September 4, 2025 • 14 mins
In this episode of Lead-Lag Live, I sit down with David Busch, CFA and Co-Chief Investment Officer at Trajan Wealth, to cut through the noise after Powell’s Jackson Hole speech and the latest inflation data.
With CPI softening, PPI still hot, and Fed policy hanging in the balance, David explains how investors should think about rates, risk, and portfolio allocation as volatility looms into the fall.
In this episode:
– How Powell’s “data dependent” tone shapes the Fed’s path
– Why CPI vs PPI is creating mixed signals for inflation
– The growth vs value dilemma in equity positioning
– Credit and consumer data showing cracks beneath the surface
– Why bonds offer a rare generational opportunity today
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #Fed #Inflation #Rates #Markets #Bonds
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
When the Fed lowers or raises rates, they're
targeting the overnight Fedfunds rate, and then the rest of
the curve is driven by supplyand demand dynamics.
We're seeing a risingdelinquencies in credit cards,
auto loans, personal loans andnow we have the restarting of
(00:20):
student loan payment programs.
Speaker 2 (00:32):
I'm your host, melanie Schaefer.
Welcome to Lead Leg Live Now.
After Powell's speech atJackson Hole and the release of
the July FOMC Minutes, investorsare still trying to make sense
of the Fed's next move.
Will we get rate cuts or hasthe market jumped the gun?
Inflation is sending mixedsignals, headline CPI softened,
but poor producer prices arestill running hot.
(00:54):
Meanwhile, upcoming housingdata and consumer metrics could
give us a clear read on just howresilient the US economy really
is on just how resilient the USeconomy really is.
Joining me today is David Bush,cfa and Co-Chief Investment
Officer at Trajan Wealth.
Today, we're breaking down whatthis all means for rates, risk
and portfolio positioning as wehead into the fall.
(01:17):
David, thanks so much forjoining me today.
Speaker 1 (01:20):
Thank you, melanie, I'm happy to join you.
Speaker 2 (01:23):
So let's just get right into it.
Powell's tone from Jackson Hole.
Some investors heard a dovishlean, others thought it was more
of the same.
What stood out to you the most,and how should we be reading
the tea leaves?
Speaker 1 (01:38):
That's a great question.
You know what was interestingto me in just having been in the
markets for the last 25 years?
One thing that always standsout to me with Jerome Powell is
he is very data dependent and sohis tone at Jackson Hole
appeared to be a little bit moredovish, meaning that we still
(01:58):
have persistent inflation, butthe labor markets while the
unemployment rate is still low,we've seen some cracks forming
in the labor markets while theunemployment rate is still low,
we've seen some cracks formingin the labor markets.
And so his the way that Iinterpreted his tone was leaning
dovish, but still datadependent, and from that
perspective, you know, it'll beinteresting to see what happens
(02:20):
on September 17th.
Speaker 2 (02:21):
Yeah and David.
So last week CPI Creek gavemarkets hope.
The hotter PPI number temperedthat optimism.
How do you see this sort of tugof war playing out and what's
the real message for ratesensitive sectors?
Speaker 1 (02:35):
Yeah, so with PPI, what's interesting is is that in
some of those sectors you know,like food and energy, the price
is reflected relatively quicklyin CPI.
But there are other sectors,you know that it usually takes
like a one to three month lag.
So when we see a spike in PPI,I would expect, you know,
(02:57):
probably the next two to threemonths we'll see it translate
into CPI as well.
And this has really been drivenoff of a lot of.
You know a lot of it's drivenoff of the tariff.
You know all the tariffnegotiations that are happening
worldwide and that's going tocause like an initial price
increase but then over time, asconsumer demand wanes, you know,
(03:19):
while tariffs are inflationaryto begin with, over time it
becomes deflationary.
Speaker 2 (03:26):
And that's sort of.
The next thing that I wanted totalk about is equity
positioning.
So if Powell stays cautious butdata weakens, what sectors do
you see outperforming and whichones are the most at risk?
Speaker 1 (03:38):
So what's interesting , just at a high level, if we
zoom out, historically speaking,rates down favors growth growth
companies, rates up favorsvalue companies, and the
mechanism behind that is a termwe call duration of equity.
And when you think about agrowth company, their cash flows
are further out into the future, whereas value companies,
(04:02):
because they pay dividends andthey're typically cyclically
proven businesses, they willprovide cash flows, shorter cash
flows.
So, depending on which wayrates go, you know depends on
really which tilt we need tolean into, whether it's growth
or value.
And so, at a high level,because it's sort of unknown at
(04:25):
this point, you know, I'mleaning more towards a balanced
approach Because, on one hand,if, if inflation is continues to
be persistent and the fed, youknow, gets one, maybe two rate
cuts, you know dividend payersare going to do well, but also,
uh, growth could potentially,you know, have some upside Um,
(04:46):
but I would be cautious becauseyou know we really don't at this
point, we don't know how muchthe Fed can cut rates and and
you know, I think that's it,it's the unknown.
And so stay balanced.
So if we look at individualsectors, you know I'm long
technology, meaning that youknow technology is the future,
(05:10):
and so you know there shouldalways be an allocation towards
tech and specifically with AI.
On the defensive side, you knowthings like consumer staples
should should perform well.
I would also look at somedefensive, some defensive
holdings like utilities.
I would lean away from or steerclear of consumer discretionary
(05:31):
.
Lean away from or steer clearof consumer discretionary.
Consumer discretionary is asector that, as consumer, start
to pull back from their spending.
The higher end consumer, thewealthy of the world, they'll
continue to spend money, butit's that call it upper middle
(05:52):
class in in lower, that willhave to lean into more consumer
staples versus discretionary.
So I'd be cautious ondiscretionary.
Speaker 2 (06:00):
Yeah, that's what I was going to lead into.
Next is consumer discretionaryand and also there's still
pressure in financials.
Do you think some of this ismargin compression from student
loans and slowing credit, or isit something much deeper?
Speaker 1 (06:15):
So when we look at, you know, if we look at the bank
loan data, what we're seeing iswe're seeing a rising
delinquencies in credit cards,auto loans, personal loans, and
now we have, you know, therestarting of student loan
payment programs.
And the interesting thing is, inthe US, student loans are given
(06:38):
by the government, so banksdon't necessarily lend for
student loans.
I think there's a handful ofstudent loans that you can get
from a bank, but generallyspeaking, they're originated by
the US government originated bythe US government.
So what'll be interesting tosee is so if we see rising
delinquencies and defaults,that's going to pressure
(06:59):
financials.
In the commercial real estateside, we're also seeing some
rising delinquencies,specifically in office
properties, but multifamilyseems to be holding up pretty
well.
Certain retail sectors arewe're starting to see a rise in
delinquencies as well, but Ithink that's that's the main
(07:20):
catalyst for the pressure onfinancials rates.
Higher actually should benefitbanks, and the reason is is
because you know their depositbase.
They can pay a lower amount ontheir deposits and lend at
higher rates or invest at higherrates, so that should be a
(07:44):
tailwind for financials banksspecifically.
Speaker 2 (07:48):
Yeah, so just for a minute to the bond side, but the
front end of the curve has beenwhipsawed by rate expectations.
How are you thinking aboutduration here, and what's your
view on quality versus yieldchasing?
Speaker 1 (08:00):
Yeah, so, to your point, when the Fed lowers or
raises rates, they're targetingthe overnight Fed funds rate,
and then the rest of the curveis driven by supply and demand
dynamics.
And so anytime the Fed iseither in an easing or a
tightening phase, we're going tosee that front end whipsaw a
(08:22):
lot more.
And so what what I've beenfocused on is investing at the
intermediate part of the curve.
So call it right around thefive year.
But if we continue toexperience persistent inflation,
an allocation towards treasuryinflation protected securities
or TIPS on the front end willhelp manage or mitigate some of
(08:45):
the inflationary pressures.
So I think the five year iskind of the sweet spot, or right
around the five-year.
Speaker 2 (08:54):
You've mentioned before, David, that industrials
and selective staples could holdup well, especially with
infrastructure, CapEx and tariffpressures.
How do you think investorsshould approach that rotation?
Speaker 1 (09:05):
Yeah, you know we're a firm believer in
diversification and so, goingback to fixed income for a
moment, you know this is reallya generational opportunity for
investors to buy bonds and lockin some yields.
And you know, at least in theUnited States, you know we've
had we haven't had this level ofinterest rates for quite a long
(09:28):
time.
You know it's been since afterthe global financial crisis in
2008.
And so bonds can providecurrent income as well as a
great diversifier.
Also, within fixed income, Iwould go up in quality.
You know high yield to acertain extent, but I'd be very
cautious there.
You know high yield to acertain extent, but I'd be very
(09:51):
cautious there in terms of howthat matches off with with an
equity allocation.
Is I would lean into moredefensive sectors, but maintain
an allocation to tech and andspecifically AI driven type
companies, and the reason is isbecause tech will always be the
future.
Right, that's what they'resolving for is the the problems
of the future?
So I would maintain thatallocation.
Speaker 2 (10:13):
And I think you've already answered this, but just
sort of finally end to be markedthere for people trying to stay
nimble through this macrouncertainty what's your biggest
advice on positioning through tothe end of just this year?
Speaker 1 (10:26):
Yeah for the end of this year.
I would just caution that we'regonna experience some
volatility, specifically rightaround any of the Fed meetings
and any of the Fed speakers.
So we watch that closelybecause I'll call it inflation
volatility or inflation drivenvolatility or inflation-driven
(10:49):
volatility.
If we see a continued increasein inflation, then we're going
to get some volatility, both theequity and the bond markets.
If inflation starts to subsideand we trend towards the Fed's
2% inflation target, then Ithink things will calm down and
(11:13):
we won't have as much volatility.
So I would caution investors bemindful of the volatility,
don't react too terribly, don'tlet the emotions of investing
kind of get the best of you,because what happens is
investors have a tendency thatwhen the markets start to sell
off, they immediately sell andmove into something like a cash
type position.
But the recovery is usuallypretty quick and if you look at
(11:33):
both the size and the durationof bull markets equity bull
markets versus bear markets thebear markets the size and the
length is substantially lessthan the bull markets.
So we typically have a recoverybecause of intervention like
monetary or fiscal policy, andwe can look back to April of
this year as a great example.
(11:55):
The equity markets had sold off.
And then there was one daywhere the Dow Jones jumped like
3,000 points.
Now, if investors had moved tothe sidelines during that time
period, they would havegenerally missed that upswing in
the equity market.
So from a positioningperspective I would stay
balanced growth and value and onthe fixed income side,
(12:19):
intermediate with a allocationto tips on the front end.
Speaker 2 (12:24):
And David, just to wrap up where can our viewers go
to find out more about you andabout Trajan Wealth?
Speaker 1 (12:31):
Yes, trajanwealthcom, and you can also follow us on
all of our social mediaplatforms.
Speaker 2 (12:37):
Fantastic.
Well, thank you so much forjoining me.
It's been a pleasure and thanksto everyone for watching.
Be sure to like share.
Subscribe for more macro marketcoverage and expert
conversations on Big Leg Live.
When the Fed lowers or raises rates, they're
targeting the overnight Fedfunds rate, and then the rest of
the curve is driven by supplyand demand dynamics.
We're seeing a risingdelinquencies in credit cards,
auto loans, personal loans andnow we have the restarting of
(00:20):
student loan payment programs.
Speaker 2 (00:32):
I'm your host, melanie Schaefer.
Welcome to Lead Leg Live Now.
After Powell's speech atJackson Hole and the release of
the July FOMC Minutes, investorsare still trying to make sense
of the Fed's next move.
Will we get rate cuts or hasthe market jumped the gun?
Inflation is sending mixedsignals, headline CPI softened,
but poor producer prices arestill running hot.
(00:54):
Meanwhile, upcoming housingdata and consumer metrics could
give us a clear read on just howresilient the US economy really
is on just how resilient the USeconomy really is.
Joining me today is David Bush,cfa and Co-Chief Investment
Officer at Trajan Wealth.
Today, we're breaking down whatthis all means for rates, risk
and portfolio positioning as wehead into the fall.
(01:17):
David, thanks so much forjoining me today.
Speaker 1 (01:20):
Thank you, melanie, I'm happy to join you.
Speaker 2 (01:23):
So let's just get right into it.
Powell's tone from Jackson Hole.
Some investors heard a dovishlean, others thought it was more
of the same.
What stood out to you the most,and how should we be reading
the tea leaves?
Speaker 1 (01:38):
That's a great question.
You know what was interestingto me in just having been in the
markets for the last 25 years?
One thing that always standsout to me with Jerome Powell is
he is very data dependent and sohis tone at Jackson Hole
appeared to be a little bit moredovish, meaning that we still
(01:58):
have persistent inflation, butthe labor markets while the
unemployment rate is still low,we've seen some cracks forming
in the labor markets while theunemployment rate is still low,
we've seen some cracks formingin the labor markets.
And so his the way that Iinterpreted his tone was leaning
dovish, but still datadependent, and from that
perspective, you know, it'll beinteresting to see what happens
(02:20):
on September 17th.
Speaker 2 (02:21):
Yeah and David.
So last week CPI Creek gavemarkets hope.
The hotter PPI number temperedthat optimism.
How do you see this sort of tugof war playing out and what's
the real message for ratesensitive sectors?
Speaker 1 (02:35):
Yeah, so with PPI, what's interesting is is that in
some of those sectors you know,like food and energy, the price
is reflected relatively quicklyin CPI.
But there are other sectors,you know that it usually takes
like a one to three month lag.
So when we see a spike in PPI,I would expect, you know,
(02:57):
probably the next two to threemonths we'll see it translate
into CPI as well.
And this has really been drivenoff of a lot of.
You know a lot of it's drivenoff of the tariff.
You know all the tariffnegotiations that are happening
worldwide and that's going tocause like an initial price
increase but then over time, asconsumer demand wanes, you know,
(03:19):
while tariffs are inflationaryto begin with, over time it
becomes deflationary.
Speaker 2 (03:26):
And that's sort of.
The next thing that I wanted totalk about is equity
positioning.
So if Powell stays cautious butdata weakens, what sectors do
you see outperforming and whichones are the most at risk?
Speaker 1 (03:38):
So what's interesting , just at a high level, if we
zoom out, historically speaking,rates down favors growth growth
companies, rates up favorsvalue companies, and the
mechanism behind that is a termwe call duration of equity.
And when you think about agrowth company, their cash flows
are further out into the future, whereas value companies,
(04:02):
because they pay dividends andthey're typically cyclically
proven businesses, they willprovide cash flows, shorter cash
flows.
So, depending on which wayrates go, you know depends on
really which tilt we need tolean into, whether it's growth
or value.
And so, at a high level,because it's sort of unknown at
(04:25):
this point, you know, I'mleaning more towards a balanced
approach Because, on one hand,if, if inflation is continues to
be persistent and the fed, youknow, gets one, maybe two rate
cuts, you know dividend payersare going to do well, but also,
uh, growth could potentially,you know, have some upside Um,
(04:46):
but I would be cautious becauseyou know we really don't at this
point, we don't know how muchthe Fed can cut rates and and
you know, I think that's it,it's the unknown.
And so stay balanced.
So if we look at individualsectors, you know I'm long
technology, meaning that youknow technology is the future,
(05:10):
and so you know there shouldalways be an allocation towards
tech and specifically with AI.
On the defensive side, you knowthings like consumer staples
should should perform well.
I would also look at somedefensive, some defensive
holdings like utilities.
I would lean away from or steerclear of consumer discretionary
(05:31):
.
Lean away from or steer clearof consumer discretionary.
Consumer discretionary is asector that, as consumer, start
to pull back from their spending.
The higher end consumer, thewealthy of the world, they'll
continue to spend money, butit's that call it upper middle
(05:52):
class in in lower, that willhave to lean into more consumer
staples versus discretionary.
So I'd be cautious ondiscretionary.
Speaker 2 (06:00):
Yeah, that's what I was going to lead into.
Next is consumer discretionaryand and also there's still
pressure in financials.
Do you think some of this ismargin compression from student
loans and slowing credit, or isit something much deeper?
Speaker 1 (06:15):
So when we look at, you know, if we look at the bank
loan data, what we're seeing iswe're seeing a rising
delinquencies in credit cards,auto loans, personal loans, and
now we have, you know, therestarting of student loan
payment programs.
And the interesting thing is, inthe US, student loans are given
(06:38):
by the government, so banksdon't necessarily lend for
student loans.
I think there's a handful ofstudent loans that you can get
from a bank, but generallyspeaking, they're originated by
the US government originated bythe US government.
So what'll be interesting tosee is so if we see rising
delinquencies and defaults,that's going to pressure
(06:59):
financials.
In the commercial real estateside, we're also seeing some
rising delinquencies,specifically in office
properties, but multifamilyseems to be holding up pretty
well.
Certain retail sectors arewe're starting to see a rise in
delinquencies as well, but Ithink that's that's the main
(07:20):
catalyst for the pressure onfinancials rates.
Higher actually should benefitbanks, and the reason is is
because you know their depositbase.
They can pay a lower amount ontheir deposits and lend at
higher rates or invest at higherrates, so that should be a
(07:44):
tailwind for financials banksspecifically.
Speaker 2 (07:48):
Yeah, so just for a minute to the bond side, but the
front end of the curve has beenwhipsawed by rate expectations.
How are you thinking aboutduration here, and what's your
view on quality versus yieldchasing?
Speaker 1 (08:00):
Yeah, so, to your point, when the Fed lowers or
raises rates, they're targetingthe overnight Fed funds rate,
and then the rest of the curveis driven by supply and demand
dynamics.
And so anytime the Fed iseither in an easing or a
tightening phase, we're going tosee that front end whipsaw a
(08:22):
lot more.
And so what what I've beenfocused on is investing at the
intermediate part of the curve.
So call it right around thefive year.
But if we continue toexperience persistent inflation,
an allocation towards treasuryinflation protected securities
or TIPS on the front end willhelp manage or mitigate some of
(08:45):
the inflationary pressures.
So I think the five year iskind of the sweet spot, or right
around the five-year.
Speaker 2 (08:54):
You've mentioned before, David, that industrials
and selective staples could holdup well, especially with
infrastructure, CapEx and tariffpressures.
How do you think investorsshould approach that rotation?
Speaker 1 (09:05):
Yeah, you know we're a firm believer in
diversification and so, goingback to fixed income for a
moment, you know this is reallya generational opportunity for
investors to buy bonds and lockin some yields.
And you know, at least in theUnited States, you know we've
had we haven't had this level ofinterest rates for quite a long
(09:28):
time.
You know it's been since afterthe global financial crisis in
2008.
And so bonds can providecurrent income as well as a
great diversifier.
Also, within fixed income, Iwould go up in quality.
You know high yield to acertain extent, but I'd be very
cautious there.
You know high yield to acertain extent, but I'd be very
(09:51):
cautious there in terms of howthat matches off with with an
equity allocation.
Is I would lean into moredefensive sectors, but maintain
an allocation to tech and andspecifically AI driven type
companies, and the reason is isbecause tech will always be the
future.
Right, that's what they'resolving for is the the problems
of the future?
So I would maintain thatallocation.
Speaker 2 (10:13):
And I think you've already answered this, but just
sort of finally end to be markedthere for people trying to stay
nimble through this macrouncertainty what's your biggest
advice on positioning through tothe end of just this year?
Speaker 1 (10:26):
Yeah for the end of this year.
I would just caution that we'regonna experience some
volatility, specifically rightaround any of the Fed meetings
and any of the Fed speakers.
So we watch that closelybecause I'll call it inflation
volatility or inflation drivenvolatility or inflation-driven
(10:49):
volatility.
If we see a continued increasein inflation, then we're going
to get some volatility, both theequity and the bond markets.
If inflation starts to subsideand we trend towards the Fed's
2% inflation target, then Ithink things will calm down and
(11:13):
we won't have as much volatility.
So I would caution investors bemindful of the volatility,
don't react too terribly, don'tlet the emotions of investing
kind of get the best of you,because what happens is
investors have a tendency thatwhen the markets start to sell
off, they immediately sell andmove into something like a cash
type position.
But the recovery is usuallypretty quick and if you look at
(11:33):
both the size and the durationof bull markets equity bull
markets versus bear markets thebear markets the size and the
length is substantially lessthan the bull markets.
So we typically have a recoverybecause of intervention like
monetary or fiscal policy, andwe can look back to April of
this year as a great example.
(11:55):
The equity markets had sold off.
And then there was one daywhere the Dow Jones jumped like
3,000 points.
Now, if investors had moved tothe sidelines during that time
period, they would havegenerally missed that upswing in
the equity market.
So from a positioningperspective I would stay
balanced growth and value and onthe fixed income side,
(12:19):
intermediate with a allocationto tips on the front end.
Speaker 2 (12:24):
And David, just to wrap up where can our viewers go
to find out more about you andabout Trajan Wealth?
Speaker 1 (12:31):
Yes, trajanwealthcom, and you can also follow us on
all of our social mediaplatforms.
Speaker 2 (12:37):
Fantastic.
Well, thank you so much forjoining me.
It's been a pleasure and thanksto everyone for watching.
Be sure to like share.
Subscribe for more macro marketcoverage and expert
conversations on Big Leg Live.
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