ANYTHING THEY'RE DOING

I AGREE WITH ALL THE COMMENTARY

ON THAT.

>> ALL RIGHT

OUR NEXT GUEST WARRANTS THE

MARKET IS LOOKING FROTHY ONCE

AGAIN.

MARK WILSON IS MORGAN STANLEY'S

CHIEF EQUITY STRATEGY AND CIO.

HE IS HERE WITH US IN MIAMI.

GREAT TO SEE YOU IN PERSON IN

THE SUNSHINE.

>> IT'S NICE

>> THE FED HAS NO REASON TO EVEN

GIVE AN OLIVE BRANCH TO THE

BULLS AT THIS POINT, DOES IT

THERE IS NO GAIN FROM THAT.

>> I DON'T THINK SO.

I MEAN, THEY'VE DONE A LOT OF

HARD WORK.

THEY'VE DONE THE HARD WORK

THEY'VE RACED TO 4.5%.

WHY QUIT NOW, PARTICULARLY WITH

THE FROTH COMING BACK.

FINANCIAL CONDITIONS ARE

ACTUALLY WHERE THEY WERE A YEAR

AGO ALMOST WHEN THEY STARTED

RAISING RATES.

SO THERE IS NO INCENTIVE FOR

THEM TO DO IT.

BUT I HAVE NO IDEA WHAT THEY'RE

GOING TO DO.

THE WAY I LOOK AT IT IS THIS IS

AN EVENT THAT'S BEEN THOUGHT

ABOUT NOW FOR FOUR MONTHS.

THIS IS PART OF OUR CALL IN

OCTOBER THAT THE FED MAY PAUSE

AFTER THIS MEETING

SO WE'VE HAD THE RALLY AT THIS

POINT, RIGHT

TO ME IT'S SIMPLY THE MARKET

NEEDS TO GET PAST THIS EVENT

AND THEN WE CAN PRICE TO

FUNDAMENTALS AGAIN, WHICH ARE

DETERIORATING.

>> FINANCIAL CONDITIONS ARE AS

LOOSE AS THEY CAN BE

YET THE MARKET DOESN'T SEEM TO

ACKNOWLEDGE IT

ONE WOULD THINK GIVEN WHAT THE

FED HAS DONE FOR THE LAST 14

MONTHS, FINANCIAL CONDITIONS BE

AS TIGHT AS THEY'VE BEEN IN A

DECADE

THEY'RE NOT.

SPEAK TO THAT.

AND WHAT IS THE MARKET NOT

SEEING

>> I THINK THE MARKET DID ADJUST

THAT LAST YEAR

WE SAW A MAJOR ADJUSTMENT IN

MULTIPLES IN THE BOND MARKET, OF

COURSE, BECAUSE THE FED DID

TIGHTEN OR FINISH CONDITIONS

BUT NOW THE MARKET IS LOOKING

PAST AS IF ALL THE FUNDAMENTAL

NEWS CAN BE OVERLOOKED

A AND THE FUNDAMENTAL NEWS IS

DETERIORATING SIGNIFICANTLY.

WE'RE SEEING THAT EARNINGS

TONIGHT.

YOU GUYS WERE JUST DISCUSSING

THAT

WE THINK THAT'S GOING TO

CONTINUE TO BE THE CASE.

ONCE THIS EVENT GETS PAST US,

AND PEOPLE REALIZE THE FED IS

NOT CUTTING THE RATE, THERE IS

NO MORE HEROIN, SO TO SPEAK,

THEN WE'RE GOING PRICE THE

FUNDAMENTALS WHICH ARE CLEARLY

DETERIORATING IN OUR VIEW.

>> WE'VE SEEN THIS CYCLE BEFORE

THE LAST YEAR WHERE INVESTORS --

ESTIMATES COME DOWN END OF THE

QUARTER.

THEY'RE NOT AS BAD AS EXPECTED

WE SEE STOCKS RALLY OUT OF IT.

BUT AGAIN, WE'VE SEEN THEM PULL

BACK AND MAKE NEW LOWS

WHEN YOU THINK OF THE ROTATIONS

WE'VE SEEN OVER THE PAST FEW

MONTHS, MONEY INTO FINANCIALS,

INTO INDUSTRIALS, INTO ENERGY

AND LIGHT, THERE IS A RISK

THERE.

AND STOCKS THAT LOOK REASONABLY

PRICED

BUT IF WE DO BOTTOM SOMEWHERE

LIKE 14 TIMES EARNINGS, THEY MAY

LOOK REALLY EXPENSIVE, SOME OF

THESE INDUSTRIALS.

>> I KNOW WHERE YOU'RE GOING

WITH THIS.

THE CYCLICALS ARE PROBABLY MORE

RISKY THAN THE GROWTH STOCKS

THE GROWTH STOCKS, A LOT OF THEM

HAD THEIR COMEUPPANCE WITH THE

CONDITIONS TIGHTENING.

NOW THERE IS THIS NARRATIVE THAT

CHINA IS REOPENING, INFLATION

HAS PEAKED

WE CAN LOOK THROUGH THE VALLEY

HERE AND START BUYING EARLY

CYCLICAL STOCKS.

I THINK THAT'S A REAL MISTAKE,

GIVEN THE DEGRADATION IN

EARNINGS WE THINK IS COMING.

>> HOW SURE ARE YOU THAT

INFLATION HAS IN FACT PEAKED

WE JUST GOT SPAIN'S INFLATION

NUMBERS ON MONDAY.

I NEVER THOUGHT I'D BE TALKING

ABOUT SPAIN'S INFLATION NUMBERS.

BUT INFLATION WENT BACK UP

AND THAT'S GOING TO MAKE THE JOB

OF THE ECB WHICH MEETS LATER

THIS WEEK TOO A LITTLE BIT

HARDER.

>> AND THERE ARE SO MANY OTHER

CROSSCURRENTS.

WITH CHINA REOPENING, ISN'T THAT

DIRECTLY IN THE FACE OF FIGHTING

COMMODITY INFLATION, FOR

EXAMPLE?

GASOLINE PRICES ARE UP 30% OVER

THE LAST MONTH

WE'RE SEEING OTHER COMMODITY

PRICES SPIKE UP.

SO IT'S MAKING THE FEDS' JOB

HARDER, WHICH SPEAKS TO YOUR

POINT.

WHY GET OFF THE TRAIN NOW?

IF THINGS WERE CRASHING AND

THERE WAS ALL KIND OF DISTRESS

OUT THERE, I GET IT.

BUT THAT'S NOT WHAT'S HAPPENING.

THERE IS NO INCENTIVE.

>> A QUESTION FOR MIKE

>> YEAH, MIKE.

YOU TALKED ABOUT THE NEGATIVE

OPERATIONAL LEVERAGE

I THINK THAT'S A BIG PART OF THE

EARNINGS STORY

HERE WE ARE AT AMD REPORTING

TODAY AFTER THE BELL

AND WHAT WE'RE HEARING FROM AT

LEAST A LOT OF SEMICONDUCTORS,

YOU JUST TALKED ABOUT CYCLICALS,

YOU CAN MAKE AN ARGUMENT THAT

THESE FOLKS ARE GIVING YOU THE

CLEARANCE TO SAY THROUGH THE

MARCH QUARTER, THROUGH THE JUNE

QUARTER, WE'RE KIND OF AT OUR

BOTTOM

WE'VE REMEDIED INVENTORY

WHAT'S YOUR CALL ON THAT

BECAUSE, AGAIN, A LOT OF THESE

LEADING INDICATOR CYCLE STOCKS

HAVE ALREADY UNDERGONE A LOT OF

PAIN

>> YEAH, I THINK THAT'S FAIR

BUT WE THINK FIRST OF ALL

SEMICONDUCTORS NEVER REALLY WENT

THROUGH THE RECESSION BECAUSE OF

THE MAJOR OF THE PANDEMIC THERE

WAS A PULL FORWARD

THEY ACTUALLY HAD KIND OF TWO

CYCLES IN ONE.

WE ACTUALLY THINK THE DAMAGE IN

THAT SPACE IN PARTICULAR IS

GOING TO BE ONGOING AND THE

MARGIN PRESSURE WILL PERSIST

THIS IS A THEME WE THINK IS

GOING TO HAPPEN ALL OVER THE

ECONOMY.

IT'S NOT JUST TECH

I WANT TO MAKE THIS CLEAR.

IT'S OTHER AREAS TOO

WE'RE SEEING NEGATIVE LEVERAGE

AND FINANCIALS, IN SOME OF THE

INDUSTRIALS.

WE'RE SEEING IT IN THE CONSUMER

FOR SURE WHERE THE OVEREARNING

WAS THE GREATEST

AND THIS IS JUST SOMETHING WE

THINK IS HAPPENING, WHICH IS

NOBODY SAW THE INFLATION COMING.

NOW THEY'RE OPERATING ON THE

NEGATIVE CYCLE

WE HAVE TO GO WITH THE WORK.

THE FUNDAMENTALS WILL DECIDE HOW

LOW WE GO.

>> YOUR TITLE IS CHIEF U.S.

EQUITY STRATEGIST, MIKE.

BUT EARLIER TODAY ON THE PANEL

THAT WE'RE BOTH ON, YOU SAID

LOOK ELSEWHERE IN TERMS OF

EQUITIES AND LOOK AT BONDS

>> YES

>> THAT'S THE MESSAGE THAT --

RIGHT, RIGHT

BUT THAT REALLY GOES TO THE

HEART OF ALL OF THIS, RIGHT?

THAT THIS IS AN EXTRAORDINARY

TIME FOR YOU.

>> THAT'S RIGHT.

LOOK, I DO THE ASSET ALLOCATION

FOR OUR CHANNELS TOO

I DO LOOK ACROSS CAPITAL

STRU

STRUCTURE.

THE TITLE OF OUR REPORT THIS

YEAR WAS THE YEAR OF YIELD

THAT MEANS THERE IS NOT RISK IN

LONGER DURATION BONDS OR MARKETS

OR CREDIT ISN'T GOING TO HAVE A

TOUGH TIME IF WE GO INTO

RECESSION.

THE SEQUENCING IS ALWAYS THE

SAME

THE FED TIGHT 10s.

THE RATES GO UP.

YOU GO TO CASH FIRST, DURATION,

CREDIT, AND EVENTUALLY YOU GET

TO EQUITIES.

WE'RE SUCH AN EQUITY CULTURE

EVERYBODY WANTS TO PUT THE

EQUITY CART AT THE FRONT OF THE

HORSE.

THAT'S JUST NOT THE WAY IT

WORKS, AND IT'S A MISTAKE.

>> FOR YOU, WHAT IS THE SIGNAL

TO BE PUTTING MONEY INTO

EQUITIES

IS IT WHEN THE FED EASES AGAIN

>> WELL WE DID PUT MONEY INTO

ASIA

>> FOR U.S. EQUITIES, I THINK

IT'S GOING TO BE A COMBINATION

WHERE WE THINK THE EARNINGS

REFLECT CLOSER TO REALITY, AND

VALUATIONS REFLECT THAT TOO.

IT'S A TWO-EDGED SWORD

THE FED WILL BE PART OF THAT

STORY.

BUT I CAN THE FED WILL PROBABLY

BE CUTTING RATES LONG AFTER THE

MARKET HAS BONDED.

THAT'S MY GENERAL VIEW BECAUSE

THE FED IS GOING TO HAVE TO HOLD

FIRM

I THINK THEY'RE GOING HAVE TO DO

THEIR JOB.

JAY POWELL IS HERE TO MAKE