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Speaker 1: Alifia Dori Wala is our guest for the half hour.

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Speaker 1: Alifia is managing director at Rock Creek. Sheet joins from Washington,

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Speaker 1: d C. Alifia, thanks so much, So much going on

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Speaker 1: in market. So we've got some earnings generally very positive.

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Speaker 1: Today's economic data was much above forecast. Now we've got

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Speaker 1: the Fed, we're hearing kind of hawkish language. The market

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Speaker 1: suspects though that we may be closer to a pivot

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Speaker 1: than the FED is. Letting on makes sense of where

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Speaker 1: things are for you right now in terms of market action, Yeah,

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Speaker 1: you know, we're very cautious on increasing exposure to risk assets.

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Speaker 1: Despite the July bear market rally we saw, there's just

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Speaker 1: not enough data evidence to really increase our conviction on

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Speaker 1: entering the market use levels. And I think investors have

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Speaker 1: to remember the equity and bond markets are a great

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Speaker 1: odds right now. Right we have an inverted yield curve

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Speaker 1: and bond markets are pricing in a recession, and yet

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Speaker 1: equity investors seem to be bypassing a lot of that

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Speaker 1: and in the hope of more optimism rather than what

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Speaker 1: the bond markets are telling us. So your risk of

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Speaker 1: this does that and you expect a bit more downside

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Speaker 1: to come in equities. Yes, I think we are predicting

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Speaker 1: potentially another leg down during the second half, and it's

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Speaker 1: all really dependent on growth, inflation, and policy, right, those

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Speaker 1: are the three factors were monitoring cautiously. But you also

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Speaker 1: have to remember the SMP is still up over from

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Speaker 1: where it was peak pre pandemic. So to think that

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Speaker 1: there could be another leg down, I think is not

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Speaker 1: out of the realm of possibility. So is it complacency

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Speaker 1: or is that really more about a lack of options

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Speaker 1: at this point? You know, that is very very true,

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Speaker 1: there is a lack of options. A lot of investors

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Speaker 1: are just saying, let's just try and stay out of

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Speaker 1: the way of anything that can hurt us in the portfolio.

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Speaker 1: Be cautious. Um, But I think you have those investors

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Speaker 1: that are just containing a rosier picture than potentially we're seeing.

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Speaker 1: And I think a lot of them are discounting what

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Speaker 1: bomb markets are saying and even what the FETE is saying,

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Speaker 1: and really looking beyond that and saying, well, maybe the

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Speaker 1: second half of next year the FED is going to

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Speaker 1: have to cut rates. We think it's a little too

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Speaker 1: early to be talking about that. Let's take a look

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Speaker 1: at the earnings picture. Though so far it's been much

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Speaker 1: better than some of those worst case scenarios that were feared.

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Speaker 1: Do you find that at least reassuring that there's some

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Speaker 1: well run businesses out there with good fundamentals. Do you

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Speaker 1: look at opportunities like that. I think there are definitely,

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Speaker 1: you know, those companies that have durable cash flows that

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Speaker 1: are going to be able to come out on the

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Speaker 1: other end. But that doesn't mean that they're gonna going

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Speaker 1: to be withstanding on some volatility and potentially lower valuations

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Speaker 1: in the next year or so, right. I mean, even

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Speaker 1: if you look at Starbucks, they reported they you know,

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Speaker 1: in stock rose today because the earnings costs that demand

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Speaker 1: was still strong and they were raising prices to partially

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Speaker 1: offset higher labor costs. But how long are consumers going

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Speaker 1: to be paying seven dollars for a latte? If things

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Speaker 1: continue to get worse and we're seeing a global growth

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Speaker 1: slow down inflation doesn't move from here, I think the

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Speaker 1: mixed results that you saw during this earning season could

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Speaker 1: turn into companies potentially guiding downward. I think the other

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Speaker 1: aspect of earnings in corporate um response is the strong

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Speaker 1: dollar right, and that remains a major had went for

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Speaker 1: global companies, including some of the bigger tech companies that

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Speaker 1: again will be fine in three, four or five years,

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Speaker 1: but what's going to happen in the near term. And Alicia,

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Speaker 1: you're painting a rather grim picture earlier about the prospect

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Speaker 1: of recission and growth in the US and how you're

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Speaker 1: a little risk averse when it comes to markets there.

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Speaker 1: So where do you put money to work? Do you

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Speaker 1: look off shore at the moment? You know, we've always

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Speaker 1: thought that emerging markets present a good long term opportunity.

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Speaker 1: I think in the near term. North Asia had always

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Speaker 1: been attractive to us, and there are still some bright spots,

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Speaker 1: you know. It's you know, despite the tensions that we're

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Speaker 1: seeing across some of some of the northern Asian countries,

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Speaker 1: but there are some bright spots. There's companies in India,

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Speaker 1: both on the private side as well as on the

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Speaker 1: public side, that have really been able to weather the

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Speaker 1: pandemic in India as a whole in terms of the

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Speaker 1: economy has come out potentially better than some of their

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Speaker 1: emerging market peers. Some of the Asian countries that have

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Speaker 1: been a big beneficiary of some of the slowdown that

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Speaker 1: we saw in China and some of the supply chain

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Speaker 1: issues that we saw, and you know, I think China

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Speaker 1: remains to be seen in terms of whether we're able to,

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Speaker 1: you know, get back into China in a meaningful way.

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Speaker 1: It's a huge part of the market. China Central Bank

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Speaker 1: is now in the position of the FED pre pandemic

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Speaker 1: right lowering interest rates to blow one percent. They've had

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Speaker 1: little success so far in boosting demand. But we're gonna

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Speaker 1: have to wait and see whether that plays out and

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Speaker 1: whether that's a place that we want to get back in.

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Speaker 1: But I will say that I think US equities still

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Speaker 1: remain the most attractive risk reward opportunity in Particularly troubling

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Speaker 1: on the mainland is the property segment that we know

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Speaker 1: is just riddled with with difficulty right now and the

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Speaker 1: boycotts that we've been talking about on this show. Are

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Speaker 1: you skeptical about the strength of the consumer in China.

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Speaker 1: I'm curious about the themes that you would like if

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Speaker 1: you had to get exposure to markets in Asia. Is

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Speaker 1: it more technology from a kind of a bigger picture,

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Speaker 1: and I'm talking about semiconductors or anything related to hardware, robotics,

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Speaker 1: Whether you want to avoid the exposure to let's say,

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Speaker 1: consumer facing tech. I think you know, three or four

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Speaker 1: years ago, that was all we we're looking at in

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Speaker 1: terms of potential investments, right the delivery platforms and all

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Speaker 1: of the more consumer tech focus names at tech, all

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Speaker 1: of that has really been areas that we've been wanting

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Speaker 1: to avoid in the past year and going forward. And

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Speaker 1: so I think it is definitely much more around some

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Speaker 1: of the areas you mentioned in terms of UM, you know,

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Speaker 1: the hard hardware in terms of semi conductors, and certain

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Speaker 1: in terms of inputs into the supply chain UM. And

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Speaker 1: so those are the areas that we're focused on because

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Speaker 1: we think that also the government will be less likely

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Speaker 1: to maybe intervene in some of those areas that are

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Speaker 1: less consumer dependent. Given the uncertainty, Do you have a

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Speaker 1: greater relocation to havens than you normally wouldn't And if so,

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Speaker 1: what havens would they be? Because bonds are traditionally not

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Speaker 1: performing as you might expect in a traditional sixty forty portfolio,

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Speaker 1: there are very little havens today, but cash is still king,

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Speaker 1: and so it sounds boring, but I think you know,

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Speaker 1: being cautious and and continuing to keep higher levels of cash,

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Speaker 1: which we're seeing across institutions um that are able to

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Speaker 1: do that. It's great because you're canna be flexible, you

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Speaker 1: can pivot, But of course a lot of investors are

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Speaker 1: going to find it hard to do that as their

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Speaker 1: private you know, portfolios continue to increase in their balances

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Speaker 1: of cash decrease. So so we're in a fortunate position

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Speaker 1: to be keeping higher levels of cash that we can

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Speaker 1: jump into the market when we see some of this

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Speaker 1: change in course. Okay, so give me a percentage. Is

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Speaker 1: that ten percent of your portfolio right now in cash?

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Speaker 1: Is it greater than ten percent? I'd say, depending anywhere

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Speaker 1: from five to ten percent ahead just before we let

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Speaker 1: you go, you know, we did, of course have the

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Speaker 1: I Pick plus meeting yesterday. You're smaller than expected to increase.

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Speaker 1: What do you see energy prices heating from here? Do

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Speaker 1: you feel as if that may be peaked now? You know?

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Speaker 1: It's funny everyone keeps talking about how gas prices have

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Speaker 1: come down eleven percent in the last few weeks, but

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Speaker 1: we have to remember gas is still up since the

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Speaker 1: beginning of the year, and I really see no end

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Speaker 1: in sight for gas prices to come down. Anywhere near

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Speaker 1: levels that we have seen a year two years ago

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Speaker 1: if we don't see resolution in areas like Ukraine and Russia.

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Speaker 1: So I think that is a situation that will really,

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Speaker 1: you know, determine the path of oil of gas prices

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Speaker 1: here in the US. And that is a huge factor

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Speaker 1: in terms of whether we seem inflation come down here

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Speaker 1: in the US. Yeah, and by extension very quickly. I

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Speaker 1: assume you don't feel inflations peaked either, right, not not quite.

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Speaker 1: I wish I could say I did, but you know,

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Speaker 1: remains to be seen. I don't think we've seen the

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Speaker 1: worst of it yet, all right, Alifia Dorry, While I'm

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Speaker 1: managing director at Rook Creek, thanks so much for joining

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Speaker 1: us on bloom Big Daybreak Asia today