Now turn to the markets more broadly as stocks turn a little bit higher right now, just a little bit since the top of the hour again following a brief drop on Fed Chair Jerome Powell remarks, he said there’s a lack in progress on inflation. Geopolitics higher for longer rates continue to weigh on investors minds including on the mind of our next guest who only sees one rate cut ahead this year. Joining us now for more, Scott Clemens, Chief investment Strategist at Brown Brothers Harriman Private Banking Scott, welcome. We’ll get to the broader market in a moment. But I wanted, I wanted to hone in on something that is in my notes that you said about geopolitical risk that the developments that threaten sentiment and therefore price are one thing and those that threaten fundamentals I assume by you mean there by the actual operating of businesses are quite another and those threatened value. Would you explain those distinctions, why you consider them important and which you consider to be the biggest threat to equities right now? It is the most critical distinction that any investor, at least a long term investor has to make is the difference between sentiment risk and and by that I mean the daily price volatility that is a feature of markets. It’s not a bug. And the fundamental risk that threatens either a company’s operating structure, as you were just discussing Live Nation, the possibility of regulatory risk, the possibility of a hit to earnings, the possibility of a hit to the economy, those are the sort of things that worry me as a fundamental investor in the longer term. And so when I place the geopolitical risks that populate headlines today into that category of sentimental risk, I don’t do that to dismiss them. They’re very real and they’re very serious. But just to observe that U.S. financial markets are reasonably resilient when it comes to developments abroad, be at the Middle East, Ukraine via China’s wandering eye towards Taiwan. Those can certainly and should dominate news cycles, but right now I consider those falling mostly into the category of risk to sentiment. So risk to sentiment, which if I’m interpreting you correctly would be a less long term phenomenon than a fundamental risk to the to the companies and their businesses. Let’s go to your interest rate outlook. Beginning of the year the the working assumption was five or six interest rate cuts. You’re now all the way down to one why? Well two or two reasons and I think they’re both good. This may be kind of a glass, half full glass half empty observation. The economy has proven to be more resilient and robust than I think we expected headed into the year. The strength of last year’s carried forward, we’re adding hundreds of thousands of jobs a month. Unemployment rate remains relatively low. The housing market remains relatively robust despite higher mortgage rates. So in some sense, there’s no real call for the Fed to lower interest rates. At the same time, there has yet to be enough improvement on inflation to warrant lower interest rates and a lot of that really does come down to it and you and your colleagues have reported on this, the core measure of inflation and the stickiness of shelter prices in particular. I think unless or until we get improvement on that, we’re in an era of of of higher rates for longer. I do think by the time we get into the latter half of the year, there will be enough improvement in core inflation to allow the Fed to cut interest rates once by 25 basis points. But you’re absolutely right. At the beginning of this year, the futures market had priced in six rate cuts this calendar year, and there isn’t enough time left for six rate cuts this year. Almost.
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