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Speaker 1: Let's get to our guest. J Plowski is with us.

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Speaker 1: Jay is principal and founder at TPW Advisory. He joins

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Speaker 1: from here in New York City via the telephone. A J.

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Speaker 1: Thanks for being with us. Uh, talk to me a

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Speaker 1: little bit about the way you understand the market between

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Speaker 1: now and the end of the year. I mean, things

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Speaker 1: are holding up remarkably well. A lot of folks are

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Speaker 1: very much concerned about the headwinds that the American economy

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Speaker 1: is going to be facing in the first quarter of

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Speaker 1: next year. Yeah, I know, I'm happy to do that.

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Speaker 1: We actually have a different point of view. We've been

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Speaker 1: talking for months about an earnings bridge stabilizing markets over

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Speaker 1: the course of time as inflation starts to moderate, and

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Speaker 1: that's really been the driver we see for risk assets

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Speaker 1: doing pretty well over the last couple of months. Looking

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Speaker 1: in the twenty three where of the view that stability

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Speaker 1: is ahead and that the big three items that we've

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Speaker 1: been focused on since the summer, we call them the

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Speaker 1: three keys. First, the pates of the US and place

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Speaker 1: ins declined, the path of European energy prices, and the

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Speaker 1: ability of China to move off of zero COVID. All

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Speaker 1: of those things which have been headwinds for two risk

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Speaker 1: assid wise are turning into tail winds, we believe, and

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Speaker 1: most importantly, uh, we see the dollar as the US

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Speaker 1: dollar as the biggest loser in a world of gradual stability.

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Speaker 1: There's a lot to unpack the Jay, I just want

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Speaker 1: to start with your remarks on inflation. Do you feel

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Speaker 1: that inflation has peaked in the U S or WI

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Speaker 1: Do you place the risk that this is a head

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Speaker 1: fake and we get another leg higher out of nowhere? Yeah? No,

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Speaker 1: I think that that game has been played, Paul, And

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Speaker 1: you know we've we've been wrong in expecting inflation have

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Speaker 1: peaked earlier. UM. But I think you know the idea

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Speaker 1: of it coming out of nowhere and going up higher again,

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Speaker 1: I think is is one's really hard pressed to identify

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Speaker 1: where that might come from. Um, if you look at

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Speaker 1: supply chains back to normal, if you look at rents

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Speaker 1: rolling over, used car prices, collapsing energy prices down, UM,

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Speaker 1: it's really hard to identify that wage is stable. You

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Speaker 1: can't even get wage price firals in Germany where inflation

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Speaker 1: is doubled that in the US. They just had their

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Speaker 1: big union um deal come through and it was quite

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Speaker 1: benign from a wage price spiral fear, so where we

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Speaker 1: think inflation is going to continue to decline, it's going

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Speaker 1: to be slow, but the FED market is going to

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Speaker 1: follow the FED is gonna follow the data, and markets

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Speaker 1: are going to follow the FED. And that's uh, that's

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Speaker 1: for the benefit of risk asset prices into the detriment

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Speaker 1: of the dollar, which has been boosted by the amount

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Speaker 1: of ray heights that the US has done relative to

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Speaker 1: the rest of the world. And I just want to

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Speaker 1: into a point you are making earlier about the likely

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Speaker 1: trajectory of the US dollar. We're hearing some rather davish

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Speaker 1: woods coming out of the latest round of FED speakers.

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Speaker 1: How much longer do you think this tightening cycle has

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Speaker 1: got to run now? And what's your outlook for the

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Speaker 1: U s dollar hitting into three Well, I think that's

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Speaker 1: really uh, that's really it, Paul, is that you know,

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Speaker 1: markets have priced in the FED to a terminal rate

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Speaker 1: of five and five and a quarter and another hundred

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Speaker 1: basis points or so of great heights through the first quarter,

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Speaker 1: and so that's all priced into the market. I think

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Speaker 1: the markets already appreciated that. The dollars already appreciated that equities,

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Speaker 1: et cetera. And so as we go forward, the potential

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Speaker 1: is for rates to start to decline and that the

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Speaker 1: market front runs the FED a little bit. We've already

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Speaker 1: seen that in the dollar has reacted accordingly at peak

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Speaker 1: two months ago in late September one fourteen on the

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Speaker 1: d X Y and today it's one oh seven and change.

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Speaker 1: And you know that it's so extended versus uh certainly

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Speaker 1: the d M f FX world overvalued versus the Euro

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Speaker 1: or the end, there's there's significant room for the door.

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Speaker 1: It's to weekend as we go into and through. But

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Speaker 1: if you look at what's happening in Europe, we had

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Speaker 1: a guest last hour saying that she believes that the

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Speaker 1: American investors have really underestimated the degree to which Europe

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Speaker 1: could be in very very dire straits economically, and not

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Speaker 1: just on the continent, but the UK as well. We're

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Speaker 1: talking earlier on this program about COVID curbs in China, continuing,

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Speaker 1: it's still not clear where this is, how this story

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Speaker 1: will play out on the mainland, and so if there

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Speaker 1: is a haven bid, could that not put a floor

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Speaker 1: under the U S currency? In spite of everything that

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Speaker 1: you're saying with respective Fed policy. Sure, I mean you

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Speaker 1: know that it's not going to go I'm not saying

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Speaker 1: it's going to go one way for you. I mean

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Speaker 1: that went from one fourteen the one oh six. Now

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Speaker 1: it's found a little bit. I would actually turn it

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Speaker 1: around and say, you know the fact that China UM

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Speaker 1: announces that it's going to kind of ease away from zero,

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Speaker 1: COVID dot B is strict, and then you get a

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Speaker 1: bunch of cases, um in the market's only down, but

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Speaker 1: yesterday last night less than one. That tells you that

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Speaker 1: the markets already, you know, understands fully that it's not

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Speaker 1: going to be a one way a one way street.

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Speaker 1: If that had happened three or six months ago, I

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Speaker 1: would have thought China would be down, you know, three

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Speaker 1: to five all the selling has been done. And in

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Speaker 1: the case of Europe, I'm not sure you know what

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Speaker 1: your guest was looking at. But um, I think you

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Speaker 1: have a very cheap currency. You have energy prices which

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Speaker 1: are behaving much better than expected. European storage is full,

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Speaker 1: well above where it is historically at this time of year. UM,

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Speaker 1: you have record vote unemployment, you have significant fiscal support,

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Speaker 1: much better than the fiscal situation United States, and again

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Speaker 1: Europe is priced roughly as cheap as it's been versus

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Speaker 1: the US equity market in the last twenty five years.

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Speaker 1: So you view this as a buying opportunity. Yeah, I

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Speaker 1: think people should be adding. We've been adding more to

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Speaker 1: e M over the last couple of months. We've become

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Speaker 1: more constructive on emerging markets, probably with some specific markets

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Speaker 1: that we like, which include China in part because of

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Speaker 1: what we just talked about, UH, includes Brazil, include Southeast Asia.

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Speaker 1: We also like emerging market local currency debt, again on

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Speaker 1: the view that the dollars going to all over. We

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Speaker 1: like Asian high yield because we think the property market

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Speaker 1: in China, not to put a punt on it, but

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Speaker 1: the flip there's been a floor placed under the property

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Speaker 1: market by the Chinese authorities. And so when we look

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Speaker 1: around the world, um, and we believe that the dollar

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Speaker 1: holds the key. If that happens, there's lots of opportunities

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Speaker 1: around the world, alright. Pulaski, their principal and founder a

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Speaker 1: TPW Advisory