1
00:00:02,720 --> 00:00:10,520
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,560 --> 00:00:14,480
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

3
00:00:14,560 --> 00:00:17,800
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

4
00:00:17,880 --> 00:00:21,000
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,320 --> 00:00:23,040
Speaker 1: or watch us live on YouTube.

6
00:00:24,079 --> 00:00:26,279
Speaker 2: Let's stay on the zone of retail sales and what

7
00:00:26,320 --> 00:00:28,680
Speaker 2: it means then for retail stocks. Joining us now is

8
00:00:28,800 --> 00:00:32,560
Speaker 2: mari Sure, Senior Equity Analystic Columbia, Thread Needle Investments joining

9
00:00:32,640 --> 00:00:35,960
Speaker 2: us from Boston. All right, Mariy, just talk about the

10
00:00:36,000 --> 00:00:39,839
Speaker 2: broader landscape. It is your takeaway for retail sales.

11
00:00:41,600 --> 00:00:44,479
Speaker 3: Hi, thanks again for having me. Yes. When looking at

12
00:00:44,520 --> 00:00:46,120
Speaker 3: the adjusted.

13
00:00:45,880 --> 00:00:52,280
Speaker 4: Numbers for February up slightly versus January, I think the results.

14
00:00:51,880 --> 00:00:53,159
Speaker 3: Overall were solid.

15
00:00:53,640 --> 00:00:58,600
Speaker 4: We saw the strength led by non store retail, while

16
00:00:58,920 --> 00:01:02,520
Speaker 4: most of the other categor gory slowed versus January. But again,

17
00:01:02,600 --> 00:01:06,280
Speaker 4: this was very much expected and I think the key

18
00:01:06,360 --> 00:01:11,160
Speaker 4: question here is is this slow down transitory or more structural?

19
00:01:11,680 --> 00:01:15,919
Speaker 4: And while I do acknowledge the political turmoil and rising

20
00:01:16,000 --> 00:01:19,840
Speaker 4: inflation expectations, I think when you listen to a lot

21
00:01:19,880 --> 00:01:23,000
Speaker 4: of the companies as they reported earnings over the past

22
00:01:23,040 --> 00:01:26,360
Speaker 4: few weeks. Listening to the large credit card companies and

23
00:01:26,480 --> 00:01:29,960
Speaker 4: large banks, it does seem that most of the pressure

24
00:01:30,040 --> 00:01:33,759
Speaker 4: that we saw in February was weather driven, and that

25
00:01:33,800 --> 00:01:37,560
Speaker 4: there has been some improvement in March to date. So

26
00:01:37,840 --> 00:01:40,240
Speaker 4: I actually believe a lot of the pressure that we're

27
00:01:40,240 --> 00:01:45,200
Speaker 4: seeing is more transitory. But I acknowledge that the backdrop

28
00:01:45,280 --> 00:01:50,720
Speaker 4: is still, you know, very tumultuous and makes it difficult

29
00:01:50,760 --> 00:01:53,200
Speaker 4: for investors to really stick their necks out here.

30
00:01:53,760 --> 00:01:56,120
Speaker 5: So, Mary, what are the you know, the companies we

31
00:01:56,120 --> 00:01:58,800
Speaker 5: saw Col's just last week gave a I guess a

32
00:01:58,880 --> 00:02:04,040
Speaker 5: disappointing for cast. How representative is that of companies actually

33
00:02:04,080 --> 00:02:06,160
Speaker 5: seeing some weakness or maybe just we need to be

34
00:02:06,160 --> 00:02:07,280
Speaker 5: cautious here in our outlook.

35
00:02:08,320 --> 00:02:09,640
Speaker 3: I think it's a little bit of both.

36
00:02:09,680 --> 00:02:12,400
Speaker 4: I mean, when I look at the results today, I

37
00:02:12,480 --> 00:02:14,320
Speaker 4: think we are back to a lot of the same

38
00:02:14,440 --> 00:02:18,000
Speaker 4: category and channel trends that we saw in twenty twenty four.

39
00:02:18,480 --> 00:02:22,840
Speaker 4: So that would include relative outperformance and categories like food,

40
00:02:23,280 --> 00:02:28,120
Speaker 4: personal care, clothing, and general merchandise, and then weakness in

41
00:02:28,160 --> 00:02:33,079
Speaker 4: other areas like home electronics, sporting goods, and department stores.

42
00:02:33,400 --> 00:02:36,600
Speaker 4: So to your question about coals, I mean the department

43
00:02:36,639 --> 00:02:39,920
Speaker 4: stores continue to lose share, and at the end of

44
00:02:39,919 --> 00:02:43,359
Speaker 4: the day, retail is a low single digit growth category

45
00:02:43,919 --> 00:02:47,959
Speaker 4: and it's all about who's winning and who's losing share.

46
00:02:48,360 --> 00:02:51,320
Speaker 4: And so our playbook is to really stick with the

47
00:02:51,400 --> 00:02:54,400
Speaker 4: companies that are gaining share. And I think there's a

48
00:02:54,440 --> 00:02:56,920
Speaker 4: couple of ways to do that, but I would not

49
00:02:57,120 --> 00:03:01,440
Speaker 4: take Coal's results and extract the life those across a

50
00:03:01,560 --> 00:03:02,400
Speaker 4: much broader group.

51
00:03:02,680 --> 00:03:03,520
Speaker 1: So what do you guys like?

52
00:03:05,280 --> 00:03:08,080
Speaker 4: So I think, you know, looking at different ways to

53
00:03:08,160 --> 00:03:11,600
Speaker 4: play that share gain opportunity.

54
00:03:11,760 --> 00:03:13,480
Speaker 3: I think there's really two buckets.

55
00:03:13,840 --> 00:03:17,880
Speaker 4: Number one is the companies that offer value, convenience and

56
00:03:17,960 --> 00:03:21,840
Speaker 4: a broad assortment. And within that bucket, I would put

57
00:03:21,880 --> 00:03:26,720
Speaker 4: the mass merchants like Walmart, Warehouse Clubs, and the off pricers,

58
00:03:27,040 --> 00:03:30,480
Speaker 4: and I think that bucket remains very well positioned, especially

59
00:03:30,600 --> 00:03:33,680
Speaker 4: in a weaker Macro backdrop. Then on the other hand,

60
00:03:33,680 --> 00:03:38,960
Speaker 4: you have best in class global brands which are executing

61
00:03:39,200 --> 00:03:43,400
Speaker 4: very well from a product and marketing standpoint and gaining share.

62
00:03:43,520 --> 00:03:44,280
Speaker 3: So within that.

63
00:03:44,160 --> 00:03:48,600
Speaker 4: Bucket, I would put companies like Gap, Ralph, Lauren, Tapestry

64
00:03:48,680 --> 00:03:50,200
Speaker 4: and even Contour brands.

65
00:03:51,200 --> 00:03:51,440
Speaker 6: Mark.

66
00:03:51,440 --> 00:03:55,040
Speaker 5: What are your companies saying about tariffs and their ability

67
00:03:55,160 --> 00:03:58,840
Speaker 5: to how they're thinking about passing that along or taking

68
00:03:58,840 --> 00:04:01,000
Speaker 5: that in their margin. What do you hearing from the companies.

69
00:04:02,160 --> 00:04:02,960
Speaker 3: It's a great question.

70
00:04:03,080 --> 00:04:06,560
Speaker 4: This is very top of mind, of course for investors,

71
00:04:06,840 --> 00:04:12,120
Speaker 4: and most companies that at this point have included the

72
00:04:12,200 --> 00:04:15,080
Speaker 4: impact of the tariffs that have already been announced in

73
00:04:15,200 --> 00:04:19,839
Speaker 4: their guidance. However, there is the risk that you know,

74
00:04:19,920 --> 00:04:24,840
Speaker 4: the tariff headlines continue to worsen and that is not

75
00:04:25,040 --> 00:04:27,760
Speaker 4: included in the company's guidance. So I think that does

76
00:04:27,880 --> 00:04:31,400
Speaker 4: create some risk as we look forward. I think, you know,

77
00:04:31,480 --> 00:04:35,640
Speaker 4: the companies are looking at various ways to mitigate the impact.

78
00:04:36,000 --> 00:04:39,560
Speaker 3: Some of it is moving production around, some of.

79
00:04:39,480 --> 00:04:43,920
Speaker 4: It is pushing back on their sourcing partners, and we

80
00:04:43,960 --> 00:04:48,240
Speaker 4: saw Walmart in the headlines last week along those lines.

81
00:04:48,480 --> 00:04:50,719
Speaker 4: And then some of it will you know, the higher

82
00:04:50,760 --> 00:04:55,359
Speaker 4: prices getting passed through to the consumer. And you know,

83
00:04:55,440 --> 00:04:57,480
Speaker 4: I would say to that, I think that the price

84
00:04:57,560 --> 00:05:00,880
Speaker 4: increases for the most part would be modern. But there

85
00:05:00,880 --> 00:05:04,960
Speaker 4: are some categories like consumer electronics, which would need to

86
00:05:05,040 --> 00:05:10,839
Speaker 4: take significant pricing to offset worst case China tariffs, and

87
00:05:10,920 --> 00:05:15,120
Speaker 4: I think that will be very difficult to engineer in

88
00:05:15,120 --> 00:05:16,720
Speaker 4: this macro backdrop.

89
00:05:17,000 --> 00:05:20,240
Speaker 2: Yeah, absolutely, Mari thanks a lot. We really appreciate. Thank

90
00:05:20,240 --> 00:05:24,440
Speaker 2: you so much. Marie Shore, Senior equity analyst, Columbia, Threadneedle Investments,

91
00:05:24,520 --> 00:05:26,160
Speaker 2: joining us a firm Boston.

92
00:05:27,920 --> 00:05:31,640
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

93
00:05:31,720 --> 00:05:34,799
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

94
00:05:34,800 --> 00:05:38,120
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

95
00:05:38,160 --> 00:05:41,279
Speaker 1: you get your podcasts, or watch us live on YouTube.

96
00:05:41,920 --> 00:05:44,479
Speaker 2: Equities in the Green just a touch because volume also

97
00:05:44,839 --> 00:05:47,719
Speaker 2: is quite light. Fill Orlando, chief equity market strategist and

98
00:05:48,000 --> 00:05:52,599
Speaker 2: ahead of client portfolio management at Federiate Hermes joins us. Now, Hey, Phil,

99
00:05:53,640 --> 00:05:56,120
Speaker 2: every note that I get on my desk is it's

100
00:05:56,160 --> 00:05:59,080
Speaker 2: a tricky, trarating environment. No one's coming out and saying

101
00:05:59,120 --> 00:06:02,080
Speaker 2: buy the dip. Yet it's all TBD. It's all question

102
00:06:02,160 --> 00:06:05,800
Speaker 2: marks surrounding eventual growth, margins and earnings. How do you

103
00:06:05,839 --> 00:06:06,280
Speaker 2: look at it?

104
00:06:07,400 --> 00:06:12,720
Speaker 6: So we don't materially disagree with that, but we did

105
00:06:12,760 --> 00:06:17,159
Speaker 6: think that the market was ahead of itself in terms

106
00:06:17,160 --> 00:06:20,320
Speaker 6: of the dramatic outperformance of the mag seven versus the

107
00:06:20,960 --> 00:06:25,160
Speaker 6: Forgotten four ninety three. And so you know, our call

108
00:06:25,400 --> 00:06:28,559
Speaker 6: has been that we were hoping for a move down

109
00:06:28,600 --> 00:06:31,240
Speaker 6: in the S and P five hundred. That would take

110
00:06:31,640 --> 00:06:34,320
Speaker 6: the market back to about the two hundred day moving average.

111
00:06:34,560 --> 00:06:37,320
Speaker 6: Now for the S and P that's about fifty seven hundred,

112
00:06:37,880 --> 00:06:41,360
Speaker 6: or was about fifty seven hundred. The stocks got down

113
00:06:41,360 --> 00:06:44,880
Speaker 6: on about the fifty five hundred level on Thursday, and

114
00:06:44,920 --> 00:06:47,280
Speaker 6: then we had, you know, Friday's nights bounce, and then

115
00:06:47,320 --> 00:06:50,240
Speaker 6: we're doing a little better this morning. So the question is,

116
00:06:50,279 --> 00:06:53,520
Speaker 6: all right, so we've achieved the move down below the

117
00:06:53,520 --> 00:06:56,880
Speaker 6: two hundred day moving average or in correction territory, you know,

118
00:06:57,040 --> 00:07:00,119
Speaker 6: is this the point we ought to be stepping in.

119
00:06:59,640 --> 00:07:05,560
Speaker 6: It's in a relatively sharp decline, about eleven percent in

120
00:07:05,600 --> 00:07:10,240
Speaker 6: a relatively short amount of time, you know, about four weeks. Generally,

121
00:07:10,320 --> 00:07:14,560
Speaker 6: these things need a little bit more seasoning before the

122
00:07:14,600 --> 00:07:17,920
Speaker 6: bottom sort of establishes itself. So I guess that's a

123
00:07:17,920 --> 00:07:22,920
Speaker 6: long way of saying we're getting interesting here, you know, I,

124
00:07:23,280 --> 00:07:28,440
Speaker 6: if you're a long term investor, I couldn't disagree with

125
00:07:28,520 --> 00:07:31,840
Speaker 6: you starting to nibble here. But in terms of getting

126
00:07:31,880 --> 00:07:37,880
Speaker 6: an all out full blown market capitulation signal, I don't

127
00:07:37,920 --> 00:07:39,600
Speaker 6: know that we're quite there just yet.

128
00:07:41,120 --> 00:07:45,280
Speaker 5: So Phil, to the extent that this market's pullback has

129
00:07:45,440 --> 00:07:49,360
Speaker 5: been generated in large brought by uncertainty about some economic

130
00:07:49,400 --> 00:07:51,680
Speaker 5: policies coming out of the Trump administration, where it relates

131
00:07:51,720 --> 00:07:55,800
Speaker 5: to the tariffs or whatever that doesn't seem to be

132
00:07:55,880 --> 00:07:58,680
Speaker 5: changing anytime soon. Does that continue to be a headwind

133
00:07:58,680 --> 00:07:59,720
Speaker 5: do you think for this market?

134
00:07:59,800 --> 00:08:03,840
Speaker 6: Well, you know, that's a really good question, Paul, because

135
00:08:03,960 --> 00:08:07,760
Speaker 6: if you if you ask the the average strategist or whatever,

136
00:08:07,880 --> 00:08:11,640
Speaker 6: that continues to be a significant headwind. You asked that

137
00:08:11,800 --> 00:08:15,600
Speaker 6: question to Federated Hermes, We've got somewhat different view, you know,

138
00:08:15,680 --> 00:08:18,600
Speaker 6: based upon you know, listening to what the President was

139
00:08:18,600 --> 00:08:21,840
Speaker 6: talking about during the campaign last year. Looking at the

140
00:08:21,920 --> 00:08:25,760
Speaker 6: economic data right now, we've got a one point two

141
00:08:26,520 --> 00:08:30,400
Speaker 6: trillion dollar balance of trade goods deficit at the end

142
00:08:30,440 --> 00:08:35,760
Speaker 6: of last year. GDP in the fourth quarter on a

143
00:08:35,840 --> 00:08:39,040
Speaker 6: chain dollar basis was twenty three and a half trillion dollars,

144
00:08:39,360 --> 00:08:43,079
Speaker 6: which means that that we've got about a one half

145
00:08:43,080 --> 00:08:47,000
Speaker 6: of one percent deficit in terms of GDP growth last

146
00:08:47,080 --> 00:08:50,120
Speaker 6: year for no reason other than than what was going

147
00:08:50,160 --> 00:08:53,880
Speaker 6: on with with trade. So so you look at the

148
00:08:54,240 --> 00:08:57,800
Speaker 6: quote unquote trade war that that that you know, Trump

149
00:08:57,920 --> 00:09:03,480
Speaker 6: is waging here in some ways, it's reciprocal that these

150
00:09:03,679 --> 00:09:10,560
Speaker 6: countries are waging tariffs against US, and and to some degree,

151
00:09:10,600 --> 00:09:13,959
Speaker 6: the president is trying to you know, neutralize or level

152
00:09:13,960 --> 00:09:17,200
Speaker 6: of the playing field. And if he's able to successfully

153
00:09:17,280 --> 00:09:21,040
Speaker 6: do that, that represents the potential for half a percent

154
00:09:21,160 --> 00:09:24,040
Speaker 6: more GDP growth. Now, one of the President's goals and

155
00:09:24,080 --> 00:09:28,120
Speaker 6: one of Treasury Secretary Scott Defense goals, is that we

156
00:09:28,160 --> 00:09:31,880
Speaker 6: want to generate trend line GDP growth to three percent

157
00:09:32,000 --> 00:09:35,040
Speaker 6: or higher on a sustainable basis. Well, if you could

158
00:09:35,120 --> 00:09:38,480
Speaker 6: figure out a way to neutralize this one point two

159
00:09:38,600 --> 00:09:42,800
Speaker 6: trillion dollar trade deficit, that that significant step in that direction.

160
00:09:43,200 --> 00:09:46,640
Speaker 6: And so we're looking at what's going on right now

161
00:09:46,880 --> 00:09:50,040
Speaker 6: as sort of a necessary step to try to achieve

162
00:09:50,559 --> 00:09:55,000
Speaker 6: that economic goal. Neutralize the trade deficit, boost GDP growth.

163
00:09:55,160 --> 00:09:57,280
Speaker 2: It's just a matter of phase one versus phase two

164
00:09:57,320 --> 00:09:59,559
Speaker 2: and how long the difference between the two lasts, right,

165
00:09:59,559 --> 00:10:02,960
Speaker 2: because in theory should also be a growth incentives like

166
00:10:03,000 --> 00:10:06,559
Speaker 2: deregulation and tax cuts. Does the longer that gap persist,

167
00:10:06,960 --> 00:10:08,200
Speaker 2: does that worry you or no?

168
00:10:09,920 --> 00:10:13,400
Speaker 6: Well, again, we've we're taking a long term view here

169
00:10:13,559 --> 00:10:17,080
Speaker 6: and that when you when a new president comes in office,

170
00:10:17,120 --> 00:10:21,720
Speaker 6: typically you'll want to implement the more difficult policies early,

171
00:10:21,880 --> 00:10:25,880
Speaker 6: you know, swallow the bitter medicine in year one. That way,

172
00:10:25,960 --> 00:10:31,360
Speaker 6: the positivity associated with those fiscal policy initiatives will begin

173
00:10:31,400 --> 00:10:34,400
Speaker 6: to bear fruit in year two and beyond. So as

174
00:10:34,440 --> 00:10:38,240
Speaker 6: we're modeling all of this out, you know, we're saying, Okay, yeah,

175
00:10:38,520 --> 00:10:40,920
Speaker 6: we're gonna we're gonna have a hit to GDP growth

176
00:10:41,200 --> 00:10:43,319
Speaker 6: in the back half of twenty four, in the first

177
00:10:43,320 --> 00:10:46,280
Speaker 6: half of twenty five. But as some of this stuff

178
00:10:46,800 --> 00:10:49,199
Speaker 6: actually occurs when we get the tax cuts later in

179
00:10:49,240 --> 00:10:52,400
Speaker 6: the year, and then you know, as this grows into

180
00:10:52,520 --> 00:10:55,800
Speaker 6: economic growth in calendar twenty six, in calendar twenty seven,

181
00:10:56,320 --> 00:11:01,400
Speaker 6: we're then saying, okay, based upon our now that suggests

182
00:11:01,440 --> 00:11:04,000
Speaker 6: we've got a seventy five hundred s and t five

183
00:11:04,080 --> 00:11:07,640
Speaker 6: hundred two years from now. Discount that back a year.

184
00:11:07,720 --> 00:11:11,520
Speaker 6: That's a seven thousand forecast discount that back a year.

185
00:11:11,559 --> 00:11:14,400
Speaker 6: We thought we'd end last year at about sixty two hundred.

186
00:11:14,600 --> 00:11:17,080
Speaker 6: We got up to about sixty one fifty. So I

187
00:11:17,080 --> 00:11:21,000
Speaker 6: think we've figured out the trajectory in terms of fair valuation.

188
00:11:21,480 --> 00:11:25,280
Speaker 6: But you've got this air pocket that's occurred because of

189
00:11:25,280 --> 00:11:30,200
Speaker 6: the volatility and uncertainty associated with how is this policy

190
00:11:30,240 --> 00:11:32,960
Speaker 6: going to be implemented. What are the near term impacts?

191
00:11:33,200 --> 00:11:36,360
Speaker 6: So we're taking the longer term view, saying, Okay, we've

192
00:11:36,400 --> 00:11:39,920
Speaker 6: just had an eleven percent correction. That's pretty attractive. If

193
00:11:39,960 --> 00:11:43,320
Speaker 6: we're a long term holder or a long term buyer

194
00:11:43,600 --> 00:11:46,520
Speaker 6: and are looking out two years, this is very attractive.

195
00:11:46,840 --> 00:11:49,199
Speaker 6: If I'm looking out how is the market going to

196
00:11:49,240 --> 00:11:51,840
Speaker 6: return over the next week or the next month, It's

197
00:11:51,920 --> 00:11:56,400
Speaker 6: highly uncertain, and you've got two completely different scenarios to

198
00:11:57,040 --> 00:12:01,160
Speaker 6: consider whether or not you're investing long term short term.

199
00:12:01,559 --> 00:12:04,520
Speaker 5: Hey Phil, thanks as always for joining us. Really appreciate it.

200
00:12:04,559 --> 00:12:07,680
Speaker 5: Phil Orlando, chief equity market Strategists ahead of Client Portfolio

201
00:12:07,679 --> 00:12:10,960
Speaker 5: Management at Federator at Hearmeys joining us there with his

202
00:12:11,280 --> 00:12:11,880
Speaker 5: market call.

203
00:12:13,600 --> 00:12:17,280
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

204
00:12:17,360 --> 00:12:20,760
Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto

205
00:12:20,880 --> 00:12:23,920
Speaker 1: with the Bloomberg Business App. Listen on demand wherever you

206
00:12:23,960 --> 00:12:27,160
Speaker 1: get your podcasts, or watch us live on YouTube.

207
00:12:27,640 --> 00:12:29,960
Speaker 5: Looking at the i go function on the Bloomberg terminal

208
00:12:30,000 --> 00:12:32,640
Speaker 5: gives you the indexes and the performance for the fixed

209
00:12:32,640 --> 00:12:36,560
Speaker 5: income space. The Bloomberg US AG fixed Income indexes up

210
00:12:36,600 --> 00:12:40,160
Speaker 5: about two point zero eight percent this year. The best

211
00:12:40,160 --> 00:12:43,000
Speaker 5: performance has been in the mortgage backed securities business. So

212
00:12:43,040 --> 00:12:45,200
Speaker 5: a little bit more on the risky profile there. Let's

213
00:12:45,200 --> 00:12:47,320
Speaker 5: talk about the fixed income markets and how they're dealing

214
00:12:47,320 --> 00:12:50,360
Speaker 5: with a lot of this uncertainty policy uncertainty coming out

215
00:12:50,360 --> 00:12:53,000
Speaker 5: of Washington, DC. Steve perty Joints is co head of

216
00:12:53,000 --> 00:12:57,280
Speaker 5: Global Credit at TCW based in Los Angeles. Steve, uncertainty

217
00:12:57,320 --> 00:12:59,679
Speaker 5: has kind of been the words so far here in

218
00:13:00,040 --> 00:13:03,480
Speaker 5: twenty twenty five. How the fixed income market's been dealing

219
00:13:03,520 --> 00:13:03,840
Speaker 5: with it.

220
00:13:05,160 --> 00:13:06,920
Speaker 7: He first of all, thanks so much for having me.

221
00:13:06,960 --> 00:13:08,319
Speaker 7: Really appreciate doing it back on.

222
00:13:09,040 --> 00:13:11,840
Speaker 8: You know, it's funny if Don Trump told us when

223
00:13:11,840 --> 00:13:14,800
Speaker 8: you campaign that tariffs were in his favorite or in dictionary,

224
00:13:15,200 --> 00:13:18,200
Speaker 8: and now that we've gotten tariffs, the market is reacting

225
00:13:18,280 --> 00:13:20,760
Speaker 8: prey dramatically, and I think there's an assumption that a

226
00:13:20,800 --> 00:13:23,040
Speaker 8: lot is with with bluff and that there wouldn't be

227
00:13:23,160 --> 00:13:27,480
Speaker 8: dramatic policy shifts. But as all these headlines keep hitting us,

228
00:13:28,040 --> 00:13:29,920
Speaker 8: that is where our market is focused right now.

229
00:13:30,200 --> 00:13:33,240
Speaker 7: It's occupying the minds and not only investors but.

230
00:13:33,400 --> 00:13:35,960
Speaker 8: Management team as well as they try to navigate from

231
00:13:35,960 --> 00:13:39,320
Speaker 8: what the headline to the next and define what the

232
00:13:39,400 --> 00:13:43,320
Speaker 8: next path looks like for their capex spend and really earning.

233
00:13:43,000 --> 00:13:49,720
Speaker 2: Something as an investor, what's the path of least resistance

234
00:13:49,800 --> 00:13:52,640
Speaker 2: right now? As the equity market kind of struggles for direction,

235
00:13:52,800 --> 00:13:55,480
Speaker 2: how does that wind up impacting the credit market? Do

236
00:13:55,520 --> 00:13:58,160
Speaker 2: we get more inflows outflows? Has that work?

237
00:13:59,160 --> 00:13:59,360
Speaker 8: Yeah?

238
00:13:59,440 --> 00:14:02,439
Speaker 7: No, that's excellent question. I mean, clearly, we've had an

239
00:14:02,520 --> 00:14:05,320
Speaker 7: unbelievable run in equities for the last few years.

240
00:14:05,320 --> 00:14:08,040
Speaker 8: It's been the only game in town, and particularly the

241
00:14:08,120 --> 00:14:10,480
Speaker 8: mag seven people have kind of ignored our asset last seas.

242
00:14:11,000 --> 00:14:13,840
Speaker 8: I think this last change and sentiments really widened people's

243
00:14:13,880 --> 00:14:16,280
Speaker 8: perspectives as so where else they can put their capital,

244
00:14:16,520 --> 00:14:18,800
Speaker 8: including the credit markets, are going to be a big

245
00:14:18,840 --> 00:14:21,840
Speaker 8: beneficiary that as people look at the income to stabilize

246
00:14:21,840 --> 00:14:25,160
Speaker 8: the overal portfolios. And we agree at the same time

247
00:14:25,640 --> 00:14:27,760
Speaker 8: some of the real challenges that are being addressed in

248
00:14:27,800 --> 00:14:31,360
Speaker 8: the equity market are also play being the credit markets.

249
00:14:31,640 --> 00:14:33,320
Speaker 8: And what that really comes down to is, you know,

250
00:14:33,440 --> 00:14:36,200
Speaker 8: what do future earnings look like? And we have this

251
00:14:36,320 --> 00:14:40,240
Speaker 8: strange you know, there's a strange relationship between the stock.

252
00:14:39,960 --> 00:14:41,600
Speaker 7: Market and the real economy.

253
00:14:42,080 --> 00:14:45,920
Speaker 8: Typically the real economy drives the stock market, but we

254
00:14:46,040 --> 00:14:48,000
Speaker 8: feel like over the last year or so, it's almost

255
00:14:48,040 --> 00:14:50,800
Speaker 8: become the reverse, and a lot of the spending we've

256
00:14:50,840 --> 00:14:54,320
Speaker 8: been seeing, particularly the wealthy co work, is driven by

257
00:14:54,320 --> 00:14:58,280
Speaker 8: the wealth effect, meaning whole prices are up, and more importantly, equity.

258
00:14:57,960 --> 00:14:58,440
Speaker 7: Prices are not.

259
00:14:59,000 --> 00:15:04,360
Speaker 8: So Our concern is as investors look at their equit performance,

260
00:15:04,880 --> 00:15:07,520
Speaker 8: it starts to actually impact what they're doing on a

261
00:15:07,560 --> 00:15:08,400
Speaker 8: spending basis.

262
00:15:08,560 --> 00:15:10,320
Speaker 7: And that's where we hear it from companies right now

263
00:15:10,440 --> 00:15:11,320
Speaker 7: is people are getting.

264
00:15:11,080 --> 00:15:13,400
Speaker 9: A little scooped by policy, a little scooped by the

265
00:15:13,440 --> 00:15:16,400
Speaker 9: price action in the equity market, and that is fugiant

266
00:15:16,440 --> 00:15:19,000
Speaker 9: to change their behaviors, which we think will actually flow

267
00:15:19,120 --> 00:15:21,440
Speaker 9: through to earnings as we look forward to.

268
00:15:21,440 --> 00:15:22,400
Speaker 7: The next few quarters.

269
00:15:22,880 --> 00:15:25,080
Speaker 5: Steve, you know, for the longest time, when Alex and

270
00:15:25,080 --> 00:15:27,480
Speaker 5: I would speak to fixed income pros like you, we

271
00:15:27,520 --> 00:15:32,400
Speaker 5: would hear discussion about how tight credit spreads are in

272
00:15:32,440 --> 00:15:35,560
Speaker 5: this time of I guess growing uncertainty. Are those spreads

273
00:15:35,600 --> 00:15:36,280
Speaker 5: widening at all?

274
00:15:37,640 --> 00:15:41,640
Speaker 8: Yeah? You know, the narrative over the last year has

275
00:15:41,720 --> 00:15:46,520
Speaker 8: been what could possibly move spreads wider? And we've been

276
00:15:46,640 --> 00:15:50,160
Speaker 8: kind of underweight credit spreads on the narrative that credit

277
00:15:50,200 --> 00:15:51,400
Speaker 8: spreads on that equity are.

278
00:15:51,280 --> 00:15:54,360
Speaker 7: A meaner birding asset class. They don't go up into

279
00:15:54,360 --> 00:15:54,720
Speaker 7: the right.

280
00:15:54,800 --> 00:15:59,160
Speaker 8: They tend to rotate and gyrate around a baseline.

281
00:15:59,400 --> 00:16:00,960
Speaker 7: It happens tight levels.

282
00:16:01,040 --> 00:16:03,680
Speaker 8: The narrative was there's just nothing that could break out

283
00:16:04,600 --> 00:16:07,680
Speaker 8: from the economic growth, particularly the United States or America,

284
00:16:08,240 --> 00:16:11,680
Speaker 8: and that has been changed. Spreads rallied from kind of

285
00:16:11,720 --> 00:16:13,960
Speaker 8: October when it looked like Trump was going to be

286
00:16:14,040 --> 00:16:17,880
Speaker 8: elected all the way through inauguration there. All that was

287
00:16:17,920 --> 00:16:20,680
Speaker 8: when the optimism of animal spirits and how that would

288
00:16:20,720 --> 00:16:23,000
Speaker 8: continue to keep the economy chugging and.

289
00:16:23,040 --> 00:16:24,239
Speaker 7: Cred spreads compressed.

290
00:16:24,800 --> 00:16:29,040
Speaker 8: Once we saw this administration and action, however, we've seen

291
00:16:29,040 --> 00:16:31,840
Speaker 8: a move wider and so you know, credspreads have gone

292
00:16:31,880 --> 00:16:34,840
Speaker 8: on the investment grate side from kind of the high seventies,

293
00:16:34,840 --> 00:16:37,000
Speaker 8: which will be all time lows for the last decade

294
00:16:37,040 --> 00:16:40,040
Speaker 8: plus and wid that out about fifteen to twenty bases points.

295
00:16:40,160 --> 00:16:43,240
Speaker 7: So to us, that feels healthy. It also feels like the.

296
00:16:43,200 --> 00:16:45,920
Speaker 8: Direction of travel will continue in our lines over the

297
00:16:45,920 --> 00:16:46,600
Speaker 8: course this year.

298
00:16:47,080 --> 00:16:49,480
Speaker 2: But if the underlying issue is that we don't know

299
00:16:49,720 --> 00:16:52,240
Speaker 2: what the economic growth outlook will be for the United

300
00:16:52,280 --> 00:16:56,240
Speaker 2: States economy. Look at the OECD downgrading growth and upgrading inflation.

301
00:16:56,720 --> 00:16:59,880
Speaker 2: I mean, doesn't that wind up hitting credits in some capacity?

302
00:17:01,680 --> 00:17:05,920
Speaker 7: It really does. I mean we're not very very sophisticated

303
00:17:05,920 --> 00:17:08,280
Speaker 7: in bond land. We dis like cash flows. That is

304
00:17:08,320 --> 00:17:09,400
Speaker 7: the most important.

305
00:17:09,119 --> 00:17:09,840
Speaker 3: Days I see.

306
00:17:09,840 --> 00:17:13,920
Speaker 2: So it's like a safety play, even with the risks correct.

307
00:17:13,600 --> 00:17:14,840
Speaker 8: You know, we still think that this is a good

308
00:17:14,840 --> 00:17:17,400
Speaker 8: place for investors to be compared to where the lost

309
00:17:17,440 --> 00:17:20,640
Speaker 8: and valuations are on the equity land. Even still after

310
00:17:20,680 --> 00:17:23,400
Speaker 8: a ten percent pullback, we think this is a much

311
00:17:23,400 --> 00:17:27,160
Speaker 8: better place for investors to kind of really rely on

312
00:17:27,160 --> 00:17:29,359
Speaker 8: some of the stronger parts of the economy while not

313
00:17:29,440 --> 00:17:31,200
Speaker 8: leading into full evaluations.

314
00:17:31,760 --> 00:17:33,760
Speaker 5: Steve, thanks so much for joining us. Really appreciate it.

315
00:17:33,800 --> 00:17:37,959
Speaker 5: Steve Perdy. He's co head of Global Credit at TCWT

316
00:17:37,960 --> 00:17:40,760
Speaker 5: there in La TCW Trust Company of the West, huge,

317
00:17:40,840 --> 00:17:45,320
Speaker 5: huge asset manager, both in fixed income and equities.

318
00:17:46,080 --> 00:17:50,800
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,

319
00:17:50,960 --> 00:17:54,440
Speaker 1: and anywhere else you get your podcasts. Listen live each

320
00:17:54,480 --> 00:17:58,240
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

321
00:17:58,359 --> 00:18:02,399
Speaker 1: the iHeartRadio app in and the Bloomberg Business app. You

322
00:18:02,400 --> 00:18:05,720
Speaker 1: can also watch us live every weekday on YouTube and

323
00:18:05,920 --> 00:18:07,880
Speaker 1: always on the Bloomberg terminal