Laffer Tengler CEO: Fed will cut rates this year

With this at post 9:00 this morning, Laffer Tengler, Investment CEO and CIO Nancy Tengler is back. It's great to have you, Nancy. Welcome. Thanks for having me. Carl. You still you still like this tech trade, I think, do you not? I do. I'm. I'm happy if we get a correction because that has been the the times that in 2022 and 2023 when we stepped in and added to our holdings. So we're waiting. We're waiting for the hedges to go to the Hamptons. At which point you think they'll be some bargains? I do, Yeah. What To what degree what, what's a reasonable drought drawdown in some of these favorite names? Well, I think, I think, you know, if you look historically, we get a 10% correction at about once a year. We've had, we had a 5% sell off. I, I think we, we could use a correction and I think it would make everybody feel a lot better about the lofty levels we're at in terms of a correction. Does that need to be had had on a broad based level or is it just NVIDIA? Obviously we've seen some weakness in the last two days and there's been a lot of commentary just about how much NVIDIA is responsible for the gains in the market itself. So is it a correction that's really just necessary by 1 stock or do you think it's one that will, you know, probably be a bit more broad based? Well, I, I think it'll probably be a bit more broad based, but it might be a little bit more violent with NVIDIA. I, I mean, I'm not predicting this. I don't know when it's going to happen, but it will happen at some point. And so that's an opportunity if you've missed out on some of these names to step in and and initiate or add to holdings, which is what we do. Meantime, there have been some calls earlier in the week looking at the weakness and real retail sales that we got, the three weeks of jobless claims. The the notion that the Fed might be surprised at the deterioration in the labor market. You, you don't disagree necessarily, not at all. We've been, we've been saying that we thought the labor market was much softer than the Fed thought. You saw average hours, hourly earnings come down. Savings rates have come down to 3.6% versus 6.1 pre pandemic. If you're a non managerial hourly worker, it costs you 71 1/2 hours to pay your mortgage each month. I mean, those are big numbers that impact certainly the low end of the consumer. And so we, we are, we think the Fed will cut this year. I, I don't actually really care because, you know, we talked about my analogy to the 90s before where we had higher rates and, and higher inflation and stocks still did very well. But I think they're going to be forced. And the the primary reason is that the Treasury is funding at the short end of the curve. So the weighted average cost of debt has gone up from 1.8% just over a year ago to over three. Right. So do you think July gets live? Do you, like you said, you don't care? I guess. Why am I asking? Yeah, because you should ask. I don't know. I mean, I think it is certainly July or September, but we're, I'm not, I'm not in the for, you know, Fed forecasting mode. I'm in the sort of Fed critiquing mode. You stay, you stay away from discretionary. In that case, we have reduced our exposure and adjusted our exposure to discretionary and you know, it's been a tough place to be. So you think it's really the labor market that will ultimately entice the Fed to do its cutting 'cause we heard from Chicago Fed President Austin Goolsby, I believe it was yesterday where he said if we get more inflation prints that look like the May 1, the May surprise, then that would basically be enough for a cut. So do you think that some labor market weakness really preempts that? I actually do, because I think inflation's pretty sticky. You know, we're seeing home prices or rents going back up. You know, there's still a lot embedded in sticky inflation and the average consumer Arizona, my homeowners do or homeowners insurance went up 75% from 2020, has gone up 75%. Took my dog to the vet and it was it was $300 to get vaccines, you know, and that those costs are up 33%. So I think I think it's going to be Fed Chairman Powell mentioned to the labor market press conference before last, and he also kind of pulled back. He said, you know, if you're at 2.6 to 2.7% inflation, that's a good place to be on the heels of the ECB where that was a mind blower, where she raised the inflation estimates and cut rates. Yeah. So I think central bank land is kind of itching to cut in my view. And I think we'll probably see it not because of being data dependent necessarily as much as looking around and and anticipating the politics and the, the, the actual need to to cut. Speaking of Europe, we're just a few days out now from these French snap polls. There's Le Pen, the polls are going her way. Are, are, is that rising to the level of client outreach where they're wondering what, what's going to happen next with European yields or ours by extension? Yeah, yes. And and then you've got the flip side, you know, so you've got France moving to the right and you've got the UK moving way to the left. And so I think it's it is it is impacting and causing, you know, turmoil in in the markets. Bond market is is just a befuddler because it's so volatile.

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