1 00:00:00,080 --> 00:00:02,920 Speaker 1: Let's get to our guest. Katherine Kaminski is with US, 2 00:00:02,960 --> 00:00:08,520 Speaker 1: chief research strategist and portfolio manager at Alpha Simplex Group. Katherine, 3 00:00:08,520 --> 00:00:11,640 Speaker 1: do you like the go slow approach that we saw 4 00:00:11,640 --> 00:00:14,240 Speaker 1: in the second half of the trading day today or 5 00:00:14,320 --> 00:00:16,560 Speaker 1: the off to the races approach that we saw it 6 00:00:16,640 --> 00:00:21,960 Speaker 1: right after the CPI? Oh? Wow? Yeah, today was definitely shocking. 7 00:00:22,040 --> 00:00:25,160 Speaker 1: I mean, just how big the numbers were and how 8 00:00:25,239 --> 00:00:28,400 Speaker 1: much they just receded was kind of a sign that 9 00:00:28,960 --> 00:00:32,000 Speaker 1: there's not as much air in the tires as people thought, 10 00:00:32,840 --> 00:00:36,000 Speaker 1: um in the sense that people have already been pricing 11 00:00:36,040 --> 00:00:39,720 Speaker 1: in this move before today. So I think that was 12 00:00:39,760 --> 00:00:46,200 Speaker 1: shown by how quickly we saw that enthusiasm retreat. And also, Katherine, 13 00:00:46,240 --> 00:00:48,959 Speaker 1: given that a lot of commentators out there is suggesting 14 00:00:48,960 --> 00:00:52,480 Speaker 1: that just by its self, we'd have inflation slowing down 15 00:00:53,080 --> 00:00:55,280 Speaker 1: in the early part of next yet because of base 16 00:00:55,280 --> 00:00:58,520 Speaker 1: effects and more, do you think that this print that 17 00:00:58,560 --> 00:01:02,160 Speaker 1: we did have is setting up the Federals for policy mistake. 18 00:01:03,960 --> 00:01:06,800 Speaker 1: I think it's going to take a longer time to tell. 19 00:01:06,840 --> 00:01:10,000 Speaker 1: I mean, I think the mistake would be to jump 20 00:01:10,680 --> 00:01:14,039 Speaker 1: and change your policy overnight in such a way that 21 00:01:14,080 --> 00:01:17,920 Speaker 1: they would sort of rapidly change, and I just don't 22 00:01:17,959 --> 00:01:21,000 Speaker 1: think they're going to do that. But on the other hand, 23 00:01:21,120 --> 00:01:23,920 Speaker 1: the policy mistake is going to be much more hard 24 00:01:23,959 --> 00:01:27,120 Speaker 1: to see until we have much more clarity, and it's 25 00:01:27,120 --> 00:01:30,560 Speaker 1: going to be like this mistake of saying transitory, we 26 00:01:30,600 --> 00:01:32,880 Speaker 1: will know it when it's too late to do something 27 00:01:32,920 --> 00:01:36,800 Speaker 1: about it. Well, there's addressing inflation, and then there's also 28 00:01:37,080 --> 00:01:41,400 Speaker 1: addressing the easing of financial conditions that the FED is seen. 29 00:01:41,440 --> 00:01:43,959 Speaker 1: They seem not so comfortable with that. So I guess 30 00:01:43,959 --> 00:01:45,920 Speaker 1: the question, as soon as tomorrow, do you think the 31 00:01:45,920 --> 00:01:49,440 Speaker 1: FED will push back on that easing of financial conditions 32 00:01:49,440 --> 00:01:53,080 Speaker 1: that went along with the risk rally. Yes, I mean 33 00:01:53,120 --> 00:01:56,120 Speaker 1: I think the challenges for them that they just really 34 00:01:56,480 --> 00:01:59,440 Speaker 1: you know, I feel like tomorrow everyone already feels that 35 00:01:59,480 --> 00:02:02,640 Speaker 1: this is aked in. I think the challenge for them 36 00:02:02,840 --> 00:02:05,800 Speaker 1: is much more that they actually need to decide what 37 00:02:05,920 --> 00:02:08,880 Speaker 1: the plan is. I mean, if you look where we are, 38 00:02:09,080 --> 00:02:11,480 Speaker 1: we're much better off than where we were a couple 39 00:02:11,520 --> 00:02:14,640 Speaker 1: of months ago, but we're still really far from where 40 00:02:14,680 --> 00:02:16,960 Speaker 1: we need to be so that we have inflation low 41 00:02:17,040 --> 00:02:19,760 Speaker 1: enough that it's not a problem. Um. And so I 42 00:02:19,800 --> 00:02:23,040 Speaker 1: think that's where it's still really unclear to a lot 43 00:02:23,080 --> 00:02:27,800 Speaker 1: of us. These the federal reserves, a monetary policy, tighten 44 00:02:27,880 --> 00:02:30,680 Speaker 1: the HTC any results on the ground in you o view, Katherine, 45 00:02:32,240 --> 00:02:35,560 Speaker 1: I would say yes, but it's not clear, because you know, 46 00:02:35,919 --> 00:02:39,160 Speaker 1: inflation might just debate somewhat on its own. At least 47 00:02:39,160 --> 00:02:42,959 Speaker 1: tighter monetary conditions has calmed things down a little bit. 48 00:02:43,360 --> 00:02:46,680 Speaker 1: The question is more how far does it have to 49 00:02:46,720 --> 00:02:49,720 Speaker 1: go for it to calm enough to actually get inflation 50 00:02:49,760 --> 00:02:53,240 Speaker 1: down to real targets that they had prior to this 51 00:02:53,520 --> 00:02:56,720 Speaker 1: um this environment, and I think that's where people don't 52 00:02:56,760 --> 00:02:59,639 Speaker 1: really know. So what's the next phase? Can we run 53 00:03:00,160 --> 00:03:03,520 Speaker 1: on hot inflation or at least higher than average inflation 54 00:03:03,600 --> 00:03:08,360 Speaker 1: for a longer period of time if we stop hiking rates? UM, 55 00:03:08,400 --> 00:03:11,040 Speaker 1: I don't know what are the ramifications of that. That's 56 00:03:11,040 --> 00:03:15,120 Speaker 1: where I'm more confused about where things will go. It 57 00:03:15,120 --> 00:03:18,280 Speaker 1: seems that caution is a smart approach if you listen 58 00:03:18,360 --> 00:03:20,560 Speaker 1: to what a lot of people say on this program, 59 00:03:20,600 --> 00:03:22,359 Speaker 1: from the standpoint that the Fed has made it very 60 00:03:22,360 --> 00:03:25,280 Speaker 1: clear it wants to air on the side of tackling 61 00:03:25,320 --> 00:03:29,840 Speaker 1: inflation first and maybe second is trying to achieve some 62 00:03:29,880 --> 00:03:33,760 Speaker 1: sort of soft landing and and protecting the economy from 63 00:03:33,800 --> 00:03:37,120 Speaker 1: falling into recession. Uh. Is that a good guide? Then 64 00:03:37,200 --> 00:03:39,560 Speaker 1: just stay cautious. Um, as long as you get these 65 00:03:39,960 --> 00:03:45,119 Speaker 1: inflation numbers moving down, you can kind of incrementally move in. Yes. 66 00:03:45,200 --> 00:03:47,480 Speaker 1: And I think from our side as a cross as 67 00:03:47,520 --> 00:03:50,600 Speaker 1: a trader, what we have seen is that short bond 68 00:03:50,680 --> 00:03:54,320 Speaker 1: signals are still persistent, despite the fact that we've seen 69 00:03:54,360 --> 00:03:58,119 Speaker 1: a little bit more bullish moves and equities in terms 70 00:03:58,200 --> 00:04:02,119 Speaker 1: of technical signals. So I say that it's better to 71 00:04:02,120 --> 00:04:04,360 Speaker 1: to air on the side of caution, that they won't 72 00:04:04,360 --> 00:04:08,160 Speaker 1: move quickly, and that the market wants things faster than 73 00:04:08,200 --> 00:04:11,360 Speaker 1: they're willing to do it. Okay, give me you know 74 00:04:11,400 --> 00:04:14,640 Speaker 1: what about looking at the markets themselves and where does 75 00:04:14,840 --> 00:04:16,880 Speaker 1: one put the money? I mean, what have you been doing, 76 00:04:16,880 --> 00:04:19,719 Speaker 1: how's your investment strategy evolving? I was interested to see that, 77 00:04:19,920 --> 00:04:22,200 Speaker 1: and you just alluded to it that the short bonds 78 00:04:22,320 --> 00:04:25,520 Speaker 1: is one of your contrade to interviews. Yes, I mean 79 00:04:25,600 --> 00:04:29,040 Speaker 1: this year has been phenomenal for cross asset traders and 80 00:04:29,160 --> 00:04:33,880 Speaker 1: anyone who's really written this inflation wave. We have to 81 00:04:33,920 --> 00:04:37,480 Speaker 1: say though, that there has been a dissipation of those signals, 82 00:04:37,720 --> 00:04:42,760 Speaker 1: particularly recently and risk consolidation in the sense that the 83 00:04:42,800 --> 00:04:48,240 Speaker 1: current trend positioning is very mixed. UM equity signals have 84 00:04:48,360 --> 00:04:52,359 Speaker 1: moved a little more positive. The long bond view is 85 00:04:52,440 --> 00:04:55,359 Speaker 1: definitely not there yet, which suggests that the market is 86 00:04:55,360 --> 00:04:59,000 Speaker 1: still holding on or there's still a chance for higher 87 00:04:59,120 --> 00:05:02,440 Speaker 1: rates before or higher rates than we would like UM 88 00:05:02,560 --> 00:05:05,440 Speaker 1: or that we think is fun UM in that sense. 89 00:05:05,480 --> 00:05:07,960 Speaker 1: And what I would say also is that it's really 90 00:05:08,040 --> 00:05:10,760 Speaker 1: an inflection point. So we're gonna have to see what 91 00:05:10,920 --> 00:05:14,159 Speaker 1: the next big trend is. We've we've definitely see consolidation 92 00:05:14,240 --> 00:05:17,279 Speaker 1: to the point that it's very unclear and anything could 93 00:05:17,320 --> 00:05:21,520 Speaker 1: be the next big trend going into Yeah, one big 94 00:05:21,560 --> 00:05:24,279 Speaker 1: trend might be the reopening of the Chinese economy. So 95 00:05:24,279 --> 00:05:26,680 Speaker 1: if we could pivot talk a little bit about Asia 96 00:05:27,400 --> 00:05:30,560 Speaker 1: there there are some conflicting views out there about how 97 00:05:30,920 --> 00:05:33,160 Speaker 1: easy it's going to be. We're already seeing some of 98 00:05:33,200 --> 00:05:36,080 Speaker 1: the trials and tribulations of all these cases mounting and 99 00:05:36,200 --> 00:05:40,880 Speaker 1: the hospitals getting overwhelmed. How do you feel about the 100 00:05:40,920 --> 00:05:47,120 Speaker 1: input from China? So we're still seeing sort of more 101 00:05:47,800 --> 00:05:51,720 Speaker 1: less less bullish signals in Asia due to some of 102 00:05:51,760 --> 00:05:56,360 Speaker 1: the complexities of how this can be resolved. UM. I 103 00:05:56,400 --> 00:06:00,000 Speaker 1: think that there's been some positive signs, but we definitely 104 00:06:00,160 --> 00:06:02,200 Speaker 1: aren't out of the woods in terms of seeing that 105 00:06:02,240 --> 00:06:06,240 Speaker 1: the Chinese economy is coming back online. Definitely moving that 106 00:06:06,279 --> 00:06:09,320 Speaker 1: direction if we've seen some indication, But I think this 107 00:06:09,520 --> 00:06:12,880 Speaker 1: also will take longer UM. And that's why you're seeing 108 00:06:12,880 --> 00:06:15,719 Speaker 1: a lot of people cautious to put money back to 109 00:06:15,760 --> 00:06:20,560 Speaker 1: work there UM, just because it's really not that clear 110 00:06:20,720 --> 00:06:26,120 Speaker 1: how that's going to resolve and how that changes overnight. 111 00:06:30,120 --> 00:06:32,640 Speaker 1: About you know, in a portfolio. You know, we've got 112 00:06:32,640 --> 00:06:35,800 Speaker 1: a mixed view with the commodities out there at the moment, 113 00:06:35,839 --> 00:06:38,920 Speaker 1: and looking at equities, is it about yield in your 114 00:06:39,000 --> 00:06:41,680 Speaker 1: view as well? When you look at equities in large parts, 115 00:06:41,720 --> 00:06:46,600 Speaker 1: I'm really here alluding to value. So for equities, I mean, 116 00:06:46,680 --> 00:06:48,680 Speaker 1: look at what moved today. I mean I think the 117 00:06:48,680 --> 00:06:53,240 Speaker 1: biggest mover right now is definitely duration exposure UM and 118 00:06:53,360 --> 00:06:56,480 Speaker 1: that narrative of rising rates and the impact of inflation. 119 00:06:56,480 --> 00:07:00,440 Speaker 1: You're also seeing things with energy exposure being real relatively, 120 00:07:01,040 --> 00:07:04,680 Speaker 1: You're seeing that dispersion UM. And so as we resolve 121 00:07:04,839 --> 00:07:08,000 Speaker 1: this inflation narrative and we figure out what is the 122 00:07:08,160 --> 00:07:11,400 Speaker 1: right interest rate level, UM, that's going to have a 123 00:07:11,440 --> 00:07:14,640 Speaker 1: bigger effect And think in the cross section across equities, 124 00:07:14,880 --> 00:07:17,680 Speaker 1: and that's what we've seen this year. UM in general 125 00:07:17,720 --> 00:07:20,520 Speaker 1: has been positive for value, but that's tilting a little 126 00:07:20,520 --> 00:07:24,200 Speaker 1: bit back more recently. So I think it's exciting from 127 00:07:24,240 --> 00:07:28,560 Speaker 1: a cross sectional dispersion perspective that you're actually seeing interesting 128 00:07:28,600 --> 00:07:34,000 Speaker 1: relative moves across the space this year. That is interesting 129 00:07:34,040 --> 00:07:37,960 Speaker 1: for the any tactical trader. What's the one big thing 130 00:07:38,040 --> 00:07:40,440 Speaker 1: you think could go wrong into the early part of 131 00:07:40,520 --> 00:07:44,120 Speaker 1: next year. I think the thing that could really go 132 00:07:44,200 --> 00:07:48,160 Speaker 1: wrong is underestimating the persistence of the FED and the 133 00:07:48,200 --> 00:07:52,080 Speaker 1: need to fight inflation and thinking that this is over 134 00:07:52,200 --> 00:07:56,680 Speaker 1: before it's actually over. UM. I think people are underestimating 135 00:07:56,760 --> 00:08:00,520 Speaker 1: their need to fight inflation and they're man endate like 136 00:08:00,560 --> 00:08:04,320 Speaker 1: you already said, to take inflation first, which means that 137 00:08:04,400 --> 00:08:08,040 Speaker 1: people will be too quick to buy bonds and consider 138 00:08:08,080 --> 00:08:10,520 Speaker 1: them as a safe haven asset again just like they 139 00:08:10,560 --> 00:08:13,840 Speaker 1: always have. All Right, we'll have to close it there, Katherine, 140 00:08:13,840 --> 00:08:16,840 Speaker 1: thanks so much for joining us. Katherine Kaminski, chief research 141 00:08:16,880 --> 00:08:20,040 Speaker 1: strategist and pm over at Alpha Simplex Group.