UK’s Child-Care Costs Under Examination

have here in the US. This week, though, in the upcoming new issue of Bloomberg Business Week at on newsstands on Thursday, already on the Bloomberg In online at Bloomberg dot com Slash business Week, a story on the exorbitant childcare costs in the UK, which happened to be the most expensive among the O E c D countries, and how the calls will reform in that country are growing louder. So let's get to it, and let's get to her story.

From Bloomberg News Equality reporter Olivia knot a Hulu with us on the phone from London, along with Bloomberg Business Week editor Jil Whever. He is here in our Bloomberg Interactive Broker studio. All right, Joel, I thought it was bad here, really bad, it is actually, But it turns out that we are not alone and that the UK actually has things even worse, m Olivia, what did What

are the numbers reveal as you dug into the story? So, I think the most striking one is what you mentioned in terms of just the fact that proportion proportionate to what people earn, the UK has the highest childcare costs in UM in the O E c D, which is obviously very striking, and just the sense that some people are paying more on childcare costs and their mortgages UM.

Some people are, some women are finding it's actually well, some parents and women to sticks are finding that it's more cost effective not to work because they earn less than they would pay on childcare UM. So that's coming some of the figures that we're seeing at the moment. Okay, so if it's so expensive that people are giving up their jobs just to take care of their kids, that

cannot bode well for the economy. And this is an economy that has already I know, I know the word brex it maybe give you a little PTSD sail Olivia, but but what does this mean for the economy. So one of the general effects, one of the things that people generally find is that when childcare is very expensive and when women are generally the people who will kind of um take the hit and either cut back their hours or stay at home. And what we're seeing that

that potentially could be the case in the UK. So what we've seen in the latest data available that um quite a few women left the workforce to stay at home and that's kind of been roughly happening over two which is one of the first time that's happened in

about twenty years, so that's quite concerning. And overall, what one report found that you know, that cost if the UK had a similar employment rate female employment rates to Sweden, then you know the economy would gain a hundred and seventy seven billion pounds dollars a year, so you know, that could potentially be quite a big economic win. Olivia, I think it's worth talking about why why are costs

so high? Is this a function of supply because clearly you're seeing you know, demand is strong but maybe decelerating with all these women leaving the workforce. Because the cost is so high, there must be a supply constraint hidden in here that's creating high cost of childcare? What is it?

And one that's part of it? So you do speak to women who well to parents where it's pretty normal for them, for example, to triumph a childcare placed before they're born, and that kind of can be exacerbated depending

on where you live. But what if you talk to anyone in the industry, what pretty much everyone says, without um exception, is that the way that childcare subsidies are structured basically means that although childcare costs are partly subsidized, when your child turns three or four, um, the cost of that the cost of those substitutes aren't fully met by the government, so providers have to hike their costs in order to meet those costs, which makes having which

makes there anyone who's not doing no subsidies basically very very very expensive UM. And so what people in the industry are generally saying is that for the immediate term, what's just needed. It's just more cash. Hey, Olivia talked to us about the political will to actually do something substantial, because when I think about it here in the US, I feel like it's very low when it comes to the list of priorities of you can throw billions of

dollars around and it's still not really touched. Childcare in the US, right, it's like in the UK. Well, I think it is a growing it is a growing theme. So last year there was this big protest called March the Mummy isn't really kind of really court people's attentions because they were just all these mums saying that they were fed up basically. And also last year they started the inquiry and the issue and the Labor Party, the

opposition party, is really kind of doubling down. So recently, um, one of their officials went to Estonia because they have a really kind of exemptary model of childcare and there's this growing kind of recognition that something needs to be done because a lot of people are really really angry and it is going to be is potentially going to be a key electoral issue going forward. What did you

say Estonia? What can we learn from Estonia here? Well, it's interesting apparently they have relatively low childcare costs, but there's a lot of kind of childhood of courts are very low basically, and that really kind of has helped the female employment rates. UM. So yeah, Labor's education spokesperson went went to Estonia and and they have really good

educational outcomes as a result. Also Worth mentioning that if if you're going to start a march, March of the Mummies is definitely going to get in some people's attention, want the T shirt along with that. So what's the likelihoods and everything? All right? So, Olivia, what's the likelihood though that anything changes or is there a time frame that that's being thought about? Well, the thing is that the election the next general elections in the next two years.

So if if major reform is going to be done, then the clock is ticking. And what one study said is that most kind of liberal economies which are similar to us, have had some kind of major reform of childcare in the past five years or so, but the UK it's biggest change within two thousand and seventeen, and a lot of people said that in many things worse.

So what some people would say that changes over to you basically, and considering the laundry list of issues that the Labor Party is going to try to contend with, this is obviously one of them. But how would you rank this relative to the other issues that the party is really focused on right now? Well, I think the cost of living in the UK does eclipse almost anything.

It feels like at the moment, and although inflation isn't as pronounced as it was saying at some point last year, it's still I think, just just people getting by and the health of the economy is the number one concern. But obviously part of that is childcare cost for families are just a really, really substantial expense, So I'd say for that particular group of the voters it is pretty high.

So just on that political front, like what what could become of this, is anybody willing to really step into the ring and say this is a political issue that we can really get behind, or is it's still just so divisive like it is here in the US that no one's really willing to go to back for it. I think it's difficult because fundamentally what's being asked for in the short term, at least, there's a lot of money.

In the UK does feel like there's a lot of things which needs another a lot of money for for example, the NHS, the health services, the other it's another massive issue. A lot of public place servants want more, want higher pay for much inflation, There's so many things kind of competing for the government's attention. It's hard to know if they would. It's hard to to know if they will choose this as the issue where they're going to pour money into UM, but so I think that's my way

of thinking. It's hard to know at this point. Yeah. An interesting aspect of the story too that they're mostly are largely privately held companies, a lot of them are leveraged, and the insolvencies of Search often leads to you know, ultimately higher class as well. Olivia really interesting story a

via Ka ta Hulu. She's a quality reporter at Bloomberg News on the phone from London along with the editor of Bloomberg Business Week, told Webber the story in the upcoming new double issue up Bloomberg Business Week, out later this week, but already on the Bloomberg and Bloomberg dot com. This is Bloomberg business Week Inside, from the reporters and editors who bring you America's most trusted business magazine, plus

global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim stinebec from Bloomberg Radio on our radar. This week thirteen filings which institutional investment managers are required to file quarterly, and it really does give investors some clues on how some of the most watched investors have been investing their money. We are usually obsessed with them and watched them because they can move

share prices. Our next guest uses machine learnings to create index replication et s to track all the investments such as hedge funds, VC venture cow but and also private equity. Bob Elliott is the CIO at Unlimited and is former senior investment executive at Bridgewater Associates. His bio reminds us that he built and led Ray Dalios personal investment research team for Newly a decade and he's here in our Bloomberg Interactive Broker studio. Hey, welcome, Nice to have you

here with Gena and myself. How are you? Thanks so much for having me. Great to be here. What was it like to be with Ray years? It was great. It was, you know, really a formative time in my career, particularly starting around the financial crisis and navigating that challenging time, and then of course you know, the decade and a half cents and so it was really about about the best place and about the best time to to learn how the macro economy works and how how financial markets work.

So it's really it was a great time. So talk to us about what you've taken from your lessons at Bridgewater and brought to your new organization. I mean, it sounds fantastic because it sounds like the confluence of hedge funds and AI and machine learning, and these are all things that people are very, very captivated by. So how

are you utilizing a machine or learning in your process? Now? Well, if you think about it, most investors, whether they're explicit about it or not, use a set of decision rules to make to inform their investment decisions, right, And of course some people are more explicit about it, using an explicit systematic approach. Some people call themselves discretionary, but they're

using heuristics. And what we can do is we can draw on our understanding of the types of decisions that those investors are making, the types of assets that they're making across different hedge fund strategies. So like equity long short managers are a little different than global macro folks than fixed income are. And with that understanding, we can actually look at the returns of those managers and infer what they're doing and close to real time, and that's

what we're really doing. That's what our technology is all about, is understand seeing what they're doing, seeing the outcomes of their strategies, knowing what they could plausibly be betting on long and short, and then we can take that understanding and package it into an et F structure and make it accessible to everyone in a in a very tax efficient form. What kind of back testing did you do

to really figure out that this works? Because because once you get the filings right, all of these investment folks could have been out of the positions in different positions. So I'm trying to understand how this strategy can be used going forward. We don't actually look at the filings. We look at the returns, which is really important because

it's still after the fact, isn't it. It is after the fact that we actually have pretty timely returned some some returns information that's daily, some of it is a few days after the end of the month, and so we have a pretty good real time sense of what types of positions these folks have on. And the interesting thing is at sort of the industry wide level or

hedge fund style level, they don't move that fast. Uh, you know, the shifts, say from being very into growth stocks and tech stocks to being more positioned in value stocks. Really transitioned from say the summer of until early two. That's a pretty normal, normal shift in thinking and positioning amongst hedge fund managers. That's sort of twelve to eighteen month time frame. And so when we're when we're doing what we're doing, we're a few weeks behind the actual positions.

But you know, relative to uh, relative to capturing understanding of what these most sophisticated asset managers are doing, it's it's it's a pretty good job of capturing what they're doing. And then when you're actually capturing what they're you're doing, are you investing alongside them effectively or are you ever going against them? For instance, if they're going more long small caps, are you always going more along small caps or are you taking that as a contrary signal and

going short small caps in your strategy. What we're doing with our first product is we're replicating the returns of the aggregate hedge fund industry. So we're going along with what we see those managers doing and trying to match it as closely as we can. And that's because you know, the truth is hedge fund managers are pretty darn good at investing them, surely inaggregate, particularly when you when you

consider the the strategy. So if you add back the fees, which is really one of the things that we can do because we don't have to charge two and twine, we use technology to replicate what they're doing rather than charge two and twenty and so grossive fees. You know, if you add back the fees, hedgemen managers are great, it's just the challenges. You can't invest in them typically

without that high fee structure. And so what we're trying to do is infer what they're doing and offer it a much lower fee structure than a typical LP position. How does this work for VC and p E because they're not all the same worlds. Absolutely absolutely, those those

positions and those exposures are different. Although the same idea that there's a set of core decision rules that those investors are making to identify what type of investments they wanted they want to put in, they want to invest in is it's it's the same basic concept except they're what we're doing is we're looking at their private market investments and finding look alike type companies in the public markets that we can use that look a lot like

the type of investments that they're doing, particularly later stage investments that they're doing. We can take that understanding, find lookalikes in the public markets and use that and package that as an e t F to make it widely accessible. And the tradeoff is it's imperfect, but you also don't have your money locked up for you know, ten or twelve years, and you don't have to pay two and

twenty fees. So how do you speaking of fees, I think immediately of transactions costs, I would think that this is a pretty lumpy sort of transactions cost strategy where you have the thirteen F filings, all of your transactions occur. How do you manage those transactions costs and also manage the impact that you may have on the market by having such a lumpy trading period. Yeah, because we're looking at the returns, we actually get information, incremental information kind

of all the time. Every week or two we're getting new incremental information, and so that allows us to evolve the portfolio through time in instead of in a concentrated way, in an incremental way, and that and that helps reduce the transactions costs that that we see. We also typically are trading and you know some of the biggest liquid markets, the sixty biggest liquid markets in the world, and so

those markets fortunately have much lower transactions costs. Then if you know, we were trading very specific positions, so no fees or low fees. Low fees we we charge at basis point management fee, which you know, when you think about that in the context of say two and twenty type products, right, you know, a typical hedge fund strategy charge what four hundred basis points on average per year looks like a good deal, and you know, I probably don't have to sell you all on the et F structure.

But it also comes with the incredible tax efficiency of an et F, whereas most of these hedge fund structures are fund to fund structures are typically LP positions and their tax at ordinary income, which is much less efficient than an ETF. Bob, how do you think, though, you know, we're coming out of this environment where money was so cheap for such a long time, and we're also coming out of a pandemic where again we had just so

much money flooding the market. How might that we're all trying to figure out what everything is on the other side and whether we are in somewhat of a new normal, right, so, how do you think about how that might potentially impact performance? For sure, the dynamic for fifteen years of unbridled monetary stimulation was if you bought pretty much pretty much everything went up, and the more risky the thing that you bought,

the more it went up. Typically, And and that air is over and the fetes make it very clear that that era is over. And so now we're in an era of of tighter monetary policy and a lot more

macroeconomic uncertainty. And that's a period of time where alpha typically shines, right because you have the most sophisticated asset managers who can who spend billions of dollars on you know, the smartest minds to figure out what's likely to transpire, and that's where they really shine is in those difficult moments, those uncertain moments, where they can position their portfolios agilely in a way that helps them navigate the difficult ronment.

If you look back last year, you know, hedge funds, the hedge fund industry in general in aggregate was roughly flat at a time when you know sixty stock index investing was down fifteen or that's the that's the type of significant outperformance that you can see in these in these very challenging times from the sophisticated asset managers. So you gave us the opening to talk about positioning, So

I'm just going to dive right in. What are you seeing with respect to position And you talked a little bit about the value growth transition or the growth value transition over the last year. What are the big themes in terms of positioning this year. I think the biggest thing which connects to that aggregate uncertainty is we're actually seeing managers playing about as conservatively as we have seen in the last twenty five years other than the acute

crisis periods of oh eight and twenty. And I think that speaks to the fact that there is a lot of uncertainty, macro uncertainty about exactly where we're going. Is it, you know, higher for longer or has the FED tightened enough to tip us into recession? And in those moments, um you don't have to you don't have to hold your max positions in order to UH, in order to continue to earn, to continue to deliver those returns. And

so that's what we're seeing as a conservativism. And then under the under the hood, what we're seeing is a bunch of positioning in line with that, tilted towards value stocks, tilted towards higher top part of the credit stack, positions like that that are defensive in nature in this environment. All right, we're gonna have to leave it there. I'm

good to know. I know you're just getting these funds off the ground, or get you got one fund off the ground, right, one fund, the h F n D E t F. Looking looking forward to hear a little bit more as you guys build out. Bob Elliott, Chief Investment Officer Unlimited. Here in our studio, you're listening to the Bloomberg Business Week Podcast. Catch us live week days from two to five pm Eastern on Bloomberg Radio, the

Bloomberg Business Bank You do. You can also listen live to our flagship New York station, Just say Alexa, play Bloomberg eleven, Dirty This Next story, Today's Big Take and Big Take podcast. You can find it at Bloomberg dot com or wherever you get your podcast. Don't miss also the Big Take on Bloomberg Radio. That's weeknights at eleven pm. Wall Street Times story at eleven pm Wall Street Time.

So you want to know what the story is because it also happens to be one of our most read It's about how global cities and businesses are still struggling to get workers back into offices and the economic cost of not being able to And it's really pronounced when you think about Manhattan. So let's get to it, uh. In our interactive broker studios. Emma Court, she's reporter at Bloomberg knew she and some of our colleagues here wrote this story, and she joins Gina and myself, So all right,

break it down to us because we keep talking. I keep talking with executives like people are coming back, but it's a lot of hybrid work still going on, especially here in New York City. Yeah, so I think that there are kind of two key takeaways from our story. The first is that workers are back in offices. They're just back full time. They're not back at the same levels they used to be, and they're definitely not back

at the same levels on Mondays and Friday's. The second big takeaway is as a result of some of these big shifts and work schedules. We know that workers are spending less money in and around the office than they used to be. Thinking about it, your coffee in the morning, you're salad at lunch, you're happy hour after work. That's spending, you know, isn't happening near the office anymore. It maybe help it happening elsewhere, but it's not happening, you know,

here in Manhattan sometimes. So we calculated that the cost of this shift in spending for Manhattan is a missed twelve point four billion dollars a year. So that's twelve point billion dollars of consumers spending near the office that isn't happening anymore as a result of workers being in the office about thirty percent less. Amazing. Can you break that down a little bit by industry, because we all think of obviously the restaurant, the retailer, maybe the transportation services.

What are the most impacted industries and what are the least? Yeah, so it really the effect of this is pretty wide ranging, right, so we know if you're not taking the subway in the morning, the m t A isn't getting your fair for instance. We know this is affecting a wide variety of businesses. Some of the ones we focused on the story. We're you know, a food vendor in Zukkati Park downtown called Sam's Falafel, very good falafel, this is not UM

and then Sweet Green in UM you know, Midtown Manhattan. UM. But we also know it poses issues for the City of New York because the City of New York funds itself through sales tax revenue on if sales are consumed, you know, if supers are spending less, then that's less tax revenue. We also know that if you don't need to be in the office all the time, you might move further way and you might move out of New

York City. And so that is a big kind of longer term existential risk for the city because you know, sales income tax revenues fund all these like essential things in the city. How much of this is financial industry And we've heard from a lot of the big bank CEOs, right, and I feel like the financial sector, whether it's a Jamie Diamond or some others who who have been pretty vocal about like getting back to the work a lot

of it. Because you did mention, you know, the financial district in Manhattan that this is one of the places where we're seeing not a lot of people come back to work. So it sounds like a lot of it is in finance. It's really the business districts. So like if you think of the areas in New York City where like you know, they're kind of animated each day by people coming in and not a lot of people

live there. This is really what we're talking about. We're talking about, you know, the financial district and downtment Manhattan, and we're talking about Midtown Manhattan like predominantly. Can we dig in a little bit too, sort of the transportation issue. We talked a little bit about this offline, but I'm just fascinated by this idea that you know, the subway has to run no matter who's on it, and they're not going to get any writers on Monday and Friday.

I know you mentioned that they are responding to that to some degree, but how much is the m t A really just quaking at this notion that we're not going to get back to five days a week. It's a huge problem. It's a huge problem. And in fact, like if you think about the m t A, right,

they need fares to sustain their operations. And they've said they are facing this really long term problem because they don't expect ridership levels to come back anytime soon, and so they're looking, you know, staring down big you know, billion dollar deficits over the next several years and they need to fill it somehow. So that might mean they've said,

you know, fair increases, it might mean service cuts. In fact, they're already talking about cutting service on about seven train lines on Mondays and Fridays when people are working from home, including the one train, the L and F trains. These are you know, kind of commuter trains, right they you know, these are people typically coming from other parts of Manhattan or Brooklyn, Queens, the bronx Um taking these trains into the city and they're not doing that as much anymore.

Problem of course with that is there are still a lot of people who do need to work in person five days a week. We don't typically talk about them when we have this conversation, but you know, they have to get to work still. So if there's cuts to service, they're the ones who are going to suffer, and they can't afford to take an uber into the city, you know, just because everyone else is staying home. Hey, Emma, you know, if we go back to right after the pandemic and

my office has started to open. I mean, I even look at the Bloomberg office. You know, it was slow and coming in terms of people coming back, and eventually it does feel a lot more normal. Um nowadays. Is it just a case of it's going to take some time ultimately for leaders to put you know, even more pressure on workers, or is there really a shift in that we're going to see hybrid work continue forever? Because I do feel like we haven't quite figured out whether

people whether it still continues to be a mix. And I'm just curious what you heard from folks and doing this story. That is such a good question. Um, I think it's a question a lot of people want to answer to. I mean, I don't I can't predict the future, but you know, I think one of the impetus is for doing this story was the idea that, know, this is stabilizing, like hybrid work, you know, seems to be

here to stay. We haven't seen like big changes in the numbers in a while, and so it does seem like office occupancy is at a sort of stable level right now, pending any big changes, but by big employers or something, um and we know like they're you know, employers want people in, but they realize the same thing that a lot of us realize, which is that commutes are terrible and people do work really long hours from home. And so there is a little bit of a you know,

there are arguments definitely on on both sides. I think what we what we were thinking about, what the story is. Can we figure out what why this matters? Right, Like, you know, I want to work from home, my employer doesn't. Why does this matter for cities, for businesses, for transit systems,

and what are the implications of that? Yeah, I think we think of this as like the story is a little bit of a sort of a you know, charting the path forward for cities, for businesses, for for the rest of us to start thinking about this issue, because look, I don't have an issue with people working from home, to be clear, I've got a lot of responses on Twitter that are like, but you know, we do need

to reckon with the implications of that. And in a city like New York, we all know this entire city, the infrastructure has been built around these big offices and hattan that people go into every day. If that isn't happening, something's got to give. Like, some people are going to

suffer the economic effects of that. That's just math. You know, I'm not saying everyone should have to work in person, but I do think we need to understand that there are costs to that, and there they fall on, you know, certain segments of society and certain people in certain companies. So let's talk about sort of the real time implications and maybe some of the evidence that you uncovered as

you're investigating this. You recognize that the MTV m t A is thinking about transitioning, right, they're going to cut some lines on Mondays and Fridays. Were there any other sort of examples of a retail or cutting hours, or a restaurant only opening a few days week, or you know, how how flexible are some of these companies in addressing these issues. Yeah, that's a really really good point. So we looked at, for instance, um, you know, the m t A is a really good example. We also looked

at Sweet Green. So sweet Green has said, you know, we used to have a really good kind of starting end of the week and now Mondays and Fridays are just not back the way they used to be UM, and they're actually looking at renegotiating leases with landlords so they could have a more flexible rent schedule, maybe more like a percentage of sales than a fixed price every month. So I think, you know, there are some examples of how places can kind of, you know, change the terms

of engagement if you will. We've also heard from places that are UM, like the Fitzpatrick Hotel Group, which is here in Midtown and Hottan. They have two hotels, and they're like, how can we drum up some business on a Friday evening at the bar, Like maybe we could raffle off a free trick free trip to Iron Okay, did people come running in? Well? I don't think they've done it. Okay, Okay. I was like, hey, I'll go sir.

You know UM. And they're also trying to see if can they encourage because you know, business travelers are cutting their trips short too. That's part of you know, if there's no one in the office, why am I traveling to New York City on a Monday. Nobody's gonna be here? Well, and Fridays are like a big bar date, and so if if people are on coming to the office. It trickles out in that impact as well, and we gotta run.

Thank you, Emma Court at Bloomberg News. Here on Bloomberg Business Week, you're listening to the Bloomberg Business Week Podcast. Catch us live week days from two to five pm Easter on Bloomberg Radio, the Bloomberg Business app band you too. You can also listen live to our flagship New York station, Just say Alexa play Bloomberg e Love and Dirty bloom Journal. Yeah, but you let me drive out. Who's honey, please gravels, I want to drive good question. This is the Drive

to the Globe up on Bluebird Radio. All right, everybody, we got about sevent two minutes left in the trading session, keeping an eye on those markets. That does look like stocks taking another bit of a leg up, but it looks like for the most part, we've got one percent gains. As we heard from Charlie on each of your major equity average is really the nav deck once again the outperformer up about one and a half percent. All right,

so let's get to it. Our Drive to the closed guest is Dave Donna Beatie, and he's Chief investment Officer of CIBC Private Wealth Management. They have roughly ninety three billion in assets under management, and he joins us once again on the phone from Baltimore. Dave, nice to have you here with Gina and myself. So what's top of mind for you when you think about what investors need to be doing or where the markets and asset classes

might be going from here? Sure? So, I think that the good news is that by by your end we expect higher equity prices. I think though, that we have a bit of a challenge here over the next couple of months. As good as the momentum has been so far in three I do think that we have a likelihood of a recession coming probably later this year, which which tells me that at current valuations, markets don't quite have that priced in yet. So we do see one more potential down leg in this bear market in in

the short term. UM, So some some caution is appropriate, I think today for investors. But we do think we're setting up for a um the beginning of the new bowl market in the second half of the year, and interestingly, what it's likely to prompt that is the the recession itself. It sounds strange some times we're talking about recession and new bowl market and the same breadth. But that's actually usually how it works, and we've done the work on

that going back over the last ten recession. Dave, can you talk to us a little bit about how inflation and the broader inflation landscape plays into your strategy. I mean, you think the market is definitely very captivated by the will we or will we not fall into recession? How deep, how long? But certainly inflation has played a really big

part in the equity market outcomes. How do you see inflation playing out in terms of ex equity market impact over the course of sure, So we had a actually a commodity hedge in place starting in early one right through through late two because we believe that we're going to see this inflation acceleration. We took that out of our asset allocation models because we believe inflation is has peaked and is on a downward trajectory. Expect that to continue here for uh, you know, for at least a

few more months. Um. One of the things we need to look out for is is kind of what happens now. In other words, inflation has come from you know, from nine to eight to seven to six point something, probably where the CPI will be when it's reported tomorrow. Year of the year, there's a chance that we go down quickly below four percent, but then inflation kind of gets stuck and it doesn't go down to two or two

and a half like the FED one. So that's a potential dilemma for the FED, you know, kind of later in the year that we have a high on and will probably not be terribly well received by either stock or bond markets. And if inflation does get stuck in that three to four percent range, do you see that as consequential for your strategy longer term? Does that mean you lean into value, you lean into small caps? What are your thoughts on sort of a broad market strategy

in a stuck kind of inflation landscape. Yeah, I think in a stuck inflation landscape, obviously income becomes more important. So we would emphasize dividend growers, not necessarily the highest yielding stocks, but the ones that are going to be able to grow their dividends year in and year out and keep pace without a somewhat higher trend to inflation.

And then I think around that's your core, and then around that you look for opportunities that are just just inexpensive, and today, uh, you know, small caps would would certainly fit that definition at least for a small allocation. And then the other area that's both cheap and where you can find more yield are in the international equity markets, particularly the developed international markets, which many of which have

higher payout ratios than the the S and p FID. Hey, you know one thing, Dave our rich Miller a Bloomberg business we wrote a story about, you know, forget the harder soft economic landing, meet the rolling recession, and this whole idea of you're going to see you know, different segments of our world and our environment go through recession. We've already seen it with housing, right because of higher mortgage rates, and then it will move on to another recession.

If we get that kind of recessionary environment, if you will, a rolling recession. Does that change your thoughts about kind of the market, you know, maybe taking another one leg down and then getting ready for a new bowl market?

Could that impact it? If we're in kind of a fuzzy okay growth not a clear cut recessionary environment, sure, but they call it a growth recession, right, or it would change it somewhat, but but but not a lot, because the we're not just interested in in g d P and whether it's growing or not, it's how does that translate into earnings and um I. As much as the earnings estimates have been coming down over the last couple of months, what we think, they're still too high,

and even a let's call it a growth recession or stagnation environment, something short of a recession would happen, it's still probably going to translate into a a down year for earnings. And we've looked at that possibility of the

rolling sector recession and it could happen. But there are so many leading indicators um that indicate a more general recession that it's kind of overwhelming that we've had an equity bear market, that's a very strong for looking indicator, deeply inverted yield curve, obviously tighter liquidity from number of sources, and even the old index of leading economic indicators has tilted way into negative territory. So it's possible we don't have a statistical recession, but but you have to very

much build at this time. It's different argument to say that what are the biggest concerns within your client base right now? Are they also mostly concerned about recession? Are they still talking inflation? You know, it's it's some of both. And where those two things converge, obviously is what what is the Fed going to do right? How are they

going to process inflation risk versus versus recession risk? So we've got a lot of questions about how many more rate hikes and um, you know, is the Fed going to raise rates a little bit more and then pause or are they going to start cutting rates right away? And and um our our view there is that we've got, you know, probably two more rate hikes, um and then

a multi month pause from from the Fed. So that maybe a little bit of disappointment that the you don't go right from the last rate hike to rate cuts which they start that happened before. I just don't think the circumstances we have now warnt because I don't think inflation is going to come down quite fast enough for the Fed to be able to yeah, point being, we're gonna peak at at a fairly restrictive point monetary policy and stay there for months. All right, We're gonna leave

it on that note. Dave Donna Beede and chief Investment Officer at CIBC Private Wealth Management joining us on the phone from Baltimore. This is the Bloomberg Business Week Podcast, available Apple, Spotify, and anywhere else you get your podcast. Listen live each weekday is starting a two pm Eastern on Bloomberg dot Com, the I Heart Radio app tune In, and the Bloomberg Business happ You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. A