You know, I have to wonder, just given what we see in this bond rally, how much
more can yields head lower? You think, Mark?
Oh, I think they can go quite a bit lower.
Judging by what the futures market is telling us, and if you look at the most
recent data coming out of the US, the economy is softening.
We had the jobs report for March, which was significantly below expectations.
And then ADP payrolls for sorry, jobs report was for February.
ADP payrolls from March overnight and the ISE some services PMI there.
They're all basically converging on the same page, which is an economy that's
softening. And I think if you just combine that
with with what's happened in the banking sector, there is good reason for the Fed
to be pausing here and eventually start cutting in the second half of the year,
which would mean yields go down.
OK. What is that?
And what if inflation continues to be elevated?
I mean, we certainly have seen central banks this week saying that even if
there's a pause, it doesn't really quite mean that they're gonna be cutting
anytime soon. That would be a problem.
Thankfully, we don't think inflation will remain elevated.
We don't think it's going back to 1 or 2 percent, but we think it can settle
between 3 to 4 percent starting in the second half of this year.
And I don't want people to be bored ad nauseum hearing about the delayed effect
between the real market for property prices and how it figures in the
inflation baskets, but that delayed effect does exist.
So we're looking at shelter numbers from last summer and we know that after last
summer, property prices peaked and came down.
So it's inevitable that will be helpful as well.
Gasoline prices, they're way below where they were after Russia invaded Ukraine
last year. So, I mean, you're right, inflation is
something to bear in mind, but we think it is coming down.
We're quite certain about that. OK.
So what's the what's the investment prognosis and prescription mark?
Because if someone told me stock markets at various points this year, I would
have gotten burned. So when they put that money.
Exactly, David, if you'd told me at the beginning of this year we were going to
have to bank failures in the US. And Credit Suisse bought by UBS under
emergency legislation and all of that stuff, I wouldn't have been buying big
cap technology, but that's exactly what's outperformed.
I do think we're in a bad news is good news environment, and that'll probably
persist until around May or June because people will like the fact that yields
are falling. But eventually when you get so much bad
news, it just kind of turns into bad news period.
And then I think what what really continues to do well is the bond market
and treasuries are already up 5 percent so far this year.
But that's some play. That's a place, you know, to come back
to what I said earlier, if yields are going to continue to decline that.
That is also a good place to be. So maybe I just say one last thing,
which is I think the breakout in gold is very important and indicative of people
wanting to hedge against the dollar going down.
And if the dollar does soften and we're looking for one point one five euro
dollar twelve months from now, 123 dollar yen, that's a positive tailwind
for financial assets generally. Well, what about China?
Generally speaking. Well, like China, a lot it's reopening
and you'll have seen the housing data, the key property developer sales are up
30 percent year on year and the PMI ISE are very robust, certainly higher than
most of the rest of the world. And the market is not expensive.
The last I looked, the Hang Seng was sort of around 12 times and it still got
very chunky dividend yield. So I think China could be up about 20,
possibly even 30 percent between now and the end of the year.
The Hang Seng index specifically.