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Speaker 1: So let's get to our guest, Chuck Cumelo, President and

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Speaker 1: CEO at Essex Financial Services. Chuck, the bare narrative in

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Speaker 1: markets is pretty simple. It's an aggressive FED that probably

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Speaker 1: has to get the Fed funds rate up above cp

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Speaker 1: I and that's going to take some work. The bull

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Speaker 1: case isn't without merit. Energy prices have come down, earnings

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Speaker 1: have been better than expected, and recession fears have received.

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Speaker 1: So my question to you, and what I think is

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Speaker 1: the key, is how long does the Fed dodge the

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Speaker 1: forward looking inflation figures? Yeah? Listen, you just you just

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Speaker 1: summed it up there pretty pretty well, and U yeah,

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Speaker 1: that the Fed certainly does have its work cut out

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Speaker 1: for it. I think the missing part in there of

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Speaker 1: what you had just mentioned that that factors into this

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Speaker 1: as well. And no one's quite sure of how it's

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Speaker 1: going to play out as the quantitative tightening that the

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Speaker 1: Fed is going to start, and no one can really

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Speaker 1: put their finger on what that might equate to in

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Speaker 1: terms of bass points, in terms of a corresponding if

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Speaker 1: you tried to correspond it to a rise in rates.

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Speaker 1: But yeah, listen, they they said they're going to be nimble. Um,

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Speaker 1: you know, last week you had. You know, a lot

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Speaker 1: of the Fed officials walked back some of Powell's comments

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Speaker 1: about you know, there seems to be a little bit

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Speaker 1: more dubish, so they definitely were back more on the

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Speaker 1: hawkish side. But listen, I'm I'm in the the inflation

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Speaker 1: is sticky camp, and it's going to take a while,

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Speaker 1: and it's going to take more rate moves for it

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Speaker 1: to come under control. And now inflation is part of

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Speaker 1: the re emit of course, as is indeed employment. And

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Speaker 1: you know, the thing is that we had this report

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Speaker 1: on Friday, and another way you put it, you said

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Speaker 1: you saw a report titled disastrously disastrously good. Yeah, yeah,

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Speaker 1: I thought I thought that was a tremendous title for

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Speaker 1: for the you know, for the report that that we received.

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Speaker 1: But yeah, look, I mean there's been a ton of

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Speaker 1: talk about recession, but you know, you you generally do

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Speaker 1: not have a recession, and you're adding five eight thousand

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Speaker 1: jobs and having the prior two months raised increased as well,

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Speaker 1: and with wage inflation at five point two percent year

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Speaker 1: over year. You know, again, that is why I fall

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Speaker 1: into the sticky inflation camp. But yeah, you know, you

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Speaker 1: you might have had two quarters of back to back

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Speaker 1: negative GDP. But um, the overall the definition of a

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Speaker 1: recession is a general slowdown in the economy and a

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Speaker 1: lack of spending. And you know, you you generally haven't

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Speaker 1: you seen the slowdown, um, but you probably put a

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Speaker 1: couple of asterisks connect to it. But spending the still strong,

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Speaker 1: and the employment situation still is cranking on all cylinders. Yeah,

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Speaker 1: you mentioned q T. I would say, even as big

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Speaker 1: as QT might be the lag effect of higher rates,

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Speaker 1: we we simply can't know what those effects are at

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Speaker 1: the moment. Brian, You're spot on, and that's the challenge.

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Speaker 1: So if you mean that that that that hurts the

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Speaker 1: bulls uh in in in a sense, because it could

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Speaker 1: be waves of effects coming. And that's why I think

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Speaker 1: you know this, this you know, basing a bullish um

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Speaker 1: outlook on a FED pivot, I think is misguided at

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Speaker 1: this point. And you're right, you know, we're not exactly

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Speaker 1: sure what's gonna happen. I mean, we've got cp I

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Speaker 1: coming on on Wednesday, and I think that that number

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Speaker 1: is going to come down from nine point one in

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Speaker 1: my opinion, given just what you've seen with gasoline and

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Speaker 1: you've seen consumers expectations on future inflation come down because

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Speaker 1: most consumers care about two things, gas that lets them

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Speaker 1: go to work and live their lives, and groceries that

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Speaker 1: that obviously fuels their family. So I think you'll see

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Speaker 1: it come down. But there certainly we're by no means

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Speaker 1: out of the woods, and this market has a lot

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Speaker 1: more potential landlines that it's going to roll over. I

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Speaker 1: want to just have a look at some of these

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Speaker 1: rather to put it mildly curious flows out there looking

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Speaker 1: at Kathy Woods Arc what it's taken in seven billion

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Speaker 1: dollars and its performances being woeful, I think down about

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Speaker 1: six so far. Looking at excel E of course energy

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Speaker 1: related here, energy select sector basically et F outflows of

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Speaker 1: a billion dollars and up thirty gives yeah, it's it's

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Speaker 1: really fascinating, is it. I mean that those figures really

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Speaker 1: grab my attention when I saw him, and I think,

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Speaker 1: I think you can look at it in two ways.

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Speaker 1: I think the energy sector, you know, we saw a

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Speaker 1: phrase it's you know, overbought but not over owned, and

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Speaker 1: energy last week was down. I think UM still having

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Speaker 1: a tremendous year. But there's so many other things that

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Speaker 1: go along with energy. You know, the political climate, you know,

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Speaker 1: you know, when President Biden was campaigning for president, you know,

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Speaker 1: he wanted to do away with the fossil fuel industry.

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Speaker 1: So there's a lot of um capital questions and and

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Speaker 1: obviously anytime one of these big energy companies is doing

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Speaker 1: anything from a briinery to drilling, it's a long lead,

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Speaker 1: long lead project, to put it mildly, So that's a

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Speaker 1: lot of challenges about the future of that industry. But

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Speaker 1: there is a structural imbalance. There's a structural supply demand

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Speaker 1: problem there. We think, we think there's great opportunity there

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Speaker 1: for the foreseeable future. And with Cathy Wooden, with arc

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Speaker 1: I think part of it is, you know, people like

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Speaker 1: to swing for the fences, and yes, she is down

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Speaker 1: at one point down, has come back with the you know,

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Speaker 1: the nice month of July that we had. And there

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Speaker 1: are still a lot of growth investors out there, but

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Speaker 1: a lot of people chasing a lot of these names.

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Speaker 1: And if you are if you do want to take

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Speaker 1: a slice of that type of you know, security, that

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Speaker 1: type of industry, you know, she's proven herself a wonderful manager.

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Speaker 1: So if you're gonna do it, She's probably a good

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Speaker 1: person to hit your wagon too, but it is a

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Speaker 1: little bit confounding in terms of putting money to work.

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Speaker 1: We're in a little bit of a neutral zone here.

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Speaker 1: We've recovered about half of the of the big drop

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Speaker 1: in June, and uh, it looks like I could go

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Speaker 1: either way. I mean, listening to Doug, you know it

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Speaker 1: was it was a big turnaround today, but net net

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Speaker 1: from Friday and Monday's training really not too much of

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Speaker 1: a move. Do you see retesting the old lows, Chuck,

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Speaker 1: or do you think we sort of just go sideways

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Speaker 1: until we get something definitive on the inflation side. Yeah,

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Speaker 1: you know, I think we're gonna bounce around here. I

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Speaker 1: think we're going to be in the sideways market, um,

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Speaker 1: you know, for the foreseeable future. I mean. One of

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Speaker 1: the things we're looking at as an indicator of whether

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Speaker 1: or not this is just a you know, a bear

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Speaker 1: market bounce, or whether or not something is fundamentally changed

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Speaker 1: is the number of stocks, the percentage of stocks in

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Speaker 1: the SNP that are trading above their fifty day moving

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Speaker 1: average right now we're at that's up obviously from from June.

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Speaker 1: But where you really see a prolonged market recoveries once

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Speaker 1: that number gets above nine. So you know, that's that's

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Speaker 1: an interesting number that we're looking at. But yeah, I

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Speaker 1: think I think this is going to be a sideways market. Listen,

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Speaker 1: it's not a great market. It's not a horrible market.

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Speaker 1: It's a fair to middling market. You can say that

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Speaker 1: about a lot of things right now, and you can

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Speaker 1: make money in those environments. But you do need to

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Speaker 1: be patient and you do need to pick your spots

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Speaker 1: for for when you go in talking about being confounding.

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Speaker 1: I mean, what a real conundrum has to be is

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Speaker 1: what's going on with the economy. I don't want to

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Speaker 1: go into details, but high inflation, virtually full employment. Now

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Speaker 1: that's a head scratch when it comes to actually deciding

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Speaker 1: what you want to do equity wise, isn't it, Because

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Speaker 1: again it's all these muddied waters. It is it lisn't it?

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Speaker 1: This is it is a very challenging environment to invest

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Speaker 1: invest money. And we've chatted before about the challenges in

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Speaker 1: the fixed income market where for many investors investment time

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Speaker 1: frames and lifetimes, as well as financial advisors, they've never

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Speaker 1: seen a fixed income environment like this. But listen, every

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Speaker 1: market does give you opportunity, and you know, the challenge

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Speaker 1: is trying to pick and choose where you can actually

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Speaker 1: go in and build a position for the long term,

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Speaker 1: for long term growth. And that's really the biggest issue

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Speaker 1: that we're faced right now is that these waters are

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Speaker 1: so muddied that it is very difficult to make a

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Speaker 1: really solid long term decision. So generally, what are you

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Speaker 1: looking to do? You want to head your bets, you

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Speaker 1: want to be very diversified and leg into the market.

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Speaker 1: We we have actually seen some of these forward looking

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Speaker 1: inflation indicators come down. Let me rephrase my my first question,

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Speaker 1: how much longer will have FED kind of ignore that

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Speaker 1: in its commentary. You know, Wednesday is going to be

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Speaker 1: a very big day, right I mean, I don't think

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Speaker 1: we're gonna be at nine point one. I think that's

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Speaker 1: certainly going to come down. But you know, the two

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Speaker 1: things are going to drive the FED right now. It

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Speaker 1: is going to continue to these inflation numbers, and it's

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Speaker 1: going to continue to be employment and what this economy

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Speaker 1: is doing. And you know, they right now they have

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Speaker 1: got they certainly have the employment side of things covered.

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Speaker 1: But again, inflation is here, it's not going away, and

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Speaker 1: you know I've mentioned before, Chuck. That's how we got

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Speaker 1: time for Thank you so much. As of a big

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Speaker 1: thank you, Chuck out a president that Essex financial services