker 9: see some changes, but definitely there is quite an ask
Speaker 9: at the moment for more sustainable things and quite a change.
Speaker 9: Also we see a lot of traction in the sustainability
Speaker 9: space boss in Europe and on the US continent, and
Speaker 9: that happens in very different areas such as climate adaptation.
Speaker 9: Obviously if you think about out some of the storms
Speaker 9: that are increasing, but also the rainfalls that now you
Speaker 9: can get, you know, the volume of a month within
Speaker 9: an hour.
Speaker 8: And then in New York we definitely feel that. God
Speaker 8: So to that point though, I hear you, and politically
Speaker 8: as well, you get the Chips Act here, the Infrastructure
Speaker 8: Act and the IRA, and there's so much money to
Speaker 8: be deployed so quickly. But I'm seeing a disconnect, particularly
Speaker 8: in industrials, about backlog and projects versus actually getting money,
Speaker 8: like people actually poining up the cash. Are you guys
Speaker 8: noticing that right now too?
Speaker 9: If we are honest, we need to admit, you know
Speaker 9: that all these similar packages in some respect of creating
Speaker 9: some sort of a pose because suddenly, you know, people
Speaker 9: are saying, I could get a bunch of money, so
Speaker 9: then you know I should wait to make my decisions.
Speaker 9: We've been some people hesitating between the stimulus in Europe
Speaker 9: versus the stimidius in the US, but what we can
Speaker 9: see is that traction is now coming. We are already
Speaker 9: have a first project. For example, we work on the
Speaker 9: Nano Research Center in New York Albany, which is funded
Speaker 9: by stimulus package money, and we still have other projects
Speaker 9: coming in. We also have the same thing in Europe
Speaker 9: with a very large semiconductor factory in Germany one mile
Speaker 9: per one mile or a very large thing. And definitely
Speaker 9: there is the need for more of these elements. And
Speaker 9: then this is going to happen, but probably H two
Speaker 9: will be showing us more of.
Speaker 3: That so I would think for your business, those projects
Speaker 3: that you work on are just some multi year projects.
Speaker 3: What kind of visibility do you have into your business
Speaker 3: going forward?
Speaker 9: We have quite a long term visibility. Our way of
Speaker 9: freakenting backlog whatever is very conservative and then our backlog
Speaker 9: at any moment is not more than ten months. Is
Speaker 9: but if we consider our entire pipeline, quite a number
Speaker 9: of our project like the asentannel, you are referring to
Speaker 9: several years projects, so we have visibility in what's going
Speaker 9: to happen. We recently signed a strong project in Europe
Speaker 9: with Shell about gas extraction cleaning to get the rebigation
Speaker 9: of the soil and convert that, you know, potentially either
Speaker 9: back into farmland the one it's theremediated or into a
Speaker 9: different sort of compression storage for example for energy. So
Speaker 9: this type of project gives you a ten year of
Speaker 9: visibility on some of those different things. We have also
Speaker 9: large frameworks with some clients you know that also want
Speaker 9: us to accompany on the long time and very long
Speaker 9: lasting relationship here in the US with more seventy years
Speaker 9: with some clients.
Speaker 8: Yeah, and I know that at least in my world,
Speaker 8: I do energy transition stuff. A lot of businesses are
Speaker 8: just like they're staying in the queue for stuff even
Speaker 8: if they don't need it or they don't have the
Speaker 8: money right now, because it just takes so long to
Speaker 8: get on a line. And if it's like companies like yours,
Speaker 8: at the end of the day, I'm interested in terms
Speaker 8: of how you're managing costs, like where are you still
Speaker 8: seeing inflation, where are you seeing deflation? And where do
Speaker 8: you feel like prices are sticky?
Speaker 9: So I think we've been over the worst phase of inflation, obviously,
Speaker 9: But at the end of the day, when we talk about,
Speaker 9: you know, such a large project like the Santanel or
Speaker 9: other project we are in, the share of course that
Speaker 9: we represent is super small. So I wouldn't be honest
Speaker 9: if I'm not admitting, you know that pushing inflation in
Speaker 9: our revenue has not been really a key question. That's
Speaker 9: been something you know that the way we organize, the
Speaker 9: way we work and what we deliver you know, for
Speaker 9: our clients has been something quite smooth, and the operating
Speaker 9: performance of the last few years have shown that.
Speaker 3: So what type of specific consulting services do you provide?
Speaker 3: You focus just trying to get a sense of how
Speaker 3: what role you guys play in these different projects.
Speaker 9: So Arcadis would be able to intervene around any natural
Speaker 9: or built asset from the very beginning conception thinking and
Speaker 9: such down to remediation and potentially dismantling. So that's where
Speaker 9: we operate, and in that space we will never take
Speaker 9: any construction. This is not where we operate, but we
Speaker 9: are really an advisor, a consultant that will be able
Speaker 9: to give environmental permitting for example, or design construction. Architecture
Speaker 9: also thinks about the fifth Avenue. We've been recently refurbishing
Speaker 9: the Tiffany store.
Speaker 10: But you know, towards you guys, yes, okay, okay, all right,
Speaker 10: yeah right, So what is the hardest part of your
Speaker 10: business right now?
Speaker 8: Like what keeps you up at night? As CFO, what.
Speaker 9: Keeps me upset night? My kid is more than my job.
Speaker 8: I really get that. Yeah, for sure, I'm just curious
Speaker 8: as to what the hardest part of your job is.
Speaker 9: This is a very fragmented portfolio. So you know, you
Speaker 9: need to have a view on everything, and you need
Speaker 9: to admit also that you can't have a view on
Speaker 9: everything at the same time. So it's the way you
Speaker 9: are organized, the way you make people, you know, have
Speaker 9: the information that they need to make the relevant decision
Speaker 9: at any moment. And part of our new strategic cycle
Speaker 9: is really around that there's more project outside that project
Speaker 9: that we can see. So then what do we do
Speaker 9: internally to make sure that our salesforce has a capability
Speaker 9: to make the right decision and not work on a
Speaker 9: first and first mode?
Speaker 3: You know, I see they have about thirty five thousand employees.
Speaker 3: Is it hard to attract and retain employees in your business?
Speaker 9: There are some difficult elements, but obviously we've worked a
Speaker 9: lot on that. Maybe one you hand a half ago
Speaker 9: we were above fourteen percent attrition rate, which was quite
Speaker 9: high just after COVID, So we worked a lot into
Speaker 9: that trying to understand what's happening in terms of engagement score.
Speaker 9: Now we close the year of fifty two, which puts
Speaker 9: US in the highest quartile of our industry, and our
Speaker 9: nutrition is down, you know, just above eleven percent.
Speaker 3: Are you backed in Amsterdam? Are you back to office hybrid?
Speaker 3: What are you doing?
Speaker 9: We are hybrid. We've reduced our office print by thirty
Speaker 9: five percent, you know.
Speaker 8: As the last yes, So what is your policy?
Speaker 3: How does it work for you? Guys. So in Amsterdam,
Speaker 3: for example, Well.
Speaker 9: I would not talk about the head quarter, you know,
Speaker 9: because this is not where it is buoyant and where
Speaker 9: you have a life of the company. But in a
Speaker 9: normal office where we operate for project and for client
Speaker 9: number one, you potentially have people with the client on
Speaker 9: mix site working on the project from time to time
Speaker 9: if we can do it. We love, you know, having
Speaker 9: those teams in our offices because that's you know, quite
Speaker 9: attractive and stimulate everyone, and we we encourage them to
Speaker 9: come in the office two to three days a week.
Speaker 9: But we have, you know, broken our capabilities in terms
Speaker 9: of open spaces and search to create more collaborative spaces
Speaker 9: where a team would gather and go into a specific
Speaker 9: meeting that they have prepared and where they want to
Speaker 9: collaborate on.
Speaker 8: Okay, right, Virginie, thank you so much. Really appreciate your time.
Speaker 8: It was really wonderful to get that perspective. Virginie du
Speaker 8: Parachi joins us Arcadus chief financial Officer. You're jealous of
Speaker 8: the work, Yeah, yes, you want the remote radio working.
Speaker 8: That's part of things it works.
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Speaker 8: Let's get the sort of innovation startups, how do you
Speaker 8: get it done? How do you start a business? What
Speaker 8: does it mean? How do you do it in the
Speaker 8: world of AI. Also, and there's a great person to
Speaker 8: talk to you about this, Sunny Bonell. She's co founder
Speaker 8: and CEO of Mato, which is a global brand strategy
Speaker 8: and design firm focused on brand transformations for innovative tech companies.
Speaker 8: So let's get more on all of this and what
Speaker 8: it means and how hard it is to start a business.
Speaker 8: I certainly don't want to do that, by the way,
Speaker 8: Sonny joins us. Now, Sonny, first of all, what is Mato.
Speaker 11: Well, we are a brand strategy and design agency and
Speaker 11: we work on brand transformations for innovative tech companies. As
Speaker 11: you said there, we typically join forces with visionary leadership
Speaker 11: teams executive teams at very pivotal inflection points in their
Speaker 11: business to help them sort of define what's new and
Speaker 11: what's next. And we really are known as this kind
Speaker 11: of big idea company, So we work with leadership teams
Speaker 11: to kind of find what is that big idea worth
Speaker 11: ratling around, how do we make it famous for them,
Speaker 11: how do we areticulate it within the company and without
Speaker 11: the company in terms of external and how do we
Speaker 11: get people really excited to champion and build that future
Speaker 11: with them. So that's kind of us working with all
Speaker 11: sorts of brands like Minnesota, Vikings, Google, Hershey's, Virgin and
Speaker 11: a lot of challenger startups as well.
Speaker 3: So, Sonny, what's I guess some of the types of
Speaker 3: work you're doing now with clients and maybe how's that
Speaker 3: changed over the years.
Speaker 9: Well, I think a.
Speaker 11: Lot of teams in particular, are you know, navigating a
Speaker 11: very tricky landscape, and so a lot of our work
Speaker 11: is really focused on leadership alignment. Many teams, with the
Speaker 11: advance of AI, with the way the world is evolving
Speaker 11: and changing so quickly, they need to adapt and be
Speaker 11: very agile, and so what we're often doing is we're
Speaker 11: coming in and working with visionary leadership teams to sort
Speaker 11: of help them align around what is it that they're
Speaker 11: fighting for, what is it that they're fighting against, what
Speaker 11: future are they trying to move the organization towards and
Speaker 11: how do we get everybody to adopt that and really
Speaker 11: buy into that future And and most importantly, you know,
Speaker 11: really not just not just anticipate it, but really be
Speaker 11: proactive and trying to move their businesses to that future
Speaker 11: so they can remain relevant and achieve resonance in this
Speaker 11: wild landscape that we're all in.
Speaker 8: Do you feel like companies Paul and I were in
Speaker 8: Newark at nj T earlier in the week, do you
Speaker 8: feel like companies and the c suite really understand the
Speaker 8: role of AI and their business and like, have the
Speaker 8: right vocabulary, have the right strategy, have the right outward
Speaker 8: facing stuff.
Speaker 11: Yes, and no, I think that we're leadership teams need
Speaker 11: to understand that AI is now part of the dominant
Speaker 11: conversation and it is important to not only mobilize your
Speaker 11: team and understand the technology to become really fluent in
Speaker 11: the in the technology, but to adopt that technology company wide.
Speaker 11: But I think it even goes higher up right with
Speaker 11: visionary leadership, which is what I really speak about and
Speaker 11: am an expert in, which is you know, how do
Speaker 11: visionary leaders help their teams not only see that future,
Speaker 11: but continue using these tools to sort of amplify it,
Speaker 11: to make efficiency greater, to just help them transform, to
Speaker 11: to stay relevant and meet that new future.
Speaker 3: Sonny, it used to be back in the day. If
Speaker 3: you want to build a brand, you just bought a
Speaker 3: thirty second spot on you know, network television. Those days,
Speaker 3: I believe are over. What are some successful ways or
Speaker 3: strategies that you've used with some of your clients.
Speaker 1: Well, I think a lot of it is positioning, you know,
Speaker 1: making sure that you have a very clear.
Speaker 11: Point of view, what do you stand for, what do
Speaker 11: you stand against? And more importantly, how do you get everybody,
Speaker 11: both your audience and your internal team aligned to that?
Speaker 11: And then what is that sort of core story that
Speaker 11: you're trying to tell and to remain that to build
Speaker 11: that authenticity within the company. So you're trying to sort
Speaker 11: of have something to say, not just something to sell,
Speaker 11: and that's extraordinarily difficult when things are very competitive, when
Speaker 11: you have a lot of people in many.
Speaker 1: Businesses doing the same thing as you.
Speaker 11: What is going to define your competitive advantage? What is
Speaker 11: that cutting edge thing that you bring to the table,
Speaker 11: and how do you get people really excited about it?
Speaker 11: And how do you make it in a way that
Speaker 11: it's clear, it's compelling, it's articulate, and people want to
Speaker 11: be part.
Speaker 1: Of that dialogue.
Speaker 11: And so a lot of our work is really helping
Speaker 11: teams and organizations just define that what is that big idea?
Speaker 11: What is that thing that you want people to rally around,
Speaker 11: and then how do we ultimately, uh, you know, build
Speaker 11: that into the brand and into the mechanisms, into our ecosystem,
Speaker 11: into our language, into our into our brands, you know
Speaker 11: system essentially to get people really excited about that.
Speaker 8: How did you get into this business? And like, how
Speaker 8: did you start your own company? Like what was that journey?
Speaker 11: Like, well, I was on track to be a veterinarian
Speaker 11: no candidate college. Yeah, so my partner and I dropped
Speaker 11: out of college in our early twenties to start Motto
Speaker 11: and we had been moonlighting as designers on the side
Speaker 11: and just kind of fell in love with it and
Speaker 11: started to be hired for it. And so that was
Speaker 11: two thousand and five. This is eighteen years later, and
Speaker 11: now we've worked with some of the biggest brands on
Speaker 11: Earth and it's it's it's a labor of love because
Speaker 11: it's taught us like how to evolve with times.
Speaker 1: When we started, it was yellow pages and digital at
Speaker 1: you know, basically like yeah.
Speaker 11: Like printed materials, you know, whereas now everything's digital and
Speaker 11: everything's you know, much much more diverse. But back then,
Speaker 11: you know, you had to really continue adapting, you know,
Speaker 11: every so couple of years. And then also seeing organizations
Speaker 11: that you're working with also have to be agile on
Speaker 11: a day app and your strategies and the way that
Speaker 11: you move teams forward is some of it remains the same.
Speaker 11: You know, values and authenticity will always be at the heart.
Speaker 11: I think of every organization. You have to know what
Speaker 11: you stand for and what you don't and and ultimately
Speaker 11: again what is your competitive difference? Is what is your
Speaker 11: point of view? And everything? And so as brands become
Speaker 11: more demanding of not only people, demanding of you know,
Speaker 11: how do they what do they feel about political issues?
Speaker 11: What do they feel about the issues of our time,
Speaker 11: you find organizations having to be and called upon to
Speaker 11: speak about these things, to really sort of plant their flags.
Speaker 11: And so that's why we call the company motto is
Speaker 11: because what is your flag?
Speaker 1: What is what flags are you planting so that people
Speaker 1: can understand who you are? As a rallying call for
Speaker 1: who you are.
Speaker 8: We only have like twenty seconds. But do you think
Speaker 8: if you had started this business today, you would have
Speaker 8: been able to do it? Like has environment has changed
Speaker 8: this much?
Speaker 11: It has changed, but I think that but that would
Speaker 11: not have been I think. I think visionary leaders are
Speaker 11: driven by two things, innovation and progress.
Speaker 1: And I believe that if I had to start this
Speaker 1: business today.
Speaker 11: I would absolutely be able, we would be able to
Speaker 11: do it because I think that if you are a
Speaker 11: visionary leader, you're able to understand and follow kind of
Speaker 11: move towards the trends and move your business towards that
Speaker 11: new future.
Speaker 8: So absolutely, all right, Sonny, I mean really, starting my
Speaker 8: own business seems like the hardest, scariest thing in the world.
Speaker 8: All right, Sonny Banilla co founder and CEO at Mina,
Speaker 8: We super appreciate it. Kudos to you. That is quite
Speaker 8: a journey. Thank you for all of that part.
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