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Speaker 1: Let's get to our final guest this hour. It's David Waddell,

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Speaker 1: CEO and chief Investment Strategies at wadel and Associates, to

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Speaker 1: discuss the latest on the markets. Good morning, good evening

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Speaker 1: to you, David. Good to have you as always. Obviously

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Speaker 1: it's a big week this week for central banks. The

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Speaker 1: r b A will be out later today. Fifty basis

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Speaker 1: points the consensus the ECB on Thursday, perhaps seventy five.

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Speaker 1: What's your outlook for the Fed? Obviously there was a

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Speaker 1: bit of a hawkish tone we got from j Powell

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Speaker 1: at Jackson Hole. Market expects seventy five. How do you

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Speaker 1: see the Fed tackling what could be month of a

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Speaker 1: month slight decline in inflation in the United States? Well,

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Speaker 1: I do think the said thanks for having me on,

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Speaker 1: Good to talk to you, but I do think the

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Speaker 1: Fed has to continue this sort of disciplining UM that's

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Speaker 1: going on, and certainly did from the podium at Jackson Hole. Um.

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Speaker 1: The unfortunate thing about the market rallying seventeen and a

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Speaker 1: half percent off those June Lowe's was that inflation expectations

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Speaker 1: rallied as well. So optimism is the enemy of the

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Speaker 1: fed's mission right now. So I think they raised seventy

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Speaker 1: five basis points, and I think the futures market have

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Speaker 1: a basically even money, but they need to follow through

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Speaker 1: I think a little bit on this disciplining path that

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Speaker 1: I mean, they're all taking the podium and just talking

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Speaker 1: as negatively as they can, so I imagine they have

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Speaker 1: to back that up and then they can sort of

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Speaker 1: watch it. I don't think that the inflation print on

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Speaker 1: September thirteen, right is enough to dissuade the FED from

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Speaker 1: kind of falling up with their aggressive tone from Jackson Hole,

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Speaker 1: So I would anticipate seventy I don't think that crushes

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Speaker 1: the market, and it just brings us even closer to

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Speaker 1: the end of this typeing campaign. You wonder at what

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Speaker 1: level I mean right now. I think the takeaway the

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Speaker 1: main takeaway from Jerome Palace speech at Jackson Hole was

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Speaker 1: that they've kind of set aside the soft landing scenario

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Speaker 1: that they want to be seen as crushing inflation. Is

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Speaker 1: a soft landing still in their playbook, do you think

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Speaker 1: or has it just been kind of shunted to the side. Well,

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Speaker 1: I think we need to find what a soft landing

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Speaker 1: and a hard landing is I mean, a soft landing

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Speaker 1: is kind of where we are right now, because there's

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Speaker 1: not much growth going on. And when I talked to

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Speaker 1: business leaders, you know, they're pretty pessimistic, and you saw

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Speaker 1: that and sort of the CEO competence surveys, etcetera. So

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Speaker 1: there is definitely a close growth slow down. You're like housing,

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Speaker 1: it's pretty nasty right now, deservedly so, um, but it's

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Speaker 1: obviously softening. So I think we're sort of already sort

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Speaker 1: of soft landing right now. The hard landing might mean

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Speaker 1: an actual recession, since we've discredited the two quarters of

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Speaker 1: negative GDP growth we've gotten so far. My head is

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Speaker 1: still a recession. It's so with books. But David, especially

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Speaker 1: if you consider the lag defect, there could be you know,

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Speaker 1: much more difficult times ahead based on what they've already done.

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Speaker 1: Yet they're promising to do a lot more. Well, I

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Speaker 1: think again they have to because they need as pessimistic

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Speaker 1: because I don't bring down the inflation expectations. So they're

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Speaker 1: sort of talking us into worrying ourselves to death on purpose.

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Speaker 1: I think, you know, they sort of soften their tone.

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Speaker 1: Bostick said, well, maybe we don't need to raise rates, etcetera.

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Speaker 1: And then we as market participants took advantage of that,

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Speaker 1: and that did not please them. I think the challenge

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Speaker 1: for them right now is the extra trillion dollars in

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Speaker 1: stimulus that you know, White House and Congress snuck in UM,

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Speaker 1: and so they're going to have to deal with the

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Speaker 1: fact that we've got fiscal expansion while we're having monetary tightening.

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Speaker 1: But if there's no crisis, if the Fed doesn't break anything,

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Speaker 1: then we can have a two percent draw down in

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Speaker 1: g d P, which is sort of a non crisis,

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Speaker 1: normal recession. And I don't think that crushes the stock

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Speaker 1: market because the CEOs are already sort of doing everything

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Speaker 1: they can to protect margins. So time to start planning

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Speaker 1: for recovery in your portfolio in and how soon? I mean, yes,

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Speaker 1: that's sort of my operating narrative right now. So this

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Speaker 1: may be your last invitation, this draw down between now

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Speaker 1: and call it how weeen UM. But I think we

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Speaker 1: get past the mid terms, you know, the percentages of

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Speaker 1: the Republicans take in the House are still obviously better

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Speaker 1: than you get into grid luck, which takes the government

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Speaker 1: off the board, which is actually good for the FED.

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Speaker 1: I think um, and then we can start looking at

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Speaker 1: you know, next year, we'll see inflation fall, we'll see

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Speaker 1: the Fed obviously not as aggressive and probably start easing

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Speaker 1: by the end of the year. So they'll just be

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Speaker 1: some tail winds next year. There's some pain between now

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Speaker 1: and them. But the thing the markets already accounted for

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Speaker 1: that and we discounted, which is the normal sort of

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Speaker 1: media and average during a recession. Let's see that we

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Speaker 1: let's just say that we get a fairly measurable drop

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Speaker 1: in inflation, and what you're talking about happens in the

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Speaker 1: early part of next year. The dollar could drop pretty sharply,

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Speaker 1: one would think, given how much it's risen this year.

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Speaker 1: Does that then reignite inflation. I don't think so. And

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Speaker 1: what's going on in Europe is disinflationary too, right, So

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Speaker 1: if there's a recession there and then they're slow growth

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Speaker 1: in China, there's less sort of growth impulse across the world.

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Speaker 1: And by the way, International's x us are trading at

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Speaker 1: twelve times, so I'd be perfectly happy with the dollar declining.

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Speaker 1: Me it's up fifty percent since the low back can

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Speaker 1: oh nine, I guess in twenty five percent almost from

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Speaker 1: from two thousand one or twenty one. So I'd love

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Speaker 1: to see the dollar roll over, and so with Corporate America,

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Speaker 1: given them fact that so much of the earnings are

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Speaker 1: harvested overseas. So I think a dollar going down is

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Speaker 1: a risk on signal UM and that gives you an

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Speaker 1: opportunity to make money in these international equities that are

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Speaker 1: so cheap. Does that diminish them? What we've seen is

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Speaker 1: the bit of a tailwind in Asian economies because of

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Speaker 1: the currency declines in these export dependent economies. Here, I

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Speaker 1: don't think so. I mean Asian has actually held up

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Speaker 1: pretty well in this UM. If you look at Japan

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Speaker 1: UM and what's happened with the end, the markets are

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Speaker 1: actually reacted okay to that kind of disruption. So there's

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Speaker 1: been a whole lot of red herrings and you know,

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Speaker 1: calls for turmoil and default, none of which are really registered.

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Speaker 1: And China is a mess, but obviously they have macro

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Speaker 1: potential control over that UM system. So I think the

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Speaker 1: emerging markets if you look at them, like last week,

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Speaker 1: we were down for percent and the emerging markets were

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Speaker 1: down to UM, so they've actually had this bizarre sort

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Speaker 1: of safe haven status. This whole time, UM, and they

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Speaker 1: really haven't gone anywhere in decades now, so I still

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Speaker 1: think there's value there. So, David, in this transition period

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Speaker 1: to let's say some of your skies sometime next year,

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Speaker 1: what are you? What are you? What are you buying? Well,

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Speaker 1: I think you don't have to get that cute. The

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Speaker 1: beta trade will come back, right, so you can buy

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Speaker 1: the profitless tech and the UM the bitcoin stuff, and

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Speaker 1: that will work as a trade. But I just don't

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Speaker 1: think you have to get that cute. I think you know,

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Speaker 1: you look at the dividends docks held up. UM. You know,

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Speaker 1: ten percent of the SMP is trading at multiple of

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Speaker 1: ten or less. You've got lots of stocks with big

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Speaker 1: dividends like JP Morgan, and you know, you've got companies

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Speaker 1: like Intel that have been punished that are trading at

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Speaker 1: single pas with big dividends. So I think there's plenty

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Speaker 1: of value. And for me, I think the small caps

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Speaker 1: go on to tear. You know, even if we reflect

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Speaker 1: upon the seventies where we had terrible inflation, small caps

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Speaker 1: did great while the dal Jones went nowhere for fifteen years. Okay, David,

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Speaker 1: thanks very much for joining us. Really appreciate it. Nice

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Speaker 1: chatting with you. David Woddell is CEO and chief investment

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Speaker 1: Strategist at waddell an Associates