WOODS Welcome back to ░░░░░░░░ on Close I m ░░░░░░░░ Woods in for Oliver ░░░░░░░░ Let s wrap up ░░░░░░░░ show with a look ░░░░░░░░ the bigger picture Joining ░░░░░░░░ for that is Jeffrey ░░░░░░░░ principal and chief economist ░░░░░░░░ Payden Rygel So good ░░░░░░░░ have you here with ░░░░░░░░ Jeffrey CLEVELAND Thank you ░░░░░░░░ You know I was ░░░░░░░░ thinking about this note ░░░░░░░░ We teased it in ░░░░░░░░ into break You say ░░░░░░░░ is dead I ve ░░░░░░░░ that inflation is coming ░░░░░░░░ down to target Inflation ░░░░░░░░ moving in the right ░░░░░░░░ Haven t actually heard ░░░░░░░░ is dead yet So ░░░░░░░░ me in What do ░░░░░░░░ mean CLEVELAND I think ░░░░░░░░ need to move on ░░░░░░░░ the next thing When ░░░░░░░░ look at the three ░░░░░░░░ average of the monthly ░░░░░░░░ in the inflation gauge ░░░░░░░░ the Fed cares about ░░░░░░░░ core PCE it s ░░░░░░░░ at a 0 3 ░░░░░░░░ 13 percent month to ░░░░░░░░ rate So if that ░░░░░░░░ to persist in the ░░░░░░░░ year I think it ░░░░░░░░ entirely possible the core ░░░░░░░░ will be under two ░░░░░░░░ Caroline So for the ░░░░░░░░ two or three years ░░░░░░░░ ve been talking about ░░░░░░░░ inflation inflation above the ░░░░░░░░ s target Sometime in ░░░░░░░░ spring we could be ░░░░░░░░ about inflation that s ░░░░░░░░ low it s below ░░░░░░░░ Fed s target So ░░░░░░░░ think that s very ░░░░░░░░ for people to consider ░░░░░░░░ from that perspective inflation ░░░░░░░░ dead on the key ░░░░░░░░ that the Fed cares ░░░░░░░░ WOODS How are you ░░░░░░░░ about this port worker ░░░░░░░░ which we don t ░░░░░░░░ how long it s ░░░░░░░░ to go on for ░░░░░░░░ could put upward pressure ░░░░░░░░ not just goods but ░░░░░░░░ wages And then we ░░░░░░░░ oil prices ticking higher ░░░░░░░░ well How could that ░░░░░░░░ the inflation picture CLEVELAND ░░░░░░░░ think that s a ░░░░░░░░ question So the way ░░░░░░░░ think about inflation especially ░░░░░░░░ the past 20 25 ░░░░░░░░ is when you need ░░░░░░░░ get really worried about ░░░░░░░░ it s when the ░░░░░░░░ for labor was wildly ░░░░░░░░ the supply of labor ░░░░░░░░ you had a mismatch ░░░░░░░░ demand for labor to ░░░░░░░░ for labor So we ░░░░░░░░ that during 2022 and ░░░░░░░░ The data that we ░░░░░░░░ yesterday on job openings ░░░░░░░░ that job openings picked ░░░░░░░░ a little bit in ░░░░░░░░ month of August but ░░░░░░░░ ve come down labor ░░░░░░░░ has come down over ░░░░░░░░ last year or so ░░░░░░░░ terms of the unemployed ░░░░░░░░ other side of that ░░░░░░░░ the labor supply that ░░░░░░░░ picked up a little ░░░░░░░░ So we re in ░░░░░░░░ balance on the labor ░░░░░░░░ We re almost one ░░░░░░░░ one We look at ░░░░░░░░ openings to the unemployed ░░░░░░░░ at that point when ░░░░░░░░ re one to one ░░░░░░░░ s not a worrisome ░░░░░░░░ If we have some ░░░░░░░░ shortages or we have ░░░░░░░░ temporary shutdowns that s ░░░░░░░░ a worrisome It s ░░░░░░░░ you see demand for ░░░░░░░░ really start to outstrip ░░░░░░░░ So that s what ░░░░░░░░ to watch out for ░░░░░░░░ that I think inflation ░░░░░░░░ probably continue to cool ░░░░░░░░ as I mentioned earlier ░░░░░░░░ OK so what does ░░░░░░░░ all mean for the ░░░░░░░░ s next moves CLEVELAND ░░░░░░░░ 3 percent maybe 3 ░░░░░░░░ percent on the Fed ░░░░░░░░ rate I think they ░░░░░░░░ going to get there ░░░░░░░░ in the second half ░░░░░░░░ next year So sometime ░░░░░░░░ late 2025 That might ░░░░░░░░ some people the bond ░░░░░░░░ who they want they ░░░░░░░░ faster rate cuts So ░░░░░░░░ expecting you know another ░░░░░░░░ basis point rate cut ░░░░░░░░ then 50 after that ░░░░░░░░ types of bond investors ░░░░░░░░ be disappointed More likely ░░░░░░░░ our view that the ░░░░░░░░ will just go 25 ░░░░░░░░ next two meetings and ░░░░░░░░ maybe 25 per quarter ░░░░░░░░ the next year So ░░░░░░░░ ll get to 3 ░░░░░░░░ 5 percent at the ░░░░░░░░ of next year I ░░░░░░░░ that s important because ░░░░░░░░ are cutting and they ░░░░░░░░ cut by you know ░░░░░░░░ 200 basis points So ░░░░░░░░ is some easing or ░░░░░░░░ least removal restriction that ░░░░░░░░ going to feed into ░░░░░░░░ markets and into the ░░░░░░░░ The thing that we ░░░░░░░░ point out is in ░░░░░░░░ when the Fed is ░░░░░░░░ and you re not ░░░░░░░░ a recession those tend ░░░░░░░░ be very good times ░░░░░░░░ the stock market for ░░░░░░░░ sectors and the bond ░░░░░░░░ things like the high ░░░░░░░░ bond market for example ░░░░░░░░ that s what we ░░░░░░░░ we re in right ░░░░░░░░ Caroline We re going ░░░░░░░░ get maybe 150 200 ░░░░░░░░ points of rate cuts ░░░░░░░░ we don t think ░░░░░░░░ re in a recession ░░░░░░░░ on the cusp of ░░░░░░░░ recession So that should ░░░░░░░░ really bullish for financial ░░░░░░░░ WOODS Alright so risk ░░░░░░░░ we have 30 seconds ░░░░░░░░ me where you d ░░░░░░░░ putting money right now ░░░░░░░░ terms of equities CLEVELAND ░░░░░░░░ ask the bond market ░░░░░░░░ where to put your ░░░░░░░░ in terms of equities ░░░░░░░░ think you just stay ░░░░░░░░ the S P The ░░░░░░░░ of history in the ░░░░░░░░ or five periods that ░░░░░░░░ mentioned where you know ░░░░░░░░ don t have a ░░░░░░░░ and the Fed is ░░░░░░░░ you can see another ░░░░░░░░ percent in terms of ░░░░░░░░ on just the S ░░░░░░░░ 500 So I would ░░░░░░░░ keep it simple stay ░░░░░░░░ know broadly diversified and ░░░░░░░░ invest it in stocks ░░░░░░░░ that s your avenue ░░░░░░░░ also you know inaudible ░░░░░░░░ from Payden Rygel 160 ░░░░░░░░ under management mostly in ░░░░░░░░ We do like the ░░░░░░░░ sectors and the bond ░░░░░░░░ So things like high ░░░░░░░░ I think are going ░░░░░░░░ do well if equities ░░░░░░░░ well So I think ░░░░░░░░ that when you re ░░░░░░░░ your asset allocation WOODS ░░░░░░░░ good point I should ░░░░░░░░ checked your title once ░░░░░░░░ Jeffrey Cleveland Principal Chief ░░░░░░░░ Payden Rygel thank you ░░░░░░░░ much Have a good ░░░░░░░░ CLEVELAND: “You too.”