Bonds Looking Bullish In The Near-Term | Michael Lebowitz

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**Adam Taggart** (0:58)
And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart. I am very happy to be joined this Wednesday for our live stream by portfolio manager Michael Lebowitz. Michael, how are you doing?

**Michael Lebowitz** (1:13)
I'm doing great. Thanks, Adam.

**Adam Taggart** (1:15)
Hey, thanks for joining us. So folks, normally, this is one of Stephanie Pomboy's bi-weekly sessions with me, live streams with me. Steph had a curveball that she had to deal with and unfortunately can't make it this week. Very kindly, Michael agreed to step in when I pinged him late last night. So Michael, thanks for being game here. And it's very timely anyways. I've been meaning to bring you on. We have a lot of people that have been asking about or asking for an update on bonds, especially as the Fed has returned to a rate-cutting regime, it looks like. We just got a 25 basis point cut last week, and the Fed has signaled more rate cuts to come. The market certainly is expecting that. So love to get any general reaction that you have to the latest for the Fed. But at a higher level, what do you think this means for bonds? You guys at RIA, you and your partner in crime there, Lance Roberts, have been generally pretty optimistic on bonds. And as I've said many times in this program, probably the single greatest topic that I see the greatest division on with the experts I interview is inflation expectations and thereby where bond yields are going to head, because bond yields in most cases are a function of inflation expectations. And you guys historically have said, hey, you think they're going to trend down, say, over the coming six to 12 months.
Not everybody agrees with you on that. Is that still your outlook?

**Michael Lebowitz** (2:48)
Yeah, absolutely.
So when we talk about inflation, we've been calling for inflation to fall towards 2%.
It was, it got held up with the tariffs. Now, you know, it seems like it's kind of stuck, maybe inching a little higher. It's not surging like some people thought it would be. It's not dropping like some other people thought it would be. But you have a mix of contributors that are keeping it relatively flat for lack of a, it's not really trending anymore. Goods prices have risen, service prices are coming down, and we're watching the tariffs work themselves through the economy. And it's always a question of who's going to pay the tariff. Is it the exporting country? Is it the company that is importing the good? Or is it the consumer that's buying the good? And so far, what we've seen is that the weight has overwhelmingly fallen on the companies, not the exporting country and not the consumer. So the good news with that is that it doesn't really affect our inflation readings too much, and that's what we've seen. Now, the problem with it is that the companies aren't going to accept low margins. And this is, you know, we're kind of in the first phase. The first phase is where the tariff affects impact prices. But the second phase and third phase are what comes next. And, you know, I have firsthand knowledge of this. My daughter works for a marketing company, and they've recently had to lay off a few employees. And it's because their customers, companies that sell products, are seeing their margins get hurt. They're cutting back on spending. So what are they doing? They're cutting back on marketing expenses, obviously. They're probably laying off employees. All that reduces economic activity, which is disinflationary or deflationary. So the tariff effect comes first, and now we're seeing some of the economic impacts seeping in, which helps mitigate some of the tariff effect, and we think eventually will overwhelm it. Especially since a lot of the tariff effect, you know, this is kind of the math that we use for inflation. A lot of the tariff effect is one time. So if you raise the price of sneakers, 10 percent, they go up in the month of June by 10 percent, but they're going to be flat every month thereafter.