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The Fed, Markets, ETFs, and ESG (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg markets podcast. I'm Paul Sweeney. Alongside
• 0:04
  Speaker 1: my co host Matt Miller, every business day we bring
• 0:06
  Speaker 1: you interviews from CEOS, market pros and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg markets podcast
• 0:15
  Speaker 1: on Apple podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg Dot com slash podcast. Let's give it Jennifer
• 0:22
  Speaker 1: Lee here, senior economist and managing director at BMO capital markets. Jennifer,
• 0:26
  Speaker 1: thanks so much for joining us here. Lots of data
• 0:30
  Speaker 1: crossing the Bloomberg Erman over the last week. Uh. Federal,
• 0:34
  Speaker 1: you know, central banks around the world, seemingly in a
• 0:37
  Speaker 1: concerted effort to tame global inflation, and led by the
• 0:42
  Speaker 1: Federal Reserve yesterday, of course. What did you take away
• 0:45
  Speaker 1: from Fed Chairman J PAL so? Good Morning. Um, you
• 0:49
  Speaker 1: know what he uh, the sentify basis points. Obviously, was
• 0:52
  Speaker 1: widely expected from most. I didn't take his comments as
• 0:57
  Speaker 1: being too much focish than he has been already, if any.
• 1:00
  Speaker 1: Think I think he made it even more clear. Um,
• 1:03
  Speaker 1: I don't think he wanted to be there to be
• 1:04
  Speaker 1: any ambiguity and, you know, to say that there's gonna
• 1:07
  Speaker 1: be pain felt. You know, we're not there yet. Uh.
• 1:10
  Speaker 1: He even just Um didn't he? He didn't even struck
• 1:13
  Speaker 1: off the possibility of a recession, which was quite interesting
• 1:15
  Speaker 1: as well. But you know, if there is any question,
• 1:18
  Speaker 1: and he dealt about the resolves of getting inflation back
• 1:20
  Speaker 1: down to two percent, everyone, anyone who has had any
• 1:22
  Speaker 1: doubt so obviously put that aside because he made it
• 1:25
  Speaker 1: pretty crystal clear that they are continuing to raise rates
• 1:27
  Speaker 1: and probably into so talk to us about I guess
• 1:32
  Speaker 1: the next thing on you know, investors minds is, all right,
• 1:36
  Speaker 1: how bad is this gonna get? I mean we're, I guess,
• 1:38
  Speaker 1: recessions now penciled into pretty much everybody's models. I would say,
• 1:42
  Speaker 1: what if they go too far, except for it seemed
• 1:44
  Speaker 1: pretty clear yesterday that they intend to go intend to
• 1:48
  Speaker 1: go too far. So that brings up the recession scenario.
• 1:51
  Speaker 1: So what do you, the good folks there, think about
• 1:55
  Speaker 1: how deep it might be? Yeah, I think. I mean
• 2:01
  Speaker 1: we've got out, we've we've actually been lowering our growth
• 2:03
  Speaker 1: forecasts steadily like everyone else, and we've actually got zero
• 2:06
  Speaker 1: growth now for three Um we still have only one
• 2:11
  Speaker 1: quarter of negative growth. I guess the big difference here,
• 2:14
  Speaker 1: you know, in terms of recession, is, you know, the
• 2:16
  Speaker 1: labor market, and that's the situation. Yeah, so unique. I
• 2:20
  Speaker 1: mean if if everyone was cutting jobs right now, you know,
• 2:23
  Speaker 1: if we were seeing negative signs in front of pay rolls,
• 2:25
  Speaker 1: and that would be a whole different story. But the
• 2:27
  Speaker 1: fact that there is still strong demand out there, I
• 2:29
  Speaker 1: mean it's it's it's still it's starting to disappear a
• 2:32
  Speaker 1: little bit, but it's still people are still looking for work.
• 2:34
  Speaker 1: You know, it's still hard to find truck drivers, for example, Um,
• 2:37
  Speaker 1: and it's that's the big story. And and wage and
• 2:40
  Speaker 1: wage pressures are still high because of that. Um. I mean,
• 2:44
  Speaker 1: he also mentioned yesterday that the labor market has been
• 2:46
  Speaker 1: very strong and there's still a strong, robust economy. So
• 2:49
  Speaker 1: because of that, you know, he's you know, I think
• 2:50
  Speaker 1: they're very comfortable. And there there's I think everyone sort
• 2:53
  Speaker 1: of resolves themselves with that possibility that we're going to
• 2:56
  Speaker 1: slide into a recession or or a deeper downtown turn
• 2:59
  Speaker 1: than a usually had been anticipated. But if that's what
• 3:01
  Speaker 1: it takes, too but with lower unemployment, right. I mean
• 3:04
  Speaker 1: everyone yesterday was talking about four point four percent unemployment,
• 3:07
  Speaker 1: which is, I think, Mike McKee had calculated, that's about
• 3:10
  Speaker 1: another one point three million job losses. But still compared
• 3:14
  Speaker 1: to the great recession, compared to Um, the Internet bubble burst, Um,
• 3:20
  Speaker 1: you know, it's nothing. Four point four percent unemployment, right.
• 3:23
  Speaker 1: I remember when five percent was like enviable in the US.
• 3:27
  Speaker 1: So can we really hold to an unemployment number that's
• 3:31
  Speaker 1: that low? We have it edging up to around maybe
• 3:35
  Speaker 1: five percent, I think, by the end of next year.
• 3:38
  Speaker 1: But again, let's not forget that, you know, there's still
• 3:41
  Speaker 1: over ten million job vacancies out there. So some of
• 3:43
  Speaker 1: that will get, you know, soaked up from from that
• 3:45
  Speaker 1: point Um, from you know, some of the or some
• 3:47
  Speaker 1: of the job openings, and of course some of the
• 3:49
  Speaker 1: openings will also be taken off the table. Um. You know,
• 3:52
  Speaker 1: as I've been saying for for a long time now,
• 3:54
  Speaker 1: you know anyone who has multiple job offers out there,
• 3:56
  Speaker 1: you know, take one because it's not gonna last. Um.
• 4:00
  Speaker 1: But you know, again, this is all parted personal with
• 4:02
  Speaker 1: what happens when there's a central bank who is aggressively tightening.
• 4:05
  Speaker 1: You're gonna see that slower growth, you're gonna see it
• 4:07
  Speaker 1: hit consumers bending and you're going to see the doubles
• 4:09
  Speaker 1: rate to hire. And on that front, Jennifer just the
• 4:13
  Speaker 1: consumer here is another kind of variable, and the consumer
• 4:16
  Speaker 1: seems pretty dark strong. I mean you cannot get, uh,
• 4:21
  Speaker 1: you know, a table at a restaurant even on a
• 4:23
  Speaker 1: Wednesday night here in New York and and in the
• 4:25
  Speaker 1: surrounding areas. The consumer seems pretty strong. How do you
• 4:28
  Speaker 1: think that might play out? Well, that's the that's one
• 4:32
  Speaker 1: of the wild cars, I guess. And and then you
• 4:34
  Speaker 1: know again, I've always, sadly, I've never underestimate the US consumer,
• 4:37
  Speaker 1: and that's one of the biggest things that you're mentioning
• 4:38
  Speaker 1: about dying out. I mean, if anyone was seriously, truly, truly,
• 4:42
  Speaker 1: truly worried about their balance, she is about their finances.
• 4:45
  Speaker 1: You know, that's where you're gonna come back first dying out.
• 4:46
  Speaker 1: You'RE gonna Brown bag it for for launch, YOU'RE NOT
• 4:48
  Speaker 1: gonna go up for the drinks, for drinks after work,
• 4:51
  Speaker 1: and that's still happening. So that speaks, I don't think,
• 4:53
  Speaker 1: a lot about the US consumer, about the strength of
• 4:55
  Speaker 1: about the US consumer. Until we start seeing that fold
• 4:59
  Speaker 1: a little bit more, you know the ray hypes will
• 5:01
  Speaker 1: continue um and that's a different story. By the way,
• 5:04
  Speaker 1: I just mentioned what you guys talked about earlier about
• 5:06
  Speaker 1: what's happening overseas. You know, this is all demand riven
• 5:09
  Speaker 1: right now, whereas where you're looking at overseas with the
• 5:11
  Speaker 1: big of England and the U C B, it's all
• 5:13
  Speaker 1: energy driven. The supply chain, the supply side of the equation,
• 5:17
  Speaker 1: we thought was getting better. We've heard recently from companies
• 5:20
  Speaker 1: like Ford Um, you know, more concerning announcements on the
• 5:25
  Speaker 1: supply chain. And obviously the chip situation also isn't expected
• 5:30
  Speaker 1: to recover. A lot of companies are saying until twenty
• 5:33
  Speaker 1: four really, or twenty five even. Is that side, though,
• 5:36
  Speaker 1: of the equation getting better to the point where inflation
• 5:39
  Speaker 1: is going to come down to the level power wants
• 5:41
  Speaker 1: to see it, even without too much demand destruction, by
• 5:44
  Speaker 1: like the middle of next year? Probably not enough. I
• 5:47
  Speaker 1: mean I think you know, I've I've it's all anecdotes,
• 5:50
  Speaker 1: but you know, you hear stories about some of the
• 5:51
  Speaker 1: supply chains easing. Um, you know you saw the the
• 5:54
  Speaker 1: supplier delivery delays from some of the regional fed surveys
• 5:56
  Speaker 1: have been coming down sharply and that's because demand has
• 5:59
  Speaker 1: cooled and that's even manufacturer's time to get through that backlog.
• 6:02
  Speaker 1: But other areas like the computer chips, for the for
• 6:05
  Speaker 1: the for the Automa auto sector, that's still in high demand, Um,
• 6:09
  Speaker 1: and that's still pretty backed up. Jennifer, maybe some of
• 6:13
  Speaker 1: our listeners don't know that BEMO is short for Bank
• 6:16
  Speaker 1: of Montreal. You're in Canada. How are how is the
• 6:19
  Speaker 1: economy in Canada? How's the consumer in Canada? How different
• 6:23
  Speaker 1: is it maybe there versus the United States? Do you
• 6:25
  Speaker 1: think it's actually fairly similar? We're also we've also got
• 6:30
  Speaker 1: the heavy weight of the housing market and the housing
• 6:33
  Speaker 1: takes of the larger share of Canadian economy here than
• 6:37
  Speaker 1: than in the US, and there we're seeing a pretty
• 6:40
  Speaker 1: you know, Um, we're seeing a correction right now in
• 6:42
  Speaker 1: the housing market just given the weight of higher rates,
• 6:45
  Speaker 1: and we actually had a one hundred basis point rate
• 6:47
  Speaker 1: hike here from the Bank of Canada back in July, which,
• 6:50
  Speaker 1: you know, that has yet to really filter through into
• 6:52
  Speaker 1: the housing market. But but you're we're seeing some of
• 6:54
  Speaker 1: the other great hips already filtering through. So we won't
• 6:57
  Speaker 1: see a big, real big impact until later this year.
• 7:00
  Speaker 1: But consumers so far, you know, is to holding up again,
• 7:03
  Speaker 1: labor market and and waste pressures, and we're going to
• 7:05
  Speaker 1: get a July retail sales number. We're kind of behind
• 7:07
  Speaker 1: on that, by the way. We're getting our July retail
• 7:10
  Speaker 1: sales numbers on Friday, so we'll see how the volumes
• 7:12
  Speaker 1: pan up. But you know, we're looking for declines because
• 7:14
  Speaker 1: you know, just like everywhere else, you know you're gonna
• 7:16
  Speaker 1: get hit by higher prices and higher energy prices and
• 7:19
  Speaker 1: higher boring costs. So how do you see housing markets? Um,
• 7:23
  Speaker 1: you know, obviously it's very regional, but if you look at,
• 7:27
  Speaker 1: for example, the US housing market versus Canada, versus the UK,
• 7:30
  Speaker 1: which I think are the three places where you saw
• 7:33
  Speaker 1: extreme heat, Um, are we going to get any, you know,
• 7:37
  Speaker 1: serious financial disasters in terms of housing markets or our
• 7:43
  Speaker 1: prices just going to, you know, come off ten and Um,
• 7:48
  Speaker 1: you know, the frenzy will unravel without, you know, causing
• 7:53
  Speaker 1: great financial arts, that's what you want to call it.
• 7:56
  Speaker 1: That's Um. We already have seen prices decline and we
• 7:59
  Speaker 1: I think we're seeing, for a toll of net pete
• 8:02
  Speaker 1: trough decline. But there's still there's underlying demands. Like you know,
• 8:06
  Speaker 1: there's still immigration you know, organic demand from you know,
• 8:09
  Speaker 1: households moving out, like the millennials. Wins over is probably
• 8:11
  Speaker 1: seeing the peak of that coming soon. So there's still that.
• 8:14
  Speaker 1: But you're you're absolutely correct. It's very regional. Some places
• 8:17
  Speaker 1: are going to get harder, hit harder than others. And
• 8:20
  Speaker 1: a lot of this also, still forget, stem from the
• 8:22
  Speaker 1: whole work from home situation, which is starting to you know,
• 8:25
  Speaker 1: to fade a little bit as well. So but we
• 8:26
  Speaker 1: don't see it again. We still we're still seeing a correction.
• 8:29
  Speaker 1: There's still some more peam to come, but the Bank
• 8:31
  Speaker 1: of Canada is also quite causing some of it. So
• 8:33
  Speaker 1: we don't see the bank here raising rates as quickly
• 8:36
  Speaker 1: or as aggressively as they said. And Jennifer, just real
• 8:39
  Speaker 1: quickly the strong dollar. How high does it go? Is
• 8:42
  Speaker 1: there any bear case for the U S dollar? Like
• 8:45
  Speaker 1: goodness Um. It's interesting because I remember what at one
• 8:47
  Speaker 1: point some people were talking about, you know peak US dollar.
• 8:50
  Speaker 1: This is when Um at that one um good CPI report.
• 8:54
  Speaker 1: I don't remember that in June where, you know, people
• 8:56
  Speaker 1: started thinking that they're gonna be pivoting because of that
• 8:57
  Speaker 1: one number. But I think you know, given that the case,
• 9:00
  Speaker 1: that the Fed is still super aggressive. Um everyone else
• 9:03
  Speaker 1: as raising rates, but not everyone, um so. I think
• 9:06
  Speaker 1: we're still there's still a case for a strong invest dollar,
• 9:08
  Speaker 1: you know, handing into three. But it was also very interesting,
• 9:11
  Speaker 1: by the way, that not everybody was raising rates this week.
• 9:13
  Speaker 1: You know, we had, UM, Brazil holding off, for example.
• 9:17
  Speaker 1: You know, Norway raising rates. I think they said that.
• 9:19
  Speaker 1: You know, that's gonna be it for a little bit because,
• 9:21
  Speaker 1: you know, um Um so again it's it's it's interesting.
• 9:24
  Speaker 1: And even the RBA, by the way, has been making
• 9:26
  Speaker 1: noises and know how it may be time to turn
• 9:29
  Speaker 1: it down a little bit. So that's kind of interesting.
• 9:31
  Speaker 1: I meanwhile, the Fed is going the other way. They are,
• 9:34
  Speaker 1: they certainly are. Jennifer Lee, senior economist, managing director at
• 9:36
  Speaker 1: email capital markets. Thanks so much for joining us. Right now,
• 9:43
  Speaker 1: let's check in with Greg Han. He's a C I
• 9:45
  Speaker 1: O at winterp capital management get a sense, uh, what
• 9:49
  Speaker 1: is he thinking about these markets? Greg thanks so much
• 9:50
  Speaker 1: for joining us here again. Another uh, week day in
• 9:54
  Speaker 1: the markets. Here we had the Federal Reserve yesterday raising rates,
• 9:57
  Speaker 1: being very clear in their message that their number one
• 10:00
  Speaker 1: mandate is to fight inflation and they will do that
• 10:03
  Speaker 1: with the in part with their interest rate mechanisms, and
• 10:05
  Speaker 1: today we had some more central banks from around the
• 10:07
  Speaker 1: world following suit. Uh. What do you do at winthrop
• 10:11
  Speaker 1: couple management with that type of background? Well, that's a Paul,
• 10:17
  Speaker 1: is a great question. Uh. So these are difficult markets.
• 10:20
  Speaker 1: We're going through a shift right now invaluation and how
• 10:24
  Speaker 1: the markets are perceiving valuation. Um, and it's it's really
• 10:27
  Speaker 1: that's the whole push higher and short term interest rates. Um,
• 10:30
  Speaker 1: and then the dislocation and the equity markets. So we are,
• 10:34
  Speaker 1: like I've said, we're kids in the candy store. In
• 10:35
  Speaker 1: the fixed income markets. This is a window to Um
• 10:38
  Speaker 1: to build portfolios in fixed income that can earn five
• 10:41
  Speaker 1: percent without a lot of risk for in a quarter
• 10:44
  Speaker 1: on a municipal portfolio. For investors, that the tax free income.
• 10:49
  Speaker 1: So that that part of this is that's the easy part.
• 10:52
  Speaker 1: The hard part is the the equity Um. We're about
• 10:55
  Speaker 1: to hit a storm on the equity side because earnings
• 10:58
  Speaker 1: are going to become more and more difficult it as
• 11:00
  Speaker 1: we head into the third and fourth quarter because margin compression,
• 11:03
  Speaker 1: increased labor costs, Um. It's it's a litany of things.
• 11:06
  Speaker 1: And then the latest now is higher interest expense because
• 11:09
  Speaker 1: we've got short term interest rates climbing. So what do
• 11:12
  Speaker 1: you expect in terms of earnings this year and next year?
• 11:15
  Speaker 1: Do you have a forecast? Well, we're, I think you know,
• 11:18
  Speaker 1: consensus right now is what to thirty five on the
• 11:20
  Speaker 1: S and p. The SUP is is we're looking at.
• 11:22
  Speaker 1: Our expectation is we're sixteen and a half times earnings,
• 11:26
  Speaker 1: which is now we're kind of kind of getting into
• 11:28
  Speaker 1: fair value and we've come down from twenty times. I
• 11:31
  Speaker 1: mean this is this is the adjustment, as we were
• 11:32
  Speaker 1: so overvalued. The pain that investors are feeling is an
• 11:36
  Speaker 1: adjustment from an overvalued market to one that is simply
• 11:38
  Speaker 1: fairly valued. Markets overshoot and we can't overshoot when we
• 11:42
  Speaker 1: can't go to an undervalued market, which we haven't seen
• 11:45
  Speaker 1: in over fifteen years. And Amazing, amazing. That is. No, yeah, yeah, no,
• 11:51
  Speaker 1: it's and that's but there's great companies out there. We
• 11:54
  Speaker 1: are seeing. I mean he's got stocks that are down
• 11:56
  Speaker 1: six are that are they're still great stocks, they're great companies.
• 12:01
  Speaker 1: But Um, you just we just have to we're not
• 12:04
  Speaker 1: going to pick the bottom. We just want to find
• 12:06
  Speaker 1: we want to be able to invest in good, solid
• 12:07
  Speaker 1: companies with solid business models. That's the pall. That's the
• 12:10
  Speaker 1: other thing that's happening is business models are being challenged. Auto,
• 12:14
  Speaker 1: when auto companies can't get cars onto lots, when the
• 12:18
  Speaker 1: airline industry is capacity constraint and they can't get passengers
• 12:21
  Speaker 1: on the planes because they don't have, you know, the
• 12:24
  Speaker 1: the Labor to help support the UH, you know, the
• 12:27
  Speaker 1: the business model we've got. That's those are challenges that
• 12:30
  Speaker 1: are structural. Raising short term interest rates and isn't going
• 12:33
  Speaker 1: to fix that. I just want to quickly jump in
• 12:35
  Speaker 1: with the average analyst estimate for earnings is two fours
• 12:41
  Speaker 1: for Um and in three I'm looking at an average
• 12:48
  Speaker 1: of two and twenty nine dollars. It's not the median fall.
• 12:51
  Speaker 1: The median is two thirty two. Yeah, that's what I'm
• 12:54
  Speaker 1: looking out on my spx index e page like that.
• 13:00
  Speaker 1: So anyway. So, Greg just real quickly, is there a
• 13:02
  Speaker 1: sector that I should be looking at right now, given
• 13:05
  Speaker 1: that we're likely to be going into a recession, or
• 13:07
  Speaker 1: if we're not already in one? So look, I just
• 13:11
  Speaker 1: the whole Infotech space, which bleeds over into the the
• 13:16
  Speaker 1: communications sector. Uh, there's some those. Some of those stocks
• 13:20
  Speaker 1: are just really undervalued. That's where we like and now
• 13:23
  Speaker 1: it's it's hard because that's the part that's gotten hit hard.
• 13:26
  Speaker 1: But in a storm we're ones to run into the storm,
• 13:28
  Speaker 1: that run away from it, and so when stocks are
• 13:30
  Speaker 1: down we want to buy loads. So I that kind
• 13:32
  Speaker 1: of learned that my my my business school, Um and
• 13:37
  Speaker 1: so you know the the you know Microsoft, alphabet. Those
• 13:40
  Speaker 1: are the core holdings for us. We we love those stocks. Disneys,
• 13:43
  Speaker 1: one that's come into our sweet spot in video, is
• 13:47
  Speaker 1: in video has a valuation now that starts to make sense.
• 13:50
  Speaker 1: So we're we are seeing opportunities, but it's going to
• 13:52
  Speaker 1: get I mean we have the risk of it getting
• 13:54
  Speaker 1: a little bit worse here and ending into the second
• 13:56
  Speaker 1: half of the year. All right, Greg, I really appreciate it.
• 13:58
  Speaker 1: Greg Han Cio, winthrop, but to management. He mentioned his
• 14:01
  Speaker 1: business school. That would be Indiana. I get his undergraduate
• 14:04
  Speaker 1: from the University of Wisconsin. So all big ten there
• 14:06
  Speaker 1: for Greg Hand. Well, I guess after yesterday the question
• 14:13
  Speaker 1: isn't so much is the Fed going higher. Yes, they are.
• 14:16
  Speaker 1: The question is how high and for how long. Let's
• 14:19
  Speaker 1: check up with Ben Emmon's managing director of global macro
• 14:21
  Speaker 1: strategy at Medley Global Advisors. So, Ben, what do you
• 14:25
  Speaker 1: take away from yesterday's statement and yesterday's comments by Fed
• 14:29
  Speaker 1: Scherman J pal about how high are these interest rates
• 14:32
  Speaker 1: going to go? Hi, Paul. Well, he was really explicit,
• 14:36
  Speaker 1: I felt. You know, he said that at the very
• 14:39
  Speaker 1: last question of the press conference, that you know, four
• 14:42
  Speaker 1: point six percent fat funds rateing next year is likely,
• 14:46
  Speaker 1: and then he also mentioned that one one to one
• 14:49
  Speaker 1: and a half percent will rates is where they want
• 14:51
  Speaker 1: to get to, to be a restrictive policy. So with
• 14:55
  Speaker 1: Dan in mind, as you see the reaction today in
• 14:57
  Speaker 1: the markets right, that's being factored in now the two
• 15:01
  Speaker 1: you could probably move towards at four point six and
• 15:04
  Speaker 1: it will pull up the rest of the you curve too,
• 15:06
  Speaker 1: and that's in motion. So I think that was a
• 15:09
  Speaker 1: big takeaway for me. In addition that they surprised, of course,
• 15:12
  Speaker 1: with that medium dots for two being higher than why
• 15:16
  Speaker 1: the market was price. And I think that shows too
• 15:19
  Speaker 1: that within the inflorence see there's a real clear push
• 15:22
  Speaker 1: of fact we must get quicker to restrictive sense, to
• 15:26
  Speaker 1: put a little inflation or were in trouble and they wanted. Well,
• 15:30
  Speaker 1: by the way, I was listening to this I thought
• 15:32
  Speaker 1: it was a great press conference. UMS entertainment value. Um, yeah,
• 15:36
  Speaker 1: I love when Steve Leesman his Mike went out or
• 15:39
  Speaker 1: he didn't remember to ask the second question. The MIC
• 15:42
  Speaker 1: and the PALSI I don't even want to answer your
• 15:44
  Speaker 1: second question, which was pretty good. Yeah, at least. What
• 15:49
  Speaker 1: I was thinking was he's so insistent that they want
• 15:51
  Speaker 1: to get rates Um to more restrictive level as quickly
• 15:56
  Speaker 1: as possible. Um, for from a layman's person, why in
• 16:01
  Speaker 1: the hell don't they just say rates are four an
• 16:03
  Speaker 1: a percent? Boom, there you go. Yeah, exactly a meth.
• 16:07
  Speaker 1: I mean, what are you waiting for? We agree like you,
• 16:11
  Speaker 1: sort of one of base points. Hight, that was, you know,
• 16:14
  Speaker 1: but you know, envisued by the market. Right, I had
• 16:17
  Speaker 1: an eighteen percent probability. It could have just done that yesterday, right,
• 16:21
  Speaker 1: and the move is high and would shock it the markets,
• 16:24
  Speaker 1: I guess, and maybe it's still holding them back. But
• 16:27
  Speaker 1: if it comes down to inflation, you slatch hammered, right,
• 16:30
  Speaker 1: so you would bring it up banged like that. But
• 16:33
  Speaker 1: you know, it's a policy about seventy five is sort
• 16:36
  Speaker 1: of the way to go, you know, touch feel still
• 16:40
  Speaker 1: right tied in financial conditions and get to an end destination.
• 16:44
  Speaker 1: You know, it does bring the risk that you you're
• 16:46
  Speaker 1: not doing enough and you have to do more right,
• 16:48
  Speaker 1: and then that will be the such hammer. So I
• 16:51
  Speaker 1: think you know, it looks to me they have a
• 16:54
  Speaker 1: wall set in speech about it. We Week and half ago,
• 16:57
  Speaker 1: when the last time I saw you, that was sort
• 16:59
  Speaker 1: of the four book to what happened yesterday within the
• 17:02
  Speaker 1: from sea. There's like people banging official on the table. Yes,
• 17:05
  Speaker 1: we've got a such hammer here, but it's a consensus.
• 17:08
  Speaker 1: So that's why you end up with that seven five
• 17:10
  Speaker 1: basis points. But it should move faster. I agree with it.
• 17:13
  Speaker 1: I mean I would just do two hundred, except for
• 17:15
  Speaker 1: I would stop. I would say inflation is peaked. Let's
• 17:19
  Speaker 1: just see how these rate increases trickle through the country
• 17:22
  Speaker 1: over the next six months. Is that? That seems to
• 17:24
  Speaker 1: be completely off the table. Bed there burns. Yes, thank you. Yeah, yeah, yeah,
• 17:29
  Speaker 1: that that is the art of burns issue, and that's
• 17:32
  Speaker 1: basically even though the art of Burns, by the way,
• 17:34
  Speaker 1: in seven, three, seventy four Hyde grates up to I think.
• 17:38
  Speaker 1: So you did, didn't fat the tightening, but the underestimated
• 17:43
  Speaker 1: economy being still too far above potential and too much
• 17:46
  Speaker 1: stork on an easily economy in terms of both the
• 17:49
  Speaker 1: pressure on inflation and so you should have actually done
• 17:52
  Speaker 1: more at that time if you look back in history.
• 17:55
  Speaker 1: And that's what they're struggling with right. But we're in
• 17:58
  Speaker 1: an environment where, you know, at four percent rates, that's
• 18:02
  Speaker 1: we're stored glow. Right. You will have to go a
• 18:04
  Speaker 1: lot higher than that, and that's still worry in the markets.
• 18:07
  Speaker 1: I think facts, you may have to do just so
• 18:10
  Speaker 1: much more because because actually will interest rates are still
• 18:13
  Speaker 1: too negative and the economy is still too strong. Right.
• 18:16
  Speaker 1: It's still too overheated. The claims say that this morning.
• 18:20
  Speaker 1: It's just just I think, part of the reason why
• 18:23
  Speaker 1: use are up to claims against shoulder right, unbelievable. So
• 18:26
  Speaker 1: it's just a strong economy. That's what they have to tackle. Well,
• 18:29
  Speaker 1: for sure, judging by the labor market it still looks
• 18:32
  Speaker 1: pretty strong. We do see some pink slips going out,
• 18:35
  Speaker 1: we see banks starting to call the hurt a little bit,
• 18:37
  Speaker 1: but that's just normal. Um. He mentioned a couple of times.
• 18:41
  Speaker 1: There are a number of ways you can look at inflation.
• 18:44
  Speaker 1: Expectations or inflation forecasts. So I want to ask you
• 18:47
  Speaker 1: some dashboard questions. What do you look at Um for
• 18:50
  Speaker 1: inflation forecast? Do you like the Um, you know, five year,
• 18:57
  Speaker 1: five year, or do you like the any surveys specifically
• 19:01
  Speaker 1: better than the others? And also financial conditions, Um, you know,
• 19:05
  Speaker 1: I pull up F con go on the Bloomberg. They
• 19:07
  Speaker 1: look so they don't look so tight to me, certainly
• 19:10
  Speaker 1: not compared to what we saw in March of so
• 19:13
  Speaker 1: what do you look at to measure Um? To look
• 19:17
  Speaker 1: to sort of gauge inflation expectations or a market forecast?
• 19:21
  Speaker 1: And what do you look at to measure financial conditions? Yeah,
• 19:25
  Speaker 1: with inflation, what I found was that the Conference Board
• 19:28
  Speaker 1: has the one year expectation in there and since the
• 19:31
  Speaker 1: spring of that number has been six percent or higher
• 19:35
  Speaker 1: and it has been a perfect predictor of where CPI
• 19:39
  Speaker 1: actually ended up. So I find out a really strong
• 19:42
  Speaker 1: indicator in this environment where inflations and that that one
• 19:46
  Speaker 1: of your expectations. That I believe the last Sumer seven
• 19:48
  Speaker 1: point six percent, so a little over than my head
• 19:51
  Speaker 1: finess now, but that's still really elevated right. So that's one.
• 19:56
  Speaker 1: You know that the market break even, the ditch break even.
• 19:59
  Speaker 1: I'm a skeptical there because it's a real yield and
• 20:02
  Speaker 1: phenomenal yield, and they move around right, so they actually
• 20:05
  Speaker 1: react to one another. So find that less credible indicator
• 20:10
  Speaker 1: the long term expectations from Michigan is something that the
• 20:13
  Speaker 1: fact reacts. You would take that into account. And then
• 20:16
  Speaker 1: there's this blue chip survey, which is, you know, you
• 20:19
  Speaker 1: have to get this specific access to you know there
• 20:22
  Speaker 1: is actually an expectation in there of what people think
• 20:24
  Speaker 1: that real interest rates will look like. They're now rising
• 20:27
  Speaker 1: in line where the market is. So I find those
• 20:29
  Speaker 1: three interesting. COMFERENCE boards, Michigan Blue Chip, some more survey base.
• 20:34
  Speaker 1: If you look at financial conditions, you know what's interesting
• 20:37
  Speaker 1: on that function is that there's also a tap called
• 20:39
  Speaker 1: market details. If you coun go and it shows really
• 20:44
  Speaker 1: nicely what what is contributed to the standard of financial conditions.
• 20:48
  Speaker 1: And you can tell right, it's particularly real interest rates,
• 20:51
  Speaker 1: where the standard deviations is now over to two point
• 20:54
  Speaker 1: two or so. So that's, I think, what's really driving
• 20:58
  Speaker 1: at there. But not enough. Need to be even more tighter. So,
• 21:01
  Speaker 1: as we talked earlier, real interesting actually go even higher
• 21:05
  Speaker 1: from here, right, and settle and say one seventy five
• 21:09
  Speaker 1: and two year and one on a quarter and antenue
• 21:11
  Speaker 1: tip shields are still too low. Uh with safe leady
• 21:14
  Speaker 1: are driving Frenchship conditions tight, but not tight enough. All right, Ben,
• 21:18
  Speaker 1: good stuff as always, bringing in here. We appreciate it.
• 21:21
  Speaker 1: Ben Emmon's, managing director of Global Macro Strategy Medley Global Advisors.
• 21:26
  Speaker 1: I'm looking at him. We didn't ask him about Bank
• 21:28
  Speaker 1: of Japan. What do you want to ask about? How
• 21:31
  Speaker 1: how serious is this that they intervened the first time
• 21:33
  Speaker 1: since strengthen the currency? I don't think they're a big
• 21:36
  Speaker 1: carry trade. Do you think there's a big carry trade
• 21:38
  Speaker 1: out there? Ben, I think we lost him. We'll get
• 21:40
  Speaker 1: them next time. Carry Trade. You want to do a
• 21:43
  Speaker 1: Japanese yen carry trade? I've been doing it all year.
• 21:45
  Speaker 1: Have you nice in my head and you're okay, alright,
• 21:49
  Speaker 1: good stuff there, Ben Emmon's we've always appreciate chatting with him.
• 21:52
  Speaker 1: Looking at the markets here, SMP off about eight tenths
• 21:56
  Speaker 1: of one percent, so still some selling pressure out there,
• 22:00
  Speaker 1: given what we heard from our friender reserved. Yes, this
• 22:03
  Speaker 1: is Wood Barker Kind O. Next guest in studio. Extra
• 22:13
  Speaker 1: Points Gold Star, Amanda Rebello, head of passive sales us
• 22:17
  Speaker 1: on shore. I don't know what that means at D
• 22:19
  Speaker 1: W S group. Dws, that's Deutsche, that's Deutsche banks, Deutsche
• 22:24
  Speaker 1: very wait, Deutsche very poppier specialists, and I believe, yeah,
• 22:29
  Speaker 1: you just kind of have German. So what do you
• 22:32
  Speaker 1: got for us? Let's talk about e t S. I mean,
• 22:34
  Speaker 1: is it still a thing? Is Money still going to
• 22:36
  Speaker 1: e t F s like crazy? We still see the
• 22:40
  Speaker 1: broader trend. Yeah, so you can see so many benefits
• 22:42
  Speaker 1: to e t F s. We see, Um, the DI
• 22:46
  Speaker 1: diversification elements are really useful. Um, we see as well
• 22:49
  Speaker 1: as an access vehicle, it's providing Um, good access to
• 22:53
  Speaker 1: different markets that clients are looking to get into very
• 22:57
  Speaker 1: quickly and I think, especially in light of the motility
• 22:59
  Speaker 1: in the market at the moment, being able to get
• 23:01
  Speaker 1: in and out of positions easily, quickly, efficiently cheaply is
• 23:06
  Speaker 1: of the utmost importance. Now, first of all, step up
• 23:08
  Speaker 1: to the mic a little bit here. Why do you
• 23:09
  Speaker 1: think or why do you head of passive sales? What
• 23:12
  Speaker 1: does that mean? Passive sales? Yeah, passive sales for us
• 23:15
  Speaker 1: at dws is anything which is linked to an index.
• 23:19
  Speaker 1: So we have our e t f range ex trackers
• 23:21
  Speaker 1: and then we also offer segregated mandates tracking indices, b
• 23:25
  Speaker 1: they on the equities, fix income or commodities. So you
• 23:27
  Speaker 1: don't do all the e t f that are actively managed.
• 23:29
  Speaker 1: We don't know at the stage now, but it's something
• 23:32
  Speaker 1: we've seen in the market as an emerging trend. So
• 23:34
  Speaker 1: what are the most popular products or what are the
• 23:36
  Speaker 1: hardest products? When you get up in the morning and
• 23:38
  Speaker 1: you're super pumped about a new product? What is it
• 23:41
  Speaker 1: at the moment? Yeah, I really like hi yield. I
• 23:44
  Speaker 1: think that there's going to be a time for it
• 23:46
  Speaker 1: again in portfolios. I think it's been hammered. We see
• 23:48
  Speaker 1: where spreads are at the moment, but especially in light
• 23:51
  Speaker 1: of where the Fed action is. You know, we really
• 23:54
  Speaker 1: need to be on the hunt for yield. Um we
• 23:56
  Speaker 1: can get equities, but I think when we look at SMP,
• 23:58
  Speaker 1: for example, historical defield is only two percent. You need
• 24:02
  Speaker 1: to look at fixed income again, but also be willing
• 24:05
  Speaker 1: to take on some risks. So fixed income not behaving
• 24:07
  Speaker 1: as it historically does as a dampening portfolios y s G. Yes,
• 24:13
  Speaker 1: I'm skeptical. Okay, tell me why I shouldn't be skeptical,
• 24:16
  Speaker 1: because I know e s g themed e t s
• 24:19
  Speaker 1: are very popular in getting a lot were right. We're
• 24:23
  Speaker 1: I don't know. I mean I think we're all skeptical now, right,
• 24:25
  Speaker 1: aren't we? Isn't the market pretty skeptical? Fair to ask questions,
• 24:28
  Speaker 1: you know, I think that's everyone doing their job at
• 24:30
  Speaker 1: the end of the day. Um, look, we but we're
• 24:33
  Speaker 1: in climate week in New York at the moment, right. Um,
• 24:36
  Speaker 1: I think all of us know and feel as well.
• 24:38
  Speaker 1: We see record breaking summers. Um, all of us. We
• 24:41
  Speaker 1: need to think that when we're making an investment, it's
• 24:43
  Speaker 1: a deployment of capital. Right, so can we help the
• 24:46
  Speaker 1: situation with that? Right. And so from our stance at dws,
• 24:51
  Speaker 1: when we think about E S G, when often thinking
• 24:54
  Speaker 1: about not being exclusionary. So I think some of the
• 24:56
  Speaker 1: cynicism has come from this in the past, that you're
• 24:59
  Speaker 1: just outright filtering names and energy sector, for example, when
• 25:03
  Speaker 1: in fact they're part of the solution in terms of
• 25:05
  Speaker 1: helping US bring down climate change or at least, you know,
• 25:08
  Speaker 1: stabilize it. Right, we all need to have electricity at
• 25:10
  Speaker 1: the end of the day. Things like this. So we're
• 25:12
  Speaker 1: not really helping the problem there. Um. I think also
• 25:15
  Speaker 1: the social components as well, now that we have more
• 25:17
  Speaker 1: data points there as well. Um, it's not just something vague,
• 25:21
  Speaker 1: it's something more demonstrable. So the kind of rigor that
• 25:24
  Speaker 1: we have in investments built on the equities fixing come
• 25:26
  Speaker 1: a community side. We can have the same rigor when
• 25:29
  Speaker 1: we think about the e, s g Lens. That's a
• 25:30
  Speaker 1: good point. The the S is probably Um, the easiest
• 25:34
  Speaker 1: to quantify and deal with instantly, right, because the e
• 25:39
  Speaker 1: is kind of soft and mushy. The Germans, for instance,
• 25:41
  Speaker 1: would rather burn cold and use nuclear power, Um, and
• 25:45
  Speaker 1: you can debate whether or not nuclear is green. Um
• 25:48
  Speaker 1: The G. let's face it, when you have companies out
• 25:54
  Speaker 1: there that are very powerful and make a lot of money,
• 25:56
  Speaker 1: the CEO wants to be the chairman and the G
• 25:58
  Speaker 1: gets thrown out the window. So the s that we
• 26:01
  Speaker 1: can really make some progress on and you can measure
• 26:03
  Speaker 1: it and we can all agree, you know, on what
• 26:05
  Speaker 1: diversity looks like and how important that is. Um. So
• 26:09
  Speaker 1: I think that's that's really fascinating. Let's talk about what
• 26:11
  Speaker 1: you did to get into this position. You studied mathematics.
• 26:17
  Speaker 1: I think it's interesting and and this is this is
• 26:21
  Speaker 1: a great way to get into this kind of this
• 26:22
  Speaker 1: kind of work, right. It is. Yeah, not go up
• 26:26
  Speaker 1: and start a conversation with the math masters and mathematics person.
• 26:30
  Speaker 1: You like engineers, though. You always ask people that engineers,
• 26:33
  Speaker 1: why are you studying engineering and getting onto wallster? What
• 26:35
  Speaker 1: would you say is the right path to get to
• 26:36
  Speaker 1: Wall Street in terms of a major? Well, it's all different,
• 26:39
  Speaker 1: and now it's now it is probably math and engineering
• 26:42
  Speaker 1: computer you know what the mathematicians say? They say that
• 26:44
  Speaker 1: engineers that just want to be mathematicians. In any case, what? What? What?
• 26:50
  Speaker 1: What led you to this position? And you know, what
• 26:53
  Speaker 1: would you tell others who want to get into into
• 26:54
  Speaker 1: the field? Yeah, so, when I was younger, much younger,
• 27:00
  Speaker 1: I actually was obsessed with news and probably wanted your
• 27:04
  Speaker 1: job in fact. And well, I realized that was finance.
• 27:09
  Speaker 1: was actually a really good way to be very engaged
• 27:10
  Speaker 1: with news. At the end of the day, I'm talking
• 27:12
  Speaker 1: about it as much on the daily basis as you
• 27:14
  Speaker 1: are really Um and seeing then the implications in markets. Um,
• 27:19
  Speaker 1: my maths background was quite useful for that. I think.
• 27:22
  Speaker 1: I don't use any of the numeracy realistically, but I
• 27:24
  Speaker 1: use a lot of the logic and argument forming. So
• 27:28
  Speaker 1: I think that's Um maybe how the two are tied together. Yeah,
• 27:31
  Speaker 1: I mean when we're covering the news, essentially what we
• 27:34
  Speaker 1: do is kind of follow the money to find out
• 27:36
  Speaker 1: what's going on in your the money friends, things like this. Um,
• 27:39
  Speaker 1: the trend of e t F, I think, has been
• 27:41
  Speaker 1: amazing to watch. I started looking into it and talking
• 27:45
  Speaker 1: about it in hosting conferences about et f about ten
• 27:48
  Speaker 1: years ago and I thought this is the future, and
• 27:50
  Speaker 1: now we're there. I mean it is huge. So many people,
• 27:53
  Speaker 1: not just the kids investing in ets, but so many people,
• 27:56
  Speaker 1: because of regulations, can only invest in e TF. A
• 27:59
  Speaker 1: lot of people have and having trouble getting into them.
• 28:01
  Speaker 1: Now they are. You're seeing a lot of mutual funds
• 28:04
  Speaker 1: convert over to E T S in this market. Right
• 28:07
  Speaker 1: I P os, with the exception of Porsche, they're like dead,
• 28:10
  Speaker 1: but people are launching new e t f s every week.
• 28:13
  Speaker 1: It's incredible to see the growth it is. We were
• 28:16
  Speaker 1: speaking with contacts at the exchanges, so at Cebo and Nicey,
• 28:21
  Speaker 1: and they're saying that nowadays most of the bell ringings
• 28:23
  Speaker 1: it's like e t f providers rather than which is super,
• 28:26
  Speaker 1: super interesting actually right, when you think about the coverage
• 28:29
  Speaker 1: that used to be from you guys, from from other wires,
• 28:33
  Speaker 1: it was always about a new company listing, but now
• 28:36
  Speaker 1: you know, we're fighting for slots really in terms of
• 28:39
  Speaker 1: the bell ringings. So at dwus again, Deutsche Bank's asset
• 28:44
  Speaker 1: management businesses. That the way to describe it? Okay, one
• 28:46
  Speaker 1: trillion dollar global asset management manager. You guys are big.
• 28:49
  Speaker 1: How much of that is passive? Would you say? Yeah, so,
• 28:52
  Speaker 1: first and foremost we're actually separately listed from Deutsche Bank,
• 28:56
  Speaker 1: but obviously they have a shareholding in us. And then
• 29:01
  Speaker 1: about a quarter of our a U M is in passive,
• 29:04
  Speaker 1: so in this indexed investment management piece. But do you
• 29:08
  Speaker 1: see Um passive? Is that right now sort of on
• 29:13
  Speaker 1: the back foot compared to active management in this kind
• 29:15
  Speaker 1: of market? I would say Um, people are thinking it
• 29:19
  Speaker 1: makes sense to pay a money manager to decipher these
• 29:22
  Speaker 1: tough markets at the moment. But also if you have
• 29:24
  Speaker 1: a robust index and if you feel then that you
• 29:26
  Speaker 1: can add value through Acet allocation rather than through stock picking,
• 29:30
  Speaker 1: then passive mandates and e t f s are definitely
• 29:33
  Speaker 1: a very useful tool. So we do actually see this
• 29:35
  Speaker 1: trend continuing, I think as well, just like, given how
• 29:37
  Speaker 1: tough liquidity is at the moment, actually this has added
• 29:40
  Speaker 1: fuel to the fire in terms of the growth of ets. Well,
• 29:43
  Speaker 1: they're not across purposes really for you, because I could
• 29:45
  Speaker 1: go to a money manager who uses your passive products
• 29:48
  Speaker 1: to exectively manage my wealth. Exactly. Vanguard and black rock
• 29:54
  Speaker 1: control the majority of the tip. Is that a good structure,
• 29:58
  Speaker 1: do you think, for the ET F business or wrong?
• 30:01
  Speaker 1: I would say that both of these providers add some value.
• 30:04
  Speaker 1: I'm actually ex black rock myself. Fantastic leaders that. I
• 30:09
  Speaker 1: would say that competition is always healthy, right, and I
• 30:12
  Speaker 1: think that sometimes when you have some of these newer players,
• 30:14
  Speaker 1: it's great that they innovate so quickly, you know, and
• 30:17
  Speaker 1: they get products and markets so quickly. So I think
• 30:20
  Speaker 1: there's a place for everyone. Um, I think that some
• 30:22
  Speaker 1: of these established products from the likes of vanguard or
• 30:24
  Speaker 1: black rock are so useful to clients we won't ever
• 30:26
  Speaker 1: be able to compete with them. So there's still a
• 30:29
  Speaker 1: place for them too. But you think the duopoly is
• 30:31
  Speaker 1: going to stay? I mean, like there are a lot
• 30:33
  Speaker 1: of competitors up and coming you do think that vanguard
• 30:37
  Speaker 1: and black rock are going to remain these two anchors,
• 30:40
  Speaker 1: though I wish I had a Christian it's always I
• 30:44
  Speaker 1: always thought about you know, Bloomberg and Reuters are the
• 30:46
  Speaker 1: two major. When I started we wanted to beat routers,
• 30:50
  Speaker 1: you know, and they wanted to beat us. And throughout
• 30:52
  Speaker 1: the years we've seen other upstarts coming business insider axios,
• 30:56
  Speaker 1: what have you, but we're still kind of the two
• 30:58
  Speaker 1: biggest in terms of business. I think it's basically us
• 31:02
  Speaker 1: and then Reuter's all right, Amanda Rebello, head of passive
• 31:05
  Speaker 1: sales us on shore for dws group, joining us here
• 31:08
  Speaker 1: in our Bloomberg interactive broker studio. We appreciate that. Well then,
• 31:15
  Speaker 1: guests are just kind of flowing into the studio these
• 31:17
  Speaker 1: days that we're getting back to the old days, which
• 31:19
  Speaker 1: is good. Getting people come in we can get in
• 31:21
  Speaker 1: some good conversations. Amy O'Brien joins us. She's global head
• 31:24
  Speaker 1: of responsible investing at nouvene. Amy, it is you know,
• 31:28
  Speaker 1: it's climate week here in New York, in addition to
• 31:30
  Speaker 1: being the UN General Assembly. So I'm guessing this is
• 31:33
  Speaker 1: a big, big week for you. What how do you
• 31:35
  Speaker 1: guys at nouvine kind of describe responsible investing. What's that
• 31:40
  Speaker 1: mean to you? Well, responsible investing is our umbrella term
• 31:43
  Speaker 1: for how we credibly embed E S G factors into
• 31:47
  Speaker 1: investment decision making, how we use our influence in the
• 31:50
  Speaker 1: market through our stewardship practices and how we measure and
• 31:52
  Speaker 1: manage positive and negative impact. So we had a guest
• 31:56
  Speaker 1: on here a few weeks ago, maybe a month ago,
• 31:59
  Speaker 1: and he has an et f out calling. You might
• 32:01
  Speaker 1: have her. I can remember his name, but he has
• 32:02
  Speaker 1: et a D R I l drill, and he's saying basically,
• 32:07
  Speaker 1: companies should just maximize profit. They should influence social policy.
• 32:12
  Speaker 1: Their job is to maximize profit and if that's buying
• 32:15
  Speaker 1: in a oil and gas company, fine, policymakers will take
• 32:19
  Speaker 1: care of all the other stuff. How does how do
• 32:21
  Speaker 1: you think about that at new vine? Yeah, I think
• 32:23
  Speaker 1: that's a debate that's been going on. I mean the
• 32:25
  Speaker 1: field is over five decades old and I think one
• 32:28
  Speaker 1: of the realities, though, is the client interest in e
• 32:33
  Speaker 1: s g investing, in stewardship practices and impact strategies is
• 32:38
  Speaker 1: stronger than ever. There are a lot of companies themselves
• 32:41
  Speaker 1: who have committed to tackling different types of issues like
• 32:44
  Speaker 1: climate risk and investing in opportunity. So while we we
• 32:48
  Speaker 1: certainly don't think that the whole world will just be
• 32:51
  Speaker 1: E S G leaders tomorrow, we think that all the
• 32:55
  Speaker 1: momentum around these factors and what's driving growth means that
• 32:59
  Speaker 1: E S G is here to stay. Despite some of
• 33:01
  Speaker 1: those some of those views. I'm old school Wall Street.
• 33:04
  Speaker 1: My first job, my trader would just come up to
• 33:06
  Speaker 1: me every single day, my head trader, and say make money,
• 33:09
  Speaker 1: don't lose money and then walk away. That was my
• 33:12
  Speaker 1: pep talk. E S G investing. Do I make do
• 33:16
  Speaker 1: I get superior returns? Do I sacrifice some returns to
• 33:19
  Speaker 1: do social good? What's the data show? So E S
• 33:23
  Speaker 1: G and responsible investing is all about making money and
• 33:26
  Speaker 1: that has been the approach that many of us who
• 33:29
  Speaker 1: are based at commercially oriented firms, uh, you know, have
• 33:32
  Speaker 1: to take. We have to be careful about what mean
• 33:35
  Speaker 1: by e s G. is at e S G commitment,
• 33:37
  Speaker 1: E S G outcome. You know, there are, you know,
• 33:39
  Speaker 1: the devils in the details when we're talking about this field,
• 33:42
  Speaker 1: but we are we're grounded in them, in the views
• 33:45
  Speaker 1: that these factors can help us manage risk across multiple
• 33:49
  Speaker 1: asset classes. They're uncovering very unique kinds of investment opportunities, um,
• 33:54
  Speaker 1: that clients want and you know, based on where the
• 33:57
  Speaker 1: policy environment is going, you know we're we're well position
• 34:00
  Speaker 1: to to meet the future demand from clients. So we
• 34:03
  Speaker 1: were just talking Um with a head of E T
• 34:09
  Speaker 1: F business at at dws and she pointed out that
• 34:13
  Speaker 1: it's e. The E is a little squishier. Right. The
• 34:17
  Speaker 1: S is pretty easy to identify, Um, and as well
• 34:21
  Speaker 1: as the g. But but e is where you get
• 34:24
  Speaker 1: a debate. Germans will say nuclear is horrendous for the environment,
• 34:30
  Speaker 1: and the rest of Europe, I think just made nuclear green.
• 34:34
  Speaker 1: How do you deal with this kind of taxonomy issue? Um?
• 34:38
  Speaker 1: That that we're still trying to figure out right. Well,
• 34:40
  Speaker 1: it all gets down to data and taxonomy. But then
• 34:44
  Speaker 1: it gets then you have to add on what are
• 34:46
  Speaker 1: the client's own views, and so we have to build
• 34:49
  Speaker 1: out a robust system for which our investment teams can
• 34:52
  Speaker 1: have access to credible e s g information across all companies.
• 34:56
  Speaker 1: Use that alongside the fundamental research. But increasingly we're seeing
• 35:01
  Speaker 1: clients come to US and ask us for you know,
• 35:03
  Speaker 1: very specific Um you know, portfolios, separately managed accounts that
• 35:08
  Speaker 1: do express your views. So you have to be careful
• 35:10
  Speaker 1: about what clients get when it comes to e s
• 35:13
  Speaker 1: g versus, you know what across the board and in
• 35:16
  Speaker 1: terms of investment discipline, versus what they're coming and asking.
• 35:19
  Speaker 1: And many of us do have very customized beliefs depending
• 35:22
  Speaker 1: on the region they're in, and we have to work
• 35:24
  Speaker 1: with those clients accordingly. So and I guess the probably
• 35:28
  Speaker 1: number one conundrum is something like uh, an oil company
• 35:31
  Speaker 1: right like BP. Is that an e s g offender
• 35:35
  Speaker 1: because they, you know, are pulling oil out of the
• 35:39
  Speaker 1: ground and causing environmental problems, or is that a leader
• 35:43
  Speaker 1: in E S G because they're looking at alternatives and
• 35:47
  Speaker 1: trying to change the way we think of and use energy? Yeah,
• 35:51
  Speaker 1: I think we have to also be careful to not
• 35:53
  Speaker 1: to have black and white, you know, views on here.
• 35:55
  Speaker 1: I mean a lot of investors are working with large
• 35:58
  Speaker 1: companies such as BP and others to map out what
• 36:01
  Speaker 1: the transition will be to a lower and you've seen
• 36:06
  Speaker 1: a lot of proxy votes this year shielder resolutions on
• 36:10
  Speaker 1: this topic, and so you know we we aren't taking
• 36:13
  Speaker 1: a stand at new being, you know, energy good or bad.
• 36:16
  Speaker 1: You know, it's really about a case by case working
• 36:18
  Speaker 1: with each company, understanding what their strategy is for our
• 36:21
  Speaker 1: views about the long term transition towards a low carbon
• 36:25
  Speaker 1: economy and so bp Um, you know, could be used
• 36:27
  Speaker 1: by different investors in different portfolios. But we have to
• 36:30
  Speaker 1: be precise as asset managers about what our view is
• 36:33
  Speaker 1: and when those companies are in a portfolio and when
• 36:36
  Speaker 1: they're not. Cope is coming up. What is? Just tell
• 36:40
  Speaker 1: us what copy seven is and how it impacts the
• 36:42
  Speaker 1: E S G investing world. Yeah, so there's been, you know,
• 36:46
  Speaker 1: cop twenty six, of course, was last year and last
• 36:49
  Speaker 1: night I was at at an event at the British
• 36:51
  Speaker 1: consulate that actually uh where, Um a look. He Sharma
• 36:56
  Speaker 1: spoke about what what was achieved in this past year
• 36:59
  Speaker 1: and we'll remember the timing here where a cop happened.
• 37:03
  Speaker 1: And then we've had, you know, the war in Ukraine
• 37:05
  Speaker 1: and all of the issues around covid and President Biden
• 37:08
  Speaker 1: left cap twenty six on the phone with the Saudis
• 37:10
  Speaker 1: saying please pump more oil. Right, I mean it was really,
• 37:13
  Speaker 1: really interesting. Uh M, a time it is, but I
• 37:18
  Speaker 1: mean I think what copies achieved for the industry is is,
• 37:21
  Speaker 1: you know, bringing together. You know what a credible commitment
• 37:24
  Speaker 1: could look like. I mean I think everyone understands that.
• 37:28
  Speaker 1: You know, in terms of emissions, we are all long
• 37:31
  Speaker 1: term looking for a downward trend. There a significant downward trend,
• 37:34
  Speaker 1: but we may have periods where there there are some
• 37:37
  Speaker 1: some blips and you know, what's happening in the energy
• 37:40
  Speaker 1: markets has to affect our plans. But last night I
• 37:43
  Speaker 1: heard a lot of talk from large asset owners, sovereign
• 37:46
  Speaker 1: wealth funds, you know, around the world, who are still
• 37:49
  Speaker 1: committed to making this transition possible. Believe there's investment to
• 37:53
  Speaker 1: be made and money to be made in the transition
• 37:55
  Speaker 1: to that long term. Um, you know outcome of net
• 37:58
  Speaker 1: zero carbon. So cop twenty seven is coming up in November.
• 38:01
  Speaker 1: I think you'll see a lot of the commitments that firms,
• 38:04
  Speaker 1: companies and asset managers like us made last year coming
• 38:08
  Speaker 1: out with stronger, more detailed implementation plans. I think that's
• 38:11
  Speaker 1: really important for investors and other stakeholders. The regulators are
• 38:15
  Speaker 1: looking at us on this very topic. Um, we are
• 38:18
  Speaker 1: we are being regulated and have disclosure requirements being placed
• 38:21
  Speaker 1: on us as an asset manager. More than ever before,
• 38:24
  Speaker 1: you know, especially on the issue of climate risk. So
• 38:27
  Speaker 1: what are the investment opportunities that you're that you're pumped
• 38:30
  Speaker 1: about as we head into that? Yeah, I think we.
• 38:32
  Speaker 1: You know, one way that I'd like Um to think
• 38:34
  Speaker 1: about this is the investment opportunities here are cross sectors.
• 38:37
  Speaker 1: We're placing a lot of emphasis on the energy sector,
• 38:41
  Speaker 1: but when we look at other parts of the investable universe,
• 38:44
  Speaker 1: there are many companies who are changing business models because
• 38:47
  Speaker 1: of consumer preference. So we're looking across asset classes. Um.
• 38:52
  Speaker 1: You know, Nuvine has been building out alternatives in a
• 38:54
  Speaker 1: natural capital investment area to to kind of capitalize on
• 38:59
  Speaker 1: that part of the equation. So there's a lot of
• 39:02
  Speaker 1: emphasis on how how you lower emissions, but you know,
• 39:05
  Speaker 1: how do we create syncs to which to to remove
• 39:07
  Speaker 1: those from from the environment? Tell us about data, like
• 39:10
  Speaker 1: it might buy a stock or a bond or company
• 39:12
  Speaker 1: and look at the income statement, balance sheet, cash flow
• 39:14
  Speaker 1: statement to get a sense of evaluation. Where do I
• 39:17
  Speaker 1: go to get good, consistent data for e s G. Paul,
• 39:21
  Speaker 1: how much more time do we have in the show?
• 39:23
  Speaker 1: I mean this is certainly, you know, an area that
• 39:25
  Speaker 1: I started my career out twenty six years ago in
• 39:27
  Speaker 1: this space, working for one of the first firms organizations.
• 39:30
  Speaker 1: It was a nonprofit Um. That those that's those days.
• 39:34
  Speaker 1: That's who was producing E S G ratings Um and
• 39:36
  Speaker 1: we were struggling with some of the same challenges we
• 39:38
  Speaker 1: are now. But I do see, you know this, we'd
• 39:41
  Speaker 1: have to, you know, make sure the world begins to
• 39:44
  Speaker 1: align around e s g data needs, uh, disclosure requirements
• 39:49
  Speaker 1: from issuers. Then regulators have to get on board about
• 39:53
  Speaker 1: then what do they want from the investors themselves? So
• 39:55
  Speaker 1: there's this whole data infrastructure ecosystem that we all and
• 40:00
  Speaker 1: I would encourage us all to take a look at that,
• 40:02
  Speaker 1: because that is really where the rubber is going to
• 40:04
  Speaker 1: hit the road. Is when we have good data, we're
• 40:05
  Speaker 1: gonna be able to make good decisions. We're gonna be
• 40:08
  Speaker 1: able to show who's the leader, you know, in in
• 40:10
  Speaker 1: on the S G you know who might be a
• 40:12
  Speaker 1: laggard and then, more importantly, you know what were the
• 40:15
  Speaker 1: real change that that happened. And you know that's still
• 40:17
  Speaker 1: a little muddy right now. And you know, and investors
• 40:20
  Speaker 1: to get the credibility and confidence to to further allocate Um.
• 40:24
  Speaker 1: You know, we're gonna need to really that's one way
• 40:26
  Speaker 1: that we could align as a as an industry. All right,
• 40:29
  Speaker 1: Amyo Bryant, great, great stuff. Amy Brian, global head of
• 40:31
  Speaker 1: responsible investing at Nouvine, I'll mention you know you go
• 40:34
  Speaker 1: to the f a function on the Bloomberg terminal, one
• 40:36
  Speaker 1: of the most widely used terminal functions for financial analysis.
• 40:40
  Speaker 1: We have a big tab there of all E S
• 40:41
  Speaker 1: G data for Jillions of companies. So, Amy Brian, thanks
• 40:45
  Speaker 1: so much. We appreciate it. Thanks for listening to the
• 40:49
  Speaker 1: Bloomberg markets podcast. You can subscribe and listen to interviews
• 40:53
  Speaker 1: with apple podcasts or whatever podcast platform you prefer. I'm
• 40:57
  Speaker 1: Matt Miller. I'm on twitter at Matt Leer in nineteen
• 41:00
  Speaker 1: seventy three, and on ball sweeney. I'm on twitter at
• 41:03
  Speaker 1: PT Sweeney. Before the podcast, you can always catch US
• 41:06
  Speaker 1: worldwide at Bloomberg radio.