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Speaker 1: Our guest is Terry Spath, ce Io at Zuma Wealth. Terry,

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Speaker 1: the market and companies can't really say it, but they

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Speaker 1: would seem to be screaming at the Fed you're going

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Speaker 1: too far, too fast, just like last year when you

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Speaker 1: went too far on hold. I don't think it's unfair

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Speaker 1: to say that investors are telling the Fed that they're acting, uh,

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Speaker 1: they're acting a little bit um as though they're incompetent. Hi,

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Speaker 1: Brian Hirishad, thanks for having me back. UM, I think

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Speaker 1: incompetent is it's a pretty tough word. However, I think

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Speaker 1: UM the Monday Morning quarterbacking that it's pretty easy to

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Speaker 1: do at this stage. Is it's pretty easy to point

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Speaker 1: a finger out the set and to say that they've

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Speaker 1: made a lot of mistakes, they were wrong. A year ago, UM,

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Speaker 1: we were in a very similar position in terms of

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Speaker 1: UM a lot of the economic data that was out there,

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Speaker 1: and they were pouring money into the US economy and

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Speaker 1: that's just a textbook macro econ one oh one. If

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Speaker 1: you do that, you're going to get inflation, and that

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Speaker 1: was allowed. You know, this is transitory, it's not going

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Speaker 1: to get out of control. And here we are a

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Speaker 1: year later and they're going a hundred miles an hour

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Speaker 1: on a on a wet road, slamming the brakes on inflation,

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Speaker 1: and I think that's injecting a lot of volatility. You know,

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Speaker 1: it's an institution that's supposed to be injecting calm um. Yeah,

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Speaker 1: I mean, I just could be and it's not. I

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Speaker 1: I think that we used to think of the FED

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Speaker 1: as a smoothing mechanism for the economy, cooling things when

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Speaker 1: it was too hot and warming them up when they're

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Speaker 1: too cold. Now they're the rod stoking the volatility they

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Speaker 1: do seem to be, and I think that's causing um.

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Speaker 1: I think that's a source of a lot of the problems,

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Speaker 1: not just in the US, but at other central banks.

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Speaker 1: They're creating volatility, not reducing it. And there and you

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Speaker 1: know in you know, one thing in fairness to the

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Speaker 1: FAT is that their data driven. But they're looking at

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Speaker 1: you know, backwards racing data, and they're they're not giving

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Speaker 1: the sort of guidance that I think the market um

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Speaker 1: wants right now, which is that, hey, that we're in

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Speaker 1: a pretty unusual situation. Inflation is really hot, but when

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Speaker 1: you're slamming on the brakes like this. When we have

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Speaker 1: inventories like they are, you know, it's it's quite possible

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Speaker 1: that inflation is going to come in much more quickly

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Speaker 1: than is expected. And I think that disconnect between the

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Speaker 1: Fed and what the markets are saying is making a

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Speaker 1: lot of investors very uncomfortable with with what the outcome

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Speaker 1: is going to be. But well, given the rapidity of

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Speaker 1: how they try to correct this by going really big

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Speaker 1: with these three jumbo rate hids that we've had, of course,

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Speaker 1: then raises the possibility that they're trying to restore credibility.

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Speaker 1: It's the cost of perhaps a deeper recession that's needed,

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Speaker 1: and secondly, I guess the cost of actually losing their credibility.

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Speaker 1: I suppose yeah, yeah. I mean every time I think

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Speaker 1: the Fed's got some credibility back, it does seem like

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Speaker 1: they've lost it. And I think these recent moves are

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Speaker 1: certainly going to do that. If anything, the risk is

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Speaker 1: that they keep tightening when they don't need to be

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Speaker 1: tightening any longer. And I think, um, if anything, if

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Speaker 1: we see the FED kind of not take such a

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Speaker 1: hawkish approach and be a little bit more sensitive to

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Speaker 1: current conditions versus just backward looking that could be a

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Speaker 1: surprise to the upside. So we'll see, you know, when

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Speaker 1: when you look at what's happening out there, sixty forty

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Speaker 1: going out the window. And I've often make this sort

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Speaker 1: of joke that maps, you know, you go sixty bonds

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Speaker 1: and forty into equities the other way around in the woods,

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Speaker 1: what how are you doing in terms of your split?

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Speaker 1: And it must be really very difficult to try and

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Speaker 1: pick out then seek the wood from the chaff. Yes,

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Speaker 1: very good question, and it's exactly what we're wrestling with

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Speaker 1: with our clients. The sixty forty, though, is something that

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Speaker 1: I've been talking about is just it's dead. And the

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Speaker 1: reason I used to say was dead is just because

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Speaker 1: the the forty part that goes to bonds has been

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Speaker 1: just dead money. It's gotten even worse for bonds is

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Speaker 1: now it's not just dead money, it's it's losing money.

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Speaker 1: They're having their worst year for bonds. Um. You know,

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Speaker 1: since I don't even know when, it's rare, if ever,

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Speaker 1: to see double digit losses and bonds in one calendar year.

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Speaker 1: But we're also seeing these huge problems um and stops.

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Speaker 1: It's really difficult to make a bowl case, right now

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Speaker 1: for risk on because of the recency bias of so

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Speaker 1: much bad news and so much bloodshed right now. So

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Speaker 1: what we've got for clients is um a little bit

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Speaker 1: different allocation. We're putting money actually into very short term

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Speaker 1: to build laddering them over the next twelve months. We

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Speaker 1: can earn mid single digit, low single digit I should

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Speaker 1: say returns on that. And as far as we're concerned,

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Speaker 1: you know, a little bit up is the new up.

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Speaker 1: Flat is the new up. Not losing money is the

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Speaker 1: new up in this in this very short term environment

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Speaker 1: that we're in. Yeah, I think, you know, with with

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Speaker 1: the looking at the FED and trying to justify what

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Speaker 1: they're doing, you know, they're trying to channel vulgar But

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Speaker 1: the difference between the seventies yet a whole decade of inflation.

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Speaker 1: We've had it for a little more than a year now,

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Speaker 1: and that's why I think some people in the market

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Speaker 1: it's not my opinion, but people this is what you

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Speaker 1: hear is that people think the FED has gone too far.

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Speaker 1: Would you like to see the Fed take a more

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Speaker 1: patient approach, maybe to slowly Like I mentioned that the

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Speaker 1: r b A was going to this is probably the

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Speaker 1: last big rate height that they'll do and then they'll

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Speaker 1: move to like twenty five basis points. That's what both

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Speaker 1: traders and and economists think. Would you like to see

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Speaker 1: that from the Fed? Or do you like this aggressive push? No,

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Speaker 1: I don't like this aggressive push. And I'm not the

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Speaker 1: only one that doesn't like this aggressive push. The Feed

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Speaker 1: is being extremely hawkish. And the and the worry that

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Speaker 1: markets have is that they're just gonna keep being the

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Speaker 1: bull in a in a China shop. Um, when it's

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Speaker 1: not necessary anymore. We're gonna see other factors that are

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Speaker 1: going to pull inflation in. It doesn't need to be

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Speaker 1: the Fed, you know, hatcheting up interest rates as fast

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Speaker 1: as they say they want to. We've got inventories that

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Speaker 1: are piling up. That's gonna you know, unline noose is

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Speaker 1: going to help on the on the inflationary front um.

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Speaker 1: You know, things like that are certainly going to its

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Speaker 1: strengthen the dollar. It's another thing that's going to kind

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Speaker 1: of pull in inflation without the fed's help. And so

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Speaker 1: we don't need to be as aggressive on the FED.

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Speaker 1: I think the risk in fact, if there's good news

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Speaker 1: I could I could present to you and your audience

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Speaker 1: and that I believe is that you know that the

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Speaker 1: FED is done by the end of this year in

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Speaker 1: terms of raising rates because a lot of these other

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Speaker 1: factors are going to come into play and pull in

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Speaker 1: rain in inflation, rain in demand, and they're not going

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Speaker 1: to need to keep pushing rates up through a lot

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Speaker 1: of three. And I think that UM shift to a

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Speaker 1: dobbish stance UM, that perception of it, at least, will

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Speaker 1: UM will serve as a bit of a tail wind

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Speaker 1: for risk on assets. Yeah. I mean the way that

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Speaker 1: twos intends have inverted, it just is quite it's so

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Speaker 1: deep that inversion at times when it has been so deep,

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Speaker 1: if anything is not screaming, there's gonna be recess. To

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Speaker 1: the point is how much of a slowdown is a

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Speaker 1: FED reserve really really prepared to put up with one

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Speaker 1: part of the question. A lot of what they've been

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Speaker 1: doing seems to be posturing too, right, Yeah, so too

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Speaker 1: some sometimes inverted are you know the fail safe signal

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Speaker 1: recessions on the horizon if we're not already in one.

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Speaker 1: And I think that the question is is you know

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Speaker 1: how bad of a recession? This is not a two

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Speaker 1: thousand eight you know, financial global crisis where we could

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Speaker 1: see total collapse. This is not even a COVID shut

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Speaker 1: down the whole world economic collapse. This is a cold

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Speaker 1: versus you know, versus COVID. And for those reasons, I

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Speaker 1: don't think that the FED needs to be as aggressive,

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Speaker 1: and I think that we could be seeing a bit

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Speaker 1: of an overreaction in both the bond market as well

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Speaker 1: as the stock market. Terry, that's all we got time for,

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Speaker 1: But thank you so much for joining us, Terry Spat.

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Speaker 1: There Ce I owe at assume of wealth getting her

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Speaker 1: latest on the markets.