WEBVTT - How do fluctuating interest rates affect our personal finances? 0:00:00.009 --> 0:00:02.288 You're listening to AC N A podcast. 0:00:04.530 --> 0:00:08.488 Welcome back to Money talks. We have a fresh slate 0:00:08.500 --> 0:00:12.600 of personal finance topics that will help you save and 0:00:12.609 --> 0:00:16.780 invest your money properly. I'm your host Andrea Heng. And 0:00:16.790 --> 0:00:19.680 before we introduce our guest, I want to talk about 0:00:19.690 --> 0:00:23.940 some money related news that may affect you. So I 0:00:23.950 --> 0:00:27.250 wrote in my editor Tiffany Ang to come chat with me. 0:00:27.260 --> 0:00:30.799 It's a new segment. We call I on the money. 0:00:30.915 --> 0:00:35.604 Hello, everybody. So let's get straight to the headlines are 0:00:35.615 --> 0:00:38.924 obviously being the first week of January. Happy New Year. 0:00:38.935 --> 0:00:42.055 Happy New Year. Happy New Year, everyone. Well, it's not 0:00:42.064 --> 0:00:45.025 just a new year. Actually, we've got a new GST 0:00:45.034 --> 0:00:47.525 we have. That's right. So in the New Year comes 0:00:47.534 --> 0:00:51.775 a new year present. 9% GST. That's correct. So, 9% 0:00:51.784 --> 0:00:54.064 GST if you don't already know that's our goods and 0:00:54.075 --> 0:00:57.455 services tax, it increased from 8% to 9%. 0:00:57.970 --> 0:01:01.450 It's been in every single conversation that I've had since 0:01:01.459 --> 0:01:04.550 the start of this year and it's only been a week. Right. Yeah. Yeah. Actually, 0:01:04.559 --> 0:01:07.619 I'm curious. Did you make any big purchases before the 0:01:07.629 --> 0:01:11.809 clock struck? 12, you know, I actually did, I bought 0:01:11.819 --> 0:01:16.139 a TV. Not bad. So we were like 1%. The 0:01:16.150 --> 0:01:19.410 GST actually was the impetus for us to buy a TV. 0:01:19.419 --> 0:01:20.870 So here's the story. We don't have, 0:01:20.955 --> 0:01:22.745 we have a TV. We've lived in this house for 0:01:22.754 --> 0:01:25.134 a year, not had a TV. So we decided, oh, 0:01:25.144 --> 0:01:26.785 you know what if we want to buy a TV? 0:01:26.794 --> 0:01:29.014 And we've been mulling it for some time, we better 0:01:29.025 --> 0:01:32.404 do it before the extra 1%. GST kicks in. So 0:01:32.595 --> 0:01:34.785 that's what I did. Did you buy anything big ticket 0:01:34.794 --> 0:01:37.304 before the GST kicked in? No, I didn't actually because 0:01:37.315 --> 0:01:39.815 I have everything that I need at the moment. So 0:01:39.824 --> 0:01:43.995 that's GST big, big headline. We also got some 0:01:44.430 --> 0:01:49.059 nicer news. It is to help cushion the increase in 0:01:49.069 --> 0:01:53.330 GST and the rising cost of living everything is going up. 0:01:53.339 --> 0:01:56.790 So did our CDC vouchers 500 up from 300. I 0:01:56.800 --> 0:02:00.910 think that's really generous and I can't wait to spend it. 0:02:00.919 --> 0:02:02.830 But you know what? I had this conversation with my 0:02:02.839 --> 0:02:05.980 co-host on the morning show at CN A 938, Joel Chua. 0:02:06.519 --> 0:02:08.570 And you know what? We're going to donate ours. Oh, 0:02:08.580 --> 0:02:11.910 that's nice. Yeah, because here's the thing. I forgot to 0:02:11.919 --> 0:02:13.779 spend the rest of mine. That's what I was gonna 0:02:13.788 --> 0:02:17.020 ask you what happened, what happened to last year's Trench 0:02:17.029 --> 0:02:20.428 for you. So I spent, strangely, people find it easier 0:02:20.440 --> 0:02:23.820 to spend the supermarket ones and the Hawker ones. And 0:02:23.830 --> 0:02:24.529 that's what you did. 0:02:24.669 --> 0:02:26.948 I, I like the supermarket ones. It was hard for 0:02:26.960 --> 0:02:30.889 me to finish spending the Hawker Center one. Right. So, strangely, 0:02:30.899 --> 0:02:33.929 the opposite happened with me. I was, I was able 0:02:33.940 --> 0:02:37.199 to finish the Hawker ones. First. I spent maybe about 0:02:37.210 --> 0:02:39.960 half of the supermarket ones and then I left the 0:02:39.970 --> 0:02:42.570 remaining 75 or whatever else that was left behind. 0:02:43.160 --> 0:02:46.539 And I didn't realize that I forgot, completely, forgot there 0:02:46.550 --> 0:02:50.229 was an expiry date until I saw on Instagram three 0:02:50.240 --> 0:02:53.148 of my friends they said they spent New Year's Eve 0:02:53.160 --> 0:02:55.559 at the supermarket. Well, the good news this year is 0:02:55.570 --> 0:02:59.750 that you can spend at more participating merchants. Yes, I 0:02:59.758 --> 0:03:03.279 think the list is something like 23,000 merchants now. So 0:03:03.288 --> 0:03:06.500 you can go to, you know, pretty much your Heartland shops, 0:03:06.508 --> 0:03:09.339 have a check, see if they have that CDC voucher, 0:03:09.750 --> 0:03:12.209 you know, poster, there was ac N A article that 0:03:12.220 --> 0:03:14.550 said a lot of our uncles and aunties, they were, 0:03:14.740 --> 0:03:18.389 you know, buying new phones, new phone cases just before 0:03:18.800 --> 0:03:21.720 31st of December. Yeah. So I think a lot of 0:03:21.729 --> 0:03:23.788 aunties will go get their perms, you know, their hair 0:03:23.800 --> 0:03:26.250 perms right before Chinese New Year. So, you know, you 0:03:26.258 --> 0:03:28.250 don't actually only have to spend it on food. You 0:03:28.258 --> 0:03:30.850 can support any of these Heartland shops, any of these 0:03:30.860 --> 0:03:34.008 participating merchants. Well, it's not just about Singapore. We want 0:03:34.020 --> 0:03:38.020 to talk about some international movements. That's right. So you know, ok, 0:03:38.126 --> 0:03:42.285 which company beat Tesla as the top maker of electric vehicles. 0:03:42.296 --> 0:03:47.085 It is Byd, the Chinese brand, I kind of saw 0:03:47.095 --> 0:03:50.955 this coming because yeah, because Byd China has been really 0:03:50.966 --> 0:03:56.626 ramping up their electric vehicle industry. A lot of national 0:03:56.636 --> 0:04:01.065 efforts poured into this industry. At the same time, Tesla 0:04:01.076 --> 0:04:04.065 has its own problems, just some stats, right? So Byd 0:04:04.076 --> 0:04:06.466 took over the crown with almost 40,000 0:04:06.572 --> 0:04:10.261 more cars in the fourth quarter of last year. In total, 0:04:10.272 --> 0:04:13.352 it sold more than 3 million passenger vehicles last year. 0:04:13.501 --> 0:04:16.891 I mean, this is full and hybrid V combined. So 0:04:16.902 --> 0:04:20.261 that's interesting whether it's time as an investor to take 0:04:20.272 --> 0:04:22.891 a look at Byd in your stock portfolio. If you're 0:04:22.902 --> 0:04:27.291 looking into the space to diversify your portfolio, there could 0:04:27.302 --> 0:04:30.291 be potential for it, but of course, always do your homework. 0:04:30.302 --> 0:04:33.402 You can always ask your financial advisor what he or 0:04:33.411 --> 0:04:34.872 she thinks and off you go. 0:04:37.299 --> 0:04:39.640 Now before we get started, I want to check in 0:04:39.649 --> 0:04:42.760 on you. I want to know how has money talks 0:04:42.769 --> 0:04:46.380 helped you in 2023? We would really love to know. 0:04:46.390 --> 0:04:48.529 So drop us a note in the comments. I cannot 0:04:48.540 --> 0:04:52.269 wait to see what you tell us. Well, personally, for me, 0:04:52.279 --> 0:04:55.959 it's been a very educational year as host of money 0:04:56.049 --> 0:04:59.839 talks. I've learned so much from our guests from spending 0:04:59.850 --> 0:05:04.230 hacks on credit cards and groceries to investing in unusual 0:05:04.238 --> 0:05:08.309 portfolios to learning tips from the pros on how to 0:05:08.320 --> 0:05:12.040 optimize my CPF biggest lesson for me, how to get 0:05:12.049 --> 0:05:13.868 out of an IP if I really wanted to get 0:05:13.880 --> 0:05:17.238 out of one, another, thing I learned was how to 0:05:17.250 --> 0:05:21.410 take advantage of higher interest rates that we saw in 2023. 0:05:21.760 --> 0:05:25.349 Yeah, sure. It made things expensive. But I found out 0:05:25.359 --> 0:05:28.380 that there were in fact ways that this could be 0:05:28.390 --> 0:05:31.738 useful to me. But the verdict is out from the 0:05:31.750 --> 0:05:34.679 US Federal Reserve, that's the American Central Bank in case 0:05:34.690 --> 0:05:38.709 you didn't know they're very likely to stop hiking interest 0:05:38.720 --> 0:05:43.390 rates and 2024 is the year we will finally start 0:05:43.399 --> 0:05:43.600 seeing 0:05:43.845 --> 0:05:48.284 rate cuts. Ok. So in the first place, what do 0:05:48.295 --> 0:05:51.424 interest rates have to do with inflation? Does it mean 0:05:51.434 --> 0:05:54.994 we'll see an easing of prices? Let's get some help 0:05:55.005 --> 0:05:57.695 making sense of all of this. And that person is 0:05:57.704 --> 0:06:01.244 Eddie Low chief investment officer at May Bank Singapore. He's 0:06:01.255 --> 0:06:04.885 in the studio with me on the Money Talks podcast. Welcome, Eddie. Hi, 0:06:04.894 --> 0:06:05.105 I'm 0:06:06.380 --> 0:06:10.200 so first of all give us a 101 on interest rates. Ok. 0:06:10.209 --> 0:06:13.529 What happens when they move? Why are so many things 0:06:13.540 --> 0:06:15.459 affected by them? I think 0:06:15.470 --> 0:06:18.950 if you look at interest rates, it affects us at 0:06:18.959 --> 0:06:25.010 different levels on the individual personal basis, right? Obviously, depositors 0:06:25.019 --> 0:06:28.238 are happy when interest rates are higher because you get 0:06:28.250 --> 0:06:31.039 actually more for your deposits, your time deposits, correct? 0:06:31.480 --> 0:06:36.670 Not so happy for those who are actually having mortgage loans, right? 0:06:36.678 --> 0:06:39.868 Because you need to pay more interest. Then on the 0:06:39.880 --> 0:06:44.899 market side, obviously, it also has implications not necessarily that 0:06:44.910 --> 0:06:50.738 good for bonds which tend to underperform in the era 0:06:50.750 --> 0:06:54.200 of rising interest rates, right? As for equities, it depends 0:06:54.359 --> 0:06:59.440 really certain interest rate, sensitive sectors or markets will be 0:06:59.450 --> 0:07:00.209 affected 0:07:00.630 --> 0:07:01.349 others less 0:07:01.359 --> 0:07:04.380 so, right. What are some examples of those sectors? I 0:07:04.390 --> 0:07:04.599 think 0:07:04.609 --> 0:07:07.649 in Singapore, what is very common is actually Singapore S yes, 0:07:07.670 --> 0:07:10.920 we have actually seen how Singapore rates have actually been 0:07:10.929 --> 0:07:14.899 negatively impacted when interest rates were rising 0:07:15.890 --> 0:07:19.070 and which sectors benefited from the high interest rates. 0:07:19.519 --> 0:07:24.339 I think in the normal economy where there's still growth, actually, 0:07:24.350 --> 0:07:28.220 the banking sector tends to benefit from a rising interest 0:07:28.230 --> 0:07:32.119 rate environment because you sort of like get the expansion 0:07:32.190 --> 0:07:35.649 in interest margins while your loan growth, you know, is 0:07:35.660 --> 0:07:39.290 still somewhat healthy because economy is still chugging along. Yeah. 0:07:39.529 --> 0:07:42.519 Yeah, that's an interesting observation, right? The economy went on 0:07:42.529 --> 0:07:45.529 even though things got more expensive. It was almost as 0:07:45.540 --> 0:07:47.179 if the high interest rate 0:07:47.290 --> 0:07:48.549 didn't scare. 0:07:48.600 --> 0:07:51.670 It depends on where you are looking at. Obviously what 0:07:51.679 --> 0:07:55.589 really triggered this spike in interest rates over the 12 0:07:55.600 --> 0:07:58.950 to 18 months was really the very high inflation that 0:07:58.959 --> 0:08:01.970 we have witnessed, not just in Singapore but in other 0:08:01.980 --> 0:08:05.609 parts of the world US Europe, right? And the US 0:08:05.619 --> 0:08:10.589 FED had to combat inflation by really hiking interest rates 0:08:10.600 --> 0:08:14.980 very rapidly and that actually negatively affected. 0:08:15.440 --> 0:08:19.040 Not so much on the economy, but actually the markets, 0:08:19.179 --> 0:08:23.440 both equities and bonds because the pace of rate hikes 0:08:23.450 --> 0:08:24.100 was very 0:08:24.109 --> 0:08:26.350 fast. Yeah, it was quite aggressive, very, very 0:08:26.359 --> 0:08:29.230 aggressive. And that is something that investors do not 0:08:29.239 --> 0:08:33.510 like. Right. Ok. So high consumption, not necessarily a good 0:08:33.520 --> 0:08:34.988 thing for investors. 0:08:35.260 --> 0:08:38.419 Well, it depends on what drove the inflation in the 0:08:38.429 --> 0:08:41.109 first place. Right. Right. And I think we came out 0:08:41.119 --> 0:08:45.030 from a very unprecedented time where we had COVID, right. 0:08:45.109 --> 0:08:49.640 So when the economy started to reopen, obviously there's this 0:08:49.650 --> 0:08:50.819 pent up demand, 0:08:50.969 --> 0:08:53.109 the revenge everything. Yes, 0:08:53.119 --> 0:08:56.030 but at the same time, supply wasn't keeping up so 0:08:56.039 --> 0:08:58.299 that it took time to come back online. Exactly. So 0:08:58.309 --> 0:09:02.799 that actually drove higher inflation. But we did see inflation 0:09:02.809 --> 0:09:06.728 coming down this year. Combination of high interest rates as 0:09:06.739 --> 0:09:09.228 well as normalizing supply chain. How 0:09:09.239 --> 0:09:12.400 is it that interest rates have anything to do with inflation? 0:09:12.409 --> 0:09:14.760 How is it that the US decided? Ok. 0:09:15.210 --> 0:09:19.130 In order to curb inflation to dampen inflation, I'm gonna 0:09:19.140 --> 0:09:21.840 aggressively hike interest rates. What's that link 0:09:21.849 --> 0:09:24.840 there? Right. Right. So I think inflation can be supply 0:09:24.849 --> 0:09:25.390 driven 0:09:25.940 --> 0:09:30.289 all demand driven. So the inflation that witnessed over the past, 0:09:30.299 --> 0:09:32.690 I don't know, 12 to 18 months is probably a combination, 0:09:32.700 --> 0:09:36.359 a bit of both. So the interest rate part is 0:09:36.369 --> 0:09:39.900 actually to tackle the demand. Right. So when you have 0:09:39.909 --> 0:09:44.309 higher interest rates, cost of money becomes higher. Sure. So 0:09:44.320 --> 0:09:49.380 theoretically it's going to dampen demand, you know, where people 0:09:49.390 --> 0:09:52.349 think twice about spending a little bit more. 0:09:52.570 --> 0:09:56.030 Sometimes there's a lag effect. It is not like immediate, 0:09:56.039 --> 0:09:58.199 the rate hikes do not have an immediate impact on 0:09:58.210 --> 0:10:01.830 demand economy. That's why it took time actually for inflation 0:10:01.840 --> 0:10:02.450 to come 0:10:02.460 --> 0:10:07.479 off. Right? Ok, I understand now. So let's fast forward 0:10:07.489 --> 0:10:10.580 to what's happening now. The latest news is that the feds, 0:10:10.909 --> 0:10:15.468 they signaled three cuts in 2024. So tell me this 0:10:15.479 --> 0:10:19.030 is overall good news, right? What happens now? 0:10:19.679 --> 0:10:22.330 Well, if you look at the market reaction to the 0:10:22.340 --> 0:10:27.580 very Dovish fed statements recently, definitely good news for investors. Yeah, 0:10:27.869 --> 0:10:32.130 we are anticipating like the fed, there will be three 0:10:32.159 --> 0:10:35.409 rate cuts starting sometime in second half. Ok? 0:10:35.770 --> 0:10:39.299 But some of the market participants are even more aggressive 0:10:39.500 --> 0:10:42.530 pricing in a rate cut in the first half and 0:10:42.539 --> 0:10:45.959 maybe 100 basis points or even more. That means four 0:10:45.969 --> 0:10:49.130 or five rate cuts. So in our view, that's maybe 0:10:49.140 --> 0:10:53.159 a little bit too aggressive because, well, yes, indeed, we 0:10:53.169 --> 0:10:54.960 saw inflation 0:10:55.299 --> 0:10:58.710 moderating. It is still actually a bit higher. A tad 0:10:58.719 --> 0:10:59.250 higher 0:10:59.260 --> 0:10:59.950 things are still 0:10:59.960 --> 0:11:04.989 expensive. Yeah. Yeah, and it's like 3% fat is targeting 2%. 0:11:05.000 --> 0:11:09.479 So is still not exactly back to normal yet. So 0:11:09.489 --> 0:11:12.439 I think the timing of rate cuts is really uncertain 0:11:13.090 --> 0:11:17.020 and the fed will really be very data dependent. So 0:11:17.030 --> 0:11:19.780 it's a bit premature to say, ok, now I'm seeing 0:11:19.789 --> 0:11:23.200 inflation moderating at 3.1% and therefore the, 0:11:23.283 --> 0:11:27.023 that is going to cut rates in first quarter, too early. 0:11:27.033 --> 0:11:27.182 It's 0:11:27.192 --> 0:11:29.322 excitement. Right. I'm putting it down to just 0:11:29.333 --> 0:11:32.802 markets can overreact to time. But I think I also 0:11:32.812 --> 0:11:37.171 wanted to point out there are actually also factors to consider. Right. 0:11:37.182 --> 0:11:41.953 That could keep inflation maybe a little bit higher for longer. 0:11:42.002 --> 0:11:44.252 I think on a fundamental basis, if you look at 0:11:44.263 --> 0:11:47.102 the US again because I think that's a key economy 0:11:47.112 --> 0:11:51.181 that's driving global markets. US, unemployment is still very 0:11:51.265 --> 0:11:53.245 low compared to historical levels 0:11:53.255 --> 0:11:55.314 means more people have jobs, more 0:11:55.325 --> 0:11:58.145 people have jobs and wages are still going higher, right? 0:11:58.155 --> 0:12:02.315 So that's going to lend some upward pressure on inflation. 0:12:02.325 --> 0:12:04.786 Yeah, because when people have jobs, they have the means 0:12:04.796 --> 0:12:05.454 to spend 0:12:05.466 --> 0:12:09.486 exactly at the same time if you've noticed on the 0:12:09.495 --> 0:12:13.096 geopolitical side, some of the trade, like for example, the 0:12:13.106 --> 0:12:16.515 Red Sea, yes, some of the geopolitical tensions is causing 0:12:16.526 --> 0:12:19.145 rerouting of trade routes that could actually lead 0:12:19.500 --> 0:12:23.559 to higher shipping costs and therefore indirectly inflation, it's going 0:12:23.570 --> 0:12:26.559 to lead to higher costs and then therefore higher inflation, right? 0:12:26.729 --> 0:12:29.280 So that's a more on the supply side. And therefore 0:12:29.289 --> 0:12:33.460 these combination of factors could add to the uncertainty about 0:12:33.469 --> 0:12:34.780 the inflation trajectory, 0:12:34.789 --> 0:12:38.400 right? Why do the rate cuts need to be done 0:12:38.450 --> 0:12:40.760 in such a measured way? Because at the risk of 0:12:40.770 --> 0:12:44.989 sounding naive, couldn't they just slash it one time and say, OK, 0:12:45.000 --> 0:12:46.199 one time go 25 0:12:46.309 --> 0:12:49.289 basis points, 100 basis points and then bring it down 0:12:49.299 --> 0:12:51.799 at least to a level that the feds think everyone 0:12:51.809 --> 0:12:52.809 is agreeable to 0:12:53.190 --> 0:12:55.549 good question. So I think to answer that question, I 0:12:55.559 --> 0:12:58.359 think two points here to make, I think one is 0:12:58.369 --> 0:13:02.809 the fed has been accused of hiking rates too late. 0:13:03.130 --> 0:13:07.809 So they do not want to be accused of repeating 0:13:07.820 --> 0:13:11.199 the mistake again by cutting rates too early. Therefore, they 0:13:11.210 --> 0:13:12.848 are very cautious 0:13:13.450 --> 0:13:16.729 in making any rate cuts. And I think they will 0:13:16.739 --> 0:13:20.409 maintain that very cautious stance. And also if you take 0:13:20.419 --> 0:13:24.280 a step back for those who, who are a bit older, 0:13:24.599 --> 0:13:27.449 if you look at the seventies, right? There was also 0:13:27.460 --> 0:13:31.840 a similar episode where inflation was very high and then 0:13:31.849 --> 0:13:35.520 the FED had to hide interest rate to tame inflation. 0:13:36.119 --> 0:13:40.729 But then they actually, once they saw inflation coming off, 0:13:40.739 --> 0:13:44.450 they actually cut interest rates and that led to a 0:13:44.460 --> 0:13:46.450 resurgence in inflation. 0:13:47.630 --> 0:13:50.349 So it was a pendulum swing. Yes, exactly. 0:13:50.359 --> 0:13:52.080 So, so I think the fed now if you look 0:13:52.090 --> 0:13:54.299 at fair Chair Power, I don't think he was 0:13:54.559 --> 0:13:55.469 to go in. 0:13:55.609 --> 0:13:58.539 So you mentioned in an environment of higher interest rate 0:13:58.549 --> 0:14:02.840 benefits one group and it doesn't benefit another group when 0:14:02.849 --> 0:14:06.330 it comes to falling interest rates, which if all goes well. 0:14:06.340 --> 0:14:08.739 And Jay Powell says, ok, we can start cutting rates 0:14:08.750 --> 0:14:11.718 now and we do see those falling interest rates who 0:14:11.729 --> 0:14:12.729 would it benefit? 0:14:13.710 --> 0:14:19.229 Well, obviously those servicing their loans, their mortgage mortgages, I 0:14:19.239 --> 0:14:22.849 think they will be happier because yeah, at least you 0:14:22.859 --> 0:14:25.890 don't have to pay as much interest right from an 0:14:25.900 --> 0:14:30.330 investor standpoint. I think it will benefit both equity and 0:14:30.340 --> 0:14:33.400 bond investors because if you look at bonds, there is 0:14:33.409 --> 0:14:33.969 this negative 0:14:34.065 --> 0:14:37.625 correlation between bond prices and interest rates when interest rate 0:14:37.635 --> 0:14:42.044 goes higher, bond prices go lower and vice versa. So 0:14:42.054 --> 0:14:44.465 I think it would be a very conducive environment for 0:14:44.474 --> 0:14:47.804 fixed income. Ok? But at the same time for equities, 0:14:47.815 --> 0:14:50.705 as long as growth stays up, interest rate coming off 0:14:50.715 --> 0:14:54.455 will also benefit equity investors. At the same time, 0:14:55.030 --> 0:14:58.630 in particular, more interest rate sensitive sectors. For example, that 0:14:58.640 --> 0:15:01.950 Singapore reads that we mentioned earlier on some of the 0:15:01.960 --> 0:15:05.489 growth sectors which the valuation can also be sensitive to 0:15:05.500 --> 0:15:10.500 interest rates, usually higher interest rates negatively impact the valuation 0:15:10.510 --> 0:15:12.369 of these growth stocks. So if interest rate were to 0:15:12.380 --> 0:15:15.270 come off, right, then it will be deemed as positive 0:15:15.280 --> 0:15:15.619 for these 0:15:15.630 --> 0:15:18.830 growth stocks. Ok. That's excellent stuff. I'm glad you brought 0:15:18.840 --> 0:15:20.479 that up because this is the part of the 0:15:20.900 --> 0:15:25.429 where I wanted to tackle how interest rate movements affect 0:15:25.440 --> 0:15:30.599 our portfolios. So what role did high interest rates play 0:15:30.609 --> 0:15:33.809 for our investments? I remember investors were flocking to things 0:15:33.820 --> 0:15:38.340 like your 10 year treasuries, your Singapore government bonds, high 0:15:38.349 --> 0:15:43.440 yield instruments. Was this why everyone was flocking to these 0:15:43.450 --> 0:15:45.530 high yield products? And then when the interest rates start 0:15:45.539 --> 0:15:46.320 to fall, 0:15:46.849 --> 0:15:51.570 what do I do now? That I'm in these portfolio instruments, right? 0:15:51.580 --> 0:15:56.159 I think definitely we saw very strong flow cash deposits, 0:15:56.169 --> 0:15:59.669 fixed deposits because of the very high interest rate environment 0:16:00.409 --> 0:16:06.919 and investors are flowing to these instruments because also partly 0:16:06.929 --> 0:16:10.710 because of the macro uncertainty. So they are not so sure, right. 0:16:10.719 --> 0:16:12.869 So the best way is to stay short term, 0:16:13.239 --> 0:16:16.039 go to cash, go to deposits, go to money market 0:16:16.049 --> 0:16:21.340 funds where the level of risk is low, right? But 0:16:21.469 --> 0:16:24.849 if we get a falling interest rate, what happens is 0:16:24.859 --> 0:16:27.619 these short term deposits when they mature, 0:16:28.309 --> 0:16:30.679 you may not be able to get back into them 0:16:30.690 --> 0:16:32.590 at the same level of rate. So that is actually 0:16:32.599 --> 0:16:36.909 increasing a reinvestment risk, right? It's always good to have 0:16:36.919 --> 0:16:41.440 some cash buffer, you know, downside protection for advice. But, 0:16:41.450 --> 0:16:43.900 but I think given the fact that we, you know, 0:16:43.909 --> 0:16:44.760 our base case is 0:16:44.844 --> 0:16:47.854 really for a soft landing for inflation to moderate for 0:16:47.864 --> 0:16:51.385 fed to start cutting rates. I think it's time to 0:16:51.395 --> 0:16:56.695 really redeploy some of this cash into bonds and equities, right? 0:16:56.705 --> 0:16:59.784 But obviously, I think on the bond side, we still 0:16:59.794 --> 0:17:01.304 want to stay with quality, 0:17:01.659 --> 0:17:05.810 right? So you want to have more exposure into investment 0:17:05.819 --> 0:17:09.939 grade bonds where the default risk tends to be a 0:17:09.949 --> 0:17:13.050 bit lower save versus high yield credit. So just don't 0:17:13.060 --> 0:17:14.790 just go blindly chasing after 0:17:15.390 --> 0:17:16.750 higher interest rate 0:17:17.189 --> 0:17:21.109 or high high bonds because sometimes there's this risk with 0:17:21.119 --> 0:17:22.329 what trade off. And 0:17:22.339 --> 0:17:24.420 I'm glad that you brought that up. Also, it, it's 0:17:24.430 --> 0:17:29.250 worth clarifying. So you're saying not necessarily stop looking at 0:17:29.260 --> 0:17:32.270 your higher yield products, but it's time to start thinking 0:17:32.339 --> 0:17:36.729 about moving into other refinancing, taking the extra cash and 0:17:36.819 --> 0:17:39.399 pumping it into other safer bets like your bonds or 0:17:39.410 --> 0:17:39.880 rather 0:17:39.890 --> 0:17:43.089 actually not necessarily a safer bets because we are actually 0:17:43.099 --> 0:17:45.660 advocating or suggesting clients to move out of the so 0:17:45.670 --> 0:17:49.579 called very low risk cash deposits, which are high yielding 0:17:49.589 --> 0:17:51.760 at this moment, but may not be as high yielding 0:17:51.770 --> 0:17:52.669 12 months down the 0:17:52.680 --> 0:17:55.040 road. That's the thing. So I'm glad you said that 0:17:55.050 --> 0:17:58.280 my question was going to be, when do we start pivoting? 0:17:58.910 --> 0:18:01.089 I think we could start actually looking at it right 0:18:01.099 --> 0:18:07.530 now because investors will be looking ahead. So for while 0:18:07.540 --> 0:18:10.079 you say you may decide to stay in cash for now, 0:18:10.239 --> 0:18:11.650 12 months down the road, 0:18:11.969 --> 0:18:16.030 the other investments like bonds and equities may become more expensive, 0:18:16.219 --> 0:18:18.030 the prices may have actually. 0:18:18.040 --> 0:18:21.599 So buying in low when bonds are not looking great 0:18:21.609 --> 0:18:22.790 now would be a good 0:18:22.800 --> 0:18:26.020 move, right? In the sense that bond prices, we think 0:18:26.030 --> 0:18:30.040 that there are still pockets of value within the bonds 0:18:30.050 --> 0:18:31.349 and as well as equity space. 0:18:31.444 --> 0:18:34.814 Um So bonds, I mentioned investment grade bonds, I think 0:18:34.824 --> 0:18:38.104 that is still the place to be in. And you know, 0:18:38.114 --> 0:18:41.324 they are actually pretty defensive as well, especially if you 0:18:41.334 --> 0:18:45.114 stick with the higher quality names, right where the default 0:18:45.125 --> 0:18:49.014 risk is, you know, relatively low. Ok. Obviously not, not 0:18:49.025 --> 0:18:50.505 as safe as cash, 0:18:52.170 --> 0:18:55.719 but I think it's worthwhile taking the additional bit of risk. 0:18:55.729 --> 0:18:55.939 You 0:18:55.949 --> 0:18:58.849 know how there's that adage right time in the market 0:18:58.859 --> 0:19:01.910 and not timing the market. This sounds a little bit 0:19:01.920 --> 0:19:04.780 like the opposite, just a little bit. This is where 0:19:04.790 --> 0:19:06.540 timing does matter 0:19:06.959 --> 0:19:09.260 a little bit because if you stay too long with 0:19:09.270 --> 0:19:12.219 your low risk products, you might actually lose out on 0:19:12.229 --> 0:19:14.619 stuff that might be attractive later on or more expensive 0:19:14.630 --> 0:19:15.899 later on down the road. Right. 0:19:15.910 --> 0:19:18.380 Frankly, I would actually turn it around to say that timing, 0:19:18.390 --> 0:19:22.040 the market is always very difficult. Right. So, although we 0:19:22.050 --> 0:19:23.300 try to be tactical 0:19:23.380 --> 0:19:26.390 about things to move things, shift things around, but we, we, 0:19:26.400 --> 0:19:29.550 we think that it's actually important to maintain a core portfolio, 0:19:29.560 --> 0:19:34.270 a mixture of cash bonds and equities because while we 0:19:34.280 --> 0:19:37.569 try our best, very best to predict where the economies 0:19:37.579 --> 0:19:41.439 are going, where the markets are going. Nobody can really, 0:19:41.520 --> 0:19:44.930 nobody has, nobody has the real, not even Jay Powell, 0:19:45.660 --> 0:19:47.739 but it just, just maybe a case in point, case 0:19:47.750 --> 0:19:49.919 in point is if you look at the beginning of 0:19:49.930 --> 0:19:56.689 2023 consensus are actually all predicting a US recession. Yeah. Right. Exactly. 0:19:56.739 --> 0:20:00.629 A very bearish outlook and 12 months down the road, 0:20:00.640 --> 0:20:02.369 we did not get the US recession 0:20:03.250 --> 0:20:07.010 and equity markets did very well for markets not too 0:20:07.020 --> 0:20:08.420 badly as well. 0:20:08.579 --> 0:20:11.310 I mean, they seem to have weathered, everything that was 0:20:11.319 --> 0:20:14.660 thrown their way. I mean, I remember talking about the 0:20:14.670 --> 0:20:17.170 big R word as if you know, oh, we need 0:20:17.180 --> 0:20:20.060 to be scared of this. Now today you can mention 0:20:20.069 --> 0:20:22.188 the R word and no one really bets an eyelid, 0:20:22.260 --> 0:20:23.180 not so much, 0:20:23.189 --> 0:20:26.670 which actually raises another concern as well because I think 0:20:26.680 --> 0:20:30.349 the economy is not exactly without this. 0:20:30.959 --> 0:20:33.649 We still have to bear in mind that as we mentioned, 0:20:33.660 --> 0:20:37.430 inflation may not come down one straight line. We are 0:20:37.439 --> 0:20:40.410 actually anticipating global growth, including that of us 0:20:40.800 --> 0:20:44.099 to soften in 2024. And then coupled with the fact 0:20:44.109 --> 0:20:48.760 that apart from geopolitics, we also have major elections coming 0:20:48.770 --> 0:20:49.349 on in 0:20:49.670 --> 0:20:52.829 changing of the Guard in so many places in 0:20:53.130 --> 0:20:59.030 Asia, as well as in Indonesia, right. So you know, 0:20:59.040 --> 0:21:03.859 these political elections sometimes can create marker uncertainty. So we 0:21:03.869 --> 0:21:07.040 need to be conscious of the fact that volatility could 0:21:07.050 --> 0:21:08.619 still spike from time to time. 0:21:09.219 --> 0:21:12.369 So the best approach again for us is really to 0:21:12.380 --> 0:21:17.869 spread your bets, avoid over concentration in any pockets, then 0:21:17.880 --> 0:21:21.329 you probably will have a smoother ride as 0:21:21.339 --> 0:21:24.550 smooth as can be as smooth as can be. Ok. 0:21:24.560 --> 0:21:27.560 So the one part that I think really affects us 0:21:27.569 --> 0:21:32.099 all one way or another in a very uncertain environment, 0:21:32.109 --> 0:21:35.290