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00:00 Speaker A
I’m inherently a little contrary and I did not set out that way. My my thought process and by the way, my S&P target is 6500. So it’s not like
00:06 Speaker B
we’re at seven. Yeah.
00:06 Speaker A
Yeah, it’s not like it’s not like I’m calling for this cataclysm. But I do see some headwinds that I think are under appreciated by the market. Let me stipulate that you know, the economic outlook remains pretty solid.
00:20 Speaker A
And that’s always a good backdrop, which is why, you know, I’m not looking for something like 5,000 or something like that. But a few things. Number one, we’re not as likely to get the number of rate cuts that the market had been expecting. We’re sort of in the one to two range. I think it somewhat depends who the next Fed chair will be. We obviously don’t know that while we’re taping this. Uh but I I think that number there’s I think we’re closer to neutral than than we might be letting on. So I don’t think we’re going to get that push from an aggressive rate cutting cycle.
00:44 Speaker A
Secondly, um, new Fed chairs have a way of getting tested early in their terms. I I I it’s not always clear what that will be, you know, because it’s usually something somewhat random. But going back over time, Powell uh took office in February 2018. Well, that was Valmegeddon.
01:05 Speaker B
Yeah, and then he had a bear market.
01:06 Speaker A
And then he had a bear market at the end of the year, which is something I’m going to get to in a minute. Um, Yellen had it relatively easy. She had a couple of minor tests, but they weren’t too terrible. Uh, before her was Bernanke who took office in 2006. He had a pretty long runway before the global financial crisis uh hit him. And Alan Greenspan was before him, who took office in August of ’87 and those of us with long memories remember
01:31 Speaker B
that portfolio insurance sell off.
01:32 Speaker A
Yes, the crash of 87. So, um let me just say that that doesn’t, you know, it’s it’s not exactly the most robust sample size that I just gave you, three out of four. But it’s it’s something to put in the back of your mind. Um another quick thought would be, it’s a mid-term election year. We’ve had two down years in the last 10. Care to guess when they were? You mentioned one of them, 2018, the other one was 2022.
01:58 Speaker A
What do they have in common? Mid-term election years. We had obviously a big, you know, sort of bear market moves in 2020 obviously, and again last year with with the liberation day, but uh in terms of lasting down years, those were the two. So those, those and I do think and by the way, coincident with that is my price target for the my yield target for the uh 10 years about 445 because I do think there are some incipient inflation pressures out there, particularly if, you know, we start to really get into a a weaker dollar scenario, um, you know, where we import a lot of we’re we’re net importers of goods. That’s good for a weaker dollar is good for corporate earnings translations, but not necessarily for for an inflation fighting Fed. Um, so these are the things that make me cautious.