About this episode
In this episode, FS Chiron Funds CIO Ryan Caldwell is joined by Chief U.S. Economist Lara Rhame, Head of Quantitative Research Brian Cho and their team to cover key warning signs of a late cycle and urge investors to remain dynamic in a bearish time. While markets are facing downward pressures, the team urges investors to recognize the speed at which the economy is moving, and the potential for the long term to differ greatly from the short term. Plus, Ryan taps on Peter Bianco, Head Trader, and Scott Sullivan, Head of Fundamental Research, to discuss how commodities and other real assets may fare in this uncertain time. Want to read more from the FS Chiron team?
Ryan Caldwell (00:00:00):
Welcome to another episode of the Caldwell Hour, an FS Fireside chat podcast. I’m your host Ryan Caldwell. I am joined by my FS colleagues, Lara Rhame, Scott Sullivan, Brian Cho and Peter Bianco. In this episode of the podcast, we will be discussing the quarterly performance of global capital markets. The fundamental economic and quantitative inputs that all drove outcomes in the quarter and what our views are of the going forward influences that are likely to affect capital markets.
Ryan Caldwell (00:00:49):
I thought, I guess, first to talk about the quarter, there were a couple of things, and I was thinking about it this way. Like the cadence of the quarter was really weird. First and foremost, it was a bad quarter, right? If you look at kind of equity returns, bond returns…and Pete, we’ll get to commodity returns in a minute, but outside of commodity returns, it was a bad one. And again, as bad as I can remember, early in the year back to 2008 and even like a glimmer of a 2020. And I thought the cadence was actually really different. Because I was thinking about this as I was getting ready for the podcast, which was, January it was all about slaughtering growth stocks, right? Like the real issue in January was, “Wait a minute, no, the Fed’s really going to have to move and inflation’s probably going to run a little bit hot.” And so, like the high, multiple stuff, like you didn’t want to be in. And there is, again, from a fundamental perspective, I don’t know that a lot had gone on other than I think people woke up at the turn of the calendar and realized, “No, I probably don’t want to be in the high, multiple stuff.” And we talked about in the 3D report, it is shocking to me how fast you rerated all that stuff down. So, I do think one of the takeaways out of the first quarter was this really wide, multiple disparity that existed between like super premium, high growth, non-cash flow, generating growth and value, like eviscerated in a quarter.
Ryan Caldwell (00:02:06):
Like normally, if you think back to 2000, that took 12 months to work all that out. When the market was transitioning out of tech into kind of the next thing, like it took a full 12 months. This was literally in like 30 days, you rip the multiple. So again, back to this discussion we’ve been having about how fast the market’s moving. So, I thought again, January a lot about the multiple compression and again, strategists have been all over multiple compression. The truth of the matter is most of the multiple compression happened in one place. It was really expensive stuff. The cheap stuff didn’t see a bunch of multiple compression and we’re going to talk about that. February then changed gears a bit because obviously Ukraine became the key point. Were they going to go in? Were they not going to go in? And ultimately, obviously toward the end of the month they did. So I think that changed the characteristic stack. And when I think about the last month March, which was wild, right? Like you had a terrible first part of the month and then the back half, it rallied, like somebody lit it on fire.