Speaker 1: Bloomberg Audio Studios, Podcasts.
Speaker 2: Radio News.
Speaker 3: We begin with our top story, It's Share Pale Day one,
Speaker 3: the Fed chap heading to Capitol Hill, where he's expected
Speaker 3: to reiterate the Central Bank's call to wait and see
Speaker 3: on rate cuts. Black Ross Kate Moore saying this where
Speaker 3: prices continue to moderate, inflation is still running above target,
Speaker 3: and we believe the Fed needs to feel a higher
Speaker 3: degree of confidence before rushing to cut rates. We view
Speaker 3: rate cuts will likely be appropriate in twenty four and
Speaker 3: we believe that a June first cut is realistic. Kate
Speaker 3: Moore joins us now for more. Kate, great to catch
Speaker 3: up with you ahead of this testimony from Shairman Powell.
Speaker 3: We've pushed out the time of the call, We've reduced
Speaker 3: the magnitude, and stocks have done Okay. A thing for
Speaker 3: us this morning is just how important, how relevant is
Speaker 3: monetary policy to this equity market as we speak.
Speaker 4: I think people are still fixated, of course, on inflation
Speaker 4: and on kind of the messaging and tone from monetary
Speaker 4: policy decision makers. That said, I look at the internals, John,
Speaker 4: and what has been performing within the equity market. It
Speaker 4: has been fundamentals that have been driving stock prices much
Speaker 4: more than just expectations around inflation.
Speaker 1: So when we initially got excited.
Speaker 4: About inflation coming down a disinflationary trend and rate cuts
Speaker 4: in twenty twenty four, there was a pop in some
Speaker 4: really kind of lower quality stuff that was getting hit
Speaker 4: hard on higher rates for longer. But what is performed
Speaker 4: today and what is performing right now in this market
Speaker 4: are companies that are putting up good numbers on earnings,
Speaker 4: that have been raising guidance, and that have very strong fundamentals.
Speaker 1: So we're going to talk about it to we're blue
Speaker 1: in the face.
Speaker 4: Inflation and FED policy and parsing all of the speeches
Speaker 4: is going.
Speaker 1: To be what we do for hours on end.
Speaker 4: That said, we really have to focus on what companies
Speaker 4: can perform in this economy in order to make money.
Speaker 3: Okay, for years you and I were talking about price
Speaker 3: and power when inflation was high, they had this ability
Speaker 3: to kick up prices and boost marchins. Have you impressed
Speaker 3: by their ability to preserve margins given the bank drop currently?
Speaker 4: Yeah, I don I think you're asking this question because
Speaker 4: you know, I have great faith and confidence in the
Speaker 4: US corporate sector to continue to maintain margins even through
Speaker 4: lots of last year, where prices were rising and where
Speaker 4: there was a lot of strain, we saw companies continuously
Speaker 4: focus on maintaining margins and think about strategies that would
Speaker 4: allow them to expand their.
Speaker 1: Margins in twenty twenty four.
Speaker 4: I'm actually very optimistic, and I think this is the
Speaker 4: consensus of a lot of analysts on the street that
Speaker 4: margins will gradually expand over the course of this year
Speaker 4: as prices come down and as companies continue to focus
Speaker 4: have this laser focus on maintaining and expanding margins.
Speaker 1: This is going to be critical for.
Speaker 4: The fundamentals, and as I said, the fundamentals are going
Speaker 4: to underpin equity risk and sentiment I think for the
Speaker 4: balance of this year.
Speaker 2: So your overweight risk assets strongly overweight risk assets piling
Speaker 2: on shrugging off all the bubbletalk. Are bonds a good
Speaker 2: diversifier or right now? Are they the toxic ones at
Speaker 2: a time of concern about deficits and inflation being stickier
Speaker 2: for a longer period of time.
Speaker 4: Yeah, Look, we have a significant portion of our portfolio
Speaker 4: and bonds, but we're not massively overweight when it comes
Speaker 4: to say treasuries. You know, we're seeing a more opportunity
Speaker 4: in the credit side. I think the fixingcum plays an
Speaker 4: important part in a balanced like allocation portfolio. That said,
Speaker 4: there are lots of parts of fixed incum that are
Speaker 4: more attractive than others, and we've.
Speaker 1: Used cash as a tool aggressively. Over the last you know,
Speaker 1: twelve to eighteen months.
Speaker 4: We're seeing more alternatives and currency opportunities as well. So
Speaker 4: I think we need to think holistically about the acid
Speaker 4: class opportunity set. Even though Lisa, you know this, I'm
Speaker 4: very constructive on equities for the balance of the year.
Speaker 4: We're going to get this periodic pullbacks, but I think
Speaker 4: that is where you're going to deliver the bulk of
Speaker 4: your returns for a multi assid portfolio.
Speaker 2: Kay, I've been putting together a project where I'm trying
Speaker 2: to collect all the worries and put them on a
Speaker 2: list and then take them off as people basically shrug
Speaker 2: them off.
Speaker 1: Do you have any to put on the list?
Speaker 4: Of course, I mean I barely last night thinking about
Speaker 4: all of my worries. No, Lisa, for sure, there are
Speaker 4: a couple things that really concern me.
Speaker 1: You know.
Speaker 4: One of the things I'm focused on, and we were
Speaker 4: paying attention to this with target reporting yesterday was what
Speaker 4: is the true health of the US consumer? Some of
Speaker 4: the data gets amasked by the higher end or kind
Speaker 4: of well, think about the upper two quintile of earners
Speaker 4: and you know, does low end consumer continue to show
Speaker 4: cracks and what does discretionary demand look like?
Speaker 1: I worry a little bit about that.
Speaker 4: I'm frankly worry a little bit about the election cycle
Speaker 4: having an impact on overall spending. We've seen in previous
Speaker 4: election cycles that companies pull back or hold back on
Speaker 4: non essential capex as they're waiting for you know, trying
Speaker 4: to figure out who the next administration is going to
Speaker 4: be and what that policy will look like. So I
Speaker 4: worry that that could have a dampening effect on overall economy.
Speaker 4: And then I worry a decent amount around the impact
Speaker 4: that geopolitical risk and geopolitical tensions could have on multinationals
Speaker 4: in terms of their overall operations. Does any of this
Speaker 4: like take my enthusiasm out of the SMP and NASDAC
Speaker 4: not fully, but I think these are things that could
Speaker 4: be risks for certain sectors as we look through the year.
Speaker 3: Okay, it was going through year old coves at the
Speaker 3: end of last year credit where it's too top favorite
Speaker 3: markets US one Japan the other US up by six
Speaker 3: point five percent, MIK two twenty five, twenty percent this year.
Speaker 3: What was it that you liked about Japanese equities? What
Speaker 3: is it that you still like about Japan.
Speaker 4: We've seen a bunch of small green shoots, I would say,
Speaker 4: across the Japanese equity space, and there was also a
Speaker 4: large positioning and.
Speaker 1: Technic technical component.
Speaker 4: John, you know, the Japanese equities have been underloved for
Speaker 4: some time. We continue to see you know, stronger growth
Speaker 4: across Asia and with some of the trading partners that
Speaker 4: we thought would bolster earnings across the Japanese corporate sector,
Speaker 4: and we, like a lot of people, remain hopeful that
Speaker 4: we will continue to see a change in BOJ policy
Speaker 4: over the balance of this year, which will change sentiment
Speaker 4: for the overall ASSAD class.
Speaker 1: I will say US is our largest.
Speaker 4: Overweight by a long stretch, and that's where we're taking
Speaker 4: our concentrated equity risk. But I think Japan continues to
Speaker 4: bear some food and will continue to have an overweight
Speaker 4: there through coming quarters.
Speaker 3: Some pretty decent fruit, that's for sure. Kate Moore of
Speaker 3: black Rock. Congrats on a call, Big call Japan. Just
Speaker 3: massive out performance year today so far,