although it's time for a big week of
negotiation signs like the Chinese might
have the Americans on the ropes are
slightly on the run you take on the
latest salvos this morning welcome
thanks for having me here this morning
look there's been a bit of a
cat-and-mouse game going on for a while
here Dale so you'll have a bit of a
olive branch and then you'll have a
little bit of a parry so I don't think
that this is anything more than the
reticle rhetoric that we've seen over
the last several months as that rhetoric
continues and people started saying look
we should hunker down for something
slightly longer more enduring and and
less stable with that in mind is the
bastion for you I want to be long
American equities I want to be long the
dollar relative to the rest of the world
if we're hunkering down for a
longer-term fraca look the main reason
to be long us right now is that the US
economy is still doing pretty well
relative to the rest of the world and so
that's reflective in you know capital
flows being interested in US assets so
that continues to propel US markets but
as you say anything that continues to
weigh on that that suggests that this is
going to deteriorate into a broader
global recessionary impact which
ultimately would pull the u.s. down with
it any of those things are things are
gonna make investors very nervous in
this environment my last guest Laurie I
have a look at this is in the gtv
Library opposites attract I'm talking
about equities versus bonds that
undoubtedly the bond traders really had
the narrative didn't they I think the
phrase that my last guys used the bonds
were winning control of the narrative in
other words the the yields really were
beginning to turn quite aggressively
lower the shorting has reduced and what
happens next in this story in regards to
the bond market Laurie do we see lower
yields in the near term well we think
the bond market at least in the US has
it a bit wrong in the sense that you
know yields on the 10-year at one and a
half are not consistent with an economy
that's still growing north of two
percent our forecast is that 2019 will
be about 2.3 percent in the US and even
2020 looks pretty good at about 1.9 so
it's
seems as though rates at one-and-a-half
are lower than then they should be on
the other hand when you have zero
interest rate policies and other
geographies around the world the u.s.
it's pretty much a safe haven it's a
place to put some capital and get at
least a little bit of return so we think
that that's a lot of what's driving the
lower yields at least on the long end we
just caught up with Jeff for you there
and I said to him you know was Thursday
a pivotal moment if you look at the
slate card the slate of data card last
week manufacturing services on a less
than effusive jobs report even though
the rate of unemployment at a 50-year no
wages were a bit dubious I asked him was
it a pivotal moment on Thursday and he
said to me it might have been a pivotal
moment in terms of the markets but it
might have been a pivotal moment in
terms of the Fed shipping chivvying them
along to do a little bit more you say
the case for pause is building have a
look at the rates market and tell me why
you think the case for pause is building
well look we still think that the Fed
may move one more time this year we
don't think that it's going to be
October we think it's going to be more
like the end of the year December but
really the Fed has said repeatedly that
they're going to be data dependent and
when you look at the data at least in
the US economy the consumer health is
quite strong and about 70 percent of the
US economy rests on the shoulders of the
consumer so you've got an employment
number that came in not you know knock
your shot socks off but it was also a
number that had you know reasonable
backing we had some improvement in the
past you know a jobs growth we still see
you hoursworked being pretty good so
there doesn't seem to be anything on the
horizon that suggests that the consumer
is gonna crack so as long as that
doesn't happen there's no reason for the
Fed to to get into a bit of an emergency
mode here okay and you've got some
tactical calls in terms of credit versus
duration right why don't you people have
sort of said to me look madness what
what maybe I'm missing is that this
scale of taking those duration trades
off has been quite substantial so when
you say you prefer credit to duration
just talk me through that yeah so again
as I mentioned our views are there
you know 10 years at one and a half just
doesn't seem consistent with the kind of
broad growth backdrop that we have in
the US on the other hand even though
there were late we're late cycle we do
believe that the low interest rates
enable companies to continue to finance
and continue to have their own
operations do well here so you know at
the margin we think investment-grade
looks better than Treasuries because
you're picking up a little bit of income
there at the margin we like the certain
sectors of the high-yield market here
again a nice sort of a balance between a
large overweight to equities versus
having a little bit of our equity
exposure through high-yield credit so
we're trying to be very selective in
here we're trying to stay focused on
quality but we aren't looking for those
places to get incremental return above
just the risk-free rate