WEBVTT - (Radio)

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<v Speaker 1>Let's get to our guest, Steve Sosnick, chief strategist at

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<v Speaker 1>Interactive Brokers. Steve, thanks very much for taking out some

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<v Speaker 1>time on a Sunday evening and help us navigate through

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<v Speaker 1>these markets. Do you feel that investors will start to

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<v Speaker 1>turn more positive because the Fed maybe slowing down a

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<v Speaker 1>little bit in its approach to a monetary policy, or

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<v Speaker 1>more on the negative side because one of the reasons

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<v Speaker 1>they might do that is that it looks like recession

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<v Speaker 1>could be closer and we have these ongoing difficulties in China. Um,

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<v Speaker 1>good morning, Brian. Wow, you you came ready with a

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<v Speaker 1>good question there. Um. The I look at it this way,

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<v Speaker 1>the bond market in the stock market are telling us

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<v Speaker 1>two different things. The bond market is clearly sending a

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<v Speaker 1>recession signal. So you know, again, let's let me just

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<v Speaker 1>sort of stipulate. If the markets are telling me two

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<v Speaker 1>different things, I tend to trust the bond market over

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<v Speaker 1>the stock market. That said, I think investors have gotten Um,

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<v Speaker 1>they've gotten a bit more mellow in terms of what

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<v Speaker 1>they're looking for. First, we're looking for a FED pivot

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<v Speaker 1>that wasn't coming from Powell. Then they were hoping for Um,

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<v Speaker 1>pause that didn't come. Then they were hopings. You know,

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<v Speaker 1>now they're just sort of okay with okay at the

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<v Speaker 1>pace of rate hike slows that's good enough for us,

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<v Speaker 1>and that that kind of boiled us up um earlier,

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<v Speaker 1>you know, early last week. UM, it's not clear to

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<v Speaker 1>me that that is a great way to go through life. UM.

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<v Speaker 1>I think that's a little I think they've gotten a

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<v Speaker 1>little ahead of themselves. And so we'll see what happens

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<v Speaker 1>whether the data, which which side the data is really

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<v Speaker 1>favors over the coming days and as phycifically at the

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<v Speaker 1>moment that people living for next month when we see

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<v Speaker 1>the latest earnings come through. But you know, how important

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<v Speaker 1>and how seriously are people taking earnings in your view,

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<v Speaker 1>Steve Um, let me say your cho there, always take

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<v Speaker 1>it seriously. But sometimes I think they may not be

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<v Speaker 1>discounting enough going forward. UM. I think you know, we

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<v Speaker 1>we saw some great reactions from a wide range of retailers.

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<v Speaker 1>It's not clear to me whether that was just because

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<v Speaker 1>they liked the numbers or because they were sort of

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<v Speaker 1>caught wrong footed by okay numbers. But as we get

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<v Speaker 1>into next year, I was kind of expecting that, Um,

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<v Speaker 1>we might see some more revisions from analysts in terms

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<v Speaker 1>of next year's numbers, and they're not really coming through

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<v Speaker 1>with those. So we're reasonably fairly valued, you know, and

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<v Speaker 1>actually maybe slightly undervalued if the if those earnings that

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<v Speaker 1>are still being predicted come through, but if you're expecting

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<v Speaker 1>more of a recessionary scenario, UM, then then I think

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<v Speaker 1>we're still a little bit we may we still have

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<v Speaker 1>some downside then potentially, And some investors had taken some

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<v Speaker 1>positive signs from China over the past couple of weeks,

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<v Speaker 1>thinking that perhaps if not in actual name, but in practice,

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<v Speaker 1>some of the COVID restrictions would be retreating. But we

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<v Speaker 1>see a very different story now. And then these protests

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<v Speaker 1>add a lot to it too, because that raises added

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<v Speaker 1>concerns I suppose about governance. Oh absolutely, this this has

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<v Speaker 1>become you this has become an issue with US. Investors

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<v Speaker 1>really jump on the bandwagon anything anything that seems positive

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<v Speaker 1>out of China. They get very excited about. We saw

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<v Speaker 1>a tremendous amount of call buying in UM you know

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<v Speaker 1>f x I, which is you know, sort of a

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<v Speaker 1>China related ETF and a lot of the you know,

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<v Speaker 1>the the usual sort of names like Ali Baba and stuff. Um.

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<v Speaker 1>And this has to put a little bit of a

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<v Speaker 1>damper on it in the short term. So last week

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<v Speaker 1>was a bit money because of the Thanksgiving holiday and

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<v Speaker 1>the partial trading day on on Friday, So we've got

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<v Speaker 1>a proper said trading week and culminating, of course with

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<v Speaker 1>the non farm payrolls report. How important is that in

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<v Speaker 1>the context of the verbiage we've had out of the

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<v Speaker 1>Federal Reserve of late Um. I think the non farm

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<v Speaker 1>payrolls is sort of taking a back seat right now

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<v Speaker 1>because I think we can more or less check off

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<v Speaker 1>the full employment portion of the feds dual mandate. Remember

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<v Speaker 1>it's you know, full employment and stable prices. We can

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<v Speaker 1>pretty much say that full employment if not here, it's

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<v Speaker 1>awful close. Um And we're and the FED is basically

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<v Speaker 1>said that they're going to sacrifice employment at the at

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<v Speaker 1>you know, if it means getting stable prices. So I

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<v Speaker 1>think these are always important numbers, um And I think

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<v Speaker 1>people will read into it if it's an outlier, but

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<v Speaker 1>I think it more or less comes in in line.

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<v Speaker 1>It doesn't change much of the FED narrative that people

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<v Speaker 1>are looking for. Yeah, it's a tricky time when you

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<v Speaker 1>think that actually recession may be part of the game

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<v Speaker 1>plan for the FED. Uh So it puts you in

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<v Speaker 1>a in a funny position and you you seem to

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<v Speaker 1>express Steve a little bit of frustration in the first

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<v Speaker 1>part of our interview with you know this run over

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<v Speaker 1>four thousand for the SMP when it wasn't really much

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<v Speaker 1>news to justify. So my question to you is is

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<v Speaker 1>that actually a good sign or a bad sign. A

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<v Speaker 1>bad sign would be, well, maybe it's this complacency being shown.

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<v Speaker 1>But a good sign is maybe they see and feel

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<v Speaker 1>some underlying strength. Yeah, I mean it. This is the

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<v Speaker 1>problem is it's very hard to unpack. My my gut

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<v Speaker 1>kind of tells me it's a little bit of hopium,

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<v Speaker 1>you know, just sort of everybody being hopeful that that

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<v Speaker 1>something is going to turn around. You know, do have

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<v Speaker 1>the seasonality of the end of the year. Um, if

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<v Speaker 1>you get a little bit of positive momentum into November December,

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<v Speaker 1>the institutional investors want to stay invested because they want

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<v Speaker 1>to ride that momentum higher um. And so I think

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<v Speaker 1>you can you can get a kind of run where

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<v Speaker 1>the market just has enough to justify it its actions

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<v Speaker 1>without necessarily being a real causative UM story, and that's

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<v Speaker 1>I think that's I think kind of the situation we're in.

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<v Speaker 1>It's a bit of momentum, it's a bit of good feelings.

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<v Speaker 1>People feel okay being invested, but but it's you know,

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<v Speaker 1>longer you know, and then we'll sort of wait until

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<v Speaker 1>next year and see what happens. That could be a

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<v Speaker 1>little bit tricky, Steve, when you look at you know,

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<v Speaker 1>your your clients, and you look at what's been happening

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<v Speaker 1>in the crypto space. But what's your take from what

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<v Speaker 1>they're asking you? How badly damaged has this whole indeed ecosystem,

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<v Speaker 1>I mean by what happened with the ft exident, the

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<v Speaker 1>rippling effect from it. How many hours do we have

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<v Speaker 1>for the short answer is you know. I think that

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<v Speaker 1>that people if you're a believer in crypto, you kind

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<v Speaker 1>of remain a believer in crypto UM. I think people

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<v Speaker 1>are encouraged by the fact that it hasn't sold off.

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<v Speaker 1>I do think that that is more of a function

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<v Speaker 1>of a lot of small investors really just can't sell

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<v Speaker 1>because they don't have access to their accounts UM depending

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<v Speaker 1>on which firm they're invested at. UM. I don't think

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<v Speaker 1>this does anything toward to you know, the institutional adoption

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<v Speaker 1>of crypto. I can't see a lot of you know,

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<v Speaker 1>major asset allocators saying, oh, you know, let's get into

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<v Speaker 1>crypto now. There's still so many unanswered legal questions about who,

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<v Speaker 1>you know, how the accounts are going to be um

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<v Speaker 1>separated out, um, you know, custody and things of that nature.

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<v Speaker 1>It's a big mess. I think those who those who

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<v Speaker 1>believe in it remain believers. You know, a lot of

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<v Speaker 1>the a lot of the so called whales are in

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<v Speaker 1>at levels where they're you know, even a fifteen thousand

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<v Speaker 1>down from sixty thousand, there's still up huge if you're

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<v Speaker 1>in a five or a thousand dollars or something like that.

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<v Speaker 1>So it's you have this really bifurcated market right now.

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<v Speaker 1>Um And I think for the most part, people are

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<v Speaker 1>just sort of hanging tight, sort of hopeful that and

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<v Speaker 1>and happy that it hasn't collapsed more. But there's not

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<v Speaker 1>a great investment thesis to it right now. You know,

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<v Speaker 1>as I've been saying all along, it's it's a crypto

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<v Speaker 1>has never existed in an environment where there's been sustained,

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<v Speaker 1>monitor restrictive monetary policy. UM, and that's what we're seeing now.

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<v Speaker 1>And so you know, there's a bit of reckoning going on.

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<v Speaker 1>UM And I just hope it's not more painful. It's

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<v Speaker 1>been painful for a lot of people already, UM, and

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<v Speaker 1>I just hope we can kind of get our way

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<v Speaker 1>through it. But in terms of you know, customers, I

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<v Speaker 1>think those who love it love it. Those who don't

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<v Speaker 1>UM are certainly not dipping their toe in now. Steve

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<v Speaker 1>real pleasure having on the program as usual, Steve Solsnick

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<v Speaker 1>that you strate is an interactive broke is getting his

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<v Speaker 1>take on the market actions are just getting his take

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<v Speaker 1>on what's going on with regards to the crypto space

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<v Speaker 1>as well.