Laurie we're equities removed from the turmoil in the other asset classes. I think they were a little bit this week but
frankly I think they deserved a bit of a break after the year that we've had in the past couple of months that we've had. And
look I think investors on the equity side were also gearing up for earnings and we were a little bit of a holding pattern until
we got to the end of the week. And financials I mean there was definitely interesting moves in financials today. Once we
finally got through the kind of Sonali Basak age this morning. David Bianco helped me there because in your research note you
say the banks are of interest but the banks are all varied. Which kind of bank is where investment should be today.
The big banks the ones that have sticky deposit bases the ones that will benefit from the Fed hiking and the continued Fed
hiking. So it's not comfortable to own banks if we're perhaps heading
into a recession. But even if we do have a recession this is not going to be a
deflationary type of financial crisis. I think the credit costs will be well behaved and the banks will do fine. How much our
financials and idiosyncratic story versus a story of macro economic strength really. Because that really was the feeling
when J.P. Morgan came out and over time it became something different. Well it's a good question. And I do think when you
have it's hard. Financials are always a macro story. It's very difficult for financials not to be sensitive to the
macro and purely idiosyncratic. However what's happening in the macro situation right now is is inflation and the Fed hiking. So
who's the only beneficiary of interest rates going up its banks. Everybody else is worried about that not just in terms of
slowing economy and earnings and P pressure but banks benefit with least with higher earnings from higher interest rates. So
given that backdrop Larry and given the fact that you said that really stocks were somewhat immune to the volatility we were
seeing in other asset classes what are we pricing in. Is there a disconnect right now between the asset classes with
stocks painting a much more sanguine picture. Look stocks are pricing in a recession at this point in time. I mean we've we've
moved beyond kind of growth scare territory which is where we were for the first part of the year. And now we've been down
around 25 percent from the peak or so in your typical recession. Draw down on a median basis is twenty seven. Your average draw
down is thirty two. So we're kind of pricing and that's short shallow recession scenario. We're not type pricing in a typical
recession. We're not pricing in a severe one. We're not pricing in an extended one. But I think the good news if we do have that
short shallow recession in the back half of the year the equity market got a lot of that damage out of the way early. It's
asymmetric or large. Normal I should say actually. And it's so easy to get out of the market. David Bianco it's so tough to get
back in. I want you to go back. Lou Rukeyser 1987. How afraid were we. In 1987 after the crash and getting in in November and
December before that 88 boom in the market was brutal. David where do you find the courage to get into the market if you're
afraid to pick the bottoms. Not an easy thing. And the 87 crash of about 35 percent.
That's the only time the market has gone down more than it has now outside of a recession. It's not clear that. So there's an
equivalency now with 1987. Well no 87 was far worse. This going to make some headlines here. This is a tough market. Laura is
right. I think the equity market is largely priced to recession. A small one but not entirely.
However we have seen how things can get worse like 87 even when the economy was fairly OK. But you're right that there was a lot
of uncertainty around interest rates. The dollar and the global economy wasn't as important to the US and the S&P back then. But
the volatility we see in commodities currencies interest rates the fear of what might happen to credit costs I am not sure that
we should try to pick a bottom and scoop up stocks in one fell swoop. But I do think investors should nibble well and it gives
you confidence nibbling. Where do you like the banks for those who are the brave heart. I think some safer areas are health
care and utilities. Well Laurie I want to get to this idea of both baking in a
recession but also the Fed and the possibility that as we see the Fed officials go into a blackout period we're not gonna hear
from any of them next week and some people might cheer perhaps this guy. St. Louis Fed President Jim B Jim Bullard came out
today and yesterday and really knocked down the idea of 100 basis point rate hike but did raise the specter of 4 percent Fed
funds rates by the end of this year. Has that been priced into stocks. I think that largely the idea that the Fed is going to
be very very aggressive in here. That's in the market. But I think markets are still struggling a little bit with the extent
of the economic damage and that's what's yet to be priced in. And you know I think that markets at the end of the day on the
equity side they just want to know what the path is. They want to know what the exit strategy is. They want to know how far
this is going to go. They want a bit of a timeline. We're seeing some investors talking about you know bad economic data points
and saying well we're going to know we've ups the possibility that we're going to get cuts early next year. And that's telling
you. Equity investors are willing to look very far ahead but we need to stop giving the equity market nasty surprises. Laurie do
you understand the consumer. I think so. I am one I'm the American consumer supposedly a
strong. And yet we see that they're incredibly worried and we see that their balance sheets are getting weaker. We're seeing
their savings are getting depleted. How do you understand that. In terms of the path of this economic cycle. So I think there
are two things. I think that you know at the end of the day I think we may look back at 2022 and say that this was Phase 3 of
the pandemic with 2020 being the year that everything fell apart. Everything happened to the health crisis hit 20 21 being
the year of the initial recovery. And this year possibly ending up being the year of normalization. So I think we need to think
about it in that context from the psychology perspective. And I think there's something powering consumers that we don't quite
know how to model as forecasters. And I think you know we've been talking about how lousy the consumer confidence data has
been since I think about this time last year. And it didn't derail spending. Why is that. I think also you know if you think
about the consumer we're starting this crisis from a point of strength stronger than we're not into past recessions. Yes date
is going to get worse. But we need to keep that in mind as well.