00:00They bought the dip and they let it go for a few days.
00:02If that was a dip, right?
00:04Define a dip here. What kind of dip would you buy?
00:07I mean, you know, a 1% sell-off isn't really a dip worth buying.
00:10I would say 5% is a dip, 10% is a correction, 20% is a bear market.
00:13That's kind of the way we talk about it.
00:15So we do think a 5% correction or dip is possible based on the move in rates.
00:20That's kind of been our view.
00:21And quite frankly, we're still stuck in that range that we identified earlier this year, 5,500 to 6,100.
00:27So we got closer to the upper end of the range.
00:29Now we're going to get a dip.
00:30I'd be surprised if we take out the 5,500 unless something really, you know, deteriorates again on the tariff side.
00:36And we go through that in our mid-year update.
00:39Like a lot of things now have turned the corner from a rate of change standpoint.
00:42That's going to make it hard to return to a sub-5,500 price in our view.
00:47Is the tariff the only, like, left-tail risk?
00:50Because it seems that a blown-out deficit with this new tax, this one big, beautiful bill, is concerning markets, at least when you look at rates, right?
01:01Well, that's right.
01:01And that's exactly why we can't break through to the upside.
01:04Because there's two things going on on the rate side.
01:06Number one, you have excess supply.
01:08The deficit now is a problem again, potentially, for the bond market.
01:11But also the Fed's on hold, right?
01:13The Fed has been a bit, you know, overly focused on inflation.
01:17And so you don't have any rate cuts in the near term.
01:20And you now have this supply risk and the fiscal deficit blowing out.
01:24So that took rates back about 4.5%.
01:26That's always been our level where multiples come in.
01:29That's a 5% move historically.
01:31That's not a 10%, 20% move in isolation.
01:34Now, if that leads to something else, where we have another growth scare, for example, because rates are higher, and all of a sudden recession risk comes back on the table, that's a whole different ballgame.
01:44That's not our view.
01:45Okay.
01:46So for long-end rates, at the very least, at what point do they become a bigger problem for the equity market?
01:51Yeah, I think 5% is where it becomes a real headwind for...
01:55For 10-year.
01:56Yeah, for consumer.
01:57Like, everything's priced up to 10-year, right?
01:58So then all of a sudden you're looking at, oh, my goodness, we have now recession risk potentially is back on the table.
02:03But in that instance, just think about it, the Fed will act then, right?
02:07I mean, so we have this sort of, it's going to be back and forth like this for the next three to six months.
02:11The way you've got to think about the first half of the year, most people came in very bullish.
02:15We came in more, you know, not that bullish about the first half because of the sequencing of policy.
02:20But that policy now has flipped to a more pro-growth sort of stretch.
02:24And that's what the market's going to start to think about.
02:26That's why it's going to be really hard to take out 5,500.
02:28That is, by the way, my question of the day, Shonali.
02:30Like, at what level do yield really start to put pressure on stocks?
02:35And you're saying 5%.
02:36Goldman Sachs was out this morning saying 5% as well.
02:41Chris Waller was speaking, I think he was on Fox this morning.
02:46Are you looking at me funny?
02:47Yeah, I forgot exactly where he was as well.
02:49I just saw that line.
02:50Yeah, okay.
02:50So, but he was saying, like, if tariffs stay at 10%, the Fed is good to go in terms of cuts in the second half of this year.
02:58What are you expecting from the Fed in terms of stimulus?
03:01Because that is important to the stock market at the end of the day.
03:03I think it's critical.
03:04It's another factor, though, the rate of change is going to turn more positive.
03:07Don't forget, you know, the big rally last fall was driven by a lot of it was driven by Fed cutting into an economy that was fine.
03:13And then they stopped in December.
03:15That was really the beginning of the correction that we saw.
03:17Not tariffs.
03:18Okay.
03:19So, yeah, I think that the Fed will be either communicating that they're turning more dovish or they'll actually be cutting.
03:24Our official house view is no cuts this year, but then they have seven cuts for next year with no recession.
03:30Yeah.
03:30So that's pretty bullish.
03:32So, I mean, if we get seven cuts with no recession next year, stocks are not going down.
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