WEBVTT - The Fed, Markets, ETFs, and ESG (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg markets podcast. I'm Paul Sweeney. Alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller, every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOS, market pros and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg markets podcast 0:00:15.600 --> 0:00:18.439 on Apple podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.800 at Bloomberg Dot com slash podcast. Let's give it Jennifer 0:00:22.880 --> 0:00:26.640 Lee here, senior economist and managing director at BMO capital markets. Jennifer, 0:00:26.640 --> 0:00:30.440 thanks so much for joining us here. Lots of data 0:00:30.520 --> 0:00:34.080 crossing the Bloomberg Erman over the last week. Uh. Federal, 0:00:34.360 --> 0:00:37.360 you know, central banks around the world, seemingly in a 0:00:37.400 --> 0:00:42.239 concerted effort to tame global inflation, and led by the 0:00:42.240 --> 0:00:45.240 Federal Reserve yesterday, of course. What did you take away 0:00:45.280 --> 0:00:49.839 from Fed Chairman J PAL so? Good Morning. Um, you 0:00:49.880 --> 0:00:52.560 know what he uh, the sentify basis points. Obviously, was 0:00:52.640 --> 0:00:56.040 widely expected from most. I didn't take his comments as 0:00:57.000 --> 0:01:00.000 being too much focish than he has been already, if any. 0:01:00.040 --> 0:01:02.800 Think I think he made it even more clear. Um, 0:01:03.280 --> 0:01:04.840 I don't think he wanted to be there to be 0:01:04.880 --> 0:01:07.840 any ambiguity and, you know, to say that there's gonna 0:01:07.880 --> 0:01:10.800 be pain felt. You know, we're not there yet. Uh. 0:01:10.880 --> 0:01:13.479 He even just Um didn't he? He didn't even struck 0:01:13.480 --> 0:01:15.680 off the possibility of a recession, which was quite interesting 0:01:15.720 --> 0:01:18.039 as well. But you know, if there is any question, 0:01:18.080 --> 0:01:20.200 and he dealt about the resolves of getting inflation back 0:01:20.200 --> 0:01:22.480 down to two percent, everyone, anyone who has had any 0:01:22.480 --> 0:01:25.120 doubt so obviously put that aside because he made it 0:01:25.160 --> 0:01:27.679 pretty crystal clear that they are continuing to raise rates 0:01:27.880 --> 0:01:32.960 and probably into so talk to us about I guess 0:01:32.959 --> 0:01:36.400 the next thing on you know, investors minds is, all right, 0:01:36.440 --> 0:01:38.640 how bad is this gonna get? I mean we're, I guess, 0:01:38.680 --> 0:01:42.480 recessions now penciled into pretty much everybody's models. I would say, 0:01:42.480 --> 0:01:44.560 what if they go too far, except for it seemed 0:01:44.560 --> 0:01:48.120 pretty clear yesterday that they intend to go intend to 0:01:48.160 --> 0:01:51.360 go too far. So that brings up the recession scenario. 0:01:51.840 --> 0:01:55.800 So what do you, the good folks there, think about 0:01:55.840 --> 0:02:00.960 how deep it might be? Yeah, I think. I mean 0:02:01.000 --> 0:02:03.040 we've got out, we've we've actually been lowering our growth 0:02:03.040 --> 0:02:06.279 forecasts steadily like everyone else, and we've actually got zero 0:02:06.320 --> 0:02:11.120 growth now for three Um we still have only one 0:02:11.440 --> 0:02:14.600 quarter of negative growth. I guess the big difference here, 0:02:14.720 --> 0:02:16.440 you know, in terms of recession, is, you know, the 0:02:16.680 --> 0:02:20.280 labor market, and that's the situation. Yeah, so unique. I 0:02:20.280 --> 0:02:23.160 mean if if everyone was cutting jobs right now, you know, 0:02:23.240 --> 0:02:25.359 if we were seeing negative signs in front of pay rolls, 0:02:25.400 --> 0:02:27.280 and that would be a whole different story. But the 0:02:27.320 --> 0:02:29.880 fact that there is still strong demand out there, I 0:02:29.880 --> 0:02:32.239 mean it's it's it's still it's starting to disappear a 0:02:32.240 --> 0:02:34.799 little bit, but it's still people are still looking for work. 0:02:34.840 --> 0:02:37.560 You know, it's still hard to find truck drivers, for example, Um, 0:02:37.760 --> 0:02:40.720 and it's that's the big story. And and wage and 0:02:40.800 --> 0:02:44.040 wage pressures are still high because of that. Um. I mean, 0:02:44.040 --> 0:02:46.200 he also mentioned yesterday that the labor market has been 0:02:46.280 --> 0:02:49.000 very strong and there's still a strong, robust economy. So 0:02:49.040 --> 0:02:50.440 because of that, you know, he's you know, I think 0:02:50.440 --> 0:02:53.720 they're very comfortable. And there there's I think everyone sort 0:02:53.760 --> 0:02:56.320 of resolves themselves with that possibility that we're going to 0:02:56.720 --> 0:02:59.160 slide into a recession or or a deeper downtown turn 0:02:59.240 --> 0:03:01.560 than a usually had been anticipated. But if that's what 0:03:01.600 --> 0:03:04.040 it takes, too but with lower unemployment, right. I mean 0:03:04.080 --> 0:03:07.160 everyone yesterday was talking about four point four percent unemployment, 0:03:07.200 --> 0:03:10.080 which is, I think, Mike McKee had calculated, that's about 0:03:10.120 --> 0:03:14.440 another one point three million job losses. But still compared 0:03:14.480 --> 0:03:20.120 to the great recession, compared to Um, the Internet bubble burst, Um, 0:03:20.160 --> 0:03:23.760 you know, it's nothing. Four point four percent unemployment, right. 0:03:23.800 --> 0:03:27.079 I remember when five percent was like enviable in the US. 0:03:27.200 --> 0:03:31.400 So can we really hold to an unemployment number that's 0:03:31.520 --> 0:03:35.440 that low? We have it edging up to around maybe 0:03:35.440 --> 0:03:38.360 five percent, I think, by the end of next year. 0:03:38.520 --> 0:03:41.160 But again, let's not forget that, you know, there's still 0:03:41.160 --> 0:03:43.560 over ten million job vacancies out there. So some of 0:03:43.600 --> 0:03:45.480 that will get, you know, soaked up from from that 0:03:45.520 --> 0:03:47.920 point Um, from you know, some of the or some 0:03:47.960 --> 0:03:49.840 of the job openings, and of course some of the 0:03:49.880 --> 0:03:52.560 openings will also be taken off the table. Um. You know, 0:03:52.640 --> 0:03:54.360 as I've been saying for for a long time now, 0:03:54.400 --> 0:03:56.760 you know anyone who has multiple job offers out there, 0:03:56.760 --> 0:04:00.000 you know, take one because it's not gonna last. Um. 0:04:00.040 --> 0:04:02.720 But you know, again, this is all parted personal with 0:04:02.800 --> 0:04:05.600 what happens when there's a central bank who is aggressively tightening. 0:04:05.600 --> 0:04:07.280 You're gonna see that slower growth, you're gonna see it 0:04:07.360 --> 0:04:09.520 hit consumers bending and you're going to see the doubles 0:04:09.560 --> 0:04:12.960 rate to hire. And on that front, Jennifer just the 0:04:13.000 --> 0:04:16.720 consumer here is another kind of variable, and the consumer 0:04:16.760 --> 0:04:20.919 seems pretty dark strong. I mean you cannot get, uh, 0:04:21.080 --> 0:04:23.080 you know, a table at a restaurant even on a 0:04:23.160 --> 0:04:25.360 Wednesday night here in New York and and in the 0:04:25.440 --> 0:04:28.800 surrounding areas. The consumer seems pretty strong. How do you 0:04:28.800 --> 0:04:32.320 think that might play out? Well, that's the that's one 0:04:32.360 --> 0:04:33.960 of the wild cars, I guess. And and then you 0:04:34.000 --> 0:04:36.880 know again, I've always, sadly, I've never underestimate the US consumer, 0:04:37.200 --> 0:04:38.800 and that's one of the biggest things that you're mentioning 0:04:38.800 --> 0:04:42.279 about dying out. I mean, if anyone was seriously, truly, truly, 0:04:42.320 --> 0:04:44.880 truly worried about their balance, she is about their finances. 0:04:45.160 --> 0:04:46.920 You know, that's where you're gonna come back first dying out. 0:04:46.920 --> 0:04:48.840 You'RE gonna Brown bag it for for launch, YOU'RE NOT 0:04:48.839 --> 0:04:50.920 gonna go up for the drinks, for drinks after work, 0:04:51.200 --> 0:04:53.520 and that's still happening. So that speaks, I don't think, 0:04:53.560 --> 0:04:55.320 a lot about the US consumer, about the strength of 0:04:55.720 --> 0:04:59.239 about the US consumer. Until we start seeing that fold 0:04:59.240 --> 0:05:01.000 a little bit more, you know the ray hypes will 0:05:01.040 --> 0:05:04.240 continue um and that's a different story. By the way, 0:05:04.240 --> 0:05:06.599 I just mentioned what you guys talked about earlier about 0:05:06.680 --> 0:05:09.559 what's happening overseas. You know, this is all demand riven 0:05:09.640 --> 0:05:11.680 right now, whereas where you're looking at overseas with the 0:05:11.680 --> 0:05:13.520 big of England and the U C B, it's all 0:05:13.760 --> 0:05:17.159 energy driven. The supply chain, the supply side of the equation, 0:05:17.640 --> 0:05:20.480 we thought was getting better. We've heard recently from companies 0:05:20.480 --> 0:05:25.520 like Ford Um, you know, more concerning announcements on the 0:05:25.600 --> 0:05:30.880 supply chain. And obviously the chip situation also isn't expected 0:05:30.920 --> 0:05:33.080 to recover. A lot of companies are saying until twenty 0:05:33.120 --> 0:05:36.640 four really, or twenty five even. Is that side, though, 0:05:36.800 --> 0:05:39.719 of the equation getting better to the point where inflation 0:05:39.760 --> 0:05:41.320 is going to come down to the level power wants 0:05:41.400 --> 0:05:44.280 to see it, even without too much demand destruction, by 0:05:44.320 --> 0:05:47.480 like the middle of next year? Probably not enough. I 0:05:47.520 --> 0:05:50.000 mean I think you know, I've I've it's all anecdotes, 0:05:50.000 --> 0:05:51.320 but you know, you hear stories about some of the 0:05:51.360 --> 0:05:54.159 supply chains easing. Um, you know you saw the the 0:05:54.200 --> 0:05:56.640 supplier delivery delays from some of the regional fed surveys 0:05:56.680 --> 0:05:59.320 have been coming down sharply and that's because demand has 0:05:59.360 --> 0:06:02.640 cooled and that's even manufacturer's time to get through that backlog. 0:06:02.760 --> 0:06:05.599 But other areas like the computer chips, for the for 0:06:05.680 --> 0:06:09.400 the for the Automa auto sector, that's still in high demand, Um, 0:06:09.480 --> 0:06:13.839 and that's still pretty backed up. Jennifer, maybe some of 0:06:13.839 --> 0:06:16.560 our listeners don't know that BEMO is short for Bank 0:06:16.600 --> 0:06:19.520 of Montreal. You're in Canada. How are how is the 0:06:19.560 --> 0:06:23.680 economy in Canada? How's the consumer in Canada? How different 0:06:23.720 --> 0:06:25.760 is it maybe there versus the United States? Do you 0:06:25.800 --> 0:06:30.520 think it's actually fairly similar? We're also we've also got 0:06:30.520 --> 0:06:33.440 the heavy weight of the housing market and the housing 0:06:33.600 --> 0:06:36.960 takes of the larger share of Canadian economy here than 0:06:37.000 --> 0:06:40.520 than in the US, and there we're seeing a pretty 0:06:40.520 --> 0:06:42.600 you know, Um, we're seeing a correction right now in 0:06:42.640 --> 0:06:45.120 the housing market just given the weight of higher rates, 0:06:45.120 --> 0:06:47.120 and we actually had a one hundred basis point rate 0:06:47.160 --> 0:06:50.000 hike here from the Bank of Canada back in July, which, 0:06:50.080 --> 0:06:52.640 you know, that has yet to really filter through into 0:06:52.680 --> 0:06:54.800 the housing market. But but you're we're seeing some of 0:06:54.839 --> 0:06:57.200 the other great hips already filtering through. So we won't 0:06:57.200 --> 0:06:59.880 see a big, real big impact until later this year. 0:07:00.360 --> 0:07:02.760 But consumers so far, you know, is to holding up again, 0:07:03.200 --> 0:07:05.480 labor market and and waste pressures, and we're going to 0:07:05.520 --> 0:07:07.960 get a July retail sales number. We're kind of behind 0:07:07.960 --> 0:07:09.960 on that, by the way. We're getting our July retail 0:07:10.000 --> 0:07:12.360 sales numbers on Friday, so we'll see how the volumes 0:07:12.360 --> 0:07:14.880 pan up. But you know, we're looking for declines because 0:07:14.960 --> 0:07:16.560 you know, just like everywhere else, you know you're gonna 0:07:16.560 --> 0:07:19.520 get hit by higher prices and higher energy prices and 0:07:19.680 --> 0:07:23.240 higher boring costs. So how do you see housing markets? Um, 0:07:23.280 --> 0:07:26.960 you know, obviously it's very regional, but if you look at, 0:07:27.000 --> 0:07:30.600 for example, the US housing market versus Canada, versus the UK, 0:07:30.760 --> 0:07:32.640 which I think are the three places where you saw 0:07:33.000 --> 0:07:37.320 extreme heat, Um, are we going to get any, you know, 0:07:37.680 --> 0:07:43.360 serious financial disasters in terms of housing markets or our 0:07:43.400 --> 0:07:47.760 prices just going to, you know, come off ten and Um, 0:07:48.080 --> 0:07:52.720 you know, the frenzy will unravel without, you know, causing 0:07:53.080 --> 0:07:56.440 great financial arts, that's what you want to call it. 0:07:56.520 --> 0:07:59.360 That's Um. We already have seen prices decline and we 0:07:59.400 --> 0:08:02.520 I think we're seeing, for a toll of net pete 0:08:02.560 --> 0:08:06.240 trough decline. But there's still there's underlying demands. Like you know, 0:08:06.280 --> 0:08:09.240 there's still immigration you know, organic demand from you know, 0:08:09.320 --> 0:08:11.920 households moving out, like the millennials. Wins over is probably 0:08:11.920 --> 0:08:14.280 seeing the peak of that coming soon. So there's still that. 0:08:14.320 --> 0:08:17.840 But you're you're absolutely correct. It's very regional. Some places 0:08:17.880 --> 0:08:19.960 are going to get harder, hit harder than others. And 0:08:20.240 --> 0:08:22.080 a lot of this also, still forget, stem from the 0:08:22.120 --> 0:08:25.000 whole work from home situation, which is starting to you know, 0:08:25.080 --> 0:08:26.880 to fade a little bit as well. So but we 0:08:26.920 --> 0:08:29.440 don't see it again. We still we're still seeing a correction. 0:08:29.440 --> 0:08:31.320 There's still some more peam to come, but the Bank 0:08:31.320 --> 0:08:33.080 of Canada is also quite causing some of it. So 0:08:33.160 --> 0:08:36.280 we don't see the bank here raising rates as quickly 0:08:36.400 --> 0:08:39.439 or as aggressively as they said. And Jennifer, just real 0:08:39.480 --> 0:08:42.920 quickly the strong dollar. How high does it go? Is 0:08:42.920 --> 0:08:45.000 there any bear case for the U S dollar? Like 0:08:45.040 --> 0:08:47.920 goodness Um. It's interesting because I remember what at one 0:08:47.920 --> 0:08:50.160 point some people were talking about, you know peak US dollar. 0:08:50.240 --> 0:08:54.000 This is when Um at that one um good CPI report. 0:08:54.000 --> 0:08:55.920 I don't remember that in June where, you know, people 0:08:56.040 --> 0:08:57.719 started thinking that they're gonna be pivoting because of that 0:08:57.880 --> 0:09:00.320 one number. But I think you know, given that the case, 0:09:00.360 --> 0:09:03.160 that the Fed is still super aggressive. Um everyone else 0:09:03.200 --> 0:09:06.040 as raising rates, but not everyone, um so. I think 0:09:06.040 --> 0:09:07.880 we're still there's still a case for a strong invest dollar, 0:09:08.000 --> 0:09:11.320 you know, handing into three. But it was also very interesting, 0:09:11.320 --> 0:09:13.560 by the way, that not everybody was raising rates this week. 0:09:13.679 --> 0:09:17.040 You know, we had, UM, Brazil holding off, for example. 0:09:17.160 --> 0:09:19.560 You know, Norway raising rates. I think they said that. 0:09:19.559 --> 0:09:21.080 You know, that's gonna be it for a little bit because, 0:09:21.240 --> 0:09:24.360 you know, um Um so again it's it's it's interesting. 0:09:24.360 --> 0:09:26.080 And even the RBA, by the way, has been making 0:09:26.120 --> 0:09:29.079 noises and know how it may be time to turn 0:09:29.160 --> 0:09:31.760 it down a little bit. So that's kind of interesting. 0:09:31.800 --> 0:09:34.079 I meanwhile, the Fed is going the other way. They are, 0:09:34.120 --> 0:09:36.560 they certainly are. Jennifer Lee, senior economist, managing director at 0:09:36.559 --> 0:09:43.280 email capital markets. Thanks so much for joining us. Right now, 0:09:43.360 --> 0:09:45.280 let's check in with Greg Han. He's a C I 0:09:45.400 --> 0:09:48.920 O at winterp capital management get a sense, uh, what 0:09:49.040 --> 0:09:50.800 is he thinking about these markets? Greg thanks so much 0:09:50.800 --> 0:09:54.280 for joining us here again. Another uh, week day in 0:09:54.320 --> 0:09:57.640 the markets. Here we had the Federal Reserve yesterday raising rates, 0:09:57.679 --> 0:10:00.840 being very clear in their message that their number one 0:10:00.840 --> 0:10:02.960 mandate is to fight inflation and they will do that 0:10:03.040 --> 0:10:05.920 with the in part with their interest rate mechanisms, and 0:10:05.960 --> 0:10:07.719 today we had some more central banks from around the 0:10:07.760 --> 0:10:11.360 world following suit. Uh. What do you do at winthrop 0:10:11.400 --> 0:10:16.680 couple management with that type of background? Well, that's a Paul, 0:10:17.000 --> 0:10:20.199 is a great question. Uh. So these are difficult markets. 0:10:20.480 --> 0:10:23.960 We're going through a shift right now invaluation and how 0:10:24.000 --> 0:10:27.520 the markets are perceiving valuation. Um, and it's it's really 0:10:27.559 --> 0:10:30.480 that's the whole push higher and short term interest rates. Um, 0:10:30.559 --> 0:10:33.280 and then the dislocation and the equity markets. So we are, 0:10:34.000 --> 0:10:35.719 like I've said, we're kids in the candy store. In 0:10:35.760 --> 0:10:38.880 the fixed income markets. This is a window to Um 0:10:38.880 --> 0:10:41.800 to build portfolios in fixed income that can earn five 0:10:41.840 --> 0:10:44.160 percent without a lot of risk for in a quarter 0:10:44.440 --> 0:10:49.000 on a municipal portfolio. For investors, that the tax free income. 0:10:49.080 --> 0:10:52.040 So that that part of this is that's the easy part. 0:10:52.120 --> 0:10:55.240 The hard part is the the equity Um. We're about 0:10:55.240 --> 0:10:58.520 to hit a storm on the equity side because earnings 0:10:58.559 --> 0:11:00.240 are going to become more and more difficult it as 0:11:00.240 --> 0:11:03.080 we head into the third and fourth quarter because margin compression, 0:11:03.520 --> 0:11:06.680 increased labor costs, Um. It's it's a litany of things. 0:11:06.720 --> 0:11:09.480 And then the latest now is higher interest expense because 0:11:09.480 --> 0:11:12.160 we've got short term interest rates climbing. So what do 0:11:12.200 --> 0:11:15.079 you expect in terms of earnings this year and next year? 0:11:15.080 --> 0:11:17.920 Do you have a forecast? Well, we're, I think you know, 0:11:18.040 --> 0:11:20.000 consensus right now is what to thirty five on the 0:11:20.120 --> 0:11:22.680 S and p. The SUP is is we're looking at. 0:11:22.880 --> 0:11:26.280 Our expectation is we're sixteen and a half times earnings, 0:11:26.320 --> 0:11:28.320 which is now we're kind of kind of getting into 0:11:28.400 --> 0:11:31.160 fair value and we've come down from twenty times. I 0:11:31.160 --> 0:11:32.920 mean this is this is the adjustment, as we were 0:11:32.960 --> 0:11:36.000 so overvalued. The pain that investors are feeling is an 0:11:36.000 --> 0:11:38.920 adjustment from an overvalued market to one that is simply 0:11:38.960 --> 0:11:42.679 fairly valued. Markets overshoot and we can't overshoot when we 0:11:42.720 --> 0:11:44.920 can't go to an undervalued market, which we haven't seen 0:11:45.440 --> 0:11:51.160 in over fifteen years. And Amazing, amazing. That is. No, yeah, yeah, no, 0:11:51.240 --> 0:11:53.760 it's and that's but there's great companies out there. We 0:11:54.120 --> 0:11:56.120 are seeing. I mean he's got stocks that are down 0:11:56.200 --> 0:12:01.520 six are that are they're still great stocks, they're great companies. 0:12:01.600 --> 0:12:04.360 But Um, you just we just have to we're not 0:12:04.360 --> 0:12:06.000 going to pick the bottom. We just want to find 0:12:06.040 --> 0:12:07.560 we want to be able to invest in good, solid 0:12:07.600 --> 0:12:10.280 companies with solid business models. That's the pall. That's the 0:12:10.280 --> 0:12:14.280 other thing that's happening is business models are being challenged. Auto, 0:12:14.320 --> 0:12:18.120 when auto companies can't get cars onto lots, when the 0:12:18.160 --> 0:12:21.640 airline industry is capacity constraint and they can't get passengers 0:12:21.640 --> 0:12:23.920 on the planes because they don't have, you know, the 0:12:24.320 --> 0:12:27.040 the Labor to help support the UH, you know, the 0:12:27.040 --> 0:12:29.960 the business model we've got. That's those are challenges that 0:12:30.000 --> 0:12:33.240 are structural. Raising short term interest rates and isn't going 0:12:33.280 --> 0:12:35.120 to fix that. I just want to quickly jump in 0:12:35.160 --> 0:12:41.360 with the average analyst estimate for earnings is two fours 0:12:41.440 --> 0:12:48.280 for Um and in three I'm looking at an average 0:12:48.440 --> 0:12:51.280 of two and twenty nine dollars. It's not the median fall. 0:12:51.440 --> 0:12:54.280 The median is two thirty two. Yeah, that's what I'm 0:12:54.280 --> 0:12:58.840 looking out on my spx index e page like that. 0:13:00.120 --> 0:13:02.480 So anyway. So, Greg just real quickly, is there a 0:13:02.480 --> 0:13:05.000 sector that I should be looking at right now, given 0:13:05.040 --> 0:13:07.840 that we're likely to be going into a recession, or 0:13:07.880 --> 0:13:11.040 if we're not already in one? So look, I just 0:13:11.720 --> 0:13:16.600 the whole Infotech space, which bleeds over into the the 0:13:16.640 --> 0:13:20.440 communications sector. Uh, there's some those. Some of those stocks 0:13:20.440 --> 0:13:23.400 are just really undervalued. That's where we like and now 0:13:23.440 --> 0:13:26.080 it's it's hard because that's the part that's gotten hit hard. 0:13:26.120 --> 0:13:28.679 But in a storm we're ones to run into the storm, 0:13:28.720 --> 0:13:30.920 that run away from it, and so when stocks are 0:13:30.960 --> 0:13:32.839 down we want to buy loads. So I that kind 0:13:32.840 --> 0:13:37.240 of learned that my my my business school, Um and 0:13:37.320 --> 0:13:40.760 so you know the the you know Microsoft, alphabet. Those 0:13:40.800 --> 0:13:43.720 are the core holdings for us. We we love those stocks. Disneys, 0:13:43.760 --> 0:13:47.320 one that's come into our sweet spot in video, is 0:13:47.520 --> 0:13:50.000 in video has a valuation now that starts to make sense. 0:13:50.000 --> 0:13:52.360 So we're we are seeing opportunities, but it's going to 0:13:52.440 --> 0:13:54.160 get I mean we have the risk of it getting 0:13:54.480 --> 0:13:56.600 a little bit worse here and ending into the second 0:13:56.600 --> 0:13:58.640 half of the year. All right, Greg, I really appreciate it. 0:13:58.679 --> 0:14:01.040 Greg Han Cio, winthrop, but to management. He mentioned his 0:14:01.040 --> 0:14:04.160 business school. That would be Indiana. I get his undergraduate 0:14:04.200 --> 0:14:06.760 from the University of Wisconsin. So all big ten there 0:14:06.840 --> 0:14:13.120 for Greg Hand. Well, I guess after yesterday the question 0:14:13.200 --> 0:14:16.160 isn't so much is the Fed going higher. Yes, they are. 0:14:16.240 --> 0:14:19.000 The question is how high and for how long. Let's 0:14:19.040 --> 0:14:21.200 check up with Ben Emmon's managing director of global macro 0:14:21.320 --> 0:14:25.320 strategy at Medley Global Advisors. So, Ben, what do you 0:14:25.400 --> 0:14:29.000 take away from yesterday's statement and yesterday's comments by Fed 0:14:29.040 --> 0:14:32.200 Scherman J pal about how high are these interest rates 0:14:32.200 --> 0:14:36.600 going to go? Hi, Paul. Well, he was really explicit, 0:14:36.680 --> 0:14:39.160 I felt. You know, he said that at the very 0:14:39.240 --> 0:14:42.840 last question of the press conference, that you know, four 0:14:42.880 --> 0:14:46.160 point six percent fat funds rateing next year is likely, 0:14:46.720 --> 0:14:49.160 and then he also mentioned that one one to one 0:14:49.160 --> 0:14:51.200 and a half percent will rates is where they want 0:14:51.200 --> 0:14:55.400 to get to, to be a restrictive policy. So with 0:14:55.480 --> 0:14:57.840 Dan in mind, as you see the reaction today in 0:14:57.880 --> 0:15:01.040 the markets right, that's being factored in now the two 0:15:01.280 --> 0:15:04.680 you could probably move towards at four point six and 0:15:04.720 --> 0:15:06.760 it will pull up the rest of the you curve too, 0:15:06.800 --> 0:15:09.200 and that's in motion. So I think that was a 0:15:09.240 --> 0:15:12.720 big takeaway for me. In addition that they surprised, of course, 0:15:12.760 --> 0:15:16.400 with that medium dots for two being higher than why 0:15:16.440 --> 0:15:19.240 the market was price. And I think that shows too 0:15:19.360 --> 0:15:22.160 that within the inflorence see there's a real clear push 0:15:22.200 --> 0:15:25.960 of fact we must get quicker to restrictive sense, to 0:15:26.000 --> 0:15:30.320 put a little inflation or were in trouble and they wanted. Well, 0:15:30.360 --> 0:15:32.120 by the way, I was listening to this I thought 0:15:32.120 --> 0:15:36.680 it was a great press conference. UMS entertainment value. Um, yeah, 0:15:36.800 --> 0:15:39.560 I love when Steve Leesman his Mike went out or 0:15:39.600 --> 0:15:42.160 he didn't remember to ask the second question. The MIC 0:15:42.240 --> 0:15:44.120 and the PALSI I don't even want to answer your 0:15:44.160 --> 0:15:49.040 second question, which was pretty good. Yeah, at least. What 0:15:49.080 --> 0:15:51.760 I was thinking was he's so insistent that they want 0:15:51.800 --> 0:15:56.760 to get rates Um to more restrictive level as quickly 0:15:56.800 --> 0:16:01.000 as possible. Um, for from a layman's person, why in 0:16:01.040 --> 0:16:03.200 the hell don't they just say rates are four an 0:16:03.200 --> 0:16:07.560 a percent? Boom, there you go. Yeah, exactly a meth. 0:16:07.640 --> 0:16:10.280 I mean, what are you waiting for? We agree like you, 0:16:11.040 --> 0:16:14.240 sort of one of base points. Hight, that was, you know, 0:16:14.480 --> 0:16:17.520 but you know, envisued by the market. Right, I had 0:16:17.560 --> 0:16:21.080 an eighteen percent probability. It could have just done that yesterday, right, 0:16:21.160 --> 0:16:24.800 and the move is high and would shock it the markets, 0:16:24.800 --> 0:16:26.960 I guess, and maybe it's still holding them back. But 0:16:27.440 --> 0:16:30.640 if it comes down to inflation, you slatch hammered, right, 0:16:30.680 --> 0:16:33.360 so you would bring it up banged like that. But 0:16:33.440 --> 0:16:36.880 you know, it's a policy about seventy five is sort 0:16:36.880 --> 0:16:39.920 of the way to go, you know, touch feel still 0:16:40.000 --> 0:16:43.640 right tied in financial conditions and get to an end destination. 0:16:44.280 --> 0:16:46.400 You know, it does bring the risk that you you're 0:16:46.400 --> 0:16:48.880 not doing enough and you have to do more right, 0:16:48.920 --> 0:16:51.320 and then that will be the such hammer. So I 0:16:51.360 --> 0:16:54.120 think you know, it looks to me they have a 0:16:54.240 --> 0:16:57.240 wall set in speech about it. We Week and half ago, 0:16:57.280 --> 0:16:59.280 when the last time I saw you, that was sort 0:16:59.280 --> 0:17:02.240 of the four book to what happened yesterday within the 0:17:02.360 --> 0:17:05.640 from sea. There's like people banging official on the table. Yes, 0:17:05.680 --> 0:17:08.600 we've got a such hammer here, but it's a consensus. 0:17:08.680 --> 0:17:10.560 So that's why you end up with that seven five 0:17:10.600 --> 0:17:13.359 basis points. But it should move faster. I agree with it. 0:17:13.440 --> 0:17:15.439 I mean I would just do two hundred, except for 0:17:15.560 --> 0:17:19.720 I would stop. I would say inflation is peaked. Let's 0:17:19.720 --> 0:17:22.200 just see how these rate increases trickle through the country 0:17:22.280 --> 0:17:24.560 over the next six months. Is that? That seems to 0:17:24.560 --> 0:17:29.280 be completely off the table. Bed there burns. Yes, thank you. Yeah, yeah, yeah, 0:17:29.320 --> 0:17:32.200 that that is the art of burns issue, and that's 0:17:32.320 --> 0:17:34.680 basically even though the art of Burns, by the way, 0:17:34.760 --> 0:17:37.440 in seven, three, seventy four Hyde grates up to I think. 0:17:38.880 --> 0:17:42.520 So you did, didn't fat the tightening, but the underestimated 0:17:43.000 --> 0:17:46.760 economy being still too far above potential and too much 0:17:46.760 --> 0:17:49.240 stork on an easily economy in terms of both the 0:17:49.320 --> 0:17:52.800 pressure on inflation and so you should have actually done 0:17:52.840 --> 0:17:55.639 more at that time if you look back in history. 0:17:55.840 --> 0:17:58.360 And that's what they're struggling with right. But we're in 0:17:58.400 --> 0:18:01.960 an environment where, you know, at four percent rates, that's 0:18:02.200 --> 0:18:04.480 we're stored glow. Right. You will have to go a 0:18:04.480 --> 0:18:07.080 lot higher than that, and that's still worry in the markets. 0:18:07.119 --> 0:18:10.080 I think facts, you may have to do just so 0:18:10.160 --> 0:18:13.000 much more because because actually will interest rates are still 0:18:13.040 --> 0:18:16.479 too negative and the economy is still too strong. Right. 0:18:16.520 --> 0:18:19.840 It's still too overheated. The claims say that this morning. 0:18:20.400 --> 0:18:22.960 It's just just I think, part of the reason why 0:18:23.080 --> 0:18:26.240 use are up to claims against shoulder right, unbelievable. So 0:18:26.520 --> 0:18:29.720 it's just a strong economy. That's what they have to tackle. Well, 0:18:29.760 --> 0:18:32.520 for sure, judging by the labor market it still looks 0:18:32.560 --> 0:18:35.280 pretty strong. We do see some pink slips going out, 0:18:35.320 --> 0:18:37.280 we see banks starting to call the hurt a little bit, 0:18:37.320 --> 0:18:41.640 but that's just normal. Um. He mentioned a couple of times. 0:18:41.720 --> 0:18:44.000 There are a number of ways you can look at inflation. 0:18:44.080 --> 0:18:47.520 Expectations or inflation forecasts. So I want to ask you 0:18:47.760 --> 0:18:50.679 some dashboard questions. What do you look at Um for 0:18:50.760 --> 0:18:57.000 inflation forecast? Do you like the Um, you know, five year, 0:18:57.119 --> 0:19:01.320 five year, or do you like the any surveys specifically 0:19:01.600 --> 0:19:05.520 better than the others? And also financial conditions, Um, you know, 0:19:05.560 --> 0:19:07.719 I pull up F con go on the Bloomberg. They 0:19:07.880 --> 0:19:10.560 look so they don't look so tight to me, certainly 0:19:10.600 --> 0:19:13.760 not compared to what we saw in March of so 0:19:13.880 --> 0:19:17.200 what do you look at to measure Um? To look 0:19:17.359 --> 0:19:20.960 to sort of gauge inflation expectations or a market forecast? 0:19:21.000 --> 0:19:24.600 And what do you look at to measure financial conditions? Yeah, 0:19:25.000 --> 0:19:28.240 with inflation, what I found was that the Conference Board 0:19:28.359 --> 0:19:31.720 has the one year expectation in there and since the 0:19:31.760 --> 0:19:35.320 spring of that number has been six percent or higher 0:19:35.840 --> 0:19:39.280 and it has been a perfect predictor of where CPI 0:19:39.440 --> 0:19:42.119 actually ended up. So I find out a really strong 0:19:42.200 --> 0:19:46.280 indicator in this environment where inflations and that that one 0:19:46.280 --> 0:19:48.760 of your expectations. That I believe the last Sumer seven 0:19:48.800 --> 0:19:51.600 point six percent, so a little over than my head 0:19:51.600 --> 0:19:55.200 finess now, but that's still really elevated right. So that's one. 0:19:56.000 --> 0:19:59.480 You know that the market break even, the ditch break even. 0:19:59.600 --> 0:20:02.040 I'm a skeptical there because it's a real yield and 0:20:02.080 --> 0:20:05.240 phenomenal yield, and they move around right, so they actually 0:20:05.280 --> 0:20:09.439 react to one another. So find that less credible indicator 0:20:10.000 --> 0:20:13.159 the long term expectations from Michigan is something that the 0:20:13.200 --> 0:20:16.240 fact reacts. You would take that into account. And then 0:20:16.240 --> 0:20:19.080 there's this blue chip survey, which is, you know, you 0:20:19.080 --> 0:20:22.000 have to get this specific access to you know there 0:20:22.080 --> 0:20:24.480 is actually an expectation in there of what people think 0:20:24.520 --> 0:20:27.040 that real interest rates will look like. They're now rising 0:20:27.040 --> 0:20:29.160 in line where the market is. So I find those 0:20:29.160 --> 0:20:34.000 three interesting. COMFERENCE boards, Michigan Blue Chip, some more survey base. 0:20:34.520 --> 0:20:37.240