Listen and subscribe to Stocks In Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcasts. The long-awaited Federal Reserve...
on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.to discuss its implications. “Anytime you have either a Fed meeting or an opportunity to hear from a Fed governor, including Jay Powell, that's where all the attention needs to be,” Manley says.since March 2020. “We’ve been talking about this rate cut since the hike started,” Manley continues.
I mean, I think it it it maybe goes without saying, but it's worth saying anyway, like how a fixed income fits into your portfolio has to do with rates, right? And um let me just break it down the, the dual mandate of the US Federal Reserve System as prescribed by Congress. It was the only thing that matters, who knows anything, who cares anything about the labor market since then though inflation has gotten a whole lot better, right?And then, I mean, you know what's funny about that, by the way, that means that inflation actually was transitory.
Is that the right way to go about it when you see inflation running so hot, you say, well, I'm gonna deal with this side of the dual mandate and I'm gonna ignore the other side of the dual mandate is that no, it doesn't.I think, I think they played this the right way. And you know, energy went from being inflationary to deflationary uh uh goods from inflationary to deflationary and bring all this up, right?And it had nothing to do with interest rates like the fed could have done nothing and inflation would have moved in from 9.1 to 3.0 because the fed has no control over supply side issues.So that there, I would think though that even if that wasn't, the FED was not the proximate cause of that reduction in inflation, that that would be some legs.
But yeah, that's the, there are still, there are implications right now in monetary policy on inflation today, but they're not necessarily positive ones bringing it back to that headline inflation number.It is, I mean, it, it feels like, I guess in an economy that is growing at around 2% a 2% inflation target feels somewhat reasonable.
Is that always the way it is or just during these this crazy tightening cycle, we're waiting for rates.I if you buy that narrative, that rates are the only thing that matters, which at least right now seems to be the case, then you have to think about these numbers in aggregate at a national level like one of the one of the tougher conversations that I have when I'm traveling and talking to clients is I'll, I'll, I'll give like blanket statements.
Um I mean, II, I think when we look at today's equity market and, and really the equity market of the last, let's call it 1819 20 months, it very clearly has been a story driven by just a small handful of names, right?These are us domiciled mega cap, multinational technology companies that one way or another are gassed up on this idea that artificial intelligence is going to fundamentally transform the world as we know it.
So you have these two things happening simultaneously where one of them is investors are getting a little bit, I don't wanna say sick of, but at least a little, a little bit cautious about their allocation to the MAG seven. So whether that is an S and P 500 allocation or approaching that through active management, buying a specific mutual fund, right?I don't think you want to have to make style box bets.
It doesn't mean that all 493 names in the S and P 500 that didn't do anything are going to start to do something.You mentioned profitability as a big factor.How do you, how do you think those companies that are geared towards cash flow will do those with the, the B the good balance sheets and the good balance sheet mattered a little bit ago, but not so much right now.
The labor backlog has been eased at least partially through immigration and Washington passed a whole lot of fiscal stimulus last year through the Chips and Science Act amongst other things that is pouring billions if not trillions of dollars into building stuff. So if, if you look at, if you look at how different generations experience different market cycles, one of the things that I think is super interesting is that when you compare um to, to millennials, to Gen X to baby boomers before them, Gen Z has had by far the best experience with the stock market by far on an annualized return basis.
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