00:00Noel Dixon of State Street writing, we expect volatility for markets to continue in the medium term as investors reluctantly
00:05accept the new reality of reaccelerating inflation.
00:09Noel joins us now for more. Noel, good morning. Good morning. Let's talk about that new reality. Sure. Your words,
00:15reaccelerating inflation.
00:16What makes that so real for you? Yeah, so I think, you know, the risk is certainly piling up.
00:21I think before this event occurred, three-month annualized inflation, when we look at PCE, was leaning more towards 3
00:29percent.
00:30Now we have this potential for an energy shock. I don't think anyone really knows where it's going to end
00:36up.
00:36And we know that the transmission mechanism as it relates to energy prices and to goods prices, for example, that's
00:43a lot more quicker than, say, tariffs, if you will.
00:45So I think we're going to have a situation, even when we look at PPI, the financial components, the health
00:52care components, January PCE is going to be pretty firm.
00:56So I think we're going to have this inflation that investors are going to have to come to grips with.
01:01And I think that could be problematic for risk moving forward. Well, let's talk about bonds before we get into
01:05equities.
01:06Sure. Tonya, bond yields right now closer to 4 than 4.25. Yep. Is that a problem?
01:10I think it is a problem. And I think it's actually an opportunity, I think, to go short the long
01:15end.
01:16I think whether you look at real growth or I think inflation expectations will start to pick up, break-evens
01:23will start to break out, I think that's a real opportunity to short the long end.
01:27Can you go short the long end and be long risk in assets like stocks, in assets like credit?
01:32I don't think so in the medium term.
01:34I think right now we've been in this trading range on the S&P 6,800 to 7,000.
01:40And I think when the data starts to come out and people start to grapple with the reality that inflation
01:46is here to stay at least for the next few prints,
01:48I think we could break out to the low side on equities.
01:52And I'm eyeing more like the 200-day moving average.
01:55We don't even feel like technology is the pressure.
01:55We've that plan for a half inch of gas opportunity with our mouths so we know how we are doing.
01:55And so perhaps it's not too much because we make our phones come out ofacje.
01:55So that's reasonable, I think to do something.
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