Higher cost of capital has made fixed income relevant, says Janus Henderson CEO Ali Dibadj

So where should you be looking for opportunities now? Well, joining us now is Ali Debauge, CEO of Janice Henderson, which manages more than $300 billion in assets. Just rang the closing bell at the New York Stock Exchange to celebrate Janice Henderson’s 90th anniversary. Happy birthday to you, a little older than CNBC. So you say that a lot of investors are looking toward fixed income in this environment. What type and what’s driving that given that we’re in a higher for longer environment where some people might feel they don’t have to move immediately? Yeah. John, good to see you. Thanks for having me. Fixed income is definitely on people’s minds right now. The, the higher cost of capital that’s out there has really made fixed income relevant to people right now. People were worried a little bit that there’d be a a big drop off in rates. At this point, it doesn’t seem like that’s going to happen as soon as people anticipated. So they’re looking for a longer term rates. They’re also looking for things that are more floating in nature. So we’re seeing a lot of demand for example for a securitized suite of products whether they be ETF form like J, triple AJ, triple BJ, MB, S and JSI or whether they be things that have longer durations associated to them as well just a lock in current rates. You think that’s a shift more toward the mindset that leads to a 6040 portfolio or is this more a parking spot that there were people are looking to just buy their time until equities aren’t so expensive? It’s a great question. I think right now there’s this cautious optimism, but the caution as you said about the SMP has started to really play through. So what we’re seeing a lot of folks is they want to take a little bit more risk, but they don’t want to go all the way. And so balanced portfolio is getting in very high demand right now. Balanced portfolios obviously have the fixed income returns now that there is a return given interest rates and where they are. And that’s also a ballast relative to the equities, and equities gives you that growth opportunity. So right now, the balanced portfolio is very high in people’s list. We think that’s one of the right places to go as well. If you don’t want to go all the way to AUS equities portfolio or even emerging market equities portfolio and take on more risk balance is a real focus for people. Right now. We have something like $6 trillion sitting in money market funds right now. Is there a point at which we start to see some of that convert over to equities or to other asset classes? Is it going to hinge on a rate cut? Yeah. So we’ve seen historically, absolutely, when you see a rate cut come down even a little bit, not just in the US but around the world, people do immediately go to more risky asset classes. Now to your point, Morgan, there are folks who are trying to be a little bit more forward thinking, take advantage of some of the dips in the S&P right now, some of the opportunities in fixed income, and they’re going there today, they’re going there now. But we see the real money come off the sidelines, which is what everybody’s hoping for, Everybody’s talking about to try to help clients get better returns. You really have to see the rates dip down even a little bit. That’ll play out in terms of movement of money. Is your expectation that we’re actually going to see that? And I asked that knowing that we had more Fed officials doing more jawboning and raising more questions or at least tilting a little more hawkishly even even today based on some of the data we’ve gotten, You take that, you factor in geopolitical risks that we’ve been talking about here this week, the fact that yields have been moving back up, maybe the fiscal piece of that playing into to the bond market. I mean there’s a, there’s a wall of worry that seems to be growing here. And I just wonder how much of it is scalable and how much of it is perhaps not or poised to become a bigger issue than than the markets are realizing right now. Well, we were never Janice Anderson in the camp of the six or seven or eight drawdowns that we were going to anticipate this year from an interest rate perspective. We were a little more conservative on that. We still think it’ll happen, right. We still see really positive signs around the consumer, really positive signs as earnings have reported for, for the past little while. We think that’s going to continue. We do think there will be a rate obviously declines, but maybe not as immediately as people had anticipated initially, maybe towards the end of the year. Ally, how risky are emerging markets right now given what’s happening with geopolitics and and given just how hot overall global markets have been and where is it worthwhile to take that risk. So we’re having a lot of demand on the emerging markets, but emerging markets aren’t all created equally, right? Very little demand right now among our client base on the emerging Asia, emerging markets, developed Asia, yes, but emerging Asia, emerging markets not there. People are absolutely looking at the Middle Eastern area even with the some of the geopolitical questions are happening right now. North Africa, Eastern Europe and Latin America is very, very hot. So emerging markets both from the equity perspective, we’ve got a great portfolio manager very focused on that as well as emerging market debt. We do think emerging Asia comes in maybe a little bit later in this year or or next year, but there’s no demand right now for that market.