1 00:00:00,040 --> 00:00:02,080 Speaker 1: All right, let's get right to our guest, J. Paulowski, 2 00:00:02,200 --> 00:00:06,320 Speaker 1: founder and principle at T PW Advisory. J. There was 3 00:00:06,400 --> 00:00:09,720 Speaker 1: every opportunity today for the Bears to press the downside. 4 00:00:09,960 --> 00:00:13,119 Speaker 1: We didn't actually get that. Uh. We seem to be 5 00:00:13,200 --> 00:00:15,440 Speaker 1: in a in a sort of no man's land here 6 00:00:15,440 --> 00:00:18,600 Speaker 1: where you can make arguments for a break either direction, 7 00:00:19,040 --> 00:00:21,439 Speaker 1: and a lot depends on the eight pound gorilla in 8 00:00:21,440 --> 00:00:24,239 Speaker 1: the room. Jerome Powell on Friday, how do you see 9 00:00:24,280 --> 00:00:27,480 Speaker 1: this thing moving? Yeah? I think that's exactly right, Brian. 10 00:00:27,520 --> 00:00:29,880 Speaker 1: You set it up well. UK. We had had a 11 00:00:29,920 --> 00:00:33,040 Speaker 1: five percent fullback in both the NAS back in the 12 00:00:33,200 --> 00:00:35,479 Speaker 1: SMP over the last two or three days, so the 13 00:00:35,560 --> 00:00:39,479 Speaker 1: market has done a pretty good job of discounting Jackson Hole, 14 00:00:39,600 --> 00:00:42,400 Speaker 1: I think. And that's after a very healthy run up 15 00:00:43,120 --> 00:00:46,760 Speaker 1: into resistance the two hundred day moving average for the SMP. 16 00:00:47,840 --> 00:00:50,239 Speaker 1: I'm of the view that it could we could be 17 00:00:50,280 --> 00:00:52,040 Speaker 1: shaping up for a little bit of a sell. The 18 00:00:52,120 --> 00:00:55,240 Speaker 1: rumor by the news at Jackson Hall. I don't really 19 00:00:55,240 --> 00:00:59,560 Speaker 1: think Jeff was going to be particularly aggressive in his 20 00:00:59,640 --> 00:01:01,960 Speaker 1: language it. I think he's going to be a descripted talk. 21 00:01:02,040 --> 00:01:05,120 Speaker 1: He's going to be very straightforward. I think more importantly 22 00:01:05,240 --> 00:01:08,520 Speaker 1: as we moved past Jackson Hole is the whitelihood that 23 00:01:08,560 --> 00:01:12,640 Speaker 1: the Fed ends the aggressive front loading U seventy five 24 00:01:12,720 --> 00:01:16,760 Speaker 1: basis point heights in September, and that really sets the 25 00:01:16,800 --> 00:01:20,360 Speaker 1: stage for a rollover in the dollar, which in turn 26 00:01:20,440 --> 00:01:25,880 Speaker 1: sets the stage for non US cyclicals, commodities, emerging markets 27 00:01:25,920 --> 00:01:28,479 Speaker 1: to really start to perform. That's the set up as 28 00:01:28,520 --> 00:01:31,720 Speaker 1: we see it at TPW Advisory. All right, Jay, but 29 00:01:31,840 --> 00:01:34,160 Speaker 1: I mean just be can you be a bit more 30 00:01:34,200 --> 00:01:39,959 Speaker 1: granular on that? Sure? What would you like to what 31 00:01:40,120 --> 00:01:42,760 Speaker 1: in particular? You know, when you look at Europe, I 32 00:01:42,760 --> 00:01:45,720 Speaker 1: mean they're confronting all sorts of problems here and not 33 00:01:45,880 --> 00:01:48,320 Speaker 1: least possibly that they'll have no gas in in the 34 00:01:48,320 --> 00:01:51,880 Speaker 1: winter of Vladivia putin carries on. Yeah, No, I think 35 00:01:51,960 --> 00:01:55,120 Speaker 1: that's clearently a risk and the markets had to feel 36 00:01:55,320 --> 00:01:58,040 Speaker 1: deal with that for for months and um, you know, 37 00:01:58,080 --> 00:02:01,040 Speaker 1: we we talked about a shutdown of nord Stream one 38 00:02:01,320 --> 00:02:03,880 Speaker 1: uh some months ago for maintenance and now we're talking 39 00:02:03,880 --> 00:02:07,440 Speaker 1: about it again. I mean, the market there, I think 40 00:02:07,600 --> 00:02:10,919 Speaker 1: is in decent shape. Valuation is very compelling, the Euros 41 00:02:11,440 --> 00:02:14,200 Speaker 1: at parity, um, and we're a couple of months away 42 00:02:14,240 --> 00:02:18,359 Speaker 1: from moving past this energy issue right once we determined 43 00:02:18,440 --> 00:02:22,239 Speaker 1: storage levels for the winter. Uh, then all this goes away, 44 00:02:22,280 --> 00:02:24,640 Speaker 1: I think, or most of it goes away. And the 45 00:02:24,680 --> 00:02:27,959 Speaker 1: good news is is that the storage activity has been 46 00:02:28,360 --> 00:02:32,520 Speaker 1: at record highs. Germany has had an average inflow at 47 00:02:32,560 --> 00:02:36,000 Speaker 1: an all time high, and they've ahead of schedule for 48 00:02:36,560 --> 00:02:41,400 Speaker 1: reaching their storage. So you can see, Yeah, I we 49 00:02:41,480 --> 00:02:43,840 Speaker 1: get the point. You can see downward pressure on the 50 00:02:43,880 --> 00:02:47,120 Speaker 1: U S economy, UM, somewhat from what's happening in Europe, 51 00:02:47,160 --> 00:02:50,359 Speaker 1: I suppose. And then it's as we mentioned the uh, 52 00:02:50,360 --> 00:02:52,519 Speaker 1: you know, the big interest rate hikes from the Fed. 53 00:02:52,680 --> 00:02:55,280 Speaker 1: While slowing, they're still there. I wonder though if this 54 00:02:55,400 --> 00:02:59,520 Speaker 1: recent rally UM got your attention for a couple of things, 55 00:03:00,160 --> 00:03:05,320 Speaker 1: only the rebound off the lows, but then also the breadth. Yeah. No, 56 00:03:05,440 --> 00:03:07,799 Speaker 1: there are definitely reasons to be constructive, and we are 57 00:03:08,520 --> 00:03:12,520 Speaker 1: constructive on risk outs that were of the mindset that 58 00:03:12,600 --> 00:03:15,200 Speaker 1: this is not a two thousand and eight or two 59 00:03:15,200 --> 00:03:18,239 Speaker 1: thousand and one environment. It's more like a mid seventies, 60 00:03:18,600 --> 00:03:21,320 Speaker 1: mid eighties environment in terms of the high inflation, and 61 00:03:21,400 --> 00:03:25,919 Speaker 1: there the playbook is quite simple. Inflation peak, stocks bottom, 62 00:03:26,200 --> 00:03:28,640 Speaker 1: and we think we have in fact had the peak 63 00:03:28,639 --> 00:03:31,959 Speaker 1: and inflation, and we have had the mone and their 64 00:03:32,320 --> 00:03:36,520 Speaker 1: were constructive going forward. So we talked about how it's 65 00:03:36,560 --> 00:03:39,000 Speaker 1: a little bit indecisive at the moment. There's plenty of 66 00:03:39,240 --> 00:03:41,880 Speaker 1: arguments on the on the Barrys side, and there are 67 00:03:41,920 --> 00:03:44,360 Speaker 1: some on the on the bullish side too as well. 68 00:03:44,400 --> 00:03:48,480 Speaker 1: How likely, then, is it that the SMP trades sideways, 69 00:03:48,520 --> 00:03:53,280 Speaker 1: say between hundred and maybe forty two hundred, until you 70 00:03:53,320 --> 00:03:57,200 Speaker 1: get a clearer picture on what people are referring to 71 00:03:57,280 --> 00:04:01,960 Speaker 1: as peaks, the inflation peak and then the fed kishness peak. Well, 72 00:04:02,000 --> 00:04:06,119 Speaker 1: I think we've already passed the peak of Fed hawk business. Uh, 73 00:04:06,520 --> 00:04:09,160 Speaker 1: that was passed some time ago. I think when you 74 00:04:09,200 --> 00:04:12,680 Speaker 1: look at kind of how the bond market has repositioned 75 00:04:12,720 --> 00:04:14,920 Speaker 1: over the last you know, call it a couple of months, 76 00:04:14,920 --> 00:04:18,600 Speaker 1: I think that was really back in June. So to us, 77 00:04:19,160 --> 00:04:22,279 Speaker 1: it's not so much that the Fed is gonna raise rates. 78 00:04:22,360 --> 00:04:24,239 Speaker 1: I mean the market already has priced in a hundred 79 00:04:24,279 --> 00:04:27,279 Speaker 1: basis points of further raising. I mean we're really looking 80 00:04:27,320 --> 00:04:30,839 Speaker 1: for a by the rumor, sell the news Jackson hole, 81 00:04:30,920 --> 00:04:34,560 Speaker 1: so share Pow will not be any more hockeys than 82 00:04:34,560 --> 00:04:38,320 Speaker 1: he's already been for the Fed to finish its front 83 00:04:38,320 --> 00:04:42,680 Speaker 1: loading with the basis point hike in September, and for 84 00:04:42,760 --> 00:04:46,479 Speaker 1: the doll or once that peak and front loading has 85 00:04:46,520 --> 00:04:49,120 Speaker 1: been reached, for the dollar to start to roll over. 86 00:04:49,200 --> 00:04:52,240 Speaker 1: We really see the dollar as the key catalyst here 87 00:04:52,360 --> 00:04:56,360 Speaker 1: driving markets going forward. And with that dollar rollover, we 88 00:04:56,400 --> 00:04:59,080 Speaker 1: think it opens up a real opportunity, as I was 89 00:04:59,080 --> 00:05:04,719 Speaker 1: saying before, in commodities non US and in particular emerging markets. 90 00:05:04,720 --> 00:05:08,480 Speaker 1: So the emerging market spaces where we've been focusing our 91 00:05:08,520 --> 00:05:11,560 Speaker 1: attention over the last month or so, starting to add 92 00:05:11,960 --> 00:05:16,560 Speaker 1: both to debt in equity. Interesting, Jay, that you've just 93 00:05:16,920 --> 00:05:20,640 Speaker 1: been a Mexico city, of course, visiting a pension fund 94 00:05:20,760 --> 00:05:24,760 Speaker 1: that they have similar concerns as US investors, it would 95 00:05:24,800 --> 00:05:28,479 Speaker 1: seem as well, Yes, I mean very much so sad 96 00:05:28,560 --> 00:05:31,000 Speaker 1: they were. You know. The first question is, you know, 97 00:05:31,120 --> 00:05:33,359 Speaker 1: has the low been seen? And we talked about that 98 00:05:33,440 --> 00:05:35,800 Speaker 1: a minute or two ago. Low is our process, not 99 00:05:35,920 --> 00:05:39,000 Speaker 1: a point in time. We think with inflations peek back 100 00:05:39,040 --> 00:05:43,120 Speaker 1: in June, stocks bottomed as well. The second question was 101 00:05:43,480 --> 00:05:46,919 Speaker 1: the rate of inflations declined. We think there's potencial for 102 00:05:46,960 --> 00:05:51,159 Speaker 1: inflation decline faster than people think um in the US 103 00:05:51,240 --> 00:05:54,960 Speaker 1: as the transitory stuff fades away. You've already touched on 104 00:05:55,080 --> 00:05:58,599 Speaker 1: housing rolling over very quickly. In the labor market, we 105 00:05:58,680 --> 00:06:03,360 Speaker 1: think as its offense, that should ease concerns about hourly 106 00:06:03,440 --> 00:06:07,000 Speaker 1: earnings and in wage inflation. And then we look into 107 00:06:07,080 --> 00:06:10,360 Speaker 1: Europe as we touched on with the gas front, and 108 00:06:10,400 --> 00:06:14,360 Speaker 1: then Asia in particular China's ability to move out of lockdowns. 109 00:06:14,680 --> 00:06:17,800 Speaker 1: Those were the main issues. If we could talk about 110 00:06:17,920 --> 00:06:21,240 Speaker 1: China for a moment, it seems like you want depreciation 111 00:06:21,360 --> 00:06:25,680 Speaker 1: now might be a new effort to to sort of 112 00:06:25,680 --> 00:06:28,520 Speaker 1: get growth going again. I mean, they've they've tried limited 113 00:06:28,520 --> 00:06:32,320 Speaker 1: stimulus with limited effect. How weak do you see this 114 00:06:32,400 --> 00:06:35,960 Speaker 1: currency moving? Yeah, that's think that's that's a really good point, Brian. 115 00:06:36,000 --> 00:06:38,440 Speaker 1: I mean, we've been pretty constructive on China and that 116 00:06:38,680 --> 00:06:41,039 Speaker 1: has you know, that said its moments, but it's been 117 00:06:41,080 --> 00:06:46,599 Speaker 1: a challenge. Um we're looking for China to gradually grow 118 00:06:46,640 --> 00:06:49,839 Speaker 1: in the second half about four percent on the manualized basis. 119 00:06:50,160 --> 00:06:52,800 Speaker 1: We think it's a demand issue, not a supply issue, 120 00:06:53,120 --> 00:06:56,200 Speaker 1: and as they move further away from the lockdowns that 121 00:06:56,240 --> 00:06:59,320 Speaker 1: demand should come back. We do think China drawing a 122 00:06:59,360 --> 00:07:02,000 Speaker 1: line under the property sector. Over the last week or so, 123 00:07:02,480 --> 00:07:05,400 Speaker 1: both of rate cuts and a bailout fund is a 124 00:07:05,440 --> 00:07:08,760 Speaker 1: really important point and it's interesting to us. We have 125 00:07:08,839 --> 00:07:12,600 Speaker 1: a global multi asset model portfolio which has in it 126 00:07:13,160 --> 00:07:16,920 Speaker 1: an Asian high yield et F which itself consists of 127 00:07:16,920 --> 00:07:22,280 Speaker 1: about China real estate, and notwithstanding all the negative headlines 128 00:07:22,320 --> 00:07:25,520 Speaker 1: over the last week or so, that position has been 129 00:07:25,560 --> 00:07:28,920 Speaker 1: a top five performer for US out of about twenty 130 00:07:29,320 --> 00:07:32,840 Speaker 1: EPFs over the last two weeks, which suggests that all 131 00:07:32,880 --> 00:07:36,360 Speaker 1: the bad headline news is already in the price and 132 00:07:36,480 --> 00:07:39,800 Speaker 1: people are looking to start to position in these things 133 00:07:40,040 --> 00:07:44,800 Speaker 1: as China acts more aggressively to stabilize the property sector 134 00:07:44,840 --> 00:07:47,880 Speaker 1: in particular, Jay, always a pleasure, Thank you so much 135 00:07:47,920 --> 00:07:51,000 Speaker 1: for joining. Is the thoughts on the market.