Let’s Run It Hot (FvF Ep. 193)

In Episode 193 of Facts vs Feelings, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, talk about the passing of former Fed Chair Alan Greenspan and what his 18-year tenure actually produced for markets.

Kevin Warsh's first Fed meeting as chair featured a statement that clocked in at roughly 130 words and told markets almost nothing about how the new Fed intends to make decisions.

Sonu makes the case that despite all the hawkish headlines, dot plot drama, and a two-year yield that jumped 16 basis points on Fed day (the largest single-day move on a Fed decision since 2008), actual real policy rates are more accommodative now than they were in March. The committee is split 9-9 on whether to hike this year, Warsh has opted out of the dot plot entirely, and inflation is running well above target, with core PCE likely to finish the year above 3.3%.

Apple's announcement that iPhone prices are going up due to memory chip shortages puts a real-world face on the inflation story. PPI for semiconductor chips and printed circuit boards is running above 100% annualized. Meanwhile the Dow, Russell 2000, and S&P MidCap 400 all closed at all-time highs last Thursday, which is the market's own vote on whether any of this is a crisis. The episode closes with a look at sector leadership, why communication services being down 6% to 7% year-to-date while tech is up 33% is genuinely strange, and why momentum breaking down is the signal to potentially worry about and why it isn't breaking down yet.

Key Takeaways: 

• Former Fed Chair Alan Greenspan oversaw a 190% gain in the S&P 500 over 18 years, second only to William McChesney Martin. He also presided over two bubbles that burst within a decade, the tech crash, and the housing collapse, producing what remains the worst decade for equity investors in history.
• Kevin Warsh's first Fed statement came in at roughly 130 words, the shortest non-emergency statement in modern Fed history. He also declined to submit a dot plot projection. The practical effect is that markets are now pricing guidance from the other 18 members, who are not stepping back from the spotlight.
• The dot plot went 9-9 on whether to hike in 2026. Three months ago, 12 of 19 members expected at least one cut this year. That shift may explain the volatility. 428 S&P 500 stocks fell on Fed day, the broadest single-day decline of the year, but it does not automatically mean the Fed is hawkish.
• After subtracting the Fed's own inflation projections from its own rate projections, real policy rates are actually more accommodative now than in March, dropping from an implied 0.7% real rate to 0.5%. With core PCE running around 3.5% to 3.8% annualized, the real policy rate is effectively near zero.
• Apple's decision to raise iPhone prices due to memory chip shortages is the real-world confirmation of a broadening inflation story. PPI for semiconductor chips and printed circuit boards is running above 100% annualized.
• The Dow Jones Industrial Average, Russell 2000, and S&P MidCap 400 all closed at all-time highs last Thursday. The NYSE advance-decline line and the small cap advance-decline line both hit all-time highs the prior Tuesday.

Jump to:

0:00 — World Cup Weekend and Father’s Day

3:07 — Remembering Alan Greenspan’s Fed

8:05 — A New Chair and a Short Statement

13:25 — Dot Plot Split and Market Shock

19:45 — Yield Curve Signals and Bond Surprise

24:35 — AI Supply Chains and Price Pressure

28:20 — The Case for a Dovish Fed

34:40 — Economy Strength and Running It Hot

37:10 — A Car Break in Reality Check

40:35 — Breadth Seasonality and Sector Rotation

53:20 — Closing Thoughts and Listener Requests

Connect with Ryan:

• LinkedIn: https://www.linkedin.com/in/ryandetrick/

• X: https://x.com/RyanDetrick

Connect with Sonu:

• LinkedIn: https://www.linkedin.com/in/sonu-varghese-phd/

• X: https://x.com/sonusvarghese?lang=en

Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com

Transcript

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SPEAKER_00 0:02

Welcome to the Facts versus Feelings Podcast. I'm your host, Ryan Dietrich, and I'm joined by my co-host, Sony Varge. Cutting through the noise each week, Ryan Dietrich, chief market strategist, and Sonovarge, Chief Macro Strategist, taking out the boring and helping investors focus on what really matters. All right, Sonu, let's run it hot. Episode 193, inching closer to the round number of 200 on Facts versus Feelings here. There's a lot to talk about. Um, rumor is it was really hot where you were this weekend, right?

SPEAKER_01 0:46

It was hot in Houston. I was in Houston for a World Cup game, but it was cool in the stadium. It was a stadium of 68,000 plus people. NRG Stadium in Houston. What a game. I mean, the Netherlands was a Sweden, but it was my childhood dream to go watch the Netherlands play, the Dutch play, the Orange, as it called. My daughter and I were decked out in orange. I took my daughter for the game. So it was a blast. It was, you know, I was fortunate enough to be able to go for a game. We got, you know, the players are right there, so I was sitting close to the sidelines. It was larger than life, literally. So it was a lot of fun. And uh, but it took us an hour and a half to get out of the stadium. To get out of the stadium and get to the train. And the train ride is literally 15 minutes to where we were staying, staying at the relative's house, my wife's aunt's place. And it's that the train ride is just 15 minutes from the stadium, but it took us an hour and a half to get out there. So that was, you know, well, that was wild, but it was it was a blast. It was uh a good Father's Day. What about you? Well Father's Day?

SPEAKER_00 1:51

Yeah, I'll get there in a second. You see all these videos, right, from people all around the world coming to US and just loving the US and just all the different things the food to the how open it is to Buckeys to all the cool stuff. Yeah, I guess uh they probably with some upset people though, an hour and a half to get out of there. That feels a little extreme. Um it was but you know, it was a fantastic game.

SPEAKER_01 2:14

He saw like five goals that the Dutch scored, and it was bedlam, literally, it was bedlam in there. It was crazy, so you can imagine. But it was, yeah, you had people from all around the world, right? Like, you know, yeah, we were we traveled to Chicago. Uh, there were a whole bunch of people from Houston, and I guess the the Texans are colors orange as well, so there's like a nice orange theme going on. The stadium was decked out in orange. You had a few Swedish supporters, one little corner with you know the yellow t-shirts and things like that. So I'll put up a picture, but yeah, no, it's a blast. And yeah, the World Cup is, you know, we were talking before this, right? I think uh what Boston's running out of beer as well because of the scarlet sets.

SPEAKER_00 2:56

Yeah, the Scottish are just drinking everything in Boston. I know Carson will be in Boston here. What maybe um two, six weeks, seven weeks or so? Six weeks. We'll see. Hopefully they leave some for us, but no, it's all right. Um, anyway, yeah, so you'd mentioned larger than life, and that got me thinking, you know, we lost a great one. Uh the time we're recording this actually. What is today? Today's we're recording on Monday morning. 22nd. 22nd. Alan Greenspan passed away at the ripe old age of 100. Um, so let's talk about him because he was known as the the the the maestro, the maestro, the maestro, I guess. Um he led one of the largest expansions we've ever seen in the 1990s for the economy, one of the largest bull markets we've ever seen in the 1990s. He took over in 1987, right before the 87 crash took place. So kind of a rough start um for for Greenspan there, the first couple of months. You know, there's some, you know, some people say he was potentially some of the not of cause is the right word, but some of the um momentum behind the housing bubble that eventually burst. You know, I I don't I don't know, maybe some of that's true or not. What what are some of the takeaways you've had here as we had a little time to reflect on Greenspan, Sonu?

SPEAKER_01 4:05

I think as a modern Fed in a lot of ways, right? I mean, I know the communications press conferences started with Bernanke, but you know, Fed Watch essentially, I think started with Greenspan. People are talking about look at the size of Greenspan's briefcase when he walks around to see, are we getting a rate hike or a cut? Right. And then his uh there were no press conferences. So most of the time it was when he appeared in front of Congress, and it was very hard to parse what he was saying. But I do think the three chairs that came after him probably looked up to him in a lot of regards with respect to communication, especially communicating, and we'll talk about Walsh and what happened last week. Communicating how the Fed thinks about its job, how it reaches decisions, and how why it does, what it does, and the context around that. I think that's you know, come down from Greenspan, and that continued with Bernanke, Yellen, and Powell. We'll see, we'll talk about Mr. Walsh, but uh I think there may be a break here. But yeah, so rest in peace, Alan Greenspan.

SPEAKER_00 5:14

Under Greenspan is 190% gain in 18 years for the SP 500, second Martin. Uh second only to Martin. He he was uh 18 and a half years and uh slightly higher gains um in terms of total return, but it was an incredible run, as you can see then. Annualized the return was about 7.6% or so. So kind of right in the middle, uh, so to speak, but he was in charge for a long time. Um, did he cause some of the bubble in the late 90s, though? Or did he cause the bubble to burst with this hiking? Or what'd you think there, Sonu?

SPEAKER_01 5:45

I think uh look, bull markets don't die of old age. I heard Warren Pies talking about this recently. Bull markets kind of get killed by the Fed. Yes. And there's an argument in '99. Look, we've talked about the whole productivity thing, and it's not like Greenspan caused the productivity boom or anything like that. But he was able to take advantage of it. And in 1995, after raising rates in 94, I think 94, safe to say they sort of panicked about inflation, and that's why they wrote raised rates. And 94 was a really bad year for the bond market. 95 into 96, they dropped rates, thinking, okay, we have a bit of a productivity growth story going, which allows for growth without inflationary pressures. And over the next several years, and this gets to the difference between what's happening now, and then it's not because of Greenspan that we got lower inflationary pressures and he was able to keep rates low. We had globalization, right? We had NAFTA come on board. By 99, China had signed the WTO. They got in, and we had cheap goods. Yep. That's not where we are right now. We talk about Apple increasing prices for the iPhones a little later, but yeah, that's it's a very different situation. But still, even in 1999, at the back end of 99, he started raising rates. I think it was August of 99. Rates are about four and a half percent. He took them to I think 625, 650, something like that.

SPEAKER_02 7:16

Yeah.

SPEAKER_01 7:16

By you know, the end of 2000. Did that cause the bubble to burst? I think you know it was probably one amongst various factors. But then coming to the housing bubble thing, he dropped rates all the way close to zero, right? I think that gets to wait a minute, you went from but one bubble to another one, and we got two busts within a decade.

SPEAKER_00 7:38

Well, we did, and that of course that decade, the aughts is known as the worst decade for investors in history, right? Even worse in the 1930s. Stocks were cut in half in the first part of it, and then obviously the GFC happened. Um, so just interesting, but again, it again, as we showed on the YouTube channel, gained about 290 in his 18 years, and again, Martin was 295. So, again, um, RIP to Alan Greenspan, which is again kind of a good segue, if you will, to what we're seeing here. Now, I'll I'll set it up, Sony. So last week, obviously, was the very first Fed meeting with Kevin Walsh. Um, you're gonna dive in a lot into what he said or what he didn't say, what we think he said, what the market might think, what the market didn't think, all this, all this stuff to uh dive in there. But I guess one thing that stands out is if you look at previous like statements, right? The statements were two, three, well, more than that, three, four hundred words, right? This statement was like only 130 words, which was like the least since there was like an emergency uh cut back in COVID time, which was I guess was a ballpark around this number of number of words. But you're getting back to kind of Greenspan statement territory, which again is a little shorter, a little sweeter, a little more to the point. Take it away, Sony. What do you think on that?

SPEAKER_01 8:48

Yeah, it's shot simple, limited to what the Fed just did. There's no guidance as such. No, I would argue that Greenspan is different because Greenspan, we knew how he thought about the economy. I mean, literally the whole productivity growth story, right? That came out, you know, Greenspan is talking about that. So it it reduces you know the risk of overcommitting.

SPEAKER_00 9:26

You know what, Sonny? Let me jump in. Sorry, let me read one Alan Greenspan quote. I love this quote. I've used it before. We used it this morning with our Carson uh advisors. This is from Alan Greenspan. If I turn out to be particularly clear, you've probably misunderstood what I've said. Because that's the truth. Greenspan would say so much, you could go back and look, he'd say a whole bunch, and everybody like, what's he saying? I don't know. Then it'd be over, like, oh, that's pretty good. Then you move on, then you move on. It's like you try to confuse everybody for an hour or something. Um, go ahead, Sonny.

SPEAKER_01 9:56

No, I think it gets to what I was going to talk about. Like, it like not giving too much, it reduces the risk of overcommitting. But it does strip away the context for decision making, right? The markets, for example, like even last Wednesday, we got a decision, but there was no quite reasoning behind it. Now we can talk about the dark plot and set that aside for now. But it gets to like even Greenspan, he was always talking about, you know, like he didn't want to forecast, he didn't want to tell us where rates are going, and that's fair. But I think a lot of people are conflating that with forward guidance, right? Right. Like it's it's it is hard to figure out, you know, where rates are going. And the Fed doesn't know. And that's what Walsh is saying. I don't want to give forward guidance because I don't want to forecast what rates will be. I don't think anybody expects that. At least, you know, you can't get that, not with any certainty. And that's reasonable because you know, who knows where the data is going, right?

SPEAKER_00 10:52

Well, let me let me just chime in. There's a period in 2022 when PAL's like, ah, we're not gonna do anything. Then, like a month later, they hiked by 50 basis points. Right. I mean, so let me go very, very quickly hiked 50 basis points when he said a month before, we're not gonna do anything. That's yeah, they're not perfect, they're not perfect, yeah.

SPEAKER_01 11:09

And and you know, you need to have some sense of what is the Fed's reaction function, and this gets to just backing up. Look, there's always uncertainty under a new Fed chair. That's totally you know open. I I think even when Powell started, there was some, you know, it wasn't perfect. The press conferences. I think it got better. He's definitely very plain-spoken, if that's a term for it. Uh, but you know, as I was saying this morning, it was more about style than substance for the most part, right? It was more how they communicate rather than what they're communicating about. And with Walsh, I think it was like he just doesn't want to communicate. It's more substance. The guy is pretty stylish, maybe, you know. But he doesn't want to engage in any of the you know normal Fed sort of communication that other the, let's say, the last several chairs have engaged in. Look, chairs explain the thinking behind decisions, how the Fed may respond under different scenarios. What's the Fed's reaction function? What do you what are they doing? Why are they doing it? How it responds as the data changes. Essentially, they're doing scenario analysis, right? There's always uncertainty, as I said, but it's usually around uncertainty about how the data will evolve. That's always uncertain. But it's not about the Fed's, less so about the Fed's reaction function. Look, the Fed manages risk, right? Just like we manage portfolios, things like that. What are they managing? They're managing the risk of higher inflation and higher unemployment. Markets need confidence that can do that. We talked about the housing bubble bursting and the tech bubble bursting within a decade. We got the COVID shock, we got high inflation, we got the Russia-Ukraine war. How is the Fed going to respond to all of this? Right. Right now, we've had five years, five plus years of elevated inflation. It's one thing to say, you know what, I don't want to talk about anything, and things are fine. There's low inflation, strong are, you know, labor markets. Yeah, you don't really need to say much, right? What do you don't change anything? Don't break what's not broken. But right now we have elevated inflation, so you can't just say, oh, the Fed will deliver price stability. And I think Walsh said that six times. How? You need more than that. How are you going to balance that against the labor market? Is there a trade-off or is there no trade-off?

SPEAKER_00 13:22

I just love this. As you see on YouTube here, literally they cut out like everything. It's like the big old red erasers up. So this is uh again, we'll send this to you guys. Um, but it it kind of sums up just uh there's a new sheriff in town, I guess. You know, and then I know you've got the charts and stuff, so I'll just kind of start talking and you can tell uh Podpony when to put these up. But you know, there's 19 voting members, only 18 this time. Well, sorry, for the dot plots or 19 people to give their opinion on you know the economy and policy and rates and stuff. And now there's 18 because Warsh kind of said, No, no, I'm not gonna give mine. Um, but you know, there was like six of the 18 are looking for multiple hikes. I believe one said three hikes. You know, now it's like split down the middle, right? Nine are saying, yeah, there's gonna be a hike this year, and nine say no. I believe one person expects a cut, versus this time three months ago, like 12 people were looking for a cut. I mean, this, you know, the market said, or market media, everybody said, Oh, this is a hawkish fed. I don't think we were shocked by that. And calmer heads did prevail, I think. When you look at the action on Thursday, we can get more into that. But so no, I'll just put it like this almost 428 stocks in the SP 500 fell last Wednesday. That is the most down stocks in any single day all year. Actually, and I forgot this.

SPEAKER_01 14:33

I didn't know that, actually. Huh?

SPEAKER_00 14:35

Well, see, hey, there you go. Now you know something. Now you know you know uh stadiums apparently aren't that hot in Texas. You learned that because America I learned that too, yes. And um, but we had a big, and then now the SP was down 1.2%, not minimizing 1.2%. But you know, you think if 430 stocks were down, it'd be down more. So it wasn't like this bloodbath. It felt bad because everything was down for the most part. Not everything, 85% of stocks give or take, were down. But that was actually the most down stocks in any one day since the last day of the year. I I kind of forgot that, but the last day of the year, December 31st, 2025, saw more stocks down. It was kind of like a weird, kind of clunky, funky, like you know, you almost think like algorithms trading. I don't know, but there was something that happened then, and that happened again. Now, interestingly, you look at the last five Fed chairpersons, the SP 500 was down on their first Fed meeting every single time. You have to go back to 1978, the year you and I were born, and uh the year of the fire horse. The year of the horse, yeah. Yeah, yeah. I believe 78 was a fire horse like this year. I'm pretty sure. Don't quote me on that, but I'm pretty sure. But definitely, definitely year of the horse. Um, you definitely know your Chinese science more than me. I act like it. Uh, I don't know that much at all. I just talk like I know what I'm saying, trust me. Done it for 25 years, it keeps working, so I'm gonna keep doing it. Uh, but in 1978, during uh uh Volcker, Volcker's first Fed meeting, the market went up. So listen, this is real small sample sizes. There's some flukiness to it, but I'm just saying you kind of sometimes see weakness the first time a Fed chairperson does something. We've been seeing that historically. I mean, Greenspan's first one again was down pretty pretty good. So uh just some things to think about. And then we did bounce back Thursday. Sono I kind of butted in what you have a bunch of cool charts. I mean, what charts do you want to share here for the YouTube channel?

SPEAKER_01 16:12

So let's start with what you talk about, the other 18 Fed members, the 19 members, right? Walsh is one and 18 ex-Walsh, and 12 of them vote, right? Every single meeting. I mean, there are the governors, the Fed governors always vote, and I think seven of them, and then five regional Fed presidents, the New York Fed president always votes, and the remaining four are rotated. You know, once a year, you know, they're they're rotating. Now, with Warsh sort of disengaging from the process, you think, oh, good, we don't have to talk about the Fed, which normally would not be a bad thing. Well, if things are going well, but now inflation's elevated, right? We already talked about that. It's easy to think, okay, you know, like maybe that's not a bad thing. But the remaining 18 Fed members are not stepping back. They like the spotlight, they're not leaving. And that's why we got the dot plot, right? Everyone submitted a dot. Now we could have a situation where Wars says, you know what, no more dot plot. And this gets to, if he's not engaging in communication, what's he going to do? He's going to set up a bunch of blue ribbon commissions focusing on the Fed communication balance sheet, the type of data they're looking at. That always worries me. I'm like, wait, you know, what data are you going to look at? Do we need more than we're already looking at? And he gets to like tell us, right? And now he's going to spend the next six months with commissions looking at productivity and jobs. Well, they call them a task force, right? Five task force. Yeah. Everybody listening to this. When the government uh sets a committee, you know, he's going to spend the next two weeks setting up the committees and then the next six months working with the committees. Maybe he'll get some results by the end of it.

SPEAKER_00 17:51

So he's going to be sounds like some nice lunches, though. Some nice working lunches. Uh courtesy, if you are taxed, our tax dollars.

SPEAKER_01 17:58

Uh let me know if you get a call to be on a task force. But you know, maybe any of the listeners too. But look, he's busy creating these commissions and markets are looking for clarity. Where are they going to look? They're going to look at the other Fed members because they're going to be out there speaking. And that gets to the dot plot, right? So the dots, and this is where markets sort of like, oh my god, the dots went hawkish, right? I have a different take, we'll go there. But look, they didn't change rates in June. We're still in the 350, 375 range, the policy rate. So let's say it's about 360 right now. So the median policy rate, we can put this chart up, Pete. This is for the Fed median rate projections. The median policy rate, so the median across 18 members, that increased for 2026, that increased from 3.4 to 3.8%. Right? So it moved from one cut to one hike. The median policy rate for 2027 that went up from 3.1 to 3.6%. That still reflects one cut relative to the 2026 expectation, right? And then it gets to what you were just talking about. The committee is very divided. We can put this chart up showing the Fed dot plot. It's very hard staring at the dots and counting. I always get that messed up, so I put it in the form of a table with actual numbers. You can look at that. And if anyone wants to look at these charts, it's in our blog too. If you just go to Carsong Group.com/slash research, I wrote about all this. But anyway, the committee split down the middle. Nine members out of 18 expect to hike rates in 2026. Five expect two rate hikes, one expects three, I think. Three. Yeah. Yeah, one, three. Eight members expect to leave rates unchanged this year. One expects to cut. Right? I think that's Michelle Bauman, maybe. Who knows? But back in March, a clear majority, 12 out of 19, because at that time the chair was also putting the dot in, 12 out of 19 expected to cut rates at least once in 2026. Right. So now it's split down the middle, and this gets to the whole that band of uncertainty around policy is just widened because think of that. The committee split 9-9, set aside wash for a moment. If inflation's elevated, right, and we'll talk about the other projections as well. Inflation's elevated, like what happens in July? What if one person changes their mind? What if two change their mind? Two decide, you know what, we need to have tighter policy. Oh, we get a rate hike. What if two decide, you know, maybe inflation is transitory? We get a rate cut? I don't know. So you can see where there's so much uncertainty, and every meeting is going to be kind of a toss-up.

SPEAKER_00 20:40

Well, and I you might have this chart, but I'll say it. We can pull it up if you do. Um, the hike, the odds of a hike in July was about 10%, this time a week ago. And then after this meeting, it went up to what mid-30 percentile or so. And now the odds of an October hike went from like low 40% to a hundred percent chance. The two-year yield went up 16 basis points last Wednesday. At least the data that I saw, that was the largest jump in short-term yields on a Fed day since like 2008, and the crisis was going on, and just volatility was just going all over the place. So, again, that's interesting. But then Sony, as you pointed out on our call this morning, and we talked about longer-term yield. What did 10-year go up? Five bips that day? About five bips, five bips total through the end of the week. Like you take, okay, let's just normal, like like you know, normal. So there's a lot going on there, but here's what really surprised me, and I'll turn it to you. Um, when you look at the Barclays AG last week, it gained 0.1%. So that's bonds. So bonds actually were a tad higher when all we heard all week was how yields went up and the Fed was hawkish. So it's like maybe not, because again, I understand, we understand for listeners, that's because that's more longer-term yields really didn't move. The 10-year yield was down on the week from where it started the previous Friday, where it closed last Thursday, which I think is surprising if all you looked at were the headlines. But also that's because the short end of the curve spiked higher on the dot plots, which apparently was a surprise, even though I guess it wasn't to us because we said inflation's a problem. Uh, go ahead, Sonny.

SPEAKER_01 22:07

Now, look, short term yields rose more than long term yields. So you're getting the yield curve is flattening. Okay. Right? It tells you the market expects the Fed to hike and try to slow the economy. Which is why long-term yields don't rise as much. Right. But there's a lot of uncertainty here. July, like you said, probability before of a rate hike in July. July's at this point, it's just five weeks away, by the way. The July meeting. And before the meeting, the probability of a rate hike was 10%. Right now, I'm looking at my screens, it's about 43%. That's pretty much a coin flip. That gets to what we were talking about. That uncertainty is wider. October, it was 42% probability before the Fed meeting. Now it's 100%. A rate hike is fully priced in. We'll talk about the fact that I disagree with that, all of this. And December has gone to 150%. Or no, 174%. Sorry. 150% was on Thursday. Right now, the probability of rate hikes in December is 175%. What does that mean? 100% chance of a rate hike and 75% chance of a second rate hike. Right? And here's the thing the Fed is unlikely to hike just once if they hike. Right. They probably hike three times, four times. Our friend Neil Dudders talked about this. Right? The committee is also split down the middle. Nine, nine plus Walsh. So it's going to depend whether we get a hike or not, it's going to depend on the marginal members. Right? Like I said, if only two people change their mind, we get a very different decision. And it gets back to the inflation outlook, right? The median policy rate going up from 3.3% in March to the median dot for 2026 going to 3.8%. Shouldn't be a surprise given, you know, they just met inflation reality. Their core PCE projection for 2026 revised up 2.7 to 3.3%.

unknown 23:58

Right?

SPEAKER_01 23:59

Core PCE for 2027 revised up from 2.2 to 2.5%. Yep, all above the Fed's target of 2%. So the Fed expects inflation to stay above target for another two years. It'll be seven years of elevated inflation. Right? Now, what's interesting is that the fact that they revised core PC higher tells you that most Fed members, at least a median Fed member, doesn't think higher inflation is just about energy prices. So even they've acknowledged that, oh, there's more going on here, right? Actual core PC, last thing for May, it's going to be about 3.5% year over year. Core PC is going to be about 3.8% annualized over the last three months. Yeah. And I think it finishes the year above 3.3%. Right? We can talk about how, you know, I actually think Fed policy is dovish, despite all the commentary around, oh, this is really hawkish.

SPEAKER_00 24:52

We'll get there in a second. Um, that's uh definitely want to focus on that. You know, crude oil is just cratered. I mean, it is absolutely saying. I mean, I think I saw crude's actually lower now than it was before the war started. I remember it virtually doubled overnight. Um, is that true? Is crude lower than where before the war started? Not close. Not yet. Okay, okay. I don't know where I thought I thought I saw that, but but nonetheless, we know crude is significant by the time we finish this. It continues to sink um mid-70s approximate barrel. Um, so just incredible from that point of view. And I did a radio call this morning, like I do every single Monday um on Sirius XM channel 132, 10 o'clock Eastern time. If you want to hear me do this stuff, and the question came up like with oil dropping, they think inflation, this is not they, but the question was you know, inflation's gonna be transitory and it's gonna come back lower and headline inflation. I said, Yeah, that's headline, but like you've been laying out, and we've been laying out, you know, look at core. There's still issues which uh can kind of maybe jump around here. But last week, and I definitely want to get to why you think it's more dovish, we'll get there. Um, you know, last week on Thursday, maybe it's Wednesday night, Thursday, the news came out from the Wall Street Journal that uh Tim Cook over at Apple said, Hey, we're gonna increase prices. And the reason we have to, he says, we have to do it. Like we have to do it because other people have already done it, other places done it, because memory chip prices and the incredible shortage is just impacting them. So the reality is if you buy stuff from Apple, uh a year from now, it's probably gonna cost more because of the memory chip shortage. And Sonya, you probably have this chart, I believe. But you've been showing and saying why inflation, it's not just about energy, it's not just about services, it's not just about goods, it's also about AI. There is broadening out, and AI has been pressing higher on inflation, and Apple just real world said it. But why did the market rally some on Thursday if Apple said they're gonna increase uh prices, Sonu?

SPEAKER_01 26:41

Look, uh markets or investors like margin expansion. There you go. One company's margin expansion is somebody else's higher prices, especially for someone like me who may be thinking about getting an iPhone. And I just learned that you I thought you're an Android guy, but you buy iPhones for the rest of your family, apparently.

SPEAKER_00 27:00

Uh yeah, I'm outvoted. Four to one. Four to one. Four to one. Wow. Good luck, my friend. But I'm a contrarian by nature, Sonny. I have no problem.

SPEAKER_01 27:11

You you need diversification, so you're holding the fourth set. Exactly, exactly, exactly. Get some Android in there and Samsung and you know, all of that. But yeah, no, look, uh, if you look at the core the PC index, the personal consumption expenditures index for computer software, it's not chips quite as such, but it gets to AI tokens, things like that. It's up 64% year today in annualized pace. That's massive. But that's also somebody's margins, right? PPI for semiconductor chips, printed circuit boards is up over 100% year to date. Annualized pace, that's massive. That's essentially what Tim Cook is talking about. Now, Tim Cook, when he says we're going to increase prices, two things. One is somebody's on the other side of that. If he's paying higher prices for memory chips, maybe that's benefiting the people they're buying chips from it. Clearly is not maybe, it clearly is benefiting or going to benefit the people they're buying chips from. But he they're also thinking, you know what, this is our chance to increase prices, increase margins, and just blame the memory chip guys.

SPEAKER_00 28:14

Yeah, true.

SPEAKER_01 28:15

That's why the stock price for Apple was up on Thursday.

SPEAKER_00 28:19

Yeah.

SPEAKER_01 28:19

Market like that. Now, the rest of us don't like inflation, but it's two sides of the same coin.

SPEAKER_00 28:24

Yeah, tech in general had a really big week last week and soared specifically on Thursday. And even Apple, I think it was about 70 basis points on Thursday on the news of again potentially higher prices due to the bottlenecks with AI that we've been discussing uh for a while. So all right, so Sona, now let's get to this. Um, so everybody, I'm doing like air quotes, everybody said the Fed was hawkish. The Fed was hawkish two-year yield, again, big jump. We get it. The dot plots showed again a more hawkish-looking Fed going forward. But you're taking, well, I guess you use the word contrarian again, more of a contrarian take that it it maybe isn't as hawkish as as people think, and potentially it's dovish because again, the markets don't care about what's happening right now, markets are all about what's priced in in the future. Six months ago, right now, you and I were talking about these concepts, you were specifically talking about them, but I was chiming in. That the question wasn't when will the Fed cut? The question was how many times will the Fed cut in 2026? It was just so obvious the Fed had to cut in 2026. And you were saying, listen, it's gonna be hard for them to cut. Not saying they can't, but that was not our base case. That's why we positioned our portfolios for an inflationary growth environment, you know, not owning as many long-term bonds, having some hard assets, and honestly, just being overweight stocks. We still thought stocks would do fine, and that inflationary growth environment's taking place. Here we are six months later, and now it's oh boy, is the Fed gonna hike in July, August, October? When's the Fed gonna hike? Now it's like I think we're once again kind of saying, calm down here. We don't think the Fed's gonna hike. The Fed's probably on pause. Take it away from there, Sonu.

SPEAKER_01 29:56

I think it's a little overwrought. Maybe it's very overwrought, and maybe I'm whistling past the gravy idea. I don't know. I don't think they're going to hike. I know the market's expecting hikes, 175% chance of rate hikes by December. And that sounds like a lot. That sounds like a lot.

SPEAKER_00 30:10

175%. I'm joking. I mean, yeah, it's more than 100. So I don't know how to even do that. I don't know. My head can't understand how you do that.

SPEAKER_01 30:16

That's okay.

SPEAKER_00 30:17

That's just two weeks. But anyway, yeah, go ahead.

SPEAKER_01 30:19

Like the irony is like, duh, dude, look at the dark block. That was a hawkish pivot. Yes. But it was 9-9, right? And you have to measure what you know median rate expectations are against their own economic projections, in this case, inflation, right? What do we know now? We know inflation's hard. We've been talking about that for a long time. I think it, you know, core inflation is hard. It's not just an energy problem. And I don't think they're going to hike rates because I think it's a very divided committee, and maybe Walsh puts his finger towards, for now, for now, I think he puts his finger towards let's not hike rates, right? So when you think about the Fed, you have to measure expected policy against the Fed's own projections of what they expect for inflation. So we look at quote unquote real policy rates. This is the expected policy rate minus expected inflation. Okay. Now you we need a baseline. Let's uh let's stop with that, right? Long run, they expect the policy rate to be about 3.1%. They expect inflation at a target of 2%. So 3.1% minus 2%. That's 1.1%. Let's say that's a neutral rate. Policy is not too tight, policy is not too accommodative or easy. 1.1% is our baseline. If real expected rates are higher than that, policy is tight. If it's, and by the way, that's great for stocks. Right? Uh, or that's not great for stocks if rates are going up, right? Right. But if real rates are below that, policy is loose, easy, it's good for stocks. So let's see what happened now in the March dots and relative to the June dots. In March, the median rate projection for 2026 was 3.4%. Core PC, and let's just use core PC here instead of headline. The median rate projection in March is 3.4%. One rate cut. Core PC projected at 2.7% for 2026. So you subtract that 3.4 minus 2.7, real rate is 0.7%. That's lower than 1.1. Remember, it's lower than a base point. It's easy policy, right? Policy is on the easy side. Fed members may not agree with that, but that's what it is. In June, the median rate projection went up. It went to 3.8%. Okay. That's what everyone focused on. But the core PCE projection rose even more. It went to 3.3%. You subtract that 3.8 minus 3.3. Real policy implied rate of 0.5%. So between March and June, we went from 0.7%, which was already on the looser side, to 0.5% in June. Policy is expected to be even easier now. In the real world, final thing, core PC, what is it right now? About 3.5% year over year, 3.6%, 3.8%, three months annualized pace. Policy rate at 3.6%. The real rate is just 0.1, 0.2, maybe close to zero, somewhere around there. In any case, big picture. I think the Fed is pretty easy right now. That's good for stocks.

SPEAKER_00 33:16

It's dovish. And yeah, I'll just chime in. We'll we'll kind of transition to equities here and stocks in the bull market uh soon. But you know, just last week on Thursday, first I think it's by the way, that's the first time. So Monday's half over. I've called it Friday, literally the past five hours, because usually Friday's the last day of the week. Uh you know, I'm a little slow. We should be in for that. Thursday was the last day last week. Uh, on a weekly closing basis. The Dow Jones Industrial Average, which started on May 26th, 18, or May, yeah, May, May 24th, 1896. Um it closed at the highest level ever on a weekly close last Thursday. That's not bad. Small caps, Russell 2000, highest level ever. Um, mid-caps are right there, SP 400 right there. Uh emerging markets also did. I think EFA, parts of EFA did. So the reality is stocks are kind of already saying, you know, we can live with this. I mean, they wouldn't be doing that if they couldn't. I mean, and honestly, another conversation I had about that uh radio call I did a little bit ago, because in my mind, I just did it before this call. But we were talking about, you know, crude oil is a lot lower now. Yes. But remember, I mean, we uh lots of smart people were saying crude should be much higher than it was back this time, you know, two, two and a half months ago when everything started. But it's almost like the market, and whoever the market is, I don't know, just the market in general. Once again, it was smarter than everybody else because crude wasn't massively higher. I know it spiked initially, then it just drift, drift, drift, and now it's really crashing lower. Uh, the market always probably thought that we were gonna get some type of resolution in the Middle East, or crude oil would have been higher. Um, you know, just some things, just some things I'm thinking about uh when you connect all these dots, you know. And um let's see, you what you want to let's wrap the Fed up. Anything else on the Fed? And then we can maybe talk markets for the next 10 minutes and wrap this thing up. What do you what do you think about it?

SPEAKER_01 35:01

Look, I think big picture, I think the Fed's running policy easy. Okay, and I think this continues because I I don't think they raise rates this year. Right now, if they do, yes, that's a different thing. You'll talk about it, you know, when that happens, but I don't think they do for now. We have easy policy, and it's one thing if that would be fine if the labor market is weak. Okay. You know, you and I have been talking about the fact that we didn't think the labor market was weak months ago, and then over the last two months we've gotten some good data. Maybe there's some reacceleration, maybe the labor market is getting tighter, right? It's pretty solid. And you look at every other most of the indicators retail sales, industrial production, durable goods orders. I mean, we put all this together in our own proprietary leady economic index, and that's showing the line going up. It shows essentially nominal activity is really strong. Part of that is an inflation problem, like Tim Cook was saying, and he's saying we are going to raise prices as well. So this problem continues down the road. But nominal activity, nominal GDP growth is going to clock in five to six percent. We can put the chart up, Pete. Our Carson proprietary, the leading economic index for the US. It is as far from a recession that you can be right now, right? And that gets to the fact that you know the Fed's okay running things hot.

SPEAKER_00 36:23

Well, and that's why we called episode 193 Let's Run It Hot, because again, the Fed's a tad more dovish in that most people are thinking and expecting, like you just laid out, and the labor market is coming back. I mean, everybody's talked already about how strong earnings season uh was. We had some ISM data two weeks ago on services and manufacturing, both better than expected. Listen, the housing market by no means is perfect. We understand you know, the consumer has some problems, the K-shaped economy. We we understand there are issues out there, but overall, on the aggregate, the economy, like we've shown sharing with our proprietary LEI, which by the way, our proprietary LEI back in 2022, 2023, never said to be a recession. I mean, everybody else's we're talking about recessions and all this and that. We push back against that repeatedly. And once again, um, now it's saying there's a pretty good expansion potentially coming in the uh U.S. economy second half of the year. And I think it's gonna be led by a better labor market. I know you've you kind of uh talked about that too, a lot, Sonu. So those are things that that we're clearly thinking about. Um, so what the story time is.

SPEAKER_01 37:28

Okay, go ahead. Yeah, story time first.

SPEAKER_00 37:30

So we did go down to uh Blowing Rock, North Carolina, for a couple days for Father's Day. There's a nice Airbnb we've used many times over the years. Used to live in Charlotte, so it's a little closer uh to Charlotte. But we went down there, had a nice house uh right in the mountains, like 74 degrees. My big white great Pyrenees, big fluffy guy Walter, he loved it because it's nice and cool down there. We took Mabel, our 125-pound great Dane. So they both got to go to the house and play and do all the stuff. Um, and then we got a call yesterday morning. So it's still Father's Day. Father, good morning, Father's Day morning, Sunday, from our neighbor across the street. She called Emily, and I mean I wasn't really paying attention, honestly, but then I was like, that's kind of a you know it's Father's Day, you're not supposed to be I don't know. I was like, I don't know about this. Um, well, sure enough, there were some break-ins in some cars in our neighborhood, and one of the cars was mine, which was sitting in our driveway back in Cincinnati because we were again, you know, a couple hundred miles to the south. Um, and I guess they only broke into Dodge Durango's, which I have a Dodge Durango. I guess they're easy to steal. I I don't know, but apparently what happened, so they just smashed one of my back windows. They messed with some of them.

SPEAKER_01 38:38

They have like a tape recorder that they really like in there.

SPEAKER_00 38:41

I don't know what's in there. I don't know. There's nothing in there, just junk, really. Uh anyway, um, maybe some old French fries under some under some from the kids in the back or something, you know. But I think what they were doing, they were just smashing them, looking for keys and trying to physically steal the car. They actually stole one car from our neighborhood. They broke into eight. They broke into eight cars. Wow. And they stole one, and I guess apparently it got in an accident like later that evening, downtown Cincinnati. So I don't know all the details. It's what the police officer told us we heard through the grapevine. So, yeah, so anyway, so now I I'm dealing with safe light auto, that little jingle. You safe light? Yeah, that's a jingle, like what I call them. They played the jingle. I can't either. They played the jingle on the phone now, and I was like, Oh, there we go. I I know that. So they come to your house to fix it, they can't even come to Saturday. Now, today's Monday, and I'm like, okay, well, so I've just got it taped up and whatever. You and I are going to New York for a couple days. I really don't need to.

SPEAKER_01 39:32

You have like 25 Dodge Durangos in your neighborhood. I can't.

SPEAKER_00 39:36

So everybody's smashed up. So anyway, so that was that was that. No, that sucks. And the last thing, like, I've got a $500 deductible and you're gonna like this. They said, or I can pay for it out of pocket for $493. Like, you gotta be kidding me.

SPEAKER_01 39:51

Are you sure it's not $499?

SPEAKER_00 39:53

Yeah, I'm like, you gotta be kidding me. So they they they're they're playing the game, aren't they? They're so I'm like, oh, I guess paying for it out of pocket then. Um, anyway, so that was that was that was that was interesting.

SPEAKER_01 40:02

But I'm still dealing with insurance for my uh bathroom repairs, and you know, yes, there are a lot of philosophical decisions, you know, discussions taking place as to we think you should pay for it because you know you're an insurance company and our home is insured. Like, no, but we don't cover wear and tear. What else do you cover then?

SPEAKER_00 40:25

Right, wow, whatever, right?

SPEAKER_01 40:28

Okay, like that's all I need to be on the other. I maybe I should just buy Berkshire or more Berkshire. I have Geico, but right, so Warren's making money off of this.

SPEAKER_00 40:37

Yes, not a recommendation, but uh my kids own some stocks, and one of my Sebastian and Gus both do own Dick Sporting Goods. Please understand it's not a recommendation, but I don't feel bad when we go there and I buy like $600 worth of stuff. Like, oh hey, at least we own the stock, you know. So I feel I feel okay with that. Um, all right, so now let's talk equity markets here for a little bit. So last week, again, stocks were up. Yes, we had that volatility on Wednesday. I will share, though, the June swoon. This is your average June. You can see on the YouTube channel. Listen, no, we don't blindly invest in this at all. I just do want to point out that from like June 17th, about June 27th to 28th, that historically is one of the weaker periods of the year. Now, the good news is July has by far been like the strongest month lately, last 20 years. I think July is actually the strongest month. So maybe we get a little weakness to end June. I don't know. Um, you know, I wouldn't be overly concerned because again, just last week, last Tuesday, the New York Stock Exchange advanced decline line hit an all time high. Small cap advanced decline line hit an all-time high, mid-cap was right there. Um, so we have some broadening out some breadth. I don't think this is a major market peak. We've mentioned many times June 2nd was the uh last all-time high on the SP 500. June is the only month in history that the stock market has not peaked during that month. So if this is the peak for the year, June 2nd, this will be the first time in history. I don't think that's the case. Uh time you and I are doing this, we're like one and a half percent from all-time high. We're probably gonna make one eventually. Um, but just some things to think about. I don't think the summer rally is over either. But from a calendar point of view, the next uh two weeks or so doesn't really do anyone any favors. Uh Sony, what else are you looking at from a markets point of view? I have a hot take. All right, let's see here.

SPEAKER_01 42:12

And I'm gonna run it by you. But let's put up this chart of sector returns. This is a year today, and let's think about the back half of the year. We're almost done with you know the first half, right? Isn't that something? We're gonna sound old. Can you believe it? It's almost July. It's almost July. Yes, just one week. So the SP 500 is up 10% year today, thereabouts. Yep, and technology is up 33%, the tech sector. And this chart will be up. Energy is up 21%, but it's down a ton over the last six weeks. Industrial is up 17. But on the other side, you have four big sectors in the red year today. We're halfway through the year, it's not the first two months or three, or even four months, right? Financial is down almost two percent, consumer disparity down almost two percent, healthcare down three percent, communication services, which is also pseudo tech or tech adjacent, that's down six and a half, seven percent. So that's about 40% of the index. The SP 500, that's negative going into the back half. Now, you asked an interesting question. So do you think you know, the SP 500, you know, our year today, your full year target is about 12 to 15 at the start of the year. I won't give anything away for our mid-year outlook, but safe to say we're bullish still with equities. So you all can probably figure out what we think of the market will do. But what needs to happen over the back half of the year, now you think, okay, there should be rotation. Now, here's my take. I'd like to see rotation, especially financials, right? There's something, you know, like you mentioned that small cap financials are doing better than large cap, but you want to see large cap financials do well too. Credit and all of that. But I don't want to see too much rotation because if you see too much rotation, let's say tech underperforms. Like one way the SP 500 could get to, let's say, 15% even 16, 17% year to date is tech stays where it is or even goes down a little bit, but everything else catches up. Financials go up in the green, communication services in the green, uh, healthcare in the green, all of that, right? It doesn't need a lot. Maybe even the mag 7. The mag 7 has been lagging. If you look at the mag ZTF, I think. It's you know it's it's not it's definitely underperforming the SP 500 that could rally. But my thing is you don't want to see too much of that because that what would that mean for six months? If tech doesn't go anywhere, if tech goes down, that means the AI story is sort of breaking down. Okay. I think the AI story is something like a rising tide lifts all boats. We'll see breath, right? But we'll also see a lot of dispersion. So that's my take. I think, you know, again, not a recommendation, but just gets to how we're positioning our portfolios. We're still slightly overweight tech. We think the AI story is not done, right? And we think that picks the entire market up. And if I do see a lot of rotation, I think I start getting worried that the market's starting to, you know, think, oh make, wait, the AI story is getting done. But I think we go into July earnings season, companies are going to come out and say, hey, we're gonna spend even more on capex. You're gonna come to October and November, companies are gonna spend even more on capex. I think that just continues because we are in this vicious cycle for these large tech firms, the Mag 7, that everyone's literally falling over themselves to spend more than the next guy because they know they have to. That's survival now.

SPEAKER_00 45:33

Well, no, you're you're right.

SPEAKER_01 45:35

Yeah, I threw a lot at you. Sorry.

SPEAKER_00 45:36

So I don't even know what you so no, I don't even know what you threw at me. You just you were just talking for like five minutes. I zoned out there. Um, anyway, no. I can't. I'm only half teasing, half-teasing. Um, listen, we called our outlook start of the year ride the wave, right? And without giving our mid-year, it's some similar theme, right? There's still a lot of waves out there. So, yes, tech is up 33% for the year, and you have communication services down. I mean, that to me is shocking. Like that, I I if you told me communication services were down on the year, I would probably say, I don't know, tech's maybe down too, or they're both up about the same because they're tech adjacent, they're kind of cousins, but that's clearly not what's happened, right? We understand why memory shortage, all the stuff that's going on, memory chip shortage, I should say, all the stuff that's going on with uh semiconductors and this. But but that's that's a fascinating one. But I still think uh financials are kind of the key to the whole thing, if you will, slightly negative for the year right now. Uh community banks have broken out the 52-week highs, regional banks have broken out. No, the large ones haven't yet, but I think maybe they could uh they could come back. And industrials, I love seeing industrial leadership. Industrials are a very broad, I mean, Uber's an industrial, Boeing's an industrial, GE's an industrial. I guess SpaceX might be considered an industrial unless it's official yet. So it's a real broad base one that you think if industrial is doing well, it's probably a good sign. Now, last I'll finish it up with this. So staples relative or equal weight staples relative to the SP 500, just last week again hit like new lows. When you have weakness relative on staples, kind of a defensive area, let's call it that. That's usually a bullish signal. It's a message of the market, the market's clues that things are good. I'll never forget the fourth quarter of 2021. Everybody's making money, spacks are going crazy. There's tons of IP. Go look it up. There were way more IPOs in 2021 than now. Now, in terms of market cap, we're about to see this year. Yeah, it's going to be more. But in terms of the number of IPOs going crazy, people had money from the government, they were day trading, they were doing this, doing that. And it felt like crazy times. And it really was looking back. And then the fourth quarter, though, Low Val and Staples significantly outperformed. Very few people were talking about this, except for some of the really smart technicians I follow. And yes, and then we had a 25% bear market. So it was a clue, it was a signal, it was a sign that something was a little bit off when you saw leadership and a bid on a relative basis coming from the defensive stuff, specifically Staples. Well, fast forward to right now. We're not seeing that. We are not seeing that. So this is one I watch very closely. So I think that's a message of the market that is positive. Um, I guess the bottom line, maybe, Sonu, is we still like momentum here. You know, I mean, there's momentum stock, there's momentum ETFs, momentum sectors from a factor-based point of view. I know you've been a fan of momentum for a long time. Um, is that still maybe the easiest way to play this wave?

SPEAKER_01 48:13

I think so, but you have to be diversified because I mean, even going back to 1999, even 1972, when the Nifty 50 bubble that broke, you know, again, high inflation, fed, things like that. Even 1929, you before the actual crash, you had momentum sort of fading. Okay. Right? Exactly what you were saying. Even 2021, the meme stocks started to break down. Low vol, this is before the actual the market fell in 2022, but before all that, as you said, Low Val was doing all the other diversifying sectors are starting to do well.

SPEAKER_00 48:47

Well, let's be clear, the war happened in March of 22, right? And that's when everything really fell apart. But did the market sniff out the war? No, of course not. But it sniffed out something was off. Go ahead.

SPEAKER_01 48:56

Something exactly. And even in 1999, right? And 2000, right? 2000, yes, March was the peak, but stocks, there was a broad rotation all the way into the back half of 2000. You go back to 1972, you saw that rotation, which gets to what I was saying. If we do see a big rotation out of momentum, if momentum starts to break, be like momentum now, to your point. Like that's one way we are trying to ride the wave. If that starts to break, what does that mean? That means the story of the last year, two years, three years is done. The AI story is over. Okay. And I think that's the end of it. Because if it starts to go down, it's going to take everything else down with it at some point. For we'll get some rotation. Now, going back to managing risk and portfolio management, how we are trying to sort of ride that wave but avoid a wipeout, be diversified now itself. Yes, we have banking on momentum, but we have you know defensive low-vol stocks as well. So to sort of you know, buffer that a little bit, you're not going all in on this AI thing. Because look, the reality is we can't time the market. It's hard to catch it there. I think everyone in these sort of situations, like, oh, we're just gonna ride it and then we'll time it and we'll get out before everybody else. That almost like let's be clear, like, even from our perspective as portfolio managers, yes, I'd like to think we're pretty good at what we do, but I'm almost throwing the towel in on timing the top. That's very hard to do.

unknown 50:29

Right.

SPEAKER_01 50:29

So, how do you avoid a wipeout? Make sure you're diversified. So, even if there's rotation right now, I don't think we'll be complaining.

SPEAKER_00 50:37

Yeah. No, no, I don't think so. I mean, listen, we manage billions of dollars, right? Carson Group just cracked 80 billion dollars um total. Our team manages a lot of that. We have 60,000 financial advisors all around the United States. I believe we're in 44 states now. And uh 60,000 clients.

SPEAKER_01 50:53

I wish we I wish it was financial advisors. I wish it was 60,000 financial advisors, but you're right. Maybe someday we get there, 60,000 financial advisors.

SPEAKER_00 51:03

Sorry, it's 600 financial advisors. Uh a bunch of sixes in there. I knew that much, but apologies. I guess we say 60,000 families serve is kind of how we say it. 600 advisors. Um, but I know we hit 60 billion AUM total. Um, but when you manage that much money, you know, we're not trying to pick tops, we're not trying to pick bottoms, we're trying to get the guts of the middle of those these big trends correct. And if you've listened to this podcast for a while, we have obviously done pretty well, all things considered, knock on wood, on that front. And we still think, again, the wave isn't over yet, but again, we're cautiously, I hate to say cautiously optimistic. Turn on TV everybody's cautiously optimistic, but pretty optimistic. I think we're pretty optimistic. But we're pretty optimistic.

SPEAKER_01 51:43

Um, a bit more than cautiously optimistic, I think.

SPEAKER_00 51:46

Yeah, no, I think so too. Um, so I mean, we've probably gone plenty long. What do you want to what else do you want to hit on, Sona, before we wrap this thing up?

SPEAKER_01 51:53

I mean, last thing, one thing, I was thinking about this with the chart that you put up. We don't have to put this up, but I think it's generally known anyway. Sentiment doesn't seem wild, especially amongst a professional class of people, especially amongst active managers. And I think that gets to the fact that we have a lot of dispersion, right? When you have a lot of dispersion, usually people say that's good for active management. When you have more dispersion, some, you know, one group of stocks doing well versus other stocks. Yeah, if you're an active management manager, that's good for you if you pick the right stocks. I mean, yeah, that's it's not easy, easier said than done. But the problem is now you just have very few stocks driving it. You have a lot of dispersion. And these are large parts of the index. They're contrary, they're big contributors to index returns. So if you're an active manager, let's say all active managers are looking for value. Even if you're a growth manager looking at tech, you're looking for what's actually, you know, worth the price that you have to pay for it. Right? So they're also value, even if you're, you know, looking at technology stocks, communication services, whatever it is, right? And if you have a few stocks driving, being the biggest contributors to the year-to-date returns, what do managers have to do? You have to include those in your portfolio or you're going to get fired. Which means they're buying stuff that's going up rather than buying stuff that they think is value. But that gets to why momentum begets momentum. I think we continue down this road for some time.

SPEAKER_00 53:20

And eventually that will stop, but I don't think we're there yet. And again, that's why you have a diversified portfolio, and just in case it does. But um, you know, that's like uh, you know, the music's still playing, so I guess we're still going. I guess we'll leave it there. Um so listen, this is episode 193 of Facts versus Feelings. Uh, feel free, wherever you're listening to this podcast, give us a like, give us a follow, give us a positive review, give us a negative review. We can't lead the witness, but it does help with the algorithms, and feel free and leave comments on the YouTube channel as well. So, Sono, we'll wrap it up with this. This week seems pretty calm, I guess. We have Core PCE coming out later this week. Not a lot of earnings. The holiday is not all that far away. The July 4th holiday coming up here. A lot of people are gonna be on vacation. I know you and I next week are gonna try to take a little vacation as well. So hopefully a lot of people get some vacation in the middle of the year here to catch your breath for the second half of the year. Anything this week on your radar, though, that we should think about?

SPEAKER_01 54:14

Uh, I think the USA is playing Turkey in the World Cup, and maybe you and I can watch it together on Thursday evening.

SPEAKER_00 54:19

There you go. Yeah, we'll be in New York City. Probably don't want to say why yet. Well, we're running around doing some media stuff, but it'll be out why we're coming. We're doing we're doing something together. You'll you'll hear about it soon enough. Um, everyone, thank you so much for listening. Thank you uh for coming every single week. Thanks to PodPony, our producer. We've done a couple, I mean, I thought they were great. The last couple we did, we had some really great guests. Dr. Taylor last week. If you had a chance to listen to that one, check it out. He was hilarious and informative and just everything about it was really, really, uh, really awesome. And um, yeah, again, with all that, this is episode 193. We'll see everybody next week. I don't know where Sona will be or I will be when we record next week, but we'll we'll do it like we always do. And uh we'll see everybody then. So have a great week and enjoy summertime and go out and have some have some fun with the family and enjoy the sun. We'll see everybody soon. Take care. Thank you. Information provided on facts versus feelings with Sonovar Geeks and Ryan Dietrich are for general information only and are not intended to provide specific advice or recommendations for any individual. The statements and opinions of show guests may not be reflective of CWM LLC or its affiliates. Past performance is no guarantee of future results. All indices are unmanaged and may not be invested in directly. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult with your attorney, accountant, financial, or tax advisor prior to investing. Guests on facts versus feelings are not affiliated with CWM L L Cha.