Government bond valuations are becoming more attractive, says Gurpreet Garewal

Well, let’s talk a little bit about this. A lot of rate rhetoric in recent days. You look at the 10 years I just mentioned a minute ago, it’s risen about 25 basis points since the start of the year, but also since the start of February, since February 1st. But since that time, we’ve seen a real broadening of the market. Give us a sense, what’s your view of the overall market when it comes to the Fed and cuts, The rally that we’ve seen, the broadening that we’ve seen, is it dependent on a certain amount of rate cuts or does the market continue to move higher on AI enthusiasm? Well, that’s a big question. Look, markets are fast moving. They’re information rich. We’ve seen a lot happen over this first quarter. We had no landing bears turned to soft landing bulls. You’ve had disinflation confidence turned to reflation worries and like you mentioned, we’ve had expectations for central bank cutting cycles move back and move lower. But against that backdrop, what you’ve seen in markets is quite interesting. You have seen bond yields gravitate higher like you said. But yet interestingly, risk assets have been relatively unperturbed by that. Credit has moved higher, equities have gained ground. So why is that? Well, in my view, it’s because the the inflation data is good enough that you still are going to have central Bank rate cuts this year, but the growth data is not too good that you risk reigniting inflation. And if anything, it means government bond yields are more that government bond valuation, sorry, are more attractive. So it’s an opening to add and there’s still lots of other opportunities to be had in fixed income, All right. So fixed income is attractive. I also want to get your outlook for rates. We had you on the beginning of the year, you had one outlook. Where are you at right now? Do you still see the same number of cuts? Do you think we’re going to 1st see these cuts in June? Yeah, it’s a great question. I think right now as the data stands and what we are read of it is we still do anticipate that the US Central Bank and the ECB will initiate rate cutting cycles in June. Of course between now and then we have several CPI data frames. We have the employment cost index, which is a key wage gap gauge for the Fed. So we need to see what happens with that. But at at present, we still anticipate rate cutting cycles to begin this summer. All right. So I know you said the bond market’s attractive, but I do just want to come back to the the equity markets for just a minute. So I want to get your take on Altimeter Capital founder Brad Gerstner talking about whether or not the markets are in a bubble. Take a listen, look at the the multiples. You know, Google trading at 19 times, meta trading at 22 times, NVIDIA trading at 31 times. These are not bubble territory, but you do have to get your forward forecast right. So we continue to own, you know, those names in our portfolio. All right. So Gerson are saying the markets are not in the bubble. Agreed, disagree. Well, first of all, I don’t work in the equity space and my fixed income strategist. And on that front, I would say the fixed income markets are still opportunistic. I think a lot of the enthusiasm that you’ve seen in equity markets this year does rest not just on those resilience you see in the economy, but also enthusiasm around secular trends like the adoption of AI from a fixed income or an economic standpoint. I think a lot of the implications of AI are still relatively ambiguous. We still don’t know the full impact on jobs, on productivity, on overall profits and therefore potential growth, so it remains to be seen.