What Goes UpA rallying stock market and better-than-expected second-quarter economic growth are just the latest developments pointing Wall Street skeptics to the possibility of a US “soft landing.” That’s where the Federal Reserve gets inflation back down to around 2% without triggering a downturn.
For more than a year, Fed Chair Jerome Powell has waged war on inflation while a chorus of adamant recession predictions has fallen flat. But even now, with inflation cooling and the economy looking to be on the glidepath, some big names remain uncertain that he can pull it off. Vanguard Group is one of them.
Joseph Davis, the firm’s global chief economist and head of its Investment Strategy Group, joined the What Goes Up podcast to explain why that is, as well as offer his reaction to the latest interest-rate increase and give his outlook for the bond market.
“To get inflation down that last yard to 2%, you have to see a modest weakening in the labor market, which means the unemployment rate’s going to rise—although hopefully not drastically, let’s say four-and-a-half percent over the next year,” he says. “Well, that’s a hundred basis-point rise. So by definition, that is a recession. Now, anyone who thinks that that’s a soft landing is spitting in the face of 150 years of history.”
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 Katie Greifeld. I'm an anchor with Bloomberg Television and a cross auser reporter.
And this week on the show, while the Federal Reserve raised borrowing costs again this week, taking their benchmark interest rate to a twenty two year high. At Mane on Wall Street, believe the Central Bank is either finished or very close to being finished this very aggressive rate hike cycle. But what about the recession that so many were convinced would result from the Central Bank's aggressive fight against inflation? Was that just misplaced pessimism or is the downturn still on its way. We'll get into it with our guest, who is an economist at a major investment firm. But first I got a question for you. Yeah hit me, And I know you went to college in the Philadelphia area at Haverford. I assume you sampled the cheese steaks in Philadelphia at some point, and you're.
Preaching right, No, I've never had a cheese steak. I feel like I'm immediately killing our banter. Our top of the show banter. But I've never had a cheese steak.
You've never had a cheese steak?
No, It just.
Something about the strips of meat never appealed to me. I do eat, I'm not a vegetarian, but just did not fill out my boat.
Oh man, all right, all right, that's fair. So your answer is none of the above, Na, not applicable?
I said, yes, what would have happened?
My tradition here is to ask Philadelphia area guests what their favorite cheese steak joint is. And I'm going to tell you right now, Katie, If our guest this week actually is a cheese steak eater, I think I can guess what his favorite place is. And this after never have met him, never spoken to him. That's how good I am. All right, you ready?
All right?
I'm excited.
Now let's bring him in. He is Joe Davis. He's the global chief economist and head of the Investment Strategy Group at Vanguard. Joe, welcome to the show.
Oh thanks for having me.
All right, Joe? Are you ready to be blown away?
Yeah? Let's go.
Your favorite cheesesteak joint is Larry's Steaks on fifty for fifty fourth I believe it is and city line on Hawk Hill? Am I right?
Not bad? Not bad?
Did I get?
It's not my favorite?
So I grew up outside of Philly, but I went to college in Philadelphia proper. So Larry's is a great one, particularly after midnight because being in college, they're there.
It's a good cheese.
Joe Is, I believe you might be our first Hawk, our first Saint Joseph's University hawk on the show, which is exciting for me, my whole. I've one of six kids. Everyone in the family went to Saint jose but me. Yeah, yeah, it's crazy.
Well, how is this so if you're from Philadelphia, you know a rivalry of Saint Jose's.
Villanova r Oh, absolutely yeah.
So that's where that's where my daughter's going next year. So we're gonna have some family tensions.
Oh yeah, boy, you're at your let you're gonna let her back in the house.
I don't know.
My son's at Penn. So we got the whole. We have almost the entire Big Five. So yeah, long lived Pilly.
Three fifths of the Big Five. Well, Joe, let's get down to business. Then, you know we have the fed uh statement and press conference today. You know, the vibe I'm getting is not too many surprises. You know, we got the quarter point rate increase, so the FED funds target's now five and a quarter to five and a half percent. Anything shock you today or surprise you at all about the statement or what Jerome Palell had to say.
No, I mean, nothing's really surprised me, Mike.
I mean again again, I think the big, open ended question is the same question that we were facing at the beginning of the year, and that really is how much work, if at all, there needs to be done from the Fed, which really brings to the heart really the essential question, which is how restrictive are they today? You hear Chairman pal saying they're restrictive.
By any measure. The question is how much? Because if you can.
Get a handle on that, then you know how much both inflation will fall and how much economic damage may be done over the next six or twelve months. So I think that's still the open question that we were facing the beginning of the year.
Something else that I wanted to ask about, though, was the fact that just stepping back from you know, will they won't they? In terms of rate rises, it's been striking to me how there's been so relatively few descents on Chairman Palell's watch. This was another meeting that was completely unanimous, even though in their words and the FED speak that follows every big decision, there seems to be some disagreement. You never see that in the actual votes. I'm wondering if that's something you've noticed as well.
That is a good point, Katie, I have noticed it. I think that if you know, going forward, we may see greater disagreement. Certainly there's probably more healthy disagreement in the actual discussions when they're making decisions rather than the statement. But I think I think they've been I think Chairman has been able to navigate that with more of the first appause, you know, the last meeting and now being a more data dependent phrase because you do have you know, a healthy spectrum of those wanting to go a little bit further and those thinking on the FED that they've done enough. So I think that's also a somewhat of a testament to his leadership being able to navigate that. But I think from here on out, I think that the probability of having you know, some modest descent could rise.
Do you think at all that it sort of muddles the message coming from the FED that there has been unanimous votes up until this point. And the reason I asked is because I was listening to Andrew Hollenhorst from City on ATV immediately after the decision, before the press or after the decision, saying that basically they sacrifice clarity in having a completely unanimous vote, especially after what we saw in June where they decided to skip but they signaled more raises to come. Is that something that that irks you at all, something that muddels their message? Or are they pretty loud and clear here?
No, I mean I think they're closer to loud and clear. I mean I think reason why we probably haven't seen as much of a descent or open aired sort of dialogue is because inflation is still well buff target. Yes, it has come down, you know, the more recent data is lower than what it was a year ago. But I think that that they're still off on their core mandate, which is why we're seeing still coalestion coalescing around the final decision. I think again, as we get closer to two percent, could be a ways off, but as closer we get a two percent inflation I think you could see more healthy debate, including on.
The voting, you know, Joe, I think one of the remarks that caught some people by surprise was when Jerome Palce said he doesn't see the economy getting back to that two percent target until twenty twenty five, so you know, another year and change, you know, five quarters or so. Does that make sense? You know, we've seen such an aggressive drop from you know, what was the peak in headline CPI like nine to three in the last print. Does it make sense that it would take that much longer to get to two?
You know?
Is it a is it a story of base effects that you know, now we're comparing year over year to inflation that had already cooled off. How are you thinking about how long it'll take to get to that two percent?
Well, I think it will take some time.
I think that's you know, I think that was a subtle but a very important point is actually it's one of the most important comments I thought that was made today, Mike, and that you know, there's there's our own research and projections, the Federal reserves projections as well as academic analysis, including from former chairman Ben Bernanke all point to that to the same outcome, which is inflation and remaining elevated, meaning.
Above two percent for some time.
The primary reason for that is the tightness in the labor market, and so you know, I think that's where you know, and we have been of the view I've been have had strong conviction for some time that we were going to need to see some material cooling in the labor market to get to two percent in any near term horizon, because it is in the wage dynamics. And so I don't I think the market has slowly, the bond market has slowly come to grips with that starting to price out cuts. Right if recall at the beginning of the year there was you know, high conviction in the bond market there would be significant easy and almost at this point right now. And so I think even those comments today, I still think point to the fact that you know, it's going to take some labor market weakness to get to that last yard at as many call it, from three percent trend inflation down to two, which brings up another I think important debate that words matter with respect to this narrative around the soft landing. But perhaps you know, I'll say that for another question.
Before we get there, and I do want to get there, I want to talk a little bit more about what you're saying about wages in the fact that we need to see some cooling in the labor market to get back to target. Is that because there's evidence of a wage price spiral at this point?
Well, I think, kay, I think there was clearly that last year you had wage pressures that were significant six seven percent. You had labor market turnover that was as high as a generation. Again, we all knew some of that was somewhat temporary. But I think where I come out, there's not a wage price spiral. But the fact is the labor market is imbalanced, and we've grown. You know, there's measures that many point to the vacancy to unemployment rate. You know that ratio one is in balanced number of vacancies equal number of unemployed Americans. We've grown that data actually back to as far back as World War One, so one hundred years, which gave us early insight during the throes of COVID that we're going to have some wage based inflation pressures. That ratio now has come down, that's good news, but we're starting to enter the territory the ratio is right now, one point five vacancies to a unemployment of one, So one point five is above one. It's imbalance demand exceed supply. We're starting to enter the territory where any further drop in vacancies starts to be associated with a modest increase in unemployment. That's important because that suggests that and there hasn't been an exception to that for one hundred years. So if we're right, we should see some further weakness in the labor market. If we do not, then that opens up a different door, which means inflation may be stickier than we think, and that would be a surprise to the market.
I did want to wrap in this conversation we're having on the labor market to current events that we're seeing in the economy, especially when we're seeing all these labor negotiations. We saw a big win for labor un unions this week with the Teamsters versus UPS, and actually the Teamsters chief was on Bloomberg Television after that saying that now they're taking the name at Amazon, and I'm wondering how you're viewing that, whether those are one off scenarios where you know, maybe that segment that was involved, that union that was involved gets a price hike. How that is fitting into your overall view on the labor market right now?
Well, you know, I think you know, if you talk to friends and colleagues, as even a Boston as an employer, you know, you can feel the tightness in the labor market when you're looking for applicants. It's in the data, it's in common experience. It's not as tight as a year ago. Last year seemed like a really a frenzy where demand just was was was drassicala ecceede supply. Labor turnovers come down. We know, job you know wage increases are double the rate when you leave a company for a new job then when you stay at the existing ones, So is labor turnovers come down. The wage growth is cooled, and again this is good news for consumers. But the fact is we still have an imbalanced labor market. Now that's why the biggest reason why the Fed took rates from zero to five percent, right, It's just that there was that debate a year ago, your member, between Waller and Summers and others and some calling that immaculate disinflation, meaning you could have that ratio which at one point was two vacancies to one unemployed. You could fall most magically to one. I'm just saying that that's that's historically unprecedented. You can drop from two to about one point five maybe one point three, which we're we're tracking along that pace. At that point, it becomes that that sort of that line becomes a little kinked, and so any further drop in vacancies to get a better balance in labor market, which gets to the wage pressures being a little bit less, you know, intense, you start to see a rise in unemployment, and so there's no getting around that trade off at some point. And that I think the soft that the soft landing crowd has to come as to grips with is that is it theoretically possible, Sure, but it would actually require decent good luck and further labor supply coming out of the woodwork for us to magically balance the labor market.
Over the next six months.
Well, Joe, let's talk about that soft landing notion. I mean, it seems like it's getting a bigger and bigger sort of constituency among economists. One of the interesting things Pal said today was that the FED staff is no longer forecasting a recession. The IMF this week raised its its growth forecast for next year. And at Bloomberg, you know, obviously we do a lot of surveys of economists. They've boosted their GDP estimates for the second and third quarters. According to that survey, consensus is there's about a sixty percent chance of a recession within the next twelve months. I'm curious what how you're handicapping it, you know, is that sixty percent sound high to you? Load to you? Is it? Is it more of a sure thing than that? How are you thinking about?
So I'll give you my answer. I also give you which it's semantics, but it's actually a very important one and that is actually many of the forecasts out there, although they seem dramatically bipolar, either if there's a recession camp or there's a soft landing camp, right, they're actually the forecasts, including the FED, including vanguards you know, are forecast and many from you know, many many economist firms. They're actually more similar than different. There's just there's this there's been this bipolar sort of oh we're in the recession camp or not?
Why say that?
Is almost everyone has a rise in the unemployment rate of at least thirty or forty basis points, so going above four percent over the next year.
Right.
Well, historically that that that has been one hundred percent associated with a recession, now not necessarily deep in magnitude, but a recession that, by the way, is the Federal Reserves forecast. So the Federal Reserve, I mean semantically, they they're on record saying no, no recession, but by that metric, it actually it would it is a recession because you have very modest job losses. Now GDP could be you know, zero point five percent, one percent next year. That's closer to our projections one percent. You know, here's the quiz in two thousand and one, which has been our central tendency of what's the most closest reference point for a very mild recession, which is our baseline two thousand and one, GDP never fell on an annual basis Really, yeah, we had unemployment rise.
Yeah.
No. In fact, many recessions do not have GDP fall in the calendar year with which they occur. Again, except GFC and nineteen eighty two and all those deep ones clearly fall. So again, we haven't changed our view on that the data has been a little bit stronger than expected. But ultimately our view has been you can't have your cake, you need it too, which means to get inflation down to that last yard of two percent, you have to see a modest weakening in the labor market, which means, on pointing rate's going to rise, although hopefully not Drasticgo let's say let's say four and a half percent over the next year. Well, that's one hundred basis point rise, right, So by definition, that is a recession. Now, anyone who thinks that that's a soft landing is spitting in the face of one hundred and fifty years of history. I'm just saying that that's categorically wrong. Now, I think what the soft landing camp really is is there's actually no landing at all, meaning there's no rise in unemployment. Now I would assign the probability of that of roughly fifteen percent. I mean, that would be both good luck on the supply side. We still have an increase in labor force participation rate for example. Right, we got better news there, and you would have the federal reserve really calibrated just the right way. The five and a half percent fed funds with core coming down, it's enough to have non farm payrolls over the next year come in I don't know, let's say one hundred thousand, just enough to have a rise on point rate, but you don't have job losses where you start to really you know, start to see set am weaken further. Effectively, that's an environment where businesses do not really have job cuts, they effectively they just pause on hiring.
That is that, in my mind, is what the soft landing really is.
And and so that's where I think, you know, from an economists perspective, that may sound a little bit like you know, splitting hairs, but it's actually important. So our view, we say that is a low probability, so the odds of recession are higher than sixty percent, but we're not calling, you know, like for a deep recession. It's been it's fairly mild and closest examples two thousand and one, so hopefully that's helpful. I just see this disconnect between those saying we're going to avoid recession, yet they have an unemployment rate rise in of one hundred basis points. It's just I just don't think that's possible to have those two outcomes at the same time.
Joe, there's a lot to dig into there, But I want to return to a point you made that to get to the last yard, to get back to two percent, sort of The plain question I have is whether or not that's worth it. Is it worth it to get to two percent and tip the economy into a recession versus accepting, you know, maybe a higher inflation rate of two and a half percent.
Again, it's a fair question, Katie. I've heard that dialogue. I've been in research meetings with Federal Reserve officials. That conversation has been had. I hear that argument. I just think it's risky. Could it work?
Yes?
I mean, why die on the hill for two point seven percent core inflection?
Right?
The only risk to that is what happened in nineteen sixty seven, And that's actually the.
One year where the yield curve inverted, yet we didn't have a recession.
People call it a soft landing, But as I've written to our own clients and Vanguard, what happened two years later was actually a deeper recession and inflation came back. Now that's not our baseline, But why I bring up nineteen sixty seven is comes back to that indicator I mentioned before, the vacancy's unemployment ratio. In nineteen six, conditions were very similar as now. The Federal Reserve cut rakes because of some a little bit of credit pressures in the banking sector. Now again, the Federal Reserve is not cutting rates today. Within a year, though, that vacancy on appointment ratio it cooled down but always remained well above one. It started to rise again closer back to two, which is where we were at the beginning of the year, And so the Federal Reserve had to switch course dramatically and actually had to take rates. They were at five and a half, They took them down to three. By the end of sixty nine are up to nine percent, and a deep recession followed. Why so, like you could let inflation kind of hover at two and a half two point seven, I would be looking at that point if that was the decision, where's that vacancy the unappointment.
Ratio is it? Is it good?
It is it around one, which is like the true sooft landing, or is it going back up closer to the two ratio than we had to beginning of the year. If that is the case, then I would be screaming for higher rates because we have seen that play out before. So I would put a caveat, like, if you're going to pursue that policy and let inflation hover around three percent, really keep a close eye on the imbalance or balance in the labor market, because that was a mistake that I think many would take back that mistake in nineteen sixty seven.
Hey, Joe, if I could ask you to switch hats for a minute here, As I said at the top, you are the global chief economist at Vanguard, but you're also head of the investment strategy group and on the portfolio management team in fixed income. So I'm curious how you were thinking about the bond market. You know, it seems like yields have sort of settled into this range last few months, call it four point eight four point nine on the two year and about three point eight three point nine on the ten year. We did have the ten year spike above four a few weeks ago, but it seems like it's settled back into that three point eight three point nine, you know, at least on a nominal basis. Obviously, real yields are another story there. As inflation comes down but are we just kind of locked into this range phenomenal yields. Do you think if we if the FED is sort of going into plateau rates for the rest of this year and next year.
I think so.
I mean, I think, you know, first of all, from an investment perspective, our theme has been for a year that you know, bonds would come back because you have some rich real yields that you mentioned Mike, right, You have real yields positive across most of the term structure. It's something that you know that I've called the beginning of the year, that return to sound money, right, And I think it's been the best positive single development in the financial markets in the last twenty years bar none.
Because we have less of a subsidization by.
Savers to those have had debt, you know, because you had you had negative interest real interest rates.
So that is a theme for us.
I think within the fixed income market. To have a higher long end of the curve, to have a higher ten year treasury, you're going to need to make an argument that either inflation is going to cyclically come back, which I would say more as a tail risk, although certainly possible.
The other one is is that our star that's so called neutral rate is higher.
And as you know, our listeners may know, you know, or we've published research, we've put it on external websites to say that our star is actually is higher, which is one of our thesis going into the year that FED wasn't as restrictive as people think. So I think from a fixed income perspective, you know, but again, bonds are back, They're providing income across various investment strategies. On the corporate sector, I mean, you see the total nominal yield and on a real, real perspective of pretty compelling on the municipal space, similar case. So I think it's been a great development. We viewed this as view really as a positive outcome for investors. My biggest concern five years ago, Mike, is that we had negative interest rates or remember the concerns around secular stagnation and low interest rates forever. I think this is, you know, the power of compounding find an investment perspective is pretty powerful.
So just to draw that point out a little bit, maybe this is an oversimplification, but if our star is higher, do treasury yields across the curve need to be structurally higher as well?
Yeah, it's an esoteric terms, okaitis you know, but it's effectively a way saying, what is the neutral cache rate? Right, which is the bise asset for any security in the world, equities, fixed income, private equity, So the risk free rate? What's that neutral risk free rate? No one can see it. It's like something in the heavenly bodies. You know, it's out there if you can't actually feel it with your hands. But our research that we've updated, actually it's fed O Reserve's own research, we can show that it's one hundred basis points higher than whatever that neutral rate was before COVID, and it was starting to rise actually before COVID, and it doesn't move on a dime. So if we're right, that means the neutral nominal rate is roughly three and a half, maybe perhaps this high as four percent, say a cash rate a treasury T bill, and then you would price out the yield curve from that, which would get out of fair value potentially for the tenure treasury over time. So with the you know, a modestyness in the yield curve, you can get a fair value five or ten years from now on a tenure that's a little bit higher than where we are today, and that's really debate in the market. The market was very bomb market, as you know, was very skeptical that we were ever going to leave that secular stagnation camp. We were anticipating high odds that we would. We just did not know the timing of it. But we think this is more there's more permanence to the recent rise in interest rates. Yeah, the Federal Reserve may cut rates in the next two years with some economic weakness, but I think neutral rate is clearly nominal rate is clearly in the three percent, you know, three to four percent range. We can debate within that range and as if it's slightly over that. But again, that's a dramatic shift from where we were pre.
COVID and Joe, You'll have to forgive me, but I'm a journalist. I think in headlines so unforgivable listening to what you're saying. I mean, ten year yields right now we're at three point eighty six percent. If the cash rate is you know, three and a half, I have to assume that has to rise. Is this the end of the bond bull market?
Then I would characterize it differently. So my headline would be there's more permanence to this, and then this is really a good news. So I think those that have been betting that we're going to we're well above normal ranges and betting on a significant drop in interest rates. I just think it's off base now this fair value range. You know, the ten year traders are three point eight. But there's a probability of recession in the next twelve months, and so the market is trying to have assign a certain probability to that over the next several years, which can drop us below the numbers I just gave you, right, So it doesn't surprise me that we're a little bit below the four percent for four and a half percent range on the tenure because it's also trying to discount economic weakness in the next two years.
But I again, I.
Think we're within a normal range. I think the big headline I would be putting is bonds will stay back. You know, the headline beginning the years was bonds are back. I think that they'll they'll stay high in their perch for the foreseeable future.
Chairman Palell duly noted at the press conference the long and variable lags of monetary policy and how signal they're still kind of waiting for perhaps some other shoes to drop. You know, we saw the issues with regional banks in the spring. These days, there's this sort of slow trickle of alarming news in the commercial real estate sector. You know, there's a lot of debt coming up for refinance in the next few years at much higher rates, with much lower occupancy rates on top of it. I'm just curious where how you're thinking about that long and variable lag and where maybe we should be looking for the effects to perhaps surprise people. I mean, is it commercial real estate? Is the regional banking issue not something that's completely solved at the moment, Where perhaps would you worry about effects from this aggressive interest rate campaign that we haven't really seen yet.
Yeah, well, I think it'd be too Mike. I mean, clearly commercial real estate.
Has gotten the most attention, and not to say that's that that's misplaced. Myself and my team are looking at two other areas in addition, and one is if we're going to have a recession at all, or that's called it, you know, just a significant slowdup. We had it in housing, but there has to be weakness in the in the construction in the employment.
Side we are now.
Housis would suggest that the pen up demand which was which is still significant from the COVID type period, that starts to wean its way through the system by November, and so after that point, if there's not renewed demand, then we're going to start to see modest layoffs. That's the break even. So it puts you into early twenty twenty four. And then the other one is what you said in terms of terms out in terms of you know, refinancing or new debt costs.
Again, because a lot of a lot of.
The locking in of low interest rates during COVID, I think there is some truth to the fact that the lives could be somewhat longer this cycle because of the lock up. Exactly, the interest rates sensitivity for the economy right now is lower than what it would be on average, right And so both of them put you into not that interest rates don't have an impact on the economy, it just puts you in the downturn. The flowdown being later into twenty twenty four. That would corroborate with another piece Avage was had nothing to do with the lags, and that's just what the fact is only now that have we had the real, the real Fed funds rate, so that you know where the Fed is five and a half percent today minus the rate of trend inflation, which you know is own recently gone. That those lines have only recently crossed, and so you know, we've really never had a recession without the Fed funds rateing at least two percentage points above the rate of core inflation.
So if you put cord four and a.
Half roughly, let's say in three months we're down to three and a half only, then you start really ticking the clock between those long and variable lags impacting the economy from a from a growth perspective. So housing is still I think you know something I would I would focus on. It's tough for me to square having a slowdown in the labor market and not having some modest job losses on the construction side.
Yeah, and it's been really interesting to watch the home builder stocks in particular really crush it this year because people just don't want to sell out of that three percent mortgage. The supply of existing homes has been very tight. So definitely an area that we've been watching at Bloomberg. But I do want to ask about you know, we're talking about all these scary things, and I want to talk about what is the haven asset in this environment, because you would think it's treasuries, But then you take a look at treasury volatility. It's come in a little bit, but it's still pretty elevated relative to history. And then you take a look at some of the big tech stocks that are just absolutely crushing it this year, and it feels like the there's no volatility to speak of. And I haven't even mentioned the vics here, and Joe, I guess this is a long way of asking, why is it that text stocks have pretty much supplanted treasuries as the safety trade this year? And do you think that, you know, maybe that holds water, that maybe that's not the worst dynamic in the world.
Well, you know, we looked at that.
You know, ca'se a good question even over a year ago, and we're back to where we were a year ago, right where we had gross stocks. It's just you know, fantastic valuation levels at least relative to say the other half of the un verse, more value based companies. And I think there's two things going on. One is legitimate and one more of a narrative which you start to get concerned with with overvaluations, and the narrative is today it's AI, but before it was platform effects, network effects, winner take all dynamics. Again, there's some truth to it, but it's one of the reasons why you can get overvaluations. It's the extent of the of the multiple that's priced in, and the other one is just a discount rate. I mean, I still think, you know, you can justify some of the growth stock the tech stocks valuations only if you think that we live in the old world and that rates are going to are well above where they should be, and that we're going to ultimately go back to the very low interest rate environment. So I don't think, you know, tech stocks are certainly not immune to gravity. So if you ask your question, where is there a haven, I'd be more I would want to stay fully investigate. I mean, I think the natural response would be cash, but over a long period of time, I'm not going to get really a strong risk premium for that. So you know, for me, person, oh yeah, I'm looking at areas that haven't been his love for the past year, and that's like the value part of the market. You're still participating in the equity market, but you know, he doesn't have that major run up like you have on the tech side. And I don't need value stocks to grow at the same path as gross stocks to win, because that has not been the case historically, So I would put the value of risk premium. It's been a headwind the past six months, but I think over long periods of history it's been a tailwind. So that's where I'd be kind of rebalancing into because the market is pretty unbalanced within the equity market.
Well, you're listening to Joe Davis. He's the global chief Economists and head of Investment Strategy Group at Vanguard. Katie at Larry Steaks in West Philly. The name of the sandwich, the famous sandwich is the belly filler. That's you're just disgusted. I was gonna say, I think Joe filled our belly there with a lot of good information there is that Is that too weird? The belly filler? Joe, the belly filler. Thanks man, the belly filler. I always love that one. Anyway, Joe, we can't let you go just yet. We do have attrition on the podcast where we have to reveal the craziest things we've seen in markets, or in your case, I'll take in economic data. Whatever you got for the week, Katie, how about you go first.
I think this is pretty good. Take a look at the Dow Jones Industrial Average. On Wednesday, it closed it's thirteenth straight up day in a row, a wind streak of thirteen days. That is the longest wind streak for the Dow since January nineteen eighty seven.
Since eighty seven. Oh boy, well, that's anomenous here to bring out. I don't know about that, that connection to nineteen eighty seven. I guess we got ten months till everything hits the fan. That is pretty amazing. Thirteen days. Yeah, wow, that's a good one. That is crazy. Yeah, you did well.
All right?
How about you, Joe, you got anything crazy for Yeah?
I would say, well, and it probably matches Katie's chart. That would be you know, the number of web searches for the phrase soft landing. It used to be high, than it dropped to zero. Now it's back at record highs. And so I think those two charts would be very highly correlated. May maybe they stick for the rest of the year. I'm skeptical, but hey, here's the wishing.
All right, good stuff to both you. I'll give you mine now, all right. This is courtesy of cbsnews dot Com. Joe, I prefer the alternative asset classes for my crazy things, and this is about as alternative as it gets. It's a gold, ruby and diamond ring worn by rapped legend Tupac Shakur during his last public appearance. Wow, he were, yeah, how about that? And it's pretty cool look and it's got a crown on it, and with the crown is made of rubies and diamonds and gold. He apparently was a big reader of Machavelli and like the medieval kings and medieval lure of Europe. Anyway, Yeah, yeah, who knew about Tupac? What up production at Sotheby's. So it's time to play that game. The price is precise. I regret to inform both of you. You are contestants. Katie, what's your price or the winning bid for rap legend Tupac Shakur's gold, ruby and diamond ring.
Can I tell you something horrible? I actually just googled it because it sounded so it sounded very pretty, and I wanted.
To see no, no, googling.
I'm sorry, I'm sorry. I removed myself.
You forfeit, You forfeit. Well, Joe, I gotta tell you you're automatically the winner. But I still want to hear what your bid is.
Oh, I know I heard. I was just going to throw it a million. I have no idea.
Are you googling too? Joe? You hit it exactly on the nose. That's impressive.
How big was the diamonds and rubies?
Katie does it?
Say?
I don't know, but it's not it.
Yeah, I mean the diamonds are accents. I'm on people dot com right now. It's more about the crown. Is really the centerpiece of in the crowd.
Yeah, yeah, Well.
That makes more sense to me though than you know, you know, things like sneakers and stuff.
At least there's intrinsic.
Guys who knows, well, at least you're gonna do if you're gonna diversify and alternative assets. You got that, You got gold, diamonds and ruby, so you got multiple You got it.
All covered right South of Beys had only estimated two hundred to three hundred thousand, so way off base. They said, wow, this makes it the most valuable hip hop artifact ever sold, I don't know.
Artifact sounds well, you could tell, you could tell that the Federal Reserve that perhaps financial conditions are not that restrictive.
When you have things going on.
We're gonna add Tupac's jewelry to the financial conditions index. But and rest in peace to uh to mister Shaker. My old college buddy Jeff Peerlman is actually right in a biography of them, so little shout out to them. Yeah, Joe, pleasure to hear your thoughts. We really appreciate it. Oh and you never didn't give us your favorite cheeseteak. Join it's not Larry's.
Oh I go Pats Downtown. Yeah all right, yeah, but they're all good, you know, classic. And you know, Katie, you should try the chicken cheese steak. You know, It's just it's a nice diversifier too.
I'm gonna I'm gonna buy you one next time I'm in the Okay together, Katie.
I appreciate that, but I'll just have a burger.
Yeah, man man oh man. Anyway, Joe, David Niche so much for your time. We really appreciate it.
Thank you both for having me.
What Goes Up.
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