And I'll start with you. Ah happy times here again. I think it's too soon to tell. Looking at a one week rally after
seven weeks of pretty significant carnage is is more indicative of a counter trend move. The types of rallies you tend to see in
bear markets. I think it's premature to look at this either from a technical or breath perspective and suggests that it marks the
beginning of a new cyclical uptrend. This is just natural to see this kind of pressure. I think you know somewhat ironically it
was the weaker economic data to a large degree that changed the perspective or the narrative as it relates to Fed policy to
maybe they have some flexibility to pause after the next couple of rate hikes. But I think it's also premature to make that
assessment. So Ben I know that you're a longer term investor. You don't just look week to week. But did we learn anything
about that issue about whether it's a soft landing or a hard landing for what we saw this week.
I don't think we learned anything. DAX that determinative. We've seen some evidence that there are parts of the economy that are
softening. I mean it's most clear in the housing market and that's the place most heavily impacted by what goes on in rates.
So that shouldn't have been a surprise. I'd say from the consumer
perspective the consumer still seems to be pretty strong. We haven't seen strong evidence of the consumer pulling back. So I
don't think we've seen anything that should really cause people to have said oh OK great. We're gonna have a soft landing. We're
not going to have a recession. We're not going to have continued inflation problems. But as Liz Ann was saying man it's been a
really long run of the market losing week after week. And markets almost never move for long periods of time just in one
direction. There's always two way low volatility. LaSalle I wonder what it told us if anything about the
possibility of recession. I mean obviously the Fed in part wants things to slow down and they're not going to get their arms
around inflation without some slowdown someplace. And we certainly are seeing some weaker numbers and things like housing
as you mentioned. So clearly the Fed doesn't want to engineer or drive us into a
recession but they do concede it may be that the price in order to narrow the gap between demand and supply and monetary policy
can sometimes be a fairly blunt instrument. And really all they can control right now is the demand side. I think the path to a
soft landing would be the supply side easing up not just supply chain disruptions but also the supply of labor. And that doesn't
appear to be imminent. But I think that's probably the primary path to a soft landing. Otherwise I think the conditions in
place right now the kind of early deterioration that we're seeing have the needle pointing a little bit more toward
recession than soft landing the last 13 rate hike cycles. You've had 10 recessions and three soft landing. So simple history says
that it's more likely this time and with a 40 year high and inflation and that simultaneously trying to shrink a 9 trillion
dollar balance sheet. It's hard to suggest that that points the needle more towards soft landing but there is a path in that
direction. Ben I'm not going to ask you necessarily make a prediction on a
recession or even when it might happen but it's must be one thing you take into account as you decide your investment issues
that are in front of you. Well how do you take into account a possible recession right now.
You know there's two things we tend to focus on one of them and we focus on almost all the time. Are there conditions that would
make a recession if we get one a particularly dangerous one. We look for things going on in the financial markets evidence of
excessive leverage either on the corporate side the household side the financial system side or an economy that's just been
growing in a way that just looks really unhealthy. We don't see any evidence for that now. So even if we get a recession now I
don't think it's going to be that big a deal. And most recessions aren't that common. They go inflation goes up. I mean
excuse me unemployment goes up. It's bad for people who lose their jobs. But you come back in a couple of years it's like oh
yeah right. There was a recession. I'd forgotten about that. The thing that I think makes it matter more this time is right now
we obviously have more of an inflation problem in the US than we have had in 40 years. And one of the clear ways that that might
go away is if we got a recession. So ordinarily we don't care that much. Is it gonna be a soft
landing. Is it going to be a recession. Because either way it's going to disappear within a couple of years. This time around I
do think the question of whether inflation becomes entrenched and becomes very difficult to get rid of is incredibly impactful
one not just for the bond market but for the stock market as well.
And so the evidence of the US heading into recession earlier than expected
matters more than I'd say a recession normally does. And David I would agree with with Ben I think this is I don't
want to be so cavalier is to say garden variety recession but not that kind of crisis driven recession not even as we see
housing rolling over. This is not a systemic crisis. It's going to bring down the global financial system along with the then
how popping of the housing bubble. So it's a more natural into a business cycle which even if it's not imminent will happen at
some point. And I think that the Fed gets that and they don't want to do anything artificial to try to prevent the natural
force of the business cycle especially if inflation doesn't become contained in the near term. Ben as Lasn says if the
supply situation straightens itself out we're in pretty good shape. It will take care of inflation. But if that doesn't
happen where are we today. You're talking about a couple of supply shocks right now. Certainly energy. What's going on with
Russia but is that actually energy prices are up even before the sanctions against Russia. And of course food. We're really
concerned about getting grain and other food out of Ukraine. Yeah I think I mean the food situation is a really important one
for the world. And if you think about kind of the poorer countries in the world where food is a big part of the
consumption basket that price rise is a extraordinary social problem. The nice thing about the US and the rest of the
developed world is higher food prices. But the vast majority of people are a nuisance and a pain. But they're not a life or
death problem with energy and the commodity price increases. It has been interesting right. This is a supply shock. We've seen
prices go up that often leads to problems in the economy. But the other thing it often does is lead to excessive
investment in the commodities space itself and kind of creates the seeds of destruction in terms of falling prices. And there's
where it's really been interesting this time around. We have not seen the burst of investment either on the energy side of things
or you know because industrial metals prices have moved up hugely.
We haven't seen the huge increase in investment there. And that's good. If you're going to be buying those companies
because ordinarily the dangerous thing not buying those companies when prices are high is because they make bad
decisions and destroy their return on capital but not necessarily so good.
As we look forward for the global economy because we're not seeing the obvious places where more copper more oil more
natural gas more iron and more lithium is really going to come from and and released that cost pressure coming from the supply
side there. Listen Ben Rhodes is a really interesting point. Even beyond commodities what are we seeing in capital investment
as we'd like to see capital investment productivity go up. So short term I think there is a risk that it continues to weaken
here. If you look at capital spending intentions if you look at the CEO survey of confidence it suggests that near-term there's
going to be a constraint. However if you want to find a bright spot medium to longer term
in the U.S. economy I think that the capital investment side is going to be very strong. In fact I wouldn't be surprised to see
if the consumer is a driver of GDP starts to move down slightly from its current 70 percent weight. And what ticks up some of
that decline is business investment capital investment and in conjunction with government investment. And I think that's a
that's a healthy backdrop for an economy. And it may not be the near-term story but I think it's a much more powerful medium to
longer term story.