Bond yields peaked at this point. Where are we headed.
It's quite possible life take. I don't want to make that cold decision
because they could slip a little bit higher but I think in the period ahead
we're probably going to see more evidence that US inflation has peaked.
It's probably still gonna be too high for the Fed's conference.
So that probably means two point seven percent hike at the next meeting.
But that's largely factored in. And I think as the year goes by we'll
see more evidence of the combination of improving supply
declining delivery times declining upstream price pressures and so on
combined with slowing demand will allow bond yields to stabilize and start to
get back down again. And if we go into another leg down and
share markets it's more likely to be led by not the valuation pressure.
Bond yields rising from low levels but concerns about recession.
And again I think it's ISE concerns about recession.
A dominant net would probably say bonds rally.
So it's quite possible. We've gone from an era for a six month
window where bonds were a poor diversify in a portfolio where they will be
updated to this fire going forward. Is that why we're seeing so much
uncertainty in the equity space. We continue to see outflows from US
markets not to mention European equities as well as a concern about recession.
What's being the big hit for these equity markets.
I think so. I'm.
Markets are surprisingly resilient. And there are technical reasons for
that. Markets diets oversold level last week.
We also had the sentiment levels at a negative levels that is obviously
positive from a contrarian point of view.
But by the same token bond markets never go in a straight line.
And despite that resilience I think the risk is still on the downside.
And the big driver of that risk is is recession risk.
Obviously recession risk is much higher in Europe but the risk of recession in
Europe 80 percent 70 80 percent in the US is probably 50/50.
But that I think is is going to become the dominant concern.
And obviously that impacts earnings expectations going forward.
Well we do have a lot of data coming out of trying to.
This week industrial production retail sales are trying to of course staying
strongly committed to this policy of zero.
Covid. So what's your outlook for China
particularly the growth story in this environment.
Well you'd have to size Macy. I think the growth target for this year
was north of hot seats kind of a trade that obviously zero and kind of it is a
big factor behind that. The graph is certainly in the hot
weather is certainly not helping as is the property slump.
The data that we get I think on Friday this week will probably show some
stabilization in things like industrial production retail sales.
But it's going to be stabilizing in a pretty soft level.
And recently we've seen an increase in the number of cities going into
lockdowns again which will act as a drag as we go through September.
So you'd have to sign the Chinese outlook remains fairly rough until we
get some more clarity on this probably pose to the Congress all in which I
think is coming up in October November. We might get some change in direction in
China and maybe somebody like Satya Nadella 0 Covid brought about until we
get to that point. I think the risk is still on the
downside in terms of growth as the government's focus is on keeping Covid
numbers down. And that obviously hasn't any impact on
the economy. Yeah.
You anticipated my next question. There was wondering if you think
investing conditions are going to change material in the after that people's
Congress happens. Does this present an opportunity for
some reform some reset of policy. I think it certainly does.
Xi Jinping is confirmed in his quest for another term and an expansion is his
role. But I think you can relax on some of
these other things so that might see some relaxation in the 0 Covid policies
and that might also combine with the introduction of the MRI vaccines in
China. So obviously if they want to go ahead on
that front. But I think that is probably one thing
that will say some sort of turning point.
The rest of the world has gone down the path of living with kind of and I think
it's only a matter of time before China does as well.
But they're unlikely to do that before those political events later in the
year. Can of course an economy that's very
much dependent on what happens in China ISE Australia itself and we have seen
property prices here in the US for example the sector really taking a hit
with the Fed rate hikes. What are you seeing in Australia right
now. When do you see the opportunities in the
property sector going forward. Well they will.
There will be opportunities based probably a bit early this year.
Some in Australia what many other countries have benefited massively.
Australian property market brothers benefited massively from the shift from
very high interest rates 30 years ago to the ultra low interest rates we had a
year or two ago. And DAX now reversing this rise in
interest rates is effectively pulling the rug out from under the property
market. And that has further to go because the
central banks here more garbage. Perhaps but now the central banks.
By the same token it is signalling more rate hikes ahead.
And that's going to be an ongoing drag in the property markets so far.
Property prices in Australia have fallen about 4 percent.
A top to bottom we think they'll probably fall to 20 percent.
So you still got a fair way to go. Yes that will provide opportunities for
investors but it's probably a bit too early to go to go to those investors
unless you really prepared to deep down into those parts of the property market
and have already been hit very hard. But on average I think it's still a bit
too early.