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Speaker 1: So our guest is Olivia Darsier, head of a pack

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Speaker 1: applied research at Contigo. So if you look at the

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Speaker 1: Russian War and the COVID restrictions in China and a

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Speaker 1: very aggressive federal reserve, and now we've got earnings concerns,

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Speaker 1: I think I woke up in a in a cold

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Speaker 1: sweat this morning, Olivier, how do you navigate that? It's

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Speaker 1: certainly a very different kind of narrative that that we

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Speaker 1: had in the middle of the summer when everybody was saying,

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Speaker 1: you know, the Fed is going to start decreasing rates

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Speaker 1: because they're worried about inflation, about recession and all that,

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Speaker 1: and that we have the opposite, right, we have strong

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Speaker 1: views that everything is going to get bad very quickly,

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Speaker 1: but if you look at the data, it doesn't really

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Speaker 1: support that, you right. So, yes, those earnings that we

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Speaker 1: just heard about earlier were negative, but nothing pointed to

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Speaker 1: consumers stopped spending. Right, There's inventories that needs to be done,

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Speaker 1: there's chip shortages, there is maybe they they forecasted wrongly,

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Speaker 1: but so far consumers are spending money. Is still full

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Speaker 1: employment or near full employment in an economies everywhere, So

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Speaker 1: that's that's the key thing that powers you come in

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Speaker 1: as long as the consumer does not shy from spending. Uh,

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Speaker 1: everything else is potentially temporary. Right, does that discussion really spend,

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Speaker 1: you know, continue if we continue to see the pain

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Speaker 1: for home buyers when you've got these mortgage rates in

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Speaker 1: the US at a fifteen year high. Yeah, I mean,

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Speaker 1: that's that's a good question, and the answer to that

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Speaker 1: is unknown at this point. But you know, the same

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Speaker 1: question was raised at the beginning of the summer, was say,

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Speaker 1: our consumer is going to keep spending when gas at

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Speaker 1: the pump is is so expensive, but gas at the

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Speaker 1: pump is not a little bit lower, so they're breathing

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Speaker 1: a bit better. Yes, mortgage rates are up, that only

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Speaker 1: affects people with mortgages with especially good floating rate mortgages,

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Speaker 1: not fixed rate mortgages. Um. And they're still able to

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Speaker 1: to find jobs, to to get raises and so on.

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Speaker 1: So right now, I think that that's pretty much a stalemate. Uh.

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Speaker 1: We also see that sentiments for investors has soured in

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Speaker 1: the last couple of weeks. We we hit almost very

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Speaker 1: sentiment last week already, So for the next few weeks,

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Speaker 1: emotions might come into play and might effect decision making

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Speaker 1: for for for some of them. So we're in a

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Speaker 1: dangerous period now because of investor sentiment is so weak,

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Speaker 1: which is a very big difference from where it was

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Speaker 1: in July and the beginning of August, where sentiment was

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Speaker 1: rising and people were hoping for for things to get better,

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Speaker 1: even on the Ukraine front. And now things are getting

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Speaker 1: worse again. So and winter is coming. Yeah, winter is coming.

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Speaker 1: More winter from the Fed, Laurettemester saying that real interest

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Speaker 1: rates have to be positive and and then held there

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Speaker 1: for a long time. That has to be tough on

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Speaker 1: risk risk assets. I mean, obviously now we see that

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Speaker 1: there are alternatives risk assets, even fixed deposits is starting

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Speaker 1: to have a pulse now for for investors. But you're

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Speaker 1: talking about a huge amount of liquidity that can't go

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Speaker 1: into these small buckets, right, and you're still the vast

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Speaker 1: majority of it has to go into into risk assets. Um.

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Speaker 1: I think also investors have been worried about the economy,

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Speaker 1: word about inflation, first, word about the central banks, worked

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Speaker 1: about interest rates, word about the economy since about Q

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Speaker 1: one of last year. So over the last eighteen months,

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Speaker 1: risk of strategies have greatly out of born risk strategies

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Speaker 1: and even in the market. So I think you know

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Speaker 1: you're you're getting close to verish fatigue here in terms

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Speaker 1: of investors. I mentioned there again the PBOC trying to

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Speaker 1: stem the decline in the currency, and we are looking

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Speaker 1: ahead to the p of my data, which is expected

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Speaker 1: to show once again weakness in this economy. When do

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Speaker 1: things start to turn around for the China story, Olivia,

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Speaker 1: I think you know that this is this is hard

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Speaker 1: to tell because we don't know when the policy is

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Speaker 1: are lifted, right, so as long as the policy is

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Speaker 1: still overhanging, uh, and there could be no winter is

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Speaker 1: coming and we could expect another surgeon in new cases

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Speaker 1: and therefore another series of lockdown. So that's that's the

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Speaker 1: big question right now. I think people are gonna avoid

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Speaker 1: that question for the time being. Uh, simply because there's

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Speaker 1: just too many unknown unknowns. Um you've got higher volatility,

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Speaker 1: about ten percent more than you had earlier in the summer.

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Speaker 1: So also again on a daily basis, your your probability

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Speaker 1: or possibility of losses are bigger than they used to be,

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Speaker 1: so you have to be more sure about the return

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Speaker 1: side of the equation now. And I think given the

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Speaker 1: way that the narratives is going on both geo political,

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Speaker 1: climate change, you name it, macroeconomic news. Nothing really is

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Speaker 1: positive right now. So I think the return side of

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Speaker 1: the equation is probably taking a hit, which means since

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Speaker 1: the risk side is being is going up, a lot

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Speaker 1: of people have to jump out. So I think for

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Speaker 1: the foreseeable days or weeks, it's going to be a

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Speaker 1: kind of a negative net risk cappetite market, and that's

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Speaker 1: going to go on a lot. With the Party Congress

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Speaker 1: coming up, China is expected to push further on its

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Speaker 1: goal of of common prosperity, and we heard that from

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Speaker 1: the senior party ideologist how Aboo Jung or hanba Jong.

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Speaker 1: So when I read that, I just started thinking that,

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Speaker 1: you know, that probably means that you're going to have

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Speaker 1: this overhang of of regulatory constrictions to continue for some

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Speaker 1: time to come in China. Um And I think many

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Speaker 1: of us were hoping that that that that was going

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Speaker 1: to be easy during this period. Your thoughts on that,

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Speaker 1: I mean, it's possible, But again I would say around

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Speaker 1: especially around an event like this which is very much domestic,

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Speaker 1: a lot of a lot of the talk that you

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Speaker 1: hear is is saying at at a local audience, UH,

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Speaker 1: not necessarily at a business audience or a global audience.

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Speaker 1: You know, same thing around you know, US election periods

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Speaker 1: or anywhere else. People are playing to the local uh

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Speaker 1: electorate or in China just the local party bosses. UH.

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Speaker 1: So I wouldn't read too much into it. We always

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Speaker 1: knew that regulatory risks is high in China because they

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Speaker 1: can very quickly decide that no shorting, no this, you

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Speaker 1: can't get out. You can't get your money out the

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Speaker 1: good needing money out for now. So this has always

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Speaker 1: been in the background, and I don't think it's new

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Speaker 1: for investors. A very big weekend here Olivia in Singapore

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Speaker 1: for the F one, and you're looking at the Porsche

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Speaker 1: I p O that we saw in Europe as a

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Speaker 1: guide of investor sentiment. What do you think that? Yeah,

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Speaker 1: I think this one will be interesting because they priced

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Speaker 1: it at the very high end of the range, uh,

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Speaker 1: indicating that at Ease, GOLs Wagon and then their bankers

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Speaker 1: believe that wealthy consumers are not going to change their

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Speaker 1: their their buying patterns. It will be interesting to see

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Speaker 1: what investors think of that. Maybe investors are also worried

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Speaker 1: that the high net worth consumers is starting to pull

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Speaker 1: back on this on this spending as well, So I

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Speaker 1: think I look at that as an indication of what

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Speaker 1: the market deals going to spending. So you have basically

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Speaker 1: through this interview not been as bearish as what many

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Speaker 1: people are are thinking of. But I guess if you

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Speaker 1: think about the past twelve years, Olivier, we've had returns

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Speaker 1: in the stock market of about say ten ten eleven

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Speaker 1: percent per annum. At the same time, risk free assets

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Speaker 1: were zero, so that gap was huge. But now you

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Speaker 1: can buy treasuries um you know, I get four percent

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Speaker 1: and you've got earnings coming down. So this would be

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Speaker 1: a tough time for equities, say in the next one

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Speaker 1: six months to a year. I think less than that.

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Speaker 1: I think I think this could be just temporary because

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Speaker 1: we've been preparing for this for eighteen months now, so

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Speaker 1: I think most people have either positioned themselves or a

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Speaker 1: very scenario or or have already alright, unfortunately out of time.

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Speaker 1: Olivia Dosia from Contiguo, this is Bloomberg