Let's get to our guest, Paul Christopher, head of Global market Strategy at Wells Fargo Investment Institute. Paul, let's talk a little bit about the b o J action. I'm not sure if it's fair to say that the b o J wants to have it both ways, but there there's both tightening and easing aspects to the move. So net net for Paul Christopher, do you like this move? Yes?
We do. Uh, you're you're right. Uh. Some tightening with the changing in the in the yield curve policy, but some extra buying of government bombs that will help with the economy. So is this a bad move? Well, too soon to tell, but they had to do something, uh to stop or or at least intervene in the great shorting that's been going on in Japanese government death as well as in the end those are not good for the economy over the long haul. So yeah, there's some
position squaring going on right now. So it's positive at least for the moment. Positive for the moment. Do you think the market's going to be satisfied with this? Do you think they're going to push for more action from the b o J. Yeah, it's typically the case that markets will take a certain amount of intervention and then and then push, Okay, you're gonna buy nine trillion in in Japanese government debt. Let's see if you'll do ten. Let's see if you do eleven. Wouldn't have surprised me
a bit. And notice that the spreads in the squat between the swaps and the j GB themselves are still where they were yesterday, So markets maybe not believing it quite yet. Well, I'm I think that one byproduct of this would be that for everybody who has he has neglected the end of late that maybe it's nice to be diversified and maybe add some end to the portfolio. Is that is that sensible? Uh? Maybe not quite time yet. Uh. Look, the end was definitely oversold and what we're seeing as
an oversold bounce. But again, if the market decides to test the b o J, it would do it not just with the pushing yields higher on the bond, but also by selling the end forward again. So it remains to be seen there whether it's time yet, we think it's probably too early for Europe Edgepan. We would prefer the US right now. Okay, let's let's move there because it seems to me that this this whole moving out of monetary stimulus is going to take a time. You know,
this is not going to happen overnight. Uh So in the US, though we've got that big uncertainty of the FETE are actually to me it is not uncertainty at all. They're going to keep raising rates and they intend at this point to keep them high over the course of the year. Should I just look around in equities for individual companies that can do well in this environment, or
forget equities altogether. Oh, we definitely wouldn't forget equities altogether, but we would agree with you that the FETE is going to keep rates higher for longer than the market think. This idea of tapering, where they go from seventy five basis points in hike to a fifty hike to and hike, does not mean that a cut of twenty five is the next thing to happen. They could easily hold rates at a high level for a while. We think the
economy is at the doorstep of recession. We do expect that recession to be necessary along with those elevated rates to push the economy or push inflation down so we would remain defensive here and and maybe not so much individual companies, but there are sectors that we like what we would think of as those with have that have some organic revenue growth, good cash generation energy for example, really good cash generation this year. Uh, and then maybe
good balance sheets. So health care fits that bill. And we think tech oddly enough that I know you'll tell me it's been taken up behind the woods shed and spank, but we like what we like what we're seeing invaluations coming down there. So as three sectors where we think you can be defensive here a little bit and dollar cost average into these positions for several more months, and then we think you will start to look for some opportunities to be more cyclical. Yes, but you say you've
been saying pay attention to layoffs. It seems like we've only seen baby steps in that in that area. Do you think that gets more aggressive going forward? Yeah, first thing that happens, well, for the first thing we need to remember is that the labor market is the last pillar of strength in the economy to fall as you go into recession. So we would not expect layoffs to become more prominent until we were more clearly and more
obviously in a spending recession. We're not quite there yet, but I would expect those a lot of those you know, the two job openings for every applicant that's going to go away. Uh, they're just gonna pull those open recks now you're not going to get the job creation going forward, and that will have some of the same impact on spending. So, uh, do you have any industries that you like or uh?
And when it comes to stocks, where do we start looking at you very defensive like healthcare and utilities or do you see opportunities in any of the you know, companies that have more value or maybe are some kind of growth opportunity. Yeah, we don't really like utilities right now. The high interest rates have put a damper on that one. So it's not strictly a defensive play. I'd call it
more of a quality play. I t energy healthcare again, good organic growth prospects, good revenue streams, good cash production, and good balance sheets. That's where we want to be right now because we think the losses will be proven comparatively less by the time this market finally bottoms. We're not there yet. We had some interesting earnings today, one kind of looks at the possibility of recession, one looks at inflation. Um Nike came out with very strong sales.
Uh so, I think you have to give them credit for that, and that's one reason stocks up twelve percent in after hours FedEx. Well, they did a good job of cost cutting, saving a billion dollars. Is so is the ingeniousness of American company is going to partially save the day? It typically does, But you want to be careful when you're looking at those companies that have good revenue streams. Is it being driven by sales of units
or by price increases? And it's the latter that ultimately we think will undermine their profitability because they just won't be able to keep up that with As the is, the quantity sold declines faster than the prices can rise. So be careful with looking at the revenue. Stremes would would tend to look more at the profit margins and
at the cost cutting. All right, when we're out of time, I probably should have said perceived ingeniousness of of management teams in the United States, but obviously some credit is often given there. Thanks so much for joining us, Paul, Paul, Christopher head of global market strategy at Wells Fargo Investment Institute,