in years past. according to a recent study, the overall quites of father's day gifts will cost nearly $200 a person on average, up 14% from this time last year. we're e keeping an eye on your money on "mornings with maria" every weekday 6-9 a.m. eastern on fox business. and then i'll see you over on fox news channel on sunday, 10 p.m. eastern, sunday morning on fox news channel, exclusive interviews on "sunday morning futures" with congressman michael waltz and marjorie taylor greene, also francis suarez, my special guest. hope you'll join us then. thank you so much for being with us, sending you best wishes for a happy father's day to all. have a great rest of the weekend. i'll see ♪ ♪ barron's round table sponsor by:

♪ ♪ ♪ ♪ >> welcome to barron's round table. i'm jack otter. coming up, did we already beat inflation? i'm asking rob around not what he's watching and where investors should be putting their money. then a.i. versus the music industry, record labels and artists seeing both promise and peril from songs generate by artificial intelligence. and later some predict a rebound for the ipo market. we we begin as always with three things investors ought to be thinking about right now. stocks ended the week higher despite signals from the fed e that more rate hikes could be coming. we'll take a look at how the market is reacting. and have mortgage rates finally peaked? housing analysts seem convinced. then bud with light deloaned -- throned as the nation's number one selling beer. my colleagues, ben levisohn, carlton english and jack howe.

so, ben, the fed if talked real tough this week, but investors were not scared away. >> not at all. the s&p 500 finished up about 2.5% this week, it was its fifth straight week of gains, the longest winning streak since 2021 is. so whatever the fed said, you know, it's going to pause here, it's going to do a couple more hikes, it didn't faze the market at all. and that's probably because of two things. one, the fed since 2000 has never stopped and then restarted. so are there's a chance that the fed, maybe it wants to raise rates again, but it might not. the other side of it is the market is always looking ahead about six months or so, and if that's the case, it's saying rates are going to peak, and two more hikes? that's fine. jack: and the bred withth you've been talking about earlier this year does appear to be there. more stocks going up including some dividend payers? >> that's right. my favorite one to look at is tesla. it had a 13-day winning streak that ended on fed day. that's pretty fantastic. dell the that airlines had a

15-day winning streak, and that was after sort of, it picked up after it raised its dividend, which is great and something that i think one of our reporters predicted? jack: yes. andrew berry said he thought delta would pay a dividend. if you followed him, you did very well. what about the sexy seven, those stocks that have been powering the market through the first half? >> it's hard to pull back from them, they really have been driving the market, and maybe they take a pause just because they've gone up so much. but because they are such a big part of it and they are getting a boost from a.i., i think you might not want to chase them here, but if you own them, you don't want to sell. jack: speaking of rates maybe peaking, carlton, there is some expectation that mortgage rates have hit their peak and could go down from here. it's pretty tough to find an affordable house. >> exactly. to ben's point, you know, we do see the fed potentially lifting rates two more times, so in the near term you might see mortgage rates bump along close to the 7% level, but the anticipation is

rates could be around 6 if by the end of this year as we get more stabilization and certainty around the rate picture. but the other thing is 92% of mortgages have rates of less than 6%, and housing prices are still 37% higher than they were before the pandemic. so people don't want to sell the houses that they have because unless you're going to be downsizing drastically or moving in with family or something, you're going to have to be buying into a very challenging market. jack: yeah. nobody wants to do that. through all of this, investors might have some opportunities. >> one spot to look on that demand side, you want to look at a home builder like lennar. they were out with earnings this past week, beat on expectations and also raised guidance. the other spot to look is mortgage bonds. there's two bond funds, one from double line which is dltnx or pimco which is pmzi, and. both yielding more than 5%. and with inflation coming down a little bit from the highs of 9,

we're a little above 4% now, 5% yield is not a bad spot to be in. jack: yeah. and if you don't like that high mortgage rate, you could take the other side of the trade and get paid the high mortgage rate. >> exactly. [laughter] jack: okay, jack, the old king of beers has been dethroned. >> shocker coming up, modelo is the new -- jack: who? >> everybody kind of figured, bud light was getting hit by that boycott. if i told you that the new top selling brand is mexican, you might be surprised. if i told you it's the hex can and not corona, i mean, who would have thought modelo? the hispanic drinking age population in the u.s. has been growing much faster than the non-hispanic one, and there's a trend toward premiumization. help me say that. premiumization -- jack: i don't think that's a word. >> modelo to is the corporate premium cousin to corona. that's been gradually gaining sales. it passed coroma in the u.s.

there's an irony here. bud light is an icon that's been european-owned for 18 years. that company also brought modelo which makes can corona and modelo to. u.s. antitrust regulators said, hang on, that's whey too much beer -- way too much beer. they sold to a company called constellation brands best known for i don't want to say cheap booze, but cheap booze. the company got its start in 1945 in something called richard's wild irish rose. let's just say it pairs well with a brown paper bag. [laughter] it had this spirits and wine portfolio. just ten years ago it happened boo what has become the best place to be in america which is these hex can brands. they've been -- mexican brands. they've made a ton of money, so, you know, an american beer icon has been dethrone by a mexican brand that's arguably american. jack: you're going to have to say that a few more times, but they only have 10% share in four

states -- >> a lot of room for growth. jack: absolutely. all right, so what investments will do best over the next ten years? i'll ask research affiliates' rob arkansas not next. ♪ ♪ chevy silverado has what it takes to do it all. with up to 13 camera views. and the z71 off-road package. ♪ you ok?

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i'm a bear. i'm coming out of hibernation, and papa is hungry. and while you're hittin' the trail, i'm hitting your cooler. and your cut-rate car insurance might not pay for all this. so get allstate. jack: economic data out this week shows inflation is showily easing, this as the fed paused after ten consecutive rate hikes. where do we go from here and where can investors find opportunity? joining me now is research affiliates' founder and chairman rob arnott. thanks so much for joining us from sunny newport beach. we appreciate it. >> jack, it's always a pleasure. jack: let's start with this fight against inflation. the federal reserve's tool, monetary policy, is often described as a blunt instrument, but it's the only one they've

got. the irony here, of course, is the fed is using that tool to beat down a monster largely of its own making. >> i think that's exactly right. if you have an organization that has created a tremendous burst of inflation with 400 ph.d. economists, more harvard and mit together only have 100, the fed has 4000 -- [laughter] and those -- 4000 #, and those 400 ph.d. economists can't predict unemployment, gdp or inflation, how do we expect them to manage it effectively? they've created it, and we're it is a -- tasking them to fix it. there's something wrong with this picture. i look back at the vietnam war,s it was a formative time in my life, and there was a colonel famously quoted as saying we had to destroy the village in order to save it. is the fed's goal to destroy the economy in order to save it? i think so.

it's very sad. jack: and so you think there's a real danger that the path they're on will do exactly that. >> yes. one of our advisers is a fella named cam harvey, professor at duke. he's the tell la who originated -- fella who originated, who discovered that yield curve inversion predicts recession. he did it in his ph.d. dissertation in 1986, and it was later published in the journal of financial economics in 1988. so this dates way back, and his observation is that when you have an inversion in the yield curve, it tends to predict a recession with, so far, 8 out of 8 successful calls with no false positives. that's are pit cool. pretty cool. now, my own take on it is that the yield curve inversion doesn't predict a recession, it causes one. because, in effect, what you have is the long end of the yield curve set by the invisible

hand of the marketplace at the yield level that is appropriate for default risk-free debt that is an appropriate reward for deferring consumption. now, if the yield, the short-term yield is higher than that, think of yields as a speed bump if the speed bump is too low, you get reckless driving. if the speed bump is too high, traffic stops. we've swung there a yield level that was too low, propping up zombie companies leading to mal investment and misallocation of resources to thousand too high. why doesn't the fed pay attention to the long end of the yield curve and what it has to tell us about the appropriate level of yields? jon swrk so, rob, i want to switch to your view of where you find opportunitieses and dangers in the market. you have a fascinating interactive graph on your web site that we can't show on the screen in full because it would, frankly, be too confusing, so i

cherry picked a few asset classes i think our viewers might be interested in. your prediction of 10-year returns for u.s. large cap and small cap stocks. why do you get these fairly muted returns? >> it's actually very simple. the u.s. is the most expensive major stock market in the world. there's a measure called the shiller pe ratio which measures price relative to 10-year average earnings. so that takes out the effects of the economic cycle. you can have an economic peak with peak earnings and the p if e ratio will look -- pe ratio will look artificially lower than it really is, and you can have a trough associated with a recession where the pe ratio is higher than it really is. and so this takes out the effects of the economic cycle. that pe ratio for the u.s. is a little bit above 30 times earnings. that's historically very high. the growth side of the market is priced at an extravagant

multiple of the pricing on the value side of the market, about five times the valuation multiples of value. so we have distortions in the economy. i think a.i., despite its near certainty of massively disrupting the economy in the years ahead, a.i. has created it own bubble with all of the a.i.-related stocks priced as if those individual companies are going to be the winners in what's likely to be a vigorous us competition over who can dominate in that market. but the u.s. is expensive. u.s. value is sensibly priced. not cheap, sensibly priced. and international value outside the u.s. is cheap in europe, in japan, in emerging markets, very attractively priced. one other observation, inflation is wonderful for value stocks. so if this inflation is not put

to to can death in the coming year, then value's the place to be, not those -- jack: rob, unfortunately, we have to leave it there. i appreciate your observations. you and i have been talking about emerging markets for a long time. i hope your predictions come true because you've got some rosy returns there. thanks for joining the show, appreciate it. >> thank you very much. jack: some musical artists are using artificial intelligence as a creative tool, but is it really just copyright infringement, and what's the impact of music st my relationship with my credit cards wasn't good. i got into debt in college, and no matter how much i paid, it followed me everywhere. the high interest... i felt trapped. debt! debt! debt! debt! so i broke up with my credit card debt and consolidated it into a low rate personal loan from sofi. i finally feel like a grown-up.

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♪ cc jon artificial intelligence is hitting some sour notes as it moves from text to song, breaking into the music industry. some record labels and artists have embraced the creativity unleashed with this new

technology, but fear of a.i. has tanked music label stocks. investors can take advantage and, carlton, recently we've seen both the promise but also the peril of a.i. mixing with music. >> yeah. so take a look what happened in april. you had this song that was uploaded to music streaming services that sure sounded a lot like drake and the weekend, only it wasn't. it was an a.i.-generated song that was eventually yanked. and this is a problem for artists because there have already been issues about artists' music being sampled and the rights that go with this, artists wanting to have more control over the rights of their music. of it's usually owned by the label, not by the artists themselves. now artists have to play whack-a-mole with these fake a.i.-generated songs, and what do you do with that? if someone is creating or using a.i. to generate new music from an existing catalog, what are the intellectual property rights of that? so it's a huge issue in the industry. you did mention only -- some of the positives which one thing

a.i. can do and has been doing, you do like listening to drake, maybe a.i. realizes, hey, you might like other artists that sound like him. not copying him, but similar style of music. so it can recommend some less arer known artists. another plus, you have paul mccartney coming out with an album this year that uses a a.i. to include john lennon's voice. so, i mean, that's one of the more kind of creative aspects that i think fans can get around. overall, there is a lot of fear about the intellectual property rights of a.i. and the music industry. jack: and the danger that when the a.i. list is generated on your spotify account, it can make you feel really old. why do you think i want that music? come on. ben, i want to. >> you about an interesting aspect of this story in barron's this week which is music as a whole looks undervalued. tell us about that. >> it does. i mean, when you look at these stocks, universal music group and warner music, both of them have dropped a lot this year.

and it's really because people are worried about pricing power. getting paid for this music they have. but it looks like they're going to be getting a raise if spotify goes ahead and raises its price point which hasn't gone up in a very, very, very long time. they have a lot of room to raise that price. they have to worry about competition, but if they do that, then the music labels are going to get more money. they're also probably going to renegotiate contracts with places like tiktok so when songs are used there, they'll also get more money. and that provides a good opportunity, about 20% upside in both these stocks. now, on the streaming side, spotify's had a massive run this year, it's up about 90%, and that's in anticipation of these price hikes happening. so i think with that one, obviously, you just want to wait and see what happens. jack: yeah. they haven't raised quiteses -- prices since 2011. jack, there are some worries in this industry, however. tell us about that. >> ben makes a good point, these

companies can make more money from their existing deals because there's not a lot of growth in the streaming is services. think about how people have five tv and movie services and and they're trying to figure out which ones they want. ing with the music services, there's a lot of the same content. i pay for three of them. i've got my sirius for listening to howard stern when the kids aren't in the car, and i've got my apple and amazon which come bundled with other stuff. that's way more music than i need, i think, and a bet -- i bet a lot of other people are in the same is position. jack: ben, i do need to ask you kind of a personal thing, you have pointed out in discussions that in some ways musicians get the rawest e deal of all from all this. >> that's right. we talk a lot about the streaming companies, we talk about the labels, but as always, the musicians are stuck in the middle. especially with the way streaming works in terms of giving the money to the labels. it's actually the artists who get played by people like me that maybe aren't so popular. we don't listen all the time.

they get fewer plays, but my money's still being thrown into a big pot that gets tossed over to other artists that are very popular. and for smaller artists, you're better off buying one of their records, a cd or going to a site and down loading it digitally, and that way they get that money that you have and you're going right to them. jack: you're being modest. ben is also a member of a band, is that right? >> i was a very long time ago, had a daughter and that put an end to it. and we were nothing. mine, it was a self-released album. but, yeah, it's out there on spotfy. i think we've probably had, like, five listens over time. [laughter] we're never going to see a dime from them. we shouldn't, obviously, because we haven't gotten played -- jackie: i think that playlist is going to double after this show -- >> i saw groupies outside the building. >> reunion tour. jackie: as we head to -- jack: as we head to break, why don't we listen to ben's band. ♪ ♪

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♪ jack: jack, i have never set foot in a cava restaurant, but investors sure got excited about it. >> stock almost doubled on its first day of trading. it's a chipotle-style med e train january restaurant. our colleague, andrew berry, tells me mostly cool people eat there and, you know, i've never been, and i'm pretty sure i'm cool, is so i can't quite figure it out. he says the company looks richly valued. its growth has been partly fueled by acquisitions. he thinks it could become another sweet green that's at trendy eatery that has been so far kind of a stock market flop. i've never eaten there either, and i went to mcdonald's twice

in the past week, but enough brag. [laughter] jackie: -- jack: check out cava, we'll report back. carlton, your idea is kind of fun. >> i've been loving the luxury sector, and one thick i -- pick i have is estee lauder. i do get some wellness brands which that is a growing industry. beauty sales in general have been climbing about % per year -- 4% a year and is expected to go as high as 6%. as companies are more strict about the return the work, i think you're going to see people spending a bit more on cosmetics. jack: i'll be honest, you learn from carlton. ben, you have a different sector. >> mine's not a fun stock, it's a chemical company, and it does industrial gases. the stock's up -- >> you said not fun though. [laughter] >> and it's up 29% year, but it's been going sideways for the past month, and it really does

look like it's breaking out again, it's actually pretty cheap, below its 16.9 times average and well below the s&p 500. still looking pretty interesting. jack: and who doesn't love industrial gases, you know? all right. thanks, ben, carlton and jack. check out this week's edition at barron's.com. don't forget to follow us on twitter @barron's online. we'll see you next week on "barron's roundtable". ♪ [laughter] pete: you got it. have a good sunday. ♪ muck more good