The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson
Sep 23, 2023
54:44
auto_awesome Snipd AI
Nanette Jacobson, Global Investments Strategist at Hartford Funds, discusses her investment outlook, suggesting it might be time to lean into bonds. Topics discussed include the economic outlook, banking system, interest rates and Fed, China's affordability, US fiscal stimulus, cautious views on stocks, and costly investor mistakes. The debate about bonds and the potential for expensive stocks to get even more expensive are also explored.
Read more
AI Summary
AI Chapters
Episode notes
auto_awesome
Podcast summary created with Snipd AI
Quick takeaways
It might be time to lean into bonds because they tend to rally 13 months before the Federal Reserve cuts rates, reflecting a belief that growth and inflation dynamics are shifting compared to the past.
The preference for bonds over higher-risk assets is driven by expectations of structural inflation and potential higher rates, with the market pricing in a transition from hiking to easing even without explicit easing from the Federal Reserve.
Deep dives
Economic Backdrop and Caution on Global Equities
The economic backdrop is characterized by resilient growth and inflation. However, over the next 12 months, a more challenging environment is expected. As a result, there is a slight caution on global equities, with a preference for bonds. The attractive bond returns and slightly cautious stance reflect the belief that growth and inflation dynamics are shifting compared to the past.
Opportunities in Japan and Concerns about US Tech Stocks
The US market, particularly the technology sector, is facing challenges due to high valuations and concentration in a few stocks and sectors. Therefore, looking beyond the US, Japan stands out as an attractive opportunity, with positive performance and a favorable economic landscape. On the other hand, Europe is facing recession risks, making Japan a more preferred option. The focus is on sectors like financials, manufacturing, and insurance in Japan, while the US market's overvalued tech stocks may be at risk in the face of higher rates and inflation.
The Importance of Value Investing and Diversification
Amid the dominance of growth-oriented companies and technology stocks, the importance of value-oriented investments is emphasized. It is recommended to rebalance portfolios and consider sectors that have been overlooked but offer growth potential, such as manufacturing, energy transition-related areas, and industrial companies. Additionally, diversification plays a crucial role in creating a balanced portfolio, which can provide protection during market downturns.
Outlook on Bonds, Inflation, and Economic Scenarios
Despite an inverted yield curve and expectations of future rate hikes, there is a favorable outlook on bonds. The belief in structural inflation and the potential for higher rates lead to the preference for bonds over higher-risk assets. The expectation is for yields to remain inverted for a prolonged period, and while there might be some correction, total returns from bonds are seen as favorable. The market is pricing in a transition from hiking to easing, even without explicit easing from the Federal Reserve. However, the balancing act lies in assessing inflation stickiness and the potential impact of future Fed policy on the economy and markets.
Nanette Jacobson, Global Investments Strategist at Hartford Funds, joins Forward Guidance to share her investment outlook. Jacobson argues that it might be time to lean into bonds because the bonds tend to rally 13 months before the Federal Reserve cuts rates, and she and Jack Farley debate the various merits of owning bonds at this juncture in the business cycle.
Follow Jack Farley on Twitter https://twitter.com/JackFarley96
Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance
Follow Blockworks on Twitter https://twitter.com/Blockworks_
Timecodes:
(00:00) Introduction
(00:30) Economic Outlook
(09:04) Outlook On Banking System
(12:45) Views On Interest Rates & Fed
(25:20) China is "Cheap For A Reason"
(30:14) U.S. Fiscal Stimulus
(37:22) Cautious Views On Stocks
(39:05) Common Costly Mistakes That Investors Make
(39:06) Debate About Bonds
(45:56) Common Costly Mistakes That Investors Make
(50:52) Expensive Stocks Can Always Get More Expensive
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode