The Caldwell Hour: Inflation, interest rates and international affairs

Ryan Caldwell and guests reflect on the markets and economy and what these trends may mean for the rest of the year.

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September 8, 2021 | 3 minute read

About this episode:
The group reflects on the economy and how the current geopolitical climate may impact the markets for the rest of the year while sharing insights on what the FS Chiron fund team is seeing in the markets from both a quantitative and fundamental research perspective.

Transcript excerpt: 

Ryan Caldwell (00:00:04):
This is the FS Chiron FireSide chat for the month of August. This is Ryan Caldwell. And today I’m joined by my colleagues, Scott Sullivan, Brian Cho, Lara Rhame and Peter Bianco. Good afternoon, everybody.

Scott Sullivan (00:00:22):
Good afternoon.

Peter Bianco (00:00:24):
Good afternoon.

Lara Rhame (00:00:25):
Hey, how’s everyone doing today?

Ryan Caldwell (00:00:28):
Well, Lara, I thought what we would do today for our listeners, it’s been a minute since we podcasted. A whole lot has gone on, I would argue over the last quarter. And where we last left our listeners off I believe we were in the middle of the roaring 20s hyperinflation cycle. And we were trying to gauge just how high interest rates were going to go, before the end of the world came.

Ryan Caldwell (00:00:56):
And much to form, that’s all reversed. And so here we are sitting in August, with markets that have been actually quite good. If you look at the cap weighted indices globally, they’ve actually been pretty good. Underneath the surface, however, it’s been actually a pretty rough quarter. I would argue it’s been fairly analogous to spots in 2019, spots in 2018, spots in 2017. And we’re going to try to dive into that a little bit today.

Ryan Caldwell (00:01:27):
And where I wanted to start off with our highly esteemed chief economist was with the economic outlook, and the inflation outlook. Because quite honestly, outside of again, a couple of pockets over the last three or four years, I can’t remember a tape that is as macro driven as this tape. It really is, it’s all about sort of where growth rates are going to land, and where inflation rates are going to land around those growth rates. And it’s gotten quite controversial.

Ryan Caldwell (00:01:57):
So I thought maybe to kick off the podcast where again, we will talk a bit about economics, we’ll talk about geopolitics, we’re definitely going to get into our own quant work. And then ultimately, Scott and team kind of what they’re seeing on the fundamental side. But Lara, I wanted to kick off with you, because you’ve just come off writing a piece kind of talking about these issues, particularly about us growth rates, into the next six to 12 months. Which were in that kind of critical window, and then partnering that with the inflation call, because those seem to have been the two big calls that Wall Street’s wanted to make.

Ryan Caldwell (00:02:34):
And so maybe, Lara, can you kind of kick off for us this dilemma, if you will, if you had just dropped in from another planet, which, by the way, it looks like you very well could have given all the evidence we’re getting recently on UFOs. If you just dropped in from another planet, and you said consensus growth for 2022 is somewhere a touch under 6%, maybe right around 6%. Yet, here we are with a 10 year bond at 125. And that seems to have caused a lot of consternation for market participants, policymakers and politicians. And so maybe can you kind of kick us off as to what’s going on?

Lara Rhame (00:03:18):
Yeah, sure. I mean, I think that is… So I see three sort of systems right now that a lot of people feel are internally contradictory. And I think that’s where the interest rate picture gets so interesting. And people are getting it so wrong. Because you’ve got on the surface are the numbers, certainly would tell you have this incredible, incredible growth rate. 2.6%, more than three times our underlying potential growth rate.

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Ryan Caldwell

Managing Director, FS Investments

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