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Speaker 1: Well, I'm going to bring in Martin Henneken. Now he's

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Speaker 1: a head of Asian Investment Advisory at Saint James's Place,

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Speaker 1: and Martin, as I was describing a moment ago, was

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Speaker 1: seeing a bit of selling around the region. It was

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Speaker 1: another down day for most US markets. But what's really changed.

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Speaker 1: Do you get a sense that maybe just realities starting

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Speaker 1: to think in about the challenges ahead in twenty three, Well,

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Speaker 1: there have been a few mixed news. Earlier in the week,

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Speaker 1: you had got quite a lot of investor optimism UM

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Speaker 1: or economic optimism. Is the jobs reports, UM. They're also

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Speaker 1: a number of other items out, But then then you

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Speaker 1: that deeper UM over time and had some more things

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Speaker 1: coming out later on banks, he was warning about recession.

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Speaker 1: You have had the savings rate at the seventeen year lower,

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Speaker 1: and just a few hours ago he saw the credit

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Speaker 1: card debt up by ten point one billion in October,

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Speaker 1: which is a record high. So there are some concerning

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Speaker 1: um items on the economy, and it's not exactly clear

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Speaker 1: what that means for the fat But you know, beyond

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Speaker 1: the very short term picture, I'd say there's sort of

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Speaker 1: free thing that investors should watch out for. One is

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Speaker 1: you know, there's some weakening in the economies that might

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Speaker 1: limit the FATS ability to increase rates, which could be

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Speaker 1: a generally a positive thing. And there's not any way

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Speaker 1: a direct correlation between growth and recession. Sometimes when you

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Speaker 1: actually get a recession, it might be the best time

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Speaker 1: for equities because they're anticipatory. You know, as long as

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Speaker 1: you're globally diversified, you also capture some of the lower

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Speaker 1: valued places like China that we're discussing before. But then

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Speaker 1: there's also a few things I think that investors are

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Speaker 1: still missing. One is the FAT is not only boxed

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Speaker 1: in by relatively weak growth or weaken in growth, but

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Speaker 1: also by high debt levels. It's something that nobody really

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Speaker 1: has been watching very carefully, the US sovereign debt except

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Speaker 1: the CBO. And another another factor that you have seen

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Speaker 1: a bit of an easing of inflation lately. There's some

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Speaker 1: some numbers out manam used, kent Ex, etcetera, etcetera. But

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Speaker 1: the fact that China's reopening, they have had deflation. PPI

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Speaker 1: was minus one point three in October. That will change.

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Speaker 1: Consumers are going to pick up some demand that might

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Speaker 1: bring inflation up a bit. In the US as well.

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Speaker 1: Dollar dropping back perhaps might support inflation as well, and

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Speaker 1: the rising interests that you see on the US that

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Speaker 1: now could sort of fan did that problem and make

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Speaker 1: it worse and over time. You've heard Alan Greenspan warning

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Speaker 1: even before the inflation uptreack. He was one of the

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Speaker 1: few people who warned about that based on the US deficits.

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Speaker 1: And if higher rates bring up US deficits and deficits

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Speaker 1: for shadow high inflation, you know, this whole rate increases

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Speaker 1: might not even working potentially even backfire in the medium

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Speaker 1: term as affects production as well negatively. So Martin in

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Speaker 1: your work, and I'm going to guess here that you're

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Speaker 1: looking at a lot of historical data, right, but I

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Speaker 1: would say that we haven't been in a situation like

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Speaker 1: this ever before where we've got such a huge build

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Speaker 1: up on the balance sheet that the fattest try in

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Speaker 1: one wine. They're going about that fairly methodically. Yes, they're

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Speaker 1: trying to get the FED funds rate uh just right

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Speaker 1: so that other areas of the credit market will modulate

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Speaker 1: maybe a little bit to the downside. But if push

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Speaker 1: came to shove, let's say, could the Fed that just

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Speaker 1: rather than playing around with the FED funds rate. Could

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Speaker 1: the FED just to just roll off of the balance

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Speaker 1: sheet a little bit to take away some of the

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Speaker 1: stress that you're kind of alluding to. Um. Firstly, a

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Speaker 1: very good point that it's quite a unique situation like

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Speaker 1: unlike in the seventies eighties, now you have this huge

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Speaker 1: sovereign that limiting those FED ability now in terms of

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Speaker 1: adjusting the runoff of the quantitative easing and going into

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Speaker 1: quantitative if tightening. If there's a bobble, you have actually

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Speaker 1: seen it, and not everybody is even away of this.

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Speaker 1: You have actually seen a big wobble and the treasury

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Speaker 1: market in October UM. You know, arguably it's it's sort

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Speaker 1: of a reminder of what happened in the UK. You

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Speaker 1: had I journe It yell and very worried. We have

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Speaker 1: headlines he has a Bloomberg article headline can't show it obviously,

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Speaker 1: but says yelling worried over loss of adequately credity and

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Speaker 1: treasuries October thirteen, October twenty four closely monitoring and looking

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Speaker 1: at enhancing the resilience of treasuries, and then the next

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Speaker 1: day they're looking at buy back. You know, some of

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Speaker 1: this tinkering there. But um, I think when you look

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Speaker 1: at the big picture, this this, this, that challenge, and

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Speaker 1: I would encourage everybody to reach the CBO Congressional Budget

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Speaker 1: Office report, especially the two one long term budget Outlook,

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Speaker 1: and they've just published an update as well on thirty

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Speaker 1: years of November. When you look at the charging there

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Speaker 1: is really quite concerning. And you know, when you consider

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Speaker 1: how a lot of that was based on the much

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Speaker 1: lower treasury years, you know, that's the challenge ultimately medium

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Speaker 1: to long term. What I believe it means for investors

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Speaker 1: is that even this inflation dropping back a bit now,

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Speaker 1: ultimately inflation remains a major risk to be watching out on.

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Speaker 1: That means, you know, keep holding some assets that protect

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Speaker 1: against inflation from medium to long term, even if they

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Speaker 1: if exactly those have seen a lot of bobbles during

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Speaker 1: the recent inflationary environment because of the fear of central bankers,

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Speaker 1: you know, hiking wherever it's needed, but there may not

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Speaker 1: be able to and that's why I think inflation might

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Speaker 1: become um you know, still a very big challenge that

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Speaker 1: might not go away easily. So which are the best

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Speaker 1: assets to look at if you want to have an

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Speaker 1: inflation hit well. I think a diversified basket of assets

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Speaker 1: is over as good. So typically as a classes, they

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Speaker 1: are inflation proof of course can include property, um, commodities,

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Speaker 1: but also equities. I think it's one s class that's

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Speaker 1: often quite misunderstood. People have been trading, like the last

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Speaker 1: year whenever inflation surprised on the upside, the selling of

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Speaker 1: equities because of the concern of rates and other factors.

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Speaker 1: But generally speaking, principally speaking, equities are on sset class.

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Speaker 1: That is, inflation proves because companies that sturbing edge in

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Speaker 1: the market, as long as the economy is not falling

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Speaker 1: off the cliff, if they have an action in the

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Speaker 1: market that can just put on or pass on these

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Speaker 1: cost increases to consumers in the form of higher prices

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Speaker 1: they are charging. Now that's not always happening in a

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Speaker 1: linear way and immediately across all sectors, but generally it is.

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Speaker 1: And if you then diversify, of course different places globally,

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Speaker 1: if we just talked about China, there's a lot of

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Speaker 1: hope they I think there's the reopening. Valuations are low.

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Speaker 1: You have a country that's not tightening at all, but

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Speaker 1: rather easing and supporting growth. Now, UM, you know you

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Speaker 1: you never want to bet just in any one thing.

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Speaker 1: But if you diversify globally, have a good exposure to inflation,

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Speaker 1: had assets and and make sure ideally you are not

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Speaker 1: leverage to be able to sit out any any correction. UM,

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Speaker 1: I think that's that's a good strategy. Rather than chasing

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Speaker 1: the daily news flow and worrying about daily market movements

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Speaker 1: too much, we chase the daily news flow. It's our

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Speaker 1: business here, Martin, thank you so much for being with us.

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Speaker 1: A good conversation with Martin Hennike. He has Head of

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Speaker 1: Asia Investment Advisory at Same James Place, joining us from

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Speaker 1: our studios in Hong Kong. Here on dB A