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Speaker 1: Let's get to Carol Shchlife. Our guest. Carol is the

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Speaker 1: chief investment officer at BMO Family Office, on the line

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Speaker 1: from Atlanta. Three updates for the equity market. Looks like

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Speaker 1: that trend is going to be broken tomorrow when we open.

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Speaker 1: I'm looking at the mini futures for the nastac on

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Speaker 1: two Microsoft Google Texas instruments. All disappointing. How do you

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Speaker 1: make sense of this, Carol? Yeah, don't you hate those

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Speaker 1: after the closed reports? Do it during the day so

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Speaker 1: we have a chance to respond to it. But um,

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Speaker 1: I think a piece of it is is it's really

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Speaker 1: important to remember that text spending overall is up dramatically

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Speaker 1: through the pandemic, and so you're over a year, you're

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Speaker 1: bound to have some leveling off in some of those

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Speaker 1: pandemic related spends. And actually, if you're taking it from

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Speaker 1: a macro standpoint, the fact that Corporate America is being

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Speaker 1: pretty circumspect and trying to figure out, let's level off

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Speaker 1: the spending a bit and hunker down just in case

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Speaker 1: things flatten out here. The resiliency of Corporate America, the

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Speaker 1: way they're showing that is actually a pretty positive sign

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Speaker 1: as opposed to just continuing to spend. I think they're

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Speaker 1: being very strategic about where the spend is. But yeah,

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Speaker 1: it's it's worth and there's there's no lack of things

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Speaker 1: to fret about in this economy. Really, at the end

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Speaker 1: of the day, Carol, was it the case that during

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Speaker 1: the pandemic, what happened was that the consumer essentially spent

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Speaker 1: a lot on technology include of course semis in this

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Speaker 1: they actually borrowed growth from the future, and that's what

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Speaker 1: we're seeing. Well, I think it's not only the consumer,

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Speaker 1: but corporates did too, because when you think about the

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Speaker 1: quantity of us, you know, some of us worked remotely

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Speaker 1: or worked from different places, but all of us did

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Speaker 1: in the pandemic, and corporations had to ship extra monitors,

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Speaker 1: they had to ship computers, they had to get you know,

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Speaker 1: anybody who didn't have to be on the front line

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Speaker 1: was getting outfitted for remote work. And so corporation spent

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Speaker 1: a whole lot in the last two or three years

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Speaker 1: to so leveling out some of that kind of spending,

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Speaker 1: especially if you're going to level out your employment spend,

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Speaker 1: is is natural and so is to your point, consumers,

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Speaker 1: because we outfitted all our kids to be able to

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Speaker 1: school from home, and now we're putting them back in

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Speaker 1: the classroom. How concerned to you about a recession, Carl,

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Speaker 1: I'm not sure asking recession or not is the operative

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Speaker 1: word in or the operative phrase, because if we do

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Speaker 1: have one, I'm not sure it necessarily predicts more declines

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Speaker 1: in the markets per se, because it's very tough to

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Speaker 1: do a direct correlation between the economy going one direction

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Speaker 1: and then the markets because keep in mind, the S

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Speaker 1: and P is part of the leading economic indicators, not

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Speaker 1: the coincident or trailing indicators. And so I think the

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Speaker 1: issue is is if we have one, how deep does

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Speaker 1: it get, how broad spread does it get? Does it impact?

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Speaker 1: Most importantly, how badly does it impact employment? Because those

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Speaker 1: are the things to look at. I think the bigger

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Speaker 1: question is what set of factors do we have to

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Speaker 1: have in place before the FED finds an off ramp

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Speaker 1: from raising rates as aggressively as they have. So I

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Speaker 1: think that's the piece to watch, because we want to

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Speaker 1: make sure that the FED doesn't raise too aggressively for

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Speaker 1: too long and then force a very deep recession. Yeah,

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Speaker 1: on Thursday, we get data on personal consumption adjusted for inflation.

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Speaker 1: I think the reading Reading is expected to show growth

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Speaker 1: at a mere one percent annualized for Q three. That

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Speaker 1: would be the weakest for quite some time, and I

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Speaker 1: think about half of what we saw in the previous quarter.

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Speaker 1: Talk to me about what you're seeing in the bond

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Speaker 1: market right now. We know some of the data that

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Speaker 1: we had today was soft. But we've heard so much

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Speaker 1: about this liquidity crisis or a potential liquidity crisis in

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Speaker 1: the treasury market and yelling yesterday the Treasury Secretary suggesting

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Speaker 1: the potential for some type of buy back of a

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Speaker 1: certain US government securities to mitigate the problem. Here are

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Speaker 1: you concerned when you look at the price action in

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Speaker 1: the bond market? Is it at all distressing to you?

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Speaker 1: It's it's worth watching and watching carefully because there were signs,

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Speaker 1: for example, in oh eight oh nine, there were signs

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Speaker 1: in the short term credit markets early on that they

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Speaker 1: were starting to seize up and not function. And I

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Speaker 1: think the government is very much aware of that and

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Speaker 1: wants to ensure that that doesn't happen, and we'll do.

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Speaker 1: You know, they've gotten really creative over the last ten

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Speaker 1: or fifteen years with how they're managing um different bits

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Speaker 1: of monetary policy. To try to ensure that we have

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Speaker 1: liquidity in the system, because that's a key function that

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Speaker 1: the Treasury and the Fed plays, is the confidence in

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Speaker 1: that system. So we're watching it carefully. You have seen

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Speaker 1: spreads in the risk here bonds not blow out, but

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Speaker 1: they've widened them. So it's it's well worth watching and

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Speaker 1: then just watching what global investors do relative to It's

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Speaker 1: a different scenario buying US bonds when the dollars were strong. Well,

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Speaker 1: that's one of the things, isn't it. Certainly in liquidity

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Speaker 1: like it not is going to be challenged, and you know,

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Speaker 1: it's just also certainly down to the sheer size of

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Speaker 1: the treasury market, the biggest in the world. I mean,

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Speaker 1: US government outstanding issuance is almost double since I think

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Speaker 1: it's quadruple since two thousand and seven, and the market

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Speaker 1: growth there's significantly out the growth outpace the growth that

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Speaker 1: we've been seeing in bank capital as well since the GFC. Well,

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Speaker 1: i mean, the upset to some of it in here

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Speaker 1: might be that you've got a lot of investors. If

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Speaker 1: markets stay volatile like we expect that they will and

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Speaker 1: largely raised bond range bond stock markets, you could see

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Speaker 1: investors increasingly say well, I'll take a four percent yield

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Speaker 1: on a ten yuere and lock it up, or I'll

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Speaker 1: take up three and a half percent yield on a

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Speaker 1: shorter bond and lock it up. So to the extent

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Speaker 1: you have more individual investor interest in that, especially if

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Speaker 1: inflation starts coming down, because right now you're losing money

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Speaker 1: or you're losing purchasing power relative to inflation to lock

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Speaker 1: up three or four percent when inflation is running eight

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Speaker 1: inflation starts taming. And then the other factor I think

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Speaker 1: you could see is, you know, right now the FEDS

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Speaker 1: announced some pretty aggressive quantitative tightening, and maybe they slow

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Speaker 1: that down the rate of that if they were to

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Speaker 1: see too much distress in the bond market. So I

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Speaker 1: think there's a lot of people watching it and traversing

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Speaker 1: very carefully to make sure that we don't have more

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Speaker 1: disruption there than we need. Carol, thank you so much

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Speaker 1: for joining is great having on the program as of

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Speaker 1: a Carrish life, the chief investment officer at BMO Family Office,

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Speaker 1: getting her take on the markets