We had this you know very optimistic Risk-on moves in January February I Think the story is really about sort of Macroeconomic reality becoming uh you Know priced back into the market Um you know I think similar to the no You were just discussing 18 times Forward earnings does look very rich uh If you do expect some turbulence ahead Now I think you know a recession is not A foregone conclusion right and that's Why I think we're holding at these Valuations right now you use the word Macro I I felt like a few weeks ago People had started to flip to this idea That we finally got into this micro Market and a lot of that of course Seemed to be predicated on this idea That the Fed was near the end of its Hiking cycle here you think that for the Next few months maybe even the next year That macro is basically going to be the Main driver well I wouldn't say for the Full year but I definitely think you Know what we have come to realize in the Last couple weeks as those inflation Expectations have looked a little bit Hotter as fed fund rate terminal rates Have moved quite a bit higher you know We we had sort of a period of sort of Status quo around you know a consensus Around five percent that's pushed much Higher now so certainly macro is is uh You know still a uh I'd say in the
Driver's seat yeah Um but I think what we need to pay Attention to is what we are seeing on The micro right I think probably this Market is overlooking some of the Information that did come through in the Earnings season and the earnings season I would describe as pretty underwhelming Yeah um you know corporations were Guiding lower and really the big Takeaway is the speed with which we've Seen downward revisions looks a lot like Heading into a recession so I think you Need to be preparing in terms of your Asset allocation preparing for more Market turbulence well let's talk about How you actually factor that into asset Application the info information that You're getting into the micro how should That inform where you're allocating your Money right now well I mean let's start At the high level even though we're Talking about micro the high level is That you know we still think bonds look Better than equities right now you know As I said 18 times looks pretty Expensive given you know what we think Earnings are headed what Romaine alluded To you know typically what we see in Terms of multiples when we do go through Recessions now again not a foregone Conclusion but if you're thinking about What has the you know best downside Protection in this type of Market it's
Not equities bonds look much more Attractive we've spoken before just About you know it's about total returns This year I know earlier programs today It was sort of being thrown out there You know this was supposed to be the Year of the bonds is it going to be can We throw that out the window I think it Is still going to be the year the bonds We just have to be a bit more patient
