1 00:00:00,120 --> 00:00:02,240 Speaker 1: Let's get to our guest for the half hour. Marianne 2 00:00:02,240 --> 00:00:06,239 Speaker 1: Montaigne is with Thiss, portfolio manager at A Gradient Investments 3 00:00:06,240 --> 00:00:10,240 Speaker 1: who joins from Arden Hills, Minnesota. Marianne, thanks for being 4 00:00:10,240 --> 00:00:12,440 Speaker 1: with us. We're kind of treading water a bit today. 5 00:00:12,520 --> 00:00:15,360 Speaker 1: In front of this employment report for the US. I 6 00:00:15,400 --> 00:00:18,079 Speaker 1: think the Bloomberg forecast is looking for something around a 7 00:00:18,160 --> 00:00:20,520 Speaker 1: quarter of a million jobs in the month of July. 8 00:00:21,280 --> 00:00:24,160 Speaker 1: If we miss that mark, does that bring us closer 9 00:00:24,200 --> 00:00:28,400 Speaker 1: to a FED pivot. Well, first of all, dog, thanks 10 00:00:28,400 --> 00:00:31,240 Speaker 1: for having me on. But um, you know, we've looked 11 00:00:31,280 --> 00:00:34,400 Speaker 1: at jobless claims rising to the highest level in eight 12 00:00:34,440 --> 00:00:39,160 Speaker 1: months through on the four week data, and job openings 13 00:00:39,200 --> 00:00:42,880 Speaker 1: have dropped just over six hundred thousand and the last 14 00:00:42,960 --> 00:00:46,519 Speaker 1: month alone. So uh we we see that, you know, 15 00:00:46,560 --> 00:00:49,479 Speaker 1: as slowing here. We think it's more than just the 16 00:00:49,520 --> 00:00:54,040 Speaker 1: two quarters of UH you know, negative GDP growth. Um. 17 00:00:54,160 --> 00:01:00,600 Speaker 1: We see weakness across wholesale sales UH and real basis, 18 00:01:01,320 --> 00:01:05,800 Speaker 1: retail sales again on an inflation adjusted basis, personal income 19 00:01:06,200 --> 00:01:11,959 Speaker 1: down on an inflation adjusted basis. We see some declines 20 00:01:12,000 --> 00:01:15,400 Speaker 1: in industrial production or I shouldn't say declines, but a 21 00:01:15,440 --> 00:01:20,039 Speaker 1: loss of momentum there um, we see home building falling. 22 00:01:20,640 --> 00:01:24,479 Speaker 1: Inventories in many areas are too high, so I think, 23 00:01:24,600 --> 00:01:26,360 Speaker 1: you know, however you want to define it, we're in 24 00:01:26,400 --> 00:01:29,319 Speaker 1: a recession, but I don't think that means that the 25 00:01:29,360 --> 00:01:34,080 Speaker 1: FED is stopped raising rates. I don't think inflation has subsided, 26 00:01:34,200 --> 00:01:37,840 Speaker 1: and I don't think we can't make money in this market. Yeah, 27 00:01:37,920 --> 00:01:40,960 Speaker 1: jobs market strength was hailed. Hasn't indicator that we're not 28 00:01:41,120 --> 00:01:42,880 Speaker 1: in a recission. But if you think it's going to 29 00:01:42,880 --> 00:01:45,680 Speaker 1: be steady as she goes for the fit, what is 30 00:01:45,720 --> 00:01:47,680 Speaker 1: that going to mean for growth in the depth of 31 00:01:47,680 --> 00:01:51,480 Speaker 1: a potential recission. Yeah, Again, I don't think it's so 32 00:01:51,960 --> 00:01:55,880 Speaker 1: um as steady as it were. You know, they're they're 33 00:01:55,960 --> 00:02:00,280 Speaker 1: facing uh, you know, lower commodity costs that we saw 34 00:02:00,320 --> 00:02:04,520 Speaker 1: in June and persistent to July across UH, grains and 35 00:02:04,640 --> 00:02:10,040 Speaker 1: other farm products across UH, certainly timber and oil, and 36 00:02:10,639 --> 00:02:14,359 Speaker 1: a number of industrial metals in the month of June. 37 00:02:14,840 --> 00:02:17,240 Speaker 1: But it takes a while to filter that all the 38 00:02:17,240 --> 00:02:20,959 Speaker 1: way through to the consumer. So, you know, prices are 39 00:02:21,400 --> 00:02:24,239 Speaker 1: easy on the upside, sticky on the downside. I think 40 00:02:24,240 --> 00:02:28,480 Speaker 1: they're going to see UH still higher inflation levels than 41 00:02:28,919 --> 00:02:31,720 Speaker 1: any of US want to see for a while, and 42 00:02:32,120 --> 00:02:34,480 Speaker 1: if they think that raising rates is the cure, then 43 00:02:34,720 --> 00:02:37,239 Speaker 1: I think we're going to be raising rates for a while. Yet, 44 00:02:37,400 --> 00:02:39,680 Speaker 1: have you been impressed by the quality of earnings that 45 00:02:39,720 --> 00:02:42,560 Speaker 1: we have had for Q two that at the same time, 46 00:02:42,600 --> 00:02:45,440 Speaker 1: and maybe you can address the outlook and how you're 47 00:02:45,440 --> 00:02:49,079 Speaker 1: feeling about what you're hearing from Corporate America. Well, many 48 00:02:49,160 --> 00:02:52,320 Speaker 1: of our companies have announced better than expected revenues, which 49 00:02:52,360 --> 00:02:56,400 Speaker 1: we think is important, but it's based on their pricing power. UM. 50 00:02:56,440 --> 00:02:58,480 Speaker 1: If you look into the second half of the year, 51 00:02:58,960 --> 00:03:02,200 Speaker 1: the DAL is going to cut into the estimates for 52 00:03:02,240 --> 00:03:06,679 Speaker 1: our global players, and consensus earnings per share estimates have 53 00:03:06,919 --> 00:03:10,600 Speaker 1: used slightly though, from ten percent growth this year and 54 00:03:10,720 --> 00:03:16,960 Speaker 1: next to now eight percent in two and nine. So 55 00:03:17,160 --> 00:03:23,400 Speaker 1: I think we're dealing with UM all the issues fairly. Well. Uh, certainly, 56 00:03:23,440 --> 00:03:26,880 Speaker 1: the valuations have come down sharply in the first half 57 00:03:26,880 --> 00:03:30,160 Speaker 1: of this year, and a lot of those growth stocks 58 00:03:30,200 --> 00:03:33,840 Speaker 1: that had the huge multiples now are garp stocks. Mariam, 59 00:03:33,880 --> 00:03:36,840 Speaker 1: We've spent a little bit of time unpacking the Macray picture, 60 00:03:36,880 --> 00:03:39,000 Speaker 1: but you mentioned that you can still make money in 61 00:03:39,000 --> 00:03:43,720 Speaker 1: this environment. So where are you looking to invest right now? Well, first, 62 00:03:43,800 --> 00:03:47,640 Speaker 1: of all from a larger maybe ten thousand feet area. 63 00:03:47,960 --> 00:03:50,760 Speaker 1: We rotated away from value which worked so well in 64 00:03:50,800 --> 00:03:52,920 Speaker 1: the first half of the year, to growth in our 65 00:03:53,040 --> 00:03:57,400 Speaker 1: endowment series in early July. We prefer the US and 66 00:03:57,920 --> 00:04:01,520 Speaker 1: mid and large caps, and you know, drilling down to 67 00:04:01,560 --> 00:04:04,920 Speaker 1: a couple of names, we like the autopart retailers Advanced 68 00:04:04,920 --> 00:04:08,760 Speaker 1: Auto and Riley Auto Parts. They should continue to benefit 69 00:04:08,840 --> 00:04:11,920 Speaker 1: from the aging vehicles on the road because new vehicle 70 00:04:12,080 --> 00:04:17,479 Speaker 1: demand is outstripping production UM and those repairs have to 71 00:04:17,640 --> 00:04:20,360 Speaker 1: increase as more miles are driven on that old car. 72 00:04:21,000 --> 00:04:24,400 Speaker 1: So historically the pricing passed through has been really good 73 00:04:24,440 --> 00:04:27,440 Speaker 1: amongst the auto part retailers, and earnings are expected to 74 00:04:27,440 --> 00:04:30,960 Speaker 1: grow in the low teams next year and UH over 75 00:04:31,000 --> 00:04:34,040 Speaker 1: the next twelve months UH for those who are looking 76 00:04:34,080 --> 00:04:37,480 Speaker 1: for some income. Advanced Auto also provides a three percent 77 00:04:37,560 --> 00:04:40,320 Speaker 1: of it in the yield, so we're looking for mid 78 00:04:40,360 --> 00:04:43,360 Speaker 1: teams total return on each of these names. How would 79 00:04:43,400 --> 00:04:46,680 Speaker 1: you characterize the American consumer right now? We were pointing 80 00:04:46,680 --> 00:04:49,960 Speaker 1: out moments ago that gasoline prices have been down for 81 00:04:50,080 --> 00:04:53,120 Speaker 1: fifty straight days. Some of that, undoubtedly is due to 82 00:04:53,200 --> 00:04:56,800 Speaker 1: demand destruction. Are people feeling like they just can't endure 83 00:04:57,400 --> 00:05:01,440 Speaker 1: this inflationary environment. Yeah. Uh, I think it's been telegraphed 84 00:05:01,560 --> 00:05:05,400 Speaker 1: very well that in inflation is very high. Then they're 85 00:05:05,480 --> 00:05:09,200 Speaker 1: losing their um, uh purchasing power. You know, all you 86 00:05:09,240 --> 00:05:12,000 Speaker 1: have to do is drive past a gas station uh 87 00:05:12,040 --> 00:05:14,720 Speaker 1: this summer to feel the pain. You don't even have 88 00:05:14,800 --> 00:05:16,359 Speaker 1: to go to the pump. You just look at the 89 00:05:16,400 --> 00:05:19,680 Speaker 1: price and you feel the pain. Um. And so we've 90 00:05:19,720 --> 00:05:25,240 Speaker 1: seen people withdraw from certain activities, but um, you know, 91 00:05:25,560 --> 00:05:30,160 Speaker 1: there's really a need for services, you know, getting out 92 00:05:30,200 --> 00:05:33,360 Speaker 1: of the house and going to parties and getting dressed 93 00:05:33,360 --> 00:05:37,279 Speaker 1: for a party and uh just doing the entertainment, the travel, 94 00:05:37,520 --> 00:05:41,720 Speaker 1: that sort of thing. So um, there's uh, you know 95 00:05:41,960 --> 00:05:45,040 Speaker 1: some again that goes back to miles driven. Uh. People 96 00:05:45,520 --> 00:05:49,479 Speaker 1: did cut back on miles driven though. Um it's interesting 97 00:05:49,520 --> 00:05:53,800 Speaker 1: they didn't have to be told to uh consolidate your 98 00:05:53,839 --> 00:05:58,240 Speaker 1: trips and other things we've heard in uh prior decades. Um, 99 00:05:58,279 --> 00:06:00,599 Speaker 1: they just did that. But also there's a lot of 100 00:06:00,600 --> 00:06:02,800 Speaker 1: people still working from home. You get the option to 101 00:06:02,800 --> 00:06:04,880 Speaker 1: work from home, you take it because you get an 102 00:06:05,240 --> 00:06:09,360 Speaker 1: instant increase in your salary by just staying home. Yeah, 103 00:06:09,400 --> 00:06:11,760 Speaker 1: we had some bit of and expected numbers that of 104 00:06:11,920 --> 00:06:14,080 Speaker 1: Ali Baba. So when you look at that sort of thing, 105 00:06:14,160 --> 00:06:17,880 Speaker 1: do you think that consumer discretionary stocks probably not a 106 00:06:17,920 --> 00:06:20,760 Speaker 1: bad option right now? And Ali Baba didley delist in 107 00:06:20,800 --> 00:06:25,120 Speaker 1: the U S. Would you buy h is Um? You know, 108 00:06:25,800 --> 00:06:29,400 Speaker 1: I can't say that we would right now. UM. I 109 00:06:29,440 --> 00:06:32,679 Speaker 1: would say we're still focused on the service side of things, 110 00:06:32,839 --> 00:06:36,279 Speaker 1: and on the consumer discretionary side, we're more on the 111 00:06:36,400 --> 00:06:41,000 Speaker 1: defensive end of things rather than um the offensive part. 112 00:06:41,360 --> 00:06:43,520 Speaker 1: And then we hear after the bell from companies like 113 00:06:43,720 --> 00:06:47,600 Speaker 1: Lift with adjusted ibada for a Q two above forecast 114 00:06:47,680 --> 00:06:51,159 Speaker 1: the door dash numbers. I think we're above forecast on 115 00:06:51,200 --> 00:06:54,000 Speaker 1: the revenue side. Do you think maybe that there are 116 00:06:54,000 --> 00:06:58,600 Speaker 1: certain pockets of the American consumer that are holding up 117 00:06:58,760 --> 00:07:01,000 Speaker 1: really really well, and maybe you want to be in 118 00:07:01,120 --> 00:07:06,119 Speaker 1: some of those parts of the market, like consumer discretionary Well, 119 00:07:06,320 --> 00:07:10,240 Speaker 1: certain pockets again, I could see UM where people might 120 00:07:10,240 --> 00:07:14,200 Speaker 1: look at Lift as their alternative to m renting a 121 00:07:14,280 --> 00:07:17,720 Speaker 1: car while traveling. UM. I've been in that position, and 122 00:07:17,760 --> 00:07:20,200 Speaker 1: when you look at seven hundred dollars for a few 123 00:07:20,280 --> 00:07:24,720 Speaker 1: days time with a rental, uh, Lift looks really really attractive. 124 00:07:24,800 --> 00:07:28,080 Speaker 1: So I think they're probably benefiting from the fact that 125 00:07:28,120 --> 00:07:31,120 Speaker 1: people do want to get out and explore more. At 126 00:07:31,160 --> 00:07:35,600 Speaker 1: the same time, there's limited vehicles available, and that moves 127 00:07:35,640 --> 00:07:39,120 Speaker 1: into their sweet spot. Mary, I'm just quickly. A lot 128 00:07:39,120 --> 00:07:40,920 Speaker 1: of the people we talked to on this show have 129 00:07:41,000 --> 00:07:43,440 Speaker 1: a larger than normal cash allocation. Do you fall into 130 00:07:43,480 --> 00:07:47,880 Speaker 1: that category at the moment, No, we don't. Across almost 131 00:07:48,000 --> 00:07:52,720 Speaker 1: all of our strategies, we are mandated to be fully invested, 132 00:07:53,040 --> 00:07:57,640 Speaker 1: so we do not have abnormally large amount of cash 133 00:07:57,680 --> 00:08:01,160 Speaker 1: on hand. All right, Aram, We'll leave it there. Thanks 134 00:08:01,160 --> 00:08:04,720 Speaker 1: so much for joining us on Bloomberg Daybreakcasia Maria Montaigne 135 00:08:04,880 --> 00:08:08,120 Speaker 1: is portfolio manager at Gradient Investments.