1 00:00:00,040 --> 00:00:02,760 Speaker 1: Let's get to our guest, Alefia Dory Wallah, co cee 2 00:00:02,759 --> 00:00:06,840 Speaker 1: IO at Rock Creek, for her take on the markets. Alfia, 3 00:00:06,880 --> 00:00:09,399 Speaker 1: thanks very much for joining us. We mentioned that the 4 00:00:09,440 --> 00:00:12,000 Speaker 1: dollar had dropped quite a lot of late. Nothing nothing 5 00:00:12,039 --> 00:00:15,040 Speaker 1: really has changed since last week when the Fed was 6 00:00:15,680 --> 00:00:18,360 Speaker 1: uber hawk ish and we had that big sell off 7 00:00:18,400 --> 00:00:22,079 Speaker 1: in in megacap tech. It would be tempting to think 8 00:00:22,120 --> 00:00:24,959 Speaker 1: that this is just a rally around the mid term elections, 9 00:00:25,560 --> 00:00:28,120 Speaker 1: But we're rallying a lot in Asia too, So it's 10 00:00:28,120 --> 00:00:32,120 Speaker 1: a little perplexing, um what's driving the action at the moment. 11 00:00:33,200 --> 00:00:35,479 Speaker 1: So I think the action in Asia might actually be 12 00:00:35,520 --> 00:00:37,479 Speaker 1: different than what we're seeing here in the US. I 13 00:00:37,520 --> 00:00:39,159 Speaker 1: think in the here in the US, you've had a 14 00:00:39,159 --> 00:00:42,000 Speaker 1: perpetual optimism that at some point the FED will pivot. 15 00:00:42,240 --> 00:00:45,880 Speaker 1: You saw markets react quite violently last week when Powell 16 00:00:45,960 --> 00:00:48,400 Speaker 1: came out and tried to reiterate the message that it's 17 00:00:48,400 --> 00:00:50,920 Speaker 1: all about infreation. So I think you are getting just 18 00:00:51,000 --> 00:00:53,960 Speaker 1: some short term bear market rallies here in the US. 19 00:00:53,960 --> 00:00:56,279 Speaker 1: That being said, earnings haven't been maybe as bad as 20 00:00:56,360 --> 00:01:00,000 Speaker 1: investors might have expected as well. Slightly different story in Asia. 21 00:01:00,000 --> 00:01:03,080 Speaker 1: Diving in Asia they're sentiment around China and whether the 22 00:01:03,320 --> 00:01:06,760 Speaker 1: strict zero COVID policy is going to be loosened, and 23 00:01:06,760 --> 00:01:08,800 Speaker 1: I think that might be also affecting some of the 24 00:01:08,840 --> 00:01:12,080 Speaker 1: moves you're seeing in Asia. Uma do we look at 25 00:01:12,319 --> 00:01:15,040 Speaker 1: the earning season itself when you look at tech and 26 00:01:15,160 --> 00:01:17,039 Speaker 1: of late, I mean we look at lift, We look 27 00:01:17,040 --> 00:01:19,280 Speaker 1: at all these reports coming through from Meta and a 28 00:01:19,360 --> 00:01:22,240 Speaker 1: variety of others that you know, they are cutting jobs 29 00:01:22,240 --> 00:01:27,039 Speaker 1: and cutting jobs quite well in a large way. That 30 00:01:27,240 --> 00:01:31,480 Speaker 1: this is perhaps, uh something which would then lend itself 31 00:01:31,480 --> 00:01:33,280 Speaker 1: to you looking at tech perhaps in a different light. 32 00:01:34,800 --> 00:01:36,959 Speaker 1: So you know, I think tech has been quite fascinating. 33 00:01:36,959 --> 00:01:39,399 Speaker 1: Of course, you had the monster star market rally in 34 00:01:39,440 --> 00:01:43,039 Speaker 1: the second half of one, then you had the decline 35 00:01:43,040 --> 00:01:47,160 Speaker 1: in tech stocks in some companies like Apple have had 36 00:01:47,160 --> 00:01:49,280 Speaker 1: the best of both worlds, and then you've obviously seen 37 00:01:49,320 --> 00:01:52,360 Speaker 1: the zooms in the lifts, you know, start to feel 38 00:01:52,400 --> 00:01:54,600 Speaker 1: the pain that maybe they were a little bit overvalued 39 00:01:54,680 --> 00:01:57,880 Speaker 1: relative to their pre pandemic values. I think that kind 40 00:01:57,880 --> 00:02:00,680 Speaker 1: of ten to fourteen percent layoffs will see across the 41 00:02:00,720 --> 00:02:03,880 Speaker 1: tech sector is going to be pretty typical. Um, but 42 00:02:03,960 --> 00:02:06,760 Speaker 1: it doesn't you know, I think the opportunity in tech 43 00:02:06,880 --> 00:02:09,960 Speaker 1: is a long term opportunity. You're seeing short term headwinds. 44 00:02:10,120 --> 00:02:13,080 Speaker 1: You're obviously seeing them react to the you know, sensitive 45 00:02:13,120 --> 00:02:16,160 Speaker 1: interest rate environment. But we invest in in tact both 46 00:02:16,160 --> 00:02:18,280 Speaker 1: on the public market and the private market, and there's 47 00:02:18,320 --> 00:02:20,680 Speaker 1: just so much innovation in the long term that it's 48 00:02:20,680 --> 00:02:24,280 Speaker 1: the place you have to be. And you can look 49 00:02:24,280 --> 00:02:26,080 Speaker 1: at the US. But what is your take on emerging 50 00:02:26,120 --> 00:02:28,799 Speaker 1: markets and recently as because here in Hong Kong we've 51 00:02:28,800 --> 00:02:33,120 Speaker 1: got the evaluations which are so so I suppose enticing 52 00:02:33,120 --> 00:02:35,840 Speaker 1: in normal times, but they're cheap for a reason. But 53 00:02:36,400 --> 00:02:39,520 Speaker 1: as you know, the market here on China equities and 54 00:02:39,560 --> 00:02:44,040 Speaker 1: your view presented you with any buy opportunities. You know, 55 00:02:44,160 --> 00:02:46,680 Speaker 1: China is a fascinating story and we have been looking 56 00:02:46,800 --> 00:02:49,079 Speaker 1: very closely and is there a good time to get 57 00:02:49,080 --> 00:02:52,079 Speaker 1: back into the China market. We have been very underweight China. 58 00:02:52,520 --> 00:02:55,880 Speaker 1: Um that being said, Asians are still attractive. We have 59 00:02:56,040 --> 00:02:58,359 Speaker 1: been really looking to see what is the policy coming 60 00:02:58,360 --> 00:03:00,720 Speaker 1: out of China, and until we see a little bit 61 00:03:00,760 --> 00:03:03,520 Speaker 1: of relief in terms of the no covid um, you know, 62 00:03:03,600 --> 00:03:05,800 Speaker 1: lockdown policy, I think it's gonna be hard for us 63 00:03:05,840 --> 00:03:08,320 Speaker 1: to really get back into China and that's on the 64 00:03:08,360 --> 00:03:10,800 Speaker 1: public side. I'll say that we are much more cautious 65 00:03:10,840 --> 00:03:14,119 Speaker 1: longer term in terms of investing in private UH investment 66 00:03:14,160 --> 00:03:18,440 Speaker 1: opportunities in China. That being said, general emerging markets, you know, 67 00:03:18,480 --> 00:03:22,359 Speaker 1: we are very excited about opportunities in Vietnam, in India, 68 00:03:22,919 --> 00:03:26,280 Speaker 1: um even in Brazil. You know, we're cautiously optimistic and 69 00:03:26,400 --> 00:03:28,639 Speaker 1: looking to see where we can maybe see some pockets 70 00:03:28,639 --> 00:03:32,919 Speaker 1: of valuation opportunities in countries such as those, But China 71 00:03:33,000 --> 00:03:36,120 Speaker 1: still remains a big unknown for US and still airing 72 00:03:36,120 --> 00:03:39,560 Speaker 1: on the side of caution there. There was some interesting 73 00:03:39,640 --> 00:03:42,200 Speaker 1: timing on the dollar dropping as much as it did. 74 00:03:42,480 --> 00:03:45,360 Speaker 1: It seemed to happen after the job's report. Part of 75 00:03:45,400 --> 00:03:47,960 Speaker 1: the jobs report was kind of friendly for those worried 76 00:03:47,960 --> 00:03:50,480 Speaker 1: about inflation and that unemployment went up, But there's some 77 00:03:50,840 --> 00:03:53,560 Speaker 1: various reasons for that. I'm wondering whether or not the 78 00:03:53,680 --> 00:03:57,080 Speaker 1: rally in equities and the drop in the dollar might 79 00:03:57,160 --> 00:04:02,160 Speaker 1: also be tied to hope or expectations of a softer 80 00:04:02,280 --> 00:04:05,520 Speaker 1: CPI print, what do you think I mean? I think, 81 00:04:05,520 --> 00:04:07,640 Speaker 1: you know, the market's expecting a seven point nine percent 82 00:04:07,760 --> 00:04:10,120 Speaker 1: number relative to eight point two from last month. I 83 00:04:10,120 --> 00:04:12,640 Speaker 1: think if we get anything less than seven point nine 84 00:04:12,680 --> 00:04:15,320 Speaker 1: will be happy. But I don't think the FED really cares. 85 00:04:15,400 --> 00:04:17,120 Speaker 1: I think if the Fed isn't anywhere at the seven 86 00:04:17,160 --> 00:04:19,040 Speaker 1: and a half to eight percent territory, they're going to 87 00:04:19,120 --> 00:04:21,839 Speaker 1: see it as no soft you know, not a softening trend. 88 00:04:22,320 --> 00:04:24,720 Speaker 1: And I think what's actually more worrisome is what Powell 89 00:04:24,800 --> 00:04:27,680 Speaker 1: also alluded to in terms of inflation becoming entrenched in 90 00:04:27,720 --> 00:04:30,920 Speaker 1: the economy. Right, You've seen shipping prices have just tumbled, 91 00:04:31,040 --> 00:04:33,400 Speaker 1: but inflation rates have really not come down much over 92 00:04:33,400 --> 00:04:36,359 Speaker 1: the same time period, even though you've seen poor bag 93 00:04:36,440 --> 00:04:39,039 Speaker 1: backlog slowed and we've seen shipping rates kind of back 94 00:04:39,040 --> 00:04:41,880 Speaker 1: to more normalized levels. So the question is what can 95 00:04:41,920 --> 00:04:45,800 Speaker 1: they do to really get inflation down. Well, they are 96 00:04:45,839 --> 00:04:47,880 Speaker 1: doing it. Are they putting up interest rates? I guess? 97 00:04:48,040 --> 00:04:51,919 Speaker 1: But how does that There's a lag between how long 98 00:04:52,040 --> 00:04:53,880 Speaker 1: it takes between when you put up rates to the 99 00:04:53,880 --> 00:04:56,599 Speaker 1: effect of them. What effects, if any, are we seeing 100 00:04:56,680 --> 00:04:58,440 Speaker 1: of the interest rate hikes that we've had thus far. 101 00:04:59,560 --> 00:05:02,279 Speaker 1: Will you mentioned they drop in and shipping, But what 102 00:05:02,320 --> 00:05:06,000 Speaker 1: about housing? I think housing is on a on a 103 00:05:06,160 --> 00:05:08,880 Speaker 1: much longer lag in terms of the data we're getting 104 00:05:08,880 --> 00:05:10,840 Speaker 1: out of the housing market. If you see some real 105 00:05:10,880 --> 00:05:14,680 Speaker 1: time indicators UM silo and other indices which actually the 106 00:05:14,720 --> 00:05:17,520 Speaker 1: FED does not look at. Some of those are showing 107 00:05:17,560 --> 00:05:21,080 Speaker 1: a softening in prices. But the you know, housing index 108 00:05:21,120 --> 00:05:23,640 Speaker 1: that Powell is referring to and what he uses, does 109 00:05:23,680 --> 00:05:26,440 Speaker 1: have a significant lag. So I think you're gonna start 110 00:05:26,480 --> 00:05:29,200 Speaker 1: to see some real trouble in the housing market. But 111 00:05:29,240 --> 00:05:31,039 Speaker 1: I don't think we're going to necessarily see it in 112 00:05:31,080 --> 00:05:33,000 Speaker 1: the next couple of months. It could take a quarter 113 00:05:33,120 --> 00:05:35,159 Speaker 1: or two to really start to see some of that 114 00:05:35,240 --> 00:05:38,760 Speaker 1: housing numbers UM soften, which we would anticipate, in which 115 00:05:38,760 --> 00:05:41,400 Speaker 1: case maybe that's another reason for the FED to start 116 00:05:41,440 --> 00:05:44,640 Speaker 1: to pause or slow down their rate hikes. And of course, 117 00:05:44,720 --> 00:05:48,919 Speaker 1: now when bond markets were not that attractive at these yields, 118 00:05:48,960 --> 00:05:51,520 Speaker 1: are they proving attractive to you as far as investment 119 00:05:51,520 --> 00:05:55,159 Speaker 1: grade goes. Yeah, you know, bond markets we talked about 120 00:05:55,200 --> 00:05:56,760 Speaker 1: a lot more than we ever did in the last 121 00:05:56,760 --> 00:05:59,720 Speaker 1: five seven years. Um. You know, we think US bond 122 00:05:59,760 --> 00:06:02,200 Speaker 1: mark this is down sixteen percent year today. It could 123 00:06:02,240 --> 00:06:05,360 Speaker 1: be near cyclical lows. For now, we are keeping duration 124 00:06:05,400 --> 00:06:08,160 Speaker 1: low in our portfolios, though we're cautious on taking too 125 00:06:08,200 --> 00:06:11,480 Speaker 1: much credit risk, so short term Treasury is yielding four 126 00:06:11,480 --> 00:06:13,920 Speaker 1: and a half percent. Don't look so bad right now. 127 00:06:14,120 --> 00:06:17,040 Speaker 1: UM floating rate funds look attractive. I think it Diversified 128 00:06:17,400 --> 00:06:20,280 Speaker 1: extincome exposure today is really what you want to have, 129 00:06:20,320 --> 00:06:22,560 Speaker 1: But you still want to keep duration low because there's 130 00:06:22,560 --> 00:06:26,240 Speaker 1: still risk that you know, interest rates obviously are going 131 00:06:26,279 --> 00:06:28,280 Speaker 1: to climb and we're going to see you start to rise. 132 00:06:29,360 --> 00:06:31,200 Speaker 1: I thank you so much for joining us with you 133 00:06:31,320 --> 00:06:35,800 Speaker 1: inside and if Coachief Investment Officer A Rock Creek getting 134 00:06:35,839 --> 00:06:37,240 Speaker 1: her take on the market.