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Speaker 1: Let's get to our guest. Mona Mahajan is with us.

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Speaker 1: Mona is senior investment strategist at Edward Jones, joining from

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Speaker 1: just across the Hudson River from here in New York City. Mona,

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Speaker 1: thanks for being with us. Kind of an interesting day

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Speaker 1: in markets. I think the invidious story did cast a

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Speaker 1: pall over a lot of the price section. Nonetheless, I

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Speaker 1: mean we started the day with a pretty decent rally.

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Speaker 1: It proved not to be durable. Is this just anxiety

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Speaker 1: ahead of the CPI data on Wednesday? Yeah, you think.

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Speaker 1: I think generally, um, the CPI data will be the

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Speaker 1: big market mover this week. We're seeing pretty quiet volumes,

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Speaker 1: pretty quiet markets leading up to that. Now, keep in

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Speaker 1: mind we've had a pretty nice bounce off those loads

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Speaker 1: in mid June as well. You know, this quarter alone,

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Speaker 1: the SMP is up about nine and a half percent,

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Speaker 1: NAZDAK up nearly. I think the next big move will

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Speaker 1: be determined by what happens on Wednesday. Well, absolutely, And

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Speaker 1: you know the thing is, could you see a surprise

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Speaker 1: with the inflation to the downside and what would that

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Speaker 1: do because that would perhaps bring out the bulls. Yeah,

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Speaker 1: you know, generally, UM, I think we're all watching the

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Speaker 1: headline data pretty carefully. We're seeing what's happening with whale markets,

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Speaker 1: but really, even beyond oil, broader commodity markets, grain, food,

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Speaker 1: UH industrial metals all down nicely since the June data

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Speaker 1: came out last month. Now, for the month of July,

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Speaker 1: w T t I oil for example is about down

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Speaker 1: about twelve per cent on average in July versus June,

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Speaker 1: similarly with the broader SMP Commodity index down about so

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Speaker 1: some of this will certainly be reflected in the headline

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Speaker 1: data that's starting to get priced. Perhaps UM, some of

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Speaker 1: the enthusiasm and markets reflected that where the questions will

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Speaker 1: really be will still be around core inflation. Now, keep

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Speaker 1: in mind core inflation, the stickier parts of it, like

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Speaker 1: a shelter and rent, which is about a third of

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Speaker 1: inflation broadly, UH, services inflation all tend to be stickier

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Speaker 1: than most would like. UM. But in the next six

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Speaker 1: or twelve months, and given what's happening with software housing

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Speaker 1: with softer consumer demand, we should start to see that

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Speaker 1: moderate as well. So the story on inflation hopefully is

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Speaker 1: now moving in the right direction. UM. The question is,

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Speaker 1: you know, will the FED rely on one data point,

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Speaker 1: probably not. They'll want to see two, three, maybe even

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Speaker 1: four moves in the right direction before they can really

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Speaker 1: kind of take their foot off the break a little.

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Speaker 1: So pretty quickly here, I'll give you about forty seconds

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Speaker 1: to unpack the employment story as it relates to the

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Speaker 1: case from more Fed tightening. Do you think another seventy

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Speaker 1: five basis points is a slam dunk here in September? Yeah,

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Speaker 1: you know, I think that the Fed is set up

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Speaker 1: nicely for seventy point in in September. Now we will

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Speaker 1: have two more zpi prints ahead of that. So if

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Speaker 1: they're both moving very sharply lower, maybe they do fifty.

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Speaker 1: But the bottom line is the direction of travel for

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Speaker 1: Fed funds rate, it's higher. Will probably a fifty or

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Speaker 1: seventy five and September followed by two more um in

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Speaker 1: November and December as well, And so we're getting increase

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Speaker 1: seemingly tighter on the Fed funds rate, and that may

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Speaker 1: create a little bit more volatility for markets than what

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Speaker 1: we've seen, but hopefully set us up well heading into

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Speaker 1: I mean, with all what's going on, the volatility, the

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Speaker 1: two ing and frowing, is there something that you have

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Speaker 1: absolute conviction in looking ahead. Yeah, you know, generally, what

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Speaker 1: we'd say is that this rebound we've seen a belos

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Speaker 1: in mid June, we don't think that will continue in

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Speaker 1: a straight line upwards through your end. So what we'd

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Speaker 1: say is the conviction is probably around we will probably

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Speaker 1: get another bout of volatility. And keep in mind September

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Speaker 1: and October are historically volatile periods, but also a time

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Speaker 1: when the Fed will be continuing to raise rates. Quantitative

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Speaker 1: tightening will begin more in earnest um, some of that reopening,

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Speaker 1: travel demand may start to slow, and then of course,

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Speaker 1: you know, as the Fed raises rates, you could see

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Speaker 1: you'll start to move higher, which kind of could disrupt

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Speaker 1: the market rebound as well. So you know, what we'd say,

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Speaker 1: broadly though, even if we start to see a little

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Speaker 1: softening in the economy or earnings projection, and we wouldn't

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Speaker 1: expect yet another twenty type of draw down in equities.

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Speaker 1: So you know, given we don't see yet the scope

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Speaker 1: for any deep or prolonged recession, the good news for

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Speaker 1: investors is the big move down in markets may have

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Speaker 1: already occurred in the first half, so um, we would

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Speaker 1: probably not see a sustained rebound or rally until you know,

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Speaker 1: as we noted earlier, inflation starts moving lower in earnest um.

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Speaker 1: This could start to coincide with the post midterm election

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Speaker 1: period here in the US, which generally tends to be

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Speaker 1: favorable for equities, but we would use any upcoming market

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Speaker 1: volatility to start reviewing your portfolio, also adding, you know,

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Speaker 1: risk interesting opportunities, quality investments at better prices according to

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Speaker 1: your long term plans, both in defensive parts of the market,

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Speaker 1: but then gradually layering in those growth and heck names

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Speaker 1: once again, especially as economic growth slows down the year.

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Speaker 1: I'm sorry to interrupt their moment. Are you seeing opportunities

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Speaker 1: outside the US right now offshore that you think are

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Speaker 1: particularly attractive, you know, interestingly? Valuations of course once again

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Speaker 1: start to look interesting in Europe and even parts of

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Speaker 1: Asian e M. But for now, what we'd say is um,

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Speaker 1: the US is still the most resilient player in the block. Um,

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Speaker 1: given we are the country economy generally is less dependent

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Speaker 1: on oil and energy from the Russia Ukraine area also

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Speaker 1: less dependent on China as a trading partner broadly, so

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Speaker 1: we would say we would still need to see UM

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Speaker 1: the resilience of the economy's play out, and for now

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Speaker 1: for the next probably two to four quarters, um U

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Speaker 1: s economy started from a position of strength, and that

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Speaker 1: will probably play out in markets as well. So probably

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Speaker 1: more US domestically oriented for now, but really the opportunities

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Speaker 1: we're seeing probably start to look more attractive in the

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Speaker 1: e M region if we start to get a global

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Speaker 1: rebound UM in in the next year or so. I

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Speaker 1: just want to get to the M life pulse question

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Speaker 1: that we have a moment, and that is is the

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Speaker 1: sixty faulty portfolio dead um? We think absolutely not. In fact,

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Speaker 1: while bonds had a very tough first half of the year,

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Speaker 1: historically when they are down to that extent, the next

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Speaker 1: twelve months tends to be pretty positive. In fact, on

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Speaker 1: average a return of twelve percent across the bond market.

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Speaker 1: And in fact, what we're seeing now is bonds are

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Speaker 1: offering better income opportunities and they really have over the

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Speaker 1: last twelve months plus, but also could start really acting

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Speaker 1: as a diversification tool in your portfolio that you need

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Speaker 1: UM keep in mind during economic downturns or even slow downs,

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Speaker 1: UM that flight to safety does come to play and

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Speaker 1: bonds do tend to outperform during those periods, and so

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Speaker 1: you're getting both the income benefits the diversification benefit. Now

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Speaker 1: sixty forty is the broad generalization may be different for

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Speaker 1: for different investors seventy thirty eight twenty even depending on

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Speaker 1: where you are and what your goals are, but generally

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Speaker 1: having some bond um exposure at this point, actually, uh

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Speaker 1: could be a very interesting income and investment opportunity. Mona

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Speaker 1: very quickly fifteen seconds you mentioned the off term elections

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Speaker 1: in the fall market moving event or not. You know

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Speaker 1: her markets love gridlock in fact, and what it's looking

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Speaker 1: like in the polling is that we could get gridlock,

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Speaker 1: and so I think it could be actually not a

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Speaker 1: bad opportunity for markets. Historically, the six months after midterm

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Speaker 1: elections has been positive regardless of which party is in

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Speaker 1: power after midterm elections, and so we're hopeful that that

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Speaker 1: does mark perhaps a bit of an inflection point, but

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Speaker 1: certainly for for areas like healthcare for example, even technology.

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Speaker 1: Thank you Hodgen, I seen investment strategies that Edward Jones

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Speaker 1: and her take on the markets. This has been the