CC-Transcript

• 00:00Lori Calvasina of RBC writing, we are lowering our year-end 25 price target to 5550 from 6200, essentially making our old bear case, our new base case. Lori joins us now for more. And Lori, I have to say that old bear case, which is the new base case, is sounding like the bull case. Based on the moves we’ve seen over the past few days, how are you reflecting on things over the weekend? It’s a great question, Jon. I was actually talking to my energy trader in the days are all bleating together at this point. I think it was on Friday. And, you know, we sort of discussed how we went from stagflation in terms of people’s thinking to recession in about 2 seconds. And I’ve never seen anything like it where you’ve just seen the mentality shift so much so quickly. But I will caution you, that is what happens in growth scares and that is what we are smack dab in the middle of. The 17.4% drawdown that we saw as of Friday was exactly in line with the average drawdown that we saw in 2010, 2011, 2015, 16, and 2018. Of course, that 2018 went all the way down 20%, which would take us to around 4900 on the S & P this time around. I think just a touch under. And so this is what it feels like. You know, we have this tears of fear framework we’ve talked about to help us navigate. We’re in tier two. Tier one is the garden variety pullback. Tier two is the growth scare. Tier three is recession. And so we have increasingly been talking to people. If we break through that 20% number, what does recession look like? If you look at the average and the median drawdown, it’s about 27 and 32%. It’s taking it to 4240 500 on the S & P. We could do that. It’s not unreasonable to be thinking about that, Larry. We know how to price growth scarce. We’re okay at that. We’re fairly decent at knowing what a recession might look like, though we haven’t seen many over the last 20 years. That’s a shock to the cycle. The issue that we’ve been trying to get our hands around has had a price, a shock to the system, because if these are the new rules of the game, this is a change we haven’t seen for decades. Laurie how different is that? So I think it’s a great question, John. And as I’ve been talking to investors over the past month and we’ve been talking we were talking about how that Tier two fear was rising. One of the thoughts that occurred to me and I didn’t like to say this out loud all that often, but it had felt a bit to me like this was January of 2020 where there was something coming that we didn’t quite know what it was. I will give you one bit of comfort from that 2020 period, which was that that ended up being a garden variety recession in the thirties in terms of the drawdown from peak. And I know it doesn’t make us all feel happy for me to say that out loud right now, But it does give me a little bit of comfort if you really want to talk about big crises. We don’t have a big sample size on those. You know, we’ve got things like the tech bubble, we’ve got things like the GFC. You basically see the market lose half its value. I’m not saying that’s what’s going to happen, but as we sort of explore, you know, the depths that we could go, that is the one outside of recession that you want to look at.