WEBVTT - Bloomberg Wall Street Week - February 10, 2023 0:00:00.520 --> 0:00:03.760 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.840 --> 0:00:07.120 to the markets this week. U s CPI members reinforcing 0:00:07.160 --> 0:00:10.639 concerns about inflation. The financial stories that chief are worth 0:00:10.720 --> 0:00:13.480 a really different reaction to mark. Its more indications of 0:00:13.640 --> 0:00:16.239 just how hot the U. S economy really is. Through 0:00:16.239 --> 0:00:19.520 the eyes of the most influential voices. Larry Summers, the 0:00:19.560 --> 0:00:22.479 former Treker Secretary, Katherine Keating, CEO of v n Y 0:00:22.600 --> 0:00:26.160 Mallin Sam's l Sharmon and founder of Equatic Group Investment. 0:00:26.200 --> 0:00:30.240 In Bloomberg Wall Street Week with David Weston from Bloomberg Radio, 0:00:30.440 --> 0:00:33.920 a FED chair speaks, President delivers his blueprint for the 0:00:33.960 --> 0:00:37.519 next two years. Earnings roll in, but a tragedy and 0:00:37.600 --> 0:00:41.440 Turkey overshadows them all. This is Bloomberg Wall Street Week. 0:00:41.560 --> 0:00:45.400 I'm David Weston. This week's special contributor Larry Summers of 0:00:45.479 --> 0:00:47.920 Harvard on whether we're headed for a landing at all, 0:00:48.240 --> 0:00:52.880 soft or hard. I think to FED understands that it 0:00:53.000 --> 0:00:56.760 doesn't understand. Stephen Meyer, the man responsible for New York 0:00:56.840 --> 0:00:59.840 City pension funds, on investing for the long term in 0:01:00.000 --> 0:01:03.480 this uncertain market. There's a lot of things to consider 0:01:03.520 --> 0:01:07.360 out there. The risk of recession here and abroad. And 0:01:07.440 --> 0:01:10.200 Josh Bolton of the Business Roundtable on what the President's 0:01:10.200 --> 0:01:13.640 State of the Union message means for American business. You 0:01:13.720 --> 0:01:15.839 won't find a single member of the Business round Table 0:01:15.959 --> 0:01:33.000 saying please put me in a completely unregulated environment. There 0:01:33.040 --> 0:01:34.920 was a lot for Global Wall Street to pay attention 0:01:34.920 --> 0:01:37.160 to this week, but the tragedy of the earthquakes in 0:01:37.200 --> 0:01:40.560 southeastern Turkey cast a shadow over it all as the 0:01:40.600 --> 0:01:43.480 death toll reached into the tens of thousands and the 0:01:43.520 --> 0:01:50.760 difficulties of reaching those in need seemed almost insurmountable. But 0:01:50.880 --> 0:01:53.440 even as the world came to terms with human disaster, 0:01:53.760 --> 0:01:57.520 we also focused on the economy and inflation. When fitzher J. 0:01:57.640 --> 0:02:00.800 Powell talked with Bloombergs David Rubinstein about the latest jobs 0:02:00.880 --> 0:02:04.600 numbers and whether they changed his mind on further rate hikes. 0:02:04.880 --> 0:02:08.079 This process is likely to take quite a bit of time. Uh, 0:02:08.160 --> 0:02:11.000 it's not going to be We don't think smooth. It's 0:02:11.040 --> 0:02:14.080 probably gonna be bumpy. President Biden delivered his annual State 0:02:14.120 --> 0:02:18.040 of the Union address and called for bipartisanship even over 0:02:18.080 --> 0:02:20.880 the cat calls from Republicans on things like the border. 0:02:21.800 --> 0:02:28.760 Congress must restore the right and and energy policy. I said, 0:02:28.760 --> 0:02:32.280 we're gonna need oil for at least another decade, and 0:02:32.320 --> 0:02:36.520 I'm going to exceed and beyond that. The follow out 0:02:36.560 --> 0:02:39.960 from that Chinese by balloon continued with questions about whether 0:02:40.080 --> 0:02:42.639 if it was a Chinese test of US defenses in 0:02:42.840 --> 0:02:46.800 the US passed that test. They wanted to display weakness, 0:02:46.800 --> 0:02:48.440 and I think to some extent they got that. I 0:02:48.520 --> 0:02:52.720 don't know why this wasn't shut down prior to entering 0:02:52.919 --> 0:02:56.840 US airspace. Earnings continued to pour in, with Disney surprising 0:02:56.880 --> 0:03:00.280 the upside on earnings, the downside on subscribers, and newly 0:03:00.320 --> 0:03:03.840 returned CEO Bob Iger announcing a major restructuring and the 0:03:03.880 --> 0:03:08.320 trimming of thousands of jobs. We will aggressively curate our 0:03:08.440 --> 0:03:13.040 general entertainment content. We will reassess all markets we have 0:03:13.120 --> 0:03:16.320 launched in and also determine the right balance between global 0:03:16.560 --> 0:03:20.720 and local content. The markets reacted to all of this 0:03:20.800 --> 0:03:23.960 by being all over the place. The Spire started out 0:03:24.000 --> 0:03:27.280 lower on Monday, spiked up after Pile's talk on Tuesday, 0:03:27.440 --> 0:03:30.040 only to come back down to earth on Friday, ending 0:03:30.040 --> 0:03:33.160 the week down just over one. The NASDAG had a 0:03:33.160 --> 0:03:35.880 tougher time of it. It too, shot up on Tuesday, 0:03:36.080 --> 0:03:38.760 but settled for the week down two point four percent, 0:03:38.880 --> 0:03:41.880 while the yield on the tenure rose more steadily through 0:03:41.880 --> 0:03:44.880 the week, starting out at three point five and any 0:03:44.960 --> 0:03:47.960 of just over three point seven percent. To help us 0:03:47.960 --> 0:03:50.240 sort it all out, we welcome to Christina Hooper, she's 0:03:50.240 --> 0:03:54.040 investco chief Global Market Strategists and Joanne Feeny, partner in 0:03:54.120 --> 0:03:56.960 Advisor's Capital Management. Welcome back to both of you. Great 0:03:57.000 --> 0:03:58.240 to have you here, Joe, and let me start you 0:03:58.320 --> 0:04:01.280 with with you if I could it. Uh, the markets 0:04:01.320 --> 0:04:02.800 get a little bit more sober by the end of 0:04:02.800 --> 0:04:06.600 the week. They seemed a little u fouric after Tuesday. Yeah, David, 0:04:06.640 --> 0:04:09.000 I think that's exactly what we saw. You know, the 0:04:09.040 --> 0:04:11.120 Fed has had a hard time convincing the markets that 0:04:11.160 --> 0:04:13.080 there's a lot more work to be got to bring 0:04:13.120 --> 0:04:15.800 down inflation, you know, and they need to understand the 0:04:15.840 --> 0:04:17.680 market needs to understand that rates are going to go 0:04:17.760 --> 0:04:19.760 higher and they're likely to stay higher through the year. 0:04:20.160 --> 0:04:22.600 We're almost there in terms of the markets forecast. They 0:04:22.600 --> 0:04:24.479 do still expect one rate cut at the end of 0:04:24.480 --> 0:04:27.280 the year, but you know that is quite a different 0:04:27.520 --> 0:04:29.960 position and being relative to the beginning of last year 0:04:30.279 --> 0:04:33.360 where we saw many rate hikes. So there's certainly less 0:04:33.360 --> 0:04:35.719 of a head wind this year from further rate hikes. 0:04:35.800 --> 0:04:38.039 But we're also not likely to get that break that 0:04:38.080 --> 0:04:41.320 the market is hoping for any time this year. Well, Christina, 0:04:41.320 --> 0:04:44.279 what is the market slowly giving up on that break? Glord? 0:04:44.520 --> 0:04:46.080 Later in the year, we had been told the markets 0:04:46.080 --> 0:04:47.560 saying that we're gonna have a cut by the end 0:04:47.560 --> 0:04:49.279 of the year. It looks like they're not so sure 0:04:49.279 --> 0:04:53.240 of that anymore. Well, hopefully, um, they get accustomed to 0:04:53.279 --> 0:04:55.440 that idea, because I don't think we're going to see 0:04:55.440 --> 0:04:57.760 a cut by the end of this year. Um. The 0:04:57.760 --> 0:05:01.159 economy is in better shape than I think most anticipated. 0:05:01.400 --> 0:05:04.640 So there really isn't a reason for the Fed to 0:05:04.720 --> 0:05:06.880 cut rates later this year. Something would have to go 0:05:07.640 --> 0:05:10.159 very wrong. Um for the Fed to need to cut 0:05:10.240 --> 0:05:12.240 rates by the end of the year. It looks like 0:05:12.360 --> 0:05:15.680 it's going to be a softish landing. So Joan, what 0:05:15.680 --> 0:05:18.120 about the economy looking stronger? Can we talk about the 0:05:18.120 --> 0:05:20.279 economy because you talk about different parts of the economy, 0:05:20.520 --> 0:05:22.560 you get different results. I mean, look at housing, it 0:05:22.560 --> 0:05:24.760 doesn't look that strong at all. And some people this 0:05:24.760 --> 0:05:27.120 week we're talking about a so called rolling recession. I 0:05:27.160 --> 0:05:30.120 know that's something you take issue with. Well, yeah, we're 0:05:30.120 --> 0:05:33.120 certainly seeing some parts of the economy in contraction housing, 0:05:33.120 --> 0:05:35.719 as you pointed out, certain parts of the technology sector 0:05:35.760 --> 0:05:39.960 where we've heard about lots of layoffs, shrinking, PC production 0:05:40.480 --> 0:05:43.440 significantly down year a year. So there's certainly parts of 0:05:43.480 --> 0:05:46.360 the economy that are suffering contraction. But there are also 0:05:46.400 --> 0:05:49.480 parts of the economy that continue to expand. And when 0:05:49.480 --> 0:05:51.800 you look at the aggregate of what consumers have to 0:05:51.839 --> 0:05:54.120 work with in terms of spending power, we have seen 0:05:54.160 --> 0:05:57.560 real disposable income rise for the last six months, so 0:05:57.640 --> 0:05:59.800 consumers still have more to work with, and I think 0:05:59.800 --> 0:06:02.960 that's why we're continue to see relatively robust numbers in 0:06:03.040 --> 0:06:05.960 terms of spending. Joanne, this is an important point you 0:06:06.080 --> 0:06:08.000 made to me. I want to make sure we unpack it, 0:06:08.080 --> 0:06:09.560 which is we have a tendency to take a look 0:06:09.560 --> 0:06:11.839 at wages and we say real wages have not gone up, 0:06:11.920 --> 0:06:14.880 they've even gone down, and that's for individuals. But if 0:06:14.920 --> 0:06:17.000 you look at the additional people coming to the workforce, 0:06:17.160 --> 0:06:19.720 you can have the aggregate actually going up, which says 0:06:19.760 --> 0:06:23.760 something strong about the economy. Yeah, that's exactly right, and 0:06:23.800 --> 0:06:26.320 In fact, if you look more granulally at the data, 0:06:26.960 --> 0:06:29.720 In fact, over the last few months, we're seeing an 0:06:29.720 --> 0:06:33.000 increase in real wages as well. So you combine that 0:06:33.080 --> 0:06:35.480 with more people in the workforce, that gets a lot 0:06:35.520 --> 0:06:38.360 of support for consumer spending. Now, it doesn't mean that 0:06:38.400 --> 0:06:40.720 a recession may not be coming at some point in 0:06:40.720 --> 0:06:43.960 the future. High entry straits are clearly an impediment to 0:06:44.040 --> 0:06:47.640 economic activity, whether it's firms investing or households squarrowing for 0:06:47.640 --> 0:06:49.880 the next car or or to buy the next house. 0:06:50.160 --> 0:06:53.279 So we're by no means sanguine that the recession threat 0:06:53.360 --> 0:06:56.680 is over, but we do see continued strength for now, 0:06:56.720 --> 0:06:59.680 at least from the consumer side. Well, consumers as you know, 0:06:59.880 --> 0:07:02.039 or is all what it's all about. What is something 0:07:02.080 --> 0:07:05.080 like the economy as consumer? So what is the state 0:07:05.120 --> 0:07:07.000 of the consumer as far as you can tell, Well, 0:07:07.040 --> 0:07:10.400 I think that consumer is in fairly good shape what 0:07:10.440 --> 0:07:13.360 we see. Of course, it's an incredibly tight labor market. 0:07:13.680 --> 0:07:15.920 That's a problem perhaps for the Fed in terms of 0:07:15.920 --> 0:07:19.120 its concerns about inflation, but it's it's a wonderful thing 0:07:19.200 --> 0:07:22.240 to have. Um when you have rates going up, right, 0:07:22.320 --> 0:07:25.760 you have so many people employed. Um, yes, they've come 0:07:25.840 --> 0:07:29.400 under some pressure in different areas because of the rate hikes, um, 0:07:29.480 --> 0:07:32.920 but in general people can still afford to go out 0:07:32.960 --> 0:07:36.080 and shop, and so it's a very different environment than 0:07:36.200 --> 0:07:39.400 what we saw when when the Fed was was hiking 0:07:39.520 --> 0:07:42.720 rates and unemployment was higher. I mean, this is a 0:07:42.840 --> 0:07:48.000 very very appealing labor market that leads to a fundamentally 0:07:48.120 --> 0:07:51.880 sound consumer in general. Joan als so much this depends 0:07:51.920 --> 0:07:54.120 obviously on what the Fed things. Now, what we think, 0:07:54.120 --> 0:07:55.840 what the Fed thinks. So what do you think the 0:07:55.840 --> 0:07:57.840 Fed is looking at? What will look at? Is it 0:07:57.920 --> 0:08:00.240 ties eyes whether to keep moving up and how far 0:08:00.320 --> 0:08:02.160 to keep moving up and how long to hold it 0:08:02.240 --> 0:08:03.920 up there? Well, you know, David, the Vets made it 0:08:03.920 --> 0:08:07.800 pretty clear that they're really focused on a persistent source 0:08:07.840 --> 0:08:10.720 of inflation, which could be coming through wages, and so 0:08:10.840 --> 0:08:13.560 nominal wages are still rising. They look also at the 0:08:13.600 --> 0:08:17.520 e c I, the Employment cost Compensation Index, which gives 0:08:17.520 --> 0:08:19.360 you are a much more accurate view of what's really 0:08:19.360 --> 0:08:22.200 going on in terms of compensation. So they're concerned that 0:08:22.200 --> 0:08:25.000 that's continuing to rise at a decent clip and that 0:08:25.000 --> 0:08:28.080 that could feed into inflation. They're seeing inflation still in 0:08:28.120 --> 0:08:32.080 their super core measure that is services excluding housing, and 0:08:32.120 --> 0:08:34.360 so they're going to watch that really carefully. And that's 0:08:34.360 --> 0:08:36.440 why when they say their data dependent, that's really what 0:08:36.480 --> 0:08:38.520 it means. If they see that start to slow down, 0:08:38.840 --> 0:08:40.640 then I think everybody can breathe a bit of a 0:08:40.679 --> 0:08:43.440 sigh of relief. But right now, right we're still seeing 0:08:43.440 --> 0:08:45.440 a lot of demand for services that are keeping that 0:08:45.480 --> 0:08:49.120 inflation pretty robust. At the same time, we're seeing more 0:08:49.240 --> 0:08:52.120 labor flow into the services sector. So if you think 0:08:52.120 --> 0:08:54.719 to the fundamentals of inflation, it was all about shortages 0:08:54.840 --> 0:08:58.320 of supply. Now we're starting to see supply rolling back 0:08:58.360 --> 0:09:01.760 through into services that could help the FED solve this problem. 0:09:01.840 --> 0:09:03.959 But that's what they're going to be watching. Christina. There's 0:09:03.960 --> 0:09:05.880 a lot of talk about plateau ng or holding at 0:09:05.880 --> 0:09:07.800 some point, maybe not quite yet, but having maybe a 0:09:07.840 --> 0:09:10.920 couple more rad hikes. What if that's not enough. I mean, 0:09:10.920 --> 0:09:13.720 you know, there's long and variable legs from mont withven 0:09:13.800 --> 0:09:17.520 facts inflation does not come in. How dangerous it is 0:09:18.040 --> 0:09:21.200 if the FED levels off and then resumes hiking because 0:09:21.240 --> 0:09:24.160 inflation comes back. Well, that's the concern, right That's the 0:09:24.200 --> 0:09:26.920 ghost of Paul Vulker, is that if you don't extinguish 0:09:27.040 --> 0:09:30.840 every ember of inflation, it could come back and and 0:09:31.440 --> 0:09:35.800 fan the flames of higher inflation. However, I think we 0:09:35.840 --> 0:09:39.440 can take a page from the Bank of Canada's playbook. Uh. 0:09:39.640 --> 0:09:42.480 They announced recently that they would have a conditional pause, 0:09:42.720 --> 0:09:45.880 so they're going to be very very data dependent, watching 0:09:46.000 --> 0:09:49.120 the economic data and inflation data like hawks. And I 0:09:49.160 --> 0:09:52.640 think that that could be a model for the FED. UM. 0:09:52.679 --> 0:09:56.240 That means that if anything is concerning, they can move 0:09:56.320 --> 0:09:59.000 right back into action, and markets know that that is 0:09:59.040 --> 0:10:01.240 hanging over them. Well, that's interesting. What do you think 0:10:01.280 --> 0:10:02.880 of that, Joanna? That would that to get care of 0:10:02.920 --> 0:10:04.680 the problem for the market, so they wouldn't react to 0:10:04.720 --> 0:10:07.839 adversely if they had to hike some more. Oh, I 0:10:07.880 --> 0:10:09.960 think the market still would really like to see the 0:10:09.960 --> 0:10:14.520 head cut um. So you know, if they signal, if 0:10:14.559 --> 0:10:17.520 they say okay, we're done for now, and they'll always 0:10:17.559 --> 0:10:20.680 say their data dependent, I think the market might grow 0:10:20.720 --> 0:10:22.600 a little bit too enthusiastic. And then if the FET 0:10:22.679 --> 0:10:25.240 does turn around some months later and say, oh sorry, 0:10:25.360 --> 0:10:27.320 we we still have to raise rates some more, they'll 0:10:27.360 --> 0:10:30.719 be one of these resets again. So I think we're 0:10:30.760 --> 0:10:33.480 in for a year of volatility, both because of what 0:10:33.520 --> 0:10:36.560 the FETE is doing and the larger risks that the 0:10:36.559 --> 0:10:38.800 world economy is still in the middle of, whether it's 0:10:38.840 --> 0:10:43.160 the war, energy price and supply dynamics. I just think 0:10:43.200 --> 0:10:46.520 it's a it's a tough year heading heading through this 0:10:46.679 --> 0:10:49.600 because of this ongoing recession risk and the unknowns about 0:10:49.720 --> 0:10:52.360 rate increases. Thank you so much to Christina Hooper and 0:10:52.440 --> 0:10:54.560 jo and Feeny. They're staying with us as we turned 0:10:54.600 --> 0:10:57.760 to questions of asset allocation in this As Joanne just said, 0:10:57.960 --> 0:11:01.240 very uncertain market. That's gonna up next on Wall Street 0:11:01.280 --> 0:11:10.400 Week on Bloomberg. This is Bloomberg Wall Street Week with 0:11:10.559 --> 0:11:19.840 David Weston from Bloomberg Radio. Actually, it turned out to 0:11:19.840 --> 0:11:23.240 be a remarkably good week for the president. His approval 0:11:23.360 --> 0:11:27.520 ratings have never been higher, suggesting that if only two 0:11:27.640 --> 0:11:31.800 or three more scandals can break between now in Washington's birthday, 0:11:32.360 --> 0:11:35.840 he'll have every American behind him. His State of the 0:11:35.920 --> 0:11:39.839 Union address, which began with a plea for fiscal responsibility 0:11:40.200 --> 0:11:43.839 and continued with an extensive laundry list of brand new 0:11:43.880 --> 0:11:47.720 ways to extend governmental power and spending, seems to have 0:11:47.760 --> 0:11:51.480 played beautifully in Peoria. Not to mention, but Keepsie in 0:11:51.520 --> 0:11:55.199 Palm Springs. That was Lewis Rockheiser with his firm and 0:11:55.559 --> 0:11:57.560 his tongue firmly in his cheek on Wall Street week 0:11:57.600 --> 0:12:00.199 back in j You may remember that was the week 0:12:00.280 --> 0:12:02.679 after the Monica Lewinsky scandal broke. That's what he's talking 0:12:02.679 --> 0:12:06.200 about with another presidential scandal. Titanic was the number one 0:12:06.240 --> 0:12:08.960 movie that week, and the number one song was Together 0:12:09.120 --> 0:12:12.160 Again by Janet Jackson. Still with us are joe Anfini 0:12:12.240 --> 0:12:15.360 of Advisor's Capital Management and Christina Hooper fro Vesco. Christina, 0:12:15.440 --> 0:12:17.559 let me start with you, because we've just talked about 0:12:17.559 --> 0:12:18.960 what we think are going to the FED, what's going 0:12:19.000 --> 0:12:21.120 on the economy. How do you put together portfolio? How 0:12:21.160 --> 0:12:24.760 do you allocate your assets in this world? Well, first, David, 0:12:24.760 --> 0:12:26.640 I have to answer the question I keep getting asked, 0:12:26.679 --> 0:12:31.240 which is is the sixty portfolio still alive? And I 0:12:31.280 --> 0:12:34.200 think to a certain extent it very much is. The 0:12:34.240 --> 0:12:37.360 concept of diversification is so important and I think we 0:12:37.440 --> 0:12:40.240 will see the benefits of it this year, and actually 0:12:40.280 --> 0:12:42.800 not just equities and fixed income, but some alts in 0:12:42.840 --> 0:12:48.200 there as well to provide um lower correlating assets. My 0:12:48.280 --> 0:12:51.480 view is, as with Joanne um I believe we're going 0:12:51.520 --> 0:12:54.800 to see a significant amount of volatility, especially in the 0:12:54.800 --> 0:12:56.640 first half of this year. There's just an awful lot 0:12:56.640 --> 0:13:00.520 of uncertainty. So we're going to want to have exposure 0:13:00.559 --> 0:13:04.200 to fixed income and some dividend paying stocks. We need 0:13:04.240 --> 0:13:07.760 that income to stabilize as we move up and down UM. 0:13:07.800 --> 0:13:11.360 I also believe that that as we move further into 0:13:11.360 --> 0:13:14.079 the year, we're likely to see markets start to discount 0:13:14.080 --> 0:13:16.720 in economic recovery, and so that would be a time 0:13:16.760 --> 0:13:20.560 to start to perhaps increase sequity allocations, especially among the 0:13:20.600 --> 0:13:23.480 more cyclical parts of the stock market. But fixed income 0:13:23.520 --> 0:13:28.160 looks attractive, especially in investment grade communis UM. Those are 0:13:28.800 --> 0:13:30.719 very attractive yields right now. I like to think of 0:13:30.760 --> 0:13:33.840 this as almost a golden age of fixed income UM. So, 0:13:33.840 --> 0:13:37.040 so that's an important component of portfolios right now. Joanna, 0:13:37.080 --> 0:13:38.560 what do you think? I mean, it sounds like a 0:13:38.640 --> 0:13:41.720 fairly diversified approach, but with an emphasis on getting some cash, 0:13:41.760 --> 0:13:45.800 whether from dividends or otherwise. Yeah, we offer a range 0:13:45.800 --> 0:13:48.600 of opportunities. It really depends on the client, on the investor, 0:13:48.679 --> 0:13:51.280 and what their time horizon is. You know, at this point, 0:13:51.280 --> 0:13:53.560 there are certainly some opportunities in the market that if 0:13:53.559 --> 0:13:56.200 you're a long term investor, you can be all in 0:13:56.200 --> 0:13:58.000 on equities. But you know, a lot of our clients 0:13:58.040 --> 0:14:01.840 are also looking for that ash flow, and so you know, 0:14:02.000 --> 0:14:06.080 we like to offer them choices a mixture of stocks 0:14:06.120 --> 0:14:10.240 that will appreciate versus stocks that will deliver that yield 0:14:10.280 --> 0:14:14.160 alongside a fixed income and let the client really decide, 0:14:14.480 --> 0:14:16.280 you know, how much they want to put into equities 0:14:16.280 --> 0:14:18.560 at this point, based on their time horizon and their risk. 0:14:18.640 --> 0:14:21.480 But yeah, I mean, I agree, given the volatility that 0:14:21.480 --> 0:14:24.000 we've just talked about, this is an awfully good time 0:14:24.040 --> 0:14:28.320 for a balanced strategy to protect the principle in the portfolio. 0:14:28.720 --> 0:14:31.320 And hopefully if you can get enough of yield on 0:14:31.360 --> 0:14:33.960 the dividend side and also on the fixed income side, 0:14:34.400 --> 0:14:37.160 you can eat your cash flow to pay your expenses 0:14:37.200 --> 0:14:39.640 if you're in retirement, and that will save you from 0:14:39.640 --> 0:14:42.920 having to sell stocks when the market does go down. Christina, 0:14:42.960 --> 0:14:44.480 what about you, is it can't be the case we're 0:14:44.480 --> 0:14:46.040 gonna have as many rate hikes this year as we 0:14:46.080 --> 0:14:48.400 did last year. I don't think at least, So what 0:14:48.440 --> 0:14:50.320 does that mean? Certainly has said something about bonds, but 0:14:50.360 --> 0:14:52.240 beyond that, what does it tell you as an investorment, 0:14:52.480 --> 0:14:56.120 I do think that it gives certainly UM some space 0:14:56.240 --> 0:14:59.880 to technology, right that the tech sector is likely to 0:15:00.200 --> 0:15:04.880 to start to see better performance, especially as as rates 0:15:04.960 --> 0:15:08.480 come down UM. But I also believe that what it 0:15:08.520 --> 0:15:11.280 really does is clear the way for an economic recovery. 0:15:11.400 --> 0:15:15.160 Right that once we have a stabilization um of of 0:15:15.960 --> 0:15:19.640 rates UM, that is really when the economy can start 0:15:19.640 --> 0:15:22.400 to recover accelerate, and I think stocks are going to 0:15:22.440 --> 0:15:25.280 anticipate that, so so we're likely to see smaller caps 0:15:25.320 --> 0:15:27.160 perform well. I also think the dollar is going to 0:15:27.200 --> 0:15:29.120 be relatively weak this year. That's a trend that's going 0:15:29.160 --> 0:15:32.800 to continue. So emerging markets equities, especially Asia e M. 0:15:32.840 --> 0:15:35.240 We haven't even talked about the China reopening, but that 0:15:35.360 --> 0:15:38.160 is gonna be really powerful for Asia e M. What 0:15:38.200 --> 0:15:40.560 about Joan briefly here at the end, it's strong bounce back. 0:15:40.600 --> 0:15:43.880 Do you think this year in the overall stock market? 0:15:44.040 --> 0:15:47.440 I think I think the jury is still out on that. Uh, 0:15:47.480 --> 0:15:49.400 you know, it looks pretty good from the consumer side. 0:15:49.600 --> 0:15:52.760 Fuer rate increases is a good thing, but ultimately we 0:15:52.800 --> 0:15:55.640 do have a pretty substantial decline in certain sectors of 0:15:55.640 --> 0:15:57.640 this economy. We have to see if housing comes back. 0:15:58.040 --> 0:16:00.320 So I think it's it's an open our ship, and 0:16:00.360 --> 0:16:04.120 that's why we are counseling to really diversify and be 0:16:04.280 --> 0:16:07.400 prepared for volatility. Sounds wise. Thank you so much to 0:16:07.480 --> 0:16:11.000 Christina Hooper of Investco and Joanne Fini of Advisor's Capital Management. 0:16:11.680 --> 0:16:15.440 We welcome now a big time, serious long term investor, 0:16:15.680 --> 0:16:18.240 and he is Stephen Meyer. He is the chief investment 0:16:18.240 --> 0:16:21.160 officer for the New York City Retirement System. Welcome, it's 0:16:21.160 --> 0:16:22.560 great to have you here. Thank you, David. It's a 0:16:22.560 --> 0:16:24.640 pleasure to be here. So you've got a big responsible 0:16:24.640 --> 0:16:27.120 to two d fifty billion dollars. Seven and fifty thousand 0:16:27.160 --> 0:16:30.800 people are depending on this. We've got fireman, policeman, teachers 0:16:30.840 --> 0:16:33.400 for their pensions. Tell us about the investment climate as 0:16:33.440 --> 0:16:35.240 you see it today, it's a bit different than it 0:16:35.280 --> 0:16:37.160 was just two or three years ago, given work over 0:16:37.200 --> 0:16:39.840 with interest rates, inflation growth. Yeah, well, David, I think 0:16:39.880 --> 0:16:42.560 it's gonna be another challenging a year in three for 0:16:42.880 --> 0:16:46.400 the US economy and financial markets. As a long term investment, 0:16:46.400 --> 0:16:48.440 we tend to look less at the fluctuates, short term 0:16:48.480 --> 0:16:52.840 fluctuations and asset prices. We have diversified portfolios that actually 0:16:52.840 --> 0:16:56.000 are geared to weather all different markets. My hope and 0:16:56.080 --> 0:17:00.440 expectation is for the global economy to bob for growth 0:17:00.480 --> 0:17:04.520 to um bottom out this year UH, and inflation start 0:17:04.600 --> 0:17:08.600 to decline more meaningfully. We have inflation coming down the States, UH, 0:17:08.880 --> 0:17:11.320 less so in Europe at this point. You know, there's 0:17:11.359 --> 0:17:13.840 a lot of things to consider out there. We look 0:17:13.880 --> 0:17:17.320 at UM the risk of a recession here and abroad. 0:17:17.920 --> 0:17:20.440 We're coming off of one of the most aggressive interest 0:17:20.520 --> 0:17:22.960 rate hike cycles that we've seen by the FED in 0:17:23.000 --> 0:17:26.879 forty years. UM. You know that monetary policy operates with 0:17:26.960 --> 0:17:29.760 a long and variable lag, so we really haven't seen 0:17:29.800 --> 0:17:32.159 the impact of those rate hikes yet. And those rate 0:17:32.240 --> 0:17:35.639 hikes continue. The Fed hikes basis points earlier this month. 0:17:35.920 --> 0:17:38.119 They've hinted that they're probably gonna do another two and 0:17:38.160 --> 0:17:42.080 that's what fit from futures are pricing in UM. We also, 0:17:42.280 --> 0:17:45.440 as I said, inflation abroad is still sticky on the upside. 0:17:45.840 --> 0:17:48.280 I also think there's a heightened level of geopolitical risk 0:17:48.320 --> 0:17:52.840 to consider. The war the Russian invasion Ukraine is problematic. 0:17:52.920 --> 0:17:55.560 We worry about that escalating, and I do think from 0:17:55.560 --> 0:17:58.960 a longer term perspective, the dynamic between the US and 0:17:59.040 --> 0:18:02.120 China and the relations ship. I think we'll have UH 0:18:02.200 --> 0:18:08.000 implications for growth, competition, asset allocation for years to come. 0:18:08.359 --> 0:18:10.200 So see when you have the luxury of a long 0:18:10.320 --> 0:18:12.679 term perspective. On the other hand, you have to have 0:18:12.760 --> 0:18:15.600 the money when the pensioners need the money. It's you 0:18:15.640 --> 0:18:18.520 have to generate returns. As you say, it was a 0:18:18.600 --> 0:18:21.800 rough year. We had stocks and bonds both down. What 0:18:21.840 --> 0:18:25.240 does that tell you as an asset allocator about stocks, 0:18:25.240 --> 0:18:28.200 bonds and maybe the alternative to the above. So stock 0:18:28.280 --> 0:18:30.240 and bonds, you know, it's rare that they go down 0:18:30.240 --> 0:18:33.400 in tandem, but it's not unprecedented, And you were right, David, 0:18:33.440 --> 0:18:36.040 last year was a tough year. We had that traditional 0:18:36.080 --> 0:18:39.240 sixty forty equity fixed income bond split generated a negative 0:18:39.280 --> 0:18:44.080 return of that's painful for all manner of investor um. 0:18:44.160 --> 0:18:46.359 We do again look on a long term horizon. We 0:18:46.400 --> 0:18:49.440 want that balanced portfolio. But you're absolutely right we had 0:18:49.600 --> 0:18:53.720 the offset, if you will, of private assets. We have 0:18:53.840 --> 0:19:00.000 about allocation into private assets, spanning private equity, private credit, 0:19:00.040 --> 0:19:03.360 it UH, infrastructure, core non core real estate, as well 0:19:03.400 --> 0:19:06.480 as hedge funds. So we do have those offsets that 0:19:06.480 --> 0:19:10.000 that that can help drive that performance irrespect of what 0:19:10.119 --> 0:19:13.639 happens in the public markets. You've had a cap of 0:19:14.320 --> 0:19:16.959 centers I understand it that's now been raised at by 0:19:17.000 --> 0:19:19.720 the governor, got the hocoll Do you expect to use 0:19:19.760 --> 0:19:23.159 a lot of that increased cap. Well, it's a wonderful question. 0:19:23.200 --> 0:19:25.720 So you know, the new legislation was signed in the 0:19:25.760 --> 0:19:28.000 law by the Governor at the end of the year. Uh, 0:19:28.040 --> 0:19:30.920 and it definitely will give us an expand an opportunity set. 0:19:31.359 --> 0:19:35.080 We'll be able to have a more optimal portfolio. My 0:19:35.200 --> 0:19:37.399 expectation is, you know what, We're going to start the 0:19:37.440 --> 0:19:40.600 process of reviewing our strategic asset allocations with the five 0:19:41.280 --> 0:19:45.240 Plan Trustees and their consultants UM hoping to wrap that 0:19:45.280 --> 0:19:48.560 work up by say October and then perhaps if there 0:19:48.600 --> 0:19:51.240 is a change in strategy that will be implemented in 0:19:51.240 --> 0:19:53.960 two thousand and twenty four beyond series. Really great to 0:19:54.000 --> 0:19:55.520 have you ere in Walsh. Thank you so much for 0:19:55.560 --> 0:19:58.439 joining us that Stephen Meyer, he's the chief investment officer 0:19:58.480 --> 0:20:02.800 for the New York City Return from a System coming up. 0:20:02.880 --> 0:20:05.240 We wrap up the week with our special contributor Larry 0:20:05.240 --> 0:20:08.919 Summers of Harvard. That's next on Wall Street Week on Bloomberg. 0:20:12.040 --> 0:20:16.280 This is Bloomberg Wall Street Week with David Weston from 0:20:16.359 --> 0:20:25.240 Bloomberg Radio. This is Wall Street Week, Clim David Weston, 0:20:25.280 --> 0:20:27.479 We're welcome back now our special contributor here at Wall 0:20:27.520 --> 0:20:30.200 Street Week, he is Larry Summers of Harvard. So Larry. 0:20:30.200 --> 0:20:32.760 One of the big events of this week was j Pile, 0:20:32.840 --> 0:20:35.479 the Chair of the Federal Reserve, speaking with our very 0:20:35.520 --> 0:20:38.719 own David Rubinstein the Economic Club in Washington, and the 0:20:38.760 --> 0:20:40.720 markets came away from that saying, you know what, he 0:20:40.800 --> 0:20:42.719 didn't go as far as we thought he would. It's 0:20:42.720 --> 0:20:45.760 saying we've got a tighten more given those jobs numbers. 0:20:46.040 --> 0:20:48.720 Are we becoming complacent because there's talk on Wall Street 0:20:48.720 --> 0:20:51.040 now that there won't we any landing, whether it's soft 0:20:51.160 --> 0:20:54.800 or hard. Basically, we'll just keep going. I didn't the 0:20:54.960 --> 0:20:59.560 FED understands that it doesn't understand because no one can 0:21:00.440 --> 0:21:04.800 know the future with confidence, and I think that the 0:21:04.880 --> 0:21:09.399