Investment committee, josh, steve brown, we begin with the markets, stocks continue to stage their rebound, rise in bound yields giving relief there. You finally can take a little bit of a sigh of relief that yields have stop going down, maybe they bottomed and stocks did too. I feel like were in one of those moments and we have had them off and on over the years it remind message a lot of that risk on, risk off kind of market environment that we had previously spent months in different years throughout the recovery 2011 stands out. We probably did this in 2015 too. Where you have days is obvious, today is a risk on day, and so they sell off all the bond proxy, defensive sec ttors, and lasts a di or two days, and find yourself in other days, theyre taking up consumer stable stocks and utilities and Everything Else gets dumped i dont know that were definitively in that for a long time, but we have definitely been in that the last week or so maybe thats the way it has to be until we get to the next fed meeting in september thats my best guess one thing i think is interesting, itb near a 52 week high, very few Industry Groups can say theyre doing that right now outside of defensive stocks. These are home construction, obviously companies that benefit from Lower Borrowing rating. What these stocks are telling you are that lower rates are a permanent feature of the landscape. That could end up being wrong, but that is what they seem to be pricing in, and there were some really really cheap names in the group that thought the housing rally was over, perhaps not. Anastasia do we need to have a conversation on which market is right, the bond market or the equity market. This is an ongoing conversation i dont know that either one of them is wrong or one is right. I think what the markets are pricing in is the backdrop of growth that is sluggish, but also policy makers are going to be increasingly active here. If you think about the g 10 global tenyear yield, its. 6 and could be headed lower if you have Additional Central Bank easing, which we expect. This is not necessarily so strange, the yields are where they are now, i will say that the yields are pricing in growth rates that are south par, and below what our forecasts are. Stocks on the other hand are saying, look, at some point, there is a trump put, a fed put, a ucb put, and thats what the stocks are trading on. If you think that still exists, nmike wilson throws col water on that says theres no such thing as the trump put, fed put, they have expired, is that right . I think thats true except for a call for a hundred basis point cut. If that happens theres a pretty big fed put under the market absent that, the markets price continued easing i dont know what trump can do other than jawbone it because were out of fiscal policy in terms of the ability of congress to do something. Feds can jawbone it this week they can but youve got an issue with the credibility of powell, so you dont know which way hes going to do he has changed his mind a few times. I dont think the market is putting a lot of stock as a matter of fact, i think the market is leading the dialogue, not the fed. I dont really see that changing i believe you have two choices in this market, you can stand pat the way you are, come back in a year, two years, dont even look at because the volatility is going to continue, or you can try and be opportunistic, selling these major pops and buying the major highly emotional lows thats where youve got to be. What about all points in between . You know, if you get this sort of steady, if you get some of the volatility to go away. Thats my base case, you dont. I think the dialogue continues to be, you know, backwards and forwards in terms of china trade and there are two factors driving the market one is yields, i dont think its accidental or coincidental that you have the tenyear trade back up in the yield today, and now its come up a little bit, and the market trading higher today or on friday, nor is it accidental we have the china narrative calm down a little bit, if anything be net positive slightly. Bonds versus stocks, you know, the bond yield is coming down, joe, gave everybody the feeling that a recession not imnegligent but going imminent but going to happen sooner than we thought, and Economic Data is good, stocks should be higher than where the bond market is suggesting they should be. 147 on august 15th for a tenyear, that was the lowest since 2016 both steve and josh have cited the relationship between bonds and equities, and i think an stay stasia, you also mentioned the relevancy isimportant wherewe are now because of the algos you look at a day like today, and the market rallies, but now look at a tenyear and see it at 158, falling back to your point, how do they respond to that, and you cant as an investor get caught up in the temptation of which way an algo is going to drive. As long as bond yields are where they are or lower. Relevant, thats the question. The questions are going to persist as to is there a worsening picture in the u. S. Economy, then the data is suggesting right now. Let me finish this thought real quick the bond yield is relevant because it is being put in at the top of the criteria for an algo, just as oil used to be now its the bond yield. 6 months ago, it wasnt the bond yield. It will be replaced by Something Else at some point, but right now, that is whats driving the criteria in these algorithms. I think youre absolutely right, the bond yield is the yield curve and last week we were saying its impossible for stocks to rally if the yield curve is going to flatten and invert i think they had a lot to do with the price action we have seen in treasuries as well we look at market depth and liquidity, it was also very low for the treasury markets as well, so i think the fundamental fears got exaggerated by the treasury technical i wouldnt say the treasuries are flashing this imminent recession sign because theres more at play. With respect, yeah, the equities cant rally with the yield curve inverting is not necessarily true i know we dont cheer for an inversion. I understand what the ramifications are, but if you look at the last five inversions going back to 1970, in four cases, stocks actually went on to rally for at least a year into the onset he pointed that out. Historically the day of the inversion it doesnt mean its an average of 15 gains for the stock market, and i dont know what the fundamental reason for that is i would just suggest that i would just suggest that historically we had not been following the yield curve as closely as we follow it now. Were about five minutes from cnbc putting a box above the right hand corner where they put the s p 500. Youre going to have an inversion and its going to say how many basis points, you dont think were going there, remember when gold had an all time high, a permanent spot on cnbc, oil the same in 07 and 08, bitcoin that will happen at a certain point. Maybe its after the yield curve has inverted or stays inverted for a week or two weeks. This is going to joes point, this is going to dominate, sentiment and the way we talk about recession. Its also going to dominate the Software Programs that are written to trade this market are going to behave, and i just think we need to be aware that its not normally a good sign but also we should beware theres something called the hizenberg uncertainty principal, something observed is going to act differently than not being observed and we are so focused on this yield discussion, its possible that we are talking ourselves into something that need to happen. Opthey say the selloff is wa over done to make the point that stocks got too beaten up. Only 3 off the high. I dont think its way over done a nice come back in the last two days. Even at the bottom, this selloff wasnt 10 this sell off was half of that, but, you know, some of the caterpillars, theyre oversold the facts are that were still and im saying we shouldnt be to the old thinking which is that when you have yields come down the way they are, it presages economic slow down the curve wasnt inverted long enough to predict a recession. My view is the textbook isnt written. Negative rates and the sovereigns around the world, is now you have 20 sovereigns yielding negatively than you had just a few months ago. Theres this drive for yield, and as those instruments roll off, youll see the u. S. Treasuries yield go lower till if you knew that, and just playing into the theme of jackson hole this week, if you knew that global Central Banks were going to do to borrow a comment from a few years ago, whatever it takes, you know they are. Theyre going to at least try. Whether they have to say those words explicitly or not, then the risk is getting too negative because Central Banks are going to be all in, so to speak if they have to. Thats right, and then to tie that with joshs point because i cant let him have that one, you mentioned stocks rally, even though the yield curve is inverted, they rally over the next 12 months what i was saying over the near term its very difficult to rally, why they ultimately rally is because the fed recalibrates the policy and this gets me back to the point on jackson hole, the fed cannot just idly sit by and let the trump tariffs threaten further the u. S. Economy and see the yield curve where it is, and not do anything so my base case is that sometime between now and september, they will likely acknowledge the risks that are building to the economy, whether it happens at jackson hole this week or not but ultimately this is why we want to be buying in dip in august for september. If trump said no more tariffs tomorrow and actually meant it and fired navarro, are we too easy, are we back to the fed has to tighten or things permanently in this cycle slowed for the Global Economy, and u. S. Central stimulus brings us back from the brink. A lot of damage has been inflicted on the Global Economy for the last year, its not about one more incremental tariff theres a big hole we have to dig out of this morning we were talking about germany adding fiscal stimulus i dont think were all that easy i think we do need to continue stimulus if rates fall back to 0, and President Trump does pull back from the worst of the tariff escalations, that could be a pretty good the market will trade up. Theres no question. If he fires navarro without doing anything else, the market trades up significantly. I agree. In terms of lowering rates, you have met the point of diminishing returns. I just dont think it drives anything stock prices will probably go up. They will go up, but i dont think it improves the economy. May not. You had another disappointing Inflation Report out of europe today. They have taken it down from 1. 1 to 1 its not helping there he have had negative rates for a while. But youre still going to have a bazookas. I think the biggest risk what josh alluded to, you keep looking at this, youre going to talk yourself into a recession, and thats a bigger risk than an actual recession, slowing Economic Conditions in the u. S. To scotts point, if you know theyre bringing out the bazooka, europe is dealing with a yield move fundamental in its nature more aggressive monetary easing is only going to push yields down further and further, the impact on that in the u. S. Is a technical yield move, not a fundamental yield move flows of capital continue to go here on a day like today, we began talking about, you dont give up the bond proxies on a day like to today. If the market believed there was a bottom in yields and we were shifting back to an environment where the selloff is way overdone and you want to go in on equities, you would see the faang is up 4 today. Some positives, though, apple is getting some momentum again the most important stock in the world, about 10 off the august 1st lows which aint nothing google is starting to act better, and it deserves to twitter, big gap up after earnings and guess what, that gap held throughout the volatility nvidia has been bottoming for months, now starting to turn higher and guess what the two best performing sectors are performing today u you have retailers, acting really well, and look at Energy Stocks, more money has been lost in Energy Stocks than any other set, worse than the banks, i have never seen anything work so bad. Having a risk on day and a risk on day where everyone plays,eniplays i think its constructive. Now, oversold, were down less than 4 from all all time high how can you make that statement as an adult, and expect to be taken seriously afterward. Were nowhere near overdone. Tariffs that go into effect on september 1st, and whatever they c concoct next, im telling you, were not overdone, the market is going lower the market despises anything to do with increases on tariffs. Your firm says wait until september to buy it. Thats when the time to buy is yeah, and the rational for that is we know what august liquidity is like. There has been so much escalation that were quickly put in the bottom drawer, but the reality is china, the currency manipulate tor, if chia doesnt buy ag products, could we do Something Else i think the answer is yes. Theres plenty of ways for trump to escalate this, and probably the biggest risk is going into jackson hole, i think the fed should acknowledge the yield curve moves. What if they dont the market is pricing aggressively, 60 basis points, what if they dismiss and dont act on that. September, theyre not going to do all the rate cuts before september. No, no, no. But on the way to the lead up down the runway. Right theyll take a look, too, at retail this week, right, the pillar of what the economy strength has been has been retail you have a flood of earnings next week. I want to say one thing that larry kudlow, the of a lot of people are giving him hell, bringing up that he was wrong about the economy in 07 hes doing his job, and larry understands something, he may be totally wrong and just saying what the president wants but larrys job is so cheer lead the economy and the market and somebody has to do that because sentiment is unquantifiable, we dont know why all of a sudden people buy 50 at a store one month, and the next month only spend 30, and that happens on mass when we go to recession we dont understand exactly why that happens, we dont know what caused the last recession. We know that the markets and the economy got bad after. You need somebody who will do that role, and i actually think larry is doing a decent job of it, but if and when things turn and sentiment shifts permanently. There aint going to be nothing that the white house can do at that point thats why this stuff is so important for not to get out of hand because when it does turn, were in trouble. Okay. This is the week that could, i think, seal the fate on a rate cut and the size of the cut you get because of the retail, because of what it is. Right into jackson hole. Is it 50 basis points. Can the consumer remain, all day today were going to look at the state of the consumer. Can the consumer remain Strong Enough to fend off any weakness thats maybe on the other smaller part of the economy. The consumer has been very strong i would say this week home depot and lowes is going to be important. Thats going to give you the puzzle of what the consumer is doing. We know the strong numbers from walmart, and we know the strong numbers from some of the online, but home depot and lowes gives you a glimpse into the consumer, and i think the interesting thing is the big ticket items. Are consumers walking into cars . No, theyre not are consumers walking into home depot. Are they walking big ticket items and cars and things like that had dropped in sentiment. But i think getting that insight and seeing what home depots guidance, are they going to have to cut guidance, the lot of analysts believe home depot is going to have to cut guidance refinancing activity has been incredibly strong, that suggests a very strong environment for home depot and for lowes. Im not sure if youre going to get that, youve got commodity deflation. Youve got fears of what the Economic Outlook is about. I think home depot and lowes this week is going to complete the puzzle. And it will be the puzzle for two days, and Something Else is going to dictate where we go i think that in normal investing environments, thats true. I dont think its healthy that everything is up to date. What would you watch more closely retail sales or credit card spending. Credit card spending has been straight up, right, retail sales, it depends who youre watching, there are winners and losers, retail sales were strong, but if youre watching walmart, then youre all in. I just dont think theyre indicating that. Whats more important to you. Before you mplay mc. I think the market is driven by the algos, you cant have everything going up on recovery days, you need to have equilibrium on the market in some sense, and youre just not getting that. To answer your question, josh, i think credit card sales are more important to watch. Theres a whole host of ale alternative data, to gauge what is the football traffic look like, and you know, the credit card receipts that are in peoples gmail accounts and i mean, were seeing such strength in payments to me thats just that the u. S. Consumer is on solid footing. Back to your point, is consumer important or not, if we were amid this slow down, and we had concerns about the u. S. Consumer, then we would be in trouble. You get to that point and youre in trouble. That is not the case today. Not today. You look at jobs and wages, i sound like larry kudlow now. If we say the consumer is the best part of the united states, and its been for a while, and its the only Thing Holding this up, the stock market becomes an indicator of the stock market and an Economic Indicator more so than the past if youre looking at retail same store sales, youre not capturing whats happening in the economy. If youre looking at credit cards and the credit card stocks, you are capturing, almost realtime sentiment because people do a lot more than buy things from Retail Stores on credit cards they pay for all the Services Like apple, et cetera which has become the engine of the economy. I would focus on mastercard, visa, how are the stocks trading, the payment process, square or pay pal. I think thats the whole shooting match, if the consumer loses confidence, thats it. I cant remember where i read it, that, you know, the consumer