ICYMI: Jennifer Grancio on Volatility and Trade War

Jennifer Grancio, head of ETFs at TCW, discusses investment options through ETFs amid market volatility and the trade war.

Wall Street’s rally took a breather on Tuesday, with stocks falling as traders awaited fresh catalysts after a six-day run that put the S&P 500 up almost 20% from its April lows. The US equity benchmark lost steam following an $8.6 trillion surge.

Long-term Treasury yields climbed as fractious US budget negotiations kept focus on the growth in deficit spending. President Donald Trump is growing frustrated with demands to significantly boost the cap on the state and local tax deduction, according to a senior administration official, signaling a deadlock as Republicans aim to quickly pass a giant tax-cut bill.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.

Speaker 2 (00:07):
You're listening to Bloomberg Business Week with Carol Masser and
Tim Stenoveek on Bloomberg Radio.

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It's a good question.

Speaker 1 (00:34):
This is the drive to the Clothes Punks music on
Bloomberg Radio.

Speaker 3 (00:40):
All right, everybody, we are just about eighteen minutes away
from the closing bell on this Tuesday. We've mentioned how
during the two o'clock hour Wall Street time we did
see a leg down in terms of equities, going near
our lows of the session. We've bounced back, not completely,
but definitely off our lows. But as you have heard
from Bill and both Charlie so down about half a
percent in the S and P five hundred, NASDEK one hundred.

(01:00):
Tim still down to also about half a percent.

Speaker 2 (01:03):
I want to bring in Jennifer Grantcio. She's head of
ETFs and Global head of ETFs ATTCW. She was also
former a CEO of the impact investment firm Engine Number one.
Remember they took on Exelon back in twenty twenty one
and scored a major victory by winning three seats on
the board. She's back in our Bloomberg Interactive Brokers studio
usually in LA spends a lot of time on the road.

(01:23):
We are happy to see you here in New York.
How are you.

Speaker 4 (01:25):
I'm great.

Speaker 2 (01:26):
Well, it's good to have you with us. Carol and
I were talking a little earlier about sort of the
strangeness of the market since quote unquote, I guess the
April eighth liberate post so called Liberation Day low. What
do you make of what's happened over the last six
weeks or so, because we are pretty close to all
time highs on the S and P five hundred.

Speaker 4 (01:47):
Yeah, I mean it's an interesting question. I think everybody
wrestles with the same question from an equity perspective. You know,
we actually at TCW are doing concentrated fundamental portfolios, so
we're looking for opportunities high quality management teams, quality revenue
growth through trends like how we use energy and electricity

(02:07):
and supply chain. We're shoring. So they're like, we like
the names we have in the portfolios. We think it's
a good time for people to be investing at the
same time. You know, we're a big bond investor, and
so when we are managing the core bond products, one
of the ETFs there it's done very well, is flexor
and when we're managing that, we're a value investor. So
we took advantage of the volatility in credit spreads in particular,

(02:30):
drove a lot of alpha for clients looking back a
couple of weeks. But in the bond fund, we're still
being cautionary. We want to be positioned so if the
economy does slow, we're doing the right thing for investors.

Speaker 3 (02:42):
What kind of visibility do you feel right now that
you have on the outlook?

Speaker 4 (02:46):
I think it's uncertain, yeah, and we just don't know,
and we have data. We have this debate internally within
TCW all the time on to what extent is it's slowing.
How many rate cuts will there be this year? We
do not have the answer. But in the bond part
of the portfolio, we think people should be positioned with
an active manager so that we're managing that for them
as things unlined.

Speaker 2 (03:06):
I think one thing that we've been thinking a lot
about is really the and we'll talk about some of
these ETFs in just a second, but from a big
picture perspective, and Eric Weener from our equities team was
just in here talking about how professionals that we've reported
on are still kind of thinking about this other shoe
that's going to drop. There's like just around the corner,

(03:26):
there could be some sort of big risk, whether it's
trade related, whether it's related to the economy. What do
you see as the risks out there right now?

Speaker 4 (03:36):
I think from a tariff perspective, it's come back a lot,
but tariffs that are in the low single digits, low
double digits rather, I mean, that's still a big tax
on the consumer. So we're watching that. It's better, they're lower,
they're a little bit more reasonable, but we don't know
how much of an impact that will have on the consumer.
So that's probably the main thing we're watching, and we're
looking at everything. We look at employment data, we look

(03:57):
at the earnings calls to see what consumer companies thinking.

Speaker 2 (04:01):
That's funny because I thought, I mean when we were
talking to Eric earlier, it was like, yeah, we were
waiting for the companies reporting earnings for the most recent
quarter to talk about the impact and certainly a lot
of them did, but we didn't necessarily see the equity
market reaction that I think people thought they would. Like
the concern is, Okay, maybe it's happening now rather than

(04:22):
in the last quarter.

Speaker 3 (04:22):
Well, it does feel like if we're going to see
things like the tariff impact, it's not necessarily showing up
in the statistics, right, And as you said, Tim, like
in the earnings reports, that's maybe a second half thing
and we've got to kind of wait and see for that.

Speaker 4 (04:33):
Yeah, that's right, and that's why we think we have
we have to be careful from a portfolio positioning perspective.

Speaker 3 (04:38):
Jennifer, I want to ask you. I know I probably
do this before, but I'm always curious about flows where
you see investors moving in and out of at this point,
because obviously it's been an interesting what four weeks, six weeks,
and I'm just curious how much movement was going on.

Speaker 4 (04:52):
Yeah, I mean, I think at the at a wealth
and retail level, what we've seen is a lot of
money rebalancing back towards equities. So people certainly moved right
back into equity, they really did, so we've seen that completely.

Speaker 3 (05:04):
The money that came out.

Speaker 4 (05:05):
They've taken they've taken money out of cash and other
things and put it back in equity and then in
our shop, a lot of what we do is are
these thematic or complementary equity strategies, and so some of
them have done very well. I mean they've done great
from a performance perspective in terms of beating the S
and P. But from a flows perspective, we've seen money
come into high quality company defensive growth grow is the

(05:26):
ETF there, as well as into powered, which is the
energy system transition product.

Speaker 3 (05:30):
I mean that has been such a dominant theme. I
was asking before we got going Tom if you were
at Milkin, and I mean that was one of despital
the uncertainty and teriff conversations. One of the things that
seemed to be again beating the drum was that of
the AI play and the energy that's going to be
needed that build out was still happening. And is that
what you're talking about?

Speaker 4 (05:51):
First? For sure? And so from an from an investment perspective,
the way that we're managing products that people can come into.
We have an AI product we have for a very
long time, as well as the powered ETF strategy, which
are a way to get access to that theme, but
we think don't do it in a way that is
too narrow. Both trends how companies use AI, how companies

(06:11):
get power and use electricity. We're very early innings on
these mega trends.

Speaker 3 (06:15):
Can I just say powered is app almost twenty percent
over the past month, up about eleven percent year to date.

Speaker 2 (06:20):
Jennifer, how would you characterize the flows that you've seen
in the last six weeks or so? Would they be
more defensive or more oriented toward growth in your view?

Speaker 4 (06:29):
It's somewhere. It's somewhere in between. Just the real answer.
We're seeing both. And then on the fixed income side
of the business. So with Flexer, which is total return
bond fund but also as a very strong income target,
it's yielding around six percent. We've seen very strong flows there.
So from a portfolio perspective, it certainly doesn't feel like
people are doing one thing or the other. They're just
topping up positions.

Speaker 2 (06:50):
How's it yielding six percent?

Speaker 4 (06:52):
From an SEC yield perspective, we have a target and
we're managing for income while we're doing till return at
the same time. Okay, So I think that's what sort
of rocketed that particular fund up to the top of
the category.

Speaker 2 (07:03):
Yeah, this is nearly tripled since it was converted back in, showing.

Speaker 3 (07:06):
Exactly you know, we introduced you and we said, you know,
former CEO of Engine number one, you did take on
Xon major victory three seats.

Speaker 2 (07:16):
On the board.

Speaker 3 (07:17):
We're now looking at an administration that seems to be
rolling back perhaps on energy things. Although there was a
positive for wind farms today based on Trump administration initiatives.
How do you think about that? I don't knowether I
should say ESG, but the alternative energy space, that kind
of transitioning that we were seeing pretty aggressively, how do
you think about that? Does that continue in terms of

(07:38):
the move away maybe from fossil fuel companies or do
you think maybe this is another pivotal change that we
kind of roll back a little bit.

Speaker 4 (07:46):
Yeah, I mean, I think we have such a demand
for energy. I think that we're going to continue to
continue both so prudent, more efficient fossil fuel. But some
of the companies we hold in the powered portfolio, for example,
are its natural gas and other sources of non intermittent power.
Data centers need those, and then the more effective we

(08:08):
can get with wind and solar. People are still investing there.
So I think it's again it's a massive trend and
we need so much energy. We'll see balanced growth across
the brown and the green parts of the industry.

Speaker 3 (08:21):
Where does the environment come into all of this? Just
thirty seconds? Like, is there like a concern among companies? Like,
I don't know if you guys are talking with investors,
do they care about it? Do CEO's leaders and forgive
me just got about twenty twenty five seconds.

Speaker 4 (08:33):
Yeah, I think from an environmental perspective, I think both
asset owners like public pension funds and sovereign wealth funds,
as well as CEOs of companies care about these issues.
But we're having a conversation that's based on financial metrics, yeah,
and long term outcomes.

Speaker 3 (08:48):
Okay, so that plays into it in a big way.
So good to have you in studio, So good to
see you.

Speaker 4 (08:52):
Be well.

Speaker 3 (08:52):
Be well, Jennifer Grencio, head of ETFs and Global head
of ETFs over at TCW. Right here any