00:00Boy, the markets, I like what they saw, I guess, on this inflation print, as Alexa was just
00:04reporting stocks higher, yields kind of steady-ish. The 10 years down three, coming in almost four
00:10basis points, 492. So there you go. Sarah Hunt, she's a professional. She does this stuff for a
00:14living. Partner and chief market strategist at Alpine Saxon Woods. Sarah, what did you make of
00:19the inflation data today? And more importantly, what do you think the Fed's going to make of it?
00:23So it came in pretty much in line, a little bit high on one component. But I think the issue
00:30is
00:30around energy right now. I think the hardest thing for the Fed is it's hard to use a policy
00:37prescription of raising rates to deal with the fact that we have an energy supply problem. And I think
00:41that that's the tension. And if you see a discussion about why they did or did not raise rates, I
00:46think
00:47something in there tells you that it's hard to fix this problem with raising rates. You've got a
00:52housing market that's in fairly struggling shape still. You've got rising mortgage rates. You've
00:58got rising gas prices. All these things are tough on the consumer. So trying to slow demand and raise
01:02rates that way, it's a tension of trying to fix the problem. And I'm not sure that that fixes it.
01:07But I think that that's what people are looking at right now. So that said, markets finally
01:11having to price in a world where inflation isn't going back to 2% anytime soon. I think they're
01:15definitely pricing in what the problem of energy is doing. And to your point about diesel earlier,
01:21it's goods. It's everything that moves in a truck is now going to have a surcharge in it,
01:25right? You've got fertilizer prices being high as well. You've got beef prices in this country
01:29for other reasons being high. There's a lot of different things there. It's hard to see how
01:33fixing how raising rates is going to fix those things. But I understand also that the Fed does
01:37not want to look like it's not responsive. So there's that's I think that's the biggest tension
01:41there for next week. How do you think the equity market behaves if we're going to go into a period
01:47of maybe one, maybe two, maybe three rate hikes over the next, I don't know, six months?
01:53I mean, the bond market seems to have priced it in. I'm not sure about the equity market. How do
01:57you
01:57think about that? I'm not sure that the equity market has either. But some of the issues that
02:00are driving the equity market, higher earnings and big spend on technology, I'm not sure that that
02:05rate change is going to make that go away. So the issue really is for whom do higher rates have
02:11a
02:11bigger problem as far as equity markets are concerned. For the larger technology companies that are
02:15building out the data centers and the infrastructure and all the spend that we keep talking about,
02:19I'm not sure that those changes are going to be so impactful in the near term that it's going to
02:23cut that spending. Therefore, the earnings are still going to be fairly robust. I think that's
02:27the tension that the equity market is playing with. And how that goes forward is we're going to see
02:31where that goes. But you've got plenty of pockets in where stocks have come down, but the backdrop is
02:37still fairly good on the industrial sector. You've seen a lot of those stocks come in, but the backdrop still
02:42looks good. They're coming in on the potential for higher interest rates. So I think that there's
02:46I think that there's some room in the equity markets, but we are sitting in pretty lofty levels
02:49in some cases. Yeah. So what, sorry, blue button, there we go. I feel like Tom, I'm in the scene
02:55too.
02:55Thank you. Detroit Lions blue button. Detroit Lions blue button. So that said, I mean, where does AI
03:01spending have to go to a certain point before you say, you know what, this is a concern? Well, I
03:06think that
03:07this is the interesting thing about the fact that you're getting so much backlash on data center
03:11location is one of the things that may slow down spending, whether or not companies want to slow.
03:16And what you did hear in second quarter earnings was still that there's an enormous amount of demand
03:20pent up in there. It was not a discussion of dropping demand, whether or not token prices continue
03:24to drop and how that impacts the decisions going forward is now being slightly bottlenecked by the
03:29fact that it's difficult to cite things. So there is some slowdown that's happening because of
03:34ancillary issues as opposed to just, I just want to keep spending. So it's all of those things are
03:40playing together. If things slow down on the spending front.
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