Speaker 1: This is Bloomberg daybreak. Let's jump into these markets now.
Speaker 1: STI Dwek Joins, us chief investment officer at Flow Bank,
Speaker 1: st good morning. We're seeing futures rise after the two
Speaker 1: days slide following Jackson Hole. Do you buy this dep
Speaker 1: Good morning? Um? I think I would. Um. You know,
Speaker 1: there's a lot of talk about this FED pivot that
Speaker 1: wasn't happening, but I don't think we were ever going
Speaker 1: to get an actual pivot. The market wasn't expecting the
Speaker 1: FED to start cutting now or to stop hiking. The
Speaker 1: FED is clearly past the most aggressive part of his
Speaker 1: tightening cycle. We're probably going to get fifty basis points
Speaker 1: unless we get a really bad inflation number for August,
Speaker 1: which indicators don't seem to be pointing that way, and
Speaker 1: then we'll have a couple more basis points. But we're
Speaker 1: moving intour into the end of the tightening cycle, and
Speaker 1: I think the FED needed to re anchor those medium
Speaker 1: to long term expectations, reaffirm it was going to keep
Speaker 1: fighting in lation because it felt the market maybe got
Speaker 1: a little too complacent over the summer. But I don't
Speaker 1: think this speech should be that much of a surprise
Speaker 1: and change the perspectives, and you can see you didn't
Speaker 1: see that much of a move in the bond market.
Speaker 1: You're getting right into the heart of the debate, aren't you.
Speaker 1: Whether the Fed is going to pivot I guess to
Speaker 1: slower rate hikes. Dig a little deeper into your call here,
Speaker 1: Why do you think the Fed is going to start
Speaker 1: slowing down next month? We saw in the July minutes
Speaker 1: that they know it takes three to six months for
Speaker 1: the rate hikes to feed through into the economy. We
Speaker 1: started to see a couple of data points showing that
Speaker 1: growth is gradually slowing, although not yet so much in
Speaker 1: the labor market, of course. And we're continuing to get
Speaker 1: these disinflation indicators. Hopefully August comes in lower than July,
Speaker 1: and again most of these indicators are pointing that way.
Speaker 1: One month doesn't make a trend, but to three four
Speaker 1: months in a row. If this continues into the end
Speaker 1: of the year, that gives a little confidence that inflation
Speaker 1: is coming down. And they need to let the big,
Speaker 1: big rate hikes that they did in the second and
Speaker 1: third quarter have an impact on growth, bring demand down
Speaker 1: slowly and let that feed through into next year. I'm
Speaker 1: sure By now you've heard the comments to our Odd
Speaker 1: Lots podcast here on Bloomberg News from Minneapolis FED President
Speaker 1: Neil cash Cary saying that he was pretty happy with
Speaker 1: the market reaction following Chairman pal speech on Friday. He says,
Speaker 1: it's a sign that the message from Powell on higher
Speaker 1: for longer rates was received by markets. Is the market
Speaker 1: sending a different message here? I don't think. Again, if
Speaker 1: you look at the bone market, you had more of
Speaker 1: a reaction before the speech, then after the terminal rate
Speaker 1: didn't change so much. The odds of seventy five basis
Speaker 1: points versus fifty for September went up, but they've sort
Speaker 1: of retreated already since. I think the Fed also wanted
Speaker 1: to send a message that the rate cut expectations that
Speaker 1: were coming in sort of early or in earlier in
Speaker 1: three weren't going to happen. So I'm not sure it
Speaker 1: was so much about September or into the end of
Speaker 1: the year. I think it was a view that they
Speaker 1: are going to get restrictive, as we've already known, and
Speaker 1: they're going to stay restrictive for longer, and even if
Speaker 1: growth slows, it's kind of what they're hoping for. So
Speaker 1: they're not going to jump in at the first sign
Speaker 1: of a disappointing non farm peril's number or a softer
Speaker 1: p m I number. They're going to stay tighter for longer. So,
Speaker 1: given all that you're saying here, I see in our
Speaker 1: last minute or so, how are you advising your clients
Speaker 1: to add to risk? Are you making a certain recommendations
Speaker 1: on sectors or styles through the rest of this year. Well,
Speaker 1: we think that technology is going to resume its out
Speaker 1: performance in the coming months and lead the market higher
Speaker 1: into the end of the year. Now, it doesn't mean
Speaker 1: we don't get more speed bumps like we did just now,
Speaker 1: and September for sure, can be tricky at least at
Speaker 1: some point during the month. So it's not there's certainly
Speaker 1: no all clear signal, but some of these more some
Speaker 1: of the cyclical sectors should start to recover if growth
Speaker 1: holds up. And again I think technology growth and earnings
Speaker 1: are going to continue to support the sector and that
Speaker 1: will help lead the market higher. Great to get your
Speaker 1: thoughts this morning, s D. Thanks for this. I really
Speaker 1: appreciate you joining us. That's s D. Dwack, chief investment
Speaker 1: officer at Flow Bank,