WEBVTT - Bloomberg Surveillance: Lynn Martin on Global Market Trends 0:00:00.240 --> 0:00:02.800 Investors watching out for a range of headwinds. In twenty 0:00:02.840 --> 0:00:05.320 twenty four, Linn Martin, the president of the New York 0:00:05.360 --> 0:00:08.639 Stock Exchange, outlining three principal trends that may shape global 0:00:08.680 --> 0:00:13.000 markets this year, volatility remaining, a reinvigorated IPO market, and 0:00:13.119 --> 0:00:16.279 US capital markets continuing to lead the world. Lind Martin, 0:00:16.320 --> 0:00:18.479 a police are saying, joins us at the table, Morty, Lyn. 0:00:18.600 --> 0:00:20.159 Thanks for having me. It's great to be with you. 0:00:20.320 --> 0:00:22.600 It's good to see you again. Let's start with the geopolitics. 0:00:22.600 --> 0:00:24.640 Clearly the risk in the Middle East is front and 0:00:24.720 --> 0:00:26.759 center after the events at the weekend. How does that 0:00:26.800 --> 0:00:29.400 contribute to this theme of high volatility sticking around for 0:00:29.480 --> 0:00:30.639 longer in your view? 0:00:31.160 --> 0:00:35.440 Yeah, you know, the geopolitical environments are quite complicated environment. 0:00:35.479 --> 0:00:38.640 I think we can all agree with that. It clearly 0:00:38.680 --> 0:00:42.320 impacts the US equity markets and the global equity markets 0:00:42.320 --> 0:00:46.559 by contributing to volatility. The surprise factor, that's what's going 0:00:46.600 --> 0:00:49.960 to contribute to volatility, and this weekend's events were, you know, 0:00:50.040 --> 0:00:51.080 one of those surprises. 0:00:51.240 --> 0:00:54.560 Unfortunately, We've talked about this before, how capital markets might 0:00:54.560 --> 0:00:58.040 be increasingly polarized regionally, geographically, it might see a situation 0:00:58.080 --> 0:01:01.160 where it's US capital markets for US com companies Chinese 0:01:01.160 --> 0:01:03.640 companies capital markets for Chinese companies. Do you see it 0:01:03.720 --> 0:01:04.800 quite the same way? 0:01:05.200 --> 0:01:06.040 You know, I don't. 0:01:06.120 --> 0:01:08.319 I mean, the US capital markets are the envy of 0:01:08.360 --> 0:01:13.880 the world. They have withstood multiple pandemics, multiple wars, and 0:01:13.920 --> 0:01:17.440 they've really shown to be the best source of liquidity 0:01:17.880 --> 0:01:21.120 for a founder, for an entrepreneur to raise the capital 0:01:21.160 --> 0:01:24.240 that they need to change the world. If that's true, 0:01:24.319 --> 0:01:27.000 more than more than ever. In fact, you know, you 0:01:27.080 --> 0:01:29.200 see the ability. 0:01:28.720 --> 0:01:31.920 To tap the US capital markets as. 0:01:32.240 --> 0:01:36.440 Aspirational, but also when you look at the cost of capital, 0:01:36.680 --> 0:01:39.800 the most efficient way to raise capital to change the world. 0:01:39.959 --> 0:01:41.760 Let's put these two ideas together. So you think that 0:01:41.800 --> 0:01:45.920 because of the potential volatility, because of the unknown unknowns 0:01:46.000 --> 0:01:49.480 later this year, are people moving forward their plans for IPOs? 0:01:49.840 --> 0:01:52.240 Absolutely? You know, we have a tremendous amount of companies 0:01:52.360 --> 0:01:52.960 on the road. 0:01:53.000 --> 0:01:56.440 We're actually about to welcome one a large one this week. 0:01:56.640 --> 0:02:00.200 M or Sports, which is the holding company for Willis 0:02:00.520 --> 0:02:03.760 for Louisville Slugger, for a lot of the brands you know, our. 0:02:03.680 --> 0:02:05.800 Children and we use every day. 0:02:06.400 --> 0:02:11.160 And just later today we're about to welcome a UK 0:02:11.320 --> 0:02:15.880 based company, Flutter, who is transferring they're listing out of 0:02:15.919 --> 0:02:19.200 their regional market over to the New York Stock Exchange 0:02:19.200 --> 0:02:20.320 a little bit later this morning. 0:02:20.440 --> 0:02:23.160 One of the reasons why IPOs haven't been as active 0:02:23.280 --> 0:02:26.399 as people had expected was because of just a lot 0:02:26.480 --> 0:02:29.360 of private equity companies not wanting to take the valuation cuts. 0:02:29.360 --> 0:02:31.000 And we've seen that even with Reddit right they have 0:02:31.080 --> 0:02:35.440 five billion dollar market capitalization different lower than what some 0:02:35.480 --> 0:02:39.040 of the previous private market valuations had been. How much 0:02:39.080 --> 0:02:42.600 are people accepting a haircut, accepting not getting the price 0:02:42.639 --> 0:02:45.120 that they wanted in order to really cash out of 0:02:45.120 --> 0:02:45.840 those investments. 0:02:46.000 --> 0:02:48.600 You know, I think the main you had two reasons 0:02:48.639 --> 0:02:51.760 really impacting the IPO markets over the last two years. 0:02:51.800 --> 0:02:54.600 You had the volatility, the increased volatility when the VIX 0:02:54.720 --> 0:02:58.320 is trading a you know, a thirty handle as opposed 0:02:58.360 --> 0:03:02.200 to you know, below twenty. It's not that founders couldn't 0:03:02.200 --> 0:03:04.760 get deals done, it was what is my stock going 0:03:04.800 --> 0:03:09.120 to do the day after IPO, the month after IIPO? 0:03:09.440 --> 0:03:12.840 What macroeconomic factors are going to influence. 0:03:12.760 --> 0:03:16.880 The way my stock is trading? Now? 0:03:17.000 --> 0:03:22.079 You also see that there is a recalibration of valuations 0:03:22.240 --> 0:03:24.920 in the market. I would make the argument though, that 0:03:24.960 --> 0:03:28.680 twenty twenty one had inflated valuations in the market, so 0:03:29.040 --> 0:03:32.320 you know twenty twenty one was one side of tail risk. 0:03:32.840 --> 0:03:35.400 This is the last two years or the other side 0:03:35.520 --> 0:03:37.600 of tail risks on the Bell curve. 0:03:37.760 --> 0:03:39.560 There is this structure story as well, and we've talked 0:03:39.560 --> 0:03:41.800 a lot about it around this table and in Dallas 0:03:41.840 --> 0:03:44.400 as well at the World Economic Forum, that we're seeing 0:03:44.440 --> 0:03:48.000 regulation shift that will push more financing activity into private markets. 0:03:48.000 --> 0:03:49.800 When you start to think about those themes, do you 0:03:49.800 --> 0:03:52.280 think the lifespan, the arc of a company's lifespan, the 0:03:52.280 --> 0:03:54.520 timeline of it is going to change just in terms 0:03:54.560 --> 0:03:56.520 of how long they stay private for versus how long 0:03:56.560 --> 0:03:58.120 they started private previously. 0:03:58.360 --> 0:04:00.760 I think companies are going to be more disciple about 0:04:00.840 --> 0:04:04.640 when they tap the public markets. Obviously, they're going to 0:04:04.760 --> 0:04:08.280 want to be able to articulate a path to profitability 0:04:08.480 --> 0:04:12.080 or profitability. So I think what you're going to see 0:04:12.160 --> 0:04:16.560 is when companies come to market the public markets, they're 0:04:16.560 --> 0:04:19.479 going to be public market ready. They're going to be 0:04:19.520 --> 0:04:24.000 able to articulate a very clear message to investors, to 0:04:24.760 --> 0:04:28.680 their shareholders that will enable them to thrive I don't 0:04:28.680 --> 0:04:31.719 think there's any substitute though, for the public markets, and 0:04:31.720 --> 0:04:33.359 that's been proven time and time again. 0:04:33.600 --> 0:04:35.640 Have you seen that change already? That change you just 0:04:35.680 --> 0:04:37.080 described absolutely. 0:04:37.279 --> 0:04:39.159 With the amount companies we have on the road, we 0:04:39.200 --> 0:04:41.040 have a tremendous mount companies on the road. We have 0:04:41.080 --> 0:04:44.360 a tremendous amount of companies that we're working with at 0:04:44.360 --> 0:04:47.760 the moment to tap the public market. So we're really 0:04:47.800 --> 0:04:50.440 excited about the prospects for twenty twenty four. 0:04:50.480 --> 0:04:52.120 I want to talk about one threat for twenty twenty 0:04:52.160 --> 0:04:55.440 four and beyond AI. I've asked you about this before, 0:04:55.800 --> 0:04:59.640 Let's go through it again. Confronting an era of misinformation 0:05:00.240 --> 0:05:01.800 for someone in your position, how are we going to 0:05:01.800 --> 0:05:02.520 go back to doing this? 0:05:02.800 --> 0:05:05.600 You know, I'm really glad you made the point about misinformation, 0:05:05.680 --> 0:05:09.760 because AI is just a continuation of data driven trends 0:05:09.800 --> 0:05:12.600 that have really existed for more than a decade. If 0:05:12.640 --> 0:05:17.120 you've got good data that is going to enable models 0:05:17.480 --> 0:05:20.919 to add efficiencies to markets. It's something that we've seen 0:05:21.200 --> 0:05:24.760 in production for more than a decade now with the 0:05:25.040 --> 0:05:28.599 AI or large language models that we employ to add 0:05:28.640 --> 0:05:32.600 transparency to the energy markets. And as a result of 0:05:32.839 --> 0:05:35.640 the large language models that we have had in production 0:05:35.880 --> 0:05:39.680 for a decade. We've seen the more opaque parts of 0:05:39.720 --> 0:05:43.040 the energy market have tremendous amount of transparency, a tremendous 0:05:43.040 --> 0:05:46.479 amount of liquidity added to them, particularly over the last 0:05:46.520 --> 0:05:47.159 couple of years. 0:05:47.320 --> 0:05:49.160 Did you guys see what happened with Taylor Swift and 0:05:49.440 --> 0:05:52.520 X the AI sort of renditions of her and that 0:05:52.640 --> 0:05:56.119 basically it was preventing you from googling Taylor Swift search 0:05:56.279 --> 0:06:00.560 and search on X because there are pornographic, artificially intelligence 0:06:00.600 --> 0:06:02.599 generated images. But it sort of shows you some of 0:06:02.640 --> 0:06:06.440 the challenges in misinformation or just a false videos. I 0:06:06.480 --> 0:06:08.920 am curious how many companies that are planning to IPO 0:06:09.560 --> 0:06:11.520 our tech companies are building themselves as such. I mean, 0:06:11.600 --> 0:06:13.920 is it like one hundred percent their tech company, even 0:06:13.920 --> 0:06:14.960 if they sell furniture. 0:06:15.440 --> 0:06:19.880 You know, in this digital age, everyone uses technology. Everyone's 0:06:19.880 --> 0:06:22.640 a technology company. You sort of missed the boat. If 0:06:22.680 --> 0:06:26.520 you're not employing technology in some way, shape or form 0:06:26.600 --> 0:06:29.080 to drive your business forward, who do you. 0:06:29.080 --> 0:06:31.279 Think right now is your biggest competitor? Though, I mean, 0:06:31.360 --> 0:06:34.000 to John's point, the private markets. We've been talking about 0:06:34.000 --> 0:06:36.320 that for a long time, and there was a discussion. 0:06:35.880 --> 0:06:37.240 About some sort of transfer. 0:06:38.080 --> 0:06:40.720 Is it just, you know, another stock exchange, or is 0:06:40.760 --> 0:06:42.320 it another avenue of financing? 0:06:42.600 --> 0:06:44.920 You know, I don't really think we have a competitor 0:06:44.920 --> 0:06:46.839 because the role of the New York Stock Exchange is 0:06:46.880 --> 0:06:51.680 just very different than a traditional stock exchange or a 0:06:51.760 --> 0:06:52.560 listing's venue. 0:06:52.600 --> 0:06:54.599 Our job is to be the stewards. 0:06:54.120 --> 0:06:57.640 Of the US capital markets, and since the US is 0:06:57.640 --> 0:07:00.800 such an important part of the global capital markets, we 0:07:00.880 --> 0:07:04.040 really are the stewards of the global capital markets, allowing 0:07:04.360 --> 0:07:09.039 entrepreneurs and innovators to tap the markets to raise the 0:07:09.040 --> 0:07:12.120 capital they need in a cost efficient fashion and to 0:07:12.200 --> 0:07:13.800 democratize investing. 0:07:14.080 --> 0:07:16.760 You expect there to be a much more active year 0:07:16.880 --> 0:07:18.720 in the IPO world. We have seen this with a 0:07:18.720 --> 0:07:22.400 lot of banks predicting much more active capital markets activity 0:07:22.440 --> 0:07:25.640 this year. How much is that predicated on significant rate 0:07:25.640 --> 0:07:28.080 cuts by the Federal Reserve It. 0:07:28.320 --> 0:07:31.000 I think the market's already pricing in the rate cuts 0:07:31.040 --> 0:07:32.120 to a certain extent. 0:07:32.520 --> 0:07:34.720 The one thing that I'm watching. 0:07:34.600 --> 0:07:37.840 Is the discrepancy between the US equity markets and how 0:07:37.840 --> 0:07:40.640 it's pricing in call it two or three rate cuts, 0:07:40.640 --> 0:07:42.480 and then you look at the Fed fund futures markets. 0:07:42.480 --> 0:07:44.520 If you go further out in the curve. Towards the 0:07:44.600 --> 0:07:46.560 end of the year, it's pricing in probably five or 0:07:46.600 --> 0:07:48.600 six rate cuts, so there's a bit. 0:07:48.440 --> 0:07:49.320 Of discrepancy there. 0:07:49.320 --> 0:07:51.000 The reason why I'm watching this is because that's what's 0:07:51.000 --> 0:07:55.760 going to impact volatility. Really, volatility is what's going to 0:07:56.360 --> 0:08:00.440 I would say impact the IPO markets. But for the 0:08:00.520 --> 0:08:02.840 short to medium term, I think we're going to see 0:08:02.840 --> 0:08:04.000 some good IPOs. 0:08:04.360 --> 0:08:07.240 You wrote last year that seventy percent of IPOs executed 0:08:07.400 --> 0:08:09.800 actually couldn't meet the provisions on the New York section. 0:08:10.040 --> 0:08:11.760 What is the biggest provision that's holding some of these 0:08:11.800 --> 0:08:13.760 companies back from going to the NICY. 0:08:13.920 --> 0:08:17.960 Yeah, So we've got a variety of quantitative standards. A 0:08:18.000 --> 0:08:21.480 lot of those are focused on the minimum amount of shareholders, 0:08:22.080 --> 0:08:25.680 the size of a company's float that they actually put 0:08:25.800 --> 0:08:30.520 into the public markets, as well as the minimum. 0:08:30.160 --> 0:08:33.640 Market cap of a company. And you're right, more. 0:08:33.520 --> 0:08:36.040 Than seventy percent didn't qualify for US last year, and 0:08:36.040 --> 0:08:38.360 that number was even higher in twenty twenty two. 0:08:38.559 --> 0:08:41.319 New York Stock Exchange President Limartin alongside maybe we talked 0:08:41.320 --> 0:08:43.560 about politics, remember and Davos, and the whole room just 0:08:43.559 --> 0:08:46.120 went quiet. No one wanted to discuss does this changed 0:08:46.160 --> 0:08:47.680 your world, this race this year. 0:08:48.240 --> 0:08:50.160 You know, the only way it changes our world is 0:08:50.280 --> 0:08:53.240 it's impacting volatility and the IPO window. 0:08:54.040 --> 0:08:55.160 So our job is to. 0:08:55.160 --> 0:08:59.000 Make sure that, particularly in years like twenty twenty four, 0:08:59.160 --> 0:09:03.439 our systems are are reliable, resilient and open so that 0:09:03.480 --> 0:09:05.440 people can efficiently manage risk. 0:09:05.679 --> 0:09:09.000 That's how you diplomatically sort of dodge that question without 0:09:09.000 --> 0:09:09.680 addressing it. 0:09:09.760 --> 0:09:11.520 Basically, they're going to look at the markets and not 0:09:11.559 --> 0:09:13.440 address the politics of it. I will just say Saturday 0:09:13.480 --> 0:09:15.360 Night Live will get funnier because they seem to really 0:09:15.440 --> 0:09:18.480 enjoy this Lynn. When you talk about volatility, how much 0:09:18.720 --> 0:09:22.199 is really driven by an unexpected weakening in the economy. 0:09:22.280 --> 0:09:25.160 Is that what you're really referring to that is potentially 0:09:25.160 --> 0:09:28.640 the greatest supplier of volatility or is it a lot 0:09:28.720 --> 0:09:29.440 of different things? 0:09:29.559 --> 0:09:31.000 You know, it's a lot of different things. 0:09:31.040 --> 0:09:33.280 And the important thing to look at when you think 0:09:33.280 --> 0:09:36.400 about volatility. So there's the VIX, which is clearly the 0:09:36.400 --> 0:09:38.439 measure of equity vall. But then there's also the MOVE, 0:09:38.600 --> 0:09:41.640 which is our index, which is the Treasury market ball, 0:09:41.760 --> 0:09:46.520 and those levels are still elevated. It's still above one hundred. 0:09:46.559 --> 0:09:48.319 If I look at the move Index, which I do 0:09:48.400 --> 0:09:49.000 every day. 0:09:49.360 --> 0:09:52.480 Said thank you to be brilliant. Lynn Martin, the NYSC President, 0:09:52.559 --> 0:09:53.560 joining us around the table.