wants to start with a note the why she put out a number of weeks ago and the title was something like why are we so happy with eight point five percent cpi so why was this market so happy with eight point five percent cpi look i think that part of it was the idea that were off peak but our point was sometimes the second derivative doesnt matter sometimes its the first year but if you want to pay attention to an eight and a half percent cpi is really far away from two or three percent which is what we believe the market is pricing in i think that you know when i hear the bullish arguments for you know kind of justification for the rally that weve seen from july or june i guess its two things thats why weve moved past peak inflation but wages are still strong so the consumer is still going to be ok therefore a soft landing thats one bullish argument that i disagree with and a second bullish argument that i disagree with is that weve seen earnings of better than feared and weve seen results better than feared and everybody points to really strong top line and 15 percent sales growth for the s  p the problem with that is that most of the work for sales was coming from energy energy group sales by 80 percent everything else was fairly lackluster and then when you adjust for inflation when you take that 9 percent trend of inflation out of 2 q sales the sales for the s  p 500 ex energy were essentially flat more companies in the s  p 500 under shot inflation in sales couldnt grow sales faster than pricing which is really kind of a weird setup versus the other half that managed to beat beat cpi so i think that what were point what were all looking for reasons to get more bullish but the reasons are pretty thin if you ask me on peak cpi and strong still strong job costs i mean i see that as still strong labor i see i see that as overwhelmingly negative because what that means is pricing power for the average corporation is starting to wane demand is starting to wane but wages which are the biggest depressant on corporate margins for the s  p 500 are sticky and high i mean why are we celebrating about this i just dont get it that was the essence of your notes today we caught up with mike wilson a multi standard yesterday hes very much on the same page as you at the moment some of these issues take a listen to what he had to say it all fired ise narrative is coming back into play were in a downtrend and until the market can get back above that downtrend i think to be making some grandiose call about new high rises is quite frankly its irresponsible given whats going on with the fed keep coming as bob laid out its going to be a lot worse and people have experience or far prices wrong earnings are wrong again which means the attractiveness of risk reward today could be almost as bad as it was back in january safina you back at thirty six hundred on the s  p dax forecasts whats the feds role in that move love whether youre looking for look i dont think the short end of the curve and what the fed is doing at the short end matter as much as the long end and i think that whats bizarre to me is that you know i think this laser focus on sort of inflation prints and on a monthly basis and real time reads on inflation and what is the fed going to do are they going to hike 50 basis points or 25 you know are they going to start cutting i think all of that is second to what happens at the long end of the curve and you know i like that that that that phrase complexity of the moment because i think this is a very complex market for equities and the reason i say that is the duration of the s  p 500 is still above 30 years were looking at as 30 year zero coupon bond so what that means is that a mere 50 basis point change in the cost of equity capital which is more influenced by the long end could drive the market either really high or really low from here and i think thats what makes up the complexity of the moment for equities to brian moynihan takes immense pride in studying the granularity of american business it is the franchise of your bank of america where do you and the sell side and bank of america the research analysts what are they saying about how corporations are adapting and adjusting to these complexities well you know youre right so corporations are adapting and adjusting and its really marvelous to watch but i think that what that requires is a fair amount of capital spending from the big multinationals that are in the process of rejiggering supply change with supply change which is a complicated and long process that costs a lot of money also in the process of automating labor which has gotten that much more expensive so this is all really good for long term productivity of corporations we havent seen a real capex cycle in a long time because earnings have been buoyed by low rates buybacks all sorts of imaginations that arent real economic growth but i think what were seeing now is the beginnings of a real you know a real growth cycle driven by companies getting more productive and that is very bullish for the s  p 500 unfortunately i think it takes a little while to get there and it also costs a lot in terms of capital spending so what we like within the market are the more domestic players that could benefit from that cap ex skyfall and hall our smith strategist has been talking about this you know on your show quite a bit so i think thats a great area to start to deploy capital but multi now for the time being yeah yeah i mean i think multi dow jones loose talk its bullish talk from tv well its like its a veto this is actually exactly where i wanted to go because basically everyones calling me a baron dressing me up this one on the internet but i am wondering from your perspectives to how much those michael barr yeah i accepted i embrace it i mean im not here yes i would just say that there is the sort of monolithic tell no i i embrace it if you want to see dax it thirty six hundred right this is thats the distinction between the long term bulls and the long term bears right thirty six hundred is that the new low that is catharsis that then leads to adjusting and adapting of tom keene or is this a more protracted loss in the momentum and frankly the valuation of us equities look i think this is all happening at a warp speed so at the beginning of the year our long term model was pointing to negative returns for the next 10 years today the good news is that after this massive drop in the market and lower not low but lower multiples that model is spitting out you know mid single digit returns for the s  p 500 for the next 10 years thats a much better setup a much better entry point i do think that point this point in time targets are fraught with all sorts of problems but i will tell you this i think that the fact that just a mere 50 basis point change in the cost of equity capital either long rates or the risk premium to drive us to our target of thirty six hundred makes me worried about the downside risk so there are two questions for all global wall street they know you own the high ground on esg investing socially you invented it is investing dow jones where is it in a year im serious where is it in a year well you know i think whats the problem right now is that investors are throwing the baby out with the bathwater and weve done a lot of great work on it and weve talked about our work on your show esg investing is nuanced its not one size fits all different sectors have different factors that are more important for driving you know social factors are more important for labor intensive innovators environmental factors are more important for energy and materials so its not just some kind of one size fits all apply this rating to your entire portfolio and youre done so we do think that there are a lot of esg considerations that are being ignored in this kind of refusal to even think about esg and an environment where it roaring a lot of fire so i think its a its a complex nuanced topic but i still think that there are lots of ways to make money