As we said, as Kathleen indicated, a lot of things can still go wrong.
How? What are you positioning for?
I think it's fair to say that Tuesday marked a very in a suspicious start to
Wall Street. For 2023 and I think now, yes, even
though U.S. shares attempted to trim losses and are
still trying to trim losses right now. I think the jitters are likely to find
the market and macro mildew for the foreseeable future.
And this is one of the problems is a lot of uncertainty again.
Now, if we actually had at least let even a less cloudy looking glass view
into what's going on right now, I'd feel a lot more comfortable.
But for index huggers like myself or people that buy indexes like myself,
it's very, very difficult here to see any low hanging fruit.
What are we going to do? And that's going to be a big problem as
we get through this orientation period, as I call it right now in the markets.
Recession calls even coming from just about everywhere we heard it from Bill
Dudley adding to calls from the IMF saying, you know what, US, Europe, China
will slow down in tandem, paving the way for perhaps a global recession.
Where should smart money go to? What will do?
Well, despite a recession? How about cash?
Is that a really bad strategy for the first in a while?
I mean, I think it's the best that I think it's the best at the money put
right now. But, you know, if you ask Bill Dudley, I
think that was a fantastic interview you did on Bloomberg and in the you know,
the US recession itself is getting created by the Fed.
So the opportunistic, opportunistic take here and he correctly pointed this out
and this is an everybody's back to mine. Will the Fed reverse it quickly by
dropping interest rates? I think it's an unlikely pass.
You know, an unlikely prospect given one that inflation is likely to be above the
Fed target as we enter the later half of 2023.
I think it's going be well north of 3 percent and this is going to create a
significant problem. My fear here is the markets will still
be talking about rate hikes by the end of 2023, and that's the problem.
And then a rate hike, environment stocks just don't do well as we saw valuations
drop by the increasing yields, I hear. But here's the big problem has learned
and this is what I'm really worried about here, removing off the high yield
or knock down on stocks and removing to the potential destruction of earnings.
And this is a real worry for four for four stock pickers as the lagged effects
the Fed policy start to weigh on a broad, wide spectrum of stocks.
You say that China is a buy with its reopening.
What exactly is looking attractive in China?
Well, I think there's a few things. I think the accelerated reopening is
probably caught a lot of people by surprise.
I think everybody was expecting and maybe at the end of Q2 and now it looks
like it's been on the fast track to the Covid policy off ramps right now.
But judging by media reports and observations from boots on the ground in
new cold cases and popular centers in China appear to have peaked.
And this is quite good. I mean, let's face it, there's still a
miserably high levels. And this is one of the problems with the
markets really when you think about. We have no concern about people's
health. All we care is about things accelerating
positive for the markets. And unfortunately, that's a side effect
of what we're seeing right now. Look, we've got green shoots and
mobility data opening. A low PMI index is still markedly weak
on policy message. Messages have been very, very
consistently pro-growth. And I think this is really what's
spurring on some adventures here.
And stock markets writing it Hong Kong today.
And it's just don't show up late for the party.
Well, the thing is, there's so much optimism pinned on the pledged stimulus
by China. But you've got to wonder how much China
can actually do, given the economy has been in doldrums for the past three
years and land sales have been pretty, pretty meager,
various pretty limited funding at hand. Yeah, but this is another interesting
part that we're looking at, we're looking at the PBS, BBC and policymakers
themselves trying to internationalize that you want to attract that foreign
direct investment. I mean, they're opening the hours to to
allow trading. That's a very big positive.
We think this is going to continue to resonate.
And this is part of what we're looking at, a gradual appreciation of the one, I
think. I think everything is pointing quite
good. But one thing that we always remind our
investors and why we look to take profits on peaks and then re-enter on
dips is simply the fact that the data has turned.
I think my view here is we're going to have to see a convincing turn in the US
or in the China economic data to really reaccelerate another spurt higher
without that growth impulse passing through to their gross sentiment,
impulse passing through the data. I don't think we're going to go much
higher than we're seeing right now. Some say, Stephen, that the path for the
path of least resistance for the yuan is actually to the outside.
But you've got to wonder how the PRC views it.
A weaker yuan would be better for an economy that is slowing down, isn't it?
Definitely, but they've got a little bit of help here from from the Bank of
Japan, at least from the implications the traders are taking on the Bank of
Japan that are changing their policy a little bit.
The, you know, the stronger, stronger yen allows you want to weaken on a
competitive advantage basis. So sorry, let me rephrase that.
Allows the you you want to strengthen on a competitive advantage basis and this
is OK. So they see this from a basket
perspective, not necessarily straight up against the US dollar.