WEBVTT - Markets And The Fed In 2022 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 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.639 at Bloomberg dot com slash podcast. Let's check in on 0:00:22.680 --> 0:00:25.640 these markets. Rebecca Felt and senior market strategists at Riverfront 0:00:25.720 --> 0:00:29.760 Investment Group located in beautiful Richmond, Virginia. Rebecca, thanks so 0:00:29.840 --> 0:00:32.720 much for joining us here. You are a fellow University 0:00:32.720 --> 0:00:35.319 of Richmond alumni. You know what the mascot is mat 0:00:35.320 --> 0:00:37.000 at the University of Richmond. Wait, I thought you were 0:00:37.000 --> 0:00:40.680 a duke guy graduate school. I see, Okay, so undergrad 0:00:40.920 --> 0:00:47.040 the mascot is um General Lee Spiders. Oh yes, you 0:00:47.200 --> 0:00:49.360 never would have guessed that, but Rebecca knows that. Rebecca, 0:00:49.360 --> 0:00:51.559 thanks so much for joining us here. What are you 0:00:51.640 --> 0:00:54.480 doing in a market where we've got interest rates rising, 0:00:54.520 --> 0:00:57.920 we've got growth slowing? How do you have the courage 0:00:57.960 --> 0:01:00.959 to be in this market? Thank you so much for 0:01:01.240 --> 0:01:02.960 having me. Well for self. You know, one of the 0:01:03.000 --> 0:01:05.160 things we rely on as our process and our tactical 0:01:05.160 --> 0:01:09.440 indicators are still suggesting it's appropriate to be overweight stocks UM, 0:01:09.520 --> 0:01:12.120 and we are with a preference for US equity. Now, 0:01:12.120 --> 0:01:14.200 I'll say that and also point out that we have 0:01:14.319 --> 0:01:17.400 taken some risk off the table um in the last 0:01:17.400 --> 0:01:20.120 month or so. We've we've bumped up our cash just 0:01:20.160 --> 0:01:23.039 a little bit UM, but that's really for maybe a 0:01:23.080 --> 0:01:26.440 buying opportunity later, not because we bearish. Yeah. We heard 0:01:26.520 --> 0:01:28.920 yesterday we're talking to Phil Orlando from Federate Hermes and 0:01:28.920 --> 0:01:32.880 he was saying, uh, he thinks the markets rallying to 0:01:33.680 --> 0:01:36.800 undred by year end, but this first half is going 0:01:36.880 --> 0:01:41.080 to be choppy and almost wanting to preserve capital. I 0:01:41.080 --> 0:01:43.559 think he said, you know for now, Um, you sound 0:01:43.600 --> 0:01:47.680 a little bit more sanguine about the risks the headwinds 0:01:48.000 --> 0:01:51.280 UM to to face US stock investors for for this 0:01:51.320 --> 0:01:54.160 part of the year. Well, you know, when we put 0:01:54.160 --> 0:01:57.920 our outlook out in at the end of December beginning 0:01:57.920 --> 0:02:00.440 of January, the theme of it was the return of 0:02:00.480 --> 0:02:03.760 volatility in two So of course that doesn't mean it's 0:02:03.800 --> 0:02:05.840 going to be pleasant, um, but we think, you know, 0:02:05.920 --> 0:02:09.160 selection is going to be t having um, you know, 0:02:09.360 --> 0:02:13.320 some growth, some value and against some cash for ballost 0:02:13.360 --> 0:02:15.680 if you will, against these types of periods, and we 0:02:15.760 --> 0:02:18.640 think that you can navigate through, but we do also 0:02:18.680 --> 0:02:22.040 agree that the volatility will likely continue through through the 0:02:22.080 --> 0:02:24.640 first half of the year. And Rebecca, we're kind of 0:02:24.680 --> 0:02:27.440 in getting into the meat here of earning season. What 0:02:27.520 --> 0:02:30.560 do you need to see from corporate earnings here as 0:02:30.600 --> 0:02:34.280 it relates to maybe valuation here? Obviously some people have 0:02:34.440 --> 0:02:36.520 some valuation concerns. What do you need to see from 0:02:36.520 --> 0:02:39.720 earnings to kind of address that issue? Well, when you 0:02:39.760 --> 0:02:42.120 think about where we were in terms of growth in 0:02:42.200 --> 0:02:46.320 twenty one right there now forecasting full year one is 0:02:46.320 --> 0:02:49.959 going to come in north oft and we know that 0:02:49.960 --> 0:02:52.080 that was you know, coming out of the depths, and 0:02:52.120 --> 0:02:55.160 then now you're looking at two where you're seeing a 0:02:55.160 --> 0:02:58.519 deceleration of growth in that eight ten percent range. That's consensus, 0:02:58.520 --> 0:03:00.920 i think for the calendar year that are in. But 0:03:01.040 --> 0:03:03.880 that has been well known for six months or so, 0:03:04.040 --> 0:03:07.920 right so that that forward growth expectation has been there, 0:03:08.160 --> 0:03:10.520 and we've also seen a couple of multiple points come 0:03:10.560 --> 0:03:13.919 out of the SMP five hundred as we have navigated 0:03:13.919 --> 0:03:16.400 through this year, so we're back to what we would 0:03:16.400 --> 0:03:20.240 consider a more normal type of earnings growth trajectory, and 0:03:20.280 --> 0:03:23.239 we think that the current valuations can bear that out, 0:03:23.280 --> 0:03:26.520 particularly when you look at UH profit margins being so strong, 0:03:26.600 --> 0:03:29.720 cash levels being so high, and the growth prospects still 0:03:30.040 --> 0:03:34.280 very good for the US in terms of yields. Right 0:03:34.280 --> 0:03:38.000 now we're headed towards two. It seems quickly. UM. How 0:03:38.080 --> 0:03:41.120 much does that bother you, uh in terms of your 0:03:41.160 --> 0:03:43.960 equity investments and at what point would it you know, 0:03:44.400 --> 0:03:46.760 what level do you think you'd have to make some 0:03:46.840 --> 0:03:51.680 changes to your strategy? Well, definitely UH north of two, 0:03:51.840 --> 0:03:55.080 most likely before we started bumping up our our fixed 0:03:55.120 --> 0:03:57.440 income UM. I asked that question a lot of our 0:03:57.440 --> 0:04:00.360 fixed income folks, and I think that they serve the 0:04:00.440 --> 0:04:03.200 right to to to hold off on giving a finite number. 0:04:03.240 --> 0:04:06.080 But when you think about the technology space, we are 0:04:06.160 --> 0:04:08.480 still neutral to slightly over light there. But we are 0:04:08.520 --> 0:04:12.000 still leaning into those software companies because we think it's 0:04:12.040 --> 0:04:15.360 worth it to pay up for names that have consistency 0:04:15.560 --> 0:04:18.520 potential as it relates to earnings and revenues UM. And 0:04:18.560 --> 0:04:20.480 we do expect that they're going to be a little 0:04:20.560 --> 0:04:22.960 choppy in here as folks digest the fact that rates 0:04:22.960 --> 0:04:25.280 are going higher, But we still think growth will win out, 0:04:25.320 --> 0:04:28.920 and so we're content to stick with the space. I'm 0:04:28.920 --> 0:04:31.480 looking at w t I crude oil. It's off about 0:04:31.480 --> 0:04:35.520 two percent today but still just below nine per barrel, 0:04:35.560 --> 0:04:38.360 and it's obviously been a good harbinger for energy stocks 0:04:38.960 --> 0:04:41.040 actually getting a little bit more love in the marketplace. 0:04:41.120 --> 0:04:42.919 How do you think about energy? Right here? Is are 0:04:42.960 --> 0:04:46.880 more room to go? Well, we had come into this 0:04:47.000 --> 0:04:50.760 year slightly underweight energy because we did not expect oil 0:04:50.800 --> 0:04:53.400 to go as high as it has gone. Um. Obviously 0:04:53.680 --> 0:04:57.039 for the foreseeable future, though, we expect prices to stay high, 0:04:57.120 --> 0:05:01.320 particularly with the tensions going on on the you crane border. Um. 0:05:01.400 --> 0:05:04.680 So we have neutralized that position and we're sitting tight 0:05:04.720 --> 0:05:09.200 with that at this moment. All right. So the geopolitical 0:05:10.160 --> 0:05:13.120 issues are always just difficult to get right. Let me 0:05:13.160 --> 0:05:16.120 ask you, just with about thirty seconds left, what you 0:05:16.120 --> 0:05:22.239 think about crazy things like crypto? Is it too crazy? Well? 0:05:22.440 --> 0:05:25.719 I don't um have really a good answer for you. There. 0:05:25.720 --> 0:05:28.640 It is a space that we watch, obviously because companies 0:05:28.680 --> 0:05:31.400 that we own have exposures there um that we do 0:05:31.440 --> 0:05:35.000 not outright invest in it. It's this time, all right, Rebecca, 0:05:35.040 --> 0:05:37.800 crazy and it's still too crazy. It's still crazy for 0:05:37.839 --> 0:05:41.360 a lot of people. For main Street, yes, Richmond, and 0:05:41.480 --> 0:05:46.279 for maybe even Jamie diamond In. Yeah, but I think 0:05:46.320 --> 0:05:50.080 like Rebecca, you know, they she has she's invested in 0:05:50.120 --> 0:05:54.080 companies that are connected. He's willing to work with clients 0:05:54.120 --> 0:06:01.640 that are connected. He thinks. Let's check in with Darren Schurvi. 0:06:01.680 --> 0:06:06.840 It's portfolio manager for jacob Asset Management. Darren, what are 0:06:06.839 --> 0:06:09.440 you doing with this market here? We've seen I guess 0:06:09.520 --> 0:06:12.360 volatility has been kind of the name of the game 0:06:12.400 --> 0:06:17.920 here so far. Ino, how are you thinking about this market? Well, 0:06:17.960 --> 0:06:22.040 it's absolutely uh remains one of the craziest market environments 0:06:22.440 --> 0:06:25.640 I've seen. But that's pretty much been the case for uh, 0:06:25.760 --> 0:06:29.800 you know, not just two but uh certainly I would 0:06:29.839 --> 0:06:32.960 say for the last twelve twenty four months. Frankly, so 0:06:33.120 --> 0:06:36.200 this is really not much different. I mean, if if 0:06:36.240 --> 0:06:39.560 you look at the area where we generally focus on 0:06:39.600 --> 0:06:43.839 a jacobeth In Management, which is the smaller cap portion 0:06:43.880 --> 0:06:46.000 of the marketplace, I mean, we've been kind of in 0:06:46.040 --> 0:06:50.719 a stealth are market for twelve months. So again I'm 0:06:50.760 --> 0:06:53.520 you know, generally speaking, I'm looking at this this opportunity 0:06:53.640 --> 0:06:56.240 to try and find values that are out there in 0:06:56.240 --> 0:07:00.960 the marketplace. So where are you finding them? Oh, in 0:07:01.160 --> 0:07:03.440 a lot of different places obviously, you know. I mean 0:07:04.240 --> 0:07:07.279 part of the uh you know question is trying to 0:07:07.360 --> 0:07:11.080 determine which companies are going to do well when we 0:07:11.560 --> 0:07:16.480 come out of this uh, you know, difficult COVID pandemic environment, 0:07:16.480 --> 0:07:19.680 which ones are going to be able to handle inflationary 0:07:19.800 --> 0:07:24.400 environments and uh So I mean one example, for for instance, 0:07:24.480 --> 0:07:29.440 is in cryptocurrency, which obviously, UH is a area that 0:07:29.440 --> 0:07:33.280 that we're pretty intensely interested in. Uh. You know, in 0:07:33.280 --> 0:07:37.120 a lot of ways, it parallels what we saw UM 0:07:37.160 --> 0:07:40.560 as a technology focused investor way back when in the 0:07:40.600 --> 0:07:43.400 dot com bubble. A lot of interesting opportunities, but a 0:07:43.400 --> 0:07:45.880 lot of perils. So you know, one of the UH 0:07:46.240 --> 0:07:49.200 stocks that we like here is is a cryptocurrency broker 0:07:49.280 --> 0:07:52.920 called Voyager Digital. Uh. That is one area that we like. 0:07:53.280 --> 0:07:57.280 We have investments in silver Gate and Galaxy Digital as 0:07:57.280 --> 0:08:00.600 well in that space. So, and I know, I know 0:08:00.640 --> 0:08:04.040 you were back at the dot com era here, boy, 0:08:04.240 --> 0:08:07.200 that didn't end well for a lot of people you 0:08:07.240 --> 0:08:09.800 think the risk was good for But Darren, you were 0:08:09.960 --> 0:08:14.080 at market Watch at the time, right, Yeah, So I've 0:08:14.120 --> 0:08:18.320 been uh, originally a journalist and and left to join 0:08:18.400 --> 0:08:22.240 the asset management field in actually the peak of the 0:08:22.320 --> 0:08:27.120 dot com Yeah, in hindsight is a pretty good conjuring indicator. 0:08:27.880 --> 0:08:30.240 But you know, it's all about your timelines. I mean, 0:08:30.320 --> 0:08:32.640 you'd say it didn't end well. And yet if you 0:08:32.679 --> 0:08:35.920 look at the you know, ten most valuable companies in 0:08:35.920 --> 0:08:38.360 the world, they're all basically Internet base. It was an 0:08:38.360 --> 0:08:42.160 issue of timing more so than opportunity, and and so 0:08:42.320 --> 0:08:43.920 you know that's part of the game in the in 0:08:43.960 --> 0:08:47.679 the market and uh so generally speaking, you know, when 0:08:47.679 --> 0:08:50.680 I was looking at this marketplace and all of the 0:08:50.720 --> 0:08:53.719 crazy speculation that we saw with the meme stocks and 0:08:53.760 --> 0:08:56.920 the cryptos and and f t s and and just 0:08:57.160 --> 0:09:01.439 had trouble finding good opportunities in that type of marketplace. 0:09:01.480 --> 0:09:05.040 So when I see this uh kind of come down, Uh, 0:09:05.080 --> 0:09:08.160 you know, that gets me more excited. It opens up opportunities. 0:09:08.160 --> 0:09:11.240 A great example of that is with SPACs. I mean, 0:09:11.320 --> 0:09:14.120 you know, that was one of the the biggest indicators 0:09:14.120 --> 0:09:17.439 that things were just getting entirely uh you know, too 0:09:17.520 --> 0:09:21.880 speculative and goofy and some level, and and so many 0:09:21.960 --> 0:09:26.280 of those SPACs are now totally broken with with evaluations 0:09:26.320 --> 0:09:29.440 well under the price they became public at. You know, 0:09:29.880 --> 0:09:32.520 are we there yet at the bottom. Probably not. You know, 0:09:32.559 --> 0:09:34.360 a lot of these companies, just like we saw in 0:09:34.440 --> 0:09:36.880 the in the dot com bubble, will will fail. But 0:09:37.440 --> 0:09:40.120 there are some interesting companies, There are some interesting technologies 0:09:40.160 --> 0:09:42.000 out there, and I think it is going to be 0:09:42.720 --> 0:09:44.960 on us to kind of pick through some of the 0:09:45.000 --> 0:09:48.559 carcasses that arise and and and realize where there's opportunity 0:09:48.600 --> 0:09:52.280 and when there was just hype. All right, Darren, great 0:09:52.280 --> 0:09:53.680 to get some time with you, and I hope to 0:09:54.480 --> 0:09:56.840 talk to you more again in the future. I'm intensely 0:09:56.840 --> 0:09:59.840 focused on crypto as well. So um, I'm glad we 0:10:00.200 --> 0:10:03.120 had you on. And uh, Darren turvit's their portfolio manager 0:10:03.120 --> 0:10:06.560 from Jacob Asset Management talking to us about what he's 0:10:06.600 --> 0:10:09.320 looking for in terms of opportunity in terms of crypto. 0:10:09.440 --> 0:10:11.480 You know, it's been an incredible run over the past 0:10:12.000 --> 0:10:14.920 um few sessions for bitcoin. We're trading it just over 0:10:15.080 --> 0:10:18.640 forty forty three thousand, I should say right now, so uh, 0:10:19.160 --> 0:10:22.440 forty three thousand, four hundred dollars basically. But you know, 0:10:22.480 --> 0:10:26.120 it was only two weeks ago that we were down 0:10:26.360 --> 0:10:30.600 at thirty six and um, we had flirted. People thought 0:10:30.600 --> 0:10:32.480 we were going down to thirty um, but we have 0:10:32.559 --> 0:10:34.640 gone the other way and it's interesting to watch bitcoin 0:10:34.679 --> 0:10:40.760 now get some get some real power. Let's check in 0:10:40.800 --> 0:10:44.680 with our next. Katerina Simonetti, Senior vice president, Private Wealth 0:10:44.720 --> 0:10:48.160 Advisor at Morgan Stanley. Katerina thinks, so much for joining 0:10:48.240 --> 0:10:50.599 us here. I kind of feel like, you know, I 0:10:50.679 --> 0:10:53.480 got a lot of bricks in my wall of worry here, 0:10:53.600 --> 0:10:57.120 not the least of which is inflation. But I need 0:10:57.160 --> 0:10:59.480 to be in the market though I just stayed defensive. 0:11:00.280 --> 0:11:03.839 What are you telling your clients, Matt, You're right, I 0:11:03.880 --> 0:11:07.079 mean the certainly has been a bumpy right, and it's 0:11:07.160 --> 0:11:10.640 nice to see some green on the screen for sure. Uh. 0:11:10.679 --> 0:11:13.400 And the uniqueness of the situation is that we not 0:11:13.600 --> 0:11:16.440 only have inflation, but we also have this really low 0:11:16.559 --> 0:11:19.040 rate environment and with no rates are going up. But 0:11:19.120 --> 0:11:22.400 this combination of the low rate environment and inflation that 0:11:22.520 --> 0:11:28.160 is higher than expected, UH, is a definite concerns for investors. 0:11:28.160 --> 0:11:30.439 And we see it with consumer spending, with the consumers 0:11:30.440 --> 0:11:33.760 seeing extremely relactant suspense and kind of just start looking 0:11:33.800 --> 0:11:37.040 at the situation and perhaps inflation is not going to 0:11:37.080 --> 0:11:40.040 stay at the current high levels that we're seeing it. 0:11:40.160 --> 0:11:42.200 Perhaps it's going to they're going to be some type 0:11:42.200 --> 0:11:46.479 of level of normalization. But what it means to investors 0:11:46.559 --> 0:11:51.559 is that real returns, inflation adjusted returns, are more important 0:11:51.559 --> 0:11:54.640 than ever and we have to very carefully analyze the 0:11:54.679 --> 0:11:58.760 investment portfolios through the prison of are they producing enough 0:11:58.880 --> 0:12:01.680 income to at the rear least maintained the buying power 0:12:02.040 --> 0:12:05.360 of our portfolios and does everything that we have in 0:12:05.400 --> 0:12:09.559 our portfolios makes sense from the perspective of real returns? 0:12:09.640 --> 0:12:13.040 And that's what inflation, That's what investors are asking us about. 0:12:13.200 --> 0:12:15.920 And these are the conversations that we're having over and over, 0:12:16.200 --> 0:12:20.000 you know, looking at everything through the perspective of being 0:12:20.040 --> 0:12:24.200 prepared for being at the higher rate um inflation environment 0:12:24.280 --> 0:12:26.880 for a quite some time. Yeah, it's the rates that 0:12:26.960 --> 0:12:30.600 are the concern. Right, how far do you expect the 0:12:30.720 --> 0:12:32.760 FED to go? How far do you set a ten 0:12:32.800 --> 0:12:37.079 year ago? Well said has done you know, very good 0:12:37.160 --> 0:12:41.960 job setting expectations and their decisions are very much economically driven, 0:12:42.040 --> 0:12:45.480 not market driven, and economy has remained strong. I mean, 0:12:45.559 --> 0:12:48.240 there are challenges without shadow of a doubt, you know. 0:12:48.320 --> 0:12:50.079 So we think that they're going to be a number 0:12:50.080 --> 0:12:52.320 of rate hikes, you know, probably the quarter point at 0:12:52.320 --> 0:12:55.440 the time. UM, it's hard to know exactly how far 0:12:55.559 --> 0:12:58.240 the rates are going to get, you know, but the 0:12:58.360 --> 0:13:03.120 concern is really for the existing portfolios and existing positioning 0:13:03.600 --> 0:13:07.040 UM and the quality right now of fixing com portfolios. 0:13:07.160 --> 0:13:09.839 You know, it's important more than ever. Um. Now, this 0:13:09.920 --> 0:13:13.480 is not an unprecedented times you know, the environment of 0:13:13.559 --> 0:13:16.120 raising races a little bit not writing for investors, but 0:13:16.440 --> 0:13:18.560 you know, we get through it, you know, over and over. 0:13:19.360 --> 0:13:23.720 But it is unprecedented when we're dealing with hiking market volatility, 0:13:24.000 --> 0:13:27.240 inflution and the environment would fed as a raising rate 0:13:27.360 --> 0:13:29.560 all at the same time. So it's going to be 0:13:29.600 --> 0:13:34.120 a bumpy, right, heightened volatility, and we should mentally prepare 0:13:34.160 --> 0:13:38.080 for it. Katarina, When your clients call up and ask 0:13:38.160 --> 0:13:42.679 about crypto broadly defined or bitcoin, how do you kind 0:13:42.679 --> 0:13:47.040 of have that conversation, Well, you know, it's it's there. 0:13:47.200 --> 0:13:50.560 There's a lot of uncertainty in that effort pass and 0:13:50.679 --> 0:13:52.680 you know, we see the volatility that is at the 0:13:52.760 --> 0:13:56.280 highest level you know possible. So we really are very 0:13:56.320 --> 0:13:59.520 thankful about having those discussions. You know, from the perspective 0:13:59.679 --> 0:14:02.000 of you know, we want to make sure that that 0:14:02.200 --> 0:14:05.760 investors themselves do a lot of homework trying to understand 0:14:05.920 --> 0:14:08.560 what the assets class is all about and what will 0:14:08.720 --> 0:14:11.720 in place, you know, in their investment portfolios. You know, 0:14:11.840 --> 0:14:15.120 so we we just you know, our job as advisors, 0:14:15.200 --> 0:14:18.480 you know, EA is to set expectations and prepare the 0:14:18.640 --> 0:14:21.400 general investment public for a much much higher level of 0:14:21.480 --> 0:14:26.880 volatility and asset class versus traditional stock market investments and uh, 0:14:27.000 --> 0:14:30.760 you know, more expected volatilities. We've seen some reasonable volatility 0:14:30.760 --> 0:14:33.400 and commodities other commodities, right because a lot of people 0:14:33.440 --> 0:14:37.120 think of cryptos just as digital commodities. What do you 0:14:37.160 --> 0:14:41.200 think about the the o G commodities though? I mean, 0:14:41.760 --> 0:14:47.440 you know, the oils, the metals, the eggs. Is that important? Well, 0:14:47.520 --> 0:14:51.359 it's bring you bring me to the original question about inflation. 0:14:51.680 --> 0:14:56.200 So commodities traditionally are viewed as one of the inflation hedges. 0:14:56.400 --> 0:14:58.720 And you know what we're doing right now is we're 0:14:58.720 --> 0:15:03.040 putting making sure that an investors do have a diversified portfolio. 0:15:03.320 --> 0:15:06.840 You know, all the sectors that are you know, historically 0:15:06.880 --> 0:15:11.000 known as inflation hedges, and commodities absolutely play a role 0:15:11.040 --> 0:15:13.200 there we can deny that. You know, there has been 0:15:13.280 --> 0:15:15.880 a serious subject in the price of oil, you know. 0:15:15.920 --> 0:15:18.160 But the other area that that works really well in 0:15:18.200 --> 0:15:21.000 this environment is real estate because as we look at 0:15:21.040 --> 0:15:24.320 the inflation heades, you know, would ideally would we try 0:15:24.400 --> 0:15:29.400 to combine is not only the appreciation potential and maintaining 0:15:29.440 --> 0:15:32.680 the ability of these sectors to maintain the purchasing value 0:15:32.720 --> 0:15:35.240 of the investors, but also looking at asset classes that 0:15:35.320 --> 0:15:38.440 produced currents become and this is where you know, industrials 0:15:38.440 --> 0:15:41.520 and reads, you know, really common to play. But historically, 0:15:41.600 --> 0:15:44.359 you know, coming back to your question about commodity, commodities 0:15:44.560 --> 0:15:48.720 can be used very effectively as inflation hedges. All right, Katerina, 0:15:48.720 --> 0:15:51.560 thank you so much for joining us. Always appreciate getting 0:15:51.640 --> 0:15:54.320 your thoughts and perspective. Katerina Semineity. She's a senior vice 0:15:54.360 --> 0:15:59.200 president and a private wealth adviser for Morgan Stanley. And 0:15:59.280 --> 0:16:02.640 you know, it's just math. We've seen the commodities inflation. 0:16:03.320 --> 0:16:05.160 You know, everybody that comes on and there are a 0:16:05.160 --> 0:16:08.160 lot smarter than me, say, inflation is going to come 0:16:08.200 --> 0:16:11.680 down markedly throughout this year and maybe it's even peaky 0:16:11.760 --> 0:16:16.240 now or perhaps next month. Boy I guess I haven't 0:16:16.240 --> 0:16:21.320 seen it yet. I mean I also hear that from UM. 0:16:21.440 --> 0:16:24.120 Most of the people who come on, all of whom 0:16:24.120 --> 0:16:28.600 are also smarter than I. UM. I will say, and 0:16:28.680 --> 0:16:30.800 again I'm going to revert to N I Gilbert. I 0:16:30.880 --> 0:16:34.360 highly recommend people type NI space Gilbert on the terminal. 0:16:34.400 --> 0:16:38.960 I'm doing it as Mark's story number three on on 0:16:39.080 --> 0:16:43.200 his ticker. There is about a couple of really big 0:16:43.280 --> 0:16:46.280 names on Wall Street. Nikolai Tangan, who's I guess Global 0:16:46.280 --> 0:16:48.480 Wall Street right because he runs the Norwegian Wealth Fund, 0:16:48.800 --> 0:16:52.960 and Blackrock are both saying inflation is here to stay. Yeah, 0:16:53.680 --> 0:16:55.640 I don't know, but you're right. Most people have said 0:16:55.840 --> 0:16:58.200 it's going to be tempered in the second half, come 0:16:58.240 --> 0:16:59.880 back down to earth. So we'll have to see a 0:17:00.000 --> 0:17:06.080 that's certainly an issue for investors today. David Cats, president 0:17:06.080 --> 0:17:09.960 and chief investment officer for Matrix Asset Advisors, joins us, David, 0:17:09.960 --> 0:17:11.800 I love chatting with you. I love to get your 0:17:11.840 --> 0:17:15.800 thoughts here as we struggle here early in the equity 0:17:15.840 --> 0:17:18.840 markets a lot of altility, which people warned us about, 0:17:19.560 --> 0:17:23.160 how do you think about value versus growth here? Given 0:17:23.200 --> 0:17:26.000 what we've seen so far this year, So we went 0:17:26.040 --> 0:17:30.119 into the year cautiously optimistic about the market, but a 0:17:30.119 --> 0:17:32.879 little bit concerned about the growthier areas of the market 0:17:32.960 --> 0:17:35.639 because we saw a lot of accesses in light of 0:17:35.680 --> 0:17:39.040 the fact that you had a ten to sell off 0:17:39.080 --> 0:17:41.240 in that area for the first month of the year. 0:17:41.640 --> 0:17:43.960 We think it's a more level playing field right now, 0:17:44.000 --> 0:17:46.159 and we think that you can buy in both areas, 0:17:46.240 --> 0:17:48.760 both value and growth, but you do have to be 0:17:48.800 --> 0:17:52.119 a lot more discerning on the growth side. What do 0:17:52.160 --> 0:17:54.160 you think when you look at what's happening in rates 0:17:54.280 --> 0:17:56.080 right now? I mean, we're all on kind of two 0:17:56.080 --> 0:17:58.960 percent watch with a tenure um right now trading at 0:17:59.000 --> 0:18:03.160 one plus. We have in It's not just the US, 0:18:03.320 --> 0:18:06.400 right You've got UM, the b o E, and now 0:18:06.400 --> 0:18:09.400 the ECB on board with kind of a global rate 0:18:09.920 --> 0:18:14.359 raising uh cycle. So we do think that rates are 0:18:14.359 --> 0:18:16.320 going to be going up this year. That's you know, 0:18:16.560 --> 0:18:18.199 locked and load of the fet is going to be 0:18:18.280 --> 0:18:22.480 raising rates. Whether it's three or four or five times, 0:18:22.520 --> 0:18:25.600 it's going to be happening. We think inflation is definitely 0:18:25.600 --> 0:18:27.919 out there. We do believe it's going to start to 0:18:27.960 --> 0:18:31.560 come down a little bit by the July August time frame, 0:18:31.840 --> 0:18:33.760 but we think interest rates are going higher, and you 0:18:33.800 --> 0:18:37.320 want to invest accordingly because it shouldn't be a surprise 0:18:37.400 --> 0:18:39.480 when the tenure does hit too. It's going to happen 0:18:40.359 --> 0:18:42.480 small caps. Is it a time for small caps to 0:18:42.960 --> 0:18:47.560 really shine? Here? David So again, small caps opened the 0:18:47.680 --> 0:18:51.840 year pretty horribly. They're down about fifteen to so we 0:18:51.920 --> 0:18:54.680 do think from here, in a better economy and as 0:18:54.720 --> 0:18:58.240 count COVID takes a back seat eventually that they will 0:18:58.240 --> 0:19:01.160 come back very sharply. So we like small caps here. 0:19:01.800 --> 0:19:05.800 We don't traffic as much in individual small stocks. We 0:19:05.880 --> 0:19:08.639 focus on mid and large. On the small cap side, 0:19:08.680 --> 0:19:11.080 we like the e t f s like the Russell 0:19:11.240 --> 0:19:13.720 two thousand or the SMP Small Cap Index. We think 0:19:13.840 --> 0:19:16.600 is your real good exposure to that area of the market, 0:19:16.600 --> 0:19:18.480 and we would be buying the step. You know, you've 0:19:18.480 --> 0:19:20.520 had a very sharp sell off. We think if you 0:19:20.560 --> 0:19:22.359 have a six or twelve month time arise and there 0:19:22.359 --> 0:19:24.399 are lots of different places to put money to work, 0:19:24.720 --> 0:19:27.000 we would not chase the strong days like today, but 0:19:27.040 --> 0:19:29.600 on the days where the markets off two hundred five 0:19:29.680 --> 0:19:32.680 hundred points small caps are down, we'd buy small caps 0:19:32.680 --> 0:19:34.439 and we think there are, you know, lots of places 0:19:34.480 --> 0:19:36.960 to make money, whether it's small, mid, or large. And 0:19:37.040 --> 0:19:40.639 what about regionally, I mean, do you focus on only 0:19:40.680 --> 0:19:42.439 the US? Do you look at what's going on in 0:19:42.440 --> 0:19:47.000 Europe emerging markets? So our primary expertise is in the US. 0:19:47.080 --> 0:19:49.600 We do look at the international markets, and we we 0:19:49.680 --> 0:19:53.359 think after a decade of underperforming that the international markets 0:19:53.359 --> 0:19:56.080 are also poised to do better. So we like the 0:19:56.160 --> 0:19:59.840 developed markets this year again, we would do that probably 0:20:00.000 --> 0:20:02.600 where e t f s or some active managers. We 0:20:02.720 --> 0:20:05.000 also think the emerging markets are probably one of the 0:20:05.080 --> 0:20:08.480 better opportunities in the globe. There's a lot more uncertainty there, 0:20:08.520 --> 0:20:11.480 there's a lot more volatility, but as long as you 0:20:11.480 --> 0:20:13.400 can put a small percentage there, we think you can 0:20:13.400 --> 0:20:16.040 buy some e t f s in the emerging market 0:20:16.080 --> 0:20:18.840 area and you'll be well rewarded. Rewarded on a twelve 0:20:18.840 --> 0:20:22.200 month basis um. Just to understand that there's a lot 0:20:22.240 --> 0:20:24.679 more risk associated with it. And in terms of the 0:20:24.680 --> 0:20:27.320 emerging markets, we think they're about six to twelve months 0:20:27.320 --> 0:20:30.080 behind the United States in terms of trying to deal 0:20:30.119 --> 0:20:32.080 with COVID. But we do think you're gonna have a 0:20:32.119 --> 0:20:36.280 global economic recovery and that helps the emerging markets, all right, David, 0:20:36.720 --> 0:20:39.280 we have inflation, and one of the discussions that Matt 0:20:39.320 --> 0:20:41.760 and I continue to have is, you know, we know 0:20:41.880 --> 0:20:44.240 the feed is retired the term transitory, but a lot 0:20:44.280 --> 0:20:46.840 of folks that we talked to on this program talk 0:20:46.840 --> 0:20:51.200 about inflation ebbing materially in the second half of the years. 0:20:51.240 --> 0:20:55.240 That's something you ascribe to. So the question is what's 0:20:55.280 --> 0:20:57.800 materially We think that inflation is going to start to 0:20:57.840 --> 0:21:00.199 move lower, you think we think the comparisons start to 0:21:00.200 --> 0:21:04.800 get easier by uh June July, August. We think inflation 0:21:04.920 --> 0:21:07.520 ultimately settles down and like the three and a half 0:21:07.600 --> 0:21:10.480 to four percent range and then then goes lower from there. 0:21:10.520 --> 0:21:12.240 But we don't think you're going back to two percent, 0:21:12.600 --> 0:21:14.280 But we don't think you're going to stay at seven 0:21:14.359 --> 0:21:19.480 or eight percent. So you do think UM inflation is 0:21:19.600 --> 0:21:22.439 here to stay UM to a point? What does that 0:21:22.520 --> 0:21:26.080 mean the Fed has to do to fight it? Well, 0:21:26.080 --> 0:21:29.200 we think the Fed is correctly raising rates this year, 0:21:29.359 --> 0:21:33.840 and we think that as the logistics problems from that 0:21:33.920 --> 0:21:37.159 our COVID related go into the rear view mirror, and 0:21:37.200 --> 0:21:41.160 as the labor market settled down, UM inflation settles back 0:21:41.160 --> 0:21:43.320 at the three and a half percent level, and we 0:21:43.359 --> 0:21:45.720 think if the Fed has raised rates a number of 0:21:45.760 --> 0:21:49.480 times this year, um, they will have correctly slowed inflation down. 0:21:49.480 --> 0:21:51.640 And that's a very livable number, we think in terms 0:21:51.680 --> 0:21:55.280 of the stock market. Uh, inflation under three and a 0:21:55.320 --> 0:21:58.520 half percent is very good for the long term. When 0:21:58.560 --> 0:22:02.119 inflation gets above percent on a longer term basis, and 0:22:02.200 --> 0:22:04.600