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Speaker 1: Nine and a half minutes past the is Let's get

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Speaker 1: to Paul Christopher, head of Global market Strategy at Wells

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Speaker 1: Fargo Investment Institute. Paul, So, we just detailed there the Microsoft,

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Speaker 1: Alphabet and Texas Instruments earnings, and they're all down pretty

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Speaker 1: heavily after the bill. In your view, how strongly does

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Speaker 1: that change the perception that the earnings have actually been, uh,

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Speaker 1: not as bad as feared. Well, the bar was pretty

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Speaker 1: low in the first place, right, everybody's been expecting earnings

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Speaker 1: at some point fall off the table as the economy

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Speaker 1: rolls over and the dollars strength has really been a

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Speaker 1: has a strong head wind protect But but overall, we

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Speaker 1: have to say, in the early going, it looks like

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Speaker 1: earnings have beaten that lower bar, and that's part of

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Speaker 1: the reason why I've seen that rally here recently. Not

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Speaker 1: sure how long that riley lasts, but the licensee earnings

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Speaker 1: coming in strong at least the first but surely at

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Speaker 1: the end of the day, because it's will been about

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Speaker 1: what they've been saying looking to the future and what

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Speaker 1: have they been saying. Yeah, what they've been saying is

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Speaker 1: that you're going to start to see earnings come off,

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Speaker 1: you're gonna start to see even before the earnings themselves,

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Speaker 1: guidance will start to turn lower as we head further

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Speaker 1: and further into three. We do expect a recession here

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Speaker 1: in the first half of the year, and so we

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Speaker 1: are in that camp as well. So is this the

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Speaker 1: type of environment where you hunker down here and what

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Speaker 1: do you do to do? So you know, we've been

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Speaker 1: talking since February about quality, and we still think their

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Speaker 1: quality sectors out there. We like energy, it generates a

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Speaker 1: lot of cash One are the few sectors of the

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Speaker 1: SMP that has generated net positive cash flow this year.

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Speaker 1: Healthcare we think is one that's got good organic growth

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Speaker 1: prospects for the future. And we also like tech here.

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Speaker 1: Uh yeah, there's been a lot of selling, you could

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Speaker 1: say a lot of bloodshed, but we still think it's

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Speaker 1: a quality sector going forward, one that as a dollar

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Speaker 1: comes off next year, we think we'll f you'll start

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Speaker 1: to see a strong rebound there. If the market's going

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Speaker 1: to rebound, it's going to have to have tech behind it.

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Speaker 1: So we like those three areas quality would be. We

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Speaker 1: think the way to go not so much hunkering down

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Speaker 1: as far as defenses. Tell me something here a pool.

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Speaker 1: Does the treasury market worry you? And does liquidity where

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Speaker 1: you as well? And I asked this question as simply

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Speaker 1: as we had the janet Yellen saying that admitting to

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Speaker 1: the publish, she's worried about a loss of adequate liquidity

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Speaker 1: if o't on the fourteenth of the month, her staff

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Speaker 1: went out and asked the tb a C, the Treasury

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Speaker 1: Bond Auction Committee, if they should start buying less liquid

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Speaker 1: treasuries to prevent them freezing up. And recently, of course,

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Speaker 1: rug and Rogen and Vera said that qut and this

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Speaker 1: is immense diplomacy is not likely to be an entirely

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Speaker 1: benign process. Yeah, that's right, And liquidity is an issue

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Speaker 1: all around the world and in the United States here

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Speaker 1: as well. We would be much more worried about liquidity

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Speaker 1: if we thought inflation was going to continue to rise.

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Speaker 1: That would that would tend to leave lots of upward

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Speaker 1: room for bond heels to rise further and lots more

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Speaker 1: selling that would do decrease liquidity. We would also be

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Speaker 1: worried if the dollar strengthens a lot more forces international

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Speaker 1: central banks to uh to sort of sell their currencies

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Speaker 1: to buy dollars uh, and that might end up reducing

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Speaker 1: their reserves of treasuries as well, so more selling there.

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Speaker 1: But I think I think both of those trends might

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Speaker 1: be coming near to their peaks. Not quite there yet,

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Speaker 1: but we'll have to see. Especially the action the treasury

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Speaker 1: market today was encouraging that that we you know, as

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Speaker 1: the economic data rolls over, you might start to see

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Speaker 1: some bid for treasuries that will put some money back

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Speaker 1: into that market. Maybe liquidity starts to to turn more

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Speaker 1: to the positives. It would seem kind of awkward having

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Speaker 1: the Treasury buy back treasuries, I mean the U. S.

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Speaker 1: Treasury Department buy back treasuries to improve liquidity. Would it

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Speaker 1: be simpler if the Fed were to just slow down

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Speaker 1: QT They could do that. What we've seen from the Fed, though,

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Speaker 1: especially since August is a real commitment to to break inflation.

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Speaker 1: We need to see more of a of a peak,

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Speaker 1: more evidence of a peak and services inflation upcoming the

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Speaker 1: next month or two for the Fed to start to

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Speaker 1: feel more comfortable doing something like that. And well, let's

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Speaker 1: having a good to what we have coming out on

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Speaker 1: the day after tomorrow YO time. G d P hadboard

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Speaker 1: is going to be what are you looking at for

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Speaker 1: and if you go into a deep dive in the data,

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Speaker 1: what will you try to find out? Yeah, I mean

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Speaker 1: it's it's like the first place for for investors. This

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Speaker 1: is all very stale, very old data. So we're looking

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Speaker 1: at third quarters somewhere in the two's for for growth

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Speaker 1: in the US. Uh, not a big surprise there. It

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Speaker 1: was a pretty strong quarter actually a lot of activities,

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Speaker 1: especially in services. What's more important is how quickly that

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Speaker 1: activity slows down here in the fourth quarter. We think

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Speaker 1: the recession actually begins in the fourth quarter, goes into

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Speaker 1: the middle part of next year. So what'll be interesting

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Speaker 1: to see is how much weakness you see in things

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Speaker 1: like real retail sales, real final sales in the third quarter.

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Speaker 1: How strong were those really after you account for inflation. Yeah,

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Speaker 1: the housing data was weaken Uh. I think when you

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Speaker 1: get into that market, you can really see that the

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Speaker 1: higher rates are are definitely playing a very big role

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Speaker 1: um time constraints here. So we won't go further on that.

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Speaker 1: I wanted to ask you about China. We did have

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Speaker 1: sock Gen strategists out saying that China deserves higher risk premium.

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Speaker 1: Now the essential point being that a lot more focus

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Speaker 1: is being put on national security. Is China down enough

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Speaker 1: for you to be interested? And what are your thoughts there?

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Speaker 1: Not quite down enough yet? We think they do avoid recession,

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Speaker 1: but the uh well really need to see more from

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Speaker 1: the economic conference that takes place in December. How much

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Speaker 1: are they going to do to take zero COVID policies

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Speaker 1: off the table? What are they going to do for

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Speaker 1: the property market here to get that restarted and protect

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Speaker 1: those debtors that developing companies development companies. A little too

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Speaker 1: soon to tell on China, but tell me something for

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Speaker 1: what I mean, you know, after that speech Jing being

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Speaker 1: and you know his pronouncements before, China is certainly turning

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Speaker 1: inwood even though they say that they need they have

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Speaker 1: a need to open up. I mean, is it investable anymore?

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Speaker 1: That's going to be difficult. But you know, one of

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Speaker 1: the things that has always been true of China throughout

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Speaker 1: here is that when they need a foreign capital, when

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Speaker 1: they need foreign technology in particular for a particular reason,

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Speaker 1: development reason, then they let that capital in. And I

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Speaker 1: think you're going to see more need for China to

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Speaker 1: end up having to import by Western expertise and healthcare

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Speaker 1: and agriculture and pollution abatement and control, and I think

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Speaker 1: there's going to be room for multinationals to take take

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Speaker 1: that role in the US. Thank you. Paul Christopher, the

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Speaker 1: head of Global Market Strategy at the Wells FuG Investment Institute,