WEBVTT - Wall Street Hit by US Recession Fears 0:00:02.920 --> 0:00:08.960 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.920 --> 0:00:16.599 weekdays at ten am Eastern on Apple car Playing and 0:00:16.720 --> 0:00:19.640 broyd Outo with the Bloomberg Business app. Listen on demand 0:00:19.680 --> 0:00:24.000 wherever you get your podcasts, or watch us live on YouTube. 0:00:25.079 --> 0:00:27.560 Let's check in on what we're doing with this market. 0:00:27.800 --> 0:00:29.560 I'm bringing in Geena Martin Adams. I'm just going to 0:00:29.640 --> 0:00:32.680 radio by right, the age for Bloomberg Intelligence. 0:00:33.159 --> 0:00:36.320 Gina. I left Thursday. I don't work Fridays in the summer, 0:00:36.520 --> 0:00:38.640 as you well know. I come back in the world. 0:00:38.880 --> 0:00:39.440 What happened? 0:00:39.560 --> 0:00:42.800 We left Thursday with a nice soft landing discussion, right, 0:00:42.880 --> 0:00:46.080 you know, the markets, Maybe we'll get a little friendly pullback. 0:00:46.360 --> 0:00:47.599 We come in today and you. 0:00:47.520 --> 0:00:49.400 Know I've got I had the nastak off more than 0:00:49.440 --> 0:00:50.960 a thousand points earlier this morning. 0:00:51.320 --> 0:00:54.280 Also the last three trading days, the NASA slaw seven percent. 0:00:54.360 --> 0:00:56.760 So this will stretch since June of twenty twenty two. 0:00:57.800 --> 0:01:00.760 Well, I think one big thing happened, and that was 0:01:01.080 --> 0:01:04.920 tech disappointed forecasts. I think that this has been actually 0:01:05.000 --> 0:01:08.200 underway for more than just Friday. Friday was an exacerbation 0:01:08.319 --> 0:01:11.280 of trends that really started a couple of weeks ago. 0:01:11.400 --> 0:01:14.039 We wrote a note early last week and we called 0:01:14.040 --> 0:01:16.440 it four than three hundred and forty four reasons text 0:01:16.440 --> 0:01:20.680 stocks may struggle with high expectations because tech stock valuations 0:01:20.760 --> 0:01:24.000 are three hundred and forty four basis points above recent 0:01:24.080 --> 0:01:27.680 five year average. It just got to the point where 0:01:27.720 --> 0:01:30.559 valuations were so extreme in an environment where tech stacks 0:01:30.680 --> 0:01:34.319 were nearly faced with impossible expectations. Now, what's interesting about 0:01:34.319 --> 0:01:38.240 the earning season is all the tech stacks beat. They 0:01:38.319 --> 0:01:41.120 beat forecasts for second quarter earnings, but they were unable 0:01:41.160 --> 0:01:44.880 to sustain forecasts for going forward margin growth. And they 0:01:44.920 --> 0:01:47.400 started to talk about how much they're going to have 0:01:47.440 --> 0:01:50.360 to spend going forward, and well, they need to cut 0:01:50.360 --> 0:01:53.160 cap X and they're going to write size AI expectations. 0:01:53.160 --> 0:01:55.800 And that created a tremendous amount of uncertainty that was 0:01:55.840 --> 0:02:00.600 then exacerbated by two big macro indicators last week which 0:02:00.600 --> 0:02:04.680 fell back to twenty twenty three low levels, which unfortunately 0:02:04.720 --> 0:02:08.400 would suggest the manufacturing sectors sort of niscent tiny recovery 0:02:08.440 --> 0:02:11.240 that kind of sort of emerged by March is now 0:02:11.240 --> 0:02:13.880 could put and we're back to twenty twenty three, which 0:02:14.000 --> 0:02:17.480 was clearly a recession in the manufacturing sector. And then 0:02:17.520 --> 0:02:20.880 also the employment report, which you know, honestly, I'm kind 0:02:20.880 --> 0:02:24.360 of shocked by the degree of extreme, exaggerated move that 0:02:24.400 --> 0:02:26.880 we've had to the employment report, because all we're seeing 0:02:26.919 --> 0:02:31.280 is slowing job growth so far and still extreme entry 0:02:31.320 --> 0:02:33.760 into the labor force, which as a resulting in modest 0:02:33.880 --> 0:02:36.519 uptick in the unemployment rate. But we are seeing a 0:02:36.520 --> 0:02:39.200 slow on an average hourly earnings growth, which may cause 0:02:39.320 --> 0:02:42.560 questions about the consumer. The other note that we wrote 0:02:42.639 --> 0:02:44.959 last week is Amazon is entirely holding up the house 0:02:45.000 --> 0:02:47.399 of cards of consumer discretionary. So I think that also 0:02:47.520 --> 0:02:50.160 played out last week is when all your hopes and 0:02:50.240 --> 0:02:52.880 dreams are on one stock and that stock cannot sustain 0:02:52.960 --> 0:02:56.720 expectations and then the consumer outlook starts to deteriorate somewhat, 0:02:57.200 --> 0:02:58.959 you see some real weaknesses emerge there. 0:02:59.000 --> 0:02:59.799 And I'm glad you brought. 0:02:59.680 --> 0:03:01.880 Up because overall, if you look at the S and P. 0:03:01.960 --> 0:03:04.440 Five hundred, as you know, twelve percent earning growth year 0:03:04.440 --> 0:03:07.400 over year here. But you've talked so much also about 0:03:07.760 --> 0:03:10.240 when people want to argue about the broadening out, but 0:03:10.280 --> 0:03:12.160 then when you're looking on the fundamental side, what you're 0:03:12.200 --> 0:03:14.919 seeing beyond Tech, as you're seeing kind of that growth 0:03:14.919 --> 0:03:17.600 as opposed to narrow between Tech and the rest of 0:03:17.639 --> 0:03:20.800 the index. So what improvements are we seeing in other components. 0:03:20.880 --> 0:03:23.400 It's actually really fascinating, and I think that this is 0:03:23.480 --> 0:03:25.880 part of the reason, as much as it feels so painful, 0:03:26.560 --> 0:03:29.400 this market meltdown has looked very different than the meltdown 0:03:29.400 --> 0:03:31.600 of last fall. Remember we corrected ten percent in the 0:03:31.600 --> 0:03:33.360 third quarter of last year as well. It seems like 0:03:33.360 --> 0:03:35.280 a distant memory because we've had such a great pair 0:03:35.360 --> 0:03:37.480 in stock so far, but we did have a ten 0:03:37.520 --> 0:03:41.160 percent meltdown led by Tech, but the market's decline was 0:03:41.200 --> 0:03:44.320 one for one with Tech. This time, Tech has doubled 0:03:44.320 --> 0:03:46.720 the decline of the market, and so there is some 0:03:46.840 --> 0:03:50.480 internal rotation that's quite different characterizing the twenty twenty four 0:03:50.760 --> 0:03:54.240 tech meltdown and the overall market impact relative to twenty 0:03:54.280 --> 0:03:56.680 twenty three. And I do think that that's because of 0:03:56.720 --> 0:03:59.920 the cyclical the cyclicality of earnings, whereas in twenty two 0:04:00.000 --> 0:04:02.080 twenty three when tech melted down, there was nothing to 0:04:02.160 --> 0:04:03.880 kind of hang your hat on because the rest of 0:04:03.880 --> 0:04:09.320 the sectors we're producing accelerating downside on earnings today that's 0:04:09.440 --> 0:04:12.560 very different. We're actually seeing earnings growth improve so x 0:04:12.640 --> 0:04:14.680 mag seven the four to ninety three are posting seven 0:04:14.720 --> 0:04:18.000 percent earnings growth. It's the first positive quarter that we've 0:04:18.040 --> 0:04:21.799 seen in more than four so starting to see some earnings. 0:04:22.320 --> 0:04:25.480 The most fascinating part about this earning season also is guidance. 0:04:26.080 --> 0:04:28.880 As much as I think the market narrative has been 0:04:29.560 --> 0:04:32.719 all the companies are guiding terribly, now the reality is 0:04:32.760 --> 0:04:36.320 that tech companies have been guiding us to expect less, 0:04:36.880 --> 0:04:39.360 but the rest of guidance is actually net positive. We're 0:04:39.400 --> 0:04:42.240 actually seeing positive guidance momentum emerge in the rest of 0:04:42.240 --> 0:04:45.279 the groups. There's going to be so much confusion as 0:04:45.279 --> 0:04:48.080 to how this plays out. If we do indeed move 0:04:48.200 --> 0:04:52.599 into a state where we're seeing accelerated layoffs, we're seeing 0:04:52.680 --> 0:04:55.359 much greater jobless claims emerge, and that's going to imply 0:04:55.480 --> 0:04:59.160 that maybe we have some actual employment losses around the corner. 0:04:59.520 --> 0:05:01.880 That's going to create a lot of confusion in this 0:05:01.960 --> 0:05:04.039 market if we get there. But that's not where we 0:05:04.080 --> 0:05:06.599 are right now. Where we are is actually companies outside 0:05:06.600 --> 0:05:09.039 of tech are showing still improvement in their outlook. 0:05:09.400 --> 0:05:11.080 We had a guest on earlier this morning that a 0:05:11.120 --> 0:05:13.719 fund manager just flat out says his note to the 0:05:13.720 --> 0:05:14.720 clients is by the dip. 0:05:14.960 --> 0:05:15.200 Yeah. 0:05:16.000 --> 0:05:20.600 Wow, listen, when you get to a VIX that's the 0:05:20.680 --> 0:05:25.520 highest level since COVID. It's very clear that there is 0:05:25.640 --> 0:05:29.919 panic right now in the equity market, and panic usually 0:05:29.960 --> 0:05:34.159 results in major buying opportunities. So I completely understand that 0:05:34.760 --> 0:05:38.760 we haven't even seen absolute nonfarm job losses yet, and 0:05:38.800 --> 0:05:42.400 the market is already completely and totally panicked. And this 0:05:42.560 --> 0:05:46.200 is really because tech really drove a lot of our optimism. 0:05:46.279 --> 0:05:48.479 It was the only source of optimism. Now we're starting 0:05:48.480 --> 0:05:50.719 to see those tech stocks melt down, and the manict 0:05:50.839 --> 0:05:52.279 the market is completely panicked. 0:05:52.360 --> 0:05:54.200 Although you could have bought Nvidia at the open today 0:05:54.200 --> 0:05:55.880 at ninety two, which training at ninety eight. 0:05:56.960 --> 0:06:00.479 Yeah, Andrew Tyler over a GP Mortgan's treat so he 0:06:00.520 --> 0:06:03.200 made that tactical call this morning about buying the dip. 0:06:03.320 --> 0:06:04.320 Yeah. Interesting. 0:06:04.400 --> 0:06:05.440 Yeah, so we'll keep an eye on. 0:06:05.480 --> 0:06:08.280 I remember being on a desk in nineteen eighty seven. Uh, 0:06:09.920 --> 0:06:10.920 don't out pick up the phone. 0:06:11.200 --> 0:06:13.279 Did we start right before the eighty seven crash? 0:06:13.360 --> 0:06:13.520 Yes? 0:06:13.560 --> 0:06:13.840 I did. 0:06:14.320 --> 0:06:16.560 I was on the floor at eighty seven October nineteenth 0:06:16.600 --> 0:06:18.920 so anyway, Gina, thank you so much for joinings. Really 0:06:18.960 --> 0:06:22.279 really appreciate it. Gina Martin Adams. She is our equity 0:06:22.279 --> 0:06:26.000 strategist for Bloomberg Intelligence. We really appreciate gatting few minus 0:06:26.080 --> 0:06:28.440 or a times. Michael McKee joins is here and he 0:06:28.520 --> 0:06:30.560 does all the economy stuff for Bloomberg Television. 0:06:30.600 --> 0:06:30.760 Mike. 0:06:30.839 --> 0:06:32.719 I left the studio Thursday. 0:06:33.600 --> 0:06:37.440 All my discussions were soft landing, some variation of soft landing. 0:06:37.680 --> 0:06:40.040 And then today people are talking about a recession. 0:06:40.160 --> 0:06:41.480 Well it's only genus people. 0:06:41.640 --> 0:06:46.560 Yeah, exactly, it's only the equity market you were talking 0:06:46.560 --> 0:06:49.159 about nineteen eighty seven. I made a reference this morning 0:06:49.320 --> 0:06:52.800 when I was on with to people opening the windows 0:06:52.839 --> 0:06:55.680 down on Wall Street, and I got a note from 0:06:55.720 --> 0:06:59.119 a trader who's been around for a while who said, 0:06:59.360 --> 0:07:01.120 the twenty two year old sitting next to me had 0:07:01.160 --> 0:07:01.960 no idea. 0:07:01.640 --> 0:07:02.559 What you were talking about. 0:07:03.440 --> 0:07:09.160 So maybe we come up with a different analogy. I said, 0:07:09.240 --> 0:07:11.840 just a minute ago, it's it's an Emily Lettella moment 0:07:11.880 --> 0:07:14.960 now because we got the ism services index, and now 0:07:15.000 --> 0:07:20.720 there's another reference. Nobody she was a comedian, saiday live 0:07:20.760 --> 0:07:23.200 who would come on and say never mind? Right, and 0:07:23.240 --> 0:07:28.360 the services ism comes in and everything is higher, including employment, 0:07:28.480 --> 0:07:31.680 and that was the thing that everybody worried about on Friday. 0:07:31.720 --> 0:07:36.920 And with the ism factory orders on factory index on 0:07:37.440 --> 0:07:42.760 Wednesday Thursday, and you know, production's up, everything is up 0:07:42.800 --> 0:07:45.560 in that number comes in better than expected, and that's 0:07:45.600 --> 0:07:49.160 two thirds of the economy. So soft landing might still 0:07:49.160 --> 0:07:53.760 be in the cards. I think probably what you're seeing, 0:07:53.800 --> 0:07:57.040 and I'm going way beyond my level of expertise, is 0:07:57.080 --> 0:08:02.080 that Gina Martin Adams is right and that the equity 0:08:02.120 --> 0:08:05.680 markets were overly dependent on a few stocks that then 0:08:05.760 --> 0:08:10.440 didn't have great numbers, and you put the data on 0:08:10.520 --> 0:08:13.560 Friday behind them, and everybody panicked, And now maybe they 0:08:13.560 --> 0:08:14.120 don't need to. 0:08:14.560 --> 0:08:17.360 Also this morning, when we're looking at the yield curve, 0:08:17.400 --> 0:08:19.360 as I'm sure you saw as well, Mike, it's turning 0:08:19.360 --> 0:08:21.920 positive for the first time since July twenty twenty two. 0:08:21.920 --> 0:08:24.320 If you're looking at the twos tens part of that. 0:08:24.440 --> 0:08:27.200 So isn't that something also that you would potentially want 0:08:27.240 --> 0:08:29.360 to see as far as what that means for the 0:08:29.400 --> 0:08:31.800 direction of the economy after it was inverted for so long. 0:08:32.040 --> 0:08:35.520 Well, yes, and no. People don't realize is that the 0:08:35.600 --> 0:08:41.240 yield curve disinverts right before recessions because people are anticipating 0:08:41.320 --> 0:08:44.240 FED action, and I think that's one of the reasons 0:08:44.240 --> 0:08:48.200 we saw a big move. It's been slowly flattening, but 0:08:48.320 --> 0:08:52.040 I think today it was basically the two year went 0:08:52.200 --> 0:08:54.600 way down, the two year yield went way down, people 0:08:54.640 --> 0:08:57.240 anticipating the FED would be cutting rates and maybe an 0:08:57.240 --> 0:09:00.000 emergency rate cut and things like that. And right after 0:09:00.200 --> 0:09:03.120 this ISM number came out, it went back to where 0:09:03.160 --> 0:09:08.520 it was yesterday. So we're either slightly positive or back 0:09:08.559 --> 0:09:12.240 to slightly disinverted. So I'm not sure that's a signal, 0:09:13.160 --> 0:09:14.880 but there are a lot of different signals you can 0:09:14.960 --> 0:09:17.960 point to these days one way or the other. And 0:09:18.200 --> 0:09:22.560 I had an argument with another strategist this morning over 0:09:22.600 --> 0:09:26.440 the Bloomberg suggesting who was suggesting the FED needs to 0:09:26.440 --> 0:09:28.880 act now, and I thought, don't you think it probably 0:09:28.880 --> 0:09:31.400 be good for them to wait a few days and 0:09:31.480 --> 0:09:33.280 get a little more data and see if this is 0:09:33.400 --> 0:09:36.280 just a panic or a real collapse. And I think 0:09:36.720 --> 0:09:39.080 the waiting part is what the FED is going to endorse. 0:09:39.679 --> 0:09:42.000 It just remind us how rare is it for the 0:09:42.080 --> 0:09:45.840 FED to do an emergency like intrameding kind of rate cut. 0:09:46.800 --> 0:09:49.240 Very rare, and they only do it when the market 0:09:49.320 --> 0:09:53.400 stops functioning. And that's what we saw during the pandemic 0:09:53.400 --> 0:09:55.920 in March of twenty twenty. That's what we saw in 0:09:55.960 --> 0:09:59.360 the fall of two thousand and eight when Lehman Brothers 0:10:00.080 --> 0:10:03.080 went out of business and we saw the market seize 0:10:03.120 --> 0:10:08.480 up there. But there doesn't seem to be any indication 0:10:08.640 --> 0:10:10.840 that you can't trade today. So as long as you 0:10:10.880 --> 0:10:14.040 can trade, that's what the FED is concerned about. If 0:10:14.080 --> 0:10:17.520 you lose money, that's your problem exactly, not theirs. 0:10:17.880 --> 0:10:20.600 Well, you also spoke to Austin Golesby on Friday. He 0:10:20.640 --> 0:10:23.480 spoke again this morning, but kind of unpacked for us 0:10:23.520 --> 0:10:26.480 what he in his reaction to the jobs report, because 0:10:26.480 --> 0:10:28.680 it seems like again they followed trends and that was 0:10:28.760 --> 0:10:29.560 just one report. 0:10:29.800 --> 0:10:32.559 Well, it was interesting because Goolesby has been one of 0:10:32.600 --> 0:10:35.400 the more dubbish members of the FED, suggesting that they 0:10:35.480 --> 0:10:39.640 needed to start the process of normalizing rates, and yet 0:10:39.679 --> 0:10:44.000 he wouldn't really go there on Friday. He didn't want 0:10:44.040 --> 0:10:46.840 to front run what they might do. He said, you know, 0:10:47.200 --> 0:10:50.360 we're okay with where we are. Let's see what happens 0:10:50.400 --> 0:10:53.280 in the rest of the data. And he had a 0:10:53.440 --> 0:10:57.800 vote this time filling in for the vacant Cleveland seat, 0:10:58.280 --> 0:11:02.720 and he did not dissent. He voted for the Fed 0:11:02.760 --> 0:11:06.200 to hold rates where they were. So if one of 0:11:06.200 --> 0:11:10.200 the biggest doves was okay with it, then probably the 0:11:10.240 --> 0:11:12.520 rest of the Fed is going to be feeling okay 0:11:12.559 --> 0:11:13.560 with it for the moment. 0:11:13.880 --> 0:11:15.640 Right, all right, very good, Michael McKee, Thank you so 0:11:15.720 --> 0:11:18.880 much for joining us. Michael McKee covers all the economics 0:11:18.920 --> 0:11:21.960 for Bloomberg, and we appreciate getting some of his thoughts here. 0:11:23.440 --> 0:11:27.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:27.400 --> 0:11:30.920 weekdays at ten am Eastern on applecard Play and Android 0:11:30.960 --> 0:11:33.760 Auto with the Bloomberg Business app. You can also listen 0:11:33.840 --> 0:11:36.959 live on Amazon Alexa from our flagship New York station 0:11:37.320 --> 0:11:40.079 Just Say Alexa playing Bloomberg eleven thirty. 0:11:41.720 --> 0:11:43.520 So just went and sitting in for Alex Steel here 0:11:43.520 --> 0:11:46.840 for the next couple hours. Again, John was just reporting 0:11:46.840 --> 0:11:49.439 this ism data came in better than expected. Let's go 0:11:49.559 --> 0:11:51.400 right to that because we could use some good news here. 0:11:51.400 --> 0:11:56.400 Steve Miller, Chair of im Services PMI, it seems Steve 0:11:56.520 --> 0:11:58.800 some pretty solid results. What do you take away from 0:11:58.840 --> 0:11:59.760 some of this ism data. 0:12:00.840 --> 0:12:03.320 Yeah, we were certainly happy to see it return to 0:12:03.400 --> 0:12:07.920 expansion territory. You know, it seems like things are moderating 0:12:08.160 --> 0:12:10.839 in terms of terms of feedback that we're getting through 0:12:10.840 --> 0:12:15.120 the survey. We saw from a GDP standpoint, kind of 0:12:15.120 --> 0:12:18.440 almost dead even those that were in expansion versus those 0:12:18.480 --> 0:12:20.800 that were in contraction, with just a slight percent but 0:12:20.960 --> 0:12:24.240 three percent higher on the expansion side. As you see 0:12:24.240 --> 0:12:26.679 in the number, it's just just slightly above in the 0:12:26.720 --> 0:12:30.240 expansion range. So happy to see it's less volatile than 0:12:30.280 --> 0:12:32.679 we've seen in the past. With last month it was 0:12:32.679 --> 0:12:37.400 about ten percent higher a GDP represented in the contraction 0:12:37.600 --> 0:12:38.920 territory versus expansion. 0:12:39.360 --> 0:12:42.439 And when you're looking at the Atlanta Feds GDP now model, 0:12:42.440 --> 0:12:44.760 obviously we know that's volatile, but still the next update 0:12:44.800 --> 0:12:46.400 is going to come later this week, but it's around 0:12:46.440 --> 0:12:48.079 two and a half percent for the third quarter, so 0:12:48.120 --> 0:12:50.080 I know there's a lot of concern when we had 0:12:50.120 --> 0:12:53.040 some of the manufacturing data lasts Thursday. Obviously the jobs 0:12:53.040 --> 0:12:55.600 are port on Friday, but when you still have economic 0:12:55.600 --> 0:12:58.920 growth forecasted to be pretty solid here, how do you 0:12:58.960 --> 0:13:01.040 sort of unpack some of the latest wave of data 0:13:01.080 --> 0:13:03.280 here and how this latest when you're looking at ISM 0:13:03.360 --> 0:13:04.480 sort of fits into this. 0:13:05.600 --> 0:13:10.679 Yeah, so on average for twenty twenty four, what we're 0:13:10.720 --> 0:13:14.320 seeing is gradual expansion. The latest reading is about I 0:13:14.320 --> 0:13:16.839 believe it's point eight percent represents about a point eight 0:13:16.880 --> 0:13:22.719 percent increase in GDP growth. So I wouldn't be surprised 0:13:22.840 --> 0:13:25.120 to see that kind of a growth a growth number, 0:13:25.320 --> 0:13:27.480 but certainly what we see in our survey data on 0:13:27.559 --> 0:13:31.640 average is continued growth in GDP. 0:13:32.000 --> 0:13:33.520 All right, Steve, thank you so much for joining us. 0:13:33.520 --> 0:13:35.280 Really appreciate you coming on and breaking down some of 0:13:35.320 --> 0:13:38.400 these numbers. For Steve Miller, Chair of the ISM Services PMI, 0:13:38.840 --> 0:13:42.040 again some better than expected services PMI fifty one point 0:13:42.040 --> 0:13:45.280 four was the actual reading consensus was fifty one. Last 0:13:45.360 --> 0:13:48.120 period is forty eight point eight, so a nice improvement there. 0:13:49.520 --> 0:13:53.400 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:13:53.480 --> 0:13:56.199 weekdays at ten am Eastern on Apple card Playing and 0:13:56.320 --> 0:13:59.640 Brounoto with the Bloomberg Business app. Listen on demand wherever 0:13:59.720 --> 0:14:03.560 you get your podcast, or watch us live on YouTube. 0:14:04.320 --> 0:14:06.760 Jess Meant and sitting in for Alextel on Paul Sweeney 0:14:07.320 --> 0:14:10.040 here on Bloomberg Intelligence Program. We're live on a Bloomberg 0:14:10.040 --> 0:14:13.800 Interactive Brokers studio streaming live on YouTube as well here, 0:14:14.000 --> 0:14:16.840 and John's just talking about the ten year treasury three 0:14:16.880 --> 0:14:19.040 point seventy five percent. We were low with three point 0:14:19.080 --> 0:14:21.360 sixty six percent, so it's moving all around. 0:14:21.440 --> 0:14:26.840 That's right there. Today we missed that five percent mark. Paul, Yes, exactly, 0:14:27.080 --> 0:14:28.960 so bad, exactly all right. 0:14:29.120 --> 0:14:31.480 Next guest Joints is here in studio making a big 0:14:31.520 --> 0:14:34.840 trip over the pond, Chris Watling, CEO and chief market 0:14:34.840 --> 0:14:38.040 strategist for Longview Economics based out of London. We got 0:14:38.080 --> 0:14:41.080 him here in the big town. Chris, thanks for coming 0:14:41.120 --> 0:14:42.080 into our studio here. 0:14:42.360 --> 0:14:44.880 What do you make of the last several days here? 0:14:44.920 --> 0:14:47.840 It's just been a real readjustment for the market in 0:14:47.920 --> 0:14:48.760 terms of its outlook. 0:14:49.160 --> 0:14:50.320 Yeah, I think it's fascinating. 0:14:50.320 --> 0:14:53.640 I mean it seems to me we've evolved from sectu otation, 0:14:53.840 --> 0:14:57.120 which was kind of a mid July theme, to really 0:14:57.160 --> 0:15:00.280 we're oute to a liquidation event. And as as we 0:15:00.280 --> 0:15:03.000 were saying just off air, it's really all about the 0:15:03.000 --> 0:15:06.560 Bank of Japan's governor Yoida, who came out they surprised 0:15:06.560 --> 0:15:09.440 markets with a fifteen bit hike. But then of course, 0:15:09.480 --> 0:15:11.000 on top of that he talked about the idea that 0:15:11.040 --> 0:15:13.160 neutral rates are a long way away, so in other words, 0:15:13.200 --> 0:15:16.080 as a weight hiking cycle, and he's done that into 0:15:16.440 --> 0:15:18.240 you know, we've done it's very interesting. So the Fed's 0:15:18.280 --> 0:15:20.480 talked about cutting and we've got a bit of that 0:15:20.520 --> 0:15:23.560 from Power last week, a bit firmer and the boj 0:15:23.760 --> 0:15:26.680 is raising, and they've done that into two extreme positionings 0:15:26.680 --> 0:15:30.160 in markets. Everyone was short the end and everyone was 0:15:30.240 --> 0:15:34.200 max along the MAG seven and those both those rate cutting, 0:15:34.320 --> 0:15:37.560 those rate cycles changing influenced that position. So it's like 0:15:37.560 --> 0:15:40.880 we're in a giant repositioning in global markets and. 0:15:40.840 --> 0:15:42.840 A giant liquidity event on the back of it. 0:15:43.240 --> 0:15:45.280 So it's a lot going on. It's pretty interesting, not 0:15:45.320 --> 0:15:47.880 to mention the macro data, which we haven't got to. 0:15:48.120 --> 0:15:51.640 Right well, looking at the MAG seven index here in 0:15:51.680 --> 0:15:54.360 the terminal down almost five percent a days on peace 0:15:54.400 --> 0:15:57.160 for its worst day actually since July twenty fourth here, 0:15:57.360 --> 0:16:00.560 so keeping close eye on that. But also you neutral 0:16:00.640 --> 0:16:03.600 to US equities in late July, actually it was ahead 0:16:03.640 --> 0:16:07.920 of the Federal reserves decision last Wednesday. Kind of unpack 0:16:08.000 --> 0:16:11.160 us how you're advising clients to position, where are you 0:16:11.320 --> 0:16:13.280 telling them to put their money and like, what would 0:16:13.280 --> 0:16:14.480 you want to buy what would you want to sell 0:16:14.520 --> 0:16:15.040 at this point? 0:16:15.840 --> 0:16:18.080 Well, I think it depends on obviously your time frame. 0:16:18.200 --> 0:16:20.520 So if you're sort of, you know, the next couple 0:16:20.560 --> 0:16:24.000 of months, I'd just be cautious. I think markets haven't 0:16:24.040 --> 0:16:26.480 finished their sell off today, where you know, we're in 0:16:26.480 --> 0:16:28.600 the midst of it and there's more to come. And 0:16:28.720 --> 0:16:31.400 generally when markets sell off this sharply, the price section 0:16:31.560 --> 0:16:34.400 dictates you get a we test unless we get something 0:16:34.480 --> 0:16:36.880 dramatic out of the FED in terms of you know, 0:16:36.960 --> 0:16:40.960 inter meeting cut or very dramatic strong signaling. So so 0:16:41.600 --> 0:16:43.560 short term I do that. In the medium term, I 0:16:43.560 --> 0:16:45.840 think one wants to see this as an opportunity to 0:16:45.960 --> 0:16:50.000 start moving portfolios around in terms of that global sector rotation, 0:16:50.200 --> 0:16:54.240 So our viue is that markets have fashions. Every six 0:16:54.320 --> 0:16:58.360 or seven years, the global sector leaderships change, and you know, 0:16:58.400 --> 0:17:01.160 it's been tech, it's been strong, and we think it's 0:17:01.200 --> 0:17:02.080 now starting to change. 0:17:02.120 --> 0:17:04.040 We're coming into a rate cutting cycle. 0:17:04.440 --> 0:17:07.159 I think we can get cyclical week acceleration in the West, 0:17:07.720 --> 0:17:10.400 and you know, we think people should stop positioning for that. 0:17:10.400 --> 0:17:14.000 That's smaller midcaps in the US, that's overseas equities non 0:17:14.080 --> 0:17:16.639 US equities. So I think, I think, you know, the 0:17:16.640 --> 0:17:19.400 headline is we're going back to the noughties in terms 0:17:19.480 --> 0:17:21.919 of what does well, you know, I mean, it's like 0:17:22.000 --> 0:17:23.520 back to the future all over again. 0:17:24.640 --> 0:17:26.199 But what goes around comes around. 0:17:26.280 --> 0:17:28.280 And I think we're going to get a consumer and 0:17:28.320 --> 0:17:31.120 housing boom over the next one to four years across 0:17:31.160 --> 0:17:33.439 the Western world, and that's going to change the equity 0:17:33.440 --> 0:17:35.679 sector leadership in the global stock market. 0:17:36.280 --> 0:17:38.480 Look at that de Vic's here, it's up about nineteen 0:17:38.520 --> 0:17:40.960 points to just north of forty two. It was up 0:17:41.000 --> 0:17:43.560 to a level of sixty five earlier this morning, just 0:17:43.600 --> 0:17:44.720 blowing out like crazy. 0:17:45.640 --> 0:17:48.800 Does that tell you that panic is out there earlier today? 0:17:49.200 --> 0:17:51.520 Well, it's definitely panic, isn't there. I mean, sixty is 0:17:51.520 --> 0:17:52.919 a big I mean I remember when I started in 0:17:52.920 --> 0:17:54.600 this business, if it went over twenty, you thought it 0:17:54.680 --> 0:17:57.439 was a big number, and then of course that's all changed. 0:17:57.480 --> 0:18:00.760 But sixty is undoubtedly a big number, very very rarely 0:18:00.800 --> 0:18:03.480 to get above that. So I think very short term 0:18:03.480 --> 0:18:05.399 what people want to watch is do you get a 0:18:05.400 --> 0:18:08.639 bullish keydo reversal in markets today? You know, obviously the 0:18:08.800 --> 0:18:12.199 voting below the lows to their close above levels that 0:18:12.240 --> 0:18:14.120 they saw on Friday. I mean, it seems a long 0:18:14.160 --> 0:18:16.720 stretch from here, but still a few more hours of trading. 0:18:16.800 --> 0:18:19.240 This market is very volatile. It can move along very quickly. 0:18:20.280 --> 0:18:22.919 But look, most sell offs happen in three or five waves. 0:18:22.960 --> 0:18:25.200 So we've had wave one. We're going to get a 0:18:25.240 --> 0:18:28.320 Willie Fraley. If you're a trader at some stage over 0:18:28.320 --> 0:18:29.680 the course of this week, you want to get involved 0:18:29.720 --> 0:18:31.639 in that. On alongside, when you're. 0:18:31.520 --> 0:18:33.920 Talking to your clients, what are some of their top 0:18:34.000 --> 0:18:35.400 questions right now? 0:18:36.240 --> 0:18:39.280 Well, I mean I haven't talked to many today because 0:18:39.280 --> 0:18:42.440 I think the questions might have changed over the last 0:18:42.440 --> 0:18:43.600 twelve eighteen hours. 0:18:43.600 --> 0:18:45.160 But no, I mean we've been, we've been. 0:18:45.640 --> 0:18:49.800 You know, the big question has really been when you 0:18:49.800 --> 0:18:51.760 get out of the MAC seven, and I think that's 0:18:51.800 --> 0:18:54.720 becoming increasingly obvious. And of course I think the really 0:18:54.760 --> 0:18:59.040 big question will be, now, has the psychology really broken 0:18:59.040 --> 0:19:02.000 in that sector? Is this genuinely the top on a 0:19:02.040 --> 0:19:05.200 relative basis for the MAG seven? I would definitely argue 0:19:05.240 --> 0:19:07.760 it is because it happened on July the eleventh, on 0:19:07.800 --> 0:19:11.880 that CPI day when we changed better inflation and so on, 0:19:11.960 --> 0:19:15.320 and better therefore interest rate outlook for the FED. But look, 0:19:15.359 --> 0:19:17.359 I mean, there are you know, there are tons of questions. 0:19:17.400 --> 0:19:19.159 People are going to be asking about this liquidity out 0:19:19.200 --> 0:19:21.800 of Japan. They're going to be asking about neutral weights 0:19:21.880 --> 0:19:25.200 in Japan, what is your aid to mean? And we're 0:19:25.200 --> 0:19:27.840 going to be looking for FED, FED and other central 0:19:27.840 --> 0:19:30.520 bankers to accelerate their weight cutting torque. 0:19:30.560 --> 0:19:31.640 I think I'm glad. 0:19:31.520 --> 0:19:34.159 You brought up July eleventh, the CPI day when we 0:19:34.240 --> 0:19:36.480 got that last report for the month of June, because 0:19:36.520 --> 0:19:38.840 if you look at the flows data, a lot of 0:19:38.880 --> 0:19:41.400 that rotation. Of course, people were talking so much about 0:19:41.440 --> 0:19:43.760 small caps last month, but now they're coming under pressure. 0:19:43.760 --> 0:19:47.560 But those kind of income driven type proxy bond like sectors. 0:19:47.560 --> 0:19:50.520