WEBVTT - Joe Gilbert on the Markets (Radio)

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<v Speaker 1>We had joined by Joey Gilbert, he's portfolio manager at

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<v Speaker 1>Integrity Asset Management. Enjoy plenty of we had news around

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<v Speaker 1>at the moment, plenty of bad news as well. We

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<v Speaker 1>seem to talk about recession every day. We've had another

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<v Speaker 1>really hot inflation print out of New Zealand. Do you

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<v Speaker 1>feel like markets have got all this priceton now or

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<v Speaker 1>is it possibly more downside to come? Well, well, thanks

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

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<v Speaker 1>gonna sing before we started this um But I say

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<v Speaker 1>that now, um no, I think that ultimately, you know,

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<v Speaker 1>the market has really discounted a lot of slow down

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<v Speaker 1>and slowing that is happening in any economy or you know,

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<v Speaker 1>around the globe. You know, I think that it is

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<v Speaker 1>really adequately kind of priced that end. I think that

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<v Speaker 1>it hasn't priced in a full all out on deep

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<v Speaker 1>recession um so, so right now when you actually is

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<v Speaker 1>it pricing and bad things, I think we have gotten there.

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<v Speaker 1>I think that probably where we are is more of

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<v Speaker 1>our base case that we're we're in a technical recession

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<v Speaker 1>um and so, which which means that it really doesn't

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<v Speaker 1>matter because you know, the psychology of it all is

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<v Speaker 1>gonna act like it's a recession either way. But I

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<v Speaker 1>think that the markets are kind of discounting that we're

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<v Speaker 1>gonna have a slowing earnings a reset um mind you um,

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<v Speaker 1>but we're really markets are really looking forward to three

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<v Speaker 1>at this point versus the back half of the year.

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<v Speaker 1>So when it comes to having to put money to

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<v Speaker 1>work in an environment such as this, Joe, where do

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<v Speaker 1>you have the highest conviction? Where are you really kind

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<v Speaker 1>of stepping up and going all in so to speak? Um,

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<v Speaker 1>you know, we we we try to make sure we

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<v Speaker 1>don't have too much conviction sometimes because there's a lot

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<v Speaker 1>of uncertainty that is happening right now. And like the

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<v Speaker 1>way we see the market is we've going the market

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<v Speaker 1>has gone into the late cycle trading and kind of

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<v Speaker 1>actually out of that like late cycle to more of

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<v Speaker 1>the recession downturn playbook. So you know, when we saw

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<v Speaker 1>last month with energy and materials, um, those names that

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<v Speaker 1>had held up pretty well being like the only names

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<v Speaker 1>that were positive positive returns, and then slowly that you know,

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<v Speaker 1>the market came out to them as well. And so

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<v Speaker 1>now you get to the point where investors are trying

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<v Speaker 1>to play defense, but defense is too expensive when you

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<v Speaker 1>try to go into consumer staples or utilities or even

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<v Speaker 1>some some parts of healthcare. So what we're doing is

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<v Speaker 1>we're we're really trying to be UM a little more

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

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<v Speaker 1>So we're we're UM, you know, waiting into financials, waiting

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<v Speaker 1>into some of the consumer discretionary names. And a lot

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<v Speaker 1>of these names, especially for consumer discretionary names, are trading

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<v Speaker 1>below where they were during the height of the pandemic,

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<v Speaker 1>in which we think that's a little overdone. So those

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<v Speaker 1>are what opportunities are right now. We still think, like

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<v Speaker 1>I said, we think it's probably too late to play

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<v Speaker 1>defense UM at this juncture. Given to our base cases,

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<v Speaker 1>that is not going to be a really deep procession.

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<v Speaker 1>So with that in mind, if it's not going to

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<v Speaker 1>be a deeper station, when would you expect to see

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<v Speaker 1>some up train to start to resume. You know, we

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<v Speaker 1>think that this quarter um of of earnings UM coming

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<v Speaker 1>up second quarter earnings with management most likely being UM

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<v Speaker 1>if they really want to help themselves out really either

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<v Speaker 1>suspending guidance or or taking dramatic UM pack the guidance,

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<v Speaker 1>which which we've seen actually companies that have done that

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<v Speaker 1>over the past couple of weeks um that have been

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<v Speaker 1>uh you know, not necessarily pessimistic, but more realistic about

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<v Speaker 1>the environment. They've they've gone on and been rewarded. So

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<v Speaker 1>they've actually turned out to be trade higher, you know,

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<v Speaker 1>two days after their earnings announcement. So I think right

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

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<v Speaker 1>the big the big thing that's out there that will

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<v Speaker 1>give everybody some calm is knowing when the Fed will

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<v Speaker 1>stop um raising rates. And and actually we really think

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<v Speaker 1>that will be sometime and um, you know, probably you know,

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<v Speaker 1>fourth quarter, but maybe even at this quarter. You know,

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<v Speaker 1>I think that if they can give some sense that September,

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<v Speaker 1>if they go in September that that is where they

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<v Speaker 1>want to pause even further, I think that will give

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<v Speaker 1>us set us up for a nice fourth quarter rally.

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<v Speaker 1>Although you know, we will will you know, make up

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<v Speaker 1>some of the losses we have this year, we don't

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<v Speaker 1>think that we think we still have a negative year

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<v Speaker 1>in for equity market. One of the things Joe, as

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<v Speaker 1>you know, that's been a little concerning, especially where the

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<v Speaker 1>multinational is concerned, as this resilient dollar. And even if

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<v Speaker 1>the FED were to go maybe on hold, let's say

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<v Speaker 1>hold in the autumn, as you just kind of suggested that,

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<v Speaker 1>does that necessarily mean that the dollar is going to

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<v Speaker 1>retreat a bit and give some relief to multinational firms? Now?

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<v Speaker 1>I think at that point, I think the dollar will

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<v Speaker 1>be similar to inflation. I think I think we're we're

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<v Speaker 1>to the point where we where, you know, we think

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<v Speaker 1>we have peak inflation. I think we're close to peak

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<v Speaker 1>dollar as well. Does a dollar need to fall dramatically? Um,

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<v Speaker 1>I don't think so in order for multinationals work. I

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<v Speaker 1>think it just needs to stop appreciating. And I think

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<v Speaker 1>so the pace that we've seen over the you know,

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<v Speaker 1>the previous seven months, we think that is probably you know,

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<v Speaker 1>similar to inflation. They kind of track each other with

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<v Speaker 1>a tight correlation. So we think that as inflation starts

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<v Speaker 1>to slow down and moderate, the dollar strength will do

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<v Speaker 1>the same, which will follow, you know, similar to FED actions.

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<v Speaker 1>Speaking of the fade to everyone's got an opinion on

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<v Speaker 1>what the Fate is going to do in July, I'd

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<v Speaker 1>like to hear yours is going to be the last

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<v Speaker 1>meeting until September. This one so that's their chance to

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<v Speaker 1>go big here prevent inflation from becoming entrenched. You know,

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<v Speaker 1>from the Fete speak that we got as far as

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<v Speaker 1>if there was anything as far as um guiding us

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<v Speaker 1>where they wanted the market to be, it feels like

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<v Speaker 1>seventy five is pretty much baked in the cake. I

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<v Speaker 1>think the hundred basis point um thought of that was

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<v Speaker 1>a lot more reflective as far as when the market

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<v Speaker 1>saw the inflation numbers last week. So it looks like

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<v Speaker 1>seventy five is probably most likely. Yet, I mean, and granted,

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<v Speaker 1>we're still kind of cautious because we think that there

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<v Speaker 1>is a risk that the Fed will go too far.

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<v Speaker 1>They're they're trying to judge a lagging indicator with somewhat

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<v Speaker 1>real time tools, and that really puts them in a

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<v Speaker 1>predicament that there's always a time and mismatch and so

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<v Speaker 1>that you know, they never know if they're gone too

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

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<v Speaker 1>we we think seventy five is the case for you know,

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<v Speaker 1>next week, and then you we hope that maybe there's

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<v Speaker 1>a fifty basis point in September and they and then

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<v Speaker 1>they're done for the year. Are you looking to pick

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

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<v Speaker 1>we're talking a lot on this program about markets in

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<v Speaker 1>the Asia Pacific. Are is there anything there that you like,

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<v Speaker 1>you know, when we think about all sorces where US

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<v Speaker 1>based investors, I mean, we're we're really you know, our

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<v Speaker 1>biggest fear right now is, you know, we talked about

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<v Speaker 1>a lot about the US recession. Our biggest fear is

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<v Speaker 1>what is going to happen in Europe and what that

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<v Speaker 1>actually does as far as cascade throughout the you know,

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<v Speaker 1>the global economy with the US and with the UM

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

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<v Speaker 1>we're really watching Europe because we think that is going

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<v Speaker 1>to be the lynch pen as too far as how

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<v Speaker 1>you know, the fulcrum, as far as how Marcus actually

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<v Speaker 1>react and how they go into three and so that

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<v Speaker 1>we're using that as a guide. Unfortunately, we're not as

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<v Speaker 1>constructive there because we have winter coming. We know, you know,

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<v Speaker 1>there's no resolution for natural gas there and so it's

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<v Speaker 1>it's it's a big area of concern that I think

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<v Speaker 1>is one of the things that's under the radar that

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<v Speaker 1>no once talk Joe Gilbert from Integrity Asset Management. Thanks

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<v Speaker 1>so much. This is Bloomberg