Your reaction there to what we heard from Larry Summers as we continue to see the Fed really try to pinpoint when we've
reached peak inflation and how to fight it. Well good morning Julia. And it's so good to be back. Yes.
Mr. Summers it's probably right. The neutral rate is actually very hard to calculate and it
moves. And in higher inflation periods it will be higher. So what's really important here is not so much the neutral rate.
It's going to be financial conditions overall. And that's what the Fed is going to be looking at. So they're going to be and in
fact that's what they're going to be probably disappointed about given the strong rally that we've seen the last couple of days.
And speaking of the strong rally particularly when it comes to the equity markets I mentioned the S&P 500 up by some 9 per cent
in July. So do we continue to see this bear market rally I guess be chased. Well we think it probably is a bear market rally.
Again what we always have to remember is the markets are not the economy and the markets are driven by fundamentals technicals
and valuations. Now in the technicals and evaluation side it is very supportive at the moment and that's why you're having this
disconnect. But we do think the fundamentals will come back into play. We do see higher interest rates. We do see higher while
inflation remains sticky. And we therefore expect growth to become enough. And that's not good. That's not good for risk
assets. Kirk so if there is that disconnect you forgot one thing by the
way you've got speculation as being one of the other ones. But you look at what's going on with the earnings season. How does
that inform you of what's going on with the economy. You raised two really important issues reshot the first one is
sentiment and you're absolutely right and that's again what people at Fed Power is trying to rebuild careful about. They
don't want to be coming out there and being overly negative. And that's probably why they're saying where we're at a neutral rate
because if if your authorities are coming out as very negative that will have a negative sentiment. And that again obviously
you know impact what's happening in the markets in terms of earnings. Earnings today for the last quarter have probably come
in a little bit stronger than expected. But then it was a relatively low bar. And so again we would say it's going to be
really what happens in Q3 and Q4 that counts. And certainly we seen earnings revisions on the downside globally. So it is again
another reason just to be cautious. And how does that then translate. I'm asking you to the
employment picture which bizarrely of course if it is a technical recession we don't have employment numbers like this.
Well I put that noise they can be lagging indicators richer. But you are right. In the US in particular households in one
case boosters still by the savings they were able to accumulate during the Covid lockdowns and strong employment growth
continues to really provide good support for their overall economy.
However once again I think you'll start to see the numbers deteriorate in the months ahead. And again they need to because
if they don't we're going to still have inflationary pressures and that will mean even higher interest rates. Speaking of Covid
lockdowns that's very much impacting China's growth and therefore the overall global economy. We saw that bit of a
shocker in terms of the official PMI. We're asking our Emily question today how will this China slowdown really affect
broader assets. Juliet you're absolutely right. The elephant in the room in China remains a curve and zero policy. And I don't
think you're going to see any change in that in the near term. In fact Xi Jinping came out late last week and again once again
reiterated how important the Covid zero policy was. And that's just incredibly hard to predict incredibly high.
So that will continue to be a weight around the China market. And again we are actually neutral China at the moment because
again while we're concerned about the fundamentals and a lot of that is driven by PERVAN from a valuation and technical
perspective it's got strong support. So if you asked me what do I think China looks like 12 to 24 months out I think it will
look in a much better position. And that's why we're invested over the NIKKEI over the weeks ahead.
It's very very uncertain and uncertain too in terms of the global growth picture. I mean we were a little disappointed from
a lack of new stimulus announced last week by the Politburo as well. So all of that then factors into the global growth
picture. What's your sort of outlook for that impeding I guess the impediment of global growth. Well you're absolutely right.
In the period that second largest economy it's not going to get its 5.5 percent growth target. It could even be less than 4. So
you're not going to have the support from China. And then in that more than a lot of the other economies you're having those
rising interest rates and expecting that to be kind of impinging on growth. So it's not it's not a rosy outlook.
Kirk last question. Where does the dollar go and how does that affect how you advise people.
I expect in this environment of rising interest rates in the US and we expect rates to peak higher in the US and other developed
markets. The dollar will continue to be well supported. And again the real impact on that is in the emerging markets and in
Asia because that's going to be pushing the central banks in this part of the world again probably to to raise interest rates
to protect themselves from the inflationary pressures.