Why the Economic Cycle Says Growth Isn't Over
Matt Eagan, Co-Head and Portfolio Manager, Multisector Full Discretion: So, I think what investors really want to know is, are we at the end of this cycle.
Brian Kennedy, Portfolio Manager, Multisector Full Discretion: Are we going into a recession in 2019.
Elaine Stokes, Co-Head and Portfolio Manager, Multisector Full Discretion: The US is really in a soft patch.
Kennedy: We’re emphatically saying no, that’s not the case.
Eagan: I think the US economy is quite healthy, with a solid job situation, unemployment is low, wages are rising. So we don’t have a lot of concerns about the US economy by itself.
Stokes: You have a bigger hiccup in China than we had thought was happening last year.
Kennedy: But we are seeing the Chinese government stimulate the economy on a number of different fronts, and we think that that’s a positive sign.
Eagan: So this year is going to be interesting.
Kennedy: I think the Fed is likely on hold during first half of this year.
Eagan: They might not have the confidence that that data is solid enough until maybe the second half of 2019.
Stokes: There’s a lot of debt that needs to come to this market, so we really need to watch the rate picture pretty closely.
Kennedy: The markets are very much looking at the political landscape right now, and that’s really dominating I think, in a lot of cases.
Eagan: They’re worried about geopolitical events, like the US/China tariff spat.
Stokes: We still have a level of unpredictability in the US government, beyond anything I’ve seen in my lifetime.
Stokes: I don’t think we can underestimate the move towards nationalism, populism, protectionism.
Kennedy: I do believe that people are concerned about the paths that the politicians are taking and how it affects not only their jobs, but also their investments.
Stokes: I live in this economy too – and I feel it, and I talk to people who are concerned.
Eagan: For fixed income investors I think the good news is that it gets a bit easier from here.
Stokes: So what we’re going to do, is just with each bout of volatility, we’re going to add those long-term positions that we have conviction in, so that we are positioned for what we think is a late cycle environment, but one that’s going to last a little bit longer.
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