WEBVTT - A Closer Look At Markets, Focus On The Fed 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. Let's bring in Tom 0:00:22.000 --> 0:00:25.680 string Fellow, chief investment strategist for Argent Trust Company. Tom, 0:00:25.720 --> 0:00:27.880 what do you make of this market this week? It 0:00:28.080 --> 0:00:30.440 feels it looks like a by the dip? Should we 0:00:30.440 --> 0:00:33.680 read anything more into that? I think she was headed 0:00:33.840 --> 0:00:36.160 right there. And you know, just going back and looking 0:00:36.200 --> 0:00:39.720 at what's happening in last oh year or so, since 0:00:39.960 --> 0:00:42.559 about this time last year, buying the dip, it made 0:00:42.600 --> 0:00:44.680 a lot of sense. You know, the market dropped down 0:00:44.720 --> 0:00:47.479 about the fifty day moving average and you'd see support 0:00:47.520 --> 0:00:50.040 coming right in and then all of a sudden, you know, 0:00:50.080 --> 0:00:53.360 we started hearing about a contagion, uh that you know, 0:00:53.400 --> 0:00:55.800 for many it seemed to come out of nowhere. You know, 0:00:55.960 --> 0:00:59.480 that really started look hitting the markets on Monday and 0:01:00.120 --> 0:01:03.480 the question of buying the dip of you know, people 0:01:03.520 --> 0:01:06.039 started you know, scratching their head. But you know today 0:01:06.040 --> 0:01:10.280 it looks like it might be another reversal and and uh, 0:01:10.520 --> 0:01:14.000 you know, I'll say by the dip until it's proven otherwise. 0:01:14.120 --> 0:01:17.960 And right now, I'd say markets are kind of excited 0:01:18.000 --> 0:01:21.800 about you know, it's kind of a stealth day for investors, 0:01:21.800 --> 0:01:24.399 but it's a pretty big day for the markets. We 0:01:24.480 --> 0:01:29.679 have had a number of um, big market commentators come 0:01:29.680 --> 0:01:32.760 out and say this dip could be could get bigger. 0:01:33.040 --> 0:01:35.640 Scott Minored, for example, was telling me yesterday from Guggenheim 0:01:36.000 --> 0:01:39.360 he thinks we could go down ten maybe. And that 0:01:40.240 --> 0:01:43.720 isn't dramatic compared to what we've heard from a lot 0:01:43.760 --> 0:01:46.839 of the big banks on Wall Street. So what what 0:01:46.840 --> 0:01:50.480 what do you think a correction will look like here? Yeah, 0:01:50.560 --> 0:01:53.600 corrections are inevitable, you know, we we talked about them. 0:01:53.600 --> 0:01:57.080 They're healthy for the market. It it gives investors time 0:01:57.280 --> 0:02:00.920 to kind of reassess where you knowings make sense and 0:02:00.960 --> 0:02:03.920 we're realocate But the fact is when it happens, you know, 0:02:03.960 --> 0:02:06.760 we all cringe and you know, scrambled from monitors and 0:02:06.800 --> 0:02:11.040 talk two clients. But yeah, we always talk about you know, 0:02:11.120 --> 0:02:14.640 what's normal and what's healthy is in that ten correction 0:02:15.160 --> 0:02:17.840 where you get into problems when you start realizing that 0:02:18.280 --> 0:02:20.480 ten percent on a market level of day is a 0:02:20.480 --> 0:02:23.400 little more significant than you know a few years back. 0:02:24.280 --> 0:02:27.560 Uh But I still think that you know, there's going 0:02:27.600 --> 0:02:31.120 to be something that it's going to be an outlier event. 0:02:31.360 --> 0:02:33.600 It's not going to be something expected that's going to 0:02:33.680 --> 0:02:36.800 cause market nervousness, and it's not going to be a 0:02:36.840 --> 0:02:38.960 one or two day events. You know, there will be 0:02:39.040 --> 0:02:42.519 selloffs and that will give us an opportunity to to 0:02:43.120 --> 0:02:45.560 really look at the markets. But you know, when you 0:02:45.560 --> 0:02:47.880 still look at what the underlying and support for the 0:02:47.919 --> 0:02:51.799 market is, we still have you know, strong earnings growth. 0:02:51.880 --> 0:02:55.280 It's slowing down, but you know it's certainly above trend 0:02:55.400 --> 0:02:57.799 from what we have seen over the last several years. 0:02:57.919 --> 0:03:02.280 We've still got uh fed that's giving us liquidity, which 0:03:02.720 --> 0:03:05.480 you know, we'll find out what it really means, you 0:03:05.520 --> 0:03:08.040 know in a few more hours, you know from you 0:03:08.040 --> 0:03:10.720 know what German Powell says, and you know, you know, 0:03:10.800 --> 0:03:12.960 let's just not forget that. You know, when we're sitting 0:03:12.960 --> 0:03:16.760 at rates near zero, investors are looking for places to 0:03:16.840 --> 0:03:21.800 park cash with some upside opportunities. So you know, corrections inevitable. 0:03:22.080 --> 0:03:24.160 You know, we're going to scramble and trying to understand 0:03:24.200 --> 0:03:27.560 what it means this time. But you know, I don't 0:03:27.600 --> 0:03:32.800 look for you know, that recessionary impact anytime since. All right, Tom, So, 0:03:33.000 --> 0:03:35.080 to the extent that people have what Tom Keene will 0:03:35.080 --> 0:03:37.280 call the courage to be in the market, are you 0:03:37.320 --> 0:03:39.720 more inclined on the equity side to be in kind 0:03:39.720 --> 0:03:44.240 of the cyclical maybe a reopening type scenario, or are 0:03:44.320 --> 0:03:47.280 you comfortable with what has worked for better part of 0:03:47.280 --> 0:03:50.920 a decade, the big top line growth text stories. You know, 0:03:50.960 --> 0:03:53.160 I think it's it's really is a combination both. And 0:03:53.200 --> 0:03:55.160 the reason is that, you know, when you look at 0:03:55.200 --> 0:03:59.400 what has been you know, sustainable over the last several months, 0:03:59.440 --> 0:04:03.440 you know, once we got past the pandemic clearance and 0:04:03.480 --> 0:04:05.560 we solve you know, stay at home, work at home 0:04:05.600 --> 0:04:08.440 stocks really moving. A number of those stocks still have 0:04:08.640 --> 0:04:11.600 good growth prospects and they're changing the way we work 0:04:11.640 --> 0:04:15.160 and we live and we play. Those are good quality stocks. 0:04:15.160 --> 0:04:19.440 But meanwhile, those cycnical stocks are starting to come back. Uh. 0:04:19.480 --> 0:04:22.360 Just jumping on a plane over the weekend, looked around, 0:04:23.040 --> 0:04:26.120 flights were full, airplanes are full, and lo and behold 0:04:26.160 --> 0:04:28.440 everybody's wearing masks, so there's kind of a new normal. 0:04:28.520 --> 0:04:31.599 Their cynicles are coming in. You just talked about the 0:04:31.720 --> 0:04:34.599 energy markets on a rally. I think, you know, that's 0:04:34.920 --> 0:04:38.400 really reading and the fact that economies are coming back. 0:04:38.480 --> 0:04:41.239 But it's going to be looking a little bit different 0:04:41.320 --> 0:04:44.880 now as we adjust to you know, whatever COVID variant 0:04:45.080 --> 0:04:48.839 looks like. You know, we're starting to see still manufacturing, 0:04:48.920 --> 0:04:51.520 you know, coming up to all time high, so the 0:04:51.520 --> 0:04:54.760 economies are building up to you know, what looks like 0:04:55.120 --> 0:04:58.800 traction in the economy. I think that looks a little 0:04:58.839 --> 0:05:01.479 bit different than saw a year ago, but it's going 0:05:01.520 --> 0:05:03.960 to be kind of I think a bifurcated of both 0:05:04.400 --> 0:05:08.719 good quality growth and followed by good quality value stocks 0:05:08.720 --> 0:05:11.120 that have you know, like a growth factor in them. 0:05:11.160 --> 0:05:14.520 That's going to really explain how this economy is going 0:05:14.560 --> 0:05:17.640 to pull out and you know, start maintaining its traction 0:05:17.680 --> 0:05:20.960 that we've seen for the last several months. Tom, thanks 0:05:21.000 --> 0:05:23.120 so much for joining us. Tom string Fellow there he 0:05:23.200 --> 0:05:28.120 is chief investment strategist at Argent Trust Company, talking to 0:05:28.200 --> 0:05:32.080 us about his outlook ahead of the Federal Reserve finishing 0:05:32.080 --> 0:05:34.040 their two day meeting today and we are going to 0:05:34.120 --> 0:05:37.040 hear from Jerome Powell m a little bit later on. 0:05:37.120 --> 0:05:43.560 I guess it is. What's just about four hours from now, Well, 0:05:43.600 --> 0:05:46.000 it is FED Day, and that's a big day here 0:05:46.040 --> 0:05:49.880 at Bloomberg Television or radio. So we're gonna be all 0:05:49.960 --> 0:05:52.920 over that said on this side, it's big. It's big. 0:05:52.960 --> 0:05:55.279 It's kind of like you know, playoff day for ESPN 0:05:55.400 --> 0:05:57.720 or something. So it's a big day here. We certainly can. 0:05:58.000 --> 0:06:00.320 It comes once a month though, I know, and that's 0:06:00.320 --> 0:06:03.880 what we love about it. Once a month. All right, 0:06:03.920 --> 0:06:05.440 let's bring in an expert that kind of help us 0:06:05.520 --> 0:06:07.760 kind of preview what we might hear and see and read. 0:06:07.839 --> 0:06:11.120 Danielle di Martino, Booth CEO of Quill CEEO on Director 0:06:11.160 --> 0:06:15.000 of Intelligence for Quill Intelligence, also former advisor at the 0:06:15.040 --> 0:06:17.719 Dallas Federal Reserve, in a Bloomberg Opinion contributor. And the 0:06:17.839 --> 0:06:21.719 highlight is she's actually in the Bloomberg Interactor Broker studio today. 0:06:21.920 --> 0:06:26.400 It's great. Yes, it's so cool. And I know on 0:06:26.400 --> 0:06:29.479 Bloomberg Television, Matt Jeff Curry from Goldman Sax He's also 0:06:29.520 --> 0:06:31.920 in the Bloomberg Television studio. So people are coming out 0:06:32.200 --> 0:06:35.040 and their count coming into our offices, coming into our studios, 0:06:35.040 --> 0:06:37.920 which makes it so much better. Uh So, Danielle, great 0:06:37.960 --> 0:06:40.000 to see you give us a sense of what we 0:06:40.080 --> 0:06:43.320 should be looking for today. It feels like the tapering 0:06:43.320 --> 0:06:46.560 discussion has been so well telegraphed. What should I be 0:06:46.680 --> 0:06:50.200 looking for? It has been so well telegraphed. But on 0:06:50.240 --> 0:06:53.560 the other hand, and I'm starting I sound like an economist. 0:06:53.839 --> 0:06:56.200 But on the other hand, J. Powell's got a lot 0:06:56.320 --> 0:06:58.719 of reasons to be reticent, and I don't think that 0:06:58.760 --> 0:07:01.000 there's a great enough appreciated ation for that right now. 0:07:01.520 --> 0:07:04.640 Uh you know, in the post COVID world, we've forgotten 0:07:04.760 --> 0:07:08.640 what FED traditions are. And there are certain things that 0:07:08.680 --> 0:07:12.000 the FED does not do, regardless of where we are 0:07:12.040 --> 0:07:16.320 in economic cycles and before or after pandemics. They don't 0:07:16.400 --> 0:07:18.600 step into the in the middle of any type of 0:07:18.600 --> 0:07:22.560 political event or political morass, the debt ceiling, the budget resolution, 0:07:23.160 --> 0:07:26.520 the drama that's being played out in the Beltway. The 0:07:26.520 --> 0:07:29.920 FED does not make major policy shifts in the midst 0:07:30.040 --> 0:07:32.960 That is the tradition. And the FED also, if you 0:07:33.040 --> 0:07:35.920 look back through history, does not make big moves in 0:07:36.000 --> 0:07:40.680 the month of December. So I understand the telegraphing, the 0:07:40.760 --> 0:07:44.240 broadcasting the fact that the market is ready, the appearance 0:07:44.280 --> 0:07:46.520 that we're not going to get a taper tantrum, because 0:07:46.640 --> 0:07:48.480 if we were going to get a tape taper tantrum, 0:07:48.720 --> 0:07:51.520 we would have gotten that when J. Powell first acknowledged 0:07:51.640 --> 0:07:54.520 that the discussion had started, and that really didn't happen. 0:07:55.200 --> 0:07:57.640 But again, the flip side of it is, there are 0:07:57.680 --> 0:08:01.800 certain traditions and we're starting to see foreclosures rise. Right 0:08:01.800 --> 0:08:04.920 before I stepped into this into the studio, Cox Automotive 0:08:04.960 --> 0:08:08.040 came out with a report and said that of potential 0:08:08.080 --> 0:08:10.720 auto buyers are now going to pull back and wait 0:08:10.920 --> 0:08:14.920 because of prices, not low supply. We're hearing the same 0:08:14.960 --> 0:08:18.560 thing coming out on housing, that prices are becoming a deterrent, 0:08:19.000 --> 0:08:22.240 not just low supply. So there's a different narrative that 0:08:22.400 --> 0:08:25.760 started to emerge, and J Pal will be paying attention 0:08:25.760 --> 0:08:29.240 to that, especially as you hear one company after another 0:08:29.440 --> 0:08:33.880 talk about the labor pool refilling and more applicants um 0:08:33.920 --> 0:08:36.360 putting in, putting in for some of these job openings. 0:08:36.440 --> 0:08:39.360 He'll be looking for wage inflation to fall. Yeah, we 0:08:39.360 --> 0:08:42.959 we actually just had a headline Cross that existing home 0:08:43.080 --> 0:08:47.280 sales fell um two percent. And just this morning I 0:08:47.320 --> 0:08:49.880 was talking to a friend who decided not to buy 0:08:49.880 --> 0:08:54.120 a Kia because the dealer wanted ten grand over ms 0:08:54.240 --> 0:08:58.360 RP and wouldn't budge a Kia Akia. And what do 0:08:58.440 --> 0:09:00.200 they say? What do they say? That the cure for 0:09:00.280 --> 0:09:04.680 high prices is high prices? Yeah, well, I guess that's 0:09:04.720 --> 0:09:07.800 the case here. Um. You know, you've got so many 0:09:07.800 --> 0:09:15.640 other issues. Uh, You've got the China, the common prosperity crackdown. Um. 0:09:15.720 --> 0:09:18.800 You've got the supply chain snarl ups, which I guess 0:09:18.840 --> 0:09:22.680 are are are part of that high prices issue. Um, 0:09:22.800 --> 0:09:25.959 and you've got, um, the labor shortage. I wonder if 0:09:26.040 --> 0:09:29.160 especially the latter, what what's your take on the labor shortage? 0:09:29.200 --> 0:09:33.439 Now that we see extended unemployment benefits coming off, are 0:09:33.480 --> 0:09:37.920 we going to see the labor shortage ease again? Just 0:09:38.000 --> 0:09:41.640 this morning I read a laundry list of companies that 0:09:41.679 --> 0:09:44.920 have come out on calls and said that the shortage 0:09:44.960 --> 0:09:48.600 is alleviating before their very eyes, now that all fifty 0:09:48.679 --> 0:09:52.840 states UM have indeed stepped away from these programs. I 0:09:52.880 --> 0:09:56.880 live in Texas, where the supplemental benefits went away in July, 0:09:57.200 --> 0:09:59.480 and I can tell you just by driving around the 0:09:59.480 --> 0:10:01.880 Warren buff fit fashion and kicking the tires. I don't 0:10:01.920 --> 0:10:04.400 see as many help wanted signs as I want said. 0:10:04.520 --> 0:10:06.920 I'm not waiting as long in restaurants. I don't have 0:10:06.960 --> 0:10:08.800 to wait as long to get an uber or a lift. 0:10:09.040 --> 0:10:11.520 There are certain things that are just said. They had 0:10:11.559 --> 0:10:14.760 a huge spike in new drivers, so they've really added 0:10:14.760 --> 0:10:18.920 a ton and plus. But uber rates are up. Why not? Um? 0:10:19.559 --> 0:10:22.280 Sometimes that I've spent in Florida with my family, for example, 0:10:22.480 --> 0:10:24.559 I've heard people say I'm not going back to my 0:10:24.640 --> 0:10:26.880 job at Disney because I can make double that as 0:10:26.920 --> 0:10:30.480 a lift or an uber driver. Yeah. Well again far. 0:10:31.640 --> 0:10:34.319 But but to your question about Disney would be a 0:10:34.360 --> 0:10:36.480 lot more fun. I feel like Disney would be so fun, 0:10:36.559 --> 0:10:38.280 especially if you get to dressed up as the mouse. 0:10:38.679 --> 0:10:41.559 Okay when it's a hundred degrees in humit, Okay, let 0:10:41.559 --> 0:10:43.960 me get back to me on that. Um. But But 0:10:44.040 --> 0:10:46.560 the point is, this is what j. Powell has been 0:10:46.600 --> 0:10:49.640 waiting for. This is why he keeps saying, let me 0:10:49.679 --> 0:10:53.080 see September and October, let me see those non farm 0:10:53.120 --> 0:10:56.400 payroll reports come out before we make any big decisions. 0:10:56.400 --> 0:10:59.920 And again I will bring back to you the debt ceiling, 0:11:00.080 --> 0:11:04.120 and there are major implications we've just had come to 0:11:04.240 --> 0:11:08.720 light meeting minutes from an emergency Federal Open Market Committee 0:11:08.760 --> 0:11:13.319 from October two thousand thirteen. There is actually a blueprint 0:11:13.400 --> 0:11:16.880 for what the Fed can do to alleviate a potential 0:11:16.920 --> 0:11:21.280 debt default if extraordinary measures that Treasury Secretary Yellen is 0:11:21.320 --> 0:11:25.320 implementing or exhausted. You can, in theory but default on 0:11:25.480 --> 0:11:29.559 the treasuries that the FED owns, and really not it's 0:11:29.559 --> 0:11:33.320 called a strategic default, and and and and not technically default. 0:11:33.480 --> 0:11:35.760 Fitch and Moodies won't like it, though. What are the 0:11:35.840 --> 0:11:38.200 chances I was talking with Matt Winkler, or editor in 0:11:38.240 --> 0:11:41.040 chief emeritus about this this morning. What are the chances 0:11:41.120 --> 0:11:44.920 that the United States might, you know, not because we 0:11:45.040 --> 0:11:49.959 can't afford to, but for political reasons, miss an interest 0:11:50.000 --> 0:11:53.040 payment on its debt. Well, that was exactly what I 0:11:53.080 --> 0:11:56.800 was just describing. And again there is a blueprint that 0:11:56.840 --> 0:11:59.240 has been drawn up between the Treasury and the FED 0:11:59.600 --> 0:12:03.120 that ex blains how we would go about doing that. 0:12:03.200 --> 0:12:06.640 Because the first debt first default in the Fed's debt 0:12:06.720 --> 0:12:09.960 and then defaulted everyone else, just the Feds. It's just 0:12:10.000 --> 0:12:11.920 a quarter of the Treasury mark. They own a big 0:12:12.000 --> 0:12:14.640 chunk of it, so you can theoretically buy a lot 0:12:14.679 --> 0:12:18.240 of time. And you have to remember their accounting maneuvers. 0:12:18.240 --> 0:12:22.120 The FEDA Reserve remits treasury interest back to the Treasury 0:12:22.440 --> 0:12:25.720 once a year. That's how accounting it at the FED works. 0:12:25.800 --> 0:12:27.840 So as far as they're concerned, they're just moving money 0:12:27.880 --> 0:12:30.640 around on a ledger until the debt ceiling is resolved. 0:12:31.160 --> 0:12:33.640 All right. So one of the things I'm wondering if 0:12:33.640 --> 0:12:36.320 the FED is looking at the FED Chairman Pal's looking at, 0:12:36.400 --> 0:12:38.640 is we're hearing from many sectors of the economy in 0:12:38.679 --> 0:12:41.559 many companies, that's the supply chain. It's not getting better 0:12:41.840 --> 0:12:43.360 and it may even be getting worse. We take a 0:12:43.360 --> 0:12:45.280 look at the number of ships stopped off the coast 0:12:45.280 --> 0:12:48.800 of Los Angeles and Long Beach, and it's get it's growing, 0:12:49.240 --> 0:12:51.720 and we're getting into that killer, you know, kind of 0:12:52.160 --> 0:12:55.439 season of you know, shopping and Christmas and Holidays and 0:12:55.440 --> 0:12:58.120 a lot kind of stuff. Is that on their radar? Uh? 0:12:58.400 --> 0:13:02.360 It really is. And just listening to a lot of 0:13:02.360 --> 0:13:05.960 of manufacturers in the Texas area, the Houston port is 0:13:06.080 --> 0:13:10.280 hopping other ports companies are trying to get around that 0:13:10.600 --> 0:13:14.120 the three big West Coast port log jam because it's historic, 0:13:14.440 --> 0:13:17.600 it's it's it's as bad as it's ever been. And 0:13:18.120 --> 0:13:20.680 freight costs have become you know, comed about if they 0:13:20.760 --> 0:13:23.520 used to be a small line item, but they're enormous. 0:13:23.559 --> 0:13:25.920 So even though we're seeing iron ore prices come down, 0:13:25.960 --> 0:13:29.720 and obviously we've talked about lumber and corn, little bits 0:13:29.720 --> 0:13:33.439 and pieces here of input costs coming down, but freight 0:13:33.520 --> 0:13:38.440 searcharges and you can I'm hearing anecdotes of freight surviving 0:13:38.559 --> 0:13:41.880 and companies saying, if you want the merchandise, by the way, 0:13:42.000 --> 0:13:43.600 you're gonna have to pay up. It will be another 0:13:43.600 --> 0:13:46.720 fifty dollars. And some of these sitting there right Paul, 0:13:46.760 --> 0:13:49.559 weren't you saying, yes, yes, somebody had a shipment come 0:13:49.600 --> 0:13:51.800 in and it just sat in the port for two weeks. Yeah, 0:13:51.800 --> 0:13:53.280 it just sat in the port. It just sounds like 0:13:53.320 --> 0:13:56.400 something I guess we thought about this. Yeah, Okay, there's 0:13:56.400 --> 0:13:58.400 a supply chain, but it will work itself out as 0:13:58.440 --> 0:14:01.440 the world reopens. It seems to be a bigger issue, 0:14:01.440 --> 0:14:03.040 and again we're hearing it from more and more and 0:14:03.040 --> 0:14:08.040 more companies. Well, and I think on a broader level, 0:14:08.360 --> 0:14:10.880 I think that companies are also kind of starting to 0:14:11.040 --> 0:14:14.440 hide behind, for lack of a better term, the ability 0:14:14.480 --> 0:14:19.040 to really ramp up pricing, behind the auspices of this 0:14:19.200 --> 0:14:22.440 supply chain distruction. But again, pay attention to what's happening 0:14:22.520 --> 0:14:25.760 underneath the surface. Pay attention to things like Cox Automotives 0:14:25.760 --> 0:14:29.120 saying it ain't a supply issue. People, fifty percent of 0:14:30.040 --> 0:14:32.360 is a big percent. Fifty percent of buyers. And you're 0:14:32.400 --> 0:14:35.400 seeing this in the University of Michigan buying conditions for 0:14:35.440 --> 0:14:39.280 cars and houses. They're saying, Bosta, this is too much. 0:14:39.320 --> 0:14:42.160 I'm stepping back because of the price shock. Yeah. Interesting, alright, 0:14:42.200 --> 0:14:44.320 so much to look at there. Danielle di Martino, Booth 0:14:44.400 --> 0:14:47.320 CEO and Director of Intelligence for quill And Intelligence and 0:14:47.400 --> 0:14:49.800 former advisor of the Dallas Fota Reserve and a bloomerket 0:14:49.800 --> 0:14:54.920 opinion and contributor, thank you so much for joining us. Well, 0:14:54.960 --> 0:14:57.280 I guess the folks that were, you know, by the 0:14:57.320 --> 0:15:01.480 dip type of people, they were right again, the markets 0:15:01.560 --> 0:15:03.880 up over one percent here in the SMP and DOW. 0:15:04.320 --> 0:15:06.960 So there you go. Let's check in with Alan Adleman, 0:15:07.160 --> 0:15:10.040 Senior fund manager and senior Research annels for Frost Investment 0:15:10.040 --> 0:15:13.640 advisors have about five point one billion dollars in assets 0:15:13.720 --> 0:15:16.320 under management. Alan, it seems like to buy the dip. 0:15:16.400 --> 0:15:22.280 Folks were right again, is that your take, Paul, thank you, 0:15:22.400 --> 0:15:29.920 good morning. And I'm still not convinced. Frankly, Uh, the 0:15:30.000 --> 0:15:34.520 market to us feels a bit fatigued, just kind of 0:15:34.560 --> 0:15:36.840 given the rapid pace that we've seen over the last 0:15:37.640 --> 0:15:41.000 year or so. So a lot of our smart money 0:15:41.040 --> 0:15:45.680 investors and you know, we're engaged with a lot of investors, 0:15:45.720 --> 0:15:51.520 both institutional as well as individuals in Texas are actually 0:15:51.560 --> 0:15:55.680 looking to buy the dips. But the expectations are that 0:15:56.320 --> 0:15:59.160 the market is a bit fatigued, and we could see 0:15:59.200 --> 0:16:02.760 it Isptember going on October, and we could see a 0:16:02.760 --> 0:16:07.200 little bit more of a pullback we have seen looking 0:16:07.240 --> 0:16:10.960 back at the SMP five moves about there were a 0:16:11.000 --> 0:16:15.480 hundred and ten one moves in and so far we've 0:16:15.520 --> 0:16:19.160 only seen thirty five. So it's definitely a market that 0:16:19.240 --> 0:16:23.200 has lost some energy in terms of um you know, 0:16:23.320 --> 0:16:26.520 the size of of moves here. And we've heard a 0:16:26.520 --> 0:16:29.920 lot more people Alan's calling for a pullback, calling for 0:16:29.960 --> 0:16:32.560 a correction, not saying you know that they're bears, but 0:16:32.640 --> 0:16:37.200 saying we expect a ten percent drop or even a drop. 0:16:37.560 --> 0:16:39.840 What do you think about the possibility of the ladder? 0:16:41.080 --> 0:16:45.120 I think, well, first off, I would say that we're 0:16:45.160 --> 0:16:48.520 still very constructive on the on the US large camp 0:16:48.520 --> 0:16:52.680 equity market. We're fully invested at this choke er. You know, 0:16:52.760 --> 0:16:58.640 we've looked for further opportunities, but we're fully invested, which 0:16:59.080 --> 0:17:02.880 should should show you where you know, where we're at 0:17:02.960 --> 0:17:07.360 from a market perspective. But your constructive, and you put 0:17:07.359 --> 0:17:11.080 your money where your mouth is now, and well, I mean, 0:17:11.160 --> 0:17:12.760 I'm not trying to be a wise guy, but we 0:17:12.840 --> 0:17:16.359 put our clients money where our mouth is. And that's 0:17:16.400 --> 0:17:20.000 even more of a conviction from a Frost perspective. So 0:17:21.040 --> 0:17:24.400 do we expect some kind of correction, We would welcome it. 0:17:25.480 --> 0:17:27.280 We think that right now we're kind of in a 0:17:27.320 --> 0:17:31.240 purgatory period, Paul, relative to you know, we're not yet 0:17:31.240 --> 0:17:35.040 an earning season. We've got all sorts of exogenous types 0:17:35.080 --> 0:17:39.760 of activities going on. You know, evergrand Is seems to 0:17:39.800 --> 0:17:43.080 not be quite as the topic to Jore, but nonetheless, 0:17:43.359 --> 0:17:46.280 you know, you've got you've got situations like that, You've 0:17:46.280 --> 0:17:50.399 got the congressional circus going on in Washington. Relative to 0:17:50.440 --> 0:17:54.760 the death ceiling. So there are are non corporate events 0:17:54.840 --> 0:18:01.320 that really could trigger investors at this particular um juncture. 0:18:01.480 --> 0:18:03.960 And we're looking forward to earning seasons, but you know, 0:18:04.040 --> 0:18:06.960 we've got realistically, we've got a month ago before we 0:18:07.000 --> 0:18:10.560 get back into that. So, Alan you're fully invested in 0:18:10.600 --> 0:18:13.639 the market, are you invested for a reopening type of trade, 0:18:13.680 --> 0:18:18.080 i e. Some more cyclical parts of the market, or 0:18:18.359 --> 0:18:20.520 are you uh kind of in that camp where I'm 0:18:20.560 --> 0:18:24.000 sticking with the tried and true top line growth stories, tech, 0:18:24.040 --> 0:18:28.200 healthcare things like that. Well, the short answer, Paul is both, 0:18:28.880 --> 0:18:32.560 and we take a blend approach, so to speak, in 0:18:32.680 --> 0:18:36.240 terms of the ladder the names that you are referring 0:18:36.320 --> 0:18:41.119 to on the growth side technology, um, you know some 0:18:41.160 --> 0:18:45.280 of the healthcare names for sure, um. But we're also 0:18:45.359 --> 0:18:47.600 invested in the cyclical names. And if you think about 0:18:47.600 --> 0:18:53.400 it from a portfolio construction waiting perspective, UM, we're probably, 0:18:53.440 --> 0:18:56.960 we're not. Probably we are more heavily weighted to the 0:18:56.960 --> 0:18:59.840 growth segment than we are to the sick of sick 0:18:59.880 --> 0:19:06.480 of learn um exposure perspective. So that's you know, that's 0:19:06.520 --> 0:19:10.440 that's where we're at today. What do you think about 0:19:10.520 --> 0:19:12.199 or how much does it matter to you that we 0:19:12.320 --> 0:19:18.680 get more fiscal uh spending in terms of for example, 0:19:18.720 --> 0:19:21.360 the infrastructure bill. It looks difficult right now, but it's 0:19:21.440 --> 0:19:23.879 it's a huge number. How much does it matter to 0:19:23.640 --> 0:19:27.119 you to you for your clients, I would say, well, 0:19:28.720 --> 0:19:32.400 for our clients, it's a broader topic. For us specifically. 0:19:32.880 --> 0:19:36.520 You know, we really pay attention Paul uh To. I mean, 0:19:36.560 --> 0:19:39.040 you're an analyst, so I mean we take a very 0:19:39.119 --> 0:19:41.800 much of a bottom up approach, and we talk to 0:19:41.800 --> 0:19:45.399 our companies and we listen to them all all the time. 0:19:45.440 --> 0:19:47.760 We do channel checks, we do all of the things 0:19:47.800 --> 0:19:51.960 that are fundamental equity manager we do. We're managing portfolios, 0:19:52.640 --> 0:19:57.760 diversified portfolios where we're we're investing in literally every economic 0:19:57.880 --> 0:20:01.399 sector in the S and p um or our benchmark, 0:20:01.600 --> 0:20:05.359 So we do take that approach. Having said that, I 0:20:05.400 --> 0:20:08.560 would say that the infrastructure built over the long term 0:20:08.560 --> 0:20:13.800 would have positive ramifications for for the economy at large. 0:20:13.880 --> 0:20:18.320 These are things that are required, are necessary. Whether we 0:20:18.359 --> 0:20:21.280 get into some of the softer things time will tell. 0:20:21.400 --> 0:20:24.600 But but I think our client base and where we're 0:20:24.640 --> 0:20:27.720 coming from is we have a high level of confidence 0:20:27.760 --> 0:20:31.879 that ultimately will get at least the hard infrastructure build past, 0:20:32.960 --> 0:20:35.680 you know, sometime in the near future, and that will 0:20:35.720 --> 0:20:40.320 bode well as we get into two and twenty three 0:20:40.800 --> 0:20:44.320 and beyond. But I'm repeating myself, which I guess I'd 0:20:44.320 --> 0:20:48.960 like to do. But having said that, the whole atmosphere 0:20:48.960 --> 0:20:53.920 in Washington is still problematic in terms of not being 0:20:53.960 --> 0:20:58.840 able to make a decision, not being able to come together. Alan, 0:20:58.840 --> 0:21:01.160 thanks so much for joining us. All Adelman there from 0:21:01.160 --> 0:21:08.080 Frost Investment Advisors. I want to get over to the 0:21:08.160 --> 0:21:13.080 chief investment Officer of Global Equities at invest Go. George 0:21:13.080 --> 0:21:17.120 Evan joins us. George Evans joins us now, and we're 0:21:17.119 --> 0:21:19.280 gonna hear about your market views, but I want you 0:21:19.320 --> 0:21:24.160 to first, George, explain your Mantra investment themes to us. 0:21:25.040 --> 0:21:28.119 So certainly, so good morning and what everyone, um, So 0:21:28.200 --> 0:21:32.919 we we run I've been running an international strategy uh 0:21:33.600 --> 0:21:37.920 at Investco. It was often time before since so we're 0:21:37.960 --> 0:21:40.600 just over twenty five years and we've followed the same 0:21:41.320 --> 0:21:45.760 four themes over the entire art of that time. So 0:21:45.800 --> 0:21:50.040 there's MANTRA stands for the four themes, which is mass affluents, 0:21:50.480 --> 0:21:54.600 new technology, restructuring and aging. So we want to be 0:21:55.560 --> 0:21:58.680 focused on areas of the global economy that we think 0:21:58.720 --> 0:22:03.359 are set to grow structurally over many, many years, and 0:22:03.480 --> 0:22:08.679 to find the winning companies and invest in those stocks accordingly. 0:22:09.280 --> 0:22:13.440 So they're connected. So mass affluence is basically about the 0:22:13.600 --> 0:22:18.560 world getting getting rich, and particularly after the fall of 0:22:18.560 --> 0:22:22.760 the Berlin Wall, the massive increment to growth and wealth, 0:22:22.800 --> 0:22:27.840 both of wealth in the emerging markets. I mean we 0:22:27.920 --> 0:22:29.800 see it. We all see it in the number of 0:22:29.840 --> 0:22:33.520 millionaires and billionaires just soaring everywhere in the Western world 0:22:33.560 --> 0:22:35.840 and in well in China as well. What what's led 0:22:35.880 --> 0:22:39.679 to that? Well, I think the biggest thing is the 0:22:39.720 --> 0:22:43.480 way that the whole world more or less embraced a 0:22:43.560 --> 0:22:47.399 greater orientation towards market economies after the collapse of the 0:22:47.400 --> 0:22:50.040 Berlin Wall. So if we look at pre Berlin War, 0:22:50.160 --> 0:22:53.119 you're looking at really only about fifteen percent of the 0:22:53.160 --> 0:22:59.320 global population that lived in countries that had market oriented economies. 0:23:00.119 --> 0:23:03.720 After the collapse of communism, we saw more and more 0:23:04.280 --> 0:23:06.639 of the world embraced market economies and that's been the 0:23:06.720 --> 0:23:10.719 principal driver to wealth creation. So you know, China's gotten 0:23:11.040 --> 0:23:17.000 grown staggeringly fast over the last thirty forty years. We've 0:23:17.000 --> 0:23:20.560 seen huge increments to growth from many other emerging markets. 0:23:20.920 --> 0:23:24.359