00:00 Speaker A
Inflation for now, relatively stable, hovering just below 3%. So, will the rally continue or could there be more market volatility on the horizon? Joining me in studio is Chris Watling, Longview Economics global economist and chief market strategist. Thanks for being here.
00:15 Chris Watling
Thanks for having me. Appreciate it.
00:17 Speaker A
So, Chris, it's been so interesting covering um, economic forecasting over the past few years, because economists on average keep expecting things to go worse than they do. Um, and that seems to be unfolding once again. Is that how you read it?
00:44 Chris Watling
Well, economists are a terrific bunch. They're generally wrong as a group, sadly. So, uh, in fact the IMF did a study that once, showing how how economists are very poor at getting turning points in the economy. It's very easy to extrapolate the same old, same old continuing. Um, how do I say it? I mean, I think, I think the US economy is getting softer, and the way I, I really think about it big picture is, if you, under President Biden, there was enormous amounts of fiscal stimulus. Do you remember all the fiscal packages? Money was tight. And then, uh, under, under Trump, initially, I know we've got the one big, beautiful bill out there, but initially fiscals tightening. And monetary policy is still tight. Just look at housing. There's nothing going on, no activity. If you look at the industrial cycle in the US, it's flat. There's no growth for three years. So, there's tight money and tightening fiscal, and then when you really start to dig into the detail, I know you can pick your nice data points. Twitter sales looks better, and this and that, but in aggregate, I think the data looks pretty soft. Look at services ISM, barely at 50.
02:36 Chris Watling
I mean, that's terrible. I mean, normally you'd say, I mean, ISM manufacturing's been below 50 for three years, pretty much, which is quite something. And services is sort of at 50. You know, that's pretty troubling. That's not an economy that's any better than stall speed, really.
03:07 Speaker A
Do you also believe that the, in, the tariff shock is coming? You know, we keep sort of waiting for it and it doesn't. It shows up here and there, but we haven't seen that big shock.
03:25 Chris Watling
Well, I think it's slowly accumulating, isn't it? You know, the tariff, some tariffs are going on, the odd deal's being done. Stuff's getting pushed back, but, but it's coming. And, and more deals are being done and, and none of them are really surprising significantly to the downside. They're mostly a little bit more than you might expect. So, it's clearly not a positive for the global economy. It's definitely a net negative.
04:01 Speaker A
Um, it's curious then, as we have this conversation, to see US stocks back at record highs, right? And so, do you think it's just that most market participants are not reading the the data as you are and seeing it negative, or it has to be much more obviously turning for markets to turn also?
04:26 Chris Watling
Well, I think what happens is markets swing from greed to fear, fear to greed. I mean, I was last on on April the 7th. I remember it very well. It was the low of the day, and the market actually moved 10% whilst I was on. It was extraordinary. And of course, that was telling you at the time people wanted to buy. There was so much fear around, but the fact that you could bounce at 10% an hour was telling you that actually there was underlying need to buy. Everyone was short, and everyone was bearish. So, I think we're at the opposite now. We've rallied hard since April the 7th. We've gone up a ton. The MAG 7 have been amazing, and Nvidia has been breaking out to new highs, and I think now the market's very greedy, and you can see that if you look at certain models, we measure greediness across across global risk appetites. So, I think we're just at that stage where there's going to be a trigger, and then we'll get some of this turbulence we've been talking about. And what that trigger is, it's always very difficult to know, but you know that the positioning is there. The exuberance has been building. Uh, and you can look at single stock call options, for example. Retail traders love to trade single stock calls, as I'm sure you probably talk about quite a lot. I mean, the the volumes of those have been surging in the last few days as you've probably been talking about.
06:19 Speaker A
Yeah. I'm going to talk about it later this hour, more.
06:22 Chris Watling
Are you? Okay, great.
06:24 Speaker A
With an option strategist.
06:25 Chris Watling
Well, that's fantastic, but it's a great, in aggregate, it's a great demonstration of exuberance. People are getting a little bit carried away, when when, when in aggregate it gets quite high, the volumes being traded. So, so that's kind of confirmation of a lot of risk appetite models of fear and greed models we look at.
06:46 Speaker A
So, when you're doing positioning and what you're recommending to clients then, is to get more defensive, or at least to hedge against that possibility that things could get a little rockier?
07:00 Chris Watling
Depends entirely on your timeframe. If you're short term, month by month guy, be cautious. If you're medium term guy or girl, or whatever, then I take We can use the non-gender guy, that's fine. Is that Is that okay, non-gender guy? Yeah, I But if if you're medium term, then I'd take advantage of any weakness. So, I think the the medium-term trend, the multi-quarter trend is up in global equities, US equities and so on. But there's a rotation going on that I think will go on within the market, and I think um, and I think you want to use So you use dips as opportunities to add to risk.
