1
00:00:00,040 --> 00:00:03,840
Speaker 1: We've joined by Nadia Level. She's senior US equity strategist

2
00:00:03,840 --> 00:00:08,160
Speaker 1: at UBS Global Wealth Management, and Nadia, we did see

3
00:00:08,240 --> 00:00:11,040
Speaker 1: US markets closed a little bit lower on Friday. What

4
00:00:11,160 --> 00:00:14,280
Speaker 1: do your sense is the path of least resistance from here?

5
00:00:14,400 --> 00:00:16,799
Speaker 1: Still a lot of unknowns out there, and one of

6
00:00:16,840 --> 00:00:21,639
Speaker 1: them isn't the fad continuing to tighten. Yeah, there's still

7
00:00:21,680 --> 00:00:23,800
Speaker 1: a lot our uncertainty in this market. And this is

8
00:00:23,840 --> 00:00:26,640
Speaker 1: why we've been saying for the last week or two

9
00:00:26,720 --> 00:00:29,120
Speaker 1: that we thought that this rally would fade, and we're

10
00:00:29,120 --> 00:00:32,040
Speaker 1: seeing the evidence of that. We don't think that we

11
00:00:32,040 --> 00:00:33,840
Speaker 1: were in the start of a new built market where

12
00:00:33,880 --> 00:00:36,440
Speaker 1: still we still see it as a bear market rally.

13
00:00:36,560 --> 00:00:38,280
Speaker 1: This is sort of normal. This is what you see

14
00:00:38,280 --> 00:00:40,760
Speaker 1: in a bear market. You see a couple of these rallies,

15
00:00:41,080 --> 00:00:43,040
Speaker 1: and we don't think that this bear market is going

16
00:00:43,080 --> 00:00:45,920
Speaker 1: to end until when you look at the historical data,

17
00:00:46,000 --> 00:00:49,480
Speaker 1: there's some evidence of near an embodiment of the economic

18
00:00:49,560 --> 00:00:52,800
Speaker 1: data or pivot by the fat to a more defferice

19
00:00:52,880 --> 00:00:55,760
Speaker 1: stands or through rhetoric or whether that be through interest

20
00:00:55,840 --> 00:00:57,920
Speaker 1: rate cuts, and so we don't see either of those

21
00:00:57,920 --> 00:01:00,840
Speaker 1: things on the nature horizons. So we continue to think

22
00:01:00,920 --> 00:01:03,840
Speaker 1: that the SMP is going to end the year at

23
00:01:03,920 --> 00:01:06,120
Speaker 1: thirty nine dres that we expect the market to pull

24
00:01:06,160 --> 00:01:09,200
Speaker 1: back from current levels and we could even retest the

25
00:01:09,280 --> 00:01:12,280
Speaker 1: June lows, especially as we think that the forward estimates

26
00:01:12,280 --> 00:01:15,800
Speaker 1: still need to be reduced. So we had the week

27
00:01:15,959 --> 00:01:18,600
Speaker 1: PM inded, and not just in the US, but many

28
00:01:18,640 --> 00:01:21,840
Speaker 1: global economies are suffering the same fate right now. Contraction

29
00:01:22,680 --> 00:01:24,679
Speaker 1: in the week ahead. We're getting a couple of key

30
00:01:24,760 --> 00:01:27,080
Speaker 1: data points on the US housing market right before the

31
00:01:27,120 --> 00:01:30,240
Speaker 1: FED as the decision on Wednesday, and I'm wondering whether

32
00:01:30,360 --> 00:01:34,280
Speaker 1: or not if the FED begins to see meaningful deterioration

33
00:01:34,400 --> 00:01:37,400
Speaker 1: in the demand story, that you've got to revisit your

34
00:01:37,440 --> 00:01:39,920
Speaker 1: thesis here that the FED is not going to continue

35
00:01:39,920 --> 00:01:44,160
Speaker 1: to be aggressive. I do think that the FED is

36
00:01:44,160 --> 00:01:47,360
Speaker 1: going to remain data dependent. It signaled that. But inflation

37
00:01:47,440 --> 00:01:50,280
Speaker 1: readings are still coming in hotter than expected. We saw

38
00:01:50,320 --> 00:01:53,640
Speaker 1: that with the June numbers, and we expect inflation to

39
00:01:53,680 --> 00:01:56,680
Speaker 1: really elevated this summer, and so we think that that's

40
00:01:56,680 --> 00:01:59,880
Speaker 1: going to keep the FED focus on inflation, which they

41
00:02:00,000 --> 00:02:02,400
Speaker 1: are adamant about bringing down. And so we're looking for

42
00:02:02,440 --> 00:02:05,280
Speaker 1: another seventy five basis points this week. We think that

43
00:02:05,480 --> 00:02:08,280
Speaker 1: came so will reduce when we get to the September

44
00:02:08,360 --> 00:02:10,280
Speaker 1: made it more to a fifty basis points, and then

45
00:02:10,320 --> 00:02:13,840
Speaker 1: eventually to basis points in November and December. But we

46
00:02:13,919 --> 00:02:16,280
Speaker 1: think that the that is going to remain course until

47
00:02:16,320 --> 00:02:19,360
Speaker 1: there's some give on inflation or unless they see meaningful

48
00:02:19,440 --> 00:02:22,359
Speaker 1: deterioration in the job markets, because that's the other part

49
00:02:22,360 --> 00:02:25,520
Speaker 1: of their mandate. So we've had a lot of earnings

50
00:02:25,600 --> 00:02:28,040
Speaker 1: rolling in so far. I'm just wondering what your assessment

51
00:02:28,120 --> 00:02:31,880
Speaker 1: is an earning season to this point and as the

52
00:02:31,919 --> 00:02:36,480
Speaker 1: guidance for the coming quarte is credible in your view, Yes,

53
00:02:36,600 --> 00:02:38,800
Speaker 1: you know this week will be key. We we know

54
00:02:38,960 --> 00:02:41,000
Speaker 1: the heavy hitters are reporting this week. We're still in

55
00:02:41,040 --> 00:02:42,960
Speaker 1: the early endings as we said, but I would say

56
00:02:43,000 --> 00:02:46,280
Speaker 1: we're starting to tease out from the earning season. Is

57
00:02:46,280 --> 00:02:49,680
Speaker 1: that we are seeing consumer spending holding up, but there

58
00:02:49,720 --> 00:02:52,160
Speaker 1: are signs of cracks. You know, the higher mortgage rates

59
00:02:52,160 --> 00:02:54,320
Speaker 1: are starting to impact the house and demand, and we're

60
00:02:54,320 --> 00:02:57,400
Speaker 1: also see in some of the lower and um the

61
00:02:57,440 --> 00:03:00,120
Speaker 1: lower income household feeling the pinch from high inflation, and

62
00:03:00,120 --> 00:03:03,120
Speaker 1: we're seeing some deterioration and credit in that area. We're

63
00:03:03,120 --> 00:03:05,280
Speaker 1: hearing from some of the wildest companies that people are

64
00:03:05,360 --> 00:03:07,799
Speaker 1: not paying their phone bills on time, and so that's

65
00:03:07,840 --> 00:03:10,040
Speaker 1: concerned in some of the card issues as well. Are

66
00:03:10,080 --> 00:03:13,240
Speaker 1: seeing an increase in delinquency rate and so we are

67
00:03:13,320 --> 00:03:16,880
Speaker 1: starting to see a slight decline in the forward the STMs,

68
00:03:16,880 --> 00:03:20,520
Speaker 1: so guidance are pointing to that economic slowdown that's happening,

69
00:03:20,520 --> 00:03:22,280
Speaker 1: but we think that that's going to accelerate in the

70
00:03:22,280 --> 00:03:24,400
Speaker 1: coming quarters. I mean, right now, we still have the

71
00:03:24,400 --> 00:03:28,360
Speaker 1: consensus expectations for three come down now to eight percent,

72
00:03:28,480 --> 00:03:30,640
Speaker 1: but we have three and a half percent work the

73
00:03:30,639 --> 00:03:32,359
Speaker 1: next year, and so we think that the consensucy is

74
00:03:32,400 --> 00:03:35,040
Speaker 1: to come down further, and so that guidance as we

75
00:03:35,160 --> 00:03:36,720
Speaker 1: as we go out for the rest of the year

76
00:03:36,840 --> 00:03:39,040
Speaker 1: is probably going to pull those estimates down. So you're

77
00:03:39,040 --> 00:03:41,160
Speaker 1: in a position where you have to put capital to work.

78
00:03:41,160 --> 00:03:44,200
Speaker 1: And I'm curious what you're saying to clients at UBS

79
00:03:44,240 --> 00:03:46,800
Speaker 1: Global Wealth Management about the current environment. If I have

80
00:03:46,920 --> 00:03:50,200
Speaker 1: to be an invested right now in some asset class

81
00:03:50,200 --> 00:03:52,320
Speaker 1: and some part of the globe, how does it play

82
00:03:52,360 --> 00:03:56,240
Speaker 1: out where do I put money to work. We continue

83
00:03:56,320 --> 00:03:59,680
Speaker 1: to think that value is a place to be versus growth.

84
00:03:59,720 --> 00:04:02,960
Speaker 1: I mean historically that's tend to perform. I'll perform in

85
00:04:03,000 --> 00:04:06,520
Speaker 1: periods of inflation above dirty percent. We're also added to

86
00:04:06,640 --> 00:04:09,400
Speaker 1: defensive and quality you know in areas like healthcare, as

87
00:04:09,440 --> 00:04:12,920
Speaker 1: well as high quality companies that have real earning, strong

88
00:04:13,040 --> 00:04:15,800
Speaker 1: return and invest in capital and free cash flow UM.

89
00:04:15,880 --> 00:04:18,599
Speaker 1: And I would say also from a sectis standpoint, we

90
00:04:18,680 --> 00:04:21,440
Speaker 1: continue to be buyers of energy on the pull back.

91
00:04:21,520 --> 00:04:23,680
Speaker 1: We've seen a pull back obviously in all prices, but

92
00:04:23,720 --> 00:04:25,719
Speaker 1: we think that all prices is going to end a

93
00:04:25,800 --> 00:04:28,320
Speaker 1: year at a hundred twenty five dollars on rent and

94
00:04:28,400 --> 00:04:31,360
Speaker 1: into UM the first half of next year. We just

95
00:04:31,440 --> 00:04:34,480
Speaker 1: continue to think that the supply market remains very tight,

96
00:04:34,520 --> 00:04:36,640
Speaker 1: and we think it's going to get even worse as

97
00:04:36,720 --> 00:04:39,080
Speaker 1: we approach that all embargo that's going to go into

98
00:04:39,080 --> 00:04:41,839
Speaker 1: place in the EU UH later this year. You've got

99
00:04:41,960 --> 00:04:45,320
Speaker 1: to replace a three million dollars three billion excuse me,

100
00:04:45,440 --> 00:04:48,320
Speaker 1: three million barrels of oils each day, and that's going

101
00:04:48,360 --> 00:04:50,200
Speaker 1: to tighten the marketing for more. So we think that

102
00:04:50,240 --> 00:04:52,640
Speaker 1: there are areas in that as well. And we also

103
00:04:52,680 --> 00:04:56,400
Speaker 1: advise and using this volatility in terms of adding too derivatives.

104
00:04:56,400 --> 00:04:59,039
Speaker 1: And structures that can offer you some downside protection but

105
00:04:59,160 --> 00:05:01,760
Speaker 1: still a lot. How you've got to participate if the

106
00:05:01,800 --> 00:05:06,039
Speaker 1: market does rally on the upside. Despite these very strong

107
00:05:06,080 --> 00:05:08,760
Speaker 1: oil prices we've seen, the consumer has been pretty resilient.

108
00:05:09,400 --> 00:05:14,080
Speaker 1: How enduring do you see that consumer strength being in there?

109
00:05:14,279 --> 00:05:16,440
Speaker 1: Termed the continuing that obviously is continued to spend the

110
00:05:16,520 --> 00:05:19,800
Speaker 1: scene shifting away from spending from goods to services. As

111
00:05:19,800 --> 00:05:22,520
Speaker 1: we know, but as I highlighted earlierre starting to see

112
00:05:22,839 --> 00:05:26,800
Speaker 1: you know, pockets of weakness, particularly within the lower and household.

113
00:05:26,839 --> 00:05:30,200
Speaker 1: So we expect that eventually that consumer spending will slow

114
00:05:30,200 --> 00:05:31,760
Speaker 1: as we get to the back half of the Y

115
00:05:32,080 --> 00:05:35,560
Speaker 1: into three. But we're not calling for a recession. We

116
00:05:35,640 --> 00:05:38,520
Speaker 1: do think that you know, consumer balance sheet remains it's

117
00:05:38,680 --> 00:05:42,000
Speaker 1: bit safe with success sex savings. We also think in

118
00:05:42,080 --> 00:05:45,840
Speaker 1: terms of the ability to service debt ratios are quite low,

119
00:05:46,120 --> 00:05:48,200
Speaker 1: and so we think that the consumer might be able

120
00:05:48,200 --> 00:05:50,800
Speaker 1: to help the How do we skirt recession even though

121
00:05:50,839 --> 00:05:53,320
Speaker 1: we're seeing a slow down and reduced spending. You heard

122
00:05:53,320 --> 00:05:55,919
Speaker 1: it here, We avoid recession? Naughtia, good stuff. Thank you

123
00:05:55,960 --> 00:05:57,680
Speaker 1: so much for being with us. Not your level is

124
00:05:57,720 --> 00:06:01,720
Speaker 1: senior us equity strategist at you ys Clothes Well Management