Markets, ETFs, And Inflation

us about markets. Bring us back, Sylvia. What are we looking at here in terms of inflation? Is Cameron just mentioned, um the seven point nine print that we saw didn't even have really this wartime inflation in it. We know that the inflation is an issue in the market. You know, what what happens to inflation going forward is really the issue.

If you know, if if what we see going on in Russia and Ukraine comes to an end in in shorter order than you know, perhaps we go back to that that famous word transitory and something that we live with for you know, another three to six months on top of what we were um expecting before and it kind of fades away. Into the early part of three. But it all depends on what happens I think with Russia.

So um, you know, the issue with with inflation in the market and as it continues to rise, is that consumers, which have really pushed our economy forward and have strong savings and all these things that will help get us, you know, out of sort of a reception and keep us growing and keep us recovering from this, is that their sense of wealth wanes as that inflation number gets higher and they make different spending decisions. So that's that's I think really the risk of um, as you said,

inflation and potentially wartime inflation to the market. Well, so what I'm kind of questioning, here's a timeline of it, all right, because if you do have this wartime inflation, we're already seeing it in prices kind of skyrocketing. How long does it take to actually affect the consumer in the real economy, because it kind of seems like there is a lag in that if you actually look at

the inflation print, Yes, it's a very high number. Seven point nine percent is not a good number necessarily, but it isn't an upside surprise. It was bang Online Estimates, which you looked at the last year, a lot of those prints were actually upside surprises. They were much higher than the consensus was. This I think is one of the few times it was actually bang in line with estimates. Is there some kind of silver lining in that? And

that's a great point. I you know, my sense is that because a lot of the UM sanctions have only started two weeks ago, it's not fully built into that number. So I think that you know, March number will probably be a little bit uglier. But you know, the silver lining here is really that consumer savings remain at all time highs UM. I think once rushing Ukraine situations beyond us,

we go back to economic activity shining through. And you know, even with higher input costs like wages, commodities, companies that have considerable cash cushions larger too pre pandemic levels, and so do consumers. So you know who does it impact. It really impacts the lower income consumer UM. You know, consumers that are that are sort of working and have

higher wages and saving from the bank. I mean, they're unlikely to cancel their you know, trip to the shore and not drive because gas is a little bit more expensive. In the short term. However, the longer that goes on, you know, the more that that dynamic does shift and it does kind of change the way that we behave. So in the near term, right now, I think we'll

be okay. But I do think that, you know, the situation has to come to an end or or it will sort of spell a different situation for the market. Is there, uh Um? I guess a boilerplate e t F strategy to fight inflation. Uh you have, I mean, you definitely have some inflation you know, inflation fighting e t F products. Um A story. Advisors recently launched a new one that's worth looking at. But I think, you know, I think with this it's it's not so much because

I think it's going to be transitory. I think, you know, it's worth looking at those types of products, but I also think it's it's worth just looking at, you know, buying on the dips and these types of markets. Right I think that a lot of the process and taken off of big megacat names. For example, you know, queues

are at a discount. Nazac w off of highs um things like five G that you need to power you know, the future of electric vehicles augmented reality, AI, metaverse, all the stuff we're talking about before UM, the Russia Ukraine UM, you know issue came into the market. I think that basically a lot of the E t F that that focus on secular growth stories UM and and hold. You know, companies with strong UM cash reserve, bound sheets and and that are part of the future are worth looking at

now too. So I would just I would argue that there are a lot of good deals out there, and they don't have to be inflation hides per se um. You know, divin end bts like aristocrats, you know, people like to keep consistent income, so even if the share prices following, you're getting the income on on some dips there. So you know, those are some different ideas that you

sud look at. Have I told you, Sylvia that we're restarting relaunching the E t F Show, a weekly special every Monday at one p m. Did you see how he ron kg not creedy group to Katie Greifeldt will be joining that program. But do you see how sneakily he stuck that in there. It's not even a shameless plug. It's a lot of grade. There are a lot of great ets out there, and I think a lot of them have launched since that show had stopped, so you'll you'll have some good content to talk about well, and

hopefully you'll join us as well. We can call that episode the Big Jablonsky Awesome, Sylvia, thank you so much for joining us. Sylvia Jablonsky, their chief investment officer over at Defiance ETFs. Let's get back to Hugh Johnson, Chairman and chief economist at Hugh Johnson Economics. Hugh, I'm sorry to have had to cut you off there um for the president, but of course we wanted to hear what he was going to say. And you know, what's your take on on the move um and on the sanctions

that we've seen thus far. Well, he's turning up. I think the word is as as your reporter suggested, as escalates and bit by bit, and what we're seeing is just bit by bit turning up the pressure on Biden. It doesn't seem to have had much of an effect, yet you will see it have an effect. The economy of Russia is really a big question mark, and it's going to go to positive two growth rates. We were talking about maybe a month or a month and a half ago, and it's going to be negative, But is

how much negative it could be? As much as a contraction of in the Russian economy to one extent, is that going to put enough pressure on Putin to change his approach? You know, there's not much evidence he's going to change his approach, but we certainly want him to do that. And you can see the response of the markets today when there was wind of perhaps some agreement being reached, the markets were performing positively. So the markets

obviously want to see an end of this. Otherwise we're going to see a sort of back and forth, the type of a volatile financial market environment for a while. Now, you let's stick with the markets here and the economy. I'm curious about the conversation on demand destruction, on potential interest rate cuts down the road after we kind of returned to this normal policy, more monterary policy. How seriously is the market taking the r word right now, the

recession word. That's a great question. And the reason it's a great question is if you take a look at what the markets have done since really January four we've had a lot of fourteen decline in the SMP. And you asked the question is this decline in the stock market, which could be called a correction in other words, of decline in stock prices that will not be accompanied by a recession, or is it the start of a bear

market that will be accompanied by a recession. The markets are taking that possibility seriously, But I think the conclusion of the markets again four decline and take a look at some of the other or variables, such as leading indicators for the economy, the yield curve, which allows us to sort of measure the probability of a recession starting in twelve months, And the answer is this is looking like a correction in an ongoing bull market, but a

very severe correction. Now I say severe, it's not altogether different. It's actually a little bit less than the normal post war correction, which has been about over four months. So we probably have a little bit further to go if we use averages. But nevertheless, I think that the conclusion of the markets now is tentatively this is only a correction. It's not the start of a bearer market that's going

to be accompanied by an economic contraction or resission. So um, I want I want to get your take on a couple of things that we've heard from market participants. Jeff Gunlock has said he couldn't see he could envision inflation at in double digits, maybe at ten percent of those base cases for seven and a half at the end of the year. And Goldman Sachs um had last night that there's a thirty five percent chance of a recession next year. What do you think about those uh two forecasts?

Is not a big number, but it's still too high, And my judgment, I bring it down to we're gonna try to quantify the probability of a recession, so that I kind of am not with Goldman sachs on that number UM as far as ten percent. When we get up to ten percent inflation. That also, I have very a variety of leading indicators of inflation. I don't see that in the cards talking about six consumer inflation now, it's probably gonna stay. It'll be a big number for

the month of March. I think we all know that. So we're gonna have a high number for the first quarter for the consumer price index. But I think as we get not to the second quarter, but the third and fourth quarter, you're going to see the rate of inflation. You're over your rate of inflation coming down, It's not going to come down as much as the consensus expects.

The consensus expects it to come down to a two and a half percent, I think and a half percent the number we'll get there by the end of this year. And that's what leading indicators of inflation are telling me very clearly. So no to good luck on this ten percent, and probably too high on the thirty chance of a recession, although that's certainly I've seen higher numbers. All right, great

to get your take. You thanks so much for joining us and for sticking with us throughout the president's speech. Hugh Johnson is the chairman and chief economist of Hugh Johnson Economics, also an advisor to great Point, and it's Hugh Johnson Advisor's division. Let's get over to David Katz right now, President c IO of Matrix Asset Advisors. David, I've talked with so many investment professionals this week who've said I haven't had any sleep. I'm seriously worried about

heart palpitations. Um, how do you deal with this kind of volatility? Well, the best thing to do is to take a longer time, arise and try to put the market in some historical perspective, and if you do that, you actually can feel pretty comfortable. Since there have been thirty five corrections of five percent or more. Uh, number

of those were the ten to fifteent level. And what's critical here is that if you look in the aftermath of those corrections, stocks rebound much quicker than anybody anticipates. The actual rebound is it about four point seven months. So we think that the best thing to do turn the noise down. Turn turn the news down. Uh, take this nine to twelve month perspective, and we think there's

some great buying opportunities being presented. There's an enormous likelihood that a week and a month later you're gonna feel stupid. The stocks will be lower, But nine and twelve months later, these will have been great buys and you're likely going to be making a lot of money. Okay, but don't don't turn the news down. Don't don't don't turn off Bloomberg Radio. What else would you listen to? You're you're right,

you gotta listen to the news. Just don't react in terms of your stock market investments based up on the bad news you've heard. First here folks listen to Bloomberg Radio very important. Um, what's interesting to me? I gotta say, I listened to so I'm so glad to have moved back to the US because of serious x M. I'll listen to Bloomberg. I'll listen to the Grateful Dead Channel sometimes Fish, I only listen to Bloomberg Radio. That is my level of loyalty, Matt. But whatever, Um, David, let's

talk to us. That you talking about buying essentially essentially buying the dip. This is something that's kind of pressure we haven't seen. I feel like since the crash, Um, how much further can stocks fall before we see perhaps some sustainable games here. Well, stocks on a day to day basis really can do anything. And you do have some pretty negative news out of Russia in the Ukraine,

and you have some negative inflation news and negative oil news. However, a lot of as impacting stocks already, so stocks could easily move down five from here. However, we do think that when they rebound, you're gonna get a rebound. You never know where the bottom is. We think that it's down enough that most of the damage has been done, so we're very comfortable buying here, and there are a lot of stocks that have just been creamed that have

very good fundamentals, are a great prices? Are your Are your clients more concerned with preserving capital right now though than um than growing well? Typically during a down market, everybody tries to think about, oh, my goodness, I don't want to lose money. How do I preserve capital? And people are less focused on making money. But the best thing to do is set up a long term massive allocation.

Not to get overly enthusiastic when stocks are great in thinking that you're doing wonderfully, and not to get overly negative when you're doing badly. And I think you had mentioned March of when the COVID pandemic broke out. You had a thirty five percent correction in a matter of weeks, and it looked like the world was coming to an end, and it actually was on a health side, But the market fully recovered that it was up nicely for the year. If you were selling into that bad news, you locked

in your losses and didn't get the recovery. So again, not getting overly concerned about the really bad news in terms of its financial implications, and and sort of being a contrarian was very helpful. Then we think it's going to be helpful now. There was an article this weekend in Barrens that talked about how stock markets did after wars, terrorist attacks, geopolitical events. In the bottom line was six to twelve months later, stocks are generally a lot higher.

So for a lot of reasons. You know, we're pretty comfortable here, David, thanks so much for joining us. Appreciate your insight today. David Kats, President, ce IO of Matrix

Asset Advisers. Let's get over right now to Andrew Channon, the CEO of procure Am, to talk to us about what we see going on in terms of um well, space is what we always focus on with Andrew and Uh they run the UFO E t F. I would have thought that there is little connection, um well, I hadn't thought about it, frankly until Cretty pointed out that the Russians are so active in space. Andrew, how does

that affect your business from so many different ways? And if you look at you from the even before the invasion occurred, we had companies like max Argo have satellite pointed at borders all around the world. That was providing us with real time information of the troop build up outside of Ukraine, and as time has progressed, we've seen a ton of changes. We've seen breakups of relationships surrounding

the International Space Station. We've seen Russia refusing to sense engines for rockets um and as they are closing this off, we've even seen them hold hostage of thirty six one web satellites at the back of door launchpad in Kazakhstan. And so as they are becoming more protectivists of their space industry, it's creating many opportunities that are opening up for commercial space business outside of Russia. So there's a lot going on, and you know, the military and defense

side of it is roamly critical at this time. So let's put a market lens on this. How do you play it? How do you trade it? So, yeah, we created UFO to provide a diversified vehicle for investors that want to get global diversification to the to the space industry. So we have over forty companies currently in UFO specializing

in all different areas. So you have your defense uh and and even weapons manufacturers that are helping to build different technologies that help militaries around the world utilizing space their satellites, communications, observations, surveillance, which is also very critical not just for military times, but for for many other things,

even including tracking climate change. So, you know, with so many relevant areas that are becoming priorities around the world, spaces helping address many of these problems and providing solutions. Is it is there a point where you think we need to have um many different multiple space ETFs because it's it's become such a big business that you can break it down in so many different ways. I would never say that, you know, we we need more competition.

I'm I'm really happy with the partners that we've made in the index that we've licensed. The underlying index is actually a collaboration with a former director of research from the Space Foundation actually helped build the most popular global model that's used for actually calculating the size, growth and change of the space industry. So we have a really great team that we love working with, and there's been a ton of research that actually goes into developing this concept.

It wasn't just hey can you build one, let's go and license it. There was a lot of work that was done beforehand, and um, they really look at companies deriving revenues from the space industry. So this is the first sure play global space etf out there, and it was one done with a lot of consideration taking into before bringing this product out. Just want to quickly ask, what's your favorite space movie? I mean, we had a

big debate about this. I'll watch anything with space related um, and definitely tons of TV shows, but happy to be yours. It's hard. I mean, I don't know. Armageddon is great, Intergalactic is amazing. Um, you know I love two thousand and one. In two thousand and ten, I'm gonna I love space movies as well. So I just thought i'd get you. Really liked Passengers honestly, for Lawrence thought it was very good. Yeah, very good. Peter Stormare I think

is the best space astronaut. He's the one who always plays the crazy, drunk cosmonaut even though he's not Russian, he's actually Swedish anyway, Andrew, thanks for joining us. Always a pleasure talking to you. Andrew chain in there um from procure Am. He is the CEO. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple podcasts, or whatever podcast platform you prefer.

I'm Matt Miller. I'm on Twitter at Matt Miller V three pen on Ball Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio