Stone: Concern around the debt ceiling offers opportunity in short-term fixed income

A lot of people, especially the markets, they seem to be pricing in a pause. A lot of people interpret it with J-PAL had to say as a pause was coming. Barkin pushing back pretty hard on that notion. Yeah. So I think he has to look at two things. So one is, yeah, I mean, clearly the market has it priced in as a pause, really doesn't look for any change until maybe September when you start to see cuts. So that's the market side of things.

You know, the Fed clearly has to keep talking about the fact that they're going to keep fighting inflation if it sticks in there. There is reasons to be a little worried, as he kind of notes. So I watched the Atlanta Fed sticky inflation. It's still up there at 6.5 percent year over year. It has improved, but it's still up there. That's the numbers now.

I think when you look through things, there's reasons to believe the market may be right. So you're starting to see some softness creep into the labor market. You know, you have to look at the average or the four week average of initial jobless claims, they've moved up off the bottoms. So a lot of this sticky inflation is related to wages and labor. That's why you see so much emphasis on payrolls, etc. And again, you can't say it's soft. It's just a little bit softer in that area.

And eventually, at least if the trend continues, that will probably end up helping inflation. You know, Bill, this is a great chart. I know you brought this to our attention. When you look at this chart, it's hard to think that there is going to be a pause because the stickiness and the inflations weigh up. About a third of the CPI report is shelter, a.k.a.

rent. We have a housing shortage here in the United States. So it's hard to imagine that number going back down. Were there other parts of the CPI print that you saw being especially sticky? Well, so rents are one where the government is kind of a lag number against the real world. So the year of your comparisons in rents have actually in the real world. But we put it that way, not in government data have started to get better. You can watch it from Zillow and some other places.

So actually, you could probably have a good bet that that's part of what will start helping. It's really all I've pitted on the wages because it's the service side of the economy and those things and those are so tied to the wage side. And that's really the place to watch. That's interesting. That's where you think you're going to see deflation, because a lot of people think that's the stickiest inflation of them all. I do want to switch gears, though. Banking crisis and debt ceiling are two issues that you are watching very closely with those kind of threats to the markets coming up.

How are you advising your clients to protect their portfolios? Are there any just big moves that you're making ahead of, you know, a possible default or a banking crisis taking a turn for the worse? So, you know, I kind of try and say the debt crisis or debt ceiling is really a political issue. And you have to keep that in mind. So both sides have reasons to ramp up or every side kind of involved in this has reasons to ramp up the rhetoric because you're in a negotiation, right? And you also have a reason to maybe take it to the last minute. You always wonder why does it always happen at the last minute they thought this well, because it's a negotiation. So that being said, I just don't expect a default, because even if there was technically some sort of an issue, we have the money or, you know, could easily have the money to pay. So it's much different than I would say, or less worrisome than I think some would pay them out to be, not that it couldn't cause market volatility, et cetera. So I think what you look for is to take opportunity in it, which is, you know, if you look around the one month T bills, which is where the kind of thinking will run out of money, those having a little bit of an elevated yield.

So, hey, why not get paid a little bit more over 5% 5.3, 5.4%, depending on when you look at it. Those things get kind of interesting.

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