S&P Global CEO: "Business Conditions Are Still Strong"
Speaking to investors, CEO Doug Peterson says, "A lot of the factors in the economy are actually quite strong and point to recovery in the market."
Doug, the stock market has been zigzagging, but it is recovering. And if you look at the S&P 500 index, it's up more than 12% so far this year. So is the correction over? I think the correction is over, and I'll tell you why. Business conditions are still strong. Interest rates are low-- they're stable. Oil prices are stable. You've got business confidence. You have deregulation. You have wage growth. So a lot of the factors in the economy are actually quite strong and would point to recovery in the markets. During this latest market correction, a lot of investors just got burned. And they pulled their money out and now they've put it into cash, into money market funds, and they're very content with 2% return at this point. What is it going to take to get that cash back into the market? What happens a lot of times when people pull their cash out, they pull it out at the bottom of the market and they see this kind of recovery. And once they see the stability of the general economic conditions, they'll probably start coming back. And there's things like trade and Brexit and others that are some of the risk factors that they're going to be watching very closely. Fed Chairman Powell has been sounding pretty optimistic recently. He says there's no reason why this economy can't continue to expand. Do you agree with that? I agree with it. I think the expansion is going to slow down. Our economists expect that in 2020, growth is going to be more like 1.8% instead of 2.3%. But that's still growth, and that's a level of growth that also with the very low inflation and positive business conditions, growth is always positive. The Fed is saying that they're going to put a pause on raising interest rates. Does that make you feel more bullish or does it concern you? When it comes to the financial markets, I see it as a positive, because it gives you some certainty and stability. When I look at the real markets, it means that rates are going to stay low so you could see some investment. The one thing that worries me-- the third aspect-- is that on a relative basis, Europe is slowing down, China's slowing down, rates are low in Europe. So this is where you get the relative aspect that worries me a little bit more. Let's talk a little bit about China. You do a lot of business in China. And recently, you created the first ever credit ratings agency in China. So congratulations on that. So you get to look up close and what's going on in China. How is their economy doing? And what does it mean for American businesses? Their economy has been slowing down a little bit, which obviously has some concerns on a global level of global growth. But the Chinese market has a lot of firepower, a lot of opportunity, and American companies are all looking to see how they can be bigger in China. Well, American companies are moving in a big way to China. But to what extent can they expect to be on a growth track? Or are there just too many obstacles in the way-- whether they're political or whether it's driven by trade? There is a lot of companies that already have a really strong position in China-- automotive companies, food companies, et cetera. They're doing really well, and they're actually benefiting from this change of the economy from an investment economy to a consumption economy. So the ones that are more worried about China are those that aren't there yet, that are trying to get in. That's where a lot of the barriers are coming up. Another concern for American investors is Brexit has been very much in the headlines recently. Whatever is decided, what's the impact for us here in the United States? We should worry about it, first of all, because we should see what's happening with trade negotiations everywhere in the world. It's become a very important political factor and certainty factor for businesses. And the other is about growth. The last thing we want to do is see Europe slow down even more than it already has and the UK slowdown, because that could impact global growth, and, at the end of the day, American businesses as well. Well, every CEO does have a worry list. Right now, what concerns you the most? Well, when I look around the world, Brexit and the trade negotiations are two that I would put at the top of my list. Brexit because of the signal that it has for such an important trade bloc in the world to break up and the uncertainty that's going to bring. The China-US trade discussions-- there is no such thing as a win-win in a trade war. And I really hope that we can see some kind of a resolution that opens up China more, that gets some of the conditions going in that it make it easier to do business in China. So these are definitely at the top of my list.