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00:00Marginal gains for the stock market while the dollar keeps on strengthening. I'm pretty GUPTA Bloomberg Markets starts right now. Let's dive into the price action. Here we are seeing green on screen. We're up almost seven tenths of one percent when it comes to the S & P 500. Take a look at this. The stock market has since paired those gains. We even went into negative territory. Now only up two tenths of one percent. But it's the VIX that's really catching my eye here. A twenty nine handle on the volatility gauge. And we know in the last six sessions you started to see 30 become kind of the mark. This resistance level perhaps if you're into the technicals as we see between 29 and 30 to become this kind of short term range for the volatility index we're gonna keep an eye on that. Anything above 30 might signal a little bit more conviction in one direction or the other. We'll talk about the bond market though. Not a ton happening to seventy five on the 10 year. We're going to keep an eye on that especially as we continue to see the dollar strengthen even though it doesn't have the yield push it has right now. Let's take in a little bit more into the market story and bring in Bloomberg's Abigail Doolittle AP while creating we do of course as you were just mentioning have markets super choppy and within this year's downtrend a bear market officially last week briefly for the S & P 500. The big question is are we ever going to get some sort of bounce now back in March. We did have one. If we take a look at this chart of the S & P 500 you can see here the S & P 500 rolling over down about 15 percent into that march low and then roughly a 12 percent bounce up. That happened as the RSI went from roughly oversold to basically overbought. Now down down down there is that brief market last Friday on an intraday basis. It seems likely that this year the S & P 500 will drop down to let's call it thirty five hundred thirty four hundred. But in the near term this range makes the case that you could see a bounce up toward forty five hundred. That number comes in as time goes on. But it's also supported by the idea that the RSI not while oversold is near the bottom. Maybe you're going to have the buyers come in but at this point it seems as though we need a lack of bad news and maybe even some good news creating. Well blueberries Abigail Doolittle thank you as always for more of today's market moves and really where we are in this market cycle I'm pleased to say we're joined by Steve Parker head of advisory solutions at J.P. Morgan Private Bank. Steve thank you as always for joining us. A special pleasant pleasure for me. We go way back to our audience. Let's start with where Abby ended here. This idea that a bear market rally is still possible whereas you do have some calls in the market saying perhaps the stock market is bottoming out. What's your take. So they say that markets move on better or worse. Not good or bad. And there's a lot of pessimism priced into the market right now whether you're looking at surveys of retail investors fund managers sitting on their highest levels of cash since 9/11 economic surprises bottoming at the levels that we saw during the early days of the pandemic. So when we think out over the next 12 to 18 months we think this is going to end up looking back as a nice entry point for the stock market. At the same time we have to have the humility in the short term to recognize the fact that we're dealing with a couple of factors war inflation things that most investors in this market don't have a lot of experience with. And so what we're doing is staying patient. We're staying diversified. We're focusing on quality but we are at normal levels of risk in our portfolios. I love that you said that most traders most investors don't have that experience as a journalist. I certainly don't have that for that long kind of vision. But I have to ask does that really matter in this environment given that over and over again we're talking about this being unprecedented. And also we knew inflation was coming. This was something we were talking about. So even a year ago before the actual consumer felt it we did know it was coming. But I think that we weren't we didn't realize how long it would last and how high it might persist. And I think that's one of the challenges that investors are grappling with at the moment. I think the reality is we're watching signs inflation is going to be the number one thing on people's minds. And it's not necessarily the absolute level but it's signs that things are beginning to roll over. And to us we actually think that inflation signs are going to begin to ease. Whether it's easing of concerns in the labor market wage pressures are beginning to abate. The economy is shifting from goods based consumption which is where a lot of the supply chain bottlenecks exist to more to to more services based consumption which is where there's less inflation pressures. And then we're obviously seeing some cooling in the housing market. So three of the big factors that are contributing to inflation right now we think are gonna begin to abate. And I think that's going to make investors happy. Well that's good news especially at a time when the stock market is hearing a lot of the words recession is hearing volatility is the fact or the idea that recession is inevitable and say by the end of the year this contraction of the economy while the economy is still growing at say 2 percent. Are those figures completely overdone. I don't think they're completely overdone. And we certainly think that the risk of recession is higher today than it was when we came into the year. But we don't think it's as high as what markets are reflecting right now. Sorry. What. Just interrupt there. What is the driver. What changed. That was the war in Ukraine. It was a number of things. The persistence of inflation the war in Ukraine some of these structural factors related to inflation which ultimately led the Fed to have to take a more bearish stance. And in the way that they're approaching raising rates I don't think markets were prepared for how aggressive they might need to be. They've done the good news is the markets have done a lot of that repricing for them. Financial conditions have tightened. Rates at the long end have gone up. Mortgage rates have gone up. So I don't think we're gonna need to wait for the Fed to finish hiking rates for markets to be able to recover. But you know it's going to take a little bit of time and guidance that we're going to that there is a a soft landing potential. Well let's go where I want you took me right where I wanted to go here. And that is talking about the Federal Reserve. We can't have a market conversation without that. We've only been in this kind of quantitative easing cycle once before and a hiking regime that kind of counters that 2016 through 2019 and during that era the stock market rallied. If we're going by that precedent what does the stock market have to worry about when the Federal Reserve is quite literally tackling the inflation that it was criticized for not tackling. So I think that's going to be good news. And when we see signs that it's working that's what's going to get investors excited again about the market. I do think one of the things that we have to recognize is the playbook that we've seen for the last decade which is a slowdown. The Fed's ability to then cut rates and stimulate the economy is probably not going to come back in the same force that we've seen it over the last decade. So what we're focused on is a focus on quality companies strong balance sheets. Investors have spent the last five years focusing on how much revenue can you give me 10 years from now. Now they're focusing on how much free cash flow can you give me today. It's faster. And they bring up the cash flow story because for so long they were trading on liquidity. I mean you saw one of the most attractive pieces of Apple Microsoft. It wasn't the fact that they were the fastest growing companies in the S & P 500. It was that they were sitting on billions of cash. I have to ask though if we're going from a liquidity trading story to say trading on margins to trading on supply chain issues or whatever that may be what is the next signal to buy into some of these names specifically into big tech. You know I think big tech is actually well positioned when we talk to our fundamental analysts. When we go to conferences and talk to companies or you see headlines around some of these earnings and revenues misses. Generally speaking the message from big tech is that demand is still strong. And I think when you consider the valuation dynamics of a lot of these big companies it's just going to take time and patient investors are going to be rewarded for looking at some of these big tech opportunities. We're not as excited about some of those more speculative parts of the market the High Flyers. I think that financing and capital raising is going to become a lot more difficult. On the other side of this cycle. And that's why we want to focus on quality big tech checks a lot of those boxes. I'm really glad you used the word valuations because now one of the major reasons for the bull case is I should say for going hopping into the stock market here is that if you look at some of these valuations they are back to pre pandemic levels. But if you kind of rewind to January of 2019 4 or January 2020 and even in the last quarter of 2019 I remember one of the big conversations there being the stock market is overheated. Tech is overvalued. What are we going to do about this. So getting back to those levels is really a positive. You know I think that when you look at the valuation story certainly a lot of froth has come out of the market. Unfortunately when you see market corrections valuations tend to overcorrect on the bottom on the downside just as they do tend to overshoot on the upside. That's why again stay focused on quality stay focused on those companies that are going to be able to grow into those attractive valuations. And I actually think that you know staying in a place where we're closer to long term historical averages as opposed to looking for you know the historical highs on the valuation front puts us in a good spot. It means that overall returns on the equity market are probably a little bit lower than what we've seen over the last couple of years. But that's completely normal and a good environment to be investing in. Lots to digest. We thank you so much Steve Parker of the J.P. Morgan Private Bank. Always a pleasure. We hope to have him back soon. Let's get to some breaking news though. Headlines regarding the S.E.C. The regulator is taking its biggest step yet to stop money managers from misleading investors when they claim their funds are indeed focused on ESG issues the agency set to propose. On Wednesday a slate of new restrictions aimed at ensuring ESG funds accurately and describing their investments. Take a listen. Or actually say listen to me about what the S.E.C. chair Gary Gensler said in a statement. He commented It is important that investors have consistent and comparable disclosures about asset managers ESG strategies so they can understand what data underlies funds claims and choose the right investments. For that we will of course have more details on this ruling as the day progresses. For now let's get to Bloomberg's first war news with Mark Crumpton Marc RTS. All those children in elementary school were in the same fourth grade classroom. 19 children were killed along with two adults. A number of others were wounded in that incident. Yesterday the gunman who shot and killed by a gun before. Mark we're going to come back to you in a second. And let's actually just head to break here. We'll bring you some more of those headlines once we come back. This is Bloomberg. This is Bloomberg Markets. I'm pretty good at Twitter's annual shareholder meeting just kicking off now. Joining us now for the latest is Bloomberg's ad Ludlow who is standing outside Twitter's headquarters in San Francisco California. Ed always a pleasure. Walk us through what we're expecting to hear. What are the big issues at this meeting. Yeah. Hello from a windy San Francisco. I'm not sure that things are quite as turbulent inside the building behind me because of course Elon Musk sped to buy. The company isn't officially on the agenda that's being discussed. But let's be under no illusions. That's what shareholders want to know about what is the status because as you'll remember Elon Musk said a few weeks ago quote The deal's temporarily on hold. He had concerns about the number of bots or percentage of users on the platform that were bots. But really what we're trying to understand is where the bid stands from a pricing perspective. We are a long way from 54 dollars 20 cents a share based on where Twitter is currently trading and all the fees. Merger arbitrage specialist that Bloomberg is talking to increasingly paint a picture where we're somewhere between a scenario where Musk walks away from the deal and there could be legal consequences that follow that. And a new lower price below the 54 dollar 20 cents per share offer that Musk currently has in. And there have been let's put a mosque aside for a moment. There has been this major talk about actually Twitter reframing. They've made some rules in terms of monitoring some of the contact flagging content that that becomes or poses an issue. In top of that they've also had a major round of layoffs both on the junior and senior levels. I have to ask how much of that is going to get addressed in the shareholder meeting. Yeah it's interesting because one of the resolutions the official agenda items is management compensation. And you see a number of pension funds for example vote against the management proposal because they feel that performance has not been good. You know you have this situation is Bloomberg's reported where you have a number of senior departures from the company hiring put on hold because they're in limbo essentially. You know we talk to insiders all the time who are working on specific products carrying out specific engineering in the building behind me. But they don't know where they stand because if Mitt Mosque is successful of course he has his own ideas for the platform. And if he does by Twitter it does take the company private. We don't actually have a clear picture of what day to day involvement will have. We know based on extensive reporting and well-documented occasions that mosque has been a micromanager right at Tesla and Space X. So everyone inside that building is bracing for it. But from a shareholder perspective they just want to know where they stand. Is the bet is the deal going to happen or not at 30 seconds less. Macro this out a little bit. We heard from Snapchat and the issues that they're expecting on ad revenue. Is Twitter in the same boat. Yeah. Twitter is vulnerable right. We talk about advertising. The first thing to suffering in this week at macro environment is advertisers pull money especially when they have concerns about consumer confidence. We draw investor expectations down to Earth across this technology subsector in recent days. And I'm sure that shareholders will ask about the future of Twitter's app business. During the meeting Boomers AD Ludlow joining us from right outside Twitter's headquarters in San Francisco. We thank you as always. Let's continue the conversation on Twitter and bring in RO head coach Kahney MKM Partners executive director and really dig into this issue with social media. Rohit sorry let's start with where AD left off this question of ad revenue. We heard about snapshots warning these macroeconomic fears. How much of those fears are going to seep into the Twitter story. So what SNAP told us this week that band and direct response advertising bought are under pressure. Twitter does more to brand. And the first thing that as Ed said the first thing that advertisers would pull back is branding spend. So obviously Twitter is not going to work in a vacuum. I think they would definitely see the headwinds comparable to what SNAP is seeing. The industry is seeing and probably more amplified level atrophy. And now we have to ask about whether or not some of these fears are overdone. I mean remember the market is largely trading on recession odds this kind of slowdown that's guaranteed. But a recession is not the same thing as a slowdown. So is the ad revenue story really a function of these fears that may or may not be warranted. I feel the market is jumping ahead to a certain degree with regards to almost getting to like a self-fulfilling prophecy about a field that is going to be a decision we make going to a decision and B we are in a position right now. Perhaps that's where the market is right now. I'm not a macro person but that's where we feel some of the stocks where they're trading with the valuations that they have in the longer term outlook that they may have. That's where we are getting to a point where absolute risk reward is very very attractive. Having said that there is going to be downside to numbers. There is going to be some downside no second half numbers. As you know last year it lost half. All these companies had a tremendous loss top off 31 which led to a very very tough comps and inflows top off. Really do what everybody expects returns NAB interest to accelerate revenues in second half because of what happened in second half of last year. If that doesn't happen then that is probably under the leg down to some of these names. Despite the correction we are seeing. And as we speak we are seeing Twitter shares actually higher up two point four percent. What trading here at a thirty six a handle. Far cry from the 50 for 20 that you own mosque has to offer. Of course law has been kind of this deal on pause as Elon Musk phrase it. I have to ask what are the odds this deal actually goes through. In my opinion given what we are hearing from Frank returned from mosque again all in the public realm of things. This this deal the likelihood of this deal happening on higher given again probably. Mosque is willing to negotiate at a lower price. If you look at what a lot of these are arbitrage opportunities are there is a reading about 30 to 25 percent below the offer price. Some companies say for example Activision is trading at 20 to 25 percent below the offer price and that Microsoft is willing to pay. So there is a slight slightly greater arbitrage for Covid as compared to some other mergers that we are seeing the ending right now. So that arbitrage just probably markets. We are seeing that Musk is willing to come back to the table the slightly lower offer and DAX Amanda Lang closes. Let's talk about the monetization of it because that seems to be something that you and Musk hasn't necessarily addressed. You talk about the content side note. How does Twitter actually make money. Aside from the ad revenue story they've put out things like super follows Twitter blue Twitter spaces. How will Twitter make money say 10 years from now. Twitter believes that they can make money the way some other companies like Instagram on Facebook have been doing for the last six seven years. As I said Twitter 85 to 90 percent. The revenues come from round advertisers which are very very similar to what you see on TV and there is less emphasis on that done on and spend as such. Facebook Instagram they do direct response. Reader believes that 50 percent of the revenues come from better response. Now add onto that what Musk believes that a pretty chunky slice of the business could come from subscriptions. So that could be a 300 monster idea that must believe that are a brand. You have a direct response and subscriptions are maybe a third a third a third. So a lot of incremental revenues. But it remains to be seen how they execute that for sure. Thirty seconds here. What is Twitter's biggest problem right now. Execution management and execution. I feel love. There are a lot of John recently that you have a younger new CEO with a tech background. I feel love. It's a short me story to have a good story. You've got to show me that as an artist you've got to execute on the plan. Road Kill CARNEY MKM Partners. Executive director we thank you so much for joining us of course as we speak. Twitter shares are higher up to the tune of two point three percent and the AGM the annual JEN Holders shareholders meeting is underway. Still ahead though we hear from the New York state DFS superintendent Audrey and Harris about the state of crypto regulation a key topic as we talk about the adoption. More coming up next. This is Bloomberg. This is Bloomberg Markets. I'm Kristie Gupta. Now to something that caught my eye Anderson Howard Witt says it has raised a 4.5 billion dollar crypto fund the industry's largest to date. The firm is dedicating three billion dollars to venture investments and one point five billion dollars to seed investments. The fund the fourth crypto dedicated investment vehicle for Andreessen Horowitz brings its total digital asset focused efforts to get this seven point six billion dollars regulation a big part of the crypto universe of course. Earlier today Bloomberg's David Westin spoke with the New York State Department of Financial Affairs Superintendent Audrey and Harris about the issues tied to crypto regulation. Take a listen. It's very robust regime we have for regulating virtual assets and we've been at it for a long time and our standards are very very high. But it continues to attract companies to New York. And having that engagement with Washington is really helpful as they seek to regulate this space because they are learning from us. One former digital essence crypto currencies are changing very dramatically. We've seen in the last two or three weeks and they just plummeted in value. What is that done to inform how you approach regulation of those. Yeah absolutely. It really does help us think about not only the value of the regulatory framework that we have but how we need to think about these things going forward. So for instance would stable coins when they're licensed by DFS we require one to one reserving with cash and cash equivalents for every coin that's on chain. We require third parties to attest to the reserves of our licensed companies and we require internal and external audits as well. So we really have quite a rigorous framework. So that takes me back in a sense to a prior question which is other people are not requiring that other jurisdictions requiring that. How do you make sure that New York doesn't fall behind sort of the race for cryptocurrency when other jurisdictions whether in United or elsewhere are not requiring things like reserves unstable coins. Yeah well into the country of what might be popular belief. We see that that clarity those rules attract companies to New York. So in 2021 46 percent of venture capital investment in cryptocurrency was in New York based in regulated companies. That's more than Silicon Valley. It's more than Miami. So we know that having those clear rules of the road is good for consumers good for markets and can be good for companies as well. Adrian Harris New York State DFS superintendent speaking earlier with Bloomberg's David Westin a crucial conversation when we talk about the adoption of crypto currencies broadly. I mean even as we speak we are seeing Bitcoin higher to the tune about five tenths of one percent not the same standard deviation move that we usually see. Compare that to the broader market though and you're seeing a slightly risk on kind of vibe. S & P 500 about flat on the session but in the green you forcing the 10 year yield as well. Two hundred and seventy five basis points there still. Once again it screams risk off it off risk on excuse me across the board generally speaking. Coming up. We await the latest on the Fed miss. This is Bloomberg. I'm John Logan. Welcome to Bloomberg Markets. And I'm critic Gupta. Let's dive into the price action here. Green on the screen when you're looking at the S & P 500 but only marginally. John this is important as we talk about the volatility down one to two percent one day coming back up one to two percent the next. That is not the sign of a healthy market. Now though we're perhaps seeing marginal gains. How much of this is caution. How much of this is a return to normalcy. Of course when the dive into that topic throughout the next 30 minutes the VIX as well you are seeing a twenty nine handle. If it crosses 30 that might signal some conviction in either direction. Buying and selling. Also keep an eye on the bond market here. Not a lot happening ahead of those FOMC minutes at the top of the hour to seventy five on the 10 year yield. We're of course going to keep an eye on that. Interesting to see no movement in the bond market or limited I should say in the face of a stronger dollar. What is the dollar reacting to another day. We're starting to see that dollar strength John. And a great sector to look at for that conviction story is the beaten up technology sector Kitty. And to your point about green on the screen we are seeing some of those names that have struggled down anywhere from 40 to 50 percent this year moving higher today. The Tesla donkey side and zoomed stories front and center. If we are seeing a turning point and there are concerns about the economy and growth to growth stocks find a place in portfolios again. But of course still so many sensitive on the outlook. So we'll be watching it very very closely after the bell on what they have to say about the road ahead. Let's stick with that. The road ahead and turn to the economic picture here which has been a key factor in the volatility we've seen in the markets so far. Earlier today Bloomberg caught up at Davos with the CEO of the Ontario Teachers Pension Plan Board managing a nearly two hundred billion dollar fund. Listen to his thoughts on inflation. A lot of turbulence in current markets that shouldn't put us off our mission which is actually to provide stable returns of a longer term and it's really inflation which we're probably the one we're watching the most. And we may get more insight on inflation and the path of rate hikes when the Fed is pretty was talking about releases the minutes from its latest meeting just about 30 minutes from now 2:00 p.m. Eastern Time. Joining us for a preview Dana Peterson chief economist at the Conference Board. Always nice to have you with us. And what are you thinking about as we get ready to get a closer look at what they had been talking about at that most recent meeting. Sure we'll be looking for any clues in terms of how many more 50 basis point rate hikes where you expect that beach chair Powell did say June and July. But what about after that. Are we looking at 25 basis point hikes or are we looking at a pause where the Fed basically takes a breather and sees how financial markets are absorbing higher interest rates as well as the real economy meaning businesses and consumers. We're also interested in understanding what neutral means is the neutral range for the Fed funds rate really two to three percent. And does the Fed plan to go above that rate this year or even next year. You talked about watching for any clues on how aggressive the key members of the Fed will be. But I know at the conference board as well you have been measuring confidence among CEOs and how they feel about issues such as a recession right now. What kind of data points can you share with our audience. Absolutely our survey of CEO of CEOs published last week showed that 57 percent of them anticipate that inflation will slow over the course of this next year but that there will be a recession. A brief and shallow recession but a recession nonetheless. And that's pretty much tied to many of the events that we're seeing abroad but also monetary policy. And even though they think that the Fed is going to be aggressive they also anticipate that the Fed will come back and help calm things down. If we do go into recession. So you know hiking I can interpret they interpret that as hiking above 3 percent and then coming back and cutting rates. Alternatively the Fed may just pause after several rate hikes to see where we are. But certainly businesses are many of them are convinced that we are headed for a recession either later this year or next year. Dana what does that mean for the balance sheet. Well I think for the balance sheet and just even for a Fed policy in general the Fed has signaled that it's willing to do whatever it takes to arrest inflation to wrangle it to the ground. However the chair has said look we want a soft to soft ish landing. But certainly that leaves open the possibility of recession in terms of the balance sheet. I think the balance sheet action really has very little a few implications for the real economy and indeed even share. Powell suggested that some people are saying that dialing back down the size of the balance sheet is equivalent to about a 25 basis point rate hike. So there's really not much going on there. But I think no interest rate hikes will certainly calm consumer spending. We're already hearing consumers saying that they're delaying purchases in the face of rising interest rates. And certainly if inflation remains elevated even with the Fed's actions consumers are saying they're buying cheaper goods and looking for discounts and they're even driving less. Dana Petersen of the Conference Board we thank you as always. Let's get a quick check on these markets here ahead of the FOMC minutes that we were just talking to Dana about. John we are seeing some marginal gains in the S & P 500 up about two tenths of a percent. John I wonder how much of this is a wait and see approach for what we're going to get at two o'clock. And obviously we also have to wait and see what happens with a lot of other economies around the world we had seen those comments out of China today as well. So you're right we are seeing a little bit of buying ahead of those Fed minutes particularly in hard hit technology stocks. We'll have all those details coming up next. And obviously watch the market reaction to all of that. For Christy Gupta I'm John Erlichman. This is Bloomberg.

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Bloomberg Markets: Americas Full Show (05/25/2022)

Stocks making small gains, while the dollar strengthens yet again as Twitter shareholders meet Wednesday. "Bloomberg Markets" hosted by Kriti Gupta and Jon Erlichman speak with Dana Peterson, Conference Board Chief Economist. (Source: Bloomberg)

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