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Speaker 1: Let's get to our guest, Aaron Gibbs, Senior Partner in

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Speaker 1: c I O at Main Street Asset Management. Aaron, I know,

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Speaker 1: I know you say you're taking your your queue from

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Speaker 1: the bond market. If the yield on the tenure hold

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Speaker 1: steady here around three percent, is that a green light

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Speaker 1: for you in the equity market. Yes, it's really about

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Speaker 1: the tenure not going higher and particularly not hitting that

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Speaker 1: that high of three and a half percent. So I

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Speaker 1: think we're going to see you headwinds and struggles for

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Speaker 1: the stock market as long as the tenure keeps that uptrend.

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Speaker 1: You know it was. It was great while it was

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Speaker 1: dropping from three five down to to eight UM. Now

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Speaker 1: we've we've crossed that that big three percent hurdle UM

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Speaker 1: and so obviously everybody's waiting for comments from Jackson Hole.

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Speaker 1: We're waiting for CPI points and obviously the next meeting,

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Speaker 1: But we need to see a slow down in that

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Speaker 1: rate increase, uh as for for stocks to really be

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Speaker 1: able to pick back up and pick up the bull

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Speaker 1: run that we had the past two months. Yeah, markets

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Speaker 1: seem to be getting a bit worried that j Pal

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Speaker 1: is going to go all Vulcar on us. But how

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Speaker 1: likely are we to get some more certainty on inflation

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Speaker 1: and the rates picture by the end of Jackson Hole?

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Speaker 1: There are just so many variables. Are we going to

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Speaker 1: get a clear path of hit? No. I think it's

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Speaker 1: really going to be all about reading into the tea leaves.

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Speaker 1: I don't think there's going to be anything particularly spit specific.

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Speaker 1: And it's very unlikely that they're going to give really

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Speaker 1: concrete guidance on whether it's fifty BIPs or seventy five

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Speaker 1: bibs at all from Jackson Hole. So it's it's a

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Speaker 1: little much to do about nothing. It's it's really going

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Speaker 1: to be about about that CPI report that comes out

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Speaker 1: in early September, and obviously the meeting in late September

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Speaker 1: that's going to drive it. And and so it's very

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Speaker 1: likely that the markets might just sort of churn on

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Speaker 1: themselves over the next months as we wait for some

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Speaker 1: real data. So you're tilting a little to the positive side.

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Speaker 1: I can sign a whole bunch of of of reasons

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Speaker 1: why the equity mark it could go higher, but I'd

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Speaker 1: rather hear you do it. Are you prepared to make

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Speaker 1: that case for moving for moving into the beginning of

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Speaker 1: a bull market, I do. I think that certainly there

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Speaker 1: are areas that are already extended. Uh. And we should

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Speaker 1: remember that we're looking at about an estimated five profit

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Speaker 1: growth over the next four quarters, so that's not robust.

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Speaker 1: And so when you're looking at um these types of

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Speaker 1: headwinds of higher interest rates and compressing profit margins, UM,

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Speaker 1: you need to be very careful about where you get in,

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Speaker 1: when you get in, and how much you're paying for

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Speaker 1: that stock. And so I am bullish, but I'm not

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Speaker 1: saying I'm buying all in across the board on the markets,

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Speaker 1: and certainly not then as neck one d I think

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Speaker 1: that that has already overextended. UM. I've been a little

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Speaker 1: more aggressive within the mid cap and small caps just

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Speaker 1: because even though they are more volatile, they have been

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Speaker 1: so beaten up. The valuations are just so incredibly low

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Speaker 1: on so many areas that I feel that that's a

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Speaker 1: safer bet to get in at this point. UM. But yeah,

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Speaker 1: I do believe that we've seen the worst or the

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Speaker 1: most of the worst of the bear market is over.

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Speaker 1: And Aaron, one of the variables in the US at

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Speaker 1: the moment in terms of the macro picture, consumer health,

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Speaker 1: what sort of a guide do you have on that,

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Speaker 1: particularly through the lands of recent retail innings. Right, Well,

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Speaker 1: I think it's interesting when you look across different categories

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Speaker 1: because obviously that the housing prices came out, so that's

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Speaker 1: saying that consumers are are really being hit on not

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Speaker 1: being able to afford higher prices with the mortgage rates. UM.

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Speaker 1: And we've seen a lot of retail earnings reports where

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Speaker 1: consumers are shifting from name brands into generic brands. UM.

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Speaker 1: Obviously impacted by inflation, and you know one of the

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Speaker 1: reasons that Walmart did so well. I feel that trend

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Speaker 1: is going to continue or we're at the stage or

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Speaker 1: sort of the earlier stages inflation where you simply shift

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Speaker 1: what you're buying, you don't stop buying completely. Um. There's

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Speaker 1: a lot because unemployment is so low and and wage

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Speaker 1: growth is still not keeping up with inflation. Is still good. UM.

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Speaker 1: I think that we're still going to see a lot

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Speaker 1: of discutionaries spending on experience types. I still feel that

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Speaker 1: there's a lot of demand when it comes to travel.

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Speaker 1: We're seeing that with an airline's hotels, um. But certainly

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Speaker 1: when it comes to the apparel, just like we saw

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Speaker 1: always reports with Nordstrom. UM, that's one area that I

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Speaker 1: think you absolutely should avoid. I just don't think it's

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Speaker 1: going to be an area that the U. S. Consumer

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Speaker 1: is going to have a lot of patients for with

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Speaker 1: higher prices. So inflation is the key, Aaron. One of

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Speaker 1: the things we heard from Jan Hatzis from Goldman Sachs

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Speaker 1: was that three and a half percent on the FED

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Speaker 1: funds rate would would break the back of inflation. We

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Speaker 1: had John Taylor on yesterday from Stanford. I was surprised

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Speaker 1: by how moderate he was about how much is left

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Speaker 1: with the Fed's job, and also that you don't need

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Speaker 1: to worry too much. This is not like the seventies

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Speaker 1: where inflation is really entrenched. If the FED stays stays

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Speaker 1: active here for another hundred basis points or a little more,

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Speaker 1: that will do it. UM. Do you sort of share

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Speaker 1: that view? I do? I think we you know, we

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Speaker 1: know that it's around and obviously this changes months to month,

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Speaker 1: but you know is really coming from raw materials, sort

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Speaker 1: of the manufacturing side. UM. So that already coming down

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Speaker 1: helps uh, and now we've got to tackle sort of

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Speaker 1: the services side and some of the bigger ticket items.

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Speaker 1: And that's where the FED can really help in reducing inflation. UM. Now,

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Speaker 1: I think the bigger fear is I think they will

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Speaker 1: be successful in getting inflation down. It's just you know,

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Speaker 1: how much damage are you going to do the economy

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Speaker 1: and just how high are you going to let the

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Speaker 1: unemployment rate get? Uh? And and and that might is

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Speaker 1: you know, obviously the trick in this uh you know,

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Speaker 1: theoretical soft landing, but not so worried about inflation. I

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Speaker 1: think they're going to be able to take care of that. Fine,

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Speaker 1: since we're talking about the nineteen seventies. Uh, does the

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Speaker 1: oil price remind you at all of that decade? No?

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Speaker 1: And I think you know that the oil recently is

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Speaker 1: has a lot to do with obviously Russia and Ukraine

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Speaker 1: and and worries from from Europe. Again, I think that

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Speaker 1: that can be uh dissipated rather quickly, much like we

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Speaker 1: saw um earlier this this summer. Um that once those

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Speaker 1: tensions calm, once people get a little more secure about

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Speaker 1: finding alternatives, finding other options. UM, that that that that

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Speaker 1: that's going to go away. You know, it's such a

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Speaker 1: volatile market. I don't see that sticking again. Um, especially

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Speaker 1: after what we've already gone earlier in the year, We've

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Speaker 1: questioned on Asia, anything here at the moment if you

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Speaker 1: find compelling. Uh, certainly some of the you know, Australia

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Speaker 1: as some of the materials doing well. Um. I'm a

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Speaker 1: little hesitant around anything in China just because you know,

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Speaker 1: every time it looks good and we think they're going

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Speaker 1: to reopen, they shut down. So I'm just sort of

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Speaker 1: staying off. But absolutely I think some of the more

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Speaker 1: open markets are our opportunities. Alright, Yeah, one does wonder

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Speaker 1: how many shoes are left to drop when it comes

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Speaker 1: to China. Aaron Gibbs as Senior partner and ce IO

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Speaker 1: at main Street Asset Management, Thanks so much for joining

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Speaker 1: us on the Bloomberg Daybreak Asia