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Speaker 1: Walter Todd joins this President, chief investment officer, managing director

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Speaker 1: at Greenwood Capital. Walter the two big issues inflation in

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Speaker 1: the West and the COVID policy in China. They tease us,

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Speaker 1: but they just don't seem to really show us any

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Speaker 1: convincing progress. Um. Yet if you look at equities there

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Speaker 1: above the June low, so it must be a little

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Speaker 1: bit of residual strength there. What's striving that? Yeah, I think, UM,

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Speaker 1: a couple of things. Uh, you know, the seasonal factor

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Speaker 1: that a lot of people have pointed to. Fourth quarter

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Speaker 1: tends to be the best quarter for stocks, particularly in

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Speaker 1: the midterm election year. We're gonna get the election next week,

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Speaker 1: so I think there's a lot of people kind of

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Speaker 1: hoping and wanting and and wishing the market to have

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Speaker 1: that holiday rally, and we've gotten some of that, but

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Speaker 1: it's definitely been very volatile and range bound. But also

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Speaker 1: I think outside of the mega capps, I would say

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Speaker 1: earnings UM have been probably better better than feared, uh

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Speaker 1: the common term used UM. And so I think that's

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Speaker 1: you know, we've seen some strengthening outside of the top

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Speaker 1: of the market of the average stock out performing the

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Speaker 1: mecca caps and so that's provided some support. And then finally,

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Speaker 1: if you look at the sector performance within the market,

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Speaker 1: it has been oddly kind of pro cyclical, which you

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Speaker 1: wouldn't think kind of given the news headlines and the

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Speaker 1: backdrop that we're talking about. You know, industrials and materials

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Speaker 1: and financials have kind of been leading the market since

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Speaker 1: the lows in mid October. Yeah, So, what ultimately did

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Speaker 1: the payrolls report tell you here on Friday? And you know,

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Speaker 1: the thing is how does it inform the Fed? How

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Speaker 1: does it inform you and the investment community? Yeah, well,

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Speaker 1: I think the payroll report, as you said, was was

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Speaker 1: pretty good, but when you kind of peel it back

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Speaker 1: a little bit, um, if you get the household report

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Speaker 1: versus the payroll headline, it was definitely a little bit weaker.

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Speaker 1: We saw that increase in the unemployment rate um, and

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Speaker 1: so I think it was maybe not as strong as

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Speaker 1: as maybe initially thought if you if you look at

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Speaker 1: those details. Also when you look at the continu nuwing

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Speaker 1: unemployment claims files, those have been tacking up a little bit.

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Speaker 1: So I think the evidence is there, in our opinion

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Speaker 1: that the Fed should be really starting to slow down

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Speaker 1: the pace of increases, if not stopping increases because prices

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Speaker 1: are starting to roll over across the economy. They're just

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Speaker 1: kind of looking, I believe that some lagging data and

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Speaker 1: waiting to see it in numbers that unfortunately are going

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Speaker 1: to show up for another, you know, probably a couple

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Speaker 1: of months. So I think, yeah, yeah, go ahead. Well

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Speaker 1: I'm just gonna say you probably heard me say it

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Speaker 1: or you saw it anyway, that Nomura, for one has

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Speaker 1: raised the estimate on the terminal rate to as high

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Speaker 1: as five and three quarters per cent um. You know.

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Speaker 1: That's the opposite of what you saying should happen. Yeah,

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Speaker 1: well yeah, and that's you know, that's the old notion

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Speaker 1: of well, what they should do and what they are

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Speaker 1: going to do are two different things, right, So Pal

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Speaker 1: is very you know, unequivocal about what they're gonna continue

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Speaker 1: to do is raise rates. And they've got a long

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Speaker 1: way to go and um a lot higher to go

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Speaker 1: on rates, and they're gonna stay there. So that's what

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Speaker 1: they're going to do. Unfortunately, I think they're making a

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Speaker 1: you know, a policy here, but you know, such as

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Speaker 1: such as the market all right, well, looking to welter

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Speaker 1: what's been happening marketwise, How would you characterize the price

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Speaker 1: action that we're seeing. It does seem to be as

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Speaker 1: though we are in a mode of wait and see,

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Speaker 1: let's see what happened with the monetary policy, Let's have

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Speaker 1: a look at what's going on in China and geopolitics

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Speaker 1: as well. What's your take, Yeah, I mean, it definitely

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Speaker 1: appears kind of day to day, UM, a little bit schizophrenic,

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Speaker 1: if you will, UM in terms of the price action

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Speaker 1: and markets, whether you look at currencies, rates, equities, they're

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Speaker 1: kind of jumping from headline to headline looking for something

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Speaker 1: to you know, kind of grab on and establish, you know,

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Speaker 1: a directional pattern versus this zigzag that we've had. So

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Speaker 1: I think that's unfortunately kind of the situation that we're

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Speaker 1: in right now. You mentioned it was a little counterintuitive.

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Speaker 1: A cyclicals have rallied the most here of late, UM,

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Speaker 1: even though the bond market seems to be suggesting recession.

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Speaker 1: What gives Yeah, it's very confusing picture the best way

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Speaker 1: to put it, because we did have the three month

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Speaker 1: tenure invert last week for the first time this cycle, UM, which,

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Speaker 1: since you know, a recession signal, pretty dominant recession signal

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Speaker 1: with your twelve months out and so again I think

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Speaker 1: it's a little bit of this again confusion about where

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Speaker 1: we're gonna be three six months from now, um in

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Speaker 1: the market trying to figure that out. But I do

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Speaker 1: think you got to listen to the market what is

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Speaker 1: trying to tell you. I do think it is quite

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Speaker 1: interesting of the the sector price action that we're seeing.

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Speaker 1: Energy has been there a whole year, but this recent

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Speaker 1: resurgence and industrials and financials and materials is something quite noticeable.

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Speaker 1: And again I do think that has to do with

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Speaker 1: the conversation arounout China, which got you know, squashed a

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Speaker 1: little bit, as you said, over the weekend. So we'll

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Speaker 1: see how that influences prices price action this week. I mean,

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Speaker 1: with the way Chinese market and if you look at

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Speaker 1: Hong Kong and let you look at the evaluations yere,

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Speaker 1: do you think in a few years time we'd be

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Speaker 1: I can't believe that Hong Kong was that cheap and

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Speaker 1: I didn't buy it. Yeah, that's a great question. I mean,

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Speaker 1: we've been talking about this, I know for a while,

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Speaker 1: and and and the valuation has been very compelling for

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Speaker 1: a long time. Just x us versus US whether you're

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Speaker 1: talking about Asia or other parts of the world, and

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Speaker 1: it hasn't been a good clearly a good timing signal.

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Speaker 1: You gotta think, you know, if financial kind of history

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Speaker 1: holds up, that it will be a good signal at

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Speaker 1: some point over the long term. But it's been a

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Speaker 1: very poor timing tool in the short term. So if

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Speaker 1: you can, if you're willing to look out maybe three

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Speaker 1: to five years, it holds your nose. I think you're

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Speaker 1: probably right, but very difficult right now. Yeah, six times

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Speaker 1: earnings for the Hank Sang Index now constituent stocks, and

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Speaker 1: you know, the Tech index is treading at nine times earnings,

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Speaker 1: which is, you know, pretty surprising for some of those

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Speaker 1: types of of companies. So we talked a little bit

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Speaker 1: about industrials and materials and financials. Is it energy that

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Speaker 1: that stands out as perhaps one of the safer areas still,

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Speaker 1: you know, from it's actually much cheaper today than it

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Speaker 1: was despite being up. The sector is actually trading cheaper

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Speaker 1: on a multiple basis because the earnings have been so strong.

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Speaker 1: So I still think there's I still think there's value there.

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Speaker 1: I think you've just got to recognize in this sector

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Speaker 1: it's very overbought right now, in the short term, there's

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Speaker 1: a lot of money flow into the sector, so you

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Speaker 1: just I think in a short term basis, probably gotta

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Speaker 1: be careful. But I still think there's more to go.

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Speaker 1: When you look at the absolute weight of the energy

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Speaker 1: sector in the SMP, it's still only around five to

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Speaker 1: five and a half percent, so it's still relatively small,

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Speaker 1: So there's probably some more to go. On the upside,

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Speaker 1: it probably is gonna trend towards eight, maybe even uh

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Speaker 1: ten percent ultimately as we moved through this cycle. So

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Speaker 1: I still think there's upside there as well. Well. Absolutely,

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Speaker 1: So how does that inform me? I mean looking at

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Speaker 1: the dollar pha instance, I mean, how is that playing

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Speaker 1: into what you've been seeing? Yeah, so energy has kind

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Speaker 1: of been able to look through the strengthen the dollar

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Speaker 1: right the world, the supplyca strain issue has been so

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Speaker 1: dominant it's overshadowed the strengthen dollar, which no only would

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Speaker 1: be very detrimental to energy equities and oil and and

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Speaker 1: so we think that that continues because this supply constraints

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Speaker 1: not doesn't seem to be comproved improving at all. And

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Speaker 1: if we you know, we've talked about the China reopening

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Speaker 1: not reopening, but if that ever does happen to any certainty,

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Speaker 1: that's gonna be another supply issue or demand issue that's

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Speaker 1: gonna hurt the supply constraints that we already have. So

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Speaker 1: I don't think the dollar is an issue for oil specifically,

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Speaker 1: but it's certainly a broader issue for you know, outside

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Speaker 1: the US markets like Hong Kong, like we're talking about.

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Speaker 1: That's one of the reasons they haven't been able to perform. Well,

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Speaker 1: thank you so much for joining. Is always a pleasure.

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Speaker 1: Well told that President, chief investment officer and managing director

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Speaker 1: at Greenwood Capital, getting his take on what we have

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Speaker 1: market wise,