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Speaker 1: Let's get Tamara Panda, advice president and global market strategist

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Speaker 1: at Jpmulgan Asset Management, to discuss her market outlook joining

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Speaker 1: us from New York City. We're gonna be focusing very

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Speaker 1: much on the China markets when they reopen. But let's

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Speaker 1: start with the FED, because we are seeing the duller

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Speaker 1: climbing after the Federal Reserve. Governor Christopher will a push

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Speaker 1: back on bets that the Fed is nearing the end

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Speaker 1: of its hiking cycle. What are you expecting in terms

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Speaker 1: of the continual ng tightening that we're seeing from the Fed?

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Speaker 1: I guess slower for longer is is the case here? Absolutely,

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Speaker 1: we are likely in for a period of slower for longer.

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Speaker 1: Of course, the set is not done yet, despite a

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Speaker 1: better cp I report, the first one we've seen in

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Speaker 1: a long time, so it certainly strengthens the case for

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Speaker 1: a fifty basis point rate hike in December. And remember,

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Speaker 1: at four percent at the top range of the Federal

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Speaker 1: funds rate, the Fed really had to do seventy five

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Speaker 1: basis points slugs in order to get to restrictive territory.

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Speaker 1: Now that we're there, they have to shift from power

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Speaker 1: to finesse to really fine tune monetary policy going for

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Speaker 1: with an eye on growth, so that will allow them

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Speaker 1: to go into two smaller increments. Of course, that doesn't

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Speaker 1: mean they need to stop. They could do as many,

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Speaker 1: you know, smaller quarter point great hikes as they need

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Speaker 1: to next year if the data warrants it. But we're

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Speaker 1: certainly gradually transitioning into a period where they can go

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Speaker 1: a little bit slower, but potentially need to go continuing

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Speaker 1: a little bit longer. Yeah, I guess finesse is the

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Speaker 1: word here. Are they able to engineer a soft landing

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Speaker 1: in your view? Or is recession a foregone conclusion. It's

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Speaker 1: going to be difficult to avoid recession in three. And yet,

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Speaker 1: as I say that, if you look at the Atlanta

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Speaker 1: FEDS GDP tracker for the fourth quarter of two, there

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Speaker 1: tracking around four percent right now, and we did have

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Speaker 1: a fairly strong reading in the third quarter, even though

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Speaker 1: a lot of that was due to improvement in trade.

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Speaker 1: But we're still seeing that resilient growth, resilient consumer overall

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Speaker 1: in the United States. That could help us delay recession

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Speaker 1: further into three. But it is very likely that we

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Speaker 1: could see a mild recession, but a session nonetheless, next year,

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Speaker 1: just given even if they get slightly above or slightly

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Speaker 1: under five percent, whatever it is, if they're close to

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Speaker 1: five percent rates, it's going to be a challenging environment

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Speaker 1: once we really start to feel those higher rates in

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Speaker 1: the economy. A volatile year for investors, but as you say,

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Speaker 1: staying invested when we are seeing these band markets will

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Speaker 1: potentially help your portfolios recover. What kind of further moves

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Speaker 1: are you expecting as we head into the latter part

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Speaker 1: of the year the SMP five, We do want to

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Speaker 1: be cautious to to not draw too much conclusion from

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Speaker 1: the rally we saw late last week. Look at this

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Speaker 1: great news to start to see actual improvement in the data,

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Speaker 1: But what we have seen time and time again this

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Speaker 1: year is we start to feel like inflation could start

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Speaker 1: to cool down and therefore the Fed could start to slow.

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Speaker 1: We start to see that terminal rate where the market

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Speaker 1: expects the Fed to go and stop um fall, and

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Speaker 1: then all of a sudden, you know, markets are off

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Speaker 1: to the races. But we've seen this about seven times

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Speaker 1: this year where we've seen these bear market rallies, So

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Speaker 1: we do want to be cautious that you know, even

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Speaker 1: though that federal funds rate expectation can come down. We're

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Speaker 1: not there yet, so we don't know where that endpoint is,

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Speaker 1: and until we do, we could see these fits and

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Speaker 1: starts in the market. But nonetheless, as you mentioned, these

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Speaker 1: bear market rallies can help portfolios recover in the long run.

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Speaker 1: I mean, on average, the seven bear market rallies we've

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Speaker 1: seen so far this year have provided about a nine

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Speaker 1: percent return, and we're up twelve percent since the mid

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Speaker 1: October lows. So we certainly want to stick with our

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Speaker 1: portfolios in this environment to help them recover. But at

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Speaker 1: the same time, we don't want to be barreling into

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Speaker 1: equities until we have a clearer signal for for where

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Speaker 1: the FED pauses and then thereafter how growth continues to

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Speaker 1: play out next year. Yeah, sometimes we we forget the

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Speaker 1: idea that it's really earnings that drives. I mean, I

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Speaker 1: understand the macrow, I understand the rate environment, but where

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Speaker 1: would we be without sales and earnings? Right? And and

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Speaker 1: I guess in an inflationary environment, you also have to

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Speaker 1: be very concerned about margin pressure here. Talk to me

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Speaker 1: a little bit about how you expect the reports to

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Speaker 1: behave going forward. While we do expect that earnings revisions

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Speaker 1: need to continue to calm down. It's interesting that inflation

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Speaker 1: actually cuts both ways when it comes to earnings, because

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Speaker 1: on the one hand, as you point out, there is

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Speaker 1: margin pressure, higher input costs, higher wages. We're starting to

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Speaker 1: see a little bit more relief on the input costs.

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Speaker 1: Wages are are still kind of, as share power would

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Speaker 1: put it, elevated, but moving sideways. But if we think

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Speaker 1: about the sales side and we think about revenues, you know,

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Speaker 1: ultimately earnings are nominal. So even if people are buying

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Speaker 1: less individual units of things, if they cost more money

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Speaker 1: and sales are still coming in strong, that's going to

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Speaker 1: kind of bluey earnings. What we've also seen is that

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Speaker 1: in this year, when we look at returns, earnings have

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Speaker 1: actually been a support despite this collapse in multiples. Next year,

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Speaker 1: where we could see is that earnings do start to slide.

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Speaker 1: Potentially if we see an economic procession, we could also

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Speaker 1: see an earnings recession. But we could also start to

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Speaker 1: see because markets are forward looking and do tend to

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Speaker 1: bottle before that bottom and profits or growth or that

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Speaker 1: peak and unemployment, that actually multiples start to carry returns

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Speaker 1: next year, even if our earnings become a little bit

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Speaker 1: more challenged very quick wet on China. I mean, we

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Speaker 1: saw a huge rally coming through in Asia after China

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Speaker 1: scraped to reduce that quarantine time and scrap COVID flat suspensions.

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Speaker 1: Now we're seeing some measures for the economy too, on

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Speaker 1: the real estate and virus control front. What do we

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Speaker 1: say when we finally get every opening of China. Well,

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Speaker 1: on the one hand, it's good for economic growth both

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Speaker 1: of course in China and globally, I think we don't

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Speaker 1: again want to get too ahead of ourselves. We have

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Speaker 1: to actually see the impacts of these looser COVID policies.

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Speaker 1: I think actually the looser um demands on the property

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Speaker 1: sector could be more helpful for Chinese growth and than

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Speaker 1: um than anything if we think about the longer term

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Speaker 1: perspective um. But we want to be a little bit

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Speaker 1: cautious here and actually make sure these reforms are are

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Speaker 1: feeding into stronger growth. Now. The flip side of this

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Speaker 1: globally is the fact that a slower growing China over

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Speaker 1: the last couple of quarters has also meant less pressure

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Speaker 1: on inflation coming out of China. So that's a key

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Speaker 1: thing for us to watch in global markets, and we

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Speaker 1: will watch that mirror. Thank you so much for being

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Speaker 1: with us. Mirror Pendant from JP Morgansset Management joining us

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Speaker 1: here on day Break Asia