1 00:00:00,120 --> 00:00:03,400 Speaker 1: Let's get to our guest, Naudia level senior US equity 2 00:00:03,400 --> 00:00:07,560 Speaker 1: strategists over it ubs Global Wealth Management Nadia. So, as 3 00:00:07,600 --> 00:00:09,560 Speaker 1: I laid out there, the big drop in oil, the 4 00:00:09,560 --> 00:00:12,480 Speaker 1: BRAINERD comments, um, the easing of bond deals, that all 5 00:00:12,520 --> 00:00:16,600 Speaker 1: helped us rally here off of what was oversold conditions. 6 00:00:17,120 --> 00:00:19,680 Speaker 1: But I put it to you that nothing really changed, 7 00:00:20,079 --> 00:00:25,680 Speaker 1: so wise to stay defensive, Yeah, I mean we would agree. 8 00:00:25,760 --> 00:00:28,400 Speaker 1: I mean I think also today you saw some short covering, 9 00:00:28,520 --> 00:00:30,880 Speaker 1: but when you look under the hood, I mean there 10 00:00:30,960 --> 00:00:33,680 Speaker 1: was some dispersion in those consistent themes. You did see 11 00:00:33,720 --> 00:00:37,360 Speaker 1: some defensive sector like utilities outperformed, but at the same 12 00:00:37,360 --> 00:00:39,400 Speaker 1: time you saw stickle coole and grow till sector like 13 00:00:39,479 --> 00:00:43,640 Speaker 1: ansumer discretionary and materials also do well. Um. I do 14 00:00:43,840 --> 00:00:46,839 Speaker 1: think that ultimately that we are sort of in this 15 00:00:47,000 --> 00:00:50,360 Speaker 1: toppy trade and range. Ultimately we think that any sort 16 00:00:50,400 --> 00:00:52,360 Speaker 1: of near term rally that you're seeing in the market, 17 00:00:52,600 --> 00:00:55,120 Speaker 1: our band market mo rallies and we wouldn't chase them. 18 00:00:55,160 --> 00:00:57,640 Speaker 1: So we do think that you should use this opportunity 19 00:00:57,720 --> 00:01:00,959 Speaker 1: to really continue to reposition, trim some of at growth exposure, 20 00:01:01,040 --> 00:01:04,080 Speaker 1: reduce some of that's the catality, and continue to shift 21 00:01:04,080 --> 00:01:08,520 Speaker 1: towards value and defensive. Right, absolutely so. In other words, 22 00:01:08,520 --> 00:01:12,080 Speaker 1: what we saw was just a bit of a gut 23 00:01:12,160 --> 00:01:14,560 Speaker 1: check on the upside, as it were Riley in the 24 00:01:14,600 --> 00:01:18,800 Speaker 1: bare market. Yes, you know, I think I think that, 25 00:01:19,040 --> 00:01:22,000 Speaker 1: you know, the market continues to hang on every word 26 00:01:22,040 --> 00:01:23,880 Speaker 1: coming out of the FAT. I didn't think that the 27 00:01:23,880 --> 00:01:28,920 Speaker 1: comments today were um, it sort of signal any pivot, 28 00:01:29,080 --> 00:01:31,840 Speaker 1: and it is indeed in all of you remains hawkish. 29 00:01:31,840 --> 00:01:34,119 Speaker 1: And I don't think it settles the debate on whether 30 00:01:34,160 --> 00:01:37,119 Speaker 1: we get fifty basis points of seventy five basis points 31 00:01:37,160 --> 00:01:39,000 Speaker 1: next week. I mean, what's cleared at us is that 32 00:01:39,080 --> 00:01:42,560 Speaker 1: the fact continues to emphasize that they're not done until 33 00:01:43,000 --> 00:01:46,160 Speaker 1: they get inflation or see inflation back towards at two 34 00:01:46,160 --> 00:01:48,520 Speaker 1: percent target. And we know we're a long ways away 35 00:01:48,560 --> 00:01:52,400 Speaker 1: from that. Yeah, the essential message keeps coming through, we'll 36 00:01:52,440 --> 00:01:56,640 Speaker 1: find inflation until the job is done. However, and well, 37 00:01:56,640 --> 00:01:59,640 Speaker 1: what what Leo Brainard said, what she added to that 38 00:02:00,160 --> 00:02:04,080 Speaker 1: UM was basically that you know, we don't want to overtighten. 39 00:02:04,160 --> 00:02:06,840 Speaker 1: I think that's kind of a no brainer. I don't 40 00:02:06,880 --> 00:02:08,800 Speaker 1: think many people would be rushing to buy on that, 41 00:02:08,840 --> 00:02:11,840 Speaker 1: but but it does tell you it does suggest that 42 00:02:11,880 --> 00:02:15,160 Speaker 1: the FED is still thinking about a soft landing, and 43 00:02:15,240 --> 00:02:18,519 Speaker 1: that's not a bad thing. That is not a bad thing. 44 00:02:18,560 --> 00:02:21,040 Speaker 1: You know, we're not calling for an outright recession, although 45 00:02:21,320 --> 00:02:24,200 Speaker 1: we all can admitially, you know, see that the risk 46 00:02:24,240 --> 00:02:27,200 Speaker 1: of recession increased as we move above the neutral rate 47 00:02:27,240 --> 00:02:31,560 Speaker 1: and move more into restrictive policy, a UM, restrictive monetary policy. 48 00:02:31,840 --> 00:02:34,519 Speaker 1: But we'll see what the data is saying. Ah. Well, 49 00:02:34,600 --> 00:02:37,239 Speaker 1: I like us and the fact we're monitoring the data 50 00:02:37,400 --> 00:02:40,399 Speaker 1: very closely, and I think that the FED will look 51 00:02:40,480 --> 00:02:44,320 Speaker 1: to pause if they see that the economy is tipping 52 00:02:44,320 --> 00:02:46,960 Speaker 1: into recession. I think that ultimately they do want to 53 00:02:47,000 --> 00:02:49,520 Speaker 1: avoid a recession in and end up in a soft 54 00:02:49,639 --> 00:02:53,600 Speaker 1: lending Alright, Well, which a bit of data do you 55 00:02:53,600 --> 00:02:55,720 Speaker 1: think is going to be more important for them? Looking 56 00:02:55,720 --> 00:02:57,760 Speaker 1: ahead now and looking about the Fed here, I mean, 57 00:02:57,840 --> 00:03:01,560 Speaker 1: certainly payrolls last week. We also have acting on the thirteenth, 58 00:03:01,560 --> 00:03:03,400 Speaker 1: We've got CPI numbers coming out and they're going to 59 00:03:03,440 --> 00:03:06,280 Speaker 1: be absolutely key here. Is it likely to be any 60 00:03:06,520 --> 00:03:09,920 Speaker 1: kind of any sign within those numbers that inflation is 61 00:03:09,919 --> 00:03:14,080 Speaker 1: debating very quickly? Yes? I think you know. The CPI 62 00:03:14,200 --> 00:03:17,000 Speaker 1: number on Tuesday is is sort of key here, we're 63 00:03:17,040 --> 00:03:22,560 Speaker 1: looking for around eight percent moderation down from the last 64 00:03:22,560 --> 00:03:25,040 Speaker 1: reading that we saw. I mean, we have seen energy 65 00:03:25,080 --> 00:03:28,079 Speaker 1: prices fall, We've seen used car prices fall, a travel 66 00:03:28,200 --> 00:03:32,480 Speaker 1: rent and all of that. As a portfolio managing that 67 00:03:32,600 --> 00:03:36,760 Speaker 1: yet you know, how has your your strategy change? So 68 00:03:37,200 --> 00:03:39,080 Speaker 1: is it something which has remained the same, but you 69 00:03:39,120 --> 00:03:43,960 Speaker 1: have to wait for your opportunities to actually execute. You know, 70 00:03:44,000 --> 00:03:47,000 Speaker 1: I would say what we have done over the last quarter. 71 00:03:47,240 --> 00:03:50,000 Speaker 1: So we have continued to lean in and ship more 72 00:03:50,080 --> 00:03:53,000 Speaker 1: defensively and also continue to move more on to value. 73 00:03:53,240 --> 00:03:56,920 Speaker 1: I mean we recently upgraded consumer staples to our most 74 00:03:56,960 --> 00:03:59,480 Speaker 1: preferred because when you look at historically, this is a 75 00:03:59,520 --> 00:04:02,560 Speaker 1: sector that tends to fare well in economic slow down. 76 00:04:02,680 --> 00:04:06,000 Speaker 1: Earners tends to be a lot more resilient. And also 77 00:04:06,120 --> 00:04:10,720 Speaker 1: from a value standpoint, we still are in an elevated 78 00:04:10,800 --> 00:04:13,000 Speaker 1: inflation environment and we all know it's going to take 79 00:04:13,040 --> 00:04:15,760 Speaker 1: some time for inflation to come down. And when we 80 00:04:15,800 --> 00:04:18,839 Speaker 1: look at value, historically value tends to do well in 81 00:04:18,960 --> 00:04:22,360 Speaker 1: a high inflation environment. So we continue to lead into 82 00:04:22,640 --> 00:04:24,880 Speaker 1: value as well. So that's how we're positioning would be. 83 00:04:25,520 --> 00:04:28,240 Speaker 1: We have been um you know on the weight um 84 00:04:28,880 --> 00:04:31,359 Speaker 1: on on the growth areas of the market UM and 85 00:04:31,720 --> 00:04:35,080 Speaker 1: more favor value and the defensive areas of the market. 86 00:04:35,720 --> 00:04:37,920 Speaker 1: I mentioned I wanted to talk to you about Apple. 87 00:04:38,120 --> 00:04:41,600 Speaker 1: UM It feel free to avoid discussing the company in 88 00:04:41,640 --> 00:04:45,200 Speaker 1: particular if you want. But it's just interesting that they're 89 00:04:45,200 --> 00:04:48,640 Speaker 1: not raising prices this year. It may say something or 90 00:04:48,720 --> 00:04:51,680 Speaker 1: may not. I mean, you can interpret that as um, 91 00:04:51,720 --> 00:04:53,880 Speaker 1: they're a little worried about demand, you could. You could 92 00:04:53,920 --> 00:04:57,640 Speaker 1: also interpret it as you know, they they have such 93 00:04:57,680 --> 00:05:00,320 Speaker 1: power that they can really manage their margins. Oh well, 94 00:05:00,320 --> 00:05:03,599 Speaker 1: they don't need to, you know. I think it's somewhat 95 00:05:03,680 --> 00:05:06,640 Speaker 1: encouraging that you aren't seeing any price increases from some 96 00:05:06,680 --> 00:05:08,800 Speaker 1: of these larger companies. But at the same time, it 97 00:05:08,800 --> 00:05:11,719 Speaker 1: shouldn't be overly surprising. I mean, these are high priced 98 00:05:11,760 --> 00:05:14,960 Speaker 1: discretionary products. You know, we continue to see the consumer 99 00:05:15,000 --> 00:05:18,360 Speaker 1: shift away from goods and tooper services, and reality is 100 00:05:18,480 --> 00:05:21,919 Speaker 1: many people have already applied their smartphone, they've already upgraded 101 00:05:22,200 --> 00:05:26,359 Speaker 1: during COVID, just given the importance of communications and so, 102 00:05:26,760 --> 00:05:29,320 Speaker 1: you know, it's not surprising to see some sort of 103 00:05:29,360 --> 00:05:31,839 Speaker 1: weakness in this area. We've been hearing that from the 104 00:05:31,880 --> 00:05:34,640 Speaker 1: semiconductor system. Been some bread through for a few months 105 00:05:34,800 --> 00:05:38,640 Speaker 1: weakness and smartphone weakness and PCs, and also even more 106 00:05:38,680 --> 00:05:41,640 Speaker 1: recently some weakness and gaming. So we are too overly 107 00:05:41,640 --> 00:05:45,240 Speaker 1: surprised not to see um pricing increases UM within the 108 00:05:45,960 --> 00:05:49,360 Speaker 1: smartphone segment of the market, not even what I will 109 00:05:49,400 --> 00:05:52,120 Speaker 1: say is the um You know, did they really need 110 00:05:52,160 --> 00:05:55,240 Speaker 1: to raise prices considering the dollars appreciated eleven point three 111 00:05:55,240 --> 00:05:57,160 Speaker 1: per cents this out of the year, which of course 112 00:05:57,200 --> 00:06:01,880 Speaker 1: means that they uh money is still on the currency. 113 00:06:02,040 --> 00:06:04,159 Speaker 1: And that brings me nicely to talk about where you 114 00:06:04,160 --> 00:06:05,800 Speaker 1: think the dollars going on? How does it fit into 115 00:06:05,880 --> 00:06:10,400 Speaker 1: your UH in terms of what you do. Yes, you know, 116 00:06:10,680 --> 00:06:12,960 Speaker 1: we uh, we do think that we are termed that 117 00:06:13,000 --> 00:06:16,400 Speaker 1: there's more upside to the dollar is given how park 118 00:06:16,520 --> 00:06:19,120 Speaker 1: is your federal reserve has been a determination to bring 119 00:06:19,160 --> 00:06:22,280 Speaker 1: down in in inflation. Of course, the dollar has been 120 00:06:22,320 --> 00:06:25,640 Speaker 1: a head wind to SMP earnings all year. We've heard 121 00:06:25,640 --> 00:06:28,360 Speaker 1: it from the multinational companies that shaved off a couple 122 00:06:28,400 --> 00:06:31,760 Speaker 1: of percentage points off of earnest growth. We know that 123 00:06:31,880 --> 00:06:35,680 Speaker 1: about thirty or so SMP revenues are coming from overseas, 124 00:06:35,720 --> 00:06:37,800 Speaker 1: so this is something that we continue to a monitor 125 00:06:38,120 --> 00:06:40,240 Speaker 1: and think that that is also a risk to our 126 00:06:40,320 --> 00:06:43,039 Speaker 1: earners outlook as we head into twenty three, even though 127 00:06:43,040 --> 00:06:46,920 Speaker 1: our earnest expectations are much below consensus, the dollar is 128 00:06:46,960 --> 00:06:50,360 Speaker 1: going to be here as well. All as all, Also 129 00:06:50,520 --> 00:06:52,760 Speaker 1: what's going on in Europe in terms of where they 130 00:06:52,760 --> 00:06:55,440 Speaker 1: are in terms of procession, how long and deeper recession 131 00:06:55,520 --> 00:07:01,240 Speaker 1: could be. So you've outlined how you're positioning yourselves defensively here. 132 00:07:01,600 --> 00:07:04,400 Speaker 1: Uh there's a lot of different sectors in there in 133 00:07:04,400 --> 00:07:07,280 Speaker 1: the defensive category. So if you could just expand again 134 00:07:07,320 --> 00:07:09,520 Speaker 1: what you like the best and then also what would 135 00:07:09,560 --> 00:07:12,440 Speaker 1: be the sign to maybe start to move away from 136 00:07:12,480 --> 00:07:16,080 Speaker 1: that strategy and get more aggressive. Yeah, So it was 137 00:07:16,120 --> 00:07:20,080 Speaker 1: addition of two consumer staples. We also have a preference 138 00:07:20,120 --> 00:07:22,960 Speaker 1: for healthcare. We've had a preference for healthcare for several 139 00:07:23,040 --> 00:07:25,440 Speaker 1: months now, but we continue to think that the valuation 140 00:07:25,480 --> 00:07:28,120 Speaker 1: within this sector remains very attractive. This is a sector, 141 00:07:28,160 --> 00:07:30,240 Speaker 1: the only defense sector is really traded in on the 142 00:07:30,360 --> 00:07:33,680 Speaker 1: discount to the broader market. We've also had some recent 143 00:07:33,720 --> 00:07:36,400 Speaker 1: news from a policy standpoint in terms of drug price 144 00:07:36,440 --> 00:07:39,760 Speaker 1: and reform through the inflation protection uh to we think 145 00:07:39,800 --> 00:07:42,560 Speaker 1: that that is going to us us sim clarity to 146 00:07:42,600 --> 00:07:44,720 Speaker 1: the market and some of the overhang that's been on 147 00:07:44,760 --> 00:07:47,080 Speaker 1: this area of the market but quite some time should 148 00:07:47,120 --> 00:07:49,200 Speaker 1: be able to remove be removed, and we can see 149 00:07:49,200 --> 00:07:52,440 Speaker 1: some multiple expansion. Also, Earnest tends to be really resilient 150 00:07:52,600 --> 00:07:56,840 Speaker 1: in processionary environments within healthcare. In terms of what would 151 00:07:56,840 --> 00:07:59,400 Speaker 1: cause us to shift away and you know, lead into 152 00:07:59,480 --> 00:08:01,840 Speaker 1: the other segments of markets. I think you have to 153 00:08:01,880 --> 00:08:04,400 Speaker 1: see historically what you have seen in terms of beer markets, 154 00:08:04,440 --> 00:08:06,400 Speaker 1: and we think we will remain in a beer market 155 00:08:06,400 --> 00:08:09,200 Speaker 1: in near term. Quickly, quickly, thank you very much. Just 156 00:08:09,240 --> 00:08:12,720 Speaker 1: let her finish quickly, quickly pivot, a fair pivot, a 157 00:08:12,760 --> 00:08:16,840 Speaker 1: peak in inflation, and also a bottoming of p M. 158 00:08:16,920 --> 00:08:20,400 Speaker 1: I's thank you, not the level that from UBS.