Pivotal Week of Earnings and Inflation Data

Jeff (00:00):

Hello everyone, and welcome to the latest edition of LPL Market Signals. Jeff Buchbinder here, your host for today with my friend and colleague Quincy Krosby. We've got a great agenda for you, a lot of interesting things to talk about, certainly, and a very busy week of earnings and economic data. Quincy, how are you today?

Quincy (00:20):

I'm good, thank you. Thanks for inviting me. I appreciate it.

Jeff (00:24):

Oh, absolutely. No doubt you are in the regular rotation. I guess you and I were in the same state just the other day, which doesn't happen a ton.

Quincy (00:35):

No.

Jeff (00:36):

It's nice to share Massachusetts with you here while you were taking a little bit of a vacation. So, here's the agenda. So, we'll get right into it, you know, of course, recap the markets as we always do. We'll talk quickly about the jobs report from last Friday when the equity markets were closed, preview earnings and talk about the U.S. dollar. There's been a lot of talk in the financial media about the dollar potentially losing its status as a reserve currency. So, we'll talk a little bit about that. Sounds kind of ridiculous to me, but we'll talk about it anyway. And then lastly you know, preview the week ahead with some really important economic data. So, we'll start with the market recap. And so, I priced this through last night, so this is a Monday to Monday, look for the last week.

Jeff (01:28):

We're recording this Tuesday morning April 11. The S&P was pretty flattish, you know, for the last five days, but here again, you know, the market's been pretty resilient. You'll see an S&P 500 chart in a second, but pretty resilient in the face of these banks stresses, Quincy. So, you know, we'll call that maybe a win, glass half full perspective on it, but call that a win. But we have seen a little bit of weakness in small caps. And then looking at the global you know, you're seeing some, you know, some nice gains in Europe over the past week. So in terms of, you know, the major indexes, Quincy you know, either in the U.S. or abroad what's your perspective of how stocks have done over the last week?

Quincy (02:19):

Well, they, you know, they've held up. I mean, but remember, the volume has been low. This is a major holiday, Easter week. You get Good Friday off, Easter Monday is a holiday in major markets. And because of that it's one time, for example, that traders or portfolio managers will take an extra day on either side of it. So, we always go into this period understanding that volume is going to be lower than normal. So, given that you know, and given that the market is more and more digesting the fact that we probably will have a rate hike on May 2nd, May 3rd at their next meeting, I think the market held up pretty well.

Jeff (03:06):

Yeah, I'd agree. I mean, small caps are, you know, more financials heavy. Yeah. And certainly the, you know, the smaller banks are perceived mm-hmm. <Affirmative> certainly, and rightly so, to have more risks than the bigger banks. So, you saw some weakness in small caps Yeah. As a result of those factors. But generally the whole global environment is, you know, kind of marching to the same drumbeat. We're talking about the Fed, we're talking about inflation and all that. You know, in terms of the sectors, this has been interesting because of course, first quarter we just had, you know, tech, tech and more tech. But you know, over the last week we started to see the defensives perform a little bit better. You see, I mean, a lot better in the case of utilities, up almost 4% over the past five trading days, you have you know, tech declines. You have consumer discretionary declines, which of course has a lot of big tech in it. So, you know, I think the question investors are asking is you know, is this move away from big tech going to continue? And you know, should people move into the defenses? What do you think Quincy?

Quincy (04:13):

Well, I mean, you know, this got more, you know, we need more evidence. And thank goodness we're going into the formal quote unquote opening of the earnings season, which is going to be very helpful in deciding just that question, where should we be? What are companies telling us? What is corporate America telling us? It's going to be significant because as you know, there's been a tug of war amongst analysts whether or not this is going to be a very difficult earnings season, and that we're going to see an important selloff that a recession is impending. It could be a deep recession versus the other side which says, you know what? We're going to slow down. We probably will be in a recession, but it's not going to be that deep. So this is the market, the equity market, as you say, try to figure out, wait a minute, are rates going to come down so low that because of a more dire backdrop that utilities provide a, you know, a higher return? Isn't that correct? Because obviously it's the market saying, you know, expect to see yields coming down because of a deeper downturn. So, it's this uncertainty in the market, which is moving away from the orientation we saw for months now, in every rally, a cyclical recovery is at hand, a cyclical recovery is at hand. And now again, you've got the defensives coming back up. We'll see if they maintain that lead, an early lead, as we get into the earnings season.

Jeff (05:49):

Yeah, earnings will certainly be a key factor, Quincy, in determining whether this defensive rotation continues. I think it's fair to say though, that the you know, the high beta, we'll call it, you know, these more volatile sectors probably got a little bit ahead of themselves, a little over their skis relative to the defensive. So, a little bit of a comeback probably makes sense here for healthcare, utilities, consumer staples et cetera. Turning to you know, bonds and commodities, I don't have a lot to say here other than just the fact that you know, bonds continue to you know, offer some income. They, of course, are cushioning a little bit now against equity market declines, at least better than they did last year, which they didn't do it well at all. And then on the commodity side we've had you know, some weakness in natural gas, certainly, as oil has moved higher on the OPEC+ production news from last week. So, you know, energy doesn't look like it's doing a whole lot on the headline but if you break it into pieces there's been quite a bit of movement there. You know, natural gas reacting to warmer weather, particularly in the Northeast, which I have benefited from. And Quincy, you did as well recently on your vacation. And then Precious,

Quincy (07:10):

Oh, not a vacation <laugh>, but yes, it was an Easter visit up at Cape Cod, which is right near you. Yeah,

Jeff (07:18):

Yeah, that's right. That's right.

Quincy (07:20):

But it was cold. It was cold.

Jeff (07:23):

Well, but coming up from, you know, a lot of the thirties and forties that we've seen here in Yeah. In recent weeks. Yeah. I'll call it warm. The precious metals have been getting a lot of attention recently. We've seen a nice move higher there. And so we in LPL Research actually continue to recommend precious metals related investments. You know, you have the weakness in the dollar, which we'll talk about a little bit more later, you have lower interest rates, which generally helps gold. And then you have the concerns about the bank stress and geopolitics which has increased demand for gold as a safe haven. So, that is you know, probably the most interesting data point I'd say to highlight on this page. Anything you would add to any of that Quincy, bonds or commodity?

Quincy (08:17):

Yeah, there's one thing that I would add to the energy story, and that is, it's not a deal, not a deal yet, they're talking. Is Exxon and Pioneer, Pioneer being the lead in the Permian Basin, shale, hydraulic fracking, if you will. Question is why, what are they thinking? And this is important for the energy sector. What are they thinking? What would possess Exxon to even enter into talks with Pioneer, given the concerns over the energy future, a green future, EV future, and so on. This is a fascinating, fascinating development, if it turns into an actual deal, because it would be the beginning of other deals. We saw how the market reacted yesterday to that announcement that they were talking. I don't even think it was an announcement. It was the Wall Street Journal saying that talks are ongoing.

Jeff (09:22):

Yeah. Very interesting indeed. So, you know, we'll see how that plays out and what impact that might have on prices. Yeah. That would be a big one. So, you know, turning the S&P 500, I mean, I think we could probably just you know, play a recording of what I said last week. We're looking at higher lows on the S&P. We're ahead of the 50- and 200-day moving averages, but we can't break out of this range, you know, 3,800 to 4,200. Rather be at the top end of it than the low end of it, <laugh>. But yeah, this has been a pretty tough a tough spot. You know, maybe we need the Fed to be done and signal that maybe we need more progress on inflation.

Jeff (10:09):

Maybe we need more information from corporate America, in terms of the earnings outlook, the stocks are getting a bit expensive especially at higher interest rate levels than what we've seen in recent years. So, you know, we'll just have to wait and see. But it could be a while before the S&P can break above the you know, either the August 2022 highs or even the February 2023 highs. I think also it's important to note Quincy, that breadth has been pretty good, even though you're seeing headlines that suggest that it's just been mega cap tech driving all the gains this year. I mean, it's pretty much always the case that the biggest market cap companies drive the market wherever it goes. Yeah. but if you just, you know, separate out the top 10 names or top 20 names and look at the rest, you've got the majority of stocks in the S&P above their 200-day moving averages.

Jeff (11:01):

You have a lot of stocks that are up on the year. So, there is, it's not great participation, but there's decent participation from, you know, S&P 500 stocks, let's call it 20 to 500. So, I wanted to make that point, too, before we move forward. Let's go to the jobs report. Quincy, I want to get your thoughts on this. I mean, this looks like kind of a soft-landing type of pattern here, especially when you do the moving average for payrolls. We got pretty much right in line you know, kind of in that sort of 230, 240 range, which is what the market expected. I guess the, you know, the question is, is this enough to solidify the Fed rate hike in May? You kind of already alluded to it. Or do you think this could potentially you know, contribute to a pause?

Quincy (11:53):

No, I don't think it would contribute to a pause. In fact, you know, unless something blows up between now and the May 2nd, May 3rd meeting for the Fed I think it gives the Fed a chance to put in one more rate hike, which they want to do. And they would like to do it, you know, with a strong labor market. So maybe we readjust strong to move down to solid, but we also saw where job openings have also eased. And that's something the Fed really wants to see, because clearly the fewer jobs, now, mind you, it's still very strong, but it has come down from that you know, over a million jobs has come down. The Fed would prefer to see that happen and not have to go after the actual labor market. Because as you know, the concern to the Fed is that if higher wages ease into a very strong input cost, that they try to pass it on as higher prices.

Quincy (12:53):

And that's where you get the inflation. So, which you have fewer jobs opening, it means that perhaps you know, if you have a job you're going to be happy about it, you're not going to quit because it's going to be harder to find another job. There's nothing like concerns over a recession, concerns over more layoffs to keep people in their jobs and not go job hopping as we saw so much of. And the Fed would prefer that because you, if you think you're vulnerable, you're not going to be going in and saying, I demand a raise. So, I think this helps the Fed, but it also gives the Fed a cushion to go in with another 25 basis points, get that in, see how it works. The market is almost accepting it cuz we've seen the market reaction. And right now there's an 80% probability in the futures market that we will have the another 25 basis points, unless, as you alluded to Jeff, that we see in the CPI report that comes out, that inflation has moved down much more marketly than the market is pricing in right now.

Quincy (14:03):

Mm-Hmm.

Jeff (14:04):

<Affirmative>. Yeah. We'll look at wages here on the next slide, but I want to make one more point here. The bank stress really isn't in this number so much, right? Because the survey period was through March 12th, and, you know, that was kind of just the start. Yeah. Right. So, we're going to see some impact from the banking stress, I'm not going to call it a crisis, the banking stress in the April payroll number that will be reported in early May. Yeah. We also have gotten some other data suggesting that, you know, you alluded to the, you know, reduction in job openings that we've seen, certainly. We got the NFIB kind of telling us the same story that yeah, the job market is cooling a bit. So the combination of what the Fed has done to date plus the bank situation you know, and frankly just slowing profits, right?

Jeff (15:03):

And a slowing economy that we were already seeing, all that kind of points to a further cooling of the job market. So, we may get, you know, something with a one handle next month, we'll have to see. So, here's wage growth. I mean, this is moving the right direction, you know, we, I mean, it's possible that we're going to see CPI numbers in the threes pretty soon. Probably not here, but pretty soon. So, that is certainly encouraging. We'll get, of course, CPI, we get tomorrow on Wednesday, and we get PPI I believe Thursday. We'll look at the calendar in a minute. But you know, this is good news and it's almost occurring. I mean, obviously we don't know what's going to happen in the next several months, but this is almost occurring exactly the way the Fed would want it, right, exactly.

Jeff (15:56):

Cooling inflation, not a big increase. Hardly any increase really in unemployment, just reducing job openings, modest cooling orderly, and it's taking some of the heat out of wage pressures, no doubt. So, let's go to earnings next, Quincy. This is I mean, I guess I would argue that maybe CPI is going to be a little bit more of a potential market mover for the broad market because we only get just a handful of banks, but they're big ones. We wrote a preview of earnings season on in this week's Weekly Market Commentary, which is available on lpl.com, calling it an earnings malaise, right? I mean, we were down almost 6% earnings last quarter. We'll probably be down pretty close to that for this quarter, for Q1 that's going to be reported over the next six weeks or so.

Jeff (16:51):

Yeah. you know, I think, Quincy, I mean, there's two big stories, right? One is just the banks, right? There's a lot of uncertainty around the banks and the impact of Silicon Valley Bank and Signature Bank and all of that, right? And we saw tightening financial conditions, we've seen estimate cuts over the last several weeks. So, that's one piece that I think is a big story. But you've also got, you know, the other 85, 90% of the market <laugh>, which, you know, is getting a little bit of a break on inflation, and the revenue's still going to come through. Maybe not big revenue growth, but we could see a point or two of revenue growth, that's not so bad, and expectations are really low. So, you know, maybe we could get kind of a better than feared, you know, in the commentary I wrote that it could be deja vu all over again, right? Last yeah. Quarter it was, yeah. There was no good number. <Laugh>. I mean, you, you couldn't find really anything good about last quarter's earnings season, but the market liked it, or at least liked it enough to keep going higher, right? Yeah. Could we see a repeat here in Q1 numbers over the next several weeks where the numbers aren't that good, but, and estimates come down, but market's okay with it?

Quincy (18:09):

Well, exactly. And this is the big question. At what point on this tug of war, do you come and see that, oh my goodness, you know, margin compression is so dire that now we have to start laying people off. That's the concern. Because if you take this and extrapolate the earnings and extrapolate it to the picture of a recession, how do you get the recession? You get it with more layoffs. That's typically how it happens. And then the question is that what we're going to hear during this earnings season, that in order to have operating margins, you know, attractive again, they come out and say, well, we'll have layoffs. We'll have, and do they imply that in the guidance, that's why it's considered to be a very especially important earnings season because the cost of capital is up.

Quincy (19:05):

The concern over loans, the ability to get loans, if you're a smaller company or you're an individual. Cause remember, the consumer is what, 70% of the economy, and we're already seeing a slowdown in the ISM, Institute for Supply Management service sector that is precariously close to that 50 level right? Contraction and expansion. So, the question is whether or not it shows up and manifests itself in this earnings season, and if it doesn't, and if we kind of muddle through the way that we have and, you know, not stellar, but certainly not dire either, do we then leave this tug of war? Do we end it and we move on and say, yeah, it's a difficult backdrop, but companies are doing what they always do, managing and managing for the bottom line and for the shareholders. That's what I think that's what this earnings season is about. And we'll see it. And I think it's also then going to affect the futures market in terms of what the futures market sees the Fed doing. And it's all integrated, I think, at this point. And that's why this earnings season is so important. Jeff, can you agree with me? Or maybe you don't, that if we then take this and then take it to the second quarter's earnings season, that perhaps the debate is over, if we have to push it to the second quarter?

Jeff (20:33):

Well, I mean, Q1 could be the trough, right?

Quincy (20:36):

And then up, and then tick up in the second quarter.

Jeff (20:38):

Right? So, I think that's possible. You know, we all know the game that analysts and companies play where they take estimates down and then they beat them, right? And so, yeah. You know, maybe the estimate for Q2 comes down a little bit and then you get a beat, and you end up, you know, down four rather than down six, something like that. Right? Exactly. That's possible. But what really interests me though, I think is you know, what's going to happen in the second half when yes. Inflation, you know, obviously the cost pressures could ease quite a bit between now and Q4 mm-hmm. <Affirmative>, right? Exactly. And the market's forward looking, as we all know. And so therefore, there's the potential for a pretty strong late year rally on prospects for earnings to hold up and, you know, we'll start to see gains hopefully by Q4 on a year over year basis.

Jeff (21:30):

Whereas it's quite possible that this malaise, you know, it's possible we see year over year declines in earnings for Q1, Q2, and Q3, maybe marginal in Q3 if we get a decline. But you know, that is certainly possible. So, you know, we're not buying earnings growth right now when we buy stocks. We're really buying the you know, the optimism around late 2023 and potentially into 2024. A lot of analysts think we're going to have a 10% decline in earnings from here. We're not in that camp. You know, we may get a very modest decline, but, you know, if this economy kind of muddles through, even if we have a very mild and short-lived recession, you know, we still think we could, you know, be in that 215 to 220 range for S&P 500 earnings per share in 2023.

Jeff (22:25):

We'll see. But there's no doubt there's not going to be a lot of good news in earnings for the next quarter or two. It's really about guidance and the outlook and about the pessimism that you know, markets are clearly expressing about the earnings outlook. So, let's move on from that topic, Quincy. You had a nice segue in there though, about ISM services correlating to the earnings to clients. So, thanks for doing that for me. This next topic you know, is kind of in response to a lot of questions that we've gotten from advisors and clients about, you know, the U.S. dollars status as a reserve currency. You know, these concerns, you know, come out of the political right, more than the political left, it seems.

Jeff (23:16):

But you know, the way I look at this, Quincy and the, you know, this is really kind of right up your alley given your background and your knowledge of you know, global economics, but and currency markets, you know, if the dollar's going to lose its place as a reserve currency, there has to be an alternative <laugh>, right? That's kind of where I start. And there is no logical alternative, right? And also, you know, China can't completely disentangle itself from the global economy. They, I mean, the way I put it is, you know, they have to feed their people, and if they don't sell stuff to the U.S., they're not going to be able to feed all their people <laugh>, right? They're not going to be able to pay the bills. That's kind of the simplest terms. It would be incredibly disruptive, right?

Jeff (24:08):

So, trade with the U.S. is going to continue and the majority, I think it's 80% of global trade or maybe more, takes place in dollars, right? Of course, China, big trading partner, second biggest economy. So those are, I think, really two good reasons to think the U.S. is going to maintain its place. But at the same time, Quincy, and here's where I'll hand it over to you. There's nowhere to go but down <laugh>, right? When you are dominant and essentially you know, there hasn't been an alternative. I mean, I guess the Euro has been an alternative over the past couple decades, but, you know, when there's nowhere to go, but down, down, sure, the U.S. is going to be a little less dominant in the future, but that's very different than saying that they're going to lose their place as a reserve currency.

Quincy (24:57):

Well, yeah, I mean, you want a reserve currency, and I had a wonderful conversation with an advisor from Ohio. His clients are asking about this, this was yesterday, and we had a discussion about this, and he said, you know, is it improper to have another reserve currency along with the U.S. dollar? And of course you want to have it. I would have to argue Jeff, that the Deutschmark in a very short period of time became a reserve currency of sorts, and not as strong as the U.S. dollar, but it was headed in that direction. And when you introduced the Euro, it was fascinating to watch how the Euro traded, as if it were the Deutschemark for quite a long time. To watch that was absolutely fascinating.

Quincy (25:54):

Now, that said, you want to have, I want to repeat that. You want a reserve currency. Many would argue at having this discussion, Quincy, what about Bitcoin? You know that that's a reserve currency. Now, I would say, no, I don't see that as a reserve currency gold. Many people see that as a reserve currency, even there, I'd say, yes, it compliments currencies, it compliments your portfolio, but I don't see that as a reserve currency. Now, in terms of China, they have longed to have the status of a reserve currency. And back in 2015, they pushed the International Monetary Fund. And remember, before that, well before that, I was one of the U.S. representatives on the board to the IMF. And even then, we started hearing about how China was looking to have a reserve currency.

Quincy (26:58):

And you may remember past that. They wanted, they came up with a structure where the yuan would be for oil, for gasoline. It never went anywhere, but they tried. However, they pushed to have in the International Monetary Fund, the strategic reserve. It's their reserve basket of currencies, the SDR, strategic basket of currencies. And they said, we belong in there. Now, mind you, they in the WTO, World Trade Organization, they are an emerging market. Nonetheless, they pushed and pushed and they felt that it was really important for their status to be included in that basket of currencies that the IMF, International Monetary Fund, uses in addition to, you know, the bailouts that they have in government, government funding, various government funding.

Quincy (28:02):

In any case, the U.S. turned it down at least one time. And finally, finally, because we are the largest shareholder in the International Monetary Fund, approved it. Now, who's in there? It is. They say the renminbi, that's the other term for yuan. One, it's sort of like British pound sterling. So, let's call it the yuan. It is now in there it is in there with the euro. And remember with the euro coming in, they took away the French franc and they took away the German deutschemark, and then the euro came in. They're there with the British pound sterling. They are there with the Japanese yen. And they insisted. And if you go back, for those of you who are listening, go back and look at the press release associated with the yuan coming into the International Monetary Fund's reserve fund.

Quincy (29:01):

It's fascinating. It gives them the status, if you will, of a mature economy with a transparent currency. It gives them that status that they wanted by being approved to go in. Now, where has it gone after that? Remember, that's back in 2016. They have forced, not force. But I mean, if you are doing business with China, chances are, if you're Australia, for example, you are going to use the yuan as the chief currency for trading. And many countries are doing this. What worries folks in this country is that it will move to replace the U.S. dollar. I don't think so at all. Now, perhaps, and I'm just going to say this, this is a question mark, what if, in their hostility towards the U.S., Saudi Arabia, Russia, and China form their own currency for trade purposes? What about that?

Quincy (30:07):

I don't know if it would hold up. You know, at the end of the day, you need transparency. You need a country, quote unquote pays its bills. Obviously that's important. And many are talking about how is it that we're always at the edge of the cliff? Are we going to pay our bills? Are we going to take care of a budget that is viable for the long term? All of those questions are raised as to the viability of the dollar as a reserve currency. So, these are questions, but if I had to bet, if I had to bet, they said, Quincy, you've got to bet, this is it. This is it. This is the, as they say, the come to Jesus moment, that you're going to say. I would have to say that I see the euro, which had a very troubling beginning.

Quincy (30:57):

We all remember the concern of what would happen to the euro if Greece dropped the euro as their currency. I don't want to go back over that period, but it was dicey. It was globally dicey for portfolios and it was fixed. But there will be problems along the way. But I would have to say that the euro becomes the reserve currency. And remember, the euro has been intact now for many years, and they have you know, strong European central bank that is highly respected. And I would imagine that that would be a reserve currency along with the U.S. And I want to repeat, it's helpful to have a reserve currency along with the major dominant reserve currency. It's needed, it's healthy. And that's where I would put my bet, that it would be the euro.

Jeff (31:52):

Yeah, that makes a lot of sense. Quincy, thanks for that. The you know, I guess the other piece of this is just the depth of the U.S. Treasury market or U.S. capital markets in general. And the transparency that that brings. It's just, it's not something certainly that a China or a Russia can duplicate. Europe can, certainly. Of course Europe friendly to the US. So, as long as you know, the U.S., Europe, and Japan kind of maintained their approach, <laugh>, you know, if you're picking sides that means there's a lot of room for the U.S. dollar, a lot of runway. Maybe the dollar goes down because of the budget and trade deficits in the U.S. but it should be gradual and orderly. And you know, some of these risks we're talking about here are risks, you know, over many, many decades.

Jeff (32:51):

Maybe <laugh>, but certainly nothing that investors, it's hard enough to get investors to just focus on a year or two out, right? <Laugh>, but we certainly don't need to be talking about, you know, risk for 2080, right now. It's not going to impact markets. So, bottom line, we would not worry about this. Certainly, we want to, you know, follow the geopolitical landscape, but you know, the U.S.'s place in that lineup is safe. And there's probably maybe a little bit of room for the euro. So, let's go to the week ahead of data, Quincy, because there is a lot of key data here. We have CPI and PPI inflation. We have the Fed minutes, we have retail sales. You know, I mentioned you know, that it might not be too long before the CPI has a three handle. We could have a four handle. I mean, I wouldn't bet on it, but we could have a four handle on year over year, even as soon as this week March because 52, 52 year over year consensus isn't too far away from that. What do you think investors should be watching in terms of the calendar for the week?

Quincy (34:06):

Well, certainly, I mean, it's a full calendar. And then we have earnings, we have the banks at the end of the week, and I want to hear what they have to say about lending, about what they're seeing, what are their customers, what are their clients saying? Because the beauty of this particular earnings week is you've got a broad spectrum of banks. You've got money center banks, you've got banks with global market. And you've got more of the domestic banks. We're going to hear from all of them, and I think the market is going to focus on what they have to say about stress in the lending market. Certainly, they're going to hear, I mean the last two weeks of March we saw lending come down dramatically. We want to see, has it has it picked up? Is it normalizing?

Quincy (34:56):

Because if it is normalizing, Jeff, it would suggest that the quote unquote, I've got quotation marks folks, if you can see it, that the crisis, the banking crisis has eased. That we've wrapped it up, we packaged it, and it has eased. Doesn't mean there won't be, you know, other flareups in the financial markets, commercial real estate perhaps, but nonetheless, that this has eased. So, this is going to be important for the market and we'll see how it is reflected in small caps because again, small caps have a preponderance of banks in our country. So, we'll watch to see the correlation between what they have to say and whether or not we could see the Russell come in and the banks come back. So that'll be important. But certainly, the CPI and Jeff, you're so right because everyone complains.

Quincy (35:52):

It's lagging, it's backwards. It is. But one of the things that we know is that at some point, even at the margin, we're going to see that new leases, the cost of new leases, is coming down. Every industry report suggests that we are seeing rents coming down in the majority of the United States, and it is showing up in the leases. So, that's going to start helping, I think, the inflation come down because we know that housing rents and so on are a very strong portion of the CPI. And so that's going to be, it, it's going to be really important. I would love to see that it shows up even a tad because that would tell us that the trajectory is truly moving in the right direction.

Jeff (36:46):

Yeah. And psychologically I think we'd like to see core year over year flat, you know, five five or even down mm-hmm. <Affirmative>, that might be too much to ask five four, but of course the PCE a little bit better read on inflation and the Fed's preferred measure, we'll get that later this month. Yeah, that should start to show some of the, you know, the lower lease prices that you mentioned, Quincy, that you know, real estate's a big piece of these inflation readings. You could see a really nice move lower starting maybe several months from now, but we're, yeah, we're still in this period where we're kind of working through those lease rates which are still going to keep the year over year inflation numbers a little bit elevated, a little bit sticky, stickier than we'd like probably for the next few months. We've been hearing that from Fed Chair Powell recently. Yeah. Yeah. And then you know, the last thing, retail sales, I mean, there's been a lot of data suggesting a slowdown, right? And that, you know, even though we're not in recession now, clearly, in Q1 is going to see some decent growth overall. Not good growth, but hanging in there kind of growth,

Quincy (38:00):

Hanging the growth, yeah.

Jeff (38:01):

Yeah. If we do get, you know, up a point or two, which is kind of normal these days, but if you get a negative number on retail sales, which you're probably going to get, you know, that's going to get the, you know, bring out more calls for recession coming soon, the consumers key element to the bull case, kind of keeping us in this more muddle through rather than recession so the retail sales numbers will be interesting as well to see if the consumer continues to hang in there. So, we shall see. So, a lot to follow, Quincy, with, you know, a busy economic calendar and earnings season and the Fed minutes too, which you know, are probably going to continue to point to another rate hike. So with that, let's wrap. Thanks Quincy for joining. Thanks to all of our listeners and viewers as well for tuning in to another LPL Market Signals. We will be back with you next week. Again, take care, everybody.