RiskReversal Pod Less Certainty, More Volatility with Michael Contopoulos
May 30, 2025
Michael Contopoulos, Deputy Chief Investment Officer at Richard Bernstein Advisors, shares his expert insights on navigating today's unpredictable market. He discusses the challenges of market volatility, the influence of tariffs, and the implications of changing interest rates. The conversation touches on potential stagflation and the role of AI in productivity shifts. Contopoulos emphasizes understanding macroeconomic factors and examines gold's status as a hedge against uncertainty, while critiquing the focus on major tech stocks in investment strategies.
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Fed Cuts Can Raise Long Yields
- The Federal Reserve influences short-term rates, but long-term yields reflect growth and inflation expectations.
- Cutting rates during strong growth can paradoxically push long-term yields higher, as seen in 2022.
Debt Demand & Yield Risks
- The US faces challenges in debt demand as foreign buyers reduce holdings and banks have limited capacity to absorb it.
- Rapid rises to 5% yields would cause market stress, especially with strong earnings and growth.
Fed Cutting Strategy Outlook
- Expect any Fed rate cuts before September to be modest and symbolic, not the start of a cutting cycle.
- The Fed will wait for unemployment to rise significantly before easing to fulfill their inflation mandate.