WEBVTT - Can Stocks See a Repeat of 2021? 0:00:00.560 --> 0:00:15.560 Hi, and welcome to What Goes Up a weekly markets podcast. 0:00:15.800 --> 0:00:19.840 UM Voldana hire across Asset Report at Bloomberg, and I'm 0:00:19.880 --> 0:00:23.120 Crystal Kim, Crypto reporter at Bloomberg, filling in for Mike 0:00:23.160 --> 0:00:26.840 Reagan and this week on the show. Wall Street forecasters 0:00:26.840 --> 0:00:28.840 have been saying all year that a slowdown in the 0:00:28.840 --> 0:00:31.120 bullmarket will be in the cards thanks to any number 0:00:31.120 --> 0:00:34.560 of reasons. The average projection for the SMP at the 0:00:34.640 --> 0:00:38.839 end of represents a mere three percent advance from current levels. 0:00:39.360 --> 0:00:41.640 We'll get into all of that with a first time guest, 0:00:42.240 --> 0:00:44.560 but first, Crystal, I want to welcome you to the show. 0:00:44.640 --> 0:00:47.960 Thanks so much for joining us, Thank you, thank you 0:00:48.159 --> 0:00:51.600 a lot to be grateful for joining you on this podcast. 0:00:51.840 --> 0:00:55.480 The endless number of pies waiting to be eaten, and 0:00:55.640 --> 0:00:58.680 of course what will be served up hot at Thanksgiving 0:00:59.360 --> 0:01:02.240 UM this year is the conversation. From what I read, 0:01:02.360 --> 0:01:04.800 seems like the talk around the Turkey will be crypto. 0:01:05.720 --> 0:01:07.920 UM Macy's isn'to n f t S, so is the 0:01:08.040 --> 0:01:11.560 NFL and Odell Beckham Jr. Martha Stewart is into it. 0:01:11.720 --> 0:01:14.679 Quentin Tarantino is into it. N f d s have 0:01:14.800 --> 0:01:18.360 become an all encompassing subject and it'll be fun to discuss. 0:01:18.880 --> 0:01:20.600 Maybe we can get into all of that with our 0:01:20.640 --> 0:01:23.520 guests as well. I want to bring in Candice Banks, 0:01:23.600 --> 0:01:27.160 and she's a portfolio manager of Global asset Allocation at 0:01:27.200 --> 0:01:30.199 Fierra Capital and Nnchial. Candice, thanks so much for joining 0:01:30.280 --> 0:01:33.200 us this week. Hey, thanks for having me. Just to 0:01:33.240 --> 0:01:35.800 start out, I'm hoping you can just lay out your 0:01:35.800 --> 0:01:38.880 strategy for us, what sectors and areas of the market 0:01:38.959 --> 0:01:41.319 you're favoring right now, and then how you're starting to 0:01:41.360 --> 0:01:46.160 think about two as the year closes out. Yeah. Absolutely. 0:01:46.280 --> 0:01:51.600 While our base case scenario is calling for a reflationary recovery, 0:01:51.640 --> 0:01:56.840 this is essentially an extension of the post pandemic recovery 0:01:57.040 --> 0:02:01.640 that inevitably results in appear an extended period of strong 0:02:01.760 --> 0:02:06.480 and above trend global growth. Now in our base case UM, 0:02:06.680 --> 0:02:11.000 this visibility of the cycle is extended UM, given that 0:02:11.200 --> 0:02:16.680 policymakers take a very measured and gradual approach to policy 0:02:16.760 --> 0:02:21.640 normalization UM and essentially supporting the economy going forward. So 0:02:21.680 --> 0:02:26.200 this is very much a supportive backdrop for financial markets 0:02:26.200 --> 0:02:30.600 in particularly stocks, over the next twelve to eighteen months UM. Obviously, 0:02:30.960 --> 0:02:34.200 you know there's been talk about the global economy um 0:02:34.240 --> 0:02:36.280 you know, moderating here, but the fact of the matter 0:02:36.360 --> 0:02:40.000 is that it has peaked at a very elevated levels. 0:02:40.040 --> 0:02:42.560 And um, you know, like I said, we'll remain strong 0:02:42.960 --> 0:02:46.720 and above trend um without the fear of you know, 0:02:46.800 --> 0:02:51.760 premature and aggressive policy normalization that would derail that recovery 0:02:51.760 --> 0:02:54.800 going forward. So we remain quite constructive on the global 0:02:54.840 --> 0:02:58.960 economic outlook. UM. We think the devish reaction function from 0:02:59.000 --> 0:03:02.000 central banks and the increased tolerance for higher inflation will 0:03:02.000 --> 0:03:06.520 allow for that more cautious and gradual approach to policy 0:03:06.520 --> 0:03:10.440 normalization in the coming twelve eighteen months, and together this 0:03:10.600 --> 0:03:15.639 will um again create um, you know, a favorable backdrop 0:03:15.720 --> 0:03:18.920 for stocks versus bond. Now that being said, we do 0:03:19.040 --> 0:03:23.880 expect a more challenging environment for equities in the next 0:03:24.240 --> 0:03:27.120 in the coming year. We've obviously come off a very 0:03:27.160 --> 0:03:31.800 strong period of UM out performance and and very robust 0:03:31.800 --> 0:03:35.480 results in the global equity landscape since the lows of 0:03:35.560 --> 0:03:39.800 March twenty but also here in alone, and our sense 0:03:39.920 --> 0:03:43.800 is that you know, there's fewer obvious catalysts that will 0:03:43.840 --> 0:03:47.920 push equity markets significantly higher from here, and that the 0:03:47.960 --> 0:03:51.720 fundamental tail winds that supported equity markets in the last 0:03:51.760 --> 0:03:56.560 eighteen nineteen months have deteriorated somewhat, and as a result, 0:03:56.880 --> 0:03:59.040 you know, while we don't expect a recession or a 0:03:59.040 --> 0:04:02.240 bear market for that matter, UM, we do expect more 0:04:02.360 --> 0:04:06.360 muted and volatile equity market returns going forward after the 0:04:06.400 --> 0:04:12.000 extended stretch of gained since those UM, those march loads. 0:04:12.000 --> 0:04:15.640 So here are a couple of factors to think about UM. 0:04:15.680 --> 0:04:19.680 You know, given um our outlook I mentioned UM, you know, 0:04:19.720 --> 0:04:22.640 the fundamental backdrop, and our senses that when we go 0:04:22.720 --> 0:04:26.320 down the list, the downside risks are beginning to outweigh 0:04:26.320 --> 0:04:30.840 the potential for positive surprise, particularly given that much of 0:04:30.880 --> 0:04:33.840 the good news UH pertaining to the macro backdrop has 0:04:33.920 --> 0:04:37.680 likely been priced in at these elevated levels, and this, 0:04:37.800 --> 0:04:40.479 in our view, could leave some scope for more volatility 0:04:40.600 --> 0:04:47.360 disappointment UM unwanted volatility UM should something go awry. So 0:04:47.480 --> 0:04:50.880 on the fundamental friend I mentioned, the strong recovery earnings 0:04:50.920 --> 0:04:54.080 have been soaring, but our senses that you know, the 0:04:54.240 --> 0:04:58.640 strong recoveries have likely already been discounted. And this comes 0:04:58.760 --> 0:05:02.320 on the heels of an vironment of rising input prices 0:05:02.400 --> 0:05:06.880 inflation UM rising wages UM, as the job market continues 0:05:06.920 --> 0:05:10.720 to recover. All of this has the potential to squeeze 0:05:10.720 --> 0:05:14.560 profit margins. So some vulnerability on the profit front, and 0:05:14.600 --> 0:05:18.640 I think most critically is on the policy front. UM. 0:05:18.680 --> 0:05:21.400 And we've passed the point of peak stimulus, and this 0:05:21.480 --> 0:05:25.480 is going to UM create some uncertainty and some unwanted 0:05:25.560 --> 0:05:30.800 volatility as policymakers transition from that extremely accommodative stance towards 0:05:30.800 --> 0:05:35.919 something less accommodative and incrementally so and while we're not 0:05:36.000 --> 0:05:41.000 moving to restrictive policy UM or even neutral UH for 0:05:41.160 --> 0:05:43.520 you know, for that matter, in the next year, UM, 0:05:43.760 --> 0:05:48.000 that shift from extreme accommodation to something less supportive. Typically 0:05:48.400 --> 0:05:51.599 UM does inject a little bit of volatility in the market. 0:05:51.680 --> 0:05:54.600 So taken together, UM, you know those factors, whether it's 0:05:54.640 --> 0:05:59.839 buoyant earnings expectations, intensifying pressure on margins UM and limited 0:06:00.040 --> 0:06:05.479 go for further pe expansion. UM. You know basically has 0:06:05.960 --> 0:06:10.280 UM you know, UH given us them, you know, an 0:06:10.279 --> 0:06:14.680 opportunity to take some profits and adopt a more neutral 0:06:14.920 --> 0:06:19.440 stance on equity market for for the time being. Kennessy said, 0:06:19.560 --> 0:06:22.400 so many great things, and I want to get into 0:06:22.520 --> 0:06:25.200 like every element of what you've said, but I want 0:06:25.200 --> 0:06:29.960 to start at the top with UM, with your stance UM, 0:06:30.040 --> 0:06:33.919 your economic base case of a reflationary recovery. I was 0:06:33.960 --> 0:06:39.159 wondering if this week's market events thus far affirm your view. Namely, 0:06:39.240 --> 0:06:44.040 I'm referencing the largely anticipated continuity and FED leadership and 0:06:44.080 --> 0:06:48.520 thus the continuity of the Fed's posture. Yeah. Absolutely, I 0:06:48.560 --> 0:06:54.000 think the the outcome of the nomination process has reinforced 0:06:54.040 --> 0:06:58.240 that base case for reflationary recovery. Essentially, like you said, UM, 0:06:58.279 --> 0:07:01.479 you know, given that you know Paleal is you know, 0:07:01.560 --> 0:07:04.560 back in the chair position for another four years. UM. 0:07:04.600 --> 0:07:09.920 Really for us, UM, you know, reinforces the UM status 0:07:10.000 --> 0:07:12.680 quo UM from that perspective. So a little bit more 0:07:13.040 --> 0:07:17.800 visibility on on that front. So again consistent with UM, 0:07:17.840 --> 0:07:21.480 you know, the narrative where policymakers do adopt or UM 0:07:21.520 --> 0:07:25.680 you know, take that more pragmatic approach to policy normalization. 0:07:25.960 --> 0:07:29.559 So encouraging in that respect. And Kenness, I was hoping 0:07:29.560 --> 0:07:32.160 you would sort of walk us through your thinking about 0:07:32.240 --> 0:07:37.880 some areas of international markets that you might be preferring 0:07:37.960 --> 0:07:39.920 right now. In particular, I think in one of your 0:07:39.960 --> 0:07:44.200 recent notes you said you like Canadian stocks and Japanese stocks, 0:07:44.280 --> 0:07:46.080 if you wouldn't mind just going over how you're thinking 0:07:46.080 --> 0:07:50.800 about things internationally. Yeah, So, while we're neutral overall from 0:07:50.800 --> 0:07:55.920 an equity perspective, we do see particular pockets of opportunity 0:07:56.440 --> 0:07:59.679 in UM, you know, certain corners of the market, namely 0:07:59.800 --> 0:08:03.040 the a cyclical value space. So as we all know, 0:08:03.160 --> 0:08:05.880 you know, the growth defensive stocks have done extremely well 0:08:06.200 --> 0:08:09.480 UM with interest rates you know, uh tumbling to rock 0:08:09.520 --> 0:08:14.840 bottom levels. This has basically boosted the valuations of these 0:08:14.880 --> 0:08:18.720 growth talk growth stocks, particularly in the tech space UM 0:08:18.760 --> 0:08:21.200 over the last UM you know, eighteen or nineteen months, 0:08:21.240 --> 0:08:22.960 and a lot of that was a result of all 0:08:22.960 --> 0:08:25.720 of the liquidity that was being injected into the market 0:08:25.760 --> 0:08:29.200 by central banks UM, you know, back during the depths 0:08:29.360 --> 0:08:34.440 of the pandemic. Now, with earnings UM acting as more 0:08:34.480 --> 0:08:37.520 of a driver, the global economy is on solid ground. 0:08:38.160 --> 0:08:43.400 UM inflation obviously accelerating interest rates are rising in response, 0:08:43.480 --> 0:08:48.080 we expect UM that rotation from the growth towards the 0:08:48.200 --> 0:08:51.160 value space to take hold, and this is where we 0:08:51.240 --> 0:08:55.640 see an opportunity going forward. From a valuation perspective alone, 0:08:56.240 --> 0:09:01.520 UM you know, looks like a favorable backdrop for these UM, 0:09:01.600 --> 0:09:04.120 you know, cyclical value corner corners of the markets. When 0:09:04.160 --> 0:09:08.120 you think about UM, steeper yield curves boosting financial stocks, 0:09:08.679 --> 0:09:12.600 higher commodity prices across the board, boosting the resource sectors. UM. 0:09:12.600 --> 0:09:17.760 This essentially UM underscores our preference for Canadian stocks given 0:09:18.200 --> 0:09:21.839 the composition of the Canadian stock market, which is about 0:09:21.880 --> 0:09:27.480 two thirds of these value oriented cyclical sectors of the market. 0:09:27.520 --> 0:09:30.760 So that's how we play that UM you know, cyclical 0:09:30.840 --> 0:09:43.720 value opportunity within the global equity space. I thought it 0:09:43.760 --> 0:09:46.480 was interesting that in your base case for stocks next year, 0:09:46.520 --> 0:09:50.480 for US large caps specifically, you forecast minus twelve point 0:09:50.559 --> 0:09:56.559 five UM UH, Canadian large cap is does better than that, 0:09:56.880 --> 0:10:01.200 and I wondered if that bakes in the sumption that 0:10:01.400 --> 0:10:06.439 value does better than growth in both regions. So the 0:10:06.920 --> 0:10:09.679 matrix that you're referring to in the expected returns are 0:10:09.720 --> 0:10:14.320 all in Canadian dollars. So the reason that sp expectation 0:10:14.520 --> 0:10:17.880 looks so dire is because we expect the US dollar 0:10:17.960 --> 0:10:20.280 to weekend in the next year in the Canadian dollar 0:10:20.360 --> 0:10:23.040 to strength, and so that's actually the currency impact you're 0:10:23.040 --> 0:10:26.240 seeing there when it comes to the spire though UM 0:10:26.280 --> 0:10:29.960 we have exceeded our target. We have a forty target, 0:10:30.240 --> 0:10:34.400 so the total return is still negative or the total 0:10:34.440 --> 0:10:37.760 expected return, and we still expect some modest upside in 0:10:37.800 --> 0:10:41.080 Canadian stock. So it's a relative play between Canada and 0:10:41.160 --> 0:10:43.920 the US. And like I said, from a valuation perspective, 0:10:44.200 --> 0:10:48.120 the Canadian market has rarely traded this um at this 0:10:48.200 --> 0:10:51.160 size of a discount to the US, and given that 0:10:51.280 --> 0:10:55.240 composition and the value oriented bias of the T s X, 0:10:55.800 --> 0:10:58.400 we think this is UM you know, offering more compelling 0:10:58.440 --> 0:11:02.760 opportunities for equity upside going forward. And then as Crystal mentioned, 0:11:02.760 --> 0:11:05.960 we did have the Powell news earlier this week, but 0:11:06.040 --> 0:11:08.000 the other news that's sort of also happening in the 0:11:08.040 --> 0:11:12.000 background and happening internationally is the rise in COVID cases, 0:11:12.280 --> 0:11:14.760 especially in Europe and some of the headlines that we're 0:11:14.760 --> 0:11:17.880 seeing there. So I'm wondering how you're thinking about that. 0:11:18.040 --> 0:11:20.520 I know JP Morgan had a NOE doubt earlier this 0:11:20.559 --> 0:11:24.199 week saying that this new wave is unlikely to be 0:11:24.240 --> 0:11:26.880 a material problem for stocks, So how are you thinking 0:11:26.880 --> 0:11:29.959 about it? Yes, so I think it adds to that 0:11:30.960 --> 0:11:35.120 narrative where the risks are mounting at a time when 0:11:35.640 --> 0:11:38.440 you know the markets are largely pricing a lot of 0:11:38.480 --> 0:11:43.360 good news UM. While we don't think that these subsequent 0:11:43.559 --> 0:11:48.720 waves of the coronavirus will derail the economic expansion UM, 0:11:48.760 --> 0:11:51.680 it is something that we need to monitor because of 0:11:51.720 --> 0:11:55.440 course it could UM stall the recovery, like I said, 0:11:55.480 --> 0:11:58.280 but not to derail it all together. Whether it's given 0:11:58.480 --> 0:12:03.280 the high vaccination rates, the UM the fact that you know, hospitalizations, 0:12:03.320 --> 0:12:08.439 mortalities have UM remained very subdued even in the UM 0:12:08.480 --> 0:12:11.160 in the wake of these subsequent waves just tells us 0:12:11.160 --> 0:12:16.040 that we're not likely to see that recession scenario even 0:12:16.200 --> 0:12:20.760 in the wake of more stringent countermeasures. But that being said, 0:12:20.800 --> 0:12:24.720 it is something that I think you'll see more UM 0:12:24.760 --> 0:12:28.400 you know, from a financial market volatility perspective. Again, just 0:12:28.720 --> 0:12:33.199 something for investors to contemplate UM and like I said, 0:12:33.240 --> 0:12:37.240 the potential for whether it's you know, you know, some 0:12:37.360 --> 0:12:41.760 lockdowns or UM you know, fear of UM you know, 0:12:41.880 --> 0:12:44.520 traveling or going out again. If you get some of 0:12:44.559 --> 0:12:48.760 that UM you know that M deterioration and confidence that 0:12:48.800 --> 0:12:52.240 could potentially UH damp in growth kind of similar to 0:12:52.320 --> 0:12:54.960 what we saw in the third quarter UM of this year. 0:12:55.880 --> 0:13:00.120 But nonetheless we don't expect that to derail or to 0:13:00.400 --> 0:13:02.760 impact our base case scenario. But I think, like I said, 0:13:02.760 --> 0:13:06.040 you'll see it more through UM the lens of the 0:13:06.040 --> 0:13:10.040 financial markets and volatility. UM, you know, as these headlines 0:13:10.400 --> 0:13:13.120 UM you know, hit the hit the screen. Going back 0:13:13.160 --> 0:13:17.920 to your base case of a reflationary recovery, I thought 0:13:17.920 --> 0:13:20.520 it interesting that your firm put it at a fifty 0:13:20.960 --> 0:13:24.800 probability if I have that right, UM, what would have 0:13:24.840 --> 0:13:27.400 to happen to give you all greater than a coin 0:13:27.480 --> 0:13:32.160 toss conviction? UM about a reflationary recovery? Yeah, So the 0:13:33.000 --> 0:13:37.120 difference between our top two scenarios really hinges on the 0:13:37.200 --> 0:13:42.319 policymaker response. So in that reflationary recovery scenario, we're essentially 0:13:42.760 --> 0:13:47.560 assuming that that UM you know, that devish bias from 0:13:47.600 --> 0:13:51.120 central banks, and that tolerant for inflation to run above 0:13:51.200 --> 0:13:54.720 target for an extended period of time UM allows for 0:13:55.000 --> 0:13:58.280 a slower and more gradual approach policy normalization. And like 0:13:58.320 --> 0:14:01.960 I said, that's essentially UM you know what has reinforced 0:14:02.000 --> 0:14:05.080 our strong outlook for the global economy and of course 0:14:05.520 --> 0:14:09.600 UM you know financial markets broadly. Now, the risk to 0:14:09.679 --> 0:14:15.920 that scenario is if policymakers basically step in prematurely UM 0:14:16.000 --> 0:14:19.760 start to panic given some of these elevated inflation numbers 0:14:19.760 --> 0:14:22.760 that we've been seeing, and start to tighten monetary policy, 0:14:22.840 --> 0:14:27.000 in our view, something that would be prematurely. This would 0:14:27.160 --> 0:14:31.200 in in response, likely dampen the recovery, if not derail 0:14:31.240 --> 0:14:34.040 it all together. And that's I think UM the policy 0:14:34.320 --> 0:14:37.400 error that people should be thinking about. You know, you've 0:14:37.760 --> 0:14:40.760 I've seen a number of headlines about the policy air 0:14:40.880 --> 0:14:46.080 being allowing inflation to run at these levels without stepping in. 0:14:46.160 --> 0:14:47.960 I think the policy air at this point would be 0:14:47.960 --> 0:14:50.960 stepping in prematurely and derailing the recovery at a time 0:14:51.360 --> 0:14:55.240 when it is still UM vulnerable. What happens to US 0:14:55.320 --> 0:15:00.120 stocks if that happens, stock mark is in general UM 0:15:00.200 --> 0:15:03.640 would sell off in that in that UM stag inflationary scenario. 0:15:03.680 --> 0:15:06.200 So that's what about that second scenario that you're referring 0:15:06.240 --> 0:15:09.880 to as stag inflation. And in that scenario, UM, it's 0:15:10.080 --> 0:15:13.520 UM an unfortunate outcome not only for stocks but also 0:15:13.560 --> 0:15:15.880 for bonds because of course interest rates would be rising 0:15:16.600 --> 0:15:21.560 quite aggressively as well. So UM very much a risky 0:15:21.600 --> 0:15:24.520 scenario for financial markets in general. And it all really 0:15:24.600 --> 0:15:30.240 hinges on that policy response, which is very difficult to forecast, 0:15:30.320 --> 0:15:32.480 to navigate. UM. You know, you see a lot of 0:15:32.520 --> 0:15:36.280 different headlines, many different policymakers speaking, um, you know, some 0:15:36.320 --> 0:15:39.840 more hawkish than others. That's why those probabilities are so close, 0:15:39.920 --> 0:15:43.440 because there is very much, um, a lot of uncertainty 0:15:43.480 --> 0:15:45.960 as to how this will all shake out in the 0:15:45.960 --> 0:15:48.280 next twelve the eighteen months. I'm glad you mentioned that, 0:15:48.320 --> 0:15:50.800 but you did steal my question because I was going 0:15:50.840 --> 0:15:54.120 to ask you if you and your team have projections 0:15:54.160 --> 0:15:56.800 for what we can expect for interest rate hikes from 0:15:57.000 --> 0:15:59.600 the Fed. I know. John Author's a Bloomberg opinion had 0:15:59.600 --> 0:16:02.880 a column this week saying it's a little bit perplexing 0:16:03.000 --> 0:16:05.760 the way the markets reacted to the Power renomination because 0:16:05.840 --> 0:16:09.360 Brainard actually tends to vote in the same way the 0:16:09.400 --> 0:16:13.640 Pole does. So how should we be thinking about that? Yeah, 0:16:13.680 --> 0:16:18.440 when it comes to the trajectory for UM FED funds, 0:16:18.600 --> 0:16:23.360 we are much more dubbish than the market. UM. Following 0:16:23.480 --> 0:16:28.400 the UM renomination of Chair Powell, markets are pricing I believe, 0:16:28.440 --> 0:16:33.120 close to five rate hikes over um, you know, three, 0:16:33.120 --> 0:16:38.160 which we think is overdone. Um. Given the you know, 0:16:38.200 --> 0:16:44.720 given again the narrative where policymakers UM will take that 0:16:44.800 --> 0:16:49.840 cautious approach. UM, we expect UM only one rate hike 0:16:50.360 --> 0:16:54.080 from the Fed in two obviously in the back half, 0:16:54.080 --> 0:16:58.880 because of course by the mid midway through UM our 0:16:58.960 --> 0:17:03.320 senses that in play shin those that acceleration will have receded. 0:17:03.480 --> 0:17:07.640 And while we still expect inflation to be sustainably above target, 0:17:07.680 --> 0:17:10.480 we think the focus then we'll shift to the labor market, 0:17:10.480 --> 0:17:12.840 and that's where there's still some significant flack. And that's 0:17:12.840 --> 0:17:18.040 also another precondition for policymakers to start lifting rates UM, 0:17:18.080 --> 0:17:21.159 you know, from these rock bottom levels. So again, you know, 0:17:21.520 --> 0:17:25.600 when you bring in that bias to allow UM inflation 0:17:25.800 --> 0:17:28.960 to run at these levels for UM longer than may 0:17:28.960 --> 0:17:32.040 have typically been the case. After ten years of underperforming 0:17:32.440 --> 0:17:35.679 the inflation target, our senses that policy makers will be 0:17:35.680 --> 0:17:39.320 in a position to take a slow approach to policy normalization. 0:17:39.400 --> 0:17:43.840 And therefore, you know, my um, my interpretation is that 0:17:43.920 --> 0:17:47.280 the markets UM are leaning a little bit too hawkish 0:17:47.280 --> 0:17:48.879 and I've gotten a little bit ahead of themselves from 0:17:48.920 --> 0:17:52.040 a policy's perspective, and we see that here in in 0:17:52.080 --> 0:17:55.919 the Canadian market as well as similar a similar narrative. 0:17:56.280 --> 0:17:59.520 All Right, it seemed to me that earlier this week, Uh, 0:18:00.400 --> 0:18:04.440 and gold was backing off and the hedges were coming off, 0:18:04.520 --> 0:18:07.240 and and I wanted to ask you what are good 0:18:07.359 --> 0:18:10.760 inflation hedges these days? I mean, I would say gold 0:18:10.840 --> 0:18:13.720 actually broke out of its down trend here just in 0:18:13.760 --> 0:18:15.760 the last few weeks. I mean, it's been a tough 0:18:15.840 --> 0:18:20.080 year for gold in and you know, investors are starting 0:18:20.119 --> 0:18:23.360 to threat about that inflation outlook. And in the last 0:18:23.400 --> 0:18:27.320 few weeks we've seen gold turn UM decidedly higher UM 0:18:27.359 --> 0:18:31.120 in response as investors seek that hedge in an inflationary environment. 0:18:31.119 --> 0:18:34.720 Went again. UM. You know, if we're right and policymakers 0:18:34.840 --> 0:18:39.520 take a very gradual and you know, measured approach to 0:18:39.560 --> 0:18:43.359 policy normalization, suggests that real interest rates are going to 0:18:43.720 --> 0:18:46.800 remain in negative terrain. And this is obviously also a 0:18:46.880 --> 0:18:50.800 tail wind for gold. UM. That being said our view 0:18:51.080 --> 0:18:55.080 and at Fierira, UM, you know, we feel that real 0:18:55.240 --> 0:18:59.800 assets UM, you know, such as real estate, agriculture, infrastructure, 0:18:59.840 --> 0:19:03.639 for vibe UM the best hedge to inflation over the 0:19:03.680 --> 0:19:06.639 long term. UM. You know, we expect inflation will remain 0:19:06.800 --> 0:19:09.680 above two percent target not only in the next twelve 0:19:09.720 --> 0:19:12.120 the eighteen months, but over the next three or four years. 0:19:12.200 --> 0:19:15.480 As well. So that's just really um, you know, reinforces 0:19:15.520 --> 0:19:19.639 the need for real assets in a well balanced portfolio. 0:19:36.440 --> 0:19:38.760 It's interesting you mentioned those things because I've been I 0:19:38.800 --> 0:19:41.000 had actually been working on a story for Business Week 0:19:41.600 --> 0:19:44.480 about some of the best inflation hedges that people had 0:19:44.520 --> 0:19:47.320 mentioned farmland to me, and they mentioned cattle and things 0:19:47.359 --> 0:19:50.600 like that. Some of these things I frankly had never 0:19:50.920 --> 0:19:53.399 heard of as inflation hedges before. And then Crystal, I 0:19:53.440 --> 0:19:55.879 know you and I haven't talked too much about your 0:19:55.880 --> 0:19:58.360 new beat yet, but you do cover crypto and bitcoin, 0:19:58.560 --> 0:20:01.800 and cryptocurrencies come up quite a bit in this conversation. 0:20:01.840 --> 0:20:03.679 I don't know, Candice, if a lot of your clients 0:20:03.680 --> 0:20:06.399 are asking you about that as well. It just seems 0:20:06.480 --> 0:20:09.280 like this big hot topic these days. Yeah, it's definitely 0:20:09.359 --> 0:20:12.840 something we're seeing more in the headlines these days. From 0:20:12.840 --> 0:20:16.040 an ass allocation perspective, we are not, um, you know, 0:20:16.119 --> 0:20:19.439 deploying capital towards the SASA class right now. Lots of 0:20:19.480 --> 0:20:22.440 speculation built around that and you know, very little in 0:20:22.480 --> 0:20:25.480 the way of tangible value. So I think, um, you know, 0:20:25.560 --> 0:20:28.920 from our from our perspective, UM, you know, not something 0:20:29.000 --> 0:20:32.040 that we're looking at, UM, you know, proactively at this point, 0:20:32.560 --> 0:20:35.240 I hear you. I mean, though, if we're tapped out 0:20:35.280 --> 0:20:38.400 in terms of return or yield in traditional places, we've 0:20:38.440 --> 0:20:41.480 got to find them somewhere else. So if not in crypto, 0:20:41.680 --> 0:20:44.879 where can we go? That is a fantastic question. And 0:20:44.920 --> 0:20:49.359 you know, I've talked about a very challenging backdrop for 0:20:49.400 --> 0:20:52.680 both stocks and bonds in the coming year. Um, as 0:20:52.680 --> 0:20:55.320 I already mentioned, you know, while we don't expect the 0:20:55.359 --> 0:20:59.399 bearer market or recession for that matter, the easy money 0:20:59.440 --> 0:21:03.320 has been made in global stock markets, so those similar 0:21:03.960 --> 0:21:06.080 double digit returns are gonna be tough to come by 0:21:06.200 --> 0:21:09.600 going forward. At the same time, given our interest right forecast, 0:21:09.640 --> 0:21:12.000 particularly at the long end of the curve, you know, 0:21:12.160 --> 0:21:16.199 the expected returns in traditional bonds, which are supposed to 0:21:16.200 --> 0:21:20.919 be this you know, the stability and the income generating 0:21:21.000 --> 0:21:24.119 aspect of the of a balanced portfolio. Um you know, 0:21:24.160 --> 0:21:27.320 we're expecting negative returns and we've already seen minus five 0:21:27.359 --> 0:21:31.840 percent here in one alone, and expect something similar for two. 0:21:32.359 --> 0:21:35.960 So with that, you know, given the you know, unfavorable 0:21:36.000 --> 0:21:40.480 return prospects and those traditional bond and equity as a classes, 0:21:40.560 --> 0:21:43.600 this really, you know, reinforces the need to diversify a 0:21:43.640 --> 0:21:46.680 portfolio into the private alternative space. So this is where 0:21:46.720 --> 0:21:49.960 those um real asset strategies come into play, whether it's 0:21:50.000 --> 0:21:55.560 real estate, agriculture, infrastructure, UM, private lending. Obviously you're getting 0:21:55.560 --> 0:21:59.480 that nice income stream and the stability um of fixed 0:21:59.520 --> 0:22:04.960 income without the well like the negative return expectation and 0:22:05.040 --> 0:22:08.160 that that we're expecting for traditional bonds given our expectation 0:22:08.240 --> 0:22:11.639 for interest. Right, So I think these asset these private alternative, 0:22:11.960 --> 0:22:16.200 non traditional sources of income will uh provide a very 0:22:16.240 --> 0:22:20.920 important part in a well balanced portfolio from an income perspective, um, 0:22:20.960 --> 0:22:25.160 you know, without imploding the volatility of a well balanced portfolio. 0:22:25.160 --> 0:22:29.080 These are typically more stable strategies. But importantly they also 0:22:29.280 --> 0:22:31.960 have a low correlation to traditional asset classes, so in 0:22:32.000 --> 0:22:35.600 a well balanced portfolio, they would tend to reduce your 0:22:35.720 --> 0:22:38.840 overall portfolio risks. And I want to ask you one 0:22:38.840 --> 0:22:41.679 more question before we get into our weirdest thing. And 0:22:41.800 --> 0:22:45.120 as Crystal mentioned at the top of this show, there's 0:22:45.160 --> 0:22:47.760 a lot to talk about there in terms of Thanksgiving 0:22:47.760 --> 0:22:50.320 and Krypton, all these other things happening this week, But 0:22:50.680 --> 0:22:52.760 the one thing we really haven't talked about yet is 0:22:53.000 --> 0:22:55.159 the state of the consumer. I know, I get a 0:22:55.200 --> 0:22:58.639 lot of reports about holiday shopping trends. And then we 0:22:58.680 --> 0:23:02.600 also had Arnie from the you know, big box walmarts 0:23:02.640 --> 0:23:07.520 and targets and all of them have been passing cost 0:23:07.800 --> 0:23:11.040 increases onto the consumer and so on. So how much 0:23:11.080 --> 0:23:14.200 of everything is dependent on the state of the consumer 0:23:14.240 --> 0:23:16.840 and the well being of the consumer. Well, our senses 0:23:16.920 --> 0:23:20.280 that the consumer continues to drive the recovery and it's 0:23:20.320 --> 0:23:25.400 an instrumental source of you know, a strong economy, particularly 0:23:25.560 --> 0:23:27.960 in the in the US, but also here in Canada 0:23:28.000 --> 0:23:30.520 and globally as well. And the good news is that 0:23:30.640 --> 0:23:35.719 the consumer right now does have some ammunition to rising prices. 0:23:36.280 --> 0:23:40.439 You look at the abundance of savings um that have 0:23:40.600 --> 0:23:44.680 been stashed over the last you know, several months UM 0:23:44.760 --> 0:23:48.080 that are right for spending. As you know, the consumer 0:23:48.160 --> 0:23:51.680 goes out, resumes resumes those normal activities, whether it's taking 0:23:51.720 --> 0:23:55.480 a vacation or um you know, spending more money on 0:23:55.520 --> 0:24:00.080 the services side, going out to restaurants, etcetera. UM sour 0:24:00.160 --> 0:24:03.359 census that the consumer will continue to you know, be 0:24:03.640 --> 0:24:07.480 a driving force for the economy. At the same time, 0:24:07.560 --> 0:24:09.960 you know, the job market, in our view, will continue 0:24:10.000 --> 0:24:13.920 to improve wages will be um on the rise. Already 0:24:13.920 --> 0:24:16.040 in some parts of the market we're seeing some sizable 0:24:16.119 --> 0:24:19.080 wage games. So all of this taken together, Um, you know, 0:24:19.119 --> 0:24:24.240 reinforces are positive. Outlook for the back backdrop for consumption. 0:24:24.880 --> 0:24:28.480 Stand clear of the craziest things we saw in markets 0:24:28.520 --> 0:24:31.080 this week. And I know I asked both of you 0:24:31.200 --> 0:24:34.480 two come prepared with some of the craziest or weirdest 0:24:34.520 --> 0:24:37.680 things you saw in markets this week, and I feel 0:24:37.680 --> 0:24:40.560 like we've hinted at a bunch of them already. But Crystal, 0:24:40.640 --> 0:24:42.959 I feel like you have like a big list of 0:24:43.240 --> 0:24:46.000 things that you've been watching all week. I hope you 0:24:46.320 --> 0:24:49.720 I hope you proved me right. Yes, um, I mean 0:24:49.840 --> 0:24:53.119 it would be so easy to reach for the Volcano bond. 0:24:54.080 --> 0:24:56.879 That's the world's first sovereign bond that will build a 0:24:56.920 --> 0:25:01.040 bitcoin city. El Salvador plans to issue one billion dollars 0:25:01.040 --> 0:25:05.119 in tokenized USD denominated tenure bonds. But that's not my 0:25:05.280 --> 0:25:08.320 weird thing of the week. By weird thing of the 0:25:08.400 --> 0:25:12.040 week is this thing called the Constitution DOW that goes 0:25:12.080 --> 0:25:15.440 back to my crypto beat. This DOW, or a decentralized 0:25:15.520 --> 0:25:19.560 autonomous organization think of it basically as a club born 0:25:19.600 --> 0:25:22.440 on the Internet. It's the A O L chat room 0:25:22.680 --> 0:25:26.240 of the future, but it has an agenda. So the 0:25:26.320 --> 0:25:28.720 Constitution Now was a group of people who raised something 0:25:28.720 --> 0:25:31.399 like forty seven million dollars to buy a really old, 0:25:31.560 --> 0:25:36.360