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Speaker 1: Let's get to our guest. Julie Beale is with us.

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Speaker 1: She's portfolio manager also senior research analyst at Kane Anderson Rudnick.

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Speaker 1: On the line from l A, Julie, this market move

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Speaker 1: in equities today seems tied to this hope of a

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Speaker 1: shift in a less aggressive FED. Do you buy into this?

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Speaker 1: I don't. I mean, I think at the end of

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Speaker 1: the day, the feed is looking at two categories that

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Speaker 1: have been persistently sticky. The first is housing, and it's

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Speaker 1: probably the most important rentals, but also just the cost

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Speaker 1: to own a home have gone up and I don't

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Speaker 1: see that really retreating anytime soon. And then it's also

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Speaker 1: been very persistent our food and energy. Food and energy prices.

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Speaker 1: Food prices in particular have really taken a sizeable chunk

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Speaker 1: out of the average consumer's pocket. And I think the

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Speaker 1: set has really been caught a little bit um sleeping

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Speaker 1: at the wheel when it came to transitory inflation last year,

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Speaker 1: and so I now think that they're trying to make

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Speaker 1: up for lost time. And if they're going to air

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Speaker 1: on any side, it's gonna be on being more hawkish,

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Speaker 1: not less I would things. So do you obviously don't

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Speaker 1: think the markets of correctly priced in future fit moves

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Speaker 1: where two from head you see a significant leak down,

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Speaker 1: I think I think it kind of depends one is

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Speaker 1: understanding the health of the US consumer. So much hinges

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Speaker 1: on the US consumers ability to kind of continue to

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Speaker 1: shoulder shocks to the system. It's been remarkably resilient through

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Speaker 1: the pandemic and post pandemic. What I'm curious to see

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Speaker 1: is when everyone comes back from their holiday vacations, how

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Speaker 1: open are they to continuing to spend on new projects

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Speaker 1: within their own homes back to school holiday. To me,

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Speaker 1: that is going to be the best indication of the

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Speaker 1: health and vibrancy of the economy, and I think the

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Speaker 1: FED will be paying attention to that as well. One

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Speaker 1: of the things that's going to cushion I think the

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Speaker 1: response on the part of what consumers have had to

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Speaker 1: deal with lower oil prices, and this is not a

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Speaker 1: demand destruction story. When you're talking about the possibility of

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Speaker 1: Irani and crude coming back to market, I mean, we're

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Speaker 1: trading eighty eight dollars a barrel right now. Yeah, I

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Speaker 1: think that's absolutely and I think it's something that's been

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Speaker 1: maybe a little bit under reported. Um, you know, I've

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Speaker 1: seen many reports to say, if this deal goes through,

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Speaker 1: oil goes to eighty, and that's great, that's certainly an

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Speaker 1: improvement for where we have been. But it's still quite high,

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Speaker 1: right relative to where we were in the last three

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Speaker 1: or four or five years. And so I think on

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Speaker 1: an absolute basis, we have to keep in mind that

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Speaker 1: consumers are not aware of oil prices declining. They're aware

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Speaker 1: of I'm paying five dollars, four dollars, etcetera. So any

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Speaker 1: relief is good, but on a relative basis, it's still

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Speaker 1: quite high. And Julie, later on this week tomorrow, in fact,

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Speaker 1: we're going to be getting retail sales numbers out of

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Speaker 1: the US for the month of July. This is of

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Speaker 1: course backward looking read but still our important. Is this

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Speaker 1: going to be as a barometer of consumer demand? Yeah,

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Speaker 1: I think it's going to be actually pretty critical understanding

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Speaker 1: where consumers are and their appetite to be out there spending,

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Speaker 1: particularly when we know that a lot of consumer access

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Speaker 1: consumer discretionary cash has gone towards travel and leisure. Anyone

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Speaker 1: who's been in an airport knows it's absolute chaos. Um,

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Speaker 1: But I'm really curious to see what consumers are spending

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Speaker 1: on because I think that gives us an indication for

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Speaker 1: their future optimism. So I think particularly understanding durable goods

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Speaker 1: versus the amount of discretionary income going towards essentials is

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Speaker 1: going to give us some indication of where consumer confidence

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Speaker 1: really is. So I we were talking earlier in the

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Speaker 1: program about this disappointing data that we had for China.

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Speaker 1: Yesterday retail sales industrial profit all down, and today an

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Speaker 1: editorial in the PBOC back newspaper Financial News saying that

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Speaker 1: China needs to do more to essentially adopt more policy

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Speaker 1: tools to boost growth. The c s I three right

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Speaker 1: now is trading less than sixteen times earnings versus a

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Speaker 1: multiple on the SMP roughly twenty one time z earnings.

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Speaker 1: Are you tempted to put money to work in China

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Speaker 1: just on the basis of not only valuation but the

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Speaker 1: commitment to do more to boost growth, Well, you know,

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Speaker 1: I think it's it's pretty compelling when you think of

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Speaker 1: the size of the opportunity in China. But what always

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Speaker 1: kind of keeps us on the sidelines is the volatility

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Speaker 1: around the regulatory frameworks. And you know, for us as

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Speaker 1: as long term investors. You know, we're not in and

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Speaker 1: out of things very quickly. We tend to kind of

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Speaker 1: marry the companies that we invest in. It's hard to

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Speaker 1: really get enthusiastic when you just have so much uncertainty

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Speaker 1: of what the underlying economics, what are tolerable underlying economics

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Speaker 1: for the Chinese government, So for us that we see

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Speaker 1: individual opportunities. There are certain businesses that just have such

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Speaker 1: an impressive business model that they're compelling, but rit large,

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Speaker 1: it's something that we're careful and cautious on. You mentioned volatility.

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Speaker 1: I mean it's not just limited to the Chinese regulatory framework.

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Speaker 1: Was seeing volatility and markets everywhere at the moment. How

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Speaker 1: are you trading around that? So you know, typically we don't.

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Speaker 1: We don't trade very much. I'll tell you as a

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Speaker 1: portfolio manager, I didn't trade a single stock in the

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Speaker 1: first quarter. But what we try to do is look

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Speaker 1: at the underlying drivers of our businesses and see if

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Speaker 1: they are, you know, able to withstand any kind of

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Speaker 1: market shocks that are coming towards us. So obviously inflation

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Speaker 1: is an important one. I think with a weakening US consumer,

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Speaker 1: we're trying to focus more on businesses that serve other

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Speaker 1: businesses rather than businesses that are directly going after a

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Speaker 1: consumer discretionary dollar, and I think that gives you some

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Speaker 1: more earning stability and durability, which is right now, something

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Speaker 1: we're willing to pay for it. Okay, so you may

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Speaker 1: not be trading this market, but I'm wondering whether or

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Speaker 1: not you're a little reticent to putting new capital to

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Speaker 1: work in the environment. If you imagine a world where

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Speaker 1: there's another leg down for the equity market. I'm curious

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Speaker 1: about how much dry powder you have right now? Are

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Speaker 1: you holding a substantial amount of cash? Well, you know,

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Speaker 1: we our mandate is to be fully invested at all

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Speaker 1: times to the most cash will have is about ten percent.

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Speaker 1: But I'm, you know, pretty close to that amount now

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Speaker 1: because I think there are better values out there. If

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Speaker 1: you look at quality businesses, they haven't recovered to the

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Speaker 1: same levels that more cyclical, volatile companies have in the

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Speaker 1: last couple of months. So I actually think there are

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Speaker 1: some I wouldn't call them bargains because quality businesses are

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Speaker 1: never cheap, but they're cheaper and for us, that can

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Speaker 1: be pretty compelling opportunity to either have an entry point

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Speaker 1: or to add the positions we already have you mentioned

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Speaker 1: a minute ago. You haven't really done any trading in

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Speaker 1: the past quarters. So if you if you're looking to

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Speaker 1: get along on something, where do you go? Some of

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Speaker 1: those big tech names have sold down a bit just quickly. Yeah.

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Speaker 1: I think we like the software names, but kind of

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Speaker 1: on a small and MidCat size, they're a little bit

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Speaker 1: more niche and vertical focus of something like a Bentley Systems,

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Speaker 1: which does infrastructure software, I think it's going to be

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Speaker 1: less cyclical and have better results over the long term.

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Speaker 1: All right, Julie Beale, thanks so much for joining us

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Speaker 1: today on Bloomberg Daybreak. Asian with your analysis. Julie Bieliz,

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Speaker 1: port folio manager and senior research Analystic Kane Anderson Rudnick