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Speaker 1: This is Taking Stock with Kathleen Hayes and Prim Fox

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Speaker 1: on Bloomberg Radio, a special live broadcast today on taking

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Speaker 1: Stock at the fourth Annual Canadian Fixed Income Conference sponsored

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Speaker 1: by National Bank of Canada Financial Markets here at Bloomberg

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Speaker 1: World Headquarters. You've had a terrific day amidst several hundred

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Speaker 1: institutional investors who have come here to get an in

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Speaker 1: depth look at the market for Canadian bonds, and certainly

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Speaker 1: markets around the world, whether it's bonds, stocks or commodities,

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Speaker 1: have been royaled by uncertainty over central banks and where

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Speaker 1: they are heading next. So we want to bring in

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Speaker 1: someone who can help us sort all of this out.

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Speaker 1: Joe McLendon, founder and Chairman mac Lindon Research Partners and

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Speaker 1: its parent company, Katalpa Capital Advisers. Joe, welcome, Thank you.

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Speaker 1: What a time we're having in the markets. I mean,

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Speaker 1: I think at this point, I feel like I don't

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Speaker 1: know if bonds are selling off, and we had another

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Speaker 1: bad day today because what the VET isn't going to

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Speaker 1: raise rates in September, because they're probably going to raise

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Speaker 1: in December, and the same thing for stocks. How are

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Speaker 1: you starting this out? I I think it's not um,

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Speaker 1: whether they raise rates in September or not, because it's

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Speaker 1: most likely that they won't given the presidential election, UM

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Speaker 1: and the division that we apparently have on the on

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Speaker 1: the f O m C. But rather, I think the

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Speaker 1: certainty that may come out next week about the December

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Speaker 1: rate hikes and three or four more rate hikes next year. Uh.

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Speaker 1: That information is likely to come out with the f

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Speaker 1: O m C meeting next week on Wednesday, and I

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Speaker 1: think that's what's got the market in a tizzy. Joe

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Speaker 1: Mcalindon have taken a look at the performance of the

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Speaker 1: SMP five hundred so far this year. It's up a

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Speaker 1: little bit more than four out Jones industrial average, a

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Speaker 1: little bit more than three and a half percent. If

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Speaker 1: you've made some money in the market, what should you do?

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Speaker 1: Should you just cash out for a little bit, pay

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Speaker 1: your taxes and wait for things to settle, or do

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Speaker 1: you remain fully invested? UM? Well, I wish you didn't

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Speaker 1: have to pay those taxes, but I would. I would

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Speaker 1: be raising cash here. Cash is my favorite asset class.

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Speaker 1: I think that both bonds and stocks are gonna be

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Speaker 1: UH in for a tougher time over the next three

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Speaker 1: to six months. Because of what's going on with monetary policy.

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Speaker 1: Um number one, Number two, the uncertainty of the election outlook,

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Speaker 1: and number three, Um, you're going I believe, Pam, you're

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Speaker 1: gonna be getting uh some very nasty inflation numbers uh

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Speaker 1: over the next six months as the year on year

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Speaker 1: energy prices begin to push the CPI up towards a

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Speaker 1: three handle and and maybe higher. Okay, So and it's

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Speaker 1: it's inflation is going to move up, and you think

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Speaker 1: that is what's going to force the fits hand to

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Speaker 1: uh move on because the headline cp I guess to three,

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Speaker 1: So good for stocks or bad for stocks? If inflation

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Speaker 1: is rising, companies have more pricing power. Companies have more

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Speaker 1: pricing power, and and beyond the uncertainty of the next

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Speaker 1: three to six months, I would say that that that

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Speaker 1: pricing power is going to be a very big positive.

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Speaker 1: And the fact that historically stocks are a good inflation hedge,

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Speaker 1: that that kind of thinking will kick in. But in

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Speaker 1: the short run, you're gonna go front. You have to

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Speaker 1: go from a hey, there's no inflation and the fit's

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Speaker 1: never going to raise interest rates into a new mindset,

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Speaker 1: and that that transition, along with the uncertainty over the election,

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Speaker 1: and who knows where that's going at this point. Um,

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Speaker 1: I think it's going to be a difficult period. And

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Speaker 1: you've had a you've had a gradual topping out of

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Speaker 1: stock prices in the US through August and now we're

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Speaker 1: rolling over. It's been an insignificant, really correction so far,

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Speaker 1: but I think it's gonna get worse in October. Joe McLendon,

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Speaker 1: I don't hear you talking about gold or any precious

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Speaker 1: metal or any traditional safe haven other than cash. Why

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Speaker 1: is that? Well, I didn't get to that yet, Tam.

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Speaker 1: I would say, there's always uh places to make money

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Speaker 1: on alongside and my two favorites, believe it or not,

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Speaker 1: there are two things that got hammered today. Um, but

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Speaker 1: that's happened many times before, and then they turn around

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Speaker 1: and start calling back up again, and that is gold

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Speaker 1: and gold stocks and oil and oil stocks. And I

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Speaker 1: think that's where you want to be. And this kind

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Speaker 1: of changing environment, I think the growth side of the

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Speaker 1: market is very vulnerable. Bonds are very vulnerable, and uh,

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Speaker 1: you know my I personally, UM would like to uh. Well,

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Speaker 1: if I personally am focused in my own investing on

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Speaker 1: cash and energy and gold well, and as a matter

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Speaker 1: of fact, one of our big stories on the Bloomberg

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Speaker 1: today the bond market sell off, deepening as money managers

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Speaker 1: pile into cash, and Bank of America their latest surveys

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Speaker 1: showing investors ramping up cash holdings to near the highest

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Speaker 1: and fifteen years. Well, I think it's going to go

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Speaker 1: higher because I mean, look, the market is just what

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Speaker 1: is it all three percent from the August high? Uh

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Speaker 1: and and uh. I think there's a lot of additional vulnerability.

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Speaker 1: I mean, these corrections that we've had over the last six, seven,

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Speaker 1: eight years UM have typically been single digit, but every

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Speaker 1: once in a while we've gotten double digit decline. And

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Speaker 1: I think, uh, between now in the spring, that's that's

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Speaker 1: what the exposure is. And I think the decline and

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Speaker 1: bond prices could be just as bad um as what

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Speaker 1: we likely to see in stocks as we moved towards

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Speaker 1: a new reality that the set is indeed kind of

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Speaker 1: tighten three or four times next year, inflation is parking

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Speaker 1: up um and uh, and we have the uncertainty of

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Speaker 1: a new administration. I think that's going to be true

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Speaker 1: no matter which canadate wins. I want to thank you

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Speaker 1: very much Joe maclendon is the founder and the chairman

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Speaker 1: of Macaillndon Research Partners and its parent accompany, Kaupa Capital Advisors.

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Speaker 1: We've been broadcasting live from Bloomberg World Headquarters, site of

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Speaker 1: the fourth annual Canadian Fixed Income Conference, sponsored by a

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Speaker 1: National Bank of Canada Financial Markets. We've learned a lot

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Speaker 1: about Canada. We have and all the the government officials,

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Speaker 1: industry leaders so much. We think national Big of Canada

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Speaker 1: financial markets are being here. Indeed, you're listening to taking Stock.

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Speaker 1: Thank you for listening. This is Bloomberg