ALO18: Asset Allocation a la carte ft. David Kelly
Top Traders Unplugged
Factors Protecting the US from Recession
This chapter discusses the absence of a recession in the US and identifies two factors that have protected the economy, including the absence of a boom in cyclical sectors and unusual labor market conditions.
David Kelly, Chief Global Strategist at J.P. Morgan joins Alan Dunne in this episode for a big picture perspective on the outlook for the global economy and the implications for asset allocation. We discuss why David is upbeat on the outlook for the US economy with a key part of his optimism resting on the fact that no individual sectors appears stretched or out of balance, which is normally the case prior to a recession. The recent rise in bond yields has been a key focus in markets – we discuss what has driven this and why David is optimistic on the outlook for inflation and bonds looking ahead. We also discuss asset allocation more broadly, the outlook for the 60-40 portfolio and the longer term themes (such as the investment implications of climate change and the shift to more active industrial policy) which are addressed in JP Morgan Asset Management’s recent Long Term Capital Markets Assumptions publication.
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Episode TimeStamps:
02:42 - Introduction to David Kelly
05:44 - What has become of the recession?
08:38 - Are we missing an accident?
11:09 - Why is the saving rate in the U.S. so low?
13:29 - Is this cycle unusual compared to the past?
14:52 - Are central bankers becoming arrogant?
17:15 - What happened to the bond market?
19:31 - High debt and high deficit - a new normal?
21:48 - Kelly's outlook for the next decade
23:42 - Inflation in the U.S.
27:29 - A new equilibrium
30:14 - Discussing inflation on a global scale
33:35 - The state of the asset allocation environment
35:37 - Should you look beyond the 60/40 portfolio?
39:04 - The magnificent seven
40:50 - A political mess
44:51 - How will Artificial Intelligence impact the economy?
47:55 - Managing the labour shortage
50:13 - An all-time high misery
51:36 - A discontent with the economy
53:50 - An outlook of the political landscape
56:14 - How does the shifting demographics impact the economy?
57:57 - Is an aging population disinflationary?
59:07 - Advice for investors
01:01:34 - Thanks for listening
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