RUSH TRANSCRIPT Caroline Big ░░░░░░░░ not doing enough to ░░░░░░░░ the markets lower Fiserv ░░░░░░░░ of the lowest on ░░░░░░░░ russell 2000 You are ░░░░░░░░ a flattening yield curve ░░░░░░░░ selling off and cyclicals ░░░░░░░░ on the lower side ░░░░░░░░ is ramping up coal ░░░░░░░░ again Maybe the supply ░░░░░░░░ constraint is easing off ░░░░░░░░ little bit Let s ░░░░░░░░ about sentiment Our guest ░░░░░░░░ a portfolio manager Talk ░░░░░░░░ us about volatility in ░░░░░░░░ market Earnings season came ░░░░░░░░ us about 10 days ░░░░░░░░ We see a rebalancing ░░░░░░░░ that going to lead ░░░░░░░░ more volatility Volatility is ░░░░░░░░ low When volatility becomes ░░░░░░░░ it s almost like ░░░░░░░░ coiled spring You can ░░░░░░░░ quite a bit of ░░░░░░░░ because it is priced ░░░░░░░░ and people are expecting ░░░░░░░░ and equity markets People ░░░░░░░░ complacent and bond markets ░░░░░░░░ will prove to be ░░░░░░░░ When everyone gets calm ░░░░░░░░ the opposite happens Taylor ░░░░░░░░ that what we re ░░░░░░░░ in the bond market ░░░░░░░░ well The yield curve ░░░░░░░░ been flattening We have ░░░░░░░░ the biggest global flattening ░░░░░░░░ the world All yield ░░░░░░░░ are flattening and especially ░░░░░░░░ the U S it ░░░░░░░░ big it has been ░░░░░░░░ biggest flattening in years ░░░░░░░░ are either credibly complacent ░░░░░░░░ inflation or they are ░░░░░░░░ a hawkish Federal Reserve ░░░░░░░░ personally think the rates ░░░░░░░░ is overaggressive with a ░░░░░░░░ of hikes If you ░░░░░░░░ at the two year ░░░░░░░░ will say three years ░░░░░░░░ romaine is here we ░░░░░░░░ to talk about the ░░░░░░░░ The belly is 20 ░░░░░░░░ points right now The ░░░░░░░░ between the two year ░░░░░░░░ 10 year the Fed ░░░░░░░░ five times the market ░░░░░░░░ telling you the 10 ░░░░░░░░ will only move 20 ░░░░░░░░ points That s pretty ░░░░░░░░ Sonali you mentioned this ░░░░░░░░ been a global phenomenon ░░░░░░░░ global flattening Is this ░░░░░░░░ value Comes to trading ░░░░░░░░ is relative value Generally ░░░░░░░░ markets are saying is ░░░░░░░░ are de risking right ░░░░░░░░ into equities and going ░░░░░░░░ long dated duration and ░░░░░░░░ it a safe haven ░░░░░░░░ question is if there ░░░░░░░░ inflation that is not ░░░░░░░░ and it sticks around ░░░░░░░░ group of investors could ░░░░░░░░ really surprised Markets are ░░░░░░░░ complacent with long dated ░░░░░░░░ rates so incredibly low ░░░░░░░░ what is the doll ░░░░░░░░ your table That s ░░░░░░░░ game of thrones This ░░░░░░░░ me Caroline amazing We ░░░░░░░░ that insight Nancy Davis ░░░░░░░░ of thrones clearly a ░░░░░░░░ The S P 500 ░░░░░░░░ Tech on the higher ░░░░░░░░ but it s all ░░░░░░░░ bonds Taylor it is ░░░░░░░░ of the yield curve ░░░░░░░░ This is bloomberg Sonali ░░░░░░░░ bostick is off today ░░░░░░░░ the NASDAQ 100 hit ░░░░░░░░ record earlier today Microsoft ░░░░░░░░ Tesla Amazon all doing ░░░░░░░░ What takes us lower ░░░░░░░░ paypal and fiserv A ░░░░░░░░ about economic growth is ░░░░░░░░ out in cyclical space ░░░░░░░░ you are seeing it ░░░░░░░░ the tech markets as ░░░░░░░░ The relative out performers ░░░░░░░░ NASDAQ up That is ░░░░░░░░ off the highs of ░░░░░░░░ session In the last ░░░░░░░░ you have seen the ░░░░░░░░ year yield we are ░░░░░░░░ below 2 across the ░░░░░░░░ as we continue to ░░░░░░░░ our eyes on the ░░░░░░░░ it is hurting the ░░░░░░░░ today Let s go ░░░░░░░░ this with Nancy Davis ░░░░░░░░ talked a lot about ░░░░░░░░ volatility that has continued ░░░░░░░░ do you do in ░░░░░░░░ like these It s ░░░░░░░░ about diversification Investors need ░░░░░░░░ be thinking about how ░░░░░░░░ can add different things ░░░░░░░░ diversify away from not ░░░░░░░░ portfolio all be correlated ░░░░░░░░ each other all at ░░░░░░░░ same time Many investors ░░░░░░░░ looking for non correlated ░░░░░░░░ Looking at other asset ░░░░░░░░ That s one of ░░░░░░░░ reasons why has been ░░░░░░░░ they have had historically ░░░░░░░░ correlation to common asset ░░░░░░░░ Sonali do you think ░░░░░░░░ are right to be ░░░░░░░░ to safety as much ░░░░░░░░ they are I don ░░░░░░░░ think government bonds are ░░░░░░░░ If we have inflation ░░░░░░░░ the 30 year could ░░░░░░░░ quite risky Because it ░░░░░░░░ very long duration It ░░░░░░░░ sensitive to changes in ░░░░░░░░ rates If interest rates ░░░░░░░░ to go lower owning ░░░░░░░░ dated bonds would be ░░░░░░░░ but it s a ░░░░░░░░ of where interest rates ░░░░░░░░ going to be in ░░░░░░░░ future Caroline what are ░░░░░░░░ feeling you were great ░░░░░░░░ you were talking about ░░░░░░░░ bond markets factoring in ░░░░░░░░ it would only move ░░░░░░░░ basis points if we ░░░░░░░░ five rate hikes What ░░░░░░░░ we missing when it ░░░░░░░░ to inflationary pressure The ░░░░░░░░ flattening we have had ░░░░░░░░ the forward yield curve ░░░░░░░░ been hit on both ░░░░░░░░ Think about when we ░░░░░░░░ q2 the 10 year ░░░░░░░░ around 1 75 We ░░░░░░░░ had 10 year yields ░░░░░░░░ At the same time ░░░░░░░░ have it s like ░░░░░░░░ seesaw when you have ░░░░░░░░ dated yields lower and ░░░░░░░░ dated yields higher because ░░░░░░░░ the anticipation of fed ░░░░░░░░ That s where the ░░░░░░░░ flattening his coming I ░░░░░░░░ it s overdone I ░░░░░░░░ t see an environment ░░░░░░░░ the Fed hikes more ░░░░░░░░ five times before the ░░░░░░░░ of 2023 Plus tapirs ░░░░░░░░ going into midterms in ░░░░░░░░ Caroline rate thoughts coming ░░░░░░░░ Nancy when it comes ░░░░░░░░ what the market factors ░░░░░░░░ in terms of tapering ░░░░░░░░ rate hikes Taylor this ░░░░░░░░ one we have been ░░░░░░░░ at closely We will ░░░░░░░░ interested to see what ░░░░░░░░ has to say given ░░░░░░░░ we heard from gm ░░░░░░░░ morning Highlighting the supply ░░░░░░░░ issues that we still ░░░░░░░░ well into 2022 Shares ░░░░░░░░ ford are falling in ░░░░░░░░ Look at auto revenue ░░░░░░░░ will be the numbers ░░░░░░░░ are looking at Nancy ░░░░░░░░ me bring you back ░░░░░░░░ because we are talking ░░░░░░░░ inflationary concerns and the ░░░░░░░░ on growth I m ░░░░░░░░ at five year breakevens ░░░░░░░░ is the highest we ░░░░░░░░ ever seen Do you ░░░░░░░░ that these numbers are ░░░░░░░░ and if so is ░░░░░░░░ inflationary environment going to ░░░░░░░░ the economy It s ░░░░░░░░ good point Breakevens have ░░░░░░░░ up quite a bit ░░░░░░░░ is a measure of ░░░░░░░░ inflation It s a ░░░░░░░░ to point out that ░░░░░░░░ are just CPI inflation ░░░░░░░░ is just one index ░░░░░░░░ about the russell or ░░░░░░░░ Jones or S P ░░░░░░░░ index is composed of ░░░░░░░░ huge component of owner ░░░░░░░░ rent The combination of ░░░░░░░░ rent and higher energy ░░░░░░░░ is what has driven ░░░░░░░░ much higher If you ░░░░░░░░ at the term premium ░░░░░░░░ yield curve which is ░░░░░░░░ a result of investors ░░░░░░░░ for inflation in the ░░░░░░░░ it selling a very ░░░░░░░░ story The yield curve ░░░░░░░░ experienced the biggest forward ░░░░░░░░ since the financial crisis ░░░░░░░░ market is not saying ░░░░░░░░ s going to be ░░░░░░░░ lot of inflation in ░░░░░░░░ future People are definitely ░░░░░░░░ the camp of inflation ░░░░░░░░ transitory Sonali when we ░░░░░░░░ anything is the worst ░░░░░░░░ the financial crisis it ░░░░░░░░ scary When do we ░░░░░░░░ to reverse course a ░░░░░░░░ bit I think it ░░░░░░░░ a question of if ░░░░░░░░ Fed tapers more likely ░░░░░░░░ hikes will come out ░░░░░░░░ the curve because everybody ░░░░░░░░ waiting for the taper ░░░░░░░░ start If we had ░░░░░░░░ equity pullback that would ░░░░░░░░ steepen the curve because ░░░░░░░░ Fed rate hikes five ░░░░░░░░ them have been priced ░░░░░░░░ before 2023 That seems ░░░░░░░░ a lot to me ░░░░░░░░ with the taper and ░░░░░░░░ I don t think ░░░░░░░░ Fed is going to ░░░░░░░░ more than five times ░░░░░░░░ think the rates market ░░░░░░░░ interesting Especially the difference ░░░░░░░░ short dated and long ░░░░░░░░ rates The rates market ░░░░░░░░ really discounted future inflation ░░░░░░░░ think it s a ░░░░░░░░ opportunity to buy things ░░░░░░░░ they re low when ░░░░░░░░ re not price tie ░░░░░░░░ s one market that ░░░░░░░░ not price tie not ░░░░░░░░ high Caroline thank you ░░░░░░░░ much Looking straight at ░░░░░░░░ market we see worries ░░░░░░░░ by the bond market ░░░░░░░░ it s my kind ░░░░░░░░ day Technology is struggling ░░░░░░░░ hold onto the gains ░░░░░░░░ is mostly on chon ░░░░░░░░ date unchanged on the ░░░░░░░░ Sonali so much for ░░░░░░░░ Bitcoin hedge That is ░░░░░░░░ down on the day ░░░░░░░░ well Why buy bonds ░░░░░░░░ meanwhile we move closer ░░░░░░░░ the closing bell Stick ░░░░░░░░ us for the coverage.