Game 5 of the 1973 NBA finals would be the last one played by Wilt Chamberlain, as the Lakers lost to a NY Knick team that featured basketball legends Walt Clyde Frazier, Earl the Pearl Monroe and Willis Reed. A fourth hall of famer, Dave DeBusschere, donning the number 22, also played an instrumental role in what was the last championship for the Knicks. 50 years later, his son, Dennis DeBusschere, is a co-founder and the Chief Market Strategist at 22V Research, a firm advising institutional clients on risk and asset allocation.

My conversation with Dennis explores his process for uncovering the interaction between the economy, inflation and the Fed’s reaction function. He emphasizes the importance of the financial conditions channel, asserting that economic growth that proves too resilient will force the market to ultimately confront policy that is higher for longer.  A large part of our conversation is around the linkages that Dennis and his team find in various equity factors to macro variables like the shape of the yield curve. Of these, one interesting assertion is that defensive stocks and factors like low vol have provided little safety in the context of bear steepening. Lastly, we talk about hedging in an environment of stock/bond correlation levels that remain unfriendly. Here he points to a customized short basket he’s developed comprised of stocks with deteriorating short-term debt levels and high cash flow volatility.

I hope you enjoy this episode of the Alpha Exchange, my conversation with Dennis DeBusschere.