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Speaker 1: Our guest is Sarah Ponzac, financial advisor at UBS Private

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Speaker 1: Wealth Management. Sarah, welcome back to the platform, which you

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Speaker 1: know well. So it seems like the data today, the

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Speaker 1: disappointing a manufacturing data, kind of suggests that investors will

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Speaker 1: switch here from the glee from yesterday about Jay palace

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Speaker 1: comments about slowing the pace of rates two more serious

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Speaker 1: fears of recession thinking being sort of along the lines

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Speaker 1: of great, we don't have a runaway freight train at

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Speaker 1: the FED, but now the worry is they went too far,

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Speaker 1: and I guess that means that we're all going to

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Speaker 1: be trying to figure out whether it's soft landing or

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Speaker 1: hard landing. Your thoughts which of the two or neither? Right, Well,

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Speaker 1: thank you for having me. It's always great to be

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Speaker 1: back on the Bloomberg platform. And you know, the markets,

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Speaker 1: at least the market perspective is that bad data is

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Speaker 1: still good news. Uh. You know, we didn't see much

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Speaker 1: of a reaction today at markets, but you have to

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Speaker 1: keep in mind that or coming off of a period

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Speaker 1: in which the dowe just rose from its low back

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Speaker 1: in September, so it's really been quite the feat to

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Speaker 1: witness the strength in the stock market over the past

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Speaker 1: couple of months, and that, of course, has really been

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Speaker 1: set upon the expectations of a federal reserve pivot. But

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Speaker 1: to your question of has the Federal Reserve gone too far? Now,

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Speaker 1: that is starting to be the million dollar question, and

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Speaker 1: a lot of people are expecting that that's probably the case, because,

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Speaker 1: as we all know, monetary policy acts with a lag.

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Speaker 1: We have now seen four straight seventy five basis point

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Speaker 1: rate hikes. The expectation is for another fifty in the

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Speaker 1: middle of this month. That is a massive, massive change

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Speaker 1: from where we started the year, and we have not

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Speaker 1: yet really started to see the effects of that and

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Speaker 1: how that's going to affect the economy. And that's why

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Speaker 1: at UBS, you know, our our chief investment office is

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Speaker 1: still concerned here and you know, wary of taking on

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Speaker 1: too much risk because sure, you know, the expectation is

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Speaker 1: the pace of right hikes might slow, but then you

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Speaker 1: have to turn your focus to the economy next year

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Speaker 1: and the potential for session and the profits. I suppose

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Speaker 1: it comes down to trust. Do you trust the Fed

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Speaker 1: gets it right when they didn't last year? Well, trust

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Speaker 1: is you know a little too fickle a concept. Maybe

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Speaker 1: to hang your hat on. As an investor, I don't know.

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Speaker 1: We can just say, okay, I trust the Federal Reserve,

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Speaker 1: especially like you said, after a year in which they

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Speaker 1: kept demanding in saying over and over that inflation was transitory,

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Speaker 1: and here we are December. Clearly it was not. But

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Speaker 1: if if we think about, you know, the forward picture

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Speaker 1: and what's going to happen to corporate profits, it's really

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Speaker 1: interesting from a valuation perspective. If you look at the

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Speaker 1: SMP five hundred right now, it's treating above seventeen times

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Speaker 1: forward earnings. Now, historically, whenever the SMP has been trading

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Speaker 1: at evaluations around these levels forward earnings growth averages four

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Speaker 1: fourteen excuse me four. And if you think about where

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Speaker 1: we actually stand, we are not even close to that

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Speaker 1: right now. Bottoms of analysts expectations are five. We expected

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Speaker 1: the client of force. So the interest rate tightening cycle

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Speaker 1: setted off in March. We've had a sixteen fold increase

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Speaker 1: in the cost of borrowing. We should be feeling something

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Speaker 1: or seeing something in the data suggesting it's working, shouldn't we, sir?

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Speaker 1: And you know when we look at the non farm

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Speaker 1: Pails report coming up Friday, you know it's not going

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Speaker 1: to be keen determining whether anything is actually taking hold.

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Speaker 1: And of course the inflation report coming up will be

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Speaker 1: even more important. You're absolutely right. And if we think

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Speaker 1: about the past couple inflation points c p I, p

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Speaker 1: p I, even the last jobs data that came out

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Speaker 1: as well, they all started to show a loosening and

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Speaker 1: economic conditions, you know, some deterioration. Of course, one data

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Speaker 1: point does not make a trend. But as you mentioned,

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Speaker 1: the jobs data that we expect to see tomorrow, the

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Speaker 1: inflation data that we will then see you know next week,

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Speaker 1: pc uh, those will start to tell us you know,

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Speaker 1: maybe it is a trend. We'll have to continue to

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Speaker 1: see it. But there have been slight hints that the

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Speaker 1: interest rate hike cycle that we have seen is starting

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Speaker 1: to filter through the economy. Well, the PC deflator in

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Speaker 1: the data today was was better than than what it

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Speaker 1: might have been. But but the problem is it's just

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Speaker 1: still not down anywhere near the target. No, And it's

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Speaker 1: always a you know, it's almost a funny conversation because

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Speaker 1: when we speak about the market participants and you look

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Speaker 1: at the markets so excited, you know, look at the

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Speaker 1: look at the market reaction from the last cp I

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Speaker 1: and p p I prints because inflation was cooler than expected.

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Speaker 1: But please, we're stop still talking about decade long highs

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Speaker 1: in inflation. So in order for inflation to get down

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Speaker 1: to where the Federal Reserve wanst back towards that two

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Speaker 1: percent level, it's going to take some time. And it

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Speaker 1: is possible that the reactions that we have seen the

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Speaker 1: market might have gotten a little bit ahead of itself,

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Speaker 1: but we'll wait to see the next set of data. Prince, Yeah,

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Speaker 1: this is it. I mean, when we didn't look at

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Speaker 1: you know, ten year yields not three point five, did

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Speaker 1: the market or did investors, I should say, really get

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Speaker 1: perhaps an alternate message from j. Powell, and perhaps he

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Speaker 1: wanted to send out well it's interesting, so you know,

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Speaker 1: fetch your Powell's message on on yesterday. It wasn't necessarily

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Speaker 1: dutched by any means, but some are saying, well, he

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Speaker 1: didn't push back against the market rally that we have

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Speaker 1: seen this quarter, and that in and of itself is

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Speaker 1: relatively dubblish. But let's be clear here. He still said

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Speaker 1: that we are expecting that we will see a slowing

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Speaker 1: in the pace of rate heights starting in December. That's

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Speaker 1: not new news. It was already expected the Fed was

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Speaker 1: not going to raise sevent They would likely go fifty

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Speaker 1: in December, and then we'll see what comes after that.

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Speaker 1: But but certainly the market heard what it wants to hear.

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Speaker 1: The market heard a doublish Powell. Um. But the reality

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Speaker 1: is beyond December, it's still up you know, the path

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Speaker 1: of right heights. Whether we're going to see a leveling off,

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Speaker 1: whether we're gonna see a bit more is still up

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Speaker 1: for grabs. Let's talk about conviction calls. So we see

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Speaker 1: from your notes, M what you like, if you could

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Speaker 1: sum it up a little bit, in a nutshell, tell

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Speaker 1: our audience where they can go to make some money.

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Speaker 1: So in a nutshell, I'll give you short term and

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Speaker 1: then long terms. So short term right now, and we've

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Speaker 1: been advising this for quite a while. Um. Look the

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Speaker 1: defensive areas of the stock market, if you want to

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Speaker 1: be tactical, so healthcare, consumer staples, that's really worked out

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Speaker 1: well this year considering their flat in two roughly. And

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Speaker 1: then we do still like energy even then we've seen

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Speaker 1: you know, a rally of more than six considering the

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Speaker 1: fact that office have kept up with that, you know,

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Speaker 1: energy energy still looks good here on the equity side.

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Speaker 1: From a long term perspective, though, think about long term

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Speaker 1: structural growth themes, and this more so fits in the

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Speaker 1: growth category, which is really taken a hard hit this year.

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Speaker 1: So areas like cybersecurity for example. You've got to be

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Speaker 1: particular in an area like this, but we have seen

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Speaker 1: valuations come down, and if you have the ability to

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Speaker 1: weather volatility and risk in the coming years and you

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Speaker 1: have a long term picture, that could be a structural

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Speaker 1: theme to start looking at. What about tech? So when

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Speaker 1: you say tech, I assume you mean big tech and

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Speaker 1: megacap tech because obviously it's been a really difficult year

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Speaker 1: for technology this year. We're not quite ready to go

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Speaker 1: all in yet on tech. You know, it's still an

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Speaker 1: interest rate play at the end of the day right now. Sarah,

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Speaker 1: thank you so much for joining us. That is fun.

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Speaker 1: Check there joining us from a EUBS Private wealth management

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Speaker 1: which she is a financial adviser, getting her take on

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Speaker 1: the car market. Action