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Speaker 1: Let's get to our guest. Marianne Montaigne is with us

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Speaker 1: UH portfolio manager at Gradian Investments who joins from Arden Hills, Minnesota.

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Speaker 1: Hope you're staying warm. It's got to be really cold

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Speaker 1: up there. Oh, it's the bold North up here, it is.

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Speaker 1: So give me the view of the bold North when

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Speaker 1: you look at the price action. Let's talk about yesterday.

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Speaker 1: That was stunning, just the the explosion that we had

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Speaker 1: in the equity market. What do you make of it? Well,

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Speaker 1: we heard the Fed chair say that he's got a

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Speaker 1: less hawkish stand an upcoming Fed funds interest rate as

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Speaker 1: to those increases, so that deceleration from several months of

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Speaker 1: seventy basis point increases to probably fifty basis points uh

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Speaker 1: likely in his words, uh so to speak for the

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Speaker 1: month of December, which is just the middle of this month.

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Speaker 1: And it really caused a lot of people to, you know,

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Speaker 1: uh think that maybe they won't overtighten and we won't

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Speaker 1: go into a deep recession. I And it caused a

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Speaker 1: lot of short covering yesterday. So that's what really drove

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Speaker 1: the stock crisis higher, was the shortcovering. You've also said

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Speaker 1: that you're more comfortable now in your sixty forty split

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Speaker 1: for stokes and bonds. Tell us what you're expecting in

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Speaker 1: terms of momentum in the SNP five as we end

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Speaker 1: out two and into three, Well, we think that will

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Speaker 1: continue to see the market go higher between now and

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Speaker 1: the near end um. It puts us to right now

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Speaker 1: on track for maybe a five to ten percent drop

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Speaker 1: in the SFP for the full year, far better than

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Speaker 1: the rap we saw at the end of September. Yeah,

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Speaker 1: a lot of people were making a light of the

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Speaker 1: fact um that the two hundred day moving average, but

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Speaker 1: I think it's up for debate. The fact that we

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Speaker 1: held above that there's a bold case, I guess to

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Speaker 1: be made, although other folks were saying that it's not

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Speaker 1: really a durable move, particularly when you consider some of

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Speaker 1: the soft economic data. The p M I was was weak,

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Speaker 1: and this kind of suggests that we should be on

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Speaker 1: high alert for a contraction in corporate earnings. Well, I'm

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Speaker 1: not sure about that contraction and corporate earnings. If you

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Speaker 1: look at all the commodity input uh, they've all come

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Speaker 1: down sharply from their peaks in the middle of the year,

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Speaker 1: and so as you roll through lower cost of energy

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Speaker 1: into the first quarter and other things, timber, copper, you

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Speaker 1: name it. Um, we could see corporate earnings perhaps being

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Speaker 1: better than feared. But I do think there's a fear

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Speaker 1: factor in the first quarter, maybe into the second quarter

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Speaker 1: as well. UM. I just appreciate the fact that the

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Speaker 1: FED is willing to step back and take a look

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Speaker 1: at how much damage they've done to the economy, how

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Speaker 1: much damage they've done to the inflation rate, in order

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Speaker 1: to um, you know, assess what needs to be done

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Speaker 1: going forward and that overtighten and put us into a

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Speaker 1: worse situation. And just quickly, in terms of the damage

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Speaker 1: that you say they've done, what is the likelihood of

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Speaker 1: a deep recession. I don't think it's highly likely, but um,

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Speaker 1: you know, given given current factors, again, if we've got

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Speaker 1: if people are fearing and earnings recession going into the

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Speaker 1: first half her depression, UM, I think they have to

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Speaker 1: look at the um the factors from the ground up

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Speaker 1: and reassess. Picking up on that China story, it's certainly

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Speaker 1: saw some positive momentum in assets in Asia yesterday that

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Speaker 1: Beijing will allow some virus impicted people to isolate at home.

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Speaker 1: As we start to see these piecemeal pieces about reopening.

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Speaker 1: What are you looking at in emerging markets? Well, we

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Speaker 1: like the I shares Core et F and the picker

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Speaker 1: is I E M G like ice cream, Edward Um

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Speaker 1: Michael gold Uh, where we're seeing strong price momentum over

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Speaker 1: the past five weeks and it appears to also be

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Speaker 1: breaking through its two D day moving average is as

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Speaker 1: his s and P five hundred. But here it's on

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Speaker 1: expectations that China is finally going to reopen its economy.

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Speaker 1: And we like the diversification of this E t F

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Speaker 1: across various emerging markets. But we note that cent or

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Speaker 1: the largest piece is stocks based in China, so that's

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Speaker 1: an area that's a great interest to us. Are there

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Speaker 1: other markets outside of the United States that you're interested in,

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Speaker 1: not necessarily China or e M per se, Would you

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Speaker 1: be interested in North Asia? Japan? We were just talking

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Speaker 1: about possibly the idea that we're going to get some

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Speaker 1: revisitation or at least a consideration to to change policy

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Speaker 1: on the part of the Bank of Japan. Would you

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Speaker 1: be tempted to put money to work either in Japan

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Speaker 1: or let's say South Korea? Not at this point, Um,

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Speaker 1: that's just not on our front burner. Shall we say, alright,

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Speaker 1: let's talk about what is your from bon I am

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Speaker 1: looking at some of the consum of Stokes, But you've

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Speaker 1: gone a little cautious on McDonald's. Why is that, Well,

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Speaker 1: it's not so much cautious on the company. It's really

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Speaker 1: about the valuation. So it's trading at twenty six times

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Speaker 1: forward earnings right now, where as the market is closer

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Speaker 1: to eighteen times. Uh. This is a stack we've held

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Speaker 1: for about four and a half years, so we can

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Speaker 1: just definitely say we're long to my investors. Um, it's

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Speaker 1: done well for us, but um, we just decided that

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Speaker 1: we're going to exit here at a ten year high.

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Speaker 1: What's your view on the bond market right now? Are

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Speaker 1: there opportunities that you like in credit? Yeah? So, um,

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Speaker 1: really across the bond market, we think it's more interesting

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Speaker 1: than it has been in a while. Um. We saw

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Speaker 1: the ten year reach uh four point to five percent.

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Speaker 1: Now that was five weeks ago, and since that time,

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Speaker 1: all interest rates have been on the decline. So we'd

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Speaker 1: like to get people to read balance and here, uh

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Speaker 1: take advantage of some of these higher rates before they

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Speaker 1: slipped lower. Uh. We think that investment grade credit is attractive.

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Speaker 1: We think that high yield is very attractive. Uh. You know, again,

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Speaker 1: we're looking at where it was at the start of

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Speaker 1: the year where it is now. And uh at the

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Speaker 1: start of the year, we were in a real conundrum.

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Speaker 1: How do you make money in a bond market where

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Speaker 1: rates are going to go higher? And uh so we

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Speaker 1: had to be very nimble around that. But now it's like,

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Speaker 1: let's look at some steady eddy you know, household names

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Speaker 1: like the tenure U S Treasury or just j n

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Speaker 1: K for the e t F for the high yield bombs.

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Speaker 1: You make a great point that where we are now

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Speaker 1: is certainly know where we thought we would be twelve

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Speaker 1: months ago. And that is I guess that the cycle

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Speaker 1: of all of these headwinds that that have come out

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Speaker 1: of out of nowhere. I guess in a sense for

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Speaker 1: the year, where do you see I guess the biggest

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Speaker 1: three Is it going to be these recessionary fears we

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Speaker 1: touched on. Is it geopolitical tension too? We've heard that,

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Speaker 1: uh Stephen Roach saying the US chain attention is worse

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Speaker 1: under bottom than it was under President Trump. Yeah. Um,

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Speaker 1: our base case is not a solid recession. That is

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Speaker 1: not our base case. Um. The geopolitical concerns are what

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Speaker 1: I call them the black swans. A lot of times

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Speaker 1: you can't predict who's going to pop out of where

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Speaker 1: with what action. And that's why we like to have

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Speaker 1: gold as about five percent holding in our portfolios draft

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Speaker 1: year for those black swan events. And I want to

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Speaker 1: point out that the price of eighteen sixteen one eight

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Speaker 1: hundred sixteen pounds on gold is up from seventeen oh

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Speaker 1: two just a few weeks ago. So um that compares

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Speaker 1: to uh, it's nemesis bitcoin where, which has been on

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Speaker 1: a continued slide this year. I think through November it

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Speaker 1: was down sixty Um. So there's a black swan investment. Yeah,

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Speaker 1: well maybe not the black swan. I think many people

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Speaker 1: saw that coming very quickly. Ten seconds. How much cash

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Speaker 1: are you sitting on these days, Marianne, We are fully invested. Um,

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Speaker 1: we are not sitting on excess cash, all right, Marianne,

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Speaker 1: And thank you for putting it more concisely than I did.

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Speaker 1: Black swan rather than things coming out of nowhere. Mariam

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Speaker 1: want In, portfolio manager at Gradient Investments, on the line

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Speaker 1: for us here from on Bloomberg daybreak Asia,