>> welcome to "bloomberg markets" looking at the s&p 500 hitting a session high right now, extended a record run with wall street calling for even more gains. let's talk about the evercore isi call. expecting a price target now of $6,000 and the s&p 500 started the day in the red, now back in the green. the nasdaq 100 also seeing gains. everything flying just a little bit. the bond market space, after the

big last week, two year yield up about four basis points, nearly five basis points on the day. to year at 4.74. tenure still below comfortably at 4.27. roughly five basis point move today. some midday movers on the equity side, star board pushing for changes at autodesk because of the performance issues and how it handled accounting probe. star board said it will sue to delay at her desk's annual meeting and force a board boat. they have a $600 million stake in the company -- $500 million stake in the company and you see the shares reacting. look at the ai craze. tsmc flying as well about 2.4% higher but worrisome to investors who have adopted the

arbitrage strategy of buying tsmc shares while shorting listings. share served about -- research about 10% more than they have in taiwan. looking at flows for hyg attract junk bonds. fascinating play in the equity market on what is happening in the bond market. look at the one-month flow of nearly 1.3 billion worth of net blows. really detracting from that bleed we've seen in the last couple of years, certainly over one year step definitely over three years. even this year alone. you do have that rally when you see those expectations for interest rate cuts rising. you have kkr send credit investors are focusing too much on spreads, missing out on bargains further down the credit rating spectrum. they are looking at those triple c bonds. joining me now from san francisco is chris sheldon out with a note today, one of the most red on the bloomberg

terminal. if you look at what investors are missing, a lot of people concerned you're just not getting value because of where spreads are right now. what do you tell them? >> i think a lot of people are too focused on the spread and not looking at the absolute dollar price of the index, which is still below par. absolutely, yield. if you look at these higher rates for longer, which is what our view is, you will compound that interest from a default standpoint, that mitigates a lot of the recovery. we like credit right now. we think it is a higher resting heart rate for rates. albert einstein said compounding is the eighth wonder of the world. i think you're going to get that continue reinvestment of income for a while. sonali: i don't pretend everything is rosy. i want to pay attention to what is starting to weaken in the credit spectrum. we're started to see defaults. >> you're are seeing the economy slow.

the fed rate hikes is working. it is slowing the economy. but we are not envisioning a big spike in defaults. it is not like previous recessions where you see there's a big shock on the system. if you look across the different sectors we have seen, you have almost been enrolling recession were some businesses have been in a right for 30 years now, just coming out. and some industries are starting to see slowing and continuing going in. we do envision increased faults, increased downgrades. however, it is not armageddon in terms of a big spike of defaults. sonali: fairpoint. what he think about investors who are piling into riskier credits right now? do you think some might be aborting some of the risks out there? >> for sure. if you look at the market and the market construct, the incentive to take risk has been taken out, particularly in the liquid markets. if you look at the loan markets,

triple c's, big part is insurance markets that can belie -- can't buy below bb. incentives have been pulled out. there are more more dispersions in the market. as i mentioned people are focused on spreads, but there's a lot of dispersion. it is a credit picking market. i'm not saying you should buy all lower rated triple c risk, but there's a lot of interesting opportunities if you can underwrite and differentiate yourself on some of that lower rated risk. sonali: to the extent you see dispersion, where are the most mispriced opportunities worth picking at right now? >> right now and as we mentioned in our letter, the cee-lo machine start again. you're seeing a ton of resets happening. people are trying to bring their triple c baskets down. you're seeing a lot of motivated sellers and triple c loans right now today. there are a lot of good companies or certain industries where the ratings for those industries are whether the

insurance brokerage or software where they are not a lot of hard assets for the rating industries often penalize the recurring cash flows of those businesses. sonali: motivated sellers or forced sellers? is our reason some people are offloading at this point? >> it is more motivated. i think when there are misses, there is i so first -- so first come ask russians later. -- cell first, ask questions later. when things are going into a default or really in dire, you see more forced selling. right now it is not armageddon forced selling. sonali: i'm curse about why people are tapping debt markets at this point. you saw a tremendous boom at the beginning of the year of investment grade and then the junk bonds follow, and then you also saw a wave of issuance when it came to leverage on its pertaining to private equity firms. we have a story right now about

how private equity won't stop gorging on debt to pay their busters, looking at dividend recaps. would you be a buyer of that kind of issuance? >> it depends. i think you're seeing a lot of flows as you highlighted in the high-yield ,hyg inflows. your sing flows back into credit. you're at the point where i think you are more consensus around a soft landing, not a deep dark recession. a little more certainty that inflation is under control. so capitals coming in the market. there has been a lack of m&a which is why you're seeing an increased in dividend deals from private equity sponsors. so i am ok lending and participating in some of these dividend transactions, particularly if their businesses we know, management teams we know, that they have hit our numbers for the last five years or three years and we have been in those loans. i don't get too spooked by the increase of private equity transactions taking capital

back. in many cases, a lot of these private equity firms still have a time of capital in these businesses. so you are still live. you have to be wary. it is about the right ones leading in and avoiding the mistakes. i think right now it is about keeping it simple, not reaching for return or yields. understanding the businesses you are lending to, picking the right sectors, avoiding the secular decline ors. w time to go into stress. we just don't think that is the time right now. sonali: if you had a choice between a broadly syndicated market or private credit market, seeing the deals that are coming to surface right now, what do you choose? >> private credit market, it is a big market that includes direct lending engineer debt and asset finance and capital solutions. right now we are seeing a really jesting opportunity in asset-based finance -- we are seeing a really interest-based

opportunity in asset-based finance. less correlated with what you're saying sort of fundamental corporate macro risk. we are leaning toward that asset-based finance right now, leaning toward a little bit of the capital solutions where you can be a little construct your own capital structure. sonali: chris sheldon come off the heels of a fresh note out of his team, thank you so much for joining us. perfect moment to bring in churchill president and ceo who is from overseas 50 billion as a capital affiliate of nuveen and very close to those private credit markets we've been talking about. with this conversation with kkr about things weakening in certain parts of the economy. how do you think things are headed from here, especially given the recalibration of where investors think interest rates are going? >> by the way, great to see you. always great to catch up. look, there's been a lot of questions about portfolio performance, a lot of issues

around, ok, what is the impact on hire for longer, how are these companies handling it? i was to overall the answer is, quite well. if you look at our portfolio, for example, today we have $22 billion portfolio. we have incredibly small percentage, less than 1% overall, having issues. i think for the better managers, i think you're seeing quality hold up quite well. i think it is leading to a dispersion among managers, margins, chasing higher yields. they really were not sticking to focus and quality and starting to see issues in their portfolio. if you look at recent research coming out, the widest dispersant along time, and managers that have 9% or 10% of their portfolios in high quality managers with no percentage or very low percentage on nonaccrual. i think it is a mixed bag on

portfolio performance. i think in agreement with your last discussion, i think it is a bit of a rolling dynamic as well. certain industries are being impacted and others are doing quite well. sonali: where do you see the stress? when you see things peek out of the service, even if we get a rate cut, it is not coming right now. so where is the stress we see through the end of the year? >> i would say in our portfolio, what we've seen is it tends to be idiosyncratic issues, meaning you have a company that for various reasons is challenged with some dynamics in very specific subsector. we're not seeing rod-based issues across an industry or subsector we are investing in. of course, we generally don't invest in restaurants and retail and oil and gas and some of them more cyclical areas, but overall, i would say it tends to be idiosyncratic and not really based upon any overall trends.

i would say there -- health care, if anything, in certain areas you are seeing some challenges in terms of cost reimbursement. but overall across the portfolio, we see things as handling the higher interest rate environment quite well. sonali: in the last week, we have seen a lot of changes in the expectations were interest rates go from here. potentially two rate cuts, at least that is what the market wants. how does that change your thinking about how you put money to work? >> we are being more conservative today. if you look at leverage multiples in our world today, a company that might have lever five or six times cash flow two years ago, that same deal today is being levered four to five. a full turn to return and have lower leverage focus on higher quality issuers, companies that have strong, consistent stable cash flow. that is how we approach things. i will say overall with the opening of the broadly syndicated loan markets, the amount of liquidity poured into that market, you're certainly

seeing opportunities for refinancing or fixes in the liquid loan market. that is put a fair amount of pressure on spreads and ultimately leverage in that market. we have chosen generally not to play in that world. we are staying focused on our core middle-market, companies down the fairway, staying away from the more pressure points in the market. i was a the liquid market, we see more now today. sonali: the first part of the year brought so much exuberance in debt markets. do you think it has brought on too much exuberance given your staying away from some of it? >> i would say certainly in the large liquid markets, you've seen spreads come in 100, 150 basis points. you have seen leverage move up have a turn, three quarters of return. refinancing has dominated that market. new deal m&a activity remains quite low. in our case, we generally have chosen not to play in the world so we are in the core middle-market.

larger companies but not so large as to have graduated in that world. what we like our -- we know the company, we know the borrower, they're doing strategic acquisitions were adding on to their assets. we like new deals in certain industries with high quality industries that we generally have stayed away from the kind of rescue, refinancing we see now going on in the larger market. sonali: thank you so much for joining us, churchill president and ceo ken kencl. coming up, gamestop holding its annual shareholder meeting. biden this is "bloomberg." ♪ okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet,

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sonali: this is "bloomberg markets" gamestop, the annual shareholders meeting is underway amid drastic fluctuations in the shares, lower down on the day roughly 5%. trading influencer keith gill posted images of a massive steak in the company earlier this month. bloomberg reporting gill has unwound that position of 120,000 call options and at a more gamestop, upping his portfolio to about 9 million shares. amid this frenzy, gamestop announced plans to sell more than $2 billion worth of stock and we have ryan cohen, the ceo gamestop, speaking to investors at that meeting saying he is focusing on profitability and avoiding all the hype. anymore headlines as they compost up coming up, we will talk with sarah samuels about what is the

hottest story right now on wall street. stick with us. this is "bloomberg." ♪

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sonali: this is "bloomberg markets" it is time for the wall street beat. joining us now is sarah samuels, head of investment manager research at the nepc and a partner there. the firm is an investment of eyes re-firm with 1.7 trillion dollars in assets under

management. sarah, you're part of the story where we talked a lot about that crunch on the private equity industry, that pressure to get money back to investors. what does that crunch be like under the surface to pension fund endowments? >> is great to see you again. thank you for having me. there are three things happening today. the first is the big money, so endowments, pension funds, sovereign wealth funds, are not getting the capital back in the private investments they have made that they have expected that they modeled out in their commitment pacing plans. the second is we need to see evaluation reset in order for more deal activity and exits to transpire. the third is this can be a great time to put capital, new capital to work in private markets. sonali: fascinating. if investors are demanding money back, a lot of people say, this is to recycle. put that into new private equity funds. why would you put it into new private equity funds if you're not getting the money back in

the first place? >> if we zoom out a little and think about how did we get here, investors 15 years ago or so was zero interest rate environment were really ramping of exposure to private markets. which is what the fed intended, to incentivize risk-taking. lots of money went into private markets and it worked and distributions worked. with higher rates, we are seeing there are not those realizations happening. there aren't the distributions modeled out by these lps and at the same time gps are continuing to call capital, which is putting the crunch on the quiddity. we just on article last week about large pension funds who are struggling with figuring out how to source their liquidity. with think about what is this matter? why do lps need liquidity? it is about important missions they are serving in our communities and the ecosystem. sonali: is there some sort of liquidity crunch just given how much private markets have become part of the portfolio? >> yes.

so many of our clients are doing ok. the reason for that is the public markets have really masked any potential issues. should we see a meaningful downturn in public markets like we did let's say, to quiddity -- liquidity will be harder to come by. sonali: when you said there needs to be evaluation reset, it is also the since returns might be lower, isn't it. >> we think about what the cost of debt is today, let's take a buyout strategy for an example. historically of the last 15 years, the cost of debt was somewhere between 4% and 5% come today is 9%. any of those loans are floating rates and that will eat into the profitability of the underlying portfolio companies and their ability to generate earnings. when it comes time to sell, if those private equity sponsors want to sell, there is a valuation drop and buyers and sellers are not yet able to be on price. sonali: if you say people are taking that fun, those funds that are returned to them and recycling them into other private markets, do they recycle

it into new private equity funds or take it and go into other hot areas of private markets like real? estate or private credit? >> that is where the cio's job gets interesting come deciding where those opportunities to put new capital to work. we got clients not to try to skip vintage years and continue to commit to your highest quality gps because if you lose access and you skip a year, then you're out for good. when we think about other areas where we see really great opportunities and maybe some great cios do, too, early-stage venture where valuations are lower and lots of upside. we don't to see buyouts generated value only through add-ons and high use of leverage. we what earnings growth in multiple expansion. sonali: when you see private equity firms turning to that markets, net asset value loans to leverage finance dividend recaps, do you accept that as a form of payment? do you say that is ok? >> this is very present.

it is more hyped up in the media that is happening so we did a survey and found only about 10% of the proceeds that were coming from those loans were disturbed to back to lps. in general, that is really not a strategy we can get behind. sonali: we thank you for keeping these markets. look forward to talking to you again soon. nepc partner sarah samuels. gamestop shares before we get going, it has hit a wall. beloved stock have not seen a decline of the day from around 10%. this is as ryan cohen has been speaking at the annual shareholder meeting. you are seeing those shares decline since he began speaking. that does it for "bloomberg markets" broadly, and up arrow market on the day post of interesting bond market ahead with a ton of fed speak this week. stick with us through the close and true balance of power.

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announcer: from the world of politics, to the world of business, this is "balance of power." ♪

live from washington, d.c. ♪ joe: israel announces a daily pause in fighting to allow more aid into gaza. welcome to the seth: are in politics with an important development in lieu of a cease-fire. i am john mackey alongside kailey leinz in washington. this news arrives as benjamin netanyahu dissolves his war cabinet. kailey: which perhaps is more a symbolic move that anything else because you had two members leaving to war cabinet in recent weeks, including benny gantz who left the government over disagreements over the conduct of the war. so now you no longer have a war cabinet, you also do not still, have an agreement on the temporary cease-fire deal, which is what makes these 11-our technical pauses israel has decided to pursue, all the more important.