There's more risk-management now than before, says Trivariate's Adam Parker

It does take us to our talk of the tape, the great bounce back for stocks and whether it is in fact sustainable. Let’s ask Adam Parker. He’s the CEO and founder of Trivariate Research with me here at Post 9. Good to see you again. Great to be here. I get the feeling from reading your notes of late that you’re not so sure this is sustainable and you’re maybe a little more cautious than you’ve been in a few months. Is that fair? Yeah. When we talked I think last week on halftime, you know, I think the conditions are still the same. I see about equal chance we’re at 10% up versus 10% down from here and it makes me a little less confident because I think the the data are mixed. I think if you really look at it, for every good thing I get, I get a slight little upside maybe on retail sales, a little down on housing. You know it just seems like there’s some good and some bad and enough to feed both bulls and bears at this point. So I mean you have to get to a soft landing somehow, right? Isn’t isn’t that kind of the definition of are you looking for? Were you looking for the economy just to keep roaring along and figuring that the inflation story was going to work in your favor? Even if it did, I think just erode, not implode. You know that’s kind of the base case that we slow down from what was the highest nominal GDP in our lifetimes, right. So we knew we were going to slow, but the question was just at what pace. And I think the good news is that you don’t have a synchronous contraction because so many things were the cycles were you know at different times. Housing is a little bit different. Cycle than auto is a little different than semis, a little different than electrification. Industrials, you know, there’s enough things that are working that I think things can be positive. I think earnings will grow. The streets got I think 278 and earnings next year bottom up. So 1584, what is that about eighteen point 618.7 times the number, maybe it’s 19 if they’re a little too high, seems OK. I don’t think it’s like crazy expensive where you’re like wow, this is awful, especially as you pointed out when you know pond yields come a little bit lower. So I think it’s OK, but I just don’t feel as positive about the risk award as we did you know 12-15 months ago. I feel like you’re if there’s an area you’re getting more concerned about it’s tech where you know now we’ve gotten a couple notes in a row from you that one of the headlines here today is why technology investing is getting riskier now how do we get from in a few weeks right from wanting to still be overweight mega cap tech to now it’s getting riskier and you know we’re riding the surfboard now it’s maybe time to put the surfboard on back on top of the car. If you’re like when you run a portfolio you know a guy who’s got 4050 stocks trying to beat the S&P long only and they’ve been correctly you know benefiting from AI and and and semis and software. I think what their debate is going to be and I had a big debate with a a big long only man for earlier today is how much do I lighten that if if we worry not that we get stagflation but just that others think it has a higher probability, the first thing that’s going to get sold. Two things that get sold are tech and energy and what’s going to get bought is staples. You know kind of healthcare maybe a little bit of utility. I’m using that word stagflation. I mean you said the economy slows and inflation picks up cyclically. People will worry about it. I don’t think that’s the base case nor do I think I should position the economy slowing. It’s not stagflation. No. But the question is if people right what what do you think right now? Half thing, no landing, half thing, soft landing and we’re somewhere in that. You know, were you not convinced by what the Fed chair said last week, where he said no stag noflation? Should I ever be convinced by what the Fed chair says? I mean, isn’t that what do you mean? Like I should be there? No. Should I position My Portfolio listening to the Fed chair? No. But I mean people people have been you know getting crazy about this stagflation word in the last two weeks. It’s it’s if you if you like, in my world and my if you searched on at the previous six months, there were zero mentions and now it’s like rocket in the last two weeks. And it was all because that one day had a little bit of like a high PCE and a little bit of a weak GDP and all the big houses lowered their GDP numbers. So I I again, I don’t think it’s the base case. I’m just saying tech’s ripped. It’s higher beta than ever a lot. If you take stocks and you look at their bounce, you know, versus the market or the beta, half of the of the stocks that are 1.2 beta or higher are tech. So if we do somehow get a little bit of like a hawkish thing or a little bit of an economic slowdown just directionally before we are that’s going to go down more than normal. So I think guys who have done well who are really up this year 78910 are saying, all right, I don’t want to like lose it all in just like we had the great, what do you call it, the great, you know, pick up here. If we get a bit of a four, 5% downdraft, again like we were below 5000 a little a few sessions ago, I think people like, you know what, maybe I should buy a little consumer staple that’s got something interesting or maybe healthcare services that everyone hates. And I’ll sell my Palantir, which was on our list of, you know, risky stocks in the note you talked about before it blew up today. So I think it’s that kind of logic that you’re trying to just protect yourself a little, just kind of protect that it’s gotten a little riskier in the portfolio. So we had Brad Gershner of Altimeter on halftime, right? He’s a growth manager. He, he invests in a lot of mega cap tech stocks here. Here’s what he said he’s doing in terms of his positioning and in reaction to what Adam has written about protecting your capital. Listen, we’ve taken down our own exposure by 1000 to 2000 basis points and our hedge fund and our long only fund, right and that we’ve done that by both adding shorts, custom basket shorts. We’re worried about some some things in the world as well as reducing some of the overall position sizes. Again, this isn’t about all or none. This isn’t about 100% net long or 0%. This is simply about going from 80% net long to start the year to something closer to 60% net long today. Yeah. Makes a ton of sense. Makes a ton of sense, man, I, I, you know, to me I think that’s you’re always trying to look if you’re a growth manager, you want exposure for the next several years to AI, software, life sciences, electric, patient, industrial, like you’re going to want to be long those stocks. But there are times where you’re going to try to manage the risk and this is one of those times. I think there’s a little bit more risk management involved today than the 1-6 months ago. Yeah, I do. And that’s why we’re indicating that I if I were correctly overweight a ton of this stuff, I’d be lightning a little bit. Just until I get more clarity on the direction of of of you know how how much the economy is eroding and where estimates are going to come out. I I still think a number of companies are going to have margin expansion as we talked about for a long time. I still think that the feds more likely to be accommodative than not. That’s a good cocktail for equities.