1 00:00:00,200 --> 00:00:03,440 Speaker 1: Let's get to Marvin Lower, guest, senior global macro strategist 2 00:00:03,480 --> 00:00:06,400 Speaker 1: at State Street. So Marvin, I wanted to start off 3 00:00:06,440 --> 00:00:09,760 Speaker 1: just about every guest with a question really just sort 4 00:00:09,760 --> 00:00:13,680 Speaker 1: of remembrances about the Queen, her her reign spanned such 5 00:00:13,680 --> 00:00:16,840 Speaker 1: a period from the steam engine to the smartphone, and 6 00:00:17,040 --> 00:00:21,040 Speaker 1: I saw this incredible line that people in Britain were 7 00:00:21,040 --> 00:00:25,360 Speaker 1: born after after she ascended the throne. And it's one 8 00:00:25,360 --> 00:00:27,800 Speaker 1: thing to remain above the fray, but to be that 9 00:00:27,920 --> 00:00:31,000 Speaker 1: beloved is quite remarkable. Your thoughts just on the passing 10 00:00:31,320 --> 00:00:35,720 Speaker 1: of Queen Elizabeth, Well, you know, ultimately as American watching 11 00:00:36,080 --> 00:00:39,840 Speaker 1: watching from afar um, you know she she certainly didn't 12 00:00:39,840 --> 00:00:41,920 Speaker 1: have as big of an impact on our daily lives, 13 00:00:41,960 --> 00:00:44,720 Speaker 1: but um, you know, she is the embodiment of the 14 00:00:44,840 --> 00:00:47,480 Speaker 1: UK and kind of we viewed her and have seen 15 00:00:47,520 --> 00:00:50,680 Speaker 1: her for so long. So certainly our condolences go out 16 00:00:50,720 --> 00:00:52,960 Speaker 1: to Um, to all the UH, to all the British 17 00:00:53,000 --> 00:00:55,840 Speaker 1: as well as the family is they you know, deal 18 00:00:55,920 --> 00:00:58,120 Speaker 1: with what's going to be a big loss for the world. 19 00:00:59,160 --> 00:01:01,320 Speaker 1: B and one thing that the Queen did live through 20 00:01:01,400 --> 00:01:05,319 Speaker 1: with several crises of the pound and certainly sterlings in 21 00:01:05,360 --> 00:01:07,880 Speaker 1: the crossheads now and it's all down to the dollar 22 00:01:07,959 --> 00:01:12,280 Speaker 1: fundamentally and the dollars strength. And you know, without sounding trite, 23 00:01:13,480 --> 00:01:16,399 Speaker 1: what is the past at least resistance to the dollar 24 00:01:16,640 --> 00:01:21,440 Speaker 1: apart from it, I mean, it can only seemingly go higher. Yeah, 25 00:01:21,520 --> 00:01:24,120 Speaker 1: I still think UM, and we've we've been in we've 26 00:01:24,160 --> 00:01:25,959 Speaker 1: been of the thought that a stronger dollar is just 27 00:01:26,080 --> 00:01:29,160 Speaker 1: something that UM, you can't fight for the moment, and 28 00:01:29,200 --> 00:01:31,680 Speaker 1: you really can't fight until you get a much better 29 00:01:31,720 --> 00:01:36,679 Speaker 1: idea of what this global inflation um environment that we're 30 00:01:36,680 --> 00:01:39,120 Speaker 1: all dealing with in terms of how it evolves. And 31 00:01:39,400 --> 00:01:41,600 Speaker 1: you know, when we get a sense that the central 32 00:01:41,600 --> 00:01:44,240 Speaker 1: banks are going to be able to at least slow 33 00:01:44,840 --> 00:01:47,440 Speaker 1: UM their hiking process down, so you know, dollars strength 34 00:01:47,480 --> 00:01:51,000 Speaker 1: and UM and you know, really the challenges that are 35 00:01:51,040 --> 00:01:54,320 Speaker 1: that are emerging from Europe because of the war, makes 36 00:01:54,400 --> 00:01:58,600 Speaker 1: both Sterling and the euro prime candidates to go a 37 00:01:58,680 --> 00:02:02,000 Speaker 1: lower relative to that dollar. Are you get a feeling 38 00:02:02,040 --> 00:02:04,360 Speaker 1: with the action and US equities in the past couple 39 00:02:04,400 --> 00:02:08,440 Speaker 1: of days that investors, even though they're hearing only hawkish 40 00:02:08,480 --> 00:02:11,359 Speaker 1: commentary from the Fed, that they're starting to think about 41 00:02:11,440 --> 00:02:15,680 Speaker 1: positioning for once real rates move lower and so The 42 00:02:15,680 --> 00:02:18,680 Speaker 1: thing is that if you have inflation turning down, it 43 00:02:18,720 --> 00:02:22,320 Speaker 1: could turn down quicker than the Fed is raising interest 44 00:02:22,400 --> 00:02:25,120 Speaker 1: rates as a result of it getting almost close now 45 00:02:25,160 --> 00:02:27,680 Speaker 1: to the neutral zone. So you're in a period where 46 00:02:27,720 --> 00:02:30,160 Speaker 1: the market may not care what the Fed says if 47 00:02:30,160 --> 00:02:37,880 Speaker 1: they see inflation and thus real rates actually coming down. Yeah, yeah, absolutely, UM. 48 00:02:37,919 --> 00:02:39,880 Speaker 1: And we kind of to a certain degree went through 49 00:02:39,919 --> 00:02:42,760 Speaker 1: this over the summer when we started really thinking about, um, 50 00:02:42,800 --> 00:02:45,440 Speaker 1: the FED being able to slow down because we were 51 00:02:45,480 --> 00:02:49,320 Speaker 1: getting signs and inflation was at least starting to stabilize. Um. 52 00:02:49,440 --> 00:02:51,040 Speaker 1: You know, we've got a message out of the ECB 53 00:02:51,160 --> 00:02:54,240 Speaker 1: today where they thought inflation was going to remain elevated 54 00:02:54,560 --> 00:02:59,160 Speaker 1: really well into three UM. So that inflation and certainty 55 00:02:59,240 --> 00:03:02,720 Speaker 1: is still there. Um. You know, energy coming off will 56 00:03:02,760 --> 00:03:07,280 Speaker 1: probably kind of help, um the discussion. But really, um, 57 00:03:07,400 --> 00:03:11,160 Speaker 1: the jobs market and how inflation potentially can be spreading 58 00:03:11,639 --> 00:03:14,520 Speaker 1: into into wider parts of the core reading, if you will, 59 00:03:15,000 --> 00:03:17,080 Speaker 1: is going to be key to whether or not the 60 00:03:17,160 --> 00:03:20,480 Speaker 1: market is premature. And it's and it's thinking that the 61 00:03:20,800 --> 00:03:25,560 Speaker 1: that the inflation fight is closer to the end um 62 00:03:25,760 --> 00:03:28,440 Speaker 1: than kind of the six of smthening that the central 63 00:03:28,480 --> 00:03:31,480 Speaker 1: banks seemed to be saying, but there are many indicators 64 00:03:31,520 --> 00:03:33,400 Speaker 1: out there, not least at the ones that we saw 65 00:03:33,520 --> 00:03:36,320 Speaker 1: new prices paid in the latest I S M surveys, 66 00:03:36,640 --> 00:03:40,440 Speaker 1: but others which are really seeing I suppose that well 67 00:03:40,720 --> 00:03:44,680 Speaker 1: a fall off in inflation age you by the data, 68 00:03:44,880 --> 00:03:49,040 Speaker 1: and b is this heaven forfend, the totally wrong time 69 00:03:49,040 --> 00:03:53,360 Speaker 1: for j PAL to be turning VOLCA. You know what 70 00:03:53,800 --> 00:03:57,000 Speaker 1: I I don't I I don't think so. UM they 71 00:03:58,120 --> 00:04:02,680 Speaker 1: the said was certainly concerned with financial conditions loosening again 72 00:04:03,360 --> 00:04:05,840 Speaker 1: um the way they did over the summer UM, and 73 00:04:05,840 --> 00:04:09,640 Speaker 1: and that ultimately what works against what they're trying to 74 00:04:09,640 --> 00:04:12,000 Speaker 1: do on the inflation side of things. UM. I do 75 00:04:12,080 --> 00:04:15,640 Speaker 1: think that they need to continue this very um strict 76 00:04:15,720 --> 00:04:19,360 Speaker 1: rhetoric around remaining pufiction doing what it needs so that 77 00:04:19,680 --> 00:04:23,440 Speaker 1: the financial conditions, you know, can can ultimately continue to tighten, 78 00:04:23,520 --> 00:04:28,160 Speaker 1: so that UM inflation not only starts to get under control, 79 00:04:28,520 --> 00:04:31,920 Speaker 1: but keeps a downward path that you know, markets are 80 00:04:31,960 --> 00:04:34,400 Speaker 1: really hoping for and to a certain degree pricing at 81 00:04:34,400 --> 00:04:37,599 Speaker 1: this point, do you feel that the Fed is is 82 00:04:37,640 --> 00:04:41,280 Speaker 1: targeting the stock market to a certain degree, and so 83 00:04:41,320 --> 00:04:44,640 Speaker 1: will We'll be looking from comments from them to try 84 00:04:44,680 --> 00:04:47,760 Speaker 1: to keep the market from running up, if indeed that's 85 00:04:47,800 --> 00:04:50,359 Speaker 1: what he wants to do. Yeah, you know what, I 86 00:04:50,400 --> 00:04:53,839 Speaker 1: think wealth overall in the US is something that's supporting 87 00:04:54,200 --> 00:04:57,119 Speaker 1: kind of this higher inflation environment that we have, whether 88 00:04:57,160 --> 00:04:59,799 Speaker 1: it's just the equity markets and or the housing markets, 89 00:05:00,080 --> 00:05:01,880 Speaker 1: which certainly have created a lot of wealth over the 90 00:05:01,960 --> 00:05:05,279 Speaker 1: last several years. UM, all of all of that needs 91 00:05:05,360 --> 00:05:08,120 Speaker 1: to ultimately come into the calculus in terms of how 92 00:05:08,240 --> 00:05:13,680 Speaker 1: they approach UM an environment where spending isn't as robust 93 00:05:13,720 --> 00:05:15,520 Speaker 1: as as we've really seen for the last six to 94 00:05:15,600 --> 00:05:18,240 Speaker 1: nine months. Mom, And is there anything do you think 95 00:05:18,520 --> 00:05:21,800 Speaker 1: that the market participants are at the moment missing or 96 00:05:21,839 --> 00:05:27,320 Speaker 1: perhaps foolishly discounting You know, we we we certainly have 97 00:05:27,400 --> 00:05:30,840 Speaker 1: seen a bit of adjustment UM over the course of 98 00:05:30,839 --> 00:05:33,120 Speaker 1: the last couple of weeks, you know, the office message 99 00:05:33,160 --> 00:05:36,680 Speaker 1: making its way into into a risk assets UM. I think, however, 100 00:05:36,800 --> 00:05:40,720 Speaker 1: there still are asset classes that are not really discounting 101 00:05:41,160 --> 00:05:44,719 Speaker 1: the potential UM that that that a recession UM is 102 00:05:44,760 --> 00:05:47,880 Speaker 1: not only on its way and likely something that the 103 00:05:47,920 --> 00:05:50,840 Speaker 1: FED is to a certain degree hoping to manufacture in 104 00:05:50,920 --> 00:05:53,680 Speaker 1: terms of selling growth UM, but that the risk is 105 00:05:54,120 --> 00:05:58,200 Speaker 1: certainly that they overtighten UM in particular, you know, credit 106 00:05:58,279 --> 00:06:02,479 Speaker 1: and high yield to me stands out in UM just 107 00:06:02,640 --> 00:06:06,080 Speaker 1: really where overall levels are compared to how those asset 108 00:06:06,160 --> 00:06:11,280 Speaker 1: classes typically trade. UM. Going into a recession, as we 109 00:06:11,360 --> 00:06:14,200 Speaker 1: come up to the CPI report next week, UM, what 110 00:06:14,320 --> 00:06:16,479 Speaker 1: happens if we get a little bit of a surprise 111 00:06:16,520 --> 00:06:20,000 Speaker 1: to the downside? UM? You know what, So from a 112 00:06:20,000 --> 00:06:23,479 Speaker 1: headline perspective, it's certainly UM, you know, there's certainly a 113 00:06:23,520 --> 00:06:26,520 Speaker 1: chance that we might get it downside surprise, particularly given 114 00:06:26,560 --> 00:06:29,320 Speaker 1: what energy has been doing. UM. I think that we 115 00:06:29,480 --> 00:06:31,880 Speaker 1: I think that we have to be somewhat broad in 116 00:06:31,960 --> 00:06:33,479 Speaker 1: terms of how we look at it and make sure 117 00:06:33,640 --> 00:06:36,839 Speaker 1: that kind of the services component, the core aspect of 118 00:06:36,920 --> 00:06:40,960 Speaker 1: cp I UM is doing what we would expect to occur. 119 00:06:41,440 --> 00:06:45,599 Speaker 1: I find it difficult, given the housing component within a 120 00:06:45,680 --> 00:06:48,200 Speaker 1: CPI as well as what food is doing, to really 121 00:06:48,240 --> 00:06:50,800 Speaker 1: take a lot of solace UM in a print that 122 00:06:50,800 --> 00:06:53,720 Speaker 1: that might be a little bit better than what people expect. UM. 123 00:06:53,760 --> 00:06:56,440 Speaker 1: The market you know, certainly might grab hold of it, 124 00:06:56,480 --> 00:06:59,480 Speaker 1: but you know, really keep that in perspective in terms 125 00:06:59,520 --> 00:07:02,800 Speaker 1: of how much further it needs to get before we 126 00:07:02,960 --> 00:07:05,039 Speaker 1: before we can even think about a two kind of 127 00:07:05,040 --> 00:07:09,440 Speaker 1: CPI number. And are we seeing signs yet, Marvin of 128 00:07:09,520 --> 00:07:12,560 Speaker 1: this filtering into the demand side of the equation, I 129 00:07:12,680 --> 00:07:16,000 Speaker 1: eat in wages, which would then create perhaps that circle 130 00:07:16,040 --> 00:07:20,320 Speaker 1: which does create inflation. UM. You know, you know, certainly, 131 00:07:20,440 --> 00:07:23,920 Speaker 1: certainly we're seeing UM demand destruction UM on the on 132 00:07:24,000 --> 00:07:27,160 Speaker 1: the on the good side of things. Most certainly it 133 00:07:27,320 --> 00:07:30,640 Speaker 1: is driven by different income stratus, so so so you 134 00:07:30,680 --> 00:07:33,680 Speaker 1: do have kind of the wealth that UM remains at 135 00:07:33,720 --> 00:07:36,480 Speaker 1: maybe the middle to higher income I'm not having as 136 00:07:36,480 --> 00:07:42,200 Speaker 1: big of an effect UM in terms of wage gains, however, UM. 137 00:07:42,240 --> 00:07:45,679 Speaker 1: I still think that that is a risk. We didn't 138 00:07:45,880 --> 00:07:49,000 Speaker 1: see a lot of wage gains in the last employment 139 00:07:49,000 --> 00:07:52,720 Speaker 1: report as more people kind of came back into the workforce, 140 00:07:52,760 --> 00:07:55,880 Speaker 1: so that was encouraging, but we need to see much 141 00:07:55,960 --> 00:07:59,679 Speaker 1: more of that type of UM, that type of environment 142 00:07:59,720 --> 00:08:03,840 Speaker 1: where UM, you know, a few hundred thousand people come 143 00:08:03,920 --> 00:08:07,240 Speaker 1: into the workforce while demand for those jobs starts to 144 00:08:07,280 --> 00:08:10,480 Speaker 1: slow to to really UM get a sense that kind 145 00:08:10,480 --> 00:08:14,080 Speaker 1: of this wage concern that the FED has UM in 146 00:08:14,200 --> 00:08:17,560 Speaker 1: terms of you know, really ingraining itself into the process, 147 00:08:18,080 --> 00:08:20,960 Speaker 1: UM can be can be looked a little bit more favorably. 148 00:08:22,160 --> 00:08:24,400 Speaker 1: I think of you as a bond guy. Marvin going 149 00:08:24,480 --> 00:08:28,280 Speaker 1: back aways Scott Minor, another guy who really looks at 150 00:08:28,320 --> 00:08:30,400 Speaker 1: the bond market. He had a tweet earlier this morning 151 00:08:30,440 --> 00:08:34,839 Speaker 1: which was pretty scary in the sense talking about sell 152 00:08:34,880 --> 00:08:37,760 Speaker 1: off in stocks and basically just kind of building on 153 00:08:37,760 --> 00:08:40,200 Speaker 1: this rule of twenty idea that when you have pe 154 00:08:40,360 --> 00:08:44,079 Speaker 1: s plus core inflation over twenty, you're in the danger zone. 155 00:08:44,320 --> 00:08:46,559 Speaker 1: And that's why he's looking for a big drop off. 156 00:08:46,600 --> 00:08:49,560 Speaker 1: You've got the pe on the SMP about nineteen and change, 157 00:08:49,840 --> 00:08:53,520 Speaker 1: and of course core inflation is almost five. Is that 158 00:08:53,640 --> 00:08:55,920 Speaker 1: something that you find some residents with that kind of thinking? 159 00:08:57,040 --> 00:08:59,040 Speaker 1: You know what? I think that to me, that number 160 00:08:59,040 --> 00:09:02,360 Speaker 1: feels fairly large. UM. I do think that at this 161 00:09:02,480 --> 00:09:07,040 Speaker 1: point the bond market is trading within ranges until unless 162 00:09:07,080 --> 00:09:10,160 Speaker 1: we get a significant change in kind of that inflation 163 00:09:10,200 --> 00:09:13,439 Speaker 1: discussion going into you know, let's say late fall, where 164 00:09:13,480 --> 00:09:15,680 Speaker 1: it doesn't look like it's moving in the right direction. 165 00:09:16,000 --> 00:09:17,880 Speaker 1: I think that we can hold the levels that we 166 00:09:17,920 --> 00:09:20,360 Speaker 1: saw earlier this year. So um, you know, certainly a 167 00:09:20,400 --> 00:09:24,079 Speaker 1: ten year that had approached three and a half percent. UM, 168 00:09:24,120 --> 00:09:27,440 Speaker 1: we we probably will be an environment where we where 169 00:09:27,440 --> 00:09:30,000 Speaker 1: we have a steeper UM have a flatter and more 170 00:09:30,040 --> 00:09:35,440 Speaker 1: inverted curve, but that might be enough to keep stocks 171 00:09:35,679 --> 00:09:38,960 Speaker 1: ultimately from going much lower than what we saw earlier 172 00:09:38,960 --> 00:09:41,520 Speaker 1: this year. I wouldn't be surprised if we if we retested, 173 00:09:41,920 --> 00:09:44,640 Speaker 1: but I do think that um there are dynamics out 174 00:09:44,679 --> 00:09:48,280 Speaker 1: there that will keep us um with with the lows 175 00:09:48,320 --> 00:09:52,240 Speaker 1: of having occurred. Marvin, always a pleasure. Thank you so 176 00:09:52,280 --> 00:09:55,360 Speaker 1: much for joining us that senior Global macro Strategies at 177 00:09:55,400 --> 00:09:58,480 Speaker 1: State Street, getting out the latest and his take on 178 00:09:58,720 --> 00:09:59,200 Speaker 1: the market.