Latest / Bloomberg Intelligence / The FOMC Meeting And Its Impact On Markets

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The FOMC Meeting And Its Impact On Markets · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Today is a big day, obviously,
• 0:23
  Speaker 1: FED a day today. It looks like the FED is
• 0:26
  Speaker 1: about to give us some more color on how it
• 0:29
  Speaker 1: intends to look at the interest rate structure out there.
• 0:32
  Speaker 1: I eat raising rates and that's gonna be some That's
• 0:35
  Speaker 1: a new environment for a lot of investors out there,
• 0:36
  Speaker 1: So let's see how financial advisors are talking to their
• 0:39
  Speaker 1: clients about that. Katerina Simonetti, Senior vice president, Private wealth
• 0:43
  Speaker 1: advisor for Morgan Stanley, joins this. Katerina, thanks so much
• 0:46
  Speaker 1: for taking the time here. I'm guessing some of your
• 0:49
  Speaker 1: investors really don't have your clients, I mean, don't have
• 0:53
  Speaker 1: a lot of experience investing in a rising interest rate environment.
• 0:58
  Speaker 1: What are you telling them these days? Matt, thank you
• 1:01
  Speaker 1: for having me on um. I think it's no surprise
• 1:05
  Speaker 1: to them that the rates are going up, said has
• 1:08
  Speaker 1: done a pretty good job setting expectations, and look, you know,
• 1:12
  Speaker 1: interest rates are going to be going up, and there
• 1:14
  Speaker 1: is zero reason why they shouldn't be. Um, we really
• 1:18
  Speaker 1: should not be as low as they are right now.
• 1:20
  Speaker 1: And yet there is this perceived fear that when the
• 1:24
  Speaker 1: race are going to be going up, the market somehow
• 1:26
  Speaker 1: is going to pull apart. Is it's not necessarily the case.
• 1:30
  Speaker 1: Rates should be going up, and we're preparing our clients,
• 1:33
  Speaker 1: and we're preparing the investors who were strategically positioning the
• 1:36
  Speaker 1: portfolio in light of the rating late. So what do
• 1:41
  Speaker 1: you do with someone who's you know, looking to retire
• 1:45
  Speaker 1: in the next decade or two and is worried about
• 1:49
  Speaker 1: putting new cash into the market of these high valuations
• 1:53
  Speaker 1: and obviously also into bonds when rates are rising. Well,
• 2:00
  Speaker 1: met it's not just the rates themselves, it's also the inflation.
• 2:04
  Speaker 1: I think that the key of how challenging this environment
• 2:06
  Speaker 1: is is that we've never had the inflation ory period
• 2:11
  Speaker 1: with the raids of this slow and specifically for the
• 2:14
  Speaker 1: in the retirees, the people that are about to start
• 2:17
  Speaker 1: their retirement and are going to be losing their active
• 2:20
  Speaker 1: income and switching into more of a passive situation. You know,
• 2:23
  Speaker 1: the key is to focus on quality, and you know,
• 2:26
  Speaker 1: when we look at strategic positioning of the portfolios and
• 2:29
  Speaker 1: specifically at certain sectors that you know are a little
• 2:34
  Speaker 1: bit stronger, a little bit more defense than the light
• 2:36
  Speaker 1: of all the challenges that this market present. Our focus
• 2:40
  Speaker 1: is on quality and on larger positions large cap for example,
• 2:45
  Speaker 1: but not just like large cap growth or large cap value,
• 2:48
  Speaker 1: but on defensive positions specifically. You know, we're looking very
• 2:52
  Speaker 1: closely at each investments and make sure that the companies
• 2:55
  Speaker 1: that we invest in have the earning stability, reasonable valuations,
• 3:00
  Speaker 1: we're not overpaying for them. In the most importantly, companies
• 3:03
  Speaker 1: with enough pricing power to perform well during this the
• 3:06
  Speaker 1: average challenge and environment. Because while we absolutely are quite
• 3:10
  Speaker 1: positive over the market, there is growth in the US
• 3:13
  Speaker 1: you know that is still strong, that is still going
• 3:15
  Speaker 1: to continue is going to be a bumpy right, and
• 3:18
  Speaker 1: that's would present so many challenges and were preparing investors
• 3:21
  Speaker 1: for it. So, Katarina, you know, there's I guess a
• 3:24
  Speaker 1: little bit of a push and pool out there from
• 3:25
  Speaker 1: some investors who really, since the Gray financial crisis, have
• 3:29
  Speaker 1: really been successfully invested in the big growth names that
• 3:32
  Speaker 1: have really driven this market, whether it's an Apple or
• 3:34
  Speaker 1: an Amazon, or or Facebook or something like that. To
• 3:38
  Speaker 1: what's really been a good trade over last eighteen or
• 3:41
  Speaker 1: twenty months, which is more of a a cyclical trade
• 3:44
  Speaker 1: if you will, um, maybe even you know, betting a
• 3:46
  Speaker 1: little bit on the reopening of the global economy. Where
• 3:49
  Speaker 1: are you suggesting, uh your clients think about, Well, I
• 3:56
  Speaker 1: think it's it's all about the balance, right, and it's
• 3:58
  Speaker 1: all about being the resoughtful about the portfolio design. And
• 4:03
  Speaker 1: when we look at the twenty two and to analyze
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  Speaker 1: this amazing growth that we have seen uh in the
• 4:11
  Speaker 1: market recently, the especially the year end is generally the
• 4:15
  Speaker 1: good time to kind of just just analyze what happened.
• 4:18
  Speaker 1: And this is a perfect time for strategic profit taking
• 4:21
  Speaker 1: because there are some areas, for example, that we're used
• 4:24
  Speaker 1: to saying that are extremely aggressive, that performed pretty well,
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  Speaker 1: but they are in fact, you know, showing some some
• 4:31
  Speaker 1: stability and showing some price resilience, and they definitely have
• 4:36
  Speaker 1: role in the portfolio. But this is a good time
• 4:39
  Speaker 1: to rebalance, to go back to the drawing board to
• 4:42
  Speaker 1: make sure that all the sectors are properly represented in
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  Speaker 1: some sectors that have that positioning into the interlight of
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  Speaker 1: what's happening with the economy. Sectors like financials, like healthcare,
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  Speaker 1: um inflationary hadgets of such commodities and reads for example, Well,
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  Speaker 1: we want to ensure that we overweight into the sectors
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  Speaker 1: that are either positioned well in light of the rising
• 5:06
  Speaker 1: grades or present to be good inflationary head just or
• 5:10
  Speaker 1: like healthcare. You know, the the um, the this this
• 5:14
  Speaker 1: healthcare crisis that we're experiencing. You know, this this situation
• 5:18
  Speaker 1: with the pandemic that you know is still going on.
• 5:21
  Speaker 1: And you know, as much as progress are at healthcare
• 5:23
  Speaker 1: companies and you know, are just health care communities making
• 5:27
  Speaker 1: this is still something that is going to be lingering
• 5:29
  Speaker 1: with us for many years to come. So when we
• 5:31
  Speaker 1: look at this positioning of the portfolios, whether it's fixed income,
• 5:36
  Speaker 1: whether it's equity, we need to take inflation into consideration,
• 5:40
  Speaker 1: the resilience quality and make sure that the portfolio is
• 5:43
  Speaker 1: strong enough to get us through this period of volatility
• 5:47
  Speaker 1: that is not over yet. We still have a lot
• 5:49
  Speaker 1: of challenges out there. Katerina, thank you so much for
• 5:52
  Speaker 1: joining us. Love getting your perspective here. As you talk
• 5:54
  Speaker 1: to and counsel your clients. Katerina Seminetti, Jesus, Senior Vice president,
• 5:59
  Speaker 1: Private Wealth Advisor for Morgan Stanley here, like the rest
• 6:02
  Speaker 1: of us, waiting to see what we will hear from
• 6:04
  Speaker 1: our Freederal Reserve the sion in a two pm Wall
• 6:06
  Speaker 1: Street time, and and how that will impact markets going forward,
• 6:10
  Speaker 1: and how investors should be allocating their capital. Katina deals
• 6:14
  Speaker 1: with her Morgan Stanley clients, and I'm sure they have
• 6:17
  Speaker 1: lots of questions, and so we appreciate getting some time
• 6:19
  Speaker 1: from Katerina. We have read on the screen here not
• 6:22
  Speaker 1: much to speak about SMP off about about three tenths
• 6:25
  Speaker 1: of one percent. All right, we have a pretty great
• 6:31
  Speaker 1: guest for you right now, Sam City, as president and
• 6:34
  Speaker 1: CEO of Customers Bank, and they've had a pretty good pandemic. Sam,
• 6:39
  Speaker 1: looking at your your stock price, you've gone from twenty
• 6:41
  Speaker 1: bucks basically a share at the end of beginning to
• 6:45
  Speaker 1: sixty bucks a share basically now. And I see that
• 6:50
  Speaker 1: some analysts are even raising your price target, uh tow
• 6:53
  Speaker 1: to seventy five dollars web Bush, for example. We talked
• 6:56
  Speaker 1: to Dan Ives from web Bush a lot um and
• 7:00
  Speaker 1: b Riley has your price target raised to a hundred dollars,
• 7:03
  Speaker 1: so expecting a lot from customers. Walk us through what
• 7:07
  Speaker 1: makes Customers different than other banks? Sure? Absolutely, Well, Matt
• 7:11
  Speaker 1: and Paul, thanks so much for having me. It's a
• 7:13
  Speaker 1: pleasure to be here. I really appreciate that that introduction.
• 7:17
  Speaker 1: You know, Customers Bank entered the pandemic as a tech forward,
• 7:21
  Speaker 1: organic grower, and I think that's really one of the
• 7:23
  Speaker 1: big things that differentiates us. So in the banking industry,
• 7:26
  Speaker 1: there's not so much to differentiate yourselves on and a
• 7:28
  Speaker 1: reasonably commoditized business, so service and technology are big portions
• 7:32
  Speaker 1: of that. So we started off in the in in
• 7:35
  Speaker 1: March and April of last year by being a big
• 7:37
  Speaker 1: player in the Paycheck Protection Program and that really helped
• 7:40
  Speaker 1: allow us to deliver three thousand plus loans ten billion
• 7:45
  Speaker 1: dollars of PPP funds out. We also earned origination fee,
• 7:49
  Speaker 1: which really allowed us to build some capital and support
• 7:52
  Speaker 1: the future growth of the organization. So being that sort
• 7:55
  Speaker 1: of tech forward organic grower um with a very strong
• 7:58
  Speaker 1: digital focus as it is, is really what what Customers
• 8:02
  Speaker 1: Bank is today. Sam, what are your clients doing these days?
• 8:06
  Speaker 1: They've just gone through you know, almost two years of
• 8:08
  Speaker 1: unprecedented disruption to their businesses. Just give us an overall
• 8:12
  Speaker 1: sense of how they're faring. Are they are they trying
• 8:15
  Speaker 1: to come back, are they trying to invest in their business,
• 8:17
  Speaker 1: are they trying to expand? Or are they still cautious?
• 8:21
  Speaker 1: Absolutely so, I think that there's obviously been a little
• 8:25
  Speaker 1: bit of a change in stands. Will wait and see
• 8:26
  Speaker 1: what happens with the Fed UH later today, UM, But
• 8:30
  Speaker 1: earlier this year there was a strong sense of confidence
• 8:34
  Speaker 1: emerging inflation. I think that that concern has turned into
• 8:37
  Speaker 1: a little bit more of a little bit of a
• 8:39
  Speaker 1: reality UM sitting where we are today, but overall, the
• 8:44
  Speaker 1: macroeconomics backdrop is strong. There are challenges with supply chain,
• 8:49
  Speaker 1: there are challenges with concerns about labor UH and inflation,
• 8:53
  Speaker 1: but generally UH, the the sentiment is still positive and
• 8:58
  Speaker 1: I think that's the that's the importance. We've survived as
• 9:01
  Speaker 1: an economy, the pandemic, and you know, while they're they're
• 9:05
  Speaker 1: arguably could have been too much stimulus as leading to
• 9:08
  Speaker 1: potential non transitory inflation. I think at the end of
• 9:11
  Speaker 1: the day, it's it's difficult to um to Monday morning
• 9:15
  Speaker 1: quarterback with certainty I just want to paint a picture
• 9:17
  Speaker 1: for for listeners of where you're coming from, because you
• 9:21
  Speaker 1: have a pretty impressive resume. Undergrad at Wharton NBA. From Harvard,
• 9:25
  Speaker 1: you worked at Providence Equity Partners as well as Goldman Sachs.
• 9:29
  Speaker 1: You've done real estate focused private equity, You've done blockchain
• 9:33
  Speaker 1: based real payment services. UM, what do you think with
• 9:38
  Speaker 1: all of this experience in finance and on Wall Street,
• 9:41
  Speaker 1: what do you think of something like defy? M so uh.
• 9:48
  Speaker 1: I like to firstly say, my resume makes me seem
• 9:51
  Speaker 1: a lot stronger uh than I am, but note the
• 9:53
  Speaker 1: less that's that's how my friend. That's very humble of you,
• 9:58
  Speaker 1: you know. But I think Defied is really a reaction
• 10:01
  Speaker 1: to to where we are from number one, the emergence
• 10:04
  Speaker 1: of blockchain, because that's really the ledger and the and
• 10:06
  Speaker 1: the platform upon which and the infrastructure upon which these
• 10:09
  Speaker 1: decentralized finance concept is is going to be established. I think,
• 10:13
  Speaker 1: you know, generally, as you think about if defy it
• 10:16
  Speaker 1: is successful in the way that the folks that are
• 10:18
  Speaker 1: that are um emerging as as important players and platforms
• 10:23
  Speaker 1: from a decentralist finance perspective, Arguably, centralized finance kee structures
• 10:30
  Speaker 1: methodologies would would change UM and you may see reversion
• 10:35
  Speaker 1: back to a different way of doing business, to traditional
• 10:38
  Speaker 1: forms which are working extremely well. By the way, say
• 10:41
  Speaker 1: that's that's why I asked, you know, yesterday I talked
• 10:43
  Speaker 1: to Mike Novigrats. He's got a new office UM down
• 10:46
  Speaker 1: by Goldman Sachs and he was most pumped about that.
• 10:49
  Speaker 1: And it just makes me wonder, UM, what the future
• 10:52
  Speaker 1: of Wall Street looks like? How do you see it?
• 10:56
  Speaker 1: You know? UM, At Customers Bank, we we like to
• 11:00
  Speaker 1: think that this hybrid approach of human based experienced bankers
• 11:04
  Speaker 1: plus technology and a commercial banking sense is the right
• 11:07
  Speaker 1: is the right hybrid way to approach the market today.
• 11:11
  Speaker 1: I think similarly, from an investment banking perspective, you're gonna
• 11:15
  Speaker 1: see very similar trends. There's always going to need be
• 11:18
  Speaker 1: a need for for customized advice, for specific advice, and
• 11:22
  Speaker 1: for bespoked UM type transactions and service in handholding. It.
• 11:26
  Speaker 1: It's going to be difficult to completely UM, you know,
• 11:30
  Speaker 1: change the way that that many businesses need to operate,
• 11:35
  Speaker 1: given the fact that that that there's a lot of
• 11:38
  Speaker 1: businesses that that have disparate needs and not everything is somotronized. Alright,
• 11:44
  Speaker 1: never enough time, Sam, but always great talking to you.
• 11:46
  Speaker 1: Thanks so much for joining us. Sam. To do there's
• 11:49
  Speaker 1: president and CEO of Customers Bank. Check out the stock.
• 11:52
  Speaker 1: The ticker is CEU b I trades on the New
• 11:55
  Speaker 1: York Stock Exchange. All right, it is FED day today. Um.
• 12:04
  Speaker 1: The question is how our investors positioning their portfolios for
• 12:08
  Speaker 1: what is likely to be a rising interest rate environment.
• 12:10
  Speaker 1: Let's check out the Brian small Look, Chief investment Officer
• 12:13
  Speaker 1: of hood River Capital Management. Brian, thanks so much for
• 12:16
  Speaker 1: joining us once again. You guys at hood River, you
• 12:18
  Speaker 1: focus on small cap growth stocks. Give us a sense
• 12:22
  Speaker 1: of how you think small caps are going to perform
• 12:26
  Speaker 1: and what's going to be a different interest rate environment.
• 12:30
  Speaker 1: So we're constructive on small caps from here, especially after
• 12:34
  Speaker 1: after this ten percent pullback or so we've seen in
• 12:37
  Speaker 1: small caps since oh Macron broke and talks of a
• 12:42
  Speaker 1: FED taper of really heated up here. Valuations have pulled
• 12:46
  Speaker 1: back pretty significantly to where now small cap trades at
• 12:50
  Speaker 1: an absolute pe discount on earnings versus the SMP. Usually
• 12:56
  Speaker 1: it's at a premium. The market does have to thread
• 12:59
  Speaker 1: the needle here over the next couple of months with
• 13:02
  Speaker 1: rising rates and O Macron, which could kind of put
• 13:04
  Speaker 1: a pause on recovery while rates are going up. But
• 13:08
  Speaker 1: after that, we think that earning assessments need to move
• 13:12
  Speaker 1: up and the economy will recover and you want to
• 13:16
  Speaker 1: own stocks and small cat stocks will move up with
• 13:19
  Speaker 1: those earnings revision. Specifically a good river. We're looking for
• 13:22
  Speaker 1: a dislocation in of the market fundamentals for that particular company,
• 13:28
  Speaker 1: which is what the streets expecting, and we're optimists is
• 13:30
  Speaker 1: gonna be able to find plenty of those opportunities in
• 13:32
  Speaker 1: twent twenty two. So do you expect a big dip
• 13:36
  Speaker 1: a correction? Is there is there an opportunity for investors
• 13:40
  Speaker 1: to buy? So yeah, I mean, I think we're kind
• 13:43
  Speaker 1: of looking at it here. There's going to be continued
• 13:45
  Speaker 1: choppinists over the next month or so. You'll probably see
• 13:49
  Speaker 1: a spike in O Macron cases crowd crowding out Delta,
• 13:53
  Speaker 1: but thus far the disease looks to be more mild
• 13:57
  Speaker 1: than Delta. We're probably going to have a vaccine ready
• 14:01
  Speaker 1: in the next days and people are gonna start to
• 14:04
  Speaker 1: look through that. The FED doesn't have much room to
• 14:07
  Speaker 1: raise race it looks like without invarying the curve, but
• 14:12
  Speaker 1: the market is basically saying that it's transitory, and that's
• 14:15
  Speaker 1: how we're thinking about it. What are some of the
• 14:18
  Speaker 1: sectors that you think investors should be looking at in
• 14:21
  Speaker 1: their portfolios in two again, given what looks like to
• 14:24
  Speaker 1: be a at least for some period of time at
• 14:27
  Speaker 1: a rising interest rate environment, So we're overweight, and we've
• 14:32
  Speaker 1: been overweight for the last nine months or so. Cyclical names,
• 14:36
  Speaker 1: so that would include financials, industrials, consumer stocks, and then
• 14:41
  Speaker 1: also some semi stocks. Valuation is more important in a
• 14:46
  Speaker 1: rising rate environments, particularly in small cup growth um so
• 14:50
  Speaker 1: you want to own names that are cheaper on traditional
• 14:53
  Speaker 1: valuation metrics like price to earnings. A lot of growth
• 14:56
  Speaker 1: investors tend to look at enterprise value two revenues and
• 15:00
  Speaker 1: and when you have to discount the terminal value out more,
• 15:03
  Speaker 1: that can make those stocks riskiers. That's why you've seen
• 15:06
  Speaker 1: software names, for example, pull back a lot and biotech
• 15:09
  Speaker 1: pull back a lot in this environment because in rising
• 15:12
  Speaker 1: rates environments is tougher on those valuations. What do you
• 15:15
  Speaker 1: expect to hear from Jerome Powell today? Do you think
• 15:18
  Speaker 1: we'll get any surprises or does he telegraph everything pretty well?
• 15:23
  Speaker 1: He tends to telegraph everything pretty well, and River were
• 15:26
  Speaker 1: not exactly said watching experts were focusing on bombs up,
• 15:30
  Speaker 1: stock picking and s pundamentals there. But but my sense
• 15:35
  Speaker 1: is that he's had to get track wickers there and
• 15:37
  Speaker 1: they'll just announce an accelerated taper, which I think is
• 15:40
  Speaker 1: what the markets expecting. Is there a risk in your
• 15:43
  Speaker 1: mind as you listen to and read FED Chairman Pale's
• 15:47
  Speaker 1: comments over the last several months, that perhaps he feels
• 15:51
  Speaker 1: he's a little bit behind the curve and maybe needs
• 15:53
  Speaker 1: to catch up and maybe maybe more aggressive than the
• 15:56
  Speaker 1: market's discounting. I think that's for sure a risk. He
• 16:01
  Speaker 1: basically acknowledged the fact that he had to take the
• 16:04
  Speaker 1: word transitory out of their vocabulary. And when you talk
• 16:07
  Speaker 1: to companies, that's what we're doing every quarter. We're talking
• 16:10
  Speaker 1: to foreign companies every quarter. They're seeing real inflation that
• 16:14
  Speaker 1: they have to handle day to day, and there's no
• 16:16
  Speaker 1: guarantee that that is transitory. So it's not responsible for
• 16:21
  Speaker 1: the FED to handle it that way, and they're gonna
• 16:24
  Speaker 1: have to make some adjustments and see how see how
• 16:26
  Speaker 1: it pleased, all right? Brian great having on the program.
• 16:29
  Speaker 1: Thanks very much for joining us. Another Harvard NBA by
• 16:32
  Speaker 1: the way, but I would say more importantly a University
• 16:35
  Speaker 1: of Virginia undergrad. He's Oahu. But but he's also a
• 16:38
  Speaker 1: fellow alum of Solomon Brothers like me. Wow. Yeah, the
• 16:43
  Speaker 1: solid team, all right? Excellent. Brian Smallock is the chief
• 16:46
  Speaker 1: investment officer at hood River Capital Management, talking to us
• 16:51
  Speaker 1: about the future of growth and markets. Enough of this
• 16:59
  Speaker 1: tri state areas stuff out a little bit. Dan Gander
• 17:04
  Speaker 1: joins us CEO of r n C Genter Capital Management
• 17:08
  Speaker 1: to talk about his expectations for UM, the FED, the markets,
• 17:14
  Speaker 1: and the economy. Dan, we had a very strong pp
• 17:18
  Speaker 1: I number UM nine point six, nine point seven percent.
• 17:22
  Speaker 1: I think after a huge CPI number six last week.
• 17:26
  Speaker 1: Is this gonna push Jerome Powell to be faster with
• 17:30
  Speaker 1: his taper. Well, I think he's in a position that
• 17:34
  Speaker 1: he just can't ignore it. I mean, they took an
• 17:37
  Speaker 1: early position that inflation was going to be transitory. I
• 17:40
  Speaker 1: think that they're frankly being honest that that's what they thought.
• 17:43
  Speaker 1: They didn't really know how things were gonna flesh out
• 17:46
  Speaker 1: now with the CPI number, as you mentioned at six,
• 17:48
  Speaker 1: eight with pp I at nine six. You know, we
• 17:50
  Speaker 1: don't have the new PC number, which is one of
• 17:53
  Speaker 1: the main things that they look at, the personal consumption
• 17:55
  Speaker 1: at spendature index, but that was five percent in October.
• 17:58
  Speaker 1: So we're no matter how you look at it, we're
• 18:00
  Speaker 1: running double to triple really where they'd like to be
• 18:03
  Speaker 1: at two to three percent. So I know, I don't
• 18:05
  Speaker 1: know how you ignore it. I think it's it's a
• 18:07
  Speaker 1: matter of what do you do about it? And the
• 18:09
  Speaker 1: you know, they're the tools are there. You know, you
• 18:12
  Speaker 1: you finish out the taper even faster, obviously, start to
• 18:15
  Speaker 1: raise FED funds, and we don't you know, certainly don't
• 18:18
  Speaker 1: think along with everyone else that we're going to see
• 18:19
  Speaker 1: an increase in rates at this meeting. But you know,
• 18:21
  Speaker 1: you you look, you're putting some odds on the table. Now.
• 18:24
  Speaker 1: You could see something as early as the first quarter
• 18:26
  Speaker 1: of two or certainly by the second quarter, and up
• 18:30
  Speaker 1: until recently two was off the table. So things are changing, Dan,
• 18:34
  Speaker 1: things are changing it. As you mentioned here, how do
• 18:37
  Speaker 1: your clients, how are you positioning your portfolio for what's
• 18:41
  Speaker 1: likely to be, you know, a rising interest rate environment
• 18:43
  Speaker 1: for the foreseeable future. Well, I think on the equity market,
• 18:46
  Speaker 1: there's really not much of a change when you when
• 18:48
  Speaker 1: you look at it historically of what you're likely to
• 18:51
  Speaker 1: see out of this FED. I mean, when you look
• 18:53
  Speaker 1: at it historically, typically when there's a major reversal policy,
• 18:56
  Speaker 1: you normally see fifty basis points initially twenty and the
• 19:00
  Speaker 1: same thing when they start lowering rates, it's very very similar.
• 19:03
  Speaker 1: I don't think you're gonna see anything more aggressive here.
• 19:05
  Speaker 1: As a matter of fact, you might even are much
• 19:07
  Speaker 1: more likely. You're just gonna see a well telegraphed twenty
• 19:11
  Speaker 1: five basis points increase, and they'll do that very steadily.
• 19:14
  Speaker 1: Now with that, if you look at it again historically
• 19:17
  Speaker 1: from the standpoint of FED policy, is that pees generally
• 19:21
  Speaker 1: don't change much. You know, what they were at six
• 19:24
  Speaker 1: months before the FED started the rays and where they
• 19:26
  Speaker 1: are six months after basically that twelve month window, pea
• 19:30
  Speaker 1: stay about the same. So I think the equity market,
• 19:32
  Speaker 1: you know, we're you know, it will certainly start to
• 19:35
  Speaker 1: buy us more the value stocks. It's going to buy
• 19:37
  Speaker 1: us more the sixical stocks. You know, we're we've already
• 19:39
  Speaker 1: begun tilting more in that direction. You know, the bond
• 19:42
  Speaker 1: markets a different matter altogether. I mean, you're you're gonna
• 19:44
  Speaker 1: have to be very active and what you're doing in
• 19:47
  Speaker 1: the bond market, you know, as the as the youal
• 19:49
  Speaker 1: curves already shifted. What do you expect in terms of hikes?
• 19:54
  Speaker 1: I mean you said you don't expect this meeting. I
• 19:56
  Speaker 1: don't think anyone does. But um, is the dot plot
• 19:59
  Speaker 1: gonna show to this year? Is their possibility for a
• 20:02
  Speaker 1: hawk is surprise? Look, it's always there. And I think
• 20:05
  Speaker 1: that the good thing about Jerome Powell's he's you know,
• 20:09
  Speaker 1: it's not like dealing with green you know, green speak.
• 20:12
  Speaker 1: I mean he telegraphs it right out in front. Everything's
• 20:15
  Speaker 1: I think he's going to give the market a lot
• 20:17
  Speaker 1: of indication, uh to some degree. Frankly, you know, the
• 20:20
  Speaker 1: market may even breathe a sigh of relief when we
• 20:22
  Speaker 1: have that, you know, because the market will take good
• 20:25
  Speaker 1: news bad news. It just doesn't like no news. And
• 20:28
  Speaker 1: so this this unknown limbo right now is making people nervous.
• 20:32
  Speaker 1: So you know, I doubt that we're gonna be see
• 20:35
  Speaker 1: something that's going to surprise the market. But him well
• 20:38
  Speaker 1: telegraphing in advance that they're going to start with the
• 20:41
  Speaker 1: basis point to increase and FED funds, you know, I
• 20:43
  Speaker 1: think is what we're going to see. So Dan, all right,
• 20:46
  Speaker 1: that's the Fed. And again we're gonna get a lot
• 20:48
  Speaker 1: more information later on today. The other aspect there are
• 20:51
  Speaker 1: One of the other aspects that the market tends to
• 20:53
  Speaker 1: focus on is kind of what's coming out of Washington,
• 20:55
  Speaker 1: d c Um. How important is that to you to
• 20:59
  Speaker 1: this market or do you think the markets again is
• 21:01
  Speaker 1: pricing in some kind of build back better But there's
• 21:05
  Speaker 1: other things to focus on. Well, I think the market
• 21:08
  Speaker 1: is definitely pricing it in and the build back better.
• 21:10
  Speaker 1: We're look, we're gonna have something now, whether it's a
• 21:12
  Speaker 1: two trillion dollar number or a two trillion that really
• 21:16
  Speaker 1: is four point two trillion when you take the time
• 21:19
  Speaker 1: limits off. I mean, we're gonna have something that's going
• 21:21
  Speaker 1: to come out of that. They're gonna make some kind
• 21:23
  Speaker 1: of a deal. But but now, I don't think you're
• 21:26
  Speaker 1: gonna see anything very radical, and the reason being is
• 21:29
  Speaker 1: that the Democrats right now are in trouble. Look the
• 21:32
  Speaker 1: way the numbers stack up now is redistricting. They're gonna
• 21:35
  Speaker 1: lose the House two and so you have a lot
• 21:38
  Speaker 1: of people that are midstream that you know, they're they're
• 21:41
  Speaker 1: just not going to go hardcore against radical democratic policy
• 21:45
  Speaker 1: because they don't want to. They don't want to get
• 21:46
  Speaker 1: washed out. So I'm not expecting anything dramatic. You know,
• 21:49
  Speaker 1: we were probably the biggest thing the market will be
• 21:51
  Speaker 1: concerned about, and that's waning is significant tax increases. But
• 21:55
  Speaker 1: I mean that that's frankly, it's really dropping off. You're
• 21:58
  Speaker 1: just you know that that's going down to a whisper
• 22:00
  Speaker 1: right now. So we don't think right now, barring something unforeseen,
• 22:04
  Speaker 1: which can always happen, there's going to be a dramatic
• 22:06
  Speaker 1: change of change in policy that will have a significant impact.
• 22:12
  Speaker 1: All right, thanks very much for joining us. Dan, always
• 22:15
  Speaker 1: great talking to you. Dan Genter there, who is the
• 22:19
  Speaker 1: CEO as well as the c i O and the
• 22:21
  Speaker 1: chairman of R and C all management. I love. I
• 22:26
  Speaker 1: mean a lot of people have a lot of titles,
• 22:28
  Speaker 1: um and I always wonder what else, what else is
• 22:31
  Speaker 1: he hiding? Exactly based in the based in Los Angeles,
• 22:34
  Speaker 1: we get get getting away from the metro area. So
• 22:37
  Speaker 1: I think it's great, by the way to have a
• 22:39
  Speaker 1: diversity of views, because if you just stick in the
• 22:41
  Speaker 1: Wall Street bubble or just in the Tri State area.
• 22:44
  Speaker 1: If we include you know, Wall Street, Greenwich and Summit,
• 22:49
  Speaker 1: you don't get the viewpoint from the left. From the
• 22:53
  Speaker 1: left coast, I'm not necessarily left, obviously, and it's key
• 22:56
  Speaker 1: I think to get Thanks for listening to the Bloomberg
• 22:59
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• 23:03
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• 23:07
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• 23:11
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• 23:14
  Speaker 1: the podcast. You can always catch us worldwide at Bloomberg Radio.