Speaker 1: Bloomberg Audio Studios, podcasts, radio news. The market is lower
Speaker 1: than the futures at nine twenty nine, the Vix, Paul, please,
Speaker 1: I can't do it, Paul, quote the Vix, it's too
Speaker 1: much pain.
Speaker 2: Well, I'm just ninety s and P five technically got
Speaker 2: bear market right there at that low here, but we've
Speaker 2: got the vics here fifty how about that Tom five zero.
Speaker 1: Five zero point sixty four. And I did a standard
Speaker 1: deviation study. Lauri Kelvicina said she wouldn't come on if
Speaker 1: I didn't do bear market bull market calls. I gotta
Speaker 1: do standard deviation calls. And we're out at three point
Speaker 1: three standard deviations down, standard imports five hundred, one step down,
Speaker 1: two steps down, and this morning, three steps down. We
Speaker 1: are honored the Lori Kelvicina would join us here in
Speaker 1: this hour, Lord, your observation as you speak to your
Speaker 1: clients this morning.
Speaker 3: Look, I think people are trying to make sense of
Speaker 3: what's going on. How far we could go down? You know,
Speaker 3: just a few minutes to go, I had an email
Speaker 3: with someone who was talking to me about my four
Speaker 3: Tiers of Fear framework, and so there's a lot of
Speaker 3: sympathy among my clients for your thirty one hundred, which
Speaker 3: is the fourth tier where you have a major crisis
Speaker 3: and lose half the market value. I'm not going to
Speaker 3: sit here, Tom and tell you everybody saying that, but
Speaker 3: that was one email that came across, whereas other people
Speaker 3: have sort of resonated to the idea that we said,
Speaker 3: you know, we've been in a growth scare. Of the
Speaker 3: risk now is we're pricing in recession. And it sounds
Speaker 3: to me like just based on where we open, we're
Speaker 3: headed straight for that. So I think that people are
Speaker 3: doing what we do when we have these events in
Speaker 3: markets where there is a fear that is cascading very rapidly.
Speaker 1: What we're going to do here now with an equity
Speaker 1: strategist is take all over wonderful abilities, particularly with less
Speaker 1: profitable non Apple, non Microsoft companies, and bring it over
Speaker 1: to what people are talking about with the DOWBT negative
Speaker 1: fourteen hundred. Laurie Calvicina, take the equity market and what
Speaker 1: it will bounce off in a credit mark. The deteriorates.
Speaker 1: The jargon that Paul Sweeney uses is spreads deteriorate. That's
Speaker 1: the yield of a garbage bond versus a full faith
Speaker 1: in credit and the yield goes higher. Are we to
Speaker 1: tipping point in credit that affects the equity market.
Speaker 3: It's a great question. I'm certainly not an expert on
Speaker 3: the credit market, tom, so I'm gonna deflect on that one.
Speaker 3: But what I will say is that, you know, maybe
Speaker 3: up until about a week ago, and it was a
Speaker 3: little bit before the Rose Garden ceremony, to be honest,
Speaker 3: but we had actually been seeing small caps starting to
Speaker 3: outperform large caps, and like on the big down days
Speaker 3: in the market, small caps weren't doing quite as bad,
Speaker 3: and I thought that was interesting. That was making me
Speaker 3: feel a little bit better because they had already been
Speaker 3: so de risk, they were so cheap, and we felt
Speaker 3: like there was this rotation going on that was hitting
Speaker 3: the bigger caps harder than the small caps. But that's
Speaker 3: all changed. So we've seen that attempt that small caps
Speaker 3: were making to bottom now fail posts the Rose Garden,
Speaker 3: and that's going to be very you know, similar right
Speaker 3: to that high high yield cohort of the market. And
Speaker 3: what that's been telling me over the past few days
Speaker 3: is that those recession risks are getting priced in rapidly
Speaker 3: because as cheap as they are. And honestly, tom My
Speaker 3: valuation pe for the My valuation model, the market cap
Speaker 3: way to pe for the Russell two thousand, was it
Speaker 3: thirteen and a half times on the Thursday close In
Speaker 3: recession it tends to go to eleven to thirteen times,
Speaker 3: even before you clean up the excess earning's optimism. So
Speaker 3: these things have been acting pretty pretty bad. But I
Speaker 3: do think that credit markets holding off, not deteriorating, you know,
Speaker 3: that's been sort of the thing that's kind of kept
Speaker 3: people out. And I hate to use the word panic
Speaker 3: in markets like these, but that's been kind of the
Speaker 3: thing that's kept people calm. But they can't be a
Speaker 3: necessary part of the bonding process we have to go
Speaker 3: through in here.
Speaker 1: Let me uncom you right now, Paul the Vicks fifty
Speaker 1: two point zero.
Speaker 2: Seven exactly, Laurie, what's the earnings risk still out there
Speaker 2: in the marketplace do you think? I mean, is it
Speaker 2: a flat earnings year in twenty five or maybe something
Speaker 2: more than that.
Speaker 3: You know, what we've got modeled is is you know,
Speaker 3: kind of a stagflationary scenario right now for two fifty eight,
Speaker 3: which is well below the bottom up consensus which last
Speaker 3: I checked was two sixty nine. Who knows what it
Speaker 3: is now because things are starting to change. But what
Speaker 3: we have found is an interesting question you asked Paul,
Speaker 3: because if you kind of go back and look at
Speaker 3: bad earnings years, what we often find is that, you know,
Speaker 3: in kind of big crises, big recessions, you're seeing earnings
Speaker 3: year Earnie's growth on a year over year basis going
Speaker 3: down like thirteen percent or something worse. Right, So some big,
Speaker 3: ugly numbers, but they're actually a lot of years where
Speaker 3: earnings are just flat year to year, and when we
Speaker 3: see companies, you know, sort of being able to muddle through,
Speaker 3: that's often what's happened. So we when we recently changed
Speaker 3: our Arni's number to two fifty eight, we said, you know,
Speaker 3: kind of the downside scenario, if we want to kind
Speaker 3: of put in a barricase, We're thinking a lot about
Speaker 3: kind of that two forty six number for now. That
Speaker 3: could change if we go into a full on recession.
Speaker 3: But outside of that, that's not a bad assumption to make,
Speaker 3: just that earnings go nowhere.
Speaker 1: Laurie's staying with us. We're going to continue Lori Kelevisina
Speaker 1: wec with this yere on the equity market. Eric belt
Speaker 1: Chuonis made it up from Philadelphia. They didn't cut the
Speaker 1: funding on the A Cell Express. Get the bell chunis
Speaker 1: here in a moment. I just had a negative fifteen
Speaker 1: hundred print on the Dow, negative two thirteen. I want
Speaker 1: to emphasize futures at eight. At nine twenty nine, we're
Speaker 1: about negative one forty. We're now negative two ten on
Speaker 1: the equity market. The vics explodes out. That's the right word.
Speaker 1: Forty seven forty eight out to fifty two point seventy six.
Speaker 1: I never used this phrase. I'm going to use it, Paul.
Speaker 1: On a half hour to half hour basis to the
Speaker 1: Asia opening. We're sort of in uncharted territory. It's different
Speaker 1: in Paul. The yields go up. There's a fear trade
Speaker 1: into bond's price. Excuse me, priced down, yield up, and
Speaker 1: the whole margin call. I'm sorry, I'm going where Dennis
Speaker 1: Gartman was earlier this morning. You wonder, Paul, what's going
Speaker 1: on out there?
Speaker 2: Of course, and I think I was just asking where
Speaker 2: do we go from here? In terms of policy? I'm
Speaker 2: not sure anybody really knows. And that kind of goes
Speaker 2: to the earnings question, like, I don't know how bad
Speaker 2: earnings could get because I'm not sure how far this
Speaker 2: policy is going to go. And I think that reflects
Speaker 2: a lot of what the market's doing. So, Laurie, I
Speaker 2: think most of us listening watching here would say, you
Speaker 2: know what, twelve twenty four to thirty six months from now,
Speaker 2: this market's going to be higher than where we are
Speaker 2: right here, probably meaningfully higher. So I should probably be
Speaker 2: doing some buying here. How does that conversation do with you?
Speaker 3: Well, look, look, I'll tell you it's sort of the
Speaker 3: fly and the ointment for the strategists right now. And
Speaker 3: I see this in my own modeling, Paul. We have
Speaker 3: five different models that we used to come up with
Speaker 3: our price targets. And look, I know everything is scary
Speaker 3: if people are like math, Oh my god, you're doing math,
Speaker 3: But that's what we have to do right to keep
Speaker 3: ourselves grounded. And when I go through and look at
Speaker 3: my modeling, the one model that's still pretty constructive is
Speaker 3: actually the sentiment model, and it's basically looking at aaii
Speaker 3: net bulls that are down around GFC lows twenty two lows,
Speaker 3: nineteen ninety one recession lows, and that is a good
Speaker 3: reminder that as quickly as things cascade onto the downside,
Speaker 3: they come, they tend to come roaring back when you
Speaker 3: get some resolution, And so I think that's you know that,
Speaker 3: that's something a lot of you know, us forecasters, we
Speaker 3: had in the back of our heads as we've tried
Speaker 3: to navigate this environment.
Speaker 2: It's hard.
Speaker 3: So that's impossible, right to say, what is that trigger?
Speaker 3: But it is something we have to watch, and it's
Speaker 3: a necessary condition for a bottom that's already been put
Speaker 3: in place.
Speaker 1: Tesla not to a two hundred and ninety nine. We're
Speaker 1: not there yet. I don't want to be too gloomy,
Speaker 1: but I'm going to go over here, Laurie to something
Speaker 1: nobody talks about. And of course we're on a Canadian
Speaker 1: border on this Ford Motor under ten dollars nine dollars
Speaker 1: eleven cents right down on lows for twenty twenty five,
Speaker 1: and they got a pe multiple on Ford of five
Speaker 1: and maybe the forward multiple, which we're going to blow up.
Speaker 1: We know that is seven. Are we in value territory
Speaker 1: medium and small cap stocks like we clearly are with
Speaker 1: the Ford Motor Company.
Speaker 3: So you know, I was having an argument with someone
Speaker 3: about that this morning, talking about not my husband. I'm
Speaker 3: I'm on a trip, I'm in a hotel room. So
Speaker 3: I believe that he ardues with.
Speaker 1: The marriage survives.
Speaker 3: Yeah, but not. He's very scared of my tears of
Speaker 3: fear chart. I had to take some passwords away from him.
Speaker 3: But the reality is is that you know, when I
Speaker 3: highlight this small cap chart and that we're at thirteen times,
Speaker 3: or at least we were as a Thursday, people say, well,
Speaker 3: we have to adjust the earnings, and I say, I know,
Speaker 3: we have to adjust the earnings. That's the separate thing
Speaker 3: though if you look at you know, sort of historically
Speaker 3: my forward pe data, eleven to thirteen times is where
Speaker 3: small caps tend to bottom out even when the E
Speaker 3: is too high, and people just can't mentally wrap their
Speaker 3: heads around that. But it is something important you have
Speaker 3: to keep in mind because it's one of those things
Speaker 3: again that you have to see. It's not going to
Speaker 3: peg a bottom on its own, but it's still a
Speaker 3: signal even though there's some problems with the E. Now,
Speaker 3: I do think with earnings, we have to get the
Speaker 3: numbers down before anybody is going to have faith to
Speaker 3: come in and buy here. Forty percent of the revisions
Speaker 3: and the rote, the Russell and SMP are still to
Speaker 3: the upside. Nobody's cutting numbers because they don't you know
Speaker 3: they I don't know a lot of different reasons, but
Speaker 3: nobody's been cutting the numbers.
Speaker 1: You're a trooper to come on. Lori back to her
Speaker 1: clients at RBC Capital, Marcus Lori, Kelvisenior. Hug the children
Speaker 1: is all I can say.