McAlinden on Market News (Audio)

World Headquarters. You've had a terrific day amidst several hundred institutional investors who have come here to get an in depth look at the market for Canadian bonds, and certainly markets around the world, whether it's bonds, stocks or commodities, have been royaled by uncertainty over central banks and where they are heading next. So we want to bring in someone who can help us sort all of this out. Joe McLendon, founder and Chairman mac Lindon Research Partners and

its parent company, Katalpa Capital Advisers. Joe, welcome, Thank you. What a time we're having in the markets. I mean, I think at this point, I feel like I don't know if bonds are selling off, and we had another bad day today because what the VET isn't going to raise rates in September, because they're probably going to raise in December, and the same thing for stocks. How are

you starting this out? I I think it's not um, whether they raise rates in September or not, because it's most likely that they won't given the presidential election, UM and the division that we apparently have on the on the f O m C. But rather, I think the certainty that may come out next week about the December rate hikes and three or four more rate hikes next year. Uh. That information is likely to come out with the f O m C meeting next week on Wednesday, and I

think that's what's got the market in a tizzy. Joe Mcalindon have taken a look at the performance of the SMP five hundred so far this year. It's up a little bit more than four out Jones industrial average, a little bit more than three and a half percent. If you've made some money in the market, what should you do? Should you just cash out for a little bit, pay your taxes and wait for things to settle, or do you remain fully invested? UM? Well, I wish you didn't

have to pay those taxes, but I would. I would be raising cash here. Cash is my favorite asset class. I think that both bonds and stocks are gonna be UH in for a tougher time over the next three to six months. Because of what's going on with monetary policy.

Um number one, Number two, the uncertainty of the election outlook, and number three, Um, you're going I believe, Pam, you're gonna be getting uh some very nasty inflation numbers uh over the next six months as the year on year energy prices begin to push the CPI up towards a three handle and and maybe higher. Okay, So and it's it's inflation is going to move up, and you think that is what's going to force the fits hand to uh move on because the headline cp I guess to three,

So good for stocks or bad for stocks? If inflation is rising, companies have more pricing power. Companies have more pricing power, and and beyond the uncertainty of the next three to six months, I would say that that that pricing power is going to be a very big positive. And the fact that historically stocks are a good inflation hedge, that that kind of thinking will kick in. But in

the short run, you're gonna go front. You have to go from a hey, there's no inflation and the fit's never going to raise interest rates into a new mindset, and that that transition, along with the uncertainty over the election, and who knows where that's going at this point. Um, I think it's going to be a difficult period. And you've had a you've had a gradual topping out of stock prices in the US through August and now we're rolling over. It's been an insignificant, really correction so far,

but I think it's gonna get worse in October. Joe McLendon, I don't hear you talking about gold or any precious metal or any traditional safe haven other than cash. Why is that? Well, I didn't get to that yet, Tam. I would say, there's always uh places to make money on alongside and my two favorites, believe it or not, there are two things that got hammered today. Um, but that's happened many times before, and then they turn around and start calling back up again, and that is gold

and gold stocks and oil and oil stocks. And I think that's where you want to be. And this kind of changing environment, I think the growth side of the market is very vulnerable. Bonds are very vulnerable, and uh,

you know my I personally, UM would like to uh. Well, if I personally am focused in my own investing on cash and energy and gold well, and as a matter of fact, one of our big stories on the Bloomberg today the bond market sell off, deepening as money managers pile into cash, and Bank of America their latest surveys showing investors ramping up cash holdings to near the highest and fifteen years. Well, I think it's going to go higher because I mean, look, the market is just what

is it all three percent from the August high? Uh and and uh. I think there's a lot of additional vulnerability. I mean, these corrections that we've had over the last six, seven, eight years UM have typically been single digit, but every once in a while we've gotten double digit decline. And I think, uh, between now in the spring, that's that's

what the exposure is. And I think the decline and bond prices could be just as bad um as what we likely to see in stocks as we moved towards a new reality that the set is indeed kind of tighten three or four times next year, inflation is parking up um and uh, and we have the uncertainty of a new administration. I think that's going to be true

no matter which canadate wins. I want to thank you very much Joe maclendon is the founder and the chairman of Macaillndon Research Partners and its parent accompany, Kaupa Capital Advisors. We've been broadcasting live from Bloomberg World Headquarters, site of the fourth annual Canadian Fixed Income Conference, sponsored by a National Bank of Canada Financial Markets. We've learned a lot about Canada. We have and all the the government officials,

industry leaders so much. We think national Big of Canada financial markets are being here. Indeed, you're listening to taking Stock. Thank you for listening. This is Bloomberg