Anna Han on the Markets (Radio)

to get ahead of the curve here? But they have signaled that they are turning a little more devish and consensus expects a lower rate hike this December. I think that is actually a pretty sensitive and in tune with the data we've been seeing. Okay, I think what what we have at the moment is Brian just asking you know, they are the dangers of a policy mistake liming larger. I would say there's always been that mistake. Has it become larger? In fact, I think sentiment has actually improved

and expected that perhaps that risk has read deuced. Um, you're seeing less and less people talking about hard landing and the probability or the hope for soft landing increasing. UM. I think the fact that you've seen in the last CPI print as well as some of the most recent data UM with inflation coming down, that the fact that they're hiking has taken impact. That's what's giving us hope UM. And the fact that they're willing to slow it down.

That's also giving hope that perhaps the FED won't get to ahead and that we can manage that soft landing. I think what you said about the timing is is very important that we haven't had enough time yet to really feel the full brunt of these rate hikes that have come through. That said, the markets have have been looking beyond and you would think that J. Powell will come out more hawkish tomorrow than he might have otherwise given the rise in stocks and bonds and what that

means for UM, for conditions in the financial markets. Oh, you can bring up a great point. UM, when you have good news and sometimes it could be bad news, does it fuel the Fed? Do give them more ability to get hawkish without perhaps crashing the markets. But what we keep in mind as well is UH, even with that backward looking data they they have UM. I think the focus is going to be in what trends we're

seeing with economic data. I think the I S N manufacturing and the personal incomes data we're going to see on Thursday is going to be a good indicator of what direction we're going. What do you think it's gonna What sort of picture is it actually gonna paint for you? Well, right now, what we're concerned about is how the consumer is doing. We're seeing on the manufacturing side that some of the prices paid components are suggesting a little bit

of deflationary pressures. But on the same time, consumers continue to spend. Now they're using their access disposable income, they're using increased credit card debt. But can that sustain into next years? What's going to control elearnings. Let's just have a look at where you actually now invest give what we talked about in terms of the broader macro picture. What kind of companies are doing well in this type of environment, and which you're likely to do in the

one that you're predicting. I think right now what we're focused on is momentum, and momentum is simple. You look at what companies have been working. That's never a promise

for the future. But the reason why we're liking these good performance, which right now has been energy and particular parts of health care, specifically biotech, is that they are in a way have an ability to have a little more secular growth UM Now, of course energy markets impacted by inflation and how this pans out, but particularly um the lack of uber caps in the leadership that's looking attractive to us right now. So that's sort of where

we're keeping our eyes. What do you make of of Dave Costin's view that that companies margins are likely to start coming down next year as expenses normalize. I'd actually say margins already are coming down now. You saw with this last quarter earnings, and this is something we've been saying and expecting for several quarters. To see it realize after this past earning season, something we expected, but of

course something would continue to be weary about. But that margin is exactly why on a bigger picture scale, we're looking for where we can find secular growers, companies that can manage their operational costs, that can continue to manage those inflation prices and still grow their earnings. In particular for three, when we're expecting and most of the street is expecting an overall pretty flat EPs growth. Okay, so

this is going to be the next question. I think in your notes you're talking about uh AN equity market leadership. Also look at how that perhaps may well change if we look at a change in sentiment towards the greenback, which seems to be at a pivotal point. Yeah. I think really it's a macro story if you still and you're seeing that not just um over the past year, but also think about today with field Tire, you're seeing the value sectors outperformed, seeing growth take a little bit

on the chin. But over the month with that decline and inflation expectation, especially after we got a more friendly i'll say October CPI print, you saw NOMO yields come down, and these tech and more growthy industries, especially semis and software, you saw those have a bounce this month. So you're still seeing the macro narrative pulling the strings on the

puppets here. I think next year, depending on when the FED really decides to fully pivot and go into cutting mode, that's going to help determine when we might get that resurgence in growth and growth industries for a longer run. But that's really a back half story of next year. Another good input could be if China starts to reopen.

We've had a lot of doubts about that. I think investors have had some doubts, but a huge rally yesterday and it seems like the overall strategy is easing a little bit here uh IF if more on the ground actions rather than uh in name, the National Health Commission said excessive curbs should be avoided. Are you optimistic that that is a positive story for markets that's happening in China.

We do think that would be positive, but we are cautious because China's economy hasn't particularly gathered this economic momentum post pandemic that you saw in the US. They had a lot of stop and start fits. So that's something that we're cautious about, and that volatility exposure is why

we're not particularly pouring or our funds into Chinese equities directly. Rather, what we have looked at is within the U S companies, particularly the large companies domestically which have the particular higher sales to China. There are a good number of SMP companies SMP five companies that have over ten percent revenue exposure China. That could be a good place to start for those who truly believe that this is a turning

point and that reopening UM is a certainty. But that's again something that is a bit more of a higher risk investment, so something that would have to fit your risk APPA site. Anna, thank you so much for joining us that Anna hand, they're joining execuity strategist at Wells Fargo Securities getting her take on the market action