WEBVTT - Outlook For Markets After Powell's Comments (Radio)

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<v Speaker 1>This is Bloomberg daybreak. Let's jump into these markets now.

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<v Speaker 1>STI Dwek Joins, us chief investment officer at Flow Bank,

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<v Speaker 1>st good morning. We're seeing futures rise after the two

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<v Speaker 1>days slide following Jackson Hole. Do you buy this dep

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<v Speaker 1>Good morning? Um? I think I would. Um. You know,

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<v Speaker 1>there's a lot of talk about this FED pivot that

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<v Speaker 1>wasn't happening, but I don't think we were ever going

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<v Speaker 1>to get an actual pivot. The market wasn't expecting the

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<v Speaker 1>FED to start cutting now or to stop hiking. The

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<v Speaker 1>FED is clearly past the most aggressive part of his

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<v Speaker 1>tightening cycle. We're probably going to get fifty basis points

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<v Speaker 1>unless we get a really bad inflation number for August,

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<v Speaker 1>which indicators don't seem to be pointing that way, and

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<v Speaker 1>then we'll have a couple more basis points. But we're

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<v Speaker 1>moving intour into the end of the tightening cycle, and

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<v Speaker 1>I think the FED needed to re anchor those medium

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<v Speaker 1>to long term expectations, reaffirm it was going to keep

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<v Speaker 1>fighting in lation because it felt the market maybe got

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<v Speaker 1>a little too complacent over the summer. But I don't

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<v Speaker 1>think this speech should be that much of a surprise

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<v Speaker 1>and change the perspectives, and you can see you didn't

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<v Speaker 1>see that much of a move in the bond market.

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<v Speaker 1>You're getting right into the heart of the debate, aren't you.

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<v Speaker 1>Whether the Fed is going to pivot I guess to

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<v Speaker 1>slower rate hikes. Dig a little deeper into your call here,

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<v Speaker 1>Why do you think the Fed is going to start

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<v Speaker 1>slowing down next month? We saw in the July minutes

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<v Speaker 1>that they know it takes three to six months for

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<v Speaker 1>the rate hikes to feed through into the economy. We

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<v Speaker 1>started to see a couple of data points showing that

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<v Speaker 1>growth is gradually slowing, although not yet so much in

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<v Speaker 1>the labor market, of course. And we're continuing to get

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<v Speaker 1>these disinflation indicators. Hopefully August comes in lower than July,

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<v Speaker 1>and again most of these indicators are pointing that way.

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<v Speaker 1>One month doesn't make a trend, but to three four

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<v Speaker 1>months in a row. If this continues into the end

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<v Speaker 1>of the year, that gives a little confidence that inflation

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<v Speaker 1>is coming down. And they need to let the big,

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<v Speaker 1>big rate hikes that they did in the second and

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<v Speaker 1>third quarter have an impact on growth, bring demand down

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<v Speaker 1>slowly and let that feed through into next year. I'm

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<v Speaker 1>sure By now you've heard the comments to our Odd

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<v Speaker 1>Lots podcast here on Bloomberg News from Minneapolis FED President

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<v Speaker 1>Neil cash Cary saying that he was pretty happy with

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<v Speaker 1>the market reaction following Chairman pal speech on Friday. He says,

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<v Speaker 1>it's a sign that the message from Powell on higher

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<v Speaker 1>for longer rates was received by markets. Is the market

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<v Speaker 1>sending a different message here? I don't think. Again, if

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<v Speaker 1>you look at the bone market, you had more of

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<v Speaker 1>a reaction before the speech, then after the terminal rate

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<v Speaker 1>didn't change so much. The odds of seventy five basis

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<v Speaker 1>points versus fifty for September went up, but they've sort

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<v Speaker 1>of retreated already since. I think the Fed also wanted

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<v Speaker 1>to send a message that the rate cut expectations that

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<v Speaker 1>were coming in sort of early or in earlier in

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<v Speaker 1>three weren't going to happen. So I'm not sure it

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<v Speaker 1>was so much about September or into the end of

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<v Speaker 1>the year. I think it was a view that they

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<v Speaker 1>are going to get restrictive, as we've already known, and

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<v Speaker 1>they're going to stay restrictive for longer, and even if

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<v Speaker 1>growth slows, it's kind of what they're hoping for. So

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<v Speaker 1>they're not going to jump in at the first sign

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<v Speaker 1>of a disappointing non farm peril's number or a softer

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<v Speaker 1>p m I number. They're going to stay tighter for longer. So,

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<v Speaker 1>given all that you're saying here, I see in our

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<v Speaker 1>last minute or so, how are you advising your clients

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<v Speaker 1>to add to risk? Are you making a certain recommendations

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<v Speaker 1>on sectors or styles through the rest of this year. Well,

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<v Speaker 1>we think that technology is going to resume its out

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<v Speaker 1>performance in the coming months and lead the market higher

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<v Speaker 1>into the end of the year. Now, it doesn't mean

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<v Speaker 1>we don't get more speed bumps like we did just now,

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<v Speaker 1>and September for sure, can be tricky at least at

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<v Speaker 1>some point during the month. So it's not there's certainly

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<v Speaker 1>no all clear signal, but some of these more some

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<v Speaker 1>of the cyclical sectors should start to recover if growth

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<v Speaker 1>holds up. And again I think technology growth and earnings

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<v Speaker 1>are going to continue to support the sector and that

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<v Speaker 1>will help lead the market higher. Great to get your

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<v Speaker 1>thoughts this morning, s D. Thanks for this. I really

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<v Speaker 1>appreciate you joining us. That's s D. Dwack, chief investment

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<v Speaker 1>officer at Flow Bank,