Speaker 1: Right. Let's get over now to our next guest, John Maya.
Speaker 1: He's the chief investment officer a Global x E t
Speaker 1: f S. And John, we had those uh consumer prices
Speaker 1: out of the US recently peak inflation. Are we there yet? Yeah?
Speaker 1: Thanks for having me on the show. Um. Yeah, the
Speaker 1: numbers were a little bit better than expected, but you
Speaker 1: have to kind of put it into perspective. Inflation is
Speaker 1: a four year high and the FED is in its
Speaker 1: most aggressive tighten cycle since the mid nineties, and I
Speaker 1: think the markets want to believe that the FED will
Speaker 1: stop hiking once they believe that that that the FED
Speaker 1: has demand under control. Uh. And with inflation taking down,
Speaker 1: the market certainly has taken that as a positive tone.
Speaker 1: But there's still a lot of things of concern that
Speaker 1: will cause that I think may keep inflation at higher
Speaker 1: levels going forward. So the markets may have gotten a
Speaker 1: little ahead of themselves, I think, John, do you think
Speaker 1: it's fair to say that the FED strategy of front
Speaker 1: loading may be coming clear in terms of its off activeness.
Speaker 1: I mean, the supersized rate hikes up front that they
Speaker 1: begin to kind of moderate them. Maybe we're looking at
Speaker 1: fifty basis points in September, and you know, maybe fifty
Speaker 1: basis points again at the following meetings, so that the
Speaker 1: magnitude of these increases becomes a little reduced. I mean,
Speaker 1: I think that's that's possible. And and this FED is
Speaker 1: has in its DNA, they're more devish, but they have
Speaker 1: to and what they can controls demands by raising interest rates,
Speaker 1: but there's been there's there's a lot of other things
Speaker 1: to consider. There's wage inflation, that the labor market is
Speaker 1: is still very tight, and there's been a lot of
Speaker 1: under investment in areas like infrastructure and alternate sources of energy.
Speaker 1: So these are all potentially inflationary because we're going to
Speaker 1: have to spend on some of these areas. So I
Speaker 1: do think that I'm not sure if it's fifty or
Speaker 1: seventy five that FED can control demand to a certain extent,
Speaker 1: but there's other things that they can control. So I
Speaker 1: think that's what we're going to have to contend with.
Speaker 1: You you mentioned wage inflation, and maybe inflation is peaked,
Speaker 1: but prices are still going up. With that in mind,
Speaker 1: consumers might be enjoying higher wages, but the still kind
Speaker 1: of have to pay higher prices. How resilient. Does consumption
Speaker 1: look to you at the moment, Well, I think it'll
Speaker 1: be interesting to see some of the big retailers report
Speaker 1: this week in terms of how healthy is the consumer. So,
Speaker 1: as you pointed out, I mean, July headline CPI rose
Speaker 1: eight point five percent year over year, but it was
Speaker 1: flat compared month over months, so it's still very high.
Speaker 1: And in terms of real wages, they're like they're declining,
Speaker 1: So the consumer is spending more on gas, uh, they're
Speaker 1: spending more on food, and I don't think that's likely
Speaker 1: going to change in the near term. So I think
Speaker 1: that's of concerning. You're seeing credit card balances increase at
Speaker 1: higher interest rates, so that will further exacerbate the ability
Speaker 1: of the consumer to spend going forward. Um. But you know,
Speaker 1: that's not to say there's certain areas that I think
Speaker 1: make a lot of sense um in this current environment,
Speaker 1: a tech food innovation are particularly areas that are well
Speaker 1: positioned to gain from kind of some of the growing
Speaker 1: risk of global food insecurity right now. So I think
Speaker 1: there are as well as commodities. So, as you know, John,
Speaker 1: we had a rally in the equity market, uh Friday,
Speaker 1: consumer discretionary lead to the upside. It seemed like the
Speaker 1: catalyst here was the Consumer Expectations Index reading from the
Speaker 1: University of Michigan. So everything that we're saying about maybe
Speaker 1: maybe the consumer being on shaky ground, the University of
Speaker 1: Michigan number really doesn't support that. Well. I think the
Speaker 1: consumer is you know, we're coming off two years with
Speaker 1: pandemic that they're looking to spend on things they haven't
Speaker 1: spent them a long time. Um. And so I think
Speaker 1: you have if you take that out of the equation
Speaker 1: and you look more towards the beginning of that, that
Speaker 1: picture may change some. Um. That's not to say that
Speaker 1: there's certain areas that still make a lot of sense
Speaker 1: in terms of investment, but you have to remember that
Speaker 1: unemployment is so low right now. Um and uh, those
Speaker 1: are things to consider John very quickly. What do you
Speaker 1: put money to work in this environment? What do you like? Well,
Speaker 1: as as mentioned, I think, particularly in light of the
Speaker 1: Inflation Reduction Act that said that passed on Friday that
Speaker 1: will be signance law by Biden, there's areas that this
Speaker 1: will be a tremendous amount of spending in the climate
Speaker 1: and energy area. So commodities certainly make a lot of sense,
Speaker 1: certainly commodities that uh geared towards clean energy. Lithium I
Speaker 1: think is a commodity that makes a lot of sense
Speaker 1: because of the supports electric batteries, solar panels, and turbines
Speaker 1: and more are areas that I think are going to
Speaker 1: benefit from the spending that's going on with the i R,
Speaker 1: A bill that's going to be signed into law very soon. Yeah,
Speaker 1: the Inflation Reduction Act. John, good stuff, Thank you so
Speaker 1: much for being with us. John Mayer is the chief
Speaker 1: investment Officer at Global x E t f S