Federal Reserve, Michael, United States discussed on BTV Simulcast


It looks like fed officials will have their work cut out for them as they begin their two day policy meeting later today. Markets will be expecting signals that they're prepared to cut rates at some point, although a move is not expected this month. However, indications of too much change could also raise the alarm. Let's bring in Rainer, Michael Price. He's executive director of client investments over tours wealth advisors so nice to see this morning. Michael, let me start with a hypothetical as we've been discussing market seemed to be pricing and just a twenty percent chance of a cut tomorrow. But let's say the fed did unveil cut early. How do you think stocks would react to that? Because on the one hand, of course they're getting easier monetary policy from the fed. But surely, the fact that fed the fed see something on the horizon, that suggests this easy monetary policy is necessary surely that should be a concern to equity investors. Most, if you remember last year, two thousand eighteen ninety five percent of all asset classes, had negative fraternities, especially the full of last year was very, very pool for for equities, and then the pet fitted lifted everything. And then the supe- today, this roughly fifteen percent, predominantly two largest and on, onto hopes the hoped-for sort of outcome of the US trade war, tensions, or at least reduction in those tensions. And Secondly, that the fed might actually pivot, or potentially cut rate. So I would actually think that if they move on rates, we could actually see potential the proverbial by the room of sell the news event, because I think the marketing, and he might have realized that the interest rate cycle has peaked. And there's no potentially turning into a digitally. Historically in easing cycle has actually been negative for risk S's. Like, let's get some additional perspective here because we'll have another area and wrote that the to'real and here's a key, quote from that piece. He writes set the first cut will probably not take place this week, but rotter at the next FOMC meeting scheduled for July thirty thirty one is likely to twenty-five bit production as part of an open ended cycle of rate, cutting with a smaller probability of a fifty Bip one and done approach. Can you subscribe to them? Look, I most probably that's rather sensible of potentially could be could be what is happening is if you think about it, look at what you really want to cut rates when the stock market is on alternate record high. If it is about a preemptive move. Does this mean that the economy is much weaker than Wall Street is officially forecasting or pricing? Look, again, the preemptive move might actually scoop the markets more than being on hold this time. And then again in line was slowdown or potentially risk for further use of US tweet for esscalation us, lower rates to basically offset some of that those headwinds the especially if the terrorists could or should come into play than most probably this would be meaningful to offset richly economic weakness because of higher terrorist. So, yes, most probably July's increasing the high probability. So Michael L area, and has historically been quite critical central banks. And in his column this morning, he sort of takes up the notion that they've failed to boost inflation higher, especially the fed, and in fact, if you take a look at this particular chart you can see that real yields inflation adjusted yields on the ten year have been dropping like a stone recently, especially when compared to nominal yields. Why do you think that is an is going to be reason to give the Federal Reserve? Pause. When it comes to the confidence that they need to be able to affect inflation, or even inflation, expectations at this point. Moved. It reminds me of this. Proverbial extended pretend central banks have been at this game for a long time and originally, the idea was that it would be temporary. I mean ten years into the crisis or the recovery rather, you. You cannot call for the stimulus and just basically more curious temporary. But as oppose the real question my mind comes down to what we mean by inflation, if consumer price inflation. Yes, most disappointed. But if you look at the surprise inflation, maybe we have too much asset price inflation, whether it is a lot of companies listing appeals that are still most making more importantly as well. The proverbial story, Bloomberg reporter just few hours ago that socities be selling out and going private. If you if you look back to the Japanese bubble burst, the real top in the market woes win a Japanese life insurance company border think for three hundred fifty million dollars a Van Gogh painting. There was I think six weeks before the Nikki finally topped out inventor little twenty bear markets. These sort of things potentially indicate immediately said, we're closer to a top of the market rather than the bottom. The global head of fixed income for J P Morgan asset management. Bob, Michael, he is shifting his views on credit. Why don't we take a quick? Listen to say, I think credit will continue to do well, because they're still looking pretty good. You're still having the flow through the fiscal stimulus into corporate earnings, but the future looks pretty bleak. So I wanna start telling rallies in here say high yield through four hundred basis points. But Michael, you're going even further than that you're taking all chips off the table and putting everything in goals that, right? None of I mean, gold gold is always been sort of a conscientious the location decision. I mean, our model put full as we have around five to eight percent allocated to gold and gold for two reasons. Number one. Maintains its value over the centuries, and Secondly, especially now it's could be considered geopolitical hatch, and also a hedge against the static risk, and don't forget, we are cutting rates, as well, in the US market when to some extent the debt levels are unprecedented level. So don't forget the debt and the in the world problem has never really gone away. And gold is one way to hedge against credit risk. All right. Michael, you're staying with us to get through that as Michael pricey stays with us on the show. In fact, let's get you a preview of what's Scylla had deflation is rearing. It said in the Gulf, and policymakers may.

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