WEBVTT - Stock Market Gets Ironic 0:00:13.920 --> 0:00:17.680 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:18.200 --> 0:00:20.400 My name is Mike Reagan. I'm a senior editor at 0:00:20.400 --> 0:00:24.480 Bloomberg and HUMBLDNNA higher across Acid reporter with Bloomberk and 0:00:24.640 --> 0:00:27.000 this week on the show, well, we've got some bad 0:00:27.040 --> 0:00:30.520 news for you. We're come to think of it, maybe 0:00:30.560 --> 0:00:33.600 it's actually good news. It's hard to tell these days 0:00:33.640 --> 0:00:35.720 if you have your eyes on the market, since we're 0:00:35.720 --> 0:00:38.960 back in an upside down world where strong economic reports 0:00:39.000 --> 0:00:41.800 can cause stocks to drop on concerns that they will 0:00:41.840 --> 0:00:45.080 make the Federal Reserve maintain its aggressive efforts to tame 0:00:45.120 --> 0:00:49.520 inflation through interest rate increases. But it's definitely good news 0:00:49.520 --> 0:00:51.880 that we have a global market strategist at a major 0:00:51.920 --> 0:00:55.240 firm here to help unpack it all for us. But first, Viltano, 0:00:55.280 --> 0:00:57.280 before we get to the guest, I have to ask, 0:00:57.280 --> 0:00:59.680 how was your trip to London? It was really fun 0:00:59.720 --> 0:01:02.400 and I want to thank all of the cross acid 0:01:02.440 --> 0:01:06.200 reporters and editors over in London who were so so 0:01:06.280 --> 0:01:08.600 nice to me and welcome me and we went out 0:01:08.600 --> 0:01:11.600 for drinks and had a really good time. Oh that's good. 0:01:11.360 --> 0:01:14.880 Did did uh? Did they all join your professional network 0:01:14.920 --> 0:01:20.280 on LinkedIn. Yeah, I'm friends with all of them on LinkedIn. Yeah, yeah, yeah, Yeah, 0:01:20.280 --> 0:01:22.640 you've got quite a following on LinkedIn. Yeah. I think 0:01:23.080 --> 0:01:27.080 it's a small type, tight knit group of maybe like 0:01:27.319 --> 0:01:30.040 three thousand people or so, I would say. Yeah, Yet 0:01:30.200 --> 0:01:34.160 I am not yet up to snop to join your 0:01:34.840 --> 0:01:40.399 professional network on LinkedIn? Is that me, the one who's 0:01:40.560 --> 0:01:44.840 edited how many of your stories as a podcast guest's 0:01:45.040 --> 0:01:47.319 even a big LinkedIn guy? I can't even believe I 0:01:47.400 --> 0:01:50.200 actually I'm going to send my request to be in 0:01:50.240 --> 0:01:53.600 your professional network. I wasn't gonna. I think I'm not 0:01:53.640 --> 0:01:55.400 even sure I did it on purpose. I think it 0:01:55.480 --> 0:01:59.640 was like a butt dial. I'm sure rarely on LinkedIn. 0:02:00.120 --> 0:02:02.120 I feel like if you're on LinkedIn, you're looking for 0:02:02.160 --> 0:02:04.280 a job. I don't want my employers to think I'm 0:02:04.280 --> 0:02:08.120 out there looking for a job. And somehow the fact 0:02:08.120 --> 0:02:11.320 that I'm not in your professional network on LinkedIn, I 0:02:11.360 --> 0:02:13.320 don't you think it probably bothers me. It does not 0:02:13.760 --> 0:02:17.600 bother me. I'm going to resend my requestsional I don't 0:02:18.840 --> 0:02:21.840 work on LinkedIn. Yeah no, And you're not welcoming it, 0:02:21.919 --> 0:02:25.520 to be honest, because if for listeners who aren't familiar 0:02:25.560 --> 0:02:28.560 with this. Mike tweeted about this. He called me out. 0:02:28.960 --> 0:02:31.760 I hadn't accepted his friend Is it a friend request? 0:02:31.800 --> 0:02:35.160 I don't know what do they call it on It's 0:02:35.280 --> 0:02:37.800 request to be a member of your professional yes, exactly, 0:02:37.840 --> 0:02:40.120 And and I didn't accept it. And you know what, 0:02:40.280 --> 0:02:42.400 now that you called me out, I'm not going to 0:02:42.480 --> 0:02:46.240 do it. I m dumb. I'm dumbfounded by this. I 0:02:46.280 --> 0:02:49.840 am dumbfounded by this. I will get my revenge on somehow. 0:02:50.520 --> 0:02:53.160 You will find out. I imagine this week's guest is 0:02:53.200 --> 0:02:55.840 a member of your professional note. Oh yeah, for sure. No, 0:02:56.000 --> 0:02:58.960 we've been friends for a really long time. No, but 0:02:59.000 --> 0:03:00.560 I do, I do want to bring it. Bring him in. 0:03:00.600 --> 0:03:04.480 It's Anthony Saglane Benny. He's the global market strategist at 0:03:04.560 --> 0:03:08.480 amery Prise Financial. Anthony, welcome to the show. Welcome to 0:03:08.480 --> 0:03:11.959 the podcast, and welcome to my my LinkedIn network. Yeah, 0:03:12.320 --> 0:03:15.320 thanks thanks for having me. Uh, Like Mike, my my 0:03:15.520 --> 0:03:18.239 LinkedIn network is not nearly as big as yours. So 0:03:18.600 --> 0:03:20.880 for somebody who says they're not, they don't know what 0:03:21.000 --> 0:03:25.320 to do on LinkedIn. It's a little suspicious. It's a 0:03:25.360 --> 0:03:28.560 little suspicious. Keep calling me out. I'm just gonna send 0:03:28.560 --> 0:03:32.840 all I'm gonna decline all of those. Yeah. Yeah, but uh, Anthony, 0:03:32.880 --> 0:03:35.360 maybe just to start you can you send us a 0:03:35.400 --> 0:03:38.560 couple of notes right before we started the podcast, and 0:03:38.600 --> 0:03:40.720 you said that we are entering a good news is 0:03:40.840 --> 0:03:43.040 bad news market and I wanted to ask you why 0:03:43.360 --> 0:03:44.800 that is and if you could just sort of lay 0:03:44.880 --> 0:03:47.320 that up for us. Yeah. Yeah, I mean, I think 0:03:47.320 --> 0:03:49.920 over the last couple of weeks, the markets have really 0:03:50.480 --> 0:03:53.880 kind of settled into this idea um of of a, 0:03:54.360 --> 0:03:56.920 you know, are we headed for a recession? And then 0:03:57.040 --> 0:04:00.600 be is it going to be prompted by the Fed 0:04:00.760 --> 0:04:04.560 raising interest rates too aggressively? And so what I mean 0:04:04.640 --> 0:04:07.920 by a good news is bad news type of market 0:04:08.040 --> 0:04:12.920 environment is the hotter that economic news comes in versus 0:04:13.000 --> 0:04:17.080 expectations kind of implies that maybe the Fed will need 0:04:17.120 --> 0:04:20.600 to continue to raise interest rates more aggressively. And so 0:04:20.680 --> 0:04:23.400 you saw so a little bit of that in the 0:04:23.520 --> 0:04:27.880 reaction on the May employment report on Friday, where you know, 0:04:27.920 --> 0:04:33.279 we created three jobs in May, unemployment rate held steady 0:04:33.279 --> 0:04:36.520 at three point six percent for for the third straight month. 0:04:36.839 --> 0:04:41.200 By all accounts, the employment backdrop is very strong. Um. 0:04:41.240 --> 0:04:44.200 But on top of that, those numbers came in above 0:04:44.360 --> 0:04:48.320 the three three thousand that was expected in the markets 0:04:48.400 --> 0:04:52.039 declined because that the idea is is that as long 0:04:52.080 --> 0:04:55.400 as the labor market remains strong, as long as economic 0:04:55.480 --> 0:04:59.320 activity is moving above what I think in census an 0:04:59.839 --> 0:05:03.159 I estimates are, it implies that the Fed may have 0:05:03.240 --> 0:05:06.080 to raise interest rates more aggressively. And so I think 0:05:06.160 --> 0:05:08.159 as we move through the couple of the next couple 0:05:08.200 --> 0:05:11.039 of weeks and a couple of months, um data that 0:05:11.120 --> 0:05:13.800 comes in hotter than expected, you would expect that the 0:05:13.839 --> 0:05:18.039 market would greet that more negatively, and then data that 0:05:18.120 --> 0:05:21.200 comes in a little bit weaker but not too weak 0:05:21.600 --> 0:05:26.039 would be greeted positively. That we call it this goldilocks 0:05:26.200 --> 0:05:30.039 kind of scenario where economic momentum is declining but not 0:05:30.320 --> 0:05:33.919 so much that fears of a recession start to set in. 0:05:34.240 --> 0:05:36.520 I think it's a tall order, but um, I think 0:05:36.560 --> 0:05:38.720 that's where we are in the market environment right now. 0:05:38.960 --> 0:05:40.919 You know, I think the question on a lot of 0:05:40.960 --> 0:05:44.680 people's minds is a there's there's a lot of sort 0:05:44.720 --> 0:05:47.839 of wishful thinking and fingers being crossed all over Wall 0:05:47.880 --> 0:05:51.039 Street that inflation may have peaked, that we may have 0:05:51.080 --> 0:05:53.680 seen the worst of it. But it raises the question 0:05:53.720 --> 0:05:56.520 of well, what's next, and you know, how low does 0:05:56.560 --> 0:05:59.440 it have to go for the Fed to be um 0:05:59.480 --> 0:06:02.200 if not completely done with raising interest rates, at least 0:06:02.440 --> 0:06:04.919 to your point, be a little less aggressive and maybe 0:06:04.920 --> 0:06:09.479 switch back to basis point increases, which some are hoping 0:06:09.560 --> 0:06:12.600 for maybe in the fall. So I'm wondering how you're 0:06:12.680 --> 0:06:16.040 thinking about that, is is a slow, steady grind lower 0:06:16.640 --> 0:06:19.720 in inflation in the cards? Do you think or NFL 0:06:19.880 --> 0:06:23.919 is that? Is that enough to cause the Fed to 0:06:24.040 --> 0:06:28.960 dial it back to basis point increases? Yeah? Uh, you know, 0:06:29.120 --> 0:06:31.240 I think that's it's kind of a loaded question because 0:06:31.320 --> 0:06:33.200 I think it depends on where you're looking at when 0:06:33.240 --> 0:06:37.200 you're talking about inflation. So our view is that yes, 0:06:37.440 --> 0:06:41.240 inflation has likely peaked. When you look at break even spreads, UM, 0:06:41.360 --> 0:06:44.240 you look out two or three years, the bond market 0:06:44.279 --> 0:06:47.640 is telling you that that inflation like likely peaked. However, 0:06:48.080 --> 0:06:49.840 you know, does it really make a difference to a 0:06:49.839 --> 0:06:53.600 consumer if you know, and the CPI number goes from 0:06:53.640 --> 0:06:56.799 eight point five percent in March to say eight point 0:06:56.839 --> 0:07:00.719 two percent in May, um employee, and it's still high. 0:07:01.040 --> 0:07:03.640 Prices at the pump and food are still high, and 0:07:03.680 --> 0:07:07.880 those those parts of inflation are likely to linger longer, 0:07:08.400 --> 0:07:11.600 and so I I think there will be a gradual 0:07:11.760 --> 0:07:14.960 decline in inflation. But even if you look at our 0:07:15.000 --> 0:07:19.520 own estimates, we see CPI kind of ending the year 0:07:19.520 --> 0:07:23.679 at around six percent, that that's still three times higher 0:07:23.720 --> 0:07:26.520 than what the FED wants inflation to be on a 0:07:26.600 --> 0:07:32.760 longer term basis. So I feel that inflation likely moderates 0:07:32.760 --> 0:07:35.720 a supply chains kind of ease the food and energy 0:07:35.760 --> 0:07:38.720 as a separate component, and I think that will remain elevated. 0:07:39.000 --> 0:07:42.320 But as long as wage inflation moves down and some 0:07:42.400 --> 0:07:46.040 of the core components of inflation move moved down, then 0:07:46.080 --> 0:07:48.480 I think that will give the Fed a little bit 0:07:48.520 --> 0:07:51.720 of room to start, like you sacremental moves in the 0:07:51.800 --> 0:07:54.720 in the coming meetings in September UH and then I 0:07:54.720 --> 0:07:56.920 think the markets could react a little bit more positively 0:07:57.040 --> 0:08:00.000 to that, because they'll have gotten to neutral by that point, 0:08:00.720 --> 0:08:03.360 And if they don't have to or getting close to neutral, 0:08:03.560 --> 0:08:05.880 and if they don't really have to move past neutral, 0:08:06.200 --> 0:08:08.559 then I think opportunities are being created in the stock 0:08:08.640 --> 0:08:11.520 market if that doesn't look like it's the case, And 0:08:11.520 --> 0:08:14.280 and maybe we're at seven or seven and a half 0:08:14.320 --> 0:08:16.560 percent by the end of the year, then I think 0:08:16.600 --> 0:08:18.360 the FED will need to be more aggressive and they 0:08:18.400 --> 0:08:21.480 may push into that restrictive zone, which then I think, 0:08:21.600 --> 0:08:26.400 you know, makes odds of further declines in the stock market, Um, 0:08:26.440 --> 0:08:28.480 you know greater. I was actually going to ask you 0:08:28.520 --> 0:08:30.520 about this about the latter half of the year, because 0:08:30.560 --> 0:08:32.800 we've been writing a bit about this, where we have 0:08:32.840 --> 0:08:35.640 a lot of people saying that inflation is peaking, and 0:08:35.679 --> 0:08:39.720 they're looking at some indicators of still good economic data 0:08:39.760 --> 0:08:42.760 and so on, and they're saying that potentially the second 0:08:42.800 --> 0:08:44.679 half of the year might be a bit better than, 0:08:44.800 --> 0:08:47.360 you know, less rough than the first half. So I'm 0:08:47.400 --> 0:08:50.040 wondering your view on that. Yeah, I think from an 0:08:50.040 --> 0:08:54.520 economic standpoint, we we write a lot about this as well. 0:08:54.559 --> 0:08:57.360 I mean that the consumer isn't good shape. Um, saving 0:08:57.480 --> 0:09:01.240 rates are high, debt levels are low, they're starting to 0:09:01.360 --> 0:09:03.840 use revolving credit a little bit more. So that's something 0:09:03.880 --> 0:09:07.160 that we're watching. But but net net, consumers are in 0:09:07.200 --> 0:09:10.160 good shape, and as long as the labor market remains 0:09:10.440 --> 0:09:13.240 in good shape, then I think you're seeing a shift 0:09:13.440 --> 0:09:18.439 in consumer behaviors, not a retrenching in spending right there, 0:09:18.559 --> 0:09:21.240 they're spending less on goods and more on food and energy, 0:09:21.559 --> 0:09:24.280 maybe a little bit more on services. And as kind 0:09:24.280 --> 0:09:27.800 of that that pandemic wave of of of maybe travel 0:09:27.880 --> 0:09:31.040 starts to ebb in the summer UM, maybe that starts 0:09:31.080 --> 0:09:34.680 to come down. So is if inflation pressures can moderate 0:09:34.800 --> 0:09:38.600 and employers don't retrench and spend uh in hiring, and 0:09:38.679 --> 0:09:42.520 consumers don't retrench and spending, then I do think that 0:09:42.559 --> 0:09:47.360 the FED has a pretty narrow bath to start um, 0:09:47.400 --> 0:09:50.600 maybe slowing the pace of increases. And I think the 0:09:50.640 --> 0:09:54.120 opportunities that have been created in the stock market because 0:09:54.240 --> 0:09:56.920 I in my view, I think the stock market is 0:09:56.960 --> 0:09:59.360 pricing in we're going to see a recession maybe by 0:09:59.400 --> 0:10:01.720 the end of this year early next year. If that's 0:10:01.800 --> 0:10:05.320 not the case, and the FED can really land this 0:10:05.480 --> 0:10:08.720 plane and get a softish landing, not a hardish landing, 0:10:09.040 --> 0:10:11.680 then I think the stock market can recover in the 0:10:11.720 --> 0:10:13.880 second half of the year. The one thing we have 0:10:14.040 --> 0:10:18.160 talked about is earnings, and and that has us a 0:10:18.160 --> 0:10:22.000 little bit more concerned because earnings estimates really really haven't 0:10:22.000 --> 0:10:26.040 been coming down and um, I think there's there's likely 0:10:26.400 --> 0:10:29.560 based on the last week or so of of corporate 0:10:29.600 --> 0:10:33.240 news and headlines about warning about earnings. I think we're 0:10:33.320 --> 0:10:35.480 in for a period where animals are going to need 0:10:35.520 --> 0:10:38.240 to adjust their earnings, and I think the market reaction 0:10:38.320 --> 0:10:40.959 to that could be a little bit more negative. You 0:10:41.000 --> 0:10:45.240 don't think the market has gotten price dotted already those expectations. 0:10:46.200 --> 0:10:48.760 I think it's priced in some of it, um, not 0:10:48.920 --> 0:10:54.080 all of it, and so UM. You know the the 0:10:54.160 --> 0:10:59.040 warnings from Target, um And and Walmart and then obviously 0:10:59.120 --> 0:11:01.400 Microsoft last week, a couple of couple of stocks about 0:11:01.440 --> 0:11:06.800 either currency or inventory builds or changing consumer habits. You 0:11:06.840 --> 0:11:09.680 would think their stock prices already reflect that, but but 0:11:09.720 --> 0:11:13.120 they got hammered, and so I think there's there's a 0:11:13.320 --> 0:11:17.959 larger resetting that needs to go into the market as 0:11:18.040 --> 0:11:22.520 analysts bring in their earnings expectations. Um. You know, whether 0:11:22.559 --> 0:11:26.280 it's fifties, sixties, seventy five built in the stocks, I 0:11:26.280 --> 0:11:29.080 don't know, But I do think if we're heading into 0:11:29.120 --> 0:11:33.280 the second quarter earning season and more companies start to warn, 0:11:33.800 --> 0:11:35.120 I think that could be a little bit of a 0:11:35.120 --> 0:11:38.160 headwind for stock prices over the near term. Over the 0:11:38.240 --> 0:11:40.520 very near term, Well, what do you make of some 0:11:40.600 --> 0:11:43.040 of the companies that have been coming out with the warnings. 0:11:43.440 --> 0:11:45.520 Target was a big one. I remember a couple of 0:11:45.559 --> 0:11:48.160 months ago, and it feels like maybe that was sort 0:11:48.160 --> 0:11:50.760 of the start of this trend. It was restoration hardware 0:11:50.800 --> 0:11:53.040 where they had come out with a bunch of warnings. 0:11:53.080 --> 0:11:57.280 So how are you thinking about what CEOs are telling us? 0:11:57.320 --> 0:12:00.920 And also what's some you know, some of the top 0:12:00.960 --> 0:12:05.839 brasset banks are telling us. Yeah, yeah, Um, I think 0:12:05.880 --> 0:12:07.840 it's a it's a there's a lot of cross currents 0:12:07.880 --> 0:12:10.920 coming from companies right now. Um. I think I think 0:12:11.000 --> 0:12:14.040 some of it is supplied chain driven. Um, you know, 0:12:14.120 --> 0:12:16.680 think about it if you're if you're a retailer and 0:12:16.720 --> 0:12:19.240 you're you're trying to order goods and you can't get 0:12:19.280 --> 0:12:21.959 goods on time. You know, are you double ordering or 0:12:22.000 --> 0:12:24.440 you triple ordering? Are you ordering ahead of time to 0:12:24.480 --> 0:12:26.880 get those in and then it's not coming in and 0:12:26.920 --> 0:12:29.120 then it comes all in at once, and then you 0:12:29.120 --> 0:12:32.000 you know, and then consumer trendits have changed, and now 0:12:32.000 --> 0:12:34.160 you've got a bunch of change stories. So I think 0:12:34.240 --> 0:12:37.960 some of it is very specific to supply chains. And 0:12:38.000 --> 0:12:41.000 then I think some of it is based on changes 0:12:41.120 --> 0:12:45.120 in demand and reactions to inflation. So, um, you know, 0:12:45.200 --> 0:12:48.960 with with Russia invading Ukraine, Uh, it put what was 0:12:49.040 --> 0:12:53.600 already a tight oil market it's an even tighter market, 0:12:53.960 --> 0:12:58.280 and so oil prices have dramatically shifted higher. Food prices 0:12:58.720 --> 0:13:02.280 uh dramatically shifted to higher. So at least for the 0:13:02.600 --> 0:13:05.720 lower wage earners, they've had to shift more of their 0:13:05.760 --> 0:13:09.560 spending to those types of items, so there's less money, 0:13:09.760 --> 0:13:13.240 less discretionary to money to spend on goods. And then 0:13:13.280 --> 0:13:18.400 I think higher income individuals have been shifting their um 0:13:18.480 --> 0:13:23.040 They're they're spending away from things like restoration hardware during 0:13:23.040 --> 0:13:26.360 the pandemic, where they're buying furniture and things for the home, 0:13:26.840 --> 0:13:29.080 and now they're out traveling. Now they're going on trips 0:13:29.120 --> 0:13:32.000 like you went to London right what California? Recently? I 0:13:32.040 --> 0:13:34.679 did a lot of ski trips in the winter. So 0:13:34.960 --> 0:13:38.520 I've shifted my own spending in ways that is spending 0:13:38.600 --> 0:13:40.760 less on good So I think we just have to 0:13:40.880 --> 0:13:45.320 move through some of the supply chain issues, see some normalization, 0:13:45.800 --> 0:13:48.800 and then consumer trends have to normalize, and I think 0:13:48.800 --> 0:13:51.480 that's what they're doing. Um. I just think we have 0:13:51.600 --> 0:13:55.160 this backdrop of really high energy and food prices that 0:13:55.200 --> 0:13:59.320 are creating noise and how investors, how consumers are spending 0:14:00.040 --> 0:14:01.600 and I think it's just going to take time to 0:14:01.679 --> 0:14:04.800 move through that. The bottom line is it makes it 0:14:04.920 --> 0:14:09.719 very challenging for for companies, particular retailers to navigate that. 0:14:10.200 --> 0:14:13.360 And then for some of the financial companies, Uh, some 0:14:13.400 --> 0:14:17.160 of the earnings warnings that we've seen, you've seen this 0:14:17.240 --> 0:14:19.920 is not the environment to bring I p O s 0:14:20.040 --> 0:14:23.360 or no deals or mergerent acquisitions. Right, So a lot 0:14:23.360 --> 0:14:27.000 of that investment banking um is really dried up. And 0:14:27.320 --> 0:14:29.560 so you know a lot of banks have warned about that. 0:14:29.880 --> 0:14:33.760 Consumer trends are still strong. Banks should still benefit from 0:14:34.800 --> 0:14:38.320 rising that interest margins, those rates move higher, they should 0:14:38.320 --> 0:14:41.440 benefit from that. That's a tail wind, but the headwind 0:14:41.680 --> 0:14:45.400 is investment bankings down trading activity. Will see what that 0:14:45.480 --> 0:14:47.760 looks like. You know, by the way, if we're headed 0:14:47.800 --> 0:14:50.440 for a recession, to hear some of the commentary from 0:14:50.480 --> 0:14:53.680 Jamie Diamond, and you know, is it superstorm standing or 0:14:53.720 --> 0:14:57.200 is it just like a category one hurricane? Um, how 0:14:57.240 --> 0:15:00.760 we navigate that, how banks get through that will depend. 0:15:00.800 --> 0:15:03.760 I think as an investor, this is the time to 0:15:03.840 --> 0:15:06.640 kind of rain in the horns a little bit um, 0:15:06.800 --> 0:15:11.240 be balanced across your portfolios, make sure you're properly diversified, 0:15:11.280 --> 0:15:14.240 don't take too much risk on on either end, and 0:15:14.280 --> 0:15:17.400 I think, well, you you'll be able to weather this volatility. 0:15:17.440 --> 0:15:20.760 I do think, as I said before, there are opportunities 0:15:20.800 --> 0:15:24.440 being created in the stock market with these declines. Yeah. Yeah. 0:15:24.440 --> 0:15:27.000 The target story is interesting to me because it's it's 0:15:27.040 --> 0:15:29.760 sometimes hard to sort of sort out whether or not 0:15:29.840 --> 0:15:35.240 it's a you know, execution issue with one retailer, you know, 0:15:35.760 --> 0:15:37.960 supplying the wrong type of goods. You know, we've seen 0:15:38.000 --> 0:15:41.960 this just in time. Supply chain notion kind of just 0:15:42.040 --> 0:15:45.040 blown up over the past year and and trying to 0:15:45.120 --> 0:15:48.520 navigate that. So, uh, you know, it's it's it's a 0:15:48.560 --> 0:15:57.200 tough one. But I didn't want to, uh, Ethny ship 0:15:57.280 --> 0:15:59.240 gears a little bit because I know you're you're a 0:15:59.240 --> 0:16:01.640 global strateg just and and you're looking at all over 0:16:01.680 --> 0:16:04.560 the world, and I was struck. Recently I looked at 0:16:04.720 --> 0:16:07.840 sort of on the terminal Bloomberg terminal, you can rank 0:16:08.120 --> 0:16:12.760 developed market equity performance over the year, and it's rare 0:16:12.800 --> 0:16:15.640 to see the US so low in that sort of 0:16:15.720 --> 0:16:18.240 league table. You know, I think of twenty four developed markets, 0:16:18.280 --> 0:16:24.120 it was like twenty two or three. Um, that's that's 0:16:24.160 --> 0:16:25.880 kind of shocking to me in a way. You know, 0:16:25.920 --> 0:16:28.600 you would almost think of the US market in a 0:16:28.680 --> 0:16:31.600 risky world of stocks being sort of the haven market. 0:16:31.640 --> 0:16:33.880 But what do you think was behind that? Is it 0:16:34.000 --> 0:16:35.960 just a matter of the sort of growth to value 0:16:36.240 --> 0:16:39.320 rotation and the US being way more orient oriented to 0:16:39.800 --> 0:16:43.760 two growth stocks and and you know a minuscule waiting 0:16:43.800 --> 0:16:47.320 to say energy that is that is the leader this year? UM, 0:16:47.360 --> 0:16:49.680 how are you thinking about the global equity markets and 0:16:49.840 --> 0:16:52.520 and sort of the US role in them and where 0:16:52.560 --> 0:16:56.440 the opportunity set is going forward. Yeah, that's a great question, 0:16:56.520 --> 0:16:58.400 and I do think you're right there. There is a 0:16:58.480 --> 0:17:04.040 component of UM, the US markets being very growth heavy, 0:17:04.119 --> 0:17:10.760 so very technology, communication services, consumer discretionary. Those growth components 0:17:10.760 --> 0:17:15.160 have really been where UM the stock declines have been 0:17:15.200 --> 0:17:18.840 the greatest this year because as interest rates have reset higher, 0:17:19.080 --> 0:17:21.439 a lot of these growth companies are priced not on 0:17:21.480 --> 0:17:24.720 their earnings today but on their future earnings, and when 0:17:24.760 --> 0:17:27.320 you discount that back at a higher rate, means the 0:17:27.440 --> 0:17:30.399 value of those future earnings are are less today, and 0:17:30.480 --> 0:17:33.280 so you've seen a shift. I think I think a 0:17:33.320 --> 0:17:35.800 lot of that has already occurred. I think if if 0:17:35.880 --> 0:17:38.159 I were going to look at growth stocks today and 0:17:38.200 --> 0:17:42.360 the reset there. There there's obviously potential more downside there, 0:17:42.359 --> 0:17:45.440 but I do think in the US market in growth 0:17:45.480 --> 0:17:48.520 stocks in particular, a lot of damage has already been 0:17:48.560 --> 0:17:51.720 done to that area. Um. The other component that sticks 0:17:51.760 --> 0:17:55.040 out is whether you're looking at it on a dollar 0:17:55.680 --> 0:17:58.320 or local basis. And so when I look at a 0:17:58.359 --> 0:18:01.879 lot of them, a lot of the developed market indexes 0:18:01.920 --> 0:18:05.159 on a dollar basis, they are pretty similar to to 0:18:05.240 --> 0:18:07.359 the declines in the US a little bit less so 0:18:07.520 --> 0:18:10.359 because of the value bias they have. Um. Some of 0:18:10.400 --> 0:18:14.360 the international markets have more energy and commodity exposure. That's 0:18:14.359 --> 0:18:17.240 been a great place to be this year. Those those 0:18:17.240 --> 0:18:21.719 stocks are benefiting. So there's some tail winds from UH 0:18:21.840 --> 0:18:28.120 both being valued exposed internationally with more energy exposure, and 0:18:28.160 --> 0:18:32.280 then the strength of the dollar. His his kind of 0:18:32.480 --> 0:18:35.560 you know, at least on a local currency basis, made 0:18:35.560 --> 0:18:38.560 those indexes look look better than what I think they 0:18:38.680 --> 0:18:41.960 really are at the end of the day. UM. I 0:18:42.359 --> 0:18:46.439 I kind of hint to your question. The US is, 0:18:46.840 --> 0:18:50.680 in our view, the best place to be when uncertainty 0:18:50.760 --> 0:18:53.359 is high and volatility is high. And I think the 0:18:53.440 --> 0:18:57.280 US market from that perspective, outside of the growth component 0:18:57.480 --> 0:19:00.760 is acting a little bit more defensively. UM and I 0:19:01.280 --> 0:19:05.480 in our own allocations were overweight the US. We're underweight 0:19:06.080 --> 0:19:10.240 Europe because we see we see higher odds of a 0:19:10.320 --> 0:19:14.560 recession there. Um. You know, the energy prices are crippling 0:19:14.680 --> 0:19:17.639 a lot of consumers over in Europe right now. And 0:19:17.680 --> 0:19:20.960 then in Asia it's been zero COVID policy around China. 0:19:21.119 --> 0:19:23.680 So those have been big head winds for for those 0:19:23.680 --> 0:19:26.679 two regions this year. Yeah. Yeah, it's a it's a 0:19:26.680 --> 0:19:30.040 great point about the currency adjusted returns, and you know 0:19:30.119 --> 0:19:34.200 that the flip side of that, um Uh, that strong 0:19:34.240 --> 0:19:36.800 dollar is obviously a week euro, but by the week yen, 0:19:36.920 --> 0:19:40.160 it's really cut a lot of people's attention uh this year. 0:19:40.200 --> 0:19:43.600 You know, such an important currency as a gauge of 0:19:43.680 --> 0:19:46.640 risk sentiment, or used to be anyway, I guess it's 0:19:46.640 --> 0:19:49.080 going in the other direction now. But what what do 0:19:49.119 --> 0:19:50.800 you make of this yen? You know, have you given 0:19:50.880 --> 0:19:53.000 much thought to the end weakness and and any sort 0:19:53.000 --> 0:19:55.960 of signal that it's sending about UM risk assets and 0:19:56.280 --> 0:19:59.399 markets globally. Yeah, yeah, I mean I've I've looked at 0:19:59.440 --> 0:20:02.440 it over the last a couple of days or more recently, 0:20:03.000 --> 0:20:06.280 UM and you're right. I mean, you're you're The currencies 0:20:06.320 --> 0:20:08.120 move for a lot of different reasons and a lot 0:20:08.160 --> 0:20:10.640 of different um and they can be very volad though, 0:20:11.000 --> 0:20:13.000 and I think the US has kind of the U 0:20:13.080 --> 0:20:16.480 S dollars kind of come back a little bit versus 0:20:16.520 --> 0:20:19.520 the end and versus the Euro more recently, and I 0:20:19.560 --> 0:20:23.320 think it's just a resetting in the dollar. I I 0:20:24.040 --> 0:20:28.320 the strength in the US dollar is really driven by 0:20:28.359 --> 0:20:30.960 this expectation that the FED is going to have to 0:20:31.000 --> 0:20:34.440 be ultra aggressive, and as we get more economic data 0:20:34.440 --> 0:20:37.080 over the coming weeks and coming months, I think it 0:20:37.160 --> 0:20:40.280 might look like they might not have to be as aggressive. 0:20:40.560 --> 0:20:42.560 So you're going to see the dollar on a trade 0:20:43.160 --> 0:20:45.879 trade weighted basis kind of start to move back down. 0:20:46.200 --> 0:20:48.400 Things like the end will strengthen a little bit more, 0:20:48.480 --> 0:20:51.440 the Euro will strengthen a little bit more. UM. We'll 0:20:51.440 --> 0:20:54.280 see if that shows up in the data, but I 0:20:54.320 --> 0:20:56.879 think it's just a little bit of normalization over a 0:20:56.960 --> 0:20:59.200 pretty big move in the dollar verse the end and 0:20:59.320 --> 0:21:01.760 Euro over the last several week. And you mentioned China, 0:21:01.840 --> 0:21:03.080 and I wanted to ask you about how are you 0:21:03.119 --> 0:21:06.879 thinking about China because on the podcast and broadly speaking, 0:21:07.080 --> 0:21:08.840 I feel like There's been a lot of discussion about 0:21:08.840 --> 0:21:12.280 whether or not China is investable versus uninvestable, And I 0:21:12.280 --> 0:21:15.040 know we've had some developments there this week where it 0:21:15.080 --> 0:21:17.200 looks like they're being a little a little bit more 0:21:17.280 --> 0:21:19.800 lenient maybe towards some of their tech companies and some 0:21:19.880 --> 0:21:22.800 other developments around video games and so on. So how 0:21:22.840 --> 0:21:26.399 are you thinking about China? Yeah, China, you know, the 0:21:26.680 --> 0:21:30.560 second largest economy. They're they're they're significant and a lot 0:21:30.600 --> 0:21:34.639 of different ways, both for heres domestically in terms of 0:21:34.680 --> 0:21:37.960 what we can produce and be shipped here, but then 0:21:38.119 --> 0:21:41.880 just are just our relations with China, So both from 0:21:41.920 --> 0:21:46.600 a political and economic standpoint, they are very very important. 0:21:46.920 --> 0:21:50.600 I think from an economic standpoint right now, zero COVID 0:21:50.640 --> 0:21:55.600 policy is wreaked a little bit of additional uh I 0:21:55.880 --> 0:22:00.760 created additional problems for the global economy that zero COVID 0:22:00.840 --> 0:22:05.760 policies shutting down Shanghai and Beijing. Um, you know, Shanghai 0:22:05.840 --> 0:22:10.760 is a significant port city, and so getting items and 0:22:10.840 --> 0:22:13.600 goods out of that city have been very very difficult. 0:22:13.960 --> 0:22:17.119 Keeping up with production schedules have been very very difficult 0:22:17.440 --> 0:22:20.360 for US companies and global companies. And it looks like 0:22:20.880 --> 0:22:23.080 maybe this month, that's going to start to change and 0:22:23.119 --> 0:22:25.120 they're gonna start to open up a little bit more. 0:22:25.480 --> 0:22:28.720 But it's it's very hard to get confidence in in 0:22:28.760 --> 0:22:32.400