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S&P Global CEO Says "Market Conditions are Very Strong"

September 03, 2018 00:00 AM UTC
- Updated September 02, 2020 11:45 AM UTC

Doug Peterson says the market rally is more than just tech stocks.

Transcript
Doug, what an amazing year this has been for stock investors, all of the major averages. The S&P 500, the Dow Industrials, the NASDAQ are all at record highs. Where do you expect the markets to go for the rest of this year? I think that the conditions are still very favorable. You have low unemployment, you have high growth. You also have an economy that is very robust. You see confidence from consumers, confidence from business executives. These are the sorts of factors which lead to continued growth in markets I can't predict them, but the conditions and the factors are very strong. One of the things that we hear from skeptics is that this rally has been pretty much all because of technology companies. And there's a handful of them, Apple, Amazon, Netflix, Microsoft, that are responsible for most of the gains. What do you say to that? Well, the technology stocks obviously are going to have that extra weight, and part of the buoyancy of the markets come from the technology stocks. Just remember where the financial institutions came from 10 years ago. They've done very well in this market. The data and analytical companies like ours have also seen a lot of steady growth on their top line. You also have the industrial sectors have started getting much more buoyant in the United States. This has become a country where manufacturing is starting to come back. So there's a lot of factors which are going to be impacting the markets, and it's not really just technology companies. I'm sure you hear this all the time because everybody's been saying that this is the longest bull run in the history of the S&P 500. We have not seen what they call a healthy correction. Is that a bad thing? One of the things we don't want is for people to think that this kind of buoyancy, this kind of a strong market goes on forever, that the credit markets go on forever. We're taking risks. And people need to understand that when they're taking risks, sometimes you could have a loss or markets could turn around. And so in addition to potentially risk the market's changing direction, when that's going to happen, I can't predict. But also, I think it's important that people recognize that and they get the experience from that. If they've never had that experience, make sure you talk to somebody that has. Well, there's always something for investors to worry about. And right now, worries about a trade war, especially with China, is a very big worry. How big a risk is it? I mean, how serious could a trade war be, not only for the markets, but also for the economy? Well, first of all, I don't know anybody that's in favor of a trade war. I believe that right now, the United States is engaged in a very important trade discussion, trade negotiations around the world. I was encouraged that the United States reached agreements with Mexico over the last couple days, and Canada seems to have come back to the table. In addition, the Chinese and the Americans have started talking about solutions to some of the issues which the Trump administration has been raising. Nobody would do well in a trade war. A problem with a trade war, it's a lose-lose. Everybody loses. Now, I understand that you have been in Europe recently and also in Asia. What kind of feedback were you getting from your clients about trade issues or economic issues? Are they holding off from making investments? Are they holding off from hiring more? Where I see people that are probably the most impacted like the auto manufacturers because there are some discussions about adding very significant tariffs on auto imports, so that's given pause to the automotive industry. But most of the other industries have said that they think this trade war is not going to have a long term impact. There's going to be some kind of a resolution to it. We're all going to be watching very closely what's happening in Washington and Beijing. It's kind of interesting. You mentioned just a moment ago, we have a very strong job market. Consumer confidence is very high, and yet there are forecasts that there could be a significant slowdown, even a recession coming. I'm not sure when. How realistic is that? I don't see any real signs right now for recession. Our economists have done a lot of analysis. The probability of recession that they believe is still very low and under 20% in the next two years. You know, your company, S&P Global, is excellent at collecting data, and you're in a great position to know what all that data, what it's saying about the future. I mean, to what extent did you study that data is it telling you about how the economy is going to do, the US economy, in 2019? Is it going to be stronger than where it is now, weaker, or just about the same? If you go back the last few years, we've been projecting and we've been seeing steady increase in the growth rate of the United States, and we're projecting for this year and next year, annualized rates of over 3%. So better than what we've had? Better than what we've had. And remember, some of that is driven by people having jobs, people having more discretionary income, people having the tax cut that went into their pockets, and allowed them to spend a little bit more money. You sound very optimistic. I am generally optimistic about the business conditions of the United States. There's just so many positive factors.