[CC may contain inaccuracies] Inflation numbers a real blow out in terms of investing strategy where do you want to be and where do you want to definitely not
be. If inflation really starts to rip. Yeah I mean. I mean certainly
the transitory versus structural question is still in play. You know we're we're of the view that like present daily it is going
to be transitory. So for the most part at this point we've priced in as much as we can with the Fed. So I think so. I think
rates at this point are going to be relatively stable from here the long it has remained fairly well
entrenched in kind of its transitory view. And as long as that's in there risk is ultimately fairly well supported. Now if rates
if this proves incorrect and the Fed has to hike earlier potentially earlier than June. Given given that they view
inflation as being a much bigger problem then certainly various parts of the cyclical discussion various parts of the technology
discussion within the equity markets become more of a challenge and longer duration becomes a bigger risk because it's really
been the anchoring of those long term yield that has kept a lot of the risk complex fairly stable.
And there's a very diverse range of opinions here. And I must say you're at the conservative end of the spectrum. If we take a
look at this chart on the Bloomberg terminal the markets are now pricing in a five of race hikes between now and December 2023.
So where do you put the risk of a policy error here. Yeah. So. So you know certainly. Certainly. You know five rate
hikes within the next two years is much more than it was know three to six months ago. And when we pulled a lot of that
forward. Now if we were to pull the chart a little further the number of hikes after that five however are not that significant
which means that ultimately yields yields remain fairly well anchored. And in an environment where inflation is expected to
tick slowly back down to normal real yields remain fairly low which again remains somewhat supportive of risk assets.
What happens to the inflationary outlook if we get the bigger two trillion dollar spending package you've caused. This also
would come at a time when we have probably more volatility given that the stopgap funding measure will run out around December.
So that the bigger stimulus package ironically won't have that big of an impact on near-term inflation. It's for the most part
funded with tax increases. So if anything close the deficit a little earlier because those taxes will come in earlier then the
money will actually be spent. But but more importantly it's over a 10 year period whereas we're dealing with like 5 percent daily
said Covid related issues. And we'll know within the next two to three quarters how much of these shortages and supply chain
issues remain. And hopefully by then we'll be looking at Covid in the rearview mirror.
There's been a lot of speculation about the reappointment of the Fed chair Powell with the Fed Governor Little Brown there also
talking to President and Biden. What are your expectations on this front. And if we do see a change at the helm of the Fed.
Will that have a meaningful impact on Fed policy. You know what. I still think Palin's going to be reappointed. I
think it makes sense. I think there's enough things going on with regard to Fed policy and inflation that that continuity
makes sense. It's really maybe the more progressive part of the of the congressional wing that is pushing Lael Brainard a little
bit harder. There are ways around it possibly having her get more involved in bank supervision. Having said that I think that
if we're looking at the inflation figures that don't really back off the way you know every Fed member is saying that they expect
it's back off for the most part. I don't think there's much policy choice for them to make on this. They still are going to
be guided by the mandates on their dual mandates. And if those prices are unstable while the jobs market is improving and
continues to show gains the Fed's hands are really somewhat tied in terms of what it should do next.
They should drill into those U.S. inflation numbers we see some pretty good big gains for gasoline prices fuel oil as well. When
do you see those pressures starting to raise. Yeah I mean certainly we're seeing the energy prices stabilize a
little bit more. You know the way I kind of look at the bigger contributors to this month scheme it's been shelter it's been
energy and it's been food which which has been accelerating slowly. Each one of those is a tax on the consumer.
Most Americans need to put gas in their car. They obviously need to put food on their table and they have to pay their rent. If
those numbers keep increasing it will have an impact on other parts of the consumer discussion. And again once hopefully we
get past these Covid shortage issues we'll be able to see how that consumption demand starts to affect prices that look look a
little bit more normal. But I but I would expect some of the energy prices to start to stabilize as we go into the beginning
of next year after maybe the heavier travel that occurs during the holidays here.