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Speaker 1: Joanne Feeney is with us as our guest. Joan is

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Speaker 1: partner also portfolio manager of the adviser's Capital Management. She

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Speaker 1: joins us from outside New York City on the western

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Speaker 1: shore of the Hudson River. Joan, thanks for being with us.

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Speaker 1: We're talking a lot about an impending recession. I guess

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Speaker 1: if there is a bright spot here, it comes from

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Speaker 1: JP Morgan. The firm is expecting it to be shallow

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Speaker 1: and short lived. What do you think we're going to

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Speaker 1: be dealing with in well, Doug, it's it's awfully hard

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Speaker 1: to predict when we haven't even really entered that recession yet.

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Speaker 1: If if we do that, the US is in a

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Speaker 1: strange situation with very tight labor markets, that is, shortages

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Speaker 1: of labor, and classically a recession is when you get

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Speaker 1: a lot of unemployed people. And now we may end

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Speaker 1: up there. We may very well, because the Fed has

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Speaker 1: a lot of work to do to reduce those inflationary

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Speaker 1: pressures and bring us back to its two percent target.

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Speaker 1: But at this point, I think it's a bit early

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Speaker 1: to call how long and deep the recession is going

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Speaker 1: to be. From the strength of the labor market, that

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Speaker 1: does suggest a shorter and shallower recession. So barring new

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Speaker 1: information to the contrary, that's probably not a bad way

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Speaker 1: to approach investing for but there's a lot of risks

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Speaker 1: out there in the world, and we've seen how badly

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Speaker 1: those risks can disturb markets. Yeah, I know you think

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Speaker 1: inflation may have paked, but you also say just then

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Speaker 1: that the FIT has a lot of work to do

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Speaker 1: to get that inflation right back to target. And when

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Speaker 1: we say work, we mean more right increases. So what

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Speaker 1: do you see the funds right peaking up? We think

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Speaker 1: it's likely the funder it's going to hit five uh,

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Speaker 1: and it's gonna stay there for a while because it

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Speaker 1: is going to be hard to bring that inflation back

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Speaker 1: to target. And the fedest signal pretty clearly that it's

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Speaker 1: going to wait to see concrete evidence of a decline

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Speaker 1: in inflationary pressures. And we are seeing some signs that

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Speaker 1: some of the transitory impacts are coming out. I mean,

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Speaker 1: look at use cars prices. They were reported again today

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Speaker 1: they were down to sparkly year every year, and then

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Speaker 1: that's happened for a few months. So that's helping um.

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Speaker 1: But the challenge for the more persistent inflation is though,

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Speaker 1: is the tight labor market, is the pressure on wages

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Speaker 1: to continue to grow, and they're growing at a pretty

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Speaker 1: fast pace, and that is going to directly feed into

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Speaker 1: one of the biggest segments of the US economy, which

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Speaker 1: is the services segment. So are you still favoring equities?

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Speaker 1: I mean, if you had to put capital to work,

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Speaker 1: you're looking at stocks as opposed to bonds right now. Well,

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Speaker 1: it really depends on the client. I mean, we do

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Speaker 1: have some clients who are entirely in bonds. It depends

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Speaker 1: on their position life, it depends on their risk tolerance.

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Speaker 1: But for the long term, we still like equities. And

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Speaker 1: it isn't because the market is particularly cheap. It isn't.

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Speaker 1: It's about in line with long term historical valuations. But

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Speaker 1: there are stocks within the market that can deliver very

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Speaker 1: attractive dividend yields. And that's one way for our clients

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Speaker 1: to ride out some of the down traps we're seeing

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Speaker 1: in stock prices, because if they can fund their cash

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Speaker 1: flow needs out of dividends, then they can not have

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Speaker 1: to sell a stock to raise that cash and they

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Speaker 1: can ride this out. And you know, for folks that

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Speaker 1: have a longer term view, you know, we are finding

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Speaker 1: some stocks that are particularly attractive here. They have gone

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Speaker 1: on way too much. It's as if the market thinks

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Speaker 1: there will be no growth ever again. And we do

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Speaker 1: know that recessions are temporary. So where do you go

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Speaker 1: to to get some dividends in three Well, there's a

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Speaker 1: number of things to do here, right. You want to

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Speaker 1: build some defense into the portfolio, the defense against some

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Speaker 1: of the risks that are out there, and so hence

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Speaker 1: defense companies often are good like Lockheed Martin two and

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Speaker 1: a half percent yield, or Raytheon a little bit below that.

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Speaker 1: But then beyond that, healthcare is a very attractive sector

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Speaker 1: even through a recession. So a company like ab V,

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Speaker 1: which has a very robust pipeline, as a three point

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Speaker 1: six percent of at a yield or even higher than that,

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Speaker 1: you can go to Philip Morris. I hate to say it,

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Speaker 1: but you know, demand for ber nicotine is still very

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Speaker 1: high and they offer a five percent yield. So there

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Speaker 1: are a lot of choices out there that can be

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Speaker 1: less volatile than recessionary classic cyclical stocks and provide some

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Speaker 1: defense against some of the more concerning risks like global instability. Yeah,

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Speaker 1: geopolitical risks, certainly a key that may have accounted for

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Speaker 1: some of the bid that we had in the bond

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Speaker 1: market today, maybe haven buying. But that brings me to

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Speaker 1: the oil story. I mean, we don't know when we're

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Speaker 1: going to get resolution on this conflict, the war in Ukraine.

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Speaker 1: Today we've felt quite a bit in New York on

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Speaker 1: w t I we were down about three percent, But

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Speaker 1: we're seeing a build in gasoline stockpiles, which may go

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Speaker 1: to the issue of demand destruction. Is energy a place

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Speaker 1: that you want to hide here? Or has this been

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Speaker 1: maybe too much bid up so to speak, and and

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Speaker 1: prices have moved so far in one direction to the

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Speaker 1: upside that you would just avoid energy. Yeah, it really

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Speaker 1: depends again on the strategy and the goals of the clients.

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Speaker 1: But we don't think you want to avoid the energy entirely.

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Speaker 1: I mean, it is pretty cheap. And I think the

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Speaker 1: e t I UM clearly there's concerned about recession, right,

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Speaker 1: that is, the forecast demand is going to be lower

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Speaker 1: because of recession in the US and Europe. China reopening

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Speaker 1: on the one hand might raise a man. But as

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Speaker 1: you're earlier reporting noted, uh, you know, the risk is

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Speaker 1: that COVID cases are going to climb pretty steeply into

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Speaker 1: and a lot of people are gonna be at to

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Speaker 1: work as a consequence, and that's going to constrain growth.

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Speaker 1: So it's really hard to tell what the global demand

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Speaker 1: situation is going to be for oil. Plus then you

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Speaker 1: have OPEC. You know, it's already cut production, which could

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Speaker 1: cut production again, which could sustain prices. So you own

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Speaker 1: a company like you know, Chevron for example, again a

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Speaker 1: nice dividend yield, and yeah, the stock might be volatile,

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Speaker 1: it's going to move with a recession threat, but longer term,

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Speaker 1: you know, it's a very well run company. Obviously, it's

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Speaker 1: great assets, and we're you know, as much as people

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Speaker 1: want to move to a greener economy, it's gonna be

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Speaker 1: a long time technologically before we can do that. And

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Speaker 1: so it doesn't seem like a bad idea to have

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Speaker 1: some energy exposure. Or you could go to pipelines like

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Speaker 1: a Kinder Morgan, which basically charges feest for the use

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Speaker 1: of their pipes and their storage, and that's you know,

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Speaker 1: that's not likely to slack off very much. You mentioned

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Speaker 1: China there, it's obviously going to be an interesting road

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Speaker 1: out of COVID zero but are you looking for opportunities

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Speaker 1: in China? Yeah, Paul, you know, we were a little

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Speaker 1: cautious about China. UM, we are selective. We don't want

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Speaker 1: to be sposed to the whole country. Politics plays a

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Speaker 1: big role, as we've seen over the last year or so,

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Speaker 1: But there are opportunities. The engines of growth in China

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Speaker 1: still remain pretty tied to the I T infrastructure, and

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Speaker 1: so you know, we like a company like a Baidu

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Speaker 1: for example. UM. You know, more broadly, there's just a

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Speaker 1: lot more uncertainty in China than there used to be,

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Speaker 1: but valuations reflect that now. So again for the long

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Speaker 1: term investor there, I think there's it's worthwhile to have

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Speaker 1: some exposure. Obviously, one of the biggest populated countries on

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Speaker 1: the planet. Eventually they will be growing again, and so

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Speaker 1: if you have a long enough horizon, some exposure there

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Speaker 1: isn't a bad idea. So away from China particularly, I'm

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Speaker 1: wondering how you feel about e M more broadly, and

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Speaker 1: particularly if you include the fact or the likelihood that

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Speaker 1: we have seen a peak in the dollar. Do you

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Speaker 1: favor e M at this point? Yeah, we do have

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Speaker 1: um international portfolio strategies. Again, we don't like to invest

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Speaker 1: in a whole country. That's why we do all individual

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Speaker 1: stock and bond investing. And we have found some names

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Speaker 1: out of emerging markets that have you know, deep moats

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Speaker 1: uh and that offer opportunities. So you know, it's not

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Speaker 1: so much e M as a group, it's more are

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Speaker 1: their companies within these countries that are being well run,

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Speaker 1: that are serving a growing market. Now, we don't know

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Speaker 1: how the dollar is going to go statistically, right, dollar

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Speaker 1: pretty much follows a random walk, which means your best

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Speaker 1: guess of what it's going to be tomorrow is what

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Speaker 1: it is today. So I don't think we want to

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Speaker 1: make big bets on the direction of the change in

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Speaker 1: the dollar versus other currencies, but rather look for the

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Speaker 1: good companies, all right, Joanne Feeny On that night, were

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Speaker 1: out of time. Joanne Feny is Patna and Pull folio manager,

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Speaker 1: Devises Capital Management. Thanks so much for joining us on

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Speaker 1: the bloom Back Daybreak Asia Today,