scarlet: welcome to "bloomberg markets." i am scarlet fu. we are moderating --monitoring emmanuel macron's visit to the white house. in the meantime, let's show you equity markets and other asset classes. the s&p 500 opening higher and managing to recoup earlier losses so it looks like we are

gaining for the first time in three days. mag seven still under pressure including microsoft after an analyst said the company canceled leases for data center capacity. nvidia reports wednesday. treasury serving as a safe haven. prices up, yields down. gold making an intraday high of 29.56 per ounce. we have surpassed that. 29.58 per ounce. the word on the street the past few years is there has been a huge wave of opportunity building up in credit markets. chris sheldon this month's wrote while credit markets have been evolving decades, we see 2025 as a pivotal moment, much like how the iphone streamlined technology, investment solutions are transforming how businesses access and optimize capital. this is our iphone moment.

we are joined by chris sheldon of kkr. we also want to welcome sonali basak. explain what you mean by iphone moment. >> thanks for having me. credit markets have evolved over the past five years. right now, we are at a situation where as an institutional investor, you can get diversified income across all parts of credit and you can do that at scale and with ease. that was not on offer five years ago. you can get exposure to investment-grade, high-yield, private, public, and it is no longer the market we grew up in. the asset-based finance market is larger than the direct fund and others altogether. this big evolution where you can get diversified income, build multi asset class private credit, and credit pulls together.

we are in this iphone moment which is exciting. sonali: is interesting for companies trying to withstand credit markets at a time like today. we have seen leverage finance deals be pulled from the market. can you explain what is going on under the surface and why investors are not able to meet the flow when spreads are still tight, complacency is kind of the name of the game. frankly, we have seen deals finally come back after a glut for so long. chris: deals are coming back which is great. we need more m&a to fuel the demand. we are in a broader consensus defaults are not going to spike. that is a great place to be credit. rates will be higher for longer. compounding interest is super attractive. you have seen a lot of accretion in you're seeing the liabilities tighten.

you are seeing the asset side trying to reprice tighter and take advantage of the strong supply and demand imbalance. sonali: is the market demanding better quality? chris: it is a little of people testing the market to see how tight they can go in terms of repricing deals. we have seen an increase in defaults modestly, increase of downgrades. if you are managing a clo, it is a rule-based construct. weighted average price, diversity score. if you push a riskier deal, the incentives to take risks are not necessarily there in the syndicated loan market which is why it is pushing product to other markets. those public-private markets will coexist together which is a big reason why you can build now a diversified portfolio across public, private, corporate asset bases. scarlet: how do they evaluate

returns? there is no benchmark to judge against. chris: it goes back to what fixed income was years ago. it is about getting the coupon, compounding the interest rate. it is much more attractive compounding at double-digit returns. if you are earning 9%, you are doubling your money in eight years. that is attractive. now that a lot of public pension plans and funds are overfunded, why reach for the incremental yield when you can compound the interest? sonali: are you talking the private markets in particular? chris: private or public. the last two years, the public markets have outperformed the direct lending market. i think they need to coexist and will coexist together. that is a lot different from the rhetoric a couple of years ago where it was, is private credit eating public markets or will

public markets take share from the private markets? it is now pretty balanced. sonali: we recently reported on a carwash company that went bankrupt. the marks on the company before the bankruptcy were high. there were disparities between how different funds marked the assets and a delay between when investors got the information and when the company went bankrupt. what issues are you seeing in the private markets with the information delay and discrepancy between where funds are marking? chris: abigail: from my perspective, the discrepancy is minor. everyone hires, most reputable firms hire third parties to come up with a valuation. there are a lot of different methods. i am not worried private assets are mismarked. your question about the speed at which things get out to the

market and communicated, the speed at which marks move, a lot of these restructurings happen quickly, particularly in a market like today where it is strong. usually it is a liquidity event and that happens very quickly. the lender may not know until a week later that we need to put new money in, now we need to adjust the mark. a lot of times, you are just restructuring your credit instrument into an equity instrument to recover at or above par. scarlet: without regulators overseeing private assets, should private credit be more transparent, more public in terms of disclosure? that is something that gives retail investors pause. chris: we are disclosing our assets, our prices. i am a registered investment advisor.

there is a lot of transparency we are providing. we are providing all institutional clients updates on a watchlist, our individual names doing well, not doing well. i think if you think about it, if you are investing in private credit or private equity or asset marked on a monthly or quarterly basis, as long as it is diversified particularly in credit where you are earning 10% cash on cash on a diversified basis where sometimes you have positions less than 1%, it is hard to lose money when you are earning that much from a cash account. sonali: where can investors be losing money? i am also looking at the 10-year at 4.4% because people are worried. if people are concerned about growth moving forward, you are starting to see some bankruptcies. i totally hear you on defaults not being very high. forever 21, hooters.

what is investors missing when it comes to the riskier parts of the debt market where spreads are still tight? chris: i think the biggest mistake you can make as a credit investor, you need to be right 99% of the time on a loss adjusted basis. the biggest mistake people make is reaching for the incremental yield. things that seem cheap. in an environment like today where the economy is slowing, rates have been high for a while, keep it simple. keep it diversified. i think the dispersion of returns from private equity to cash bonds in the last five years to the next five years is going to be a lot more dispersed. as a result, you should diversify a lot. that is a great way of building what the asset portfolios, whether it be asset-based finance which is less correlated to what you are seeing in the

corporate market. regions like asia are seeing massive tailwinds with gdp growth. diversify your portfolio and not get concentrated in things that seem cheap. sonali: where are you seeing the most stress? downgrades, where are you seeing the biggest wave of downward moves? chris: it is mostly sectors feeling inflationary pressures they cannot pass to the underlying customers. think consumer facing health care. you are capped at what you can pass on to the consumer. plus you are seeing costs go up. a lot of the secular decline in businesses whether traditional brick-and-mortar retail, cable, or some of those businesses of traditional media which is evolving and changing. a big part of what we are trying to do is invest in really good businesses that have tailwinds and not be too cute around do i

need to get paid next to 25 or 50 bits. scarlet: thank you for joining us. you can catch more high-profile interviews like these at bloomberg invest h-mart 4-5. you will get a front row conversation with industry leaders. register at bloomberglive.inv est. president macron at the white house meeting with president trump. that is just the start of a long day for him. we will bring you the latest, next. this is bloomberg. ♪

scarlet: this is "bloomberg

markets." i am scarlet fu. we want to focus on europe because germany held national elections and the conservative party is poised to become the next chancellor. in his remarks, he said he remains hopeful but did express a degree of uncertainty about the future of relations with the u.s. >> i still am hopeful we can convince the americans of the fact it is in both sides 'interest to have good transatlantic relations. as is always the case, you have to prepare for the worst-case scenario. if america does not just want america first but something more along the lines of america alone, it will be more difficult. scarlet: meanwhile, french president macron is at the white house speaking with president trump. it is the third anniversary of the start of the war in ukraine. president trump saying he has been in serious discussions with vladimir putin on ukraine. trump and macron will be holding

a press conference just over an hour from now. for more on their discussions, i want to bring in catherine clevenger, associate professor at georgetown university. as we see the headlines from comments trump made before their meeting began, he says, macron says he wants guarantees of solid piece in ukraine and europe is willing to be a stronger partner on defense and willing to step up. what do you think is the number one concession president trump once france to make and what is the number one concession macron is willing to give to the u.s.? >> such a good question. i think one of president macron's major bargaining chips he is trying to promote is the idea europe can spend more on its own security pretty have been floating the idea france needs to contribute more to the defense funds in nato and for

ukraine. i think that is what he is trying to emphasize in his visit today, that president trump can see france and europe as a solid financial partner in this. i am not convinced that is enough, to your point about what president trump is looking for. it does not necessarily seem that is going to be enough for him to decide it is time to continue his war efforts. he seems more ready to move towards a conclusion on any grounds. it seems like president macron is trying to keep france at the table and keep europe in the discussion as this moves forward. scarlet: to what extent does macron represent the e.u.'s interests? will other european leaders need to go to washington and make their own deal and give their own personal assurances? >> i think the answer depends on

who you ask. if you ask president macron, i think he will try to say he is speaking in the name of the unified european collective. the reality is president macron was meeting with a much smaller group last week. monday, he invited france, italy, germany, denmark, poland, and the united kingdom to meet with him about this. notably absent was hungary and slovakia. it depends on who you ask. president macron is trying to set himself up as the primary voice on european cooperation and partnership. scarlet: does france have leverage they can use? it feels like they are very much in reaction to whatever moves donald trump makes when it comes to unilateral discussions with russia to end the war in ukraine. does france or any european country have anything they can

use to shape the outcome? >> i am not sure they truly do. i think they are trying to use the promise of greater financial contributions as their leverage. i have read when prime minister starmer comes at the end of this week, he is supposedly going to announce a deadline by the time he will contribute more so i think they are trying to bring this up as their leverage. if this does not work, i think president macron is still trying to emphasize the human touch. he is very bold on his diplomatic gestures trying to befriend president trump. i think in the absence of concrete financial or military leverage, he is working more the human angle. scarlet: he is leveraging his personal charm. one thing i have notice is world leaders using

china as a common target. claudia sheinbaum said north america could team up against china. you said macron will bring up china but in a different way? >> he said he would. president macron held a livestream q&a session with french citizens thursday night and china with front and center. he specifically said he was going to frame this as a matter of both force and precedent, saying you cannot let putin have everything and maintain your position of strength with china and taiwan. he did very much saying he is trying this sort of logical precedent tactic to argue that if you go through with what you say you are going to go through, it will be from a position of weakness and that is not who you are. scarlet: we know macron has gone to washington along with keir starmer.

france and the u.k. are permanent members of the security council. is there any role for the u.n. to player am i being optimistic? >> just breaking news as i was waiting to come on, i see the security council resolution that came up about blaming russia for the aggression, that the u.s. joined russia in vetoing it. and the united states has its own bill they are bringing forward as well, the resolution. france has tried to include some amendments on respecting europe's territorial integrity in the u.s. has said we are going to vote against amendments on our own resolution. i hope the united nations can continue to play a role here. i am not seeing exactly how that will come to be with these various nations having veto power. scarlet: it seems they are very

much a bystander as a result. thank you for joining us from george washington university. stay tuned to bloomberg television as we will bring you that news conference with president donald trump and emmanuel macron 2:00 washington time. coming up, we are going to stay with politics because apple says it will hire 20,000 new workers. this is bloomberg. ♪ i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one.

scarlet: this is "bloomberg markets." i am scarlet fu. let's get to individual equity movers. talent here extending their decline after pete hegseth -- palantir extending their decline after pete hegseth pre-checks military spending.

this is a stock that has done incredibly well over time. let's look how much it rose in 2024. astronomical 340% gain for the year. before that, 167% jump in 2023. alibaba declining after president trump's latest executive order stirred concerns about deepening trade tensions. trump directed the committee to limit chinese bending on technology and other strategic u.s. sectors. alibaba announced a plan to -- i just lost that information. let's get back to that. apple shares up after the company announced plans to spend 500 billion dollars domestically over the next four years. apple also plans to hire 20,000 new workers and produce ai servers in the u.s. after president trump's tariffs on goods imported from china came

through or has been announced. apple seeking to find relief from it, as it has in the past during the first trump administration. we should note president trump thanked tim cook in a post on his truth social network. let's turn to broader markets and look at where the s&p 500 is because it did open higher and quickly lost ground. there are a lot of questions about whether the buy the dip guys would come back and. it looks like they have with the index up .2%. we will see if we can hold onto the advanced. if so, this would mark the first gain in three days. mag seven names under pressure as a group. nvidia reporting earnings on wednesday. expectations are very high. it will produce large growth rates when it comes to revenue. the expectations are high. the development of the deepseek model has raised questions about spending committed by hyper scalars. the 10-year yield moving down

three points. prices higher, lower yields. gold making an intraday high. that does it for "bloomberg markets." this is bloomberg. ♪ the way i approach work post fatherhood, has really trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

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

live from washington d.c. ♪ joe: the president has one big beautiful deal. can it pass? welcome to the fastest show in politics. as has monica's return to d.c. today with a bill that would bring significant cuts to federal spending. i am joe mattarella that can washington. thanks for being with us on the monday edition of "balance of power." doesn't seem like all republicans are board, at least not yet. kailey: some have concerns and medicaid cuts. at his just not interested in voting for a debt ceiling increase at least historically in the house republican conference, so as always, it becomes a question of the math -- with the very tight majority of the house, do they have the votes? joe: