WEBVTT - TINA's Dead and Bonds Are Back 0:00:13.840 --> 0:00:17.280 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.320 --> 0:00:19.599 My name is Mike Reagan. I'm a senior editor at 0:00:19.600 --> 0:00:22.959 Bloomberg and I'm all Donna hik Across Acid reporter with Bloomberg. 0:00:23.360 --> 0:00:27.200 This week on the show, wello is almost ready for 0:00:27.320 --> 0:00:30.639 its place in the history books, and for investors, it'll 0:00:30.680 --> 0:00:34.720 be a pretty ugly chapter. Stocks, bonds, crypto, you name it. 0:00:34.760 --> 0:00:37.880 Pretty much all investments suffered this year as the Federal 0:00:37.920 --> 0:00:41.600 Reserve raised interest rates to quell historic inflation. So what 0:00:41.680 --> 0:00:44.919 does having store? We'll get into it with the head 0:00:44.920 --> 0:00:48.200 of investment strategy for the America's at a big investment firm, 0:00:48.280 --> 0:00:52.240 who is kind enough to break out her crystal ball fore. 0:00:52.280 --> 0:00:55.840 I hope she has a crystal balls Okay, you know 0:00:55.920 --> 0:00:58.280 how about you, Baldonna. It's very It's that time of 0:00:58.360 --> 0:01:02.440 year to get very reflective. Uh do your year end evaluation? 0:01:02.480 --> 0:01:07.520 Have you yourself evaluation? Of course? I look so highly 0:01:07.560 --> 0:01:11.760 of myself. You did, I would say if they were 0:01:11.920 --> 0:01:14.200 to ask me for some input for that, I would 0:01:14.200 --> 0:01:16.760 be mostly positive, but I would have to say, um 0:01:16.800 --> 0:01:19.679 when it comes to our game show. Uh. In the 0:01:19.720 --> 0:01:23.800 Craziest Thing segment of the podcast, the prices, precise performance 0:01:23.840 --> 0:01:26.240 has been a little lot less. It's been a little 0:01:26.720 --> 0:01:29.480 three or four times. I think I should go back 0:01:29.480 --> 0:01:31.520 and keep tracking how many times I've one. I have 0:01:31.520 --> 0:01:33.560 one more time than you have. Well, not in the 0:01:33.600 --> 0:01:38.280 host I win every time. That's not fair. But the 0:01:38.280 --> 0:01:40.240 good news is, I feel like it's kind of been 0:01:40.280 --> 0:01:42.840 my fault that the the topics have been out of 0:01:42.840 --> 0:01:46.280 your wheelhouse. So just to boost your yearine performance, I've 0:01:46.280 --> 0:01:49.240 got one that's squarely in your wheelhouse this week, just 0:01:49.280 --> 0:01:52.880 for you. Is it about Taylor Swift? Is that yours? Yeah? 0:01:56.360 --> 0:01:58.920 All right, and I hear I guess has something really 0:01:59.000 --> 0:02:02.680 great prepared for craziest things in markets, So I do 0:02:02.760 --> 0:02:05.400 want to bring her in. It's Gargi Chadry. She's head 0:02:05.400 --> 0:02:08.880 of Ice Shares Investment Strategy America's and I'm so happy 0:02:08.880 --> 0:02:11.000 that she's joining us today. Thanks so much for coming 0:02:11.000 --> 0:02:13.440 on the show. Gargi. Hi guys, it's so great to 0:02:13.480 --> 0:02:16.399 be here. Thank you Mike and Lodanna for having me. Yeah, 0:02:16.440 --> 0:02:18.240 thanks so much for joining us. And maybe just to 0:02:18.280 --> 0:02:21.239 start out, you can tell us about your role at 0:02:21.440 --> 0:02:24.720 black Rock and what it entails. Sure, of course, so 0:02:24.960 --> 0:02:29.240 um I run a team of investment strategists. The what 0:02:29.360 --> 0:02:33.720 that means in um plain English language is we tell 0:02:33.760 --> 0:02:36.320 our clients who invest with a share as E t 0:02:36.520 --> 0:02:38.960 F S how to think about the market. So, you know, 0:02:38.960 --> 0:02:41.560 obviously you guys were talking about what a historic here 0:02:41.680 --> 0:02:43.840 this has been, but what does that mean? Where does 0:02:43.880 --> 0:02:47.639 that create opportunities? And what is the macro environment telling us? 0:02:48.200 --> 0:02:52.200 You know, taking everything the data, the policy, the geopolitics 0:02:52.400 --> 0:02:57.400 and turning that into investable themes with shas ETF. So 0:02:57.440 --> 0:02:59.880 that's what my team and I do. And then also 0:03:00.040 --> 0:03:02.240 we try to get a sense of how people are 0:03:02.280 --> 0:03:04.520 position what are the flows telling us, Is there an 0:03:04.560 --> 0:03:06.720 area of the market that flows should have gone to 0:03:06.880 --> 0:03:10.680 and didn't. So a lot of macro research, implementation ideas 0:03:11.080 --> 0:03:14.440 and research. Yeah, yeah, Gargy, We very much look forward 0:03:14.440 --> 0:03:17.640 to getting your outlook for three. But even in the 0:03:17.720 --> 0:03:20.680 more near term point, we have a big week ahead 0:03:20.720 --> 0:03:25.400 of US next week Federal Reserve meeting, uh CPI data. 0:03:25.680 --> 0:03:28.280 You know, I think everyone is sort of has their 0:03:28.280 --> 0:03:32.320 fingers crossed under the assumption that the Federal downshift its 0:03:32.400 --> 0:03:35.480 rate hikes to fifty basis points. What are you expecting 0:03:35.480 --> 0:03:37.880 for next weekend? Is there anything you're worried about surprising 0:03:38.240 --> 0:03:41.880 uh in either the CPI or the or the FED decision. 0:03:42.160 --> 0:03:45.440 I love that question, thank you. So I think next 0:03:45.480 --> 0:03:48.520 week will probably be all about inflation. I know we 0:03:48.600 --> 0:03:50.760 wanted to be about the Fed, but I think it 0:03:50.800 --> 0:03:54.560 will be about inflation. As of right now, the market 0:03:54.640 --> 0:03:59.240 is expecting again one more week ish CPI print, So 0:03:59.400 --> 0:04:03.000 think about perhaps a point three on core I think 0:04:03.080 --> 0:04:06.040 anything that looks higher than that. So if we get 0:04:06.040 --> 0:04:08.840 another point four or even a strong point three with 0:04:09.120 --> 0:04:12.920 a strong core X shelter, so remember now the market 0:04:12.960 --> 0:04:16.760 will be extremely focused on that core X shelter piece 0:04:16.839 --> 0:04:19.160 because Chair Powell has brought that up and now we're 0:04:19.200 --> 0:04:22.120 going to be just uniformly focused on that one line item. 0:04:22.279 --> 0:04:25.159 And I think if we get a stronger than expected 0:04:25.240 --> 0:04:27.280 number on that core X shelter, I think that could 0:04:27.360 --> 0:04:30.520 negatively impact risk sentiment. So I think, uh, you know, 0:04:30.600 --> 0:04:33.279 inflation is something that I've focused on my whole career, 0:04:33.320 --> 0:04:35.840 so I'm kind of excited to to deep dive into 0:04:35.880 --> 0:04:40.400 that data. And then with the Fed, I think a 0:04:40.440 --> 0:04:42.800 fifty basis point is baked in. I think a Chair 0:04:42.839 --> 0:04:47.240 Power told us as much at the Brookings. But more 0:04:47.320 --> 0:04:50.960 important than that, fifty basis points is actually how they 0:04:51.120 --> 0:04:54.760 project their SEP forecast. So what are they telling us 0:04:54.760 --> 0:04:57.360 about the path of policy for the next two years, 0:04:57.520 --> 0:05:02.040 How are they guiding us about inflation, So really breaking 0:05:02.080 --> 0:05:05.080 down the SEP forecast for next day, I think that's 0:05:05.120 --> 0:05:09.000 going to be really important. And also how Chair Powell 0:05:09.920 --> 0:05:13.560 is perceived from a hawkish perspective. Again, remember the market 0:05:13.640 --> 0:05:17.320 at first breathed a huge sigh of relief at least 0:05:17.360 --> 0:05:20.359 after November thirty year that he didn't push back on 0:05:20.440 --> 0:05:23.839 the easing of financial conditions. So is Chair Powell going 0:05:23.920 --> 0:05:26.480 to be a little bit more hawkish this time around 0:05:26.480 --> 0:05:28.919 at the December meeting. I don't think so, But I 0:05:28.920 --> 0:05:31.000 think that's what the market is going to focus on. 0:05:31.040 --> 0:05:34.960 To what extent does he talk about uh, double sided 0:05:35.080 --> 0:05:39.159 risks versus to what extent does he talk just about 0:05:39.480 --> 0:05:41.159 you know, more needs to be done. So that's what 0:05:41.240 --> 0:05:44.040 I'll be looking at. And I know you have these 0:05:44.080 --> 0:05:46.720 different themes that you laid out in your year head look, 0:05:46.760 --> 0:05:48.320 and I want to get to those. But just while 0:05:48.320 --> 0:05:51.080 we're talking about the FED, another thing you had said 0:05:51.640 --> 0:05:54.440 in your outlook is that FED easing is unlikely in 0:05:55.320 --> 0:06:00.280 because inflation will keep persistently. Yeah, yeah, that's actually really 0:06:00.279 --> 0:06:02.560 one of the core themes as we think about the 0:06:02.600 --> 0:06:06.440 market for the next day. This idea that we're already 0:06:06.560 --> 0:06:10.800 pricing in some cuts for the end of three I 0:06:10.839 --> 0:06:13.520 think is a little bit optimistic. I think the FED 0:06:13.600 --> 0:06:15.640 has told us again and again. Now whether the market 0:06:15.640 --> 0:06:18.120 wants to believe it or not, but the Fed has 0:06:18.160 --> 0:06:22.360 told us again and again that they are looking to 0:06:22.440 --> 0:06:26.760 keep rates higher for longer. That's what they want, and 0:06:26.880 --> 0:06:31.720 our viewers at least that both core CPI and PC inflation, 0:06:31.800 --> 0:06:33.640 which as we know the FED looks at, you know, 0:06:33.800 --> 0:06:37.120 their preferred measure to look at PC, both of those 0:06:37.160 --> 0:06:40.800 will stay significantly about the two percent target. And in 0:06:40.880 --> 0:06:43.880 a world where unemployment is still, you know, at this 0:06:44.000 --> 0:06:46.760 juncture much below four percent, it's at three point seven 0:06:46.760 --> 0:06:51.080 percent and looking ahead probably still remains much below their 0:06:51.120 --> 0:06:55.159 assumption of Nehru, I think it's a little too optimistic 0:06:55.200 --> 0:07:00.520 to expect meaningful eases three. I think we get to five, 0:07:00.760 --> 0:07:04.560 maybe five and a quarter, and then just stop. We 0:07:04.839 --> 0:07:09.279 let the monetary policy and its lagged effects work um 0:07:09.400 --> 0:07:12.000 and you know, the market prices that in sometimes and 0:07:12.040 --> 0:07:13.680 then comes all the way back and then the FED 0:07:13.720 --> 0:07:15.920 pushes back and they price that that in and then 0:07:15.920 --> 0:07:17.840 come all the way back. So I think there's a 0:07:17.840 --> 0:07:20.280 little bit of that tug tug of war with the 0:07:20.320 --> 0:07:23.320 markets and the pricing of policy for the remainder of 0:07:23.320 --> 0:07:25.680 the year. But I doubt that they are going to 0:07:25.760 --> 0:07:29.400 cut fifty or so basis points before the you know, 0:07:29.520 --> 0:07:32.200 maybe in four but I doubt that will happen this year. 0:07:32.280 --> 0:07:34.240 Maybe one at the end of the year, but no 0:07:34.320 --> 0:07:36.920 more than that. Well, it's a great point. You know, 0:07:36.960 --> 0:07:40.360 we've all been conditioned to sort of assume that FED 0:07:40.400 --> 0:07:44.480 policy is joined at the hip to that two inflation target. 0:07:44.880 --> 0:07:48.040 But is there sort of you know, some space between 0:07:48.080 --> 0:07:51.560 those now where you know, the FED may no longer 0:07:51.640 --> 0:07:54.320 think of two as mission accomplished. You know, if they 0:07:54.360 --> 0:07:57.880 get that PC or core pc actually below the level 0:07:58.120 --> 0:08:01.920 of the FED funds rate, but higher than is that 0:08:01.960 --> 0:08:03.800 sort of mission accomplished for them, do you think? So? 0:08:03.960 --> 0:08:06.440 You know, there's this view in the markets that a 0:08:06.480 --> 0:08:09.240 few a few of the a few people have spoken about, 0:08:09.280 --> 0:08:11.640 and I believe I heard this um in one of 0:08:11.680 --> 0:08:15.080 your other podcasts as well, that you know, the FED 0:08:15.160 --> 0:08:20.400 may revise up their target to something significantly above two. 0:08:20.920 --> 0:08:23.600 I don't think that will happen. I don't think they're 0:08:23.600 --> 0:08:26.200 going to revise it meaningfully higher. And I think, you know, 0:08:26.280 --> 0:08:29.480 every time the chair gets asked about their flexible average 0:08:29.480 --> 0:08:32.199 and facion targeting their faith policy, remember how much we 0:08:32.280 --> 0:08:36.680 obsessed about that in the pre pandemic era when inflation 0:08:36.720 --> 0:08:39.920 was below two percent UM. So I don't think they'll 0:08:39.960 --> 0:08:43.520 revise it how higher. However, what I think will happen 0:08:44.320 --> 0:08:49.680 is that even before inflation gets back to below two percent, 0:08:50.400 --> 0:08:53.240 the Fed will pause on their rate hiking path. They 0:08:53.280 --> 0:08:57.040 will do that because they will have seen significant improvement 0:08:57.440 --> 0:08:59.719 on the path of policy. So we you know, just 0:09:00.120 --> 0:09:03.040 this next month's CPI print, which will come out next week, 0:09:03.400 --> 0:09:07.200 I think we'll already see headline CPI coming down to 0:09:07.360 --> 0:09:10.840 a seven handle, So that's significantly lower than the nine 0:09:10.880 --> 0:09:14.040 is percent that we saw. Core inflation will probably come 0:09:14.080 --> 0:09:16.960 down to just about six maybe, I mean, if we're lucky, 0:09:16.960 --> 0:09:19.480 maybe a five point nine, but just about six, I think. 0:09:20.120 --> 0:09:23.319 And then as we look towards you know, May of 0:09:23.520 --> 0:09:26.120 next day, I think it's likely that we could see 0:09:26.160 --> 0:09:28.480 sort of a high three, like up three point seven 0:09:28.559 --> 0:09:31.120 or so. So it's a lot of progress from where 0:09:31.160 --> 0:09:34.160 we come from. But it's not the two percent that 0:09:34.160 --> 0:09:36.600 they're looking for, and I think they have to be 0:09:36.720 --> 0:09:40.120 okay with that as long as the direction of travel 0:09:41.000 --> 0:09:44.080 is in the right direction. So if the direction of travel, 0:09:44.400 --> 0:09:49.080 especially on a core x of shelter, is in the 0:09:49.280 --> 0:09:54.040 right direction, I think they will definitely be okay to pause, 0:09:54.440 --> 0:09:57.080 but not easy. And then let's talk a little bit 0:09:57.080 --> 0:10:00.439 more about what you're seeing. Because in your side for 0:10:00.559 --> 0:10:03.320 next year, you say that the investing regime we have 0:10:03.480 --> 0:10:06.480 long known has changed, and then you lay out your themes. 0:10:06.520 --> 0:10:09.360 So maybe you can just walk us through your thinking. Sure, 0:10:09.520 --> 0:10:12.440 thank you for bringing up the investment Investment Guide. So 0:10:12.480 --> 0:10:16.040 we published that last week November three year. It is 0:10:16.160 --> 0:10:20.959 our themes for twenty three and I think it's particularly exciting. Well, 0:10:21.000 --> 0:10:23.560 I would think so because my team and I, you know, 0:10:23.679 --> 0:10:25.880 spend a lot of time and effort on this. But 0:10:25.960 --> 0:10:30.240 I think it's particularly exciting thinking about twenty three now 0:10:30.480 --> 0:10:34.920 because of the rough year two was like no doubt 0:10:35.000 --> 0:10:37.040 unless you were in cash, and if you were privileged 0:10:37.120 --> 0:10:39.600 enough to be in cash, um, if you were in 0:10:39.640 --> 0:10:42.400 any other part of the market. I guess outside of energy, 0:10:42.960 --> 0:10:46.120 you've had a really tough go at it and I 0:10:46.160 --> 0:10:50.120 think while we sort of swallow that, it has also 0:10:50.280 --> 0:10:54.080 created this incredible opportunity for the year ahead. And and 0:10:54.120 --> 0:10:57.400 nowhere is that more prevalent than in the fixed income markets. 0:10:57.559 --> 0:11:00.000 And we spend a lot of the report actually talking 0:11:00.040 --> 0:11:03.280 about that, but broadly, you know, as you lay Abradana, 0:11:03.480 --> 0:11:06.800 one of the things that we we start off talking 0:11:06.800 --> 0:11:10.840 about is how this next six to twelve months and 0:11:10.880 --> 0:11:13.000 you know, we're not looking past that, but at least 0:11:13.000 --> 0:11:15.120 the next one six to twelve months is going to 0:11:15.200 --> 0:11:20.200 be very different than the previous regime of a very 0:11:20.240 --> 0:11:25.160 accommodative central bank that is poised to cut rates at 0:11:25.200 --> 0:11:28.800 any hint of an economic slowdown. And I think we 0:11:28.880 --> 0:11:32.760 are now grappling with a central bank, or for that matter, 0:11:32.840 --> 0:11:37.600 we're grappling with a capital market where interest rates are 0:11:37.800 --> 0:11:40.560 higher for longer, and that is the new normal. It 0:11:40.679 --> 0:11:43.560 is not the lower for normal, lower for longer that 0:11:43.679 --> 0:11:46.360 we have gotten used to, which of course, you know, 0:11:46.520 --> 0:11:49.720 had its own ramifications on where in the equity market 0:11:49.760 --> 0:11:52.240 you want to invest or what that means for returns 0:11:52.240 --> 0:11:57.080 and fixed income. I think understanding that for the near term, 0:11:57.200 --> 0:12:01.160 with inflation remaining above the FED style, get that rates 0:12:01.160 --> 0:12:04.520 are going to stay high and where you should allegate 0:12:04.640 --> 0:12:08.040 too is really profound, and that's what we're focused on 0:12:08.040 --> 0:12:17.400 on the investor guy. So how do are we thinking 0:12:17.400 --> 0:12:22.079 about sort of the growth versus value trade in that scenario? Um? 0:12:22.120 --> 0:12:24.320 You know, is is it time to keep in that 0:12:24.520 --> 0:12:27.360 value and and sort of everything but tecking growth basket 0:12:28.120 --> 0:12:32.120 going in absolutely, Mike, that's actually our you know, second 0:12:32.200 --> 0:12:34.880 theme our first team, which I'm hopeful that we'll talk 0:12:34.920 --> 0:12:36.839 a little bit more about, is the role of bonds 0:12:36.840 --> 0:12:40.280 in a portfolio and how it's significantly shifted UH this 0:12:40.360 --> 0:12:43.480 year and will be much more meaningful in three. But 0:12:44.200 --> 0:12:47.760 second theme is around this idea that you know, whenever 0:12:47.760 --> 0:12:50.960 I'm talking to clients and they're looking to hear our 0:12:51.080 --> 0:12:53.560 views on the equity market, they always want to know 0:12:53.679 --> 0:12:56.320 around you know, when should I get back into the 0:12:56.400 --> 0:13:01.480 growth trade? And historically, obviously, you know, when we've gone 0:13:02.000 --> 0:13:05.800 into slow down periods where we've either been forecasting a 0:13:05.880 --> 0:13:09.800 recession or we've been in a recession, growth has obviously 0:13:09.880 --> 0:13:13.240 led the way. But that's been because that's always the 0:13:13.320 --> 0:13:17.439 time when the FED steps in and cuts rates meaningfully, 0:13:18.000 --> 0:13:22.360 sometimes even bringing real rates to negative territory. And that 0:13:22.400 --> 0:13:26.960 has been very very beneficial for the growth part of 0:13:26.960 --> 0:13:30.240 the equity market. But this time it's a new regime 0:13:30.400 --> 0:13:32.800 where at least again for the next six to twelve months, 0:13:32.800 --> 0:13:35.040 the FED has told us over and over again that 0:13:35.080 --> 0:13:40.040 they are keeping rates at a higher level for longer, 0:13:40.520 --> 0:13:44.280 and that's actually better, we think for the value segments 0:13:44.360 --> 0:13:47.280 of the market, so um at least for the near term, 0:13:47.360 --> 0:13:51.319 until we expect the FED to start to cut rates, 0:13:51.360 --> 0:13:53.920 to begin on their cutting cycle, which we do not 0:13:54.080 --> 0:13:56.400 think is going to be the case this year. We 0:13:56.480 --> 0:13:59.880 think that value, much like this year, will outperform in 0:14:00.000 --> 0:14:02.959 a higher rate regene. Now we can certainly and if 0:14:03.000 --> 0:14:05.199 this does happen, if we feel like the economy is 0:14:05.240 --> 0:14:08.600 slowing down much more meaningfully or inflation has come back 0:14:08.679 --> 0:14:11.559 down much more meaningfully than is our base case or 0:14:11.600 --> 0:14:13.920 our forecast right now. Of course, that could shift if 0:14:13.960 --> 0:14:16.160 the FED were to begin to cut rates back down 0:14:16.559 --> 0:14:18.680 um to zero or even just back down to two 0:14:18.679 --> 0:14:20.440 percent or something like that, But that is not the 0:14:20.480 --> 0:14:22.760 card right now. I think we are going to at 0:14:22.840 --> 0:14:25.880 least for the next few months, actually see higher interest 0:14:25.960 --> 0:14:29.160 rates from the BED, perhaps at the end of first quarter, 0:14:29.720 --> 0:14:33.239 and again in that period. You want to be allocated 0:14:33.280 --> 0:14:36.960 to the value part of the equity market with tickers 0:14:36.960 --> 0:14:38.680 such as sort of you know I W D or 0:14:38.720 --> 0:14:43.200 I V which give you that allocation to broader value 0:14:43.200 --> 0:14:45.400 segments of the market, or something like a V l 0:14:45.440 --> 0:14:48.520 U E, which again is a value factor that gives 0:14:48.520 --> 0:14:51.600 you exposure to those deep value names. And we saw 0:14:51.640 --> 0:14:54.240 that this year. We saw sort of that outperformance of 0:14:54.240 --> 0:14:58.600 minimum volatility and value and to a certain extent, at 0:14:58.640 --> 0:15:00.920 least in the beginning of next day, I think that 0:15:01.080 --> 0:15:05.800 minimum volatility and value can outperform. And then by the 0:15:05.960 --> 0:15:08.040 end of next day, and you know, hopefully we can 0:15:08.080 --> 0:15:11.040 have another conversation then. But by the end of next day, 0:15:11.040 --> 0:15:13.280 if we do see that the FED is stepping in 0:15:13.840 --> 0:15:16.480 and getting ready to ease rates, we can talk about 0:15:16.560 --> 0:15:19.200 if it's time to go into growth and where and growth. 0:15:19.240 --> 0:15:21.520 I think that will be another exciting conversation. Not all 0:15:21.640 --> 0:15:25.280 growth will be behaved the same way. They'll certainly be 0:15:25.360 --> 0:15:29.280 pockets of high quality tech such as semiconductors, such as 0:15:29.360 --> 0:15:31.680 robotics that will do really well, and there will be 0:15:31.760 --> 0:15:35.880 other pockets that will not. So can I ask you 0:15:36.160 --> 0:15:39.480 follow up on this which is so earlier this year 0:15:39.520 --> 0:15:42.920 we obviously had a couple of different rallies in the 0:15:42.960 --> 0:15:46.440 stock market that then sort of petered out, they didn't 0:15:46.520 --> 0:15:49.720 end up holding. And I think during one of the 0:15:49.720 --> 0:15:53.480 earlier ones, maybe sometime over the summer, we actually saw 0:15:54.080 --> 0:15:55.880 when we saw the rally happening, we saw a lot 0:15:55.880 --> 0:16:00.000 of speculative names also rallying meme stocks and tech versus 0:16:00.080 --> 0:16:02.640 is what we're seeing now where we are actually seeing 0:16:02.680 --> 0:16:04.800 some of those value names doing a little bit better. 0:16:04.920 --> 0:16:06.720 I'm just wondering if you think that that's a sign 0:16:06.800 --> 0:16:09.840 that maybe the rally is a bit stronger, more broad 0:16:09.880 --> 0:16:13.560 based versus just seeing you know, tech coming back for 0:16:13.680 --> 0:16:15.760 a couple of days or a couple of weeks. Yeah, 0:16:15.880 --> 0:16:18.400 you're absolutely right. I think there have been seven periods 0:16:18.440 --> 0:16:21.080 the sale when the market and when I say market, 0:16:21.120 --> 0:16:25.400 I mean IVV, just the broad index SMP has rallied 0:16:25.440 --> 0:16:28.560 over seven percent, and we actually saw that, not not 0:16:28.640 --> 0:16:31.400 including the last couple of days, but from October twelve 0:16:31.520 --> 0:16:34.440 to sort of the beginning of this week, Um, we 0:16:34.520 --> 0:16:37.240 saw another massive rally in the market. And a lot 0:16:37.360 --> 0:16:41.920 of that is actually around the pricing in of a pivot, right, 0:16:41.960 --> 0:16:44.680 So every time that has happened, and obviously the most 0:16:44.720 --> 0:16:49.520 recent one was because of the CPI number followed by 0:16:49.640 --> 0:16:52.360 the last day of November when the FEDS spoke at 0:16:52.600 --> 0:16:55.280 UM at the Brookings Institute in November thirty year. Then 0:16:55.280 --> 0:16:58.480 again that was all pricing in a pivot of policy. 0:16:58.520 --> 0:17:00.640 And of course if you're pricing in a pig of policy, 0:17:00.680 --> 0:17:04.159 you do have sort of that growth led rally and 0:17:04.200 --> 0:17:06.520 you also have the you know, what's been interesting to 0:17:06.560 --> 0:17:09.680 me is sort of the most shorted names that rally 0:17:09.720 --> 0:17:13.280 the most, because obviously that's where positioning is the most offsides. 0:17:13.680 --> 0:17:15.879 We also saw this back in the sort of the 0:17:15.960 --> 0:17:19.400 July two or June two August rally, right, and that 0:17:19.400 --> 0:17:22.919 that rally was what se which ended right before the 0:17:23.040 --> 0:17:26.720 Jackson Hole meeting. And again we saw the same thing 0:17:26.800 --> 0:17:31.320 where there was a pivot narrative getting priced in very prematurely. 0:17:31.359 --> 0:17:34.399 There's no pivot in sight for now. And again you 0:17:34.440 --> 0:17:36.960 saw that those areas of the market that we're probably 0:17:37.000 --> 0:17:40.119 the least owned, that we're pricing in that pivot, and 0:17:40.240 --> 0:17:42.880 for now, this is not a pivot. For now. The 0:17:42.920 --> 0:17:46.639 best we can get early next year is perhaps a pause. 0:17:47.160 --> 0:17:49.720 To me, a pivot means that the FED is going 0:17:49.760 --> 0:17:52.320 to turn around and cut rates we're not expecting that, 0:17:52.400 --> 0:17:55.080 and therefore those value names, looking at a v LUV, 0:17:55.280 --> 0:17:58.160 looking at an IVY, looking at a nightputy really makes 0:17:58.200 --> 0:18:00.200 a lot of sense in a portfolio. And I'll be 0:18:00.320 --> 0:18:04.200 very honest, depending on how this data for CPI next 0:18:04.240 --> 0:18:07.439 week comes out, if we get another point too or 0:18:07.480 --> 0:18:09.919 even a point three, and if we get a core 0:18:10.520 --> 0:18:13.760 UH Services ex Shelter component, which is the one that 0:18:13.800 --> 0:18:17.280 I was talking about earlier, having another sort of weakest print. 0:18:17.320 --> 0:18:19.240 It was a little less than point to last month, 0:18:19.280 --> 0:18:22.919 and we have another point to and core UH Services 0:18:23.000 --> 0:18:26.439 ex Shelter, I think that that can be a huge 0:18:26.560 --> 0:18:30.920 catalyst going into your end. Everyone wants the Santa rally UM. 0:18:30.960 --> 0:18:34.119 That can be a catalyst going into between now and 0:18:34.160 --> 0:18:36.800 the end of January. We can see that, but I 0:18:36.880 --> 0:18:39.800 don't think that's going to be a lasting rally because 0:18:39.840 --> 0:18:43.480 I think that earnings growth will probably get revised lower 0:18:43.760 --> 0:18:48.000 as we see many of the UM analysts starting their 0:18:48.000 --> 0:18:50.840 revision for twenty three. We're going to see that in 0:18:50.880 --> 0:18:53.040 the earning season. That is going to be with us 0:18:53.080 --> 0:18:55.560 in the end of January, so we can have a 0:18:55.640 --> 0:18:57.760 period of market rally. For sure. It can be a 0:18:57.800 --> 0:19:01.040 relief rally, but it is not believed to be a 0:19:01.119 --> 0:19:04.600 groat lad start of a new cycle. I think that 0:19:04.720 --> 0:19:07.560 is still far away from us. Well, thank you for 0:19:07.680 --> 0:19:10.440 defining pivot for us. It's funny how much debate there 0:19:10.560 --> 0:19:13.560 is over the meaning of the word. Everybody uses it, yeah, 0:19:13.600 --> 0:19:16.520 without defining it. I think it's the basketball players that 0:19:16.560 --> 0:19:19.040 are messing everything up because you can pivot. You can 0:19:19.040 --> 0:19:23.000 pivot in basketball without doing the full money. Just throw 0:19:23.080 --> 0:19:25.000 that out there. One really interesting point you make in 0:19:25.040 --> 0:19:28.800 this look ahead pieces bonds are back. Would have ever thought? 0:19:28.800 --> 0:19:31.040 Who would have ever thought we'd be talking about bonds 0:19:31.080 --> 0:19:33.440 as a and you have a you have a great 0:19:33.480 --> 0:19:37.160 acronym for it. I think it's bar It's barbed. Yeah, 0:19:37.400 --> 0:19:40.240 so we went from Tina to Barb. Thank you for 0:19:41.359 --> 0:19:46.560 Bonds are back. Bonds are back, Bonds are back. Okay, yeah, 0:19:46.720 --> 0:19:48.639 bonds are back. So we you know, lived in a 0:19:48.640 --> 0:19:52.040 decade and a half of the of the Tina world, 0:19:52.040 --> 0:19:54.440 which of course we know is there is no alternative, 0:19:55.000 --> 0:19:58.080 and now we are about to embark upon actually we 0:19:58.160 --> 0:20:01.240 have embarked upon it since I first started talking about 0:20:01.280 --> 0:20:03.720 this barb or actually the first thing that I was 0:20:03.760 --> 0:20:06.080 talking about a lot was um I called it the 0:20:06.160 --> 0:20:09.280 yield of dreams. So it was our yield of dreams 0:20:09.320 --> 0:20:12.080 that we were getting when you could earn about six 0:20:12.119 --> 0:20:13.960 and a half percent and something like an i G 0:20:14.240 --> 0:20:17.560 s B which gives you exposure to the one to 0:20:17.680 --> 0:20:21.639 five year part of investment grade corporate credit, and to 0:20:21.800 --> 0:20:25.200 earn over six percent was the stuff of dreams because remember, 0:20:25.320 --> 0:20:29.120 not that long ago we were going out into high 0:20:29.200 --> 0:20:32.080 yield and emerging markets to earn that. We've lived through that, 0:20:32.200 --> 0:20:34.679 not that long ago, so we remember what it's like 0:20:34.840 --> 0:20:37.600 to crave yield and live in a world where there 0:20:37.680 --> 0:20:40.480 is an alternative but to go out of the risk spectrum. 0:20:40.560 --> 0:20:43.960 And now it is so exciting, I think, to be 0:20:44.040 --> 0:20:48.080 in a world where there are some incredible opportunities staying 0:20:48.200 --> 0:20:53.080 very high in quality, short in duration in the fixed 0:20:53.080 --> 0:20:56.840 income markets and on yields that we could have only 0:20:56.920 --> 0:21:00.119 dreamed about. Because bonds are back, because it's barbed, and 0:21:00.160 --> 0:21:03.000 I'm talking to your treasuries here, I'm talking one to 0:21:03.080 --> 0:21:05.159 five year i G credit, something like an i G 0:21:05.400 --> 0:21:08.920 s V or something like an sage why or even 0:21:08.920 --> 0:21:11.679 mortgages something like an MBB which you can earn you 0:21:11.680 --> 0:21:14.840 about four point six percent yield without taking again too 0:21:14.920 --> 0:21:19.320 much credit risks, staying very up in quality and earning 0:21:19.640 --> 0:21:24.199 significant yield in your portfolio, and especially having that in 0:21:24.240 --> 0:21:28.280 a world where, um, you know, growth is going to 0:21:28.280 --> 0:21:31.040 slow down. Now, whether we're immediately going to fall into 0:21:31.040 --> 0:21:33.280 a recession or not, you know, we don't know. I 0:21:33.320 --> 0:21:38.399 think the signs are showing a recession. But even without 0:21:38.440 --> 0:21:41.639 all of that, I think owning bonds in your portfolio 0:21:41.720 --> 0:21:44.560 where you have historically been sixty forty two equities, I 0:21:44.600 --> 0:21:49.080 wonder if you're supposed to be sixty forty two bonds right, Well, 0:21:49.119 --> 0:21:52.080 the let's unpack a little bit. You're thinking on the 0:21:52.080 --> 0:21:54.879 the m B B, the uh, the mbs E T 0:21:55.040 --> 0:22:00.159 F T. I feel like when people hear mortgages, uh know, 0:22:00.480 --> 0:22:03.399 there's there's a little bit of a yeah and a 0:22:03.440 --> 0:22:05.400 little bit of a fear. And and then that scenario 0:22:05.480 --> 0:22:08.119 laid out where if we do have, uh you know, 0:22:08.840 --> 0:22:11.040 a sort of a deeper recession than people are worried about, 0:22:11.080 --> 0:22:14.520 if we do see that uptick in unemployment and delinquencies 0:22:14.560 --> 0:22:18.280