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Speaker 1: Okay, let's get to our next guest. We're joined by

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Speaker 1: me up and It vice president and global market Strategy

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Speaker 1: to JP Morgan Asset Management, getting her take on what's

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Speaker 1: going on out there. Well in the program here we

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Speaker 1: are looking at markets so generally speaking, and you're pointing

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Speaker 1: to valuations and putting a big question mark next to

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Speaker 1: that word. Ultimately, we never want markets to fall as

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Speaker 1: we've seen them fall in their recent weeks, but you

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Speaker 1: do want markets to price in reality, and valuations at

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Speaker 1: these levels are somewhat more realistic than certainly where we

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Speaker 1: started the year and where we started to get to

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Speaker 1: throughout the summer. And I would stress to investors, particularly

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Speaker 1: in US markets, that some of the falling markets that

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Speaker 1: we've seen in recent weeks is not a result of

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Speaker 1: a fundamental deterioration in the economy. Instead, it's just reality

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Speaker 1: understanding what the FED is looking to do for the

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Speaker 1: rest of the year, and pricing that in. Fundamentals haven't

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Speaker 1: really fundamentally changed in the last month, but as Chair

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Speaker 1: Powell said, we could be in for more pain ahead,

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Speaker 1: and I think that that's what markets have been reflecting

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Speaker 1: in recent weeks. But it's more than just the equity

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Speaker 1: market volatility. It's been interesting to see this year that

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Speaker 1: the interest rate volatility has been you know, double that

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Speaker 1: what if we've seen the equity market and even higher

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Speaker 1: than the FX market. So I think what we need

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Speaker 1: to be prepared for for the rest of the year

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Speaker 1: is ongoing volatility across the markets until we get more

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Speaker 1: clarity from the Central Bank um and and the path

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Speaker 1: of growth. Yeah, Jerome Powell promising pain is never a

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Speaker 1: great thing, I suppose, but then the FAT hasn't been

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Speaker 1: all that correct and a lot of their analysis and

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Speaker 1: a lot of their predictions of late. But I think

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Speaker 1: the point you make about valuations was hammered home last

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Speaker 1: week by a couple of investors saying that you sort

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Speaker 1: of need to have price earnings ratios plus inflation plus

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Speaker 1: core core inflation, you know, not more than twenty and

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Speaker 1: we'll way over twenty now, absolutely, And I think that

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Speaker 1: when we look forward at the equity markets and what

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Speaker 1: we can expect, we've seen this massive decline in multiples,

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Speaker 1: and we've seen this huge rollover in sentiment across the

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Speaker 1: board throughout the year. What we're really trying to pay

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Speaker 1: attention to from now on is what happens with earnings

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Speaker 1: in a second quarter earning season was certainly less bad

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Speaker 1: than feared, but that doesn't mean that we're not going

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Speaker 1: to see some deterioration on the earning side in the

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Speaker 1: months ahead, and that's something that we would expect to see.

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Speaker 1: I think the silver lining for investors, though, even though

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Speaker 1: we'll continue to wade through volatility for the rest of

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Speaker 1: the year, is that it's pretty rare in a given

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Speaker 1: calendar year that you see a decline in both earnings

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Speaker 1: and multiples. So this year, earnings have actually been supportive

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Speaker 1: of equity market performance overall, while multiples have been a

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Speaker 1: big detractor. If we look into next year, even if

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Speaker 1: we do see a mild earnings recession, what we would

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Speaker 1: anticipate is in the depths of that earnings recession we

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Speaker 1: start to see a multiple turnaround and sentiments start to

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Speaker 1: look better, because again markets are forward looking instruments in

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Speaker 1: terms of pricing, so we we wouldn't anticipate that could

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Speaker 1: potentially be a support next year, even if this year

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Speaker 1: it's it's a really challenging environment. Okay, you know you're

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Speaker 1: talking earnings. It was not so much to you know,

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Speaker 1: what they did in the second quarter. It's a full

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Speaker 1: guidance which as of perhaps particular interest. What did it

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Speaker 1: tell you and does it really the moment prestage any

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Speaker 1: form of do you think a recession? Well, what it

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Speaker 1: told me more than anything is the dueling impacts that

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Speaker 1: inflation has on earnings, because on the one hand, we

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Speaker 1: have to remember that earnings are nominal. When we looked

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Speaker 1: at that top line revenue growth, it was pretty strong,

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Speaker 1: reflecting a resilient consumer. Now in some cases that could

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Speaker 1: be because the consumers still spending the same amount of

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Speaker 1: money but being able to buy fewer goods. But again

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Speaker 1: that is the importance of earnings being nominal and kind

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Speaker 1: of tracking with inflation. On the other hand, where we

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Speaker 1: did see deterioration is in margins, and margins reach record

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Speaker 1: highs last year. So the starting point was good at

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Speaker 1: least in terms of the the pain that companies can withstand.

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Speaker 1: But at the same time, higher input prices, higher wages,

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Speaker 1: the strong dollar of course, has all eaten away at

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Speaker 1: what companies can do. So we're really looking for companies

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Speaker 1: with that pricing power. In particular, we tend to see

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Speaker 1: it in some of the more value oriented companies that

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Speaker 1: essentially have fixed costs that aren't moving with this higher

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Speaker 1: inflation environment um, whereas other areas of the market that

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Speaker 1: are very dependent on wages and and high skilled talent

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Speaker 1: um could continue to to face some challenges. So we're

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Speaker 1: seeing some sector dispersion here in terms of who can

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Speaker 1: be successful in this type of environment. So we're very

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Speaker 1: much looking at companies on a bottoms up basis. So

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Speaker 1: do you think companies pretty soon will we'll have to

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Speaker 1: accelerate their job cuts to some extent. We've seen that already,

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Speaker 1: particularly and again some of the the tech sectors where

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Speaker 1: wages are really important because talent is what keeps things going.

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Speaker 1: So I do think that in some parts we're going

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Speaker 1: to start to see companies cut back a little bit more.

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Speaker 1: But I think it's gonna be a lot of the

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Speaker 1: areas that did tend to over hire. The bigger challenge

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Speaker 1: those that structurally we have a labor apply problem. So

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Speaker 1: I do think that companies are really going to hold

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Speaker 1: off as much as they can on massive layoffs because

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Speaker 1: it was so hard and so expensive to get some

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Speaker 1: of this talent in the door in the first place.

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Speaker 1: Quality of labor was a problem pre pandemic as well. Um,

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Speaker 1: so I don't know that you're necessarily going to see

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Speaker 1: a meteoric rise in unemployment, and even as you eventually

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Speaker 1: see a rise in unemployment due to actual economic stress, um,

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Speaker 1: I think that we're going to see jobs come back

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Speaker 1: quicker than certainly we did after the financial crisis, where

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Speaker 1: that growth after unemployment was incredibly slow. Well, that must

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Speaker 1: certainly mean that you don't really see a recession, a

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Speaker 1: deep recession, maybe just to slow down twenty seconds. It

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Speaker 1: is really you know, recession is not guaranteed. The consumer

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Speaker 1: has been incredibly resilient and the labor market has been

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Speaker 1: very resilient. So we would not say that recession is

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Speaker 1: a foregone conclusion, but with the FED being as aggressive

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Speaker 1: as it is, it's certainly still a risk on our radar. Alright, Mira,

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Speaker 1: thank you very much for being with us live here

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Speaker 1: on the pro Graham, especially early Monday morning in Asia.

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Speaker 1: Sunday evening in the State's Mirror, Panda, vice President Global

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Speaker 1: Market Strategies, that JP Morgan Asset Management with her best

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Speaker 1: ideas