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I'm Alex Steele and I'm normal Linda filling in for Paul Sweeney.
On today's Bloomberg Intelligence Show. We're going to dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies in one hundred and thirty industries our analysts cover worldwide.
Today, we'll take a look at it TD Bank because exiting it's in Charles Schwab.
Plus, we'll discuss why sales at the fast food giant McDonald's improved last quarter.
But first we take a look at earnings from the farm machinery leader Deer.
This week, Deer said that North American sales are expected to be down thirty percent this year for Maura.
And Nora and I were joined by Christopher Chiolino, Bloomberg Intelligence Senior US machinery analyst, and we first asked Chris for his take on this week's earnings report.
We knew going into the quarter that was going to be a pretty ugly print, but these results were really well below even some of the most bearish expectations. The company really continues to underproduce retail demand across the board to bring down some of the excess inventories that the industry has been plagued with. We also sounds like some products there were some timing issues, so products got pushed out to subsequent quarters, which which weighed on the one
Q performance. Now, Deer did reaffirm its twenty twenty five net income outlook, and it certainly seems that we are approaching a cyclical trough this year.
But just our.
Concern lies that you know, earnings may not be fully de risked here. You continue to see further softness on the largeag side used equipment inventories remain somewhat of an overhang. Currency headwinds are going to be more pronounced in the back half, and really we still have this uncertainty around what the US trade policy is going to be and what and what those retaliatory actions are going to be as well.
Well, I was going to say, if they sound relatively confident they'll be at trough, but then you add on tariffs, how well does that confidence hold up?
Yeah, I mean that's the million dollar question, right, I mean, I would say that AG historically has had a tremendous amount of pricing power and deer in particular, this is a company in a market that even gets positive price in down markets. You know, this quarterly sales were down over thirty five percent, earnings down significantly, and we were still up on pricing. It will add costs, but they have a history and the track record of being able to pass those through.
What has really been concern for investors out of this report as they're looking forward?
Yeah, I think there's two big concerns here. One is, you know, the expectation is that yes, twenty five is trough and that we should start to see that this recovery build into twenty six. But I still think there's a lot of uncertainty out there as to what the recovery trajectory looks like, just given the uncertainty around trade and tariffs, you know, I think we're probably looking at a lower for longer type cycle. So maybe we don't get that typical acceleration in the first year after a
cyclical trough. So I think investors are still trying to digest that. And then too, you know, the costs side of the equation. It certainly seems that costs are going to go up. How are they going to mitigate that through some of their you know, internal initiatives or even from shifting some production around with their footprint.
I also am wondering where we are in terms of the cyclicality of equipment, Like are are farmers operating on older stuff that they're going to have to replace or did they already do that during the pandemic. So they're good for a while, and it's going to take like really new high tech products to get them to fork over that kind of cash.
I think we're good for a little bit a little bit of time here. I mean, you have to remember, up we had you know, three four strong years of growth up to the twenty twenty three peak. Yes, twenty four was a down year. We were down, you know, fifteen sixteen percent in terms of units on high horsepower equipment. We're looking at somewhere of a twenty five to thirty percent decline in volumes this year. So that's going to put us, you know, att lows of you know, over
the last two decades where we haven't seen before. So from these levels, we think there's probably limited downside risk. But you know, farmers still have the ability to you know, push out some of these replacement purchases at least for another few years, we think.
Our Thanks to Christopherciellino, Bloomberg Intelligence Senior US Machinery analyst, we moved next.
To the energy sector. This week's shares of the British oil giant BP surge the most is twenty twenty.
This came after news of the activist investor Elliott Investment Management said it built a stake in BP.
And this comes as Elliott seeks to end years of underperformance at BP by pushing for significant change for more.
Alex and I were joined by Will Harris, Bloomberg Intelligence Global Energy analysts.
We first asked Will what all of the problems are that Elliott wants to fix.
I think there's too many to really go through, given there our time constraints here, but I think they can really boil down to a significant moment, which was the original rollout of their twenty twenty energy transition strategy. This is the quickest, most risky energy transition of all the energy global energy majors, and it sort of it depicted a pretty quick drop in their upstream hydrocarbon production, a really rapid rollout of their renewables portfolio. And obviously this
has not been taken well by the market. It's undermined the sustainability of their distribution, it's hit their returns, and especially now when we are seeing a sort of backlash against ESG, we're seeing a slowing of energy transition paces across this sector. It hasn't gone down well for BP's financial performance or share evaluation.
So well, if we go back to that moment in twenty twenty, and I was there when they laid out this new strategy. Was that a bad strategy or is it bad timing or some combination.
There is some part of me that has a little bit of sympathy for BP because because I think they were trying to do the right thing, and then of course Russia's invasion of Ukraine sort of up ended the
global energy sector pretty materially. I also think that they were, yes, trying to do the right thing, but doing the right thing isn't isn't always what's best for investors, And I think just comparing it to some of their their peers, particularly Shell, which has taken a much much more capital discipline approach, they have a very high bar for acquisitions.
They've been very prudent in their energy transition rollout, and we can just see in the financial performance and how the market is valuing them, which has been the more successful strategy over the last four or five years.
As we think about BP in particular, what really can they do in this moment? What are investors really looking for?
So I think I think I'll touch on what Elliott is I think going to try and do. There's four levers that I think Elliott might try and pull here, and the first is transition business spin off, so this can remove debt and capital intensity of these businesses off the balance sheet. We think they'll push to focus on growing their oil production. More, the current oil production is supposed to be declining about ten percent to twenty thirty.
We can hope to see that flatten or increase over that same time period, and I think there could be a push for a board change. The chairman of the board, helgat Lund, has overseen VP since twenty seventeen and compared to peers, there's been pretty underwhelming performance there and then finally a primary US listing. I think that this could be a big game changer. It has not only been
discussed at BP, but amongst the other European majors. It's seen as a major hurdle to starting to close that valuation gap with Chevron and exon our thanks.
To Will Harris, Bloomberg Intelligence Global Energy Analysts, we.
Move next to the leisure sector. Bloomberg Intelligence recently gave his twenty twenty five outlook on cruises and theme parks.
And for more. We were joined by Jody Lori, Bloomberg Intelligence Senior Credit Analysts.
We first asked Jody what she expects to perform well for cruise lines this year.
I will say that the most fascinating thing is the momentum continues for the cruise lines. The booking rates continue to be very high, and we're seeing that Royal Caribbean, we're seeing that Carnival, and that's what management is communicating. Whether or not that continues into twenty six is the question that we're grappling with. But at least for twenty five, it's very very positive moment.
Jody, it seems like demand out there for experiences is still very strong. How about for a family that's thinking about a theme park trip versus maybe a cruise, how does that kind of shake out?
Yeah, So, Paul, I think you hit on the major issue is that we're seeing these sort of two sets of consumers, right the lower end consumers that are pairing back or they're still doing experiences, but maybe not as lavish an experience. And then you have the high end consumers that are still doing very well. High end hotels are doing well, high end cruise lines are doing well,
anything that's higher end. If you put that in the perspective of theme parks, one thing that we saw in our survey that we ran in November is that for theme park vacations, the average consumers income level is a little bit lower than the average consumer that's planning to
do a cruise vacation this year. So I think that's pretty telling when you think about the cost of admission, when you think about who the target audiences and what's going to continue the cash flow generation for the cruise lines versus what might be a little bit of a sticking point for the theme parks.
Jody.
One of the earliest memories I have of the very earliest days of the pandemic was these cruise lines rushing out to the bond market. They're raise cash because they knew that their business was in for a tough haul there. How are the balance sheets of some of these big cruise companies theme park companies, How are the balance sheets these days?
So we're going to break it out to the cruise versus the theme parks in terms of their balance sheets. So for the cruise lines, you know, particularly Carnival and Royal Caribbean, they are dead set on getting to investment grade level metrics. Norwegian says that they want to as well, They've never been investment grade rated. But Carnival and Royal Caribbean are really set on keeping leverage very low. They're
focused on that. Carnival's targeting three point five times by the end of next year, so twenty twenty six, Royal is targeting below three times this year. What we've modeled out is that they can both get there and their relatively comfortably. I mean, they've been pretty aggressive in terms of de leveraging bringing down the debt load. Viking is pretty happy where it is, so we don't see them
improving much. But they also have a low leverage. Now, if you think of the theme parks, they repaid their debt. They had this gravy of a year in twenty twenty two, everybody rushed to theme parks, regional theme parks. Since then, it hasn't been as exciting twenty twenty two to twenty three, I should say, And what we're seeing there is a little bit more problem now. SeaWorld really doesn't have that
much debt outstanding. So where we're concerned there is that they start getting creative with their balance sheet again, particularly if they're finding issues in the business as a whole and they need to propel sort of. You know, the equity value improving for six Flags. You know, they had the merger between six Fags and cedar Fare and that
is resulting in much higher leverage. Management already bumped out the target of when they're bringing down leverage, and we already think that it might be a little bit harder to achieve even pushing it out by a year and a half.
Our thanks to Jody Laurie Bloomberg Intelligency, your credit analysts.
All right, coming to have a conversation with the chief financial officer over at Huntington National Bank on the firm's outlook and opportunities ahead.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal. I'm Normal Linda, and I'm Alex Steele, and.
This is Bloomberg.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
I'm Alex Steele and I'm Normal Linda. Filling in for Paul Sweeney.
We move next to the banking sector and Huntington National Bank. Co host Paul Sweeney and I were recently joined by Zach Wasserman, chief financial officer at Huntington National Bank.
He discussed where the firm's focus has been and how it's never been better positioned to benefit from significant organic opportunities ahead.
And Zach began this portion of the conversation by discussing how the bank is now trying to expand beyond lending to small businesses.
The business has been performing exceptionally well recently, and one of the reasons is because we're driving expansion both geographically and in our commercial business, expanding in a number of
special divertical areas and national business lines. Just this year, we've launched into three new states, North Carolina, South Carolina, and Texas, and we've also established eight new special verticals that are national, for example of funds financed vertical that's supporting private equity clients, one that's focused on the mortgage ecosystem, and other national commercial areas.
Talk to us about loan growth. What I do know about the bank business. That's an important driver. So talk to.
Shot loan growth, where it's coming from, where you're seeing it, and is it kind of in line.
With what you were expecting You know, we've actually had very strong loan growth of the last two years. If you take a step back, much of the industry has been in a pretty neutral position, not actually growing. Huntington
has grown outperformed that by about ten percentage points. And for us, the growth is coming from both our core business, which is consumer small business and then mid corporate typically private commercial clients, and then also these new initiatives that I just mentioned before launching into three New states, a number of specialty businesses.
So we're seeing a nice breadth of growth.
Actually, one thing that's actually, you know, a nice indication of the economic strength is we're seeing strong demand from small businesses from our regional banking business, typically in the kind of smaller middle market client sets. So it's a it's been a healthy dynamic we've been.
Seeing before you were in this position. You also was chief financial officer to Visa, and I know that Huntington is trying to get into the payments business in a particular way too. What's the what's the market for that and how do you guys play and compete in that?
You know, the market for payments is incredibly broad, and if you think if you took a step back.
To categorize it actually, like is that zell or like what is that?
You know, it is so broad, the one that really needs to zoom into it. You know, we have a number of card based payment products, so think consumer cards, commercial cards, but also importantly treasury management, and that's really the biggest driver right now. We're seeing in payments growth supporting commercial clients with the ability to accept payments and then make payments in essentially every form you can imagine, Alex,
so big big growth driver there. One of the things that we've done recently is invest to expand our merchant acquisition capability. Merchant acquiring is when a company accepts payments electronically, and it's often the lynchpin of their business. Saw the lifeblood of the company is how they accept payments. So we launched a merchant acquiring business just in October and
it's been going incredibly well. So, you know, kind of almost every area there's growth in payments for sure, but for us, treasury management and commercial payments in particular as a major growth driver.
Talk to us about your long portfolio, specifically your exposure to.
Office, yeah, real estate, you know, office and commercial real estate generally for Huntington is.
A very small exposure.
Actually, typically for large regional banks, the average commercial real estate within the loan portfolio might be fifteen or twenty percent of the loan book.
For us, it's nine percent, so.
We're relatively smaller and an office is only one percent of that nine To give you a sense. With that being said, you know what we're seeing in that commercial real estate environment is this is gonna this is gonna be a situation that.
Plays out over multiple years.
Thankfully, we are seeing a fairly orderly process of refinancing and generally seeing pretty sound ability for our commercial real estate developers to maintain their financing and to successfully.
Roll through maturities. But it'll take a while to run through.
To give you a sense, something like twenty percent of the portfolio matures any given year, so this will be you know, on average, it'll take five years to really roll through. So I think that's a kind of an industry dynamic we're seeing, which this is a dynamic that will play out over quite sometime.
What part of this is encompasses any kind of m and as is organic yees.
You know, for us we're focused on organic growth m and A. It can be a tool for banks to grow. Certainly we've seen m and A in the industry over time. With that being said, it can also be distracting to the progress that the company is making on organic growth.
And for US Alex, we're seeing so much progress on our organic growth initiatives, both acquiring customers but also importantly putting more and more focus around the value added fee services that come around that come to them, namely payments, wealth management, and capital markets, and so, you know, just the customer acquisition. We're seeing the success in those businesses.
That's where our focus is. To give you a sense in the fourth quarter just that we just closed a ten percent year of year revenue growth, really driven by those organic strategies.
What's a typical corporate customer for you guys?
You know, often, Paul, they are middle market companies that are private.
That's the most typical company.
You know.
You know, the regional banks serve a really important niche within the overall US economy because you know, the client set that we are servicing are typically you know, focused on their local market.
They want a bank with a company that.
Is deeply embedded in the community and knows them personally. But importantly can bring down to them the power of a large bank in terms of specialized capabilities. It's actually one of the reasons why we've been so successful in these new geographic launches.
How about private credit?
Is that a competitor to you?
You know, it's funny we get this question all the time, and the answer generally is no, okay.
You know, private credit.
Is looking for the sort of you know, the kind of loans that they finance are typically where there's more leverage, where there's more yield to be had. Because of the risk, that's not the core client for Huntington, and so our head of Commercial Business mentioned that only in two cases last year across our entire business did we see commercial borrowers actually go to a price a credit facility away from our own lending facility.
Art thanks to Zach Wasserman, chief financial officer at Huntington National Bank.
I'm staying in finance. This week, Canada's TD Banks that it's offloading its entire ten point one percent stake in the financial services firm Charles Schwab.
And this comes as part of a corporate overhaul. In October, TD Bank reached the settlement with the US Department of Justice and bank regulators over its failure to catch money laundering at several American branches.
For Moura and Nora and I were joined by Paul Goldberg, Bloomberg Intelligence senior equity analyst.
We first asked Paul why TD Bank would offload it's full stake in Charles Schwab.
I don't think it's necessarily strategic Cox. I think it's partially to simplify the business. Also, TD got hit with AML investigation and was fine, then got an asset cap in the US, so they can really grow in the US much larger on the bank inside. Sounds like they trying to simplify the business, having the ability to buy back some stock, have some extra capital in handhand.
Where does TD's business currently if you were to give us a broader perspective, how is it lining up against competitors?
Well, I think that you have to look at it in two different areas. One in Canada. So in Canada with the one of the largest banks across personal and commercial banking. In the US, they again one of the largest banks, but they very much personally focused all over the east coast of the US.
So what is going to take for them to get their asset cap raised in the US.
I think it'll take a long time.
But what's the problem that the FED highlighted, Well.
The FEED highlighted is they mL deficiencies which they trying to fix. It costs them a lot of money they invested in it, but it can take years. So if we'll look at what's happening to Wells farga we're in eight years and they're still trying to get out from under that.
Yeah, and it always seems like nebulous. It's like we have an asset cap, but it's not like you check these three boxes and it's gone. It's sort of like, at least for Wells Fargo, because it's like risk management. It's controls that's making sure that you know everyone's on board doing the right thing at the right time, which can be very difficult.
What do you take away from this idea of the repurchasing of its for.
TD or for swap. They both do so for TD. I think they repurchasing on the fraction of that. So they's take in Canadian dollars is about twenty billions. That fourteen billion they repurchasing only eight So the impact on TV shares from this sale of from the sale of Schwap shares is about seven percent of the earnings. They're going to repurchase back six so mostly neutralize that kind of impact. The rest is going to add a whole point of capital to them so that they can be
invested in other sides of the business. But because they kept in the US, which makes it very challenging because they have they'll have to figure ways to invest adding to capital markets, which they're doing right now, or domestically Schwab. They only bind one percent of the ten percent stake that's being sold, but TD is still keeping the depository relationships, so I think it's strategic more on the TD's side rather than having any impact on Schwap side.
Is this bad news for the Swap side of things?
I don't think, so that's what I'm saying. It's a strategic decision on t D side to simplify their business. They're still keeping the deposits relationship, which clearly says that they're working well with Schwab and the TD is going to put a decent gain on sale and this kind of thing. So I think that's nothing wrong with the schwab its, just big stake of the company's going up in the open market, right.
Totally switching to TD and their actual Canadian business. How are they doing there?
They're doing pretty well, right, So the second largest bank domestically, right after the RBC. They've been very consistent right on the mortgage side, on their commercial operations and everywhere, so they've been doing well. But it's an extremely competitive market. That's why the concern is that they're going to have this all extra capital that they're going to try to invest domestically into a super competitive.
Market and breakdown in Canada. There's fewer banks than we have a million over here, so like, how do they shake up in terms of their competition in Canada? How do they line up the well.
Their competition there are six largest banks, or some people call it five plus one because National Bank is a little bit smaller, even though they just finalize in the closure of Canadian Western Bank, that's going to expand them a little bit. But some people describe that market as
a competitive monopoly between these banks. So there's some smaller banks and credit unions, but these banks control ninety plus percent of deposits and loans in the country, so very very concentrated, and they compete very aggressively against everything, so the market shares when you see them shift. We're talking about basis points here and there from period to period.
All right, thanks to Paul Goldberg, Bloomberg Intelligence and your equity analyst, you're.
Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal. I'm normal ind and I'm Alex Steele, and.
This is Bloomberg.
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I'm Alex Steele and I'm normal Linda filling in for Paul Sweeney. We move now to earnings from the fast food giant McDonald's. This week, McDonald's reported that its sales rose in the fourth quarter, and this comes after growth in the chains international business made up for a decline in the US.
For Maura Nora and I were dorma Michael hallon Bloomberg Intelligence and your Restaurant and food service Analyst, and we first asked Michael for his broad read on these latest results.
You know, the most important piece of the report really is the US recovery post e Coli, and we got some good news on that front. So traffic was actually positive in December, so I think that was much better than anyone had expected. They cited kind of a choppy January here, but the only the only region still impacted by ECOLI seems to be the Rocky Mountain region where the outbreak occurred, and they expect a full US recovery by the beginning of the second quarter, which is good news.
What about the rest of the world versus the US, It was the rest of the world that really performed well.
Yeah, yeah, And a big part of that was just lapping like pretty weak year ago results, right, so we wrapped the start of the of the Israel Hamas war, and so the Middle East was stronger. Countries with large Muslim populations were also stronger. And then also China lapped a very weak result last year, and management cited some stabilization in that market, which is encouraging for them. So
the easy comps was what really fueled international sales. You know, we're kind of more bullish on the US moving forward than international, you know, because outside of the Middle East, in China, Europe is we think is going to continue to kind of be an issue for them. The Arizona is experienced it's seeing much higher inflation than the US and that's really crimping low income and family spending on the continent.
Are people still buying the Big Mac.
They don't break out Big Mac sales, but they cited pretty strong results out of the Chicken Big Mac, which I was kind of surprised about. You know, my associate tried it, he was not a big fan. But but yeah, they cited, you know, pretty strong results out of the Chicken Big Mac in the United States and other markets. I think France was who they called out specifically and to the point where they're going to continue to you know, bring it back as a limited time offerre.
In the future.
So I was actually talking to an ib user, a Bloomberg user about this. Why are McDonald's franchises elsewhere like at rest of world so much better than in the US and that like you can get like super good food that doesn't taste like fast food. Why is that?
Yeah, Jonathan Farrowe asked me the same thing, said he wants them all to be like the you know McDonald's in Italy, you know. And the answer I had there was just more discerning tastes, right, that.
Might be it, No, but really, like is it? I mean, does it affect margins? Like what are the margins like in the US versus the rest of the world.
We don't We don't have that information, you know what I mean. It's a franchise business, right, so.
You know what I mean.
So, so we don't have a ton of color on all the different franchise markets and what kind of margins they pull in. You know, the US generally is a lower margin for the franchise business, just because they have a lot more franchisees and need a lot more oversight. The international franchise business tends to generate wider margins.
So I always used to think about McDonald's is a really cheap place, a discount fast food place, but prices are getting higher. Are we still seems demand from lower income consumers for the brand.
You know, it continues to be the weak spot at McDonald's and for anyone that has a lot of exposure to low income consumers. So the entire QSR space, right, Jack in the Box, Wendy's, Burger King. You know, a lot a lot of chains, you know, struggled last year because of their inability to draw low income consumers. You know, they're impacted most by inflation.
Right.
We've had four plus years.
Of restaurant price hikes and higher costs across the board, right, and so you know, chains that are exposed to low income consumers are going to continue to press on value to try to bring them into the fold. You know, it seemed like it didn't seem like restaurants sales did improve for a quick service in the fourth quarter, and we think a big part of that is just a re establishing of their value proposition.
Right.
McDonald's early last year got a lot of shade about the eighteen dollars big Mac meal in Connecticut, and so they decided to push hard on value, and prior to the E Coli outbreak, you know, October.
Had some really good results.
They were drawing customers in with that five dollars meal deal and traffic was positive for the first time during the year. So value pushing on value has been successful for McDonald's. That's not good for their competitors because McDonald's has the most scale, right, But we think this is going to continue throughout twenty twenty five in the quick service industry.
So just to confirm, you're saying there was a meal that came up to eighteen dollars.
She totally missed this. She totally missed this one.
Yeah.
Yeah, it was one franchisee in Connecticut. No comment, No, fair enough, fair enough. But he was he was pushing back because he, you know, he was dealing with a lot of inflation and he was just, you know, he wanted to make some money on the big McNeal. He was trying to make a point.
Our thanks to Michael Halen, Bloomberg Intelligence senior Restaurant and food service analysts.
Each week we look at research from Bloomberg n EF previously known as New Energy Finance. They're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agricultural sectors.
This week we looked at the energy sector and how it's being impacted by Donald Trump's presidency in the United States. For more, Alex and I were joined by Derek Fletgall b Any F lead US policy analysts.
We first asked Derek, where we stand today with the energy transition.
Where we stand today is at a point of uncertainty and early consolidation. At this point, we've heard a variety of conflicting reports about the release or lack thereof, of obligated federal funding for climate grants. We've heard reports that EPA has released some others that are implicated by some of the presidents DEI related orders, anything with an environmental justice or a community benefits component have been more affected.
And meanwhile, at the executive level, we've seen some people at Brook Rawlins the USDA, Doug Bergham at the Department of Interior, and Chris Wright at the Department of Energy get into place and put forward their formal priorities. So, with that early staffing up in place and continued uncertainty about the release of funds, we are kind of looking at a wait and see period, seeing how things shake out in the courts and in the executive branch itself.
Well, it definitely has been a massive makeover that Trump has been planning to do and it is continuing to do right now in terms of federal agencies. But are there any areas in particular that you're keeping an eye on. I know that there's things going on in terms of EV charging funding right absolutely.
I mean sectors that were specifically named in Trump's executive orders, oil and gas. They're supposed to be four momentum on that, as well as electric vehicles and electricfical charging and offshor win. In particular, EV charging saw a pause on existing dispersements
of funds from the National Electric Vehicle Infrastructure Program. That's about five billion dollars if I recall correctly from the Infrastructure Investment and Jobs Act, what about one billion dollars if that had been allocated, So it's clearly a disruption to those on going disbursements. Keep in mind that there's also something called the Charging and Fueling Infrastructure Program, which was not as directly targeted by that, that's obligated rather
more funding. So there's still some full momentum so far to the EV charging sector. But what this does is throw a bit more sand in the gears that continued forward movement.
Do we know what the Republican's energy plan consists of, versus just rolling back certain things, like I know, we know that it's energy independence and we want more oil, Like, I get that. But in terms of dismantling Democrat policies versus their own support for different.
Industries, I don't think we do. And there's two different reasons for that. Firstly, on the executive side, my sense is that they are reviewing and looking to see which aspects of existing policies are worth keeping in place for goals like national security, energy independence, and so forth. Certainly, we've seen emphasis that subsidies for nuclear critical minerals manufacturing those should continue, and to the degree that renewables can help meet new load for new factories for data centers
that might also be somewhat protected. We've seen these reversals quite rapidly, even in the renewables permitting space. For example, within the same day our colleagues at Bloomberg News reported that federal permitting was paused and then unpaused by the US Army Corps of Engineers. That's just the federal side, executive side. On the legislative side, we are still waiting for the Senate and the House to come together on one core plan for the big tax and reconciliation bill
that's going to come later this year. They need to find a lot of pay force to extend Trump's tax cuts from twenty seventeen. And other than being sure they want to sell more oil and gas leases and cut back taxes on methane, they're not really consolidated around one common plan of movement. The House wants to do one
big beautiful bill. The Senate wants to have an early energy measure, And of course, the earlier you move on some of these big unifying factors like the border or increasing supplies of fossil fuel energy, the harder it will be to have consensus on doing some other, maybe more controversial things like pulling back clean energy subsidies that have mostly benefited Republican districts and states. So we're really waiting
to see where these negotiations land. And I think the more that businesses can continue to engage with the Trump administration to make the case with their priorities in Trump's own terms, the more we'll see clarity around where this administration will land.
Ultimately, so with a.
New administration in power, where do things stand with Biden's Inflation Reduction Act, particularly tax credits.
Right, So, the key thing about tax credits is that these are a bit more of a complicated instrument than simple grants and loans. Right there's legal obligations that are associated with those, but there's also a lot of sort of intervention points to try and keep that money back with taxes. That's a thing that you file to the IRS, the IRS eventually gives back to you. And further complicating this,
the IRA created a sellable tax credit mark. So right now there's a lot of businesses that effectively have anticipated getting tax credits from the government later and use that to sort of set up some transfers with other businesses in advance. Everything is kind of moving along before tax day comes and before IRS disbursement needs to come back.
But because of all of that, there's a lot less certainty right now about whether tax credits are affected by this alleged funding freeze, and of course that it's sort of like you know, the roadrunner running off of a cliff in a cartoon. As long as you don't look down, maybe there's not as much fall as you would expect.
We're going to see later on what real implications this has. Now, from what I've read of legal analysis, it's going to be particularly hard to try and hold back tax credit funding, even if you know there's a longer wait on that. But that level of uncertainty has yet to affect the market.
To my knowledge.
Later on though, we'll.
See our thanks to Derek flake Hall be an eapp lead US pol analysts.
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