WEBVTT - David Kudla on the Markets (

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<v Speaker 1>Let's get to our guest, David Coudla, who is founder

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<v Speaker 1>and CEO and chief investment strategist at Mainstay Capital Management. So, David,

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<v Speaker 1>on a day like today, a little bit for everybody.

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<v Speaker 1>For the bears, well enough of that nonsense of those

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<v Speaker 1>crazy rallies. And for the bulls, well you wouldn't expect

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<v Speaker 1>us to go up every day. Nice to have a

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<v Speaker 1>little consolidation. How do you see it? Hi, Brian, I

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<v Speaker 1>think that we're what we're saying, we're continuing to see

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<v Speaker 1>is uh interpretation of is the FED going to pivot

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<v Speaker 1>like we saw back in or the the narrative of

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<v Speaker 1>a FED pivot back in July in early August. Now

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<v Speaker 1>it's more of a Fed pause. We had a noted

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<v Speaker 1>economist this is on Bloomberg earlier this week, uh ed

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<v Speaker 1>Yar Denny that said he thought that the November meeting

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<v Speaker 1>would be the last hype by the FED. And then

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<v Speaker 1>of course we have daily who beneficial who has said, uh,

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<v Speaker 1>make make no mistake about it. There, we're not gonna

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<v Speaker 1>stop hiking rates, We're not going to cut ray. It's

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<v Speaker 1>next year. So it's just back and forth. And when

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<v Speaker 1>we um have expectations that the Fed has a very

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<v Speaker 1>aggressive tone, like after Jackson Hole, like the meeting stock

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<v Speaker 1>sell off. When there's a belief of a pivot or

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<v Speaker 1>a pause, stocks do better. And that's what we saw

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<v Speaker 1>the last couple of days, Jevin. I mean, let's not

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<v Speaker 1>forget that. A lot of what we saw in the

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<v Speaker 1>last couple of days. It's probably downe to a short

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<v Speaker 1>squeeze and people conflating what after what the r b

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<v Speaker 1>A did in terms of that lesson expected interest rate hike,

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<v Speaker 1>that others are going to just slow down a little bit,

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<v Speaker 1>so they perhaps conflated or confused what was going on

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<v Speaker 1>with perhaps a turnaround, a change in sentiment entirely. Yeah,

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<v Speaker 1>I think between the confusion from the Bank of England

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<v Speaker 1>where they're buying bonds on the long end of the

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<v Speaker 1>curve but the raising interest rates lower than expected rate

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<v Speaker 1>hike in Australia, um that that's what tree is. These

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<v Speaker 1>beliefs of uh, the central banks, major central banks, and

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<v Speaker 1>I think certainly eyes in the US and a lot

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<v Speaker 1>of eyes around the world are looking at the Federal

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<v Speaker 1>Reserve that there may be a softening of that stance,

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<v Speaker 1>There may be a less aggressive position, There may be

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<v Speaker 1>a pivot or a pause. But when the Fed officials

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<v Speaker 1>come out to dismiss that UM, the massive rally we

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<v Speaker 1>had on Monday and Tuesday becomes a flattish day to

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<v Speaker 1>a down day like today. David, give us an idea

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<v Speaker 1>of what you are looking for out of the job's

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<v Speaker 1>report Friday and how it's going to inform the Federal Reserve. Well,

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<v Speaker 1>I think that you know, we're looking at consensus estimates

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<v Speaker 1>of two two seventy jobs and uh, you know, we've

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<v Speaker 1>seen a continued strength in the in the workforce. Uh.

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<v Speaker 1>Recently the number of job openings had reduced. We saw

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<v Speaker 1>data came down from about eleven million to ten million

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<v Speaker 1>in the US, and so, uh, we expect that UM,

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<v Speaker 1>that continued strength in the labor force to have a Obviously,

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<v Speaker 1>the impact on has been has been the area of

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<v Speaker 1>the economy that has remained very strong, very robust. Uh.

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<v Speaker 1>As we've continued to have these concerns about a recession

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<v Speaker 1>in the US, but with unemployment this low, with jobs

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<v Speaker 1>doing this well, it's hard to see that. Yeah. The

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<v Speaker 1>point I was trying to make before we went to

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<v Speaker 1>break was briefly that you were getting into where the

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<v Speaker 1>data maybe more important than the commentary, and you understand

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<v Speaker 1>why we're much closer to the so called terminal rate

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<v Speaker 1>than we used to be. UM do you see it

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<v Speaker 1>that way? And UM, how does the data sit with you?

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<v Speaker 1>I mean, do you feel comfortable with it? Well, we've

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<v Speaker 1>got data coming in mixed, right, So we have when

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<v Speaker 1>we look at UH, some of the U S I,

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<v Speaker 1>S I S M factory orders that came in this

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<v Speaker 1>week felt two points to fifty point nine near contraction territory,

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<v Speaker 1>lowest level since May of two thousand and nine. UM.

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<v Speaker 1>We have at the same time, we have housing prices

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<v Speaker 1>that are at the lowest level for September since two

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<v Speaker 1>thousand and nine, with mortgage rates that have continued to rise.

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<v Speaker 1>So we see that the economy is slowing and slowing

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<v Speaker 1>UH significantly, but jobs are remaining, are remaining strong and

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<v Speaker 1>haven't have we haven't seen the suration there. So I

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<v Speaker 1>think that for the Fed too h really change their policy.

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<v Speaker 1>They need to see that change in jobs. We've also

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<v Speaker 1>we also know that we've never the Fed has never

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<v Speaker 1>stopped a rate hiking cycle. With the FED funds rate

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<v Speaker 1>UH not rising above real rates, above positive real rates

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<v Speaker 1>rising the rate the UH, the FED funds rate above

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<v Speaker 1>that of of inflation. So that's a long way to

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<v Speaker 1>go here. It's not very often you go from zero

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<v Speaker 1>to three or four hundred basis points in this quick

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<v Speaker 1>a time. So think that is a little bit of

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<v Speaker 1>a check on that. Uh. And it does bring into

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<v Speaker 1>the conversation this discussion about about whether the neutral rate

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<v Speaker 1>gets adjusted lower given financial instability considerations, the debt levels

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<v Speaker 1>are high, the rapidity of the hike increases maybe a

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<v Speaker 1>factor affecting where the neutral rate is. Yeah, but we've

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<v Speaker 1>seen the new tra rate, or if we want to

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<v Speaker 1>talk about the terminal rate, we were down near three

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<v Speaker 1>point two percent Midsummer. We're now up to about four

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<v Speaker 1>point seven four point eight percent. Uh, and I think

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<v Speaker 1>if anything, we see that terminal rate and new TRA

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<v Speaker 1>rate move even higher. Uh. They're they're talking about we've

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<v Speaker 1>had discussions about uh, fragility of the economy. I don't

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<v Speaker 1>think the Fed is concerned about those issues. Uh. They're

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<v Speaker 1>going to tame inflation. They're going to raise hikes, raise rates,

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<v Speaker 1>continue to high rates until they see inflation coming down.

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<v Speaker 1>So UH, obviously October thirteenth is going to be very

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<v Speaker 1>instructive in terms of what we see for September CPI. David,

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<v Speaker 1>very quick, they give us an idea of what you're

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<v Speaker 1>investing in, very in brief. Well, you talked a little

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<v Speaker 1>bit bit about what's happened in the energy complex here recently,

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<v Speaker 1>or at least with oil. We've been bullish on energy

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<v Speaker 1>for all of this year. UH and with the holdings

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<v Speaker 1>that we initiated last year. UH invest co Dynamic Energy

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<v Speaker 1>Exploration Production et f p x C fourteen percent over

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<v Speaker 1>these last three days, but having a very good year

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<v Speaker 1>even through this summer corrections, doing very well this year. UH.

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<v Speaker 1>And also with what's happening in housing, we like we're

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<v Speaker 1>actually shorting real estate. David, thank you so much for

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<v Speaker 1>joining us. David, could let that I find in chief

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<v Speaker 1>executive non chief investment strategists main stay capital management