WEBVTT - Steve Sosnick on the Markets (Radio)

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<v Speaker 1>Let's get to our guest. It's Steve Sosnik, chief strategist

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<v Speaker 1>at Interactive Brokers. Steve, we also had kind of a

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<v Speaker 1>three day delay on the statement from the G twenty

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<v Speaker 1>and the headlines kind of cute. The guardians of the

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<v Speaker 1>global economy have been told to buckle up. That doesn't

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<v Speaker 1>exactly inspire all that much confidence in the immediate future

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<v Speaker 1>for you, Steve, is that parallel opportunity over the next

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<v Speaker 1>six to twelve months. Um, Good morning, Brian. I'm going

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<v Speaker 1>to say both. Um. I think in the short term, UM,

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<v Speaker 1>it's probably a bit more perilous than than than not. Um.

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<v Speaker 1>You know, there are so many cross currents that we're

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<v Speaker 1>having to deal with right now, and you know, uncertainty

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<v Speaker 1>is easier to deal with when the when the monitor

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<v Speaker 1>fiscal and monetary wins are at your back. Um, when

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<v Speaker 1>they're in your face, it's just that much harder to

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<v Speaker 1>deal with, and it's so much harder to protict. The

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<v Speaker 1>reason I say that, the reason I agree that there's

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<v Speaker 1>some opportunity, of course, is there will always be stocks

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<v Speaker 1>that are beaten up. There's always gonna be sectors that

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<v Speaker 1>are beaten up unfairly. Um. But you know, you're you

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<v Speaker 1>have to do a bit of mining for those. It's

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<v Speaker 1>not you know, you're not just gonna, you know, dip

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<v Speaker 1>the pan into the stream and come up with a

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<v Speaker 1>lot of gold. You're gonna have to really sift through

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<v Speaker 1>it and find what works well. Using that analogy, you

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<v Speaker 1>buy the shovel then don't even these but itself, don't

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<v Speaker 1>you always That's that's who That's who makes the money

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<v Speaker 1>and the goal in the gold mining business, right It's

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<v Speaker 1>it's the people selling the shovels and the picks and

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<v Speaker 1>everything else. Um, you know, and and and you know,

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<v Speaker 1>I think right now there's so many crises that we

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<v Speaker 1>have to get through. I think this is why going

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<v Speaker 1>defensive UM in terms of you know, your stock selection,

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<v Speaker 1>your your asset allocation, probably makes a lot of sense because, um,

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<v Speaker 1>you know, there's all the things that people still need

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<v Speaker 1>to buy. There's all the things that that are just

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<v Speaker 1>going to be bought or sold regardless of whether the

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<v Speaker 1>economy goes up or down. Um, And which is why

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<v Speaker 1>I'm sort of favoring consumer staples that sort of stuff,

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<v Speaker 1>because um, consumers still have the money to spend. The

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<v Speaker 1>tricky thing is that the macro is still weighing heavily.

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<v Speaker 1>And and you know, we just ran that story about

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<v Speaker 1>Jeremy Hunt and Liz Trust. Do you think what happened

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<v Speaker 1>in the UK kind of presages a battle between governments

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<v Speaker 1>and central banks that no traders would be looking forward

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<v Speaker 1>to seeing. Yeah, that that was pretty much really careful

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<v Speaker 1>what you wish for a type of moment where you know,

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<v Speaker 1>where the where the policies from the fiscal side were

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<v Speaker 1>pretty much at odds with what the central bank is

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<v Speaker 1>trying to do. Um. You know what scares me about

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<v Speaker 1>the UK situation more than anything. You know, I'm far

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<v Speaker 1>from the most expert on the politics of it, but

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<v Speaker 1>what what what really bothered me was that there was

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<v Speaker 1>this this strategy used by huge numbers of funds that

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<v Speaker 1>it had ultimately required them to sell assets into a

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<v Speaker 1>declining market. As someone who's you know, sort of formative

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<v Speaker 1>market experience was the seven Crash, which was that was

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<v Speaker 1>the these is a portfolio insurance self futures into a

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<v Speaker 1>declining market. Any strategy that involves that on a large

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<v Speaker 1>scale scares the heck oademy and that that's really and

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<v Speaker 1>also Steve, with the backdrop of a declining a rapidly

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<v Speaker 1>declining currency. Oh absolutely, rishot, I mean this was you know,

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<v Speaker 1>this this was I hate tell we use the term

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<v Speaker 1>perfect storm, but this was sort of everything that could

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<v Speaker 1>go wrong? Did um? And I guess you know Mr Quartang,

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<v Speaker 1>you know, was the scapegoat or I don't know if

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<v Speaker 1>he was scapegoated or not. Again, I'm not the best

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<v Speaker 1>expert on UK specific politics, but um boy, that was.

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<v Speaker 1>You know, this is this is not the time for

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<v Speaker 1>a major policy misstep, um, you know. And it's really

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<v Speaker 1>not the time maybe even for bold policy moves, because

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<v Speaker 1>it's not clear how the market is going to take

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<v Speaker 1>any of them. Yeah, as we just mentioned what Ed

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<v Speaker 1>was talking about Doing's speech yesterday, one thing which struck

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<v Speaker 1>a lot of the commentators at the time was he

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<v Speaker 1>didn't really mention COVID by name. He didn't also really

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<v Speaker 1>say the word market or free market at all. Um,

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<v Speaker 1>does this again, just perhaps cement what's really been the actuality?

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<v Speaker 1>You know? I think so, I think that um, you know, COVID,

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<v Speaker 1>the COVID policy has been in the backdrop. I think

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<v Speaker 1>you know that they're they're continued um use of the

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<v Speaker 1>zero COVID policy. I think they have to realize has

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<v Speaker 1>caused some issues both economically and socially UM, and so

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<v Speaker 1>you know, maybe this shows a little bit of easing

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<v Speaker 1>off that policy. UM in general. I think, well, what

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<v Speaker 1>we want to hear from him is is just something

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<v Speaker 1>you know, will we will we be getting sort of

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<v Speaker 1>the China of old, or will we be getting a

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<v Speaker 1>new version of China UM a slower growing UM, somewhat

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<v Speaker 1>more stagnant, more mature market UM more or economy UM.

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<v Speaker 1>And I think that, you know, that's something the world

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<v Speaker 1>has to reckon with because we've already seen that it's

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<v Speaker 1>not particularly helpful when you have a fairly staged in

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<v Speaker 1>China UM. And you know, I think back to sort

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<v Speaker 1>of the you know, the aftermath of global financial crisis.

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<v Speaker 1>Want a growing China, you know, sort of counterbalance the

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<v Speaker 1>shrinking rest of the world. You know, right now, you know,

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<v Speaker 1>if China is not particularly growing and no one else

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<v Speaker 1>is UM, you know, that's not particularly helpful. And I

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<v Speaker 1>don't know that Si Jing Ping Um you know, assuage

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<v Speaker 1>many people UM that that that that the situation might

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<v Speaker 1>turn around abruptly. One of the key points is that

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<v Speaker 1>he really believes that China is UH an admired alternative

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<v Speaker 1>model for development on the on the global stage that

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<v Speaker 1>counters the the the US led multilateral and democratic system. Uh.

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<v Speaker 1>Do you see many countries that will embrace this path

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<v Speaker 1>or want to embrace this path? Um? I don't. I

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<v Speaker 1>don't see that. I'm you know, I'm sure there are

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<v Speaker 1>sort of there's got to be some autocratic leaders out

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<v Speaker 1>there who would prefer the Chinese model. Um, you know,

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<v Speaker 1>which is which is more autocratic than most of the

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<v Speaker 1>most of the rest of the developed world. Um, But

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<v Speaker 1>you know, I don't. I don't see that as necessarily

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<v Speaker 1>the you know, if people are rioting for freedoms or whatever,

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<v Speaker 1>I don't see them really rioting to adopt the Chinese model.

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<v Speaker 1>I see that being imposed from top down. Okay, but

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<v Speaker 1>that's you know, China itself. But you know, that does

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<v Speaker 1>throw up a lot of other e m s out there.

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<v Speaker 1>And how closely did you look at them? And how

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<v Speaker 1>closely are your clients now looking at them? Given that

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<v Speaker 1>they've been so beaten up as we've been people, people

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<v Speaker 1>just have not been prepared to put risk on the

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<v Speaker 1>table for any length of time. We are not seeing

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<v Speaker 1>people really actively talking about or looking at emerging markets

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<v Speaker 1>right now. Maybe that's a good thing. Maybe that means

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<v Speaker 1>that if there's a complete lack of interest, it's a

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<v Speaker 1>buying opportunity. Um. But you know, this is a difficult environment.

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<v Speaker 1>A strong a strong dollar um, you know, is a

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<v Speaker 1>big problem for so many emerging markets, particularly ones who

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<v Speaker 1>borrow in dollars um. So there there's there's a lack

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<v Speaker 1>of interest. There's sort of a very strong wariness about

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<v Speaker 1>emerging markets right now, and it's it's probably with good reason,

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<v Speaker 1>but you know, it echoes what I said earlier. They're

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<v Speaker 1>not all bad. So the problem is finding which ones

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<v Speaker 1>there are. And I got to say right now, I

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<v Speaker 1>don't have a strong candidate to say this is the

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<v Speaker 1>one we have to be looking at right now. I

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<v Speaker 1>think it's gonna it's gonna reveal itself over a bit

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<v Speaker 1>more time and require a lot more work, which which

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<v Speaker 1>frankly I have not done to find it. I have

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<v Speaker 1>not been able to find it yet. You mentioned that

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<v Speaker 1>you you see opportunity as well as danger. UM. I

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<v Speaker 1>guess the earning season will give us a really good

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<v Speaker 1>insight into some companies that are managing through this much

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<v Speaker 1>better than others. Do you have an inkling of where

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<v Speaker 1>they might come from perhaps what, what sector or what

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<v Speaker 1>type of company. I think it's gonna be a bit idiosyncratic.

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<v Speaker 1>I think, right, you know the problem right now that

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<v Speaker 1>that that I think we've discussed in the past is

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<v Speaker 1>it's not a great sign. I wish I could rearrange

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<v Speaker 1>earning season. I don't love that it starts with banks

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<v Speaker 1>because they're very idiosyncratic. Know, nobody else's trading revenues, nobody

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<v Speaker 1>else is that interest rate focused. Um, so we're going

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<v Speaker 1>to really get in and see. I think the the

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<v Speaker 1>initial tells will be Netflix is this week, and I

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<v Speaker 1>don't think I don't know that Netflix particularly is a

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<v Speaker 1>great bell weather in and of itself as a company,

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<v Speaker 1>but how we react to that stock is a great

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<v Speaker 1>bell weather because think about it January and in April, Steve,

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<v Speaker 1>that's what we got time for. Steve Selznick, chief strategist

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<v Speaker 1>that Interactive broke is getting his take on market prospects.

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<v Speaker 1>This has Bemberg