U.S. EQUITY MARKET LAST YEAR

EVEN FOR GUY, THAT IS A LARGE

NUMBER

THE NEXT GUEST MAY BE A CERTAIN

LONG-TERM BUYING OPPORTUNITY

LET'S COMBINE THE MARKETS AND

THE FED AND SOME SCHOOL NAMED

GEORGETOWN

PAUL McCULLY IS NOW TEACHING AT

AFOREMENTIONED GEORGETOWN AND

JOINS US NOW ON THE "FAST" LINE

AND CHOMPING AT THE BIT TO GET

IN ON THIS CONVERSATION, PAUL.

TIM SEYMOUR, I HAD TERMINAL RATE

AND HE'S REFERENCING IT GOING

UP

HOW CLOSELY CONNECT IT THE

FEDERAL RESERVE MONEY SUPPLY AND

THE ABILITY OF STOCKS TO GO UP,

HOW CONNECTED ARE THOSE THINGS

>> I THINK THE CONNECTIONS ARE A

WHOLE LOT CLOSER TO THE POLICY

RATE THAN THE MONEY SUPPLY PER

SE

I THINK THE MONEY SUPPLY SLOWING

DOWN AND ACTUALLY GOING DOWN IS

REFLECTING A SLOWDOWN IN OVERALL

DEMAND FOR CREDIT, LEVERAGE AND

SO FORTH.

SO THE BIG ISSUE FOR ME IS THE

POLICY RATE AND THEN, TWO, HOW

DOES THE YIELD CURVE RESPOND TO

IT

SO I THINK WE'RE ALMOST FINISHED

THE TIGHTENING PROCESS

IT IS EEJ A LITTLE BIT BELOW 5

OR ABOVE 5

BUT I THINK WE PUT IN THE HIGHS

FOR THE YIELD CURVE IS INVERTED

AND IT IS TIME TO THINK IN TERMS

OF YES, I PIVOT, NOT IN THE

DISTANT FUTURE BUT PROBABLY BY

THE MIDDLE OF THE YEAR

>> OKAY.

AGREED

AND I THINK THE DEBATE OVER

RATES GOING UP IS PROBABLY OVER

OR REALLY DARN CLOSE TO IT,

PAUL

SO LET'S DEFINE PIVOT.

BY THE WAY, MAYBE OUR WORDLE

STARTING WORD TOMORROW

THERE IS TWO PIVOTS.

THERE IS THE PIVOT TO CUTTING

RATES WITH THE FED AND THEN

THERE IS THE PIVOT TO NOT

RAISING THEM BUT NOT LOWERING

THEM AND KEEPING THE RATE AND

THE RATE AND EVERYTHING HIGH FOR

A LOT LONGER THAN MANY PEOPLE

EXPECT

WHICH ONE WOULD YOU BE LOOKING

FOR?

>> WELL ACTUALLY YOU'LL HAVE --

A STOCK THAT THEY COULD REVERSE

AND CUT.

SO YOU HAVE A PAUSE, THEN A

PIVOT.

TWO P'S IF YOU WILL.

AND I THINK THIS WILL NOT BE

THAT FAR APART

AND I THINK THAT THE PAUSE WILL

BE THE CATALYST FOR RENEWED RISK

APPETITE AND THEN THE PIVOT WILL

BE THE TURBOCHARGER.

>> ALL RIGHT

SO YOU HEARD OUR DEBATE BETWEEN

EQUITY MARKETS AND RATES

I'LL GO BACK TO MY FIRST

QUESTION, PAUL

IF THE FED STAYS WHERE THEY ARE

FOR A WHILE, IS TECH TOAST FOR A

WHILE?

FOR THE SAME LENGTH OF TIME?

>> I'M NOT SURE.

BECAUSE THE FED CAN FIND A

PLATEAU AND TELL US THAT THEY'RE

GOING TO STAY THERE FOR A WHILE.

BUT I DON'T THINK THE YIELD

CURVE NECESSARILY WILL BE

SINGING IN HARMONY

I THINK IT WILL BECOME EVEN MORE

INVERTED AS THE FED FINISHED

THIS TIGHTENING PROCESS.

AND I WOULD SUGGEST THAT GROWTH

STOCKS IN THE MARKET FOR BROADLY

IS GOING TO BE KEY TO WHAT IS

GOING ON IN THE FIVE AND SEVEN

AND TEN-YEAR PART OF THE CURVE

AND IN THAT PORTION OF THE CURVE

COULD MAINTAIN AND -- ITSELF AND

HAVE LOWER RATES, THEN YOU JUST

HAVE A HIGHER INVERTED YIELD

CURVE, BUT THE EQUITY MARKET

COULD GET A GRIP

>> HEY, PAUL, IT IS KAREN,

THANKS FOR BEING ON AND HAPPY

NEW YEAR

COULD YOU TELL ME IN YOUR

THESIS, WHAT DO YOU THINK

INFLATION HAS TO BE AT TO ALLOW

THE FED TO PAUSE AND PIVOT

>> I DON'T THINK IT IS A LEVEL,

I THINK IT IS MANIFESTLY GOING

DOWN, DISINFLATING ACROSS A

BROAD SPECTRUM

AND CHAIR POWELL HAS ALREADY

EFFECTIVELY TOLD US THIS IN THE

SENSE THAT WE'VE SEEN GOODS

STARTING TO DISINFLATE AND SOME

PLACES DEFLATE AND SEEING THE

HOUSING MARKET DO THE SAME AND

THE THIRD BUCKET FROM MR. POWELL

IS SERVICES AWAY FROM HOUSING

AND HE LOOKS AT THAT BEING

DRIVEN BY THE TIGHT LABOR MARKET

AND WAGES AND THAT IS THE LAST

THING THAT HAS TO CRACK UNCLE

AND WHEN IT DOES, THEN THE F