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00:00What is your perspective on this first half horrible second half. Dot dot dot. What do you see. Yeah I mean there's no question we're in an uncertain environment and I think everyone's pointing out the very obvious risks that we're facing on the one hand with inflation and then on the other hand with recession. And right now I think the consensus is saying that you know inflation is peaking whether it's peaked you know now or whether it's going to peak soon. It's kind of running its course. And a recession is a risk but it's a lower risk. And if we do see a recession it's a more moderate recession. So any instance that we have where inflation doesn't follow that narrative or the recession is more severe than people would anticipate. I think we're going to see continued losses in the market. So that's something that we're preparing for. And what we're thinking about is kind of considering this market a dollar cost averaging market valuations have come off. We see more attractive valuations in equity and fixed income. So it's a market to start to lag into but it's not a market to try to time. Given the uncertainty. Okay the concern that a lot of people have for the second half is very much on the earnings front that they see that earnings story really starting to unravel and unravel fairly quickly. What did you see that. Right so the pressure is on earnings come on both the cost front from an inflation perspective and then also from a revenue perspective as you see maybe sales start to decline. And certainly we see CEOs starting to say that you know that the risks of a recession are the concerns that they have are growing. But when they look at their own companies there's still a little bit more optimistic. When we take a look at earnings. Certainly we're taking account that pressures that we see today. But we're also looking through to kind of a more normalized long term perspective. And so to the extent that we can find healthy companies who might have earnings blips in the near-term but longer term their earnings are still very attractive and valuations look good relative to those earnings. And that's what we would consider an opportunity. You mentioned fixed income so let's just talk about what is happening there. The German two year. Schatz has just set its biggest weekly range on record. We are seeing yields coming off very sharply today and they have done over the last few days as well. It's true over where you are right now in the AMA and in America too. The market seems to be signaling that the Fed is not going to be able to deliver the rate hikes that the Fed is talking about yet. What I heard from the Fed this week from Jay Powell and from others is that they are determined to stamp out inflation. Who's going to end up being wrong here. The bond market or the Fed. I think one thing that the Fed has done historically and what we've seen in the current cycle is that they want the market to do the work for them. So they have very strong language in language. Frankly that's getting stronger about the you know their their approach to inflation and that they're single minded and they're willing to take on some recession risk in order to to stamp out inflation. And I think it's fairly consensus to assume that in the near term the Fed is going to continue to fight really hard in terms of raising rates and taking a more tightening posture. I think there is reasonable skepticism on how the Fed is going to behave longer term whether when we start to see real cost on an economic level whether the Fed will stay the course or be willing to live with a bit higher inflation. I think they'd want to see some movement in the direction that they're pushing you know see some tapering I guess of inflation before they would make that past year. But I think that's a risk. So would you be averaging into the bull market as well today. Would you be doing that over the next few days after the kind of moves we've seen this week. You know interestingly enough we do see fixed income as a more attractive opportunity than it's been. You know that's that might seem somewhat bizarre given where inflation is given the path of interest rates. But yields have popped and we're seeing spreads that much more attractive level. So I wouldn't call it a screaming buy but I would say if we're underweight inflation maybe we're starting to reduce that underweight really across the board in the different areas of fixed income given the fact that everything is swinging around massively more. So what's your degree of certainty. Clearly the market is really struggling to get a handle on what is happening. Rates so as an investor I don't think uncertainty I think and probabilities. And so as I think about that and I see valuations come off I do think that this is an opportunity to start moving in. That doesn't mean that there isn't more pain to come but we won't time that bottom. And frankly no one will. And so as we see valuations come off and we have a 5 10 year time horizon it's time to start adding potentially to equity taking from alternatives. Those hedge like strategies convertible arbitrage merger arbitrage which is something that we use in our portfolios and moving back into fixed income and equities in incremental steps.

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Morningstar's Norton Says Inflation Is Peaking

The bears have been out in 2022, but Marta Norton, Morningstar Investment Management CIO for the Americas, told Guy Johnson she has a positive outlook on the US Economy for the rest of the year. Norton said this Friday morning on "Bloomberg Markets: Americas". (Source: Bloomberg)

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