WEBVTT - Bob Doll, CIO at Crossmark Global Investments Talks Bond Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Robert Doll joins us right now this morning.

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<v Speaker 3>Bob, thank you so much for joining us.

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<v Speaker 4>How do you link price down, yield up into a

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<v Speaker 4>belief of conviction in the equity market?

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<v Speaker 3>Hard to do, Tom.

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<v Speaker 1>The market has been fighting at several issues, but it's

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<v Speaker 1>got a new one the bond market. Although bond yields

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<v Speaker 1>have been creeping up, as you know, inflation concerns, tariff

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<v Speaker 1>concerns and sort of the four to sixty level on

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<v Speaker 1>the ten year and the five percent level on the

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<v Speaker 1>thirty year, which we've now broken, have been technicians and nightmares.

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<v Speaker 3>And we've crossed one, will we cross the other? Just

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<v Speaker 3>a hurdle for shots, particularly at these valuation levels.

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<v Speaker 2>But Bob, you and I are enough of a fossil

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<v Speaker 2>a credit all weekend starting with the secondary of treasury

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<v Speaker 2>I got. It doesn't matter, Are you kidding me? Back

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<v Speaker 2>to nineteen seventy one to seven World War One? Moody's

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<v Speaker 2>has been looking at this. To me, it was like,

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<v Speaker 2>am I wrong?

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<v Speaker 1>Bob?

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<v Speaker 3>This is like big news? Right? Absolutely?

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<v Speaker 1>Look, some would say this is the third credit agency

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<v Speaker 1>to downgrade.

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<v Speaker 3>What's the big deal? The big deal is the bond market.

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<v Speaker 1>And the big deal is the bill that's sitting in

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<v Speaker 1>Congress that's gonna exacerbate the deficit yet some more so,

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<v Speaker 1>as long as those things keep happening, we will be

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<v Speaker 1>decreasing the number of degrees of freedom. We have to

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<v Speaker 1>fix this thing before it really strangles us.

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<v Speaker 3>Bob.

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<v Speaker 5>A lot of people will come into this studio and

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<v Speaker 5>tell Tom and I that, Hey, as long as investors,

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<v Speaker 5>both domestic international, continue to show up and buy US treasuries,

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<v Speaker 5>it just doesn't matter what do you say to them.

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<v Speaker 1>Well, you know, if they're gonna keep buying them and

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<v Speaker 1>the level is not gonna change, I guess they're right.

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<v Speaker 1>But the problem is the level the interest rates going up.

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<v Speaker 1>We've got an economy that is slowing down. We have

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<v Speaker 1>inflation that a lot of people want to argue.

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<v Speaker 3>Has been solved.

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<v Speaker 1>And why are bond yields moving up because we haven't

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<v Speaker 1>solved the inflation problem? Because we've got Look, the alternative

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<v Speaker 1>is the biggest tax increase in US history on December

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<v Speaker 1>thirty first. So that's not a pleasant alternative. Simply to

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<v Speaker 1>say no to the build it's a city in Congress.

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<v Speaker 3>We've got a lot of work to do. I'm gonna

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<v Speaker 3>have the longer way.

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<v Speaker 1>Wait, as you know, Paul, the fewer choices we're gonna have.

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<v Speaker 5>So, Bob, given that backdrop here, what is your what

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<v Speaker 5>kinds of discussions are you having with your clients as

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<v Speaker 5>it relates to stocks, bonds, alternatives? Where do you go here?

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<v Speaker 3>Yeah, with great difficulty. Look, I think, look, you can still.

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<v Speaker 1>Buy on weakness, and we've had a lot of strength

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<v Speaker 1>in the US equity market.

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<v Speaker 3>So you're hearing me. I'm a big canscious.

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<v Speaker 1>We get a few days like today and some prices

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<v Speaker 1>will get interesting again.

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<v Speaker 3>The pe ratio on the stock market, as you.

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<v Speaker 1>Know, got down to almost eighteen in the tariff selloff,

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<v Speaker 1>but now we're twenty one twenty two. Not that eighteen's cheap,

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<v Speaker 1>but twenty one twenty two is certainly expensive.

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<v Speaker 3>So you just have to be cautious. You have to

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<v Speaker 3>focus on companies that have a strong free cash flow, that.

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<v Speaker 1>Have improving return on equity so they can weather these

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<v Speaker 1>valuation storms.

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<v Speaker 2>See, but one find a question. We gotta run with

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<v Speaker 2>all that's going on, particularly in.

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<v Speaker 4>Europe, Bob Dall, we got a higher real rate, does

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<v Speaker 4>that just make it harder to do business or is

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<v Speaker 4>it ambiguous where a higher real rate shows a spirit

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<v Speaker 4>of the American corporate economy.

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<v Speaker 3>I wish it was.

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<v Speaker 1>The latter, but sadly, in reality, it's the former. It

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<v Speaker 1>just makes it tougher to do business. And you know,

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<v Speaker 1>you hear, like the jawboning of Walmart.

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<v Speaker 3>They have to run a business with low margins.

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<v Speaker 1>If they're gonna have cost increases, they're going to increase prices, period,

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<v Speaker 1>full stop.

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<v Speaker 3>Thank you so much.