Markets, Inflation, And Golf

Riverfront Investment Group and her claim to fame. She is a fellow Spider Matt from the University of Richmond, my alma mater, so we can't go wrong there, and Rebecca, thanks so much for joining us here. Um boy, the wall of worry out there for an equity investor is pretty darn high, and now you add to it over the last couple of months geopolitical risk. How are you guys thinking about the market right here? Well, good morning

to you both, and thank you for having me. Um. You know, we're we're cautious somewhat just because of all of the headwinds that we face in terms of headlines, but we have recently actually put some money back to work and we're still a little bit overweight equities because we think the fundamentals are so strong. What are some of the sectors that you think folks should have some exposure to hear? If you, in fact in strates are rising,

growth is slowing, how do you think about that? Well, we are sticking on the growth category with our technology overweight, specifically software and services, because you do have consistency of earnings and revenue growth there, and even if you've got to higher multiples, we're willing to pay up for it. Um. We've also added back to our energy exposure, so we're trying to sort of barbel that growth with some sicklicality.

So we have gone a little overweight energy. And we've also gone overweight financials in our longer horizon portfolios because you do have the play into higher net interest margins and you've also got better loan growth, so we're sticking with some large cat banks there too. Are you worried about a recession? We had a survey from our end Live blog and about half of the people we survey

to expect a recession in three Well, it is. It is a great question, and you know, one of the things that We always say our mantras process over prediction, so we don't think we have a better crystal ball than anyone else, and arguably that the worries are growing every day as to whether or not we cannot navigate a soft landing and avoid a recession. UM. So uh, we would agree that that the probabilities are are rising, but we are still not saying that we expect to

have one next year. Rebecca, We're going to really start kicking off big time earning season next week. What do you think is critical for this market? How are you thinking about this earning season? Well, I guess the good news is there's a lot of companies have already guided lower. Right when you look at the number of companies UM that have pre announced, the majority of those pre announcements have been lower guidance. So we believe the bar is

set low. Growth for the quarter is expected to come in at a low single digit level, so it should be a quarter where the surprises maybe to the upside, and we're optimistic about that in terms of actual earnings growth, But of course we expect there to be more caution around wage pressures, supply chain disruptions and that sort of thing.

So the key will be to watch margins. So far they have held in above average up around twelve, so we're hopeful that the companies will still have pricing power and be able to deliver on those margins, which is going to be key to keeping multiples up here at these levels. But you think we're going to continue to see supply chain problems, continue to see chip shortage, continue to see commodity inflation. Do you stay away from companies

that are hit by that? Well, I mean we are, We're seeing some signs of easing, but of course the situation in in in Ukraine Russia that has that has caused some aggravation in those supply chains again. Uh so again we've increased our our level of cyclicality in terms of energy. Also, we've got an avoid an industrial specifically infrastructure place, so some of those areas are going to maybe be um impacted by these types of things. But we're going to take away and see attitude before we

start adjusting positions dramatically versus where we are. Rebecca, how do you and your firm, Riverfront Investment Group, how do you think about E s G investing? Does that factor into your analysis at all? It seems to be gaining a lot of momentum with a lot of different types of investors. Well, absolutely, it's gaining traction that when you think about how what we do, you know, we we

are products are global as allocation products. So anytime we want to think about thematic investing, it has to be against the backdrop of that global allocation theme. But then you also have to remember that E s G means something different to every investor, so it's really hard, I think, for us to to go down that path in a global diversified strategy, So we're sticking with sort of true sector plays and that sort of thing, rather than really playing in what would be called traditionally an E s

G world. At what point do you, um, how, how how or when do you expect inflation to come back down? Well, obviously that's what job number one for the FED right now. They're going to do whatever they have what is the wordings, will do whatever it takes um but it's probably still not going to be until the back half of this year or maybe even into three given the pressures that we've already discussed in terms of supply chain disruptions, higher uh net energy costs for folks um and those sorts

of things, and also the wage pressures. Right, the wages are going higher, so it's probably going to be maybe we'll still be talking about inflation this time next year, but I think that ultimately the FED will succeed. We may not like the ride, but they will be successful in terms of accomplishing that mission. These of you the policy changes that they're going to make. Hey, Rebecca, thank you so much for joining us. We always appreciate getting

your thoughts. Rebecca Felton, Senior market strategist, Riverfront Investment Group. They are located in lovely Richmond, Virginia. Let's check in with Seth Carpenter, chief Global economists from Morgan Stanley. All Right, Seth, d dollars for a trucker. That sounds inflationary to me. How do you think about inflation in this marketplace? When you hear news that again Walmarts can pay their truckers

up the hundred ten thousand dollars. Absolutely, that does sound inflationary. UM. I have to say, though, the trucker shortage is a long standing trend. In fact, the pre dates COVID, and the fact that now they're realizing that one way to get people to work for you is to pay them a little bit more. Is not overly surprising. But I think more broadly, you're right. I mean, there there is a tight labor market. I think there are no two

ways about it. There continues to be very strong aggregate demand and at the end of the day, something's got to give. And we have, of course seen not only strong wages, but we've also seen, as everyone knows, a lot of inflation. I have to say also, and then we'll get off the trucker thing. It is a difficult job.

It is an important job, and it is not a job that you want to just give to anyone, right because it's dangerous, a big rig in the hands of, you know, someone who doesn't know how to control it. So I'm glad they're finally getting paid more. They deserve it, they earn it, and they should. Um all right, let's get onto the broader economy because um we did a survey. Paula just sent you the story. The umly blog did a survey set and half of the respondents said they

expect a recession. Ine Now, considering what we heard from Lyle Brainerd and everybody else at the FED, UM it makes more and more sense. Buller just told us he thinks they need to raise to three percent, So, um, what do you think? Yeah, so you know, I'm not going to say that a recession in three is our baseline at all, um, But I think some of the complinents that you're talking about their do ray at the risk.

So the FED is in a challenging circumstances situation. They're trying to in effect land a jet on an aircraft carrier during a storm, and they've only seen one training film before, right, So it's a very very difficult situation to be in. Um. And moreover, the amount by which they're going to be tightening policy, the speed with which they're tightening policy, I think is going to be directly

influenced by how strong they see the economy. And right now, look at the last Non Front Perils Report, for example, it's clearly very strong right now. So they're on there, They're they're clearly asked to start going. So then what would cause us to have a recession next year and not at all our baseline? Cage? But I think I could see a few things happening. First, is the FED getting a little bit overly enthusiastic, and they're going to

start running off their balance sheet. We've got some details from that in the Minutes yesterday. But I have to say, even after my fifteen years there at the FED spending a lot of time thinking about the FED balance sheet, if anybody tells you they know for sure exactly how that un of the balance she is going to affect markets in the economy, I think they're either lying to you or they're lying to themselves. So there's some possibility

of of a policy you know, hiccup there. I think on top of that, as they start hiking, especially if they front load the hiking, if Heaven forbid, things get worse with the Russian invasion of Ukraine and we have what we've detailed as the cut off scenario where all energy stops flowing to Europe for example, you could see Europe slip into recession. That's got to spill over to the US. And if the set is already front loaded a lot of the hikes and let the unwinded the

balance sheet go with some unintended consequences. I think that's the sort of constellation of the events that that gets you a recession in early how material is that risk to you seth and that energy risk for Europe leading to a recession. UM. Right now, the oil still flowing, the dollars and euros are still going into Russia, but boys are growing call to kind of tone that down or limit that it doesn't seem more really tenable. YEA, So I completely agree. I mean, I'm not a political scientist,

and I cannot forecast where this conflict is going. But but I absolutely subscribe to the way you're reading things, which is things are worse now than they were two or three weeks ago. I think the calls for starting to cut off with oil with a coal rather so it shows you that when maybe we're on that path in that direction, the discussions about dollars versus rubles and which accounts are frozen, I think adds to the to the tension. So I think it's got to be a

scenario that we take very very seriously. How about this, UM, where's your our start right now? I'd rather start off with how big the aeror bands are around that our star. I mean, the FED has there's the nominal terms at about two and a half. I guess I would very slightly take the under on that but boy, the ability to be certain about where that is is very hard

to come by. And I'll just highlight one thing. I mean, in one version of the world, the FED having a really big balance sheet, all else equal, just makes financial conditions easier, which means our star has got to be higher to get the same amount of neutrality. On the other hand, the act of shrinking the balance sheet pushes spreads wider and tightens financial conditions. And so as you're shrinking the balance sheet, maybe that says our star is

a little bit lower. Um. I think anybody would be an idiot to try to say that they know for sure where it is and and and drive with that knowledge. Instead, where I suspect Powell and company are going is they're going to be driving by feel a little bit sort of like what we saw in Alright, thanks so much for joining us. Seth Carpenter, chief Global Economists from Warring Stanley. All right, let's hep mobile banking. You know, Matt, I am a whiz now at mobile banking. I deposit checks,

transfer money, wire transfers. I do it all, uh, and I'm feeling pretty good about that. And that's all learned in the last two years let check of a lovely in situ chair CEO and founder of BM Technologies help banks and folks, you know, kind of get into the digital game on the banking side. Lovely, thanks so much for joining us here. Am I representative of the average person out there? I E I've gotten a lot more tech savvys relates to my banking So absolutely, thank you

so much for having me. And just to begin a little bit about b M Technologies, just as a reminder, we are one of the largest digital banking and banking as a service providers in the country today um and and really one of the first neo banking fintech to go public, to be profitable and now as to actually embrace a bank charter. Um. So to answer your questions, I think that you know, COVID in that period definitely accelerated the use of technology, not just in financial services

but really across the board. Um. And then couple that with a surgeon deposits from stimulus, it was definitely, you know, a good good time for for banks and for consumers to start engaging with them in any way. So what does this mean, Lovely and we can do at b M Technology do can I use you as a consumer. Um or do companies use you to help embed you know, banking services in their online presence or do you work with with banks directly? What what is it? Who's your client? Yeah?

A little bit of all of the above. Um And so we have you know, a unique digital banking platform that allows us to directly go to consumers and offer them a more compelling banking experience from the products, to the features, to more affordable products that but also the same digital banking platform that's cloud based, that's a PI enabled.

The beauty of it is that we could license that to others and we allow and enable large brands to offer financial services as well, and not just from a technology standpoint, but you know, as you know, banking is regulated and there's a lot in the back end to really operate and support a bank, and all of that we also provide as well today and lovely and I know you know, the banks of a talking about for years the capital investments they're making in their technology platforms.

Is it lowering the cost is allowing them to increase their profit margins if they really make the investment for digital You know, we've been saying for years that banks continue to invest in in in technology and product enhancements, and that doesn't always correlate to a better customer experience. It's how is it done and is it done well with the customer in mind? And so you don't rapidly see as as larger banks are investing billions and dollars

that correlates to more and more happy customers. Um. But that being said, it's a good move forward. I think that you know, consumers are demanding more as it relates to crypto in terms of having that being part of their financial planning and assuming that banks would have an opportunity for them to get involved in that. They're demanding

more of a rebundling of financial services. I shouldn't have to go to robin Hood for one thing, so by for another thing, but really going under one umbrella at one platform to get all of my financial needs um. And and lastly, you know, really a push for financial inclusion so that I don't just need to go to a bank branch to get my my banking done. But really, if there's a brand that I truly trust, I value, I have an emotional connection with, can I go there

and get my banking needs met? And that's what we're doing with our banking as a service and and b M Technology is partnered with T Mobile, for example, to launch the T Mobile Checking account. Interesting stuff. Yeah, I'm doing it. I'm doing it. I feel like I am TECHT savvy. Now on my consumer financials gardner? What's that during this program? I paid my gardener? There you go,

look at you. Lovely to do Chair, CEO and founder of b M Technologies, New York Stock Exchange list a b M t X. It is day one of the Master's tigers on a second hole. Even par so, we thought a good time to talk about the business of golf. Friendy Pich, CEO of PGA Superstore, He's gonna join us and talk us about the retail side of the game of golf. Plus, Barry Ridholtz joins us because it's Thursday and he always talks to us on Thursday, so we'll

see what his thoughts are on these markets. But first let's go to Greig Jarrett's gonna blow our business flash. Greg Well stocks continue to retreat. Paul investors are digesting the possibility of even more aggressive monetary tightening by the FED, and are monitoring the war in Ukraine. Sp Right now is down six tenths and percent down twenty five. That DO was down eight tenths of a percent, down two hundred sixty seven, and the NaNs acts down eight tenths

of a percent, down a hundred sixteen. The Tenure is down eleven thirty seconds. The yield is two point six four percent. West Texas Intermediate Crude continues to descend. It's down one point four percent. Seven of barrel Comics gold is up six tenths of a percent at nine twenty and ounced the dollar five, the euro dollar nine oh won, the British pound, the dollar thirty sixty. Harvard plans to sell green bonds to finance construction of a new science

and engineering complex for renovation of an existing dorm. The richest U S College is planning to sell eight hundred million dollars of taxable bonds three D you know, which will be designated as green, according to documents posted to Muni o S. That is a Bloomberg business flash. Bloomberg Markets continues now. Paul Sweeney and Matt Miller. All right,

great Jered, good stuff there, you know, Matt. When the pandemic hit March of Lockdown, one of the few things you could do is kind of go out on the golf course and play golf and rounds of golf at my club in New Jersey. Roup almost fifty there in just a you know, amazing surgeon. Has to be good for the game of golf. Let's talk about the business of golf. Randy piche CEO of p g A Tour Superstars, Randy, thanks so much for joining us here again. Rounds of my club, we're up. Is that kind of what we

saw around the country. Yes, very very much, and thank you first of all for having me on the show. But you are absolute of the writing in the rounds of golf. Um, the industry saw five hundred and twenty nine million rounds of golf played last year. Um that's nearly a five percent increase from which was also the

highest ever recorded. Uh So we are at an all time high in in rounds played, and as you said, at your club, you're seeing that and various clubs around the country are seeing a surge like has never been seen before in the golf industry. So, uh, it's it's

it's really fun to to see it. And I know that our world is experiencing a lot of pain right now between wars and what you just announced in the market, and there's a lot of bad going on in the world, but um, people are are looking for a little bit of an escape from time to time. And that's what our our business and our our great game provides. So it's really fun to to be to be able to be a part of that. How important is Tiger's participation?

Extremely important? So so you probably uh remember back in in n when he first won the Masters, um and the surge that the golf, the game of golf saw between nine and two thousand, when Tiger was at his peak, um, and prior tow we had never seen a surge like that in golf. Um and and this is equal to that. And um the human side of the story of Tiger that he actually almost lost his life number one, We start with that, uh, but he was he was more likely to lose that leg than he was to to

have the leg. So to to see him out here even just walking around a golf course, let alone competing as I'm watching him hit his third shot into a par five year and fakes, but he ties for the lead in the Masters. Just to be able to say that in fourteen months after that horrific accident for Tiger Woods to be ties for the lead is something that um a normal story at the Master's obviously, this is

the biggest tournament of the year. Um, a normal feel good story at the Master's reaches certain news outlets when Tiger is in the Masters and contending in a normal year, it's a bigger story that my wife, who's just marginally interested in golf talks about. It's talked about in places and on networks. Uh that it's not talked about in other places. But with the accident and the comeback story

added to that, this has larger than life. And you know the fact that we're sitting here watching his second hole of a seventy two whole tournament and talking about it is is really incredible. And and lots of other people are as well. We've gotten text messages the Tigers now teeing off and what do you think he's gonna do? And it's it's the talk of the golf world. So it's a lot of fun, um and it helps business and it helps people be interested in golf, which is uh,

which is the most important thing. Yeah, it's interesting. Uh, you know, we're you're in here a Bloomberg We're all over. Stay tuned for updates of the Master's Tournament every hour throughout the weekend on Bloomberg Radio, and a special edition of Masters Tonight coming up at eleven pm Eastern. Randy talked to us about supply chain. If I want to go buy a new set of clubs or golf shoes, are they going to be in the store. Yeah, so that's a great question we have. We have struggled like

like others have initially on the supply chain. But the best part about us is we've gotten very, very creative. Uh So, Number one, we've we've we have great relationships with our manufacturers, as you can imagine, but we've done things that are a little bit out of the norm. So we had a manufacturer but you probably know, by the name of titlist Um, and they make wedges called Boki wedges, and they were out of grips, and what

we told titleists, we worked to deal with them. They sold They sent us wedges that were ungripped, and we told customers that came in, you pick out any grip in our store and we'll put it on at no charge. And customers were happier we're able to have products, so we're doing things that are very unique. UM. And for the first time since the pandemic started, we are back to the inventory levels that are above what our plans are. UM. So it's really really good news, UM that that we're

still we're we're doing better now than we ever have. UM. I'm not going to tell you that there are no lead times out there for certain special orders, but it's gotten a lot better. UM. And and as I said, we're the leader in the marketplace that's that's able to

to do things that are really really unique UM. And I just got off the phone with our call center UM and the calls for things that are follow ups on special orders are way down UM, which is an anecdotal way to say that special order lead times are coming down. UM. So it's a it's great news for everybody that our manufacturers have stepped up and and we're certainly the leader in the category and in being able to get customers product quicker than what they're expecting today.

Quite frankly, all right, Randy, thanks so much for joining us. Randy Piche there chief operating officer the p g A Tour superstore, and he has a ton of experience in the industry with posting formally at sports Authority and sacks, et cetera. So it's great to get his insight on the merchandizing and supply chain side of these things. In terms of sporting events, I gotta say, Paul, for me, the Masters is the greatest sporting event that I've ever

been to. It's just so much fun. And I've been to other big deals like the super Bowl, but nothing is like Augusta. I appree with pent. I've been to the Masters once. I was fortunate enough to do that, and again, I've been fortunate to go to a lot of other big sporting events, but it's just special. Even if you're not a golf fan, there's just a special filling there, and uh, the place itself is just immaculate.

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 three pt on false Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radient