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Speaker 1: Let's get to our guest. Andy kapern is with us.

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Speaker 1: He is partner also co c i O at Region

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Speaker 1: Atlantic Capital. He's on the line from here in New

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Speaker 1: York City. Andy. We heard today from ahead of the

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Speaker 1: Minneapolis Fed Neil cash Kari, who reminded us the Fed

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Speaker 1: is a long way from achieving that two percent inflation rate.

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Speaker 1: We've got to move lower though in yields was the

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Speaker 1: case Friday on some soft data and a rally in

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Speaker 1: the equity market makes sense of this for me. So

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Speaker 1: what's happening in the market today is we're really transitioning

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Speaker 1: from thinking about inflation first and thinking about the dynamics

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Speaker 1: underlying the economy and companies. Companies, uh if if you

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Speaker 1: look at earning seasons so far, are demonstrating a lot

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Speaker 1: of a lot of resolve in tackling the fundamental problem.

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Speaker 1: They're they're being very good about passing on higher costs

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Speaker 1: to consumers, being very good about executing well. If you

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Speaker 1: look at the typical company, about three quarters of beating

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Speaker 1: estimates UM and earnings are growing at about a six

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Speaker 1: percent clip, and the market is savaging anybody who's not

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Speaker 1: succeeding UM. Case and point made of platforms. But by

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Speaker 1: and large, corporate America is doing well and handling a

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Speaker 1: challenging environment well. At the same time, we're we appear

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Speaker 1: to be getting closer and closer to a slowdown in

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Speaker 1: economic growth. Now I know, I know, we just had

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Speaker 1: to to sequential GDP prints that were below zero. But

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Speaker 1: it's it's not a real recession. A real recession is

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Speaker 1: one that feels like a recession with declining corporate profits

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Speaker 1: and declining employment. That's probably coming our way in and

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Speaker 1: that's why the market for fixed income is start and

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Speaker 1: get a bit um in this environment of rising rights.

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Speaker 1: Do you see that the market is doing its job again?

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Speaker 1: Are we getting back to this era of creative destruction?

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Speaker 1: You know, I think we are. I think what we're

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Speaker 1: seeing in the market is investors are becoming much more

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Speaker 1: choosy about how to allocate their capital now that that

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Speaker 1: capital is no longer free um. When when a company

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Speaker 1: can fund itself at a very low cost, it enables

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Speaker 1: a lot of creative and interesting ways to do business.

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Speaker 1: It enables a lot of companies to try to win

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Speaker 1: market share by running on profitably for as long as

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Speaker 1: a decade and essentially giving a big chunk of their

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Speaker 1: product away. Now this new environment requires more business discipline. Um,

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Speaker 1: it's a different kind of environment and it's going to

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Speaker 1: favor different kinds of investments. And Andy, we just want

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Speaker 1: to talk a little about inflation. When do you see

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Speaker 1: this reaching the fits two percent target? It does feel

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Speaker 1: like a rather a long way off at the moment. Sure,

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Speaker 1: so inflation is definitely uncomfortably much too high for for

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Speaker 1: the central Bank and for consumers at large. And getting

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Speaker 1: back to that steady two that we've all gotten so

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Speaker 1: used to in the United States is probably going to

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Speaker 1: take more than a year. Um. The Fed today is

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Speaker 1: laying the seeds for what is going to take a

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Speaker 1: fair amount of time to siphon off some of the

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Speaker 1: excess liquidity that we have slashing around in the US economy.

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Speaker 1: And expecting an easy and quick fix here is is

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Speaker 1: probably asking for too much. I think what's important, though,

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Speaker 1: is once they've stabilized, and once they start to see

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Speaker 1: some motions towards economic weakness as well as as well

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Speaker 1: as a more normal rate of price gains, they'll be

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Speaker 1: able to take some of that pressure off. Andy. We

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Speaker 1: know the story in China is pretty bleak, with the

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Speaker 1: property problems there in the market now in contraction where

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Speaker 1: manufacturing is concerned, And we were talking a moment ago

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Speaker 1: on the program about the fact that the in the

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Speaker 1: Polark Bureau meeting last week not really a lot of

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Speaker 1: clarity when it comes to much more in the way

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Speaker 1: of stimulus. Would you be tempted to put some money

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Speaker 1: to work in China under the given circumstances. The Chinese

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Speaker 1: market is one that is much big to ignore and

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Speaker 1: is really fetching some attractive bargains um. The reason those

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Speaker 1: bargains exist is because of all the hair that's on

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Speaker 1: the Chinese market at the moment um. Those that hair includes, um,

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Speaker 1: the risk of delistening for in New York for some

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Speaker 1: of their largest tech titans, it includes the economic risks,

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Speaker 1: and it includes the risk of a stops are recovery

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Speaker 1: on the back of on the back of essentially rolling

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Speaker 1: economic blackouts um from from China a COVID zero policy.

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Speaker 1: But those are the risks if if you're a long

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Speaker 1: term investor and you're committed to holding something through a

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Speaker 1: potentially turbulent time period, Chinese equities are an attractive entry point.

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Speaker 1: So are they an attractive entry point for you? Though? Because,

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Speaker 1: as you say, there was a lot of hair on that,

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Speaker 1: and there's still a lot of concern around the zero

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Speaker 1: COVID policy and real estate troubles as well. They are

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Speaker 1: an attractive entry point for me UM. I view Chinese

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Speaker 1: equities as a core market that a globally diversified investor

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Speaker 1: ought to own. UM. At this point, I would hold

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Speaker 1: it out a benchmark waight um, given that all the

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Speaker 1: risks out there are tempering the attractive valuations. Are you

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Speaker 1: avoiding anything UM the European at all cost, whether it's Germany,

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Speaker 1: whether it's the UK, France or anywhere else. Sure, So

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Speaker 1: what's interesting about the European market is of course they

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Speaker 1: they they faced one of the greatest economic risks out

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Speaker 1: there at the moment um. What's interesting about the European

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Speaker 1: market is, uh, the euro has declined to a level

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Speaker 1: that is very, very undervalued on the back of these

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Speaker 1: economic risks. And if you look at their the underlying

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Speaker 1: investments that you're getting into as a as an investor

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Speaker 1: in European stocks, you get global energy companies UM, which

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Speaker 1: are set up for a fundamental period of of of

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Speaker 1: high profit generation. You're getting global materials companies, You're getting

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Speaker 1: global pharmaceutical companies. Um, if you if you look past

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Speaker 1: the country and into the company that you're buying, there

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Speaker 1: are definitely bargains in Europe. UM in industries that should

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Speaker 1: avoid the worst of the fallout should there be an

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Speaker 1: energy crisis. In terms of the energy car says, do

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Speaker 1: you think have we hit peak oil yet? Was the

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Speaker 1: trend line down? Now? The market for oil is fundamentally

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Speaker 1: undersupplied as a result of ten lean years for oil producers.

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Speaker 1: That that those ten lean years have resulted in a

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Speaker 1: lot of capital discipline for them. That means that even

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Speaker 1: in the face of very high prices, they're being pretty

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Speaker 1: slow to tap new wells, pretty slow to commit to

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Speaker 1: new spending. Um, it's gonna be a great time to

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Speaker 1: be an investor in energy companies as they use this

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Speaker 1: capital discipline to produce mounds of cash flow in response

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Speaker 1: to these high prices. But it also likely means that

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Speaker 1: these hype prices are here to stay, even in a

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Speaker 1: weaker economy. Yeah, US shell drillers have been doing particularly

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Speaker 1: well recently, and we got waste takes this right now.

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Speaker 1: Ninety seven ninety two A Barrel Andicapyra and Patna and Co.

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Speaker 1: Ce IO at Region Atlantic Capital. Thanks so much for

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Speaker 1: joining us today on Bloomberg Daybreak Asia