Latest / UBS Trending / Navigating markets in uncertain times
Transcript
- 1 00:00:00,033 --> 00:00:01,134 Markets are navigating a 2 00:00:01,134 --> 00:00:05,155 complex mix of pressures right now, from higher energy prices 3 00:00:05,155 --> 00:00:06,990 to shifting fed policy 4 00:00:06,990 --> 00:00:09,893 and growing questions about the strength of the US economy. 5 00:00:09,893 --> 00:00:11,878 At the same time, investors are weighing 6 00:00:11,878 --> 00:00:13,613 whether this is a recession signal, 7 00:00:13,613 --> 00:00:17,484 a slowdown or simply a transition to a different phase of growth. 8 00:00:17,751 --> 00:00:18,418 We're going to break it 9 00:00:18,418 --> 00:00:22,338 all down with my guest, Brian Levitt of Invesco, in just a moment 10 00:00:22,338 --> 00:00:25,341 on this episode of UBS Trending. 11 00:00:36,169 --> 00:00:38,121 Hi, everybody, and welcome to UBS Trending. 12 00:00:38,121 --> 00:00:39,122 I'm Anthony Pastore. 13 00:00:39,122 --> 00:00:41,458 Very excited to have Brian here in the studio with me. 14 00:00:41,458 --> 00:00:44,177 Brian great to see you. Good to be here Anthony. Thank you. 15 00:00:44,177 --> 00:00:45,412 As a bit of a mid-year 16 00:00:45,412 --> 00:00:46,262 kind of outlook, 17 00:00:46,262 --> 00:00:47,480 you came here at the perfect time 18 00:00:47,480 --> 00:00:50,717 where just after our memorial weekend, the summer has begun, 19 00:00:50,717 --> 00:00:51,451 even though the weather 20 00:00:51,451 --> 00:00:53,937 may not feel like it here in New York City. 21 00:00:53,937 --> 00:00:54,888 But I wanted to ask you. 22 00:00:54,888 --> 00:00:55,789 There's a lot, obviously, 23 00:00:55,789 --> 00:00:57,173 that the first six months of the year 24 00:00:57,173 --> 00:00:57,891 have brought us 25 00:00:57,891 --> 00:00:58,858 in the beginning of the year, 26 00:00:58,858 --> 00:01:02,128 it was concerns about software because of AI development. 27 00:01:02,128 --> 00:01:04,948 Then it moved into the Iran conflict. That's still ongoing. 28 00:01:04,948 --> 00:01:08,401 We've seen the impact of oil prices on inflation. 29 00:01:08,401 --> 00:01:11,988 So where do you see us now, given what we've seen over 30 00:01:11,988 --> 00:01:12,739 the first 31 00:01:12,739 --> 00:01:15,058 six months of the year, economically, market 32 00:01:15,058 --> 00:01:16,342 Wise? Two years in a row, 33 00:01:16,342 --> 00:01:18,361 I was very excited about what I would 34 00:01:18,361 --> 00:01:21,347 consider to be as good of a backdrop as you could have 35 00:01:21,448 --> 00:01:24,501 for markets coming into a year, two years in a row. 36 00:01:24,567 --> 00:01:28,621 It got disrupted momentarily by a policy decision, 37 00:01:28,621 --> 00:01:29,789 obviously 2025, 38 00:01:29,789 --> 00:01:34,010 the tariffs this year, the war in Iran in both instances, 39 00:01:34,010 --> 00:01:35,478 there were some adjustments 40 00:01:35,478 --> 00:01:36,629 with regards to market 41 00:01:36,629 --> 00:01:39,382 leadership and rates and inflation expectations. 42 00:01:39,382 --> 00:01:43,553 But in both instances, the resilience of the economy came through 43 00:01:43,553 --> 00:01:44,754 and corporate America 44 00:01:44,754 --> 00:01:49,075 continued to deliver earning results that were beyond impressive. 45 00:01:49,075 --> 00:01:51,377 So it's a market that has pressed higher. 46 00:01:51,377 --> 00:01:54,264 You've seen a little bit of a shift in leadership 47 00:01:54,264 --> 00:01:58,368 from the small cap value to more of the mega cap again, 48 00:01:58,501 --> 00:02:02,605 and that's consistent with this idea of a slowdown in activity, 49 00:02:02,605 --> 00:02:06,142 a repricing of Fed expectations because of the disruption 50 00:02:06,142 --> 00:02:07,794 we've had around the war. 51 00:02:07,794 --> 00:02:08,244 Yeah. 52 00:02:08,244 --> 00:02:10,113 We have this interesting chart that you sent us 53 00:02:10,113 --> 00:02:11,581 that I would love to call up. 54 00:02:11,581 --> 00:02:13,766 It's looking at median S&P 55 00:02:13,766 --> 00:02:17,487 500 index levels and its relationship to Brent crude. 56 00:02:17,487 --> 00:02:19,372 Because I think for a lot of our viewers 57 00:02:19,372 --> 00:02:21,624 the price of oil is a real factor. 58 00:02:21,624 --> 00:02:25,078 Right now, it's almost double what it was just a few months ago. 59 00:02:25,228 --> 00:02:28,948 And certainly we've seen inflation peak hopefully temporarily. 60 00:02:28,948 --> 00:02:31,434 But because of those prices, can you talk us through that chart? 61 00:02:31,434 --> 00:02:32,719 Because I find it to be really interesting. 62 00:02:32,719 --> 00:02:33,653 Yeah, we show it to people 63 00:02:33,653 --> 00:02:35,722 because anytime there's a spike in something, 64 00:02:35,722 --> 00:02:37,407 it happens really quickly. 65 00:02:37,407 --> 00:02:40,793 And so investors who weren't there try to get there. 66 00:02:40,793 --> 00:02:44,480 And what the news media tends to do is they tell you why 67 00:02:44,480 --> 00:02:48,001 this problem that just happened is going to get a lot worse. 68 00:02:48,117 --> 00:02:50,970 They never really think about what could get better. 69 00:02:50,970 --> 00:02:53,072 And so what ends up happening is investors 70 00:02:53,072 --> 00:02:57,510 by the time they tend to pile into things like oil or natural gas 71 00:02:57,510 --> 00:02:58,978 after a shock, 72 00:02:58,978 --> 00:03:02,515 they tend to underperform over the subsequent months. 73 00:03:02,515 --> 00:03:04,951 And perhaps paradoxically, to people, 74 00:03:04,951 --> 00:03:06,619 the equity markets tend to do 75 00:03:06,619 --> 00:03:10,456 well after the shocks 6 and 12 months later. 76 00:03:10,456 --> 00:03:14,627 And the reality is, if you go back and look at most conflicts, 77 00:03:14,994 --> 00:03:18,298 the market tends to absorb quickly 78 00:03:18,481 --> 00:03:21,601 and then tends to perform quite well in the 12 months 79 00:03:21,601 --> 00:03:25,255 following the really the peak in geopolitical risk. 80 00:03:25,255 --> 00:03:25,672 Right. 81 00:03:25,672 --> 00:03:28,408 So hopefully you know past is prologue. 82 00:03:28,408 --> 00:03:28,641 Right. 83 00:03:28,641 --> 00:03:30,510 And we can sort of see maybe down the road 84 00:03:30,510 --> 00:03:31,461 there are some positives. 85 00:03:31,461 --> 00:03:33,413 But although you did bring up a really good point, 86 00:03:33,413 --> 00:03:34,847 earnings have been really strong. 87 00:03:34,847 --> 00:03:36,566 Corporate profits are high. 88 00:03:36,566 --> 00:03:37,951 Fundamentals are there. 89 00:03:37,951 --> 00:03:38,401 But you know 90 00:03:38,401 --> 00:03:40,203 and even looking at things like the bond market, 91 00:03:40,203 --> 00:03:41,337 if you look at the 10-year 92 00:03:41,337 --> 00:03:43,673 right now as we sit here, the 10-year has come off. 93 00:03:43,673 --> 00:03:44,941 The yield itself has come off 94 00:03:44,941 --> 00:03:48,745 its recent peak, which was about an 18-month high itself. 95 00:03:48,778 --> 00:03:52,098 So now it's sitting around for 4.48, 4.50. 96 00:03:52,532 --> 00:03:56,185 But spreads, credit spreads are incredibly tight and have been, 97 00:03:56,185 --> 00:03:57,537 which is an indicator that 98 00:03:58,588 --> 00:04:01,157 investors feel confident in the state of the economy. 99 00:04:01,157 --> 00:04:02,842 Can you say the same thing? 100 00:04:02,842 --> 00:04:04,527 What do you - when you look at credit spreads 101 00:04:04,527 --> 00:04:05,628 what are you seeing there? 102 00:04:05,628 --> 00:04:06,512 It's stunning. 103 00:04:06,512 --> 00:04:09,232 Yeah. And they've been tight for a long time. 104 00:04:09,232 --> 00:04:09,782 For a long time. 105 00:04:09,782 --> 00:04:12,268 And they've tightened since the war began. Right. 106 00:04:12,268 --> 00:04:15,288 And if that isn't a testament to the fundamental strength 107 00:04:15,288 --> 00:04:16,406 of corporate America 108 00:04:16,406 --> 00:04:20,209 and the resilience of the US economy, I'm not sure what is right? 109 00:04:20,209 --> 00:04:21,261 That is - credit 110 00:04:21,261 --> 00:04:24,564 spreads are a very true canary in a coal mine for markets. 111 00:04:24,564 --> 00:04:25,315 I know investors 112 00:04:25,315 --> 00:04:26,633 get concerned when they're tight, 113 00:04:26,633 --> 00:04:29,485 but they can remain tight for a long time. 114 00:04:29,485 --> 00:04:30,987 You have to ask yourself 115 00:04:30,987 --> 00:04:33,990 what would cause credit spreads to blow out? 116 00:04:34,007 --> 00:04:37,944 Usually it's a significant deterioration in economic activity 117 00:04:37,944 --> 00:04:40,913 and a change in what the Federal Reserve is going to do. 118 00:04:40,913 --> 00:04:42,448 So what's just happened? 119 00:04:42,448 --> 00:04:43,549 The credit markets have looked 120 00:04:43,549 --> 00:04:45,952 at both of those and essentially yawned. 121 00:04:45,952 --> 00:04:46,886 They've said, yeah, the U.S. 122 00:04:46,886 --> 00:04:48,204 economy is going to slow, 123 00:04:48,204 --> 00:04:50,940 but there's enough support from the government from investment. 124 00:04:50,940 --> 00:04:53,926 The highest income consumers are doing well. 125 00:04:53,926 --> 00:04:57,597 We backed out three, not we, the world, backed out three rate 126 00:04:57,597 --> 00:05:02,452 cuts from the Fed, now maybe they’contemplating a rate hike. 127 00:05:02,452 --> 00:05:04,470 I don't suspect they will. 128 00:05:04,470 --> 00:05:07,690 And the credit market yawned. It did not care. 129 00:05:07,840 --> 00:05:10,677 It seems like they barely paid attention to the news. Right. 130 00:05:10,677 --> 00:05:13,262 And it's you know, you can look at it one of two ways. 131 00:05:13,262 --> 00:05:16,616 Some may look at and say, this market is way too complacent. 132 00:05:16,616 --> 00:05:18,451 Yeah, I look at it and say, 133 00:05:18,451 --> 00:05:19,585 this is fundamental 134 00:05:19,585 --> 00:05:22,789 strength in corporate America and resilience of the US economy. 135 00:05:22,789 --> 00:05:25,308 Do you think it's sort of like, 136 00:05:25,308 --> 00:05:26,642 There are a lot of headlines out there 137 00:05:26,642 --> 00:05:28,378 every single day, and a lot of it is related 138 00:05:28,378 --> 00:05:29,629 to what's going on in Iran. 139 00:05:29,629 --> 00:05:31,881 And it's like, “will they be a ceasefire?” 140 00:05:31,881 --> 00:05:33,149 There's another attack, 141 00:05:33,149 --> 00:05:36,235 and it's almost as if - I always use the word complacent as well 142 00:05:36,235 --> 00:05:37,203 when it comes to markets. 143 00:05:37,203 --> 00:05:39,806 But clearly the real fundamentals are there. 144 00:05:39,806 --> 00:05:43,042 But it seems like there's just so much headline news 145 00:05:43,042 --> 00:05:43,893 every single day 146 00:05:43,893 --> 00:05:46,713 that it's hard to even decipher through the noise. 147 00:05:46,713 --> 00:05:48,147 So you just kind of look again 148 00:05:48,147 --> 00:05:49,949 at the basic fundamentals of the markets. 149 00:05:49,949 --> 00:05:52,251 Yeah, I look at what the markets are telling me. 150 00:05:52,251 --> 00:05:54,737 So I'll tell you when I start to get concerned. 151 00:05:54,737 --> 00:05:58,341 It would be things like inflation expectations rocketing higher. 152 00:05:58,341 --> 00:06:00,893 Yeah they've risen but they're pretty stable here. 153 00:06:00,893 --> 00:06:01,310 5-year 154 00:06:01,310 --> 00:06:02,095 break evens around 155 00:06:02,095 --> 00:06:05,098 2.0, 2.50, 2.60. I'm okay with that. 156 00:06:05,098 --> 00:06:08,267 I'd be worried if the dollar was strengthening meaningfully. 157 00:06:08,267 --> 00:06:10,286 It's up a bit but it's not going nuts. 158 00:06:10,286 --> 00:06:13,940 I'd be nervous if credit spreads were blowing out there. 159 00:06:13,940 --> 00:06:14,807 Not so. 160 00:06:14,807 --> 00:06:18,261 The market is telling me that this is going to be okay. 161 00:06:18,294 --> 00:06:18,594 Now… 162 00:06:18,594 --> 00:06:21,714 where I think investors get it wrong is 163 00:06:21,948 --> 00:06:25,284 I always want to assess markets, not good versus bad. 164 00:06:25,284 --> 00:06:28,321 If you're assessing the world as good versus bad, 165 00:06:28,771 --> 00:06:30,706 you're probably never going to invest 166 00:06:30,706 --> 00:06:32,208 because things are rarely good. 167 00:06:32,208 --> 00:06:32,942 Anthony, I'll tell you 168 00:06:32,942 --> 00:06:33,893 almost every time 169 00:06:33,893 --> 00:06:36,712 I've been introduced in my entire life to speak, 170 00:06:36,712 --> 00:06:37,730 whoever's introducing me 171 00:06:37,730 --> 00:06:40,016 says, well, Brian has a lot to talk about today, right? 172 00:06:40,016 --> 00:06:41,868 So there's always a lot going on. 173 00:06:41,868 --> 00:06:42,201 Yeah. 174 00:06:42,201 --> 00:06:42,985 By the way, 175 00:06:42,985 --> 00:06:44,537 I thought the same thing when you walked in today. 176 00:06:44,537 --> 00:06:46,422 I was like, Brian is going to have a lot to talk about today. 177 00:06:46,422 --> 00:06:47,356 Yeah. 178 00:06:47,356 --> 00:06:49,158 Markets trade on whether things are getting better 179 00:06:49,158 --> 00:06:50,610 or worse relative to expectations. 180 00:06:50,610 --> 00:06:54,864 So think about the beginning of the war on February 28th. 181 00:06:54,864 --> 00:06:56,849 The market assessed this as wow, 182 00:06:56,849 --> 00:06:59,402 this is worse relative to expectations. 183 00:06:59,402 --> 00:07:01,070 And you go down pretty quickly, right? 184 00:07:01,070 --> 00:07:05,041 8%, 10% on the broad indices from there. 185 00:07:05,041 --> 00:07:08,578 If you get a ceasefire, are things going to get better 186 00:07:08,961 --> 00:07:11,964 relative to expectations or are they going to get worse? 187 00:07:12,265 --> 00:07:17,670 And in reality, at least from the hot perspective of the war 188 00:07:17,787 --> 00:07:20,423 and the fact that the two countries are speaking, 189 00:07:20,423 --> 00:07:22,892 things are getting better relative to expectations. 190 00:07:22,892 --> 00:07:24,777 Could that turn? Sure. 191 00:07:24,777 --> 00:07:28,581 But it doesn't seem like it's in America's best interest 192 00:07:28,581 --> 00:07:29,365 at the current moment, 193 00:07:29,365 --> 00:07:30,500 or at least the administration's 194 00:07:30,500 --> 00:07:32,268 best interest with the midterms coming up. 195 00:07:32,268 --> 00:07:33,920 Yeah, well, I'm going to get to that in a moment with you. 196 00:07:33,920 --> 00:07:36,088 But I do want to kind of pivot to the Fed for a second, 197 00:07:36,088 --> 00:07:37,373 because you did say 198 00:07:37,373 --> 00:07:39,392 that the market is pricing in hikes, 199 00:07:39,392 --> 00:07:40,760 even though here, I'll tell you 200 00:07:40,760 --> 00:07:42,178 what our Chief Investment Office’s 201 00:07:42,178 --> 00:07:45,348 view is. 25 basis points before the end of this year - cut 202 00:07:45,648 --> 00:07:48,651 and another 25 bps likely in spring of 2027. 203 00:07:49,135 --> 00:07:50,486 That seems to be our base case. 204 00:07:50,486 --> 00:07:52,939 And we've pushed it out a little further than we expected 205 00:07:52,939 --> 00:07:54,891 it was two (cuts) this year. Now it's one and one. 206 00:07:54,891 --> 00:07:56,242 What are you thinking about the Fed? 207 00:07:56,242 --> 00:07:58,528 We've got Warsh now coming in. 208 00:07:58,528 --> 00:08:01,531 Powell still sitting there with the with the board. 209 00:08:01,731 --> 00:08:03,499 What are your thoughts on what the Fed needs to do 210 00:08:03,499 --> 00:08:04,550 or what they will do? 211 00:08:04,550 --> 00:08:05,485 What will they do. 212 00:08:05,485 --> 00:08:07,970 Ultimately I think the neutral rate is 3%. 213 00:08:07,970 --> 00:08:09,839 So I've thought that's two years in a row. 214 00:08:09,839 --> 00:08:13,676 I thought we were going to 3%, two years in a row, Policy 215 00:08:13,676 --> 00:08:17,697 prevented us from getting there, you know? Why do I say 3%? 216 00:08:17,730 --> 00:08:18,531 In reality, 217 00:08:18,531 --> 00:08:19,982 the spread between the funds rate 218 00:08:19,982 --> 00:08:21,717 and the 10-year Treasury should be around 219 00:08:21,717 --> 00:08:23,486 four and a quarter, four and a half. 220 00:08:23,486 --> 00:08:25,338 If you're less than that, you're restrictive. 221 00:08:25,338 --> 00:08:26,672 So you have a Federal Reserve 222 00:08:26,672 --> 00:08:30,693 that's restrictive right now while the job market is slowing. 223 00:08:30,693 --> 00:08:34,013 Now, can the Fed do that much about the job market? 224 00:08:34,013 --> 00:08:36,299 No, but they could try. 225 00:08:36,299 --> 00:08:38,751 You know, and it's in their mandate to try. 226 00:08:38,751 --> 00:08:39,352 Now. The only way they 227 00:08:39,352 --> 00:08:42,872 wouldn't do that is if inflation expectations 228 00:08:42,872 --> 00:08:43,973 are getting out of whack. 229 00:08:43,973 --> 00:08:48,027 And so what you'd seen is 1-year, 2-year, 3-year 230 00:08:48,060 --> 00:08:51,898 break-evens the bond markets expectation for inflation climb 231 00:08:52,014 --> 00:08:52,848 meaningfully. 232 00:08:52,848 --> 00:08:55,851 So that starts to get a little bit worrisome. 233 00:08:56,068 --> 00:08:58,104 But when you look out at 5-year 234 00:08:58,104 --> 00:09:00,990 the market's kind of sitting there saying price stability. 235 00:09:00,990 --> 00:09:03,593 And even the 3-year has come in more recently. 236 00:09:03,593 --> 00:09:06,662 So if the Fed has price stability, 237 00:09:07,430 --> 00:09:11,400 even with us all paying $70, $80 to fill up our gas tanks, 238 00:09:11,667 --> 00:09:15,288 if the Fed has price stability, they'll likely lower rates. 239 00:09:15,688 --> 00:09:18,841 First thing I learned in this industry is “don't fight the Fed.” 240 00:09:19,225 --> 00:09:22,228 From an asset portfolio perspective, right? 241 00:09:22,495 --> 00:09:22,795 Yeah. 242 00:09:22,795 --> 00:09:24,981 And obviously we're looking at the yield curve every single day. 243 00:09:24,981 --> 00:09:26,249 I know you're doing the same thing. 244 00:09:26,249 --> 00:09:28,584 And as we said, the long end it's higher than the front end. 245 00:09:28,584 --> 00:09:30,353 But it's still, it's coming down a little bit. Yeah. 246 00:09:30,353 --> 00:09:33,422 And I mean what does that indicate to you? I mean obviously 247 00:09:33,439 --> 00:09:35,207 you know Warsh and the Fed are always looking 248 00:09:35,207 --> 00:09:36,926 at what's happening in the Treasury markets. 249 00:09:36,926 --> 00:09:39,228 But they're looking at inflation. They're looking at jobs. 250 00:09:39,228 --> 00:09:39,412 You know 251 00:09:39,412 --> 00:09:40,613 we did see the ADP number 252 00:09:40,613 --> 00:09:43,316 come in recently a little bit lower than the previous month. 253 00:09:43,316 --> 00:09:45,618 Not sure if that's an indication of a slowing market 254 00:09:45,618 --> 00:09:46,369 or job market 255 00:09:46,369 --> 00:09:47,937 because right now it seems like the market 256 00:09:47,937 --> 00:09:50,640 job market is still pretty stable. It's okay. Yeah. 257 00:09:50,640 --> 00:09:51,891 I mean, we're not firing people, 258 00:09:51,891 --> 00:09:53,309 but we're not hiring a ton of people. 259 00:09:53,309 --> 00:09:55,611 That unemployment rate remains historically low. 260 00:09:55,611 --> 00:09:56,679 Kind of neutral ground. Yeah. 261 00:09:56,679 --> 00:09:59,682 What the bond market’s telling us has been interesting. 262 00:10:00,032 --> 00:10:02,218 The move higher in the bond market. 263 00:10:02,218 --> 00:10:03,686 Some of it's been inflation 264 00:10:03,686 --> 00:10:04,770 expectations this year, 265 00:10:04,770 --> 00:10:07,607 but perhaps not as much as people believe. 266 00:10:07,607 --> 00:10:11,661 Some of it's just been recalibrating where the Fed is going to go 267 00:10:11,661 --> 00:10:14,513 and where the terminal or neutral rate may be. 268 00:10:14,513 --> 00:10:18,267 And so ultimately, I think rates are coming back down. 269 00:10:18,417 --> 00:10:22,071 This move in rates is being driven more 270 00:10:22,071 --> 00:10:23,522 from the Strait of Hormuz. 271 00:10:23,522 --> 00:10:26,542 And what's happening with oil and gas prices, what that means 272 00:10:26,542 --> 00:10:27,860 for longer term inflation, 273 00:10:27,860 --> 00:10:30,713 what that means for the Federal Reserve. 274 00:10:30,713 --> 00:10:33,949 Ultimately, I think we get some resolution on this. 275 00:10:34,200 --> 00:10:35,668 The good news is 276 00:10:35,668 --> 00:10:37,787 we don't have a resolution as of this current moment 277 00:10:37,787 --> 00:10:39,772 and again, the markets have shrugged it off. 278 00:10:39,772 --> 00:10:41,457 Admittedly, leadership in the equity 279 00:10:41,457 --> 00:10:44,460 market has changed, but you're still pressing, 280 00:10:44,660 --> 00:10:46,879 highs in the major indices. 281 00:10:46,879 --> 00:10:47,129 Yeah, it's 282 00:10:47,129 --> 00:10:48,564 still a lot of AI momentum 283 00:10:48,564 --> 00:10:50,282 there, especially in the big tech names. 284 00:10:50,282 --> 00:10:53,219 I just even saw the Russell 2000, which is a small-, mid-cap index. 285 00:10:53,219 --> 00:10:54,620 I mean, it hit an all-time high. 286 00:10:54,620 --> 00:10:55,771 So there's 287 00:10:55,771 --> 00:10:58,040 some good things happening on the market side. 288 00:10:58,040 --> 00:10:59,075 So as an investor, 289 00:10:59,075 --> 00:11:00,142 if you're long 290 00:11:00,142 --> 00:11:02,028 you know, if you're long the markets right now 291 00:11:02,028 --> 00:11:02,928 you're doing pretty well. 292 00:11:02,928 --> 00:11:03,813 So that was the question 293 00:11:03,813 --> 00:11:04,580 I was going to ask you 294 00:11:04,580 --> 00:11:05,815 as we wrap up here 295 00:11:05,815 --> 00:11:07,500 with midterms on the horizon 296 00:11:07,500 --> 00:11:09,001 for the midterm elections in November. 297 00:11:09,001 --> 00:11:11,220 So there's a little bit of policy uncertainty. 298 00:11:11,220 --> 00:11:14,223 Obviously there's still no end in sight yet 299 00:11:14,223 --> 00:11:17,360 for the Iran conflict, although we hope it resolves itself soon. 300 00:11:17,660 --> 00:11:21,047 Where are you recommending investors put their money to work 301 00:11:21,047 --> 00:11:22,098 Considering valuations 302 00:11:22,098 --> 00:11:24,917 Are, they're not over the top 303 00:11:24,917 --> 00:11:26,118 but they're kind of getting up there. 304 00:11:26,118 --> 00:11:27,837 Yeah. Where's the best place to put money right now. 305 00:11:27,837 --> 00:11:29,455 Yeah I'm not thinking significantly 306 00:11:29,455 --> 00:11:32,875 about the midterms with regards to where I want to 307 00:11:32,875 --> 00:11:33,743 allocate money. 308 00:11:33,743 --> 00:11:35,928 I mean these happen every couple of years. 309 00:11:35,928 --> 00:11:37,263 We kind of know how they go. 310 00:11:37,263 --> 00:11:40,132 One side gets, you know, single party rule. 311 00:11:40,132 --> 00:11:41,067 Then they get kicked out. 312 00:11:41,067 --> 00:11:42,451 Then the other side gets single party rule. 313 00:11:42,451 --> 00:11:44,103 So we flip back and forth. 314 00:11:44,103 --> 00:11:45,388 We're going to have a divided government. 315 00:11:45,388 --> 00:11:47,123 Investors have been told that that's fine. 316 00:11:47,123 --> 00:11:49,291 I don't know how statistically significant that is, 317 00:11:49,291 --> 00:11:51,060 but they've been told that that's fine. 318 00:11:51,060 --> 00:11:53,012 And that's our base case here in CIO as well. 319 00:11:53,012 --> 00:11:55,931 Divided government, at least the House to the Democrats. 320 00:11:55,931 --> 00:11:57,566 Right. We'll see about the Senate. 321 00:11:57,566 --> 00:12:00,803 But the markets have done well under most combinations. 322 00:12:00,803 --> 00:12:01,404 In fact, they've done 323 00:12:01,404 --> 00:12:02,538 well under 324 00:12:02,538 --> 00:12:05,658 really all of the combinations that are possible. 325 00:12:05,658 --> 00:12:07,410 So I'm not overly concerned about that. 326 00:12:07,410 --> 00:12:08,961 What I focus on with market 327 00:12:08,961 --> 00:12:11,964 leadership is the direction of the economy 328 00:12:11,964 --> 00:12:13,799 and what the policymakers are going to do. 329 00:12:13,799 --> 00:12:15,468 And so it was very clear 330 00:12:15,468 --> 00:12:18,387 the direction of the economy was expanding. 331 00:12:18,387 --> 00:12:19,288 Coming into the year, 332 00:12:19,288 --> 00:12:20,723 you had a lot of fiscal support 333 00:12:20,723 --> 00:12:23,309 in a lot of places and a Fed that wanted to lower rates. 334 00:12:23,309 --> 00:12:23,659 I remember 335 00:12:23,659 --> 00:12:25,311 telling people at the beginning of the year, 336 00:12:25,311 --> 00:12:27,530 if you're not bullish now, I don't know what to tell you. 337 00:12:27,530 --> 00:12:29,899 Yeah, right. You had all of this policy support. 338 00:12:29,899 --> 00:12:31,801 So now you're slowing down a bit. 339 00:12:31,801 --> 00:12:33,903 When you're slowing down a bit, 340 00:12:33,903 --> 00:12:37,590 that's when you go back to mega-cap growth, higher quality. 341 00:12:37,590 --> 00:12:39,308 That's when government bonds rally. 342 00:12:39,308 --> 00:12:42,411 So my expectation is government bonds will rally here. 343 00:12:42,411 --> 00:12:44,163 And they've started to. Yeah. 344 00:12:44,163 --> 00:12:46,282 The big question for investors 345 00:12:46,282 --> 00:12:48,501 is can we get back on that expansion path. 346 00:12:48,501 --> 00:12:51,504 Can we get a reasonable resolution with Iran 347 00:12:51,654 --> 00:12:55,341 that brings any type of inflation pressure off the boil, 348 00:12:55,341 --> 00:12:57,092 even though my expectations are contained, 349 00:12:57,092 --> 00:13:00,079 inflation expectations are good to bring us forward. 350 00:13:00,663 --> 00:13:01,697 Rate easing. 351 00:13:01,697 --> 00:13:06,168 Again, if you get back to that, leadership should shift again 352 00:13:06,168 --> 00:13:07,403 to non-U.S. 353 00:13:07,403 --> 00:13:10,039 dollar or smaller capitalization stocks. 354 00:13:10,039 --> 00:13:12,208 Excellent. Brian I wish I had more time. 355 00:13:12,208 --> 00:13:14,009 Always great to sit with you. Brian 356 00:13:14,009 --> 00:13:15,711 always has a lot to say. 357 00:13:15,711 --> 00:13:17,663 Always stuff going on for you to talk about. 358 00:13:17,663 --> 00:13:19,165 Appreciate you making time to sit here 359 00:13:19,165 --> 00:13:20,583 with me. Brian Levitt from Invesco. 360 00:13:20,583 --> 00:13:22,952 Thank you, my friend, and thank you all for joining us. 361 00:13:22,952 --> 00:13:24,019 Lots more information 362 00:13:24,019 --> 00:13:25,621 coming out of our Chief investment Office 363 00:13:25,621 --> 00:13:27,206 and our great partners like Invesco. 364 00:13:27,206 --> 00:13:28,491 You can check everything out 365 00:13:28,491 --> 00:13:31,510 on our Insights website at ubs.com/views. 366 00:13:31,527 --> 00:13:33,145 Plus UBS is on social media. 367 00:13:33,145 --> 00:13:35,631 You can follow us on LinkedIn and Facebook. 368 00:13:35,631 --> 00:13:38,484 Plus the studio has its own dedicated Instagram channel. 369 00:13:38,484 --> 00:13:40,252 Follow us @UBSTrending. 370 00:13:40,252 --> 00:13:40,920 And as always, 371 00:13:40,920 --> 00:13:41,787 if you have any questions 372 00:13:41,787 --> 00:13:43,639 or want to continue this conversation, 373 00:13:43,639 --> 00:13:45,474 please do so with your financial advisor. 374 00:13:45,474 --> 00:13:46,909 Until next time, I'm Anthony Pastore. 375 00:13:46,909 --> 00:13:48,260 We hope you have a great rest of your day 376 00:13:48,260 --> 00:13:50,362 and remember to keep your eyes on what's trending. 377 00:13:50,362 --> 00:13:52,464 We'll see you soon. Everybody. Thank you so 378 00:13:53,516 --> 00:13:53,766 much.