WEBVTT - Jon Maier on the Markets (Radio)

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<v Speaker 1>Right. Let's get over now to our next guest, John Maya.

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<v Speaker 1>He's the chief investment officer a Global x E t

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<v Speaker 1>f S. And John, we had those uh consumer prices

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<v Speaker 1>out of the US recently peak inflation. Are we there yet? Yeah?

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<v Speaker 1>Thanks for having me on the show. Um. Yeah, the

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<v Speaker 1>numbers were a little bit better than expected, but you

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<v Speaker 1>have to kind of put it into perspective. Inflation is

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<v Speaker 1>a four year high and the FED is in its

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<v Speaker 1>most aggressive tighten cycle since the mid nineties, and I

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<v Speaker 1>think the markets want to believe that the FED will

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<v Speaker 1>stop hiking once they believe that that that the FED

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<v Speaker 1>has demand under control. Uh. And with inflation taking down,

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<v Speaker 1>the market certainly has taken that as a positive tone.

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<v Speaker 1>But there's still a lot of things of concern that

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<v Speaker 1>will cause that I think may keep inflation at higher

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<v Speaker 1>levels going forward. So the markets may have gotten a

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<v Speaker 1>little ahead of themselves, I think, John, do you think

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<v Speaker 1>it's fair to say that the FED strategy of front

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<v Speaker 1>loading may be coming clear in terms of its off activeness.

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<v Speaker 1>I mean, the supersized rate hikes up front that they

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<v Speaker 1>begin to kind of moderate them. Maybe we're looking at

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<v Speaker 1>fifty basis points in September, and you know, maybe fifty

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<v Speaker 1>basis points again at the following meetings, so that the

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<v Speaker 1>magnitude of these increases becomes a little reduced. I mean,

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<v Speaker 1>I think that's that's possible. And and this FED is

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<v Speaker 1>has in its DNA, they're more devish, but they have

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<v Speaker 1>to and what they can controls demands by raising interest rates,

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<v Speaker 1>but there's been there's there's a lot of other things

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<v Speaker 1>to consider. There's wage inflation, that the labor market is

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<v Speaker 1>is still very tight, and there's been a lot of

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<v Speaker 1>under investment in areas like infrastructure and alternate sources of energy.

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<v Speaker 1>So these are all potentially inflationary because we're going to

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<v Speaker 1>have to spend on some of these areas. So I

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<v Speaker 1>do think that I'm not sure if it's fifty or

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<v Speaker 1>seventy five that FED can control demand to a certain extent,

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<v Speaker 1>but there's other things that they can control. So I

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<v Speaker 1>think that's what we're going to have to contend with.

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<v Speaker 1>You you mentioned wage inflation, and maybe inflation is peaked,

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<v Speaker 1>but prices are still going up. With that in mind,

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<v Speaker 1>consumers might be enjoying higher wages, but the still kind

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<v Speaker 1>of have to pay higher prices. How resilient. Does consumption

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<v Speaker 1>look to you at the moment, Well, I think it'll

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<v Speaker 1>be interesting to see some of the big retailers report

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<v Speaker 1>this week in terms of how healthy is the consumer. So,

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<v Speaker 1>as you pointed out, I mean, July headline CPI rose

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<v Speaker 1>eight point five percent year over year, but it was

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<v Speaker 1>flat compared month over months, so it's still very high.

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<v Speaker 1>And in terms of real wages, they're like they're declining,

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<v Speaker 1>So the consumer is spending more on gas, uh, they're

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<v Speaker 1>spending more on food, and I don't think that's likely

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<v Speaker 1>going to change in the near term. So I think

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<v Speaker 1>that's of concerning. You're seeing credit card balances increase at

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<v Speaker 1>higher interest rates, so that will further exacerbate the ability

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<v Speaker 1>of the consumer to spend going forward. Um. But you know,

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<v Speaker 1>that's not to say there's certain areas that I think

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<v Speaker 1>make a lot of sense um in this current environment,

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<v Speaker 1>a tech food innovation are particularly areas that are well

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<v Speaker 1>positioned to gain from kind of some of the growing

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<v Speaker 1>risk of global food insecurity right now. So I think

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<v Speaker 1>there are as well as commodities. So, as you know, John,

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<v Speaker 1>we had a rally in the equity market, uh Friday,

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<v Speaker 1>consumer discretionary lead to the upside. It seemed like the

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<v Speaker 1>catalyst here was the Consumer Expectations Index reading from the

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<v Speaker 1>University of Michigan. So everything that we're saying about maybe

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<v Speaker 1>maybe the consumer being on shaky ground, the University of

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<v Speaker 1>Michigan number really doesn't support that. Well. I think the

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<v Speaker 1>consumer is you know, we're coming off two years with

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<v Speaker 1>pandemic that they're looking to spend on things they haven't

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<v Speaker 1>spent them a long time. Um. And so I think

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<v Speaker 1>you have if you take that out of the equation

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<v Speaker 1>and you look more towards the beginning of that, that

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<v Speaker 1>picture may change some. Um. That's not to say that

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<v Speaker 1>there's certain areas that still make a lot of sense

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<v Speaker 1>in terms of investment, but you have to remember that

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<v Speaker 1>unemployment is so low right now. Um and uh, those

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<v Speaker 1>are things to consider John very quickly. What do you

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<v Speaker 1>put money to work in this environment? What do you like? Well,

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<v Speaker 1>as as mentioned, I think, particularly in light of the

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<v Speaker 1>Inflation Reduction Act that said that passed on Friday that

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<v Speaker 1>will be signance law by Biden, there's areas that this

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<v Speaker 1>will be a tremendous amount of spending in the climate

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<v Speaker 1>and energy area. So commodities certainly make a lot of sense,

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<v Speaker 1>certainly commodities that uh geared towards clean energy. Lithium I

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<v Speaker 1>think is a commodity that makes a lot of sense

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<v Speaker 1>because of the supports electric batteries, solar panels, and turbines

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<v Speaker 1>and more are areas that I think are going to

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<v Speaker 1>benefit from the spending that's going on with the i R,

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<v Speaker 1>A bill that's going to be signed into law very soon. Yeah,

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<v Speaker 1>the Inflation Reduction Act. John, good stuff, Thank you so

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<v Speaker 1>much for being with us. John Mayer is the chief

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<v Speaker 1>investment Officer at Global x E t f S