Speaker 1: Let's get to our guest, David Coudla, who is founder
Speaker 1: and CEO and chief investment strategist at Mainstay Capital Management. So, David,
Speaker 1: on a day like today, a little bit for everybody.
Speaker 1: For the bears, well enough of that nonsense of those
Speaker 1: crazy rallies. And for the bulls, well you wouldn't expect
Speaker 1: us to go up every day. Nice to have a
Speaker 1: little consolidation. How do you see it? Hi, Brian, I
Speaker 1: think that we're what we're saying, we're continuing to see
Speaker 1: is uh interpretation of is the FED going to pivot
Speaker 1: like we saw back in or the the narrative of
Speaker 1: a FED pivot back in July in early August. Now
Speaker 1: it's more of a Fed pause. We had a noted
Speaker 1: economist this is on Bloomberg earlier this week, uh ed
Speaker 1: Yar Denny that said he thought that the November meeting
Speaker 1: would be the last hype by the FED. And then
Speaker 1: of course we have daily who beneficial who has said, uh,
Speaker 1: make make no mistake about it. There, we're not gonna
Speaker 1: stop hiking rates, We're not going to cut ray. It's
Speaker 1: next year. So it's just back and forth. And when
Speaker 1: we um have expectations that the Fed has a very
Speaker 1: aggressive tone, like after Jackson Hole, like the meeting stock
Speaker 1: sell off. When there's a belief of a pivot or
Speaker 1: a pause, stocks do better. And that's what we saw
Speaker 1: the last couple of days, Jevin. I mean, let's not
Speaker 1: forget that. A lot of what we saw in the
Speaker 1: last couple of days. It's probably downe to a short
Speaker 1: squeeze and people conflating what after what the r b
Speaker 1: A did in terms of that lesson expected interest rate hike,
Speaker 1: that others are going to just slow down a little bit,
Speaker 1: so they perhaps conflated or confused what was going on
Speaker 1: with perhaps a turnaround, a change in sentiment entirely. Yeah,
Speaker 1: I think between the confusion from the Bank of England
Speaker 1: where they're buying bonds on the long end of the
Speaker 1: curve but the raising interest rates lower than expected rate
Speaker 1: hike in Australia, um that that's what tree is. These
Speaker 1: beliefs of uh, the central banks, major central banks, and
Speaker 1: I think certainly eyes in the US and a lot
Speaker 1: of eyes around the world are looking at the Federal
Speaker 1: Reserve that there may be a softening of that stance,
Speaker 1: There may be a less aggressive position, There may be
Speaker 1: a pivot or a pause. But when the Fed officials
Speaker 1: come out to dismiss that UM, the massive rally we
Speaker 1: had on Monday and Tuesday becomes a flattish day to
Speaker 1: a down day like today. David, give us an idea
Speaker 1: of what you are looking for out of the job's
Speaker 1: report Friday and how it's going to inform the Federal Reserve. Well,
Speaker 1: I think that you know, we're looking at consensus estimates
Speaker 1: of two two seventy jobs and uh, you know, we've
Speaker 1: seen a continued strength in the in the workforce. Uh.
Speaker 1: Recently the number of job openings had reduced. We saw
Speaker 1: data came down from about eleven million to ten million
Speaker 1: in the US, and so, uh, we expect that UM,
Speaker 1: that continued strength in the labor force to have a Obviously,
Speaker 1: the impact on has been has been the area of
Speaker 1: the economy that has remained very strong, very robust. Uh.
Speaker 1: As we've continued to have these concerns about a recession
Speaker 1: in the US, but with unemployment this low, with jobs
Speaker 1: doing this well, it's hard to see that. Yeah. The
Speaker 1: point I was trying to make before we went to
Speaker 1: break was briefly that you were getting into where the
Speaker 1: data maybe more important than the commentary, and you understand
Speaker 1: why we're much closer to the so called terminal rate
Speaker 1: than we used to be. UM do you see it
Speaker 1: that way? And UM, how does the data sit with you?
Speaker 1: I mean, do you feel comfortable with it? Well, we've
Speaker 1: got data coming in mixed, right, So we have when
Speaker 1: we look at UH, some of the U S I,
Speaker 1: S I S M factory orders that came in this
Speaker 1: week felt two points to fifty point nine near contraction territory,
Speaker 1: lowest level since May of two thousand and nine. UM.
Speaker 1: We have at the same time, we have housing prices
Speaker 1: that are at the lowest level for September since two
Speaker 1: thousand and nine, with mortgage rates that have continued to rise.
Speaker 1: So we see that the economy is slowing and slowing
Speaker 1: UH significantly, but jobs are remaining, are remaining strong and
Speaker 1: haven't have we haven't seen the suration there. So I
Speaker 1: think that for the Fed too h really change their policy.
Speaker 1: They need to see that change in jobs. We've also
Speaker 1: we also know that we've never the Fed has never
Speaker 1: stopped a rate hiking cycle. With the FED funds rate
Speaker 1: UH not rising above real rates, above positive real rates
Speaker 1: rising the rate the UH, the FED funds rate above
Speaker 1: that of of inflation. So that's a long way to
Speaker 1: go here. It's not very often you go from zero
Speaker 1: to three or four hundred basis points in this quick
Speaker 1: a time. So think that is a little bit of
Speaker 1: a check on that. Uh. And it does bring into
Speaker 1: the conversation this discussion about about whether the neutral rate
Speaker 1: gets adjusted lower given financial instability considerations, the debt levels
Speaker 1: are high, the rapidity of the hike increases maybe a
Speaker 1: factor affecting where the neutral rate is. Yeah, but we've
Speaker 1: seen the new tra rate, or if we want to
Speaker 1: talk about the terminal rate, we were down near three
Speaker 1: point two percent Midsummer. We're now up to about four
Speaker 1: point seven four point eight percent. Uh, and I think
Speaker 1: if anything, we see that terminal rate and new TRA
Speaker 1: rate move even higher. Uh. They're they're talking about we've
Speaker 1: had discussions about uh, fragility of the economy. I don't
Speaker 1: think the Fed is concerned about those issues. Uh. They're
Speaker 1: going to tame inflation. They're going to raise hikes, raise rates,
Speaker 1: continue to high rates until they see inflation coming down.
Speaker 1: So UH, obviously October thirteenth is going to be very
Speaker 1: instructive in terms of what we see for September CPI. David,
Speaker 1: very quick, they give us an idea of what you're
Speaker 1: investing in, very in brief. Well, you talked a little
Speaker 1: bit bit about what's happened in the energy complex here recently,
Speaker 1: or at least with oil. We've been bullish on energy
Speaker 1: for all of this year. UH and with the holdings
Speaker 1: that we initiated last year. UH invest co Dynamic Energy
Speaker 1: Exploration Production et f p x C fourteen percent over
Speaker 1: these last three days, but having a very good year
Speaker 1: even through this summer corrections, doing very well this year. UH.
Speaker 1: And also with what's happening in housing, we like we're
Speaker 1: actually shorting real estate. David, thank you so much for
Speaker 1: joining us. David, could let that I find in chief
Speaker 1: executive non chief investment strategists main stay capital management