what is a 5 percent plus rate mean for the market how much will the market hate it i mean i think the question is a good one you know does 5 percent make powell unpopular i think its really important to recognize that powell is not solving for popularity at this point hes really solving for his legacy and what history books write about how we manage this really challenging economic period he doesnt really care what equity investors like myself think about 5 percent if it achieves the right goals in terms of employment and in just the right goals in terms of inflation and i think thats a really hard thing for a lot of equity investors to get their head around is that market levels are not what the fed is really focusing on and theyre not saying words to encourage us to not saying words explicitly discourage us either but at the same time if we are not the game yeah inflation is the game kate as you say good morning its guy and im fascinated that the market believes that we are on this glide path back down to 2 percent inflation that its going to be pretty straightforward from here are we underestimating just how difficult its going to be pauls talked about the challenge here he clearly doesnt want to go back to the 70s and make the mistake mistakes that were made then is is the onus still very much on doing more rather than less yeah i think that the onus is going to be on doing more rather than less and as people were discussed on the show previously and ise that clip you just showed from julian emmanuel said no were likely to get to a rate and stay there one of the things that sort of confused me guys has been that the market doesnt seem to want to believe anything that fed leaders are saying you know if people give a very clear message these policymakers and then the markets like you dont really believe youre going to actually have to change your mind were right were right youre wrong and i think we need to get to a place where we really take them seriously and take them at their word that once we get to a rate that they feel is appropriate for the economy theyre going to hold that rate for a considerable period of time is the bad phrase over and over again and i dont think thats going to bad environment for equities by the way you have a level of certainty were staying here theres going to be no significant policy changes well see the economy and companies adjust to that higher policy rate and i think a much better environment for risk assets once we hold what risk assets i mean equities in particular thats what im focused on although to be fair in our fund we have considerably increased our allocation to credit and we think theres a huge opportunity there to get good total returns over the course of this year but in the nearterm i think theres too much uncertainty for equities look i love my asset class i like to be a bull its uncomfortable to be uncomfortable with this current market move right now and the green on my screen but i think we need to get through fourth quarter earnings and not so much what happened last quarter but how companies then talk about how theyre gonna be managing input costs how theyre gonna be managing so revenue growth in 2023 and talk about their guidance for the full year before we can really get a picture of what the fundamentals will look like so you know im kind of a holding pattern when it comes to equities at the moment but i do expect once we get past some of the policy uncertainty you get past some of the earnings uncertainty will be in a better environment for stocks tied to us stocks still expensive well guy theyre not particularly cheap im not sure theyre as expensive as some people have claimed sure the us trades at a premium multiple to the rest of the world and thats been an argument some people have used for allocating more outside of the us but frankly us companies deserve a premium not just because of the strength of their balance sheet for their debt profile for their agility for how well theyve managed more challenging economic environments in the past and really manage their margins in rising input cost periods so i think they deserve a premium its a dynamic group of companies that say its not cheap and i think you have to really pick your spots in the us equity market right now outside of the us do you pick spots in say europe or emerging markets particularly china reopens yeah i look i think there are some more interesting opportunities than there had been in the past outside of the us and weve been adding a little bit to our international exposure in the fund there are some areas in europe those companies that are geared towards kind of secular themes around the energy transition in industrial spend and automation those are interesting things we also see opportunity kind of more nearterm in some of the european financials and you know were looking at emerging markets closely resources has been a place that we have had a considerable overweight and emerging market plays on that are longer are going to be an interesting alpha generator in 2023 the big difference for europe and the united states over the last 10 years has been tech about tech the comparison is is easier to make do you think tech has fallen are you in the camp that still wants to buy tech that still thinks theres going to be an opportunity in tech or do you think the tech trade is going to be done for a while yeah im not in one of those camp that says for the next 10 years tech is done weve already had the leadership and its all over i mean technology innovation the need for technology across all different industries really creates a fertile environment going forward do multiples need to come down a little bit further if the rates continue to rise yes probably but were going to really separate the wheat from the chaff here were gonna see some companies really continue to grow their revenues in a slower economic environment and i think this is in the technology space and that will bring attention back weve got gotta remember weve got to look past the big mega cap tech and look at some software and services and even some hardware companies that have the ability to grow over the medium term everyone just focuses on the top couple names and forgets its a giant sector thats important for all parts of our economy a real quick for let you go dollar up or down this year well im going to chicken out alex and they say dollars can be range bound to flat yeah i find dollar predictions incredibly difficult but i dont expect the same type of appreciation we saw in 2020