1 00:00:00,120 --> 00:00:02,480 Speaker 1: Let's get to our guest, David Coudla, who was founder 2 00:00:02,520 --> 00:00:07,960 Speaker 1: and CEO and chief investment strategist over at Mainstay Capital Management. David, great, 3 00:00:08,000 --> 00:00:10,160 Speaker 1: as usual to have you on the program. So with 4 00:00:10,240 --> 00:00:14,040 Speaker 1: the SMP five hundred here at the halfway point between 5 00:00:14,040 --> 00:00:16,919 Speaker 1: the January to June Lowe's it's a good time to 6 00:00:17,239 --> 00:00:20,560 Speaker 1: reflect a little bit in terms of the stagflation fears. 7 00:00:20,760 --> 00:00:24,040 Speaker 1: We've had some recent improvement on on both sides of 8 00:00:24,079 --> 00:00:28,280 Speaker 1: that made up word, both growth and on the inflation side, 9 00:00:28,680 --> 00:00:33,280 Speaker 1: but is it enough to counter a vigilant Fed. Well, 10 00:00:33,320 --> 00:00:35,360 Speaker 1: we we have seen an improvement right where it was 11 00:00:35,720 --> 00:00:39,360 Speaker 1: very good UH data that we've we've got relative to 12 00:00:39,400 --> 00:00:41,920 Speaker 1: both cp I and p p I in the US 13 00:00:42,600 --> 00:00:49,000 Speaker 1: UH and that obviously sparked a uh rallying stocks the 14 00:00:48,720 --> 00:00:52,920 Speaker 1: UH concern. Though as we look forward, we know that 15 00:00:53,200 --> 00:00:56,960 Speaker 1: the Fed has further to go, and you know, we 16 00:00:56,960 --> 00:01:00,360 Speaker 1: we've never seen a period where the Fed has had 17 00:01:00,400 --> 00:01:04,240 Speaker 1: to increase the Fed funds rate above cp I to 18 00:01:04,360 --> 00:01:07,800 Speaker 1: bring inflation down levels they want. Coming down from eight 19 00:01:07,840 --> 00:01:12,160 Speaker 1: and a half percent to six or even five could 20 00:01:12,160 --> 00:01:15,680 Speaker 1: happen quicker, but that five down to their two target 21 00:01:16,200 --> 00:01:19,480 Speaker 1: will be long in coming. So there's a long slog 22 00:01:19,520 --> 00:01:23,360 Speaker 1: ahead for the FED on this in more volatile in 23 00:01:23,400 --> 00:01:27,399 Speaker 1: the markets, even with this rally we've seen recently, David, 24 00:01:27,720 --> 00:01:29,360 Speaker 1: the thing is, you know, we get that stuff to 25 00:01:29,400 --> 00:01:32,480 Speaker 1: read in inflation, but you know we had interested is 26 00:01:32,520 --> 00:01:34,960 Speaker 1: going up in March. It takes time, a lot of time. 27 00:01:35,319 --> 00:01:37,840 Speaker 1: It's probably not the work of the FED that's brought 28 00:01:37,880 --> 00:01:39,960 Speaker 1: it down. It is down to supply side issues in 29 00:01:40,160 --> 00:01:42,039 Speaker 1: a such as oil. But it gives a sense of 30 00:01:42,160 --> 00:01:44,920 Speaker 1: why they have to keep on pressing on and what 31 00:01:44,959 --> 00:01:47,240 Speaker 1: would it take for them to realize what they've done 32 00:01:47,240 --> 00:01:50,600 Speaker 1: has actually made the material differens. Yeah, that's a that's 33 00:01:50,600 --> 00:01:54,880 Speaker 1: a good point. Rashod. The reaction function for UH, the 34 00:01:54,920 --> 00:01:58,800 Speaker 1: impact of a change in FED policy, as you know, 35 00:01:58,920 --> 00:02:02,000 Speaker 1: the experts tell us, some economists tell us somewhere between 36 00:02:02,040 --> 00:02:06,120 Speaker 1: three months and eighteen months. So even if we take 37 00:02:06,200 --> 00:02:09,000 Speaker 1: the short end of that time horizon, we're just starting 38 00:02:09,000 --> 00:02:12,440 Speaker 1: to see the effects of what UH they started with 39 00:02:12,520 --> 00:02:15,919 Speaker 1: in March, and it will be quite a while before 40 00:02:15,919 --> 00:02:18,240 Speaker 1: we see the full effects of what they've been doing 41 00:02:18,440 --> 00:02:21,760 Speaker 1: more recently, which are the higher FED rate hikes. Again, 42 00:02:21,800 --> 00:02:25,919 Speaker 1: the concern because their front loading so much that they 43 00:02:25,960 --> 00:02:28,839 Speaker 1: do more economic damage than we would like, and we 44 00:02:28,960 --> 00:02:32,079 Speaker 1: end up with the recession in three and we've got 45 00:02:32,080 --> 00:02:35,880 Speaker 1: a different problem. Yeah, the scenario that you described a 46 00:02:35,960 --> 00:02:38,359 Speaker 1: little while ago suggests perhaps it would be good for 47 00:02:38,400 --> 00:02:41,000 Speaker 1: the banking sector. If you're talking about at the low 48 00:02:41,120 --> 00:02:44,760 Speaker 1: end being around or so and at the upper end 49 00:02:44,800 --> 00:02:48,280 Speaker 1: around five or six percent for loan rates um, that 50 00:02:48,320 --> 00:02:51,040 Speaker 1: would set up good for the financial industry. Are you 51 00:02:51,200 --> 00:02:54,960 Speaker 1: chasing in that area? Yeah, Brian, it there's no doubt 52 00:02:55,160 --> 00:02:59,519 Speaker 1: that when we look out further UH and the two 53 00:02:59,600 --> 00:03:02,799 Speaker 1: year you know, the we look at net interest margin 54 00:03:03,000 --> 00:03:07,280 Speaker 1: for UH, for loans, for the net inst margin for 55 00:03:07,320 --> 00:03:10,000 Speaker 1: the banks and financial services, we should be in a 56 00:03:10,000 --> 00:03:13,320 Speaker 1: good spot. So we think that, you know, the financials 57 00:03:13,360 --> 00:03:17,200 Speaker 1: are probably okay here. We're you know, we're mostly and 58 00:03:17,240 --> 00:03:20,959 Speaker 1: we consider financials in that cyclical camp and we've backed 59 00:03:21,000 --> 00:03:25,160 Speaker 1: away from the cyclicals we held earlier this year. Looking 60 00:03:25,200 --> 00:03:27,160 Speaker 1: at Marcus David, I mean, you know, what we're seeing 61 00:03:27,200 --> 00:03:28,919 Speaker 1: at the moment has been a status perhaps in the 62 00:03:28,960 --> 00:03:31,519 Speaker 1: move to the upside. Is that is this a bear 63 00:03:31,639 --> 00:03:33,919 Speaker 1: market rally or is it the start of a new 64 00:03:33,960 --> 00:03:36,480 Speaker 1: bull running? How can you tell? Shot? I think the 65 00:03:36,560 --> 00:03:39,280 Speaker 1: jury is still out on that I would have called 66 00:03:39,320 --> 00:03:41,800 Speaker 1: it a and I think I continue to call it 67 00:03:41,800 --> 00:03:45,520 Speaker 1: a bear market rally for now. Uh. Certainly, if we 68 00:03:45,560 --> 00:03:48,400 Speaker 1: look at it, some of the technical factors of the 69 00:03:48,480 --> 00:03:51,880 Speaker 1: rally look very good. But if if we indeed saw 70 00:03:51,920 --> 00:03:56,800 Speaker 1: the low on June seventeenth and we go higher from here, um, 71 00:03:56,840 --> 00:03:59,760 Speaker 1: it would be uncharacteristic of many of the bear markets 72 00:03:59,760 --> 00:04:02,720 Speaker 1: we've seen. I don't think we need to test the 73 00:04:02,800 --> 00:04:05,960 Speaker 1: lows of June, but I think we could easily. I 74 00:04:06,000 --> 00:04:08,440 Speaker 1: think that there's a lot of I don't want to 75 00:04:08,480 --> 00:04:11,520 Speaker 1: see euphoria, but a lot of hope about a pivot 76 00:04:11,520 --> 00:04:15,560 Speaker 1: by the Fed initially and then more good news with 77 00:04:15,640 --> 00:04:20,600 Speaker 1: cp I, and it's created a rally here. But uh, 78 00:04:20,880 --> 00:04:23,159 Speaker 1: I think we've got volatilely head and I think some 79 00:04:23,279 --> 00:04:26,360 Speaker 1: of the reality of what the Fed has a head 80 00:04:26,400 --> 00:04:30,120 Speaker 1: of it will settle in and we'll see some another 81 00:04:30,200 --> 00:04:32,920 Speaker 1: dip or two and in the markets here before your end, 82 00:04:33,240 --> 00:04:36,159 Speaker 1: we've got a lot coming up. For one thing, the spire. 83 00:04:36,240 --> 00:04:38,719 Speaker 1: At the moment, it's three or so below the two 84 00:04:39,240 --> 00:04:41,760 Speaker 1: moving average. That's sort of the top moving average. You 85 00:04:41,760 --> 00:04:44,559 Speaker 1: could possibly move up to that and then maybe pause 86 00:04:44,600 --> 00:04:46,440 Speaker 1: for a while, get your thoughts on that and then 87 00:04:46,440 --> 00:04:48,320 Speaker 1: also you've got the FED minutes coming up, and then 88 00:04:48,400 --> 00:04:51,039 Speaker 1: Jackson Hole and then we've got to be ready for 89 00:04:51,080 --> 00:04:54,960 Speaker 1: the September c p I. So maybe for a while 90 00:04:55,120 --> 00:04:57,160 Speaker 1: not too much, but then all of a sudden, you've 91 00:04:57,160 --> 00:05:00,320 Speaker 1: got a lot to trade on. Yeah, and we've also 92 00:05:00,400 --> 00:05:03,160 Speaker 1: have uh, you know, we don't we're not talking as 93 00:05:03,240 --> 00:05:06,480 Speaker 1: much or there's not as much talk about quantitative tightening. 94 00:05:06,839 --> 00:05:11,599 Speaker 1: In September, the cap for quantitative tightening were the amount 95 00:05:11,600 --> 00:05:14,600 Speaker 1: that they'll let roll off the balance sheet rises to. 96 00:05:16,040 --> 00:05:18,480 Speaker 1: So we've got that coming in September as well. So 97 00:05:18,560 --> 00:05:21,920 Speaker 1: there's that's when QT becomes an even bigger component of 98 00:05:21,920 --> 00:05:24,280 Speaker 1: what the FET is doing. In addition to the rate hikes. 99 00:05:25,160 --> 00:05:27,760 Speaker 1: Do what you're buying them and if you own them 100 00:05:27,839 --> 00:05:32,040 Speaker 1: or not, the stocks and the ets. So we're taking 101 00:05:32,040 --> 00:05:34,960 Speaker 1: a barbell approach right now to the markets. We were 102 00:05:35,680 --> 00:05:41,800 Speaker 1: overweight cyclicals that what we call uh cyclical value earlier 103 00:05:41,839 --> 00:05:45,960 Speaker 1: this year commodities energy did did very well for us. 104 00:05:46,000 --> 00:05:50,400 Speaker 1: We still like energy, but we're more now into On 105 00:05:50,400 --> 00:05:54,080 Speaker 1: one side of the barbell is our recession resistance sectors, 106 00:05:54,160 --> 00:05:59,120 Speaker 1: right our defensive healthcare, consumer staples, and utilities. On the 107 00:05:59,160 --> 00:06:02,080 Speaker 1: other side of the bar Bell our growth stocks, and 108 00:06:02,120 --> 00:06:05,800 Speaker 1: that's quality growth. You know, we've seen some of the UH, 109 00:06:06,520 --> 00:06:10,520 Speaker 1: the the companies that aren't really what we consider quality 110 00:06:10,520 --> 00:06:13,040 Speaker 1: growth they have high debt, not as good a balance sheet, 111 00:06:13,080 --> 00:06:16,480 Speaker 1: that have rallied here just very very recently. But those 112 00:06:16,560 --> 00:06:19,919 Speaker 1: quality growth stocks that we want on one side and 113 00:06:20,080 --> 00:06:22,359 Speaker 1: our defenses on the other side. That's where we're focused 114 00:06:22,440 --> 00:06:24,960 Speaker 1: right now. Let's talk a little bit about the Apple news. 115 00:06:25,200 --> 00:06:29,560 Speaker 1: UM it talks about sustaining iPhone sales this year. I'm 116 00:06:29,560 --> 00:06:32,839 Speaker 1: trying to figure out if that's encouraging or if it's 117 00:06:32,880 --> 00:06:36,640 Speaker 1: maybe a little disappointing, UH, and whether or not it 118 00:06:36,240 --> 00:06:39,640 Speaker 1: it feeds into this story about overall demand or is 119 00:06:39,680 --> 00:06:43,680 Speaker 1: this just a company specific development. I think it's a 120 00:06:43,680 --> 00:06:47,520 Speaker 1: company specific development. But I think that when we take 121 00:06:47,560 --> 00:06:51,599 Speaker 1: that back to an investment thesis, UH looking forward in 122 00:06:51,600 --> 00:06:55,000 Speaker 1: in a time when the economy could be slowing, do 123 00:06:55,080 --> 00:06:59,160 Speaker 1: we want to look at UH cyclical growth stories or 124 00:06:59,560 --> 00:07:02,800 Speaker 1: second growth stories. And Apple is specifically one of those 125 00:07:02,800 --> 00:07:06,359 Speaker 1: companies that's a secular growth story. And coming out of 126 00:07:06,400 --> 00:07:10,320 Speaker 1: this just like we've seen here recently in these six weeks, UH, 127 00:07:10,440 --> 00:07:13,680 Speaker 1: those gross stocks, long duration stocks will do quite well. 128 00:07:13,720 --> 00:07:16,920 Speaker 1: They did very well yesterday. Our defensives did well today 129 00:07:17,680 --> 00:07:19,680 Speaker 1: when when the growth stocks didn't hold up as well. 130 00:07:20,720 --> 00:07:23,640 Speaker 1: Quickly here, David, you are founder in sponsor of Engaged, 131 00:07:23,680 --> 00:07:27,120 Speaker 1: the biggest student stock pitch competition and conference. That us 132 00:07:27,160 --> 00:07:29,520 Speaker 1: about it and tell us about any interesting things that 133 00:07:29,960 --> 00:07:33,600 Speaker 1: you're could have come out of it. Very of late. Yeah, So, 134 00:07:33,840 --> 00:07:37,320 Speaker 1: the the Engage Student Investment Conference. It's the largest UH 135 00:07:37,360 --> 00:07:42,320 Speaker 1: student stock pitch and stock pitch competition and conference in 136 00:07:42,360 --> 00:07:45,200 Speaker 1: the world. We have UH students that come from all 137 00:07:45,200 --> 00:07:48,640 Speaker 1: over the world, mostly North America. UH. It is UH 138 00:07:48,880 --> 00:07:52,400 Speaker 1: it's experentual learning for the students that are involved some 139 00:07:52,440 --> 00:07:56,080 Speaker 1: real world experience and UH something that they like to 140 00:07:56,080 --> 00:07:58,720 Speaker 1: talk about in their interviews of course, and help them 141 00:07:58,840 --> 00:08:03,400 Speaker 1: as they pursue their careers. Good stuff, David. David Kudlow 142 00:08:03,480 --> 00:08:06,360 Speaker 1: there founder and chief executive as well as being chief 143 00:08:06,360 --> 00:08:10,280 Speaker 1: investment strategist at Mainstay Capital Management.