Kenny Polcari: The market wants more clarity on the Federal Reserve's moves

Joining me now, Blackrock's Global Co head of iShares fixed income ETF Steve Lapley and Slate Stone Wealth chief management strategist Kenny Pocari. Kenny Minneapolis Fed President Neel Kashkari gave a point on the calendar now for how long he thinks investors will have to wait. He told CB S S Face the Nation that if we get even just a A1 cut this year is going to be December because the Fed can afford to wait. Well, let's just say that's true. What can't investors afford to do if that is the case? So listen, I don't think investors can afford the wait, but they haven't been able to afford to wait. Look what this market has done right, you know, this year, certainly over the last three or four weeks. But I think what was really interesting is that Neel Kashkari, who's a non voting member has been on both sides of the fence, right. He's been very cautious, more hawkish. Slow down. Not yet. We're not in a rush. We got to be careful. And then on Face the Nation yesterday, he came out and to flip the story suddenly saying, you know, we're going to get one and it's probably going to be December, kind of kind of now putting that to rest. So stop the speculation about July, stop the speculation about September. Here's what it looks like. Here's what we're going to do. And that just offered clarity. And you know me, you know the market, the market likes clarity, whatever it is, good or bad. It just wants more clarity. And I think that's kind of what we're seeing today. Tomorrow you're going to get five more Fed heads speaking. Let's see if they support 5. Oh my gosh, yeah. That that leaves us looking like we're at a tennis match. So, Steve, one thing we know about Treasuries is they have been like Weebles, right? That toy weebles wobble, but they don't fall down. The yield sometimes wobble, the price of the bond sometimes wobbles, but continuing to move higher. I mean, look at the two year up 6.6 basis points right now to 4.772%. What does this tell you about the investment opportunity within Treasuries still? Yeah, Liz, look, I I think to your point, we've been all over the place. We went to 5% last year. We went as low as 380 at some point over the last six months and started edging back up again and now we've retraced. So I think where we are right now in this market is going to be very hard to call the peak. So we believe there's a ton of opportunity right now across the board in fixed income. You know you're at yields that are higher than they were 20 years ago. If you go back to 2004, we're seeing yields across the board that are higher than than that. So we think regardless of what you do, there's a great opportunity here to put cash to work and now is the time to do it. It's going to be really hard to finesse all this timing on when the first cut actually is etcetera. Well, you talk about which part of the yield curve. I mean, right now you've got the six months yielding 5.36%. But BlackRock just announced the first of its kind ETF. It's a bond ETF. It has both 20 year and 30 year treasury defined maturities in it. I mean, I'm looking right now the the 30 years at 4.41%, you've got the 20 year at 4.52%. Why go into those right now? Well, this is part of a longer term laddering strategy. So again, you know investors could have a view that we're about to see a change in in policy, I mean whether that comes in September or December or some combination of both. What our research has shown is that the market does start moving ahead of those cuts. So, you know, for an investor who's worried that maybe the economy may slow a little bit more than than what the markets pricing in longer term treasuries would be one way to potentially hedge against that. And so you could do that through something like TLT or you could do that through one of these longer dated I bonds, as we call them Kenny. The market and the economy will slow. That's just a fact of life because trees don't grow to the sky, correct. But does this tech rally? I mean, we look at the SOCKS index, the SOCKS index doing incredibly well over the past several months. And that of course, has all of the semiconductors in it. I'm looking, yeah, it's hitting A50 to an all time high, I think 256 at the moment. So you can't afford not to be in this market. However, that said, there's always that warning sign down the road that, OK, trees don't grow to the sky. So how do you square that? Well, so you square it by saying, look, to your point, you can't afford not to be in this sector. And if you're in this sector, you've been enjoying the benefits of this run that we've had. I would not be chasing tech way up because to your point, we're kissing all time highs now, right? Even beyond all time highs. People said that four months ago. Don't change, chase it, don't chase it. And then they miss out on even bigger returns. Well, but are they missing out or they look, I haven't been chasing it. I've been long at all along. So I'm still participating as it goes up. I haven't bought any more because I'm not chasing it. I put money to work in other places. So I have certainly not missed it. So if you're in it, you're OK. What you're saying is to, you know, to get yourself even longer. And the here's the issue with get yourself even longer. If you do it here at the top and then the market suddenly turns and we get this back off that we're looking, everyone's going to scream it out and say, you know, I got hoes because I bought it at the top. Slow down and have a plan. That's what you should really do. You shouldn't be chasing at the top, but you're invested. So you're enjoying the ride as you go along. Although some have not been invested. They got nervous. They said it's too rich. Well, let me jump to Steve because Steve, you talk about people who kept saying, oh, I, I should park some of my cash and treasuries. Are most investors underweight fixed income right now? And what's the best place to put it it? Would you go into some corporates here? Yeah, Liz, look, I think, I think investors are underweight fixed income. Our our research shows that investors probably have around a 20% allocation to fixed income. And if you think of that in the context of, you know, the classic 6040, not that everybody looks like that, but yeah, you would be fairly underweight. And so again, it's going to depend on the scenario. So let's assume you're in the soft landing camp, you can go into, you know, broad high yield to get to lock in this great income that you're seeing right now. You probably also want treasuries in there to provide some ballast, high quality investment grade as well. Again, if you think you're going potentially into a larger slowdown, you would want to skew much more towards quality, right? So you would want to be in treasuries, longer duration treasuries, potentially higher quality investment grade, you know, defensive investment grade like IGEB. And then you know, that that allows you to kind of pick your pick your journey. But you do have to have somewhat of a view here. Either way, though, we do think it's time to move back into fixed income. You should have a view on what that looks like, but you it's time to start moving back in. Steve Kenny, thank you so very much.