A Hot Start For Stocks and A Retail Earnings Preview

Intelligence Senior analyst Jennifer Bartashes. But first we want to start with the stock market has gotten off to a pretty good start if you're a bull, so is the worst behind us? For equities, Let's bring in Lorie Calvacina for some analysis, head of US Equity Strategy at RBC Capital Markets. It has been quite the rally, and it seems like stocks are holding onto it in the month of February. How do you see equities position, Lorie as

we moved through the rest of this quarter. Well, thanks for having me, and look, I think that you know, we're sort of an interesting spot. I've got a target for year end and I still very much like that number. I think of it as a December thirty one number, but at times earlier this year we've traded above that, UM, and so I find myself feeling quite neutral. I do think that the barish case for equities has been overstated. Um. You know, I've been accused of being a bull. Um.

You know. Again, I feel more neutral, but I do have certain models that tell us we could hit forty fred by the end of the year. So perhaps I guess that that puts me in the bullish camp. UM. But I will say this, I think that we are still in a period of messy normalization post the COVID crisis, very similar to very similar to two thousand to two thousand three, and so I do think things are going

to continue to be choppy this year. And I think October was probably the low UM for kind of this three period of economic challenge, recession weakness, whatever we end up calling it. UM. And I do think that equities perhaps do need to sort of exhale, right and or maybe a little bit over do for a breather in the short term. UM. So I think, you know, things are going to continue to be choppy for a while, But that doesn't mean I'm feeling terrible about things. Well,

let's breakdown a little bit of your view here. You said that the bear case may be overstated. Talk a little bit more about that. Why do you think that is? So? You know, I think there's been this view right that earnings forecast still have to come down. We're in the middle of doing that right now. UM, and that that's got a pummel stocks. And you know, I think even we were worried about the onset of more challenging economic conditions, UM, kind of taking some of the window out of sales

of stocks. But I will tell you, Nathan, you know, as I think back to kind of my December and early January meeting, UM, I found that, you know, every strategist was sort of making the same kind of call. And if you look back at the December weakness, I think a lot of that was getting filtered into stock prices already. So maybe that weakness that we deserve to see, UM, I think just simply got pulled forward. So we have

gotten through the bulk of this current earning season. How do you view what companies have told us so far and how does that position us as we head through the better part of the first half of this year. So I think it's been very muddled messaging. If you read through the artiens called transcripts, which my team and I are trying our best to read as money as we can UM, and what we have found is that,

you know, there's some good and there's some bad. From a macro perspective, I think that one of the things we noticed that and one of the sectors I'm reading is tech UM is that you know, we have started to see the onset of slowing start to show up in a lot of the company commentary, and that perhaps it's most no more noteworthy in the tech sector than

other areas. At the same time, a lot of the consumer companies are still talking about resiliency, so you know, there's good news and that whatever this is is starting, there's also you know, kind of good news in that UM. Some of that resiliency on the consumer side of the economy is still being seen by the corpus, which should limit some of the economic carnage that we have to endure this year. I've also been hardened to see that when companies are talking about guidance, that a lot of

them are referring to a mild or short recessions. So even if the numbers may still feel a little bit too high, I do think a lot of companies are baking in that software economic scenario into their thinking. Um, they're just telling us that, you know, they think that they can get through it pretty well. Um. And I've also been intrigued with me that a lot of companies when they're talking about the forward look are talking about recovery, whether it's later this year on certain metrics or whether

it's four on earnings. And I think that's very important because I think that markets have just been pricing everything in very very early. I think the economic challenges of got price then back in um. And so I think investors themselves are ready to start looking ahead too and recovery, and the companies are giving the client an excuse to do that. Speaking with Lori calvacin ahead of US Equity strategy at RBC Capital Markets, of course it's a long

way before we get to Lori. So in the meantime, given what you're telling me, are you sticking with value as a strategy as opposed to growth at least in the medium term. So we've got our our feet in in both pools, so to speak. Um, you know, I do think that growth is appealing in the context of after we get through this period of economic challenge. I

think there's sluggish growth economically waiting us. On the other side, I think that's the price we pay for a short, shallow recession, is not having much in the way of exciting GP GDP growth for a while, And traditionally that's an environment which you want to be in growth stocks. So we like areas like technology. We think it's sort of the best of the bunch. If you're kind of looking at the growth sectors, I think you've evaluations never

looked great there, but you've got high quality. A lot of the industries and you know, sort of within that space look like they're pretty washed out in terms of earning sentiment and are starting to recover. Um, So we want to keep some exposure there. Um. I do think

on the value side, they'll um. You do want to have some exposure there as well, because one of the things that we see about, you know, big kind of challenging periods, whether it's the financial crisis, the tech bubble, these are all things that esure in big changes in leadership, and I think kind of this pandemic era should be thought of in that regard as well. So that would suggest moving away from growth and back of value. UM. I think that on the value side, we continue to

see the best valuations in financials and energy. I do think that they have a short term problem in that they were resilient on earnings expectations last year, so they've got to take their lumps right now in terms of getting some earnings down grades in. But I think the good news is the valuations are pretty appealing. We think energy is a more investible sector, and financials is an area that typically does well once markets are convinced a recession low has been put in place, so it's a

good rebound area to be in. UM. So I think you want to maintain exposure to both buckets, but really be selective within each of those. Yeah, it's interesting to think as well about financials potentially doing well in this kind of Federal Reserve central bank policy environment where we're seeing rates moving higher, the potential for that as well. It's interesting as well to think about tech potentially outperforming given that tighter policy environment. How much could the Fed

have an impact on where stocks go from here? I think that we need to get to the pause. UM. You know, I've become less convinced that we need the

actual cuts. But I think if you look at how sectors performed to start the year, they're really starting to bake in that idea the FED pause um historically, and we did a study where we look at what sectors tend to do well after your final FED hikes going back to the mid nineties, and it was interesting because you do tend to see the growth sectors like technology,

like communication, services like consumer discretionary do quite well. So the fact that those three sectors had such a nice start to the year in January, it was really telling us markets were starting to try to price in that pause. Financials is another area for you know that act interestingly does well after the final hikes, not as well as the growth sectors um, but does tend to do pretty

well afterwards. UM. I think that you know, the market needs to know and needs to remain convinced that we're closer to the end than the beginning. I think that you know, where the FED ends up at the end of the year is going to have a big determinant on the pe multiple um that we pay for this market.

And you know, when I sort of talk of out potential upside to undred, that's baking in kind of a twenty two plus trailing PE multiple on my earnings number, and I'll share you all the details that that's based on a model that has a couple FED cut baked into the end of the year. I think FED around four seven five ten year treasury yield at three four.

If I take those assumptions up a little bit and raise those interest rate levels, I come out there's something that's a little closer to my target of forty one DRED, which implies something more like a twenty times PE multiple. Um So I think that you know the short answer, here's those interest rate levels. What happens with inflation is going to dictate the PE multiple, But a higher for longer FED may not be as disastrous for the PE multiple as a lot of the bears on the street

have been trying to imply. Since it is President stay, Laura, I want to ask you about something I know you've been keeping your eye on that the president President Biden is going to be embroiled in over the next few months, and that's the debt ceiling debate. Is this something investors

should be concerned about at this point? A potential default in the last the next couple of months, you know, it's you hear varying opinions on this, and you know, from my from my state of mind, you know, I think that the risks are starting to a morge more in the back half of the year. And I think that markets never like uncertainty, um and particularly don't like

uncertainty with some of these throning political issues. And I think one of the impacts of the mid terms and having that you know, sort of very precarious balance of power for Republicans in the House, um, you know, and and the split Congress, I think the implications for the depth seeling negotiations, you know, are probably one of the most meaningful things we have coming out of that. In the short term, I just think it's going to be very difficult, um you know, based on that that that

balance of power for a deal to get struck. And so if we assume that, you know, everyone down in DC has uh the economy's best interests at heart, and we'll find a way to get it done, you know, I hope that's true, but it feels like it's going to be more difficult to get to that point than it has in the past. And if we look at markets and we're sort of you know, kind of done a year's worth, um, you know, of what I think is a deserved move in the first month plus of

the year, a month and a half of the year. Um, you know, sentiment is rebounding very very quickly. We could get to a point by midyear when those negotiations are really coming into the forefront where it doesn't take a lot to knock the market down. So, you know, I am worried about. It's something we're keeping an eye on. We're not seeing a ton of chatter of it about it from companies yet, but we expect to see it

pick up. Yeah with Meg and so since the time for it to run out potentially could be early this summer. Thanks for this as always, Lorie, great speaking with you. Thanks for having me our Thanks to Lorie Calvacina, head of US Equity Strategy at RBC Capital Markets. Welcome back to this special edition of Bloomberg Daybreak. I'm Nathan Hager. The US stock market is closed on this President's Day holiday. We now want to turn our focus to the economy.

Inflation and interest rates continue to be top of mind for investors in so what's in store for the rest of this year. Let's bring in Tiffany Wilding for some insights, the chief US economist at Pimcope. Tiffany, it's great to speak with you on this holiday, and I guess it's great to keep seeing signs of resilience in this economy. What does that tell you about the path ahead for the Fed? Yeah, well, first, thanks for having me, Nathan,

It's great to be on the show. UM. I think it's a little bit of good news, UM, but also a little bit of bad news in the sense that, yes, the U. S economy has been much more resilient, you know, than we and many forecasters were expecting. Um. But but nevertheless, as a result of that, um, you know, inflationary pressures could remain high for longer than expected, and that ultimately requires the Federal Reserve to to raise rates more UM.

And so that um you obviously will will continue to put downward pressure on economic activity to get inflation down. You know. So even though the the economy is a little bit more resilient now, you know, that doesn't really change the outlook, because that just means the Fed has to do a little bit more work. That sounds a lot like the message we keep hearing from a parade

of FED speakers, including Federal Reserve Chairman Jerome Powell. In fact, earlier this month, he was talking about just that with David Rubinstein at the Economic Club of Washington. Let's play a little bit of what he had to say. We have a significant road ahead to get inflation down to two percent, and I think there's been an expectation that it will that will go away quickly and painlessly, and I don't think that's it all guaranteed. That's not the

base case. The base cases it will t for me is that it will take some time, and we will have to do more rate increases, and then we'll have to look around to see whether we've done enough. It's a pretty broad base case, isn't it. Tiffany, how much time do you think is some time for this FED

to get inflation back to target? Well, I mean, that's clearly the key question here, As Powell noted, you know, ultimately our forecast for for core CPI inflation, for example, is that it will get down to three percent by the end of this year. You know, so that's down from six Obviously that is not in line with the

fence target. We have said, you know, from a headline inflation perspective that getting from eight to four will be relatively easy because there is still some pandemic related effects that are impacting the year of your rate of headline inflation. But getting from four to two, that'll take a little bit more time, um, you know. And again, as you suggested, exactly how much time is, there's a lot of uncertainty around that, and I would say incrementally, we've actually recently

gotten some not so great news on that. Um you know, this is maybe a little bit wonky, but the statistical agencies, the cp I, the BLS that releases the CPI recently, um, you know, revised their their measure and it suggests that actually some of the disinflation that we thought we were seeing at your end actually didn't happen. It was revised away. Um, And so that suggests that maybe inflation could come down even a little bit more slowly than many were expecting.

So that's obviously not very good news. Is it making it more difficult than to see the impact that the tightening that we've gotten from this Federal Reserve over the last few months of like four hundred basis points in rate increases whether that's actually having an effect on the

inflationary re pressures that are in this economy. Yeah, So I think that the reaction to the pandemic as well from the fiscal authority, you know, from the government's UH as well as UM, the supply chain bottlenecks actually are creating, you know, somewhat different relationships with how monetary policy affects the economy these days. In other words, it's actually making monetary policy impact the economy with a little bit longer of a lag potentially than what we're normally used to.

And that's because you know, the post you know, the pandemic related government spending, increased consumer UH you know, increased consumer savings, and they have a buffer, and then the supply chain bottlenecks resulted in major backlaw hugs for for various companies, which they're still working through. So as a result of these buffers, we are still having very resilient and very strong activity UM you know. But of course, as we work through them, you know, the story will

be a bit different, you know. And I think that's why we're seeing some greater lag and the monetary policy transmission mechanism because we still have those buffers. So does that raise the possibility then that we could get an overshoot from the Federal Reserve if they haven't given themselves the time to see whether the lag is allowing the

policy that's already been put out to have that effect. Yeah, I mean certainly, And I think that the obviously the Photo Reserve and with monetary policy, they have to balance the various risks that are out there. You know. Not there's an obvious one of the fact they maybe are doing too much um and and then they will send the economy sort of needlessly into a weaker state. UM. But obviously the other risk that they're trying to balance is is that, you know, as we discussed, inflation may

prove to be a bit sticky than expected. It may need more work from them in order to bring it down. So I think, you know, currently their balancing act has basically led them to slow down the pace of rate hikes. For example, we're now at a more you know, at least kind of more historically somewhat more normal rate of twenty five basis point rate hikes per meeting UM, and the Photo Reserve has has said, you know, we're going to continue at that pace basically until we see more

progress on inflation, you know. So I think that's the kind of balance that they've reached right now. So where do you think the FED needs to get when it comes to restrictive territory? Have they gotten there at this point? Do they have further to go? What's your view? Yeah? Well, well, so, um, you know, the a tailor rule would would suggest that they need to get the FED funds rate above wherever

they think the underlying trended inflation is. So I mentioned before, there's still pandemic related effects that will go away that

are impacting inflation. So really the tricky thing right now, so try to figure out, excluding those effects, where is the underlying trend and inflation, and you know, to us it kind of looks like it's between three and a half and four, you know, so they need to at a minimum get the Fed funds rate above that level, um, And their recent projections from the SEP and December suggested they would get up to around five percent a little

bit above that. So that's obviously above that kind of you know, three to four three and a half to four percent trend that we mentioned, you know, but more recently, the communications that we've gotten from from them maybe suggest that they maybe even will go a little bit above that, so maybe closer to three and a half excuse me, five and a half percent. But but ultimately, you know, where they ultimately end up the terminal rate of this

hiking cycle. You know, obviously it's very uncertain. They're going to be probing for that, you know, trying to understand how much is too much, um, you know, and ultimately they will will sort of continue to assess the data to try to figure that out, um and continue to balance those risks that I mentioned before. You also mentioned before that you're projecting that inflation is going to get down to three percent by the end of this year.

Obviously that's just a little bit higher than the FEDS target of two Does a two percent inflation target still makes sense? Is it realistic? Yeah? I think that's a really great question, you know, And obviously right now, when inflation is elevated, you know, Chair Pal has to be very resolute in his communication to you know, I'm bringing inflation down. So I think recently he's suggested that they're not revisiting the two percent inflation target. Um. You know,

that's completely off the table right now. Nevertheless, though, you know, when inflation has come down, um, you know, to three percent, you know that I think, you know, is reason for a little bit of victory, uh, you know, a bit of a victory lab from Federal Reserve officials, um, and three percent, you know, even though they say their inflation target is at to three percent, might be you know, okay, at least for for a time. Um, you know. Now,

there's really no magic around on that two percent level. Um. That two percent level you know, kind of came from uh you know, the Central Bank of New Zealand, you know, several several decades ago, and it sounded like a level that was was pretty good. Um, you know, but there's no real magic around that level. It could be three percent,

it could be one percent, you know. And so I think that you know, given that, you know, there probably will be some room once inflation comes down it's getting close to target, there will be a little bit of wiggle room there that the Federal Reserve will say, Okay, maybe it's not exactly a target yet, but that's okay. Thanks for this, Tiffany, great having you on with us, Thanks for having me. That's PIMCA Chief US economist Tiffany Wilding.

Welcome back to this special President's Day edition of Bloomberg Daybreak. I'm Nathan Hagar. Let's turn our focus now to earnings because we're gonna hear from a couple of giants in the retail sector tomorrow. Walmart and Home Depot report their latest quarterly results before the opening bell of the holiday short and trading week. For more policed welcome Bloomberg Intelligence in your analyst, Jennifer Bartash is great to have you

on with us, jen Thanks for being here. So for Walmart, this is going to be our first look at the holiday quarter for them, right, what's the expectation That's correct, Nathan, Um. When we're looking at Walmart, what we're really expecting to see is that they had a very solid holiday quarter UM in terms of the top line. So we're expecting same store sales to be up. We expect top line growth to be up. UM. We do think that traffic into stores maybe have maybe contracted just a little bit UM.

But the real issue with Walmart for this quarter is margins UM. They really struggled lest during the course of the entire year on right sizing their inventory UM and we're really looking at what kind of signal if they are sending about the markdowns and the impact that will have on margins after the holiday season. Yeah, it's something we've been hearing a lot about from many of these retailers.

The glut of inventory and the idea that they're being forced to put in deep discounts to unload all this extra stuff they've got. Is that something that could potentially eat into the margins that we get from Walmart. We think that there is a possibility of that. Early in

the year, Walmart had a huge inventory problem. They sort of cleared that out, but because of all the supply chain issues that we saw over the course of the year, they brought inventory in early, and they brought an inventory in terms of extra to make sure that they would

have enough fun hand for holiday. UM. And with the holiday season, it was a good season, but it wasn't a fabulous season UM, which means that they likely didn't sell through all of that inventory that they had, and so that creates the necessity from markdowns UM and the steeper the markdown to tempt people to to spend, which is hard in this environment, UM is what could drive

the margin margin issues that we're expecting. Yeah, something else we've been hearing for a lot of these companies going into this earning season is the need to cut costs against the tough economic headwinds that we've been seeing signs of. Is that something you're expecting to get from Walmart as well in terms of perhaps having to get rid of some of the overhead for the company. Well, generally Walmart is is pretty efficient I meant, containing costs and are

pretty systematic at being a low cost operator. Um. But we you know, there are certainly going to be opportunities to to sort of, you know, be strategic in ways to cut costs. And whether that isn't closing a couple of stores, or whether that's in using automation to help improve efficiency. Um. Those are the types of actions that we would expect. Um. But we're not expecting any huge announcements in terms of layoffs. You know that that has

already sort of happened during the course of the year earlier. Yeah. What about the possibility of continued wage pressures from Walmart? I think I recalled them making some kind of announcement that they were at least raising some of the minimum wage for many of the workers as well. Is that

something that could play into the results? Well, it could, Um, We're at a point now that where all of the retailers are sort of systematically gradually raising UM wages, kind of in competition with each other in that bid for talent um. And so I don't expect that we'll see a big wave of increases UM. It's sort of become more of a normal course of business that that wage pressure is going to remain persistent over the next few quarters,

for sure. And how about inflation overall potentially playing into Walmart's nominal results. Obviously, we're continuing to see signs that price pressures are elevated throughout the economy. Does that factor in it all? It does, um, because of the of you know, Walmart's merchandise mix and the customer base that they have, you know, you know, they are certainly positioned to do well in a higher inflation environment because people are seeking to stretch their budgets as far as they can.

But what's happening is that Walmart is seeing a mix shift in what they're selling, and they're selling way more groceries than they used to sell, in a lot less general merchandise than they used to sell UM, and that has a big impact on the actual profitability of the business because the margins on general merchandise are much much higher than they are on grocery. So as long as we have inflationary pressure that's sort of affecting the consumer

UM as well as affecting Walmart's cost of goods. UM will continue to see that play out in a in a very interesting dynamic. Although I'd imagine that that's something that could potentially provide something of a tailwind for Walmart, couldn't it. That's just the fact that they have such a diversified portfolio of products that they offer to customers that that could, you know, put them in a better foundation perhaps than some of the competition. That definitely does

play in their favor. And we often see in times where consumers are under pressure that they consolidate trips. They prefer stores where they can shop across multiple categories UM. So for Walmart, the only thing is making sure that they have the right items for customers UM and that then there's demand for them and that they sell through them. I'm curious as well to get your view on how Walmart stacks up against some of them it's major competitors.

I'm thinking particular early of Amazon in the e commerce space and Costco in the sort of wholesale retail space. With Sam's Club as part of Walmart or a lot of Walmart's mix. Yeah, Sam's Club has actually been a real bright spot for Walmart. UM. They've had incredibly strong

sales growth UM, their membership bases growing. UM. If you remember, a couple of years ago, they closed a lot of Sam's Clubs that were sort of underperforming or were in poor locations, And since then they've really adjusted the business and it has got a lot of momentum behind it. UM. They are competing well against Costco. UM. The customer base is still a little bit different between Sam's Club and and Costco, so there seems to be enough room for

both players. UM. But Sam's Club does continue to be a real bright spot for Walmart. UM. When it comes to Amazon, UM, it's been interesting to watch, especially in recent weeks, how Amazon is has sort of backed away from their grocery business. UM. You know that I think in part is attributable to how much of a powerhouse Walmart is in grocery. UM. But on the e commerce side, UM,

there's still a large gap obviously between the two companies. UM. You know, Walmart continues to expand its online offering by its marketplace and how many items it has and how many different sellers it has. UM. It's it's growing its businesses in terms of fulfillment services. So it's it's doing the right things. UM, but it's still at a much

much smaller size than Amazon overall. Speaking with Jennifer Bartasha, senior analyst at Bloomberg Intelligence, of course, the other major retailer we're looking to hear from tomorrow is in a different category than Walmart and the home improvement sector. That's Home Depot. What's the team at Bloomberg Intelligence expecting there? Yeah, when when when we look at home Depot, UM, it's an interesting story because you know, home you know, home

was such a hot uh segment for such a long time. UM. We are expecting same store sales for Home Depot to moderate this quarter. UM and And really that's because last quarter they sort of outperformed, but the company didn't change its full year guidance, and so that really implies that the company was expecting a slowdown in the fourth quarter. UM. And so we do think that that's gonna that's going

to play out now. We do think that the Home Depot in particular UM will be able to support top line growth just because of the relative strength of their professional customers UM. And that's they have a much higher density of professionals that use Home Depot than say, some of their competitors like Lows UM. But it is possible that when first quarter is going to be sort of the peak of UM, the fourth quarter is going to be kind of a peak and it's going to continue

to moderate from there. Well, it is interesting that we have seen so much difficulty of late in the housing market, UH in terms of economic data. Could that potentially be reflected in what we get from home Depot tomorrow? Yes? Absolutely, UM. You know, we we've seen that home improvement spending his sort of decouple from existing home sales UM, and so the challenges that we're seeing in the housing market are

likely to wait on that repair and remodeling spending. That is a big component of what home Depot is all about, UM. And the longer the housing market is challenged UM, the more difficult things are going to get for Home Depot long term. How do you look at Walmart and Home Depot as proxies for the overall economy. What could the earnings tell us in that context? Well, I think you know, when you look at them together, it gives you a

really good sense of where the average consumer is today. Um. You know, Walmart arguably has more exposure to the widest swath of the typical American household than any other retailer. Um, So it really is a good indication of where where people's heads are and where their pocketbooks are today. UM. With Home Depot, um, it really starts to give you a sense of, you know, where that spending and that tends to be more a little more discretionary and terms

of home is happening for the consumer. But we'll also get a sense of how that professional, um, the professional side of the business is holding up and what that may mean for the housing market. Man, we'll be on the lookout for those earnings before the opening bell tomorrow from Walmart and Home Depot. Thanks for this, Jen, great having on with us. Thank you so much, our thanks to Bloomberg Intelligence Senior Analyst Jennifer Bartashes. Welcome back to

this special edition of Bloomberg Daybreak. I'm Nathan Hagar, the u s Stock market is closed for the President's Day holiday, and this week will mark a year since Russia's invasion of Ukraine, a moment that's set off the most devastating ground war for Europe since World War Two. For more, we're joined by Rosalind Mathieson, Bloomberg's senior executive editor for Government. Roz, thanks for being with us as we get closer to

that milestone. Where do things stand now, as we get closer to year two, well as we go into the you Tube. The reality is that Russia is still pretty bogged down on the ground in a war that, no doubt laddim me a pretty envisage would last, perhaps even just days. He saw his troops going into Kire, overtaking the capital, perhaps the president Vladimir's Dlinsky fleeing the country, and that he would have an easy result. And obviously

it's been anything but that. Over the past year, we've seen Russia's troops pushed back from the north, away from the capital, focusing now on the east and the southeastern part of Ukraine. But really it's been a grinding war the last few months, and as the casualties mount on both sides, and as they burned through a lot of

ammunition and artillery as well. So the question really is it can Russia make proper progress on the ground, can Ukraine in turn push Russia further back and regain territory, or are we really facing many, many months yet of this kind of like continued grind on the ground in

the East. It is an interesting question to ponder as we've been hearing these warnings over the last several weeks that Russia's planning this new Spring offensive and it really does see bras like the Kremlin has ramped up its attacks, particularly on infrastructure, in just the last couple of weeks. Well, that's right, they continue to fire barrages of rockets attacking

Ukrainian energy infrastructure. There's an argument perhaps that they're offensive has already begun, that it won't be that big bang moment when something dramatic happens, but rather will just be a continued escalation over time of activity by Russia on the ground. The question is, in all of that, will they be able to do very much before Ukraine gets

the weapons that we know are coming its way. And it raises the question as well as we wait for those weapons to make their way to Ukraine, the bolstering with the tanks, and that whether we could see even

further escalation to this war. Well, that's right and certainly, and that's probably what Vladimir Putin is seeking to do, is to use that window because he knows, come perhaps June or July, Ukraine will be in a much stronger position to push back his troops um, And does he use the one year mark of the war to try and rally not just his troops on the ground, but his people at home. Of course, you're probably sort of looking at this war with at least a sense of

dismay over the past year. How does he keep momentum going there? That's really another big question for him. Are you looking at signs that we could see escalation pointed outside Ukraine toward NATO with these weapons coming in and with President Zolensky of Ukraine calling for fighter jets to

be part of the arsenal as well. Well, that's been the interesting thing over the past year, because there was a lot of concern initially about sending in offensive weapons because would Russia see that as a particular escalation by NATO. But each time that the Western sent in more advanced weapons, that promised retaliation has not come, so that kind of

concern about possible broader Russia retaliation seems to have faded. Also, equally that the retoric around possibly using nuclear weapons has also dissipated, And the reality is that Russian troops are in no position to when you go further than Ukraine at the moment. Really, the idea that any of this can come out with really from Ukraine right now seems

highly unlikely. Finally, rose as we get closer to this second year, are we seeing any signs on either side that we're getting closer to a negotiated resolution between Russia and Ukraine. Certainly not at this point in time. You can see that Ukrainians are very dug in. President Zlynsky has said that he won't negotiate unless all the territory that Russia has taken over the years, including Crimeer which had annexed in two thousand and fourteen, is on the table.

Russia has made clear that it won't agree to those sorts of terms um and so there's sort of nowhere at all at the moment to create an atmosphere for talks to occur, negotiations to happen that we're nowhere near that at this point. Thanks for rights. Appreciate you coming on with us. That's Rosalind Mathison, Senior Executive editor for Government at Bloomberg News.