Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan, I'm a senior editor at Bloomberg, and I'm Valdonna, hired across asset reporter with Bloomberg. And this week on the show, Well, it was the first time in more than two decades that the Federal Reserve raised interest rates by half a percentage point. But all it took was just a little hint of dovishness from chair j Palell to get the stock market roaring. He indicated it's unlikely that the federal increase rates by seventy five basis points during this cycle and the SMP shot up about three. So is that it is that all it took to set up bottom in the stock market. We'll talk about it this week with a Wall Street strategist. But first, Vildanna, I have to ask one thing before we get started, All Ears, did you have any nicknames in high school? Um? Why wait wait wait stop stop stop stop? Do not reveal your high school nicknames? Why you don't understand why? At this point of the show, the veteran podcast co host and listener of What Goes Up, nicknames are a very valuable commodity on this podcast. I think we got about a hundred reviews on Apple podcasts when I promised to reveal my high school nickname and I realized we are ratings and reviews have slowed down on Apple podcast, so I think we need to leverage your high school nickname. How long are you holding your hostage? A hundred more ratings. I think I got about seventy ratings on the on Apple podcast. So go ahead, listeners, if you want to hear Voldonna's high school nickname, you have to go and give us a rating on Apple podcast. We're not saying it has to be a five star rating. Uh, even though you know, maybe maybe that's what you want to give us. I don't know, but go rate, rate, review the show and I think we get a hundred more. Will will reveal you're holding the listeners hostage. No, no, no, I'll have to go and click that five stars, however many stars you want to click. I'm not saying it has to be five stars, not making any prerequisites. I will have no idea what they actually hit, how many stars they hit, but it's going to get the numbers going so more listeners can find the show and Uh, find out what you think about it, especially if you have a good a good review for us. You know who else we're holding hostage our guest this week. I realized this week he's probably having second thoughts about about English but joining this podcast. Yeah exactly. Oh, he might not even be on the zoom call anymore. I think he's still there. He is. I want to welcome Jeremy's here and he's senior portfolio manager and head of private client US Equities at ubs ASCID Management. Jeremy, welcome to the show. Thanks for having me out. And if you need a nickname for me. The other jay Z works is fine, that's pretty good. One, that's really good. All right, you'll be jay Z the rest of the rest of this podcast. But tell us, you know, what is your takeaway from this FED meeting this week? I mean, obviously, a relief rally in the market. Uh SMP up three in a matter of minutes after Pal indicated that seventy basis points was most likely off the table. Also some comments suggesting that, you know, a soft landing in the economy amid rising FED rates is not necessarily unthinkable. Uh. You know, he indicated to be tricky but he doesn't think it's possible. I mean, was it just that was a real relief rally. Do you think we'll give it all back in coming days or we're um or is that really the type of thing that could help the market set a bottom after this ugly start to a year. Look, I think the markets are going to remain shoppy, but I do think that the Federals are being very clear that they're not con conto inflating far more aggressive tightening was certainly helpful in terms of thinking about the future path of monetary policy and just reducing what a lot of investors fear is a policy mistake tightening too quickly in the context of a slowing economy. I also think one of the statements that was really interesting was that you know, Federal you know s Propell said that he will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain time. Right. So it's not just that they didn't tighten as much or they're not contemplating tightening as much as feared, but it was also they want to be predictable, They want to be very clear on what they're doing and not surprised the market, and so to the extent that the market already has lots of things to worry about that are hard to predict, write the war in Ukraine, COVID outbreaks in China, out just you know, will we see peak inflation in the first half of this year? You know, the Federal Reserve is trying to reduce one of those uncertainties. Jermy, can you talk about the idea of I mean, wouldn't Pal sort of want the idea of a seventy five basis point hike at least like floating out there as this sort of fear because it helps tighten financial conditions. Whereas if we have stocks and other risky acids rallying, financial conditions are are are going to to ease or loosen. So can you talk about why he felt the need to to quash the idea of a seventy five basis point hike. Yeah, I think it's pretty straightforward. I think that financial conditions have tightened. Right. We've seen a dramatic increase in the two year the ten year, and real interest rates that have gone from deeply negative territory just three months ago to positive territory from the first time since before the pandemic, and so, you know, I think that that has a tricky balancing act to handle. I mean, we certainly have seen some of the growth indicators soften, uh during the first week of this month, with the I s M both manufacturing and non manufacturing index, you know, coming off the boil. And so I think this was just a matter of you know, the Fed saying, look, financial conditions are tightening, we have are high on the ball in terms of trying to balance our dual mandate and that you know, given you know, market positioning, which was horrendous right over the last month, with you know, the SMP dropping on early ten percent last month. UM, this was just the Powell's attempt to try to balance and square that equation. You know. Jeremy, you mentioned that you think markets will remain choppy on some of the outlook notes you sent over to us. Uh, you indicated that you think yes, and people probably be in a trading range over the next few months. UM, as investors wrestle with all these cross currents. Uh, how do you play that as a portfolio managers a strategist, I mean, is it just kind of hold what you have and you know, wait, for this this phase to be overs there. You know, it doesn't make sense to try to play that range at all, or is that just too risky? I think it's hard to sort of a so called play the range in terms of the very short term just because of the unpredictability of what's happening in some of the risk factors that we talked about. UM. Generally, you know, we invest for the long term, so we own great companies that generate great cash flows and normalized environments, and so we don't worry too much about you know, thinking about you know, we're in the range of a tactical positioning. We are, although when opportunities arise, I think that you do want to tilt portfolios to take advantage of some areas that could be attractive. Uh, you know, certainly, you know, we think and we've been positioned more towards the value segments of the market over the past several months, believing that we are in a tightening cycle. We are in a rising rate environment and with elevated valuations and some of the secular growth areas of the market that you value reopening plays are you know, the most interesting and offer the best reward in the market. So when segments within those categories sell off because of you know, near term concerns, we get more interested in and tend to back those positions. But would you want if I just follow up on that and ask, you know, uh, what looks like a good value in the market. You know, what are the what are the value pockets of the market that look attractive at the moment um. But I think there's a couple of ways to look at it, right, I mean, if you look at it by you know, sort of sector and industry, I think it is your classic value oriented sectors, So that would be energy, financials, you pockets of the consumer discretionary sector, um, where you do see you know, just low valuations and just fears that the earnings will not be resilient enough and that they are you know, potentially value traps. And so you know, you look at energy energy right now trading at free cash flow yields over ten percent, four per points above any other sector in the market. So there's clear fear that you know, the oil prices will normalize or go be lower over the next six twelve, twenty four months. And just given you know how tight oil markets are, limited supply just the under investment in the sector for the past five to six years. It does look like there's you know, even though the sector has done phenomenally well over the last twelve to fifteen months or so, I think that there's more upside and markets are still you know, cautious on the long term outlook. I think financials also look attractive here in certain areas. Um You know, if what's been interesting is that, you know, the financials have traded sort of in line with the tenure treasury up until about two months ago, and that's been a there's there's been a pretty big disconnect between the performance of financials and interest rates, meaning that financials haven't kept up with the pace of interest rates. And I think a lot of this is on fears of a hard landing and fears that you know, credit is going to be a problem, and that if we do have uh an extension of the economic cycle and that that is able to orchestrate a soft or soft dish landing, then you know, financial should perform very well in this type of environment. And then also I think you like a lot of the reopening place that are tied to the travel industry, the hotel leisure that type of stuff. If you could talk about that. I know, we had some really good earnings from the likes of Airbnb earlier and I think it was earlier this week. Speek feels really long, but um, but you to like some of those, right, I do? Right, Like, So, if you think about across you know, across sectors where there's good value, I would say it's in you know, industries where their earnings were impaired because of COVID and their catch up trades, because the market is skeptical that earnings can reach more you know, pre COVID levels anytime in the next couple of years. And so if you look at some of the travel uh um levered stocks, I mean just bookings last night, but up I said that room night growth was thirty percent higher than two thousand nineteen levels, and so there is significant pent up demand for travel for service oriented industries, and largely, you know, I think what investors are really wrestling with is that we've had this you know, pull forward of demand in segments of the economy and you know, technology and many goods producing industries, and we've had you know, and that was largely just because consumers had cash and they needed we're going to spend it, but they couldn't spend it on service oriented industries because of health concerns or just restrictions. And so now I think we're seeing that reverse and it's not a straight line because we don't have you know, uh, we still have COVID to deal with, not as much as we did, but we still are dealing with some some of the effects of COVID. Less so in the United States, but you know, still seeing the effects in other parts of the world, especially in Asia. Um. But I do think that for patient capital that the best risk rewards in the market are really on those areas that have seen um, you know, you know, disruption from COVID that you know, I don't know if it's going to be in three to six months, but in two to five years are likely to have sort of more normal earnings levels and back to trend earnings levels that they saw before COVID. Yeah. I think it's an interesting dynamic that pent up sort of bottleneck and demand that you mentioned. You know, the flip side of the coin of that is just you know, consumers having this extraordinary amount of savings that you know, the likes of which we really never saw in modern times before the pandemic um. So to me, it seems like that a corporations to you know, corporations balance sheets are are so strong, uh coming out of the pandemic um that it seems like, you know, the inflationary environment mean um is not as sort of a head as big of a headwind as it would be otherwise. If you know, if the savings rate had not sort of ballooned the way it did during the pandemic, how long do you think that lasts? Though? How long can that consumer sort of draw down those savings um before we sort of normalize back to uh, you know, pre pandemic levels of demand. Is it, you know, something that could happen quickly or is it something that the last perhaps as long as the pandemic lasted. Is there any sense from your end of of how long we can count on that consumer to have the spending power that they do. Yeah, I think the market is overestimating just the probability of the consumer retrenching. I think it is because of what as you mentioned, there is a good amount of pent up savings, but more importantly what the highest correlation to consumer spending is simply jobs? Right, If if if you have a job, you're going to spend. If your way just are going up, you're going to spend a little bit more. If you have excess savings, you're gonna spend a little bit more. But the main, the main focal point for any analysis of the outlook for consumer spending is employment. And right now labor demand is by far outstripping labor supply. We still have labor force participation rates at well below pre pandemic levels because a lot of people were fearful of entering the labor market because of COVID or couldn't because of child care concerns. And so if we get I mean, at the end of the day, you know, the consumer can stay resilient, and it's not a matter of working off savings in my view, it's a matter of whether they stay employed. And I think that you know, even with that tightening, we're not anywhere close to seeing our trenchment in corporate hiring, and so, like, I understand the bearish argument that the FED is tightening and that you know, the yield curve inverted and that has been a precur search of recession, but it seems like in this environment the buffer is that consumer and corporate balance sheets are in very good shape. We still have a very healthy demand for labor. That isn't that is far out of balance, and that you know, the spent you know, because consumer spending can remain far more resilient for a longer period of time because you know, we don't this isn't a normal economic cycle. We didn't see, you know, a housing boom and bust like we did in two thousand six or two thousand seven. We're not seeing a corporate spending boom and bust in technology like we did in the late nineties. Fundamentals are generally pretty good going into this health crisis and pandemic. So I think that, you know, the outlook for for UH and the probability of a softer landing and longer expansion is fairly high and probably higher than market perception. I was just about to ask you what your view is and whether or not the FED can avoid a hard landing or this UH if we can have this softish lending is how I think Paul described it this week. Yeah, I mean, look, I think that because of what I just mentioned, and just because the strength of the consumer and incorporate balance sheets and still generally healthy labor markets. You know, there's a good chance. I mean, that's that's essentially what Powell said, that there's a good chance we don't know, right. I mean, there's a lot of risk factors that you know, could lead to a you know, moderate downturn um. I don't think that if we do see your recession, it would be your normal you know, typical you know, markets go down, it takes a couple of years to get back to you know, back to trend levels of economic activity. It will probably be a little bit you know, more shallow um, given some of the strong economic momentum that's already you know, in the in the U. S. Economy. But I think that there's a good chance that we you know, in our base case, you know, the economy slows, it doesn't roll over, you know, even the outlined and very clearly defined you know, hiking path from the Fed, you know, we're only going to go to sort of neutral territory in terms of FED policy over the next several months. And you know, in my view, there's a reasonably good chance that the Fed can pause there and once they reach you know, levels of around two to and a half percent on the FED funds right, and because I think that inflation is likely peaking right about now or in the next couple of months, and that will see lower levels of inflation over the course of the second half of the year, and that will give the FED an opportunity to you know, uh the ease off in terms of it's hiking, increasing the probability of a software landing. You know, you mentioned in UH when your notes to us that you like high quality companies with pricing power. I've been kind of surprised, um at it seems like so many companies have that pricing power right now. This week, UM, we saw a T and T and Verizon you know, either announcing or planning to announce uh increases in mobile UH subscription rates, which perhaps that's kind of a no brain or a cell phone company is going to be able to you know, raise prices arguably more than sort of a discretionary um uh consumer company. Where where would you expect the pockets of the market to be where the pricing power is not robust. Is it as simple as sort of you know, frivolous consumer discretionary type of products, or is it more complicated than that. Now I think that like in general, you know, you would see it in sort of some of the names that are are really sort of like discounters, right, and where you don't have where you're already working on very low margins. And so I do think that you know, in pockets of consumer discretionary um or very competit it is environments and very competitive industries, you're likely to see you less pricing power than and see some further margin erosion than other you know, other other sectors. But probably it seems like most companies are are being you know, have that power they a they're able to raise prices pretty aggressively. Um, so far is up in your your general impression, Yeah, I mean, if you look at the ring season so far most companies have reported and you're seeing that you know, sales growth is on track to be up about twelve percent for the sp earnings up about ten so you know, an aggregate, that statement you just made is true. I do think though, that we are in a period where as you mentioned, right, the consumer still has a good amount of savings to spend, and labor markets are strong, so we have good economic momentum. What will be more interesting to see is how companies have you know, how the pricing power holds up as the economy starts to and the consumer you know, starts to get a little bit more stretched. And so there I think, you know, what we try to do in our analysis is really look at, you know, do the companies have a mode. Are they in industries that have oligopalistic nature to them where they don't have where they generally have rational pricing across the industry, and you know, are they able to do they have enough brand equity where they can and raise prices to continue to offset some of the costs. You mentioned the earning season, and I actually wanted to ask you why you feel the market hasn't held up better or didn't hold up better during the earning season when we did have all of these reports that were largely very good and whether or not you think that's largely tied to you know, the macro narratives just being so much more overwhelming than anything we've heard from from companies. Yeah, I would say one it was the rate backdrop was the primary driver. Uh. You know, if you look at what didn't work in the stock market the last few weeks, it's been you know, the secular growth names that sold off a lot more than you know, value and cyclicals, and so you know that was directly tied to the rise in you know, nominal and real interest rates, I think more so than than earnings. I would also note that, you know, while earnings were reasonably good in the quarter, the level of beats this quarter was well below the outsized beats that we saw over the last several quarters. Now, it doesn't make me overly concerned because the level of beats this quarter is actually pretty normal in line with historical averages. It was just that the companies were beating by such a wide margin, uh in the last few quarters that I think you know, investors sort of have muscle memory and said, well, you know, things are beats are slowing the aggregate level of growth, this slowing the beds raising rates, and you know, putting all of that into the into the equation to say, you know, this might not be as good in uh time to be investing inequities. I also think you also, just last point I'll make is you had some pretty high profile margin misses, you know with technology companies or you know pull forward demand companies like you know a Netflix, um or an Amazon, and so from the from that perspective, you know, there was I think just concern about Okay, you know, well in aggregate companies are handling, are able to pass along pricing um, and are seeing reasonably resilient and market demand. It's not uniform and so it's not a fewer company you know, with a breath of companies beating and the level of company beats uh decelerating. I think that just added to the rate rise in some of the angsteon markets. Yeah, it's a great point about sort of that recency bias. You know, it's easy for the market to get used to the companies beating and you know reversion back that's not normal. Yeah, yeah, yeah, that's it's Uh, that's interesting, Jeremy. I'm wondering what you see as what are the risks that sort of keep you up at night. You know, I'm looking at the news today, it's Thursday. Uh. Leaders in China are reiterating the whole notion of the zero COVID policy. Um, they're not backing down from that. There's a lot of concern about this Russian holiday coming up on on May nine, that Russia will really use that as an excuse to get very aggressive in this war and maybe you know some some real dangerous rhetor coming out from them. Is it? Are they the two main risks? Do you think China lockdowns in Russia's is that really what keeps everyone up at night right now? Or is there anything we're missing? I think from you know, a very tactical perspective about what's going to drive markets in the next week or two. Um, you know that you know what's in with the war in Ukraine and the Asian Chinese cities, lockdowns are are front and center. I would say, looking out a little bit further, and not even a lot further tactically, but just over the next several months, I would say it's going to be the inflation data that drives markets. If we see inflation continuing to stay at very elevated levels and not seeing some of the declines that you know we're hoping to see, UM, then I think that you're gonna start to see expectations for the FED tightening to be even more aggressive, and that's going to put more pressure on the markets. And I think the timing on the inflation data is difficult to assess, but we are seeing some signs that inflation is in fact peeking, and so I mentioned that, you know, I think we're gonna be at a trading range, but I think we're probably closer to the bottom of that trading range in the near term than than the top. And it's because of the fact, uh you know, you have seen use car prices come off the boil, right, you have seen sort of a stall in some of the commodity price increases, and encouragingly from a from a wages perspective, you you are seeing labor force participations start to improve and without further meaningful outbreaks of COVID that would restrict mobility, uh in in you know, domestically, I do think you'll see labor supply improve over time, and just the combination of FED tightening and slowing the economy a little bit from the demand perspective, and increased supply of labor should allow for you know, wage growth at a minimum to stop going up and likely to to plateau and start trending a little bit lower over the next couple of quarters, in more likely the next couple of years. You know, Jeremy, we often hear about this idea that stocks can be a really good inflation hedge because of what we were just talking about companies passing on costs. But we have this story earlier this week that said, adjusted for inflation, the SMP five dred is down in value at an annualized rate of roughly or sent any full year since nine. So what do you make of the idea that stocks are a good inflation hedge. Yeah, I think that down is just a a poor way to frame a statistic. Uh that that that shouldn't that is misguided, right, I mean in the long run, you know, stocks are a very good inflation hedge because they appreciate at a level that is much higher than inflation. And to the point we were making before, stocks do have pricing. You know, many companies do have pricing power and are able to offset those costs. I mean, we've seen very clearly that bonds are a terrible inflation edge and their prices have gone down dramatically as well, you know, inflation has risen. I think one of the more underappreciated areas of you know, the equity market for long term invest you're just looking for inflation protection. Are just your stable, lower risk dividend growth stocks, right, I mean if you think about, uh, you know, the return you're getting from a company that has a two two and a half percent dividend yield today moderate pes but grow learnings and dividends in the mid to high single digits year after year. Um. You know, we're all freaking out that inflation is eight percent now on the CPI and six percent on the pc E UH indicators. Um. But you know there are many companies in the SMP five that you know, historically have delivered dividend growth of eight to ten percent every year. Right, And so if you're worried about you know, inflation being stickier at a mid single digit rate over the next you know, three, five, ten years, and what that does to your purchasing power by dividend growth stocks, right, you know, by bye bye, you know, more stable dividend growth docks and consumer staples in health there that consistently grow their dividends by to ten percent a year, and you'll have that offset relative to high levels of inflation. The aristocrats, as they say, the dividend aristocrats. Jeremy, I wonder you know you mentioned the notion of inflation being sticky. I do think you know, I agree, and everyone seems to agree that there are plenty of signs that inflation is piqud. But I wonder what happens if we get it sort of plateauing out, say later in the year, in the in the summer, and into the second half of the year. If you know, I don't know CPI is at what eight and a half? If it sort of sticks at you know, in the fives and PCs sort of sticks in the fours or the fives, is that ultimately a dangerous situation for equities? If you know, we get to the point where we say, well, it's peaked, but it's still not normalizing back to two. Um, you know, is that sort of a a danger point for equities? Do you think? I mean, certainly, if we see more structural drivers of higher inflation take hold, like if wage growth continues to stay at a very high level and isn't trending in a more you know, trending lower, I think that is going to lead to a lot more concerns that that are reserved, is going to have to high interest rates a lot faster. UM. I tend to think of inflation and the inflation problems that we're having right now, you know, in three buckets. I mean, you have this commodity price inflation, which is you know, very clear, and it's a high frequency purchase, so it gets a lot of you know, airtime. Um. But look, I mean commodity prices went from you know, oil prices for example, and from sixty dollars a barrel a year ago to over a hundred dollars of barrel today. Uh, you know you're going to see a deceleration and headline inflation unless commodity prices go to a hundreds oil prices to a hundred and six hundred and seventy. Right, and so just from a year on your change basis, because that's how we measure inflation, you know, the commodity complex should start to show deceleration of inflation over the next several months and quarters. I mean in terms of you know, the second bucket is goods, right, Like we've just seen a huge amount of goods price inflation, not service price inflation, because demand for goods was so high during the pandemic and now that we're seeing, as we talked about, like really strong demand for travels, a shift in spending from goods to services. The bands for goods is declining. Um. But the sticky point there is that we are still seeing manufacturing centers and supply chain bottlenecks because of COVID related issues UH in in zero policy to zero COVID season in China, and so the timing is tricky. But I still think that, you know, markets are forward looking, and you know, if you think that the primary driver of the inflation that we're seeing is mostly COVID related, right because you know, the commodity shock, the goods inflation, and labor and wages, then if we do see relief from COVID and limited mobility restrictions and more uniform global trends of COVID UH improving, then I think that the outlook for the broader based inflation both domestically and globally will be you know, structurally lower, and that people will have a lot more comfort that even if it transit from a transitory perspective that falls from eight to five and stays there for a little bit, if it's because of COVID trends that are sticking that are you know, that are that are stickier or problematic or cropping up, then I think that you know, the investors will not be thrilled about it, but they'll look past it. If it's really structural that we're seeing signs of a wage price spiral and then there's just a lot more bargaining power for labor and we don't get the increase in labor force participation, then I think it's a much more problematic for equities because then I think you're gonna have to see them more aggressive. That it sounds like you're you're kind of expecting the former rather than the ladder. Though I guess I am with a lot of concern that the timing could be you know, it might not be the next couple of months, it could be the next couple of quarters. It might not be the next couple of quarters, it could be the next couple of years. Right, So that I think the timing is the trickiest part. Which makes me, you know, more cautious on the overall outlook, is particularly in the near term, because I just think that at the end of the day, you know, it's you know, we've all been underestimating the duration of COVID uh you know, related disruptions, and so because of you know, just out of that, out of that hubress, I would say that I think we all need to to be a little bit of humble, diversify your portfolios, not take huge tilts based on a single core view, but not getting overly negative as well. And Jeremy, just to round things out, I know we were talking about whether or not, UM, we could potentially be bottoming right now, and I wanted to ask you what sorts of signals you look for. I know a lot of people turn to technicals, others look at sentiments. So what are you looking for to see signs that we potentially could be forming a bottom look. I think that you know, sentiment certainly got very extreme. If you look at the you know AI bullish bearish indicators, UM. Historically, when you reach the level of bearishness that we reached last month, that forward returns are generally, you know, well above average. So that's a decent signal, UM. But you know, at the end of the day, I really think it's you know, as we talked about, it's going to be the you know, the outlook for inflation. And so I think the next couple of months indications of c P I p p I UH cour PC price index inflation is going to be critical in terms of just the short term movements of markets. UH. If the market thinks that inflation is stickier and that bed is still well behind the curve. Um, there's likely still you know, more downside. And the reason I think that you know, we've seen as sort of like as much downside as we've had already this year is because you know, the composition of the SMP over the last several years has has shifted and you have a lot more concentration and secular growth names within the index, and they're the most vulnerable to arising interest rates because their long duration plays within the equity market and they're gonna be more sensitive to interest rates. And so from that perspective, I think it's really you know, inflation. Inflation. Inflation is what we uh, we're worried about as our as our top three um and uh we'll assess as we moved along. Jay Z, great stuff, really appreciating anyway, but that I think it's time. It's that time. It's time ye tell the people what time it is. It's time for the craziest thing in market. All right, I'm gonna get started for once, I'll get started. So, Uh, there was a news report on a TV station in China, um in let me make shureg at the city right hang Zoo, which is where Ali Baba is headquarters. And this TV report said a gentleman by the name of Ma was arrested, and instantly the market assumed it was Jack Ma and sold off aggressively shares the value Baba. I'm sorry, detained, not arrested. We've had discussions about this. He was detained, not arrested, the Chinese translator and I had to this question about this anyway, Ali Baba sold off. So to play the prices right with this one, how much do you think uh investors getting the wrong ma uh in the news mixed up? How much do you think that lopped off of the value of value Baba in a matter of minutes, are going first market cap US dollar market cap. I'm gonna go with five billion, all right, I'm gonna keep a poker face, Jeremy, how much do you think the wrong Ma cost Ali Baba in a few short minutes. I'm gonna take the over if we're playing price right. So yeah, that's that's why, that's why he's a strategist. He does so. So you're you'll take twenty five billion and one dollars I exactly, that's good. The over was good? Was six billion? Was? Though? I think you read the story? Did you read the story? Did? But but the story came out on like Monday or something, which honestly feels like it was three years ago. Billion vaporized in a matter of minutes, but it all came back. So um, I don't know, there's a lesson there somewhere to make sure you got your your maths straight before you sell. I don't know. Quite a remarkable story, though, how about you hold on it? What's what's the craziest thing you saw this week? Had tip to Matt Levine who wrote about this, But there's this amazing story in the Wall Street Journal about n f T s and how sales and interest has has totally been dropping off recently. And so there's this one tidbit that really really struck me. The story says, an n f T of the first tweet from Twitter co founder Jack Dorsey sold in March of last year for two point nine million to Sina Estavi, who is a chief executive at a blockchain company in Malaysia. Earlier this year, he put the n f T up for auction, and he didn't get any bids above fourteen thousand dollars. Remember he paid two point nine million four you know, and some people might find it crazy that someone's willing to pay fourteen thousand for this thing. Yeah, good point, that's pretty good. Although I see the the the crypto punks and the board apes. They're still selling. I think those are. I guess they are your blue chip n f T s right there. They seem to still be selling for six figures. Yeah, so I don't know. They are the uh, the the Apple and the Amazon of the n f T world. I suppose we're not Amazon so much anymore. But anyway, cheremy, you see anything crazy this week? That's the end of the second week of earning season, the busiest week of earning season. So my my brain is mush by the end of the week. So I'm gonna pass. I'm the crazy things I don't just think I've seen. Probably the last week is the the Mets throwing a five pitch or no hitter with taking out a picture after five innings and eight pitches. Oh yeah, As as a Phillies fan, I uh uh that one hurt. That one hurt. I just went to that game. Actually, yeah, that was we had a group outing of Bloomberg to that game. I'm glad I missed it, though five pitch really found. I'm glad you did. I'm sure you're glad you five pictured no hitter. I wonder if that. I wonder what the most pictures ever used in a no hitter is. That's got to be getting close to it. That's pretty I'll to look that one up. Five and that counts a five picture no hitter will allow that. That's a That's probably the craziest thing I saw this week too. Anyway, jay Z, great to get your perspective on markets. Really appreciate your time, and I hope we can bring you back some day. Great, happy to do it. Thanks so much for joining us What Goes Up. We'll be back next week and so. And you can find us on the Bloomberg Terminal website and app or wherever you get your podcasts. We love it if you took the time to rate and review the show on Apple Podcasts so more listeners can find us. And you can find us on Twitter, follow me at Bring Anonymous, Boldanda Hierrich is at Bilbonna Hierrich. You can also follow Bloomberg Podcasts at podcasts What Goes Up is produced by Stacy Wong. The head of Bloomberg Podcast is Francesco Levie. Thanks for listening, See you next time.

Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan, I'm a senior editor at Bloomberg, and I'm Valdonna, hired across asset reporter with Bloomberg. And this week on the show, Well, it was the first time in more than two decades that the Federal Reserve raised interest rates by half a percentage point. But all it took was just a little hint of dovishness from chair j Palell to get the stock market roaring. He indicated it's unlikely that the federal increase rates by seventy five basis points during this cycle and the SMP shot up about three. So is that it is that all it took to set up bottom in the stock market. We'll talk about it this week with a Wall Street strategist. But first, Vildanna, I have to ask one thing before we get started, All Ears, did you have any nicknames in high school? Um? Why wait wait wait stop stop stop stop? Do not reveal your high school nicknames? Why you don't understand why? At this point of the show, the veteran podcast co host and listener of What Goes Up, nicknames are a very valuable commodity on this podcast. I think we got about a hundred reviews on Apple podcasts when I promised to reveal my high school nickname and I realized we are ratings and reviews have slowed down on Apple podcast, so I think we need to leverage your high school nickname. How long are you holding your hostage? A hundred more ratings. I think I got about seventy ratings on the on Apple podcast. So go ahead, listeners, if you want to hear Voldonna's high school nickname, you have to go and give us a rating on Apple podcast. We're not saying it has to be a five star rating. Uh, even though you know, maybe maybe that's what you want to give us. I don't know, but go rate, rate, review the show and I think we get a hundred more. Will will reveal you're holding the listeners hostage. No, no, no, I'll have to go and click that five stars, however many stars you want to click. I'm not saying it has to be five stars, not making any prerequisites. I will have no idea what they actually hit, how many stars they hit, but it's going to get the numbers going so more listeners can find the show and Uh, find out what you think about it, especially if you have a good a good review for us. You know who else we're holding hostage our guest this week. I realized this week he's probably having second thoughts about about English but joining this podcast. Yeah exactly. Oh, he might not even be on the zoom call anymore. I think he's still there. He is. I want to welcome Jeremy's here and he's senior portfolio manager and head of private client US Equities at ubs ASCID Management. Jeremy, welcome to the show. Thanks for having me out. And if you need a nickname for me. The other jay Z works is fine, that's pretty good. One, that's really good. All right, you'll be jay Z the rest of the rest of this podcast. But tell us, you know, what is your takeaway from this FED meeting this week? I mean, obviously, a relief rally in the market. Uh SMP up three in a matter of minutes after Pal indicated that seventy basis points was most likely off the table. Also some comments suggesting that, you know, a soft landing in the economy amid rising FED rates is not necessarily unthinkable. Uh. You know, he indicated to be tricky but he doesn't think it's possible. I mean, was it just that was a real relief rally. Do you think we'll give it all back in coming days or we're um or is that really the type of thing that could help the market set a bottom after this ugly start to a year. Look, I think the markets are going to remain shoppy, but I do think that the Federals are being very clear that they're not con conto inflating far more aggressive tightening was certainly helpful in terms of thinking about the future path of monetary policy and just reducing what a lot of investors fear is a policy mistake tightening too quickly in the context of a slowing economy. I also think one of the statements that was really interesting was that you know, Federal you know s Propell said that he will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain time. Right. So it's not just that they didn't tighten as much or they're not contemplating tightening as much as feared, but it was also they want to be predictable, They want to be very clear on what they're doing and not surprised the market, and so to the extent that the market already has lots of things to worry about that are hard to predict, write the war in Ukraine, COVID outbreaks in China, out just you know, will we see peak inflation in the first half of this year? You know, the Federal Reserve is trying to reduce one of those uncertainties. Jermy, can you talk about the idea of I mean, wouldn't Pal sort of want the idea of a seventy five basis point hike at least like floating out there as this sort of fear because it helps tighten financial conditions. Whereas if we have stocks and other risky acids rallying, financial conditions are are are going to to ease or loosen. So can you talk about why he felt the need to to quash the idea of a seventy five basis point hike. Yeah, I think it's pretty straightforward. I think that financial conditions have tightened. Right. We've seen a dramatic increase in the two year the ten year, and real interest rates that have gone from deeply negative territory just three months ago to positive territory from the first time since before the pandemic, and so, you know, I think that that has a tricky balancing act to handle. I mean, we certainly have seen some of the growth indicators soften, uh during the first week of this month, with the I s M both manufacturing and non manufacturing index, you know, coming off the boil. And so I think this was just a matter of you know, the Fed saying, look, financial conditions are tightening, we have are high on the ball in terms of trying to balance our dual mandate and that you know, given you know, market positioning, which was horrendous right over the last month, with you know, the SMP dropping on early ten percent last month. UM, this was just the Powell's attempt to try to balance and square that equation. You know. Jeremy, you mentioned that you think markets will remain choppy on some of the outlook notes you sent over to us. Uh, you indicated that you think yes, and people probably be in a trading range over the next few months. UM, as investors wrestle with all these cross currents. Uh, how do you play that as a portfolio managers a strategist, I mean, is it just kind of hold what you have and you know, wait, for this this phase to be overs there. You know, it doesn't make sense to try to play that range at all, or is that just too risky? I think it's hard to sort of a so called play the range in terms of the very short term just because of the unpredictability of what's happening in some of the risk factors that we talked about. UM. Generally, you know, we invest for the long term, so we own great companies that generate great cash flows and normalized environments, and so we don't worry too much about you know, thinking about you know, we're in the range of a tactical positioning. We are, although when opportunities arise, I think that you do want to tilt portfolios to take advantage of some areas that could be attractive. Uh, you know, certainly, you know, we think and we've been positioned more towards the value segments of the market over the past several months, believing that we are in a tightening cycle. We are in a rising rate environment and with elevated valuations and some of the secular growth areas of the market that you value reopening plays are you know, the most interesting and offer the best reward in the market. So when segments within those categories sell off because of you know, near term concerns, we get more interested in and tend to back those positions. But would you want if I just follow up on that and ask, you know, uh, what looks like a good value in the market. You know, what are the what are the value pockets of the market that look attractive at the moment um. But I think there's a couple of ways to look at it, right, I mean, if you look at it by you know, sort of sector and industry, I think it is your classic value oriented sectors, So that would be energy, financials, you pockets of the consumer discretionary sector, um, where you do see you know, just low valuations and just fears that the earnings will not be resilient enough and that they are you know, potentially value traps. And so you know, you look at energy energy right now trading at free cash flow yields over ten percent, four per points above any other sector in the market. So there's clear fear that you know, the oil prices will normalize or go be lower over the next six twelve, twenty four months. And just given you know how tight oil markets are, limited supply just the under investment in the sector for the past five to six years. It does look like there's you know, even though the sector has done phenomenally well over the last twelve to fifteen months or so, I think that there's more upside and markets are still you know, cautious on the long term outlook. I think financials also look attractive here in certain areas. Um You know, if what's been interesting is that, you know, the financials have traded sort of in line with the tenure treasury up until about two months ago, and that's been a there's there's been a pretty big disconnect between the performance of financials and interest rates, meaning that financials haven't kept up with the pace of interest rates. And I think a lot of this is on fears of a hard landing and fears that you know, credit is going to be a problem, and that if we do have uh an extension of the economic cycle and that that is able to orchestrate a soft or soft dish landing, then you know, financial should perform very well in this type of environment. And then also I think you like a lot of the reopening place that are tied to the travel industry, the hotel leisure that type of stuff. If you could talk about that. I know, we had some really good earnings from the likes of Airbnb earlier and I think it was earlier this week. Speek feels really long, but um, but you to like some of those, right, I do? Right, Like, So, if you think about across you know, across sectors where there's good value, I would say it's in you know, industries where their earnings were impaired because of COVID and their catch up trades, because the market is skeptical that earnings can reach more you know, pre COVID levels anytime in the next couple of years. And so if you look at some of the travel uh um levered stocks, I mean just bookings last night, but up I said that room night growth was thirty percent higher than two thousand nineteen levels, and so there is significant pent up demand for travel for service oriented industries, and largely, you know, I think what investors are really wrestling with is that we've had this you know, pull forward of demand in segments of the economy and you know, technology and many goods producing industries, and we've had you know, and that was largely just because consumers had cash and they needed we're going to spend it, but they couldn't spend it on service oriented industries because of health concerns or just restrictions. And so now I think we're seeing that reverse and it's not a straight line because we don't have you know, uh, we still have COVID to deal with, not as much as we did, but we still are dealing with some some of the effects of COVID. Less so in the United States, but you know, still seeing the effects in other parts of the world, especially in Asia. Um. But I do think that for patient capital that the best risk rewards in the market are really on those areas that have seen um, you know, you know, disruption from COVID that you know, I don't know if it's going to be in three to six months, but in two to five years are likely to have sort of more normal earnings levels and back to trend earnings levels that they saw before COVID. Yeah. I think it's an interesting dynamic that pent up sort of bottleneck and demand that you mentioned. You know, the flip side of the coin of that is just you know, consumers having this extraordinary amount of savings that you know, the likes of which we really never saw in modern times before the pandemic um. So to me, it seems like that a corporations to you know, corporations balance sheets are are so strong, uh coming out of the pandemic um that it seems like, you know, the inflationary environment mean um is not as sort of a head as big of a headwind as it would be otherwise. If you know, if the savings rate had not sort of ballooned the way it did during the pandemic, how long do you think that lasts? Though? How long can that consumer sort of draw down those savings um before we sort of normalize back to uh, you know, pre pandemic levels of demand. Is it, you know, something that could happen quickly or is it something that the last perhaps as long as the pandemic lasted. Is there any sense from your end of of how long we can count on that consumer to have the spending power that they do. Yeah, I think the market is overestimating just the probability of the consumer retrenching. I think it is because of what as you mentioned, there is a good amount of pent up savings, but more importantly what the highest correlation to consumer spending is simply jobs? Right, If if if you have a job, you're going to spend. If your way just are going up, you're going to spend a little bit more. If you have excess savings, you're gonna spend a little bit more. But the main, the main focal point for any analysis of the outlook for consumer spending is employment. And right now labor demand is by far outstripping labor supply. We still have labor force participation rates at well below pre pandemic levels because a lot of people were fearful of entering the labor market because of COVID or couldn't because of child care concerns. And so if we get I mean, at the end of the day, you know, the consumer can stay resilient, and it's not a matter of working off savings in my view, it's a matter of whether they stay employed. And I think that you know, even with that tightening, we're not anywhere close to seeing our trenchment in corporate hiring, and so, like, I understand the bearish argument that the FED is tightening and that you know, the yield curve inverted and that has been a precur search of recession, but it seems like in this environment the buffer is that consumer and corporate balance sheets are in very good shape. We still have a very healthy demand for labor. That isn't that is far out of balance, and that you know, the spent you know, because consumer spending can remain far more resilient for a longer period of time because you know, we don't this isn't a normal economic cycle. We didn't see, you know, a housing boom and bust like we did in two thousand six or two thousand seven. We're not seeing a corporate spending boom and bust in technology like we did in the late nineties. Fundamentals are generally pretty good going into this health crisis and pandemic. So I think that, you know, the outlook for for UH and the probability of a softer landing and longer expansion is fairly high and probably higher than market perception. I was just about to ask you what your view is and whether or not the FED can avoid a hard landing or this UH if we can have this softish lending is how I think Paul described it this week. Yeah, I mean, look, I think that because of what I just mentioned, and just because the strength of the consumer and incorporate balance sheets and still generally healthy labor markets. You know, there's a good chance. I mean, that's that's essentially what Powell said, that there's a good chance we don't know, right. I mean, there's a lot of risk factors that you know, could lead to a you know, moderate downturn um. I don't think that if we do see your recession, it would be your normal you know, typical you know, markets go down, it takes a couple of years to get back to you know, back to trend levels of economic activity. It will probably be a little bit you know, more shallow um, given some of the strong economic momentum that's already you know, in the in the U. S. Economy. But I think that there's a good chance that we you know, in our base case, you know, the economy slows, it doesn't roll over, you know, even the outlined and very clearly defined you know, hiking path from the Fed, you know, we're only going to go to sort of neutral territory in terms of FED policy over the next several months. And you know, in my view, there's a reasonably good chance that the Fed can pause there and once they reach you know, levels of around two to and a half percent on the FED funds right, and because I think that inflation is likely peaking right about now or in the next couple of months, and that will see lower levels of inflation over the course of the second half of the year, and that will give the FED an opportunity to you know, uh the ease off in terms of it's hiking, increasing the probability of a software landing. You know, you mentioned in UH when your notes to us that you like high quality companies with pricing power. I've been kind of surprised, um at it seems like so many companies have that pricing power right now. This week, UM, we saw a T and T and Verizon you know, either announcing or planning to announce uh increases in mobile UH subscription rates, which perhaps that's kind of a no brain or a cell phone company is going to be able to you know, raise prices arguably more than sort of a discretionary um uh consumer company. Where where would you expect the pockets of the market to be where the pricing power is not robust. Is it as simple as sort of you know, frivolous consumer discretionary type of products, or is it more complicated than that. Now I think that like in general, you know, you would see it in sort of some of the names that are are really sort of like discounters, right, and where you don't have where you're already working on very low margins. And so I do think that you know, in pockets of consumer discretionary um or very competit it is environments and very competitive industries, you're likely to see you less pricing power than and see some further margin erosion than other you know, other other sectors. But probably it seems like most companies are are being you know, have that power they a they're able to raise prices pretty aggressively. Um, so far is up in your your general impression, Yeah, I mean, if you look at the ring season so far most companies have reported and you're seeing that you know, sales growth is on track to be up about twelve percent for the sp earnings up about ten so you know, an aggregate, that statement you just made is true. I do think though, that we are in a period where as you mentioned, right, the consumer still has a good amount of savings to spend, and labor markets are strong, so we have good economic momentum. What will be more interesting to see is how companies have you know, how the pricing power holds up as the economy starts to and the consumer you know, starts to get a little bit more stretched. And so there I think, you know, what we try to do in our analysis is really look at, you know, do the companies have a mode. Are they in industries that have oligopalistic nature to them where they don't have where they generally have rational pricing across the industry, and you know, are they able to do they have enough brand equity where they can and raise prices to continue to offset some of the costs. You mentioned the earning season, and I actually wanted to ask you why you feel the market hasn't held up better or didn't hold up better during the earning season when we did have all of these reports that were largely very good and whether or not you think that's largely tied to you know, the macro narratives just being so much more overwhelming than anything we've heard from from companies. Yeah, I would say one it was the rate backdrop was the primary driver. Uh. You know, if you look at what didn't work in the stock market the last few weeks, it's been you know, the secular growth names that sold off a lot more than you know, value and cyclicals, and so you know that was directly tied to the rise in you know, nominal and real interest rates, I think more so than than earnings. I would also note that, you know, while earnings were reasonably good in the quarter, the level of beats this quarter was well below the outsized beats that we saw over the last several quarters. Now, it doesn't make me overly concerned because the level of beats this quarter is actually pretty normal in line with historical averages. It was just that the companies were beating by such a wide margin, uh in the last few quarters that I think you know, investors sort of have muscle memory and said, well, you know, things are beats are slowing the aggregate level of growth, this slowing the beds raising rates, and you know, putting all of that into the into the equation to say, you know, this might not be as good in uh time to be investing inequities. I also think you also, just last point I'll make is you had some pretty high profile margin misses, you know with technology companies or you know pull forward demand companies like you know a Netflix, um or an Amazon, and so from the from that perspective, you know, there was I think just concern about Okay, you know, well in aggregate companies are handling, are able to pass along pricing um, and are seeing reasonably resilient and market demand. It's not uniform and so it's not a fewer company you know, with a breath of companies beating and the level of company beats uh decelerating. I think that just added to the rate rise in some of the angsteon markets. Yeah, it's a great point about sort of that recency bias. You know, it's easy for the market to get used to the companies beating and you know reversion back that's not normal. Yeah, yeah, yeah, that's it's Uh, that's interesting, Jeremy. I'm wondering what you see as what are the risks that sort of keep you up at night. You know, I'm looking at the news today, it's Thursday. Uh. Leaders in China are reiterating the whole notion of the zero COVID policy. Um, they're not backing down from that. There's a lot of concern about this Russian holiday coming up on on May nine, that Russia will really use that as an excuse to get very aggressive in this war and maybe you know some some real dangerous rhetor coming out from them. Is it? Are they the two main risks? Do you think China lockdowns in Russia's is that really what keeps everyone up at night right now? Or is there anything we're missing? I think from you know, a very tactical perspective about what's going to drive markets in the next week or two. Um, you know that you know what's in with the war in Ukraine and the Asian Chinese cities, lockdowns are are front and center. I would say, looking out a little bit further, and not even a lot further tactically, but just over the next several months, I would say it's going to be the inflation data that drives markets. If we see inflation continuing to stay at very elevated levels and not seeing some of the declines that you know we're hoping to see, UM, then I think that you're gonna start to see expectations for the FED tightening to be even more aggressive, and that's going to put more pressure on the markets. And I think the timing on the inflation data is difficult to assess, but we are seeing some signs that inflation is in fact peeking, and so I mentioned that, you know, I think we're gonna be at a trading range, but I think we're probably closer to the bottom of that trading range in the near term than than the top. And it's because of the fact, uh you know, you have seen use car prices come off the boil, right, you have seen sort of a stall in some of the commodity price increases, and encouragingly from a from a wages perspective, you you are seeing labor force participations start to improve and without further meaningful outbreaks of COVID that would restrict mobility, uh in in you know, domestically, I do think you'll see labor supply improve over time, and just the combination of FED tightening and slowing the economy a little bit from the demand perspective, and increased supply of labor should allow for you know, wage growth at a minimum to stop going up and likely to to plateau and start trending a little bit lower over the next couple of quarters, in more likely the next couple of years. You know, Jeremy, we often hear about this idea that stocks can be a really good inflation hedge because of what we were just talking about companies passing on costs. But we have this story earlier this week that said, adjusted for inflation, the SMP five dred is down in value at an annualized rate of roughly or sent any full year since nine. So what do you make of the idea that stocks are a good inflation hedge. Yeah, I think that down is just a a poor way to frame a statistic. Uh that that that shouldn't that is misguided, right, I mean in the long run, you know, stocks are a very good inflation hedge because they appreciate at a level that is much higher than inflation. And to the point we were making before, stocks do have pricing. You know, many companies do have pricing power and are able to offset those costs. I mean, we've seen very clearly that bonds are a terrible inflation edge and their prices have gone down dramatically as well, you know, inflation has risen. I think one of the more underappreciated areas of you know, the equity market for long term invest you're just looking for inflation protection. Are just your stable, lower risk dividend growth stocks, right, I mean if you think about, uh, you know, the return you're getting from a company that has a two two and a half percent dividend yield today moderate pes but grow learnings and dividends in the mid to high single digits year after year. Um. You know, we're all freaking out that inflation is eight percent now on the CPI and six percent on the pc E UH indicators. Um. But you know there are many companies in the SMP five that you know, historically have delivered dividend growth of eight to ten percent every year. Right, And so if you're worried about you know, inflation being stickier at a mid single digit rate over the next you know, three, five, ten years, and what that does to your purchasing power by dividend growth stocks, right, you know, by bye bye, you know, more stable dividend growth docks and consumer staples in health there that consistently grow their dividends by to ten percent a year, and you'll have that offset relative to high levels of inflation. The aristocrats, as they say, the dividend aristocrats. Jeremy, I wonder you know you mentioned the notion of inflation being sticky. I do think you know, I agree, and everyone seems to agree that there are plenty of signs that inflation is piqud. But I wonder what happens if we get it sort of plateauing out, say later in the year, in the in the summer, and into the second half of the year. If you know, I don't know CPI is at what eight and a half? If it sort of sticks at you know, in the fives and PCs sort of sticks in the fours or the fives, is that ultimately a dangerous situation for equities? If you know, we get to the point where we say, well, it's peaked, but it's still not normalizing back to two. Um, you know, is that sort of a a danger point for equities? Do you think? I mean, certainly, if we see more structural drivers of higher inflation take hold, like if wage growth continues to stay at a very high level and isn't trending in a more you know, trending lower, I think that is going to lead to a lot more concerns that that are reserved, is going to have to high interest rates a lot faster. UM. I tend to think of inflation and the inflation problems that we're having right now, you know, in three buckets. I mean, you have this commodity price inflation, which is you know, very clear, and it's a high frequency purchase, so it gets a lot of you know, airtime. Um. But look, I mean commodity prices went from you know, oil prices for example, and from sixty dollars a barrel a year ago to over a hundred dollars of barrel today. Uh, you know you're going to see a deceleration and headline inflation unless commodity prices go to a hundreds oil prices to a hundred and six hundred and seventy. Right, and so just from a year on your change basis, because that's how we measure inflation, you know, the commodity complex should start to show deceleration of inflation over the next several months and quarters. I mean in terms of you know, the second bucket is goods, right, Like we've just seen a huge amount of goods price inflation, not service price inflation, because demand for goods was so high during the pandemic and now that we're seeing, as we talked about, like really strong demand for travels, a shift in spending from goods to services. The bands for goods is declining. Um. But the sticky point there is that we are still seeing manufacturing centers and supply chain bottlenecks because of COVID related issues UH in in zero policy to zero COVID season in China, and so the timing is tricky. But I still think that, you know, markets are forward looking, and you know, if you think that the primary driver of the inflation that we're seeing is mostly COVID related, right because you know, the commodity shock, the goods inflation, and labor and wages, then if we do see relief from COVID and limited mobility restrictions and more uniform global trends of COVID UH improving, then I think that the outlook for the broader based inflation both domestically and globally will be you know, structurally lower, and that people will have a lot more comfort that even if it transit from a transitory perspective that falls from eight to five and stays there for a little bit, if it's because of COVID trends that are sticking that are you know, that are that are stickier or problematic or cropping up, then I think that you know, the investors will not be thrilled about it, but they'll look past it. If it's really structural that we're seeing signs of a wage price spiral and then there's just a lot more bargaining power for labor and we don't get the increase in labor force participation, then I think it's a much more problematic for equities because then I think you're gonna have to see them more aggressive. That it sounds like you're you're kind of expecting the former rather than the ladder. Though I guess I am with a lot of concern that the timing could be you know, it might not be the next couple of months, it could be the next couple of quarters. It might not be the next couple of quarters, it could be the next couple of years. Right, So that I think the timing is the trickiest part. Which makes me, you know, more cautious on the overall outlook, is particularly in the near term, because I just think that at the end of the day, you know, it's you know, we've all been underestimating the duration of COVID uh you know, related disruptions, and so because of you know, just out of that, out of that hubress, I would say that I think we all need to to be a little bit of humble, diversify your portfolios, not take huge tilts based on a single core view, but not getting overly negative as well. And Jeremy, just to round things out, I know we were talking about whether or not, UM, we could potentially be bottoming right now, and I wanted to ask you what sorts of signals you look for. I know a lot of people turn to technicals, others look at sentiments. So what are you looking for to see signs that we potentially could be forming a bottom look. I think that you know, sentiment certainly got very extreme. If you look at the you know AI bullish bearish indicators, UM. Historically, when you reach the level of bearishness that we reached last month, that forward returns are generally, you know, well above average. So that's a decent signal, UM. But you know, at the end of the day, I really think it's you know, as we talked about, it's going to be the you know, the outlook for inflation. And so I think the next couple of months indications of c P I p p I UH cour PC price index inflation is going to be critical in terms of just the short term movements of markets. UH. If the market thinks that inflation is stickier and that bed is still well behind the curve. Um, there's likely still you know, more downside. And the reason I think that you know, we've seen as sort of like as much downside as we've had already this year is because you know, the composition of the SMP over the last several years has has shifted and you have a lot more concentration and secular growth names within the index, and they're the most vulnerable to arising interest rates because their long duration plays within the equity market and they're gonna be more sensitive to interest rates. And so from that perspective, I think it's really you know, inflation. Inflation. Inflation is what we uh, we're worried about as our as our top three um and uh we'll assess as we moved along. Jay Z, great stuff, really appreciating anyway, but that I think it's time. It's that time. It's time ye tell the people what time it is. It's time for the craziest thing in market. All right, I'm gonna get started for once, I'll get started. So, Uh, there was a news report on a TV station in China, um in let me make shureg at the city right hang Zoo, which is where Ali Baba is headquarters. And this TV report said a gentleman by the name of Ma was arrested, and instantly the market assumed it was Jack Ma and sold off aggressively shares the value Baba. I'm sorry, detained, not arrested. We've had discussions about this. He was detained, not arrested, the Chinese translator and I had to this question about this anyway, Ali Baba sold off. So to play the prices right with this one, how much do you think uh investors getting the wrong ma uh in the news mixed up? How much do you think that lopped off of the value of value Baba in a matter of minutes, are going first market cap US dollar market cap. I'm gonna go with five billion, all right, I'm gonna keep a poker face, Jeremy, how much do you think the wrong Ma cost Ali Baba in a few short minutes. I'm gonna take the over if we're playing price right. So yeah, that's that's why, that's why he's a strategist. He does so. So you're you'll take twenty five billion and one dollars I exactly, that's good. The over was good? Was six billion? Was? Though? I think you read the story? Did you read the story? Did? But but the story came out on like Monday or something, which honestly feels like it was three years ago. Billion vaporized in a matter of minutes, but it all came back. So um, I don't know, there's a lesson there somewhere to make sure you got your your maths straight before you sell. I don't know. Quite a remarkable story, though, how about you hold on it? What's what's the craziest thing you saw this week? Had tip to Matt Levine who wrote about this, But there's this amazing story in the Wall Street Journal about n f T s and how sales and interest has has totally been dropping off recently. And so there's this one tidbit that really really struck me. The story says, an n f T of the first tweet from Twitter co founder Jack Dorsey sold in March of last year for two point nine million to Sina Estavi, who is a chief executive at a blockchain company in Malaysia. Earlier this year, he put the n f T up for auction, and he didn't get any bids above fourteen thousand dollars. Remember he paid two point nine million four you know, and some people might find it crazy that someone's willing to pay fourteen thousand for this thing. Yeah, good point, that's pretty good. Although I see the the the crypto punks and the board apes. They're still selling. I think those are. I guess they are your blue chip n f T s right there. They seem to still be selling for six figures. Yeah, so I don't know. They are the uh, the the Apple and the Amazon of the n f T world. I suppose we're not Amazon so much anymore. But anyway, cheremy, you see anything crazy this week? That's the end of the second week of earning season, the busiest week of earning season. So my my brain is mush by the end of the week. So I'm gonna pass. I'm the crazy things I don't just think I've seen. Probably the last week is the the Mets throwing a five pitch or no hitter with taking out a picture after five innings and eight pitches. Oh yeah, As as a Phillies fan, I uh uh that one hurt. That one hurt. I just went to that game. Actually, yeah, that was we had a group outing of Bloomberg to that game. I'm glad I missed it, though five pitch really found. I'm glad you did. I'm sure you're glad you five pictured no hitter. I wonder if that. I wonder what the most pictures ever used in a no hitter is. That's got to be getting close to it. That's pretty I'll to look that one up. Five and that counts a five picture no hitter will allow that. That's a That's probably the craziest thing I saw this week too. Anyway, jay Z, great to get your perspective on markets. Really appreciate your time, and I hope we can bring you back some day. Great, happy to do it. 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