WEBVTT - The Fed Is Playing a ‘Dangerous Game’ 0:00:13.720 --> 0:00:17.079 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.200 --> 0:00:20.160 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:20.360 --> 0:00:23.119 and I'm about a high across ASID reporter with Bloomberg. 0:00:23.480 --> 0:00:26.360 This week on the show, Well, stocks are all over 0:00:26.400 --> 0:00:29.880 the map again, with benchmark indexes moving one to three 0:00:29.920 --> 0:00:32.400 per cent or more each day between their highs and lows, 0:00:33.120 --> 0:00:36.760 and treasury yields continue to creep higher. Most are at 0:00:36.800 --> 0:00:40.240 the hyst in more than fifteen years. Meanwhile, just about 0:00:40.320 --> 0:00:43.440 everyone is convinced that at least a mild recession is 0:00:43.440 --> 0:00:46.880 on the horizon. So what on earth are you supposed 0:00:46.920 --> 0:00:48.440 to do with your money at a time like this. 0:00:49.120 --> 0:00:51.839 We'll get into it with the chief market strategist of 0:00:51.880 --> 0:00:56.080 a major investment company, But first, fill Donna, just get 0:00:56.120 --> 0:00:58.720 it out of your system. I I know what you 0:00:58.760 --> 0:01:01.560 want to do with your money. You want to bet 0:01:01.600 --> 0:01:05.559 on the Buffalo bills forever, at least at least gloat 0:01:05.640 --> 0:01:07.600 about the Buffalo bills. So get it out of your system. 0:01:07.640 --> 0:01:09.479 Go ahead. I'm not going to gloat. I'm a very 0:01:09.480 --> 0:01:12.800 superstitious person, so I need good karma, so no gloating 0:01:12.800 --> 0:01:16.880 on on my end. However, Josh Allen is a superhuman. 0:01:18.160 --> 0:01:20.679 Did you watch the game? He's pretty good? Yeah, I watched. 0:01:20.720 --> 0:01:23.319 I watched most of it. I uh, did you see 0:01:23.400 --> 0:01:26.200 him jump over that man? He jumped over a man? 0:01:27.040 --> 0:01:29.760 Who does that? He jumped like eight feet into the 0:01:29.760 --> 0:01:33.040 air that I can barely jump over a small child. 0:01:33.600 --> 0:01:37.959 How a woman who grew up where you grew up 0:01:38.120 --> 0:01:41.480 is not an Eagles fan or at least a Giants 0:01:41.520 --> 0:01:43.720 are Jets fan? I would I would even allow Giants 0:01:43.800 --> 0:01:48.520 or Jets. No, your tongue not giants, No, no, no, yeah, 0:01:48.960 --> 0:01:52.160 no Eagles. I'm with you on the Eagles, definitely. Uh. 0:01:52.200 --> 0:01:54.720 And I'm rooting for them. I'm happy that they're doing well. 0:01:54.960 --> 0:01:58.320 But the Bills are so fun to watch. Was your 0:01:58.400 --> 0:02:01.240 husband lured you into the Bills name? Yeah he's from Buffalo, Yeah, 0:02:01.240 --> 0:02:04.400 he's from Well you're you're a good wife. My wife 0:02:04.600 --> 0:02:06.320 is an Eagles fan too. There's no way I could 0:02:06.320 --> 0:02:08.000 have lured her away from the Eagles of fire. I 0:02:08.040 --> 0:02:10.400 have an Eagles jersey. Of all the games I've been 0:02:10.440 --> 0:02:12.880 to in my life, the majority of them were Eagles games. 0:02:13.480 --> 0:02:15.720 All Right, there you go, I'll give you that. How 0:02:15.720 --> 0:02:20.960 many folding tables are left in your apartment right now. Oh. None, none, 0:02:21.000 --> 0:02:23.480 They've all been broken through. They've all been broken by 0:02:23.880 --> 0:02:27.160 Bills fans. Yeah, Wills fans has set themselves on fire 0:02:27.200 --> 0:02:30.799 and then jumped through tables as as one does. Yes, 0:02:31.080 --> 0:02:33.919 we have a guest here with us. We should bring 0:02:33.919 --> 0:02:37.400 her in. Christina, who per chief Global Market Strategy, said Investco, 0:02:37.440 --> 0:02:39.440 thank you so much for joining us, Thank you for 0:02:39.480 --> 0:02:42.760 having me. Christina might be a Jets or a Giants fan, 0:02:42.919 --> 0:02:46.280 but well we'll leave that for another coming. All right, 0:02:46.320 --> 0:02:51.080 spell the beans, Christina, who's your team? The next, the next, 0:02:51.680 --> 0:02:55.839 the nick It's like it's like um poo petually being 0:02:55.880 --> 0:02:59.280 in the seventh circle of hell. That's good. I didn't 0:02:59.280 --> 0:03:01.240 want to say anything. I didn't want to say anything. 0:03:02.000 --> 0:03:07.600 But you definitely develop an important skill, uh, in terms 0:03:07.680 --> 0:03:14.120 of patience and persistence and and constant optimism, or else 0:03:14.280 --> 0:03:17.360 you would just exactly else, you would just lose your mind. 0:03:17.800 --> 0:03:22.680 That's a buy and hold franchise, I guess for sure. 0:03:23.680 --> 0:03:26.480 But Christina, markets have been very interesting in the last 0:03:26.480 --> 0:03:28.080 couple of days, and I was hoping to just start 0:03:28.080 --> 0:03:30.440 out with you're talking about what it's been like to 0:03:30.480 --> 0:03:32.360 be a part of this market, to be watching this 0:03:32.480 --> 0:03:36.120 market and everything that we've seen going on where we 0:03:36.160 --> 0:03:38.880 have these you know, stretches of days where it's up 0:03:38.920 --> 0:03:45.480 two percent, down two down. It's just very volatile. It's 0:03:45.520 --> 0:03:50.320 incredibly volatile, and yet in a way it makes sense 0:03:50.440 --> 0:03:54.760 given that we have this one key driver of markets 0:03:54.800 --> 0:03:57.760 this year, and it's been the FED and really the 0:03:58.160 --> 0:04:03.000 just dramatically shifting expectations around what the Fed is going 0:04:03.080 --> 0:04:05.760 to do. The FED has even surprised itself. You know, 0:04:05.760 --> 0:04:09.360 if we look at the dot plot from December of one, 0:04:09.880 --> 0:04:12.240 they thought they'd be at ninety basis points at the 0:04:12.360 --> 0:04:15.760 end of two. Now they think as of the September 0:04:15.960 --> 0:04:18.800 dot plot they'll be at four forty basis points. That 0:04:18.880 --> 0:04:21.880 to me is monetary policy whiplash. And those kinds of 0:04:21.920 --> 0:04:26.760 surprises are are why we see the volatility, not just 0:04:26.839 --> 0:04:30.359 in stocks, but in bonds. You know, Christine, I know 0:04:30.440 --> 0:04:32.520 a lot of people were hoping that at least we 0:04:32.520 --> 0:04:36.520 get some diversion from the FED focused during earning season, 0:04:36.760 --> 0:04:38.719 and it seemed like, you know, the first couple of 0:04:38.760 --> 0:04:42.839 earlier reporters, uh really sort of reignited some of the 0:04:42.839 --> 0:04:45.120 bullish instincts in the market, and that's why we saw 0:04:45.160 --> 0:04:47.880 some some really big gains. What are you looking out 0:04:47.960 --> 0:04:52.000 for an earning season? Uh? What have you learned so far? Um? 0:04:52.160 --> 0:04:55.280 You know, is there enough meat on the bone and 0:04:55.320 --> 0:05:00.040 earnings to to maybe overpower that fed uh fixation in 0:05:00.120 --> 0:05:04.520 the market. Great questions, so, and great questions. So let 0:05:04.520 --> 0:05:07.320 me start at the beginning. What I've learned so far? Um? 0:05:07.360 --> 0:05:10.600 First of all, it has been you know, fairly focused 0:05:10.640 --> 0:05:14.479 on financials thus far. UM. What we've learned is that 0:05:14.640 --> 0:05:18.039 consumers and businesses are in pretty good shape. Right. We've 0:05:18.040 --> 0:05:21.559 heard that from multiple bank uh CEO s is that 0:05:21.560 --> 0:05:24.600 that the consumers in good shape, businesses are in good 0:05:24.640 --> 0:05:28.800 shape UM. And and that certainly is a positive in 0:05:28.880 --> 0:05:32.240 terms of being able to weather economic headwinds, but it 0:05:32.360 --> 0:05:35.359 is a negative in that the FED doesn't seem to 0:05:35.400 --> 0:05:39.039 have cool demand very much. UM. We also know financial 0:05:39.040 --> 0:05:41.640 conditions are tightening. We're hearing that, we're seeing it in 0:05:41.680 --> 0:05:44.440 the data bank banks are providing in terms of, you know, 0:05:44.480 --> 0:05:48.200 the average FICO score for people they're giving mortgages to. UM. 0:05:48.320 --> 0:05:53.240 So fundamentals are are solid, um. But but clearly lenders 0:05:53.240 --> 0:05:57.080 are becoming increasingly discerning UM, which is what the FED 0:05:57.160 --> 0:05:59.880 wants to see. And we've also heard from a few 0:06:00.040 --> 0:06:03.640 airlines UM, one major airline saying that that the summer 0:06:03.720 --> 0:06:06.680 was very strong and they don't think that the demand 0:06:06.760 --> 0:06:10.760 for travel that thirst has been quenched yet. UM. So 0:06:10.760 --> 0:06:14.640 So you know, as I as I process the earnings reports, 0:06:14.640 --> 0:06:17.880 I'm I'm beyond just the earnings results, which have been 0:06:17.880 --> 0:06:22.240 relatively positive. You know, my takeaways are that the FED 0:06:22.400 --> 0:06:26.680 hasn't necessarily achieved UM what it wants to uh yet 0:06:26.880 --> 0:06:29.080 and so we could be in store for for a 0:06:29.160 --> 0:06:33.799 fair number more rate hikes UM given this environment, Christina 0:06:33.839 --> 0:06:36.040 and I ask you, we used to think about the 0:06:36.080 --> 0:06:39.040 earning season as as a stretch of time that will 0:06:39.080 --> 0:06:42.600 give us clarity on things that are going on. Can 0:06:43.040 --> 0:06:45.480 we make that same case this time around? Or is 0:06:45.520 --> 0:06:49.039 it so much that there's so much uncertainty with the FED, 0:06:49.200 --> 0:06:52.800 the macrol look, etcetera, that the earning season really even 0:06:52.920 --> 0:06:54.880 can't be giving us as much clarity as you might 0:06:54.920 --> 0:06:57.000 have in the past. I think that's true to a 0:06:57.040 --> 0:06:59.039 certain extent. I mean, let's think about it. You know, 0:06:59.080 --> 0:07:03.640 earning season and j general UM is backward looking. What 0:07:03.720 --> 0:07:08.960 we can glean about the future comes from UM. What 0:07:09.160 --> 0:07:13.000 is shared on the earnings calls um to the extent 0:07:13.120 --> 0:07:15.480 that management teams are willing to provide an outlook, and 0:07:15.520 --> 0:07:20.440 I think it is UM far less clear because they 0:07:20.480 --> 0:07:22.680 don't know where the FED funds rate is going to 0:07:22.760 --> 0:07:24.920 go from here, and they really don't know how much 0:07:25.000 --> 0:07:27.200 damage has been done thus far, because it takes some 0:07:27.320 --> 0:07:30.560 time UM for that to actually make its way into 0:07:31.520 --> 0:07:34.640 the main street economy and and show up in data 0:07:34.680 --> 0:07:36.480 and certainly show up in their results. So I think 0:07:36.680 --> 0:07:40.200 the question remains, you know, when is that other shoe 0:07:40.200 --> 0:07:43.520 going to drop? Visa V earnings? Now, for some industries 0:07:43.680 --> 0:07:46.480 it could very well drop this quarter, but but for 0:07:46.560 --> 0:07:48.680 others it might not be this quarter, It might be 0:07:48.800 --> 0:07:52.160 next or beyond. So what do you think we need 0:07:52.200 --> 0:07:56.560 to see to get uh either not necessarily even a 0:07:56.600 --> 0:07:58.520 full pivot from the Fed. I think you know, a 0:07:58.560 --> 0:08:00.560 lot of people would be happy with just sort of 0:08:00.600 --> 0:08:04.280 a go back to a fifth year basis point at 0:08:04.360 --> 0:08:07.440 rate hike. But what what really where do you need 0:08:07.480 --> 0:08:10.520 to see that inflation start to cool off? I'm guessing 0:08:10.600 --> 0:08:13.520 is it the shelter and rent costs? Is that the 0:08:13.720 --> 0:08:16.559 Is that the main issue that's still front and center 0:08:16.640 --> 0:08:19.120 for them? Do you think, well, I think that's certainly 0:08:19.280 --> 0:08:22.480 one key issue for them, but beyond that, I mean, 0:08:22.640 --> 0:08:26.480 what we're seeing is a labor market that remains very tight, 0:08:26.640 --> 0:08:29.640 and so that's showing up on the services side of 0:08:29.680 --> 0:08:33.640 the economy, UM, that's showing up in in the wage 0:08:33.679 --> 0:08:36.800 growth we've seen thus far. So you know, the FED, 0:08:37.480 --> 0:08:40.960 I think, is looking at the economy through a Phillips 0:08:40.960 --> 0:08:44.360 curve lens, and it believes it needs to achieve a 0:08:44.360 --> 0:08:49.559 certain level of unemployment in order to see inflation moderate UM. 0:08:49.600 --> 0:08:51.920 I would argue that doesn't have to be the case, though, 0:08:52.600 --> 0:08:56.200 given this unique market environment where we have just such 0:08:56.240 --> 0:08:58.880 a high level of job openings. Even after the last 0:08:58.960 --> 0:09:01.640 Jolts report, we still have more job openings than there 0:09:01.640 --> 0:09:04.199 are people to fill them. And so if we were 0:09:04.240 --> 0:09:08.160 to see a major slashing of job openings, that reduces 0:09:08.280 --> 0:09:13.120 labor mobility. Uh and and so that goal of of 0:09:13.280 --> 0:09:18.800 moderating wage growth UM could potentially be achieved without having 0:09:18.960 --> 0:09:23.080 very significant layoffs, without having a very substantial increase in unemployment. 0:09:24.040 --> 0:09:26.000 So can you talk about what you foresee from the 0:09:26.040 --> 0:09:28.560 Fed in the coming months, because we have the FED 0:09:28.600 --> 0:09:31.960 minutes come out, but recently it was just last week, 0:09:32.280 --> 0:09:34.480 and then also we had a report from Bloomberg, where 0:09:34.480 --> 0:09:36.920 one of my colleagues actually looked through the minutes and 0:09:36.960 --> 0:09:41.160 found I guess it was some detail that others hadn't noticed, 0:09:41.559 --> 0:09:45.280 saying that FED officials were worried that the that we 0:09:45.320 --> 0:09:49.320 were coming off of an extremely hot economy and that 0:09:49.320 --> 0:09:52.400 that means that potentially they would be tightening for more 0:09:52.440 --> 0:09:55.680 aggressively or for for longer than previously thought. So what 0:09:55.720 --> 0:09:59.120 are you expecting from the Fed? Well, certainly the most 0:09:59.160 --> 0:10:03.000 recent fo MC minutes, UM, we're not dubvish by any 0:10:03.000 --> 0:10:05.880 stretch of the imagination. I think people held, you know, 0:10:06.120 --> 0:10:11.760 people um anchored to that statement about a few participants 0:10:12.000 --> 0:10:15.800 worrying that um, they were moving too quickly, they'd need 0:10:15.840 --> 0:10:19.760 to calibrate because of of the delayed impact on the economy. 0:10:19.800 --> 0:10:22.080 But in general, I think what the FED is telling 0:10:22.200 --> 0:10:26.280 us is that inflation is not just job number one, 0:10:26.320 --> 0:10:29.320 it's job number one, number two, number three, UM, and 0:10:29.400 --> 0:10:32.800 that dual mandate really that that other part of the 0:10:32.840 --> 0:10:36.640 dual mandate is is really getting going being put on 0:10:36.679 --> 0:10:39.760 the back burner, um on the way way back burner, 0:10:40.040 --> 0:10:43.200 as if focuses on inflation. So that says to me 0:10:43.280 --> 0:10:46.439 that the FED will definitely high rates seventy five basis 0:10:46.480 --> 0:10:50.439 points in November, UM, and I think seventy five basis 0:10:50.480 --> 0:10:53.200 points is on the table for December as well. I 0:10:53.200 --> 0:10:59.440 think that's a very real um uh likelihood, especially given 0:10:59.720 --> 0:11:02.240 you know some of the recent statements we've gotten UM 0:11:02.360 --> 0:11:06.000 arguing that UH that you know, the FED wants to 0:11:06.600 --> 0:11:09.560 front load rate hikes like the Bank of Canada. Well, 0:11:09.960 --> 0:11:12.199 you know, I thought we were like in the sixth 0:11:12.280 --> 0:11:14.160 or seventh inning when it comes to rate hikes. So 0:11:14.200 --> 0:11:17.320 to hear they're still talking about front loading UM causes 0:11:17.360 --> 0:11:21.680 a little concern and does raise questions about when when 0:11:21.720 --> 0:11:26.120 this finally comes to an end or even just eases somewhat. 0:11:27.480 --> 0:11:29.880 You know, Christina, you mentioned the notion of the Fed 0:11:30.240 --> 0:11:33.880 uh tightening until it breaks something, And it seems like 0:11:34.800 --> 0:11:38.320 at the moment it's pretty close to a consensus that 0:11:38.760 --> 0:11:41.560 the US is going to slide into at least a 0:11:41.640 --> 0:11:45.920 shallow recession next year. UM. But I also look at 0:11:45.960 --> 0:11:49.760 the market. You know, SMP five down as much as 0:11:49.840 --> 0:11:53.640 and change percent from its high nas Doock index is 0:11:53.720 --> 0:11:57.920 down even more in the thirties of percentages. With everybody 0:11:57.960 --> 0:12:00.720 bracing for this recession, I mean, are we in one 0:12:00.760 --> 0:12:05.480 of these crazy scenarios where the market is so far 0:12:05.520 --> 0:12:07.760 ahead of the economy that it's it's mostly all been 0:12:07.800 --> 0:12:10.720 priced in or almost all priced in. And if we 0:12:10.800 --> 0:12:14.000 do get that slow down, that, uh you know, we'll 0:12:14.000 --> 0:12:17.040 see that sort of contrarian instinct kick in and we'll 0:12:17.040 --> 0:12:19.199 get a rally in the equity market. You think it's 0:12:19.200 --> 0:12:21.400 the worst priced in? Do you think? I don't think 0:12:21.400 --> 0:12:23.600 it's all priced in, but I do think some is 0:12:23.640 --> 0:12:25.679 priced in. I mean, what we've seen this year is 0:12:25.720 --> 0:12:28.760 a multiple contraction. I'm driven by the rise in the 0:12:28.800 --> 0:12:33.360 ten year yield um? But has you know, has earnings 0:12:33.559 --> 0:12:38.760 disappointment been fully priced in? Probably not, because we don't 0:12:38.800 --> 0:12:43.640 know the extent of the impact earnings, because we don't 0:12:43.679 --> 0:12:47.400 know the path of rate hikes from here. Uh So 0:12:47.440 --> 0:12:50.400 I think that there's that level of uncertainty that that 0:12:50.480 --> 0:12:54.440 makes it hard to price in. And uh to me, 0:12:54.840 --> 0:12:57.600 I think there's the potential for another leg down. Are 0:12:57.640 --> 0:12:59.760 we going to go down as as much as we 0:12:59.800 --> 0:13:02.840 have of thus far? No? I highly doubt that, UM, 0:13:02.880 --> 0:13:05.200 but I do think we could see another five to 0:13:05.280 --> 0:13:09.040 seven percent drop too before we get to the point 0:13:09.440 --> 0:13:12.200 UM where it's priced in and and where we're ready 0:13:12.240 --> 0:13:17.240 to perhaps begin a bowl market, um that is anticipating 0:13:17.280 --> 0:13:20.480 in economic recovery. And why has it been so difficult 0:13:20.520 --> 0:13:22.840 to price things into the market this year? Is it 0:13:22.880 --> 0:13:25.680 just because we have this discrepancy between what's going on 0:13:25.720 --> 0:13:28.120 with the labor market and what's happening with inflation in 0:13:28.160 --> 0:13:31.040 the Fed. Yeah, in a word, it's it's uh, seventy 0:13:31.320 --> 0:13:33.960 is the new twenty five. When you're raising rates in 0:13:34.040 --> 0:13:37.920 seventy five bases point increments UM, and you're not giving 0:13:38.000 --> 0:13:41.199 any time to for it to process through and make 0:13:41.240 --> 0:13:44.280 its way through the day into the data. UM, you're 0:13:44.280 --> 0:13:47.839 playing a dangerous game. And the more you're doing it, um, 0:13:47.880 --> 0:13:52.439 the more likelihood uh you create of having a recession 0:13:52.480 --> 0:13:56.559 and a significant recession. So I think that is is 0:13:56.760 --> 0:13:59.080 what's behind us. I think there's a lot of uncertainty 0:13:59.200 --> 0:14:02.240 and and and as you point out, there's uncertainty around 0:14:02.240 --> 0:14:07.440 inflation and where that goes from here. It's been stubbornly high. Christina. 0:14:07.520 --> 0:14:10.280 You know when you say seventy five is the new careful, 0:14:10.320 --> 0:14:12.840 you're setting Villdon off for a joke about my age. 0:14:13.440 --> 0:14:25.680 You know, I can't say anything. Yeah, yeah, right, of course, Christina. 0:14:26.320 --> 0:14:30.640 You know, Investco's a huge company, famous for a lot 0:14:30.680 --> 0:14:34.120 of things, a lot of different investment strategies. UM. But 0:14:34.200 --> 0:14:36.040 I think if you do like a name association with 0:14:36.080 --> 0:14:37.640 a lot of people, they'll go right to the q 0:14:37.840 --> 0:14:41.400 q Q, you know, the Nasdaq one hundred, uh et F. 0:14:42.320 --> 0:14:45.880 I think you know a lot of people that I've 0:14:45.880 --> 0:14:51.440 talked to, I've always gotten the sense that once we 0:14:51.520 --> 0:14:55.200 got through the other side of the pandemic, when interest 0:14:55.280 --> 0:15:00.360 rates normalize, growth normalizes, and and life becomes more or 0:15:00.520 --> 0:15:03.080 like it was pre pandemic, that we once again see 0:15:03.080 --> 0:15:06.400 that instinct to buy big growth tech uh. You know, 0:15:06.440 --> 0:15:08.680 really the main companies in the in the q q 0:15:08.880 --> 0:15:13.080 Q E t F. Is that still a real realistic 0:15:13.480 --> 0:15:17.280 assumption or anticipation, I mean, is are we going to 0:15:17.360 --> 0:15:20.640 revert back to where the big tech stocks are the 0:15:20.680 --> 0:15:23.080 stars of the show or are we just in a 0:15:23.080 --> 0:15:26.200 whole new paradigm now for the time being or for 0:15:26.240 --> 0:15:30.360 the foreseeable future. Well, I certainly think that that, Uh, 0:15:30.480 --> 0:15:34.720 it's likely we revert back to to tech performing better 0:15:35.120 --> 0:15:38.800 um than the cyclical side of the stock market in 0:15:38.840 --> 0:15:41.320 the near term. I mean, tech has been beaten down 0:15:41.680 --> 0:15:45.640 as it traditionally has been by rising rates UM. But 0:15:45.880 --> 0:15:50.600 once we get through a period of time and adjustment. UM. 0:15:50.680 --> 0:15:56.760 Usually tech then then starts to perform significantly better. Um. 0:15:56.800 --> 0:16:01.280 It's part of what investors now you as as the 0:16:01.360 --> 0:16:04.760 defensive part of the stock market. And and so I 0:16:04.800 --> 0:16:07.040 think there's there's certainly going to be a real interest 0:16:07.160 --> 0:16:10.440 that doesn't go away. Also just for the longer term, 0:16:10.600 --> 0:16:13.480 tech is a big part of innovation, it's a big 0:16:13.560 --> 0:16:17.600 driver of of where the economy goes from here. Uh So, 0:16:17.600 --> 0:16:19.000 so I think it's going to continue to be a 0:16:19.040 --> 0:16:23.760 significant portion of most investors portfolios. And as you meant, 0:16:23.840 --> 0:16:26.640 as Mike mentioned, you, you guys have this huge suite 0:16:26.640 --> 0:16:29.560 of ETF products, And I'm wondering if you are also 0:16:29.680 --> 0:16:32.560 tracking what the retail investor is doing, because you know 0:16:32.720 --> 0:16:35.960 retail investors, they tend to favory tfs a lot. But 0:16:36.560 --> 0:16:39.520 what is the retail cohort doing at the moment, Because 0:16:39.600 --> 0:16:42.720 I've seen some notes recently and some interesting research that's 0:16:42.760 --> 0:16:47.440 showing that they're selling into any rally really recently, whereas 0:16:47.720 --> 0:16:50.680 earlier in the year maybe they were buying the dip 0:16:50.800 --> 0:16:53.040 because they had been sort of conditioned to do that 0:16:53.120 --> 0:16:55.760 over the last two years. So how important or what 0:16:55.920 --> 0:16:59.280 role is the retail investor playing in this market. Well, 0:16:59.320 --> 0:17:04.440 if we were to look at UM the AII sentiment surveys, 0:17:04.520 --> 0:17:09.359 that certainly shows a very barish level of sentiment among 0:17:09.600 --> 0:17:13.160 retail investors. But I think that's the kind of thing 0:17:13.400 --> 0:17:17.720 you need, UM to help form a market bottom UM. 0:17:17.760 --> 0:17:21.879 It can be a pretty temporary phenomenon, and unfortunately, I 0:17:21.920 --> 0:17:25.200 think some retail investors hurt themselves by doing that. In fact, 0:17:25.200 --> 0:17:27.560 I'd argue perhaps the biggest mistake made in the global 0:17:27.560 --> 0:17:30.879 financial crisis or those investors, and it wasn't just retail, 0:17:30.920 --> 0:17:33.760 it was also institutional that cashed out at or near 0:17:33.800 --> 0:17:36.439 the bottom UM and then locked in their losses and 0:17:36.440 --> 0:17:39.520 weren't able to participate in in a recovery. Uh So, 0:17:39.520 --> 0:17:43.199 So certainly there's some of that going on, but hopefully 0:17:43.520 --> 0:17:48.119 more investors are thinking long term. Hopefully UM. You know, 0:17:48.200 --> 0:17:51.320 a lot of of the education that we've done has 0:17:51.359 --> 0:17:53.800 had an impact in terms of having you know, well 0:17:53.800 --> 0:17:57.800 diversified portfolio UM both across and within the three major 0:17:57.840 --> 0:18:02.520 asset classes, and also thinking long term. Because as much 0:18:02.560 --> 0:18:05.360 as this is a difficult market environment and it's painful 0:18:05.400 --> 0:18:08.160 to read the headlines and look at the statements, UM, 0:18:08.200 --> 0:18:12.720 it is still very much a temporary UM market environment, 0:18:12.840 --> 0:18:16.240 and for many that have ten and twenty year time horizons, UM, 0:18:16.320 --> 0:18:20.800 they hurt themselves by um becoming panicked or letting emotions 0:18:20.840 --> 0:18:24.480 take over right now. And uh, Christine, I know you 0:18:24.520 --> 0:18:27.159 have a global focus, So I'm gonna land the plane 0:18:27.200 --> 0:18:31.520 next in Beijing, China. The Party Congress is going on 0:18:31.560 --> 0:18:35.800 this week week. UM. I don't think any major surprises, 0:18:35.840 --> 0:18:39.440 but it's become pretty clear that their COVID zero policies 0:18:39.480 --> 0:18:43.280 are not going anywhere anytime soon, at least won't be 0:18:43.320 --> 0:18:47.679 relaxed anytime soon. How are you thinking about China and 0:18:47.760 --> 0:18:51.439 its place in global markets these days? Um? On the 0:18:51.480 --> 0:18:55.240 one hand, uh, COVID zero is sort of restraining growth 0:18:55.280 --> 0:18:59.720 there and possibly uh still snarling supply chains to some 0:18:59.840 --> 0:19:03.320 to three. On the other hand, Uh, you know that's 0:19:03.320 --> 0:19:06.399 at least one source of the world where it's not 0:19:06.480 --> 0:19:10.199 necessarily an inflationary situation. I mean, maybe it is with 0:19:10.240 --> 0:19:12.560 the supply chains. But help us sort out how to 0:19:12.600 --> 0:19:16.080 think about China where it goes from here and sort 0:19:16.119 --> 0:19:18.320 of what the dynamics with the rest of the global 0:19:18.359 --> 0:19:22.040 markets will be. Well, actually not differently than what we 0:19:22.080 --> 0:19:24.919 saw on the global financial crisis. China is in a 0:19:25.040 --> 0:19:29.400 very different place than Western developed economies UM, which makes 0:19:29.440 --> 0:19:33.600 a wonderful case for diversification of portfolios right UM. What 0:19:33.640 --> 0:19:38.320 we're seeing in China is a central bank that has 0:19:38.400 --> 0:19:43.240 actually eased monetary policy this year as opposed to tightening dramatically. UM. 0:19:43.280 --> 0:19:48.720 We're seeing some some fiscal stimulus that is significant. And 0:19:48.840 --> 0:19:51.840 so China is in a very different place than than 0:19:51.920 --> 0:19:56.720 Western economies. So yes, UH, COVID lockdowns could potentially be 0:19:56.800 --> 0:20:00.200 a headwind depending upon what what happens in term of 0:20:00.920 --> 0:20:04.080 future waves of COVID UM. But for the most part, 0:20:04.440 --> 0:20:08.520 China is ahead in terms of UM when it's likely 0:20:08.680 --> 0:20:11.359 to begin recovering, and in fact, I think we're seeing 0:20:11.440 --> 0:20:15.679 signs of recovery now UM. And that's why if you 0:20:15.760 --> 0:20:19.160 look at, for example, the I M f S projections 0:20:19.200 --> 0:20:21.679 that they put out last week in terms of growth 0:20:21.720 --> 0:20:26.240 expectations for three UM, for a lot of major economies, 0:20:26.280 --> 0:20:29.040 the anticipate growth to be lower next year than this year. 0:20:29.320 --> 0:20:32.119 That's not the case for China. Their expectation is is 0:20:32.480 --> 0:20:36.280 significantly higher growth next year UM. So and I think 0:20:36.320 --> 0:20:38.840 that makes a lot of sense just given UM the 0:20:38.880 --> 0:20:42.959 positives that are going on um in in the Chinese economy. 0:20:43.080 --> 0:20:45.159 Can you talk more about what your view is on 0:20:45.160 --> 0:20:47.800 on the possibility of us seeing a global recession. I 0:20:47.800 --> 0:20:49.520 think you had asked in one of your recent notes 0:20:49.560 --> 0:20:55.200 if a global recession is coming, Well, it is very, 0:20:55.320 --> 0:20:58.880 very possible, just given that we have so many central 0:20:58.920 --> 0:21:02.760 banks raising rates all at the same time. In fact, 0:21:03.240 --> 0:21:05.959 we heard from the World Bank last month and issuing 0:21:06.000 --> 0:21:09.560 a very stark warning about how Um, this is the 0:21:09.600 --> 0:21:12.719 first time in five decades we've seen this level of 0:21:12.760 --> 0:21:16.440 synchronicity in terms of tightening. And you don't have to 0:21:16.480 --> 0:21:18.560 play that police song in the background while I talk 0:21:18.600 --> 0:21:22.760 about this. But um, but you know it is Uh. 0:21:23.240 --> 0:21:26.600 It does increase the odds of a global recession, so 0:21:26.640 --> 0:21:30.679 we have to be um vigilant about it. Um. Uh. 0:21:30.720 --> 0:21:33.320 You know, at this point, I think that there is 0:21:33.320 --> 0:21:36.360 still the potential for us to avoid that, um, if 0:21:36.400 --> 0:21:39.320 central banks were to pivot soon. We just don't know 0:21:39.359 --> 0:21:42.399 if they're going to pivot soon. Um. That is is 0:21:42.400 --> 0:21:46.120 the big question on everyone's mind right now. But every 0:21:46.160 --> 0:21:48.160 day that goes by that we continue to be as 0:21:48.200 --> 0:21:50.280 hawkish as we see the kind of tightening we see. 0:21:50.520 --> 0:21:53.640 I think it increases the odds of a global recession 0:21:53.680 --> 0:21:56.960 next year. Well, I applaud your chase taste in music. 0:21:57.000 --> 0:21:58.959 Now I'm gonna I've got policed in my head. I'm 0:21:59.000 --> 0:22:01.399 gonna have to go go do a deep dive on 0:22:01.400 --> 0:22:18.639 the Synchronicity album. Later we'll boil it down to was 0:22:18.720 --> 0:22:22.159 Christina with. Given everything we've talked about, what's what's the 0:22:22.720 --> 0:22:27.679 Hooper sort of recommended portfolio look like these days for 0:22:27.680 --> 0:22:30.679 for sort of your average investor with you know, a 0:22:30.760 --> 0:22:34.639 longer time horizon. Well, it doesn't look that different, and 0:22:34.680 --> 0:22:39.159 it shouldn't look that different than they prescribed portfolio the 0:22:39.200 --> 0:22:43.000 Hooper portfolio from two thousand nineteen or two thousand sixteen 0:22:43.080 --> 0:22:46.240 or quite frankly two thousand ten, you know. And again, 0:22:46.359 --> 0:22:49.040 of course it depends upon the time horizon for an 0:22:49.080 --> 0:22:51.840 individual investor. But but you know, a good rule of 0:22:51.880 --> 0:22:58.600 thumb is, you know, a fifty five thirty fifteen type 0:22:58.640 --> 0:23:01.840 of portfolio where you have significant exposure to equities and 0:23:01.880 --> 0:23:05.600 not just within the US, global equities and some dividend 0:23:05.680 --> 0:23:09.480 paying equities um uh, and a very diversified fixed income 0:23:09.520 --> 0:23:13.440 portfolio um I. You know, tactically I might over emphasize 0:23:13.440 --> 0:23:15.919 the investment grade and government, right now and then of 0:23:15.920 --> 0:23:21.119 course alts UM reads in their infrastructure crypto. That's a 0:23:21.160 --> 0:23:24.679 great question. Um, you know I I what I encourage 0:23:24.720 --> 0:23:27.639 is I say, you know, you all have to do 0:23:27.720 --> 0:23:30.040 your homework on crypto. And I've told my kids this 0:23:30.119 --> 0:23:32.119 as well as UM. You know, when I talk to 0:23:32.200 --> 0:23:34.399 investors and know there's a lot of interest in it. 0:23:34.600 --> 0:23:37.520 There are a lot of differences among the different cryptocurrencies. 0:23:37.920 --> 0:23:40.920 Some might work for some investors portfolios, but others might 0:23:40.960 --> 0:23:43.680 do enough research and say this isn't for me. Um, 0:23:43.680 --> 0:23:46.040 But I think certainly be open to it and and 0:23:46.080 --> 0:23:48.359