Given what we saw from the Fed, but then from the jobs numbers, what does what do
we make of the economy right now and where it's headed?
Well, clearly, inflation is still high and the Fed is still has concerns around
that. And this the latest job numbers still
indicate that there is more slowing down to do.
However, what's happening with the regional banking crises?
I think that will help in this effort, but there's still more work to be done.
Inflation is not quite there. And also, the slowdown is not at a pace
that we would wanted to be in the current environment.
So what would you Savita, we heard about a possible pause maybe on Wednesday.
Is that still viable after the jobs numbers we saw on Friday?
I mean, look, I think we're in a data dependent environment and the data so
far is suggesting we're probably not going to see that rate cut that
everybody is hoping for by the end of the year.
You know, in the next couple of quarters, I mean, our view is that
inflation might remain stickier and higher for the rest of the year.
I mean, if you look at jobs, a big part of the the tight labor market is is just
the great resignation during Covid. And those folks haven't come back yet.
So, you know, I think it remains tight in certain parts of the economy.
So. Let's start with the equity markets.
You are one of our 24 LS. I'm delighted to say thank you for being
here. And you're sort of in the middle of
pack. Four hundred dollars on the U.P.S.
and four thousand two hundred ninety one and you've some 4000 on the S&P.
Are you inclined to change that at all, given what we saw this week?
I might. I'm right in the middle of the
consensus. Elf, I guess.
Well, I think we're a little lower than that consensus on earnings.
And I think, if anything, I would be inclined to move that higher after what
we've heard over the last few weeks. I mean, what really impresses me about
earnings season is that guidance has been very positive.
Despite every reason that companies have to guide down on this year earnings or
next year's earnings, they're actually guiding above what consensus is
expecting. So I was surprised by that optimism.
We're also seeing beats across the board, not just in technology stocks,
but also in financials and healthcare. So it's been a very healthy earnings
season relative to what what folks were expecting coming into it.
I think on the market itself, what I worry about is that it's still very tech
top heavy, and that's the part of the market that I'm actually more concerned
about from a rate risk perspective. What about tech?
Tech had been a leader for a long time that it sort of gave up leadership.
Who's going to be down? I mean, you we believe in that next
cycle with no themes like energy, transition and more automation and
energy infrastructure build. And on shoring, we think industrials
will be more at the head of market leadership as we are hearing not only
the U.S. but also in Europe of continuous CapEx
plans because of the change that's needed to get us to the next era.
And again, with interest rates where they are, you know who we if we believe
the zero rate cut interest rates are not bad.
The biggest beneficiary of those that actually resided in the tech sector and
we don't think that will come back and therefore, we believe in sectors like
industrials and energy will be the next rally.
So you would talk about capital investment as well.
Yeah, really what that might mean for productivity down the road.
Very bullish on CapEx and I think that's bullish longer term, although
unfortunately you don't typically see productivity gains immediately.
It takes a couple of years. I think there's a lot of really positive
trends taking place in the market. You've got efficiency.
You know, we did a word count on the word efficiency during transcripts and
it was like through the roof. Everybody is talking about getting more
efficient and they have reasons to get more efficient because we're no longer
in this zero interest rate environment where all you need to grow earnings is,
you know, buying back shares. I think we're we're past that point
where the easy money from earnings margins and globalization that's behind
us. But we're now in an environment where we
could see healthier earnings growth from actually getting more efficient.
So I think that was what I came away with this, you know, over the last
couple of weeks, companies are doing exactly what they should be doing.
They're dealing with higher costs, trying to preserve margins by getting
more efficient. Exactly.
Particularly, you don't have as many workers to go around.
You have to get more efficient. Exactly.
Automation is a big theme right now.