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President elect Donald Trump has been crystal clear his second term will be an assault on climate policy. He just released a statement that said that he's thrilled to announce Doug Bergham, the Governor of North Dakota, is joining the administration as bost Secretary of the Interior and as chairman of the newly formed National Energy Council. It'll consist of all departments and agencies involved in permitting production, generation, distribution, regulation,
transportation of all forms of American energy. The statement continues on to say that the radical lefts war on American energy has hurt our allies by forcing them to buy from our adverse series, who in turn use those profits to fund wars and terror. Energy dominance will allow us to sell energy to our friends. For more on what the climate agenda looks like or doesn't look like under the President elect, and that new administration that comes in
on January twentieth. We're joined by Lesli Kaufman. She's Bloomberg Green climate change reporter and for Bloomberg Business Week. She writes about the President elect aiming a wrecking ball at Climate Policey check out her story on the Bloomberg terminal and at Bloomberg dot com slash business Week. Leslie joins us from New York City. Leslie to bring up that statement which he might not have even seen yet because it just came out from the former president, but from
the President elect and former president. He says that America is blessed with vast amounts of liquid gold and other valuable minerals and resources right before our feet. We're going to drill, baby, drill, and expand all forms of energy production to grow our economy and create good paying jobs. I want to take a step back and sort of understand what the energy industry has looked like over the last four years so we can better understand what the President elect is saying right now.
Right Well, the United States has not stepped back exactly from oil production. We've been the number one oil exporter for this oil exporter for six years. That includes both the Trump and the Biden administration, So we haven't exactly walked away from that, but Biden has been trying to nudge the US towards a much greener economy, an economy that doesn't rely so much on fossil fuels. He had, of course, the Inflation Reduction Act, which put billions of
dollars towards new forms of energy. And the question now is what happens under Trump.
Let's talk more about that, because one of his pledges on day one has specifically been to end offshore When when you're thinking about more of those energy side of things that you're mentioning, would he actually be able to do that as quickly as he claims that he could end it when he comes into office.
Well, this is a more complicated question. There's some pieces of that. The first is that the IRA some of that money has already gone out, so some of that is committed.
He could.
Go after the tax credits that promote wind in solar. I think he will have a tough time doing that. Why because a lot of the beneficiaries of those tax credits are in red states and a group of congressmen has already written a note to Mike Johnson saying, please don't get rid of those tax subsidies. We'd like those. He's made a special point about wind. He does hate wind.
I am sure there are all sorts of things in permitting and other things that could make it difficult for people who are doing wind generation.
However, okay, talk a little bit about that, because there is there's some real politics involved in this, as you mentioned. A lot of the beneficiaries of the Reduction Act, as you just said, and you write in the piece as well, are in red states and have Republican members of Congress. So how do you dismantle something that is actually popular
even if those politicians didn't approve it. And you have some examples of politicians sort of lotting the money that's coming to this even after not voting for it.
Right, they certainly have gone after it and gotten as much as they can. This includes everything from solar and wind farms, but also battery manufacturers and things like evs and ev factories. All of those are things that a lot of people will believe will be the economy of the future, and they'd like China not to dominate as much as it already does. So this has also brought a lot of jobs to the US and certainly billions
in investment. So will he take on the tax credits directly, Maybe not, But there are still lots of things he can do to adjust the IRA to make it much more fossil fuel friendly. For instance, we give all sorts of grants for innovation, they could move that away from clean energy more towards things that fossil fuel companies like, like carbon capture, for example, hydrogen things that come from
oil and fossil fuel products. This would give money back to oil companies or allow them to continue to produce fossil fuel emissions and maybe have it carbon captured later. So those are some of the things that he can do to adjust the law to make it more friendly to his contributors and to the oil industry.
Does the oil industry actually want to be drilling more right now in the US given where oil prices are and the demand concerns out of China that sent oil prices lower this week, right, Well.
So there's an interesting question. I mean, there were leases that went up for sale under Trump that no one took. Its oil is very sensitive to things beyond the US market, and so it'll be very interesting to see the head of Exon is now on the record saying he thinks the IRA is a good thing. So of course, like I said, there's plenty of goodies in there for fossil fuel companies too, so they don't exactly want to see that wiped off the boards either.
Well, speaking of the fossil fuel industry, Donald Trump has promised to increase oil and gas production, even though the US already set records. To your point that you were mentioning earlier at the start of this, and especially if you think about those records under the Biden administration, what do you think a new Trump administration could do to increase it even more than it already has.
Well, some of the things they're talking about is making more public lands available for leasing. They could loosen up water standards and things like that, which would make it easier to get permitting. And in particular, permitting has been a problem for the United States. We just have to acknowledge that across all our energies systems. I think a lot of people in renewable energy have been so frustrated
with the permitting process also nuclear. One hope for green greenies is that the Trump administration will continue nuclear that they will not be hostile to it because that has been a bar bipartisan issue. And if they can loosen up some of the permitting, that might speed everyone's energy capabilities. Of course, you produce the capabilities.
Right And of course when we bring up energy oil and gas as well as gas production, people are going to think back obviously to their pocketbooks as well as what's happening with gas prices. So when you think about all these different kind of proposals, could any of this lead to lower energy costs for Americans?
Sometimes energy costs, you know, it's complicated. Obviously, more coming onto the grid is good. The huge and vestments in solar, for instance, are paying off. Now solar is now half the price of natural gas because we've put a huge incentive into building it. So yes, I do think that proper incentives can lead to cheaper prices for Americans. But it's complicated. It has to do with the demand, it has to do with you know, we all saw oil
prices shoot up. That had to do with COVID and the sudden shutting things down and then having to revamp things up just as there were demands. As you know, there are wars in the Middle East, There's a lot of things that are outside the control of the United States.
Where does this leave renewables in general? Leslie, because these projects are already broken ground across the country, indeed, some in red states or at least in more conservative districts. I've been by some new ones in conservative parts of New York State, for example, where they've already broken ground. Where does it leave projects that could be in limbo?
I think that.
There is great hope that there is enough momentum that those will just keep going, that their goal will not be to dislodge things that are already occurring, because the contracts are signed and the money is moved, and is probably not going to be their goal. The question is what does it mean for future innovation down the line? What does it mean for new projects? There's been a huge battle in this nation of natural gas versus renewables. This could tip the hand towards natural gas even further.
What about when it comes to electric vehicles? How much would a Trump administration change what's already in mind for EV production and ownership When you're thinking about the green aspect side of it.
Right, well, so EV is a whole complicated list of things you saw that they've already said that they will probably go after the tax credit. This is despite the fact that Elon Musk has been a huge supporter. So that's seven five hundred dollars. There've been rumors outside of Washington that that's going to be in the first tax package. They'd like to go after that, So that could certainly affect sales in the short run. But then there's a lot of questions about highways. Are you going to push
to have the infrastructure for EVS there? That does not seem like that would be a huge priority for the Trump administration. So I do think that they will. They will slow EVS at least for a while.
Is there any optimism from folks you talk to about Elon Musk? Being close to the president, he understands the challenges the climate faces. He's talked a lot about renewable energy. He is a fan of renewable energy.
He is a fan of renewable energy, and Republicans themselves used to be a fan of all kinds of energy. That was one of their benefits. They used to say, I'm not against renewables, I'm just for everything. It's unclear that Trump feels that way. I think that there's a lot of wait and see, a lot of hope placed on certain people, and I think we have to say there's just a big question mark about what they'll do. We can say, looking back at the last Trump administration
that it was fairly hostile. That particularly when you looked at the kind of regulations they put in place, or more importantly, the regulations they knocked out. They were not particularly friendly.
That said.
He said he'd come in and be very friendly to coal, but Cole continued to decline under his administration. I don't know if you recall his first months that brought miners into interior. He was going to help Cole grow. He did not.
Lesli Kaufman, Bloomberg Green Climate Change reporter. Check out her story in a Bloomberg Business Week and if you never want to miss a Bloomberg Business Week story, become a subscriber today. You can check out all our offers right now Bloomberg dot com slash subscribe Now.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on it Bookarplay and then Broud Auto with a Bloomberg Business app or watch us live on YouTube.
Well, so much happening right now that the c suite we know is focused on companies all over the country and indeed all over the world. A new administration coming in January, figuring out what tariffs and trade will look like, trying to parse through those names that have been announced
as the transition team makes its way to Washington. We talked a lot about that last week, perhaps though, about ESG and sustainability initiatives for companies, how those look under the next administration, especially one that denies climate change even exists. Nina Tretman is a Bloomberg News senior editor who writes the weekly CFO Briefing newsletter. You can sign up for that at Bloomberg dot com slash CFO Briefing. She joins
us here in the Bloomberg BusinessWeek Studio. We're also joined right now by Deanna Strabel, the CEO and formerly CFO of Principal Financial Group. She joins us from Iowa. Nina, I want to start with you and just get an understanding from you about how you're thinking about the CFO Briefing newsletter this week ahead of cop Yeah.
Yeah, thank you.
Very much for having me. Yeah, one thing that we'll look at in the upcoming edition is specifically this how do companies navigate this that we have COP twenty nine,
Who's what's is going on in Azerbaijan. We also have the new administration getting ready here in the US, and of course the contrast couldn't be starker, and companies are in this in the middle ground there sort of trying to navigate climate change which increasingly we all feel, and the realities of this new administration, and so we are speaking to CFOs about this in the new upcoming edition of the CFO Briefing. We're talking to them about sort
of how do they figure out new reporting requirements. There's new regulation taking place in the EU, for example, on that. We're also talking to them about net zero and why those goals are trickier to achieve then you might think. And then also we're talking to them about sustainability financing and the fact that sort of as debt markets around the world have been pretty busy this year, we've also seen an increase in that interestingly of the America so
sort of flagging behind Europe and Asia and Pacific regions there. So, yeah, what are we bring in Deana? Thanks for joining us again. It was great to talk earlier this week. Could you talk a little bit to us about how Principal is navigating that challenge that I just described earlier.
Yeah, thank you so much, and it's great to be with you today.
You know, one of the things is I was just announced earlier this week as moving from the CFO position to our CEO elect position, with that taking over in early twenty twenty five. For those of you that don't know, Principle the global financial services company across retirement, asset management, and workplace benefits, but specifically you talked about just the time that we're in regarding both just the election and some of the uncertainty around that, as well as the
ESG and the sustainability journey. I think the good news on both front is, you know, we have navigated for one hundred and forty five years over a lot of different regimes, a lot of different agendas regarding these topics, and ultimately we come back to doing what we think is right for our clients and right for our customers and employees, and ultimately feel that in doing that, we'll navigate these uncertain waters in a very effective way, but would love to go deeper if you want to dive
a little deeper into those items.
Yeah, definitely do that, Dana, because I know that Principle sold its for sustainability bond back in twenty twenty one, and you were considering potentially doing so again if any sort of good opportunities arise. So talk more about while you feel this is the right thing to do, and what opportunities you might see again to jump back in.
Yeah, we did, as you mentioned, issue our first sustainable bond a few years ago, and ultimately it is still something that we assess whenever we're facing an opportunity where we need to refinance a current debt or issue a new one. And so again we do have a debt
that matures in twenty twenty five. We've made no decisions whether we will reissue from a sustainability perspective or not, but it is one thing that we'll assess, and really what comes into it is thinking about obviously economics, but also investor demand and ultimately how that fits into the landscape of when we are issuing.
And so more to come on that, but we are.
Very pleased with our issuance that we have had great client interest in that, our investor interest in that, and we'll continue to assess that as we move forward.
One follow up for me. You talked about your clients and what's right for your clients. What are you hearing from clients sort of thinking about us clients but also those in Europe, like, where do they stand on this topic?
Yeah?
I think you know, as I mentioned earlier, we are an asset manager and we have clients and customers around the globe. I think the first thing I would say is every climate client is different. You know, there is some regional geographic differences. Obviously sustainability in ESG has been something much higher on the priority of the European clients and investors, But even within an any geography, there are clients that ultimately have either a higher or a lower.
Sensitivity to that.
And so ultimately we're going to really take seriously our fiduciary responsibility to our clients and acting in their best interest comes first and foremost. And so if you look across our asset management solutions, we have a wide range of choice there that can really resonate with that different landscape that we see amongst our client base.
Now is demand right now for that type of asset or that type of offering, Deana, because it seems at least many Americans that's not necessarily on their radar right now, given what we saw at the polls last week. It's not like this is twenty twenty one and this is top of mind for a lot of people.
Yeah, I would agree with that, but I don't think it's a broad base that there's no one in the US that is interested in that. And so again I just come back to ultimately, we listen to the clients and we're able to meet their needs, whether that's high on their priority list or lower. But I do think given I do agree with really the backdrop of what you said, and ultimately it's a much higher interest when we talk to clients outside of the US than I would say it is here in the US.
I want to switch gears quickly because we only have a little under two minutes left here. But when you take over the helm of CEO of Principal on January seventh, you will be the first CEO to lead at the firm. What do you think needs to be done to get more females at the head of Fortune five hundred companies.
Yeah, so you are correct.
I am proud to join the small but growing ranks of female CEOs, particularly when you look at the financial services sector.
I think if you look at my path, it's been not linear.
I started. I'm an actuary by background. Then I spent twenty years actually running P and L leadership. Then I moved in to the chief financial officer role, and then ultimately I'll be transitioning into this role in January.
And I do think it's a journey, right. It is continuing to.
Give women the opportunity to have a seat at the table.
Principal has long been a supporter of that.
If you look at our board, if you look at our management team, if you look at us thirty years ago, we had a lot of gender diversity. And again that environment has encouraged others to continue to rise within senior manager of the organization. So I think it's giving it opportunities females, finding organizations that support that and ultimately seeing other people succeed gives others the confidence that they can reach those aspirations as well.
Dan, I canna have to leave it there. Deanna Strabels, the incoming CEO, formerly CFO of Principal Financial Group, joining us from Iowa. Also here in the studio Nina Traman, Bloomberg News Senior editor. She writes the CFO Briefing newsletters. Sign up for it at Bloomberg dot com slash CFO Briefing.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty Bloomco Journal.
Now about you let me drive?
Oh no, no, no, no, honey, please, I'll do the travel.
Excuse mate, I want to try it.
It's good question time.
This is the drive to the Globe dot Tim thing.
We'll bround Dad.
On Bloomberg Radio, Jess Meant and Tim Senovik here in the Bloomberg Interactive Brokers studio. And what Charlie was just mentioning, we do have just under twenty minutes to go before the closing bell on this Friday, wrapping up the week here with the S and P five hundred on pace for actually to notch losses here and closing for the week, as well as a NASAQ one hundred, so would be the third week of losses in the past month for
the SNP. Well, the NATSAK one hundred scene just two weeks of losses in the past ten And of course, Tim, you know it might feel like earning seed is in has winded down. Oh God, it ends I know it's true. So we still have retailers though, even though ninety percent of companies in the S and P five hundred had reported so far. So we're gonna have Walmart Low's target, We'll have department stores. So real big tell here on the consumer, especially on the back of the tail sales
data that we got earlier this week. But of course you cannot forget the world's most valuable company as well as the world's biggest ship maker. You may have heard of it, Tim and Vidia, but also reporting after the closing bell next Wednesday, so stay tuned for that. But more of the broader market heading into next week, along with the implication of this week's FED commentary on the path of rate cuts. Joining us now is Tracy Bell CIO at First Horizon Advisors in Alabama, Tracy. Always great
speaking with you. Of course, we did have Bloomberg's Mike McKee interviewing Chicago Fed President Austin Goulesby in the previous hour, obviously talking about kind of the conundrum of where the neutral rate could potentially be when some officials were thinking it was closer to three percent, but was kind of, you know, still standing firm on not mentioning too much about what could potentially happen with fiscal policy coming out of Washington and saying that they're still going to be
on their mandate for obviously price stability, maximum employment. So when it comes to you and managing money for your clients going into next year when you do have a lot of uncertainty on the policy side, how are you feeling going into this and what are you recommending to your clients to add exposure to or to sell after what's been a really gangbuster not just a year but the past two years at the S and P five hundred up more than fifty percent.
Hey, yes, thank you. It's great to join you guys again. And I saw that interview with Mike McKee and Austin googles Still a little while ago, and yes, he did stick to his guns on it, but he did say something that was really important. If CPI stays where it
is today, it would be too high. So you know, that's that's the talk this week after having quite a run up in the equity markets after the election, that having grown up in bonyles after the election, and then getting a CPI number that was a little on the hot side in that core services side, and then watching that three month moving average CPI continue to move a little higher from where it was back this summer, and you kind of ended up with the perfect storm today
of a sell off in markets on the equity side. So, you know, thinking about where we're talking to for next year, We've had a couple of years of really strong equity markets, and that equity market return has been especially concentrated within large cap growth stocks and technology stocks in particular. So a lot of clients today may find themselves in the position where their targets are a little out of whack. So, yeah, it's argetting in.
That case, are you trimming say when you have a rally in some of these big names. Obviously in Vidia didn't have the greatest quarter in the third quarter, but still one of the top performing stocks. Even the top performing stocks actually at one point coming into this quarter was up almost one thousand percent over the last two years. So do you end up having to trim a stock like that ahead of earnings next week?
Yeah, you know, trying to time before and after earnings that that's really difficult to do. Markets can move around those reports, and you really shouldn't try to time too much, but you should look at your overall exposure. So if you're overexposed to equities at this point, you've got a great opportunity to maybe trim that back and go go into some fixed income. Some guilds are there now that haven't been there in a while, especially after the past
couple of weeks. And then there's also the opportunity to diversify the equity exposure across market cap. So large cap stocks are expensive. They are trading it close to twenty two times next year's earnings of the IC and P five hundred.
Glad you brought that up, because that's also above the ten year average, which sits around eighteen. So at this point, when you have a strong rally over the last couple of years, you have valuations as well as positioning a little bit stretched. What is the setup going into next year, even just aside from politics and things like that, because I know a lot of portfolio managers, when you don't have policies passed yet, you can't really, you know, manage
portfolios on that. So are stocks sitting a little bit say, potentially vulnerable to maybe just a short term correction when you have valuations and positioning stretched.
They can be in valuations or a situation where they're more of a condition as opposed to a catalyst. But you do have to understand that high valuations do mean that there is downside risk in the short term. It may be a little bit of a limited upside return longer term, but you can diversify away from that, so you can diversify out of large caps. Look at your
exposure to MidCap and small cap next year. In twenty twenty five, earnings growth expectations from mid, large and small cap companies are much more in line with each other as opposed to this year when large cap growth was
really where the growth was. So next year you can get potentially a better valuations small and mid or trading closer to sixteen to seventeen times on forward earnings we're as large as at twenty two, but next year earnings growth across all the large cap, MidCap and small cat spectrum is much more in line with each other.
So what should you do if you have cash right now on the sidelines. You've missed this rally in large caps, you've reached this, missed this rally in domestics. What should you do with the cash?
You know, one of my.
Favorite things to say to people is time in the market is far more valuable than timing the market. So putting together a plan to get yourself invested in a way that spreads your timing risk, I think, is a great way to approach it. The good old dollar cost averaging is tried and true. It's a great method to get yourself invested over the long term.
But what about looking to areas of the market that are been unloved over the last few years, Emerging markets for example, maybe even European developed markets.
Yeah, so on evaluation perspective, they certainly are less expensive. There's probably some more headwinds there than there are domestically at the moment. Jess mentioned the men there to goo the unknown political environment, we don't know, but we know that there are potentially headwinds there, and growth in those markets is not as attractive as in the US, so that valuation gap between international and US may be somewhat warranted.
At this point, you certainly should own these things. Diversification is important, but you probably don't have to be in as much of a hurry there.
What about when it comes to small caps, because last week there was a point in coming into this week where the Rustle two thousand was actually close to being back at a record high, which it hadn't touched since November of twenty twenty one, And now it looks like that drawdown still around five percent though away from that, but it's been one of those I mean, there's so many zombie companies within this type of index. We're only
about thirty seconds left. But how do you position? And do you position in small caps?
Loll and mid or two of those areas where active management can really add value for you As you get up the cap level up to large cap, you know, index management less active management tends to make a little more sense, but small mid find yourself a good active manager, you don't necessarily need to index in those areas.
All right, I'm gonna have to leave it there. Tracy, thanks so much for joining us. Always great when you join its. Tracy bell Is CIO over at First Horizon Advisors, joining us from Alabama.
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