Nancy Davis, founder and portfolio manager of Quadratic Capital Management, joins The Julia La Roche for episode 166 to react to the May Fed Meeting and the Federal Reserve's decision to keep rates unchanged.
In this episode, Nancy shares that inflation is a persistent issue that cannot be easily resolved. However, she sees this as an opportunity for investors, as many people do not have inflation-protected bonds or exposure to the rates market in their core bond portfolios. Nancy notes that during the last period of high inflation in the 1970s, people often turned to commodities and cyclical equities because the interest rate derivative markets, rates market, and even the inflation-protected bond market did not exist at that time. She adds that investors now have more options to protect their portfolios against inflation compared to the past.
Links:
IVOL: https://ivoletf.com/
Quadratic Capital: https://quadraticllc.com/
Twitter: https://twitter.com/nancy__davis
0:00 Intro and welcome Nancy Davis
0:59 FOMC reaction
1:22 Fed allowing mortgages to run off
2:30 Volatility, explained
3:15 Fed interest rate policy
5:19 Be really careful about not focusing too much on consensus and looking more at what's priced in.
5:59 Rate cuts this year/ inflation exposure in investor portfolios
7:36 Opportunity in rates
10:49 IVOL (Quadratic Interest Rate Volatility and Inflation Hedge ETF)
15:48 Rates market a leading indicator for you
18:04 Macro picture
19:47 Inflation protected bond market
22:45 Inverted yield curve
24:13 Bonds a good buy?
25:18 Will the Fed cut this year? Will they cut before the election?
26: 22 Assessment of the Federal Reserve/ stagflation?
29:03 Nancy's background
32:40 Parting thoughts
