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Speaker 1: Let's get to our guest for this half hour. It's

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Speaker 1: Julie Beal, portfolio manager and senior research analyst at Kane

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Speaker 1: Anderson Rudnick. Julie, you've made the case of late for

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Speaker 1: owning quality. So my question to you is, at this moment,

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Speaker 1: given all the volatility, is quality more important than say, valuations. Oh,

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Speaker 1: that's a good question. I would say yes, generally speaking.

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Speaker 1: And I say that as kind of a long term investor,

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Speaker 1: you really want to own quality through a cycle, and

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Speaker 1: you want to be thoughtful about valuation when there is

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Speaker 1: as much turbulence and rates as there is right now.

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Speaker 1: So I think in the short term you really have

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Speaker 1: to be thoughtful about valuations, particularly if you own pricier names.

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Speaker 1: But I think for the long term you really get

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Speaker 1: paid for owning quality and it's usually a little less

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Speaker 1: stressful in those difficult markets. So I mean, you look

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Speaker 1: at p H and E which one is more important

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Speaker 1: in your view? Well, I think the thing that we

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Speaker 1: all need to recognize that the ease that are out

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Speaker 1: there are pretty hard to really hang your hat on.

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Speaker 1: I think the real challenge for us is doing any

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Speaker 1: kind of forecasting, and it's sort of besides the point

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Speaker 1: right now, if you think about forecasts, right we have

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Speaker 1: pretty much weekly changes and interest rate forecasts. You know,

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Speaker 1: analysts estimates are all over the place, and you know,

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Speaker 1: you think about most CFOs, they're really struggling to put

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Speaker 1: out any good guidance because it's just a really uncertain economy.

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Speaker 1: So I think it's better to look at backwards looking earnings,

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Speaker 1: look at how your businesses have performed at the last recession,

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Speaker 1: and look at where they're trading and their average historical range.

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Speaker 1: I feature the comments of Ken Griffin from Citadel a

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Speaker 1: couple of times this morning because it's it's interesting he's

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Speaker 1: not He's not one of those who, you know, maybe

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Speaker 1: many today we're buying because they thought that that maybe

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Speaker 1: this drop in yields and a couple of central bank interventions,

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Speaker 1: I mean, the FED could be a little closer to

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Speaker 1: a pivot. That's not why he's buying. He's buying because

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Speaker 1: he sees jilience in the in the US equity market,

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Speaker 1: in the economy, and in the consumer. Do you yeah,

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Speaker 1: I mean, I think we've all been surprised by how

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Speaker 1: resilient the consumer has been. And if you look at

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Speaker 1: the balance sheet of let's say the average US consumer,

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Speaker 1: it's pretty good. The thing is is that the U

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Speaker 1: S consumers spending down pretty aggressively relative to the income

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Speaker 1: they're gaining. And that's that's not even looking at inflation, right,

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Speaker 1: So if you think, if they continue at this rate,

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Speaker 1: they're going to spend down their savings very early in

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Speaker 1: So I'm not sure that we can just count on

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Speaker 1: the US consumer being as robust as it has been.

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Speaker 1: And I think when you think that the US economy

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Speaker 1: is two thirds consumer and that consumers are really all

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Speaker 1: of us, we talk about consumers like they're this distant

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Speaker 1: group that you know, we don't know anything about. But

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Speaker 1: we're consumers, right, And when everything is on sale, that

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Speaker 1: causes most business owners and managers to be more cautious,

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Speaker 1: and so it has a ripple effect. Are you seeing

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Speaker 1: any of that, Yeah, I think you see it. The

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Speaker 1: initial things you see are just in how reluctant CFOs

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Speaker 1: are to give any kind of guidance they really even businesses.

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Speaker 1: So you know, I look at a lot of tech

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Speaker 1: and health care companies. These are businesses that have high

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Speaker 1: levels of recurring revenue, and even they are really struggling

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Speaker 1: to get confident about what their growth outlook is. We're

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Speaker 1: seeing some real high flyer businesses, you know, like a

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Speaker 1: UI pass that reported recently, you know, being very thoughtful

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Speaker 1: about taking down guidance and taking down expectations. And so

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Speaker 1: that's the first part that we all need to do

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Speaker 1: is to digest and bring that n down. So I

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Speaker 1: know that of late a lot of people have been

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Speaker 1: sort of throwing shade on the sixty portfolio mix, but

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Speaker 1: does it really now live to fight another day? When

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Speaker 1: you can get four percent on short data US government bonds,

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Speaker 1: it's almost paying you. It's it's setting you up to

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Speaker 1: take a bed on on on equity. Yeah, I think

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Speaker 1: it really is making it hard for the case to

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Speaker 1: be made for owning equity in what looks like, you know,

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Speaker 1: an increasingly looming recession. So you know, my heart goes

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Speaker 1: out to everyone who's trying to decide. And I think

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Speaker 1: what's really going to be interesting is for retail investors

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Speaker 1: who have got so jazzed about investing in the equity

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Speaker 1: markets and now they're really seeing the other side of

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Speaker 1: that volatility and how painful that could be. That's making

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Speaker 1: those you know, pretty high yields look very compelling and

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Speaker 1: so I wonder if the level of holdings inequities is

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Speaker 1: going to slip. It started too, and I wonder if

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Speaker 1: that will continue to happen and not as important implications

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Speaker 1: for us as professional managers, right because people who own

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Speaker 1: mutual funds are probably going to look at, you know,

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Speaker 1: lightening those positions, and so we need to be prepared

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Speaker 1: with cash. So, you know, I think overall it's something

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Speaker 1: it's something we all need to kind of keep in mind.

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Speaker 1: But for me, as an equity investor, I still think

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Speaker 1: that through a cycle it is the best place to be. Well, Judy,

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Speaker 1: you know, on top of that, let's look at sixty

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Speaker 1: should be sixty now in bonds and fourteen equities, you know,

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Speaker 1: I mean I think everyone who makes that case it

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Speaker 1: makes a lot of sense. But a lot of it

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Speaker 1: depends on your appetite for risk. I mean that's something

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Speaker 1: that we all learn when where a baby analysts that

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Speaker 1: has you and no one really understands what their appetite

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Speaker 1: for risk is until they actually lose a bunch of money,

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Speaker 1: and then it can look really quite different. Um. The

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Speaker 1: other thing that's really important is understanding your time horizon.

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Speaker 1: I'm really lucky to be you know, a professional investor

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Speaker 1: with a long time horizon, because that allows me the

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Speaker 1: confidence to buy things at a fair price rather than

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Speaker 1: having to wait and hope for a really really cheap price.

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Speaker 1: And you know, I think that is how you avoid

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Speaker 1: the biggest mistakes is waiting for things and missing the

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Speaker 1: boat completely. Let's talk a little bit about China. We

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Speaker 1: have this burgeoning property crisis there. Um. We had the

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Speaker 1: PBOC kind of lecturing the market yesterday touting it's plenty

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Speaker 1: of experience that it says it has in fending off

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Speaker 1: shocks and such. You know, I mean in the States,

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Speaker 1: the market participants say don't fight the FED. It's not

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Speaker 1: usually the FEDS that says don't fight us. But is

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Speaker 1: this a message from the PBOC that people should you know,

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Speaker 1: take to heart. Well, I mean, I think that the

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Speaker 1: the p BOC has a lot more latitude and a

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Speaker 1: lot more power than I think are FED. So you know,

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Speaker 1: in that way, I wouldn't be fighting against them. What's

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Speaker 1: difficult is that they're much more willing to move in

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Speaker 1: different directions quite quickly. You know, I think everyone is

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Speaker 1: frustrated that the FED waited as long as it did

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Speaker 1: here um to move, but The advantage of that is

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Speaker 1: you know, things are are not happening and not quite

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Speaker 1: as volatile as they are um in China, so that

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Speaker 1: you know, that's kind of a difference, and I think

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Speaker 1: it's an important one that we need to keep in mind. Well,

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Speaker 1: the fact that the FED was related to the game

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Speaker 1: and it was behind the curves when you put it,

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Speaker 1: does that mean that they are now more at risk

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Speaker 1: of a policy the error and perhaps over egging it. Yeah,

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Speaker 1: I think that part of it is. I think that's

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Speaker 1: happened within the last two weeks, is there is an

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Speaker 1: acceptance that this soft landing is possible. I just think

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Speaker 1: there is. We have to come to base facts that

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Speaker 1: that when we have inflation in high single digits, the

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Speaker 1: idea that we're and we have this giant balance sheet

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Speaker 1: that we still have to unwind, the idea that we're

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Speaker 1: going to be able to do that without an economic

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Speaker 1: impact seems pretty far fetched. So I I appreciate the

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Speaker 1: realism that's coming in there, But if I look to

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Speaker 1: the nineteen seventies or the double dip, I think it's

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Speaker 1: more important to squash the inflation. It has more important

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Speaker 1: implications long term than you know, a normal cycle and recession.

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Speaker 1: I mean we're due for one that makes sense. Yep,

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Speaker 1: very very quickly, fortune favors the liquid. Just que team

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Speaker 1: mean there's not much liquid liquidity out the very very

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Speaker 1: quickly came seconds there. I think there's still plenty of liquidity,

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Speaker 1: and I think for most investors there's a great time

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Speaker 1: to sell your lower quality and buy higher quality. Julie,

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Speaker 1: thank you so much for your time. Thank you, Julie Wilder,

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Speaker 1: portfolio manager and senior research channelist that Kane Anderson Rudnick.

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Speaker 1: This is Bloomberg