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[00:01] thank you. Good to see you. Roger Altman thank you very much for weighing in. Let's bring in RBC Capital Markets. Head of U.S. Equity strategy Lori [00:09] Calvasina. On the market pricing in all of this, are they underpricing a risk or is it just okay that he continues to jawbone the fed? Well, look, you know, every time some, you know, something along these lines comes up. >> On this topic, I go to my rate strategist and, you know, say, what do you think? What are you hearing from bond investors? [00:27] And he comes back to me with the [00:29] comment that you made, which is [00:31] that this is a committee. This is not a unilateral, you know, sort of decision maker at the fed. And he, you know, kind of tries to emphasize that message. I do think at the same time, you know, you all just had a very interesting point about risk assets. International investors don't like this kind of chatter. [00:45] And they are not the biggest [00:46] owners of U.S. Equities, but they're important owners of US equities. And they've been moving in in a very concerted way. If you look at funds flow data in recent years. And what [00:55] we know about them is that [00:56] they've kind of come into the [00:58] second half of the year [00:59] skittish. We've heard a lot of concern from those investors recently about valuation levels in the US. I don't necessarily hear that from US based stock pickers. But, you know, we look at this market that has run is pricing in so much good news. Desperately wants to get past tariffs. Thinks 2026 is going to [01:14] be a great year and wants to [01:16] focus on that. And we're kind of getting sucked back into this. So I don't think that's necessarily a good thing to do, even if it doesn't end up being horrific, just given where we are at. >> So do you think the market is fully valued here? >> You know, it depends on which model you're looking at. My [01:31] valuation and earnings work [01:32] we've blown past fully valued [01:33] right. If you're looking on 2025 we might have a little bit more room to go on a rosy 2026 scenario. But I'll tell you, Sarah, my favorite stat is if you look at the move that we've had in three months time off of the April 8th lows, it equates to what we typically do in a nine month rebound off of growth scare. >> 30% on the S&P. >> Right about. Yeah, we I think [01:52] we got about 26% when we looked [01:54] at the recent high. And you know, if you go back to 2010 2011 2018 where we are now, those kinds of drawdowns, this is where we should be at the end of the year, not right now. And if you look at all those, if you look at all those rebounds, just, you know, take the percentage off the table, they do tend to experience some periods of chop after an initial run up. So it does feel to me like we're kind of entering into a digestion period now where we're not, you know, as sort of under owned. We're not as, you know, kind of seen deeply depressed sentiment the way we did three months ago. And we're [02:25] starting to get vulnerable to [02:25] bad news again, maybe not on [02:27] tariffs, but on other issues. >> But I think that the rebound in hindsight makes sense in that there was so much fear that those really high tariff rates would lead to and we saw a spike in, in uncertainty, but they would lead to layoffs and in massive inflation and, and flight out of US assets. And none of that has happened. >> Yeah. If you look at the CPI data yesterday, our economists think that you are starting to see signs of inflation pressure emerging, not in the overall number but in certain components. And you know, we've [02:54] been you know we're kicking off [02:56] on earnings season. I'll tell you this morning I was really excited to read financials earnings. And I got completely distracted by this. Those are. >> Good too. And you know [03:04] resilient consumer M&A starting [03:05] to come back. I mean those all point to signs of growth in second half of. >> Next year. I think the financials are managing through very very carefully. We actually spent some time last week reading through all of the earnings call transcripts across the Russell 3000 from June 25th forward. So kind of getting some [03:21] of those off cycle reporters and [03:21] seeing what they're saying. There's a lot of mid companies in there. They may not be able to execute and manage around as well. But I'll tell you, Sarah, going through that exercise, I did not come out of it thinking it's time to put tariffs behind us. I came out of it thinking that some companies are going to manage through well, others are not. We're going to see adverse [03:39] reactions in the latter camp, [03:40] and there's already a lot of [03:42] optimism baked in to the ones, [03:43] you know, that have been [03:45] managing well and sending [03:46] through good messages. So I think it's going to be very, very messy. But I do think you are starting to see whether you're looking at that CPI data yesterday or some of these earnings reports. I read the last few weeks, the gears of price pressures are starting to turn. >> Right, but at the same time we're getting a little price relief on services and on shelter, which are almost bigger deals and bigger weights in the overall inflation numbers. [04:06] Right. >> And I think a really interesting debate that could maybe put some downward pressure later on. We're just going to have to see how it plays out. But there hasn't really been a robust discussion of demand impacts yet as some of those price increases come through. I think there's also a lot of opacity around Pre-buying. You [04:22] know, some companies are saying [04:24] they've seen it, others are [04:25] adamant that they haven't. And some are being frank and saying, you know, we don't really know if we would be able to tell. And I think we're going to have a really interesting discovery process here in this next few weeks as to what exactly happened on that demand side. >> So of all the sectors heading into earnings now, which one looks most mispriced to you? >> So we actually just upgraded materials about a week week and a half ago. And it's not that it [04:47] was super cheap, but we compare [04:49] it to the industrial sector [04:50] which everybody loves and is all [04:51] excited about reshoring. And it's like close to like two and a half standard deviations on my valuation models. If I go back to the 80s and, you know, we agree the fundamentals there are nice. But you're paying a lot for that. And it feels like the material space should benefit from a lot of those same drivers. And you've got very [05:07] reasonable valuations, earnings [05:09] revisions that have been [05:09] negative or shifting positive. We did a survey of our analysts recently on their second half outlooks. And our materials team across the board was extremely bullish over the next 6 to 12 months. So we think that's one. It's not that it's completely washed out o