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Speaker 1: Vassu Mena joins US Executive Director of Investment Strategy at

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Speaker 1: OCBC Bank Wealth Management Vasso. Last week, we had Mike

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Speaker 1: Wilson over at Morgan Stanley talked about how maybe, uh,

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Speaker 1: you know, in the in the spring, the bear market

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Speaker 1: would be over. We had Marko Kolonovitch saying that the

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Speaker 1: FEDS aggressive rate hiking cycle could be will end in

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Speaker 1: the spring of early next year. We've seen equities pop

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Speaker 1: about eight in the past month, starting to look more

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Speaker 1: like investors are willing to to to bet that we're

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Speaker 1: kind of getting towards the end of all this. Uh

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Speaker 1: do you think they're right? Well, you know, the jury's out.

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Speaker 1: Our view is that the set it's going to hike

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Speaker 1: SUNI five business points this week, they'll do another sunny

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Speaker 1: five business points in December, before the probably stepped down

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Speaker 1: towards fifty five business points early next year. Uh So,

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Speaker 1: you know, there isn't a very strong case for the

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Speaker 1: Fed to really step down or dial down just yet.

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Speaker 1: The core inflation numbers that you got last week from

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Speaker 1: the PC Indicator shows that you know, inflation remains elevated

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Speaker 1: at five in one pick up from the previous one

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Speaker 1: of four point nine percent, So you know, um, there

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Speaker 1: isn't a strong case of the fat. But having said that,

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Speaker 1: the fat is already hight rates on four occasions by

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Speaker 1: Sandy FIBs points, that's a lot. It's rather unpresidented in

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Speaker 1: US history. And it's possible that, you know, down the road,

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Speaker 1: the FAT would also get nervous and said, look, I mean,

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Speaker 1: we could, you know, tip the balance and send the

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Speaker 1: economy into recession. So let's just pause for a while

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Speaker 1: or maybe dial down a little bit. But I don't

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Speaker 1: think they didn't do it just yet, perhaps twenty three.

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Speaker 1: I feel it's a difficult calculation, though, isn't it. I've

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Speaker 1: seen one commentator refer to it as like driving using

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Speaker 1: the rear view mirror, because of course inflation is backward looking.

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Speaker 1: So how can you know how much of the tightening

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Speaker 1: we've seen so far has been reflected in inflation? Do

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Speaker 1: you get a sense that we're going to be turning

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Speaker 1: a corner? So? Well, it doesn't seem that way, because

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Speaker 1: you know, if you get the inflation numbers, the fat

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Speaker 1: is already high rates by three point two five pc

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Speaker 1: ince the beginning of this year. Uh, And yet you

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Speaker 1: you see inflation being very stically, very persistent. Uh. And

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Speaker 1: I think that's quite frustrating for the FET and perhaps

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Speaker 1: to some extent frustrating for the market as well. And

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Speaker 1: the US labor market is very very tight. I mean,

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Speaker 1: unemployment rate is very low. We just contributed to grow

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Speaker 1: and the feed is going to make this division a

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Speaker 1: couple of days before the US employment report is out

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Speaker 1: this Friday, So they came a bit of a risk.

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Speaker 1: If the numbers then so are to be pretty strong, uh,

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Speaker 1: you know, then the FAT could miss calculate if it

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Speaker 1: uh signals that it's going to pivot to a slower

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Speaker 1: piece of red hikes. So I think data driven, we're

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Speaker 1: always saying that equity investors looking you know, six to

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Speaker 1: nine months out. I mean, if you're looking really nine

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Speaker 1: months from now, you're getting well into the back half

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Speaker 1: of next year. Um and and that's a lot of time.

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Speaker 1: And and equity is sold down say twenty five pcent,

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Speaker 1: they're not down that much now because you have this

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Speaker 1: recent rally. But isn't it maybe okay to start looking

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Speaker 1: into the next year? Absolutely, I mean I'm not suggesting

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Speaker 1: that investors should stay at the markets altogether. In fact,

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Speaker 1: what we are telling our clients is to stay invested,

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Speaker 1: but to treat carefully. In otherwids, this is not the

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Speaker 1: time to be aggressive, but it's important to stay invested because,

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Speaker 1: as you say, the markets have corrected a lot, and

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Speaker 1: as we've spent a little bit of time talking about

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Speaker 1: the broader macro picture. But I want to get your

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Speaker 1: thoughts on where you're seeing opportunities right now. We are

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Speaker 1: heading into a very busy week of earnings and so far,

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Speaker 1: what's your opinion of how well these companies have been

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Speaker 1: dealing with the head wins. Well, you know, the results

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Speaker 1: have been very mixed. I mean, there's some companies that

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Speaker 1: have exceed expectations, some we have fallen below expectations. But overall,

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Speaker 1: the earning season has you know, been relatively positive. You've

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Speaker 1: had more companies announcing results that have exceeded market expectations

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Speaker 1: and that's contributed to the value of Wall Street that

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Speaker 1: we see we saw in October. So you know, so

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Speaker 1: far earnings appear to be fairly resilient. Uh yeah, So

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Speaker 1: the million dollar question is whether it will lose that

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Speaker 1: resilience in the coming protest. Uh, you know, and least

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Speaker 1: have got it wrong. So find terms of thinking that

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Speaker 1: you know, earnings are going to fall off the cliff.

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Speaker 1: But let's see whether the high industry and the slow

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Speaker 1: economy will hurt earnings. But for now, you're not You're

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Speaker 1: not see that happened just yet. For the Federal Reserve,

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Speaker 1: its mandate is very domestic, not really paid to look

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Speaker 1: at the rest of the world. But you would think

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Speaker 1: it's a big risk if the if the rest of

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Speaker 1: the world is slowing. The US is a smaller part

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Speaker 1: of the global economy than it was back in the

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Speaker 1: seventies when we had inflation so hot. Is probably more

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Speaker 1: than a quarter of the global economy then now less

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Speaker 1: than a fifth. But they will have noticed that the

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Speaker 1: Bank of Canada, you know, went a little less than expected,

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Speaker 1: and that the RBA did at the last meeting. How

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Speaker 1: much do you think they're they're looking at these other

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Speaker 1: central banks. Well, they may be looking at other central banks,

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Speaker 1: but I think, as you said, you know, they are

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Speaker 1: mult focused on the domestic issues right now. And right

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Speaker 1: now in the US, inflation is still fairly high, the

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Speaker 1: job market is still very tight. We just continue to grow.

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Speaker 1: So yes, they've got an eye on what's happening elsewhere,

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Speaker 1: I'm sure, but they're still very much focused on what's

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Speaker 1: happening domestically. Don't forget they got this wrong last year.

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Speaker 1: They thought inflation a strategitory and so you know, I mean,

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Speaker 1: they've just hype rates in the last nine months and

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Speaker 1: they haven't seen a lot of results. So don't see

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Speaker 1: how they can pivot too aggressively at this juncture. But

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Speaker 1: if what they do the stabilizes the global markets and

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Speaker 1: the U S stock market or financial markets, then the

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Speaker 1: fact could take its foot of the pedal. But for now,

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Speaker 1: you're not seeing that happened in fact, that the markets

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Speaker 1: are really or really in the month of October, and

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Speaker 1: that you know, gives the FAT a stronger case to

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Speaker 1: continue hiking rates. I want to get your thoughts on

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Speaker 1: the situation in China at the moment as well. We're

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Speaker 1: going to have Tishan p M. I is a little

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Speaker 1: bit later on the official p MS yesterday. We're somewhat disappointing.

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Speaker 1: What's your growth outlook as China just remains absolutely committed

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Speaker 1: to this COVID zero policy. Um, you're right, you know,

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Speaker 1: essentially the zero COVID policies need to overhang. The property

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Speaker 1: market is still very weak and that's another dragon of

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Speaker 1: the economy as well. The government is forecasting five point

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Speaker 1: was forecasting fiber and fipercent growth of the economy this year,

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Speaker 1: implicit forecast. But I don't think they're gonn hit anywhere

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Speaker 1: near that. And I think that the you know, the

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Speaker 1: Communist Party and the government accepts the fact that that's

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Speaker 1: not going to be achieved. They're very much focused on

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Speaker 1: zero COVID. That doesn't appear like it's going to change

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Speaker 1: anytime soon, and that's not the best piece of use

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Speaker 1: for China as so as the economy is concerned. Uh,

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Speaker 1: you know, So, I don't see how things are going

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Speaker 1: to change dramatically unless you have zero COVID being lifted,

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Speaker 1: and there are no indications that will happen, at least

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Speaker 1: not this year. Maybe in the developer m m r

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Speaker 1: any vaccine. Next year. Uh, they'll be a bit more confidence. Yeah,

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Speaker 1: I mean you you mentioned the m R n A vaccine.

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Speaker 1: That's that's an example of how nationalism has affected policy

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Speaker 1: may King in China. So I guess my broad question

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Speaker 1: is COVID is just one thing. But the policymakers will

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Speaker 1: be there and it seems that they're de emphasizing the

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Speaker 1: economy in favor of politics. Now, is that a you know,

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Speaker 1: is that a headwind for us? Uh? It is a headwind.

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Speaker 1: I mean that's a perception that the market has about,

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Speaker 1: you know, what the government is doing in China freely

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Speaker 1: focused on national security and politics. But you know, if

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Speaker 1: you look at the constituents of the new polity Brewer

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Speaker 1: in China, many of them are also pro economy. I mean,

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Speaker 1: they haven't shown their hands, so we've got to give

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Speaker 1: them a chance. And once that dost settles, you know,

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Speaker 1: the process is completed, I think by you know, the

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Speaker 1: first quarter of next year. The process of appointing low

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Speaker 1: level officials, projecting the economic plan for you know three

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Speaker 1: those things will be completed in the coming months, all right,

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Speaker 1: vastly man, and we'll have to leave it there, vastly men.

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Speaker 1: As executive Director Investment Strategy at OCBC Bank Wealth Management,

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Speaker 1: thanks so much for joining us.