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Speaker 1: We had joined by Joey Gilbert, he's portfolio manager at

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Speaker 1: Integrity Asset Management. Enjoy plenty of we had news around

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Speaker 1: at the moment, plenty of bad news as well. We

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Speaker 1: seem to talk about recession every day. We've had another

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Speaker 1: really hot inflation print out of New Zealand. Do you

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Speaker 1: feel like markets have got all this priceton now or

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Speaker 1: is it possibly more downside to come? Well, well, thanks

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Speaker 1: for having me, and I'm sad that you guys weren't

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Speaker 1: gonna sing before we started this um But I say

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Speaker 1: that now, um no, I think that ultimately, you know,

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Speaker 1: the market has really discounted a lot of slow down

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Speaker 1: and slowing that is happening in any economy or you know,

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Speaker 1: around the globe. You know, I think that it is

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Speaker 1: really adequately kind of priced that end. I think that

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Speaker 1: it hasn't priced in a full all out on deep

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Speaker 1: recession um so, so right now when you actually is

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Speaker 1: it pricing and bad things, I think we have gotten there.

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Speaker 1: I think that probably where we are is more of

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Speaker 1: our base case that we're we're in a technical recession

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Speaker 1: um and so, which which means that it really doesn't

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Speaker 1: matter because you know, the psychology of it all is

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Speaker 1: gonna act like it's a recession either way. But I

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Speaker 1: think that the markets are kind of discounting that we're

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Speaker 1: gonna have a slowing earnings a reset um mind you um,

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Speaker 1: but we're really markets are really looking forward to three

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Speaker 1: at this point versus the back half of the year.

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Speaker 1: So when it comes to having to put money to

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Speaker 1: work in an environment such as this, Joe, where do

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Speaker 1: you have the highest conviction? Where are you really kind

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Speaker 1: of stepping up and going all in so to speak? Um,

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Speaker 1: you know, we we we try to make sure we

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Speaker 1: don't have too much conviction sometimes because there's a lot

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Speaker 1: of uncertainty that is happening right now. And like the

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Speaker 1: way we see the market is we've going the market

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Speaker 1: has gone into the late cycle trading and kind of

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Speaker 1: actually out of that like late cycle to more of

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Speaker 1: the recession downturn playbook. So you know, when we saw

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Speaker 1: last month with energy and materials, um, those names that

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Speaker 1: had held up pretty well being like the only names

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Speaker 1: that were positive positive returns, and then slowly that you know,

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Speaker 1: the market came out to them as well. And so

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Speaker 1: now you get to the point where investors are trying

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Speaker 1: to play defense, but defense is too expensive when you

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Speaker 1: try to go into consumer staples or utilities or even

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Speaker 1: some some parts of healthcare. So what we're doing is

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Speaker 1: we're we're really trying to be UM a little more

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Speaker 1: measured UM. What we're looking at evaluation as a guide here.

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Speaker 1: So we're we're UM, you know, waiting into financials, waiting

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Speaker 1: into some of the consumer discretionary names. And a lot

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Speaker 1: of these names, especially for consumer discretionary names, are trading

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Speaker 1: below where they were during the height of the pandemic,

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Speaker 1: in which we think that's a little overdone. So those

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Speaker 1: are what opportunities are right now. We still think, like

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Speaker 1: I said, we think it's probably too late to play

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Speaker 1: defense UM at this juncture. Given to our base cases,

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Speaker 1: that is not going to be a really deep procession.

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Speaker 1: So with that in mind, if it's not going to

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Speaker 1: be a deeper station, when would you expect to see

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Speaker 1: some up train to start to resume. You know, we

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Speaker 1: think that this quarter um of of earnings UM coming

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Speaker 1: up second quarter earnings with management most likely being UM

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Speaker 1: if they really want to help themselves out really either

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Speaker 1: suspending guidance or or taking dramatic UM pack the guidance,

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Speaker 1: which which we've seen actually companies that have done that

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Speaker 1: over the past couple of weeks um that have been

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Speaker 1: uh you know, not necessarily pessimistic, but more realistic about

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Speaker 1: the environment. They've they've gone on and been rewarded. So

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Speaker 1: they've actually turned out to be trade higher, you know,

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Speaker 1: two days after their earnings announcement. So I think right

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Speaker 1: now the market is looking at earnings as a clearing event. Obviously,

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Speaker 1: the big the big thing that's out there that will

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Speaker 1: give everybody some calm is knowing when the Fed will

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Speaker 1: stop um raising rates. And and actually we really think

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Speaker 1: that will be sometime and um, you know, probably you know,

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Speaker 1: fourth quarter, but maybe even at this quarter. You know,

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Speaker 1: I think that if they can give some sense that September,

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Speaker 1: if they go in September that that is where they

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Speaker 1: want to pause even further, I think that will give

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Speaker 1: us set us up for a nice fourth quarter rally.

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Speaker 1: Although you know, we will will you know, make up

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Speaker 1: some of the losses we have this year, we don't

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Speaker 1: think that we think we still have a negative year

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Speaker 1: in for equity market. One of the things Joe, as

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Speaker 1: you know, that's been a little concerning, especially where the

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Speaker 1: multinational is concerned, as this resilient dollar. And even if

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Speaker 1: the FED were to go maybe on hold, let's say

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Speaker 1: hold in the autumn, as you just kind of suggested that,

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Speaker 1: does that necessarily mean that the dollar is going to

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Speaker 1: retreat a bit and give some relief to multinational firms? Now?

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Speaker 1: I think at that point, I think the dollar will

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Speaker 1: be similar to inflation. I think I think we're we're

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Speaker 1: to the point where we where, you know, we think

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Speaker 1: we have peak inflation. I think we're close to peak

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Speaker 1: dollar as well. Does a dollar need to fall dramatically? Um,

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Speaker 1: I don't think so in order for multinationals work. I

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Speaker 1: think it just needs to stop appreciating. And I think

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Speaker 1: so the pace that we've seen over the you know,

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Speaker 1: the previous seven months, we think that is probably you know,

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Speaker 1: similar to inflation. They kind of track each other with

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Speaker 1: a tight correlation. So we think that as inflation starts

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Speaker 1: to slow down and moderate, the dollar strength will do

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Speaker 1: the same, which will follow, you know, similar to FED actions.

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Speaker 1: Speaking of the fade to everyone's got an opinion on

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Speaker 1: what the Fate is going to do in July, I'd

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Speaker 1: like to hear yours is going to be the last

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Speaker 1: meeting until September. This one so that's their chance to

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Speaker 1: go big here prevent inflation from becoming entrenched. You know,

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Speaker 1: from the Fete speak that we got as far as

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Speaker 1: if there was anything as far as um guiding us

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Speaker 1: where they wanted the market to be, it feels like

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Speaker 1: seventy five is pretty much baked in the cake. I

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Speaker 1: think the hundred basis point um thought of that was

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Speaker 1: a lot more reflective as far as when the market

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Speaker 1: saw the inflation numbers last week. So it looks like

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Speaker 1: seventy five is probably most likely. Yet, I mean, and granted,

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Speaker 1: we're still kind of cautious because we think that there

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Speaker 1: is a risk that the Fed will go too far.

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Speaker 1: They're they're trying to judge a lagging indicator with somewhat

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Speaker 1: real time tools, and that really puts them in a

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Speaker 1: predicament that there's always a time and mismatch and so

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Speaker 1: that you know, they never know if they're gone too

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Speaker 1: far until it's too late. So you know, we just

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Speaker 1: we we think seventy five is the case for you know,

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Speaker 1: next week, and then you we hope that maybe there's

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Speaker 1: a fifty basis point in September and they and then

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Speaker 1: they're done for the year. Are you looking to pick

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Speaker 1: up a little bit more exposure, let's say offshore. I mean,

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Speaker 1: we're talking a lot on this program about markets in

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Speaker 1: the Asia Pacific. Are is there anything there that you like,

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Speaker 1: you know, when we think about all sorces where US

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Speaker 1: based investors, I mean, we're we're really you know, our

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Speaker 1: biggest fear right now is, you know, we talked about

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Speaker 1: a lot about the US recession. Our biggest fear is

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Speaker 1: what is going to happen in Europe and what that

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Speaker 1: actually does as far as cascade throughout the you know,

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Speaker 1: the global economy with the US and with the UM

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Speaker 1: Asia as well. So we're, you know, o, our biggest thing,

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Speaker 1: we're really watching Europe because we think that is going

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Speaker 1: to be the lynch pen as too far as how

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Speaker 1: you know, the fulcrum, as far as how Marcus actually

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Speaker 1: react and how they go into three and so that

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Speaker 1: we're using that as a guide. Unfortunately, we're not as

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Speaker 1: constructive there because we have winter coming. We know, you know,

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Speaker 1: there's no resolution for natural gas there and so it's

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Speaker 1: it's it's a big area of concern that I think

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Speaker 1: is one of the things that's under the radar that

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Speaker 1: no once talk Joe Gilbert from Integrity Asset Management. Thanks

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Speaker 1: so much. This is Bloomberg