Remy Blaire: Well, the U.S. jobs report for the latest month coming in softer than expected. Wall Street recalibrating Federal Reserve rate hike expectations as the benchmark 10-year Treasury yield eases off 24-year highs, but is creeping higher yet once again.
Now, headline equity indexes remain near records as elevated borrowing costs and the Fed's policy stance tighten financial conditions across credit markets, also driving record divergence between mega-cap tech and the broader market.
Well, joining us this afternoon to weigh in is Natalia Lojevsky, who is Managing Director and Head of Wealth Solutions at CIFC Asset Management.
Good afternoon, Natalia. Thank you so much for joining us.
Natalia Lojevsky: Hi, Remy. Thank you for having me. I'm glad to be here.
Remy Blaire: Well, first and foremost, let's talk about the move we're seeing in stocks as well as Treasury yields.
Because the Dow has come off session highs, and we are looking at Treasury yields creeping higher yet once again.
So what does this tell you?
Natalia Lojevsky: Yeah, interesting reversal, and a quick one.
And this kind of just confirms, I think it's a good reminder for everybody, that the risks in the market are really two-sided, right?
Rates can move very quickly in either direction, and if you're positioned wrong, you can get hurt here real quick, you know, either way.
Remy Blaire: Yeah. And this week, not only did we get the jobs report, but we got the PCE figure, and that is something that the Federal Reserve keeps its eyes on.
But when we take a step back, we're also looking at geopolitical tensions, and oil has been wavering and breaching some key levels here.
So as we approach that Fed meeting later on in October, we do get CPI once again.
But what do you think is key as we move forward?
Natalia Lojevsky: Yeah. I mean, I think today's softer jobs report, it did likely take an October rate hike off the table, right?
The Fed has a little bit of room to pause and wait, right? We'll get some more data.
But again, this week was telling, right? You just mentioned the softer PCE report, and the yields, again, once again moved straight through it.
So it's telling you that they're reacting to other forces out there, right?
This isn't really an inflation scare, right? They are looking toward that geopolitical uncertainty, the deluge of supply that's coming both from the sovereign and the corporate side, and they're building in more term premium, right?
Investors are demanding to be compensated more, especially on the long end.
Remy Blaire: And, of course, I do have to ask you about the move that we're seeing in the Nasdaq because, despite the pullback we're seeing in gains for the Dow Industrials, we are looking at a rally for the Nasdaq, up by about 1.3%.
And this does come on the heels of tech advancing.
So what do you make of what we're seeing when it comes to the AI trade as well as tech?
Natalia Lojevsky: Yeah. I mean, the market, or the equity market, clearly likes it, right?
The Fed on hold here in October, not another rate hike coming through. It's a little bit of a sigh of relief.
I mean, ultimately, this is an earnings story, right?
Earnings have been underpinning this entire move that we've been observing really all year, right, through all these various shocks.
So, you know, even as the cost of capital gets repriced higher with these kind of marching-higher yields, you know, the earnings expectations for large-cap tech, for the hyperscalers, continue to exceed that bar.
So that's something to watch, right?
Remy Blaire: Yeah. And speaking of earnings, we are kicking off the month of October, and we are approaching official earnings season.
And we'll be hearing from the financials first.
But tell us what sectors you're bullish on and bearish on as we head into the season.
Natalia Lojevsky: Well, look, I think where our attention will be, and where investor attention should be, is to the rate-sensitive sectors, right?
Because that's where you're seeing the pressures really build in the market, and that's where selectivity matters.
Certainly, you know, housing is front and center there, with mortgage rates back up above 7% and home buying slowing.
But anything kind of rate-sensitive, exposed to the weakest consumer, right?
Because when the weakest consumer gets squeezed, again, that's reflected in sort of the weakest borrowers, at least on the corporate side.
Remy Blaire: And here we are about to head into the final months of 2026, and the year has been quite volatile.
But despite all that volatility, we are looking at gains for the major U.S. stock averages year to date so far.
So in terms of managing portfolios and structuring them as you head into the end of this year, where do you stand right now? Why?
Natalia Lojevsky: Yeah, it's really remarkable, actually, how resilient the economy has been, how resilient the market has been, right, across a wide variety of risk assets.
And again, it's that strong earnings growth that's really underpinning all that.
Again, I would say that it's a little bit of a difficult setup because your risks are running in both directions, right?
As we can see, both oil and yields can move very quickly and sharply on even just a single headline.
So it's a difficult setup heading into year-end.
And I would say that, you know, maybe don't make a large directional bet here, right? That's very difficult to call. Timing is very difficult to call.
So, for example, if you're taking on duration, maybe pair it with something that pays you to wait, right?
Front-end floating-rate, higher-quality assets like senior secured loans, for example, on the credit side, have been a port in the storm for investors seeking refuge from this rate volatility and providing meaningful compensation along the way.
Remy Blaire: And Natalia, finally, before I let you go, speaking of the rest of this year, of course, there is plenty of event risk, and I'm sure you're paying attention to catalysts.
But what do you think is key heading into the final months of the year, and why?
Natalia Lojevsky: Yeah. Again, I think earnings are the real key.
But also any resolution on the geopolitical side, again, that can move markets and can move rates very quickly.
So if we get any sort of resolution on Iran, you're likely to see both oil prices and yields come off.
Remy Blaire: Well, Natalia, thank you so much for joining us on this Friday morning, especially following that jobs report.
I appreciate your time as well as all of your insights.
Natalia Lojevsky: Thank you so much. Thank you very much.
