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Speaker 1: Let's get over to our next guest now, Nadia Lavel,

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Speaker 1: she's senior US equity straagorist at UBS Global Wealth Management,

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Speaker 1: to talk about her market's outlook. And Nadia, we did,

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Speaker 1: of course ever stronger than expected US jobs report, the

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Speaker 1: fair looking to be setting up to uh in grease rates,

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Speaker 1: not at the same pace as we expected, but potentially

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Speaker 1: for longer. So when you look at valuations at the moment,

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Speaker 1: you feel they accurately reflect this narrative, No, we don't

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Speaker 1: think so. I mean, you have the forward p multiple

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Speaker 1: now at seventeen and half times UM that would indicate

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Speaker 1: to us at the market is sort of expecting a

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Speaker 1: selfish landing, and we don't think that you're going to

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Speaker 1: get that. We also think that the earnest expectation for

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Speaker 1: three are quite inflated. So if you adjust those numbers

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Speaker 1: down words, you know the multiple is actually even higher

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Speaker 1: than a seven seen and a half times, it's probably

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Speaker 1: closer to eighteen and a half times. So we don't

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Speaker 1: think that the market valuation is currently reflective the risk

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Speaker 1: of the economy and the risk to earn it. So

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Speaker 1: are you negative then on US equities right now and

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Speaker 1: maybe favoring the credit market. Instead, we are we are

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Speaker 1: we are, We're cautious on the outlook for US equities. UM.

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Speaker 1: We are expecting a market, the market that's going to

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Speaker 1: see a lot of happiness in the first half of

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Speaker 1: the year. In fact, we have a year in twenty

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Speaker 1: three price target of four thousand, which is lower than

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Speaker 1: where the market is right now, because we think that

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Speaker 1: you are going to see an earnings recection in twenty three.

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Speaker 1: We think that consensus estimates needs to come down by

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Speaker 1: at least ten to fift over the next six months

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Speaker 1: or so, and that's going to put downward pressure on

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Speaker 1: the market. Right now, it feels like the market is

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Speaker 1: traded on hope. I mean, we saw some resiliency in

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Speaker 1: the market on Friday despite the strong job numbers and

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Speaker 1: the wage growth numbers. But we think that once you

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Speaker 1: get into three those soft data and the leader indicator,

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Speaker 1: our suggested witnesses on the horizon, and we saw last

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Speaker 1: week I s M p M I not in contraction.

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Speaker 1: And I think importantly that Chicago p M I actually

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Speaker 1: came out the same day that UM German Power spoke,

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Speaker 1: and a lot of people missed that. But it is

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Speaker 1: at a level that is only seen when one is

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Speaker 1: heading into our recession. Were you're painting a pretty bleak

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Speaker 1: picture here, Where do you put money to work? Then

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Speaker 1: is it time to get defensive? It is, you know,

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Speaker 1: that is something that we have been you know, encouraging

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Speaker 1: our clients and investors to do over the last year.

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Speaker 1: It's a position more defensively and more into value. We're

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Speaker 1: seeing some rally in the market and we would use

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Speaker 1: that to continue to rotate in the defensive area of market.

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Speaker 1: And what I mean by that, we're talking about consumer staples,

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Speaker 1: we're talking about healthy All of these sectors are going

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Speaker 1: to have more earnest resiliency. And I would also say

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Speaker 1: energy despite the massive performance that we have seen this year,

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Speaker 1: we continue to believe that oil is going to trend

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Speaker 1: higher again. We think that Brent is going to get

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Speaker 1: over a hundred dollars as we've headed to three and

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Speaker 1: we saw the open plus actions UM this morning keeping

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Speaker 1: production on change. We know that you know, UM, the

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Speaker 1: the EU C one all embarga is going to go

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Speaker 1: into effect tomorrow, and we're seeing continued headlines about a

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Speaker 1: potential reopening up China more broadly into and that's all

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Speaker 1: of that is going to put out profession on all prices,

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Speaker 1: and we think support the energy sector. So you're positive

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Speaker 1: on energy, and I'm gonna guess given the trajectory of

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Speaker 1: interest rates where the FED is concerned, that you would

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Speaker 1: avoid information technology and anything that is sensitive to rates,

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Speaker 1: and I would put in that group real estate, financials

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Speaker 1: and utilities. Where do you come down with healthcare? In

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Speaker 1: health care? You know, we see healthcare as a defensive sector.

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Speaker 1: It does have some growth characteristics as well, but we

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Speaker 1: do think that the innovation and health care will continue.

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Speaker 1: We also think that the earnings resiliency is going to

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Speaker 1: be there, and so we are positive on healthcare. I

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Speaker 1: mean agree with you in terms of tech and but

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Speaker 1: but tech it's more than just evaluation that usually it's

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Speaker 1: coming quite a bit. But the sector still isn't cheap

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Speaker 1: as we know, stillctuating at so premium above the market.

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Speaker 1: But I think even beyond that is also the earnest

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Speaker 1: growth as tack you know, their headwinds ahead. Were continue

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Speaker 1: to see some softness within you know, the consumer demand

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Speaker 1: within PCs and electronics. We're also seeing some of the

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Speaker 1: cloud players also seeing some weakness. So we think that

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Speaker 1: it's not only the valuation, but the earnings will also

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Speaker 1: at risk. Within tech, I see that you have energy

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Speaker 1: as a preferred sector as well, and we're seeing some

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Speaker 1: gains for the oil price at the moment, but so

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Speaker 1: many variables at play here, How is it possible to

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Speaker 1: accurately judge the demand picture? It is quite difficult. And

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Speaker 1: we think that the the market is going to remain

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Speaker 1: faults and what we think that the the upward trend

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Speaker 1: is going to resume. And I think also what's important

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Speaker 1: is that in the last you know, several weeks, we've

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Speaker 1: seen a disconnect between the commodity oil and the energy

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Speaker 1: sector and we've seen the energy sector actually outperform. And

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Speaker 1: I think that what that is telling us is that

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Speaker 1: investors are looking beyond the temporary weakness that we have

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Speaker 1: seen in all you know, before opex action earlier today.

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Speaker 1: And also I think what investors are coming to appreciate

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Speaker 1: is the free cash for generation that this sector is

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Speaker 1: you know, creating, and that's also being returned through diffidends

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Speaker 1: and buy backs, and that's going to help support the

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Speaker 1: energy sector in twenty four I really think that you know,

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Speaker 1: we are in an environment we're all is going to

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Speaker 1: be higher for longer, and I think that's what the

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Speaker 1: investors are sarting to appreciate within the energy sector, and

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Speaker 1: the profits that those companies can produce in an inflationary environment.

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Speaker 1: It may be a little bit foolish to part money

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Speaker 1: in cash, But if you're expecting a rough ride for

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Speaker 1: equities over three, might it not be prudent to just

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Speaker 1: keep a lot of powder on the sideline, that dry powder,

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Speaker 1: so to speak, and maybe deploy it later in the

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Speaker 1: new year. I think so. I think it's always good

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Speaker 1: to have some dry powder on the sideline. I mean,

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Speaker 1: also there's also the treasury market, the deals between targerisolves

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Speaker 1: or short articularly shorturation treasures, is also looking quite of aractive,

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Speaker 1: So that's another way also to park some cash um temporarily.

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Speaker 1: But yes, I think it's important to have some drive

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Speaker 1: pod on on the silent because we do think that

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Speaker 1: those loads that we saw in the SMP in November

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Speaker 1: are going to get retested in the first half the

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Speaker 1: year and the investors will have an even more attractive

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Speaker 1: entry point at that point. So when you're looking ahead

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Speaker 1: to three, what what's your biggest concern, what's the biggest

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Speaker 1: risk factor out there? I think the biggest respect that

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Speaker 1: continues to be not only the FED, but the FEDS

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Speaker 1: um the economy's reaction to the cumulating effects of monetary policy,

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Speaker 1: whether or not we tipped into a recession. We do

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Speaker 1: think that we end up in a recession, but the

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Speaker 1: question remains of the time and of that recession, how

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Speaker 1: deep it is in the duration of a recession. We're

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Speaker 1: looking for a shallow recession on a short recession, but

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Speaker 1: it could be worse, especially if we don't see that inflation,

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Speaker 1: particularly the non housing services part of inflation, start to abate.

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Speaker 1: We saw Chairman Paul highlight at that again last week,

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Speaker 1: we saw the wage groat number that came in on Friday,

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Speaker 1: you know, five percent year over year, and on a

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Speaker 1: three month month over mon change analyzed it's closed to

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Speaker 1: six percent. So that has to start to come back

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Speaker 1: towards a three and a half percent that the FED

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Speaker 1: is a good world for a wage growth and so

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Speaker 1: if we don't have that, that's what's going to be

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Speaker 1: the biggest risk. Okay, the potential for a more aggressive

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Speaker 1: of FED in three that's not your level. Joining us

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Speaker 1: from UBS Global Wealth Management