WEBVTT - Ceasefire Push Keeps Markets on Edge 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.160 or watch us live on YouTube. 0:00:27.760 --> 0:00:31.800 Eric Fannastron, we start strong, Chief investment officer at Wizard 0:00:32.200 --> 0:00:37.559 Asset Management. What a tumultuous weekend. The emotion, the President's 0:00:37.600 --> 0:00:42.000 tweet and everything else is well, what are people actually 0:00:42.560 --> 0:00:43.839 doing well? 0:00:43.880 --> 0:00:45.920 I think, Tom, if you look over the past couple weeks, 0:00:45.920 --> 0:00:47.600 this is not the first couple of days that we've 0:00:47.600 --> 0:00:49.879 had whipsaw action coming out of the White House in 0:00:49.960 --> 0:00:52.280 terms of how aggressive the posture is going to be, 0:00:52.680 --> 0:00:55.840 and or on and corresponding whipsaw action in the way 0:00:55.920 --> 0:00:58.480 markets are responding. You know, you open the show talking 0:00:58.480 --> 0:01:00.520 about OILBA at one o eight. It's not at ninety 0:01:00.760 --> 0:01:02.560 the way I think about it. It's at one oh eight, 0:01:02.600 --> 0:01:05.040 it's not at one thirty. If you do a basic 0:01:05.120 --> 0:01:07.400 back of the envelope on how much the oil price 0:01:07.440 --> 0:01:09.839 should be moving, if we're really in for a persistent 0:01:09.920 --> 0:01:12.760 period of straight disruption, I get much higher numbers and 0:01:12.760 --> 0:01:15.160 That's why I'm pretty worried looking at markets that are still. 0:01:15.000 --> 0:01:16.840 In the car that was really in the Zeitgasis. Ye, 0:01:17.160 --> 0:01:19.600 it was the pros like Eric are all one thirty one, 0:01:19.760 --> 0:01:23.520 forty yep, you know in a Wong's model and two hundreds. 0:01:23.120 --> 0:01:27.600 And exercise impact. So as the chief investment officer and 0:01:27.640 --> 0:01:31.200 asset management is, what's the conversation you're having with your 0:01:31.240 --> 0:01:32.559 portfolio managers these days? 0:01:32.640 --> 0:01:35.280 So what we're looking at is the disconnect between where 0:01:35.440 --> 0:01:38.040 where economic fundamentals are telling us that oil is going 0:01:38.080 --> 0:01:40.400 to go, that companies that are linked to the oil price, 0:01:40.400 --> 0:01:42.520 the companies that are link to other non oil imports 0:01:42.520 --> 0:01:44.240 coming out of the straight are going to go, and 0:01:44.280 --> 0:01:47.640 what markets are saying. And we're still concerned that markets 0:01:47.640 --> 0:01:50.760 are much too sanguine about these shocks, much too sanguine 0:01:50.760 --> 0:01:54.559 about inflation in general, in an environment where the fundamentals 0:01:54.600 --> 0:01:56.720 on the ground don't seem like this is wrapping up 0:01:56.720 --> 0:01:57.360 anytime soon. 0:01:57.600 --> 0:01:59.880 Yeah. I mean, I think when it first all started 0:02:00.120 --> 0:02:03.800 five weeks ago, it was always a concern of not 0:02:04.120 --> 0:02:06.440 too concerned in the near term. But if oil is 0:02:06.560 --> 0:02:10.600 higher for longer, then we have concerns about inflation. Then 0:02:10.600 --> 0:02:14.320 we have concerns about economic growth. Potentially, it seems like 0:02:14.320 --> 0:02:16.760 we're longer now. It seems like this is higher for 0:02:16.800 --> 0:02:20.120 longer now. I'm not sure when it starts impacting you know, 0:02:20.200 --> 0:02:21.000 economic data. 0:02:21.120 --> 0:02:21.720 That's right, Paul. 0:02:21.720 --> 0:02:24.359 And this is what worries me is markets have been trained, 0:02:24.520 --> 0:02:29.040 over years of geopolitical disruptions to always bet these disruptions 0:02:29.040 --> 0:02:30.880 are in the short term. And by the way, if 0:02:31.440 --> 0:02:34.080 you've been investing alongside that, if you've been just betting 0:02:34.080 --> 0:02:37.640 against every big geopolitical disruption, you've been rewarded over the 0:02:37.639 --> 0:02:40.160 past twenty years. So people think that's the smart thing 0:02:40.200 --> 0:02:42.400 to do, is always bet against the shock. What we're 0:02:42.400 --> 0:02:45.000 seeing now is the shock is lasting longer than a 0:02:45.000 --> 0:02:47.120 lot of the optimists set up front, and that requires 0:02:47.160 --> 0:02:49.400 a bit more tactical decision making from investors. 0:02:49.480 --> 0:02:52.880 So are you guys dialing back risk? Are you reallocating 0:02:53.080 --> 0:02:56.320 to safer I guess sectors in the market, What are 0:02:56.320 --> 0:02:56.799 you guys doing? 0:02:57.000 --> 0:02:59.240 Well, what we're doing is focusing more on bottoms up 0:02:59.240 --> 0:03:04.360 idiosyncrat investment stories, identifying the individual companies that are likely 0:03:04.440 --> 0:03:08.480 well placed to be resilient to supply chain shocks, rather 0:03:08.560 --> 0:03:11.120 than betting with the whole market to improve quickly on 0:03:11.120 --> 0:03:11.720 some downturn. 0:03:12.600 --> 0:03:13.680 We don't think it's covered right here. 0:03:13.680 --> 0:03:15.840 Well, we're betting on companies that we think are have 0:03:16.040 --> 0:03:18.600 robustness in their supply chains that are going to be 0:03:18.600 --> 0:03:21.640 able to handle the near term disruption, even if it 0:03:21.680 --> 0:03:23.480 persists longer than the overall markets. 0:03:23.560 --> 0:03:25.800 Say what about MEG seven? I mean, one of the 0:03:25.840 --> 0:03:28.280 great themes I'm seeing and I don't have an opinion 0:03:28.320 --> 0:03:32.960 on this, folks. Is some people saying to borrow the phrase, 0:03:33.280 --> 0:03:37.280 A few are saying load the boat, and others are saying, boy, 0:03:37.320 --> 0:03:40.840 you better do a new review of a repriced mag seven. 0:03:40.880 --> 0:03:41.760 Where are you on that? 0:03:42.120 --> 0:03:44.800 So your first two questions, Tom, the combination of them 0:03:44.880 --> 0:03:47.760 is exactly why I think markets this year are so interesting. 0:03:48.040 --> 0:03:50.720 We're dealing with this negative supply shock that's coming from 0:03:50.720 --> 0:03:53.200 oil markets in the Straits. At the same time, we're 0:03:53.240 --> 0:03:57.000 also dealing with a historically huge positive supply shock from 0:03:57.040 --> 0:03:59.520 optimism around what AI is going to deliver, and the 0:03:59.560 --> 0:04:02.720 mags and are benefiting meaningfully not just recently but over 0:04:02.760 --> 0:04:06.000 the past couple of years from that optimistic supply shock. 0:04:06.280 --> 0:04:07.920 It's hard for investors because they don't know how to 0:04:07.920 --> 0:04:10.560 manage these supply dynamics. We all grew up in markets 0:04:10.800 --> 0:04:13.280 worried about demand. It's the fact going to stimulate enough, 0:04:13.320 --> 0:04:15.720 Government's going to spend enough. This is all about supply 0:04:15.840 --> 0:04:17.320 too much, constraint too much AI. 0:04:17.480 --> 0:04:21.880 I mean, Paul, let's be honest. April fourteen, twenty twenty six. 0:04:22.200 --> 0:04:26.040 Two things happen, JP Morgan starts the yearning SS and 0:04:26.120 --> 0:04:28.120 off and that's it for the Red Sox. 0:04:28.400 --> 0:04:32.120 Yes, I know, for your restues there, Tom, All right, 0:04:32.160 --> 0:04:35.440 So Eric, what is the AI call here? I mean, 0:04:35.520 --> 0:04:36.920 let's let's just get away from the war for a 0:04:36.960 --> 0:04:39.320 second and focus on the fundamentals and what the One 0:04:39.320 --> 0:04:41.600 of the fundamental questions for the marketplace for the last 0:04:42.120 --> 0:04:45.080 three years arguably was AI. And I think that it 0:04:45.120 --> 0:04:49.160 went from being let's just buy anything remotely associated with AI. 0:04:49.279 --> 0:04:51.920 Now it's kind of the market's trying to differentiate a 0:04:51.920 --> 0:04:54.479 little different winners and losers. How do you approachiate that big, 0:04:54.520 --> 0:04:55.119 big theme. 0:04:55.440 --> 0:04:58.360 Well, look at Lizard, we're very optimistic about the reality 0:04:58.440 --> 0:05:00.680 the AI is going to meaningfully chase not just our 0:05:00.680 --> 0:05:03.159 working lives, but our investing lives for the rest of 0:05:03.200 --> 0:05:04.240 our professional careers. 0:05:04.440 --> 0:05:05.320 It's easy to look. 0:05:05.160 --> 0:05:07.840 At valuations of AI names today and say they're too expensive, 0:05:07.839 --> 0:05:11.560 you got to just back off. But I still think investors, 0:05:13.000 --> 0:05:16.080 you know, white collar employees up and down the income 0:05:16.120 --> 0:05:20.000 struct from across and across industries haven't really found them 0:05:20.040 --> 0:05:23.359 the transformative nature of the technology still, even a couple 0:05:23.320 --> 0:05:24.960 of years into the into the hype. 0:05:25.000 --> 0:05:27.559 I just noticed on the screen JP Morgan twelve months 0:05:27.600 --> 0:05:31.760 trailing of forty two percent. This market doesn't feel like 0:05:31.800 --> 0:05:35.239 we're celebrating that. Maybe, you know, with all the trauma 0:05:35.320 --> 0:05:38.720 out there and this weekend as well, there's this gauze 0:05:38.800 --> 0:05:42.279 of negativity and the answer is a select group of 0:05:42.320 --> 0:05:44.520 equities have really performed. Yeah. 0:05:44.680 --> 0:05:46.280 The way I think about it is that supplied demand 0:05:46.360 --> 0:05:52.440 dynamic again that the corporate earnings are seeing continued robust demand. 0:05:51.920 --> 0:05:53.920 September into Q four, Q three. 0:05:54.080 --> 0:05:56.000 Well, I think it's been the story the last twelve months. 0:05:56.080 --> 0:05:58.800 I'm actually a little pessimistic about how long that's going 0:05:58.839 --> 0:05:59.680 to last this year. 0:05:59.640 --> 0:06:02.240 Single digit pessimistic or z it won't let that in 0:06:02.240 --> 0:06:04.080 the house single digit. 0:06:04.440 --> 0:06:06.640 Yeah, I think we're seeing I think we're seeing a 0:06:06.640 --> 0:06:09.080 meaningful slow down in households and band it's coming from 0:06:09.080 --> 0:06:12.080 a slower labor market and it's coming from slower wage growth, 0:06:12.120 --> 0:06:14.120 and I think that's going to be tough to reconcile 0:06:14.400 --> 0:06:16.920 with the levels of consumer spedding we've seen in reci years. 0:06:17.440 --> 0:06:19.720 What are we doing in the bond market these days? 0:06:19.720 --> 0:06:21.560 I mean, you could sit there in to your treasury 0:06:22.120 --> 0:06:24.400 oly three point eighty five percent. That seems like a 0:06:24.600 --> 0:06:28.040 very nice return for very little risk. Do I take 0:06:28.120 --> 0:06:29.440 credit risk on above and beyond that? 0:06:29.680 --> 0:06:31.680 Well, here's where I go back to the inflation story, 0:06:31.760 --> 0:06:35.159 right because I am I am shocked that interest rate markets, 0:06:35.160 --> 0:06:37.320 that treasury yields in long term and in the short 0:06:37.400 --> 0:06:40.920 term haven't been more responsive to the inflationary dynamic we've 0:06:40.920 --> 0:06:42.440 seen over the past couple of months. 0:06:42.600 --> 0:06:43.000 Oils. 0:06:43.000 --> 0:06:44.800 We talked about oil, oils, a lot of it. Oil 0:06:44.839 --> 0:06:47.000 is not the whole story. There are also non oil 0:06:47.040 --> 0:06:49.080 imports coming out of the coming out of the Gulf 0:06:49.120 --> 0:06:51.120 that are going to be supply constrained, that are going 0:06:51.160 --> 0:06:53.440 to drive the inflation numbers up in the near term. 0:06:53.720 --> 0:06:55.880 And I'm surprised that we haven't seen long term, long 0:06:55.960 --> 0:06:58.800 term inflation expectations. I look at you know, five or 0:06:58.800 --> 0:07:01.560 five year break evens, the the market metric that used 0:07:01.600 --> 0:07:04.120 to be very cool to watch for inflation expectations. Now 0:07:04.160 --> 0:07:06.680 I feel like no one pays attention to anymore, very 0:07:06.720 --> 0:07:09.840 sanguine about the inflationary path from here, and I think 0:07:09.920 --> 0:07:12.280 central banks can't afford to be that sing wine over. 0:07:12.200 --> 0:07:13.600 The coming years. And I think we're god see more 0:07:13.680 --> 0:07:17.280 upward pressure on rates that Eric is to give us 0:07:17.280 --> 0:07:20.400 a nice start, Dana, I've scheduled here at about fifteen 0:07:20.880 --> 0:07:23.840 man is starting strong into seven o'clock hour. We say 0:07:23.880 --> 0:07:25.880 good morning, and across the nation the way you choose 0:07:25.920 --> 0:07:28.960 to listen to us, Good morning, Nathan Hager ninety two 0:07:29.040 --> 0:07:33.080 nine FM, Dodgers Radio in Washington, we say good morning, 0:07:33.120 --> 0:07:36.400 ninety two NINEF. But in Boston Bloombrig eleventh three to zero. 0:07:36.480 --> 0:07:40.360 Here in somewhat frigid New York as well, Poss meeting 0:07:40.440 --> 0:07:41.440 with Eric Astro. 0:07:41.680 --> 0:07:44.360 So Eric, I'm just looking at our good friend Torsten 0:07:44.400 --> 0:07:46.520 Slock from Apollo out with a note. Sure talk talking 0:07:46.520 --> 0:07:48.720 about gold and the reasons that went up and maybe 0:07:48.720 --> 0:07:52.080 the reasons it's gone down here, maybe just because people 0:07:52.120 --> 0:07:54.240 need liquidity in other parts of their portfolio, so they're 0:07:54.240 --> 0:07:57.040 selling gold. How do you guys think about gold here? 0:07:57.360 --> 0:07:59.520 The way I think about it generally, is if if 0:07:59.560 --> 0:08:01.560 you and I are talking about gold fall, people are 0:08:01.600 --> 0:08:05.040 watching too much gold volatility, then things are probably not 0:08:05.160 --> 0:08:08.240 running very smoothly in the global supply chain picture. And 0:08:08.320 --> 0:08:10.640 I think just the focus on gold, more so than 0:08:10.640 --> 0:08:13.120 what the price is doing, is an indicator that people 0:08:13.160 --> 0:08:15.880 are very worried about the pipes of the global economy's 0:08:15.880 --> 0:08:18.960 ability to deliver goods and services. And that's the same 0:08:18.960 --> 0:08:21.040 thing we're seeing in oil markets, same thing we're seeing 0:08:21.040 --> 0:08:22.040 in global food markets. 0:08:23.040 --> 0:08:24.960 So how do you think about these? I mean, I 0:08:24.960 --> 0:08:28.760 think with this war, I'm not sure where we are 0:08:28.760 --> 0:08:31.640 in terms of our ultimatums here for Iran here, but 0:08:31.720 --> 0:08:34.160 it feels like it's gone longer than expected. It feels 0:08:34.200 --> 0:08:36.720 like I may go even a little bit longer here. 0:08:37.520 --> 0:08:40.079 Is there a positioning here that you guys feel comfortable 0:08:40.080 --> 0:08:41.760 about for the next three to six months? 0:08:41.840 --> 0:08:42.040 Here? 0:08:42.360 --> 0:08:46.360 Am I getting more conservative in my positioning? Am I 0:08:46.440 --> 0:08:48.280 just taking cash? What am I doing here? 0:08:48.559 --> 0:08:48.760 Yeah? 0:08:48.800 --> 0:08:51.880 So to a first order, at Lazard, we're not focused 0:08:51.880 --> 0:08:54.319 on trying to time the macro events. We don't think 0:08:54.360 --> 0:08:56.600 that's our edge, And I would humbly point out that 0:08:56.640 --> 0:08:59.400 those who do things their edge have seen some egg 0:08:59.440 --> 0:09:01.760 on their face recently. What we're trying to do is 0:09:01.800 --> 0:09:05.080 identify the companies from a bottoms up perspective that have 0:09:05.200 --> 0:09:08.560 enough robustness on their balance sheets to tolerate prolonged periods 0:09:08.600 --> 0:09:12.240 of uncertainty on margins pond Tom, we are leaning against 0:09:12.720 --> 0:09:15.520 aggressive expansion into risk given that oil dynamic. 0:09:15.559 --> 0:09:17.760 I did a survey with an intern into a survey 0:09:17.840 --> 0:09:20.360 for US over the weekend. They used AI did they 0:09:20.600 --> 0:09:24.400 how many people are waiting for healthcare to move? Let's 0:09:24.440 --> 0:09:27.679 begin with the why Why hasn't the healthcare sector moved? 0:09:28.120 --> 0:09:30.720 I think the healthcare sector is really emblematic with some 0:09:30.800 --> 0:09:34.280 of the broader some of the broader demand dynamics we've 0:09:34.320 --> 0:09:37.240 seen in the US. Because within the healthcare sector, what 0:09:37.280 --> 0:09:39.120 we haven't seen that you would normally see at this 0:09:39.160 --> 0:09:42.560 point in the cycle is more R and D investment, 0:09:42.640 --> 0:09:47.560 more capital expenditure to really strengthen our ability to deliver 0:09:47.640 --> 0:09:50.360 improve health care services. You haven't seen it. I think 0:09:50.400 --> 0:09:53.760 it's because business leaders are still pessimistic about the consumer's 0:09:53.760 --> 0:09:56.200 ability to really deliver persistent robust demand. 0:09:57.160 --> 0:09:59.080 What's that better reserve doing here? I mean, I'm looking 0:09:59.080 --> 0:10:01.680 at the WORP function. I don't see much movement at all. 0:10:02.320 --> 0:10:05.480 It's just shirt. I don't know. 0:10:05.720 --> 0:10:07.840 Yeah, the way I think about it, the FED managers 0:10:07.840 --> 0:10:11.040 demand and everyone's talking about supply right now. I still 0:10:11.080 --> 0:10:14.160 think the big story is how calm markets and particularly 0:10:14.480 --> 0:10:16.880 investors who are pricing for FED action when you're looking 0:10:16.920 --> 0:10:19.800 at the work function, how calm they are about inflation. 0:10:20.280 --> 0:10:22.160 And I still expect us to see a bit of 0:10:22.200 --> 0:10:25.240 an upward turn in some of those pricing forum pricing 0:10:25.240 --> 0:10:27.079 for monetary tightening over the coming years. 0:10:27.160 --> 0:10:29.719 Next two meetings, folks. April twenty nine. The end of 0:10:29.760 --> 0:10:33.319 this month seems distant away given all the war news, 0:10:33.360 --> 0:10:36.760 but there is April twenty nine. In June seventeen. I 0:10:36.760 --> 0:10:38.720 need to get in trouble on a Monday. You know 0:10:39.640 --> 0:10:44.400 that was a jaption. I'm doing my Easter thing and 0:10:45.120 --> 0:10:47.840 like God looked down at me and said, get Eric 0:10:47.880 --> 0:10:50.520 in trouble on Monday morning. That's a great way to 0:10:50.559 --> 0:10:54.400 stir Or's egg. And Adam Posen has framed out a 0:10:54.559 --> 0:10:59.040 higher interest rate environment. Yeah, not the scale the magnitude 0:10:59.040 --> 0:11:02.520 they're talking about, but given all the events were sobered 0:11:02.520 --> 0:11:05.960 by this, what happens if we get a Posen or 0:11:06.120 --> 0:11:11.040 ZG five point two percent thirty year bond five point 0:11:11.240 --> 0:11:14.480 five percent thirty year bond, what actually happens? 0:11:14.840 --> 0:11:16.720 So I think the main point of their piece is 0:11:16.760 --> 0:11:20.000 that the reason what's gonna the big trigger that's going 0:11:20.080 --> 0:11:22.280 to get you to those higher bond yields is this 0:11:22.360 --> 0:11:25.520 inflationary uptick. We've been doing the wage push with exactly 0:11:25.720 --> 0:11:29.440 inflation from labor markets coming wage. I know you did 0:11:29.480 --> 0:11:32.280 talk right, would I would have questioned it, but that 0:11:32.280 --> 0:11:35.600 that inflationary impulse which has you know, we thought that 0:11:35.679 --> 0:11:38.040 was likely to be the case before the war, Yes, 0:11:38.240 --> 0:11:40.600 And what happened in the war was we pour gasoline 0:11:40.600 --> 0:11:43.960 on the inflation outlook, right, And I think the I 0:11:44.000 --> 0:11:47.160 think both from the oil and food sectors, we're going 0:11:47.200 --> 0:11:49.439 to see continued up ticket prices that are going to 0:11:49.480 --> 0:11:51.240 put even more pressure on long termials. 0:11:51.520 --> 0:11:54.280 So what's the for the remainder of twenty twenty six? 0:11:54.320 --> 0:11:57.520 What's your what's the call here? Is it the you know, 0:11:58.720 --> 0:12:01.120 I'm just wondering if people are going to be buying 0:12:01.120 --> 0:12:03.000 the dip here like they've been buying the dip for 0:12:03.040 --> 0:12:04.520 the as you mentioned last twenty years. 0:12:04.600 --> 0:12:08.240 Yeah, the big the big story is we think investors 0:12:08.280 --> 0:12:10.880 should spend less time focused on are you going to 0:12:10.880 --> 0:12:12.400 buy the dip? Are you going to sell the spike? 0:12:12.440 --> 0:12:14.040 Because that's a very hard call to make. 0:12:14.440 --> 0:12:17.160 So we figu where our portfolios are going to generate alpha, 0:12:17.200 --> 0:12:19.840 where we're going to deliver returns from our clients. It's 0:12:19.880 --> 0:12:23.280 from the bottoms up, it's from identify the companies systematically 0:12:23.360 --> 0:12:25.600 and fundamentally that are going to be robust to these 0:12:25.679 --> 0:12:27.079 geopolitical environments. 0:12:27.720 --> 0:12:30.200 Eric, thank you so much, really really great to get 0:12:30.280 --> 0:12:33.920 us started. Eric, mister van Nostrin, he is with Lizard 0:12:34.480 --> 0:12:40.559 Asset Management. Stay with us. More from Bloomberg Surveillance coming 0:12:40.640 --> 0:12:41.640 up after this. 0:12:48.880 --> 0:12:52.480 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:12:52.520 --> 0:12:55.680 weekday afternoons from seven to ten am Eastern Listen on 0:12:55.760 --> 0:12:59.440 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:59.559 --> 0:13:01.080 watch us live on YouTube. 0:13:01.280 --> 0:13:04.200 Scott Demago picks up the piece of Senior Vice president 0:13:04.520 --> 0:13:09.000 pet of Fixed Income Alliance Bernstein. I guess just simply 0:13:09.280 --> 0:13:11.480 on what I would call bonds, but of course it's 0:13:11.520 --> 0:13:16.040 bills notes in bonds. What is the to do as 0:13:16.080 --> 0:13:21.120 we launch into April? A wonderful research notes, Scott. But 0:13:21.400 --> 0:13:25.200 you know, if I'm not panicking, if I'm capturing a coupon. 0:13:25.720 --> 0:13:27.040 What is the to do? 0:13:29.120 --> 0:13:31.480 Hey, good morning Tom, Good morning Paul. Thanks thanks for 0:13:31.480 --> 0:13:34.360 having me. I think that to do here is to 0:13:34.400 --> 0:13:38.760 focus on duration. And you know, as this war has progressed, 0:13:38.800 --> 0:13:41.240 as you said, the past thirty eight days, we've seen 0:13:41.280 --> 0:13:44.320 the market really start to worry about inflation, and we've 0:13:44.320 --> 0:13:47.120 seen that cause bond yields to sell off. We think 0:13:47.120 --> 0:13:49.120 we're getting to that point where the market's going to 0:13:49.160 --> 0:13:52.679 start worrying about the growth impact that higher energy prices have, 0:13:53.200 --> 0:13:56.040 and that's going to cause bonds to rally as we 0:13:56.120 --> 0:13:57.320 go through the second half of the year. 0:13:57.520 --> 0:14:01.079 Does it matter what kind of bonds Paul's I am. 0:14:01.360 --> 0:14:04.040 He says credit risk, but boy, you know, do you 0:14:04.160 --> 0:14:05.800 just run to full faith and credit? 0:14:05.960 --> 0:14:06.160 Yep. 0:14:07.600 --> 0:14:07.800 Yeah. 0:14:07.880 --> 0:14:10.240 We think there's value in investment grade names right, we 0:14:10.320 --> 0:14:12.480 sat good a good week for investment grade. 0:14:13.520 --> 0:14:14.199 Last week. 0:14:14.559 --> 0:14:18.200 We've seen yields in ig move out towards five percent, 0:14:18.600 --> 0:14:21.000 which historically has been a pretty attractive levels. 0:14:21.360 --> 0:14:22.560 The faults remain low. 0:14:22.920 --> 0:14:26.400 There should be a good environment where investment grade, especially 0:14:26.440 --> 0:14:29.920 and even parts of high yield should perform, should perform well, 0:14:30.120 --> 0:14:32.160 I think it does matter. There are going to be 0:14:32.240 --> 0:14:35.400 some central banks overseas that are going to be forced 0:14:35.400 --> 0:14:38.240 to hike interest rates as we go through a higher 0:14:38.280 --> 0:14:41.160 inslationary period, and there'll be other central banks, like we 0:14:41.200 --> 0:14:43.520 think in the US and Canada that will have a 0:14:43.560 --> 0:14:46.560 lot more patients and be able to potentially lower rates, 0:14:46.840 --> 0:14:48.360 if not keep rates at these levels. 0:14:49.000 --> 0:14:51.880 Scott, what do you think of all the new issues 0:14:51.880 --> 0:14:54.240 coming out of the technology sector. It's not something that 0:14:54.280 --> 0:14:57.360 the bond market sees that that often, but boy, there's 0:14:57.400 --> 0:14:59.600 been a ton of flow coming out of those big 0:14:59.640 --> 0:15:02.400 tech games, and I'm guessing Alliance bursting is one of 0:15:02.440 --> 0:15:04.640 the first phone calls that the underwriters make. 0:15:06.080 --> 0:15:09.680 Yeah, we definitely see our share of that activity. 0:15:09.960 --> 0:15:13.120 I would say what a very positive dynamic is that 0:15:13.200 --> 0:15:15.760 these companies are coming, these hyper scale ors. They're coming 0:15:15.800 --> 0:15:18.520 with much bigger deals now. So rather than drip on 0:15:18.600 --> 0:15:21.400 the market every three months or six months and put 0:15:21.400 --> 0:15:25.120 that fear about the issuance that's coming, they've tended to 0:15:25.160 --> 0:15:27.720 do at least in the first quarter, much bigger deals. 0:15:28.040 --> 0:15:31.200 Do them across the maturity spectrum, do them across currencies 0:15:31.520 --> 0:15:34.120 right in both the US and in Europe, And I 0:15:34.160 --> 0:15:38.320 think those deals clear pretty well. And as since the 0:15:38.400 --> 0:15:41.520 technology sector has been trading better in both IG and 0:15:41.840 --> 0:15:42.840 high yield in the US. 0:15:43.560 --> 0:15:45.160 What do you think your federal Reserve is going to 0:15:45.200 --> 0:15:48.280 do here given all these crosswinds here Scott, with the 0:15:48.360 --> 0:15:51.320 geopolitics as well as just the fundamentals. 0:15:52.640 --> 0:15:54.960 Yeah, I think they're going to sit on their hands 0:15:54.960 --> 0:15:57.880 for a little while and watch to see how this progresses. 0:15:57.920 --> 0:16:00.960 We had a good jobs number on Fry, but if 0:16:00.960 --> 0:16:03.240 you look at the last six months, the US economy 0:16:03.280 --> 0:16:06.280 has been averaging about fifteen thousand jobs. So we think 0:16:06.320 --> 0:16:08.760 the jobs market is kind of, you know, just ticking 0:16:08.800 --> 0:16:11.520 along at a fairly static level, which is a good 0:16:11.560 --> 0:16:12.840 thing to feds in a good place. 0:16:13.760 --> 0:16:18.720 Do you see any lessening of this issuance? It seems 0:16:18.760 --> 0:16:22.840 every story I hear from helping Emily Graffeo and the 0:16:22.880 --> 0:16:27.640 restaurant in bonds, there's this huge demand to buy new paper. 0:16:28.200 --> 0:16:29.800 Is that going to sustain. 0:16:31.400 --> 0:16:33.600 Yeah, we think so, as long as yields are at 0:16:33.600 --> 0:16:36.800 these levels. Again, IG at five percent, high yield at 0:16:36.880 --> 0:16:40.640 seven thirty seven forty deals are coming. They're pricing with 0:16:40.680 --> 0:16:42.920 a bit of a concession. There seems to be a 0:16:43.000 --> 0:16:46.240 lot of cash on the sidelines right seven point eight 0:16:46.400 --> 0:16:49.320 or so trillion in money markets. We think these higher 0:16:49.440 --> 0:16:53.000 yields will find buyers and the market will will keep clearing. 0:16:53.560 --> 0:16:56.520 Scott, how do you think about just fixing come opportunities 0:16:56.520 --> 0:16:59.480 in the US versus rest of the world. 0:16:59.560 --> 0:17:03.560 Here, Yeah, we think, I mean, we still like credit 0:17:03.600 --> 0:17:07.200 in Europe. We think that you know, that market's repriced 0:17:07.240 --> 0:17:10.520 a bit. The credit fundamentals remain very solid in Europe. 0:17:10.800 --> 0:17:13.359 So we have been picking up some US sorry, some 0:17:13.400 --> 0:17:17.119 European IG and European high Yeald names. We think in 0:17:17.160 --> 0:17:20.640 the US the emerging markets US dollar emerging markets are 0:17:21.160 --> 0:17:24.639 offering value here as well as you know, parts of 0:17:24.640 --> 0:17:27.240 that single B and double B part of the high 0:17:27.280 --> 0:17:30.080 Yeald market. So there is a lot of opportunity. This 0:17:30.240 --> 0:17:32.919 repricing that we've seen in the past thirty or so 0:17:33.119 --> 0:17:36.000 days is creating some attractive opportunities. 0:17:36.240 --> 0:17:38.119 Then bring it over to the equity market. Are you 0:17:38.160 --> 0:17:41.720 in the Campscott, with all of your expertise that your 0:17:41.760 --> 0:17:45.560 world is a value right now to interpret what to 0:17:45.600 --> 0:17:46.800 do in equities? 0:17:48.920 --> 0:17:51.000 You know, talking to our equity colleagues who just sit 0:17:51.040 --> 0:17:53.920 across the floor, you know they're looking at us saying, look, 0:17:53.960 --> 0:17:57.480 as long as high yield spreads and credit spreads in general, 0:17:57.840 --> 0:18:01.959 they stay pretty well anchored. They stay optimistic on you know, 0:18:02.000 --> 0:18:05.840 what's happening in equity, so earnings continue to remain pretty robust. 0:18:05.880 --> 0:18:08.159 We'll have to see what the next couple of quarters 0:18:08.200 --> 0:18:11.600 brings after this conflict in the Middle East, But so 0:18:11.720 --> 0:18:14.600 far with credit spreads anchored, you know, at these still 0:18:14.640 --> 0:18:19.119 fairly attractive levels, that's giving our equity colleagues, you know, 0:18:19.680 --> 0:18:22.400 a breath of relief, Paul, to me, this is. 0:18:22.359 --> 0:18:27.560 The heart of the matter over the weekend. It's like 0:18:27.760 --> 0:18:30.440 so many of the recent wars. You know, I get 0:18:30.440 --> 0:18:33.080 the news and all that, then people like you and me. 0:18:33.600 --> 0:18:39.920 But the answer is it's removed from the investment financed dialogue. 0:18:40.080 --> 0:18:42.679 It seems to be like the private credit issue is 0:18:42.800 --> 0:18:44.800 way more important to the street right now. 0:18:44.880 --> 0:18:48.639 Yep, you would have thought, how about a year, Scott 0:18:48.680 --> 0:18:51.920 here as we step back here in is twenty twenty 0:18:51.960 --> 0:18:55.080 six a year where Tom and I just clip coupons 0:18:55.480 --> 0:18:59.159 or can we get some capital return as well? How 0:18:59.160 --> 0:18:59.840 do you think about that? 0:19:01.359 --> 0:19:03.400 I mean, I think the majority, we think the majority 0:19:03.400 --> 0:19:06.359 of your return is going to come from clipping clipping 0:19:06.440 --> 0:19:09.160 that coupon. But if we are right and the economy 0:19:09.200 --> 0:19:11.400 slows and we get into the second half of the year, 0:19:11.760 --> 0:19:15.000 the Federal Reserve can reduce interest rates one to two times. 0:19:15.280 --> 0:19:16.160 We think you can. 0:19:16.040 --> 0:19:19.639 Get some spread tightening, some lower interest rates, and you 0:19:19.680 --> 0:19:22.520 can get some capital appreciations as well. 0:19:23.040 --> 0:19:25.720 The corporate market offers value. 0:19:25.840 --> 0:19:28.000 You know, the muni market's repriced quite a bit the 0:19:28.040 --> 0:19:30.920 last two or three weeks, So we think the muni market, 0:19:31.000 --> 0:19:33.960 especially the long end, also offers values for those you know, 0:19:34.160 --> 0:19:36.080